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Pitney Bowes Announces First Quarter 2020 Financial Results
“Clearly, we are all operating in unprecedented times and unchartered territory. Our first priority remains around the health, well-being and safety of our workforce, clients, partners and suppliers,” said
Lautenbach continued, “It is important to note that businesses engaged in mailing and shipping, which includes
“Over the last several years, we have made strategic decisions to strengthen our portfolio, products and balance sheet for long-term growth. As a result, we are in a much better position to weather this situation and come out stronger as a Company.”
Financial Overview:
- Revenue of
$796 million , flat to prior year; growth of 1 percent when adjusted for the impact of currency and market exits - GAAP EPS was a loss of
$1.22 ; Adjusted EPS of$0.05 - EPS was negatively impacted by
$0.05 as a result of the increase in credit loss provisions to reflect current macro-environment conditions in connection with the application of the current expected credit losses (CECL) accounting standard onJanuary 1, 2020 . - GAAP EPS includes a non-cash
$1.15 per share goodwill impairment charge related to the Global Ecommerce business. - GAAP cash from operations was a use of
$66 million ; free cash flow was a use of$47 million . - Based on the uncertainty around Covid-19, the Company is suspending its 2020 annual guidance.
Other Highlights:
- The Company secured a new
$850 million five-year Term Loan B; proceeds along with cash on the balance sheet used to pre-pay$928 million in near-term debt maturities. - The Company’s next bond maturity is not due until
October 2021 for$172 million . - In April, the Company drew down
$100 million from its revolving credit facility to hold in reserves. The Company continues to have access to the remaining balance of$400 million and is in compliance with all of its financial covenants contained in the credit facility. - The Company ended the first quarter with
$730 million in cash and short-term investments on its balance sheet and remains confident in its liquidity position. - The Board of Directors has declared a quarterly cash dividend on the Company’s common stock of
$0.05 per share.
First Quarter Results
Revenue totaled
GAAP earnings per share was a loss of
EPS was negatively impacted by
GAAP cash from operations was a use of
During the quarter, the Company used cash to reduce total debt by
Earnings per share results for the first quarter are summarized in the table below:
|
First Quarter* |
|||
|
2020 |
|
2019 |
|
GAAP EPS |
( |
|
( |
|
Discontinued operations |
(0.06) |
|
- |
|
GAAP EPS from continuing operations |
( |
|
(0.01) |
|
|
1.15 |
|
- |
|
Extinguishment of debt |
0.16 |
|
- |
|
Restructuring charges |
0.02 |
|
0.01 |
|
Loss from market exits |
- |
|
0.10 |
|
Adjusted EPS |
|
|
|
* The sum of the earnings per share may not equal the totals due to rounding.
Business Segment Reporting
The Commerce Services group includes the Global Ecommerce and Presort Services segments. Global Ecommerce facilitates domestic retail and ecommerce shipping solutions, including fulfillment and returns, and global cross-border ecommerce transactions. Presort Services provides sortation services to qualify large volumes of First Class Mail, Marketing Mail, Marketing Mail Flats and Bound Printed Matter for postal workshare discounts.
The Sending Technology Solutions segment offers physical and digital mailing and shipping technology solutions, financing, services, supplies and other applications for small and medium businesses to help simplify and save on the sending, tracking and receiving of letters, parcels and flats.
The sum of the segment results may not equal the totals due to rounding.
Commerce Services
|
First Quarter |
|||||||
($ millions) |
2020 |
|
2019 |
|
Y/Y Reported |
|
Y/Y Ex Currency |
|
Revenue |
|
|
|
|
||||
Global Ecommerce |
|
|
|
|
10% |
|
10% |
|
Presort Services |
141 |
|
135 |
|
4% |
|
4% |
|
Commerce Services |
|
|
|
|
8% |
|
8% |
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
|
|
|
|
|
|
Global Ecommerce |
( |
|
|
|
>(100%) |
|
|
|
Presort Services |
23 |
|
22 |
|
7% |
|
|
|
Commerce Services |
|
|
|
|
(49%) |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT |
|
|
|
|
|
|
|
|
Global Ecommerce |
( |
|
( |
|
>(100%) |
|
|
|
Presort Services |
16 |
|
15 |
|
4% |
|
|
|
Commerce Services |
( |
|
- |
|
>(100%) |
|
|
|
Global Ecommerce
Revenue growth driven by growth in Delivery and Fulfilment Services. EBIT and EBITDA margins were impacted by the mix of business and incremental costs associated with new facilities that opened during the fourth quarter 2019.
