Total Revenue of $22.3 Million; GAAP Net Income of $1.6 Million; Non-GAAP Income From Operations of $2.4 Million, Up 4%; Non-GAAP Diluted Earnings Per Share of $0.16
-- Total revenue was $22.3 million, down 8% versus the fourth quarter of
2007.
-- PC Postage® subscriber-related revenue, including service revenue,
store revenue and insurance revenue, was $18.3 million, up 4% from the
fourth quarter of 2007. Excluding the enhanced promotion channel (which
consists of online programs where additional promotions are offered to
customers), subscriber-related revenue was $16.2 million, up 8% from the
fourth quarter of 2007.
-- Total gross margin was 70.5% versus 67.7% in the fourth quarter of
2007. PC Postage subscriber-related revenue gross margin was 79.5% versus
79.8% in the fourth quarter of 2007, and PhotoStamps gross margin was 29.2%
versus 35.4% in the fourth quarter of 2007.
-- Total spending on small business PC Postage customer acquisition,
excluding spending on the enhanced promotion channel, was $6.2 million, up
9% 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
costs in this area by approximately 64% versus the fourth quarter of 2007;
the lower sales and marketing spending level contributed to a 39% decline
in fourth quarter PhotoStamps revenue versus the fourth quarter of 2007.
-- GAAP net income was $1.6 million, or $0.09 per fully diluted share.
This includes a $0.8 million non-cash stock-based compensation expense, a
$0.3 million adjustment to a prior litigation charge, and a $0.2 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 $2.4
million, up 4% versus the fourth quarter of 2007, and non-GAAP net income
per fully diluted share was $0.16, flat versus the fourth quarter of 2007.
"In light of the tough macroeconomic environment, we were pleased to see
reasonable performance in our PC Postage revenue and earnings during the
fourth quarter," said Ken McBride, Stamps.com president and CEO. "In
particular our PC Postage service fees, excluding the enhanced promotion
channel, were up 10% during the fourth quarter while our total business
operating earnings grew at 4% versus the fourth quarter of 2007. We also
saw improved customer acquisition in our PC Postage business during the
fourth quarter versus the third quarter of 2008. Overall, we believe that
our core PC postage business is still a very stable and predictable one and
we expect that this recurring revenue business will allow us to continue to
produce solid earnings in tough times."
Fourth Quarter 2008 Detailed Results
Stamps.com reported 2008 fourth quarter GAAP net income of $1.6 million.
On a per share basis, total 2008 fourth quarter GAAP net income was $0.09
based on fully diluted shares outstanding of 18.0 million. Fourth quarter
GAAP net income was reduced by a non-cash cost of $0.8 million for FASB
123R stock-based compensation expense, and by $0.3 million for an
adjustment to the litigation charge which was previously included in the
third quarter of 2008. Fourth quarter GAAP net income was also reduced by
an income tax adjustment of $0.2 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. Non-GAAP
and GAAP amounts are reconciled in the following table:
Fourth Quarter Fiscal 2008
All amounts in Income
millions except per Non-GAAP FASB Litigation Tax GAAP
share or margin data: Amounts 123R Charges Adjustment Amounts
Cost of Sales $ 6.51 $ 0.06 $ - $ - $ 6.57
Research &
Development 1.99 0.15 - - 2.14
Sales & Marketing 8.28 0.20 - - 8.48
General &
Administrative 3.14 0.37 0.25 - 3.76
--------- --------- --------- --------- --------
Total Expenses 19.92 0.78 0.25 - 20.95
Gross margin 70.8% -0.3% - - 70.5%
Income from
Operations 2.36 (0.78) (0.25) - 1.33
Interest and Other
Income 0.54 - - - 0.54
--------- --------- --------- --------- --------
Pre-Tax Income 2.90 (0.78) (0.25) - 1.87
Provision for Income
Taxes (0.10) - - (0.17) (0.27)
--------- --------- --------- --------- --------
Net Income $ 2.80 $ (0.78) $ (0.25) $ (0.17) $ 1.60
========= ========= ========= ========= ========
--------- --------- --------- --------- --------
On a diluted per
share basis $ 0.16 $ (0.04) $ (0.01) $ (0.01) $ 0.09
========= ========= ========= ========= ========
Shares used in per
share calculation 17.99 17.99 17.99 17.99 17.99
Excluding the FASB Statement 123R expense, litigation charge adjustment,
and income tax adjustment, 2008 fourth quarter non-GAAP net income was $2.8
million or $0.16 per fully diluted share based on fully diluted shares
outstanding of 18.0 million. This compares to 2007 fourth 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 fourth quarter diluted earnings per share excluding
123R-related expenses were flat versus the same quarter last year.
