Q3 2021 Pitney Bowes Inc Earnings Call
And good morning, and welcome to the Pitney Bowes third quarter earnings 2021 results Conference call. Your lines have been placed in a listen only mode. During the conference call.
Until the question and answer segment today.
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I would like now.
I would now like to introduce your participants for today's conference call. Mr. Marc Lautenbach, President and Chief Executive Officer, Ms. Anna Chadwick Executive Vice President and Chief Financial Officer.
That Mr. Ned Zacher, Vice President Investor Relations. Mr. Xactly will now begin the call with a safe Harbor overview.
Good morning, everybody. This is <unk>.
I manage the Investor Relations program for Pitney Bowes.
And I'd like to welcome everyone to the call. This morning, we very much appreciate your participation part of my new duties include covering the usual and customary safe Harbor information for these calls so please bear with me for just a few minutes.
Included in today's 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.
For more information about these risks and uncertainties. Please see our earnings press release, our 2020 Form 10-K annual report.
And other reports filed with the SEC that are located on our website at www Dot PB dot com and by clicking on Investor Relations. Please.
Please keep in mind that we do not undertake any obligation to update any forward looking statements as a result of new information or developments also for non-GAAP measures that are used in the press release or 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 provided a slide presentation on our Investor Relations website that summarizes many of the points, we will discuss during today's call.
Our format today is going to be familiar.
Mark logging back our president and Chief Executive Officer will begin with opening remarks, which will be followed by <unk>, Our chief Financial Officer, who will provide a deeper discussion of our financial results.
Now I'd like to turn the presentation over to Mark.
Mark the floor is yours.
Thank you everyone for joining today's call.
I'd like to welcome Matt to the team that brings a wealth of experience to the role including investing an analyst experience and has also been an investor in our debt. So he is familiar with our company.
Turning to the quarter, given a return to pre Covid top line seasonality.
The distortions in last year results in supply and demand imbalances. There are many different cross currents running through the quarter and year to year comparisons.
Why does it take to get lost in the numbers from my perspective, the headline is that.
Demand for our products and services remains strong and we continue to make progress repositioning our company for long term success.
Our presort business had an excellent quarter from both a top and bottom line perspective, the pretty sharp team was able to overcome labor and transportation inflation, I imagine pricing productivity and moved back into our long term profit model.
Importantly, the investments we have made in our network and technology position us well to drive even more productivity and help more clients.
Our <unk> business performed close to the long term model, even though supply constraints at the top and bottom line.
Equipment sales and our backlog both increased in the quarter evidenced in strong demand.
We will continue to battle through supply demand dynamics.
Clearly, our new product innovations are making a very positive difference.
In addition, more of our business is moving to a subscription model.
While this depresses short term revenue increased subscription revenue did that very positive harbinger for the future.
Within global ecommerce.
Our year to year aberrations. There are two things that are important to the long term success of this business.
The first is service to our clients.
We have improved our end to end cycle times by 25% since the beginning of the year, which was a significant improvement.
Secondly, gross margin.
It is notable that gross margin improved from prior year. Despite the fact that we had a substantial capacity.
And without the benefit of peak volumes, we had foreshadowed that volumes normalize this margin improvement would happen in a dead.
We have been very disciplined about the kind of volumes, we are committed to the fourth quarter and we like what we have both in terms of overall volume commitments, the economics and the kind of volume we anticipate receiving.
Like others in the industry, we saw volumes decreased year to year in the quarter, but we very much like how we are positioned for the fourth quarter and going forward.
However to be clear, we expect there to be some challenges this peak season.
Daily headlines talk about supply chain disruptions and larger players are already calling out an impact on the results or outlook.
We're not immune to the supply chain constraints.
More as it relates to our ecommerce clients supply levels and to a degree our syntax products.
Well it remains a level of uncertainty our team is substantially better position. This year based on the actions we have taken thus far.
Additionally.
And similar to the market.
We're looking at pricing to help offset some of the higher cost, particularly as it relates to transportation and labor for example within E. Commerce, we have put in place a surcharge for this peak season, and recently announced our annual general rate increase effective for 2022.
