Q1 2020 Earnings Call

Maintain desirable economic sports products and services and Monetizers customers transactions us carriers the impact of the ongoing Hogan 19 pandemic and the efforts of governments businesses and individuals to mitigate the effects of such pandemic on company, it's customers, that's carrier and integration partners and the global economy, the company's ability to say.

<unk> integrate and realize the benefits of its past or future strategic acquisition or investments accompanies ability to diversify as relationships carriers and the impact of foreign exchange fluctuation, the geopolitical jokes, which could cause actual results to defer materially from those in the forward looking statements or detailed is filings with the securities and exchange coming.

<unk> made from time to time buy stamps dot com, including an annual report on form 10 K. for the fiscal year ended December 31st 2019 quarterly reports on form 10, Q. and current reports on four eight k.

Down dot com undertake no obligation to release publicly any revisions to any forward looking statements to reflect events or circumstances after the daycare or to reflect the occurrence of unanticipated events.

By natural results, we discussed on the cold today include non gap financial measures in the first quarter of 2020 gotten that didn't come with 16.5 million and gap that income her fully w. to share with 90 ones that.

Are non gas financial measures exclude the following first quarter item 10.7 million of noncash stock based compensation and 5.6 million of noncash amortization expense of acquired intangibles debt issuance costs.

Are non gap financial measures include 8.9 million of additional non gap income tax expense in the first quarter are mailing and shipping numbers include service revenue product revenue and insurance revenue and do not include any revenue from customized postage. Please see our first quarter 2020 earnings release and metrics posted on our Investor website for.

Conciliations them or not gap financial measures to the corresponding gap measures now let me have the call over okay.

Like Suzanne and thank you for joining us today.

On today's call will cover several topics will discuss the impact that cope with 19 has had on our business.

We'll discuss the progress and go for plans of our various business initiatives in the U.S., we'll talk about our progress and plans on our initiatives internationally.

We'll discuss some recent developments in our customized postage business.

And we'll talk about some of the employee in corporate programs, we've implemented in light of covert 19.

And then Jeff, we'll discuss our metrics or Q1 financial results in our guidance for the remainder of 2020.

So let me begin by discussing the overall impact that cover 19 pandemic is having on our business today.

So far the cover 19 pandemic has resulted in a significant positive impact to our new customer acquisition and.

And a significant increase in the volume of packages that our customers processed using our software.

Particularly since mid March when many companies and <unk> individuals began working from home and sheltering in place.

For the first quarter as a whole acquisition was up almost 50 per cent you every year.

While our cost per acquisition dropped dramatically.

The surgeon acquisition started to meaningfully accelerate in the last two weeks of the first quarter.

During the month of March in particular, we saw an increase of over 100% in customer acquisition versus the same month last year.

We've continued to see similarly strong opposition trends today and the second quarter. The month of April was up over 300% you every year for acquisition.

The acquisition surge in the last few weeks of the first quarter.

Resulted in a significant sequential increase in our paid customers for the first quarter.

The largest number of customers added sequentially ever as a company.

Outside of our acquisitions we've done.

The pay customer number increased by 27000 to reach 777000.

Some factors for why we're seeing a large number of new customers coming to our service include.

A large number of people are looking for an alternative to go into the post office or two other retail locations in order to do their mail and their packages.

Are incredible brand awareness that we have built up over the last 20 years across all of our properties.

Meant that we were the big beneficiary of that shift online.

Well the questions. We expect our investors to have is whether these new customers are just using our solutions. During the current work at home environment or if they will stick with our solution longer term.

We would expect that certainly there may be a mix of both types.

But generally speaking we believe that many of these customers will discover the superior way of doing their mailing packages and we'll stick with it as long term and never go back to the hassle of doing their packages in other ways like retail locations.

They also now understand how much they can save using our great online discounts.

Or customer save 9% on their first class letters paying only 50 cents versus the normal rate 55 cents.

We stayed customers up to 40% off U.S.P.S. retail prices for packages.

And with our new U.P.S. partnership were able to save customers up to 62% off U.P.S. is standard daily rates.

The savings add up quickly and cover our monthly service fees once a customer reaches a small amount of packets volume.

We found another challenge is always getting people to just try our solutions and then once they do they love it.

So we're hopeful than many of these new customers will become longterm users of our solutions.

But we will of course monitor customer trends carefully given the unique circumstances, we're in right now.

In addition to the surgeon new customer acquisition. We also saw a strong increase in the total shipping volumes that we process through our software across all of our major carriers and all of our brands.

Our customers range from very small domestic businesses to very large multinational businesses uncover virtually every industry.

As such we have customers, who have been strong beneficiaries of increased e. commerce consumption, driven by coping 19, as well as customers who have.

Unfortunately had to suspend operation.

We've also seen strong recent growth in domestic shipping trends as more consumers adopted to work from home model and as <unk> E. commerce activity picked up with consumers shopping more online.

