Q1 2021 Pitney Bowes Inc Earnings Call
[music].
Good morning, and welcome to the Pitney Bowes first quarter 2021 earnings conference call. Your lines have been placed in a listen only mode. During the conference call until the question and answer segment. Today's call is also being recorded if you have any objections. Please disconnect your lines at this time.
I would now like to introduce participants on today's conference call, Mr. Marc Lautenbach, President and Chief Executive Officer, Ms. Anna Maria Chadwick Executive Vice President and Chief Financial Officer, and Mr. Adam David Vice President Investor Relations and financial planning Mr. David will now begin the call with the Safe Harbor overview.
Good morning included in this presentation of 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 the risks and uncertainties can be found on our earnings press release, our 2020 form 10-K annual report.
And the other reports filed with the SEC that are located on our website at www PB dot com and by clicking on Investor Relations.
Please keep in mind, we do not undertake any obligation to update any forward looking statements as the result of new information or developments.
Also from non-GAAP measures used in our press release, we're discussing the 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 summarize many of the points, we will discuss during the call the.
The slides can also be found on our Investor Relations website.
Now, our president and Chief Executive Officer, Marc Lautenbach will start with the few opening remarks Marc.
Thank you Adam and thank you everyone for joining today's call.
We got off to a solid start for the year with every business, making an important contribution to the quarter.
Overall revenue at constant currency grew 14% and every business improved our EBIT performance.
For the second consecutive quarter <unk> improved EBIT on a year to year basis.
As I mentioned before the transformation of on Centex net.
And sector on a climb to the business well positioned to capture new value in the shipping market is one of the most impressive transformation I have ever seen.
The businesses leverage digital technologies to transform our offerings and our go to market strategy.
That type of platform is built on the Iot technologies that are delivered on a SaaS chassis and this business is very well positioned going forward.
Our presort business continued with the momentum we saw at the end of last year with both revenue and EBIT of improving on a year to year basis.
Global ecommerce revenue at constant currency grew 40% for the quarter and the EBIT margins improved nearly 400 basis points on a year to year basis.
Importantly profit performance improved throughout the quarter as our labor model continued to mature and pricing changes kitchen in the month of March domestic parcel services per unit labor cost delivered the best performance compared to any quarter since the second quarter of last year.
We expect unit labor costs to continue to improve on transportation and automation of efficiencies are primarily still in front of us.
Transportation cost remained high in both our ecommerce and presort businesses. So further in sourcing of transportation as well as the deployment of automation will benefit both businesses.
A lot of opportunity in front of us as we continue to invest in areas that will yield future productivity benefits.
We also made several important additions to our global ecommerce team.
Well I'm sure. The team will continue to evolve we have a group of professionals and consultants.
Our business.
The business to consumer networks centered on the adoption to the USPS system.
Cash performance for the quarter was also relatively strong compared to prior year off of an improved working capital performance the.
<unk> continued to demonstrate strong operational discipline.
We also executed a successful refinancing of the quarter there were two objectives to the refinancing.
First we wanted the push out the maturities further decreasing our refinancing risk.
Secondly, and more importantly from my perspective, we created strategic flexibility.
We achieved both of those objectives.
I've described four chapters of transformations.
<unk> <unk>.
Sustained investments revenue growth and finally profitable revenue growth.
Last quarter I said, we are poised to enter that fourth chapter.
Profitable revenue growth.
It's hard to call the first quarter at an inflection point given the nominal EBIT increase of <unk>.
Revenue and profit did increase and I very much like how we're positioned going forward.
Each business is poised to continue to make progress during this year and for that matter of going forward beyond the share on.
On on quite pleased with the quarter. It turned on another strong revenue performance and improved EBIT across each segment compared to the prior year.
As the revenue compares get more difficult as the year goes on.
Both will inevitably moderate but the trend is quite clear and I very much like the way we are positioned.
With that I will turn it over to Anna.
Thank you Marc before I get the detail.
On the quarter.
The my first earnings call with the team.
