Stamps.com 2002 Annual Report Download - page 28

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Table of Contents
ITEM7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected
Financial Data” and our financial statements and the related notes thereto. This discussion contains forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results including those set forth
in “Risk Factors” beginning on page9 of this report.
Overview
Stamps.com ™ provides easy, convenient and cost-effective Internet-based services for mailing or shipping letters, packages or parcels anywhere
in the United States and at anytime. Our core mailing and shipping service is designed to allow individual consumers, home offices or small
businesses to print USpostage or shipping labels using any ordinary PC, any ordinary inkjet or laser printer, and an Internet connection.
In October 2000, we began to implement a business strategy to decrease our operating losses and enhance our ability to achieve profitability.
This strategy involved an initial restructuring that reduced our total number of employees by approximately40% to 315employees. We also
implemented other cost-cutting programs, including a significant reduction and redeployment of our sales and marketing expenses to those
programs that demonstrated the best return on investment.
During 2001, we continued to execute our strategy by reducing the total number of employees by approximately50% to 150employees in
February 2001 and by an additional25% to approximately 70employees in August 2001. We also sold the iShip multi-carrier shipping service
assets to United Parcel Service for $2.8million in May 2001.
With the restructuring completed, we spent the majority of 2002 transforming our core Internet Postage product by adding two significant new
product features. On July17, 2002 we launched NetStamps. NetStamps allows a customer to print generic postage of any value on special label
stock that has 25 labels per an 8by 11sheet of paper. The customer can print any value of postage from $.01 to $.37 and up. The postage does
not expire and is not tied to the destination address so it can be printed and stored for later use. Additionally, the postage can be used for any
class of mail which allows us to expand beyond our previously supported classes of mail to include such mail classes as International, Book
Rate, and Non-Profit.
One of the more significant results of the NetStamps launch is the incremental revenue generated by the sale of these special stock labels. Each
NetStamps sheet contains 25labels and is sold in packs of 5sheets. In both the third and fourth quarters of 2002 we experienced strong
NetStamps label sales of approximately $495,000 and $440,000, respectively. This equates to approximately 473,000sheets sold in the third
quarter and approximately 422,000sheets sold in the fourth quarter of 2002.
On November 29, 2002 we launched our Plain Paper Shipping feature within version3.0 of our client software. This version of our software was
designed to enhance shipping functionality, including the ability to print a shipping label with electronic delivery confirmation. Customers are
now able to print a shipping label on a plain piece of 8by 11printer paper. This eliminates the need to use 3-part labels and reduces the risk of
misprinted postage. Using our new Plain Paper Shipping Label allows customers to receive free electronic delivery confirmation with Priority
Mail. Prior to this technology, the United States Postal Service(USPS) required separate confirmation labels that added an additional step to the
process, and delivery confirmation cost an additional $.45per package. Electronic signature confirmation and electronic delivery confirmation
on other mail classes are also available at discounted rates with a $.40-$.50 savings per package. Customers may also track their packages
within our software with an easy status check, thus eliminating the need to key in a long tracking number. As of March16, 2003, customers
acquired since the November29 release date have used Plain Paper Shipping for 14% of their total postage prints.
22
2003. EDGAR Online, Inc.