Overall, the total U.S. dollar volume, we processed across all of the carriers, we support it in the U.S. meaningfully accelerated starting in the second half of March and that trend has continued into April.

March saw a nice double digit growth and then during the month of April we have seen growth north of 50%.

The dramatic increase in package volume indicates that are solutions are working very well to address the needs of our customers.

Again, the question is whether the surgeon volume is a longer term trend or just the transitory phenomenon that remains to be seen.

We do believe that one's customers use our solutions more regularly.

They discover more and more sophisticated features that can really save them a lot of time and they discover the great discounts that we offer which couldn't really say them a lot of money.

With those two big value propositions, we expect that many customers will continue to use our solutions more regularly for the long run.

Now, let me give a quick update on R.M.P.S. partnership late last year, we signed a new partnership with U.P.S., which allows us to offer attractive U.P.S. packets discounts to our customers.

The U.P.S. package discounts, we are able to offer customers under our new partnership.

Are the discount or as much as 62% off U.P.S., a standard daily rates and the discounts are available through our products without any necessary existing shipping volume that is frequently required to qualify for discounts when working with U.P.S.

In other ways.

Within R.E. Commerce, Multicarrier properties, including Shipstation shipping easy and Shipworks, we've always provided a U.P.S. shipping capability.

However, the new U.P.S. partnership allows us to more actively and effectively drive customers and shipping volume to U.P.S.

New solution way why than Shipstation with a subset of customers last year in in the fourth quarter, we roll it out more broadly to a larger number of shipstation customers during the first quarter.

Also began rolling it out to shipping easy Shipworks stamps dot com and India branded solution customers during the first quarter.

Within the stamps dot com and India branded products offering U.P.S. shipping is an entirely new capability that we just began to rule out to new and existing customers.

Within those products, we previously had exclusivity arrangements with the U.S.P.S. that are now no longer in place.

We're now able to offer stamps dot com and a d. should customers U.P.S. shipping solution side by side with U.S.P.S. services.

Accessing U.P.S. is very simple with the default account.

Discounted rates available immediately when the customer first begins to use the product.

We're seeing a rapid adoption of the U.P.S. solution and a very steep growth trajectory and the volume of packages that we process.

Over the past few months, we have seen sequential month over month growth in excess of 250%.

We would caveat that to say it's early in the growth it's off a relatively lower starting base.

Nonetheless, we're very excited about our new U.P.S. relationship, we expect them to be a great long-term partner for stamps dot com and all of our company products and solutions.

Without let me turn to some of the <unk> initiatives, we're working on the U.S. market.

First we're continuing to invest heavily on growth in the shipping part of the business.

As you know, we devote a large percent of the company's recesses resources to target the E. commerce shippers.

And 2020 M. beyond we expect to continue making the large investments in order to attract those types of shippers to our solutions.

Continuing to increase our investment and all of our channels, including direct sales direct mail traditional media radio television search engine marketing search engine optimization as well as refining our customer acquisition processes through the affiliates department is in the telemarketing that we do in other areas.

Second we plan to expand the features and functionality of our solutions, particularly in the multi carrier should be part of the business.

Calmer shipping industry is very dynamic and we invest a significant amount of our research and development resources and continuing to innovate and I'm marketing.

A goal is to be able to meet the needs of as many customers as possible. So that we can maximize our customer acquisition maximize our average annual revenue prepaid customer or <unk>.

Produce our monthly customer cancellation rates and increase overall customer usage.

For 2020, we're focused on delivering new capabilities, such as more sophisticated third party logistic support delivery options provided in the shopping cart drop shipping branded tracking returns pick up and drop off and we're continuing to enhance our capabilities in our mobile apps.

[noise] third were we plan to continue bringing innovative in cost effective solutions to U.S. customers that are sending packages to other countries.

As you recall <unk> during 2017, we launched a new international shipping initiative called Global post, where we offer customers access to discounted international shipping rates through our private label carrier partnerships.

As a reminder, these are programs where companies can do a portion of the work for the carrier and receive a discount on their postage rates.

During 2018, we added the global advantage program, which is a great bundles customer solution built on top of the global post carrier that includes customer benefits such as free package pick up free insurance upgraded delivery speeds enhance tracking simpler customs procedures in other benefits.

We're seeing nice growth in this area and we expect to continue to drive these solutions 2020.

We would also note that now we offer DHL express and U.P.S. as international shipping options, they're very attractive for this customer base.

[noise] without let me turn to some of the plans for expansion outside of the U.S.

Starting with the acquisition of met a pack that we made in 2018, we began a path of expanding our business from a domestic only U.S.P.S. focus model.

Towards the global multi carrier E. Commerce shipping solutions company.

Over the past several years, we've entered into a significant number of partnerships for the international market. During 2018 to 2019, we undertook efforts to begin test marketing or shipstation product in the U.K., Canada in Australia.

During 2020, we expect to ramp up our marketing our business development and our product development efforts in the international markets.

First for Shipstation and for ship engine, we plan to continue to develop partnerships carrier relationships product enhancements and to continue to market are solutions in our target countries.

