Stamps.com 2006 Annual Report Download - page 24

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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® is the leading provider of Internet-based postage solutions. 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. Throughout this document and in general when we refer to the PC Postage business, we mean
excluding the PhotoStamps business.
Stamps.com Inc. (the “Company” or “Stamps.com”) was founded in September 1996 to investigate the feasibility of entering into the U.S.
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. 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.
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™,
Bound Printed Matter, and international mail. 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
the 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 U.S. 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.
Stamps.com offers its customers three primary ways to print PC Postage. First, our NetStamps® feature and Photo NetStamps® feature
enables customers to print postage for any value and most classes of mail on NetStamps or Photo NetStamps labels. After they are printed,
NetStamps and Photo 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 the postage and address 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.
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