Q1 2025 Pitney Bowes Inc Earnings Call
Janice: Thank you for standing by. My name is Janice, and I will be your conference operator today. At this time I would like to welcome everyone to the Q1 2025 Pitney Bowes Inc. earnings conference call. All lines have been placed on mute to prevent them from any background noise.
Janice: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask questions during this time, simple press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you.
Speaker Change: I would like to turn the call over to Alex Brown, Director, Investor Relations. Please go ahead.
Good afternoon and thank you for joining us.
Speaker Change: Included in today's presentation are four looking statements about our future business and financial performance.
Speaker Change: For looking statements involve risks, along with uncertainties that could cause actual results to be materially different from our projections.
Speaker Change: More information about these items can be found in our earnings press release, our 2024 Form 10K and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on investor relations.
Also included in today's presentation are Non-Gat Measures
Speaker Change: specifically Ebid, Ebidah, EPS, and Freakashlow are all on an adjusted basis.
Speaker Change: You can find reconciliation for these items to the appropriate gap measure and the tables attached to our press release.
Speaker Change: We have also provided a slide presentation and a spreadsheet with historical segment information on our investor relations website.
Lance: With that, I now like to turn the call over to Lance [inaudible]
Thank you, Alex, and good afternoon, everyone.
Lance: In the first quarter, we continued repositioning Pitney Bowes as a cast-generative and profitable technology-enabled services company.
Lance: We produce strong results that have enabled us to reiterate robust, full-year guidance and increase our dividend for the second consecutive quarter in terms of our results.
Lance: Revenue was 493 million in line with previously disclosed expectations for this point in our product life cycle and down 5% year over year.
Adjusted EPS was 33 cents, up 74% year-over-year .
Lance: Adjusted EBIT was 120 million, up 28% year over year, and free cash flow was a use of 20 million, excluding 13 million of restructuring payments.
Lance: The use of cash was based on timing factors, and is consistent with our budget and guidance.
There were three main drivers of progress in the quarter.
Sustaining High Margins & Centek
Lance: sustaining high margins in pre-sort and remaining disciplined on cost controls at the corporate level.
Lance: In light of our momentum, we have taken three notable steps today.
First, we've reaffirmed the company's full-year guidance [inaudible]
Lance: This reflects our belief in the strength and resilience of our business, even against an uncertain economic backdrop and tariffs [inaudible]
Lance: and to be clear, our guidance bakes in tariffs based on what we know currently.
Lance: Second, we are taking additional steps to cut costs and de-leverage to strengthen our financial position.
Lance: And third, given our improved financial position and stable outlook, we've increased our quarterly dividend for a second consecutive quarter, from six cents to seven cents a share.
Lance: Even in the current macroeconomic environment, we expect to remain on track to meaningfully grow cash flow and increase profitability in 2025.
Lance: On the cost front, we're keeping our foot on the pedal. We removed an additional 34 million of annualized costs in Q1, reaching an annualized run rate of 157 million at the end of the quarter.
Lance: Consequently, we are raising our cost savings target to $180 million to $200 million [inaudible]
Lance: In terms of debt management, we repurchase 37 million of debt at an average cost slightly below par through the end of last week.
Lance: Additionally, we now expect to drop below our 3X leverage ratio target by Q3 of this year.
Lance: Once we get there, we will no longer be limited with respect to restricted payments under our covenants.
This will further increase our ability to take value enhancing actions
Lance: such as continuing to increase dividends and repurchasing shares at attractive prices.
Now, I'll summarize our 2025 Business-Level Priorities Now, I'll summarize our 2025 Business-Level Priorities
Lance: In Centech, we're focused on maximizing profitability and minimizing churn in our mailing business.
while continuing to grow our shipping business.
Lance: As we have stated in previous calls, our shipping business has similar profitability characteristics to our mailing business.
Lance: and we expect shipping growth to more than offset revenue slowdowns elsewhere in Centek over the next 12 to 24 months.
Lance: We are specifically focused on high margin customer groups in targeted verticals.
Lance: As far as global financial services, this business has been a hidden gem for Pitney Bowes.
Lance: For the past 50 years, we have financed captive equipment, enabled postage payments for our clients.
Lance: And as of the end of this quarter, we had $1.15 billion of finance receivables.
