Pitney Bowes Announces Third Quarter 2020 Financial Results

Note: Consolidated statements of income; revenue, EBIT and EBITDA by business segment; and reconciliations of GAAP to non-GAAP measures for the three months and nine months ended September 30, 2020 and 2019, and consolidated balance sheets at September 30, 2020 and December 31, 2019 are attached.

Pitney Bowes Inc.
Consolidated Statements of Income (Loss)
(Unaudited; in thousands, except per share amounts)

		Three months ended September 30,						Nine months ended September 30,
			2020			2019			2020			2019
Revenue:
	Business services	$	550,954		$	419,101		$	1,524,323		$	1,243,609
	Support services		117,519			126,274			353,320			382,578
	Financing		86,218			90,577			260,758			280,039
	Equipment sales		79,572			89,618			213,682			264,956
	Supplies		39,635			44,818			118,117			142,261
	Rentals		18,000			19,737			55,458			60,339
	Total revenue		891,898			790,125			2,525,658			2,373,782

Costs and expenses:
	Cost of business services		482,965			338,519			1,311,941			1,003,483
	Cost of support services		37,647			41,086			114,132			123,453
	Financing interest expense		11,626			11,026			36,054			33,433
	Cost of equipment sales		59,766			59,859			165,045			182,094
	Cost of supplies		10,132			12,225			30,751			37,533
	Cost of rentals		6,055			5,090			18,455			23,223
	Selling, general and administrative		238,618			254,092			720,882			757,228
	Research and development		9,255			12,272			28,838			38,421
	Restructuring charges		3,766			47,017			12,505			56,616
	Goodwill impairment		-			-			198,169			-
	Interest expense, net		27,175			28,704			79,504			84,325
	Other components of net pension and postretirement (income), expense		(109	)		(882	)		126			(3,138	)
	Other (income) expense, net		(6,325	)		667			9,787			18,350
	Total costs and expenses		880,571			809,675			2,726,189			2,355,021

Income (loss) from continuing operations before taxes			11,327			(19,550	)		(200,531	)		18,761
Provision (benefit) for income taxes			554			(24,895	)		7,540			(13,351	)
Income (loss) from continuing operations			10,773			5,345			(208,071	)		32,112
Income (loss) from discontinued operations, net of tax			616			(8,470	)		7,648			(14,199	)
Net income (loss)		$	11,389		$	(3,125	)	$	(200,423	)	$	17,913

Basic earnings (loss) per share (1):
	Continuing operations	$	0.06		$	0.03		$	(1.21	)	$	0.18
	Discontinued operations		-			(0.05	)		0.04			(0.08	)
	Net income (loss)	$	0.07		$	(0.02	)	$	(1.17	)	$	0.10

Diluted earnings (loss) per share (1):
	Continuing operations	$	0.06		$	0.03		$	(1.21	)	$	0.18
	Discontinued operations		-			(0.05	)		0.04			(0.08	)
	Net income (loss)	$	0.07		$	(0.02	)	$	(1.17	)	$	0.10

Weighted-average shares used in diluted earnings per share			174,704			171,201			171,388			179,096

(1)

The sum of the earnings per share amounts may not equal the totals due to rounding.

Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited; in thousands)

Assets		September 30, 2020			December 31, 2019
Current assets:
	Cash and cash equivalents	$	799,177		$	924,442
	Short-term investments		21,185			115,879
	Accounts and other receivables, net		348,565			373,471
	Short-term finance receivables, net		559,148			629,643
	Inventories		66,974			68,251
	Current income taxes		11,477			5,565
	Other current assets and prepayments		115,981			101,601
	Assets of discontinued operations		-			17,229
Total current assets			1,922,507			2,236,081

Property, plant and equipment, net			367,466			376,177
Rental property and equipment, net			40,352			41,225
Long-term finance receivables, net			587,548			625,487
Goodwill			1,142,144			1,324,179
Intangible assets, net			167,493			190,640
Operating lease assets			213,490			200,752
Noncurrent income taxes			69,305			71,903
Other assets			533,726			400,456
Total assets		$	5,044,031		$	5,466,900

