Stamps.com Announces Second Quarter 18% Core PC Postage Revenue Growth and Non-GAAP Earnings per Share of $0.40

Wed Jul 25, 2012 4:30pm EDT

* Reuters is not responsible for the content in this press release.

  LOS ANGELES, CA, Jul 25 (Marketwire) -- 
Stamps.com(R) (NASDAQ: STMP), the leading provider of postage online and
shipping software solutions, today announced record results for the
second quarter ended June 30, 2012.

    Highlights for the second quarter:


--  Total revenue (including core PC Postage revenue and non-core revenue
    from PhotoStamps and the enhanced promotion channel) was $28.2
    million.
--  Core PC Postage revenue (including small business, enterprise and high
    volume shipping customer segments) was $26.2 million, up 18% from the
    second quarter of 2011.
--  GAAP net income was $5.9 million or $0.34 per fully diluted share,
    including $1.0 million in stock-based compensation expense.
--  Excluding the stock-based compensation expense, non-GAAP income from
    operations was $6.8 million, non-GAAP net income was $6.9 million and
    non-GAAP net income per fully diluted share was $0.40.
--  During the second quarter last year, the Company first applied
    breakage accounting to its PhotoStamps boxes sold through retail
    channels, and this added to that quarter $2.2 million to PhotoStamps
    revenue, $1.7 million to non-GAAP net income, and $0.12 to non-GAAP
    net income per fully diluted share. In this release, we have provided
    growth rates excluding the initial recognition of PhotoStamps breakage
    in the second quarter of 2011 as we believe that it provides a more
    meaningful comparison for second quarter 2012 year-over-year
    performance. See below for reconciliation between GAAP and non-GAAP
    amounts for fiscal 2012 and fiscal 2011.
--  Excluding the initial recognition of PhotoStamps retail box breakage
    in 2011, total revenue in the second quarter of 2012 was up 15%
    year-over-year, non-GAAP net income was up 45% year-over-year and
    non-GAAP net income per fully diluted share was up 21% year-over-year.

    

"The second quarter of 2012 continued to reflect our strong business
momentum," said Ken McBride, Stamps.com Chairman and CEO. "Despite a very
tough comparison to last year's strong second quarter performance, we
grew our core PC Postage revenue by 18%, non-GAAP net income by 45%, and
non-GAAP earnings per share by 21%. In addition, we hit our highest level
of total paid customers ever, we grew our enterprise paid customers at
the highest rate in five years, and we continued to see very strong
growth in our high volume shipping area as well."

    Second Quarter 2012 Detailed Results

    Core PC Postage revenue (including small business, enterprise and high
volume shipping customer segments) was $26.2 million, up 18% from the
second quarter of 2011. Second quarter PC Postage gross margin was 79.0%.
Non-core PC Postage revenue from the enhanced promotion channel (online
programs where additional promotions are provided directly by marketing
partners) was $0.7 million, down 9% versus the second quarter of 2011.
PhotoStamps revenue was $1.3 million, and, excluding the initial
recognition of PhotoStamps retail box breakage in the second quarter of
2011, PhotoStamps revenue was down 7% year-over-year as the Company
continues to reduce its investment in marketing of PhotoStamps.
PhotoStamps gross margin was 24.9%. Total gross margin was 76.5%. 

    As previously announced, the Company is currently completing a renovation
project on its new corporate headquarters. The project utilized $6.1
million in cash during the second quarter which was funded with cash flow
from operations and existing cash and investments. As a result the
Company's cash and investments decreased by $1.2 million from $67.3
million at the end of the first quarter of 2012 to $66.1 million at the
end of the second quarter of 2012. The Company expects to complete its
new corporate headquarters early in the third quarter of 2012. 

