Stamps.com Announces Second Quarter 2008 Results

SOURCE:

Stamps.com

2008-07-23 15:30:00

Stamps.com Announces Second Quarter 2008 Results

Stamps.com Announces Second Quarter 2008 Results

Subscriber-Related Revenue up 14%; Total Revenue $21.4 Million; GAAP Net Income of $1.3 Million; Non-GAAP Diluted Earnings per Share of $0.15

LOS ANGELES, CA–(EMWNews – July 23, 2008) – Stamps.com® (NASDAQ: STMP), the

intelligent online postage alternative to a postage meter, today

announced results for the second quarter ended June 30, 2008.

For the second quarter:


--  Total revenue was $21.4 million, unchanged versus the second quarter

    of 2007.

--  PC Postage® subscriber-related revenue, including service revenue,

    store revenue and insurance revenue, was $18.5 million, up 14% from the

    second quarter of 2007.

--  Total gross margin was 75% versus 70% in the second quarter of 2007.

    PC Postage subscriber-related revenue gross margin was 82% versus 80% in

    the second quarter of 2007, and PhotoStamps gross margin was 27% versus 34%

    in the second 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), was

    $5.6 million, up 37% 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 and marketing

    in this area by approximately 55% versus the second quarter of 2007; this

    resulted in PhotoStamps revenue of $2.9 million, down 38% versus the second

    quarter of 2007.

--  GAAP net income was $1.3 million, or $0.07 per fully diluted share,

    after the effects of a $0.9 million non-cash stock-based compensation

    expense, and a $0.7 million one time litigation charge related to a lawsuit

    emanating from the Company's iShip operations which were divested in 2001.

--  Excluding the FASB Statement 123R expense and the litigation charge,

    non-GAAP net income per fully diluted share was $0.15.

    

“We were encouraged to see strong performance in our PC Postage business,”

said Ken McBride, Stamps.com president and CEO. “Our PC Postage

subscriber-related revenue grew at the fastest year-over-year rate in six

quarters, and our gross customer acquisition remained strong. Excluding

the enhanced promotion channel, we increased the number of customers that

paid for our service by 16% versus the second quarter of 2007. For

PhotoStamps, we continued our program to increase profitability with a

smaller and more focused marketing plan, and as a result the profitability

for that business line was improved versus the same quarter last year.”

Second Quarter 2008 Detailed Results

Stamps.com reported 2008 second quarter GAAP net income of $1.31 million.

On a per share basis, total 2008 second quarter GAAP net income was $0.07

based on fully diluted shares outstanding of 19.7 million. Second quarter

GAAP net income was reduced by costs of $0.90 million for a FASB 123R

non-cash stock-based compensation expense, and $0.71 million for a one time

litigation charge related to a lawsuit emanating from the Company’s iShip

operations which were divested in 2001. The $0.90 million stock-based

compensation expense and the $0.71 million litigation charge were allocated

among cost of sales, sales and marketing, research and development, and

general and administrative as shown in the following table:


All amounts in millions except    Non-GAAP    FASB    Litigation    GAAP

per share or margin data:         Amounts     123R      Charge    Amounts

                                  --------  --------  ----------  --------



Cost of Sales                     $   5.35  $   0.07  $        -  $   5.42

Research & Development                1.96      0.15           -      2.10

Sales & Marketing                     8.61      0.17           -      8.78

General & Administrative              3.23      0.52        0.71      4.46

                                  --------  --------  ----------  --------

Total Expenses                       19.15      0.90        0.71     20.76



Gross margin                          75.0%     -0.3%          -      74.7%



                                  --------  --------  ----------  --------

Net Income                        $   2.92  $  (0.90) $    (0.71) $   1.31

                                  ========  ========  ==========  ========



                                  --------  --------  ----------  --------

On a diluted per share basis      $   0.15  $  (0.05) $    (0.04) $   0.07

                                  ========  ========  ==========  ========



Shares used in per share

 calculation                         19.71     19.71       19.71     19.71

Excluding the FASB Statement 123R expense and the litigation charge, 2008

second quarter non-GAAP net income was $2.92 million or $0.15 per fully

diluted share based on fully diluted shares outstanding of 19.7 million.

This compares to 2007 second quarter non-GAAP net income per fully diluted

share excluding 123R expenses of $0.16. Thus, non-GAAP second quarter

diluted earnings per share excluding 123R-related expenses were down 6%

versus the same quarter last year.

PhotoStamps

During the second quarter, approximately 171 thousand sheets, or

approximately 3.4 million individual PhotoStamps, were shipped to

customers. Since the beginning of the second market test in May 2005, more

than 3 million sheets, or more than 60 million individual PhotoStamps, have

been shipped to customers. During the second quarter, the Company continued

its program to increase profitability in the PhotoStamps business, reducing

the overall level of sales and marketing costs in this area by

approximately 55% versus the second quarter of 2007. As a result of the

reduced level of sales and marketing activity, total second quarter

PhotoStamps revenue was $2.9 million, a decrease of 38% versus the second

quarter of 2007.

