Q2 2019 Earnings Call
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Mrs and park. Please go ahead.
Thank you.
On the call today are CEO , Ken Mcbride, and CFO , Jeff Carberry, the agenda for todays call is as follows.
Well review the results of our second quarter 2019, we'll provide an update on elements of our business model and partnership and finally will discuss our financial results and talk about our business outlook, but first the safe Harbor statement.
Safe Harbor statement under the private Securities Litigation Reform Act of 1995. This release includes forward looking statements about or anticipated financial metrics and results all of which involve risks and uncertainties important factors, including the company's ability to successfully integrate and realize the benefits of its past or future strategic acquisitions or investments, including the company's ability to complete and ship its products maintain desirable economics for its products the timing of when the company will utilize its deferred tax assets and obtain or maintain regulatory approval, which could cause actual results could differ materially from those in the forward looking statements are detailed in filings with the Securities and Exchange Commission made from time to time by SAP Dot com, including its annual report on Form 10-K for the fiscal year ended December 31st 2018 quarterly reports on Form 10-Q , and current reports on Form 10-K .
Dot com undertakes no obligation to release publicly any revisions to any forward looking statements to reflect events or circumstances. After the date hereof or to reflect the occurrence of unanticipated events.
The financial results, we will discuss on the call today include non-GAAP financial measures in the second quarter of 2019, GAAP net income was $14.8 million and GAAP net income for per fully diluted share was 79 cents.
Our non-GAAP financial measures exclude the following second quarter items.
9.8 million of non cash stock based compensation and $5.6 million of noncash amortization expense of acquired intangibles and debt issuance costs.
Our non-GAAP financial measures include 7.2 million of additional non-GAAP income tax expense in the second quarter.
Our mailing and shipping numbers include service revenue product revenue and insurance revenue and do not include any revenue from customized postage. Please see our second quarter 2019 earnings release, and 2019 metrics posted on our Investor website for reconciliations of our non-GAAP financial measures to the corresponding GAAP measure now, let me hand, the call over to Ken.
Thanks, Suzanne Thank you for joining us today.
Today, we announced our second quarter results, which include a GAAP revenue of 138.8 million that was down 1% year over year.
non-GAAP adjusted EBITDA of 39.3 million down 38% year over year.
During the second quarter, we continued to make progress in the efforts to diversify from a domestic single carrier business model to a global carrier business model.
We continue to work proactively with the U.S.P. as to drive value for our customers.
As the U.S.P.S. remains a very important carrier partner for us.
We also continue to make strides in our diversification of our carrier relationships.
With international post, including Royal Mail, French post, Austria Austrian post.
Non traditional carriers with our global advantage program.
Our financial results for the second quarter were in line with our expectations in life of our new strategic direction.
Now I'd like to spend a bit of time discussing some of the most recent changes in the shipping industry.
Shipping industry continues to change rapidly the announcements we've seen recently from both shipping industry incumbents as well as other newer entrants into the carrier market highlight the pace of change in the market, which has continued to accelerate.
You P.S. recently made some very meaningful announcements.
They announced that they will be adding Sunday pickup and delivery in order to move to a seven day delivery starting in January of 2020.
They also announced the addition of 12000, new pickup and drop off points for packages in partnership with CBS Michaels and advanced auto parts.
Not dramatically expand their already broad reach.
P. S. Also continues to add more automation to its crown sort centers and to increase its airlift capacity with 44, new wide body jets by 2022.
Likewise Fedex has made several significant announcements and continues to rapidly evolve its business model to more squarely focused on e-commerce .
In June Fedex announced the termination of its air shipping contract with Amazon.
Earlier, this morning announced it was ending its ground network relationship as well, which had stated will allow it to focus more clearly on serving the broader e-commerce market.
[noise] Fedex also announced that it plans to in source the balance of its low cost smartpost business that traditionally utilized the U.S.P.S. for last mile delivery with the goal of increasing its ability to meet the demands of e-commerce shippers and online shoppers.
The next also recently announced the addition of 8000 pickup and drop off points inside dollar general stores by 2020.
The recently the stated that their goal is to be the low cost producer in the e-commerce space for residential deliveries, which of course position positions them directly in competition with the U.S.P.S. as traditional area of strength.
The non traditional carriers and logistics providers continue to evolve and create new and exciting changes in the e-commerce shipping industry.
