Good morning and welcome to the Pitney Bowes Fourth 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 call, Mr. Marc Lautenbach, President and Chief Executive Officer; Mr. Stan Sutula, Executive Vice President, Chief Financial Officer; and Mr. Adam David, Vice President of 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 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 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 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 us. I will take you through my perspectives on 2018 and our going forward capital allocation and then Stan will take you through the quarter and our 2019 guidance. I am pleased with what the team accomplished this year. We grew revenue for the second consecutive year, improved SG&A as a percent of revenue by nearly 600 basis points, reduced debt and increased EBITDA. We put good numbers on the board while overcoming unexpected increases in transportation and labor costs and a much stronger dollar that negatively affected our cross-border business. The fourth quarter and full year 2018 were important moments in the transformation of our company. In the fourth quarter, we grew constant currency revenue 4% and also grew EBIT 14% over prior year. The revenue performance was the highest pro forma quarterly growth in 10 years and 2018 was our second consecutive year of growth making the last 2 years the best revenue growth performance in a decade. We clearly have more work to do, but the revenue growth has a clear indication that we have something the market wants. E-commerce shipping is a market that is still early in its maturity, but there is already strong growth and Pitney Bowes is uniquely positioned to win in important niches in this market. I am particularly pleased with the improvement in our software business. The software team had a very good fourth quarter and posted their second consecutive year of growth. While it has taken longer than I would have hoped, our efforts to build new channels in this business are gaining traction. Let me now take you through the progress we made against our strategic pillars in 2018. First, taking the complexity out of mailing and shipping, in 2018, shipping revenues…

Thank you, Marc and good morning. Let me start by providing an overview of the full year results followed by the details of our fourth quarter. I will then take you through our 2019 guidance. Additionally, unless otherwise noted, my statements going forward will be on a constant currency basis when talking about revenue comparisons and on an adjusted basis when talking about earnings related items including cash flow. Reconciliations of all non-GAAP to GAAP measures can be found in the schedules posted with our earnings press release and on our Investor Relations website. For our full year results, revenue, adjusted EPS and free cash flow performed within the respective annual guidance ranges, revenue of $3.5 billion, which represents growth of 12% over prior year. On a pro forma basis, revenue grew 1% over prior year. This represents the second consecutive year of revenue growth. Looking at the composition of our revenue, Commerce Services represented roughly 44% to overall revenue, while SMB was 47% and software was 10%. Adjusted EPS was $1.16 and GAAP EPS was $1.19. Free cash flow was $318 million and GAAP cash from operations was $392 million. Looking at our capital allocation and uses of cash for the year, for the year, we use free cash flow to pay $140 million in dividend to our common shareholders. We paid $53 million restructuring payments. Our capital expenditures totaled $191 million. Through the year, we made investments in automation, new and existing facilities, our technology, platforms and our products. At year end, we had $867 million in cash on our balance sheet. Through the year, we repatriated over $550 million in cash from overseas. The majority of which went to reduce debt. We ended the year with long-term and short-term debt totaling $3.3 billion, which is a reduction…

[Operator Instructions] And our first question today comes from the line of Ananda Baruah with Loop Capital. Please go ahead.

Hey, good morning, guys. Appreciate you taking the question. I have a few, if I could. Hey, so, Marc, just the first – just kind of with regards to overall kind of demand sort of tenor on –look at the customer base that you’re seeing with, do you recall any impact from macro excluding the FX moves?

Yes. I mean, so far from a macroeconomic perspective, I think it’s kind of the tale of two worlds. You’ve got – our business, which is principally based in the U.S., which the U.S. economy continues to be pretty good. That being said, outside of the United States, there is obviously some pressures particularly in Europe and China slowing down. If you bifurcate Asia versus Europe, while China is slowing down, it’s still at a pretty fast clip relative to the rest of the world and our base there is so low that we continue to think that’s a great opportunity. On the other side of it, Europe is troublesome from a macro perspective. We do like the fact that our business is U.S. based as you get into 2019 and 2020.

Okay, great. That’s really helpful. And then can you also just go a little bit more into the difference between the new leasing initiatives, I guess, you’re calling as origination and what you’ve traditionally have been doing just so we understand the details there?

