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

Pitney Bowes Announces Second Quarter 2020 Financial Results

Jul. 30, 2020

STAMFORD, Conn.--(BUSINESS WIRE)--Jul. 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 second quarter 2020.

"I want to acknowledge and thank all of the essential workers, including the Pitney Bowes team, for their dedication to their work in what is an unprecedented time. And, likewise, our hearts go out to all who lost loved ones to this virus," said Marc B. Lautenbach, CEO and President, Pitney Bowes.

"It is times like these that test the resilience of our business," Lautenbach continued. "We are fortunate to have taken significant actions over the past several years to move into shipping and invest in our digital capabilities, which now enables us to leverage the benefits of a more agile, flexible and contemporary business. We have momentum and are well positioned to emerge from this time as a better and stronger Company."

Financial Overview:

* Revenue of $837 million, growth of 6 percent as reported and 7 percent when adjusted for the impact of currency * GAAP EPS loss of $0.02; Adjusted EPS of $0.04 * GAAP cash from operations of $153 million; free cash flow of $148 million. * Given the continued uncertainty around Covid-19 and consistent with direction from the last quarter, the Company has suspended its 2020 annual guidance.

Other Highlights:

* The Company ended the second quarter with over $1 billion in cash and short-term investments and remains confident in its liquidity position. * The Company's next bond maturity is not due until October 2021 for $172 million.

Second Quarter Results

Revenue totaled $837 million, which was growth of 6 percent over prior year on a reported basis and 7 percent when adjusted for the impact of currency.

GAAP earnings per share was a loss of $0.02, which included charges of $0.07 for taxes on the settlement of certain investment securities, $0.02 for discontinued operations and $0.02 for restructuring and asset impairments, partly offset by a $0.05 gain on sale of an equity investment.

Adjusted earnings per share were $0.04.

GAAP cash from operations was $153 million and free cash flow was $148 million. Free cash flow increased over prior year as a result of higher accounts payable and accrued liabilities driven by growth in Global Ecommerce and higher customer deposits. Free cash flow also benefited from the higher run-off of finance receivables.

During the quarter, the Company used cash to invest $34 million in capital expenditures, pay $9 million in dividends to its common shareholders and make $5 million in restructuring payments.

On a year-to-date basis, GAAP cash from operations is $87 million and free cash flow is $101 million.

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

Second Quarter*

2020 2019

GAAP EPS ($0.02 ) $0.13

Discontinued operations 0.02 0.03

GAAP EPS from continuing operations $0.00 $0.16

Taxes on settlement of investment securities 0.07 -

Gain on sale of an equity investment (0.05 ) -

Restructuring and asset impairments 0.02 0.02

Transaction costs - 0.01

Adjusted EPS $0.04 $0.19

* 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

Second Quarter

($ millions) 2020 2019 Y/Y Y/Y Ex Reported Currency

Revenue

Global Ecommerce $398 $282 41% 41%

Presort Services 118 128 (8%) (8%)

Commerce Services $517 $410 26% 26%



EBITDA

Global Ecommerce ($2) $1 >(100%)

Presort Services 20 23 (9%)

Commerce Services $19 $24 (21%)



EBIT

Global Ecommerce ($19) ($16) (21%)

Presort Services 13 15 (19%)

Commerce Services ($6) - >(100%)

Global Ecommerce

Revenue driven by significant growth in Domestic Parcel Delivery services volumes as well as Digital Delivery volumes. EBIT margin improved from the first quarter and versus prior year. EBIT and EBITDA margins benefited from lower transportation and warehousing costs per unit as a result of scale achieved in the quarter, offset by incremental costs associated with Covid-19.

Presort Services

Revenue declined due to lower Marketing Mail and First Class volumes. Marketing Mail Flats and Bound Printed Matter volumes grew significantly over prior year. EBIT and EBITDA margins were impacted by the lower revenue.

SendTech Solutions

Second Quarter

($ millions) 2020 2019 Y/Y Y/Y Ex Reported Currency

Revenue $321 $378 (15%) (15%)

EBITDA $113 $137 (17%)

EBIT $104 $125 (16%)

Revenue declined driven by lower equipment sales, support services, supplies and financing. Business services revenues grew as clients increased their usage of shipping offerings and capabilities. Covid-19 adversely impacted in-period revenue, particularly equipment sales and supplies. EBIT and EBITDA margins performed relatively in-line with prior year despite the lower revenue.

