Pitney Bowes Inc. (NYSE:PBI), a global technology company that
provides commerce solutions in the areas of ecommerce, shipping,
mailing, and data, today announced its financial results for the
first quarter 2018.
Quarterly Financial Results:
- Revenue of $983 million, an increase of
18 percent as reported and 15 percent at constant currency versus
prior year
- GAAP EPS of $0.28; Adjusted EPS of
$0.30
- GAAP cash from operations of $83
million; free cash flow of $65 million
- The Company is reaffirming its annual
guidance and updating solely to reflect the impact of the
definitive agreement for the sale of Production Mail and its
supporting software.
Transaction Signed and Debt Management:
- On April 30, 2018, the Company
announced it signed a definitive agreement to sell Production Mail
and its supporting software to Platinum Equity for $361 million,
subject to certain adjustments. The Company expects proceeds from
the sale of approximately $270 million, net of estimated closing
costs, transaction fees and taxes. The Company expects to use the
majority of the net proceeds from the sale to pay down debt.
- The Company repaid its March 2018 notes
for $250 million using repatriated non-U.S. cash.
“Our performance continues to show that Pitney Bowes is moving
to growth and our strategy is delivering results,” said Marc B.
Lautenbach, President and CEO, Pitney Bowes. “Revenue was strong in
the quarter as our business continues to shift to the higher-growth
markets. Our first quarter results demonstrate that we are making
progress which sets us up to deliver our financial commitments for
the year.”
On April 30, 2018, Pitney Bowes announced that it signed a
definitive agreement for the sale of its Document Management
Technologies (DMT) production mail business to Platinum Equity for
$361 million, subject to certain adjustments. The company expects
proceeds from the sale of approximately $270 million, net of
estimated closing costs, transaction fees and taxes. Also, included
in the transaction is the enterprise mail, print and data
management software that integrates data with print streams to
optimize document output for high-volume production mailers. The
transaction is likely to be completed late in the second or early
in the third quarter subject to customary closing conditions.
Pitney Bowes expects to use the majority of the net proceeds from
the sale to pay down debt.
“Our decision to sell our DMT production mail business is the
result of a thorough evaluation of the best opportunity for
long-term growth for both DMT and Pitney Bowes,” said Lautenbach.
“As a stand-alone business, DMT will have greater flexibility and
opportunity to build on its industry-leading portfolio, create
greater market opportunity and deliver new client value. For Pitney
Bowes, this transaction supports our move to higher growth markets
and aligns with our strategic intent to do in the shipping market
what we’ve done in mailing for almost 100 years – enabling global
commerce by taking out the complexity and enhancing the value for
clients.”
First Quarter 2018 Results
Revenue totaled $983 million, which was an increase of 18
percent as reported and 15 percent at constant currency versus
prior year.
Commerce Services revenue grew 73 percent as reported and 71
percent at constant currency. Small and Medium Business (SMB)
Solutions revenue declined 6 percent as reported and 8 percent at
constant currency. Software Solutions revenue increased 4 percent
as reported and 1 percent at constant currency. Production Mail
revenue increased 9 percent as reported and 6 percent at constant
currency.
GAAP earnings per diluted share (GAAP EPS) were $0.28, which
included $0.01 for transaction costs largely related to the sale of
Production Mail and its supporting software. Adjusted earnings per
diluted share (Adjusted EPS) were $0.30.
The Company’s earnings per share results for the first quarter
are summarized in the table below:
First Quarter*
2018 2017
GAAP
EPS $0.28 $0.35 Transaction
costs $0.01 - Restructuring charges, net
- $0.01
Adjusted EPS
$0.30 $0.36
* The sum of the earnings per share may not equal the totals
above due to rounding.
GAAP Cash from Operations and Free Cash Flow Results
GAAP cash from operations during the quarter was $83 million and
free cash flow was $65 million. Compared to the prior year, free
cash flow decreased by $46 million primarily due to the timing of
working capital, largely within accounts receivable.
During the quarter, the Company paid down $255 million of debt
using repatriated non-U.S. cash. The Company also used cash to
return $35 million in dividends to shareholders and pay $16 million
for restructuring payments.
First Quarter 2018 Business Segment Reporting
Effective January 1, 2018, the Company revised its business
reporting groups to reflect how it manages these groups and the
clients served in each market.
