Pitney Bowes CEO Discusses Q3 2010 Results – Earnings Call Transcript

Pitney Bowes Inc. (

PBI

)

Q3 2010 Earnings Call Transcript

November 2, 2010 5:00 pm ET

Executives

Charles McBride – VP, IR

Murray Martin – Chairman, President and CEO

Mike Monahan – EVP and CFO

Analysts

Chris Whitmore – Deutsche Bank Securities

Ananda Baruah – Brean Murray, Carret & Co.

Austin Bernard [ph]

Gregory Geleptico [ph]

Steve Sirl [ph]

Presentation

Operator

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» Pitney Bowes Inc. Q3 2009 Earnings Call Transcript

Good evening and welcome to the Pitney Bowes third quarter 2010 earnings results conference call. Your lines have been placed in a listen-only mode during the conference call until the question-and-answer segment. Today’s call is also being recorded. If you have any objections, please disconnect your lines at this time.

I would now like to introduce your speakers for today’s conference call, Mr. Murray Martin, Chairman, President and Chief Executive Officer; Mr. Michael Monahan, Executive Vice President and Chief Financial Officer; and Mr. Charles McBride, Vice President, Investor Relations.

Mr. McBride will now begin the call with a Safe Harbor overview.

Charles McBride

Thank you. Included in this presentation are forward-looking statements about our expected future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections.

More information about these risks and uncertainties can be found in our 2009 Form 10-K Annual Report and other reports filed with the SEC that are located on our Web site at www.pb.com by clicking on our company and Investor Relations. Please keep in mind that we do not undertake any obligation to update any forward-looking statements as a result of new information or developments.

Now, our Chairman, President, and Chief Executive Officer, Murray Martin will start with an overview of the quarter. Murray?

Murray Martin

Good afternoon, and thanks for joining us today. Let me start by sharing some thoughts on our performance. Mike, will follow with the details of our third quarter results and then we’ll take your questions.

Overall this quarter, we achieved performance in line with the prior year in both revenue at $1.3 billion, excluding the impact of foreign currency and adjusted diluted earnings per share of $0.55.

We, like others, have seen an uneven recovery in the global economic environment, which has been characterized by low job growth and lingering weakness in consumer confidence and spending. This quarter, however, we did see some signs of improvement in certain segments of our customer base.

We experienced 10% increases in both equipment sales and in software revenues. The growth in equipment sales included a 5% increase in U.S. mailing equipment, which was the first year-over-year increase in seven quarters.

Double-digit equipment sales growth in Production Mail also included the installation of some of our advanced systems in several accounts in the enterprise customer segment.

The positive equipment sales performance in the segment of our business that serves small-to-medium sized businesses was led by placement of Connect+, our latest generation of mailing solutions.

We recently launched Connect+ in the U.K. and will continue its global rollout in phases over the next few quarters. Connect+ provides full color, process printing on the envelope as well as web-based functionality. We expect this innovative system to be a key component in driving future mailing equipment sales.

During the quarter, our software revenue growth was driven by increased demand for data management, analytics and CRM solutions. We also saw continuing demand in growth in our presort operations driven in part by a greater participation in the standard mail market.

This is the second consecutive quarter of year-over-year growth in this segment of the Mailstream. The equipment sales and software revenue growth drivers represent important early milestones in returning our total revenue to growth.

It is important to remember, however, as we have discussed in previous calls, our recurring revenue streams of financing, rental and supplies will lag in growth because of the lower equipment sales in prior quarters.

During the quarter, we continued to see benefits from our actions to reduced cost and enhance productivity, which resulted in improved EBIT in International Mailing, Production Mail, Management Services and Marketing Services.

Software EBIT grew at a double-digit rate when the costs associated with the acquisition of Portrait Software are excluded. Increased shipping costs related to our growth and participation in the international eCommerce parcel market reduced EBIT in our Mail Services operation.

We continued the implementation and acceleration of our strategic transformation program. As a result, we achieved net benefits of more than $35 million during the third quarter and approximately $65 million year-to-date. Given the benefits, we’ve been able to achieve year-to-date, we now target net benefits from our transformation program of about $100 million this year.

Let me now turn it over to Mike for a discussion of the third quarter financial results. Mike?

Mike Monahan

Thank you, Murray. As Murray noted, revenue was $1.3 billion for the quarter, a decline of less than 1% when compared with the prior year and unchanged excluding the impact of foreign currency.

Breaking down our revenue for the quarter between U.S. and non-U.S. operations, U.S. revenue declined by about 1%. Outside the U.S., revenue was relatively flat versus the prior year. Excluding the impact of currency, revenue outside the U.S. increased 3%. Non-U.S. operations represented 29% of total revenue.

Adjusted earnings before interest and taxes or EBIT for the quarter was $228 million, which was about 1.5% lower than last year. During the quarter, EBIT benefited from a favorable adjustment related to the leverage lease portfolio in Canada, but was impacted by costs related to the acquisition of Portrait Software, higher international shipping costs and Mail Services and higher personnel and pension-related costs.

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