Stamps.com Reports First Quarter Results

EL SEGUNDO, Calif.–(BUSINESS WIRE)–Stamps.com® (Nasdaq: STMP), the leading provider of postage
online and shipping
software, today announced results for the quarter ended March 31,
2019.

First Quarter 2019 Financial Highlights

• Total revenue was $136.0 million, up 2% compared to $133.6 million in
  the first quarter of 2018.
• GAAP net income was $15.8 million, down 67% compared to $47.0 million
  in the first quarter of 2018.
• GAAP net income per fully diluted share was $0.87, down 66% compared
  to $2.54 in the first quarter of 2018.
• Non-GAAP adjusted EBITDA was $39.2 million, down 37% compared to $62.1
  million in the first quarter of 2018.
• Non-GAAP adjusted income per fully diluted share was $1.23, down 51%
  compared to $2.54 in the first quarter of 2018.

“During the first quarter we continued to make progress on our efforts
to evolve our strategy to more fully embrace a global multi-carrier
business model,” said Ken McBride, Stamps.com’s Chairman and CEO. “Our
financial results for the first quarter were in-line with our
expectations in light of our new strategic direction.”

First Quarter 2019 Detailed Results

First quarter 2019 total revenue was $136.0 million, up 2% compared to
the first quarter of 2018. First quarter 2019 Mailing and Shipping
revenue (which includes service, product and insurance revenue but
excludes Customized Postage and Other revenue) was $132.6 million, up 1%
versus the first quarter of 2018. First quarter 2019 Customized Postage
revenue was $3.4 million, up 30% versus the first quarter of 2018.

First quarter 2019 GAAP income from operations was $23.2 million, GAAP
net income was $15.8 million, and GAAP net income per share was $0.87
based on 18.0 million fully diluted shares outstanding. This compares to
first quarter 2018 GAAP income from operations of $49.2 million, GAAP
net income of $47.0 million, and GAAP net income per share of $2.54
based on 18.5 million fully diluted shares outstanding. First quarter
2019 GAAP income from operations, GAAP net income, and GAAP income per
fully diluted share decreased by 53%, 67%, and 66% year-over-year,
respectively.

First quarter 2019 GAAP income from operations included $8.9 million of
non-cash stock-based compensation expense and $5.6 million of non-cash
amortization of acquired intangibles. First quarter 2019 GAAP net income
included $93 thousand of non-cash amortization of debt issuance costs.
First quarter 2019 GAAP income tax expense was $6.7 million and non-GAAP
income tax expense was $14.8 million, resulting in an $8.1 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 40.0% for the first quarter. See the section later
in this 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 and non-cash amortization of acquired
intangibles, first quarter 2019 non-GAAP income from operations was
$37.7 million. Also excluding non-cash amortization of debt issuance
costs and including the non-GAAP tax expense adjustment, first quarter
2019 non-GAAP adjusted income was $22.2 million or $1.23 per share based
on 18.0 million fully diluted shares outstanding.

First quarter 2018 GAAP income from operations included $7.5 million of
non-cash stock-based compensation expense and $4.0 million of non-cash
amortization of acquired intangibles. First quarter 2018 GAAP net income
included $93 thousand of non-cash amortization of debt issuance costs.
First quarter 2018 GAAP income tax expense was $1.6 million and non-GAAP
income tax expense was $13.3 million, resulting in an $11.7 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 22.0%. Excluding the non-cash stock-based
compensation expense and non-cash amortization of acquired intangibles,
first quarter 2018 non-GAAP income from operations was $60.7 million.
Also excluding non-cash amortization of debt issuance costs and
including the non-GAAP tax expense adjustment, first quarter 2018
non-GAAP adjusted income was $47.0 million or $2.54 per share based on
18.5 million fully diluted shares outstanding.

Therefore, first quarter 2019 non-GAAP income from operations, non-GAAP
adjusted income, and non-GAAP adjusted income per fully diluted share
decreased by 38%, 53%, and 51% 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 (First Quarter
2019)

Reconciliation of GAAP to Non-GAAP Financial Measures (First Quarter
2018)

First Quarter GAAP Net Income and Non-GAAP Adjusted EBITDA

First quarter 2019 GAAP net income was $15.8 million, down 67% compared
to $47.0 million in the first quarter of 2018.

First quarter 2019 non-GAAP adjusted EBITDA was $39.2 million, down 37%
compared to $62.1 million in the first quarter of 2018.

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 first quarter of 2019, the Company reported a GAAP income tax
expense of $6.7 million representing an effective tax rate of 30.0%. As
discussed below under the heading, “About Non-GAAP Financial Measures,”
we believe our effective tax rate for 2019 will be approximately 40%.
Accordingly, the first quarter 2019 effective rate of 30.0% should not
be assumed to apply for 2019 as a whole, and our after tax income during
the remainder of 2019 will likely reflect a materially higher rate than
is reflected in our after tax results for the first quarter of 2019. Our
first quarter 2019 GAAP net income should also be understood to have
been positively impacted by the lower effective tax rate applicable
specifically to the quarter.

Share Repurchase and Debt Repayment

During the first quarter of 2019, the Company repurchased approximately
235 thousand shares at a total cost of approximately $32 million.

On March 8, 2019, our Board of Directors approved a $60 million share
repurchase plan which is scheduled to expire in September 2019. As of
May 8, 2019, we have repurchased approximately $24 million under this
plan. On May 1, 2019, the Board of Directors adjusted the repurchase
parameters of the plan which is now expected to repurchase a further $9
million, in addition to the approximately $24 million already purchased,
between May 9, 2019 and the plan’s expiration in September 2019.

