This Quarterly Report on Form 10-Q (this "Report") contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). You can find many (but not all) of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "projects," "seeks," "intends," "plans," "could," "would," "may" or other similar expressions in this Report. Our forward-looking statements relate to future events or our future performance and include, but are not limited to, any statements that refer to future responses to and effects of COVID-19, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans and the adequacy of our funding. Other statements contained in this Report that are not historical facts are also forward-looking statements. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented in this Report, or that we may make orally or in writing from time to time, are based on beliefs and assumptions made by us and information available to us at the time made. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements to anticipate future results or trends. Please refer to the risk factors under "Item 1A. Risk Factors" of our Form 10-K for the year ended
December 31, 2020, as well as those described elsewhere in this Report (if any) and in our other public filings. Some important factors which could cause actual results to differ materially from those in the forward-looking statements include: (i) direct and indirect effects of the ongoing COVID-19 pandemic and any changes or end to it; (ii) our ability to monetize our customers' transactions with carriers, including uncertainties regarding the duration, renegotiation and ultimate impact of existing and potential future arrangements with carriers and partners and our success in implementing our strategy over the long term, (iii) our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments, (iv) our ability to diversify our relationships with carriers, (v) the impact of foreign exchange fluctuations and geopolitical risks, and (vi) other important factors that are detailed in our filings with the Securities and Exchange Commissionmade from time to time. Important risk factors that may cause such a difference also include, but are not limited to, risks related to the ability of the Company to consummate the proposed transaction with Thoma Bravoon a timely basis or at all; the satisfaction of the conditions precedent to consummation of the proposed transaction; the Company's ability to secure regulatory approvals on the terms expected in a timely manner or at all; the risk of disruption from the transaction making it more difficult to maintain business and operational relationships; the risk of negative side effects of the announcement or the consummation of the proposed transaction on the market price of the Company's common stock or on the Company's operating results; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the proposed transaction; competitive factors, including competitive responses to the transaction and changes in the competitive environment, pricing changes and increased competition; customer demand for the Company's products; the Company's ability to develop and deliver innovative applications and features; the Company's ability to provide high-quality service and support offerings; the Company's ability to build and expand its sales efforts; regulatory requirements or developments; changes in capital resource requirements; and other business effects, including the effects of industry, market, economic, political or regulatory conditions; future exchange and interest rates; changes in tax and other laws, regulations, rates and policies; and future business combinations or disposals. The risks included are not exhaustive, and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Without limiting the foregoing, the significant and unprecedented uncertainty regarding the business and economic impact of the ongoing COVID-19 pandemic (as well as the impact of efforts of governments, businesses and individuals to mitigate the effects of such pandemic) on us, our customers, our carrier and integration partners and the global economy, makes it particularly difficult to predict the nature and extent of impacts on demand for our products and services, making our business outlook subject to considerable uncertainty. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of the other risks we face. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Report. 25
Our registered trademarks include
Stamps.com, Auctane, Endicia, Metapack, NetStamps, PhotoStamps, ShipEngine, ShippingEasy, ShipStation, ShipWorks, and the Stamps.comlogo. This Report also references trade names and trademarks of other entities. References in this Report to "we" "us" "our" or "Company" are references to Stamps.com Inc.and its subsidiaries.
July 9, 2021, the Company announced the execution of an Agreement and Plan of Merger (the "Merger Agreement") by and among the Company, Stream Parent, LLC, a Delawarelimited liability company ("Parent"), and Stream Merger Sub, Inc., a Delawarecorporation and wholly owned subsidiary of Parent ("Merger Sub"), pursuant to which, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, in an all-cash transaction valued at approximately $6.6 billion, with the Company surviving the Merger as a direct wholly owned subsidiary of Parent (the "Transaction" or the "Merger"). Parent and Merger Sub are affiliates of Thoma Bravo Fund XIV, L.P.(the " Thoma Bravo Fund") managed by Thoma Bravo, L.P.If the Transaction is completed, the Company's stockholders will be entitled to receive $330.00per share in cash. The Transaction is expected to close in the third or fourth quarter of 2021, subject to approval by the Company's stockholders and regulatory authorities and the satisfaction of customary closing conditions.
