Non-GAAP Diluted Earnings per Share Up 69% to $0.30, Highest Level in the Company's History
For the fourth quarter: -- PC Postage revenue, excluding the enhanced promotion channel, was $19.3 million, up 11% from the fourth quarter of 2009. -- Total PC Postage revenue, including the enhanced promotion channel (which consists of online programs where additional promotions are provided directly by marketing partners), was $20.3 million, up 8% from the fourth quarter of 2009. -- PhotoStamps revenue was $2.4 million, a decrease of 17% versus the fourth quarter of 2009. -- Including the decline in PhotoStamps, total revenue was $22.7 million, up 5% compared to the fourth quarter of 2009. -- PC Postage gross margin was 76.8%, PhotoStamps gross margin was 23.7% and total gross margin was 71.1%. -- GAAP net loss was $0.3 million or $0.02 per fully diluted share. This includes $0.6 million in stock-based compensation expense, a $0.6 million asset write-off and $3.4 million in dividend-related compensation expense. -- Excluding the stock-based compensation expense, asset write-off and dividend-related compensation expense, non-GAAP income from operations was $4.1 million, non-GAAP net income was $4.4 million and non-GAAP net income per fully diluted share was $0.30."For the quarter, our non-GAAP earnings per share was up by 69%, and this was the highest level of quarterly non-GAAP earnings per share we have generated in the Company's history," said Ken McBride, Stamps.com president and CEO. "We continue to see strong results across-the-board, including our small business, enterprise and high volume shipping segments. As we enter 2011, we are well positioned to continue making progress in each of these business areas." Fourth Quarter 2010 Detailed Results Stamps.com reported fourth quarter 2010 GAAP net loss of $0.3 million. On a per share basis, total fourth quarter 2010 GAAP net loss was $0.02 based on basic shares outstanding of 14.4 million. Fourth quarter 2010 GAAP net loss included $0.6 million of stock-based compensation expense, a $0.6 million asset write-off related to the Company's billing system and $3.4 million of compensation expense related to the special dividend and its impact on employee stock options. Non-GAAP and GAAP amounts are reconciled in the following table:
Fourth Quarter Fiscal 2010 All amounts in millions except per share or margin data: Dividend Non-GAAP Stock-Based Asset Related GAAP Amounts Comp. Exp. Write-Off Exp. Amounts Cost of Sales $ 6.21 $ 0.05 $ - $ 0.28 $ 6.54 Research & Development 2.00 0.12 - 0.71 2.83 Sales & Marketing 7.58 0.17 - 0.83 8.59 General & Administrative 2.78 0.30 - 1.62 4.69 -------- -------- -------- -------- -------- Total Expenses 18.56 0.65 - 3.44 22.65 Gross Margin 72.6% (0.2%) -- (1.2%) 71.1% Income (Loss) from Operations 4.12 (0.65) - (3.44) 0.03 Asset Write-Off - - (0.63) - (0.63) Interest and Other Income 0.14 - - - 0.14 -------- -------- -------- -------- -------- Pre-Tax Income (Loss) 4.25 (0.65) (0.63) (3.44) (0.47) Provision for Income Taxes 0.19 - - - 0.19 -------- -------- -------- -------- -------- Net Income $ 4.44 $ (0.65) $ (0.63) $ (3.44) $ (0.28) ======== ======== ======== ======== ======== -------- -------- -------- -------- -------- On a diluted per share basis $ 0.30 $ (0.04) $ (0.04) $ (0.24) $ (0.02) ======== ======== ======== ======== ======== Shares used in per share calculation 14.57 14.42 14.42 14.42 14.42Excluding the stock-based compensation expense, asset write-off and dividend-related compensation expense, fourth quarter 2010 non-GAAP net income was $4.4 million or $0.30 per fully diluted share based on fully diluted shares outstanding of 14.6 million. This compares to fourth quarter 2009 non-GAAP net income of $2.9 million and non-GAAP net income per fully diluted share of $0.18. Thus, non-GAAP fourth quarter 2010 diluted earnings per share increased by 69% compared to the same quarter last year. Fiscal 2010 Detailed Results Total 2010 revenue was $85.5 million, an increase of 4% versus revenue of $82.1 million in 2009. Total 2010 PC Postage revenue, including service revenue, store revenue and insurance revenue, was $78.4 million, up 6% versus PC Postage revenue of $73.6 million in 2009. Excluding the enhanced promotion channel, PC Postage revenue in 2010 was $73.8 million, up 10% versus $67.4 million in 2009. Total 2010 