Pitney Bowes Inc. (NYSE: PBI), a global technology company that
provides commerce solutions in the areas of ecommerce, shipping,
mailing and financial services, today announced its financial
results for the first quarter 2020.
“Clearly, we are all operating in unprecedented times and
unchartered territory. Our first priority remains around the
health, well-being and safety of our workforce, clients, partners
and suppliers,” said Marc B. Lautenbach, President and CEO, Pitney
Bowes. “Given these challenging times, I am proud of how our team
worked together and supported our clients in the first quarter.
These actions are consistent with the culture Pitney Bowes has
built over the last 100 years and what will carry us into our next
100 years as a Company. Today, thousands of women and men across
Pitney Bowes continue to play a critical role in the economy by
keeping mail and parcels moving, by keeping our clients’ equipment
running, and by keeping our supply chain flowing. I want to
acknowledge and thank our employees for the incredible work they
each are doing under these difficult circumstances. In the same
way, we salute the many selfless Americans that are doing essential
work to help our country through this difficult period.”
Lautenbach continued, “It is important to note that businesses
engaged in mailing and shipping, which includes Pitney Bowes, have
been designated an essential service by the Department of Homeland
Security. The sending of mail and parcels is critical to our
economy and we understand how vital it is for our clients.”
“Over the last several years, we have made strategic decisions
to strengthen our portfolio, products and balance sheet for
long-term growth. As a result, we are in a much better position to
weather this situation and come out stronger as a Company.”
Financial Overview:
- Revenue of $796 million, flat to prior year; growth of 1
percent when adjusted for the impact of currency and market
exits
- GAAP EPS was a loss of $1.22; Adjusted EPS of $0.05
- EPS was negatively impacted by $0.05 as a result of the
increase in credit loss provisions to reflect current
macro-environment conditions in connection with the application of
the current expected credit losses (CECL) accounting standard on
January 1, 2020.
- GAAP EPS includes a non-cash $1.15 per share goodwill
impairment charge related to the Global Ecommerce business.
- GAAP cash from operations was a use of $66 million; free cash
flow was a use of $47 million.
- Based on the uncertainty around Covid-19, the Company is
suspending its 2020 annual guidance.
Other Highlights:
- The Company secured a new $850 million five-year Term Loan B;
proceeds along with cash on the balance sheet used to pre-pay $928
million in near-term debt maturities.
- The Company’s next bond maturity is not due until October 2021
for $172 million.
- In April, the Company drew down $100 million from its revolving
credit facility to hold in reserves. The Company continues to have
access to the remaining balance of $400 million and is in
compliance with all of its financial covenants contained in the
credit facility.
- The Company ended the first quarter with $730 million in cash
and short-term investments on its balance sheet and remains
confident in its liquidity position.
- The Board of Directors has declared a quarterly cash dividend
on the Company’s common stock of $0.05 per share.
First Quarter Results
Revenue totaled $796 million, which was flat to prior year.
Revenue grew 1 percent over prior year when adjusted for both the
impact of currency and the January 2019 sale of direct operations
in 6 smaller European markets (market exits).
GAAP earnings per share was a loss of $1.22, which included a
non-cash $1.15 per share goodwill impairment charge related to the
Global Ecommerce business, $0.16 for the extinguishment of debt,
$0.02 for restructuring charges and a benefit of $0.06 for
discontinued operations. Adjusted earnings per share were
$0.05.
EPS was negatively impacted by $0.05 as a result of the increase
in credit loss provisions to reflect current macro-environment
conditions in connection with the application of the current
expected credit losses (CECL) accounting standard on January 1,
2020.
GAAP cash from operations was a use of $66 million, which
included taxes related to the Software Solutions sale. Free cash
flow was a use of $47 million. Compared to prior year, the decline
in free cash flow was principally driven by higher accounts payable
and accrued liabilities predominantly as a result of timing, in
part due to the acceleration of interest payments related to the
tender offer completed in the first quarter. Free cash flow versus
prior year was also impacted by a lower run-off of finance
receivables.
