UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: 1-03579

PITNEY BOWES INC.

(Exact name of registrant as specified in its charter)

State of incorporation:

Delaware

I.R.S. Employer Identification No.

06-0495050

Address of Principal Executive Offices:

3001 Summer Street,

Stamford,

Connecticut

06926

Telephone Number:

(203)

356-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $1 par value per share

PBI

New York Stock Exchange

6.7% Notes due 2043

PBI.PRB

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of ~~July 28,~~October 27, 2023, ~~176,026,252~~176,331,236 shares of common stock, par value $1 per share, of the registrant were outstanding.

PITNEY BOWES INC.

INDEX


		Page Number

Part I - Financial Information:

Item 1:	Financial Statements

	Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022	3

	Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022	4

	Condensed Consolidated Balance Sheets at ~~June~~September 30, 2023 and December 31, 2022	5

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3:	Quantitative and Qualitative Disclosures about Market Risk	44

Item 4:	Controls and Procedures	44


Part II - Other Information:

Item 1:	Legal Proceedings	45

Item 1A:	Risk Factors	45

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 5:	Other Information	45

Item 6:	Exhibits	46


Signatures		47

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share amounts)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Revenue:	Revenue:									Revenue:
Business services	Business services	$	473,497	$	551,478	$	996,988	$	1,148,862	Business services	$	483,987	$	518,405	$	1,480,975	$	1,667,267
Support services	Support services	103,315		107,625		208,599		217,977		Support services	101,855		107,642		310,454		325,619
Financing	Financing	66,702		67,298		133,751		139,327		Financing	68,572		67,757		202,323		207,084
Equipment sales	Equipment sales	79,451		89,986		162,061		179,282		Equipment sales	76,705		83,528		238,766		262,810
Supplies	Supplies	36,505		38,245		75,340		79,306		Supplies	35,695		37,455		111,035		116,761
Rentals	Rentals	17,011		16,863		34,280		33,683		Rentals	16,937		16,127		51,217		49,810
Total revenue	Total revenue	776,481		871,495		1,611,019		1,798,437		Total revenue	783,751		830,914		2,394,770		2,629,351
Costs and expenses:	Costs and expenses:									Costs and expenses:
Cost of business services	Cost of business services	410,638		477,544		856,955		980,759		Cost of business services	419,859		452,715		1,276,814		1,433,474
Cost of support services	Cost of support services	35,018		37,711		71,858		74,845		Cost of support services	35,589		36,618		107,447		111,463
Financing interest expense	Financing interest expense	14,763		12,533		29,299		24,135		Financing interest expense	16,813		13,692		46,112		37,827
Cost of equipment sales	Cost of equipment sales	56,180		63,815		113,351		127,586		Cost of equipment sales	52,952		60,595		166,303		188,181
Cost of supplies	Cost of supplies	10,884		11,028		22,109		22,545		Cost of supplies	10,498		10,529		32,607		33,074
Cost of rentals	Cost of rentals	5,142		7,473		10,570		12,782		Cost of rentals	4,289		6,270		14,859		19,052
Selling, general and administrative	Selling, general and administrative	222,549		226,638		464,669		469,423		Selling, general and administrative	209,416		209,576		674,085		678,999
Research and development	Research and development	10,274		11,254		20,767		22,588		Research and development	10,362		9,812		31,129		32,400
Restructuring charges		22,443		4,224		26,042		8,408
Restructuring charges and asset impairments										Restructuring charges and asset impairments	16,578		4,264		42,620		12,672
Goodwill impairment	Goodwill impairment	118,599		—		118,599		—		Goodwill impairment	—		—		118,599		—
Interest expense, net	Interest expense, net	22,920		21,007		45,262		43,131		Interest expense, net	26,782		23,685		72,044		66,816
Other components of net pension and postretirement (income) cost	Other components of net pension and postretirement (income) cost	(1,751)		958		(3,461)		1,802		Other components of net pension and postretirement (income) cost	(2,683)		1,427		(6,144)		3,229
Other income, net	Other income, net	(228)		—		(3,064)		(11,901)		Other income, net	—		(8,398)		(3,064)		(20,299)
Total costs and expenses	Total costs and expenses	927,431		874,185		1,772,956		1,776,103		Total costs and expenses	800,455		820,785		2,573,411		2,596,888
(Loss) income before taxes	(Loss) income before taxes	(150,950)		(2,690)		(161,937)		22,334		(Loss) income before taxes	(16,704)		10,129		(178,641)		32,463
Benefit for income taxes		(9,415)		(7,026)		(12,665)		(2,823)
(Benefit) provision for income taxes										(Benefit) provision for income taxes	(4,185)		4,642		(16,850)		1,819

Net (loss) income	Net (loss) income	$	(141,535)	$	4,336	$	(149,272)	$	25,157	Net (loss) income	$	(12,519)	$	5,487	$	(161,791)	$	30,644

Basic net (loss) earnings per share	Basic net (loss) earnings per share	$	(0.81)	$	0.02	$	(0.85)	$	0.14	Basic net (loss) earnings per share	$	(0.07)	$	0.03	$	(0.92)	$	0.18

Diluted net (loss) earnings per share	Diluted net (loss) earnings per share	$	(0.81)	$	0.02	$	(0.85)	$	0.14	Diluted net (loss) earnings per share	$	(0.07)	$	0.03	$	(0.92)	$	0.17

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; in thousands)

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Net (loss) income $ (141,535) $ 4,336 $ (149,272) $ 25,157
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax of $403, $(2,907), $576 and $(3,074), respectively 9,193 (48,138) 20,080 (65,703)
Net unrealized gain (loss) on cash flow hedges, net of tax of $125, $407, $(562) and $2,176, respectively 375 1,229 (1,687) 6,562
Net unrealized (loss) gain on investment securities, net of tax of $(415), $(3,661), $612 and $(8,808), respectively (1,322) (11,043) 1,950 (26,565)
Amortization of pension and postretirement costs, net of tax of $1,223, $1,870, $2,365 and $4,331, respectively 3,739 8,229 7,228 15,965
Other comprehensive income (loss), net of tax 11,985 (49,723) 27,571 (69,741)
Comprehensive loss $ (129,550) $ (45,387) $ (121,701) $ (44,584)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net (loss) income	$	(12,519)	$	5,487	$	(161,791)	$	30,644
Other comprehensive loss, net of tax:
Foreign currency translation, net of tax of $(262), $(2,393), $314 and $(5,466), respectively	(25,640)		(56,419)		(5,560)		(122,122)
Net unrealized (loss) gain on cash flow hedges, net of tax of $(439), $963, $(1,001) and $3,138, respectively	(1,316)		2,853		(3,003)		9,415
Net unrealized loss on investment securities, net of tax of $(1,972), $(2,545), $(1,360) and $(11,353), respectively	(6,280)		(9,583)		(4,330)		(36,148)

Amortization of pension and postretirement costs, net of tax of $1,032, $2,461, $3,397 and $6,792, respectively	3,158		7,749		10,386		23,714
Other comprehensive loss, net of tax	(30,078)		(55,400)		(2,507)		(125,141)
Comprehensive loss	$	(42,597)	$	(49,913)	$	(164,298)	$	(94,497)

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands, except per share amount)


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	541,704	$	669,981	Cash and cash equivalents	$	557,696	$	669,981
Short-term investments (includes $2,399 and $1,882, respectively, reported at fair value)		18,972		11,172
Accounts and other receivables (net of allowance of $4,217 and $5,344, respectively)		272,963		343,557
Short-term finance receivables (net of allowance of $11,522 and $11,395, respectively)		559,979		564,972
Short-term investments (includes $2,280 and $1,882, respectively, reported at fair value)						Short-term investments (includes $2,280 and $1,882, respectively, reported at fair value)	21,732		11,172
Accounts and other receivables (net of allowance of $4,124 and $5,344, respectively)						Accounts and other receivables (net of allowance of $4,124 and $5,344, respectively)	288,592		343,557
Short-term finance receivables (net of allowance of $14,128 and $11,395, respectively)						Short-term finance receivables (net of allowance of $14,128 and $11,395, respectively)	550,152		564,972
Inventories	Inventories	92,783		83,720		Inventories	83,781		83,720
Current income taxes	Current income taxes	11,159		8,790		Current income taxes	6,392		8,790
Other current assets and prepayments	Other current assets and prepayments	117,132		115,824		Other current assets and prepayments	109,189		115,824

Total current assets	Total current assets	1,614,692		1,798,016		Total current assets	1,617,534		1,798,016
Property, plant and equipment, net	Property, plant and equipment, net	401,905		420,672		Property, plant and equipment, net	391,649		420,672
Rental property and equipment, net	Rental property and equipment, net	25,936		27,487		Rental property and equipment, net	24,652		27,487
Long-term finance receivables (net of allowance of $10,595 and $10,555 respectively)		640,097		627,124
Long-term finance receivables (net of allowance of $8,571 and $10,555 respectively)						Long-term finance receivables (net of allowance of $8,571 and $10,555 respectively)	641,251		627,124
Goodwill	Goodwill	952,302		1,066,951		Goodwill	945,418		1,066,951
Intangible assets, net	Intangible assets, net	70,062		77,944		Intangible assets, net	66,111		77,944
Operating lease assets	Operating lease assets	284,783		296,129		Operating lease assets	309,995		296,129
Noncurrent income taxes	Noncurrent income taxes	44,859		46,613		Noncurrent income taxes	55,378		46,613

Other assets (includes $227,583 and $229,936, respectively, reported at fair value)		388,728		380,419
Other assets (includes $214,752 and $229,936, respectively, reported at fair value)						Other assets (includes $214,752 and $229,936, respectively, reported at fair value)	370,716		380,419
Total assets	Total assets	$	4,423,364	$	4,741,355	Total assets	$	4,422,704	$	4,741,355

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY					LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	812,474	$	907,083	Accounts payable and accrued liabilities	$	793,609	$	907,083
Customer deposits at Pitney Bowes Bank	Customer deposits at Pitney Bowes Bank	639,425		628,072		Customer deposits at Pitney Bowes Bank	642,556		628,072
Current operating lease liabilities	Current operating lease liabilities	53,984		52,576		Current operating lease liabilities	58,270		52,576
Current portion of long-term debt	Current portion of long-term debt	264,980		32,764		Current portion of long-term debt	56,533		32,764
Advance billings	Advance billings	82,828		105,207		Advance billings	87,739		105,207
Current income taxes	Current income taxes	2,929		2,101		Current income taxes	1,819		2,101

Total current liabilities	Total current liabilities	1,856,620		1,727,803		Total current liabilities	1,640,526		1,727,803
Long-term debt	Long-term debt	1,884,798		2,172,502		Long-term debt	2,101,595		2,172,502
Deferred taxes on income	Deferred taxes on income	236,859		263,131		Deferred taxes on income	238,391		263,131
Tax uncertainties and other income tax liabilities	Tax uncertainties and other income tax liabilities	24,745		23,841		Tax uncertainties and other income tax liabilities	21,386		23,841
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	254,051		265,696		Noncurrent operating lease liabilities	279,920		265,696
Other noncurrent liabilities	Other noncurrent liabilities	241,778		227,729		Other noncurrent liabilities	265,995		227,729
Total liabilities	Total liabilities	4,498,851		4,680,702		Total liabilities	4,547,813		4,680,702

Commitments and contingencies (See Note 13)	Commitments and contingencies (See Note 13)					Commitments and contingencies (See Note 13)

Stockholders’ (deficit) equity:	Stockholders’ (deficit) equity:					Stockholders’ (deficit) equity:
Common stock, $1 par value (480,000 shares authorized; 323,338 shares issued)	Common stock, $1 par value (480,000 shares authorized; 323,338 shares issued)	323,338		323,338		Common stock, $1 par value (480,000 shares authorized; 323,338 shares issued)	323,338		323,338

Retained earnings	Retained earnings	4,908,641		5,125,677		Retained earnings	4,872,439		5,125,677
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(807,993)		(835,564)		Accumulated other comprehensive loss	(838,071)		(835,564)
Treasury stock, at cost (147,557 and 149,307 shares, respectively)		(4,499,473)		(4,552,798)
Treasury stock, at cost (147,011 and 149,307 shares, respectively)						Treasury stock, at cost (147,011 and 149,307 shares, respectively)	(4,482,815)		(4,552,798)
Total stockholders’ (deficit) equity	Total stockholders’ (deficit) equity	(75,487)		60,653		Total stockholders’ (deficit) equity	(125,109)		60,653
Total liabilities and stockholders’ (deficit) equity	Total liabilities and stockholders’ (deficit) equity	$	4,423,364	$	4,741,355	Total liabilities and stockholders’ (deficit) equity	$	4,422,704	$	4,741,355

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Six Months Ended June 30,
2023 2022
Cash flows from operating activities:
Net (loss) income $ (149,272) $ 25,157
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization 79,770 85,472
Allowance for credit losses 7,164 7,092
Stock-based compensation 6,075 9,866
Amortization of debt fees 4,413 2,985
(Gain) loss on debt redemption/refinancing (3,064) 4,993
Restructuring charges 26,042 8,408
Restructuring payments (12,883) (8,255)
Pension contributions and retiree medical payments (25,196) (18,559)
Gain on sale of assets — (14,372)
Gain on sale of businesses — (2,522)
Goodwill impairment 118,599 —
Changes in operating assets and liabilities, net of acquisitions/divestitures:
Accounts and other receivables 67,506 50,340
Finance receivables 3,837 1,260
Inventories (9,065) (4,078)
Other current assets and prepayments (1,561) (33,833)
Accounts payable and accrued liabilities (108,836) (72,101)
Current and noncurrent income taxes (27,903) (14,069)
Advance billings (22,948) (285)
Other, net 7,564 18,195
   Net cash from operating activities (39,758) 45,694
Cash flows from investing activities:
Capital expenditures (54,646) (64,174)
Purchases of investment securities (9,973) (3,988)
Proceeds from sales/maturities of investment securities 12,088 18,601
Net investment in loan receivables (14,835) (22,537)
Proceeds from asset sales — 50,766
Proceeds from sale of businesses — 3,284
Settlement of derivative contracts 6,185 (19,470)
Other investing activities 485 10,000
   Net cash from investing activities (60,696) (27,518)
Cash flows from financing activities:
Repayments of debt (53,803) (106,779)
Premiums and fees paid to redeem/refinance debt (4,464) (4,759)
Dividends paid to stockholders (17,525) (17,313)
Customer deposits at Pitney Bowes Bank 52,348 (15,912)
Common stock repurchases — (13,446)
Other financing activities (9,109) (8,295)
   Net cash from financing activities (32,553) (166,504)
Effect of exchange rate changes on cash and cash equivalents 4,730 (13,455)
Change in cash and cash equivalents (128,277) (161,783)
Cash and cash equivalents at beginning of period 669,981 732,480
Cash and cash equivalents at end of period $ 541,704 $ 570,697


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net (loss) income	$	(161,791)	$	30,644

Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization	120,032		124,752
Allowance for credit losses	11,393		6,355
Stock-based compensation	7,281		15,237
Amortization of debt fees	7,604		6,737
(Gain) loss on debt redemption/refinancing	(3,064)		4,993
Restructuring charges and asset impairments	42,620		12,672
Restructuring payments	(25,152)		(11,761)
Pension contributions and retiree medical payments	(30,739)		(23,411)
Gain on sale of assets	—		(14,372)
Gain on sale of businesses	—		(10,920)
Goodwill impairment	118,599		—

Changes in operating assets and liabilities, net of acquisitions/divestitures:
Accounts and other receivables	48,914		24,895
Finance receivables	8,144		(1,125)
Inventories	54		(12,233)
Other current assets and prepayments	5,239		(22,234)
Accounts payable and accrued liabilities	(117,376)		(120,993)
Current and noncurrent income taxes	(34,819)		(14,633)
Advance billings	(16,106)		(774)
Other, net	4,714		15,400


Net cash from operating activities	(14,453)		9,229
Cash flows from investing activities:
Capital expenditures	(77,598)		(97,533)
Purchases of investment securities	(11,248)		(5,722)
Proceeds from sales/maturities of investment securities	16,100		24,835
Net investment in loan receivables	(17,039)		(31,101)
Proceeds from asset sales	—		50,766
Proceeds from sale of businesses	—		109,326
Acquisitions	—		(1,154)
Settlement of derivative contracts	(6,988)		(48,987)
Other investing activities	1,337		15,961


Net cash from investing activities	(95,436)		16,391
Cash flows from financing activities:

Proceeds from the issuance of debt, net of discount	266,750		—
Repayments of debt	(308,755)		(112,965)
Premiums and fees paid to redeem/refinance debt	(10,531)		(4,759)
Dividends paid to stockholders	(26,330)		(26,013)
Customer deposits at Pitney Bowes Bank	88,456		31,359
Common stock repurchases	—		(13,446)
Other financing activities	(11,649)		(10,356)
Net cash from financing activities	(2,059)		(136,180)
Effect of exchange rate changes on cash and cash equivalents	(337)		(25,273)
Change in cash and cash equivalents	(112,285)		(135,833)
Cash and cash equivalents at beginning of period	669,981		732,480


Cash and cash equivalents at end of period	$	557,696	$	596,647

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

1. Description of Business and Basis of Presentation

Description of Business

Pitney Bowes Inc. (we, us, our, or the company) is a global shipping and mailing company that provides technology, logistics, and financial services to small and medium sized businesses, large enterprises, including more than 90 percent of the Fortune 500, retailers and government clients around the world. These clients rely on us to remove the complexity and increase the efficiency in their sending of mail and parcels. For additional information, visit www.pitneybowes.com.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In addition, the December 31, 2022 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In management's opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary to fairly state our financial position, results of operations and cash flows for the periods presented have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2023. These statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report to Stockholders on Form 10-K for the year ended December 31, 2022 (2022 Annual Report).

Factors Affecting Comparability

Certain transactions and changes occurred during 2022 that impact the comparability ofto our 2023 financial ~~results to the prior periods.~~results. These transactions and changes include:

•the sale of our Borderfree cross-border ecommerce solutions business (Borderfree) in July 2022. Accordingly, ~~reported~~ revenue and costs for the ~~three and six~~nine months ended ~~June~~September 30, 2022 include revenue and costs for ~~Borderfree.~~Borderfree through the sale date. Net income of Borderfree for ~~these periods~~the year-to-date 2022 period was not significant.

•a change in the presentation of revenue for digital delivery services effective October 1, 2022, from a gross basis to a net basis. ~~Accordingly, in~~Throughout 2023, revenue and costs of revenue for certain digital delivery services are reported on a net basis as business services revenue; whereas ~~for the three and six months ended June 30,~~in 2022, revenue and ~~cost~~costs of revenue for these services were reported as business services revenue and cost of business services, respectively. The change primarily impacts our Global Ecommerce ~~business.~~segment.

