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STMP earnings call for the period ending December 31, 2019.

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Image source: The Motley Fool. Inc (STMP)
Q4 2019 Earnings Call
Feb 19, 2020, 5:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Greetings. Welcome to the Fourth Quarter 2019 Financial Results Call. [Operator Instructions]

I will now turn the conference over to your host, Suzanne Park. You may begin.

Suzanne Park -- Investor Relations

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 fourth quarter and fiscal year 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. As far as 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.

The four 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 deliver products and services; maintain desirable economics for its products and services and monetize its customers, transactions as 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, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, 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 as of 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.

Our fourth quarter and fiscal year 2019 financial results include GAAP net income of $20.3 million in the fourth quarter and $59.2 million in the fiscal year 2019 and GAAP income per fully diluted share of $1.13 in the fourth quarter and $3.33 in fiscal year 2019. Our non-GAAP financial measures exclude the following fourth quarter and fiscal year 2019 items: $12.5 million of noncash, stock-based compensation in the fourth quarter and $42.9 million in fiscal year 2019; and $5.6 million of noncash amortization expense of acquired intangibles and debt issuance costs in the fourth quarter and $22.6 million in fiscal year 2019. Our non-GAAP financial measures include the following fourth quarter and fiscal year 2019 items: $0.5 million of additional non-GAAP income tax expense in the fourth quarter and $22.8 million in fiscal year 2019. 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 fourth quarter 2019 earnings release and metrics posted on our investor website for reconciliations of our non-GAAP financial measures to the corresponding GAAP measures.

Now let me hand the call over to Ken.

Ken McBride -- Chairman and Chief Executive Officer

Thanks, Suzanne, and thank you for joining us today. During the fourth quarter, we continued to execute on our strategy to transform the business into a global, multi-carrier and e-commerce solutions company. On today's call, we're going to cover several topics. First, we're going to give you an update on our great new partnership with UPS and the progress we've made so far in rolling out that new customer solution. Second, we're going to provide you an update on the new, long-term agreements that the USPS signed with its major shipping reseller partners. Third, we're going to discuss the progress and our go-forward plans on our various business initiatives in the U.S. Fourth, we'll discuss our progress and plans on our various initiatives internationally. And finally, Jeff will discuss our metrics, our Q4 and our 2019 financial outcome and our guidance for 2020. So let's begin by spending a few minutes refreshing everyone on some key elements of our UPS partnership, discussing our progress with that great, new relationship. As you know, late last year, we signed a new partnership with UPS, which allows us to offer attractive UPS package discounts to our customers.

Through the new partnership, we will be working very closely with UPS in multiple ways across our organizations. Within our e-commerce, multi-carrier properties, including ShipStation, ShippingEasy and ShipWorks, we've always provided the UPS shipping capability. However, the new UPS 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, the new UPS account will be set up by default for all new and existing customers, and the new discounted UPS rates will be available by default in that new account. So a customer can get up and start shipping with UPS immediately versus a process that previously required some time and effort. The new solution went live in ShipStation with a subset of customers in the fourth quarter, and we're now rolling it out more broadly to the entire ShipStation base. We also expect to begin rolling the UPS solution out to ShippingEasy and ShipWorks customers during this current quarter. Within the and Endicia-branded products, offering UPS shipping will be an entirely new capability that will broadly go live soon. Within these products, we previously had exclusivity arrangements with the USPS that are now no longer in place.

So we're now able to offer the and Endicia customers a UPS shipping solution side by side with the USPS services. Accessing UPS will also be very convenient with a default account and discounted rates available immediately when a customer first begins to use the product. As a result of our broad marketing of the brand, many up-and-coming e-commerce shippers start with us in the product, and this will allow us to teach those customers about UPS and their great solutions early in the customer shipping life cycle. We recently began a small beta test of ups in our web version, and we expect to begin rolling out the UPS capability across all and Endicia-branded products during this current quarter. The UPS package discounts we're able to offer to customers under our new partnership are very attractive. The discounts are as much as 55% off UPS' standard daily rates, and the discounts include various waived surcharges. And we expect that those waived surcharges will reduce customer confusion the way surcharges are also particularly relevant to the types of shipping that our customers typically do.

And the discounts are available through our products without any necessary existing customer shipping volume that is frequently required to qualify for discounts when working directly with UPS. We always strive to bring the best solutions to our customers, and UPS is a global leader in shipping and logistics. They've been a leader in evolving their business model to continue to address the rapid changes in e-commerce. For example, they began doing seven-day delivery in 2020 to meet the market expectations in e-commerce. They recently announced a new partnership with Square. They also announced new partnerships with WooCommerce, PrestaShop, OpenCart and Magento. We would note that as we move forward with the new UPS strategic partnership, we continue to be good partners with the USPS and to work very productively with them. The USPS still provides a great solution for our customers in many areas, and we're going to continue to work very closely with the USPS across our organization. The strategic relationship with UPS further drives the value proposition of our service offerings, empowers our customers by offering them more choice and control over their shipping needs. We're very excited about our new UPS relationship.

