Stamps.com Inc.
Q3 2016 Earnings Call Transcript

Published: 5 Nov 2016

[Operator:]

Welcome to the Stamps.com Third Quarter 2016 Earnings Conference Call. [Operator Instructions]. I would now like to introduce your host for today's conference, Mr. Jeff Carberry, Vice President of Finance. Sir, you may begin.

[Jeff Carberry:]

Thanks very much and good afternoon everyone. Thanks for joining us today. On the call today is Ken McBride, CEO and Kyle Huebner, CFO. The agenda for today's call is as follows. We will review the results of our third quarter 2016. We'll provide a progress update on our recent acquisitions. We'll provide an update on elements of our business model and partnership agreements. We'll discuss two recent additions to our Board of Directors. We'll also discuss our financial results and talk about our business outlook. And finally, we'll provide an update on our long term business model. But first, the Safe Harbor statement, the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. This release includes forward-looking statements about our 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 compete -- complete and ship it's products, maintain desirable economics for its products, the timing of which -- the timing of when the Company will utilize its deferred tax assets and obtain or maintain regulatory approval which could cause actual results to differ materially from those in the forward-looking statements, are detailed in the filings with the Securities and Exchange Commission made from time to time by Stamps.com, including its annual report on Form 10-K for the fiscal year ended December 31, 2015, quarterly reports on Form 10-Q and current reports on Form 8-K. Stamps.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 today's call include non-GAAP financial measures which exclude the following third quarter 2016 items, $8.8 million of non-cash stock-based compensation expense; $4.1 million of non-cash amortization expense of acquired intangibles and debt issuance costs; $10.7 million non-cash income tax expense. Please see our third quarter 2016 earnings release and 2016 metrics posted on our Investors website for reconciliations of our non-GAAP financial measures to the corresponding GAAP measures. With that, let me hand the call over to Ken McBride.

[Ken McBride:]