Amazon continues to expand its shipping and logistics capabilities with the recent announcement of one day Prime service further expansion of its air shipping network investments in newer technologies like electric vehicles to improve the economics of it shipping operations.
[noise] ebay and Shopify, both recently announced new fulfillment services that will launch in the U.S. This year and next year.
And a significant number of new entrants such as Hubert Postmates and to live continues to make progress in their businesses focused on same day delivery.
The shipping industry is showing itself to be extraordinarily dynamic we see ourselves as is very strong driver of value to both traditional and non traditional carriers and logistics providers.
Let me now provide an update on the latest developments in the U.S.P.S. reseller area.
As a refresher for everyone resellers have water called negotiated service agreements or and assays, which are customized negotiated contracts between the postal service and an individual customer or a reseller, which provides discounted rates that can vary based on each agreement.
Companies with reseller and essays come in many forms from companies that are primarily in the business of being resellers to marketplaces like Amazon ebay and Etsy to third party logistic logistics providers like fulfillment houses.
Each resellers and essay allows a reseller partner to buy postage for shipping the package of one rate from the U.S.P. asked and then to resell that postage to customers at a higher rate.
And it's precisely those margins that have created the deep and robust ecosystem of e-commerce companies and partnerships fueling innovation.
We're aware of approximately 125 E Commerce marketplaces software tools small business software solutions order and management fulfillment solutions multi carrier software solutions and other shipping solutions that are in some way participate in a portion of the margins created.
By these you Sps reseller and assays.
The benefits of this innovative deep and robust ecosystem have in our opinion largely accrue to the U.S.P.S. and have driven the U.S.P. asked to be the market leader in ecommerce related shipping.
With phenomenal growth.
Over the past 10 years, the U.S.P.S. has seen a 21% compound growth rate for their total shipping volume through their PC postage and their reseller partnerships.
We discussed at length last quarter, the negotiations that the U.S.P.S. has initiated with certain seller partners of ours.
While these are ongoing negotiations with uncertain outcomes, we have limited visibility given that the negotiations are being conducted solely between the U.S.P.S. and the resellers, we'd like to provide our investors with our current understanding of the status of those negotiations.
Since our last earnings call, we've seen a positive shift in the U.S.P.S. is negotiating position with respect to its reseller partners.
Back in April the U.S.P.S. told some of the resellers that their economics would be decreasing starting in June of 2019.
Recently however.
The U.S.P.S. extended the N. assays of some of our reseller partners at their current margins through the end of 2019.
Do you Sps has also recently engaged in more productive conversations that seem to recognize the value that resellers bring to the post office.
It remains our understanding that the U.S.P.S. intends to decreased margins for resellers in 2020.
But we believe that the latest collaborative conversations are a positive sign.
While we continue to disagree with the U.S.P.S. a strategy of reducing the incentive structures for programs that have driven strong growth over the past 10 years.
We're encouraged by the recent positive shift.
In the U.S.P.S. is apparent approach to this negotiation.
We hope that his discussions continue regarding the complex and rapidly evolving e-commerce ecosystem.
The U.S.P.S. becomes less focused on cutting costs more focused on growing its package business and supporting its very important E Commerce technology partners.
Our goal is to position this company for the best long term outcome has all of these trends play out and to continue to diversify our business.
We have amassed a significant number of assets and worldwide E Commerce shipping.
That have put us in a great position to succeed as all of these rapidly changing global shipping trends unfold.
Worldwide the volume of shipping done by our customers is over 1 billion.
We're currently the largest shipping partner of the U. Sps with $5.5 billion in packages that we generate for the U. Sps representing over 35%.
Other U.S domestic priority mail packages.
We're also we also have significant strengthen our partnership network worldwide with over 450 partnerships, where our solutions are embedded into or integrated with those partners software solutions.
We have the market leading e-commerce , Multicarrier software solutions with Shipstation Shippingeasy and Shipworks.
We built to use salesforce that is over 100 strong they are all highly knowledgeable and shipping logistics software and technology.
We have significant external internal expertise in marketing, where we spend more than 65 million per year.
We have significant technology resources customer onboarding capabilities account management and customer support.
And our acquisition of Medpac has also positioned us to take our Multicarrier strategy worldwide.
Following the business model changes that we announced in February we have had multiple very productive discussions with traditional and non traditional carriers, both domestic and international regarding new and enhanced relationships.
These discussions have been very positive.
