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What changed in PITNEY BOWES INC /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PITNEY BOWES INC /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+202 added−211 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-17)

Top changes in PITNEY BOWES INC /DE/'s 2023 10-K

202 paragraphs added · 211 removed · 139 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeSeasonality A larger percentage of our revenue is earned in the fourth quarter relative to the other quarters, driven primarily by higher shipping volumes during the holiday season. Sales and Services We market our products, solutions and services through a direct and inside sales force, global and regional partner channels, direct mailings and digital channels.
Biggest changeWe provide revolving credit solutions to clients in Canada and the U.K. that enable them to make meter rental payments and purchase postage, services and supplies. Seasonality A larger percentage of our revenue is earned in the fourth quarter relative to the other quarters, driven primarily by higher shipping volumes during the holiday season.
We are also subject to transportation regulations for various parts of our business, customs and trade regulations worldwide related to our cross-border shipping services and regulations concerning data privacy and security for our businesses that use, process and store certain personal, confidential or proprietary data.
We are also subject to transportation regulations for various parts of our business, worldwide customs and trade regulations related to our cross-border shipping services and regulations concerning data privacy and security for our businesses that use, process and store certain personal, confidential or proprietary data.
Employee Engagement and Development We are committed to creating a culture where our employees feel supported and valued. We offer our employees many opportunities to advance their skills, learn new skills and achieve career goals through virtual and in-person development and training programs, professional development initiatives, experiential learning, mentoring and coaching programs and inclusion networks.
Employee Engagement and Development We are committed to creating a culture where our employees feel supported and valued. We offer employees many opportunities to advance their skills, learn new skills and achieve career goals through virtual and in-person development and training programs, professional development initiatives, experiential learning, mentoring and coaching programs and inclusion networks.
Additionally, the growth of alternative communication methods as compared to physical mail continue to grow, which creates competition to mail and also to our offerings that enable clients to use the mail efficiently.
Additionally, the growth of alternative communication methods as compared to physical mail continue to grow, which creates competition to mail and to our offerings that enable clients to use the mail efficiently.
Our Presort Services segment is also subject to regulations of the USPS. The Bank is chartered as an Industrial Bank under the laws of the State of Utah. The Bank and certain company affiliates that provide services to the Bank are subject to the regulations of the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation.
Our Presort Services operations are also subject to USPS regulations. The Bank is chartered as an Industrial Bank under the laws of the State of Utah. The Bank and certain company affiliates that provide services to the Bank are subject to the regulations of the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation.
Increasing regulatory restrictions in response to climate change could also materially affect our costs, especially with respect to transportation. Human Capital Employee Profile We have approximately 11,000 employees, with 81% located in the United States. We also rely on a contingent hourly workforce to supplement our full-time workforce to meet fluctuating demand.
Increasing regulatory restrictions in response to climate change could also materially affect our costs, especially with respect to transportation. Human Capital Employee Profile We have approximately 10,500 employees, with 81% located in the United States. We also rely on a contingent hourly workforce to supplement our full-time workforce to meet fluctuating demand.
We seek to create a high-performance culture that will drive and sustain enhanced value for all our stakeholders. To attract, retain and engage the talent needed, we provide competitive compensation and strive to maintain a diverse, inclusive and safe workplace, with equitable opportunities for growth and development. Our compensation programs are designed to reward performance and contribution.
We seek to create a high-performance culture that will drive and sustain enhanced long-term value for all our shareholders. To attract, retain and engage the talent needed, we provide competitive compensation and strive to maintain a diverse, inclusive and safe workplace, with equitable opportunities for growth and development. Our compensation programs are designed to reward performance and contribution.
Our competitive advantages include our extensive network of presort facilities capable of processing significant volumes and our innovative proprietary technology that provides clients with reliable, secure and precise services and maximum postage discounts. Sending Technology Solutions We face competition from other mail equipment and solutions providers and those that offer online shipping and mailing products and services solutions.
Our competitive advantages include our extensive network capable of processing significant volumes and our innovative proprietary technology that provides clients with reliable, secure and precise services and maximum postage discounts. SendTech Solutions We face competition from other mail equipment and solutions providers and those that offer online shipping and mailing products and services solutions.
In 2022, we processed over 16 billion pieces of mail through our network of operating centers throughout the United States. Using our fully-customized proprietary technology, we provide clients with end-to-end solutions from pick up to delivery into the postal system network, expedited mail delivery and optimal postage savings.
In 2023, we processed over 15 billion pieces of mail through our network of operating centers throughout the United States. Using our fully-customized proprietary technology, we provide clients with end-to-end solutions from pick up to delivery into the postal system network, expedited mail delivery and optimal postage savings.
We also offer fulfillment services, providing pick, pack and ship services for clients through four fulfillment centers co-located within four of our larger parcel sortation centers to facilitate same-day entry into our parcel delivery network. Cross-border services offers a range of services for our clients to choose from to manage their international shopping and shipping experience.
We also offer fulfillment services, providing pick, pack and ship services for clients through three fulfillment centers co-located within parcel sortation centers to facilitate same-day entry into our parcel delivery network. Cross-border services offers a range of services for our clients to manage their international shopping and shipping experience.
Through multiple platforms, we offer employees and candidates varied opportunities to find development opportunities and stay informed about key changes to our business. We also conduct an independent annual employee engagement survey with demonstrated high levels of employee participation.
Through multiple platforms, we offer employees and candidates varied opportunities to find development opportunities and stay informed about key changes to our business. We conduct an independent annual employee engagement survey with demonstrated high levels of employee participation. We benchmark our results against our previous year’s performance, as well as against other high-performing organizations.
Chadwick was employed at GE Capital as President and CEO of GE Capital Global Legacy Solutions. Ms. Chadwick spent over 20 years at GE Capital, where she held several executive positions, including Controller of GE Capital Americas and CFO at GE Capital Energy Financial Services. Mr. Fairweather was appointed Executive Vice President and Chief Innovation Officer in May 2021.
Chadwick spent over 20 years at GE Capital, where she held several executive positions, including Controller of GE Capital Americas and CFO at GE Capital Energy Financial Services. Mr. Fairweather was appointed Executive Vice President and Chief Innovation Officer in May 2021. Prior to this, he was Senior Vice President and Chief Technology Officer, Commerce Services.
The other information found on our website is not part of this or any other report we file with or furnish to the SEC. Information About Our Executive Officers Name Age Title Executive Officer Since Marc B. Lautenbach 61 President and Chief Executive Officer 2012 Daniel J.
The other information found on our website is not part of this or any other report we file with or furnish to the SEC. Information About Our Executive Officers Name Age Title Executive Officer Since Jason C. Dies 54 Interim Chief Executive Officer 2017 Daniel J.
Prior to this, he was Executive Vice President and President, Sending Technology Solutions. There are no family relationships among the above officers. The above officers have served in various executive positions with the company for at least the past five years except as follows: Mr. Zegras was appointed Executive Vice President and President, Global Ecommerce in July 2020.
The above officers have served in various executive positions with the company for at least the past five years except as follows: Mr. Zegras was appointed Executive Vice President and President, Global Ecommerce in July 2020. He joined the company in 2013 as President, Imagitas. Prior to joining the company, Mr.
Each year, we consider the feedback from employees, enhancing our relationship with them. 6 Health and Safety We are committed to providing a safe workplace that protects against and limits personal injury and environmental harm.
We consider the feedback from employees and implement changes where possible and financially prudent. 6 Health and Safety We are committed to providing a safe workplace that protects against and limits personal injury and environmental harm.
Prior to this, he was Senior Vice President and Chief Technology Officer, Commerce Services. He has been a leader in the company's strategic digital transformation and technology initiatives across Design, SaaS, Data Science and Analytics, API Management, Security and Mobility. 7
He has been a leader in the company's strategic digital transformation and technology initiatives across Design, SaaS, Data Science and Analytics, API Management, Security and Mobility. Ms. Pfeiffer was appointed Executive Vice President and President, Presort Services in January 2024.
He joined the company in 2013 as President, Imagitas. Prior to joining the company, Mr. Zegras held several executive leadership positions, including at NBC Universal, Sharecare and Hearst Entertainment. Ms. Chadwick joined the company as Executive Vice President and Chief Financial Officer in January 2021. Prior to joining the company, Ms.
Zegras held several executive leadership positions, including at NBC Universal, Sharecare and Hearst Entertainment. Ms. Chadwick joined the company as Executive Vice President and Chief Financial Officer in January 2021. Prior to joining the company, Ms. Chadwick was employed at the financial services division of General Electric Company as President and CEO of GE Capital Global Legacy Solutions. Ms.
Through our wholly owned subsidiary, The Pitney Bowes Bank (the Bank), we offer our clients in the United States a revolving credit solution that enables them to purchase postage, services and supplies and an interest-bearing deposit solution to clients who prefer to prepay postage.
Through our wholly owned subsidiary, The Pitney Bowes Bank (the Bank), we offer clients located in the United States a revolving credit solution for the purchase of postage, services and supplies and an interest-bearing deposit solution to clients who prepay postage. Additionally, we offer financing alternatives that enable clients to finance or lease other manufacturers’ equipment and provide working capital.
We compete on the basis of technology and innovation, breadth of product offerings, our ability to design and tailor targeted solutions to meet client needs, performance, service and support, price, quality and brand.
Support services are primarily provided under maintenance contracts. 4 Competition Our businesses face competition from large, multinational companies and smaller, more narrowly focused regional and local firms. We compete on the basis of technology and innovation, breadth of product offerings, our ability to design and tailor targeted solutions to meet client needs, performance, service and support, price, quality and brand.
Through these efforts and employee engagement, we have experienced seen significant improvements in our total recordable cases and total recordable incident rates since 2019. Since the inception of the COVID-19 pandemic, we implemented numerous protocols, policies and process changes in our warehouses and offices to ensure the health and safety of our employees, suppliers and the surrounding communities.
Through these efforts and employee engagement, we have experienced significant improvements in our total recordable cases and total recordable incident rates since 2019.
Dies 53 Executive Vice President and Group Executive (1) 2017 Gregg Zegras 55 Executive Vice President and President, Global Ecommerce 2020 Ana Maria Chadwick 51 Executive Vice President and Chief Financial Officer 2021 James Fairweather 51 Executive Vice President, Chief Innovation Officer 2021 (1) Effective January 3, 2023, Mr. Dies was named Executive Vice President and Group Executive.
Goldstein 62 Executive Vice President and Chief Legal Officer and Corporate Secretary 2010 Christoph Stehmann (1) 61 Executive Vice President, International Sending Technology Solutions 2016 Gregg Zegras 56 Executive Vice President and President, Global Ecommerce 2020 Ana Maria Chadwick 52 Executive Vice President and Chief Financial Officer 2021 James Fairweather 52 Executive Vice President, Chief Innovation Officer 2021 Debbie Pfeiffer (2) 63 Executive Vice President and President, Presort Services 2024 Shemin Nurmohamed (3) 52 Executive Vice President and President, Sending Technology Solutions 2024 (1) Effective April 1, 2024, Mr.
