Earnings Call Transcript - PBI Q1 2026

Operator, Operator

Good day, and thank you for standing by. Welcome to the First Quarter 2026 Pitney Bowes, Inc. Earnings Conference Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alex Brown, Director of Investor Relations and Assistant Treasurer. Please go ahead.

Alex Brown, Director of Investor Relations and Assistant Treasurer

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 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 reconciliations for these items to the appropriate GAAP measures in the tables attached to our press release. We have also provided a slide presentation and spreadsheet with historical segment information on our website. With that, I'd like to turn the call over to Kurt.

Kurt Wolf, CEO

Good morning, and thank you for joining us today. As reflected in our earnings release, first quarter results were strong and broad-based. Our results and outlook reflect momentum in the business and supported the upping of our guidance. SendTech performed well in the quarter and is showing potential signs of turning the corner on sales. Presort continues to win business and build sales momentum. We continue to expect growth to return to the business in the third quarter. Turning to Pitney Bowes Bank. Steve and his team are making rapid progress with respect to operational improvements and in identifying value-driving opportunities. Additionally, we've delivered significant shareholder value through our capital allocation policy, including dividend increases and significant share repurchases. Finally, we have started interviewing advisers for the second stage of our strategic review. In summary, Pitney Bowes is extremely well positioned for the long term. In closing, I feel obliged to send out a special thank you to the over 6,000 Pitney Bowes team members. Our results are a direct reflection of their talent and dedication to the company. With that, let's open the call for questions.

Operator, Operator

Our first question comes from Jasper Bibb with Truist Securities.

Jasper Bibb, Analyst (Truist Securities)

Can you talk about the consolidation opportunity in Presort? The letter this quarter mentioned hiring Greenhill to evaluate opportunities there historically. I think a lot of your acquisitions in that business have been pretty much mom-and-pops, which I imagine you can handle internally without having to have an investment bank involved. So I guess does hiring Greenhill signal any change there that you would potentially consider larger acquisitions in that segment or are you approaching the consolidation opportunity any differently than you have in the past?

Kurt Wolf, CEO

Yes. Jasper, thanks for joining us, and thanks for the question. With respect to the Presort acquisition strategy, we've been talking about that for quite a bit in terms of being a real strategy for us. As we've mentioned, there's great opportunity to create value. So yes, we can go out and pursue these opportunities on our own. But just having an outside adviser really can help accelerate that. We have a team that's heavily dedicated to execution within the business, but having dedicated resources to really accelerate those discussions can only help. And with respect to size of the acquisition, the sweet spot really is quite frequently the smaller mom-and-pop type Presort opportunities. But again, as we continue to progress and get better at running our business, we want to look at all opportunities to really create value for the business. And as we've said many times before, these deals typically come at a pretty low multiple or are immediately accretive to the business. So as our capital position gets better and our balance sheet gets stronger, it starts to open up additional opportunities, but we're primarily focused on trying to find some of these smaller tuck-in acquisitions that we can pursue.

Jasper Bibb, Analyst (Truist Securities)

And then a really nice quarter for SendTech. Can you maybe just talk about what worked this quarter, how you see that business trending over the balance of the year? And in your guidance scenario, do you think SendTech could potentially flatten out on the year-over-year revenue growth or maybe even grow by the end of the year and what gets you there?