Our international shipments through Shipstation.

We're up 87% you every year versus the first quarter of 2019.

During 2020, we expect to improve our capabilities to support further international expansion such as language and currently translation systems.

And we are currently expecting to launch a solution in France as our first non English speaking market.

We also expected further enhance our cross border capabilities with features such as duties in taxes and duty isn't taxes customs documents.

Added to our ship engine product.

Second internationally in our met a pack business, we continue to make progress in both customer acquisition and technology, including Rearchitect detecting the technology platform.

And driving new innovations.

[noise] during the first quarter would continue to develop a strong U.S. pipeline of deals that are household names.

And met a pack really had no presents in the U.S. before we acquire them, so bringing that a pack to the U.S. with our U.S. sales teams because one of the synergies we'd I, we've identified and the deal.

And met a pack, we continue to when new customers in Europe, Although we would note that the current covert environment has caused some slowdown in the process of closing some of those deals.

We also continue to do development work designed to allow us to connect 450 met a pack carrier services to the Shipstation International platform.

Finally, an international during 2020.

We continue to plan to invest development resources into building a simpler international E. Commerce multi carrier shipping solution based on the stamps dot com branded web solution.

Internationally, we're planning to replicate R.U.S. strategy, where we go to market with two main brands.

A simpler stamps dot com like web solution for up and coming E. commerce customers.

And more powerful and complex shipstation solution for more sophisticated e. commerce customers.

We're working on an international version of the stamps Dot Com web solution during 2020.

What's that someplace, we expected again, some test markets marketing of this amp stamps solution to some selected international markets.

We've begun to developmental these solutions and we have the gun planning our marketing approach as we prepare to enter the new Marcus.

[noise] with that now let's discuss some recent developments we've had in our customize postage business.

You recall the customize posters is a <unk> a form of U.S.P.S. posters that allows consumers to turn digital images into valid U.S.P.S. approve postage, which we offer under the photostamps branding.

Recently received notification from the U.S. postal service.

<unk> they've made to end the customize postage program on June 16th 2020.

The decision by the U.S.P.S. followed the recent filing of a lawsuit against the U.S.P.S. by a third party alleging first amendment religious expression harm as a result of U.S.P.S. regulations restricting all religious images.

We believe this decision by the U.S.P.S. was unnecessary not well considered but.

It's difficult at this time to know if we will be able to bring the program back in the future.

We certainly.

Back to keep trying as we believe it's a fun product that brings a lot of joy and creativity to the mailing world.

However, financially it is not material contribution to the bottom line is in the low single digits.

<unk>.

Annually. So the so without let me turn to the.

Some of the corporate programs were doing related to cobin 19.

As a company we're deeply committed to doing our part as a corporate citizen to help every way we can.

In April we launched a new program to provide our software to all U.S. senior citizens age 65 and over without our monthly service fee. During the current covert 19 pandemic crisis.

This pandemic has impacted the lives of the senior citizens of this country more than any other group.

Our hope is that senior citizens in regions all over the U.S. will benefit from this program by allowing them to safely mail and ship all of their letters and packages.

Without leaving their homes.

We are also exploring several additional ways to get involved and help the world as we all face this terrible pandemic together.

Let me now discuss some of the human resources aspects of our.

Cope with 19 effect on our company.

We're deeply committed to the health and wellbeing of our employees.

We took early and aggressive steps to make sure that our employees were as safe as possible and we moved to accompany wide work at home model. The week March 9th with all of our over 1300 employees worldwide.

Because their business is building and marketing software on the Internet. We were in a very good position to be able to make the change to an all remote work model early without a significant impact on productivity.

As expected there were challenges we needed to work out with these operational changes.

The issues were somewhat exacerbated by the fact that our customer acquisition surged in March more rapidly than we've ever seen before.

However, our employees are showing amazing resilience working through the challenges quickly and effectively.

We've actually increased our headcount an overall fulltime equivalent hours to absorb some of the demand for our service during the Covitz situation today.

We expect that we can continue to be very effective as an organization under the new all remote approach for as long as necessary in order to keep our employees safe.

We're lucky to be in a position, where we can be patient and we can wait until employees can safely return to the office.

But also like to let everyone know that I was one of the unlucky ones to contract Cobin 19, I tested positive for the virus back in mid March and I experienced several flu like symptoms for a short period of time, I quarantine myself and I recovered in my own home every.

Covered quickly and had been back and fully engaged in our business since that time.

During my illness, our company to Dot and this would be in any way as you can clearly see from our first quarter financial results in our metrics.

Our thoughts and prayers go out to all the individuals and their families and friends that have contracted the virus.

Particularly the more than one quarter million individuals that have lost their lives worldwide in this pandemic.

I would also like to express my deepest gratitude to all those health care workers and first responders, who are doing so much for all of us.

Very grateful for your sacrifices during this challenging time.

We remain extremely excited about the future of our company and the enormous value proposition of R.E. Commerce technology and service offerings.

