Q1 2024 Pitney Bowes Inc Earnings Call

Good morning, and welcome to the Pitney Bowes first quarter 'twenty 'twenty four earnings conference call. Your lines have been placed in a listen only mode. During the conference call until the question and answer segment. Today's call is also being recorded if you have any objections. Please disconnect. Your lines at this time I would now like to introduce.

Operator: Good morning, and welcome to the Pitney Bowes first quarter 2024 earnings conference call. Your lines have been placed in a listen only mode during the conference call until the question and answer segment. Today's call is also being recorded. If you have any objections, please disconnect your lines at this time. I would now like to introduce the participants on today's conference call: Mr. Jason Dies, Interim Chief Executive Officer; Mr. John Witek, Interim Chief Financial Officer; and Mr. Philip Landler, Vice President, Investor Relations and Global Strategy. Mr. Landler will now begin the call with a safe harbor overview.

Participants on today's conference call, Mr. Jason dies interim Chief Executive Officer, Mr. John Widick interim Chief Financial Officer, and Mr. Philip Landler, Vice President Investor Relations and global strategy. Mr. Landa will now begin the call with a safe Harbor overview.

Good morning until an alert Vice President Investor Relations and global strategy. Thank you for joining us this morning.

Philip Landler: Good morning. I'm Phil Landler, Vice President of Investor Relations and Global Strategy. Thank you for joining us this morning.

Philip Landler: Included in today's presentation are forward-looking statements about our future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections. More information about these risks and uncertainties can be found in our earnings press release, our 2023 Form 10-K Annual Report, and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on Investor Relations. Please keep in mind that we do not undertake any obligation to update forward-looking statements as a result of new information or developments.

Philip Landler: In today's presentation are forward looking statements about our future business and financial performance.

Philip Landler: Forward looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections more information about these risks and uncertainties can be found in our earnings press release, our 2023 Form 10-K annual report and other reports filed with the SEC that are low.

Philip Landler: Kate It on our website at Www Dot <unk> dot com and by clicking on Investor Relations. Please.

Philip Landler: Please keep in mind, we do not undertake any obligation to update forward looking statements as a result of new information or developments.

Philip Landler: For non-GAAP measures that are included in the press release or discussed in our presentation materials, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release. We have also provided a slide presentation and a spreadsheet with historical segment information on our website. And finally, in our prepared remarks, revenue comparisons will be on a constant currency basis, while other items such as EBIT, EBITDA, EPS, and free cash flow will be on an adjusted basis. And now I'd like to turn the call over to interim CEO, Jason Dies.

Philip Landler: For non-GAAP measures that are included in the press release or discussed in our presentation materials, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release.

Philip Landler: We have also provided a slide presentation and a spreadsheet with historical segment information on our website.

Philip Landler: Finally in our prepared remarks revenue comparisons will be on a constant currency basis.

Philip Landler: Other items, such as EBIT, EBITDA, EPS and free cash flow on an adjusted basis and.

Philip Landler: And now I'd like to turn the call over to interim CEO Jason dies.

Jason C. Dies: Good morning, and thank you for joining the call on your ongoing investment and interest in Pitney Bowes. I'd like to start the call today by first addressing the recent changes to our board of directors before providing a high-level overview of our Q1 results. As many of you know, last year the board endorsed our strategic priorities focused on achieving efficiencies, simplifying the corporate structure, increasing efforts to maximize the value of GEC, and renewing our focus on our cash-generating and high-margin sectors.

Jason C. Dies: Good morning, and thank you for joining the call and your ongoing investment and interest in Pitney Bowes.

Jason C. Dies: I'd like to start the call today by first addressing the recent changes to our board of directors before providing a high level overview of our Q1 results.

Jason: As many of you know last year the board endorsed our strategic priorities focused on achieving efficiencies simplifying the corporate structure.

Jason: Increasing efforts to maximize the value of GEC and renewing our focus on our cash generating in high margin segments.

Jason C. Dies: Given the clarity on the path ahead and the confidence in our team to carry out that mission, several directors felt this year's annual meeting was an appropriate time to retire from the board. This will result in a more streamlined board for this next phase of Pitney Bowes' transformation.

Jason: Given the clarity on the path ahead, and our confidence in our team to carry out that mission. Several directors felt this year's annual meeting is an appropriate time to retire from the board.

Jason: This will result in a more streamlined board for this next phase of Pitney Bowes as transformation.

Jason C. Dies: I and the rest of the management team look forward to working with them to accelerate progress on the key priorities and opportunities ahead of us. I'd also like to thank our retiring board members for their leadership, guidance, and insights during this period of transformation. Their skills, experiences, and counsel have been invaluable as we reposition the company for an exciting future. Now, moving on to the first quarter.

Jason: I and the rest of the management team look forward to working with them to accelerate progress on our key priorities and opportunities ahead of us.

Jason: I'd also like to thank our retiring board members for their leadership guidance and insights during this period of transformation.

Jason: Their skills experiences and counsel have been invaluable as we reposition the company for an exciting future.

Jason: Now moving on to first quarter.

Jason C. Dies: Our results from the past quarter reflect the enterprise-wide changes in focus, priorities, and accountability that we've been implementing over the past few months. The impact of these changes is evident in our strength and performance across multiple parts of the business, with EBIT growing by more than $23 million on relatively flat revenue. This represents a 71% improvement when compared to the prior year. We also continue to make progress on our cost reduction and restructuring efforts. As a result, we now expect cost savings from the program we announced last year to exceed the $75 to $85 million target.

Jason: Our results from the past quarter reflect the enterprise wide changes and focus priorities and accountability that we've been implementing over the past few months.

Jason: The impact of these changes is evident in our strengthening performance across multiple parts of the business with EBIT growing by more than $23 million on relatively flat revenue.

Jason: This represents a 71% improvement when compared to prior year.

Jason: We also continued to make progress on our cost reduction and restructuring efforts as a result, we now expect cost savings from the program, we announced last year to exceed the $75 million to $85 million target we.

Jason C. Dies: We see additional opportunities to build on this momentum by maintaining strong execution and a disciplined focus on cost to increase cash flow and create capacity for investment in high-margin growth areas. At the segment level, Centech and PreSort Services recorded strong results in the quarter. Pre-sort achieved record revenue in EBIT with an expanded EBIT margin. We will continue to capitalize on our excellent operational and client support capabilities to create value in this segment. Sentec had another solid quarter with increased EBIT, expanding margins, and accelerating growth in shipping.

Jason: We see additional opportunities to build on this momentum by maintaining strong execution and a disciplined focus on cost to increase cash flow and create capacity for investment high margin growth areas.

Jason: At the segment level.

Jason: Rentech and Presort services recorded strong results in the quarter.

Jason: Presort achieved record revenue and EBIT with expanded EBIT margins, we will continue to capitalize on our excellent operational and client support capabilities to create value in this segment.

<unk> had another solid quarter with increased EBIT, expanding margins and accelerating growth in shipping.

Jason C. Dies: Sentech will continue to shift resources towards investments in our shipping capabilities, where we see meaningful long-term profitable growth potential. Global e-commerce grew domestic parcel volumes 20% in a challenging market and reduced operating expenses while delivering the best network performance since the pre-COVID era. The team continues to take the necessary steps to accelerate progress and improve results as we continue our efforts to maximize value for this segment. Looking ahead to our 2024 strategic and operational priorities, we continue to look at ways to increase accountability, streamline the organization, and further improve execution.

Jason: <unk> will continue to shift resources towards investments in our shipping capabilities, where we see meaningful long term profitable growth potential.

Jason: Global ecommerce grew domestic parcel volumes, 20% in a challenging market and reduced operating expense, while delivering the best network performance since the pre COVID-19 time frame.

Jason: The team continues to take the necessary steps to accelerate progress and improved results as we continue our efforts to maximize value for this segment.

Jason: Looking ahead into our 2020 for strategic and operational priorities. We continue to look at ways to increase accountability.

Jason: Dreamliner the organization and further improve execution.

