Good morning, and welcome to the Pitney Bowes second quarter 2021 earnings conference call. Your line's been placed in listen-only mode during the conference call until the question- and- answer segment. Today's call is also being recorded. If you have any objections, please disconnect your lines at this time. I would now like to introduce participants on today's conference call. Mr. Marc Lautenbach, President and Chief Executive Officer, Ms. Ana Maria Chadwick, Executive Vice President and Chief Financial Officer, and Mr. Adam David, Vice President, Investor Relations and Financial Planning. Mr. David will now begin the call with a safe harbor overview. Good morning. Included in this presentation are forward-looking statements about our expected future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections. More information about these risks and uncertainties can be found in our earnings press release, our 2020 Form 10-K annual report, and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on Investor Relations. Please keep in mind that we do not undertake any obligation to update any forward-looking statements as a result of new information or developments. Also, for non-GAAP measures used in the press release or discussed in the presentation, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our Investor Relations website. Additionally, we provided slides that summarize many of the points we will discuss during the call. These slides can also be found on our investor relations website. Our President and Chief Executive Officer, Marc Lautenbach, will start with a few opening remarks. Marc? Thank you, Adam, and thank you everyone for joining today's call. We delivered a solid quarter and first half of the year and continued to make progress against our overall objectives. Every business grew revenue and improved EBIT from prior year. Overall, revenue at constant currency grew 6%, and EBIT grew 16%. SendTech and Presort both grew revenue, albeit as expected given the easier compare, and both businesses grew EBIT. Presort continues to see a nice recovery in volumes from pandemic levels, and EBIT margins remain in the double-digit range, moving back toward the long-term model. SendTech's revenue growth was led by a strong performance in our SendPro product family, in addition to continued double-digit growth in our SaaS-based shipping portfolio. The business recorded its third consecutive quarter of year-over-year EBIT growth and continues to maintain its EBIT margin above 30%. Global E-commerce grew revenue this quarter despite a tough prior year comparison, and importantly, also improved quarter-to-quarter. EBITDA turned positive in the quarter, and both EBIT and EBITDA improved meaningfully over prior year and prior quarter. The path to profitability for e-commerce is an integrated approach around talent, training, automation, and execution. We've made several important additions to our team, and the new management talent, along with the maturation of our existing workforce, are clearly yielding results. We continue to work to optimize our shipping lanes and continue to focus our investments toward more automation. We continue to make good progress with substantial opportunity still in front of us. Entering the second half of 2021, I like where we sit. The revenue comparisons will get more difficult in the second half of the year compared to the first half, but this quarter was a glimpse into what the business can look like when we hit on all cylinders, and that improved profitable revenue growth is within our grasp. Over the course of the last year or so, I have said that Pitney Bowes will come out of this pandemic a bigger and better company. While we are not out of the woods with the pandemic, we're certainly on the trajectory of being a bigger company, and we're working every day at becoming a better company. With that, let me turn it over to Ana. Thank you, Marc. Our second quarter results reflect solid momentum across all of our businesses. We continue to make good progress and are set up well for the second half of the year. Unless otherwise noted, I will talk to revenue comparison on a constant currency basis and other items such as EBIT, EBITDA, EPS, and cash flow on an adjusted basis. Revenue was $899 million and grew 6% over prior year. Adjusted EPS was $0.11 and included a $0.03 tax benefit in the quarter. Free cash flow was $87 million, and cash from operations was $79 million, which was a solid performance in the quarter and in line with our expectations. Although down from prior year, it is important to remember that last year included a $66 million contribution from the decline in our finance receivables, which was largely COVID related. This was an item that we identified as a headwind to our free cash flow comparison earlier this year. During the quarter, we paid $9 million in dividends and made $5 million in restructuring payments. We spent $40 million in CapEx as we continue to invest in our network and productivity initiatives across the business. We ended the quarter with $814 million in cash and short-term investments. Total debt was $2.4 billion, which is down $289 million from prior year. When you take our finance receivable and cash into account, our implied operating debt is $567 million. Let me turn to the P&L, starting with revenue versus prior year. Equipment sales grew 46%, supplies grew 14%, and business services grew 6%. We had decline in support services of 1%, rentals of 2%, and financing of 16%. Gross profit of $301 million improved about $17 million over prior year on