Image source: The Motley Fool.
Stamps.com Inc (STMP)
Q3Â 2019 Earnings Call
Nov 8, 2019, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Greetings and welcome to the Stamps.com Third Quarter 2019 Financial Results Call. [Operator Instructions]. A question-and-answer session will follow the formal presentation. [Operator Instructions]. I would now like to turn the conference over to your host, Suzanne Park, Vice President of Finance. Thank you. You may begin.
Suzanne Park -- Vice President, Finance
Thank you. On the call today are CEO, Ken McBride; and CFO, Jeff Carberry. The agenda for today's call is as follows. We'll review the results of our third quarter 2019. We'll provide an update on elements of our business model and partnerships. And finally, we'll discuss our financial results and talk about our business outlook. But first, the safe harbor statement. Safe harbor statement under the Private Securities Litigation Reform Act of 1995. This release includes forward-looking statements about our anticipated financial metrics and results, all of which involve risks and uncertainties.
Important factors, including the Company's ability to successfully integrate and realize the benefits of its past or future strategic acquisitions or investments, including the Company's ability to complete and ship its products, maintain desirable economics for its products and monetize its customers' transactions with carriers, the timing of when the Company will utilize its deferred tax assets 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 Stamps.com, including its annual report on Form 10-K for the fiscal year ended December 31st, 2018, quarterly reports on Form 10-Q and current reports on Form 8-K.
Stamps.com 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 financial results we will discuss on the call today include non-GAAP financial measures.
In the third quarter of 2019, GAAP net income was $9.1 million and GAAP net income per fully diluted share was $0.52. Our non-GAAP financial measures exclude the following third quarter items: $11.8 million of non-cash stock-based compensation and $5.6 million of non-cash amortization expense of acquired intangibles and debt issuance costs.
Our non-GAAP financial measures include $7.1 million of additional non-GAAP income tax expense in the third quarter. Our Mailing and Shipping numbers include service revenue, product revenue and insurance revenue and do not include any revenue from customized postage. Please see our third quarter 2019 earnings release and 2019 metrics posted on our investor website for a reconciliations of our non-GAAP financial measures to the corresponding GAAP measures.
Now let me hand the call over to Ken.
Kenneth McBride -- Chairman and Chief Executive Officer
Thank you, Suzanne. Thank you for joining us today. During the third quarter, we continued to execute on our strategy to transform our business into a global multi-carrier and e-commerce solutions Company. Within our domestic multi-carrier products, which include ShipStation, ShippingEasy and ShipWorks, we continue to drive innovation, expand our partnerships and integrations. And during the quarter, we introduced several significant new features, including things like split shipments, scan to print and international returns and tracking. We also signed more than 15 new partnership agreements.
In MetaPack, we continued to make progress in both rearchitecting the technology platform and driving new innovations. We successfully launched MetaPack in the US and signed a large new US customer to the platform in the third quarter. We're also on track to launch new advancements in early 2020, including sophisticated returns and tracking portals. And we continue to expand our small business international solutions with our ShipStation product. In the third quarter, new international accounts increased by more than 30%. Total shipments increased by more than 50%.
We also made strides in the diversification of our carrier relationships and achieved significant milestone with the recent announcement of our new strategic partnership with UPS. As expected, there continues to be short-term financial impact as we transition into our new business strategy, and our financial results for the third quarter were in line with those expectations.
Let me now spend a few minutes discussing some key elements of our new UPS partnership. Through this new partnership, we will be working very closely with UPS in multiple ways across our organization. Within our e-commerce multi-carrier properties, including ShipStation, ShippingEasy and ShipWorks, we have always provided a UPS shipping capability.
However, this new partnership allows us to more actively and effectively drive customers and shipping volume to UPS. The new partnership will make accessing UPS within those products much more convenient for the customers. For example, a new UPS account will be set up by default for all new and existing customers, and a new discounted UPS rate will be available by default in that new account. So a customer can get up and shipping with UPS immediately versus the process today that requires some time and effort.
Within the Stamps.com and Endicia branded products, offering UPS shipping will be an entirely new capability. Within those products, we previously had exclusivity arrangements with the USPS that are now no longer in place as a result of the decisions we made earlier this year. So we're now able to include a UPS shipping solution side by side with the USPS solution for customers of those products.