We see them as one of the winners in e-commerce and a great, long-term partner of and all of our company products and solutions. So with that, let's now spend a few minutes discussing the latest developments in the USPS reseller area. First, let me provide a quick refresher on the reseller industry and its importance to e-commerce. The resellers have what are called negotiated service agreements, or NSAs, which are customized negotiated contracts between the postal service and individual customer or reseller, which provides discounted rates that vary based on each agreement. Each reseller's NSA allows a reseller partner to buy postage for shipping a package at one rate from the USPs and then resell that postage to customers at a higher rate. Since the beginning of its reseller partnership partnerships nine years ago, USPS shipping has seen significant growth, and the resellers have played a large role in that success.

Over the past 10 years, the USPS has seen a 20% compound growth rate for their total shipping volume through their PC postage and their reseller partnerships. One of the most successful areas of growth for the USPS has been in e-commerce where the USPS has become the market leader in e-commerce package shipping for small and medium businesses. In our view, the reseller industry has been a big factor in that success. We're aware of more than 150 platforms such as e-commerce marketplaces, shipping software solutions, multi-carrier software solutions and other e-commerce platforms that, in some way, participate in a portion of the economics created via these USPS reseller NSAs. When you look at the behavior of these various e-commerce platforms, you see a large focus on USPS shipping on their homepages, in their products, in their technology, in their marketing and in their sales. In many ways, the reseller industry acts as an incubator for the e-commerce space where the resellers promote the USPS to various e-commerce solutions. So in summary, the USPS is offering a revenue share through what has been characterized as a wholesale network of resellers, and then those resellers have done partnership done partnerships and shared some of those economics with various e-commerce platforms. And then those organizations have, as a result, aggressively pushed USPS as their primary carrier.

This ecosystem, which is incentivized by the USPS resellers, has been extremely successful in making the USPS the market leader in small and medium business e-commerce. With that understanding of the significant importance of the reseller industry and its contribution to the USPS' success, the USPS has now astutely signed new, long-term agreements with their reseller partners. The new, multi-year agreements provide both relative stability and predictability for the resellers and for their various partners. We were not a party in the negotiation of these new agreements and are thus unable to comment on the specific structure and economics. However, certain details are available via the unredacted sections of the filings that were made by the postal service to the Postal Regulatory Commission in December of 2019. For example, the new agreements go for an initial term of four years until December 31, 2023 with an option to extend for two additional years. The new agreements were signed and implemented such that there was no interruption in the reseller program from 2019 to 2020. There's a baseline discount below commercial plus pricing for the reseller for all customers of the reseller. There is a new tiered structure that provides additional discounts for larger customers if approved in writing by the postal service.

There is a concept of a particular type of larger merchant called a platform. The contract applies to priority mail express, priority mail and other classes of packages. and all of our subsidiaries are part of the e-commerce ecosystem generated as a result of the USPS reseller program. And thus, new and existing shipping customers on our platforms will continue to have easy access to discounted USPS rates within our superior service platforms through these new reseller agreements. Our commercial relationships with the resellers remain largely unchanged, so we will continue to partner with our reseller partners and the USPS to promote the benefits of USPS as a shipping services provider. Like their innovation in 2010 in first creating the reseller industry, the USPs again made, in our opinion, a very smart business move, and we expect to continue to see the USPS be very successful in e-commerce as a result of it. We look forward to continuing to promote the USPS' services under our partnerships with the resellers where appropriate for our customers. With that, now let me update everyone on some of the initiatives we're focusing on in 2020 for the U.S. market. First, we're planning to continue to invest heavily on growth in the shipping part of our business. We devote a large percentage of our company's resources to target e-commerce shippers. For 2020 and beyond, we expect to continue making these large investments in order to attract these types of shippers to our solutions.

