Earnings Call Transcript - PBI Q4 2023

Philip Landler, Vice President Investor Relations and Global Strategy

Good morning. I'm Philip Landler. Thank you for joining us. I manage the Pitney Bowes Investor Relations program and part of my duties include covering the Safe Harbor information for these calls. So let me briefly cover that. 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 risks and uncertainties can be found in our earnings press release, our 2022 Form 10-K annual report 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 we do not undertake any obligation to update forward-looking statements as a result of new information or developments. Also for non-GAAP measures that are used in the press release or discussed in our presentation materials, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release. Finally, we have provided a slide presentation and spreadsheet with historical segment information on our website. And now, I’d like to turn the call over to our Interim CEO, Jason Dies.

Jason Dies, Interim Chief Executive Officer

Good morning, and thank you for joining the call and your ongoing investment and interest in Pitney Bowes. Over the past 120 days, I've spent a lot of time getting valuable feedback and viewpoints from our shareholders and core stakeholders. This input has helped reinforce my assessment of our key opportunities and the challenges we're working to address. Most importantly, these conversations have increased my optimism about the future here at Pitney Bowes. Later in the call, I'll discuss my work with the senior management team and the Board to develop a set of strategic and operational priorities for 2024. Let me start today by giving a high-level overview of Q4 performance at the enterprise level, as well as across each of our segments. We made good progress this quarter, growing adjusted EBIT by $14 million year-over-year, but still have work to do. At the enterprise level, we are on track with our cost reduction and restructuring efforts after increasing our original targets late last year. We are seeing the benefits from these efforts show up in segment and overall profitability, and Ana will provide more details. SendTech and Presort executed well in the quarter; SendTech Group EBIT, as a result of gross margin expansion, simplification, and cost reduction actions. These gains are enabling us to shift resources towards investments in our shipping capabilities, where we see meaningful long-term profitable growth potential. Presort grew revenue and recorded its highest ever EBIT in a quarter, which is a testament to the great work of the team. We will continue to capitalize on our excellent operational and client support capabilities to create value in this segment. Global Ecommerce delivered improved fourth-quarter profitability year-over-year and sequentially, demonstrating the value of our network in peak and on a going forward basis. Domestic parcel volumes grew 13% to 61 million parcels. We are continuing to take actions and review options to realize the value of this segment. I'd like to thank all of the PB teams for their dedication to serving our clients in the holiday season and throughout the year. Next, I want to spend a minute outlining the strategic and operational priorities that will help us build on current momentum and continue to transform in 2024 and beyond. First, we will continue to streamline the organization and reduce costs. The cost reduction program we previously announced started to yield savings in 2023, and we expect to increasingly realize these benefits throughout 2024. Although we are on target on the restructuring side, we will continue to look for additional ways to increase efficiency. Second, we're driving more accountability into our businesses. In addition to changes in how we operate and measure performance, we have also made some initial and important changes to our overall organizational structure. We have integrated the majority of our marketing functions under segment leadership to improve focus. We are also combining SendTech globally under Shemin Nurmohamed, who will have full responsibility for strategy and execution in our 10 geographies worldwide. Third, we are realigning assets and resources to better leverage our technology and innovation capabilities to create client value, with specific focus on accelerating SendTech's shipping growth. To that end, effective January 1 of this year, we moved GEC's digital shipping business into SendTech. That includes our global carrier library and API technology to create and manage multi-carrier shipping options. This will drive product development and engineering efficiencies as we upgrade existing solutions and develop new ones. Also, since SendTech recently launched a go-to-market model that prioritizes growth in shipping, having our digital offers combined in one channel will drive additional synergies and an improved client experience. Fourth, we're focused on more disciplined capital allocation and strengthening our balance sheet. As we continue to execute on corporate cost reductions and realize business unit efficiencies, we plan to allocate capital in a manner that balances near term and long-term interests of our investors. In closing, one quarter in, I am optimistic about what lies ahead for Pitney Bowes. As we look ahead in 2024, we will continue to operate with intensity and prioritize actions that support increased operational discipline and accelerate our shift into targeted shipping growth paths. We understand the challenges and also the opportunities we have. 2023 was a year of significant change for Pitney Bowes and 2024 will bring additional transformation, which I expect to be very positive. And now I'd like to turn it over to Ana to discuss our Q4 results in more detail.

