EDGAR 10-K Filing

Company CIK: 78814
Filing Year: 2023
Filename: 78814_10-K_2023_0000078814-23-000012.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
General
Pitney Bowes Inc. (we, us, our, or the company) is a global shipping and mailing company that provides technology, logistics, and financial services to small and medium sized businesses, large enterprises, including more than 90 percent of the Fortune 500, retailers and government clients around the world. These clients rely on us to remove the complexity and increase the efficiency in their sending of mail and parcels. For additional information, visit www.pitneybowes.com.
Business Segments
Global Ecommerce
Domestic parcel services offers retailers a parcel delivery and returns network for end consumers. We operate numerous domestic parcel sortation centers connected by a nationwide transportation network, enabling us to pick up parcels from retailer distribution centers and move them through our physical network. 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. Our proprietary technology enables global tracking and logistics services; calculates duty, tax and shipping costs at checkout; enables multi-currency pricing, payment processing and fraud management; ensures compliance with product restrictions and produces all documentation requirements to meet export complexities and customs clearance.
Digital delivery services enables clients to reduce transportation and logistics costs, select the best carrier based on need and cost, improve delivery times and track packages in real-time. Powered by our shipping APIs, clients can purchase postage, print shipping labels and access shipping and tracking services from multiple carriers that can be easily integrated into any web application such as online shopping carts or ecommerce sites and provide guaranteed delivery times and flexible payment options.
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 workshare discounts. 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.
Sending Technology Solutions (SendTech Solutions)
We provide 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. We also offer supplies and maintenance services for these offerings. Our cloud enabled infrastructure provides software-as-a-service (SaaS) offerings delivered online and via connected or mobile devices. Our latest offerings are designed on an open platform architecture that have the capabilities to leverage partnerships with carriers, developers and other innovative companies to deliver value to our clients. We offer financing alternatives that enable clients to finance equipment and product purchases.
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. 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.
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.
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. Support services are primarily provided under maintenance contracts.
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.
We must continue to invest in our current technologies, products and solutions, and in the development of new technologies, products and solutions in order to maintain and improve our competitive position. We frequently encounter new competitors as the markets in which we participate evolve and newer businesses enter our existing markets.
A summary of the competitive environment for each of our segments is as follows:
Global Ecommerce
The domestic parcel services and cross-border solutions market includes competitors of various sizes, including companies and national posts with greater financial resources than us. Some of these competitors specialize in point solutions or freight forwarding services, are full-service ecommerce business process outsourcers and online marketplaces with international logistic support, or major global delivery services companies. We also face competition from companies that can offer both domestic and cross-border solutions in a single package which creates pricing leverage. The principal competitive factors include speed of delivery, price, ease of integration and use, innovative services, reliability, functionality and scalability. We compete based on the accuracy, reliability and scalability of our platform and logistics services, our ability to provide clients and their customers a one-stop full-service ecommerce experience and the ability to provide a more customized shipping solution than some of the larger competitors in the industry.
Our digital delivery services business competes with technology providers who help make shipping easier and more cost-effective. These technology providers range from large, established companies to smaller companies offering negotiated carrier rates. The principal competitive factors include technology stability and reliability, innovation, access to preferred shipping rates and ease of integration with existing systems.
Presort Services
We face competition from regional and local presort providers, cooperatives of multiple local presort providers, consolidators and service bureaus that offer presort solutions as part of a larger bundle of outsourcing services. We also face competition from large mailers that have sufficient volumes and the capability to sort their own mailings in-house and could use excess capacity to offer presort services to others. The principal competitive factors include price, innovative service, delivery speed, tracking and reporting, industry expertise and economies of scale. 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. 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. We differentiate ourselves from our competitors through our breadth of physical and digital offerings, including cloud enabled SaaS and open platform architecture offerings; pricing; available financing and payment offerings; product reliability; support services; and our extensive knowledge of the shipping and mailing industry.
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 believe our competitive advantage that differentiates us from our competitors is the breadth of our financing and payment solutions and our ability to seamlessly integrate these solutions into our clients' shipping and mailing operations.
Also see Item 1A. Risk Factors for further details regarding the competition our businesses face.
Research, Development and Intellectual Property
We invest in research and development activities to develop new products and solutions, enhance the effectiveness and functionality of existing products and solutions and deliver high value technology and differentiated services in high value segments of the market.
Third-Party Suppliers
Our SendTech Solutions segment depends on third-party suppliers and outsource providers for a variety of services and product components and the hosting of our SaaS offerings. Our Global Ecommerce and Presort Services segments rely on third party suppliers
to help equip our facilities, provide warehouse support and assist with our logistical operations. All of our businesses and corporate functions depend on third-party providers for a variety of data analytics, sales, reporting and other functions. In certain instances, we rely on single-sourced or limited-sourced suppliers and outsourcing vendors around the world because doing so is advantageous due to quality, price or lack of alternative sources. We have risk mitigation programs to monitor conditions affecting our suppliers' ability to fulfill expected commitments. We believe that our available sources for services, components, supplies, logistics and manufacturing are adequate.
Regulatory Matters
We are subject to the regulations of postal authorities worldwide related to product specifications of our postage meters. 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. 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.
Climate Change
Although climate change has had no material impact on our operations to date, the risk of increasingly severe climate events or the risk that those events happen more frequently could affect one or more of our facilities and our ability to conduct daily operations in the future. 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.
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 regularly assess the business environments and labor markets in the areas we operate to ensure our compensation programs reflect best practices and are market competitive. Depending on position and level, elements of our compensation packages include base salary or wages, variable compensation based on individual and company objectives and equity. We provide a competitive benefits package fostered on work/life balance, including medical, dental, life and disability insurance, and benefits that provide additional support for our employees’ mental, physical, financial and social well being.