Jason C. Dies: We will continue to simplify the business to both reduce cost and build on the productivity improvements that you've seen over the last couple of quarters. To complement these efforts, we have recently engaged an outside firm to help us identify and implement additional ways to remove complexity and increase efficiency. These savings will create capacity for us to further capitalize on attractive growth opportunities. Our shipping plan in Sentec represents one of these significant opportunities, where we can leverage our assets and footprint to drive meaningful growth in targeted verticals, particularly for enterprise clients.

Jason: We will continue to simplify the business to both reduce cost and build on the productivity improvements that you've seen over the last couple of quarters.

Jason: To complement these efforts we have recently engaged an outside firm to help us identify and implement additional ways to remove complexity and increase efficiency.

Jason: These savings will create capacity for us to further capitalize on attractive growth opportunities.

Jason: Our shipping playing zantac represents one of these significant opportunities, where we can leverage our assets and footprint to drive meaningful growth in targeted verticals, particularly for enterprise clients.

Jason C. Dies: We are leveraging our existing relationships in the office segment and will continue to invest in and develop specialized vertical shipping solutions with differentiated values. Similarly, in pre-sort services, we can leverage our national footprint, extensive transportation network, and operational excellence to drive growth in targeted areas. In closing, we're making significant progress against our strategic and financial objectives. As a reminder, we grew EBIT 28% in Q4 and have built on that with another 71% growth in the first quarter.

Jason: We are leveraging our existing relationships in the office segment, and we will continue to invest and develop specialized vertical shipping solutions with differentiated value.

Jason: Similarly in Presort services, we can leverage our national footprint extensive transportation network and operational excellence to drive growth in targeted areas.

Jason: Yeah.

Jason: In closing, we're making significant progress against our strategic and financial objectives.

Jason: As a reminder, we grew EBIT, 28% in Q4 and have built on that with another 71% growth in the first quarter.

Jason C. Dies: We also see significant opportunities to build on that momentum as we look forward, especially in the second half of the year. The progress we've made over the past seven months and the opportunities ahead give me great confidence in our future. I'd like to thank all of our teams for their hard work in delivering a strong first quarter and their continued dedication as we move through the next phase of our transformation. Now, I'd like to turn it over to John to discuss our Q1 results in more detail.

Jason: We also see significant opportunities to build on that momentum as we look forward, especially in the second half of the year.

Jason: The progress we've made over the past seven months and the opportunities ahead give me great confidence in our future.

Jason: Like to thank all of our teams for their hard work in delivering a strong first quarter and their continued dedication as we move through the next phase of our transformation.

Jason: And now I'd like to turn it over to John to discuss our Q1 results in more detail.

John Witek: Thanks Jason, and good morning everyone. As Jason highlighted, we drove significant progress over the past two quarters in improving execution and reducing costs. These actions are showing up in our financial results, especially on the bottom line, with first quarter EBIT up 71% year over year. Consolidated revenue was $831 million in the quarter, down 1% versus the prior year, with solid performance across each of the segments.

John Widick: Thanks, Jason and good morning, everyone.

John Widick: As Jason highlighted we drove significant progress over the past two quarters and improving execution and reducing costs.

John Widick: These actions are showing up in our financial results, especially on the bottom line with first quarter EBIT up 71% year over year.

John Widick: Consolidated revenue was $831 million in the quarter down 1% versus prior year with solid performance across each of the segments.

John Widick: EBIT improved 23 million to $56 million for the quarter driven.

John Witek: EBIT improved $23 million to $56 million for the quarter, driven by cost reduction actions and strong operational performance from Semtec and PreSort. EPS was flat versus the prior year at a loss of one cent as the EBIT improvement was offset by higher interest and tax expense. Our effective tax rate was high in the quarter, primarily due to unfavorable tax adjustments related to the U.S. taxation of our foreign operations and state valuation

John Widick: Driven by cost reduction actions and strong operational performance from Suntech and presort.

John Widick: EPS was flat versus prior year at a loss of <unk> as EBIT.

John Widick: That improvement was offset by higher interest and tax expense.

John Widick: Our effective tax rate was high in the quarter, primarily due to unfavorable tax adjustments related to the U S taxation of our foreign operations and state valuation allowance adjustments.

John Witek: Free cash flow was $17 million, which was an improvement of $43 million versus the prior year due to several items, including lower CapEx, changes in Finance Receivables, and lower pension and Retiree Medical Payments. Before I get to our segment results, I want to talk about our enterprise cost reduction efforts. As Jason mentioned, this is one of our key priorities in 2024.

John Widick: Free cash flow was a use of $17 million, which was an improvement of $43 million versus prior year due to several items, including lower capex.

John Widick: Changes in finance receivables and lower pension and retiree medical payments.

John Widick: Before I get to our segment results I want to talk about our enterprise cost reduction efforts.

John Widick: As Jason mentioned this is one of our key priorities in 2024.

John Witek: This was an area I directly oversaw prior to assuming this interim CFO role. We continue to progress on our restructuring plan in the quarter and now expect to exceed the high end of the $75 to $85 million range. Turning to our segments, effective January 1, 2024, we moved the digital delivery services offering, which was previously in GEC, to Centech to better leverage our go-to-market and our capabilities to create client value. We have recast prior-period financial results to conform with this change. Recast quarterly segment results can be found in the financial reporting section of our Investor Relations website.

John Widick: This was an area I directly oversaw prior to assuming this interim CFO role.

John Widick: We continued to progress on our restructuring plan in the quarter and now expect to exceed the high end of the $75 million to $85 million range.

John Widick: Turning to our segments effective January one 2024, we moved the digital delivery services offering which was previously in GEC, the centex to better leverage our go to market and our capabilities to create client value.

John Widick: We have recast prior period financial results to conform with this change.

John Widick: Recast quarterly segment results can be found within the financial reporting section of our Investor Relations website.

John Widick: Suntech continued its momentum from last quarter with another solid quarter from strong execution and growth in shipping.

John Witek: Sentech continued its momentum from last quarter with another solid quarter from strong execution and growth in shipping. However, revenue declined 2% to $327 million, while EBIT grew 6% to $101 million as product mix and cost reductions more than offset lower revenue. Shipping-related revenue grew 8% on a recast basis and now comprises 15% of total segment revenue. However, growth primarily came from our digital offerings, including subscriptions. Revenue from SAS subscriptions grew 40% year over year, building a strong base of recurring revenue. Lower in period equipment and professional services tempered the overall shipping growth. Mailing-related revenue declined 4% year-over-year, primarily from a decrease in our meter base due to a couple factors.

John Widick: Revenue declined 2% to 327 million, while EBIT grew 6% to $101 million as product mix and cost reductions more than offset lower revenue.

John Widick: Shipping related revenue grew 8% on a recast basis and now comprises 15% of total segment revenue.

Growth, primarily came from our digital offerings, including subscriptions.

John Widick: Revenue from SaaS subscriptions grew 40% year over year building, a strong base of recurring revenue.

John Widick: Lower in period equipment and professional services tempered the overall shipping growth.

John Widick: Mailing related revenue declined 4% year over year, primarily from a decrease in our meter base due to a couple of factors. One overall secular decline in the installed base and to an expected uptick in cancellation rates as we near the tail end of our product migration.

John Witek: One, an overall secular decline in the installed base. And two, an expected uptick in cancellation rates as we near the tail end of our product migration. Also, the current phase of our product lifecycle, with more lease extensions than new placements, negatively impacted in-period results. As a reminder, this shift results in lower equipment sales, partially offset by higher margin financing revenue spread over the lease term. We expect these headwinds to increase in the second half of the year as we near the end of the migration process.

John Widick: Also the current phase of our product lifecycle with more lease extensions than new placements negatively impacted in period results.

John Widick: As a reminder, this shift results in lower equipment sales, partially offset by higher margin financing revenue spread over the lease term.

We expect these headwinds to increase in the second half of the year as we near the end of the migration process.

John Widick: In the quarter, we migrated about 5% of our total install base to our new product lines and ended the quarter with 77% of our total base on the new IMI technology.

John Witek: In the quarter, we migrated about 5% of our total installed base to our new product lines and ended the quarter with 77% of our total base on the new IMI technology. As a reminder, our low and mid-volume product lines are further along in our migration process and are required to be IMI compliant by the end of this year. Our high volume products are in the early stages and have until 2027 to be compliant.

