Stamps.com Inc.
Q4 2009 Earnings Call Transcript

Published: 12 Feb 2010

[Operator:]

Good day everyone. Welcome to the Stamps.com fourth quarter 2009 results conference call. Today's call is being recorded. At this time, I'd like to turn the call over to Jeff Carvari, Finance Director. Please go ahead.

[Jeff Carvari:]

Thank you very much. Good afternoon everyone. 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 fourth quarter and fiscal year 2009. Then we'll discuss financial results and talk about our business outlook. But first, the Safe Harbor Statement. The Safe Harbor Statement is under the Private Securities Litigation Reform Act of 1995. This release contains forward looking statements such as our expectations and financial guidance that involves risks and uncertainties, important factors including the company's ability to complete and ship its products, maintain desirable economics for its products, and obtain or maintain regulatory approval, which could cause actual results to differ materially from those in the forwardlooking statements, are detailed in filings with the Securities and Exchange Commission made from time to time by Stamps.com, including its annual report on Form 10K for fiscal year ended December 31, 2008, quarterly reports on Form 10Q, and current reports on form 8K. Stamps.com undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date here of or to reflect the occurrence of unanticipated events. Now let me hand the call over to Ken.

[Kenneth McBride:]

Thank you for joining us today. During the fourth quarter, we did $21.7 million total revenue. The nonenhanced promotion channel PC Postage revenue was $17.4 million, which was up 7% from the fourth quarter of 2008. This is our fifth consecutive quarter of sequential revenue growth in our PC Postage business, excluding the enhanced promotion channel. We were pleased with the growth this quarter in light of the continued tough macroeconomic environment. Enhanced promotion channel PC Postage revenue was $1.4 million, which was down 33% from the fourth quarter of 2008 as we continued to cut our investment in this channel. PhotoStamps revenue was $2.9 million, which was down 28% versus the fourth quarter of 2008 as we continued to reduce our sales and marketing spend in the PhotoStamps area as well. NonGAAP earnings per fully diluted share was $0.18. This is our best quarterly earnings per share in three years. On the call today, we'll talk about the PC Postage business in detail, and we'll talk about PhotoStamps, then we'll discuss financial results and our business outlook. Now, let's begin with a more detailed discussion of the PC Postage business. As a reminder, the customer metrics we will discuss on this call exclude all enhanced promotion channel activity. During the fourth quarter, we acquired approximately 66,000 gross small business customers. This was our highest single quarter customer acquisition ever. Recall that during the fourth quarter of last year we saw a large number of customers acquired from the USPS, when their website went down and they directed their customers to us. We did not see a repeat of that event this year. We estimate that our Q4 customer acquisition was up 18% versus Q4 2008 when excluding customers acquired from that unusual event last year. Without excluding those customers, customer acquisition was up 1% versus Q4 2008. Our cost per new customer acquired or CPA for the fourth quarter was $107 which was down 6% from $114 in the third quarter of this year. Again excluding the impact of the USPS outage last year, we estimate that the $107 CPA in the fourth quarter of 2009 was approximately 3% lower than the fourth quarter of 2008. When looking at the quarterly CPA trends for 2009, starting in the first quarter at $122 going to $126, $114, and then $107 in the fourth quarter, we are encouraged by the improving trends that we saw in the second half of the year, with a much stronger customer acquisition and a decreasing CPA. During the economic recession, the biggest impact to our business has been on new customer acquisition. We are very pleased to see this trend. We are cautiously optimistic that we are seeing the beginnings of improved trends in our customer acquisition related to improvements in the overall economy. Monthly churn during the fourth quarter was 3.7% versus 3.8% in the third quarter of 2009 and versus 3.8% in the fourth quarter of 2008. Although churn remains at an elevated level versus the levels we saw prior to the recession, we were pleased to see a decrease in churn in Q4. It could be another sign of improving economy impacting our business positively. Paid customers in the fourth quarter of 2009 were 320,000, which is up 5,000 sequentially versus the 315,000 paid customers in the third quarter of 2009 and up 9,000 versus the 311,000 in the fourth quarter of 2008. We also saw an increase in our ARPU during 2009 and, coupled with the paid customer growth, total 2009 PC Postage revenue growth was up 5% yearoveryear. In a very tough year, we were reasonably pleased that we were still able to generate growth in our core PC Postage business. Now let's turn to the 2010 plan for PC Postage. In the small business/home office area, we plan to modestly increase our customer acquisition spend outside the enhanced promotion channel. The return on investment on our marketing spend remains attractive, and we continue to believe that the lifetime value of a nonenhanced promotion customer is at least two times higher than the current cost of acquisition. We also feel that we are beginning to see signs of improvements in the macroeconomic environment being reflected in our small office/home office customer acquisition metrics. Based on the improving trends, we expect to increase our PC Postage small business acquisition spend outside the enhanced promotion channel by approximately 10% to 15% in 2010, versus the 10% growth we did in 2009. We feel it is important to continue to invest in our small business customer acquisition channels for the longterm growth of the business. We expect that we will continue increasing customer acquisition spend in our various marketing areas, including direct mail, traditional media, online marketing, and other areas. Also in the SOHO area, we're going to continue optimizing our business model and our overall customer experience in several ways. During 2009, we made several optimizations such as streamlining the navigation paths of our website, adding multimedia enhancements and building a social media network presence, launching new web content pages and a corporate blog for improved customer communications, improving our store experience with faster shipping times, bringing free USPS supplies to our customers available conveniently from within our store, and we also launched three new versions of our PC Postage product, version 8.0, 8.5, and 8.6, which introduced new functionality, such as online print history, batch shipping, database integration, and direct integrations with multiple ecommerce sites. During 2010, we expect to continue making improvements in our SOHO business in