Diversity and Inclusion
Maintaining a diverse workforce and an inclusive environment is critical to our success and we view diversity and inclusion as a competitive differentiator that helps us attract, grow, engage and retain the best talent. We celebrate a rich mix of countries, cultures, ages, races, ethnicities, gender identities, sexual orientation, abilities, and perspectives that showcase our humanity, differentiate us as individuals and enhance our businesses. Our global workforce is comprised of over 43% women and 35% of our global managers are women. Our U.S. population is nearly 50% people of color and 36% of our U.S. managers are people of color.
We continue to increase diversity and inclusion awareness throughout our company through enhancements and improvements to our talent acquisition processes, cultural awareness training and the creation of allies and mentors to help advance diversity and inclusion in our workforce.
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.
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. 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. Each year, we consider the feedback from employees, enhancing our relationship with them.
Health and Safety
We are committed to providing a safe workplace that protects against and limits personal injury and environmental harm. Through regular evaluations of site safety performance, sharing of successes, and creating projects to engage employees in safety improvements, we identify risks, provide guidance and training, review and learn from accidents, and reduce injuries. We also report monthly to both local site management and senior leadership on safety metrics, trends, risks and regulatory activity. 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. 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. 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.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments thereto filed with, or furnished to, the SEC, are available, free of charge, through the Investor Relations section of our website at www.investorrelations.pitneybowes.com or from the SEC's website at www.sec.gov, as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC. 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. 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. Dies 53 Executive Vice President and Group Executive (1)
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
(1) Effective January 3, 2023, Mr. Dies was named Executive Vice President and Group Executive. 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. 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. 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. 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.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Our operations face certain risks that should be considered in evaluating our business. We manage and mitigate these risks on a proactive basis, using an enterprise risk management program. Nevertheless, the following risk factors, some of which may be beyond our control, could materially affect our business, financial condition, results of operations, brand and reputation, and may cause future results to be materially different than our current expectations. These risk factors are not intended to be all inclusive.
Mailing and Shipping Industry Risks
The financial condition of the USPS, or the national posts in our other major markets, has affected, and could, in the future affect, the ability of those posts to provide services to us or our clients, which could adversely affect client demand for our offerings and thus our financial performance.
We are dependent on financially viable national posts in the geographic markets where we operate, particularly in the United States. A significant portion of our revenue depends upon the ability of these posts, especially the USPS, to provide competitive mail and package delivery services to our clients and the quality of the services they provide. Their ability to provide high quality service at affordable rates in turn depends upon their ongoing financial strength. Although Congress provided the USPS a measure of relief with the enactment of the Postal Service Reform Act of 2022, the USPS, and national posts in our other major markets, still face financial challenges. If these challenges interfere with these posts’ ability to continue to provide the services they currently provide, our financial performance may be adversely affected.
Our ability to compete in the package shipping market in the United States depends upon certain contractual relationships we have with the USPS and the successful performance of those services.
The USPS is our primary provider for the “last mile” component of our parcel delivery services in the United States. This represents a significant component of our cost in offering these services. If we are unable to receive competitive pricing from the USPS or take advantage of lower cost USPS options, our ability to compete with private carriers and achieve profitable revenue growth may be adversely affected. Our digital delivery options also depend upon certain contractual relationships with the USPS to enable us to offer these services profitably, and the USPS has adjusted the terms of those contracts in the past. Should the USPS make additional changes to how it contracts with us for this service, our profitability could be adversely affected. The quality of service we provide to our clients also depends upon the quality of delivery services received from the USPS. As the ecommerce market continues to evolve, and as the USPS implements changes to its network, if the USPS’ service performance is materially worse than that of the private carriers, we may lose clients to competition and our financial performance may be adversely affected.
We are subject to postal regulations and processes, which could adversely affect our financial performance.
A significant portion of our business is subject to regulation and oversight by the USPS, posts in other major markets, and the governmental bodies that regulate the posts themselves. These postal authorities have the power to regulate some of our current products and services and to establish guidelines for postage rates. They also must approve many of our new or future product and service offerings before we can bring them to market. 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 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. 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. 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.
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 posts consider new strategies for their operations in
an era of declining mail volumes and increasing package volumes, if we are unable to work with posts to support those strategies, our financial performance could be adversely affected.
Business Operational Risks
We face intense competition in the industries in which we operate.
The markets for our products and services in each of our segments are highly competitive. In our Global Ecommerce segment, we face competition from full-service ecommerce business process outsourcers, online marketplaces, freight forwarders, posts, and major global delivery services companies, including those that can offer both domestic and cross-border solutions in a single package. Our digital delivery business competes with technology providers ranging from large, established companies and national posts to smaller companies offering negotiated carrier rates. If we cannot compete successfully in these markets with, among other things, speed of delivery, price, reliability, functionality and scalability of our platform and logistic services and ease of integration and use, we may lose clients, incur additional costs and suffer from reduced margins, and the financial results of the segment may be adversely affected. Our Presort Services segment faces competition from regional and local presort providers, cooperatives of multiple local presort providers, consolidators and service bureaus that offer presort solutions as part of a larger bundle of outsourcing services and large volume mailers that have sufficient volumes and the capability to presort their own mailings in-house and could use excess capacity to offer presort services to others. If we are not able to effectively compete on price, innovative service, delivery speed, tracking and reporting, we may lose clients and the financial results of the segment may be adversely affected. Our Sending Technology Solutions segment faces competition from other mail equipment and solutions providers, companies that offer products and services as alternative means of message communications and those that offer online shipping and mailing products and services solutions. 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.
