PBI Pitney Bowes Inc

Pitney Bowes Inc. (NYSE:PBI), a global technology company that provides products and solutions that power commerce, today reported financial results for the second quarter 2016.

Quarterly Financial Results:

• Revenue of $836 million, a decline of 5 percent; a decline of 4 percent when adjusted for both the impact of currency and market exits.
• Revenue comparison to prior year unfavorably impacted by an estimated 2 percentage points as a result of the cutover period for the new enterprise business platform.
• GAAP EPS of $0.28; Adjusted EPS of $0.39
• GAAP cash from operations of $95 million; free cash flow of $86 million
• Repurchased 3.5 million shares of common stock.
• Updating annual revenue, adjusted EPS and free cash flow guidance.

"The second quarter was a critical period for Pitney Bowes, the progress of our strategic initiatives, and the long-term success of our Company," said Marc B. Lautenbach, President and CEO, Pitney Bowes. "During the quarter, we deployed our new enterprise business platform in the U.S., which is already delivering operational benefits across the Company; launched our Commerce Cloud, which unlocks new value for the small and medium business market and our clients; and signed agreements with several systems integrators to sell our software solutions and other products. Going forward, we remain optimistic about our ability to deliver sustained value for our shareholders, clients and employees in the second half and beyond.”

Second Quarter 2016 Results

Revenue totaled $836 million for the quarter, which was a decline of 5 percent. Revenue declined 4 percent versus the prior year when adjusted for both the impact of currency and the impact from the previously exited direct operations (market exits) in Mexico, South Africa and five markets in Asia. The revenue comparison to prior year was unfavorably impacted by an estimated $15 million to $20 million, or 2 percentage points, due to the temporary business impacts of the cutover to the new enterprise business platform in the U.S.

Digital Commerce Solutions revenue grew 11 percent on a reported basis and 12 percent on a constant currency basis. Revenue benefited from growth in Global Ecommerce, while revenue declined in Software Solutions.

Enterprise Business Solutions revenue was flat. Revenue grew 1 percent compared to the prior year when adjusted for the impacts of currency and market exits. Revenue benefited from continued growth in Presort Services.

Small and Medium Business (SMB) Solutions revenue declined 8 percent. Revenue declined 7 percent when adjusted for the impacts of currency and market exits. Within SMB, North America Mailing’s revenue comparison to prior year was unfavorably impacted by an estimated $15 million to $20 million, or 5 percentage points, due to the temporary business impacts of the cutover to the new enterprise business platform in the U.S. This impact resulted principally from lost daily sales activity and productivity during the cutover period.

Generally Accepted Accounting Principles earnings per diluted share (GAAP EPS) were $0.28, which included $0.09 per share for restructuring and asset impairment charges and $0.01 loss for discontinued operations.

Adjusted earnings per diluted share from continuing operations (Adjusted EPS) were $0.39. The Company uses Adjusted EPS to measure profitability and performance.

Earnings per share comparisons to prior year were unfavorably impacted by $0.02 per share for higher ERP related expenses; $0.02 per share for the absence of Imagitas earnings and an estimated $0.03 related to the new enterprise business platform cutover.

The Company’s earnings per share results for the quarter are summarized in the table below:

  Second Quarter*

2016

 

2015

Adjusted EPS $ 0.39 $ 0.45 Other income – gain on sale of Imagitas -

 

0.44 Other expense -

(0.05

) SG&A – compensation expense -

(0.04

) Restructuring and asset impairments

(0.09

)

(0.04

) Discontinued operations – (loss)    

(0.01

)     -   GAAP EPS $ 0.28 $ 0.75 * The sum of the earnings per share may not equal the totals above due to rounding.  

GAAP Cash from Operations and Free Cash Flow Results

GAAP cash from operations during the quarter was $95 million while free cash flow was $86 million. Free cash flow was slightly favorable to prior year as favorable working capital and lower capital expenditures were partly offset by lower net income.

During the quarter, the Company used cash for: $35 million in dividends to its common shareholders; $66 million for share repurchases and $12 million for restructuring payments. The Company also received $18 million of cash from investing activities related to the sale of a building in Troy, New York.

Business Segment Reporting

The Company’s business segment reporting reflects the clients served in each market and the way it manages these segments for growth and profitability. The primary reporting segment groups are the SMB Solutions group; the Enterprise Business Solutions group; and the Digital Commerce Solutions group.