They recognize the strong value proposition, we provide driven by the strength of our multicarrier properties the level, a number of our partnerships and integration for size and strength of our national Salesforce and the scale and success of our marketing programs.
Overall, we build an extraordinary company with incredible assets and amazing workforce, we're exceptionally well positioned to continue to drive our organization in this new direction. We're confident we will become the global leader in Multicarrier E Commerce shipping.
With that now I will turn the call over to Jeff.
Thanks, Kevin.
I will now review, our second quarter 2019 financial results.
The discussion of financial results today include non-GAAP financial measures.
As John described a reconciliation of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release and in our 2019 metrics on our Investor website.
Total revenue.
Was 138 million 0.8.
In Q2, and it was down 1% year over year versus Q2 of 18.
Total revenue excluding about APAC was $126.3 million in Q2 that was down 10% year over year versus Q2 of 18.
The decrease in revenue in the second quarter was driven by the elimination of view Sps Commission revenue.
Offset by the inclusion of met APAC revenue and by growth in our global Vantage program.
Mailing and shipping revenue was a $135.6 million in Q2 and that was up 1% year over year versus Q2 of 18.
Mailing and shipping revenue excluding about APAC.
Was 123.2 million in Q2.
And that was down 8% year over year versus Q2 of 18.
The growth in total mailing and shipping revenue was driven by the inclusion of met APAC revenue and growth in our global Vantage program and was offset by the elimination of you Sps Commission revenue.
We estimate that revenue derived from our shipping customers was approximately flat year over year and as a percentage of total revenue in Q2.
It was in the high 70% range.
We estimate that revenue derived from our shipping customers in Q2, excluding met APAC declined year over year at a low double digit rates.
And as a percentage of total revenue was in the high 60% range.
We estimate that our mailing and shipping revenue derived from our several mailers as a percentage of total revenue was in the high teens and grew year over year at a low single digit rates.
Mailing and shipping gross margin was 75.3% in Q2 versus 81.9% in Q2 of 18.
The decrease in gross margins was primarily primarily attributable to the elimination of Usbs Commission revenue.
It also was negatively impacted by our continued increase of our international offerings, including our global Nash program.
These programs tend to have a lower gross margin profile than our other service fee revenue components.
The gross margins were also negatively impacted by the inclusion of met APAC, which under US GAAP generated gross margin of approximately 65% in Q2.
We had a year over year increase in our Q2 operating costs, including sales and marketing R&D and DNA, primarily related to strategic investments to support the strong growth and innovation in our mailing and shipping business and due to the inclusion of medevac.
non-GAAP operating income was 37.8 million in Q2 and that was down 39% year over year versus Q2 of 18.
Adjusted EBITDA was 39.3 million in Q2, and that was down 38% year over year versus Q2 of 18.
Adjusted EBITDA margin was 28.3% in Q2 versus 45.6% in Q2 of 18.
The decreases and adjusted non-GAAP operating income adjusted EBITDA and adjusted EBITDA margin were primarily attributable to the following.
The elimination of Usbs Commission revenue.
Lower gross margins associated with the scaling of our international offerings offerings.
Higher operating expenses associated with our shipping related investments.
And the inclusion of met APAC, which has again lower gross and EBITDA margins.
non-GAAP adjusted income per fully diluted share was $1.25 cents in Q2 based on.
A non-GAAP tax expense rate of 40%.
And that was down 54% year over year versus $2.75 per share in Q2 of 18 based on a non-GAAP tax expense rate of 16%.
Fully diluted shares used in the EPS calculation was $17.8 million for Q2 and $18.9 million for Q2 of 18.
Let's now discuss our customer metrics.
Our total paid customer metrics was 742000, our churn rate was 3.4%.
And our ARPU was $60.96.
For the second quarter.
Paid customers were up 1% year over year.
Churn was up 0.2% year over year, but broadly in line with the churn we have seen over the past several quarters.
And ARPU was flat year over year.
As we discussed last quarter, a segment of our higher volume customers continue to receive our technology solution without our customary monthly service fee.
Which with the elimination of our Usbs Commission revenue.
Results in some of those customers being excluded from our paid customer accounts.
The exclusion of those customers from our paid customer count accordingly impacts are paid customer metric churn metric and ARPU metric.
Additionally, our ARPU metric benefited from the inclusion of met APAC revenue in our financials. This quarter and also benefited from growth in our global Vantage program.
