Q4 2022 Pitney Bowes Inc Earnings Call

Operator: Good morning, and welcome to the Pitney Bowes Fourth Quarter Earnings 2022 Results 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.

Operator: I would now like to introduce your participants for today's conference call. Mr. Mark Lottonbach, President and Chief Executive Officer, Miss Anna Chadwick, Executive Vice President and Chief Financial Officer, and Mr. Ned Zacker, Vice President and Investor Relations. Mr. Zacker will now begin the call with a safe, harbor overview.

Ned P. Zachar: Good morning, everybody. This is Ned Zachar. 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 interest and participation.

Speaker 5: We very much appreciate your interest and participation.

Ned P. Zachar: Part of my duties includes covering the safe harbor information for these calls. Included in today's presentation are forward-looking statements about our future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections. For more information about these risks and uncertainties, please see our earnings press release, our 2021 Form 10-K annual report and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on Investor Relations.

Speaker 7: Included in today's presentation are forward-looking statements about our future business and financial performance.

Speaker 8: forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections.

Speaker 9: For more information about these risks and uncertainties, please see our earnings press release, our 2021 Form 10-K Annual Report, and other reports filed with the SEC that are located on our website at www.pitneybowes.com and by clicking on Investor Relations.

Ned P. Zachar: 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 were discussed in our presentation materials. You can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our website.

Speaker 11: Also for non-GAAP measures that are used in the press release or discussed in our presentation materials, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our website.

Speaker 12: you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our website.

Speaker 13: in the tables attached to our press release and also on our website.

Ned P. Zachar: Additionally, we have provided a slide presentation and a spreadsheet with historical segment information on our Investor Relations website that summarizes many of the points we will discuss during today's call.

Ned P. Zachar: You may have seen that one of our shareholders recently announced Director nominations for the 2023 Annual Meeting. We issued a press release on January 23 with our response, and we will not be answering any questions relating to the nominations on this call.

Speaker 16: We issued a press release on January 23rd with our response, and we will not be answering any questions relating to those nominations on this call.

Ned P. Zachar: Our format today is as follows: Marc Lautenbach, our President and Chief Executive Officer, will begin with opening remarks, which will be followed by Ana Chadwick, our Chief Financial Officer who will provide an in-depth discussion of our financial results.

Speaker 18: Marc Lautenbach, our President and Chief Executive Officer will begin with opening remarks, which will be followed by Ana Chadwick, our Chief Financial Officer, who will provide an in-depth discussion of our financial results.

Speaker 19: which will be followed by Ana Chadwick, our Chief Financial Officer, who will provide an in-depth discussion of our financial results.

Ned P. Zachar: I'd like to now turn the presentation over to Mark, Mark de Flores-Journey.

Marc B. Lautenbach: Thanks, Ned, and good morning, everyone. I appreciate everyone joining our call this morning. For the quarter, revenue was flat on a comparable basis after adjusting for currency, a divestiture and a revenue presentation change that Ana will detail shortly. EBIT grew slightly and cash flow for the quarter was up strongly.

Speaker 22: I appreciate everyone joining our call this morning.

Speaker 23: For the quarter, revenue is flat on a comparable basis after adjusting for currency, a divestiture, and a revenue presentation change that Ana will detail shortly.

Speaker 24: EBIT grew slightly and cash flow for the quarter was up strongly.

Marc B. Lautenbach: SendTech and Presort continued their solid and predictable performance. In aggregate, the two businesses were essentially flat from a comparable revenue and profit perspective, and both businesses made good progress shifting their portfolios to growth. In Presort, this means marketing mail and bound printed matter and for SendTech, shipping revenue.

Marc B. Lautenbach: In North America SendTech, over 40% of our revenue is now coming from new products. They include our most recent award-winning IoT device, the Cube, Mailstation and ParcelPoint. These products set along our SaaS offerings, including PitneyShip and PitneyAnalytics. This is a direct result of investments we have made in this business. Margins at Presort continued to improve and are again within the long-term model. Again, these improvements in margin are a direct result of investments we have made in automation in the Presort business. In aggregate, these two businesses continue to perform well in a choppy market.

Speaker 27: They include our most recent award winning IoT device, the Cube, Mail Station and Parcel Point.

Speaker 28: These products sit along our SAS offerings, including Pitney Ship and Pitney Analytics.

Speaker 29: This is a direct result of investments we have made in this business.

Speaker 30: Margins of Presort continue to improve and are again within the long-term model.

Speaker 31: Again, these improvements in margin are a direct result of investments we have made in automation in the Presort business.

Speaker 32: In aggregate, these two businesses continue to perform well in a choppy market.

Marc B. Lautenbach: I would also be remiss if I didn't add our financial services business performed very well. Finance receivables, an important harbinger of future growth grew for the quarter and credit losses were minimal. 

Finance receivables, an important harbinger of future growth, grew for the quarter and credit losses were minimal.

Marc B. Lautenbach: deposits, collections, and funding activities were all very well managed. And as you see, the headlines are this.

We made substantial progress across many important items, but we're expecting to make even more progress. Specifically, our customer satisfaction increased 23 points over the course of the year.

In the quarter, our network performance improved over 10 points on a year-to-year basis. These items helped us grow domestic parcel volumes by 16% in a difficult market.

Marc B. Lautenbach: On the cos side, where will productivity improve 35% and transportation productivity improved close to 20%.

All in, gross margin per piece improved 50 cents on a year to year basis.

Lots of good improvement, but we're expecting even better. When you boil it down there were two issues.

But we're expecting even better. When you boil it down there were two issues.

Marc B. Lautenbach: First, we did not get enough heavy weight parcels within our volume. This depressed revenue per piece and ultimately gross margin to lower the positive levels. Second, while our transportation improved close to 20%, we were counting on a 25% improvement. In order to continue to improve our transportation execution, we're enhancing our processes and implementing a new transportation management system in the first half of the year. Specific to mix, we are increasing our focus and our resources on markets that have higher weight parcels. Our personal pipeline and backlog have plenty of higher weight parcels. So we have the opportunity, we just need to get that volume into our network. It will take a bit of time, but there's no shortage of opportunity.

This depressed revenue per piece and ultimately gross margin to lower the positive levels.

Second, our transportation improved close to 20%. We were counting on a 25% improvement.

In order to continue to improve our transportation execution, we're enhancing our processes and implementing a new transportation management system in the first half of the year.

Specific to mix, we're increasing our focus and our resources on markets that have higher weight parcels.

We're increasing our focus and our resources on markets that have higher weight parcels.

A personal pipeline and backlog with plenty of higher weight parcels, so we have the opportunity, we just need to get that volume into our network. It will take a bit of time, but there's no shortage of opportunity.

So we have the opportunity, we just need to get that volume into our network. It will take a bit of time, but there's no shortage of opportunity.

Marc B. Lautenbach: Our cross-border business continues to face headwinds due to the unprecedented strength of dollar and potential changes to the way one of our largest clients will access our services in the middle of the year.

As a result, I expect this business to continue to be under pressure for some time.

Marc B. Lautenbach: So in conclusion, relatively GEC removed the ball forward, but we had the opportunity and the expectation to do even better.

That said, our domestic volume XOR rate was toward the high end of what we guided to, and our implementation and backlog pipeline is very strong.

This is a good harbinger for the future, as volume is still the principal factor in reaching our long-term profitability.

Marc B. Lautenbach: A few words on capital allocation in our balance sheet. Thematically, our emphasis for capital allocation and our balance sheet continues to be around strategic flexibility. As I indicated at the outset, our cash performance was very strong for the quarter. Part of the performance was around timing of working capital, but there was also very good execution on collections, deposits and funding. Also of importance, we renegotiated our revolver agreement, which will afford us more flexibility going forward.

Dramatically our emphasis for capital allocation and our balance sheet continues to be around strategic flexibility.

As I indicated at the outset, our cash performance was very strong for the quarter.

Part of the performance was around timing of working capital, but there was also very good execution on collections, deposits, and funding.

Also of importance, we renegotiated our revolver agreement, which will afford us more flexibility going forward.

Marc B. Lautenbach: Finally, on an opportunistic basis, we began to purchase back tranches of our debt. We'll continue to pursue debt repurchases opportunistically. A final comment on the portfolio. Our Board and I continue to believe our portfolio is coherent in markets where we have a brand permission to win.

we began to purchase back tranches of our debt.

We'll continue to pursue that repurchases opportunistically.

The final comment on the portfolio: Our board and I continue to believe our portfolio is coherent in markets where we have a brand permission to win.

Our board and I continue to believe our portfolio is coherent in markets where we have a brand permission to win.

Marc B. Lautenbach: That being said, we continue to look for opportunities to unlock shareholder value. Sometimes this means proactively looking for opportunities. And other times, it means reacting to inbound inquiries. The sale of Borderfree in 2022 is an excellent and recent example of how there may be opportunities to simplify our portfolio further even within larger business segments.

Sometimes this means proactively looking for opportunities, and other times it means reacting to inbound inquiries.

The sale of Borderfree in 2022 is an excellent and recent example of how there may be opportunities to simplify our portfolio further even within larger business segments.

Marc B. Lautenbach: So in short, I like our portfolio, we will continue to look for opportunities to unlock value for our shareholders, and that process is ongoing. Let me now turn the conversation over to Ana.

Let me now turn the conversation over to Ana.

Ana Maria Chadwick: Thank you, Marc, and good morning, everyone. Before I begin my financial review, I'll note that the year-over-year revenue information I'm going to discuss is on a comparable basis.

Before I begin my financial review, I'll note that the year-over-year revenue information I'm going to discuss is on a comparable basis.

Ana Maria Chadwick: Adjustments include the impact of currency, the Borderfree disposition effective as of July 1 and a change started in the fourth quarter due to a contract modification with USPS in the presentation of certain revenues from gross to net of pass-through shipping costs for our digital solutions.

The border free disposition effective as of July first.

and a change started in the fourth quarter due to a contract modification with USPS.

in the presentation of certain revenues from gross to net of pass-through shipping costs for our digital solutions.

Ana Maria Chadwick: This revenue presentation change primarily affects Global Ecommerce and, to a lesser extent, SendTech. The change does not affect the profitability of those revenues. Also, unless otherwise noted, I will speak to other items such as EBIT, EBITDA and EPS on an adjusted basis.

and to a lesser extent, sense it.

The change does not affect the profitability of those revenues.

Also, unless otherwise noted, I will speak to other items such as EBIT, EBITDA, and EPS on an adjusted basis.

Ana Maria Chadwick: The following is a high-level review of the year-over-year comparison of our fourth quarter results. Total revenue for the quarter was $909 million, which is flat on a comparable basis. Gross profit for the company was $288 million compared to $283 million for the same period last year, a 2% increase. Gross margin was 32%, up from 29% last year. EBITDA was $88 million, down slightly from $89 million a year ago. EBIT was $49 million, up from $47 million a year ago, which is a 5% increase. Interest expense was $37 million, up from last year's $35 million level.

Total revenue for the quarter was $909 million, which is flat on a comparable basis.

Gross profit for the company was 288 million compared to 283 million for the same period last year.

a 2% increase.

Gross margin was 32%, up from 29% last year.

ibitda was 88 million, down slightly from 89 million a year ago.

The exhibit was 49 million, up from 47 million a year ago, which is a 5 percent increase.

Interest expense was $37 million, up from last year's $35 million level.

Ana Maria Chadwick: Corporate expenses for the quarter were $63 million, up $19 million from prior year, driven by the timing of variable compensation accruals. For the year, corporate expenses were 2% lower. Adjusted EPS was $0.06 in the quarter, the same as prior year. Turning to cash flow. GAAP cash from operating activities was $167 million in the quarter compared to $85 million in 2021. Free cash flow was $108 million compared to $39 million last year. The improvement in free cash flow was driven in part by lower CapEx and favorable working capital items that were a drag earlier in the year. CapEx for the quarter was $27 million, down from $43 million in prior year. During the quarter, we paid $9 million in dividends and made $4 million in restructuring payments.

For the year, corporate expenses were 2 percent lower.

Adjusted EPS was 6 cents in the quarter, the same as prior year.

Turning to cash flow.

