PC Postage(R) Revenue of $18.3 Million; Non-GAAP Diluted Earnings per Share of $0.17
-- Excluding the enhanced promotion channel, PC Postage revenue was $16.8 million, up 5% from the third quarter of 2008. -- Including the enhanced promotion channel (which consists of online programs where additional promotions are offered to customers), total PC Postage revenue was $18.3 million, up 1% from the third quarter of 2008. -- The Company reduced the overall level of sales and marketing costs for PhotoStamps by approximately 46% versus the third quarter of 2008 and as a result, total third quarter PhotoStamps revenue was $1.9 million, a decrease of 6% versus the third quarter of 2008. -- Total revenue was $20.2 million, flat compared to the third quarter of 2008. -- PC Postage gross margin was 78.3%, PhotoStamps gross margin was 18.9% and total gross margin was 72.7%. -- GAAP net income was $1.7 million, or $0.11 per fully diluted share. This includes a $0.8 million non-cash stock-based compensation expense 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 and the income tax adjustment, non-GAAP income from operations was $2.5 million and non-GAAP net income per fully diluted share was $0.17."In the third quarter we were pleased that our non-GAAP earnings per share were the strongest they have been in a year," said Ken McBride, Stamps.com president and CEO. "We achieved five percent overall revenue growth in PC Postage, excluding the enhanced promotion channel. We also saw our lowest cost per new customer acquired for this year and we continued to make good progress in our enterprise and shipping areas during the quarter." Third quarter 2009 Detailed Results Stamps.com reported 2009 third quarter GAAP net income of $1.7 million. On a per share basis, total 2009 third quarter GAAP net income was $0.11 based on fully diluted shares outstanding of 16.2 million. Third quarter GAAP net income was reduced by $0.8 million for FASB 123R stock-based compensation expense and 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 legislation which was passed in 2008 and is effective for tax years 2008 and 2009. Non-GAAP and GAAP amounts are reconciled in the following table:
Third Quarter Fiscal 2009 All amounts in millions except Non-GAAP FASB Income Tax GAAP per share or margin data: Amounts 123R Adjustment Amounts Cost of Sales $ 5.45 $ 0.07 $ - $ 5.52 Research & Development 2.02 0.18 - 2.20 Sales & Marketing 7.16 0.20 - 7.36 General & Administrative 3.06 0.33 - 3.39 -------- ------- ---------- -------- Total Expenses 17.70 0.77 - 18.47 Gross Margin 73.0% (0.3%) - 72.7% Income from Operations 2.52 (0.77) - 1.74 Interest and Other Income 0.21 - - 0.21 -------- ------- ---------- -------- Pre-Tax Income 2.73 (0.77) - 1.95 Provision for Income Taxes (0.01) - (0.21) (0.22) -------- ------- ---------- -------- Net Income $ 2.71 $ (0.77) $ (0.21) $ 1.73 ======== ======= ========== ======== -------- ------- ---------- -------- On a diluted per share basis $ 0.17 $ (0.05) $ (0.01) $ 0.11 ======== ======= ========== ======== Shares used in per share calculation 16.16 16.16 16.16 16.16Excluding the FASB Statement 123R expense and income tax adjustment, 2009 third quarter non-GAAP net income was $2.7 million or $0.17 per fully diluted share based on fully diluted shares outstanding of 16.2 million. This compares to 2008 third quarter non-GAAP net income per fully diluted share of $0.17. Thus, non-GAAP third quarter diluted earnings per share were flat versus the same quarter last year. Share Repurchase During the third quarter, the Company repurchased a total of 0.5 million shares for a total cost of $3.9 million. On July 23, 2009, Stamps.com's Board of Directors approved a new share repurchase plan authorizing the Company to repurchase up to 2.5 million shares of Stamps.com stock from August 2009 through February 2010. Under this plan to date, the Company has repurchased 0.3 million shares for a total cost of $2.9 million. 