Letter to Shareholders
Going into 2020, we intended to come out of the year a stronger company. And we did. Despite the global pandemic, the malware virus attacks, and despite social unrest and dislocations in the world around us that affected us all, we succeeded.
This took extraordinary effort, and I couldn’t be more proud of the people of Pitney Bowes, our amazing, resilient — and essential — workforce. Our people were up to every task and, in every way possible, a true team.
Each one of our businesses gained market share and closed in on profitable growth, and all are moving into our next century on a better competitive footing than we started off on a year ago.
Dislocations create opportunity. Consumer behavior changed because it had to, and that drove a substantial increase in ecommerce purchases. So much so that we had to accelerate investments to meet demand. There were certainly some growing pains, but you can’t find many billion-dollar-plus businesses that grow 40 percent in a year.
Our Global Ecommerce business is now at scale, something we wouldn’t have anticipated happening for another two or three years. We’re also on the threshold of profitable growth, which was our plan all along.
There’s a certain anatomy to transformations — quick wins, sustained investment, revenue growth and then profitable revenue growth. That’s been our path over the past decade. When we say Pitney Bowes 2.0, that’s what we mean. Pitney Bowes has entered a whole new phase of growth in its long and storied evolution. Our focus now is execution, at scale. And, we expect extraordinary things.
In the short term, to accommodate the rise in ecommerce demand, we made bigger investments than expected, but those investments are expected to pay off sooner, as well. Our SendTech business reached profitable revenue growth in the fourth quarter — coming from new products that are oriented toward new markets, specifically shipping, and new digital and digitally enabled channels. And our financial services business continues to be our “secret sauce.”
We’re not a technology company as much as a leader in enabling commerce that uses innovative technology and smart tools, in a really smart way, to serve clients and to drive competitive advantage. We have focused the Company on where we have true advantage and where we have a right to win. Pitney Bowes has begun a new era, entering our second century, transformed and ready to drive profitable growth.
The numbers speak for themselves. Revenue growth of 11 percent year over year and more than half of our revenue coming from new products.
For 100 years, Pitney Bowes has been a resilient company. The Company was born at the end of the last pandemic, so resilience is nothing new for our company. This pandemic is probably one of the worst things I’ve had to live through as a business executive. The human and economic cost has been staggering.
Our focus for COVID-19 was immediately bi-modal. In the short term, our priority was the health and well-being of our team and to ensure the Company had the financial wherewithal to endure the pandemic. It quickly became apparent the Company was in strong financial shape, and our focus turned to coming out of the pandemic stronger. And that’s what we did.
The future we imagined for Pitney Bowes is here.
Our objective is to be a high-performance company — a thriving ecommerce shipping business, the leading mailing business and a promising global financial services business, all building off our deep expertise and brand permission in mailing.
Over the past eight years, we moved into natural adjacencies for us, squarely in growth markets, drawing on all our strengths. We added expertise, proficiencies and technologies integral to growth today and for the future. We invested in and continue to drive meaningful innovation — creating and expanding new capabilities and innovating new possibilities. We never wavered from our long-term view or compromised for short-term gains.
Pitney Bowes may be entering a new era, but we’ve always been leading for the long term, focused on long-term value creation. We simply do not make moves for the sake of being expedient. You don’t get to be 100 years old — as a business — by taking the easy way.
Our businesses continue to expand. We continue to leverage the power of Commerce Cloud. SendTech, our “legacy” mail business, has transformed into a contemporary 21st-century business. SendTech continues to bring new products to market, delivered in channels that didn’t exist five years ago. We are offering software-as-a-service solutions running on open platforms. For the Pitney Bowes enterprise, we have integrated and streamlined all of our business processes and modernized the underlying technology platform.
What stays the same, always: We do the right thing the right way.
We quite consciously place ourselves at the intersection of values and commercial success. I have always said that if you want to create value for your shareholders, you have to do right by your clients, your employees and your communities. That’s always been our way.
2020 Business Performance Highlights
The year represented an important milestone for the Company, as we celebrated our 100th anniversary and simultaneously saw real progress in our transformation for the future.
We achieved double-digit revenue growth for the year, the fourth consecutive year of constant currency revenue growth and our highest modern-day organic growth rate in several years for Pitney Bowes. Significantly, half of that revenue came from our new shipping businesses. A closer look at the numbers tells a great story.
