Pitney Bowes Announces Third Quarter 2020 Financial Results
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 millionThird 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.
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.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
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
%
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.
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
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