Shipping and Mailing Industry

Pitney Bowes Inc.

Industry View
The size of the mailing industry compared to other key U.S. industries
is significant. What happens in the mailing industry echoes throughout the
economy.

Industry No. of jobs Revenue

Mailing 8.4 million $1.3 Trillion
Airline 10.0 million $1.0 Trillion

Oil & natural gas 9.6 million $1.1 Trillion

8 Million Employees 8.6% of US GDP

Annual Revenue =$1.3 Trillion 200+ Years Old

External Factor
Impact of GDP growth
Population and household growth
Business growth
Financial accounts

Date GDP Value MailVolume (Billions of pieces of mail)

2002 3.76% 202.8
2007 4.40% 208.9
2012 3.24% 201.5
2016 - 2017 2.43% 181.7

GDP Trend US

6.00%

4.00%

2.00%
0.00%
-2.00%

GDP Value
External Factor
Technological factors -Physical to Digital

Organic growth in number of households

Growth in economy
Share capture from newspaper
Shift to online alternatives to acquisition mail
(search ads, banner ads)
Shift to online alternatives for retention mail
(e.g., email to existing customers)
Increased diversion to private carrier delivery
Diversion to emerging hybrid mail options

Positive trend for Industry

Negative trend for Industry

External Factor
Inflation
Core inflation rate tracks changes in prices that consumers pay for a basket of goods which excludes
volatile food and fuel costs
increasing losses growing year after year that are caused by sharply declining volumes on an
increasing cost base.
External Factor
Inflation

Base Case projection of pieces per delivery point and revenue per delivery point per delivery
day
External Factor
Globalization and E-Commerce
Major Driver for global Shipping/Parcel service industry
Primarily involves B2B & B2C e-Commerce

Opportunity
expected to reach more than $1.915 Trillion by this Year.
huge opportunities for parcel delivery service providers
Challenges
Huge volumes come higher costs, larger infrastructure, and pricing pressures.
Automation for repetitive processes such as weighing, measuring, and certifying parcels, printing and labeling boxes,
and routing.
 Industry Performance
Measure Company Dec-11 Dec-12 Dec-13 Dec-14 Dec-01

16.34 14.56 16.8 18.76 16.69

Pitney Bowes
Stamps.com 81.53 65.26 49.59 28.35 -1.65

ROIC Neopost 13.95 14.51 14.22 12.44 8.98

16.21 16.67 16.09 17.07 17.59

Pitney Bowes
16.96 20.89 26.69 16.17 -2.49
Stamps.com
25.69 23.64 23.91 23.42 19.58
Operating Margin Neopost

7.44 5.56 1.95 5.03 6.46

Pitney Bowes
31.76 32.29 27.77 16.69 -1.07
Stamps.com
7.73 7.16 6.8 6.48 4.77
ROA Neopost

11.7 9.08 3.69 8.73 11.4

Pitney Bowes
25.86 33.34 34.54 25.04 -1.96
Stamps.com
16.12 15.32 15.01 14.97 12.04
Net Margin Neopost
Five Forces Trends
Threat of
New
Entry
Moderate/Low

Rivalry
Power of Power of
between
Suppliers buyers
Competitors
Moderate High
High

Threat to
Substitute
Low
Threat of New Entry- Mod/Low
In last 5 years no new Entry, mostly acquisitions among existing players

Important Economies of Scale

Hard to Differentiate

High Capital Requirements to Start New Biz

Leaders Control Distribution Channels

Leaders Have Highly Recognized Brands

Supplier and Buyer relationship over time

Buyer Power Mod/High
Enterprise Buyers:
Marketplace buyer
1. eBay
2. PayPal
3. Amazon
Retail Stores like
1. Macy's
2. Target
Individuals

Volume plays the role, more volume demand means more bargaining power.

Size Does Matter (individuals v. Enterprise like eBay/Amazon)

Threat of Backward Integration

Supplier Power Mod
Top 4 Suppliers
1. USPS, CPC, RMG,CLP {Postal}
2. UPS
3. FedEx
4. DHL
Tier 2 and Tier 3 Carriers play important role

Competition among T1 and T2 and T3 suupliers

Intensity of Rivalry High
Current rivals in US
1. Pitney Bowes
2. Stamps/Indicia
3. NeoPost

