Q4 2020 Stamps.Com Inc Earnings Call
[music].
Greetings and welcome to the stamps Com fourth quarter 2020 earnings call.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
If anyone should require operator or technical assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Suzanne Park, Vice President of Finance.
Mr Park, you may begin.
Thank you Amit.
On the call today are CEO, Ken Mcbride, and CFO, Jeff Carberry agenda for todays call is as follows well review the results of our fourth quarter and fiscal year 2020 will discuss the continuing impact COVID-19 or COVID-19 is having on our business.
We will discuss the progress and go forward plans on our various business initiatives in the U S. We will discuss our progress and plans on our various initiatives internationally and then we will discuss our metrics, our Q4 and 2020 financial results and our outlook for 2021.
You listen to today's conference call. We encourage you to have our press release and per revenue, which includes our financial results as well as metrics and commentary on the quarter, our comments and responses to your questions reflect management's views as of today February 2021, only and will include forward looking statements, including statements regarding our.
Fiscal year, 2021, management's expectations for our future financial and operational performance and other statements regarding our plans prospects and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results.
Factors, which could cause actual results to differ materially from sales in the forward looking statements and created significant and unprecedented uncertainty regarding the business and economic impact of the ongoing COVID-19 pandemic as well as the impact of efforts of governments businesses and individuals to mitigate the effects of such pandemic on the company.
Its customers its carrier and integration partners in the global economy.
Which makes it particularly difficult to predict the nature and extent of impacts on demand for our product and services, making our business outlook subject to considerable uncertainty the company's ability to successfully integrate and realize the benefits of its past or future strategic acquisitions or investments.
Company's ability to diversify its relationships with carriers and the impact of foreign exchange fluctuations as geopolitical risks.
Additional information about factors that could potentially cause actual results to differ materially is included in today's press release, and our filings with the SEC, including our most recent.
Sure.
From 10-K, and subsequent filings we undertake no obligation to update forward looking statements, except as required by law further during the course of today's call. We will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to but not as a substitute for or in isolation.
From GAAP measures.
Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures is included in our press release provided.
Our press release Investor metrics in SEC filings are available on our Investor Relations website at Investor Day staffs Dot Com now, let me hand, the call Kevin.
Thanks, Suzanne and thank you for joining us today.
During the fourth quarter and throughout fiscal 2020, we saw a very impressive results and our financial and business metrics. The results. We announced today included many highlights including total fourth quarter revenue of 206.0 million that was up 28% compared to the fourth quarter of 2019.
Non-GAAP adjusted EBITDA of $74 million.
Up 44% compared to the fourth quarter of 2019.
And we reached a significant milestone of over 1 million total paid customers the highest in the company's history.
We're very pleased with our financial performance and it continues to demonstrate the strength and relevance of our best in class Global multi carrier E Commerce solutions.
During this year 2021, the company and our team will reach a significant milestone of 20 years under current leadership.
And I wanted to use that anniversary to reflect briefly on.
On the impressive evolution, we have experienced.
Our services from the late 19 nineties focused on PC postage originally developed as a convenient internet based alternative to a mailing postage meter for small businesses.
Over the years, we have made various minor and major shifts in our business strategy.
For example in 2008, we began to rapidly move into shipping and E. Commerce as we began to build and later require solutions for E Commerce and.
In 2018 in 2019, we expanded to international markets with meta pack and we added UBS as a key carrier partner.
We've been successful with our homegrown solutions and our acquisitions in shipping and E Commerce.
However, the breath of our position in global ecommerce, because sometimes not always fully appreciated.
I wanted to highlight a few metrics.
Globally, the volume of shipping done by our customers is impressive.
During 2020 our.
Our customers purchased over $8 billion and U S Postal service shipping in the U S.
And they purchased an additional $5 billion and U S shipping from all of the other carriers, we support in the U S such as EPS, Fedex DHL and others.
During 2020, we had more than $5 billion in shipping volume outside of the U S.
In our med <unk> business group.
In total during 2020, our customers all over the world sent approximately $3 5 billion packages, representing a total dollar value of shipping done through our various software products and solutions worldwide of more than $19 billion.
Okay.
Within the over $8 billion in packages that we generated in the U S for the U S. Postal service, we represent over one third of all U S. Domestic priority mail packages and we are over 40% of all U S. Domestic first class packages.
We own seven significant market, leading brands worldwide stems dot com and <unk> ship station shipping easy ship works ship engine and meta pack.
