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Company Presentation
November 2008
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Safe Harbor Safe Harbor
This presentation contains forward-looking statements that involve risks and
uncertainties, including discussion of product and business plans and financial
projections. Important risk factors, including the company's ability to complete
its products and obtain regulatory approval, which could cause actual results to
differ materially from those in the forward-looking statements, are detailed in
filings with the Securities and Exchange Commission made from time to time by
Stamps.com, including its Annual Report on Form 10-K for the fiscal year ended
December 31, 2007, Quarterly Reports on Form 10-Q, and Current Reports on
Form 8-K. We encourage you to review the risk factors in these filings.
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AgendaAgenda
PC Postage Service Overview
PC Postage Marketing
PhotoStamps
Financials
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Service OverviewService Overview
Software-based Internet service that lets customers buy and print their own USPS postage
± Requires only your existing PC, printer & Internet connection
± Monthly service fee (+ the cost of postage)
Three ways to print postage
± Print your own stamps (NetStamps)
± Print shipping labels
± Print directly on envelopes
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Internet Postage FeatureInternet Postage Feature
Print postage directly onto envelopes or onto labels
Internet postage is ideal for business and mass mailings
± Address verification and correction
±Integration with MSFT Word, Office and other address databases
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NetStamps FeatureNetStamps Feature
Print your own stamps
± Use for any stamp value
± Use for any class of postage
Increased flexibility
± Not tied to an address
± No expiration date
Customers buy blank label stock
Photo NetStamps allow customersto print postage on blank labelstock with their customized logo
Consumable revenue stream
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Shipping Label FeatureShipping Label Feature
All-in-one shipping label designed specifically for package use
Printed on plain printer paper or on adhesive labels
Discounts on postal rates
± 3% discount on Express1
± 1 ± 11% discount on Priority (average 3.5%)1
± 6 ± 8% discount on Global Priority & Express
± $0.57 - $0.65 per package for electronic delivery
confirmation
Ability to hide postage amount
E-mail tracking notifications
Avoid 1lb package restrictions1 Discounts on Priority & Express become effective May 12, 2008; 3.5% is the expected average discount on Priority per the USPS
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Microsoft IntegrationMicrosoft Integration
Enhanced integration with Microsoft Office System 2003 & later
Access Stamps.com from multiple locations within Office
± Under Tools -> Envelopes and Labels (single envelope)
± As part of a Mail Merge (multiple envelopes)
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Customer BenefitsCustomer Benefits
Save Time
± Mail or ship from home or office
± Avoid trips to the post office
± Available 24 hours x 7 days a week
Save Money
± Discounted postal rates (Priority, Express, Global Priority & Express)
± Discounted package tracking (Delivery and Signature Confirmation)
±Save 10% on package insurance compared to USPS
± Avoid costly returned mail with address verification
± Avoid wasted postage by calculating exact postage amount
±
Access to cost effective mail classes (media mail, parcel post, etc.)
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Customer BenefitsCustomer Benefits
Enhance business productivity and image
± Produce more professional looking mail
± Easy mass mailings w/ Microsoft Word
±Track, control and reduce postage expenditures
Improve efficiency of shipping operations
± Hidden postage value allows shipping & handling markup
±Integrated Package Insurance
± Online package tracking capabilities with e-mail notifications
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AgendaAgenda
PC Postage Service Overview
PC Postage Marketing
PhotoStamps
Financials
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Industry Overview
Large market opportunity1
± $51B U.S. Postage Market (addressable by STMP¶s solution)
± 8M Small Businesses + 14M Home Businesses
Significant barriers to entry exist
± Long and complex USPS regulatory approval process (2 ½ years for original approval, multi-year for NetStamps approval)
± Stamps has a very strong patent portfolio (66 issued, 100 pending US Patents)
Stamps.com is the category leader
± 3 approved PC Postage vendors (Stamps, Pitney Bowes, Endicia.com)
± ~85% of all PC Postage subscription customers2
1 Source: International Data Corporation Reports and USPS 2006 Annual Report (excludes Standard Mail & Periodicals)2
Source: USPS PC Postage Data and Stamps.com Company estimates; excludes estimated customers on a no-monthly fee plan.
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Current SOHO PricingCurrent SOHO Pricing
$17.99 per month
Unlimited service usage
Auto-billed monthly
$5 free initial postage $25 free postage rebate1
Free scale rebate1
Pro Plan
Fees are in addition to postage (face value) and other supplies
Premier Plan
1 Certain Promotional items are redeemable after a customer completes their trial and is successfully billed
$24.99 per month
All features of Pro
Plus: FedEx Label Printing(and 5-10% discount)
Plus: Higher meter balance
Plus: More cost codes
Plus: Certified Mail Solution
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Cost vs. A Postage Meter Cost vs. A Postage Meter
1 Price after 1 year promotional period is $25.75/month plus an extra $5/month for a 5 lb. scale (free 5 lb. scale includedw/Stamps.com)
2 Fee charged each time postage is purchased; first two resets in meter life are included for free and all resets are $5 thereafter.3 Based on USPS reports, total CY 2006 small business meter postage divided by CY 2006 average meter count.
