Pitney Bowes Inc.

Good afternoon and welcome to the Pitney Bowles third quarter 2024 earnings release 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 the participants on today's conference call. Mr. Lance Rosenzweig, Chief Sector Officer and Board Member. Mr. John Wittig, Interim Chief Financial Officer. Mr. Kurt Wolf, Board Member. And Mr. Alex Brown, Director, Investor Relations. Mr. Brown will now begin the call with a safe harbor overview.

Good afternoon, and thank you for joining us. Included in today's presentation are forward-looking statements about our 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 2023 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 we do not undertake any obligation to update forward-looking statements as a result of new information or developments. For non-GAAP measures that are included in the 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. Finally, in our prepared remarks, revenue comparisons will be on a constant currency basis with other items such as EBIT, EBITDA, EPS, and free cash flow on an adjusted basis. At this time, I'd like to turn the call over to our CEO, Lance.

Thank you, Alex. Good afternoon, everyone. I want to begin by thanking the board for appointing me permanent CEO of Pitney Bowes. When I joined as interim CEO five months ago, we set four key priorities for our turnaround. Exit GEC, reduce excessive overheads, free up trapped cash, and reduce and improve our debt stack. I am incredibly proud of our team's success in tackling these priorities at an accelerated pace. We are on track to complete all four initiatives ahead of schedule and beat our targets in several areas. I'll share more details on this shortly, but first, our quarterly results. Q3 results reflect the strength of our core cash-generating businesses. I am pleased to highlight that we reported, on a recast basis that adjusts for the GEC exit, revenue of $499 million compared to $503 million in the prior year, adjusted EBIT of $103 million compared to $84 million in the prior year, adjusted EPS of $0.21 per share compared to $0.16 per share in the prior year, and free cash flow of $75 million compared to $56 million in the prior year, excluding $29 million of restructuring payments in the third quarter. John will provide more information on the recast numbers and a deeper dive into some additional considerations related to performance. I believe those will paint an even stronger picture of the business's trajectory than the comps I just shared. I also want to provide a comparison of our Q3 results to our reported results in Q3 2023, which included GEC. On this basis, comparing the new, more profitable Pitney Bowes with the old Pitney Bowes with GEC, we have achieved adjusted EBIT of 103 million compared to adjusted EBIT as reported in Q3 23 of 43 million, adjusted EPS of 21 cents compared to adjusted EPS as reported in Q3 23 of zero cents, and free cash flow of 75 million. compared to free cash flow as reported in Q3 23 of 15 million. This analysis illustrates the company's significant progress over the past few months. I'll now provide an update on each of our four key initiatives. First, the GEC exit is progressing well and should be largely complete by year end. We remain focused on resolving legacy obligations in the most efficient manner possible. In terms of exit costs, we continue to target one-time costs of approximately $150 million. I would like to emphasize that we expect these exit costs will improve go-forward earnings by approximately $136 million annually. Second, we continue to make progress on our cost efficiency initiatives. At the end of the quarter, we had removed $90 million in annualized costs. Given the ongoing progress we are making, we are now increasing our net cost savings forecast to $150 million to $170 million, up from $120 million to $160 million. To be clear, this improved range refers to net, not gross, savings. To provide a bit more color, we completed our first round of cost cuts, mainly focused on headcount, by the end of Q3. We are now focusing largely on external cost savings, and these savings will stretch through much of 2025. Third, we continue to make progress on cash optimization. We have largely completed our overseas cash repatriation, bringing $117 million back to the US year to date. Furthermore, the cash pooling system we have implemented will allow us to maintain and even further reduce overseas cash levels. Additionally, the exit from GEC is stabilizing our cash flows and, once complete, will allow us to feel comfortable maintaining corporate cash levels that are $100 million lower than prior to the exit. Finally, we have found new ways to unlock value via the Pitney Bowes Bank. John will give more details on this initiative. Our progress with the three above initiatives has set us up to begin paying down debt from a position of strength in the coming quarters. We currently have more than $100 million of excess cash that can be used to pay down debt, and this number continues to grow. We have been in discussions with our current and prospective lending partners on various options for strategic deleveraging, and we intend to provide an update on the debt reduction front in the near term. As we have taken decisive actions to turn around the company, I have had the opportunity to spend time hearing from our team members, partners, and clients. Allow me to unpack my on-the-ground interactions with each of our businesses. While visiting many of our pre-sort centers around the U.S., I observe firsthand the pride that our team takes in delivering great results for our clients. PreSort has built the leading player in its market with consistent revenue growth, improving operating margins, and strong and predictable cash flows. PreSort now has an opportunity to accelerate its growth organically and via roll-up M&A. I also spent time with our Centec team in the US and our tech centers in India. Centec has been the long-term market leader in its sector while developing exciting new products and services. We have an attractive opportunity with Centec in the large and growing SaaS shipping market. And our incredible team of engineers and developers are driving innovation in integrated shipping technologies, automated lockers, and analytics. Lastly, I spent time with our global financial services organization in Tampa and our Pitney Bowes Bank in Salt Lake City, observing how our financial services teams are accelerating cash generation and expanding the valuable lending and leasing services to enhance the liquidity and operations of hundreds of thousands of clients. This is a business that generates above-market returns and has exciting growth potential. My time in the field with our talented sales force and clients confirm that the Pitney Bowes brand is respected and admired as our clients trust us to continually innovate in developing the most secure, fast, and cost-effective shipping and mailing solutions. As we look toward 2025, some of our plans to reimagine Pitney Bowes include simplifying our business, moving from a geographic toward a vertical go-to-market structure, and accelerating our shift to fast-growing markets and adjacencies. I look forward to providing more details about these improvements going forward. Having spent my career improving and growing tech-enabled products and services companies, I recognize that there are tremendous advantages to having a trusted brand, a client base that includes over 90% of the Fortune 500, industry-leading products and services, and a talented and dedicated team of employees. Pitney Bowes has all of these attributes, positioning the company for a bright future. In closing, I want to emphasize that we are committed to increasing profitability, effectively managing our capital, and building a solid foundation for improved financial strength in 2025. We intend to make good on these commitments while continually exploring all paths to maximizing value for shareholders. John, on to you.