Stamps.com (STMP) Q4 2020 Earnings Call Transcript

Stamps.com (STMP)
Q4 2020 Earnings Call
Feb 17, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Stamps.com fourth-quarter 2020 earnings call.[Operator Instructions]. It is now my pleasure to introduce your host, Suzanne Park, vice president of finance. Thank you. Ms.

Park, you may begin.

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 fourth quarter and fiscal year 2020. We'll discuss the continuing impact COVID-19 is having on our business.

We will discuss the progress and go-forward plans on our various business initiatives in the US. We will discuss our progress and plans on our various initiatives internationally. And then, we will discuss our metrics, our Q4 and 2020 financial results, and our outlook for 2021. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter.

Our comments and responses to your questions reflect management's views of today, February 17, 2021, only, and will include forward-looking statements, including statements regarding our fiscal year 2021, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects, and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Important factors, which could cause actual results to differ materially from those in the forward-looking statements include significant and unprecedented uncertainty regarding the business and 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 pandemic on the company, its customers, its carrier and integration partners and the global economies, which makes it particularly difficult to predict the nature and extent of impacts on demand for our 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 acquisitions or investments; the company's ability to diversify its relationships with carriers, and the impact of foreign exchange fluctuations and geopolitical risks. Additional information about factors that could potentially cause actual results to differ materially is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

We undertake no obligation to update forward-looking statements except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, or in isolation from GAAP measures. Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures, is included in our press release provided today.

Our press release, investor metrics, and SEC filings are available on our Investor Relations website at investor.stamps.com. Now, let me hand the call over to Ken.

Ken McBride -- Chief Executive Officer

Thanks, Suzanne, and thank you for joining us today. During the fourth quarter and throughout fiscal 2020, we saw very impressive results in our financial and business metrics. The results we announced today included many highlights, including total fourth-quarter revenue of $206.0 million, which was up 28% compared to the fourth quarter of 2019. Non-GAAP adjusted EBITDA of $74 million, up 44% compared to the fourth quarter of 2019, and we reached a significant milestone of over one million total paid customers, the highest in the company's history.

We're very pleased with our financial performance, and it continues to demonstrate the strength and relevance of our best-in-class global multicarrier e-commerce solutions. During this year 2021, the company and our team will reach a significant milestone of 20-years under the current leadership, and I wanted to use that anniversary to reflect briefly on the impressive evolution we have experienced. Our services from the late 1990s focused on PC postage, originally developed as a convenient Internet-based alternative to a mailing postage meter for small businesses. Over the years, we have made various minor and major shifts in our business strategy.

For example, in 2008, we began to rapidly move into shipping and e-commerce, as we began to build and later acquire solutions for e-commerce. In 2018 and 2019, we expanded to international markets with MetaPack and we added UPS as a key carrier partner. We've been successful with our homegrown solutions and our acquisitions in shipping and e-commerce. However, the breadth of our position in global e-commerce is sometimes not always fully appreciated, so I wanted to highlight a few metrics.

Globally, the volume of shipping done by our customers is impressive. During 2020, our customers purchased over 8 billion in U.S. Postal Service shipping in the U.S., and they purchased an additional 5 billion in U.S. shipping from all of the other carriers we support in the U.S.; such as UPS, FedEx, DHL, and others.

During 2020, we had more than five billion in shipping volume outside of the U.S. in our MetaPack business group. In total during 2020, our customers all over the world sent approximately 3.5 billion packages representing a total dollar value of shipping done through our various software products and solutions worldwide of more than $19 billion. Within the over eight billion in packages that we generated in the U.S.

for the U.S. Postal Service, we represent over one-third of all U.S. domestic priority mail packages, and we are over 40% of all U.S. domestic first-class packages.

We own seven significant market-leading brands worldwide; Stamps.com, Endicia, ShipStation, ShippingEasy, ShipWorks, ShipEngine, and MetaPack. And within those seven solutions, we integrate with and support over 500 e-commerce partners where our solutions are embedded into or integrated with a partner software solution. For example, we integrate with all of the major selling channels and shopping carts such as Amazon, eBay, Facebook, Google, Etsy, Walmart, Shopify, BigCommerce, Wix, Magento, Square, WooCommerce, and others. We integrate with all of the major small business e-commerce tools and accounting software such as QuickBooks, NetSuite, SAP, Volusion, ChannelAdvisor, and others.