Total second quarter USGIF postage printed was $1.6 billion and that was up 4% versus the second quarter of 2018.
Total USGIF posted printed.
That metric includes both higher growth shipping volume and traditional non package volume.
Related to mail, which continues to see a steady decline.
Let's now discuss our cash debt and uses of cash.
We ended Q2 with $110 million in cash and investments, which was down $1 million from $111 million at the end of Q1.
The decrease in cash and investments was primarily driven by the following.
Share repurchases.
Changes in networking capital and a scheduled debt repayment.
And was partially offset by strong operating cash flow.
During Q2, we made a required principal repayments of 2.6 million, resulting in total debt under the credit agreement, excluding debt issuance costs of $56.2 million.
During Q2, the company repurchased approximately 296000 shares at a total cost of approximately $20 million.
On March Eightth Tonight, 2019, our board approved a $60 million share repurchase plan, which was to expire in September of 2019.
On may 1st of 2019, the board of directors adjusted their purchase parameters of the plan as discussed last quarter.
And on July 20, Nineth of this year the board of Directors approved an extension of the current plan through February 2020 from its prior exploration in September of this year.
To date, approximately $30 million has been purchased under that plan.
Now turning to guidance.
As Ken discussed today, U.S. guess negotiations with our reseller partners are ongoing and we have limited visibility into those negotiations.
It is our understanding that some of our reseller partners have received extensions of their current agreements through the end of 2018, while others have not yet received extensions and whose margins could decline in the second half of 2019.
We have therefore refined our guidance to reflect our current understanding of the contract margins of our reseller partners for this year.
We expect fiscal financing revenue to be in a range of $520 million to $560 million, which compares to our previous guidance of 510 million to $560 million.
With the elimination of USGIF Commission revenue and the expected decrease in revenue earned through some reseller revenue sharing arrangements.
Our shipping related revenue is expected to continue to decline year over year.
We expect mailing and shipping revenue derived from our Soho mailers will be approximately flat year over year.
And we expect our customized postage revenue to be down between 30, and 40% year over year.
We expect operating expenses to increase in 2019, reflecting the strategic investments we made in 2018 and the additional investments we anticipate continuing to make in 2019.
As well as the inclusion of Medpac in our financials.
We expect fiscal 2019, adjusted EBITDA to be in a range of 120 million to $150 million, which compares to previous guidance of 110 million to $150 million.
Our revised guidance implies a full year adjusted EBITDA margin in the low to mid 20% range based on all of the aforementioned factors affecting our business.
Our margin guidance again reflects the inclusion of met APAC in our financials. The inclusion of headcount expense increases the elimination of Usbs Commission revenue and an expected decrease in revenue earned through reseller revenue sharing arrangements.
We expect non-GAAP tax expense will be approximately 40% of non-GAAP pretax income for 2019, which remains unchanged from our previous estimates.
Our full year 2019 effective tax rate could differ from our current estimates based on a number of factors.
We expect fully diluted shares to be between $17.6 million and $18.7 million in 2019.
Which compares to our previous estimate of 17 $17.6 million and 18.4 million.
We expect fiscal 2019, non-GAAP adjusted income per fully diluted share to be in a range between $3.60 and $4.85, which compares to our previous estimate of $3.35 to $4.95.
With our increased focus on shipping our financial metrics would ordinarily exhibit seasonality reflective of customer shipping usage during the year.
However.
We would not necessarily expect that trend to continue this year to the same degree with a negative financial impact associated with the elimination of the Usbs Commission revenue and reduction of reseller related partner revenue shares with the latter of that now to a lesser degree than in our previous guidance due to some of our reseller partners receiving extensions.
In particular, we expect second half revenue and adjusted EBITDA to be particularly negatively impacted.
And finally, we continue to expect capital expenditures to be approximately 2 million to $4 million in 2019.
Although we do not provide guidance beyond 2019, the current Usbs proposals as we currently understand them at least.
Could also result in meaningful reductions in margins earned by resellers in 2020 in 2021.
This in turn could have a significant impact on our revenues and earnings in those years.
And while we do not know what ultimately will become of the Sps is proposed changes it does not alter our long term global multi carrier business strategies, which we believe will be successful.
And with that we'll open up the call for questions.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Your first question comes from the line of George Sutton with Craig Hallum. Your line is open.
Thank you.