Sure, Ananda, thanks. So, first, what we’ve traditionally done is a captive lessor situation, so we are leasing our meters, and that’s all done here as what we’ve been doing for several years. What’s different about the new third-party leasing initiatives as we will begin to lease to our existing client base primarily other types of equipment, so it could be other manufacturers’ equipment, but we will be staying within, I’ll call it, standard deviation of that pool. The reason why we think this is such a great opportunity, a, we have excess capacity in the Bank, that will give us, I’ll call it, seed funding to go out, but more importantly, it allows us to better serve our clients. So, we have 750,000 North America clients and this will be primary based in North America, but those clients we know many of them for decades and their credit history. So, the ability to go in and offer them leasing and other equipment in their facilities I think is a really logical approach. So, we think it’s an underserved market, while it has high cost of acquisition, we think we have those connections already, so that’s the distinction we’re going from a captive lessor to widening that out two equipment that we know with clients that we know quite well.

Got it. That’s really helpful. Thanks, Stan. And then can you also just comment on what the impact to free cash flow this year is from that? And I guess kind of payers just like how should we think about your structural free cash flow once you get that third-party leasing business up and running?

Sure. If you think about free cash flow, we believe this will consume somewhere between $50 million and $70 million of free cash flow as we originate these new leases, we expect to do that early in the year. As you understand the leasing business, Ananda, in our previous discussions, we’re not going to see an immediate return, right, we’re going to build that up through time. We expect that will start to yield later in the year and into next year, but – so that will consume cash this year as we build those originations. So, if you kind of take where we landed last year at $318 million, and you look at this basically, the free cash flow is kind of flattish on a year-to-year basis adjusting for this origination. But we think this is a good use of cash. And the reason why we think is a good use of cash is because it builds up finance receivables for the long-term. So, does that have a material impact on the income statement in 2019? No, but as you go out 2 years and 3 years, this could be a nice contribution to Pitney Bowes in our future.

I would just add, I mean, as we continue to transform the company and look for natural adjacencies, where we have brand permission and economic advantage to participate. We’ve obviously spent a lot of time talking about shipping and I think you’re seeing the results of that. The other very natural adjacency is what else we can finance to clients that we know for a long time who have great credit histories, in particular mission-critical assets. So, we see these as both very natural adjacencies where we have got permission from our clients, permission from the marketplace to win.

Again, that’s really helpful of you guys. Thanks a lot. Appreciate it.

And we do have a question from the line of Kartik Mehta with Northcoast Research. Please go ahead.

Hey, good morning. Marc, maybe just a little bit more on capital allocation, maybe why now, I understand you are saying that the stock is where it is and obviously the share repurchase will help, but I am just wondering this stock has been here for a little while, why maybe now the Board decided that this would be the right time to cut the dividend and move to a different type of capital allocation?

Sure. If you kind of reflect back when we initially set the capital allocation policy was 2013. And as you understand better than most, the company was in a very different spot in 2013. Our revenue had declined for consecutive years. We were in markets that were going through secular declines. So, you needed a capital allocation policy that reflected those realities. Fast forward to today, we are in a much different place. As we have talked about, the weighted market growth of businesses that were in-house positive. We have had our second consecutive year of growth. So we feel like there is different opportunities that are available. We know there is different opportunities that are available for us in the marketplace. So, we thought this is a time where we are coming from a position of strength in terms of winning in the market, good revenue results and you are right we do believe that this stock is under-priced. So for all of those reasons we thought now is the right time to do it and this new capital allocation policy gives us the flexibility to pursue what we think are really compelling opportunities.

And then Marc as you move to the e-commerce business, you are definitely seeing significant growth in the business, but the profitability of the business is still lacking. And I understand you have talked about investments in the business and this time around there is some higher costs whether it be labor and transportation. Is there a way for you to kind of parse the profitability of this business to maybe help us understand kind of the underlying profitability if you kind of strip out some of that stuff?

Yes. We will talk more about this in the Analyst Day in a couple of weeks. I would just go back to the strategic intent of our business has been and continues to be around revenue growth. I think the great mistake of platform businesses like this, particularly in the world of e-commerce as you put too much pressure to get profitability too early and you end up constraining your ability to invest and your ability to grow and take advantage of the marketplace. So we will have more to say about that as we get to Analyst Day.

And then just one last question in the past, Pitney Bowes did offer third-party leasing I believe it was different types of assets. So, maybe as you look at going back into the leasing business what type of assets are you looking to lease outside of – is it office equipment, is it something else? Could you give us just a flavor of the type of assets you are trying to do on this third-party leasing business?

