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Pitney Bowes Announces Full Year And Fourth Quarter 2019 Financial Results; 2020 Guidance

Wednesday, February 05, 2020

Press release from the issuing company

Stamford, Conn. – Pitney Bowes Inc., 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 full year and fourth quarter 2019.

Full Year 2019:

  • Revenue of $3.2 billion, flat compared to prior year; an increase of 2 percent when adjusted for both the impact of currency and market exits
  • GAAP EPS of $1.10; Adjusted EPS of $0.68
  • GAAP cash from operations of $252 million; free cash flow of $169 million

Quarterly Results:

  • Revenue of $831 million, a decrease of 3 percent; a decrease of 2 percent when adjusted for both the impact of currency and market exits
  • GAAP EPS of $1.03; Adjusted EPS of $0.14
  • GAAP cash from operations of $70 million; free cash flow of $66 million

“2019 was another important step forward in transforming our Company,” said Marc B. Lautenbach, President and CEO, Pitney Bowes. “We delivered our third consecutive year of revenue growth on a constant currency basis. We substantially realigned our business and our product portfolio, strengthened our balance sheet, and set ourselves up to drive profitable revenue growth going forward. Importantly, over the last two years, we have reduced our debt by over $1 billion, while maintaining significant investment in the business.

“In 2020, Pitney Bowes enters its 100th year, a noteworthy accomplishment few can claim,” Lautenbach added. “Our transformation continues to build on our three logical core adjacencies of shipping and mail along with the financing of mission-critical assets for our clients.”

Ransomware Attack Update:

Beginning on October 12, 2019, the Company was affected by a ransomware attack that temporarily disrupted customer access to some services. The Company has seen no evidence that customer or employee data was improperly accessed.

  • The Company estimates fourth quarter and full year revenue was adversely impacted by approximately $18 million, EPS by approximately $0.08 per share and Free Cash Flow by approximately $29 million, primarily as a result of the business interruption and incremental costs related to this attack.
  • The Company has insurance and expects a portion of any profit impact, including the profit associated with any loss of revenue, to ultimately be covered by insurance. Insurance proceeds will be recorded when there is a high degree of certainty regarding the amount of insurance proceeds to be received.

Debt Management and Software Solutions Sale:

In the fourth quarter, the Company:

  • Replaced its existing revolving credit facility with a new five-year, $500 million revolving credit facility and secured a new five-year Term Loan A for $400 million.
  • Repaid the $150 million term loan due in November 2019, the balance of the $300 million term loan due in December 2020 and redeemed its $300 million notes due in September 2020.
  • Obtained and allocated lender commitments for a new $650 million five-year Term Loan B which will be used to prepay future near-term bond maturities.
  • Completed the sale of its Software Solutions business to Syncsort for approximately $700 million in cash, with the exception of its software and data business in Australia, which closed in 2020.

Full Year 2019 Results

Revenue totaled $3.2 billion, which was flat versus prior year. Revenue increased 2 percent when adjusted for both the impact of currency and the January 2019 sale of direct operations in 6 smaller European markets (market exits).

Commerce Services revenue grew 9 percent over prior year and 10 percent when adjusted for the impact of currency. Sending Technology Solutions (SendTech Solutions) revenue declined 9 percent and 8 percent when adjusted for the impact of currency. SendTech Solutions revenue declined 6 percent when adjusted for both the impact of currency and market exits.

GAAP earnings per diluted share (GAAP EPS) were $1.10. Adjusted earnings per diluted share (Adjusted EPS) were $0.68.

GAAP cash from operations was $252 million and free cash flow was $169 million. During the year, the Company used cash to reduce debt by $526 million, repurchase $105 million of its common shares, pay $35 million in dividends to its common shareholders and $27 million in restructuring payments.

Fourth Quarter 2019 Results

Revenue totaled $831 million, which was a decrease of 3 percent versus prior year and 2 percent when adjusted for both the impact of currency and market exits.

Commerce Services revenue grew 5 percent over prior year. SendTech Solutions revenue declined 11 percent from prior year and 9 percent when adjusted for both the impact of currency and market exits.

GAAP earnings per diluted share were $1.03. Adjusted earnings per diluted share were $0.14.

GAAP cash from operations during the quarter was $70 million and free cash flow was $66 million. Compared to prior year, the decline in free cash flow was driven largely by a change in working capital, the impact of the ransomware attack and lower net income. During the quarter, the Company reduced debt by $329 million, paid $9 million in dividends to its common shareholders and made $8 million in restructuring payments.