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.
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. 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. 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.
Seasonality of the Global Ecommerce segment, unexpected declines in consumer demand or the performance of our retail customers, or unexpected spikes in the costs of labor or transportation, especially during the fourth quarter, could adversely affect our overall performance.
Our Global Ecommerce segment derives the majority of its revenue from retail clients. The retail industry is subject to cyclical trends in consumer sentiment and spending habits that are affected by many factors, including prevailing economic conditions, recession or fears of recession, inflation, exchange rates, unemployment levels, pandemics, or geopolitical events. Our retail clients are also dependent on third party suppliers to provide them with either raw materials or finished goods to meet the demands of their clients. This segment also relies upon the availability of labor and transportation at a reasonable cost and unexpected increases in these costs due to higher demand or other macroeconomic factors (which have occurred in the past) could also impact the financial results of Global Ecommerce. 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.
The loss of any of our largest clients in our Global Ecommerce segment could adversely affect the financial performance of that segment.
The Global Ecommerce segment receives a large portion of its revenue from a relatively small number of clients and business partners. 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.
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 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. 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. 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. 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. If these supply chain constraints were to worsen or, if other unknown events cause our suppliers to not be able to provide their services, components or equipment to us in a timely manner, or, if the quality of the goods or services received were to deteriorate, our relationship with certain suppliers were to be terminated, or if the costs of using these third parties were to continue to increase and we were not able to find alternate suppliers, we could lose clients, incur significant disruptions in manufacturing and operations and increased costs (including higher freight and re-engineering costs) and delay automation and productivity initiatives in our warehouses.
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. 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. 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.
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. At times, both our Global Ecommerce and Presort Services segments have experienced increased demand and competition for labor, especially for our warehouses, driving up costs. 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. 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.
There is also significant competition for the talent needed for research and development of new products and services and talent needed to sell and service our other products and services within all our business units. Increased competition for employees has resulted in higher costs for wages and other benefits necessary to attract and retain employees with the right skill sets. 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.
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 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. 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. In addition, from time to time, third parties may claim that we, our clients, or our suppliers, have infringed their intellectual property
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.
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. 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. 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. 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.
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. 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.
Cybersecurity and Technology Risks
Our financial performance and our reputation could be adversely affected, and we could be subject to legal liability or regulatory enforcement actions, if we or our suppliers are unable to protect against, or effectively respond to, cyberattacks or other cyber incidents.
We depend on the security of our and our suppliers' information technology systems to support numerous business processes and activities, to service our clients, and to enable consumer transactions and postal services. There are numerous cybersecurity risks to these systems, including individual and group criminal hackers, industrial espionage, denial of service attacks, ransomware and malware attacks, attacks on the software supply chain, and employee errors and/or malfeasance. 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. Successful breaches could, among other things, disrupt our operations or result in the unauthorized disclosure, theft and misuse of company, client, consumer and employee sensitive and confidential information, all of which could adversely affect our financial performance. Cybersecurity breaches could result in financial liability to other parties, governmental investigations, regulatory enforcement actions and penalties, and damage to our brand and reputation. Although we maintain insurance coverage relating to cybersecurity incidents, we may incur costs or financial losses that are either not insured against or not fully covered through our insurance.
We have security systems, procedures, and business continuity plans in place and require our suppliers to have them as well. 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. 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.. 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. Our goal is to prevent meaningful incursions and minimize the overall impact of those that occur.
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 businesses use, process, and store proprietary information and personal, sensitive, or confidential data relating to our business, clients, and employees. Privacy laws and similar regulations in many jurisdictions where we do business require that we take significant steps to safeguard that information, and these laws and regulations continue to evolve. The scope of the laws that may be applicable to us is often uncertain and may be conflicting. In addition, new laws may add a broad array of requirements on how we handle or use information and increase our compliance obligations. For example, the European Union greatly increased the jurisdictional reach of European Law by enacting the General Data Protection Regulation (GDPR), which, among other things, enhanced an individual’s rights with respect to their information. However, ongoing litigation in the European Union on how to comply with GDPR requirements continues to create uncertainty in how to demonstrate compliance, and the outcome of these cases could impact how companies do business in the European Union. 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. Other countries or states may enact laws or regulations in the future that have similar or additional requirements. Although we continually monitor and assess the impact of these laws and regulations, and continually update our systems to protect our data and comply with these laws, their interpretation and enforcement are uncertain, subject to change, and may require substantial costs to monitor and implement. Failure to comply with data privacy and protection laws and regulations could also result in government enforcement actions (which could include substantial civil and/or criminal penalties) and private litigation, which could adversely affect our reputation and financial performance.
If we or our suppliers encounter unforeseen interruptions or difficulties in the operation of our cloud-based applications, our business could be disrupted, our reputation and relationships may be harmed, and our financial performance could be adversely affected.
Our business relies upon the continuous and uninterrupted performance of our and our suppliers' cloud-based applications and systems to support numerous business processes, to service our clients and to support their transactions with their customers and postal services. Our applications and systems, and those of our partners, may be subject to interruptions due to technological errors, system capacity constraints, software errors or defects, human errors, computer or communications failures, power loss, adverse acts of nature and other unexpected events. We have business continuity and disaster recovery plans in place to protect our business operations in case of such events and we also require our suppliers to have the same. Nonetheless, there can be no guarantee that these plans will function as designed. If we are unable to limit interruptions or successfully correct them in a timely manner or at all, it could result in lost revenue, loss of critical data, significant expenditures of capital, a delay or loss in market acceptance of our services and damage to our reputation, brand and relationships, any of which could have an adverse effect on our business and 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. 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. 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. 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.
