Inc. (



Q2 2011 Earnings Call

July 28, 2011, 5:00 p.m. ET


Jeff Carvari – Director of Finance

Ken McBride – President and Chief Executive Officer

Kyle Huebner – Chief Financial Officer


George Sutton – Craig-Hallum Capital Group LLC

Kevin Liu – B. Riley & Company

Graham Ryan – Baer Capital


Good afternoon, ladies and gentlemen, and welcome to the second quarter 2011 financial results. (Operator Instructions).

I would like to introduce your host for today’s conference, Mr. Jeff Carvari, Senior Director of Finance. You may begin.

Jeff Carvari

Thanks very much, and good afternoon, everyone. On the call today is Ken McBridge, CEO and Kyle Huebner, CFO.

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The agenda for today’s call is as follows. We’ll give the results of our second quarter, 2011. And we’ll discuss financial outlook, but first, the Safe Harbor statement.

The Safe Harbor statement under the private recent reform act of 1995. This release contains forward-looking statements such as our expectation items that involve risks and uncertainties. Important factors including the company’s ability to compete and ship its products, maintain desirable economics for its products, and obtain [inaudible] could cause actual results to differ materially from those in forward-looking statements are detailed in findings of the Securities and Exchange Commission made from time to time by including its annual report on Form 10-K, [inaudible], quarterly reports on Form 10-Q, and current reports on report 8-K. takes no obligations related publicly, current visions, and forward-looking statements to reflect events or circumstances after the date hereof or reflect the current [inaudible] events.

Allow me now to go over to Ken.

Ken McBride

Thanks Jeff, and thank you for joining us today.

Today we announced the best quarter in the company’s history. We achieved record results in multiple areas including revenue earnings and key customer metrics. Across the board, every one of our businesses had outstanding performance.

Second quarter total revenue was $26.6 million, which was up 26% versus the second quarter of 2010.

In our core PC postage business, which excludes the non-core enhanced promotion channel, revenue was $22.3 million. And that was up 23% versus the second quarter of 2010.

This was an all-time record level for our total revenue and for our core revenue as well this quarter. This is also the highest quarterly year-over-year growth rate we have ever experienced for our core PC postage revenue. And also the highest quarterly growth rate for total revenue since 2006.

Second quarter non-GAAP earnings per share was a new record high of $0.45. That was up 124% versus the second quarter of 2010.

Our earnings were driven by the strong revenue growth in our core PC postage business.

Second quarter paid customers increased sequentially by 7,000 to a record high of 368,000 total paid customers. We usually see muted growth or even a decline in this metric during the second quarter. So it was nice to see growth during this quarter.

Second quarter average revenue per paid customer or RPU was $20.20, up 13% over the second quarter of 2010. This was our highest RPU since we began reporting this metric.

And second quarter postage printed by our total customer base was $152 million. And that was up 53% versus the second quarter of 2010. This was again the highest postage printed amount and the highest year-over-year growth rate since we began reporting this metric. Growth in total postage printed was driven by strength in our high volume shipping business segment where we experienced total postage growth of 111% year-over-year.

During the second quarter, we applied breakage accounting to our PhotoStamps boxes sold through retail channels, which contributed to $2.2 million through PhotoStamps revenue. Even excluding the impact of the PhotoStamps retail box breakage revenue, we would have still achieved all of the records in revenue and earnings this quarter that we just mentioned.

In particular, our non-GAAP earnings per share without the breakage revenue would have still been the highest level in the company’s history.

On the call today, we’ll talk more in detail about the PC postage business metrics and business, our financial results, and we’ll discuss our business outlook.

Now, I’m going to begin with a more detailed discussion of the PC postage business. The customer metrics we discussed on the call are only for the core PC postage business, which excludes all enhanced promotion channel activity. For more detailed definition of how we calculated each of our metrics, you may refer to our core and metrics spreadsheet invested on

Core PC postage revenue was $22.3 million in the second quarter, which was 23% versus the second quarter of 2010. We were very pleased with the continued acceleration in the revenue growth in our core PC postage business. Over the past four quarters, our core PC postage revenue year-over-year growth rates have gone from 8% to 11% to 14% to now, 23%. The increase in our core PC postage revenue was attributable to continuous strength in our SOHO customer segment. And also helped by our enterprise and high volume shipping customer segments, which are now contributing to our core business revenue growth in a more material way.

We acquired 63,000 gross small business customers in Q2. And that was up 20% versus the second quarter of 2010. And our cost per new small business customer acquired, or CPA was $124 in Q2. And that was down 3% versus the second quarter of 2010. This was our highest customer acquisition for any second quarter in the history of the company.

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