Lance: You're going to begin hearing more from us about our efforts to capture value via the Pitney Bowes banks receivables purchase program, which involves the sale of eligible leases to the bank.
Lance: These sales accelerate time to cash, allowing us to reduce parent company interest costs while also improving bank profitability.
Lance: The Pitney Bowes bank held $84 million of associated leases at the end of Q1 and were aiming to grow that figure to at least $120 million by the end of 2025.
Lance: We expect this program to accelerate the return of an additional 100 million in cash over the next few years, and we are evaluating other ways to expand the program.
Lance: Bob will talk more about global financial services in a bit.
Bob: In pre-sort, we intend to sustain our efficient and lean model that benefits from unique economies of scale and a true moat in the industry.
Bob: On past calls, we mentioned our focus on tuck-in acquisitions that meet a very high return on invested capital threshold.
We intend to continue pursuing these small roll-up transactions.
Bob: that generate high ROI's with very short payback periods. However, I want to be clear that we are not pursuing high cost or transformative acquisitions anywhere throughout the company.
Bob: Looking forward, we have significant momentum in our pursuit of strong cashflow, earnings, and overall value.
Bob: Also, we are committed to generating meaningful value for shareholders by returning a significant portion of that cash flow to them.
Bob: I am incredibly optimistic about what we can accomplish by remaining disciplined and focused here in 2025.
Speaker Change: With that, a welcome Bob Gold to his first earnings call with us. Bob over to you.
Bob Gold: Thank you, Lance. First, let me say how excited I am to have joined Pitney Bowes after about two months in the role. I've seen firsthand the strength of our team, the durability of our business model, and the many opportunities ahead.
Speaker Change: As Lance mentioned, Q1 was a strong start to the year.
Speaker Change: I won't repeat what Lance already covered, but just a word on free cash flow.
Speaker Change: The use of $20 million in Q1 reflected normal seasonality and working capital needs, specifically in pre-sort.
Importantly, despite the negative cash flow in the first quarter.
Speaker Change: We remain a highly cash-generative company and we continue to expect $330 to $370 million in free cash flow for the full year.
Speaker Change: From a capital allocation perspective, during Q1, we repurchased $15 million of shares.
Speaker Change: paid $11 million in dividends and bought back $23 million of debt through open market transactions.
Speaker Change: Following quarter end through May 2nd, we repurchased an additional $12 million of shares and $14 million of debt
Speaker Change: As of the end of last week, we had $123 million left in our share repurchase authorization.
Speaker Change: Returning capital to shareholders will remain a central part of the company's capital allocation framework and the company will repurchase stock opportunistically based on market conditions and other relevant considerations.
Speaker Change: I want to highlight two accounting changes we made this quarter to simplify and better reflect the business.
First, with respect to revenue
Speaker Change: We condensed six categories into three, products, services, and financing another aligned with our current offerings.
Sakon, with respect to marketing and innovation expenses
Speaker Change: These costs have moved from corporate to SENTAC to align with the organizational structure. Nearly all marketing and innovation spending supports SENTAC today.
Speaker Change: We posted a file on our investor relations site that reflect these historical adjustments.
Turning to Segment Performance
Starting with Suntak [inaudible]
Speaker Change: Revenue was $298 million, down 9% in line with our expectations.
Speaker Change: As anticipated, the conclusion of the IMI migration in Q4 2024 resulted in less product revenue.
Speaker Change: We expect this rate of decline to moderate over the next one to two quarters [inaudible]
Speaker Change: We continue to see a shift from new equipment placements toward lease extensions.
Speaker Change: While these lease extensions defer revenue recognition to future periods, they also enhance overall profitability and support stable cash flow throughout the lease term.
Speaker Change: Simply put, these lease extensions are better for the long-term health of the business, but do not have the upfront revenue associated with new equipment sales.
given our focus on long-term profitability and cash flow.
We have begun emphasizing lease extensions over new equipment placements.
Speaker Change: Additionally for comparative purposes. The prior period included $4 million of upfront revenue from a large government contract.
Speaker Change: We continue to expect shipping growth for the rest of the year.
Speaker Change: <unk> gross profit was down by $13 million year over year, driven by revenue declines. However, gross margin improved by 230 basis points to 68, 9% benefiting from service cost optimizations, and a favorable mix shift.
Speaker Change: Toward financing and other revenue.
