Pitney Bowes Inc. (NYSE:PBI), a global technology company
providing innovative technology solutions to power commerce, today
reported financial results for the first quarter 2017.
Quarterly Financial Results:
- Revenue of $837 million, a decline of
0.9 percent as reported; an increase of 0.2 percent at constant
currency
- GAAP EPS of $0.35; Adjusted EPS of
$0.36
- GAAP cash from operations of $154
million; free cash flow of $111 million
- Reaffirming 2017 annual guidance
“We turned in a solid first quarter performance, driven by
double-digit growth in Global Ecommerce, growth in both Production
Mail and Presort Services businesses, and slight growth in our
Software Solutions business,” said Marc B. Lautenbach, President
and CEO, Pitney Bowes. “In addition, North America Mailing’s
revenue rate of decline improved compared to prior quarters, driven
by growth in equipment sales, and International Mailing performed
similarly year-to-year compared to the prior quarter. In many ways,
our results in the first quarter are what we envisioned and
expected from the long-term growth initiatives and strategic
investments we have been putting in place over the past four years.
We are off to a good start and remain committed to meeting our
financial objectives for the year.”
First Quarter 2017 Results
Revenue totaled $837 million for the quarter, which was a
decline of less than one percent as reported and a slight increase
at constant currency versus prior year.
Digital Commerce Solutions revenue grew 9 percent as reported
and 11 percent at constant currency. Enterprise Business Solutions
revenue grew 3 percent as reported and 4 percent at constant
currency. Small and Medium Business (SMB) Solutions revenue
declined 6 percent as reported and 5 percent at constant
currency.
GAAP earnings per diluted share (GAAP EPS) were $0.35, which
included $0.01 per share for restructuring and asset impairment
charges. Adjusted earnings per diluted share (Adjusted EPS) were
$0.36 and grew $0.02, or 6 percent, over the prior year.
The Company’s earnings per share results for the first quarter
are summarized in the table below:
First Quarter*
2017
2016
GAAP EPS $0.35 $0.30 Restructuring charges and
asset impairments, net $0.01 $0.02 Dispositions expense -
$0.01
Adjusted EPS $0.36 $0.34
* 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 $154 million
while free cash flow was $111 million. In comparison to the prior
year, free cash flow increased due to working capital requirements
in particular the timing of accounts payable, and accrued
liabilities.
During the quarter, the Company used cash to pay down $79
million of debt, $35 million in dividends to common shareholders
and $12 million for restructuring payments.
First Quarter 2017 Business Segment Reporting
Effective January 1, 2017, the Company revised its segment
reporting to reflect a change in how it manages and reports its
office shipping solutions, which were previously reported within
the Global Ecommerce segment. The needs of retail and ecommerce
clients are different from those of office shipping clients.
Accordingly, the results for the Company’s office shipping
solutions are now reported within SMB Solutions and the retail and
ecommerce shipping solutions remain within Global Ecommerce.
The Company’s business segment reporting reflects the clients
served in each market and the way it manages these segments. The
reporting segment groups are the SMB Solutions group; the
Enterprise Business Solutions group; and the Digital Commerce
Solutions group. The segment results for the quarter and prior year
may not equal the subtotals for each segment group due to
rounding.
The SMB Solutions group offers mailing and office shipping
solutions, financing, services, and supplies for small and medium
businesses to help simplify and save on the sending, tracking and
receiving of letters, parcels and flats. This group includes the
North America Mailing and International Mailing segments.
The Enterprise Business Solutions group includes the global
Production Mail and Presort Services segments. Production Mail
provides mailing and printing equipment and services for large
enterprise clients to process mail. Presort Services provides
sortation services to qualify large mail volumes for postal
worksharing discounts.
The Digital Commerce Solutions group includes the Software
Solutions and Global Ecommerce segments. Software Solutions provide
customer engagement, customer information and location intelligence
software. Global Ecommerce facilitates global cross-border
ecommerce transactions and domestic retail and ecommerce shipping
solutions.