John Widick: As a reminder, our low and mid volume product lines are further along in their migration process and are required to be IMI compliant by the end of this year.

John Widick: Our high volume products are in the early stages and have until 2027 to be compliant.

John Widick: This quarter, we benefited from about $6 million of in period revenue as a result of two large deals signed in the fourth quarter of 2023 and implemented this quarter.

John Witek: This quarter, we benefited from about $6 million of in-period revenue as a result of two large deals signed in the fourth quarter of 2023 and implemented this quarter. Inside the financial services portion of Centech, net finance receivables were $1.2 billion and remained relatively flat, declining $2 million versus the prior year. We also continue to make progress on our previously announced program where our bank is participating in the financing of select captive lease receivables, an initiative that will be good for the bank and the enterprise overall.

Inside the financial services portion of center net finance receivables were $1 $2 billion and remained relatively flat declining $2 million versus the prior year.

John Widick: 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 initiative that will be good for the bank and the enterprise overall.

John Witek: Shifting to Sentex Segment Profitability, Gross Profit was flat despite revenue declines as we had a favorable mix of higher-margin revenue streams. Financing revenue grew 1%, and business service revenue grew 36%, primarily as a result of higher SAS subscription and volume-based revenue streams from our digital shipping offerings. Gross margins continued to benefit from improvements we made to our supply chain in 2023, which resulted in lower product and transportation costs. Simplification and cost reduction initiatives drove a $6 million, or 5%, decline in operating expenses year over year. Next, moving to a pre-sort service.

John Widick: Shifting to Centex segment profitability gross profit was flat despite revenue declines as we had a favorable mix of higher margin revenue streams.

John Widick: Financing revenue grew 1% and business service revenue grew 36%, primarily as a result of higher SaaS subscription and volume based revenue streams from our digital shipping offerings.

John Widick: Gross margins continued to benefit from improvements we made to our supply chain in 2023, which resulted in lower product and transportation costs.

John Widick: Simplification and cost reduction initiatives drove a $6 million or 5% decline in operating expenses year over year.

John Widick: Next moving to Presort services.

John Witek: PreSort had another great quarter and achieved its highest ever quarterly revenue in EBIT. The segment's continued excellent performance is a testament to the high quality of our product offering. Revenue was $170 million, up 7% year over year. Higher revenue per piece drove the growth. However, sorted volume declined 2% to 3.9 billion pieces.

John Widick: Presort had another great quarter and achieved its highest ever quarterly revenue and EBIT.

The segment's continued excellent performance is a testament to the high quality of our product offering.

Revenue was $170 million up 7% year over year higher revenue per piece drove the growth.

John Widick: Sorted volume declined 2% to $3 9 billion pieces.

John Widick: Turning to margin higher revenue per piece, along with a 10% improvement in labor productivity and a 7% improvement in unit transportation costs drove nearly a 700 basis point expansion in EBIT margins.

John Witek: Turning to margin, higher revenue per piece, along with a 10% improvement in labor productivity and a 7% improvement in unit transportation costs, drove nearly a 700 basis point expansion in EBIT margin. EBIT was $40 million in the quarter. Year-over-year improvement in both revenue and EBIT did benefit from a $5 million one-time prior period adjustment booked in this quarter. However, even without this benefit, PreSort still would have achieved record revenue and EBIT. We continue to raise the bar on labor productivity, with pieces fed per labor hour improving at 27 of our 33 sites and reaching an all-time high for us.

John Widick: EBIT was $40 million in the quarter.

John Widick: Year over year improvement in both revenue and EBIT.

John Widick: Did benefit from a $5 million of one time prior period adjustment booked in this quarter.

John Widick: Even without this benefit presort still would have achieved record revenue and EBIT.

John Widick: We continue to raise the bar on labor productivity with pieces fed per labor hour, improving at 27 of our 33 sites and reaching an all time high for us.

John Witek: Investments in automation equipment continue to bring meaningful step-ups in productivity. We are also realizing better labor efficiencies through investments in analytics and process standardization across our network. On the transportation side, we continue to optimize both our insourced fleet and our outsourced contract lanes. Now, turning to global e-commerce. Segment revenue was $333 million, with domestic parcel growing 8% and cross-border declining 49%. We will lap the headwind and cross-border decline next quarter.

John Widick: Investments in automation equipment continue to bring meaningful step ups in productivity.

John Widick: We are also realizing better labor efficiencies through investments in analytics and process standardization across our network.

John Widick: On the transportation side, we continued to optimize both our in source fleet and our outsource contract lanes.

John Widick: Turning to global ecommerce.

John Widick: Segment revenue was $333 million with domestic parcel growing 8% and cross border declining 49%.

John Widick: We will lap the headwind and cross border next quarter.

John Witek: EBIT and EBITDA were a loss of $35 million and $21 million, respectively, which were $2 million and $3 million worse than the prior year. The year-over-year decline was driven by lower gross profit and partially offset by a 19% reduction in our operating expenses. Turning to the domestic parcel space specifically, we continued to see three trends. One, volume growth. Two, lower revenue per piece. And three, better cost per piece.

John Widick: EBIT and EBITDA were a loss of $35 million and $21 million, respectively, which were $2 million and $3 million worse than prior year.

John Widick: Year over year decline was driven by lower gross profit and partially offset by a 19% reduction in our operating expenses.

John Widick: Turning to the domestic parcel space, specifically, we continued to see three trends one volume growth to lower revenue per piece and three better cost per piece.

John Witek: Domestic parcel continued to add volume in a soft market. We processed 60 million parcels in the quarter, 20% growth over the prior year. Service levels remain very competitive, which is helping us attract volumes and offset fixed costs. Our network performed the best it has ever during the quarter, with more than 80% of our overall volume delivered in less than 3 days and return volume processed consistently within 4-5 days. Revenue per piece declined 10% as market overcapacity continues to put downward pressure on prices.

John Widick: Domestic parcel continue to add volume in a soft market, we processed 60 million parcels in the quarter, 20% growth over prior year.

John Widick: Service levels remain very competitive, which is helping us attract volumes and offset fixed costs are.

John Widick: Our network performed the best it has during the quarter with more than 80% of our overall volume delivered in less than three days and return volume process consistently within four to five days.

Revenue per piece declined 10% as market overcapacity continues to put downward pressure on price.

John Witek: Our client and product mix also shifted towards lower revenue per piece with lighter weight and shorter zone delivery volume and fewer returns. Both shifts are consistent with larger market trends. Moving to costs, we continue to make steady progress in driving efficiency from prior investments in technology and systems. However, lower revenue per piece more than offsets improvements in unit cost. Unit transportation costs declined 24%, driven by productivity improvements and increased leverage from higher volumes.

John Widick: Our client and product mix also shifted towards lower revenue per piece with lighter weight and shorter zone delivery volume and fewer returns.

John Widick: <unk> shifts are consistent with larger market trends.

John Widick: Moving to costs, we continue to make steady progress in driving efficiency from prior investments in technology and systems.

John Widick: However, lower revenue per piece more than offset improvements in unit costs.

John Widick: Unit transportation costs declined, 24% driven by productivity improvements and increased leverage from higher volumes.

John Witek: Transportation utilization improved significantly in the quarter, as insourcing of certain lanes and the rollout of our regional model yielded results. We are also seeing better labor productivity, which improved 12% year over year. Total fixed costs were higher versus the prior year from investments in our network and automation made in the first half of last year. Despite higher absolute costs.

John Widick: Transportation utilization improved significantly in the quarter as in sourcing of certain lanes and the rollout of our regional model yielded results.

John Widick: We are also seeing better labor productivity, which improved 12% year over year.

John Widick: Total fixed costs were higher versus prior year from investments in our network and automation made in the first half of last year.

John Widick: Despite higher absolute cost unit fixed cost improved year over year from higher volumes.

John Widick: To wrap up our first quarter was strong.

John Witek: Unit Fixed Costs improved year-over-year from higher volume. To wrap up, our first quarter was strong. We made progress in each of our segments, and our cost reduction initiatives helped deliver a significant bottom line improvement. We exited this quarter on a good trajectory and are optimistic about the opportunities in front of us, especially in the second half of the year. With that, thank you, and Operator, please open the line for questions.

