Pitney Bowes Inc. Q3 FY2025 earnings call

• Continued profitability improvements for the quarter, but year-end revenue, EBIT, and free cash flow expected at low end of range due to forecasting issues. - Strategic review in progress, enhancing talent, structure, and processes for future growth; compiling and evaluating profitable growth opportunities, leading to additional $161M share repurchases. - Identified forecasting process issues, with Kurt Wolf and Paul Evans working to fix them. - In Presort, no customers lost since June, and efforts to win back lost business ongoing. - $50M to $60M cost cuts across the company, led by management, with benefits expected by end of 2026.

No detailed breakdown of product segment financial performance in absolute terms and revenue contribution % provided in the transcript.

• Year-end revenue, EBIT, and free cash flow expected at low end of range due to forecasting issues. - Confidence in Q4 free cash flow around $330M, plus or minus 1%. - Optimism about Presort volumes next year as efforts to win back lost business continue.

• Forecasting process issues plaguing the company, causing mismatches between operational performance and financial results. - Competitive dynamics in Presort business, including financial issues with smaller competitors and pricing competition affecting margins. - Misalignment of incentives in GFS leading to inefficiencies in SendTech's sales process.

Q: Get more insight into SendTech's trajectory over 12-18 months.

A: With respect to SendTech, IMI migration is largely past; Q4 should benefit, Q1 fully lapped. Todd Everett evaluating growth opportunities, focus on profitable growth, and underinvestment in mailing business.

Q: Thoughts on consolidating Presort business, opportunities?

A: All-the-above strategy; conversations with potential acquisition targets, interest from companies due to pricing competition and margin issues.

Q: Free cash flow guidance, how getting to that?

A: Paul Evans says around $330M, stress-tested forecast, strong pickup in Q4.

Q: Cadence of revenue, month-to-month variation?

A: No significant month-to-month variance, business operating well but forecasting issues identified.

Q: Presort sales growth, when to expect?

A: Optimistic about volumes next year, close on bids to take back lost business.

Q: New cost cuts, how allocated?

A: Across the company, in G&A and other levels, management-led effort.

Q: Misalignment of incentives in GFS?

A: GFS caused inefficiencies in sales process, now Todd Everett handles credit decisions for SendTech to improve efficiency.

Q: Presort revenue decline, incremental/decremental margin?

A: High fixed costs, lost volume leads to significant impact on EBIT, price increase in July 2024, lost volume due to competitors using rate case.

Q: Capital allocation, convertible bond, debt buybacks?

A: Convertible bond for attractive yield, considering options for debt management, evaluating capital allocation opportunistically.

Q: Shares outstanding, cash flow story?

A: Shares outstanding approx $160 million, receivable purchase program doesn't impact cash flow, working capital a significant use of cash this year, but improvement expected in 2026.