Pitney Bowes Announces First Quarter 2020 Financial Results

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 Pitney Bowes Bank, transaction costs and other special items. A reconciliation of GAAP cash from operations to free cash flow can be found in the attached financial schedules.

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.

Pitney Bowes has provided a quantitative reconciliation to GAAP in supplemental schedules. This information can be found at the Company's web site www.pb.com/investorrelations.

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 U.S. or other major markets or the loss of, or significant changes to, our contractual relationship with the United States Postal Service (USPS); our ability to continue to grow volumes, gain additional economies of scale and improve profitability within our Commerce Services group; the loss of some of our larger clients in our Commerce Services group; our success at managing customer credit risk; third-party suppliers' ability to provide products and services required by our clients; changes in labor conditions and transportation costs; capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at reasonable costs; a breach of security, including a future cyber-attack or other comparable event; our success in developing and marketing new products and services and obtaining regulatory approvals, if required; competitive factors, including pricing pressures, technological developments and the introduction of new products and services by competitors and other factors as more fully outlined in the Company's 2019 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments.

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 March 31, 2020 and 2019, and consolidated balance sheets as of March 31, 2020 and December 31, 2019 are attached.

 
Pitney Bowes Inc.
Consolidated Statements of Income (Loss)
(Unaudited; in thousands, except share and per share amounts)
 

Three months ended March 31,

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

 

Goodwill impairment

 

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.
 
 
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited; in thousands, except share amounts)
 
Assets March 31,
2020
December 31,
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

 

Goodwill

 

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 Pitney Bowes Bank

 

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, $1 par value

 

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

)

Treasury stock, at cost

 

(4,705,611

)

 

(4,734,777

)

Total stockholders' equity

 

29,430

 

 

286,096

 

Total liabilities and stockholders' equity

$

4,893,430

 

$

5,466,900

 

 
 
Pitney Bowes Inc.
Business Segment Revenue
(Unaudited; in thousands)
 

Three months ended March 31,

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

%

 
 
Pitney Bowes Inc.
Business Segment EBIT & EBITDA
(Unaudited; in thousands)
 

Three Months Ended March 31,

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

)

Goodwill impairment

 

(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 $5,841 and $4,650 for the three months ended March 31, 2020 and 2019, respectively.

 
 
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited; in thousands, except per share amounts)
 

Three months ended March 31,

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

 

Goodwill impairment

 

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

)

 

-

 

Goodwill impairment

 

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

 

 

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