Q4 2023 Pitney Bowes Inc Earnings Call

[music].

Most importantly, these conversations have increased my optimism about the future here at Pitney Bowes.

During the call I'll discuss my work with the senior management team and the board to develop a set of strategic and operational priorities for 2024, let.

Let me start today by giving a high level overview of Q4 performance at the enterprise level as well as across each of our segments.

We made good progress this quarter growing adjusted EBIT 14 million year over year, but still have work to do at the enterprise level. We are on track with our cost reduction and restructuring efforts after increasing our original targets late last year.

We are seeing the benefit from these efforts show up in the segment and overall profitability in auto will provide more detail.

Suntech and presort executed well in the quarter.

<unk> grew EBIT as a result of gross margin expansion simplification and cost reduction actions.

These gains are enabling us to shift resources towards investments in our shipping capabilities, where we see meaningful long term profitable growth potential.

Presort grew revenue and recorded its highest ever EBIT in the quarter, which is a testament to the great work of the team.

We will continue to capitalize on our excellent operational and client support capabilities to create value in this segment.

Global ecommerce delivered improved fourth quarter profitability year over year and sequentially demonstrating the value of our network in peak and on a go forward basis.

Domestic parcel volumes grew 13% to 61 million parcels.

We're continuing to take actions and review options to realize the value of this segment.

I'd like to thank all of the P. B teams for their dedication to serving our clients.

Holiday season and throughout the year.

Next I want to spend a minute outlining the strategic and operational priorities that will help us build on current momentum and continue to transform in 'twenty 'twenty four and beyond.

First we will continue to streamline the organization and reduce cost the cost reduction program. We previously announced started to yield savings in 2023, and we expect to increasingly realize these benefits throughout 2024.

Although we are on target on the restructuring side, we will continue to look for additional ways to increase efficiency.

Second we're driving more accountability into our businesses.

In addition to changes in how we operate and measure performance. We have also made some initial and important changes to our overall organizational structure.

We have integrated the majority of our marketing functions under segment leadership to improve focus.

We are also combining suntech globally under Shamin know Mohammed who will have full responsibility for strategy and execution in our 10 geographies worldwide.

Third we are realigning assets and resources to better leverage our technology and innovation capabilities to create client value with specific focus on accelerating centex shipping growth.

To that end effective January one of this year.

Move Gec's digital shipping business into Suntech.

That includes our global carrier library, and API technology to create and manage multi carrier shipping options.

Jason: work need to address. Most importantly, these conversations have increased my optimism about the future here at Pitney Bowes. Later in the call, I'll discuss my work with the senior management team and the board to develop a set of strategic and operational priorities for 2024. But, let me start today by giving a high-level overview of Q4 performance at the enterprise level, as well as across each of our segments. We made good progress this quarter, growing adjusted EBIT by 14 million year-over-year, but we still have work to do. At the enterprise level, we are on track with our cost reduction and restructuring efforts after increasing our original targets late last year. We are seeing the benefit from these efforts show up in segment and overall profitability, and Ana will provide more details. Sentec and PreSort executed well in the quarter.

This will drive product development and engineering efficiencies as we upgrade existing solutions and develop new ones.

Also since Suntech recently launched our go to market model that prioritizes growth in shipping having a lot of digital offers combined in one channel will drive additional synergies and an improved client experience.

Fourth we're focused on more disciplined capital allocation and strengthening our balance sheet.

As we continue to execute on corporate cost reductions and realized business unit efficiencies, we plan to allocate capital in a manner that balances near term and long term interest of our investors.

In closing one quarter and I am optimistic about what lies ahead for Pitney Bowes.

Jason: Syntec Group EBIT as a result of the Gross Margin Expansion, Simplification, and Cost Reduction Act. These gains are enabling us to shift resources towards investments in our shipping capabilities where we see meaningful long-term profitable growth potential. Pre-sort grew revenue and recorded its highest-ever EBIT in a quarter, which is a testament to the great work of the team.

As we look ahead in 2024, we will continue to operate with intensity and prioritize actions that support increased operational discipline and accelerate our shift into targeted shipping growth path.

We understand the challenges and also the opportunities we have.

2023 was a year of significant change for Pitney Bowes in 'twenty 'twenty four will bring additional transformation, which I expect to be very positive.

Jason: We will continue to capitalize on our excellent operational and client support capabilities to create value in this segment. Global e-commerce delivered improved fourth quarter profitability year over year and sequentially, demonstrating the value of our network at peak and on a go-forward basis. Domestic parcel volumes grew 13% to 61 million parcels.

And now I'd like to turn it over to Anna to discuss our Q4 results in more detail.

Anna: Thank you, Jason and good morning, everyone.

Anna: I will focus my comments on the financial performance in the fourth quarter.

Anna: Full year 2023 result.

Anna: All commentary can be found in our press release.

Jason: We are continuing to take action and review options to realize the value of this segment. I'd like to thank all of the PB teams for their dedication to serving our clients during the holiday season and throughout the year. Next, I want to spend a minute outlining the strategic and operational priorities that will help us build on current momentum and continue to transform in 2024 and beyond. First, we will continue to streamline the organization and reduce costs. The cost reduction program we previously announced started to yield savings in 2023, and we expect to increasingly realize these benefits throughout 2024. Although we are on target on the restructuring side, we will continue to look for additional ways to increase efficiency. Second, we're driving more accountability into our businesses.

Anna: Unless otherwise noted I will speak to revenue comparison on a constant currency basis, and other items, such as Fitbit, EBITDA EPS and free cash flow on an adjusted basis.

Anna: For the quarter total revenue was 872 million a decline of 4% versus prior year.

Anna: EBITDA was $103 million.

Anna: Make a $15 million year over year.

Anna: It was $63 million and $14 million higher than prior year.

Anna: The improvement was mostly offset by higher interest expense.

Anna: Adjusted EPS grew 7% versus six in prior year.

Anna: GAAP EPS was $8 27 loss in the quarter.

Jason: In addition to changes in how we operate and measure performance, we have also made some initial and important changes to our overall organizational structure. We have integrated the majority of our marketing functions under segment leadership to improve focus. We are also combining SunTech globally under Shemin Yomohamed, who will have full responsibility for strategy and execution in our 10 geographies worldwide.

Anna: GAAP EPS includes a non cash goodwill impairment charge of $1 24 related to the global ecommerce segment.

GAAP EPS also includes an eight <unk> restructuring charge.

Anna: <unk> noncash charge related to a foreign currency loss on intercompany loans.

Jason: Third, we are realigning assets and resources to better leverage our technology and innovation capabilities to create client value, with a specific focus on accelerating Centex shipping growth. To that end, effective January 1st of this year, we moved GEC's digital shipping business into Sentec, which includes our global carrier library and API technology to create and manage multi-carrier shipping options.

Anna: Let's dive into our three business segments.

Speaker Change: I'll start with <unk>, which had a solid quarter, especially on the bottom line.

Speaker Change: <unk> reported EBITDA growth of 7% on revenue of $327 million in the quarter down 5% compared to prior year.

Speaker Change: As previously discussed we continued to experience secular decline in our meter base.

Speaker Change: And then increasingly shifts towards lease extensions, given where we are in our product lifecycle. Both dynamics are putting pressure on near term revenues.

Jason: This will drive product development and engineering efficiencies as we upgrade existing solutions and develop new ones. Also, since Centech recently launched a go-to-market model that prioritizes growth and shipping, having our digital offers combined in one channel will drive additional synergies and an improved client experience. Fourth, we're focused on more disciplined capital allocation and strengthening our balance. As we continue to execute on corporate cost reductions and realize business unit efficiencies, we plan to allocate capital in a manner that balances the near-term and long-term interests of our investors. In closing, one quarter in, I am optimistic about what lies ahead for Pitney Bowes.

Speaker Change: This quarter shipping related revenues declined 7%.

Speaker Change: Now comprise 13% of Centex total revenue prior year included a couple of large transactions that had a high proportion of any period shipping related equipment and professional services revenue.

Speaker Change: Looking beyond these transactions, we make meaningful progress.

Speaker Change: Sustainable shipping growth.

Speaker Change: The fourth quarter was our single biggest quarter in terms of implementing.

Ana: As we look ahead in 2024, we will continue to operate with intensity and prioritize actions that support increased operational discipline and accelerate our shift into targeted shipping growth paths. We understand the challenges and also the opportunities we have. 2023 was a year of significant change for Pitney Bowes, and 2024 will bring additional transformation, which I expect to be very positive. Now, I'd like to turn it over to Ana to discuss our Q4 results in more detail. Thank you, Jason, and good morning, everyone.

Speaker Change: Enterprise subscriptions.

Speaker Change: Enterprise offerings provide leading shipping capabilities that are often integrated into multiple clients system to solve complex workflows.

Speaker Change: The high level of new implementation bodes well for the future of the business as these transactions come with a high portion of reoccurring revenue.

