Good morning, and welcome to the Pitney Bowes First Quarter 2021 Earnings Conference Call. Your lines have been placed in a 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.
Mark Lautenbach, President and Chief Executive Officer Ms. Anna 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 ks Annual Report and other reports filed with the SEC that are located on our website at www.pbb.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 our press release or discussed in this 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 have 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. Now our President and Chief Executive Officer, Mark Lambach will start with a few opening remarks. Mark?
Thank you, Adam, and thank you everyone for joining today's call. We got off to a solid start for the year with every business making an important contribution to the quarter. Overall, revenue at constant currency grew 14% and every business improved their EBIT performance. For the 2nd consecutive quarter, Semtech improved EBIT on a year to year basis. As I mentioned before, the transformation of Semtech from a business and secular decline to a business well positioned to capture new value in the shipping market is one of the most impressive transformations I have ever seen.
The business has leveraged digital technologies to transform our offerings and our go to market strategy. Semtech's platform is built on IoT technologies that are delivered on a SaaS chassis and this business is very well positioned going forward. Our Presort business continued with the momentum we saw at the end of last year
with
both revenue and EBIT improving on a year to year basis. Global ecommerce revenue at constant currency grew 40% for the quarter and EBIT margins improved nearly 400 basis points on a year to year basis. Importantly, profit performance improved throughout the quarter as our labor model continued to mature and pricing changes kicked in. In the month of March, domestic parcel services per unit labor cost delivered the best performance compared to any quarter since Q2 of last year. We expect unit labor costs to continue to improve and transportation and automation efficiencies are primarily still in front of us.
Transportation cost remains high in both our e commerce and pre sort businesses, so further in sourcing of transportation as well as the deployment of automation will benefit both businesses. There's a lot of opportunity in front of us as we continue to invest in areas that will yield future productivity benefits. We also made several important additions to our global e commerce team. While I'm sure the team will continue to evolve, we have a group of professionals and consultants guiding our business who have built business to consumer networks centered on induction to the USPS system. Cash performance for the quarter was also relatively strong compared to prior year off of an improved working capital performance.
The team continues to demonstrate strong operational discipline. We also executed a successful refinancing in the quarter. There were 2 objectives to the refinancing. First, we wanted to push out the maturities, further decreasing our refinancing risk. Secondly, and more importantly from my perspective, we created strategic flexibility.
We achieved both those objectives. I have described 4 chapters of transformations: quick wins, sustained investments, revenue growth, and finally, profitable revenue growth. Last quarter, I said we are poised to enter that 4th chapter, profitable revenue growth. It's hard to call the Q1 an inflection point given the nominal EBITDA increase, The revenue and profit did increase in a very much like how we're positioned going forward. Each business is poised to continue to make progress during this year and for that matter going forward beyond this year.
All in all, I'm quite pleased with the quarter. We turned in another strong revenue performance and improved EBIT across each segment compared to the prior year. As the revenue compares get more difficult as the year goes on, growth will inevitably moderate, but the trend is quite clear and
I very much like the way we are positioned.
With that, I will turn it over to Anna.
Thank you, Mark. Before I get into the details of the quarter, this being my first earnings call with the team, I want to share with you a few thoughts on what attracted me to Pivi Bose. The first thing that attracted me was the growth trajectory. Now that I have had a chance to go deeper into the business, I am confident that we are on the right path to achieving what Mark referred to as the 4th chapter of our transformation, which is profitable revenue growth. The second item is culture.
I can feel a true sense of team, pride and passion for continuously innovating and winning in the marketplace. These are concepts that you cannot necessarily teach. They are ingrained, and I consider them to be imperative to our success. And last, what I did not realize but quickly learned is how much technology is deeply rooted in everything we do. It's not as evident when you look at the business from a distance, but I believe it's one of the major enablers to the company's transformation.
Now let me turn to our Q1 results. Unless otherwise noted, I will talk to revenue comparisons on a constant currency basis and earnings related items, including EPS and cash flow on an adjusted basis. Revenue was $915,000,000 and grew 14% over prior year. Adjusted EPS was 0 point 0 $7 and GAAP EPS was a loss of 0 point 1 $8 GAAP EPS includes a $0.22 loss on the refinancing of our debt as well as a $0.02 loss from discontinued operations and $0.01 from restructuring charges. Free cash flow was a net use of $1,000,000 and cash from operations was $66,000,000 both an improvement from prior year due to favorable working capital changes largely around the timing of accounts payable and accounts receivable along with improved collections.
