Good morning and welcome to Pitney Bowes, third quarter 2013 results conference call. Your lines have been placed in a listen-only mode during the conference call until the question-and-answer segment. Today’s call is being recorded. If you have any objections, please disconnect your lines at this time. I would now like to introduce your speakers for today’s conference call; Mr. Marc Lautenbach, President and Chief Executive Officer; Mr. Michael Monahan, Executive Vice President and Chief Financial Officer; and Mr. Charles McBride, Vice President, Investor Relations. Mr. McBride will now begin the call with the safe harbor overview.

Good morning. Included in this presentation are forward-looking statements about our expected 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 2012 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 that we do not undertake any obligation to update any forward-looking statements as a result of new information or developments. Also for non-GAAP measures used in the press release or discussed in this presentation, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our Investor Relations website. Additionally, we have provided slides that summarize most of the points we will discuss during the call. These slides can also be found on our Investor Relations website. Now, our President and Chief Executive Officer, Marc Lautenbach, will start with a few opening remarks. Marc.

Thanks Charlie and good morning everyone. Thank you for joining us. Mike will take you through the specifics of the quarter, but I would like to start by putting our third quarter into the context of our longer-term strategy. Let me begin by saying, I’m very pleased with what we’re able to accomplish in the third quarter. Overall, we had very solid results, but more importantly, we got a lot done on our strategic to-do list. We’ve made out three chapters to our strategic transformation; stabilize our growing business, achieve operational excellence and finally, to drive growth in our digital commerce business. I will segment my remarks into those three chapters. First, stabilize our mailing business. In the third quarter, equipment sales for SMB in production mail businesses increased 1% versus the prior year. Overall SMB equipment sales were essentially flat. In fact, North American equipment sales turned in one of the best year-over-year comparisons in eight quarters. Equipment sales are a good leading indicator of financing, rental, supply and support services revenue. Perhaps most importantly, EBIT in our SMB business improved on a year-to-year basis, due in a large part to the productivity initiatives we have been undertaking for the last several quarters. Our EBIT margin in this business increased 180 basis points. This is the play we outlined earlier in the year, stabilizing revenue offset by substantial productivity opportunities. Again, our strategic intent in this business is to drive cash. Second, achieve operational excellence. There are lots of ways to talk about operational excellence, but to my way of thinking, the benefits need to be found in the income statement, the balance sheet and the cash flow. Adjusted EBIT grew 3.4% in the quarter. We announced our intent to redeem 300 million of bonds scheduled to mature in…

Thank you Marc, and good morning. Before I get started on our financial performance, I’d like to take a few minutes to note some of the recent actions that we finalized in order to position our portfolio for growth and to also point out the changes in our reporting structure that are effective this quarter. First, and as Marc spoke about, we have finalized the sale of both our Management Services and Nordic furniture business. We’ve recorded the operating results for these businesses in discontinued operations. We’ve also reclassified prior period results to reflect these changes. We will post these reclassified statements on our Investor Relations website. Additionally, we’ve completed the first phase in realigning our business segment, consistent with the way we outline the business at our Analyst Day. We are now reporting small and medium business for SMB Solutions Group, the Enterprise Business Solutions group and the Digital Commerce Solutions segment. The SMB Solutions group remains unchanged from the way we have been reporting it. In North America, the international mailing segments are included in this group. Enterprise Business Solutions group is comprised of our production mail segment; however, production mail now excludes the revenue and cost associated with our Volly products. It also excludes the document management software that was previously recorded in the segment. These are now included with our other software products in Digital Commerce Solutions. Our Presort Services segment is also recorded under the Enterprise Business Solutions group. The Digital Commerce Solutions segment includes the software that previously comprised our software segment, the document management software from production mail, Volly, ecommerce and marketing services. You may recall that this is how we outlined the business on the Analyst Day and how we will now manage and report the business on a go-forward basis. We…

Thank you (Operator Instructions). And we will go to, our first question, Kartik Mehta with Northcoast Research. Please go ahead.

Good morning Marc and Mike. Mike, I wanted to ask you about the equipment sales and what do you think is the primary reason that you are starting to see improvement in that area?

Well, as we pointed out since the beginning of the year, we saw this trend beginning to materialize. So Mike’s spoke about this for the last several questions and in some ways it’s just a materialization of what we have seen in the execution of the business. Well, I don’t think it’s a lot more complicated and totally consistent with kind of how we saw this unfolding.

And then if you look at North America Mailing, this year constant currency was down about 5%. As you look at that business segment, what would you anticipate the trajectory of that business to be? Are we at a point where the declines in that business will be right around where it is now or is there an opportunity for that improve as you look at what the business conditions are like?