Speaker Change: Operating expenses declined $14 million.
Speaker Change: We're 11%, reflecting strong cost discipline.
Speaker Change: As a result, suntech EBIT increased slightly to $95 million.
Speaker Change: Moving to global financial services within Suntech.
Speaker Change: Net finance receivables ended the quarter at $1.15 billion up slightly from year end.
Speaker Change: Portfolio quality remained very stable with relatively low levels of delinquencies and write offs.
Speaker Change: Bank deposits were $701 million.
Down seasonally from year end.
Speaker Change: Under the Pitney Bowes bank receivables purchase program.
Speaker Change: From inception through the first quarter of 2025, we have freed up $84 million of cash at the parent company level, while providing the bank with access to diversified low risk high yielding assets.
Speaker Change: The program is working well and we will continue to evaluate ways to expand the program to maximize the benefits of accelerating cash and lowering the effective borrowing costs of our finance receivables as we move leases down to the bank.
Speaker Change: Turning to Presort services.
Speaker Change: Revenue was $178 million.
Speaker Change: Up 5% driven by higher revenue per piece.
Speaker Change: Volumes declined 2% and there was one less day in the quarter.
Speaker Change: Average daily volumes were flat year over year.
Speaker Change: Gross profit rose $11 million.
Speaker Change: Up 17%.
Speaker Change: Helped by pricing, a 3% improvement in labor productivity, and 3% lower unit transportation costs.
Speaker Change: Operating expenses declined $4 million or 17%.
Speaker Change: <unk> EBIT was $55 million up $14 million or 36%.
Speaker Change: Finally, corporate expenses were $32 million.
Speaker Change: Down $10 million from the prior year.
Speaker Change: Turning to guidance.
Speaker Change: We are reaffirming our full year guidance and continue to feel good about the quarters to come.
Speaker Change: As always the board and management will continue to evaluate our guidance as the year progresses.
Speaker Change: We continue to realize benefits from our strategic initiatives.
Speaker Change: <unk> our cost reduction program.
Speaker Change: Q1 alone, we removed $34 million of annualized costs.
Speaker Change: During the quarter with an annualized run rate of $157 million.
Speaker Change: As Lance mentioned, we are raising our cost savings target to between 180 and $200 million of annualized net savings over the next year.
Speaker Change: On our ability to successfully navigate tariffs.
Speaker Change: We do not expect tariffs to have a meaningful impact on the business.
Speaker Change: Approximately 85% of our revenue is U S based and the majority of our mailing products have their final assembly here in the United States.
Speaker Change: We do source certain components from abroad, but we have a diversified supplier base that we believe will allow us to mitigate country specific impacts.
Speaker Change: More broadly our business is highly durable with meaningful recurring high margin revenue streams and stable cash flows.
Speaker Change: Pitney Bowes has historically weather downturns, well and we believe we are well positioned to do so again.
Speaker Change: In closing.
Speaker Change: Q1 was a good start to 2025 and I'm energized about the opportunities ahead to enhance shareholder value.
Speaker Change: We have a range of strategic and operational levers and we're focused on executing with discipline to deliver sustained performance.
Lance: With that I'll turn it back to Lance Thank you.
Lance: Thank you Bob.
Speaker Change: Want to end by taking a step back and making some broad observations.
Speaker Change: Over the past year, we have completely transformed the financial position of Pitney Bowes.
Speaker Change: Specifically, we have exited the extremely unprofitable GEC business.
Speaker Change: Identified and are quickly implementing 180 million to $200 million of cost cuts, which translates to profitability improvements.
Speaker Change: Improved cash management seeing the amount of freed up trapped cash reached approximately $275 million.
Speaker Change: Begun to leverage significant opportunities to unlock value from Pitney Bowes bank.
Speaker Change: And thanks to all of these actions we have paid off our most expensive debt entirely from company cash.
Speaker Change: And refinanced our revolving credit facility term loan a and term loan b with more relaxed covenants.
Speaker Change: Thanks to the tough decisions and hard work of our teams. We are now in a position that few outside the company could have imagined just 18 months ago.
Speaker Change: Expecting to generate between $330 million and $370 million of free cash flow in 2025.
Speaker Change: For context, our <unk>.
Speaker Change: Market capitalization was roughly $500 million less than two years ago.