I appreciate your and.
I would call relative enthusiasm with respect to some of the reseller negotiations as you understand them I'm curious if you can compartmentalize those in terms of timeframe are you specifically, referring to what people are hearing relative to 2019 or is is that some indication relative to the to the speed at which some of these changes might make and therefore affect 2020.
Well I mean, I think just in general we based on what we've heard of of course, we're not again, we're not a party of the negotiation, but there's been I think initially in April it was.
Largely what came down was very concrete and clear and the reseller economics were.
I'm going to be decreasing the Ns stws were.
You know terminated and starting in June of 2018, the economics would be decreasing.
And so what happened was.
Some discussions ensued.
We believe some partners came forward and perhaps there was this more.
Digging into the area, it's very complicated area.
And so the conversations shifted the the tenor of the USPI has seemed to change the June 2019 decrease was.
Removed for at least some of the resellers and we believe that some of the other resellers are still in conversations and so.
The conversation around 2020.
To our knowledge has not really changed at this point.
But I think the general change in attitude and the tenor gives us.
Hope that the collaborative conversations are a positive sign.
That perhaps that that will be looked at as well.
Okay Thats helpful. So it's been six months effectively since the commission program.
Was terminated with the U.S postal service and your.
Your thought at that point was we now can pursue opportunities with other growing carriers. Obviously, there's been a tremendous amount of moves made since then I'm wondering if you could characterize your relative position in this game of musical chairs.
Versus what you might have anticipated six months ago.
Yes, I mean, I don't think we thought that the changes we are making we are going to be simpler easier. We are going to you know.
Immediately result in some massive change in terms of our carrier partnerships the carriers were talking to.
It's a complicated space of course and.
Some of them are very large.
Organizations and it takes time for large organization too.
To examine their strategies I think starting in February when we came out with our announcements.
Certainly the conversations took a step up.
Across the board with carriers, both domestically and internationally.
And I think there was a clear recognition that given the assets that we built.
That would be a very strong player to add to your team if we get behind your your organization in Europe and year and driving your carrier.
Revenue so the conversation.
Really increased dramatically in February the conversations have continued to be very active.
I think we're hopeful that we'll have more to discuss in the coming months.
Around some concrete changes, but I don't think we ever thought that this would be something that would would happened very quickly in terms of the changes in the new partnerships.
Last question if I could you you have a very strong sales force you have a lot of integrations in E Commerce space I'm curious.
If you could just update us on sort of sales force retention and integration do you want to call it retention or any changes that might have occurred there again relative to say six months ago.
Yes, its been I mean, I think in terms of our sales team. We've continued down the same path that we would have otherwise.
Don without the you know with the commission still in place this year.
We continue to drive the EU Sps is business, we continue to gain new customers Our commission plans Havent changed.
And overall, we haven't seen any change in terms of our retention of the sales personnel.
Since the changes were made I think they're they're all excited about the opportunity to potentially broaden their portfolio of solutions. They can offer.
To customers beyond just the you Sps.
I think they're they're they're waiting to hear what the new direction is and were now as far as our conversations are progressing with the carriers were.
Keeping them in the loop, but also hopeful that.
Soon.
Perhaps the second half of this year, if not early next year, we'll be able to.
Alter their path in their direction and really get them focused on driving.
Revenue for additional carriers.
Thank you very much appreciate it.
Your next question comes from the line of documents with B. Riley FBR. Your line is open.
Hi, good afternoon, thanks for taking my questions.
In terms of the reseller contracts that were extended to the end of 2019 are these backup from a <expletive> renegotiating renegotiation again right. There at the beginning of 2020, and just sort of any incremental color around that would be helpful.
Yes so.
The contracts are currently being negotiated.
The resellers received some of the resellers received an extension.
Under their current margins through the end of the year.
That simply creates additional runway for those negotiations to to happen. So.
It's still our understanding that.
Those reseller contracts will continue but will continue at lower margins in the coming years.
But.
To answer your question.
The negotiations are ongoing between the resellers into Sps to our understanding.
Understood that's helpful and then.
And I guess in terms of those high volume customers that are not being currently charged to use your software.
What's kind of your approach with them at this standpoint is it a matter of.
I'm looking for other ways to monetize that down the road just kind of curious as your approach to that customer set.
Yes, I think we talked about potentially adding a surcharge.
So when we're looking at really a small segment of our customers that are on these high volume negotiated service agreements.