And within those seven solutions, we integrate with and support over 500 E Commerce partners, where our solutions are embedded into our integrated with a partner software solution. For example, we integrate with all of the major selling channels and shopping carts, such as Amazon ebay Facebook Google Etsy.
Walmart Shopify Big Commerce, Wix, Magenta square will commerce and others.
We integrate with all of the major small business ecommerce tools and accounting software such as Quickbooks net suite SAP <unk>.
The illusion channel advisor and others, we integrate with fulfillment solutions, such as fulfillment by Amazon ship, Bob and others, and we integrate with ERP and CRM solutions warehouse management solutions and transportation management solutions and.
<unk> E Commerce generally the strength of our partnership network for shipping is unmatched.
We support over 45 package carriers in the U S and a total of more than 300 packaged carriers worldwide.
Our goal is to bring the best carrier to the to the customer and having such a broad library of carriers allows us to tailor the solution for each individual customer so that they may optimize their business.
We estimate that the gross merchandise value or GMB shipped by our 1 million customers worldwide for 2020 was over $200 billion.
And it increased by more than 45% versus 2019.
When you look at our total GMB processed as a percentage of worldwide ecommerce our position in the global E Commerce ecosystem is significant.
Various third party reports estimate worldwide E Commerce GM the at four three trillion.
Thus the GMB associated with shipping done through all of our collective software represents an estimated nearly 5% of worldwide E Commerce.
In the U S.
We estimate that the total GMB shipped using our solutions is over 15% of total U S E Commerce.
Over the past 20 years, we have amassed a significant number of assets in worldwide E. Commerce shipping that have put us in a great position to continue to succeed as all of the rapidly changing global E Commerce trends continue to unfold.
With that now let me discuss the continuing impact of COVID-19 pandemic is having on our business.
COVID-19 continues to have a significant positive impact on our business with significant growth in both customers and shipping volume.
U S E commerce activity remained elevated throughout the fourth quarter and we benefited from that.
For the fourth quarter as a whole our customer acquisition was up approximately 60% year over year.
We saw strength in our acquisition channels with our total cost per acquisition dropping by approximately 15% year over year.
And our customer acquisition continues to remain strong to date with January 2021 up more than 50% year over year.
This accelerated customer acquisition resulted in the highest number of paid customers in the history of the company by the end of the fourth quarter. We reached an all time high of 1 million paid customers.
As new starting businesses or existing E. Commerce shippers look for an alternative to go into to a post office or carrier retail location in order to process. Their packages that led many of these businesses to our solutions.
This is because of the incredible brand awareness across all of our properties and the flexibility our online solutions provide.
And it's because of the significant financial savings that we can offer to customers. For example, postal service customers save up to 40% off USPS retail prices for packages and with our EPS partnership. We are currently able to offer up to 62% off Ups's standard daily rates.
We continue to analyze whether the new customers are just using our solutions as a short term measure or if they will stick with our solutions longer term.
While we expect that certainly there will be a mix of both types of behavior. Our continued analysis of customers acquired during the COVID-19 pandemic to date continues to be positive for.
For example, the conversion rate of trial customers to paid customers remains debt.
Paid customers remaining after that trial period is consistent with our pre COVID-19 conversion rates.
We also continued to see a favorable mix of new E commerce shippers versus customers that are primarily mailers.
We would note that during the fourth quarter customer churn did increase by approximately one 3% to four 5% versus the three two we saw in Q4 of 2019.
The increase was primarily driven by churn in the mailing segment of our customer base.
We're seeing churn rates in our shipping customer segments that are consistent with our pre COVID-19 churn rates.
Furthermore, the churn uptick was expected amongst the mailing segment of customers given the large magnitude of customers acquired during the second third and fourth quarters.
Because the normal pattern of customer churn is that it is meaningfully higher in the first year of the customer lifecycle.
Nothing within the churn uptick appears to be anything other than ordinary customer behavior.
And we continue to believe that customers. We are acquiring now are of equal quality to those that we acquired before the COVID-19 pandemic.
We did see a decrease in the mix of churn customers coming from shipping, which highlights the underlying strength in the business driven by shippers and our primary focus on acquiring these types of high quality customers.
We will of course continue to monitor and analyze customer trends given the unusual circumstances, we are in right now.