We integrate with fulfillment solutions such as Fulfillment by Amazon, ShipBob, and others. And we integrate with ERP and CRM solutions, warehouse management solutions, and transportation management solutions. In e-commerce generally, the strength of our partnership network for shipping is unmatched.  We support over 45 packaged carriers in the U.S. and a total of more than 300 packaged carriers worldwide.

Our goal is to bring the best carrier to the customer and having such a broad library of carriers allows us to tailor the solution for each individual customer so that they may optimize their business. We estimate that the Gross Merchandise Value or GMV shipped by our one million customers worldwide for 2020 was over $200 billion, and it increased by more than 45% versus 2019. When you look at our total GMV processed as a percentage of worldwide e-commerce, our position in the global e-commerce ecosystem is significant. Various third-party reports estimate worldwide e-commerce GMV at $4.3 trillion.

Thus, the GMV associated with shipping done through all of our collective software represents an estimated nearly 5% of worldwide e-commerce. In the US, we have estimated that the total GMV shipped using our solutions is over 15% of total US e-commerce. Over the past 20 years, we have amassed the significant number of assets in worldwide e-commerce shipping that has put us in a great position to continue to succeed as all of the rapidly changing global e-commerce trends continue to unfold. With that now let me discuss the continuing impact the COVID-19 pandemic is having on our business.

COVID-19 continues to have a significant positive impact on our business with significant growth in both customers and shipping volume. U.S. e-commerce activity remained elevated throughout the fourth quarter and we benefited from that. For the fourth quarter as a whole, our customer acquisition was up approximately 60% year over year.

We saw strength in our acquisition channels with our total cost per acquisition dropping by approximately 15% year over year. And our customer acquisition continues to remain strong to date with January 202, up more than 50% year over year. This accelerated customer acquisition resulted in the highest number of paid customers in the history of the company. By the end of the fourth quarter, we reached an all-time high of one million paid customers.

As new starting businesses or existing e-commerce shippers look for an alternative to go into a post office or carrier retail location in order to process their packages that led many of these businesses to our solutions. This is because of the incredible brand awareness across all of our properties and the flexibility our online solutions provider, and it's because of the significant financial savings that we can offer to customers. For example, postal service customers save up to 40% off UPS retail prices for packages. And with our UPS partnership, we are currently able to offer up to 62% off UPS standard daily rates.

We continue to analyze whether the new customers are just using our solutions as a short-term measure or if they will stick with our solutions long-term. While we expect that, certainly, there will be a mix of both types of behavior our continued analysis of customers acquired during the COVID-19 pandemic to date continues to be positive. For example, the conversion rate of trial customers to paid customers remains -- paid customers remaining after that trial period is consistent with our pre-COVID conversion rates. We also continue to see a favorable mix of new e-commerce shippers versus customers that are primarily mailers.

We would note that during the fourth quarter customer churn did increase by approximately 1.3% to 4.5% versus the 3.2% we saw in Q4 of 2019. The increase was primarily driven by churn in the mailing segment of our customer base. We're seeing churn rates in our shipping customer segments that are consistent with our pre-COVID churn rates. Furthermore, the churn uptick was expected among the mailing segment of customers, given the large magnitude of customers acquired during the second, third, and fourth quarters, because the normal pattern of customer churn is that it is meaningfully higher in the first year of the customer life cycle.

Nothing within the churn uptick appears to be anything other than ordinary customer behavior and we continue to believe that customers we are acquiring now are of equal quality to those that we acquired before the COVID-19 pandemic. We did see a decrease in the mix of churn customers coming from shipping, which highlights the underlying strength in the business driven by shippers and our primary focus on acquiring these types of high-quality customers. We'll of course continue to monitor and analyze customer trends, given the unusual circumstances we are in right now. In addition to the strong fourth-quarter new customer acquisition, we also saw continued strength in the total dollar value of shipping labels.

For example, year over year total dollar value of growth of shipping labels printed for our U.S. carriers in the fourth quarter was up more than 50%. This continues prior 2020 trends in the second quarter of 60% and the third quarter growth of more than 50%. We also saw year-over-year dollar value growth of shipping labels for the USPS, specifically in the fourth quarter of more than 30%, extending trends from the third and second quarters of more than 40% and more than 50% respectively.

