Stamps.com (STMP) Q2 2020 Earnings Call Transcript

Stamps.com (STMP)
Q2 2020 Earnings Call
Aug 06, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Stamps.com's second-quarter 2020 financial results call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Suzanne Park, VP of finance.

Please go ahead, ma'am.

Suzanne Park -- Vice President of 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 second-quarter 2020.

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 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, which can cause actual results to differ materially include the significant and unprecedented uncertainties regarding the business and the economic impact of the ongoing COVID-19 pandemic, as well as the impact of efforts of governments, businesses, and individuals to mitigate the effects of such pandemics on the company, its customers, its carrier, integration partners, and the global economy which makes it particularly difficult to predict the nature and extent of impacts on demand for products and services, making our business outlook subject to considerable uncertainty; the company's ability to successfully integrate and realize the benefits of its past or future strategic acquisition or investments; the company's ability to diversify its relationship with carriers and the impact of foreign exchange fluctuation and geopolitical risks; and other important factors that are detailed in filing with the Securities and Exchange Commission made from time to time by Stamps.com, including its annual report on Form 10-K for the year ended December 31, 2019, quarterly reports on Form 10-Q, particularly the risk factor section of those reports, and current reports on Form 8-K. Stamps.com undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect the 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 first quarter of 2020, GAAP net income was $51.7 million and GAAP net income per fully diluted share was $2.73.

Our non-GAAP financial measures exclude the following second-quarter items: $13.2 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 $11.7 million of additional non-GAAP income tax expense in the second 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 second-quarter 2020 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 -- Chief Executive Officer

Thanks, Suzanne, and thank you for joining us today. On today's call, we'll cover several topics. We'll discuss the impact that COVID-19 -- the impact it's had on our business. We will discuss the progress and go forward plans of our various business initiatives in the U.S.

We will discuss our progress and our plans on various initiatives internationally and then Jeff will discuss our metrics our Q2 financial results and our guidance for the remainder of 2020. So let me begin by discussing the overall impact that COVID-19 had on our business to date. COVID-19 continues to have significant net positive impact to our business by driving customer acquisition and shipping volume growth as the shift to working from homes fundamentally alters the way businesses and consumers transact. E-commerce activity remained elevated throughout the quarter.

We clearly benefited as businesses of varying sizes continue to adopt our technology solutions to help improve their commercial activities.The second quarter as a whole customer acquisition was up almost 250% year over year, while our customer, our cost per acquisition dropped by more than 50%. Surge in acquisition started to meaningfully accelerate in the last two weeks of the first quarter. We continued to see strong acquisition trends throughout the second quarter. Although acquisition growth moderated a bit in July, it nevertheless remained very strong, and acquisition was up over 150% for that month.

The acquisition surge resulted in the largest number of customers added during any quarter in the history of the company. By the end of the second quarter, paid customers increased by 179,000 sequentially to reach an all-time high of 956,000. Some factors for why we are seeing a large number of new customers coming from our service include a large number of people. We're looking for an alternative to going to a carrier retail location in order to do their mail and packages, and the incredible brand awareness that we built across all of our properties meant that we were a big beneficiary of that shift in behavior.

One of the questions we expect our shareholders to have is whether these new customers are just using our solutions as a short-term measure while workers have shifted to a work-at-home model during the pandemic or if they will stick with our solutions longer term. We would expect that certainly, there will be a mix of both types of behavior. We have seen a very positive early indication that the quality of the customers we're acquiring is similar to what we've seen in the past and, in some areas, may even be better. We believe many of the customers are discovering efficiencies and benefits of their mailing and shipping that will resonate favorably for long-term usage.

While initially, these customers may simply be trying to avoid a visit to a retail location, many may want to maintain the efficiency and convenience of new workflows with our solutions for the long term. Customers are also discovering how much they can save using our great online discounts. Customers can save 9% on their first-class letters paying only $0.50 versus the retail rate of $0.55. We save customers up to 40% off USPS retail prices for packages.

And with our UPS partnership, we're able to save customers up to 62% off UPS's standard daily rates. The savings add up quickly and cover our monthly service fees once a customer reaches a very modest amount of package volume. We have found that a common challenge we encounter is getting people to try our solutions, but once they do, they love it. They discover more and more that the sophisticated features that really can save them a lot of time, and they discover the great discounts that we offer.