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Thank you, Jason, and good morning, everyone. I will focus my comments on the financial performance in the fourth quarter. Full year 2023 results and additional commentary can be found in our press release. Unless otherwise noted, I will speak to revenue comparison on a constant currency basis, and other items such as EBIT, EBITDA EPS, and free cash flow on an adjusted basis. For the quarter, total revenue was $872 million, a decline of 4% versus prior year. EBITDA was $103 million, an improvement of $15 million year-over-year. EBIT was $63 million and $14 million higher than prior year. EBIT improvement was mostly offset by higher interest expense. Adjusted EPS was $0.07, versus $0.06 in the prior year. GAAP EPS was a $1.27 loss in the quarter. GAAP EPS includes a non-cash goodwill impairment charge of $1.24 related to the Global Ecommerce segment. GAAP EPS also includes a $0.08 restructuring charge and a $0.02 non-cash charge related to a foreign currency loss on intercompany loans. Let's dive into our three business segments. I'll start with SendTech, which had a solid quarter, especially on the bottom line. SendTech reported EBIT growth of 7% on revenue of $327 million in the quarter, down 5% compared to prior year. As previously discussed, we continue to experience a secular decline in our meter base and an increasing shift towards lease extensions, given where we are in our product lifecycle. Both dynamics are putting pressure on near term revenues. This quarter, shipping-related revenues declined 7% and now comprise 13% of SendTech's total revenue. The prior year included a couple of large transactions that had a high proportion of in-period shipping-related equipment and professional services revenue. Looking beyond these transactions, we made meaningful progress in sustainable shipping growth. The fourth quarter was our single biggest quarter in terms of implementing new enterprise subscriptions. Our enterprise offerings provide leading shipping capabilities that are often integrated into multiple client systems to solve complex workflows. The high level of new implementation bodes well for the future of the business as these transactions come with a high portion of recurring revenue. Though early days, SaaS subscription revenue from our shipping products grew 42% in the quarter. We remain confident about the growth potential of our shipping solutions. As Jason mentioned, we are making changes in two key areas. First, we are shifting more resources to our shipping go-to-market. And second, effective January 1, we moved the digital shipping solutions in Global Ecommerce to SendTech, streamlining our leadership, product development investment, and leveraging our new go-to-market. Segment financials will be recasted for this change when we report earnings next quarter. We continue to refresh our product base with new USPS-compliant technology. At year-end, we were 72% through the migration and even further along for the low and mid-volume products. At this stage of the migration, we continue to see more fixed-term lease extensions versus new lease transactions. As a reminder, the financial impact of this shift will be near-term pressure on equipment sales, generally offset by higher-margin financing revenue spread over the term of the lease extension. From a cash perspective, this is a net positive, as we will have lower net investment in finance receivables, while we continue to receive monthly lease payments from clients. We expect this dynamic to play out more meaningfully on financial performance in 2024. In addition, as we move into the later stages of our product refresh, we expect an uptick in cancellation rates, which is in line with our past experience during product migrations. The three dynamics I just mentioned, shipping growth, more lease extensions, and higher cancellations have been incorporated into our long-term planning. Moving to the bottom line, segment EBIT was $113 million, a 7% improvement. EBIT margin improved 370 basis points, driven by both gross margin and expense improvement. SendTech gross margin expanded by 240 basis points as a result of improvement in equipment gross margin, and a more attractive mix of financing and business services, which are both higher-margin revenue streams. Higher equipment gross margins were primarily driven by two items. First, we implemented several supply chain improvements earlier this year that have resulted in lower production and transportation costs. Second, in the quarter, we sold and installed a higher mix of more complex top-of-the-line equipment, which often comes with a higher margin profile. Moving to operating expenses, our efforts to streamline and simplify the business are also benefitting SendTech's bottom line. SG&A as a percentage of revenue improved by 130 basis points, primarily as a result of our restructuring efforts. We also continued to modernize our SMB client processes, which is driving more client interactions to lower-cost channels while improving the client experience. Of note in 2023, we saw the largest year-over-year improvement in net promoter score in the last decade. I'll spend a moment on the performance of financial services inside of SendTech. Financial services remains an important component of the business, providing valuable client solutions and steady returns. Finance receivables grew $25 million, or 2% on a year-over-year basis. Within our receivable portfolio, net loan receivables grew $30 million and net lease receivables declined $5 million, in line with the product lifecycle dynamics I previously explained. We also continue to make progress on our previously announced program where our bank is participating in the financing of select captive lease receivables, an initiative that will be good for both the bank and the