Our customers have largely been strong beneficiaries of increased e-commerce consumption, as end customers have shifted to purchasing online versus at retail locations during the pandemic. The strong performance in our package volume demonstrates that our solutions are working very well to address the needs of our customers. With that, let me give a quick update on our UPS partnership. In late 2019, we announced a new partnership with UPS, which allows us to offer attractive UPS package discounts to our customers.

The discounts are currently as much as 62% off UPS 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. This new solution went live in our ShipStation products with a subset of customers in Q4 of 2019. And during 2020, we released it to the majority of our customers across all of our U.S.

brands. Accessing UPS is very simple for our new or existing customers with an automatic account and discounted rates available immediately when the customer first begins to use the product. Strong adoption of the UPS solution continues along with positive growth in the dollar value of shipping labels that our customers purchase under this new partnership. After increasing by over 45% sequentially, during the third quarter, the dollar value of UPS labels under the partnership increased by more than 85% sequentially in the fourth quarter.

UPS and Stamps.com have become great partners, and we're very excited to continue to build on the success that we saw during 2020. Let me now discuss some of the 2021 initiatives. In the US market, first, we will further expand our shipping solutions through new partnerships and new marketing programs. In 2020, we announced new partnerships with Salesforce, SAP, Alibaba, Google Shopping, and others, and we plan to continue our partnering activity in 2021.

We also recently partnered with and produced a TV advertisement with our customer Wolfgang Puck for his Wolfgang Puck home online store. UPS recently featured our new partnership solution in an advertisement, so we are beginning to work with them more closely on marketing programs. We will scale our sales and marketing in 2021 with a focus on acquiring high-volume shipping customers across a variety of industries and continue to utilize and test a variety of marketing channels and partnerships. Second, we plan to expand the features and functionality of our solutions, particularly in the multicarrier shipping part of the business.

The e-commerce shipping industry is very dynamic and we invest a significant amount of our development resources in continuing to innovate in the market. In December 2020, we launched new in-cart delivery options for merchants and customers. With the in-cart delivery options, merchants can add multiple delivery options to their website's checkout process, including free, flat rate, and live rate options from any of their connected carriers. The new capabilities give customers the control and flexibility to select the best shipping option.

For 2021, we are also focused on continuing to deliver new and enhanced capabilities, such as more sophisticated third-party logistics support, dropshipping, brand track -- branded tracking returns and pickup drop-off, and more sophisticated mobile application solutions. Third, we plan to continue bringing innovative and cost-effective solutions to US customers that are sending packages to other countries. We've continued to see growth in our GlobalPost solution, where we offer customers access to discounted international shipping rates through our private label carrier partnerships. In November 2020, we launched the GlobalPost Plus SmartSaver service, which provides a fast low-cost international shipping alternative for high-volume shippers that fulfill 30 or more packages per day, includes prepaid duties and taxes for parcels going to the U.K., Mexico, and Canada.

We expect to continue to drive these and other international package solutions for our domestic customers in 2021. Now, let me discuss some of our continuing international expansion efforts. In 2021, we'll continue to invest in our marketing, our business development, and product development efforts in significant ways. First, for ShipStation and ShipEngine, we're developing partnerships, carrier relationships, product enhancements, and marketing strategies in our targeted markets.

We continue to see strong adoption of ShipStation in Canada, the U.K., and Australia. ShipStation's international fourth-quarter 2020 shipments increased by over 150% year over year versus the fourth quarter of 2019. For fiscal 2020 as a whole ShipStation's international shipments increased by 150% year over year. We continue to expand our support of new languages.

In January 2021, we announced that we're now supporting Spanish on the ShipStation platform. We also launched French language support in ShipStation during 2020. A French version of ShipStation is live in Canada, we're live in a beta version in France, where we expect to expand more broadly in the coming months. New and existing ShipStation users will now be able to log into their account and choose their preferred language, selecting from English, French, and Spanish.

We also continue to actively partner on the international front. For example, during 2020, we announced a new partnership with MercadoLibre, the largest online commerce and payment ecosystem in Latin America for the fourth largest marketplace in the world with more than 600 million Latin American shoppers. We also announced new carrier relationships with Canpar Express in Canada, La Poste, Chronopost, and La Poste Colissimo in France and others. For 2020, we expect to continue to expand our international footprint.

Currently, marketing the solutions in the U.K., Australia, Canada, and France. In 2021, we expect to expand our footprint to include New Zealand, Ireland, and Mexico, and others. We are actively evaluating and planning for the launch of our solution in many other countries across the EU and other regions around the world. Second, in our MetaPack business, we continue to make progress in both customer acquisition and technology, including rearchitecting the technology platform and releasing new features.