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Additionally, we offer financing alternatives that enable clients to finance or lease other manufacturers’ equipment and provide working capital. We provide revolving credit solutions to clients in Canada and the U.K. that enable them to make meter rental payments and purchase postage, services and supplies.
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Sales and Services We market our products, solutions and services through a direct and inside sales force, global and regional partner channels, direct mailings and digital channels. We provide call-center, online and on-site support services for our products and solutions.
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We provide call-center, online and on-site support services for our products and solutions. Support services are primarily provided under maintenance contracts. 4 Competition Our businesses face competition from large, multinational companies and smaller, more narrowly focused regional and local firms.
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Stehmann will be retiring. (2) Effective January 1, 2024, Ms. Pfeiffer was appointed Executive Vice President and President, Presort Services. (3) Effective January 1, 2024, Mrs. Nurmohamed was appointed Executive Vice President and President, Sending Technology Solutions. There are no family relationships among the above officers.
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We benchmark our results against our previous year’s performance, as well as against an external database of high-performing organization, with a particular focus on our strategic enablers and implement changes where possible and financially prudent.
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Prior to this, she was President, Presort Services, Vice President/General Manager of the Columbus and Cincinnati Ohio Operating Centers, Vice President of National Accounts and Vice President Sales & Client Services, Mrs. Nurmohamed was appointed Executive Vice President and President, Sending Technology Solutions in January 2024. She joined the company in 2016 as Vice President, Document Messaging Technologies France.
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All our offices and facilities are open to employees; however, we have adopted a flexible workplace strategy in our offices, allowing employees that can work remotely the opportunity to continue to do so.
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Prior to joining the company, Mrs. Nurmohamed had a 16 year career at IBM as CFO and Sales Director of various business units at the European and global levels. 7
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For those employees that report to an office or facility, we continue to place an emphasis on maintaining a high level of performance while ensuring a safe work environment.
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Goldstein 61 Executive Vice President and Chief Legal Officer and Corporate Secretary 2010 Christoph Stehmann 60 Executive Vice President, International Sending Technology Solutions 2016 Jason C.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

49 edited+12 added−14 removed57 unchanged
Biggest changeOur SendTech Solutions segment relies on third-party suppliers for services and components for our mailing equipment, spare parts, supplies and services and for the hosting of our SaaS offerings. We also rely on third-party suppliers to help us equip our Presort and Ecommerce facilities and to provide us with services related to some of our operations and productivity initiatives.
Biggest changeIf we fail to effectively manage our third-party suppliers, or if their ability to perform were negatively impacted, our business, financial performance and reputation could be adversely affected. Our SendTech Solutions segment relies on third-party suppliers for services and components for our mailing equipment, spare parts, supplies and services and for the hosting of our SaaS offerings.
If our new or future product and service offerings are not approved or there are significant conditions to approval, favorable postage rates are reversed, regulations on our existing products or services are changed, if posts utilize their position in the market or their role as product regulator to limit competition in areas where the posts themselves offer solutions, or if we fall out of compliance with the posts’ regulations, our financial performance could be adversely affected.
If new or future product and service offerings are not approved or there are significant conditions to approval, favorable postage rates are reversed, regulations on existing products or services are changed, posts utilize their position in the market or their role as product regulator to limit competition in areas where the posts themselves offer solutions, or if we fall out of compliance with the posts’ regulations, our financial performance could be adversely affected.
A significant decline in cash flows, noncompliance with any of the covenants under the revolving credit facility, further credit rating downgrades, material capital market disruptions, significant withdrawals by depositors at the Bank, adverse changes to our industrial 12 loan charter or an increase in our credit default swap spread could impact our ability to maintain adequate liquidity, which could impact our ability to provide competitive finance offerings, repay or refinance maturing debt, and fund other strategic or discretionary activities, which could adversely affect our operational and financial performance.
A significant decline in cash flows, noncompliance with any of the covenants under the revolving credit facility, further credit rating downgrades, material capital market disruptions, significant withdrawals by depositors at the Bank, adverse changes to our industrial loan charter or an increase in our credit default swap spread could impact our ability to maintain adequate liquidity, which could impact our ability to provide competitive finance offerings, repay or refinance maturing debt, and fund other strategic or discretionary activities, which could adversely affect our operational and financial performance.
Finally, from a “governance” perspective, if we do not maintain a good governance processes in general or do not satisfy investor stakeholder expectations on ESG, our reputation and attractiveness to portions of the investment community could be adversely affected. Shareholder Activism Risks Our business could be negatively affected as a result of shareholder activism .
Finally, from a “governance” perspective, if we do not 13 maintain good governance processes in general or do not satisfy investor stakeholder expectations on ESG, our reputation and attractiveness to portions of the investment community could be adversely affected. Shareholder Activism Risks Our business could be negatively affected as a result of shareholder activism .
Fluctuations in transportation costs or disruptions to transportation services in our Global Ecommerce or Presort Services segments could adversely affect client satisfaction or our financial performance. In addition to our reliance on the USPS, our Global Ecommerce and Presort Services segments rely upon independent third-party transportation service providers to transport a significant portion of our parcel and mail volumes.
Fluctuations in transportation costs or disruptions to transportation services in our Global Ecommerce or Presort Services segments could adversely affect client satisfaction or our financial performance. In addition to our reliance on the USPS, our Global Ecommerce and Presort Services segments rely upon third-party transportation service providers to transport a significant portion of our parcel and mail volumes.
Our ability to access U.S. capital markets and the associated cost of borrowing is dependent upon our credit ratings and is subject to capital market volatility. Given our current credit rating, we may experience reduced financial or strategic flexibility and higher costs when we do access the U.S. capital markets.
Our ability to access U.S. capital markets and the associated cost of borrowing is dependent upon our credit ratings and is subject to capital market volatility. Given our current credit rating, we may experience reduced financial or strategic 12 flexibility and higher costs when we do access the U.S. capital markets.
Some of our providers may also be our competitors. The use of these providers is subject to risks, including our ability to negotiate acceptable terms, increased competition during peak periods, capacity issues, performance problems, extreme weather, natural or man-made disasters, pandemics, increased fuel costs, labor shortages or disputes and other unforeseen difficulties.
Some of these providers may also be competitors. The use of these providers is subject to risks, including our ability to negotiate acceptable terms, increased competition during peak periods, capacity issues, increased fuel costs, labor shortages, performance problems, extreme weather, natural or man-made disasters, pandemics, or other unforeseen difficulties.
Given our continued reliance upon these providers, any disruption to the timely supply of these services for any reason, any future unforeseen disruptions affecting these providers, any dramatic increase in the cost of these services or any deterioration of the performance of these services (each of which we have experienced, at times),have adversely affected or could adversely affect client satisfaction and our financial performance.
Given our continued reliance upon these providers, any disruption to the timely supply of these services, any future unforeseen disruptions affecting these providers, any dramatic increase in the cost of these services or any deterioration of the performance of these services (each of which we have experienced, at times), have adversely affected or could adversely affect client satisfaction and our financial performance.
Our business depends on our ability to attract, retain, and engage with, employees at a reasonable cost to meet the needs of our business and to consistently deliver highly differentiated, competitive offerings. The rapid growth of the ecommerce industry has resulted in intense competition for employees in the shipping, transportation, and logistics industry, including drivers and warehouse employees.
Our business depends on our ability to attract, retain, and engage with, employees at a reasonable cost to meet the needs of our business and to consistently deliver highly differentiated, competitive offerings. The rapid growth of the ecommerce industry has resulted in ongoing competition for employees in the shipping, transportation, and logistics industry, including drivers and warehouse employees.
Any significant or perceived weakening of these economies, reduction in business confidence or change in business or consumer spending habits, concerns of a domestic or global recession, rising inflation or interest rates, limited availability of credit, or other macroeconomic events, not within our control, may reduce our client’s demand for shipping and mailing products and services (especially in our Global Ecommerce business, which is subject to cyclical trends in consumer sentiment and spending habits) and thus, negatively affect our financial performance.
Any significant or perceived weakening of these economies, reduction in business confidence or change in business or consumer spending habits, concerns of a domestic or global recession, rising inflation or interest rates, limited availability of credit, or other macroeconomic events (including public health crises), not within our control, may reduce our client’s demand for shipping and mailing products and services (especially in our Global Ecommerce business, which is subject to cyclical trends in consumer sentiment and spending habits) and thus, negatively affect our financial performance.
Although our 2022 financial results were not significantly impacted, these factors, at times, caused us to experience longer wait times for supplies or increased costs.
Although our 2023 financial results were not significantly impacted, these factors, at times, caused us to experience longer wait times for supplies or increased costs.
An accelerated or sudden decline could result from one or more of the following factors: changes in communication technologies and their use; changes in frequency and quality of mail delivery from national posts; legislation incentivizing alternative means of communication, burdening mail, or limiting how the mail be used; or pandemics or other external events affecting physical mail delivery.
An accelerated or sudden decline could result from one or more of the following factors: changes in communication technologies and their use; changes in frequency and quality of mail delivery from national posts; legislation incentivizing alternative means of communication, burdening mail, or limiting how the mail be used; significant rate increases; or other external events affecting physical mail delivery.
Dollar relative to currencies in the countries where we do the most business continues to impact our client’s ability to compete internationally as the cost of similar international products improved relative to the cost of U.S. retailer’s products. This in turn, adversely affected Global Ecommerce’s revenue and profitability during 2022.
Dollar relative to currencies in the countries where we do the most business continues to impact our client’s ability to compete internationally as the cost of similar international products improved relative to the cost of U.S. retailer’s products. This in turn, adversely affected Global Ecommerce’s revenue and profitability during the past two years.
In the United States, several states have enacted different laws regarding personal information and privacy that impose significant new requirements on consumer personal information. In some instances (e.g., California), these laws also expand the definition of consumer personal information to include information related to employees and business contacts.
In the United States, a growing number of states have enacted different laws regarding personal information and privacy that impose significant new requirements on consumer personal information. In some instances (e.g., California), these laws also expand the definition of consumer personal information to include information related to employees and business contacts.
We supplement our workforce with contingent hourly workers from staffing agencies on an as-needed basis; however, if we experience labor shortages, do not effectively manage our use of contingent workers, or if our staffing agencies chose to terminate their relationship with us and we cannot find alternative providers, it could result in increased costs and adversely affect our operations.
We supplement our workforce with contingent hourly workers from staffing agencies on an as-needed basis; however, if we experience labor shortages, do not effectively manage our ability to attract and utilize contingent workers, or if our staffing agencies terminate their relationship with us and we cannot find alternative providers, it could result in increased costs and adversely affect our operations.
Further, Global Ecommerce's financial results are highly dependent on its performance in the fourth quarter, so if any of these risk factors come to pass in that quarter, impact on the segment's performance could be more significant than other points in the year.
Further, the financial results for Global Ecommerce are highly dependent on its performance in the fourth quarter, so if any of these risk factors come to pass in that quarter, the impact on the segment's performance could be more significant than other times in the year.