The Commerce Services group includes the Global Ecommerce and
Presort Services segments. Global Ecommerce facilitates global
cross-border ecommerce transactions and domestic retail and
ecommerce shipping solutions, including fulfillment and returns.
Presort Services provides sortation services to qualify large mail
volumes for postal worksharing discounts.
The SMB Solutions group offers mailing and office shipping
solutions, financing, services, and supplies for small and medium
businesses to help simplify and save on the sending, tracking and
receiving of letters, parcels and flats. This group includes the
North America Mailing and International Mailing segments.
Software Solutions provide customer engagement, customer
information, location intelligence software and data.
Production Mail provides mailing and printing equipment and
services for large enterprise clients to process mail.
The results for each segment within the group may not equal the
subtotals for the group due to rounding.
Commerce
Services
($ millions) First Quarter
Revenue
2018
2017
Y/Y
Reported
Y/Y
Ex
Currency
Global Ecommerce $247 $88 180% 177% Presort Services
134
133
1%
1%
Commerce Services $381 $221 73%
71% EBIT Global Ecommerce $(8) $(4) (81%)
Presort Services
27
31
(12%)
Commerce Services $19 $26 (27%)
EBITDA * Global Ecommerce $7 $3 120% Presort Services
33
38
(12%)
Commerce Services $40 $41 (3%)
* The Company uses segment EBIT as the primary measure of profit
and operational performance for each segment. The Company is adding
EBITDA as a useful non-GAAP measure in looking at the economics of
the segments, especially in light of the Company’s more recent,
larger acquisitions. EBITDA is provided in this table and
subsequent tables in this document. A reconciliation of segment
EBIT to segment EBITDA can be found in the financial schedules
appended to this presentation.
Global Ecommerce
Results included a full quarter of revenue from Newgistics. On a
proforma basis, Newgistics delivered 10 percent revenue growth,
which was driven by strong performance in both parcel and
fulfillment volumes.
Excluding Newgistics, the segment continued to generate
double-digit revenue growth, which was driven by strong performance
in both domestic shipping and cross border volumes. The EBIT loss
was driven primarily by investments in market growth opportunities
and operational excellence initiatives as well as the amortization
of acquisition-related intangible assets. EBITDA improved from
prior year driven by the higher revenue.
Presort Services
Revenue growth was driven by improved revenue per piece along
with higher volumes of First Class mail and flats processed but
partly offset by lower Standard Class mail volumes processed. EBIT
and EBITDA margin declined from prior year primarily due to higher
labor and transportation costs.
SMB Solutions
($ millions) First Quarter
Revenue
2018
2017
Y/Y
Reported
Y/Y
Ex
Currency
North America Mailing $325 $356 (8%) (9%) International Mailing
98
93
5%
(6%)
SMB Solutions $423 $449 (6%)
(8%) EBIT North America Mailing $119 $141
(15%) International Mailing
16
13
20%
SMB Solutions $135 $154 (12%)
EBITDA North America Mailing $136 $157 (13%) International
Mailing
20
18
14%
SMB Solutions $157 $175 (10%)
North America Mailing
Equipment sales declined largely due to lower sales in the top
of the line products and a lower level of client lease extensions.
Recurring revenue streams declined, largely around financing,
rentals and service revenues. EBIT and EBITDA margins were lower
than prior year largely due to the decline in recurring streams and
equipment sales mix, but partially offset by lower expenses.
International Mailing
Revenue increased as reported but declined at constant currency.
Equipment sales benefited from growth in Germany and France, but
was offset by a decline largely in the UK. EBIT and EBITDA margins
improved versus prior year primarily driven by lower expenses.
Software Solutions
($ millions) First Quarter
2018
2017
Y/Y
Reported
Y/Y
Ex
Currency
Revenue $82 $78 4% 1% EBIT $5 $3 76% EBITDA $7 $5 50%
Software Solutions
Revenue grew over prior year. Results reflect the implementation
of the new revenue recognition standard (ASC 606). Revenue and EBIT
were favorably impacted in the quarter by $11 million and $9
million, respectively, as a result of the timing of the revenue
recognition. Excluding this impact, revenue declined from prior
year driven by a lower level of large deals in the quarter. This
quarter’s performance was also impacted by a higher mix of SaaS
deals relative to up-front license deals. EBIT and EBITDA margins
increased from prior year largely driven by the higher revenue.
While the Company benefited from the timing of recognized
revenue this quarter, the Company does not expect the full year
impact of ASC 606 to be material.
