Good morning and welcome to the Pitney Bowes' Third Quarter 2015 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 also 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, Chief Operating Officer and Chief Financial Officer and Mr. Charles McBride, Vice President, Investor Relations. Mr. McBride will now begin the call with a 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 2014 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 this 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?

Thank you, Charlie, and good morning, everyone. Thank you for joining us this morning. At our Analyst Day meeting in September we reaffirmed our strategy we rolled out in 2013. We did this for a very simple reason. The strategy is working. Over the last 30 months, our strategy and importantly our execution has increased the market value of Pitney Bowes by nearly $2 billion, while dramatically improving our balance sheet. We remained focus on the same basic three pillars of our strategy. These are not context that I'll make my remarks about what we have accomplished in the last 90 days. In terms of the stabilization of mail and what we refined to be the reinvention of mail. We continue to make good progress in the third quarter. In North America which as you know is the engine of our cash production. The rated revenue decline continue to moderate to less than 2% on a constant currency basis. This is within the long-term rates that we've appointed to and more importantly, the equipment sales which are the Harbinger of future revenue performance increased in the third quarter. One quarter doesn't make a trend. But this was an important turning point for us. Likewise our international mailing business continue to recover from the disruption from the go to market change as we've foreshadowed in our second quarter recap and reiterated at Analyst Day. We expect this trend to continue. Our enterprise business Presort and production mail operated within the long-term band that we laid out in 2013 and reiterated a couple of weeks ago. Worth noting our Presort business continued to perform well and is delivering a very high level of client satisfaction. Finally, consistent with our notion of reinventing our mail business with several important product announcements leveraging our…

Thank you, Marc, and good morning. As Marc discussed, we saw an improvement in several important business trends during the third quarter and expect these trends to further improve in the fourth quarter. North American Mailing equipment sales grew 2% international mailings revenue trend improved from prior quarters and as a result total SMB revenue on a constant currency basis declined at its lowest rate in six quarters a further indication of the stabilization of our mailing businesses. Presort services and global e-commerce both continue to deliver revenue growth and each of our business segment groups SMB, enterprise and digital commerce had revenue performance that was within the long-term market growth rate ranges that I outlined at our Analyst Day. Also as we discussed at Analyst Day in our last earnings call we have launched several new products and services across our businesses that bring our technologies and solution to broader parts of our client base. Additionally, we have been working to expand our Presort operation recently adding two new sites to our network. During the quarter, we also continue to make significant progress against our long-term strategic objectives. To say a few examples our ERP project team has worked countless hours to deliver a successful go to live launch of our new ERP platform in Canada early in October. Likewise our global e-commerce management team has been working diligently to integrate the Pitney Bowes and Borderfree businesses while identifying and achieving cost synergies. In our mailing business in France we transition to a new to sales model and in our software business we continued to offer new targeted solutions for enterprise clients including our new engage one video software solution. Now let me take you to our results for the quarter and then I'll provide a little more detail…

Operator?

We have question from the line of Kartik Mehta from Northcoast Research. Please go ahead.

Hey good morning Marc and Mike. Mike, I want to ask a little bit about the production mail business and just your perspective on it. The performance of it is it competition is it execution or is it just the marketplace right now for that business.

Thanks Kartik for the question. I think as always there is those of each one of the elements that you described. If you start with the end-user market there is no doubt that the end-user market opportunity is under some level of pressures. You see particularly businesses continuing to move their production to service has a short term dynamic on the revenue. That said I would say that longer term we think we're uniquely positioned to provide value to those service peers. So while it's disruptive in the short-term it is something that I think in the long-term that will advantage us. The second point I would make is that we've been shy on printer sales this year. Printers are something that affect the top-line in a fairly material way but obviously as you know it don't come with a lot of profit. And as we focus ourselves on driving revenue with profit we have walked away from some of those opportunities that wouldn't make economic sense for us. So as we've always said it's going to be a lumpy business. It was not great from a top-line perspective in the third quarter pretty darn good from a profit perspective and we like our hand [ph] going forward.