Kurt Wolf, CEO

Yes. And Jasper, we don't want to get ahead of ourselves. But I'll just start by pointing out or answering the part of your question of what's working. Todd and his team are doing a fantastic job as reflected in our results. And I'd highlight sort of two categories and then a few points under each. With respect to our meters business, I think there's been a level of perhaps neglect in terms of focusing on slowing the rate of decline. We're not delusional about the future of mail, but there's still a lot we can be doing. So there are three areas of focus that Todd and his team have been really digging into that are helping us slow that rate of decline. One, we're starting to look—historically, we've handled virtually all cancellations as a processing issue, not as a retention issue. So historically, if somebody asked to cancel their meter, we processed it and that was the end of it. We're now switching to, when those requests come in, doing outreach to try to figure out can we save that customer, what can we do to make sure they're getting the most value out of the meter and make them hopefully reconsider the decision. Second, one of the things we're looking at is predictive analytics. So what we're doing now is trying to understand what are the metrics and signs that a customer is at risk and trying to proactively get to those customers, figure out can we offer them a better solution in advance, and figure out how they can get more value out of their meter, which we expect to reduce the rate of cancellations. And then finally, we're refocusing on customer acquisition. Historically, we've been so focused on GEC and other parts of the business that I don't know that we put enough effort into our actual sales effort. We believe we have the best products and best services in the space. We're proud of it, and we should be out talking to the market more about it. So Todd and his team are really focusing on go-to-market strategies there. The real opportunity for growth comes from the shipping software side. And there, again, there are three things we're really doing. One is we're narrowing and simplifying our offerings. Right now, we offer a high number of shipping software solutions, which I think can create some confusion in the market. It also limits our ability to optimize those offerings. So we're putting a lot of effort into narrowing our product base and improving those products for our customers to help accelerate growth. Second, Pitney Bowes has a proud tradition of product innovation and technology development, and that's somewhat driven our product development within shipping software. So often, we would look at what's a really cool technology we could implement in the shipping software space and then figure out what customers want. We're flipping that on its head and figuring out what our customers want and how we meet that need. And then finally, and this will become more apparent in coming quarters, we're using the bank as a differentiator in the shipping software space. Financing can be pretty important in the shipping software space. There's a lot of cash that flows through that business and being the only player out there with a bank gives us real opportunities to offer products and services to customers that our competitors simply can't. So put that all together, that's the progress we're making in terms of when we get to growth. I think we've made a lot of promises in the past and not been able to deliver. Our focus is on getting things right day-to-day and the future will take care of itself. I believe that day is coming, but we'll update as we get closer to that date.

Jasper Bibb, Analyst (Truist Securities)

That all makes a lot of sense. Maybe last one for me. It sounded like a good quarter for net new business in Presort. I think the letter mentioned you think volumes might get back to growth in the back half of the year. I guess just on that comment, can you piece out maybe how much of that is net new business wins and incremental volume that you won versus, I guess, lapping the customer losses in the prior year?

Kurt Wolf, CEO

Yes. So Paul, I know you've done a lot of work on that. Do you want to take that one?

Paul Evans, CFO

On Presort, yes, we've stopped the losses, and we're picking up wins, and we're obviously filling our pipeline, which is the right thing. I think as we get into the latter half of the year, we should start to see some positive momentum again in Presort.

Operator, Operator

Our next question comes from Aaron Kimson with Citizens.

Aaron Kimson, Analyst (Citizens)

Can you help us think about the drivers of the strong 1Q free cash flow of $43.5 million? I think the consensus before you preannounced on April 21 was a $14 million outflow, so call it a $57.5 million delta to the upside. And then is there a signal investors should be taking away about the durability of free cash flow between years given that cash flow can vary quarter-to-quarter, but you followed up a strong 4Q '25 number with a strong 1Q '26 number?

Paul Evans, CFO

Aaron, thanks for the question. We had good working capital management in Q1, better than I would have originally thought. That was a positive. You are right to point out it was strong in Q4. At the end of the day, we don't totally control all aspects of when our Presort customers prepay. Obviously, we benefit from that, and we used it to improve our operating performance. But overall, solid operating performance, Q4 and Q1, and just good working capital management are the reasons. And yes, I think there's durability in our free cash flow. Kurt and I have both said many times that we're an undervalued stock if you believe in the free cash flow. The durability is proving itself out.

Kurt Wolf, CEO

And Aaron, just to add to that, the way that we're really looking at it in your question about durability, Q4 was obviously an incredibly strong quarter for cash flow. There was a little bit of concern on our part that, as you mentioned with working capital, there could have been a pull-forward effect of cash flow that maybe would have normally come in Q1 got pushed into Q4. But with the strength we saw in Q1, there are two real takeaways. One, it makes us more confident that our Q4 cash flow was a real number, not an artificially impacted number by a pull forward. And second, the strength of Q1 also gives us a lot of optimism for the current year. This is the first positive free cash flow quarter we've had in quite a few years. We're trying to be a little conservative on the guidance side. This is a whole new world for us in terms of the strength we're seeing in our cash flow. We like to think it's durable and it will lead to a strong 2026, but we're trying to be somewhat conservative on the cash flow side just in case there was a pull-forward effect into Q4 and Q1.