Production Mail
($ millions) First Quarter
2018
2017
Y/Y
Reported
Y/Y
Ex
Currency
Revenue $97 $89 9% 6% EBIT $10 $9 7% EBITDA $10 $10 5%
Production Mail
Equipment sales grew double-digits versus prior year largely due
to higher inserter and printer placements. EBIT and EBITDA margins
were relatively flat compared to prior year as a result of the
higher revenue offset by the mix of products within equipment
sales.
2018 Guidance
The Company is reaffirming its annual guidance and updating
solely to reflect the impact of the definitive agreement to sell
Production Mail and its supporting software. Beginning in the
second quarter, Production Mail and its supporting software will be
reported as discontinued operations.
- Revenue, on a constant currency basis,
is now expected to be in the range of 11 percent to 15 percent
growth, when compared to 2017.
- Adjusted EPS is now expected to be in
the range of $1.15 to $1.30.
- Free cash flow is now expected to be in
the range of $300 million to $350 million.
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 2017 Form 10-K Annual Report and other
reports filed with the Securities and Exchange Commission. 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. Revenue guidance is provided on a constant
currency basis. The Company cannot reasonably predict the impact
that future changes in currency exchange rates will have on revenue
and net income. Additionally, the Company cannot provide GAAP EPS
and GAAP cash from operations guidance due to the uncertainty of
future potential restructurings, goodwill and asset write-downs,
unusual tax settlements or payments and special contributions to
its pension funds, acquisitions, divestitures and other potential
adjustments, which could (individually or in the aggregate) have a
material impact on the Company’s performance. The Company’s
guidance is based on an assumption that the global economy and
foreign exchange markets in 2018 will not change significantly. The
Company’s guidance also includes changes in accounting standards
implemented at the beginning of the year.
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.pitneybowes.com.
About Pitney Bowes
Pitney Bowes (NYSE:PBI) is a global technology company providing
commerce solutions that power billions of transactions. Clients
around the world, including 90 percent of the Fortune 500, rely on
the accuracy and precision delivered by Pitney Bowes solutions,
analytics, and APIs in the areas of ecommerce fulfillment, shipping
and returns; cross-border ecommerce; presort services; office
mailing and shipping; location data; and software. For nearly 100
years Pitney Bowes has been innovating and delivering technologies
that remove the complexity of getting commerce transactions
precisely right. For additional information visit Pitney Bowes, the
Craftsmen of Commerce, at www.pitneybowes.com.
Use of Non-GAAP Measures
The Company's financial results are reported in accordance with
generally accepted accounting principles (GAAP); however, in its
disclosures the Company uses certain non-GAAP measures, such as
adjusted earnings before interest and taxes (EBIT), adjusted
earnings before interest, taxes, depreciation and amortization
(EBITDA), adjusted earnings per share (EPS), revenue growth on a
constant currency basis and free cash flow.
The Company reports measures such as adjusted EBIT, adjusted EPS
and adjusted net income to exclude the impact of special items like
restructuring charges, tax adjustments, goodwill and asset
write-downs, and costs related to dispositions and acquisitions.
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.
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.
Constant currency is calculated by converting our current quarter
reported results using the prior year’s exchange rate for the
comparable quarter. This comparison allows an investor insight into
the underlying revenue performance of the business and true
operational performance from a comparable basis to prior period. A
reconciliation of reported revenue to constant currency revenue can
be found in the Company’s attached financial schedules.
The Company reports free cash flow in order to provide investors
insight into the amount of cash that management could have
available for other discretionary uses. Free cash flow adjusts GAAP
cash from operations for capital expenditures, restructuring
payments, unusual tax settlements, special contributions to the
Company’s pension fund and cash used for other special items. A
reconciliation of GAAP cash from operations to free cash flow can
be found in the Company’s attached financial schedules.
Segment EBIT is the primary measure of profitability and
operational performance at the segment level. Segment EBIT is
determined by deducting from segment 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.
The Company has also included segment EBITDA as a useful measure
for profitability and operational performance, and an additional
way to look at the economics of the segments, especially in light
of some of the Company’s more recent, larger acquisitions. Segment
EBITDA further excludes depreciation and amortization expense for
the segment. A reconciliation of segment EBIT and EBITDA to total
net income can be found in the attached financial schedules.
