A Primer on Pitney Bowes Inc.
Stay tuned for our Quick Take on Pitney Bowes, with our investment outlook.
Introduction
Pitney Bowes Inc. is a technology-driven company that provides SaaS shipping solutions, mailing innovation, and financial services globally.
It serves a wide range of clients, from small businesses to large enterprises and government entities, including over 90 percent of the Fortune 500.
The company helps clients reduce the complexity of sending mail and parcels. Pitney Bowes has undergone a strategic transformation over the past year, which has resulted in changes to its business segments.
Pitney Bowes has approximately 7.2K employees, with 78% located in the United States. They also use a contingent hourly workforce to supplement staff based on fluctuating demand.
The main investor interest in PBI deleveraging through cash generation:
Selling off non-performing parts like its unprofitable Global e-Commerce (GEC) segment and serious cost cutting (targeting $200M in cuts) are the main ways to achieve deleveraging
Business Segments
The company has two main segments, SendTech (including GFS or Global Financial Services) and Presort Services.
SendTech Solutions
Provides physical and digital shipping and mailing technology solutions and applications to simplify sending, tracking, and receiving letters, parcels, and flats.
Offers supplies and maintenance services for these solutions.
Provides financing alternatives for equipment and product purchases.
Includes a revolving credit solution for meter rental, postage, services, and supplies purchases.
Offers an interest-bearing deposit solution for clients who prefer to prepay postage.
Provides financing to lease other manufacturers' equipment and offer working capital.
Digital delivery services allow clients to reduce transportation costs, select carriers based on need/cost, improve delivery times, and track packages in real-time. These services, powered by shipping APIs, enable purchasing postage, printing labels, accessing carrier services, integrating with web applications (like online shopping carts or ecommerce sites), and offer guaranteed delivery times and flexible payment options.
Financing and deposit solutions for U.S. clients are offered through their wholly owned subsidiary, The Pitney Bowes Bank. Revolving credit solutions are also available for clients in Canada and the U.K..
The Pitney Bowes Bank Receivables Purchase Program
Part of GFS (Global Financial Services), under the SendTech segment.
Accelerates Cash Flow: The program accelerates the net realization of cash from leases. For example, in 2024, it freed up approximately $41 million in cash to flow to the parent company.
Reduces Borrowing Costs: Selling eligible leases to the Pitney Bowes Bank reduces the parent company's interest costs.
Purchase Power: Pitney Bowes Bank offers a Purchase Power credit line, which consolidates postage and shipping expenses, helping businesses manage expenses and extend payment cycles. This program provides itemized monthly statements and flexible payment terms.
Eligibility: The receivables purchased must be from unrelated, third-party sellers, and the bank cannot have originated the receivables directly or indirectly. Additionally, the receivables must be generated on an arm's-length basis between the seller and the obligor.
Presort Services
Operating 30+ presort service centers nationwide, processing more than 15B pieces of mail annually, making it the largest USPS workshare partner in the US, providing end-to-end solutions from pickup to delivery into the postal system network.
Client Benefits: Mailers benefit from guaranteed pricing, end-to-end visibility, improved mail deliverability, predictable in-home dates, and reduced labor and transportation costs. The service simplifies mailing complexity, especially for time-sensitive or mission-critical mailings.
Utilizes proprietary technology like advanced sorting and conveyor systems to efficiently process large mail volumes. They also provide detailed analytics and visibility into mailing performance and costs, helping clients optimize their mail campaigns.
How It Works:
Pitney Bowes picks up mail from clients, sorts it according to USPS requirements, and delivers it into the postal system closer to the final delivery destination.
Presort labels are post-paid, meaning postage is not charged at the time of printing but managed through Pitney Bowes’ agreement with USPS.
Clients must be enrolled with a Pitney Bowes Presort facility to use the service, which involves validation and assignment of Mailer IDs and job numbers to ensure compliance and rate agreements.
Other
Represents amounts from the former Global Ecommerce segment that did not qualify for discontinued operations treatment.
Primarily relates to operations that were dissolved or sold, certain shared services functions, and a cross-border services contract.
Sales, Services, and Support
Pitney Bowes markets its offerings through various channels, including:
A direct and inside sales force.
Global and regional partner channels.
Direct mailings and digital channels. The company provides support services through call-centers, online platforms, and on-site, primarily under maintenance contracts.
Competition
Pitney Bowes faces competition in its different segments:
SendTech Solutions competes with other mail equipment/solutions providers and those offering online shipping/mailing products. Differentiation factors include the breadth of physical/digital offerings (including cloud-enabled SaaS and open platform architecture), pricing, financing/payment options, product reliability, support services, and industry knowledge. Their financing operations compete with various financial institutions and firms; the key competitive advantage here is the breadth of financing/payment solutions and their integration into clients' operations.
Presort Services competes with regional/local presort providers, cooperatives, consolidators, service bureaus, and large mailers with in-house sorting capabilities. Principal competitive factors are price, innovative service, delivery speed, tracking/reporting, industry expertise, and economies of scale. Competitive advantages include their extensive network for high volumes and innovative proprietary technology for reliable, secure, precise services and maximum postage discounts. More detailed risks regarding competition are covered in Item 1A. Risk Factors.
R&D and IP
The company invests in R&D to develop new products/solutions, enhance existing ones, and deliver high-value technology and differentiated services in specific market segments.
Third Party Suppliers Pitney Bowes relies on third-party suppliers and outsource providers across its segments:
SendTech Solutions depends on them for services, product components, and hosting SaaS offerings.
Presort Services relies on them for facility equipment, warehouse support, and logistical operations.
All businesses and corporate functions use third parties for data analytics, sales, reporting, and other functions. In some cases, they rely on single-sourced or limited-sourced suppliers due to quality, price, or lack of alternatives. Risk mitigation programs are in place to monitor suppliers. The company believes available sources are adequate.
Regulation
SendTech Solutions is subject to postal authorities worldwide regarding postage meter specifications and is regulated as a U.S. government contractor.
Presort Services operations are also subject to USPS regulations.
The Pitney Bowes Bank and certain affiliates are subject to the regulations of the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation.
The company is also subject to transportation regulations, worldwide customs and trade regulations (for cross-border services), and data privacy and security regulations.
While climate change has not had a material impact on operations to date, the risk of increasingly severe or frequent climate events could affect facilities, daily operations, or clients' ability to do business in the future. Changes in regulation related to climate change and ESG (Environmental, Social, and Governance), including differing requirements across locations, may change the cost of compliance for data collection, assurance, and reporting regarding ESG impacts and risk management.
Stay tuned for our Quick Take on Pitney Bowes, with our investment outlook.