Stamps.com Announces Record Non-GAAP Earnings per Share of

Stamps.com Announces Record Non-GAAP Earnings per Share of $0.50 
Core PC Postage Revenue up 20%; Non-GAAP Net Income up 49% 
EL SEGUNDO, CA -- (Marketwire) -- 10/25/12 --  Stamps.com(R) (NASDAQ:
STMP), the leading provider of postage online and shipping software
solutions, today announced record results for the third quarter ended
September 30, 2012. 
Highlights for the third quarter: 


 
--  Core PC Postage revenue was $27.2 million, up 20% from the third
    quarter of 2011.
    
    
--  Non-GAAP operating margin was 28.8% compared to 21.8% in the third
    quarter of 2011.
    
    
--  GAAP net income was $7.0 million or $0.42 per fully diluted share,
    including $0.9 million in stock-based compensation expense and $0.4
    million in one-time relocation expenses associated with the third
    quarter relocation of our corporate headquarters.
    
    
--  On a non-GAAP basis, excluding the stock-based compensation and
    relocation expenses, income from operations was $8.4 million, net
    income was $8.3 million and net income per fully diluted share was
    $0.50, up 54%, 49% and 35%, respectively, versus the third quarter of
    2011.
    
    
--  The Company raised its guidance today for 2012 revenue and earnings
    per share.
    
    
--  During the third quarter of 2012, the Company repurchased a total of
    961 thousand shares at a total cost of $19.9 million.

  
"We are extremely pleased with our record earnings and with the
continued strength in our core PC Postage business," said Ken
McBride, Stamps.com Chairman and CEO. "Despite a continued tough
economic environment, we continue to set new records across the board
in our business. In addition to our earnings and revenue records this
quarter, our customers printed the highest amount of postage ever for
a quarter and we continued our strong growth in both our Enterprise
and high volume shipping areas. As a result of the strength across
our business, we are raising our 2012 guidance today." 
Share Repurchase 
During the third quarter of 2012, the Company repurchased a total of
961 thousand shares at a total cost of $19.9 million. On October 17,
2012, the Board of Directors approved a new share repurchase plan
authorizing the Company to repurchase up to 1.0 mil
lion shares of
Stamps.com stock during the next six months.  
Company Customer Metrics  
A complete set of the quarterly customer metrics for the past six
fiscal years and current fiscal year to date is available at
http://investor.stamps.com (under a tab on the left side called
Company Information, Metrics).  
Quarterly Conference Call  
The Stamps.com financial results conference call will be web cast
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
web cast, a replay of the call will be available at the same website. 
Business Outlook  
Stamps.com currently expects fiscal 2012 total revenue to be in a
range of $110 to $120 million; this compares to previous guidance of
$107.5 to $117.5 million. GAAP net income per share for 2012 is
expected to be in a range of $2.00 to $2.20; this compares to a
previous guidance range of $1.80 to $2.00. GAAP net income per share
includes approximately $4 million of stock-based compensation
expense, $0.4 million of one-time relocation expenses in the third
quarter, and an $11.9 million non-cash tax benefit in the first
quarter. Excluding the stock-based compensation, relocation expenses
and the non-cash tax benefit, fiscal 2012 non-GAAP net income per
fully diluted share is expected to be in a range of $1.55 to $1.75;
this compares to previous guidance of $1.35 to $1.55.  
Additional Third Quarter 2012 Details  
Core PC Postage revenue -- including small business, enterprise and
high volume shipping customer segments, and excluding enhanced
promotion and PhotoStamps revenue -- was $27.2 million, up 20% versus
the third quarter of 2011. Non-core PC Postage revenue from the
enhanced promotion channel (online programs where additional
promotions are provided directly by marketing partners) was $0.7
million and PhotoStamps revenue was $1.2 million, down 6% and 18%,
respectively, versus the third quarter of 2011 as the Company
continues to minimize its investment in both areas. PC Postage gross
margin was 80.1%, PhotoStamps gross margin was 20.6% and total gross
margin was 77.7%.  
As previously announced, the Company is currently completing a
renovation project on its new corporate headquarters. The project
utilized $2.9 million in cash during the third quarter which was
funded with cash flow from operations and existing cash and
investments. As a result of the renovation project and share
repurchase program, the Company's cash and investments decreased by
$14.9 million from $66.1 million at the end of the second quarter of
2012 to $51.3 million at the end of the third quarter of 2012.  
Third quarter GAAP net income was $7.0 million. On a per share basis,
total third quarter 2012 GAAP net income was $0.42 based on 16.7
million fully diluted shares outstanding. Third quarter 2012 GAAP net
income was reduced by $0.9 million of stock-based compensation
expense and $0.4 million in one-time relocation expenses associated
with the third quarter relocation of our corporate headquarters.
Non-GAAP and GAAP amounts are reconciled in the following table: 


 
                                                                            