With the two fundamental benefits, we expect that many customers will continue to regularly use our solutions. Our quantitative analysis of customers acquired during COVID-19 is also very encouraging. The conversion rates from acquired to paid customers status remains consistent with more recent pre-COVID groups. We're seeing a favorable mix of new shipping customers.

The encouraging customer trends have also manifested themselves in a decrease in customer churn by 0.6% in the second quarter versus the second quarter last year. Churn reached the lowest level we have seen for many years. Lower churn is particularly encouraging with a surge in new customer acquisition as we typically see high churn in the early part of a customer lifetime. So overall, we're encouraged by the trends and optimistic that many of these new customers will become long-term users of our solutions.

We will, of course, monitor the customer trends carefully given the unusual circumstances we are in right now. In addition to the surge in second-quarter new customer acquisition, we also saw a strong increase in total shipping volumes during the second quarter. Total U.S. dollar shipping volume we processed across all carriers we support in the U.S.

meaningfully accelerated starting in the second half of March, and that trend continued through the second quarter and on into July. We saw year-over-year volume growth in both the second quarter and in the month of July in excess of 50%. Our customers who are often shippers of goods have been strong beneficiaries of increased e-commerce consumption as end customers have shifted to purchasing online versus at retail locations during the pandemic. The dramatic increase in package volumes that we have seen indicates that our solutions are working very well to address the needs of our customers.

Again, the question as to whether the surge in volume is a longer-term trend or just a transitory occurrence remains to be seen. We generally believe when merchants adopt updated methods or workflows, they tend to continue the new behavior. We also generally believe that as consumers have shifted more of their purchasing online, their general comfort with online purchasing and their recognition of the efficiencies of online purchasing may lead to e-commerce retaining a sizable portion of the increased percentage of purchases made online as opposed to through retail channels. Also, we'd note that a significant number of retailers have, unfortunately, declared bankruptcy or closed locations as a result of the COVID-19 pandemic.

So customers simply have fewer in-person retail shopping choices, which would, all else equal, generally benefit the e-commerce industry.With that, let me give a quick update on the UPS partnerships. Late last year, we signed a new partnership with UPS which allows us to offer attractive UPS discounts to our customers. The UPS package discounts we're able to offer customers under our new partnership are very attractive. The discounts are as much as 62% off UPS's standard daily rates.

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. Within our e-commerce multi-carrier properties including ShipStation, ShippingEasy, and ShipWorks, we've always provided the UPS shipping capability. However, the new partnership allows us to more actively and effectively drive customers and shipping volume to UPS. The new UPS solution went live in ShipStation with a subset of customers in the fourth quarter.

We have now rolled it out to the majority of our customers across all of our brands. Accessing UPS is very simple with an automatic account and discounted rates available immediately when the customer first begins to use the product. We're seeing rapid adoption of the UPS solution and very positive growth in the volume of packages that we process. In the second quarter, the volume of our UPS packages increased by more than 700% sequentially versus the first quarter.

However, we just began rolling out the UPS to our portfolio brands in the first quarter. We would expect the sequential trends to moderate in the coming quarters. We're very excited about our UPS relationship. We expect them to be a great partner for Stamps.com and all of our company products and solutions.

With that, let me now remind everyone about some of the initiatives we're focusing on in 2020 in the U.S. market. First, we plan to continue to invest heavily on growth and the shipping part of our business. We devote a large percentage of our company's resources to target e-commerce shippers.

In 2020 and beyond, we expect to continue making these large investments to attract these types of shippers to our solutions. We plan to continue to increase 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 affiliates, partners, telemarketing, and other areas. Second, 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 our 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 prepaid customer, reduce our monthly customer churn rates, and increase overall customer usage. For 2020, we're focused on delivering new capabilities such as more sophisticated third-party logistics support, delivery options provided in the shopping cart, drop shipping, branded tracking, returns, and pickup drop-off and continuing to enhance our capabilities in our mobile apps.Third, we plan to continue bringing innovative and cost-effective solutions to the U.S. customers that are sending packages to other countries. During 2017, we launched an international shipping initiative called the GlobalPost, where we offer customers access to discounted international shipping rates through our private-label carrier partnerships.

As a reminder, these are programs where companies can do a portion of the work for the carrier and receive a discount on their postage rates. During 2018, we added the Global Advantage program, which is a great bundle of customer solution built on top of GlobalPost. It includes customer benefits such as free package pickup, free insurance, upgraded delivery speeds, enhanced tracking simpler customs procedures, and other benefits. We also now offer DHL express and UPS as international shipping options, and we expect to continue to drive these solutions in 2020.