John Widick: We made progress in each of our segments and our cost reduction initiatives helped deliver a significant bottom line improvement.

John Widick: We exited this quarter on a good trajectory and are optimistic about the opportunities in front of us, especially in the second half of the year.

Speaker Change: With that thank you and operator, please open the line for questions.

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

Speaker Change: Thank you, ladies and gentlemen, if you'd like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press one then zero at this time and one moment. Please for your first question.

Operator: Once again, if you have a question, please press 1 then 0 at this time. And one moment, please, for your first question. Your first question comes from the line of Anthony Lebiedzinski from Sidoti and Company. Please go ahead.

Speaker Change: Your first question comes from the line of Anthony <unk> from Sidoti <unk> Company. Please go ahead.

Anthony: Good morning, and thank you for taking the questions.

Anthony Chester Lebiedzinski: Good morning, and thank you for taking the questions. So it's certainly nice to see the EBIT improvement in pre-sort and SENTEC. You know, as far as, you know, pre-SOAR, especially... You know, so I guess, you know, as far as on the pre-sort side, maybe we could start there. I know you guys have done well in that segment and have made some acquisitions also in that segment. Just wondering, what's your confidence level and your ability to sustain this strong performance and whether you're looking for, perhaps, additional acquisitions and resorts?

Anthony: So it's certainly nice to see the EBIT improvement.

Anthony: Police sorts and.

Anthony: Fantastic.

Anthony: As far as you know pre sort of especially.

Speaker Change: So I guess no.

As far as.

Speaker Change: Presort side.

Speaker Change: We could start there.

Speaker Change: I know you guys.

Speaker Change: Has done well in that segment that have done some acquisitions also in that segment.

Speaker Change: So just wondering what's your confidence level and your ability to sustain this strong performance and whether youre looking.

Speaker Change: So perhaps the additional acquisitions.

Speaker Change: Resorts.

Speaker Change: Yeah, Anthony Shar. This is Jason I'll take that so you know.

Jason C. Dies: Yeah, Anthony, sure. This is Jason.

Jason: I appreciate the comments on the call out I'm presort that team certainly had a fantastic quarter, but you know as I've said on previous calls you know they've had a fantastic few years. The past few years, they've done a tremendous job of driving both topline and bottomline growth.

Jason C. Dies: I'll take that. So, you know, I appreciate the comments and the call out on pre-tax that team certainly had a fantastic quarter. But you know, as I've said on previous calls, they've had a fantastic few years. The past few years, they've done a tremendous job of driving both top line and bottom line growth. You know, that team, I think, still has plenty of runway.

Jason: That team I think still has plenty of runway. If you think about the market and you think about the dynamics in the market we've done a tremendous job of bringing in additional volumes. Despite the overall headwinds from <unk>.

Jason C. Dies: If you think about the market and you think about the dynamics in the market, we've done a tremendous job of bringing in additional volumes, despite the overall headwinds from, you know, first-class mail. We have growth opportunities in that space as well, and not only from additional offerings around things like marketing mail but also additional opportunities, as you pointed out, to pull in additional volumes, both from clients who have traditionally outsourced. That worked before, who now look to outsource it, but also from, you know, taking additional share by bringing in additional acquisition opportunities.

Jason: First class mail, we have growth opportunities in that space as well and not only from additional offerings around things like marketing mail, but also additional opportunities as you pointed out to pull in additional volumes both from clients who have traditionally in sourced that work before who now look to outsource it but.

Jason: So from a you know.

Jason: Taking additional share by bringing in additional acquisition opportunities. We are certainly focused on that in the past I think the number off the top of my head is we've probably done 28 12 acquisitions in that space in the past 10 years. It's certainly something we continue to look at and I think we have continued opportunity.

Jason C. Dies: We've certainly focused on that in the past. I think, off the top of my head, we've probably done 12 acquisitions in that space in the past 10 years. It's certainly something we continue to look at, and I think we have a continued opportunity to drive both top-line and bottom-line growth, both because we can take in volumes on the top line, but secondly, I'd just call out again the productivity that that team has been able to deliver. You know, John mentioned it, I think, in his comments.

Jason: To drive both topline and Bottomline growth, both because we can take in volumes on the topline, but secondly, I'd just call out again, the productivity that that team has been able to deliver has been outstanding.

Jason: John mentioned that I think in his comments, we had 27% to 33 sites improve productivity across the network.

Jason C. Dies: We had 27 of 33 sites improve productivity across the network. They were up about 10% on pieces fed per labor hour, which is one of the key metrics that that team focuses on, and in the quarter, we were able to take out about 150,000 labor hours. So if you look at kind of all the metrics on that business, we feel very good about it, and we are going to be very aggressive in trying to, you know, bring in additional volumes into that because they can be creative very quickly.

Jason: They were up about 10% on pieces fed per labor hour, which is one of the key metrics that that team focuses on and in the quarter. We were able to take out about 150000 labor hours. So if you look at kind of all the metrics on that business. We feel very good about it and we are going to be very aggressive in trying to bring in additional.

Jason: Volumes into that because they can be accretive very quickly.

Speaker Change: Got it thanks for that and then Jason you and John both sounded I guess more optimistic about the second half of the year.

Jason C. Dies: Got it. Yeah, thanks for that.

Jason C. Dies: And then, Jason, you and John both sounded, I guess, more optimistic about the second half of the year. What's driving that optimism? And whether or not there's something to read into the second quarter? Or are you being just less optimistic about the near term?

Speaker Change: What's driving that optimism.

Speaker Change: And whether or not.

Speaker Change: They are subject to lead into the second quarter or are you being just less.

Speaker Change: Optimistic about the near term.

Speaker Change: So just wanted to.

Speaker Change: For you to take that opportunity to square that away.

Jason C. Dies: Yeah, look, I don't think you should read too much into our confidence in the second quarter versus the second half. You know, I certainly see opportunities as we continue to progress throughout the year. You know, I think the comment that John and I were making is as we look at kind of this next round of cost improvements and restructuring, that's going to take a little bit of time to bake in. So as we're doing that work now, you'll start to see the improvements of that more in the second half than you will in the first half.

Speaker Change: Yeah look I don't think you should read and majorly on our on our confidence in the second quarter versus the second half I certainly see opportunities as we continue to progress throughout the year I think the comments that John and I was and I were making there is as we look at kind of this next round of cost improvements and restructuring that's going to take a little bit of time to bake and so as we're doing.

Speaker Change: That work now you'll start to see the improvements of that more in the second half than you will in the first half and then I think as you look from a business segment point of view certainly I think presort has opportunity in the back half of the year that I think will increase and I think <unk> will continue to see benefit as they grow their shipping business. So.

Jason C. Dies: And then, I think as you look from a business segment point of view, certainly, I think PreSort has an opportunity in the back half of the year that I think will increase, and I think Sentec will continue to see, you know, benefit as they grow their shipping business. So it's not necessarily a statement of the timing on that, but you know, particularly around the cost takeout in this next round that we're going to be working with the third party on, that is going to take a little bit of time. So I wouldn't read into it too much, but it's a fair comment.

Speaker Change: It's not a statement necessarily of the timing on that but you know, particularly around the cost take out in this next round that we're going to be working with a third party on that is going to take a little bit of time, so I wouldn't read into too much but it's a fair comment.

Speaker Change: Okay got you okay. Thanks for that and then.

Jason C. Dies: Okay, gotcha. Okay, thanks for that. And then, you know, in terms of GEC, I know that this is the last quarter, I believe that you're lapping the Unknown Executive, Kartik Mehta, Philip Landler, John Witek, Pitney Bowes Inc, Ananda Baruah, Anthony Lebiedzinski, Matthew Swope, Ned Zachar, Peter Sakon, Jason Dies, Unknown Executive, Kartik Mehta, Philip Landler, John Witek, Pitney Bowes Inc, Ananda Baruah, Anthony Lebiedzinski,

In terms of GEC I know that this is the last quarter I believe that you're lapping the.