This was partially offset by lower customer deposits at our PB Bank. During the quarter, we paid $9,000,000 in dividends and made $4,000,000 in restructuring payments. We invested $43,000,000 in CapEx as part of our plan to drive future operational efficiencies. We ended the quarter with $697,000,000 in cash and short term investments. Total debt was 2,400,000,000 dollars We took several actions during the quarter to refine our capital structure, along with reducing overall debt by $126,000,000 from prior year.
These actions further reduce refinancing risk with the reduction of our near term bond maturities. We also improved the pricing of and substantially paid down our term loan B, improved our covenants, which provides us greater strategic flexibility and extended the duration across our capital structure. When you take our finance receivables and cash into account with our debt, our implied operating debt is $690,000,000 Looking at the P and L, starting with revenue versus prior year. Business services grew 28%, equipment sales grew 12% and rentals were flat to prior year. We have declines in support services of 4%, supplies of 10% and financing revenues of 14%.
Gross profit was $299,000,000 and gross margin was 33%, which was down from the same period last year, largely due to the mix and shift of the portfolio, but is an improvement from the Q4. SG and A was $238,000,000 or 26 percent of revenue. This is an improvement of $10,000,000 and 5 points respectively from prior year. Within SG and A, corporate expenses were $57,000,000 which was up about $14,000,000 over prior year, largely due to benefits recognized last year around employee variable related costs and a sales tax credit. R and D was $11,000,000 or 1 percent of revenue and down slightly from prior year.
Adjusted EBIT dollars were $50,000,000 which was a slight improvement over prior year. Adjusted EBIT margin was 5%. Interest expense, including finance interest, was $37,000,000 Our tax provision on adjusted earnings was a benefit of about $400,000 and includes a benefit associated with an affiliate reorganization. Compared to prior year, our tax provision benefited EPS by about $0.015 For purposes of determining adjusted EPS, shares outstanding are approximately $179,000,000 Let me now turn to each segment's performance, starting with e commerce. Revenue for this segment was $413,000,000 and grew 40% over prior year.
Revenue continues to benefit from the strong demand along with the pre pandemic comparison. Volumes grew year over year across all lines of service. Domestic parcel services volumes grew 23%, cross border volumes grew more than double and our digital services volumes grew 36%. EBIT was a loss of $26,000,000 and EBITDA was a loss of 8,000,000 dollars Compared to prior year, EBIT improved $3,000,000 and EBIT margin improved nearly 400 basis points. We made progress through the quarter, where earlier on, we were still dealing with the residual of peak holiday season.
We continue to work to improve service levels in our domestic parcels network, balancing cost and quality, which are all headed in a positive direction. As with the industry, we all continue to see relatively high transportation costs and a competitive labor market. However, as we move through the quarter, our domestic parcel network improved parcel process per hour by approximately 45% as our labor model continued to mature. Margins continue to be healthy in our digital and cross border services. Of the $26,000,000 EBIT loss in the quarter, we saw a loss of $4,000,000 in March, and we recorded positive EBITDA for the month.
Within our domestic parcel service, our initiatives to improve productivity are still largely in front of us. As we have discussed in the past, investments will include new automated sorters along with streamlining our processes to improve productivity. We placed 1 new sorter in a high volume site in the first quarter and expect to roll out more over the next 12 to 24 months. In addition, we are implementing modern sortation processes in each of our facilities before the upcoming holiday peak season this year. These investments and related productivity actions are expected to more than double our pieces processed per hour over time.
In addition, our transportation team continues to execute on the strategy of migrating outsourced lanes into our own PB3. In the Q1, we in sourced several of these lanes with more plans for the Q2, all which will improve cost and service. We also brought in 3rd party industry expertise to help support our execution in the area of transportation. We believe that optimizing our transportation will yield significant productivity benefits. Finally, we are in the process of opening 2 new sites and upgrading another, which we expect to have completed prior to the peak season.
