Business Wire | Oct 30, 2020 07:00AM EDT

Pitney Bowes Announces Third Quarter 2020 Financial Results

Oct. 30, 2020

STAMFORD, Conn.--(BUSINESS WIRE)--Oct. 30, 2020--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) B/(W) Ex Reported 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

B/(W) B/(W) Ex ($ millions) 2020 2019 Currency Reported

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 sitewww.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 Statementsof Income (Loss)(Unaudited; inthousands, except pershare amounts) Three months ended Nine months ended September September 30, 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 482,965 338,519 1,311,941 1,003,483 services Cost of support 37,647 41,086 114,132 123,453 services Financing interest 11,626 11,026 36,054 33,433 expense Cost of equipment 59,766 59,859 165,045 182,094 sales 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 238,618 254,092 720,882 757,228 administrative Research and 9,255 12,272 28,838 38,421 development 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 (109 ) (882 ) 126 (3,138 ) postretirement (income), expense Other (income) (6,325 ) 667 9,787 18,350 expense, net Total costs and 880,571 809,675 2,726,189 2,355,021 expenses Income (loss) from 11,327 (19,550 ) (200,531 ) 18,761 continuing operationsbefore taxesProvision (benefit) for 554 (24,895 ) 7,540 (13,351 )income taxesIncome (loss) from 10,773 5,345 (208,071 ) 32,112 continuing operationsIncome (loss) from 616 (8,470 ) 7,648 (14,199 )discontinuedoperations, net of taxNet 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 - (0.05 ) 0.04 (0.08 ) operations 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 - (0.05 ) 0.04 (0.08 ) operations Net income (loss) $ 0.07 $ (0.02 ) $ (1.17 ) $ 0.10

Weighted-average shares 174,704 171,201 171,388 179,096 used in dilutedearnings per share (1)

The sum of the earnings per share amounts may not equal the totals due to rounding.(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, December 31, 2020 2019Current 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' equityCurrent 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 40,642 38,834 liabilitiesNoncurrent 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 BowesInc.BusinessSegmentRevenue(Unaudited;in thousands) Three months ended September Nine months ended September 30, 30, 2020 2019 % 2020 2019 % Change Change

REVENUE Global $ 409,981 $ 278,995 47 % $ 1,100,757 $ 827,568 33 % Ecommerce Presort 127,705 131,483 (3 %) 386,552 394,468 (2 %) Services Commerce 537,686 410,478 31 % 1,487,309 1,222,036 22 % Services Sending 354,212 379,647 (7 %) 1,038,349 1,151,746 (10 %) Technology Solutions Total 891,898 790,125 13 % 2,525,658 2,373,782 6 % revenue - GAAP Currency (2,454 ) - 2,514 - impact on revenue Revenue, at $ 889,444 $ 790,125 13 % $ 2,528,172 $ 2,373,782 7 % constant currency Pitney BowesInc.Business Segment EBIT &EBITDA(Unaudited; inthousands) Three months ended September 30, 2020 2019 % change

EBIT (1) D&A EBITDA EBIT (1) D&A EBITDA EBIT EBITDA

Global $ (19,757 ) $ 16,824 $ (2,933 ) $ (21,793 ) $ 17,356 $ (4,437 ) 9 % 34 %EcommercePresort 14,481 8,031 22,512 17,687 7,667 25,354 (18 %) (11 %)ServicesCommerce (5,276 ) 24,855 19,579 (4,106 ) 25,023 20,917 (28 %) (6 %)Services Sending 112,599 7,955 120,554 130,954 9,579 140,533 (14 %) (14 %)TechnologySolutions Segment total $ 107,323 $ 32,810 140,133 $ 126,848 $ 34,602 161,450 (15 %) (13 %)

Reconciliation of SegmentEBITDA to Net (Loss) Income:Segmentdepreciation (32,810 ) (34,602 )andamortizationInterest, net (38,801 ) (39,730 )

Unallocated (53,429 ) (58,277 )corporateexpenses (2)Restructuringcharges and (3,766 ) (47,017 )assetimpairmentsLoss on debt - (667 )extinguishmentTransaction - (707 )costs andother(Provision) (554 ) 24,895 benefit forincome taxesIncome from 10,773 5,345 continuingoperationsIncome (loss)from 616 (8,470 )discontinuedoperations,net of taxNet income $ 11,389 $ (3,125 )(loss) Nine months ended September 30,

