Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2025 Pitney Bowes Earnings Conference Call. Joining us today are Chief Executive Officer, Kurt Wolf; Chief Financial Officer, Paul Evans; and Director, Investor Relations, Alex Brown. Please be advised that today's conference is being recorded. It is my pleasure to turn the call over to Alex Brown, Director, Investor Relations. Please go ahead.

Good morning, and thank you for joining us. Included in today's presentation are forward-looking statements about our 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 items can be found in our earnings press release, our Form 10-K and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on Investor Relations. Please keep in mind that we do not undertake any obligation to update forward-looking statements as a result of any new information or developments. Also included in today's presentation are non-GAAP measures. Specifically, EBIT, EBITDA, EPS and free cash flow are all on an adjusted basis. You can find a reconciliation for these items to the appropriate GAAP measure in the tables attached to our press release. We have also provided a slide presentation and a spreadsheet with historical segment information on our website. With that, I'd like to turn the call over to Kurt.

Good morning, and thank you for joining us. I trust that everyone has had a chance to read our earnings release and my quarterly letter. As such, I will keep my comments brief. First, I'd like to welcome our recently announced executive hires. It's exciting to see the level of talent we are now able to attract to Pitney Bowes. I'm particularly pleased to have Steve Fischer join the company. Steve is an accomplished bank leader, something that stood out during the recruiting process. I look forward to working closely with him to maximize the value of Pitney Bowes Bank. Moving to the fourth quarter. Our results demonstrate the progress we're making in transforming Pitney Bowes. While we did have some tailwinds, our financials were strong absent those benefits and reflect the growing strength of our business. In closing, we are rapidly progressing through our transformation. In 2025, we significantly strengthened the foundation of our business, taking meaningful steps in upgrading leadership, simplifying our structure, streamlining processes and eliminating costs. All of this is putting us on strong footing as we pivot to a focus on profitable growth and begin our external review with qualified advisers during the second quarter. With that, let's open the call for questions.

And our first question will come from Aaron Kimson with Citizens.

Kurt, can you expand on the additional market uncertainty and geopolitical challenges you mentioned in your letter as reasons for the wider guidance range?

Yes. Aaron, thanks for the question, and thanks for joining the call. Yes, some of the things that I would point to: one is, as we've seen in the past, there have been issues with government shutdowns. I think there's no guarantee that doesn't happen again. As we talked about during our Q3 call, that certainly affects some of our performance in the SendTech space. More broadly, obviously, there are questions about a change at the Fed, and there's some uncertainty about the direction of the economy. We're a pretty non-cyclical business. However, I would really point to our marketing mail aspect of the Presort business, which is more economically sensitive. So while we don't expect anything major, we are cognizant that there could be potential headwinds related to both of them, but we don't necessarily expect them.

Okay. That makes sense. And then I wanted to ask on the Presort business as well. You mentioned new business wins and no churn since June of 2025. I think you had a nice win in the state of Pennsylvania that was well-publicized in 4Q. Are boomerang customers and new wins generally reflected in Presort volumes immediately? Or is there a ramp time where Debbie and her team get agreements, but the volumes come at the end of a pre-existing contract with another vendor and you have some visibility into the ramp?

Usually, they come in pretty quickly. But what I would point to is there's definitely a sales cycle that can be pretty long. So we got more aggressive starting in June of last year, and it's taken time to fill that pipeline. I think at this point, the pipeline is pretty full start to finish. One thing I'd point to is the customer wins that we had in Q4; we've essentially met that level of wins this half the way into Q1 of this year. So you can see as that pipeline is filled that we're getting more and more wins on a more rapid basis. In terms of flow-through to the financials, it does take a little bit of time. We have to add multiple customers. We experienced many major losses from the first half of last year that we're trying to eclipse. So it's just going to be a process over the next few months and quarters.

And our next question is going to come from Anthony Lebiedzinski with Sidoti.

So just a quick follow-up. Kurt, you said that the government shutdown had some impact in the quarter. Any way you guys could quantify what that impact may have been?

Anthony, it's Paul Evans. Yes. Look, we were impacted by that. That caused delays in hardware purchases, which sort of pushed it into the subsequent quarters. So we saw most of it in Q3 last year. I'm not sure we can go down to that level of granularity to give that. But, I mean, we are susceptible to government shutdowns.

Understood. Okay. So Kurt, in your shareholder letter, you mentioned being more aggressive with pricing on Presort. So just wondering if you could further expand on that as far as how perhaps aggressive you would be with pricing to win back clients? And what type of EBIT margins should we think about as we look at the Presort business going forward?

Yes. I'll let Paul speak to the EBIT margins. But just broadly speaking, what I'd highlight on that, I know there's been questions about what's going on in Presort. To be quite honest, I think we got caught flat-footed early last year. Industry margins went up, and pretty much everybody in the space did what you would expect, which is to go out and be aggressive to try to win new customers with the higher margin levels. We unfortunately were not in the same boat. So we faced a lot of headwinds in terms of customer losses and having to give concessions to our customers, but we weren't necessarily aggressive in going after customers in the space. That's really what's happening now. So when we talk about being aggressive on pricing, a lot of it is trying to attract new business. We've already made the required concessions to our existing customer base. So it's really about winning new customers.