4 Assumes one reset/month, $0.80 average per print, and meter cleaned as recommended. Range is for low cartridge (400) to
high cartridge (800) yield at avg. $185/month usage. Postal rate change updates cost extra with meter (free with Stamps.com).Cost codes also cost extra with meter (10 included with Stamps.com Pro Plan).
Category Entry Level Meter Stamps.com
Max. Print Speed 18 letters/minute At speed of printer
Monthly Fee(rental plus 5lb. scale)
$30.75/month1
(1-Year Auto Renew Lease)
$17.99(No Lease)
Proprietary Ink Cartridge $46.99 (400 to 800 prints)($0.06 to $0.12 per print)
None
Reset Fees $5 per reset2 None
Usage Per Month(# Prints/Month)
$1853
(~230 prints)
Not Relevant(Unlimited prints for $18)
Est. Total Cost Ownership $51 to $654 $18
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Marketing ChannelsMarketing Channels
Stamps.com has a diversified set of marketing programs:
Affiliate Program
Direct Mail
Online Media (banners, permission e-mails, pop-ups, paid search words)
Referral Program
Stamps.com web site
Strategic Partners (Microsoft, EarthLink, Peachtree, Avery)
Telemarketing
Traditional media
Online Enhanced Promotion Channel1
1 Enhanced Promotion Channel includes partners that advertise our service on the Internet in which the partner typicallyoffers an incremental promotion (in addition to any promotion offered by us) in order to get the customer to try our service.
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2008 PC Postage Plan
Increase and optimize our Small Business marketing investment
± Expect to increase customer acquisition spend in the non-enhancedpromotion channels (e.g. Direct Mail) by 25 - 30% in 2008
± Continue to run online enhanced promotion channel
Improve the customer experience
± Improve software usability to improve initial customer experience
Market our new Premier version
± Added Multi-user capability
± Market Premier as an up sell to existing customers
Market our corporate enterprise solution
± Continue scaling enterprise sales and marketing efforts
±Add product features to the enterprise version of our service
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AgendaAgenda
PC Postage Service Overview
PC Postage Marketing
PhotoStamps
Financials
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PhotoStamps Offering
PhotoStamps allows customers to order valid US postage with customized
photos or images from a simple web site
± Customer uploads photo or graphic and customizes look & feel
± Customer places order online
± Stamps.com approves the image and prints the PhotoStamps sheets
± Customers receive PhotoStamps via mail in a few days
± Pricing is ~$5 to $10 per sheet plus the cost of postage1
1 Actual pricing depends on the number of sheets ordered and postage value per sheet; quotes for higher volume discounts available.
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PhotoStamps Industry OverviewPhotoStamps Industry Overview
Customized postage program is regulated by the USPS
± Currently in the 4th market test with authorization through May 2009
± Only approved PC Postage vendors can provide the postage for customized postage products
Stamps.com is the category leader in customized postage
± 3 approved vendors: Stamps, Endicia, Pitney Bowes (w/ Zazzle, Fuji)
Market opportunity exists in consumer and business
± Consumer to Consumer First Class market is 6.1B pieces per year 1
± Business to Consumer First Class market is 17B pieces per year 1
1 Source: USPS 2006 Household Diary study
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2008 PhotoStamps Plan2008 PhotoStamps Plan
Focus on improving profitability in PhotoStamps
± Reduce PhotoStamps consumer marketing spend by eliminatingunder performing marketing programs
± Expect lower revenue but improved profitability
Focus on growing business PhotoStamps
± Target high volume business usage of PhotoStamps through directselling efforts
Continue pursuing partnerships
± Target cost-effective partnerships to drive consumer PhotoStampsawareness and sales
± Current partners include Apple, Google/Picassa, HP/Snapfish,Adobe, Costco, American Idol
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AgendaAgenda
PC Postage Service Overview
PC Postage Marketing
PhotoStamps
Financials
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Financial Overview
Stamps.com has several revenue components:
± Recurring monthly service fees (PC Postage)
± Online store sales of consumables and peripherals (PC Postage)
± Stamps.com branded package insurance (PC Postage)
± PhotoStamps market test sales
Stamps.com has an attractive financial model:
± High gross margins
± Leverageable fixed costs
± Low working capital investment
± Low capital expenditure requirements
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Financial Overview
Stamps.com has strong free cash flow generation
± $15.7M Free Cash Flow1 in 2007