The SMB Solutions group offers mailing equipment, financing, services and supplies for small and medium businesses to efficiently create mail and evidence postage. This group includes the North America Mailing and International Mailing segments. North America Mailing includes the operations of U.S. and Canada Mailing. International Mailing includes all other SMB operations around the world.

The Enterprise Business Solutions group includes the global Production Mail and Presort Services segments. Production Mail provides mailing and printing equipment and services for large enterprise clients to process mail. Presort Services provides sortation services to qualify large mail volumes for postal worksharing discounts.

The Digital Commerce Solutions group includes the Software Solutions and Global Ecommerce segments. Software Solutions provide customer engagement, customer information and location intelligence software. Global Ecommerce facilitates global cross-border ecommerce transactions and shipping solutions for businesses of all sizes.

The Other segment is comprised of the Imagitas marketing services business, which was sold on May 29, 2015.

SMB Solutions Group

($ millions)     Second Quarter    

Y/Y

 

Y/Y

 

Y/Y Ex Currency

Revenue

2016

2015

Reported

Ex Currency

& Market Exits*

North America Mailing $ 322 $ 357 (10 %) (9 %) (9 %) International Mailing   106     111   (4 %) (3 %) 0 % SMB Solutions Total $ 428 $ 467 (8 %) (8 %) (7 %)   EBIT North America Mailing $ 142 $ 159 (11 %) International Mailing   13     14   (10 %) SMB Solutions Total $ 155 $ 174 (11 %) * Excluding $2.2 million related to the impacts of currency and adjusting prior year for $2.8 million related to the divested revenues resulting from the exit of direct operations in Mexico, South Africa and five markets in Asia.  

North America Mailing

The business experienced temporary impacts from the enterprise business platform cutover in the U.S., and, as a result, the revenue rate of decline was greater than prior quarters. Equipment sales declined double digits and recurring revenue streams declined at a high single-digit rate. The equipment sales impact resulted principally from lost daily sales activity and productivity during the cutover period. The recurring revenue streams were impacted in part by financing fee waivers and lower supply purchases during this transition. The Company estimates that the North America Mailing segment revenue was unfavorably impacted by an estimated $15 million to $20 million, or 5 percentage points of growth, in the quarter due to this transition. Of this estimated amount, approximately two-thirds was attributed to equipment sales and one-third was attributed to the recurring revenue streams. EBIT margin was slightly lower than prior year due to the overall lower revenue.

International Mailing

Revenue trends compared to prior year continued to improve. Although reported revenue declined, when adjusted for both the impact of currency and market exits, revenue would have been flat to prior year. Equipment sales increased versus prior year most notably in France, Italy and Japan, in part due to improved sales productivity as disruption from go-to-market changes, especially in France, have subsided. The decline in recurring revenue streams was the lowest in seven quarters. EBIT margin declined versus the prior year primarily as a result of the mix of equipment sales.

Enterprise Business Solutions Group

($ millions)     Second Quarter    

Y/Y

 

Y/Y

 

Y/Y Ex Currency

Revenue

2016

2015

Reported

Ex Currency

& Market Exits*

Production Mail $ 96 $ 98 (2 %) (2 %) 1 % Presort Services   116     114   2 % 2 % 2 % Enterprise Business Total $ 212 $ 212 0 % 0 % 1 %   EBIT Production Mail $ 13 $ 10 29 % Presort Services   21     24   (10 %) Enterprise Business Total $ 34 $ 34 2 % * Excluding $0.2 million related to the impacts of currency and adjusting prior year for $2.9 million related to the divested revenues resulting from the exit of direct operations in Mexico, South Africa and five markets in Asia  

Production Mail

Equipment sales grew due to higher sorter equipment installations during the quarter. Support services and supplies revenue declined, in part, as a result of some in-house mailers shifting their mail processing to third party outsourcers and the recent market exits. EBIT margin improved from prior year driven by service delivery cost management initiatives.

Presort Services

Revenue benefited from the higher volume of First Class mail processed as well as expansion into new markets. This was partially offset by a decline in Standard mail volumes processed. EBIT margin declined versus the prior year primarily due to the USPS rate change and increased mail processing costs related to higher labor costs.