several ways such as making our software installation process easier and more seamless, expanding our presence on social networking sites, expanding our customer web portal, and expanding content and multimedia on our website, adding an improved and more straightforward selection and delivery method for our customer promotional items, and several planned product releases in 2010, including improvements to our batch capability, expansion of our ecommerce integrations, enhancements to our certified mail capabilities, and better integration with QuickBooks for our customers. In the Enterprise business area for 2010, we are going to continue scaling up our sales and marketing efforts in that business. Customers continue to be attracted to us versus a postage meter based on our dramatically lower total cost of ownership and visibility into individual employee activity that isn't available with a meter. During 2009 we made a lot of great progress in the Enterprise area. We grew Enterprise revenue by 121% in the fourth quarter of 2009 and 113% for the full year 2009. This is a nice acceleration in growth versus the 80% growth we saw for fiscal 2008. We continue to see churn rates in Enterprise that are much lower than in our SOHO business. We're also seeing higher ARPU, as our monthly service fees are higher in Enterprise than in our SOHO area. During 2009, we continued scaling up our successful marketing lead generation program in areas such as print, direct mail, and telemarketing. We continued building our sales team and improving our sales efficiency throughout the year. In 2010, we plan to continue enhancing our Enterprise efforts. We plan to scale our sales team head count by at least 25% in 2010, and we plan to continue improving the efficiency and quality of our sales team with continued investment in hiring and training top personnel. We also plan to continue scaling up and optimizing our marketing lead generation efforts. We also plan to launch Enterprise version 2.0, which will include a dramatically improved webbased Enterprise reporting system with a sophisticated frontend reporting tool with real time data, improved webbased postage management tools, and enhanced webbased financial and administrative controls for central decision makers. Overall, we're excited about the continued progress in Enterprise, and we feel that we are going to see returns on the investments we have been making in this area. We would note that the length of the sales cycle and account rollout process means that our Enterprise effort will likely take several years to become a material and positive contributor to our top and bottom line. That said, we're expecting to see continued strong growth out of this business line going forward; and we expect that it will be a great area for us in the long term. In our high volume shipper area, we plan to continue scaling up our efforts in this area in 2010. Our goal in this area is to attract high volume shippers such as fulfillment houses, ecommerce shippers, large retailers, and other types of high volume shippers. While we have always had these types of customers using our platform, we began a more aggressive push into this area during 2008; and we continued scaling up this area in 2009. During 2009, we made several enhancements to our shipping technology such as batch capability, which allows users to print a large volume of shipping labels all at once; database integration technology for seamless, automatic import and export of information to and from a customer's internal order database; and direct integrations with ecommerce platforms including eBay, PayPal, Amazon.com, Yahoo!, and Google so that a user can read and write order information directly from Stamps.com software into and out of these platforms. We also enhanced our Stamps.com web services to provide the latest technology for integrations via a web platform, and we enhanced our Stamps.com software developers' kit for integrations via a client platform. During 2009, we also gained integrations into several ecommerce and multicarrier systems, such as ShipWorks, TrueShip, Auctane, Atandra, and Webgility. And during 2009 we also built out a national sales team which focused exclusively on the high volume shipping area. And we launched our professional shipper program featuring free service for anyone doing more than $1,500 a month of domestic or international Priority or Express Mail under a new technology partnership with the U.S. Postal Service. As a result of our efforts in 2009, we began to see some acceleration in our growth in this area. For instance, our Q4 postage printed in the high volume shipping segment grew 25% versus the fourth quarter last year. During 2010, we are continuing to invest in our shipping technology and our sales and marketing efforts. We will continue to improve our batch capability with easier order management and order flow. We will add additional shopping cart integrations for easier data export and import from the tools the customers like to use. We will continue to drive new software integrations into sophisticated high volume shipping solutions such as multicarrier shipping software. And we will continue to scale and drive up our sales efforts using our national sales force. Attracting high volume shippers is a strategic focus for our company and is also one of the most important strategic initiatives of the U.S. Postal Service. As our most important partner, we are focused on making them as successful as we can in this area. Overall, we feel that our 2010 PC Postage plan is a very solid one. We feel that our long-term opportunities to grow this business are very attractive. Despite an economic environment that, while showing signs of improvement, remains challenging, we plan to take advantage of these opportunities for the benefit of our long-term shareholders. Now let's turn to a more detailed discussion of PhotoStamps. During Q4, we continued our program to increase profitability in the PhotoStamps area with a smaller and more focused marketing plan; and we decreased our total sales and marketing for PhotoStamps by 81% versus the fourth quarter of 2008. As a result of our decreased spend, total revenue was $2.9 million for the fourth quarter, which was down 28% versus the fourth quarter of 2008. The decrease in revenue during Q4 was expected given the magnitude of our decrease in sales and marketing activity. We also believe that the broader economic slowdown continues to negatively impact PhotoStamps, as it is more of a luxury item than a necessity. During the fourth quarter and for 2009 as a whole, we estimate that the PhotoStamps business was profitable. During 2010, we plan to continue keeping a tight rein on our marketing spend; and we expect that the PhotoStamps business will again be profitable in 2010. Longer term, we do not expect to invest heavily in the PhotoStamps area until the economy improves; but we do continue to believe that there are opportunities to grow the business in a better economic environment. With that, now Kyle will discuss our more detailed financial results and our business outlook.