2020 Guidance

Given the continued level of uncertainty around the depth and duration of Covid-19, and consistent with direction provided last quarter, the Company has suspended its 2020 annual guidance.

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); expenses and potential impacts resulting from a breach of security, including cyber-attacks or other comparable events; our ability to continue to grow volumes, gain additional economies of scale and improve profitability within our Commerce Services group; the loss of some of our larger clients in our Commerce Services group; our success at managing customer credit risk; third-party suppliers' ability to provide products and services required by our clients; changes in labor conditions and transportation costs; capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at reasonable costs; our success in developing and marketing new products and services and obtaining regulatory approvals, if required; competitive factors, including pricing pressures, technological developments and the introduction of new products and services by competitors 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 six months ended June 30, 2020 and 2019, and consolidated balance sheets at June 30, 2020 and December 31, 2019 are attached.

Pitney Bowes Inc.ConsolidatedStatements of Income (Loss)(Unaudited; inthousands, except per shareamounts) Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019

Revenue: Business $ 528,990 $ 417,963 $ 973,369 $ 824,508 services Support 113,786 127,705 256,304 services 235,801

85,462 92,419 189,462 Financing 174,540

Equipment 57,837 85,551 175,338 sales 134,110

32,773 46,490 97,443 Supplies 78,482

18,644 18,445 40,602 Rentals 37,458

Total 837,492 788,573 1,633,760 1,583,657 revenue Costs and expenses: Cost of 454,311 337,918 664,964 business 828,976 services Cost of 36,725 40,520 82,367 support 76,485 services Financing 11,939 11,043 22,407 interest 24,428 expense Cost of 47,920 58,570 122,235 equipment 105,279 sales Cost of 8,379 11,758 25,308 supplies 20,619

Cost of 6,022 8,418 18,133 rentals 12,400

Selling, 233,631 241,467 503,136 general and 482,264 administrative Research and 7,467 13,572 26,149 development 19,583

Goodwill impairment - - 198,169 -

Restructuring charges and 4,922 5,899 8,739 9,599 asset impairments Interest 26,446 28,019 55,621 expense, net 52,329

Other components of net pension 386 (1,618 ) 235 (2,256 ) and postretirement income Other (income) (17,375 ) ) 17,683 expense (27 16,112

Total 820,773 755,539 1,845,618 1,545,346 costs and expenses Income (loss)from continuing 16,719 33,034 (211,858 ) 38,311 operationsbefore taxesProvision for 17,016 3,724 11,544 income taxes 6,986

(Loss) income (297 ) 29,310 (218,844 ) 26,767 from continuing operations (Loss) incomefrom (3,032 ) (5,613 ) (5,729 )discontinued 7,032 operations, netof taxNet (loss) $ (3,329 ) $ 23,697 $ (211,812 ) $ 21,038 income Basic (loss)earnings per share (1): Continuing $ - $ 0.17 $ (1.28 ) $ 0.15 operations Discontinued (0.02 ) (0.03 ) (0.03 ) operations 0.04

Net (loss) $ (0.02 ) $ 0.13 $ (1.24 ) $ 0.12 income Diluted (loss)earnings per share (1): Continuing $ - $ 0.16 $ (1.28 ) $ 0.15 operations Discontinued (0.02 ) (0.03 ) (0.03 ) operations 0.04

Net (loss) $ (0.02 ) $ 0.13 $ (1.24 ) $ 0.12 income Weighted-average shares used in 171,478 178,281 171,167 182,638diluted earningsper share

(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 June 30, December 31, 2020 2019Current assets: Cash and cash $ 862,897 $ 924,442 equivalents Short-term 153,221 investments 115,879

Accounts and other 391,748 373,471 receivables, net Short-term finance 555,196 629,643 receivables, net 73,653 Inventories 68,251

Current income 1,893 taxes 5,565

Other current 121,924 assets and 101,601 prepayments Assets of discontinued - 17,229 operationsTotal current 2,160,532 assets 2,236,081

Property, plant 375,465 and equipment, 376,177netRental property 40,875 and equipment, 41,225netLong-term finance 583,839 receivables, net 625,487