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.
We provide competitive finance offerings and fund discretionary priorities, such as business investments, strategic acquisitions, dividend payments and share repurchases through a combination of cash generated from operations, deposits held at the Bank and access to 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 flexibility and higher costs when we do access the U.S. capital markets. We maintain a $500 million revolving credit facility that requires we maintain certain financial and nonfinancial covenants.
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.
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. 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. 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. 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. 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.
Our Global Ecommerce segment is exposed to increased foreign exchange rate fluctuations.
The sales generated from many of our clients who use our cross-border services are exposed to foreign exchange rate fluctuations. Currently, merchants using our cross-border services are located primarily in the U.S. and the U.K. and a majority of consumers making purchases through these platforms are in a limited number of foreign countries. The current strength of the U.S. 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. If the strength of the U.S. dollar continues, or if the British Pound were to strengthen relative to other currencies, our retailers may continue to experience a decrease in international sales volumes, which, in turn would adversely affect this segment’s revenue and profitability.
Our operations and financial performance may be negatively affected by changes in trade policies, tariffs and regulations.
Our Global Ecommerce segment is subject to significant trade regulations, taxes, and duties throughout the world. Any changes to these regulations could potentially impose increased documentation and delivery requirements, delay delivery times and subject us to increased costs and additional liabilities, which could adversely affect our financial performance. Within the last four years, the United States increased tariffs for certain goods, which triggered other nations to also increase tariffs on certain of their goods. For our Global Ecommerce segment, tariff increases, or even an environment of uncertainty surrounding trade issues, could reduce demand and adversely affect its financial performance. For our SendTech Solutions segment, increased tariffs resulted in additional costs on certain components used in some of our products.
If we do not keep pace with evolving expectations and regulations in the areas of Environmental, Social and Governance (ESG) and address the potential impact of climate change on our costs and operations, our reputation and results of operations may be adversely affected.
The set of topics incorporated within the term ESG in general, and climate change in particular, cover a range of issues that pose potential risks to our operations. From an environmental perspective, the impact of climate change and a potential increase in extreme weather events may pose risk to the operation of our sortation facilities and the ability to transport mail and packages. The increased focus on alternative energy sources and the need to reduce our carbon footprint over time, could result in higher investments in capital spending and increased operational costs. There are also a series of laws related to product stewardship and waste disposal to which we need to comply. From a “social” perspective, a failure to meet employee expectations around safety and diversity, equity and inclusion could impact our ability to recruit new employees and retain talent. 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.
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. 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.
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
statements critical of our board, management and strategy. 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. 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.
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. Further, actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
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. 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.
Should any facility be unable to function as intended for an extended period of time, our ability to service our clients and operating results could be impacted.
We conduct our research and development activities in facilities located in Noida and Pune, India, Bielsko-Biala, Poland, Austin, Texas and Shelton, Connecticut. Management believes that our facilities are in good operating condition, materially utilized and adequate for our current business needs.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
See Note 16 Commitments and Contingencies for additional information.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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.
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. 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. (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.
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. 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.
All information is based upon data independently provided to us by Standard & Poor's Corporation and is derived from their official total return calculation. Total return for the S&P SmallCap 600 Composite Index and our peer group is based on market capitalization, weighted for each year. The stock price performance is not necessarily indicative of future stock price performance.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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. Actual results may differ significantly from those currently expressed. A detailed discussion of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements is outlined under "Forward-Looking Statements" and "Item 1A. Risk Factors" in this Form 10-K. All table amounts are presented in thousands of dollars.
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. 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). 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. Segment EBIT may not be indicative of our overall consolidated performance and should be read in conjunction with our consolidated results of operations.
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.
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) %
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. 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. 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. 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. 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. 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. 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.
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.
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.
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. 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.
Within Presort Services, we expect margin and profit improvements from continued productivity improvements driven by our investments in increased automation and facilities consolidation. 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.
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.
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. 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. 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.
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.
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. 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. 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. Domestic parcel delivery services gross margin increased $59 million over the prior year due to pricing actions, improved warehouse productivity and a $14 million prior year charge reflecting the estimated cost of a price assessment. Cross-border gross margin declined $33 million compared to the prior year period primarily due to the decline in volumes driven by a strong U.S. dollar and the loss of $21 million of gross margin due to the sale of Borderfree. 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. The slight increase in loss was driven by higher operating expenses of $12 million primarily due to higher employee-related expenses, which more than offset the increase in gross margin of $11 million.
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.
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 $ 602,016 $ 573,480 5 % 5 % $ 454,923 $ 431,382 24.4 % 24.8 %
Segment EBIT
Years Ended December 31,
2022 2021 Actual % change
Segment EBIT $ 82,430 $ 79,721 3 %
Presort Services revenue increased 5% in 2022 compared to 2021. The processing of First Class Mail, Marketing Mail and Marketing Mail Flats and Bound Printed Matter contributed revenue growth of 3%, 1%, and 1%, respectively, primarily due to the impact of pricing actions.
Gross margin increased $5 million and segment EBIT increased $3 million, or 3% in 2022 compared to 2021 primarily due to higher revenue from pricing actions and productivity improvements driven by investments in automation, partially offset by higher transportation costs of $23 million driven by increased demand, higher fuel costs and higher allocated costs due to the revised transportation cost allocation methodology. 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.
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 $ 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. 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). Partially offsetting these decreases, business services revenue increased 22% (23% at constant currency) primarily due to growth in subscription services.
