Business News

Stamps.com Announces First Quarter 2008 Results

Friday 25. April 2008 - Q1 Total Revenue $21.1 million and GAAP Net Income of $5.2 million Non-GAAP Q1 Diluted Earnings Per Share of $0.14

Stamps.com(R) Inc. (NASDAQ:STMP) today announced results for the first quarter ended March 31, 2008.

For the first quarter:
— Total revenue was $21.1 million, an increase of 5% versus the first
quarter of 2007.
— PC Postage(R) subscriber-related revenue, including service revenue,
store revenue and insurance revenue, was $18.1 million, up 10% from the
first quarter of 2007.
— Total gross margin was 72% versus 73% in the first quarter of 2007. PC
Postage subscriber-related revenue gross margin was 79% versus 80% in
the first quarter of 2007, and PhotoStamps gross margin was 29% versus
34% in the first quarter of 2007.
— Total spending on small business PC Postage customer acquisition,
excluding spending on the enhanced promotion channel (which consists of
online programs where additional promotions are offered to customers,
and which are excluded from the Company’s customer metrics as explained
below), was $6.2 million, up 40% from the same quarter last year, as
Stamps.com continued to invest in its PC Postage sales and marketing
for the long-term.
— The Company continued its program to increase profitability in the
PhotoStamps business by reducing the overall level of sales & marketing
in this area by approximately 48% versus the first quarter of 2007;
this resulted in PhotoStamps revenue of $3.0 million, down 5% versus
the first quarter of 2007.
— GAAP net income was $5.2 million, or $0.26 per fully diluted share,
after the effects of non-cash items of $0.8 million of stock-based
compensation expense, an asset write-off of $0.4 million, and an income
tax benefit of $3.7 million.
— Excluding the FASB Statement 123R expense, asset write-off, and the
income tax benefit, non-GAAP net income per fully diluted share was
$0.14.




“We continued to see very positive results in our PC Postage sales and marketing programs,” said Ken McBride, Stamps.com president and CEO. “Excluding the enhanced promotion channel, during the first quarter of 2008 we increased our total gross registered customer acquisition by 43% and we increased the number of customers that paid for our service by 38 thousand versus the first quarter of 2007. For PhotoStamps, we continued our program to increase profitability in the business line, with a smaller and more focused marketing plan. We decreased total sales and marketing in PhotoStamps by 48% but our revenue was only 5% lower than the first quarter last year. As a result, the profitability picture continued to improve for the PhotoStamps business this quarter.”

First Quarter 2008 Detailed Results

Stamps.com reported 2008 first quarter GAAP net income of $5.20 million. On a per share basis, total 2008 first quarter GAAP net income was $0.26 based on fully diluted shares outstanding of 20.0 million. First quarter GAAP net income was reduced by non-cash costs of $0.78 million for FASB 123R stock-based compensation expense and $0.45 million for a write-off of inventory of discontinued products. First quarter GAAP net income was increased by a non-cash income tax benefit of $3.67 million resulting from the reversal of a portion of the Company’s net deferred tax asset valuation allowance. The $0.78 million stock-based compensation expense, $0.45 million asset write-off, and $3.67 million income tax benefit were allocated among cost of sales, sales and marketing, research and development, general and administrative, and provision for income taxes as shown in the following table:

All amounts in millions of Asset Income
dollars except per share or Non-GAAP FASB Write- Tax GAAP
margin data: Amounts 123R off Benefit Amounts

Cost of Sales $5.79 $0.08 $- $- $5.87
Research & Development 1.79 0.15 – – 1.94
Sales & Marketing 8.45 0.18 – – 8.62
General & Administrative 3.12 0.38 0.45 – 3.94
Total Expenses 19.15 0.78 0.45 – 20.38

Gross margin 72.5% -0.4% – – 72.1%

Income from Operations 1.92 (0.78) (0.45) – 0.69
Interest and Other Income 0.94 – – – 0.94

Pre-Tax Income 2.86 (0.78) (0.45) – 1.63

Provision for Income Taxes 0.11 – – (3.67) (3.57)