Within those products, accessing UPS will also be very convenient with a default account and discounted rates available immediately when the customer first begins to use the product. As a result of the broad marketing of the Stamps.com brand that we do, many customers start with us in the Stamps.com product. And this will allow us to teach those customers about UPS and their great solutions early in the customers' shipping life cycle.
The UPS package discounts we are able to now offer the customers under our new partnership are very attractive. Discounts are as much as 55% off UPS' standard daily rates. The discounts include various waived surcharges. We expect that the waived surcharges will reduce customer confusion, and the waived surcharges are also particularly relevant to the types of shipping that our customers typically do.
The discounts are available through our products without any necessary existing customer shipping volume that is frequently required to qualify for discounts when working with UPS currently. We will begin rolling out the changes to enable the UPS capabilities and discounts within some of our products in the fourth quarter of this year. Starting in 2020, we expect that the customers across all of our solutions will be able to utilize these great new UPS capabilities and discounts within our software products.
We always strive to bring the best solutions to our customers, and UPS is the global leader in shipping and logistics. UPS has also been the leader in evolving their business model to continue to address the rapid changes in e-commerce. For example, their move to seven-day delivery that they announced last quarter, the partnerships they announced last quarter to add 12,000 new package pickup and dropoff locations in the U.S. Both of those solutions provide additional value to our e-commerce customers and will make UPS even more attractive.
The strategic relationship with UPS will further drive the value proposition of our service offerings and empower our customers by offering them more choice and control over their shipping needs. We would note that as we move forward with the new UPS strategic partnership, we continue to be very good partners with the USPS and to work very productively with them. The USPS still provides a great solution for many of our customers in many areas of their respective businesses. We will continue to work closely with the USPS across our organization.
So let me now provide an update on the latest developments in the USPS reseller area. As a refresher, resellers have what are called negotiated service agreements or NSAs, which are customized negotiated contracts between the postal service and an individual customer or reseller, which provides discounted rates that vary based on each agreement. Companies with NSAs come in many forms, from companies that are primarily in the business of being resellers to marketplaces like Amazon, eBay and Etsy to third-party logistics providers like fulfillment houses.
Each reseller's NSA allows a reseller partner to buy postage for shipping a package at one rate from the USPS and then to resell the postage to customers at a higher rate. It is precisely those margins that have created a deep and robust ecosystem of e-commerce companies and partnerships fueling innovation.
As we discussed previously, earlier this year, the USPS initiated negotiations with certain reseller partners. While we have limited visibility, given that the negotiations are being conducted solely between the USPS and the resellers, we'd like to provide our investors with our current understanding of the status of those negotiations.
As you recall back in April, the USPS told some of the resellers that their economics would be decreased starting in June of 2019. However, by June, the USPS changed course. And by the third quarter, the existing reseller agreements were extended through the end of 2019. At that time, there was still an expectation that the USPS would make a reduction in reseller discounts in 2020 and 2021.
Most recently, our understanding is it that there continues to be active and positive discussions between the resellers and the USPS. While it remains our understanding that the USPS intends to restructure the economics offered to resellers starting in 2020, it is not yet clear exactly what financial impact the changes might have on the resellers and on us.
We're very encouraged by the continued positive shift in the USPS' apparent approach to this negotiation. We hope that during this time of growing competition and rapid evolution in the e-commerce ecosystem, the USPS continues to keep its focus on growing its packaged business and supporting its very important e-commerce technology partners.
Our goal is to position the Company for the best long-term outcome as all of these trends play out and to continue to diversify our business. Following the business model changes that we announced in February, we continue to have very productive discussions with traditional, non-traditional carriers both domestically and internationally regarding new and enhanced relationships.
All of these discussions have been very positive, recognizing the strong value proposition we provide, driven by the strength of our multi-carrier solutions, the level and the number of our partnerships and integrations, the size and strength of our national sales team and the scale and success of our marketing programs. Our new UPS relationship represents a very significant step forward in our new strategy. We're very excited to begin to work closely with them across our organization. Overall, we've built an extraordinary Company with incredible assets and an amazing workforce. We're exceptionally well positioned to continue to drive our organization in this new direction. We are very confident we will become the global leader in multi-carrier e-commerce shipping.
And with that, I now turn the call over to Jeff.