And Anthony, to add to that, I think if you sort of target low to mid-20% range for EBIT margins, but it's also important to note that we are the low-cost provider. So we can sustain that. So when we come out and say we're going to get more aggressive on our pricing strategy, we can certainly afford to do that.

Got you. Okay. And then my last question before I pass it on to others. So as we look at the free cash flow guidance, you guys add back restructuring payments to your definition of free cash flow. So how much restructuring payments are you guys assuming in 2026?

It is true, yes, we do add it back. The reason we add it back is it's not really representative of our business going forward. I'm just trying to think if we've offered that level of detail in the past on that. Maybe I'll circle back to that payment. I'm not sure we've offered that level of detail.

Our next question is going to come from George Tong with Goldman Sachs.

Going back to the Presort business, in terms of winning back customers and being more competitive on pricing, given the comps ease pretty materially in the second half of this year, would you expect that by then you would return to positive growth in Presort?

I believe that this year will present an easier comparison for growth compared to last year, though we need to navigate through Q1 and Q2, which will be more challenging for us. As we mentioned previously, we halted the decline in the middle of last year. Kurt has encouraged Debbie Pfeiffer to be more proactive with pricing. Additionally, as Kurt pointed out, there is a sales cycle to consider. We are starting to gain some momentum, and I anticipate that the second half of the year will provide a more favorable comparison for us.

Okay. Makes sense. And then in the SendTech business, how do you envision the revenue performance over the course of the year? If there's any bifurcation of performance in the first half of the year, for example, versus the second half, would you expect the second half to be stronger within the SendTech business?

Let's start, first for the year. We expect a top line decline in the business. But if you split apart the year, we believe the second half of the year will be stronger than the front part of the year.

Yes. And George, just look at sequential year-over-year throughout 2025, you can see there's a trend that is essentially getting more positive every quarter, which ties back to what we’ve spoken about in the past with the IMI migration. Again, we expect that to continue. So we can't guarantee that each year-over-year comparison is going to improve quarter by quarter, but that should be somewhat of the trend going forward, at least through 2026.

And the next question will come from Jasper Bibb with Truist.

I was just curious how you're thinking about the underlying mix in SendTech in '26. I think the letter mentioned you didn't get the growth rate you wanted in the shipping technology piece. Could you maybe frame for us how you're thinking about the growth rates in the shipping technology business in '26 versus, I guess, maybe the core hardware business and everything that's associated with the mailing meters, et cetera.

Yes. We can essentially cut it into three pieces. We have the mailing meter business, the shipping software business, and the bank, which is currently reported as a part of SendTech. With respect to the mailing meters, the IMI migration certainly created some serious headwinds in 2025. We expect that to slowly ease. Additionally, we have had a bias in the past of always focusing on growing markets, which does not apply to the mailing meter business. One of the things that Todd has really identified since joining the company is that we probably aren't doing as much as we could to slow that rate of decline. So a lot of efforts will be put into addressing that. As for shipping software, Todd has done some great work there. We have a vast array of product offerings, and we're trying to better focus on how we do that. Also, we want to identify where we have the best competitive advantage so we can better hone our go-to-market strategy. It will take some time to fully identify exactly what that looks like, but Todd is aggressively already testing some concepts in the market, so we'll have more in future quarters on that. As for the bank, with Steve's hiring, we're excited about unlocking growth opportunities there, but we will proceed with caution due to risks associated with the lending space. Hopefully, that gives you some good color.

No, that's very helpful. Maybe just one on capital return. So pretty aggressive pace of buybacks in the fourth quarter. It seems like that maybe slowed a little bit in the first, call it, 1.5 months of '26. Just wanted to get an update on how you're thinking about the balance of share repurchase and the dividend and other priorities in '26?

Yes. So Jasper, this is Paul. Look, I think the keyword on share buybacks and debt buybacks is opportunistic. We're very opportunistic in Q4. We're very disciplined in how we approach that. I'll say it plainly. We're committed to a net debt of EBITDA of around 3x. We definitely see our stock as undervalued, and so we will continue to buy our stock. Relative to dividends, that's a quarter-by-quarter decision. This quarter, we decided that the best use of our capital is to continue focusing on debt buybacks and share buybacks.

And our next question will come from Curtis Nagle with Bank of America.

Just wanted to follow up quickly on the free cash flow guide. It came in nicely above where the Street was. In terms of the components, maybe we can return to that restructuring point later. But are you including the net investments in the loan receivables from the cash from investing line? Because I think the sort of comparable or the component of that in cash from ops is in there. So just wondering how all that rounds out and if that's included in the guide?