growth across all segments. Gross margin was 33%, which was slightly down from the same period last year, but an improvement from the last two quarters. SG&A was $236 million and approximately $3 million higher than prior year. SG&A was 26% of revenue, which was nearly a two-point improvement over prior year. Within SG&A, corporate expenses were $56 million, which was up about $7 million from prior year, largely due to higher employee variable related costs. R&D was $11 million, or 1% of revenue, which was up approximately $4 million from prior year. During the quarter, we received the remaining insurance proceeds of $3 million for the Ryuk ransomware attack. EBITDA was $96 million, an increase of $6 million over prior year, and EBITDA margin was 11%, which was flat to prior year. EBIT was $56 million, an increase of $8 million over prior year, and EBIT margin was 6%, which was a slight increase over prior year. Interest expense, including finance interest, was $36 million. Our tax provision was a benefit of about $300,000 and includes a benefit related to a U.K. tax legislation change, which also contributed about $0.03 to EPS in the quarter. Shares outstanding were approximately 179 million. Let me now turn to each segment's performance. It is important to note that the year-over-year comparison includes the impact of COVID. Prior year results saw a positive impact on e-commerce revenue and an adverse impact on SendTech and Presort. I will also provide growth rates from 2019- 2021 for the larger transactional parts of our business. Within e-commerce, revenue grew 3% to $418 million and also grew from first quarter levels. The revenue growth over prior year was driven by our cross-border services and partially offset by lower domestic parcel and digital services. Domestic parcel volumes were $44 million in the quarter. Compared to the second quarter of 2019, e-commerce revenue grew 48%. Demand for our services continues to be strong as new business signings accelerated from the first quarter, as we're getting merchants onboarded for peak season while balancing demand from current clients. We also continue to have success with bundling our services, which now represents close to 50% of all new business. EBITDA for the quarter was $8 million. EBIT was a loss of $11 million. Both EBIT and EBITDA were meaningful improvements from prior year. We also made significant progress sequentially, where second quarter's EBIT margins improved nearly 400 basis points as compared to first quarter, as we were able to improve our productivity and work through some of the residual impact from last year's peak that we saw earlier in the first quarter. We continue to work to improve service levels and make progress against our productivity initiatives within our domestic parcel services, while still dealing with industry-wide concerns around high transportation costs and a competitive labor market. We made progress on several unit economics as compared to the first quarter, with the greatest being around labor and transportation cost per piece. We saw a reduction in our labor cost per piece, in part due to the contribution of our new management talent, along with the maturation of our existing workforce. Parcels processed per hour continued to improve from first quarter levels. Transportation cost per piece also improved versus prior quarter as we continue to better optimize our shipping lanes. Our improvements in execution, coupled with better network balancing, are certainly yielding results. We continue to invest in automation, including high-end sorters in our larger facilities and sort to light automation in our mid-size facilities. We also announced our partnership with Ambi Robotics last month, which we will be rolling out across our network over the next few years. These initiatives take time to integrate, train our employees, and produce results. While we're seeing some early benefits, we expect to yield additional benefits during the upcoming peak season. Also, as mentioned last quarter, we are in the process of opening two new sites and upgrading another. We expect to have this completed prior to the peak season, and it will allow us to handle volumes more efficiently. Ultimately, we expect transportation and labor productivity, along with optimizing our final mile cost, to be critical drivers in attaining our long-term e-commerce margins. As Marc mentioned, we have made some important additions to our e-commerce management team in order to execute this plan. It is an exciting time, and our e-commerce business is moving in the right direction, with substantial opportunities still in front of us. Our Presort Services and SendTech businesses both turned in solid performances, which were in line with our expectations. Within Presort, revenue was $135 million and grew 14%. Compared to the second quarter of 2019, Presort revenue grew 5%. Average daily volumes grew 10% over prior year, largely driven by growth in first-class volumes of 4% and marketing mail volumes of 39%. EBITDA was $23 million, and EBITDA margin was 17%. EBIT was $16 million, and EBIT margin was 12%. EBIT and EBITDA dollars improved from prior year due to revenue growth and margin expansion. We remain focused on our productivity initiatives, having improved pieces fed per labor hour by 3%, resulting in 60,000 less processing hours versus prior year. Within SendTech, revenue was $346 million and grew 6%. We continue to differentiate ourselves in the market with a wide range of end-to-end mailing and shipping offerings that are attractive to businesses ranging from