Gross margin for 2022 decreased $55 million and gross margin percentage decreased to 59% from 61.4%, primarily due to declines in financing and support services revenue which have high gross margins. Segment EBIT decreased $29 million, or 7%, due to the decline in gross margin, partially offset by lower operating expenses of $26 million, due in part, to lower employee-related expenses, lower professional fees, lower credit loss provision and other cost savings.
CONSOLIDATED EXPENSES
Selling, general and administrative (SG&A)
SG&A expense of $906 million in 2022 decreased 2%, or $19 million, compared to 2021, primarily due to lower employee-related expenses of $23 million, lower depreciation expense of $7 million, and lower professional fees of $7 million, partially offset by higher travel expenses of $6 million and higher credit card fees of $5 million.
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.
Years Ended December 31,
2022 2021 Actual % change
Unallocated corporate expenses $ 204,251 $ 207,774 (2) %
Unallocated corporate expenses decreased $4 million in 2022 compared to 2021 primarily driven by lower salaries and variable-compensation expenses of $9 million and lower marketing expenses of $6 million, partially offset by higher pension costs of $5 million and higher travel expenses, rent expense and insurance costs of $2 million each.
Research and development (R&D)
R&D expense decreased 7%, or $3 million in 2022 compared to 2021, primarily due to cost savings, partially offset by higher R&D spending in our SendTech Solutions segment.
Restructuring charges
Restructuring charges, consisting of costs for employee severance and facility closures, were $19 million for each of the years ended December 31, 2022 and 2021. 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 amount of other components of net pension and postretirement cost (income) recognized each year will vary based on actuarial assumptions and actual results of our pension plans. See Note 14 to the Consolidated Financial Statements for further information.
Other (income) expense
Other income for the year ended December 31, 2022, of $22 million consists of a $14 million gain from the sale of our Shelton, Connecticut office building, a $5 million gain from the sale of Borderfree, and a gain of $7 million from deferred proceeds received related to the sale of businesses in prior years, and a charge of $5 million from the early redemption of debt. See Notes 9, 11 and 13 to the Consolidated Financial Statements for further information.
Income taxes
The effective tax rate for 2022 includes a tax benefit of $5 million on the pre-tax gain from the sale of Borderfree as the tax basis was higher than book basis, and a $1 million benefit associated with the 2019 sale of a business. See Note 15 to the Consolidated Financial Statements for further information.
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. 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.
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 from operations was also impacted by higher tax payments of $10 million, higher interest payments of $10 million due to increases in variable rates and a postage payment of $14 million in 2022 related to a 2021 volume-related vendor price adjustment.
Investing activities
Cash flows from investing activities for 2022 improved $131 million compared to the prior year. 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. These improvements were partially offset by increased investments in our financing products of $47 million and net payments of $28 million for the settlement of foreign currency exchange contracts due to increased volatility in foreign exchange rates during 2022. We enter into foreign currency exchange contracts with third-parties to offset the earnings volatility caused by changes in foreign currency exchange rates and the revaluation of intercompany loans denominated in a foreign currency. Although there is minimal impact to our reported earnings, the settlement of these derivative contracts results in cash outflows or inflows.
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. These improvements were partially offset by lower cash flow from changes in customer deposits at the PB Bank of $19 million and common stock repurchases of $13 million .
Debt Activity
During 2022, we have reduced debt by $124 million, primarily from the redemption of the remaining $90 million of outstanding April 2023 notes, scheduled term loan repayments of $24 million and the purchase of $9 million of our debt in the open market. Through February 16, 2023, we have purchased an additional $12 million of our debt in the open market.
The credit agreement that governs our $500 million secured revolving credit facility and term loans contains financial and non-financial covenants. At December 31, 2022, we were in compliance with all covenants and there were no outstanding borrowings under the revolving credit facility. In December 2022, we amended our $500 million credit facility to adjust our financial covenants and provide additional financial flexibility. Borrowings under the revolving credit facility and term loans are secured by assets of the company.
During 2022, The PB Bank (the Bank), a wholly owned subsidiary, has become a member of the Federal Home Loan Bank (FHLB) of Des Moines. 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.
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. 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.
Required debt repayments over the next 12 months are $33 million, which we anticipate satisfying through available cash on hand and cash generated from operations. Our next material principal maturity is in March 2024. We expect to satisfy this obligation with a cost-effective capital market solution, available cash, or revolver access. 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. 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.
Purchase obligations
Purchase obligations include unrecorded agreements to purchase goods and services that are enforceable and legally binding upon us and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancellable without penalty.
In addition to the above known and contractually committed cash payments, we anticipate using cash for the following items:
Capital Expenditures
We will continue to invest in new solutions and services across our businesses to capitalize on market opportunities, and in our facilities and technology to grow our businesses, improve productivity and gain additional economies of scale. 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. In 2021, we invested significantly in our facilities, network and technologies to expand operations, improve productivity and gain economies of scale in our Global Ecommerce and Presort operations. During 2022, we continued to make necessary investments in our facilities, network and technologies.
Dividends
We have historically paid a quarterly dividend to our shareholders. 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. 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 and for any reason without notice. 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.
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. 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. 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.
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. The accounting policies below have been identified by management as those policies that are most critical to our financial statements due to the estimates and assumptions required. Management believes that the estimates and assumptions used are reasonable and appropriate based on the information available at the time the financial statements were prepared; however, actual results could differ from those estimates and assumptions. See Note 1 to the Consolidated Financial Statements for a summary of our accounting policies.