So the.
And where we are we havent been traditionally charging a fee because of the the commission agreement, where the U.S. gas is really picking up.
The fee the cost of serving those customers. We had conversations we have had conversations with.
Lets customers we've discussed.
You know, adding a surcharge to their to their solutions. They understand the reasoning behind that of course, the alternative carriers GPS and Fedex do not charge for their solution. So that certainly has been.
One factor and making sure that we move slowly and cautiously about how we approach it.
We don't want to lose the customers, particularly as were looking.
At potentially monetizing them through.
New relationships with other carriers.
We have in some selected cases, we have charged.
We have begun charging a service as a commission.
A surcharge to customers, but by and large we've been cautious in our approach in that area.
I understood and then I guess just final question I don't know if you've ever divulge this but could you give us any sort of indication as to the number of reseller partners later or anything along those lines and it sounds like based on your commentary that some of the agreements have been terminated while others are still an ongoing negotiation just any sort of incremental color would be helpful.
Yes, I think broadly there's you know I think we counted at one point sometime back and there is north of 20 different companies out there that have some form of reseller agreement with USPI us from some of the marketplace as we mentioned like like Amazon and Etsy.
To some of the fulfillment houses that have the ability to resell at a higher margin.
And then what we would call the traditional resellers really the ones that are.
Primarily been in the business of driving the U.S. PS business through.
Through activities like business development and through sales.
Kind of call those maybe more the pure play resellers.
Theres really three large ones.
And the conversations.
That we're aware of have primarily been focused on those three.
Organizations. So when we look at the shift in the conversations we're really talking about primarily those three conversations.
Understood Thats helpful. Well. Thank you again for taking my questions and best of luck in second half of the year.
Thanks, a lot.
Your next question comes from the line of Kevin Liu with K. Lee You and company. Your line is open.
Hi, good afternoon.
First question for me just in terms of some of the new assays that are being approved by the U.S tier.
Has the ability to pursue those changed at all since.
Those kind of moved away strategically.
And just generally would be curious if you could kind of update us on what sort of when rates do you have.
For those assays versus things like the us and other alternatives. So those customers could you.
Okay, and I say.
I guess, there is multiple flavors of that and say when we talk about and assays and our business or customers within those those agreements are directly between the U.S.P.S. and the customer and I think we saw with with some of the changes in the board of governors and some of the other areas of the U.S.P. asked to some new New Board members came onboard we saw some.
Some clear slowdown and the approval of the N. assays I think we've seen some some improvement in that area.
For for customer in assays.
So I don't I don't know if I answered your question, perhaps there's you know if you if I haven't you can ask some follow ups.
Yeah, that's the follow up to that would be as these assays are being approved it's likely it seem like you guys would be kind of in the pole position to take those are you guys, adding let's say volumes are still with some of these new approvals. What do you think thats going to other alternatives like caveats or other PC postage providers.
No no I think the you know the vast majority of those are still coming to us.
In terms of the customer.
The customer relationships, you know were biased by and large the you know the PC postage industry.
We haven't really seen any significant customer defections to other alternatives out there.
And we have no we really haven't seen.
An uptick in Tvs adoptions.
On the behalf customer. So it's really you know biomarker still coming to stamps dot com and its and its properties.
That's great to hear and then your customer count was up nicely on a sequential basis as well as year over year I'm. Just curious if you could talk about if there are any particular marketing channels or maybe specific brands within your portfolio of products that are driving most of that growth today.
You ask your question, Kevin So as you know with US we take a portfolio approach to marketing and were highly innovative and experimental and testing new things.
So generally we find is that in any given quarter. It's generally more of a mixed bag of things that are working better than they were previously and other things that may not be working as well.
Theres nothing I would particularly point to this quarter that I can say drove a lot of a lot of that change I will say that we're having good success and TV and radio.
And we continue to experiment in those channels.
Got it and then just lastly for me as you talk about your international expansion opportunity and you're in discussions with some of the carriers out there, but I think did these tend to be more of a private carriers are you in talks with some of the national posts.
Postal services that are out there.
Yeah, we're both I think we're in conversations with the.
There's there's obviously, there's a lot of carriers when you talk about international.
There is a lot of smaller carriers there is larger.
National posts, and we're having conversations with all of them.
We do have you know with when you talk about carriers worldwide, we do have existing agreements.