Digital Commerce Solutions Group

  ($ millions)     Second Quarter    

Y/Y

Y/Y

Revenue

2016

2015

Reported

Ex Currency

Software Solutions $ 90 $ 99 (9 %) (7 %) Global Ecommerce   105     78   35 % 36 % Digital Commerce Total $ 196 $ 177 11 % 12 %  

EBIT

Software Solutions $ 10 $ 16 (37

%)

 

Global Ecommerce   4     3   20

%

   

 

Digital Commerce Total $ 14 $ 19 (28

%)

 

 

 

Software Solutions

Revenue declined due to lower licensing and data-related revenue versus the prior year. The Company has signed agreements with 2 global and 9 regional systems integrators as part of the continued focus on expanding the indirect channel. The Company continues to focus on improving sales efficiency to grow the pipeline of deals. EBIT margin declined as a result of the lower licensing revenue, which has a high margin.

Global Ecommerce

Results included a full quarter of Borderfree revenue as compared to one month in the prior year. Revenue benefited from strong growth in the UK marketplace and the launch of new retail storefronts. Outbound U.S. marketplace package shipments grew in the quarter despite the stronger U.S. dollar versus prior year.

When adding pre-acquisition Borderfree revenue back to the prior year, for comparative purposes, organic growth in the Cross-Border Ecommerce business grew 11 percent in the quarter, which is an improvement from the first quarter performance.

EBIT margin declined slightly versus the prior year due to the amortization of acquisition-related intangible costs and investments for growth. The Company remains on-track to achieve its cross border synergy run-rate objective by the end of the year. In addition, the higher-margin domestic shipping business was temporarily impacted by the new enterprise business platform cutover in the U.S.

Other

($ millions)   Second Quarter    

Y/Y

 

Y/Y

2016

2015

Reported

Ex Currency

Revenue $ 0 $ 25 NM NM EBIT $ 0 $ 6 NM  

The Other segment is comprised of the Imagitas marketing services business, which was sold in May 2015.

2016 Guidance

This guidance discusses future results, which are inherently subject to unforeseen risks and developments. As such, discussions about the business outlook should be read in the context of an uncertain future, as well as the risk factors identified in the safe harbor language at the end of this release and as more fully outlined in the Company's 2015 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission.

This guidance excludes any unusual items that may occur or additional portfolio or restructuring actions, not specifically identified, as the Company implements plans to further streamline its operations and reduce costs. Revenue guidance is provided on a constant currency basis because the Company cannot reasonably predict the impact future changes in currency exchange rates will have on revenue. Additionally, the Company cannot provide GAAP EPS and GAAP cash from operations guidance due to the uncertainty of future potential restructurings, goodwill and asset write-downs, unusual tax settlements or payments and contributions to its pension funds, acquisitions, divestitures and other potential adjustments, which could (individually or in the aggregate) have a material impact on the Company’s performance. The Company’s guidance is based on an assumption that the global economy and foreign exchange markets in 2016 will not change significantly.

The Company expects improving trends in the business in the second half of the year as a result of actions taken to achieve its long term strategic initiatives. Based on year-to-date results, particularly in Software, along with the second quarter temporary impact in North America Mailing as a result of the new enterprise business platform cutover, the Company is adjusting its annual guidance.

The Company now expects, for the full year 2016:

• Revenue, on a constant currency basis, to be in the range of a 1 percent decline to 3 percent decline when compared to 2015.
• Adjusted EPS to be in the range of $1.75 to $1.82, excluding the year-to-date EPS charge of $0.13 related to restructuring, asset impairments, dispositions expense and discontinued operations.
• Free cash flow to be in the range of $400 million to $450 million.
• Annual tax rate in the range of 33 percent to 35 percent.

Therefore, for the second half of 2016 the Company expects:

• Revenue, on a constant currency basis, to be in the range of 2 percent growth to 2 percent decline when compared to 2015.
• Adjusted EPS to be in the range of $1.03 to $1.10.
• Free cash flow to be in the range of $254 million to $304 million.

To achieve improvement in the second half of the year as compared to the first half, the Company expects:

• The North America Mailing business to return to a more normalized level as the Company continues to make progress post the new enterprise business platform cutover.
• Enterprise Solutions Group to perform similar to the first half.
• Within Digital Commerce Solutions, Software license revenue growth is expected to improve as a result of the progress the Company is making in channel efficiency and channel partner engagement. Global Ecommerce, post the anniversary of the Borderfree acquisition, is expected to grow revenue double-digits in the second half, subject to no material changes in key currency valuations or any new material impacts from the Brexit decision or Canada Post labor negotiations. This will be driven by continued transaction volume growth, as well as the acquisition of new and expansion of existing retail clients.
• Adjusted EPS and free cash flow will benefit from the expected revenue improvements, reduced marketing and ERP expense from first half levels.
• Adjusted EPS will also benefit from the early benefits from the new enterprise business platform cost savings, particularly in the fourth quarter.
• Free cash flow will also benefit from the recovery of delayed billing and collections activity related to the enterprise business system cutover.