In addition to the strong fourth quarter, New customer acquisition. We also saw continued strength in the total dollar value of shipping labels. For example year over year total dollar value of growth of shipping labels printed for our U S carriers in the fourth quarter was up more than 50%.
This continuous prior 2020 trends in the second quarter of 60% in the third quarter of growth of more than 50%.
We also saw year over year dollar value growth of shipping labels for the USPS, specifically in the fourth quarter of more than 30% ex.
Extending trends from the third and second quarters of more than 40% and more than 50% respectively.
Yes.
Our customers have largely been strong beneficiaries of increased E commerce consumption.
As end customers have shifted to purchasing online versus at retail locations during the pandemic.
The strong performance in our package volume demonstrates that our solutions are working very well to address the needs of our customers.
With that let me give a quick update of our EPS partnership in late 2019, we announced a new partnership with UBS, which allows us to offer attractive EPS package discounts to our customers.
The discounts are currently as much as 62% off Ups's standard daily rates.
Discounts are available through our products without any necessary existing customer shipping volume that is frequently required to qualify for discounts when working directly with UBS.
This new solution went live in our ship station products with a subset of customers in Q4 of 2019 and during 2020, we released it to the majority of our customers across all of our U S brands.
Accessing EPS is very simple for our new or existing customers with an automatic account and discounted rates available immediately when the customer first begins to use the product.
Strong adoption of the EPS solution continues along with positive growth in the dollar value.
Shipping labels that are customers purchased under this new partnership.
After increasing by over 45% sequentially during the third quarter. The dollar value of UBS labels under the partnership increased by more than 85% sequentially in the fourth quarter.
UBS and stamps dot com have become great partners and we're very excited to continue to build on the success that we saw during 2020.
Let me now discuss some of the 2021 initiatives in the U S market.
First we will further expand our shipping solutions through new partnerships and new marketing programs.
During 2020, we announced new partnerships with sales force SAP, Alibaba, Google shopping and others and we plan to continue our partnering activity in 2021.
We also recently partnered with and produced a television advertisement with our customer Wolfgang puck for his Wolfgang Puck home online store.
EPS recently featured our new partnership solution and an advertisement. So we are beginning to work with them more closely on marketing programs.
We will scale, our sales and marketing in 2021 with a focus on acquiring high volume shipping customers across a variety of industries and to continue to utilize and test a variety of marketing channels and partnerships.
Second we plan to expand the features and functionality of our solutions, particularly in the multi carrier shipping part of the business.
<unk> E Commerce shipping industry is very dynamic and we invest a significant amount of our development resources in continuing to innovate in the market.
In December 2020, we launched a new in car delivery options for merchants and customers.
With the in cart delivery options merchants can add multiple delivery options to their websites checkout process, including free flat rate and live rate options from any of their connected carriers.
The new capabilities give customers to control and flexibility to select the best shipping option.
For 2021, we're also focused on continuing to deliver new and enhanced capabilities such as more sophisticated third party logistic support.
Drop shipping brand track branded tracking returns and pick up drop off and more sophisticated mobile application solutions.
Third we plan to continue bringing innovative and cost effective solutions to U S customers that are sending packages to other countries.
Continuing to see growth in our global post solution, where we offer customers access to discounted international shipping rates through our private label carrier partnerships.
In November 2020, we launched global post plus smart safer service, which provides a fast low cost international shipping alternative for high volume shippers that fulfill 30 or more packages per day includes prepaid duties and taxes for parcels going to the UK, Mexico and Canada.
We expect to continue to drive these and other international package solutions solutions for our domestic customers in 2021.
Now, let me discuss some of our continuing international expansion efforts.
In 2021, we will continue to invest in our marketing our business development and product development efforts and significant ways.
First for ship station and ship engine, we're developing partnerships carrier relationships product enhancements and marketing strategies in our targeted markets.
We've continued to see strong adoption of ship station in Canada, the UK and Australia share.
<unk> stations International fourth quarter, 2020 shipments increased by over 150% year over year versus the fourth quarter of 2019 for fiscal 2020 as a whole ship stations international shipments increased.
By 150% year over year.
We continue to expand our support of new languages in January of 2021, we announced that we are now supporting Spanish on the ship station platform.
We also launched French language support interest and during 2020.
Our French version of ship station is live in Canada. We're live in a beta version in France, where we expect to expand more broadly in the coming months.
New and existing ship station users will now be able to log into their account and choose their preferred language selecting from English French and Spanish.