I wanted to share the EU.
A few thoughts on <unk>.
<unk>.
Okay.
The first thing that attracted with the growth trajectory.
Now that I have had a chance to go deeper into the day I am confident that we are on the right path.
Achieving what Marc referred to as the fourth chapter of our transformation.
Profitable revenue growth.
The second item.
True.
I can feel it true.
The team.
Hi, and passion for continuing the innovating and winning in the marketplace. The concept that you can model.
<unk>.
And grain and HEICO senior to them to the U K.
That is to our success.
And last one I did not realize but quickly learned is how much technology is needed.
In everything we do.
It's not of evident when you look at the business from it.
But I believe it's.
One the nature of enablers to the company's transformation.
Now, let me turn to our first quarter results.
Unless otherwise noted I will talk to revenue comparisons on a constant currency basis and earnings related items.
EPS and cash flow on an adjusted basis.
Revenue was $950 million and grew 14% over prior year.
The EPS was seven.
And GAAP EPS was a loss of a key.
GAAP EPS includes a 22 things Marc on the refinancing of our debt as.
As well as a two day loss from discontinued operations and one.
On the restructuring charges.
Free cash flow was a net use of 1 million on cash from operations was 66 million Boes an improvement from prior year due to favorable working capital changes largely around the timing of accounts payable and accounts receivable along with the.
<unk>.
This was partially offset by lower customer deposit on our <unk>, Inc.
During the quarter, we paid $90 million dividend and made $4 million in restructuring payments.
We invested $43 million in Capex as part of our plan to drive future operational efficiencies.
We ended the quarter with $697 million in cash and short term investments.
Total debt was $2 4 billion we.
We took several actions during the quarter to refine our capital structure, along with reducing overall debt.
The third $26 million from prior year.
These actions further reduced refinancing risk.
The reduction of our near term bond maturities.
We also from through the pricing of and substantially paid down our term loan b.
Our covenants, which provides us greater strategic flexibility and extended the duration across our capital structure.
When you take our financing receivables and cash into account with our debt our implied operating debt.
<unk> hundred 19.
Looking at the P&L, starting the revenue versus prior year.
The services.
8% equipment sales grew 12% and rentals were flat to prior year.
We have declines in support services of 4%.
Slide.
10% and financing revenues of <unk>.
Percentage.
Gross profit was 299 million and gross margin was 33%, which was down from the same period last year, largely due to the mix and shift of the <unk>.
Portfolio.
An improvement from the fourth quarter.
SG&A was $238 million or 26% of revenue.
This is an improvement of $10 million and five points respectively from prior year.
The net G&A corporate expenses were $57 million, which was up about $14 million over prior year, largely due to benefits recognized last year around employee variable related costs on a sales tax credit.
R&D was $11 million or one percentage of revenue and down slightly from prior year.
Adjusted EBITDA dollars were $15 million, which was a slight improvement over prior year and.
The adjusted EBIT margin was 5%.
Interest expense, including finance interest.
The $37 million.
Our tax provision on adjusted earnings was a benefit of about $400000 and includes a benefit associated with that of affiliate reorganization.
The prior year.
Explanation benefited EPS by about one and a half of them.
For the purposes of determining adjusted EPS shares outstanding are approximately 179.
Let me now turn to each segment performance starting with E Commerce.
Revenue for the segment was $413 million and grew 40% over prior year.
Revenue continues to benefit from the strong demand along with the pre pandemic comparison.
Volume grew year over year across all lines of service domestic personal services volume grew 23%.
Cross border volume the more than doubled and on.
On digital services volume grew 36%.
EBIT was a loss of 26 million on EBITDA was a loss of eight <unk>.
Compared to prior year, EBIT improved 3 million on EBIT.
Margin improved nearly 400 basis points.
We made progress through the quarter or earlier on we were still dealing with the residual peak holiday season.
We continue to work to improve service levels in our domestic portions network balancing cost and quality.
I'll put it in a positive direction.