Conference Call and Webcast

Management of Pitney Bowes will discuss the Company’s results in a broadcast over the Internet today at 8:00 a.m. ET. Instructions for listening to the earnings results via the Web are available on the Investor Relations page of the Company’s web site at www.pb.com.

About Pitney Bowes

Pitney Bowes (NYSE:PBI), is a global technology company powering billions of transactions – physical and digital – in the connected and borderless world of commerce. Clients around the world, including 90 percent of the Fortune 500, rely on products, solutions and services from Pitney Bowes in the areas of customer information management, location intelligence, customer engagement, shipping, mailing, and global ecommerce. And with the innovative Pitney Bowes Commerce Cloud, clients can access the broad range of Pitney Bowes solutions, analytics, and APIs to drive commerce. For additional information visit Pitney Bowes, the Craftsmen of Commerce, at www.pitneybowes.com.

The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP).

The Company reports measures such as adjusted earnings before interest and taxes (EBIT) and Adjusted EPS and adjusted income from continuing operations to exclude the impact of special items like restructuring charges, tax adjustments, goodwill and asset write-downs, and costs related to recent dispositions and market exits. While these are actual Company expenses, they can mask underlying trends associated with its business. Such items are often inconsistent in amount and frequency and as such, the adjustments allow an investor greater insight into the current underlying operating trends of the business.

In addition, revenue growth is presented on a constant currency basis to exclude the impact of changes in foreign currency exchange rates since the prior period under comparison. Constant currency measures are intended to help investors better understand the underlying operational performance of the business excluding the impacts of shifts in currency exchange rates over the period. Constant currency is calculated by converting our current quarter reported results using the prior year’s exchange rate for the comparable quarter. In addition, this quarter the Company reported the comparison of “revenue excluding the impact of currency and market exits” to prior year, which excludes the impact of changes in foreign currency exchange rates since the prior period and also excludes the revenues associated with the recent market exits in several smaller markets. This comparison allows an investor insight into the underlying revenue performance of the business and true operational performance from a comparable basis to prior period. A reconciliation of reported revenue to constant currency revenue, as well as reported revenue to “revenue excluding the impact of currency and market exits” can be found in the Company’s attached financial schedules.

The Company reports free cash flow in order to provide investors insight into the amount of cash that management could have available for other discretionary uses. Free cash flow adjusts GAAP cash from operations for capital expenditures, restructuring payments, unusual tax settlements, contributions to the Company’s pension fund and cash used for other special items. A reconciliation of GAAP cash from operations to free cash flow can be found in the Company’s attached financial schedules.

In addition, Management uses segment EBIT to measure profitability and performance at the segment level. Segment EBIT is determined by deducting from revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges and goodwill and asset impairments, which are recognized on a consolidated basis. A reconciliation of Segment EBIT to the Company’s total Net Income can be found in the Company’s attached financial schedules.

Pitney Bowes has provided a quantitative reconciliation to GAAP in supplemental schedules. This information may also be found at the Company's web site www.pb.com/investorrelations.

This document contains “forward-looking statements” about the Company’s expected or potential future business and financial performance. Forward-looking statements include, but are not limited to, statements about its future revenue and earnings guidance and other statements about future events or conditions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: mail volumes; the uncertain economic environment; timely development, market acceptance and regulatory approvals, if needed, of new products; fluctuations in customer demand; changes in postal regulations; interrupted use of key information systems; the ability to protect the Company’s information technology systems against service interruptions, misappropriation of data, or breaches of security resulting from cyber-attacks or other events; management of outsourcing arrangements; the implementation of a new enterprise business platform; changes in business portfolio; the success of our investment in rebranding the Company; the risk of losing some of the Company’s larger clients in the Global Ecommerce segment; integrating newly acquired businesses, including operations and product and service offerings; foreign currency exchange rates; changes in our credit ratings; management of credit risk; changes in interest rates; the financial health of national posts; increased customs and regulatory risks associated with cross-border transactions; and other factors beyond its control as more fully outlined in the Company's 2015 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments.