enterprise overall. The health and quality of our portfolio continues to demonstrate the durability of our offerings. Delinquencies and write-offs continue to be low and roughly flat quarter-over-quarter. Next, let's turn to Presort, which had another excellent quarter. Presort revenue grew by 3% to $163 million and sorted 3.7 billion pieces. Revenue growth was driven by higher revenue per piece from pricing, more attractive mail class mix, and better five-digit store qualification. Adjusted segment EBIT was $34 million in the quarter, up 17% versus prior year, a result of higher revenue per piece and continued focus on operational excellence. Our prior investments in automation, along with more efficient process management, continue to drive labor productivity and offset annual increases in hourly wages. More specifically, we drove a 9% year-over-year improvement in pieces fed per labor hour, which is the measure we use to track labor productivity. Looking forward, we continue to pilot new automation and technology that we can scale across our network to further improve labor productivity. In addition, over the past year, our team has optimized our transportation routes, which helped lower transportation costs year-over-year. Let's shift to Global Ecommerce where our performance in peak reflects progress in execution and cost management. Segment revenue was $381 million, down 7% versus prior year. The change in cross-border client relationships that occurred in the first half of the year continues to be a significant drag on year-over-year comparisons. Specifically, cross-border revenue and gross profit declined by $49 million and $11 million respectively. Cross-border performance has stabilized and we expect comparisons to normalize in the second quarter of 2024. Domestic parcel volume grew 13% to 61 million in a challenging market. Volumes fluctuated during the quarter, with parcel volumes being softer than expected pre-Black Friday, followed by a surge in December. Despite this, the team delivered sustained predictable cost and competitive service levels. While overall profitability still needs improvement, our ability to effectively manage these fluctuations reflects progress compared to the last three peaks, where we either missed on service or cost. Domestic parcel gross profit grew by $3 million. Higher volumes in the quarter resulted in better fixed cost leverage on both a year-over-year and sequential basis. As we move out of peak, we expect this benefit to be less in the first quarter as volumes are seasonally lower. Unit transportation costs also declined by 17%. Better peak planning, route optimization, higher utilization, and lower fuel prices helped drive this improvement. Better unit costs continue to be partially offset by lower revenue per piece. Altogether, revenue per piece declined by 6%. The market remains challenging from a pricing perspective as a result of excess capacity, evidenced by much lower peak surcharges across the industry. Beyond the market, client and parcel mix remains a headwind to revenue per piece. Adjusted segment EBIT improved by $3 million to a loss of $20 million. Lower operating expenses and improvement in domestic parcel economics drove higher EBIT, but as mentioned, were partially offset by the continued drag from the change in cross-border client relationships. Important to note that operating expenses declined by $8 million year-over-year, primarily due to cost reduction initiatives taken over the past three quarters. Moving on to enterprise-wide restructuring. We made meaningful progress on our cost reduction plans in the quarter and are on track to deliver the previously communicated $75 million to $85 million annual run rate savings by the end of 2024. In 2023, we realized $24 million in savings. As a reminder, the plan impacts costs and expenses across the business, including all three segments and unallocated corporate. Turning to cash flow, GAAP cash from operating activities in the quarter was $94 million, and free cash flow was $78 million. Both figures were lower on a year-over-year basis, due primarily to a large working capital benefit last year. During the quarter, we paid $9 million in dividends and $14 million to reduce debt. As Jason mentioned, we remain focused on a disciplined and balanced capital allocation strategy. I'll conclude my remarks with a perspective on 2024. We expect revenue growth to range from flat to a low-single digit decline and EBIT margins do remain relatively flat on a year-over-year basis. We expect incremental benefit in 2024 from our company-wide cost reduction program as savings from the actions taken in 2023 annualize, and we further execute on the plan. We expect restoration of variable compensation and wage inflation to partially offset gains. Within SendTech, we expect revenue and EBIT to decline due to the dynamics I previously explained around our meter base, the timing of our product lifecycle, and shipping growth. Following a strong year in 2023, we expect Presort performance to be relatively flat to slightly up as the team continues its strong execution. Within Global Ecommerce, we expect revenue and EBIT to improve as we continue to take actions to optimize performance and to realize the value of this segment. Finally, in 2024, we expect similar levels of capital expenditures as in 2023, which were at a lower level than 2022. And interest expense to remain around the elevated rate incurred in the fourth quarter of 2023. To close, the fourth quarter was a solid quarter and a testament to our team's dedication and hard work; Global Ecommerce grew domestic parcel volume and improved its bottom line in a soft market. SendTech and Presort both delivered meaningful margin expansion through a focus on operational excellence and simplification. With that, let me pass the call back to Jason.