Pitney Bowes has provided a quantitative reconciliation to GAAP
in supplemental schedules. This information can 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: declining physical
mail volumes; competitive factors, including pricing pressures,
technological developments, the introduction of new products and
services by competitors, and fuel prices; our success in developing
new products and services, including digital-based products and
services, obtaining regulatory approvals, if needed, of new
products, and the market’s acceptance of these new products and
services; our ability to fully utilize the enterprise business
platform in North America, and successfully deploy it in major
international markets without significant disruptions to existing
operations; a breach of security, including a cyberattack or other
comparable event; the continued availability and security of key
information technology systems and the cost to comply with
information security requirements and privacy laws; changes in
postal or banking regulations; changes in, or loss of, our
contractual relationships with the United States Postal Service;
the risk of losing large clients in the Global Ecommerce segment;
macroeconomic factors, including global and regional business
conditions that adversely impact customer demand, foreign currency
exchange rates, interest rates and labor conditions; capital market
disruptions or credit rating downgrades that adversely impact our
ability to access capital markets at reasonable costs; management
of outsourcing arrangements; integrating newly acquired businesses,
including operations and product and service offerings; management
of customer credit risk and other factors beyond its control as
more fully outlined in the Company's 2017 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, 2018 and 2017, and
consolidated balance sheets as of March 31, 2018 and December 31,
2017 are attached.
Pitney Bowes Inc. Consolidated Statements of Income
(Unaudited; in thousands, except share and per share amounts)
Three months ended March 31, 2018
2017
Revenue: Equipment sales $ 155,808 $ 162,974 Supplies 65,374 66,818
Software 81,616 77,867 Rentals 95,280 99,870 Financing 80,103
85,745 Support services 118,463 118,847 Business services 386,538
224,519 Total revenue 983,182
836,640 Costs and expenses: Cost of equipment sales
78,751 69,562 Cost of supplies 21,147 21,471 Cost of software
25,353 25,308 Cost of rentals 24,596 20,662 Financing interest
expense 12,225 12,974 Cost of support services 75,572 73,354 Cost
of business services 297,399 150,843 Selling, general and
administrative (1) 312,108 304,847 Research and development 32,784
31,856 Restructuring charges, net 1,021 2,082 Other components of
net pension and postretirement cost (1) (1,719 ) 1,456 Interest
expense, net 30,853 25,676 Total costs and expenses
910,090 740,091 Income before
income taxes 73,092 96,549 Provision for income taxes 19,579 31,416
Net income $ 53,513 $ 65,133
Basic earnings per share $ 0.29 $ 0.35 Diluted
earnings per share $ 0.28 $ 0.35
Weighted-average shares used in diluted earnings per share
188,174,983 186,875,143 (1) Effective
Janaury 1, 2018, components of net periodic pension and
postretirement costs, other than service costs, are required to be
reported seperately. Accordingly, for the three months ended March
31, 2017, $1.5 million of costs have been reclassified from
selling, general and administrative expense to Other components of
net pension and postretirement cost.
Pitney Bowes
Inc. Consolidated Balance Sheets (Unaudited; in
thousands, except share amounts)
March 31,
December 31,
Assets
2018
2017
Current assets: Cash and cash equivalents $ 719,875 $ 1,009,021
Short-term investments 55,603 48,988 Accounts receivable, net
488,028 524,424 Short-term finance receivables, net 792,802 828,003
Inventories 96,224 89,679 Current income taxes 42,274 58,439 Other
current assets and prepayments 94,227 77,954
Total current assets 2,289,033 2,636,508
Property, plant and equipment, net 386,977 379,044 Rental property
and equipment, net 182,727 185,741 Long-term finance receivables,
net 640,987 652,087 Goodwill 1,965,984 1,952,444 Intangible assets,
net 261,318 272,186 Noncurrent income taxes 61,367 59,909 Other
assets 531,225 540,796 Total
assets $ 6,319,618 $ 6,678,715
Liabilities and
stockholders' equity
Current liabilities: Accounts payable and accrued liabilities $
1,375,166 $ 1,486,741 Current income taxes 9,457 8,823 Current
portion of long-term debt 327,429 271,057 Advance billings
292,174 288,372 Total current
liabilities 2,004,226 2,054,993 Deferred taxes on income
239,472 234,643 Tax uncertainties and other income tax liabilities
112,520 116,551 Long-term debt 3,248,713 3,559,278 Other noncurrent
liabilities 499,794 524,689
Total liabilities 6,104,725 6,490,154
Stockholders' equity: Cumulative preferred stock, $50 par
value, 4% convertible 1 1 Cumulative preference stock, no par
value, $2.12 convertible 422 441 Common stock, $1 par value 323,338
323,338 Additional paid-in-capital 119,647 138,367 Retained
earnings 5,235,874 5,229,584 Accumulated other comprehensive loss
(771,995 ) (792,173 ) Treasury stock, at cost (4,692,394 )
(4,710,997 ) Total stockholders' equity
214,893 188,561 Total liabilities and
stockholders' equity $ 6,319,618 $ 6,678,715
Pitney Bowes Inc.