Gap cash from operating activities was $167 million in the quarter compared to $85 million in 2021.

Free cash flow was $108 million compared to $39 million last year.

The improvement in free cash flow was driven in part by lower capex and favorable working capital items that were a drag earlier in the year.

toppex for the quarter was 27 million, down from 43 million in prior year.

During the quarter, we paid $9 million in dividends and made $4 million in restructuring payments.

Ana Maria Chadwick: I will now touch on the key annual data points for 2022. For the year, company-wide revenues were $3.5 billion, similar to 2021 on a comparable basis. EBIT was $179 million, 12% lower than prior year. Adjusted EPS for the year was $0.15 versus $0.32 last year. GAAP EPS was $0.21, versus a $0.01 loss last year. Full year cash from operations was $176 million compared to $302 million in 2021. Free cash flow was $68 million compared to $154 million. Capital spending was $125 million versus $184 million in 2021.

For the year, company-wide revenues were $3.5 billion, similar to 2021 on a comparable basis. EBIT was $179 million, 12 percent lower than prior year. Adjusted EPS for the year was 15 cent versus 32 cent last year. Gap EPS was 21 cents versus a one cent loss last year. Full year cash from operations was a hundred and 76 million, compared 302 million in 20 and 20 one. Free cash flow was $68 million compared to $154 million. Capital spending was 125 million versus 184 million in 2021.

EBIT was $179 million, 12 percent lower than prior year. Adjusted EPS for the year was 15 cent versus 32 cent last year. Gap EPS was 21 cents versus a one cent loss last year. Full year cash from operations was a hundred and 76 million, compared 302 million in 20 and 20 one. Free cash flow was $68 million compared to $154 million. Capital spending was 125 million versus 184 million in 2021.

Adjusted EPS for the year was 15 cent versus 32 cent last year. Gap EPS was 21 cents versus a one cent loss last year. Full year cash from operations was a hundred and 76 million, compared 302 million in 20 and 20 one. Free cash flow was $68 million compared to $154 million. Capital spending was 125 million versus 184 million in 2021.

Gap EPS was 21 cents versus a one cent loss last year. Full year cash from operations was a hundred and 76 million, compared 302 million in 20 and 20 one. Free cash flow was $68 million compared to $154 million. Capital spending was 125 million versus 184 million in 2021.

Full year cash from operations was a hundred and 76 million, compared 302 million in 20 and 20 one. Free cash flow was $68 million compared to $154 million. Capital spending was 125 million versus 184 million in 2021.

Free cash flow was $68 million compared to $154 million. Capital spending was 125 million versus 184 million in 2021.

Capital spending was 125 million versus 184 million in 2021.

Ana Maria Chadwick: At the end of the quarter, weighted average diluted shares outstanding were approximately 178 million. Looking at the balance sheet. Cash and short-term investments were approximately $681 million at quarter end, higher by approximately $75 million as compared to the third quarter of 2022. Total debt at year-end was $2.2 billion compared to $2.3 billion at year-end 2021.

looking at the balance sheet.

Cash and short-term investment were approximately $681 million at quarter end.

Higher by approximately 75 million as compared to the third quarter of 2020 two.

Total debt at year end was $2.2 billion compared to $2.3 billion at year end 2021.

Ana Maria Chadwick: The following segment information is summarized in our press release and slide presentation, both of which are posted on our Investor Relations website. I'll start with Presort.

both of which are posted on our Investor Relations website.

I'll start with threeort.

Ana Maria Chadwick: Presort revenues were $158 million in the quarter, which is a 1% improvement from last year. New customer additions and higher revenue per piece contributed to the revenue gains. Total sortation volume of 4 billion pieces was down 8% compared to prior year. EBIT for the quarter was $29 million, up 25% versus last year. EBIT margin was nearly 19%, which is a 360 basis point improvement versus fourth quarter 2021. Our ongoing investments in automation and sorter refresh is resulting in better productivity, which is driving the margin improvement.

New customer additions and higher revenue per peace.

Contributed to the revenue game.

Total sortation volume of 4 billion pieces was down 8% compared to prior year.

EBIT for the quarter was $29 million, up 25% versus last year.

If bit margin was nearly 19%.

which is a 360 basis point improvement versus fourth quarter 2021.

Our ongoing investment in automation and sort of refresh is resulting in better productivity, which is driving the margin improvement.

Ana Maria Chadwick: The important headline is, Presort annual revenues topped $600 million for the first time, with profitability levels in line with our long-term model. Moving to SendTech. SendTech reported revenues of $341 million in the quarter, which was down fractionally compared to prior year on a comparable basis. Growth in shipping-related revenues offset declines in financing, rentals and supplies. Equipment sales continued their growth progression. SendTech EBIT was $106 million compared to $109 million in prior year. EBIT margin for the quarter was stable at 31%. Shipping-related revenue, which now comprises 14% of segment revenues increased 30% versus prior year. And the SendTech team continues to build the shipping pipeline.

freeort annual revenues pop six million for the first time.

With profitability levels in line with our long-term model.

Moving to centic.

CENFEC reported revenues of $341 million in the quarter.

Which was down fractionally compared to the prior year on a comparable basis.

Growth in shipping related revenues of set, declines in financing rentals and supply.

Equipment sales continue their growth progression.

Centec EBIT was $106 million compared to $109 million in prior year.

The pivot margin for the quarter was stable at 31%.

Shipping-related revenue, which now comprises 14 percent of segment revenues, increased 30 percent versus prior year.

and the Centech team continues to build the shipping pipeline.

Ana Maria Chadwick: I'll spend a moment on the performance of our financial services business inside of SendTech. Finance receivables are up 4% year-over-year and we continue to see healthy payment trends across our financing portfolio. 30-day delinquencies are now just 150 basis points, down 70 basis points year-over-year. At year-end, the finance portfolio totaled $1.2 billion.

Finance receivables are up 4% year over year, and we continue to see healthy payment trends across our financing portfolio.

30-day delinquencies are now just 150 basis points.

Down 70 basis points year over year.

At year end, the finance portfolio total $1.2 billion.

Ana Maria Chadwick: In summary, SendTech continued its solid performance and made strides in shipping and financial services, both of which are positive indicators for the future of the business.

sena continued its solid performance and made strides in shipping and financial services.

both of which are positive indicators for the future of the business.

Ana Maria Chadwick: Moving to Global Ecommerce. The Global Ecommerce segment made substantial progress in the quarter, especially in the domestic parcel operations where gross profit improved significantly compared to fourth quarter 2021. However, as Marc stated, the strong improvement fell short of our expectations. Global Ecommerce reported $410 million in revenues and grew slightly over prior year on a comparable basis. Total segment gross margin in the quarter was $27 million compared to $17 million a year ago. Strong gross margin in domestic partial growth total segment improvement. Segment EBITDA was negative $5.5 million compared to negative $20 million in fourth quarter 2021. EBIT for Global Ecommerce improved $18 million from a loss of $41 million a year ago to a loss of $23 million.

The global eCommerce segment made substantial progress in the quarter, especially in the domestic partial operations, where gross profit improved significantly compared to fourth quarter 2021.

However, as Mark stated, the strong improvement fell short of our expectations.

Global e-commerce reported $410 million in revenues and grew slightly over prior year on a comparable basis.

Total segment gross margin in the quarter was 27 million compared to 17 million a year ago.

Strong gross margin in domestic parcel growth total segment improvement.

Segment IBITA was negative 5.5 million compared to negative 20 million in fourth order 2021.

EBIT for global e-commerce improved 18 million, from a loss of 41 million a year ago to a loss of 23 million.

Ana Maria Chadwick: First, let's talk about where we saw improvement. Domestic Parcel volumes were up 16% year-over-year to 54 million. And as we expected, we exited the year with run rate volumes of roughly 200 million. In the context of an industry that is projecting to be down, the 16% gain highlights that our services resonate with our clients. For the quarter, domestic parcel gross profit improved $24 million year-over-year.

Domestic partial volumes were up 16% year over year to 54 million.

And as we expected...

We exited the year with runway volumes of roughly 200 million.

In the context of an industry that is projecting to be down, the 16% gain highlights that our services resonate with our clients.

For the quarter, domestic parcel gross profit improved $24 million year over year.

Ana Maria Chadwick: For the full year, gross profit per parcel improved $0.35, which translates to $58 million. Let's note, in the quarter, we reduced production labor spend by 25% versus prior year despite processing 16% more parcel. This improvement is a direct result of our investments in automation, robotics and technology. Service levels continued to excel, a net or were near the 90% mark throughout the quarter. As a result, our Net Promoter Scores improved 23 points to 27 for full year 2022.

Let's note, in the quarter, we reduced production labor spend by 25% versus prior year.

despite processing 16% more parcels.

This improvement is a direct result of our investments in automation, robotics, and technology.

Service levels continue to excel.

and met or were near the 90 percent mark throughout the quarter.

As a result, our Net Promoter scores improved 23 points.

to 27 for full year 2022.

Ana Maria Chadwick: Finally, our client pipeline is strong heading into 2023. With first quarter planned implementation, running near double the rate it was in the first quarter 2022.

On the other hand,

In spite of these improvements, we fell short of our EBITDA positive goal by 5.5 million.

Especially in December , the mix of volumes skewed toward lighter, parcel weights.

resulting in lower revenue and margin per partial than we anticipated.

Ana Maria Chadwick: To be clear, the lighter weight volumes are still profitable.

Put the difference in mix.

From what we expected, cost the majority of the Miss from our goal.

Ana Maria Chadwick: Also, as Marc noted, transportation costs per parcel decreased materially compared to prior year driving approximately 20% productivity improvement but fell short of our 25% expectation. We're taking specific actions to address these two areas. Let me now share some perspective on the full year for global e-commerce. For the year, Global Ecommerce lost $22 million in EBITDA, similar to 2021. But in many respects, the years were quite different. At the gross profit line, the improvement, excluding Borderfree was $34 million year-over-year.

We are taking specific actions to address these two areas.

Let me now share some perspective on the full year for global e-commerce.

For the year, global e-commerce lost 22 million in EBITDA.

Similar to 20- 20 one, but in many respects the years were quite different.

At the gross profit line, the improvement, excluding border free, was $34 million year over year.

Ana Maria Chadwick: Let's unpack the gross profit, which more precisely illustrates the improvement in Domestic Parcel. In 2022, Domestic Parcel gross profit increased by $58 million. The remainder, Cross-Border, Digital and Fulfillment declined by $24 million, primarily due to lower volumes in a difficult macro environment.

Which more precisely illustrates the improvement in domestic parcels.

In 2022, domestic parcel gross profit increased by $58 million.

The remainder cross border digital and fulfillment declined by 24 million, primarily due to lower volumes in a difficult macro environment.

Ana Maria Chadwick: Overall, we are very pleased with the substantial increase in Domestic Parcel volumes and profitability this quarter. We continue to expect that domestic parcels will improve gross profit by 400 basis points in 2023, building on the 650 basis point increase in 2022. Domestic Parcel now represents approximately 75% of segment revenue, which bodes well for the future success of the segment, though our financial results will be more seasonally driven than they have been in the past.

We continue to expect that domestic parcels will improve gross profit by 400 basis points in 2023, building on the 650 basis point increase in 2022.

Domestic parcel now represents approximately 75 percent of segment revenue.

which bodes well for the future success of the segment.

though our financial results will be more seasonally driven than they have been in the past.

Ana Maria Chadwick: Now I'll shift the conversation to our capital structure. As you may have seen, we filed an 8-K on December 8, that details the adjustments we made in our credit agreement. We are pleased to have received the support of our lenders, which augments our financial flexibility during a period of substantial volatility in the capital markets. We have begun to buy back our debt at a discount. To date, we have purchased approximately $10 million across the 2024 and 2027 maturities and plan to continue to do so opportunistically. Anticipating a question regarding our 2024 maturity, we expect that cash flow and revolver access will be ample to meet that obligation should a cost-effective capital market solution not be available.

As you may have seen, we filed an eight -k on December eighth that detailed the adjustments we made in our credit agreements.

We are pleased to have received the support of our lenders, which augments our financial flexibility during the period of substantial volatility in the capital markets.