We also continue to actively partner on the International front for example, during 2020, we announced a new partnership with Mercado Libre, the largest online commerce and payment ecosystem in Latin America. The forest for the fourth largest marketplace in the world with more than $600 million Latin American shoppers.
We also announced new carrier relationships with can par expressed in Canada.
Look post quantum post in la.
Post <unk> and France and others.
For 2020, we expect to continue to expand our international footprint.
Currently marketing the solutions in the U K, Australia, Canada, and France during 2021, and we expect to expand our footprint to include New Zealand, Ireland in Mexico.
And others.
We are actively evaluating and planning for a launch of our solution in many other countries across the EU and other regions around the world.
Second in our Med <unk> business, we continue to make progress in both customer acquisition and technology, including re architect the technology platform and releasing new features.
During a record fourth quarter shipping volume season, <unk> technology platform provided industry industry, leading levels of warehouse uptime label print speeds and availability.
We also saw encouraging adoption rates for new products, such as our returns portal and our delivery tracker.
Early adopters of the new delivery tracker product reported meaningful call Center contact productions.
And large E commerce retailers continue to invest in E commerce customer experience, particularly in the post ship space and Med Pac continues to align with retailers core strategy to improve customer satisfaction levels on delivery and returns.
As a highlight from last year, Hello, fresh chose <unk> delivery manager to lead its shipping services across the UK, Germany and Austria.
We also signed a significant multi year deal with a world leading luxury fashion brand last quarter.
We remain extremely excited about the future of our company and the enormous value proposition of our E Commerce technology and service offerings. Our goal is to position. This company for the best long term outcomes as the myriad of E commerce worldwide trends play out.
The value proposition, we provide is very strong driven by the strength of our multi carrier properties, the breadth and depth of our partnerships and integrations the size and strength of our U S and international sales forces and the scale and success of our marketing programs.
We're proud to service over 1 million customers that purchased and printed more than $19 billion and shipping labels last year and use those labels to ship over $200 billion in <unk> around the world.
We've always managed our company's cost structure carefully and as a result, we have a very healthy cash flow and very strong balance sheet with approximately $450 million in cash and investments and no debt.
We are experiencing a large acceleration in our business demonstrating the significant brand awareness, we have created for our market leading solutions.
And we are in a great position to continue to execute our business plans and to continue to be the global leader in multi carrier E Commerce shipping in 2021 and beyond.
With that now I'll turn the call over to Jeff.
Thanks, Kevin.
I will now review, our fourth quarter and fiscal year 'twenty financial results.
All of our efforts today includes non-GAAP measures.
A reconciliation of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release and in our metrics on our industrial sales.
Total.
<unk> was $206 zero in Q4 that was up 20% year over year for vaccines.
And the 758 zero interest.
Full year 2020, and that was up 33% versus 2019.
Total revenue, excluding <unk> was $190 3 million in Q4.
Q4 range.
And what's the current $95 9 million for fiscal year 2020.
34% versus 2019.
The growth in revenue in the fourth quarter and for the year was primarily driven by strong margin growth attributable share online E commerce purchasing.
It's been driven by the worldwide COVID-19 pandemic.
The year over year revenue growth from the fourth quarter for the fiscal year was negatively impacted by the termination of the customized postage program from June of 2020, resulting in no revenue from that area in the second half of the fiscal year 2020.
Mailing and shipping revenue was $206 zero in Q4.
32% year over year versus Q4 19.
$746 1 million in fiscal year 2020.
4% versus 2019.
Mailing and shipping revenue looking better.
$190 3 million in Q4, 34% year over year.
For Q4 vaccine and with 684 million in fiscal year from 'twenty.
Financing.
We estimate that total revenue derived from our shipping customers grew approximately 35% year over year.
Mid 80% range as a percentage.
Total core revenue.
We also estimate that our total revenue derived from mainland customers as a percentage of total revenue was in the mid teens and grew year over year.
As well.
Mailing and shipping gross margin was 77, 8% in Q4 versus 34, 7% from Q4 dollars 19.
77, 9% from 2020 versus 74 from <unk>.
2019.
Mailing and shipping gross margin was positively impacted from a strong growth in revenue associated commerce journey.
The Medisoft business gross margin was 68% in Q4, 66% fiscal year 2020.
Yes, the year over year increases in our Q4 and fiscal year 2020 operating cash operating costs.
Primarily driven by growth in sales and marketing and R&D related to customer acquisition and strategic investments to support innovation and long term growth.