Jeffrey Carberry -- Chief Financial Officer
Thanks, Ken. We'll now review our third quarter 2019 financial results. The discussion of our financial results today includes non-GAAP financial measures. As Suzanne described, a reconciliation of the non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release and in our 2019 metrics on our investor website.
Total revenue was $136.2 million in Q3, and that was down 5% year-over-year versus Q3 of '18. Total revenue excluding MetaPack was $123.5 million in Q3, and that was down 11% year-over-year versus Q3 of '18. The decline in revenue in the third quarter was driven by the elimination of USPS commission revenue, offset by the full quarter inclusion of MetaPack revenue and by growth in our Global Advantage Program.
Mailing and Shipping revenue was $132.9 million in Q3, and that was down 3% year-over-year versus Q3 of '18. Mailing and Shipping revenue excluding MetaPack was $120.2 million in Q3, and that was down 8% year-over-year versus Q3 of '18. The decline in total Mailing and Shipping revenue was driven by the elimination of USPS commission revenue, offset by the full quarter inclusion of MetaPack revenue and growth in our Global Advantage Program. We estimate that revenue derived from our shipping customers declined at a mid-single-digit rate year-over-year and, as a percentage of total revenue in Q3, was in the high 70% range.
We estimate that revenue derived from our shipping customers in Q3, excluding MetaPack, declined year-over-year at a low double-digit rate and, as a percentage of total revenue, was in the high 60% range. We also estimate that our Mailing and Shipping revenue derived from our SOHO mailers as a percentage of total revenue was approximately 20% and grew year-over-year at a mid-single-digit rate.
Mailing and Shipping gross margin was 73.8% in Q3 versus 80.5% in Q3 of '18. The decrease in gross margins was primarily attributable to the elimination of USPS commission revenue. It was also negatively impacted by the continued increase of our international offerings, including our Global Advantage Program. These programs tend to have a lower gross margin profile than our other service fee revenue components. The gross margins were also negatively impacted by the full quarter inclusion of MetaPack which under U.S. GAAP generated a gross margin of approximately 64% in Q3. We had a year-over-year increase in our Q3 operating costs, including sales and marketing, R&D and G&A, primarily related to strategic investments to support the growth and innovation in our Mailing and Shipping business and due to the full quarter inclusion of MetaPack.
Non-GAAP operating income was $33.0 million in Q3, and that was down 45% year-over-year versus Q3 of '18. Adjusted EBITDA was $34.5 million in Q3, and that was down 43% year-over-year versus Q3 of '18. Adjusted EBITDA margin was 25.3% in Q3 versus 42.5% in Q3 of '18. The decrease in adjusted non-GAAP operating income, adjusted EBITDA and adjusted EBITDA margin were primarily attributable to the following. The elimination of USPS commission revenue; lower gross margins associated with the scaling of our international offerings; higher operating expenses associated with our shipping-related investments; and finally, the inclusion of MetaPack, which has lower gross and EBITDA margins.
Non-GAAP adjusted income per fully diluted share was $1.12 in Q3 based on non-GAAP tax expense rate of 40%. And that was down 60% year-over-year versus $2.76 per share in Q3 of '18, based on a non-GAAP tax expense rate of 11%. Fully diluted shares in the EPS calculation was $17.4 million for Q3 and $19.0 million for Q3 of '18.
Let's now discuss our customer metrics. Our total paid customer metric was 743,000. Our churn rate was 3.2%, and our ARPU was $59.60 for the third quarter. Paid customers were up 1% year-over-year. Churn was up 0.2% year-over-year but broadly in line with the churn we've seen over the past several quarters, and ARPU was down 4% year-over-year.
As we discussed last quarter, a segment of our higher volume shipping customer -- higher volume customers continue to receive our technology solution without our customary monthly service fee which, with the elimination of our USPS commission revenue, results in some of those customers being excluded from our paid customer count.
The exclusion of those customers from our paid customer count quarterly impacts our paid customer count, our churn and our ARPU metrics. Total third quarter USPS postage printed was $1.6 billion, and that was up 3% versus the third quarter of 2018. Total USPS postage printed metric includes both higher growth shipping volume and traditional nonpackage mail volume, which continues to see a steady decline.
Let's now discuss our cash, debt and uses of cash. We ended Q3 with $143 million in cash and investments, which was up $34 million from $110 million at the end of Q2 of '19. The increase in cash and investments was primarily driven by strong operating cash flow, changes in net working capital, a net equity adjustment related to foreign exchange and proceeds from option exercises and was partially offset by share repurchases and a scheduled debt repayment.