[Kyle Huebner:]

Q4 customer metrics. PC Postage metrics we will discuss in this section exclude all estimated enhanced promotion activity. For a more detailed definition of how we calculate each of our metrics, you may refer to our quarterly investor metrics spreadsheet at investor.stamps.com. We will now review the postage metrics for the fourth quarter. Paid customers in Q4 were 320,000, up 5,000 from the 315,000 paid customers in Q3 2009 and up 3% versus the 311,000 paid customers in Q4 of 2008. The change in paid customers from Q3 2009 to Q4 2009 was composed of 46,000 new paid customers that were successfully billed for the first time during the quarter, offset by 41,000 in lost paid customers. We were pleased with the sequential growth in paid customers in the fourth quarter driven by the strength in customer acquisition and new paid customers. PC Postage small business customer acquisition spend, which includes both sales and marketing spend as well as promotional spend which is included in cost of sales, was $7.0 million in Q4 which was up 14% versus $6.2 million in Q4 2008. Small business cost per new registered customer was $107 in Q4, which was down 6% versus $114 in Q3 2009 and up 13% versus $94 in Q4 2008. As Ken mentioned, we believe the CPA would have been down 3% excluding the USPS customers acquired in Q4 2008. So we were pleased to see the lower CPA in Q4. Subscriber revenue per customer. ARPU was $18.12 for Q4, which was up 4% versus $17.41 for Q4 2008. The increase in ARPU was partially attributable to increase in the average store revenue per paid customer driven by increased usage of our service and partially attributable to having a larger number of customers on higher priced plans. We do see some normal quarter-to-quarter fluctuations in our ARPU metric based on factors such as pricing plan tests, store promotions, and seasonality. Paid customer cancel rate was 3.7% in Q4 compared to 3.8% in Q3 2009 and 3.8% in Q4 2008. We believe that efforts we have taken to reduce churn, such as our retention program and product usability improvements, are helping to mitigate the impact of the economy on churn and that our churn rates would be higher without those programs in place. Customer usage. Total postage used by all customers was $100 million in Q4, up 14% versus Q4 2008 and $355 million in 2009, up 11% versus 2008. We were pleased to see continued growth in postage usage as it demonstrates the value the customers are getting from our service. Now we will review our fourth quarter financial results. Today we are going to discuss our financials on a nonGAAP basis. A detailed reconciliation of nonGAAP to GAAP measures is contained in the earnings release posted on our website. Total revenue was $21.7 million in Q4, which was down 3% compared with Q4 2008. Nonenhanced promotion PC Postage revenue was $17.4 million in Q4, up 7% compared with Q4 2008. The $17.4 million was our highest ever quarterly nonenhanced promotion PC Postage revenue and was our fifth consecutive quarter of sequential revenue growth in this area. The enhanced promotion PC Postage revenue was $1.4 million in Q4, down 33% compared with Q4 2008. The decline in enhanced promotion revenue was primarily attributable to lower marketing spend, which was down 56% compared with Q4 2008 as we continue to reduce our investment in this segment of the business. PhotoStamps revenue was $2.9 million in Q4, which was down 28% compared with Q4 2008 as a result of the pull back in marketing spend which was down 81% yearoveryear. Gross margin, excluding 123R expense was 70.5% in Q4 compared with 70.8% in Q4 2008. PC Postage gross margin excluding 123R expense was 77.6% in Q4, compared with 79.8% in Q4 2008. Cost of sales included promotional expenses of $550,000 in Q4. The yearoveryear decrease in PC Postage gross margins was primarily due to increased promotional expenses and slightly lower supply store gross margins due to increased fulfillment costs. For the PhotoStamps business, gross margin excluding 123R was 23.6% in Q4 compared with 29.3% in Q4 2008. The yearoveryear decrease in PhotoStamps gross margin was primarily attributable to higher postage costs as a percent of revenue and less fixed cost leverage with the revenue decline. Total sales and marketing, excluding 123R expenses, was $7.9 million in Q4 which was down 5% compared with $8.3 million in Q4 2008. PC Postage sales and marketing spend increased by 5% compared with Q4 2008 and PhotoStamps sales and marketing decreased by 81% compared with Q4 2008. R&D spend, excluding 123R expense, was $1.9 million in Q4, which was down 3% compared with Q4 2008. G&A spend excluding 123R expenses, was $2.7 million in Q4, which was down 15% compared with $3.1 million in Q4 2008. The decrease was primarily attributable to lower legal spend during the quarter. NonGAAP operating income was $2.8 million in Q4, which was up 17% compared with $2.4 million in Q4 2008. We were pleased to see this growth in operating income for the quarter. Interest and other income was $202,000 in Q4 2009, which was down 63% versus $542,000 in Q4 2008. The lower interest income compared with last year was attributable to the lower interest rates and lower cash balances resulting from our stock repurchase plan. NonGAAP net