If we are not able to respond to the continuing decline in the volume of physical mail delivered via traditional postal services, our financial performance could be adversely affected. Traditional mail volumes have declined and continue to decline and impact our current and future financial results, primarily within our SendTech Solutions and Presort Services segments.
If we are not able to respond to the continuing decline in the volume of physical mail delivered via traditional postal services, our financial performance could be adversely affected. Continuing declines in traditional mail volumes impact our financial results, primarily within our SendTech Solutions and Presort Services segments.
Additional labor costs which may also impact our business include those triggered by regulatory actions; increased health care and workers’ compensation insurance expenses; and costs associated with the health and safety of our employees. Difficulty in obtaining and protecting our intellectual property, and the risks of infringement claims by others may negatively impact our financial performance.
Additional labor costs which may also impact our business include those triggered by federal, state and local laws and regulatory actions; increased health care and workers’ compensation insurance expenses; and costs associated with the health and safety of our employees. 10 Difficulty in obtaining and protecting our intellectual property, and the risk of infringement claims by others may negatively impact our financial performance.
Any of these events could not only affect our financial performance, but also adversely affect our brand and reputation. We may not fully realize the anticipated benefits of strategic acquisitions and divestitures which may harm our financial performance. We may make strategic acquisitions or divest certain businesses.
Any of these events could not only affect our financial performance, but also adversely affect our brand and reputation. We may not fully realize the anticipated benefits of strategic acquisitions and divestitures which may harm our financial performance.
Macroeconomic and General Regulatory Risks Periods of difficult economic conditions, other macroeconomic events, or a public health crisis, such as the ongoing global COVID-19 pandemic, could adversely affect our business. Our operations and financial performance are impacted by the economic conditions in the United States and the other countries where we and our clients do business.
Macroeconomic and General Regulatory Risks Periods of difficult economic conditions, other macroeconomic events, or a public health crisis could adversely affect our business. Our operations and financial performance are impacted by the economic conditions in the United States and the other countries where we and our clients do business.
If one or more government agencies discovers contractual noncompliance by us or one of our subcontractors in the course of an audit or investigation, we may be subject to various civil or criminal penalties and administrative sanctions, which could include the termination of the contract, reimbursement of payments received, fines and debarment from doing business with one or more governments.
If one or more government agency discovers contractual noncompliance by us or one of our subcontractors, we may be subject to various civil or criminal penalties and administrative sanctions, which could include the termination of the contract, reimbursement of payments received, fines and debarment from doing business with other government agencies.
Accordingly, if we cannot continue to grow package volumes, gain additional economies of scale through increasing volumes, lowering our cost per piece and in turn, improve margins and profitability, our short and long-term financial performance may be adversely affected.
Accordingly, if we cannot continue to grow package volumes and gain additional economies of scale, and in turn, improve margins and profitability, our short and long-term financial performance may be adversely affected.
Changes in tax rates, laws or regulations could adversely impact our financial results. We are subject to taxes in the U.S. and in the foreign jurisdictions where we do business. Due to economic and political conditions, tax rates, assessments and enforcement approaches in the U.S. and various foreign jurisdictions have been and may be subject to significant change.
Changes in tax rates, laws or regulations could adversely impact our financial results. We are subject to taxes in the U.S. and in the foreign jurisdictions where we do business. Due to continuing global fiscal challenges and political conditions, tax laws and enforcement approaches have been and may continue to be subject to significant change.
Significant changes to the laws regulating the USPS or other posts, or changes in their operating models could have an adverse effect on our financial performance. As a significant portion of our revenue and earnings is dependent on postal operations, changes in the laws and regulations that affect how posts operate could have an adverse effect on our financial performance.
As a significant portion of our revenue and earnings is dependent on postal operations, changes in the laws and regulations that affect how posts operate could have an adverse effect on our financial performance.
If we are not successful in these new product or service introductions at the levels anticipated when making the investments, or our investments in facilities do not yield the expected productivity improvements, there may be an adverse effect on our financial performance.
We made and are continuing to make significant capital investments in new products and services. If we are not successful in these new product or service introductions, or if our past investments in facilities do not yield the expected productivity improvements, at the levels anticipated when making the investments, there may be an adverse effect on our financial performance.
Our businesses are not materially dependent on any one patent or license or group of related patents and licenses; however, our business success depends in part upon protecting our intellectual property rights, including proprietary technology developed or obtained through acquisitions.
Our businesses are not materially dependent on any one patent or license or group of related patents and licenses; however, our business success depends in part upon protecting our intellectual property rights, including proprietary technology developed or obtained through acquisitions. We rely on copyrights, patents, trademarks, trade secrets and other intellectual property laws to establish and protect our proprietary rights.
Our goal is to prevent meaningful incursions and minimize the overall impact of those that occur. 11 Failure to comply with data privacy and protection laws and regulations could subject us to legal liability and adversely affect our reputation and our financial performance.
Our goal is to prevent meaningful incursions and minimize the overall impact of those that occur. For more information on how the Company handles cybersecurity, see Item 1C. Cybersecurity. Failure to comply with data privacy and protection laws and regulations could subject us to legal liability and adversely affect our reputation and our financial performance.
Additionally, perceived uncertainties as to our future direction as a result of activist stockholders or changes to the composition of our board may lead to the perception of a change in the direction of our business or other instability, which may be exploited by our competitors and/or other activist stockholders and cause concern to our current or potential customers, employees, investors, rating agencies, strategic partners and other constituencies, which could result in lost sales and business opportunities, make it more difficult to attract and retain qualified personnel and business partners and adversely impact our ability to access capital markets at reasonable costs.
Actions by activist stockholders may be exploited by our competitors and/or other activist stockholders, cause concern to customers, employees, investors, rating agencies, strategic partners and other constituencies, which could result in lost sales and business opportunities, make it more difficult to attract and retain qualified personnel and business partners and adversely impact our ability to access capital markets at reasonable costs.
These actions may involve significant risks and uncertainties, which could have an adverse effect on our financial performance, including: • difficulties in achieving anticipated benefits or synergies; • difficulties in integrating newly acquired businesses and operations, including combining product and service offerings and integrating financial reporting and other IT systems; • the loss of key employees or clients of businesses acquired or divested; • significant charges for employee severance and other restructuring costs, legal, accounting and financial advisory fees; • reducing fixed costs previously associated with divested businesses; and • possible goodwill and asset impairment charges as divestitures and changes in our business model may adversely affect the recoverability of certain long-lived assets and valuation of our operating segments.
Strategic acquisitions and business divestitures involve significant risks and uncertainties, which could have an adverse effect on our financial performance, including: • difficulties in achieving anticipated benefits or synergies; • difficulties in integrating newly acquired businesses and operations, including combining product and service offerings and integrating financial reporting and other IT systems; • the loss of key employees or clients of businesses acquired or divested; • significant charges for employee severance and other restructuring costs, legal, accounting and financial advisory fees and goodwill and asset impairment charges; and • reducing fixed costs previously associated with divested businesses Our capital investments to develop new products and offerings may not yield the anticipated benefits.
These economic conditions, at times, have arisen and can arise suddenly, and the duration and full impact of such conditions can be difficult to predict.
These economic conditions, at times, have arisen and can arise suddenly, and the duration and full impact of such conditions can be difficult to predict, which could adversely impact our business, financial condition, and results of operations.
If any of these larger clients or business partners leave our network or reduce their use of our services, which has occurred in the past, and we are unable to replace that lost volume, it could have a material adverse effect on the revenue and profitability of the segment.
If any of these larger clients or business partners leave our network or reduce their use of our services, which has occurred in the past, and we are unable to replace that lost volume, it could have a material adverse effect on the revenue and profitability of the segment. 9 There can be no assurance that our larger clients and business partners will continue to utilize our products or services at current levels, or that we would be able to replace any of these clients or business partners with others who can generate revenue at current levels.
If we fail to comply with government contracting regulations, our financial performance, brand name and reputation could suffer. We have a significant number of contracts with governmental entities. Government contracts are subject to extensive and complex procurement laws and regulations, along with regular audits and investigations by government agencies.
We have a significant number of contracts with governmental entities. Government contracts are subject to extensive and complex procurement laws and regulations, along with regular audits and investigations by government agencies.
Other countries or states may enact laws or regulations in the future that have similar or additional requirements.
Other countries or states have enacted and will continue to enact and amend laws or regulations in the future that have similar or additional requirements.
We value constructive input from investors and regularly engage in dialogue with our stockholders regarding strategy and performance. Our board of directors and management team are committed to acting in the best interests of all of our stockholders.
We value constructive input from investors and regularly engage with our stockholders regarding strategy and performance. Although our Board of Directors and management team are committed to acting in the best interests of all our stockholders, there is no assurance that the results of actions taken by our Board of Directors and management team will be successful.
If we are not successful at meeting the continuing challenges faced in our mailing business, or if physical mail volumes were to experience an accelerated or sudden decline, our financial performance could be adversely affected.
If we are not successful at meeting the continuing challenges faced in our mailing business, or if physical mail volumes experience an accelerated or sudden decline, our financial performance could be adversely affected. Significant changes to the laws regulating the USPS or other posts, or changes in their operating models could have an adverse effect on our financial performance.
As our businesses shift to more digital and shipping-related services, the relative revenue contribution from our shipping-related offerings now exceeds that of the revenue from our mailing-related offerings. We expect the revenue contribution from shipping-related services to continue to grow; however, profit margins on these services are lower than those for our mailing-related offerings.
We expect the revenue contribution from shipping-related services to continue to grow; however, profit margins on these services are lower than those for our mailing-related offerings. As a result, we need to achieve higher dollars of revenue to generate the same dollars of profit that we generate in our mailing businesses.
Future credit rating downgrades or capital market disruptions could adversely affect our ability to maintain adequate liquidity, provide competitive financing services and to fund various discretionary priorities.
Future credit rating downgrades, capital market disruptions, significant decline in cash flows, noncompliance with any of our debt covenants, or significant withdrawals by depositors at the Bank, could adversely affect our ability to maintain adequate liquidity, provide competitive financing services and to fund various discretionary priorities.
The evolution of our businesses to more digital and shipping-related services has resulted in a decline in our overall profit margins. If we cannot increase our volumes while at the same time reduce our costs, our overall profitability could be adversely affected.
If we cannot increase our volumes while at the same time reduce our costs, our overall profitability could be adversely affected. As our businesses shift to more digital and shipping-related services, the relative revenue contribution from our shipping-related offerings now exceeds that of the revenue from our mailing-related offerings.
Although some countries have passed tax laws based on findings from the BEPS project, the final nature, timing and extent of any such tax reforms or other legislative or regulatory actions is unpredictable, and it is difficult to assess their overall effect. These changes could increase our effective tax rate and adversely impact our financial results.
Although some jurisdictions have issued guidance or passed tax laws based on the OECD Model Rules, the final nature, timing and extent of any such tax reforms or other legislative or regulatory actions is unpredictable, and it is difficult to assess their overall effect.