With many carriers and we've continued to have conversations.
As we as we move more.
Into the international Arena with both Shipstation and also met APAC those conversations have.
Accelerated and we're very encouraged by the openness of some of the carriers out there too.
The pit potentially share the economics.
With with both Shipstation as well as met APAC.
Okay, great color. Thanks for taking the question.
Thanks, Kevin Thanks, Kevin.
Again, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Your next question comes from the line of Allen Klee with Maxim Group. Your line is open.
Yes, Hi, just following up also on U.U.S.P.S. resellers, just wanted to make sure I understand as you have to know if the three major ones you said that it's been postponed for some but.
But is it true then for for one or two of them that you. They actually did cut rates and you're now in your new guidance here taking into account, but you're you're actually getting paid on a lower rate.
Uh Huh so no the answer is amongst the three there they've either definitively delayed any cuts to the end of the year and continued in conversations it like we characterize have been positive for they're still in conversations around potential changes they might make.
So at this point, we you know we were assuming I think within our guidance to be conservative.
The ones that haven't received a definitive new agreement the postponed those rate cuts.
That we're assuming that the rate cuts happened for for purposes of guidance, but the conversations to our knowledge have continued and the the conversations are all very positive.
Okay. Thank you and then for for potentially winning business with a large U.S. carrier or the likes of something like Amazon you commented in your presentation how.
These negotiations have gone on and positively, but what what do you think needs to happen on your side or or their side to to make one of those deals happen.
Well I think part of it is just the complexity of you know of a new partnership.
The likes of which has never been done with some of these larger carriers.
To the extent that our businesses.
<unk> has such a significant footprint in ecommerce.
And the multi carrier properties, we have.
And the approach we've taken in the market that position in small business the sales team.
There's a lot of complexity around how how do you work together across the board how do you have the sales teams coordinate how do you work to onboard customers, how do you potentially migrate existing customers.
Onto new solutions, there's just a lot of complexity around how things work I mean, our agreement with the U.S.P.S. was 10 years in the making.
And was it was very complicated.
And likewise I think the large organizations we're talking to.
Have a large footprint in our large footprint in ecommerce trying to meld those two together in a way that works for both organizations is really kind of what what needs to happen.
Okay recently Ali Baba made an announcement they were opening up their marketplaces to U.S. small businesses to tick go on and I believe Shipstation is partnered with them in that how do you think about this as if we were gonna sizes as an opportunity do you think this could be.
This is something that could could be pretty significant.
Yeah, I mean, we're very excited about that I mean, I think that the you know the Ali Baba integration is it's early we just did it we just announced it.
But we we integrated between Ali Baba and as these as they've opened up there I'm not not just the allowing the purchases of small business, but now allowing sales of small businesses in the U.S.
You know I think to my knowledge there first integration was with Shipstation really ship engine.
And so I think our philosophy has always been to go out there and.
Do partnerships.
No rapidly and aggressively and as a result, we have over 200.
Sales channels and various partnerships just in the Shipstation.
[laughter] property and so Alibaba is you know you got another one of those where we're excited about that opportunity.
For sure and you know like I said, it's early but everybody knows size of Alibaba and the potential volume that could drive as they move into the market.
Okay. Thank you so much.
Yeah.
Your final question comes from the line of Tim classes with Northland Securities. Your line is open.
Hey, Jim.
Hi, This is Tyler wood on for Tim actually Thanks for taking our question as we think about sources of growth going forward under the new strategy I was there any specific numbers you can put on growth rates for the shipping software piece and also the international side of the business. Thanks.
Yeah, Tyler I think broadly what we're looking at from a global perspective is.
Ever increasing percentages of dollars going through e-commerce , and those broader e-commerce trends correlating with.
Our business now ultimately growth rates will be a function of when revenue structure is stabilizing anniversary with other carriers both domestically internationally for us. So I think it's premature to say when and what those numbers will look like.
But I think the broad strokes are of that.
We are actively.
[noise] monetizing transactions and therefore, you would see a strong correlation with for our ecommerce trends both domestically internationally in terms of our future business.
Thank you.
Thank you.
There are no further question at this time I will now turn the call back over to Ken Mcbride.
Thank you for joining us.
So as always.
If you have questions follow up are available.
Time at our Investor Relations Hotline, three Renault 42, five Athree zero.
Thank you very much.
This concludes today's teleconference. You may now disconnect.