Shipping customers are more expensive to acquire than small business customers. However, they yield higher, long-term returns on investment with their typical characteristics, including the higher average revenue per customer, the lower churn and the higher usage when compared to other small businesses that predominantly use our service to send mail. On the marketing front, we plan to continue increasing our investment in direct sales, direct mail, traditional media, radio, television, search engine marketing, search engine optimization as well as refining our customer acquisition process through our affiliates, partners, our telemarketing and other areas. We also expect to continue to expand our partnerships and integrations. During 2019, we added several, new partners, including Alibaba, Overstock, Shopware, Wix, NetSuite, Acumatica, SPS Commerce, Snapchat Salesforce Essentials and others. We also recently announced a collaboration with ChannelAdvisor to bring a simplified version of ShipStation to its e-commerce platform that targets the small and medium business market. Second, in our 2020 U.S. plan. We plan to expand the features and functionality of our solutions, particularly in the multi-carrier shipping part of our business. The e-commerce shipping industry is very dynamic, and we invest a significant amount of development resources and continuing to innovate in the market.

Our goal is to be able to meet the needs of as many customers as possible so that we can maximize our customer acquisition; maximize our average annual revenue per paid customer, or ARPU; reduce our monthly customer cancellation rates and increase our overall customer usage. For example, during 2019, we made several enhancements to the ShipStation product, including we expanded our split shipping and multi-warehouse functionality to support more complex shipping workflows and higher-volume shippers. We released what's called a scan-based workflow, which allows shippers to run their shipping operations more automatically using a scanner. We also added inventory functionality to the ShipStation mobile app. During 2020, we plan to continue to enhance and add new features and functionality that will improve the value proposition of our solutions for shippers. Third, we plan to continue bringing innovative and cost-effective solutions to U.S. customers that are sending packages to other countries. During 2017, we launched a new international shipping initiative called Global Post where we offer customers access to discounted USPS international shipping rates through our private-label carrier partnerships that utilize the USPS' [Technical Issues] Share program, which is a program whereby companies can do a portion of the work for the USPS and receive a discount on their postage rates.

During 2018, we added the Global Advantage Program, which is a great bundled customer solution built on top of Global Post, and that includes customer benefits such as free package pickup, free insurance, upgraded delivery speeds, enhanced tracking, simpler customs procedures and other benefits. During 2019, our total revenue under the Global Post and Global Advantage programs grew 45%. We expect to continue to drive these solutions in 2020. We also now offer DHL Express as an international shipping solution. And under our new partnership with UPS, we have a great, new solution for international packages as well. Now let me discuss some of our plans for expansion outside of the U.S. Starting with our acquisition of MetaPack in 2018, we began a path of expanding our business from a domestic-only, USPS-focused business model toward a global, multi-carrier e-commerce shipping solutions company. Over the past several years, we had entered into a significant number of partnerships for the international market, and during 2018 and 2019, we undertook efforts to begin to test market our ShipStation product in the U.K., Canada and Australia.

During 2020, we expect to ramp up our marketing, our business development and our product development efforts aggressively. First, for ShipStation and ShipEngine, we plan to continue to develop partnerships, carrier relationships, product enhancements and to continue to market our solutions in our target countries. ShipStation's 2019 shipments by international customers grew by 87%. During 2019, we launched 11 new partnerships focused on the international market, including Miracle; Sage UK, Visualsoft [Indecipherable] Express, DPD Local and Australia Post. Using the Miracle marketplace platform, we integrated the Best Buy Canada marketplace, opening the door to other 200 Miracle marketplace customers. We also added three new Australian carriers Fastway, Couriers Please and Sendo.

We also landed some significant major accounts internationally with the addition of Jaguar, Land Rover and Leoustane and Permount [Phonetic] as new, major accounts in 2019. During 2020, we expect to improve our capabilities to support further international expansion such as language and currency translation systems, and we expect to launch in France as our first non-English-speaking market. In 2020, we also expect to further enhance cross-border capabilities with features such as duties and taxes added to ShipEngine. Second, in our MetaPack business, we continue to make progress in both customer acquisition and technology, including rearchitecting the technology platform and driving new innovations. On the customer side, in the U.S., we signed our first two major U.S. customers during 2019, utilizing our U.S.-based sales team. We also developed a very strong U.S. pipeline of deals that are household names.

MetaPack really had no presence in the U.S. before we acquired them. Bringing MetaPack to the U.S. with our U.S. sales team was one of the synergies we identified when we acquired MetaPack. In MetaPack, we also continued to win a large number of new customers in Europe, and we expanded several of our existing customers into new countries and added new carriers to their solutions. On the technology side, we launched an exciting, new product called Delivery Tracker, which we expect to enhance the e-commerce shopping experience of users and drive value for our customers. The new tracking portal that includes retailer branding, tracking for 470 carriers, 5,500 services and 350,000 pickup and drop-off locations, translating to 17 languages and many other features. We've also continued to do the development work that will allow us to connect the 450 MetaPack carrier services to the ShipStation international platform.

