Stamps.com Inc. ( STMP)

Q4 2011 Earnings Call

February 9, 2012 05:00 p.m. ET

Executives

Ken McBride – CEO

Kyle Huebner – CFO

Jeff Carvari – Senior Director of Finance and IR

Analysts

Kevin Liu – B. Riley & Co.

George Sutton – Craig-Hallum Capital Group

Presentation

Operator

Good day and welcome to the Stamps.com Fourth Quarter 2011 Financial Results Conference Call. At this time all participants are in a listen-only mode, later we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) As a reminder this conference call is being recorded.

I would now like to introduce the host for today’s conference, Mr. Jeff Carvari, Senior Director of Finance and Investor Relations. Sir, please go ahead.

Jeff Carvari

Thanks very much and good afternoon, everyone. On the call today is Ken McBride, CEO; and Kyle Huebner, CFO. The agenda for today’s call is as follows: we’ll review the results of our fourth quarter 2011 that’s financial results and talk about our business outlook, but first the Safe Harbor statement.

The Safe Harbor statement under the Private Securities Litigation Reform Act of 1995, this release contains forward-looking statements such as our expectations and financial guidance that involve risks and uncertainties. The 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, the risk factors also 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 www.stamps.com including its annual report on Form 10-K for the fiscal year ended December 31st, 2010; quarterly reports on Form 10-Q and current reports on Form 8-K. Stamps.com undertakes no obligation to release publically any revisions to any forward-looking statements to reflect events after the date hereof or to reflect the occurrence of unanticipated events.

Now, let me hand it over to Ken McBride.

Ken McBride

Thank you, Jeff and thank you for joining us today. Today, we announced another great quarter and another set of record performance as across many areas of our business. During the fourth quarter we achieved a record high growth rate for core PC postage revenue at 27% year-over-year growth. A record high for paid customers at 385,000 and for ARPU at $21.25. A record high for small business new customer acquisition at 83,000 which was up 24% year-over-year and a record for total postage print of our customer base at $211 million up 52% year-over-year.

And the fourth quarter caps up a great fiscal 2011 where we generated multiple new records across our business include the vastest total annual core PC postage revenue ever at 22%, the highest total small business new customer acquisition at 276,000 which was up 19% year-over-year. The highest total postage printed in our high volume shipping segment, which was up 96% for the year, the highest customer acquisitions in our enterprise business with total new enterprise locations added for the year up 108% year-over-year and the highest total postage printed for the year at $6.72 million which was up 50% year-over-year.

The strength across our business lines drove strong earnings growth with non-GAAP net income of $5.7 million in the fourth quarter and $21.2 million in fiscal year 2011, which were up 29% and 55% respectively. Our non-GAAP earnings per share was $0.35 in the fourth quarter and a $1.40 in fiscal year 2011, which were up 14% and 50% respectively.

Strong performance and record highs in our business were particularly significant in light of the continued weaker small business economic environment that while it showed some recent improvements continued to struggle relative to pre-recession levels.

On the call today, we’ll talk in more detail about our postage metrics and business, our plan for 2012 and our financial results and our business outlook.

Now, let me begin with a more detailed discussion of the PC postage business. 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 definitions of how we calculate each of our metrics you may refer to our quarterly investor metrics spreadsheet at investor.stamps.com.

Core PC postage revenue including small business enterprise and high volume shipping customer segment was $24.5 million in the fourth quarter, which was up 27% versus the fourth quarter of 2010. Over the past six quarters our core PC postage revenue year-over-year growth rates have accelerated from 8% to a 11%, 14%, 23%, 25% and now 27%. This was though the highest revenue and highest growth rate we’ve experienced in our core PC postage business since we started tracking this area separately six years ago.

The increase in the core PC postage revenue was attributable to continued strength in our small business area and our enterprise and our high volume shipping customer segments which are now contributing to our core business revenue growth in a more material way.

We acquired 83,000 gross small business customers in the fourth quarter that was up 24% versus the fourth quarter of 2010 and our cost for new small business customer acquired for CPA was a $108 in the fourth quarter and that was down 1% versus the fourth quarter of 2010. This was our highest customer acquisition for any quarter in the history of the company.

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