Covid-19 adversely impacted revenue and drove lower productivity across all sites, which was in part due to the difficulty in predicting accurate levels of consumer demand which impacted staffing levels. The business implemented CDC guidelines around social distancing at each sorting facility and incurred higher costs related to sanitizing facilities, staggered break and shift scheduling as well as health and temperature screenings.
Presort Services
Revenue growth was driven by investments in acquisitions for expansion along with higher revenue per piece. Volumes grew in First Class Mail and Marketing Mail Flats, which was partly offset by a decline in Marketing Mail. EBIT and EBITDA growth versus prior year were negatively impacted by
Covid-19 had an impact primarily on Marketing Mail volumes in addition to productivity across all sites during the first quarter. The business implemented CDC guidelines around social distancing at each sorting facility and incurred higher costs related to sanitizing facilities, staggered break and shift scheduling as well as health and temperature screenings.
SendTech Solutions
|
First Quarter |
|||||||
($ millions) |
2020 |
|
2019 |
|
Y/Y Reported |
|
Y/Y Ex Currency |
|
Revenue |
|
|
|
|
(8%) |
|
(7%) |
|
EBITDA |
|
|
|
|
(12%) |
|
|
|
EBIT |
|
|
|
|
(13%) |
|
|
|
Revenue declined driven by lower equipment, financing, support services, supplies, and rentals, partly offset by higher business services revenue.
Covid-19 adversely impacted revenue, particularly equipment sales and supplies. In addition to the revenue loss, EBIT and EBITDA were negatively impacted by
2020 Guidance
Based on the level of uncertainty around the depth and duration of Covid-19, in addition to the impact on clients, consumer demand and suppliers, and how it may ultimately impact each of our businesses, the Company is suspending guidance for the current financial year.
Conference Call and Webcast
Management of
About
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-
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
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.
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, global supply chain and consumer 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
Note: Consolidated statements of income; revenue, EBIT and EBITDA by business segment; and reconciliations of GAAP to non-GAAP measures for the three months ended
Consolidated Statements of Income (Loss) | ||||||||
(Unaudited; in thousands, except share and per share amounts) | ||||||||
Three months ended |
||||||||
2020 |
2019 |
|||||||
Revenue: | ||||||||
Business services |
$ |
444,379 |
|
$ |
406,545 |
|
||
Support services |
|
122,015 |
|
|
128,599 |
|
||
Financing |
|
89,078 |
|
|
97,043 |
|
||
Equipment sales |
|
76,273 |
|
|
89,787 |
|
||
Supplies |
|
45,709 |
|
|
50,953 |
|
||
Rentals |
|
18,814 |
|
|
22,157 |
|
||
Total revenue |
|
796,268 |
|
|
795,084 |
|
||
Costs and expenses: | ||||||||
Cost of business services |
|
374,665 |
|
|
327,046 |
|
||
Cost of support services |
|
39,760 |
|
|
41,847 |
|
||
Financing interest expense |
|
12,489 |
|
|
11,364 |
|
||
