UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~(Mark~~(Mark One)

☑
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2021

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 000-26427

Stamps.com Inc.

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in ~~its charter)~~Its Charter)

~~Delaware~~	~~77-0454966~~
Delaware		77-0454966
(State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation~~Incorporation or ~~organization)~~Organization)		(I.R.S. Employer Identification No.)

1990 E. Grand Avenue

El Segundo, California 90245

(Address of ~~principal executive offices, including zip code)~~Principal Executive Offices and Zip Code)

(310) 482-5800

(~~Registrant’s telephone number, including area code)~~Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	STMP	NASDAQ Global Select Market

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑þ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☑þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting company,”" and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b‑2 of the Exchange Act. (Check one):

	~~Large accelerated filer~~ ☑	~~Accelerated filer~~ ☐

	~~Non-accelerated filer~~ ~~☐ (Do not check if a smaller reporting company)~~	~~Smaller reporting company~~ ☐

	~~Emerging growth company~~ ☐

Large accelerated filer þ Accelerated filer o

Non-accelerated filer o Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the ~~registrant~~Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑þ

~~As of October 31, 2017, there were 17,478,768 shares of the Registrant’s~~As of April 30, 2021, there were 18,319,142 shares of the Registrant's Common Stock ~~issued and~~ outstanding.

STAMPS.COM INC. AND SUBSIDIARIES

FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2021

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION			1

	ITEM 1.	FINANCIAL STATEMENTS	1

	ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19 23

	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34 35

	ITEM 4.	CONTROLS AND PROCEDURES	34 35

PART II –- OTHER INFORMATION			34 36

	ITEM 1.	LEGAL PROCEEDINGS	34 36

	ITEM1A.	RISK FACTORS	34 36

	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35 37

	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	35 37

	ITEM 4.	MINE SAFETY DISCLOSURES	35 37

	ITEM 5.	OTHER INFORMATION	35 38

	ITEM 6.	EXHIBITS	36 39

Table of Contents

PART I - FINANCIAL INFORMATION

~~ITEM 1.~~

ITEM 1. FINANCIAL STATEMENTS

~~FINANCIAL STATEMENTS~~

STAMPS.COM INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	September 30, 2017			December 31, 2016
	(Unaudited)							March 31, 2021		December 31, 2020
Assets							Assets	(Unaudited)
Current assets:							Current assets:
Cash and cash equivalents	$	183,538		$	106,932		Cash and cash equivalents	$	567,471	$	443,552
Short-term investments		—			1,511
Accounts receivable, net		52,555			62,756		Accounts receivable, net	47,600		63,308
Current income taxes							Current income taxes	610		8,035
Prepaid expenses							Prepaid expenses	14,467		17,480
Other current assets		44,616			13,081		Other current assets	68,645		86,319
Total current assets		280,709			184,280		Total current assets	698,793		618,694
Property and equipment, net		38,138			36,829		Property and equipment, net	36,021		32,887
Goodwill		239,705			239,705		Goodwill	390,353		388,753
Intangible assets, net		85,000			97,027		Intangible assets, net	120,635		125,254
Deferred income taxes, net.		42,231			48,782
Deferred income taxes, net							Deferred income taxes, net	26,371		26,378
Lease right-of-use assets							Lease right-of-use assets	56,348		58,506
Other assets		5,579			3,506		Other assets	20,734		46,827
Total assets	$	691,362		$	610,129		Total assets	$	1,349,255	$	1,297,299

Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current liabilities:							Current liabilities:
Accounts payable and accrued expenses	$	88,830		$	86,205
Accounts payable and other current liabilities							Accounts payable and other current liabilities	$	230,962	$	215,967
Deferred revenue		3,598			3,858		Deferred revenue	7,411		7,833
Current portion of debt, net of debt issuance costs		7,876			6,329
Current portion of lease right-of-use liabilities							Current portion of lease right-of-use liabilities	4,956		6,285
Total current liabilities		100,304			96,392		Total current liabilities	243,329		230,085
Long-term debt, net of debt issuance costs		125,117			141,025

