Pitney Bowes Announces Third Quarter 2020 Financial Results

·14-min read

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 third quarter 2020.

"We grew revenue 13 percent in the third quarter, which is the strongest organic revenue growth rate we have achieved in well over a decade," said Marc B. Lautenbach, President and CEO, Pitney Bowes. "I am extremely proud of what the team has accomplished, especially during these challenging times.

"Several years ago, we implemented a strategy to shift our portfolio to the growth areas of the market," Lautenbach continued. "The investments we have made are paying off especially with our shipping-related revenues, which comprise half of our overall revenue. Although uncertainties remain given the Covid-19 pandemic, we are pleased with the momentum in our businesses and believe we are well positioned to capitalize on the market opportunities ahead of us."

Third Quarter - Financial Overview:

  • Revenue of $892 million, growth of 13 percent

  • GAAP EPS of $0.07; Adjusted EPS of $0.08

  • GAAP cash from operations of $104 million; free cash flow of $85 million

Third Quarter - Other Highlights:

  • The Company repaid the $100 million drawn against the revolving credit facility.

  • The Company ended the third quarter with $820 million in cash and short-term investments.

  • Shipping-related revenues represented 50 percent of total revenue.

  • Global Ecommerce revenue exceeded $400 million for the first time, representing 47 percent growth.

  • Global Ecommerce Domestic Parcel volumes more than doubled from prior year.

  • Presort Services productivity measures resulted in 115,000 fewer labor hours to sort nearly 4.1 billion pieces.

  • SendTech shipping revenue was $32 million and grew at a double-digit rate.

  • SendTech shipped nearly 12,000 units of the SendPro Mailstation since launching in April.

Third Quarter Results

Revenue totaled $892 million, which was growth of 13 percent over prior year.

GAAP earnings per share were $0.07 and adjusted earnings per share were $0.08.

GAAP cash from operations was $104 million and free cash flow was $85 million. Free cash flow increased over prior year largely due to changes in working capital, particularly around timing of accounts receivable, which was partly offset by lower net income.

During the quarter, the Company repaid the $100 million drawn against the revolving credit facility, invested $21 million in capital expenditures, paid $9 million in dividends and made $5 million in restructuring payments.

On a year-to-date basis, GAAP cash from operations is $191 million and free cash flow is $186 million.

Earnings per share results for the third quarter are summarized in the table below:

Third Quarter*

2020

2019

GAAP EPS

$0.07

($0.02)

Discontinued operations

-

0.05

GAAP EPS from continuing operations

$0.06

$0.03

Restructuring and asset impairments

0.02

0.20

Adjusted EPS

$0.08

$0.24

* 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

Third Quarter

($ millions)

2020

2019

B/(W)
Reported

B/(W) Ex
Currency

Revenue

Global Ecommerce

$410

$279

47%

47%

Presort Services

128

131

(3%)

(3%)

Commerce Services

$538

$410

31%

31%

EBITDA

Global Ecommerce

($3)

($4)

34%

Presort Services

23

25

(11%)

Commerce Services

$20

$21

(6%)

EBIT

Global Ecommerce

($20)

($22)

9%

Presort Services

14

18

(18%)

Commerce Services

($5)

($4)

(28%)

Global Ecommerce

Revenue increased driven by strong volume growth in Domestic Parcel, Digital Delivery and Cross Border Services. EBIT margin improved from prior year driven by increased volumes, partly offset by investments to support growth and gain share along with incremental costs associated with Covid-19.

Presort Services

Revenue improved from second quarter as the year-over-year volume declines moderated. Revenue declined from prior year due to lower Marketing Mail and First Class volumes processed. Marketing Mail Flats and Bound Printed Matter volumes continued to grow at a double-digit rate over prior year. EBIT and EBITDA margins improved slightly quarter-to-quarter. Compared to prior year, EBIT and EBITDA margins were impacted primarily by the lower revenue.

SendTech Solutions

Third Quarter

($ millions)

2020

2019

B/(W)

Reported

B/(W) Ex
Currency

Revenue

$354

$380

(7%)

(7%)

EBITDA

$121

$141

(14%)

EBIT

$113

$131

(14%)

Revenue improved from second quarter as year-over-year declines moderated. Revenue declined from prior year largely driven by lower equipment sales, support services, supplies and financing. Business services revenues grew over prior year as clients increased their usage of shipping offerings and capabilities. EBIT and EBITDA margins declined from prior year primarily driven by the lower revenue performance.

