STAMFORD, Conn. — (BUSINESS WIRE) — November 1, 2017 — Pitney Bowes Inc. (NYSE: PBI), a global technology company providing innovative technology solutions to power commerce, today reported financial results for the third quarter 2017.
Quarterly Financial Results:
- Revenue of $843 million, flat versus prior year.
- GAAP EPS of $0.31; Adjusted EPS of $0.33.
- GAAP cash from operations of $146 million; free cash flow of $109 million.
- The Company is increasing its annual revenue guidance range to reflect the Newgistics acquisition.
- The Company is lowering its annual guidance range for adjusted EPS and free cash flow.
- The Company is announcing a $200 million spend reduction program over the next 2 years.
- The Board of Directors has initiated a review of strategic alternatives for the Company to enhance shareholder value.
Transaction Completed and Debt Management:
- Acquired Newgistics for $475 million; transaction closed on October 2, 2017.
- Issued $400 million of 5 year notes, $300 million of 3 year notes and borrowed $350 million in term loans.
- The Company redeemed its September 2017 notes for $385 million. In October 2017, the Company also redeemed its May 2018 notes for $350 million.
“Our third quarter revenue performance was largely in-line with our expectations; however our bottom line results fell short as we continued to realign our businesses to higher growth areas and invest in new business opportunities, products and solutions,” said Marc B. Lautenbach, President and CEO, Pitney Bowes. “During the third quarter, we validated that the next chapter of revenue growth will come from shipping, parcels and address verification, all of which transcends our entire business. And while I was disappointed in our financial results in the third quarter, I am encouraged about our path forward as we continue to transform our company.”
Lautenbach continued: “We have made substantial progress against our strategic objectives over the past four years and remain committed to improving margins and driving efficiencies throughout the business by deploying a $200 million spend reduction program. The recent acquisition of Newgistics repositions the portfolio towards growth. With the Board of Directors and management team continuing to focus on enhancing shareholder value, we believe now is the time to explore a broad range of strategic alternatives that may have the potential to further unlock shareholder value.”
Third Quarter 2017 Results
Revenue totaled $843 million for the quarter, which was flat versus prior year.
Digital Commerce Solutions revenue grew 19 percent and Enterprise Business Solutions revenue increased 1 percent. Small and Medium Business (SMB) Solutions revenue declined 7 percent as reported and 8 percent at constant currency.
GAAP earnings per diluted share (GAAP EPS) were $0.31, which included $0.02 for transaction costs related to the Newgistics acquisition as well as $0.01 for restructuring charges. Adjusted earnings per diluted share (Adjusted EPS) were $0.33.
The Company’s earnings per share results for the third quarter are summarized in the table below:
|Restructuring charges and asset impairments, net||$0.01||$0.06|
|Tax adjustment – preferred stock redemption||-||$0.03|
|* The sum of the earnings per share may not equal the totals above due to rounding.|
GAAP Cash from Operations and Free Cash Flow Results
GAAP cash from operations during the quarter was $146 million and free cash flow was $109 million. Compared to the prior year, free cash flow decreased by $11 million primarily due to lower net income offset by favorable working capital, specifically within accounts payable and accrued liabilities. During the quarter, the Company used cash to pay down $385 million of debt, return $35 million in dividends to shareholders and pay $11 million for restructuring payments.
During the quarter, the Company issued $400 million 5 year fixed rate notes, $300 million 3 year fixed rate notes and borrowed $350 million in term loans. The Company used these proceeds together with cash on-hand to fund the Newgistics acquisition and redeem $385 million notes due September 2017. In October 2017, the Company also redeemed the $350 million notes that would have come due in May 2018.
Third Quarter 2017 Business Segment Reporting
The Company’s business segment reporting reflects the clients served in each market and the way it manages these segments. The reporting segment groups are the SMB Solutions group; the Enterprise Business Solutions group; and the Digital Commerce Solutions group. The segment results for the quarter and prior year may not equal the subtotals for each segment group due to rounding.
The SMB Solutions group offers mailing and office shipping solutions, financing, services, and supplies for small and medium businesses to help simplify and save on the sending, tracking and receiving of letters, parcels and flats. This group includes the North America Mailing and International Mailing segments.
The Enterprise Business Solutions group includes the global Production Mail and Presort Services segments. Production Mail provides mailing and printing equipment and services for large enterprise clients to process mail. Presort Services provides sortation services to qualify large mail and parcel volumes for postal worksharing discounts.
The Digital Commerce Solutions group includes the Software Solutions and Global Ecommerce segments. Software Solutions provide customer engagement, customer information and location intelligence software. Global Ecommerce facilitates global cross-border ecommerce transactions and domestic retail and ecommerce shipping solutions.
SMB Solutions Group
|($ millions)||Third Quarter|
|North America Mailing||$320||$350||(9%)||(9%)|
|North America Mailing||$108||$142||(24%)|