Thank you Jeff. Thank you for joining us today. Today, we again announced outstanding quarterly financial results, including our highest ever total revenue of $92.6 million -- that was up 79% year-over-year -- our highest ever non-GAAP adjusted EBITDA which was $45.6 million -- that was up 113% year-over-year -- highest ever non-GAAP earnings per share of $2.33 and that was up 104% year-over-year and our highest ever average revenue per unit or ARPU, of $45.05 which was up 56% year-over-year. I'm very pleased with the results this quarter and as a result of the strong year-to-date performance and our current outlook for the business, we again increased our revenue and earnings guidance today. So, let me just do a quick overview of the mailing and shipping business. Mailing and shipping revenue was $87.6 million in the third quarter. That was up 78% year-over-year. The mailing and shipping revenue includes service, product and insurance revenue. Mailing and shipping revenue growth was driven by the growth in paid customers and also growth in ARPU or average revenue per customer. Paid customers in the third quarter was 648,000 and that was up 14% versus the third quarter of 2015. Churn was 3% in the third quarter versus 3.4% in the third quarter of 2015. The growth in paid customers and the declines in churn were driven by continued success in our sales, marketing and our customer retention across all of our customers as well as in our acquisitions. Total USPS postage printed through all our solutions was $1.2 billion in the third quarter and that was up 113% versus the third quarter of 2015. The average monthly revenue per paid customer, ARPU, was $45.05 in the third quarter and that was up 56% versus the third quarter of 2015. Growth in ARPU benefited from our continued growth in our shipping businesses. Specifically, growth in ARPU has been driven by the higher ARPU typically associated with shippers. Customers at ShipStation, ShipWorks, Endicia and ShippingEasy all have much higher ARPU that our historical average. ARPU for shipping customers is more correlated with postage printed than our traditional small business customers as a result of the various ways we're able to monetize shipping postage volume. We're pleased with our financial results and the strength of our business metrics during the third quarter. Let me now provide some updates on our recent acquisitions. We're approaching our one-year anniversary of the Endicia acquisition. Very pleased with the progress we've made from a strategic, operational and a financial perspective. We've centralized all our marketing efforts and we've gained meaningful scale economies and operational efficiencies. We've combined our sales teams. We've aligned the combined team to capitalize on our expanded product portfolio. Our development teams are capitalizing on the benefits of cross utilizing our deep expertise to enhance the combined innovation and efficiency across the companies. Customer service teams are benefiting from our increased scale and our broader geographic diversity across our combined organizations. We've achieved cost reductions through the elimination of duplicate infrastructure and efforts across our organizations are well-positioned to capitalize on the longer term cost synergy and our potential operating efficiencies. We're happy with the progress we've made to date with Endicia acquisition. We remain very excited about the financial benefits and continue to drive through our ongoing integration initiatives. Now we're little more than a quarter into our acquisition of ShippingEasy. Likewise, I'm very pleased with the results being generated there. ShippingEasy provides a very impressive web-based technology platform focused on providing robust yet simplified functionality in the multicarrier space. Accordingly, ShippingEasy augments our portfolio of shipping solutions, allows us to broaden our target market, improve our ability to meet the needs of customers and to grow USPS postage volumes. We've begun the process of leveraging our collective companies' resources and our expertise in sales and marketing, customer service, product development and technology innovation to help accelerate growth. We're happy with the progress we've made to date on ShippingEasy acquisition with the company positively contributing to our bottom-line performance in the third quarter. As you recall from our last earnings call, we spent time explaining the complicated area of USPS negotiated service agreements or NSAs, in a subset of those NSA agreements called reseller agreements. An approved reseller NSA agreement allows a reseller partner to buy postage at one rate and then resell that postage to another USPS customer at a higher rate. This reseller area had been the subject of misleading and inaccurate material that was released by various sources attacking Stamps.com's business and its partners. In the three months since our July earnings call, many of the key arguments made by these sources have already proven to be wrong, so I'd like to provide you an update of what has happened since our July earnings call. The initial argument put forth back in July was that the reseller program was being misused by Stamps.com and its business partners and that the USPS was unaware of this alleged misuse and, once they became aware of it, they would shut down the program in 30 days. On our July earnings call, we provided some specific information demonstrating why the allegations of abuse by the reseller program were without merit. We also explained how the USPS was fully aware of and benefits from the reseller program. It has been a most four months since the original reports came out and the assertion that the program will be shut down by the USPS in 30 days obviously did not happen. The USPS has not terminated nor curtailed any reseller NSA agreements. We're in frequent contact with the top management of the USPS and they continue to be in support of the reseller program. In fact, we're aware of one reseller agreement where a long term extension was proposed by the USPS management and was approved by the Postal Regulatory Commission in July after the initial reports came out. The USPS has consistently extended the reseller program and the Postal Regulatory Commission has consistently approved the program for the past seven years. We expect them to continue to do so in the future. Another argument put forth back in July was that, even if the USPS management didn't shut down the reseller program, the USPS Office of Inspector General or OIG, was going to start an investigation of the program. However, the