Deferred income taxes, net							Deferred income taxes, net	7,701		7,524
Long-term portion of lease right-of-use liabilities							Long-term portion of lease right-of-use liabilities	54,894		53,986
Other liabilities							Other liabilities	32,709		31,585
Total liabilities		225,421			237,417		Total liabilities	338,633		323,180
Commitments and contingencies (Note 3)
Commitments and contingencies (Note 2)							Commitments and contingencies (Note 2)	0		0
Stockholders' equity:							Stockholders' equity:
Common stock, $.001 par value per share
Authorized shares: 47,500 in 2017 and 2016
Issued shares: 31,772 in 2017 and 30,507 in 2016
Outstanding shares: 17,337 in 2017 and 16,897 in 2016		54			53
Common stock, $0.001 par value per share; Authorized shares: 47,500 in 2021 and 2020; Issued shares: 34,906 in 2021 and 34,707 in 2020; Outstanding shares: 18,369 in 2021 and 18,306 in 2020							Common stock, $0.001 par value per share; Authorized shares: 47,500 in 2021 and 2020; Issued shares: 34,906 in 2021 and 34,707 in 2020; Outstanding shares: 18,369 in 2021 and 18,306 in 2020	57		57
Additional paid-in capital		940,001			855,344		Additional paid-in capital	1,302,865		1,276,484
Treasury stock, at cost, 14,435 shares in 2017 and 13,610 in 2016		(356,908	)		(252,981	)
Accumulated deficit		(117,213	)		(229,715	)
Accumulated other comprehensive income		7			11
Treasury stock, at cost, 16,537 shares in 2021 and 16,401 shares in 2020							Treasury stock, at cost, 16,537 shares in 2021 and 16,401 shares in 2020	(675,163)		(648,132)
Retained earnings							Retained earnings	363,850		329,606
Accumulated other comprehensive income (loss)							Accumulated other comprehensive income (loss)	19,013		16,104
Total stockholders' equity		465,941			372,712		Total stockholders' equity	1,010,622		974,119
Total liabilities and stockholders' equity	$	691,362		$	610,129		Total liabilities and stockholders' equity	$	1,349,255	$	1,297,299

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

STAMPS.COM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016			2017			2016				2021		2020
Revenues:													Revenues:
Service	$	97,529		$	78,871		$	292,634		$	220,567		Service	$	179,020	$	139,136
Product		4,824			4,703			15,301			15,109		Product	5,513		5,956
Insurance		4,099			4,050			12,932			12,643		Insurance	4,557		3,180
Customized postage		8,588			4,912			15,306			10,016		Customized postage	0		3,074
Other		22			23			69			74

Total revenues		115,062			92,559			336,242			258,409		Total revenues	189,090		151,346
Cost of revenues (exclusive of amortization of intangible assets, which is included in general and administrative expense):													Cost of revenues (exclusive of amortization of intangible assets, which is included in general and administrative expense):
Service		11,882			9,903			37,284			28,054		Service	41,375		36,527
Product		1,535			1,579			4,930			5,019		Product	1,848		1,738
Insurance		966			1,291			3,547			3,920

Customized postage		7,151			3,954			12,600			8,076		Customized postage	0		2,115
Total cost of revenues		21,534			16,727			58,361			45,069		Total cost of revenues	43,223		40,380
Gross profit		93,528			75,832			277,881			213,340		Gross profit	145,867		110,966
Operating expenses:													Operating expenses:
Sales and marketing		20,588			18,229			66,018			59,708		Sales and marketing	43,866		37,004
Research and development		12,037			9,111			34,187			25,579		Research and development	28,510		21,323
General and administrative		25,243			16,901			65,676			49,276		General and administrative	29,170		28,468
Total operating expenses		57,868			44,241			165,881			134,563		Total operating expenses	101,546		86,795
Income from operations		35,660			31,591			112,000			78,777		Income from operations	44,321		24,171
Foreign currency exchange gain (loss), net													Foreign currency exchange gain (loss), net	(89)		(138)
Interest expense		(967	)		(828	)		(2,779	)		(2,648	)	Interest expense	(95)		(467)
Interest and other income		120			24			309			98
Interest income and other income (loss), net													Interest income and other income (loss), net	28		26
Income before income taxes		34,813			30,787			109,530			76,227		Income before income taxes	44,165		23,592
Income tax (benefit) expense		(11,412	)		12,115			(873	)		30,026		Income tax (benefit) expense	9,921		7,098
Net income	$	46,225		$	18,672		$	110,403		$	46,201		Net income	$	34,244	$	16,494
Net income per share
Net income per share:													Net income per share:
Basic	$	2.71		$	1.08		$	6.51		$	2.67		Basic	$	1.86	$	0.97
Diluted	$	2.49		$	1.03		$	6.04		$	2.52		Diluted	$	1.74	$	0.91
Weighted average shares outstanding
Weighted average shares outstanding:													Weighted average shares outstanding:
Basic		17,073			17,218			16,969			17,319		Basic	18,362		17,064
Diluted		18,548			18,120			18,282			18,325		Diluted	19,644		18,189