income was $2.9 million or $0.18 per fully diluted share based on 15.9 million fully diluted shares, compared with $2.8 million or $0.16 per fully diluted share based on 18 million fully diluted shares in Q4 2008. Free cash flow, defined as nonGAAP net income plus D&A less CapEx, was positive $3.1 million in Q4 and positive $11.1 million for the full year 2009. For the quarter, D&A was $290,000 and CapEx was approximately $35,000. We ended Q4 with $72 million in cash and investments, which was equivalent to $4.58 per ending balance sheet share. In calculating the total cash and investments, we are including cash, cash equivalents, long-term investments, short-term investments, and restricted cash. During the fourth quarter, the company repurchased 132,000 shares for a cost of $1.2 million. For the full year 2009, the company repurchased 1.6 million shares for a cost of $13.7 million. On July 23, 2009, Stamps.com's board of directors approved a share repurchase program authorizing the company to repurchase up to 2.5 million shares of Stamps.com stock from August 2009 to February 2010 as market and business conditions warrant. Under that plan, to date the company has repurchased 600,000 shares for a total cost of $5.2 million. On February 4, 2010, the board of directors voted to extend the currently authorized share repurchase program for an additional 6 months through August 2010. Net operating loss shareholder update. We estimate that as of December 31, 2009, our Section 382 ownership shift was at an approximately 26% level compared with a 50% level that would trigger an impairment of our NOL asset. Per our NOL protective measures, any person, company, or investment firm who wishes to become a 5% shareholder of Stamps.com must first obtain a waiver from the NOL protective measures from the company's board of directors. We currently have approximately 15.5 million shares outstanding, so ownership of approximately 777,000 shares or greater would constitute a 5% shareholder. Now turning to guidance. We expect fiscal 2010 revenue to be between $80 million to $90 million. We expect fiscal 2010 GAAP EPS to be between $0.50 to $0.70 per fully diluted share. GAAP numbers assume an estimated $3.5 million of 123R expense and $3.7 million noncash tax benefit resulting from the potential additional partial release of the valuation allowance against our deferred tax asset and NOLs. Excluding the FASB 123R expense and noncash tax benefit from our deferred tax asset, we expect 2010 nonGAAP EPS will be between $0.50 to $0.70 per fully diluted share. We expect to see midsingle digit revenue growth in PC Postage revenue excluding the enhanced promotion channel for 2010. The PC Postage Enterprise and shipping businesses are currently in an investment phase that we expect to act as a drag on 2010 earnings, but with high expected return over the next 5 years. We expect enhanced promotion revenue and marketing spend to be down in 2010 compared to 2009, as we continue to reduce our investment in this area. While we expect full year enhanced promotion revenue to be down versus 2009, we are hopeful that we may start to see a stabilization in this part of the business during the year. We expect PhotoStamps revenue and marketing spend to be flat to down in 2010 compared with 2009, depending on the state of the economy and the seasonally strongest fourth quarter of 2010. We expect PC Postage customer acquisition spend in 2010 to be up 10% to 15% compared to 2009 as we continue to invest in this core part of our business. We expect acquisition spend to follow a similar pattern of higher spend in the seasonally stronger Q1 and Q4 and lower spend in the seasonally slower Q3. Legal spend continues to be a material expense for us, and there's still a high degree of uncertainty in terms of the timing of legal expenses in 2010 across our primary litigations with Kara and Endicia. We historically tend to see overall higher costs in Q1 such as payroll taxes and audit related expenses that hit Q1 disproportionately. We also expect to increase our customer acquisition spend sequentially in Q1. In terms of our outlook on our business relative to the economic environment, we believe the economy is still having a negative impact on our business; and we are operating in a challenging economic environment relative to historical norms. We were, however, pleased to see improvements in our customer metrics in the second half of 2009 relative to the first half of the year; and we are cautiously optimistic that we will see a continuation of that trend during 2010. So, in summary, despite the current short-term challenges related to the economy, we feel we have a solid business model and that the fundamentals of our long-term business prospects have not changed. Our nonenhanced promotion PC Postage business model with recurring revenue and high gross margins continues to grow despite the economic headwinds, and we are excited about the long-term prospects for the Enterprise and shipping opportunities. Our business generates strong free cash flow, which has helped fund our share repurchase program. We have a strong balance sheet with $72 million in cash and investments, no debt, and a large $94 million deferred tax asset. With that, we will open it up for questions.