OIG has not announced any investigation related to resellers since the reports came out four months ago and we have not been contacted by the OIG nor are we aware of any internal discussion happening at the OIG around this area. Another argument put forth back in July was that the USPS was going to eliminate Commercial Plus pricing in January 2017 which would shut down or cripple the reseller program. You may recall that there are two commercial rates, the Commercial Base and Commercial Plus. Commercial Plus rates provide an additional average discount of approximately 3% versus Commercial Base. Customers can receive Commercial Plus rates by working with a reseller. The additional 3% discount is one of the primary benefits for customers that utilize resellers. The negative reports argued the USPS would eliminate Commercial Plus pricing in January 2017 and by eliminating that rate, they would eliminate the reason for customers to use resellers, thereby shutting the reseller program down. However, on October 19, the USPS submitted its January 2017 rate proposal for competitive products to the Postal Regulatory Commission and the USPS rate proposal maintained the same rate structure which included both Commercial Base and Commercial Plus rates. The USPS also maintained the same 3% discount between the two rates. One additional thing of note was that the USPS also decided not to repeat a previous public statement it made in conjunction with its equivalent finally made a year ago regarding moving towards a single commercial rate over time. We believe the change in their public stance was a strong indication that the USPS intends to maintain the current Commercial Plus or an equivalent rate structure in the future. After some of the misleading reports came out, there was a lot of confusion over the very complex topic of resellers. Several investors sought out independent industry experts to help understand it. Ruth Goldway, who is the former Chair of the Postal Regulatory Commission, came forward and gave a detailed postal industry insider's view of the reseller program. As you may recall, the Postal Regulatory Commission or PRC, is the government agency that directory regulates and approves all USPS ratesetting, including the negotiated service agreements like the ones that enable the resellers to provide discounts to their customers. Miss Goldway was Chair of the PRC from 2009 to 2014, including when the original reseller agreements were first approved in 2009 and also through multiple approved extensions to the reseller agreements. In a conference call that was hosted by one of our research analysts on August 8, Ms. Goldway made several insightful observations. She provided information that explained how the overall goal for the USPS for resellers and in general is the generation and the retention of package volume. Ms. Goldway explained how the USPS has an enormous network that can handle a great amount of capacity and their focus over the last 40 years has been to grow volume. She said that the USPS worries about maintaining their package volume and getting package volume into the system in one way or another. USPS has a huge fixed cost because they must go to every address in the U.S. every day and the more volume, the better their overall economics so long as each package is profitable which it is in the reseller industry. This is consistent with what we explained back in July when we noted that an important goal of the reseller program is not only acquiring new customers but also the retention of existing customers. Whether you label a package as new volume or existing volume, each and every package is critical to generating USPS volume growth and every package is financially important to the USPS. Mrs. Goldway also provided information which supported our assertion that there are not any restrictions on the types of channels or customers that the resellers were allowed to target. She provided some history of the reseller program and said that what the USPS was hoping for at the time that they established the program was the small volume package shippers which had been the business of DHL when they exited the U.S. market in 2009. In July, we explained how the reseller program wasn't solely meant by the USPS to be for high-volume shippers, as had been alleged in the original misleading reports. Resellers are in fact authorized by the USPS to offer discount rates to smaller shippers as well as larger shippers. In fact, larger shippers are able to get their own discounts by going directly to the USPS and making a volume commitment. So, the smaller shippers are really more directly the target of the reseller industry. Miss Goldway also added a few additional viewpoints and told her audience that the PC postage companies are considered to be the Postal Service's most valued partners. She also said that, in her opinion, the reseller program has been very successful and it has benefited the USPS in terms of meeting its initial goals. At this point, the arguments championed by the misleading reports have been proven wrong by the actions of the USPS and its regulators and have also been discredited by an independent industry expert. Meanwhile, we continue to execute on our business model. We continue to generate significant package volume growth for the USPS. In fact, on August 9, the USPS reported its latest numbers for the quarter ended June 30 and their growth in package volume was 14%. Their growth in shipping revenue was 18%. These are among the highest growth rates the USPS has seen over the past several years. We believe the reseller program and our investment in shipping were important factors in helping the USPS grow their package volume and their revenue. Last week, we announced that we're adding two new board members to our Board of Directors which increases the total number of board members to six. David Habiger has joined our board and is the former CEO of Textura, NDS Group and Sonic Solutions and has served on the Board of Directors of many publicly traded companies. Ted Samuels will join our board upon his retirement in January and is President of Capital Guardian Trust Company, a longtime portfolio manager and equity analyst of Capital Group. Dave and Ted bring significant capital markets, corporate governance, operational, strategic and public company board experience to our Company -- board expertise. We think their experience really adds to the strength of our current board and we're excited to have them involved. With that, let me hand the call over to Kyle for a detailed discussion of our financial results.