    Second quarter GAAP net income was $5.9 million. On a per share basis,
total second quarter 2012 GAAP net income was $0.34 based on 17.2 million
fully diluted shares outstanding. Second quarter 2012 GAAP net income was
reduced by $1.0 million of stock-based compensation expense. Non-GAAP and
GAAP amounts are reconciled in the following table:



Second Quarter Fiscal 2012
All amounts in millions except      Non-GAAP     Stock-Based       GAAP
per share or margin data:            Amounts     Comp. Exp.       Amounts

Cost of Sales                             6.57          0.07           6.64 
Research & Development                    2.39          0.17           2.56 
Sales & Marketing                         9.58          0.20           9.77 
General & Administrative                  2.90          0.54           3.43 
                                  ------------  ------------   ------------ 
Total Expenses                           21.43          0.97          22.40 

Gross Margin                              76.7%         (0.2%)         76.5%

Income (Loss) from Operations             6.79         (0.97)          5.82 
Interest and Other Income                 0.16             -           0.16 
                                  ------------  ------------   ------------ 
Pre-Tax Income (Loss)                     6.96         (0.97)          5.99 

Provision for Income Taxes               (0.06)            -          (0.06)

                                  ------------  ------------   ------------ 
Net Income                        $       6.89  $      (0.97)  $       5.92 
                                  ============  ============   ============ 

                                  ------------  ------------   ------------ 
On a diluted per share basis      $       0.40  $      (0.06)  $       0.34 
                                  ============  ============   ============ 

Shares used in per share
 calculation                             17.20         17.20          17.20 


    
Excluding the stock-based compensation expense, second quarter 2012
non-GAAP net income was $6.9 million or $0.40 per share based on 17.2
million fully diluted shares outstanding. This compares to second quarter
2011 non-GAAP net income, excluding the initial recognition of
PhotoStamps retail box breakage, of $4.8 million or $0.33 per share based
on fully diluted shares outstanding of 14.5 million. Thus, non-GAAP net
income and non-GAAP fully diluted earnings per share increased by 45% and
21% year-over-year, respectively. 

    Share Repurchase

    On July 19, 2012, the Board of Directors approved a new share repurchase
plan effective upon the expiration of the current plan on August 18,
2012, authorizing the Company to repurchase up to 1.0 million shares of
Stamps.com stock during the subsequent six months. The Company did not
repurchase any shares during the second quarter of 2012.

    The timing of share repurchases, if any, and the number of shares to be
bought at any one time will depend on market conditions and the Company's
assessment of the risk that its net operating loss asset could be
impaired if such repurchases 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 may be subject to limitations imposed on such purchases by
applicable securities laws and regulations and the rules of the Nasdaq
Stock Market.

    Business Outlook

    Stamps.com currently expects fiscal 2012 total revenue to be in a range
of $107.5 to $117.5 million. GAAP net income per share for 2012 is
expected to be in a range of $1.80 to $2.00 including approximately $4
million of stock-based compensation expense and an $11.9 million non-cash
tax benefit. Excluding the stock-based compensation expense and non-cash
tax benefit, fiscal 2012 non-GAAP net income per fully diluted share is
expected to be in a range of $1.35 to $1.55. Diluted shares for 2012 are
projected to be in a range of 17.2 to 17.5 million compared to 15.2
million diluted shares in 2011. As a result, we expect that the
year-over-year growth for 2012 non-GAAP net income will be approximately
15 to 20 percentage points higher than the year-over-year growth for 2012
non-GAAP diluted earnings per share. 

    Company Customer Metrics

    A complete set of the quarterly customer metrics for the past six fiscal
years and current fiscal year to date is available at
http://investor.stamps.com (under a tab on the left side called Company
Information, 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.

    Net Operating Loss (NOL) Update 

    Stamps.com currently has approximately $225 million in Federal NOLs and
$120 million in State NOLs. The Company estimates its ownership shift was
approximately 17% as of June 30, 2012, well below the 50% level that
could trigger impairment of its NOL asset under Internal Revenue Code
Section 382 rules. As part of its ongoing program to preserve future use
of its NOL asset, the Company requests that any shareholder contemplating
becoming a 5% shareholder contact the Company before doing so. 