Net Income $2.75 $(0.78) $(0.45) $3.67 $5.20

On a diluted per share basis $0.14 $(0.04) $(0.02) $0.18 $0.26

Shares used in per share
calculation 19,950 19,950 19,950 19,950 19,950




Excluding the FASB Statement 123R expense, asset write-off, and income tax benefit, 2008 first quarter non-GAAP net income was $2.75 million or $0.14 per fully diluted share based on fully diluted shares outstanding of 20.0 million. This compares to 2007 first quarter non-GAAP net income per fully diluted share excluding 123R expenses of $0.16 (there were no comparable asset write offs or reversal of the Company’s net deferred tax asset valuation allowance in the 2007 period). Thus, non-GAAP first quarter diluted earnings per share excluding 123R-related expenses were down 12% versus the same quarter last year.

PhotoStamps

During the first quarter, approximately 178 thousand sheets, or more than 3.5 million individual PhotoStamps, were shipped to customers. Since the beginning of the second market test in May 2005, more than 2.8 million sheets, or more than 57 million individual PhotoStamps, have been shipped to customers. Total first quarter PhotoStamps revenue was $3.0 million, a decrease of 5% versus the first quarter of 2007. During the first quarter, the Company continued its program to increase profitability in the PhotoStamps business, reducing the overall level of sales & marketing in this area by approximately 48% versus the first quarter of 2007.

Net Operating Losses Shareholder Notice

Under Internal Revenue Code Section 382 rules, a change in ownership can occur whenever there is a shift in ownership by more than 50 percentage points by one or more 5% shareholders within a three-year period. When a change of ownership is triggered, the Company’s net operating losses (NOL) asset may be impaired. We estimate that as of March 31, 2008, the Company was at an approximately 34% level compared with the 50% level that would trigger impairment of our NOL asset.

As part of our ongoing program to preserve future use of our NOL asset, Stamps.com requests that any shareholder contemplating owning 800,000 shares or greater contact the Company before doing so.

Net Operating Losses Protective Measures

Owing to the large value of the NOL asset and the risk of possible impairment through a change of ownership under Internal Revenue Code Section 382 rules, the Company plans to seek shareholder approval during its May 22, 2008 annual meeting for additional measures to protect its NOL asset (the “NOL Protective Measures”). For all details on the NOL Protective Measures, please refer to the Company’s definitive proxy filed April 2, 2008.

Share Repurchase

On February 7, 2008, following the decision to seek approval for the NOL Protective Measures, Stamps.com’s Board of Directors approved an additional share repurchase program authorizing the Company to purchase up to 1.2 million shares of Stamps.com stock through August 6, 2008 as market and business conditions warrant. During the first quarter of 2008, the Company repurchased 0.5 million shares for a total cost of $4.5 million under that program. Over the past seven quarters, the Company repurchased a combined total of 4.6 million shares for a total cost of $64.5 million.

Share purchases may be made from time-to-time on the open market or in negotiated transactions in compliance with Rule 10b-18 of the United States Securities and Exchange Commission. The Company’s purchase of any of its shares is subject to limitations that may be imposed on such purchases by applicable securities laws and regulations and the rules of the Nasdaq Stock Market. Purchases may be made in the open market, or in privately negotiated transactions from time to time at the Company’s discretion. The timing of purchases, if any, and the number of shares to be bought at any one time will depend on market conditions.

Business Outlook

Stamps.com currently expects total 2008 revenue to be $80 to $90 million. 2008 GAAP net income per share is expected to be $0.58 to $0.68, including approximately $3.6 million of 2008 FASB Statement 123R stock-based compensation expense, the first quarter $0.5 million asset write-off and $3.7 million deferred tax benefit. Excluding the FASB Statement 123R expenses, the asset write-off, and the income tax benefit, non-GAAP 2008 net income per fully diluted share is expected to be $0.60 to $0.70.

Company Customer Metrics

Last quarter Stamps.com announced that it modified its publicly available PC Postage customer metrics. The new customer metrics are identical to the previous Company metrics, but now exclude customers from the enhanced promotion channel so as to give a more meaningful view of the underlying long-term business trends for all other marketing channels. A complete set of the old and new quarterly customer metrics over the past two fiscal years is available currently at http://investor.stamps.com/ (under a tab on the left side called Company Metrics).