And we've had pricing increases in other parts of our business, where it is justified by the new and increased value. We are delivering for clients through our new product portfolio. So lots of moving pieces, but from my perspective, the successful quarter across many dimensions, but most importantly in terms of how the quarter set us up.
For our going forward success, now I will turn it over to Anna.
Thank you Mark unless otherwise noted I will speak to revenue comparisons on a constant currency basis.
Other items, such as EBIT, EBITDA, EPS and cash flow on an adjusted basis.
Total revenue for the third quarter was $875 million and declined 2% from prior year.
Recall that the year over year comparisons include the impact of Covid on us.
And many other companies.
Last year's third quarter, so a very positive impact on e-commerce revenue.
And an adverse impact on centex and presort.
When we compare this year's third quarter to the third quarter of 2019 in other words pre COVID-19, our 2021 revenue grew over 10%, which illustrates that the bulk of the topline gains we made last year remain intact.
Adjusted EPS was 8% and GAAP EPS was five cents.
EPS includes a two cent net tax benefit.
Offset by a three cent charge related to a specific pricing assessment in global E Commerce, which I will discuss momentarily.
Free cash flow was 30 million in cash from operations was $71 million down from prior year, largely due to higher capex and changes in working capital, which are in line with our previous commentary on this topic.
During the quarter, we paid 9 million in dividends and made $6 million in restructuring payments.
We spent $57 million in Capex as we continue to enhance our E Commerce network and drive productivity initiatives in both our ecommerce and presort businesses.
We ended the quarter with $743 million in cash and short term investments.
During the quarter, we redeemed our 2022 note for 72 million.
Notably total debt has declined about $225 million is year end 2020.
Two $2 3 billion.
When you take our finance receivables cash and short term investments into consideration our implied operating company debt is $556 million.
Let me turn to the specifics in the P&L, starting with revenue versus prior year.
Equipment sales grew 4%, we had declines in business services of 1% support services and supplies of 4% rentals of 5% and financing of 17%.
I would like to point out.
That as it relates to our financing revenue prior year results included investment gains related to the sale of securities, which represent about half of the year over year decline.
Gross profit was $286 million and improved across our e-commerce and pre search segments gross margin of 33% was flat to prior year.
SG&A was 225 million and approximately 14 million lower year over year SG&A was 26% of revenue, which is 100 basis point improvement over prior year.
Within SG&A corporate expenses were $49 million.
4 million lower than prior year, largely due to variable employee related costs.
R&D was $11 million or 1% of revenue EBIT.
EBITDA was $92 million and EBITDA margin was 10.5% both of which were relatively flat to prior year.
EBIT of $50 million was down about $4 million from prior year, while EBIT margin of 6% was flat to prior year.
Total interest expense was $36 million down $3 million year over year.
Our tax rate of 1% includes net benefit associated with the resolution of tax matters.
And we expect our rate will return to more normalized levels going forward.
Shares outstanding were approximately $179 million.
Let me turn to each segment's performance.
Within e-commerce revenue in the quarter declined 4% to $398 million.
However, recall that last year's third quarter sort of a surge of new revenues.
Driven by the effects of the pandemic.
If you compare this quarter to third quarter of 2019 revenues for the E. Commerce segment are up over 40% said.
Said another way we kept the vast majority of the revenue gains we experienced post COVID-19.
Inside of E Commerce revenue growth from cross border and digital services was offset by lower revenues from domestic parcel services.
Domestic parcel volumes were $41 million in the quarter.
Down from prior year on a tough compare but up from 2019 levels.
Aside from the tough compare the declining volumes can be attributed to the return of a more normal seasonality, where third quarter is typically softer than second.
Additionally, we made a strategic decision to take on volumes that fit our desired partial profiles and drive improved service levels.
Which also had an impact on volumes.
Demand for our services continues to be strong as we signed over 130 client deals in the quarter and we're able to bundle additional services with 40% of those signings.
Gross margin improved 100 basis points from prior year, despite higher labor and transportation cost and inclusive of the previously mentioned pricing assessment.
EBITDA for the quarter was breakeven, which is an improvement of 3 million versus the same period last year EBIT.
EBIT was a loss of $21 million.
As I referenced earlier our results in the quarter include an 8 million charge associated with a pricing assessment, which was mainly caused by lower than anticipated volumes that originate outside of the U S for our domestic delivery services.