During a record fourth-quarter shipping volume season, MetaPack's technology platform provided industry-leading levels of warehouse uptime, label print speeds, and availability. We also saw encouraging adoption rates for new products such as our returns portal and our delivery tracker. Early adopters of the new delivery tracker product have reported meaningful call center contact reductions, and large e-commerce retailers continue to invest in the e-commerce customer experience particularly in the post ship space. And MetaPack continues to align with retailers' core strategy to improve customer satisfaction levels on delivery and returns.

As a highlight from last year, HelloFresh chose MetaPack's delivery manager to lead its shipping services across U.K., Germany, and Austria. We also signed a significant multi-year deal with a world-leading luxury fashion brand last quarter. 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 this company for the best long-term outcomes as the myriad of e-commerce worldwide trends play out.

The value proposition we provide is very strong, driven by the strength of our multicarrier properties, the breadth and depth 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're proud to service over one million customers that purchased and printed more than 19 billion in shipping labels last year and used those labels to ship over $200 billion in GMV around the world. We've always managed our company's cost structure carefully and as a result, we have a very healthy cash flow and a very strong balance sheet with approximately $450 million in cash and investments and no debt.

We are experiencing a large acceleration in our business demonstrating the significant brand awareness we have created for our market-leading solutions, and we are in a great position to continue to execute our business plans and to continue to be the global leader in multicarrier e-commerce shipping in 2021 and beyond. With that now, I'll turn the call over to Jeff.

Jeff Carberry -- Chief Financial Officer

Thanks, Ken. We'll now review our fourth-quarter and fiscal-year 2020 financial results. Discussion of our financial results today includes non-GAAP measures. A reconciliation of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release and in our metrics on our investor website.

Total revenue was $206.0 million in Q4. That was up 28% year over year versus Q4 of 2019 and was $758.0 million in the fiscal year 2020, and that was up 33% versus 2019. Total revenue excluding MetaPack was $190.3 million in Q4, and that was up 30% year over year versus Q4 of 2019, and was $695.9 million for the fiscal year 2020, up 34% versus 2019. The growth in revenue in the fourth quarter and for the year was primarily driven by strong shipping growth attributable to the shift to online e-commerce purchasing that has been driven by the worldwide COVID-19 pandemic.

The year-over-year revenue growth in the fourth quarter and for the fiscal year was negatively impacted by the termination of the customized postage program in June of 2020, resulting in no revenue from that area in the second half of the fiscal year 2020. Mailing and shipping revenue was $206.0 million in Q4, and that was up 32% year over year versus Q4 of 2019 and was $746.1 million in the fiscal year 2020, and that was up 34% versus 2019. Mailing and shipping revenue excluding MetaPack was $190.3 million in Q4, up 34% year over year versus Q4 of 2019, and was $684 million in the fiscal year 2020, up 36% versus 2019. We estimate that total revenue derived from our shipping customers grew approximately 35% year over year and was in the mid-80% range as a percentage of total Q4 revenue.

We also estimate that our total revenue derived from mailing customers, as a percentage of total revenue, was in the mid-teens and grew year over year in the mid-teens as well. Mailing and shipping gross margin was 77.8% in Q4 versus 74.7% in Q4 of 2019 and was 77.9% in 2020 versus 74.7% in 2019. And Mailing and shipping gross margin was positively impacted by the strong growth in revenue associated with e-commerce-driven shipping. The MetaPack business gross margin was 68% in Q4, and 66% in the fiscal year 2020.

We had year-over-year increases in our Q4 and fiscal year 2020 operating costs, primarily driven by growth in sales and marketing and R&D related to customer acquisition and strategic investments, to support innovation and long-term growth. As Ken mentioned, we continue to aggressively scale our operational investments to drive our domestic and international business initiatives. Non-GAAP operating income was $73.0 million in Q4, which was up 45% year over year versus Q4 of 2019, and was $263.6 million in the fiscal year 2020, which was up 66% versus 2019. Adjusted EBITDA was $74.0 million in Q4, which was up 44% year over year versus Q4 of 2019, and was $257.6 million in the fiscal year 2020, and that was up 63% versus 2019.

