Stamps.com Announces Third Quarter 2008 Results

LOS ANGELES, CA, Oct 23 (MARKET WIRE) --
Stamps.com(R) (NASDAQ: STMP), the intelligent online postage alternative
to a postage meter, today announced results for the third quarter ended
September 30, 2008.

For the third quarter:

-- Total revenue was $20.2 million, down 1% versus the third quarter of
2007.

-- PC Postage(R) subscriber-related revenue, including service revenue,
store revenue and insurance revenue, was $18.1 million, up 8% from the
third quarter of 2007. Excluding the enhanced promotion channel (which
consists of online programs where additional promotions are offered to
customers), subscriber-related revenue was $16.0 million, up 11% from the
third quarter of 2007.

-- Total gross margin was 75.0% versus 71.8% in the third quarter of
2007. PC Postage subscriber-related revenue gross margin was 80.4% versus
80.7% in the third quarter of 2007, and PhotoStamps gross margin was 26.3%
versus 29.7% in the third quarter of 2007.

-- Total spending on small business PC Postage customer acquisition,
excluding spending on the enhanced promotion channel, was $5.6 million, up
25% from the same quarter last year.

-- 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 68% versus the third quarter of 2007; this
resulted in PhotoStamps revenue of $2.0 million, down 43% versus the third
quarter of 2007.

-- GAAP net income was $2.06 million, or $0.10 per fully diluted share,
after the effects of a $0.88 million non-cash stock-based compensation
expense, a $0.06 million charge related to expected legal settlements in
litigation matters, and a $0.35 million adjustment resulting from the
temporary suspension of the Company's ability to utilize its net operating
losses for California income tax purposes.

-- Excluding the FASB Statement 123R expense, the litigation charge, and
the income tax adjustment, non-GAAP income from operations was $2.7
million, up 20% versus the third quarter of 2007, and non-GAAP net income
per fully diluted share was $0.17, up 6% versus the third quarter of 2007.

"In the current tough macroeconomic environment, we were happy with
the strength in our earnings this quarter," said Ken McBride, Stamps.com
president and CEO. "Our non-GAAP income from operations grew at 20% versus
the third quarter last year, the fastest growth rate we have seen in two
years. However, in this tough atmosphere we did experience a slowdown in
our gross customer acquisition for our PC Postage business which led to
slower customer acquisition spending and also to a slowdown in our top
line growth in that business this quarter. Overall, we believe that our
core PC postage business is a very stable and predictable model, and we
expect that our recurring revenue business will allow us to continue to
produce solid earnings in tough times."

Third Quarter 2008 Detailed Results

Stamps.com reported 2008 third quarter GAAP net income of $2.06 million.
On a per share basis, total 2008 third quarter GAAP net income was $0.10
based on fully diluted shares outstanding of 19.7 million. Third quarter
GAAP net income was reduced by a non-cash cost of $0.88 million for FASB
123R stock-based compensation expense, and by $0.06 million representing
adjustments to the prior one-time litigation charge related to a lawsuit
emanating from the Company's iShip operations and representing expected
settlements in other litigation matters. Third quarter GAAP net income was
also reduced by an income tax adjustment of $0.35 million resulting from
the temporary suspension of the Company's ability to utilize its net
operating losses for California income tax purposes based on new
legislation which was signed on September 23, 2008 and is effective for
tax years 2008 and 2009. The $0.88 million stock-based compensation
expense, $0.06 million litigation charge, and $0.35 million income tax
adjustment 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
except per share or Income
margin data: Non-GAAP FASB Litigation Tax GAAP
Amounts 123R Charge Adjustment Amounts
-------- -------- -------- -------- --------

Cost of Sales $ 4.96 $ 0.08 $ - $ - $ 5.05
Research & Development 2.06 0.18 - - 2.24
Sales & Marketing 7.45 0.20 - - 7.65
General & Administrative 2.95 0.41 0.06 - 3.42
-------- -------- -------- -------- --------
Total Expenses 17.42 0.88 0.06 - 18.37

Gross margin 75.4% -0.4% - - 75.0%

Income from Operations 2.73 (0.88) (0.06) - 1.79
Interest and Other Income 0.70 - - - 0.70
-------- -------- -------- -------- --------
Pre-Tax Income 3.43 (0.88) (0.06) - 2.49

Provision for Income
Taxes 0.08 - - 0.35 0.43

-------- -------- -------- -------- --------
Net Income $ 3.35 $ (0.88) $ (0.06) $ (0.35) $ 2.06
======== ======== ======== ======== ========

-------- -------- -------- -------- --------
On a diluted per share
basis $ 0.17 $ (0.04) $ (0.00) $ (0.02) $ 0.10
======== ======== ======== ======== ========

Shares used in per share
calculation 19.73 19.73 19.73 19.73 19.73

Excluding the FASB Statement 123R expense, litigation charge, and
income tax adjustment, 2008 third quarter non-GAAP net income was $3.35
million or $0.17 per fully diluted share based on fully diluted shares
outstanding of 19.7 million. This compares to 2007 third quarter non-GAAP
net income per fully diluted share excluding 123R expenses of $0.16
(there were no comparable litigation charges or income tax adjustments in
the 2007 period). Thus, non-GAAP third quarter diluted earnings per share
excluding 123R-related expenses were up 6% versus the same quarter last
year.

