Pitney Bowes Inc. (NYSE: PBI), a global technology company that
provides products and solutions that power commerce, today reported
financial results for the first quarter 2016.
Quarterly Financial Results:
- Revenue of $845 million, a decline of 3
percent, excluding the impacts of market exits and currency; a
decline of 4 percent on a constant currency basis and a decline of
5 percent as reported.
- Adjusted EPS of $0.34; GAAP EPS of
$0.30
- SG&A of $327 million, which
includes $12 million of incremental costs for advertising and ERP
implementation.
- Free cash flow of $60 million; GAAP
cash from operations of $58 million
- Repurchased 6.8 million shares of
common stock
- Reaffirming 2016 annual guidance
“We continued to make progress during the first quarter as
performance improved in several of our businesses and we largely
completed the next major milestones in our transformation to
deliver greater long-term value,” said Marc B. Lautenbach,
President and CEO, Pitney Bowes. “During the quarter, we turned in
a strong performance in new equipment sales in North America
Mailing, a leading indicator for our Mailing business. Our Presort
Services business also performed well, and Global Ecommerce
continued to have strong revenue growth. However, we did not
execute in our Software Solutions business, which also experienced
weaker technology market conditions. We have realigned our Software
management team and expect improvement throughout the year.
“In the last 120 days, we launched the first major television
advertising campaign in twenty years, deployed our new ERP and
business process platform in Canada and the U.S., and moved to a
dealer network in several markets. Last week, we announced the
Pitney Bowes Commerce Cloud, including five SaaS-based solutions
that utilize our physical and digital capabilities, mobile, global
and ecommerce technologies with all of the end-to-end requirements
that drive commerce. While these investments have impacted our
first quarter results, we will begin to realize benefits associated
with the implementation of our new platform beginning in the second
half of the year. Going forward, I am confident in our ability to
deliver on our long-term strategic plans and we will continue to
unlock value for our shareholders.”
First Quarter 2016 Results
Revenue totaled $845 million for the quarter. On a comparative
basis, revenue declined 3 percent versus the prior year when
adjusted for the impact of currency and the impact from the exit of
direct operations (market exits) in Mexico, South Africa and five
markets in Asia. Revenue declined 4 percent on a constant currency
basis and 5 percent on a reported basis.
Digital Commerce Solutions revenue grew 11 percent on a constant
currency basis and 9 percent on a reported basis. Revenue on a
constant currency basis benefited from growth in Global Ecommerce,
while revenue declined in Software Solutions.
Enterprise Business Solutions revenue declined 1 percent
compared to the prior year when adjusted for the impact of currency
and market exits. Revenue declined 2 percent on a constant currency
basis and 3 percent on a reported basis. Revenue benefited from
continued growth in Presort Services, which was offset by a decline
in Production Mail.
Small and Medium Business (SMB) Solutions revenue declined 3
percent compared to the prior year when adjusted for the impact of
currency and market exits. Revenue declined 4 percent on a constant
currency basis and 5 percent on a reported basis. SMB equipment
sales revenue grew globally while recurring revenues declined.
Adjusted earnings per diluted share were $0.34. Earnings per
diluted share on a Generally Accepted Accounting Principles (GAAP)
basis were $0.30, which included $0.02 per share for restructuring
charges and $0.01 per share for disposition costs related to the
market exits.
Earnings per share comparisons this quarter were adversely
impacted by $0.03 per share for incremental advertising expenses;
$0.01 per share for higher ERP related expenses and $0.02 per share
for the absence of Imagitas earnings compared to last year.
The Company’s earnings per share results for the quarter are
summarized in the table below:
First Quarter*
2016
2015 Adjusted EPS from continuing operations
$0.34 $0.40 Restructuring (0.02) - Dispositions
expense (0.01) -
GAAP EPS
$0.30 $0.40
* The sum of the earnings per share may not equal the totals
above due to rounding
Free Cash Flow Results
Free cash flow during the quarter was $60 million and $58
million on a GAAP operating cash basis. In comparison to the prior
year, free cash flow declined due to lower net income and a slower
decline in finance receivables. Cash flow comparisons were also
impacted by the timing of payments resulting from the launch of the
new ERP program in the U.S.