- $3.6 billion in revenues, up by 11 percent
- $0.30 reported adjusted earnings per diluted share (Adjusted EPS); GAAP EPS showed a loss of $1.06
- Free cash flow of $283 million — almost $100 million more than 2019
- $302 million in cash generated from operations
- $34 million returned to shareholders through dividend payments
- Debt reduced by $175 million
- Global Ecommerce generated $1.6 billion in revenue, representing growth of 41 percent
- Global Ecommerce processed approximately 222 million domestic parcels in the United States, an increase of 74 percent over prior year
- Presort Services processed a total of 16.7 billion pieces of mail
- SendTech shipped 20,000 SendPro® Mailstation devices since introducing it in April — the latest extension of our SendPro line of internet-connected sending devices that enable clients to use a single device for both shipping and mailing
And, while I’m not convinced the short-term stock price is always a complete barometer of a company’s strength, it was gratifying to see our efforts over the past eight years show up in the stock price as it increased by 50 percent in 2020.
The Character of Our Culture
Our remarkable talent works in a culture of excellence, with passion and a proven ability to innovate, to persevere and to succeed. Our focus on being diverse and inclusive makes this all the stronger. This has been true for a while. We didn’t strive to create a diverse team and board because it was trendy. We did it because we firmly believe that diversity makes us better and inclusion is essential to drive engagement and deliver value to all our stakeholders. We have a diverse workforce, leadership team and board and we know we can and must continue to do more.
We continue to earn recognition as a company to be proud of. Forbes named Pitney Bowes to its annual list of America’s Best Employers for Women and Best Employers for Diversity. Newsweek put us on its list of Most Responsible Companies.
More important is how our people feel about us. Throughout our multi-year transformation, we have seen a related increase in employee engagement scores overall, and even in the midst of the pandemic, our employee engagement survey results continued to rise. We are especially focused on several areas that we think are strategic enablers in delivering long-term value, which include client focus, teamwork, innovation, manager effectiveness, sustainable engagement, and diversity and inclusion. We measure our progress against high-performing companies. Over time our results have become consistent with other high-performing companies in several of these focus areas, with some areas of focus, such as diversity and inclusion, now exceeding high performance.
I’m heartened by this, because the number-one predictor of successful transformation, just ahead of revenue growth, is engaged employees.
We’re trying to make a difference in the world. We are not the largest company around, and we do not cure disease or solve climate problems, but Pitney Bowes has made a difference in our communities for 100 years.
James Allen, the novelist, said, “Adversity does not build character, it reveals it.” In that sense, 2020 was a very revealing year. When the global pandemic hit, we instituted protocols to keep our people safe and secure and create new ways of working. Essential personnel got the protective gear they needed. We reorganized how work got done to enforce proper distancing. Those who could, worked from home. We not only kept everyone working productively, we added personnel to meet burgeoning demand.
To a degree, the nature of the pandemic played to our strengths. First, we have always been — for 100 years — a company that cares about our people, and the feeling is mutual. Our second CEO, Walter Wheeler, said that if you treat your people right, they will “exert more discretionary effort.” Never was that truer than in the previous year, when so many of our essential workers went to our distribution and sortation centers each day to do the essential work to keep commerce moving. Second, we have long valued flexibility and encouraged remote and agile work. So, it was a short putt for many of us to go from the office to home, or to adjust to new protocols, and keep our focus and keep giving our all.
Throughout our many communities worldwide, our people contributed to COVID-19 response efforts. And, through our support of many organizations, including the United Way Worldwide COVID Community Response and Recovery Fund, and, in Connecticut, the Stamford Hospital, we worked to address the urgent needs faced by healthcare providers and those most in need during this challenging period.
Apart from the pandemic, we have always valued community engagement and supported our communities with actions and resources. For many years, our efforts have coalesced around combating social inequities through closing educational gaps. In our role in the Business Roundtable, we have pushed for and supported STEM education in disadvantaged communities. In Fairfield County, the site of our global headquarters, we organized local business leaders to play a more direct role in funding and guiding efforts to create better educational outcomes, particularly for students of color — helping to create a diverse next generation of creators and innovators.
On the sustainability front, we achieved our five-year target for carbon emission reduction one year early — and we continue working to build on this success. The Climate Leadership Awards 2020 recognized Pitney Bowes for excellence in greenhouse gas management.
We also never stopped fostering deep relationships with our clients.
2020 was a difficult year for far too many, but a good year to reveal what one really believes about what enterprises are supposed to do in this world. And I’m proud of how Pitney Bowes operated this year.
The world sees us as a well-run, responsible company and a great one to work for. This is something I believe we have earned from the strength of our culture and the earnest efforts of our people.
Welcome to Pitney Bowes 2.0 — your high-performance company. Our future is now, and our story has just begun.
Marc B. Lautenbach
President and Chief Executive Officer