Q3 2019 Earnings Call
Greetings and welcome to these stamps dot com third quarter 2019 financial results call.
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I shouldn't answer session will follow the formal presentation.
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I would now like to turn the conference over to your host Suzanne Park, Vice President Finance. Thank you you may begin.
Thank you.
On the call today, our CEO , Ken Mcbride, <unk> CFO , Jeff Carberry their agenda for todays call is their father will review. The result of our third quarter 2019 will provide an update on elements of our business model and partnerships and finally, we'll discover financial result to talk about our business outlet, but first the safe Harbor statement.
Safe Harbor statement under the private Securities Litigation Reform Act of 1995.
Certainly includes forward looking statements about our anticipated financial metrics unresolved all of which involve risks and uncertainties important factors, including the company's ability to successfully integrate and realize the benefits of its cocker feed for strategic acquisitions or investments.
Regarding the company's ability to complete and ship its products maintain desirable economic support the products and monetize its customer transactions with carrier the timing of when the company will utilize this deferred tax assets.
They are maintained regulatory approval, which could cause actual results could differ materially from those in the forward looking statements are detailed in filings with the Securities and Exchange Commission may from time to time like <unk> Dot com, including annual report on Form 10-K for the fiscal year ended December 31st 2018 quarterly reports on.
Form 10-Q , and credit reports on form 8-K.
<unk> Dot com undertakes no obligation to release publicly any revisions to any forward looking statements to reflect events or circumstances. After the date hereof or to reflect the occurrence of unanticipated events.
The financial results, we will discuss on the call today include non-GAAP financial measure.
In the third quarter 2019, GAAP net income was 9.1 million and GAAP net income per fully diluted share with 52 cents.
Our non-GAAP financial measures exclude the following third quarter items.
11.8 million up noncash stock based compensation and 5.6 million of noncash amortization expense of acquired intangibles in debt issuance cost.
Our non-GAAP financial measures included 7.1 million of additional non-GAAP income tax expense in the third quarter.
Mailing and shipping number it includes service revenue product revenue and insurance revenue and do not include any revenue from customized postage. Please see our third quarter 2019 earnings release, a 2019 metric posted on our Investor website for reconciliations of our non-GAAP financial measure to the corresponding GAAP measures now, let me hand, the call over to Kevin.
Thank you Suzanne Thank you for joining us today.
During the third quarter, we continued to execute on our strategy to transform our business into a global multi carrier in E Commerce solutions company.
Within our domestic multi carrier products, which include Shipstation shipping easy and ship works, we continue to drive innovation expand our partnerships in integrations.
During the quarter, we introduced several significant new features including things like split shipments scanned Apprenda international returns and tracking.
We also signed more than 15, new partnership agreements.
APAC, we continue to make progress in both re architecting the technology platform and driving new innovations, we successfully launched met a pack in the U.S. and.
And signing a large new U.S. customer to the platform in the third quarter.
We're also on track to launch new advancements in early 2020, including sophisticated returns and tracking portals.
We continue to expand our small business international solutions with our Shipstation product.
In the third quarter, New international accounts increased by more than 30% total shipments increased by more than 50%.
We also made strides and the diversification of our carrier relationships and achieved a significant milestone with the recent announcement of our new strategic partnership with U.P.S.
As expected there continues to be short term financial impact as we transition into our new business strategy and our financial results for the third quarter were in line with those expectations.
Let me now spend a few minutes discussing some key elements of our new U.P.S. partnership.
Through this new partnership we will be working very closely with U.P.S. in multiple ways across our organization.
Within our e-commerce , Multicarrier properties, including Shipstation shipping easy and Shipworks, we've always provided the U.P.S. shipping capability.
However, this new partnership allows us to more actively and effectively drive customers and shipping volume to U.P., yes.
The new partnership will make accessing U.P.S. within those products much more convenient for the customers. For example, a new U.P.S. account will be set up by default for all new and existing customers.
And the new discounted U.P.S. rates will be available by default in that new account.
So a customer can get up in shipping with U.P.S. immediately versus the process today that requires some time and effort.
Within the stamps dot com and additional branded products offer U.P.S. shipping will be an entirely new capability.