Finally, in the international front, during 2020, we'll also invest development resources into building a simpler, international, e-commerce, multi-carrier shipping solution based on the web solution. Internationally, we're now planning to replicate our U.S. strategy where we go-to-market with two main brands: a simpler web solution for up-and-coming e-commerce customers and a more powerful and complex ShipStation solution for more sophisticated e-commerce customers.

We expect to build a U.K. version of the web solution during 2020 with a small set of the important carriers in that market, for example, Hermes, DPD and Royal Mill. Once that is in place, we expect to begin some test marketing of the solution in the U.K. So we remain very excited about our the future of our company and the enormous value proposition of our e-commerce technology and our service offerings. Our goal is to position the company for the best, long-term outcome as the myriad of e-commerce trends play out and to continue to diversify our business. Following the business model changes that we announced early last year, we continue to have very productive discussions with traditional and nontraditional 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 properties, the level and number of our partnerships and integrations, size and strength of our national sales force and scale and success of our marketing programs. Overall, we built an extraordinary company with incredible assets, an amazing workforce, and we are exceptionally well positioned to continue to drive our organization in this new direction. We're confident we will become the global leader in multi-carrier e-commerce shipping.

With that, I now turn the call over to Jeff.

Jeff Carberry -- Chief Financial Officer

Thanks, Ken. We'll now review our fourth quarter and fiscal year 2019 financial results. The discussion of our financial results today include non-GAAP financial measures. As Suzanne described, a reconciliation of non-GAAP financial measures to corresponding GAAP measures can be found in our earnings release and in our metrics on our investor website. Total revenue was $160.9 million in Q4, and that was down 5% year-over-year versus Q4 of 2018 and was $571.9 million in 2019. That was down 3% versus 2018. Total revenue, excluding MetaPack, was $146.4 million in Q4. That was down 6% year-over-year versus Q4 of 2018 and was $519.1 million in 2019, and that was down 8% versus 2018. The decline in revenue in the fourth quarter and for the year was a result of our decision to discontinue our exclusive relationship with USPS at the beginning of 2019, and thus, we received no commission revenue in 2019. Revenue was positively impacted by strong growth in our Global Post and Global Advantage Program. Additionally, we had our first full year contribution of MetaPack revenue in 2019 versus a partial year contribution in 2018.

Mailing and Shipping revenue was $156.0 million in Q4, and that was down 6% year-over-year versus Q4 of 2018 and was $557.1 million in 2019, and that was down 2% versus 2018. Mailing and Shipping revenue, excluding MetaPack, was $141.5 million in Q4, and that was down 6% year-over-year versus Q4 of 2018 and was $504.4 million in 2019, and that was down 8% versus 2018. The decline in total Mailing and Shipping, including revenue that we received from our shipping customers, was also a direct result of our 2019 decision to discontinue our exclusive relationship with USPS, and it was likewise offset by growth in our Global Post and Global Advantage Programs and also offset by a full year contribution of MetaPack revenue. We estimate that total revenue derived from our shipping customers declined at a high single-digit rate year-over-year and, as a percentage of total revenue in Q4, was approximately 80%. We estimate that revenue derived from our shipping customers in Q4, excluding MetaPack, declined year-over-year at high single-digit rates and, as a percentage of total revenue, was in the low 70% range. We also estimate that our revenue derived from our SOHO mailers as a percentage of total revenue was in the high teens and grew year-over-year at a mid-single-digit rate. Mailing and Shipping gross margin was 74.7% in Q4 versus 79.4% in Q4 of 2018 and was 74.7% in 2019 versus 81% in 2018.

The decrease in year-over-year gross margins was, again, primarily attributable to the 2019 decision to discontinue our exclusive relationship with USPS. Gross margins were also negatively impacted by the increase in our Global Post and Global Advantage Program offerings and by the full year contribution of MetaPack, both of which have lower margins. MetaPack's gross margin under U.S. GAAP was approximately 65% in Q4 and also 65% for full year 2019. We had a year-over-year increase in our Q4 operating costs, including sales and marketing, R&D and G&A, primarily related to strategic investments to support innovation and long-term growth and due to the full year contribution of MetaPack in 2019. As Ken mentioned, we are aggressively scaling our investment in R&D and sales and marketing related to our international business strategy. Non-GAAP operating income was $50.3 million in Q4, and that was down 28% year-over-year versus Q4 of 2018 and was $158.7 million in 2019, down 30% 37% versus 2018. Adjusted EBITDA was $51.4 million in Q4, and that was down 28% year-over-year versus Q4 of 2018 and was $164.4 million in 2019, and that was down 36% versus 2018. Adjusted EBITDA margin was 32% in Q4 and versus 41.9% in Q4 of 2018 and 28.7% in 2019 versus 44% in 2018. The decreases in adjusted non-GAAP operating income, adjusted EBITDA and adjusted EBITDA margin were again primarily attributable to the same aforementioned factors that affected revenue.