The settlement encompasses the first three quarters of the year.
The impact from this pricing assessment has been factored into our full year guidance.
It is also important to highlight that since the beginning of the year. There has been a 25% improvement in our end to end cycle time from induction into our system to the actual delivery of the parcels.
Looking ahead, we have taken numerous steps to be ready for this year's holiday peak season.
We have brought in new leadership with deep industry expertise across virtually every facility in the network.
Additionally, last year's peak called for a change in our approach to hourly labor and we have made very good progress heading into this year end.
We have more than doubled the ratio of our permanent hourly workforce from a year ago and.
And we are seeing promising results from new wage programs, resulting in a more effective recruiting processes and improved employee retention both of which will further improve service quality.
We have increased our PB fleet by 42% over prior year, which reduces our reliance on third party transportation, including use of the spot market.
Lastly, we opened three new facilities and our expanding another to create more effective network footprint with enhanced coverage. Additionally, all of our new facilities now have some element of induction and or sortation automation with plenty of.
The opportunity for further automation is still in front of us.
The net of all these items.
Is that we believe we are well positioned to handle peak volumes and deliver appropriate service levels to our clients.
Yeah.
Turning to pre strike pre start had a terrific quarter revenue was hungry and 39 million, 9% better than prior year.
This is the third consecutive quarter of positive revenue growth illustrating the resilience of a business that has recovered nicely from the impact of Covid.
Revenue growth was driven by several factors, including <unk>.
Higher revenue per piece.
Strong sales performance and growth in overall volumes.
In addition, we are realizing clear financial benefit from network investments, we made to capture greater workshop discounts around five digit sortation.
While volumes and revenue grew.
So did variable cost to support that growth.
On a positive note the strength of our management systems as well as the investments we have made in technology have enabled us to hold productivity levels flat to prior year.
In the end, we are pleased that volumes and revenue growth more than offset the market driven increases in our presort costs.
We will continue to invest in automation and productivity in order to help us continue to grow EBIT dollars and expand profit margins.
For the quarter Presort, EBITDA was 27 million and EBITDA margin was 20%.
EBIT was $21 million and EBIT margin was 15%.
All of these are significant improvements from prior year and aligned with our long term targets.
Moving to the Centex segment.
<unk> revenue was $338 million, which was down 5% from prior year.
As noted earlier last year's third quarter included investment gains, which benefited financing revenue and created a challenging year over year comparison.
Last year's investment gains represent about 200 basis points of the year over year revenue decline for <unk> in the quarter inside sent deck I'd like to highlight equipment sales, which is a leading indicator for future revenue streams for the quarter.
Equipment sales saw a 4% growth despite some supply chain challenges in obtaining product.
I'd also highlight our efforts to shift our business mix to the growth areas of the shipping and mailing markets.
Our new centric products and offerings have been gaining traction in the marketplace.
Led by the send pro family, which is an all in one system that offers multi carrier alternatives to find the best freight and delivery options.
Track parcels gain postage discounts and manage spend in North America more than 25% of our revenue comes from these new products and we have begun to launch these products in select international markets. We are also seeing strong demand for our centers.
Males patient product, which we launched in April 2020, and have shipped over 40000 of these devices to date.
Our SaaS based subscription revenue grew 21% and paid subscribers for our central online product were up 58% over prior year.
I am also pleased to report that we have been able to satisfy the strong demand for our products.
Managing supplier and transportation disruptions that have become prevalent across global supply chains.
<unk> EBITDA was $107 million and EBITDA margin was 32% EBIT.
EBIT was $99 million and EBIT margin was 29%.
Margins reflect the decrease in high margin financing result, as well as increased freight and shipping costs that have become a season across the corporate sector.
It's important to note that we have implemented pricing actions, where it is justified by the new and increased value we are delivering for our clients through our newer product portfolio.
Let me now turn to our outlook.
As Mark discussed we expect there will be some supply chain disruptions, we are not immune to the market why supply chain challenges.
But we believe our outlook takes this into consideration and we are reaffirming what we have previously communicated.
We still expect annual revenue at constant currency to grow over prior year in the low to mid single digit range, we still expect adjusted EPS to be in the range of 35 to 42 cents.