Speaker Change: Cost border headwinds that being said you know the bill.

Speaker Change: Admittedly still lost more money there.

Speaker Change: Was a shareholder letter sent to the board of directors a couple of days ago. Just wondering if you guys have a response to that and how.

Speaker Change: How do we think about this.

Speaker Change: Nearer term, but longer term this segment.

Speaker Change: Yeah look I mean, it's not going to be a tremendously different answer than I've I've given in the past you know what I've said is we are certainly focused on maximizing the value of that business as best we can I think the team has done a really good job of creating value with that business over the past few months and over the past few years.

Jason C. Dies: Yeah, look, I mean, it's not going to be a tremendously different answer than I've given in the past. You know, what I've said is that we are certainly focused on maximizing the value of that business as best we can. I think the team has done a really good job of creating value in that business over the past few months and over the past few years. Now, when you think about kind of what's going on in that business, I'll just kind of step back and give a little bit of color on it. You know, clearly, there are a couple of headwinds that we're facing.

Speaker Change: Think about kind of what's going on in that business I'll, just kind of step back and give a little bit of color on it.

Speaker Change: You know clearly there's a couple of headwinds that we're facing the market is clearly at overcapacity you heard that from multiple of our competitors you heard it from the USPS is they talked about their volumes.

Jason C. Dies: The market is clearly at overcapacity. You heard that from multiple of our competitors. You heard it from the USPS as they talked about their volumes.

Speaker Change: That's creating tremendous pressure on rate per piece.

Jason C. Dies: That's creating tremendous pressure on the rate per piece. That said, if you look at kind of the three factors that we've always talked about for that business, we always talk about volumes as being important, and we're doing very well on that. We continue to grow volumes and bring clients into our network, which is a testament to the value we can provide to clients and a recognition by clients of the value we provide. Secondly, we are improving on cost performance. We continue to make strides there, and again, I would say that the team has really taken up the banner on that over the last two or three quarters.

Speaker Change: That said if you look at kind of the three factors that we've always talked about for that business. You know, we always talk about volumes as being important and we're doing very good on that we continue to grow volumes and bring clients into our network, which is a testament of the value we can provide to clients and a recognition by clients of the value we provide.

Speaker Change: Secondly is is improving on cost performance.

Speaker Change: We continue to make strides there and again I would say that the team has really taken up the banner on that over the last two or three quarters or this quarter I think John said were down 19% on Opex.

Jason C. Dies: This quarter, I think John said, we were down 19% on OPEX, which is a really solid improvement. And then the third variable is the one I just mentioned, which is the price and the rate per piece in the market, which is clearly at a tough point market-wide, not just with us. And that's going to take some time to stabilize out and stabilize. You know, that said, if you look at what we're doing, from an internal perspective, we're doing the things that we need to do for both short-term and long-term success. We are driving more volumes into the network to cover our fixed costs.

Speaker Change: Is really solid improvement and then the third variable is the one I just mentioned, which is kind of the price and the rate per piece in the market, which is clearly.

Speaker Change: At a at a tough point market why not just with us and thats going to take some time to stable out and to stabilize.

Speaker Change: That said if you look at what we're doing from an internal perspective.

Speaker Change: We're doing the things that we need to do for both short term and long term success, we are driving more volumes into the network to cover our fixed costs. We are working to make our mix more effective right. If you think about that rate per piece of things like focusing on our returns business, which generally comes in at a better rate per piece and we're continuing to focus on.

Jason C. Dies: We are working to make our mix more effective, right? If you think about that rate per piece, things like focusing on our returns business, which generally comes in at a better rate per piece. And we're continuing to focus on cost reductions, and you'll see more improvement on that as we go forward throughout the year. So internally, we're focused on what we can control to make the business better. Externally, we're looking at things like partnerships and other opportunities that present themselves in the market to make sure that we maximize the value of this business going forward.

Speaker Change: Cost reductions and you'll see more improvement on that as we go forward throughout the year. So internally we're focused on what we can control to make the business better externally, we're looking at things like partnerships and other opportunities that present themselves in the market to make sure that we maximize the value of this business going forward.

Speaker Change: Got it thanks for that and then last question.

Jason C. Dies: Got it. Yeah, thanks for that. And then last question. Before I pass it on to others, I guess maybe for John, you know, so, you know, the tax rate was higher here in the first quarter. What do we think about the tax rate for the balance of the year?

Speaker Change: Before I pass it onto others I guess, maybe for John So.

John Widick: The tax rate was higher here in the first quarter, how do we think about the tax rates for the balance of the year.

John Witek: Yeah, so thanks for the question. The tax rate in the quarter was really affected by a couple of things. Really, the tax-only permanent tax items were really due to the unfavorable mix between US and foreign income, the U.S. tax on foreign income, and some permanent disallowances of deductions. So, that's what we would expect aligned right now. There's opportunity to take a better look at that.

John Widick: So thanks for the question.

John Widick: <unk> rate in the quarter was really affected by a couple of things really tax only permanent tax items really was due to the unfavorable mix between U S and foreign income.

Speaker Change: The tax on the U S tax on foreign income and some permanent disallowances of deductions. So that's.

Speaker Change: That's what we would expect.

Speaker Change: Aligned right now and Uh huh.

Speaker Change: There is opportunity to two.

Speaker Change: Take a better look at that.

Speaker Change: Understood. Okay. Thank you and best of luck.

Anthony Chester Lebiedzinski: Understood. Okay. Thank you and best of luck!

Speaker Change: Thanks Anthony.

Operator: Once again, if you'd like to ask a question, please press 1 then 0. Next, we'll go to the line of Matt Swope from Baird. Please go ahead.

Speaker Change: Once again, if you'd like to ask a question. Please press one zero.

Speaker Change: Next we'll go to the line of Matt Swope from Baird. Please go ahead.

Hi, Good morning, Jason and John Jason you've done a fantastic job in the interim role, but it's gone on for a long time, we've got an interim CFO now as well it feels like the board is up in the air with all the changes that have gone on in an impending vote.

Matthew Warren Swope: Good morning, Jason, and John. Jason, you've done a fantastic job in the interim role, but it's gone on for a long time. We've got an interim CFO now as well. It feels like the board is up in the air with all the changes that have gone on and an impending vote. Can you help us feel more comfortable about something a little more permanent in terms of management here both on the board side and, maybe, you could remind us when the next board vote is and then with the CEO and CFO positions?

Speaker Change: Can you help us feel more comfortable about.

Speaker Change: And it's something a little more permanent in terms of management here both on the board side, and maybe you could remind us when the next board.

Speaker Change: Vote is and then what the CEO and CFO positions.

Jason: Yeah, I'll take I'll take that in two parts. So we do have our shareholder annual meeting on Monday may six so that'll be the time when we see this new constitution, a new iteration of the board take take effect.

Jason C. Dies: Yeah, I'll take it in two parts. So we do have our shareholder annual meeting on Monday, May 6. So that'll be the time when we see this new constitution or new iteration of the board take effect. But what I would say is, you know, the board has undergone significant change over the past year, right? I mean, there's no doubt about that.

Speaker Change: What I would say is.

Speaker Change: You know the board has undergone significant change over the past year right. I mean, there is no doubt about that.

Speaker Change: Even back before the proxy over a year ago. We had we had changes to the board. The board has been working through that I will tell you they've been very effective at helping us to create the mandate and the strategic direction going forward.

Jason C. Dies: You know, even back before the proxy over a year ago, we had changes to the board. The board has been working through that, and I will tell you, they've been very effective at helping us to create the mandate and the strategic direction going forward. If you look back over the past, you know, six to nine months, there's been absolute clarity from the board on what we need to get done and how we need to progress against our strategic objectives.

Speaker Change: If you look back over the past six to nine months Theres been absolute clarity from the board on what we need to get done and how we need to progress against our strategic objectives. So from a board dynamics perspective, I personally don't have any issue at all and I don't think there's been any hesitation with the board on what we need to do how we need to prove.

Speaker Change: Rest of the business and kind of what the priorities are for P. B as we go forward, so theres been tremendous stability stability.