This will allow us to handle volumes more efficiently and deliver deeper into the USPS network. Ultimately, we expect transportation and labor productivity along with optimizing final mile solutions to be critical drivers in attaining our long term e commerce margins. We expect these to account for approximately 75% of the margin improvement. Our pre search services saw the momentum from the second half of twenty twenty continue into the Q1. The business turned in a solid performance, growing revenue, EBIT and EBIT margin over prior year.
Revenue was $143,000,000 and grew 2%. Overall, average daily volumes were flat to prior year, where 1st class letter mail declined 2%, marketing mail grew 11% and marketing mail flat and found printed banner grew 30%. EBIT was $19,000,000 and EBIT margin was 13%. EBITDA was $27,000,000 and EBITDA margin was 19%. EBIT and EBITDA improved from prior year due to both revenue growth and lower expenses.
We have been able to maintain double digit margins in the Presort business even as we continue to invest in our talent and equipment. Compared to prior year, we improved pieces fed per labor hour by 4%, resulting in 85,000 less processing hours. Within Semtech, we also picked up on the momentum from the second half of twenty twenty as we continue to soften the decline in our revenue and maintain strong EBIT margins. Revenue was $359,000,000 and declined 3%. We continue to differentiate ourselves in the market with our end to end mailing and shipping offerings to enterprise and small office providers that are attractive to both existing and new clients.
We have a growing revenue stream around office shipping that carries with it high margin approaching that of our legacy mailing business and a software business. And like the legacy mailing business, the shipping opportunity in Sendtec provides multiple paths for us to add profit and revenue like supply, financing and the professional services. SenTek's shipping related revenues grew at a low double digit rate to approximately $30,000,000 in the quarter. The number of labels printed through our shipping offerings grew over 40% and paid subscriptions grew approximately 80%. Additionally, we are seeing good growth in shipping volumes that our U.
S. Clients are financing, which grew nearly 80% over prior year. These positive metrics show that our clients are adopting and using these new offerings as they see the value it brings to their businesses. Equipment sales grew 12% over prior year, driven by strong placement of our Centro C, which includes a large government deal and we continue to see good placements of our new SENPRO mail station multipurpose device. It is important to point out that like others, we have experienced transportation issues related to our supply chain.
We have been able to properly manage our inventory and grow our equipment sales despite these challenges, and it is an area that we are closely monitoring. We are also keeping a close eye on the semiconductor industry and are looking to mitigate any potential second half supply shortage by repositioning our solutions as necessary. We turned in a strong EBIT performance of $114,000,000 which represents growth of $8,000,000 over prior year and is the 2nd consecutive quarter of EBIT growth. EBIT margin was 32%, which improved 2 50 basis points over prior year. EBITDA was $122,000,000 EBITDA margin was 34%, both improving over prior year.
As you may recall, prior year included an increase to our credit loss provision to reflect macroeconomic conditions resulting from COVID-nineteen in connection with the application of the CECL accounting standard. One other point that I'd like to make is that this team has done a tremendous amount of work not only to transform its products and offerings, but also its channel. Today, about 80% of all U. S. Sales transactions are happening through our web or inside sales channel.
This has allowed our field team to concentrate on larger enterprise deals. And this has been a great contributor to maintaining the very healthy margins that we see in this business. I am pleased with the performance our team turned in the Q1. We entered the year with good momentum and continue to concentrate on the opportunities in front of us, and we expect to make good progress throughout the year. As discussed during our last earnings call, we continue to expect annual revenue at constant currency to grow over prior year in the low to mid single digit range, making this our 5th consecutive year of constant currency revenue growth.
We also continue to expect adjusted EPS to grow over prior year. Free cash flow is expected to be lower from prior year primarily due to specific items which benefited 2020 such as higher customer deposits, lower finance receivables and lower CapEx, which are not expected to continue at the same level in 2021. Within our segments, we expect global e commerce revenue growth to be stronger in the first half compared to the second half as the revenue comparisons will get more difficult as we move through the year. We also expect e commerce to demonstrate significant profit improvement and deliver positive EBITDA for the full year. Within Semtech, we expect the momentum we saw in the second half of twenty twenty and Q1 to continue, particularly around our shipping capabilities and new multipurpose devices and help partially offset the decline in reoccurring related revenues.
