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STMP
Stamps.com
conference date: July 25, 2006
for quarter ending: June 30, 2006 (2nd quarter)
Overview: Revenue growth has ceased for two consecutive quarters, but earnings continue to grow rapidly.
Basic data:
Revenues were 20.2 million, down 1.5 % sequentially and up 42% from the year-earlier quarter. GAAP earnings were 4.2 million or .17 per share, up 25% sequentially and up 89% from the year-earlier quarter. Non-GAAP EPS was .20 per share (up 122% from year-earlier) due to $.696 million stock-based compensation.
Photostamp revenues were $3.7 million, down slightly. Subscription revenue was $13.6 million.
Gross margin increased to 73%.
Cash and equivalents ended at $117 million.
Guidance:
Total fiscal 2006 revenue to be $85 to $90 million. Fiscal 2006 GAAP net income per share is expected to be $0.61 to $0.66, including approximately $3 million of stock-based compensation expense. Non-GAAP fiscal 2006 net income per share is expected to be $0.73 to $0.78, an increase in guidance from the Company's prior range of $0.67 to $0.75.
Conference Highlights:
"Second quarter seasonal weakness." With Photostamps business has become more seasonal.
Mailing and shipping supplies revenue of $2 million was up only 8% over last year and was a sequential decline.
87,000 new customers at $57 per customer, down from $73 per last year. Has mid-80% of market.
Indicia-Dymo heavy marketing in quarter, no monthly service fee, but requires $140 printer purchase and $ .10 per label. Netstamps are $.045 per label. Believes Dymo label writers are not attractive to most of customer base. Believes signed up only about 4000 customers. Does not believe is a threat to Stamps.com.
Now in 3rd phase of Photostamps, now can do business logos. Bought their own high-capacity printer. In June about 15% of sales were business. Need to set up for direct mail, such as pre-sorted rates, but does not believe will be allowed until at least 2007. Believes captured 78% of this market in the quarter. Continues to invest in Photostamps; expenses greater than revenues, partly due to equipment purchases.
New platform was launched last night with client version 6.0 beta tests started and overhauled store. Will have full international shipping capabilities.
Continue enterprise-oriented marketing and product development.
Ending registered customers 376,000, up 5000 from prior quarter. 327,000 successfully billed.
Authorized $20 million for share buyback, was not used in 2nd quarter, but $3.7 million used so far in 3rd quarter.
Q&A:
Gross margins? Believes current margins are stable, could be affected by promotional expenses, which could have a slightly negative impact.
Enterprise? Has 30 customers, up from three last year, but basically still on learning curve.
Photostamps? Believes will break even by end of 2006. Likely to follow seasonal patterns for stamps in general.
Competition with USPS stamps online? USPS supports priority mail but not 1st class, for example; targetted at consumer to consumer, one time use. Stamps.com created a lot of the technology, so there would be issues in the government directly competing.
What is driving guidance? Cost effective marketing, new platform plus Photostamp Q4 seasonality bump.
Premier plan? Still testing customer response, which so far is reasonable.
Churn increase was do to enhanced promotion churn, and discontinued Simple plan had a lower churn rate than the current Pro plan.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but its possible. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2006 William P. Meyers