Well, 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 model toward a global multi-carrier e-commerce shipping solutions company. Over the past several years, we've entered into a significant number of partnerships for our international market. And during 2018 and 2019, we began efforts to test our ShipStation product in the U.K., Canada, and Australia.

During 2020, we're ramping up our marketing business development and product development efforts in significant ways. First, for ShipStation and for ship engine, we're developing partnerships, carrier relationships, product enhancements, and marketing our solutions in our target countries. ShipStation launched a new partnership with MercadoLibre, which will open up the sizable Latin American market to ShipStation sellers and further enhances the advantages sellers have working with ShipStation. ShipStation's international second-quarter shipments increased over 200% year over year versus the second quarter of 2019.

For the remainder of 2020, we expect to improve our capabilities to support further international expansion such as language and currency translation systems. We expect to launch a French language version of our ShipStation product. 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. In MetaPack Europe, we had a strong second quarter with seven significant new customer additions, including a large European fashion retailer, one of the largest third-party logistics globally.

During the quarter, we also continued to develop a strong U.S. pipeline of potential deals with companies that are prominent household names. We also saw encouraging adoption rates for new products such as our returns portal and our delivery tracker. Both features will significantly enhance e-commerce operations and the consumer's shopping experience for our large omnichannel customers.

We also continue to do development work designated to allow -- designed to allow connection of the 450 MetaPack carrier services to the ShipStation international platform. Finally, during 2020, we plan to invest development resources into building a simpler international e-commerce multi-carrier shipping solution based on the Stamps.com web solution technology platform. Internationally, we're planning to replicate our U.S. strategy, where we go to market with two main brands: a simpler Stamps.com-like web solution for up-and-coming e-commerce customers and a more powerful and complex ShipStation solution for more sophisticated e-commerce customers.

Once the development is further along, we'll begin to test market the Stamps.com-like solution to some selected international markets. With that, now let me turn to an update on how the COVID pandemic is impacting the employees of our company. We're deeply committed to the health and well-being of our employees. We took early and aggressive steps to make sure that our employees were as safe as possible.

We moved to a companywide work-at-home model the week of March ninth. Because our businesses to build and market software on the Internet, we were in a very good position to be able to make the change to an all-remote work model early without a significant impact on productivity. As expected, there were some challenges we needed to work out with the operational changes. However, today, our employees have shown amazing resilience working through the inevitable challenges and working from home quickly and effectively.

We've actually increased our head count and overall full-time equivalent hours to absorb some of the demand for our service during the ongoing COVID-19 pandemic. We expect that we can continue to be very effective as an organization under the new all-input approach for as long as necessary in order to keep our employees safe. We're lucky to be in the position where we can be patient and wait until employees can safely return to the office. We remain extremely excited about the future of our company and the enormous value proposition of our e-commerce technology and service offerings.

Our goal is to position the company for the best long-term outcome as the myriad of worldwide trends play out. The value proposition we provide is very strong, driven by the strength of our multi-carrier properties, the level and number of our partnerships and integrations, the size and strength of our U.S. and international sales forces, and the scale and success of our marketing programs. We've always managed our company's cost structure very aggressively, and as a result, we have a very healthy cash flow, a very strong balance sheet with over $275 million in cash and investments, and no debt currently.

As we experience the large acceleration in our business, it reinforced the significant brand awareness that we have created for our market-leading solutions. We're in a great position to continue to execute our business plans and to be in the global leader in multi-carrier e-commerce shipping in 2020 and beyond. With that, now, I will turn the call over to Jeff.

Jeff Carberry -- Chief Financial Officer

Thanks very much, Kevin. We will now review our second-quarter 2020 financial results. The discussion of our financial results today includes non-GAAP financial measures. As Suzanne described, a reconciliation of non-GAAP financial measures to the corresponding GAAP measures is found in our earnings release and in our metrics on our investor website.

Total revenue was $206.7 million in Q2, and that was up 49% year over year versus Q2 of '19. Total revenue excluding MetaPack was $191.0 million in Q2, and that was up 51% year over year versus Q2 of '19. The growth in revenue in the second quarter was primarily driven by strong growth in our mailing and shipping business, which, in the United States, benefited from strong domestic shipping growth and was offset by international shipping declines, both of which, we believe, are attributable to the ongoing COVID-19 pandemic. Revenue was also positively impacted by strong growth, and customized postage as purchases rose ahead of the program's termination.