During the quarter, the Company used cash for: $36 million in
dividends to its common shareholders; $128 million for share
repurchases; $22 million for restructuring payments and $37 million
for a contribution to the UK pension fund.
Business Segment Reporting
The Company’s business segment reporting reflects the clients
served in each market and the way it manages these segments for
growth and profitability. The primary reporting segment groups are
the SMB Solutions group; the Enterprise Business Solutions group;
and the Digital Commerce Solutions group.
The SMB Solutions group offers mailing equipment, financing,
services and supplies for small and medium businesses to
efficiently create mail and evidence postage. This group includes
the North America Mailing and International Mailing segments. North
America Mailing includes the operations of U.S. and Canada Mailing.
International Mailing includes all other SMB operations around the
world.
The Enterprise Business Solutions group includes the global
Production Mail and Presort Services segments. Production Mail
provides mailing and printing equipment and services for large
enterprise clients to process mail. Presort Services provides
sortation services to qualify large mail volumes for postal
worksharing discounts.
The Digital Commerce Solutions group includes the Software
Solutions and Global Ecommerce segments. Software Solutions provide
customer engagement, customer information and location intelligence
software. Global Ecommerce facilitates global cross-border
ecommerce transactions and shipping solutions for businesses of all
sizes.
The Other segment is comprised of the Imagitas marketing
services business, which was sold on May 29, 2015.
Consolidated Segment Results
($ millions) First
Quarter
2016 2015
Y/Y
Reported
Y/Y
Ex Currency
Y/Y Ex Currency& Market
Exits*
Revenue $845 $891 (5%) (4%)
(3%) Segment EBIT $202 $229
(12%)
* Excluding the impacts of currency and the
divested revenues resulting from the exit of direct operations in
Mexico, South Africa and five markets in Asia.
SMB Solutions Group
($ millions) First
Quarter
Revenue 2016
2015 Y/Y
Reported
Y/Y
Ex Currency
Y/Y Ex Currency& Market
Exits*
North America Mailing $350 $362 (3%) (3%) (3%) International
Mailing
104 116 (11%)
(7%) (5%) SMB Solutions Total
$453 $478 (5%) (4%) (3%)
EBIT North America Mailing $156 $164 (5%) International
Mailing
12 12 1% SMB
Solutions Total $168 $175 (4%)
* Excluding the impacts of currency and the
divested revenues resulting from the exit of direct operations in
Mexico, South Africa and five markets in Asia.
North America Mailing
The revenue rate of decline for the quarter was consistent with
prior quarters. Equipment sales and supplies increased in the
mid-single digit range compared to the prior year on a constant
currency basis, which was the best year-over-year performance for
equipment sales in several years. Recurring revenue streams
declined at a mid-single digit rate. The Company continues to focus
on driving increased sales effectiveness in the segment’s sales
channels, which was evident in the quarter. EBIT margin was lower
as a result of the decline in high margin recurring revenue
streams.
International Mailing
Excluding the adverse effect from currency and the recent market
exits, the revenue decline for the segment continued to moderate.
The Company’s strategies of realigning its geographic footprint and
go-to-market have been completed and the productivity benefits are
being reflected in the results. Revenue on a constant currency
basis benefited from equipment sales growth in France, Germany and
Japan. The decline in recurring revenue streams was consistent with
prior quarters. EBIT margin improved versus the prior year
primarily as a result of lower costs associated with the change in
go-to-market.
Enterprise Business Solutions
Group
($ millions) First
Quarter
Revenue 2016
2015 Y/Y
Reported
Y/Y
Ex Currency
Y/Y Ex Currency
& Market Exits*
Production Mail $ 87 $100 (12%) (11%) (8%) Presort Services
127 122 5% 5%
5% Enterprise Business Total $215
$221 (3%) (2%) (1%) EBIT
Production Mail $7 $9 (24%) Presort Services
29
27 5% Enterprise Business Total
$36 $37 (2%)
* Excluding the impacts of currency and the
divested revenues resulting from the exit of direct operations in
Mexico, South Africa and five markets in Asia.