We have begun to buy back our debt at a discount.

Today, we have purchased approximately $10 million across the 24 and 27 maturities and plan to continue to do so opportunistically.

Anticipating a question regarding our 24 maturity.

We expect that cash cash flow and revolver acess will be ample to meet that obligation, should a cost-effective capital market solution not be available.

Ana Maria Chadwick: I'll conclude my remarks with perspective on 2023. We expect flat to mid-single-digit revenue growth on a comparable basis. We expect percentage EBIT growth to outpace revenue growth as Global Ecommerce profitability continues to improve. Finally, we expect Global Ecommerce to be EBITDA positive in 2023, driven largely by continued gross margin expansion in domestic parcels and partially offset by increasing macro uncertainties and softness in cross-border. We are providing the following additional perspective on 2023. We are reaffirming our CapEx expectations of approximately $115 million. Also, higher interest rates will result in roughly $30 million of incremental interest expense compared to prior year. And finally, we expect our effective tax rate to be approximately 25%.

We expect flat to mid-single digit revenue growth on a comparable basis.

We expect percentage EBIT growth to outpace revenue growth as global e-commerce profitability continues to improve.

Finally, we expect global e-commerce to be EBITDA positive in 2023, driven largely by continued gross margin expansion in domestic parcels and partially offset by increasing macro uncertainties and softness in cross-border. We are providing the following additional perspective on the

And finally, we expect our effective tax rate to be approximately 25%.

Ana Maria Chadwick: In closing, SendTech and Presort continue to deliver solid and predictable performance. In Global Ecommerce, we made significant progress, especially in domestic parcels and look forward to continuing this momentum into 2023.

In global e-commerce. We made significant progress, especially in domestic parcels, and look forward to continuing this momentum into 2020. -three.

Ana Maria Chadwick: I will turn the call back to the operator for Q&A.

Operator: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1 then 0 at this time. And one moment please for your first question.

Operator: Your first question comes from the line of Matt Sloap from Beard. Please go ahead.

Matthew Warren Swope: Yeah, good morning guys. Could you talk a little bit further on the globally commerce side and how you're looking at strategic alternatives for that business? I think I can hear the disappointment in another negative evid dye year. Would you be open or consider selling part of the business, shutting part of the business?

I know you talked about being EBITDOT positive this year, but what are other options you might explore?

Marc B. Lautenbach: Yes. So I appreciate the question. The first thing I would say is -- we did have the expectation to do slightly more. It would not be accurate, however that we are disappointed. There's a lot of progress there. So I'd start with that. In terms of alternatives that we look for, not just Global Ecommerce, but for any business, what I've said for 10 years is if a business is worth more to somebody else than it is to us then -- and it's a serious offer, we would certainly contemplate that. And if you look at the last 10 years, whether it be the divestiture of the software business or Imagitas or other assets, we've hold true to that.

Appreciate it.

The question the percent is you. We did have the expectation to do slightly more it would not be accurate's that we were disappointing. There's a lot of progress there. So I'd start with that in terms of alternatives that we work for not just go e-commerce. But for any business what I've said for 10 years is if.

If a business is worth more to somebody else than it is to us, and it's a serious offer, we would certainly contemplate that. If you look at the last 10 years, whether it be that divestiture, the SOPRA business, or Amajitas, or other assets, we hold true to that.

Marc B. Lautenbach: Most recently, the divestiture of Borderfree, I think, speaks to your question. That was a portion of Global Ecommerce. It was something that we like the business. We continue to be in cross-border, but that was worth more to Global-E than it was to us. So we would look at any alternative that we think unlocks value for our shareholders, whether it be shutting something down, selling something or indeed selling the whole business. But we do think, as I said, that business continues to be a coherent part of our portfolio, and we're optimistic about how we go forward.

that we think unlocks value for our shareholder, whether it be shutting something down, selling something, or indeed selling the whole business.

But we do think, as I said, that that...

Business continues to be a coherent part of our portfolio and we're optimistic about how we go forward.

Matthew Warren Swope: I appreciate that, Marc. Thank you. Would you mind commenting further on SendTech. You talked a couple of interesting comments I thought. One, about 40% of your sales coming from new products now, but also seen declines last year in finance, rentals and supplies that were partially offset by shipping. Can you talk about some of the dynamics in SendTech and how you see that on a unit basis for 2023?

on a unit basis for 2023?

Marc B. Lautenbach: Sure. So I mean there's 2 different currents running through the SendTech business. The first is the mail business, which continues to experience secular decline. That hasn't changed. The other current is shipping revenue, which continues to be a good market. In aggregate, those two markets together are about a $6 billion business that's growing. So our expectation is shipping revenue becomes a higher and higher percent of the total business and continues to grow. Ana said 20%, that those 2 dynamics begin to cancel it or out. And as you look at SendTech overall, it was essentially flat last year. From a unit perspective, equipment revenue is probably the easiest way to think about that. Equipment revenue was up low single digits for the quarter and for the year. That's kind of the confluence of those two dynamics coming together. So I like that business. I would say SendTech and Presort together provide ballast for the business and our balance sheet as we continue to improve Global Ecommerce.

and aggregate those two markets together are about a $6 billion business that's growing. So our expectation, you know, as shipping revenue becomes a higher and higher percent of the total business and continues to grow, you know, Ana said 20% that those two dynamics begin to...

canfully to out. And as you look at stech overall, you know it was essentially flat last year from a unit perspective. You know equipment revenueesis probably the easiest way to think about that. Equipment revenue is up. You know low single digits for the quarter and for the year. You know that's.

kind of the confluence of those two dynamics coming together.

So I like that business, I would say Centec and Presort together provide ballast for the business and our balance sheet as we continue to improve global commerce.

Matthew Warren Swope: And Marc, when you say mail continues to experience secular decline. Could you quantify that secular decline number at all about where you guys continue to see that?

Marc B. Lautenbach: So first class mouth I would say down high single digits you know 5 to 10% depending on a quarter You know marking meals down a little bit less

So it's, you know, I would say single-digit declines depending on which segment of mail.

Multiple: [Matthew Warren Swope] That's great. And then just a last one for me. Ana, could you comment on just expectations for free cash flow for 2023? I think you gave us the pieces, but just curious from your model, how that looks on a total free cash flow basis for 2023. [Ana Maria Chadwick] Yes. So as you commented, I gave you the pieces there on EBIT, CapEx, interest and tax. The hard one to call here is a little bit around working capital, and that's why we gave you the pieces. As the business moves to seasonal adjustments greater in the fourth quarter and calling out the movements in working capital is a little harder. That's why we moved the path here to give you the components.

Interest and tax. The hard one to call here is a little bit around working capital and that's why we gave you the pieces. As the business moves to seasonal adjustments greater in the fourth quarter and calling out the movements in working capital is a little harder. That's why we moved the path here to give you the components.

Matthew Warren Swope: Got it. Thank you both for your help.

Operator: Your next question comes from the line of Anthony Liebenzinski from Sidoe and company. Please go ahead.

Anthony C. Lebiedzinski: Yes, good morning and thank you for taking the questions. So first on GEC. So you talked about that the mix overall had a higher-than-expected volume of light weight parcels putting profitability or maybe less than expected, I guess that's a better choice of words. But was this really you think more of a result of new client wins that these new clients that you signed on? Did that have the most significant impact from this? Or was it just a mix of old clients just shipping more light volume? Just wanted to get a better sense of that.

volume of light weight parcels, hurting profitability or maybe less than expected. I guess that's a better choice of words. But was this really you think more of a result of the new client wins that these new clients that you signed on? Did that have?

themost significant impact from this? Or was it just a mix of old clients just shipping more light volume? Just just wanted to get a better sense of that.

Marc B. Lautenbach: That's a great question. So there's a couple of things that are true. We had a very successful quarter in bringing on new clients. I would say those new clients did have a slightly lower weight than average. However, we plan for that? What was different than what we expected is from our existing customers. Think of that as same-store sales for lack of a better term. In weeks 49, 50 and 51, read that as the last couple of weeks of the quarter, we didn't get as much volume from them as we expected. We still got more volume than we had the previous quarters and good performance, but we are expecting slightly more. So if you look at same-store sales, they were -- we got good increases from many of our clients. It was just slightly less than we expected those last 2 or 3 weeks.

is from our existing customers. Think of that as same store sales, for lack of a better term. In weeks 49, 50, and 51.

We didn't get as much volume from them as we expected. We still got more volume than we had the previous quarters and good performance, but we're expecting slightly more. So if you look at same source sales, we got about 2.5 percent volume.

Good increases from many of our clients. It was just slightly less than we expected those last two or three weeks.

Anthony C. Lebiedzinski: Understood. Okay. So now looking forward when you're going out and targeting new clients, are you going to be more kind of diligent as far as who you assess as to who you're going to bring on to make sure that you have a better mix of heavier weight parcels.

Is that how you're thinking about managing that? Or maybe you could you just talk a little bit more. Are you thinking about the kinding to be more profitable in GC?

Marc B. Lautenbach: Sure. So one thing that Ana said that's really important, and I don't want people to lose sight of is even the lighter weight parcels were positive from a gross margin perspective. So as long as our network is under capacity, we'll take that volume. It adds to profitability. It's accretive to absolute margins, et cetera. We will, within the total pipeline, be more diligent, if you will, in terms of realizing the higher weight stuff, and we will skew our marketing and sales resources to get more higher weight stuff too. So it's not that I don't like the lower weight stuff. I like it. As long as our network is under capacity, we'll take more of it. But it's also true that our sales and marketing and our management system will be more skewed to ensure that we get higher weight stuff. And that's -- my comment on the backlog is important. So we've got a big backlog right now, and we've got plenty of higher weight stuff in there. We just need to get that stuff into the network.

So as long as our network is under capacity, we'll take that volume. It adds to profitability, it's accretive to absolute margins, etc.

We will within the total pipeline.

be more diligent, if you will, in terms of realizing the higher weight stuff and we will skew our marketing and sales resources.

to get more higher weight stuff too. So it's not that I don't like the lower weight stuff, I like it, you know, as long as our network's under capacity, we'll take more of it. But it's also true that our sales and marketing and our management system will be more skewed to ensure that we get higher weight stuff. And that's my comment on, you know,

The backlog is important. So we've got a big backlog right now and we've got plenty of higher weight stuff in there. We just need to get that stuff into the network.

Anthony C. Lebiedzinski: Gotcha. Okay --

Marc B. Lautenbach: I think it's important. Hold up a second, if you will. If you look at our revenue per piece for last year in our domestic business, it was up double digit. So I know there's always a fear that you chase lower-margin stuff. But if you look at our revenue per piece last year, it was up 12% to 15%. So that gives you -- should give you -- gives me a fair amount of assurance that the team is focused on bringing in the right mix at the right price.

In a domestic business. It was up double digit. So I know there's A. there's always a fear that you'd chase lower margin stuff. But if you look at our revenue per piece last year it was up 12% to 15%. So that gives you.

It gives me a fair amount of assurance that the team is focused on bringing in the right mix at the right price.

Anthony C. Lebiedzinski: Okay, thanks for that explanation. And then as far as the unallocated corporate expenses, those came in higher than expected. I know Ana, you talked about the incentive comp or the timing of that impacting. Going forward, how should we expect unallocated corporate expenses to flow through for the year?

you know, unallocated corporate expenses to flow through for the year.

Ana Maria Chadwick: Yes, so what we're expecting is, you know, as a company paper for performance, we expect to replenish or re-levelize some of our incentive compensation as we move into 2023, and we are continuing.

As I mentioned last quarter, to have a very strict cost program. So the net of those two you should see pull-through.

Anthony C. Lebiedzinski: Okay, thanks. And then lastly, as far as the 23 guidance, can you give us a sense to how should we think about the different segments and as far as quarterly progress?

I'll given them what's going on with the economy.

Do you expect the things to be softer in the 1st, half versus the back half or I don't want to put words in your mouth, but how should we think about the quarterly progression? If you could give any color as far as the revenue outlook for the year. That'd be very helpful. Thank you.

Ana Maria Chadwick: Sure. As I mentioned, I think the biggest driver here will be the growth in globally commerce, especially around our domestic parcel, and we anticipate that to be more back-end loaded in the year.