A little bit on free cash flow. A big component of free cash flow is Presort prepayments. We don't control the timing of that per se, but we had a very strong Q4 on that despite not fully controlling it. That's definitely a larger component for us when we look at that. As for the detail on the amount of restructuring in there, I'm just not sure if that's a number we've disclosed in the past.

And the next question comes from Dillon Bandi with Northcoast Research.

Looking at that target of 3x net debt, is that a 2026 target? Or are you guys looking more into 2027 or longer term for that?

I think in how we define net debt, we actually came in at the end of the year slightly below 3x net debt to adjusted EBITDA. I think it's just a good overall target to be at. There might be times we hover slightly above or below that on the quarter, but I think for this business going forward, that's the right place to be.

Yes. And Dillon, just to add to that, as Paul highlighted, we're going to be opportunistic in our capital allocation. We've said on previous calls that we're aware of how the market views us and what levels of debt they think we can manage. While we believe we could have a higher ratio than that, as long as the market doesn't believe it, we're going to follow the market's lead. By being opportunistic in the capital markets, we may go above, we may go below, but that's the mean or the point we want to keep returning to over time. We may fluctuate above for a bit, return back, or dip below and then return back.

Got you. That's really helpful. And then, Kurt, in your letter, you talked about SendTech exiting its low point of the product cycle. Has there been any fundamental change in that business, whether that's renewal rates or price competition? Or do you guys just overall feel confident about that?

Yes. Overall, we feel confident we believe we have the best products in the market. I think the market agrees with that based on buying habits. We're performing well in the federal and government space. The low point was tied to the IMI migration, and we're recovering from it. There’s fundamentally nothing that's changed in terms of the rate of decline we've historically seen and shouldn't change going forward.

And our next question comes from Justin Dopierala with Domo Capital Management.

So do the new hires you've announced signal that you're no longer looking to sell the business as part of the strategic review?

No, not at all. With these additions, I hope everybody recognizes the level of talent we brought in here. These executives will be important no matter what the future of the business is. They are a significant asset going forward, and that is in no way a comment on the future path of the company.

Got it. I know you touched a little bit on restructuring. In Q4, it was a lot larger than I was expecting. I would assume in 2026 that these costs drop closer to 0. I don't know if you can say what was the largest restructuring cost in Q4?

Just headcount reductions.

Okay. So that was essentially a one-time cost?

In 2026, but most of it is already included in the 2025 number.

Perfect. Also, it appears that your dominance in the Presort space has contributed to a much lower price for Presort customers. I was just wondering how does the USPS view this with respect to work share discounts? Wouldn't the post office also benefit considerably if they simply privatize the entire Presort function to companies like Pitney Bowes in the future?

I don't think we're going to comment on postal relations. All I'd say is we have an incredibly constructive relationship with the post office. Regarding workshare discounts, the rationale for those being introduced is common throughout the government. Workshare discounts serve not only to save money for the post office but also result in lower costs for the end user of postal services, helping maintain volume through the postal system. I think it's a win-win for the post office, but I can't speak on their behalf.

Absolutely. Got it. And I think you briefly touched on this. But looking ahead over the next few years, what do you think are the top growth opportunities that you're seeing?

In Presort, given that we're the low-cost provider in the market, our pricing strategy should drive growth there, but that will take some time. We’re seeing more interest in acquisition opportunities. We'll certainly explore that. A renewed focus on mail and the necessary investments there will help slow the decline, which is a form of growth. Shipping has great potential, and Todd's team is equipped to evolve that. Lastly, with Steve coming on to run the bank, I see growth opportunities there as well.

Okay. And just, I guess, lastly, analyst coverage from yesterday seems to amplify that there's still a huge opportunity to educate people on the fundamentals of the Pitney Bowes business. Are you planning to have an Investor Day in 2026?

Yes. Yes, we are. I certainly agree with you on the education level. As Paul said, we're incredibly opportunistic in our capital allocation. When we look at it, we're trading on a levered basis of 4x free cash flow. We did see a decline in revenue that was larger than typical last year, which may create some concern from shareholders. Yet, much of that was tied to customer losses in Presort that were entirely preventable and shouldn't recur. In SendTech, it was tied to the IMI migration. But to quote Warren Buffett, when the price of hamburgers goes down, it should make you happy. We’re not worried about short-term price movements. We are opportunistic about handling them, as we believe in the long-term outcome for the company.

At this time, I'm showing no further questions in the queue. I would now like to turn the call back to Kurt for closing remarks.

Yes. Thank you, everybody, for joining us. I appreciate your continued investment in our company. Hopefully, everybody has seen the results of Q4 show some of the progress we're making. I know everybody is eager to understand and see when we get to growth. But what we hope people appreciate, and I think the right investors will appreciate, is that we're doing everything we can to build a strong foundation. As that foundation is built, we're going to be much more successful in our pursuit of growth going forward. So thank you for your continued investment and faith in us. We will do our best to continue to deliver strong results for you. So thank you all.

Thank you for participating. You may now disconnect.