± $67M of stock repurchased from Jul-06 to Sep-08
Stamps.com has a strong balance sheet
±$94M cash and investments with no debt (as of 09-30-08)
± ~$240M in Federal NOL¶s and $150M in State NOL¶s (as of 09-30-08)representing ~$95M Deferred Tax Asset
± To preserve full use of the NOL¶s, the ³NOL Protective Measures´ werepassed by shareholder vote that restrict purchases of Stamps.com¶sstock that would create a new 5% shareholder without first obtaining awaiver from the Company¶s Board of Directors2
± The Company strongly urges investors interested in owning 725Kshares or more contact the Company first
1 Non-GAAP measure calculated as Net Income + 123R Expense + D&A ± Capital Expenditures
2 For full details on the ³NOL Protective Measures´ see the Company¶s definitive Proxy filed on 4-2-08
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$0
$3
$6
$9
$12
$15
$18
$21
$24
$27
Q 3-06 Q 4-06 Q 1-07 Q 2-07 Q 3-07 Q 4-07 Q 1-08 Q 2-08 Q 3-08
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2003 2004 2005 2006 2007
Revenue Trend (millions)
Service Fee Revenue
Store, Insurance PhotoStamps
Licensing, other
$ 3 8 .1
$ 6 1 .9
$ 8 5 .8
$ 2 1 .2
$ 8 4 .6
$ 2 0 .2
$ 1 8 .9
$ 2 5 .0
$ 2 0 .0
$ 2 1 .4$ 2 0 .3
$ 2 4 .1
$ 2 1 .1 $ 2 1 .4
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PC Postage RevenuePC Postage Revenue
Subscriber Related Revenue(Excluding Enhanced Promotion Channel)
( Millions)
Subscriber related revenue includes Service Fee,Store and insurance revenue ± estimate excludingthe enhanced promotion channel
Subscriber Related Revenue(Enhanced Promotion Channel)
( Millions)
Subscriber related revenue includes Service
Fee, Store and insurance revenue ± estimatefor the enhanced promotion channel
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$17.1$17.1$17.0
$17.1$17.0
$17.4$17.5
$17.8
$15
$16
$17
$18
$19
Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08
PC Postage Customer MetricsPC Postage Customer Metrics
Paid Customers 1
(Excluding Enhanced Promotion Channel)
(Thousands)
Avg. Monthly Subscriber Revenue per Paid Customer 2
(Excluding Enhanced Promotion Channel)
258
267270
281
293
305
314312
240
250
260
270
280
290
300
310
320
330
Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08
2 Calculated as [ (Quarterly Service Fee Revenue + Store
Revenue + Insurance Revenue) / (Current Quarter Paid
Customers)] / 3 Months excluding customers acquired
through the enhanced promotion channel
1 Unique customers successfully billed at least once
during the quarter excluding customers acquired
through the enhanced promotional channel
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Cost per Gross NewRegistered Customers1
(Excluding Enhanced Promotion Channel)
Paid Customer Cancel Rate 2
(Excluding Enhanced Promotion Channel)
2 Calculated as [ (Lost Paid Customers) / (Prior Quarter
Paid Customers + Current Quarter New Paid Customers) ]
/ 3 months excluding customers acquired through the
enhanced promotion channel
1 Estimated PC Postage small business sales and
marketing expense (excluding 123R) plus promotional
expenses / gross new registered small business
customers excluding customers acquired through the
enhanced promotional channel and excluding
enterprise marketing spend
3 3 13
3
3 33 3
1
2
3
Q Q1 Q2 Q3 Q Q1 Q2 Q3
$ 3
$1 3
$$
$
$1 1$9
$11
$
$
$
$1
$12
$1
Q Q1 Q2 Q3 Q Q1 Q2 Q3
PC Postage Customer MetricsPC Postage Customer Metrics
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Gross Margin Trend
PhotoStamps Gross Margin(excluding R expense) ,
PC Postage Gross Margin(excluding R expense) ,
PC Postage gross margins do not include the Postage Face Value in either revenue or cost of sales
PhotoStamps gross margins include the Postage Face Value in both revenue and cost of sales
Non GAAP measure that excludes stock based compensation (FASB Statement R expenses); for reconciliation to GAAP
see the Company¶s prior K filings
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Net Income & PC Postage SpendNet Income & PC Postage Spend
Non GAAPNet Income & EPS
..
.
.
...
.
.
.
.
.
.
.
.
.
.
.
Excludes stock based compensation ( R expenses), . Mnon cash tax benefit ( ) and K asset write off ( );
for reconciliation to GAAP see the Company¶s prior K filings
PC Postage Customer Acquisition Spend
Non GAAP measure includes both sales and marketingspend on the PC Postage business as well aspromotional expenses which are included in COS;
excluding R expenses
EPS . . . . . . . .
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Key Investment TakeawaysKey Investment Takeaways
Large market opportunity ($51B US postage, 22M SOHOs)
Significant barriers to entry (USPS approval process)
Superior customer benefits at prices up to 75% less than meters
Category leader in PC Postage and Customized Postage
Attractive expected return on PC Postage marketing spend
Accelerating PC Postage revenue growth with high gross margins
Strong cash flow and balance sheet