Probably more fourth quarter than than everything. So I I would anticipate our profile as a company to follow that as well.

Multiple: [Marc B. Lautenbach] I also mean --I will try to make a really important point, which I know you guys get. The seasonality of Global Ecommerce is heavily skewed to the fourth quarter, and you can see it across the entire market. So as I think about it, you've got SendTech and Presort that are pretty consistent throughout the year. You have GEC that is entering a more seasonal business. And it's also true as we bring on more customers that will also be realized in the back half of the year. So it's a different kind of skew than we're used to seeing. I think the market's best consistent with the overall dynamics within the industry. [Anthony C. Lebiedzinski] Alright, well thank you and best of luck. 

You have GC that is entering a more seasonal business, and it's also true that as we bring on more customers, that will also be realized in the back half of the year. So it's a different kind of skew than we're used to seeing, I think, the markets have seen, but it's consistent with the overall dynamics within the industry.

see that is entering a more seasonal business. And it's also true that as we bring on more customers, that will also be realized in the back half of the year. So it's a different kind of skew than we're used to seeing, I think, the markets, but it's consistent with the overall dynamics within the industry. All right, well, thank you and best of luck.

Multiple: [Operator] As a reminder, if you have a question, please press 1 then 0. Next, we'll go to the line of Peter Sakon from CreditSights. Please go ahead. [Peter Sakon] Good morning. Following up on the weight of the parcels. You talked about targeting a higher weight package. Can you talk about what the average is now and the strategy to gain with additional higher weight volume? [Marc B. Lautenbach] Average is about 2.5 pounds, I mean, between 2.4 and 2.5 pounds.

Marc B. Lautenbach: last couple weeks of the quarter went closer to two pounds. I mean, so that was kind of the variance that we saw. We like that, too, and I mean, you know, as I said, even at two pounds, it's got a positive contribution margin to the overall business. So it's not that we don't like those business, it's just we've got to ensure that we get the right absolute.

number of higher weight parcels. So we don't think about this as mixed. We think about this, you know, if we're targeting 200 plus million parcels within that we need the right absolute percent of heavyweight or at right absolute number of heavyweight parcels.

Peter Sakon: can you talk about how you'll achieve this? Like what are the strategies that are important to improve this?

Marc B. Lautenbach: So within -- as I said, within our backlog, the mix is -- there's plenty of heavier weight parcels there. So we'll have a higher degree of focus on those parcels. I would also say if you look at the mid-market in general, which is kind of where our principal hunting round is, the mid-market within retail marketplaces tends to have more higher weight parcels. So I mean, our bias and kind of our go-to-market model is already skewed towards heavier weight stuff. And now it's near compensation system is as well. So we pay sensitive to profit, which is largely, although not exclusively driven by weight and price.

The mid-market within retail and marketplaces tends to have more higher weight parcels. So our bias and kind of our go-to-market model is already skewed towards heavier weight stuff. And I would say our compensation system is as well. So we pay, you know.

sensitive to profit, which is largely, although not exclusively, driven by weight and price.

Peter Sakon: Okay, what can you use the capacity utilization of your nothing of your network currently and what would talk to you over 2022?

Marc B. Lautenbach: So right now, our exit rate of the year, which we said in the fall of this year was between 195 million to 200 million parcels. I would say we're kind of on the north end of that. So a little bit above 200 million parcels. I think about a network that's got capacity for 300 million parcels. Our objective this year for that business is probably to be north of 220 million to 230 million parcels. So that's kind of the basic math that we're looking at. So think of a market that's running 70% to 75%.

parcels. You know, our objective this year for that business...

is probably to be, you know.

mostth of 220 to 23 million parcels.

So that's kind of the...

The basic math that we're looking at. So you know, think of a market that's are, you know when, 70 to 70, five percent.

Peter Sakon: Okay. And on capital applications, we need to talk about CAPEX and what's the next by segment.

For 2023, in the quarterly, I see it in your disclosure, roughly 40% for global e-commerce and. 20 times doing so what what's the sort of. Uh, your expectation for each segment for 2023.

Ana Maria Chadwick: Yes. The expectation would be -- will be down, as I mentioned, on a year-over-year basis. And the expectation would be that we will have a little bit of a higher decline in Global Ecommerce. So Global Ecommerce will be around 40-ish percent still of the total. The interesting thing here to point out is that as we mentioned in 2022, we will continue to spend on optimization of the network rather than that expansion of capacity. We feel good with the capacity, as Marc just noted, and the other segments will keep roughly similar proportions than what they've had in the past.

still of the total.

The interesting thing here to point out is that, as we mentioned in 2022, we will continue to spend on optimization of the network rather than that expansion of capacity. We feel good with the capacity, as Mark just noted. And the other segments will keep roughly similar proportions than what they've had in the past.

Marc B. Lautenbach: So the CapEx, I want to make two additional points with that CapEx number and context. Two years ago, I believe we spent $190 million on CapEx or $185 million, I mean somewhere in that range on CapEx. That was largely around the build-out of the network to accommodate those 300 million parcels. So the 110 is kind of in that context. The other point that I would say, if you look at the capital consumption of GEC, it is, as Ana said, down dramatically. We're still targeting for EBITDA minus CapEx and working to have a plan. That number is positive. I'd say I've become a little more cautious about that dynamic in 2023, given the macroeconomic environment. But that's still what the team is reaching for.

A number in context. two years ago I believe, we spent $19 million on CapEx 100 and eightyfive- I mean somewhere that range on CapEx that was largely around the buildout of the network to to accommodate those three million parcels. So the 1: 10 is kind of a that context.

The other point that I would say: if you look at the capital consumption of of G e C, you know it is as onest set down dramatically. We're still targeting for EBIT a minus CapEx and you know, working to have a plan, that that number is positive.

I'd say I've become a little more cautious about that dynamic in 2023, given the macroeconomic environment. But that's still what the team's reaching for.

Peter Sakon: And just following up on the e-commerce show, how much do we have done in the domestic business versus the international business? And I'm guessing the national is...

Is struggling more early seems to be yeah, could you separate that or? For exit international it doesn't turn you got a positive in 20.3

Multiple: [Ana Maria Chadwick] Yes. So the way -- the easiest way to think about it is from a gross margin perspective. And I want to point out what we mentioned is the dynamics are changing. And as we move into 2023, Domestic Parcel will become even a greater proportion of that gross margin. As I mentioned, 650 basis point improvement and additional at least 400 basis points more as we go into 2023. So we anticipate that more and more of our profitability will come from that Domestic Parcel and 75% of revenues are already in that domestic parcel. So it gives you a sense of the proportionality. [Peter Sakon] This is my last question. But just -- I guess you could argue that just because of something in a greater proportion doesn't necessarily mean if international is smaller, it doesn't necessarily mean it's good, if you will, or maybe if I could say differently, if it's still negative, is it worth keeping despite being a smaller proportion?

So the way I, the easiest way to think about it is from a gross margin perspective. And I want to point out what we mentioned is the dynamics are changing and as we move into 2023, domestic parcel will become even a greater proportion of that gross margin. As I mentioned, 650 basis point improvement and an additional, at least, a little bit of improvement in the gross margin.

myaspression, but just a.

I guess you could argue that just because of something is a greater proportion doesn't necessarily remean pertent. Maybe if international is.

Smaller doesn't cessarily mean.

It's good, if you will.

Or maybe if I could say differently, if it's still negative.

Is it worth keeping despite being a smaller proportion?

Marc B. Lautenbach: Is that the question specific to GEC?

Peter Sakon: Yes, the international portion of GEC.

Marc B. Lautenbach: Is it worth keeping? It depends a little bit on what you could fetch on the outside market. It's still positive from a gross margin perspective. I would say, as witnessed with the cross-border business, and globally, if it's worth more to somebody else than it is to us, then we would certainly consider any serious offer. So our intent is all those businesses to contribute positively to the P&L going forward. I will say, as you think about the business going forward and the reason we're so fixated on the domestic parcel margins is that's where most of the appreciation comes from in the next couple of years.

Then you know, we would certainly reconsider any serious offer.

So I intended all those businesses to contribute positively to the PL going forward. I will say as you think about.

the business going forward. And the reason we're so fixated on the domestic parcel margins is that's where most of the appreciation comes from in the next couple of years.

Peter Sakon: Thank you for your time.

Operator: Your next question comes from the line of Alek Valero from Loop Capital. Please go ahead.

Alek Valero: Hey, how's it going guys? It's Alek, I'm [indiscernible]. So my question is regarding the December quarter. Maybe if you guys could provide a bit more color on to what extent macro impacted the December quarter relative to where your expectations were? Was it a little bit more macro focus? Or was Street just too high?

So, my question is regarding the December quarter. Maybe if you guys could provide a bit more color on to what extent MACO impacted the December quarter. Relative to where it's 3 expectations were at was it a little bit more MACO focus or was 3 just too high? Thank you.

Marc B. Lautenbach: I don't think the Street was too high. I mean we had -- as I said, we had higher expectations for the business. The principal variance was in Global Ecommerce and it was in those two line items I mentioned. One was revenue per piece in weeks, 49, 50 and 51 was a little bit less than we thought. That cost us about $5 million in transportation costs, while they improved meaningfully year-to-year, but that would also improve meaningfully quarter-to-quarter. So we said north of 20% improvement year-to-year is also about the same quarter-to-quarter. We were expecting another probably $5 million of benefit there. So those two together were $10 million of EBIT, that's kind of -- that more than closes our -- the $0.02 to the Street.

that cost us about five million bucks. And transportation costs while, you know.

They improved meaningfully year to year, but that would also improve meaningfully quarter to quarter. So, you know, we said north of 20% improvement year to year was also about the same quarter to quarter. We were expecting another, you know, probably $5 million of benefit there. So those two together were $10 million of EBIT. That's, you know, kind of.

That more than closes your the two cents to the street.

Alek Valero: Awesome. That was helpful. Thank you so much for that. And the second question, if I may. So given your guidance of having EBIT outpaced revenue growth. And you mentioned that was primarily -- was going to primarily be driven by Global Ecommerce. So do you guys expect Global Ecommerce to be profitable in 2023?

Marc B. Lautenbach: The EBITDA profitable in 2023?

Alek Valero: Yes.

Marc B. Lautenbach: I think-- I mean, think about it this way. I mean, so it was minus $22 million from an EBITDA perspective last year. So EBITDA positive, right, there is $20 million to $25 million of improvement. Candidly, we expect more than that, but that's just kind of the basic math. But you've got some headwinds of interest expense and other things that you're running against.

It was minus 22 from an EBITDA perspective last year. So even a positive, you know, right there is 20 to 25 million dollars of improvement.

Can we expect more than that? But that's just kind of the basic math.

But you've got some headwinds of interest expense and other things that you're running against.

Multiple: Got it, got it, for sure. Thanks not for that. And at this time there are no further questions. I'll turn it back to you for any closing remarks.

Marc B. Lautenbach: Thanks. So, with a lot of time pack up quarter, I do miss if I didn't. And by thanking the PITNYBOWS team, I am continue to be pleased and impressed with people's commitment to this business. You saw it in our distribution centers where we have

Lots of volunteers to help in the middle of peak, and not just first or second shift, and not just in the good cities, but you know, all over and and third shift, and that's a true sign of of folks's dedication to this business.

Marc B. Lautenbach: and to moving forward. So as I said, I have ironed for the quarters. We made lots of good progress across many different dimensions. In globally commerce, we're expecting to touch more. Centech and PreSort continue to be steady performers and we expect that to continue. So as we move into 23, there's lots of different.

currents running through the economy. We're a little more cautious about how we call the year. We've got much more focus on providing flexibility to accommodate different things that may happen in the environment. That being said, our focus continues to be on the economy and on the economy as a whole.

as we get out of this economic moment and get to more calm waters, how this business is positioned. And I continue to like our hand. We will certainly look at any strategic options that present themselves along the way, but I like our position. So thanks for your time this morning and we'll talk soon.