But the most products. We previously had exclusivity arrangements with the U.S.P.S. that are now no longer in place as a result of the decisions. We made earlier this year.
So we're now able to include a U.P.S. shipping solution side by side with the U.S.P.S. solution for customers of those products.
Within those products accessing your P.S. will also be very convenient with a default account and discounted rates available immediately when the customer first begins to use the product.
As a result of the broad marketing of the stamps dot com brand that we do.
Many customers start with us.
In the stamps dot com product.
And this will allow us to teach those customers about U.P.S. and they're great solutions early in the customers shipping lifecycle.
Okay.
The U.P.S. package discounts, we are able to now offer the customers under our new partnership are very attractive.
Discounts or as much as 55% off your P.S. the standard daily rates.
The discount include various wave surcharge.
We expect that the wave surcharges will reduce customer confusion and the wave surcharges are also particularly relevant to the types of shipping that our customers typically do.
The discounts are available through our products without any necessary existing customer shipping volume.
That is frequently required to qualify for discounts when working with U.P. Uh huh.
We will begin rolling out the changes to enable the U.P.S. capabilities and discounts within some of our products in the fourth quarter of this year.
Starting in 2020, we expect that the customers across all of our solutions will be able to utilize these great new U.P.S. capabilities and discounts within our software products.
We always strive to bring the best solutions to our customers and U.P.S. as the global leader and shipping and logistics.
Yes has also been a leader and evolving their business model to continue to address the rapid changes in E. Commerce. For example, there moved a seven day delivery that they announced last quarter.
Partnerships, they announced last quarter to add 12000, new package pick up and drop off locations in the U.S.
Both of those solutions provide additional value to our e-commerce customers and we'll make U.P.S. even more attractive.
The strategic relationship with U.P.S. will further drive the value proposition of our service offerings and empower our customers by offering them more choice and control over their shipping needs.
We would note that as we move forward with the new you P.S. strategic partnership we continued to be very good partners with the U.S.P.S. and to work very productively with them.
The U.S.P.S. still provides a great solution for many of our customers in many areas of their respective businesses.
We will continue to work closely with the U.S.P.S. across our organization.
So let me now provide an update on the latest developments in the U.S.P.S. reseller area.
As a refresher resellers have what are called negotiated service agreements or and essays, which are customized negotiated contracts between the postal service and an individual customer or reseller, which provides a discounted rates that vary based on each agreement.
Companies with and assays coming many forms from companies that are primarily in the business being resellers to marketplaces like Amazon ebay NFC to third party logistics providers like fulfillment houses.
Each resellers and I say allows a reseller partner to buy posted for shipping a package in one rate from the U.S.P.S. and then to resell the postage to customers at a higher rate.
Is present it is precisely those margins that have created a deep and robust ecosoc ecosystem of ecommerce companies and partnerships fueling innovation.
As we discussed previously earlier this year the U.S.P.S. initiated negotiations with certain reseller partners.
Well, we have limited visibility given that the negotiations are being conducted solely between the U.S.P.S. and the resellers, we'd like to provide our investors with our current understanding of the status of those negotiations.
As you recall back in April the U.S.P.S. told some of the resellers that their economics would be decreased starting in June of 2019.
However.
By June the U.S.P.S. change course, and by the third quarter the existing reseller agreements were extended through the end of 2019.
At that time, there was still an expectation that the U.S.P.S. would make a reduction in reseller discounts in 2020 and 2021.
[noise] most recently our understanding is it there continues to be active and positive discussions between the resellers and the U.S.P.S.
While it remains our understanding that the U.S.P.S. intends to restructure the economics offered to resellers starting in 2020 is not yet clear exactly what financial impact the changes might have on the resellers and on us.
We're very encouraged by the continued positive shift in the U.S.P.S. is apparent approach to this negotiation.
We hope it during this time of growing competition rapid evolution in the ecommerce ecosystem. The U.S.P.S. continues to keep its focus on growing its package business and supporting its very important ecommerce technology partners.
Our goal is to position the company for the best long term outcome. It's all of these trends play out and to continue to diversify our business.