As Ken mentioned, we continue to aggressively scale of operational investments to drive our domestic and international business initiatives.
Yes.
Non-GAAP operating income was $73 <unk> in Q4 that was up 45% earlier Q4 banking.
Almost $263 6 million fiscal year 2020.
66%.
19.
Adjusted EBITDA was 74.0 in Q4 that was up 44% year over year Q4 financing.
And those $257 6 million in fiscal year, 2020, and that was up 63% versus financing.
<unk>.
Adjusted EBITDA margin was 35, 9% from Q4 two.
Two zero percent Q4 margin.
And was 35, 3% from fiscal year 'twenty.
Versus 28, 7% financing.
The increase in adjusted EBITDA margin was driven by strong revenue growth.
A more favorable mix of higher margin services.
Non-GAAP adjusted income per fully diluted share was $4 13 status in Q4, six non non-GAAP tax benefit rate of 11 <unk> expense.
And was up 95% year over year versus $2 12 per share before line team.
Non-GAAP tax expense rate from $2002 four.
Non-GAAP adjusted income per diluted share was $12 51000 2020 based.
Based on a non-GAAP tax expense rate.
One percentage.
118% versus $5 73000 financing based on a non-GAAP tax expense rate of 34.
Sure.
Yes.
Fully diluted shares from the EPS calculation.
So the non for Q4 $2019 1 million for 2020.
$17 9 million per key for our team at <unk> 17 per.
Financing.
Let's now discuss our copper metrics, our total paid customer metric was one 3 million, which was up 30.
35% versus Q4 19.
It represents the highest number per customer from our company's history.
This was driven by strong new customer acquisition.
SaaS by an increase income from China.
Our fourth quarter churn rate was four five percentage.
From about 130 basis points year over year Scott.
Discussed earlier, the increase was primarily driven by churn in the maintenance segment.
Non preferred.
As expected given the large magnitude of recently acquired customers and the normal dynamics customer churn and with churn, especially from a maintenance segments.
Higher from the first year.
Our fourth quarter our growth.
And.
If you want a SaaS.
<unk> was down 2% year over year, driven primarily by strong growth in our mainland customers.
Total volume.
Who are generally much lower arcos from both of our shipping costs.
Total fourth quarter USPS postage printed was a record of $2 4 billion up 30% versus the fourth quarter of 2019.
And total fiscal year 'twenty 'twenty USPS postage was $8 6 billion up for success.
Financing.
But hopefully this gives us the metric includes both higher growth shipping volume and traditional non package mail volume.
Historically, we've seen that it required to non average megawatts.
This year from growth in this area for.
For the fourth quarter for total fiscal fine line.
Now discuss our cash debt and uses of cash.
And in Q4 with $444 million in cash and investments, which was up 54 million $390 million at the end of Q3 of 2020.
The increase in cash and investments was primarily driven by strong operating cash flows from cash from option exercises.
It was partially offset by share repurchases changes net working capital.
We continue to have no debt outstanding.
During Q4, the company repurchased approximately 96000 share at a full cost of approximately $28 million.
Our current reported <unk> plan that was approved by our board of directors in August 2010.
Were completed earlier this month.
On February 20.
One is approved $60 million.
Through August of 2021.
Let's now turn it over to develop.
Okay.
The COVID-19 pandemic contributed meaningful financial benefit for our business in 2020, driven by an increased need for online Inc.
And from a more generally.
Yes.
Our growth.
Precedented worldwide E commerce growth.
However, as we look forward to 'twenty, one a myriad of projects.
Troll and the resulting effects those factors could have on our business are very difficult to accurately forecast.
These factors include one such a global.
Macroeconomic risks associated with the ongoing Amanda.
And the degree of moderation.
Krishna.
Shifting back to an office based working environments and the overall changes those things could have on global ecommerce.
But given the circumstances, we do not feel that we are.
Accurately forecast the range of potential outcomes.
Put them forward in 2021, and thus we are not providing any specific numerical guidance for kind of 'twenty one revenue at this time.
And moving to a specific guidance, we will provide some more general thoughts to help investors think about certain dynamics that might affect our business in 'twenty 'twenty one.
The financial benefits in subsequent COVID-19 to our business started with the large scale implementation of safer at home restrictions around the middle of March 2020.
And we continue to see strong year over year growth in our business throughout the remaining nine months of fiscal 2020.
