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Analyst Conference Summary
conference date: April 25, 2006
for quarter ending: March 31, 2006 (4th quarter)
Overview: As expected, now that conversions to $15.95 monthly fees are complete, growth and projected growth are slowing. Slight sequential revenue decline due to seasonality issues. Apparently this surprised other investors and analysts. Otherwise financial performance is solid.
Basic data:
Revenue were $20.5 million, a slight decline from $20.6 million the prior quarter but up 74% from the prior year. Earnings were $3.36 million or .14 per share, down from .17 EPS prior quarter but up from .07 year ago. Stock-based comp was .795 million, v. zero year earlier.
Photostamp revenue was $3.9 million, down from $6 million the prior quarter. Non-photostamp revenues of $16.7 million increased nicely from $14.6 prior quarter.
Guidance:
2006 revenues of $82 to $90 million, GAAP EPS .54 to .62. Includes $3.3 million non-cash stock-based expense.
Conference Highlights:
Expects business advertising on Photostamps to be allowed starting this quarter. Business-related PhotoStamps may eventually have lower markup than consumer-related.
Cash ended at $114 million, up $9 million. Free cash flow was $4.4 million.
99,000 gross new customers; best ever (up from 85,000 prior quarter). Enhanced promotion channel did well, but does increase monthly churn. Overall $54 cost of acquisition per customer. Ending customers 371,000 up 22,000 from prior quarter. Simple plan conversion completed. Average rev. per customer was $52.00. Trial churn was 29.9%. Average monthly base churn was 5.2%. $57 million postage printed.
Believes had 77% of market in quarter, but is back up to 80%. However, believes increased competitor interest. Pitney-Bowes Shipstream is more expensive than Stamps and has less usability. Indicia introduced Netstamps-like service, but no impact was seen. Dymo is now selling Indicia instant postage with their label-writers; no monthly service fee, but requires $140 printer plus very expensive labels.
2006 plan is on target. Core SOHO goal is to increase marketing. Renewed enterprise marketing effort. Software platforms are being revised. Continued investment in supplies business. Photostamps marketing investment will be heavy.
Sales & Marketing was 6.7 million, constant from Q4. R&D was $2.0 million.
Q & A:
Photostamps marketing costs? No useful answer.
Enterprise sales? Happy with sales since they moved out of beta, but has not been marketing it substantially yet.
Acacia settlement costs? Value of settlement was immaterial, and spread out over 2006-2007.
Competitors' marketing? Pitney-Bowes is not trying to replace postage meters; Stamps is.
Churn from enhanced marketing? Each channel gets evaluated separately. Believe life-time value is attractive despite churn.
Considering another cash give-back? Comfortable with cash at this point.
Premier accounts did grow sequentially in quarter, but a small percentage of total.
Photostamps effect on EPS? No breakout, but investment caused loss to EPS line.
Re guidance, look like you outperformed street consensus. Is guidance conservative? Revenue guidance now includes photostamps. But Photostamps not expected to have impact on EPS. Q2 and Q3 are usually seasonally slow. Q4 is seasonally strong for Photostamps.
Integration of Photostamps into Stamps Web site? still working on it.
Photostamps for business will begin with full rate postal classes. About 5% of earlier test was business-related. Small businesses with small mailings where not trying to reduce costs would be market. Price drops on high volume already; expects businesses to order in larger quantities than consumers.
Expects G&A expense to be up, but less as a percent of revenue.
Q2 comparisons are harder than Q1, do you expect subscription base to decline? 2nd Q does tend to be relatively weak, so it is possible to lose subscription base, but not likely. No prediction for Photostamps for Q2.
Reversal of deferred tax? $275 million in NOLs, so no cash tax payment except minimum alternative in near future.
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