During the first quarter of 2019, the Company made a required principal
repayment of $2.6 million against the borrowings under the Company’s
existing credit agreement related to the Endicia acquisition. As of
March 31, 2019, total debt under the credit agreement, excluding debt
issuance costs, was $58.8 million.

Summary of our Updated Business Outlook

For fiscal year 2019, the Company currently expects its GAAP financial
outlook to be as follows:

• We expect total revenue to be in a range of approximately $510 million
  to $560 million; this compares to previous guidance of $540 million to
  $570 million.
• We expect GAAP net income to be in a range of approximately $21
  million to $45 million; this compares to previous guidance of $55
  million to $69 million.
• We expect GAAP net income per fully diluted share to be in a range of
  approximately $1.15 to $2.56; this compares to previous guidance of
  $2.86 to $3.76.
• We expect our 2019 effective tax rate to be 40.0%; this compares to
  previous guidance of 30.0%.

The revision to our guidance is principally the result of potential
short and long term adverse amendments, renegotiations, changes, or
termination of certain contracts between the USPS and certain of our
strategic partners who are part of the USPS’s reseller program, that we
have recently become aware of, and which will be discussed further on
our conference call later today. See also below under “Safe Harbor”
Statement Under the Private Securities Litigation Reform Act of 1995.

The above GAAP amounts, adjusted as detailed below, result in the
following non-GAAP financial outlook:

• We expect non-GAAP adjusted EBITDA to be in a range of approximately
  $110 million to $150 million; this compares to previous guidance of
  $145 million to $165 million.
• We expect non-GAAP adjusted income per fully diluted share to be in a
  range of $3.35 to $4.85; this compares to previous guidance of $5.15
  to $6.15.

The Company plans to discuss certain strategic items during its
conference call that impact our business outlook for 2019.

Detailed Discussion of our Business Outlook

As noted above, for 2019, the Company currently expects total revenue to
be in a range of approximately $510 million to $560 million; this
compares to previous guidance of $540 million to $570 million.

Also, for 2019, the Company currently expects GAAP net income to be in a
range of approximately $21 million to $45 million; this compares to
previous guidance of $55 million to $69 million.

The expected GAAP net income range includes depreciation and
amortization expense of approximately $28 million, stock-based
compensation expense of approximately $45 million, interest and other
expense, net of approximately $2 million, and income tax expense of
approximately $14 million to $30 million. Excluding the depreciation and
amortization expense, stock-based compensation expense, interest and
other expense, net and income tax expense, we expect non-GAAP adjusted
EBITDA to be in a range of approximately $110 million to $150 million;
this compares to previous guidance of $145 million to $165 million.

The following table is provided to facilitate a reconciliation of 2019
expected non-GAAP adjusted EBITDA to expected GAAP net income:

As noted above, for 2019, the Company currently expects GAAP net income
per fully diluted share to be in a range of approximately $1.15 to
$2.56; this compares to previous guidance of $2.86 to $3.76. The
expected GAAP net income per fully diluted share range includes non-cash
stock-based compensation expense of approximately $45 million, non-cash
amortization of acquired intangibles expense of approximately $22
million, and non-cash amortization of debt issuance costs of
approximately $0.4 million. Excluding the stock-based compensation
expense, amortization of acquired intangibles expense, and amortization
of debt issuance costs, and including higher expected non-GAAP income
taxes of approximately $27 million from the expected tax effects of
these adjustments at an assumed 40% effective full-year tax rate,
non-GAAP adjusted income per fully diluted share is expected to be in a
range of $3.35 to $4.85; this compares to previous guidance of $5.15 to
$6.15.

The following table is provided to facilitate a reconciliation of 2019
expected non-GAAP adjusted income per fully diluted share to expected
GAAP net income per fully diluted share:

This business outlook does not include the impact from potential future
acquisitions, including acquisition costs or related financings, or
unanticipated events. This business outlook also does not include the
impact of foreign currency fluctuations, or other geopolitical events,
such as trade negotiations or Brexit. This business outlook also does
not include the impact of employee stock option exercises and any
associated tax effects. 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

2019 Company metrics, updated to include the first 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 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,
ShippingEasy
and MetaPack.
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 325 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
provides a single platform for e-commerce merchants to automate order
imports and shipping, manage inventory, and increase sales through
customer email marketing and online reviews. Powerful integrations with
leading online channels such as Amazon, eBay, Etsy, Walmart, Shopify,
Magento, WooCommerce and many others allow merchants to manage orders
from everywhere they sell all in one place. The inclusion of email
marketing and inventory management solutions plus award-winning support
from real humans via phone, email, and chat lets online merchants
streamline their businesses and increase orders through a single
integrated platform that provides more than best-in-class shipping
solutions.

MetaPack
helps e-commerce and delivery professionals to meet with the consumer’s
growing expectations of delivery, while maintaining and optimizing
operational efficiency. MetaPack’s SaaS solution offers a wide range of
personalized delivery services, from global order tracking to simplified
return procedures, through a catalog of more than 450 carriers and 5,000
services available that span every country in the world.

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.

Contacts

Investor Contact:
Suzanne Park
Stamps.com
Investor Relations
(310) 482-5830
[email protected]

Press Contact:
Eric Nash
Stamps.com
Public Relations
(310) 482-5942
[email protected]

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