Operator: 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. Mark clog and back our present and Chief Executive Officer will begin with opening remarks. which will be followed by Ada Chadwick, our chief financial officer, who will provide an in-depth discussion of our financial results. I'd like to now turn the presentation over to Mark. Mark, the floor is yours.

Operator: 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.

We're sorry, your conference is ending now. Please hang up.

So F? F.

Operator: disconnect. Mark clog and back our present and Chief Executive Officer will begin with opening remarks. which will be followed by Ada Chadwick, our chief financial officer, who will provide an in-depth discussion of our financial results. I'd like to now turn the presentation over to Mark. Mark, the floor is yours.

I have you.

Morning and welcome to the pinney bow's fourth quarter earnings 2022 results 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 your participants for today's conference call: MR Mark lottenbuck, President and Chief Executive Officer.

Ms annah Chadwick, Executive Vice President and Chief Financial Officer, and MR Ned zacher, Vice President, Investor Relations. Mr zacher will now begin the call with a safe harbor overview. Good morning everybody. This is Ned zacher. I managed Investor Relations program for Benny bowz and I'd like to welcome everyone to the call this morning.

We very much appreciate your interest and participation. Part of my duties includes covering the safe harbor information for these calls. Included in today's presentation are forward-looking statements about our future business and financial performance. Forward-looking statements involve risks and uncertainties.

that could cause actual results to be materially different from our projections.

For more information about these risks and uncertainties, please see our earnings press release, our 2021 Form 10-K Annual Report, and other reports filed with the SEC that are located on our website at www.pbe.com and by clicking on Industrial 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 developments. Also for non-GAAP . Measures that are used in the press release were discussed in our presentation materials.

Also for non-GAAP . Measures that are used in the press release were discussed in our presentation materials.

You can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our website. Additionally, we have provided a slide presentation and a spreadsheet with historical segment information on our industrial relation website that summarizes many of the points we will discuss during today's call. You may have seen that one of our shareholders recently announced Director nominations for the 2023 annual meeting. We issued a press release on January 23rd with our response, and we will not be answering any questions relating to the nominations on this call. Our format today is as follows.

Additionally, we have provided a slide presentation and a spreadsheet with historical segment information on our industrial relation website that summarizes many of the points we will discuss during today's call. You may have seen that one of our shareholders recently announced Director nominations for the 2023 annual meeting.

We issued a press release on January 23rd with our response, and we will not be answering any questions relating to the nominations on this call.

Our format today is as follows.

Mark clog and back our present and Chief Executive Officer will begin with opening remarks. which will be followed by Ada Chadwick, our chief financial officer, who will provide an in-depth discussion of our financial results. I'd like to now turn the presentation over to Mark. Mark, the floor is yours.

which will be followed by Ada Chadwick, our chief financial officer, who will provide an in-depth discussion of our financial results.

I'd like to now turn the presentation over to Mark. Mark, the floor is yours.

Thanks, Ned, and good morning, everyone. I appreciate everyone joining our call this morning. In pre-sort, this means marketing mail and bound to printed matter, and for SendTech, shipping revenue.

For the quarter, revenue is flat on a comparable basis after adjusting for currency, a divestiture, and a revenue presentation change that honor will detail shortly. Uber grew slightly and cash flow for the quarter was up strongly. Centec and Presort continued their solid and predictable performance. In aggregate, the two businesses were essentially flat from a comparable revenue and profit perspective, and both businesses made good progress shifting their portfolios to growth.

Uber grew slightly and cash flow for the quarter was up strongly. Centec and Presort continued their solid and predictable performance. In aggregate, the two businesses were essentially flat from a comparable revenue and profit perspective, and both businesses made good progress shifting their portfolios to growth.

In aggregate, the two businesses were essentially flat from a comparable revenue and profit perspective, and both businesses made good progress shifting their portfolios to growth.

In pre-sort, this means marketing mail and bound to printed matter, and for SendTech, shipping revenue.

In North America, Centec, over 40% of our revenue is now coming from new products. They include our most recent award winning IoT device, the cube mail station and parcel point. These products sit along our SaaS offerings, including penny ship and pity analytics. This is a direct result of investments we have made in this business. Margins of Presort continue to improve and are again within the long-term model.

They include our most recent award winning IoT device, the cube mail station and parcel point. These products sit along our SaaS offerings, including penny ship and pity analytics. This is a direct result of investments we have made in this business.

These products sit along our SaaS offerings, including penny ship and pity analytics. This is a direct result of investments we have made in this business.

Margins of Presort continue to improve and are again within the long-term model.

Again, these improvements in margin are a direct result of investments we have made in automation in the presort business. In aggregate, these two businesses continued to perform well in a choppy market. I would also be remiss if I didn't add our financial services business performed very well. Finance receivables, an important harbinger of future growth, grew for the quarter and credit losses were minimal. Deposits, corrections. S&S Review and funding activities were all very well managed. And do you see the headline is this? We made substantial progress across many important items, but we're expecting to make even more progress. Specifically our customer satisfaction increased 23 points over the course of the year. In the quarter, our network performance improved over 10 points on a yeartoyear basis. These items helped us grow domestic parcel volumes by 16% in a difficult market. On the cost side, labl productivity improved 35% and transportation productivity improved close to 20%. All in gross margin per piece improved.

In aggregate, these two businesses continued to perform well in a choppy market. I would also be remiss if I didn't add our financial services business performed very well. Finance receivables, an important harbinger of future growth, grew for the quarter and credit losses were minimal. Deposits, corrections. S&S Review

and funding activities were all very well managed. And do you see the headline is this?

We made substantial progress across many important items, but we're expecting to make even more progress.

Specifically our customer satisfaction increased 23 points over the course of the year. In the quarter, our network performance improved over 10 points on a yeartoyear basis.

These items helped us grow domestic parcel volumes by 16% in a difficult market. On the cost side, labl productivity improved 35% and transportation productivity improved close to 20%. All in gross margin per piece improved.

50 cents on a year-to-year basis. Lots of good improvement. to your basis. Lots of good improvement, but we're expecting even better. When we boil it down. There were two issues. First, we that get enough heavyweight parcels within our volume. This depressed revenue per piece and ultimately gross margin to lower at positive levels. Second, our transportation improved close to 20 percent, we're counting on a 25 percent improvement. In order to continue to improve our transportation execution, we're enhancing our processes and implementing a new transportation management system in the first half of the year.

to your basis. Lots of good improvement, but we're expecting even better.

When we boil it down. There were two issues. First, we that get enough heavyweight parcels within our volume.

This depressed revenue per piece and ultimately gross margin to lower at positive levels.

Second, our transportation improved close to 20 percent, we're counting on a 25 percent improvement. In order to continue to improve our transportation execution, we're enhancing our processes and implementing a new transportation management system in the first half of the year.

Specific to mix, we're increasing our focus and our resources on markets that have higher weight parcels. Our personal pipeline and backlog has plenty of higher weight parcels, so with the opportunity, we just need to get that volume into our network. It will take a bit of time, but there's no shortage of opportunity. Our cross-border business continues to face headwinds due to the unprecedented strength of the dollar and potential changes to the way one of our largest clients will access our services in the middle of the year.

Our personal pipeline and backlog has plenty of higher weight parcels, so with the opportunity, we just need to get that volume into our network. It will take a bit of time, but there's no shortage of opportunity.

Our cross-border business continues to face headwinds due to the unprecedented strength of the dollar and potential changes to the way one of our largest clients will access our services in the middle of the year.

As a result, I expect this business to continue to be under pressure for some time. So in conclusion, relative to GEC, we moved the ball forward, but we had the opportunity and the expectation to do even better. That said, our domestic volume XOR8 was toward the high end of what we guided to, and our implementation and backlog pipeline is very strong. This is a good harbinger for the future, as volume is still the principal factor in reaching our long-term profitability. A few words on capital allocation and our balance sheet. Dramatically, our emphasis for capital allocation and our balance sheet continues to be around strategic flexibility.

This is a good harbinger for the future, as volume is still the principal factor in reaching our long-term profitability.

A few words on capital allocation and our balance sheet. Dramatically, our emphasis for capital allocation and our balance sheet continues to be around strategic flexibility.

As I indicated at the outset, our cash performance was very strong for the quarter. Part of the performance was around timing of working capital, but there was also very good execution on collections, deposits, and funding. Also of importance, we renegotiated our revolver agreement, which will afford us more flexibility going forward. Finally on an opportunistic basis, we began to purchase back tranchesas- our debt. We'll continue to pursue that repurchases opportunistically. pursue that repurchases opportunistically. A final comment on the portfolio. Our Board and I continuue to weave our portfolio as coherent in their markets where we have a brand permission to win.

Also of importance, we renegotiated our revolver agreement, which will afford us more flexibility going forward.

Finally on an opportunistic basis, we began to purchase back tranchesas- our debt.

We'll continue to pursue that repurchases opportunistically.

pursue that repurchases opportunistically. A final comment on the portfolio.

Our Board and I continuue to weave our portfolio as coherent in their markets where we have a brand permission to win.

That being said, we continue to look for opportunities to unlock shareholder value. Sometimes this means proactively looking for opportunities, and other times it means reacting to inbound inquiries. The sale of Border Free in 2022 is an excellent and recent example of how there may be opportunities to simplify our portfolio further even within larger business segments. So in short, while I like a portfolio, we'll continue to look for opportunities to unlock value for our shareholders, and that process is ongoing.

Sometimes this means proactively looking for opportunities, and other times it means reacting to inbound inquiries. The sale of Border Free in 2022 is an excellent and recent example of how there may be opportunities to simplify our portfolio further even within larger business segments.

So in short, while I like a portfolio, we'll continue to look for opportunities to unlock value for our shareholders, and that process is ongoing.

Let me now turn the conversation over to Ana. Thank you Mark, and good morning everyone. Before I begin my financial review, I'll note that the year-over-year revenue information I'm going to discuss is on a comparable basis. Adjustments include the impact of currency the boardof freered disposition effective as of July first. And, a change started in the fourth quarter due to a contract modification with USPS. in the presentation of certain revenues from gross to net of pass-through shipping costs for our digital solutions. This revenue presentation change primarily affects global e-commerce.

Before I begin my financial review, I'll note that the year-over-year revenue information I'm going to discuss is on a comparable basis. Adjustments include the impact of currency the boardof freered disposition effective as of July first. And, a change started in the fourth quarter due to a contract modification with USPS. in the presentation of certain revenues from gross to net of pass-through shipping costs for our digital solutions. This revenue presentation change primarily affects global e-commerce.

Adjustments include the impact of currency the boardof freered disposition effective as of July first.

And, a change started in the fourth quarter due to a contract modification with USPS.

in the presentation of certain revenues from gross to net of pass-through shipping costs for our digital solutions.

This revenue presentation change primarily affects global e-commerce.

and to a lesser extent, sensex. The change does not affect the profitability of those revenues. Also, unless otherwise noted, I will speak to other items such as EBIT, EBITDA, and EPS on an adjusted basis. The following is a high-level review of the year-over-year comparison of our fourth quarter results. Total revenue for the quarter was $909 million, which is flat on a comparable basis. Gross profit for the company was 288 million, compared to 283 million for the same period last year.

Also, unless otherwise noted, I will speak to other items such as EBIT, EBITDA, and EPS on an adjusted basis.

The following is a high-level review of the year-over-year comparison of our fourth quarter results. Total revenue for the quarter was $909 million, which is flat on a comparable basis.

Gross profit for the company was 288 million, compared to 283 million for the same period last year.

The profit for the company was $288 million compared to $283 million for the same period last year, a 2% increase. Gross margin was 32%, up from 29% last year. EBITDA was 88 million, down slightly from 89 million a year ago. The improvement in free cash flow was driven in part by lower capex and favorable working capital items that were a drag earlier in the year. toppex for the quarter was 27 million, down from 43 million in prior year. During the quarter, we paid nine million dividends and made four million in restructuring payments. I will now touch on the key annual data points for 2022. for the year, company-wide revenues worth three point five billion.

Gross margin was 32%, up from 29% last year.

EBITDA was 88 million, down slightly from 89 million a year ago.