During Q3, we made a required principal repayment of $2.6 million, resulting in total debt under the credit agreement excluding debt issuance costs of $53.6 million. During Q3, the Company repurchased approximately 113,000 shares at a total cost of approximately $6 million.
On March 8th of 2019, our Board of Directors approved a $60 million share repurchase plan, which was scheduled to expire in September 2019. On May 1st of 2019, the Board of Directors adjusted the repurchase parameters of the plan as previously discussed.
On July 29th of '19, the Board of Directors approved an extension of the plan through February 2020 from its prior expiration in September 2019. And at the most recent Board meeting on October 31st of this year, the Board of Directors approved an additional extension of the current plan through May of 2020 from its prior expiration in February 2020. To date, approximately $36 million has been repurchased under that plan.
Let's now turn to guidance. As Ken discussed earlier, we signed a partnership agreement with UPS, in which we will offer significant discounts for UPS services to our customers. We expect to begin offering these rates to some of our customers in the fourth quarter of this year and would expect to offer them to all of our customers in the first quarter of 2020 as we complete the development work necessary to do so.
As Ken also mentioned, USPS negotiations with our reseller partners are ongoing, and we have limited visibility into those negotiations. However, all of our reseller partners have received extensions of their current agreements through the end of this year. We have therefore refined our guidance to reflect the benefits of our new UPS agreements and our current understanding of the contract margins of our reseller partners for this year.
It's important to understand, however, that the financial implications of our new UPS agreements are impacted by the following. The rollout of UPS, which will happen over multiple quarters; and by the fact that some of the volume that will migrate to UPS based on preferential rates and service offerings would have potentially gone to USPS previously.
And when that happens, financial gains in UPS will be offset to some degree by losses of revenue from our USPS partnerships. It's also important to understand that our guidance also reflects the increasingly challenging competitive environment facing the USPS and the negative impact it has on our financial results.
We expect fiscal 2019 revenue to be in the range of $535 million to $565 million, which compares to previous guidance of $520 million to $560 million. With the elimination of the USPS commission revenue and the increasingly competitive environment facing the USPS, our shipping-related revenue is expected to continue to decline year-over-year.
We expect Mailing and Shipping revenue derived from our several mailers will be approximately flat year-over-year, and we expect our customized postage revenue to be down 25% to 35% year-over-year as compared to down 30% to 40% year-over-year previously.
We expect operating expenses to increase in 2019, reflecting the strategic investments we made in 2018 and the additional investments we've made and anticipate continue to make in 2019 as well as the inclusion of MetaPack in our financials.
We expect fiscal 2019 adjusted EBITDA to be in the range of $132 million to $152 million, which compares to our previous guidance of $120 million to $150 million. Our revised guidance implies a full year adjusted EBITDA margin in the mid 20% range based on all the aforementioned factors affecting our business.
We expect non-GAAP tax expense will be approximately 40% of non-GAAP pre-tax income for 2019, which is unchanged from our previous estimate.
Our full year 2019 effective tax rate could differ from our current estimates based on a number of factors. We expect fully diluted shares to be between 17.8 million and 19.4 million in 2019, which compares to our previous estimate of 17.6 million and 18.7 million.
We expect fiscal 2019 non-GAAP adjusted income per diluted share to be in a range between $3.85 to $4.85, which compares to our previous estimate of $3.60 to $4.85.
With our increased focus on shipping, our financial metrics would ordinarily exhibit seasonality reflective of customer shipping usage during the year. However, we do not expect that trend to continue this year to the same degree with the negative financial impact associated with the elimination of the USPS commission revenue and the increasingly challenging competitive environment facing the USPS.
In particular, we expect fourth quarter revenue and adjusted EBITDA to be particularly negatively impacted relative to historical patterns. And finally, we continue to expect capital expenditures to be between approximately $2 million to $4 million in 2019.
Although we do not provide guidance beyond 2019, the current USPS reseller discussions as we understand them may also result in reductions in margins earned by resellers in 2020 and 2021. This, in turn, could have an impact on our revenues and earnings in those years. And while we do not know what ultimately will become of the USPS' proposed changes, it does not alter our long-term global multi-carrier business strategies, which we believe will be successful.
And with that, let's open up for questions.
