Stamps.com® (Nasdaq: STMP), the leading provider of postage
online and shipping
software solutions to over 725 thousand customers, today announced
results for the quarter ended June 30, 2018.
Second Quarter 2018 Financial Highlights
“We were very pleased with our acquisition of MetaPack and with our
second quarter performance,” said Ken McBride, Stamps.com’s Chairman and
CEO. “Our growth continues to be driven by success in the shipping area
of our business. With MetaPack we will be able to accelerate our focus
on international expansion, and will be in a much better position to
address the global e-commerce shipping industry. We are continuing to
execute on our operational and strategic plans and we are excited about
our long-term business opportunities.”
Second Quarter 2018 Detailed Results
Second quarter 2018 total revenue was $139.6 million, up 20% compared to
the second quarter of 2017. Second quarter 2018 Mailing and Shipping
revenue (which includes service, product and insurance revenue but
excludes Customized Postage and Other revenue) was $134.4 million, up
20% versus the second quarter of 2017. Second quarter 2018 Customized
Postage revenue was $5.2 million, up 22% versus the second quarter of
2017.
Second quarter 2018 GAAP income from operations was $46.9 million, GAAP
net income was $45.5 million, and GAAP net income per share was $2.41
based on 18.9 million fully diluted shares outstanding. This compares to
second quarter 2017 GAAP income from operations of $41.7 million, GAAP
net income of $31.0 million and GAAP net income per share of $1.71 based
on 18.1 million fully diluted shares outstanding. Second quarter 2018
GAAP income from operations, GAAP net income, and GAAP income per fully
diluted share increased by 12%, 47% and 41% year-over-year, respectively.
Second quarter 2018 GAAP income from operations included $9.9 million of
non-cash stock-based compensation expense, $4.0 million of non-cash
amortization of acquired intangibles, and $1.6 million of transaction
expenses related to the MetaPack acquisition and legal settlement
expense related to the class action wage and hours case filed against us
in February 2018. Second quarter 2018 GAAP net income included $93
thousand of non-cash amortization of debt issuance costs. Second quarter
2018 GAAP income tax expense was $0.7 million and non-GAAP income tax
expense was $9.9 million, resulting in a $9.2 million non-GAAP tax
expense adjustment. The higher non-GAAP tax expense reflects the tax
impact on the non-GAAP pre-tax income at a non-GAAP effective tax rate
of 16.0% for the second quarter. See the section later in this press
release entitled, “About Non-GAAP Financial Measures” for more
information on how non-GAAP taxes are calculated. Excluding the non-cash
stock-based compensation expense, non-cash amortization of acquired
intangibles, transaction expenses related to the MetaPack acquisition,
and legal settlement expense, second quarter 2018 non-GAAP income from
operations was $62.3 million. Also excluding non-cash amortization of
debt issuance costs and including the non-GAAP tax expense adjustment,
second quarter 2018 non-GAAP adjusted income was $51.9 million or $2.75
per share based on 18.9 million fully diluted shares outstanding.
Second quarter 2017 GAAP income from operations included $11.0 million
of non-cash stock-based compensation expense and $4.0 million of
non-cash amortization of acquired intangibles. Second quarter 2017 GAAP
net income included $93 thousand of non-cash amortization of debt
issuance costs. Second quarter 2017 GAAP income tax expense was $9.9
million and non-GAAP income tax expense was $18.2 million, resulting in
an $8.3 million non-GAAP tax expense adjustment. The higher non-GAAP tax
expense reflected the tax impact on the non-GAAP pre-tax income at a
non-GAAP effective tax rate of 32.5%. Excluding the non-cash stock-based
compensation expense and non-cash amortization of acquired intangibles,
second quarter 2017 non-GAAP income from operations was $56.7 million.
Also excluding non-cash amortization of debt issuance costs and
including the non-GAAP tax expense adjustment, second quarter 2017
non-GAAP adjusted income was $37.8 million or $2.08 per share based on
18.1 million fully diluted shares outstanding.
