Stamps.com Inc.
Q1 2020 Earnings Call Transcript

Published: 9 May 2020

[Operator:]

Greetings, and welcome to Stamps.com's First Quarter 2020 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.I would now like to turn the conference over to your host, Suzanne Park, Vice President of Finance. Please, proceed.

[Suzanne Park:]

Thank you. Good afternoon. On the call today are CEO, Ken McBride; and CFO, Jeff Carberry. The agenda for today's call is as follows

[Ken McBride:]

Thanks, Suzanne, and thank you for joining us today. On today's call, we'll cover several topics. We'll discuss the impact that COVID-19 has had on our business. We'll discuss the progress and go-forward 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 and corporate programs we've implemented in light of COVID-19. And then, Jeff will discuss our metrics, our Q1 financial results and our guidance for the remainder of 2020.So let me begin by discussing the overall impact that COVID-19 pandemic is having on our business today. So far, the COVID-19 pandemic has resulted in a significant positive impact to our new customer acquisition and a significant increase in the volume of packages that our customers process using our software, particularly since mid-March when many companies and individuals began working from home and sheltering in place.For the first quarter, as a whole, acquisition was up almost 50% year-over-year, while our cost per acquisition dropped dramatically. The surge in 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 acquisition trends to date in the second quarter. The month of April was up over 300% year-over-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 paid customer number increased by 27,000 to reach 777,000.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 to other retail locations in order to do their mail and their packages. Our 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.One of 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 mail and packages and will stick with it 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. Our customers saved 9% on their first-class letters paying only $0.50 versus the normal rate of $0.55. We save customers up to 40% off USPS retail prices for packages. And with our new UPS partnership, we're able to save customers up to 62% off UPS' standard daily rates. The savings add up quickly and cover our monthly service fees once a customer reaches a small amount of package volume.We found that a challenge is always getting people to just try our solutions and that once they do they love it. So, we're hopeful that many of these new customers will become long-term users of our solutions, but we will of course monitor customer trends carefully, given the unique circumstances we are in right now. In addition to the surge in 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 and cover virtually every industry. As such we have customers who have been strong beneficiaries of increased e-commerce consumption driven by COVID-19 and as well as customers who have unfortunately had to suspend operations.We've also seen strong recent growth in domestic shipping trends as more consumers adopted the work from home model and as 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 supported 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 our solutions are working very well to address the needs of our customers. Again the question is whether the surge in volume is a longer-term trend or just a transitory phenomenon that remains to be seen.We do believe that once customers use our solutions more regularly they discover more and more the sophisticated features that can really save them a lot of time and they discover the great discounts that we offer which can really save 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 our UPS partnership. Late last year we signed a new partnership with UPS which allows us to offer attractive UPS package discounts to our customers. The UPS package discounts we are able to offer customers under our new partnership are the discounts as much as 62% off UPS' 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 UPS in other ways.Within our e-commerce multi-carrier properties including ShipStation, ShippingEasy and ShipWorks, we have always provided a UPS shipping capability. However the new UPS partnership allows us to more actively and effectively drive customers and shipping volume to UPS. The new solution went live in ShipStation with a subset of customers last year in the fourth quarter and we rolled it out more broadly to a larger number of ShipStation customers during the first quarter.We also began rolling it out to ShippingEasy, ShipWorks, Stamps.com and Endicia branded solution customer during the first quarter. Within the Stamps.com and Endicia branded products offering UPS shipping is an entirely new capability that we just began to roll out to new and existing customers.Within those products we previously had exclusivity arrangements with the USPS that are now no longer in place. So, we're now able to offer Stamps.com and Endicia customers a UPS shipping solution side-by-side with USPS services. Accessing UPS is very simple with a default account and discounted rates available immediately when the customer first begins to use the product. We are seeing rapid adoption of the UPS solution and a very steep growth trajectory in 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 UPS relationship. We expect them to be a great long-term partner for Stamps.com and all of our company products and solutions.With that let me turn to some of the initiatives we're working on in 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 resources to target the e-commerce shippers. In 2020 and beyond, we expect to continue making the large investments in order to attract those types of shippers to our solutions. We're continuing to increase our investment in 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, the partners and 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 shipping part of the business. The e-commerce shipping industry is very dynamic and we invest a significant amount of our research and development resources in continuing to innovate in that market.Our 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 per paid customer or ARPU, reduce 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 logistics support, delivery options provided in the shopping cart, drop shipping, branded