Hi Kartik, this is Mike. Yes, to address that I’d say the key is what you asked your first question around, which is getting the equipment sales line moving in the right direction, and certainly we saw the third quarter as an improvement over the trends, over the last several quarters and that’s a leading indicator ultimately of what will drive recurring revenue streams. While we did see a little bump in the road in recurring revenue streams this quarter, we still believe the trajectory over the longer term is for improvement, particularly as we drive the equipment sales side of the equation. So our outlook remains the same. We are looking for stabilizing trends in the revenue and as you saw, a continuing improvement from a margin standpoint.

And then just Mike, just the last question. Your use of fee cash flow as you go into next year and you’ve done a very good job of getting the balance sheet better. As you look at kind of where the balance sheet is now and the way your debt is, going into next year your use of free cash flow, will it be to continue to pay down debt of are there other opportunities for you?

We will continue to use a balanced approach as we look at it. We obviously will get the $300 million paid down in November, that’s post the PBMS disposition. That I think puts us in good stead from a ratio standpoint. But we’ll continue to manage our investment grade ratios, as well as look at, we are making certainly investments in the business and then we’ll look at acquisition and share repurchase as alternatives as we go forward.

Thank you very much. I appreciated it.

Thank you.

And we’ll got to Shannon Cross with Cross Research. Please go ahead.

Thank you. I have a few questions. My first is, can you talk a bit more about the ecommerce solutions, what you’re seeing in terms of just specifics on expansion, countries, revenue, anything you can give us as background on how that business is trending.

Sure. In terms of the ecommerce business, we are up to about 37 countries that we offer that product in. That’s in partnership with eBay. We obviously offered to a number of ecommerce providers directly as well. We continue to see good growth in the revenue base as a result of significant growth in the number of packages shipped. As you know, we’ve seen sequential growth over the last four quarters and it was the biggest contributor to that business services growth in the Digital Commerce Solution segment.

Okay and Mike, or actually Mike or Marc, in terms of the Nordic furniture business, which I covered your stock for a long time and I didn’t realized you sold furniture, I suppose I should have. But are there any other of those business that are sort of hanging out there to be sort of pruned from the portfolio or do you feel like things are pretty much cleaned up now?

Yes, I would say the Nordic furniture business, I think we referenced it once about a year ago, but it is a relatively small business. It came in with an acquisition of a mailing dealer in the Nordic several years ago and it was a product line really that didn’t fit with the overall direction and the strategic approach that we are taking. I would say we continue to look at both, product lines and geographies, where we don’t see significant strategic fit in or value generation. I would say we have addressed a lot of the biggest things in the portfolio. So anything beyond this won’t be more modest in scale.

Okay, and then with the sale of the headquarters building, can you talk a little bit about how we should think about potential benefit from that, both from a cash perspective as well as you mentioned lower operating expenses, although I was assuming you would have rents. So how do we think about that in 2014?

Yes, in terms of this building, I think the operating expense savings is part of what we outlined is part of our $100 million to $125 million target of reducing expenses. There will be a fairly good savings relative to owning this building and the depreciation in the building is obviously bigger than our needs going forward. We are able to leverage some of the other facilities we have and then focus on a smaller footprint headquarters. So we do think there is meaningful operating savings, as I said in concert with our overall program to reduce cost. In terms of cash, we expect to exit the building probably mid year 2014 as we get online with the new space, and we would realize the cash from the sale at that point in time. It’s less than $15 million of cash we would expect out of the building.

Okay, great. And one last question, sorry about this. Maybe Marc, could talk about a bit about what’s going on in North American Mailing in terms of specifics on the recurring revenue stream. You talked about having lower income from some of the mailing, the support services that you provide to people for postage, but any specifics. I mean, is this pricing? Is this anything that you think will be recurring or does this have more to do with where interest rates are at and what you can charge?

Yes Shannon, it’s Mike. As you know we take depositions from customers for reserve account. The average balances were down year-over-year that fluctuates. So when we are talking about different between second and third quarter, we are talking about pretty small amounts here, so that was a driver between the quarters. We still think that the ongoing trajectory, this recurring revenue stream basis will go in the right direction.

Great. Thank you very much.

Thank you.

And we will go to the line of George Tong with Piper Jaffray. Please go ahead.

Good morning. Thanks for taking my questions. So first question on Digital Commerce Solutions; could you provide some color on how location intelligence performed within Digital Commerce. That’s a pretty big segment contributing about $200 million in revenues and then I have a couple of follow-ups. Thanks.