SMB Solutions Group
($ millions) First Quarter
Revenue
2017
2016
Y/Y
Reported
Y/Y
Ex
Currency
North America Mailing $356 $371 (4 %) (4 %) International Mailing
93 105 (11 %)
(7 %) SMB Solutions Total
$449 $476 (6 %) (5 %)
EBIT North America Mailing $141 $161 (12 %)
International Mailing
13 11
19 % SMB Solutions Total
$154 $172 (10 %)
North America Mailing
Equipment sales grew 5 percent compared to prior year. The
middle and bottom of the line products, which include the new
SendPro offerings, performed well this quarter. The web channel
also experienced strong growth in the quarter. This growth in
equipment sales was offset by a decline in the recurring revenue
streams, largely around lower financing and supplies revenue. EBIT
margin was lower than prior year largely due to the decline in the
higher-margin recurring revenue streams.
International Mailing
Equipment sales and recurring revenue streams both contributed
to the decline. The rate of decline in recurring revenue streams
decreased compared to the prior quarter. EBIT margin increased
versus prior year due to improved equipment sales margins and lower
expenses.
Enterprise Business Solutions
Group
($ millions) First Quarter
Revenue
2017 2016 Y/Y
Reported
Y/Y
Ex Currency
Production Mail $ 89 $ 87 2 % 3 % Presort Services
133
127 4 % 4
% Enterprise Business Total $222
$215 3 % 4 % EBIT
Production Mail $ 9 $ 7 31 % Presort Services
31
29 6 % Enterprise
Business Total $40 $36 11 %
Production Mail
Equipment sales grew 12 percent over prior year on higher
inserter and sorter equipment placements. The inserter performance
was largely driven by strong placements of the Epic inserter
product. Support services revenue declined as a result of the shift
last year of some in-house mail production clients moving to third
party service bureaus who tend to self-service. EBIT margin
improved from prior year as a result of the growth in revenue and
lower operating expenses.
Presort Services
The revenue increase was driven by higher Standard Class and
First Class mail volumes processed. EBIT margin increased from
prior year driven by the higher revenue.
Digital Commerce Solutions
Group
($ millions) First Quarter
Revenue
2017
2016
Y/Y
Reported
Y/Y
Ex
Currency
Software Solutions $ 78 $78 - 3 % Global Ecommerce
88
75 17 %
20 % Digital Commerce Total
$166 $153 9 % 11 %
EBIT Software Solutions $ 3 $ (3 ) >100% Global Ecommerce
(4 ) (3 )
(23 %) Digital Commerce Total $
(2 ) $ (6 ) 75 %
Software Solutions
The revenue performance was driven by Customer Information
Management license revenues as well as growth in data and SaaS
revenue. This was offset by lower maintenance revenue. The Company
is seeing progress in developing the indirect channel which
contributed to the revenue growth this quarter. EBIT margin
improved due to savings from cost reduction initiatives.
Global Ecommerce
The sustained double-digit revenue growth was largely driven by
strong volumes in the UK outbound marketplace as well as growth in
overall retail volumes. The EBIT loss was driven primarily by
investments in market growth opportunities. The Company continues
to invest in its cross-border solutions and domestic shipping
capabilities.
2017 Guidance
The Company is reaffirming its annual guidance for 2017:
- Revenue, on a constant currency basis,
to be in the range of a 2 percent decline to 1 percent growth when
compared to 2016.
- Adjusted EPS to be in the range of
$1.70 to $1.85.
- Free cash flow to be in the range of
$400 million to $460 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 2016 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 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 2017 will not change
significantly.
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 powering
billions of transactions – physical and digital – in the connected
and borderless world of commerce. Clients around the world,
including 90 percent of the Fortune 500, rely on products,
solutions and services from Pitney Bowes in the areas of customer
information management, location intelligence, customer engagement,
shipping, mailing, and global ecommerce. And with the innovative
Pitney Bowes Commerce Cloud, clients can access the broad range of
Pitney Bowes solutions, analytics, and APIs to drive commerce. 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 our
disclosures we use certain non-GAAP measures, such as adjusted
earnings before interest and taxes, Adjusted EPS, revenue growth on
a constant currency basis, free cash flow and Segment EBIT.
The Company reports measures such as adjusted earnings before
interest and taxes (EBIT) and Adjusted EPS and adjusted income from
continuing operations to exclude the impact of special items like
restructuring charges, tax adjustments, goodwill and asset
write-downs, and costs related to dispositions. 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, 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.
In addition, Management uses segment EBIT to measure
profitability and performance at the segment level. Segment EBIT is
determined by deducting from 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. A reconciliation of
Segment EBIT to the Company’s total Net Income can be found in the
Company’s attached financial schedules.