Questions and Answers:
Operator
Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from George Sutton with Craig-Hallum. Please state your question.
George Sutton -- Craig-Hallum Capital Group LLC -- Analyst
Thank you and congratulations on the UPS deal. Obviously, you're having conversations with a number of carriers and potential partners. And I'm curious if you could discuss the responses to the new partnership with UPS relative to those discussions. Does it help accelerate or decelerate those discussions? And I just want to confirm, there are no inabilities for you to work with other carriers via the UPS-specific relationship?
Kenneth McBride -- Chairman and Chief Executive Officer
Yes. I mean, obviously, we've been having discussions, as we've discussed with -- ever since February, we've been having discussions with multiple carriers both in the U.S. as well as internationally. And all the discussions continue to be really positive. Obviously, one of our key targets in the original strategy was UPS is the global leader in logistics, and so we're very excited about that relationship. And I think we continue to have active conversations with multiple carriers.
I think in terms of your question on whether or not this relationship precludes our ability to work with other carriers, obviously, we can't disclose the specifics of the contract with UPS. However, the -- within the multi-carrier solutions, we already support 40 carriers, and we're going to continue to support any carrier that really makes sense from a customer perspective.
Within the Stamps and Endicia products, we currently -- we're adding UPS over the next couple of quarters, and we don't expect to add any additional major carriers at this point within those products. We don't really see a big need for a customer to have USPS plus 40 other carriers. If they need that, then we're going to just move them up to a ShipStation, ShippingEasy, ShipWorks solution.
So I think, broadly, we're going to continue to pursue the business model. We want to work with multiple carriers, not just one new one. And -- but we're really excited about UPS as our first in relationship.
George Sutton -- Craig-Hallum Capital Group LLC -- Analyst
Relative to your UPS work, you mentioned a customer set would get included for UPS in Q4. I'm just interested relative to your guidance. You're assuming how -- or maybe what percentage of your customer base in Q4 versus pushing the rest into 2020?
Kenneth McBride -- Chairman and Chief Executive Officer
Yeah, it's a good question, George. With regards to the impact in our guidance for Q4, certainly what we expect to introduce in the customer adoption rate is included in guidance. We don't get into bifurcating the customer base in terms of those that we would migrate versus those we don't and kind of quantifying that. But rest assured, it is included in our guidance.
George Sutton -- Craig-Hallum Capital Group LLC -- Analyst
And then lastly, Ken, you ran quickly through a number of new product pieces that you've added. And I'm wondering if you could give us a sense of any of those that are more important than others? And also, you mentioned 15 new partnerships. Are there any that you would specifically reference as meaningful for your strategic benefit? Thanks.
Kenneth McBride -- Chairman and Chief Executive Officer
Sure. Well, I mean I think we're really pleased with the progress we've made across the board. In the multi-carrier products, we had a big launch of a new version, which we call version 3.0 within our ShipStation solution. And we've migrated the majority of customers onto that solution. It added several significant new features. I mean we mentioned split shipments, which is the ability to kind of go in and take an order and split it across multiple shipments or multiple carriers, so really to provide that extra flexibility if, say, for instance, part of the order is in stock and part of the order isn't in stock.
And really adding other things like the international returns and tracking capability to that product as we continue to move ShipStation into our international -- as our small business international solution. The new partnership agreements, several were very significant. We haven't made those announcements yet. So we expect that we'll be able to announce some more new partnership -- new significant partnerships in the next one or two quarters. But we're very excited about a couple in particular.
And I think it really continues to reflect our market leadership with the ShipStation and also ShippingEasy and ShipWorks, but also with ShipEngine, which we haven't discussed in a while, but that's really our API solution, where we're integrating that into other UIs, and so it provides a lot of the capabilities of ShipStation with the various integrations on marketplaces and e-commerce tools and also carriers in the form of an API, so it makes integrating a lot of the capabilities of ShipStation into your own website or solution easier.
I think in MetaPack, we're really excited about continued innovation in the technology. I think we -- when we went in there, we had a little bit of work to do in terms of kind of moving some of the technology in that platform in the direction that we'll be able to utilize it within our broader international strategy.
But in the meantime, we've really been able to move MetaPack effectively into the U.S., and we signed a significant large new U.S. customer on the platform in the third quarter, so we were excited about that. It's a significant installation with a large organization that wants to take their solutions global.
