Pitney Bowes Inc.

Good morning and welcome to the Pitney Bowes Fourth Quarter Earnings 2022 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 participants for today's conference call, Mr. Mark Lautenbach, President and Chief Executive Officer, Ms. Anna Chadwick, Executive Vice President and Chief Financial Officer, and Mr. Ned Zachar, Vice President, Investor Relations. Mr. Zachar will now begin the call with the Safe Harbor overview.

Good morning, everybody. This is Ned Zachar. I manage the Investor Relations program for Pitney Bowes, and I'd like to welcome everyone to the call this morning. We very much appreciate your interest and participation. Part of my duties includes covering the Safe Harbor information for these calls. Included in today's presentation are forward-looking statements about our future business and financial performance. For more information about these risks and uncertainties, please see our earnings press release, our 2021 Form 10-K annual report, and other reports filed with the SEC that are located on our website at www.pbe.com and by clicking on Industrial 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 that are used in a press release or discussed in our presentation materials, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our website. Additionally, we have provided a slide presentation and a spreadsheet with historical segment information on our investor relations website that summarizes many of the points we will discuss during today's call. You may have seen that one of our shareholders recently announced director nominations for the 2023 Annual Meeting. We issued a press release on January 23rd with our response, and we will not be answering any questions relating to the nominations on this call. Our format today is as follows. Mark Laudenbach, our President and Chief Executive Officer, will begin with opening remarks, which will be followed by Ana Chadwick, our Chief Financial Officer, who will provide an in-depth discussion of our financial results. I'd like to now turn the presentation over to Mark. Mark, the floor is yours.

Thanks, Ned, and good morning, everyone. I appreciate everyone joining our call this morning. For the quarter, revenue is flat on a comparable basis after adjusting for currency, a divestiture, and a revenue presentation change that Ana will detail shortly. Uber grew slightly, and cash flow for the quarter was up strongly. Centec and Presort continued their solid and predictable performance. In aggregate, the two businesses were essentially flat from a comparable revenue and profit perspective, and both businesses made good progress shifting their portfolios to growth. In Presort, this means marketing mail and bound to printed matter, and for Centec, shipping revenue. In North America, Centec, over 40% of our revenue is now coming from new products. They include our most recent award-winning IoT device, theCUBE, MailStation, and ParcelPoint. These products sit along our SaaS offerings, including PitneySHIP and Pitney Analytics. This is a direct result of investments we have made in this business. Margins and presort continue to improve and are again within the long-term model. Again, these improvements in margin are a direct result of investments we have made in automation and the pre-sort business. In aggregate, these two businesses continued to perform well in a choppy market. I would also be remiss if I didn't add our financial services business performed very well. Finance receivables, an important harbinger of future growth, grew for the quarter and credit losses were minimal. Deposits, collections and funding activities were all very well managed. In GEC, the headline is this. We made substantial progress across many important line items, but we're expecting to make even more progress. Specifically, our customer satisfaction increased 23 points over the course of the year. In the quarter, our network performance improved over 10 points on a year-to-year basis. These items helped us grow domestic parcel volumes by 16% in a difficult market. On the cost side, labor productivity improved 35%, and transportation productivity improved close to 20%. All in, gross margin per piece improved 50 cents on a year-to-year basis. Lots of good improvement, but we're expecting even better. When you boil it down, there were two issues. First, we did not get enough heavyweight parcels within our volume. This depressed revenue per piece and ultimately gross margin too lower at positive levels. Second, while transportation improved close to 20%, we're counting on a 25% improvement. In order to continue to improve our transportation execution, we're enhancing our processes and implementing a new transportation management system in the first half of the year. Specific to MIPS, we're increasing our focus and our resources on markets that have higher weight parcels. Our parcel pipeline and backlog has plenty of higher weight parcels, so we have the opportunity We just need to get that volume into our network. It will take a bit of time, but there's no shortage of opportunity. Our cross-border business continues to face headwinds due to the unprecedented strength of the dollar and potential changes to the way one of our largest clients will access our services in the middle of the year. As a result, I expect this business to continue to be under pressure for some time. So in conclusion, relative to GEC, we moved the ball forward. but we had the opportunity and the expectation to do even better. That said, our domestic volume exit rate was toward the high end of what we guided to and our implementation and backlog pipeline is very strong. This is a good harbinger for the future as volume is still the principal factor in reaching our long-term profitability. A few words on capital allocation in our balance sheet. Thematically, our emphasis for capital allocation in our balance sheet continues to be around strategic flexibility. As I indicated at the outset, our cash performance was very strong for the quarter. Part of the performance was around timing of working capital, but there was also very good execution on collections, deposits, and funding. Also of importance, we renegotiated our revolver agreement, which will afford us more flexibility going forward. Finally, on an opportunistic basis, we began to purchase back tranches of our debt. will continue to pursue debt repurchases opportunistically. A final comment on the portfolio. Our board and I continue to believe our portfolio is coherent in markets where we have a brand permission to win. That being said, we continue to look for opportunities to unlock shareholder value. Sometimes this means proactively looking for opportunities, and other times it means reacting to inbound inquiries. The sale of border-free in 2022 is an excellent and recent example of how there may be opportunities to simplify our portfolio further, even within larger business segments. So in short, like our portfolio, we will continue to look for opportunities to unlock value for our shareholders, and that process is ongoing. Let me now turn the conversation over to Anna.