Speaker Change: So early days SaaS subscription revenue from our shipping products grew 42% in the quarter.

Speaker Change: We remain confident about the growth potential of our shipping solutions.

Ana: I will focus my comments on the financial performance in the fourth quarter. Full year 2023 results and additional commentary can be found in our press release. Unless otherwise noted, I will speak to revenue comparison on a constant currency basis and other items such as EBIT, EBITDA, EPS, and free cash flow on an adjusted basis. For the quarter, total revenue was $872 million, a decline of 4% versus the prior year.

Speaker Change: As Jason mentioned, we are making changes in two key areas.

First we.

Speaker Change: We are shifting more resources to our shipping go to market and second effective January 1st we love the digital shipping solutions in global E. Commerce, two scenting streamlining our leadership product development investment and leveraging our unique go to market.

Speaker Change: Segment financials will be recast it for this change when we report earnings next quarter.

Speaker Change: We continue to refresh our product base with.

Ana: EBITDA was $103 million, an improvement of $15 million year-over-year. EBIT was $63 million and $14 million higher than the prior year. The ABIT improvement was mostly offset by higher interest expense. Adjusted EPS was $0.07 versus $0.06 in the prior year. GAP EPS was a $1.27 loss in the quarter.

U S P S compliant technology.

Speaker Change: At year end, we were 72% through the migration.

Speaker Change: Further along for the low and mid volume products.

Speaker Change: At this stage of the migration, we continue to see more fixed term lease extensions versus new lease transactions and as a reminder, the financial impact of this shift will be near term pressure on equipment sales generally offset by higher margin financing revenue spread.

Ana: GAP EPS includes a non-cash goodwill impairment charge of $1.24 related to the global e-commerce segment. GAAP EPS also includes an $0.08 restructuring charge and a $0.02 non-cash charge related to a foreign currency loss on intercompany loans. Let's dive into our three business segments. I'll start with Synthic, which had a solid quarter, especially on the bottom line. CENTEC reported EBIT growth of 7% on revenue of $327 million in the quarter, down 5% compared to the prior year.

Speaker Change: Over the term of the lease extension.

Speaker Change: From a cash perspective this is a net positive.

Speaker Change: As we will have lower net investment and finance receivables, but we continue to receive monthly lease payments from clients.

Speaker Change: We expect this dynamic to play out more meaningfully.

Speaker Change: Financial performance in 2024.

Speaker Change: In addition, as we move into the later stages of a product refresh we expect an uptick in cancellation rate, which is in line with our past experience doing product migrations.

Ana: As previously discussed, we continue to experience secular decline in our meter base and an increasing shift towards lease extensions given where we are in our product lifecycle. Both dynamics are putting pressure on near-term revenue. This quarter, shipping-related revenues declined 7% and now comprise 13% of Sentex's total revenue.

Speaker Change: The three dynamics I, just mentioned shipping growth.

Speaker Change: Lease extensions and higher cancellations have been incorporated into our long term planning.

Speaker Change: Moving to the bottom line segment EBITDA was $113 million, a 7% improvement.

Speaker Change: EBIT margin improved 370 basis points.

Speaker Change: Given by both gross margin and expense improvement.

Ana: The prior year included a couple of large transactions that had a high proportion of in-period shipping-related equipment and professional services revenue. Looking beyond these transactions, we made meaningful progress in sustainable shipping growth. The fourth quarter was our single biggest quarter in terms of implementing new enterprise subscriptions.

Speaker Change: Some good gross margin expanded by 240 basis points as a result of improvement in equipment gross margin, a more attractive mix of financing and business services.

Speaker Change: We can both higher margin revenue streams.

Speaker Change: Higher equipment gross margin were primarily driven by two items.

Speaker Change: First we implemented several supply chain improvements earlier this year that have resulted in lower production and transportation cost.

Ana: Our enterprise offerings provide leading shipping capabilities that are often integrated into multiple client systems to solve complex workflows. The high level of new implementation bodes well for the future of the business, as these transactions come with a high portion of recurring revenue. Though it is early days, SAS subscription revenue from our shipping products grew 42% in the quarter. We remain confident about the growth potential of our shipping solution. As Jason mentioned, we are making changes in two key areas. All right.

Speaker Change: Second in the quarter, we sold and installed a higher mix of more complex topical line equipment, which often come with a higher margin profile.

Speaker Change: Moving to operating expense.

Speaker Change: Our efforts to streamline and simplify the business are also benefiting some fixed bottom line.

Speaker Change: SG&A as a percent of revenue improved 130 basis points.

Speaker Change: Primarily as a result of our restructuring efforts.

Speaker Change: We also continue to modernize our SMB client processes.

Ana: We are shifting more resources to our shipping go-to-market. And second, effective January 1st, we will move the digital shipping solutions in global e-commerce to Centech, streamlining our leadership, product development investment, and leveraging our new go-to-market. Segment financials will be recast for this change when we report earnings next quarter. We continue to refresh our product base with new USPS compliant technology. At year-end, we were 72% through the migration and even further along for the low- and mid-volume products.

Which is driving more client interactions to lower cost channels, while we can.

Speaker Change: Proving the client experience.

Speaker Change: Of note in 2023, we saw the largest year over year improvement net promoter score in the last decade.

Speaker Change: I'll spend a moment on the performance of financial services inside of centric financial services remains an important component of the business, providing valuable client solutions and steady returns.

Speaker Change: Finance receivables grew $25 million or 2% on a year over year basis within our receivable portfolio loan receivables grew $30 million and net lease receivables declined $5 million.

Ana: At this stage of the migration, we continue to see more fixed-term lease extensions versus new lease transactions. As a reminder, the financial impact of this shift will be near-term pressure on equipment sales, generally offset by higher margin financing revenue spread over the term of the lease extension. From a cash perspective, this is a net positive, as we will have lower net investment in finance receivables while we continue to receive monthly lease payments from clients. We expect this dynamic to play out more meaningfully on financial performance in 2024. In addition, as we move into the later stages of our product refresh, we expect an uptick in cancellation rates, which is in line with our past experience during product migration. The three dynamics I just mentioned.

Speaker Change: Aligned with the product lifecycle dynamics I previously explained.

Speaker Change: We also continue to make progress on our previously announced program, where our bank is participating in the financing of select captive lease receivable and initiatives that will be good for both the bank and the enterprise overall.

Speaker Change: The health and quality of our portfolio continues to demonstrate the durability of our offerings.

Speaker Change: Delinquency and write offs continue to be low and roughly flat quarter over quarter.

Speaker Change: Next let's turn to pre strike, which had another excellent quarter.

Speaker Change: Research revenue grew 3% to $163 million and sorted $3 7 billion pieces right.

Speaker Change: Revenue growth was driven by higher revenue per piece from pricing more attractive now class mix and better five digit short qualification.

Ana: Shipping growth. More lease extensions and higher cancellations have been incorporated into our long-term planning. Moving to the bottom line, segment EBIT was $113 million, a 7% improvement. EBIT margin improved 370 basis points, driven by both growth margin and expense improvement. Accented gross margin expanded by 240 basis points as a result of an improvement in equipment gross margin and a more attractive mix of financing and business services, which are both higher-margin revenue streams. Higher equipment gross margins were primarily driven by two items.

Speaker Change: Adjusted segment, EBITDA was $34 million in the quarter up 17% versus prior year.

Salt of higher revenue per piece and continued focus on operational excellence.

Speaker Change: Our primary investments in automation, along with more efficient process management continued to drive labor productivity and offset any increase in hourly wages.

Speaker Change: Specifically, we drove a 9% year over year improvement pieces fed per labor hour, which is the measure we use to track labor productivity looking forward. We continue to pilot new automation and technology that we can scale across our network to further improve labor productivity.

Ana: First, we implemented several supply chain improvements earlier this year that have resulted in lower production and transportation costs. Second, in the quarter, we sold and installed a higher mix of more complex, top-of-the-line equipment, which often comes with a higher margin profile. Moving to operating expense, our efforts to streamline and simplify the business are also benefiting Semtex's bottom line. SG&A as a percent of revenue improved 130 basis points, primarily as a result of our restructuring efforts.

Speaker Change: In addition over the past year has optimized our transportation routes, which helped lower transportation cost year over year.

Speaker Change: Let's shift to global ecommerce, where our performance in peak reflects progress in execution and cost management.

Speaker Change: Segment revenue was $381 million down 7% versus prior year the change in cross border client relationships that occurred in the first half of the year continues to be a significant drag on year over year comparison.

Ana: We also continue to modernize our SMB client processes, which is driving more client interactions to lower cost channels while improving the client experience. Of note, in 2023, we saw the largest year-over-year improvement in net promoter score in the last decade. I'll spend a moment on the performance of financial services inside of Centic. Financial services remain an important component of the business, providing valuable client solutions and steady returns. Finance receivables grew by 25 million, or 2%, on a year-over-year basis.