Sure. And let me make a couple of distinctions from the past if I might. So the first thing that stands out is quite important and that is we are focusing principally on clients that we already know small or medium businesses. So we have dissected our installed base. We have decided in a target segment that we believe that we now have great credit history. So that’s one important departure from the past. To the point of your question in terms of the kinds of assets, I like and it’s some way to the meter, the meter is for small and medium business is a mission-critical asset in some way, because it has actually has something to do with either collecting revenue or generating revenue. So extrapolating from that same dynamics, we are looking for mission-critical assets in few certain industries where we think we can – where we understand them better and then we understand the asset class better. So, it’s much different than the past. It’s with clients we know, it’s with assets that we understand better. So, the example that we give is Dennis [ph] chairs or forklifts. So, obviously, the last thing that Dennis disclaimed to not make a payment on is the Dennis chair, forklifts moves things around. So, it’s those types of assets that we’re looking at.

Okay, thank you very much. Appreciate it, Marc.

And we do have a question from the line of Shannon Cross with Cross Research. Please go ahead.

Thank you very much for taking my questions. Stan, I’m curious, should we think about the – basically, funding your new leasing business from run-off of finance receivables in sort of the core to some extent? I think you talked about some pressure next year in SMB – or in 2019 in SMB given lower lease renewal opportunities. So, how is sort of the – what’s the balance from what you expect in terms of finance receivable net run-off from core versus what you’re funding?

Sure. Thanks, Shannon. So, there is numerous ways to fund this business. First, we have excess deposits in our Pitney Bowes bank reserve accounts probably in the neighborhood of roughly $300 million plus or minus, that will start the initial funding for it. From there because we have the advantage of the ILC, we can issue deposits, certificates of deposits and internet savings accounts. We also have the ability as this gets larger to securitize those when we need to or syndicate those. So, we see a number of meters to be able to leverage this business without necessarily tapping into regular Pitney Bowes cash flow. We also have that as a vehicle. So, we like the ability to start up. We think we have a good path here on driving funding through the bank, which we can lever and that works out to our advantage. So, we’ll grow this and have the ability to temper the originations over time to deal with market conditions.

Okay. But should we think about – I’m just trying to figure out, should we think about your overall finance receivables bucket that you have up this year, because again, I would assume that there is some run-off that’s coming out of or maybe I ask the question is, what do you expect if you think about core finance receivables, how much of your free cash flow estimate for the year, how much is included in your free cash flow estimate?

Yes. If we take a look at the free cash flow piece, Shannon, and go through that, we do expect that, that business is going to decline on a year-to-year basis. So that ends – part of that will come off of the finance receivables running off. But we look at the balance of those, I wouldn’t say that those are necessarily going to be equal, because there are number of things remember that we’re doing in the core business investing into new equipment, we’re rolling out the SendPro C-Series to international markets and bringing new capability there. So as we look at that comparison of finance receivables, we’ll see a decline here and then I think it’s going to depend on the level of originations we generate in the new third-party leasing to see how those balance. But we’ll expect finance receivables to run off in the base business.

Okay. And then can you talk a bit about capital going forward? And I’m just curious, because you’ve, I mean, you’ve done a good job of managing the debt maturities and paying off in the near term, but you’ve got several coming due starting in 2020. So, how are you kind of thinking about, I don’t know share repurchase on a longer term basis, is this something you expect given where the stock is at just sort of maintain and reup every year so or are things going to change as you look forward again in 2020 and beyond? Thank you.

I would think of our capital allocation as – the important feature of our capital allocation is flexibility. So, we were purposeful in terms of what we announced this year. We believe that’s appropriate for 2019. Once we have a better view of 2020 including the maturities that you talked about, but also the organic and inorganic opportunities, as well as the stock price then we can make a decision about 2020. So, I wouldn’t see it as a long-term statement, but a clear view that we think the investment thesis for this company has changed to growth. And the capital allocation policy that we’re putting in place is reflective of that reality.

And I’m just curious, Marc, given – I think you’ve done – you sold distribution in certain other countries over the years and now you’ve obviously done it in some of the smaller countries in Europe. Is there an opportunity perhaps to sort of shift just to third-party distribution market overall or model sorry, overall, in international markets or what was sort of behind that decision versus maintaining direct sales in certain countries? Thanks.