Sure. Location intelligence performed well, particularly for enterprise level customers, where we have seen continued leverage of that in particularly mobile applications. So as we outlined at Analyst Day, that’s one of the growth areas that we see as providing good opportunity for driving software growth and we did see, as I said good results in the enterprise segment.

Got you. Where would you say the majority of growth in Digital Commerce came from? Would you say it was from parcel management, given its the smaller part of Digital Commerce currently. So would you say that’s the majority of where the growth came from?

Yes, ecommerce certainly drove the bulk of the overall growth rate just because of its growth during the course of the year, where its starting from the very small base last year and had good ramping of the revue base. So it’s contributed meaningfully to the growth rate. But we did see software growth of 5% on a year-over-year basis, on a reported basis, and 7% on a constant currency basis. So its balanced, but certainly the ecommerce contribution was greater to the overall growth rate.

That’s helpful. And then related to that, if you look at margins for ecommerce – I’m sorry, for Digital Commerce Solutions for the quarter was 6.6%. That was on the lower side of my exceptions. Would you expect that to go higher over time, especially in the context of mitigating some of the higher margin declines in the SMB businesses?

Yes, that margin is really a mix, right. It’s a mix of a software business margin that’s somewhat more mature, along with really net investment in new businesses like ecommerce, Volly and even some of the shipping businesses. So the margin is reflective of that combination of investment and some more mature businesses.

That’s helpful and have you given the target of where you would like to see margins go to for digital commerce?

Again, it would be a bit of a blend, but we’ve outlined what we think are typical margins we should get in the software components on this business. Ecommerce is a mix of services and software so that maybe a little less, but certainly in a mature state, much higher than what we see today.

And my last question; related to your business portfolio reconciliation, could you tell us a little bit more about the Brazilian JV interest that you acquired and related to the Nordic furniture business, was that a margin diluted business?

Let me answer the second part first. Yes, the Nordic business was margin diluted. It was relatively low margin, because we resold other manufacturers furniture. We didn’t manufacture the products. In terms of Brazil, we have developed the joint venture relationship over the last several years, really to enter the Brazilian mailing market. We today have our digital product in market there. We see opportunities both in the mailing and the software space. Software was not originally included in that JV. So, one of the benefits of taking 100% ownership of that business is to allow us to better take advantage of the total opportunity in the market by bringing those businesses together. It’s a relatively small business today, but obviously an end market with growth potential.

That’s very helpful. Thanks for the insight.

Thank you.

Then we’ll go to the line of Ananda Baruah with Brean Capital. Please go ahead.

Good morning, thanks for taking the questions. Marc and Mike, I was just wondering if you could talk about metering trends, small business metering trends both in the U.S. and Europe and what changes if any that you saw through the quarter. Thanks.

Sure. In terms of North America, I don’t think we’ve seen any real change in the trajectory of the meter base. I think it’s been relatively constant. In Europe we’ve seen actually improving meter base metrics in a number of those markets and that’s reflected I think in what’s already a relatively stable and modestly growing revenue base.

Got it, and expectation is for continuation of those trends, not seeing anything that would shift that in the near…

We don’t see anything that’s sure to change that trajectory.

And with regard to the recurring revenue, the change in the postal business, is that the only impact, the only shift in the recurring revenue stream that you guys are seeing and are expecting?

Yes, as I said I think quarter-to-quarter these things can vary. We are talking about $1 million to $2 million of differential here and we don’t see any significant changes in outlook, relative to what we have been talking to.

If you do the math, do you expect recurring revenue trends to begin to improve again going forward or should we expect things to flatten here maybe.

Yes, again we have a longer-term objective here of stabilizing the mail revenue base and the recurring revenue streams are certainly part of that and we continue to view that as the key strategy.

Okay, got it. And for the revenue growth guidance, the maintenance of that, just back of the envelope math for me suggests sequential growth in the December quarter, something mid-teens or maybe a little bit better, to get it up into the range and maybe there is currency that I’m not accounting for, but is that better than typical seasonality? Is that what is baked into your guidance? And if so, what gives you guys the conviction to see that, to get up into the revenue growth range? Thanks.

Ananda, you’re talking about total revenue growth?

Total revenue growth.

Yes, obviously in terms of the fourth quarter as we look ahead, if you look at the trends in the business, particularly the digital commerce space, positive growth there and improving trends across the rest of the business. We feel obviously reaffirming the guidance that we have the opportunity to do that for the full year.

And Mike, last one for me. I guess that you had a strong June quarter in production mail, obviously the September quarter being sort of a little lighter relative, I was surprised. What are you expecting for the December quarter from production mail?