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

STAMPS.COM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016				Three Months Ended March 31,
													2021		2020
Net income	$	46,225	$	18,672		$	110,403		$	46,201		Net income	$	34,244	$	16,494
Other comprehensive income, net of tax:
Unrealized loss on investments		—		(7	)		(4	)		(3	)
Other comprehensive income (loss), net of tax:												Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments												Foreign currency translation adjustments	2,909		(14,727)
Comprehensive income	$	46,225	$	18,665		$	110,399		$	46,198		Comprehensive income	$	37,153	$	1,767

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

STAMPS.COM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)


	Three Months Ended March 31, 2021
	Common Stock			Additional Paid-in Capital		Treasury Stock at Cost		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance at December 31, 2020	18,306	$	57	$	1,276,484	$	(648,132)	$	329,606	$	16,104	$	974,119
Net income	—	—		—		—		34,244		—		34,244
Other comprehensive income (loss)	—	—		—		—		—		2,909		2,909

Stock-based compensation expense	—	—		8,690		—		—		—		8,690
Exercise of stock options	186	—		15,237		—		—		—		15,237
Shares issued under the Employee Stock Purchase Plan	13	—		2,454		—		—		—		2,454
Stock repurchase	(136)	—		—		(27,031)				—		(27,031)

Balance at March 31, 2021	18,369	$	57	$	1,302,865	$	(675,163)	$	363,850	$	19,013	$	1,010,622


	Three Months Ended March 31, 2020
	Common Stock			Additional Paid-in Capital		Treasury Stock at Cost		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance at December 31, 2019	17,029	$	56	$	1,098,426	$	(593,511)	$	150,941	$	9,713	$	665,625
Net income	—	—		—		—		16,494		—		16,494
Other comprehensive income (loss)	—	—		—		—		—		(14,727)		(14,727)

Stock-based compensation expense	—	—		10,725		—		—		—		10,725
Exercise of stock options	103	—		8,818		—		—		—		8,818
Shares issued under the Employee Stock Purchase Plan	50	—		1,950		—		—		—		1,950
Stock repurchase	(80)	—		—		(8,577)		—		—		(8,577)

Balance at March 31, 2020	17,102	$	56	$	1,119,919	$	(602,088)	$	167,435	$	(5,014)	$	680,308

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

STAMPS.COM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016				2021		2020
Operating activities:							Operating activities:
Net income	$	110,403		$	46,201		Net income	$	34,244	$	16,494
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,055			13,922		Depreciation and amortization	6,443		6,588
Stock-based compensation expense		33,669			24,755		Stock-based compensation expense	8,690		10,725
Deferred income tax expense		8,650			26,724
Stock option windfall tax benefit		—			(9,771	)

Accretion of debt issuance costs		279			279		Accretion of debt issuance costs	96		93
Changes in operating assets and liabilities, net of assets and liabilities acquired:							Changes in operating assets and liabilities, net of assets and liabilities acquired:
Accounts receivable		10,201			(3,843	)	Accounts receivable	15,966		18,645
Other current assets, net of excess tax benefit from stock-based award activity		(31,535	)		(1,275	)
Prepaid expenses							Prepaid expenses	3,071		3,102
Other current assets							Other current assets	17,675		(6,110)
Current income taxes							Current income taxes	7,438		69
Lease right-of-use assets							Lease right-of-use assets	2,238		1,024
Other assets		(2,073	)		(508	)	Other assets	26,003		(7,304)
Deferred revenue		(261	)		2,122		Deferred revenue	(460)		(18)
Accounts payable and accrued expenses		3,647			5,350
Lease right-of-use liabilities							Lease right-of-use liabilities	(497)		(827)
Other liabilities							Other liabilities	1,169		929
Accounts payable and other current liabilities							Accounts payable and other current liabilities	14,938		3,248
Net cash provided by operating activities		149,035			103,956		Net cash provided by operating activities	137,014		46,658