THE adjusted EBITDA margin was 35.9% in Q4 versus 32% in Q4 of 2019 and was 35.3% in the fiscal year 2020 versus 28.7% in 2019. 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 $4.13 in Q4 based on a non-GAAP tax benefit rate of 11.8%, and was up 95% year over year versus $2.12 per share in Q4 of 2019, based on a non-GAAP tax expense rate of 23.4%. Non-GAAP adjusted income per fully diluted share was $12.51 in 2020 based on a non-GAAP tax expense rate of 9.1%, and was up 118% versus $5.73 in 2019 based on a non-GAAP tax expense rate of 34.7%.

Fully diluted shares in the EPS calculation were 19.7 million for Q4 of 2020, and 19.1 million for 2020, versus 17.9 million for Q4 of 2019, and 17.8 million for 2019. Let's now discuss our customer metrics. Our total paid customer metric was 1.0 million, which was up 35% versus Q4 of 2019 and represents the highest number of paid customers in our company's history. This was driven by strong new customer acquisition but partially offset by an increase in customer churn.

Our fourth-quarter churn rate was 4.5%. Churn was up 130-basis-points year over year. As discussed earlier, the increase was primarily driven by churn in the mailing segment of the Stamps.com customer base and was expected, given the large magnitude of recently acquired customers and the normal dynamics of customer churn in which churn, especially in the mailing segment is meaningfully higher in the first year. Our fourth-quarter ARPU was $67.51.

ARPU was down 2% year over year, driven primarily by strong growth in our mailing customers -- total mailing paid customers who have generally much lower ARPUs than those of our shipping customers. Total fourth-quarter USPS postage printed was a record 2.4 billion, up 30% versus the fourth quarter of 2019, and total fiscal year 2020 USPS postage was 8.6 billion, up 30% versus fiscal 2019. The total USPS postage printed metric includes both, higher growth in shipping volume and traditional non-package mail volume. Historically, we've seen a steady decline in non-package mail volume.

But this year, we saw growth in this area both, for the fourth quarter and for total fiscal 2020. Now, I'll discuss our cash, debt, and uses of cash. We ended Q4 with $444 million in cash and investments, which was up $54 million, from $390 million at the end of Q3 of 2020. The increase in cash and investments was primarily driven by strong operating cash flows and cash from option exercises and was partially offset by share repurchases and changes in networking capital.

We continue to have no debt outstanding. During Q4. The company repurchased approximately 96,000 shares at a total cost of approximately $20.8 million. Our current $40 million repurchase plan that was approved by our Board of Directors in August 2020 was completed earlier this month.

On February 11, 2021, our board of directors approved a new $60 million repurchase plan that runs through August of 2021. Let's now turn to our business outlook. The COVID-19 pandemic contributed a meaningful financial benefit to our business in 2020, driven by an increased need for online mailing and shipping solutions, and driven more generally by the global shifts to online purchasing behavior that drove unprecedented worldwide e-commerce growth. However, as we look forward to 2021, the myriad of factors that are beyond our control, and the resulting effects that those factors could have on our business are very difficult to accurately forecast.

These factors include as; global macroeconomic risks, associated with the ongoing pandemic; timing and degree of moderation, in Safer at Home restrictions; the shift back to an office-based working environment; and the overall changes those things could have on global e-commerce. Thus, given the circumstances, we do not feel that we are able to accurately forecast the range of potential outcomes that could unfold in 2021. And thus, we are not providing any specific numerical guidance for 2021 revenue or earnings at this time. In the lieu of specific guidance, we will provide some more general thoughts to help investors think about certain dynamics that might affect our business in 2021.

Financial benefits associated with COVID-19 to our business started with the large-scale implementation of Safer at Home restrictions around the middle of March of 2020, and we continued to see strong year-over-year growth in our business throughout the remaining nine months of fiscal 2020. However, we would note that the pace of our growth that we saw has slowed each quarter. For example, total customer acquisition was up approximately 200% in the second quarter of 2020, approximately 80% in the third quarter of 2020, and approximately 6% in the fourth quarter of 2020. Also, the total U.S.

dollar shipping volume, we processed across all carriers that we support in the U.S. was up over 60% in the second quarter, over 50% in the third quarter, and over 50% in the fourth quarter of 2020. In January of 2021, we continue to see strong growth. But, once again, the growth seems to have slowed a bit, versus the pace we saw during fiscal 2020.