Speaker Change: Even based on our current market capitalization of approximately one 6 billion.
Speaker Change: We are still trading at only five X levered free cash flow, representing what we believe is the significant opportunity for investment in our shares.
Speaker Change: Moving forward, we are setup to reward our long term shareholders for their patients by returning a significant amount of capital to them.
Speaker Change: One of our top objectives will remain sustaining both appropriate dividend increases and meaningful share repurchases.
Speaker Change: Thank you to everyone for joining today and now we'll open it up for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: Your first question comes from the line of Kartik Mehta with Northcoast Research. Please go ahead.
Kartik Mehta: Hey, good morning, good morning, I apologize good afternoon lands and Bob.
Speaker Change: Bob you talked about.
Speaker Change: Extending lease.
Speaker Change: Emphasizing lease extensions versus new equipment, which makes sense I'm, assuming you are at a point, where the number of customers that want new equipment is.
Speaker Change: Is getting down to a few and therefore extending leases is probably the right.
Speaker Change: Financial decision, but I'm wondering what type of impact you anticipate that having on revenue since youre not selling new equipment.
Kartik Mehta: What we expect to see thank you kartik for the question appreciate it.
Kartik Mehta: What we expect to see with respect to the lease extensions is a more stable revenue.
Kartik Mehta: Revenue and cash flow.
Kartik Mehta: I don't I don't think that.
Kartik Mehta: The number of product placements or equipment place in placements as few and far between we still have demand for new product placements, but.
Kartik Mehta: Focus on lease extensions gives us a much more predictable stable revenue stream and cash flow.
Speaker Change: And then obviously, there's been a lot of discussion about what could happen to the USPS. It seems like there is a new story every other day and I'm wondering if there had been any changes at the USPS that you've noticed.
Speaker Change: If any of those changes have resulted in either a positive or negative impact to the business.
Kartik Mehta: Hey, Kartik I'll I'll take that one thanks for that question.
Kartik Mehta: I was actually just with virtually the entire leadership team of the USPS last week.
Kartik Mehta: And.
Kartik Mehta: I think that the organization continues to be strong.
Kartik Mehta: And the partnership that Pitney Bowes has with the USPS, which has been there for over 100 years.
Kartik Mehta: Is exceptional on many many levels throughout the organization.
Kartik Mehta: We've got a great working relationship a great partnership across our businesses and we're excited about the future of the USPS.
Speaker Change: And then just one last question Lance I know.
Speaker Change: Obviously tariffs are impacting the business I'm wondering if you're seeing any hesitation or any change in how your customers are reacting obviously, especially if you're the presort business because of.
Speaker Change: What might be happening with their business related to tariffs.
Speaker Change: Yes, so I'd say that.
Speaker Change: A couple of things one is.
Speaker Change: We have seen some delays.
Speaker Change: Businesses that are operating under greater levels of uncertainty, we might have expected to close in one quarter and it's kind of being pushed off to the next quarter.
Speaker Change: You mentioned <unk>, there's also a little bit of that across particularly federal clients federal agencies.
Speaker Change: I wouldn't say any of that as material, it's more kind of anecdotal at this stage.
Speaker Change: Perfect. Thank you so much I really appreciate it.
Speaker Change: Your next.
Speaker Change: Question comes from the line of Anthony <unk> with Sidoti. Please go ahead.
Anthony: Good afternoon, everyone and thank you for taking the questions.
Speaker Change: My apologies I joined the call late so you may have addressed some of these topics, but yes.
Speaker Change: In terms of the increased cost savings program that you announced today.
Speaker Change: Where is that coming from and.
Speaker Change: Yes.
Speaker Change: Could you give us maybe some examples of.
Speaker Change: What else are you finding there to save money on and.
Speaker Change: A couple of other questions as well.
Anthony: Anthony Thank you for the question.
Anthony: The cost savings, we're seeing today are part of a broader cost saving program, we announced last year.
Anthony: They are primarily they're really across the business.
Anthony: And.
Anthony: Yes.
Anthony: Bottoms up built what.
Speaker Change: What I would say is we're also focusing on indirect spend and external spend contract negotiations vendor negotiations as well as.
Anthony: Things like insurance.
Speaker Change: And Anthony I would add to that that.
Speaker Change: We've really implemented a cultural shift at Pitney Bowes.