Jason Dies, Interim Chief Executive Officer

Thanks, Ana. Before moving to Q&A, I'd like to formally welcome Bill Simon and Jill Sutton to our Board of Directors. You may have seen an announcement last night regarding changes to our Board. Bill and Jill bring significant experience in areas such as corporate governance, transformations, and capital allocation. I look forward to their insights and counsel as we continue to move Pitney Bowes forward. As part of that announcement, Mary Guilfoyle has also announced that she will not stand for reelection in May, but will stay on as Board Chair until then. I would like to take this opportunity to personally thank Mary for her many contributions to the Board of Directors over the past six years, and her continued leadership as Board Chair. She has been a steady hand during an important period of change for Pitney Bowes in overseeing governance enhancements and strategic actions that we expect will put the company on stronger footing for years to come. I look forward to continuing to work with her over the next four months to build on the progress we've made. And with that, let's open the line for Q&A.

Kartik Mehta, Analyst

Good morning. I wanted to get a little bit more insight into the Global Ecommerce business. You're making good progress there. And I'm wondering, as you move into 2024, is it a function now of trying to get revenue per piece to increase or is it because of the higher price competition, more about making sure you control costs, becoming more efficient and driving more volume?

Jason Dies, Interim Chief Executive Officer

Hey, Kartik, thank you for the question. I mean look, as always with GEC, I'd say it's multiple things. First off, we need to continue to drive the cost management that we've been pushing for a while now. I think you really started to see the cost management kick in over the last few months. I'll call out in the fourth quarter in particular, we saw an $8 million improvement in OpEx year-over-year. So that is going to continue and the team is focused on that. Second, as you've heard from us repeatedly, we need to continue to focus on driving volumes into the network, especially volumes that add margin in an important way to the network. We did a good job of that again, in the fourth quarter. We've done a good job of that over the past couple of years. Last year, we drove a 24% increase in domestic parcel volume over the course of the year, 13% in the fourth quarter, in what was a down peak for most in the industry. So that has to be a part of the equation again. And then to your point, we're always focused on rate per piece and the price and margin that we're getting in the market. And I would say in particular, we've probably shifted more to a focus on the margins that we are yielding in the market over the past few months. And that will continue to be a focus for us going forward.

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yes, so we believe that our free cash flow, as you saw, we delivered that $20 million-some and we believe will be somewhat north of that for next year. Nothing significant, but somewhat north.

Jason Dies, Interim Chief Executive Officer

Yeah, you're talking specifically about the SendTech business, I think with these multiple speakers.

Kartik Mehta, Analyst

Yeah. Yeah, I apologize. Yeah.