2020 2019 % change

EBIT (1) D&A EBITDA EBIT (1) D&A EBITDA EBIT EBITDA

Global $ (68,126 ) $ 52,187 $ (15,939 ) $ (51,969 ) $ 50,697 $ (1,272 ) (31 %) >Ecommerce (100%)Presort 42,758 23,662 66,420 48,215 21,675 69,890 (11 %) (5 %)ServicesCommerce (25,368 ) 75,849 50,481 (3,754 ) 72,372 68,618 > (26 %)Services (100%) Sending 323,429 25,771 349,200 378,095 30,347 408,442 (14 %) (15 %)TechnologySolutions Segment Total $ 298,061 $ 101,620 399,681 $ 374,341 $ 102,719 477,060 (20 %) (16 %)

Reconciliationof SegmentEBITDA to NetIncome:Segmentdepreciation (101,620 ) (102,719 )andamortizationInterest, net (115,558 ) (117,758 )

Unallocated (146,640 ) (160,283 )corporateexpenses (2)Restructuringcharges and (12,505 ) (56,616 )assetimpairmentsGoodwill (198,169 ) - impairmentGain on sale 11,908 - of equityinvestmentLoss on debt (36,987 ) (667 )extinguishmentLoss ondispositions (641 ) (20,256 )andtransactioncosts(Provision) (7,540 ) 13,351 benefit forincome taxes(Loss) incomefrom (208,071 ) 32,112 continuingoperationsIncome (loss)from 7,648 (14,199 )discontinuedoperations,net of taxNet (loss) $ (200,423 ) $ 17,913 income (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.(1) Segment EBIT excludes interest, taxes, general corporate expenses,restructuring charges, and other items that are not allocated to aparticular 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, respectivelyand $18,783 and $15,795 for the nine months ended September 30, 2020 and2019, respectively.Pitney Bowes Inc.Reconciliation of ReportedConsolidated Results to AdjustedResults(Unaudited; inthousands, except pershare amounts) Three months ended Nine months ended September 30, September 30, 2020 2019 2020 2019

Reconciliation ofreported net income(loss) to adjusted netincome, adjusted EBITand adjusted EBITDANet income (loss) $ 11,389 $ (3,125 ) $ (200,423 ) $ 17,913

(Income) loss from (616 ) 8,470 (7,648 ) 14,199 discontinued operations,net of taxRestructuring charges 2,639 34,722 8,493 41,709 and asset impairmentsGoodwill impairment - - 196,600 -

Gain on sale of equity - - (8,943 ) - investmentTax on surrender of - - 12,229 - company owned lifeinsurance policiesLoss on debt - 497 27,777 497 extinguishmentLoss on dispositions and - 527 487 21,313 transaction costsAdjusted net income 13,412 41,091 28,572 95,631

Interest, net 38,801 39,730 115,558 117,758

Provision (benefit) for 1,681 (12,250 ) 7,291 669 income taxes, asadjustedAdjusted EBIT 53,894 68,571 151,421 214,058

Depreciation and 38,616 40,537 120,403 118,514 amortizationAdjusted EBITDA $ 92,510 $ 109,108 $ 271,824 $ 332,572

Reconciliation ofreported dilutedearnings (loss) pershare to adjusteddiluted earnings pershareDiluted earnings (loss) $ 0.07 $ (0.02 ) $ (1.17 ) $ 0.10 per share(Income) loss from - 0.05 (0.04 ) 0.08 discontinued operations,net of taxRestructuring charges 0.02 0.20 0.05 0.23 and asset impairmentsGoodwill impairment - - 1.14 -

Gain on sale of equity - - (0.05 ) - investmentTax on surrender of - - 0.07 - company owned lifeinsurance policiesLoss on debt - - 0.16 - extinguishmentLoss on dispositions and - - - 0.12 transaction costsAdjusted diluted $ 0.08 $ 0.24 $ 0.17 $ 0.53 earnings per share Note: The sum of theearnings per shareamounts may not equalthe totals due torounding. Reconciliation ofreported net cash fromoperating activities tofree cash flowNet cash provided by $ 103,815 $ 95,502 $ 190,624 $ 182,284 operating activitiesNet cash (provided by)used in operating - (10,324 ) 38,423 (15,858 )activities -discontinued operationsCapital expenditures (20,833 ) (36,034 ) (80,787 ) (95,221 )

Restructuring payments 4,504 5,840 15,869 18,845

Change in customer (2,867 ) 11,441 19,464 3,125 deposits at PB BankTransaction costs paid - 2,917 2,117 9,025

Free cash flow $ 84,619 $ 69,342 $ 185,710 $ 102,200

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CONTACT: Editorial - Bill Hughes Chief Communications Officer 203/351-6785 Financial - Adam David VP, Investor Relations 203/351-7175