Cost of equipment sales |
|
57,359 |
|
|
63,665 |
|
||
Cost of supplies |
|
12,240 |
|
|
13,550 |
|
||
Cost of rentals |
|
6,378 |
|
|
9,715 |
|
||
Selling, general and administrative |
|
248,633 |
|
|
261,669 |
|
||
Research and development |
|
12,116 |
|
|
12,577 |
|
||
|
198,169 |
|
|
- |
|
|||
Restructuring charges |
|
3,817 |
|
|
3,700 |
|
||
Interest expense, net |
|
25,883 |
|
|
27,602 |
|
||
Other components of net pension and postretirement income |
|
(151 |
) |
|
(638 |
) |
||
Other expense, net |
|
33,487 |
|
|
17,710 |
|
||
Total costs and expenses |
|
1,024,845 |
|
|
789,807 |
|
||
(Loss) income from continuing operations before taxes |
|
(228,577 |
) |
|
5,277 |
|
||
(Benefit) provision for income taxes |
|
(10,030 |
) |
|
7,820 |
|
||
Loss from continuing operations |
|
(218,547 |
) |
|
(2,543 |
) |
||
Income (loss) from discontinued operations, net of tax |
|
10,064 |
|
|
(116 |
) |
||
Net loss |
$ |
(208,483 |
) |
$ |
(2,659 |
) |
||
Basic (loss) earnings per share (1): | ||||||||
Continuing operations |
$ |
(1.28 |
) |
$ |
(0.01 |
) |
||
Discontinued operations |
|
0.06 |
|
|
- |
|
||
Net loss |
$ |
(1.22 |
) |
$ |
(0.01 |
) |
||
Diluted (loss) earnings per share (1): | ||||||||
Continuing operations |
$ |
(1.28 |
) |
$ |
(0.01 |
) |
||
Discontinued operations |
|
0.06 |
|
|
- |
|
||
Net loss |
$ |
(1.22 |
) |
$ |
(0.01 |
) |
||
Weighted-average shares used in diluted earnings per share |
|
170,912,395 |
|
|
185,970,755 |
|
(1) |
The sum of the earnings per share amounts may not equal the totals due to rounding. | |
Consolidated Balance Sheets | ||||||||
(Unaudited; in thousands, except share amounts) | ||||||||
Assets | 2020 |
2019 |
||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
663,072 |
|
$ |
924,442 |
|
||
Short-term investments |
|
67,180 |
|
|
115,879 |
|
||
Accounts and other receivables, net |
|
342,823 |
|
|
373,471 |
|
||
Short-term finance receivables, net |
|
597,805 |
|
|
629,643 |
|
||
Inventories |
|
71,848 |
|
|
68,251 |
|
||
Current income taxes |
|
16,356 |
|
|
5,565 |
|
||
Other current assets and prepayments |
|
111,104 |
|
|
101,601 |
|
||
Assets of discontinued operations |
|
- |
|
|
17,229 |
|
||
Total current assets |
|
1,870,188 |
|
|
2,236,081 |
|
||
Property, plant and equipment, net |
|
371,464 |
|
|
376,177 |
|
||
Rental property and equipment, net |
|
40,264 |
|
|
41,225 |
|
||
Long-term finance receivables, net |
|
601,547 |
|
|
625,487 |
|
||
|
1,125,035 |
|
|
1,324,179 |
|
|||
Intangible assets, net |
|
181,624 |
|
|
190,640 |
|
||
Operating lease assets |
|
193,635 |
|
|
200,752 |
|
||
Noncurrent income taxes |
|
73,186 |
|
|
71,903 |
|
||
Other assets |
|
436,487 |
|
|
400,456 |
|
||
Total assets |
$ |
4,893,430 |
|
$ |
5,466,900 |
|
||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities |
$ |
653,539 |
|
$ |
793,690 |
|
||
Customer deposits of |
|
590,230 |
|
|
591,118 |
|
||
Current operating lease liabilities |
|
36,085 |
|
|
36,060 |
|
||
Current portion of long-term debt |
|
62,952 |
|
|
20,108 |
|
||
Advance billings |
|
96,641 |
|
|
101,920 |
|
||
Current income taxes |
|
3,070 |
|
|
17,083 |
|
||