Customer acquisition in January of 2021 was up approximately 50% year over year, and the total U.S. dollar shipping volume we processed, across all carriers that we support in the US was up over 40%, in January 2021. As we move into the second quarter of 2021, we also begin to face very tough comparisons given the strong growth that began in March of 2020. Hence, in light of the significant number of macroeconomic and other COVID-related factors we outlined earlier, it would not be unreasonable to consider a very wide range of potential outcomes that may include negative year-over-year revenue growth rates, once we reach to that point of the year.

In terms of operating expenses, we plan to continue to invest in strategic initiatives that Ken discussed -- our long-term growth. Accordingly, we would expect our operating expenses in 2021, may increase as much as 20% or more. The growth in operating expenses reflects both, the annualized -- annualizing of investments in R&D made throughout 2020, and additional R&D investments expected in 2021. Additionally, growth in operating expense is heavily dependent on new customer acquisition, which as we saw in 2020 was very difficult to predict.

As a result, we anticipate that our adjusted EBITDA margins are likely to moderate from the elevated levels we saw in the fiscal year 2020. Despite the significant near-term risks and uncertainties, we remain very excited about the longer-term secular trends of shipping e-commerce, our global market opportunities, the strength and the sensibility of our technology platforms, and the strong value proposition of our service offerings. So, while we would potentially expect shorter-term volatility, we believe the longer-term fundamentals of our business offer a very attractive long-term financial profile. And with that, we'll open the call for questions.

Questions & Answers:

Operator

Ladies and gentlemen, we will now be conducting a Q&A session. [Operator Instructions] Our first question comes from George Sutton with Craig-Hallum. Please, proceed with your question.

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

Thank you. First, I really would like to say thank you Ken for providing the volumes relative to the market. I believe that's the first time you've ever done that. I found that to be a very helpful and a good perspective.

As you looked into providing or not providing guidance for 2021, aside from the tough Q2 to Q4 comparisons, which are fairly obvious, is there anything else fundamentally that you are specifically concerned about that might not be obvious?

Jeff Carberry -- Chief Financial Officer

Thanks for the question. There's nothing that I think is not obvious. I think the reality is that COVID has a -- and has obviously, shown a very large impact on not just our business but broader e-commerce. And the myriad of factors that impact global e-commerce and us, in particular, are subject to those COVID-related variables that are just impossible to forecast.

And, therefore, what they create for us is really an unreasonably wider range of entirely possible outcomes to make guidance effectively not very useful for anyone. So I think -- the bottom line is that the level of risk and the associated ranges really make guidance not particularly relevant and extraordinarily difficult this year for us just given those uncertainties.

Ken McBride -- Chief Executive Officer

Yeah, I'll just add George. I mean, I think the point of view I expressed at the beginning, I think the punch-line of that was we represent -- we process merchandise value -- the shipping for merchandise value of 15% of all U.S. e-commerce. So, clearly, we're very heavily tied to the outcomes in e-commerce and what the growth may be there.

And I think that -- I think it's just challenging to forecast that. I mean, you guys are probably in a better position to forecast it than we are being able to sit in the position you are as an analyst. And so it's -- I think it's challenging for us in 2021 given the magnitude of what happened in 2020. And so, I think as a result of that we just decided to not be the ones that are trying to forecast the e-commerce business to allow our investors to do that for themselves.

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

So, what if we were to look beyond 2021. Obviously, a tough comparison in 2021. But 2022 and beyond, we are still clearly driven by the secular growth of e-commerce and you also have an international opportunity that's pretty significant. Can you discuss growth rate potential beyond 2021?

Ken McBride -- Chief Executive Officer

Yeah. I mean, I think likewise it's tough for us to really talk about -- if we can't talk about what happens this year it's even more challenging to talk about the out-years. But I certainly think that we're in a great position. If you look at worldwide as you mentioned, we have a lot of greenfields if you will for expansion as we go out there.

There really is no other solution out there like a ShipStation or a Stamps.com solution when you look across the world. It's really wide open. And as we go into these new markets in Europe and Australia and other areas, we're finding that our solution is resonating with these new customers. And so we're just getting started in that area.

We have a lot of plans and we're aggressively going after it. But worldwide as a percent of e-commerce, we're only about 5%. And as a percent of shipping worldwide we're just a few percent. So I think that we have a huge runway here with international that we'll be able to access in the out-years.

And certainly, that will start to be a lot more meaningful in 2022 and beyond.

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

Finally, if I can, you're scaling up to quote you, your sales and marketing effort in 2021. I would assume, given how conservative you are that is not to do anything other than growing the business. Can you just provide perspective on the thoughts behind the scaling up of the sales and marketing?