And we continue to expect global ecommerce to be EBITDA positive for the year.
We still expect free cash flow to be lower than prior year, driven primarily by a rebound in capex investment largely as it relates to the expansion of our E Commerce network and productivity initiatives.
Along with a slower decline in our finance receivables.
We also expect our tax rate in the fourth quarter to return to a normalized level.
In summary.
I feel that Pitney Bowes is in very good shape, both operationally and financially we.
We have taken important steps throughout the year to strengthen our network capabilities and footprint, our balance sheet and our human capital.
These actions leave us well positioned to achieve our financial objectives for the year and going forward.
Thank you very much and now I'd like to ask the operator to open the line for questions.
Yeah.
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One moment please for our first question.
And our first question comes from the line of Allen Klee with Maxim Group. Please go ahead.
Good morning, just two questions on global ecommerce first.
Could you talk about is as you think out over the next few years the lever levers that are.
Should get the how how you think about the timing of getting the margin improvement there and then second.
On the on that.
$8 million charge in that segment that was pricing related to could you just explain that a little more to to help you understand that thank you.
Sure.
The first one I'll go Ah Ah.
The second question, so as we think about global ecommerce and the levers.
That.
We have at our disposal.
The first thing I would say is it doesn't take large incremental improvements to get to the long term model as you look at our long term model.
And you look at each of the line items, whether it be transportation labor.
Our postal Ferro as small incremental improvements end up getting you to the margins that we've described.
In the short term labor and transportation are the two.
Most substantial levers that we have and you know what.
Comes in a couple of forum transportation or.
When we start with labor.
Labor is first of all just getting a more mature labor model. So if you look at our.
Labour compositional last year it was predominantly temporary.
If you look at where we are today, it's a 55% permanent and 45% temp.
As you have a more permanent workforce there just are better at what they do so that's kind of the first lever.
The second lever around laborers around automation. So we've introduced automation into a couple of our sites I've had the opportunity to see it over the last 60 or 90 days. So if you look at where we have the preponderance of our labor.
Putting parcels in socks, most of that can be done.
The robotics.
So large opportunities there and candidly, we've just scratched the surface there. So while we have got the robotics in place on a couple of our sites.
We're early days, so you can see the benefits.
But it's you know a lot more in front of us.
A transportation you know again, a couple of levers first of all.
Last year, we talked about.
Being very dependent on the spot market for our trucks.
We've added substantial capacity in the last.
12 months in terms of our own transportation capability.
We added 40% of our 40.
40% of our capability.
We will continue to do that as you are able to do that you become less reliant on the spot market and you know the spot market economics versus having your own internal transportation.
Dramatically different I mean, it can be four or five times different per Wayne so substantial benefits there.
More recently, we've redesigned our western.
Region <unk>.
Inspiration network, we've seen substantial benefits there are principally on service levels, but again.
You know and it all adds up and then finally postal savings is a significant driver and what we mean by that is if you can ingest more deeply into the postal network you get better economics. So those three together produced 74% of.
Our benefit we continuously prices and important.
Dynamic are you know what this industry has demonstrated in the last 12 or 15 months as.
Inflation has gone up around transportation and labor are the industry as a whole continues to price that in and you see it in our peak pricing in the fourth quarter, but you also see it in.
And our G. R. I that we announced earlier this week so prices are important.
Whoever as well.
In terms of our expectation going forward, we expect this business to make steady progress I always incentive progress this year and we continue to expect that going forward.
And I'll, let you talk about the charge.
Sure Mark So as I mentioned before the pricing assessment is caused by lower than anticipated volumes between the year 'twenty 'twenty and 2021.
A certain kind of parcels. So we entered into a contract with a vendor that set that pricing based on.
A specific growth rate target and as we discussed there are several reasons mainly.
Actually the fact that 2020 due to Covid had very high volumes that we are not anticipating now meeting that our volume targets and for that for that reason, we have taken discharge.
It's important to note that we do not anticipate any adverse impact from this as we move into 2022.
And we have included and anything associated with this related to our guidance for 'twenty 'twenty. One so I view this as a unique one time activity.
Thank you very much.