Earnings per share results for the fourth quarter and full year are summarized in the table below:

 

Fourth Quarter

 

Full Year

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

GAAP EPS

$

1.03

 

 

$

0.26

 

 

$

1.10

 

 

$

1.28

 

Discontinued Operations

($

0.98

)

 

 

-

 

 

($

0.87

)

 

($

0.32

)

GAAP EPS from Continuing Operations

$

0.05

 

 

$

0.26

 

 

$

0.23

 

 

$

0.96

 

Restructuring Charges and Asset Impairments, net

$

0.06

 

 

$

0.03

 

 

$

0.30

 

 

$

0.11

 

Loss on Extinguishment of Debt

$

0.03

 

 

 

-

 

 

$

0.03

 

 

$

0.03

 

Loss from Market Exits

$

0.01

 

 

 

-

 

 

$

0.11

 

 

 

-

 

Transaction Costs

 

-

 

 

 

-

 

 

$

0.01

 

 

$

0.01

 

Pension Settlement

 

-

 

 

$

0.12

 

 

 

-

 

 

$

0.12

 

Tax Adjustments, net

 

-

 

 

($

0.11

)

 

 

-

 

 

($

0.18

)

Adjusted EPS

$

0.14

 

 

$

0.31

 

 

$

0.68

 

 

$

1.05

 

* The sum of the earnings per share may not equal the totals above 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 and Bound and Packet 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 results for each segment within the group may not equal the subtotals for the group due to rounding.

Commerce Services

($ millions)

 

Fourth Quarter

Revenue

 

2019

 

2018

 

Y/Y
Reported

 

Y/Y
Ex Currency

Global Ecommerce

 

$324

 

$304

 

6%

 

6%

Presort Services

 

135

 

133

 

1%

 

1%

Commerce Services

 

$459

 

$438

 

5%

 

5%

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

 

 

 

 

Global Ecommerce

 

$0

 

$12

 

>(100%)

 

 

Presort Services

 

30

 

24

 

26%

 

 

Commerce Services

 

$30

 

$36

 

(16%)

 

 

 

 

 

 

 

 

 

 

 

EBIT

 

 

 

 

 

 

 

 

Global Ecommerce

 

($18)

 

($4)

 

>(100%)

 

 

Presort Services

 

22

 

17

 

34%

 

 

Commerce Services

 

$4

 

$12

 

(65%)

 

 

 

 

 

 

 

 

 

 

 

Global Ecommerce

Revenue grew driven by volume growth across all platforms partially offset by business interruption related to the ransomware attack. EBIT and EBITDA margins were largely impacted by investments in market growth opportunities, including engineering, facilities and marketing, higher costs related to the ransomware attack and lower fulfillment margins. The Company estimates that revenue was adversely impacted by approximately $7 million and EBIT and EBITDA by approximately $6 million as result of the ransomware attack.

Presort Services

Revenue grew driven by investments in acquisitions for expansion along with growth in existing volumes across all mail classes partially offset by business interruption related to the ransomware attack. EBIT and EBITDA margins increased compared to prior quarter and prior year driven by lower labor and transportation costs per unit partially offset by lower revenue per piece due to the ransomware attack. The Company estimates that revenue, EBIT and EBITDA were adversely impacted by approximately $4 million as result of the ransomware attack.

SendTech Solutions

($ millions)

Fourth Quarter

 

 

2019

 

 

2018

 

Y/Y
Reported

 

Y/Y
Ex Currency

 

Y/Y Ex Currency
& Market Exits*

Revenue

$

 

372

 

$

 

420

 

(11%)

 

(11%)

 

(9%)

EBITDA

$

 

122

 

$

 

155

 

(21%)

 

 

 

 

EBIT

$

 

112

  $  

147

 

(23%)

   

 

   

 

* Excluding $11 million related to market exits and $1 million related to the impacts of currency

SendTech Solutions

Revenue declined driven by lower equipment, financing, support services and supplies along with business interruption related to the ransomware attack partially offset by higher rentals and business services revenue. EBIT and EBITDA margins decreased versus prior year driven by lower equipment sales margins primarily due to higher tariff costs and costs related to the ransomware attack. EBIT and EBITDA margins were also impacted by the overall lower segment revenue. The Company estimates that revenue, EBIT and EBITDA were adversely impacted by approximately $8 million as result of the attack.

2020 Guidance

The Company expects for full year 2020:

  • Revenue, on a constant currency basis, is expected to be in the range of 1 percent decline to 1.5 percent growth when compared to 2019.
  • Adjusted EPS from continuing operations to be in the range of $0.60 to $0.70 and reflects double-digit EBIT dollar growth over prior year, which will be offset by an expected higher tax rate as compared to prior year.
  • Free cash flow to be in the range of $140 million to $170 million. Free cash flow also reflects the planned use of cash for growth in third party leasing initiatives.

This guidance excludes any unusual items that may occur, such as 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. Additionally, the Company does not 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, special 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.

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

 

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