Liabilities of discontinued operations |
|
- |
|
|
9,713 |
|
||
Total current liabilities |
|
1,442,517 |
|
|
1,569,692 |
|
||
Long-term debt |
|
2,567,010 |
|
|
2,719,614 |
|
||
Deferred taxes on income |
|
275,815 |
|
|
274,435 |
|
||
Tax uncertainties and other income tax liabilities |
|
36,096 |
|
|
38,834 |
|
||
Noncurrent operating lease liabilities |
|
171,079 |
|
|
177,711 |
|
||
Other noncurrent liabilities |
|
371,483 |
|
|
400,518 |
|
||
Total liabilities |
|
4,864,000 |
|
|
5,180,804 |
|
||
Stockholders' equity: | ||||||||
Common stock, |
|
323,338 |
|
|
323,338 |
|
||
Additional paid-in-capital |
|
69,553 |
|
|
98,748 |
|
||
Retained earnings |
|
5,200,024 |
|
|
5,438,930 |
|
||
Accumulated other comprehensive loss |
|
(857,874 |
) |
|
(840,143 |
) |
||
|
(4,705,611 |
) |
|
(4,734,777 |
) |
|||
Total stockholders' equity |
|
29,430 |
|
|
286,096 |
|
||
Total liabilities and stockholders' equity |
$ |
4,893,430 |
|
$ |
5,466,900 |
|
||
Business Segment Revenue | |||||||||
(Unaudited; in thousands) | |||||||||
Three months ended |
|||||||||
2020 |
2019 |
% Change |
|||||||
REVENUE | |||||||||
Global Ecommerce |
$ |
292,323 |
$ |
266,254 |
10 |
% |
|||
Presort Services |
|
140,720 |
|
134,847 |
4 |
% |
|||
Commerce Services |
|
433,043 |
|
401,101 |
8 |
% |
|||
Sending Technology Solutions |
|
363,225 |
|
393,983 |
(8 |
%) |
|||
Total revenue - GAAP |
|
796,268 |
|
795,084 |
0 |
% |
|||
Currency impact on revenue |
|
2,339 |
|
- |
|||||
Revenue, at constant currency |
|
798,607 |
|
795,084 |
0 |
% |
|||
Less revenue from Market Exits |
|
552 |
|
4,102 |
|||||
Revenue, excluding currency and Market Exits |
$ |
798,055 |
$ |
790,982 |
1 |
% |
|||
Business Segment EBIT & EBITDA | |||||||||||||||||||||||||||||||||
(Unaudited; in thousands) | |||||||||||||||||||||||||||||||||
Three Months Ended |
|||||||||||||||||||||||||||||||||
2020 |
|
2019 |
|
% change |
|||||||||||||||||||||||||||||
EBIT (1) |
|
|
D&A |
|
|
EBITDA |
|
EBIT (1) |
|
|
D&A |
|
|
EBITDA |
|
EBIT |
|
|
EBITDA |
||||||||||||||
Global Ecommerce |
$ |
(29,475 |
) |
$ |
18,065 |
$ |
(11,410 |
) |
$ |
(14,600 |
) |
$ |
16,458 |
$ |
1,858 |
|
>(100 |
%) |
>(100 |
%) | |||||||||||||
Presort Services |
|
15,695 |
|
|
7,774 |
|
23,469 |
|
|
15,066 |
|
|
6,920 |
|
21,986 |
|
4 |
% |
7 |
% |
|||||||||||||
Commerce Services |
|
(13,780 |
) |
|
25,839 |
|
12,059 |
|
|
466 |
|
|
23,378 |
|
23,844 |
|
>(100 |
%) |
(49 |
%) |
|||||||||||||
|
|
|
|||||||||||||||||||||||||||||||
Sending Technology Solutions |
|
106,562 |
|
|
9,039 |
|
115,601 |
|
|
122,403 |
|
|
8,857 |
|
131,260 |
|
(13 |
%) |
(12 |
%) |
|||||||||||||
|
|
|
|||||||||||||||||||||||||||||||
Segment total |
$ |
92,782 |
|
$ |
34,878 |
|
127,660 |
|
$ |
122,869 |
|
$ |
32,235 |
|
155,104 |
|
(24 |
%) |
(18 |
%) |
|||||||||||||
Reconciliation of Segment EBITDA to Net Loss: | |||||||||||||||||||||||||||||||||
Segment depreciation and amortization |
|
(34,878 |
) |
|
(32,235 |
) |
|||||||||||||||||||||||||||
Unallocated corporate expenses (2) |
|
(43,722 |
) |
|
(56,958 |
) |
|||||||||||||||||||||||||||
Interest, net |
|
(38,372 |
) |
|
(38,966 |
) |
|||||||||||||||||||||||||||
|
(198,169 |