And so that the capabilities in MetaPack really were a perfect fit for them. And as you recall, like when we bought MetaPack, it was really primarily a European solution. They didn't really have a lot of traction in the U.S., and one of our synergies we identified in that acquisition was the ability to bring them and to have our sales teams here really drive that solution in the U.S. So we've seen some nice early successes in that area.
And I think, in international, we continue to kind of make a hard push into the countries that we've targeted so far. There's five countries that we're focused on right now. And we're continuing to look at -- we're expanding. We're expanding our solutions in those markets. We're seeing nice customer adoption. We're also seeing nice growth in the shipments. So I think across the board, we've really seen nice progress in all of our products and initiatives.
George Sutton -- Craig-Hallum Capital Group LLC -- Analyst
Very helpful detail. Thank you.
Operator
Our next question comes from Kevin Liu with K. Liu & Company. Please state your question.
Kevin Liu -- K.Liu & Company -- Analyst
Hi, good afternoon. I wanted to follow-on on someone's question regarding UPS. To the extent you can share any sort of additional details, would be curious to hear if you guys are more of a reseller for UPS at this point or if there's more of a commission-type structure that you can earn.
And then maybe just in the grander scheme of things, obviously, it's going to take some time to fully roll out. But was wondering at -- how you guys think about the total revenue opportunity from this. Do you see there's enough to kind of offset some of the losses you've experienced with the USPS relationship and some of the impacts of the reseller program? Or is it more sort of kind of a fraction event?
Jeffrey Carberry -- Chief Financial Officer
Yeah. So we haven't really -- we're not able to disclose exactly the financial relationship other than the fact that we're able to offer these significant discounts to the customers. The end customers are getting, like I said, the 55% off the daily rate, which is a very significant discount. I mean we expect that -- we expect to see volume, both existing volume as well as new volume, moving into the UPS solution based on those rates. But in terms of whether the structure is reseller versus other structures, we're not able to really talk about that. And the second part of the question?
Kenneth McBride -- Chairman and Chief Executive Officer
Yeah. So in terms of the second part of the question, in terms of what this means going forward. Certainly, it's a strong strategic partnership for us. It's an important component to bring to our customers and certainly does incrementally benefit us financially.
The impact on -- the impact would be to resellers. There are a lot of uncertainties regarding the reseller structure, with USPS, that is. And to what degree the impact in 2020 and '21 and beyond is relative to the resellers.
It's impossible to say right now without further clarity on what the USPS will do ultimately with the resellers. But I think it's safe to assume, obviously, that we're excited about it, and it is certainly financially beneficial for us. We talked about part of our strategy was diversification of our financial relationships with our carrier partners. And this is certainly a big step in achieving that goal.
So we're definitely very excited about it. But quantification at this point relative to USPS, I think, is premature given the uncertainties around USPS.
Kevin Liu -- K.Liu & Company -- Analyst
Understood. And then, Ken, you had mentioned that by default, all of your customers will have access to these UPS services. Do you guys just have a master account with UPS, and so that way, you can just establish all these accounts directly? Or are there any sort of kind of opt-in process that your customers will have to go through in order for you to be able to show that information with them?
And then just related to that -- well actually, I'll let you answer that first, and then I'll ask my last question. Thank you.
Kenneth McBride -- Chairman and Chief Executive Officer
Yes. So when the customer signs up for the service, as they begin using our solution, they're -- currently, their USPS account is already automatically there, obviously. But now also, their UPS account will be automatically there. So whereas customers may have previously had to go and fill out some forms or go reach out to UPS sales or other ways of getting an account set up with UPS, now it just is automatically there.
So it will really ease the start-up, and we think that the ability to kind of push people right into UPS the way we've always done with USPS will be a big benefit from a convenience perspective. And then the attractiveness of the rates as customers go into the solutions to really look at optimizing their cost for their packages, the attractiveness of the rates as well will be there automatically.
So whereas today, you may have to go and build some volume first to get a discount from UPS. Those discounts will be available from package one, day one. So it will be a nice way to incent people to go in and start utilizing UPS right off the bat.
Kevin Liu -- K.Liu & Company -- Analyst
Got it. And then kind of the final part of that question was just for your multi-carrier customers who already have UPS accounts established, are you able to just be able to monetize those relationships under this new agreement if your -- if the rates that they have aren't tied exactly in this offer?