Mailing and shipping revenue was $197.9 million in Q2, and that was up 46% year over year versus Q2 of '19. Mailing and shipping revenue excluding MetaPack was $182.2 million in Q2, and that was up 28% year over year Q2 of '19. The growth in mailing and shipping revenue was driven by increases in paid customers and ARPU. We estimate that total revenue derived from our shipping customers in excess of 50% year over year and as a percentage of total revenue in Q2 was approximately 80%.

We estimate that revenue derived from our shipping customers in Q2 including MetaPack also grew year over year in excess of 50% and as a percentage of total revenue was in the low 70s. We also estimate that our revenue derived from our SOHO mailers as a percentage of total was in the teens and grew year over year in excess of 20%. Mailing and shipping gross margin was 80.3% in Q2 versus 75.3% in Q2 of '19. Mailing and shipping gross margin was possibly impacted by growth in revenue associated with our traditional carrier business, including USPS and UPS, which was offset by strong growth in our MetaPack business, which has a gross margin of 57%.

We had year-over-year operating costs primarily driven by growth in R&D and sales and marketing-related strategic investments to support innovation and long-term growth. As Kevin mentioned, we continue to aggressively scale our operational investments to drive our international business strategy. Non-GAAP operating income was $79.9 million in Q2, and that was up 111 % year over year versus Q2 of '19. Adjusted EBITDA was $81.0 million in Q2, and that was up 106% year over year versus Q2 of '19.

Adjusted EBITDA margin was 39.2% in Q2 versus 28.3% in Q2 of '19. The increase in adjusted EBITDA margin was driven by strong revenue growth and a more favorable mix of higher-margin service revenue. Non-GAAP adjusted income per fully diluted share was $3.11 in Q2 based on a non-GAAP tax expense rate of 26% and was up 148% year over year versus $1.25 per share in Q2 of '19 based on a non-GAAP tax expense rate of 40%. Fully diluted shares used in the EPS calculation was $18.9 million for Q2 versus $17.8 million for Q2 of '19.

With that, let's now discuss our customer metrics. Our total paid customer metric was 956,000, which was up 29% versus Q2 of '19 and was our highest number of paid customers in our company's history. This was driven by the strong new customer acquisition and reduced customer churn. Our second-quarter churn rate was 2.8%.

Churn was down 0.6% year over year. Our second-quarter ARPU was $68.98, and ARPU was up 13% year over year, driven primarily by growth in the shipping-focused areas of our business. Total second-quarter USPS postage printed was a record 2.4 billion, and that was up 47% versus the second quarter of 2019. The total USPS postage printed metric includes both higher-growth shipping volume and traditional non-packaged mail volume, which was up slightly this quarter as opposed to the steady declines we've historically seen, driven by a longer longer-term trend of declining mail usage in the US.

Let's now discuss our cash, debts, and uses of cash. We ended Q2 with $275 million in cash and investments, which was up $59 million from $216 million at the end of Q1 of '20. The increase in cash and investments was primarily driven by strong operating cash flows, changes in networking capital, and cash from option exercises and was partially offset by share repurchases and the prepayment in full of our debt balance onto our previous credit agreements. During Q2, the company repaid the principal balance of $47.4 million onto our previous credit agreements, resulting in the elimination of debt from our balance sheets.

On June 29, 2020, the company amended and extended the previously existing credit agreement for a new revolving credit facility of up to $130 million with a term of two years. During Q2, the company repurchased approximately 56,000 shares at a total cost of approximately $9.4 million. On August 3, 2020, our board of directors approved a new $40 million repurchase plan that replaces our current plan and runs through February of 2021. With that, we'd now turn to guidance.

As we discussed last quarter, our guidance reflects the following: the new multi-year USPS reseller agreements; our USPS partnership, which we ruled out throughout the first quarter of this year to our customer base across all of our properties; and expected increases in operating costs related to our continued investments in the U.S. and abroad. Our updated guidance also reflects the following: first, the termination of the customized postage program effective mid-June; second, traditional seasonal slowness in the third quarter potentially exacerbated by decreased back-to-school-related shopping and the extraordinary strength of the second quarter, which potentially reflects discretionary purchases brought into the second quarter by the COVID-19 pandemic; and third, a cautious outlook on the COVID-19-related impacts to our customer acquisition, churn, and shipping volume growth. As Kevin discussed, although recent trends have been strong, driven by increased e-commerce activity, we believe there is a risk that broader macroeconomic weakness could impact our business in the second half of 2020.