[Operator:]

(Operator Instructions) Your first question comes from Graeme Rein – Bares Capital.

[Graeme Rein:]

I had a quick question about the pricing. Have you guys experimented with that any in the most recent quarter both on the PC Postage and also with the Enterprise product? Can you talk about any trends that you are seeing there?

[Ken McBride:]

We continue to look at the pricing situation with some of the longer-term data we have been monitoring. As you know, we tested out some higher price points back in 2008 before the recession. But as a result of the recession partly as well as some of our tests, we decided to revert to the $15.99 price point which is where we remain in the SOHO area.

[Kyle Huebner:]

So specifically in Q4, in terms of new small business customers, the majority of those signed up on the service at the $15.99 price point. But we do have kind of the some of our other pricing plans with our products that have more features, such as the multi-user premier, the Enterprise product, and professional shipper, which are all at higher price points than the $15.99. In the small business area, it's mostly $15.99 at this point, but we continue to make efforts and sign up more customers on some of the more feature rich products at higher price points.

[Graeme Rein:]

Question on the buy back, given your cash levels and given where the stock price is trading, I would have expected a little bit more shares to be purchased. Was there any reason that you held back or can you just talk generally about that?

[Kyle Huebner:]

At this point, our biggest factor is the daily volume limitation that we can repurchase. If you look at the trading volume in our stock over the past couple of years with the decline in the overall market, the volumes come down. Probably the biggest factor at this point is we're kind of limited to about 10,000 shares a day as the daily max repurchasing in the open market.