Kenneth McBride -- Chairman and Chief Executive Officer
Yes. I mean, obviously, we have a significant -- we have a lot of volume already running through other carriers we've talked about outside the USPS. We have about 2 billion in volumes through all the other carriers. And so within that volume, we have UPS volume as well as other carriers like FedEx and other solutions.
And so some of these larger customers have already received their UPS account numbers, have already gone through that process of setting up their account. And they have discounts that are better than the ones we can offer them, or they may have discounts that aren't as good. So I think it will be a customer-by-customer question as to whether they want to move into the discounts we're able to offer or stick with the one they already have.
Kevin Liu -- K.Liu & Company -- Analyst
Got it. So it does sound like those customers do have the ability to move into kind of your accounts if you're able to offer those better rates.
Kenneth McBride -- Chairman and Chief Executive Officer
Yeah, I mean I think customers will have that flexibility.
Kevin Liu -- K.Liu & Company -- Analyst
Okay, great. Congrats, and thanks for taking the question.
Kenneth McBride -- Chairman and Chief Executive Officer
Thanks, Kevin.
Operator
Our next question comes from Darren Aftahi with ROTH Capital Partners. Please state your question.
Darren Aftahi -- ROTH Capital Partners -- Analyst
Hi. This is Dillon on for Darren. Thanks for taking my question. First, on USP -- I mean UPS. Could you talk about sort of the reasoning behind making it the default shipping option versus sort of maybe like a drop-down menu? Does that mean that the UPS rate will be better in every instance? Or will it sort of notify if there might be a potential lower rate through a different carrier on the platform?
Kenneth McBride -- Chairman and Chief Executive Officer
Yeah. We didn't say default as much as there is an account set up for you by default so -- and the rates are available within that account by default. Obviously, customers are still going to be looking at, within the multi-carrier products, using more than one carrier like the vast majority.
I mean the reason you adopt multi-carrier in the first place is because you want to use more than one carrier. So to the extent that -- and it's really a package-by-package, weight-by-weight, zone-by-zone question as to what the best carrier solution is.
And in some cases, there might still be another carrier that has a better solution cell-by-cell. So it's not that UPS is going to be your default across all packages and all weights and all zones. It's going to be that those rates are available for the customers by default.
So they don't have to go out and get rates directly from UPS, and so there's no really start-up -- no start-up friction in terms of getting those customers in and shipping with UPS.
Darren Aftahi -- ROTH Capital Partners -- Analyst
Okay. Got it. And then on MetaPack, can you talk about sort of what you're seeing in the US? I know in the past you've talked about adding some sales efforts there. Was that one of the prime drivers of gaining that new customer? And do you think that helps you leverage in attracting more sort of US based customers? And then in the past, you've talked about some weakness in MetaPack from Brexit, and with that sort of still ongoing, just what are you seeing there in the UK?
Kenneth McBride -- Chairman and Chief Executive Officer
Yeah. So yeah, I mean the answer is yes. One of our key synergies we identified right up front is that, hey, MetaPack is really European, rest of the world organization. And at that point, Stamps.com and our family of solutions are really US.
And so together, we have the ability to kind of cross-pollinate across the world. And so one of our key initiatives initially, MetaPack really had zero penetration in the US. And there's several organizations here that make a ton of sense they should be using MetaPack, but they haven't. So we have a sales team of 100 people. And we were able to take the MetaPack solution and bring that in to the sales team so that they could initiate conversations with customers.
And so it's a long sales cycle, so it's taken some time. But we've seen some nice traction, and we had a big customer win here this past quarter that gets us excited about the strategy continuing to accelerate going forward.
I think in terms of Brexit, we have seen some slowdown in spending in the U.K. with -- related to some of the uncertainty around Brexit. And MetaPack does have a significant U.K. business. So certainly, it's had some impact.
However, I think they remain strong, and their position is strong. So ultimately, we don't really see that as a long-term issue. It's more just a short-term situation.
Darren Aftahi -- ROTH Capital Partners -- Analyst
Great. Thank you.
Operator
Thank you. [Operator Instructions]. Our next question comes from Tyler Wood with Northland Securities. Please state your question.
Tyler Wood -- Northland Securities -- Analyst
Thank you. As you try and size up the opportunity of partnerships with other carriers in the future, can you kind of help us get a feel for how much of the volume going through those multi-carrier products is with carriers other than UPS or USPS? Just ballpark.