During the past few years, like many other companies, we and our suppliers experienced supply chain interruptions and increased supply costs, due to, among other things, lockdowns associated with COVID-19, disruptions in the container transportation market, volatility in the semiconductor industry, shortage of raw materials such as rubber and resin, threats of rail strikes, rising inflation and geopolitical instability.
Like many other companies, we and our suppliers have experienced interruptions and increased supply costs in the past, due to, among other things, volatility in the semiconductor industry, threats of strikes, rising inflation and geopolitical instability.
Moreover, given the nature of our Global Ecommerce and Presort Services employee base, if we cannot continue to maintain good relationships with those employees resulting in employee dissatisfaction and turnover, our operating costs could significantly increase, and our operational flexibility could be significantly reduced.
Moreover, given the nature of our Global Ecommerce and Presort Services employee base, if we cannot continue to maintain good relationships, we could experience increased employee dissatisfaction and turnover, which could result in increased operating costs and reduced operational flexibility. In May 2023, we approved a worldwide restructuring plan (the 2023 Plan), which involved the elimination of 850-950 positions worldwide.
In response to these attacks, as well as the constantly evolving cyber threat landscape, we continually implement and update measures to enhance our cybersecurity protections and minimize the impact of any future attack. None of these systems are fool proof and like all companies, intrusions will occur, and have occurred, from time to time.
Despite the fact that we continually implement and update measures to enhance our cybersecurity protections and minimize the impact of any potential attack, none of these measures are fool proof and like all companies, intrusions will occur, and have occurred in the past (e.g. the previously disclosed ransomware attacks we experienced 11 in 2019 and 2020).
In certain instances, we rely on single-sourced or limited-sourced suppliers around the world because of advantages in quality, price or lack of alternative sources.
We also rely on third-party suppliers to help us equip our Presort and Ecommerce facilities and to provide us with services related to some of our operations and productivity initiatives. In certain instances, we rely on single-sourced or limited-sourced suppliers around the world because of advantages in quality, price or lack of alternative sources.
In addition, from time to time, third parties may claim that we, our clients, or our suppliers, have infringed their intellectual property 10 rights. These claims, if successful, may require us to redesign affected products, enter into costly settlement or license agreements, pay damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain products.
These claims, if successful, may require us to redesign affected products, enter into costly settlement or license agreements, pay damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain products. If we fail to comply with government contracting regulations, our financial performance, brand name and reputation could suffer.
Our digital delivery business competes with technology providers ranging from large, established companies and national posts to smaller companies offering negotiated carrier rates.
Our digital delivery business competes with technology providers ranging from large, established companies and national posts to smaller companies offering negotiated carrier rates. In addition, our financing operations face competition, in varying degrees, from large, diversified financial institutions, including leasing companies, commercial finance companies and commercial banks, as well as small, specialized firms.
We rely on copyrights, patents, trademarks and trade secrets and other intellectual property laws to establish and protect our proprietary rights. If we are unable to protect our intellectual property rights, our competitive position may suffer, which could adversely affect our revenue and profitability.
If we are unable to protect our intellectual property rights, our competitive position may suffer, which could adversely affect our revenue and profitability. The continued evolution of patent law and the nature of our innovation work may affect the number of patents we are able to receive for our development efforts.
In addition, our financing operations face competition, in varying degrees, from large, diversified financial institutions, including leasing companies, commercial finance companies and commercial banks, as well as small, specialized firms. If we are not able to differentiate ourselves from our competitors or effectively compete with them, the financial results of the segment may be adversely affected.
If we are not able to differentiate ourselves from our competitors or effectively compete with them, the financial results of the segment may be adversely affected. The evolution of our businesses to more digital and shipping-related services has resulted in a decline in our overall profit margins.
The continued evolution of patent law and the nature of our innovation work may affect the number of patents we are able to receive for our development efforts. As we continue to transition our business to more software and service-based offerings, patent protection of these innovations will be more difficult to obtain.
As we continue to transition our business to more software and service-based offerings, patent protection of these innovations will be more difficult to obtain. In addition, from time to time, third parties may claim that we, our clients, or our suppliers, have infringed their intellectual property rights.
The risk of cyberattacks has increased in the past year by cyberwarfare in connection with the ongoing Russia/Ukraine conflict, including proliferation of malware from the conflict into systems unrelated to the conflict. These cyber threats are constantly evolving, thereby increasing the difficulty of preventing, detecting, and successfully defending against them.
These cyber threats are constantly evolving, especially given the advances in, and the rise of the use of, artificial intelligence, thereby increasing the difficulty of preventing, detecting, and successfully defending against them.
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As a result, we need to achieve higher dollars of revenue to generate the same dollars of profit that we generate in our mailing businesses.
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Such actions may cause us to experience a loss of continuity, loss of accumulated knowledge and/or inefficiency, loss of key employees and/or other retention issues during transitional periods. Such actions may also make hiring qualified employees more difficult.
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There can be no assurance that our larger clients and business partners will continue to utilize our products or services at current levels, or that we would be able to replace any of these clients or business partners with others who can generate revenue at current levels. 9 If we fail to effectively manage our third-party suppliers, or if their ability to perform were negatively impacted, our business, financial performance and reputation could be adversely affected.
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Some of these state laws have established independent agencies with rule making and enforcement authority, whose initial guidance, actions, and regulations remain to be determined and tested, adding additional layers of uncertainty with respect to compliance.
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Our capital investments to develop new products and offerings or expand our current operations may not yield the anticipated benefits. We made and are continuing to make significant capital investments in new products, services, and facilities.
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Changes in tax laws may be on a prospective or retroactive basis and could have a material impact of our tax expense and cash flows. The Organization for Economic Co-operation and Development (OECD) have set forth a Two-Pillar Solution fundamentally overhauling the international tax rules.
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We have security systems, procedures, and business continuity plans in place and require our suppliers to have them as well.
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Pillar One focuses on reallocation of profits while Pillar Two applies a global minimum corporate tax. The OECD has set forth Model Rules and an ambitious timeline to ensure the effective implementation of the Two-Pillar Solution.
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These security systems, procedures, and business continuity plans are designed to ensure the continuous and uninterrupted performance of our information technology systems, protect against unauthorized access to information or disruption to our services, and minimize the impact of, and the time to detect, respond, and recover from a breach should one occur.
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However, these changes could result in double tax, increase our effective tax rate and adversely impact our financial results and cash flows. We are subject to tax audits in the various jurisdictions in which we operate.
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Despite the protections we have in place, we have suffered cyber-events in the past, like the 2019 and 2020 ransomware attacks that were previously discussed in Item 7 of our Annual Reports for the periods ended December 31, 2019 and December 31, 2020..
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Given the complexity of the current and changing tax laws and regulations, tax authorities may disagree with certain positions we have taken and assess additional taxes.
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Moreover, while our financial results for the fiscal year 2022 were not significantly impacted by the COVID-19 pandemic, due to variants of the virus that continue to appear, COVID-19, or the emergence of another public health crisis, could also adversely impact our business, financial condition, and results of operations.
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We regularly review the strength of our positions based on current law, court cases, rulings and proposed legislative changes to determine the appropriateness of our tax provision, however, there can be no assurance that we will accurately predict the outcomes of these audits, which could have a material impact on our effective tax rate and adversely impact our financial results and cash flows.
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In addition, changes in tax laws including further regulatory developments arising from U.S. tax reform legislation and/or regulations around the world could result in a tax expense or benefit.
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In 2023, Hestia Capital Partners, LP (collectively with its affiliates, “Hestia”) ran a proxy contest seeking the election of five of its nominees to our Board of Directors at the 2023 annual meeting of stockholders (the “2023 Annual Meeting”).
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For example, in light of continuing global fiscal challenges, various levels of government and international organizations such as the Organization for Economic Co-operation and Development (OECD) and EU are increasingly focused on tax reform and other legislative or regulatory action to increase tax revenue.
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At the 2023 Annual Meeting held on May 9, 2023, our stockholders voted to elect four directors nominated by Hestia to serve on our Board of Directors. Any qualifying stockholder may conduct a proxy contest in the future.
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These tax reform efforts, such as the OECD-led Base Erosion and Profit Shifting project (BEPS), are designed as anti-abuse measures, including a global minimum tax.
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Responding to proxy contests, including related litigation, can be costly, time-consuming, disrupt our operations and divert the attention of management, Board of Directors and employees. All of this could adversely affect our results of operations and financial condition, as well as the market performance of our securities.
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There is no assurance that the actions taken by our board and management in seeking to maintain constructive engagement with certain stockholders will be successful.
Added
Additionally, perceived uncertainties as to our future direction or changes to the composition of our Board of Directors as a result of activist stockholders, may lead to the perception of an adverse change in the direction of our business, instability or lack of management or oversight continuity.
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The company recently received a notice from Hestia Capital Partners, LP (together with its affiliates, “ Hestia ”) of Hestia’s intention to nominate seven director candidates for election to our board at our 2023 annual meeting of stockholders. Hestia has also made public 13 statements critical of our board, management and strategy.
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These uncertainties may be more acute or heightened if an activist stockholder seeks to change a majority of our Board of Directors.
Removed
Responding to Hestia’s actions or potential actions by another activist stockholder could be time-consuming, disrupt our operations and divert the attention of management, our board and our employees. It could also require us to incur substantial legal, communications and other advisory fees and proxy solicitation expenses.
Removed
Further, we may choose to initiate, or may become subject to, litigation as a result of proposals by activist stockholders or proxy contests or matters relating thereto, which would serve as a further distraction to our board of directors and management and could require us to incur significant additional costs.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeManagement believes that our facilities are in good operating condition, materially utilized and adequate for our current business needs. ITEM 3. LEGAL PROCEEDINGS See Note 16 Commitments and Contingencies for additional information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 14 PART II
Biggest changeManagement believes that our facilities are in good operating condition, materially utilized and adequate for our current business needs. ITEM 3. LEGAL PROCEEDINGS See Note 15 Commitments and Contingencies to the Consolidated Financial Statements for additional information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 15 PART II
ITEM 2. PROPERTIES We lease numerous facilities worldwide, including administrative offices, fulfillment centers, parcel operations and mail sortation facilities, service locations, data centers and call centers. Our corporate headquarters is located in Stamford, Connecticut. Our Global Ecommerce segment leases four fulfillment centers that comprise the majority of our fulfillment operations.
ITEM 2. PROPERTIES We lease numerous facilities worldwide, including administrative offices, fulfillment centers, parcel operations and mail sortation facilities, service locations, data centers and call centers. Our corporate headquarters is located in Stamford, Connecticut. Our Global Ecommerce segment leases three fulfillment centers that comprise the majority of our fulfillment operations.
Our Global Ecommerce and Presort Services segments conduct parcel operations and mail sortation operations through a network of over 50 operating centers throughout the United States. Our SendTech Solutions segment leases a manufacturing and distribution facility in Indianapolis. This facility is significant as it stores a majority of the SendTech Solutions products, supplies and inventories.
