Finance Assets and Lessor Operating Leases

3 Months Ended

Mar. 31, 2024

Receivables [Abstract]

Finance Assets and Lessor Operating Leases

Finance Assets and Lessor Operating Leases

Finance Assets

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

Finance receivables consisted of the following:

	March 31, 2024						December 31, 2023
	North America		International		Total		North America		International		Total
Sales-type lease receivables
Gross finance receivables	$	981,126	$	130,139	$	1,111,265	$	987,743	$	143,466	$	1,131,209
Unguaranteed residual values	37,798		6,803		44,601		38,059		7,211		45,270
Unearned income	(255,945)		(40,847)		(296,792)		(253,711)		(42,847)		(296,558)
Allowance for credit losses	(13,213)		(2,479)		(15,692)		(13,942)		(2,786)		(16,728)
Net investment in sales-type lease receivables	749,766		93,616		843,382		758,149		105,044		863,193
Loan receivables
Loan receivables	330,526		17,983		348,509		342,062		17,865		359,927
Allowance for credit losses	(6,124)		(152)		(6,276)		(6,346)		(153)		(6,499)
Net investment in loan receivables	324,402		17,831		342,233		335,716		17,712		353,428
Net investment in finance receivables	$	1,074,168	$	111,447	$	1,185,615	$	1,093,865	$	122,756	$	1,216,621

Maturities of gross finance receivables at March 31, 2024 were as follows:

	Sales-type Lease Receivables						Loan Receivables
	North America		International		Total		North America		International		Total
Remainder 2024	$	276,844	$	47,624	$	324,468	$	212,740	$	17,983	$	230,723
2025	301,413		38,259		339,672		39,781		—		39,781
2026	215,733		24,302		240,035		31,234		—		31,234
2027	129,174		13,435		142,609		24,551		—		24,551
2028	53,162		5,333		58,495		15,644		—		15,644
Thereafter	4,800		1,186		5,986		6,576		—		6,576
Total	$	981,126	$	130,139	$	1,111,265	$	330,526	$	17,983	$	348,509

Aging of Receivables

The aging of gross finance receivables was as follows:

	March 31, 2024
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Past due amounts 0 - 90 days	$	970,612	$	128,802	$	327,806	$	17,731	$	1,444,951
Past due amounts > 90 days	10,514		1,337		2,720		252		14,823
Total	$	981,126	$	130,139	$	330,526	$	17,983	$	1,459,774

	December 31, 2023
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Past due amounts 0 - 90 days	$	977,744	$	140,857	$	339,789	$	17,664	$	1,476,054
Past due amounts > 90 days	9,999		2,609		2,273		201		15,082
Total	$	987,743	$	143,466	$	342,062	$	17,865	$	1,491,136

Allowance for Credit Losses

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

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

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

	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Balance at January 1, 2024	$	13,942	$	2,786	$	6,346	$	153	$	23,227
Amounts charged to expense	62		(123)		631		70		640
Write-offs	(1,178)		(156)		(1,260)		(67)		(2,661)
Recoveries	398		113		408		—		919
Other	(11)		(141)		(1)		(4)		(157)
Balance at March 31, 2024	$	13,213	$	2,479	$	6,124	$	152	$	21,968
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Balance at January 1, 2023	$	14,131	$	2,893	$	4,787	$	139	$	21,950
Amounts charged to expense	395		238		1,097		55		1,785
Write-offs	(1,683)		(267)		(1,109)		(46)		(3,105)
Recoveries	614		111		648		—		1,373
Other	1		(102)		—		2		(99)
Balance at March 31, 2023	$	13,458	$	2,873	$	5,423	$	150	$	21,904

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

	March 31, 2024
	Sales Type Lease Receivables												Loan Receivables		Total
	2024		2023		2022		2021		2020		Prior
Write-offs	$	21	$	193	$	566	$	249	$	172	$	133	$	1,327	$	2,661

	March 31, 2023
	Sales Type Lease Receivables										Loan Receivables		Total
	2022		2021		2020		2019		Prior
Write-offs	$	455	$	675	$	412	$	250	$	158	$	1,155	$	3,105

Credit Quality

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

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

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

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

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

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

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

	March 31, 2024
	Sales Type Lease Receivables												Loan Receivables		Total
	2024		2023		2022		2021		2020		Prior
Low	$	54,204	$	250,379	$	208,036	$	140,263	$	88,707	$	64,848	$	250,820	$	1,057,257
Medium	9,721		44,388		33,492		22,228		13,821		16,441		66,167		206,258
High	791		4,261		3,955		2,347		1,422		979		6,772		20,527
Not Scored	31,761		49,096		34,169		22,514		9,203		4,239		24,750		175,732
Total	$	96,477	$	348,124	$	279,652	$	187,352	$	113,153	$	86,507	$	348,509	$	1,459,774
	December 31, 2023
	Sales Type Lease Receivables												Loan Receivables		Total
	2023		2022		2021		2020		2019		Prior
Low	$	261,583	$	222,947	$	155,193	$	96,986	$	46,635	$	27,164	$	264,232	$	1,074,740
Medium	46,208		35,891		24,483		16,027		10,503		8,041		62,910		204,063
High	4,455		4,217		2,554		1,853		740		862		7,487		22,168
Not Scored	59,335		49,839		33,494		15,944		5,089		1,166		25,298		190,165
Total	$	371,581	$	312,894	$	215,724	$	130,810	$	62,967	$	37,233	$	359,927	$	1,491,136

Lease Income

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

	Three Months Ended March 31,
	2024		2023
Profit recognized at commencement	$	26,977	$	31,822
Interest income	37,968		38,931
Total lease income from sales-type leases	$	64,945	$	70,753

Lessor Operating Leases

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

Remainder 2024	$	13,687
2025	18,505
2026	20,622
2027	5,653
2028	951
Thereafter	1,706
Total	$	61,124