Analyst Conference Summary

conference date: October 25, 2007 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2007 (2nd quarter)

Forward-looking statements

Overview: Record number of customers, but slimmer earnings due to marketing expense.

Basic data:

Revenues were $20.3 million, down 5% sequentially from $21.4 million, but up 7% from Q3 2006.

Net income was $2.4 million, down 14% sequentially from $2.8 million and down 47% from $4.2 million in Q3 2006. Non-GAAP net income was $3.3 million.

EPS was $0.12, down 8% sequentially from $0.13, and down 33% from $0.18 year-earlier. Excluding stock-based comp was $0.16.


Total 2007 revenues of $85 to $90 million. EPS $0.47 to $0.52. Non-GAAP EPS $0.60 to $0.65.

Conference Highlights:

Ended with $84 million cash and equivalents, down $10 million in quarter due to stock buy-back.

PC Postage subscriber segment was $16.8 million, up 9% y/y. Paid customers a record: 344,500, up 19,000 sequentially and up 34,000 from year-earlier. Acquisition cost was $53 per customer, better than the $59 year-earlier.

Gross margin was 71.8%, down from 73.1% year-earlier. PC Postage gross margin was 80.7%, PhotoStamps 29.75.

Total customer acquisition costs for PC Postage was $6.4 million, well up (29%) from year-earlier.

PhotoStamps had $3.5 million revenue, up 12% from year-earlier. 225,000 sheets printed. Reduced marketing spend from Q2, but business orders continued. PR buzz declining. New focus is on business customers, as consumer acquisition is expensive.

1.2 million shares were repurchased for $14 million. Repurchase program completed.

Enterprise seats were up 200% over last year. We offer a dramatically lower TCO.

It takes several quarters to go from marketing spend to revenue growth. Lifetime value of customers seems to be steady, so with lower acquisition costs the long term value is increasing.

A new share buy back program could effect the retention of NOLs, so will study that before taking any action.


Guidance down? Lower marketing spend for PhotoStamps will result in revenue reduction. EPS side is driven by increased marketing expense on the PC Stamps side.

Retention program? Going well, trying to retain each customer or find out why leaving.

PhotoStamps gross margin? Typically increases in Q4. Business side margin is dependent on volume discounts.

Multi-user capability? Thinks it will be good, beta test starts next month.

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Copyright 2007 William P. Meyers