And we do have a question from the line of Ananda Baruah with loop capital. Please go ahead.
Hey, Yeah, Thanks, guys for taking the question.
Yeah, a couple if I could just to sort of piggyback off of the transportation.
Comment can you Mark just go into a little more context for us what aspect of the transportation and you're into I think you've talked about your sourcing transportation path, but now it sounds like it's actually getting some traction.
Yes that is a second yeah sort of yes.
Providing us a context of what all parts of your in store.
It would be helpful. Thanks.
So let me kind of do it through the life of a parcel just to kind of.
Make it a little bit clearer, so parcels get from retailers.
Or marketplaces.
And one of two ways predominantly they come.
And.
Third party trucks that are contracted by us.
The the retailer of the marketplaces.
So there's.
A little bit of transportation, there, but where most of our transportation is is.
From our sortation centers into the postal network are the postal DD use so that's where the preponderance of our transportation is a last year as volumes spiked Oh, we were very vulnerable to what happened in the spot markets and you know in some way and no.
Those prices went.
Now four or five times, what they had been so just to kind of dimensionalize. It for you I visited one of our sites are 30 days ago, and if we were to use that spot market.
The driver that was costume between 3500 to $4000 of lane.
With one of our drivers it was 600 Bucks.
So the principal transfer the principle.
Use of the transportation is from a sortation facilities into the postal network.
So less reliance on the spot market as I said, we've increased our capacity a lot. The second thing is if.
If you can ingest directly into the postal network as opposed to going from our Atlanta facility the Orlando facility.
And then from Orlando and through the postal facilities you save a trip.
And that's largely what we've done.
In the West region pilot, which will roll out. So that's that's how we use transportation that kind of gives you an order of magnitude of the.
Savings that are available to us and candidly just as importantly from our perspective are taking time out of our overall service levels.
So I hope that that yeah, no that's great context, I really appreciate it and then I guess a quick follow up on E Commerce.
Are you guys.
Are you expecting December quarter volumes to be it would be up year over year I guess, maybe I should ask you what are you expecting year over year from December quarter volumes and the.
<unk> expansion that you spoke of.
To handle peak volumes has that been completed or is that still taking place.
We expect volumes for G C to be up quarter to quarter third quarter to fourthquarter as pig iron.
Would expect there'd be a little bit down from last year and they're down for a couple of reasons. You know first and foremost we have been very careful about the kinds of volumes that we've taken on to.
To ensure that we can provide the right service levels to our clients.
And importantly, the right economics to our firm. So we've been very very thoughtful about that you know obviously this is in the context of you know.
Overall supply chain challenges. So if you look at you know retailers and you'll see this in your own experience go into stores.
As far as them pretty short retards pretty short of inventory right now.
So that also has an overall effect so I would say the fourth quarter volume.
Forecasts are pretty pretty dynamic at this point, we'd go through that with our customers on a weekly basis.
And you know it'll be interesting to see how it.
How it turns out.
I'm sorry was there a second part of the question.
The facility expansion to handle peak has that been completed or is that still correct.
Completed for this year, so a different very much different dynamic this year than last time I visited our Orlando site earlier. This week, our Orlando was just coming online 12 months ago.
So you know as you look at our sites today, they've all been a you know in business for a while now I visited Columbus last night, that's a fairly new site.
We're not really relying a lot on volume there. So the overall network is much more stable.
Stable today than it was 12 months ago, and I visit a 75% of the sites in the last.
Hum.
60, or 90 days in.
Their readiness for peak.
<unk> is in a much much better place and I was really pleased with what.
I saw in terms of the overall network build out.
We've got two or three sites larger sites that will build out over the coming 12.
12 months, but as it relates to the fourth quarter and peak where.
We're in pretty good shape and pretty stabilized.
Stinker helpful. Thanks, a lot.
Yeah.
And we do have a question from the line of Shannon Cross with Cross Research. Please go ahead.
Thank you very much I was wondering with your contracts with your customers how much flexibility do you have in terms of pricing.
I assume you know obviously that whenever you incur for me.
How far do we lose Shannon.
Her line is still open your line is still open.
Well, let me let me answer the question on waste as I understand it and if we get the sandbox you can elaborate so in terms of pricing pressure really happened on AR.
