Q3 2019 Earnings Call

Mr stands to Tula Executive Vice President and Chief Financial Officer, and Mr., Adam David Vice President Investor Relations Mr., David will now begin the call with the 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 2018 Form 10-K annual report and other reports filed with the FCC, they're located on our website at Www Dot PB dot 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 development.

Also for non-GAAP measures used in the press release are discussed in this presentation you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our Investor Relations website.

Additionally, we have provided slides at summarize many of the point, we will discuss during the call.

The slides can also be found on our Investor Relations website.

Now, our president and Chief Executive Officer, Marc Lautenbach, we'll start with a few opening remarks mark.

Thank you Adam.

And thank you all for joining the call.

We delivered a solid quarter and one of the best quarters for revenue growth in a very long time.

At an enterprise level.

Revenue this quarter grew 6% when adjusted for currency and market exits.

Which was driven by 20% growth and our global ecommerce business and an improved performance and our global SMB organization.

Which you will see from our earnings press release, we have renamed Sunday in technology solutions or Semtech for short.

While we do not expect 6% revenue growth every quarter. The third quarter performance is clear evidence that the steps we've taken.

And continue to take to transform our company are paying off.

Shipping was the key driver for the quarter.

Our domestic parcel services grew its delivery and return volumes, 27% in the quarter to 29 million packages processed.

Shipping products comprise 38% of our total revenue in the third quarter.

To put us in perspective shipping revenue was 20% of our overall revenue two short years ago.

Importantly, we continued to bring in new clients in the quarter and of course, we continue to make the required investments to build out our network to accommodate the significant growth.

As I mentioned before you need to invest in front of this growth.

We're also making the necessary investments to ensure we can handle what we expect to be a various successful peak season, which we are now entering.

It is also true to the kind of growth we're experiencing brings some operational challenges.

While we experienced some operational issues in our fulfillment business. We believe we have addressed most if not all and we're confident that we're well positioned to meet the demands of our clients.

Sending technology solutions also turned in a much improved performance in the quarter.

Revenue in the third quarter declined less than 3% when adjusted for currency and market exits, which is much better than recent trends.

Particularly have note we grew equipment sales in four out of seven major markets, including the United States.

Within Semtech through the end of the quarter, we've installed over 100000 Sendpro see units since launching this product two years ago and we're on track to rollout ascend proceeds to all major markets outside of North America within the next six to nine months.

We're also in the process of extending our physical footprint within the Sendpro family of products to our low end client base over the next several months in the U.S.

This will mark as significant milestone, making the majority of our Semtech products refresh with a modern shipping and mailing platform and easy to use client interface and connected via our world class Aiotv technology.

Our press our business turned in a solid performance growing revenue, 5% in the quarter on improved volumes.

Pre sort margins also improved from its first half performance as a result of initiatives we put in place earlier in the year. We expect these trends to continue to improve.

Also in the quarter.

As you know, we sold our software and data business.

Our softer business has grown in 2017 in 2018.

This enabled us to sell the business were $700 million, which was an attractive price at a strong multiple.

As I've said many times, we will do what is right to create long term value for the company.

Our software business has proven to be more viable outside of PB benefit remain in our portfolio.

The softer business has been an essential part of the PV family.

Specially in helping to events our digital transformation.

We remain focused on the balance sheet.

The majority of net proceeds from the software sale are being used to pay down debt.

Over the last two months Weve repaid three term loans due this year and next year and early this month, we secured a new term loan.

These actions in aggregate will reduce our near term debt towers and make for a much more manageable maturity profile.

In addition, we closed on a new revolving credit facility, which will provide ample liquidity to execute our business plan.

We have good access to the capital markets and our team has done a nice job optimizing our debt structure Stan will take you through more of the details in his remarks.

Finally.

Let me make a brief comment on the cyber attack, we experienced a few weeks ago.

Here are the major takeaways.

First there was no evidence that client were employed data was compromised for improperly access.

Second I.

Our disaster recovery processes work, and we're back up and running relatively quickly.

Third finally to the extent there were incremental cost of the attack we have cyber insurance, which we believe should cover the preponderance of these costs.

Unfortunately, these kinds of attacks are becoming more common in the business world today.

That said I'm pleased with how our team handled it now, particularly heartened by the response from our clients.

At the very outset, we were transparent with our clients with what was going on.

While there was no simple recipe for how to deal with these kinds of situations I'm proud of the urgency and diligence our team demonstrated especially with our clients.

We will continue to make the necessary investments in cyber and of course, we will make sure. We operationalized whatever lessons that are to be learned from this incident.

The third quarter was an important step forward and our transformation.

Revenue growth is fundamental to the transformation and on that measure we delivered.

We move forward with momentum in our shipping business at coherent portfolio with businesses, where we have a right to win any balance sheet, which is in good shape.

I've said this before but transformations are never quick and easy and our transformation is no exception.

That said I'm proud of the progress our team has made and I'm, particularly proud of the teams grit and resilience with that let me turn it over to Stan.

Good morning, and thank you for joining the call we made progress against our strategic initiatives in the third quarter and turned in a solid performance overall.

With the now till software, we're creating more focused and streamline portfolio were able to further leverage synergies and reduce costs over time, while operating more efficiently around our core competencies of shipping mailing and financing.

Let me discuss the details of our third quarter's performance as in the past unless otherwise noted my statements going forward will be on a constant currency basis, when talking about revenue comparisons and on an adjusted basis when talking about earnings related items, including cash flow.

Reconciliations of all non-GAAP to GAAP measures can be found in the financial statements post two with their earnings press release and on our Investor Relations website.

Also but the announced sales software solutions current and prior period results for this business have been recorded as discontinued operations. We have posted a file in our Investor Relations website, which provides a historical view, reflecting this recast.

And finally as Mark mentioned, we have rename global SMB to now be called sending technology solutions and consolidate the reporting to be one segment.

We refer to this segment as syntech and our remarks going forward.

Turning to our results the portfolio continues to shift to higher growth markets Commerce services comprised 52% of revenue.

Our shipping related revenues made up 38% of total revenue in the quarter. Both of these metrics are solid proof points of the progress against our long term model.

For the third quarter, we turned in a strong topline performance revenue totaled 790 million in grew 4.5% over prior year.

You take the market exits into consideration revenue grew 6% over prior year.

Looking at revenue by segment Global ecommerce grew 20% research services grew 5% and Centex solutions declined less than 3% new exclude the impact of currency and market exits.

Adjusted EPS is 24 cents for the quarter GAAP EPS was a loss of two cents and includes charges of five cents related to discontinued operations as well as 20 cents for restructuring and asset impairment costs, which include a noncash 16 sent impairment charge related to capitalized software cost incurred in the development of.

New enterprise business platform in certain international markets.

GAAP and adjusted EPS also include a net benefit of 13 cents related to the release of a foreign deferred tax asset valuation allowance, which was previously disclosed and as a onetime item.

Free cash flow was $69 million and GAAP cash from operations was $96 million compared to prior year free cash flow is lower by about 7 million as we experienced lower net income and higher capital expenditures this quarter, which were partly offset by higher reserve account deposits.

Looking at capital allocation at the ended the quarter, we had 652 million in cash and short term investments on our balance sheet.

During the quarter, we as free cash flow to returned approximately 14 million to our shareholders.

We repurchased 1 million shares for 5 million, we paid nearly 9 million in dividends to our common shareholders.

Year to date, we have repurchased a total of 18.6 million shares of us stock totaling 105 million do not anticipate any further share repurchase for the balance of the year.

Within the quarter, we also use cash for capital expenditures of 36 million in for restructuring payments of $6 million.

Within Wheeler financial we have funded over 6 million in loans as of the ended the third quarter and have a healthy pipeline as we enter the fourth quarter, we're helping our clients to be more successful and their businesses, but the same time, we are being deliberate in the quality of clients, we extend financing too.

From a debt perspective, we ended the quarter with 3.1 billion in total debt, which is about 200 million lower than prior year and $175 million lower than prior quarter.

During the third quarter, we prepaid the balance of 165 million on our term loan due in September 2020.

Additionally in November we repaid our $150 million term loan due this month the balance of about 280 million on a term loan due in December 2020.

We have also secured a new five year term loan a in the amount of 400 million.

And as we've communicated we are using the net proceeds from a softer sales reduced debt. We also look to refinance other maturities in the near term in order to reduce our future maturity towers.

Looking at the composition of our debt today, when you take the implied debt associated with our gross finance receivables of 1.1 billion along with the 652 million of cash and short term investments on the balance sheet into account.

Our implied net debt position on an operating company basis is currently 1.3 billion today.

Additionally, we have replaced our existing revolving credit facility with a new one securing 500 million over a five year term.

We have had good access to the capital markets and our team has done a nice job, reducing near term debt obligations with more work to be done in regards to longer dated maturities, making our debt maturities more manageable.

Turning to the piano, starting with revenue performance by line item as compared to prior year.

Business services revenue grew 15% and equipment sales grew 2%, we saw declines and financing of 6% rentals, a 7% support services of 8% and supplies of 10%.

The market exits from earlier in the year impacted the year over year decline in several of the line items, resulting in over a one point negative impact on the overall revenue comparison in the quarter.

Gross profit was 333 million with a margin of 42.2%. This is a decline of four points from prior year, which largely reflects a shifting mix of our portfolio.

SGN, a was 253 million or 32.1% of revenue.

Compared to prior year SGN, a increased about $12 million was relatively flat as a percent of revenue.