    Fiscal 2011 Non-GAAP Measures Excluding PhotoStamps Breakage

    During the second quarter last year, the Company first applied breakage
accounting to its PhotoStamps boxes sold through retail channels, and
this added to that quarter $2.2 million to PhotoStamps revenue, $1.7
million to non-GAAP income from operations, $1.7 million to non-GAAP net
income, and $0.12 to non-GAAP net income per fully diluted share.
Excluding the initial recognition of PhotoStamps retail box breakage in
the second quarter of 2011, fiscal year 2011 results would have been
total revenue of $99.4 million and non-GAAP diluted earnings per share of
$1.29. Throughout this release, we have provided growth rates for fiscal
2012 excluding the initial recognition of PhotoStamps breakage in the
second quarter of 2011 as we believe that it provides a more meaningful
comparison for second quarter 2012 year-over-year performance. Non-GAAP
to GAAP amounts for the second quarter of 2011 are reconciled in the
following table: 



Second Quarter Fiscal 2011
All amounts in millions
 except                        Non-GAAP  Stock-Based   Photostamps    GAAP
per share or margin data:       Amounts   Comp. Exp.     Breakage   Amounts 

Revenues                       $  24.47  $         -   $      2.16  $ 26.63 

Cost of Sales                      6.18         0.05          0.45     6.68 
Research & Development             2.18         0.15                   2.33 
Sales & Marketing                  8.31         0.17                   8.48 
General & Administrative           3.08         0.43                   3.51 
                               --------  -----------   -----------  ------- 
Total Expenses                    19.75         0.80          0.45    21.00 

Gross Margin                       74.7%        (0.2%)         0.4%    74.9%

Income (Loss) from Operations      4.72        (0.80)         1.71     5.63 
Interest and Other Income          0.15            -             -     0.15 
                               --------  -----------   -----------  ------- 
Pre-Tax Income (Loss)              4.87        (0.80)         1.71     5.78 

Provision for Income Taxes        (0.10)           -             -    (0.10)

                               --------  -----------   -----------  ------- 
Net Income                     $   4.77  $     (0.80)  $      1.71  $  5.68 
                               ========  ===========   ===========  ======= 

                               --------  -----------   -----------  ------- 
On a diluted per share basis   $   0.33  $     (0.06)  $      0.12  $  0.39 
                               ========  ===========   ===========  ======= 

Shares used in per share
 calculation                      14.45        14.45         14.45    14.45 


    
About Stamps.com and PhotoStamps

    Stamps.com (NASDAQ: STMP) is a leading provider of Internet-based postage
services. Stamps.com's service enables small businesses, enterprises,
advanced shippers, 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 currently has PC Postage partnerships with
Avery Dennison, Microsoft, HP, 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. 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 the collegiate collection. Stamps.com
currently has PhotoStamps partnerships with HP/Snapfish and others.

    About 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.
Reconciliation to the nearest GAAP measures of all non-GAAP measures
included in this press release can be found in the financial tables of
this earnings release.

    Non-GAAP measures are provided to enhance investors' overall
understanding of the Company's current financial performance, prospects
for the future and as a means to evaluate period-to-period comparisons.
The Company believes that these non-GAAP measures provide meaningful
supplemental information regarding financial performance by excluding
certain expenses and benefits that may not be indicative of recurring
core business operating results. The Company believes the non-GAAP
measures that exclude such items as stock-based compensation, asset
write-offs, dividend-related compensation expense, legal settlements and
reserves, initial adoption of breakage accounting in fiscal 2011, and
income tax adjustments, when viewed with GAAP results and the
accompanying reconciliation, enhance the comparability of results against
prior periods and allow for greater transparency of financial results.
The Company believes non-GAAP measures facilitate management's internal
comparison of the Company's financial performance to that of prior
periods as well as trend analysis for budgeting and planning purposes.
The presentation of non-GAAP measures are not intended to be considered
in isolation or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP.