Production Mail
Excluding the adverse effect from currency and the recent market
exits, revenue declined 8 percentage points. Equipment sales
declined due to fewer inserting equipment installations in part due
to the timing of closing some large deals. Support services and
supplies revenue declined, in part, as a result of some in-house
mailers shifting their mail processing to third party outsourcers
and the recent market exits. EBIT margin declined versus the prior
year as a result of the lower revenue, especially the higher-margin
inserting equipment sales revenue.
Presort Services
Revenue benefited from the higher volume of First Class mail
processed as well as expansion into the St. Louis market. EBIT
margin was relatively flat to the prior year as benefits from
on-going operational productivity initiatives offset increased mail
processing costs.
Digital Commerce Solutions
Group
($ millions) First
Quarter
Revenue
2016 2015
Y/Y
Reported
Y/Y
Ex Currency
Software Solutions $ 78 $86 (10%) (7%) Global Ecommerce
98 75 30% 31%
Digital Commerce Total $176 $162 9%
11%
EBIT
Software Solutions $ (3) $ 4 (162%)
Global Ecommerce
1
8
(91%)
Digital Commerce Total ($ 2) $12 (115%)
Software Solutions
Revenue declined due to fewer large licensing deals and lower
data-related revenue versus the prior year. The Company is
expanding its channel reach and focus on several high-potential
industries with targeted solutions, which have longer sales cycles.
Management continues to focus on improving sales efficiency and
expanding the indirect channel to improve the pipeline of deals.
EBIT margin declined as a result of the lower licensing revenue,
which has a high margin, and increased selling and marketing
costs.
Global Ecommerce
Results included another full quarter of revenue from Borderfree
retail clients and strong growth in the UK marketplace. The launch
of new retail storefronts also added to revenue in the quarter.
Outbound U.S. package shipments improved during the course of the
quarter as pressure from the strong U.S. dollar began to
subside.
EBIT margin declined versus the prior year due to the
amortization of acquisition-related intangible costs and
investments in the business, which more than offset the early
stages of synergy savings. The Company remains on-track to achieve
its synergy run-rate objective by the end of the year.
Other
($ millions) First
Quarter
2016 2015
Y/Y
Reported
Y/Y
Ex Currency
Revenue $0 $30 NM NM EBIT
$0 $5 NM
The Other segment is comprised of the Imagitas marketing
services business, which was sold in May 2015.
2016 Guidance
This guidance discusses future results, which are inherently
subject to unforeseen risks and developments. As such, discussions
about the business outlook should be read in the context of an
uncertain future, as well as the risk factors identified in the
safe harbor language at the end of this release and as more fully
outlined in the Company's 2015 Form 10-K Annual Report and other
reports filed with the Securities and Exchange Commission.
The Company is reaffirming its annual revenue growth, earnings
per share and free cash flow guidance. The Company’s guidance is
based on an assumption that the global economy and foreign exchange
markets in 2016 will not change significantly. This guidance
excludes any unusual items that may occur or additional portfolio
or restructuring actions, not specifically identified, as the
Company implements plans to further streamline its operations and
reduce costs.
The Company still expects in 2016:
- Revenue, on a constant currency basis,
to be in the range of a 1 percent decline to 2 percent growth when
compared to 2015.
- Earnings per diluted share from
continuing operations to be in the range of $1.80 to $2.00 on both
an adjusted and GAAP basis.
- Free cash flow to be in the range of
$425 million to $525 million.
The Company is providing further detail on the timing of
advertising and ERP expenses among the quarters. The Company
expects:
- Incremental marketing expense in the
second quarter to have a similar impact on earnings as the first
quarter. The change in timing of the expense is related, in part,
to an extension of the Company’s advertising campaign and support
for the launch of the new Pitney Bowes Commerce Cloud solutions.
Total annual expense is expected to remain the same.
- Incremental ERP expense is expected to
be the highest in the second quarter as the Company supports the
post-launch implementation phase of its ERP platform in the
U.S.
- The aggregate of these incremental
advertising and ERP expenses in the second quarter are expected to
be at a similar level to the impact on earnings in the first
quarter.