Revenue recognition
We derive revenue from multiple sources including the sale and lease of equipment, equipment rentals, financing, support services and business services. Certain transactions are consummated at the same time and can therefore generate revenue from multiple sources. The most common form of these arrangements involves a sale or noncancelable lease of equipment, meter services and an equipment maintenance agreement. We are required to determine whether each product and service within the contract should be treated as a separate performance obligation (unit of accounting) for revenue recognition purposes. We recognize revenue for performance obligations when control is transferred to the customer. Transfer of control may occur at a point in time or over time, depending on the nature of the contract and the performance obligation.
Revenue is allocated among performance obligations based on relative standalone selling prices (SSP), which are a range of selling prices that we would sell the good or service to a customer on a separate basis. SSP are established for each performance obligation at the inception of the contract and can be observable prices or estimated. Revenue is allocated to the meter service and equipment maintenance agreement elements using their respective observable selling prices charged in standalone and renewal transactions. For sale and lease transactions, the SSP of the equipment is based on a range of observable selling prices in standalone transactions. We recognize revenue on non-lease transactions when control of the equipment transfers to the customer, which is upon delivery for customer installable models and upon installation or customer acceptance for other models. We recognize revenue on equipment for lease transactions upon shipment for customer installable models and upon installation or customer acceptance for other models.
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. If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired, If the fair value of the reporting unit is less than the carrying value of the net assets assigned to the reporting unit, a goodwill impairment loss is calculated as the difference between these amounts, limited to the amount of goodwill allocated to the reporting unit.
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. 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. Further, we determined that the shortfall in fourth quarter performance of the Global Ecommerce reporting unit was an additional triggering event. Accordingly, we performed another goodwill impairment test as of December 31, 2022 to assess whether the goodwill of the Global Ecommerce reporting unit was impaired. 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.
The results of our impairment analysis indicated that the Global Ecommerce reporting unit was not impaired. However, the fair value of the reporting unit exceeded the carrying value by less than 10%. The judgements and assumptions used to estimate the fair value of the reporting unit are inherently subjective and changes in any of the judgements or assumptions used to determine the fair value of this reporting unit at December 31, 2022, could result in a different fair value determination. In order to evaluate the sensitivity of the fair value calculations on the goodwill impairment test, we applied hypothetical changes to our most significant judgments and assumptions. The most significant judgements and assumptions used in our analysis to determine the fair value of the reporting unit was the discount rate and operating margins. Assuming all other factors remain constant, a 100 basis point increase in the discount rate or a 100 basis point reduction in operating margins in each year would have resulted in a reporting unit fair value less than its carrying value. The carrying value of goodwill for the Global Ecommerce reporting unit at December 31, 2022 was $339 million.
Events and circumstances that could change our estimates and assumptions and impact the fair value determination of the Global Ecommerce reporting unit, include, but are not limited to, continued financial and operating performance below expectations, reduced consumer spending due to inflationary pressures and rising prices, a continued and prolonged slow-down in economic activity, increased competition and pricing pressures, changing consumer behaviors, our ability to increase volumes, gain economies of scale and improve margins, and rising interest rates.
Long-lived and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The estimated future undiscounted cash flows expected to result from the use and eventual disposition of the assets is compared to the carrying value. If the sum of the undiscounted cash flows is less than the asset's carrying value, an impairment charge is recorded for an amount by which the carrying value exceeds its fair value. The fair value of the impaired asset is determined using probability weighted expected cash flow estimates, quoted market prices when available and appraisals, as appropriate. 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 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. 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. We provide an allowance for credit losses based on historical loss experience, the age of the receivables, specific troubled accounts and other currently available information. Accounts deemed uncollectible are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible, or when they are 365 days past due, if sooner. We believe that our accounts receivable credit risk is low because of the geographic and industry diversification of our clients and small account balances for most of our clients. The allowance for credit losses as a percentage of trade accounts receivables was 2% at December 31, 2022 and 3% at December 31, 2021. 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. 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. 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. 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.
Significant judgment is also required in determining the amount of deferred tax assets that will ultimately be realized and corresponding deferred tax asset valuation allowance. When estimating the necessary valuation allowance, we consider all available evidence for each jurisdiction including historical operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. If new information becomes available that would alter our estimate of the amount of deferred tax assets that will ultimately be realized, we adjust the valuation allowance through income tax expense. Changes in the deferred tax asset valuation allowance could have a material impact on our financial condition or results of operations.
Pension benefits
The calculation of net periodic pension expense and determination of net pension obligations are dependent on assumptions and estimates relating to, among other things, the discount rate (interest rate used to discount the future estimated liability) and the expected rate of return on plan assets. These assumptions are evaluated and updated annually.
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. For 2023, the discount rate used in the determination of net periodic pension expense for the U.S. Plan and the U.K. Plan will be 5.55% and 4.8%, 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 $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. 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. 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. 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.
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. 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. 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.
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. Changes in the value of the U.S. dollar relative to the currencies of countries in which we operate impact our reported assets, liabilities, revenue and expenses. Exchange rate fluctuations can also impact the settlement of intercompany receivables and payables between our subsidiaries in different countries. 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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. We 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. 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.
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. 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. 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. 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. 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.
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. 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 do not expect to recognize impairment losses on investment securities in an unrealized loss position as we have the intent and ability to hold these securities until recovery of unrealized losses or maturity.
Credit Risk
We are exposed to credit risk on our accounts receivable and finance receivable balances. 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. We maintain provisions for potential credit losses based on historical experience, age of receivable, current economic conditions and future outlook and other relevant factors that may impact our customers’ ability to pay. We continually evaluate the adequacy of our allowance for credit losses and adjust as necessary.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Consolidated Financial Statements and Schedules" in this Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), that are designed to reasonably assure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to reasonably assure that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosure.