The debit was $49 million, up from $47 million a year ago, which is a 5% increase. This expense was $37 million, up from last year's $35 million level. Corporate expenses for the quarter were 63 million, up 19 million from prior year. Driven by the timing of variable compensation accrual, for the year, corporate expenses were 2% lower. Adjusted EPS with six cents in the quarter, the same as prior year. adjusted EPS with 6 cents in the quarter, the same as prior year. Turning to cash flow. Gap cash from operating activities was $167 million in the quarter compared to $85 million in 2021. Free cash flow was $108 million compared to $39 million last year.

Corporate expenses for the quarter were 63 million, up 19 million from prior year. Driven by the timing of variable compensation accrual, for the year, corporate expenses were 2% lower. Adjusted EPS with six cents in the quarter, the same as prior year.

Adjusted EPS with six cents in the quarter, the same as prior year.

adjusted EPS with 6 cents in the quarter, the same as prior year. Turning to cash flow.

Gap cash from operating activities was $167 million in the quarter compared to $85 million in 2021. Free cash flow was $108 million compared to $39 million last year.

The improvement in free cash flow was driven in part by lower capex and favorable working capital items that were a drag earlier in the year. toppex for the quarter was 27 million, down from 43 million in prior year. During the quarter, we paid nine million dividends and made four million in restructuring payments. I will now touch on the key annual data points for 2022. for the year, company-wide revenues worth three point five billion.

toppex for the quarter was 27 million, down from 43 million in prior year. During the quarter, we paid nine million dividends and made four million in restructuring payments. I will now touch on the key annual data points for 2022. for the year, company-wide revenues worth three point five billion.

During the quarter, we paid nine million dividends and made four million in restructuring payments. I will now touch on the key annual data points for 2022. for the year, company-wide revenues worth three point five billion.

similar to 2021 on a comparable basis. EBIT was 179 million, 12 percent lower than prior year. Adjusted EPS for the year was 15 cents versus 32 cents last year. GAP EPS was 21 cents. Versus a one cent loss. Last year. Full year cash from operations was one hundred and seventy six million, compared to 302 million in 20 20: one Free cash flow was $68 million compared to $154 million. Capital spending was $125 million versus $184 million in 2021. At the end of the quarter, weighted average diluted shares outstanding. were approximately $178 million. Looking at the balance sheet, cash and short-term investment were approximately $681 million at quarter end, higher by approximately $75 million as compared to the third quarter of 2022. Total debt at year-end was two point two billion, compared to two point three billion at year-end 2000 and twenty-onethe following segment information is summarized in our press release and slightide presentation. both of which are posted on our Investor Relations website. I'll start with fsort. fsearch revenues were 158 million in the quarter, which is a 1% improvement from last year. New customer additions and higher revenue per piece contributed to the revenue gain. The full sortation volume of 4 billion pieces was down 8% compared to prior year.

Versus a one cent loss. Last year. Full year cash from operations was one hundred and seventy six million, compared to 302 million in 20 20: one

Free cash flow was $68 million compared to $154 million. Capital spending was $125 million versus $184 million in 2021. At the end of the quarter, weighted average diluted shares outstanding. were approximately $178 million. Looking at the balance sheet, cash and short-term investment were approximately $681 million at quarter end, higher by approximately $75 million as compared to the third quarter of 2022. Total debt at year-end was two point two billion, compared to two point three billion at year-end 2000 and twenty-onethe following segment information is summarized in our press release and slightide presentation. both of which are posted on our Investor Relations website. I'll start with fsort. fsearch revenues were 158 million in the quarter, which is a 1% improvement from last year. New customer additions and higher revenue per piece contributed to the revenue gain. The full sortation volume of 4 billion pieces was down 8% compared to prior year.

were approximately $178 million. Looking at the balance sheet, cash and short-term investment were approximately $681 million at quarter end, higher by approximately $75 million as compared to the third quarter of 2022.

Total debt at year-end was two point two billion, compared to two point three billion at year-end 2000 and twenty-onethe following segment information is summarized in our press release and slightide presentation.

both of which are posted on our Investor Relations website.

I'll start with fsort. fsearch revenues were 158 million in the quarter, which is a 1% improvement from last year.

New customer additions and higher revenue per piece contributed to the revenue gain. The full sortation volume of 4 billion pieces was down 8% compared to prior year.

E for the quarter was 29 million, up 25% versus last year. Ebit margin was nearly 19%. Which is a 360 basis point improvement versus fourth quarter: 20, 20 one. Our ongoing investment in automation and sorter refresh is resulting in better productivity, which is driving the margin improvement. The important headline is: Fort annual revenues. Top six million for the first time, with profitability levels in line with our long-term model.

Which is a 360 basis point improvement versus fourth quarter: 20, 20 one.

Our ongoing investment in automation and sorter refresh is resulting in better productivity, which is driving the margin improvement.

The important headline is: Fort annual revenues. Top six million for the first time, with profitability levels in line with our long-term model.

Moving to SENSEK. SENSEK reported revenues of $341 million in the quarter. which was down fractionally compared to prior year on a comparable basis. Growth in shipping related revenues offset declines in financing rentals and supplies. Equipment sales continued their growth progression. Centec EBIT was $106 million compared to $109 million in prior year. The pivot margin for the quarter was stable at 31%. Shipping related revenue, which now comprises 14% of segment revenues, increased 30% versus prior year. The Centech team continues to build the shipping pipeline. I'll spend a moment on the performance of our financial services business inside offorest family club fish office.

which was down fractionally compared to prior year on a comparable basis. Growth in shipping related revenues offset declines in financing rentals and supplies. Equipment sales continued their growth progression. Centec EBIT was $106 million compared to $109 million in prior year. The pivot margin for the quarter was stable at 31%. Shipping related revenue, which now comprises 14% of segment revenues, increased 30% versus prior year. The Centech team continues to build the shipping pipeline. I'll spend a moment on the performance of our financial services business inside offorest family club fish office.

Equipment sales continued their growth progression. Centec EBIT was $106 million compared to $109 million in prior year.

The pivot margin for the quarter was stable at 31%. Shipping related revenue, which now comprises 14% of segment revenues, increased 30% versus prior year. The Centech team continues to build the shipping pipeline.

I'll spend a moment on the performance of our financial services business inside offorest family club fish office.

Finance receivables are up 4% year over year and we continue to see healthy payment trends across our financing portfolio. Thirty day delinquencies are now just 150 basis points, down 70 basis points year over year. At year end, the finance portfolio total one point two billion dollarsin summary. SENSEK continued its solid performance and made strides in shipping and financial services, both of which are positive indicators for the future of the business. continued its solid performance and made strides in shipping and financial services, both of which are positive indicators for the future of the business. Moving to global e-commerce.

At year end, the finance portfolio total one point two billion dollarsin summary.

SENSEK continued its solid performance and made strides in shipping and financial services, both of which are positive indicators for the future of the business.

continued its solid performance and made strides in shipping and financial services, both of which are positive indicators for the future of the business. Moving to global e-commerce.

The global eCommerce segment made substantial progress in the quarter, especially in the domestic partceial operations, where gross profit improved significantly compared to fourth quarter 2021. However as Mark stated, the strong improvement fell short of our expectations. Global e-commerce reported 41 million in revenues and grew slightly over prior year. On a comparable basistotal segment, gross margin in the quarter was 27 million compared to 17 million a year ago. Strong gross margin and domestic parcel growth. Total segment improvement segment EBITDA was negative five point five million compared to negative two million in fourth quarter 20 20 one.

However as Mark stated, the strong improvement fell short of our expectations.

Global e-commerce reported 41 million in revenues and grew slightly over prior year. On a comparable basistotal segment, gross margin in the quarter was 27 million compared to 17 million a year ago.

Strong gross margin and domestic parcel growth. Total segment improvement segment EBITDA was negative five point five million compared to negative two million in fourth quarter 20 20 one.

EBIT for global e-commerce improved 18 million, from a loss of 41 million a year ago to a loss of 23 million. First, let's talk about where we saw improvement. The partial volumes were up 16% year-over-year to 54 million. And, as we expected, we exited the year with runway volumes of roughly 200 million. In the context of an industry that is projecting to be down, the 16 percent gain highlights that our services resonate with our clients. For the quarter domestic parcel gross profit improved 24 million year-over-year. For the full year gross profit for parcel improved 35 cent which translates to 58 million. dollarslet's note. In the quarter, we reduced production labor spend by 25% versus prior year, despite processing 16% more parcels.

And, as we expected, we exited the year with runway volumes of roughly 200 million.

In the context of an industry that is projecting to be down, the 16 percent gain highlights that our services resonate with our clients.

For the quarter domestic parcel gross profit improved 24 million year-over-year. For the full year gross profit for parcel improved 35 cent which translates to 58 million. dollarslet's note.

In the quarter, we reduced production labor spend by 25% versus prior year, despite processing 16% more parcels. This improvement is a direct result of our investments in automation, robotics and technologyour service levels continuue to itself a nett or where near the 90% Mark throughout the quarter. As a result, our net Promoter scores improved 23 points to 27, were full year 20 20, two. Finally our client pipeline is strong, heading into 2023, with first quarter planned implementations running near doubled the rate it was in the first quarter 2000 and twenty-twoon the other hand.

This improvement is a direct result of our investments in automation, robotics and technologyour service levels continuue to itself a nett or where near the 90% Mark throughout the quarter.

As a result, our net Promoter scores improved 23 points to 27, were full year 20 20, two.

Finally our client pipeline is strong, heading into 2023, with first quarter planned implementations running near doubled the rate it was in the first quarter 2000 and twenty-twoon the other hand.

In spite of these improvement, we fell short of our EBITDA positive goal by five point five million. Especially in December , the mix of volumes skewed toward lighter, parcel weights, resulting in lower revenue and margin per parcel than we anticipated. To be clear, the lighter weight volumes are still profitable. The lighter weight volumes are still profitable, but the difference in mix. from what we expected caused the majority of the miss from our goal. Also, as Mark noted, transportation costs per parcel decreased materially compared to prior year, driving approximately 20% productivity improvement, but fell short of our 25% expectation. We're taking specific actions to address these two areaslet me now share some perspective on the full year for global e-commercefor the year, global e-commerce lost 22 neural in EBITDA, similar to 2021 , but in many respects the years were quite different.

Especially in December , the mix of volumes skewed toward lighter, parcel weights, resulting in lower revenue and margin per parcel than we anticipated. To be clear, the lighter weight volumes are still profitable. The lighter weight volumes are still profitable, but the difference in mix. from what we expected caused the majority of the miss from our goal. Also, as Mark noted, transportation costs per parcel decreased materially compared to prior year, driving approximately 20% productivity improvement, but fell short of our 25% expectation. We're taking specific actions to address these two areaslet me now share some perspective on the full year for global e-commercefor the year, global e-commerce lost 22 neural in EBITDA, similar to 2021 , but in many respects the years were quite different.

To be clear, the lighter weight volumes are still profitable.

The lighter weight volumes are still profitable, but the difference in mix.

from what we expected caused the majority of the miss from our goal. Also, as Mark noted, transportation costs per parcel decreased materially compared to prior year, driving approximately 20% productivity improvement, but fell short of our 25% expectation.

We're taking specific actions to address these two areaslet me now share some perspective on the full year for global e-commercefor the year, global e-commerce lost 22 neural in EBITDA, similar to 2021 , but in many respects the years were quite different.

At the gross profit line, the improvement, excluding border free, was $34 million year over year. Let's unpack the gross profit. which more precisely illustrates the improvement in domestic parcels. In 2022, domestic parcel gross profit increased by $58 million. The remainder, cross-border, digital and fulfillment, declined by $24 million primarily due to lower volume. in a difficult macro environment. Overall, we are very pleased with the substantial increase in domestic parcel volumes and profitability this quarter. We continue to expect that domestic parcel will improve gross profit by 400 basis points in 2023, building on the 650 basis PO increase in 2020 -two. Domestic parcel now represents approximately 75 percent of segment revenue.

which more precisely illustrates the improvement in domestic parcels. In 2022, domestic parcel gross profit increased by $58 million. The remainder, cross-border, digital and fulfillment, declined by $24 million primarily due to lower volume.

in a difficult macro environment. Overall, we are very pleased with the substantial increase in domestic parcel volumes and profitability this quarter.