Accounting Pronouncements Adopted in 2023

On January 1, 2023, we adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which requires disclosure of gross write-offs of finance receivables by year of origination. The adoption of this standard did not have a material impact on our financial statement disclosures.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The transition to new reference interest rates will require certain contracts to be modified and the ASU is intended to provide temporary optional expedients and exceptions to U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The accommodations provided by the ASU are effective through December 31, 2024, and may be applied at the beginning of any interim period within that time frame. We continue to assess the impact of this standard on our condensed consolidated financial statements.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

2. Revenue

Disaggregated Revenue

The following tables disaggregate our revenue by source and timing of recognition:


		Three Months Ended June 30, 2023													Three Months Ended September 30, 2023
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	312,754	$	143,107	$	17,636	$	473,497	$	—	$	473,497	Business services	$	313,161	$	152,451	$	18,375	$	483,987	$	—	$	483,987
Support services	Support services	—		—		103,315		103,315		—		103,315		Support services	—		—		101,855		101,855		—		101,855
Financing	Financing	—		—		—		—		66,702		66,702		Financing	—		—		—		—		68,572		68,572
Equipment sales	Equipment sales	—		—		19,060		19,060		60,391		79,451		Equipment sales	—		—		18,353		18,353		58,352		76,705
Supplies	Supplies	—		—		36,505		36,505		—		36,505		Supplies	—		—		35,695		35,695		—		35,695
Rentals	Rentals	—		—		—		—		17,011		17,011		Rentals	—		—		—		—		16,937		16,937
Subtotal	Subtotal	312,754		143,107		176,516		632,377		$	144,104	$	776,481	Subtotal	313,161		152,451		174,278		639,890		$	143,861	$	783,751

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing	—		—		144,104		144,104						Revenue from leasing transactions and financing	—		—		143,861		143,861

Total revenue	Total revenue	$	312,754	$	143,107	$	320,620	$	776,481					Total revenue	$	313,161	$	152,451	$	318,139	$	783,751

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	—	$	—	$	73,495	$	73,495					Products/services transferred at a point in time	$	—	$	—	$	71,634	$	71,634
Products/services transferred over time	Products/services transferred over time	312,754		143,107		103,021		558,882						Products/services transferred over time	313,161		152,451		102,644		568,256
Total	Total	$	312,754	$	143,107	$	176,516	$	632,377					Total	$	313,161	$	152,451	$	174,278	$	639,890


		Three Months Ended June 30, 2022													Three Months Ended September 30, 2022
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	393,770	$	138,934	$	18,774	$	551,478	$	—	$	551,478	Business services	$	354,326	$	144,824	$	19,255	$	518,405	$	—	$	518,405
Support services	Support services	—		—		107,625		107,625		—		107,625		Support services	—		—		107,642		107,642		—		107,642
Financing	Financing	—		—		—		—		67,298		67,298		Financing	—		—		—		—		67,757		67,757
Equipment sales	Equipment sales	—		—		21,400		21,400		68,586		89,986		Equipment sales	—		—		20,389		20,389		63,139		83,528
Supplies	Supplies	—		—		38,245		38,245		—		38,245		Supplies	—		—		37,455		37,455		—		37,455
Rentals	Rentals	—		—		—		—		16,863		16,863		Rentals	—		—		—		—		16,127		16,127
Subtotal	Subtotal	393,770		138,934		186,044		718,748		$	152,747	$	871,495	Subtotal	354,326		144,824		184,741		683,891		$	147,023	$	830,914

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing	—		—		152,747		152,747						Revenue from leasing transactions and financing	—		—		147,023		147,023

Total revenue	Total revenue	$	393,770	$	138,934	$	338,791	$	871,495					Total revenue	$	354,326	$	144,824	$	331,764	$	830,914

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	—	$	—	$	76,153	$	76,153					Products/services transferred at a point in time	$	—	$	—	$	76,667	$	76,667
Products/services transferred over time	Products/services transferred over time	393,770		138,934		109,891		642,595						Products/services transferred over time	354,326		144,824		108,074		607,224
Total	Total	$	393,770	$	138,934	$	186,044	$	718,748					Total	$	354,326	$	144,824	$	184,741	$	683,891

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)


		Six Months Ended June 30, 2023													Nine Months Ended September 30, 2023
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	661,145	$	302,009	$	33,834	$	996,988	$	—	$	996,988	Business services	$	974,306	$	454,460	$	52,209	$	1,480,975	$	—	$	1,480,975
Support services	Support services	—		—		208,599		208,599		—		208,599		Support services	—		—		310,454		310,454		—		310,454
Financing	Financing	—		—		—		—		133,751		133,751		Financing	—		—		—		—		202,323		202,323
Equipment sales	Equipment sales	—		—		39,055		39,055		123,006		162,061		Equipment sales	—		—		57,408		57,408		181,358		238,766
Supplies	Supplies	—		—		75,340		75,340		—		75,340		Supplies	—		—		111,035		111,035		—		111,035
Rentals	Rentals	—		—		—		—		34,280		34,280		Rentals	—		—		—		—		51,217		51,217
Subtotal	Subtotal	661,145		302,009		356,828		1,319,982		$	291,037	$	1,611,019	Subtotal	974,306		454,460		531,106		1,959,872		$	434,898	$	2,394,770

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing	—		—		291,037		291,037						Revenue from leasing transactions and financing	—		—		434,898		434,898

Total revenue	Total revenue	$	661,145	$	302,009	$	647,865	$	1,611,019					Total revenue	$	974,306	$	454,460	$	966,004	$	2,394,770

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	—	$	—	$	150,559	$	150,559					Products/services transferred at a point in time	$	—	$	—	$	222,193	$	222,193
Products/services transferred over time	Products/services transferred over time	661,145		302,009		206,269		1,169,423						Products/services transferred over time	974,306		454,460		308,913		1,737,679
Total	Total	$	661,145	$	302,009	$	356,828	$	1,319,982					Total	$	974,306	$	454,460	$	531,106	$	1,959,872


		Six Months Ended June 30, 2022													Nine Months Ended September 30, 2022
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	812,297	$	299,478	$	37,087	$	1,148,862	$	—	$	1,148,862	Business services	$	1,166,623	$	444,302	$	56,342	$	1,667,267	$	—	$	1,667,267
Support services	Support services	—		—		217,977		217,977		—		217,977		Support services	—		—		325,619		325,619		—		325,619
Financing	Financing	—		—		—		—		139,327		139,327		Financing	—		—		—		—		207,084		207,084
Equipment sales	Equipment sales	—		—		42,699		42,699		136,583		179,282		Equipment sales	—		—		63,088		63,088		199,722		262,810
Supplies	Supplies	—		—		79,306		79,306		—		79,306		Supplies	—		—		116,761		116,761		—		116,761
Rentals	Rentals	—		—		—		—		33,683		33,683		Rentals	—		—		—		—		49,810		49,810
Subtotal	Subtotal	812,297		299,478		377,069		1,488,844		$	309,593	$	1,798,437	Subtotal	1,166,623		444,302		561,810		2,172,735		$	456,616	$	2,629,351

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing	—		—		309,593		309,593						Revenue from leasing transactions and financing	—		—		456,616		456,616

Total revenue	Total revenue	$	812,297	$	299,478	$	686,662	$	1,798,437					Total revenue	$	1,166,623	$	444,302	$	1,018,426	$	2,629,351

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	—	$	—	$	154,526	$	154,526					Products/services transferred at a point in time	$	—	$	—	$	231,194	$	231,194
Products/services transferred over time	Products/services transferred over time	812,297		299,478		222,543		1,334,318						Products/services transferred over time	1,166,623		444,302		330,616		1,941,541
Total	Total	$	812,297	$	299,478	$	377,069	$	1,488,844					Total	$	1,166,623	$	444,302	$	561,810	$	2,172,735

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Our performance obligations for revenue from products and services are as follows:

Business services includes fulfillment, delivery and return services, cross-border solutions, mail processing services and shipping subscription solutions. Revenue for fulfillment, delivery and return services and cross-border solutions and mail processing services is recognized over time using an output method based on the number of parcels or mail pieces either processed or delivered, depending on the service type, since that measure best depicts the value of goods and services transferred to the client over the contract period. Contract terms for these services initially range from one to five years and contain annual renewal options. Revenue for shipping subscription solutions is recognized ratably over the contract period as the client obtains equal benefit from these services through the period.

Support services includes providing maintenance, professional and subscription services for our equipment and digital mailing and shipping technology solutions. Contract terms range from one to five years, depending on the term of the lease contract for the related equipment. Revenue for maintenance and subscription services is recognized ratably over the contract period and revenue for professional services is recognized when services are provided.

Equipment sales generally includes the sale of mailing and shipping equipment, excluding sales-type leases. We recognize revenue upon delivery for self-install equipment and upon acceptance or installation for other equipment. We provide a warranty that the equipment is free of defects and meets stated specifications. The warranty is not considered a separate performance obligation.

Supplies includes revenue from supplies for our mailing equipment and is recognized upon delivery.

Revenue from leasing transactions and financing includes revenue from sales-type and operating leases, finance income, late fees and investment income, gains and losses at the Pitney Bowes Bank.

Advance Billings from Contracts with Customers


		Balance sheet location	June 30, 2023		December 31, 2022		Increase/ (decrease)			Balance sheet location	September 30, 2023		December 31, 2022		Increase/ (decrease)
Advance billings, current	Advance billings, current	Advance billings	$	74,743	$	97,904	$	(23,161)	Advance billings, current	Advance billings	$	80,405	$	97,904	$	(17,499)
Advance billings, noncurrent	Advance billings, noncurrent	Other noncurrent liabilities	$	828	$	906	$	(78)	Advance billings, noncurrent	Other noncurrent liabilities	$	1,858	$	906	$	952

Advance billings are recorded when cash payments are due in advance of our performance. Revenue is recognized ratably over the contract term. Items in advance billings primarily relate to support services on mailing equipment. Revenue recognized during the period includes ~~$80~~$81 million of advance billings at the beginning of the period. Advance billings, current, at ~~June~~both September 30, 2023 and December 31, 2022 also includes ~~$8 million and~~ $7 million, ~~respectively,~~ from leasing transactions.

Future Performance Obligations

Future performance obligations include revenue streams bundled with our leasing contracts, primarily maintenance and subscription services. The transaction prices allocated to future performance obligations will be recognized as follows:

Remainder of 2023 2024 2025-2028 Total
SendTech Solutions $ 131,067 $ 227,613 $ 341,507 $ 700,187


	Remainder of 2023		2024		2025-2028		Total
SendTech Solutions	$	65,822	$	236,924	$	395,164	$	697,910

The amounts above do not include revenue for performance obligations under contracts with terms less than 12 months or revenue for performance obligations where revenue is recognized based on the amount billable to the customer.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

3. Segment Information

Our reportable segments are Global Ecommerce, Presort Services and SendTech Solutions. The principal products and services of each reportable segment are as follows:

Global Ecommerce: Includes the revenue and related expenses from business to consumer logistics services for domestic and cross-border delivery, returns and fulfillment.

Presort Services: Includes revenue and related expenses from sortation services that enable clients to qualify for USPS workshare discounts in First Class Mail, Marketing Mail, Marketing Mail Flats and Bound Printed Matter.

SendTech Solutions: Includes the revenue and related expenses from physical and digital mailing and shipping technology solutions, financing, services, supplies and other applications to help clients simplify and save on the sending, tracking and receiving of letters, parcels and flats.

Management measures segment profitability and performance using adjusted segment earnings before interest and taxes (EBIT). Adjusted segment EBIT is calculated by deducting from segment revenue the related costs and expenses attributable to the segment. Adjusted segment EBIT excludes interest, taxes, unallocated corporate expenses, restructuring charges and asset impairments, goodwill impairment, and other items not allocated to business segments. Costs related to shared assets are allocated to the relevant segments. Management believes that adjusted segment EBIT provides investors a useful measure of operating performance and underlying trends of the business. Adjusted segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of operations. The following tables provide information about our reportable segments and a reconciliation of adjusted segment EBIT to net (loss) income.


		Revenue									Revenue
		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Global Ecommerce	Global Ecommerce	$	312,754	$	393,770	$	661,145	$	812,297	Global Ecommerce	$	313,161	$	354,326	$	974,306	$	1,166,623
Presort Services	Presort Services	143,107		138,934		302,009		299,478		Presort Services	152,451		144,824		454,460		444,302
SendTech Solutions	SendTech Solutions	320,620		338,791		647,865		686,662		SendTech Solutions	318,139		331,764		966,004		1,018,426
Total revenue	Total revenue	$	776,481	$	871,495	$	1,611,019	$	1,798,437	Total revenue	$	783,751	$	830,914	$	2,394,770	$	2,629,351


		Adjusted Segment EBIT									Adjusted Segment EBIT
		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Global Ecommerce	Global Ecommerce	$	(38,115)	$	(28,825)	$	(72,321)	$	(42,521)	Global Ecommerce	$	(41,712)	$	(34,881)	$	(114,033)	$	(77,402)
Presort Services	Presort Services	20,429		12,851		47,334		32,483		Presort Services	29,124		20,561		76,458		53,044
SendTech Solutions	SendTech Solutions	97,480		95,565		194,151		200,140		SendTech Solutions	97,761		95,234		291,912		295,374
Total adjusted segment EBIT	Total adjusted segment EBIT	79,794		79,591		169,164		190,102		Total adjusted segment EBIT	85,173		80,914		254,337		271,016
Reconciliation of adjusted segment EBIT to net (loss) income:	Reconciliation of adjusted segment EBIT to net (loss) income:									Reconciliation of adjusted segment EBIT to net (loss) income:
Unallocated corporate expenses	Unallocated corporate expenses	(47,709)		(40,761)		(104,058)		(98,595)		Unallocated corporate expenses	(41,704)		(42,908)		(145,762)		(141,537)
Restructuring charges		(22,443)		(4,224)		(26,042)		(8,408)
Restructuring charges and asset impairments										Restructuring charges and asset impairments	(16,578)		(4,264)		(42,620)		(12,672)
Interest expense, net	Interest expense, net	(37,683)		(33,540)		(74,561)		(67,266)		Interest expense, net	(43,595)		(37,377)		(118,156)		(104,643)
Proxy solicitation fees	Proxy solicitation fees	(4,538)		—		(10,905)		—		Proxy solicitation fees	—		—		(10,905)		—
Goodwill impairment	Goodwill impairment	(118,599)		—		(118,599)		—		Goodwill impairment	—		—		(118,599)		—
Gain (loss) on debt redemption/refinancing	Gain (loss) on debt redemption/refinancing	228		—		3,064		(4,993)		Gain (loss) on debt redemption/refinancing	—		—		3,064		(4,993)
Gain on sale of assets	Gain on sale of assets	—		—		—		14,372		Gain on sale of assets	—		—		—		14,372
Loss on sale of businesses, including transaction costs		—		(3,756)		—		(2,878)
Gain on sale of businesses, including transaction costs										Gain on sale of businesses, including transaction costs	—		13,764		—		10,920

Benefit for income taxes		9,415		7,026		12,665		2,823
Benefit (provision) for income taxes										Benefit (provision) for income taxes	4,185		(4,642)		16,850		(1,819)

Net (loss) income	Net (loss) income	$	(141,535)	$	4,336	$	(149,272)	$	25,157	Net (loss) income	$	(12,519)	$	5,487	$	(161,791)	$	30,644

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

4. Earnings per Share

The calculation of basic and diluted earnings per share (EPS) is presented below.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Numerator:	Numerator:									Numerator:

Net (loss) income	Net (loss) income	$	(141,535)	$	4,336	$	(149,272)	$	25,157	Net (loss) income	$	(12,519)	$	5,487	$	(161,791)	$	30,644
Denominator:	Denominator:									Denominator:
Weighted-average shares used in basic EPS	Weighted-average shares used in basic EPS	175,695		173,490		175,094		173,859		Weighted-average shares used in basic EPS	176,099		173,847		175,428		173,881
Dilutive effect of common stock equivalents (1)	Dilutive effect of common stock equivalents (1)	—		3,479		—		3,814		Dilutive effect of common stock equivalents (1)	—		3,119		—		3,537
Weighted-average shares used in diluted EPS	Weighted-average shares used in diluted EPS	175,695		176,969		175,094		177,673		Weighted-average shares used in diluted EPS	176,099		176,966		175,428		177,418


Basic net (loss) earnings per share	Basic net (loss) earnings per share	$	(0.81)	$	0.02	$	(0.85)	$	0.14	Basic net (loss) earnings per share	$	(0.07)	$	0.03	$	(0.92)	$	0.18

Diluted net (loss) earnings per share	Diluted net (loss) earnings per share	$	(0.81)	$	0.02	$	(0.85)	$	0.14	Diluted net (loss) earnings per share	$	(0.07)	$	0.03	$	(0.92)	$	0.17

Common stock equivalents excluded from calculation of diluted earnings per share because their impact would be anti-dilutive:	Common stock equivalents excluded from calculation of diluted earnings per share because their impact would be anti-dilutive:	11,426		9,602		9,833		9,602		Common stock equivalents excluded from calculation of diluted earnings per share because their impact would be anti-dilutive:	10,574		13,967		9,665		9,573

(1) Due to the net loss for the three and ~~six~~nine months ended ~~June~~September 30, 2023, an additional ~~3.7~~4.3 million and ~~4.1~~4.2 million, respectively, of common stock equivalents were also excluded from the calculation of diluted earnings per share.

5. Inventories

Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) basis, or net realizable value. Inventories consisted of the following:


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Raw materials	Raw materials	$	28,137	$	25,539	Raw materials	$	25,494	$	25,539
Supplies and service parts	Supplies and service parts	33,046		27,573		Supplies and service parts	28,775		27,573
Finished products	Finished products	31,600		30,608		Finished products	29,512		30,608

Total inventory, net	Total inventory, net	$	92,783	$	83,720	Total inventory, net	$	83,781	$	83,720

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

6. Finance Assets and Lessor Operating Leases

Finance Assets

Finance receivables are comprised of sales-type lease receivables, secured loans and unsecured loans. Sales-type leases and secured loans are from financing options for the purchase or lease of Pitney Bowes equipment or other manufacturers' equipment and are generally due in installments over periods ranging from three to five years. Unsecured loans comprise revolving credit lines offered to our clients for postage, supplies and working capital purposes. These revolving credit lines are generally due monthly; however, clients may rollover outstanding balances. Interest is recognized on finance receivables using the effective interest method. Annual fees are recognized ratably over the period covered and client acquisition costs are expensed as incurred. All finance receivables are in our SendTech Solutions segment and we segregate finance receivables into a North America portfolio and an International portfolio.

