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STMP
Stamps.com
conference date: October 19, 2006
for quarter ending: September 30, 2006 (3nd quarter)
Overview: Now that customers are no longer being switched to a higher-priced premium plan, with little business customer growth the main hope for the future is in Photostamps.
Basic data:
Revenues of $18.9 million, down 6% sequentially but up 24% from year-earlier.
Net income was $4.3 million, up 2% sequentially, resulting in EPS of 18 cents which is up 64% from year ago. $5.0 million non-GAAP net income. Non-GAAP earnings per share were 21 cents, resulting from .03 per share in stock-based compensation.
Gross margin was flat at 73%.
176 thousand sheets of Photostamps shipped for $3.1 million revenue, down from 210 thousand 2nd quarter.
$8 million in shares were repurchased during the quarter.
Cash and equivalents ended at $116 million.
Guidance:
Total 2006 revenues of $82 to $85 million, with GAAP earnings of .64 to .67 per share. Includes $2.7 million stock-based compensation.
For fiscal 2007 expects revenues of $90 to $100 million with GAAP earnings of .70 to .80 per share, including $2.4 million stock-based compensation. Assumes USPS will continue Photostamps trial. Some revenue decrease due to patent expiration. Legal expense increase likely.
Conference Highlights:
Third quarter is traditionally seasonally challenging. Slowed marketing activity during the quarter. Difficulty with billing and collections.
Core (non-Photostamp) revenue was $15.8 million up 17% from year-earlier. Subscription revenue was $13.1 million. Online store revenue was $1.9 million, up 9% from year-earlier. Photostamp revenue was $3.1 million, down sequentially by $600,000.00.
85,000 gross new customers in core business, 65,000 customers churned out, net 20,000 gain. Total billed customers 311,000 which was down sequentially. 395,000 registered customers. Industry-wide credit card processing problems. Automatic credit-card update system for new platform was not working, but hope to have it online soon and may collect back fees. 32% trial churn. Monthly base churn rate of 2.9%. $55 million total postage printed in quarter.
High acquisition costs for quarter, $59, but that is substantially from last year. Believes cost to acquire customers still attractive when compared to lifetime value of customers.
Has mid-80 percent range of its market despite major marketing campaign by Indicia/Dymo.
Photostamp marketing will be accelerated in the 4th quarter. Had 78% of market. Repeat order trend was good for 3rd quarter. Estimate 18% of orders were business-related. Orders of up to 75,000 stamps. Does not believe Post Office will allow pre-sorted rates anytime soon.
Believes Pitney-Bowes may offer customized postage targetted at businesses.
New platform launched in Q3 and integrated payment system. Client version 6.0 released, most upgrades will happen in October. PhotoNetstamps launched in September. Lukewarm acceptance so far. Priced cheaper than PhotoStamps.
Working on allowing multiple users to access a single account.
Enterprise space effort continues. Seats grew by 30% on a small base.
Q&A:
Legal expense? Ongoing litigation that is scheduled for trial in 2007.
Cash use? Share buy-back, internal investment. No current acquisition candidates, but that is a medium-term possibility.
Credit card transaction failures? Getting insufficient information from processors. Hope will improve when card updating program goes live.
$ impact from billing issues? Hard to quantify. Service fee revenue difficult to compare, but decline is due to decline of successfully billed customers.
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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