We continue to expect that domestic parcel will improve gross profit by 400 basis points in 2023, building on the 650 basis PO increase in 2020 -two.

Domestic parcel now represents approximately 75 percent of segment revenue.

Which bodes well for the future success of the segment, though our financial results will be more seasonally driven than they have been in the past. Now I'll shift the conversation to our capital structure. As you may have seen, we filed an 8K on December 8th that details the adjustments we made in our credit agreement. We're pleased to have received the support of our lenders, which augments our financial flexibility during a period of substantial volatility in the capital market. We have begun to buy back our debt at a discounttodayate. We have purchased approximately one million across the 24 and 27 maturities and plan to continue to do so opportunisticallyand anticsiipating a question regarding our 24 maturity. We expect that cash.

As you may have seen, we filed an 8K on December 8th that details the adjustments we made in our credit agreement. We're pleased to have received the support of our lenders, which augments our financial flexibility during a period of substantial volatility in the capital market.

We have begun to buy back our debt at a discounttodayate. We have purchased approximately one million across the 24 and 27 maturities and plan to continue to do so opportunisticallyand anticsiipating a question regarding our 24 maturity. We expect that cash.

cash flow, and revolver access will be ample to meet that obligation should a cost-effective capital market solution not be available. I'll conclude my remarks with perspective on 2000 and twenty-threewe expect flat to mid-single-digit revenue growth. On a comparable basis. We expect percentage EBIT growth to outpace revenue growth as global e-commerce profitability continues to improve. I'll conclude my remarks with perspective on 2000 and twenty-threewe expect flat to mid-single-digit revenue growth. On a comparable basis. We expect percentage EBIT growth to outpace revenue growth as global e-commerce profitability continues to improve.

I'll conclude my remarks with perspective on 2000 and twenty-threewe expect flat to mid-single-digit revenue growth. On a comparable basis. We expect percentage EBIT growth to outpace revenue growth as global e-commerce profitability continues to improve.

Finally, we expect global e-commerce to be EBITDA positive in 2023, driven largely by continued gross margin expansion in domestic parcels and partially offset by increasing macro uncertainties and softness in cross-border. We are providing the following additional perspective on 2025. We expect our effective tax rate to be approximately 25 percent. In closing, cytech and fer continue to deliver solid and predictable performance in global e-commerce. We made significant progress, especially in domestic parcels, and look forward to continuing this momentum into 2000 and twenty-threei will turn the call back to the operator for qa.

We expect our effective tax rate to be approximately 25 percent.

In closing, cytech and fer continue to deliver solid and predictable performance in global e-commerce. We made significant progress, especially in domestic parcels, and look forward to continuing this momentum into 2000 and twenty-threei will turn the call back to the operator for qa.

Thank you. Ladies and gentlemen, if you'd like to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1 then 0 at this time. And one moment please for your first question. Your first question comes from the line of Matt Swope from Baird. Please go ahead.

And one moment please for your first question. Your first question comes from the line of Matt Swope from Baird. Please go ahead.

yesgood morning guys. Could you talk a little bit further on the global e-commerce side and how you're looking at strategic alternatives for that business? I think I could. Can hear the disappointment in another negative EBITDA year. Would you be open or consider selling part of the business? Shutting part of the business? I know you talked about being EBIT.positive this year, but what are other options you might explore? Yeah. I appreciate that. The question the fr is. You know, we did have the expectation to do slightly more. It would not be accurate and how they we were justappointing. There's a lot of progress there. So I'd start with that in terms of alternatives that we look for, not just go e-commerce for any business.

I know you talked about being EBIT.positive this year, but what are other options you might explore? Yeah. I appreciate that.

The question the fr is. You know, we did have the expectation to do slightly more. It would not be accurate and how they we were justappointing. There's a lot of progress there. So I'd start with that in terms of alternatives that we look for, not just go e-commerce for any business.

What I've said for 10 years is if a business is worth more to somebody else than it is to us, then it's a serious offer, we would certainly contemplate that. If you look at the last 10 years, whether it be that divestiture, the software business or Amajitas or other assets, we've hold true to that. Most recently, the divestiture of boiler free speaks to your question.

That was a portion of global e-commerce. It was something that we liked the business. We continue to be in cross border, but it was worth more to global even it was to us. So we would look at any alternative that we think unlocks value for our shareholder, whether it be something like global, as you said, global-like or something like that. shutting something down, selling something, or indeed selling the whole business. But we do think, as I said, that that's a good thing. shutting something down, selling something, or indeed selling the whole business. But we do think, as I said, that that's a good thing.

shutting something down, selling something, or indeed selling the whole business. But we do think, as I said, that that's a good thing.

further on SendTech, you talked a couple interesting comments, I thought, one about 40% of your sales coming from new products now, but also seeing declines last year in finance, rentals and supplies that were partially offset by shipping. Can you talk about some of the dynamics in SendTech and how you see that on a unit basis for 2023? The other current is shipping revenue, which continues to be a good market. And aggregate those two markets together are about a $6 billion business that's growing. So our expectation, you know, is shipping revenue becomes a higher and higher percent of the total business and continues to grow. You know, Ana said.

The other current is shipping revenue, which continues to be a good market. And aggregate those two markets together are about a $6 billion business that's growing. So our expectation, you know, is shipping revenue becomes a higher and higher percent of the total business and continues to grow. You know, Ana said.

20% that those two dynamics begin to cancel each other out. And as you look at Centech overall, it was essentially flat last year. From a unit perspective, equipment revenue is probably the easiest way to think about that. Equipment revenue is up low single digits for the quarter and for the year. that's kind of the confluence of those two dynamics coming together. So I like that business. I would say Centech and Presort together provide ballast for the business and our balance sheet as we continue to improve global commerce.

that's kind of the confluence of those two dynamics coming together. So I like that business. I would say Centech and Presort together provide ballast for the business and our balance sheet as we continue to improve global commerce.

And Mark, when you say mail continues to experience secular decline, could you quantify that secular decline number at all about where you guys continue to see that? I mean, so first-class mails, I would say down high single digits, you know, 5 to 10 percent depending on the quarter. Marking mails down a little bit less. So it's, you know, I would say single-digit declines depending on which segment of mail.

interest and tax. The hard one to call here is a little bit around working capital and that's why we gave you the pieces. As the business moves to seasonal adjustments greater in the fourth quarter and calling out the movements in working capital is a little harder. That's why we moved the path here to give you the components. Tax the hard one to call here a little bit around working capital and that's why we gave you the P pieces. As the business moves to seasonal adjustments greater in the fourth quarter and calling out the movement in working capital is a little harder. That's why we moved the path here to to give you the components, got it. Thank you both for help.

Tax the hard one to call here a little bit around working capital and that's why we gave you the P pieces. As the business moves to seasonal adjustments greater in the fourth quarter and calling out the movement in working capital is a little harder. That's why we moved the path here to to give you the components, got it. Thank you both for help.

Your next question comes from the line of Anthony lebonzinski from sidoian company. Please go ahead. Yes morning, I thank you for taking the questions. So first on the GEC, So you talked about that. The mix overall had a higher than expected. Volume of light, the weight parcels of hurting profitability, or maybe less than expected. I guess it's a better choice of words. But was this really, you think, more of a result of new client wins, these new clients that you signed on?

Volume of light, the weight parcels of hurting profitability, or maybe less than expected. I guess it's a better choice of words. But was this really, you think, more of a result of new client wins, these new clients that you signed on?

That have most significant impact for from this? Or was it just a mix of old clients just shipping more light volume just wanted to get a better sense of that's great question. So there's a couple of things that are true. We had a very successful quarter in bring on new clients- I would say those new clients. Did have a slightly lower weight than, you know, average. How are we planned for that? What was you know? What was different than what we expected is from our existing customers? Think about as same-store sales, for lack of a better term.

Did have a slightly lower weight than, you know, average. How are we planned for that? What was you know? What was different than what we expected is from our existing customers? Think about as same-store sales, for lack of a better term.

In weeks 49, 50, and 51, I believe that is the last couple weeks of the quarter, we didn't get as much volume from them as we expected. We still got more volume than we had the previous quarters and good performance, but we're expecting slightly more. We broke at same source sales, they were, we got good increases from many of our clients, it was just slightly less than we expected those last two or three weeks. Understood, okay. So now looking forward when you're going out and targeting new clients, are you going to be more diligent as far as... who you assess as to who you're going to bring down to make sure that you have a better mix of heavier weight parcels. Is that how you're thinking about managing that or maybe could you just talk a little bit more how you're thinking about trying to be more profitable in GEC?

good increases from many of our clients, it was just slightly less than we expected those last two or three weeks. Understood, okay. So now looking forward when you're going out and targeting new clients, are you going to be more diligent as far as... who you assess as to who you're going to bring down to make sure that you have a better mix of heavier weight parcels. Is that how you're thinking about managing that or maybe could you just talk a little bit more how you're thinking about trying to be more profitable in GEC?

who you assess as to who you're going to bring down to make sure that you have a better mix of heavier weight parcels. Is that how you're thinking about managing that or maybe could you just talk a little bit more how you're thinking about trying to be more profitable in GEC?

Sure. So, you know, one thing that Ana said that's really important and I don't want people to lose sight of is even the lighter weight parcels were positive from a gross margin perspective. So as long as our network is under capacity, we'll take that volume. It adds to profitability, it's accretive to absolute margins, et cetera. We're will within the total pipeline.

So as long as our network is under capacity, we'll take that volume. It adds to profitability, it's accretive to absolute margins, et cetera. We're will within the total pipeline.

be more diligent, if you will, in terms of realizing the higher weight stuff and we will skew our marketing and sales resources. to get more higher weight stuff too. So it's not that I don't like the lower weight stuff, I like it, you know, as long as our network's under capacity, we'll take more of it. But it's also true that our sales and marketing and our management system will be more skewed to ensure that we get higher weight stuff. And that's my comment on, you know,

to get more higher weight stuff too. So it's not that I don't like the lower weight stuff, I like it, you know, as long as our network's under capacity, we'll take more of it. But it's also true that our sales and marketing and our management system will be more skewed to ensure that we get higher weight stuff. And that's my comment on, you know,

the backlog is important. So we've got a big backlog right now, and we've got plenty of higher-weight stuff in there. We just need to get that stuff into the network. Gotcha, okay. And that's, I think, important. Hold on a second, if you will. If you look at our revenue per piece for last year in our domestic business, we've got a lot of revenue. It was up double digit. So I know there's there's always a fear that you chase lower margin stuff. But if you look at you know our revenue per piece. Last year it was up you know 12 to 15%. So you know that gives you- should give it e gibecause me- a fair amount of assurance that the team is focused on. Bring in you know the right mix at the right price.

It was up double digit. So I know there's there's always a fear that you chase lower margin stuff. But if you look at you know our revenue per piece. Last year it was up you know 12 to 15%. So you know that gives you- should give it e gibecause me- a fair amount of assurance that the team is focused on. Bring in you know the right mix at the right price.

Okay that, thanks for that explanation. And then, as far as the allocated the corporate expenses of those came in higher than expected- I know honor, you talked about the incentive comp or the timing of that impacting going forward- how should we expect unallocated corporate expenses to flow through for the year? Yes, so what we're expecting is, you know, as a company, pay for performance, we expect to replenish or re-levelize some of our incentive compensation as we move into 2023.

Yes, so what we're expecting is, you know, as a company, pay for performance, we expect to replenish or re-levelize some of our incentive compensation as we move into 2023.

And we are continuing, as I mentioned last quarter, to have a very strict cost program. So the net of those two, you should see fall through. Okay, okay, thanks. And then lastly, as far as the 23 guidance, can you give us a sense as to how should we think about the different segments and as far as quarterly progress? Given them what's going out with the economy. Do you expect the things to be softer in the first half versus the back half or? I don't want to put's in your route, but how should we think about the quarterly progression? If you could give any color as far as the revenue outlook for the year, that would be very helpful. Thank you. Sure, as I mentioned, I think the biggest driver here will be the growth in global e-commerce, especially around our domestic parcel, and we anticipate that to be more back-end loaded in the year, probably more fourth quarter than everything. So I would anticipate our profile as a company.