We also expect the improvement in volume trends we saw in Presort in the second half of twenty twenty and first quarter to continue through 2021. There are a few headwinds to be aware of on a year to year basis that will partially offset the overall business unit improvements. In 2020, we recorded RIOT insurance proceeds. In 2021, we expect higher employee related costs as it relates to variable compensation. Additionally, we expect a higher tax rate in 2021.
Looking at the timing through the year, our portfolio continues to shift to markets that are growing, particularly around shipping. As a result, the 4th quarter will continue to be our largest quarter of the year for revenue and earnings. For the Q2, we expect revenue to grow in the mid to high single digit range. Similar to Q1, we also expect adjusted EPS to grow modestly over prior year. That concludes my remarks.
Operator, please open the line for questions.
Thank you. Your first question comes from the line of Ananda Baruah from Loop Capital. Please go ahead.
Hi, guys. Good morning. Thanks for taking the question and congrats on the solid start to the year. Yes, you just answered what was going to be my first question, which is how you feel about potential for e commerce profitability as we move through the year. But let me ask it this way too.
So you mentioning EBITDA positive for the full year. Do you feel like you have any opportunity for EBIT positive, if not for the full year, by the end of the year? And then I have a couple of quick follow ups. Thanks.
Sure. Thanks, Ananda. Listen, we're pleased with the progress that the Global Ecommerce team is making to get to profitability. And being EBITDA profitable for the year is an important milestone, but it's just that, it's a milestone. We have more work to do.
My expectation is we're on a trajectory as we exit this year to be EBIT profitable next year. So, I think that's probably one way of answering your question. So, we like the trajectory. I would also point out, we made nearly 400 basis points of EBIT improvement year to year. If we do that for the next couple of years, we're on the long term model in 2024 as we have outlined.
So, good progress, more to do. And as Anna said, the benefits around transportation and automation are still in front of us. And with that, we'll carry better labor unit cost.
And it sounds thanks, Mark. That's great. Listen, I mean, you did a great job of laying out sort of the upcoming initiatives in e commerce with transportation, automation, labor, etcetera. In any way and it sounds like you're talking about a 24 month timeframe for the ones that you're speaking to today. Any way to frame for us when you think you'll reach sort of when in that 24 months you'll hit kind of sort of, I guess, the bulk of normalized impact just so we can sort of frame for ourselves as we model out, quite frankly, 'twenty one and 'twenty two because that's what we have to do, like when we might expect those initiatives to layer in, in a really critical mass kind of way?
And I have one last quick one. Thanks.
Sure. It's a little bit hard to predict with precision just because you take transportation in particular, there's a lot of unknowns, not the least of which is how quickly you can get trucks and truck drivers, which right now are remarkably scarce. So as I said, we think EBITDA positive this year on a trajectory to be EBIT positive next year is kind of how we're thinking about it.
Okay. That's helpful. And then the last one for me is any way you can give us a sense of what the e commerce gross margin profile look like for the quarter just reported the March quarter and then relative to the December quarter and then relative to year over year March quarter last year as well, just so we can get a sense of what progression is there too?
Yes. So there's 2 different things that affect gross margins in Global Ecommerce. 1 is the various efficiency of the businesses and the second is mix. So, as you look at the gross margins for the cross border business as well as the expedited business and the digital business, those margins are all very healthy. Delivery margins improved, but they still have a way to go.
So I would say gross margins were a touchdown in the business, but it was due to mix more than anything else.
So on a Q over Q basis, it's a touchdown?
Year over year.
Year over year, got it. Got it. Okay, great. Thank you, guys.
Your next question comes from the line of Shannon Cross from Cross Research. Please go ahead.
Thank you very much. I have a few questions about e commerce. FedEx had mentioned China outbound is back to normal. So just overall, what are you seeing in terms of cross border? And maybe you can talk about a regional performance?
Cross border business was quite strong across almost all lanes, including China.
Okay. I mean, is it I guess, my question is, is it do you think you're back to normal? Is there still some improvement to go
related to COVID?
Yeah. No, I think that has a very different personality depending on where in the world you are. So, obviously, if you're in India or Brazil right now, those economies are and those societies are suffering a lot. So, it's very different depending on where you are. Most of our lanes are into Europe, so as well as China.