Finance receivables consisted of the following:


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
		North America		International		Total		North America		International		Total			North America		International		Total		North America		International		Total
Sales-type lease receivables	Sales-type lease receivables													Sales-type lease receivables
Gross finance receivables	Gross finance receivables	$	986,317	$	143,792	$	1,130,109	$	967,298	$	158,167	$	1,125,465	Gross finance receivables	$	989,069	$	135,913	$	1,124,982	$	967,298	$	158,167	$	1,125,465
Unguaranteed residual values	Unguaranteed residual values	38,837		8,346		47,183		38,832		8,798		47,630		Unguaranteed residual values	38,570		7,555		46,125		38,832		8,798		47,630
Unearned income	Unearned income	(246,871)		(45,218)		(292,089)		(239,238)		(48,334)		(287,572)		Unearned income	(249,639)		(42,059)		(291,698)		(239,238)		(48,334)		(287,572)
Allowance for credit losses	Allowance for credit losses	(14,255)		(2,434)		(16,689)		(14,131)		(2,893)		(17,024)		Allowance for credit losses	(14,352)		(2,454)		(16,806)		(14,131)		(2,893)		(17,024)
Net investment in sales-type lease receivables	Net investment in sales-type lease receivables	764,028		104,486		868,514		752,761		115,738		868,499		Net investment in sales-type lease receivables	763,648		98,955		862,603		752,761		115,738		868,499
Loan receivables	Loan receivables													Loan receivables
Loan receivables	Loan receivables	317,513		19,477		336,990		311,887		16,636		328,523		Loan receivables	317,269		17,424		334,693		311,887		16,636		328,523
Allowance for credit losses	Allowance for credit losses	(5,264)		(164)		(5,428)		(4,787)		(139)		(4,926)		Allowance for credit losses	(5,747)		(146)		(5,893)		(4,787)		(139)		(4,926)
Net investment in loan receivables	Net investment in loan receivables	312,249		19,313		331,562		307,100		16,497		323,597		Net investment in loan receivables	311,522		17,278		328,800		307,100		16,497		323,597
Net investment in finance receivables	Net investment in finance receivables	$	1,076,277	$	123,799	$	1,200,076	$	1,059,861	$	132,235	$	1,192,096	Net investment in finance receivables	$	1,075,170	$	116,233	$	1,191,403	$	1,059,861	$	132,235	$	1,192,096

Maturities of gross finance receivables at ~~June~~September 30, 2023 were as follows:


		Sales-type Lease Receivables						Loan Receivables							Sales-type Lease Receivables						Loan Receivables
		North America		International		Total		North America		International		Total			North America		International		Total		North America		International		Total
Remainder 2023	Remainder 2023	$	197,140	$	43,305	$	240,445	$	224,057	$	19,477	$	243,534	Remainder 2023	$	103,877	$	38,932	$	142,809	$	214,865	$	17,424	$	232,289
2024	2024	323,973		45,253		369,226		33,442		—		33,442		2024	343,412		44,439		387,851		35,617		—		35,617
2025	2025	232,550		28,915		261,465		26,991		—		26,991		2025	255,720		27,813		283,533		29,217		—		29,217
2026	2026	148,495		16,607		165,102		18,104		—		18,104		2026	170,704		15,739		186,443		20,025		—		20,025
2027	2027	72,840		7,306		80,146		11,659		—		11,659		2027	91,804		6,777		98,581		13,163		—		13,163
Thereafter	Thereafter	11,319		2,406		13,725		3,260		—		3,260		Thereafter	23,552		2,213		25,765		4,382		—		4,382
Total	Total	$	986,317	$	143,792	$	1,130,109	$	317,513	$	19,477	$	336,990	Total	$	989,069	$	135,913	$	1,124,982	$	317,269	$	17,424	$	334,693

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Aging of Receivables

The aging of gross finance receivables was as follows:


		June 30, 2023											September 30, 2023
		Sales-type Lease Receivables				Loan Receivables							Sales-type Lease Receivables				Loan Receivables
		North America		International		North America		International		Total			North America		International		North America		International		Total
Past due amounts 0 - 90 days	Past due amounts 0 - 90 days	$	981,470	$	141,849	$	314,794	$	19,285	$	1,457,398	Past due amounts 0 - 90 days	$	980,673	$	134,330	$	314,832	$	17,113	$	1,446,948
Past due amounts > 90 days	Past due amounts > 90 days	4,847		1,943		2,719		192		9,701		Past due amounts > 90 days	8,396		1,583		2,437		311		12,727
Total	Total	$	986,317	$	143,792	$	317,513	$	19,477	$	1,467,099	Total	$	989,069	$	135,913	$	317,269	$	17,424	$	1,459,675


	December 31, 2022
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Past due amounts 0 - 90 days	$	959,203	$	155,596	$	308,872	$	16,503	$	1,440,174
Past due amounts > 90 days	8,095		2,571		3,015		133		13,814
Total	$	967,298	$	158,167	$	311,887	$	16,636	$	1,453,988

Allowance for Credit Losses

We provide an allowance for credit losses based on historical loss experience, the nature of our portfolios, adverse situations that may affect a client's ability to pay and current economic conditions and outlook based on reasonable and supportable forecasts. We continually evaluate the adequacy of the allowance for credit losses and adjust as necessary. The assumptions used in determining an estimate of credit losses are inherently subjective and actual results may differ significantly from estimated reserves.

We established credit approval limits based on the credit quality of the client and the type of equipment financed. We cease financing revenue recognition for lease receivables and for unsecured loan receivables that are more than 90 days past due. Revenue recognition is resumed when the client's payments reduce the account aging to less than 60 days past due. Finance receivables are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. We believe that our credit risk is low because of the geographic and industry diversification of our clients and small account balances for most of our clients.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Activity in the allowance for credit losses for finance receivables was as follows:


		Sales-type Lease Receivables				Loan Receivables							Sales-type Lease Receivables				Loan Receivables
		North America		International		North America		International		Total			North America		International		North America		International		Total
Balance at January 1, 2023	Balance at January 1, 2023	$	14,131	$	2,893	$	4,787	$	139	$	21,950	Balance at January 1, 2023	$	14,131	$	2,893	$	4,787	$	139	$	21,950

Amounts charged to expense	Amounts charged to expense	1,035		250		2,067		160		3,512		Amounts charged to expense	1,339		800		3,246		305		5,690
Write-offs	Write-offs	(2,374)		(779)		(2,668)		(145)		(5,966)		Write-offs	(3,227)		(1,209)		(3,722)		(292)		(8,450)
Recoveries	Recoveries	1,460		134		1,061		—		2,655		Recoveries	2,058		151		1,488		—		3,697
Other	Other	3		(64)		17		10		(34)		Other	51		(181)		(52)		(6)		(188)
Balance at June 30, 2023		$	14,255	$	2,434	$	5,264	$	164	$	22,117
Balance at September 30, 2023												Balance at September 30, 2023	$	14,352	$	2,454	$	5,747	$	146	$	22,699

		Sales-type Lease Receivables				Loan Receivables							Sales-type Lease Receivables				Loan Receivables
		North America		International		North America		International		Total			North America		International		North America		International		Total
Balance at January 1, 2022	Balance at January 1, 2022	$	19,546	$	3,246	$	3,259	$	167	$	26,218	Balance at January 1, 2022	$	19,546	$	3,246	$	3,259	$	167	$	26,218

Amounts charged to expense	Amounts charged to expense	145		73		1,408		186		1,812		Amounts charged to expense	(1,913)		189		2,459		259		994
Write-offs	Write-offs	(2,806)		(433)		(2,491)		(152)		(5,882)		Write-offs	(4,625)		(587)		(3,684)		(212)		(9,108)
Recoveries	Recoveries	1,572		—		1,354		—		2,926		Recoveries	2,273		35		1,916		1		4,225
Other	Other	(19)		(364)		(2)		(31)		(416)		Other	(103)		(589)		(10)		(62)		(764)
Balance at June 30, 2022		$	18,438	$	2,522	$	3,528	$	170	$	24,658
Balance at September 30, 2022												Balance at September 30, 2022	$	15,178	$	2,294	$	3,940	$	153	$	21,565

The table below shows write-offs of gross finance receivables by year of origination.

June 30, 2023
Sales Type Lease Receivables Loan Receivables Total
2023 2022 2021 2020 2019 Prior
Write-offs $ 272 $ 688 $ 936 $ 601 $ 366 $ 290 $ 2,813 $ 5,966


	September 30, 2023
	Sales Type Lease Receivables												Loan Receivables		Total
	2023		2022		2021		2020		2019		Prior
Write-offs	$	833	$	912	$	1,141	$	748	$	447	$	355	$	4,014	$	8,450

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Credit Quality

The extension of credit and management of credit lines to new and existing clients uses a combination of a client's credit score, where available, a detailed manual review of their financial condition and payment history, or an automated process. Once credit is granted, the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes to ensure that our global strategy is executed, collection resources are allocated and enhanced tools and processes are implemented as needed.

Over 85% of our finance receivables are within the North American portfolio. We use a third-party to score the majority of this portfolio on a quarterly basis using a proprietary commercial credit score. The relative scores are determined based on a number of factors, including financial information, payment history, company type and ownership structure. We stratify the third party's credit scores of our clients into low, medium and high-risk accounts. Due to timing and other issues, our entire portfolio may not be scored at period end. We report these amounts as "Not Scored"; however, absence of a score is not indicative of the credit quality of the account. The third-party credit score is used to predict the payment behaviors of our clients and the probability that an account will become greater than 90 days past due during the subsequent 12-month period.

•Low risk accounts are companies with very good credit scores and a predicted delinquency rate of less than 5%.

•Medium risk accounts are companies with average to good credit scores and a predicted delinquency rate between 5% and 10%.

•High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent. The predicted delinquency rate would be greater than 10%.

We do not use a third-party to score our International portfolio because the cost to do so is prohibitive as there is no single credit score model that covers all countries. Accordingly, the entire International portfolio is reported in the Not Scored category. This portfolio comprises less than 15% of total finance receivables. Most of the International credit applications are small dollar applications (i.e. below $50 thousand) and are subjected to an automated review process. Larger credit applications are manually reviewed, which includes obtaining client financial information, credit reports and other available financial information.

The table below shows gross finance receivables by relative risk class and year of origination based on the relative scores of the accounts within each class.


		June 30, 2023																				September 30, 2023
		Sales Type Lease Receivables												Loan Receivables					Total			Sales Type Lease Receivables																			Loan Receivables			Total
		2023		2022		2021		2020		2019		Prior						2023					2022				2021			2020			2019			Prior
Low	Low	$	144,677	$	255,499	$	183,923	$	119,576	$	68,835	$	25,262			$	252,372					$	1,050,144	Low	$	214,237		$	241,101		$	172,532		$	108,325		$	55,651		$	16,531		$	239,612		$	1,047,989
Medium	Medium	27,214		45,522		33,343		22,615		16,592		6,076		49,631					200,993		Medium	37,123				40,116			29,949			20,506			12,288			4,007			62,663			206,652
High	High	2,345		4,581		3,055		2,482		1,214		850		6,416					20,943		High	3,426				4,495			2,909			2,231			824			801			7,632			22,318
Not Scored	Not Scored	48,423		50,455		37,337		17,854		9,379		3,000		28,571					195,019		Not Scored	56,364				46,715			32,930			14,264			6,319			1,338			24,786			182,716
Total	Total	$	222,659	$	356,057	$	257,658	$	162,527	$	96,020	$	35,188	$	336,990				$	1,467,099	Total	$	311,150			$	332,427		$	238,320		$	145,326		$	75,082		$	22,677		$	334,693		$	1,459,675

		December 31, 2022																				December 31, 2022
		Sales Type Lease Receivables												Loan Receivables					Total			Sales Type Lease Receivables																			Loan Receivables			Total
		2022		2021		2020		2019		2018		Prior						2022					2021				2020			2019			2018			Prior
Low	Low	$	286,297	$	206,511	$	140,800	$	95,485	$	34,721	$	12,674			$	239,635					$	1,016,123	Low	$	286,297		$	206,511		$	140,800		$	95,485		$	34,721		$	12,674		$	239,635		$	1,016,123
Medium	Medium	53,419		40,669		27,013		19,668		6,751		3,441		56,048					207,009		Medium	53,419				40,669			27,013			19,668			6,751			3,441			56,048			207,009
High	High	6,492		3,840		3,119		1,942		750		508		6,800					23,451		High	6,492				3,840			3,119			1,942			750			508			6,800			23,451
Not Scored	Not Scored	71,435		53,831		29,957		19,232		5,889		1,021		26,040					207,405		Not Scored	71,435				53,831			29,957			19,232			5,889			1,021			26,040			207,405
Total	Total	$	417,643	$	304,851	$	200,889	$	136,327	$	48,111	$	17,644	$	328,523				$	1,453,988	Total	$	417,643			$	304,851		$	200,889		$	136,327		$	48,111		$	17,644		$	328,523		$	1,453,988

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Lease Income

Lease income from sales-type leases, excluding variable lease payments, was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Profit recognized at commencement	Profit recognized at commencement	$	30,839	$	34,337	$	62,661	$	69,378	Profit recognized at commencement	$	29,476	$	31,576	$	92,138	$	100,951
Interest income	Interest income	39,181		41,021		78,112		83,304		Interest income	38,588		40,480		116,700		123,783
Total lease income from sales-type leases	Total lease income from sales-type leases	$	70,020	$	75,358	$	140,773	$	152,682	Total lease income from sales-type leases	$	68,064	$	72,056	$	208,838	$	224,734

Lessor Operating Leases

We also lease mailing equipment under operating leases with terms of one to five years. Maturities of these operating leases are as follows:


Remainder 2023	Remainder 2023	$	10,241	Remainder 2023	$	7,096
2024	2024	17,361		2024	17,430
2025	2025	18,934		2025	19,044
2026	2026	9,561		2026	14,827
2027	2027	2,779		2027	3,449
Thereafter	Thereafter	607		Thereafter	1,048
Total	Total	$	59,483	Total	$	62,894

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

7. Intangible Assets and Goodwill

Intangible Assets

Intangible assets consisted of the following:


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	Customer relationships	$	155,719	$	(87,804)	$	67,915	$	155,715	$	(80,188)	$	75,527	Customer relationships	$	155,712	$	(91,603)	$	64,109	$	155,715	$	(80,188)	$	75,527
Software & technology	Software & technology	21,973		(19,826)		2,147		22,000		(19,583)		2,417		Software & technology	21,941		(19,939)		2,002		22,000		(19,583)		2,417

Total intangible assets	Total intangible assets	$	177,692	$	(107,630)	$	70,062	$	177,715	$	(99,771)	$	77,944	Total intangible assets	$	177,653	$	(111,542)	$	66,111	$	177,715	$	(99,771)	$	77,944

Amortization expense for the three months ended ~~June~~September 30, 2023 and 2022 was $4 million and $8$5 million, respectively and amortization expense for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 was $8$12 million and ~~$15~~$20 million, respectively.

Future amortization expense as of ~~June~~September 30, 2023 is shown in the table below. Actual amortization expense may differ due to, among other things, fluctuations in foreign currency exchange rates, acquisitions, divestitures and impairment charges.


Remainder 2023	Remainder 2023	$	7,859	Remainder 2023	$	3,928
2024	2024	15,719		2024	15,714
2025	2025	15,515		2025	15,510
2026	2026	14,526		2026	14,520
2027	2027	11,471		2027	11,467
Thereafter	Thereafter	4,972		Thereafter	4,972
Total	Total	$	70,062	Total	$	66,111

Goodwill

Changes in the carrying value of goodwill by reporting segment are shown in the table below.


		December 31, 2022		Impairment		Currency impact		June 30, 2023			December 31, 2022		Impairment		Currency impact		September 30, 2023
Global Ecommerce	Global Ecommerce	$	339,184	$	(118,599)	$	—	$	220,585	Global Ecommerce	$	339,184	$	(118,599)	$	—	$	220,585
Presort Services	Presort Services	223,763		—		—		223,763		Presort Services	223,763		—		—		223,763
SendTech Solutions	SendTech Solutions	504,004		—		3,950		507,954		SendTech Solutions	504,004		—		(2,934)		501,070
Total goodwill	Total goodwill	$	1,066,951	$	(118,599)	$	3,950	$	952,302	Total goodwill	$	1,066,951	$	(118,599)	$	(2,934)	$	945,418

Global Ecommerce goodwill is net of accumulated goodwill impairment charges of $317 million and $198 million at ~~June~~September 30, 2023 and December 31, 2022, respectively.

WeAt the end of the second quarter of 2023, we determined that the performance of our Global Ecommerce reporting unit through June 30, 2023 and continuing changes in macroeconomic conditions, was a triggering event ~~causing~~that caused us to evaluate the Global Ecommerce goodwill for ~~impairment at June 30, 2023.~~impairment. To assess Global Ecommerce goodwill for impairment, we determined the fair value of the ~~Global Ecommerce~~ reporting unit and compared it to the unit's carrying value, including goodwill. We engaged a third-party to assist in the determination of the fair value of the reporting unit. The fair value ~~of the reporting unit~~ was estimated using a discounted cash flow model based on management developed cash flow projections, which included judgements and assumptions related to revenue growth rates, operating margins, operating income, and a discount rate. We determined that the estimated fair value of the ~~Global Ecommerce~~ reporting unit was less than its carrying value and recorded a non-cash, pre-tax goodwill impairment charge of $119 ~~million.~~million in the second quarter of 2023. Future changes in any of these judgements or assumptions could materially affect the determination of fair value and result in an additional impairment charge in the future. The estimates and assumptions are considered Level 3 inputs under the fair value hierarchy.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

8. Fair Value Measurements and Derivative Instruments

We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. An entity is required to classify certain assets and liabilities measured at fair value based on the following fair value hierarchy that prioritizes the inputs used to measure fair value:

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3– Unobservable inputs that are supported by little or no market activity, may be derived from internally developed methodologies based on management’s best estimate of fair value and that are significant to the fair value of the asset or liability.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect its placement within the fair value hierarchy. The following tables show, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis.