We will, of course, continue to monitor our customers and their shipping volumes very closely. And now, on to specific quantitative guidance. We expect fiscal 2020 revenue to be in the range of $650 million to $725 million, which compares to our previous guidance range of $570 million to $600 million. We expect growth in our shipping revenue will be in the range of approximately high teens to low 20s year over year.

We expect growth in our mailing revenue derived from our SOHO mailers will be in the low to mid-teens year over year. And as previously discussed, our customized postage revenue was eliminated effective June 16, 2020, and as a result, determination of the program by the USPS. We expect operating expenses to increase in 2020, reflecting the annual effects of the strategic investments we made throughout 2019 and additional strategic investments we anticipate making in 2020 for both our U.S. and international efforts.

We expect fiscal 2020 adjusted EBITDA to be in the range of $180 million to $240 million, which compares to previous guidance of $135 million to $155 million. Our guidance implies a full-year adjusted EBITDA margin in the high-20% to low-30% range. We expect non-GAAP tax expense will be approximately 28% of non-GAAP pre-tax income for 2020, which compares to our previous estimates of 40%. 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 18.3 million and 20.2 million in 2020, which compares to our previous estimate of 18.0 million and 19.5 million. We expect fiscal 2020 non-GAAP adjusted income per diluted share to be in the range of $6.25 to $9.25, which compares to our previous estimate 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 the call for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] And we'll take our first question today from George Sutton with Craig-Hallum.

George Sutton -- Craig-Hallum Capital Group -- Analyst

Thank you. I feel like I should say Merry Christmas and Happy Holidays because it sure feels like a Q4 result. I wondered if you could bifurcate the 179,000 customers between the single carrier offerings and the multi-carrier offerings.

Ken McBride -- Chief Executive Officer

Sure, George. So we actually don't break down customers further than we give publicly, but I would remind you, though, that all of our customers now are multicarrier customers. We don't have any single-carrier customers. So through all of our properties now, our customers can avail themselves in historical USPS-focused products, both USPS and UPS.

And of course, in our multicarrier products, they have access to over 40 carriers.

George Sutton -- Craig-Hallum Capital Group -- Analyst

Let me ask it a different way then. Are you able to break it into work-from-home benefits versus the e-commerce benefits in terms of the additional customers?

Ken McBride -- Chief Executive Officer

Yes. We mentioned on the call, when you look at the customer acquisition, the customers in the post-COVID cohorts are looking very similar in terms of their performance, in terms of conversion, and activity to pre-COVID. So invariably, we've got some customers who are going to be, perhaps, more short-term in nature. But given the quantitative analysis of customers and given Kevin kind of went through in detail as to what we think customers experience when they join our services with the first time, we think they'll realize the benefits of our services, the efficiencies, and the cost savings.

And even though COVID may be a catalyst to join our service, it looks like based on the qualitative and quantitative analyses, those customers, hopefully, will perform in line with pre-COVID cohorts.

George Sutton -- Craig-Hallum Capital Group -- Analyst

Gotcha. Lastly for me. The real white space for you, in my view, remains international expansion. Certainly, this was a growth-inflection quarter there.

Can you talk about a long-term plan relative to how you've grown up in the U.S.? Are you viewing it as an accelerated replay of the U.S. growth scenario? And if you could marry up M&A potential as you think through that, that would be very helpful.

Ken McBride -- Chief Executive Officer

Sure, George. Yes. I mean, I think our No. 1 focus for growth is international.

And as you know, we launched in the U.K., Australia, New Zealand, and Canada, and so we've been early marketing in those markets, and we've seen great success. I think you heard the number that we gave on the call. We had gross in the second quarter that was up over 200% year over year on shipments. So we've seen really nice adoption in those markets.

We're still very early, and now, we're working on some language and currency translation solutions so that we can begin to market in other languages and other currencies. That's an active development project this year. The first target is French language. We will be launching that both in Canada, as well as in France.

And so I could continue to focus on just going after each market, working with each carrier there, happy to get different integrations with different carriers in each market. So there is a little bit of work in each market to get that business development, as well as partnership, partnership efforts done. But overall, I think we're really happy with the progress we've made internationally. In terms of the M&A internationally, we certainly are open and active.