Investing activities:							Investing activities:
Sale of short-term investments		1,502			6,988
Sale of long-term investments		10			77
Purchase of long-term investments		(4	)		(15	)
Acquisition of Endicia		—			(573	)
Acquisition of ShippingEasy, net of cash acquired		—			(55,447	)

Acquisition of property and equipment		(5,972	)		(2,903	)	Acquisition of property and equipment	(1,233)		(1,921)
Net cash used in investing activities		(4,464	)		(51,873	)	Net cash used in investing activities	(1,233)		(1,921)

Financing activities:							Financing activities:
Proceeds from short term financing obligation, net of repayments		(389	)		2,713
Net proceeds from (repayments of) short-term financing obligations							Net proceeds from (repayments of) short-term financing obligations	(2,636)		15,665
Principal payments on term loan		(4,641	)		(3,092	)	Principal payments on term loan	0		(3,093)
Payment on revolving credit facility		(10,000	)		(10,000	)

Proceeds from exercise of stock options		48,054			9,773		Proceeds from exercise of stock options	15,237		8,818
Issuance of common stock under Employee Stock Purchase Plan		2,937			2,181		Issuance of common stock under Employee Stock Purchase Plan	2,454		1,950
Repurchase of common stock		(103,127	)		(47,411	)	Repurchase of common stock	(27,031)		(8,577)
Shares withheld to satisfy statutory income tax withholding obligations		(799	)		—
Stock option windfall tax benefit		—			9,771
Net cash used in financing activities		(67,965	)		(36,065	)
Net increase in cash and cash equivalents		76,606			16,018
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	(11,976)		14,763
Effect of exchange rate changes							Effect of exchange rate changes	114		(183)
Net increase (decrease) in cash and cash equivalents							Net increase (decrease) in cash and cash equivalents	123,919		59,317
Cash and cash equivalents at beginning of period		106,932			65,126		Cash and cash equivalents at beginning of period	443,552		156,307
Cash and cash equivalents at end of period	$	183,538		$	81,144		Cash and cash equivalents at end of period	$	567,471	$	215,624

Supplemental information:							Supplemental information:
Capital expenditures accrued but not paid at period end	$	123		$	122		Capital expenditures accrued but not paid at period end	$	3,138	$	0
Issuance of 2015 and 2014 earn-out shares	$	—		$	63,209
Noncash adjustment of purchase price for Endicia acquisition	$	—		$	372
Tenant improvement allowance	$	848		$	676
Cash paid for amounts included in the measurement of lease liabilities included in cash provided by operating activities							Cash paid for amounts included in the measurement of lease liabilities included in cash provided by operating activities	$	857	$	1,275
Lease liabilities arising from obtaining right-of-use assets							Lease liabilities arising from obtaining right-of-use assets	$	0	$	852

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(UNAUDITED)~~(Unaudited)

1.	~~Summary of Significant Accounting Policies~~

1. Summary of Significant Accounting Policies

Basis of Presentation

We prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States ~~(U.S.)~~(US) generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to make the information presented not misleading. We recommend that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in our latest annual report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2020, filed with the SEC on ~~March 1, 2017.~~February 26, 2021.

In our opinion, these unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly our financial position as of ~~September 30, 2017,~~March 31, 2021, our results of operations for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, and our cash flows for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2017.~~2021.

~~Principles~~Basis of Consolidation

The consolidated financial statements include all the ~~accounts~~assets, liabilities, revenues, expenses and cash flows of Stamps.com Inc.~~, Auctane LLC (ShipStation), Interapptive, Inc. (ShipWorks), PSI Systems Inc. (Endicia), ShippingEasy Group, Inc. (ShippingEasy)~~ and ~~PhotoStamps Inc. In July 2016, we completed our acquisition of 100% of~~ the ~~outstanding shares of ShippingEasy.~~

~~Because 100% of the voting control of ShipStation, ShipWorks, Endicia and ShippingEasy is held by us,~~entities in which we have ~~consolidated the results of operations of ShipStation, ShipWorks, Endicia~~100% voting and/or economic control. References in this Report to "we" "us" "our" or "Company" are references to Stamps.com Inc. and ShippingEasy from the date we obtained control in the accompanying consolidated financial statements. Similarly, due to our 100% control of PhotoStamps, Inc., PhotoStamps, Inc. is also consolidated in the accompanying consolidated financial statements from the date of its ~~inception.~~ subsidiaries.