Well, production mail, keep in mind that that can be influenced quarter-to-quarter by big deals and second quarter as we pointed out at that time I think picked up some benefit from things that didn’t close in the first quarter and probably got some things closed, that would have otherwise closed in the third quarter. So that was a bit of an aberration at 18% growth. If you look back at what we said was the outlook for this space as a whole, low to mid single digits is an appropriate growth rate, but that is going to vary quarter-to-quarter.

Okay. So maybe to move those two quarters, then we can get a sense of the run rate that you guys are on?

:

Okay. Thank you very much.

Thank you.

Then we’ll go to the line of Chris Whitmore with Deutsche Bank. Please go ahead.

Thanks very much. I wanted to follow up on that, the last line to questioning with respect to your base. I’m a little confused as to why your recurring revenues would stabilize within your mailing business if you don’t see any change in trend occurring within your installed base. So in other words, if your installed base continues to decline with this rate, why would the recurring elements stabilize?

Yes, in terms of what drives that, there’s a couple of things Chris. One is, if you look at the equipment sales side, obviously to the extent that we can drive growth in equipment sales that will add to the base. The second is supplies as a component of recurring revenue streams. Obviously the installed base of connect pluses can drive more positive supplies, revenue streams over time and then obviously pricing selectively in different markets can have an impact on those streams as well. So it’s really a combination of factors that we would expect to help improve that over time.

Okay. And then I wanted to follow-up and ask about the software business. If I look at typical seasonality in the software business, in going back to 2010, 2011, it looks like that business would typically be up high single digits, maybe even low double digits quarter-on-quarter. This quarter it was actually down slightly sequentially, so I’m trying to understand kind of what you are seeing in terms of underlying strength or sustainability of growth in the software on a go-forward basis, because this quarter you had a pretty easy compare and seasonally it looked sub-seasonal. So can you maybe describe what your expectations are over the next six to 12 months in software and what kind of growth we should expect going forward?

Sure. Software first of all was up about 5% year-over-year, on a reported basis about 7%, on a constant currency basis in terms of the software revenue line, so back to a growth comparison. In terms of seasonality in that, I would say the software business has some similar characteristics of the production mail business. Even that on a quarter-to-quarter basis it can be influenced by a big deal here or there, where we have the enterprise software license agreement. :

What about license sales year-on-year?

I don’t have that number off the top of my head.

Okay, thank you.

Thank you.

We’ll go to Glenn Mattson with Sidoti. Please go ahead. Glenn Mattson – Sidoti: Hi gentlemen. So most of my questions have been answered, but I guess when you think about kind of software and the importance that’s going to play growing the business, are there any products that are, you know may be this is for Marc, but as you get more comfortable with the business, are there any products in the software segment that standout as potential growth drivers?

Yes, and I think that’s the ones we’ve talked about in May. We look at -- our location based solutions has been very well positioned competitively and as I visit with our clients, very good feedback from our clients. We certainly think our shipping in ecommerce, well again we’re seeing good growth there and getting very good feedback from our clients, so we think our software around our sorters inserters is well positioned. So, I don’t see materially different opportunities for growth in those businesses than what we’ve seen so far and as I looked at not only kind of what we’ve accomplished in terms of prosecution over the quarters, but also our activity with clients, I’m very encouraged in terms of what we see going forward. Glenn Mattson – Sidoti: And then in terms of ecommerce, obviously the business with eBay has been a tremendous success. Are you having conversations? Do you see any opportunity to broaden that out amongst any other potential big partners?

Yes. Glenn Mattson – Sidoti: Okay, great thanks.

(Operator Instructions) And we have a question from James Cappello with Invicta Capital. Please go ahead.

Yes. Could you guys mention how much the revenue was from the Nordic furniture business and what was it?

Yes, the annual revenue in 2012 was about $68 million and its run rate per quarter was between $12 million and $15 million a quarter. The financial statements had been restated to exclude the results of the business and treated as discontinued operations.

Great, thank you.

Thank you.

Thank you and at this time there are no questions in queue. Please continue.

Good. Thanks operator and thank you everyone. As I said at the beginning of the call, I’m quite pleased with our third quarter performance and encouraged, very encouraged by our ability to execute against the strategy that we laid our earlier this year. As you can see in this quarters results, we are not only focused on driving efficiency into our business, we’re also focused on growing our business. In the third quarter we realized double-digit growth in our digital commerce business grew EBIT in our SMB business and the summation of these two dynamics drove very strong cash flow. We have tremendous opportunity before us and the steps and the actions we’ve taken over the past few quarters will further solidify our position for the future. I’ve said this before, it will take some time, but we’re on the right track and we’re very focused on finishing the year in a very strong manner. Thank you again for your time and we look forward to speaking with you soon.