1,132,785 Goodwill 1,324,179

Intangible 175,460 assets, net 190,640

Operating lease 199,162 assets 200,752

Noncurrent income 68,449 taxes 71,903

379,611 Other assets 400,456

Total assets $ 5,116,178 $ 5,466,900

Liabilities andstockholders' equity Current liabilities: Accounts payable and $ 732,048 $ 793,690 accrued liabilities Customer deposits at 613,449 591,118 Pitney Bowes Bank Current 35,432 operating lease 36,060 liabilities Current portion 163,257 of long-term 20,108 debt Advance 122,606 billings 101,920

Current income 11,723 taxes 17,083

Liabilities of discontinued - 9,713 operationsTotal current 1,678,515 liabilities 1,569,692

2,553,490 Long-term debt 2,719,614

Deferred taxes on 270,376 income 274,435

Tax uncertainties 35,928 and other income 38,834tax liabilitiesNoncurrent 177,901 operating lease 177,711liabilitiesOther noncurrent 355,388 liabilities 400,518

5,071,598 Total liabilities 5,180,804

Stockholders' equity: 323,338 Common stock 323,338

Additional 68,498 paid-in-capital 98,748

Retained 5,188,119 earnings 5,438,930

Accumulated other (836,262 ) (840,143 ) comprehensive loss Treasury stock, (4,699,113 ) ) at cost (4,734,777

Total 44,580 stockholders' 286,096equity Total liabilities $ 5,116,178 $ 5,466,900 and stockholders' equity

Pitney Bowes Inc.BusinessSegment Revenue(Unaudited;in thousands) Three months ended June 30, Six months ended June 30, 2020 2019 % 2020 2019 % Change Change

REVENUE Global $ $ 282,319 41 % $ $ 548,573 26 % Ecommerce 398,453 690,776

Presort 128,138 (8 %) 262,985 (2 %) Services 118,127 258,847

Commerce 410,457 26 % 811,558 17 % Services 516,580 949,623

Sending 378,116 (15 %) 772,099 (11 %) Technology 320,912 684,137 Solutions Total 788,573 6 % 1,583,657 3 % revenue - 837,492 1,633,760 GAAP Currency impact on 2,627 - 4,967 - revenue Revenue, at $ 840,119 $ 788,573 7 % $ 1,638,727 $ 1,583,657 3 % constant currency

Pitney Bowes Inc. Business Segment EBIT & EBITDA(Unaudited; in thousands) Three months ended June 30, 2020 2019 % change

EBIT (1) D&A EBITDA EBIT (1) D&A EBITDA EBIT EBITDA $ ) $ $ ) $ (15,576 ) $ $ 1,307 (21 %) >Global Ecommerce (18,894 17,297 (1,597 16,883 (100%)

22,550 (19 %) (9 %)Presort Services 12,582 7,857 20,439 15,462 7,088

) ) 23,857 > (21 %)Commerce Services (6,312 25,154 18,842 (114 23,971 (100%)

Sending 136,649 (16 %) (17 %)Technology 104,268 8,776 113,044 124,738 11,911 Solutions $ $ $ 124,624 $ 160,506 (21 %) (18 %)Segment total 97,956 33,930 131,886 35,882

Reconciliation ofSegment EBITDA to Net (Loss)Income:Segment ) (35,882 )depreciation and (33,930 amortization Unallocated ) (45,048 )corporate (49,489 expenses (2) ) (39,062 )Interest, net (38,385

Restructuring ) (5,899 )charges and asset (4,922 impairmentsGain on sale of equity investment 11,908 -

Transaction ) (1,581 )costs (349

Provision for ) (3,724 )income taxes (17,016

(Loss) income ) 29,310 from continuing (297 operationsLoss from discontinued (3,032 ) (5,613 ) operations, netof tax $ ) $ 23,697 Net (loss) income (3,329

Six months ended June 30, 2020 2019 % change

EBIT (1) D&A EBITDA EBIT (1) D&A EBITDA EBIT EBITDA $ ) $ $ (13,006 ) $ (30,176 ) $ $ 3,165 (60 %) >Global Ecommerce (48,369 35,363 33,341 (100%)

44,536 (7 %) (1 %)Presort Services 28,277 15,631 43,908 30,528 14,008

) 47,701 > (35 %)Commerce Services (20,092 50,994 30,902 352 47,349 (100%)