Speaker Change: Specifically cross border revenue and gross profit declined 49 and $11 million respectively.

Speaker Change: Cross border performance has since stabilized and we expect compares to normalize in the second quarter of 2024.

Speaker Change: Domestic parcel volume grew 13% to $61 million in a challenging market.

Speaker Change: These fluctuated during the quarter with parcel volumes be softer than expected pre black Friday, followed by a surge in December.

Speaker Change: Right.

Speaker Change: The team delivered sustained predictable cost and competitive service levels, while overall profitability still needs improvement our ability to effectively manage these fluctuations reflect progress compared to the last three peak, where we either missed on service cost.

Ana: Within our receivable portfolio, net loan receivables grew $30 million, and net lease receivables declined $5 million, in line with the product lifecycle dynamics I previously explained. We also continue to make progress on our previously announced program where our bank is participating in the financing of select captive lease receivables, and others. The health and quality of our portfolio continue to demonstrate the durability of our offering. Delinquencies and write-offs continue to be low and roughly flat quarter over quarter.

Speaker Change: Domestic parcel gross profit grew $3 million higher volumes in the quarter resulted in better fixed cost leverage on both a year over year and sequential basis.

Speaker Change: As we move out of peak, we expect this benefit to be less in the first quarter as volumes are seasonally lower.

Speaker Change: Unit transportation costs also declined 17%.

Speaker Change: Better peak planning right up to my station higher utilization and lower fuel prices helped drive this improvement.

Ana: Next, let's turn to PreCert, which had another excellent quarter. PreCert revenue grew 3% to $163 million and it sorted $3.7 billion pieces. Revenue growth was driven by higher revenue per piece from pricing, a more attractive male class mix, and better five-digit SOAR qualification. Adjusted segment EBIT was $34 million in the quarter, up 17% versus the prior year, a result of higher revenue per piece and continued focus on operational excellence. Our prior investments in automation, along with more efficient process management, continue to drive labor productivity and offset annual increases in hourly wages. More specifically, we drove a 9% year-over-year improvement in pieces fed per labor hour, which is the measure we use to track labor productivity. Looking forward, we will continue to pilot new automation and technology that we can scale across our network to further improve labor productivity.

Speaker Change: Better unit costs continued to be partially upset by lower revenue per piece.

Speaker Change: Altogether revenue per piece declined 6% the market remains challenging from a pricing perspective, as a result of excess capacity evidenced by much lower peak surcharges across the industry.

Speaker Change: Beyond the market client I'm partial mix remains a headwind to revenue per piece.

Speaker Change: Adjusted segment, EBIT improved $3 million to a loss of $20 million.

Speaker Change: Lower operating expenses.

Speaker Change: An improvement in domestic parcel economics drove higher it but as mentioned were partially offset by the continued drag from the change in cross border client relationships.

Speaker Change: Important to note that operating expenses declined $8 million year over year, primarily due to cost reduction initiatives taken over the past three quarters.

Speaker Change: Moving on to enterprise wide restructuring, we made meaningful progress on our cost reduction plans in the quarter and are on track to deliver the previously communicated $75 million to $85 million annual run rate savings by end of 2024 and.

Ana: In addition, over the past year, our team has optimized our transportation routes, which helps lower transportation costs year over year. Now, let's shift to global e-commerce, where our performance in peak reflects progress in execution and cost management. Segment revenue was $381 million, down 7% versus the prior year. The change in cross-border client relationships that occurred in the first half of the year continues to be a significant drag on year-over-year comparisons. Specifically, cross-border revenue and gross profit declined by 49 and 11 millionth, respectively. However, cross-border performance has since stabilized, and we expect comparisons to normalize in the second quarter of 2024. Domestic parcel volume grew 13 percent to 61 million in a challenging market.

Speaker Change: In 2023, we realized $24 million saving as a reminder, the plant impacts cost and expenses across the business, including all three segments and unallocated corporate.

Speaker Change: Turning to cash flow.

Speaker Change: GAAP cash from operating activities in the quarter was 94 million and free cash flow was $78 million.

Speaker Change: Both figures were lower on a year over year basis.

Speaker Change: Primarily to a large working capital benefit last year.

Speaker Change: During the quarter, we paid $9 million in dividend and $14 million to reduce debt.

Speaker Change: As Jason mentioned, we remained focused on a disciplined and balanced capital allocation strategy.

Speaker Change: I'll conclude my remarks with a perspective on 2024.

Ana: Volumes fluctuated during the quarter, with parcel volumes being softer than expected pre-Black Friday, followed by a surge in December. Despite these, the team delivered sustained, predictable cost and competitive service levels. While overall profitability still needs improvement, our ability to effectively manage these fluctuations reflects progress compared to the last three peaks where we either missed on service or cost. Domestic gross profit for the quarter grew $3 million.

Speaker Change: We expect revenue growth to range from flat to a low single digit decline in EBIT margins to remain relatively flat on a year over year basis.

Speaker Change: We expect incremental benefit in 2024 from our company wide cost reduction program savings from the actions taken in 2023 annualized and we further execute on the plan, we expect restoration of variable compensation and wage inflation.

Ana: Higher volumes in the quarter resulted in better fixed-cost leverage on both a year-over-year and sequential basis. As we move out of peak, we expect this benefit to be less in the first quarter as volumes are seasonally lower. Unit transportation costs also declined 17 percent.

Speaker Change: To partially offset gains.

Speaker Change: Within <unk>, we expect revenue to.

Speaker Change: To decline due to the dynamics I previously explained around our meter base.

Speaker Change: Timing of our product lifecycle and shipping growth.

Speaker Change: Following a strong year in 2023, we expect <unk> performance to be relatively flat to slightly up.

Ana: Better peak planning, route optimization, higher utilization, and lower fuel prices help drive this improvement. However, higher unit costs continue to be partially upset by lower revenue per person. Altogether, revenue per piece declined 6%.

<unk> continues its strong execution.

Speaker Change: Within global ecommerce, we expect revenue and EBIT to improve as we continue to take actions to optimize performance and to realize the value of this segment.

Ana: The market remains challenging from a pricing perspective as a result of excess capacity, evident by much lower peak surcharges across the industry. Beyond the market, client and partial mix remains a headwind to revenue. Adjusted segment EBIT improved $3 million to a loss of $20 million.

Speaker Change: In 2024, we expect similar levels of capital expenditures as in 2023.

Speaker Change: We're at a lower level than 2022 and interest expense to remain around the elevated rate incurred in fourth quarter 2023.

Speaker Change: To close.

Ana: Lower operating expenses and improvement in domestic partial economics drove higher EBIT, but as mentioned, we're partially upset by the continued drag from the change in cross-border client relations. It is important to note that operating expenses declined $8 million year-over-year, primarily due to cost reduction initiatives taken over the past three quarters. Moving on to enterprise-wide restructuring, we made meaningful progress on our cost reduction plans in the quarter and are on track to deliver the previously communicated $75 to $85 million annual run rate savings by the end of 2024. In 2023, we realized $24 million in savings. As a reminder, the plan impacts costs and expenses across the business, including all three segments and allocated corporate. Turning to cash flow, gap cash from operating activities in the quarter was $94 million, and free cash flow was $78 million. Both figures were lower on a year-over-year basis due primarily to a large working capital benefit last year.

Speaker Change: The fourth quarter was a solid quarter and a testament to our team's dedication and hard work global ecommerce grew domestic parcel volume and improved its bottom line a soft market centric and preserve both delivered meaningful margin expansion through focus on operational excellence.

Speaker Change: And simplification.

Speaker Change: With that let me pass the call back to Jason.

Jason: Thanks Ana.

Jason: Before moving to Q&A I'd like to formally welcome Bill Simon and Jill Sutton to our board of Directors you May have seen an announcement last night regarding changes to our board.

Jason: Bill and Joe brings significant experience in areas, such as corporate governance transformations and capital allocation and I look forward to their insights and counsel as we continue to move Pitney Bowes forward.

Jason: As part of that announcement.

Jason: Gilfoyle has also announced that she will not stand for reelection in may, but we will stay on as board chair until then.

Gilfoyle: I would like to take this opportunity to personally thank Mary for her many contributions to the board of directors over the past six years and her continued leadership as board chair.

Gilfoyle: She has been a steady hand during an important period of change for Pitney Bowes and overseeing governance enhancements and strategic actions that we expect will put the company on stronger footing for years to come.

Ana: During the quarter, we paid $9 million in dividends and $14 million to reduce debt. As Jason mentioned, we remain focused on a disciplined and balanced capital allocation strategy. I'll conclude my remarks with a perspective on 2024. We expect revenue growth to range from flat to a low single-digit decline and EBIT margins to remain relatively flat on a year-over-year basis. We expect incremental benefit in 2024 from our company-wide cost reduction program as savings from the actions taken in 2023 annualize and we further execute on the plan. However, we expect restoration of variable compensation and wage inflation to partially offset gains. With the incentive, we expect revenue and EBIT to decline due to the dynamics I previously explained.