Intercompany accounts and transactions between consolidated entities have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with ~~U.S.~~US GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. ~~Examples include estimates of loss contingencies, realizability of deferred income taxes, the~~There are significant estimates and ~~assumptions used to calculate stock-based compensation,~~judgments inherent in the ~~estimates and assumptions used to calculate the allocation~~preparation of the ~~purchase price~~consolidated financial statements including those related to ~~our acquisitions, and estimates regarding~~ the ~~useful lives~~fair value of ~~our building, amortizable~~ intangible assets and ~~goodwill.~~goodwill and the allowance for credit losses.

The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the consolidated financial statements for the period ended March 31, 2021. As events continue to evolve and additional information becomes available, our assumptions and estimates may change materially in future periods.

Accounts Receivable

Our accounts receivable relate to mailing and shipping services, postage purchasing and invoicing, branded insurance provided to customers prior to billing, and other receivables.

We maintain an allowance for credit losses for expected uncollectible accounts which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the consolidated statements of operations.

We evaluate collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known collectability issues. The evaluation is based on a combination of factors. If we become aware of a customer’s inability to meet its financial obligations, an allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible from the customer. Accounts receivable are written off against the allowance for uncollectible accounts when we determine amounts are no longer collectible. We recognize allowances for credit losses for all other customers based on either the age of the receivable or applying a loss rate method which incorporates historical experience and an evaluation of macroeconomic factors, including the estimated impact of COVID-19 on the collectability of our accounts receivable.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As additional information becomes available to us, our future assessment of our allowance for credit losses could materially and adversely impact our consolidated financial statements in future reporting periods.

There were no material write offs or recoveries against the allowance for uncollectible accounts during fiscal 2021 and 2020, respectively.

The allowance for credit losses on accounts receivable was approximately $9.1 million and $11.9 million as of March 31, 2021 and December 31, 2020, respectively.

Business Combinations

The acquisition method of accounting is used for business combinations. The results of operations of acquired businesses are included in our consolidated financial statements prospectively from the date of acquisition. The fair value of purchase consideration is allocated to the assets acquired and liabilities assumed from the acquired entity and is generally based on their fair value at the acquisition date. The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. Historically, the primary items that have generated goodwill include anticipated synergies between the acquired business and the Company and the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset. Acquisition-related expenses are recognized in our consolidated financial statements as incurred.

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Contingencies and Litigation

In the ordinary course of business, we are subject to various ~~routine~~ litigation matters as a claimant and a defendant. We record any amounts recovered in these matters when received. We establish loss provisions for claims against us when the loss is both probable and can be reasonably estimated. If either or both of the criteria are not met, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is a reasonable possibility that a loss or additional loss may have been incurred for such proceedings, we disclose the estimate of the amount of loss or possible range of loss, or disclose that an estimate of loss cannot be made, as applicable.

Deferred Revenue

Our deferred revenue relates mainly to service revenue, which generally arises due to the timing of payment versus the provision of services for certain customers billed in advance. Approximately $5.9 million of revenue recognized in the three months ended March 31, 2021 was included in the deferred revenue balance at December 31, 2020. Approximately $6.4 million of revenue recognized in the three months ended March 31, 2020 was included in the deferred revenue balance at December 31, 2019.

Fair Value of Financial Instruments

Carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate fair value due to their short maturities. ~~The fair values of investments are determined using quoted market prices for those securities or similar financial instruments. The Company’s~~When drawn, the Company's outstanding debt held by ~~third-party~~third party financial institutions is carried at cost, adjusted for debt issuance costs. ~~The Company’s~~When drawn, the Company's debt is not publicly traded and the carrying amount typically approximates fair value for debt that accrues interest at a variable rate for companies with similar financial characteristics as the Company, which are considered Level 2 fair value inputs as defined in ~~footnote 8.~~Note 7 - "Fair Value Measurements" in our consolidated financial statements.

