PC Postage(R) Revenue of $18.8 Million; Non-GAAP Income From Operations up 17%; Non-GAAP Diluted Earnings per Share of $0.18
-- Excluding the enhanced promotion channel, PC Postage revenue was $17.4 million, up 7% from the fourth quarter of 2008. -- The Company continued to reduce its investment in the enhanced promotion channel (which consists of online programs where additional promotions are provided directly by marketing partners), and total PC Postage revenue including that channel was $18.8 million, up 3% from the fourth quarter of 2008. -- The Company reduced the overall level of sales and marketing costs for PhotoStamps by approximately 81% versus the fourth quarter of 2008 and as a result, total fourth quarter PhotoStamps revenue was $2.9 million, a decrease of 28% versus the fourth quarter of 2008. -- With the reduction in revenue from PhotoStamps and the enhanced promotion channel, total revenue was $21.7 million, down 3% compared to the fourth quarter of 2008. -- PC Postage gross margin was 77.3%, PhotoStamps gross margin was 23.6% and total gross margin was 70.2%. -- GAAP net income was $2.2 million, or $0.14 per fully diluted share. This includes a $0.7 million non-cash stock-based compensation expense, a $0.1 million asset write-down for an other-than-temporary impairment and a $0.1 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 asset write-down and the income tax adjustment, non-GAAP income from operations was $2.8 million and non-GAAP net income per fully diluted share was $0.18."For the fourth quarter we generated our highest non-GAAP earnings per share in the past three years, and we achieved seven percent overall revenue growth in PC Postage, excluding the enhanced promotion channel," said Ken McBride, Stamps.com president and CEO. "We also saw improvements in our customer metrics and we continued to make good progress in our enterprise and high volume shipping areas during the quarter." Fourth Quarter 2009 Detailed Results Stamps.com reported 2009 fourth quarter GAAP net income of $2.2 million. On a per share basis, total 2009 fourth quarter GAAP net income was $0.14 based on fully diluted shares outstanding of 15.9 million. Fourth quarter GAAP net income was reduced by $0.7 million for FASB 123R stock-based compensation expense, reduced by $0.1 million for an asset write-down of certain investment holdings for an other-than-temporary impairment, and increased by $0.1 million for an income tax adjustment related to the temporary suspension of the Company's ability to utilize its net operating losses for California income tax purposes for the tax years 2008 and 2009. Non-GAAP and GAAP amounts are reconciled in the following table:
Fourth Quarter Fiscal 2009 All amounts in millions except per share or Asset margin data: Non-GAAP FASB Write- Income Tax GAAP Amounts 123R Down Adjustment Amounts Cost of Sales $ 6.40 $ 0.06 $ - $ - $ 6.47 Research & Development 1.93 0.15 - - 2.07 Sales & Marketing 7.90 0.18 - - 8.09 General & Administrative 2.68 0.32 - - 3.00 -------- ------- ------- ---------- ------- Total Expenses 18.92 0.71 - - 19.63 Gross Margin 70.5% (0.3%) - - 70.2% Income from Operations 2.76 (0.71) - - 2.05 Interest and Other Income 0.20 0.00 (0.08) - 0.12 -------- ------- ------- ---------- ------- Pre-Tax Income 2.96 (0.71) (0.08) - 2.17 Provision for Income Taxes (0.10) - - 0.10 0.00 -------- ------- ------- ---------- ------- Net Income $ 2.86 $ (0.71) $ (0.08) $ 0.10 $ 2.17 ======== ======= ======= ========== ======= -------- ------- ------- ---------- ------- On a diluted per share basis $ 0.18 $ (0.04) $ (0.01) $ 0.01 $ 0.14 ======== ======= ======= ========== ======= Shares used in per share calculation 15.90 15.90 15.90 15.90 15.90Excluding the FASB Statement 123R expense, asset write-down and income tax adjustment, 2009 fourth quarter non-GAAP net income was $2.9 million or $0.18 per fully diluted share based on fully diluted shares outstanding of 15.9 million. This compares to 2008 fourth quarter non-GAAP net income per fully diluted share of $0.16. Thus, non-GAAP fourth quarter diluted earnings per share increased by 16% compared to the same quarter last year. Fiscal 2009 Detailed Results Total 2009 revenue was $82.1 million, a decrease of 3% versus revenue of $84.9 million in 2008. Total 2009 PC Postage revenue, including service revenue, store revenue and insurance revenue, was $73.6 million, up 1% versus PC Postage revenue of $73.0 million in 2008. Excluding the enhanced promotion channel, PC Postage revenue in 2009 was $67.4 million, up 5% versus $63.9 million in 2008. Total 2009 PhotoStamps revenue was $8.5 million, down 29% versus PhotoStamps revenue of $11.9 million in 2008. Total 2009 GAAP net income was $6.2 million, including approximately $3.1 million of FASB Statement 123R stock-based compensation expense; $0.4 million asset write-down of inventory of discontinued products; $0.1 million asset write-down of certain investment holdings for other-than-temporary impairment; and $0.4 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 2009 GAAP net income was $0.38 based on fully diluted shares outstanding for the year of 16.4 million. Non-GAAP and GAAP amounts are reconciled in the following table:
Fiscal Year 2009 All amounts in millions except per share or Asset margin data: Non-GAAP FASB Write- Income Tax GAAP Amounts 123R Down Adjustment Amounts Cost of Sales $ 22.64 $ 0.28 $ - $ - $ 22.91 Research & Development 8.05 0.65 - - 8.70 Sales & Marketing 30.97 0.77 - - 31.74 General & Administrative 11.18 1.40 0.37 - 12.96 -------- ------- ------- ---------- ------- Total Expenses 72.84 3.10 0.37 - 76.31 Gross Margin 72.4% (0.3%) - - 72.1% Income from Operations 9.29 (3.10) (0.37) - 5.81 Interest and Other Income 1.00 0.00 (0.08) - 0.92 -------- ------- ------- ---------- ------- Pre-Tax Income 10.28 (3.10) (0.46) - 6.73 Provision for Income Taxes (0.19) - - (0.37) (0.55) -------- ------- ------- ---------- ------- Net Income $ 10.10 $ (3.10) $ (0.46) $ (0.37) $ 6.18 ======== ======= ======= ========== ======= -------- ------- ------- ---------- ------- On a diluted per share basis $ 0.62 $ (0.19) $ (0.03) $ (0.02) $ 0.38 ======== ======= ======= ========== ======= Shares used in per share calculation 16.37 16.37 16.37 16.37 16.37Excluding the FASB Statement 123R expense, the asset write-downs and the additional California income tax, 2009 non-GAAP net income was $10.1 million. On a per share basis, 2009 non-GAAP net income per fully diluted share was $0.62 based on 2009 fully diluted shares outstanding of 16.4 million. This compares to 2008 non-GAAP net income per fully diluted share of $0.61. Thus, non-GAAP 2009 diluted earnings per share increased by 1% compared to 2008. Share Repurchase During the fourth quarter, the Company repurchased a total of 0.1 million shares for a total cost of $1.2 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 approximately 0.6 million shares for a total cost of approximately $5.2 million. On February 4, 2010, the Board of Directors voted to extend the currently authorized share repurchase program for an additional six months through August of 2010. 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. Net Operating Losses (NOL) and Protective Measures Stamps.com currently has approximately $230 million in Federal NOLs and $150 million in State NOLs, with a potential value of up to $94 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 December 31, 2009, the Company was at an approximately 26% 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 15.5 million shares outstanding and therefore ownership of approximately 777 thousand shares or greater would currently constitute a "5% shareholder." Stamps.com strongly urges that any stockholder contemplating owning more than 625 thousand shares contact the Company before doing so. Business Outlook Stamps.com currently expects total 2010 revenue to be $80 to $90 million. 2010 GAAP net income per share is expected to be $0.50 to $0.70, including approximately $3.5 million of 2010 FASB Statement 123R stock-based compensation expense and $3.7 million of non-cash tax benefit resulting from the potential additional partial release of the valuation allowance against our deferred tax asset. Excluding the FASB Statement 123R expenses and the non-cash tax benefit, non-GAAP 2010 net income per fully diluted share is expected to be $0.50 to $0.70. Company Customer Metrics A complete set of the quarterly customer metrics for the past four fiscal years is available currently 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. 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, 2009 2008 2009 2008 -------- --------- --------- -------- Revenues: Subscription $ 15,450 $ 15,347 $ 61,372 $ 61,556 Product 2,920 2,515 10,653 9,906 Insurance 422 433 1,598 1,574 PhotoStamps 2,877 3,979 8,485 11,876 Other 9 - 16 - -------- --------- --------- -------- Total revenues 21,678 22,274 82,124 84,912 Cost of revenues: Subscription 3,064 2,735 11,869 10,365 Product 1,073 883 3,989 3,520 Insurance 130 135 494 498 PhotoStamps 2,198 2,817 6,562 8,525 -------- --------- --------- -------- Total cost of revenues 6,465 6,570 22,914 22,908 -------- --------- --------- -------- Gross profit 15,213 15,704 59,210 62,004 Operating expenses: Sales and marketing 8,086 8,481 31,735 33,538 Research and development 2,075 2,137 8,699 8,425 General and administrative 3,000 3,761 12,961 15,581 -------- --------- --------- -------- Total operating expenses 13,161 14,379 53,395 57,544 -------- --------- --------- -------- Income from operations 2,052 1,325 5,815 4,460 Interest and other income, net 119 542 916 2,918 -------- --------- --------- -------- Income before income taxes 2,171 1,867 6,731 7,378 Income tax expense (benefit) (1) 270 554 (2,786) -------- --------- --------- -------- Net income $ 2,172 $ 1,597 $ 6,177 $ 10,164 ======== ========= ========= ======== Net income per share: Basic $ 0.14 $ 0.09 $ 0.38 $ 0.53 ======== ========= ========= ======== Diluted $ 0.14 $ 0.09 $ 0.38 $ 0.53 ======== ========= ========= ======== Weighted average shares outstanding: Basic 15,764 17,820 16,238 19,081 ======== ========= ========= ======== Diluted 15,897 17,994 16,369 19,345 ======== ========= ========= ======== CONDENSED BALANCE SHEETS (in thousands) December 31, December 31, 2009 2008 ------------ ------------ ASSETS Cash and investments $ 71,745 $ 74,059 Accounts receivable 4,367 4,163 Other current assets 3,288 4,426 Property and equipment, net 2,102 3,086 Intangible assets, net 498 505 Deferred tax assets 3,671 3,671 Other assets 3,587 3,348 ------------ ------------ Total assets $ 89,258 $ 93,258 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 9,583 $ 11,174 Deferred revenue $ 4,070 $ 3,743 ------------ ------------ Total liabilities 13,653 14,917 ------------ ------------ Stockholders' equity: Common stock 47 47 Additional paid-in capital 630,322 626,810 Treasury Stock (104,344) (90,613) Accumulated deficit (450,214) (456,391) Unrealized loss on investments (206) (1,512) ------------ ------------ Total stockholders' equity 75,605 78,341 ------------ ------------ Total liabilities and stockholders' equity $ 89,258 $ 93,258 ============ ============