Okay, okay, thanks. And then lastly, as far as the 23 guidance, can you give us a sense as to how should we think about the different segments and as far as quarterly progress?

Given them what's going out with the economy. Do you expect the things to be softer in the first half versus the back half or? I don't want to put's in your route, but how should we think about the quarterly progression? If you could give any color as far as the revenue outlook for the year, that would be very helpful. Thank you.

Sure, as I mentioned, I think the biggest driver here will be the growth in global e-commerce, especially around our domestic parcel, and we anticipate that to be more back-end loaded in the year, probably more fourth quarter than everything. So I would anticipate our profile as a company.

To follow that as well I also it means I it makes the you know a really important point which I know you guys get you know. The seasonality of gloway commerce is have whkewed to the fourth quarter and you can see it. You know across the entire market. If I think about it. You've got stech and.

pre-sort that are pretty consistent throughout the year. You have GEC that is entering a more seasonal business, and it's also true that as we bring on more customers, that will also be realized in the back half of the year. So it's a different kind of skew than we're used to seeing, I think, the market's been...

But is consistent with the overall dynamics within the industry. All right well, Thank you. A best the book. As a reminder, if you have a question, please press one in zero. Next we'll go to the line of Peter sacon from credit sites. Please go ahead. Only up on the weight of the parcels. You talk about targeting a higher weight package. Can you talk about, like what the average is now and the strategy to gain at additional higher weight volume?

Only up on the weight of the parcels. You talk about targeting a higher weight package. Can you talk about, like what the average is now and the strategy to gain at additional higher weight volume?

Average about two and a half pounds. I mean between two point four and two point £5. In the last couple of weeks of the quarter went closer to twopounds I mean. So that was kind of the variance that we saw. We like that two and a half. I mean. You know that, as I said, even at £2 it's got a positive contribution margin to the overall business. So it's not that we don't like those businesses, it's just we've got to ensure that we get the right absolute number of higher weight parcels. So we don't think about this as mixed, we think about this, you know, if we're targeting 200 plus million parcels, within that we need the right absolute percent of heavyweight, the right absolute number of heavyweight.

So it's not that we don't like those businesses, it's just we've got to ensure that we get the right absolute number of higher weight parcels. So we don't think about this as mixed, we think about this, you know, if we're targeting 200 plus million parcels, within that we need the right absolute percent of heavyweight, the right absolute number of heavyweight.

But how can you talk about how you'll achieve this? What are the strategies that are important to improve this? So within our backlog, there's plenty of heavier weight parcels there. So we'll have a higher degree of focus on those parcels. I would also say if you look at the mid-market in general, which is kind of where our principal hunting ground is... Xeno Orsioum The mid-market within retail and marketplaces tends to have more higher weight parcels. So our bias and kind of our go-to-market model is already skewed towards heavier weight stuff. And I would say our compensation system is as well. So we pay sensitive to profit, which is largely, although not exclusively, driven by the fact

So within our backlog, there's plenty of heavier weight parcels there. So we'll have a higher degree of focus on those parcels. I would also say if you look at the mid-market in general, which is kind of where our principal hunting ground is... Xeno Orsioum

The mid-market within retail and marketplaces tends to have more higher weight parcels. So our bias and kind of our go-to-market model is already skewed towards heavier weight stuff. And I would say our compensation system is as well. So we pay sensitive to profit, which is largely, although not exclusively, driven by the fact

weight and price. What would be the capacity utilization of your network currently? And what would the target be for 2023? So, right now our rate of the year, which we said in the fall of the year was between 195 to 200 million parcels. I would say we're kind of on the North end of that. So a little bit above 200 million parcels. Think about a network that's got capacity for 300 million parcels. Right now our rate of the year, which we said in the fall of the year was between 195 to 200 million parcels. I would say we're kind of on the north end of that, so a little bit above 200 million parcels. Think about a network that's got capacity for 300 million parcels.

So, right now our rate of the year, which we said in the fall of the year was between 195 to 200 million parcels. I would say we're kind of on the North end of that. So a little bit above 200 million parcels. Think about a network that's got capacity for 300 million parcels.

Right now our rate of the year, which we said in the fall of the year was between 195 to 200 million parcels. I would say we're kind of on the north end of that, so a little bit above 200 million parcels. Think about a network that's got capacity for 300 million parcels.

You know, our objective this year for that business is probably to be, you know, north of 220 to 230 million parcels. So that's kind of the... The basic math that we're looking at. So think of a market that's run 7, y is 75% ok, and on capital occasion we talk about CapEx and what mixed by segal for 2020 per in the quarterly a, C or disclosure, roughly 40%, but a little. be that we will have a little bit of a higher decline in global e-commerce. So global e-commerce will be around 40-ish percent still of the total.

The basic math that we're looking at. So think of a market that's run 7, y is 75% ok, and on capital occasion we talk about CapEx and what mixed by segal for 2020 per in the quarterly a, C or disclosure, roughly 40%, but a little. be that we will have a little bit of a higher decline in global e-commerce. So global e-commerce will be around 40-ish percent still of the total.

be that we will have a little bit of a higher decline in global e-commerce. So global e-commerce will be around 40-ish percent still of the total.

The interesting thing here to point out is that, as we mentioned in 2020 do, we will continue to spend on optimization of the network rather than that expansion of capacity. We feel good with the capacity, as Mark just noted it, and the other segments will keep roughly similar proportions than what they've had in the past. So this CAPEX, I want to make two additional points. Put that CAPEX number in context. Two years ago, I believe, we spent $190 million on CAPEX or 185, somewhere in that range on CAPEX. That was largely around the build out of the network to accommodate those 300 million parcels. So the 110 is kind of in that context.

So this CAPEX, I want to make two additional points. Put that CAPEX number in context. Two years ago, I believe, we spent $190 million on CAPEX or 185, somewhere in that range on CAPEX. That was largely around the build out of the network to accommodate those 300 million parcels. So the 110 is kind of in that context.

The point that I would say: if you look at the capital consumption of of G e C, you know it is, as ona set down, dramatically. We're still targeting for EBIT a minus CapEx and you know, working to have a plan, that that number is positive. I'd say I've become a little more cautious about that dynamic in 2023, given the macroeconomic environment, but that's still what the team's reaching for. And just following up on the e-commerce. So how much is EBITDA, the domestic business versus the international business for?

I'd say I've become a little more cautious about that dynamic in 2023, given the macroeconomic environment, but that's still what the team's reaching for.

And just following up on the e-commerce. So how much is EBITDA, the domestic business versus the international business for?

Is other bus guess international struggling more ly seems to be. Could you separate that or exit international? It doesn't turn you posit in twenty point per. Yes Yes So the way I think easi way to think about it is from from a gross margin perspective and I want to point out what we mentioned is. The dynamics are changing and as we move into 2023 domestic parcel will become even a greater proportion of that gross margin as I mentioned 650 basis point improvement and.

Yes Yes So the way I think easi way to think about it is from from a gross margin perspective and I want to point out what we mentioned is. The dynamics are changing and as we move into 2023 domestic parcel will become even a greater proportion of that gross margin as I mentioned 650 basis point improvement and.

I guess you could argue that just because something is a greater proportion doesn't necessarily mean or maybe if international is Smaller doesn't necessarily mean. It's good, it too will, or maybe I I a say differently, if it's still negative. Is that worth keeping, despite being a smaller proportion? It's the question specific to GC. Yeah, the international portion of GEC. You know, is it worth keeping with, it depends a little bit on what you could fetch on the outside market. It's still positive from a gross margin perspective. You know, I would say, you know, as witnessed with the cross-border business and GlobalE, it's worth more of somebody else than it is to us.

Smaller doesn't necessarily mean.

It's good, it too will, or maybe I I a say differently, if it's still negative.

Is that worth keeping, despite being a smaller proportion? It's the question specific to GC.

Yeah, the international portion of GEC. You know, is it worth keeping with, it depends a little bit on what you could fetch on the outside market. It's still positive from a gross margin perspective. You know, I would say, you know, as witnessed with the cross-border business and GlobalE, it's worth more of somebody else than it is to us.

then we would certainly consider any serious offer. So, you know, I intend with all those businesses to contribute positively to the P&L going forward. I will say as you think about The business going forward, and the reason we're So fixated on the domestic parcel margins is that's where most of the appreciation comes from over the next couple of years. Thank you for your time. Your next question comes from the line of Eric Valero from Loop Capital. Please go ahead. In our distribution centers where we have lots of volunteers to help in the middle of peak and not just first or second shift and not just in the good cities but you know all over and third shift and that's a true sign of folks' dedication to this business and to.

The business going forward, and the reason we're So fixated on the domestic parcel margins is that's where most of the appreciation comes from over the next couple of years.

Thank you for your time.

Your next question comes from the line of Eric Valero from Loop Capital. Please go ahead.

Hey, how's it going guys? It's Alex, I'm on for Amanda. So my question is regarding the December quarter. Maybe if you guys could provide a bit more color on to what extent NACo impacted the December quarter relative to where street expectations were at. Was it a little bit more macro focus or was street just too high? Thank you. I don't think the street was too high. I mean, as I said, we had higher expectations for the business. The principle variance was in global e-commerce, and it was in those two line items I mentioned. One was revenue per piece in weeks. deal. 49, 50, and 51 was a little bit less than we thought. That cost us about $5 million. Transportation costs while, you know,

Was it a little bit more macro focus or was street just too high? Thank you. I don't think the street was too high. I mean, as I said, we had higher expectations for the business. The principle variance was in global e-commerce, and it was in those two line items I mentioned. One was revenue per piece in weeks. deal.

49, 50, and 51 was a little bit less than we thought. That cost us about $5 million. Transportation costs while, you know,

They improved meaningfully year to year, but that would also improve meaningfully quarter to quarter. So we said north of 20% improvement year to year was also about the same quarter to quarter. We were expecting another probably $5 million of benefit there. So those two together. Or $1 million of EBIT. That's, you know, kind of that more than closes your the two cents to the street.

Or $1 million of EBIT. That's, you know, kind of that more than closes your the two cents to the street.

Awesome that was helppeful. Thanks so much for that. And the second question that I mayso, given your guidance of having EBIT outpace revenue growth- and you mentioned that was primarily, that's going to primarily be driven by global e-commerce. And at this time there are no further questions. I'll turn it back to you for any closing remarks. Thanks. So listen, lots to unpack about the quarter. I do miss if I didn't end by thanking the Pitney Bose team. I am continuing to be pleased and impressed with people's commitment to this business. You saw it.

Yes. So think, I mean, think about this way. I mean, so it was minus 22 from an EBITDA perspective last year. So EBITDA positive, you know, right there is 20 to $25 million of improvement. Candidly we expect more than that, but that's just kind of the basic math. You know, you've got some headwinds of interest expense and other things that you're running against. Got it. Got it. For sure. Thank you so much for that.

And at this time there are no further questions. I'll turn it back to you for any closing remarks. Thanks. So listen, lots to unpack about the quarter. I do miss if I didn't end by thanking the Pitney Bose team. I am continuing to be pleased and impressed with people's commitment to this business. You saw it.

In our distribution centers where we have lots of volunteers to help in the middle of peak and not just first or second shift and not just in the good cities but you know all over and third shift and that's a true sign of folks' dedication to this business and to.

Moving forward. So I said our our headline for the quarters. We mean lots of good progress across many different dimensions. In global commerce, we're expecting to touch more. stech and Presort continue to be sey performers and we expect that to continue So as we move into 23. there's lots of the different. Currents running through the economy, we're a little more cautious about how we call the year. We've got much more focusused on providing flexibility to accommodate different things that may happen in the environment. That being said, our focus continues to be as we get out of the economic moment and get to more calm waters.

Currents running through the economy, we're a little more cautious about how we call the year. We've got much more focusused on providing flexibility to accommodate different things that may happen in the environment. That being said, our focus continues to be as we get out of the economic moment and get to more calm waters.

how this business is positioned, and I continue to like our hand. We will certainly look at any strategic options that present themselves along the way, but I like how we're positioned. So thanks for your time this morning, and we'll talk soon. 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.

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.