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Stamps.com, Inc. (STMP) |
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CEOCFO Current
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This is a printer friendly page! Stamps.com
provides a service that allows consumers to print USPS postage for packages or envelopes
using a basic computer printer at an 80% savings over a basic postage meter BIO: Key features of Stamps.com’s services are:
Stamps.com is a software solution - no additional hardware required and you can use
Stamps.com to print postage on envelopes and labels or print sheets of postage stamps with
their new NetStamps feature. Print postage for packages on plain 8 ½" x 11"
paper with discounted electronic Delivery Confirmation and print postage for any mail
class and any amount. Stamps.com supports use of USPS Special Services such as Delivery
ConfirmationTM, Return Receipt, Registered Mail, Certified MailTM,
and Insured Mail. Benefits of using Stamps.com includes saving time
because it allows you to mail letters and ship packages from your home or office without
having to go to the post office. It lets you buy and print postage 24 hours a day, 7 days
a week ensuring that you will never run out of postage and you avoid long lines at the
post office. It also allows you to save money because Stamps.com is up to 80% cheaper than
a traditional postage meter, verifies addresses which avoids costly returned mail,
calculates the exact postage required avoiding wasted postage and encourages users to take
advantage of competitive USPS shipping rates, saving up to 60% over expensive shippers and
lets you print plain paper shipping labels with discounted Delivery Confirmation (Free for
Priority Mail, $0.13 for First Class, Parcel Post and Media Mail). Additional features include: Stamps.com integrates
with Microsoft Word, Outlook and your existing address books. It provides address
verification and bar-coded postage ensuring timely and accurate delivery of your mail and
lets you track, monitor and reduce postage expenditures. Stamps.com makes mass mailings
easier -- print postage and address in one step and produce professional-looking mail by
adding your company logo to your mail. CEOCFOinterviews: Mr.
McBride, please give us some background about Stamps.com. Mr. McBride: “The company was founded in 1997 by some business school students from UCLA that had the idea of printing postage from their own P.C. We investigated and got into the program in 1997 and became incorporated back in 1998. After going through a regulatory process, we were able to launch our initial service in 1999. Over the past year-and-a-half we have experienced a lot of restructuring and working on the product. We have now come to the point where our product is a lot different than it was when we launched the service. As a result of the improved product, we have seen increased revenue growth over the past few quarters.” CEOCFOinterviews: What is the basic service that you offer today? Mr. McBride: “The basic service lets a customer print U.S.P.S. postage for packages, envelopes or flats from their own home or work computer. All they need is an Internet connection and a regular computer printer, either ink or laser jet. People can print their own postage at home. A customer signs up for an account with Stamps.com and receives what amounts to a postal license similar to if you were going to get a postage meter. Typically, our customers give us a credit card number and then they buy postage for their account. For the convenience of doing this, we charge a subscription fee to the customers, which varies anywhere from about five dollars a month to about sixteen dollars a month depending on the plan.” CEOCFOinterviews: That sounds like it compares favorably to postage meters! Mr. McBride: “We tend to be about 80% cheaper than a postage meter for a comparable level of usage between our product and their product. It is a much more cost-effective way to do postage. Our customers are typically small businesses, home offices, and consumers.” CEOCFOinterviews: How do you get people to know about your service and how do you get people to use it? Mr. McBride: “We do a lot of marketing in the traditional ways. Since we do target the small business and home office market, which is a difficult market to reach, we tend to do many things with partners. We have about 35 partnerships with companies like Microsoft Corporation and Office Depot, Comp USA, Earthlink, NCR and PayPal. We try to tap into their customer base and let their customers know that we have this service group through that effort. We also do a lot of traditional type of marketing such as direct mailing, Internet advertising, and e-mails and banner ads. Through all those types of marketing is where we usually get our customers.” CEOCFOinterviews: Do you tend to have a good retention of customers? Mr. McBride: “We do have a good retention rate and we find that the service is fairly sticky. The average customer stays with us for about four years past the original free trial for the first month. That is based on projections.” CEOCFOinterviews: Is there any competition on the internet for you? Mr. McBride: “There are a couple of companies that do what we do. There are only three companies including us that have licenses with the US Postal Service to offer this service. We are in what is called the P.C. postage program, which is an officially sponsored program. As of the end of the last quarter, we have about 292,000 customers; about 80% of the customers that are in the P.C. postage market place. We are the largest player in that market place.” CEOCFOinterviews: What are the barriers to entry for somebody who wants to put in the effort that you? Mr. McBride: “The barriers to entry are probably more significant than most industries that you would typically encounter. We went through a regulatory process with the Postal Service that took about two-and-a-half years. A lot of that regulatory process was focused around security and the security of our system. We enable an individual or small business to print currency at home on their printer because postage is considered legal tender in the U.S. So, in order to be able to do that, we had to reach a level of security that was far beyond typical banking institutions. The barriers to entry are very significant. If you were to get through that two-and-a-half year regulatory process, then there are significant intellectual property claims of the companies that are already in the industry including ourselves. We have over a hundred patents that are either issued or pending.” CEOCFOinterviews: Is there a typical type of business that is more likely to use your services? Mr. McBride: “We have a broad array of small businesses using us. We find that our solution works better with higher volume. Clearly the more volume one has, the more compelling it is to avoid the post office.” CEOCFOinterviews: What is the financial condition of the company today? Mr. McBride: “Our financial condition is very strong. Our balance sheet is about as strong as it can be for a company our size. We have about $168 million dollars in cash on our balance sheet, which is about three dollars and eighty-one cents a share at the end of last quarter. From a balance sheet perspective, we are very strong. From an earnings perspective, we have lost about one to two million dollars per quarter for the last few quarters. We have had a few quarters in the past where we were cash flow positive. We have been running more on the growth mode recently; we have been investing in the business. We have been ramping up the sales and marketing front, which has driven the bottom-line a little more negative, but we are expecting to turn a profit next year.” CEOCFOinterviews: Are there any other products or services that you can offer in conjunction with what you do? Mr. McBride: “We offer a complete service to our customer base. Within the area of printing postage from a home printer, we offer several variations of that. For small businesses that do mass mailings, they have the ability to print directly on envelopes. With a product by the name of NetStamps, you can have the ability to print stamps on a sheet of labels. We have a shipping focus solution that allows you to print 4x6 shipping labels on a plain piece of paper for a package, and simply tape it to the package and hand it to the mail carrier. We also offer an array of office products that compliment the service that we offer, such as scales and envelopes.” CEOCFOinterviews: What are the challenges that you face growing the business and how are you ready? Mr. McBride: “Our biggest challenge, now that we have gotten many of these changes in the product behind us, is the marketing of the company. Small business and home office has been a tough market to reach and requires a very diligent effort in terms of keeping costs down and making sure that everything we do is a positive return on investment for shareholders. It is important to get the distribution and a scaleable marketing program.” CEOCFOinterviews: Why should potential investors be interested in Stamps.com? Mr. McBride: “Most potential investors that are in the company right now are in the stock. I think many people look at our balance sheet and look at the fact that we have three dollars and eighty-one cents a share in cash and tend to trade at the $4.50 range and today we are a little higher than that. The enterprise value of the company relative to the balance sheet is relatively low. The opportunity going forward with what we have done with the product over the past year and the position we have in the market place has really put us in a great position to grow the business going forward.” disclaimers |
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