Good morning, and welcome to the Pitney Bowes First Quarter Earnings 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 also being recorded. If you have any objections, please disconnect your lines at this time. I would now like to introduce participants on today's conference: Mr. Marc Lautenbach, President and Chief Executive Officer; Mr. Michael Monahan, Executive Vice President, Chief Operating Officer; Mr. Stan Sutula, Executive Vice President, Chief Financial Officer; and Mr. Adam David, Vice President, Investor Relations. Mr. David 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 risk 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 2017 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 many 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?

Good morning, and thank you for joining the call. The headline for the quarter is the company continues to move to growth, and our strategy is delivering results. As is always the case, there are positives and negatives to the quarter. We had positive top line performance in our ecommerce business and Newgistics, our recent acquisition performed very well. And we had an outstanding performance in our Production Mail business. On the other side of the ledger, our SMB business got off to a slow start performing below our expectations and revenue was below the long-term model. Also, our Software business had no large deals in the quarter. That said, both businesses are off to solid starts, and we expect these businesses to improve in the second quarter. The first quarter epitomizes what we've been saying and seeing as we transform the company. The business continues to shift to higher growth markets as witnessed through our revenue growth. Our first quarter results demonstrate that we are making progress against that strategy and set us up to deliver on our financial commitments for the year. Stan will take you through the financial details, and I will have more on that in a moment. First, let me update you on our recent announcement around the portfolio, and then also talk about the strategic pillars by which we now measure ourselves. Earlier this week, we announced the sale of Production Mail and its supporting software to Platinum Equity. The Production Mail business is a leader in this industry. Our strategic review will validate that this business is more viable outside our company. I have said many times in the past that we'll do what is right by our shareholders to create long-term value for our company. This is a prime example. This business…

Thank you, Marc, and good morning. As Marc mentioned, as always, there were pluses and minuses throughout the business. However, our overall financial results, leaves us well-positioned for the year. In the first quarter, we continued to see the portfolio shift to higher growth markets, with our Commerce Services business comprising 39% of revenue and shipping-related offerings contributing over 25% to total revenue. Let me first talk about the recently announced change to our portfolio. Earlier this week, we announced that we entered into a definitive agreement to sell Production Mail and its supporting software to Platinum Equity for $361 million. We expect net proceeds from this sale to be approximately $270 million. These numbers are subject to adjustment upon finalizing the deal. We also announced that we plan to use the majority of the net proceeds to pay down debt. As Marc mentioned, our Production Mail business performs well but does not have as strong a tie to our shipping and addresses as our other businesses. From a financial perspective, we are reaffirming our annual guidance and have updated solely to reflect the impact of this announced sale. I will take you through the details after I go through our first quarter results. There are a few items that are important to note before I discuss our results. The divestiture is still reported in our first quarter results. Beginning in the second quarter, Production Mail and its supporting software will be reported as discontinued operations. We expect to close on this deal late in the second quarter or early in the third quarter. Also, and as mentioned at Analyst Day, starting this quarter, we are now showing Commerce Services as a reporting group. This group is comprised of our Presort and Global Ecommerce segments. Newgistics rolls up into the…

Thank you. First question is from the line of Ananda Baruah, Loop Capital. Please go ahead.

Hi, guys. Good morning. Can you hear me okay?

Ananda, can you speak up a little bit more?

Yes. You got it. Hey. Good morning. Thanks for taking the question and congratulations on another strategic move. Hey, Marc, you talked a little bit in the prepared remarks about the import of the core mailing business and sort of the client actions that it provides you. Could you just remind us for the remaining businesses how you guys view the connectivity between them, the synergies between them as they exist today operationally and then maybe, as you see the – I'm going to say synergy opportunities but, really, sort of just the overall business opportunities that could exist between the remaining business units going forward? That would be helpful. Thanks.