Any system of controls and procedures, no matter how well designed and operated, can provide only reasonable (and not absolute) assurance of achieving the desired control objectives. Under the direction of our CEO and CFO, management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as required by Rule 13a-15 or Rule 15d-15 under the Exchange Act. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and procedures were effective as of December 31, 2022.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Management assessed the effectiveness of the internal control over financial reporting as of December 31, 2022 under the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013) and concluded that the internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report in this Form 10-K.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Other than information regarding our executive officers disclosed in Part I of this Annual Report, the information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.
Code of Ethics
We have Business Practices Guidelines (BPG) that apply to all our officers and other employees and a Code of Business Conduct and Ethics (the Code) that applies to our Board of Directors. The BPG and the Code are posted on our corporate governance website located at www.pb.com/us/our-company/leadership-and-governance/corporate-governance.html. Amendments to either the BPG or the Code and any waiver from a provision of the BPG or the Code requiring disclosure will be disclosed on our corporate governance website.
Audit Committee - Audit Committee Financial Expert
The information regarding the Audit Committee, its members and the Audit Committee financial experts is incorporated by reference to our Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table provides information as of December 31, 2022 regarding the number of shares of common stock that may be issued under our equity compensation plans.
Plan Category (a)
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) (b)
Weighted-average exercise price of outstanding options, warrants and rights (2) (c)
Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
Equity compensation plans approved by security holders
18,036,423 $9.91 17,217,552
Equity compensation plans not approved by security holders
- - -
Total 18,036,423 $9.91 17,217,552
(1) Includes 10,027,048 shares issuable pursuant to outstanding stock options, 7,197,755 shares issuable pursuant to outstanding RSUs and 811,620 shares issuable pursuant to outstanding PSUs.
(2) Excludes RSUs and PSUs that convert to common stock from determination of weighted average exercise price.
Other than information regarding securities authorized for issuance under equity compensation plans, the information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Index to Consolidated Financial Statements and Schedules
Page Number in Form 10-K
Consolidated Statements of Income (Loss) for the years ended December 31, 2022, 2021 and 2020 38
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020 39
Consolidated Balance Sheets at December 31, 2022 and 2021 40
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 41
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2022, 2021 and 2020 42
Notes to Consolidated Financial Statements 43
Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2022, 2021 and 2020 87
(a)(2) Exhibits
Reg. S-K
exhibits
Description Status or incorporation by reference
3(a) Amended and Restated Certificate of Incorporation of Pitney Bowes Inc. Incorporated by reference to Exhibit 3(i)(a) to Form 8-K filed with the Commission on September 30, 2019 (Commission file number 1-3579)
3(b) Pitney Bowes Inc. Amended and Restated By-laws (effective May 10, 2013) Incorporated by reference to Exhibit 3(d) to Form 8-K filed with the Commission on May 13, 2013 (Commission file number 1-3579)
4 Description of Registered Securities Exhibit 4
4(a) Senior Debt Indenture, dated as of February 14, 2005, by and between the Company and Citibank N.A., as trustee Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-3 filed with the Commission on June 18, 2008 (Commission file number 1-3579)
4(b) First Supplemental Indenture, dated as of October 23, 2007, by and among Pitney Bowes Inc., The Bank of New York, as successor trustee, and Citibank, N.A., as resigning trustee Incorporated by reference to Exhibit 4.1 to Form 8-K filed with the Commission on October 24, 2007 (Commission file number 1-3579)
4(c) Supplemental Indenture No. 2 dated as of February 26, 2020, by and between Pitney Bowes Inc. and The Bank of New York Mellon, as successor trustee to Citibank N.A. Incorporated by reference to Exhibit 4.1 to Form 8-K filed with the Commission on February 26, 2020 (Commission file number 1-3579)
4(d) Form of 5.25% Global Medium-Term Note due 2037 Incorporated by reference to Exhibit 4(d)(1) to Form 8-K filed with the Commission on November 16, 2006 (Commission file number 1-3579)
4(e) Officer's Certificate establishing the terms of the Notes, dated March 7, 2013, and Specimen of 6.70% Notes due 2043 Incorporated by reference to Exhibits 4.1 and 4.2 to Form 8-K filed with the Commission on March 7, 2013 (Commission file number 1-3579)
4(f) Officer's Certificate establishing the terms of the 4.625% Notes due 2024, dated March 13, 2014, and Specimen of 4.625% Notes due 2024. Incorporated by reference to Exhibits 4.1 and 4.2 to Form 8-K filed with the Commission on March 13, 2014 (Commission file number 1-3579)
4(g) Indenture, dated March 19, 2021, among Pitney Bowes Inc., the guarantors party thereto and Truist Bank, as trustee, with respect to Pitney Bowes Inc.'s 6.875% Senior Notes due 2027. Incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the Commission on March 23, 2021 (Commission file number 1-3579).
4(h) Indenture, dated March 19, 2021, among Pitney Bowes Inc., the guarantors party thereto and Truist Bank, as trustee, with respect to Pitney Bowes Inc.'s 7.250% Senior Notes due 2029. Incorporated by reference to Exhibit 4.2 to the Form 8-K filed with the Commission on March 23, 2021 (Commission file number 1-3579).