Jason C. Dies: So from a board dynamics perspective, I personally don't have any issue at all. And I don't think there's been any hesitation with the board on what we need to do, how we need to progress the business, and kind of what the priorities are for PB as we go forward. So there's been tremendous stability in that respect, despite board members for sure coming on and off the board. I look forward to working with the new board, you know, as of May 6, many of them have been around for a bit.

Speaker Change: From that respect despite board members for sure coming on and off the board I look forward to working with the New Board.

Speaker Change: May six many of them have been around for a bit and so I do know them and have a comfort level with them and think we'll be able to work together effectively to progress our goals.

Jason C. Dies: And so I do know them and have a comfort level with them, and think we'll be able to work together effectively to progress our goals. On the CEO search, you know, we're kind of in the same spot that we've been in for a while. And, you know, we have had, you know, no updates on that today to announce.

Speaker Change: On the CEO search.

Speaker Change: We're kind of in the same spot that we've been in for a while and we have had.

Speaker Change: No no updates obviously on that today to announce.

Jason C. Dies: We are in a similar place this quarter as we were last quarter, with the board considering internal and external candidates for the role. I will say, you know, the additional point I want to make on this is that the board continues to give me a very active mandate to execute on that strategic set of priorities that I talked about before. And they've supported me, you know, soup to nuts on the decisions that I've made as we've progressed the business over the past couple of quarters.

Speaker Change: We are in a similar place this quarter as we were last quarter with the board considering internal and external candidates for the role.

Speaker Change: I will say the.

Speaker Change: The additional point I want to make on this is that the board continues to give me a very active mandate to execute on that strategic set of priorities that I talked about before and they've supported me soup to nuts on the decisions that I've made is we've progressed the business over the past couple of quarters. So we've made a lot of progress over the last six months.

Jason C. Dies: So, we've made a lot of progress over the last six months, especially driving better execution and improving our cost base, and I remain very optimistic about what we will continue to do as we look forward to the second half of the year.

Speaker Change: Especially on driving better execution, and improving our cost base and I remain very optimistic about what we continue to do as we look forward over the second half of the year.

Speaker Change: That's that's all helpful. Jason Thank you and I mean would it be would it be right to assume that post the shareholder meeting next week.

Jason C. Dies: That's that's all very helpful, Jason. Thank you.

Jason C. Dies: And then what would it be? Would it be right to assume that after the shareholder meeting next week? Something could happen, you know, before May's out, to get a little more permanent on some of those.

Speaker Change: Something could happen.

Speaker Change: Before amaze out to get a little more permanent on some of those.

Jason C. Dies: Look, I'm not going to prejudge or pre-announce anything that the board may or may not do. You can understand that making a decision about a CEO, for sure, and a CFO, in particular, are the most important decisions a board can make, and I respect them for taking the time and effort that they need to make sure that we have the right person in place to take Pitney Bowes forward.

Jason: Look I'm not going to I'm not going to prejudge, our pre announcing anything that the board may or may not do you can understand that making a decision around a CEO for sure in a CFO in particular are the most important decisions. The board can make and I respect them for taking the time and effort that they need to make sure that we have the right person in place to take Pitney Bowes.

Speaker Change: Sure.

Speaker Change: That's fair enough. Thank you and then on Suntech and presort.

Speaker Change: Really good numbers in both but obviously both businesses that are under some secular pressure can you highlight you guys mentioned in your comments both the.

Matthew Warren Swope: Can you highlight, you guys mentioned in your comments both the continued reduction in the meter base in Sentec and then the decline in volumes in PreSort. As we model forward, how do you think about just sort of an average secular decline in both of those things, both in postage meters and in volumes in PreSort?

Speaker Change: Continued reduction in the meter base in Centex and then.

Speaker Change: The decline in volumes in presort as we model forward.

Speaker Change: How do you think about just sort of an average secular decline in both of those things both in postage meters and in volumes in presort.

Speaker Change: Yeah look I'll take them, one at a time and I would say.

Jason C. Dies: Yeah, look, I'll take them one at a time. And I would say, you know, the market headwinds have not changed substantively in any business in either of the two businesses from what we've seen, you know, so as you think about the market decline and pre-sort on first class letters, it's been pretty steady. Off the top of my head, it's been in the six to 8% decline range, if memory serves. You know, the good news is, as I've said, we've been able to continue to grow revenue, not just the past couple quarters, but the past few years in that business.

Speaker Change: You know the market headwinds have not changed substantively in any business in either of the two businesses from what we've seen so as you think about the market decline in presort on first class letters, it's been pretty steady off the top of my head it's been in the 6% to 8% decline range if memory serves.

Speaker Change: The good news is as I've said, we've been able to continue to grow revenue not just the past couple of quarters, but the past few years in that business and again as you well know pre sorted a little counter cyclical as those first class volumes go down or opportunity to in source volumes from other parties goes up and so I do.

Jason C. Dies: And again, as you well know, pre-sort is a little counter-cyclical. As those first class volumes go down, our opportunity to insource volumes from other parties goes up. And so I do like the part the opportunity that pre-sort has ahead of it going forward to continue to do that, to continue to bring volumes in. And as we've demonstrated, we can make those volumes accretive very quickly and can do it in a very productive way that drives both top line and bottom line growth.

Speaker Change: Do like the opportunity that presort has ahead of it going forward to continue to do that to continue to bring volumes in and as we've demonstrated we can make those volumes accretive very quickly and can do it in a very productive way that drives both topline and bottomline growth.

Jason C. Dies: On the Sentex side, again, no change in the mail trajectory on that either. What I will say on the Sentex side is we've done a tremendous job on two fronts over the past couple of years. One is with our new product portfolio, which is now refreshed from the top of the line all the way down to the bottom of the line. Over the past couple of years, we've been able to outrun market headwinds just by bringing new products with new value into the market. That's the key point.

Speaker Change: On the <unk> side again, no change in the mail trajectory on that either what I will say on the <unk> side is we've done a tremendous job on two fronts over the past couple of years, one is with our new product portfolio, which is now.

Speaker Change: Refreshed from the top of the line all the way down to the bottom line over the past couple of years, we've been able to outrun the market headwinds just by bringing new products with new value into the market and that's the key point, we keep finding ways to deliver value to clients on those products.

Jason C. Dies: We keep finding ways to deliver value to clients on those products. The thing that's particularly interesting about Sentec is the shift we've been able to make into an adjacent space in shipping, which gives us tremendous opportunity going forward. And I'll just remind you that, if you think about the enterprise and office space where Pitney Bowes has traditionally had its bread and butter from a mailing perspective, we have relationships and brand reputation in that space that's allowed us to move into that office shipping space very aggressively.

Speaker Change: Thing, that's particularly interesting interesting on Suntech is the shift we have been able to make them to an adjacent space and shipping which gives us tremendous opportunity going forward and I'll just remind you on that if you think about the enterprise and office space, where Pitney Bowes has traditionally had its bread and butter from a mailing perspective, we have relation.

Speaker Change: Ships and brand reputation in that space, that's allowed us to move into that office shipping space very aggressively if you think about our SaaS business. This past quarter. We grew our SaaS revenue in the shipping side, 40% and if you look under the covers at what we've been able to do in the enterprise space. So think about large.

Jason C. Dies: If you think about our SaaS business this past quarter, we grew our SaaS revenue on the shipping side by 40%. And if you look under the covers at what we've been able to do in the enterprise space, think about large clients, Fortune 500 companies, we actually grew our SaaS revenue 61% in the first quarter. So if you think about shipping as a growing part of that business portfolio going forward and offsetting the natural decline that you have in the mailing business, our job is really two parts.

Speaker Change: Large clients a fortune 500 companies, we actually grew our SaaS revenue, 61% in first quarter. So as you think about shipping as a growing part of that business portfolio going forward and offsetting the natural decline that you have in the mailing business.

Speaker Change: Our job is really two parts one is to stem the mailing decline as best we can and we've demonstrated that we've been able to do that by introducing new value and new products and second to began to grow into an adjacent space shipping now is going to be somewhere north of 230 $240 million of revenue this year as part of that.