Thanks. And I think it's an important question, one that we can't communicate often enough on. So, if you think about the portfolio in a little bit of historical perspective, we were pretty much all a mailing company in 2012, a market that was going through secular decline. As we sit today, we're certainly still a mailing company. We've got a big chunk of our business in mailing, that will continue to be important in SMB. But we're moving to shipping as well. So, if you think about what we're doing, we're rotating the portfolio from mailing to shipping for markets that were going through secular declines to markets that are growing. So, shipping would be the first synergy. And you see that in SMB with our new CSG (28:27) product that has multi-carrier shipping which is a very unique feature. You clearly see it in Commerce Services. You see it in Newgistics. So, you begin to see this logical coherence across the portfolio. So, that gives us all kinds of opportunities to create synergies around carrier libraries, around APIs, around other like technologies. Secondly, we talked about Commerce Services. Many of our, what I'll call broadly Software-as-a-Service functions, whether they be in SMB, Software, or Commerce Services are delivered via a common chassis, Commerce Services. Obviously, the more volume you can put through that chassis, the more you're able to get synergies. Underneath that, we've also identified the import of addresses and that, again, is obvious as it relates to mailing and shipping. But when you really begin to decompose the Software portfolio and where we're doing well in Location Intelligence and CIM. Addresses is a common denominator. We use the example, and perhaps not the most economically significant example, but it's important to our clients, around – we'd…

Yeah. No, I appreciate all the context. And actually, I was going to follow up with a question on financial services also. So, I appreciate you just sort of got to it. Yeah, no, that's great. I'll stop there and cede the floor. Thank you so much.

Okay. Our next question is from the line of Kartik Mehta, Northcoast Research. Please go ahead.

Hey. Good morning, Marc and Stan. Marc, you talked about using the proceeds of the Production Mail business for debt pay-down. And I'm wondering, considering where the stock is, what thought was given to buying back shares and maybe how the board and you thought about that and using the proceeds in the manner in which you're using them?

You have to indulge me for a moment so I can give you a rather long-winded answer. This is an important question, and I want to make sure that we're complete and transparent about how we think about it. So, I'm going to take you back to March 6 on Analyst Day where we outlined our priorities for capital. We first talked about investments in the business organically and then through acquisitions that conformed to very rigorous financial criteria. The second was deleveraging of the balance sheet and the achievement over the long term of investment grade ratios. And the third priority was return of cash to shareholders principally through dividends. You asked a similar question after the last earnings call and I gave a fairly similar answer. And then, finally, I'll point back to September when we were out raising money for the Newgistics acquisition. We told the market broadly and we told our debt investors, in particular, that it would be a priority for us to deleverage our balance sheet. Why do I run through that litany of events? Certainly not to recount history, it's to make two fundamental points. The first is we've been very clear about what our prioritization of capital is. I think that's important from an investor perspective, to understand what you're investing in. It's also candidly important in terms of running the business. It's hard to turn on a dime in terms of capital allocation. As we think about capital allocation, we think about over a three, five-year time period. So that's one reason. Second is at a very simple level, I think it's important to do what you say you're going to do. But the broader point is this, and that is I think the higher level question is, why do you…

Maybe, Marc, as probably a broader discussion, I appreciate the buzz. Are you at all worried about maybe where the debt covenants are and is this a reflection on that or is this strictly a reflection on flexibility? And is that flexibility because you see other opportunities, be it in Global Ecommerce or Presort, or other areas where you think you could grow the revenue and EBIT?

And talk about the covenants, but let me make a couple of broad points. We have $775 million of cash. We are not cash poor. We've got plenty of cash. Our motivation around capital allocation is precisely what I said. It is to provide flexibility, so we can continue to move in the shipping market and grow. We see continued organic opportunities around building out the network. We see some technologies that we think would make sense either to develop internally or to buy. But we are not – we are in a strong cash position that affords us the flexibility to do what we need to do.

Yeah. And on covenants, Kartik, it is not an issue around covenants whatsoever. It is really around maintaining strategic flexibility. It's around using that cash in the form we said we're going to on repatriation. And you saw that we were successful in repatriating a significant amount first quarter. Currently, we have just over $400 million of the $500 million repatriated, combined with the proceeds, we'll be able to take debt down this year back to roughly slightly below the first quarter of 2017 levels but has nothing to do with covenants. Has everything to do with financial flexibility.