With the industry, we all continue to see relatively high transportation costs and a competitive labor market. However, as we move through the quarter, our domestic parcel network improved parcels profit per hour by approximately 45% as our labor model continue to.
Mature margins continued to be healthy and our digital and cross border services.
At the $26 million EBIT loss in the quarter, we saw a loss of $4 million in March.
We reported positive EBITDA for the month.
Within our domestic parcel service on.
Our initiatives.
Productivity are still largely in front of us.
As we have discussed in the past Inc.
Investments will include new automated sorters, along with streamlining our processes to improve productivity.
We placed one shorter than a high volume side in the first quarter and expect the rollout more over the next 12 to 24 months.
In addition, we are implementing modern certification processes in each of our facility before the upcoming holiday peak season each year.
This investment and related productivity actions are expected to more than double our pieces process.
Our overtime.
In addition, our transportation Inc.
To execute on the strategy of migrating outsourced link into our own PV.
In the first quarter, we esports several of the slate with more planned for the second quarter.
All of which will improve cost and services.
We also brought in third party industry expertise.
The support our execution in the area of transportation.
We believe that optimize the art transportation will yield significant productivity benefits.
Finally, we are in the process of opening two new sites and upgrading another which we expect to have completed prior to the peak season.
This will allow us to handle volumes more efficiently and deliver deeper into the U S. P. S network.
Ultimately, we expect transportation and labor productivity, along with optimizing final mile solution to the critical drivers in obtaining our long term E. Commerce margins, we expect Ts who accounts for approximately 75% of the margin improvement.
Our presort services saw the momentum from the second half of 2020 continue into the first quarter.
The business turned in a solid performance growing revenue EBIT and EBITDA margin over prior year.
Revenue was $143 million and grew 2%.
Overall average thinning volume were flat to prior year.
The first class letter of meal declined 2%.
Marketing and sales grew 11% at.
That market being now flat and balance printed battered grew 30%.
EBITDA was $19 million and EBIT margin was 13%.
EBITDA was $27 million and EBITDA margin was 19%.
And EBITDA improved from prior year due to both revenue growth and lower expenses.
We have been able to maintain double digit margin in the presort business, even as we continue to invest in our talent and equipment.
Compared to prior year.
Food dataset for labor hour by 4%, resulting in 85000 net processing hours.
We then send deck, we also picked up on the momentum from the second half of 2020.
As we continue to soften the decline in our revenue and maintain strong EBIT margin.
The revenue was $359 million and declined 3%.
We continue to differentiate ourselves from the market with our end to end mailing and shipping offerings to enterprise and small office providers that are attractive to both.
And new clients.
We have of growing revenue stream around off the shipping that carries with it high margin approaching that of our legacy mailing business and a software business.
Unlike the latest the mailing business the shipping opportunity Inc. Deck provides multiple paths for us to add profit and revenue like supplies.
Financing.
On the professional services.
Syntax shipping related revenue.
At a low double digit rate to approximately $30 million in the quarter.
The number of labels.
Two of our shipping offerings grew.
Over 40% and paid.
Scripts <unk> grew approximately 80%.
Additionally, we are seeing good growth in shipping volume that our U S clients are financing, which group Inc.
Nearly 80% over prior year.
These positive metrics show that our clients are adopting and using these new offerings.
They see the value it brings to their business.
Equipment sales grew 12% over prior year, driven by strong placement of our sense proceed reaching.
Which includes a large government deal and we continued the scene.
<unk> of our U sand from mail station multi purpose device.
It is important to point out that like others, we have experienced transportation issue related to our supply chain.
We have been able to properly manage our inventory and grow our equipment sales.
Spike is challenging and it is an area that we are closely monitoring.
We are also keeping a close eye on the semiconductor industry and arent looking to mitigate any potential second half supply shortage by repositioning our solutions as necessary.
We kind of in a strong EBIT performance of $114 million, which represents growth of $8 million over prior year.
And is the second consecutive quarter of epic growth.
EBIT margin was 32%, which improved 250 basis points over prior year.