During the quarter, the Company used cash to reduce total debt
by $110 million, paid $30 million as a premium payment to redeem
debt, invested $26 million in capital expenditures, paid $9 million
in dividends to its common shareholders and made $6 million in
restructuring payments.
Earnings per share results for the first quarter are summarized
in the table below:
First Quarter*
2020
2019
GAAP EPS
($1.22)
($0.01)
Discontinued operations
(0.06)
-
GAAP EPS from continuing
operations
($1.28)
(0.01)
Goodwill impairment charge
1.15
-
Extinguishment of debt
0.16
-
Restructuring charges
0.02
0.01
Loss from market exits
-
0.10
Adjusted EPS
$0.05
$0.11
* The sum of the earnings per share may not equal the totals due
to rounding.
Business Segment Reporting
The Commerce Services group includes the Global Ecommerce and
Presort Services segments. Global Ecommerce facilitates domestic
retail and ecommerce shipping solutions, including fulfillment and
returns, and global cross-border ecommerce transactions. Presort
Services provides sortation services to qualify large volumes of
First Class Mail, Marketing Mail, Marketing Mail Flats and Bound
Printed Matter for postal workshare discounts.
The Sending Technology Solutions segment offers physical and
digital mailing and shipping technology solutions, financing,
services, supplies and other applications for small and medium
businesses to help simplify and save on the sending, tracking and
receiving of letters, parcels and flats.
The sum of the segment results may not equal the totals due to
rounding.
Commerce Services
First Quarter
($ millions)
2020
2019
Y/Y
Reported
Y/Y
Ex Currency
Revenue
Global Ecommerce
$292
$266
10%
10%
Presort Services
141
135
4%
4%
Commerce Services
$433
$401
8%
8%
EBITDA
Global Ecommerce
($11)
$2
>(100%)
Presort Services
23
22
7%
Commerce Services
$12
$24
(49%)
EBIT
Global Ecommerce
($29)
($15)
>(100%)
Presort Services
16
15
4%
Commerce Services
($14)
-
>(100%)
Global Ecommerce
Revenue growth driven by growth in Delivery and Fulfilment
Services. EBIT and EBITDA margins were impacted by the mix of
business and incremental costs associated with new facilities that
opened during the fourth quarter 2019.
Covid-19 adversely impacted revenue and drove lower productivity
across all sites, which was in part due to the difficulty in
predicting accurate levels of consumer demand which impacted
staffing levels. The business implemented CDC guidelines around
social distancing at each sorting facility and incurred higher
costs related to sanitizing facilities, staggered break and shift
scheduling as well as health and temperature screenings.
Presort Services
Revenue growth was driven by investments in acquisitions for
expansion along with higher revenue per piece. Volumes grew in
First Class Mail and Marketing Mail Flats, which was partly offset
by a decline in Marketing Mail. EBIT and EBITDA growth versus prior
year were negatively impacted by $4 million from unrealized losses
on certain investment securities driven by changes in the financial
markets. Labor costs per piece improved from prior year as a result
of productivity initiatives.
Covid-19 had an impact primarily on Marketing Mail volumes in
addition to productivity across all sites during the first quarter.
The business implemented CDC guidelines around social distancing at
each sorting facility and incurred higher costs related to
sanitizing facilities, staggered break and shift scheduling as well
as health and temperature screenings.
SendTech Solutions
First Quarter
($ millions)
2020
2019
Y/Y
Reported
Y/Y
Ex Currency
Revenue
$363
$394
(8%)
(7%)
EBITDA
$116
$131
(12%)
EBIT
$107
$122
(13%)
Revenue declined driven by lower equipment, financing, support
services, supplies, and rentals, partly offset by higher business
services revenue.
Covid-19 adversely impacted revenue, particularly equipment
sales and supplies. In addition to the revenue loss, EBIT and
EBITDA were negatively impacted by $10 million as a result of the
increase in credit loss provisions to reflect the current
macro-environment conditions resulting from Covid-19 in connection
with the application of the CECL accounting standard.
