Stamps.com 2015 Annual Report Download - page 10

TABLE OF CONTENTS
OnMarch22,2015weenteredintoaStockPurchaseAgreement(“StockPurchaseAgreement”)withPSISystems,Inc.,a
Californiacorporationd/b/aEndicia(“Endicia”),andNewellRubbermaidInc.,aDelawarecorporation(“Newell”).Endicia,basedin
PaloAlto,California,isaleadingproviderofhighvolumeshippingtechnologiesandsolutionsforshippingwiththeUSPS.TheStock
PurchaseAgreementprovidedforourpurchaseofalloftheissuedandoutstandingsharesofcommonstockofEndiciafromawholly-
ownedindirectsubsidiaryofNewell(“Transaction”)foranaggregatepurchasepriceof$215millionincash.Thepurchasepricewas
subjecttoadjustmentforchangesinEndicia’snetworkingcapitalasofthedateoftheclosingoftheTransactionandcertain
transactionexpensesandclosingcashadjustments.Afterreceivingregulatoryclearance,theTransactionclosedonNovember18,2015.
AspartofthefundingforouracquisitionofEndicia,weenteredintoacreditagreementwithagroupofbanksonNovember18,
2015,whichprovidesforatermloanof$82.5millionandarevolvingcreditfacilitywithamaximumborrowingof$82.5million
(collectively,the“CreditAgreement”).TheCreditAgreementissecuredbysubstantiallyallourassets.Wefundedouracquisitionwith
cashof$56.5millionanddebtfromourCreditAgreementof$164.5million,totaling$221.0million.The$221.0millionconsistsof
thefollowing:1)purchasepriceof$214.2million,2)$1.5millionofdebtissuancecostsand3)thetransferofEndicia’sendingcash
balanceonNovember17,2015of$5.3million.Totaldebtissuancecostsof$1.8million,whichincludes$300thousandofcosts
incurredpriortoclosing,wererecordedasdebtdiscountandarebeingaccretedasinterestexpenseoverthelifeoftheCredit
Agreement.OurCreditAgreementmaturesonNovember18,2020.AsofDecember31,2015ouroutstandingdebtundertheCredit
Agreement,grossofdebtissuancecosts,wasapproximately$81.5millionunderthetermloanandapproximately$82.0millionunder
therevolvingcreditfacility.Becausewehavealetterofcreditofapproximately$500,000relatingtoafacilitylease,wedonothave
anyavailableorunusedborrowingsundertherevolvingcreditfacility.
PleaseseeNote 3 – “Acquisitions” and Note 7 – “Debt” inourNotestoConsolidatedFinancialStatementsforfurtherdescription.
Marketing of our Mailing and Shipping Business
Wetargetourmailingandshippingmarketingatsmallbusinesses,homeoffices,medium-sizebusinessesandlargeenterprises,
andwithinthesesegmentswetargetbothmailersandshippers.Wemarketourmailingandshippingservicesthroughthefollowing
channels:
•Affiliate Channels. Weutilizethetrafficandcustomersofsmallerwebsitesandotherbusinessesorindividualsthataretoo
smalltoqualifyforapartnershipdirectlywithusbyofferingfinancialincentivesforthesesmallbusinessesandindividuals
todrivetraffictoourwebsitethroughathirdpartyaffiliatemanagementcompany.
•Direct Mail. Wesenddirectmailpiecestoprospectivecustomerswithprospectlistspurchasedfromthirdpartiesorobtained
frompartners.
•Direct Sales .Weutilizeadirectsalesforcethatoffershigherpricedversionsofourmailingandshippingservicestargeting
enterprisesandhighvolumeshippers.
•Offline Marketing Programs .Weutilizevariousotherofflineadvertisingandmarketingprogramsincludingtelemarketing,
tradeshows,retailandotherprograms.
•Partnerships. Weworkwithstrategicpartnersinordertoleveragetheirwebsitetraffic,marketingprograms,andexisting
customerbasetodistributeourmailingandshippingsoftware.Forexample,thesepartnershipsmayresultinalinktoour
websitefromapartner’swebsite,acopyofoursoftwareincludedalongwithapartner’ssoftwareproduct,thedistributionof
oursoftwareataretaillocation,orthebundlingofoursoftwarewithahardwaredevice.OurpartnershipsincludeMicrosoft,
Avery,HewlettPackard(“HP”)andtheUSPS.
•Remarketing. Weremarketourservicestoformercustomers.Ourremarketingeffortsaregenerallyfocusedonnewfeatures
thatmayrelatetothereasonsformercustomersstoppedusingourservice.Weutilizee-mailandregularmailtocommunicate
newfeaturesofourproductstoourformercustomers.
•Shipping Integrations. Wemarketourservicesthroughintegrationswithe-commerceplatforms,multi-carriershipping
managementsoftware,shoppingcartsoftwareandotherorder-entrymanagementapplications.Ourshippingintegration
partnershipsincludeAmazon,theUSPS,QuickBooksandothers.
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