Sending 267,909 (15 %) (15 %)Technology 210,830 17,815 228,645 247,141 20,768 Solutions $ $ $ 247,493 $ 315,610 (23 %) (18 %)Segment Total 190,738 68,809 259,547 68,117

Reconciliation ofSegment EBITDA to Net (Loss)Income:Segment ) (68,117 )depreciation and (68,809 amortizationUnallocated ) (102,006 )corporate (93,211 expenses (2) ) (78,028 )Interest, net (76,757

Goodwill ) impairment (198,169 -

Restructuring ) (9,599 )charges and asset (8,739 impairmentsGain on sale of equity investment 11,908 -

Loss on debt ) extinguishment (36,987 -

Loss on ) (19,549 )dispositions and (641 transaction costsProvision for ) (11,544 )income taxes (6,986

(Loss) income ) 26,767 from continuing (218,844 operationsIncome (loss) from discontinued 7,032 (5,729 ) operations, netof taxNet (loss) income $ (211,812 ) $ 21,038

(1) Segment EBIT excludes interest, taxes, general corporate expenses,restructuring charges, and other items that are not allocated to a particularbusiness segment.(2) Includes corporate depreciation and amortization expense of $7,138 and$5,210 for the three months ended June 30, 2020 and 2019, respectively and$12,978 and $9,860 for the six months ended June 30, 2020 and 2019,respectively.

Pitney BowesInc.Reconciliationof ReportedConsolidated Results toAdjustedResults(Unaudited; inthousands,except pershare amounts) Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019

Reconciliationof reportednet (loss)income toadjusted netincome,adjusted EBITand adjustedEBITDANet (loss) $ (3,329 ) $ 23,697 $ (211,812 ) $ 21,038 incomeLoss (income)from 3,032 5,613 (7,032 ) 5,729 discontinuedoperations,net of taxGoodwill - 196,600 - impairment -

Restructuringcharges and 3,183 4,242 5,854 6,987 assetimpairmentsGain on sale (8,943 ) - (8,943 ) - of equityinvestmentTax onsettlement of 12,229 - 12,229 - investmentsecuritiesLoss on - 27,777 - extinguishment -of debtLoss ondispositions 264 1,171 487 20,786 andtransactioncostsAdjusted net 6,436 34,723 15,160 54,540 incomeInterest, net 38,385 39,062 76,757 78,028

Provision for 3,646 5,791 5,610 12,919 income taxes,as adjustedAdjusted EBIT 48,467 79,576 97,527 145,487

Depreciation 41,068 41,092 81,787 77,977 andamortizationAdjusted $ 89,535 $ 120,668 $ 179,314 $ 223,464 EBITDAReconciliationof reporteddiluted (loss)earnings pershare toadjusteddilutedearnings pershareDiluted (loss) $ (0.02 ) $ 0.13 $ (1.24 ) $ 0.12 earnings pershare Loss (income)from 0.02 0.03 (0.04 ) 0.03 discontinuedoperations,net of taxGoodwill 1.14 impairment - - -

Restructuringcharges and 0.02 0.02 0.03 0.04 assetimpairmentsGain on sale (0.05 ) (0.05 ) of equity - -investmentTax on settlement of 0.07 - 0.07 - investmentsecuritiesLoss on debt 0.16 extinguishment - - -

Loss ondispositions 0.01 0.11 and - -transactioncostsAdjusteddiluted $ 0.04 $ 0.19 $ 0.09 $ 0.30 earnings pershareNote: The sumof theearnings pershare amounts may not equalthe totals dueto rounding.Reconciliationof reportednet cash from operatingactivities tofree cash flowNet cashprovided by $ 153,093 $ 17,054 $ 86,809 $ 86,782 operatingactivities Net cash usedin (providedby) operating 618 (4,277 ) 38,423 (5,534 )activities -discontinuedoperationsCapital (34,176 ) (31,493 ) (59,954 ) (59,187 )expendituresRestructuring 5,318 4,759 11,365 13,005 payments Change incustomer 23,219 14,720 22,331 (8,316 )deposits at PBBankTransaction 377 4,269 2,117 6,108 costs paidFree cash flow $ 148,449 $ 5,032 $ 101,091 $ 32,858

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