		June 30, 2023									September 30, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Investment securities	Investment securities									Investment securities
Money market funds	Money market funds	$	9,804	$	178,973	$	—	$	188,777	Money market funds	$	13,365	$	137,444	$	—	$	150,809
Equity securities	Equity securities	—		14,888		—		14,888		Equity securities	—		13,778		—		13,778
Commingled fixed income securities	Commingled fixed income securities	1,538		6,318		—		7,856		Commingled fixed income securities	1,500		5,756		—		7,256
Government and related securities	Government and related securities	10,339		18,674		—		29,013		Government and related securities	10,456		17,350		—		27,806
Corporate debt securities	Corporate debt securities	—		52,907		—		52,907		Corporate debt securities	—		50,820		—		50,820
Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	—		123,009		—		123,009		Mortgage-backed / asset-backed securities	—		114,327		—		114,327
Derivatives	Derivatives									Derivatives
Interest rate swap	Interest rate swap	—		13,283		—		13,283		Interest rate swap	—		11,683		—		11,683

Total assets	Total assets	$	21,681	$	408,052	$	—	$	429,733	Total assets	$	25,321	$	351,158	$	—	$	376,479
Liabilities:	Liabilities:									Liabilities:
Derivatives	Derivatives									Derivatives

Foreign exchange contracts	Foreign exchange contracts	$	—	$	(1,314)	$	—	$	(1,314)	Foreign exchange contracts	$	—	$	(715)	$	—	$	(715)
Total liabilities	Total liabilities	$	—	$	(1,314)	$	—	$	(1,314)	Total liabilities	$	—	$	(715)	$	—	$	(715)

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Investment securities
Money market funds	$	29,087	$	238,536	$	—	$	267,623
Equity securities	—		13,233		—		13,233
Commingled fixed income securities	1,520		6,526		—		8,046
Government and related securities	10,253		18,796		—		29,049
Corporate debt securities	—		52,319		—		52,319
Mortgage-backed / asset-backed securities	—		126,882		—		126,882
Derivatives
Interest rate swap	—		15,283		—		15,283
Foreign exchange contracts	—		479		—		479
Total assets	$	40,860	$	472,054	$	—	$	512,914
Liabilities:
Derivatives

Foreign exchange contracts	$	—	$	(1,472)	$	—	$	(1,472)
Total liabilities	$	—	$	(1,472)	$	—	$	(1,472)

Investment Securities

The valuation of investment securities is based on the market approach using inputs that are observable, or can be corroborated by observable data, in an active marketplace. The following information relates to our classification within the fair value hierarchy:

•Money Market Funds: Money market funds typically invest in government securities, certificates of deposit, commercial paper and other highly liquid, low risk securities. Money market funds are principally used for overnight deposits and are classified as Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an exchange.

•Equity Securities: Equity securities are comprised of mutual funds investing in U.S. and foreign stocks. These mutual funds are classified as Level 2.

•Commingled Fixed Income Securities: Commingled fixed income securities are comprised of mutual funds that invest in a variety of fixed income securities, including securities of the U.S. government and its agencies, corporate debt, mortgage-backed securities and asset-backed securities. Fair value is based on the value of the underlying investments owned by each fund, minus its liabilities, divided by the number of shares outstanding, as reported by the fund manager. These mutual funds are classified as Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an exchange.

•Government and Related Securities: Debt securities are classified as Level 1 when unadjusted quoted prices in active markets are available. Debt securities are classified as Level 2 where fair value is determined using quoted market prices for similar securities or benchmarking model derived prices to quoted market prices and trade data for identical or comparable securities.

•Corporate Debt Securities: Corporate debt securities are valued using recently executed comparable transactions, market price quotations or bond spreads for the same maturity as the security. These securities are classified as Level 2.

•Mortgage-Backed Securities / Asset-Backed Securities: These securities are valued based on external pricing indices or external price/spread data. These securities are classified as Level 2.

Derivative Securities

•Foreign Exchange Contracts: The valuation of foreign exchange derivatives is based on the market approach using observable market inputs, such as foreign currency spot and forward rates and yield curves. These securities are classified as Level 2.

•Interest Rate Swaps: The valuation of interest rate swaps is based on an income approach using inputs that are observable or that can be derived from, or corroborated by, observable market data. These securities are classified as Level 2.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Available-For-Sale Securities

Investment securities classified as available-for-sale are recorded at fair value with changes in fair value due to market conditions recorded in accumulated other comprehensive loss (AOCL), and changes in fair value due to credit conditions recorded in earnings. There were no unrealized losses due to credit losses charged to earnings in the ~~six~~nine months ended ~~June~~September 30, 2023.

Available-for-sale securities consisted of the following:


		June 30, 2023				September 30, 2023
		Amortized cost		Gross unrealized losses			Estimated fair value			Amortized cost		Gross unrealized losses		Estimated fair value
Government and related securities	Government and related securities	$	35,186	$	(7,694)		$	27,492	Government and related securities	$	35,125	$	(9,054)	$	26,071
Corporate debt securities	Corporate debt securities	65,638		(12,731)			52,907		Corporate debt securities	65,271		(14,451)		50,820
Commingled fixed income securities	Commingled fixed income securities	1,768		(230)			1,538		Commingled fixed income securities	1,778		(278)		1,500
Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	151,671		(28,662)			123,009		Mortgage-backed / asset-backed securities	148,113		(33,786)		114,327
Total	Total	$	254,263	$	(49,317)		$	204,946	Total	$	250,287	$	(57,569)	$	192,718


	December 31, 2022
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Government and related securities	$	35,744	$	11	$	(8,210)	$	27,545
Corporate debt securities	66,300		—		(13,981)		52,319
Commingled fixed income securities	1,749		—		(229)		1,520
Mortgage-backed / asset-backed securities	156,352		—		(29,470)		126,882
Total	$	260,145	$	11	$	(51,890)	$	208,266

Investment securities in a loss position were as follows:


		June 30, 2023				December 31, 2022					September 30, 2023				December 31, 2022
		Fair Value		Gross unrealized losses		Fair Value		Gross unrealized losses			Fair Value		Gross unrealized losses		Fair Value		Gross unrealized losses
Greater than 12 continuous months	Greater than 12 continuous months									Greater than 12 continuous months
Government and related securities	Government and related securities	$	22,263	$	5,001	$	17,063	$	2,753	Government and related securities	$	26,071	$	9,054	$	17,063	$	2,753
Corporate debt securities	Corporate debt securities	52,440		12,715		48,812		13,749		Corporate debt securities	50,820		14,451		48,812		13,749

Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	122,646		28,642		114,839		28,040		Mortgage-backed / asset-backed securities	114,327		33,786		114,839		28,040
Total	Total	$	197,349	$	46,358	$	180,714	$	44,542	Total	$	191,218	$	57,291	$	180,714	$	44,542

Less than 12 continuous months	Less than 12 continuous months									Less than 12 continuous months
Government and related securities	Government and related securities	$	5,229	$	2,693	$	10,061	$	5,457	Government and related securities	$	—	$	—	$	10,061	$	5,457
Corporate debt securities	Corporate debt securities	467		16		3,508		232		Corporate debt securities	—		—		3,508		232
Commingled fixed income securities	Commingled fixed income securities	1,538		230		1,520		229		Commingled fixed income securities	1,500		278		1,520		229
Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	363		20		12,042		1,430		Mortgage-backed / asset-backed securities	—		—		12,042		1,430
Total	Total	$	7,597	$	2,959	$	27,131	$	7,348	Total	$	1,500	$	278	$	27,131	$	7,348

At ~~June~~September 30, 2023, all securities in the investment portfolio were in an unrealized loss position. However, we have the ability and intent to hold these securities until recovery of the unrealized losses or expect to receive the stated principal and interest at maturity. Accordingly, we have not recognized an impairment loss and our allowance for credit losses on these investment securities is not significant.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Scheduled maturities of available-for-sale securities at ~~June~~September 30, 2023 were as follows:


		Amortized cost		Estimated fair value			Amortized cost		Estimated fair value
Within 1 year	Within 1 year	$	2,640	$	2,399	Within 1 year	$	2,567	$	2,280
After 1 year through 5 years	After 1 year through 5 years	14,947		13,501		After 1 year through 5 years	15,107		13,669
After 5 years through 10 years	After 5 years through 10 years	72,584		59,847		After 5 years through 10 years	71,033		56,861
After 10 years	After 10 years	164,092		129,199		After 10 years	161,580		119,908
Total	Total	$	254,263	$	204,946	Total	$	250,287	$	192,718

Actual maturities may not coincide with scheduled maturities as certain securities contain early redemption features and/or allow for the prepayment of obligations.

Held-to-Maturity Securities

Held-to-maturity securities at ~~June~~September 30, 2023 and December 31, 2022 totaled ~~$24~~$25 million and $22 million, respectively. Held-to-maturity securities primarily consist of highly-liquid government securities with maturities less than two years.

Derivative Instruments

In the normal course of business, we are exposed to the impact of changes in foreign currency exchange rates and interest rates. We limit these risks by following established risk management policies and procedures, including the use of derivatives. We use derivative instruments to limit the effects of currency exchange rate fluctuations on financial results and manage the cost of debt. We do not use derivatives for trading or speculative purposes. Derivative instruments are recorded at fair value and the accounting for changes in fair value depends on the intended use of the derivative, the resulting designation and the effectiveness of the instrument in offsetting the risk exposure it is designed to hedge.

Foreign Exchange Contracts

We may enter into foreign exchange contracts to mitigate the currency risk associated with anticipated inventory purchases between affiliates and from third parties. These contracts are designated as cash flow hedges. The effective portion of the gain or loss on cash flow hedges is included in AOCL in the period that the change in fair value occurs and is reclassified to earnings in the period that the hedged item is recorded in earnings. There were no outstanding contracts associated with these anticipated transactions at ~~June~~September 30, 2023. At December 31, 2022, outstanding contracts associated with these anticipated transactions had a notional value of $1 million.

Interest Rate Swaps

We have interest rate swap agreements with an aggregate notional value of $200 million that are designated as cash flow hedges. The fair value of the interest rate swaps is recorded as a derivative asset or liability at the end of each reporting period with the change in fair value reflected in AOCL.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

The fair value of derivative instruments was as follows:


Designation of Derivatives	Designation of Derivatives	Balance Sheet Location	June 30, 2023		December 31, 2022		Designation of Derivatives	Balance Sheet Location	September 30, 2023		December 31, 2022
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments						Derivatives designated as hedging instruments
Foreign exchange contracts	Foreign exchange contracts	Other current assets and prepayments	$	—	$	15	Foreign exchange contracts	Other current assets and prepayments	$	—	$	15
		Accounts payable and accrued liabilities	—		(23)			Accounts payable and accrued liabilities	—		(23)

Interest rate swaps	Interest rate swaps	Other assets	13,283		15,283		Interest rate swaps	Other assets	11,683		15,283

Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments						Derivatives not designated as hedging instruments
Foreign exchange contracts	Foreign exchange contracts	Other current assets and prepayments	—		464		Foreign exchange contracts	Other current assets and prepayments	—		464
		Accounts payable and accrued liabilities	(1,314)		(1,449)			Accounts payable and accrued liabilities	(715)		(1,449)

		Total derivative assets	$	13,283	$	15,762		Total derivative assets	$	11,683	$	15,762
		Total derivative liabilities	(1,314)		(1,472)			Total derivative liabilities	(715)		(1,472)
		Total net derivative asset	$	11,969	$	14,290		Total net derivative asset	$	10,968	$	14,290

Results of cash flow hedging relationships were as follows:


		Three Months Ended June 30,																Three Months Ended September 30,
		Derivative Gain (Loss) Recognized in AOCL (Effective Portion)				Location of Gain (Loss) (Effective Portion)		Gain (Loss) Reclassified from AOCL to Earnings (Effective Portion)										Derivative Gain (Loss) Recognized in AOCL (Effective Portion)								Location of Gain (Loss) (Effective Portion)		Gain (Loss) Reclassified from AOCL to Earnings (Effective Portion)
Derivative Instrument	Derivative Instrument	2023		2022			2023			2022		Derivative Instrument				2023				2022							2023			2022
Foreign exchange contracts	Foreign exchange contracts	$	—	$	100		Revenue			$	—			$	—		Foreign exchange contracts			$	—			$	134		Cost of sales			$	—			$	80
						Cost of sales		(34)				49
Interest rate swap	Interest rate swap	586		1,717		Interest expense		138				138		Interest rate swap				(1,600)				3,936				Interest expense		137				137
		$	586	$	1,817			$	104			$	187					$	(1,600)			$	4,070					$	137			$	217

		Six Months Ended June 30,																Nine Months Ended September 30,
		Derivative Gain (Loss) Recognized in AOCL (Effective Portion)				Location of Gain (Loss) (Effective Portion)		Gain (Loss) Reclassified from AOCL to Earnings (Effective Portion)										Derivative Gain (Loss) Recognized in AOCL (Effective Portion)								Location of Gain (Loss) (Effective Portion)		Gain (Loss) Reclassified from AOCL to Earnings (Effective Portion)
Derivative Instrument	Derivative Instrument	2023		2022			2023			2022		Derivative Instrument				2023				2022							2023			2022
Foreign exchange contracts	Foreign exchange contracts	$	(25)	$	123		Revenue			$	—			$	—		Foreign exchange contracts			$	(25)			$	257		Cost of sales			$	(33)			$	143
						Cost of sales		(33)				63
Interest rate swap	Interest rate swap	(2,000)		8,927		Interest expense		275				275		Interest rate swap				(3,600)				12,863				Interest expense		412				412
		$	(2,025)	$	9,050			$	242			$	338					$	(3,625)			$	13,120					$	379			$	555

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Nondesignated Derivative Instruments

We also enter into foreign exchange contracts to minimize the impact on earnings from the revaluation of short-term intercompany loans and related interest denominated in a foreign currency. These foreign exchange contracts are not designated as hedging instruments. Accordingly, the revaluation of intercompany loans and interest and the change in fair value of these derivatives are recorded in earnings. All outstanding contracts at ~~June~~September 30, 2023 mature within three months.

The impact on earnings from the change in fair value of these foreign exchange contracts, exclusive of the corresponding impact on earnings from the revaluation of the intercompany loans and related interest, was as follows:


			Three Months Ended June 30,						Three Months Ended September 30,
			Derivative Gain (Loss) Recognized in Earnings						Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument	Derivatives Instrument	Location of Derivative Gain (Loss)	2023		2022		Derivatives Instrument	Location of Derivative Gain (Loss)	2023		2022
Foreign exchange contracts	Foreign exchange contracts	Selling, general and administrative expense	$	5,893	$	(17,769)	Foreign exchange contracts	Selling, general and administrative expense	$	(11,614)	$	(24,116)

			Six Months Ended June 30,						Nine Months Ended September 30,
			Derivative Gain (Loss) Recognized in Earnings						Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument	Derivatives Instrument	Location of Derivative Gain (Loss)	2023		2022		Derivatives Instrument	Location of Derivative Gain (Loss)	2023		2022
Foreign exchange contracts	Foreign exchange contracts	Selling, general and administrative expense	$	7,464	$	(21,183)	Foreign exchange contracts	Selling, general and administrative expense	$	(4,150)	$	(45,299)

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, available-for-sale and held-to-maturity investment securities, accounts receivable, loan receivables, derivative instruments, accounts payable and debt. The carrying value of cash and cash equivalents, held-to-maturity investment securities, accounts receivable, loans receivable, and accounts payable approximate fair value. The fair value of available-for-sale investment securities and derivative instruments are presented above. The fair value of debt is estimated based on recently executed transactions and market price quotations. The inputs used to determine the fair value of debt were classified as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of debt was as follows:


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Carrying value	Carrying value	$	2,149,778	$	2,205,266	Carrying value	$	2,158,128	$	2,205,266
Fair value	Fair value	$	1,744,098	$	1,856,878	Fair value	$	1,804,017	$	1,856,878

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

9. Restructuring Charges and Asset Impairments

In May 2023, we approved a worldwide restructuring plan (the 2023 Plan) designed to improve profitability and cash flow by reducing complexity, streamlining processes, and driving further operational efficiencies. This will be achieved through the elimination of 850-950 positions worldwide in part through ~~the expansion of the Company's shared services activities,~~ further centralization and standardization of processes, including the expansion of our shared services activities, increased automation, and the consolidation or closure ~~and consolidation~~ of select facilities in North America.

~~We expect to eliminate 400-500 positions worldwide.~~ Total charges are expected to be ~~$40~~$60 million-$5070 million, consisting of employee severance and facility consolidation costs. We expect to substantially complete these actions by the end of the first half of 2024.