Kartik its Mike I just want to add that at Analyst Day we did speak to the fact that we introduced three new products in the production mail space that directly addresses what Marc outlined. So our epic and [indiscernible] platform is really geared towards that third party service provider quick change over to slight of things. We have a parcel sort of solution well that is really aimed at a new market opportunity and we introduced new excel jet [ph] large format inkjet printer for the mid-market versus the high-end market that we have served with our prior product. So we're really well-positioned from a product portfolio standpoint even in those market dynamics that Marc outlined.

Thanks Mike and Mike I wanted to get your thoughts on your debt strategy. I know you've recently that you made announcement that you're calling some notes that are going to be due in 2022. And I'm wondering if this is part of an overall strategy of doing a larger debt placement or if it's another strategy that you're going to employee.

Yeah we've really planned to take those out with commercial paper so not reduce our overall debt in the near term but really replace those we can call them with no premium. And so it's an opportunity to swap those out. And as you know we have about $370 million coming due early next year. So it is part of our overall view of how we look at the portfolio maturities and potential issuance at that.

And then finally and just Marc I know you bought back a 100 million shares this quarter as you have another 100 million shares repurchase authorization. Is it the intention that you'd like to first that also in 2015 and then start with something else in 2016?

Yeah Kartik we continue to look at the market conditions and consult with the board and we'll move forward with our authorization and the way we think optimizes our shareholder value. So we will put more as we have more there.

Thank you very much. Appreciate it.

Thank you.

We now have a question from the line of Ananda Baruah with Brean Capital. Please go ahead.

Hi good morning guys. Thanks for taking the question. Hey congrats on some pretty solid metrics in some of the core areas of the company. Just to start off just a quick clarification Marc did you actually say that North American mailing equipment was up on a year-over-year basis in the September quarter?

I started and then said Mike.

Yeah so equipment sales grew 2% in the quarter in North American mailing.

Got it. And it sounded like you thought that may have some near term stickiness I just wanted to make sure I didn't hear that.

I believe that our mailing business in general will continue to improve in the fourth quarter. So at our Analyst Day and the remarks at the end of the second quarter we pointed to a second half continued improvement with third quarter being better than the first half and fourth quarter being better than third quarter year-to-date. So listen the go-to-market particular in North America and mostly in Europe has stabilized. But stabilized is different than driving the kind of productivity throughout that we ultimately can. So we like the foundation that we've built and now it's how we really drive even better productivity.

And can you - did you guys just walk us through how we should think about the supplies and the rentals dynamic in coming quarters given the ongoing improvement in the US mailing business and it implies I don't want to repeat too much into this but supplies look like it improves pretty significantly in the September quarter on a year-over-year basis. The rounds have been more kind of consistent and should we expect improvements there as well and then what should we think expecting supplies in coming quarters.

Yeah let me start with supplies, there is really two key drivers to supply it's the traditional Ink products in the mailing business and we had very solid performance there. To Marc's comment on go-to-market obviously a component of go-to-market is our sales activities around supplies and we put a real focus on that and have had good performance there. The other thing benefitting supplies is in our production mail business even though we didn't have any placements of printers in the quarter as we built in an installed base of printers out there that drives supplies revenue as well. So that was a positive and as we achieve future placements that helps build an incremental recurring revenue stream. With respect to rentals I would say you have seen the stabilization certainly in the North American mailing business, on the international side that's been impacted somewhat by the go-to-market particularly in France which is the other key market where we see rental. So to Marc's earlier comments as we see stabilization in those markets and particularly in France on a go forward basis that should help over time with rentals and as you know rentals and the other recurring revenue streams tend not to move as dramatically quarter-to-quarter because of an installed base and say the equipment sales line.

All right. And then just given the ongoing improvement in the U.S. mailing business and the subsequent stabilization improvement and surprise in rentals. I guess collectively how should we think about the impact of the free cash flow dynamics? In size of your - I mean you are reaffirming the guidance. How should we think about this mechanics working going forward?