Therefore, second quarter 2018 non-GAAP income from operations, non-GAAP
adjusted income, and non-GAAP adjusted income per fully diluted share
increased by 10%, 37% and 32% year-over-year, respectively.
Non-GAAP income from operations, non-GAAP adjusted income, and non-GAAP
adjusted income per share are described further in the “About Non-GAAP
Financial Measures” section of this press release and are reconciled to
the corresponding GAAP measures in the following tables (unaudited):
Reconciliation of GAAP to Non-GAAP Financial Measures (Second Quarter
2018)
Reconciliation of GAAP to Non-GAAP Financial Measures (Second Quarter
2017)
Second Quarter GAAP Net Income and Non-GAAP Adjusted EBITDA
Second quarter 2018 GAAP net income was $45.5 million, up 47% compared
to $31.0 million in the second quarter of 2017.
Second quarter 2018 non-GAAP adjusted EBITDA was $63.6 million, up 10%
compared to $58.1 million in the second quarter of 2017.
Adjusted EBITDA is a non-GAAP financial measure which is described
further in the “About Non-GAAP Financial Measures” section of this press
release and is reconciled to GAAP net income in the following table
(unaudited):
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
Taxes
For the second quarter of 2018, the Company reported a GAAP income tax
expense of $0.7 million representing an effective tax rate of 1.6%. As
discussed below under the heading, “About Non-GAAP Financial Measures,”
we believe our effective tax rate for 2018 will be approximately 18%.
Accordingly, the second quarter 2018 effective rate of 1.6% should not
be assumed to apply for 2018 as a whole, and our after tax income during
the remainder of 2018 will likely reflect a materially higher rate than
is reflected in our after tax results for the second quarter of 2018.
Our second quarter 2018 GAAP net income should also be understood to
have been positively impacted by the lower effective tax rate applicable
specifically to the quarter resulting primarily from employee stock
option exercises.
Share Repurchase and Debt Repayment
During the second quarter of 2018, the Company repurchased approximately
54 thousand shares at a total cost of approximately $12.8 million.
The current Board-approved share repurchase program, which expires in
November 2018, remains in effect with a remaining authorization of
approximately $84 million as of June 30, 2018.
During the second quarter of 2018, the Company made a required principal
repayment of $2.1 million against the borrowings under the Company’s
existing credit agreement related to the Endicia acquisition. As of June
30, 2018, total debt under the credit agreement, excluding debt issuance
costs, was $66.0 million.
Summary of our Updated Business Outlook
For fiscal year 2018, the Company currently expects its GAAP financial
outlook to be as follows:
The above GAAP amounts, adjusted as detailed below, result in the
following non-GAAP financial outlook:
The updated business outlook for 2018 revenue, GAAP net income, GAAP net
income per fully diluted share, effective tax rate, non-GAAP adjusted
EBITDA, and non-GAAP adjusted income per fully diluted share exclude the
expected financial results from MetaPack from the expected close in
August 2018 through December 31, 2018 but include the associated
acquisition related expenses and higher net interest expense due to
lower expected cash balances.
Detailed Discussion of our Business Outlook
As noted above, for 2018, the Company currently expects total revenue to
be in a range of approximately $530 million to $560 million; this is
unchanged from our previous guidance.
Also, for 2018, the Company currently expects GAAP net income to be in a
range of approximately $150 million to $166 million; this compares to
previous guidance of $150 million to $165 million.
The expected GAAP net income range includes depreciation and
amortization expense of approximately $21 million, stock-based
compensation expense of approximately $37 million, acquisition related
expenses and litigation settlement expense of approximately $1.6
million, interest expense and other income, net of approximately $2
million, and income tax expense of approximately $33 million to $36
million. Excluding the depreciation and amortization expense,
stock-based compensation expense, acquisition related expenses,
litigation settlement expense, interest expense and other income, net
and income tax expense, we expect non-GAAP adjusted EBITDA to be in a
range of approximately $245 million to $265 million.