Business Segments
(Unaudited; in thousands)
Three months ended March 31, 2018
2017
Revenue
Global Ecommerce $ 246,590 $ 88,152 Presort Services
134,458 132,677
Commerce Services
381,048 220,829 North America
Mailing 325,430 355,578 International Mailing 97,897
93,058
Small & Medium Business Solutions
423,327 448,636 Software
Solutions 81,616 78,220 Production Mail 97,191 88,955
Total revenue $ 983,182 $ 836,640
EBIT
Global Ecommerce $ (7,711 ) $ (4,270 ) Presort Services
27,026 30,717
Commerce Services
19,315 26,447 North America
Mailing 119,471 141,008 International Mailing 15,892
13,269
Small & Medium Business Solutions
135,363 154,277 Software
Solutions 4,849 2,749 Production Mail 9,619 8,964
Segment EBIT (1) $ 169,146 $ 192,437
EBITDA
Global Ecommerce $ 6,719 $ 3,052 Presort Services
33,188 37,915
Commerce Services
39,907 40,967 North America Mailing
136,320 157,003 International Mailing 20,413
17,966
Small & Medium Business Solutions
156,733 174,969 Software Solutions
7,270 4,837 Production Mail 10,261 9,733
Segment EBITDA (2) $ 214,171 $ 230,506
Reconciliation of segment EBITDA to net income
Segment EBITDA $ 214,171 $ 230,506 Less: Segment
depreciation and amortization (3) (45,025 ) (38,069 )
Segment EBIT 169,146 192,437 Corporate expenses
(49,361 ) (55,156 )
Adjusted EBIT 119,785 137,281
Interest, net (4) (43,078 ) (38,650 ) Restructuring charges, net
(1,021 ) (2,082 ) Transaction costs (2,594 ) - Provision for income
taxes (19,579 ) (31,416 )
Net income $ 53,513
$ 65,133 (1) Segment EBIT excludes interest,
taxes, general corporate expenses, restructuring charges, and other
items that are not allocated to a particular business segment. (2)
Segment EBITDA is calculated as Segment EBIT plus segment
depreciation and amortization expense. (3) Includes depreciation
and amortization expense of reporting segments only. Does not
include corporate depreciation and amortization expense. (4)
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, 2018 2017 Y/Y
Chg. Reconciliation of reported revenue to revenue
excluding currency Revenue, as reported $ 983,182 $ 836,640
Favorable impact on revenue due to currency (19,537 )
Revenue, excluding currency $ 963,645 $ 836,640
15 %
Reconciliation of reported net income
to adjusted net income Net income $ 53,513 $ 65,133
Restructuring charges, net 755 1,353 Transaction costs 1,932
- Net income, as adjusted $ 56,200 $
66,486
Reconciliation of reported diluted
earnings per share to adjusted diluted earnings per share
Diluted earnings per share $ 0.28 $ 0.35 Restructuring charges, net
0.00 0.01 Transaction costs 0.01 -
Diluted earnings per share, as adjusted $ 0.30 $ 0.36
Note: The sum of the earnings per share amounts may
not equal the totals due to rounding.
Reconciliation of reported net cash from operating activities to
free cash flow Net cash provided by operating activities $
82,672 $ 154,006 Capital expenditures (42,923 ) (35,920 )
Restructuring payments 15,702 12,416 Reserve account deposits 6,654
(19,346 ) Transaction costs 2,594 -
Free cash flow $ 64,699 $ 111,156
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Pitney Bowes Inc.EditorialBill Hughes, 203-351-6785Chief
Communications OfficerorFinancialAdam David, 203-351-7175VP,
Investor Relations
Pitney Bowes (NYSE:PBI)
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