Following the business model changes that we announced in February we continue to have very productive discussions with traditional nontraditional carriers, both domestically and internationally regarding new and enhanced relationships.
All of these discussions have been very positive recognizing the strong value proposition, we provide driven by the strength of our multicarrier solutions the level and the number of our partnerships and integrations the size and strength of our national sales team and the scale and success of our marketing programs.
Our new use yes relationship represents a very significant step forward in our new strategy. We're very excited to begin to work closely with them across our organization.
Overall, we built an extraordinary company with incredible assets, an amazing workforce.
Exceptionally well positioned to can do continue to drive our organization in this new direction.
We're very confident we will become the global leader and multi carrier ecommerce shipping.
With that I now turn the call over to Jeff.
Thanks, Kim will now review, our third quarter 2019 financial results.
A discussion of our financial results today include non-GAAP financial measures assets and described a reconciliation of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release, and our 2019 metrics on our Investor website [noise].
Total revenue was 136.2 million in Q3, and that was down 5% year over year versus Q3 of 18.
Total revenue excluding met APAC was 123.5 million in Q3 and that was down 11% year over year versus Q3 of 18.
The decline in revenue and the third quarter was driven by the elimination of U.S. guest Commission revenue offset by the full quarter inclusion of Matt APAC revenue and by growth in our global banished program.
[noise] mailing and shipping revenue was 132.9 million in Q3.
And that was down 3% year over year versus Q3 at 18.
Mailing and shipping revenue excluding met a pack was 120.2 million in Q3 and that was down 8% year over year versus Q3 of 18.
The decline in total mailing and shipping revenue was driven by the elimination of you Sps Commission revenue.
Offset by the full quarter inclusion of met APAC revenue and growth in our global Vanity program.
We estimate that revenue derived from our shipping customers declined at a mid single digit rate year over year and as a percentage of total revenue in Q3 was in the high 70% Ranch.
[noise], we estimate that revenue derived from our shipping customers in Q3, excluding medevac declined year over year at a low double digit rates.
And as a percentage of total revenue wasn't the high 60% ranch.
We also estimate that our mailing and shipping revenue derived from our so called mailers as a percentage of total revenue was approximately 20% and grew year over year at a mid single digit rates.
[noise] mailing and shipping gross margin was 73.8 million, 73.8% in Q3 versus 80.5% in Q3 at 18.
The decrease in gross margins was primarily attributable to the elimination of U.S. Just commission revenue.
It was also negatively impacted by the continued increase of our international offerings, including our global vanished program.
Programs tend to have a lower gross margin profile that our other service fee revenue components.
The gross margins were also negatively impacted by the fourth quarter inclusion of met APAC, which under US GAAP generated gross margin of approximately 64% in Q3.
We had a year over year increase in our Q3 operating costs, including sales and marketing R&D and GSK, primarily related to strategic investments to support growth and innovation in our mailing and shipping business.
And due to the full quarter inclusion of medevac.
non-GAAP operating income was 33.0 million in Q3 and that was down 45% year over year versus Q3 of 18.
Adjusted EBITDA was 34.5 million in Q3, and that was down 43% year over year versus Q3 of 18.
Adjusted EBITDA margin was 25.3% in Q3 versus 42.5% in Q3 of 18.
The decrease in adjusted non-GAAP operating income adjusted EBITDA and adjusted EBITDA margin were primarily attributable to the following.
The elimination of U.S., just commission revenue lower gross margins associated with the scaling of our international offerings.
Higher operating expenses associated with our shipping related investments.
And finally, the inclusion of met APAC, which has lower gross and EBITDA margins.
non-GAAP adjusted income per fully diluted share was $1.12 sounds from Q3 based on non-GAAP tax expense rate of 40%.
And that was down 60% year over year versus $2.76 per share and future of 18 based on a non-GAAP tax expense rate of 11%.
The weighted average fully diluted shares and the if you ask calculation was 17.4 million for Q3.
And 19.0 into Q3 of 18.
Let's now discuss our customer metrics.
Total pay customer metric was 743000, our churn rate was 3.2% and our ARPU was $59 in 60 cents for the third quarter.