tracking, returns, pickup and drop-off and we're continuing to enhance our capabilities in our mobile apps.Third, we plan to continue bringing innovative and cost-effective solutions to U.S. customers that are sending packages to other countries. As you recall, during 2017 we launched a new international shipping initiative called GlobalPost 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 bundled customer solution built on top of the GlobalPost, carrier that includes customer benefits such as free package pickup, free insurance, upgraded delivery speeds, enhanced tracking, simpler customs procedures and other benefits. We're seeing nice growth in this area and we expect to continue to drive these solutions in 2020. We would also note that now we offer DHL express and UPS as international shipping options that are very attractive for this customer base.With that, let me turn to some of the plans for expansion outside of the U.S. Starting with the acquisition of MetaPack that we made in 2018, we began a path of expanding our business from a domestic-only USPS focused model towards a global multicarrier 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 and 2019, we undertook efforts to begin test marketing our ShipStation product in the U.K., Canada and 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 ShipEngine, we plan to continue to develop partnerships, carrier relationships, product enhancements and to continue to market our solutions in our target countries. Our international shipments through ShipStation were up 87% year-over-year versus the first quarter of 2019.During 2020 we expect to improve our capabilities to support further international expansion such as language and currency translation systems and we are currently expecting to launch a solution in France as our first non-English speaking market. We also expect to further enhance our cross-border capabilities with features such as duties and taxes, customs documents added to our ShipEngine product.Second, internationally, in our MetaPack business, we continue to make progress in both customer acquisition and technology including rearchitecting the technology platform and driving new innovations.During the first quarter, we've continued to develop a strong U.S. pipeline of deals that are household names and MetaPack really had no presence in the U.S. before we acquired them. So bringing MetaPack to the U.S. with our U.S. sales teams was one of the synergies we've identified in the deal.In MetaPack, we continue to win new customers in Europe, although we would note that the current COVID 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 the 450 MetaPack carrier services to the ShipStation international platform.Finally, in 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.com branded web solution.Internationally, we're planning to replicate our U.S. strategy where we go to market with two main brands; the simpler Stamps.com like web solution for up and coming e-commerce customers, and a more powerful and complex ShipStation solution for more sophisticated e-commerce customers.We're working on an international version of the Stamps.com web solution during 2020. And once that's in place we expect to begin some test markets -- marketing of the stamp solution to some selected international markets. We've begun the development of these solutions and we have begun planning our marketing approach as we prepare to enter the new markets.With that, now let's discuss some recent developments we've had in our customized postage business. You'll recall that Customized Postage is a form of USPS postage that allows consumers to turn digital images into valid USPS-approved postage, which we offer under the PhotoStamps brand name.We recently received notification from the U.S. Postal Service of a decision they've made to end the Customized Postage program on June 16, 2020. The decision by the USPS followed the recent filing of a lawsuit against the USPS by a third-party alleging first amendment religious expression harm as a result of USPS regulations restricting all religious images.We believe this decision by the USPS 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 expect 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 for EBITDA annually.So with that let me turn to the -- some of the corporate programs we're doing related to COVID-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 COVID-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 -- the COVID-19 effect on our company. We're deeply committed to the health and the well-being of our employees. We took early and aggressive steps to make sure that our employees were as safe as possible and we moved to a company-wide work at home model the week of March 9 with all of our over 1,300 employees worldwide.Because our 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 and overall full-time equivalent hours to absorb some of the demand for our service during the COVID situation to-date. 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.I would also like to let everyone know that I was one of the unlucky ones to contract COVID-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. I recovered quickly and had been back and fully engaged in our business since that time.And during my illness, our company did not miss a beat in any way as you can clearly see from our first quarter financial results and 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 0.25 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. We're 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 our 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 and success of our marketing programs.We are a very seasoned management team. I personally had managed this company now for 19 years including through two major recessions the 2001 to 2003 recession post dot.com 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 note 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 generated a healthy cash flow throughout that entire recession. In fact, we continue to repurchase stock throughout the entire period at very attractive prices.Our 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.We're in a great position to continue to execute on our business plan throughout 2020 and beyond. And we expect to continue to get stronger as an organization and continue to solidify our position as the global leader in multicarrier e-commerce shipping.With that now, I'll turn the call over to Jeff.

