Pitney Bowes Provides Update on Accelerated Progress of Cost Rationalization Program and Increases Savings Targets

Rhea-AI Summary

Pitney Bowes (NYSE: PBI) has provided an update on its cost rationalization program, announcing $70 million in cost reductions implemented in the past month. The company has increased its savings targets to $120-$160 million, up from the initial $60-$100 million. These savings are expected to impact pre-tax earnings predominantly in the second half of 2024 and fully in 2025. The cost reductions mainly stem from general corporate, SendTech, and Presort expense reductions. Additionally, $25 million of non-recurring charges will be recorded in Q2. Pitney Bowes is also undergoing a strategic review of its Global Ecommerce segment to eliminate ongoing losses. Interim CEO Lance Rosenzweig emphasized the company's accelerated transformation efforts and the focus on long-term profitability and financial health. The company plans to provide more details during the second-quarter earnings call.

Positive

• Approximately $70 million in cost reductions implemented over the past month.
• Increased savings target to $120-$160 million, up from $60-$100 million.
• Cost reductions expected to positively impact pre-tax earnings in the second half of 2024 and fully in 2025.

Negative

• $25 million in non-recurring charges to be recorded in Q2.
• Elimination of ongoing operating losses in the Global Ecommerce segment implies past losses.

Insights

Financial Analyst

Pitney Bowes' announcement of a major cost rationalization program carries significant implications for investors. The report outlines a substantial increase in their savings target from $60 million to $120 million to $160 million, reflecting a decisive move to enhance profitability. These savings, primarily sourced from general corporate cost reductions and specific segments like SendTech and Presort, will be critical in improving the company’s financial health. Moreover, the $70 million already implemented indicates proactive management actions, which could boost investor confidence.

However, investors should be mindful of the $25 million in non-recurring charges associated with these efforts, expected to be reflected in the second quarter. These charges, along with any severance and outplacement costs, could temporarily depress earnings. Yet, the overall long-term benefit of improved profitability and efficiency is a positive sign.

This initiative is particularly relevant given Pitney Bowes' ongoing strategic review of its Global Ecommerce segment. Investors should keep an eye on developments in this area, as it might present further cost-saving opportunities or potential restructuring costs.

Market Research Analyst

The accelerated cost rationalization program at Pitney Bowes is a strategic move likely to resonate well with market forces. By swiftly implementing $70 million in cost reductions, the company is setting a proactive tone, which could positively affect its stock price. It's essential to note that these savings are poised to impact pre-tax earnings in the latter half of 2024 and fully by 2025—signaling a future ramp-up in profitability.

For retail investors, understanding the broader market context is crucial. The cost rationalization efforts may help Pitney Bowes navigate competitive pressures and economic uncertainties better. The mention of an ongoing strategic review of their Global Ecommerce segment suggests that more structural changes could be on the horizon. This could either lead to additional savings or new investment opportunities, making it a key area to watch.

Moreover, while cost-cutting often leads to short-term workforce reductions, it can also mean a leaner, more competitive company in the long run. The company's ability to identify further efficiencies could enhance shareholder value and drive long-term growth.

Management has Expeditiously Implemented ~$70 Million in Cost Reductions Over the Past Month and Identified New Opportunities for Strengthening Pitney Bowes

The Cost Rationalization Program’s Increased Savings Target is $120 Million to $160 Million, Up from $60 Million to $100 Million

STAMFORD, Conn.--(BUSINESS WIRE)-- Pitney Bowes Inc. (NYSE: PBI) (“Pitney Bowes” or the “Company”), a global shipping and mailing company that provides technology, logistics and financial services, today announced an update on the first phase of the Company’s cost rationalization initiative, which was previously announced in late May 2024.

The Company has identified and initiated approximately $70 million in cost savings, the majority of which has already been eliminated in the second quarter. Approximately $25 million of non-recurring charges associated with these efforts are expected to be recorded in the second quarter. The cost reductions announced today are anticipated to be largely reflected in the Company’s second half of 2024 pre-tax earnings and fully reflected in 2025.

The savings primarily come from general corporate cost reductions and include certain SendTech and Presort expense reductions. These savings do not include prospective savings from changes in the Global Ecommerce segment, where the Company is in the final stages of an expedited strategic review of alternatives to eliminate ongoing operating losses.

Further, management has identified additional opportunities for achieving new efficiencies in the coming months and has increased its anticipated savings from an initial target of $60 million to $100 million to between $120 million to $160 million The Company anticipates that a meaningful portion of these incremental savings will be realized over the remainder of 2024, while some initiatives will require efforts into 2025.

Lance Rosenzweig, Interim Chief Executive Officer and a member of the Board of Directors, commented:

“Since announcing our strategic initiatives in late May, new leadership has been operating with intensity and urgency to accelerate the turnaround of Pitney Bowes. Our ability to implement approximately $70 million in long-term savings in just over a month reflects the significant value creation opportunities at hand. It also reflects the dedication and hard work that our leadership teams are putting into the Company’s transformation. Looking ahead, we will continue to leave no stone unturned when it comes to improving the Company’s profitability, focus and overall financial strength. By making thoughtful decisions and laying the right foundation now, we can position Pitney Bowes to generate enhanced value from its tremendous assets and businesses in 2025 and beyond. I look forward to delivering further detail on our upsized cost rationalization program and other important initiatives on Pitney Bowes’ second quarter earnings call.”

Mr. Rosenzweig added:

“We acknowledge that certain necessary decisions impacted our workforce and valued employees. I want to express my sincere and heartfelt appreciation to these individuals who have been impacted. Some of the non-recurring charges have been dedicated to severance, outplacement and other resources intended to guide a smooth transition for those that have been so instrumental in shaping our Company.”

As previously disclosed, Pitney Bowes is also continuing to focus on other strategic initiatives that include an accelerated Global Ecommerce strategic review, cash optimization and balance sheet deleveraging. A full overview of these initiatives can be found in the Company’s May 22, 2024 announcement.

About Pitney Bowes

Pitney Bowes is a global shipping and mailing company that provides technology, logistics and financial services to more than 90 percent of the Fortune 500. Small business, retail, enterprise and government clients around the world rely on Pitney Bowes to remove the complexity of sending mail and parcels. For the latest announcements and financial results, visit https://www.pitneybowes.com/us/newsroom.html. For additional information, visit Pitney Bowes at www.pitneybowes.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240701315736/en/

For Media:

Kathleen Raymond, 203.351.7233

kathleen.raymond@pb.com

or

pitneybowes@longacresquare.com

For Investors:

Alex Brown, 203.351.7639

investorrelations@pb.com

Source: Pitney Bowes Inc.

FAQ

What is the new savings target for Pitney Bowes' cost rationalization program?

Pitney Bowes has increased its savings target to between $120 million and $160 million.

How much has Pitney Bowes implemented in cost reductions recently?

Pitney Bowes has implemented approximately $70 million in cost reductions over the past month.

What are the expected non-recurring charges for Q2 related to Pitney Bowes' cost rationalization program?

Pitney Bowes expects to record approximately $25 million in non-recurring charges in Q2.

How will the cost reductions impact Pitney Bowes' earnings?

The cost reductions are expected to impact Pitney Bowes' pre-tax earnings predominantly in the second half of 2024 and fully in 2025.

What segment is Pitney Bowes reviewing to eliminate ongoing operating losses?

Pitney Bowes is reviewing its Global Ecommerce segment to eliminate ongoing operating losses.