Foreign Currency Translation

The functional currency of the Company’s major foreign subsidiaries is generally the local currency. Adjustments resulting from translating foreign functional currency financial statements into US dollars are recorded in accumulated other comprehensive income as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in foreign currency exchange gain (loss), net. All assets and liabilities denominated in a foreign currency are translated into US dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the period.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in a business ~~combination.~~combinations. We are required to test goodwill for impairment annually and whenever events or circumstances indicate the fair value of a reporting unit may be below its carrying value. ~~Goodwill is reviewed for impairment annually on October 1.~~ A reporting unit is the operating segment or a business that is one level below that operating segment. Reporting units are aggregated as a single reporting unit if they have similar economic characteristics. ~~We aggregated our reporting units into a single reporting unit because we determined they have similar economic characteristics.~~

Goodwill is reviewed for impairment annually on October 1 utilizing either a qualitative ~~assessment~~ or ~~a two-step process.~~quantitative assessment. We have an option to make a qualitative assessment of a reporting unit's goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. ~~For reporting units where~~When we perform ~~the two-step process, the first step requires us to~~a quantitative assessment, we compare the fair value of ~~each~~the reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit's goodwill, the difference is recognized as an impairment loss. As of ~~September 30, 2017,~~March 31, 2021, we are not aware of any indicators of impairment that would require an impairment analysis other than our annual goodwill impairment analysis. No instances of impairment to the Company's goodwill were identified during our October 1, 2020 review.

Indefinite-lived intangible assets are reviewed for impairment annually on October 1 and whenever events or circumstances indicate that the fair value of an indefinite-lived intangible asset may be below its carrying value. In assessing other intangible assets not subject to amortization for impairment, the Company also has the option to perform a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of such an intangible asset is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of such an intangible asset is less than its carrying amount, then the Company is not required to perform any additional tests for assessing those intangible assets for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative impairment test that involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. As of March 31, 2021, we are not aware of any indicators of impairment that would require an impairment analysis other than our annual indefinite-lived intangible assets impairment analysis. The Company concluded that it was more likely than not the fair value of each of the Company's intangible assets not subject to amortization was in excess of its respective carrying value during our October 1, 2020 review.

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Impairment of~~ Long-Lived Assets and Finite-Lived Intangible Assets

Long-lived assets including intangible assets with finite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

~~Intangible assets~~We account for property and equipment at cost less accumulated depreciation and amortization. We compute depreciation using the straight-line method over the estimated useful life of the asset, generally three to five years for furniture, fixtures, and equipment and ten to forty years for building and building improvements. Leasehold improvements are capitalized and amortized over the shorter of the useful life of the asset or the remaining term of the lease. We have a policy of capitalizing expenditures that ~~have indefinite~~materially increase assets' useful lives and charging ordinary maintenance and repairs to operations as incurred. When property or equipment is disposed of, the cost and related accumulated depreciation and amortization are ~~not amortized but, instead, are tested at least annually for impairment while intangible assets that have finite useful lives are amortized over their respective useful lives.~~removed, and any gain or loss is included in income from operations.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Income Taxes

We are subject to income taxes in the US and foreign jurisdictions. We provide for income taxes at the current and future enacted tax rate and consistent with the laws applicable in each jurisdiction. We account for income taxes in accordance with Financial Accounting Standards Board (FASB) ~~ASC~~Accounting Standards Codification (ASC) Topic No. 740, Income Taxes (Income Taxes), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. Income Taxes also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized. We record a valuation allowance to reduce our gross deferred tax assets to the amount that is more likely than not (a likelihood of more than 50 percent) to be realized. In order for us to realize our deferred tax assets, we must be able to generate sufficient taxable income. We evaluate the appropriateness of our deferred tax assets and related valuation allowance in accordance with Income Taxes based on all available positive and negative evidence.

Leases

We determine if an arrangement is a lease at inception. Right-of-use (ROU) assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. For this purpose, we consider only payments that are fixed and determinable at the time of commencement. As most of ~~September 30, 2017 and December 31, 2016, we~~our leases do not ~~have any valuation allowance recorded~~provide an implicit rate, the interest rate used to ~~reduce~~determine the present value of future lease payments is an estimated incremental borrowing rate. Many of our ~~gross deferred tax~~leases include one or more options to renew. These options are factored into the determination of the lease term and lease payments when their exercise is considered to be reasonably certain.

Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We elected the practical expedient to combine fixed payments for non-lease components with our lease payments and account for them together as a single lease component which increases the amount of the ROU assets ~~as we believe we have met~~and liabilities.

We also elected to recognize the ~~more likely than not threshold and we will realize our tax loss carry-forwards~~associated lease payments for leases with an initial term of 12 months or less in the ~~foreseeable future.~~consolidated statements of operations on a straight-line basis without recognizing a ROU asset or liability.

~~Property~~Operating leases are included in lease right-of-use assets, current portion of lease right-of-use liabilities, and ~~Equipment~~

~~We account for property and equipment at cost less accumulated depreciation and amortization. We compute depreciation using the~~long-term portion of lease right-of-use liabilities on our consolidated balance sheets. Operating lease expense is recognized on a straight-line ~~method~~basis over the estimated useful life of the asset, generally three to five years for furniture, fixtures and equipment and ten to forty years for building and building improvements. Leasehold improvements are capitalized and amortized over the shorter of the useful life of the asset or the remaininglease term of the lease. We have a policy of capitalizing expenditures that materially increase assets’ useful lives and charging ordinary maintenance and repairs to operations as incurred. When property or equipment is disposed of, the cost and related accumulated depreciation and amortization are removed, and any gain or loss is included in income from operations on our consolidated statements of operations.

Other Current Assets

Other current assets principally consist of prepayments for postage and shipping labels and inventory. Prepayments for postage and shipping labels totaled $64.5 million at March 31, 2021 and $82.4 million at December 31, 2020, respectively.

Other Liabilities

Other liabilities principally consist of long-term unrecognized income tax benefits, as well as indirect tax liabilities and other liabilities.

Revenue Recognition

We recognize ~~revenue from product sales~~revenues when we transfer control of promised goods or services ~~rendered, as well as commissions from advertising or sale of products by third party vendors~~ to our ~~customer base~~customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services. We account for a contract when it has approval and commitment from both parties, the ~~following four revenue recognition criteria~~rights of the parties are ~~met: persuasive evidence of an arrangement exists; delivery~~identified, payment terms are identified, the contract has ~~occurred or services have been rendered; the selling price is fixed or determinable;~~commercial substance, and collectability of consideration is ~~reasonably assured.~~probable. Our payment terms vary by the products and services offered. The term between billings and when payment is due is not significant.

Revenues are presented on a disaggregated basis on the consolidated statements of operations.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Service revenue is recognized over time for each month that customers have access to our platform or at a point in time when assets are transferred to the customer. We earn service revenue from our mailing and shipping operations in several different ways: (1) customers may pay us a monthly fee, based on a subscription ~~plan;~~plan which may be waived or refunded for certain customers, for which we provide them access to our platform, in which case revenue is earned over the period of time that the customers have access to the platform which is typically month-to-month; (2) we may be compensated directly by our carriers for shipping labels printed that meet certain requirements, in which case revenue is earned over time, which is typically in the ~~United States Postal Service (USPS) for certain qualifying customers under our USPS partnership;~~same month that the relevant labels are printed; (3) we may earn ~~transaction related~~ revenue ~~based on~~from customers ~~purchasing~~when they purchase postage, print shipping labels or ~~printing shipping labels;~~perform other transactions using our solutions, in which case revenue is earned at the point in time we transfer an asset to the customer and have a present right of payment for the asset transferred; (4) we may earn ~~compensation by offering customers~~revenue that may take the form of some or all of the spread between the rate a ~~discounted postage~~customer pays and the rate ~~that is provided to~~ the ~~customers~~carrier or integration partner receives, either charged directly or paid by our ~~integration partners;~~partners, in which case revenue is earned at a point in time, which is typically when the customer purchases postage or prints a shipping label; and (5) we may earn other types of revenue shares or other compensation from specific customers that have access to our platform or through integration ~~partners. Revenue~~partners, in which case revenue is recognized at a point in time, which is when we have fulfilled our performance obligations.

In the case of monthly fees based on subscription plans, the Company recognizes a reduction of revenue in the period ~~that services are provided.~~

for which a waiver is granted or when a refund is processed, which is typically the same period in which the associated subscription revenue is recognized or, in the case of refunds, could be a later period. Waivers and refunds were not material to the consolidated financial statements during the three months ended March 31, 2021 or March 31, 2020, respectively.