large enterprises to small offices. SendTech's SaaS-based shipping products grew at a low double-digit rate over prior year to $31 million this quarter. The number of labels printed through our shipping offering grew over 30%, and paid subscriptions grew about 70% over prior year. Additionally, shipping volumes that our U.S. clients finance grew nearly 70% over prior year. Our end-to-end value proposition continues to resonate with clients as they adopt and use these new offerings, which bring value to their businesses. Equipment sales grew 46% over prior year. Compared to the second quarter 2019, equipment sales grew 1%, which is an important metric as this is a key indicator for future streams in the traditional side of the SendTech business. This also points to how our new sending products are resonating with clients and helping to strengthen our portfolio. We continue to see strong placement of our SendPro C and mailstation multipurpose devices. Our international operations also saw strong equipment sales growth, and we continue to roll out new products in these markets. Through the quarter, we, like many others, experienced some transportation challenges related to our supply chain. We are proactively managing our inventory and are able to place a significant level of new equipment despite those challenges. Looking ahead at the second half of the year, we continue to closely monitor the semiconductor industry and potential supply shortage concerns. While it is still a bit too early to tell, we would expect the impacts, if any, to be more pronounced in the fourth quarter. We will look to mitigate any potential supply shortages by working closely with our suppliers and repositioning our solutions with our clients as necessary. EBITDA was $115 million, and EBITDA margin was 33%. EBIT was $107 million, and EBIT margin was 31%. EBIT and EBITDA dollars improved from prior year and was the third consecutive quarter of improvement for both metrics. Let me now turn to our full year outlook, which is in line with what we have previously communicated. As we all know, there's still a level of uncertainty in the macro environment, particularly as new COVID variants continue to ramp up and concerns around supply chain remain. We will continue to monitor any potential impacts closely. We still expect annual revenue at constant currency to grow over prior year in the low to mid-single digit range. We still expect adjusted EPS to grow over prior year, and more specifically, to be in the $0.35-$0.42 range. We still expect free cash flow to be lower than prior year due to items that benefited 2020 and are not expected to continue at the same level this year. Prior year included a lower level of CapEx and finance receivables and higher customer deposits. We also expect our tax rate in the second half to be higher and return to more normal levels. Looking at the timing, we expect third quarter revenue to be in line with second quarter and the fourth quarter to be larger than the third, given a strong holiday peak season. Taking the midpoint of our adjusted EPS guidance into consideration, we currently expect our third quarter to represent nearly 20% of our full year attainment. Let me conclude on this. In the beginning of the year, we said that we expected revenue and adjusted EPS to grow, and we remain committed to this outlook. Each segment has delivered a solid performance through the first half of the year, improving revenue, EBITDA, and EBIT from prior year. We continue to generate good free cash flow and remain focused on maintaining a strong balance sheet. We also continue to make measurable progress and are confident in our ability to achieve our financial objectives. Thank you. Operator, please open the line for questions. And ladies and gentlemen, if you wish to ask a question, please press one then zero on your telephone keypad. You may withdraw your question at any time by repeating the one then zero command. If you're using a speakerphone, please pick up the handset before pressing the numbers. And once again, if you have a question, please press one then zero at this time. And our first question today comes from the line of Shannon Cross with Cross Research. Please go ahead. Thank you very much. I was just wondering how we should think about run rate for volume, during the quarter, and if you're able to meet domestic fulfillment. If we think about it as about 40 million parcels, a good run rate, and then how should we think about it for non-peak, post-pandemic? How should we think about, specifically what you're doing to ramp up for the fourth quarter? Thank you. Sure. Thanks, Shannon. I think it's easy to get lost in a sea of numbers. There's so many different dynamics and currents running through the marketplace. If I might, let me start with a macro view, and then go to a micro view. If you think about this from a macro perspective, e-commerce purchases as a percent of total retail last year went from roughly 16% to 26%, over a 50% increase. Subsequently, that number has regressed a little bit, but it's still 24%, 25%. Slightly below last year, but substantially above pre-COVID. Within that overall dynamic, there's also quarter-to-quarter dynamics. If you think about last year, in the world of COVID, first quarter we got two months in, before the virus hit. Second quarter was kind of the tsunami. Not only did you have many customers moving to e-commerce, and the internet for purchasing, but you had retail outlets that were essentially closed. Within the quarter-to-quarter dynamics last year, you had a particularly