Pitney Bowes has provided a quantitative reconciliation to GAAP
in supplemental schedules. This information may also 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: mail volumes;
macroeconomic factors, including global and regional business
conditions that adversely impact customer demand and foreign
currency exchange rates; timely development, market acceptance and
regulatory approvals, if needed, of new products; changes in postal
regulations; competitive factors, including pricing pressures,
technological developments and introduction of new products and
services by competitors; the continued availability and security of
key information systems and the cost to comply with information
security requirements and privacy laws; a breach of security,
including a cyberattack or other comparable event; management of
outsourcing arrangements; our ability to fully utilize the new
enterprise business platform in the United States and successfully
implement it internationally without significant disruptions to
existing operations; the success of our investment in rebranding
the Company; the risk of losing some of the Company’s larger
clients in the Global Ecommerce segment; integrating newly acquired
businesses, including operations and product and service offerings;
changes in our credit ratings; management of credit risk; changes
in interest rates and fuel prices; increased customs and regulatory
risks associated with cross-border transactions; and other factors
beyond its control as more fully outlined in the Company's 2016
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, 2017 and 2016, and
consolidated balance sheets as of March 31, 2017 and December 31,
2016 are attached.
Pitney Bowes Inc. Consolidated Statements of Income
(Unaudited; in thousands, except share and per share amounts)
Three months ended March 31,
2017 2016 Revenue: Equipment sales $ 162,974 $
159,361 Supplies 66,818 72,051 Software 77,867 78,058 Rentals
99,870 104,090 Financing 85,745 97,423 Support services 118,847
128,260 Business services 224,519 205,346
Total revenue 836,640 844,589 Costs and
expenses: Cost of equipment sales 69,562 71,539 Cost of supplies
21,471 20,690 Cost of software 25,308 26,815 Cost of rentals 20,662
20,495 Financing interest expense 12,974 14,915 Cost of support
services 73,354 75,249 Cost of business services 150,843 135,538
Selling, general and administrative 306,303 326,882 Research and
development 31,856 26,568 Restructuring charges and asset
impairments, net 2,082 6,933 Interest expense, net 25,676
19,301 Total costs and expenses 740,091
744,925 Income before income taxes 96,549 99,664 Provision
for income taxes 31,416 37,024 Net income
65,133 62,640 Less: Preferred stock dividends attributable to
noncontrolling interests - 4,594 Net income -
Pitney Bowes Inc. $ 65,133 $ 58,046 Earnings per share
attributable to common stockholders: Basic $ 0.35 $ 0.30 Diluted $
0.35 $ 0.30 Weighted-average shares used in diluted earnings
per share 186,875,143 193,181,424
Pitney
Bowes Inc. Consolidated Balance Sheets (Unaudited; in
thousands, except share amounts)
March
31, December 31,
Assets
2017 2016 Current assets: Cash and cash equivalents $
739,553 $ 764,522 Short-term investments 43,895 38,448 Accounts
receivable, net 389,990 455,527 Short-term finance receivables, net
853,390 893,950 Inventories 115,638 92,726 Current income taxes
11,919 11,373 Other current assets and prepayments 78,749
68,637 Total current assets 2,233,134
2,325,183 Property, plant and equipment, net 319,899 314,603
Rental property and equipment, net 178,281 188,054 Long-term
finance receivables, net 664,630 673,207 Goodwill 1,583,302
1,571,335 Intangible assets, net 159,200 165,172 Noncurrent income
taxes 78,946 74,806 Other assets 529,779
524,773 Total assets $ 5,747,171 $ 5,837,133
Liabilities and
stockholders' deficit
Current liabilities: Accounts payable and accrued liabilities $
1,317,532 $ 1,378,822 Current income taxes 49,933 34,434 Current
portion of long-term debt 785,287 614,485 Advance billings
295,688 299,878 Total current
liabilities 2,448,440 2,327,619 Deferred taxes on income
210,604 204,289 Tax uncertainties and other income tax liabilities
61,195 61,276 Long-term debt 2,499,025 2,750,405 Other noncurrent
liabilities 574,245 597,204
