Hestia Capital Issues Letter to Pitney Bowes Stockholders from Lance Rosenzweig, its Proposed Interim CEO and a Proven Turnaround Expert
April 04 2023 - 9:00AM
Business Wire
Highlights Mr. Rosenzweig’s Strong Track
Record as a Public Company CEO, Including Recently Overseeing Total
Stockholder Returns of 630% at Support.com, Inc.
Provides Overview of Full Slate’s Turnaround
Plan and Strategy, Which Targets a $15+ Stock Price in the Coming
Years and Longer-Term Value Creation for all Stakeholders
Visit www.TransformPBI.com to Obtain
Important Information and Voting Resources
Hestia Capital Management, LLC (collectively with its
affiliates, “Hestia” or “we”), which is the third largest
stockholder of Pitney Bowes, Inc. (NYSE: PBI) (“Pitney Bowes” or
the “Company”) and has a beneficial ownership position of 8.4% of
the Company’s outstanding common stock, today issued a letter to
fellow stockholders from Lance Rosenzweig, who is the firm’s
proposed interim Chief Executive Officer and a proven turnaround
expert in the ecommerce and technology service industries.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20230404005543/en/
Hestia is seeking to elect five highly qualified and independent
candidates to Pitney Bowes’ nine-member Board of Directors (the
“Board”) at the 2023 Annual Meeting of Stockholders (the “Annual
Meeting”). To maximize the likelihood of a turnaround at Pitney
Bowes, we urge you to vote for Hestia’s full slate on the
WHITE proxy card or
WHITE voting instruction form.
Visit www.TransformPBI.com to download a copy of today’s letter and
sign up for future updates.
***
A Letter from Hestia’s Interim
CEO Candidate, Lance Rosenzweig
April 4, 2023
Dear Pitney Bowes Stockholder,
I am writing to introduce myself and underscore the importance
of this year’s Annual Meeting, where you can vote to elect five
Hestia-nominated director candidates that have spent months
diagnosing Pitney Bowes’ challenges and developing a turnaround
strategy that targets a $15+ stock price in
the coming years. The Hestia slate believes that immediate
changes in leadership and strategy are needed at Pitney Bowes in
light of the following:
- An 80% decline in stockholder value over the past eight
years;
- Unsustainable losses within the Company’s Global Ecommerce
(“GEC”) segment;
- No articulated plan to address the $1.7 billion in debt
maturing over the next six years;
- A “junk” credit rating following six downgrades by ratings
agencies;
- A 90% decline in annual cash flow under current management to
$51 million in 2022; and
- The prospect of the Company having to cut its dividend, which
would punish all stockholders, unless our slate’s proposed
strategic changes are made.
While Pitney Bowes appears to be in critical condition today, I
am excited by the prospect of becoming interim Chief Executive
Officer and drawing on my turnaround experience to stabilize the
organization and set it on a path to long-term value creation. The
Company has attractive assets, cash-generating segments, dedicated
and talented employees, and a storied brand that can once again be
the envy of the mailing and shipping worlds. These will be the
pillars of the turnaround strategy (described
in more detail below) which I intend to help a reconstituted
Board implement.
My Background as a CEO and Introduction
to Hestia
I have spent the past three decades holding executive leadership
roles and director positions at public and private companies,
including ecommerce and technology businesses needing
transformation. I was most recently the Chief Executive Officer of
Support.com, Inc. (formerly NASDAQ: SPRT), which delivered total
stockholder returns of more than 630% during my tenure. I also
served as the Chief Executive Officer of Startek Inc. (NYSE: SRT),
where I stabilized a struggling organization with more than 40,000
employees and dramatically improved earnings, and PeopleSupport,
Inc. (formerly NASDAQ: PSPT), which I co-founded, built into one of
the fastest growing public companies in the U.S. and helped achieve
attractive stockholder returns. I also led successful turnarounds
as Chief Executive Officer of two private equity-owned
companies.