Our Global Ecommerce and Presort Services segments conduct parcel operations and mail sortation operations through a network of approximately 45 operating centers throughout the United States. Our SendTech Solutions segment leases a manufacturing and distribution facility in Indianapolis. This facility is significant as it stores a majority of the SendTech Solutions products, supplies and inventories.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(formerly Alliance Data Systems Corporation), Avery Dennison Corporation, Cimpress plc, Deluxe Corporation, Diebold Nixdorf, Incorporated, Etsy, Inc., Fidelity National Information Services, Inc., Fiserv, Inc., Hub Group, Inc., NCR Corporation, Overstock.com, Inc., Rockwell Automation, Inc., Ryder System, Inc., Schneider National, Inc., The Western Union Company, W.W. Grainger, Inc. and Xerox Holdings Corporation.
Biggest changeOur peer group for 2023 is comprised of: ACCO Brands Corporation, Avery Dennison Corporation, Cimpress plc, Bread Financial Holdings, Inc., Deluxe Corporation, Diebold Nixdorf, Incorporated, Etsy, Inc., Fidelity National Information Services, Inc., Fiserv, Inc., GXO Logistics, Inc., Hub Group, Inc., NCR Corporation, Overstock.com, Inc., Rockwell Automation, Inc., Ryder System, Inc., Schneider National, Inc., The Western Union Company, W.W.
The accompanying graph shows the annual change in the value of a $100 investment in Pitney Bowes Inc., the Standard and Poor's (S&P) SmallCap 600 Composite Index and our peer group over a five-year period assuming the reinvestment of dividends.
Stock Performance Graph The accompanying graph shows the annual change in the value of a $100 investment in Pitney Bowes Inc., the Standard and Poor's (S&P) SmallCap 600 Composite Index and a peer group over a five-year period assuming the reinvestment of dividends.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is principally traded on the New York Stock Exchange (NYSE) under the symbol "PBI". At January 31, 2023, we had 12,394 common stockholders of record.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is principally traded on the New York Stock Exchange (NYSE) under the symbol "PBI". At January 31, 2024, we had 11,860 common stockholders of record. Dividends and Share Repurchases We have historically paid a quarterly dividend to our shareholders.
On a total return basis, a $100 investment on December 31, 2017, in Pitney Bowes Inc., the S&P SmallCap 600 Composite Index and our peer group would have been worth $44, $133, and $111 respectively, on December 31, 2022.
Grainger, Inc. and Xerox Holdings Corporation. On a total return basis, a $100 investment on December 31, 2018, in Pitney Bowes Inc., the S&P SmallCap 600 Composite Index, and our peer group would have been worth $93, $169 and $144 respectively, on December 31, 2023.
Share Repurchases We periodically repurchase shares of our common stock to manage the dilution created by shares issued under employee stock plans and for other purposes. During 2022, we repurchased 2.8 million shares of our common stock at an aggregate price of $13 million. We did not repurchase any additional shares of our common stock in 2021 or 2020.
We may repurchase shares of our common stock to manage the dilution created by shares issued under employee stock plans and for other purposes. We did not repurchase any additional shares of our common stock in 2023.
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At December 31, 2022, we have authorization from our Board of Directors to repurchase up to of $3 million of our common stock. Stock Performance Graph Our peer group is comprised of: ACCO Brands Corporation, Bread Financial Holdings, Inc.
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Each quarter, our Board of Directors considers our recent and projected earnings and other capital needs and priorities in deciding whether to approve a dividend.
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We expect to continue to pay a quarterly dividend of $0.05 per share; however, our Board of Directors may decide to increase or decrease this amount or to not approve the payment of a dividend at any time.
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Our peer group consists of publicly traded companies similar in size and/or complexity that best align with our current businesses. The composition of our peer group is the result of the Compensation Committee's independent compensation consultant's recommendations. As such, the composition of our peer group could change year-over year.
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Our 2023 peer group was updated from 2022 to include one additional company. The inclusion of this company did not impact the total shareholder return of our peer group.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRevenue Cost of Revenue Gross Margin Years Ended December 31, Years Ended December 31, Years Ended December 31, 2022 2021 Actual % change Constant Currency % change 2022 2021 2022 2021 Business services $ 71,578 $ 58,614 22 % 23 % $ 37,272 $ 25,174 47.9 % 57.1 % Support services 438,191 460,888 (5) % (3) % 147,653 147,716 66.3 % 67.9 % Financing 274,508 294,418 (7) % (5) % 51,789 47,059 81.1 % 84.0 % Equipment sales 354,960 350,138 1 % 4 % 251,916 251,714 29.0 % 28.1 % Supplies 154,186 159,438 (3) % — % 43,537 43,980 71.8 % 72.4 % Rentals 66,256 74,005 (10) % (9) % 24,864 24,427 62.5 % 67.0 % Total $ 1,359,679 $ 1,397,501 (3) % (1) % $ 557,031 $ 540,070 59.0 % 61.4 % Segment EBIT Years Ended December 31, 2022 2021 Actual % change Segment EBIT $ 400,909 $ 429,415 (7) % SendTech Solutions revenue decreased 3% (1% at constant currency) in 2022 compared to 2021.
Biggest changeFinancial performance for the SendTech Solutions segment was as follows: Years Ended December 31, Favorable/(Unfavorable) 2023 2022 Actual % change Constant Currency % change Business services $ 72,144 $ 71,578 1 % 1 % Support services 410,734 438,191 (6) % (6) % Financing 271,197 274,508 (1) % (1) % Equipment sales 323,739 354,960 (9) % (8) % Supplies 147,709 154,186 (4) % (4) % Rentals 67,900 66,256 2 % 2 % Total revenue 1,293,423 1,359,679 (5) % (5) % Cost of business services 29,860 37,272 20 % Cost of support services 136,821 147,653 7 % Cost of equipment sales 222,220 251,916 12 % Cost of supplies 43,140 43,537 1 % Cost of rentals 19,407 24,864 22 % Total costs of revenue 451,448 505,242 11 % Gross margin 841,975 854,437 (1) % Gross margin % 65.1 % 62.8 % Selling, general and administrative 418,213 431,213 3 % Research and development 20,660 22,646 9 % Other components of pension and post retirement costs (2,245) (331) >(100%) Adjusted Segment EBIT $ 405,347 $ 400,909 1 % SendTech Solutions revenue decreased $66 million in 2023 compared to the prior year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and operating results should be read in conjunction with our risk factors, consolidated financial statements and related notes. This discussion includes forward-looking statements based on management's current expectations, estimates and projections and involves risks and uncertainties.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following discussion of our financial condition and operating results should be read in conjunction with our risk factors, consolidated financial statements and related notes. This discussion includes forward-looking statements based on management's current expectations, estimates and projections and involves risks and uncertainties.
We derive the cash flow estimates from our long-term business plans and historical experience. Changes in the estimates and assumptions incorporated in our impairment assessment could materially affect the determination of fair value and the associated impairment charge. Allowances for credit losses Finance receivables are comprised of sales-type leases, secured loans and unsecured revolving loans.
We derive the cash flow estimates from our long-term business plans and historical experience. Changes in 25 the estimates and assumptions incorporated in our impairment assessment could materially affect the determination of fair value and the associated impairment charge. Allowances for credit losses Finance receivables are comprised of sales-type leases, secured loans and unsecured revolving loans.
In general, we would only be liable for the amount of these guarantees in the event of default in the performance of our obligations, the probability of which we believe is remote. 23 Critical Accounting Estimates The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions about certain items that affect the reported amounts of assets, liabilities, revenues, expenses and accompanying disclosures, including the disclosure of contingent assets and liabilities.
In general, we would only be liable for the amount of these guarantees in the event of default in the performance of our obligations, the probability of which we believe is remote. 24 Critical Accounting Estimates The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions about certain items that affect the reported amounts of assets, liabilities, revenues, expenses and accompanying disclosures, including the disclosure of contingent assets and liabilities.
We provide an allowance for probable 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. Total allowance for credit losses as a percentage of finance receivables was 2% at both December 31, 2022 and 2021.
We provide an allowance for probable 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. Total allowance for credit losses as a percentage of finance receivables was 2% at both December 31, 2023 and 2022.
Testing goodwill for impairment requires us to identify our reporting units and assign assets and liabilities, including goodwill, to each reporting unit. The fair value of a reporting unit is based on one or a combination of techniques, which include a discounted cash flow model, multiples of competitors, and/or multiples from sales of like businesses.
Testing goodwill for impairment requires us to identify our reporting units and assign assets and liabilities, including goodwill, to each reporting unit. The fair value of a reporting unit is based on one or a combination of techniques, including a discounted cash flow model, multiples of competitors, and/or multiples from sales of like businesses.
Increases in estimated future residual values are not recognized until the equipment is remarketed. If the actual residual value of leased assets were 10% lower than management's current estimates and considered "other-than-temporary", pre-tax income would be $5 million lower.
Declines in estimated residual values considered "other-than-temporary" are recognized immediately. Increases in estimated future residual values are not recognized until the equipment is remarketed. If the actual residual value of leased assets were 10% lower than management's current estimates and considered "other-than-temporary", pre-tax income would be $5 million lower.
Holding all other assumptions constant, a 0.25% increase in the allowance rate at December 31, 2022 would have reduced pre-tax income by $3 million. Trade accounts receivable are generally due within 30 days after the invoice date.
Holding all other assumptions constant, a 0.25% increase in the allowance rate at December 31, 2023 would have reduced pre-tax income by $3 million. Trade accounts receivable are generally due within 30 days after the invoice date.
Impairment review Goodwill is tested annually for impairment at the reporting unit level during the fourth quarter or sooner if circumstances indicate an impairment may exist. The impairment test for goodwill determines the fair value of each reporting unit and compares it to the reporting unit's carrying value, including goodwill.
Impairment review Goodwill is tested annually for impairment at the reporting unit level at the beginning of the fourth quarter or sooner if circumstances indicate an impairment may exist. The impairment test for goodwill determines the fair value of each reporting unit and compares it to the reporting unit's carrying value, including goodwill.
Legal and Regulatory Matters See Regulatory Matters in Item 1 and Other Tax Matters in Note 15 to the Consolidated Financial Statements for regulatory matters regarding our tax returns and Note 16 to the Consolidated Financial Statements for information regarding our legal proceedings. Foreign Currency Exchange The functional currency for most of our foreign operations is the local currency.
Legal and Regulatory Matters See Regulatory Matters in Item 1 and Other Tax Matters in Note 14 to the Consolidated Financial Statements for regulatory matters regarding our tax returns and Note 15 to the Consolidated Financial Statements for information regarding our legal proceedings. Foreign Currency Exchange The functional currency for most of our foreign operations is the local currency.
A discussion of our financial condition and results of operations for the year ended December 31, 2020, can be found under Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 22, 2022.
A discussion of our financial condition and results of operations for the year ended December 31, 2021, can be found under Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 17, 2023.
