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PART I.
This Annual Report on Form 10-K, including information incorporated herein by reference, contains “forward-looking statements”
within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to
expectations concerning matters that are not historical facts. Words such as “projects,” “believes,” “anticipates,” “estimates,” “plans,”
“expects,” “intends,” and similar words and expressions are intended to identify forward-looking statements. We cannot assure you that the
expectations of future events will prove to be correct. Some of the factors that could cause actual results to differ materially from those
expectations are disclosed in this document including, without limitation, in the “Risk Factors” section of this report. All forward-looking
statements attributable to Stamps.com are expressly qualified in their entirety by this cautionary statement and you should not place undue
reliance on any forward-looking statement. Stamps.com does not undertake any obligation to update any forward-looking statements. You are
also urged to carefully review and consider the various disclosures we have made which describe factors which affect our business, including
the “Risk Factors”. Stamps.com registration filings pursuant to the Securities Exchange Act of 1934 are available via the company website at
www.stamps.com.
Stamps.com, NetStamps, Stamps.com Internet Postage, PhotoStamps, Hidden Postage and the Stamps.com logo are our trademarks. This
Report also includes trademarks of entities other than Stamps.com.
Item 1. Business
Overview
Stamps.com
®
is the leading provider of Internet-based postage solutions.
Postal Service (“US Postal Service” or “USPS”) approved postage using any 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, and using a wide range
of USPS mail classes including First Class Mail
®
, Priority Mail
®
, Express Mail
®
, Media Mail
®
, Parcel Post
®
, and others. Our customers
include home businesses, small businesses, corporations and individuals. Stamps.com was the first ever USPS-licensed vendor to offer PC
Postage in a software-only business model in 1999. 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.
Stamps.com Inc. (the “Company” or “Stamps.com”) was founded in September 1996 to investigate the feasibility of entering into the US
Postal Service’s Information-Based Indicia Program and to initiate the certification process for our PC Postage service. In January 1998, we
were incorporated in Delaware as StampMaster, Inc. and we changed our name to Stamps.com Inc. in December 1998. We completed our
initial public offering in June 1999, and our common stock is listed on the Nasdaq stock market under the symbol “STMP.”
Our principal executive offices are located at 12959 Coral Tree Place, Los Angeles, California, 90066, and our telephone number is (310)
482-5800.
Mission and Business Strategy
Stamps.com was founded with the mission to allow anyone to print valid U.S. postage using just a personal computer, an ordinary printer,
and an internet connection. In August 1999, Stamps.com became the first company approved under the US Postal Service’s PC Postage
program utilizing a software-only business model. As of December 31, 2005, Stamps.com provided its PC Postage service to approximately
349,000 registered customers that include small businesses, large businesses, home offices, and consumers.
Our current strategy for the core business small office and home office (“SOHO”) sales and marketing area is to continue optimizing our
current portfolio of customer acquisition channels while also working on new customer acquisition initiatives. We will continue to utilize our
traditional channels such as direct mail, enhanced promotion, telemarketing, partnerships, and general online advertising, and we will continue
to focus on optimizing the economics in each of these channels. On the SOHO pricing front, we will continue the approach that we began in
2005 which targets different customer segments with different service offerings that are differentiated based on
1