strong set of dynamics, in the second quarter and to a degree that moderated a touch, but lasted throughout the year. The second quarter was for all kinds of different reasons an unusual quarter. I should make one other comment from a macro perspective. All of this was against an industry capacity that was really oriented towards pre-COVID levels. Think of an industry that had capacity to accommodate the 16% or 17% with this influx of demand. From a micro perspective, Pitney Bowes is a challenger. We tried to say yes to as many customers, and as much volume as we could, partially because we saw it as an opportunity to get to scale, partially because we are a customer-driven company, and we wanted to help out as many clients. Candidly, many clients just didn't have choices next year as some of the other participants in the industry shut down. I would say in retrospect, we probably took a little bit more volume than we could handle well. Within that, we probably took some parcels and some particular lanes that in retrospect, we just couldn't accommodate as much as we wanted to. As we go forward, we are very focused on handling the volume that we think we can do exceptionally well. That limits you to certain lanes, where we've got capacity, as the industry continues to be capacity constrained and candidly certain size parcels. Our sweet spot within the marketplace is parcels that are 1 lbs-ish, slightly above, slightly below. Within that, as you said, we saw volume around 40 million-45 million parcels, in the second quarter. We suspect that will be probably slightly higher, in the third quarter, as clients begin to prepare for peak. A fourth quarter that will be on top of that, perhaps slightly below last year. Our focus is on what we can do well, what we can do with a high service level to a client, and importantly, what we can do profitably. One of the things that happened last year is we got so much volume all at once. We had to throw a lot more cost at it, both from a labor and transportation perspective. We're clearly going to try to accommodate as many clients as we can again this year, but we're going to do it in a way that we can have the highest commitment to service levels. At the same time, do it in a way that's economical and profitable to us. Hopefully. I know that's a long-winded answer, but I think it's important to kind of understand the overall dynamics. No, I think that was really helpful. I guess my follow-up question is just, how do we think about your opportunity to grow, and this is over a longer term period of time. Is it incremental customers that are around that 1 lbs level, or will you develop your facility such that you can handle a wider variety of parcels? I'm just trying to think about how you think about your CapEx investment and what you do. Thanks. No, that's a really good question. If you think about going forward, you had this kind of one-time step up with a slight digression. I suspect as you get into 2022, the out years, what you're thinking about for sustained growth, it goes back to the 10%-15% growth that the market was clipping along at. In terms of how we're thinking about it, the gating factor on size of parcel isn't as much your network footprint as it is the tooling inside of the warehouses. There's different tooling that accommodates different size parcels. Yeah, we will continue to build out our footprint. We've got a couple more sites that we'll bring online here in the second half of the year, but we're going to tool them for what we think our sweet spot in the marketplace is. I'd say, think about the 10%-15% long term. We will continue to build out the network. I think the build-out of the network, and we're looking at different scenarios, candidly, right now. Do you accelerate the build-out and finish it, or do you do it over a more staged process and kind of meter that out. I think the overall capital spending for the quarter was $40 million. That was kind of a reversion back to what it was. That's kind of how we're thinking about it, for the moment. If we change that and we decide that we're going to accelerate, we will. The total build-out of the network is, in the context of our balance sheet, certainly very manageable. Okay, great. Thank you so much. We do have a question from the line of Allen Klee with Maxim Group. Please go ahead. Hi, good morning. Two questions. One is the adding of the two new facilities for e-commerce plus optimizing another one, what percent does that increase your capacity in domestic parcel? Then second, you highlighted cross-border as an area that attributed to your Global E-commerce results. Could you just go into a little bit of what's behind that? Thank you so much. Yeah. I'm going to defer on the first question, Allen, get back to you in terms of how much capacity that increased at. I don't think it materially increased the capacity. It was more a modernization of the existing facilities. As you think about the economics of that business, the deeper you can ingest into the postal network, and the closer you are to be able to ingest deeper into the postal network, the better economics that you have. It was more kind of a fine-tuning of the footprint to improve our efficiency and our costs, as opposed to something that dramatically improved or increased capacity. I'm sorry, what was your second question, Allen? Cross-border. Cross-border, yeah. Cross-border is a combination of a couple of things. First of all, exchange rates matter a lot in cross-border. When you've got a relatively strong dollar to other currencies, that helps. We