Hey customers were up 1% year over year churn was up <unk>, 0.2% year over year, but broadly in line, but the trend we've seen over the past several quarters and ARPU was down 4% year over year.
As we discussed last quarter, a segment of our higher volume shifting customer hardline customers continue to receive our technology solution without our customary monthly service fee, which with the elimination of or discuss commission revenue results and some of those customers being excluded from our paid customer account.
The exclusion of those customers for our paid customer count quarterly impacts are paid customer counts are churn and our operating metrics.
Total third quarter USGIF postage printed was 1.6 billion and that was up 3% versus the third quarter of 2013.
All of your best guess postage printed metric includes both higher growth shipping volume and traditional non package mail volume, which continues to see a steady decline.
Let's now discuss our cash debt and uses of cash.
We ended Q3 with 143 million in cash and investments, which was up 34 million for 110 million at the end of Q2 of 19.
The increase in cash and investments was primarily driven by strong operating cash flow changes networking capital.
And the equity adjustment related to foreign exchange and proceeds from option exercises.
I was partially offset by share repurchases and a scheduled debt repayments.
During Q3, we made a required principal repayment of 2.6 million, resulting in total debt under the credit agreement, excluding debt issuance costs of 53.6 million.
During Q3, the company repurchased approximately 113000 shares at a total cost of approximately 6 million.
On March 20, Atsina Board of Directors approved 60 million dollar share repurchase plan, which was scheduled to expire in September of playing on team.
On May Onest of financing the board of directors adjusted the repurchase parameters the plan as previously discussed.
On July 29th of 19.
The board of Directors approved an extension of the plan through February 2020 from its prior exploration on September 2019.
At the most recent board meeting on October 31st of this year. The board of Directors approved an additional extension of the current plan through May of 2020 months prior exploration and February 2020.
To date, approximately 36 million has been repurchased under that plan.
Let's now turn to guidance as Ken discussed earlier, we signed a partnership agreement with EWP, Yes in which we will offer significant discounts for EUV, yes services to our customers.
We expected to get offering these rates to some of our customers in the fourth quarter of this year.
But expect to offer them to all of our customers.
In the first quarter of 2020 at the complete the development work necessary to do so.
That's can also mentioned USGIF negotiations with a reseller partners are ongoing and we have limited visibility into those negotiations. However, all of our reseller partners have received extensions of the current agreements through the end of this year.
We have therefore refined our guidance to reflect the benefits of our New York, Yes agreements.
And our current understanding of the contract margins of our reseller partners for this year.
It's important understand however that the financial implications or did you also agreements are impacted by the following.
The rollout of you'll see us, which will happen over multiple quarters and by the fact that some of the volume that will migrate to Cvs based on preferential rates and service offerings would have potentially go onto the U.S.P.S. previously and when that happens financial gains and USPI EPS will be offset to some degree by losses.
Revenue from our Usbs partnerships.
It's also important I understand that our guidance also reflects the increasingly challenging competitive environment facing dsps and the negative impact it has on our financial results.
We expect fiscal financing revenue to be in a range of 535 to 565 million, which compares to previous guidance of 520, the 560 million.
With the elimination of USGIF Commission revenue and the increasingly competitive environment facing Dsps are shipping related revenue is expected to continue to decline year over year.
We expect mailing and shipping revenue derived from our several mailers will be approximately flat year over year.
And we expect a customized postage revenue to be down 25% to 35% year over year as compared to down to 30% to 40% year over year previously.
We expect operating expenses increased in 2018, reflecting the strategic investments we made in 2018 and the additional investments we've made and I suspect continues to make and 29 team.
As well as inclusion of Medpac and our financials.
We expect fiscal 2019, adjusted EBITDA to be in a range of 132 million to 152 million, which compares to our previous guidance of 120 million to 150 million.
Our revised guidance implies a full year adjusted EBITDA margin in the mid 20% range based on all the aforementioned factors affecting our business.
We expect non-GAAP tax expense will be approximately 40% of non-GAAP pretax income for funding I can which is unchanged for our previous estimate.
Our full year 2019 effective tax rate could differ from our current estimates based on a number of factors.