The increase in SGN, a is largely due to higher employee related variable compensation as compared to prior year, along with investments in ecommerce, which was partly offset by lower spend incentive.

R&D expense was $12 million or 1.6% of revenue compared to prior year R&D expense declined about 3 million and improved a half a point as a percent of revenue.

EBIT was 69 million in EBIT margin was 8.7% compared to prior year EBIT declined 28 million in EBIT margin declined by four points driven primarily by the gross profit decline. In addition to the increase in SGN a this quarter.

Interest expense, including financing interest expense was $40 million, which was 2 million higher than prior year.

The provision for taxes on adjusted earnings was a credit of $12 million, which reflects a onetime 23 million release, they foreign deferred tax asset valuation allowance recorded in the quarter.

Average diluted weighted shares outstanding at the ended the quarter were $171 million, which is about 17 million shares lower than prior year.

Let me now discuss the performance of each of our business segments. This quarter.

And our Commerce services group revenues $410 million, which was growth of 15% over prior year EBIT was a loss of 4 million EBITDA was 21 million.

Within global ecommerce revenues 279 million, which was growth of 20% over prior year.

This top line performance benefited from growth in volumes across each of our E Commerce solutions.

The revenue growth was primarily driven by continued strong volume growth in our domestic parcel services, which grew delivering returns volumes over prior year by 27% to 29 million parcels in the quarter and 89 million parcels year to date.

Volumes for shipping solutions and cross border offerings also grew this quarter over prior year.

We continue to add new clients. This quarter as an example, etsy chose pitney Bowes to help provide their sellers with additional cost effective shipping options.

EBIT was a loss of 22 million in the quarter and EBITDA was a loss of $4 million.

The losses, driven by three major areas continued investment mix of business, an incremental costs associated with our fulfillment services.

Let me drill down into each of these areas.

First continued investment.

As mentioned on previous calls we continue to expand our network primarily in major markets on east and west coasts.

This naturally requires operational and capital expense up front, and we will not reap the productivity benefits until the facilities are fully functional.

In addition to the new facilities, we continue to invest in engineering and marketing programs, which will support the growth of this business along with improving its margins.

Through our investments we continue to remain competitive on speed and reliability. When it comes to our service delivery times on average we continue to deliver parcels just under three business days.

Second mix of business, we continue to ramp up volumes and our domestic parcel service delivery and fulfillment revenue outpacing returns.

As we have talked about in the past our returns businesses at a higher margin, which creates a shift in total margin.

As delivery and fulfillment get to scale this mix shift impact will soften.

And third incremental costs associated with our fulfillment services, we added a number of new clients, which brought an incremental volumes to which we had to reallocate and in some cases ramp up resources to handle based on the needs of our clients.

We also had some execution issues, which we are addressing through a series of actions that will streamline decision, making moves closer to the client and improve operational execution.

In addition in the quarter, we had to increase our bad debt expense related to one of our retail clients filing bankruptcy.

But then pre sort of services revenue was 131 million, which was growth of 5% over prior year total volumes process grew nearly 6% to nearly 4.3 billion in the quarter volumes grew across all categories with a major drivers being first class and marketing mail.

Gross margins increased over prior quarter and prior year, driven by lower labor cost per unit as a result of the productivity actions that we put in place earlier this year.

In fact overall labor costs were down despite the nearly 6% year to year growth in volumes.

This was partly offset by lower revenue per piece driven by mix.

It was $18 million and EBIT margin was 13.5%, which is an improvement over the first half of this year less than half a point lower than prior year margins. This quarter also included third party consulting fees.

EBITDA was 25 million, an EBITDA margin was 19%.

Turning to our Centex segment revenue was 380 million, which was a decline of 5% from prior year, excluding the impact of market exits revenue declined less than 3%.

Equipment sales grew this quarter as we saw growth in four out of seven of our major markets in the US the growth was due in part to converting the backlog that we talked about at the end of last quarter.

Equipment sales also grew in France, driven by large deal and we had growth in Japan, and Germany in the quarter.

The rate of decline in our recurring revenue streams was similar to prior periods.

Business services revenue grew which has helped by the new shipping streams that we are creating through our shipping capabilities.

EBIT was 131 million in EBIT margin was 34.5%, which is an improvement over prior year of one point, despite higher costs associated with China tariffs.

EBITDA was 141 million, an EBITDA margin was 37%.

Let me now update you on our annual guidance for 2019.

With regard to the Rins smart attack in October we Havent churns to cover these events and we are working with our insurers.

At this point virtually all operations are up and running and no data has been compromised is important to note that we expect a significant portion of any impact to profit to be covered by insurance. However, the timing of receiving those proceeds will likely be in 2020.

Given this ransomware attack is a unique event the majority of the incremental costs and subsequent insurance recoveries will be excluded from our adjusted EPS. However lost revenue the resulting profit associated with that lost revenue, while still eligible for insurance coverage will remain the company's adjusted results in will impact the company's full year performance.

We are reaffirming our annual guidance for adjusted EPS and free cash flow, we expect the impact of the ransomware attack to our full year revenue could be approximately one half percent.

We expect revenue on a constant currency basis to be in the range of 1% to 2% growth when compared to 2018. This range does not contemplate any impact to the ransomware attack, which could be approximately one half percent.

We expected adjusted EPS to be in a range of 65% to 75 cents.

And free cash flow to being a range of $175 million to $205 million.

In summary, we made good progress against our strategic initiatives, having announced the sale software, which creates a more focused and streamline portfolio and further supports our strategy to operate in markets, where we have competitive advantage.

On a comparable basis, we grew revenue, 6% this quarter driven by growth in global ecommerce of 20% which points to the work we have done to shift our portfolio.

Our newly renamed Centex segment delivered strong EBIT and EBITDA margins with a lot of runway still in front of us as shipping and third party financing ramp up.

We remain focused on our balance sheet, we will use a majority of the net proceeds from softer sales to reduce near term debt and we will continue to assess the capital markets in the near term to make our debt profile more manageable.

With that let's now open the line for questions operator.

Thank you, ladies and gentlemen, if you'd like to ask your question. Please press Star then one on your Touchtone phone you will hear a tone, indicating you have been placed in Q you may removed himself from queue at any time by pressing the pound key if you're using the speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press star one at this time and one moment. Please for your first question.

Your first question comes from the line of Allen Klee from National Securities. Please go ahead.

Yes, good morning, starting off.

With that question with the comments on what you've been doing with your debt.

Could you give us further new 500 million.

Five year term loan what the interest rate is on that and then maybe what your pro forma interest rate run rate is based on.

All the changes that you've announced so far.

Hi, good morning. Thanks, So first of all just for clarity the term loan that we took as actually 400 million. The revolving credit facility was 500 million. So if we take a look and go through.

The $400 million Tele and you could see this on on the attachments trade K that will do later here. This morning was LIBOR plus 175, so that puts it in the range for the new debt here on the T. law for 400 million.

And I think last year's second follow up was on a pro forma basis.

I'd tell you if you look at what we retired here the of the 300 million TLC that was due December in the 200 million tells me that was in September those are 3.6, and 3.8% respectively. On the latest all in rate. So you can see will have a material impact there what will have an impact as we go forward is what we're going to do with the remainder of the now.

Softer proceeds as well as we adjust for the debt for next year. So we're not going to do guidance for next year.

But I think you get a feel for what we're looking at coming out of Q3.

Okay. Thank you and then with global E Commerce, I understand the investments going after a large opportunity.

Does does any of this and that's had an impact on your margins in the quarter, which hopefully help long term.

Does this change at all what you've said on the analyst day of your forecasts for what the timing and the opportunity is for two.

The ability for global ecommerce.

So in global ecommerce in the quarter, let me start there first of all the revenue grew 20% that's actually a strongest growth. This year and we did have an EBIT loss in the quarter driven by really three areas that continued investment we added to a new larger facilities, one on east and one on the west coast, but those are needed to drive the volume and we.

Grew volumes, 27% in the quarter and shipping Apiay switch feed into that grew a 155%. So some good performance on the volume growth.

Second the mix of business, which we've talked about we continue to ramp up volumes in our domestic parcels with delivery and fulfillment revenue outpacing returns that has the mix effect, which impacted margin that we talked about some execution issues and fulfillment now we brought on some several new clients and fulfillment and as we are ramping up we had to bring.

The additional resource into address those I think thats a shorter term. So we are still driving e-commerce to get to EBIT positive and 2020 as we take a look at that that's going to be a ramp up in volumes to build scale operational improvements or reduce cost structure. So we continue to invest in that market opportunity.

And we recognize that this is going to be a big move from where we are here in 2019, but we continue to work around that growth brings scale. We announced you may have seen the press release, we announced a price increase that will go out it's lower than market and fewer fees in the competition, we're going to expand the gross.

Margin through efficiency, both transport labor and that rate through scale and finally as we alluded to in the comments that group has taken some structural actions to both improve their own efficiency and speed of decision, making now what we're doing from a global perspective for TB is also taking out additional corporate staff.

Sure. So we're on the path to deliver that profit in 2020, and with a plan b to take out additional structure.

Okay, that's great.

And then for.

For the SMB segment.

I.

Can you talk you you mentioned.

They are looking to rollout sendpro.

In.

Internationally, and then I thought I heard.

A version for the lower end clients.

Could you maybe expand a little on.

On this and what the opportunities.

Sure so within Centex for so I had one is better revenue performances, we declined 3% excluding the market exits, which is the best performance. This year I think importantly underneath that though equipment sales grew in the quarter and they grew both in North America as well as international now the opportunity within international we're just.