[Jeff Carberry:]

Thanks Ken. We'll now review our first quarter 2020 financial results. The discussion of our financial results today will include non-GAAP financial measures. As Dan described, 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 investor website.Total revenue was $151.9 million in Q1. That was up 11% year-over-year versus Q1 of 2019. Total revenue excluding MetaPack was $137.5 million in Q1. That was up 12% year-over-year versus Q1 of 2019.The growth in revenue in the first quarter was primarily driven by strong growth in our mailing and shipping business which in the United States benefited from strong domestic shipping growth and was offset by international shipping declines, both of which we believe are attributable to the ongoing COVID-19 pandemic and responses to it.Revenue was also positively impacted by strong growth in our GlobalPost and Global Advantage Program. Mailing and shipping revenue was $148.3 million in Q1 and that was up 12% year-over-year versus Q1 2019.Mailing and shipping revenue excluding MetaPack was $134.5 million in Q1 and that was up 12% year-over-year versus Q1 of 2019. The growth in mailing and shipping revenue was driven by increases in paid customers and ARPU as well as growth in our GlobalPost and Global Advantage Programs.We estimate that total revenue derived from our shipping customers grew at a low double-digit rate year-over-year. And as a percentage of total revenue in Q1 was approximately 80%. We estimate that revenue derived from our shipping customers in Q1 excluding MetaPack grew year-over-year at a low-teens rate and as a percentage of total revenue was approximately 70%.We also estimate that our revenue derived from our SOHO mailers as a percentage of total revenue was in the high teens and grew year-over-year at a high single-digit rate.Mailing and shipping gross margin was 74.8% in Q1 versus 74.9% in Q1 of 2019. Mailing and shipping gross margin was positively impacted by growth in revenue associated with our traditional carrier business including USPS and UPS which was offset by the growth of our international offerings including the Global Advantage Program, which can have a lower gross margin -- have a lower gross margin profile than our other service fee revenue components. MetaPack's gross margin under U.S. GAAP was approximately 63% in Q1.We had year-over-year increases in our Q1 operating costs primarily driven by growth in R&D and sales and marketing related to strategic investments to support innovation and long-term growth. As Ken mentioned, we continue to aggressively scale our operational investments to drive our international business strategies.Non-GAAP operating income was $40.4 million in Q1 up 7% year-over-year versus Q1 of 2019. Adjusted EBITDA was $41.5 million in Q1 and that was up 6% year-over-year versus Q1 of 2019.Adjusted EBITDA margin was 27.4% in Q1 versus 28.8% in Q1 of 2019. The decrease in adjusted EBITDA margin was attributable to higher operating expenses associated with our 2020 initiatives as previously discussed and to a lesser extent MetaPack.Non-GAAP adjusted income per fully diluted share was $1.52 in Q1 based on a non-GAAP tax expense rate of 40% and was up 7% year-over-year versus $1.23 per share in Q1 of 2019 based on a non-GAAP tax expense rate also up 40%. Fully diluted shares used in the EPS calculation was 18.2 million for Q1 versus 18.0 million for Q1 of 2019.Let's now discuss our customer metrics. Our total paid customer metric was 777,000 which was our highest number of paid customers in our company's history. This is driven by the strong new customer acquisition and customer churn. Our first quarter churn was 3.0% and that was down 0.1% year-over-year. Our first quarter ARPU was 63.60. ARPU was up 6% year-over-year driven by growth in the shipping focused areas of our business.Total first quarter USPS postage printed was $1.6 billion. That was up 1% versus the first quarter of 2019. The total USPS postage printed metric includes both higher growth shipping volume and traditional non-packaged mail volume, which continues to see a steady decline consistent with the long-term trend of declining mail usage in the U.S.Let's now discuss our cash, debt and uses of cash. We ended Q1 with $216 million in cash and investments, which was about $59 million from $156 million at the end of Q4 of 2019. The increase in cash and investments was primarily driven by the following