Note: Consolidated statements of income; revenue and EBIT by business segment; and reconciliation of GAAP to non-GAAP measures for the three and six months ended June 30, 2016 and 2015, and consolidated balance sheets at June 30, 2016 and December 31, 2015 are attached.

Pitney Bowes Inc. Consolidated Statements of Income (Unaudited; in thousands, except share and per share amounts)     Three months ended June 30,     Six months ended June 30, 2016   2015 2016   2015 Revenue: Equipment sales $ 152,641 $ 165,507 $ 312,002 $ 331,471 Supplies 65,274 70,636 137,325 144,004 Software 90,615 99,184 168,673 185,541 Rentals 102,869 111,312 206,959 225,309 Financing 91,609 101,437 189,032 207,067 Support services 131,418 139,237 259,678 278,795 Business services   201,460     193,578     406,806     399,385     Total revenue   835,886     880,891     1,680,475     1,771,572     Costs and expenses: Cost of equipment sales 78,055 79,043 149,594 154,056 Cost of supplies 19,624 21,624 40,314 44,283 Cost of software 26,983 28,501 53,798 58,365 Cost of rentals 18,415 21,003 38,910 41,704 Financing interest expense 13,495 17,868 28,410 36,638 Cost of support services 74,742 81,507 149,991 165,106 Cost of business services 140,830 135,636 276,368 275,555 Selling, general and administrative 288,580 315,578 615,462 630,107 Research and development 34,513 28,492 61,081 54,540 Restructuring charges and asset impairments, net 26,076 14,350 33,009 14,269 Interest expense, net 20,799 20,971 40,100 45,035 Other expense (income), net   536     (93,135 )   536     (93,135 )   Total costs and expenses   742,648     671,438     1,487,573     1,426,523     Income from continuing operations before income taxes 93,238 209,453 192,902 345,049 Provision for income taxes   33,394     52,351     70,418     102,898     Income from continuing operations 59,844 157,102 122,484 242,151 Loss from discontinued operations, net of tax   (1,660 )   (739 )   (1,660 )   (582 )   Net income 58,184 156,363 120,824 241,569 Less: Preferred stock dividends attributable to noncontrolling interests   4,594     4,593     9,188     9,187     Net income - Pitney Bowes Inc. $ 53,590   $ 151,770   $ 111,636   $ 232,382     Amounts attributable to common stockholders: Net income from continuing operations $ 55,250 $ 152,509 $ 113,296 $ 232,964 Loss from discontinued operations, net of tax   (1,660 )   (739 )   (1,660 )   (582 )   Net income - Pitney Bowes Inc. $ 53,590   $ 151,770   $ 111,636   $ 232,382     Basic earnings per share attributable to common stockholders (1): Continuing operations $ 0.29 $ 0.76 $ 0.60 $ 1.16 Discontinued operations   (0.01 )   -     (0.01 )   -     Net income - Pitney Bowes Inc. $ 0.29   $ 0.75   $ 0.59   $ 1.15     Diluted earnings per share attributable to common stockholders (1): Continuing operations $ 0.29 $ 0.75 $ 0.59 $ 1.15 Discontinued operations   (0.01 )   -     (0.01 )   -     Net income - Pitney Bowes Inc. $ 0.28   $ 0.75   $ 0.59   $ 1.15     Weighted-average shares used in diluted earnings per share   188,362,278     202,839,944     190,806,261     202,634,107   (1)   The sum of the earnings per share amounts may not equal the totals due to rounding.   Pitney Bowes Inc. Consolidated Balance Sheets (Unaudited; in thousands, except share amounts)    

June 30,

   

December 31,

Assets

2016

2015 (1)

Current assets: Cash and cash equivalents $ 675,972 $ 650,557 Short-term investments 74,809 117,021 Accounts receivable, net 431,580 476,583 Short-term finance receivables, net 918,974 918,383 Inventories 110,960 88,824 Current income taxes 12,186 6,584 Other current assets and prepayments   61,039     67,400     Total current assets 2,285,520 2,325,352   Property, plant and equipment, net 309,491 330,088 Rental property and equipment, net 172,269 177,515 Long-term finance receivables, net 693,589 760,657 Goodwill 1,752,714 1,745,957 Intangible assets, net 172,785 187,378 Noncurrent income taxes 66,942 70,294 Other assets   510,267     525,891     Total assets $ 5,963,577   $ 6,123,132    