Gilfoyle: I look forward to continuing to work with her over the next four months to build on the progress we've made.

Speaker Change: And with that let's open the line for Q&A.

Speaker Change: Thank you and ladies and gentlemen, if you do wish to ask a question. Please press one event zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command.

Speaker Change: The phone please pickup your handset before pressing those numbers once again, if you have a question. Please press one zero at this time.

Speaker Change: And give me just a moment here.

Speaker Change: We'll go to Kartik Mehta with Northcoast Research. Please go ahead.

Kartik Mehta: Good morning.

Kartik Mehta: I wanted to get a little bit more insight into the global ecommerce business, we're making good progress there and I'm wondering as you move into 2020 or is it a function now of trying to get revenue per piece to increase or is it because of the composite price competition more about making sure you control costs, becoming more efficient.

Ana: Around our meter base..., the timing of our product life cycle, and shipping growth. Following a strong year in 2023, we expect pre-cert performance to be relatively flat to slightly up as the team continues its strong execution. Within global e-commerce, we expect revenue and EBIT to improve as we continue to take actions to optimize performance and to realize the value of this segment. Finally, in 2024, we expect similar levels of capital expenditures as in 2023, which were at a lower level than in 2022, and interest expense to remain around the elevated rate incurred in the fourth quarter of 2023. And Cliff.

Kartik Mehta: And driving more volume.

Speaker Change: Hey, Kartik. Thank you for the question I mean look as always with GEC I I'd say, it's multiple things first off we need to continue to drive the cost management that we've been pushing for a while now.

Kartik Mehta: I think you really started to see the cost management kick in over the last few months I'll call out in the fourth quarter. In particular, we saw an $8 million improvement in opex year over year. So that is going to continue and the team is focused on that.

Kartik Mehta: Second as you've heard from US repeatedly we need to continue to focus on driving volumes into the network, especially volumes that add margin and are in an important way to the network.

Kartik Mehta: We did a good job of that again in the fourth quarter. We've done a good job of that over the past couple of years last year, we drove 24% increase in domestic parcel volume over the course of the year, 13% in fourth quarter and what was a down peak for most in the industry.

Jason: The fourth quarter was a solid quarter, and a testament to our team's dedication and hard work. Global e-commerce grew domestic parcel volume and improved its bottom line in a soft market. Centech and Precert both delivered meaningful margin expansion through focus on operational excellence and simplification. With that, let me pass the call back to Jason. Thanks, Ana.

Kartik Mehta: So that has to be a part of the equation again and then to your point, we're always focused on weight per piece and the price and margin that we're getting in the market and I would say in particular, we've probably shifted more to a focused on the margins that were yielding in the market over the past few months and that will continue to be a focus.

Kartik Mehta: For us going forward.

Jason: Before moving to Q&A, I'd like to formally welcome Bill Simon and Jill Sutton to our Board of Directors. You may have seen an announcement last night regarding changes to our board. Bill and Jill bring significant experience in areas such as corporate governance, transformations, and capital allocation, and I look forward to their insights and counsel as we continue to move Pitney Bowes forward. As part of that announcement, Mary Guilfoyle has also announced that she will not stand for re-election in May but will stay on as board chair until then.

Speaker Change: Just for 2024, what are your free cash flow expectations.

Speaker Change: No maybe in comparison to what you.

Speaker Change: You did in 2023.

Speaker Change: Yeah. So we believe that our free cash flow as you saw we are deliberate that $20 million and we believe it will be somewhat north of that for next year.

Speaker Change: Nothing significant but somewhat north.

Speaker Change: And just one last question, Jason just on equipment sales, obviously, you talked about a little bit of a transition happening and that will have an impact in 2024 and I'm wondering you know I know, it's hard but kind of as you look at this business over the next couple of years, what's your expectations for that would be if this is 24 24 is a little bit of unknown.

Operator: I would like to take this opportunity to personally thank Mary for her many contributions to the Board of Directors over the past six years and her continued leadership as Board Chair. She has been a steady hand during an important period of change for Pitney Bowes and has overseeing governance enhancements and strategic actions that we expect will put the company on stronger footing for years to come. I look forward to continuing to work with her over the next four months to build on the progress we've made. And with that, let's open the line for Q&A. Thank you, and ladies and gentlemen, if you do wish to ask a question, please press 1 and then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If using a speakerphone, please pick up a handset before pressing those numbers.

Speaker Change: Nominally or.

Speaker Change: If the trends continue.

Jason: Yeah, you're talking specifically about the <unk> business I think with the government yet.

Speaker Change: Yeah, Yeah, I apologize yeah.

Speaker Change: Yeah.

Speaker Change: I mean, as you know and as we've talked about before we are in the tail end of an I O IMI migration through most of our portfolio. So if you think about the middle of the range and the low end of the range.

Speaker Change: That has to get done this year, we have to move those clients to the new platform. We have more time on the top end and on the higher end of the products, which we announced at the beginning of last year.

Kartik Mehta: Once again, if you have a question, please press 1-0 at this time. In just a moment, I will go to Kartik Mehta with North Coast Research. Please go ahead. Good morning.

Speaker Change: So you know the truth is we're going to continue to focus on that I am on migration, we're going to continue to use the value of the lease extensions that we're now at the point, where we can start to really drive very effectively.

Jason: I wanted to get a little bit more insight into the global e-commerce business. You're making good progress there. And I'm wondering, you know, as you move into 2024, is it a function now of trying to get revenue per piece to increase, or is it because of price competition more about making sure you control costs, becoming more efficient, and driving more volume? Hey, Kartik, thank you for the question. I mean, look, as always, with GEC, I'd say it's multiple things.

Speaker Change: We've talked about before those lease extensions have a positive impact overall and locking in revenue for us for the long term long term. So 2024, you know to your point will be a bit of a transition period as you see us move from our existing equipment portfolio finish off moving to the new equipment portfolio start to see more.

Speaker Change: All of those lease extensions as opposed to.

Jason: You know, first off, we need to continue to drive the cost management that we've been pushing for a while now. I think you've really started to see the cost management kick in over the last few months. I'll call out in the fourth quarter, in particular, we saw an 8 million improvement in OPEX year over year. So that is going to continue, and the team is focused on that. Second, as you've heard from us repeatedly, we need to continue to focus on driving volumes into the network, especially volumes that add margin in an important way to the network. We did a good job of that again in the fourth quarter. We've done a good job of that over the past couple years. Last year, we drove a 24% increase in domestic parcel volume over the course of the year, 13% in the fourth quarter, in what was a down peak for most in the industry.

Speaker Change: New equipment placements and it will make for a little bit different 'twenty 'twenty four but one that ultimately is going to strengthen us as we go forward and lock in those recurring revenues.

Speaker Change: Perfect. Thank you very much I really appreciate it.

Speaker Change: Thank you and next we'll go to Anthony Lubinsky with Sidoti. Please go ahead.

Anthony C. Lebiedzinski: Alright. Good morning. This is the fun game on for Anthony Levinsky, how are you guys doing.

Anthony C. Lebiedzinski: Doing well thanks.

Anthony C. Lebiedzinski: I guess my first question is can you talk about the expected impact of higher variable compensation and wages.

Anthony C. Lebiedzinski: In 2024.

Anthony C. Lebiedzinski: Yes, so I'll take that thank you for the question so what.

What we are observing here is a we are very committed to our restructuring activities.

Ana: So that has to be a part of the equation again. And then, to your point, we're always focused on the rate per piece and the price and margin that we're getting in the market. And I would say, in particular, we've probably shifted more to focusing on the margins that we're yielding in the market over the past few months. And that will continue to be a focus for us going forward. Ana, just for 2024, what are your free cash flow expectations, you know, maybe in comparison to what you did in 2023?

Speaker Change: And we anticipate those savings that I've mentioned between 75 and $85 million.

Speaker Change: As we exit 2024.

The significant portion of that.

Speaker Change: It will be consumed with variable compensation as we anticipate paying.

Speaker Change: Paying our employees at a full rate BCP V. The performance. We've had this year, we kept them has not enabled us to do so.

Speaker Change: And in terms of increases we pay market and we're seeing in general.

Ana: Yes, so we believe that our free cash flow, as you saw, delivered twenty-some million dollars, and we believe we'll be somewhat north of that for next year, nothing significant but somewhat north. And just one last question, Jason, on equipment sales, obviously, you talked about a little bit of a transition happening, and that will have an impact in 2024. And I'm wondering, you know, and I know it's hard, but kind of as you look at this business over the next couple of years, what your expectations for that would be if this is 2024 is a little bit of an anomaly or if the trends continue? Yeah, you're talking specifically about the fintech business, I think, with the equipment. Yeah, yeah, I apologize.

Speaker Change: Everybody in the marketing fee and there are different aspects of the marketing hourly labor versus salaried and so on but on average we're somewhere around that 3%.