EBITDA was $122 million EBITDA margin was 34% both improving over prior year.
As you May recall prior year included an increase to our credit loss provision reflects macroeconomic conditions, resulting from COVID-19 in connection with the application of the diesel accounting standard.
One other point that I'd like to Inc. Is that this team has done a tremendous amount of work not only to transform its products and offerings, but also it's channel.
Good day about 80% of all of U S sales transactions are happening through our web or inside sales channel.
This has allowed our team to concentrate on larger enterprise deals.
And this has been of great contributor to maintaining the very healthy margin that we see.
I am pleased with the performance of our key trends in the first quarter, we entered the year with good momentum and continue to concentrate on the opportunities in front of us.
And we expect to make good progress throughout the year.
As discussed during our last earnings call. We continue to expect annual revenue at constant currency to grow over prior year in the low to mid single digit range net.
<unk>, Inc. Our fifth consecutive year of constant currency revenue growth.
We also continue to expect adjusted EPS to grow over prior year free cash flow is expected to be lower from prior year, primarily due to specific items, which benefited 2020, such as higher customer deposits lower financing receivable.
<unk> and lower Capex, which are not expected to continue at the same level in 2021.
Within our segments, we expect global e-commerce revenue growth to be stronger in the first half.
<unk> to the second half as the revenue comparisons will get more difficult as we move through the year.
We also expect e-commerce to demonstrate significant profit improvement and deliver positive EBITDA for the full year.
With the incentive we expect the momentum we saw in the second half of 'twenty, 'twenty and first quarter to continue particularly around the shipping capability and new multipurpose devices.
And help partially offset the decline in reoccurring related revenues.
We also expect the improvement in volume trends, we saw increase in the second half of 2020 and first quarter to continue through 2021.
There are a few headwinds to be aware of on a year to year basis that will partially offset the overall business unit improvements in.
In 2020, we recorded life insurance proceeds.
In 2021, we expect higher employee related costs as it relates to variable compensation.
Additionally, we expect a higher tax rate in 2020 of them.
Looking at the timing through the year, our portfolio continues to shift the market that are growing particularly around shipping.
As a result, the fourth quarter, we will continue to be our largest quarter of the year for revenue and earnings.
For the second quarter, we expect revenue to grow in the mid to high single digit range.
Similar to first quarter, we also expect adjusted EPS to grow modestly over prior year.
That concludes my remarks, operator, please open the lines of questions.
Thank you, ladies and gentlemen, if you'd like to ask a question. Please press one of them zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you ever question. Please press one of them zero at this time and one moment. Please for your first question.
Your first question comes from the line of Ananda Baruah from loop capital. Please go ahead.
Hi, guys. Good morning. Thanks, Thanks for taking the question and congrats on the solid start to the year.
Yes, you just ask you what was going to be my first question, which is how you feel about potential for ecommerce profitability as you move through the year.
But let me ask it this way too. So so you mentioned the EBIT positive for the full year.
Good do you feel like you have any opportunity for for the EBIT positive if not for the full year by the end of the year.
And then I have a couple of quick follow ups. Thanks.
Sure that's out of it.
Listen well.
We're pleased with the progress of the global ecommerce team is making.
The profitability and the.
The EBITDA profitable for the year is an important milestone, but it's just that it's the milestone with more work to do my expectation is we're on a trajectory as we exit this year to the EBIT profitable next year. So I think that's probably the one way of answering the question.
So that's the word.
We like the trajectory of I would also point out.
We had 400 of nearly 400 basis points of EBIT improvement year to year.
We do that for the next couple of years, where on the long term model in 2024.
As outlined so good progress more to do and you know as Ana said the.
The benefits around transportation.
On automation are still in front of us and with that we'll kind of better labor.
And it sounds good thanks, Marc that's great. It's the illicit I mean, you you did a great job of laying out sort of the upcoming initiatives and in ecommerce with with the.
Transportation on the nation labor et cetera.
And anyway and it sounds like.
It sounds like you're talking about a 24 month timeframe.
