Letter to Shareholders
Our market and our economy continued to present unprecedented opportunities and challenges in 2021. We were clear at the outset of the pandemic that it was our intent to come out of this tumultuous period better than when we entered. I think it’s safe to say we all thought this crisis would come to an end sooner than it has, and with perhaps fewer peaks and valleys. But, true to our history, our Company has proven resilient in addressing these rapid changes and is on the right trajectory to be in a much better place when we get to the other side of this pandemic.
Even before the outset of the pandemic, I have been saying that the last chapter of a successful transformation is to grow revenue and profit. In 2021, we made a step forward — increasing revenue and earnings per share. For sure, more to do.
Two key indicators for longer-term success, client satisfaction and employee engagement, affirmed we are on the right path. Client satisfaction in all of our businesses was on an improved trajectory as we exited the year.
And, even though pundits and consultants have asserted it is very difficult — if not impossible —to drive employee engagement and cultural change in this current environment, our most recent employee engagement scores were at record highs in 2021. Our cultural change measurements compared favorably with other high-performance companies, and our diversity and inclusion measures were best of class. These achievements did not go unnoticed: Pitney Bowes was recognized on Forbes’ lists of World’s Best Employers, America’s Best Employers for Diversity and America’s Best Employers for Women, plus the Human Rights Campaign’s Best Places to Work for LGBTQ+ Equality and The Wall Street Journal Management Top 250 Best Managed Companies in America, among others. We also maintain our commitment to achieving environmental sustainability with a target of carbon neutrality by 2040, and were recognized with a 2021 Climate Leadership Award for Excellence in Greenhouse Gas Management (Goal Achievement Award).
As proud as we are of the achievements of today, they build on the Company’s long-standing legacy from as far back as the 1940s when, led by the visionary Walter Wheeler, we were already addressing equal opportunity, equal pay or even just treating people the right way.
Our long-standing businesses — Presort Services, Sending Technology Solutions (SendTech) and Financial Services — had terrific years in 2021. In aggregate, these businesses grew revenue and profit for the year. Not that long ago, conventional wisdom characterized these businesses as melting icebergs — meaning the best that could be hoped for was to slow down an inexorable process. But last year was clear proof that these businesses are participating fully in the transformation of Pitney Bowes, with each creating a bright future in its own right.
2021 Business Performance Highlights
In 2021, our revenue was $3.7 billion, which was growth of 3 percent over the prior year and was also our fifth consecutive year of constant currency revenue growth. We generated very healthy levels of free cash flow despite a material increase in capital investment across the portfolio — which are generating gains in productivity. And, our customer satisfaction continued to improve in 2021, which is a vital indicator of future success.
- SendTech equipment sales were up by 11 percent for the year
- Presort Services grew revenue by 10 percent and processed a total of 17.1 billion mail pieces
- New Global Ecommerce sites opened in Dallas, Boston, Stockton and Columbus with state-of-the-art automation that has enhanced our logistics management in key parts of our network
- Cash and short-term investments ended the year at $747 million
- Debt was reduced by $241 million and we extended our maturity profile
- Shipping-related revenues represented 50 percent of total revenue
- Global Ecommerce revenue was $1.7 billion and grew by 5 percent over the prior year — growth of 48 percent versus 2019
- SG&A for 2021 improved nearly 200 basis points over the prior year
In SendTech, we continued to build out our shipping capabilities for both small businesses and large enterprises with new hardware and software offerings. Over the past several years, we have updated and upgraded our SendTech offerings. Clients want integrated mailing, shipping, digital and mobile solutions, and data and analytics to help make better business decisions, and more options to deliver packages to their customers. The value for clients and impact for the business is clear. In the US, revenue from new SendTech products is above the benchmark for high-performing companies. Financial Services expanded its offerings, with a particular focus on adding capabilities for the shipping market.
Presort continued with its year-over-year operational improvements plus further penetration into the marketing mail segment of mail sortation. We began applying data science to mail sortation to further improve Presort margins. We also have the capability to automatically create highly optimal sort plans that enable us to respond more quickly to client needs and changes in the business. Presort also launched a state-of-the-art, cloud-based system that allows clients to monitor their activity, see their mailing performance, track their spending and understand the savings presort discounts have provided.
Our Global Ecommerce business made important steps to build and improve its capabilities — with significant investments in physical infrastructure, automation, transportation and, importantly, our team. The results were marked improvements in our client satisfaction and service levels. Automation, data intelligence, and improvements in employee tools and experiences have enabled us to increase our capacity and deliver to client expectations. We have been able to rapidly integrate with new automation systems, and have significantly expanded our ability to both drive insights using data and transition to cloud-based warehousing and parcel processing technologies.
The global pandemic, combined with client supply chain issues, presented short-term challenges, particularly in the fourth quarter. However, we expect these issues to be short-lived. Global Ecommerce shipping is a robust opportunity in a market where Pitney Bowes has a clear right to win. That belief in the long term drove our decisions to invest in client satisfaction and capacity to handle peak demand. Our bias in these moments is a bias toward the long term. Our brand plays well in the ecommerce market. We also know that our experience building our Presort business provides a clear blueprint for success. So, while 2021 tested us all, I would characterize the year as successful, especially against the backdrop of the challenges of the year. SendTech, Presort and Financial Services are positioned to grow revenue and profit, and Global Ecommerce is positioned to now drive meaningful incremental profit.
Essentialness and purpose
There has been another conversation going on amid all of the tumult of the past few years. The conversation began around purpose. I suppose this was a nod to a higher calling for businesses to be about more than “just” making a profit — although let’s all agree that making a competitive profit is the starting point for any successful commercial business. With COVID-19, a parallel conversation began around “essential” businesses. This had to do with those businesses that were deemed critical by the federal government to keep our economy running. Pitney Bowes fell into this category. It’s worth saying once again, how proud I am of the team and the incredible work done over the past two years to fulfill our role as an essential business.
I admit that there are aspects of these conversations that I am uncomfortable with. I believe making an acceptable return for investors is a precursor to everything else. If you don’t do that, the rest is not sustainable. At the same time, “purpose” seems very meaningful to me for those enterprises that do an obvious public good. The health-care profession comes immediately to mind, but there are certainly other entities that have a clear societal good. For the rest of us that do important work, but perhaps with a less obvious societal role, the conversation can become a bit tortured.
That said, it does seem to me there is something important to this conversation — at least for Pitney Bowes. When I joined Pitney Bowes in 2012, my assignment was clear: Find the next chapter for this great company. We have done that. I’m proud that Pitney Bowes was designated an essential company, but that recognition goes to our employees who do the vital work to keep mail and parcels moving across our country and around the world.
Here’s the intersection of all of this purpose and essentialness. Embedded in all of these conversations for Pitney Bowes is our enduring value.
At this particular moment, institutions are coming under fire from all directions. Yet, when I reflect on our accomplishments, I believe that our successes all go back to our value system based on doing the right thing the right way. So, at one level we can say our purpose rests on the essential services we provide, but I like to think we have another one: Pitney Bowes can be an example of an institution that provides a good return for its shareholders while also providing real value to its clients, employees and the broader society.
Maybe that is our purpose and part of why we undertook this purposeful transformation that continues to unfold. If it is, that’s good enough for me.
We have more work to do, and we must accelerate our profit growth, but we have created the core conditions — competitive offerings, a highly engaged team and satisfied customers — to create substantial value for our shareholders. I like our hand.
Marc B. Lautenbach
President and Chief Executive Officer