Speaker Change: Wage increases that we're seeing across the board.

Speaker Change: Yeah, well I like to stay just specifically I mean look it is incumbent on us to continue to drive productivity to continue to drive cost out.

Speaker Change: You know that labor or something that youre going to have to adjust to and make sure you're getting the right talent to run the business, but it's part of a larger equation that we're going to continue to balance going forward.

Speaker Change: Thank you for the color and my next question is in terms of the cost saving plans that you announced last year to use baseball terms what inning are you in as far as capturing the benefits of restructuring.

Jason: Yeah. Yeah, so look, I mean, as you know and as we've talked about before, we are in the tail end of an IMI migration through most of our portfolio. So if you think about the middle of the range and the low end of the range, that has to get done this year. We have to move those clients to the new platform. We have more time on the top end and on the higher end of the products, which we announced at the beginning of last year. So the truth is, we're going to continue to focus on that IMI migration. We're going to continue to use the value of the lease extensions that we're now at the point where we can start to really drive very effectively. As we've talked about before, those lease extensions have a positive impact overall in locking in revenue for us for the long term. So 2024, you know, to your point, will be a bit of a transition period.

Speaker Change: Yes, great question. So we announced just for background here, we announced the program back in first quarter at the end of our first quarter earnings call. So we've had three quarters of execution and as you recall last quarter, we update that number.

Speaker Change: Based on where we are with our commitment we feel we're very confident.

Speaker Change: Confident.

Speaker Change: Delivering entertaining that and I would say, we're pretty far along the glide path.

As Jason mentioned.

Speaker Change: We're never done we need to remain competitive in the market.

Speaker Change: We're not leaving any stone unturned and we will continue to look for further activities to optimize our cost yeah I'll I'll go back to your baseball analogy willing laid earnings. So we saw a significant impact of that in Q4 start to materialize for us.

Jason: As you see us move from our existing equipment portfolio, cash out, moving to the new equipment portfolio, start to see more of those lease extensions as opposed to new equipment placements. And it will make for a slightly different 2024, but one that is ultimately going to strengthen us as we go forward and lock in those recurring revenues. Perfect. Thank you very much.

Speaker Change: I will tell you all the actions and activities that we need to execute on to yield that restructuring savings have already been plumbed in the system.

Speaker Change: Late stages are being executed and we expect to realize the full benefit of that throughout 2024.

Anthony C. Lebiedzinski: I really appreciate it, and next, we'll go to Anthony Lebiedzinski with Sudoti. Please go ahead. All right, good morning. This is Stephan Gill on behalf of Anthony Lebiedzienski.

Speaker Change: Thank you and the last one for me can you provide an update on the CEO search process.

Speaker Change: Yeah look so I will say, what I believe I said on the last call right. So the board has formed a four person committee that is using a nationally ranked search firms to go off and seek appropriate candidates.

Ana: How are you guys doing? Well, thanks. I guess my first question is, can you talk about the expected impact of higher variable compensation and wage inflation in 2024? Yes, so I'll take that.

Speaker Change: We said early on that that was going to take some time and the board was going to be clear and fulsome in their process that they went through.

Ana: Thank you for the question. So, what we are observing here is that we are very committed to our restructuring activities, and we anticipate those savings that I mentioned between $75 and $85 million as we exit 2024. A significant portion of that will be consumed by variable compensation as we anticipate paying our employees at a full rate, vis-a-vis the performance we've had this year, which has not enabled us to do so. And in terms of increases, you know, we pay the market and we're seeing, in general, as everybody in the market is seeing, and there are different aspects of the market in hourly labor versus salaried and so on. But on average, we're somewhere around that 3% wage increase that we're seeing across the board.

Speaker Change: We announced I think in the November earnings call that that process at the moment was expected to take four to six months and we're right in that window.

Speaker Change: Thank you so much for taking my questions.

Speaker Change: Thank you.

Speaker Change: And next we can go to Matt Swope with Baird. Please go ahead.

Matt Swope: Good morning, Jason and on I am so honored to the margin guidance you gave to be effectively flat for the whole company year over year.

Matt Swope: That.

Matt Swope: Sort of wage inflation, you've mentioned and the increase in the variable comp will offset the cost savings essentially dollar for dollar.

Matt Swope: Yeah. So let me add to that thinking for a minute here. So we mentioned revenue flat to.

Speaker Change: Potentially down in the low single digits. So to the extent that we have any revenue pressure I remember that that that drive our leverage component that we need to also address so I would say that the three components that I just mentioned.

Ana: Yeah, and what I just stated specifically, I mean, look, it is incumbent on us to continue to drive productivity, to continue to drive costs out. We know that labor is something that you're going to have to adjust to and make sure you're getting the right talent to run the business. Part of a larger equation. Thank you for the call.

Speaker Change: Yeah.

Speaker Change: Specifically looking at global ecommerce.

You saw a major decline in EBIT there in 2023.

Ana: And my next question is, in terms of the cost-saving plans that you announced last year, to use baseball terms, what innings are you in as far as capturing the benefits of this restructuring? Yes, a great question. So we announced, just for background here, we announced the program back in the first quarter at the end of our first quarter earnings call. So we've had three quarters of execution, and as you recall, last quarter we upped that number. So based on where we are with our commitment, we feel we're very confident of delivering on and attaining that, and I would say we're pretty far along the glide path. But, as Jason mentioned, we're never done.

Speaker Change: We had started 2023, hoping that juicy EBITDA might be positive.

Speaker Change: Is there any chance that you know again, especially if what you're saying about margins. It feels like maybe now but is there any chance that global ecommerce could be EBITDA positive in 2024.

Speaker Change: Yeah. So let me, let me start that and they can feel free to add.

Speaker Change: Listen, it's absolutely our intent and our goal and we are continuing to get closer and closer to that milestone, it's very hard to call when it will happen.

Speaker Change: As you know, there's a lot of market variables and the pricing pressure and the market dynamics that we're in it's just really hard to call Yeah, Matt. Let me, let me just jump in I mean look I'm going to say a couple of additional points here.

Speaker Change: We're not going to comment specifically on where we think GC is going to wind up as we go through 2024, you know I've said in the past, we're not happy with the rate of performance that we've got now from a financial point of view I think we've made tremendous progress from an operational and execution all point of view.

Ana: We need to remain competitive in the market. We're not leaving any stone unturned, and we will continue to look for further activities to optimize our costs. Yeah, I'll go back to your baseball analogy.

Jason: We're in the late innings, so we saw a significant impact of that in Q4 start to materialize for us. I will tell you all the actions and activities that we need to execute on to yield the restructuring savings have already been plucked into the system in their late stages of being executed, and we expect to realize the full benefit of that throughout 2024. Thank you.

Speaker Change: But we are still looking at ways to make sure that we can maximize the value of the business and I outlined a few of those earlier.

Speaker Change: One thing in addition, I would say is look.

Speaker Change: We are smart enough to know that we're not necessarily always going to have all the answers. We have brought in a third party to help us look at and work with the management team on are we looking at all the levers we should be looking at are there ways to accelerate the actions that we've got in place and I'd say just as a broader statement.

Jason: And the last one for me is, can you provide an update on the CEO search process? Yeah, look, so I will say what I believe I said on the last call, right? So the board has formed a four-person committee that is using a nationally ranked search firm to go out and seek appropriate candidates.

Speaker Change: And a third party reflects certainly my my personal philosophy that we should be open to ideas from the outside I think you've seen that for me in talking to investors and analysts over the past.

Speaker Change: For months and GEC is not the only place frankly, we're going to bring in an outside pair of eyes. You know as you look at opportunities for us to think differently potentially about our debt stack about how we optimize the bank well.

Jason: We said early on that that was going to take some time, and the board was going to be clear and fulsome in the process that they went through. We announced, I think, in the November earnings call that that process, at the moment, was expected to take four to six months, and we're right in that window. Thank you so much for taking my questions. And next, we can go to Matt Swope with Baird.

Speaker Change: Always going to be out looking for good ideas and N. G. C is certainly one place we're doing that.

Speaker Change: And so this change of moving the GEC shipping business into Centex.

Speaker Change: Is that part of that thinking.

Matt Swope: Please go ahead. Good morning, Jason and Ana. So Ana, to the margin guidance you gave to be effectively flat for the whole company year over year, that the sort of wage inflation you've mentioned and the increase in the variable comp will offset the cost savings essentially dollar for dollar? Yes, so let me add to that thinking for a minute here. So we mentioned revenue flat to potentially down in the low single digits. So to the extent that we have any revenue pressure, remember that that drives a leverage component that we need to also address. So I would say it's the three components that I just mentioned, specifically looking at global e-commerce. You know, you saw a major decline in EBITDA there in 2023. You know, we had started 2023 hoping that G.E.C.

How will that or is there anything you can say about the profitability of GEC shipping thing.