2020 Guidance

Given the continued level of uncertainty around the depth and duration of Covid-19, the Company will not provide guidance which is consistent with prior quarters.

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. We believe that excluding the impacts of currency exchange rates provides investors a better understanding of the underlying revenue performance. A reconciliation of reported revenue to constant currency revenue 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, the availability and cost of labor, global supply chain and 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 and manage volumes, gain additional economies of scale and improve profitability within our Commerce Services group; changes in political conditions and their potential impacts on the operations of the USPS and broader mailing and shipping industry; the loss of some of our larger clients in our Commerce Services group; expenses and potential impacts resulting from a breach of security, including cyber-attacks or other comparable events; changes in labor conditions and transportation costs; our success at managing customer credit risk; third-party suppliers' ability to provide products and services required by us and our clients; capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at reasonable costs; 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 and nine months ended September 30, 2020 and 2019, and consolidated balance sheets at September 30, 2020 and December 31, 2019 are attached.

Pitney Bowes Inc.

Consolidated Statements of Income (Loss)

(Unaudited; in thousands, except per share amounts)

Three months ended September 30,

Nine months ended September 30,

2020

2019

2020

2019

Revenue:

Business services

$

550,954

$

419,101

$

1,524,323

$

1,243,609

Support services

117,519

126,274

353,320

382,578

Financing

86,218

90,577

260,758

280,039

Equipment sales

79,572

89,618

213,682

264,956

Supplies

39,635

44,818

118,117

142,261

Rentals

18,000

19,737

55,458

60,339

Total revenue

891,898

790,125

2,525,658

2,373,782

Costs and expenses:

Cost of business services

482,965

338,519

1,311,941

1,003,483

Cost of support services

37,647

41,086

114,132

123,453

Financing interest expense

11,626

11,026

36,054

33,433

Cost of equipment sales

59,766

59,859

165,045

182,094

Cost of supplies

10,132

12,225

30,751

37,533

Cost of rentals

6,055

5,090

18,455

23,223

Selling, general and administrative

238,618

254,092

720,882

757,228

Research and development

9,255

12,272

28,838

38,421

Restructuring charges

3,766

47,017

12,505

56,616

Goodwill impairment

-

-

198,169

-

Interest expense, net

27,175

28,704

79,504

84,325

Other components of net pension and postretirement (income), expense

(109

)

(882

)

126

(3,138

)

Other (income) expense, net

(6,325

)

667

9,787

18,350

Total costs and expenses

880,571

809,675

2,726,189

2,355,021

Income (loss) from continuing operations before taxes

11,327

(19,550

)

(200,531

)

18,761

Provision (benefit) for income taxes

554

(24,895

)

7,540

(13,351

)

Income (loss) from continuing operations

10,773

5,345

(208,071

)

32,112

Income (loss) from discontinued operations, net of tax

616

(8,470

)

7,648

(14,199

)

Net income (loss)

$

11,389

$

(3,125

)

$

(200,423

)

$

17,913

Basic earnings (loss) per share (1):

Continuing operations

$

0.06

$

0.03

$

(1.21

)

$

0.18

Discontinued operations

-

(0.05

)

0.04

(0.08

)

Net income (loss)

$

0.07

$

(0.02

)

$

(1.17

)

$

0.10

Diluted earnings (loss) per share (1):

Continuing operations

$

0.06

$

0.03

$

(1.21

)

$

0.18

Discontinued operations

-

(0.05

)

0.04

(0.08

)

Net income (loss)

$

0.07

$

(0.02

)

$

(1.17

)

$

0.10

Weighted-average shares used in diluted earnings per share

174,704

171,201

171,388

179,096

(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)

Assets

September 30,
2020

December 31,
2019

Current assets:

Cash and cash equivalents

$

799,177

$

924,442

Short-term investments

21,185

115,879

Accounts and other receivables, net

348,565

373,471

Short-term finance receivables, net

559,148

629,643

Inventories

66,974

68,251

Current income taxes

11,477

5,565

Other current assets and prepayments

115,981

101,601

Assets of discontinued operations

-

17,229

Total current assets

1,922,507

2,236,081

Property, plant and equipment, net

367,466

376,177

Rental property and equipment, net

40,352

41,225

Long-term finance receivables, net

587,548

625,487

Goodwill

1,142,144

1,324,179

Intangible assets, net

167,493

190,640

Operating lease assets

213,490

200,752

Noncurrent income taxes

69,305

71,903

Other assets

533,726

400,456

Total assets

$

5,044,031

$

5,466,900

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and accrued liabilities

$

760,363

$

793,690

Customer deposits at Pitney Bowes Bank

610,582

591,118

Current operating lease liabilities

38,007

36,060

Current portion of long-term debt

63,509

20,108

Advance billings

102,919

101,920

Current income taxes

2,527

17,083

Liabilities of discontinued operations

-

9,713

Total current liabilities

1,577,907

1,569,692

Long-term debt

2,531,712

2,719,614

Deferred taxes on income

279,526

274,435

Tax uncertainties and other income tax liabilities

40,642

38,834

Noncurrent operating lease liabilities

192,789

177,711

Other noncurrent liabilities

342,330

400,518

Total liabilities

4,964,906

5,180,804

Stockholders' equity:

Common stock

323,338

323,338

Additional paid-in-capital

67,512

98,748

Retained earnings

5,190,914

5,438,930

Accumulated other comprehensive loss

(813,572

)

(840,143

)

Treasury stock, at cost

(4,689,067

)

(4,734,777

)

Total stockholders' equity

79,125

286,096

Total liabilities and stockholders' equity

$

5,044,031

$

5,466,900

Pitney Bowes Inc.

Business Segment Revenue

(Unaudited; in thousands)

Three months ended September 30,

Nine months ended September 30,

2020

2019

% Change

2020

2019

% Change

REVENUE

Global Ecommerce

$

409,981

$

278,995

47

%

$

1,100,757

$

827,568

33

%

Presort Services

127,705

131,483

(3

%)

386,552

394,468

...

(2

%)

Commerce Services

537,686

410,478

31

%

1,487,309

1,222,036

22

%

Sending Technology Solutions

354,212

379,647

(7

%)

1,038,349

1,151,746

(10

%)

Total revenue - GAAP

891,898

790,125

13

%

2,525,658

2,373,782

6

%

Currency impact on revenue

(2,454

)

-

2,514

-

Revenue, at constant currency

$

889,444

$

790,125

13

%

$

2,528,172

$

2,373,782

7

%

Pitney Bowes Inc.

Business Segment EBIT & EBITDA

(Unaudited; in thousands)

Three months ended September 30,

2020

2019

% change

EBIT (1)

D&A

EBITDA

EBIT (1)

D&A

EBITDA

EBIT

EBITDA

Global Ecommerce

$

(19,757

)

$

16,824

$

(2,933

)

$

(21,793

)

$

17,356

$

(4,437

)

9

%

34

%

Presort Services

14,481

8,031

22,512

17,687

7,667

25,354

(18

%)

(11

%)

Commerce Services

(5,276

)

24,855

19,579

(4,106

)

25,023

20,917

(28

%)

(6

%)

Sending Technology Solutions

112,599

7,955

120,554

130,954

9,579

140,533

(14

%)

(14

%)

Segment total

$

107,323

$

32,810

140,133

$

126,848

$

34,602

161,450

(15

%)

(13

%)

Reconciliation of Segment EBITDA to Net (Loss) Income:

Segment depreciation and amortization

(32,810

)

(34,602

)

Interest, net

(38,801

)

(39,730

)

Unallocated corporate expenses (2)

(53,429

)

(58,277

)

Restructuring charges and asset impairments

(3,766

)

(47,017

)

Loss on debt extinguishment

-

(667

)

Transaction costs and other

-

(707

)

(Provision) benefit for income taxes

(554

)

24,895

Income from continuing operations

10,773

5,345

Income (loss) from discontinued operations, net of tax

616

(8,470

)

Net income (loss)

$

11,389

$

(3,125

)

Nine months ended September 30,

2020

2019

% change

EBIT (1)

D&A

EBITDA

EBIT (1)

D&A

EBITDA

EBIT

EBITDA

Global Ecommerce

$

(68,126

)