Starting that rollout of some proceeds and that will go over the next few months through our international markets. So that will certainly be a tailwind for those markets as they get the opportunities to sell that new technology and that we continue to invest in this product line and that will be additional content coming out for lower end clients.

Okay. Thank you so much thanks Alan.

Your next question comes from the line of a non Birla from capital. Please go ahead.

Hi, Mike Dan Good morning, Thanks for taking the question here a few if I could.

I just wanted to get it said that make sure that understand how how you guys seeing the demand environment yet in general.

Only over the last 90 days and that and really land try to understand if from is when you announced the Taleban software business.

It seemed as though the guidance for that for the core company with the set.

A bit lower in the low end of the guide wide.

And then.

It seems like the tax benefit might have been three cents.

Greater than originally anticipated correct me, if thats not accurate.

Which would seem to dovetail with that.

So with the guidance coming up the up software sale. So can you just did have like walk through that let me add just at a level set me on on albeit that Ed. Thanks.

Sure Let me, let me start with the number side of that question. So first of all as we take a look when we did the guide remember there are softer business tends to be more backend loaded and as we extracted out for the year that was reflected in our guidance. We're also coming up on some different more difficult.

Pairs as we go through the back half of the year, but a come back to Q3, we had good growth here overall and when you go across the segments. All three really performed well in the quarter from a revenue perspective, so from that side of it we've seen solid performance and that will come up against a Q4 on the two.

Tax benefit we had disclosed in our Q that that tax benefit was approximately 20 million and they came in just under 23. So again, it's on a tax basis, so thats, two two and half sense.

You want to come out and high.

Yeah, I mean on on demand just Oh.

So up level of online if you look at our global ecommerce business, we continue to see a strong demand environment.

And with holiday season, it's up 4% strong.

You look at the.

Delivery and returns performance underneath that renewal.

Released the shopping surveyor in a couple of days.

But continued.

Strong demand for a better delivering returns experience.

As it relates to suntech in the meter business.

Youre right. The last 90 days was a pretty strong.

Demand environment different than trend.

You know we continue to.

To be optimistic about our.

Opportunities to perform well in that business, particularly at the new product, but obviously demand is going to continue to be challenged as it is incremental so I'd say it's mixed.

But we like our positioned in each of the market.

And mark to it sounds like.

As a core metering business.

Has not having gotten softer over the last 90 days.

And worth it sounds like you're saying, it's probably in a bit stable.

Yes, I mean retrospectively looked the last 90 days it was stronger than the trends that we have seen if you look at.

Alan asked a question before about the opportunity on the low end I mean that the opportunity on the low end is.

Sales and hundreds of thousands of of low and meters.

So the market.

From Alan has continued to go through secular decline that said.

We've got opportunities to continue to refresh.

Internationally for send policy in the low end opportunities entirely in front of us So we like.

Our product positioning if you will end market continues to be challenged.

And as Mark what how should we think about the puts and takes from sort of like your normalized EBIT run rate.

Going through the ended the year that the puts and take it EBIT as we go into 2020, and I know, you're not giving guidance yet, but should we think of the goal EBIT growth for 2020 anything you can help us.

The small.

Well, you're right, we're not going into 2020 guidance now, but we will do it.

In late January or February .

So as Stan said, there's several things.

That are positive that are in pharma. So the global commerce team has taken structural.

Actions that have already taken effect.

Our pre sort of taken structural actions that have already taken effect and then there's corporate actions on top of that so there's a series of actions from an expense perspective that.

Our already done.

The mix dynamics will continue.

The mix of the business continues to change so.

But.

Suffice it to say that our focus is getting to either positive here sooner versus later.

Okay, Okay great.

Just stand a couple of quick willing to be any any particular reason a corporate costs increase year over year I think it was about 20 million.

Yeah. So if we take a quick look at you know what happens overall on on the expense side of the equation.

The one of the drivers is in play variable comp and that's as much to do with last year on a release as it has to do with this year and an accrual.

If you go and Peel that back little farther, though commerce services actually improved on a year to year basis, Mark referenced some of structural actions and overall corporate spend improved.

As well and then and send tech you know they improved by over $10 million year to year and I apologize I say commerce services actually received an investment here of about 5 million on year to year basis that investments really coming along for expanding the go to market. So any kind of put that together no Sen Tech was was clearly a health.

So.

The employee variable comp here was a her which had more to do with last year than this year than we continue to make the investment Commerce services model.

And then just last one for me to now guys I appreciate it.

Can you just given as I know you've touched on.

Sort of refinancing the remainder of what you've done a finance can you.

But just more specifically can you just refresh us on on the timeline vacated looking at now to get the refinancing Don.

How much now are you.

Can you update as to how much youre looking.

I don't think finance.

And then that their apart I can repeat it today than in the it.

Okay, and Rob within its but just on the on the new loan.

That carry debt and can you yeah. When you can tell us about the tend to be helpful.

Yes, so Latin at question and I know, but let me let me take a shot here. So first of all you can see we were very active and Q3 rolling rate into Q4. So if you take a step back we had three term loan payments between Q3 in Q4, we did 165 million in September and then we had.

Paydowns of roughly 150, and 100 and 278 million in November . So if you kind of add all those up at a big round number you know thats roughly $600 million of Paydown now some of that we took out of cash on hand, and that we took a new term loan area, which we talked about earlier for 400, so kind of round numbers that's it.

Net $200 million reduction now the timing is obviously going to be influenced by.

In evaluating all of those options and we have a map of how we want to use those proceeds but I think you'll see two things coming out of that first is that there will be a reduction to the near term towers and second that we'll look to.

Set up those towers over a longer period of time to be a more manageable debt profile thats, what I'd want to leave you with on that action on the securitized.

Component so yes the.

Term loan our CFR secured facility and I would tell you that those are in line with.

Companies that are equivalent credit grade.

Okay that that's super helpful. Okay. This is the last month this market clarification.

Your your comment about working to get.

Working to get.

The profitability is it is impossible to that could occur or from the overall company in 2020.

Well do guidance in January , but yeah, I mean as possible.

Okay. Thanks, a lot guys I appreciate it.

Your next question comes from the line of Kartik Mehta from Northcoast Research. Please go ahead.

Hey, good morning.

The stand you talk about the global E Commerce business and a couple of execution issues that happened in the third quarter or those resolved or could those linger into the fourth quarter and have an impact on the results of the business.

Yeah, Kartik thing so that the execution issue is really around fulfillment and we brought in several very large clients are we had to staff up catch up on a backlog and then openly the malware incident. The ransomware incident wasn't helpful. As we went through that component I would tell you that fixing the underlying structure.

And so being able to handle that volume I do believe has been addressed and obviously as we're heading into peak. We also believe we've addressed the staffing that goes along with that so while we're recovering through the ransomware incident, which I think the teams have made incredibly good progress on how we look go forward I would tell you that those execution issues are largely.

Behind us.

And then you talked about.

Getting to positive EBIT for global ecommerce I believe in 2020, and as you said stand that so pretty big.

Delta to where you are now and I'm wondering is that all related to the volume are there other components within that business.

That would allow you to achieve that.

Say it say overall balance the equation here karthik. So it's a few things first volumes clearly going to help right. The more volumes at better rates you can negotiate.

But we've had a whole series or productivity actions within our global ecommerce unit and we are seeing some traction on labor and transport is wells, we're going to see productivity come across those two facilities. We brought on obviously those are very large facilities you have to gear up and invest in transpire.

Sure it and labor to get them stood up before you start moving volume and we expect that will move volume through those in the fourth quarter at peak.

So that was clearly a headwind here that we had in Q3 in one of the things I think will get better. We've also as you saw the press release launched a price increase that goes out and that's it inline with the industry I think ours is a little bit lower and has far less fees associated with it but that will also provide us a tailwind and then we also mentioned that that you.

When it has taken some structural actions and I think those structural actions. This unit has grown so rapidly over a short period of time that inherently we've become inefficient and Leila and her team I think have taken the appropriate actions, which will streamline their decision, making but also take out that structure. So I think those tailwinds or what.

It will help us driving into 2020 to drive towards that profitability.

Additional point if you just in stem side, if I think it bears repeating Joe did those structural actions pricing done structural cost takeout.

If you look at the other cost takeout that tends to be or around.

Negotiation with particular carriers much of that this done.

So this isn't stuff that we're betting on the calmness and stuff that's either in flight or already done in there's there's still a go get.

For sure.

But theres a lot more of those it's already done than.

Meets the eye will more than say in January for sure and on the revenue component. We continue to add new clients and we grew volumes here, 27% and had good good traction on that side as well.

And then just one last question Dan as you talked about the resort business.

The margin your third quarter margin a good run rate.

Or you are there any.

Oh puts and takes on it that will impact margins as you move forward.

No look I've been pleased with the progress our pre store team has made if you take a look no that even more EBIT margins gone from 11.2% in Q1, 12.1% Q2, 2013.5% Theres a combination here I think one of the telling comments I made in the script is while labor cost has come down at the same time.

Volumes went up I think thats a good sign that we're delivering productivity through pre store. We're also growing revenue here. So we continue to see traction in the market I would expect that those margins will improve offer this level. Our long term model is to get greater than 15% and I think we'll make progress here in fourth quarter expense that we had the third quarter, which.

Dan mentioned was the expense for the consultant. So that's obviously an expense that subsides overtime.

Thank you very much I really appreciate it.