[Operator:]

Thank you. At this time, we will be conducting a question-and-answer session [Operator Instructions] Our first question today comes from George Sutton of Craig-Hallum. Please proceed with your question.

[George Sutton:]

Thank you and Ken my sincere congratulations on making it through the COVID experience.

[Ken McBride:]

Thank you. It's nice to be done.

[George Sutton:]

It's a new badge of honor for you. So

[Ken McBride:]

It is.

[George Sutton:]

Relative to the 27,000 customers, can you give us any breakdown as to the composition of those relative to your multi-carrier options versus the Stamps.com property?

[Ken McBride:]

Yeah. So, we don't give a breakdown delineating acquisition between our properties. Suffice to say, though given the performance of the mailing business, it was a combination of both mailing customers as well as shipping customers. On the shipping side, obviously, given the volume growth, it's a combination of new customers we acquired as well as we believe increased volume associated with COVID-19 related effects the people working from home and doing more e-commerce consumption.

[George Sutton:]

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

[Ken McBride:]

Yeah. I mean Amazon definitely changed a lot of things in the first quarter as a result of what's happening right now and prioritized the essential goods for shipping. So, we may have seen 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. So that new thing that they were launching and the new third-party logistics program. They had pilots running in Los Angeles and New York, Chicago and a couple of other cities. And so they decided to halt that.It wasn't clear from their announcement whether that was temporary or permanent. But we worked with those sellers that were using that solution and moved them to other carriers. And so, there was really no disruption there. Some of the Amazon services that were discontinued in other areas, we probably didn't receive new customers as a result of that. It was more just shift in volume, from existing Amazon usage in those channels to other solutions within our multi-carrier properties.

[George Sutton:]

Understand. Lastly for me, you gave the UPS volumes, which was fascinating and I would assume fairly significant for them. I'm curious what kind of attention that's being given potentially by other partners who aren't seeing those volume increases? And then also, what if any has the reaction been from the U.S. postal service seeing some of those volumes move over? Thanks.

[Ken McBride:]

Yeah. I mean we haven't really disclosed the specific volumes. We just wanted to get everybody kind of a flavor of how things are going. And so the -- we just now started to launch it. And I think more broadly and we saw the big uptick in volumes with the months of March and April up about 250% month-over-month. So, they're growing very rapidly albeit from a small base.And certainly, that's raising eyebrows in the shipping industry. I think the information is not public until 20 minutes ago. So -- and it's not really meant to be like a full disclosure. That's not something we plan to do going forward. But we're super excited about it. It's clear that the UPS solution is resonating very well with our customer base. It's clear that we picked the right long-term partner. And the discounts they're offering are terrific. And the way we set it up, the ease of signing up for the solution, it's literally like a one-click thing as you sign up for stamps.com so.And then it's just a pull down, so you can pick between UPS and USPS. It's very, very simple very easy. It uses the same account. So, we're using what's called -- we call it the wallet. So, all of your all of your money on deposit, when you go to print the label, it goes out either USPS or UPS from one account. So there's no extra accounts. There's no -- it's really as simple as it gets.And so we've seen -- since we launched that we've really seen a big uptick and a big uptake on that by the customers. And really we're just still getting going. We really just launched -- I mean in ShipStation we launched back in early December. But we've been 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 later in the first quarter. So I would say, there's -- that's just the tip of the iceberg in terms of what we could see going forward.So I think that, we see UPS as 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. In terms of reaction of other carriers why, I guess we'll have to see where that goes, because like I said nobody really understood how well it was doing until we just talked about it 20 minutes ago.

