Pitney Bowes Reports Slightly Lower 2010 Revenue but Remains Positive on Future
Worldwide Production Mail
Worldwide Production Mail had double-digit revenue growth during the quarter, when compared with the prior year, which was partially driven by a higher backlog entering the quarter and continued demand for the company’s high-speed, high integrity inserting systems, especially in the financial services and insurance sectors in the United States. During the quarter, the company installed 11 inserting systems in China and completed the installation of two Intellijet color production printing systems from the company’s technology distribution partnership with HP. EBIT margin improved sequentially but declined versus the prior year due in part to product mix and start-up installation costs associated with the Intellijet color production printing systems.
During the quarter, the Software business experienced continued demand for its analytics and CRM software solutions in the United States. The company’s continued transition to annuity-based pricing for selected software solutions resulted in selling a majority of its larger software solutions as multi-year arrangements, which will benefit recurring revenue in future periods. If these deals had been sold as one-time licenses, revenue would have grown at a double-digit pace. Revenue for the quarter, as compared to the prior year, benefited from the company’s recent acquisition of Portrait Software, plc, which further enhances the company’s analytics and customer communications management capabilities. Software EBIT grew at a double-digit rate and the margin improved versus the prior year primarily due to margin leverage on revenue growth and ongoing productivity gains.
During the quarter, Management Services had its best net new written business in the United States. in two years as the business environment appears to be stabilizing. These new contracts will begin to offset the revenue decline resulting from account contractions and terminations in the United States during the economic downturn. Also, as noted previously, the company exited a number of postal facilities management contracts in the United States, which reduced revenue during the quarter. Outside the United States, where the company principally provides print and customer communication services to enterprise accounts in Europe, the company decided to exit some lower margin accounts. As a result of this decision and lower print volumes, revenue declined in the quarter. Despite lower revenue, segment EBIT margin improved for the sixth consecutive quarter versus the prior year. The margin improvement resulted from the company’s focus on more profitable contracts, ongoing productivity initiatives, and a continued transition to a more variable cost structure.