I think we would be very happy to be able to acquire a large organization internationally. We already bought MetaPack, and that gave us a nice platform to be able to build our international solution with almost 500 carriers that they support. But having more additional small business focused software solutions internationally would be great. As you know, we haven't announced anything, so we haven't found something that makes sense.

But we're still actively looking and actively seeking our M&A on that front.

George Sutton -- Craig-Hallum Capital Group -- Analyst

Thanks. Congrats on the great results.

Ken McBride -- Chief Executive Officer

Thanks, George.

Operator

Next, we will hear from Allen Klee with National Securities Corporation.

Allen Klee -- National Securities Corporation -- Analyst

Yes. Hi. Congratulations. Really great quarter.

I thought I heard you say customer acquisition costs were down 50% year over year. It seems like two things could go into that, one being customers are just shifting to online, so they're going to just do that without you trying harder. And second, in the environment we've been in, it's been cheaper to pay for advertising. Is there a way to think about those two factors? And if you've seen anything on the advertise, on the cost of marketing that would make that change.

Ken McBride -- Chief Executive Officer

Yes. I think it's some of those. I think that we've certainly seen a more effective numbers in our programs. I think it's just, perhaps, people are just looking for a solution, and we have ramped up our marketing efforts.

So we've done both, and we've seen more cost-effective media costs. We've also seen a more effective search-engine marketing solutions. So we've seen it across the board, both additional efficiency in our marketing, as well as improved. I think a part of it also comes from just the brand awareness we've built as people are out there looking for solution.

They've heard about us for years and years. We've spent over $0.5 billion on branding in the last 20 years. We have a significant brand in the market. So I think the best part of this is we're just getting a lot of organic growth coming directly to our website as people are out there seeking a solution and as they shifted their focus as they move online.

Allen Klee -- National Securities Corporation -- Analyst

Great. And then internationally, you mentioned MetaPack signed up seven new customers, and there's a pipeline of U.S. retailer-type customers. Could you maybe talk a little bit about what you would be offering to those potential customers and what you think about is the opportunity there?

Ken McBride -- Chief Executive Officer

Yes. I think that in the first quarter, we saw some slowdown in the pipelines as people were just kind of like trying to figure out what's what in their business. But the good news is during the second quarter, we saw some of that pipeline started moving on, and we saw with both Europe as well as we started to see some good traction in the U.S. So in terms of what those customers are adopting, what's this is the traditional MetaPack solution, the ability to add to multiple carriers across multiple countries, and to integrate into their solutions, their back end, whether that's their warehouse management solution and their transportation management solution across multiple warehouses.

So it's really those very large retailers that we're finding good traction with. And I think we're pleased with both the growth and volumes. We've seen similar kinds of increases in the growth in the volumes of the existing customers. But also, the new customer adoption seems to have really kind of started to move forward again.

Allen Klee -- National Securities Corporation -- Analyst

Thank you. My last question is -- you talked about how you kind of want to recreate the Stamps.com model internationally with a basic product and a multicarrier solution. Could you go into that a little more? Seems in the U.S. that you offer convenience and a lot of other things, but you also offer discounts because of your relationship with the USPS and UPS.

How would that work with dealing with so many countries? Is there a chicken-and-egg problem? Or how do you or do you need to do that or how do you think about that?

Ken McBride -- Chief Executive Officer

Yes. I think you're talking about -- so we're really building -- we're kind of going to market now, mostly just ShipStation in those markets. And so ShipStation is a very, very powerful product, but it's also, as a result of that, complicated. And so what we're doing now is we're working on bringing a similar solution which is more akin to what we do with the Stamps.com web solution to those markets as well so that we have both a lower-end and higher-end and we have the ability to kind of bring in up-and-coming e-commerce customers into a more simple solution and move them up over time as they grow.

It's in more complex capabilities like ShipStation. So we're really kind of missing that lower leg in the markets right now. We're really actively focused on developing that this year, and so we're working on that, and it's active in development. In terms of -- the customers use us not just for the discounts we offer but also for the savings in time and the savings -- the convenience, and so we are working actively on business development with all the carriers in those markets as well.

And our goal would be to ultimately offer a discount to the end customers versus what the retail or direct rates might be, the list rates for those carriers. But that's a longer process. But we do think that, so far, what we've seen in the markets is, even without some of those discounts, we're able to get traction. Customers just based off the convenience and the capabilities and the power that we bring for their solutions.

Allen Klee -- National Securities Corporation -- Analyst

Great. Thank you so much and congratulations again.