Liabilities, noncontrolling interests and stockholders' equity

Current liabilities: Accounts payable and accrued liabilities $ 1,345,653 $ 1,448,321 Current income taxes 7,235 16,620 Current portion of long-term debt and notes payable 470,058 461,085 Advance billings   308,728     353,025     Total current liabilities 2,131,674 2,279,051   Deferred taxes on income 212,607 205,668 Tax uncertainties and other income tax liabilities 69,803 68,429 Long-term debt 2,623,764 2,489,583 Other noncurrent liabilities   550,546     605,310     Total liabilities   5,588,394     5,648,041     Noncontrolling interests (Preferred stockholders' equity in subsidiaries) 296,370 296,370   Stockholders' equity: Cumulative preferred stock, $50 par value, 4% convertible 1 1 Cumulative preference stock, no par value, $2.12 convertible 489 505 Common stock, $1 par value 323,338 323,338 Additional paid-in-capital 148,154 161,280 Retained earnings 5,196,194 5,155,537 Accumulated other comprehensive loss (840,427 ) (888,635 ) Treasury stock, at cost   (4,748,936 )   (4,573,305 )   Total Pitney Bowes Inc. stockholders' equity   78,813     178,721     Total liabilities, noncontrolling interests and stockholders' equity $ 5,963,577   $ 6,123,132   (1)   Certain prior year amounts have been revised for accounting rules that became effective January 1, 2016 and to conform to current year presentation.   Pitney Bowes Inc. Business Segments - Revenue and EBIT (Unaudited; in thousands)     Three months ended June 30,     Six months ended June 30, 2016   2015   % Change 2016   2015   % Change

Revenue

  North America Mailing $ 322,068 $ 356,791 (10 %) $ 671,794 $ 718,665 (7 %) International Mailing   106,338     110,610   (4 %)   210,097     226,783   (7 %) Small & Medium Business Solutions   428,406     467,401   (8 %)   881,891     945,448   (7 %)   Production Mail 95,874 97,731 (2 %) 183,299 197,234 (7 %) Presort Services   115,765     113,922   2 %   243,161     235,453   3 % Enterprise Business Solutions   211,639     211,653   0 %   426,460     432,687   (1 %)   Software Solutions 90,464 99,041 (9 %) 168,386 185,278 (9 %) Global Ecommerce   105,377     77,966   35 %   203,738     153,352   33 % Digital Commerce Solutions   195,841     177,007   11 %   372,124     338,630   10 %   Other - 24,830 (100 %) - 54,807 (100 %)             Total revenue $ 835,886   $ 880,891   (5 %) $ 1,680,475   $ 1,771,572   (5 %)  

EBIT (1)