Third Quarter Fiscal 2012                                                   
All amounts in millions                   Stock-                            
 except                      Non-GAAP      Based     Relocation     GAAP    
per share or margin data:     Amounts   Comp. Exp.     Expense     Amounts  
                                                                            
Cost of Sales               $     6.42  $     0.07            -  $     6.49 
Research & Development            2.42        0.20            -        2.62 
Sales & Marketing                 8.72        0.20            -        8.92 
General & Administrative          3.13        0.41         0.41        3.95 
                            ----------  ----------   ----------  ---------- 
Total Expenses                   20.69        0.88         0.41       21.99 
                                                                            
Gross Margin                      77.9%       (0.2%)          -        77.7%
                                                                            
Income (Loss) from                                                          
 Operations                       8.38       (0.88)       (0.41)       7.09 
Interest and Other Income         0.12           -            -        0.12 
                            ----------  ----------   ----------  ---------- 
                                                                            
Pre-Tax Income (Loss)             8.50       (0.88)       (0.41)       7.21 
                                                                            
Provision for Income Taxes       (0.23)          -            -       (0.23)
                                                                            
                            ----------  ----------   ----------  ---------- 
Net Income                  $     8.27  $    (0.88)  $    (0.41) $     6.98 
                            ==========  ==========   ==========  ========== 
              
                                                              
                            ----------  ----------   ----------  ---------- 
On a diluted per share                                                      
 basis                      $     0.50  $    (0.05)  $    (0.02) $     0.42 
                            ==========  ==========   ==========  ========== 
                                                                            
Shares used in per share                                                    
 calculation                     16.68       16.68        16.68       16.68 

 
Excluding the stock-based compensation expense and one time relocation
expenses, third quarter 2012 non-GAAP net income was $8.3 million or
$0.50 per share based on 16.7 million fully diluted shares
outstanding. This compares to third quarter 2011 non-GAAP net income
of $5.5 million or $0.37 per share based on fully diluted shares
outstanding of 15.1 million. Non-GAAP net income and non-GAAP fully
diluted earnings per share increased by 49% and 35% year-over-year,
respectively.  
Stamps.com has approximately $218 million in Federal NOLs and $113
million in State NOLs. The Company estimates its ownership shift was
approximately 21% as of September 30, 2012, which is below the 50%
level that could trigger impairment of its NOL asset under Internal
Revenue Code Section 382 rules. As part of its ongoing program to
preserve future use of its NOL asset, the Company requests that any
shareholder contemplating becoming a 5% shareholder contact the
Company before doing so. 
About Stamps.com and PhotoStamps  
Stamps.com (NASDAQ: STMP) is a leading provider of Internet-based
postage services. Stamps.com's service enables small businesses,
enterprises, advanced shippers, and consumers to print U.S. Postal
Service-approved postage with just a PC, printer and Internet
connection, right from their home or office. The Company currently
has PC Postage partnerships with Avery Dennison, Microsoft, HP, the
U.S. Postal Service and others. 
PhotoStamps is a patented Stamps.com product that couples the
technology of PC Postage with the simplicity of a web-based image
upload and order process. Customers may create full custom
PhotoStamps with their own digital photograph, or they may choose a
licensed image from one of many PhotoStamps collections such as the
collegiate collection. Stamps.com currently has PhotoStamps
partnerships with HP/Snapfish and others. 
About Non-GAAP Measures and Share Repurchase Timing 
To supplement the Company's condensed financial statements presented
in accordance with GAAP, Stamps.com uses non-GAAP measures of certain
components of financial performance. These non-GAAP measures include
non-GAAP income from operations, non-GAAP pre-tax income, non-GAAP
net income, non-GAAP earnings per diluted share, and non-GAAP gross
margin. Reconciliation to the nearest GAAP measures of all non-GAAP
measures included in this press release can be found in the financial
tables of this earnings release. 
Non-GAAP measures are provided to enhance investors' overall
understanding of the Company's current financial performance,
prospects for the future and as a means to evaluate period-to-period
comparisons. The Company believes that these non-GAAP measures
provide meaningful supplemental information regarding financial
performance by excluding certain expenses and benefits that may not
be indicative of recurring core business operating results. The
Company believes the non-GAAP measures that exclude such items as
stock-based compensation, asset write-offs, dividend-related
compensation expense, legal settlements and reserves, initial
adoption of breakage accounting in fiscal 2011, one-time relocation
expenses and income tax adjustments, when viewed with GAAP results
and the accompanying reconciliation, enhance the comparability of
results against prior periods and allow for greater transparency of
financial results. The Company believes non-GAAP measures facilitate
management's internal comparison of the Company's financial
performance to that of prior periods as well as trend analysis for
budgeting and planning purposes. The presentation of non-GAAP
measures are 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. 
The timing of share repurchases, if any, and the number of shares to
be bought at any one time will depend on market conditions and the
Company's assessment of the risk that its net operating loss asset
could be impaired if such repurchases were undertaken. Share
purchases 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
about our anticipated results that involve risks and uncertainties.
Important factors, including the Company's ability to complete and
ship its products, maintain desirable economics for its products and
obtain or maintain regulatory approval, which could cause actual
results to differ materially from those in the forward-looking
statements, 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, 2011, Quarterly
Reports on Form 10-Q, and Current Reports on Form 8-K. 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. 
Stamps.com, the Stamps.com logo and PhotoStamps are trademarks or
registered trademarks of Stamps.com Inc. All other brands and names
are property of their respective owners. 