I was introduced to Hestia last fall as someone who could
provide insight on turning around Pitney Bowes. I independently
assessed the firm’s investment thesis throughout the winter before
ultimately drawing the same conclusions as Hestia about the need
for significant change. I likewise appreciated Hestia’s principles,
which focus on maximizing stockholder returns by creating lasting
value for customers, employees and all other stakeholders. I
concluded that if Hestia felt compelled to seek a change in control
of the Board at this year’s Annual Meeting, my background and
experience would be well aligned with Pitney Bowes’ most pressing
needs.
The Path to Averting Financial Distress
and Reaching $15+ Per Share
There is an urgent need for a new, turnaround-centric strategy
at Pitney Bowes in light of the $1.7 billion in debt maturing in
the next six years and long-term decline in share price. While the
current Board is expressing unanimous support for existing
management and its cash-burning, “stay the course” strategy, our
slate intends to “course correct” by placing the Company on a path
to profitable growth. This begins with electing all five members of
our slate to the Company’s nine-member Board. Absent a
change-in-control of the Board, stockholders, employees and other
stakeholders will be relying on the same leadership team and
strategy that has pushed the Company into significant financial
distress, putting both the dividend and upcoming debt obligations
at risk.
I have worked with Hestia to help assemble an exceptional slate
of director candidates with the right expertise and experience to
fix Pitney Bowes’ most glaring issues and lay a foundation for
long-term success. I have worked closely with our slate and leading
experts from the mailing and shipping industries to set the
strategic priorities below. The Hestia slate intends to begin
executing on these priorities immediately following the Annual
Meeting:
- Optimize Corporate Cost Structure – Pitney Bowes’
unallocated corporate expenses, which cover administrative
functions, exceeded $200 million in fiscal year 2022. This is an
excessive sum given that this $675 million market cap Company’s
business segments incur most of their own selling, general and
administrative expenses, totaling more than $900 million last year
alone. Based on our slate’s analysis, there is a significant
opportunity to consolidate, re-engineer and/or streamline
non-essential functions. There is also runway to reduce marketing
and other unnecessary spending once the Company is no longer
chasing unprofitable growth. I intend to work with the
reconstituted Board and the Company’s segment leaders to target at
least $50 million in annualized corporate expense reductions during
my first 100 days. While all of our
candidates will bring expertise related to this area, my background
and experience are well suited for this important
task.
- Restore GEC to Profitability & Explore Alternatives
– GEC had negative EBIT of $100 million for fiscal year 2022, yet
again validating that the Board and management’s strategy is not
working. I intend to work with Company leaders and the
reconstituted Board to dramatically reduce GEC’s cash burn by
implementing alternative pricing strategies for unprofitable
clients, optimizing the GEC logistics network, narrowing the scope
of marketing and focusing on profitable revenues (with a new sales
compensation plan aligned with this goal). These steps, among
others, can enable GEC to successfully execute a niche strategy
that focuses on profitability over sales. Our slate also intends to
run a process to explore strategic alternatives that can deliver
significant value to the Company in an expedited, yet prudent,
manner. A properly reconstituted Board that is not biased by prior
leadership’s $1+ billion in GEC-related investments will be best
positioned to work with truly independent advisors to review
alternatives. Todd Everett, who was the
Chief Executive Officer of Newgistics, Inc. when it was profitably
growing and acquired by Pitney Bowes, will lead this initiative at
the Board level.
- Drive Profitable Growth in SendTech – SendTech generated
$1.36 billion in revenue and more than $400 million in EBIT last
year. The segment includes a legacy postage meter business, a newer
and subscale shipping label software business, and the Pitney Bowes
Bank. Our slate sees opportunities to drive enhanced value in all
three businesses. The postage meter business, which has 600,000
clients and serves most of the Fortune 500, can benefit from a
renewed commitment to outside sales. The shipping business can
benefit from stronger organic growth and strategic
capability-enhancing acquisitions like improved UI/workflow and
multi-carrier shipping software. Lastly, our slate plans to explore
opportunities to unlock restricted cash at Pitney Bowes Bank
through internal balance sheet optimization or strategic
alternatives. These initiatives would unlock sustainable value and
return the segment to profitable growth. Katie May, who was Chief Executive Officer of
ShippingEasy.com and a director of Stamps.com, brings great
industry expertise and her involvement will be critical to
developing a plan to accelerate growth in this
segment.
