Pitney Bowes' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Pitney Bowes (PBI)

Q4 2011 Earnings Call

February 09, 2012 5:00 pm ET

Executives

Charles F. McBride - Vice President of Investor Relations

Murray D. Martin - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Michael Monahan - Chief Financial Officer and Executive Vice President

Analysts

Chris Whitmore - Deutsche Bank AG, Research Division

Shannon S. Cross - Cross Research LLC

Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Alex Latushkin

Presentation

Operator

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Good afternoon, and welcome to the Pitney Bowes Fourth Quarter and Year-End 2011 Earnings Results Conference Call. [Operator Instructions] 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 the Safe Harbor overview.

Charles F. 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 2010 Form 10-K annual report and other reports filed with the SEC that are located on our website 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 and the year. Murray?

Murray D. Martin

Thanks, Charlie. Good afternoon, and thanks for joining us today. Let me start by sharing some thoughts on our business. Mike will follow with the details on our fourth quarter and full year results, and I'll provide full year guidance for 2012. After the presentation, we'll take your questions.

2011 was a year in which we continued to make progress in laying the foundation for longer-term growth and value creation. We are pleased that we were able to achieve our original earnings objective and exceed our cash flow target despite a business environment that remained unexpectedly challenging throughout the year. As part of our Strategic Transformation program, we continued to take actions to streamline our business processes and improve the way we interact with our customers. Our cost structure is now more variable and efficient, and, as a result, we achieved EBIT margin improvement for the year on our adjusted results despite lower revenues. However, before I discuss some highlights of our fourth quarter performance, I want to put our long-term growth strategies into perspective.

Our growth strategies are grounded in an understanding of the fundamental changes in the way businesses and customers communicate. Historically, when businesses communicated with customers, it was largely around transactions and primarily through physical channels. The business communications landscape is much more complex today. Now businesses are communicating with customers more frequently through multiple channels in an effort to stay connected in hypercompetitive global markets.

Customers are seeking more control as they search for timely, relevant offers in the midst of an abundance of information from multiple sources. Digital Communications continues to increase through -- though physical communications remain an important part of the overall communications mix.

Businesses are struggling to reach all of their customers with the right offers in the ways that their customers want, with the technologies of their preference. Our growth strategies are built on helping enterprise and SMB customers navigate this complex environment.

In 2011, Strategic Transformation allowed us to continue making the necessary investments to expand our capabilities despite the revenue weakness that persisted throughout the year. As a result, we are delivering a wider array of solutions to help our customers manage physical, digital and hybrid communications with their customers.

Throughout the year, we continued to make progress in establishing Volly as the secure digital mail platform of choice for the industry. We are actively building a community of mailing providers that are interested in offering their customers digital options for aggregating, storing, managing and making payments for a variety of content bound for their physical addresses. We have now signed over 40 large third-party mail service providers, who produce billions of bills, statements and account communications each year for more than 5,000 companies and consumer brands. Each of them are working to bring the companies they represent into Volly.

Our investments also enabled us to change our value proposition with our SMB mailers from meters only to a broader solution set that includes our smart family of cloud-based digital solutions.

The momentum is growing for this family of solutions, which help SMB customers use QR codes, email and direct mail for marketing campaign. Our new pbSmartPostage solution recently reached its 10,000th customer. Many of the trends which we noted in our fourth quarter performance were consistent with those, which impacted our performance in the second half of the year.

Despite improvement in our equipment sales in the first half of the year, persistent economic uncertainty worldwide resulted in some of our customers deferring new equipment purchases and capital commitments during the second half of the year. However, our Connect+ digital mailing system continued to sell well on a global basis, and Production Mail installed additional and IntelliJet color printers both in the U.S. and Europe in the quarter.

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