[Kyle Huebner:]

Thanks Ken. We will now review our first quarter financial results. The discussion of our financial results today include non-GAAP financial measures. As Jeff described, the reconciliation of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release and our metrics on our Investors website. Total revenue was $92.6 million in Q3, up 79% year-over-year. Q3 year-over-year revenue growth, excluding our Endicia and ShippingEasy acquisitions, was 26%. Mailing and shipping revenue was $87.6 million, up 78% year-over-year. Mailing and shipping gross margins was 86.0% in Q3 versus 82.0% in Q3 of 2015. We experienced year-over-year increases in our Q3 costs of sales and marketing, R&D and G&A primarily related to our acquisitions and our investments to support the strong growth in our mailing and shipping business. However, these costs as a percent of revenue have all declined as we scale the business. Non-GAAP operating income was $44.4 million in Q3, up 117% year-over-year. Adjusted EBITDA was $45.6 million in Q3, up 113% year-over-year. The adjusted EBITDA margin was 49.2% compared to 41.3% in Q3 2015. Non-GAAP adjusted income per fully diluted share was $2.33, up 104%, versus $1.14 per share in Q3 2015. We ended Q3 with $84 million in cash and investments, down $39 million from $123 million at the end of Q2 2016. The decrease in cash which was partially offset by operating cash flow, was primarily related to the following uses of cash, $55 million for the ShippingEasy acquisition; $17 million for share repurchases during the quarter; $1 million for required debt payments; and approximately $2.2 million for capital expenditures. We ended the quarter with approximately $150 million in debt and our current interest rate is approximately 1.9%. During Q3, the Company repurchased approximately 193,000 shares at a total cost of $17.4 million and from the period January 1 through October 31, 2016, we repurchased approximately 614,000 shares at a cost of $55.5 million. On October 25, of this year, the Board of Directors approved a new share repurchase program that replaces the Company's prior repurchase program and authorizes the Company to repurchase up to $90 million over the next six months. Now, turning to guidance, we expect fiscal 2016 revenue to be in a range between $340 million to $360 million. This compares to previous guidance of $320 million to $345 million. We expect fiscal 2016 non-GAAP EPS to be in the range between $8.00 to $8.50 per diluted share. This compares to previous guidance of $7.00 to $7.50. We expect fully diluted shares for the year to be approximately $18.4 million. We expect capital expenditures related to normal business operations to be approximately $5 million in 2016. In addition, we expect to use approximately $5 million in cash in Q4 for investments in our Company-owned corporate headquarters for renovations and improvements to the building formerly occupied by tenants. We expect revenue in Q4 to be up sequentially over Q3 due to the holiday shipping season. We will anniversary the acquisition of Endicia on November 18, so we expect our year-over-year percent total revenue will reflect this and be lower than Q3. We also expect sales and marketing spend to be up compared to the seasonally slower Q2 and Q3, consistent with historical trends. Now, I'd like to outline the strategic evolution from our focus on traditional small business to shipping. Historically, our primary customer target was traditional small and home-based businesses such as small law firms, real estate agents, insurance brokers, consulting firms, among others. Beginning in 2008, we started to invest in the shipping business, targeting eCommerce merchants and higher volume shippers as a result of incentives the USPS put in place to incentivize the industry to make a strategic shift in that direction. In mid-2014, we made a strategic decision to enter the multicarrier shipping space via the acquisitions of ShipStation and ShipWorks as we realized that a lot of our shipping customers wanted and benefited from a multicarrier solution. Last year, we acquired Endicia and, this year, we acquired another multicarrier shipping solution, ShippingEasy. Our strategic goal in making those acquisitions was to create a portfolio of shipping solutions to meet the need of our target shipping customer no matter what their preference. Whether a customer wanted a USPS single carrier or a multicarrier or web or client technology solution, we would be able to meet the need of that customer. We feel we now have a very complete suite of shipping solutions. We now view ourselves as primarily operating in two customer segments, traditional small business and shipping which have very different value propositions, customer economics and growth prospects. Our revenue growth in the traditional small business area has primarily been by growth in paid customers. ARPU in that business has historically been more stable due to the fact that our business model is primarily a fixed monthly subscription fee. While the historical growth rates we experienced in small business were more modest than our recent growth rates, our return on investment in that business is very attractive as we're able to acquire customers with a very attractive lifetime value relative to the cost of acquiring that customer. The economic model in the shipping business -- shipping area of our business -- is different. Shipping customers typically have significantly higher lifetime values and ARPUs than small business customers because their revenue is driven by a shipper's package volume. Shipping is a critical part of an eCommerce merchant or warehouse shipper's daily operations in ensuring they get a package to their customer in an efficient, reliable and cost-effective manner. Shipping pricing and operations can be very complex which can be confusing for shippers, so our solutions represent an opportunity to create value for the customer by streamlining this area and ensuring the customer is choosing the best option for shipping each package. Our solutions allow shippers to choose the most cost-effective option for shipping the package which creates cost savings that drop to the merchant's bottom line. Package volume and growth in package volume resulting in higher ARPUs are more important drivers of revenue growth in the shipping area than are the number of customers. Since 2014, our revenue growth has been primarily driven by the shipping business. In order to help facilitate a better understanding of the significance of shipping to our overall financial results, we're providing a couple of new data points today. For the third quarter 2016, shipping related revenue accounted for approximately two-thirds of our total revenue. In addition, shipping revenue, excluding Endicia and ShippingEasy, grew in excess of 50% in Q3. For the trailing four quarters, there were over 1 billion packages shipped using our solutions. So, while we continue to execute on our non-shipping businesses, we expect that our business going forward will be more driven by the shipping area. The majority of our resources and investments are going into shipping and we expect that to continue going forward. Growth in eCommerce-driven shipping is the fastest-growing part of the mailing and shipping industry, driven by the overall growth in eCommerce. According to the U.S. Commerce Department, eCommerce sales grew approximately 16% year-over-year in Q2 2016 and industry reports project eCommerce sales growth in the U.S. in the 10% to 15% per year range going forward. So, we expect our long term shipping growth to naturally benefit from the expected growth in eCommerce. In addition, we believe there are opportunities to grow in excess of eCommerce growth rates through increased adoption of our multicarrier and technology solutions. We're confident that our shipping business has attractive long term and sustainable growth prospects. With that, we will open it up for questions.

