EL SEGUNDO, Calif.--(BUSINESS WIRE)--Aug 1, 2018--Stamps.com® (Nasdaq: STMP), the leading provider of postage online and shipping software solutions to over 725 thousand customers, today announced results for the quarter ended June 30, 2018.

Second Quarter 2018 Financial Highlights

In July 2018, Stamps.com entered into a definitive agreement to acquire MetaPack Ltd. (“MetaPack”), a United Kingdom-based software company that provides the world’s leading multi-carrier enterprise-level solution to many of the world’s preeminent e-commerce retailers and brands. The Company's second quarter financial results and 2018 financial outlook do not include MetaPack, as the transaction has not closed. Total revenue was $139.6 million, up 20% compared to $116.1 million in the second quarter of 2017. GAAP net income was $45.5 million, up 47% compared to $31.0 million in the second quarter of 2017. GAAP net income per fully diluted share was $2.41, up 41% compared to $1.71 in the second quarter of 2017. Non-GAAP adjusted EBITDA was $63.6 million, up 10% compared to $58.1 million in the second quarter of 2017. Non-GAAP adjusted income per fully diluted share was $2.75, up 32% compared to $2.08 in the second quarter of 2017.

“We were very pleased with our acquisition of MetaPack and with our second quarter performance,” said Ken McBride, Stamps.com's Chairman and CEO. “Our growth continues to be driven by success in the shipping area of our business. With MetaPack we will be able to accelerate our focus on international expansion, and will be in a much better position to address the global e-commerce shipping industry. We are continuing to execute on our operational and strategic plans and we are excited about our long-term business opportunities.”

Second Quarter 2018 Detailed Results

Second quarter 2018 total revenue was $139.6 million, up 20% compared to the second quarter of 2017. Second quarter 2018 Mailing and Shipping revenue (which includes service, product and insurance revenue but excludes Customized Postage and Other revenue) was $134.4 million, up 20% versus the second quarter of 2017. Second quarter 2018 Customized Postage revenue was $5.2 million, up 22% versus the second quarter of 2017.

Second quarter 2018 GAAP income from operations was $46.9 million, GAAP net income was $45.5 million, and GAAP net income per share was $2.41 based on 18.9 million fully diluted shares outstanding. This compares to second quarter 2017 GAAP income from operations of $41.7 million, GAAP net income of $31.0 million and GAAP net income per share of $1.71 based on 18.1 million fully diluted shares outstanding. Second quarter 2018 GAAP income from operations, GAAP net income, and GAAP income per fully diluted share increased by 12%, 47% and 41% year-over-year, respectively.

Second quarter 2018 GAAP income from operations included $9.9 million of non-cash stock-based compensation expense, $4.0 million of non-cash amortization of acquired intangibles, and $1.6 million of transaction expenses related to the MetaPack acquisition and legal settlement expense related to the class action wage and hours case filed against us in February 2018. Second quarter 2018 GAAP net income included $93 thousand of non-cash amortization of debt issuance costs. Second quarter 2018 GAAP income tax expense was $0.7 million and non-GAAP income tax expense was $9.9 million, resulting in a $9.2 million non-GAAP tax expense adjustment. The higher non-GAAP tax expense reflects the tax impact on the non-GAAP pre-tax income at a non-GAAP effective tax rate of 16.0% for the second quarter. See the section later in this press release entitled, “About Non-GAAP Financial Measures” for more information on how non-GAAP taxes are calculated. Excluding the non-cash stock-based compensation expense, non-cash amortization of acquired intangibles, transaction expenses related to the MetaPack acquisition, and legal settlement expense, second quarter 2018 non-GAAP income from operations was $62.3 million. Also excluding non-cash amortization of debt issuance costs and including the non-GAAP tax expense adjustment, second quarter 2018 non-GAAP adjusted income was $51.9 million or $2.75 per share based on 18.9 million fully diluted shares outstanding.

Second quarter 2017 GAAP income from operations included $11.0 million of non-cash stock-based compensation expense and $4.0 million of non-cash amortization of acquired intangibles. Second quarter 2017 GAAP net income included $93 thousand of non-cash amortization of debt issuance costs. Second quarter 2017 GAAP income tax expense was $9.9 million and non-GAAP income tax expense was $18.2 million, resulting in an $8.3 million non-GAAP tax expense adjustment. The higher non-GAAP tax expense reflected the tax impact on the non-GAAP pre-tax income at a non-GAAP effective tax rate of 32.5%. Excluding the non-cash stock-based compensation expense and non-cash amortization of acquired intangibles, second quarter 2017 non-GAAP income from operations was $56.7 million. Also excluding non-cash amortization of debt issuance costs and including the non-GAAP tax expense adjustment, second quarter 2017 non-GAAP adjusted income was $37.8 million or $2.08 per share based on 18.1 million fully diluted shares outstanding.