Yeah, I think as outlined in Analyst Day I think there is a convergence here on an aggregate basis for the company of earnings growth driving free cash flow growth. Stabilization implies you are not going to have as much volatility around the finance receivables in addition to that we have seen CapEx, you saw that come down in the quarter relative to prior year end part because the major part of capital investment for the ERP program is behind us. So the things that would or have been sort of drivers of free cash flow outside of earnings are beginning to moderate or revert back to really cash flow over the long-term being or even earnings driven number.

Got it. Thanks a lot guys.

Thank you.

[Operator Instructions] I would now like to open the line of Glenn Mattson with Ladenburg Thalmann. Go ahead.

Hi, good morning. Are you going to break out what Borderfree was on the quarter, so we can get a better read on what the legacy e-commerce business did year-over-year?

We really are managing as a single business now. What I would tell you is that we continue to see growth in the UK business across the - what was traditional e-commerce business and the border free platform. Offsetting that was as I outlined in the comments some pressure on U.S. volumes associated with the stronger U.S. dollar.

Okay, that helps a little and then I think you mentioned that in the SMB transition in France that you've made the personnel transitions that you need to make. But there are still some things that you had to get on. Can you explain what kind of things you are talking about there?

Yeah, on the impact I was there last week. So right now if you look at where we are in France we have all the new folks hired. We still have some of the existing staff that is helping with the transition. So in the third quarter you saw an NOA of duplicative expense structure in France. So that's the first thing that I would say. The second thing I would say is the new channel is coming up to speed as we would have expected and obviously with some of the important label [ph] in France that very mindful of it took a while to get where we are today. But at this point going forward we expect this is the kind of productivity improvements that we have in the rest of the world.

Okay, great. And last thing was the year-over-year tough comp again and software, I think that's the second quarter in a row you already mentioned that you had a large transaction that you are comping against. Does that - is there more of that in e-commerce is that the last kind of tough comp?

Good question. So in the second-quarter we did point to a difficult compare and we're having a difficult compare again in the third quarter. I don't have that issue in the fourth quarter.

Okay, great. Thanks.

Thank you.

Just let me elaborate that point because I did make a remark that I wanted to talk about. I said software executed reasonably well in the quarters ahead. If you look at the performance that had a really good performance than last has small and medium size transactions and that's important because that's a key indicator of how that channel is progressing, how the new go-to-market is progressing. So at the end of the day revenue is revenue. But if you didn't get it from a broader array of the channel then that's why I think execution - numbers are not consistent with kind of long term performance that we thought. But that's how we're still a lot better than we are two years ago. I appreciate the question Glenn. Thank you.

We have a question from Allen Klee with Sidoti. Please go ahead.

Hi, good morning. Going back SMB international. How do we think about the margin opportunity long term? Is there any reason structurally that that is going to be different than North America in your mind?

Yeah. I would say Allen there is significant opportunity from the margin standpoint as Marc noted in the short term. We even have some duplicative cost around the market like France as we transitioned people out but certainly there will be benefits associated with our ERP implementation as well I would say it's difficult to get the international business to the level of the North American business just by the nature of two things really. One, in the North American business we have the rental of postage meters which creates an additional recurring revenue stream that's not as predominant in Europe, you tend to have in France but not most of the other markets. That's number one, number two is just some infrastructure redundancy because you have to maintain some level of local country product and sales and service infrastructure but we do see the opportunity within our ERP implementation and really managing this business more as a global platform than a regional platform to substantially improve the margin profile in that business.

Two additional points and I mean if you look at the third quarter, mix was an issue and the business in Europe. So the margins are less than what we would have expected longer term and the second to my point Europe is in more fragmented market that said. I think it's worth noting that we've taken out of couple areas of management above countries. So we're trying to operate as much more efficient and an effective way.

Great. Thank you. And then in the software segment, is there a way to think about kind of a long-term opportunity of a growth rate there?

Yeah what we pointed to in the Analyst Day - well the topic of last couple years as we think those end user market opportunities should be going in north of 10%. If you look at where we are versus the last couple of years we laid out that strategy that's while it's been I would say bumpy quarter-to-quarter to the compound growth rate for the last couple of years. We've been kind of in that book [ph]. .