Activity in our restructuring reserves was as follows:


		2023 Plan		Prior Plan		Total			2023 Plan		Prior Plan		Total
Balance at January 1, 2023	Balance at January 1, 2023	$	—	$	7,647	$	7,647	Balance at January 1, 2023	$	—	$	7,647	$	7,647
Amounts charged to expense	Amounts charged to expense	22,443		3,599		26,042		Amounts charged to expense	39,021		3,599		42,620
Cash payments	Cash payments	(1,637)		(11,246)		(12,883)		Cash payments	(13,906)		(11,246)		(25,152)
Noncash activity	Noncash activity	(1,478)		—		(1,478)		Noncash activity	(8,049)		—		(8,049)
Balance at June 30, 2023		$	19,328	$	—	$	19,328
Balance at September 30, 2023								Balance at September 30, 2023	$	17,066	$	—	$	17,066

Balance at January 1, 2022	Balance at January 1, 2022	$	—	$	5,747	$	5,747	Balance at January 1, 2022	$	—	$	5,747	$	5,747
Amounts charged to expense	Amounts charged to expense	—		8,408		8,408		Amounts charged to expense	—		12,672		12,672
Cash payments	Cash payments	—		(8,255)		(8,255)		Cash payments	—		(11,761)		(11,761)
Noncash activity	Noncash activity	—		(275)		(275)		Noncash activity	—		(1,378)		(1,378)
Balance at June 30, 2022		$	—	$	5,625	$	5,625
Balance at September 30, 2022								Balance at September 30, 2022	$	—	$	5,280	$	5,280

Components of restructuring expense were as follows:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022
2023 Plan Prior Plan Total Prior Plan
Severance $ 20,965 $ — $ 20,965 $ 3,170
Facilities and other 1,478 — 1,478 1,054
Total $ 22,443 $ — $ 22,443 $ 4,224
Six Months Ended June 30, 2023 Six Months Ended June 30, 2022
2023 Plan Prior Plan Total Prior Plan
Severance $ 20,965 $ 3,057 $ 24,022 $ 6,377
Facilities and other 1,478 542 2,020 2,031
Total $ 22,443 $ 3,599 $ 26,042 $ 8,408


	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
	2023 Plan		Prior Plan		Total		Prior Plan
Severance	$	10,007	$	—	$	10,007	$	2,846
Facilities and other	6,571		—		6,571		1,418
Total	$	16,578	$	—	$	16,578	$	4,264

	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
	2023 Plan		Prior Plan		Total		Prior Plan
Severance	$	30,972	$	3,057	$	34,029	$	9,223
Facilities and other	8,049		542		8,591		3,449
Total	$	39,021	$	3,599	$	42,620	$	12,672

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

10. Debt

Total debt consisted of the following:


		Interest rate	June 30, 2023		December 31, 2022			Interest rate	September 30, 2023		December 31, 2022
Notes due March 2024	Notes due March 2024	4.625%	$	214,510	$	236,749	Notes due March 2024	4.625%	$	—	$	236,749
Term loan due March 2026	Term loan due March 2026	SOFR + 2.25%	336,500		351,500		Term loan due March 2026	SOFR + 2.25%	297,500		351,500
Notes due March 2027	Notes due March 2027	6.875%	380,000		396,750		Notes due March 2027	6.875%	380,000		396,750
Notes due March 2028							Notes due March 2028	SOFR + 6.9%	275,000		—
Term loan due March 2028	Term loan due March 2028	SOFR + 4.0%	439,875		442,125		Term loan due March 2028	SOFR + 4.0%	438,750		442,125
Notes due March 2029	Notes due March 2029	7.25%	350,000		350,000		Notes due March 2029	7.25%	350,000		350,000
Notes due January 2037	Notes due January 2037	5.25%	35,841		35,841		Notes due January 2037	5.25%	35,841		35,841
Notes due March 2043	Notes due March 2043	6.70%	425,000		425,000		Notes due March 2043	6.70%	425,000		425,000

Other debt	Other debt		1,817		2,446		Other debt		1,500		2,446
Principal amount	Principal amount		2,183,543		2,240,411		Principal amount		2,203,591		2,240,411
Less: unamortized costs, net	Less: unamortized costs, net		33,765		35,145		Less: unamortized costs, net		45,463		35,145
Total debt	Total debt		2,149,778		2,205,266		Total debt		2,158,128		2,205,266
Less: current portion long-term debt	Less: current portion long-term debt		264,980		32,764		Less: current portion long-term debt		56,533		32,764
Long-term debt	Long-term debt		$	1,884,798	$	2,172,502	Long-term debt		$	2,101,595	$	2,172,502

During the quarter, we issued an aggregate $275 million of senior secured notes. The notes mature in March 2028 and bear interest of SOFR plus 6.9%, payable quarterly. The notes were issued with original issue discount of 3%, and the net proceeds were used to redeem the March 2024 notes and repay $30 million of the term loan due March 2026.

Through ~~June~~September 30, 2023, we purchased an aggregate $39 million of the March 2024 notes and March 2027 notes and recognized a gain of $3 million. Additionally, we made scheduled principal repayments of ~~$17~~$27 million on our term loans. At ~~June~~September 30, 2023, the interest rate on the 2026 Term Loan was ~~7.5% and~~7.7%, the interest rate ofon the 2028 Term Loan was ~~9.2%~~9.4% and the interest rate on the March 2028 notes was 12.3%.

The credit agreement that governs our $500 million secured revolving credit facility and term loans contains financial and non-financial covenants. In June 2023, we amended this credit agreement to provide additional flexibility in managing our capital structure. At ~~June~~September 30, 2023, we were in compliance with all covenants and there were no outstanding borrowings under the revolving credit facility. Borrowings under the revolving credit facility, ~~and~~ term loans and March 2028 notes are secured by assets of the company.

We have outstanding interest rate swaps that effectively convert $200 million of our variable rate debt to fixed rates. In January 2023, the reference rate of the interest rate swaps was amended to align with the secured revolving credit facility. Under the terms of the interest rate swaps, we pay fixed-rate interest of 0.585% and receive variable-rate interest based on one-month SOFR plus 0.1%. The variable interest rates under the term loans and the swaps reset monthly.

The Pitney Bowes Bank (the Bank), a wholly owned subsidiary, is a member of the Federal Home Loan Bank of Des Moines and has access to certain credit products as a funding source known as "advances." As of ~~June~~September 30, 2023, the Bank had yet to apply for any advances.

In July 2023, we issued senior secured notes in an aggregate principal amount of $275 million, pursuant to a private placement. The notes mature in March 2028 and bear interest of SOFR plus 6.9%, payable quarterly, and were issued with original issue discount of 3%. The net proceeds will be used to redeem our March 2024 notes and a portion of our tranche A term loan due March 2026.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

11. Pensions and Other Benefit Programs

The components of net periodic benefit (income) cost were as follows:

Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans
United States Foreign
Three Months Ended Three Months Ended Three Months Ended
June 30, June 30, June 30,
2023 2022 2023 2022 2023 2022
Service cost $ 10 $ 24 $ 194 $ 332 $ 88 $ 179
Interest cost 16,089 11,141 5,334 3,450 1,306 939
Expected return on plan assets (21,613) (17,862) (7,515) (6,809) — —
Amortization of prior service (credit) cost (5) (11) 72 64 — —
Amortization of net actuarial loss (gain) 4,416 8,232 522 1,726 (357) 88
Settlement 314 — — — — —
Net periodic benefit (income) cost $ (789) $ 1,524 $ (1,393) $ (1,237) $ 1,037 $ 1,206
Contributions to benefit plans $ 1,908 $ 1,148 $ 512 $ 392 $ 2,838 $ 3,490
Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans
United States Foreign
Six Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30,
2023 2022 2023 2022 2023 2022
Service cost $ 20 $ 48 $ 388 $ 687 $ 177 $ 358
Interest cost 32,178 22,282 10,556 7,084 2,611 1,879
Expected return on plan assets (43,226) (35,725) (14,859) (14,014) — —
Amortization of prior service (credit) cost (10) (22) 142 132 — —
Amortization of net actuarial loss (gain) 8,833 16,464 1,027 3,547 (713) 175
Settlement 314 — — — — —
Net periodic benefit (income) cost $ (1,891) $ 3,047 $ (2,746) $ (2,564) $ 2,075 $ 2,412
Contributions to benefit plans $ 3,035 $ 2,298 $ 15,545 $ 8,613 $ 6,616 $ 7,648


	Defined Benefit Pension Plans								Nonpension Postretirement Benefit Plans
	United States				Foreign
	Three Months Ended				Three Months Ended				Three Months Ended
	September 30,				September 30,				September 30,
	2023		2022		2023		2022		2023		2022
Service cost	$	11	$	14	$	190	$	291	$	98	$	191
Interest cost	15,440		11,072		5,379		3,270		1,163		884
Expected return on plan assets	(21,280)		(17,586)		(7,575)		(6,423)		—		—

Amortization of prior service (credit) cost	(5)		(11)		72		60		—		—
Amortization of net actuarial loss (gain)	4,209		8,317		525		1,625		(977)		(131)
Settlement	366		350		—		—		—		—
Net periodic benefit (income) cost	$	(1,259)	$	2,156	$	(1,409)	$	(1,177)	$	284	$	944
Contributions to benefit plans	$	2,722	$	2,103	$	491	$	348	$	2,330	$	2,401

	Defined Benefit Pension Plans								Nonpension Postretirement Benefit Plans
	United States				Foreign
	Nine Months Ended				Nine Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,
	2023		2022		2023		2022		2023		2022
Service cost	$	31	$	62	$	578	$	978	$	275	$	549
Interest cost	47,618		33,354		15,935		10,354		3,774		2,763
Expected return on plan assets	(64,506)		(53,311)		(22,434)		(20,437)		—		—

Amortization of prior service (credit) cost	(15)		(33)		214		192		—		—
Amortization of net actuarial loss (gain)	13,042		24,781		1,552		5,172		(1,690)		44
Settlement	680		350		—		—		—		—
Net periodic benefit (income) cost	$	(3,150)	$	5,203	$	(4,155)	$	(3,741)	$	2,359	$	3,356
Contributions to benefit plans	$	5,756	$	4,401	$	16,036	$	8,961	$	8,947	$	10,049

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

12. Income Taxes

The effective tax rate for the three ~~and six~~ months ended ~~June~~September 30, 2023 was ~~6.2%~~25.1%. The effective tax rate for the nine months ended September 30, 2023 was 9.4% and ~~7.8%, respectively, primarily due to~~includes a benefit of $1 million on the $119 million goodwill impairment charge as the majority of this charge is nondeductible.

~~For~~The effective tax rate for the three and nine months ended ~~June~~September 30, 2022, ~~we reported~~ was 45.8% and 5.6%, respectively, and includes a charge of $2 million due to state tax legislation offset by a benefit of $1 million as a result of the finalization and filing of state income tax returns. The effective tax rate for the nine months ended September 30, 2022 also includesa tax benefit of $7$4 million on athe pre-tax ~~loss~~gain of $3$4 million ~~primarily due to~~from the ~~recognition~~sale of ~~a one-time tax benefit from a~~Borderfree as the tax basis adjustment resulting from the Borderfree business being classified as assets held for sale. For the six months ended June 30, 2022, we reported a tax benefit of $3 million on pre-tax income of $22 million primarily due to the benefit related to the Borderfree businesswas higher than book basis and a $1 million benefit associated with the 2019 sale of a business.

As is the case with other large corporations, our tax returns are examined by tax authorities in the U.S. and other global taxing jurisdictions in which we have operations. As a result, it is reasonably possible that the amount of unrecognized tax benefits will decrease in the next 12 months, and this decrease could be up to 15% of our unrecognized tax benefits.

With regard to U.S Federal income tax, the Internal Revenue Service examination of our consolidated U.S. income tax returns for tax years prior to 2019 are closed to audit, but for review of the Tax Cuts and Jobs Act Sec. 965 transition tax. On a state and local level, the company is closed through 2017 in most jurisdictions. For our significant non-U.S. jurisdictions, Canada is closed to examination through ~~2017~~2018 except for a specific issue under current exam. For France, Germany and the U.K., the company is closed through 2019, 2016, and 2020 respectively. We also have other less significant tax filings currently subject to examination.

13. Commitments and Contingencies

From time to time, in the ordinary course of business, we are involved in litigation pertaining to, among other things, contractual rights under vendor, insurance or other contracts; intellectual property or patent rights; equipment, service, payment or other disputes with clients; or disputes with employees. Some of these actions may be brought as a purported class action on behalf of a purported class of customers, employees, or others. Due to uncertainties inherent in litigation, any actions could have an adverse effect on our financial position, results of operations or cash flows; however, in management's opinion, the final outcome of outstanding matters will not have a material adverse effect on our business.

As of ~~June~~September 30, 2023, we have entered into real estate and equipment leases with aggregate payments of ~~$59~~$18 million and terms ranging from three to seven years that have not commenced.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

14. Stockholders’ (Deficit) Equity

Changes in stockholders’ (deficit) equity were as follows:


		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total (deficit) equity			Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total (deficit) equity
Balance at April 1, 2023		$	323,338	$	—	$	5,060,852	$	(819,978)	$	(4,504,248)	$	59,964
Balance at July 1, 2023														Balance at July 1, 2023	$	323,338	$	—	$	4,908,641	$	(807,993)	$	(4,499,473)	$	(75,487)

Net loss	Net loss	—		—		(141,535)		—		—		(141,535)		Net loss	—		—		(12,519)		—		—		(12,519)
Other comprehensive income		—		—		—		11,985		—		11,985
Other comprehensive loss														Other comprehensive loss	—		—		—		(30,078)		—		(30,078)
Dividends paid ($0.05 per common share)	Dividends paid ($0.05 per common share)	—		—		(8,800)		—		—		(8,800)		Dividends paid ($0.05 per common share)	—		—		(8,805)		—		—		(8,805)
Issuance of common stock	Issuance of common stock	—		(2,830)		(1,876)		—		4,775		69		Issuance of common stock	—		(1,206)		(14,878)		—		16,658		574

Stock-based compensation expense	Stock-based compensation expense	—		2,830		—		—		—		2,830		Stock-based compensation expense	—		1,206		—		—		—		1,206

Balance at June 30, 2023		$	323,338	$	—	$	4,908,641	$	(807,993)	$	(4,499,473)	$	(75,487)
Balance at September 30, 2023														Balance at September 30, 2023	$	323,338	$	—	$	4,872,439	$	(838,071)	$	(4,482,815)	$	(125,109)


		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total equity			Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total (deficit) equity
Balance at April 1, 2022		$	323,338	$	—	$	5,141,636	$	(800,330)	$	(4,571,762)	$	92,882
Balance at July 1, 2022														Balance at July 1, 2022	$	323,338	$	—	$	5,137,248	$	(850,053)	$	(4,566,379)	$	44,154

Net income	Net income	—		—		4,336		—		—		4,336		Net income	—		—		5,487		—		—		5,487
Other comprehensive loss	Other comprehensive loss	—		—		—		(49,723)		—		(49,723)		Other comprehensive loss	—		—		—		(55,400)		—		(55,400)
Dividends paid ($0.05 per common share)	Dividends paid ($0.05 per common share)	—		—		(8,625)		—		—		(8,625)		Dividends paid ($0.05 per common share)	—		—		(8,700)		—		—		(8,700)
Issuance of common stock	Issuance of common stock	—		(5,371)		(99)		—		5,383		(87)		Issuance of common stock	—		(5,371)		(6,005)		—		12,188		812

Stock-based compensation expense	Stock-based compensation expense	—		5,371		—		—		—		5,371		Stock-based compensation expense	—		5,371		—		—		—		5,371

Balance at June 30, 2022		$	323,338	$	—	$	5,137,248	$	(850,053)	$	(4,566,379)	$	44,154
Balance at September 30, 2022														Balance at September 30, 2022	$	323,338	$	—	$	5,128,030	$	(905,453)	$	(4,554,191)	$	(8,276)


		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total (deficit) equity			Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total (deficit) equity
Balance at January 1, 2023	Balance at January 1, 2023	$	323,338	$	—	$	5,125,677	$	(835,564)	$	(4,552,798)	$	60,653	Balance at January 1, 2023	$	323,338	$	—	$	5,125,677	$	(835,564)	$	(4,552,798)	$	60,653

Net loss	Net loss	—		—		(149,272)		—		—		(149,272)		Net loss	—		—		(161,791)		—		—		(161,791)
Other comprehensive income		—		—		—		27,571		—		27,571
Dividends paid ($0.10 per common share)		—		—		(17,525)		—		—		(17,525)
Other comprehensive loss														Other comprehensive loss	—		—		—		(2,507)		—		(2,507)
Dividends paid ($0.15 per common share)														Dividends paid ($0.15 per common share)	—		—		(26,330)		—		—		(26,330)
Issuance of common stock	Issuance of common stock	—		(6,075)		(50,239)		—		53,325		(2,989)		Issuance of common stock	—		(7,281)		(65,117)		—		69,983		(2,415)

Stock-based compensation expense	Stock-based compensation expense	—		6,075		—		—		—		6,075		Stock-based compensation expense	—		7,281		—		—		—		7,281

Balance at June 30, 2023		$	323,338	$	—	$	4,908,641	$	(807,993)	$	(4,499,473)	$	(75,487)
Balance at September 30, 2023														Balance at September 30, 2023	$	323,338	$	—	$	4,872,439	$	(838,071)	$	(4,482,815)	$	(125,109)


		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total equity			Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total (deficit) equity
Balance at January 1, 2022	Balance at January 1, 2022	$	323,338	$	2,485	$	5,169,270	$	(780,312)	$	(4,602,149)	$	112,632	Balance at January 1, 2022	$	323,338	$	2,485	$	5,169,270	$	(780,312)	$	(4,602,149)	$	112,632

Net income	Net income	—		—		25,157		—		—		25,157		Net income	—		—		30,644		—		—		30,644
Other comprehensive loss	Other comprehensive loss	—		—		—		(69,741)		—		(69,741)		Other comprehensive loss	—		—		—		(125,141)		—		(125,141)
Dividends paid ($0.10 per common share)		—		—		(17,313)		—		—		(17,313)
Dividends paid ($0.15 per common share)														Dividends paid ($0.15 per common share)	—		—		(26,013)		—		—		(26,013)
Issuance of common stock	Issuance of common stock	—		(12,351)		(39,866)		—		49,216		(3,001)		Issuance of common stock	—		(17,722)		(45,871)		—		61,404		(2,189)

Stock-based compensation expense	Stock-based compensation expense	—		9,866		—		—		—		9,866		Stock-based compensation expense	—		15,237		—		—		—		15,237
Repurchase of common stock	Repurchase of common stock	—		—		—		—		(13,446)		(13,446)		Repurchase of common stock	—		—		—		—		(13,446)		(13,446)
Balance at June 30, 2022		$	323,338	$	—	$	5,137,248	$	(850,053)	$	(4,566,379)	$	44,154
Balance at September 30, 2022														Balance at September 30, 2022	$	323,338	$	—	$	5,128,030	$	(905,453)	$	(4,554,191)	$	(8,276)

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

15. Accumulated Other Comprehensive Loss

Reclassifications out of AOCL were as follows:


		Gain (Loss) Reclassified from AOCL									Gain (Loss) Reclassified from AOCL
		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Cash flow hedges	Cash flow hedges									Cash flow hedges

Cost of sales	Cost of sales	(34)		49		$	(33)	$	63	Cost of sales	—		80		$	(33)	$	143
Interest expense, net	Interest expense, net	138		138		275		275		Interest expense, net	137		137		412		412
Total before tax	Total before tax	104		187		242		338		Total before tax	137		217		379		555
Income tax provision	Income tax provision	26		47		61		83		Income tax provision	34		54		95		138
Net of tax	Net of tax	$	78	$	140	$	181	$	255	Net of tax	$	103	$	163	$	284	$	417

Available-for-sale securities	Available-for-sale securities									Available-for-sale securities
Financing revenue	Financing revenue	$	(1)	$	(4)	$	9	$	(6)	Financing revenue	$	(20)	$	(3)	$	(11)	$	(9)
Selling, general and administrative expense	Selling, general and administrative expense	—		35		—		22		Selling, general and administrative expense	—		64		—		86
Total before tax	Total before tax	(1)		31		9		16		Total before tax	(20)		61		(11)		77
Income tax provision		—		8		2		5
Income tax (benefit) provision										Income tax (benefit) provision	(5)		15		(3)		20
Net of tax	Net of tax	$	(1)	$	23	$	7	$	11	Net of tax	$	(15)	$	46	$	(8)	$	57

Pension and postretirement benefit plans	Pension and postretirement benefit plans									Pension and postretirement benefit plans