We expect fully diluted shares to be between 17.8 million and 19.4 million in 2019, which compares to our previous estimates of 17.6 million 18.7 million.
We expect fiscal 2019, non-GAAP adjusted income per diluted share to be in a range between $3.95 to $4.95, which compares to our previous estimate $3.60 to $4.85.
With our increased focus on shipping our financial metrics would ordinarily exhibit seasonality reflective of customer shipping usage during the year.
However.
We do not expect that trend to continue this year to the same degree.
With the negative financial impact associated with the elimination of the Usbs Commission revenue and increasingly challenging competitive environment facing dsps.
In particular, we expect fourth quarter revenue adjusted EBITDA to be particularly negatively negatively impacted relative to historical patterns.
And finally, we continue to expect capital expenditures to be between approximately two to 4 million and 29 team.
Although we do not provide guidance beyond 29 team. The current yes guess restart discussions as we understand that May also result from reductions in margins earned by resellers in 2020 and 2021.
This in turn could have an impact on our revenues and earnings in those years.
While we do not know what ultimately will become of the U.S. guesses proposed changes it does not alter our long term global multi carrier business strategies, which we believe will be successful and with that let's open up for questions.
Thank you.
At this time will be conducting a question and answer session.
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Our first question comes from George Sutton with Craig Hallum. Please state your question.
Thank you and.
Congratulations on the steel, obviously, you're having conversations with the number of carriers and potential partners and I'm curious if you could discuss the responses to the new partnership with U.P.S. relative to those discussions does it does it help accelerate or decelerate.
Those discussions and I just wanted to confirm there are no.
In abilities for you to work with other carriers via the U.P.S. specific relationship.
Yes, I mean, obviously, we've been having discussions as we've discussed with you know ever since February we've been having discussions with multiple carriers, both both in the U.S. as well as internationally.
And in all the discussions continue to be really positive.
Obviously, one of our one of our key targets in this or original strategy was yes.
The global leader and logistics and so we're very excited about that relationship.
And you know I think we continue to have active conversations with multiple carriers I think in terms of your question on whether or not this relationship precludes our ability to work with other carriers.
Obviously, we can't disclose the specifics of the contract with EPS. However, the.
You know within the Multicarrier solutions, we already support 40 carriers.
And we're going to continue to support any carrier that really makes sense from a customer perspective.
Within the stamps and Endicia products.
We currently we're adding NPS over the next.
Couple of quarters, and we don't expect to add any additional major carriers at this point within those products.
We don't really see a big need for a customer to have you Sps plus you know 40 other carriers if they need that and then we're going to just move them up to a shipstation shipping easier shipworks solution.
So I think broadly we're going to continue to pursue the business model.
We want to work with multiple carriers not just one new one and.
But we're really excited about you PS is our first as our first the relationship.
Relative to your U.P.S. work, you mentioned a customer set would get a included for U P. S. In Q4, I'm just interested relative to your guidance, you're you're assuming how or maybe what percentage of your customer base in Q4 versus.
During the rest of the 2020.
Yes, good question George.
With regard to the impact and in our guidance for Q4, certainly what we expect to introduce into customer adoption rate is included in guidance, we don't get into.
Bifurcated the customer base in terms of those that we would migrate versus those we doubting kind of quantifying that but rest assured. It is included in our guidance.
And lastly can you ran quickly through a number of new product pieces that you've added and I'm wondering if you could give us a sense of any of those that are more important than others and also you mentioned 15, new partnerships are there any that you would specifically referenced says.
A meaningful for your strategic benefit thanks.
Sure well I mean, I think we're really pleased with the progress we've made across the board.
No in the multi carrier products.
We had a big launch of a new version, which we call version 3.0 within our Shipstation solution and we migrated the majority of customers onto that solution.
Added Cigna several significant new features I mean, we mentioned split shipments, which has the ability to kind of go in and taken order and split it across multiple shipments are multiple carriers that really to provide that extra flexibility.
Say for instance, part of the orders in stock and part of the order isn't in stock.
And really adding other things like the international returns and tracking capability to that product as we as we continue to move.