Net Operating Losses (NOL) and Protective Measures

Stamps.com currently has approximately $245M in Federal NOLs and $145M in

State NOLs, with a potential value of up to $95M in tax savings over the

next 15 years. Under Internal Revenue Code Section 382 rules, if a change

of ownership is triggered, the Company’s NOL asset may be impaired. 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. We estimate that as of June 30, 2008, the Company was at

an approximately 35% level compared with the 50% level that would trigger

impairment of our NOL asset.

During the second quarter the Company received shareholder approval to

amend its articles of incorporation in order to protect its NOL asset (the

“NOL Protective Measures”) and those measures are now in effect. Under the

NOL Protective Measures there is no change to the way that existing

Stamps.com shares are held or traded, but any person, company or investment

firm which wishes to become a “5% shareholder” of Stamps.com must first

obtain a waiver from the Company’s board of directors. In addition, any

person, company or investment firm which is already a “5% shareholder” of

Stamps.com cannot make any additional purchases of Stamps.com stock without

a waiver from the Company’s board of directors.

Stamps.com strongly urges that any stockholder contemplating owning more

than 775,000 shares contact the Company before doing so.

Share Repurchase

During the second quarter of 2008 the Company proposed and implemented its

NOL Protective Measures, and following that implementation the Company

updated its estimated shift in ownership under Section 382. As a result of

these activities, and as a result of market conditions, the Company did not

repurchase any shares of stock during the second quarter. The Company’s

existing share repurchase program expires on August 3, 2008.

On July 16, 2008, Stamps.com’s Board of Directors approved a new share

repurchase program authorizing the Company to purchase up to 2.0 million

shares of Stamps.com stock over the next seven months. The timing of

purchases, if any, and the number of shares to be bought at any one time

will depend on market conditions and also will depend on the Company’s

assessment of risk that its NOL asset could be impaired if such a

repurchase were undertaken. Share purchases may be made from time-to-time

on the open market or in negotiated transactions at the Company’s

discretion 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.

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 $0.55 to $0.65, including

approximately $3.4 million of 2008 FASB Statement 123R stock-based

compensation expense, the first quarter $0.5 million asset write-off, the

second quarter $0.7 million litigation charge, and a $3.7 million deferred

tax benefit. Excluding the FASB Statement 123R expenses, the asset

write-off, the litigation charge, 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

A complete set of the quarterly customer metrics for the past two fiscal

years and through the current quarter is available currently at

http://investor.stamps.com (under a tab on the left side called Company

Metrics, Current Metrics).

Quarterly Conference Call

The Stamps.com financial results conference call will be web cast today at

5:00 p.m. Eastern Time and may be accessed at http://investor.stamps.com.

The Company plans to discuss its business outlook during the conference

call. Following the conclusion of the web cast, a replay of the call will

be available at the same website.

About Stamps.com and PhotoStamps

Stamps.com

(NASDAQ: STMP) is a leading provider of Internet-based postage services.

Stamps.com’s online postage service enables small businesses, enterprises,

and consumers to print U.S. Postal Service-approved postage with just a PC,

printer and Internet connection, right from their home or office. The

Company targets its services to small businesses and home offices, and

currently has PC Postage partnerships with Avery Dennison, Microsoft,

EarthLink, HP, Office Depot, the U.S. Postal Service and others.

PhotoStamps is a patented

Stamps.com product that couples the technology of PC Postage with the

simplicity of a web-based image upload and order process. PhotoStamps is

currently available under authorization of the U.S. Postal Service for its

fourth phase market test with an authorization through May 16, 2009.

Customers may create full custom PhotoStamps with their own digital

photograph, or they may choose a licensed image from one of many

PhotoStamps collections such as NFL®, Collegiate, and now the

limited edition American

Idol® collection. Since launching PhotoStamps in May 2005, more than

60 million individual PhotoStamps have been shipped to customers.

Stamps.com currently has PhotoStamps partnerships with Apple,

Google/Picassa, HP/Snapfish, Adobe, and others.

Non-GAAP Measures

To supplement the Company’s condensed financial statements presented in

accordance with GAAP, Stamps.com uses non-GAAP measures of certain

components of financial performance. These non-GAAP measures include

non-GAAP income from operations, non-GAAP pre-tax income, non-GAAP net

income, non-GAAP earnings per diluted share, and non-GAAP gross margin.