Let me make one other point. People often ask me, why do you care about investment grade ratios? The reason I care about investment grade ratios is I want to have the flexibility to do what I need to do. It's not that we're bowing at the altar of some mathematical abstraction. Flexibility is important. Doing what you're saying you're going to do is important.

I appreciate it, Marc. Just my perspective would be great for you to – it seems like the best investment right now for Pitney is Pitney itself and to take some of the proceeds and buy back shares would be very accretive. So, maybe it's a longer conversation for us to have at another time, but thank you.

Let me just respond to that. I agree with you to the extent that we have a great set of businesses to invest in. So, as I look at our opportunities to deploy capital, we certainly look at a broad array of things. But the most persuasive investment that I see – and that's not to say that the stock isn't, at this level, a persuasive investment, I think it is. I think it's a great buy at this level. But the most compelling thing that we can do as we move to growth is invest in the capabilities that we need to secure our future. And that's going to be best for our long-term shareholders and best for the enterprise. But thank you.

Next question is from the line of Shannon Cross, Cross Research. Please go ahead.

Hi. Thank you very much for taking my question. I have a couple of cash questions as well. Stan, how much was the prepayment for services? How much did that impact cash flow this quarter? Just trying to get a magnitude of if it's a onetime or number (40:32)

Sure. So, Shannon, it's a good question. So, on free cash flow, if we take a look, we're down about $45 million year-to-year. And if you take a look at that, about two-thirds of it was driven by the timing issues, predominantly in Presort. And remember, this is areas where clients either go into deficit position short term on postage, which we cover, or IAR. (40:51) And as we've grown that business, we'll go after that. We view those strictly timing. And the prepay, it's about a third of the year-to-year delta. And look, we don't normally do prepays, but this was a compelling discount that saves us money and then obviously normalizes that within a year. So, you could think about a third of that year-to-year related to the prepay.

Okay. Thank you. And then, I don't know, Marc or Stan, I don't care. In terms of the dividend, you're at a 7.5% dividend yield I think right now. You sold the company that generated cash. Obviously, I think, Marc, when you first came in, unfortunately, due to things you had to do but you had to cut the dividend. I mean, how are you thinking about dividend payments and as you transition arguably to a more of a growth company, sometimes the capital structure shifts as well. And so I'm just curious as to your thoughts there.

Yeah, thanks for the question. I'm going to be monotonous to my answer. We've got a similar question at Analyst Day. I'll rephrase the question because I think it was kind of a similar but the gist of the question was from an equity investment perspective or sounds like an argument that you're fundamentally transformed your growth business, and therefore, you should go multiple in the marketplaces especially with the growth business. I reaffirmed the premise of that question, and my answer was as follows: we think it's very important that we have a competitive dividend. As you think about that at the next level, what informs what a competitive dividend is. The first is you are competitive relative to your peers. As your peers change, the net calculus change. And the second to your point is the size of the company. So, right now I would say that we are in-flight in terms of becoming a growth company. We made progress over the last several quarters. But I think we'll make more progress going forward. As that becomes more apparent to the market and we put proof points on the board, and if the size of the company settles out, we will inevitably relook at our capital allocation priorities. So, capital allocation to your point kind of fits the context at the time. Right now, we happen to be in transition, so it's a little bit more fluid. But I appreciate the question

Thank you. And I'm just curious, the last question, as you look at all the strategic options and all of that, and I know how things do sort of play together, but I mean, do you think this is sort of a – we'll be getting announcements like Presort throughout the year or are you pretty steady at this point?

Production Mail, not – not to start any rumors on the Street, Production Mail.

Yeah. Sorry. Production Mail, I apologize. It's been a long day.

I know you work awfully hard. That's what you do. So...

Did you see the Director's (43:53) announcement? Anyway...

My own colleague, John Visentin.