Our goal is to position this company for the best long term outcome as the myriad of worldwide trends play out.

Value proposition, we provide is very strong driven by the strength of our multicarrier properties the level and number of our partnerships and integrations the size and strength of our national sales force the scale in successive our marketing programs.

We are very season management team I personally had managed this company now for 19 years, including through two major recessions. The 2001 to 2003 recession post dotcom bubble and the 2007 to 2009 financial crisis.

We've always managed our company cost structure very aggressively and as a result, we have a very healthy cash flow and a very strong balance sheet with over $215 million in cash and investments currently on our balance sheet.

We would know that as a result of our strong cost focused culture. During the 2008 to 2009 financial crisis 2007 to 2009 financial crisis, we were able to continue to execute as a company without doing any layoffs.

We continue to execute well and generate a half healthy cash flow throughout that entire recession. In fact, we continued to repurchased stock throughout the entire period at very attractive prices.

Are strong business track record and our experience also gave us comfort to continue to provide financial guidance today.

More recently, we're experiencing a large acceleration in our business reinforcing the significant brand awareness that we have created for our market leading solutions.

When a great position to continue to execute on our business plan throughout 2020 and beyond.

We expected continued to get stronger as an organization <unk> and continued to solidify our position as the global leader in multi carrier E. Commerce shipping.

With that now altering the call over to Jeff.

Thanks again.

Well now or do you are first quarter 2020 financial results to discuss number crunchers up today includes nongaap financial measures [noise].

[noise] S.M.'s Rod reconciliation of non got financial measures to the corresponding got measures out.

Things release, <unk> Investor website.

Total revenue was 151.3 million on Q. why that was up 11%. Your every year versus Q1 up 19.

Total revenue excluding that a pack was 137.5 million and Q1 that was up 12 per cent. Your every year versus Q1 of 19.

The girls and revenue and the first quarter was primarily driven by strong growth in or merely and it should be in business, which in the United States benefited from strong domestic shipping gross Amazon stuff by international shipping declines both of which we believe are attributable to the ongoing covert 19 pandemic responses to it.

Revenue was also positively impacted my strong growth, although coast and global advantage program.

Maybe we should be revenue was 148.3 million and Q1 and that was up 12%. Your every year versus 219.

Mailing and shipping revenue, excluding that Uh Huh, what was 134.5 million I. Q1, and that was up 12%. Your earlier you want them 19.

The growth a mailing and shipping revenue was driven by increases and paid customers and are pro as well as broken up a little Huston global vanished programs.

We estimate that total revenue derived from or something customers grew at a low double digit rates, you're every year as a percentage of total revenue into one was approximately 80%.

[noise], we estimate that revenue derived from our shipping customers and Q1 exclude amount of huh.

<unk> at a low tunes rapes and as a percentage of total revenue was approximately 70%.

We also estimates that our revenue derived from our so whole mailers as a percentage of total revenue wasn't high tunes and grew your every year at a high single digit rates.

Mailing it shouldn't gross margin was 74.8% and Q1 versus 74.9% into one of 19 [noise].

[noise] mailing the shipping gross margin was positively impacted by growth and rubber name associated with our traditional terrier business, including U.S.P.S. and U.P.S., which was offset by the gross national offerings, including the goal of Venice program, which can have lower <unk> have a little gross margin profile that or other sort of see revenue components.

<unk> was approximately 63% Q1.

We had to your over your increases and R.Q. when operating costs, primarily driven by growth in R., and D. and sales and marketing.

Related to strategic investments to support innovation long-term gross.

Mentioned, we continued to aggressively scale or operational investments to drive or international business strategies.

Non gaps operating income was 14.4 million and Q1 of seven per cent year over year versus Q1 19.

Adjusted EBITDA was 41.5 million Q1, and that was up 6% earlier versus Q., let them 19.

Adjusted the but the margin was 27.4% and Q1 versus 28.8% and she went up 19.

For decrease in adjusted EBITDA margin was attributable to hire operating expenses associated with our 2020 initiatives as previously discussed and to a lesser extent not enough.

Nongaap adjusted income per fully due to share was one dollar mortgages sounds and Q1 based on a non-GAAP tax expense rate of 40% and was up 7%. Your every year versus one dollar and 23 cents per share and see what <unk>.

<unk> <unk> rate also a 40% [noise].

[noise] fully loaded shares is used in the U.P.S. calculation was 18.2 million for Q1 versus 18 point to zero million for 219.

It's now discuss our customer metrics.

Our total pay test, where I'm effort was 777000, which was our highest number of paid customers and our company's history.

Is driven by the strong customer acquisition customer churn.

First quarter trial was 3.0%.

And that was down 0.1% you every year.

Our first quarter Arthur was 63.60.

Arthur was up 6% your every year doesn't buy growth and the shipping focus areas of our business.

Total first quarter. Your best guess posted printed was 1.6 billion that was up 1% versus the first quarter plant Hmm.