Jason Dies, Interim Chief Executive Officer

Yeah, so look, I mean, as you know, and as we've talked about before, we are in the tail end of IMI migration through most of our portfolio. So if you think about the middle of the range and the low end of the range, that has to get done this year. We have to move those clients to the new platform. We have more time on the top end and on the higher end of the products, which we announced at the beginning of last year. So the truth is we're going to continue to focus on that IMI migration. We're going to continue to use the value of the lease extensions that we're now at the point where we can start to really drive very effectively. We've talked about before those lease extensions have a positive impact overall, in walking in revenue for us for the long term. So 2024, to your point will be a bit of a transition period as you see us move from our existing equipment portfolio to finish off moving to the new equipment portfolio, start to see more of those lease extensions, as opposed to new equipment placements. And it will make for a little bit different 2024, but one that ultimately is going to strengthen us as we go forward and lock in those recurring revenues.

Kartik Mehta, Analyst

Perfect, thank you very much. I really appreciate it.

Unidentified Analyst, Analyst

All right. Good morning. This is Stefan Dio on for Anthony Lebiedzinski. How are you guys doing?

Jason Dies, Interim Chief Executive Officer

Doing well. Thanks.

Unidentified Analyst, Analyst

I guess my first question is, can you talk about the expected impact of higher variable compensation and wage inflation in 2024?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yes, so I'll take that. Thank you for the question. So what we are observing here is, we are very committed to our restructuring activities. And we anticipate those savings that I mentioned between $75 million and $85 million as we exit 2024. The significant portion of that will be consumed with variable compensation as we anticipate paying our employees at a full rate, vis-à-vis the performance we've had this year, which has not enabled us to do so. And in terms of increases, we pay market, and we're seeing in general, as everybody in the market is seeing, and there are different aspects of the market in hourly labor versus salaried and so on. But on average, we're somewhere around that 3% wage increase that that we're seeing across the board.

Jason Dies, Interim Chief Executive Officer

Yeah, I'd just say just specifically. I mean, look, it is incumbent on us to continue to drive productivity to continue to drive cost out. You know that labor is something that you're going to have to adjust to and make sure you're getting the right talent to run the business. But that's part of a larger equation that we're going to continue to balance going forward.

Unidentified Analyst, Analyst

Thank you for the color. And my next question is, in terms of the cost-saving plans that you announced last year, to use baseball terms, what innings are you in as far as capturing the benefits of this restructuring?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yes, great question. So we announced just for background here, we announced the program back in the first quarter at the end of our first quarter earnings calls. So we've had three quarters of execution. And as you'll recall, last quarter, we upped that number. So based on where we are with our commitment, we feel we're very confident of delivering and attaining that. And I would say, we're pretty far along the glide path. As Jason mentioned, we're never done. We need to remain competitive in the market. We're not leaving any stone unturned. And we will continue to look for further activities to optimize our costs.

Jason Dies, Interim Chief Executive Officer

Yeah, I'll go back to your baseball analogy; we are in the late innings. So we saw significant impact of that in Q4 start to materialize for us. I will tell you all the actions and activities that we need to execute on to yield that restructuring savings have already been plumbed in the system and are in the late stages of being executed. We expect to realize the full benefit of that throughout 2024.

Unidentified Analyst, Analyst

Thank you. And the last one for me is that, can you provide an update on the CEO search process?

Jason Dies, Interim Chief Executive Officer

Yeah, look. So I will say what I believe I said on the last call, right. So the Board has formed a four-person committee that is using a nationally ranked search firm to go off and seek appropriate candidates. We said early on that that was going to take some time and the Board was going to be clear and fulsome in their process that they went through. We announced, I think in the November earnings call, that that process at the moment was expected to take four to six months. And we're right in that window.

Unidentified Analyst, Analyst

Thank you so much for taking my questions.

Jason Dies, Interim Chief Executive Officer

Thank you.

Matthew Swope, Analyst

Good morning, Jason and Ana. So Ana, to the margin guidance you gave to the effectively flat for the whole company year-over-year that sort of wage inflation you've mentioned, and the increase in the variable comp will offset the cost savings, essentially dollar for dollar.

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yeah, so let me add to that thinking for a minute here. So we mentioned revenue, flat to potentially down in the low single digits. So to the extent that we have any revenue pressure, remember that drive leverage component that we need to also address? So I would say it's the three components that I just mentioned.