The Company still expects:
- Revenue, excluding the impacts of
currency; to be driven by growth in the double-digit range in
Digital Commerce Solutions; flat to modest growth in Enterprise
Business Solutions and a low single-digit decline in SMB
Solutions.
- Revenue results will be impacted by the
recent market exits, which generated $26 million in revenue in
2015.
- On-going improvement in SG&A as a
percent of revenue as a result of the expected benefits from the
implementation of the new ERP program. The majority of these
benefits in 2016 are expected to be realized in the second half of
the year, after the U.S. launch and stabilization period.
- A tax rate in the range of 32 to 35
percent.
Conference Call and Webcast
Management of Pitney Bowes will discuss the Company’s results in
a broadcast over the Internet today at 8:00 a.m. ET. Instructions
for listening to the earnings results via the Web are available on
the Investor Relations page of the Company’s web site at
www.pb.com.
About Pitney Bowes
Pitney Bowes (NYSE: PBI) is a global technology company offering
innovative products and solutions that enable commerce in the areas
of customer information management, location intelligence, customer
engagement, shipping and mailing, and global ecommerce. More than
1.5 million clients in approximately 100 countries around the world
rely on products, solutions and services from Pitney Bowes. For
additional information, visit Pitney Bowes at
www.pitneybowes.com.
The Company's financial results are reported in accordance with
generally accepted accounting principles (GAAP). The Company uses
measures such as adjusted earnings before interest and taxes
(EBIT), adjusted earnings per share, adjusted income from
continuing operations and free cash flow to exclude the impact of
special items like restructuring charges, tax adjustments, and
goodwill and asset write-downs, because, while these are actual
Company expenses, they can mask underlying trends associated with
its business. Such items are often inconsistent in amount and
frequency and as such, the adjustments allow an investor greater
insight into the current underlying operating trends of the
business.
The use of free cash flow provides investors insight into the
amount of cash that management could have available for other
discretionary uses. It adjusts GAAP cash from operations for
capital expenditures, as well as special items like cash used for
restructuring charges, unusual tax settlements or payments and
contributions to its pension funds. Management uses segment EBIT to
measure profitability and performance at the segment level. Segment
EBIT is determined by deducting from revenue the related costs and
expenses attributable to the segment. Segment EBIT excludes
interest, taxes, general corporate expenses not allocated to a
particular business segment, restructuring charges and goodwill and
asset impairments, which are recognized on a consolidated basis. In
addition, revenue growth is presented on a constant currency basis
to exclude the impact of changes in foreign currency exchange rates
since the prior period under comparison. Constant currency measures
are intended to help investors better understand the underlying
operational performance of the business excluding the impacts of
shifts in currency exchange rates over the period.
Pitney Bowes has provided a quantitative reconciliation to GAAP
in supplemental schedules. This information may also be found at
the Company's web site www.pb.com/investorrelations.
This document contains “forward-looking statements” about the
Company’s expected or potential future business and financial
performance. Forward-looking statements include, but are not
limited to, statements about its future revenue and earnings
guidance and other statements about future events or conditions.
Forward-looking statements are not guarantees of future performance
and involve risks and uncertainties that could cause actual results
to differ materially from those projected. These risks and
uncertainties include, but are not limited to: mail volumes; the
uncertain economic environment; timely development, market
acceptance and regulatory approvals, if needed, of new products;
fluctuations in customer demand; changes in postal regulations;
interrupted use of key information systems; the ability to protect
the Company’s information technology systems against service
interruptions, misappropriation of data, or breaches of security
resulting from cyber-attacks or other events; management of
outsourcing arrangements; the implementation of a new enterprise
resource planning system; changes in business portfolio; the
success of our investment in rebranding the Company; the risk of
losing some of the Company’s larger clients in the Global Ecommerce
segment; integrating newly acquired businesses, including
operations and product and service offerings; foreign currency
exchange rates; changes in our credit ratings; management of credit
risk; changes in interest rates; the financial health of national
posts; increased customs and regulatory risks associated with
cross-border transactions; and other factors beyond its control as
more fully outlined in the Company's 2015 Form 10-K Annual Report
and other reports filed with the Securities and Exchange
Commission. Pitney Bowes assumes no obligation to update any
forward-looking statements contained in this document as a result
of new information, events or developments.