Yes. I mean, there’s a couple of things. So, to answer your question, we continually look at distribution. What was impacting those particular countries was, if you look at the overall mail market, it was declining quite quickly and candidly, we’re worried about critical mass over the longer period of time. If you look at the countries that we’re left in, France, Germany, UK, Japan, Australia, those are countries where we’ve got critical mass, the mail market is performing differently. That being said – but we always look at distribution. We’re looking at distribution unwind us 5 countries, but what are the things we can do in North America as well, both in terms of rebalancing our channels, but also looking at new channels candidly. There is a series of new channels in the United States that might be pretty attractive.

Alright. Would that be more online or I’m just curious –

We already have – we have, I mean, so if you look at the last 5 years, we’ve rebalanced from face-to-face through online and Telesales, but there is other distribution mechanisms beyond those that we think might be interesting as well.

Okay. And then just one last question, with the third-party leasing that you’re doing, do you anticipate partnering with some of the office equipment companies or are you doing this more as a outreach to your existing customers that hey we are here, we can be a good option get you fast quickly approved because we know you if you want to go out and buy copiers or whatever that might makes sense?

So, we think our distinctive advantage here is we know the customers, so that will – that’s our principal axis to major on. So, again, we’ve already incurred the – if you look at mid-market finance companies, they have a couple of problems, one is, cost of client acquisition is very, very expensive. We’ve already acquired the relationships with these clients. The second is credit history and credit management is difficult. We’ve got a subset of clients that are very creditworthy. And then the third is, as Stan pointed out with deposits, we have a source of inexpensive funding that we think we can tap into. As those three things together that create competitive advantage in the market, and those three things will continue to drive where we pursue this business.

Thank you.

And we do have a question from the line of Allen Klee with Maxim Group. Please go ahead.

Yes, good morning. For your North American SMB segments, I think it was down 6% year-over-year. Any thoughts of how this should trend in ‘19 if that’s kind of a good run rate or it would differ from that?

Yes, again, we’ll have more to say about the respective performances that you’d expect from these businesses. But we do have some tailwinds, I mean, obviously, here in a market that’s going through secular decline, that’s not going to change, that’s not going to change. That’s not going to change anytime soon. Mails going to continue to decline. That being said, if you look at the C-Series, that was announced in the mid-range of the product. We will extend that product line to other families and other countries. So, there are some things that will be different in 2019 versus 2018. That being said, we continue to see this is a market that’s going to decline securely.

Yes. I would add that, Allen, if you take a look at the stream revenue meaning non-equipment sales, that was down 4.9% in ‘18, that’s certainly an improvement from where we were ‘17 versus ‘16, so you’ve seen some stabilization. And then as we drive adoption of shipping within SMB, that has a potential to also help us on a go-forward basis. So, I think you’ll see a broadening versus just equipment sales being the only movement that drives the revenue performance over time.

That’s why the financial services as well as an important dimension of our small and medium business strategy.

Okay. And then moving to the SMB International, you had a big improvement in margins from lower expenses. Is that something we should think of as sustainable?

Well, if you look at the SG&A of International versus the SG&A of North America, the SG&A International continues to be much higher. Now part of that’s because they don’t have as much critical mass, but we believe there is ongoing opportunity to continue to improve margins in our International business.

Okay. And then for the sale of the SMB to – in 6 international countries, can you tell us what you’ve got for that? And then you’re saying that for ‘19 you are going to have $0.04 to $0.05 of a headwind associated with that sale and the China 10% tariff, can you give us an idea of how much of the $0.04 to $0.05 is coming from each of them?

Sure. So, if you take a look first of all, while we signed and closed this effective in January, we haven’t disclosed the details of and the terms publicly, but the proceeds will be minimal overall. If you think about second part of your question which I am sorry I just forgot.

Second part of the question was headwinds?

Yes. So, if you take a look, because this doesn’t qualify for disc ops, we won’t be recasting prior year, but you have a $40 millionish revenue impact. And when you look at the bottom line, we said between the two that there is $0.04 to $0.05 of impact you can think it’s roughly half each of that impact. And as China tariffs, March 1, we will see what happens externally by March 1 we will be looking at whether or not it goes to 25%. If that were to occur that would be an incremental $10 million to $15 million that’s not included in our guidance. We do have the 10% baked in.

Okay, thank you very much.

Thanks, Allen.

And our next question comes from the line of Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Good morning. In the software business, you guys mentioned a few things that helped that was a nice quarter there, but one of the things you mentioned was just how the channel continues to help benefit that group. So can you give a little more characterization on that like can you talk about the pipeline that they are generating, the conversion rate, just some more color around how that channel efforts going?