Stamps.com® is a leading provider of Internet-based mailing and shipping solutions in
the United States(US) and Europe. Our portfolio of solutions is marketed under the brand names Stamps.com®, Endicia®, Metapack®, ShippingEasy®, ShipEngine®, ShipStation®, and ShipWorks®. Our software solutions allow customers to print mailing and shipping labels for multiple carriers around the world through downloadable software, web-based user interfaces (UIs) and application programming interfaces (APIs). Our solutions provide our customers with access to discounted carrier rates for select carriers, including the United States Postal Service(USPS) and United Parcel Service (UPS). Our solutions also offer customers improved operational efficiency and financial savings. Our customers primarily include small businesses, home offices, medium-size businesses, large enterprises, e-commerce merchants, large retailers and high volume shippers including warehouses, fulfillment houses and omni-channel retailers. Segment Information and Geographic Data Our operations consist of two segments: Stamps.comand Metapack. The Stamps.comsegment includes the results of brand names Stamps.com, Endicia, ShippingEasy, ShipEngine, ShipStation and ShipWorks. Stamps.com'scustomers are primarily located in the US. The Metapacksegment offers multi-carrier enterprise-level shipping software solutions to large e-commerce retailers and brands whoare primarily located in Europe. Mailing and Shipping Business References When we refer to our "mailing and shipping business," we are referring to our mailing and shipping products and services including our USPS® and multi-carrier mailing and shipping solutions, consolidation services, mailing and shipping integrations, mailing and shipping supplies stores and branded insurance offerings. We do not include our historical customized postage business when we refer to our mailing and shipping business. When we refer to our "mailing and shipping revenue," we are referring to our service, product and insurance revenue generated by our mailing and shipping customers. We do not include our customized postage revenue generated by our customized postage business in our "mailing and shipping revenue." Services and Products
Courier and shipping company
We offer the following sending and shipping services to our customers under the
Mailing Solutions As part of our mailing and shipping business, we offer our
USPS-approved solutions to mail and ship a variety of domestic and international mail pieces and packages through the USPS. Our USPSmailing solutions enable our customers to print "electronic postage" using only a personal computing device, printer and Internet connection. Our solutions support a variety of USPSmail classes including First Class Mail®, Media Mail®, Parcel Select®, Priority Mail®, Priority Mail Express, and others. Customers can also add USPS Special Services to their mail pieces, such as Certified Mail®, Collect on Delivery, Insured Mail, Registered Mail®, Restricted Delivery, Return Receipt, Signature Confirmation™ and USPS Tracking®. Our customers can print postage on (1) NetStamps® labels, which can be used just like regular stamps, (2) envelopes and postcards or on labels in a single step process that saves time and provides a professional look, (3) plain 8.5" x 11" paper, (4) special labels for packages, and (5) on integrated customs forms for international mail and packages. Our USPSmailing solutions also provide our customers with access to discounted postage rates on certain mail classes. Multi-Carrier Shipping Solutions As part of our mailing and shipping business, we offer our industry leading domestic and international multi-carrier e-commerce shipping solutions. Our multi-carrier solutions collectively enable our customers to print approved shipping labels for more than 350 regional, national and international carriers and integrate with more than 300 partners including shopping carts, marketplaces, e-commerce tools and various other software products. Our multi-carrier solutions also provide our customers with access to discounted carrier rates, including with USPSand UPS®. Consolidation Services As part of our mailing and shipping business, we offer domestic and international shipping services through our consolidator partners, whogroup packages by destination and ship the packages directly or through partners. These services seek to take advantage of economies of scale by accessing lower carrier rates that apply to larger volume freight and are not otherwise accessible to smaller shipments, with the goal of yielding lower shipping costs for our customers. Back-End Integrations As part of our mailing and shipping services, we offer our back-end integration solutions where we provide the electronic postage for transactions to partners whomanage the front-end users. Our solutions integrate directly into the most popular e-commerce platforms, allowing web store managers to automate their order fulfillment process by processing, managing and shipping orders from virtually any e-commerce source through a single interface without manual data entry. Managers can retrieve order data and print shipping labels for all types of packages. We have integration partnerships with the USPSwhere we provide electronic postage for mailing and shipping transactions generated by certain USPS-branded programs. For example, we provide the electronic postage for Click-N-Ship®, a web-based service available at USPS.com that allows USPScustomers to purchase and print shipping labels for certain domestic and international mail classes or packages at no additional mark-up over the cost of postage. Mailing & Shipping Supplies As part of our mailing and shipping services, we offer mailing and shipping-focused office supplies to our customers through our online supplies stores. Our supplies stores are available within our mailing and shipping solutions and sell a variety of products including NetStamps labels, shipping labels, mailing labels, postage printers and scales. Branded InsuranceAs part of our mailing and shipping services, we offer branded insurance for packages to our customers in an integrated, online process that eliminates any trips to retail carrier locations or the need to complete any special forms. Our branded insurance, which is provided by third party insurance providers with which we contract, is offered by certain brands including Stamps.com, Endicia, ShippingEasy, ShipEngine, ShipStation, and ShipWorks as part of their solutions. 