During 2022, 13% of our consolidated revenue was from operations outside the United States and the translation of foreign currencies to the U.S. dollar did not have a material impact on revenues or operating results for the year ended December 31, 2022. 26
During 2023, 11% of our consolidated revenue was from operations outside the United States and the translation of foreign currencies to the U.S. dollar did not have a material impact on revenues or operating results for the year ended December 31, 2023. 27
Reserves are adjusted when information becomes available or when an event occurs indicating a change in the reserve is appropriate. Changes in tax reserves could have a material impact on our financial condition or results of operations.
Determining the appropriate level of tax reserves requires judgment regarding the uncertain application of tax laws. Reserves are adjusted when information becomes available or when an event occurs indicating a change in the reserve is appropriate. Changes in tax reserves could have a material impact on our financial condition or results of operations.
Our primary sources of liquidity include existing cash and investments, cash generated from operations and borrowing capacity under our $500 million revolving credit facility. We currently believe these sources of liquidity will be sufficient to fund our cash needs for the next 12 months.
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.
Approximately 65% of this debt is at fixed rates, including the effect of interest rate swaps, and the remaining 35% is at variable rates. The weighted average interest rate of our variable rate debt at December 31, 2022 was 7.5%. We estimate that cash interest payments for the next 12 months will be $170 - $180 million.
Approximately 64% of this debt is at fixed rates, including the effect of interest rate swaps, and the remaining 36% is at variable rates. The weighted average interest rate of our variable rate debt at December 31, 2023 was 9.7%. We estimate that cash interest payments for the next 12 months will be $190 - $200 million.
Net pension expense is also based on a market-related valuation of plan assets where differences between the actual and expected return on plan assets are recognized over a five-year period. Plan benefits for participants in a majority of our U.S. and foreign pension plans are frozen.
Net pension expense is also based on a market-related valuation of plan assets where differences between the actual and expected return on plan assets are recognized over a five-year period.
Lease obligations in the table above do not include $53 million of payments for leases signed but not yet commenced at December 31, 2022. See Note 8 and Note 17 to the Consolidated Financial Statements for further information.
These leases have terms of up to 15 years and include renewal options. Lease obligations in the table above do not include $17 million of payments for leases signed but not yet commenced at December 31, 2023. See Note 6 and Note 16 to the Consolidated Financial Statements for further information.
We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. We have established tax reserves that we believe are appropriate given the possibility of tax adjustments. Determining the appropriate level of tax reserves requires judgment regarding the uncertain application of tax laws.
Significant judgment is required in determining the annual tax rate and in evaluating our tax positions. We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. We have established tax reserves that we believe are appropriate given the possibility of tax adjustments.
At December 31, 2022, we have authorization from our Board of Directors to repurchase up to of $3 million of our common stock. Off Balance Sheet Arrangements At December 31, 2022, we had approximately $26 million outstanding letters of credit guarantees with financial institutions that are primarily issued as security for insurance, leases, customs and other performance obligations.
Off Balance Sheet Arrangements At December 31, 2023, we had approximately $28 million outstanding letters of credit guarantees with financial institutions that are primarily issued as security for insurance, leases, customs and other performance obligations.
Fair value estimates of equipment at the end of the lease term are based on historical renewal experience, used equipment markets, competition and technological changes. We evaluate residual values on an annual basis or sooner if circumstances warrant. Declines in estimated residual values considered "other-than-temporary" are recognized immediately.
Residual value estimates impact the determination of whether a lease is classified as an operating lease or a sales-type lease. Fair value estimates of equipment at the end of the lease term are based on historical renewal experience, used equipment markets, competition and technological changes. We evaluate residual values on an annual basis or sooner if circumstances warrant.
A 0.25% change in the discount rate would impact the projected benefit obligation of the U.S. Plan and U.K. Plan by $24 million and $12 million, respectively. The expected rate of return on plan assets used in the determination of net periodic pension expense for 2022 was 5.1% for the U.S. Plan and 4.0% for the U.K. Plan.
Plan was 5.15% and 4.5%, respectively. A 0.25% change in the discount rate would not materially impact annual pension expense for the U.S. Plan or the U.K. Plan. A 0.25% change in the discount rate would impact the projected benefit obligation of the U.S. Plan and U.K. Plan by $24 million and $13 million, respectively.
Our annual tax rate is based on income, statutory tax rates, tax reserve changes and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining the annual tax rate and in evaluating our tax positions.
Income taxes and valuation allowance We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our annual tax rate is based on income, statutory tax rates, tax reserve changes and tax planning opportunities available to us in the various jurisdictions in which we operate.
We engaged a third-party to assist in the determination of the reporting unit fair value. The fair value 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 discount rate.
T he fair value 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 estimates and assumptions are considered Level 3 inputs under the fair value hierarchy.
Plan by $1 million. Actual pension plan results that differ from our assumptions and estimates are accumulated and amortized primarily over the life expectancy of plan participants and affect future pension expense.
A 0.25% change in the expected rate of return on plan assets would impact annual pension expense for the U.S. Plan by $3 million and the U.K. Plan by $1 million. Actual pension plan results that differ from our assumptions and estimates are accumulated and amortized primarily over the life expectancy of plan participants and affect future pension expense.
The discount rate for our largest plan, the U.S. Qualified Pension Plan (the U.S. Plan) and our largest foreign plan, the U.K. Qualified Pension Plan (the U.K. Plan) used in the determination of net periodic pension expense for 2022 was 2.85% and 1.85%, respectively.
The discount rate for our largest plan, the U.S. Qualified Pension Plan (the U.S. Plan) and our largest foreign plan, the U.K. Qualified Pension Plan (the U.K. Plan) used to determine net periodic pension expense for 2023 was 5.55% and 4.80%, respectively. The discount rate used to determine 2024 net periodic pension expense for the U.S. Plan and the U.K.
Holding all other assumptions constant, a 0.25% increase in the allowance rate at December 31, 2022 would have reduced pre-tax income by $1 million. Income taxes and valuation allowance We are subject to income taxes in the U.S. and numerous foreign jurisdictions.
The allowance for credit losses as a percentage of trade accounts receivables was 2% at both December 31, 2023 and 2022. Holding all other assumptions constant, a 0.25% increase in the allowance rate at December 31, 2023 would have reduced pre-tax income by $1 million.
Within Global Ecommerce, we anticipate growth in Domestic Parcel, partially offset by continued softness in our Cross-border operations. We anticipate Domestic Parcel margin and profit improvements from higher volumes and continued productivity improvements from the investments we made in our facilities and network.
Within Global Ecommerce, we expect revenue growth in domestic parcel services driven by increased volumes, partially offset by lower revenue from cross-border services. We anticipate margin and profit improvements compared to 2023.
For 2023, the expected rate of return on plan assets used in the determination of net periodic pension expense for the U.S. Plan will be 6.5% and the U.K. Plan will be 5.25%. A 0.25% change in the expected rate of return on plan assets would impact annual pension expense for the U.S. Plan by $3 million and the U.K.
The expected rate of return on plan assets used to determine net periodic pension expense for 2023 was 6.5% for the U.S. Plan and 5.26% for the U.K. Plan. The expected rate of return on plan assets used to determine 2024 net periodic pension expense was 6.7% and 5.5% for the U.S. Plan and the U.K. Plan, respectively.
Accordingly, revenue and cost of revenue for certain digital delivery services for the first nine months of 2022 and full year 2021 are reported as business services revenue and cost of business services, respectively, and beginning for the fourth quarter of 2022, the revenue and cost of revenue for these services are reported on a net basis as business services revenue.
Accordingly, in 2023, revenue and costs of revenue for certain digital delivery services are reported on a net basis as business services revenue; whereas in 2022, revenue and cost of revenue for these services through September 30 were reported as business services revenue and cost of business services, respectively. The change primarily impacts our Global Ecommerce segment.
Gross margin percentage in 2022 was consistent with 2021. SendTech Solutions 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 simplify and save on the sending, tracking and receiving of letters, parcels and flats.
Adjusted segment EBIT was $111 million in 2023 compared to $82 million in the prior year. 20 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.
The majority of our SG&A expenses are recorded directly or allocated to our reportable segments. SG&A 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 innovation.
Unallocated corporate expenses primarily represents corporate administrative functions such as finance, marketing, human resources, legal, information technology, and research and development.
Throughout this discussion, we refer to revenue growth on a constant currency basis. Constant currency measures exclude the impact of changes in currency exchange rates from the prior period under comparison and is calculated by converting the current period non-U.S. dollar denominated revenue using the prior year's exchange rate.
Constant 17 currency change is calculated by converting the current period non-U.S. dollar denominated revenue using the prior year’s exchange rate.
Assuming the current $0.05 per quarter dividend payment, we estimate that dividend payments will be approximately $35 million in 2023. There are no material restrictions on our ability to declare dividends. 22 Share Repurchases We may repurchase shares of our common stock to manage the dilution created by shares issued under employee stock plans and for other purposes.
Share Repurchases We may repurchase shares of our common stock to manage the dilution created by shares issued under employee stock plans and for other purposes. We did not repurchase any additional shares of our common stock in 2023.
Offsetting these declines, domestic parcel delivery services contributed revenue growth of 5% compared to the prior year due to pricing actions. Gross margin increased $11 million in 2022 compared to 2021 and gross margin percentage increased to 8.6% from 7.3% compared to the prior year.
These declines were partially offset by domestic parcel delivery revenue growth of $158 million, driven by an increase in domestic parcel volumes. Gross margin decreased $74 million and gross margin percentage decreased to 4.6% from 8.6% compared to the prior year. Cross-border services gross margin declined $52 million, primarily due to the decline in volumes.
Cash Flow Summary The change in cash and cash equivalents is as follows: 2022 2021 Increase/(decrease) Net cash from operating activities $ 175,983 $ 301,515 $ (125,532) Net cash from investing activities (24,269) (155,251) 130,982 Net cash from financing activities (198,083) (330,371) 132,288 Effect of exchange rate changes on cash and cash equivalents (16,130) (4,863) (11,267) Change in cash and cash equivalents $ (62,499) $ (188,970) $ 126,471 Operating activities Cash flows from operating activities in 2022 declined $126 million compared to 2021, primarily due to growth in our trade and finance receivables which reduced year-over-year cash flow by $100 million.
Cash Flow Summary The change in cash and cash equivalents is as follows: 2023 2022 Increase/(decrease) Net cash from operating activities $ 79,468 $ 175,983 $ (96,515) Net cash from investing activities (122,832) (24,269) (98,563) Net cash from financing activities (31,266) (198,083) 166,817 Effect of exchange rate changes on cash and cash equivalents 5,702 (16,130) 21,832 Change in cash and cash equivalents $ (68,928) $ (62,499) $ (6,429) Operating activities Cash flows from operating activities in 2023 declined $97 million compared to the prior year.
Capital expenditures are evaluated and approved by senior leadership based on several factors, including expected impacts on revenue growth, productivity enhancements, service improvements and cost savings. Capital expenditures totaled $125 million and $184 million for the years ended December 31, 2022 and 2021, respectively.