Sure. So I think of the indirect channel initiatives in two buckets. The first is what we are doing with the global systems integrators. And I would say the most important parts of 2018 from global systems integrator perspective was the platform deals that we signed with the three global systems integrators. I would say those three are early stages in terms of building demand, but we are excited about the promise that those hold. If you look at the other buckets, it’s around the location intelligence business, the regional systems integrators. Those channels are performing well. If you look at the pipeline, there is material pipeline coming from those channels. The conversion rate is slightly less than the direct channels so far. But as we get better at understanding the pipeline that will evolve. So when you add this up, we look at the overall list that the channel efforts providing. It’s a meaningful start in 2018, but a lot more opportunity.

I think Glenn as we take a look at that, the indirect channel makes up about a third of our overall pipeline. I think the big change has been we are seeing a significant shift to lift deals within that. So we are nearly half our lift related deals versus shifting so continue to see progress in that channel.

Just to clarify of shift versus lift, those are terms that mean a lot to us, it may not mean as much to everyone else. So we think of shift as we have generated demand and usually our customer base and we shift that demand to the channel. Lift is the opposite. Lift is where the channel actually generates the demand. And occasionally, we work with them to close it, but oftentimes they close it by themselves.

In the end-market applications for location intelligence are they the same as they have been historically or is that market broadening out?

I would say it’s the same in terms of where it’s been, but we are actually getting more focused on particular used cases.

Okay. And then the other – I think you guys also have been – staying with software you talked about just the smaller deals also contributed significantly, so is that an effort to suggest that the business is – the demand is more sustainable and that it’s broadening out amongst many smaller customers or was it just kind of the handful of large deals?

No, it’s small deals. So it’s a reflection of more customers and candidly more channels pursuing those more customers. So it’s both dynamics.

Yes, but we saw good growth here over 20% in the fourth quarter year-to-year and in fact grew significantly all year and was up nearly 30%, 35% here for the full year basis, so small deals performed well.

Okay, great. Thanks guys.

Thanks, Glenn.

And we do have a question from the line of Anthony Lebiedzinksi with Sidoti. Please go ahead.

Yes, good morning. Thank you for taking the questions. So, first, just a quick housekeeping item for Software for the quarter, how much was with the impact of 606?

Yes. If we take a look at 606, I think there is an important point here which we have talked about before Anthony, when you look at 606, the accounting instruction laid out a set of terms, but we have seen changes in behavior both from selling behavior as well as buying behavior. And one of the principles we have seen along those lines is that when in the past when you did a 3-year deal that cash had to be all upfront in order for it to be recognized. That’s not the case under the new standard. So under the new standard if a client pays on 3 annual basis, then that revenue is still recognized all upfront. So we have seen a change in that behavior. And let me give you some color around Q4. So in Q4 we had a number of renewals. So they were prior 3-year deals, same clients, same content, same 3 years, their payment terms are different than they used to be. Under 605, you wouldn’t be able to recognize all 3 years of revenue recognized one, but we saw that change in behavior here and that impacted the middle of our ASC 606 of about $16 million, $17 million in the quarter. And when we look at that though, I would ask you to keep in mind, same client, same content, different payment terms has resulted in different accounting treatment. The way we look at this is we have gone out and it better serves our clients the ability to do this has opened up an opportunity and that is as the client at these type of payment terms, they are expanding content within their deals.

Okay, thank you for that. That’s very much helpful. And as far as your exposure to China, just wanted to get a better sense as to the revenue exposure and also for sourcing obviously you called out the tariff impact that wanted to see if there are any, if it’s at all possible to move any sourcing outside of China that’s something that’s even again possible?

Sure, Anthony. So first on the impact of China from revenue base, I think the part here is we see this as mostly upside for us. So we started to build this, it was late in the year, so it didn’t have a material impact to the bottom line. What we do see is create opportunity. And so while we scale that through the last part of the year, that contributed a modest amount of revenue. We see a good opportunity go forward. So we think that will grow and we have had good success there so far, but it’s not a major exposure to us in the interim. On sourcing, we work with our partners and this is primarily around the meter technology. We continue to work with them. They are sourced out of China. They have been rebalancing both inventory and manufacturing capacity. We will continue to work with them. They have made some progress here through the interim and that might give us some potential to some of those if it continues on into the future.

Suffice it to say we are hopeful that China net sales workout this issue, I don’t think it’s good for anybody.

Yes, absolutely. And in terms of your CapEx for 2019, have you articulated a plan for that?