The following table is provided to facilitate a reconciliation of 2018
expected non-GAAP adjusted EBITDA to expected GAAP net income:
Adjustments to reconcile adjusted EBITDA to
GAAP net income:
Income tax expense
$32.9
$36.5
As noted above, for 2018, the Company currently expects GAAP net income
per fully diluted share to be in a range of approximately $7.78 to
$8.75; this compares to previous guidance of $7.73 to $8.70. The
expected GAAP net income per fully diluted share range includes non-cash
stock-based compensation expense of approximately $37 million, non-cash
amortization of acquired intangibles expense of approximately $16
million, non-cash amortization of debt issuance costs of approximately
$0.4 million, acquisition related expenses and litigation settlement
expense of approximately $1.6 million. Excluding the stock-based
compensation expense, amortization of acquired intangibles expense,
amortization of debt issuance costs, acquisition related expenses, and
litigation settlement expense, and including higher expected non-GAAP
income taxes of approximately $10 million from the expected tax effects
of these adjustments at an assumed 18.0% effective full-year tax rate,
non-GAAP adjusted income per fully diluted share is expected to be in a
range of $10.15 to $11.15; this compares to previous guidance of $9.60
to $10.60.
The following table is provided to facilitate a reconciliation of 2018
expected non-GAAP adjusted income per fully diluted share to expected
GAAP net income per fully diluted share:
Adjustments to reconcile non-GAAP to GAAP:
Acquisition related expenses and litigation
settlement expense
Increased tax expense from non-GAAP
adjustments
This business outlook does not include the impact from the MetaPack
acquisition (except for associated acquisition related expenses and
higher net interest expense), other potential future acquisitions,
including acquisition costs or related financings, or unanticipated
events. This business outlook and the related assumptions are
forward-looking statements subject to the safe harbor statement
contained at the end of this press release, and reflect our views of
current and future market conditions as of the date of this press
release. Ranges reflect our business assumptions, but actual results
could fall outside the range presented. Only a few of our assumptions
underlying our guidance are disclosed above, and our actual results will
be affected by known and unknown risks, trends, uncertainties and other
factors, some of which are beyond our control or ability to predict.
Although we believe that the assumptions underlying our guidance are
reasonable, they are not guarantees of future performance and some of
them will inevitably prove to be incorrect. As a result, our actual
future results can be expected to differ from our expectations, and
those differences could be material. We do not undertake any obligation
to release publicly any revisions to our business outlook or other
forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
Company Metrics and Conference Call
2018 Company metrics, updated to include the second quarter, is
available at http://investor.stamps.com
(under a tab on the left side called Company Information, Metrics).
These metrics are not incorporated into this press release.
The Stamps.com financial results conference call will be webcast 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 webcast, a replay of the call will
be available at the same website.
About Stamps.com, Endicia, ShipStation, ShipWorks, ShippingEasy and
Metapack
Stamps.com
(Nasdaq: STMP) is the leading provider of postage
online and shipping
software solutions to over 725 thousand customers, including
consumers, small businesses, e-commerce shippers, enterprises, and high
volume shippers. Stamps.com offers solutions that help businesses run
their shipping operations more smoothly and function more successfully
under the brand names Stamps.com, Endicia,
ShipStation,
ShipWorks
and ShippingEasy.
Stamps.com’s family of brands provides seamless access to mailing and
shipping services through integrations with more than 500 unique partner
applications.
Endicia
is a leading brand for high volume shipping technologies and services
for U.S. Postal Service shipping. Under this brand we offer solutions
that help businesses run their shipping operations more smoothly and
function more successfully. Our Endicia branded solutions also provide
seamless access to USPS shipping services through integrations with
partner applications.
ShipStation
is a leading web-based shipping solution that helps e-commerce retailers
import, organize, process, package, and ship their orders quickly and
easily from any web browser. ShipStation features the most integrations
of any e-commerce web-based solution with more than 175 shopping carts,
marketplaces, package carriers, and fulfillment services. Integration
partners include eBay, PayPal, Amazon, Etsy, Square, Shopify,
BigCommerce, Volusion, Magento, Squarespace, and carriers such as USPS,
UPS, FedEx and DHL. ShipStation has sophisticated automation features
such as automated order importing, custom hierarchical rules, product
profiles, and fulfillment solutions that enable its customers to
complete their orders, wherever they sell, and however they ship.