Speaker Change: It kind of puts cost management and lean operations really at the forefront and.
Speaker Change: Going to continue to prioritize running an efficient.
Speaker Change: And well run business going forward.
Speaker Change: Got you okay. Thanks for that.
Speaker Change: And then in terms of.
Speaker Change: The <unk> business I know you talked about shipping.
Speaker Change: A component of that increasing I think 7% in the quarter, what was that as a percentage of overall revenue for Suntech and then do you guys have a goal in mind us.
Speaker Change: Where you want to be by the end of the year by next year in terms of the shipping is.
Speaker Change: Percentage of Centex.
Speaker Change: Yes, we don't I I'll give a general answer on to Anthony and then Bob can can fill in some details. So we don't have a specific.
Speaker Change: Announced goal.
Speaker Change: We have said that we expect that the the growth in centex shipping.
Speaker Change: Will overtake any declines and syntech mailing and we gave a time period of 12 months to 24 months.
Speaker Change: Got it okay. That's very helpful. Okay and then.
Speaker Change: Far as presort. So obviously you guys have done.
Speaker Change: Great job there in terms of improving the sales and profitability of that segment.
Speaker Change: This quarter again, you had higher revenue per piece improved productivity whats your confidence level about being able to sustain this even with some of the math.
Speaker Change: Macro and tariff uncertainties.
Speaker Change: Yeah.
Speaker Change: Presort has a great business set tech we love all of our businesses, but presort has really proven over the last I don't know dozen years that it could consistently grow in all the ups and downs and changes of the economy I think the only year that it Didnt show growth was the COVID-19 year.
Speaker Change: And.
Speaker Change: We're very optimistic about the future of that business.
Speaker Change: It's not really that.
Speaker Change: Dependent on tariffs and things along those lines. It's customers are all I think it's 100% U S and the.
Speaker Change: Hi.
Speaker Change: It's based on the mail volumes of these large shippers, who sent very large quantities of mail across first class Mail and also marketing mail that has some really attractive growth opportunities for us.
Speaker Change: Got it thanks, Lance and then just to kind of follow up on this on the presort side.
Speaker Change: I know you did a tuck in acquisition earlier in the year.
Speaker Change: Maybe just give us a quick update on that and are you looking for additional tuck in deals in that space.
Speaker Change: So that deal is going very very well, it's been fully integrated within the Presort network, we did not take on any of that company's assets.
Speaker Change: So we have completely subsumed it within our existing operations, which improves our capital efficiency and improves our asset utilization.
Speaker Change: It improves our returns very fast payback Super excited with how the presort team has implemented that acquisition and we hope to do more it's really a focus area of us to do these small tuck in acquisitions, but again I want to emphasize that we are not looking at.
Speaker Change: Game, changing large size transformative acquisitions zero zero interest, but these small tuck ins, they're really terrific.
Speaker Change: Sounds good thank you and best of luck.
Anthony: Thank you Anthony.
Speaker Change: Your next question comes from the line of Peter.
Peter: Peters with credit Suisse. Please go ahead.
Speaker Change: Okay.
Speaker Change: <unk> remarks, he discussed minimizing churn at <unk> could you give me some specifics extension how much of it currently and what was it last year and then what are your goals going forward.
Speaker Change: Yes, we so we don't specify churn as a metric.
Speaker Change: But what we are focused on and that's really in the mailing side of the business is sort of elongated.
Speaker Change: The strong cash flows and performance of that business.
Speaker Change: I sort of analogize it to the software businesses that a few years ago. Many of them transformed from kind of licensed software models to SaaS models and as.
Speaker Change: As we do that migration in that business. We think it provides a very predictable consistent level of revenues and earnings.
Speaker Change: And it enables customers to kind of stick with their their pitney bowes products without needing to lay out significant capex for for new equipment.
Speaker Change: Lance I think the only thing I would add is.
Speaker Change: Is that as we've gotten past the IMI migration, we see cancellation rates really mitigating through this year.
Dan: Thanks, Dan followed the hardest question about that.
Dan: Equipment sales, how much our new quarterly product placements at Suntech.
Dan: Can you can you repeat <unk>.
Speaker Change: Explain exactly what Youre looking for Peter I want to make sure we answer it correctly.
Dan: Alright, and the first question he was asked.