Purchase obligations Purchase obligations include unrecorded open purchase orders for goods and services. In addition to the above known and contractually committed cash payments, we anticipate using cash for the following items: Capital Expenditures Capital expenditures are evaluated and approved by senior leadership based on several factors, including expected impacts on revenue growth, productivity enhancements, service improvements and cost savings.
Residual value of leased assets Equipment residual values are determined at the inception of the lease using estimates of the equipment's fair value at the end of the lease term. Residual value estimates impact the determination of whether a lease is classified as an operating lease or a sales-type lease.
Plan benefits for participants in a majority of our U.S. and foreign pension plans are frozen. 26 Residual value of leased assets Equipment residual values are determined at the inception of the lease using estimates of the equipment's fair value at the end of the lease term.
The results of our annual goodwill impairment test indicated that the fair value of our reporting units exceeded their fair value and no impairment existed. During 2022, we determined that the agreement to sell Borderfree was a triggering event and an impairment test was performed as of July 1, 2022.
The results of our annual impairment test as of the beginning of the fourth quarter for our other reporting units indicated that the fair value of these reporting units exceeded their carrying values and no impairment existed.
Financing activities Cash flows from financing activities for 2022 improved $132 million compared to the prior year primarily due to lower net repayments of debt of $126 million and lower premiums and fees paid to refinance debt of $42 million.
Financing activities Cash flows from financing activities for 2023 improved $167 million compared to the prior year primarily due to lower net cash outflows from debt activity of $68 million, an increase in customer account deposits at the Bank of $90 million and $13 million of common stock repurchases in the prior year.
Segment EBIT is calculated by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges, goodwill impairment charges and other items not allocated to a business segment. Management believes that it provides investors a useful measure of operating performance and underlying trends of the business.
Net loss for 2023 was $386 million compared to net income of $37 million in the prior year. 18 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.
See Note 13 to the Consolidated Financial Statements for information regarding our debt. Lease obligations We lease real estate and equipment under operating and capital lease arrangements. These leases have terms of up to 15 years and include renewal options.
Required debt repayments over the next 12 months are $59 million, which we anticipate satisfying through available cash on hand and cash generated from operations. See Note 12 to the Consolidated Financial Statements for information regarding our debt. Lease obligations We lease real estate and equipment under operating and capital lease arrangements.
See Note 15 to the Consolidated Financial Statements for further information. 20 LIQUIDITY AND CAPITAL RESOURCES At December 31, 2022 we had cash, cash equivalents and short-term investments of $681 million, which includes $182 million held at our foreign subsidiaries used to support the liquidity needs of those subsidiaries.
Years Ended December 31, Favorable/(Unfavorable) 2023 2022 Actual % change Unallocated corporate expenses $ 210,931 $ 204,251 (3) % Unallocated corporate expenses for 2023 increased $7 million compared to the prior year primarily due to higher variable compensation expense of $4 million and higher depreciation expense of $2 million. 22 LIQUIDITY AND CAPITAL RESOURCES At December 31, 2023 we had cash, cash equivalents and short-term investments of $623 million, which includes $136 million held at our foreign subsidiaries used to support the liquidity needs of those subsidiaries.
Prior year results were not recast to exclude the revenue and expenses from Borderfree. Accordingly, revenue and costs for 2022 include only six months of operations for Borderfree, whereas 2021 includes a full year of operations. Net income of Borderfree was not significant in any period presented. The change in revenue presentation became effective October 1, 2022.
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.
Support services revenue declined 5% (3% at constant currency) primarily due to a declining meter population and shift to cloud-enabled products. Financing revenue declined 7% (5% at constant currency) primarily due to lower lease extensions as more clients are deciding to lease new equipment rather than extend leases on existing equipment. Rentals revenue declined 10% (9% at constant currency).
Equipment sales declined $31 million primarily due to customers opting to extend leases of their existing advanced-technology equipment rather than purchase new equipment. Support services revenue declined $27 million primarily due to the declining meter population and continuing shift to cloud-enabled products. Supplies revenue declined $6 million primarily driven by a declining meter population.
Presort Services Presort Services includes revenue and related expenses from sortation services to qualify large volumes of First Class Mail, Marketing Mail, Marketing Mail Flats and Bound Printed Matter for postal worksharing discounts.
Adjusted segment EBIT was a loss of $134 million in 2023 compared to a loss of $100 million in the prior year. 19 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.
The sale of Borderfree and the change in revenue presentation each contributed a revenue decline of 2%. Lower cross-border services volumes contributed a revenue decline of 5% and lower digital delivery services contributed a revenue decline of 2% compared to the prior year.
The change in revenue presentation for digital delivery services and the sale of Borderfree accounted for $139 million of the decrease.
As a member, the Bank has access to certain credit products as a funding source known as "advances." As of December 31, 2022, the Bank had yet to apply for any advances. 21 Future Cash Requirements The following table summarizes our known and contractually committed cash requirements at December 31, 2022 (in millions): Payments due in Total 2023 2024 2025 2026 2027 Thereafter Debt maturities $ 2,240 $ 33 $ 281 $ 51 $ 245 $ 401 $ 1,229 Lease obligations 405 74 70 63 53 46 99 Purchase obligations 217 215 1 1 — — — Retiree medical payments 93 12 11 11 10 10 39 Total $ 2,955 $ 334 $ 363 $ 126 $ 308 $ 457 $ 1,367 Debt At December 31, 2022, we have outstanding debt of $2.2 billion.
Future Cash Requirements The following table summarizes our known and contractually committed cash requirements at December 31, 2023 (in millions): Payments due in Total 2024 2025 2026 2027 2028 Thereafter Debt maturities $ 2,189 $ 59 $ 53 $ 196 $ 387 $ 683 $ 811 Lease obligations 431 88 83 72 63 54 71 Purchase obligations 145 140 2 1 1 1 — Retiree medical payments 84 11 10 10 9 9 35 Total $ 2,849 $ 298 $ 148 $ 279 $ 460 $ 747 $ 917 Debt At December 31, 2023, we have outstanding principal debt of $2.2 billion.
Revenue Cost of Revenue Gross Margin Years Ended December 31, Years Ended December 31, Years Ended December 31, 2022 2021 Actual % change Constant Currency % change 2022 2021 2022 2021 Business services $ 1,576,348 $ 1,702,580 (7) % (7) % $ 1,440,807 $ 1,577,628 8.6 % 7.3 % Segment EBIT Years Ended December 31, 2022 2021 Actual % change Segment EBIT $ (100,308) $ (98,673) (2) % Global Ecommerce revenue decreased 7% in 2022 compared to 2021.
Financial performance for the Global Ecommerce segment was as follows: Years Ended December 31, Favorable/(Unfavorable) 2023 2022 Actual % Change Constant Currency % change Business Services Revenue $ 1,355,326 $ 1,576,348 (14) % (14) % Cost of Business Services 1,293,285 1,440,807 10 % Gross Margin 62,041 135,541 (54) % Gross Margin % 4.6 % 8.6 % Selling, general and administrative 184,923 225,514 18 % Research and development 10,851 10,335 (5) % Adjusted segment EBIT $ (133,733) $ (100,308) (33) % Global Ecommerce revenue decreased $221 million in 2023 compared to the prior year.
Management believes that excluding the impacts of currency exchange rates provides investors a better understanding of the underlying revenue performance. Where constant currency measures are not provided, the actual change and constant currency change are the same. Management measures segment profitability and performance using segment earnings before interest and taxes (EBIT).
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.
Outlook We expect consolidated revenue growth in 2023 to be flat to a mid-single digit increase, on a comparable basis, and the percentage of EBIT growth to outpace revenue growth, primarily due to an anticipated improvement in profitability in our Global Ecommerce segment.
OUTLOOK We expect consolidated revenue to be flat to a low single-digit decline and EBIT margins to be relatively flat in 2024 compared to 2023.
Digital delivery services gross margin declined $18 million compared to the prior year period primarily due to the decline in volumes and revenue. Segment EBIT for 2022 was a loss of $100 million compared to a loss of $99 million in 2021.
Digital delivery services gross margin declined $9 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.
Proceeds from the sale of businesses and assets increased $133 million, primarily due to the sale of Borderfree ($95 million) and our Shelton, CT office building ($51 million), and capital expenditures were $59 million lower than the prior year.
Investing activities Cash flows from investing activities for 2023 declined $99 million compared to the prior year primarily due to prior year proceeds of $162 million from the sale of businesses and our Shelton, Connecticut office building, partially offset by lower payments of $28 million to settle foreign exchange derivative contracts, lower capital expenditures of $22 million and lower net investment activity of $10 million.
See Note 12 to the Consolidated Financial Statements for further information. Other components of net pension and postretirement cost Other components of net pension and postretirement cost for the year ended December 31, 2022, was $4 million compared to $1 million in 2021.
The effective tax rate for the year ended December 31, 2023 was 5.1%, primarily due to the nondeductibility of the aggregate goodwill impairment charge. See Note 14 to the Consolidated Financial Statements for more information.
Removed
Segment EBIT may not be indicative of our overall consolidated performance and should be read in conjunction with our consolidated results of operations.
Added
Within SendTech Solutions, we expect revenue and EBIT declines due in part to lower equipment sales as initial lease terms of prior equipment sales expire and customers are expected to renew these leases for a fixed term rather than purchase new equipment. We also expect revenue to decline due to lower meter populations due to the migration to cloud-based solutions.
Removed
Overview Financial Results Summary - Year Ended December 31: Revenue Years Ended December 31, 2022 2021 Actual % change Constant Currency % Change Business services $ 2,249,941 $ 2,334,674 (4) % (3) % Support services 438,191 460,888 (5) % (3) % Financing 274,508 294,418 (7) % (5) % Equipment sales 354,960 350,138 1 % 4 % Supplies 154,186 159,438 (3) % — % Rentals 66,256 74,005 (10) % (9) % Total revenue $ 3,538,042 $ 3,673,561 (4) % (3) % Global Ecommerce $ 1,576,348 $ 1,702,580 (7) % (7) % Presort Services 602,016 573,480 5 % 5 % SendTech Solutions 1,359,678 1,397,501 (3) % (1) % Total revenue $ 3,538,042 $ 3,673,561 (4) % (3) % EBIT Years Ended December 31, 2022 2021 % change Global Ecommerce $ (100,308) $ (98,673) (2) % Presort Services 82,430 79,721 3 % SendTech Solutions 400,909 429,415 (7) % Total Segment EBIT $ 383,031 $ 410,463 (7) % 16 Revenue decreased 4% (3% at constant currency) in 2022 compared to 2021 primarily due to a decrease in business services revenue primarily driven by lower Global Ecommerce volumes, lower support services revenue driven by a declining meter population and a shift to cloud-enabled products and lower financing revenue primarily due to lower lease extensions.