However, with no reported growth.
We saw a slower quarter.
For example, total cost per acquisition was up approximately 200 per SaaS or second quarter of.
2020, approximately 80% in the third quarter of 2020 kind of product.
In the fourth quarter of 2020.
Also the total U S dollar shifting volume process across all carriers that we've reported.
U S was up over 60% in the second quarter over 50% from the third quarter and over 40% from the fourth quarter of 2020.
During January of 2021, we continue to see a strong growth.
Yeah.
The growth seems to have split events versus the pace, we saw during fiscal 2020.
Customer acquisition in January of 2021 was up approximately 50% year over year and total U S dollars shipping volume and process across all carriers, we reported in the us.
It was up over 40% in January 2021.
As we move into the second quarter of 2021.
We also began to face very tough comparisons given the strong growth again in March 2020.
In light of significant number of macroeconomic and other COVID-19 related factors, we outlined earlier it would not be unreasonable to consider a very wide range of potential outcomes that may include a negative year over year revenue growth rates once we reach that point of the year.
In terms of operating expenses, we plan to continue to invest in strategic initiatives that Ken discussed.
Our long term growth.
Accordingly.
We would expect our operating expenses in 2021 day increase by as much as 20% or more.
The growth in operating expenses reflect the annualized.
The net investment in R&D.
An additional arm.
Second in 2021.
Additionally growth in operating expenses is heavily dependent on new customer acquisition, which resulted in 2020 share.
<unk> per dose.
As a result, we anticipate that our adjusted EBITDA margins are likely to moderate from the elevated levels. We saw in fiscal year 2020.
Despite the significant near term risks and uncertainties. We remain very excited about the longer term secular trends should ecommerce our global market opportunities the strength and defensibility of our technology platforms and a strong value proposition of our service offerings.
While we would potentially expect shorter term volatility we believe the longer term fundamentals of our business operating very attractive long term financial profile.
And with that we'll open the call for questions.
Ladies and gentlemen, we will now be conducting a question answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is from your question in queue.
One moment, please moving now poll for questions.
Yes.
First question comes from George Sutton with Craig Hallum. Please proceed with your question.
Yes.
Thank you.
First I really would like to say thank you Ken for providing the volumes are all of them into the market.
That's the first time, you've ever done that I found that to be very helpful and good perspective.
As you looked into the.
Providing are not providing guidance for 2021 aside from the tough Q2 to Q4 comparisons which are fairly obvious is there anything else fundamentally that you're specifically concerned about that that might not be obvious.
Okay.
Thanks for the question.
There is nothing that I think is not immediately obvious I think the reality is that covered.
Has a and have obviously shown a very large impact on not just our business, but broadly commerce and.
The myriad of factors that impact globally, commerce and us in particular.
Our subject to those COVID-19 related variables that are just impossible to forecast and therefore, what they create for us is really.
And a reasonably wide range of entirely possible outcomes to make guidance effectively not very useful for anyone. So I think the bottom line is that the level of risk.
And the associated ranges.
Really net guidance.
Not particularly relevant is an extraordinary difficult this year for us just given those uncertainties.
Yes, I'll just add George I mean, I think that.
The point.
Point of view I expressed at the beginning I think the punch line of that was.
We represent we process.
Merchandize value the shipping from merchandise value of 15% of all U S. E. Commerce. So clearly we're very heavily tied to the outcomes in E commerce and what the growth may be there and I think that.
It is challenging to forecast that you guys are probably in a better position to forecast it and we are.
Being able to sit in a position you are as an analyst and so I think it's challenging for us.
In 2021, given the magnitude of what happened in 2020, and so I think as a result of that we just decided to.
To not be the ones that are trying to forecast the E commerce business to allow our investors to do that for themselves.
So what if we were to look beyond 2021, obviously, a tough compare in 'twenty, one, but 'twenty two and beyond we are still are clearly driven by the secular growth of E. Commerce and you also have an international opportunity that's pretty significant can you discuss growth rate potential beyond 2000.
'twenty one.
Yes, I mean, I think likewise, it's tough for us to kind of really talk about if we can't talk about what happened. This year, it's even more challenging to talk about the out years, but I certainly think that we're in a great position. If you look at worldwide. As you mentioned, we have a lot of Greenfield if you will.
<unk>.
For expansion as we as we go out there there really is no other solution out there like a ship station or a stamps com solution. When you look across the world, It's really wide open and as we go into these new markets.