Jason C. Dies: One is to stem the mailing decline as best we can, and we've demonstrated that we've been able to do that by introducing new value and new products. And second, to begin to grow into an adjacent space. You know, shipping now is going to be somewhere north of 230, 240 million dollars of revenue this year as part of that portfolio. It's a tremendous growth success story that we're going to continue to leverage as we go forward.

Speaker Change: Portfolio, it's a tremendous growth success story that we're going to continue to leverage as we go forward.

Speaker Change: That's great.

Matthew Warren Swope: That's great. Thank you for both of those. And then just the last one for me.

Speaker Change: Thank you on both of those and then just the last one for me on <unk> you guys have talked in the past about one of the things driving the revenue per piece down being lower weight per piece can you talk about that trend and where that sits now.

Matthew Warren Swope: On GEC, you guys have talked in the past about one of the things driving the revenue per piece down being lower weight per piece. Can you talk about that trend and where that sits now?

Speaker Change: Yeah look I mean, I'm not going to get into parsing the types of volumes necessarily because I think to some degree that's that's going down a rabbit hole, but you are correct. If you look at the market as a whole the market has a whole has been affected by increased volumes coming from Asia and China in particular, those volumes think about things like <unk>.

Jason C. Dies: Yeah, look, I'm not going to get into parsing the types of volumes necessarily because I think to some degree that's going down a rabbit hole. But you are correct.

Jason C. Dies: If you look at the market as a whole, the market as a whole has been affected by increased volumes coming from Asia and China, in particular. Those volumes, think about things like Timu, Alibaba; those types of places tend to come in at a much lower weight, which definitely impacts the rate per piece as you go, as you pursue the business. You know, that said, there's always opportunities from a mixed perspective; there's always opportunities that you have to try to go after, you know, improvements in rate per piece.

Speaker Change: <unk> Alibaba those types of places tend to come in at a much lower much lower weight, which definitely impacts the rate per piece as you go as you as you prosecute the business that said, there's always opportunities from a mix perspective, theres always opportunities that you have to try to go after.

Jason C. Dies: What I will tell you is this market is very hard right now with the overcapacity that's out there. I think the USPS had a number that said there was about 12 million parcels a day of overcapacity across the entire country. And until that begins to normalize a little bit, I think you're going to continue to see pressure on that rate per piece.

Speaker Change: Improvements in rate per piece, what I will tell you is this market is very hard right now with the overcapacity.

Speaker Change: That's out there I think the U S. P. S had a number that said there was about a 12 million parcel a day overcapacity across the entire country.

Speaker Change: And until that begins to normalize a little bit I think youre going to continue to see pressure on that rate per piece.

Matthew Warren Swope: Great. Thanks, Jason, for all the answers.

Speaker Change: Great. Thanks, guys for all the answers.

Speaker Change: Thank you Matt.

Speaker Change: Your next question comes from the line of will Bruno <unk> from Northcoast Research. Please go ahead.

Operator: Your next question comes from the line of Will Brunman from North Course Research. Please go ahead.

Will Brunman: Hey guys, so I was going to ask you about the current environment for global e-commerce and whether you guys are seeing pricing competition on that side stabilized? And then I have one follow-up.

Will Bruno: Hey, guys. So I was going to ask you about what youre seeing in the current environment for global E Commerce and for.

Will Bruno: Are you guys seeing pricing competition on that side to stabilize and then I have one follow up.

Speaker Change: Yes look what I would say is <unk>.

Jason C. Dies: Yeah, look, what I would say is that pricing competition remains very robust. You know, and again, it stems from this overcapacity piece that we've talked about a few times. I will tell you our win rates in the market tend to be about what they've been over the past few quarters, so we think we're competing effectively. And if you look at the fact that we've been able to bring in new clients and new volumes into the network for GEC, I think that demonstrates the fact that we have a client value proposition that's responding. That said, it is a dogfight out there. And you're constantly fighting for volumes across the board, as everyone seeks to try to put in packages that will fill their network and offset their fixed costs.

Speaker Change: Competition remains very robust.

Speaker Change: And again it stems from this overcapacity piece that we've talked about a few times.

Will Bruno: I'll tell you our win rates in the market tend to be about what they've been over the past few quarters. So we think we're competing effectively.

Will Bruno: And if you look at the fact that we've been able to bring in new clients and new volumes into this into the network for <unk> I think that demonstrates the fact that we have a client value proposition that is resonating.

Will Bruno: That said it is a dog fight out there and you're constantly fighting for volumes across the board as everyone seeks to try to put it in packages that will fill their network and offset their fixed costs.

Will Brunman: And then I also wanted to ask you guys, so the pre-sort business performed really well this quarter on the margin side. Are you guys seeing those margins as sustainable long term?

Speaker Change: Awesome I think that answers my question and then I also wanted to ask you guys. So the presort business performed really well this quarter on the margin side.

Will Brunman: Awesome. I think

Speaker Change: Are you guys seeing those margins are sustainable long term.

Speaker Change: Hello.

Speaker Change: No I think that's a fair question and the way I will say it is this I think the presort team has demonstrated the ability to continue to drive improvements in their business over time that said just like any business. It has headwinds that has labor headwinds has inflationary pressures from suppliers.

Jason C. Dies: No, I think that's a fair question, and the way I will say it is this: I think the PreSort team has demonstrated the ability to continue to drive improvements in their business over time. That said, just like any business, it has headwinds. It has labor headwinds. It also has inflationary pressures from suppliers. We've been very effective at overperforming against those headwinds. But I'm not sure that I would say that you can expect that we're going to continue to overperform at the rate and pace that you saw in the first quarter. But we do think that we have the opportunity and the ability to continue to drive EBIT margin improvement and EBIT improvement in that business as we look forward.

Speaker Change: We've been very effective at over.

Speaker Change: Forming against those headwinds.

Speaker Change: I'm not sure that I would say that you can expect that we're going to continue to over perform at the rate and pace that you saw in first quarter, but we do think that we have opportunity and the ability to continue to drive EBIT margin improvement in EBIT improvement in that business as we look forward.

Will Brunman: All right, thank you, and good job on the quarter.

Speaker Change: Alright, Thank you and good job on the quarter.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Peter <unk> from credit sites. Please go ahead.

Operator: Your next question comes from the line of Peter Sakon from Credit Sites. Please go ahead.

Peter: Good morning.

Peter Sakon: I was pleased to see the improvements in corporate overhead. Can you talk about what the largest items are and should we expect similar improvements throughout the rest of the year?

Peter: Thanks.

Peter: Improvements in our corporate overhead can you talk about with the largest item Dar and should we expect similar.

Peter: Throughout the rest of the year.

Speaker Change: Yeah look I'm not going to get into specific areas that we cut on corporate overhead what I will tell you on this is again.

Jason C. Dies: Yeah, look, I'm not going to get into specific areas that we cut on corporate overhead. What I will tell you about this is, as we talk about this, and I've said this in previous previous quarters, my goal is to get cost out of the business. My goal is to simplify the business, make us more efficient, more effective, and bring speed to the business.

Peter: As we talk about this and I've said this in previous previous quarters. My goal is to get cost out of the business. My goal is to simplify the business make us more efficient more effective bring speed to the business and we're going to take that cost out wherever we find it to take out.

Jason C. Dies: And we're going to take that cost out wherever we find it to take it out. I talked last quarter about one of the things that we did is we did a pro forma allocation for our business unit leaders of our corporate costs so that they could have more control and more say over what it is that they want to pay for and what they think is effective in driving the business.

Peter: I talked last quarter I believe about one of the things that we did is we did a pro forma allocation for our business unit leaders of our corporate costs. So that they can have more control and more say over what it is that they want to pay for and what they think is effective in driving the business. We're going to continue to focus on that and we're going to continue.

Jason C. Dies: We're going to continue to focus on that, and we're going to continue to take costs out as we go through the second half of the year. We were very successful in our restructuring program that we announced last year. John and I both said that we were over performing on that. You can think about that, as you know, over 1000 heads out of the business based on the program that we announced previously.

Peter: To take cost out as we go through the second half of the year. We were very successful on our restructuring program that we announced last year, We said John and I. Both said that we are over performing on that you can think about that as you know over 1000 heads out of the business based on the program that we announced previously.