ShipWorks
is a leading brand for client-based shipping solutions that help high
volume shippers import, organize, process, fulfill, and ship their
orders quickly and easily from any standard PC. With integrations to
more than 100 shopping carts, marketplaces, package carriers, and
fulfillment services, ShipWorks has the most integrations of any
high-volume client shipping solution. Package carriers include USPS,
UPS, FedEx, DHL, OnTrac and many more. Marketplace and shopping cart
integrations include eBay, PayPal, Amazon, Etsy, Shopify, BigCommerce,
Volusion, ChannelAdvisor, Magento, and many more. ShipWorks has
sophisticated automation features such as a custom rules engine,
automated order importing, automatic product profile detection, and
fulfillment automation, which enable high volume shippers to complete
their orders quickly and efficiently.
ShippingEasy
is a leading web-based shipping software solution that allows online
retailers and e-commerce merchants to organize, process, fulfill and
ship their orders quickly and easily. ShippingEasy integrates with
leading marketplaces, shopping carts, and e-commerce platforms to allow
order fulfillment and tracking data to populate in real time across all
systems. The ShippingEasy software downloads orders from selling
channels and automatically maps custom shipping preferences, rates and
delivery options across all supported carriers.
MetaPack
helps e-commerce and delivery professionals to meet with the consumer’s
growing expectations of delivery, whilst maintaining and optimizing
operational efficiency. MetaPack’s SaaS solution offers a wide range of
personalised delivery services, from global order tracking to simplified
return procedures, through a catalogue of 450 carriers and 5,000
services available that span every country in the world. Thanks to
MetaPack, more than 550 million packages are sent annually by many of
the world’s leading e-commerce retailers.
About Non-GAAP Financial Measures
To supplement the Company’s condensed consolidated balance sheet and
consolidated statement of income presented in accordance with GAAP, the
Company uses non-GAAP measures of certain components of financial
performance. These non-GAAP measures include non-GAAP income from
operations, non-GAAP adjusted income, non-GAAP adjusted income per fully
diluted share and adjusted EBITDA.
Non-GAAP financial measures are provided to enhance investors’ overall
understanding of the Company’s financial performance and prospects for
the future and as a means to evaluate period-to-period comparisons. The
Company believes the non-GAAP measures that: (1) exclude certain
non-cash items including stock-based compensation expense, amortization
of acquired intangibles, amortization of debt issuance costs, contingent
consideration charges; (2) exclude certain expenses and gains such as
acquisition related expenses, litigation settlement expenses, executive
consulting expenses, insurance proceeds; and (3) includes income tax
adjustments provide meaningful supplemental information regarding
financial performance by excluding certain expenses and benefits that
may not be reflective of our underlying operating performance.
Non-GAAP adjusted income is calculated as GAAP net income plus the
cumulative impact of the adjustments outlined in the paragraph
immediately above.
Non-GAAP adjusted income per fully diluted share is calculated as
non-GAAP adjusted income divided by fully diluted shares. Prior to the
third quarter 2016, the Company referred to non-GAAP adjusted income as
non-GAAP net income.
Non-GAAP income tax expense for the first, second and third quarters of
our fiscal year are calculated by multiplying the projected annual
effective tax rate in that quarter by the non-GAAP adjusted income
before taxes for the quarter. The projected annual effective tax rate
does not reflect potential future employee option exercises in the
remaining quarters of the fiscal year due to the inherent difficulty in
forecasting employee option exercises. The projected annual effective
tax rate also considers other factors including the Company’s tax
structure and its tax positions in various jurisdictions where the
Company operates. The actual annual effective tax rate realized for the
fiscal year could differ materially from our projected annual effective
tax rate used in the first, second and third quarters.