In Europe, and Australia, and other areas, we're finding that our solution is resonating.
With these new customers and so we're kind of just getting started in that area. We have a lot of plans and we're aggressively going after it but worldwide as a percent of E. Commerce, we're only about 5%.
And as a percentage of shipping worldwide were.
Just a few percent so I think that.
I think that we have a huge.
Run way here with international that we will be able to to access in the out years, and certainly that will that will start to be a lot more meaningful in 2022 and beyond.
Finally, if I can your scaling up to quote you your sales and marketing effort in 2021.
I would assume given how conservative you are that is not to do anything other than grow the business can you just provide perspective on the thoughts behind the scaling up of the sales and marketing.
Okay.
Yes, sure I mean, I think we saw like aside from all the things we've talked about and the effects of our business. We also saw a lot of interesting things that happened in the marketplace in terms of advertising television inventory things that were available companies like travel companies in entertainment companies pulled back from.
From their advertising and that allowed us to go in and get some really cost effective rates for some of the advertising.
So I think we as we evaluate we'll continue to look at that and we certainly are earning a huge ROI on our on our investments right now wed like to continue to be aggressive.
On spending where it makes sense.
Yes, the only thing I'd add George is obviously very well and we took a very quantitative and analytical approach to sales and marketing. So we keep a very close eye on all the myriad of challenges, we utilized and obviously, we have and the number of those cases, the ability to modulate that spend.
Virtually real time with a lot of those jobs. So I think we obviously are going to be.
Just shifting how we spend our money, we're looking to balance both the opportunities as well as the risks.
On the sales and marketing spend to Ken's point, where it is.
Thats it for growth, but obviously, we have the ability to modulate that based on what we see real time with with how the economy shakes out with Covid and other factors.
Understand thank you.
Thanks George.
Thank you.
Our next question comes from Kevin Liu with K <unk> Company. Please proceed with your question.
Hey, good afternoon guys.
First question here just in terms of the outlook for 'twenty, one and I know, there's no specific guidance.
We think about the different levers that you guys have obviously you are coming into the year with an extremely large paid subscriber base much higher than what you came into 2020 with.
So is it fair to assume that so long as E. Commerce is generally growing in the U S and abroad.
And that your current existing arrangements with your various partners those are relatively stable, but it's really just kind of volume dependent.
The extent there is growth in E. Commerce are you guys.
See some commensurate benefit.
Yes, I think obviously when we talk about our performance in 2020 with regard to acquisition under the nature of those customers and how they.
Continue to look both on a pre and post cohort basis as as consistent all of those things speak very well for 'twenty 'twenty one obviously.
To your point, though volume is really the uncertainty and as you can see COVID-19 has a huge impact.
<unk>.
The nature of E commerce, and specifically, how it manifests for us in terms of shipping labels.
So certainly.
<unk>.
Scenarios, where you're a moderation in growth you can also see scenarios where.
Growth potentially go down as people allocate capital to other things as the economy opens up so it just highlights really some of the.
Risks in forecasting 2021, and even potentially in 2022 based on Covid related variables I think at the end of the day, you're going to see us obviously.
Correlate with ecommerce.
But I think you have to understand some of those broader dynamics well that manifest themselves for us financially in terms of E commerce generally, but how people are purchasing.
<unk> comps and the impact on shipping volume for us.
Yes.
Understood.
A lot of.
Positive E commerce trends as it relates to Covid. The one area that is kind of mixed for most companies has been kind of the global cross border shipments I was wondering if you could talk a little bit more about.
Tell your cross border business performed in 2020, and then what your outlook for growth is here in 'twenty one.
Sure so from a from a cross border standpoint, that's obviously an area that is developing very quickly.
And an example of where with our technology platforms. We are always pushing to be on the cutting edge of of those developments and the needs of our customers. So cross border gets extraordinarily complicated with things like.
Sales and use tax and import duties and controls and regulations around what you can and can't import and forms and things of that nature.
What we're doing obviously as the world becomes more and more globally interconnected is ensuring that we make that process as efficient as humanly possible for our customers both domestically in the us as well as abroad. So that's certainly a highly evolving area and one that we do have our eye on closely as we.
As we prioritize R&D and we see it as a very attractive opportunity for us again as the world becomes more interconnected globally.
Got it and then just lastly.
Expectations for operating expenses to grow as much as 20% or more this year can you talk about to the extent those kind of investments you need to make in order to expand your international.