Your next question comes from the line of Anthony we've been Zinski from Sidoti and company. Please go ahead.

Hi, Good morning, guys. Thank you for taking the questions. So I guess first on the global ecommerce. So you mentioned that you opened two new facilities. Just wondering if perhaps you could isolate the initial startup costs for those facilities and as you get into 2020 do anticipate to open additional facilities to handle the volume.

Yes, Thanks, Anthony Thanks for joining this morning, so I can't isolate out the exact costa those facilities as you would imagine no. There is capital expenditure costs that we have the gets capitalized on our balance sheet as we set up the the equipment within those facilities. Then obviously, we're staffing labor and the management in the transport.

It all goes in with setting those up clearly that had an impact in the quarter. You know as you look on a go forward basis.

We have mapped out our plan and that does include it in and our comments on global ecommerce Ondeck capital and the number of facilities will be needed to support the growth inherent in the model. So short answer is yes, we'll continue to add facilities and that's going to be variablized by the growth that we see an attraction we see in the market.

Two new facilities are both quite large ones roughly half million square feet and other ones a little bit bigger so large on the each end of the coast tier, which will help us to a lot of our China inbound as well.

Got it okay. Thanks for that explanation and the.

So looking at the equipment sales obviously those were up for the first time in a while stand you talked about closing a large deal in answer if you were to exclude that French deal.

Our equipment sales still be up and how should I think about.

That line item going forward.

Yes, Hey look large deals are part of our business. So.

Well, we don't have large deal we don't get data backend. So this is part of something team worked really hard on but I would tell you that we still would have grown.

Roughly with without that large deal.

We think about equipment sales one of the Tailwinds, we had coming into the quarter, which we won't have on a go forward is if you recall, we talked about a large backlog in North America. The team did a good job working through that backlog and getting those installed and that helped to drive equipment sales in the quarter, having equipment sales grow we've said before is not going to be a straight line.

And we're going to see some ebbs and flows with that I'm pleased with the international growth. If you heard the comments. We also grew in other countries outside of France in Japan, and Germany. So the growth was nicely to just the country. The large deal as we head into fourth quarter, we won't have that backlog to clear out, but we have new.

Product offerings coming in and the international marketplace.

Got it okay. Thanks for that and also at the Analyst Day, you guys talked about the SMB or now Centex segment.

You are looking to.

Have the EBIT.

In that segment be flat or growing 2021 are you still on track with that goal.

You know Aquari I could give guidance here for 2020 or what I'd point to is the performance in a quarter. We had a very strong EBIT margin. The strongest we've had this year and it was up year to year. So that contribution from send tech I think as a good indication that they're making progress and you saw in multiple font and multiple places.

Isn't just one angle that came they've reduced their structural expense, they're bringing out new product Wheeler financial as an investment that was just spooling up but will yield over time. So then making long term investments. They are taking productivity actions to contribute and I think we see that and their performance here with a very strong EBIT.

Performance.

Got it Okay, and lastly, as far as a tax rate for for this year, what's your expectation and the.

I assume at your tax rate will be much higher next year, but any kind of color for 2020 that'd be very helpful.

I think if you take a look as we kind of wrap up the year here, we'd expect that the operational tax rate you go back into the range, we guided to probably candidly towards a higher end of that range and if you take a look at we're talking about EBIT on a year to year basis in 2020, while we're not going to give guidance, we need to keep in mind that there was a tool.

He just under 23 million dollar tax benefit in 2019 that will become a headwind next year as we think about net income so segregate EBIT versus net income so the tax rate for next year in operational basis have to see what other things happen and tax, but I think you should think about our operational guidance for this year.

To be roughly in line for next year.

Okay. Thank you very much best of luck.

Your next question comes from the line of Shannon Cross from Cross Research. Please go ahead.

Thank you very much just a couple of questions. The first one is on the price increases is there any reason to believe that they won't go through across your products that or is there potential for volume discounts or something that would offset some of that assistance. We think about next year.

Thanks, Shannon so look the price increases when you think about this we've announced them through that as you know the industry does this they're not all going to go through theres going to be some volume discounts in particularly as we sign larger clients et cetera, So youre going to see some given takes I don't think I would take just the existing revenue and.

Popping up by the amount of the increase and that's going to be also a competitive pressure what the pricing is in the market. If you look at what's happened in a market. We're certainly not the outlier here. The market has moved in this direction and I think ours is competitive.

Okay. Thank you and then I'm curious.

You know Amazon is obviously made some some is to try to speed their delivery and significant investment. There. What are you hearing from your customers in terms of that delivery times that they would.

Hey, I guess, there customers are wanting to see that more importantly that they're willing to pay for.

So yes three years three days five days one day, you know I'm, just curious as to sort of what the discussion is out there yet and I think it varies on on the clients Shannon. So when we take a look there is a combination of free versus fast and when we look at that in the marketplace.

Yes, I remember a lot of the retailers that we deal with don't necessarily want to participate in the Amazon ecosystem. So they're looking at how do they most cost effectively.

Their product to the consumer and their balancing fast versus free our studies have shown us that if theres something if it's free quote unquote you know, there's nothing really free in the world.

With Amazon you pay prime, but but here for our retailers if it's free and they can get it within two to three days that that seems to satisfy a large number of the clients and you've seen us move our average delivery to under three days.

Thats going to that at does an average of under three days in certain markets, where we have the facilities and more importantly, where our clients have their inventory located allows us to do at faster than that.

Just plug the.

The shipments or whether it comes out.

The next several days or because it speaks to a lot of these dynamics I think just to summarize what we're hearing from clients and importantly, what we're hearing from consumers as well as.

Really.

It's got to be two days or less.

And free and that's kind of where the.

The measure.

The second thing that we're continuing to here and it was born out in last year's survey is that most consumers continue to be unhappy with their online.

Experience, so that speaks to the opportunity.

Thats in front of US clearly the bar continues to be raised which all the retailers.

Need to respond to and that's precisely the opportunity.

We are selling into and that's why we're so excited about how we're positioned.

In this marketplace.

Your next business shipments are back.

Okay. Yeah, we'll look for that and then just my other question just with regard to the cyber attack what have you learn from it I guess, what changes you're making will there be incremental investments required and 2020, what are we getting at 2020, Yeah got time flies.

That maybe are already incorporated in expectations because of incremental security needs and that just kind of curious as you step back you know if they are making any changes thinking sure we're still going through the forensics of.

Of the attack I would.

That said I'd highlight a couple of things, which we know your perimeter.

Defense tends to be strong where you need to be.

Incredibly strong is once they are inside your network, we knew that before.

And that was reaffirmed.

In terms of incremental costs there'll be contained within.

The various budgets, we may I think likely will rebalance.

Some of those budgets, we've already taken actions to.

Implement some new software that is.

More behavioral oriented them.

Screening for particular.

Terraces, so we'll get through this in the next several rigs to kind of go through lessons learned.

But.

More to come into thing I'd say in it.

Saved us is our backup so there's two things that really were important for us getting backup relatively quickly. One is our backup was really really good. So the reason we were able to restore our databases as we have backup that were largely unaffected.

By the principal malware attack. The second thing is our disaster recovery process has worked well.

I must admit that we didn't contemplate something of the spreads.

But if you look our various disaster recovery process is one of the time all of those plans. So we decided it was this just unfortunately, a fact of life for companies and governments and other public institutions in today's economy. So you need to continue to get better and better here because the bad guys are getting better and better yeah, I guess I would add a couple of things to.

First just to reiterate theres no evidence and any customer accounts are sensitive client partner employee data were impacted or extracted from our systems. Our financial systems. This particular virus is a Microsoft windows based target and our financial systems and data our non windows system. So they were not affected.

And I learned a lot when you go through these and and for sure. We have made and we'll make a number of updates to architecture and the investments that go along with that we also learned a lot about the culture and I know Mark I'll speak for market, we couldn't be more proud of our team they demonstrate our commitment to our clients in an enormous amount of grid. So I'd I'd want it.

I think the PB team for that incredible dedication to get us back up and running so we don't take the slightly in fact right now we're working just as hard after recovery to make sure that we rebuild all that resiliency and prevent us from happening again.

Really pleased with how the team did this brings us back up.

Thank you.

And at this time there are no further questions I'd now like to turn the conference back to Mr. lot Mark for any closing remarks, yes. Thank you operator, and thank you again for everyone. Joining I would just reiterate what I've said in my closing remarks, if you.

Abstract up a level and.

Value at the dynamics, we've got really strong momentum in our shipping business.

Secondly, and our center business, we've got good momentum.

Because of the core investments we've made.

Those investments in new products are now going to be spread around the world. So we like our positioning there.

Our priest our business Likewise is taken important structural actions.

I see it in the labor costs, and then underneath that we continue to drive operational excellence across.

All of our business so.

Listen, it's a dynamic market lots of things you can control lots of things you can't control, but I'm pleased with the progress we made and I'm pleased with the position going forward and.

We'll get the balance sheet actions that have been taken that just fortifies, what we think is.

Our strength going forward. So thank you for your time as why and we'll talk to them.

Ladies gentlemen that does conclude your conference for today. Thank you for your participation and for using they tend to executive teleconference. You may now disconnect.

[noise].

Hmm.

Good morning, and welcome to the Pitney Bowes third quarter earnings Conference call. Your lines have been placed in 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 participants on today's conference.