For the ones that you are speaking to you today any way to frame for us when you think you'll reach sort of.
Well in that 24 months, you'll hit kind of sort of I guess, the bulk of normalized impact just so we can sort of frame for ourselves.
As we model out quite frankly, 'twenty, one and 'twenty two because because that's what we have to do like when we might expect those initiatives to layer. It in a really critical mass kind of way and I had the one last quick one.
Sure.
It's a little bit hard to predict.
With precision just because you know you take transportation in particular.
There's a lot of unknowns and not the least of which is how quickly you can get trucks on truck drivers, which right now are remarkably scarce. So as I said you know we think of even a positive this year on <unk>.
Trajectory to be EBITDA positive.
Next year is kind of how we're thinking about it.
Okay. That's helpful. And then the last one the last one from me is any any way you can give us a sense of what the e-commerce the gross margin.
File look like for the quarter, just support the March quarter, and the relative to the December quarter, and then relative to year over year March quarter of last year as well just so we can get the sense of what <unk>.
Progression is there too.
Yes, so there's two different things that affect gross margins in global ecommerce one of the.
The various deficiency of the businesses and the second is a mix of <unk>.
When you look at the gross margins for the cross border business as.
As well of the expedited.
The digital business those margins are all very healthy.
Sure.
Delivery margins improved.
They still have a way to go so I would say gross margins were a touchdown and the business, but it was it was due to the mix more than anything else.
On a Q over Q basis of touchdown.
Our year over year year over year got it got it okay. Okay, great. Thank you guys.
Your next question comes from the line of Shannon Cross from Cross Research. Please go ahead.
Thank you very much I have of.
Few questions about e-commerce.
The Fedex had mentioned China outbound is back to normal. So just overall what are you seeing in terms of cross border and maybe you can talk about of regional performance.
The cross border business was quite strong across almost all weighted.
Including China.
Okay. I mean is the I guess the my question is is it do you think you're back to normal or is there still some improvement to go.
It really did the perfect.
Yes.
Inc.
That has a very different personality dependent on where on the world are you on.
So obviously.
The in India, or Brazil, right now.
Economists are.
On the silos are suffering a lot so it's very different depending on where in the.
Where you are most of our wins.
Our into Europe. So.
As well as China. So you know for the most part.
Sure.
For the moment not being dramatically affected.
And the cross border.
The other business and candidly the currency rates help us as well.
And what about pricing.
Taking prices up do.
Do you think there's room to take them up again given.
You know the the improving demand or are you feeling pretty good about where your prices are.
So as I said of our comments you know based pricing is the highest and other kind.
On the last 12 months the.
Peak price and this is an important dynamic from global ecommerce. So the peak pricing, we reinstated the who doesn't reinstated until the end of January So if you look at the.
What I said in her comments the the <unk>.
<unk> drove the quarter, we got off the.
A more difficult start and all the commerce that was expected because you had all of the increased costs, but you didn't have peak pricing. So what I would say so far is the the based pricing as well as the peak pricing has held.
In terms of the possibility of.
The increase in prices further obviously, we'll pay attention to what the other industry players do.
On to a degree of share as can depend on what happens the transportation costs. So labor.
Labor cost the R. I think that I'd stay high, but we've got ways with automation to deal with that and the catalyst the model matures it will become more efficient.
The transportation so on that if that was kind of true.
Cash on cost on moderate then I would expect that there'll be there.
The pressure on prices upward.
Okay, Great and then just one last question with regard to equipment.
Like how much was related to the large government deal in terms of the growth and then how should we think about the the pipeline that you're seeing for equipment sales as we look through the year. Thank you.
Yes.
Out of our out of a specific no other $5 million.
In the quarter was from the.
From the government deal.
So the.
An important contributor, but you know again the.
On the low end of that product line as well as of the mid range of that product line has done.
<unk> done well on continues to do well.
In terms of backlog, we like how the backlog of situated.
The quarter percent Axa.
A pretty easy compare so I think youre going to see pretty strong relative performance.