Speaker Change: You know that that piece on its own is that EBITDA positive or could could you give us any more color on why youre doing that and what that will mean financially.

Speaker Change: Yeah. So let me go first from a strategic point of view and I think I've said it in the opening but it's important and I want to reiterate it.

Speaker Change: Think about going forward for Pitney Bowes are getting leverage from the assets and the and the offerings that we have across the portfolio as one of the opportunities that we still have in front of us.

Speaker Change: So moving to the digital solutions business from GE E. C to Suntech was one of those things that just made obvious sense. If you think about the technology the team and the capabilities that powers that business. They do it for both GEC and for Suntech.

Speaker Change: It is a business that is focused on the digital side of shipping transactions are actually producing the labels. So it is more of a SaaS based business.

Speaker Change: So, bringing those together in the technology part of our organization, which isn't which is suntech.

Ana: EBITDA might be positive. Is there any chance that, you know, again, especially with what you're saying about margins, it feels like maybe not, but is there any chance that global e-commerce could even be thought of as positive in 2024? Yeah, so let me start that, and Jason, feel free to add.

Speaker Change: Made sense for a bunch of reasons wanted allows us to really bring the development in and go to market teams together and in a very focused way.

Speaker Change: Allows us to leverage the go to market of Suntech as they shift more and more to shipping and the synergies that we think we're going to get there are going to pay off I think over the long term as you look at the range of offerings that we will continue to create in that space.

Ana: Listen, it's absolutely our intent and our goal, and we are continuing to get closer and closer to that milestone. It's very hard to call when it will happen, as you know, there are a lot of market variables, and the pricing pressure, and the market dynamics that we're in. It's just really hard to call. Yeah, Matt, let me just jump in.

Speaker Change: And maybe let me add a few additional.

Speaker Change: Think of the opportunity here so to put it in perspective the shift.

Jason: I mean, look, I'm going to say a couple of additional points here. You know, we're not going to comment specifically on where we think GEC is going to wind up as we go through 2024. You know, I've said in the past, we're not happy with the rate of performance that we've got now from a financial point of view, but I think we've made tremendous progress from an operational and an executional point of view. But we are still looking at ways to make sure that we can maximize the value of the business, and I outlined a few of those earlier. The one thing in addition I would say is, look, you know, we are smart enough to know that we're not necessarily always going to have all the answers. We have brought in a third party to help us look at and work with the management team on whether we are looking at all the levers we should be looking at? Are there ways to accelerate the actions that we've got in place?

Speaker Change: On revenue and we will provide a lot more color next quarter, but it's around 3% of global ecommerce total revenue. So it gives you an idea of that in terms of the gross margin that that brings as Jason mentioned. This is very sad like and that has a very healthy gross margin now in.

Speaker Change: Terms of the expense base to support that gross margin, we look to have leverage it as we are.

Speaker Change: Our more focused around our engineering and our product development. So hopefully that gives you a perspective on dimensionalize the size I'm actually very excited about the mood if for no. Other reason than it refocuses the team on making sure that we are looking at our offerings. We are looking at the technologies that we have in our portfolio.

Speaker Change: Are we monetizing them correctly do we have additional opportunities.

Jason: And I'd say, just as a broader statement, bringing in a third party reflects my personal philosophy that, you know, we should be open to ideas from the outside. I think you've seen that for me in talking to investors and analysts over the past four months. And GEC is not the only place where we're going to bring in an outside pair of eyes.

Speaker Change: Just made all have a sense in the world to bring these digital assets together under the Suntech umbrella, where I think they can be best leveraged.

Speaker Change: Well. Thank you guys for a color I'm, sorry to be myopic on the on the finance part of it.

Speaker Change: That digital solutions business that moves over.

Jason: You know, as we look at opportunities for us to think differently about our debt stack, about how we optimize the bank, we're always going to be out looking for good ideas, and GEC is certainly one place we do that. And so this change of moving the GEC shipping business into Centech, is that part of that thinking? How will that, is there anything you can say about the profitability of GEC shipping? You know, that piece on its own, is that EBITDA positive? Or can you give us any more color on why you're doing that and what that will mean financially? Yes, but I'll go first from a strategic point of view.

Speaker Change: That was the piece that will move EBITDA positive in 2023.

Speaker Change:

So just to understand your question is as it relates to global ecommerce.

Speaker Change: The shift as I mentioned, it's 3% of the revenue.

Speaker Change: So yes, it carried as I mentioned healthy gross margin, but also as we optimize the expense. We believe we can do that better jointly.

Speaker Change: So in terms of the relative size on the impact of the global ecommerce business I wouldn't say, it's anything significant.

Speaker Change: Okay, well I guess I'll just ask if when you guys gave us the reclassified financials. If you could sort of highlight what the past numbers would have looked like under the new segment pieces that would be very helpful.

Jason: And I think I said it in the opening, but it's important and I want to reiterate it. You know, as you think about going forward for Pitney Bowes, getting leverage from the assets and the offerings that we have across the portfolio is one of the opportunities that we still have in front of us. So moving the digital solutions business from GEC to Sentec was one of those things that just made obvious sense. If you think about the technology, the team, and the capabilities that power that business, they do it for both GEC and Sentec. It is a business that is focused on the digital side of shipping transactions, of actually producing the labels, so it is more of a SaaS-based business.

Speaker Change: That is absolutely what we will do as we released our earnings in the first quarter, we will do a full recast of that between the segments.

Speaker Change: And I'm sorry, just one last one for me if I could in the in the press release about the new the board changes last night, you mentioned the cooperation agreement with Heska Yeah could.

Speaker Change: Could you could you elaborate on what that cooperation agreement entails Jason.

Jason: Yeah, Let me actually I. Appreciate the question, let me, let me step back and kind of put that announcement last night into into some color and some context.

Jason: The first thing I'd say on that is is pitney Bowes is actually in a great position with that announcement.

Jason: As you would expect the board and I talk regularly about board composition, and specifically, how do we enhance the skills and experiences on the board.

Jason: So bringing those together in the technology part of our organization, which is Sentec, made sense for a bunch of reasons. One, it allows us to really bring the development and go-to-market teams together in a very focused way. It allows us to leverage the go-to-market of Sentec as they shift more and more to shipping. The synergies that we think we are going to get there are going to pay off, I think, over the long term as you look at the range of offerings that we will continue to create in that space. Yes, and maybe let me add a few additional... of the opportunity here. So to put it in perspective, the shift on revenue, and we will provide a lot more color next quarter, but it's around 3% of global e-commerce total revenue, so it gives you an idea of that.

Jason: So that they can they.

Jason: They can best partner with management and lead the company. During this particular time of change.

The process that we went through it was pretty clear the board engaged in a nationally recognized search firm as part of our active and ongoing refreshment that search firm.

Jason: Brought candidates for the board.

Jason: We have given them specific skill sets and criteria that they were looking for things that you might expect around capital allocation corporate governance transformation.

Jason: And at the end of the day. It was a successful process and we now have two new board members, who bring those skills along with a wealth of experience to our boardroom.

Jason: The second half as we also have clear and committed support of one of our largest shareholders as we make the changes that we need to make continuing to move forward. So it's a it's a win win for US right now and the announcement that you saw last night as it is a strong signal of confidence in the progress we've made in the past year building alignment.

Jason: In terms of the growth margin that that brings, as Jason mentioned, this is very SAS-like, and that has a very healthy growth margin. Now, in terms of the expense base to support that growth margin, we look to have leverage as we are more focused on our engineering and our product development, so hopefully that gives you a perspective on dimensionalizing the site. I'm actually very excited about the move, Matt, for no other reason than it refocuses the team on making sure that we are looking at our offerings, we are looking at the technologies that we have in our portfolio, are we monetizing them correctly, do we have additional opportunities, and it just made all the sense in the world to bring these digital assets together under the Fentech umbrella where I think they can be best leveraged. Thank you, guys, for that

Jason: With shareholders and more importantly, it's a strong signal on the confidence in the path forward that I and the management team are pursuing here.

Jason: I've talked to a lot of investors over the past four months and the changes that I'm, making are reflective of those conversations and.

Jason: And I certainly hope that all of our stakeholders can get excited about the opportunities in front of us.

Jason: The transformation that we're undertaking and most importantly about the progress that we're starting to see.

Jason: As evidenced by the results that we're talking about right here.

Jason: So at the end you know all I will say on this is that the board and I are fully committed to the same thing, making the changes we need to make to drive shareholder value and we have what we need to move forward.

Speaker Change: That's that's helpful. Jason just one last one sorry as I as I wrap up you'd mentioned more disciplined capital allocation would you guys consider cutting the dividend.

Ana: Anasar, to be myopic on the finance part of it, would that digital solutions business that moves over be the piece that will move EBITDA positive in 2023? So just to understand, your question is as it relates to global e-commerce, the shift, as I mentioned, it's 3% of revenue. So yes, it carried, as I mentioned, a healthy gross margin. But also, as we optimize the expense, we believe we can do that better jointly. So in terms of the relative size of the impact of the global e-commerce business, I wouldn't say it's anything significant.