Shipstation into our international.
As our small business international solution.
The new partnership agreements.
Several were very significant we havent made those announcements yet so we expect that we'll be able to announce some more new partnership nuke, new significant partnerships in the next one or two quarters.
But we're very excited about a couple in particular.
And I think it really continues to reflect our market leadership with both shipstation.
And also shipping easy and Shipworks, but I'll show I'll also with ship engine, which we haven't discussed in awhile, but that's really our apiay solution, we're integrating that into other.
Others, you wise and so it provides it provides a lot of the capabilities of shipstation with the the various integrations.
Marketplaces and e-commerce tools and also carriers in the form of an API. So it makes integrating a lot of the capabilities of shipstation into your own website or or solution.
Easier.
I think in met APAC, where we're really excited about.
Continued innovation in the technology I think we when we went in there we had.
A little bit of work to do in terms of.
Kind of moving some of the technology and that platform.
And the direction that we'll be able to utilize it within our broader international strategy, but in the meantime, we've really been able to move met APAC.
Effectively and into the us and we signed a significant large new U.S. customer.
On the platform in the third quarter. So we are excited about that it's it's a significant installation.
A large.
You know organization that wants to take their solutions.
Global and so that.
Capabilities and met APAC really were a perfect fit for them and as you recall like when we bought met APAC.
It was really primarily European solution. They didn't really have a lot of traction in the U.S. and one of our one of our synergies we identified and that acquisition was the ability to bring them and to have our sales teams here really drive that solution in the U.S. So we've seen some nice early successes in that area.
And I think in international we continued to kind of make.
I'll make a hard push into into the the countries that we've targeted so far there's five countries that we're focused on right now and.
We're continuing to look at we're expanding.
We're expanding our solutions in those markets, we're seeing nice customer adoption. We're also seeing nice growth in the shipments. So I think across the board, we've really seen nice.
Nice progress and all of our products and.
And initiatives.
Very helpful detail. Thank you.
Our next question comes from Kevin do with K, Lou and company. Please state your question.
Hi, good afternoon.
I wanted to follow along.
Question regarding your chest to fix that you can share any sort of additional details would be curious to sharing with you guys are in more reseller for you Katz at this point Theres one of the commission type structure.
You can learn and then maybe just and the grander scheme of things, obviously kind of take some time to fully rollout.
Wondering how you guys talked about the total revenue opportunity and as Steve said, there's enough to kind of offset losses. It experience that will be you Sps relationship with impact so the reseller program.
Is it more so kind of the fashion.
Hum.
Yes, so we haven't really but we're not able to disclose exactly financial.
Relationship other than the fact that we're able to offer these significant discounts to the customers.
When customers are getting like you said, the 55% off the daily rates, which is a very significant discount.
We expect that.
We expect to see volume.
Both both existing volume as well as new volume moving into.
Yes solution based on those.
Those.
Rates, but in terms of whether the structure is reseller versus other structures that were not able to really talk about that.
In the second part of the question.
Yes, so in terms of the second part of the question in terms of what this means going forward certainly it's a strong strategic partnership for US it's an important.
[noise] component to bring to our customers and certainly does incrementally benefit us financially.
The impact on.
The impact going to be resellers.
There are a lot of uncertainties regarding the reseller structure with usbs that us and.
To what degree.
The impact in 2020, and 21 and beyond.
Is relative to the resellers, it's impossible to say right now without further clarity on what do you Sps will do ultimately what the resellers, but.
But I think it's safe to assume obviously that we're excited about it and it is certainly financially beneficial for US we talked about part of our strategy was diversification of our.
Financial relationships with our carrier partners and this is certainly a big big step in achieving that goal.
So we're definitely very excited about it quantification at this point.
Relative to you Sps I think it's premature given the uncertainties around you Sps.
Understood and then can you had mentioned that by default all of their customers will have access to be.
Services do you guys Utilimaster account with you can't sensor that way you hope to establish all these accounts directly or are there any sort of kind of often process.
Hi, Thanks, a lot to go through and.
Year to be able to share that information with them.
And then just related to that well actually I'll, let you answer that person and I'll ask my last question. Thank you.