Matthew Swope, Analyst

Specifically looking at Global Ecommerce, you saw a major decline in EBITDA there in 2023. We had started 2023 hoping that GEC EBITDA might be positive. Is there any chance that again, especially what you're saying about margins, it feels like maybe no, but is there any chance that Global Ecommerce could be EBITDA positive in 2024?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yeah, so let me start that and Jason feel free to add. Listen, it's absolutely our intent and our goal, and we are continuing to get closer and closer to that milestone. It's very hard to call when it will happen. As you know, there's a lot of market variables and the pricing pressure and the market dynamics that we're in, it's just really hard to call.

Jason Dies, Interim Chief Executive Officer

Yeah, Matt, let me just jump in. I mean, look, I'm going to say a couple of additional points here. We're not going to comment specifically on where we think TEC is going to wind up as we go through 2024. I've said in the past, we're not happy with the rate of performance that we've gotten now from a financial point of view, I think we've made tremendous progress from an operational and executional point of view. But we are still looking at ways to make sure that we can maximize the value of the business and I outlined a few of those earlier. The one thing in addition, I would say is, look, we are smart enough to know that we're not necessarily always going to have all the answers. We have brought in a third party to help us look at and work with the management team on are we looking at all the levers we should be looking at are there ways to accelerate the actions that we've got in place? And I'd say just as a broader statement, bringing in a third party reflects certainly my personal philosophy that we should be open to ideas from the outside. I think you've seen that for me in talking to investors and analysts over the past four months. And GEC is not the only place, frankly, we're going to bring in an outside pair of eyes. As you look at opportunities for us to think differently, potentially about our debt stack, about how we optimize the bank, we're always going to be out looking for good ideas, and GEC is certainly one place we're doing that.

Matthew Swope, Analyst

And so this change of moving the GEC Shipping business into SendTech, is that part of that thinking? How will that work? Is there anything you can say about the profitability of GEC's shipping? That piece on its own, is that EBITDA positive, or give us any more color on why you're doing that and what that will mean financially?

Jason Dies, Interim Chief Executive Officer

Let me first address this from a strategic perspective. As I mentioned earlier, it's important to emphasize that leveraging our assets and offerings across the portfolio is a key opportunity for Pitney Bowes moving forward. The decision to move the digital solutions business from GEC to SendTech was a logical step. The technology, team, and capabilities that drive this business serve both GEC and SendTech. This segment focuses on the digital aspects of shipping transactions, specifically label production, making it more of a SaaS-based business. Integrating this into the technology side of our organization, which falls under SendTech, is sensible for several reasons. It allows us to consolidate our development and go-to-market teams in a focused manner and enhances our ability to leverage SendTech’s market capabilities as they increasingly focus on shipping. We anticipate that the synergies gained from this move will be beneficial in the long run as we continue to expand our offerings in that area.

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yes, and maybe let me add a few additional sizing of the opportunity here. So to put it in perspective, the shift on revenue, and we will provide a lot more color next quarter, but it's around 3% of Global Ecommerce's total revenue. So it gives you an idea of that. In terms of the gross margin that that brings, as Jason mentioned, this is very SaaS-like, and that has a very healthy gross margin. Now in terms of the expense base to support that gross margin, we look to have leverage as we are more focused around our engineering and our product development. So hopefully that gives you a perspective on dimensionalizing the size.

Jason Dies, Interim Chief Executive Officer

I'm actually very excited about the move, Matt, and for no other reason than it refocuses the team on making sure that we are looking at our offerings. We're looking at the technologies that we have in our portfolio. Are we monetizing them correctly? Do we have additional opportunities? And it just made all the sense in the world to bring these digital assets together under the SendTech umbrella where I think they can be best leveraged.

Matthew Swope, Analyst

Thank you guys for that color. Ana, sorry to be myopic, on the finance part of it. Would that digital solutions business that moves over, was the piece that will move EBITDA positive in 2023?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

So just to understand your question is as relates to Global Ecommerce, the shift as I mentioned, it's 3% of the revenue. So yes, it carried, as I mentioned, healthy gross margin, but also as we optimize the expense, we believe we can do that better jointly. So in terms of the relative size on the impact of the Global Ecommerce business, I wouldn't say it's anything significant.