Pretty predictable rhythm within the industry there is as a matter of practice what.
What the industry referred to as a G. R. I, that's an annual price increase that we just announced our.
The price increase for next year earlier in the week and then there's a price increase.
As it relates to peak.
Which goes into effect November one and then it goes through the peak season.
So you know I would say that the.
The pricing is happens on a fairly predictable.
Favorable rhythm.
Just a couple of times a year.
And we do have a question from the line of Kartik Mehta with Northcoast Research. Please go ahead.
Hi, Good morning, this is Alex on for Kartik.
Great news, you're seeing some of the transitions of reducing some of those variable costs within global ecommerce I guess the first question is what is the timeframe of.
Bringing some of those are temporary workers to more permanent workers and then also I believe at a recent conference you guys highlighted.
Global ecommerce that have EBIT EBIT margins in the long term of 8% to 12% does that does this recent news confirms that confidence that you guys have a nose.
And that margin guidance, where does that bring some of the targets forward or are you guys thinking about that thank you.
I'd say are our long term view continues to be that the margins in this business will be 8% to 12% you know as we look at some of the other companies in our space.
That seemed to be kind of in.
Industry.
Norms, so we've learned nothing.
From industry or our own internal operations that would suggest those.
Those EBIT.
Aspiration for the long term model are.
Out of our out of range.
Do you know what what I would add to that is if you know if you look at incrementally what needs to be done and I think this is really important to understand that it's one or two points of improvement on an annual basis, but these are not long parts. These are kind of.
Things that you would expect within the normal.
Normal course of business and that gives me a lot of confidence in terms of the labor model. So you know again perspective.
It is important you know, we're essentially going from all temporary workforce to 55% permanent.
The plan this year was to be around that number I'd like overtime to get that number to 70%.
But you know, we're about where we expect it to be for this year and if you look at.
No industry models. They vary I mean, some of our largest competitors have an all temporary model.
But you know as we look at it we think 70% is important.
And that gives you the ability to flex up and flex down with volume.
But you know clearly the more permanent workforce you can have it just makes things better more permanent workforces more reliable they understand how to use the conveyor system better they understand I used equipment better it's just.
They feel more ownership of what they're doing so I would think that's kind of the right model for us. So we made a heck of a lot of progress in the last 12 months I'd say who's got a little bit more to do but where we are in the Zip code.
Great. Thank you.
Okay.
And we have a follow up question from the line of Ananda.
Gorilla with loop capital. Please go ahead.
Oh, yeah. Thanks, guys I appreciate it on Centex, how would you size it sounds like.
Things are pretty solid how would you describe the demand backdrop.
And in general and you talked about being constrained, but how would you describe the demand backdrop.
In General and then Jeff you mentioned moving to a sub model just any any context around that.
And what that looks like and what your customers are participating in that thing.
I'm sorry, what was the second part your question.
This description model, yeah more adoption of the subscription model.
Alright.
I would start where you kind of started I wouldn't say that the demand environment for <unk> is super solid.
Super solid and as you.
Unpack the results you know candidly, we lost we lost between five and $10 million.
On the on the docks in the third quarter because of supply that we couldn't get in that kind of takes three different forms first of all we're reliant like many others are on the chips that are in such short supply.
Secondly, we had as many others are ships are circling the Los Angeles Port waiting to get in and then third our trucks.
So we ended up using some of our own trucks to get.
Parts from the Los Angeles Port.
Two Chicago, where they go from Chicago into Oh, where we assembled the technology, so the $5 million to $10 million of revenue left on the on the docks where the.
Third quarter also you know as it was on a highlighted last year had some one time benefits that affected both revenue and top line. If you look at the two of those together you know.
The business is pretty close to flat overall, if you look at equipment sales you know again equipment sales were up notwithstanding the fact that we left some revenue on the on the quarter.
In terms of a subscription model. It's the same customers that we have in general it's just they're opting for a different way.
Were to procure the technology, so it's a transition that we've.
They're making for a while we haven't talked a lot about it. We think is the right long term thing to do for the business but.
But clearly suppresses you know in period revenue. So when you kind of look at all those things together now some onetime aberrations last year, so supply chain.