2020 Guidance
Based on the level of uncertainty around the depth and duration
of Covid-19, in addition to the impact on clients, consumer demand
and suppliers, and how it may ultimately impact each of our
businesses, the Company is suspending guidance for the current
financial 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; office mailing and shipping;
presort services; and financing. For 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
EBITDA and adjusted EPS to exclude the impact of items like
discontinued operations, restructuring charges, gains, losses and
costs related to acquisitions and dispositions, asset impairment
charges, goodwill impairment charges and other unusual or one-time
items. While these are actual Company income or expenses, they can
mask underlying trends associated with its business. Such items are
often inconsistent in amount and frequency and as such, the
non-GAAP measures provide investors greater insight into the
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 is
calculated by converting the current period non-U.S. dollar
denominated revenue using the prior year’s exchange rate for the
comparable quarter. The Company also reported revenue growth
excluding the impact of currency and market exits, which excludes
the impact of changes in foreign currency exchange rates since the
prior period and the revenues associated with 2019 market exits in
several smaller markets. We believe that excluding the impacts of
currency exchange rates and the revenues associated with the recent
market exits in several smaller markets provides investors a better
understanding of the underlying revenue performance. A
reconciliation of reported revenue to constant currency revenue and
“constant currency revenue excluding the impact of currency and
market exits” can be found in the 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 cash flows of discontinued operations,
capital expenditures, restructuring payments, changes in customer
deposits held at the Pitney Bowes Bank, transaction costs and other
special items. A reconciliation of GAAP cash from operations to
free cash flow can be found in the 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 also provides segment EBITDA, which further excludes
depreciation and amortization expense for the segment, as an
additional useful measure of segment profitability and operational
performance. A reconciliation of segment EBIT and EBITDA to 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 the severity, magnitude and duration of the
Covid-19 pandemic (Covid-19), including governments' responses to
Covid-19, its continuing impact on our operations, employees,
global supply chain and consumer demand across our and our clients'
businesses as well as any deterioration or instability in global
macroeconomic conditions. Other factors, which could cause future
financial performance to differ materially from the expectations,
and which may also be exacerbated by Covid-19 or a negative change
in the economy, include, without limitation: declining physical
mail volumes; changes in postal regulations, or the financial
health of posts in the U.S. or other major markets or the loss of,
or significant changes to, our contractual relationship with the
United States Postal Service (USPS); our ability to continue to
grow volumes, gain additional economies of scale and improve
profitability within our Commerce Services group; the loss of some
of our larger clients in our Commerce Services group; our success
at managing customer credit risk; third-party suppliers' ability to
provide products and services required by our clients; changes in
labor conditions and transportation costs; capital market
disruptions or credit rating downgrades that adversely impact our
ability to access capital markets at reasonable costs; a breach of
security, including a future cyber-attack or other comparable
event; our success in developing and marketing new products and
services and obtaining regulatory approvals, if required;
competitive factors, including pricing pressures, technological
developments and the introduction of new products and services by
competitors and other factors as more fully outlined in the
Company's 2019 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, EBIT and
EBITDA by business segment; and reconciliations of GAAP to non-GAAP
measures for the three months ended March 31, 2020 and 2019, and
consolidated balance sheets as of March 31, 2020 and December 31,
2019 are attached.