Matthew Swope, Analyst

Okay. Well, I guess I'll just ask if when you give us the reclassified financials, if you could sort of highlight what the past numbers would have looked like under the new segment pieces, that would be very helpful.

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

That is absolutely what we will do as we release our earnings in the first quarter. We'll do a full recap of that between the segments.

Matthew Swope, Analyst

And I'm sorry, just one last one for me, if I could, in the press release about the Board changes last night, you mentioned the cooperation agreement with Hestia. Could you elaborate on what that cooperation agreement entails, Jason?

Jason Dies, Interim Chief Executive Officer

I appreciate the question and would like to provide some context regarding the announcement last night. Pitney Bowes is in a strong position due to this announcement. The Board and I regularly discuss Board composition and how to enhance skills and experiences on the Board to effectively partner with management during this time of change. We engaged a nationally recognized search firm as part of our ongoing refreshment process, which successfully presented candidates that met our specific criteria related to capital allocation and corporate governance transformation. We are pleased to welcome two new Board members who bring valuable skills and experience to our team. Additionally, we have the clear support of one of our largest shareholders as we implement necessary changes moving forward. This is a positive development for us, and the announcement signals confidence in our progress over the past year in aligning with shareholders and confidence in our future trajectory. My discussions with investors over the last few months have shaped the changes I'm implementing, and I hope all our stakeholders will be excited about the opportunities and transformation ahead, along with the progress we are beginning to see as reflected in our results. Ultimately, the Board and I are fully committed to making the changes necessary to drive shareholder value, and we are equipped to move forward.

Matthew Swope, Analyst

That's helpful, Jason. Just one last one. Sorry, as I wrap up, you mentioned more disciplined capital allocation. Would you guys consider cutting a dividend?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Let me outline our approach to capital allocation in four key areas. First, generating capital is our top priority. We've discussed our restructuring program aimed at enhancing profitability and increasing cash flow. The second priority is investing in our business, focusing on optimizing capital expenditures rather than engaging in new construction. This strategy provides additional capital sources compared to previous periods. Third is debt reduction, as we have upcoming maturities extending to 2026, and we aim to ensure these remain current. Finally, regarding returns to shareholders, this is a topic we regularly discuss with the Board, and ultimately, it's a decision for them to make. The order I provided reflects our strategic thinking in these areas.

Jason Dies, Interim Chief Executive Officer

And Matt, I want to highlight that we reaffirmed the dividend this morning. This is something we have carefully considered with the Board. As I've mentioned, my strategic priorities for this year include capital allocation. This serves as a signal both externally and internally to our teams that we will approach capital allocation differently. We need to actively seek ways to maximize returns for all of our shareholders, both in the short term and the long term.

Peter Sakon, Analyst

Hi, good morning. For GEC, the press release, and as you mentioned, you talk about reviewing options to realize the value of the segment. Can you talk about the timing? And I'm sure it's hard to give a specific number of months. But is this something that we'll need to wait for the new Board members to get up to speed on? Is this something that the company needs to wait for the new CEO to be announced and then do an evaluation?

Jason Dies, Interim Chief Executive Officer

So right, let's be 100% clear, we're not waiting on anything. We've been taking actions over the past year and certainly have redoubled those actions over the past four to six months to try to make a meaningful impact on the GEC business. What I will tell you again is we are looking for all of our ways that we have, all of the tools that we have at our disposal to realize the value of this business. And short term, it's kind of along what I said at the beginning, right. We continue to focus on operational efficiencies. We're going to continue to make sure that we're driving volumes into our network. By the way, I would point out the fact that we've been successful in driving volumes into the network is a sign of the value that we provide to clients when we work with them. Volume comes from clients, and the fact that we've been able to continue to deliver growth there, I think is a strong statement of the value we provide in the market. And then finally, we do have to get better on making sure that we are extracting the right value from clients for the services and offerings that we provide. So I don't want anyone to have a thought that there is any sense of waiting or hesitation or that there is anything that's needed to start to make progress on GEC. That said, it's a lot of work. There's a lot of things that we're managing and juggling as we try to move forward. But I want to be clear, the Board has been nothing but supportive in me and in the GEC leadership team as we look at our alternatives and continue to move the ball forward.