Therefore, second quarter 2018 non-GAAP income from operations, non-GAAP adjusted income, and non-GAAP adjusted income per fully diluted share increased by 10%, 37% and 32% year-over-year, respectively.

Non-GAAP income from operations, non-GAAP adjusted income, and non-GAAP adjusted income per share are described further in the “About Non-GAAP Financial Measures” section of this press release and are reconciled to the corresponding GAAP measures in the following tables (unaudited):

Reconciliation of GAAP to Non-GAAP Financial Measures (Second Quarter 2018)

Reconciliation of GAAP to Non-GAAP Financial Measures (Second Quarter 2017)

Second Quarter GAAP Net Income and Non-GAAP Adjusted EBITDA

Second quarter 2018 GAAP net income was $45.5 million, up 47% compared to $31.0 million in the second quarter of 2017.

Second quarter 2018 non-GAAP adjusted EBITDA was $63.6 million, up 10% compared to $58.1 million in the second quarter of 2017.

Adjusted EBITDA is a non-GAAP financial measure which is described further in the “About Non-GAAP Financial Measures” section of this press release and is reconciled to GAAP net income in the following table (unaudited):

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

Taxes

For the second quarter of 2018, the Company reported a GAAP income tax expense of $0.7 million representing an effective tax rate of 1.6%. As discussed below under the heading, “About Non-GAAP Financial Measures,” we believe our effective tax rate for 2018 will be approximately 18%. Accordingly, the second quarter 2018 effective rate of 1.6% should not be assumed to apply for 2018 as a whole, and our after tax income during the remainder of 2018 will likely reflect a materially higher rate than is reflected in our after tax results for the second quarter of 2018. Our second quarter 2018 GAAP net income should also be understood to have been positively impacted by the lower effective tax rate applicable specifically to the quarter resulting primarily from employee stock option exercises.

Share Repurchase and Debt Repayment

During the second quarter of 2018, the Company repurchased approximately 54 thousand shares at a total cost of approximately $12.8 million.

The current Board-approved share repurchase program, which expires in November 2018, remains in effect with a remaining authorization of approximately $84 million as of June 30, 2018.

During the second quarter of 2018, the Company made a required principal repayment of $2.1 million against the borrowings under the Company’s existing credit agreement related to the Endicia acquisition. As of June 30, 2018, total debt under the credit agreement, excluding debt issuance costs, was $66.0 million.

Summary of our Updated Business Outlook

For fiscal year 2018, the Company currently expects its GAAP financial outlook to be as follows:

We expect total revenue to be in a range of approximately $530 million to $560 million; this is unchanged from our previous guidance. We expect GAAP net income to be in a range of approximately $150 million to $166 million; this compares to previous guidance of $150 million to $165 million. We expect GAAP net income per fully diluted share to be in a range of approximately $7.78 to $8.75; this compares to previous guidance of $7.73 to $8.70. We expect our 2018 effective tax rate to be 18.0%; this compares to our previous guidance of 22.0%.

The above GAAP amounts, adjusted as detailed below, result in the following non-GAAP financial outlook:

We expect non-GAAP adjusted EBITDA to be in a range of approximately $245 million to $265 million; this is unchanged from our previous guidance. We expect non-GAAP adjusted income per fully diluted share to be in a range of $10.15 to $11.15; this compares to previous guidance of $9.60 to $10.60.

The updated business outlook for 2018 revenue, GAAP net income, GAAP net income per fully diluted share, effective tax rate, non-GAAP adjusted EBITDA, and non-GAAP adjusted income per fully diluted share exclude the expected financial results from MetaPack from the expected close in August 2018 through December 31, 2018 but include the associated acquisition related expenses and higher net interest expense due to lower expected cash balances.

Detailed Discussion of our Business Outlook

As noted above, for 2018, the Company currently expects total revenue to be in a range of approximately $530 million to $560 million; this is unchanged from our previous guidance.

Also, for 2018, the Company currently expects GAAP net income to be in a range of approximately $150 million to $166 million; this compares to previous guidance of $150 million to $165 million.

The expected GAAP net income range includes depreciation and amortization expense of approximately $21 million, stock-based compensation expense of approximately $37 million, acquisition related expenses and litigation settlement expense of approximately $1.6 million, interest expense and other income, net of approximately $2 million, and income tax expense of approximately $33 million to $36 million. Excluding the depreciation and amortization expense, stock-based compensation expense, acquisition related expenses, litigation settlement expense, interest expense and other income, net and income tax expense, we expect non-GAAP adjusted EBITDA to be in a range of approximately $245 million to $265 million.

The following table is provided to facilitate a reconciliation of 2018 expected non-GAAP adjusted EBITDA to expected GAAP net income:

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