Non-GAAP adjusted income per fully diluted share was $2.12 in Q4 based on a non-GAAP tax expense rate of 23.4%, and that was down 43% year-over-year versus $3.73 per share in Q4 of 2018 based on a non-GAAP tax benefit of 0.7%. Non-GAAP adjusted income per fully diluted share was $5.73 in 2019 based on a non-GAAP tax expense rate of 34.7% and was down 51% versus $11.78 in 2018 based on a non-GAAP tax expense rate of 11.7%. Fully diluted shares used in the EPS calculation was 17.9 million for Q4 and 17.8 million for 2019. Let's now discuss our customer metrics. Our total paid customer metric was 750,000, which was our highest number of paid customers in our company's history. This was driven by the strongest quarterly and annual new customer acquisition we have ever had as a company.

This result is particularly impressive since we experienced a headwind in the growth of total paid customers as a result of our decision to discontinue our USPS exclusive agreement in 2019 and that associated impact on our paid customer calculation. As a reminder, a segment of our higher-volume customers continue to receive our technology solution without our customary monthly service fee. And thus, once we were no longer once we no longer received a commission from the USPS for those customers, they were eliminated from our paid customer calculation. We continue to offer the solution without service fees because these customers are very high volume, and we expect to be able to potentially monetize those customers in the future by marketing solutions such as our new UPS rates to them. Our fourth quarter churn was 3.2%.

Churn was up 0.3% year-over-year but was in line with the churn we've seen over the past several quarters. Our fourth quarter ARPU was $69.33. ARPU was down 7% year-over-year, again directly related to the aforementioned factors that negatively affected revenue. Total fourth quarter USPS postage printed was 1.8 billion, and that was up 1% versus the fourth quarter of 2018. The total USPS postage printed metric includes both higher-growth shipping volume and traditional nonpackaged mail volume. Mail volume, of course, continues to see a steady decline, consistent with the long-term trend of declining mail usage in the U.S. We'll now discuss our cash, debt and uses of cash. We ended Q4 with $156 million in cash and investments, which was up $13 million from $143 million at the end of Q3 of 2019. The increase in cash and investments was primarily driven by the following: strong operating cash flow, and that was partially offset by changes in net working capital, share repurchases and the scheduled debt repayment. During Q4, we made a required principal repayment of $3.1 million, resulting in total debt under the credit agreement, excluding debt-management costs of $50.5 million. During Q4, the company repurchased approximately 76,000 shares at a total cost of approximately $6 million.

And for 2019, the company repurchased approximately 720,000 shares at a total cost of approximately $65 million. On February 13 of this year, our Board of Directors approved a new share repurchase plan, which will commence on February 24 this year and will replace the current $60 million plan that was scheduled to expire in May of this year. As of February 18 of this year, we have repurchased approximately $43.2 million under the current plan. The new plan offers the company to repurchase up to $40 million of stock over the next six months following its effective date. With that, let's now turn to guidance. Some of the major trends that were factored into our guidance include the following: the new, multi-year retailer agreements; our new UPS partnership and our plan to roll that out in the first quarter; and our increase in operating costs related to our continued investment in the U.S. and our significant investments in our international strategy. We also took into account all the specifics of the new USPS reseller agreements to the extent it was available to us such as the new agreements are for an initial term of four years until December 31, 2023 with an option to extend for two additional years. The new agreements were signed and implemented such that there was no interruption in the reseller program. And there was a new tiered structure for enhanced discounts for larger customers and for e-commerce platforms. Additionally, we began offering UPS rates to a small number of ShipStation customers in the fourth quarter of 2019 and expect to offer them to all of our customers by the end of the first quarter of 2020. And now on to our specific, quantitative guidance.

We expect fiscal 2020 revenue to be in the range of $570 million to $600 million. We expect our shipping revenue will be in a range of approximately flat to up in the mid-single-digit range, reflecting both the aforementioned factors affecting 2020 and the anniversary of the elimination of our USPS commission revenue. We expect our mailing revenue derived from our SOHO mailers will be approximately flat year-over-year. And we expect our Customized Postage revenue will be down between 5% and 40% year-over-year with that wide range reflecting our inability to accurately predict the trends in this highly customer discretionary part of our business. We expect operating expenses to increase in 2020, reflecting the annual effect of the strategic investments we made throughout 2019 and additional strategic investments we anticipate making in 2020 around both our U.S. and international efforts.