Peter Sakon, Analyst

Thank you. On SendTech and maybe I missed that. You said that with the increased churn, if you will, revenue and EBIT to decline. Did you say how much decline you're expecting in 2024?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yeah, so let me take that. So we talked about three dynamics inside of SendTech happening. First, as we all know, and it's widely stated, we have our meter population declining as part of the normal mailing decline. The second dynamic we talked about extensively is the shift. We issued our new product about five years ago. And we've issued more, but those now are coming for renewals. We anticipate extending those leases for new term leases, but not having a new product to be put out. What that does is it shifts the timing of our revenue. And then the third dynamic is where we're putting a lot of emphasis on our growth and shipping. When you put all of that combined, we do anticipate revenue and EBIT reduction. What we're working really hard is on the expense side, across the board cost and topics to keep our margins. This is a transition year, the way I think about it, and I anticipate that trajectory to be an important part of our 2024 as we grow from shipping out of that timing.

Jason Dies, Interim Chief Executive Officer

What I'll say, Peter, on… Yes, hi, Peter.

Peter Sakon, Analyst

I would say if I rephrase my question, for Presort, you said that EBIT in 2024 is going to be slight flat to slightly up. SendTech you said revenue and EBIT will decline. And I hear you on the reasons why. My question was, what percentage of decrease in EBIT do you expect? Or what's the magnitude of the decline for this very important segment?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yeah, listen, we will not comment specifically to each segment. But what I will tell you is the overarching statement that I made around our overall revenue being flat to a down into low-single digits, as well as EBIT margin, maintaining, gives you a perspective of the relative size that you have in SendTech inside of that envelope.

Jason Dies, Interim Chief Executive Officer

Yeah, and when I'd say, Peter, I'll just remind you SendTech, by its very nature, is a lumpy business, right? I mean, we deal with lease cycles, we deal with this IMI migration. SendTech in various quarters and various years tends to jump around more than just about any other business based on the lease cycles and equipment sales. You could have a quarter where you have a large equipment transaction, and that's going to distort things. What I think you should be focused on is that we will continue to outperform the market in that business. And we are continuing to reposition that business for long-term success. So while there might be pockets of different outcomes quarter-to-quarter, some will be better than others, the general trend is the same. We are repositioning that business, we are going to perform ahead of market, and we are shifting that business into new growth spaces which provide us much opportunity going forward.

Peter Sakon, Analyst

Great. My last question is regarding CapEx. Can you provide insight into whether the spending this year will have the same allocation across segments? I understand that the overall amount will be unchanged, but will the specific amounts for GEC, SendTech, and others remain the same? Also, what is the typical payback period for your investments?

Ana Maria Chadwick, Executive Vice President and Chief Financial Officer

Yes, so let me take that. So overall around that $100 million level at the overall company will stay pretty steady. We will see a bit of a reduction in Global Ecommerce, shifting that to the other two segments. In terms of the payback periods, one of the key priorities, and Jason talked about this in terms of our discipline, we are more and more focused not only on long-term IRR but on quicker paybacks. So as we are evaluating very thoroughly, all the investments that we're making inside the business, we're looking well into that less than two-year payback and at times, we're really focused on the less than one-year payback. So you'll see more and more of that as we make our decisions here going forward.

Peter Sakon, Analyst

Thank you.

Jason Dies, Interim Chief Executive Officer

Thank you for the questions. I want to emphasize that each of our business units has growth potential while we streamline operations. As Ana mentioned, we will make necessary changes to leverage that potential. We see significant opportunities in SendTech, particularly in shipping, and are actively pursuing those. Presort remains a market leader and continues to exceed many expectations. GEC has demonstrated that our domestic model is effective, and we will keep implementing actions to enhance its performance in the short term. I am optimistic about Pitney Bowes' future. We recognize both the challenges and opportunities ahead, and as we look to 2024, we will maintain a strong focus on operational discipline and accelerate our targeted growth in shipping. I appreciate your time and look forward to connecting again after the first quarter.

Operator, Operator

And ladies and gentlemen, that does conclude our call for today. Thanks for your participation and for using AT&T Teleconference. You may now disconnect.