Pitney Bowes Inc.

Good morning and welcome to the Pitney Bowes Second Quarter 2020 Results 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'd now like to introduce your speakers for today's conference. Mr. Mark Lautenbach, President and Chief Executive Officer, Mr. Stan Satula, Executive Vice President and 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. Included in 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 materially different from our projections. More information about these risks and uncertainties can be found in our earnings press release, our 2019 Form 10-K Annual Report, and other reports filed with the SEC that are located on our website at www.pb.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 in the table attached 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.

Thank you, Adam, and thank you everyone for joining our call. I'd like to begin the call by thanking all the essential workers, including the Pitney Bowes team, for their dedication to the work in what is unprecedented time. And likewise, our hearts go out to all who have lost loved ones to this terrible virus. We continue to operate in challenging times and uncharted territory. and as I mentioned in our last call, times of economic dislocation, and this is certainly that, are times when market share changes hands. Our focus from the outset has been to come out of this period better than when it started. I will let Stan take you through the specifics of the quarter, but from my perspective, the quarter was quite good. We had excellent execution and made the best of a very difficult situation. Looking at the quarter from a longer-term perspective against our objective of coming out of this stronger, similarly, we hit the ball well. First and foremost was the health and well-being of our employees. We made the necessary changes to how we did business to keep our employees safe, and we got high marks from our team. Likewise, we put a premium on our balance sheet. We exited the quarter in a much better position. We had already refinanced much of our debt, and in the second quarter, we substantially increased our liquidity, exiting the quarter with over $1 billion of cash in short-term investments. We will continue to be diligent about our balance sheet and liquidity position. In our global commerce business, we work with over 100 new customers and manage them through unprecedented volumes. I have heard others in our industry talk about volumes consistent with the holiday peak. Our domestic delivery volume in the second quarter were over two times holiday peak. I won't say we were terribly efficient in dealing with the volume as the surge initially got us a touch off guard, but the bottom line is we moved an unprecedented number of parcels. The net effect of the new customers and as we will achieve scale sooner than expected. We'll accelerate some investments and we'll take some time for our expanded team and our new facilities to hit their stride, but they have already made great progress in handling the new volume levels. Twerk pausing and saying again, our business is now low over $1 billion and grew over 40% in the second quarter. This is a business that didn't exist eight years ago. Our pre-sort business performed better than the market and was able to make an important acquisition. The ironic effect of decreased volumes in the pre-sort world is fewer clients and third parties have sufficient volume to achieve five-digit densities, which is what drives the economics in the pre-sort world. Net-net, our pre-sort business is cruelly going through this pandemic in a stronger market position. In our mailing business, Our investments in online offerings, Intelli and digital channels really paid for us in the quarter. Our online offerings, in addition to our new central mail station, obviate the need for field service teams to physically install an asset. Intelli and digital channels are very well suited for offices being shut down. If you look at the quarter from a longer term perspective, the investments we have made to move our business to e-commerce shipping, build capacity for that business, The investments at Pitney Bowes Commerce Cloud, new offerings and new channels, all paid off. We have built a more agile, flexible, and contemporary business, and the second quarter is a clear proof point. The obvious question we are asking ourselves, and you and our investors will ask us, is what does all this mean for mailing and parcel volumes going forward? The honest answer is we do not know for sure. Mail volumes saw a drop through the second quarter, but we are seeing a slightly improved trend through July. And the world of e-commerce volumes have taken a material stair step up. Not clear if volumes will stay at these elevated levels, but there is no doubt that buying behavior has changed.