    "Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: This release includes forward-looking statements about our
anticipated results 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, 2011, 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. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF INCOME
              (in thousands, except per share data: unaudited)

                                  Three Months ended     Six Months ended
                                       June 30,              June 30,
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  --------- 
Revenues:
  Service                        $  21,781  $  18,929  $  43,168  $  36,166 
  Product                            3,452      3,209      7,381      6,574 
  Insurance                          1,702        941      3,364      1,774 
  PhotoStamps                        1,289      3,548      2,601      4,929 
  Other                                  3          3          6          4 
                                 ---------  ---------  ---------  --------- 
    Total revenues                  28,227     26,630     56,520     49,447 
Cost of revenues:
  Service                            3,829      3,617      8,068      7,197 
  Product                            1,278      1,148      2,738      2,440 
  Insurance                            562        358      1,097        620 
  PhotoStamps                          969      1,562      1,998      2,652 
                                 ---------  ---------  ---------  --------- 
    Total cost of revenues           6,638      6,685     13,901     12,909 
                                 ---------  ---------  ---------  --------- 
    Gross profit                    21,589     19,945     42,619     36,538 
Operating expenses:
  Sales and marketing                9,775      8,480     19,882     16,756 
  Research and development           2,555      2,332      5,212      4,605 
  General and administrative         3,435      3,506      7,280      6,966 
                                 ---------  ---------  ---------  --------- 
    Total operating expenses        15,765     14,318     32,374     28,327 
                                 ---------  ---------  ---------  --------- 
    Income from operations           5,824      5,627     10,245      8,211 

Interest and other income, net         163        145        287        301 
                                 ---------  ---------  ---------  --------- 
Income before income taxes           5,987      5,772     10,532      8,512 

Income tax expense (benefit)            64         95    (11,751)       160 
                                 ---------  ---------  ---------  --------- 
Net income                       $   5,923  $   5,677  $  22,283  $   8,352 
                                 =========  =========  =========  ========= 

Net income per share:
  Basic                          $    0.36  $    0.40  $    1.36  $    0.58 
                                 =========  =========  =========  ========= 
  Diluted                        $    0.34  $    0.39  $    1.30  $    0.57 
                                 =========  =========  =========  ========= 
Weighted average shares
 outstanding:
  Basic                             16,468     14,321     16,359     14,402 
                                 =========  =========  =========  ========= 
  Diluted                           17,196     14,450     17,184     14,532 
                                 =========  =========  =========  ========= 

                   CONDENSED CONSOLIDATED BALANCE SHEETS
                         (in thousands, unaudited)

                                                   June 30,    December 31, 
                                                     2012          2011
                                                 ------------  ------------ 

                     ASSETS
Cash and investments                             $     66,129  $     69,363 
Accounts receivable                                    10,205        10,466 
Other current assets                                    4,498         5,476 
Property and equipment, net                            22,917         2,165 
Intangible assets, net                                  1,406           837 
Deferred tax                                           28,040        16,125 
Other assets                                            3,496         3,548 
                                                 ------------  ------------ 
    Total assets                                 $    136,691  $    107,980 
                                                 ============  ============ 

      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Accounts payable and accrued expenses          $     11,247  $     12,075 
  Deferred revenue                                      1,751         1,898 
                                                 ------------  ------------ 
    Total liabilities                                  12,998        13,973 
                                                 ------------  ------------ 

Stockholders' equity:
  Common stock                                             49            49 
  Additional paid-in capital                          644,912       637,483 
  Treasury Stock                                     (123,472)     (123,472)
  Accumulated deficit                                (398,055)     (420,338)
  Unrealized gain on investments                          259           285 
                                                 ------------  ------------ 
    Total stockholders' equity                        123,693        94,007 
                                                 ------------  ------------ 
    Total liabilities and stockholders' equity   $    136,691  $    107,980 
                                                 ============  ============ 


    


Investor Contact: 
Jeff Carberry
Stamps.com Investor Relations 
(310) 482-5830 
invrel@stamps.com 

Press Contact:
Eric Nash
Stamps.com Public Relations
(310) 482-5942
publicrelations@Stamps.com 

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