Fiscal 2008 Detailed Results
Total fiscal 2008 revenue was $84.9 million, a decrease of 1% versus
revenue of $85.8 million for fiscal 2007. Total 2008 PC Postage subscriber
related revenue, including service revenue, store revenue and insurance
revenue, was $73.0 million, up 9% versus subscriber related revenue in
2007. Excluding the enhanced promotion channel, subscriber-related revenue
in 2008 was $63.9 million, up 11% versus 2007. Total 2008 PhotoStamps
revenue was $11.9 million, down 34% versus PhotoStamps revenue of $17.9
million in 2007. Total other revenue in 2008 was immaterial versus $0.9
million in 2007.
Total 2008 GAAP net income was $10.2 million, including approximately $3.3
million of FASB Statement 123R stock-based compensation expense; $0.4
million of asset write-offs; $3.7 million of deferred tax benefit; $1.0
million of litigation charges related to a lawsuit emanating from the
Company's iShip operations and an expected settlement in other litigation
matters; and $0.5 million in additional California income tax relating to
the temporary suspension of the Company's ability to utilize its net
operating losses for California income tax purposes. On a per share basis,
total 2008 GAAP net income was $0.53 based on fully diluted shares
outstanding for the year of 19.3 million. Excluding the FASB Statement
123R expense, the asset write-offs, the deferred tax benefit, the
litigation charges and the additional California income tax, 2008 non-GAAP
net income was $11.8 million. On a per share basis, 2008 non-GAAP net
income per fully diluted share was $0.61 based on 2008 fully diluted shares
outstanding of 19.3 million.
Share Repurchase
During the fourth quarter of 2008 the Company repurchased 1.9 million
shares for a total cost of $19.5 million under the share repurchase plan
originally approved by the Board of Directors on July 16, 2008. From the
third quarter 2008 through today, the Company has repurchased 2.5 million
shares for a total cost of $24.8 million under the July 2008 plan. On
February 5, 2009, Stamps.com's Board of Directors approved a new share
repurchase program authorizing the Company to repurchase up to 2.5 million
shares of Stamps.com stock over the next six months.
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.
PhotoStamps
During the fourth quarter, approximately 243 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 64% versus the fourth quarter
of 2007. As a result of the reduced level of sales and marketing activity,
total fourth quarter PhotoStamps revenue was $4.0 million, a decrease of
39% versus the fourth quarter of 2007.
Business Outlook
Stamps.com currently expects total 2009 revenue to be $80 to $90 million.
Fiscal 2009 GAAP net income per share is expected to be $0.20 to $0.40,
including approximately $3 million of 2009 FASB Statement 123R stock-based
compensation expense and $0.5 - $1.0 million of expected taxes 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 expenses and the additional California income taxes,
non-GAAP 2009 net income per fully diluted share is expected to be $0.40 to
$0.60.
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 as of December 31, 2008 the Company was
at an approximately 34% 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 17.0 million shares outstanding and therefore
ownership of 848 thousand shares or greater would currently constitute a
"5% shareholder." Stamps.com strongly urges that any stockholder
contemplating owning more than 675,000 shares contact the Company before
doing so.