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 net operating loss 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 2009 revenue to be $80 to $90 million. 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, a $0.4 million asset write-off, and $0.5 to $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, asset write-off 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 $235 million in Federal NOLs and $150 million in State NOLs, with a potential value of up to $95 million 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 September 30, 2009 the Company was at an approximately 28% 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 15.8 million shares outstanding and therefore ownership of approximately 788 thousand shares or greater would currently constitute a "5% shareholder." Stamps.com strongly urges that any stockholder contemplating owning more than 630 thousand shares contact the Company before doing so. Company Customer Metrics A complete set of the quarterly customer metrics for the past three fiscal years and through the current quarter is available currently at http://investor.stamps.com (under a tab on the left side called Company Information, Current and Previous 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 Nine Months ended September 30, September 30, 2009 2008 2009 2008 ---------- ---------- ---------- --------- Revenues: Subscription $ 15,401 $ 15,435 $ 45,922 $ 46,209 Product 2,536 2,326 7,733 7,392 Insurance 377 375 1,176 1,140 PhotoStamps 1,901 2,020 5,609 7,897 Other 1 - 6 - ---------- ---------- ---------- --------- Total revenues 20,216 20,156 60,446 62,638 Cost of revenues: Subscription 2,926 2,626 8,806 7,630 Product 940 809 2,915 2,637 Insurance 116 124 364 363 PhotoStamps 1,542 1,489 4,363 5,708 ---------- ---------- ---------- --------- Total cost of revenues 5,524 5,048 16,448 16,338 ---------- ---------- ---------- --------- Gross profit 14,692 15,108 43,998 46,300 Operating expenses: Sales and marketing 7,359 7,654 23,650 25,057 Research and development 2,198 2,243 6,624 6,288 General and administrative 3,391 3,420 9,961 11,820 ---------- ---------- ---------- --------- Total operating expenses 12,948 13,317 40,235 43,165 ---------- ---------- ---------- --------- Income from operations 1,744 1,791 3,763 3,135 Other income, net: Interest income 208 697 797 2,350 Other income - 5 - 26 ---------- ---------- ---------- --------- Total other income, net 208 702 797 2,376 ---------- ---------- ---------- --------- Pre-tax income 1,952 2,493 4,560 5,511 Income tax expense (benefit) 221 430 555 (3,056) ---------- ---------- ---------- --------- Net income $ 1,731 $ 2,063 $ 4,005 $ 8,567 ========== ========== ========== ========= Net income per share: Basic $ 0.11 $ 0.11 $ 0.24 $ 0.44 ========== ========== ========== ========= Diluted $ 0.11 $ 0.10 $ 0.24 $ 0.43 ========== ========== ========== ========= Weighted average shares outstanding: Basic 16,035 19,410 16,397 19,505 ========== ========== ========== ========= Diluted 16,162 19,726 16,527 19,796 ========== ========== ========== ========= CONDENSED BALANCE SHEETS (in thousands) September 30, December 31, 2009 2008 ------------- ------------- ASSETS Cash and investments $ 69,878 $ 74,059 Trade accounts receivable 2,806 2,962 Other accounts receivable 2,316 1,201 Other current assets 3,438 4,426 Property and equipment, net 2,358 3,086 Intangible assets, net 499 505 Deferred tax 3,671 3,671 Other assets 3,022 3,348 ------------- ------------- Total assets $ 87,988 $ 93,258 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 10,346 $ 11,174 Deferred revenue 4,206 $ 3,743 ------------- ------------- Total liabilities 14,552 14,917 ------------- ------------- Stockholders' equity: Common stock 47 47 Additional paid-in capital 629,579 626,810 Treasury Stock (103,162) (90,613) Accumulated deficit (452,386) (456,391) Unrealized loss on investments (642) (1,512) ------------- ------------- Total stockholders' equity 73,436 78,341 ------------- ------------- Total liabilities and stockholders' equity $ 87,988 $ 93,258 ============= =============