Aaron Kimson, Analyst (Citizens)

Okay. That's helpful. And then bigger picture, Kurt, this has been a great story since you formally stepped into the CEO seat from the Board almost a year ago now. Stock closed at $15.54 yesterday versus $9.10 before you came down from the Board and officially took over. What's the one thing you're most proud of over the last year and then maybe something that's proven harder than you thought it would have been initially that you're hoping to get right in the remaining two-thirds of '26?

Kurt Wolf, CEO

In terms of what I'm most proud of, I'd say the employees at Pitney Bowes. We have over 6,000 team members. I'm an ex-consultant and have been in start-ups and worked inside more than a dozen companies. One thing that impressed me even before joining the Board and before the proxy campaign was how dedicated the employees are to the company. I think maybe they needed better guidance and leadership, but the commitment is there. There's a Peter Drucker saying that culture eats strategy for lunch, and the culture of Pitney Bowes is incredibly strong. Seeing the ability of employees to stay focused on execution and remain committed to the transformation despite not always having the clarity they might want in terms of strategy has been impressive. I believe the way to run a business in our situation is to fix what you have and then figure out how to grow from there. That can be incredibly hard on employees, and they've performed admirably. As far as the biggest challenge, I would point to forecasting. It's always difficult as a CEO to come out, reiterate guidance, and then miss. I think that highlighted some of the problems we had in terms of forecasting within the business. Paul and his team have done an incredible job over the past few months to really improve our ability to forecast, and there's been a silver lining: getting better at forecasting has forced the team to dig into the nuts and bolts of the business and get down into the weeds. As we do that, we're learning a lot about the business and making better decisions going forward.

Operator, Operator

Our next question comes from George Tong with Goldman Sachs.

Keen Fai Tong, Analyst (Goldman Sachs)

On Presort, you're now competitively priced versus peers and are starting to win back market share. Can you elaborate on the near-term and then longer-term strategies you have to drive a further revenue recovery from both a product and sales perspective?

Paul Evans, CFO

It's important for us to know our cost in Presort. We have an advantage being the low-cost provider, so we can flex that muscle if we choose to. Debbie and her team are doing a great job in the new sales team of building up our pipeline, and that is one of the reasons that led us to take actions on our guidance where we increased the lower end and in some places raised the upper end. We know our costs and our position. We've done a good job of stemming the losses, picking up some wins, and I see momentum picking up.

Kurt Wolf, CEO

I would just add that looking back with GEC, there was such a focus on generating cash flow from the core businesses to fuel the growth of GEC that SendTech and Presort were really starved of resources. Debbie and her team have done a fantastic job. We've opened up the purse strings to allow Debbie to invest in new capital and get more aggressive on pricing. So rather than focusing on how do we maximize free cash flow tomorrow we focused on how do we maximize long-term free cash flow. It's not just on the revenue side, it's also on the cost side. Sometimes you have to spend money to save money. Many improvements to efficiency require resources to evaluate and those weren't there for Debbie in the past. I think we'll continue to get more efficient. Our cost advantage should grow over time. As Paul said, that gives us more ability to price aggressively, win more business, and there's a bit of a flywheel effect: the bigger we get, the more profitable we get on a per-piece basis.

Paul Evans, CFO

And the only other part to that is we're in a great liquidity position these days, so we can now look at acquisition opportunities. Kurt mentioned that in his letter. So inorganic growth in addition to organic growth is an option.

Operator, Operator

Our next question comes from Anthony Lebiedzinski with Sidoti.

Anthony Lebiedzinski, Analyst (Sidoti)

Certainly, it was nice to see the SendTech business down only less than 1%, so quite an achievement there. Can you comment on the number of paid software subscribers that you talked about in the press release and how that contributed to Q1 and your increased guidance? Also, you talked about bookings up in Q1 and Q2. If you could comment on that as well. And then I have one other question about SendTech as well.

Kurt Wolf, CEO

Do you want to take that, Paul?