The supply chain challenges this year moved to subscription revenue.
Super good demand environment.
Relatively speaking in the market that is challenged and you know candidly I point right back to the product innovations that the team has driven over the last three or four years. There you know each of those products is really hitting the ball and hitting the ball well.
That's helpful context, Mark would you just real quick follow up on that.
Is that just what you guys have been seeing on the demand side.
It in any way alter your longer term perspective.
With regard to the potential presents a great potential for centex.
We should think about it or is it changing at least the way you're you may be thinking about it.
Yeah, Alan I won't presume to tell you how you should think about it they'll tell you the way I'm thinking about it I think about it in kind of a bifurcated way. So if you look at you know the mail industry I think the mail industry is pretty set.
On the path that it's been on and it will continue to decline.
On the other side of it however is the shipping opportunity.
And the shipping opportunity is larger.
And growing and when you put those two opportunities together, which our technology allows us to address.
The opportunity.
As for that business to grow over time. So you know, we'll update our long term view of that business.
And our next.
Our analyst day, which I hope will be sooner versus later, where he can get together, but.
That technology.
That allows us to address the shipping markets, which is so important to so many of our office.
Office.
Customers allows us to think about that market in a different way and then candidly if you throw a financial services opportunity on top of that.
It makes it even more compelling so.
If I were trying to think about it I would model. The two markets you know separately and in and then aggregate them together, but my expectation is at some point you know shipping revenue gains.
Games is going to outpace our mail decline.
Appreciate it thanks.
One other point I'd make about some type of.
As you're thinking about you know the fourth quarter in particular, the team has done a terrific job of getting most of the supply they need for the fourth quarter.
In our grasp so it's our expectation that we'll have all the supply.
That we need for the quarter.
By the middle of November so I.
I think the supply chain issues are going to continue well into next year, but at least for this quarter. We have bought ahead and we're largely in possession of what we need to prosecute the corner.
He is without that business is executing.
And we do have a question from the line of Allen Klee with Maxim Group. Please go ahead.
Yes, hi, following up on Centex could you talk about for Wheeler financial how much.
They put to work during the quarter, what's your excess of bank deposits are and how you think about going forward.
The opportunity with that thank you.
We put $4 million to work for the quarter, we put $44 million life debate for Wheeler.
I continue to think it's a great opportunity we have plenty of deposits are to puts.
Put to work and you know I would say more recently as.
As we've evolved towards providing working capital for shipping Ah. We found an adjacency that you know in many ways resembles putting working capital to work for mail, but in a growing market. So I continue to think it's a great opportunity and we've scratched the surface of.
What we can do there.
Yes.
Yeah.
And if there are any additional questions at this time. Please press one then zero on your telephone keypad.
Once again, if there are any questions. Please press one to zero at this time.
And at this time it does appear there are no further questions from the phone lines.
I'll now turn the conference back to Mr. Marc Lautenbach.
Great. Thanks, Hopper and again, thank you for everyone to join this morning, Let me just conclude with a couple of thoughts.
The first is we really like the demand environment were in.
As I talked.
<unk> talked about a fantastic demand environment is the best I've seen since I've been here presort are at 9% revenue growth and we don't think that's necessarily the the long term trajectory of that business is is terrific. You know ironically is the mail.
The market continues to decline a allows us to make more and better acquisition. So we can continue to grow.
That business in and add to the demand a N N. G. C. You know well volumes are moderating a touch from.
Last year I think it's important to have a little bit of perspective last during the third quarter revenue grew 47% or so in volumes more than doubled so volumes rubbing or a little bit off of last year, but not much. So we've kept a much of the demand that we have earned over the last couple of years and MP.
Fortunately our the demand is now kind of in a sweet spot of what we think we can prosecute.
It's hard to know in the fourth quarter, how supply and demand work out.
You know the supply environment is.
<unk> both from.
Overall capability perspective, and also forecasted and visibility.
But the fourth quarter. It was one quarter overall, what will be enduring demand environment supply issues will work themselves out.
We really like our position going forward so.
We're looking forward to a very successful peak season.
And importantly, I think as you look at the <unk>.
So the business, they're all on very solid footing right now so.
That will close this morning's call and we'll talk we'll talk again soon thank you.
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