We expect fiscal 2020 adjusted EBITDA to be in the range of $135 million to $155 million. Our guidance implies a full year adjusted EBITDA margin in the low to mid-20% range based on all of the aforementioned factors affecting our business. We expect non-GAAP tax expense will be approximately 40% of non-GAAP pre-tax income for 2020. Our full year 2020 effective tax rate could differ from our current estimates based on a number of factors. We expect fully diluted shares to be between 18.0 million and 19.5 million in 2020. We expect fiscal 2020 non-GAAP adjusted income per diluted share to be in the range of $4 to $5. And finally, we continue to expect capital expenditures to be approximately $2 million to $4 million in 2020.

And with that, we'll open up for questions.

Questions and Answers:


[Operator Instructions] And our first question is from George Sutton from Craig-Hallum.

George Sutton -- Craig-Hallum -- Analyst

Thank you. Great stuff, guys. So can you discuss the role you expect to play in the reseller program now relative to your old role in that program? Our understanding is that there's a focus on value-added components in the structure, which we assume would benefit you.

Ken McBride -- Chairman and Chief Executive Officer

Yes. I mean our relationship, our partnerships with the resellers really haven't changed. I mean it's really their contracts with the USPS that changed. So I think we don't really expect to see any difference in terms of our strategy and how we work with the resellers in the market.

George Sutton -- Craig-Hallum -- Analyst

Now you mentioned that you continue to plan to try to monetize some of the former commission base from the postal service. Our belief had been much of that had been done through the Endicia business. And separately, we've seen fairly significant hiring at Endicia, specifically. I'm curious if that all intersect and if you can just give us a sense of what you're hoping to achieve with the UPS relationship with the former USPS accounts.

Ken McBride -- Chairman and Chief Executive Officer

Well, sure. I think, generally speaking, our UPS relationship, we continue to work very closely with USPS, and we've always offered UPS through our multi-carrier solutions. So with the new UPS relationship, the major changes that we're bringing UPS into our and Endicia-branded solutions, and of course, the other one is that we're going to offer the discounted rates up to 55% to the customers and automatically set up an account so that accessing UPS is very simple and easy for a new customer to sign up for an existing customer. And so we see, perhaps, some volume may move over from USPS to UPS, but we also see additive volume. So USPS, as you know, is very strong in the two pounds residential delivery up to two pounds, whereas UPS tends to be have much higher market share of the three-plus-pound market.

And so traditionally, we really haven't attracted given our 10-year relationship with the USPS, we really haven't focused on or attracted a lot of the customers that do the three-plus pounds in the business-to-business-type packages. So we expect that we'll be able to broaden our marketing, broaden our sales to go after some of those larger customers who offer who ship those larger packages. So we see the relationship as optimizing our solution for our customers, bringing a new solution with very attractive rates to the customers that may just be shipping with the regular list price of UPS right now or not using UPS at all and being able to access this larger, heavier package market with our UPS solution.

George Sutton -- Craig-Hallum -- Analyst

Got you. Finally, Ken, you ran through a great list of new partners, and I wrote them down as fast as I could, but there were some biggies there, Alibaba, SPS Commerce, Snapchat, Salesforce Essentials. Can you just give us a general sense on what sorts of roles these partnerships will be playing, how much that influences your the guidance, which was better than we anticipated?

Ken McBride -- Chairman and Chief Executive Officer

Sure. I mean I think generally speaking, we have now at this point, I think we have something like 350 different partnerships through ShipStation, over 500 partnerships companywide. And so partnerships are a huge part of our strategy. They always have been. And so I mentioned a bunch of them. We did a lot of new partnerships in 2019. We talked about integrations with marketplaces like we've done in the past with the likes of eBay and Etsy and Amazon. We added Overstock this year. Salesforce Essentials is a product that we can now integrate with, and it's a co-marketing agreement and also an integration with Salesforce that we can pull data directly from Salesforce into ShipStation. And then we did the ChannelAdvisor thing that we most recently announced. We're really offering ShipStation to their customers in a new, what's called, a ChannelAdvisor starter addition. So that's really providing some channel expansion, access to new consumers through the integration with a web store in the global marketplaces.

And so the starter addition can integrate with ShipStation to allow the combine the benefits of the multi-carrier inventory and order management we have with ShipStation and our new product efforts. And I think we've talked about Alibaba in the past. Alibaba really decided to open up their business model for small business sellers in 2019, and one of the first partnerships they did was with ShipStation. And so it's really just similar to other marketplace sellers like on an Amazon. Alibaba is adding that type of solution to their market, and we are we're integrated with Alibaba and the first shipping solution that offers that capability. So I think it's just generally speaking, we're very active on the partnership front, both domestically and internationally, and it's a huge part of our strategy, and it's going to continue to be a huge part of our strategy going forward.