Pitney Bowes Inc. Consolidated Statements of
Income (Loss) (Unaudited; in thousands, except share and per
share amounts)
Three months ended March
31,
2020
2019
Revenue: Business services
$
444,379
$
406,545
Support services
122,015
128,599
Financing
89,078
97,043
Equipment sales
76,273
89,787
Supplies
45,709
50,953
Rentals
18,814
22,157
Total revenue
796,268
795,084
Costs and expenses: Cost of business services
374,665
327,046
Cost of support services
39,760
41,847
Financing interest expense
12,489
11,364
Cost of equipment sales
57,359
63,665
Cost of supplies
12,240
13,550
Cost of rentals
6,378
9,715
Selling, general and administrative
248,633
261,669
Research and development
12,116
12,577
Goodwill impairment
198,169
-
Restructuring charges
3,817
3,700
Interest expense, net
25,883
27,602
Other components of net pension and postretirement income
(151
)
(638
)
Other expense, net
33,487
17,710
Total costs and expenses
1,024,845
789,807
(Loss) income from continuing operations before taxes
(228,577
)
5,277
(Benefit) provision for income taxes
(10,030
)
7,820
Loss from continuing operations
(218,547
)
(2,543
)
Income (loss) from discontinued operations, net of tax
10,064
(116
)
Net loss
$
(208,483
)
$
(2,659
)
Basic (loss) earnings per share (1): Continuing operations
$
(1.28
)
$
(0.01
)
Discontinued operations
0.06
-
Net loss
$
(1.22
)
$
(0.01
)
Diluted (loss) earnings per share (1): Continuing operations
$
(1.28
)
$
(0.01
)
Discontinued operations
0.06
-
Net loss
$
(1.22
)
$
(0.01
)
Weighted-average shares used in diluted earnings per share
170,912,395
185,970,755
(1)
The sum of the earnings per share amounts may not equal the totals
due to rounding.
Pitney Bowes Inc.
Consolidated Balance Sheets (Unaudited; in thousands, except
share amounts)
Assets
March 31,2020 December 31,2019 Current assets: Cash
and cash equivalents
$
663,072
$
924,442
Short-term investments
67,180
115,879
Accounts and other receivables, net
342,823
373,471
Short-term finance receivables, net
597,805
629,643
Inventories
71,848
68,251
Current income taxes
16,356
5,565
Other current assets and prepayments
111,104
101,601
Assets of discontinued operations
-
17,229
Total current assets
1,870,188
2,236,081
Property, plant and equipment, net
371,464
376,177
Rental property and equipment, net
40,264
41,225
Long-term finance receivables, net
601,547
625,487
Goodwill
1,125,035
1,324,179
Intangible assets, net
181,624
190,640
Operating lease assets
193,635
200,752
Noncurrent income taxes
73,186
71,903
Other assets
436,487
400,456
Total assets
$
4,893,430
$
5,466,900
Liabilities and stockholders'
equity Current liabilities: Accounts payable and accrued
liabilities
$
653,539
$
793,690
Customer deposits of Pitney Bowes Bank
590,230
591,118
Current operating lease liabilities
36,085
36,060
Current portion of long-term debt
62,952
20,108
Advance billings
96,641
101,920
Current income taxes
3,070
17,083
Liabilities of discontinued operations
-
9,713
Total current liabilities
1,442,517
1,569,692
Long-term debt
2,567,010
2,719,614
Deferred taxes on income
275,815
274,435
Tax uncertainties and other income tax liabilities
36,096
38,834
Noncurrent operating lease liabilities
171,079
177,711
Other noncurrent liabilities
371,483
400,518
Total liabilities
4,864,000
5,180,804
Stockholders' equity: Common stock, $1 par value
323,338
323,338
Additional paid-in-capital
69,553
98,748
Retained earnings
5,200,024
5,438,930
Accumulated other comprehensive loss
(857,874
)
(840,143
)
Treasury stock, at cost
(4,705,611
)
(4,734,777
)
Total stockholders' equity
29,430
286,096
Total liabilities and stockholders' equity
$
4,893,430
$
5,466,900
Pitney Bowes Inc. Business Segment
Revenue (Unaudited; in thousands)
Three months ended March