Non-GAAP income tax expense for the fourth quarter of the fiscal year is
calculated by multiplying the actual effective tax rate for the fiscal
year by the non-GAAP adjusted income before taxes for the fiscal year
and subtracting the non-GAAP income tax expense or benefit reported in
the first, second and third quarters. As a result, the fourth quarter
reflects the tax impact of reconciling the first, second and third
quarter projected annual effective rates to the actual effective tax
rate for the fiscal year.
The calculations described above reflect the methodology used for
calculating non-GAAP income tax expenses in reported results for 2017
and 2018. For 2016 reported results, the Company used a different
methodology for calculating non-GAAP income tax expense that reflected
the Company’s ability to use its remaining tax assets such as net
operating losses and other tax credits. The reason for the change in
methodology was that the Company had utilized substantially all of its
net operating losses and other tax credits by the end of 2016. In order
to help investors better understand the impact of the change in
methodology, the Company previously provided recast non-GAAP income tax
expense for 2016 showing what the non-GAAP income tax expense would have
been under the 2017 methodology. The Company expects that the non-GAAP
income tax expense methodology for 2018 will be consistent with the 2017
methodology. As a result, the Company believes it is no longer necessary
to provide recast non-GAAP income tax expenses.
The projected non-GAAP full-year tax rate for 2018 is 18.0%.
Adjusted EBITDA as calculated in this press release represents earnings
before interest and other expense, net, interest and other income, net,
income tax expense or benefit, depreciation and amortization and
excludes certain items, such as stock-based compensation expense.
The presentation of non-GAAP financial measures is not intended to be
considered in isolation or as a substitute for, or superior to, the
financial information prepared and presented in accordance with GAAP.
These non-GAAP financial measures may differ from similarly titled
measures used by other companies. Reconciliation of non-GAAP financial
measures included in this press release to the corresponding GAAP
measures can be found in the financial tables of this press release.
The Company believes that non-GAAP financial measures, when viewed with
GAAP results and the accompanying reconciliation, enhance the
comparability of operating results against prior periods and allow for
greater transparency of operating results. Management uses non-GAAP
financial measures in making financial, operating, compensation and
planning decisions. The Company believes non-GAAP financial measures
facilitate management and investors in comparing the Company’s financial
performance to that of prior periods as well as in performing trend
analysis over time.
Share Repurchase Timing
The timing of share repurchases, if any, and the number of shares to be
bought at any one time will depend on factors including market
conditions and the Company’s compliance with the covenants in its Credit
Agreement. Share repurchases 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.
“Safe Harbor” Statement Under the Private Securities Litigation
Reform Act of 1995
This release includes “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements are statements that are not historical facts, and may relate
to future events or the company’s anticipated results, business
strategies or capital requirements, among other things, all of which
involve risks and uncertainties. You can identify many (but not all)
such forward-looking statements by looking for words such as “assumes,”
“approximates,” “believes,” “expects,” “anticipates,” “estimates,”
“projects,” “seeks,” “intends,” “plans,” “could,” “would,” “may” or
other similar expressions. Important factors which could cause
actual results to differ materially from those in the forward-looking
statements, include the Company’s ability to successfully integrate and
realize the benefits of its pending MetaPack acquisition and its other
past or future strategic acquisitions or investments, and other
important factors that are detailed in filings with the Securities and
Exchange Commission made from time to time by Stamps.com, including its
Annual Report on Form 10-K for the year ended December 31, 2017,
Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Matters
described in forward-looking statements may also be affected by other
known and unknown risks, trends, uncertainties and factors, many of
which are beyond the company’s ability to control or predict. Stamps.com
undertakes no obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
Trademarks
Stamps.com, the Stamps.com logo, Endicia, ShipStation, ShipWorks, and
ShippingEasy are registered trademarks of Stamps.com Inc. and its
subsidiaries. All other brands and names used in this release are the
property of their respective owners.
Three Months ended June 30,
Six Months ended June 30,
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