We will cover that more in Analyst Day as we go through the details. I think you should consider to be a modest increase versus 2018, but underneath the covers, there will continue to be shifts and we have demonstrated that in the past. For example, in 2018, we had a significant increase in Presort Capital as we did automation in multiple facilities. And I think you will see that shift into global e-commerce and we always look at that composition within the business. But we think this is important. It’s an important use of cash, because it drives the long-term health and profitability of the business.

Got it, okay. And lastly as far as the 2019 guidance, you touched on the importance of the fourth quarter, given the seasonality of the business tied to the holiday season. Anything else as we look to update our models Q1 through Q4, anything else that you would like to point out as to how we should think about the quarterly distribution?

Yes. I think we gave some color around the guidance within the prepared remarks. I think there is a couple of things to keep in mind. One if you think about last year in the first quarter, we are taking a look at some of the items that happened, we had a very strong cross-border quarter last year and the first. And you have seen the performance of that business has softened a little bit in the tail end of 2018. So I think you should think about that as we take a look at that piece. You also recall that last year in the first quarter as part of ASC 606, we had the recognition as we are updating for that and that had a large software deal that won’t be repeated this year and that drove approximately 1 point of the year-over-year decline in the first quarter. I think those are two primary areas. So as you think about attainment of the year, you would expect first quarter to come down naturally as fourth quarter is going to be a bigger component. You saw that play out this year. You will see that shifts continue to happen next year.

Got it. Okay, thank you.

And we do have a follow-up question from the line of Ananda Baruah with Loop Capital. Please go ahead.

Hi, thanks guys. Appreciate it. Hey, just could you stand frame for us what you have characterized and Mart as well as you saw as lower lease opportunity in 2019 just as we understand all the dynamics at least something that we are not aware of?

Sure. So let me start, Marc can provide some additional color here. So if you think about our lease portfolio and think about finance receivables as a view of that, this is not a linear portfolio. So average lease term is a little bit over 4 years, but that doesn’t mean it’s exactly equal every year. So in any given year, the leases that were coming up to maturity is not going to be the same number as prior year. So you have an opportunity when it comes up to handle that in a few different ways. One, we can do a trade up and with new equipment we think that’s a good possibility. Two, you could extend the existing lease with the clients. Now that opens up new opportunities now with our shipping capabilities to both digitally connect that client, bring shipping capabilities and if you will up-sell into that base. And then three, they could trade down or decide that they may not need a meter anymore. When we look at that lease base for 2019, it is smaller than it was in 2018. What you will see for finance receivables though as we go through and look at that, this ties a little bit into what Shannon was talking about earlier. Normally, we get some cash generated from the runoff of that portfolio. That’s going to be partially mitigated as we do originations. We start to add finance receivables from third-party leasing. So while I still think that, that runoff will contribute some cash, I don’t think it will be at the same levels as prior years.

I was just taking up a level as I am inclined to do. So if you think about the business. Up until now finance receivables have been one of the most profitable streams of revenue that we have. And as you all know, those streams have been declining as the mail market declines. We think we have the opportunity with these incremental lease initiatives over time to arrest those declines and to replace what have been incredibly profitable streams. I would reiterate again, but we think we have got distinct advantage in new markets that we are participating. And so it is a very overt effort to take advantage of where we have got strength into arrest that dynamic of finance receivables continuing decline over time.

Yes. I think the other part to look there is competitor in place. So we have a distinct advantage with both our offerings now and I think it is an opportunity and marketplace for us.

Okay, great. I really appreciate that. Thanks.

[Operator Instructions] It does appear at this time, there are no further questions in queue. Please continue.

Terrific. So let me wrap up. It’s easy to get lost in a sea of numbers here between accounting changes and lease changes and other changes that are going on in the marketplace, but here is the takeaway from my perspective. We are exiting 2018 from a position of strength, second consecutive year of growth, fourth quarter best quarter in a decade and we think that is an affirmation of the transformation work that we are doing. And most companies don’t get to that point where they find those new opportunities. And we would distinguish ourselves from where we were in 2013 where our principle opportunities were around productivity savings. That’s not where we are. We have got great offerings in great markets that have secular growth and we are winning clients. That is the takeaway. And from that is what has driven our change in capital allocation. We think the change in capital allocation provides the right degree of flexibility to continue to fund our strategies, but also at the same time unlocks value for our investors. So, we will talk more about where we are in Investor Day, but I like where we are coming out 2018 and we are well positioned for 2019. Thank you.

And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using the AT&T executive teleconference service. You may now disconnect.