  North America Mailing $ 142,227 $ 159,392 (11 %) $ 298,142 $ 323,057 (8 %) International Mailing   12,781     14,122   (9 %)   24,632     25,846   (5 %) Small & Medium Business Solutions   155,008     173,514   (11 %)   322,774     348,903   (7 %)   Production Mail 12,914 10,028 29 % 19,738 19,060 4 % Presort Services   21,214     23,544   (10 %)   50,124     51,038   (2 %) Enterprise Business Solutions   34,128     33,572   2 %   69,862     70,098   0 %   Software Solutions 10,151 16,158 (37 %) 7,579 20,291 (63 %) Global Ecommerce   3,674     3,056   20 %   4,446     11,202   (60 %) Digital Commerce Solutions   13,825     19,214   (28 %)   12,025     31,493   (62 %)   Other - 5,611 (100 %) - 10,569 (100 %)             Segment EBIT $ 202,961   $ 231,911   (12 %) $ 404,661   $ 461,063   (12 %)     Reconciliation of segment EBIT to net income   Segment EBIT $ 202,961 $ 231,911 $ 404,661 $ 461,063 Corporate expenses   (48,777 )   (51,921 )   (106,544 )   (102,724 ) Adjusted EBIT 154,184 179,990 298,117 358,339 Interest, net (2) (34,294 ) (38,839 ) (68,510 ) (81,673 ) Restructuring charges and asset impairments, net (26,076 ) (14,350 ) (33,009 ) (14,269 ) Other (expense) income, net (536 ) 93,135 (536 ) 93,135 Acquisition/disposition related expenses   (40 )   (10,483 )   (3,160 )   (10,483 ) Income from continuing operations before income taxes 93,238 209,453 192,902 345,049 Provision for income taxes   (33,394 )   (52,351 )   (70,418 )   (102,898 ) Income from continuing operations 59,844 157,102 122,484 242,151 Loss from discontinued operations, net of tax   (1,660 )   (739 )   (1,660 )   (582 ) Net income $ 58,184   $ 156,363   $ 120,824   $ 241,569   (1)   Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges and other items, which are not allocated to a particular business segment.   (2) Includes financing interest expense and interest expense, net.   Pitney Bowes Inc. Reconciliation of Reported Consolidated Results to Adjusted Results (Unaudited; in thousands, except per share amounts)     Three months ended June 30,       Six months ended June 30,   2016   2015 Y/Y Chg. 2016   2015 Y/Y Chg.     Reconciliation of reported revenue to revenue excluding currency and Market Exits Revenue, as reported $ 835,886 $ 880,891 (5 %) $ 1,680,475 $ 1,771,572 (5 %) Unfavorable impact on revenue due to currency   4,770     -   NM     14,721     -   NM   Revenue, excluding currency 840,656 880,891 (5 %) 1,695,196 1,771,572 (4 %) Less: Revenue from Market Exits   -     5,717   (100 %)   480     11,541   (96 %) Revenue, excluding currency and Market Exits $ 840,656   $ 875,174   (4 %) $ 1,694,716   $ 1,760,031   (4 %)       Reconciliation of reported net income to adjusted earnings Net income $ 58,184 $ 156,363 $ 120,824 $ 241,569 Loss from discontinued operations, net of tax 1,660 739 1,660 582 Restructuring charges and asset impairments, net 16,931 8,613 21,559 8,560 Loss (gain) on disposition of businesses 271 (88,429 ) 2,330 (88,429 ) Transaction costs related to acquisitions and dispositions 93 6,105 209 6,105 Legal settlement - 4,620 - 4,620 Acquisition/disposition related expenses   -     7,246     -     7,246  

Income from continuing operations, after income taxes, as adjusted

77,139 95,257 146,582 180,253 Provision for income taxes, as adjusted   42,751     45,894     83,025     96,413   Income from continuing operations before income taxes, as adjusted 119,890 141,151 229,607 276,666 Interest, net   34,294     38,839     68,510     81,673   EBIT, as adjusted 154,184 179,990 298,117 358,339 Depreciation and amortization   45,238     42,657     89,538     85,153   EBITDA, as adjusted $ 199,422   $ 222,647   $ 387,655   $ 443,492       Reconciliation of reported diluted earnings per share to adjusted diluted earnings per share from continuing operations Diluted earnings per share $ 0.28 $ 0.75 $ 0.59 $ 1.15 Loss from discontinued operations, net of tax 0.01 - 0.01 - Restructuring charges and asset impairments, net 0.09 0.04 0.11 0.04 Loss (gain) on disposition of businesses - (0.44 ) 0.01 (0.44 ) Transaction costs related to acquisitions and dispositions - 0.03 - 0.03 Legal settlement - 0.02 - 0.02 Acquisition/disposition related expenses   -     0.04     -     0.04  

Diluted earnings per share from continuing operations, as adjusted

$ 0.39   $ 0.45   $ 0.72   $ 0.84     Note: The sum of the earnings per share amounts may not equal the totals due to rounding.       Reconciliation of reported net cash from operating activities to free cash flow, as adjusted Net cash provided by operating activities $ 95,221 $ 96,915 $ 153,587 $ 201,008 Capital expenditures (30,855 ) (45,498 ) (71,359 ) (89,612 ) Restructuring payments 12,210 8,901 33,866 30,775 Pension contribution - - 36,731 - Reserve account deposits 9,110 (1,387 ) (7,143 ) (21,464 ) Payments related to investment divestiture - 3,215 - 26,375 Acquisition/disposition related expenses - 10,483 - 10,483 Cash transaction fees   146     11,116     335     11,116     Free cash flow, as adjusted $ 85,832   $ 83,745   $ 146,017   $ 168,681  

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Pitney BowesEditorial -Bill Hughes, 203-351-6785Chief Communications OfficerorFinancial -Adam David, 203-351-7175VP, Investor Relations