Yes. Yes. Anyway, so – but just going back to my question, I apologize (44:05)

So, I think the portfolio continues to be – will evolve. And it will evolve because the company is evolving and will continue to evolve to where we see value in the marketplace. So, we laid out pretty specific criteria in terms of how we would think about divestitures in particular, strategic coherence, leaders in the marketplace, acceptable returns. So, we look at our portfolio across these three dimensions all the time. So, I'm not going to foreshadow any particular move, but it will be transparent about how we think about it.

Okay. Thank you so much.

Thank you, Shannon. Have a good day.

Next question is from the line of Glenn Mattson, Ladenburg Thalmann. Please go ahead. Glenn G. Mattson - Ladenburg Thalmann & Co., Inc.: Hi. Good morning. Just as it relates to the guidance, with the sale of Production Mail, you're going to be a smaller company by $400 million or something. I guess I wonder, there has been some cuts in SG&A, there's some planned cuts in SG&A, but why wouldn't you extend or add to those cuts given that you're going to be smaller size at this point?

Well, I mean, I'll let Stan answer but I mean we obviously didn't sell Production Mail on a whim. It's been something we've been contemplating for a while. So, to a degree, our $200 million of gross cuts contemplated the divestiture. We continue to work at that number to make sure that it's appropriate and that we deal with whatever stranded costs there might be. The TSA agreement is important aspect of how you deal with that. So, I understand these things kind of get processed in a different synchronization level externally and internally, but we've been working on this for a bit.

Yeah, the $200 million, Glenn, is obviously a big number. But first quarter – and first quarter I think is a really important signal on the $200 million. If we were slow out of the gate, it's incredibly hard to recover. But we actually performed very well with the units in first quarter. We're right on track what we have to do. That total number is at least $200 million over that time, and we think there's opportunity here as we look – continue to look our processes, leverage the investment and our systems which I think still has a lot of opportunity. And obviously, as we've done this and looked out when we are looking at Production Mail, we know we have to take care of those stranded costs as well. So, what this is bringing is better insight into our business. As we go through, we're not just out there with a straight target, everybody come down X. We're evolving into looking how to improve our processes that better serve our clients and extend our speed and urgency of how we deal with the market and how we deal with competition. So, we're confident in the $200 million. We're off to a very good start. The attainment, if we look at that, leaves us very well positioned for the year and $200 million is a pretty big number as well. But candidly if we can get more, we will get more. Glenn G. Mattson - Ladenburg Thalmann & Co., Inc.: Okay. You guys mentioned that on the inside – on the SMB business, you had some lower levels of staffing on the inside sales. Can you further expand on that, please?

Sure. I mean, I think if you read the newspapers, we all see that the United States now has a very low unemployment, labor markets are tightening. We experienced a dose of that in our SMB business particularly in our Spokane facility. We got ourselves a little bit under head count. They've staff back up and as we look at April, in particular, they're back on the horse.

We have a new leadership there as well in that particular piece. Glenn G. Mattson - Ladenburg Thalmann & Co., Inc.: And was that one of the driving factors behind the SMB continued a little weaker than expected or was there – what else can you do to get that business back into the (47:57)?

So, the answer to your question is yes. That was an important contributing factor to the decline of the SMB business. We think the combination of getting that staffing right as well as the new product is the right combination. We continue to kind of fine tune our strategy on pricing and offers to ensure that we have the highest possible conversion rates, but we think we've got the right basic tools it's just kind of fine tuning the staffing with the product with the pricing that is the right recipe going forward. Glenn G. Mattson - Ladenburg Thalmann & Co., Inc.: Okay. And then moving over to Software, I think one thing that stood out when you just mentioned that the indirect channel contributed to 30% of the pipeline or to 30% of pipeline growth, I wasn't sure on that. But pipeline is always nice, but can you talk about conversion rates and I guess the quality of the pipeline and just some background around that?