continue to invest in our cross-border platforms. We've got a couple of large clients that continue to give us more and more demand, particularly from the U.S. into Canada. Interestingly enough, we're able to protect pricing in that marketplace as well. You've got some macro things that are going for you with currencies, and we've got a very good capability, particularly U.S. to Canada, which is attractive to some of the larger clients with meaningful scale. Thank you. We do have a question from the line of Kartik Mehta with Northcoast Research. Please go ahead. Hi, this is Alex on for Kartik. Good morning. Our first question had to do with just the profitability of Global E-commerce. Within this elevated demand environment, could you just talk about some of the factors that increased profitability for the quarter? Was it the in-source of new lanes, better use of the spot market and variable labor? Just comment on some of those factors that improved this quarter. Sure. Why don't Ana take a crack at that, and I'll add some color. Sure. We saw improvements in two key variables. We saw with the changes in management and labor strategies that we have been implementing, in combination with the automation, we saw improvement in parcels per hour. Our labor productivity is improving. The second factor that we also saw improvement was around our transportation. We're continuing the strategy that we have mentioned about insourcing lanes and making sure we optimize the capacity of the trucks better. Those two factors, I would say, were at the top. Of course, we continue to work our postage, and ensure we deliver at the best penetration levels that we can in the USPS. I would put them in that order. Yeah, I think Ana said it quite well. I would also add, if you think about pricing quarter-to-quarter, importantly, stayed pretty steady. As the industry continues to be capacity constrained, pricing's holding. We expect pricing will actually go up in the second half of the year, as there's more volume and more demand. As Ana said, labor was an improvement, quarter-to-quarter, pretty substantial improvement, but that's not really much of a product of the automation. That's just the labor model maturing. If you think about what our labor strategy had been or what it was when we bought Newgistics a bit ago, it was all a temporary labor force, and it remained a temporary labor force well into last year. That's problematic because you just don't get enough continuity in the specific role. As we've moved to a more permanent workforce, you can see the productivity improve. We're now at, I think, 40% of the workforce is permanent. We want to get that a little bit higher, which will allow you to kind of flex up and down with volume. I say that because it demonstrates and reveals the power of just having a more mature model. Also importantly, the benefits of automation are still in front of us. While we added some automation in the quarter, and we kind of like what we're seeing, I would consider those as kind of test and learn and sandbox type initiatives. It makes you very excited about that. Transportation improved, good quarter-over-quarter. It's still well above last year. If you look at the transportation unit costs from this year to last, it's still way high. We still have an opportunity in front of us. You saw some benefit from the redesign of the network. You saw some benefit from being able to in-source more of our own trucks. Again, there's lots of opportunity in both labor and transportation, and there is opportunity in our postal costs, which is the biggest single line item. That's a function of being able to ingest deeper into the postal network. I would say, the other thing I mentioned in my remarks, and Ana mentioned in her remarks, if you look at the 16 sites that we have now, we have 16 new leaders over the last 12 months. We have a very experienced team right now. I would say not just experienced in the world of warehousing and logistics, but experienced in the world of postal ingestion, which is kind of its own little world. Then on top of those 16 leaders, we first of all, I would mention Nick Smith, who was really the architect of much of our strategy around Global E-commerce, has moved to a product and strategy role, which is terrific. It gives him more time to think about how we go forward. To the team, we've also added a new person running our 16 centers from Amazon, as well as an individual from C.H. Robinson running our transportation. What you're looking at now, starting with Nick and team, led by Gregg Zegras, is a very experienced team that's been there and done that. It's fascinating to see as you put these new leaders in place, how quickly they're able to do the basic blocking and tackling, and you see improvements. Okay, great. Thank you. Also, in regards to the growth that you saw within the equipment sales, I know part of that growth was just from the comparison of last year, but was there anything major that was also contributing to that growth for this quarter? Was that the higher product sales within the SendPro product family? Yes, you're absolutely right. Part of that was, of course, the easy comparison that was mentioned. We're seeing great traction in the market from the SendPro family, both the Mailstation and the SendPro C, and the shipping capabilities that tags along. We're seeing that, and we started also some international rollouts of the products. It's easy to kind of get lost in the year-over-year dynamics, and there's so much noise in the numbers. Ana's comment about growing 1% versus 2019, you