Yes so.
When the customer signed up for the service as they begin using our solution their.
Currently there you Sps account is already automatically there.
Obviously, but now also there are you guessed account will be automatically there so whereas customers may have previously had to go and.
Fill out some forms or go reach out to you sales or or other ways of getting.
And account set up with you PS now it just is automatically there so it'll it'll really.
He is the startup and we think that the the ability to kind of push people right into yes. The way, we've always done with U.S.P.S. will be a a big benefit from that from a convenience perspective, and then you know the the attractiveness of the rates.
As customers go into the solution is to really look at optimizing their cost for their packages the attractiveness of the rates as well will be there automatically so whereas.
Today, you may have to go and.
Build some volume first to get a discount.
Yes.
Those discounts will be available from package one day, one so it'll be a nice.
Nice way to Incent people to go in and start utilizing you PS right off the bat.
Got it.
Part of that question was just forget multi carrier customers, who already have Jessica Alba stably.
Are you able to just.
For the monetize those relationships under this agreement if you're if the rates that they have.
Walter.
Yes, I mean, obviously, we have we have a significant we we have a lot of volume already running through other carriers, we've talked about outside the U.S.P.S.. We have about 2 billion in volumes through all the other carriers and so within that volume we have.
EPS volume as well as other carrier like Fedex and other other other solutions and so.
Some of these larger customers have already received their you PS.
I count numbers have already gone through that process of setting up their account and may have discounts that are that are better than the ones. We can offer them or they may have discount that aren't as good. So I think it'll be customer by customer.
Question as to whether they want to move into.
Move into the discounts were able to offer stick with the one they already have.
Got it so it does sound like those customers the ability to move into it.
Charles.
That's you're able to offer this better rates.
Yes, I mean, I think customers will have that flexibility.
Okay, great Congrats and thanks for taking my question.
Kevin.
Our next question comes from Darren Aftahi with Roth Capital Partners. Please state your question.
Hi, This is a dillon on for Darrin. Thanks for taking my question first on U.S.P. I mean, you you P.S. could you talk about sort of their reasoning behind making it the default shipping option versus sort of.
Maybe I could drop down menu does that mean that.
The U.P.S. rate will be better in every instance are well, that's where notify us there might be a potential lower rate to a different carrier on the platform.
Yes.
We didn't say default as much as there is a an account set up for you by de Paul So.
The rates are available within that count by default now obviously customers are still going to be looking at you know within the multi carrier products using more than one carrier like the vast majority I mean, the reason you adopt multi carrier in the first place is because you want to use more than one carrier so to the extent that.
And it's really a package by package you know weight by way zone by zone question as to what the best carrier solution is and in some cases, there might there might still be another carrier that had the.
Better solution sell by fell so it's not it's not that you'd be half is going to be your default across all packages and all weights in all zones, it's going to be that those rates are available.
For the customers by default so they don't have to go out and get.
Rates directly from you asked and so Theres no theres no really start up there's no startup friction in terms of getting those customers and shipping with GPS.
Okay got it and then on Medpac.
Can you talk though.
Sort of.
What you're seeing in the U.S. I know you in the past you've talked about adding some sales efforts. There what was that one of the prime drivers of gaining that new customer.
Do you think that helps you leverage in attracting more sort of U.S. based customers and then.
In the past you've talked about some weakness in men APAC from Brexit and with that sort of still ongoing just what are you seeing there any UK.
Yes, so yes, I mean, the answer is yes, the one of our key.
Well murky synergies we identified on is that hey met APAC is really.
For the European rest of the World organization, and you know at that point stamps Dot com and our family of solutions are really us and so together, we have the ability to kind of cross pollinated across the.
Across the world and so one of our key initiatives initially met APAC really had zero penetration in the U.S.
And there's some several organizations here that make a ton of sense, they should be using met APAC, but they haven't so we have a.
Sales team of 100 people.
We were able to take the meditech solution and bring that end to the so the sales team. So they could initiate conversations with customers and so it's a long sales cycle. So it's taken some time, but we've seen some nice traction and we had a big customer win here this past quarter.