Okay. Great. And then finally any long term views on the opportunity from margins within e-commerce?

Yeah. I think if you look at what we talked about in terms of the end markets that in that DCS space broadly there is opportunities that probably range from 10% to 20% depending upon segments. We would see e-commerce probably more in that 10% to 15% range because of the inclusion of the logistics cost associated with that. But clearly the technology components have upside margin potential to that. So in the short term obviously we have the integration of two businesses. The synergies that we've identified that will go forward would go a long way to move in towards that range.

Thank you.

Thank you.

We have a question from the line of Shannon Cross with Cross Research. Please go ahead.

Thank you very much for taking my question. Can you talk a bit more about the integration of Borderfree? Just give us some more details regarding what you've done? How the two businesses are working together? Sales people if there integrated trend on product? Just any color you can give on how that's progressing? Thank you.

Yeah. So I would say the organization at this point is well integrated. So people are in - the jobs that they're going to be in on a going forward basis. The strategies have been integrated. We have a plan to integrate the brand and the products. And what we'll take a little bit longer is to integrate the two platforms. So that's something obviously is a more heavy lift and given how important the fourth quarter is to our clients. We're not likely to make any changes to the platform until next year. If you look at it from a financial perspective we talked about $25 million to $30 million of synergies we are on track with that and as I said at Analyst Day before those $25 million to $30 million were on the cost side. As we get deeper into it we're starting to see some opportunities on the revenue side as well. So I would say from a financial perspective the integration is on track. We like what we have seen so far, I would say that the team is they put together remarkably talented team and we will have great scales from across the industry I would say qualitatively in terms of the pinch list, they likewise are integrating at or ahead of plan.

And they are running a single sales organization today, so that's already moving in that direction.

Okay, great. And then in terms of your go to market productivity you mentioned collapsing [ph] management and I am just curious have you made changes to your sales comp structure any more sort of specifics in how you can improve the productivity on the sales side process stuff you've learned from the North American mailing?

Yeah, I mean at a very simple level, I mean next year the channel will be twice as experience as it is this year and that sounds try but it makes a difference so, you think about the new channels that we put inside and inside sales another year is meaningful in terms of their ability to drive productivity. The second thing I would say is that we have only scratched the surface of what we can do at the web. The web is something that we have spent in the last in a couple of years building our capabilities relaunch the web and we have got a lot that we can do they are not only in terms of driving more efficiency in our sales organization but more efficiency in our service organization more efficiency in our corporations and we have a - I would say a very detailed piece of work that might goes leading on behalf. In terms of changes to the comp not really we continue to fine tune that but I think our primary levers of productivity are as I describe maturation of the insides sales channel and the coming online to the web channel. So there is still a lot we can do here. And we always talk about impact in ERP project, in parallel with our go to market changes there is connections between those two our systems will allow us to do a bunch of things in terms of interacting with our clients that is just first and foremost a better client experience but a lot more efficient.

Okay, thanks. And then just my last question with regarding use of cash I know it came up at the Analyst Day and you do have your incremental 100 million share authorization share repurchase authorization. You went through the first script that you just did fairly quickly. I am just curious given the cash flow you saw this quarter and the trajectory reiterating how you are thinking about pace of deployment of cash back to shareholders and how you are sort of if you've had any further thoughts from the Analyst Day. Thank you.

No, I mean we have not we are pretty purposeful about what we said at the Analyst Day and I will repeat it. First of all if you start with kind of available free cash flow as you get into 16 through 18 we see a pretty big opportunity to drive real cash flow that will become very congruent with earnings. The second thing we said is that our view of capital allocation will be balanced between share repurchases and acquisitions. And the third thing we said is we have we will have a bias towards share repurchase in the short-term and I think all of those comments still stand and I am not prepared to say a lot more than however.

Thank you.

Allen Klee with Sidoti. You line is open.

Yes, hi, just one follow-up. In the prepared remarks you guys mentioned that the shipping solutions underperformed your expectations and I was wondering if you could just provide any color on that.