Ken McBride -- Chief Executive Officer

Thanks, Allen.

Operator

Final question will come from Kevin Liu with K. Liu & Company.

Kevin Liu -- K. Liu and Company -- Analyst

Hey, good afternoon. Great results. First question here. I was hoping you could expand a little bit more on some of your commentary around guidance here sequentially.

Obviously, there's typical seasonality, and we talked about it being, perhaps, a little bit more pronounced in the current environment. Is that informed by some of the volumes you're seeing just in terms of any moderation from July to August? And then maybe looking into the end of the year, wondering what your expectations for peak season are this year. Do you think that they can get back, if not exceed, Q2 levels, or are you being more conservative just given the broader macro environment?

Ken McBride -- Chief Executive Officer

Yes. No, good questions Kevin. So I think in general, the overlay on the guidance range is one of some conservatism to the bottom end. Obviously, it's a much more conservative potential impact from COVID.

On the higher end, it's a much more modest one. We do believe, though, that the guidance, certainly, was informed by July volumes. But there's also a very real possibility that given the strength of Q2, that you would have potentially exacerbated seasonality, where we normally expect the Q3 down sequentially. It may be down sequentially more than you might otherwise expect given the fact that Q2 was so strong.

And maybe that indicates people pulled forward from purchases in the Q2 that might otherwise happen later in the year. Depending on the impact on Q3 would obviously imply what Q4 happens to be, but again, the budget does assume some conservatism on the high end with regard to COVID because it is obviously a variable that had a big impact for us in Q2. And what it portends for the balance of the year with COVID in terms of vaccines and infection rates and expanding work-from-home orders. it's anyone's guess.

So I think at the end of the day, there is just a lot of uncertainty with regard to COVID, and I think it's dangerous to extrapolate too strongly the Q2 results into the balance of the year given how much of an impact COVID could had on Q2.

Kevin Liu -- K. Liu and Company -- Analyst

I understand. It's really helpful. And then just on the UPS partnership, it sounds like you guys might be fully rolled out across the base now. Is there anything you feel you can do to drive kind of more adoption of UPS services? Or is this kind of up to the customers at this point? And then also, just given the volume that they've seen, certainly, they've been more focused on potentially increasing prices and instituting surcharges.

Wondering what sort of stability you have in terms of your pricing arrangements with them. Are these going to change from year to year? Or how should we think about whether they start to come back and look for opportunities to, perhaps, limit some of the margins you can make given how much capacity is limited right now?

Ken McBride -- Chief Executive Officer

Yes. You're breaking up a little bit, Kevin, but let me take a shot at some of the questions you had there. So in terms of customer adoption of UPS, so as you know, our software is really designed to allow customers to choose either algorithmically or specifically. So where UPS on balance has an equivalent product for cheaper-price customers may automatically default into that service offering.

To the extent where it's more of a gray area in terms of differential service levels and equivalent prices or comparable prices, even the customer has a choice. And obviously, depending on their interpretation of the relative services and what they may value more or less, they may choose, and we may help them influence that decision. So at the end of the day, it's a function of both things, and it comes down to both offering technology to allow customers to choose the right product for themselves and also us educating customers on the relative benefits of the myriad of carriers we offer and how they differentiate themselves not just on cost but service levels and timeliness and a whole bunch of other factors. In terms of the partnership, it is a great partnership, and we see UPS also inking deals with other parties, some of which are competitors of us.

We view that generally as a good thing. That shows that the UPS is aggressively going after the SME market, and we think, at the end of the day, that's a strong benefit for us, as well as other players in the space. So we're definitely very excited about it. We work very closely with UPS, and we can't comment, obviously, on future deals and future discounts, and a whole host of factors to go into our arrangements.

But I will say, though, it's a strong mutually beneficial relationship for all of us.

Kevin Liu -- K. Liu and Company -- Analyst

Got it. And then just lastly here. Obviously, your stock has performed extraordinarily well with your institutions hitting new highs. You look across -- there are other e-commerce solutions providers that have raised significant amounts of capital.

What's your interest level in terms of raising capital? And I know you have a lot on your plate with international expansion, but are there kind of adjacent areas that you would consider M&A or where you think you'll be able to sell more products to your customers? Or are you purely focused on kind of the current strategy as is?