PhotoStamps

During the third quarter, approximately 120 thousand sheets were shipped
to customers. 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 68% versus the third
quarter of 2007. As a result of the reduced level of sales and marketing
activity, total third quarter PhotoStamps revenue was $2.0 million, a
decrease of 43% versus the third quarter of 2007.

Net Operating Losses (NOL) and Protective Measures

Stamps.com currently has approximately $240M in Federal NOLs and $150M 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 the Company is currently at an
approximately 37% level compared with the 50% level that would trigger
impairment of our NOL asset.

During the second quarter of 2008, 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 currently has 18.2 million shares outstanding and therefore
ownership of 910 thousand shares or greater would currently constitute a
"5% shareholder." Stamps.com strongly urges that any stockholder
contemplating owning more than 725,000 shares contact the Company before
doing so.

Share Repurchase

On July 16, 2008, Stamps.com's Board of Directors approved a share
repurchase program authorizing the Company to purchase up to 2.0 million
shares of Stamps.com stock through February 2009. The Company purchased
1.2 million shares for a total cost of $13 million under that program
during the third quarter and the fourth quarter to date. On October 16,
2008, Stamps.com's Board of Directors amended the current share repurchase
program so that the Company may now purchase up to 3.0 million shares of
Stamps.com stock, including the 1.2 million shares that have already been
purchased, though February 2009.

The timing of share 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 $0.52 to $0.62, including
approximately $3.4 million of 2008 FASB Statement 123R stock-based
compensation expense, the first quarter $0.45 million asset write-off, the
second and third quarter $0.77 million litigation charges, $0.50 million
of 2008 NOL California income tax adjustment, and the first quarter $3.7
million deferred tax benefit. Excluding the FASB Statement 123R expenses,
the asset write-off, the litigation charges, the NOL tax adjustment, 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(R),
Collegiate, and now the limited edition American Idol(R) 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, income tax
adjustments, 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 above.

"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 Nine Months ended
September 30, September 30,
2008 2007 2008 2007
--------- --------- --------- ----------
Revenues:
Service $ 15,435 $ 14,115 $ 46,209 $ 41,282
Product 2,326 2,296 7,392 7,111
Insurance 375 339 1,140 1,068
PhotoStamps 2,020 3,534 7,897 11,345
Other - - - 907
--------- --------- --------- ----------
Total revenues 20,156 20,284 62,638 61,713

Cost of revenues:
Service 2,626 2,369 7,630 7,123
Product 809 760 2,637 2,398
Insurance 124 105 363 331
PhotoStamps 1,489 2,485 5,708 7,626
Other - - - 52
--------- --------- --------- ----------
Total cost of revenues 5,048 5,719 16,338 17,530
--------- --------- --------- ----------
Gross profit 15,108 14,565 46,300 44,183
Operating expenses:
Sales and marketing 7,654 7,917 25,057 23,674
Research and development 2,243 2,100 6,288 6,322
General and administrative 3,420 3,114 11,820 9,079
--------- --------- --------- ----------
Total operating expenses 13,317 13,131 43,165 39,075
--------- --------- --------- ----------
Income from operations 1,791 1,434 3,135 5,108
Other income, net:
Interest income 697 1,062 2,350 3,449
Other income 5 - 26 -
--------- --------- --------- ----------
Total other income, net 702 1,062 2,376 3,449
--------- --------- --------- ----------
Pre-tax income 2,493 2,496 5,511 8,557
Income tax expense (benefit) 430 50 (3,056) 257
--------- --------- --------- ----------
Net income $ 2,063 $ 2,446 $ 8,567 $ 8,300
========= ========= ========= ==========
Net income per share:
Basic $ 0.11 $ 0.12 $ 0.44 $ 0.39
========= ========= ========= ==========
Diluted $ 0.10 $ 0.12 $ 0.43 $ 0.39
========= ========= ========= ==========
Weighted average shares
outstanding:
Basic 19,410 20,243 19,505 21,156
========= ========= ========= ==========
Diluted 19,726 20,575 19,796 21,548
========= ========= ========= ==========

CONDENSED BALANCE SHEETS
(in thousands)

September December
30, 31,
2008 2007
--------- ---------

ASSETS
Cash and investments $ 93,578 $ 90,823
Trade accounts receivable 2,656 2,519
Other accounts receivable 2,348 1,209
Other current assets 3,717 2,489
Property and equipment, net 3,186 3,790
Intangible assets, net 507 871
Deferred tax 3,671 -
Other assets 3,800 3,252
--------- ---------
Total assets $ 113,463 $ 104,953
========= =========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 12,915 $ 9,935
Deferred revenue 4,158 $ 2,576
--------- ---------
Total liabilities 17,073 12,511
--------- ---------

Stockholders' equity:
Common stock 47 47
Additional paid-in capital 626,026 622,781
Treasury Stock (71,148) (63,737)
Accumulated deficit (457,988) (466,555)
Unrealized loss on
investments (547) (94)
--------- ---------
Total stockholders'
equity 96,390 92,442
--------- ---------
Total liabilities and
stockholders' equity $ 113,463 $ 104,953
========= =========

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

Press Contact:
Brew PR
(310) 600-7160
Email Contact

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