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable and accrued liabilities	$	760,363		$	793,690
	Customer deposits at Pitney Bowes Bank		610,582			591,118
	Current operating lease liabilities		38,007			36,060
	Current portion of long-term debt		63,509			20,108
	Advance billings		102,919			101,920
	Current income taxes		2,527			17,083
	Liabilities of discontinued operations		-			9,713
Total current liabilities			1,577,907			1,569,692

Long-term debt			2,531,712			2,719,614
Deferred taxes on income			279,526			274,435
Tax uncertainties and other income tax liabilities			40,642			38,834
Noncurrent operating lease liabilities			192,789			177,711
Other noncurrent liabilities			342,330			400,518
Total liabilities			4,964,906			5,180,804

Stockholders' equity:
	Common stock		323,338			323,338
	Additional paid-in-capital		67,512			98,748
	Retained earnings		5,190,914			5,438,930
	Accumulated other comprehensive loss		(813,572	)		(840,143	)
	Treasury stock, at cost		(4,689,067	)		(4,734,777	)
Total stockholders' equity			79,125			286,096
Total liabilities and stockholders' equity		$	5,044,031		$	5,466,900

Pitney Bowes Inc.
Business Segment Revenue
(Unaudited; in thousands)

		Three months ended September 30,							Nine months ended September 30,
			2020			2019	% Change			2020		2019	% Change
REVENUE
	Global Ecommerce	$	409,981		$	278,995	47	%	$	1,100,757	$	827,568	33	%
	Presort Services		127,705			131,483	(3	%)		386,552		394,468	(2	%)
	Commerce Services		537,686			410,478	31	%		1,487,309		1,222,036	22	%

	Sending Technology Solutions		354,212			379,647	(7	%)		1,038,349		1,151,746	(10	%)
	Total revenue - GAAP		891,898			790,125	13	%		2,525,658		2,373,782	6	%
	Currency impact on revenue		(2,454	)		-				2,514		-
	Revenue, at constant currency	$	889,444		$	790,125	13	%	$	2,528,172	$	2,373,782	7	%

Pitney Bowes Inc.
Business Segment EBIT & EBITDA
(Unaudited; in thousands)

	Three months ended September 30,
	2020								2019								% change
	EBIT (1)			D&A		EBITDA			EBIT (1)			D&A		EBITDA			EBIT		EBITDA

Global Ecommerce	$	(19,757	)	$	16,824	$	(2,933	)	$	(21,793	)	$	17,356	$	(4,437	)	9	%	34	%
Presort Services		14,481			8,031		22,512			17,687			7,667		25,354		(18	%)	(11	%)
Commerce Services		(5,276	)		24,855		19,579			(4,106	)		25,023		20,917		(28	%)	(6	%)

Sending Technology Solutions		112,599			7,955		120,554			130,954			9,579		140,533		(14	%)	(14	%)

Segment total	$	107,323		$	32,810		140,133		$	126,848		$	34,602		161,450		(15	%)	(13	%)

Reconciliation of Segment EBITDA to Net (Loss) Income:
Segment depreciation and amortization							(32,810	)							(34,602	)
Interest, net							(38,801	)							(39,730	)
Unallocated corporate expenses (2)							(53,429	)							(58,277	)
Restructuring charges and asset impairments							(3,766	)							(47,017	)
Loss on debt extinguishment							-								(667	)
Transaction costs and other							-								(707	)
(Provision) benefit for income taxes							(554	)							24,895
Income from continuing operations							10,773								5,345
Income (loss) from discontinued operations, net of tax							616								(8,470	)
Net income (loss)						$	11,389							$	(3,125	)



	Nine months ended September 30,
	2020								2019								% change
	EBIT (1)			D&A		EBITDA			EBIT (1)			D&A		EBITDA			EBIT		EBITDA

Global Ecommerce	$	(68,126	)	$	52,187	$	(15,939	)	$	(51,969	)	$	50,697	$	(1,272	)	(31	%)	>(100%)
Presort Services		42,758			23,662		66,420			48,215			21,675		69,890		(11	%)	(5	%)
Commerce Services		(25,368	)		75,849		50,481			(3,754	)		72,372		68,618		>(100%)		(26	%)