These

non-GAAP measures are provided to enhance investors’ overall understanding

of the Company’s current financial performance and the Company’s prospects

for the future and provide further information about the impact of the

adoption of the accounting standard FASB 123R. The Company believes the

non-GAAP measures that exclude stock-based compensation, asset write-offs,

litigation charges, and income tax benefits enhance the comparability of

results against prior periods. These measures should be considered in

addition to results prepared in accordance with generally accepted

accounting principles, but should not be considered a substitute for, or

superior to, GAAP results. Reconciliation to the nearest GAAP measure of

all non-GAAP measures included in this press release can be found in the

financial tables included on page 2 of this press release.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act

of 1995: This release includes forward-looking statements about our

anticipated results and our PhotoStamps spend that involve risks and

uncertainties. Important factors, including the Company’s ability to

complete and ship its products, maintain desirable economics for its

products and obtain or maintain regulatory approval, which could cause

actual results to differ materially from those in the forward-looking

statements, are detailed in filings with the Securities and Exchange

Commission made from time to time by STAMPS.COM, including its Annual

Report on Form 10-K for the year ended December 31, 2007, Quarterly Reports

on Form 10-Q, and Current Reports on Form 8-K. STAMPS.COM undertakes no

obligation to release publicly any revisions to any forward-looking

statements to reflect events or circumstances after the date hereof or to

reflect the occurrence of unanticipated events.

Stamps.com, the Stamps.com logo and PhotoStamps are trademarks or

registered trademarks of Stamps.com Inc. All other brands and names are

property of their respective owners.


                              STAMPS.COM INC.



                         STATEMENTS OF OPERATIONS

             (in thousands, except per share data: unaudited)





                                    Three Months ended   Six Months ended

                                         June 30,            June 30,

                                      2008      2007      2008      2007

                                    --------- --------- --------  ---------

Revenues:

 Subscription                       $  15,577 $  13,506 $ 30,774  $  27,167

 Product                                2,583     2,457    5,066      4,815

 Insurance                                377       356      765        730

 PhotoStamps                            2,873     4,635    5,877      7,811

 Other                                      -       453        -        906

                                    --------- --------- --------  ---------

   Total revenues                      21,410    21,407   42,482     41,429

Cost of revenues:

 Subscription                           2,262     2,411    5,004      4,754

 Product                                  948       839    1,828      1,638

 Insurance                                119       111      239        226

 PhotoStamps                            2,092     3,058    4,219      5,141

 Other                                      -        26        -         52

                                    --------- --------- --------  ---------

   Total cost of revenues               5,421     6,445   11,290     11,811

                                    --------- --------- --------  ---------

   Gross profit                        15,989    14,962   31,192     29,618

Operating expenses:

 Sales and marketing                    8,780     7,926   17,403     15,757

 Research and development               2,102     2,077    4,045      4,222

 General and administrative             4,457     3,218    8,400      5,965

                                    --------- --------- --------  ---------

   Total operating expenses            15,339    13,221   29,848     25,944

                                    --------- --------- --------  ---------

   Income from operations                 650     1,741    1,344      3,674

Other income, net:

 Interest income                          736     1,174    1,653      2,387

 Other income                               -         -       21          -

                                    --------- --------- --------  ---------

   Total other income, net                736     1,174    1,674      2,387

                                    --------- --------- --------  ---------

Pre-tax income                          1,386     2,915    3,018      6,061

Income tax expense (benefit)               80       115   (3,486)       207

                                    --------- --------- --------  ---------

Net income                          $   1,306 $   2,800 $  6,504  $   5,854

                                    ========= ========= ========  =========

Net income per share:

 Basic                              $    0.07 $    0.13 $   0.33  $    0.27

                                    ========= ========= ========  =========

 Diluted                            $    0.07 $    0.13 $   0.33  $    0.27

                                    ========= ========= ========  =========

Weighted average shares outstanding:

 Basic                                 19,382    21,352   19,553     21,610

                                    ========= ========= ========  =========

 Diluted                               19,712    21,742   19,831     22,034

                                    ========= ========= ========  =========











                         CONDENSED BALANCE SHEETS

                              (in thousands)





                                                  June 30,    December 31,

                                                    2008          2007

                                                ------------  ------------



                 ASSETS

Cash and investments                            $     91,379  $     90,823

Trade accounts receivable                              2,954         2,519

Other accounts receivable                                501         1,209

Other current assets                                   3,051         2,489

Property and equipment, net                            3,271         3,790

Intangible assets, net                                   510           871

Deferred tax                                           3,671             -

Other assets                                           4,058         3,252

                                                ------------  ------------

   Total assets                                 $    109,395  $    104,953

                                                ============  ============



     LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

 Accounts payable and accrued expenses          $     11,067  $      9,935

 Deferred revenue                                      2,366  $      2,576

                                                ------------  ------------

   Total liabilities                                  13,433        12,511

                                                ------------  ------------



Stockholders' equity:

 Common stock                                             47            47

 Additional paid-in capital                          624,802       622,781

 Treasury Stock                                      (68,237)      (63,737)

 Accumulated deficit                                (460,051)     (466,555)

 Unrealized loss on investments                         (599)          (94)

                                                ------------  ------------

   Total stockholders' equity                         95,962        92,442

                                                ------------  ------------

   Total liabilities and stockholders' equity   $    109,395  $    104,953

                                                ============  ============

Stamps.com Investor Contact:
Stamps.com Investor Relations
(310) 482-5830
http://investor.stamps.com

Press Contact:
Brew PR
(310) 600-7160

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