Call Mr., Marc Lautenbach, President and Chief Executive Officer, Mr. stance to US Executive Vice President Chief Financial Officer, and Mr., Adam David Vice President Investor Relations Mr., David will now begin the call what the 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 2018 Form 10-K annual report and other reports filed with the FCC, they're located on our website at Www Dot TV dot 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 development.

Also for non-GAAP measures used in the press release are discussed in his presentation, you can find reconciliations to the appropriate GAAP measures and the tables attached to our press release and also on our Investor Relations website.

Additionally, we have provided slides that summarized many of the point, we will discuss during the call.

These slides can also be found on our Investor Relations website.

Now, our president and Chief Executive Officer, Marc Lautenbach, we'll start with a few opening remarks arc.

Thank you Adam.

And thank you all for joining the call.

We delivered a solid quarter and one of the best quarters for revenue growth and a very long time.

Oh, the enterprise level.

Revenue this quarter grew 6% when adjusted for currency and market exits.

Which was driven by 20% growth and our global ecommerce business and improve performance and our global SMB organization.

What you will see from our earnings press release, we have renamed Sunday in technology solutions or sometimes for short.

Well, we did not expect 6% revenue growth every quarter.

Third quarter performance is clear evidence that the steps we've taken.

Continue to take to transform our company are paying off.

Shipping was a key driver for the quarter.

Our domestic parcel services grew its delivery and return volumes, 27% in a quarter to 29 million packages processed.

Shipping products comprise 38% of our total revenue in the third quarter.

To put us in perspective shipping revenue was 20% of our overall revenue two short years ago.

Fortunately, we continued to bring in new clients in the quarter and of course, we continue to make required investments to build out or network to accommodate the significant growth.

As I mentioned before you need to invest in front of this growth.

We're also making the necessary investments to ensure we can handle what we expect to be a very successful peak season.

We are now entering.

It is also true to the kind of growth we're experiencing brings some operational challenges.

Well, we experienced some operational issues in our fulfillment business. We believe we have addressed most if not all and we're confident that we're well positioned to meet the demands of our clients.

Sending technology solutions also turned in a much improved performance in the core.

Revenue in the third quarter declined less than 3% when adjusted for currency market exits, which is much better than recent trends.

Particularly I've no we grew equipment sales and four out of seven major markets, including the United States.

Within Semtech through the end of the quarter, we've installed over 100000 Sendpro see units since launching this product two years ago and we're on track.

The rollout some proceeds to all major markets outside of North America within the next six to nine months.

We're also in the process of extending our physical footprint within the Sendpro family of products to our low end client base over the next several months and the U.S.

So mark a significant milestones, making the majority of our son type products refreshed with a modern shipping and melon platform and easy to use client interface and connected via our world class I O two technology.

Our press our business turned in a solid performance growing revenue, 5% in a quarter of improved volumes.

Pre store margins also improved from its first half performance as a result of initiatives, we put in place or in the year. We expect these trends to continue to improve.

Also in a quarter.

As you know, we sold our software and data business.

Software business has grown in 2017 in 2018.

This enabled us to sell the business for $700 million, which was an attractive price at a strong multiple.

As I've said many times, we will do what is right to create long term value for the company.

Our software business has proven to be more viable outside of PB benefit remain in our portfolio.

Softer business has been an essential part of the PV family, especially in helping to advance our digital transformation.

We remain focused on the balance sheet.

Giardia of net proceeds from the software sale are being used to pay down debt.

Over the last two months Weve repaid three term loans due this year and next year and earlier. This month, we secured a new term loan.

These actions in aggregate will reduce our near term debt towers and make for a much more manageable maturity profile.

In addition, we close I knew revolving credit facility, which will provide ample liquidity to execute our business plan.

We have good access to the capital markets and our team has done a nice job optimizing our debt structure San will take you through more of the details in his remarks.

Finally.

Let me make your brief comment on the cyber attack, we experienced a few weeks ago.

Yeah, the major takeaways.

First there was no evidence that client or employed data it was compromised or improperly access.

Second.

Our disaster recovery processes work, and we're back up and running relatively quickly.

Third finally to the extent or incremental cost of the attack we have cyber insurance, which we believe should cover the preponderance of these costs.

Unfortunately, these kinds of attacks are becoming more common in the business world today.

That said I'm pleased with how our team handled it now, particularly heartened by the response from our clients.

At the very outs that we were transparent with our clients with what was going on.

Well there was no simple recipe for how to deal with these kinds of situations I'm proud of the urgency and diligence our team demonstrated especially with our clients.

We will continue to make the necessary investments in cyber and of course, we will make sure. We operationalize whatever lessons there are to be learned from this instant.

The third quarter was an important step forward and our transformation.

Revenue growth is fundamental to the transformation and I'm not measure we delivered.

We move forward with momentum in our shipping business, a coherent portfolio with businesses, where we have a right to win any balance sheet, which is in good shape.

I've said this before but transformations are never quick and easy and our transformation is no exception.

That said I'm proud of the progress our team has made and I'm, particularly proud of the teams grit resilience with that let me turn it over to stand.

Good morning, and thank you for joining the call we made progress against our strategic initiatives and the third quarter and turned in a solid performance overall.

With the now still software, we're creating more focused and streamlined portfolio were able to further leverage synergies and reduce costs over time operating more efficiently around our core competencies of shipping mailing and financing.

Let me discuss the details of our third quarter's performance as in the past unless otherwise noted my statements going forward will be on a constant currency basis, when talking about revenue comparisons and on an adjusted basis when talking about earnings related items, including cash flow.

Reconciliations of all non-GAAP to GAAP measures can be found in the financial statements posed to with their earnings press release and on our Investor Relations website.

Also but the announced sales software solutions current and prior period results for this business had been recorded as discontinued operations. We have posted a file in our Investor Relations website, which provides a historical view, reflecting this recast.

And finally as Mark mentioned, we have renamed global SMB to now be called sending technology solutions and consolidate the reporting to be one segment.

We refer to this segment ascend tech and our remarks going forward.

Turning to our result, the portfolio continues to shift to higher growth markets Commerce services comprised 52% revenue.

Our shipping related revenues made up 38% of total revenue in the quarter. Both of these metrics are solid proof points of the progress against our long term model.

For the third quarter, we turned in a strong topline performance revenue totaled 790 million and grew 4.5% over prior year.

And you take the market exits into consideration revenue grew 6% over prior year.

Looking at revenue by segment Global ecommerce grew 20% research services grew 5% and Centex solutions declined less than 3% new exclude the impact of currency market exits.

Adjusted EPS was 24 cents for the quarter GAAP EPS was a loss of two cents and includes charges of five cents related to discontinued operations as well as 20 cents for restructuring and asset impairment costs, which include a noncash 16 sent impairment charge related to capitalized software costs incurred in the development of.

New enterprise business platform in certain international markets.

GAAP and adjusted EPS also include a net benefit of 13 cents related to the release of a foreign deferred tax asset valuation allowance, which was previously disclosed and there's a onetime item.

Free cash flow was 69 million in GAAP cash from operations was 96 million compared to prior year free cash flow is lower by about 7 million as we experienced lower net income and higher capital expenditures this quarter, which were partly offset by higher reserve account deposits.

Looking at capital allocation at the ended the quarter, we had 652 million in cash and short term investments on our balance sheet.

During the quarter, we as free cash flow to returned approximately 14 million to our shareholders.

We repurchased 1 million shares for 5 million, we paid nearly 9 million in dividends to our common shareholders.

To date, we have repurchased a total of 18.6 million shares of us stock totaling 105 million do not anticipate any further share repurchase for the balance of the year.

Within the quarter, we also use cash for capital expenditures of 36 million restructuring payments of $6 million.

Within Wheeler financial we've funded over 6 million in loans as of the ended the third quarter now the healthy pipeline as we enter the fourth quarter, we're helping our clients to be more successful and their businesses, but the same time, we're being deliberate and the quality of clients, we extend financing too.

From a debt perspective, we ended the quarter with 3.1 billion in total debt, which is about 200 million lower than prior year, and 175 million lower than prior quarter.

During the third quarter, we prepaid the balance of 165 million on our term loan due in September 2020.

Additionally in November we repaid our 150 million dollar term loan due this month the balance of about $280 million on a term loan due in December 2020.

We have also secured a new five year term loan a in the amount of 400 million.

And as we've communicated we are using the net proceeds from our software sale to reduce debt.

We also look to refinance other maturities in the near term in order to reduce our future maturity towers.

Looking at the composition of our debt today, but you take the implied debt associated with our gross finance receivables of 1.1 billion along with the 652 million of cash and short term investments on the balance sheet into account.

Our implied net debt position on an operating company basis as currently 1.3 billion today.

Additionally, we have replaced our existing revolving credit facility with a new one securing 500 million over a five year term.

We've had good access to the capital markets and our team has done a nice job, reducing near term debt obligations with more work to be done in regards to longer dated maturities, making our debt maturities more manageable.

Turning to the PML, starting with revenue performance by line item as compared to prior year.

Business services revenue grew 15% and equipment sales grew 2%.

Saw declines and financing of 6% rentals, a 7% support services of 8% and supplies of 10%.

The market exits from earlier in the year impacted the year over year decline in several of line items, resulting in over a one point negative impact on the overall revenue comparison in the quarter.

Gross profit was 333 million with a margin of 42.2%. This is a decline of four points from prior year, which largely reflects a shifting mix of our portfolio.

As today was 253 million or 32.1% of revenue.

Compared to prior year SGN, a increased about $12 million was relatively flat as a percent of revenue.

