Stamps.com 2014 Annual Report Download - page 39

Interest and Other Income, Net
Interest and other income, net primarily consists of interest income from cash equivalents, short-term and long-term investments and rental
income from our corporate headquarters in El Segundo, California. Interest and other income, net decreased 22% to $375,000 in 2014 from
$480,000 in 2013. The decrease is primarily due to (1) lower yields on our investment balances including certain investments in our portfolio
that matured and were replaced with lower yield investments and (2) lower cash and investment balances as a result of the use of cash for the
acquisitions of ShipStation and ShipWorks.
Provision for Income Taxes
In 2014, our net income tax benefit consisted of an income tax benefit resulting from the release of our valuation allowance offset by current
income tax expense consisting of federal and state alternative minimum taxes. On June 10, 2014 we completed our acquisition of ShipStation.
On August 29, 2014 we completed our acquisition of ShipWorks. Based on these discrete events, we re-evaluated our forecast of our projected
taxable income. As a result, we released a portion of our valuation allowance totaling approximately $3.6 million and $345,000 during the
second and third quarter of 2014, respectively. After analyzing our deferred tax assets including our remaining tax loss carry-forward and
completing our forecast of future income taking into consideration the potential synergies of our acquisitions, we believe we have met the more
likely than not threshold that we will be able to utilize our remaining tax loss carry-forwards in the foreseeable future. As a result we released
the remaining valuation allowance of approximately $9.6 million during the fourth quarter of 2014. During 2014 we recorded current income
tax expense for alternative minimum federal and state taxes of $856,000 and income tax benefit for the release of our valuation allowance
totaling approximately $13.6 million, totaling to a net income tax benefit of $12.7 million, an increase of 33% compared to net income tax
benefit of $9.6 million in 2013. The increase in net income tax benefit is primarily due to the increase in our valuation allowance release offset
by the increase in our current tax expense as a result of the increase in our taxable income.
We evaluated the appropriateness of our deferred tax assets and related valuation allowance in accordance with ASC 740 based on all available
positive and negative evidence , including our recent earning trend and expected future income. As of December 31, 2014, we no longer have
any valuation allowance against our gross deferred tax assets.
Expectations for 2015
We expect the following trends for 2015:
As discussed above, our expectations are subject to substantial uncertainty and our results are subject to macro-economic factors and other
factors which could cause these trends to be worse than our current expectation or which could cause actual results to be materially different than
our current expectations. These expectations are “forward looking statements”, are made only as of the date of this Report and are subject to the
qualification and limitations on the forward-looking statements discussion on page 1 of Part I of this Report and the risks and other factors set
forth in Item 1A “Risk Factors”. Our business has grown through acquisition during 2014, however the expectations above do not assume any
future acquisitions or dispositions, any of which could have a significant impact on our current expectations. As described in our forward-
looking statements discussion, we do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect
events or circumstances after the date of this Report.
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• We expect fiscal 2015 revenue to be in the range between $160 million and $180 million.
• We expect growth in Core mailing and shipping revenue to be up in the mid-teens to lower twenties percent range in 2015 compared to
2014.
• We expect Non-Core mailing and shipping revenue will continue to be down in 2015 compared to 2014 as we expect to continue to
minimize investments in these areas of our business.
• We expect PhotoStamps revenue could be down in 2015 compared to 2014, possibly by as much as 25%, as we expect it could be
challenging to repeat the same level of high volume business orders in 2015 as we saw in 2014.
• We are targeting customer acquisition spend in our Core mailing and shipping business including ShipStation and ShipWorks to be up
between 10% to 20% in 2015 compared to 2014. We will continue to monitor our customer metrics and the state of the economy and adjust
our level of spending accordingly.
• We expect capital expenditures for the business to be between $2.0 million and $3.0 million.