Total liabilities 5,793,509 5,940,793
Stockholders' deficit: Cumulative preferred stock, $50 par
value, 4% convertible 1 1 Cumulative preference stock, no par
value, $2.12 convertible 478 483 Common stock, $1 par value 323,338
323,338 Additional paid-in-capital 126,564 148,125 Retained
earnings 5,138,300 5,107,734 Accumulated other comprehensive loss
(913,831 ) (940,133 ) Treasury stock, at cost (4,721,188 )
(4,743,208 ) Total Pitney Bowes Inc. stockholders'
deficit (46,338 ) (103,660 ) Total liabilities
and stockholders' deficit $ 5,747,171 $ 5,837,133
Pitney Bowes Inc. Business Segments - Revenue and
EBIT (Unaudited; in thousands)
Three
months ended March 31, 2017
2016 (1)
% Change
Revenue
North America Mailing $ 355,578 $ 371,453 (4 %)
International Mailing 93,058 104,986
(11 %)
Small & Medium Business Solutions 448,636
476,439 (6 %) Production Mail 88,955
87,425 2 % Presort Services 132,677 127,396
4 %
Enterprise Business Solutions 221,632
214,821 3 % Software Solutions 78,220
77,922 0 % Global Ecommerce 88,152 75,407
17 %
Digital Commerce Solutions 166,372
153,329 9 %
Total revenue $ 836,640
$ 844,589 (1 %)
EBIT
North America Mailing $ 141,008 $ 160,831 (12 %)
International Mailing 13,269 11,176 19
%
Small & Medium Business Solutions 154,277
172,007 (10 %) Production Mail 8,964
6,824 31 % Presort Services 30,717 28,910
6 %
Enterprise Business Solutions 39,681
35,734 11 % Software Solutions 2,749
(2,572 ) >100% Global Ecommerce (4,270 ) (3,469 )
(23 %)
Digital Commerce Solutions (1,521 )
(6,041 ) 75 %
Segment EBIT (2) $ 192,437
$ 201,700 (5 %)
Reconciliation of
segment EBIT to net income Segment EBIT $ 192,437
$ 201,700 Corporate expenses (55,156 ) (57,767 )
Adjusted EBIT 137,281 143,933 Interest, net (3) (38,650 )
(34,216 ) Restructuring charges and asset impairments, net (2,082 )
(6,933 ) Acquisition/disposition related expenses -
(3,120 )
Income before income taxes 96,549 99,664
Provision for income taxes (31,416 ) (37,024 )
Net
income $ 65,133 $ 62,640 (1) Prior period
amounts have been recast to conform to the way we now manage and
report our segments. (2) Segment EBIT excludes interest, taxes,
general corporate expenses, restructuring charges, and other items
that are not allocated to a particular business segment. (3)
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, 2017 2016
Y/Y Chg. Reconciliation of reported revenue to
revenue excluding currency Revenue, as reported $ 836,640 $
844,589 (0.9 %) Unfavorable impact on revenue due to currency
9,546 - NM Revenue, excluding
currency $ 846,186 $ 844,589 0.2 %
Reconciliation of reported net income to adjusted earnings
Net income $ 65,133 $ 62,640 Less: Preferred stock dividends
attributable to noncontrolling interests -
4,594 Net income attributable to PBI 65,133 58,046
Restructuring charges and asset impairments, net 1,353 4,628 Loss
on disposition of businesses - 2,175
Net income, as adjusted 66,486 64,849 Preferred stock dividends
attributable to noncontrolling interests - 4,594 Provision for
income taxes, as adjusted 32,145 40,274
Income from continuing operations before income taxes, as adjusted
98,631 109,717 Interest, net 38,650 34,216
EBIT, as adjusted 137,281 143,933 Depreciation and
amortization 44,295 44,300 EBITDA, as
adjusted $ 181,576 $ 188,233
Reconciliation of reported diluted earnings per share to
adjusted diluted earnings per share Diluted earnings per share
$ 0.35 $ 0.30 Restructuring charges and asset impairments, net 0.01
0.02 Loss on disposition of businesses - 0.01
Diluted earnings per share, as adjusted $ 0.36 $ 0.34
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 (1) $
154,006 $ 63,493 Capital expenditures (35,920 ) (40,670 )
Restructuring payments 12,416 21,656 Pension contribution - 36,731
Reserve account deposits (19,346 ) (16,253 ) Other -
189 Free cash flow $ 111,156 $ 65,146
(1)
Net cash provided by operating activities
for the three months ended March 31, 2016 has been revised and
increased $5 million for a new accounting standard adopted January
1, 2017.
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Pitney Bowes Inc.EditorialBill Hughes, 203/351-6785Chief
Communications OfficerorFinancialAdam David, 203/351-7175VP,
Investor Relations
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