Stamps.com sticks to its expansion plans by acquiring Endicia

As reported by B2B E-Commerce World:

Once it completes its acquisition of Endicia, Stamps.com expects to add larger shipping companies to its list of customers.

Stamps.com Inc.’s acquisitions in the past year of the ShipStation and ShipWorks shipping services companies helped drive 37% revenue growth during the third quarter, to $51.7 million from $19.1 million a year earlier.

The majority of Stamps.com’s Q3 revenue, 81.6%, came from small business customers purchasing shipping services from the company’s Core Mailing and Shipping business, which includes both ShipStation and ShipWorks. Those sales reached $48.8 million in the quarter, up nearly 36% from $35.9 million during the same period the year before.

Now the company is adding to this growth curve by acquiring Endicia, a provider of shipping technology and services for both large and small businesses. Stamps.com has agreed to pay $215 million in cash to Endicia owner Newell Rubbermaid Inc.; the deal is expected to close on Nov. 18.

ShipStation is cloud-based shipping software that lets shippers use a web browser to manage the printing of shipping labels in fulfillment centers for online orders, including orders received through such e-commerce e-marketplaces operated by eBay Inc. and Amazon.com Inc. It also integrates with shipping carriers including UPS Inc., FedEx Corp. and the U.S. Postal Service to produce shipping labels. ShipWorks is a similar system, but designed as PC-based software that also integrates with e-commerce platforms.

By acquiring Endicia, Stamps.com aims to expand its customer base to more large companies, Stamps.com CEO Kevin McBride said in a conference call with stock analysts last week, according to a transcript from Seeking Alpha. The acquisition will help Stamps.com add more high-volume shipper clients that have “a significantly higher” average order value per customer than the average Stamps.com customer, McBride said. Endicia’s clients include such B2B companies as GreatLife International, a manufacturer of anti-aging products under the VidaCell brand.

Stamps.com has also been taking other steps to acquire new customers and grow sales. Targeted online marketing, direct mail and other efforts helped it drive sales and acquire 93,000 new small-business customers during the third quarter, McBride said. The company spent $11.34 million on marketing in the third quarter, primarily to small-business buyers, a 19.1% increase from $9.52 million a year earlier.

Endicia uses its national sales team to acquire customers. It supports the team’s efforts with targeted marketing at high-volume shippers. In comparison, Stamps.com “has traditionally focused primarily on broad marketing to small businesses. We spent approximately $40 million on marketing during 2014, with nearly all of that spend going into broad-based small-business marketing programs,” he said.

Combining Stamps.com and Endicia will decrease operating costs by eliminating redundant operations, including efforts each company carries out to meet Postal Service requirements in selling postage and maintaining accurate postage rates, Stamps.com says. The company expects to apply some of these cost savings to invest in new products and services. “By removing the redundant activity, the combined company will be able to redeploy its development resources into other areas,” McBride says, declining to be more specific.

Stamps.com is built on the hybris Software e-commerce platform. It is ranked No.178 in the new B2B E-Commerce 300, which lists companies by their annual B2B online sales.

For the third quarter ended Sept. 30, Stamps.com also reported:

  • Service revenue of $42.5 million, up 41.2% from $30.1 million during the same period last year.
  • Product revenue of $4.2 million, up 7.7% from $3.9 million.
  • Net income of $7.3 million, down 23.2% from $9.5 million.

For the nine months ended Sept. 30, Stamps.com reported:

  • Total revenue of $144.1 million, up 36.7% from $105.4 million during the same period last year.
  • Service revenue of $118.5 million, up 43.5% from $82.6 million.
  • Product revenue of $13.2 million, up 6.5% from $12.4 million.
  • A net loss of $4.1 million, compared with a net income of $28 million.

Ken Wood is the founder of LJM Consultants. LJM helps clients negotiate “Best in Class” UPS/FedEx agreements. LJM was recently named the “best parcel auditing company in America” and was also inducted into Inc. Magazine’s Top 500/5000 fastest growing companies in America for 2013. To learn how LJM Consultants can help your company get the parcel contract you deserve, call 631-844-9500 or email kenwood@myLJM.com.