Note: Consolidated statements of income; revenue and EBIT by
business segment; and reconciliation of GAAP to non-GAAP measures
for the three months ended March 31, 2016 and 2015, and
consolidated balance sheets at March 31, 2016 and December 31, 2015
are attached.
Pitney Bowes Inc. Consolidated Statements of Income
(Unaudited; in thousands, except share and per share amounts)
Three Months Ended
March 31, 2016 2015 Revenue: Equipment sales $
159,361 $ 165,964 Supplies 72,051 73,368 Software 78,058 86,357
Rentals 104,090 113,997 Financing 97,423 105,630 Support services
128,260 139,558 Business services 205,346 205,807
Total revenue 844,589 890,681
Costs and expenses: Cost of equipment sales 71,539 75,013
Cost of supplies 20,690 22,659 Cost of software 26,815 29,864 Cost
of rentals 20,495 20,701 Financing interest expense 14,915 18,770
Cost of support services 75,249 83,599 Cost of business services
135,538 139,919 Selling, general and administrative 326,882 314,529
Research and development 26,568 26,048 Restructuring charges, net
6,933 (81 ) Interest expense, net 19,301 24,064
Total costs and expenses 744,925
755,085 Income from continuing operations before
income taxes 99,664 135,596 Provision for income taxes
37,024 50,547 Income from continuing
operations 62,640 85,049 Income from discontinued operations, net
of tax - 157 Net income 62,640 85,206
Less: Preferred stock dividends attributable to noncontrolling
interests 4,594 4,594 Net income -
Pitney Bowes Inc. $ 58,046 $ 80,612 Amounts
attributable to common stockholders: Net income from continuing
operations $ 58,046 $ 80,455 Income from discontinued operations,
net of tax - 157 Net income - Pitney
Bowes Inc. $ 58,046 $ 80,612 Basic earnings per share
attributable to common stockholders: Continuing operations $ 0.30 $
0.40 Discontinued operations - - Net
income - Pitney Bowes Inc. $ 0.30 $ 0.40 Diluted
earnings per share attributable to common stockholders: Continuing
operations $ 0.30 $ 0.40 Discontinued operations - -
Net income - Pitney Bowes Inc. $ 0.30 $ 0.40
Weighted-average shares used in diluted earnings per share
193,181,424 202,679,433
Pitney Bowes
Inc. Consolidated Balance Sheets (Unaudited; in
thousands, except share amounts)
Assets
March 31,
2016
December 31,
2015 (1)
Current assets: Cash and cash equivalents $ 612,987 $ 650,557
Short-term investments 122,147 117,021 Accounts receivable, net
383,839 457,327 Short-term finance receivables, net 912,755 935,170
Inventories 100,353 88,824 Current income taxes 11,494 6,584 Other
current assets and prepayments 70,609 64,325
Total current assets 2,214,184 2,319,808
Property, plant and equipment, net 335,760 330,088 Rental property
and equipment, net 178,877 180,662 Long-term finance receivables,
net 741,138 763,054 Goodwill 1,765,002 1,745,957 Intangible assets,
net 184,047 187,378 Noncurrent income taxes 68,437 70,294 Other
assets 518,377 525,891 Total
assets $ 6,005,822 $ 6,123,132
Liabilities,
noncontrolling interests and stockholders' equity
Current liabilities: Accounts payable and accrued liabilities $
1,311,486 $ 1,448,321 Current income taxes 27,471 16,620 Current
portion of long-term debt and notes payable 269,732 461,085 Advance
billings 356,412 353,025 Total
current liabilities 1,965,101 2,279,051 Deferred taxes on
income 216,648 205,668 Tax uncertainties and other income tax
liabilities 67,502 68,429 Long-term debt 2,775,213 2,489,583 Other
noncurrent liabilities 561,720 605,310
Total liabilities 5,586,184 5,648,041
Noncontrolling interests (Preferred stockholders'
equity in subsidiaries) 296,370 296,370 Stockholders'
equity: Cumulative preferred stock, $50 par value, 4% convertible 1
1 Cumulative preference stock, no par value, $2.12 convertible 492
505 Common stock, $1 par value 323,338 323,338 Additional
paid-in-capital 145,755 161,280 Retained earnings 5,177,573
5,155,537 Accumulated other comprehensive loss (839,842 ) (888,635
) Treasury stock, at cost (4,684,049 ) (4,573,305 )
Total Pitney Bowes Inc. stockholders' equity 123,268
178,721 Total liabilities,
noncontrolling interests and stockholders' equity $ 6,005,822
$ 6,123,132
(1)
Certain prior year amounts have been
revised for accounting rules that became effective January 1,
2016.