Yeah so, I would say that is a business that over the last couple of years has performed quite well. As you look at the pipeline that they had in the third quarter they had an opportunity to do much better than they did and I would say our sales execution was not what I would have expected, so as remarked there is positives and negatives about the quarter. Software I thought the OpEx were less good than the actual execution, in shipping I just didn't like how we executed. So I think they will be back on the horse in the fourth quarter. But it certainly didn't perform well until in the third quarter.

Thank you.

George Tong with Piper Jaffray. Your line is open.

Thanks, good morning. Can you discuss how much of additional run rate you have in scaling your UK outbound cross-border e-commerce service and if you see any near term opportunity for providing outbound service in additional countries?

I would say the answer to the first question is what? And the answer to the second question is we continue to look at other outbound markets. So not to be flippant George I mean if you look at where we are in UK we are very early. So I think there is a lot that can be done there in terms of driving that even further. There is opportunities in terms of more resting to opportunities in terms of more better conversion rates. So we're early into that we are going to continue to do better and we focus with our partners to do that. As it relates to other countries that's clearly part of the plan. Right now I would say that we will go wherever we can find the next anchor client that would really provide the foundation for our business as you look at the market so that likely they find that I'd say Germany, India. China and Japan are kind of ones that were pushing hardest on. But we have to do it in the way the makes an economic sense.

Great. That's helpful. Can you discuss the timeline for remaining steps to transition your sales organization in France to achieve the productivity levels you're targeting?

Yeah, I mean at this point the biggest thing that will drive productivity are the two biggest things. One is the removal of duplicative expense so that all by itself has a positive benefit and the second is that channel becomes more experience. So there is nothing structurally at this point that's in the way, so it's balanced just a matter of time.

We have all the people in the seats and that's really what was transpiring over the third quarter. Now it's moving up to productivity curve.

Got it. That's helpful. And then lastly, can you talk about internal initiatives you have that can improve licensing and services sales in your software business to help drive revenue growth to the high-single-digits?

Yeah. So again I think if you look at that business over the last couple of years they have done that high-single-digits actually were double-digit performance. So it's not even quarter-to-quarter, software businesses are never even quarter-to-quarter particularly ones that we are starting with the level of scale that we have. The next move for them is to kind of think what we started roughly in general to product specialist. The next turn of the crank is to go from product specialist to solution sales. So let me give an example of what that means. So we have our customer information management businesses that say lined up business, at a product specialty if you will. As they mature their channel although move from product specialist, there is product inside and out, the people that know about money laundering and know your custom and another types of application areas that become important to the client. So and to get the predicate of you question looking at the third quarter results I would say that they've hit the ball fairly consistent with what we think our long-term expectation over the last couple of years. And they got more opportunities for productivity. Everything that will help and we haven't talked about the lot is we have not done as well the service business and software as we had planned, as we move more into the solutions aspects it will drag your services business along with it.

Great, thank you.

There are no additional questions at this time. So I will turn the call over to Mr. Lautenbach for any additional remarks.

Thanks. So let me recap as I mentioned from a quarterly perspective there were some positive and negatives that's not to be unexpected. That's generally the way. As we pointed to at Analyst Day, we've expected the third quarter to be better than the first half and the fourth quarter to be further improving it from there and I think that's the way it's going to turn out. In terms of strategic roadmap and I think this is the headline of the third quarter. We made a little progress over the last 90 days and I will just recap to because I think there are economic consequences so substantial. The fact that we got carried out the door from a systems perspective is significant. As we've talked about that's the next important step to realizing that $125 million of benefit. I would say we've seen productivity improvements beyond what I would have expected well we are in deployment already. In the second, really important strategic item that we are able to make progress on in the third quarter to Shawn's question was at the integration of Borderfree. We've talked about $25 million to $30 million of synergies over the next 18 months. Collectively those two items are representing the $150 million benefit. So as I said you'll get a fluctuations and a little bit noise quarter-to-quarter. But our focus and our perspective is squarely on the long-term creation of shareholder value. That will conclude our remarks for today and we'll talk to you in 90 days.