The increase in SGN, a is largely due to higher employee related variable compensation as compared to prior year, along with investments in E Commerce, which was partly offset by lower spend incentives.

R&D expense was $12 million or 1.6% of revenue compared to prior year R&D expense declined about $3 million and improved a half a point as a percent revenue.

EBIT was 69 million in EBIT margin was 8.7% compared to prior year EBIT declined 28 million in EBIT margin declined by four points driven primarily by the gross profit decline. In addition to the increase in SGN a this quarter.

Interest expense, including financing interest expense was $40 million, which was 2 million higher than prior year.

The provision for taxes on adjusted earnings was a credit of $12 million, which reflects a onetime 23 million release, they foreign deferred tax asset valuation allowance recorded in the quarter.

Average diluted weighted shares outstanding at the end of the quarter were $171 million, which is about 17 million shares lower than prior year.

Let me now discuss the performance of each of our business segments. This quarter.

And our Commerce services group revenues $410 million, which was growth of 15% over prior year EBIT was a loss of 4 million in EBITDA was $21 million.

Within global ecommerce revenue of $279 million, which was growth of 20% over prior year.

This top line performance benefited from growth in volumes across each of our E Commerce solutions.

The revenue growth was primarily driven by continued strong volume growth in our domestic parcel services, which grew delivering returns volumes over prior year by 27% to 29 million parcels in the quarter and 89 million parcels year to date.

Volumes are shipping solutions and cross border offerings also grew this quarter over prior year.

We continue to add new clients. This quarter as an example, etsy shows pitney Bowes to help provide their sellers with additional cost effective shipping options.

EBIT was a loss of 22 million in the quarter and EBITDA was a loss of 4 million.

The losses, driven by three major areas continued investment mix of business, an incremental costs associated with our fulfillment services.

Let me drill down into each of these areas.

First continued investment.

As mentioned on previous calls we continue to expand our network primarily in major markets on the east and west coasts.

This naturally requires operational and capital expense up front, and we will not reap the productivity benefits until the facilities are fully functional.

In addition to the new facilities, we continue to invest in engineering and marketing programs, which will support the growth of this business along with improving its margins.

Through our investments we continue to remain competitive on speed and reliability. When it comes to our service delivery times on average we continue to deliver parcels just under three business days.

Second mix of business, we continue to ramp up volumes in our domestic parcel service delivery and fulfillment revenue outpacing returns.

As we have talked about in the past our returns businesses at a higher margin, which creates a shift in total margin.

As delivery and fulfillment get to scale this mix shift impact will soften.

And third incremental costs associated with our fulfillment services, we added a number of new clients, which brought an incremental volumes to which we had to reallocate and in some cases ramp up resources to handle based on the needs of our clients.

We also had some execution issues, which we are addressing through a series of actions that will streamline decision, making moves closer to the client and improve operational execution.

In addition in the quarter, we had to increase our bad debt expense related to one of our retail clients filing bankruptcy.

But then pre sort of services revenue was $131 million, which was growth of 5% over prior year.

Total volumes process grew nearly 6% to nearly $4.3 billion in the quarter.

Volumes grew across all categories with a major drivers being first class and marketing mail.

Gross margins increased over prior quarter and prior year, driven by lower labor cost per unit as a result of the productivity actions that we put in place earlier. This year in fact overall labor costs were down despite the nearly 6% year to year growth in volumes.

This was partly offset by lower revenue per piece driven by mix.

EBIT was $18 million and EBIT margin was 13.5%.

This is an improvement over the first half of this year and less than half a point lower than prior year margins. This quarter also included third party consulting fees.

EBITDA was 25 million, an EBITDA margin was 19%.

Turning to our Centex segment revenue was 380 million, which was a decline of 5% from prior year, excluding the impact of market exits revenue declined less than 3%.

The equipment sales grew this quarter as we saw growth in four out of seven of our major markets in the US the growth was due in part to converting the backlog that we talked about at the end of last quarter.

Equipment sales also grew in France, driven by large deal and we had growth in Japan, Germany in the quarter.

The rate of decline in our recurring revenue streams with similar to prior periods.

Business services revenue grew which has helped by the new shipping streams that we are creating through our shipping capabilities.

EBIT was 131 million in EBIT margin was 34.5%, which is an improvement over prior year of one point, despite higher cost associated with China tariffs.

EBITDA was 141 million, an EBITDA margin was 37%.

Let me now update you on our annual guidance for 2019.

With regard to the rent smart attack in October we haven't churns to cover these events and we are working with our insurers.

At this point virtually all operations are up and running and no data has been compromised is important to note that we expect a significant portion of any impact to profit to be covered by insurance. However, the timing of receiving those proceeds will likely be in 2020.

Given this ransomware attack is a unique event the majority of the incremental costs and subsequent insurance recoveries will be excluded from our adjusted EPS. However lost revenue the resulting profit associated with that lost revenue, while still eligible for insurance coverage will remain the company's adjusted results. It will impact the company's full year performance.

We are reaffirming our annual guidance for adjusted EPS and free cash flow, we expect the impact of the ransomware attack to our full year revenue could be approximately one half percent.

We expect revenue on a constant currency basis to be in the range of 1% to 2% growth when compared to 2018. This range does not contemplate any impact to the ransomware attack, which could be approximately one half percent.

We expected adjusted EPS to be in a range of 65% to 75 cents.

And free cash flow to being a range of 175 to 205 million.

In summary, we made good progress against our strategic initiatives, having announced the sale software, which creates a more focused and streamline portfolio and further supports our strategy to operate in markets, where we have competitive advantage.

On a comparable basis, we grew revenue, 6% this quarter driven by growth in global ecommerce of 20% which points to the work we have done to shift our portfolio.

Our newly renamed Centex segment delivered strong EBIT and EBITDA margins with a lot of runway still in front of us as shipping and third party financing ramp up.

We remain focused on our balance sheet, we will use a majority of the net proceeds from softer sales to reduce near term debt and we will continue to assess the capital markets in the near term to make our debt profile more manageable.

With that let's now open the line for questions operator.

Thank you, ladies and gentlemen, if you'd like to ask your question. Please press Star then one on your Touchtone phone you will hear atone, indicating you have been placed in Q you may removed himself from queue at any time by pressing the pound key if you're using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press star one at this time and one moment. Please for your first question.

Your first question comes from the line of Allen Klee from National Securities. Please go ahead.

Yes, good morning, starting off.

With that question with the comments on which have been doing with your debt.

Could you give us further new 500 million.

Five year term loan what the interest rate and it's on that and then maybe what your pro forma interest rate run rate is based on.

All the changes that you've announced so far.

Good morning. Thanks, So first of all just for clarity the term loan that we took out is actually 400 million the revolving credit facility was 500 million.

So if we take a look and go through.

The $400 million TLC and you could see this on on the attachments trade K that will do later here. This morning was LIBOR plus 175, so that puts it in the range for the new debt here on the TEOA.

Or 400 million.

And I think your second follow up was on a pro forma basis.

I'd tell you if you look at what we retired here of the 300 million TLC that was due December and the 200 million TLC that was in September those are 3.6, and 3.8% respectively. On the latest all in rate. So you can see will have a material impact there what will have an impact as we go forward is we're going to do with the remainder of the.

Softer proceeds as well as we adjust for the debt for next year's we're not going do guidance for next year.

But I think you get a feel for what we're looking at coming out of Q3.

Okay. Thank you and then with global E Commerce, I understand the investments going after a large opportunity.

Does does any of this and has had an impact on your margins in the quarter, which hopefully help long term.

Does this change at all what you've said on the analyst day of your forecasts for what the timing and the opportunity is for the profitability for global ecommerce.

Global ecommerce in the quarter, let me start there first of all the revenue grew 20% that's actually a strongest growth. This year and we did have an EBIT loss in the quarter driven by really three areas that continued investment we added two new larger facilities one on Easton, one on the west coast, but those are needed to drive the volume and we grew.

Volumes, 27% in the quarter and shipping Npis, which feed into that grew 155%. So some good performance on the volume growth.

Second the mix of business, which we've talked about we continue to ramp up volumes in our domestic parcels with delivery and fulfillment revenue outpacing returns that has a mix effect, which impacted margin that we talked about some execution issues and fulfillment now we brought on some several new clients and fulfillment and as we are ramping up we had to be.

One additional resource and to address those I think thats a shorter term. So we are still driving ecommerce to get to EBIT positive and 2020.

We take a look at that that's going to be a ramp up in volumes to build scale operational improvements to reduce cost structure. So we continue to invest in that market opportunity and we recognize that this is going to be a big move from where we are here in 2019, but we continue to work around that growth brings scale.

We announced you may have seen the press release, we announced a price increase that will go out it's lower than market and fewer fees in the competition, we're going to expand the gross margin through efficiency, both transport labor and that rate through scale and finally as we alluded to in the comments that group has taken some structural.

Actions to both improve their own efficiency and speed of decision, making now what we're doing from a global perspective for TV is also taking out additional corporate structure. So we're on the path to deliver that profit in 2020 and with a plan b to take out additional structure.

Okay, that's great.

And then for.

For the SMB segment.

I.

Sorry.

Can you talk to you mentioned.

They are looking to rollout to send pro.

In.

Internationally, and then I thought I heard.

A version for the lower end clients.

Could you maybe expand a little on.

On this and what the opportunities.

Sure so within Centex for so I had was better revenue performances, we declined 3% excluding the market exits, which has the best performance. This year I think importantly underneath that though equipment sales grew in the quarter and they grew both in North America as well as international now the opportunity within international we're just.

