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Pitney Bowes Announces Third Quarter 2015 Financial Results

The following excerpt is from the company's SEC filing.

STAMFORD, Conn.--(BUSINESS WIRE)--October 29, 2015--Pitney Bowes Inc. (NYSE:PBI), a global technology company that provides products and solutions that power commerce, today reported financial results for the third quarter 2015.

Quarterly Financial Results:

Revenue of $870 million, a decline of 4 percent on a constant currency basis and 8 percent as reported.

Adjusted EPS of $0.43; GAAP EPS of $0.44. EPS includes a $0.02 per share negative impact of foreign exchange during the quarter.

SG&A of $309 million, a decline of $33 million versus prior year.

Gross Margin of 58.8 percent, improvement of 150 basis points versus prior year.

Free cash flow of $131 million; GAAP cash from operations of $150 million.

Repurchased $100 million of stock or 4.9 million shares.

Company reaffirms adjusted EPS, GAAP EPS and free cash flow guidance; updates revenue guidance.

Strategic Updates:

As announced in September, the Board of Directors authorized an incremental $100 million share repurchase.

The Company launched its initial implementation of the new ERP platform in Canada in early October and remains on schedule to achieve the targeted savings and efficiencies associated with this program.

The Company introduced several new products and solutions, including:

SMB group launched the Relay™ Multi-Channel Communications Suite globally;

Production Mail expanded its offerings in print, insertion and sortation equipment through its new AcceleJet™, Epic™ and TrueSort™ products;

Software expanded its offerings with the EngageOne

Video solution, which helps enterprises up-sell and cross-sell through personalized videos.

The Company made significant progress integrating its Borderfree acquisition while also achieving initial cost synergies.

"We made solid progress on our strategic plan in the third quarter," said Marc B. Lautenbach, President and CEO, Pitney Bowes. “Our North America SMB business continued to stabilize with equipment sales growing for the quarter. We improved our operational excellence with increased margins and very solid cash flow performance in the quarter. Our ERP project, which promises to unlock substantial value in our Company, got off to a very good start in early October with a successful launch in Canada. Finally, although our Ecommerce business continued to face currency headwinds, the integration of Borderfree remains on track. Overall, Digital Commerce grew 10 percent on a constant currency basis and I remain very optimistic about the long-term prospects of this business."

THIRD QUARTER 2015 - FINANCIAL RESULTS

Revenue was $870 million, a decline of 4 percent on a constant currency basis and 8 percent on a reported basis when compared to prior year.

Digital Commerce Solutions revenue grew 10 percent on a constant currency basis and 6 percent on a reported basis. Enterprise Business Solutions revenue declined 1 percent on a constant currency basis and 3 percent on a reported basis. SMB Solutions revenue declined 3 percent on a constant currency basis and 8 percent on a reported basis.

Adjusted earnings per diluted share were $0.43. Prior year adjusted earnings per diluted share were $0.51 and included $0.08 per share of tax benefits. Excluding the tax benefits in the prior year, adjusted earnings per diluted share this quarter would have been flat to the prior year.

Generally Accepted Accounting Principles (GAAP) earnings per diluted share were $0.44 and included a $0.01 per share net tax benefit related to the Company’s previous divestiture of an investment and other acquisition and disposition related transactions.

Earnings per share this quarter were reduced by $0.02 per share due to the impacts of foreign exchange. As expected, earnings per share this quarter were also impacted by the loss of three months of Imagitas earnings, which were estimated to be approximately $0.03 per share, and $0.01 per share of expense for three months of amortization of intangibles related to Borderfree.

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

Third Quarter *

Adjusted EPS from continuing operations

Net tax benefit from transactions

0.01

Investment divestiture

0.05

Restructuring charges

($0.01

GAAP EPS from continuing operations

Discontinued operations - income

0.10

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

Free cash flow during the quarter was $131 million and cash provided by operating activities was $150 million on a GAAP basis. In comparison to the prior year, third quarter free cash flow was higher primarily due to lower working capital requirements and lower capital expenditures due to less of an investment in the Company’s new ERP platform. During the quarter, the Company used cash to pay $38 million in dividends to its common shareholders, repurchase $100 million worth of its shares and make $15 million in restructuring payments.

BUSINESS SEGMENT REPORTING

The Company revised its business segment reporting in the second quarter 2015 for its Digital Commerce Solutions segment.

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 provides mailing and printing equipment and services for large enterprise clients to process mail, including sortation services to qualify large mail volumes for postal worksharing discounts.

This group includes the global Production Mail and Presort Services segments.

The Digital Commerce Solutions group provides customer engagement, customer information and location intelligence software; and solutions that facilitate global cross-border ecommerce transactions and shipping solutions for businesses of all sizes. This group includes the Software Solutions and Global Ecommerce segments.

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

SMB Solutions Group

($ millions)

Third Quarter

Reported

Ex Currency

Ex Currency

and Divested

Revenues*

North America Mailing

$353

$363

(3%)

(2%)

International Mailing

105

132

(21%)

(9%)

(7%)

SMB Solutions Total

$159

$160

0%

11

16

(33%)

* Excludes the impacts of currency and the divested revenues in Europe related to the transition to a dealer sales network in six smaller European markets completed in the third quarter of 2014.

North America Mailing revenue experienced the lowest rate of decline in 6 quarters, benefiting from 2 percent growth in equipment sales as productivity continues to improve. Recurring revenue stream trends also continued to be in-line with prior quarters. EBIT margin continued to improve versus the prior year due to the mix of business, organizational streamlining and on-going cost reduction initiatives.

During the quarter, currency adversely affected revenue comparisons by 12 percentage points. For comparative purposes, revenue declined 7 percent when adjusted for the impacts of both currency and the reduction in revenue resulting from the exit of direct...


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