Paul Evans, CFO

As for bookings, we're seeing growth in our pipeline and the sales teams are achieving the quotas we set for them, which is a reason we raised guidance. Regarding subscriptions, we are seeing better enterprise paid subscriptions. I don't believe we've ever given an exact paid-subscription number publicly. The improvement in paid subscriptions is tied to the sales team's performance. It's linked: better sales leads to better paid subscriptions. We'll consider whether to provide exact subscription numbers on our investor website in the future.

Kurt Wolf, CEO

We put in our release that this is the first year bookings were up year-over-year. One important thing about our shipping software business and our meter business is that we have equipment sales upfront as one-time revenue and we also have what we call stream revenue—think of it as SaaS or recurring revenue from discounts on shipping labels, etc. When you see strong sales and bookings like we saw in Q1, it certainly helps current revenue. But one of the encouraging parts is we also get stream revenue that will help us in future quarters. That's been really encouraging. Todd has reignited the sales organization and the go-to-market strategy. One anecdote: we had our Winners Circle conference in Fort Lauderdale recently for top salespeople and one of our salespeople networked with attendees of a neighboring conference, started talking to people, got in touch with leadership there, and we have a sales lead coming out of that. That type of initiative hasn't always been there with us, but we've gotten aggressive in our go-to-market. The energy and enthusiasm are great to see. We're getting better at developing products, better at go-to-market strategies, and more aggressive. It's encouraging and it's showing up in our results.

Anthony Lebiedzinski, Analyst (Sidoti)

That's great to hear. In your shareholder letter, you said that you could experience some one-time headwinds later in the year for SendTech. What did you mean by that? Could you elaborate?

Kurt Wolf, CEO

Without going into too much detail, it pertains to customers we work with. When you think about the core of our SendTech business, it's the meters and shipping software. We do have some related businesses that I would call non-core, such as some fulfillment activities, and they're not central to what our business is. Over time, we expect those to go away. There's the potential in the second half that one particular customer, whose volumes decline almost quarterly, could decline further and create a headwind. That would not reflect on the overall health of the core business. It may not come to pass, but we want to be transparent with investors about things that might be coming down the pipe.

Anthony Lebiedzinski, Analyst (Sidoti)

Got you. Okay. And last question for me: a few weeks ago, you announced a partnership or collaboration with Temu. Can you comment on that? What have you seen thus far? Could we see additional partnerships like this being announced?

Kurt Wolf, CEO

We don't want to get too much into the weeds on customer relationships. This is something we're focused on: how to make the most of our assets. We've looked into ways to offer banking services to customers and tried to think creatively about how to use our unique set of assets. What you're discussing is more of a beta test to figure out whether this will work. We don't want to lean too heavily into it yet. We'll see how that particular deal works out, and if we have success there, we'll try to spread it throughout the organization. It's too early to talk more about it, but maybe in a future call, assuming we have success, we can discuss more.

Operator, Operator

Our next question comes from Kartik Mehta with Northcoast Research.

Kartik Mehta, Analyst (Northcoast Research)

Kurt, you talked about potentially adding — I don't want to use this word, but adding maybe another business line to SendTech to help the growth profile of that business and being a complementary business. Do you have any more thoughts on that? Would that be something small or something bigger that could actually change the trajectory of that business?

Kurt Wolf, CEO

Is this from the letter or previous calls that we've talked about adding? The easiest example we've discussed publicly really relies on the bank. If you're an e-commerce company producing a tremendous amount of shipping labels, there's a lot of outflow of cash. We don't want to expose ourselves to undesirable credit risk, but by extending credit to creditworthy customers, we can leverage our strong balance sheet and access to low-cost capital. We have access to brokered CDs and a low cost of capital, which allows us to profit by improving opportunities for our customers who have a significantly higher cost of capital. That would be one example of a real opportunity. I don't feel like we get appropriate value for the bank we have. Our borrowing rate on deposits is incredibly low, and with Steve and his team ramping up, you'll see more of the value we can create out of the bank, not just through the bank but also for our customers and other businesses.

Kartik Mehta, Analyst (Northcoast Research)

I think the bank is a pretty big asset and an area you can leverage a lot more. Then, Kurt, on cost cutting: you've done a great job reducing costs, and sales hasn't suffered. One of the biggest questions is whether the company is cutting too much cost and whether it will hurt the long-term prospects. How are you managing cost cutting to make sure the company doesn't damage the core business?