Starting that rollout of some proceeds and that will go out over the next few months through our international markets. So that will certainly be a tailwind for those markets as they get the opportunity to sell that new technology and that we continue to invest in this product line and that will be additional content coming out for lower end clients.

Okay. Thank you so much thanks Alan.

Your next question comes from the line of a non Birla from capital. Please go ahead.

Hi, Mike Dan Good morning, Thank Terry taking the question.

A few if I could I just wanted to get it said that just make sure that understand how are you guys seeing the demand environment yet in general.

Okay over the last 90 days and that and really land try to understand it from there when you announced the sale the software business.

And it seemed as though the guidance for that for the core company.

That.

A bit lower lease the low end of the guide wide.

And then.

It seems like the tax benefit might have been three cents.

Greater than originally anticipated correct me if that is that accurate.

Which would seem to dovetail with that.

So with with the guidance coming up up software sale.

You just sort of like walk through that with me and yes at a level set me on all of that.

Thanks.

Sure Let me, let me start with the number side of that question. So first of all as we take a look when we did the guide remember there are softer business tends to be more backend loaded and as we extracted out for the year that was reflected in our guidance. We're also coming up on some different more difficult compare.

There is as we go through the back half of the year, but they come back to Q3, we had good growth here overall and when you go across the segments. All three really performed well in the quarter from our revenue perspective, so from that side of it we've seen solid performance and that will come up against a Q4 on the tax.

Benefit we had disclosed.

Our Q that that tax benefit was approximately 20 million and they came in just under 23. So again, it's on a tax basis. So thats, two two and a half sense.

You want to come out and I.

Yes, I mean on demand just oh.

Go up level of online if you look at our global ecommerce business, we continue to see a strong demand environment.

There if you look at what.

The analysts predict.

For the holiday season, that's up 4% strong.

If you look at the.

Delivery and returns performance underneath that and it will.

Released the shopping survey or in a couple of days.

But continued.

Strong demand for a better delivering returns experience as it relates to suntech in the meter business.

Youre right. The last 90 days was a pretty strong.

Amanda environment different than trend.

We continue to.

Be optimistic about our.

Opportunities to perform well in that business, particularly at the new product, but obviously demand is going to continue to be challenged as it is incremental so I'd say it's mixed.

But we like our positioned in each of the market.

And mark to it sounds like.

As a core metering business.

Has not having gotten softer over the last 90 days.

And worth it sounds like you're saying, it's probably in a bit stable.

Yeah, I mean retrospectively looked the last 90 days it was stronger than the trends that we have seen if you look at.

Alan asked a question before about the opportunity on the low end I mean that the opportunity on the low end us.

Tens of thousands hundreds of thousands of of low and meters.

So the market.

From Allergan has continued to go through secular decline that said.

We've got opportunities to continue to refresh internationally for simplicity and low and opportunities entirely in front of muscle. So we like.

Our.

Our product positioning if you will end market the continues to be challenged.

And Mark what how should we think about the puts and takes from sort of what your normalized EBIT run rate.

Going through the ended the year, the puts and take a EBIT as we go into 2020.

And I know, you're not giving guidance yet, but should we think of the goal EBIT growth for 2012 anything you can help us.

We'll be useful.

Well, you're right, we're not going to 2020 guidance now, but we will do it.

Late January or February .

As Stan said, there's several things that are positive that are in front of so the global ecommerce team has taken structural.

Actions that have already taken effect.

Pre sort of taken structural actions that have already taken effect and then there's corporate actions on top of that so.

As a series of.

Actions from an expense perspective.

That.

Our already done.

The mix dynamics will continue.

The mix the business continues to change so.

But.

Suffice it to say that our focus is getting to EBIT positive here sooner versus later.

Okay, Okay great.

Just stand a couple of quick willing to be any any particular reason they corporate costs increased year over year I think it was about 20 million.

Yes, so if we take a quick look at what happens overall and on the expense side of the equation.

One of the drivers is in play variable comp and that's as much to do with last year on our release as it has to do with this year in an accrual.

If you go and Peel that back we'll farther though commerce services actually improved on a year to year basis, Mark referenced some of structural actions and overall corporate spend improved as well and then.

On Semtech, you know they improved by over $10 million year to year, and I apologize I say commerce services actually was an investment here of about 5 million on a year to year basis that investments really coming along for expanding the go to market. So any kind of put that together those seven tech was was clearly a help.

The employee variable comp here was a her which had more to do with last year than this year than we continue to make the investment commerce services.

And then just last one from me through now guys I appreciate it.

Can you just give us any you've touched on.

Sort of refinancing the remainder of what you're going to refinance can you.

But just more specifically can you just refresh us on on the timeline that you're looking at now to get the refinancing done.

How much now are you.

Dan how much youre looking.

So I don't think finance.

And then that Theyre part I can repeat it and then in the it.

Okay, and Rob within its but yes on the on the new loan.

Is that carry debt and can you what you can tell us about will tend to be helpful.

Yes, so Latin that question and I know, but let me let me take a shot here. So first of all you can see we were very active in Q3 rolling rate into Q4. So if you take a step back we had three term loan payments.

Between Q3 in Q4, we did 165 million in September and then we had paydowns of roughly 150, and 100 and 278 million in November . So if you kind of add all those up at a big round number thats roughly $600 million of Paydown.

Now some that we took out of cash on hand, and that we took and new term loan area, which we talked about earlier for 400, so kind of round numbers. That's a net $200 million reduction now the timing is obviously going to be influenced by when we conclude on the sale of the software solutions unit, so thats going to impact the timing as we go through many hits.

Some year end dynamics here as well and terms of timing. So we expect to close on that transaction in 2019, which would enable us now to go into the second mode of what we're looking to do for the refinance and I'm going to give the exact timeline of that that's obviously going to take what we can do in the market.

I will tell you were looking and evaluating all of those options and we have a map of how we want to use those proceeds but you think you'll see two things coming out of that first is that there'll be a reduction to the near term towers and second that we'll look to.

Set up those towers over a longer period of time to be a more manageable debt profile thats, what I'd want to leave you with on that action.

On the securitized.

Component so yes the.

Term loan the our CF, our secured facility and I would tell you that those are in line with.

Companies that are equivalent credit grade.

Okay that deeper alcohol again, just as the last of media this marketplace application.

Your your comment about working to get.

Working to get.

The profitability is it is impossible to that could occur for from the overall company in 2020.

We'll do guidance in January , but yes, I mean as possible.

Okay. Thanks, a lot guys I appreciate it.

Your next question comes from the line of Kartik Mehta from Northcoast Research. Please go ahead.

Hey, good morning.

The stand you talked about the global ecommerce business and a couple of execution issues that happened in the third quarter are those resolved or could those linger into the fourth quarter and have an impact on the results of the business.

Aircard take things so that the execution issue is really around fulfillment and we brought in several very large clients. We had to staff up catch up on a backlog and then openly the malware incident. The ransomware incident wasn't helpful.

As we went through that component I would tell you that fixing the underlying structural components of being able to handle that volume I do believe has been addressed and obviously as we're heading into peak. We also believe we've addressed the staffing that goes along with that so while we're recovering through the ransomware incident, which I think the teams have made incredibly good price.

Yes on we look go forward I would tell you that those execution issues are largely behind.

And then you've talked about.

Getting to positive EBIT for global ecommerce I believe in 2020, and as you said stand that so pretty big.

Delta, where you are now and I'm wondering is that all related to volume are there other components within that business.

That would allow you to achieve that.

Say it say overall balance the equation here karthik, though it a few things first volumes clearly going to help right. The more volume that better rates you can negotiate.

But we've had a whole series of productivity actions within our global ecommerce unit and we are seeing some traction on labor and transport is wells, we're going to see productivity come across those two facilities. We brought on obviously those are very large facilities you have to gear up and invest in transfer.

For it and labor to get them stood up before you start moving volume and we expect that will move volume through those in the fourth quarter at peak.

So that was clearly a headwind here that we had in Q3 and one other things I think will get better. We've also as you saw the press release launched a price increase that goes out and that's it inline with the industry I think ours is a little bit lower and has far less fees associated with it but that will also provide us a tailwind and then we also mentioned that you.

And it has taken some structural actions and I think those structural actions. This unit has grown so rapidly over a short period of time that inherently we've become inefficient and Leila and her team I think have taken the appropriate actions, which will streamline their decision, making but also take out that structure. So I think those tailwinds or what.

It will help us driving into 2020 to drive towards that profitability.

Additional point, if you do in stem setup I think it bears repeating Joe to both structural actions pricing done structural cost takeout.

If you look at the other cost takeout that tends to be or around.

Negotiation with particular carriers much of that this done.

So this isn't stuff that we're betting on the Thomas and stuff that's either in flight or already done in there's there's still a go get for sure.

But there is lot more of those it's already done than.

Meets the eye will more than say in January for sure and on the revenue component. We continue to add new clients and we grew volumes here, 27% and had good good traction on that side as well.

And then just one last question as Dan as you talked about the resort business.

The margin that you third quarter margin a good run rate.

Or you are there any.

Puts and takes on it that will impact margins as you move forward.

No look I've been pleased with the progress our priest our team has made if you take a look you know that even our EBIT margins gone from 11.2% in Q1, 12.1% Q2, two now 13.5%. There is a combination here I think one of the telling comments I made in the script is while labor cost has come down at the same.