think about that's a meaningful accomplishment in the context of a mail market that's still declining. If you go back to 2019, that kind of takes out all of the comparison issues, and it leads you back to precisely the point that Ana made, is it's new product innovation. If you look at the new products that the SendTech team has introduced, they're just doing great. They're doing great domestically, and we're starting to roll them out internationally. If you look at their overall revenue that's driven by new products, it's meaningful. The innovation pipeline is really starting to hit the ball hard. Okay, great. Thank you. Thanks for the insight. We do have a question from the line of Anthony Lebiedzinski with Sidoti & Company. Please go ahead. Good morning, and thank you for taking the questions. First, on the Global E-commerce side, nice to see that you will be able to get that to be EBITDA positive for the full year. In order to get that business to be EBIT positive, is that more of a function of gaining more productivity or more scale? Can you just comment on your high-level thoughts there? First of all, I'm going to take a small victory lap that we're actually EBITDA positive in the first half by a couple of hundred thousand dollars. We expect that to continue in the second half as we get more efficient, more productive, and more volume. In terms of your broader question of the path to sustained profitability towards our long-term models for Global E-commerce, I'm going to caveat this upfront, in that if you would've asked me that question 18 months ago, I would've given you an answer of how we get to the long-term model. The world's changed a lot in the last 18 months, not the least of which is pricing's gone up by 20%-25%. Unit cost on transportation has gone up substantially. We're redoing the long-term model. With that caveat of how we think about the long term, if you look at the path to the long-term margins, it will principally be driven by labor and transportation. Labor and transportation provide 60% of the total. If you think about the postal costs, that's another couple points. If you think about the mix between mix, scale, and pricing, that's a slight positive. Transportation and labor are the principal cost. Also warehousing kind of gives you a couple of points as well. Labor and transportation are the things to keep an eye on. We're going to fine-tune the long-term model. I don't think that'll change that much. Got it. Okay, that's very helpful. Switching over to the SendTech business, you posted your third consecutive quarter of improved EBIT. How sustainable is that? What are your thoughts there? Well, we think it's the right long-term thought. It's something that I wouldn't lead you to believe that that's something you would expect in 2022. As we think about the long-term model, we clearly believe that that business is positioned to be able to grow revenue and grow profit. It's got to get the shipping business into, a lesser degree, the financial services business of a little bit more scale. Long term, yes. Short term, we might have a couple of quarters as we have kind of getting our nose above water. Medium term, we expect continued progress. Got it. Just to follow up on that, actually, on the SendTech piece, so how much of your revenue is now coming from shipping? Well, it was $31 million out of the total. Got it. All right. Thank you and best of luck. Thank you. We do have a question from the line of Ananda Baruah from Loop Capital. Please go ahead. Hey, good morning, guys. Thanks for taking the question. Hey, Marc, just on the e-commerce marketplace and your thoughts about it, or at least the company's position that it does go back to being a 10%-15% revenue growth business. What are your thoughts on percentage of retail remaining online? A couple of things. Is retail online stronger now? Maybe just purchasing online being still 24%, 25%. Is that higher than you thought it would be when we entered the year? If it does stay elevated meaningfully above the mid-teens level, would that alter your thought process around the 10%-15%? Would it alter your thought process around long-term Pitney Bowes? I have a couple of follow-ups. Thanks. Sure. I would say there's been kind of an evolution of thinking on percent of retail over the Internet. When COVID first hit, that was kind of the million-dollar question, is how much of this volume sticks? I think shortly into the pandemic crisis, people became convinced that buying habits had changed substantially in a more permanent way. Yeah, I think you can argue whether it's going to be 2024, 2025, 2026, where it settles out, but it's going to settle out well above where it was. I think it's pretty clear. Certainly, working from home over the last 16 months, it's been striking the number of deliveries that come to the door. I don't think that's ebbing at all. I do think once it kind of finds that new level, that 2024, 2025, 2026, then it's going to have a personality that's driven much more by kind of retail and consumer trends. 