31,
2020
2019
% Change
REVENUE Global Ecommerce
$
292,323
$
266,254
10
%
Presort Services
140,720
134,847
4
%
Commerce Services
433,043
401,101
8
%
Sending Technology Solutions
363,225
393,983
(8
%)
Total revenue - GAAP
796,268
795,084
0
%
Currency impact on revenue
2,339
-
Revenue, at constant currency
798,607
795,084
0
%
Less revenue from Market Exits
552
4,102
Revenue, excluding currency and Market Exits
$
798,055
$
790,982
1
%
Pitney Bowes Inc. Business Segment EBIT
& EBITDA (Unaudited; in thousands)
Three Months Ended March
31,
2020
2019
% change
EBIT (1)
D&A
EBITDA
EBIT (1)
D&A
EBITDA
EBIT
EBITDA
Global Ecommerce
$
(29,475
)
$
18,065
$
(11,410
)
$
(14,600
)
$
16,458
$
1,858
>(100
%)
>(100
%) Presort Services
15,695
7,774
23,469
15,066
6,920
21,986
4
%
7
%
Commerce Services
(13,780
)
25,839
12,059
466
23,378
23,844
>(100
%)
(49
%)
Sending Technology Solutions
106,562
9,039
115,601
122,403
8,857
131,260
(13
%)
(12
%)
Segment total
$
92,782
$
34,878
127,660
$
122,869
$
32,235
155,104
(24
%)
(18
%)
Reconciliation of Segment EBITDA to Net Loss: Segment
depreciation and amortization
(34,878
)
(32,235
)
Unallocated corporate expenses (2)
(43,722
)
(56,958
)
Interest, net
(38,372
)
(38,966
)
Goodwill impairment
(198,169
)
-
Restructuring charges
(3,817
)
(3,700
)
Loss on extinguishment of debt
(36,987
)
-
Loss on Market Exits
-
(17,710
)
Transaction costs
(292
)
(258
)
Benefit (provision) for income taxes
10,030
(7,820
)
Loss from continuing operations
(218,547
)
(2,543
)
Income (loss) from discontinued operations, net of tax
10,064
(116
)
Net loss
$
(208,483
)
$
(2,659
)
(1)
Segment EBIT excludes interest,
taxes, general corporate expenses, restructuring charges, and other
items that are not allocated to a particular business segment.
(2)
Includes corporate depreciation
and amortization expense of $5,841 and $4,650 for the three months
ended March 31, 2020 and 2019, respectively.
Pitney Bowes Inc. Reconciliation of
Reported Consolidated Results to Adjusted Results (Unaudited;
in thousands, except per share amounts)
Three months ended March
31,
2020
2019
Reconciliation of reported net loss to adjusted net
income, adjusted EBIT and adjusted EBITDA Net loss
$
(208,483
)
$
(2,659
)
(Income) loss from discontinued operations, net of tax
(10,064
)
116
Goodwill impairment
196,600
-
Restructuring charges
2,671
2,745
Loss on extinguishment of debt
27,777
-
Loss on disposition of businesses
-
19,423
Transaction costs
223
192
Adjusted net income
8,724
19,817
Interest, net
38,372
38,966
Provision for income taxes, as adjusted
1,964
7,128
Adjusted EBIT
49,060
65,911
Depreciation and amortization
40,719
36,885
Adjusted EBITDA
$
89,779
$
102,796
Reconciliation of reported diluted loss per share to
adjusted diluted earnings per share Diluted loss per share
$
(1.22
)
$
(0.01
)
Income from discontinued operations, net of tax
(0.06
)
-
Goodwill impairment
1.15
-
Restructuring charges
0.02
0.01
Loss on extinguishment of debt
0.16
-
Loss on disposition of businesses
-
0.10
Adjusted diluted earnings per share
$
0.05
$
0.11
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 (used in) provided by operating activities
$
(66,284
)
$
69,728
Net cash used in (provided by) operating activities - discontinued
operations
37,805
(1,257
)
Capital expenditures
(25,778
)
(27,694
)
Restructuring payments
6,047
8,246
Change in customer deposits at PB Bank
(888
)
(23,036
)
Transaction costs paid
1,740
1,839
Free cash flow
$
(47,358
)
$
27,826
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200504005138/en/
Editorial - Bill Hughes Chief Communications Officer
203/351-6785
Financial - Adam David VP, Investor Relations 203/351-7175
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