27 -------------------------------------------------------------------------------- Table of Contents Customized Postage Prior to the third quarter of 2020, we offered customized postage under the PhotoStamps® brand name. Customized postage is a patented form of USPSpostage that allowed consumers to turn digital photos, designs or images into valid USPS-approved postage. With this product, individuals or businesses could create customized USPS-approved postage using pictures of their children, pets, vacations, celebrations, business logos and more. Customized postage can be used as regular postage to send letters, postcards or packages. PhotoStamps was available from our www.photostamps.com website. As previously disclosed, in the second quarter of 2020, we received notification from the US Postal Service(USPS) that it was eliminating its customized postage program and also revoking our authorization to offer products pursuant to that program effective June 16, 2020. COVID-19 In March 2020, the World Health Organizationdeclared the outbreak of a novel strain of the coronavirus ("COVID-19") to be a pandemic. The pandemic is having widespread, rapidly evolving impacts on economies, financial markets, and business practices. We are closely monitoring the impact of COVID-19 on all aspects of our business. Since the first quarter of 2020, we have taken a number of precautionary measures to help minimize the risk of exposure to our employees, including significantly revising travel policies and implementing temporary office closures as all employees are advised to work remotely where possible. We experienced negative year-over-year performance for the three months ended June 30, 2021as a result of the strong growth experienced in 2020 resulting from the COVID-19 pandemic and the easing of shelter in place orders. While we continue to see strong performance in shipping volumes in the context of difficult year-over-year comparisons which we believe is due to changes in consumer preferences for e-commerce, we cannot predict how long these circumstances will continue, and it should not be assumed that they will yield any net financial benefit to us beyond the second quarter of 2021 and as noted below, we believe our results of operations for the three months ended June 30, 2021were impacted by the easing of shelter in place orders and work-from-home requirements. Further, it is not possible to determine the duration and scope of the pandemic, including any recurrence, the actions taken in response to the pandemic, the scale and rate of economic change from the pandemic, any ongoing effects on consumer demand and spending patterns, or other impacts of the pandemic, and whether these or other currently unanticipated consequences of the pandemic are reasonably likely to materially affect our results of operations. See "Risk Factors - Risks Related to COVID-19" within Item 1A in our Annual Report on Form 10-K, filed with the SECon February 26, 2021, for a discussion of some of the risks posed by the COVID-19 pandemic, and uncertainties we, our customers, business partners, and the national and global economies face as a result. Results of Operations
Three and six months over
Total revenue decreased 8% to
$191.1 millionin the three months ended June 30, 2021from $206.7 millionin the three months ended June 30, 2020. Total revenue increased 6% to $380.2 millionin the six months ended June 30, 2021from $358.1 millionin the six months ended June 30, 2020. Mailing and shipping revenue, which includes service revenue, product revenue, and insurance revenue, was $191.1 millionin the three months ended June 30, 2021, a decrease of 3% from $197.9 millionin the three months ended June 30, 2020. Mailing and shipping revenue was $380.2 millionin the six months ended June 30, 2021, an increase of 10% from $346.2 millionin the six months ended June 30, 2020. There was no customized postage revenue in the three and six months ended June 30, 2021due to the elimination of the program by the United States Postal Serviceeffective June 16, 2020. The Company does not expect material customized postage revenue or cost of revenues after June 2020. 28 -------------------------------------------------------------------------------- Table of Contents Revenue by Segment The following table sets forth the revenue by segment for the three and six months ended June 30, 2021and June 30, 2020and the resulting percentage change (revenue in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change Segment revenues Stamps.com $ 175,618 $ 191,047(8.1) % $ 348,228 $ 328,5926.0 % Metapack 15,456 15,683 (1.4) % 31,936 29,484 8.3 % Total revenues $ 191,074 $ 206,730(7.6) % $ 380,164 $ 358,0766.2 %
Most of the 8% decrease in total revenues is due to an 8% decrease in total revenues from the
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