STAMFORD, Conn. - Pitney Bowes Inc. (NYSE: PBI), a global technology company that provides products and solutions that power commerce, today reported financial results for the first quarter 2016.

Quarterly Financial Results:

• Revenue of $845 million, a decline of 3 percent, excluding the impacts of market exits and currency; a decline of 4 percent on a constant currency basis and a decline of 5 percent as reported.
• Adjusted EPS of $0.34; GAAP EPS of $0.30
• SG&A of $327 million, which includes $12 million of incremental costs for advertising and ERP implementation.
• Free cash flow of $60 million; GAAP cash from operations of $58 million
• Repurchased 6.8 million shares of common stock
• Reaffirming 2016 annual guidance

“We continued to make progress during the first quarter as performance improved in several of our businesses and we largely completed the next major milestones in our transformation to deliver greater long-term value,” said Marc B. Lautenbach, President and CEO, Pitney Bowes. “During the quarter, we turned in a strong performance in new equipment sales in North America Mailing, a leading indicator for our Mailing business. Our Presort Services business also performed well, and Global Ecommerce continued to have strong revenue growth. However, we did not execute in our Software Solutions business, which also experienced weaker technology market conditions. We have realigned our Software management team and expect improvement throughout the year.

“In the last 120 days, we launched the first major television advertising campaign in twenty years, deployed our new ERP and business process platform in Canada and the U.S., and moved to a dealer network in several markets. Last week, we announced the Pitney Bowes Commerce Cloud, including five SaaS-based solutions that utilize our physical and digital capabilities, mobile, global and ecommerce technologies with all of the end-to-end requirements that drive commerce. While these investments have impacted our first quarter results, we will begin to realize benefits associated with the implementation of our new platform beginning in the second half of the year. Going forward, I am confident in our ability to deliver on our long-term strategic plans and we will continue to unlock value for our shareholders.”

First Quarter 2016 Results

Revenue totaled $845 million for the quarter. On a comparative basis, revenue declined 3 percent versus the prior year when adjusted for the impact of currency and the impact from the exit of direct operations (market exits) in Mexico, South Africa and five markets in Asia. Revenue declined 4 percent on a constant currency basis and 5 percent on a reported basis.

Digital Commerce Solutions revenue grew 11 percent on a constant currency basis and 9 percent on a reported basis. Revenue on a constant currency basis benefited from growth in Global Ecommerce, while revenue declined in Software Solutions.

Enterprise Business Solutions revenue declined 1 percent compared to the prior year when adjusted for the impact of currency and market exits. Revenue declined 2 percent on a constant currency basis and 3 percent on a reported basis. Revenue benefited from continued growth in Presort Services, which was offset by a decline in Production Mail.

Small and Medium Business (SMB) Solutions revenue declined 3 percent compared to the prior year when adjusted for the impact of currency and market exits. Revenue declined 4 percent on a constant currency basis and 5 percent on a reported basis. SMB equipment sales revenue grew globally while recurring revenues declined.

Adjusted earnings per diluted share were $0.34. Earnings per diluted share on a Generally Accepted Accounting Principles (GAAP) basis were $0.30, which included $0.02 per share for restructuring charges and $0.01 per share for disposition costs related to the market exits.

Earnings per share comparisons this quarter were adversely impacted by $0.03 per share for incremental advertising expenses; $0.01 per share for higher ERP related expenses and $0.02 per share for the absence of Imagitas earnings compared to last year.

The Company’s earnings per share results for the quarter are summarized in the table below:

* The sum of the earnings per share may not equal the totals above due to rounding

Free Cash Flow Results

Free cash flow during the quarter was $60 million and $58 million on a GAAP operating cash basis. In comparison to the prior year, free cash flow declined due to lower net income and a slower decline in finance receivables. Cash flow comparisons were also impacted by the timing of payments resulting from the launch of the new ERP program in the U.S.

During the quarter, the Company used cash for: $36 million in dividends to its common shareholders; $128 million for share repurchases; $22 million for restructuring payments and $37 million for a contribution to the UK pension fund.

Business Segment Reporting

The Company’s business segment reporting reflects the clients served in each market and the way it manages these segments for growth and profitability. The primary reporting segment groups are the SMB Solutions group; the Enterprise Business Solutions group; and the Digital Commerce Solutions group.

The SMB Solutions group offers mailing equipment, financing, services and supplies for small and medium businesses to efficiently create mail and evidence postage. This group includes the North America Mailing and International Mailing segments. North America Mailing includes the operations of U.S. and Canada Mailing. International Mailing includes all other SMB operations around the world.

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 shipping solutions for businesses of all sizes.

The Other segment is comprised of the Imagitas marketing services business, which was sold on May 29, 2015.