Time volumes went up I think thats a good sign that we're delivering productivity through pre store. We're also growing revenue here. So we continue to see traction in the market I would expect that those margins will improve offer this level. Our long term model is to get greater than 15% and I think we'll make progress here in fourth quarter expense that we had the third.

Our which Stan mentioned was the expense for the consultant. So that's obviously an expense that subsides overtime.

Thank you very much I really appreciate it.

Your next question comes from the line of Anthony we've been Zinski from Sidoti and company. Please go ahead.

Hi, Good morning again, thank you for taking the questions. So I guess first on the global ecommerce. So you mentioned that you opened two new facilities. Just wondering if perhaps you could isolate the initial startup costs for those facilities and as you get into 2020 do anticipate to open additional facilities to handle the volume.

Thanks, Anthony Thanks for joining this morning.

I can't isolate the exact cost of those facilities as you'd imagine there is capital expenditure costs that we have that gets capitalized on our balance sheet as we set up the equipment within those facilities. Then obviously, we're staffing labor and the management of transport that all goes in was setting those up clearly that had.

An impact in the quarter no as you look on a go forward basis.

We have mapped out our plan and that does include it in and our comments on global ecommerce on the capital and the number of facilities will be needed to support the growth inherent in the model. So short answer is yes, we'll continue to add facilities and thats going to be variablize by the growth that we see an attraction we see in the market.

Two new facilities are both quite large ones roughly half million square feet, Netherlands little bit bigger so large on the each end of the coast tier, which will help us do a lot of our China inbound as well.

Got it okay. Thanks for that explanation and.

So looking at the equipment sales, obviously those were up.

First time in a while stand you talked about closing a large deal and answer if you were to exclude that French deal.

Our equipment sales still be up and how should I think about that line item going forward.

Yes, Hey look large deals are part of our business. So.

Well, we don't have large deal we don't get data back again. So this is part of something team worked really hard on but I would tell you that we still would have grown.

Roughly with without that large deal.

We think about equipment sales one of the Tailwinds, we had coming into the quarter, which we won't have on a go forward is if you recall, we talked about a large backlog in North America. The team did a good job working through that backlog and getting those installed and that helped to drive equipment sales in the quarter, but having equipment sales grow we've said before is not going to be a straight line.

And we're going to see some ups and flows with that I'm pleased with the international growth. If you heard the comments. We also grew in other countries outside of France in Japan, and Germany. So the growth was nicely to just the country. The large deal as we head into fourth quarter, we won't have that backlog to clear out, but we have new.

Product offerings coming in in the international marketplace.

Got it okay, if FX for that and also.

At the Analyst day, you guys talked about the SMB or now Centex segment.

You are looking to.

Have the EBIT.

In that segment be flato growing 2021.

Still on track with that goal.

You know Aquari I could give guidance here for 2020, I would I'd point to is the performance in a quarter. We had a very strong EBIT margin. The strongest we've had this year and it was up year to year. So that contribution from send tech I think is a good indication that they're making progress and you saw in multiple fonts and multiple places.

Isn't just one angle that came Dave reduce their structural expense, they're bringing out new product Wheeler financial as an investment that is just spooling up but will yield over time, so the making long term investments. They are taking productivity actions to contribute and I think we see that and their performance here with a very strong EBIT.

Performance.

Got it Okay, and lastly, as far as a tax rate for for this year, what's your expectation and the.

I assume at your tax rate will be much higher next year, but any kind of color for 2020 that'd be very helpful.

I think if you take a look as we kind of wrap up the year here, we'd expect that the operational tax rate you go back into the range, we guided to probably candidly towards the higher end to that range and if you take a look that we're talking about EBIT on a year to year basis in 2020, while we're not going to give guidance, we need to keep in mind that there was a too.

Many of just under $23 million tax benefit in 2019 that will become a headwind on next year as we think about net income so segregate EBIT versus net income so the tax rate for next year on operational basis have to see what other things happen and tax, but I think you should think about our operational guidance for this year.

To be roughly in line for next year.

Okay. Thank you very much best of luck.

Your next question comes from the line of Shannon Cross from Cross Research. Please go ahead.

Thank you very much just a couple of questions. The first one is on the price increases is there any reason to believe that they won't go through across your products that are is there potential for volume discounts or something that would offset some of that assistance I think about next year.

Thanks, Shannon so look the price increases when you think about this we've announced them through that as you know the industry does this they're not all going to go through there's going to be some volume discounts in particular as we sign larger clients et cetera, So youre going to see some given takes I don't think I would take just the existing revenue.

Popping up by the amount of the increase and that's going to be also a competitive pressure what the pricing is in the market. If you look at what's happened in the market, we're certainly not.

The outlier here the market has moved in this direction and I think ours is competitive.

Okay. Thank you and then I'm curious.

You know Amazon is obviously made some CMS to try to speed their delivery and significant investment there. What are you hearing from your customers in terms of that delivery times that they would.

I guess there customers are wanting to see that more importantly that they're willing to pay for.

So yes three years three days five days, one day I'm, just curious as to sort of what the discussion is out there.

And I think it varies on on the clients Shannon. So when we take a look there is a combination of free versus fast and when we look at that in the marketplace I remember a lot of the retailers that we deal with don't necessarily want to participate in the Amazon ecosystem. So they're looking at how do they.

Most cost effectively get their product to the consumer and their balancing fast versus free our studies have shown us that if theres something if it's free quote unquote you know, there's nothing really free in the world.

You know with Amazon, you pay prime, but but here for our retailers if it's free and they can get it within two to three days that that seems to satisfy a large number of the clients and you've seen us move our average delivery to under three days, that's going to that at that's an average of under three days in certain markets, where we have the fun.

Realty isn't more importantly, where our clients have their inventory located allows us to do at faster than that I'll, Let me just plug the.

Shipments or where that comes out.

The next several days or because it speaks to a lot of these dynamics I think just to summarize what we're hearing from clients and importantly, what we're hearing from consumers as well as.

Really.

It's got to be two days or less.

And freight and Thats kind of where the.

The measure.

The second thing that we're continuing to air and it was born out in last year's survey is that most consumers continued to be unhappy with their online.

Experience so that speaks to the opportunity that's in front of US clearly the bar continues to be raised which all other retailers.

Need to respond to and that's precisely the opportunity.

We are selling into and that's why we're so excited about how we're positioned.

In this marketplace.

Your next business shipments are back.

Okay. Yeah, we'll look to that and then just my other question to subscribe to the cyber attack what have you learn from it I guess, what changes you're making will there be incremental investments required and 2020, what are we getting at 2020 yeah.

Time flies.

You know that that maybe aren't already incorporated and expectations because of incremental security needs and that's just kind of curious as you step back.

They are making any changes thinking sure we're still under the forensics of.

Of the attack I would.

That said I would highlight a couple of things, which we know your perimeter.

Defense tends to be strong where you need to be.

Incredibly strong as once they are inside your network, we knew that before.

And that was reaffirmed.

In terms of incremental costs, there will be contained within.

The various budgets, we may I think likely will rebalance.

Some of those budgets we've already.

Taken actions to.

Implement some new software that is.

More behavioral oriented then.

The screening for particular.

Viruses, so we'll get through this in the next several rigs to kind of go through lessons learned.

But.

More to come there I'd say that saved us as our backup to there's two things that really were important for us getting back up relatively quickly. One is our backup was really really good. So the reason we are able to.

Restore our databases as we have backup that were largely unaffected.

By the principal malware attack. The second thing is our disaster recovery processes worked well.

I must admit that we didn't contemplate something of the spreads.

But if you look at our various disaster recovery process is one of the time all of those plans. So you know US items is just unfortunately, a fact of life for companies and.

Governments and other public institutions in today's economy. So you need to continue to get better and better here because the bad guys are getting better and better address that I'd add a couple of things to that first just to reiterate there is no evidence and any customer accounts are sensitive client partner employee data were impacted or extracted from our systems.

Our financial systems. This particular virus as a Microsoft Windows based target and our financial systems and data our non windows system. So they were not affected and yields are in a lot. When you go through these and and for sure. We have made and we'll make a number of updates to architecture and the investments that go along with that we also.

Learned a lot about the culture and I know Mark I'll speak from our care, we couldn't be more proud of our team they demonstrate our commitment to our clients and an enormous amount of grid. So I'd I'd want to thank the PB team for that incredible dedication to get us back up and running so we don't take a slightly in fact right now.

Now we're working just as hard after recovery to make sure that we rebuild all that resiliency and prevent us from happening again.

Really pleased with how the team did this bringing this backup.

Thank you.

And at this time there are no further questions I'd now like to turn the conference back to Mr. Lautenbach for any closing remarks, yes. Thank you operator, and thank you again for everyone joining.

I'll just reiterate what I said in my closing remarks.

If you.

Abstract up a level and.

Evaluate the dynamics, we've got really strong momentum in our shipping business.

Secondly, and our Centex business, we've got good momentum.

Because of the core investments we've made.

Those investments new products are now going to be spread around the world. So we like our positioning there.

Our priest our business.

License taken important structural actions.

You see it in the labor costs, and then underneath that we continue to drive operational excellence across.

All of our business so.

Listen, it's a dynamic market lots of things you can control lots of things you can control.

But I'm pleased with the progress we made and I'm pleased with the position going forward.

If you look at the balance sheet actions that have been taken or that's just fortifies, what we think is.

Our strength going forward. So thank you for your time is why and we'll talk to them.

Ladies gentlemen that does conclude your conference for today. Thank you for your participation and for using 18 to executive teleconference. You may now disconnect.