Ken McBride -- Chief Executive Officer

Yes, sure. I mean, I think we saw -- like aside from all the things we've talked about and the effects of our business, we also saw a lot of interesting things that happened in the marketplace in terms of advertising, TV, inventory things that were available companies like travel companies and entertainment companies pulled back from their advertising and that allowed us to go in and get some really cost-effective rates for some of the advertising. So, I think --we – as we evaluate we'll continue to look at that. We certainly are earning a huge ROI on our investments right now.

We'd like to continue to be aggressive on spending where it makes sense.

Jeff Carberry -- Chief Financial Officer

Yeah. The only thing I'd add George is obviously, you know us very well and we take a very quantitative and manual approach to sales and marketing. So we keep a very close eye on all the myriad of channels we utilize. And obviously, we have in a number of those cases an ability to modulate that spend virtually real-time with a lot of those channels.

So, I think we obviously, are going to be judicious on how we spend our money looking to balance both the opportunities as well as the risks. But I think on the sales and marketing spend to Ken's point we're investing for growth. But obviously, we have an ability to modulate that based on what we see in real-time with how the economy shakes out with COVID and other factors.

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

Understand. Thank you.

Ken McBride -- Chief Executive Officer

Thanks, George.

Operator

Thank you. Our next question comes from Kevin Liu with K. Liu & Company. Please, proceed with your question.

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

Hi, good afternoon guys. The first question here, just in terms of the outlook for 2021, I know there's no specific guide, but as we think about the different levers that you guys have obviously, you're coming into the year with an extremely large paid subscriber base much higher than what you came into 2020 with. So, is it fair for us to assume that so long as e-commerce is generally growing in the U.S. and abroad that your current existing arrangements with your various partners are relatively stable? It's really just the volume-dependent.

And to the extent, there is growth in e-commerce you guys should see some commensurate benefit.

Jeff Carberry -- Chief Financial Officer

Yeah. I think. Obviously, when we talk about our performance in 2020 with regard to acquisition the nature of those customers, and how they continue to look both on a pre-and post-COVID world basis as consistent all those things speak very well. For 2021 obviously, to your point though, the volume is really the uncertainty.

And as you can see, COVID has a huge impact on the nature of e-commerce and specifically how it manifests for us in terms of shipping labels. So certainly one scenario is where you have moderation in growth. You can also see scenarios where growth could potentially go down as people allocate capital to other things as the economy opens up. So it just highlights really some of the inherent risks in forecasting 2021 and even potentially in 2022 based on COVID-related variables.

So, I think at the end of the day you're going to see us obviously correlate with e-commerce. But I think you have to understand some of those broader dynamics as well that manifest themselves for us financially in terms of e-commerce generally, but how people are purchasing through e-commerce and then the impact on shipping volume for us.

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

Understood. And certainly, a lot of positive e-commerce trends as it relates to COVID. The one area that's the mix for most companies has been the global cross-border shipments. I was wondering if you could talk a little bit more about how your cross-border business performed in 2020, and then what your outlook for growth is here in 2021.

Jeff Carberry -- Chief Financial Officer

Sure. So from a cross-border standpoint that's obviously, an area that is developing very quickly. And an example of where -- with our technology platforms we are always pushing to be on the cutting-edge of those developments and the needs of our customers. So cross-border get extraordinarily complicated with things like sales use tax and import duties and controls and regulations around what you can and can't import and forms and things of that nature.

What we're doing obviously, as the world becomes more and more globally connected is ensuring that we make that process as efficient as humanly possible for our customers both domestically in the US as well as abroad. So that's certainly a highly evolving area and one that we do have our eye on closely as we prioritize R&D. And we see it as a very attractive opportunity for us again as the world becomes more interconnected globally.

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

Got it. And then just lastly, the expectation for operating expenses to grow as much as 20% or more this year. Can you talk about to the extent those are fixed investments you need to make in order to expand your international business versus more the variable spend for customer acquisition? And to the extent, your CPA metric starts to get back toward higher levels that you've seen historically. How comfortable are you continuing to spend at this rate?

Jeff Carberry -- Chief Financial Officer

I think I'll start with the last part of the question, which is CPAs. They were down 50% -- 15% year over year in Q4. But even if we saw CPAs back as they were pre-COVID, there was still a very attractive ROI. As it relates to the spend for opex, obviously, in R&D, it's principally headcount expense.