Jeff Carberry -- Chief Financial Officer

Yes. I mean, I think that we're open to both acquisitions that are kind of more in our core shipping multi-carrier capability, particularly internationally in markets that we're not in or markets where they have pre-existing relationships or they've built carry relationships that help us accelerate into that market or where there's just a local understanding. I think we would be very open to acquisitions in those areas. I think in sort of horizontal expansion, I think, was your second part of your question.

Certainly, expanding into new and additional areas that make sense for our customers that are things that they may be looking for that may make logical sense. Like we've talked in the past about things like inventory management and customer marketing, additional pieces of the puzzle for those customers would certainly be something as well that we would be taking a look at under the M&A umbrella.

Ken McBride -- Chief Executive Officer

I think, Kevin, the other part of your question was, if I heard it correctly, capital structure and our ability to access capital. You probably noticed that we did sign a new revolving credit agreement of $130 million for two years. We paid off all of our debt outstanding prior to that, so we have a debt-free balance sheet. So I thin – look, I think we have ample capital through the revolver to do deals of a size that are probably more likely than not.

And should we find something that's big and attractive, that requires more than $130 million revolver. I think obviously, given our financial performance, given our track record, and the strength of the management team, I don't think we'd have a problem accessing the capital markets. Obviously, with the economy, there is some risk in terms of market season up if the economy goes into recession, but obviously, we're not there yet. And I think that even in a tighter economy, I think companies with strong performance like ours with good fundamental business models, I think our access to capital for something attractive even larger than the $130 million we have would very likely be there for us.

Kevin Liu -- K. Liu and Company -- Analyst

All right. Great. Thanks for taking the questions and congrats again on the strong results.

Jeff Carberry -- Chief Financial Officer

Thanks, Kevin.

Operator

We do have a follow-up from Allen Klee with National Securities Corporation.

Allen Klee -- National Securities Corporation -- Analyst

Yes. Hi. Can you give us an update on the USPS and in terms of the government, whatever is going on, and to potentially help them with financings? And any changes on new offerings or anything to potentially make them more competitive?

Ken McBride -- Chief Executive Officer

Sure. I think we're -- like the rest of the public, we're continuing to monitor the USPS's financial situation very carefully. Although I would say that in general, the situation seems to have improved versus what it looked like in April. They made some public projections back in April 2020, and they were projecting that they expected to run out of cash by October of this year.

Well, they've revised those now, and they've come out with some new very conservative projections that are assuming the package volumes decline back toward the pre-COVID level and then mail continues to decline at similar levels. And based on that, the newer projections they made more recently, they said that they have enough cash to continue through late 2021. So they're currently sitting at about $13 billion on their balance sheet. So I think they're in a relatively OK position, and they have seen also the decline in mail volumes has abated a bit.

It started off initially back in April. They were seeing like high 30s, low 40s kind of declines in their different segments of their mail. And now, the declines are closer to like the 20s, mid-20s, and then they've seen ongoing -- driven partly by us but other things, the package volumes have been very robust. Their package volumes have been up over 60%.

And so above and beyond the $13 billion and the improvement in their business, they also recently got the additional $10 billion in the line of credit which was allocated under the CARES Act but had to be negotiated with the Treasury Department. So that just happened, I believe, last week, and so now, they have $23 billion currently on their balance sheet. I think they still have another $4 billion that they can access through their traditional line of credit. So they're close to $30 billion in total cash, and their business is improving.

So I think we feel confident that they'll be fine. They're under new leadership now. The new leadership is really focused on reducing cost aggressively, eliminating overtime, so it looks like they're really moving in the right direction, comfortable with their current path.

Allen Klee -- National Securities Corporation -- Analyst

Great. Thank you again.

Ken McBride -- Chief Executive Officer

Thanks, Allen.

Jeff Carberry -- Chief Financial Officer

Thanks, Allen.

Operator

That will conclude today's question-and-answer session. I would now like to turn the conference over to Mr. Ken McBride for any additional closing remarks.

Ken McBride -- Chief Executive Officer

Hey, thank you for joining us. As always, if you have follow-up questions, you can contact us through our investor relations number, (310) 482-5830, or our website, investor.stamps.com. Thank you.

Operator

[Operator signoff]

Duration: 30 minutes

Call participants:

Suzanne Park -- Vice President of Finance

Ken McBride -- Chief Executive Officer

Jeff Carberry -- Chief Financial Officer

George Sutton -- Craig-Hallum Capital Group -- Analyst

Allen Klee -- National Securities Corporation -- Analyst

Kevin Liu -- K. Liu and Company -- Analyst

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