Pitney Bowes Restructuring After Board Shakeup
Pitney Bowes may be in for a face lift after shareholders elected four out of five board members recommended by the hedge fund that wants to take it in a new direction.
At the shipping and mailing company’s annual shareholder meeting Tuesday, investors voted to elect former Getty Images chief financial officer Milena Alberti-Perez, former Newgistics CEO Todd Everett, former ShippingEasy CEO Katie May and Hestia Capital managing member and chief investment officer Kurtis Wolf to the company’s nine-member board of directors.
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Proxy advisory firm Institutional Shareholder Services (ISS) recommended all four nominees ahead of the vote.
The vote came after Hestia Capital, which owns 9.1 percent of Pitney Bowes shares, sought board changes while criticizing the company’s focus on its Global Ecommerce (GEC) segment. The unit, which provides business-to-consumer logistics services for domestic and cross-border parcel delivery, returns and fulfillment, has seen annual earnings decline every year since 2015.
In 2022 alone, GEC saw an EBIT loss of $100 million, on top of a $99 million loss in the segment a year prior. The unit saw sales sink 17 percent to $348.4 million in the company’s first quarter, while comparable sales slipped 5 percent. On the plus side, Pitney Bowes said the global e-commerce division processed 50 million domestic parcels in the quarter, up 22 percent from 41 million in 2022, and its on-time performance was in the mid-90 percent range.
But Hestia’s issues went well beyond GEC, particularly in that it thought the American Eagle Outfitters partner was holding back growth in other areas of the business such as cloud-based letter mailing and parcel shipping software solution SendTech and its mail sorting and distribution service, Presort.
Both businesses saw revenue declines in the quarter, with SendTech seeing a 6 percent revenue decline to $327.2 million and Presort dipping 1 percent to $158.9 million. But both still made money, with SendTech reporting $104.1 million in adjusted EBITDA while Presort generated $35.4 million. Conversely, GEC saw an adjusted EBITDA loss of $17.8 million, supporting Hestia’s case that the unit shouldn’t be Pitney Bowes’ top priority.
The hedge fund accused Pitney Bowes of failing to acquire companies like ShipStation. On the other hand, Hestia was also critical of where the shipping company did spend capital on acquisitions—namely its deal to buy cross-border e-commerce platform Borderfree for $395 million only to sell it for a mere $100 million seven years later.
In an earnings call on May 4 ahead of the vote, CEO Marc Lautenbach said the company would implement a restructuring program to improve profit and cash flow. This should save approximately $75 million per year, but will result in job cuts and facility closures, the CEO said.
The company hasn’t elaborated on restructuring details.
“I will say these are older sites. They weren’t automated. They are all close to sites that we have built that are new,” Lautenbach said. “We originally thought maybe we needed them longer-term to be kind of safety valves for the larger sites. The larger sites are operating so incredibly well that we just don’t need them. I am not going to give you specific sites.”
The restructuring charges are expected to be between $40 million and $50 million, with the majority of these recognized in 2023. Pitney Bowes expects to achieve roughly two-thirds of the total gross annualized savings—approximately $50 million—by the end of 2024.
Investors re-elected three other directors, including Lautenbach, as well as former MG Advisors Inc. chairman Mary Steele Guilfoile and former New York State Insurance Fund commissioner and audit committee board chair Sheila Stamps.
Two new director nominees by Pitney Bowes were also appointed to the board roles, including retired UPS president of corporate strategy Steve Brill and former Harley Davidson treasurer and interim chief financial officer Darrell Thomas.
The foregoing results are subject to certification by an independent inspector of election.
“We welcome all new directors, including the nominees of Hestia Capital Partners, and look forward to working with them constructively on the future of the company and on behalf of all shareholders,” Pitney Bowes said in a statement.
One Hestia nominee, Lance Rosenzweig, wasn’t elected to the board. Rosenzweig, who most recently led software company Support.com, had been put forward by the hedge fund as a candidate to replace Lautenbach as CEO on an interim basis.
With Lautenbach voted back into the nine-person board, it is unlikely that Hestia would be able to carry out its plan to replace him as CEO. In March, then-chairman Michael Roth stepped down after months of back-and-forth between Hestia and Pitney Bowes’ executives and board.
“We greatly appreciate our fellow stockholders for voting to elect four Hestia-nominated director candidates at this year’s annual meeting. We also want to thank the many stockholders who took the time to engage in thoughtful two-way conversations with us in recent weeks and months,” said Wolf in a statement. “That engagement will benefit the four of us as we enter the boardroom and start working with the incumbent directors to spur a value-generating turnaround at Pitney Bowes.”
The board shakeup comes after Pitney Bowes saw first-quarter revenue fall 10 percent to $834.5 million, and 4 percent on a comparable basis versus the prior year. In the quarter, the company incurred a net loss of $7.7 million.
For the remainder of the year, Pitney Bowes still expects flat to mid-single-digit percentage revenue growth on a comparable basis, and anticipates adjusted EBIT performance to outpace the percent change in revenue.
“Our slate believes it has been given a mandate for constructive, positive change,” Wolf said. “And we look forward to working with our fellow directors to deliver on that mandate over the near-term and long-term.”