Dan: Asking about.
Dan: Equipment sales being few and far between and I agree it's not that but I was just wondering if you could quantify new quarterly equivalent sales nurses.
Dan: I guess existing sales that run through the income statement.
Dan: Yes.
Peter: Peter Thank you.
Peter: We don't we don't provide that breakdown.
Speaker Change: <unk> versus services sales our sales are broken out in.
Speaker Change: In products and services now as I mentioned earlier.
Speaker Change: And equipment sales supplies and so on are all included in products for Suntech.
Speaker Change: That would include shipping equipment as well.
Speaker Change: What I just to want to stress that I think it was kartik, who said it earlier equipment sales are not few and far between while we are seeing a pay a long term decline in equipment sales.
Speaker Change: Still a strong part of our revenue stream.
Speaker Change: Okay, and then my wife.
Speaker Change: Question regarding pre sorry, I believe there is a July one annual adjustments to pricing.
Speaker Change: How much is the adjustment this year.
Speaker Change: How much will impact profitability going forward for the back half of the year.
Speaker Change: Sure so the.
Speaker Change: The announced.
Speaker Change: Changes are still subject to final approval and so.
Speaker Change: We're kind of waiting until it's fully baked.
Speaker Change: But we think that the impact on Pitney Bowes, if what has been announced is it.
Speaker Change: Is approved it's sort of modestly positive for us.
Speaker Change: Okay.
Speaker Change: That's all I have thank you.
Speaker Change: Thank you Peter Thank you.
Speaker Change: Your next question is coming from the line of Justin.
Speaker Change: Alamo Capital Management LLC. Please go ahead.
Speaker Change: Hey, Thanks for taking my call a fantastic quarter.
Speaker Change: Just a question first of all on restructuring should we think of the $13 million is kind of a run rate for each quarter or.
Speaker Change: No.
Speaker Change: Thank you Justin for the further question I don't have the specific run rate at my fingertips, but as we're nearing the end of the period of executing the restructuring we would expect those payments to tail off.
Speaker Change: Got it okay. Because I know you were at 330 to 370 excludes it so.
Speaker Change: Thinking about that number then in the negative 20, approximately in the first quarter I mean that means over the next.
Speaker Change: Three quarters.
Speaker Change: You guys may be generating close to $400 million.
Speaker Change: And free cash flow and I guess as I think about it.
Speaker Change: If we're just looking at the first quarter specifically.
Speaker Change: Allocated about $25 million towards dividends and buybacks and $25 million approximately towards debt repurchases. So I've got 50, 50, and I guess I'm wondering over the next nine months like how should we think about the split that you're thinking of for the $400 million of free cash flow.
Speaker Change: Your company, we're getting and how you allocate that towards debt versus.
Speaker Change: You recall at the shareholder the shareholder initiatives and giving back to shareholders.
Speaker Change: And thank you there's a lot to unpack in that question. So.
Speaker Change: If I Miss something Youll, you'll let me know forest.
Speaker Change: I think it's important as we talked earlier, there was a seasonal use of cash or time and use of cash in Q1 as I mentioned earlier related to the drawdown of deposits that were made in Q4 related to our presort customers who prepaid.
Speaker Change: Further our January peak volume in addition to that in Q1, we had.
Speaker Change: We had seasonal I don't like the term seasonal but we had first quarter employee benefit in variable compensation payments.
Speaker Change: That won't repeat in the following quarters.
Speaker Change: The quarter performed very strong excluding those payments. In addition, I guess the other side of your question is how are we going to allocate capital going forward.
Speaker Change: The answer to that is that will continue to opportunistically buy shares and debt as we have been.
Speaker Change: Based on the markets.
Justin: And the only thing I'd add Justin is that.
Speaker Change: If you think about it a couple of years ago error free cash flow when we had GEC was around $20 million.
Speaker Change: Today, it's up to $3 30 to $3 70, and that kind of creates the opportunity for capital allocation.
Speaker Change: Secondly, we've noted that debt.
Speaker Change: Really key kind of that metric for us is getting below a three <unk> leverage ratio because at that point restrictions on our use of cash become much more limited and so we.
Speaker Change: We are continuing to prioritize debt reduction so that we get below that 300 number but.
Speaker Change: But once we've done that and I think we've got far more flexibility to allocate greater amounts towards shareholders.