Resignation of Board Member
Kevin Douglas, a Company director since July 2003, provided notice to the
Company of his resignation of service from the Company's Board of Directors
on February 6, 2009 to be effective following the Board's next regularly
scheduled meeting on March 13, 2009. Mr. Douglas resigned to focus on
other activities, and his notice of resignation was not related to any
disagreement with Company management, with other Board members, or with
Stamps.com Inc.'s accounting or operating policies.
Company Customer Metrics
A complete set of the quarterly customer metrics for the past three fiscal
years 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
(
STAMPS.COM INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share data: unaudited)
Three Months ended Twelve Months ended
December 31, December 31,
2008 2007 2008 2007
------------ ------------ ------------ -------------
Revenues:
Subscription $ 15,347 $ 14,621 $ 61,556 $ 55,903
Product 2,515 2,525 9,906 9,636
Insurance 433 410 1,574 1,478
PhotoStamps 3,979 6,542 11,876 17,887
Other - - - 907
------------ ------------ ------------ -------------
Total
revenues 22,274 24,098 84,912 85,811
Cost of revenues:
Subscription 2,735 2,536 10,365 9,659
Product 883 888 3,520 3,286
Insurance 135 124 498 455
PhotoStamps 2,817 4,228 8,525 11,854
Other - - - 52
------------ ------------ ------------ -------------
Total cost of
revenues 6,570 7,776 22,908 25,306
------------ ------------ ------------ -------------
Gross profit 15,704 16,322 62,004 60,505
Operating expenses:
Sales and
marketing 8,481 9,441 33,538 33,115
Research and
development 2,137 1,938 8,425 8,260
General and
administrative 3,761 3,459 15,581 12,538
------------ ------------ ------------ -------------
Total
operating
expenses 14,379 14,838 57,544 53,913
------------ ------------ ------------ -------------
Income from
operations 1,325 1,484 4,460 6,592
Other income, net:
Interest income 542 1,012 2,892 4,461
Other income - - 26 -
------------ ------------ ------------ -------------
Total other
income, net 542 1,012 2,918 4,461
------------ ------------ ------------ -------------
Pre-tax income 1,867 2,496 7,378 11,053
Provision for
income taxes 270 130 (2,786) 387
------------ ------------ ------------ -------------
Net income $ 1,597 $ 2,366 $ 10,164 $ 10,666
============ ============ ============ =============
Net income per
share:
Basic $ 0.09 $ 0.12 $ 0.53 $ 0.51
============ ============ ============ =============
Diluted $ 0.09 $ 0.12 $ 0.53 $ 0.50
============ ============ ============ =============
Weighted average
Shares outstanding:
Basic 17,820 19,805 19,081 20,815
============ ============ ============ =============
Diluted 17,994 20,131 19,345 21,194
============ ============ ============ =============
CONDENSED BALANCE
SHEETS
(in thousands)
December 31, December 31,
2008 2007
------------ ------------
ASSETS
Cash and
investments $ 74,059 $ 90,823
Trade accounts
receivable 2,962 2,519
Other accounts
receivable 1,201 1,209
Other current
assets 4,426 2,489
Property and
equipment, net 3,086 3,790
Intangible assets,
net 505 871
Other assets 7,019 3,252
------------ ------------
Total assets $ 93,258 $ 104,953
============ ============
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Liabilities:
Accounts payable
and accrued
expenses $ 11,174 $ 9,935
Deferred revenue $ 3,743 $ 2,576
------------ ------------
Total
liabilities 14,917 12,511
------------ ------------
Stockholders'
equity:
Common stock 47 47
Additional paid-in
capital 626,810 622,781
Treasury Stock (90,613) (63,737)
Accumulated
deficit (456,391) (466,555)
Unrealized loss on
investments (1,512) (94)
------------ ------------
Total
stockholders'
equity 78,341 92,442
------------ ------------
Total
liabilities and
stockholders'
equity $ 93,258 $ 104,953
============ ============
Contact Information: Stamps.com Investor Contact: Stamps.com Investor Relations (310) 482-5830 http://investor.stamps.com Press Contact: Brew PR (310) 600-7160 dena@brewpr.com