[Operator:]

[Operator Instructions]. And our first question comes from the line of George Sutton with Craig-Hallum. Your line is now open.

[George Sutton:]

So, as you are looking at -- as you provided guidance in Q4, I'm curious how you're thinking about some of the numbers that have come out recently in terms of shipping estimates from UPS and FedEx. We've seen estimated eCommerce volumes in Q4. That obviously has a direct effect on your ARPU. I'm curious what kind of things you are using to provide the guidance for Q4. And can you also discuss ARPU in Q3? Was there anything unusual that drove that?

[Kyle Huebner:]

Yes, George, I think when we give a guidance range, it's a range that incorporates a number of different scenarios, you know, that can have an effect on our business whether it's the shipping or the small business area. So there wasn't one single assumption that went into coming up with the guidance. You know, it was just looking at an overall range of scenarios to try and provide the best estimate we could for the year. And obviously, we raised guidance by $1. So, you know, we thought that was a pretty positive sign in terms of what we were providing. In terms of Q3, one of the factors, we had ShippingEasy for the quarter, the full quarter in Q3, that we didn't have in Q2. And as we talked about and as with our other acquisitions, the ARPU for ShippingEasy's customers is higher than our traditional ARPU, so that was a factor that went into it as well as the continued postage growth.

[George Sutton:]

And your message was very clear through the guidance. I appreciate that. So, relative to what is going to be significant cash flow that you are generating going forward, I wondered if you could just sort of rank order some of the opportunities relative to share repurchases, debt pay down, M&A and also if you could address M&A within the construct of the ecosystem that you always talk about? Are there parts of that ecosystem you don't feel you are represented today that would be additive?

[Kyle Huebner:]

Yes so I think we -- in the current, in the Q3, $55 million went to the ShippingEasy acquisition that we funded from cash, so that was the biggest use of cash. The Board authorized a new $90 million program over the next six months. The previous program was $40 million. So, I think that's an indication that the share repurchase is certainly a very high priority in terms of our expected use of cash. In terms of the acquisitions, I think that's something that we evaluate on an opportunistic basis. You know, as I mentioned, we have a very complete portfolio of solutions, so we will still continue to monitor the landscape and evaluate potential opportunities on an opportunistic basis. And then, you know, the debt repayment really is just something, over the course of time, that we'll look at and, relative to cash, we might generate in excess of the share repurchase or any acquisitions that we do.

[Operator:]

And our next question comes from the line of Kevin Liu, B. Riley. Your line is now open.

[Kevin Liu:]

First, just in terms of the niche acquisition, now that you've owned it for a year, have You already recognized all of the synergies you anticipated on the cost side or are there more to come as we head into next year? And similarly, do you see any opportunities to improve the cost structure with ShippingEasy as you get it fully integrated?