[George Sutton:]

Okay. Great. Thanks.

[Operator:]

The next question is from Kevin Liu of K. Liu & Company. Please proceed with our question.

[Kevin Liu:]

Hi. Good afternoon.

[Ken McBride:]

Hey, Kevin.

[Kevin Liu:]

First question here, just on UPS. I know it's rolled out now across your various platforms. Curious if you could talk at all in terms of just kind of the penetration rates that you're seeing thus far? Is it still a very small number of merchants that have taken advantage? Or are you seeing that being more broad-based in terms of how it's contributed to volumes?

[Ken McBride:]

Yeah. It's still really early. We just got it going. I mean we -- like I said, we launched it in ShipStation in Q4, and we just started to roll it out more broadly. We launched it to a segment of that customer base. We just wanted to make sure it worked well and the customer adopted it well and that there weren't 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 Q1. So we – I would say, like, we're just getting started and we've seen really, really great adoption. Like I said, we set it up. It couldn't be any easier to sign up for a UPS account. It's literally as you're signing up for the service you just agree to the – you agree to let a UPS account be created and there it is. And like I said, 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 UPS and USPS get 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 carriers. So it's as easy as it gets. And I think for anything that's over two pounds it clearly makes sense to consider UPS over USPS, as a more cost effective solution. And even for some of the smaller packages with some of the discounts they've offered into our customer base they're seeing some nice volume. We're seeing nice volume move over and we're happy to work with UPS as a great long-term partner and we're excited and I think vice versa.

[Kevin Liu:]

Got it. And I was hoping you could talk a little bit about just how GlobalPost or Global Advantage Programs are impacted at all by some of the restrictions that USPS has in terms of being able to deliver to other countries now. It doesn't sound like the growth has suffered at all. But just curious operationally how you guys are managing through that?

[Ken McBride:]

Yeah. There's – I mean, 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 mentioned some customers that have stopped really operations. And so some – I0 think we have – we talked about the volume that's increased and we've seen a dramatic increase. But within that, we've seen an even bigger increase of e-commerce the smaller users and some larger users who have – who have suspended or changed or for various reasons. It really just depends what industry you're in, right? I mean, 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 it might be going the other direction. So we kind of have both things going on within our customer base. And certainly, GlobalPost is one of the solutions that some of our it tends to be something that the larger customers use more. And so we have seen some folks pulling back from that just because their business is going in that direction.

[Kevin Liu:]

Understood. And then just lastly here I know, there's probably a degree of conservatism from COVID-19 here but looking at your guidance for the full year now Q1 tends to be one of your softer quarters. And then on top of that you're still ramping UPS. So if we kind of extrapolate that out for the full year it would seem like you'd already be at the top end of your guidance. So is there anything you're seeing in terms of some of your larger shipping customers that gives you any cause at this point? Or are you simply just being kind of conservative in light of what's going on in the world?

[Jeff Carberry:]

Yeah. Thanks for the question, Kevin. So you're right we are seeing strong performance in Q1 and that is continuing into April as Ken mentioned. So from a financial standpoint things are looking very attractive. However, there is an inordinate amount of risk to the broader macroeconomic picture and the impact that could have on aggregate demand, which would obviously potentially have a negative impact even if e-commerce trends did persist overall aggregate demand could fall and that could weigh on the business.So I think from my perspective, we're reaffirming guidance with a caveat that obviously on the one hand things are looking quite good in the short run, but that could change very quickly depending on how the economy shapes up. So I think overall it's just maintaining guidance, but with a pretty conservative caveat that things could turn sour if the economy turns sour.

