Announces Fourth Quarter And Fiscal 2005 Results

Q4 Revenue Up 76% and Q4 EPS up 176% Versus Last Year

LOS ANGELES, Calif. – February 8, 2006 –® Inc. (Nasdaq: STMP) today announced results for the fourth quarter ended December 31, 2005.

For the fourth quarter:

  • Total revenue was $20.6 million, an increase of 76% versus the same quarter last year.
  • Approximately 345 thousand sheets of PhotoStamps® were shipped, resulting in $6.0 million total fourth quarter revenue, up 529% versus the same quarter last year, and up 234% versus the third quarter of 2005.
  • Core business subscription revenue was $11.9 million and online store revenue was $1.9 million, up 45% and 17%, respectively, versus the fourth quarter of 2004. Insurance fees, licensing fees, and other revenue contributed an additional $0.9 million.
  • Gross margin was 70% versus gross margin of 67% in the same quarter last year.
  • GAAP net income was $4.1 million, or $0.17 per fully diluted share, up 176% versus fully diluted earnings per share of $0.06 in the same quarter last year.

“We are very pleased with our fourth quarter revenue and earnings growth,” said president and CEO Ken McBride. “PhotoStamps sales picked up dramatically in the fourth quarter as we hit full stride in our marketing programs and experienced seasonal strength around the holidays. Our core PC Postage business also continued to show strong revenue and earnings growth during the fourth quarter.” reported 2005 fourth quarter net income of $4.1 million compared to net income of $1.5 million in the fourth quarter of 2004, and net income of $2.6 million in the third quarter of 2005. On a per share basis, 2005 fourth quarter net income was $0.17 based on fully diluted shares outstanding of 24.0 million. This compares to net income of $0.06 in the fourth quarter of 2004 based on fully diluted shares outstanding of 23.4 million.

Total fiscal 2005 revenue was $61.9 million, an increase of 62% versus revenue of $38.1 million for fiscal 2004. Total fiscal 2005 net income was $10.4 million versus a loss of $4.7 million for fiscal 2004. On a per share basis, fiscal 2005 net income was $0.44 based on fully diluted shares outstanding of 23.7 million. This compares to a fiscal 2004 net loss of $0.21 based on 22.4 million shares outstanding.

On May 17, 2005, began a second year-long market test of PhotoStamps, the popular form of postage that allows customers to turn digital photos, designs or images into valid U.S. postage. During the fourth quarter, approximately 345 thousand sheets, or approximately 7 million individual PhotoStamps, were shipped to customers. Since the beginning of the second market test in May 2005, more than 10 million PhotoStamps have been shipped to customers. currently expects fiscal 2006 revenue to be $75 to $90 million. Fiscal 2006 GAAP net income per share is expected to be $0.53 to $0.63, including an estimated $3 million of stock-based compensation expense related to the Company’s adoption of FASB Statement 123R that begins in 2006. Excluding the FASB Statement 123R expenses, non-GAAP fiscal 2006 net income per fully diluted share is expected to be $0.65 to $0.75.

The financial results conference call will be web cast today at 2:00 p.m. Eastern Time and may be accessed at The Company plans to discuss its business outlook during the conference call. Following the conclusion of the web cast, a replay of the call will be available at the same website.

About and PhotoStamps (Nasdaq: STMP) is a leading provider of Internet-based postage services. enables small businesses, enterprises, and consumers to print U.S. Postal Service-approved postage with just a PC, printer and Internet connection, right from their home or office. The Company targets its services to small businesses and home offices, and currently has partnerships with companies including Microsoft, CompUSA, EarthLink, HP, NCR, Office Depot, Vendio and the U.S. Postal Service.

PhotoStamps is a patented product that couples the technology of PC Postage with the simplicity of a web-based image upload and order process. Since launching PhotoStamps in 2004, over 13 million individual PhotoStamps have been ordered by the customers. PhotoStamps is currently available under authorization of the U.S. Postal Service for its second market test through May 2006.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements about our anticipated results and available products that involve risks and uncertainties. Important factors, including the Company’s ability to complete and ship its products and obtain or maintain 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, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2004, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. 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 logo and PhotoStamps are trademarks or registered trademarks of Inc. All other brands and names are property of their respective owners. Investor Contact:
Jamie Harper
Director, Investor Relations
(310) 482-5830

Press Contact:
Dena Cook
Zeno Group
(310) 566-2283
[email protected]