Speaker Change: Got it yes, we are happy to hear that you guys also think the shares are extremely undervalued.
Speaker Change: My last question then.
Speaker Change: Do you see any opportunities with artificial intelligence.
Speaker Change: Oh absolutely.
Speaker Change: Youre really getting me excited here so.
Speaker Change: We have recently announced.
Speaker Change: Our new Chief Information Officer, who is who has joined the company.
Speaker Change: Alex and Alex brings an enormously impressive background in AI and is really looking across the organization at ways that we can better utilize AI I'm utilizing it personally and a whole bunch of different areas as is our leadership team.
Speaker Change: And we are rolling it out to improve our productivity to improve our performance to think better really across the company.
Speaker Change: Thank you.
Speaker Change: Thank you Justin.
Speaker Change: The next question comes from the line of David Shanghai Plant Contrarian capital. Please go ahead.
Speaker Change: Hey, I'm sure we will see this in the 10-Q when it comes out but what was the average price paid for the shares that we bought back.
Speaker Change: Hi.
Speaker Change: Thank you.
Speaker Change: I don't have that number at my fingertips I'll have to.
Speaker Change: I'll have to follow off.
Speaker Change: We're tracking it David closely to make sure that our purchases are.
Speaker Change: Sort of in line, if not better than.
Speaker Change: Daily averages and.
Speaker Change: It will be in the queue just to confirm that.
Speaker Change: Yeah.
Speaker Change: Understood.
Bill: Just hoping I guess for an early preview. Thank you bill.
Speaker Change: In terms of when we get down to below three times leverage.
Speaker Change: Have you thought about what capital allocation might look like in terms of.
Speaker Change: Percent towards.
Speaker Change: Tuck in acquisitions and.
Speaker Change: Repurchases of stock and to that end.
Speaker Change: Have you thought about a range in which that you would be comfortable operating in in terms of a debt level, let's say two to three times.
Speaker Change: Going forward or is it too early to preview that.
Speaker Change: It's a bit early I mean, we obviously do a lot of thought to that and planning internally, but we're not we're not yet giving guidance along the lines of sort of long term debt levels et cetera, but the company is very consistently generating cash and that gives us comfort to maintain.
Speaker Change: You know sort of reasonable debt levels and we.
Speaker Change: Where we're kind of excited about the long term prospects in terms of cash generation and what we can do with that one thing I mentioned that we're not planning to do with that is large acquisitions and.
Speaker Change: The small ones that we do the tuck ins, we have a very high thresholds for ROI for a return for the payback period et cetera.
Speaker Change: And as we do for other uses of cash within the company, we really set a high bar that when we're investing internally. It has to have a very very high return for us.
Speaker Change: Understood and in terms of our credit rating.
Speaker Change: What will Moody's and S&P you look for from Us.
Speaker Change: To improve our credit rating and I don't know if the goal is to become an investment grade company over time.
Speaker Change: But if you could give us a sense of.
Speaker Change: What your discussions have been with rating agencies that'd be helpful.
David: David I'll take that so <unk>.
Speaker Change: Part of my Onboarding.
Speaker Change: Had initial meetings with both S&P and Moody's and asked that exact question.
Speaker Change: The answer well surprise you as I said, we need to get a few more quarters under our belt.
Speaker Change: Before they will raise our rating.
Speaker Change: Clearly coming out of this quarter after a really strong 24, I'm going to be pushing them again to raise our rating.
Bob Gold: And the only thing I'd add Bob is that.
Bob Gold: We do not have a stated goal to become an investment grade.
Bob Gold: Credit.
Speaker Change: Investment grade credits or increase.
Bob Gold: Increasingly few and far between and.
Bob Gold: Generally companies.
Bob Gold: Relatively little levels of leverage and I think we can be prudent and uses of leverage that don't necessarily require that kind of credit rating.
Bob Gold: Okay. Thank you.
David: Thanks, David.
David: I will now turn the call back over to Lance Rosenzweig CEO for closing remarks. Please go ahead.
David: Thank you all for joining us for our first quarter earnings call and we look forward to sharing more information in in our next quarter call appreciate it.
David: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
David: Please wait the conference will begin shortly.
David: Sure.
David: [music].
David: Yes.
David: Yes.
David: And.
David: Yes.
David: Sure.