Pitney Bowes Inc. Business Segments - Revenue and
EBIT (Unaudited; in thousands)
Three
Months Ended March 31, 2016 2015 % Change
Revenue
North America Mailing $ 349,726 $ 361,874 (3 %)
International Mailing 103,759 116,173
(11 %)
Small & Medium Business Solutions 453,485
478,047 (5 %) Production Mail 87,425
99,503 (12 %) Presort Services 127,396 121,531
5 %
Enterprise Business Solutions 214,821
221,034 (3 %) Software Solutions 77,922
86,237 (10 %) Global Ecommerce 98,361 75,386
30 %
Digital Commerce Solutions 176,283
161,623 9 % Other -
29,977 (100 %)
Total revenue $ 844,589
$ 890,681 (5 %)
EBIT
(1)
North America Mailing $ 155,915 $ 163,665 (5 %)
International Mailing 11,851 11,724 1 %
Small & Medium Business Solutions 167,766
175,389 (4 %) Production Mail 6,824 9,032 (24
%) Presort Services 28,910 27,494 5 %
Enterprise Business Solutions 35,734
36,526 (2 %) Software Solutions (2,572 ) 4,133 (162
%) Global Ecommerce 772 8,146 (91 %)
Digital Commerce Solutions (1,800 ) 12,279
(115 %) Other - 4,958
(100 %)
Total EBIT 201,700 229,152 (12 %)
Unallocated amounts: Interest, net (2) (34,216 ) (42,834 )
Corporate and other expenses (57,767 ) (50,803 ) Restructuring
charges, net (6,933 ) 81 Acquisition/disposition related expenses
(3,120 ) - Income from continuing
operations before income taxes $ 99,664 $ 135,596
(1) Segment EBIT excludes interest, taxes, general
corporate expenses, restructuring charges and other items, which
are not allocated to a particular business segment. (2) Includes
financing interest expense and interest expense, net.
Pitney Bowes Inc. Reconciliation of Reported Consolidated
Results to Adjusted Results (Unaudited; in thousands, except
per share amounts)
Three Months Ended March
31, 2016 2015 Income from continuing
operations after income taxes $ 62,640 $ 85,049 Restructuring
charges, net 4,628 (53 ) Loss on disposition of businesses
2,175 -
Income from continuing operations
after income taxes, as adjusted 69,443
84,996 Provision for income taxes, as adjusted 40,274
50,519 Income from continuing operations
before income taxes, as adjusted 109,717 135,515 Interest, net
34,216 42,834
EBIT, as
adjusted 143,933 178,349 Depreciation and
amortization 44,300 42,496
EBITDA, as adjusted $ 188,233 $
220,845 Diluted earnings per share from
continuing operations $ 0.30 $ 0.40 Restructuring charges, net 0.02
- Loss on disposition of businesses 0.01 -
Diluted earnings per share from continuing
operations, as adjusted $ 0.34 $
0.40 Net cash provided by operating
activities $ 58,366 $ 103,887 Capital expenditures (40,504 )
(43,908 ) Restructuring payments 21,656 21,874 Pension contribution
36,731 - Reserve account deposits (16,253 ) (20,077 ) Payments
related to investment divestiture - 23,160 Other 189
-
Free cash flow, as adjusted $
60,185 $ 84,936
Note: The sum of the earnings per share
amounts may not equal the totals due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160503005269/en/
Editorial:Bill HughesChief Communications
Officer203/351-6785orFinancial:Adam DavidVP, Investor
Relations203/351-7175
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