Sending Technology Solutions		323,429			25,771		349,200			378,095			30,347		408,442		(14	%)	(15	%)

Segment Total	$	298,061		$	101,620		399,681		$	374,341		$	102,719		477,060		(20	%)	(16	%)

Reconciliation of Segment EBITDA to Net Income:
Segment depreciation and amortization							(101,620	)							(102,719	)
Interest, net							(115,558	)							(117,758	)
Unallocated corporate expenses (2)							(146,640	)							(160,283	)
Restructuring charges and asset impairments							(12,505	)							(56,616	)
Goodwill impairment							(198,169	)							-
Gain on sale of equity investment							11,908								-
Loss on debt extinguishment							(36,987	)							(667	)
Loss on dispositions and transaction costs							(641	)							(20,256	)
(Provision) benefit for income taxes							(7,540	)							13,351
(Loss) income from continuing operations							(208,071	)							32,112
Income (loss) from discontinued operations, net of tax							7,648								(14,199	)
Net (loss) income						$	(200,423	)						$	17,913

(1) Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges, and other items that are not allocated to a particular business segment.
(2) Includes corporate depreciation and amortization expense of $5,806 and $5,935 for the three months ended September 30, 2020 and 2019, respectively and $18,783 and $15,795 for the nine months ended September 30, 2020 and 2019, respectively.

Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited; in thousands, except per share amounts)

	Three months ended September 30,						Nine months ended September 30,
		2020			2019			2020			2019

Reconciliation of reported net income (loss) to adjusted net income, adjusted EBIT and adjusted EBITDA
Net income (loss)	$	11,389		$	(3,125	)	$	(200,423	)	$	17,913
(Income) loss from discontinued operations, net of tax		(616	)		8,470			(7,648	)		14,199
Restructuring charges and asset impairments		2,639			34,722			8,493			41,709
Goodwill impairment		-			-			196,600			-
Gain on sale of equity investment		-			-			(8,943	)		-
Tax on surrender of company owned life insurance policies		-			-			12,229			-
Loss on debt extinguishment		-			497			27,777			497
Loss on dispositions and transaction costs		-			527			487			21,313
Adjusted net income		13,412			41,091			28,572			95,631
Interest, net		38,801			39,730			115,558			117,758
Provision (benefit) for income taxes, as adjusted		1,681			(12,250	)		7,291			669
Adjusted EBIT		53,894			68,571			151,421			214,058
Depreciation and amortization		38,616			40,537			120,403			118,514
Adjusted EBITDA	$	92,510		$	109,108		$	271,824		$	332,572

Reconciliation of reported diluted earnings (loss) per share to adjusted diluted earnings per share
Diluted earnings (loss) per share	$	0.07		$	(0.02	)	$	(1.17	)	$	0.10
(Income) loss from discontinued operations, net of tax		-			0.05			(0.04	)		0.08
Restructuring charges and asset impairments		0.02			0.20			0.05			0.23
Goodwill impairment		-			-			1.14			-
Gain on sale of equity investment		-			-			(0.05	)		-
Tax on surrender of company owned life insurance policies		-			-			0.07			-
Loss on debt extinguishment		-			-			0.16			-
Loss on dispositions and transaction costs		-			-			-			0.12
Adjusted diluted earnings per share	$	0.08		$	0.24		$	0.17		$	0.53

Note: The sum of the earnings per share amounts may not equal the totals due to rounding.

Reconciliation of reported net cash from operating activities to free cash flow
Net cash provided by operating activities	$	103,815		$	95,502		$	190,624		$	182,284
Net cash (provided by) used in operating activities - discontinued operations		-			(10,324	)		38,423			(15,858	)
Capital expenditures		(20,833	)		(36,034	)		(80,787	)		(95,221	)
Restructuring payments		4,504			5,840			15,869			18,845
Change in customer deposits at PB Bank		(2,867	)		11,441			19,464			3,125
Transaction costs paid		-			2,917			2,117			9,025
Free cash flow	$	84,619		$	69,342		$	185,710		$	102,200

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