Into the second quarter and to a degree of into the third quarter on that'll that'll moderate as the year goes on.
Adam do you have the specific number for the government the yes, that's correct.
Marc So Shannon without the government deal, we would have still grown equipment sales in the mid to high single digit range.
Okay, great. Thank you very much thank.
Thank you.
Your next question comes from the line of Kartik Mehta from Northcoast Research. Please go ahead.
Good morning, Marc and Anna.
Marc you've talked obviously about the global ecommerce business in transportation costs being a headwind, but it seems like transportation costs labor costs and the automation of three hope you Hunt of the three what's the most important is the transportation just the near term issue you have but longer term one of the other two have to be.
Have to moderate.
So I guess on a long term standpoint, what's the most important out of the three.
Transportation is the most important of the three so if you look at the.
The cost complexion of that business, 50% postal cost.
Theres some percent there are 25%.
The first so as transportation cost.
There is we believe a lot of opportunity there I mean, if you look at spot rates on a year on year basis, you know in general they're kind of up.
40 plus percent.
Candidly they went up from January to March so if the continues.
To be pressured.
Pressured up.
And then labor cost is around 12% of of the total.
So as you look at you know transportation and labor.
So those are the.
The preponderance of the opportunity for improvement and you know as Arnaud said the place pretty simple areas because of the high confidence. It's executable I mean, we are simply trying to in source more land. So in sourced seven lands in the first quarter. So we're going to in source another 20 of land.
In the second quarter, so that that not only gives you better economics and makes you less vulnerable to the spot rate, but it also you provide better service because if you're on the spot rate than you are.
The your volume that doesn't get necessarily the same priority of the others. So this is a win win.
You know, it's not spending items with the.
When we need the need to get the trucks on the truck driver. So we've got a lot of.
And a lot of pressure on the team to the AD the resource.
And then on the Presort business, obviously, a good margin quarter and you talked about it seems like the relevant revenue momentum should stay for the remainder of the year.
The margin would you anticipate the margin momentum to also.
The rest of the year.
I think the margins are probably going to stay pretty close to where they are on the one hand. The other work that we did a couple of years ago around transforming that business saved us a lot of labor hours.
We saved 85 or 90000 of labor hours in the quarter on the year to year basis. So that was good on the.
Other side of it.
Global ecommerce the other susceptible to transportation.
The.
Price increases and labor, obviously, it's becoming more scarce so.
We're looking at some accelerated.
The opportunities to apply automation to our presort business that will help.
But my expectation is you know margins will stay kind of in the.
The ZIP code that they are.
This year with the opportunities to make substantial improvement going forward and we're looking at automation opportunities that can make a real difference in that business.
Alright, well. Thank you very much appreciate it.
Okay.
Your next question comes from the line of Allen Klee from Maxim Group. Please go ahead.
Yes, hi.
For the debt that you from pay down on refinance where where does that put you in terms of how much debt and notes.
Our now two in 'twenty, one and into 'twenty two.
Yeah.
On.
On the Adam Peck of flat that one, but we're pretty good share for 'twenty one of the plan too.
Yep.
Absolutely so.
The the maturities that are coming due now for the remainder of 'twenty one.
We really don't have any.
And the maturity profile for 'twenty two is the small amount is around $72 million.
So really we truly accomplished what we set out to do when we are.
You shoot or our debt.
Financing.
And not only did we.
Pushed out some of the of our maturities but.
But we also improved some of the terms and we believe we're much better positioned now.
For having more flexibility as we execute our strategy.
Great and you.
You had announced the partnership with UBS a.
A couple of quarters ago too.
Have them as one of your.
The carriers are.
Could you just give an update on how that's going.
It's early.
So we continue to be.
The very optimistic about the possibilities are there of great company and I know it's important.
Provider of industry. So.
Early days, so we'll have more to say about that as the go forward.
Thank you last question on them.
Hi.
I thought the Suntech was great.
The quarter.
How do you think about now kind of.
