Pitney Bowes Management Discusses Q2 2012 Results - Earnings Call Transcript

Pitney Bowes (PBI)

Q2 2012 Earnings Call

August 02, 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

Shannon S. Cross - Cross Research LLC

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

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

Hale Holden

Chris Whitmore - Deutsche Bank AG, Research Division

Barbara Noverini - Morningstar Inc., Research Division

Presentation

Operator

Ladies and gentlemen, good afternoon, and welcome to the Pitney Bowes' Second Quarter 2012 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, we will now begin the call with the Safe Harbor overview. Please go ahead.

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 2011 Form 10-K annual report and other reports filed with the SEC that are located in 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. Murray?

Murray D. Martin

Thanks, Charlie. Good afternoon, and thanks for joining us. I'll start by putting our overall performance this quarter into context. Mike will follow with the details on our second quarter results, and then I'll discuss our outlook for 2012. After the presentation, we'll take your questions.

For the last few years, we've been on a journey to deliver long-term customer and shareholder value. We are fundamentally transforming our business processes, reducing our cost structure and diversifying our range of offerings beyond physical mail. During the quarter, we continue to make progress against these long-term goals. We also continue to see favorable trends in parts of our business despite ongoing economic uncertainty and fluctuations in currency.

Although total revenue declined during the quarter, there was growth on a constant currency basis in 3 of our 7 business segments. And in 2 of the remaining segments, the rate of revenue decline has moderated.

There are drivers, particularly in the enterprise group, that we anticipate will moderate year-over-year revenue declines in the second half of the year as compared with the first half of the year. These drivers include expansion of e-commerce and direct mail opportunities in Mail Services, new print outsourcing services provided by management services and increased backlog of equipment orders for Production Mail.

In the quarter, we signed a strategic partnership with ORION Holdings to provide print management services that create substantial cost savings and increased value for the global network of interpublic companies, groups, agencies and clients. We will provide a platform that supports ORION Printing worldwide, which includes project management, global network of selected printers, print outsourcing expertise and technology that provides visibility tracking and accountability to each project.

Our Volly secure digital mail delivery service continues to add capabilities and partnerships which we believe will enhance its successful adoption when it launches.

During the quarter, we announced the first partner who will be part of our payment system. The ProfitStars division of Jack Henry & Associates will enable free one-click bill payments for consumers in Volly. We believe pre-bill payment on-site is a critical consumer requirement, and we are pleased to be offering it to our Volly users.

We also reached an agreement with SafeNet Inc. to enhance the security of digital mail delivery in the cloud. Additionally, we have now signed more than 50 large third-party mail service providers who will offer the Volly secure digital mail service to more than 6,000 customer companies and the consumer brands.

The positive signs that we noted in our SMB business in the first quarter continued this quarter as well. This was led by improved customer retention rates and increased placements of the Connect+ digital mailing systems globally. During the quarter, we launched Connect+ in Germany, and it was approved for placement in France beginning in the third quarter.

In the U.S., we also launched the innovative mailstation2 with pbWebConnect. It is the world's first cloud-based mailing and shipping system that gives customers the ability to manage mail and packages via the postage meter or online. Customers can also gain access to special USPS discounts, not typically available through standard metering systems in addition to gateway access to a range of applications including the full pbSmart suite of digital solutions. pbWebConnect is already earning high marks from early adopters, for the convenience, discounts and the online access that it provides.

We continue to generate strong free cash flow during the quarter, and we also strengthened our balance sheet through the early redemption of $400 million of debt.

Let me now turn it over to Mike for a discussion about our second quarter financial results.

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