So, for the most part, we're, for the moment, not being dramatically affected in the cross border business and candidly, the currency rates help us as well.
And what about pricing? I know you've taken prices up. Do you think there's room to take them up again given the improving demand or are you feeling pretty good about where your prices are?
So, as I said in my comments, base pricing is the highest we've had in the last 12 months. The peak pricing, this is an important dynamic for Global Ecommerce. So the peak pricing, we reinstated, but we didn't reinstate it until the end of January. So if you look at, as Anna said in her comments, the texture of the quarter, we got off to a more difficult start in Global Commerce, but it was expected because you had all of the increased costs, but you didn't have peak pricing. So, what I would say so far is the base pricing as well as the peak pricing has held.
In terms of the possibility of increasing prices further, obviously, we'll pay attention to what the other industry players do. To a degree, Shasta is going to depend on what happens to transportation costs. So, labor costs are, I think, going to stay high, but we've got ways with automation to deal with that. And candidly, as the model matures, it will become more efficient. Transportation is the one that if those transportation costs don't moderate, then I would expect that there'll be pressure on prices upward.
Okay, great. And then just one last question with regard to equipment. Like how much was related to the large government deal in terms of the growth? And then how should we think about the pipeline that you're seeing for equipment sales as we look through the year? Thank you.
Yes. Adam or I'll give you the specific number. I think 5,000,000 dollars in the quarter was from the government deal. So, an important contributor, but again, the low end of that product line as well as the mid range of that product line has done well and continues to do well. In terms of backlog, we like how the backlog is situated.
2nd quarter for SenTek's a pretty easy compare. So, I think you're going to see pretty strong relative performance into the Q2 and to a degree into the Q3 and that will moderate as the year goes on. Adam, do you have a specific number for the government deal?
Yes, that's correct, Mark. So Shannon, without the government deal, we would have still grown equipment sales in the mid to high single digit range.
Okay, great. Thank you very much.
Thank you.
Your next question comes from the line of Kartik Mehta from Northcoast Research.
Please go ahead.
Good morning, Mark and Anna. Mark, you've talked obviously about the global e commerce business and transportation costs being a headwind. But it seems like transportation costs, labor costs and automation, all three help you. Out of the 3, what's the most important? Is transportation just a near term issue you have, but longer term, one of the other 2 have to moderate?
And so I guess in a long term standpoint, what's the most important out of the 3?
Transportation is the most important of the 3. So if you look at the cost complexion of that business, 50% postal cost, there's some percent there, 25% or so is transportation cost. There's, we believe, a lot of opportunity there. I mean, if you look at spot rates on a year to year basis, in general, they've gone up 40 plus percent. And candidly, they went up from January to March.
So it continues to be pressured up. And then labor cost is around 12% of the total. So as you look at transportation and labor, those are the preponderance of the opportunity for improvement. And as Anna said, our play is pretty simple here and it gives me high confidence that it's executable. I mean, we are simply trying to in source more lanes.
So we in sourced 7 lanes in the Q1. We're going to in source another 20 lanes in the Q2. So that not only gives you better economics and makes you less vulnerable to the spot rate, but it also you provide better service because if you're in the spot rate then your volume doesn't fit necessarily the same priority as others. So this is a win win and it's not spinning atoms. We need to get the trucks and the truck drivers.
So we've got a lot of pressure on the team to add the resource.
And then on the Presort business, obviously a good margin quarter. And you talked about it seems like the revenue momentum should stay for the remainder of the year. Is the margin would you anticipate the margin momentum to also
stay the rest of the year?
I think the margins are probably going to stay pretty close to where they are. There's on the one hand, the work that we did a couple of years ago around transforming that business saved us a lot of labor hours. I think we saved 85,000 or 90,000 labor hours in the quarter on a year to year basis, so that was good. On the other side of it, like global e commerce, they're susceptible to transportation price increases and labor obviously is becoming more scarce. So, we're looking at some accelerated opportunities to apply automation to our pre sort business that will help.
But my expectation is margins will stay kind of in the zip code that they are this year with the opportunity to make substantial improvement going forward. We're looking at automation opportunities that can make a real difference in that business.
Your next question comes from the line of Allen Klee from Maxim Group.