Prior service costs	Prior service costs	(67)		(53)		$	(132)	$	(110)	Prior service costs	(67)		(49)		$	(199)	$	(159)
Actuarial losses	Actuarial losses	(4,581)		(10,046)		(9,147)		(20,186)		Actuarial losses	(3,757)		(9,811)		(12,904)		(29,997)
Settlement	Settlement	(314)		—		(314)		—		Settlement	(366)		(350)		(680)		(350)
Total before tax	Total before tax	(4,962)		(10,099)		(9,593)		(20,296)		Total before tax	(4,190)		(10,210)		(13,783)		(30,506)
Income tax benefit	Income tax benefit	(1,223)		(1,870)		(2,365)		(4,331)		Income tax benefit	(1,032)		(2,461)		(3,397)		(6,792)
Net of tax	Net of tax	$	(3,739)	$	(8,229)	$	(7,228)	$	(15,965)	Net of tax	$	(3,158)	$	(7,749)	$	(10,386)	$	(23,714)

Changes in AOCL, net of tax were as follows:


		Cash flow hedges		Available for sale securities		Pension and postretirement benefit plans		Foreign currency adjustments		Total			Cash flow hedges		Available for sale securities		Pension and postretirement benefit plans		Foreign currency adjustments		Total
Balance at January 1, 2023	Balance at January 1, 2023	$	12,503	$	(39,440)	$	(716,056)	$	(92,571)	$	(835,564)	Balance at January 1, 2023	$	12,503	$	(39,440)	$	(716,056)	$	(92,571)	$	(835,564)
Other comprehensive (loss) income before reclassifications		(1,506)		1,957		—		20,080		20,531
Other comprehensive loss before reclassifications												Other comprehensive loss before reclassifications	(2,719)		(4,338)		—		(5,560)		(12,617)
Reclassifications into earnings	Reclassifications into earnings	(181)		(7)		7,228		—		7,040		Reclassifications into earnings	(284)		8		10,386		—		10,110
Net other comprehensive (loss) income	Net other comprehensive (loss) income	(1,687)		1,950		7,228		20,080		27,571		Net other comprehensive (loss) income	(3,003)		(4,330)		10,386		(5,560)		(2,507)
Balance at June 30, 2023		$	10,816	$	(37,490)	$	(708,828)	$	(72,491)	$	(807,993)
Balance at September 30, 2023												Balance at September 30, 2023	$	9,500	$	(43,770)	$	(705,670)	$	(98,131)	$	(838,071)


		Cash flow hedges		Available for sale securities		Pension and postretirement benefit plans		Foreign currency adjustments		Total			Cash flow hedges		Available for sale securities		Pension and postretirement benefit plans		Foreign currency adjustments		Total
Balance at January 1, 2022	Balance at January 1, 2022	$	3,803	$	(6,249)	$	(756,639)	$	(21,227)	$	(780,312)	Balance at January 1, 2022	$	3,803	$	(6,249)	$	(756,639)	$	(21,227)	$	(780,312)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	6,817		(26,554)		—		(65,703)		(85,440)		Other comprehensive income (loss) before reclassifications	9,832		(36,091)		—		(122,122)		(148,381)
Reclassifications into earnings	Reclassifications into earnings	(255)		(11)		15,965		—		15,699		Reclassifications into earnings	(417)		(57)		23,714		—		23,240
Net other comprehensive income (loss)	Net other comprehensive income (loss)	6,562		(26,565)		15,965		(65,703)		(69,741)		Net other comprehensive income (loss)	9,415		(36,148)		23,714		(122,122)		(125,141)
Balance at June 30, 2022		$	10,365	$	(32,814)	$	(740,674)	$	(86,930)	$	(850,053)
Balance at September 30, 2022												Balance at September 30, 2022	$	13,218	$	(42,397)	$	(732,925)	$	(143,349)	$	(905,453)

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

16. Supplemental Financial Statement Information

Activity in the allowance for credit losses on accounts and other receivables and other assets is presented below. See Note 7 for information regarding the allowance for credit losses on finance receivables.


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
Balance at beginning of year	Balance at beginning of year	$	5,864	$	29,179	Balance at beginning of year	$	5,864	$	29,179

Amounts charged to expense	Amounts charged to expense	3,652		5,280		Amounts charged to expense	5,703		5,361
Write-offs, recoveries and other	Write-offs, recoveries and other	(5,299)		(21,763)		Write-offs, recoveries and other	(7,443)		(28,110)
Balance at end of period	Balance at end of period	$	4,217	$	12,696	Balance at end of period	$	4,124	$	6,430

Accounts and other receivables	Accounts and other receivables	$	4,217	$	12,176	Accounts and other receivables	$	4,124	$	5,910
Other assets	Other assets	—		520		Other assets	—		520
Total	Total	$	4,217	$	12,696	Total	$	4,124	$	6,430

Other income, net consisted of the following:

Three Months Ended June 30, Six Months Ended June 30,
2023 2023 2022
(Gain) loss on debt redemption/refinancing $ (228) $ (3,064) $ 4,993
Gain on sale of assets — — (14,372)
Gain on sale of businesses — — (2,522)
Other income, net $ (228) $ (3,064) $ (11,901)


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022		2023		2022
(Gain) loss on debt redemption/refinancing	$	—	$	(3,064)	$	4,993


Gain on sale of assets	—		—		(14,372)
Gain on sale of businesses	(8,398)		—		(10,920)
Other income, net	$	(8,398)	$	(3,064)	$	(20,299)

Supplemental cash flow information is as follows:


		Six Months Ended June 30,				Nine Months Ended September 30,
		2023		2022				2023		2022

Cash interest paid	Cash interest paid	$	75,425	$	64,511		Cash interest paid	$	134,157	$	114,752
Cash income tax payments, net of refunds	Cash income tax payments, net of refunds	$	15,100	$	11,164		Cash income tax payments, net of refunds	$	18,200	$	16,533
Noncash activity	Noncash activity						Noncash activity
Capital assets obtained under capital lease obligations	Capital assets obtained under capital lease obligations	$	1,495	$	14,017		Capital assets obtained under capital lease obligations	$	4,804	$	21,665

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains statements that are forward-looking. We caution readers that any forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Securities Exchange Act of 1934 (Exchange Act) may change based on various factors. Forward-looking statements are based on current expectations and assumptions, which we believe are reasonable; however, such statements are subject to risks and uncertainties, and actual results could differ materially from those projected or assumed in any of our forward-looking statements. Words such as "estimate," "target," "project," "plan," "believe," "expect," "anticipate," "intend" and similar expressions may identify such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Forward-looking statements in this Form 10-Q speak only as of the date hereof, and forward-looking statements in documents that are incorporated by reference speak only as of the date of those documents.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our results of operations, financial condition and forward-looking statements are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Other factors which could cause future financial performance to differ materially from expectations, include, without limitation:

•declining physical mail volumes

•changes in postal regulations or the operations and financial health of posts in the U.S. or other major markets, or changes to the broader postal or shipping markets

•our ability to continue to grow and manage unexpected fluctuations in volumes, gain additional economies of scale and improve profitability within our Global Ecommerce segment

•the loss of some of our larger clients in our Global Ecommerce and Presort Services segments

•the loss of, or significant changes to, United States Postal Service (USPS) commercial programs or our contractual relationships with the USPS or USPS' performance under those contracts

•the impacts on our cost of debt due to recent increases in interest rates and the potential for future interest rate hikes

•declines in demand for our ecommerce services resulting from supply chain delays or interruptions affecting our retail clients, or changes in retail consumer behavior or spending patterns

•changes in international trade policies, including the imposition or expansion of trade tariffs, and other geopolitical risks, including those related to China

•global supply chain issues adversely impacting our third-party suppliers' ability to provide us products and services

•expenses and potential impacts resulting from a breach of security, including cyber-attacks or other comparable events

•changes in labor and transportation availability and costs

•competitive factors, including pricing pressures, technological developments and the introduction of new products and services by competitors

•capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at reasonable costs

•the impacts of inflation and rising prices, higher interest rates and a slow-down in economic activity, including a global recession, or a U.S. government shutdown, to the company, our clients and retail consumers

•changes in foreign currency exchange rates, especially the impact a strengthening U.S. dollar could have on our global operations

•our success at managing customer credit risk

•changes in banking regulations, major bank failures or the loss of our Industrial Bank charter

•changes in tax laws, rulings or regulations

•our success in developing and marketing new products and services and obtaining regulatory approvals, if required

•the continued availability and security of key information technology systems and the cost to comply with information security requirements and privacy laws

•our success at managing relationships and costs with outsource providers of certain functions and operations

•increased environmental and climate change requirements or other developments in these areas

•intellectual property infringement claims

•the use of the postal system for transmitting harmful biological agents, illegal substances or other terrorist attacks

•impact of pandemics (including the lingering effects of COVID-19) and acts of nature on the Company and the services and solutions we offer

Further information about factors that could materially affect us, including our results of operations and financial condition, is contained in Item 1A. "Risk Factors" in our 2022 Annual Report, as supplemented by Part II, Item 1A in this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

OUTLOOK

We earn a larger percentage of our revenue in the fourth quarter as compared to other quarters, primarily driven by increased shipping volumes during the holiday season. We believe we are well-positioned to process the holiday shipping volumes. For the full year 2023, we expect consolidated revenue on a comparable basis (see Factors Affecting Comparability below), to bedecline between 3%-4% and adjusted EBIT margins to remain relatively flat compared to ~~2022, and the percentage of adjusted EBIT growth to outpace revenue performance.~~2022.

Within Global Ecommerce, ~~we anticipate~~revenue growth in ~~Domestic Parcel operations,~~domestic parcel partially ~~offset by continued~~offsets softness in our ~~Cross-border~~cross-border and digital delivery services operations. ~~We anticipate Domestic Parcel margin and profit improvements from higher parcel volumes and the investments we made in our facilities and network. We expect our~~Throughout 2023, cross-border operations ~~to be~~have been adversely impacted by macroeconomic challenges and a reduction in parcel volumes, primarily from two clients, ~~in 2023~~as compared to 2022. We anticipate this revenue trend to continue during the remainder of 2023. We anticipate full year margin and profit improvements in domestic parcel as compared to the prior year; however, these improvements will be more than offset by declines in both cross-border and digital delivery services operations primarily driven by lower volumes.

Presort Services revenue ~~is expected to benefit~~has benefited from pricing actions designed to offset inflationary pressure on ~~costs, a full year of mail~~costs. In addition, incremental volumes from prior year acquisitions and growth in Marketing Mail Flats and Bound Printed Matter volumes, ~~which are expected to~~have offset the impact on revenue from ~~the expected decline in~~lower First Class Mail and Marketing Mail volumes. We expect full year revenue growth compared to 2022 and margin and profit improvements driven by pricing actions and our investments in network management, automation and ~~facilities consolidation.~~higher-throughput sortation equipment.

In SendTech Solutions, ~~we expect~~ revenue growth from new products and our cloud-enabled shipping solutions to partially offset anthe expected decline in mailing related ~~revenues.~~revenues and we expect to see this trend continue through the remainder of the year. Overall segment margins are expected to remain within their historical range.

In May 2023, we approved a worldwide restructuring plan (the 2023 Plan) designed to improve profitability and cash flow by reducing complexity, streamlining operating processes, and ~~drive~~driving further operational efficiencies. We have identified additional actions under the 2023 Plan and are updating our initial estimates. The updated 2023 Plan includes the elimination of ~~400-500~~850-950 positions worldwide in part through further centralization and standardization of processes, including the expansion of our shared services activities, ~~further centralization and standardization of processes,~~ increased automation, and the consolidation or closure ~~and consolidation~~ of select facilities in North America. Total charges are expected to be ~~$40~~$60 million-$~~50 million. Total cash payments are expected to be $20~~70 million, with cash-related charges of $50 million-$3060 million, athe majority of which will be paid ~~in 2023. We expect to substantially complete these actions~~ by the ~~first half~~end of 2024. ~~As a result of the~~The 2023 Plan ~~we expect~~is expected to generate annualized cost savings of ~~$35~~$75 million- ~~$45~~$85 million by the end of 2024. We expect these actions will be substantially completed by the end of the first half of 2024.

Certain factors beyond our control could have adverse impacts on our 2023 results including, but not limited to, reduced consumer spending due to inflationary pressures and rising prices, higher interest rates, downward pricing pressure in the market for shipping services, a slow-down in economic activity, higher fuel and transportation costs and other adverse geopolitical developments, including those related to China. Inflationary pressures and rising prices could put increased pressure on wages, particularly warehouse and transportation employees, and result in higher component costs. Higher fuel and freight costs could also adversely impact our operations. ~~We expect interest expense for 2023 will be about $30 million higher than 2022 due to the recent increases in interest rates and additional increases anticipated in 2023.~~

OVERVIEW OF CONSOLIDATED RESULTS

Factors Affecting Comparability

Certain transactions and changes occurred in 2022 that impact the comparability of our 2023 financial results to the prior periods. These transactions and changes include:

•the sale of our Borderfree cross-border ecommerce solutions business (Borderfree) in July 2022. Accordingly, reported revenue and costs for the ~~three and six~~nine months ended ~~June~~September 30, 2022 include revenue and costs for Borderfree. Net income of Borderfree for these periods was not significant.

•a change in the presentation of revenue for digital delivery services effective October 1, 2022, from a gross basis to a net basis. Accordingly, in 2023, revenue and costs of revenue for certain digital delivery services are reported on a net basis as business services revenue; whereas for the three and ~~six~~nine months ended ~~June~~September 30, 2022, revenue and cost of revenue for these services were reported as business services revenue and cost of business services, respectively. The change primarily impacts our Global Ecommerce ~~business.~~segment.

Constant Currency

In the tables below, we report the change in revenue on a reported basis and a constant currency basis. Constant currency measures exclude the impact of changes in currency exchange rates from the prior period under comparison. We believe that excluding the impacts of currency exchange rates provides investors with a better understanding of the underlying revenue performance. Constant currency change is calculated by converting the current period non-U.S. dollar denominated revenue using the prior year’s exchange rate.

Financial Results Summary - Three and ~~Six~~Nine Months Ended ~~June~~September 30:


		Three Months Ended June 30,									Three Months Ended September 30,
						Favorable/(Unfavorable)									Favorable/(Unfavorable)
		2023		2022		Actual % Change		Constant Currency % change			2023		2022		Actual % Change		Constant Currency % change
Total revenue	Total revenue	$	776,481	$	871,495	(11)	%	(11)	%	Total revenue	$	783,751	$	830,914	(6)	%	(6)	%
Total costs and expenses	Total costs and expenses	927,431		874,185		(6)	%			Total costs and expenses	800,455		820,785		2	%
Loss before taxes		(150,950)		(2,690)		>(100%)
Benefit for income taxes		(9,415)		(7,026)		34	%
(Loss) income before taxes										(Loss) income before taxes	(16,704)		10,129		>(100%)
(Benefit) provision for income taxes										(Benefit) provision for income taxes	(4,185)		4,642		>(100%)
Net (loss) income	Net (loss) income	$	(141,535)	$	4,336	>(100%)				Net (loss) income	$	(12,519)	$	5,487	>(100%)

Revenue decreased ~~$95~~$47 million in the ~~second~~third quarter of 2023 compared to the prior year primarily due to a decrease in business services revenue of ~~$78~~$34 million, lower equipment sales of ~~$11~~$7 million and lower support services revenue of $4$6 million.

Total costs and expenses ~~increased $53~~decreased $20 million compared to the prior year primarily due to:

•Costs of revenue (excluding financing interest expense) decreased ~~$80~~$44 million primarily due to lower cost of business services of ~~$67~~$33 million and lower cost of equipment sales of $8 million.

•Selling, general and administrative (SG&A) expense ~~declined $4 million,~~was flat compared to the prior year period primarily driven by lower ~~amortization~~salary expense of $5 million, lower stock-based compensation expense of $4 million and lower credit card fees of ~~$3 million, lower marketing expenses of~~ $2 million, ~~and lower~~which was offset by higher credit loss provision of ~~$2 million, partially offset by incremental proxy solicitation fees of~~ $5 million, ~~and~~ higher variable compensation expense of $4 million and higher professional and outsourcing fees of $2 million.

•Restructuring ~~expense~~charges and asset impairments increased ~~$18~~$12 million compared to the prior year period primarily driven by actions taken ~~in connection with~~under the 2023 Plan.

•~~During the quarter, we recorded a non-cash goodwill impairment charge of $119 million associated with our Global Ecommerce reporting unit. See Note 7 for more information.~~

•Interest expense, net represents interest on our outstanding debt, net of interest income. We allocate a portion of ~~total~~gross interest expense to financing interest expense based on our effective interest rate and average finance receivables for the period. Total interest expense, net, for the third quarter of 2023, including financing interest expense, ~~for the second quarter of 2023~~ increased $4$6 million compared to the prior year period primarily due to ~~rising interest rates resulting in~~ higher interest ~~expense on our debt of $7 million, partially offset by higher interest income of $3 million.~~rates.

The effective tax rate for the three months ended ~~June~~September 30, 2023 was ~~6.2%, primarily due to the nondeductibility of the goodwill impairment charge.~~25.1%. See Note 12 for more information.

Net loss for the ~~second~~third quarter was ~~$142~~$13 million compared to net income of $4$5 million in the prior year period.


		Six Months Ended June 30,									Nine Months Ended September 30,
						Favorable/(Unfavorable)									Favorable/(Unfavorable)
		2023		2022		Actual % Change		Constant Currency % change			2023		2022		Actual % Change		Constant Currency % change
Total revenue	Total revenue	$	1,611,019	$	1,798,437	(10)	%	(10)	%	Total revenue	$	2,394,770	$	2,629,351	(9)	%	(9)	%
Total costs and expenses	Total costs and expenses	1,772,956		1,776,103		—	%			Total costs and expenses	2,573,411		2,596,888		1	%
(Loss) income before taxes	(Loss) income before taxes	(161,937)		22,334		>(100%)				(Loss) income before taxes	(178,641)		32,463		>(100%)
Benefit for income taxes		(12,665)		(2,823)		>100%
(Benefit) provision for income taxes										(Benefit) provision for income taxes	(16,850)		1,819		>100%
Net (loss) income	Net (loss) income	$	(149,272)	$	25,157	>(100%)				Net (loss) income	$	(161,791)	$	30,644	>(100%)

Revenue decreased ~~$187~~$235 million in the first ~~half~~nine months of 2023 compared to the prior year primarily due to a decrease in business services revenue of ~~$152~~$186 million, lower equipment sales of ~~$17~~$24 million and lower support services revenue of ~~$9 million and lower financing revenue of $6~~$15 million.

Total costs and expenses decreased $3$23 million compared to the prior year primarily due to:

•Costs of revenue (excluding financing interest expense) decreased ~~$144~~$187 million primarily due to lower cost of business services of ~~$124~~$157 million and lower cost of equipment sales of ~~$14~~$22 million.