[Ken McBride:]

Yeah. Kevin, I mean, I would just add that I think that more than 80% of companies have now pulled guidance. So I think that just the fact that we haven't pulled guidance we feel confident in what we've put out there. We've managed through these types of scenarios before. We managed through the Great Recession. We started off managing the company during the dot-com implosion. And 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 stay at home online business. However, I think there is concern and we want to make sure we're not going too far in terms of assumptions that this is going to – the economy is going to continue to churn along, because certainly there's a lot of things out there that are concerning, just not for us specifically but just for the whole world economically.And so 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 make sure we leave guidance out there so we can give you some indication. Hey, we're still confident that we can make our numbers. And not pull back altogether from our guidance which I think is something we don't need to do because of how we manage the company.

[Kevin Liu:]

Yeah, understood. Well, Ken glad to hear you've recovered and congrats to all of you on another strong quarter.

[Ken McBride:]

Thanks Kevin.

[Operator:]

The next question is from Allen Klee of National Securities. Please proceed.

[Allen Klee:]

Yes. Hi, Can you talk about, how you're factoring in, potentially a higher customer churn rate in your guidance?

[Ken McBride:]

Thanks Allen. I wouldn't say we're actually factoring out a higher churn rate into our guidance. I think that kind of falls within the broader conservatism of maintain your guidance range and might have Q1 results. And again, can I mention April did well.So we're not assuming a higher return rate. Obviously, if we did have a higher churn rate resulting from macro economic slowness weigh on the business. And that was really, this was negatively. But we're pretty clear, we're not assuming that our numbers growing.

[Allen Klee:]

Okay, thanks. I'm not sure if I missed it. But did you speak to how MetaPack performed during the quarter?

[Ken McBride:]

We didn't break them up separately. But MetaPack similar to the U.S. and we saw some improvement versus by virtue of ecommerce consumption. But obviously there is some slowness and Europe, resulting from Brexit as well as from Coronavirus.We obviously breakout it in our financial result, that we added separately part of rational segmentation. So, those numbers will be there for you. I think, what we saw largely was like slow down in new deals. Because clearly people are concerned about other things and signing a new agreement, which we think is just a delay, a temporary delay.But on the flip side, we like the rest of our business are customers in MetaPack offer online solutions and online ecommerce sales and so that has seen a lift, just like every other part of the really of the worldwide economy, as people kind of stay at home in order more stuff.And so we saw a similar nice lift in the MetaPack business from the volume perspective, which is good because that's directly tied to volume. How we how we monetize the businesses largely through a transaction fee, so, we're happy to see that. Of course we'd like to see the deal pipeline start to move again.But we're confident that's going to happen. It's just a matter of kind of working through this period of time. And then the meantime, we've seen a nice lift from their businesses, translating through into our business.

[Allen Klee:]

Thank you. And as your business has shifted to most of your revenues coming from shipping, I know that just looking at new customers is trickier to figure out what that means compared to the past. So I guess, I'm wondering as of this large ad that you're getting, is there a way to think about, how that's kind of breaking out between SOHO and shipping type customers?

[Ken McBride:]

Yeah. So from the metric, it's going to be a mix of both SOHO and shipping customers. So you saw the stream business kind of grow in the low-teens rate and obviously that's a function of both increasing customers on the shipping side as well as increasing volumes from some our existing customers, offset by some declined in customers who has an unfortunate suspensions of business, because of COVID.So, I think that a mix of those two things. You saw small business SOHO, the SOHO business can grow in the mid-single digit range. You're expecting the business overall, for the year from guidance of effectively flat for the year, on the SOHO business. So you would necessarily do some that part of that growth on the SOHO side was related to new customer acquisition. So we're seeing growth on both sides.We're going to see how those customers perform. And look at those cohorts and make sure that those customers do persist. After hopefully stay at home orders are lifted for segments of the population, both domestically and internationally. So we'll see how that evolves. But right now we're excited about the growth in the customers.As Ken mentioned, we think that those customers once they try our service. And COVID being the catalyst to try it for us, they will stick with us largely. But of course, we'll continue to closely monitor that.