10(a) * Retirement Plan for Directors of Pitney Bowes Inc. Incorporated by reference to Exhibit 10(a) to Form 10-K filed with the Commission on March 30, 1993 (Commission file number 1-3579)
10(b.3) * Pitney Bowes Inc. Directors' Stock Plan (Amended and Restated effective May 12, 2014) Incorporated by reference to Exhibit 10(b.3) to Form 10-K filed with the Commission on February 20, 2015 (Commission file number 1-3579)
10(d) * Pitney Bowes Inc. 2007 Stock Plan (as amended November 7, 2009) Incorporated by reference to Exhibit (v) to Form 10-K filed with the Commission on February 26, 2010 (Commission file number 1-3579)
10(e) * Pitney Bowes Inc. Key Employees' Incentive Plan (as amended and restated February 4, 2019) Incorporated by reference to Exhibit 10(e) to Form 10-K filed with the Commission on February 20, 2019 (Commission file number 1-3579)
PART IV
Reg. S-K
exhibits
Description Status or incorporation by reference
10(f) * Pitney Bowes Severance Plan (as amended and restated as of January 1, 2008) Incorporated by reference to Exhibit 10(e) to Form 10-K filed with the Commission on February 29, 2008 (Commission file number 1-3579)
10(g) * Pitney Bowes Senior Executive Severance Policy (as amended and restated as of February 4, 2019) Incorporated by reference to Exhibit 10(g) to Form 10-K filed with the Commission on February 20, 2019 (Commission file number 1-3579)
10(h) * Pitney Bowes Inc. Deferred Incentive Savings Plan for the Board of Directors, as amended and restated effective January 1, 2009 Incorporated by reference to Exhibit 10(g) to Form 10-K filed with the Commission on February 26, 2009 (Commission file number 1-3579)
10(i) * Pitney Bowes Inc. Deferred Incentive Savings Plan as amended and restated effective January 1, 2009 Incorporated by reference to Exhibit 10(h) to Form 10-K filed with the Commission on February 26, 2009 (Commission file number 1-3579)
10(k) * Form of Long Term Incentive Award Agreement Incorporated by reference to Exhibit 10(k) to Form 10-K filed with the Commission on February 25, 2013 (Commission file number 1-3579)
10(m)* Pitney Bowes Director Equity Deferral plan dated November 8, 2013 (effective May 12, 2014) Incorporated by reference to Exhibit 10(o) to Form 10-K filed with the Commission on February 22, 2016 (Commission file number 1-3579)
10(o)* Pitney Bowes Executive Equity Deferral Plan dated November 7, 2014 Incorporated by reference to Exhibit 10(p) to Form 10-K filed with the Commission on February 22, 2016 (Commission file number 1-3579)
10(p)* Pitney Bowes Inc. 2013 Stock Plan Incorporated by reference to Annex A to the Definitive Proxy Statement for the 2013 Annual Meeting of Stockholders filed with the Commission on March 25, 2013 (Commission file number 1-3579)
10(q)* Amended and Restated Pitney Bowes Inc. 2018 Stock Plan Incorporated by reference to Annex A to the Definitive Proxy Statement for the 2019 Annual Meeting of Stockholders filed with the Commission on March 18, 2020 (Commission file number 1-3579)
10(r) Credit Agreement, dated as of November 1, 2019 (the "Credit Agreement"), among the company, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on November 5, 2019 (Commission file number 1-3579)
10(s) First Incremental Facility Amendment, dated as of February 19, 2020, to the Credit Agreement, among the company, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., administrative agent. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on February 20, 2020 (Commission file number 1-3579)
10(t) First Amendment, dated as of March 19, 2021, among Pitney Bowes Inc., the subsidiaries of Pitney Bowes Inc. party thereto, the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on March 23, 2021 (Commission file number 1-3579)
10(u) First Refinancing Agreement, dated as of March 19, 2021, among Pitney Bowes Inc., the subsidiaries of Pitney Bowes Inc. party thereto and JPMorgan Chase Bank, N.A., as administrative agent and refinancing tranche B term lender. Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the Commission on March 23, 2021 (Commission file number 1-3579)
10(v) Second Amendment, dated as of May 11, 2022, to the Credit Agreement, among Pitney Bowes Inc., the Lenders and issuing banks party thereto and JP Morgan Chase, N.A., as administrative agent Incorporated by reference to Exhibit 10.1 to the Form 10-Q filed with the Commission on November 4, 2022 (Commission file number 1-3579)
10(w) Third Amendment, dated as of December 7, 2022, to the Credit Agreement, among Pitney Bowes Inc., the Lenders and issuing banks party thereto and JP Morgan Chase, N.A., as administrative agent. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on December 8, 2022 (Commission file number 1-3579)
10(x) Fourth Amendment, dated as of December 8, 2022, to the Credit Agreement, among Pitney Bowes Inc., the Lenders and issuing banks party thereto and JP Morgan Chase, N.A., as administrative agent Exhibit 10(x)
21 Subsidiaries of the registrant Exhibit 21
23 Consent of independent registered accounting firm Exhibit 23
31.1 Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. Exhibit 31.1
31.2 Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. Exhibit 31.2
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 Exhibit 32.1
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 Exhibit 32.2
PART IV
Reg. S-K
exhibits
Description Status or incorporation by reference
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Calculation Linkbase Document
101.DEF XBRL Taxonomy Definition Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase Document
101.PRE XBRL Taxonomy Presentation Linkbase Document
104 The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL (included as Exhibit 101).
* The Exhibits identified above with an asterisk (*) are management contracts or compensatory plans or arrangements.
The Company has certain outstanding long-term indebtedness that does not exceed 10% of the total assets of the Company; therefore, copies of instruments defining the rights of holders of such indebtedness are not included as exhibits. The Company agrees to furnish copies of such instruments to the SEC upon request.