•SG&A expense declined $5 million compared to the prior year period primarily driven by lower credit cards fees of $9 million, lower amortization expense of $8 million, lower stock based compensation expense of $8 million, and lower ~~credit card fees~~marketing expenses of $7$4 million, partially offset by incremental proxy solicitation fees of $11 million, higher variable compensation expense of $9 million and higher credit loss provision of $5 million.

•Restructuring ~~expense~~charges and asset impairments increased ~~$18~~$30 million compared to the prior year period primarily driven by actions taken ~~in connection with~~under the 2023 Plan.

•~~During the second quarter, we recorded a~~A non-cash goodwill impairment charge of $119 million associated with our Global Ecommerce reporting unit.

•Interest expense, net represents interest on our outstanding debt, net of interest income. We allocate a portion of ~~total~~gross interest expense to financing interest expense based on our effective interest rate and average finance receivables for the period. Total interest expense, net for the first nine months of 2023, including financing interest expense, ~~for the first half of 2023~~ increased $7$14 million compared to the prior year period primarily due to ~~rising interest rates resulting in~~ higher interest ~~expense on our debt of $13 million, partially offset by higher interest income of $6 million.~~rates.

•Other income, net declined $9$17 million compared to the prior year period primarily driven by prior year gains of ~~$17~~$25 million from the sale of assets and businesses, partially offset by a favorable year-over-year impact of $8 million associated with the redemption/refinancing of debt.

The effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~7.8%~~9.4%, primarily due to the nondeductibility of the goodwill impairment charge. See Note 12 for more ~~information..~~information.

Net loss for the first ~~half~~nine months of 2023 was ~~$149~~$162 million compared to net income of ~~$25~~$31 million in the prior year period.

SEGMENT RESULTS

Management measures segment profitability and performance by deducting from segment revenue the related costs and expenses attributable to the segment. Segment results exclude interest, taxes, unallocated corporate expenses, restructuring charges, and other items not allocated to a business segment.

Global Ecommerce

Global Ecommerce includes the revenue and related expenses from business to consumer logistics services for domestic and cross-border delivery, returns and fulfillment. Our domestic parcel services provide retailers domestic parcel delivery and returns services for its end consumers through our nationwide parcel sortation centers and transportation network. Our cross-border services offers our clients a range of services to manage their international shopping and parcel shipping experience. Using our digital delivery services, clients can purchase postage, print shipping labels and access shipping and tracking services from multiple carriers. Delivery and return parcels using our digital delivery services are not physically processed through our network.

Financial performance for the Global Ecommerce segment was as follows:


		Three Months Ended June 30,											Three Months Ended September 30,
								Favorable/(Unfavorable)											Favorable/(Unfavorable)
		2023			2022			Actual % Change		Constant Currency % change			2023			2022			Actual % Change		Constant Currency % change
Business Services Revenue	Business Services Revenue	$	312,754		$	393,770		(21)	%	(20)	%	Business Services Revenue	$	313,161		$	354,326		(12)	%	(12)	%
Cost of Business Services	Cost of Business Services	299,072			356,025			16	%			Cost of Business Services	309,240			333,964			7	%
Gross Margin	Gross Margin	13,682			37,745			(64)	%			Gross Margin	3,921			20,362			(81)	%
Gross Margin %	Gross Margin %	4.4		%	9.6		%					Gross Margin %	1.3		%	5.7		%

Selling, general and administrative	Selling, general and administrative	48,678			63,276			23	%			Selling, general and administrative	42,893			53,562			20	%
Research and development	Research and development	3,119			3,294			5	%			Research and development	2,740			1,681			(63)	%
Adjusted segment EBIT	Adjusted segment EBIT	$	(38,115)		$	(28,825)		(32)	%			Adjusted segment EBIT	$	(41,712)		$	(34,881)		(20)	%

Global Ecommerce revenue decreased ~~$81~~$41 million in the ~~second~~third quarter of 2023 compared to the prior year period. The change in revenue presentation for digital delivery services ~~and the sale of Borderfree~~ accounted for ~~$49~~$40 million of this decrease. Cross-border revenue declined ~~$55~~$57 million due to lower volumes, primarily driven by changes in how two of our largest clients access our services, and digital delivery services revenue declined ~~$12 million due to a decrease in the number of shipping labels printed.~~$2 million. These declines were partially offset by domestic parcel delivery revenue growth of ~~$41~~$60 million, driven by an increase in domestic parcel volumes.

Gross margin decreased ~~$24~~$16 million and gross margin percentage decreased to ~~4.4%~~1.3% from ~~9.6%~~5.7% compared to the prior year period. Cross-border services gross margin declined $13 million, primarily due to the decline in volumes. Digital delivery services gross margin declined ~~$5 million primarily due to the decline in the number of shipping labels printed. The sale of Borderfree contributed a decline in gross margin of $4~~$1 million. ~~Offsetting these declines, domestic~~Domestic parcel delivery services gross margin ~~increased $1~~decreased $2 million ~~compared to the prior year~~ primarily due to ~~higher parcel volumes.~~$4 million of one-time costs in the current period related to facility consolidation.

SG&A expenses declined ~~$15~~$11 million compared to the prior year period, primarily due to lower ~~amortization expense of $4 million, lower~~ employee-related expenses of $3$5 million, lower credit card fees of $3$2 million and lower ~~credit loss provision~~amortization expense of $2$1 million.

Adjusted segment EBIT was a loss of ~~$38~~$42 million for the ~~second~~third quarter of 2023 compared to a loss of ~~$29~~$35 million in the prior year period.


		Six Months Ended June 30,											Nine Months Ended September 30,
								Favorable/(Unfavorable)											Favorable/(Unfavorable)
		2023			2022			Actual % Change		Constant Currency % change			2023			2022			Actual % Change		Constant Currency % change
Business Services Revenue	Business Services Revenue	$	661,145		$	812,297		(19)	%	(18)	%	Business Services Revenue	$	974,306		$	1,166,623		(16)	%	(16)	%
Cost of Business Services	Cost of Business Services	625,818			724,493			14	%			Cost of Business Services	935,058			1,058,457			12	%
Gross Margin	Gross Margin	35,327			87,804			(60)	%			Gross Margin	39,248			108,166			(64)	%
Gross Margin %	Gross Margin %	5.3		%	10.8		%					Gross Margin %	4.0		%	9.3		%

Selling, general and administrative	Selling, general and administrative	101,888			124,137			18	%			Selling, general and administrative	144,781			177,700			19	%
Research and development	Research and development	5,760			6,188			7	%			Research and development	8,500			7,868			(8)	%
Adjusted segment EBIT	Adjusted segment EBIT	$	(72,321)		$	(42,521)		(70)	%			Adjusted segment EBIT	$	(114,033)		$	(77,402)		(47)	%

Global Ecommerce revenue decreased ~~$151~~$192 million in the first ~~half~~nine months of 2023 compared to the prior year period. The change in revenue presentation for digital delivery services and the sale of Borderfree accounted for ~~$98~~$139 million of the decrease. Cross-border revenue declined ~~$86~~$143 million due to lower volumes, primarily driven by changes in how two of our largest clients access our services and digital delivery services revenue declined ~~$24~~$26 million due to a decrease in the number of shipping labels printed. These declines were partially offset by domestic parcel delivery revenue growth of ~~$78~~$138 million, driven by an increase in domestic parcel volumes.

Gross margin decreased ~~$52~~$69 million and gross margin percentage decreased to ~~5.3%~~4.0% from ~~10.8%~~9.3% compared to the prior year period. Cross-border services gross margin declined ~~$28~~$41 million, primarily due to the decline in volumes. Digital delivery services gross margin declined ~~$10~~$11 million primarily due to the decline in the number of shipping labels printed. The sale of Borderfree contributed a decline in gross margin of $8 million. ~~Offsetting these declines, domestic~~Domestic parcel delivery services gross margin ~~increased $2 million~~was flat compared to the prior year primarily due to ~~higher~~$4 million of one-time costs in the third quarter related to facility consolidation which offset revenue from increased parcel volumes.

SG&A expenses declined ~~$22~~$33 million compared to the prior year period, primarily due to lower amortization expense of $8$9 million, lower credit card fees of $7$9 million and lower employee-related expenses of $4$8 million.

Adjusted segment EBIT was a loss of ~~$72~~$114 million for the first ~~half~~nine months of 2023 compared to a loss of ~~$43~~$77 million in the prior year period.

Presort Services

We are the largest workshare partner of the USPS and national outsource provider of mail sortation services that allow clients to qualify large volumes of First Class Mail, Marketing Mail, and Marketing Mail Flats and Bound Printed Matter for postal worksharing discounts.

Financial performance for the Presort Services segment was as follows:


		Three Months Ended June 30,											Three Months Ended September 30,
								Favorable/(Unfavorable)											Favorable/(Unfavorable)
		2023			2022			Actual % Change		Constant Currency % change			2023			2022			Actual % Change		Constant Currency % change
Business Services Revenue	Business Services Revenue	$	143,107		$	138,934		3	%	3	%	Business Services Revenue	$	152,451		$	144,824		5	%	5	%
Cost of Business Services	Cost of Business Services	104,068			111,305			7	%			Cost of Business Services	104,685			107,789			3	%
Gross Margin	Gross Margin	39,039			27,629			41	%			Gross Margin	47,766			37,035			29	%
Gross Margin %	Gross Margin %	27.3		%	19.9		%					Gross Margin %	31.3		%	25.6		%

Selling, general and administrative	Selling, general and administrative	18,555			14,730			(26)	%			Selling, general and administrative	18,582			16,438			(13)	%

Other components of net pension and postretirement costs	Other components of net pension and postretirement costs	55			48			(15)	%			Other components of net pension and postretirement costs	60			36			(67)	%
Adjusted segment EBIT	Adjusted segment EBIT	$	20,429		$	12,851		59	%			Adjusted segment EBIT	$	29,124		$	20,561		42	%

Revenue increased $4$8 million ~~driven by~~in the third quarter of 2023 compared to the prior year period as pricing actions to mitigate inflationary pressures on costs ~~which~~ offset the revenue decline driven by a 5% decrease in total mail ~~volumes compared to the prior year quarter.~~volumes. The processing of Marketing Mail Flats and Bound Printed Matter and First Class Mail ~~each~~ contributed revenue increases of $3$5 million ~~which was partially offset by a decline in revenue of $2~~and $4 million, ~~from~~respectively, while the processing of Marketing ~~Mail.~~Mail contributed a revenue decrease of $1 million.

Gross margin increased $11 million and gross margin percentage increased from ~~19.9%~~25.6% to ~~27.3%~~31.3% compared to the prior year ~~period. These margin improvements were~~period driven by ~~pricing actions~~the increase in revenue and investments ~~we made~~ in network management, automation and higher-throughput sortation equipment. Transportation costs declined $5$4 million due to improved network management, ~~and~~which was partially offset by higher production labor costs ~~declined $1 million due to higher mail throughput per labor hour.~~of $2 million.

~~Selling, general and administrative~~SG&A expenses increased $4$2 million, primarily due to higher employee-related expenses of $3$2 million and higher professional fees of $1 million.

Adjusted segment EBIT was ~~$20~~$29 million for the ~~second~~third quarter of 2023 compared to ~~$13~~$21 million in the prior year period.


		Six Months Ended June 30,											Nine Months Ended September 30,
								Favorable/(Unfavorable)											Favorable/(Unfavorable)
		2023			2022			Actual % Change		Constant Currency % change			2023			2022			Actual % Change		Constant Currency % change
Business Services Revenue	Business Services Revenue	$	302,009		$	299,478		1	%	1	%	Business Services Revenue	$	454,460		$	444,302		2	%	2	%
Cost of Business Services	Cost of Business Services	216,564			235,956			8	%			Cost of Business Services	321,249			343,745			7	%
Gross Margin	Gross Margin	85,445			63,522			35	%			Gross Margin	133,211			100,557			32	%
Gross Margin %	Gross Margin %	28.3		%	21.2		%					Gross Margin %	29.3		%	22.6		%

Selling, general and administrative	Selling, general and administrative	38,000			30,943			(23)	%			Selling, general and administrative	56,582			47,380			(19)	%

Other components of net pension and postretirement costs	Other components of net pension and postretirement costs	111			96			(16)	%			Other components of net pension and postretirement costs	171			133			(29)	%
Adjusted segment EBIT	Adjusted segment EBIT	$	47,334		$	32,483		46	%			Adjusted segment EBIT	$	76,458		$	53,044		44	%

Revenue for the first nine months of 2023 increased $3$10 million ~~driven by~~compared to the prior year period as pricing actions to mitigate inflationary pressures on costs ~~which~~ offset the revenue decline driven by a 7% decrease in total mail ~~volumes compared to the prior year period.~~volumes. The processing of Marketing Mail Flats and Bound Printed Matter and First Class Mail contributed a revenue ~~increase~~increases of $6$14 million ~~which was partially offset by a decrease in revenue from~~and $3 million, respectively, while the processing of Marketing Mail contributed to a revenue decrease of $5$7 million.

Gross margin increased ~~$22~~$33 million and gross margin percentage increased from ~~21.2%~~22.6% to ~~28.3%~~29.3% compared to the prior year ~~period. These margin improvements were~~period driven by ~~pricing actions~~higher revenues and investments ~~we made~~ in network management, automation and higher-throughput sortation equipment. Transportation costs declined ~~$10~~$14 million due to improved network management and production labor costs declined $5$3 million due to higher mail throughput per labor hour.

~~Selling, general and administrative~~SG&A expenses increased $7$9 million primarily due to higher employee-related ~~expenses.~~expenses of $8 million and higher professional fees of $1 million.

Adjusted segment EBIT was ~~$47~~$76 million in the first ~~half~~nine months of 2023 compared to ~~$32~~$53 million in the prior year period.

SendTech Solutions

SendTech Solutions provides clients with physical and digital mailing and shipping technology solutions and other applications to help simplify and save on the sending, tracking and receiving of letters, parcels and flats, as well as supplies and maintenance services for these offerings. We offer financing alternatives that enable clients to finance equipment and product purchases, a revolving credit solution that enables clients to make meter rental payments and purchase postage, services and supplies, and an interest-bearing deposit solution to clients who prefer to prepay postage. We also offer financing alternatives that enable clients to finance or lease other manufacturers’ equipment and provide working capital.

Financial performance for the SendTech Solutions segment was as follows:


		Three Months Ended June 30,											Three Months Ended September 30,
								Favorable/(Unfavorable)											Favorable/(Unfavorable)
		2023			2022			Actual % change		Constant Currency % change			2023			2022			Actual % change		Constant Currency % change
Business services	Business services	$	17,636		$	18,774		(6)	%	(6)	%	Business services	$	18,375		$	19,255		(5)	%	(5)	%
Support services	Support services	103,315			107,625			(4)	%	(4)	%	Support services	101,855			107,642			(5)	%	(6)	%
Financing	Financing	66,702			67,298			(1)	%	(1)	%	Financing	68,572			67,757			1	%	1	%
Equipment sales	Equipment sales	79,451			89,986			(12)	%	(11)	%	Equipment sales	76,705			83,528			(8)	%	(8)	%
Supplies	Supplies	36,505			38,245			(5)	%	(4)	%	Supplies	35,695			37,455			(5)	%	(6)	%
Rentals	Rentals	17,011			16,863			1	%	1	%	Rentals	16,937			16,127			5	%	3	%
Total revenue	Total revenue	320,620			338,791			(5)	%	(5)	%	Total revenue	318,139			331,764			(4)	%	(5)	%

Cost of business services	Cost of business services	7,148			9,858			27	%			Cost of business services	8,106			10,668			24	%
Cost of support services	Cost of support services	34,798			37,365			7	%			Cost of support services	33,136			36,357			9	%
Cost of equipment sales	Cost of equipment sales	55,751			63,232			12	%			Cost of equipment sales	52,745			60,125			12	%
Cost of supplies	Cost of supplies	10,826			10,957			1	%			Cost of supplies	10,469			10,470			—	%
Cost of rentals	Cost of rentals	5,084			7,401			31	%			Cost of rentals	4,259			6,211			31	%
Total costs of revenue	Total costs of revenue	113,607			128,813			12	%			Total costs of revenue	108,715			123,831			12	%

Gross margin	Gross margin	207,013			209,978			(1)	%			Gross margin	209,424			207,933			1	%
Gross margin %	Gross margin %	64.6		%	62.0		%					Gross margin %	65.8		%	62.7		%

Selling, general and administrative	Selling, general and administrative	105,423			109,016			3	%			Selling, general and administrative	106,906			107,372			—	%
Research and development	Research and development	4,635			5,481			15	%			Research and development	5,322			5,410			2	%
Other components of pension and post retirement costs	Other components of pension and post retirement costs	(525)			(84)			>100%				Other components of pension and post retirement costs	(565)			(83)			>(100%)
Adjusted Segment EBIT	Adjusted Segment EBIT	$	97,480		$	95,565		2	%			Adjusted Segment EBIT	$	97,761		$	95,234		3	%

SendTech Solutions revenue decreased ~~$18~~$14 million in the ~~second~~third quarter of 2023 compared to the prior year period, primarily driven by lower equipment sales, support services revenue and supplies revenue. Equipment sales declined ~~$11~~$7 million as we are seeing initial leases of some of our advanced technology products expiring and customers opting to extend these leases rather than purchase new equipment. Support services revenue declined $4$6 million primarily due tothe declining meter population and the continuing shift to cloud-enabled ~~products that do not include an annual maintenance agreement option.~~products. Supplies revenue declined $2 million primarily ~~driven by~~due to a declining meter population. Business services revenue decreased $1 million; however, the change in revenue presentation for digital delivery services reduced revenue by $5$4 million. The underlying increase of $4$3 million is primarily due to growth in enterprise shipping subscriptions.

Gross margin ~~decreased $3~~increased $1 million ~~primarily due to the decline in revenue. Gross~~and gross margin percentage increased to ~~64.6%~~65.8% from ~~62.0%~~62.7% compared to the prior year period, primarily due to ~~an improvement~~improvements in business services gross margin due to the growth in revenue, rentals gross margin driven in part by a current period favorable adjustment and support services gross margin driven by a shift away from lower margin ~~clients, and rentals gross margin primarily due to a $2 million prior year unfavorable scrap adjustment.~~clients.

~~Selling, general and administrative~~SG&A expenses ~~decreased $4 million~~were flat compared to the prior year ~~period, primarily driven by lower professional fees of $2 million and lower marketing expenses of $1 million.~~period.

Adjusted segment EBIT was ~~$97~~$98 million in the ~~second~~third quarter of 2023 compared to ~~$96~~$95 million in the prior year period.