So the comment was relative to pipeline. Stan's sitting next to me. He'll correct me if I'm wrong. So, to your point, pipeline is interesting but in the end what we all care about is dollars. So as we think about the indirect channel, it's not just dollars but dollars that we wouldn't have gotten without that pipeline, without those partners. So we have very specific measures of how we not only think that channel should produce in total but what is incremental. So that's point one. Point two, in terms of the quality of the pipeline – and this is more of a macro statement than anything to do with a particular channel. The quality the pipeline in the second quarter is very high because we have a lot of renewals. We have an unusual amount of renewals, which for those who are not familiar with the software business means that the license agreement that the clients have is expiring. So there is an impending event which is a salesman's dream. So we're very optimistic about the quality of the pipeline, particularly in the second quarter but I would say more broadly, in the remainder of the year. But all that being said, this is still a work in process. We still need to prove that this channel can deliver the way I think it can. So we've got more work to do. Glenn G. Mattson - Ladenburg Thalmann & Co., Inc.: Thanks for that. And then I guess last question, just on the overall strategic outlook. The sale of this business, was this part of one of the recommendations from the study that you did, the Lazard study? And was this the extent of the recommendations or I guess would you share with maybe the investing public at some point more in depth about what they recommended and how you guys decided on which of those recommendations to pursue and which to I guess ignore?

I mean, I'll be a little circumspect about how I answer your question. But the sale of Production Mail isn't something that we just thought about over the last six months. Candidly, it's been something that we've been thinking about for several years and it had to do with the end user growth of the overall market and how that market is evolving. So, that's a market that's, as we describe it, flattish with margins that are acceptable but under pressure as the buyers of that technology begins to consolidate. That being said, we like that business. We think that business has got great opportunities, but it's not ever going to get capital inside of our business given the end user dynamics of the particular marketplace. So, I would say, as we went through the conversation with the board about strategic alternatives, this is one that we decided the timing was right both internally and externally. We think we got a really good and fair price for the asset. I think this is a great company and will do really well going forward. I just think it's going to do better outside of the portfolio than in. Beyond that, I'm not going to talk about any specific recommendations from Lazard. I will say that we clearly didn't ignore any recommendations as we thought about the strategic alternatives. Glenn G. Mattson - Ladenburg Thalmann & Co., Inc.: Okay. Thanks for those answers.

Our next question from the line is Allen Klee, Sidoti. Please go ahead. Allen Klee - Sidoti & Co. LLC: Yes. Hi. For North American SMB, can you provide any granularity in terms of what you're seeing when postal meter rentals are coming due in terms of the buckets it's going in of them declining to renew or going to SendPro or just renewing with postal meters, how to think about – and if that's kind of going with your expectations?

Yeah. So, on renewals, as they come in, I would say the trend haven't changed materially through time in terms of when clients come towards the end, renewal comes up, you get a mix of what happened. So, ideally, they would trade up, and we demonstrate our new product, and we certainly have shared that we've had success there. We sold over 30,000 of the C-series, or they extend their existing lease which is a profitable transaction, gives the client what they need over time. And then we've also extended our portfolio that if the client doesn't need the meter anymore, there are online SaaS options for the client to take advantage of. And then there are cancels. So, I would say we haven't seen that change materially. And we talked a little bit about equipment sales. I'll just remind that the equipment sales are lumpy through time. They don't follow a consistent pattern. If we looked at last year going through the quarters, North America is plus 5, plus 24, minus 16, plus 1. And we grew through the year. So, when we take a look at first quarter and we look at some of the contributing factors with the lower staffing here, we think this is temporary, and that will be back in better shape. And as Marc said, we're off to a solid start here in 2Q. Allen Klee - Sidoti & Co. LLC: Okay. Thank you. I had two modeling-related questions. One was based on the sale of Production Mail and repatriated cash, how much additional debt do you expect to pay down going forward for the rest of this year?

So if we take a look at that, Allen, thanks for the question. Marc said we have $775 million of cash and short-term investments. So we're going to yield approximately $270 million from the sale of Production Mail. If you recall, we said we are going to repatriate $500 million. We've done just over $400 million. We already paid down the March redemption here for $250 million. And if you look at free cash flow, generate $235 million to $285 million of incremental free cash flow for the year, and of course, we have the remaining dividend. When you put that all together, we'll use approximately $425 million to $475 million of that cash to pay down near-term debt. That would take our debt levels down to just below where we were at first quarter of 2017 and leave us with a similar level of cash that we have now around year-end. So, lots of moving parts in there but that deleverages our balance sheet, leaves us with lots of strategic flexibility and certainly in a position to handle any of the near-term needs. It also helps reduce our need to be out in the market anytime in the near future. Allen Klee - Sidoti & Co. LLC: Okay. Great. And how much CapEx is associated with Production Mail?