Jason C. Dies: John mentioned we've got a third party in, and we're going to continue to look for opportunities as we go through the rest of the year to take significant chunks out of that cost as well. But again, I want the business unit leaders who are delivering for clients and delivering for shareholders to be the arbiters of what they see value in from a corporate perspective. And I think that's important.

Peter: John mentioned, we've got a third party and then we're going to continue to look for opportunity as we go through the rest of the year to take significant chunks out of that cost as well, but again I want the business unit leaders, who are delivering for clients and delivering for shareholders to be the arbiters of what they see value in from a corporate perspective, that's important.

Jason C. Dies: Yeah, and then Jason, just a compliment that as you said it, I think you touched on it. It's not about just taking cost out. It's about redefining what we do, how we do it, and what the value we deliver for what we do for both our internal clients around the world.

Peter: And Jason just to complement that as you said it I think you touched on it it's not about just taking cost out it's about redefining what we do how we do it and with the value.

Speaker Change: We deliver for what we do for both our internal.

Peter: Internal clients around the around the world.

Jason C. Dies: Yeah, look, I will say we are a very different business going forward, right? If you think about the size and scale, if you think about moving to digital and SaaS, and certainly the needs of the business will be different. And that's why I want the business unit leaders to be so integral to thinking about how we take that cost-benefit.

Speaker Change: I'll say, we are up there are different business going forward right. If you think about the size and scale. If you think about moving to digital and SaaS and certainly the needs of the business will be different and that's why I want the business unit leaders to be so integral into thinking about how we take that cost out.

Jason C. Dies: Thanks. And with regard to SENTEC, can you talk about the headlines you're expecting later this year and the non-compliant folks, if you will, being shut off? Can you elaborate? Is it something that will show up in the first quarter of 2025, or is it something that we'll see throughout the rest of the year? Yeah, so that's

Peter: Thanks.

Peter: Paul pending to send tech can you talk about the headwind you're expecting later this year.

Paul: Noncompliant box if you will.

Peter: <unk> to be shut off.

Peter: Can you elaborate is it something that will show up in first quarter of 2025 or something that we will see throughout the rest of the year.

Peter Sakon: Yeah, so that's a good question, Peter. So let me just take a step back and just remind everyone that there is a forced migration in the industry as the USPS has mandated that you move from a technology that's called IBI for the mailing meters to IMI. That's really a security standard, primarily, but it has some other pieces to it.

Paul: Yeah. So that's a good question Peter So let me just take a step back and just to remind everyone that there is a forced migration in the industry as the USPS has mandated that you moved from a technology, that's called I B I for the mailing meters to IMI, that's really a security standard primarily it has some other pieces to it we've been very pubs.

Jason C. Dies: We've been very public that every client on the low and middle range product set for us has to migrate by the end of this year. The top of the line clients have additional time, I think it's through 2027, to migrate before they have to be off. You know, overall, from an overall portfolio perspective, we're up to about 77% of our clients have migrated to that IBI category. That's up from about 72% in the first quarter.

Paul: Look.

Peter: That every client on the low end middle range product set for US has to migrate by the end of this year. The top of the line clients have additional time I think it's through 2027 to migrate before they have to be off.

Peter: Overall from an overall portfolio perspective.

Peter: We're up to about 77% of our clients have migrated to that ibi category, that's up from about 72% in first quarter. If you look under the covers on the middle of the line and the bottom line, we're up to about 82%, which is up four points quarter over quarter. So we're making very good progress on <unk>.

Jason C. Dies: If you look under the covers at the middle of the line, the bottom of the line, we're up to about 82%, which is up four points quarter over quarter. So we are making very good progress on moving clients to that new technology. We have been very clear that any time that you do a forced migration of this population, we do tend to see increased cancellation rates. But you know, if I look at the number where we are at 82% of that bottom of the line, already migrated with three quarters to go, I think we're in a very good position.

Peter: New clients to that new technology, we have been very clear that anytime that you do a a forced migration of this population we do tend to see increased cancellate cancellation rates, but if I look at the number of where we are up 82% of that bottom of the line.

Peter: Already migrated with three quarters to go I think we're in a very good position I'm not going to speculate as to what I think the cancellation rate will be but we've made great progress at the end of the day those machines do get cut off and that will force additional clients to reach out to us to get the new technology and so we're gonna have to see how that.

Jason C. Dies: I'm not gonna speculate as to what I think the cancellation rate will be, but we've made great progress. At the end of the day, those machines do get cut off, and that will force additional clients to reach out to us to get the new technology. And so we're gonna have to see how that plays out over the next three quarters.

Peter: It plays out over the next three quarters.

Peter: Okay.

Peter Sakon: I have a question regarding staff revenue. You mentioned that it grew 40 percent in the quarter, and I think you said the forage amount was 60 percent. What is the number of staff that you have? What is the fourth chapter that you're referring to?

Speaker Change: Oh gosh.

Speaker Change: Yeah, Yeah, you mentioned it grew 40.

Speaker Change: 40% in the quarter.

Peter: Okay.

Peter: Okay.

Peter: Oh.

Peter: Okay.

Peter: Yeah.

Peter: Thank you.

Jason C. Dies: Peter, you broke up, I think your question, just let me kind of restate it, is I said our SAS revenue in Sentec grew 40%, and our SAS revenue in the enterprise space grew 61%. I think your question was, what comprises that?

Speaker Change: Peter Peter you broke up I think to your question just let me, let me kind of restate it as I said, our SaaS revenue incentives grew 40% and our SaaS revenue in the enterprise space grew 61% I think your question was what comprises that.

Peter Sakon: Now, my question is, what is the amount? And what is it all about?

Speaker Change: Yes my question.

Speaker Change: No.

Speaker Change: All right.

Speaker Change: I'm, sorry, I didn't get that say it one more time.

Peter Sakon: I'm sorry, I didn't understand that. Say it one more time.

Peter Sakon: I said, "What is the dollar amount? I'm trying to get context as to whether this is growing 40%? Is it up 50 million, 10 million? I'm trying to get a better feel for the impact on your financial Yeah, what I'll, you know, listen, what I will say.

Peter: What is the dollar amount I'm trying to get context too.

Peter: Growing 40% is that.

Peter: Up $50 million $10 million.

Peter: Get a better feel for the impact to your financials.

Jason C. Dies: Yeah, listen, what I will say is our shipping revenue overall grew 8% in the quarter, and if you look at the SAS component of that shipping revenue, it makes up about 25% of the total shipping revenue for us. I'm not going to get into specific dollar amounts on product.

Peter: Yeah.

Peter: Listen what I will say is our shipping revenue overall grew 8% in the quarter and if you look at the SaaS component of that shifting revenue. It makes up about 25% of the total shipping remedy for us I'm not going to get into specific dollar amounts on products.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you Peter.

Jason C. Dies: And at this time, there are no further questions. I'd now like to turn the call back to Mr. Dies for any additional remarks.

Speaker Change: And at this time there are no further questions I'd now like to turn the call back to Mr dies for any additional remarks.

Dies: Yes. Thank you Greg I appreciate it so look I'll just close the call by saying this.

Dies: Again, I think we are making very significant progress against our strategic and financial objectives, I'm very happy with the performance that you've seen over the past two quarters.

Jason C. Dies: significant progress against our strategic and financial objectives. I'm very happy with the performance that you've seen over the past two quarters. I think we now have two data points of real progress, both against both our business and cost priorities. The first quarter was, I think, a good start to the year for us as we look forward.

Jason C. Dies: I think we now have two data points of real progress both against both our business and cost priorities.

Dies: First quarter was I think a good.

Jason C. Dies: As John and I both said, we see continued strength as we look forward throughout the remainder of the year. And I look forward to talking to you all on the next call about the continued progress that we're making against our transformation priorities. So thank you very much for joining us. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.

Dies: The start to the year for us as we look forward as John and I. Both said, we see continued strength as we look forward throughout the remainder of the year and I look forward to talking to you all on our next call about continued progress that we're making against our transformation priorities. So thank you very much for joining.

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

Speaker Change: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.

Speaker Change: Yeah.

Speaker Change: We're sorry your conferences ending now please hang up.