$

52,187

$

(15,939

)

$

(51,969

)

$

50,697

$

(1,272

)

(31

%)

>(100%)

Presort Services

42,758

23,662

66,420

48,215

21,675

69,890

(11

%)

(5

%)

Commerce Services

(25,368

)

75,849

50,481

(3,754

)

72,372

68,618

>(100%)

(26

%)

Sending Technology Solutions

323,429

25,771

349,200

378,095

30,347

408,442

(14

%)

(15

%)

Segment Total

$

298,061

$

101,620

399,681

$

374,341

$

102,719

477,060

(20

%)

(16

%)

Reconciliation of Segment EBITDA to Net Income:

Segment depreciation and amortization

(101,620

)

(102,719

)

Interest, net

(115,558

)

(117,758

)

Unallocated corporate expenses (2)

(146,640

)

(160,283

)

Restructuring charges and asset impairments

(12,505

)

(56,616

)

Goodwill impairment

(198,169

)

-

Gain on sale of equity investment

11,908

-

Loss on debt extinguishment

(36,987

)

(667

)

Loss on dispositions and transaction costs

(641

)

(20,256

)

(Provision) benefit for income taxes

(7,540

)

13,351

(Loss) income from continuing operations

(208,071

)

32,112

Income (loss) from discontinued operations, net of tax

7,648

(14,199

)

Net (loss) income

$

(200,423

)

$

17,913

(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 $5,806 and $5,935 for the three months ended September 30, 2020 and 2019, respectively and $18,783 and $15,795 for the nine months ended September 30, 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 September 30,

Nine months ended September 30,

2020

2019

2020

2019

Reconciliation of reported net income (loss) to adjusted net income, adjusted EBIT and adjusted EBITDA

Net income (loss)

$

11,389

$

(3,125

)

$

(200,423

)

$

17,913

(Income) loss from discontinued operations, net of tax

(616

)

8,470

(7,648

)

14,199

Restructuring charges and asset impairments

2,639

34,722

8,493

41,709

Goodwill impairment

-

-

196,600

-

Gain on sale of equity investment

-

-

(8,943

)

-

Tax on surrender of company owned life insurance policies

-

-

12,229

-

Loss on debt extinguishment

-

497

27,777

497

Loss on dispositions and transaction costs

-

527

487

21,313

Adjusted net income

13,412

41,091

28,572

95,631

Interest, net

38,801

39,730

115,558

117,758

Provision (benefit) for income taxes, as adjusted

1,681

(12,250

)

7,291

669

Adjusted EBIT

53,894

68,571

151,421

214,058

Depreciation and amortization

38,616

40,537

120,403

118,514

Adjusted EBITDA

$

92,510

$

109,108

$

271,824

$

332,572

Reconciliation of reported diluted earnings (loss) per share to adjusted diluted earnings per share

Diluted earnings (loss) per share

$

0.07

$

(0.02

)

$

(1.17

)

$

0.10

(Income) loss from discontinued operations, net of tax

-

0.05

(0.04

)

0.08

Restructuring charges and asset impairments

0.02

0.20

0.05

0.23

Goodwill impairment

-

-

1.14

-

Gain on sale of equity investment

-

-

(0.05

)

-

Tax on surrender of company owned life insurance policies

-

-

0.07

-

Loss on debt extinguishment

-

-

0.16

-

Loss on dispositions and transaction costs

-

-

-

0.12

Adjusted diluted earnings per share

$

0.08

$

0.24

$

0.17

$

0.53

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

$

103,815

$

95,502

$

190,624

$

182,284

Net cash (provided by) used in operating activities - discontinued operations

-

(10,324

)

38,423

(15,858

)

Capital expenditures

(20,833

)

(36,034

)

(80,787

)

(95,221

)

Restructuring payments

4,504

5,840

15,869

18,845

Change in customer deposits at PB Bank

(2,867

)

11,441

19,464

3,125

Transaction costs paid

-

2,917

2,117

9,025

Free cash flow

$

84,619

$

69,342

$

185,710

$

102,200

View source version on businesswire.com: https://www.businesswire.com/news/home/20201030005031/en/

Contacts

Editorial -
Bill Hughes
Chief Communications Officer
203/351-6785

Financial -
Adam David
VP, Investor Relations
203/351-7175