Handful of High Powered Rivals

US Economy

High Fixed Costs

Homogeneous Industry

High Exit Barriers

Threat of Substitutes Low
Growing Store Partnerships
Growing Online Signatures
Industry Key Success Factors
Delivering for consumers
Consumer expectations are evolving rapidly with overall eCommerce experience.
Accenture research shows 35 percent of consumers are dissatisfied with the delivery
experience.
The opportunity from data analytics
identify patterns or predict behaviors, reinvent customer relationships, better understand
business performance, and generate new sources of revenue.
Increasing importance of cross-border eCommerce
With shrinking global boundaries concept of Anywhere to Anywhere Shipping is prevalent and
growing.
cross-border B2C eCommerce is expected to grow more than 27 percent annually
More than 75 percent of that growth will be driven by new consumers trying cross-border
eCommerce for the first time.
Industry Key Success Factors
Key Trend that Shapes Industry
 Financial Comparison
Measure Company 2011 2012 2013 2014 2015
Pitney Bowes 5.28B 4.9B 3.87B 3.82B 3.58B
Stamps.com 101.59M 115.66M 127.82M 147.27M 213.96M
Total Revenue Neopost 1B 1.07B 1.1B 1.11B 1.19B

Pitney Bowes 2.61B 2.43B 1.7B 1.68B 1.56B

Stamps.com 26.21M 29.43M 27.5M 34.51M 47.74M
Cost of Sales Neopost 222.3M 238M 257.7M 267.1M 300.2M

SG&A Expense Pitney Bowes 1.86B 1.73B 1.53B 1.48B 1.38B

Research &
148.65M 136.91M 110.41M 109.93M 110.16M
Development
Other SG&A 1.71B 1.59B 1.42B 1.37B 1.27B

Stamps.com 58.15M 62.08M 66.2M 79.42M 109.75M

9.4M 10.24M 10.96M 13.31M 20.71M
48.75M 51.84M 55.24M 66.11M 89.04M

Neopost 523.8M 565.3M 575.3M 601.7M 656.1M

30M 33M 30.7M 36.7M 43.7M
493.8M 532.3M 544.6M 565M 612.4M

Pitney Bowes 351.32M 435.93M 301.73M 300.01M 402.67M

Stamps.com 26.27M 38.56M 44.15M 36.88M (4.2M)
NET INCOME Neopost 153.6M 160.6M 164M 134M 128M
 Financial Comparison
Measure Company 2011 2012 2013 2014 2015
Pitney Bowes 8.15B 7.86B 6.77B 6.49B 6.14B
Stamps.com 107.98M 130.85M 187.12M 254.73M 528.61M
Total Assets Neopost 2.23B 2.49B 2.58B 3.04B 2.84B

Pitney Bowes 3.26B 3.21B 2.84B 2.76B 2.32B

Stamps.com 71.93M 55.93M 97.24M 67.95M 137.08M
Current Assets Neopost 742.3M 751.7M 808M 1.11B 823.6M

Pitney Bowes 3.09B 2.88B 2.23B 2.36B 2.28B

Stamps.com 13.97M 17.9M 15.35M 33.91M 132.29M
Current Liablities Neopost 1.11B 681.2M 724.9M 1.03B 721.7M

Pitney Bowes (38.99M) 110.63M 188.4M 77.26M 178.72M

Stamps.com 94.01M 112.95M 171.77M 205.03M 238.97M
Total Stockholder Equity Neopost 696.8M 746.6M 769.6M 817.8M 1.07B

Pitney Bowes 56.41%

Stamps.com 77.69%
Gross Margin % Neopost 74.78%

Pitney Bowes 3.06 2.22 0.71 1.65 2.04

Stamps.com 1.78 2.4 2.81 2.3 -0.26
EPS Neopost 4.71 4.74 4.78 3.89 3.72

Pitney Bowes 3.489B

Stamps.com 1.65B
Market Value of the Firm Neopost 855.43M
 References:
https://www.marketwatch.com
https://www.gurufocus.com
https://www.financials.morningstar.com
https://about.usps.com/publications/annual-report-comprehensive-statement-
2013/annualreport2013_048.htm
https://www.accenture.com/t20151015T043945__w__/us-
en/_acnmedia/Accenture/Conversion-
Assets/DotCom/Documents/Global/PDF/Dualpub_23/Accenture-Achieving-
High-Performance-in-the-Postal-Industry-2015-V2.pdf
http://marketrealist.com/2015/07/e-commerce-changed-courier-services-
industry/
http://www.tradingeconomics.com/united-states/core-inflation-rate
https://about.usps.com/future-postal-service/gcg-narrative.pdf
http://www.tradingeconomics.com/united-states/core-inflation-rate
http://govinfo.library.unt.edu/usps/offices/domestic-finance/usps/pdf/mail-
volume-scenarios-5-20.pdf
http://www.multpl.com/us-gdp-growth-rate/table/by-year
http://marketrealist.com/2015/07/economic-growth-important-courier-service-
industry/
Thank you