But <unk> metric includes both hired rough shitting volume and traditional non package mail volume, which continues to see a steady decline consistent with the long term trend of decline email usage in the U.S.

[noise], let's now discuss our cash debt and uses a cash.

We end up Q1, with 216 million and cashing investments.

The 9 million from 156 million at the end of Q. for 19.

The increase in cash and investments was primarily driven by the following.

Strong operating costs cash flow.

Changes networking capital and cash from option exercises.

And I was partially upsets [noise].

By Sherry purchases and a schedule debt repayment.

Drink you one I'm going to require principal repayment 3.1 million, resulting in total debt under dependent agreement. Excluding does she wants costs 47.4 million.

[noise] drink you won the company repurchased approximately 80000 shares at the total cost of approximately 9 million.

Our current share repurchase plan was approved by our board of directors on February 13th of 2020, <unk> 24, 2020 and runs through August of 2020.

On probably 20 years or 2020, our board of directors adjusted repurchase <unk> of the plan in response to increase markets all activity decoder tune.

How's <unk> this year, we ever purchased approximately 20 million.

Dollars.

Under the current plan.

[noise] now turning the guidance.

As we discussed last quarter our guidance reflects the following.

The new multi or U.S.P.S. reseller agreements, the new U.P.S. partnership, which we rolled out in the first quarter to the majority of our customers.

Across all our properties.

Had expected increases in operating costs related to our continued investment in the U.S. and abroad.

Or if they've got and also reflects the following them first.

It's been a termination of certain customized postage products effective <unk> this year and seconds.

Cautious outlook on the code 19 related impacts cost requisition charm and shipping volume growth.

That's kinda discussed although recent trends have been strong likely related to E. commerce activity driven like from the 19.

We believe there is significant risk that broader macroeconomic witness could weigh on our business for example.

We have some customers have a global Denis program.

Cool recently suspended operations in light of covert nights soon.

And as that products as California across basis, and has a relatively lower margin their suspensions will disproportionately impact revenue.

We will continue to monitor our customers and or something volumes closely.

And now onto specific quantitative guidance.

We are maintaining our previous fiscal 2020 revenue guidance range of 570 million to 600 million.

We expect our shipping revenue will be in a range of approximately flat up in the mid single digit range.

Expect harm mailing revenue derived from or several mailers will be approximately flat you every year.

And we expect a customized posted revenue will be eliminated beginning in June of this year as a result of anticipated termination of the program by the U.S.P.S.

[noise], we expect operating expenses to increase in 2020, reflecting the annual stopped opposition investments, we made threatening I tune and additional stresses investments, we anticipate making him 2020 around both are you us and our international efforts.

We continue to expect fiscal 2020, adjusting the document a range of 135 million 255 million.

Guns implies a full your adjusted EBITDA margin in the low to mid at 20% range.

We continue to expects nongaap tactics amounts will be approximately 40% of non gap crew tax income for 2020.

Our full you're 2020 us out of tax rate could differ from our current estimates based on a number of factors.

We continue to expect <unk> 18 points or a million in 19.5 million 2020.

We continue to expect Siskel 2020, Nongaap adjusted income per diluted share to be in a range of $4 to $5.

And finally, we continue to expect to capital expenditures to be approximately 2 million to $4 million can 2020.

And what's that <unk>.

[noise]. Thank you at this time will be conducting a question and answer session.

He would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate airline is in the question cue.

Pressed star too if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star case.

Our first question today comes from George Sutton up crank Hallam. Please proceed what's your question.

[noise], Thank you and Ken my sincere congratulations on making it through the coven experience [laughter]. Thank you, it's nice to be done [laughter]. That's a it's a new badge of honor for you. So it is relative to the 27000 customers can you give us any break down.

To the opposition of those relative to you're multi carrier.

Options versus a the stamps dot com property.

[noise] yeah.

So we we don't give a breakdown delineating acquisition between our properties. So much of the say, though given the performance of female. He does it was a combination of both a mailing customers one should be customers on the ship inside obviously, given the volume growth you know, it's a combination of of new customers required as well as we believe increased volume associated with.

Covert 19 related effects of people working from home and doing more E. commerce consumption.

So one of the dynamics in the quarter that was very interesting is the Amazon of course to protect essential services turned off a lot of their options for their third party sellers and I'm curious as bad have a specific impact that you saw on some of those new customer numbers.

Yeah, I mean, Amazon definitely changed a lot of things are the first quarter as a result of what's happening right now and prioritize the.

The essential goods for <unk> for shipping so.

You know we may have seen some some move over we did we certainly saw Amazon I'm sure you saw the news that they had pulled out of the shipping with Amazon capabilities to that new thing that they were they were launching and the new third party logistics program. They had pilots running in in Los Angeles.

New York, Chicago, and and a couple other cities and so they decided to halt that it wasn't clear from their announcing whether that was temporary or permanent but we we we worked with those cellars that we're using that solution to move them to other carriers and so there was really know disruption there.