- Maximize Presort EBIT – Presort, which has a leading
position in the mail sortation category, generated $602 million in
revenue and $82 million in EBIT (a 13% margin) last year. While
there may not be a certain path back to the 22% average EBIT levels
this segment enjoyed between 2011 and 2017, our slate believes it
can significantly improve EBIT margins and return on investment
through several initiatives. Alternative pricing models can likely
drive several hundred basis points of margin expansion. In
addition, tuck-in acquisitions and selective efficiency-enhancing
investments can augment the segment’s economies of scale and drive
higher earnings. These are the types of steps Pitney Bowes can take
if it is not concentrating the vast majority of its resources and
capital on GEC. I have extensive
experience overseeing these types of margin-enhancement initiatives
from previous successful turnarounds, and look forward to driving
this initiative forward.
- Address Significant Capital Structure Issues – It is
unacceptable that Pitney Bowes, which is a historic brand with
strong core segments, has seen its credit rating fall six times
over the past decade into deep “junk” status. It is clear at this
point that the Company’s capital structure cannot support its
cash-burning strategy. Fortunately, our slate’s focus on halting
GEC’s losses and prioritizing Pitney Bowes’ cash-generating
segments can lift the Company out of distress. We will quickly
chart a path back toward “investment” grade credit status through
thoughtful debt reduction, which can, and should, be done in
partnership with our creditors. Milena
Alberti-Perez has extensive experience as the Chief Financial
Officer of companies facing capital structure issues, and she has
already begun identifying opportunities to deleverage the Company,
improve its credit rating, and ensure that the dividend can be
maintained and potentially increased over the
long-term.
- Ensure the Board Protects and Prioritizes Stockholders –
The current Board has a track record of increasing Board
interlocks, resisting strategic change and stockholder feedback,
and presiding over many years of value destruction. We will take
proactive steps to instill a stockholder-first, rather than
management-first, philosophy in the boardroom. Our slate plans to
significantly improve corporate governance by taking steps that
include empowering stockholders to call special meetings and act by
written consent, reducing director interlocks and requiring
transparent disclosure of any potential conflicts of interest.
Additionally, our slate is committed to maintaining a
value-additive corporate social responsibility program that keeps
Pitney Bowes strong in areas like human capital management and
sustainability. Kurt Wolf, who is the
beneficial owner of 8.4% of Pitney Bowes and has successfully
advocated for stockholders in other boardrooms, will position a
reconstituted Board to refocus on stockholders’ long-term
interests.
I am excited to share this high-level overview of our slate’s
vision, which will be laid out in much greater detail this month. I
believe that focusing on these priorities, among others, will
result in reduced debt, increased cash flows and earnings, and a
significantly higher valuation. We will also focus on healing the
organization and rebuilding trust with non-stockholder
constituencies, including employees, customers, creditors and
ratings agencies. Our initiatives will create stability and make
the Company an attractive destination for a permanent Chief
Executive Officer, which the reconstituted Board will recruit to
take over once pressing issues are triaged.
Thank you in advance for your consideration, and I hope to have
the opportunity to engage with you once our slate issues its
detailed transition and strategy presentation next week. Please
vote to elect all five of the Hestia slate of highly qualified,
independent director candidates to the Company’s nine-member Board
at the 2023 Annual Meeting of Stockholders.
Sincerely, Lance Rosenzweig
***
About Hestia Capital
Hestia Capital is a long-term focused, deep value investment
firm that typically makes investments in a narrow selection of
companies facing company-specific, and/or industry, disruptions.
Hestia seeks to leverage its General Partner's expertise in
competitive strategy, operations and capital markets to identify
attractive situations within this universe of disrupted companies.
These companies are often misunderstood by the general investing
community or suffer from mismanagement, which we reasonably expect
to be corrected, and provide the 'price dislocations' which allows
Hestia to identify, and invest in, highly attractive risk/reward
investment opportunities.
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