* Excluding the impacts of currency and the divested revenues resulting from the exit of direct operations in Mexico, South Africa and five markets in Asia.

* Excluding the impacts of currency and the divested revenues resulting from the exit of direct operations in Mexico, South Africa and five markets in Asia.

North America Mailing

The revenue rate of decline for the quarter was consistent with prior quarters. Equipment sales and supplies increased in the mid-single digit range compared to the prior year on a constant currency basis, which was the best year-over-year performance for equipment sales in several years. Recurring revenue streams declined at a mid-single digit rate. The Company continues to focus on driving increased sales effectiveness in the segment’s sales channels, which was evident in the quarter. EBIT margin was lower as a result of the decline in high margin recurring revenue streams.

International Mailing

Excluding the adverse effect from currency and the recent market exits, the revenue decline for the segment continued to moderate. The Company’s strategies of realigning its geographic footprint and go-to-market have been completed and the productivity benefits are being reflected in the results. Revenue on a constant currency basis benefited from equipment sales growth in France, Germany and Japan. The decline in recurring revenue streams was consistent with prior quarters. EBIT margin improved versus the prior year primarily as a result of lower costs associated with the change in go-to-market.

* Excluding the impacts of currency and the divested revenues resulting from the exit of direct operations in Mexico, South Africa and five markets in Asia.

Production Mail

Excluding the adverse effect from currency and the recent market exits, revenue declined 8 percentage points. Equipment sales declined due to fewer inserting equipment installations in part due to the timing of closing some large deals. Support services and supplies revenue declined, in part, as a result of some in-house mailers shifting their mail processing to third party outsourcers and the recent market exits. EBIT margin declined versus the prior year as a result of the lower revenue, especially the higher-margin inserting equipment sales revenue.

Presort Services

Revenue benefited from the higher volume of First Class mail processed as well as expansion into the St. Louis market. EBIT margin was relatively flat to the prior year as benefits from on-going operational productivity initiatives offset increased mail processing costs.

Software Solutions

Revenue declined due to fewer large licensing deals and lower data-related revenue versus the prior year. The Company is expanding its channel reach and focus on several high-potential industries with targeted solutions, which have longer sales cycles. Management continues to focus on improving sales efficiency and expanding the indirect channel to improve the pipeline of deals. EBIT margin declined as a result of the lower licensing revenue, which has a high margin, and increased selling and marketing costs.

Global Ecommerce

Results included another full quarter of revenue from Borderfree retail clients and strong growth in the UK marketplace. The launch of new retail storefronts also added to revenue in the quarter. Outbound U.S. package shipments improved during the course of the quarter as pressure from the strong U.S. dollar began to subside.

EBIT margin declined versus the prior year due to the amortization of acquisition-related intangible costs and investments in the business, which more than offset the early stages of synergy savings. The Company remains on-track to achieve its synergy run-rate objective by the end of the year.

The Other segment is comprised of the Imagitas marketing services business, which was sold in May 2015.

2016 Guidance

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 2015 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission.

The Company is reaffirming its annual revenue growth, earnings per share and free cash flow guidance. The Company’s guidance is based on an assumption that the global economy and foreign exchange markets in 2016 will not change significantly. 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.

The Company still expects in 2016:

• Revenue, on a constant currency basis, to be in the range of a 1 percent decline to 2 percent growth when compared to 2015.
• Earnings per diluted share from continuing operations to be in the range of $1.80 to $2.00 on both an adjusted and GAAP basis.
• Free cash flow to be in the range of $425 million to $525 million.

The Company is providing further detail on the timing of advertising and ERP expenses among the quarters. The Company expects:

• Incremental marketing expense in the second quarter to have a similar impact on earnings as the first quarter. The change in timing of the expense is related, in part, to an extension of the Company’s advertising campaign and support for the launch of the new Pitney Bowes Commerce Cloud solutions. Total annual expense is expected to remain the same.
• Incremental ERP expense is expected to be the highest in the second quarter as the Company supports the post-launch implementation phase of its ERP platform in the U.S.
• The aggregate of these incremental advertising and ERP expenses in the second quarter are expected to be at a similar level to the impact on earnings in the first quarter.

The Company still expects:

• Revenue, excluding the impacts of currency; to be driven by growth in the double-digit range in Digital Commerce Solutions; flat to modest growth in Enterprise Business Solutions and a low single-digit decline in SMB Solutions.
• Revenue results will be impacted by the recent market exits, which generated $26 million in revenue in 2015.
• On-going improvement in SG&A as a percent of revenue as a result of the expected benefits from the implementation of the new ERP program. The majority of these benefits in 2016 are expected to be realized in the second half of the year, after the U.S. launch and stabilization period.
• A tax rate in the range of 32 to 35 percent.

Full Release