Kenneth McBride -- Chairman and Chief Executive Officer
We haven't disclosed that. I mean I think in the US, the big three carriers, USPS, UPS and FedEx, really make up the vast majority of the market. So when we talk about that 2 billion in volume that we already have running through our multi-carrier properties, that relates to carriers outside the USPS. Just like the market, the vast majority of that is going between UPS and FedEx.
Jeffrey Carberry -- Chief Financial Officer
I think it's important to understand though that given the changes that really precipitated our strategic move with regard to broadening our carrier relationships, the carrier world is getting much more competitive. And you're finding historical relationships where one carrier really kind of owned a given segment, those lines are blurring to a certain extent as they start pivoting to respond to competitive threats in the marketplace for their own businesses.
So those things are changing. I think to Ken's point, obviously, our exposure currently to non-USPS carriers is relatively small relative to USPS but those things are changing. And obviously, our platform was an exceptional platform for carriers to work and go after that business.
So I think it's important to understand the addressable market, which is the import of your initial question, that's something that is evolving, given the competitive dynamics as well.
Kenneth McBride -- Chairman and Chief Executive Officer
Well, one more comment I would add -- one more thing I would add which is, I think, maybe another way to go at your question. Historically, our business has really been primarily focused on postal service.
And now, as we move into this world with kind of more of a focus on diversifying among the carriers in the US, as you look at the size of the market, just in the US shipping, I think the USPS is about $20 billion. But then you add them all together, all three, and it's about $100 billion. So we're talking about a 5x increase in our addressable market just within the US.
When you look international and I think the worldwide shipping is about $260 billion. So a significantly larger number. So -- and part of the reason why we've really looked at diversifying our business both in the US as well as internationally is we've really gained a significant position, already represent a high percent of USPS' overall business, and we're more than a third of their priority mail, more than half of their first class. So in order to continue to grow our business, we have to really look at the larger market in the US as well as internationally.
Tyler Wood -- Northland Securities -- Analyst
Thanks. That's helpful. And then one more. You've talked about the revenue impact of volume shifting from USPS to UPS, but to the extent that you can talk about it due to the confidentiality of the partnership, what's the margin impact of that volume shifting from USPS to UPS under the new partnership? Thank you.
Jeffrey Carberry -- Chief Financial Officer
Yeah. And I appreciate the question. It's something we unfortunately just can't get into given confidentiality. So we unfortunately just, given the confidential, can't speak to relative margins on different carriers at this point.
Kenneth McBride -- Chairman and Chief Executive Officer
Well, I would add, which is it's not -- this partnership isn't really just about shifting volume, and it's about both shifting volume to the extent that, that makes sense to the customer with these new attractive discounts and waived surcharges, but also, it opens up a new market that we aren't really able to capture today with our current offerings.
So packages that don't go USPS because the rates of services aren't competitive, USPS really tends to be more competitive in the smaller packages, residential delivery. And so when we go into accounts where they tend to have larger packages, heavier packages going to businesses or residences, it's really been more challenging to have -- to gain that account, to win that account. So this also opens up the market for us, and it allows us to go after brand-new volume that we haven't been able to do before.
Tyler Wood -- Northland Securities -- Analyst
All right. That's all for me. Congrats on the partnership.
Kenneth McBride -- Chairman and Chief Executive Officer
Thanks.
Jeffrey Carberry -- Chief Financial Officer
Thanks, Tyler.
Operator
Thank you, ladies and gentlemen. There are no further questions at this time. I'll turn it back to management for closing remarks. Thank you.
Kenneth McBride -- Chairman and Chief Executive Officer
Thanks for joining us today. And as always, if you have any follow-up questions, you can contact us through our website or through our investor hotline at 310- 482-5830. Thank you.
Operator
[Operator Closing Remarks].
Duration: 48 minutes
Call participants:
Suzanne Park -- Vice President, Finance
Kenneth McBride -- Chairman and Chief Executive Officer
Jeffrey Carberry -- Chief Financial Officer
George Sutton -- Craig-Hallum Capital Group LLC -- Analyst
Kevin Liu -- K.Liu & Company -- Analyst
Darren Aftahi -- ROTH Capital Partners -- Analyst
Tyler Wood -- Northland Securities -- Analyst
