Pitney Bowes Inc.

Good morning and welcome to the Pitney Bowes first quarter 2020 earnings conference call. Your lines have been placed in a listen-only mode during the conference call until the question and answer segment. Today's call is also being recorded. If you have any objections, please disconnect your lines at this time. I would now like to introduce participants on today's conference call, Mr. Mark Lautenbach, President and Chief Executive Officer, Mr. Stan Satula, Executive Vice President, Chief Financial Officer, and Mr. Adam David, Vice President, Investor Relations. Mr. David will now begin the call with a safe harbor overview.

Good morning. Including this presentation are forward-looking statements about our expected future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be maturely different from our projections. More information about these risks and uncertainties can be found in our earnings press release Our 2019 Form 10-K Ending Report and other reports filed with the SEC that are located on our website at www.pd.com and by clicking on Investor Relations. Please keep in mind that we do not undertake any obligation to update any forward-looking statements as a result of new information or developments. Also, for non-GAAP measures used in the press release or discussed in this presentation, you can find reconciliations to the appropriate GAAP measures and the tables are passed to our press release and also on our investor relations website. Additionally, we have provided slides that summarize many of the points we will discuss during the call. These slides can also be found on our investor relations website. Now, our president and chief executive officer, Mark Lautenbach, will start with a few opening remarks. Mark. Good morning.