National business.
This is more kind of the variable spend for customer acquisition and to the extent Youre CPA electric let's start to get back towards higher levels of debt.
<unk> seen historically, how comfortable are you continuing to spend at this rate.
I think I'll start with the last part of the question. What's the CPA is they were down 50%, 15% year over year in Q4.
But even if we saw CPA as back as they were kind of pre COVID-19 there were still a very attractive ROI.
As it relates to the spend per opex.
Obviously in R&D, it's principally head count expense and.
And then sales and marketing is a combination of discretionary as well as head count expense.
A lot of that increase is related to international efforts and there. We are very early on and tapping extraordinarily attractive opportunities, which we believe to have very high rois in the longer run but to be clear. We are early on so we are our ability of the business effectively from scratch internationally for that kind of low to mid <unk>.
<unk> E commerce merchants, whereas a matter of fact as going after the large preeminent omni channel retailer.
So.
We're making investments that we feel are extraordinarily attractive in the long run.
But in terms to be able to modulate that modulate that.
I would bear in mind.
The way, we think about that as a lot of those are obviously investments for a multi year framework.
As reported sales and marketing obviously, if we saw for example.
Something like a global recession.
As a result of Covid, we can certainly modulate back on that in terms of head count as well as modulate back on the sales and marketing and spat. So.
We're not going to spend recklessly.
But a portion of that spend obviously a good portion of that is head count related to drive long term multi year opportunities force internationally. So.
Might see.
Even with with.
With some downside risk in the shorter run the Covid you might see us still spend pretty aggressively, especially on the head count stuff that drives the multiyear investments.
Great. Thanks for taking the questions and good luck to share in 'twenty one.
Thanks, Kevin Thank you Kevin.
Thank you.
Our next question comes from Allen Klee with National Securities. Please proceed with your question.
Yes, Hi Ahmed Maxim.
The.
On the international how do you think about the progression there.
That you hope to get from.
Getting paid directly from.
From the shipper to to what you do in the U S where you can get on the volumes with the carriers.
How do you envision how that could potentially play out over the next year or two.
Yes, it's certainly a part of our goal is as we go out into the world and we look at carriers in particular.
That those carriers are going to like in the U S. B interested in accessing our customer base and that we will be able to.
Effectively get a revenue share.
For for that activity.
I think that the.
The vast majority of or actually all of our customers effectively other than.
<unk> hundred our U S customers right. So we have 1 million customers in the U S and so that that customer base is extremely attractive here and now today and so we were able to do partnerships, we've been able to do partnerships with.
With me dreams carriers.
We have a Rev share partnership effectively with USPS and with EPS.
And with others. So internationally, we're still I think we're still up and comer.
So it's going to take some time to kind of build that customer base as we go into these new markets. We've seen incredible growth I mean, I think we mentioned that we saw 150% year over year growth.
For international shipments.
With ship station in particular, however, that's off a small base and we're early in these markets or are complex.
In many ways more complex than other companies have faced as.
As we go in we have to.
Worked through lots of relationships with a lot of the carriers there they are.
We support over 300 carriers worldwide, there's really only three in the U S that are that are the vast majority of the market. So.
Each market is more complicated we have to go into business development relationships and so it's a matter of building the market presence the customers in those markets and then we believe we'll be able to.
Do more revenue share arrangements with the carriers in those markets.
Thank you.
You've built up a nice war chest of cash on your balance sheet.
I'm curious how you think about M&A.
I guess, there's probably a lot of interesting things out there, but the prices may not be where we are.
Where you would want but what would you.
Generically would you.
Are you looking at.
Well, yes, I mean, I think youre right in pointing out that certainly the valuations are.
Our high in the market.
If you look at 20 years.
The management team having run this company we did five.
Alright, So we're I guess, we're averaging one every four years.
And I think within that says we're pretty picky.
Wed like to hit home runs when we do acquisitions and we think we've done that.
And the vast majority of the activities we've done so we're picky.
M&A can be very distracting for the for the company for the management team.
And so we want to make sure when we do it it's the right company the right fit the right culture, the right valuation and we're certainly actively.
Searching as we always do.
But at this point, obviously, we haven't been able to find something that meets our criteria.
Okay. Thank you so much.
Thanks Alan.
Thank you.
There are no further questions at this time I would like to turn the floor back over to management for any closing remarks.
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Yes.