		Six Months Ended June 30,											Nine Months Ended September 30,
								Favorable/(Unfavorable)											Favorable/(Unfavorable)
		2023			2022			Actual % change		Constant Currency % change			2023			2022			Actual % change		Constant Currency % change
Business services	Business services	$	33,834		$	37,087		(9)	%	(9)	%	Business services	$	52,209		$	56,342		(7)	%	(7)	%
Support services	Support services	208,599			217,977			(4)	%	(4)	%	Support services	310,454			325,619			(5)	%	(4)	%
Financing	Financing	133,751			139,327			(4)	%	(3)	%	Financing	202,323			207,084			(2)	%	(2)	%
Equipment sales	Equipment sales	162,061			179,282			(10)	%	(9)	%	Equipment sales	238,766			262,810			(9)	%	(9)	%
Supplies	Supplies	75,340			79,306			(5)	%	(4)	%	Supplies	111,035			116,761			(5)	%	(5)	%
Rentals	Rentals	34,280			33,683			2	%	3	%	Rentals	51,217			49,810			3	%	3	%
Total revenue	Total revenue	647,865			686,662			(6)	%	(5)	%	Total revenue	966,004			1,018,426			(5)	%	(5)	%

Cost of business services	Cost of business services	13,816			19,740			30	%			Cost of business services	21,922			30,408			28	%
Cost of support services	Cost of support services	71,330			74,300			4	%			Cost of support services	104,466			110,658			6	%
Cost of equipment sales	Cost of equipment sales	112,466			126,673			11	%			Cost of equipment sales	165,211			186,798			12	%
Cost of supplies	Cost of supplies	21,983			22,431			2	%			Cost of supplies	32,451			32,901			1	%
Cost of rentals	Cost of rentals	10,444			12,668			18	%			Cost of rentals	14,703			18,879			22	%
Total costs of revenue	Total costs of revenue	230,039			255,812			10	%			Total costs of revenue	338,753			379,644			11	%

Gross margin	Gross margin	417,826			430,850			(3)	%			Gross margin	627,251			638,782			(2)	%
Gross margin %	Gross margin %	64.5		%	62.7		%					Gross margin %	64.9		%	62.7		%

Selling, general and administrative	Selling, general and administrative	215,121			219,859			2	%			Selling, general and administrative	322,027			327,230			2	%
Research and development	Research and development	9,678			11,020			12	%			Research and development	15,000			16,430			9	%
Other components of pension and post retirement costs	Other components of pension and post retirement costs	(1,124)			(169)			>100%				Other components of pension and post retirement costs	(1,688)			(252)			>(100%)
Adjusted Segment EBIT	Adjusted Segment EBIT	$	194,151		$	200,140		(3)	%			Adjusted Segment EBIT	$	291,912		$	295,374		(1)	%

SendTech Solutions revenue decreased ~~$39~~$52 million in the first ~~half~~nine months of 2023 compared to the prior year period. Equipment sales declined ~~$17~~$24 million primarily due to customers opting to extend leases of their existing advanced-technology equipment rather than purchase new ~~equipment and lower sales in the first quarter relative to the first quarter of 2022 driven by the timing of installations.~~equipment. Support services revenue declined $9$15 million primarily due to the declining meter population and continuing shift to cloud-enabled ~~products that do not include an annual maintenance agreement option. Financing~~products. Supplies revenue declined $6 million primarily driven by a declining meter population. Financing revenue declined $5 million primarily due to $4$6 million of lower lease extensions and lower late fees of $2 ~~million. Supplies revenue declined $4~~ million, ~~primarily driven~~partially offset by ~~a declining meter population.~~higher investment income of $5 million. Business services revenue decreased $3$4 million; however, the change in revenue presentation for digital delivery services reduced revenue by $8$13 million. The underlying increase of $5$9 million is primarily due to growth in enterprise shipping subscriptions.

Gross margin decreased ~~$13~~$12 million primarily due to the decline in ~~revenue. Gross~~revenue; however, gross margin percentage increased to ~~64.5%~~64.9% from 62.7% compared to the prior year ~~period,~~period. The increase in gross profit percentage was primarily ~~due to an improvement~~driven by improvements in business services gross margin ~~equipment sales gross margin, support services margin gross which was driven by a shift away from low margin clients, and~~due to growth in enterprise shipping subscriptions, rentals gross margin ~~primarily~~ due in part to a $2 million prior year unfavorable scrap ~~adjustment.~~adjustment and a current year favorable adjustment and equipment sales gross margin due to cost management.

~~Selling, general and administrative~~SG&A expenses declined $5 million primarily driven by lower outsourcing and professional ~~fees of $4 million.~~fees.

Adjusted segment EBIT was ~~$194~~$292 million in the first ~~half~~nine months of 2023 compared to ~~$200~~$295 million for the prior year period.

UNALLOCATED CORPORATE EXPENSES

The majority of ~~our~~ operating expenses are recorded directly or allocated to our reportable segments. Operating expenses not recorded directly or allocated to our reportable segments are reported as unallocated corporate expenses. Unallocated corporate expenses primarily represents corporate administrative functions such as finance, marketing, human resources, legal, information technology, and research and development.

Unallocated corporate expenses were as follows:

Three Months Ended June 30,
Favorable/(Unfavorable)
2023 2022 Actual % change
Unallocated corporate expenses $ 47,709 $ 40,761 (17) %


	Three Months Ended September 30,
						Favorable/(Unfavorable)
		2023		2022		Actual % change
Unallocated corporate expenses		$	41,704	$	42,908	3	%

Unallocated corporate expenses for the ~~second~~third quarter of 2023 decreased $1 million compared to the prior year period primarily due to lower professional and outsourcing fees of $3 million and lower marketing expenses of $1 million, partially offset by higher variable compensation expense of $2 million.


	Nine Months Ended September 30,
						Favorable/(Unfavorable)
		2023		2022		Actual % change
Unallocated corporate expenses		$	145,762	$	141,537	(3)	%

Unallocated corporate expenses for the first nine months of 2023 increased $7$4 million compared to the prior year period primarily due to higher variable compensation expense of $4 million ~~higher professional~~ and ~~outsourcing fees of $1 million, and higher insurance costs of $1 million.~~

Six Months Ended June 30,
Favorable/(Unfavorable)
2023 2022 Actual % change
Unallocated corporate expenses $ 104,058 $ 98,595 (6) %

~~Unallocated corporate expenses for the first half of 2023 increased $5 million compared to the prior year period primarily due to~~ higher insurance costs of $2 million, ~~and higher professional and outsourcing fees~~partially offset by lower marketing expenses of $2$3 million.

LIQUIDITY AND CAPITAL RESOURCES

At ~~June~~September 30, 2023, we had cash, cash equivalents and short-term investments of ~~$561~~$579 million, which includes ~~$104~~$117 million held at our foreign subsidiaries used to support the liquidity needs of those subsidiaries. Our ability to maintain adequate liquidity for our operations is dependent upon a number of factors, including ~~our~~ revenue and earnings, our clients' ability to pay their balances on a timely basis, the impacts of changing macroeconomic and geopolitical conditions and our ability to manage costs and improve productivity. At this time, we believe that existing cash and investments, cash generated from operations and borrowing capacity under our $500 million revolving credit facility will be sufficient to fund our cash needs for the next 12 months.

Cash Flow Summary

Changes in cash and cash equivalents were as follows:


		2023		2022		Change			2023		2022		Change
Net cash from operating activities	Net cash from operating activities	$	(39,758)	$	45,694	$	(85,452)	Net cash from operating activities	$	(14,453)	$	9,229	$	(23,682)
Net cash from investing activities	Net cash from investing activities	(60,696)		(27,518)		(33,178)		Net cash from investing activities	(95,436)		16,391		(111,827)
Net cash from financing activities	Net cash from financing activities	(32,553)		(166,504)		133,951		Net cash from financing activities	(2,059)		(136,180)		134,121
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	4,730		(13,455)		18,185		Effect of exchange rate changes on cash and cash equivalents	(337)		(25,273)		24,936
Change in cash and cash equivalents	Change in cash and cash equivalents	$	(128,277)	$	(161,783)	$	33,506	Change in cash and cash equivalents	$	(112,285)	$	(135,833)	$	23,548

Operating Activities

Cash flows from operating activities in 2023 declined ~~$85~~$24 million compared to the prior year period. This decline was driven by lower earnings, higher interest payments of $19 million, higher restructuring payments of $13 million and higher ~~payments~~pension contributions of $7 million, partially offset by higher collections of accounts ~~payable~~receivables and ~~accrued liabilities ($37 million), pension contributions~~finance receivables of $33 million, lower inventory purchases of $12 million, lower prepayments of $19 million due to timing and ~~retiree medical payments ($7 million) and restructuring payments ($5 million).~~changes in other working capital items.

Investing Activities

Cash flows from investing activities for 2023 declined ~~$33~~$112 million compared to the prior year period primarily due to prior year proceeds of ~~$54~~$160 million from the sale of ~~a business~~businesses and our Shelton, Connecticut office building, ~~and lower cash from investment-related activities of $22 million,~~ partially offset by ~~year-over-year cash improvement~~lower payments of ~~$26~~$42 million from settlements of derivative contracts and lower capital expenditures of ~~$10~~$20 million.

Financing Activities

Cash flows from financing activities for 2023 improved $134 million compared to the prior year period primarily due to lower net payments of debt of $71 million, an increase in customer account deposits at the Bank of ~~$68 million, lower net repayments of debt of $53~~$57 million and ~~prior year~~$13 million of common stock repurchases ~~of $13 million.~~in the prior year period.

Financings and Capitalization

During the quarter, we issued an aggregate $275 million of senior secured notes. The notes mature in March 2028 and bear interest of SOFR plus 6.9%, payable quarterly, and were issued with original issue discount of 3%. Net proceeds were used to redeem the March 2024 notes and repay $30 million of the March 2026 term loan.

Through September 30, 2023, we purchased an aggregate $39 million of the March 2024 notes and March 2027 notes ~~in the open market~~ and recognized a gain of $3 million. Additionally, we made scheduled ~~term loan~~ principal repayments of ~~$17 million.~~$27 million on our term loans.

The credit agreement that governs our $500 million secured revolving credit facility and term loans contains financial and non-financial covenants. In June 2023, we amended the credit agreement to provide additional flexibility in managing our capital structure. At ~~June~~September 30, 2023, we were in compliance with all covenants and there were no outstanding borrowings under the revolving credit facility. Borrowings under the revolving credit facility, ~~and~~ term loans and notes due March 2028 are secured by assets of the company.

We have $265 million of debt that is due within the next 12 months, including our March 2024 notes. In July 2023, we issued senior secured notes in an aggregate principal amount of $275 million, pursuant to a private placement. The notes mature in March 2028 and bear interest of SOFR plus 6.9%, payable quarterly, and were issued with original issue discount of 3%. The net proceeds will be used to redeem our March 2024 notes and a portion of our tranche A term loan due March 2026

The Pitney Bowes Bank, a wholly owned subsidiary, is a member of the Federal Home Loan Bank of Des Moines. As a member, the Bank has access to certain credit products as a funding source known as "advances." As of ~~June~~September 30, 2023, the Bank had yet to apply for any advances.

Each quarter, our Board of Directors considers whether to approve the payment of a dividend. Under the terms of the March 2028 note purchase agreement, ~~entered into in July 2023 and the credit agreement, as amended in July 2023,~~ the annual amount of permitted dividend payments is capped at the lesser of $36 million or a maximum dividend yield of 6.25%. In addition, share repurchases would further limit this amount. We currently expect to continue paying a quarterly dividend; however, no assurances can be given.

Contractual Obligations and Off-Balance Sheet Arrangements

At ~~June~~September 30, 2023, we have entered into real estate and equipment leases with aggregate payments of ~~$59~~$18 million and terms ranging from three to seven years that have not commenced. Most of these leases are expected to commence in the ~~third quarter~~first half of ~~2023.~~2024.

At ~~June~~September 30, 2023, there are no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, results of operations or liquidity.

Critical Accounting Estimates

Goodwill

The performance of our Global Ecommerce reporting unit through June 30, 2023, and continuing changes in macroeconomic conditions, was a triggering event causing us to evaluate the Global Ecommerce goodwill for impairment at June 30, 2023. To assess Global Ecommerce goodwill for impairment, we determined the fair value of the Global Ecommerce reporting unit and compared it to the unit's carrying value, including goodwill. We engaged a third-party to assist in the determination of the fair value of the reporting unit. We determined that the reporting unit's estimated fair value was less than its carrying value and recorded a non-cash, pre-tax goodwill impairment charge of $119 million in the second quarter of 2023 to reduce the carrying value of the Global Ecommerce reporting unit to its estimated fair value.

The fair value of the reporting unit was estimated using a discounted cash flow model based on management developed cash flow projections, which included judgements and assumptions related to revenue growth rates, operating margins, operating income, and a discount rate. The judgements and assumptions used to estimate the fair value were inherently subjective and changes in any of the judgements or assumptions could materially affect the determination of fair value and result in an additional impairment charge in the future.

Regulatory Matters

There have been no significant changes to the regulatory matters disclosed in our 2022 Annual Report.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosures made in our 2022 Annual Report.

Item 4: Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably ensure that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding disclosures.

With the participation of our CEO and CFO, management evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) and internal controls over financial reporting as of the end of the period covered by this report. Our CEO and CFO concluded that, as of the end of the period covered by this report, such disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the required time periods. In addition, no changes in internal control over financial reporting occurred during the quarter covered by this report that materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and procedures were effective as of ~~June~~September 30, 2023.

PART II. OTHER INFORMATION

Item 1: Legal Proceedings

See Note 13 to the Condensed Consolidated Financial Statements.

Item 1A: Risk Factors

There were no material changes to the risk factors identified in our 2022 Annual Report.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Equity Securities

There were no purchases of our common stock during the three months ended ~~June~~September 30, 2023. We have remaining authorization to purchase up to $3 million of our common stock.

Item 5: Other Information

~~None~~None.

Item 6: Exhibits


Exhibit Number	Exhibit Number	Description	Exhibit Number in this Form 10-Q	Exhibit Number	Description	Exhibit Number in this Form 10-Q

3(i)(a)				3(i)(a)	Amended and Restated Certificate of Incorporation of Pitney Bowes Inc. (incorporated by reference to Exhibit 3(i)(a) to the Form 8-K filed with the Commission on September 30, 2019)	3(i)(a)
3~~(a)~~	3~~(a)~~	Amended and Restated Certificate of Incorporation of Pitney Bowes Inc. (incorporated by reference to Exhibit 3(i)(a) to the Form 8-K filed with the Commission on September 30, 2019)	3(i)(a)	3~~(a)~~	Pitney Bowes Inc. Amended and Restated By-laws effective May 13, 2013 (incorporated by reference to Exhibit 3 to the Form 8-K filed with the Commission on May 15, 2013)	3
3		Pitney Bowes Inc. Amended and Restated By-laws effective May 13, 2013 (incorporated by reference to Exhibit 3 to the Form 8-K filed with the Commission on May 15, 2013)	3

10.1	10.1	Fifth Amendment, dated as of June 6, 2023, among Pitney Bowes Inc., the subsidiaries of Pitney Bowes Inc. party thereto, the lenders and issuing banks party thereto, and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on June 6, 2023)	10.1	10.1	Sepa ration Agreement and General Release, dated as of September 29, 2023, between Pitney Bowes Inc. and Marc Lautenbach (incorporated by reference to Exhibit 10 .1 to the Form 8-K filed with the Commission on October 2 , 202 3 )	10.1

10.2				10.2	L etter Agreement, dated as of September 29, 2023, between Pitney Bowes Inc. and Jason Dies (incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the Commission on Octobe r 2, 2023)	10.2
10.3				10.3	Note Purchase Agreement , dated as of Ju ly 31 , 2023, by and among Pitney Bowes Inc., the noteholders party thereto and Alter Domus (US) LLC , as noteholder represent ative (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on Ju ly 31 , 2023)	10.3
10.4				10.4	Sixth Amendment, dated as of Ju ly 31 , 2023, among Pitney Bowes Inc., the subsidiaries of Pitney Bowes Inc. party thereto, the lenders and issuing banks party thereto, and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the Commission on Ju ly 31 , 2023)	10.4
10.5				10.5	Pitney Bowes Inc. Key Employees' Incentive P lan (as amended and restated September 11, 2023)	10.5
10.6				10.6	P itney Bowes Senior Executive Severance P olicy (as amended and re stated September 11, 2023)	10.6
10.7				10.7	P itney Bowes Inc. Deferred Incentive Savings Plan (as amended and restated September 11, 2023)	10.7
10.8				10.8	P itney Bowes Executive Equity Deferral Plan (as amended and restated Septembe r 11, 2023)	10.8
10.9				10.9	A mended and Restated Pitney Bowes Inc. 2018 Stock Plan (as amended and restated September 11, 2023)	10.9
10.10				10.10	P itney Bow es Inc. Directors' Stock Plan (as amended and restated September 11, 2023)	10.10
10.11				10.11	P itney Bowes Inc. Deferred Incentive S avings Plan for the Board of D irectors (as amended and restated September 11, 2023)	10.11
10.12				10.12	C ompensation Recoupment Policy of Pitney Bowes Inc. dated Dec ember 1, 2023	10.12
31.1	31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended	31.1	31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended	31.1
31.2	31.2	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended	31.2	31.2	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended	31.2
32.1	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350	32.1	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350	32.1
32.2	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350	32.2	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350	32.2
101.SCH	101.SCH	Inline XBRL Taxonomy Extension Schema Document		101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document		101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF	101.DEF	Inline XBRL Taxonomy Definition Linkbase Document		101.DEF	Inline XBRL Taxonomy Definition Linkbase Document
101.LAB	101.LAB	Inline XBRL Taxonomy Label Linkbase Document		101.LAB	Inline XBRL Taxonomy Label Linkbase Document
101.PRE	101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document		101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document
104	104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL. (included as Exhibit 101).		104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL. (included as Exhibit 101).

* Pursuant to Item 601(a)(5) of Regulation S-K, certain exhibits and schedules have been omitted. The registrant hereby agrees to furnish

supplementally a copy of any omitted attachment to the SEC upon request.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		PITNEY BOWES INC.

Date:	~~August 3,~~November 2, 2023

		/s/ Ana Maria Chadwick

		Ana Maria Chadwick
		Executive Vice President and Chief Financial Officer

		(Duly Authorized Officer and Principal Financial Officer)

		/s/ Joseph R. Catapano

		Joseph R. Catapano
		Vice President and Chief Accounting Officer
		(Duly Authorized Officer and Principal Accounting Officer)