And in sales and marketing, it's a combination of discretionary as well as headcount expense. A lot of that increase is related to international efforts. And there we are very early on in tapping extraordinarily attractive opportunities, which we believe to have very high ROIs in the longer run, but to be clear we are early on. So we are building a business effectively from scratch internationally for low to mid-sized e-commerce merchants, whereas MetaPack is going after the large preeminent omnichannel retailer.

So, I think, we're making investments that we feel are extraordinarily attractive in the long run. But in terms of being able to modulate that certainly, we could modulate that. But I would bear in mind the way we think about that is a lot of those are obviously, investments for a multi-year framework. As far as sales and marketing, obviously, if we saw for example something like a global recession as a result of COVID, we can certainly modulate back on that in terms of headcount as well as modulate back on the sales and marketing spend.

So we're not going to spend recklessly, but a portion of that spend obviously, a good portion of that is headcount-related to drive long-term multi-year opportunities for us internationally. So you might see even with some downside risk in the shorter run with COVID, you might see us still spend pretty aggressively, especially on the headcount stuff that drives multi-year investments.

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

Ok. Thanks for taking the questions, and good luck here in 2021.

Ken McBride -- Chief Executive Officer

Thanks, Kevin.

Jeff Carberry -- Chief Financial Officer

Thank you, Kevin.

Operator

Thank you. Our next question comes from Allen Klee with National Securities. Please, proceed with your question.

Allen Klee -- National Securities -- Analyst

Yes, Hi. I'm at Maxim now. On the international, how do you think about the progression that you hope to get from getting paid directly from the shipper to what you do in the U.S. where you can get on the volumes with the carriers? How do you envision, how that could potentially play out over the next year or two?

Ken McBride -- Chief Executive Officer

Yeah, certainly. A part of our goal is as we go out into the world and we look at carriers in particular that those carriers are going to like in the U.S. be interested in accessing our customer base and that we will be able to effectively get a revenue share for that activity. I think that the vast majority -- well actually all of our customers effectively other than a few hundred are U.S.

customers, right. So, we have one million customers in the U.S. And so that customer base is extremely attractive here and now today. And so we were able to do partnerships.

We've been able to do partnerships with the other carriers. We have a rev share partnership effectively with USPS and with UPS and others. So internationally we're still -- I think we're still up and comer. So it's going to take some time to build that customer base as we go into these new markets.

We've seen incredible growth. I mean, I think we mentioned that we saw 150% year-over-year growth for international shipments with ShipStation in particular. However, that's off a small base and we're early. And these markets are complex in many ways more complex than other companies have faced.

As we go in we have to work through lots of relationships with a lot of the carriers there. There's -- we support over 300 carriers worldwide. There are really only three in the U.S. that are the vast majority of the market.

So each market is more complicated. We have to go into business development relationships. And so, it's a matter of building the market presence of the customers in those markets. And then we believe we'll be able to do more revenue share arrangements with the carriers in those markets.

Allen Klee -- National Securities -- Analyst

Thank you. You've built up a nice war chest of cash on your balance sheet. I'm curious how you think about M&A. If I guessed there's probably a lot of interesting things out there but the prices may not be where you would want.

But what would you -- generically what would you be looking at.

Ken McBride -- Chief Executive Officer

Well, yeah. I mean I think you're right in pointing out that certainly, the valuations are high in the market. If you look at 20 years of the management team having run this company we did 5, right. So, we're -- I guess we're averaging one every four years.

And I think within that -- and so we're pretty picky. We like to hit home runs when we do acquisitions and we think we've done that in the vast majority of the activities we've done. So, we're picky. M&A can be very distracting for the company for the management team.

And so we want to make sure when we do it, it's the right company, the right fit, the right culture, the right valuation. And we're certainly actively searching as we always do. But at this point obviously, we haven't been able to find something that meets our criteria.

Allen Klee -- National Securities -- Analyst

Ok. Thank you so much.

Ken McBride -- Chief Executive Officer

Thanks, Allen.

Operator

Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for any closing remarks.

Ken McBride -- Chief Executive Officer

Thank you, everyone, for joining us. We appreciate it. And as always if you have follow-up questions, you can come to our website, investor.stamps.com, or contact us through our Investor Relations number, (310) 482-5830. We appreciate your tuning in today.

Operator

[Operator signoff]

Duration: 60 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

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

Allen Klee -- National Securities -- Analyst

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