Yes. Hi. For the debt that you've paid down in refinanced, where does that put you in terms of how much debt and notes are now due in 2021 and in 2022?
I'll let Anna take a swing at that one. But we're in pretty good shape for 'twenty one and 'twenty two.
Yes. Absolutely. So the maturities that are coming due now for the remainder of 2021, we really don't have any. And the maturity profile for 2022 is a small amount, it's around $72,000,000 So really, we truly accomplished what we set out to do when we issued our debt refinancing. And not only did we pushed out some of our maturities, but we also improved some of the terms.
And we believe we're much better positioned now for having more flexibility as we execute our strategy.
Great. And you had announced the partnership with UPS a couple of quarters ago to have them as one of your carriers. Could you just give an update on how that's going?
It's early. So, we continue to be very optimistic about the possibilities. They're a great company and they're an important provider in the industry. So, early days, and we'll have more to say about that as we go forward.
Thank you. Last question, I thought Centek was great, I mean, the quarter. How do you think about now kind of where the top line the trend rate longer term for the top line and the bottom line, given that you have more shipping? Maybe you could also just remind us, maybe I missed it, how much of your revenues are coming from shipping? And if you could break out maybe the 3 components of well, anyway, no, forget that last one.
It's to do with another segment, but just what I just said. Thank you.
Okay. We'll come back to it so you can finish off the last question. Listen, I feel very good about SenTek. When I started in 2012, I thought there was great opportunities to extend the life of that business. If you ask me today, that's no longer my paradigm.
My paradigm is going to be an important business in Pitney Bowe's future indefinitely. So, I think the top line will continue to moderate. It was minus 3 in the Q1, a little bit better than that at actuals. 2nd quarter is going to be an easy compare, so that's going to look pretty positive. But we had talked about low to mid single digit decline in that business.
I'm feeling right now it's closer to the low part than the mid, and the shipping is an important opportunity. So, just to dimensionalize it for you, the shipping revenue for SenTek was $30,000,000 in the quarter against the total. It grew depending on how you want to look at it. There were some anomalies and noise in the numbers, but somewhere between 10% 15%, I would say without the noise, closer to 14% or 15%. So, as you look at that number getting bigger and beginning to offset the top line and, importantly, the bottom line decline in the mail business.
It's an improving dynamic and one that we're excited about. And as Anders said, it's a similar margin profile. So, if you look at that $30,000,000 I mean, there's probably $15,000,000 of it that's pure software margins. And then there's other ancillary businesses, whether it be supplies or financing or rebates from suppliers that come at very high margins. And the addressable opportunity for shipping in the office space is twice the addressable opportunity in mail.
So, those dynamics all bode well for the mid to long term. And the other thing that I would say is the whole shipping dynamic doesn't really account for the fact that our meter attrition rate has moderated a bit, and there's lots of different reasons for that. We've clearly got some great products now and we're in a really good cycle. But also as you drive more value into those relationships, the devices are stickier. They're stickier in terms of people keeping them and people keeping them longer.
So really good dynamics in that business going forward and lots of opportunity.
Thank you. Could you give us an update on Wheeler Financial in terms of how much money was put to work and how you're thinking about that for the year?
Yes. And I'm going to defer to Adam on the specific amount
of money that was put
to work. But I mean, in general, I would say our vision for that business continues to be very positive. The nature of the opportunities that we're pursuing has changed slightly. So, it went from a business that was focused on leasing mission critical assets to loans around mission critical assets, more and more of the opportunity that we've seen is now around working capital in the shipping market. So, if you think about the whole genesis of the financial services business for Pitney Bowes that was around providing a service to mailers that they could either prepay postage or conversely buy postage on credit.
That same paradigm applies to shipping. So, we've kind of evolved our way into where I think the sweet spot is. So, it's a place that's highly accretive to our shipping business. It's a natural extension. Obviously, it's a space that we understand very well.
So, as our thinking has evolved on the target markets and that's not to say we don't continue to put money to work in those other markets around equipment, leases and loans, but more and more it's around shipping working capital, which just feels right. So Adam or Ron, do you have a specific number that we put to work in the Q1 around Wheeler?
Yes. We funded about $4,000,000 Alan, in the first quarter relative to Wheeler.