[Kyle Huebner:]

So, I'll answer the first part -- or the second part first. ShippingEasy is more comparable to our ShipStation and ShipWorks acquisitions where you had a smaller private company that had great technology, great people, but was more capital constrained. So, we view ShippingEasy not as a cost-cutting play but as an investment and provide capital to help them and us grow faster than we otherwise would have on our own. In terms of Endicia, in looking at the synergies, I think we're very pleased with where we're a year in and I think a lot of the low-hanging fruit is stuff that we have achieved already. Some of the synergies, you know, are things that will take a longer period of time. For example, all of the data centers we have not consolidated yet, that's a very -- those are very important services for the customer and we want to make sure we get them right. So, there are certain things, more on the technology and data center side, that are still future opportunities.

[Kevin Liu:]

And you talked a little bit about the evolution for mailing over to the shipping side of the business. You know, historically, when you guys were more mailing-oriented, we would see a pretty significant influx of subscribers during the fourth quarter as well as a big uptick in the marketing spend. How do you expect those to trend now that your focus is a little bit more so on the shipping side of things?

[Kyle Huebner:]

Yes, we still expect sales and marketing spend to be up, but we're allocating -- more of that spend is allocated to the shipping segment where the customers are often a lot more expensive to acquire but have the higher lifetime values that we talked about. So, in terms of number of customers, we talked about that is not really the primary focus with shipping as opposed to getting a bigger customer with more package volumes. So, the influx of customers, as you call it, might not be at the same level as historically as more the sales and marketing spend is allocated to the shipping business. But we still expect the overall sales and marketing to be up consistent with historical.

[Kevin Liu:]

And then just lastly, either in terms of your conversations with kind of the USPS in areas of shipping volumes where they might want to incentivize folks within the ecosystem to boost volumes or perhaps even with your resellers, are there any changes that you are anticipating heading into next year that would either give you more or less opportunity to benefit from those volumes?

[Ken McBride:]

You know, I would say not in general. I think, in the history of the USPS, we've been at this for quite some time in terms of the incentives they provide around shipping like Kyle outlined. So, no, I don't think we're really anticipating a change in 2017 relative to those types of economics.

[Kyle Huebner:]

Yes, I mean I would say, if you just -- if you look in the long term context from 2008 to 2016, the incentives that have been provided have been improved or expanded over the course of that six-year period, so it's hard to predict any one given year, but the long term trend is towards better and expanded incentives as the program has demonstrated to work.

[Operator:]

And our next question comes from the line of Allen Klee with Sidoti. Your line is now open.

[Allen Klee:]

How is the process of integrating Endicia's sales force into selling kind of all of the solutions you have going?

[Ken McBride:]

I think we combined our sales teams pretty early on. It's challenging to have multiple sales teams under a Stamps and Endicia umbrella trying to sell to the same customer, so we combined that effort early on and I think we really aligned their goals around the our corporate goals, including selling all of the brands into the various customer segments. And so I think what you've seen, probably our success is they do so all of our brands and they have been successful of being able to target the customer with the particular solution that really fits that customer's needs the best.

[Allen Klee:]

Okay. And then, last quarter, you had mentioned that you didn't think the seasonality would continue so the 3Q might have been a down quarter sequentially. So kind of what's changed from what your thoughts were then in terms of the strength in the quarter?

[Kyle Huebner:]

Yes, so a couple of things on that. One is it was the -- we had the first full quarter of ShippingEasy and so those results were positive and ahead of our expectations. We did have customized postage was up about $2.5 million sequentially. That was really driven by high volume business orders which are unpredictable. They tend to fluctuate quarter to quarter and you can get a really big order, so that contributed. The marketing spend I think maybe came in a little bit lighter than we had expected. It was down sequentially by almost $2 million. So and then the synergies continue to pace ahead of expectations. So, I would say those were the main factors in exceeding our expectations.

[Allen Klee:]

Okay. And just for clarification, with the buyback, can you just say again how much was bought back during the quarter? And did that mean that you completed the old buyback and now, as of today, there is this new $90 million one?

[Kyle Huebner:]

Yes, so the number for the quarter was 193,000 shares with a total cost of $17.4 million. That was really split over two different programs. So, the program that was in effect for the second half of Q3 really wasn't put into place until towards the middle of August after it was approved and the window opened. So, we repurchased about $26 million of the $40 million from when that plan went into effect through the end of October. And so, the Board approved a new plan and that will go in effect here shortly. So, the plans are more coordinated with the Board meetings and therefore they tend to overlap by quarter. So effective kind of here in the next week, the new $90 million program will take effect.