Speaker Change: So let me take a step back in terms of capital allocation and I'll bring it into kind of four four buckets is as you know first and foremost you mean, the generation of capital and and as we've talked about.

Speaker Change: Our restructuring program and different things to increase our profitability increase our cash flow generation.

Speaker Change: Second priority is investing in our business and we've talked about capex.

Ana: Okay, well, I guess I'll just ask if when you guys give us the reclassified financials, if you could sort of highlight what the past numbers would have looked like under the new segment pieces, that would be very helpful as we release earnings in the first quarter. And I'm sorry, just one last one for me, if I could. In the press release about the board changes last night, you mentioned the cooperation agreement with Hestia. Could you elaborate on what that cooperation agreement entails, Jason? Actually, I appreciate the question. Let me step back and kind of put that announcement last night into some color and some context. And the first thing I'd say about that is Pitney Bowes is actually in a great position with that announcement.

Speaker Change: And we have focus to more optimize the capex instead of Newbuild in construction. So that is also providing some additional sources of capital vis vis prior periods.

Speaker Change: Debt reduction pay downs, you know we have upcoming maturities all the way up to 26 at the moment, but we are focused and our intent is not to let that go current and lastly on return to shareholders.

Speaker Change: That is really a conversation we continue to have with the board at the end. It is a board decision, but I would say those are the order in which I just mentioned those for that that's the order and how we think about it and Matt I'll just point out I mean, we did reaffirm the dividend. This morning, clearly that's something we put a lot of thought and effort into.

Speaker Change: Two with the board and what I will say is you heard me talk about my strategic priorities for this year and in capital allocation was one of them and I put that in there both as a signal externally and also as a signal frankly internally to our teams that we're going to think differently about how we allocate capital and we need to get.

Jason: As you would expect, the board and I talk regularly about board composition and specifically how we enhance the skills and experiences of the board so that they can best partner with management and lead the company during this particular time of change. The process that we went through was pretty clear. The board engaged a nationally recognized search firm as part of our active and ongoing refreshment. That search firm brought candidates forward.

Speaker Change: We need to make sure that we continue to.

Speaker Change: Look for ways to maximize return to all of our shareholders. Both in the short term and in the long term.

Speaker Change: Okay. Thanks, Jason Thanks Rhonda.

Speaker Change: And before I go to my last question here I'll go ahead, and remind everybody else. It is one zero to ask a question. We can next go to Peter Heckmann with Creditsights. Please go ahead.

Jason: The board had given them specific skill sets and criteria that they were looking for, things that you might expect around capital allocation, corporate governance, and transformation. And at the end of the day, it was a successful process, and we now have two new board members who bring those skills along with a wealth of experience to our boardroom. The second half is that we also have clear and committed support of one of our largest shareholders as we make the changes that we need to make to continue to move forward. So it's a win-win for us right now.

Peter Heckmann: Hi, good morning.

Peter Heckmann: For the GEC.

Peter Heckmann: Especially as you mentioned talked about reviewing options to realize that value.

Peter Heckmann: This segment.

Peter Heckmann: Can you talk about the timing.

Peter Heckmann: I'm sure it's hard to tell.

Peter Heckmann: Okay.

Peter Heckmann: Number of months.

Peter Heckmann: This is something that.

Peter Heckmann: We'll need to wait for the new board members to get up to speed on it just something that.

Peter Heckmann: The company needs to wait for the new CEO to be announced.

Jason: And the announcement that you saw last night is a strong signal of confidence in the progress we've made in the past year building alignment with shareholders. And more importantly, it's a strong signal of confidence in the path forward that I and the management team are pursuing here. I've talked to a lot of investors over the past four months, and the changes that I'm making are reflective of those conversations. And I certainly hope that all of our stakeholders can get excited about the opportunities in front of us, about the transformation that we're undertaking, and, most importantly, about the progress that we're starting to see, you know, as evidenced by the results that we're talking about right here. So, at the end, you know, all I will say on this is that the board and I are fully committed to the same thing, making the changes we need to make to drive shareholder value, and we have what we need to move forward. That's helpful, Jason. Just one last one, sorry, as I wrap up.

Peter Heckmann: And evaluation.

Peter Heckmann: So let's be a 100% clear we're not waiting on anything we've been taking actions over the over the past year and certainly have redoubled those actions over the past four to six months to try to make a meaningful impact on the GEC business.

Peter Heckmann: What I will tell you again is what we are looking for all of our ways, but we have all the tools that we have others at our disposal to realize the value of this business and short term, it's kind of along what I said at the beginning right. We continue to focus on operational efficiencies, we're going to continue to make sure that we're driving value.

Peter Heckmann: Our volumes into our network by the way I would point out the fact that we've been successful in driving volumes into their network as a sign of the value that we provide to clients when we work with them.

Peter Heckmann: Volume comes from clients and the fact that we've been able to continue to deliver growth. There I think is a strong statement of the value. We provide in the market and then finally, we do have to get better on making sure that we are extracting the Ralph how are you from clients for the services and offerings that we provide so I don't want anyone to have a thought that there is any.

Peter Heckmann: Sense of waiting or hesitation or that there is anything that's needed to start to make progress on GEC.

Jason: You've mentioned more disciplined capital allocation. Would you guys consider cutting the dividend? So let me take a step back in terms of capital allocation, and I'll bring it into kind of four buckets, as you know. First and foremost, I mean, the generation of capital. And as we've talked about, a restructuring program and different things to increase our profitability, increase our cash flow generation. The second priority is investing in our business, and we've talked about CapEx. And we have focused on more optimizing CAPEX instead of new build and construction. So that is also providing some additional sources of capital vis-a-vis prior periods. We have upcoming maturities all the way out to 26 at the moment, but we're focused, and our intent is not to let that go current. And lastly, on return to shareholders, that is really a conversation we continue to have with the board. In the end, it is a board decision, but I would say the order in which I just mentioned those four is the order and how we think about it.

Peter Heckmann: That said, it's a lot of work there's a lot of things that we're managing and juggling as we try to move forward, but I wanted to be clear you know the board has been nothing but supportive in me and in the GEC leadership team.

Peter Heckmann: As we look at alternatives and continue to move the ball forward.

Speaker Change: Thank you.

Speaker Change: Centex and maybe I missed it you said that with the.

Speaker Change:

Speaker Change: Increased churn if you will.

Centex: You bet.

Two decline did you say how much.

Centex: The decline you're expecting in 2024.

Speaker Change: Yeah. So let me let me take that so we talked about three dynamics inside of something happening.

Speaker Change: As we all know and widely stated.

Speaker Change: We have our meter population declining as part of the normal mailing declined the second dynamic.

Speaker Change: <unk> talked about extensively is the shift we issued our new product about five years ago, and we shipped more but those now are coming for renewal and we anticipate extending those leases for new term leases, but not having a new product to be put out what that does is it shifts the timing of our revenue.

Ana: And Matt, I'll just point out, I mean, we did reaffirm the dividend this morning. Clearly, that's something we put a lot of thought and effort into with the board. And what I would say is, you heard me talk about my strategic priorities for this year, and capital allocation was one of them. And I put that in there both as a signal externally and also as a signal, frankly, internally to our teams that we're going to think differently about how we allocate capital, and we need to get, we need to make sure that we continue to look for ways to maximize return to all of our shareholders, both in the short term and Thanks, Jason. Thanks, Ana. And before I go to my last question here, I'll go ahead and remind everybody else that it is 1-0 to ask a question. We can next go to Peter Sackhon with Credit Sites. Please go ahead. Hi, good morning.

Speaker Change: And then the third dynamic is where we're putting a lot of emphasis around our growth in shipping when you put all of that combined we do anticipate.

Speaker Change: Revenue and if it reduction what were working really hard.

Speaker Change: On the expense side across the board cost and Opex to keep our margins I'm. This.

Speaker Change: This is a transition year the way I think about it and I anticipate that that trajectory to be an important part of our 2024 as we grow from shipping out of that timing.

Speaker Change: Well I'll say Peter.

Peter Heckmann: Yes, Hi, Peter.

Speaker Change: I would say if I can rephrase my question.

Speaker Change: Freestor you said the EBIT in 2024 is going to be slight flat excuse me just slightly up.

Speaker Change: You said that revenue EBIT will decline and I hear you on the reasons why Mike My question was what percentage decrease in EBIT, you expect or.

Speaker Change: What's the magnitude of the decline. So this is very important.

Speaker Change: Segment.

Peter Sackhon: For the action, for GEC, you know, the press release, and as you mentioned, talk about reviewing options to realize value. Can you talk about the timing? Wow, I'm sure it's hard to.

Speaker Change: Yeah listen we will not comment specific to each segment, but what I will tell you is the overarching statement that I made around our overall revenue being flat to down in the low single digits.