) |
|
- |
|
||||||||||||||||||||||||||||
Restructuring charges |
|
(3,817 |
) |
|
(3,700 |
) |
|||||||||||||||||||||||||||
Loss on extinguishment of debt |
|
(36,987 |
) |
|
- |
|
|||||||||||||||||||||||||||
Loss on Market Exits |
|
- |
|
|
(17,710 |
) |
|||||||||||||||||||||||||||
Transaction costs |
|
(292 |
) |
|
(258 |
) |
|||||||||||||||||||||||||||
Benefit (provision) for income taxes |
|
10,030 |
|
|
(7,820 |
) |
|||||||||||||||||||||||||||
Loss from continuing operations |
|
(218,547 |
) |
|
(2,543 |
) |
|||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax |
|
10,064 |
|
|
(116 |
) |
|||||||||||||||||||||||||||
Net loss |
$ |
(208,483 |
) |
$ |
(2,659 |
) |
|||||||||||||||||||||||||||
(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 |
Reconciliation of Reported Consolidated Results to Adjusted Results | ||||||||
(Unaudited; in thousands, except per share amounts) | ||||||||
Three months ended |
||||||||
2020 |
|
2019 |
||||||
Reconciliation of reported net loss to adjusted net income, adjusted EBIT and adjusted EBITDA | ||||||||
Net loss |
$ |
(208,483 |
) |
$ |
(2,659 |
) |
||
(Income) loss from discontinued operations, net of tax |
|
(10,064 |
) |
|
116 |
|
||
|
196,600 |
|
|
- |
|
|||
Restructuring charges |
|
2,671 |
|
|
2,745 |
|
||
Loss on extinguishment of debt |
|
27,777 |
|
|
- |
|
||
Loss on disposition of businesses |
|
- |
|
|
19,423 |
|
||
Transaction costs |
|
223 |
|
|
192 |
|
||
Adjusted net income |
|
8,724 |
|
|
19,817 |
|
||
Interest, net |
|
38,372 |
|
|
38,966 |
|
||
Provision for income taxes, as adjusted |
|
1,964 |
|
|
7,128 |
|
||
Adjusted EBIT |
|
49,060 |
|
|
65,911 |
|
||
Depreciation and amortization |
|
40,719 |
|
|
36,885 |
|
||
Adjusted EBITDA |
$ |
89,779 |
|
$ |
102,796 |
|
||
Reconciliation of reported diluted loss per share to adjusted diluted earnings per share | ||||||||
Diluted loss per share |
$ |
(1.22 |
) |
$ |
(0.01 |
) |
||
Income from discontinued operations, net of tax |
|
(0.06 |
) |
|
- |
|
||
|
1.15 |
|
|
- |
|
|||
Restructuring charges |
|
0.02 |
|
|
0.01 |
|
||
Loss on extinguishment of debt |
|
0.16 |
|
|
- |
|
||
Loss on disposition of businesses |
|
- |
|
|
0.10 |
|
||
Adjusted diluted earnings per share |
$ |
0.05 |
|
$ |
0.11 |
|
||
Note: The sum of the earnings per share amounts may not equal the totals due to rounding. | ||||||||
Reconciliation of reported net cash from operating activities to free cash flow | ||||||||
Net cash (used in) provided by operating activities |
$ |
(66,284 |
) |
$ |
69,728 |
|
||
Net cash used in (provided by) operating activities - discontinued operations |
|
37,805 |
|
|
(1,257 |
) |
||
Capital expenditures |
|
(25,778 |
) |
|
(27,694 |
) |
||
Restructuring payments |
|
6,047 |
|
|
8,246 |
|
||
Change in customer deposits at PB Bank |
|
(888 |
) |
|
(23,036 |
) |
||
Transaction costs paid |
|
1,740 |
|
|
1,839 |
|
||
Free cash flow |
$ |
(47,358 |
) |
$ |
27,826 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200504005138/en/
Editorial -
Chief Communications Officer
203/351-6785
Financial -
VP, Investor Relations
203/351-7175
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