PhotoStamps revenue was $7.2 million, down 16% versus PhotoStamps revenue of $8.5 million in 2009. Total 2010 GAAP net income was $5.5 million, including approximately $2.8 million of stock-based compensation expense; a $0.6 million asset write-off; $3.4 million of dividend-related compensation expense; $5.2 million of legal settlements and reserves; and a $4.0 million non-cash income tax benefit resulting from the reversal of a portion of the Company's deferred tax asset valuation allowance. On a per share basis, total 2010 GAAP net income was $0.38 based on fully diluted shares outstanding for the year of 14.7 million. Non-GAAP and GAAP amounts are reconciled in the following table:
Fiscal Year 2010 All amounts in millions except per share or margin data: Stock- Legal Based Dividend Settle- Income Non-GAAP Comp. Asset Related ments & Tax GAAP Amounts Exp. Write-Off Exp. Reserves Benefit Amounts Cost of Sales $ 23.15 $ 0.25 $ - $ 0.28 $ - $ - $ 23.68 Research & Development 8.14 0.57 - 0.71 - - 9.42 Sales & Marketing 29.61 0.73 - 0.83 - - 31.17 General & Administrative 11.69 1.29 - 1.62 - - 14.59 Legal Settlements & Reserves - - - - 5.21 - 5.21 ------- ------- ------- ------- ------- -------- ------- Total Expenses 72.59 2.84 - 3.44 5.21 - 84.08 Gross Margin 72.9% (0.3%) - (0.3%) - - 72.3% Income (Loss) from Operations 12.96 (2.84) - (3.44) (5.21) - 1.47 Asset Write-Off - - (0.63) - - - (0.63) Interest and Other Income 0.76 - - - - - 0.76 ------- ------- ------- ------- ------- -------- ------- Pre-Tax Income (Loss) 13.71 (2.84) (0.63) (3.44) (5.21) - 1.59 Provision for Income Taxes (0.03) - - - - 3.98 3.95 ------- ------- ------- ------- ------- -------- ------- Net Income $ 13.68 $ (2.84) $ (0.63) $ (3.44) $ (5.21) $ 3.98 $ 5.53 ======= ======= ======= ======= ======= ======== ======= ------- ------- ------- ------- ------- -------- ------- On a diluted per share basis $ 0.93 $ (0.19) $ (0.04) $ (0.23) $ (0.35) $ 0.27 $ 0.38 ======= ======= ======= ======= ======= ======== ======= Shares used in per share calculation 14.68 14.68 14.68 14.68 14.68 14.68 14.68Excluding the stock-based compensation expense, asset write-off, dividend-related compensation expense, legal settlements and reserves and income tax benefit, 2010 non-GAAP net income was $13.7 million. On a per share basis, 2010 non-GAAP net income per fully diluted share was $0.93 based on 2010 fully diluted shares outstanding of 14.7 million. This compares to 2009 non-GAAP net income per fully diluted share of $0.62. Thus, non-GAAP 2010 diluted earnings per share increased by 51% compared to 2009. Share Repurchase During 2010 the Company repurchased a total of 1.5 million shares for a total cost of $13.8 million. The Company did not repurchase any shares during the fourth quarter of 2010. On February 3, 2011, the Board of Directors approved a new share repurchase plan effective upon the expiration of the current plan on February 15, 2011, authorizing the Company to repurchase up to 1.0 million shares of Stamps.com stock during 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 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 may be subject to limitations imposed on such purchases by applicable securities laws and regulations and the rules of the Nasdaq Stock Market. Dividend During the fourth quarter, the Company completed a $2.00 per share special dividend to shareholders. The total amount of cash distributed in the dividend payment was $28.9 million based on 14.5 million shares outstanding as of the November 11, 2010 record date. The Company also incurred compensation expense of $3.4 million in the fourth quarter related to the special dividend and its effect on employee stock options. The Company currently estimates that approximately $1.87 of the $2.00 special dividend will qualify as a tax-free return of capital, with the remaining amount treated as a taxable dividend. The final tax classification will be reflected on the form 1099-DIV provided to shareholders. Shareholders are encouraged to consult with their own tax and financial advisors regarding the implications of this dividend on their individual circumstances. The Company has returned approximately $253 million to its shareholders since 2002 through special dividends and share repurchases. Total special dividends now represent approximately $107 million including a $78 million