Jason: Let's have a quick break. We'll be right back. How many months? Is this something that we'll need to wait for the new board members to get up to speed on? Is this something that the company needs to wait for the new CEO to be announced and then do an evaluation? So let's be 100% clear; we're not waiting on anything.

Speaker Change: Well as EBIT margin maintaining gives you a perspective of the relative size that you have incentive inside of of that envelope, yeah and.

Speaker Change: And what I'd say, Peter I, just remind you suntech of its very nature is a lumpy business right I mean, we deal with lease cycles, we deal with this migration.

Jason: We've been taking actions over the past year and certainly have redoubled those actions over the past four to six months to try to make a meaningful impact on the GEC business. What I'll tell you again is, look, we are looking for all of the ways that we have, all of the tools that we have at our disposal to realize the value of this business. In the short term, it's kind of along what I said at the beginning, right? We continue to focus on operational efficiencies.

Speaker Change: Suntech and various quarters in various years tends to jump around more than just about any other business based on the lease cycles and in equipment sales. So you can have a quarter, where you have a large equipment transaction and that's gonna distorts things.

Speaker Change: What I think what I think you should be focused on is that we will continue to outperform the market in that business and we are continuing to reposition that business for a long term success. So.

Jason: We're going to continue to make sure that we're driving volumes into our network. By the way, I would point out that the fact that we've been successful in driving volumes into the network is a sign of the value that we provide to clients when we work with them. Volume comes from clients, and the fact that we've been able to continue to deliver growth there is, I think, a strong statement of the value we provide in the market. And, finally, we do have to get better at making sure that we are extracting the right value from clients for the services and offerings that we provide. So I don't want anyone to think that there is any sense of waiting or hesitation or that there is anything that's needed to start to make progress on GEC. That said, there is a lot of work.

Speaker Change: Why there might be pockets of you know different.

Speaker Change: <unk> outcomes quarter to quarter, some will be better than others, but the general trend is the same we are repositioning that business. We're going to perform ahead of market and we are shifting that business into new growth spaces, which provide us much opportunity going forward.

Speaker Change: Okay and my last question.

And Capex.

Speaker Change: Can you give us a do you think that the spending this year will be the same allocation on a per segment basis. I heard you say about the amount will be the same but will he stay without for GCB subtype et cetera, and then how long is the typical payback period.

Speaker Change: For your investments.

Speaker Change: Yeah. So let me take that so overall around that hundred million level.

Speaker Change: At the overall company will stay pretty steady.

Speaker Change: We will see a bit of a reduction in global ecommerce shifting that to the other two segments.

Jason: There are a lot of things that we're managing and juggling as we try to move forward. But I want to be clear, you know, the board has been nothing but supportive of me and the GEC leadership team as we look at our alternatives and continue to move the ball forward. Thank you.

Speaker Change: In terms of.

Speaker Change: The payback periods, one of the key priorities and Jason talked about this in terms of our discipline, we are more and more focused not only on long term IRR, but on quicker paybacks. So as we are evaluating a very thoroughly all the investments that we're making inside the business we're looking.

Ana: On CEMTEC, and maybe I missed it, you said that... Priest John, did you say how much decline you are expecting in 2024? Yes, so let me take that. So we talked about three dynamics inside of Synthic Happening. First, as we all know, and it's widely stated, we have our meter population declining as part of the normal mailing decline. The second dynamic we have talked about extensively is the shift. We issued our new product about five years ago, and we've issued more, but those are now coming for renewals, and we anticipate extending those leases for new terms leases, but not having a new product to be put out.

Speaker Change: King well into that less than two year payback and at times, we're really focused on the less than one year paybacks, so you'll see more and more of that as we make our decisions here go forward.

Speaker Change: Thank you.

Jason: And I'll hand, the call back over to Mr dies for Mr. <unk> for any closing comments.

Mr. Dies: Yeah look I appreciate the questions I, just want a reflecting on kind of a bunch of them I want to make one final point and that is you should be walking away from this call clear that each of our b use has growth potential.

Mr. Dies: Even as we drive efficiencies across the organization and as Ana said, we're going to make the changes needed to capitalize on that potential.

Ana: What that does is it shifts the timing of our revenue. And then the third dynamic is where we're putting a lot of emphasis on our growth in shipping. When you put all of that together, we do anticipate revenue and EBIT reduction. But what we're working really hard on the expense side, across the board, cost, and OPEX to keep our margins. This is a transition year, the way I think about it, and I anticipate that trajectory to be an important part of our 2024 as we grow from shipping out at that time each year. Yeah, but I'll say Peter on top of it.

Mr. Dies: We see a lot of opportunity in centex, specifically, specifically in the shipping business were taken actions to pursue that.

Mr. Dies: Presort is a market leader and as you heard continues to perform in a way that is.

Mr. Dies: Are you now above market and certainly above many expectations, although not mine and G. C has proven that our domestic model can work and we're going to continue to take actions in the short term to drive that performance. So.

Mr. Dies: That I think I will say thank you for your questions as I mentioned at the outset I am optimistic about what lies ahead for Pitney Bowes.

Mr. Dies: We understand the challenges as well as the opportunities that we have in front of us and as we look ahead to 2024, we're going to continue to operate with intensity and we're going to continue to prioritize actions that support increased operational discipline and importantly, also accelerated our shift into targeted shipping growth path.

Peter Sackhon: Yes, I have, Peter. I would say, if I could rephrase my question. For pre-sort, you said the EBIT in 2024 is going to be flat, excuse me, slightly up, and the other thing is that in SENTAC, you said that revenue EBIT will decline. And I understand your reasons why.

Ana: My question was what percentage of a decrease in EBIT do you expect or what's the magnitude of a decline for this very important figure. Yeah, listen; we'll not comment specific to each segment, but what I will tell you is the overarching statement that I made around our overall revenue being flat to down in the low single digits, as well as EBIT margin maintaining, gives you a perspective of the relative size that you have in Sentec inside of that envelope. Yeah, and what I'd say, Peter, I just want to remind you, Sentec, by its very nature, is a lumpy business, right? I mean, we deal with lease cycles, we deal with this IMI migration. Sentec, in various quarters and various years, tends to jump around more than just about any other business based on lease cycles and equipment sales. You could have a quarter where you have a large equipment transaction, and that's going to distort things.

Speaker Change: So with that I will close and we look forward to talking to you at the end of first quarter.

Speaker Change: And ladies and gentlemen that does conclude our call for today. Thanks for your participation for using AT&T teleconference. You may now disconnect.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Jason: You know, what I think you should be focused on is that we will continue to outperform the market in that business, and we are continuing to reposition that business for long-term success. So, you know why there might be pockets of, you know, different outcomes quarter to quarter. Some will be, you know, better than others. But the general trend is the same. We are repositioning that business, we are going to perform ahead of the market, and we are shifting that business into new growth spaces, which will provide us with much opportunity going forward. Great, and my last question is the right cap.

Ana: Can you give us an idea of how much the spending this year will be on a per segment basis? I heard you say that the amount will be the same, will stand out, etc., and then how long is the typical payback period for your Yes, so let me take that.

Ana: So overall, around that $100 million level at the overall company will stay pretty steady. We will see a bit of a reduction in global e-commerce, shifting that to the other two segments. In terms of payback periods, one of the key priorities, and Jason talked about this, in terms of our discipline, we are more and more focused not only on long-term IRR but on quicker paybacks. So as we are evaluating very thoroughly all the investments that we're making inside the business, we're looking well into that less than two-year payback, and at times, we're really focused on the less than one-year paybacks So you'll see more and more of that as we make our decisions here go forward. Thank you. And I'll hand the call back over to Mr. Dice for any closing comments. Yeah, look, I appreciate the questions. I just want to, reflecting on kind of a bunch of them, I want to make one final point.

Jason: And that is, you should be walking away from this call clear that each of our BUs has growth potential, even as we drive efficiencies across the organization. And, as Anna said, we're going to make the changes needed to capitalize on that potential. We see a lot of opportunity in Sentec, specifically in the shipping business, and we're taking steps to pursue that. Presort is a market leader and, as you heard, continues to perform in a way that is, you know, above the market and certainly above many expectations, although not mine. And GEC has proven that our domestic model can work, and we're going to continue to take actions in the short term to drive that performance. So with that, I think I will say thank you for your questions.

Jason: As I mentioned at the outset, I am optimistic about what lies ahead for Pitney Bowes. We understand the challenges, as well as the opportunities that we have in front of us. And as we look ahead to 2024, we're going to continue to operate with intensity, and we're going to continue to prioritize actions that support increased operational discipline and, importantly, also accelerate our shift into targeted shipping growth paths.

Jason: So with that, I will close, and we look forward to talking to you at the end of the first quarter. And ladies and gentlemen, that does conclude our call for today. Thanks for your participation. If you're using AT&T teleconference, you may now disconnect.