10% or 15% is going to be well above what retail as a sector grows. You'll continue to see that percentage increase. It's not our expectation anywhere that it's going to grow 20%, 30%, 40% in a sustained way. In terms of how that makes me think about the opportunity, I love this opportunity. It's an opportunity that's got strong secular growth. It's an opportunity that's got industry players that are responsible in terms of how they think about pricing and how they think about managing demand. It's an industry that leverages our relationship with the USPS. It's an industry where we've got the right to win. If you think about it, you've followed the company for a while. Presort is a postal ingestion model for mail. What our Global E-commerce business is a postal ingestion business for parcels. We understand this space. We have the right to win. We've got all the right intellectual capital to be an important player here. Again, we ride off the postal service of scale. We're able to participate in this marketplace without having to buy plane fleets and automobiles. I really like where we're situated now. It couldn't be a better opportunity for us. Going back to the conversation you and Shannon were having, is there an opportunity to sort of change the tooling or add to the tooling in the warehouses and expand the TAM, I guess, at some point in the future that would make a difference to the business? I don't feel compelled to have to expand the TAM. It's plenty big as is. If you think about the addressable market on small parcels, we can grow substantially for a long period of time without having to focus on retooling our warehouses. Addressable opportunity is not the problem. Okay, awesome. I got two more quick ones. Given what you've seen so far in the marketplace this year, do you feel any different about sort of the leverage points in the e-commerce model? Do you think you can get to some of them more quickly over time? This maybe even doesn't take longer. I mean, sort of what's your thought process six months into this year on the leverage points on e-commerce over time? Yeah, I still think 2024 is kind of the right thought for us in terms of getting to the long-term model as I look at what needs to get done, and as we kind of refine the volume a little bit to be more congruent with our capabilities and then letting the labor model and the transportation kind of mature. As I said, we're updating the long-term plan now. We'll review that with you sooner versus later. Right now, I still think that the overall margin aspiration timeframe is kind of correct. Some of the elements underneath it might be a little bit different. I mean, certainly pricing, well, we know they're different. Pricing's way different than what we thought 18 months ago, as are transportation costs. Labor costs will kind of, I suspect at an hourly worker, they'll go up, but we have such an important opportunity to automate that our focus is on how we bring in a more reliable labor base that stays with us and add automation to that. That's helpful. Just quick housekeeping. This one would be for Ana. Ana, can you quantify the benefit from the lower bad debt expense to the e-commerce receipt? The benefit was around $7 million for the quarter. Got it. Any context around if that sort of going forward, if that will continue or change in any way? No. We expect the levels that we have to be realistic. Of course, we have some seasonality as you know, based on our billings and everything. We feel pretty good with our customer base and the types of credit that we have in our receivables. Based on what we see into the future, we think the levels should maintain. To the extent DSO is a predictor of this, which it is, DSO in that business is terrific. Their cash conversion in that business is crazy good. DSO is at industry best levels. That's helpful. Thank you, guys. Thanks a lot. We do have a question for the line of Jeff Harlib with Barclays. Please go ahead. Hi, good morning. Could you go into a little more detail about the semiconductor and supply shortages that you cited potentially in 4Q? In which products? In which businesses? Yep. It's in SendTech, in our SendPro product line. We use chips from principally Asia. It's kind of the same chips that everyone else is buying for, we're buying for as well. We're pretty confident that we've seen our way through the third quarter. You follow the space, so you understand how dynamic that is. It presents some risk, temporary risk to the fourth quarter. We see that risk as less than we did probably 30 days ago, but there's still a risk. Okay. In SendTech, can you just talk a little bit about in terms of the SendPro refresh cycle, you've seen very strong equipment sales. How much of your base do you see that rolling through, and when do you see that sort of maturing? We see it rolling through all of our base. If you think about that business, it's a lease business. The normal rhythm is you have probably 20%-25% of your products come up for renewal each year or trade up to a new technology. It's kind of rolling through on a fairly predictable basis. I think there's a couple more years left. Certainly, most of the international opportunity is still in front of us. Got it. Thanks very much. Thank you. With no further questions in queue, I'll now turn the call back to Mr. Lautenbach for any additional remarks. Terrific. Thank you. Thank you for joining today's call. Early in the year, we said we were poised for improved profitable revenue growth. We characterized profitable revenue growth as the last chapter of a successful transformation. We also said that Global Ecommerce would be EBITDA profitable this year. While this year isn't done, I like where we stand on profitable revenue growth, and I really like where Global Ecommerce stands in terms of being EBITDA positive. Another data point in the 2nd quarter. More work to do for sure, I certainly like how we're situated as we get into the 2nd half of the year. Thank you for your time, we'll talk soon. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference Services. You may now disconnect.