Paul Evans, CFO

The initial round of cuts was more blunt force, but going forward we've been very surgical. We obviously don't want to cut into our muscles. I don't think our cost reductions will impact our ability to grow in the future. This last round of cuts was management-led rather than via an outside consulting firm, so we were very refined in how we did it. To this point, we're seeing positive results.

Kurt Wolf, CEO

Contrary to the concern, our experience has been somewhat different. Much of our focus has been employee-focused. We've gone through painful restructurings which have been hard on the team. But at this point, associated with those changes, we've seen people step into new roles and identify opportunities. For example, within HR, someone elevated into benefits took a fresh look and identified over $1 million of low-hanging fruit in third-party spend. That was a direct result of bringing somebody new into the role due to the restructuring. In that way, these changes are leading to new thinking and better outcomes rather than worse.

Operator, Operator

Our next question comes from Justin Dopierala with Domo Capital.

Justin Dopierala, Analyst (Domo Capital)

On your pre-release, there seemed to be some confusion regarding the pension expenses. And I'd say also some skepticism about whether or not you actually raised guidance. Can you provide some clarity on that?

Paul Evans, CFO

We absolutely did raise guidance. We further refined our thoughts on how we treat pensions in our adjusted numbers. It's true that we've annuitized our U.S. and Canadian pensions very successfully, and now we're turning our attention to a few other plans. We've decided we need a triggering event; when we have that triggering event, then we'll back that out of our adjusted numbers. If we didn't tie it to a triggering event, our guidance would have gone up even more. So we're erring on the side of conservatism. There are many examples of companies backing out all legacy pensions; we decided to tie it to a triggering event.

Kurt Wolf, CEO

To put a fine point on it, some parties have suggested this pension issue made things look better. It's quite the opposite. Our guidance would have been stronger were it not for this change. Some investors have the story backwards.

Justin Dopierala, Analyst (Domo Capital)

Perfect. Makes a lot of sense. Lastly, Kurt, reading your CEO letter, there seemed to be a shift in tone regarding debt. It sounded like we should expect more material payments to reduce leverage. Can you provide your thoughts on that?

Kurt Wolf, CEO

I'll give a quick answer and then Paul can add more detail. We have a fiduciary duty to do what's in the best interest of our shareholders. Part of that is maintaining good relationships with our lenders. We've done a lot for shareholders and think it's appropriate to de-risk for lenders to ensure they continue to work with us. Specifically on deleveraging, we're in a strong financial position. We have the '27s coming up, and we have cash and liquidity to address them. Our expectation is that within the next couple of months we should be able to pay off the 2027 notes without issuing additional debt. Paul can give a broader view.

Paul Evans, CFO

To add to Kurt's comments, we have a duty to shareholders and it was the right course to do the share buybacks the way we did. Now we shift to other priorities. We desire improved credit ratings and are working toward that. Our target is to keep net debt to EBITDA around 3 or slightly lower. That's the next focus area. The most immediate item is the 2027 maturity. Between cash, liquidity, and tools our banking partners provide, we'll address that in the next few months. We need to get the company back to appropriate leverage and that's our focus.

Operator, Operator

And I'm not showing any further questions at this time. I'd like to turn the call back over to Kurt for any further remarks.

Kurt Wolf, CEO

Great. Thank you. Everybody, thank you for joining us. I can't be more excited about the performance of the business. It was a great quarter for us. We had a lot of progress that makes us optimistic about the coming quarters and years. I would like to say thank you to our shareholders for the trust you put in us. We work hard every day to try to deliver value for you. I think we're doing a pretty good job so far, and there are a lot of good things to come. Second, a big thank you to the employees — this truly is an exceptional set of employees at this company. The dedication to the company is phenomenal, and I can't thank all of them enough for the hard work they put in. Finally, thank you to our customers. They're incredibly important partners to us, and we strive every day to do a better job for them. We appreciate the trust they put in us and look forward to continued business in the future. Thank you everybody for joining and we look forward to next quarter's call.

Operator, Operator

Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.