 
                                                                            
                       STAMPS.COM INC. AND SUBSIDIARY                       
                                                                            
                      CONSOLIDATED STATEMENTS OF INCOME                     
              (in thousands, except per share data: unaudited)              
                                                                            
                                 Three Months ended     Nine Months ended   
                                    September 30,          September 30,    
                                   2012       2011       2012        2011   
                                ---------- ---------- ----------  ----------
Revenues:                                                                   
  Service                       $   22,631 $   19,216 $   65,799  $   55,382
  Product                            3,495      3,194     10,876       9,768
  Insurance                          1,774      1,085      5,138       2,859
  PhotoStamps                        1,170      1,422      3,771       6,351
 
  Other                                  1          1          7           5
                                ---------- ---------- ----------  ----------
    Total revenues                  29,071     24,918     85,591      74,365
Cost of revenues:                                                           
  Service                            3,720      3,704     11,788      10,901
  Product                            1,271      1,146      4,009       3,586
  Insurance                            573        378      1,670         998
  PhotoStamps                          929      1,094      2,927       3,746
                                ---------- ---------- ----------  ----------
    Total cost of revenues           6,493      6,322     20,394      19,231
                                ---------- ---------- ----------  ----------
    Gross profit                    22,578     18,596     65,197      55,134
Operating expenses:                                                         
  Sales and marketing                8,915      8,323     28,797      25,079
  Research and development           2,625      2,411      7,837       7,016
  General and administrative         3,953      3,428     11,233      10,394
                                ---------- ---------- ----------  ----------
    Total operating expenses        15,493     14,162     47,867      42,489
                                ---------- ---------- ----------  ----------
    Income from operations           7,085      4,434     17,330      12,645
                                                                            
Interest and other income, net         122        133        409         434
                                ---------- ---------- ----------  ----------
Income before income taxes           7,207      4,567     17,739      13,079
Income tax expense (benefit)           230         39    (11,521)        199
                                ---------- ---------- ----------  ----------
Net income                      $    6,977 $    4,528 $   29,260  $   12,880
                                ========== ========== ==========  ==========
Net income per share:                                                       
  Basic                         $     0.43 $     0.31 $     1.80  $     0.89
                                ========== ========== ==========  ==========
  Diluted                       $     0.42 $     0.30 $     1.72  $     0.88
                                ========== ========== ==========  ==========
Weighted average shares                                                     
 outstanding:                                                               
  Basic                             16,103     14,556     16,273      14,454
                                ========== ========== ==========  ==========
  Diluted                           16,675     15,059     17,015      14,707
                                ========== ========== ==========  ==========
                                                                            
                                                                            
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                         (in thousands, unaudited)                          
                                                                            
                                               September 30,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
                                                                            
                     ASSETS                                                 
Cash and investments                           $      51,275  $      69,363 
Accounts receivable                                   11,689         10,466 
Other current assets                                   4,824          5,476 
Property and equipment, net                           26,356          2,165 
Intangible assets, net                                 1,334            837 
Deferred tax                                          28,040         16,125 
Other assets                                           3,722          3,548 
                                               -------------  ------------- 
    Total assets                               $     127,240  $     107,980 
                                               =============  ============= 
                                                                            
      LIABILITIES AND STOCKHOLDERS' EQUITY                                  
Liabilities:                                                                
  Accounts payable and accrued expenses        $      13,013  $      12,075 
  Deferred revenue                                     1,571          1,898 
                                               -------------  ------------- 
    Total liabilities                                 14,584         13,973 
                                               -------------  ------------- 
                                                                            
Stockholders' equity:                                                       
  Common stock                                            50             49 
  Additional paid-in capital                         646,737        637,483 
  Treasury stock                                    (143,371)      (123,472)
  Accumulated deficit                               (391,078)      (420,338)
  Unrealized gain on investments                         318            285 
                                               -------------  ------------- 
    Total stockholders' equity                       112,656         94,007 
                                               -------------  ------------- 
    Total liabilities and stockholders' equity $     127,240  $     107,980 
                                               =============  ============= 

  
Investor Contact: 
Jeff Carberry 
Stamps.com Investor Relations
(310) 482-5830 
invrel@stamps.com  
Press Contact:
Eric Nash
Stamps.com Public Relations
(310) 482-5942
publicrelations@Stamps.com