You know some of the Amazon services that were discontinued areas.

We probably didn't receive new customers as a result of that it was more just shift and volume.

I'm from you know existing Amazon use those channels to to other to other solutions within our within our Multicarrier properties.

I understand well actually for me you gave the U.P.S. volume's, which was a fascinating and and I I would assume fairly significant for them I'm curious what kind of attention that's been given potentially by other partners to aren't enjoying those.

Volume increases and then also what if any has the reaction been from the U.S. postal service seen some of those volumes move over.

Thanks.

Yeah, I mean, we we haven't really disclosed this specific volumes. We just wanted to get everybody kind of a flavor of how things are going and so the you know the we've we just now started to launch it I think more broadly and we saw the the big Upticking volumes with you know the the months of of a March and.

<unk> up about 250 per cent monto, Vermont, so they're growing very rapidly, albeit from a small base and certainly that's you know that's raising eyebrows in in the shipping industry I think.

The the the information is not public until 20 minutes ago. So.

And it's not really you know meant to be like a full disclosure that's not something we plan to do going off <unk> I'm going forward.

But we're super excited about it it's clear that the U.P.S. solution is resonating very well with our customer base. It's clear that we picked the right long term partner and the discounts are offering are are terrific and and the way we set it up to the ease of signing up for their solution. It's literally like a one click thing as you sign up for.

For stamps Dot com, So and then it's just to pull down. So you can pick between U.P.S. and U.S.P.S., it's very very simple very easy. It uses the same account. So so we using what's called we call. It the wallet. So all of your all of your you know money on deposit when you go to print to label.

It goes out either U.S.P.S. or U.P.S. from one a cat. So there's no extra accounts, there's no it's really as simple as a gas and so we've seen since we launched that we really seen a big big up tick in a big uptake on that by the customers and really were just still getting going we really just launched mean shipstation.

Launched back in early really December.

But we'd been you know kind of rolling it out, making sure everything works, well and customers like it well and so we and we really didn't start to launch across the other properties until until later in the first quarter. So I would say there's you know that's that's that's just the tip of the iceberg in terms of what we can see going forward. So you know I think that we we see ya.

P.S. is a great long term partner and I think vice versa, and so we're talking to very senior folks there and they're excited about continuing to find ways to make the partnership better and better.

May I turns a reaction of other carriers why I guess, we'll have to have to see where that goes because like I said, nobody really understood how well it was doing until we just talked about at 20 minutes ago.

Okay. Thanks.

The next question is from Kevin <unk>, Okay. Looting company. Please proceed with your question.

<unk> catching yeah.

Kevin.

That's a question here on U.P.S. Oh, no it's rolled out now caught.

<unk>.

You could talk at all in terms of this kind of the penetration rate and let your thing. That's fine is it's still a baseball number of instead of taking advantage or anything that it was a case in terms of Hell, it's contributed to volumes.

Yeah. It's it's still really early you know we we just got a going I mean, we like I said, we launched it and Shipstation.

And Q. for and we just started to rule out more broadly we launched it to a segment of that that customer base. We just wanted to make sure. It worked well in the customers it adopted it well and that there weren't any any glitches and so we were cautious in terms of how we rolled it out to Shipstation and then we really didn't start rolling it out.

Across the rest of the properties until very recently really I would say late in Q. in key one so we I would say like we're just getting started and we've seen you know really really great adoption like I said, we we set it up it couldn't be any easier to sign up for a U.P.S. account, it's literally as you're signing up for.

Service you just you know you just agreed to the you agree to let a U.P.S. a cow be created in there. It is and I'm like I said, we have we have a unified payment system. So all of your money gets stored in one place, which we call. The wallet and then all of the different carriers that you use like U.P.S. and U.S.P.S. <unk>.

Deducted from that same balance so you just have to manage one balance.

And it's literally like a pull down where you can select between the carrier. So it's just it's easy to Gadson you know I think for for anything that's over two pounds. It clearly makes sense to consider U.P.S. over U.S.P.S. as a more cost effective solution.

And you know even for some of the smaller packages with some of the discount save offered a into our customer base, they're seeing some nice nice volume, we're seeing nice volume move over and we're happy to you know we're happy to work with U.P.S. as a great longterm partner and we're excited and I think vice versa.

But it and I was hoping it talk a little bit about just how global posting a global advantage program in fact, it at all like some other restrictions.

<unk> terms of being able to deliver to other countries right now it doesn't sound like we'll have to go out to suffer they'd all it just curious how efficiently. How you guys are managing through that.

Yeah, there's I mean, the <unk>, we haven't seen really I think a big impact to the number of countries that they've suspended deliveries to weren't like significant size.

We have seen some customers like Jeff mention some customers that have.

No have stopped.

Really operations and so some you know I think we have.

We talked about the volume increased and we've seen a dramatic increase but within that we've seen an even bigger increase a a v. commerce. The smaller uses in some larger users who have.

