Pitney Bowes Inc.

Good morning and welcome to the Pitney Bowes 3rd Quarter Earnings 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 would now like to introduce your speakers for today's conference call, 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 to pass 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?

Thank you, Adam, and thank you everyone for joining our call. We turned in a good quarter and put up some solid numbers. I'm extremely proud of what the team continues to accomplish, especially while facing these challenging times. Overall, revenue grew 13%. This is an organic growth rate that we have not achieved in well over a decade and double the growth rate we saw in the second quarter. Although the current environment is contributing to our accelerated growth rate, we recognize the opportunity in shipping well in advance of the current conditions, which is why we spent the last several years making the right investments and taking necessary actions to shift our portfolio to this large growth area that complements our portfolio. and those investments are paying off with our shipping-related revenues comprising half of our overall revenue. However, the question still remains for all of us. What will e-commerce look like in a post-COVID world? Our marketing and communications team has been conducting weekly surveys with U.S. consumers to gauge several areas, including how shopping habits have changed and where they see these habits in a post-COVID environment Based on what we are seeing in the market, it is not surprising that the survey results show that 45% of consumers said they now do more than half of their shopping online, which is nearly three times pre-pandemic adoption. While the duration of this terrible pandemic remains unknown, we do know for certain that the market has shifted dramatically and consumers have adopted and adapted to the online buying, showing up on your doorstep experience. and we are fortunate to have invested in the products and services that help our clients be successful with the post-purchase consumer experience because this is an area that retailers can only afford to get right. Stan will discuss the details of a quarter, but given how the environment has changed over the last nine months, it is important to look at our results from a sequential perspective as each of our business segments turned in a strong quarter-over-quarter revenue performance. Our e-commerce business grew 47% over prior year, exceeding $400 million of revenue in a quarter, which is a first for this business. I know I've said this on prior calls, but it bears repeating. This is a business that barely existed for us eight years ago and is now on track to generate over $1.5 billion in annual revenue and year-to-date has grown over 30%. We continue to process a record number of parcels and find a significant number of new clients, an indication that we are taking share as our services and value proposition resonate with the market, with more opportunity still in front of us. As we discussed last quarter, the acceleration in demand and volume is bringing us to a level of scale that we originally anticipated achieving in two years. but we have more work in front of us to become more efficient, which the team is focused on. We've taken the necessary steps to prepare for a successful peak holiday season. Over the course of the last few months, we signed leases on three new facilities and upgraded another, all of which will be running for peak and renounced holiday peak pricing. Unlike some others in the market, we used a simple, easy to understand, flat rate increase that helps our clients know how to budget for their holiday shipping costs. Given the performance in e-commerce, it would be easy to overlook the quarter-to-quarter improvement in our CENTEC and pre-sort businesses. We're equally focused and well-positioned to leverage the investments we've made in these businesses over the last several years. Within CENTEC, we've invested in new product offerings and channels. These investments have allowed us to find new ways to interact and conduct business with our clients while adding value and saving them money. As a result, in the third quarter, we acquired over 8,600 SendPro clients through our digital channel, which is an increase of nearly 80% year-over-year. We are delivering new capabilities around shipping and financing and building out new revenue and profit streams that are more subscription-based. We continue to see improved take rates and activation for our shipping capabilities, which grew revenue at a double-digit rate, and our paid subscriptions for our shipping offerings grew over 60%. We also saw a nice improvement in the level of equipment placements, with sales revenue improving versus prior quarter. We are now placing new male finishing devices, which is a very important market for us. Shipment of these devices grew nicely in the quarter, and we entered the fourth quarter with a healthy backlog. And this business continues to turn in a strong EBIT margin that is within our long-term model range. Given CENTAC's contribution to our cash, improving the top-line decline and delivering strong margins is essential to our overall capital allocation strategy. In pre-sort, we've also improved our revenues from second quarter and improved the bottom line. And similar to what we are doing in CENTEC, we've expanded our pre-sort services into the shipping space, creating a new revenue and profit stream for this business around bound printed matter and marketing mail flats. Overall, we are making continued improvement and progress across the portfolio, and I expect this momentum to continue in the fourth quarter. I would be remiss if I didn't again thank our employees, clients, and partners alike. Our highest priority remains around their health and safety, and we continue to take all necessary actions. Now, as we head into a busy holiday season, this will be of the utmost importance as we remain diligent and very mindful of everyone's safety. As I mentioned before, one of the hallmarks of our culture is resilience, and that has enabled our company to endure. Looking at where we are from a longer-term perspective, I like how we are positioned, and I am convinced that we will come out of this pandemic much stronger than we entered. With that, let me turn it over to Stan.