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Stamps.com (NASDAQ: STMP) Thursday announced solid results for the fourth quarter of 2018, far exceeding the earnings guidance, as the company's strategy towards its most profitable customers continues to materialize. However, the leader in postage and online shipping solutions has also surprised investors with a weak forecast, motivated by its decision to end its exclusive partnership with United States Postal Service.
With shares down nearly 58% Friday in response, let's take a closer look at how Stamps.com ended the year 2018 and what investors should expect in the coming year. .
Source of the image: Getty Images.
Stamps.com Results: The raw numbers
| Metric |
Q4 2018 |
Q4 2017 |
Growth from one year to the next |
|---|---|---|---|
|
Returned |
$ 170.2 million |
$ 132.5 million |
29% |
|
GAAP net income |
$ 42.7 million |
$ 40.2 million |
6% |
|
GAAP diluted earnings per share |
$ 2.30 |
$ 2.15 |
7% |
Data Source: Stamps.com. GAAP = generally accepted accounting principles.
What happened with Stamps.com this quarter?
- Mail and Expedition revenues increased 29% to $ 165.4 million, and Personalized Mailing revenue increased 23% to $ 4.8 million.
- After adjusting for items such as stock-based compensation and acquisition costs, net earnings (not defined by GAAP) decreased by 20% from the prior year to establish $ 3.73 per share – above the $ 2.90 per share expected by most investors.
- Adjusted EBITDA increased 11% to $ 71.3 million.
- The number of paying customers remained stable at 736,000 compared to the previous year, which is in line with Stamps.com's strategic goal of acquiring fewer customers with higher lifetime values. In this regard, average monthly revenue per client paid increased 29% to $ 74.93.
- The average monthly churn amounted to 2.9%, down slightly from 3% in the fourth quarter of last year.
- Stamps.com repurchased 531,000 shares for $ 88.5 million during the quarter.
What management had to say
Ken McBride, President and CEO of Stamps.com, said:
We are pleased with our financial performance for the fourth quarter and fiscal year 2018. We achieved strong financial results thanks to an outstanding execution of our shipping activities and we finalized our strategic acquisition of MetaPack, which positions Stamps.com as the world leader in shipping software for e-commerce. We are well positioned to compete on a global scale with a focus on creating long-term value for our customers, partners and shareholders.
During the next teleconference, McBride dropped this bomb:
When services are offered to our customers, such as shipping with Amazon, FedEx One Rate Rate, new UPS products, regional carriers, Uber shipping, shipping From the store and everything in between, we must offer these solutions to our customers so that they can always choose the best alternative for their business. USPS is working hard to be competitive in the e-commerce shipping industry. But … they have many constituents and many problems to solve, which are not the most agile private carriers. As everyone knows, we discussed with the USPS the renewal of our long-standing revenue-sharing agreement, which we use to manage their transportation activities. We have proposed our renewal terms to the USPS. One of our non-negotiable items is that … we will no longer be exclusive to USPS. And it is not negotiable. USPS has not agreed to accept these terms or any other condition of our partnership proposal. So we decided to end our partnership in the marine sector with USPS so that we could fully develop partnerships with other carriers that we believe will be well positioned to win in the marine sector over the last five years. coming years.
In summary, given the direction of the shipping industry and the plethora of superior options for customers – as well as the USPS 'refusal to accept Stamps.com renewal terms – Stamps.com does will collaborate more exclusively with USPS.
Looking forward to
As a result, McBride warned that Stamps.com would suffer "some short-term pain … over the next few years" by sacrificing its share of shipping revenues with the USPS.
In the meantime, Stamps.com forecasts revenue for fiscal year 2019 from $ 540 to $ 570 million – down 5.4% from 2018 at mid-term and far below 16% growth most analysts did modeling. This should result in adjusted net earnings per share of $ 5.15 to $ 6.15, compared to $ 11.78 in 2018 and just over half of the $ 10.79 per share expected by Wall Street.
To be fair, this could be exactly the right decision to ensure that Stamps.com can survive and thrive in the long-term in our rapidly changing transportation sector. But given the financial pressure that it has to bear until then, it's not surprising to see the stock collapse in response.
Steve Symington has no position in any of the mentioned actions. The Motley Fool has stock and recommends Stamps.com. Motley Fool has a disclosure policy.
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