Where are the topline you you know the trend rate longer term for the topline in the on the bottom line.
Given that you have more shipping and maybe you could also just remind us maybe I missed it of how much of your revenues are coming from shipping in and if you could break out maybe the three components of them.
Well anyway.
Forget that last one has to do with another segment, but just just what I just said, okay, we'll come back to take them.
The finish off the.
The the last question the factor of our good about the Suntech.
When I started in 2012 I thought there was great opportunities to extend the life of that business.
If you asked me today, that's no longer my paradigm of my paradigm of out of them going to be an important business.
And Pitney Bowes future indefinitely.
The the.
The top line, we will continue to moderate.
It was minus three on the.
Our first quarter of a little bit.
Other than that of the actuals second quarter is going to be an easy compare so that's kind of look pretty positive, but you know we had talked about low to mid single digit decline on that business on film.
So on right now.
The the world part than the the mid.
And you know.
The the shipping is an important opportunity so just the.
Dimensionalize it for you the shipping revenue for Centex was.
30 million Bucks.
In the quarter against the total it grew.
On it on how you want to work on it and there were some anomalies of noise in the numbers, but somewhere between 10, and 15% I would say without the noise of closer to 14 or 15%.
So as you look at that.
That number of getting bigger.
Getting into offset the.
On the top line and importantly, the bottom line.
Climate on the Merrell business.
It's.
That's the.
Improving our dynamic and one that we're excited about and as honest as anything out of a similar margin profile. So it's yeah. If you look at that 30 million Bucks.
Yes.
There's probably $15 million of it that's the pure software margin and theirs.
Other ancillary.
Businesses, whether it be supplies or financing or rebates from suppliers.
At very high margins.
And the the addressable opportunity for shipping in the office space.
Twice the opportunity the twice the addressable opportunity of the mail so.
You know those dynamics, all bode well for the mill.
To the wrong.
Our mid to long term.
On the other thing that I would say as you know.
The the whole shipping dynamic doesn't really account for the fact that.
Our meter attrition rate has moderated a bit and there's lots of different reasons for that with the <unk> got some great products out of on a really good cycle, but also as you drive more volume into those relationships the.
The devices are stickier, the stickier in terms of people keeping them and people kicking the longer.
So really good dynamics in that business going forward and lots of opportunity.
Thank you could you give us an update on Wheeler financial in terms of how much money was put to work and how youre thinking about.
For the year.
Yeah.
The fair to Adam on the specifics.
And it was put to work, but I mean in general I would say.
Our vision for that business continues to be very.
Positive the the nature of the opportunities that we're pursuing as you know change slightly sort of went from.
A business that was focused on what are the same mission critical assets to loans around mission critical assets more and more of the opportunity that we've seen is now around working capital on the shipping.
The market. So if you think about the whole Genesis of the financial services business for Pitney Bowes was around providing the service to mailers that they could either prepay postage or Conversely by postage on credit lets say in the paradigm applies to shipping so we've kind of evolved.
Our way on to.
Where I think the sweet spot is so it's a.
The place of highly accretive to our shipping business.
The natural extension, obviously, that's the space that we understand.
The very well so as our thinking has.
Bolt on you know the target markets and Thats not to say, we don't you know continue to put money to work in those other markets around the equipment.
As of the loans, but more and more of it surround ship in working capital, which just feels right.
Adam or on a specific number that we put the work from the first quarter on lower yes, we funded about $4 million, Alan and the and the.
First quarter relative to Wheeler.
Uh huh.
Great I apologize for so many questions, but the last one I had is within <unk>.
Global ecommerce could you say what percentage of the revenue was from your three big buckets of.
Domestic cross border in the digital.
I don't know that a number of we've made public.
Yeah, we don't publicly make that.
Number of visible.
Alan on of talked about in her comments prepared remarks growth in all three areas and gave some growth rates. There. So but we don't publicly disclose the exact amounts are for each one of those.
Okay great.
I forgot the market sizes on the delivery businesses clearly the.
The biggest and that's the that's.