[Allen Klee:]

Thank you. My last question, I know you may not be comfortable in talking about this. But what we're hearing now with the U.S. post office and kind of with our government proposing or put some comments of desires to raise their packaging, pricing and then, maybe a new person in charge of the USPS. What's your will take on all that?

[Ken McBride:]

Yeah. Well, so certainly a lot of things going on in that world. It's very reactive right now. I mean, they certainly have seen a, I think they've seen a fairly precipitous drop in their in their mail volumes. But then, they've also seen a very large increase in their shipping volumes. And so, they've kind of seen both aspects of it. Of course, they make the vast majority of their revenue on or their profit on the first class mailing. So, that's certainly been an issue for them. And they've certainly faced some financial challenges. I think, like, many, many other industries. And so they were included as part of the cares act.They got a $10 billion, 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 going to be implemented and so, while there has been some conversations and some things said publicly, it certainly seems like congress's is very behind, making sure the postal service does fine during this process. And they did announce a new postmaster general yesterday that's going to succeed.Megan Brennan, who's retiring after five years as the PMG. And so the new person Louis DeJoy is now the 75th postmaster general. And so we're excited about him. He's an outsider, the first outsider in quite some time. And he's got a lot of experience in the logistics and the shipping market. So I think he'll come in with a lot of knowledge and he is also -- I think based on what we know of him and we do know him from prior relationships and folks that we know and actually folks that work here. He's definitely a person who supports partnerships, public and private partnerships. We believe he's very much behind that.As you may recall the task force that put together a report last year on -- at President Trump's request came out with lots of recommendations. And one of the key recommendations in there was public-private partnerships are important. And so I think that with his -- by his connection with Trump with President Trump and I think that we'll see him in alignment with those thoughts in that report. And so that will be good for us. But of course, we'll have to get to know him and certainly be in DC a lot and talking to him. We're a huge partner of theirs and vice versa.So I think net-net, we're sad to see Megan go. She's been a great postmaster general, but we're excited to start working with the new PMG as soon as he takes office, which I believe is in mid-June so.

[Allen Klee:]

Thank you.

[Operator:]

The next question is from Tyler Wood of Northland Securities. Please proceed with your question.

[Tyler Wood:]

Thanks. Just one from me. Is there any color you could give us on how the competitive landscape has changed within the last couple of months with the increase of businesses trying to set up an online channel? Have you maybe seen competitors get more aggressive on pricing or marketing to try and capitalize then?

[Ken McBride:]

We haven't really -- I mean, I think that we've spent 20 years in this industry building the brands and across all the brands that we have and we are far and away the most prevalent company out there and we do $6 billion in total postage we do, $13 billion worldwide in total shipping and postage volumes. And so I think as this shift has happened from really kind of more of a retail offline to an online mode of operating by all these businesses and individuals, we have been the primary beneficiary of that. And so we haven't really seen any competitive aspects of losing in any cases.In fact, we've probably seen the opposite, which is as the strongest company in the industry we're getting stronger. And so we -- I think that 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.

[Tyler Wood:]

Right. Thanks. That's helpful.

[Operator:]

There are no additional questions at this time. I would like to turn the call back to Ken McBride for closing remarks.

[Ken McBride:]

Thank you very much for joining us today. And thanks for the well wishes on my recovery, and things are going great as a company. We're excited and we're moving forward. And like I said, I feel like we're in a great position organizationally.So if you have follow-up questions, you can contact us through our Investor Relations hotline. And that's [phone] or just come to our investor website at investor.stamps.com and put it in a request, and we'll get back to you ASAP. Thank you.

[Operator:]

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