Who have suspended or changed or you know for various reasons. It really just depends on what industry or in right. I mean, if you're if you're selling essential goods. Your business is probably taking off and if you're selling.

Luxury items or other things that people aren't really looking to buy right. Now then your business is not taking off or might be going the other direction. So we kind of have both things going on within our customer base and certainly global post is one of those solutions that some of our it tends to be something of a larger customers use more and so we have seen some.

Some folks pulling back from that just because their businesses going you know going that direction.

Oh, They said and then just last week here I know that probably a degree of conservatism from couldn't I came here, but looking at your died and stuff for the four year now Q1 penalty. When your thoughts are quarters, and then on top of that you're still vamping U.P.S.. So we kind of extrapolate that out for the full year would seem like eat already be at the top of your guidance. So.

Is there anything you're thinking travel definitely or like or something <unk> that gives you any <unk> at this point or you simply the thing.

A lot of what's going on in the little.

Yeah, I'm actually question got on so you're right. We are saying strong performance from Q1 and that is continuing into April's 10 mentioned so from a fundamental standpoint things are looking very attractive. However, there is an ordering amount of risk to the broader macroeconomic picture and the impact I could have an aggregate demand, which would obviously potentially have a negative impact.

Even if you commerce trends did persist overlap <unk> could fall and that could that could be on the doesn't know so I think from from my perspective, reaffirming guidance with a a cab out that obviously.

On the one hand things are looking quite good in the short run but that could change very quickly depend on how the economy ships up so I think overall, it's just to.

Maintaining guidance, but with a a pretty conservative caveat that things would or could turn sour if the economy turn sour.

Yeah, Kevin I I would just add that you know I think that more than 80 per cent of companies have now poll guidance. So you know I think that just the fact that we haven't poll guidance, we feel confident and and what we put out there. We've we've managed to these types of scenarios before we managed to to you know the great recession, we started off managing.

Company during the Dot com implosion and.

We are so we know how to do this but we certainly don't want to be in a position where we're getting out ahead of our guidance, we want to be conservative because.

Certainly like things look positive in the world as of right now at least if you're a a stay at home online business. However, you know I think there is concern and and you know we want to make sure we're not going too far in terms of assumptions that this is kinda you know the economy's can continue to churn along <unk> because certainly there's a lot of things out there that.

Concerning just not not for us specifically, but just for the whole world economically and so you know I I would say that in the last 19 years since I've been running the company, we've never missed our guidance and so I don't want to start now and so we want to be conservative mixture, we leave guidance out there. So we can give you some indication.

Hey, we're still confident that we can we can make our numbers and you know, but and not pullback altogether from our guidance, which I think is you know something we don't need to do because of how we manage the company.

Yep.

Well 10 glad to hear you be covered uncle got solid you only know that sounds <unk>.

I think it's Kevin.

The next question question is from Alan Clean up National Securities. Please proceed.

Yes, Hi can you talk about how your.

How your factoring in potentially a higher customer churn rate in your guidance.

[noise] Oh, thank God I I wouldn't say, we're actually factored into higher churn rate into our guys I think that kind of falls within the broader conservatism of maintain rebellions range in light of Q1 results and and again going to mention April did well. So we're not assuming a higher tournament. Obviously, if we did have a higher trend, resulting from you know.

Economic slowness away on the business and that was certainly as as negative way, but so were to be clever not assuming that are numbers currently.

Okay. Thanks, I'm not sure if I Miss it but did you speak to have met a pack perform during the quarter.

We didn't break them out separately, but not a pack you know similar to the U.S., we saw some some improvement versus versus by virtue of the commerce consumption, but obviously there is some slowness in Europe, resulting from bribes as well as from current a virus.

Obviously break out in the fashion.

Separately, it's quite a rational segmentation so those numbers will be there for you.

Yeah, I think we I think what we saw largely was you know like slow down in in new deals.

Because you know clearly people are concerned about other things then you know signing a new agreement, which we think there's just a delay a temporary delayed but on the flip side, we like the rest of our business, our our customers and met a pack offer online solutions and online E. commerce sales.

And so that has seen a list just like just like every other part of the of really of the world wide economy as people kind of stay at home and order more stuff and so we we saw we saw similar nice left in the met a pack business from the from the volume perspective, which is good because that's that's directly tied the volume how we how we monetized the businesses through you know.

Largely through a transaction fee. So we're happy to see that of course, we'd like to see the the deal pipeline start to start to move again, but we're confident that's going to happen. It's just a matter of I've kind of working through this this period of time and.

And then you know in the meantime, we've seen a nice lift from from the from their businesses translating through into our business.

Thank you and as your business so shifted to most of your revenues coming from shipping I know that just looking at paid custom new customers. It's it's trickier to figure out what that means.

Compared to the past.

So I guess, what I'm wondering is out of this large add that you're getting is there a way to think about how that's kind of breaking up between so ho and shipping type customers.

[noise] yeah. So from the from the metric, it's going to be a mix of bolsa <unk> and shifting customers. So you saw the shooting because it's going to grow and and the low teens race and obviously, that's a functional bowls.