There's not an enormous amount of CapEx in the Production Mail. Where it is, I think, low-single digit millions. So the bigger combinations of CapEx are in our other businesses. Allen Klee - Sidoti & Co. LLC: Okay. Great. And then with your APIs, it was encouraging to hear how it's grown sequentially off a tough – off the biggest 4Q quarter. Could you tell us a little more about maybe ChannelAdvisor and your other partners and kind of maybe what ChannelAdvisor does and kind of the growth outlook you see?

So first, it's like a little bit on a higher level of shipping APIs. So we continue to make progress here. We took you through the journey of last year, growing 20% over fourth quarter volumes, which is a peak, I think gives you an indication that we continue to gain momentum in this business. In fact, if you look at the volumes on a year-to-year basis, we're up almost 13x. So a significant improvement in that trajectory, and that's really coming off of heavy investments in a platform that's both from offering, as well as stability. And as you know, we haven't talked about any stability issues here since last summer. And again, we performed we think at industry norms. We're excited about the announcement with ChannelAdvisor, and candidly our other partners. Obviously, we print a lot of labels with eBay. This brings experience, it extends our reach. But with ChannelAdvisor, as they deal with all their clients, we think we bring an attractive price, a very good capability, a stable platform plus the ability to offer other types of services whether it's tracking, shipping, returns, or Newgistics. It's I think a really exciting opportunity for us to extend the model here.

I will just add, if you look where Stan is tremendously excited about not just ChannelAdvisor, but broadly the reception in the marketplace, ChannelAdvisor is a great partnership because they have access to lots of packages. They have a different business model than others in the industry. They don't charge a subscription fee, so they are economically advantaged versus competitors and it's at transactional levels. They charge at transaction level. So, we think they have great access to the market. They have an advantaged business model. They're a great company. And I think their access to the market, their access to packages, their business model in combination with our APIs is an incredibly important initiative and one that is competitive differentiated versus others in the industry. Hard to underestimate the importance of that announcement. Allen Klee - Sidoti & Co. LLC: Okay. Great. My last question is regarding the hire of Cliff Rucker and you guys have mentioned that this can potentially create some new Ecommerce related ideas. Is there anything you can expand on that?

Listen, Cliff's a tremendous executive. He comes with a wealth of experience from the USPS and I would say the industry as a whole. So, he brings relationships. He brings knowledge. It's a further proof point of our relationship with USPS so, we're excited. So, thanks for pointing that out. Allen Klee - Sidoti & Co. LLC: Okay. Thank you very much.

Thank you. No further questions in queue. Mr. Lautenbach, would you like to make any additional remarks?

Sure. I want to build off of the last comments because of that entire Kartik's question with the conversation we just had. As we contemplate our opportunities to deploy capital, to Kartik's point, we're tremendously excited about investing in the business. To us, that means investing in technologies like APIs. We didn't mention or didn't get a question on our relationship with eBay which we just extended for several years. That's how we see putting our capital to work. In some ways, it would be expedient for me to put a lot of money behind share buybacks right now. Would probably optimize our executives' earnings this year, but that's not what we're about. We're about creating long-term value. So, as we think about capital, we're going to continue to invest in our business. I've seen too many companies in growth markets that got themselves hamstrung with buying back shares and not providing the kind of flexibility that they need to grow their business. So, first quarter was an important proof point. It goes along with others as it relates to the new markets that we're moving to. And as positive we are this first quarter, I'm more positive about the balance of the year. So, thank you and we'll talk to you in 90 days.

Thank you. Ladies and gentlemen, that does conclude your conference. We do thank you for joining while using AT&T Executive TeleConference. You may now disconnect.