George Sutton -- Craig-Hallum -- Analyst

All right, great stuff. Thanks, guys.

Ken McBride -- Chairman and Chief Executive Officer



Our next question is from Darren Aftahi from Roth Capital Partners.

Darren Aftahi -- Roth Capital Partners -- Analyst

Hey, guys, thanks. Three, if I may. So on the reseller, now with the new agreement, can you kind of compare and contrast the rate card you're seeing on an apples-and-apples basis? And would you characterize that as better, worse or the same? Two, when you look at kind of the high and low end of, let's say, your revenue guidance, what are kind of the puts and takes from the reseller, MetaPack and UPS relationships? And then third, on MetaPack, you guys talked about you have two U.S. clients signed and your pipeline, I don't know the exact words you used, started very positive. I'm just kind of curious if you can kind of characterize the type of pipeline clients you're seeing with MetaPack in the U.S.

Ken McBride -- Chairman and Chief Executive Officer

Sure. So there's three questions there. The first question, on the reseller, kind of compare it before and after. There's we kind of went and pulled everything that was publicly available that we can talk about. And so there are three publicly available agreements that you can see when you look into the Postal Regulatory Commission filing system. The way the postal service always has to get in [Technical Issue] is they file them, and they redact portions of the agreements. But the agreements are there. And so what we're able to tell you is what's in the agreement. The specific rate card is not in the agreement. Clearly, for competitive reasons, that would not be disclosed. But there is a lot of details there about the agreements. As we mentioned, the long-term agreement for potentially six-year new agreements, there was no interruption. So they went live on January 1. And this new concept of a tiered structure that enhances discounts for the larger customers and for e-commerce platforms. And so there's a lot more detail there, but I think that what we're able to disclose is kind of what we've done so far. And then I'll take the last question, too, and I'll let Jeff do the guidance.

In terms of the MetaPack efforts in the U.S., I mean I think, as you know, back when we bought MetaPack, we identified a lot of synergies, and one of the main ones was that MetaPack really hadn't done a lot in the U.S. market yet. They really hadn't come over to the U.S. And so with our sales team of over 100 people, one of the first things we did is started to bring MetaPack over and offer them as a solution and start to sell them into different customers. And while it's early, we've already had two real big successes there. We can't disclose who they are, but they're household names. And our pipeline as well has grown. And again, these are names you would walking through any shopping mall, you would probably see them. So they're big retailers, big, multinational retailers that are offering solutions, shipping solutions across multiple countries using multiple carriers. And so the MetaPack solution really resonates with them. And now that MetaPack has a presence in the U.S. to our sales team, we're really starting to see a lot of traction there.

Jeff Carberry -- Chief Financial Officer

And Darren, for guidance, our philosophical approach to the guidance really hasn't changed. It represents a range of potential outcomes, both contemplating some upside as well as some downside risk. What I will say, though, is, obviously, the guidance incorporates everything we know thus far about the reseller structures. It also contemplates the expected relative mix between USPS, UPS and other carrier volume. With MetaPack specifically as it relates to your question, obviously, MetaPack continues to see some overhang vis-a-vis Brexit as well as the broader European continent.

See some of that risk as well. So we see that in our numbers with MetaPack, and we've incorporated that into our guidance as well. So I think at the end of the day, our guidance, again, philosophically is much like it always has been, contemplates a range that we're comfortable with, contemplate both some upside as well as some downside risk.

Darren Aftahi -- Roth Capital Partners -- Analyst

Right. Thank you.


[Operator Instructions] And our next question is from Kevin Liu from K. Liu & Company.

Kevin Liu -- K. Liu & Company -- Analyst

Hey, My first question, I guess I'll ask this kind of differently since you can't talk about specific reseller rates. But just within your guidance, are you guys modeling in some compression in terms of new reseller-related revenues or any sort of growth? I would be curious about that. And then one thing I wanted to clarify is when you first started talking about this reseller program about a year ago, you mentioned that there was some talk that maybe the margins would compress over a three-year time frame before stabilizing. Is that still the case? Or do you expect these rates to remain relatively stable throughout?

Jeff Carberry -- Chief Financial Officer

Yes. So in terms of guidance and margins, again, we, unfortunately, just as a matter of company policy to not comment on things that have been redacted or about regional agreements in general. So I really can't, unfortunately, get into the details of whether we expect margins to either compress or rebound. It's simply not something that, as a matter of company policy, we're going to do. We did talk about, in 2019, the expectation that rates would compress over a period of time. And that risk in the short run, we that caused us to basically expand our range. And as those risks came off the table throughout the year, we narrowed our range.