That's what I'm kind of affects the end of the question earlier about gross margin. So is because of the opportunity is the biggest there you know the the.
Flood of demand.
That's our business reflects that.
Okay.
Thank you so much.
Your next question comes from the line of Anthony the bids.
From Sidoti <unk> Company. Please go ahead.
Yes, good morning, and thank you for taking the questions. So.
Just wondering if you guys could provide a little more details on as far as the expected time lines for some of the automation initiatives.
Bob.
Surely about.
Well I mean so.
Let me talk about flow through of presort as well as our global ecommerce so global ecommerce.
He put once order to work on the first quarter and a large site.
As.
I believe installed on the second quarter.
We will continue to rollout the <unk>.
Sort of technology.
Throughout the show of looking at accelerating some of those investments if we can get the equipment.
In presort.
Well I don't think of it requires the invention of our innovation the kind of equipment that we're looking at doesn't exist yet so we're working with some automation companies too.
Yeah.
Invent or bend, a little bit metal to our help with.
Some of the of the work there, but you know again it's.
Tremendous opportunity. So if you look at the capital budget. This year, we will spend more money on capital.
Share and that's principally because of.
Of automation, so and we're looking at accelerating that.
So as the market you just said that the if you can get out of the equipment. So whatever I mean, I know there was a lot of of constrained supply.
Supply of change with the ocean shipping containers and so on so.
Coming from Asia. So so is that why you said that if you can get the equipment in the sort of like what are your.
How do you feel about that it would be at your confidence level about being able to get that equipment.
So listen it's the.
The kind of step back it's not so much around the backup in.
The of the part of this more around the availability of equipment. So if you look at the.
Overall demand for global ecommerce logistics and shipping.
<unk> increased dramatically over the last 12 months since COVID-19. So everyone's trying to get this automation. So im highly confident we will get it I'm not as confident that we'll get it.
You know as soon as I want.
Okay got it Okay. That's fair. Thank you and then I don't know if you guys said the talked about this but just overall COVID-19 related incremental costs.
Can you give a sense as to how much that of impact for the quarter.
I don't have a specific number off the top of head.
It was.
I think we've done a really good job adapting to.
Two of the snow on.
Unfortunately, the world that we find ourselves in the silent.
It wasn't a material impact from my perspective in terms of.
The expense and you know honestly.
The place that we're paying close attention right now of the surround.
<unk> and delinquencies and again, that's been relatively stable, but that's that's the place where there's.
I'd say, our strongest focus Adam are on if you want to add anything.
No I think.
You've covered it.
Got it Okay and then the last question from me.
You've mentioned it before that you expect the higher tax rate the.
For this year of can you give us a sense as to how we should think about the attach rates for 2020 one.
On all of them.
I would say, 20% to 25% type of range Anthony.
Alright, well thank you on best of luck.
Thank you.
If there are any additional questions. Please press one non zero.
And at this time there are no further questions I'd now like to turn the call back to Mr. Lautenbach for any closing remarks.
Thanks, operator, and thanks for everyone's attention this morning.
I thought we got off to a really solid start.
Yeah, you know we hit the ball on every business.
Clearly.
With that being said, we've got good opportunities to continue to improve our margins in global Commerce I'm highly confident we will do that.
The team has laid out of pretty good roadmap a very good roadmap of.
For what needs to be done on the timing.
A little bit varied and theres, some things out of our control, but as you look at the rest of things on global ecommerce that get that need to get done.
They're highly durable and as I said in my remarks, we've made some really important additions to the team in terms of people that have experience building. These types of networks on in building the business to consumer logistics network with the postal injection is a little bit of a.
A rare disease, but it's a highly.
Effective model.
So.
I feel very good about where that business headed presort is back on its feet hit the ball well in the first quarter and I think this is very well positioned for the year and Santa Clara is just you know.
I'm as excited about the possibilities of incentive because I am about the possibility of isn't global ecommerce. So all in all the good start more to do and we'll be back with you. Soon thanks for your time this morning.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.