Stamps.com 2012 Annual Report Download - page 18

Risks Related to Our Industry
Postal Reform may negatively affect or cause disruptions to our services and business.
The USPS has reached its Congressionally mandated debt limit and faces an ongoing fiscal liquidity crisis. It has embarked on cost cutting
initiatives and has asked Congress to enact various Postal Reform measures. Among the measures proposed are cutbacks in delivery schedules
(such as Saturday delivery), mail processing capability, and retail post office hours and locations. Any such changes actually approved and
implemented may adversely affect the products and services we are able to offer our customers and could therefore seriously harm our business.
Additionally, absent Congressional action, the fiscal crisis could interrupt basic USPS operations, as well as payments to USPS suppliers such as
Stamps.com, each of which could also seriously harm our business.
USPS regulations or fee assessments may cause disruptions or discontinuance of our business.
We are subject to continued USPS scrutiny and other government regulations. The availability of our services is dependent upon us continuing to
meet USPS performance specifications and regulations. The USPS could change its certification requirements or specifications for PC Postage or
revoke or suspend the approval of one or more of our services at any time. If at any time we fail to meet USPS requirements, we may be
prohibited from offering our services, and our business would be severely and negatively impacted. In addition, the USPS could suspend or
terminate our approval or offer services that compete against us, any of which could stop or negatively impact the commercial adoption of our
services. Any changes in requirements or specifications for PC Postage could adversely affect our pricing, cost of revenues, operating results and
margins by increasing the cost of providing our services.
The USPS could also decide that PC Postage should no longer be an approved postage service due to security concerns, financial difficulties
within the USPS or other issues. Our business would suffer dramatically if we are unable promptly to adapt our services to any new requirements
or specifications or if the USPS were to discontinue PC Postage as an approved postage method. Alternatively, the USPS could introduce
competitive programs or amend PC Postage requirements to make certification easier to obtain, which could lead to more competition from third
parties or the USPS itself. If we are unable to compete successfully, particularly against large, traditional providers of postage products, such as
Pitney Bowes, who enter the online postage market, our revenues and operating results will suffer.
The USPS could decide that PhotoStamps should no longer be an approved product for such reasons as the belief that PhotoStamps presents an
unacceptable risk to USPS revenues, exposes the USPS or its customers to legal liability, or causes public or political embarrassment or harm to
the USPS in any way. If the USPS were to discontinue PhotoStamps, our revenues and operating results will suffer.
In addition, USPS regulations may require that our personnel with access to postal information or resources receive security clearance prior to
doing relevant work. We may experience delays or disruptions if our personnel cannot receive necessary security clearances in a timely manner,
if at all. The regulations may limit our ability to hire qualified personnel. For example, sensitive clearance may only be provided to US citizens
or aliens who are specifically approved to work on USPS projects.
Finally, any approved USPS market test or new service that benefits us could also ultimately be suspended or cancelled by the USPS, causing
disruptions to our business.
The USPS could modify or terminate agreements and other financial compensation arrangements.
The USPS could decide to amend, renegotiate or terminate agreements or financial compensation arrangements that exist now or in the future.
For instance, if the USPS decides to amend, renegotiate or terminate our credit card cost sharing agreement, which is an agreement that governs
the allocation of credit card fees paid by the USPS and us, our revenues and operating results will likely suffer. In addition, if the USPS decides
to amend, renegotiate or terminate our arrangement under which we are compensated directly by the USPS for customers or integration partners
who print a certain amount of Priority or Express Mail postage, our revenue and operating results will likely suffer.
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