[Operator:]

[Operator Instructions]. And our next question comes from the line of Tim Klasell with Northland Securities. Your line is now open.

[Tim Klasell:]

Just a real quick question. Obviously, there's been a lot of concern over the last few quarters about your reseller arrangements. Have you seen any attrition from your resellers over the quarter that's above and beyond normal?

[Ken McBride:]

Did you say attrition?

[Tim Klasell:]

Yes, resellers going with maybe another provider, i.e. Pitney Bowes?

[Ken McBride:]

No, we haven't really seen many material changes from what we outlined last quarter and when we outlined this quarter. Largely, the businesses continue to be the same.

[Tim Klasell:]

Okay, great. And then one final question. What are you seeing out there for competition? There's a lot of smaller guys out there. I know they are relatively insignificant in the high-volume shipping business. But are there -- has there been any change? Has Pitney Bowes made any moves that have been significant or anything that you could share with us please?

[Ken McBride:]

Sure. I mean, yes, there's been some announcements out there by various different, like you said, small organizations that are talking about different technologies they may provide. Pitney Bowes has talked about some different technologies. Largely, most of it is around providing a shipping label and shipping label aren't really -- isn't really something that a typical customer really cares about so much. What's really important to our customers and to customers in general in eCommerce is really the software that is wrapped around the shipping label and the integrations and the automations we provide with our over 400 partners, you know, the support for all the carriers. We support 20 different carriers and all the sophisticated features that are there to really help the customers process their daily orders. So, I think it's really -- our solutions are really something that would not be generally applicable to the types of things that have been announced out there with the competitors.

[Operator:]

And our next question comes from the line of Darren Aftahi with ROTH. Your line is now open.

[Darren Aftahi:]

Just two if I may. One, can you talk a little bit about quarter-to quarter? It looks like, if you back out ShippingEasy, paid customers decreased. And then, second, on the ARPU question, where do you think this should go long term and, on that vein, EBITDA margin as well? Thanks.

[Kyle Huebner:]

So, on the paid customer number, Endicia was a partner of ShippingEasy's prior to the acquisition. So, ShippingEasy customers in fact already had an Endicia account. So, the paid customers that ShippingEasy brought to the table were actually already included in our paid customer numbers previously. But now, through owning ShippingEasy, we capture the complete economics on that customer instead of only a part of it. And the EBITDA margins, it's -- we've seen healthy improvements as we've leveraged our scale. And in the shipping business, a lot of the infrastructure is there, so, as a customer drives volume, the marginal economics are better than the initial economics. So, you know, we don't provide a long term EBITDA margin, but I think, where we're, we simply maintain that would be a very positive outcome. But we're always looking for ways to cut costs and expand the margin to the extent possible.

[Darren Aftahi:]

And then one more, if I may? Some of the marketplace partners that use stamps are starting to sell on social. So, I'm just kind of curious what your thoughts are about kind of potential tailwinds to your business longer term. Thanks.

[Ken McBride:]

Can you repeat the question?

[Darren Aftahi:]

I'm sort of curious about your thoughts. Some of the marketplace partners that use Stamps.com are starting to sell directly on social, i.e., you know, Bible pins on Facebook, etc. and I'm just curious about your thoughts relative to your business longer term.

[Ken McBride:]

Yes, it's a key part of our strategy to, in our multicarrier but also in our single carrier USPS, to do integration and to provide customers automation with the selling channel. So I think we've talked a lot about the 400 integrations we have out there with the various partners, the online marketplaces like eBay, Amazon and Google and PayPal and shopping carts like Shopify or ChannelAdvisor. And so, to the extent we're able to market to their customer base, it's a good source of acquisition for us.

[Operator:]

And I'm showing no further questions at this time. I would now like to turn the call back over to Mr. Ken McBride for any closing remarks.

[Ken McBride:]

Thanks for joining us. And as always, if you have any questions, you can go to our Investor website, investor.Stamps.com or call us on our investor line, 310-482-5830. Thank you.

[Kyle Huebner:]

Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.