[noise], increasing customers on the ship inside as well as increasing volumes from from some are existing customers offset by some declined from the customers who had some unfortunate suspensions, but doesn't <unk>. So I think nothing that you're seeing a mix of those two things you saw small business Soho several business kind of grow in the mid single digit ranch.

You were expecting the business overall for the year when you're from guidance of effectively flat for the here on the so Ho doesn't us. So you wouldn't necessarily <unk> from that that part of that growth on the suicide was related to new customer acquisition.

So we're seen grow from both sides, we're going to see how those customers performing and look at those cohorts and make sure that those customers do <unk>.

After hopefully stay at home orders are lifted for broad segments of the population both domestically and internationally, we'll see how that involves but right. Now. We're we're we're excited by the growth in the customers that come mentioned, we think that those customers once they try our service and co it'd be in the catalyst to try for us they will stick with us largely.

But of course will continue to closely monitored that.

Thank you my last question I I know you you may not be comfortable talking about this but what we're hearing now with the U.S. post office and.

<unk> with our government proposing <unk> <unk>.

Well some comments of you know desires to raise their packaging pricing.

And maybe a new person in charge with the U.S.P.S. <unk>.

How how what's your take on all the time.

Yeah, well, so <unk> certainly a lot of things going on in that world is very.

Active right now I mean, they they certainly have seen hmm I think they've seen a a fairly precipitous drop in their in their male volumes, but then they've also seen a very large increasing their shipping volumes and so they've kind of seems both both aspects of it of course, they they make the the vast majority of their of their revenue.

On or their their profit on the first class mailing. So that's certainly been a an issue for them and they they certainly face some financial challenges you know I think like many many other industries and so they were they were included as part of the cares Act.

They got to 10 billion dollar I guess line of credit increase and so they're negotiating through that I think with the Treasury department as to how exactly that's gonna be implemented and so while there's been some conversations and some things said publicly. It's certainly thing seems like Congress is is very you know behind making sure.

<unk> service does find during this process and they did announced a new postmaster general yesterday, that's going to succeed making Brennan who's retiring after five years as as the P.M.G. and so the new person Lewis. The Joy is now the 75th Postmaster General and so we.

Excited about him he's he's an outsider at first outside or in quite some time.

And he's got a lot of a experience in the logistics and the shipping market. So I think he'll come in with a lot of a lot of knowledge and and he is also I think based on what we know of him then we do know him from prior Empire relationships info.

That we we know and actually folks at work here.

He's he's definitely a person who supports you know <unk> partnerships public and private partnerships.

We believe he's very much behind that as as as you may recall the.

The the task force that they put together report last year on you know at President Trumps a request came out with lots of recommendations and one of the key recommendations. In there was was you know public private partnerships are are important and then and so I think that you know with his.

Bye bye his connection withdrawn from that with the President Tromp and and you know I think that I think that we'll see him <unk> in alignment with those thoughts in that report.

And so that'll be good for US you know but of course, you know we'll have to we'll have to get to know him and certainly be in D.C. a lot talking to him were were huge partner, there's and and and vice versa. So.

You know I think net net we're we're sad to see making go she's been a great postmaster general, but we're excited to to start working with with the new P.M.G. as soon as he takes office, which I believe is in June.

So.

Thank you.

Hmm.

The next question is from Tyler would have Norplant Securities. Please proceed with your question.

That's just one from the is there any color you can get <unk> competitive.

Landscape is changed within the last couple of months, you know with the increase of businesses trying to set up and I might <unk>, maybe seen competitors get more aggressive on pricing are marketing to try and catalog.

Yeah, we haven't really I mean, I think that we you know we spent.

20 years in this industry building the brands and Ah costs, all the brands that we have and we are far and away that most you know prevalent a company out there and we you know we do 6 billion in total postage we do 13 billion worldwide in total total shipping and posted.

Volumes and so I think as this shift as happen from you know from really kind of more of a a retail offline to an online.

Mode of operating by all these businesses and individuals we have been a primary beneficiary of that and so we haven't really seen any any competitive.

Aspects of you know, losing any any in any cases in fact, we probably seen the opposite which is you know as as the strongest company in the industry, where we're getting stronger.

And so are we you know I think that we're we're happy with how things have developed and we really haven't seen we haven't seen much from competitors in terms of changes or prices or anything like that.

I think that's helpful.

Mm.

There are no additional questions at this time I would like to turn to call back Kevin Mcbride for closing remarks.

Thank you very much for joining us today and thanks for the well wishes on my recovery and things are going great as as a as a company. We're excited and we're we're moving forward and I said I feel like we're in a great position organizationally. So if you. If you have follow up questions you can contact us.

Through our Investor Relations hotline and that's that's for a three went out for it to five 830 or just come to our <unk> website, it investor Dot sample dot com and and put it into request and we'll get back to a stop thinking.

This concludes today's conference you may now disconnect Caroline's. Thank you for your participation.

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