[Graeme Rein:]

I think you guys are going a great job with the investing in the shipping product and the Enterprise product. $11 million in free cash flow, I think you said, for year and you repurchased 13 million in shares. I understand you need a little bit of cushion for legal expenses. But even if you repurchase all 2.5 million shares just say at $10 a share, you still have $45 million in cash. Has there been any thought of a special dividend just to kind of get some of that cash off the balance sheet because it's far and away more than you might need?

[Kyle Huebner:]

The board and management continually look at the uses of cash. During the past two years and even four years, the focus has been on the share repurchase program. At this point, we continue to look at it. I would say we're not averse to doing a special dividend. We did a special dividend at $78 million a few years ago. Conceptually, we're not averse to it but at this point we haven't announced any specific plans to do one. I do think it's still important to maintain a strong balance sheet in terms of the cash. So the $70 million we're at now is historically kind of the lowest cash levels we've had since we went public. If we were to get down to kind of $45 million to $50 million, I think that's a level that we would still want to preserve the strong balance sheet. We will continue to monitor it going forward and see to the degree that we can execute on the share repurchase plan.

[Operator:]

Your next question comes from Kevin Liu – B. Riley & Company.

[[inaudible]:]

This is [inaudible] stepping in for Kevin.

[[inaudible]:]

I might have missed this, but will sales and marketing spend in the enhanced promotion channel decrease or increase in 2010?

[Kyle Huebner:]

At this point, if you look at the exit rate. In Q4, we were at about 500,000. If the business were to flatline, which we will see as the year develops. But just extrapolate and annualizing Q4, you come out with about $2 million. And last year for the full year, we spent $2.5 million. I think we still expect the sales and marketing or the marketing expenses in the enhanced promotion to be down on a full year basis.

[[inaudible]:]

I see that the ARPU has been trending up nicely for several quarters. Do you expect this trend to continue? If so, would it be a function of higher price points for subscription services or are you seeing an increased usage of the PC Postage software?

[Kyle Huebner:]

It's really two factors. In terms of the service fees, the primary reason for the increase in the ARPU related to service fees is having more customers in the higher priced plans compared to 2008. And I mentioned some of it is a function of various things such as the fact that we tested higher price points over the past 2 years, so we do have some of those customers on higher price points for the small business pro plan. We've increased our marketing related to the multi-user premier, which is a $24.99 price point. The Enterprise segment Ken mentioned, the Enterprise product has a higher ARPU; and then the professional shipper is a $34.99 plan. As we look forward to 2010, I think we're continuing to hold at the $15.99 price point. In the short term, I don't see that pricing on the small business being a big factor in 2010. I think we feel that longer term in a better economy that the base price we can support is higher. Then as we continue to focus on the Enterprise and shipping, those aren't material at this point. But to the extent we continue to grow those businesses, they would have a positive long-term impact on the ARPU. So that's the service fee part which is really flat rate pricing. In terms of usage of the software, that really helps drive the supply store revenue. So we have seen an increase in the store revenue ARPU related to the increased usage in the service as customers purchase consumables and peripherals. And if you look at Q4, the store revenue is up 16%, postage printed was up 14%, and paid customers was up 3%. So it really has been more of the increased usage driving things like the consumable sales in the store.

[[inaudible]:]

Has the Enterprise opportunity pipeline increased or how many enterprise trials are going on today? If you don't mind discussing that.

[Kenneth McBride:]

We don't really give that information out for competitive reasons, but we're happy with the progress we've made in the Enterprise area. You saw the revenue growth as a result of the increased customer trials and increased sales activity, the increased marketing activity. The revenue was up 113% for the year, 121% in Q4. We're happy with the progress we've made. We're planning to continue scaling up the area this year with an increase in sales head count by at least 25%, continuing to scale up the marketing and the lead gen, and continuing to build out technology to make the Enterprise solution better for our customers. So overall we're, I think, optimistic about the business the more we get into it.

[Kyle Huebner:]

The other thing I would add is if you look at the customers, the growth that's really helped by getting new customers into the trial and new customers into the pipeline, but also from expanding the number of locations within existing customers. And we've said in the past it can often take 2 years or more to kind of get full deployment across all locations. So in 2009, we benefited both from getting new customers as well as increasing the penetration in existing customers.

[Operator:]

At this time, we have no further questioners. I would like to turn the call back over to management for any additional or closing remarks.

[Kenneth McBride:]

Thanks for joining us. If you have any follow up questions, you can come to the website investor.stamps.com or give us a call at (310) 4825830. Thanks so much.

[Operator:]

This concludes today's conference. Thank you for your participation.