Commenting on the quarter, Chairman, President and CEO Murray D. Martin said, "During the quarter we continued to see the benefits of our ongoing actions to lay the foundation for long-term growth and profitability across our business portfolio. We were able to improve our EBIT margin, particularly in our SMB businesses and Software, despite an unsettled global economic environment. Strong enterprise customer demand fueled good revenue growth in Software and Production Mail.
"The flexibility provided by our improved processes, enhanced productivity, and streamlined operations from Strategic Transformation has also allowed us to make investments in new solutions and customer experience. We have continued to expand our cloud-based family of customer communications solutions for small and medium businesses. In addition to pbSmartPostage, our internet-based postage solution, and pbSmartConnections, our email marketing and communications platform, we now have pbSmartMarketer and are in pilot with pbSmartCodes. pbSmartMarketer allows businesses to identify potential new customers modeled after their existing customer base; create customized direct mail marketing campaigns; and track and measure the success of those campaigns. pbSmartCodes is a web-based software solution that enables businesses to create interactive marketing campaigns using a unique Quick Response or QR code.
"In addition, we are advancing our market development activities with large mailers and planning for a consumer roll out of Volly, our secure digital mail delivery system.
"We have accomplished a lot already because of our Strategic Transformation initiatives, but there is much more we expect to achieve before the year is finished. The disciplined, integrated approach that we have taken to our operations and markets will continue to drive a more variable cost structure, even after the formal program ends."
Business Segment Results
The company reports its business segments in two groups based on the customers it primarily serves: Small and Medium Business (SMB) Solutions and Enterprise Business Solutions. The SMB Solutions group consists of the company's global Mailing operations. The company aligns its SMB business segments into North America Mailing and International Mailing to reflect how the business is managed. North America Mailing includes the operations of U.S. Mailing and Canada Mailing. International Mailing includes all other SMB operations around the world. The Enterprise Business Solutions group includes the company's global Production Mail, Software, Management Services, Mail Services and Marketing Services operations.
2Q 2011 Y-O-Y Change Revenue $670 million (1%) EBIT $203 million 3% ------- ------------ ------------ Within the SMB Solutions Group:
North America Mailing
2Q 2011 Y-O-Y Change Revenue $494 million (5%) EBIT $176 million (2%) ------- ------------ ------------ In North American Mailing during the quarter, there were increased placements of the company's Connect+(TM) mailing systems and positive growth in equipment sales in Canada. However, overall equipment sales declined in part because of an increase in lease extensions. Lease extensions are profitable transactions but generate less sales revenue than new equipment leases. For the second consecutive quarter combined recurring supplies, rentals and financing revenue streams declined at a lower rate than previous quarters indicating a continuation of an improving trend. In total, revenue declined 5 percent compared to the prior year, including a one percent benefit from currency.
EBIT margin for the segment improved by 110 basis points versus the prior year. EBIT benefited from ongoing productivity initiatives, lower credit losses and extensions of customer leases. As revenue growth improves, the segment is positioned for continued EBIT improvement.