Added
These declines will be partially offset by higher shipping revenues. Within Presort Services, we anticipate total volumes to be relatively flat in 2024 compared to 2023, but revenue to benefit slightly from increased workshare discounts. We expect margin and profit to remain relatively flat to slightly higher compared to the prior year.
Removed
Global Ecommerce revenue decreased 7%, Presort Services revenue increased 5% and SendTech Solutions revenue declined 3% (1% at constant currency). Segment EBIT for 2022 decreased 7% compared to 2021.
Added
We continue to make progress on our worldwide restructuring program and expect to realize annualized cost savings of $75-$85 million by the end of 2024, a portion of which was realized in 2023. However, we also expect higher interest costs and the restoration of variable compensation costs in 2024 to significantly offset these savings.
Removed
Global Ecommerce EBIT decreased 2%, primarily due to higher operating expenses and a decline in revenue from cross-border services and digital delivery services, partially offset by the increase in domestic parcel delivery services gross margin. Presort Services EBIT increased 3%, primarily due to higher revenue, partially offset by higher transportation costs.
Added
See our Forward-Looking Statements under Part I on page 3 and Risk Factors under Item 1A for certain factors, some beyond our control, which could adversely impact our 2024 results. OVERVIEW OF CONSOLIDATED RESULTS Factors Affecting Comparability Certain transactions and changes occurred in 2022 that impact the comparability to our 2023 financial results.
Removed
SendTech Solutions EBIT decreased 7%, primarily driven by the decline in revenue and lower margins. Refer to Results of Operations section for further information. Factors Affecting Comparability Certain transactions and changes occurred during the year that impact the comparability of our 2022 financial results to the prior periods.
Added
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 twelve months ended December 31, 2022 include six months of revenue and costs for Borderfree.
Removed
These transactions and changes include: • The sale of our Borderfree cross-border ecommerce solutions business (Borderfree); • A change in the presentation of revenue for digital delivery services primarily related to our Global Ecommerce business from a gross basis to a net basis due to an adjustment in terms of one of our contracts with the USPS; and • A refinement in the methodology of allocating transportation costs between our Global Ecommerce and Presort Services segments Effective July 1, 2022, we sold Borderfree, which was reported in our Global Ecommerce segment.
Added
Financial Results Summary: Years Ended December 31, Favorable/(Unfavorable) 2023 2022 Actual % Change Constant Currency % change Total revenue $ 3,266,348 $ 3,538,042 (8) % (8) % Total costs and expenses 3,672,850 3,498,162 (5) % (Loss) income before taxes (406,502) 39,880 >(100%) (Benefit) provision for income taxes (20,875) 2,940 >100% Net (loss) income $ (385,627) $ 36,940 >(100%) Revenue decreased $272 million in 2023 compared to the prior year primarily due to a decrease in business services revenue of $205 million (see Factors Affecting Comparability above), lower equipment sales of $31 million and lower support services revenue of $27 million.
Removed
The refinement to the methodology of allocating transportation costs between Global Ecommerce and Presort Services resulted in an increase to Global Ecommerce EBIT and a corresponding decrease to Presort Services EBIT of approximately $10 million in 2022.
Added
Total costs and expenses increased $175 million compared to the prior year primarily due to: • Costs of revenue (excluding financing interest expense) decreased $225 million primarily due to lower cost of business services of $178 million (see Factors Affecting Comparability above) and lower cost of equipment sales of $30 million. • SG&A expense declined $8 million compared to the prior year.
Removed
In 2022, we saw significant productivity improvements in labor, transportation and warehouse operations and expect further improvements in 2023. We expect our cross-border operations to continue to be adversely impacted by a strong U.S. dollar and headwinds from changes in how certain of our clients may access cross-border services in 2023 compared to 2022.
Added
This decrease was primarily driven by lower professional fees of $10 million, salaries of $8 million, credit cards fees of $8 million, amortization expense of $8 million and stock based compensation expense of $7 million, partially offset by proxy solicitation fees of $11 million, higher variable compensation expense of $9 million, higher credit loss provision of $8 million and non-cash foreign currency revaluation losses on intercompany loans of $6 million. • Restructuring charges increased $43 million compared to the prior year driven by actions taken under the 2023 Plan. • Aggregate non-cash goodwill impairment charges totaling $339 million associated with our Global Ecommerce reporting unit.
Removed
Within Presort Services, we expect margin and profit improvements from continued productivity improvements driven by our investments in increased automation and facilities consolidation.
Added
See Note 8 to the Consolidated Financial Statements for more information. • Interest expense, net, including financing interest expense, increased $22 million in 2023 compared to the prior year primarily due to higher interest rates.
Removed
Revenue is expected to benefit from growth in Marketing Mail and Bound and Packet Mail and from a full year of volumes from our recent acquisitions, which we expect to offset the impact on revenue from the expected decline in First Class Mail volumes.
Added
We allocate a portion of gross interest expense to financing interest expense based on our effective interest rate and average finance receivables for the period. • Other (income) expense declined $19 million compared to the prior year primarily driven by prior year gains of $27 million from the sale of assets and businesses, partially offset by a favorable year-over-year impact of $8 million associated with the redemption of debt.
Removed
In SendTech Solutions, we expect revenue growth from new products and our cloud-enabled shipping solutions to partially offset an expected decline in mailing related revenues. We expect a stabilization in financing revenue due to new product offerings and an increasing finance receivable portfolio. Overall segment margins are expected to remain strong.
Added
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.
Removed
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, a slow-down in economic activity, higher fuel and transportation costs and other adverse geopolitical developments.
Added
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.
Removed
Inflationary pressures and rising prices could put increase 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.
Added
Cross-border revenue declined $190 million due to lower volumes, primarily driven by changes in how two of our largest clients access our services, digital delivery services revenue declined $26 million due to a decrease in the number of shipping labels printed and fulfillment services revenue declined $23 million due to lower volumes.
Removed
We expect that interest expense for 2023 will be about $30 million higher due to the recent increases in interest rates and additional increases anticipated in 2023. 17 RESULTS OF OPERATIONS REVENUE AND SEGMENT EBIT Global Ecommerce Global Ecommerce includes the revenue and related expenses from domestic parcel services, cross-border solutions and digital delivery services.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−3 removed3 unchanged
Biggest changeWe are also exposed to credit risk on our accounts receivable and finance receivable portfolio. Foreign Exchange Risk Our foreign currency risks include the translation of local currency balances of foreign subsidiaries and transaction gains and losses associated with intercompany loans, transactions denominated in currencies other than a location’s functional currency and forecasted inventory purchases between affiliates and third parties.
Biggest changeWe are also exposed to foreign currency risks associated with transactions denominated in currencies other than a location’s functional currency and forecasted inventory purchases between affiliates and third parties. However, these risks are not deemed to be significant. Interest Rate Risk We are exposed to interest rate risk on our variable-rate debt borrowings.
This risk is mitigated due to our large, diverse client base, dispersed over various geographic regions and industrial sectors. No single client comprised more than 10% of our consolidated net sales in 2022 or 2021.
This risk is mitigated due to our large, diverse client base, dispersed over various geographic regions and industrial sectors. No single client comprised more than 10% of our consolidated net sales in 2023 or 2022.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. To manage these market risks, we employ derivatives, including foreign currency contracts and interest rate swaps, according to established policies and procedures. We do not use derivatives for speculative purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. To manage these market risks, we may employ derivatives according to established policies and procedures. We do not use derivatives for speculative purposes.
We also maintain a significant investment portfolio comprised of fixed-rate interest-bearing money market funds, government and municipal securities, corporate securities, mortgage-backed securities and asset-backed securities. Changes in interest rates impact the fair value of these investments.
We also maintain a significant investment portfolio comprised of fixed-rate investment in government and municipal securities, corporate securities, mortgage-backed securities and asset-backed securities. Changes in interest rates impact the fair value of these investments.
However, these securities are designated as available-for-sale, and changes in fair value due to changes in interest rates are recognized in accumulated other comprehensive income, a component of equity, and not net income.
We have designated these securities as available-for-sale, and changes in fair value due to changes in interest rates are recognized in accumulated other comprehensive income, a component of equity, and not earnings.
The weighted average interest rate of our variable rate debt at December 31, 2022 and 2021 was 7.5% and 3.1%, respectively. A 100 basis point change in the weighted average interest rate of our variable rate debt in 2022 would have increased interest expense approximately $6 million.
The weighted average interest rate of our variable rate debt at December 31, 2023 and 2022 was 9.7% and 7.5%, respectively. A 100 basis point change in the weighted average interest rate of our variable rate debt in 2023 would have increased interest expense approximately $8 million.
While there is typically minimal impact to our reported earnings, the settlement of these derivative contracts results in cash outflows or inflows, which could be significant. Interest Rate Risk We are exposed to interest rate risk on our variable-rate debt borrowings. At December 31, 2022 and 2021, 35% and 26% or our debt was at variable rates, respectively.
While there was typically minimal impact to earnings, the settlement of these derivative contracts resulted in cash outflows or inflows, which could be significant. In the fourth quarter of 2023, management decided to no longer use foreign exchange contracts to hedge the revaluation of intercompany loans and related interest.
These contracts are not designated as hedging instruments and changes in fair value of the derivative contract and transaction gains and losses associated with the revaluation of the intercompany loans are recorded in earnings. Changes in the fair values of foreign currency derivative contracts recognized in earnings are generally offset by transaction gains and losses on the underlying intercompany loans.
Historically, we entered into foreign exchange contracts to minimize the impact of the revaluation of these intercompany loans and related interest on earnings. Changes in fair value of these foreign exchange contracts were also recorded in earnings and designed to generally offset the impact to earnings from the revaluation of the underlying intercompany loans.
Removed
Our objective in managing exposure to foreign currency is to reduce the volatility in earnings and cash flows associated with fluctuations in foreign currency exchange rates. The principal currencies actively hedged are the British Pound, Canadian Dollar and the Euro.
Added
We are also exposed to credit risk on our accounts receivable and finance receivable portfolio. Foreign Exchange Risk We have a number of short-term intercompany loans denominated in a foreign currency, predominantly the British Pound, Canadian Dollar and Euro. Our foreign currency risk primarily includes the periodic revaluation of these intercompany loans and related interest, which is recorded in earnings.
Removed
At December 31, 2022 and 2021, we had outstanding foreign currency exchange rate contracts to mitigate the currency risk associated with forecasted inventory purchases between affiliates and third parties. These contracts are designated as cash flow hedges and changes in fair value are recognized in accumulated other comprehensive income, a component of stockholders’ equity.
Added
While this decision reduces volatility in cash flows, the periodic revaluation of these intercompany loans could result in significant non-cash charges or income in earnings. Assuming foreign currency exchange rates at December 31, 2023, a 1% change in the British Pound, Canadian Dollar or Euro would impact earnings by $5 million, $3 million and $2 million, respectively.
Removed
At December 31, 2022 and 2021, we also had outstanding foreign currency exchange rate contracts to mitigate the currency risk associated with intercompany loans and related interest denominated in foreign currencies.

Other PBI 10-K year-over-year comparisons