Great. I apologize for so many questions. The last one I had is within global e commerce, could you say what percent of the revenue was from your 3 big buckets of domestic, cross border and digital?
Adam, is that a number we've made public?
Yes. We don't publicly make that number visible. I think, Alan, Anna talked about in her comments, prepared remarks, growth in all three areas and gave some growth rates there. So but we don't publicly disclose the exact amounts for each one of those.
If you go by market size, the delivery business is clearly the biggest, and that's what it kind of affects. The question earlier about gross margin. So, as the opportunity is the biggest there, the flood of demand, and that's our business reflects that.
Thank you so much.
Your next question comes from the line of Anthony Lebiedzinski from Sidoti and Company. Please go ahead. Yes.
Good morning and thank you for taking the questions. So just wondering if you guys could provide a little bit more details as far as the expected timelines for some of the automation initiatives that you talked about?
Sure, Levi. Well, I mean, so let me talk about both the pre sort as well as Global Ecommerce. So Global Ecommerce, we put 1 sort order to work in the Q1 in a large site. 2nd is, I believe, installed in the 2nd quarter. We will continue to roll out the sorter technology throughout this year.
We're looking at accelerating some of those investments if we can get the equipment. In Presort, while I don't think it requires big invention or innovation, the kind of equipment that we're looking at doesn't exist yet. So, we're working with some automation companies to invent or bend a little bit metal to help with some of the work there. But again, it's tremendous opportunity. So, if you look at the capital budget this year, we'll spend more money on capital this year and that's principally because of automation.
So and we're looking at accelerating that.
Right. So Mark, you just said that if you can get the equipment, so what I mean, I know there's a lot of constraints, the supply chains with the ocean shipping containers and so on, so coming from Asia. So is that what why you said that if you can get the equipment and is it like what are your how do you feel about that, your confidence level about being able to get that equipment?
So, listen, it's kind of step back. It's not so much around the backup in the ports. It's just more around the availability of equipment. So, if you look at the overall demand for global e commerce, logistics and shipping, it's increased dramatically over the last 12 months since COVID. So, everyone's trying to get this automation.
So, I'm highly confident we'll get it. I'm not as confident that we'll get it as soon as I want.
Okay. Got it. Okay. That's fair. Thank you.
And then I don't know if you guys talked about this, but just overall COVID related incremental costs, can you give us a sense as to how much that will impact the quarter?
I don't have a specific number off the top head. I mean, it was I think we've done a really good job adapting to this new unfortunate world that we find ourselves in. It wasn't a material impact from my perspective in terms of expense. And obviously, the place that we're paying close attention right now is around AR and delinquencies. And again, that's been relatively stable, but that's the place where there's, I'd say, our strongest focus.
Adam or Ron, if you want to add anything.
No, I think you've covered it.
Got it. Okay. And then last question for me. I think you mentioned before that you expect a higher tax rate for this year. Can you give us a sense as to how we should think about the tax rates for 2021?
On or on?
I would say 20% to 25%, that type of range, Anthony.
All right. Well, thank you and best of luck.
Thank you. And at this time, there are no further questions. I'd now like to turn the call back to Mr. Lautenbach for any closing remarks.
Thanks, operator, and thanks for everyone's attention this morning. Listen, I thought we got off to a really solid start. We hit the ball in every business. Clearly, with that being said, we've got good opportunities to continue to improve our margins in Global Ecommerce. I'm highly confident we'll do that.
The team has laid out a pretty good roadmap, a very good roadmap for what needs to be done. The timing is a little bit varied and there's some things out of our control. But as you look at the list of things in Global Ecommerce that need to get done, they're highly doable. And as I said in my remarks, we've made some really important additions to the team in terms of people that have experience building these types of networks. I mean, building a business to consumer logistics network with postal ingestion is a little bit of a rarity, but it's a highly effective model.
So, I feel very good about where that business is headed. Presort is back on its feet, hit the ball well in the Q1, and I think it's very well positioned for the year. And Centek is just I'm as excited about the possibilities in Centek as I am about the possibilities in Global Ecommerce. So, all in all, good start, more to do, and we'll be back with you soon. Thanks for your time this morning.
Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT and T Teleconference. You may now disconnect.