It gets us excited about the strategy continuing to to accelerate going forward.
I think in terms of Brexit.
We have seen some slowdown in spending.
In the UK.
With relate to some of the uncertainty.
Around Brexit.
You know.
And Meditech does have a significant UK business so.
Yes, certainly has had some impact.
However, I think it the big remains strong and their position is strong. So ultimately we don't really see that as a long term issue. It's more just a short term.
Short term situation.
Great. Thank you.
Thank you just to remind her to ask a question press star one.
Our next question comes from Tyler would with Northland Securities. Please state your question.
Thank you.
As it trying to size up the opportunity of partnerships with other carriers in the future can you kind of help us get us feel for how much of the volume going through those multi carrier products is with carriers other than you PS or U.S.P.S.
Just ballpark.
We haven't disclosed that I mean, I think any in the U.S. you know that big three carriers, you Sps Essen and Fedex really make up the vast majority of the market. So when we talk about that 2 billion in volume that we already have running through our multi carrier properties that relates to.
Carriers outside the U.S.P.S. just like the market. The vast majority of that is going between between essence products.
I think it's important understand though that given the changes that really precipitated our strategic move with regard to broaden your carrier relationships.
The carrier World is getting much more competitive and you're finding historical relationships, where one carrier really kind of owned to get and segment. Those lines are blurring two and two it to a certain extent as they start.
Pivoting to respond to competitive threats in the marketplace for their own businesses. So those things are change I think to Kens point obviously.
Our exposure currently to non US just carriers is is relatively small relative to U.S.P.S., but those things are changing and.
And obviously our platform slides.
An exceptional platform for carriers will work and go after that that business. So.
I think it's one understand.
The addressable market, which is the imported your initial question.
That something that is evolving given the kind of dynamics as well.
One more comment.
One more thing I would add which as you know I think maybe.
Another way to go after question.
Historically, our business has really been primarily focused on you know postal service and now as we move into this.
This world with kind of more of a focus on diversifying amongst the carriers in the us.
As you look at the size of the market just in the U.S. shipping.
I think you Sps is about 20 billion, but then you add them altogether all three in its about 100 billion. So we're talking about a fivex.
The increase in our addressable market just within the U.S. When you look you look international on I think the worldwide shipping is about 260 billion. So significantly larger number so part of the reason why we've really looked at diversifying our business both in the us what as well as internationally as you know we've we've really gained a significant puzzle.
Mission already represent a high percent.
Have you Sps is overall business and were more than a third of their priority mail more than half their first class. So in order to continue to grow our business, we have to really look at.
Larger market in the U.S. as well as internationally.
Thanks, that's helpful and then one more.
You've talked about the the revenue impact of volume shifting from U.S.P.S.T. EWP, yes.
But didn't to the extent that you can talk about it due to confidentiality of the partnerships.
What's the what's the margin impact of that volume shifting from U.S.T.S. to U.P.S. under the new partnership.
Thank you.
Yes, I appreciate the question that's something we unfortunately, just can't get into given confidentiality. So.
We unfortunately, just given the comp down she can't speak to relative margins on different carriers. This point, well I would add on it which is which as you know it's not just this partnership isn't really just about shifting volume and and it's about both shifting volume per to the extent to that makes sense to the customer with these new attractive disk.
Thompson wave surcharges, but also it it opens up a new market that we aren't really able to to capture today.
With our current offerings. So packages that don't go you Sps.
Because the rates are services aren't competitive.
Yes, yes really tend to be more competitive.
In the smaller packages residential delivery.
And so when we've gone into accounts, where they tend to have larger packages heavier packages.
Going to.
Going to businesses, where residents as it it's really been more challenging to have to get to gain that account to win that account. So.
This also opens up the market for us and it allows us to go after brand new volume that we haven't been able to do before.
I think thats all for me congrats on the partnership.
Thanks.
Tyler.
Thank you, ladies and gentlemen, there no further questions at this time I'll turn it back to management for closing remarks. Thank you.
Hi, Thanks for joining us today and as always if you have any follow up questions you can contact.
Right.
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Thank you. This concludes today's call all parties may disconnect have a great evening.