Our current range now is back to our historical range. So what I will say, though, is our 2020 guidance, obviously, contemplates everything we know thus far, incorporates all the structures, incorporates things that have been approved by the USPS, both in terms of the various structures that are obvious in the unredacted sections of the agreements. So different tier structures and platform plays. So that currently contemplates that right now.

Kevin Liu -- K. Liu & Company -- Analyst

Understood. And then just for UPS, can you share what that contribution was to your revenue stream in the fourth quarter and kind of what expectations you've baked in for that throughout this year?

Jeff Carberry -- Chief Financial Officer

Yes. So for UPS, there was a very small contribution in Q4. We as we mentioned, we started to roll it out to a subset, i.e., a small portion of our ShipStation customers in Q4. So as you'd expect, with a very fast rollout from the point of signing the contract through Q4, the contribution you would expect necessarily to be quite small for 2020. We don't comment on the relative contributions and splits between the different carriers, but our guidance does contemplate that relative split as well as migration of volume between carriers based on rolling out those rates to higher customer base. But I can't comment on what portion of our revenue derives from USPS versus UPS versus other carriers.

Kevin Liu -- K. Liu & Company -- Analyst

Understood. And as you guys kind of make this transition to be more of a multi-carrier platform play, with respect to the various metrics you provided, will you start to provide kind of the non-USPS-related postage metrics so we can kind of gauge that progress? And then anything you can speak to qualitatively just for those initial ShipStation customers that access UPS what sort of uptake you saw relative to what they may have done historically?

Jeff Carberry -- Chief Financial Officer

Yes. So I'll take the part of the question on the I'll take the metrics, sorry. Yes. So I'll take the comment on the metrics. So and I'll let Ken address really kind of the empirical behavior of the customers on UPS initially. So the metrics, obviously, we're going to our metrics are really kind of living documents. And obviously, with the strategic shift in the business toward multi-carrier and really the evolution of the business on a longer-term basis toward shipping, you're going to see us, over the year, probably look at and reexamine our metrics.

And we're providing additional metrics or refine our current metrics that give investors real insight into the business that we think is appropriate to understand fundamentally what is driving the business. Right now, obviously, the metrics are very USPS-centric. And with our shift to becoming a true, multi-carrier across all of our platforms, that is arguably a little less relevant for investors. So I think you're going to see us, over the course of the year, really take a look at our metrics and augment, refine our metrics to reflect really the fundamentals of the business going forward..

Ken McBride -- Chairman and Chief Executive Officer

Yes. Kevin, in terms of the kind of the learning so far in the launch of UPS, I would say, it's so early. It's hard to comment. Really, like what we did in Q4 was a beta test, and effectively, very small group of customers. We rolled it out to the customers. We watched their behavior. And I think we're extremely encouraged by it. I think we're very happy. As I mentioned, we're going to roll it out companywide now, and we're going to really throw our full way behind it. But like we actually just kind of got the whole thing running very late in Q4, and it's not a time when customers want to change their carriers. It's not a time when customers want to really modify anything in their business. So while we did see some good feedback from the customers, we really didn't see a lot of changes because it just doesn't make sense.

And then but going forward, I think we see, like I mentioned before, a lot of potentially additive, new volume that could come from UPS and simply just optimization of your business being able to bring in, like in a solution, bring in a second carrier could make a ton of sense for some of these customers earlier in the life cycle, not moving up to ShipStation with 50 carriers but just moving to a second carrier within the solution. It could be a great solution, a great value-add for those customers. So we're really excited to see the adoption of UPS here starting in this quarter. I think we'll have a lot more to say next quarter about it.

Kevin Liu -- K. Liu & Company -- Analyst

Okay, great. Well, thank you for taking the questions.

Jeff Carberry -- Chief Financial Officer

Excellent. Thank you, Kevin.


We have reached the end of the question-and-answer session. And I will now turn the call back over to Ken McBride for closing remarks.

Ken McBride -- Chairman and Chief Executive Officer

Well, thank you for joining us, and appreciate it. Like I mentioned, we're very excited about the opportunities going forward. If you have any more questions, you can follow up through our investor website or our investor hotline at (310) 482-5830. Thanks so much.


[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Suzanne Park -- Investor Relations

Ken McBride -- Chairman and Chief Executive Officer

Jeff Carberry -- Chief Financial Officer

George Sutton -- Craig-Hallum -- Analyst

Darren Aftahi -- Roth Capital Partners -- Analyst

Kevin Liu -- K. Liu & Company -- Analyst

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