special dividend paid in 2004 and the $29 million special dividend paid in 2010. In addition, the Company has spent approximately $146 million repurchasing its shares since 2002. Through its share repurchases, the Company has reduced its current split-adjusted total shares outstanding by approximately 45% compared to the total shares outstanding at the beginning of 2002. Net Operating Loss (NOL) Update Stamps.com currently has approximately $225 million in Federal NOLs and $145 million in State NOLs. The Company estimates that as of December 31, 2010, its ownership shift was approximately 22% compared with 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 Stamps.com's NOL asset, the Company requests that any shareholder contemplating becoming a 5% shareholder contact the Company before doing so. Business Outlook Stamps.com currently expects total 2011 revenue to be in a range between $82.5 to $92.5 million. 2011 GAAP net income per share is expected to be in a range between $0.65 to $0.85, including approximately $3 million of stock-based compensation expense. Excluding the stock-based compensation expense, non-GAAP 2011 net income per fully diluted share is expected to be in a range between $0.85 to $1.05. Company Customer Metrics A complete set of the quarterly customer metrics for the past five fiscal years 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. About Stamps.com and PhotoStamps Stamps.com (
STAMPS.COM INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months ended Twelve Months ended December 31, December 31, Unaudited Unaudited Unaudited 2010 2009 2010 2009 -------- -------- -------- --------- Revenues: Service $ 16,428 $ 15,450 $ 64,607 $ 61,372 Product 3,107 2,920 11,725 10,653 Insurance 741 422 2,023 1,598 PhotoStamps 2,396 2,877 7,162 8,485 Other 5 9 27 16 -------- -------- -------- --------- Total revenues 22,677 21,678 85,544 82,124 Cost of revenues: Service 3,338 3,064 13,282 11,869 Product 1,124 1,073 4,337 3,989 Insurance 251 130 641 494 PhotoStamps 1,829 2,198 5,424 6,562 -------- -------- -------- --------- Total cost of revenues 6,542 6,465 23,684 22,914 -------- -------- -------- --------- Gross profit 16,135 15,213 61,860 59,210 Operating expenses: Sales and marketing 8,590 8,086 31,174 31,735 Research and development 2,826 2,075 9,420 8,699 General and administrative 4,689 3,000 14,590 12,961 Legal settlements and reserves - - 5,211 - -------- -------- -------- --------- Total operating expenses 16,105 13,161 60,395 53,395 -------- -------- -------- --------- Income from operations 30 2,052 1,465 5,815 Non-operating asset write-off (634) - (634) - Interest and other income, net 136 119 756 916 -------- -------- -------- --------- Income (loss) before taxes (468) 2,171 1,587 6,731 Income tax expense (benefit) (185) (1) (3,945) 554 -------- -------- -------- --------- Net income (loss) $ (283) $ 2,172 $ 5,532 $ 6,177 ======== ======== ======== ========= Net income (loss) per share: Basic $ (0.02) $ 0.14 $ 0.38 $ 0.38 ======== ======== ======== ========= Diluted $ (0.02) $ 0.14 $ 0.38 $ 0.38 ======== ======== ======== ========= Weighted average shares outstanding: Basic 14,417 15,764 14,529 16,238 ======== ======== ======== ========= Diluted 14,417* 15,897 14,685 16,369 ======== ======== ======== ========= * Common equivalent shares are excluded from the diluted earnings per share calculation as their effect is anti-dilutive CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) Unaudited December 31, December 31, 2010 2009 ----------- ----------- ASSETS Cash and investments $ 35,299 $ 71,745 Accounts receivable 4,868 4,367 Other current assets 4,015 3,288 Property and equipment, net 1,694 2,102 Intangible assets, net 885 498 Deferred tax assets 7,650 3,671 Other assets 3,031 3,587 ----------- ----------- Total assets $ 57,442 $ 89,258 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 9,011 $ 9,583 Deferred revenue 4,193 4,070 ----------- ----------- Total liabilities 13,204 13,653 Stockholders' equity: Common stock 47 47 Additional paid-in capital 608,522 630,322 Treasury Stock (118,151) (104,344) Accumulated deficit (446,603) (450,214) Unrealized gain (loss) on investments 423 (206) ----------- ----------- Total stockholders' equity 44,238 75,605 ----------- ----------- Total liabilities and stockholders' equity $ 57,442 $ 89,258 =========== ===========