I hope everyone is staying safe and in good health. Clearly, we are all operating in unprecedented times and uncharted territory. The COVID-19 pandemic has increased uncertainty around the world, impacting the economy, business, supply chain, and customer demand. It is important to note that businesses engaged in mailing and shipping, which obviously includes Pitney Bowes, have been designated an essential service by the Department of Homeland Security. The sending of mail and parcels is critical to our economy. In the first quarter, through the disruptions and distractions, Pitney Bowes processed about 34 million domestic parcels in our e-commerce business and 4.6 billion pieces of mail and pre-sorts. Some of this came at a higher cost, but we understand how vital a service this is for our clients. This morning, I'd like to discuss our first priority, which is around the health, well-being, and safety of our workforce, clients, partners, and suppliers. Then I will take you through where we stand today as a company, financially and operationally. Then we'll then take you through how we're addressing the impacts of COVID-19 throughout the business, our first core results, and where we are through the end of April. For our part, We continue to take the necessary and required steps to ensure our work environments and employees are safe and healthy. We have business continuity plans in place that are designed to address various threats and vulnerabilities, including a response to the pandemic, high absenteeism, and an emergency response methodology. We have specific protocols in place if an employee becomes infected with or exposed to the virus. and we have adjusted our sick leave policies so employees can get paid but do not have to use their sick time if they're asked to self-quarantine. Our senior readers are communicating with their teams on a daily basis and are openly available to address concerns. Importantly, each of our businesses have been up and running through this situation. Employees that can't work remotely are doing so. Within our facilities, We are providing protective masks and conducting temperature checks in higher risk locations. We are also enforcing safe social distancing and sanitizing equipment in the facilities multiple times a day. Let me now turn to the state of our business and where we stand today. As we have consistently communicated, P&O continues to be committed to maintaining a strong balance sheet. Throughout 2019 and earlier this year, We took a series of actions to strengthen our balance sheet by reducing debt and improving our liquidity. In 2019, we executed the sale of our software solutions business, reduced our debt by over $525 million, and renewed our revolving credit facility. Today, in 2020, we have reduced debt by an additional $110 million and refinanced our near-term debt maturities. which materially reduced our debt towers through 2024. Collectively, these actions combined with the underlying strength in our Centex cash flows have made our debt structure more manageable in the upcoming years and we are performing comfortably within our covenants. While we certainly did not predict this crisis, we took these actions precisely to de-risk and de-reverage the business and to ensure our balance sheet held up in the case there was an economic downturn. While we are maintaining a strong liquidity position, we are also taking other actions within our capital structure to preserve cash during this time. We are reprioritizing our capital needs around essential and necessary investments. We will continue to invest in our shipping capabilities, platforms, and e-commerce facilities, as well as necessary investments in new product technology that will continue to support our long-term objectives. are reprioritizing, we can defer a portion of our discretionary capital spend in 2020. Given the economic environment, we are taking a prudent and sound approach to building out our financial services business. In addition, we will limit M&A and ensure our variable spend is in line with demand. Assuming our cash flow scenario plan for the year is maintaining the annual dividend and without plans to repurchase shares in 2020. Let me spend a moment here to frame our operational business model. Our segments play in different markets. There are three commonalities among them. First, each provides an essential service to their clients and is a critical part of their operations, be it helping to either deliver important documents, invoices, statements, and or parcels. Second, we have made significant investments in each segment to improve the products and services we offer. And finally, we offer different financing options and services across all of our business to help our clients manage their cash flows, which is vital, especially during times like these. Within our legacy business, or Centec, we have invested in our central family of products, which operate on a modern, open platform and uses technology that positions us well to serve our clients for their mail and shipping needs. We continue to see our new offerings resonate with clients. Our SendPro Online and SendPro Enterprise products enable clients to continue to send bills, statements, and parcels, even if they need to work remotely. In addition, we have just introduced to the market our SendPro Mail Station, a new solution for both small office clients and large enterprises with distributed or home-based workforces. It is the first and only meter device in the industry to utilize postage in the cloud capabilities and is a part of an integrated mailing and shipping solution that extends the central family of products. It is important to note that approximately two-thirds of CENTAC's revenue is recurring in nature and high margin. CENTAC makes up the majority of the company's cash flow, and the nature of its recurring revenue is an important contributor. Our pre-sort business is an example of how our enterprise clients come to rely on us to process their first-class and marketing mail letters and flash, as well as their bound, printed matter, both timely and efficiently. We've grown this business over the last few years against a market that is in decline, which is testimony to our strong value proposition and market position. The bulk of our pre-sort business is in first-class mail, which comprises bills, statements, and similar business communications. Although we are seeing modest declines there, the more dramatic declines have been in marketing now. In e-commerce, we continue to bring value to our retail and marketplace clients to satisfy their shipping needs. Over the last several years, we've invested and built this business to now be over $1.1 billion of revenue, which has been critical to Kikibo's overall transformation and has moved us solidly into the adjacent shipping space. It is difficult to predict with any accuracy how e-commerce demand will play out during this time, but we will continue to ensure that we are delivering this essential service to our clients. One might expect an accelerated shift to e-commerce sales. On the other side of the ledger, I think it is fair to expect class quarter transactions to be negatively impacted in near term due to severely restricted flights. We may also see consumer purchasing be depressed for a period of time due to the economic uncertainty. Over the past several years, we have made significant investments in our products, platforms, people, and portfolio. It is the investments we have made to transform our portfolio and the investment services we provide that allow our clients to recognize the value we bring to their business. Let me leave you with this. In April, Pitney Bowes marked a major milestone by reaching 100 years. We have certainly seen our fair share of times of crisis offset by many more times of prosperity. The COVID-19 pandemic has disrupted every aspect of life, and our commitment to supporting our communities has never been stronger. During these challenging times, our team is working through ways to support those in need. We are supporting the Business Roundtable's effort in addressing this public health crisis with a donation to Project HOPE, to source personal protection equipment from global vendors. Project HOPE will then work with non-profit healthcare to allocate the PPEs to the medical community in conjunction with the Federal Emergency Management Agency. We have donated re-imaged laptops for online learning and have committed funds to our partners at the United Way and Fairfield Community Foundation, as well as the Sanford Hospital. During this time, thousands of women and men prospecting Bowes are playing a critical role in the economy by keeping mail and parcels moving, by keeping our appliance equipment running, and by keeping our supply chain flowing. I want to take this moment to acknowledge and thank our employees for their incredible work. They each are performing under very difficult circumstances. In the same way, we salute the many selfless essential workers that are helping our country through this difficult period. Through the last hundred years, we have prevailed as a company by having a clear vision and strategy, but what has sustained Kenny Bowes is our character. There is a certain resilience and grit to this company which has enabled us to endure. The grit is built on a culture of innovation that has created and recreated this company many times over and is helping us recreate the company again today. Likewise, our country, as it always does, is demonstrating resolve and innovation that will get us to the other side of these incredible challenges. With time like these, when our true grit and ingenuity are tested, during these times, I am proud of how our team rises to the occasion to keep moving forward and get Pitney Bowes to its next 100 years. With that, let me turn it over to Stan.