Stamps.com 2005 Annual Report Download - page 23

Item 7. 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 the “Risk Factors” section of this report.
Overview
Stamps.com Inc. (“Stamps.com”, “we”, “us” or “our”) is the leading provider of Internet-based postage solutions. Our core service allows
customers to buy and print United States Postal Service (“US Postal Service” or “USPS”) approved postage using a PC, an ordinary inkjet or
laser printer and an Internet connection. Customers use our service to mail and ship a variety of mail pieces including postcards, envelopes,
flats and packages using a wide range of mail classes. Our customers include home businesses, small businesses, corporations and individuals.
Stamps.com was approved by the USPS in 1999 as the first licensed vendor to offer PC Postage in a software-only business model. On August
10, 2004, we publicly launched a market test of PhotoStamps, a new form of postage that allows consumers to turn digital photos, designs or
images into valid US postage. We completed the first market test on September 30, 2004 and launched a second market test of PhotoStamps on
May 17, 2005. Throughout this document and in general when we refer to the core business, we mean the PC Postage business which excludes
only the PhotoStamps business.
We currently offer the following products and services to our customers:
PC Postage Service
Our U.S. Postal Service-approved PC Postage service enables users to print information-based indicia, or electronic stamps, directly onto
envelopes, plain paper, or labels using ordinary laser or inkjet printers. Our service currently supports USPS classes including First-Class Mail
®
, Priority Mail
®
, Express Mail
®
, Parcel Post™, Media Mail™ and Bound Printed Matter. Customers can also add USPS Special Services
such as Delivery Confirmation™, Signature Confirmation™, Registered Mail, Certified Mail, Insured Mail, Return Receipt, Collect on
Delivery (COD) and Restricted Delivery to their mail pieces. Our service requires only a standard PC, printer and Internet connection. Our free
software can be downloaded from the Internet or installed from a CD-
ROM. After installing the software and completing a registration process,
customers can purchase and print postage 24 hours a day, seven days a week. When a customer purchases postage for use through our service,
the customer pays face value, and the funds are transferred directly from the customer’s account to the US Postal Service’s account. The
majority of new customers currently signing up for our service pay a monthly convenience fee of $15.99. Our current customer mix includes
monthly convenience fees ranging from $4.49 to $24.99 or more based on individual pricing and promotions. As of December 31, 2005, our
customer base consisted of approximately 349,000 registered customers who have downloaded our software and registered for our service.
Stamps.com offers its customers three primary ways to print PC Postage. First, our NetStamps
®
feature enables customers to print postage
for any value or any class of mail or package on NetStamps labels. NetStamps can be used just like regular stamps. Second, our shipping
feature tab allows customers to print postage for packages on plain 8.5” x 11” paper or on special labels, and to add electronic Delivery or
Signature Confirmation at discounted prices. Third, our mailing feature tab is typically used to print postage and addresses directly on
envelopes or on other types of mail or labels, in a single-
step process that saves time and provides a professional look. Our PC Postage services
also incorporate address verification technology that verifies each destination address for mail sent using our service against a database of all
known addresses in the U.S.
In addition, our PC Postage services have been designed to integrate into common small business and productivity
software applications such as word processing, contact and address management, and accounting and financial applications.
Following a December 2005 removal of approximately 65,000 customers that we deemed to be permanently uncollectible, we ended the
year with approximately 349,000 registered users, 94% of which were either Power/Pro Plan or Premier Plan members.
In the fourth quarter of
2005, we successfully billed approximately 299,000 unique customers, up from 286,000 in the fourth quarter of 2004.
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