Customers may purchase ~~postage~~delivery services from ~~the USPS~~carriers through our mailing and shipping solutions. ~~Postage purchase~~When funds ~~that~~ are transferred directly from ~~the~~ customers to the ~~USPS~~carrier, these funds are not recognized as revenue. We also provide mailing and shipping services for which the cost of postage or delivery is included in the cost of the service and, therefore, is recognized as service revenue.

Product revenue ~~for this postage, as it is purchased by~~consists of products sold through the mailing and shipping supplies stores which are available to our customers from within some of our mailing and shipping solutions. Products sold include mailing labels, shipping labels, thermal printers, scales, and other mailing and shipping-focused office supplies. We recognize product revenue on product purchases upon shipment of orders to customers.

We provide our customers with the opportunity to purchase parcel insurance directly through our solutions. Insurance revenue represents the amount we receive from customers net of the ~~USPS.~~

~~Table~~costs paid to our insurance providers. We recognize insurance revenue on insurance purchases upon the ship date of ~~Contents~~

~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

the insured package, which is the point in time when we have fulfilled our performance obligations.

Customized postage revenue, which includes the face value of postage, from the sale of ~~PhotoStamps and PictureItPostage~~customized postage sheets and rolls is ~~made pursuant to a sales contract that provides for~~recognized upon transfer of ~~both title and risk~~control of ~~loss~~the product to the customer, which occurs upon our delivery to the ~~carrier~~carrier. In the second quarter of 2020, we received notification from the US Postal Service (USPS) that it was eliminating its customized postage program and also revoking our authorization to offer products pursuant to that program effective June 16, 2020. As a result, we do not expect material customized postage revenue ~~is recognized at that time.~~

or cost of revenue after June 2020.

On a limited basis, we allow third parties to offer products and promotions to our customer base. These arrangements generally provide payment in the form of a flat fee or revenue sharing arrangements where we receive payment upon customers accessing third party products and services. Total revenue from such advertising arrangements was not significant during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 or ~~2016.~~March 31, 2020, respectively.

~~We provide~~Segment Information

Our operations consist of 2 segments: Stamps.com and Metapack. Please see Note 9 - “Segment and Geographical Information” in our ~~customers with the opportunity~~Notes to ~~purchase parcel insurance directly through our solutions. Insurance revenue represents the gross amount charged to the customer~~Consolidated Financial Statements for ~~purchasing insurance and the related cost represents the amount paid to our insurance providers. We recognize insurance revenue on insurance purchases upon the ship date~~further description.

Table of ~~the insured package.~~Contents

STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Short-Term Financing Obligations

We utilize short-term financing, which is separate from our debt as described in Note 12 - "Debt," to fund certain Company operations. Short-term financing obligations are included in accounts payable and ~~accrued expenses~~other current liabilities in the accompanying consolidated balance sheets. As of ~~September 30, 2017,~~March 31, 2021, we had ~~$15.2~~$12.4 million in short-term financing obligations and ~~$90.4~~$57.6 million of unused ~~short-term financing obligations~~ credit. As of December 31, ~~2016,~~2020, we had ~~$15.6~~$15.1 million in short-term financing obligations and ~~$90.0~~$57.0 million of unused credit.

~~Trademarks and Intangible Assets~~Stock-Based Compensation

Acquired trademarks and intangibles include both amortizable and non-amortizable assets and are included in intangible assets, net in the accompanying consolidated balance sheets. Intangible assets are carried at cost less accumulated amortization. Cost associated with internally developed intangible assets is typically expensed as incurred as research and development costs. Amortization of amortizable intangible assets is calculated on a straight-line basis, which is consistent with the expected future cash flows.

~~Treasury~~ ~~Stock~~

During the nine-months ended September 30, 2017 and September 30, 2016, we repurchased approximately 818,000 shares and 528,000 shares for $103.1 million and $47.4 million, respectively. Also, 6,670 shares were withheld to satisfy income tax obligations related to performance-based inducement equity awards issued to the General Manager and Chief Technology Officer of ShippingEasy on March 31, 2017.

~~Accounting Guidance Adopted in 2017~~

~~Share-based Payment Transactions to Employees~~

~~On January 1, 2017, the Company adopted~~ ~~Accounting Standards Update No. 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ ~~(ASU 2016-09) issued by the FASB~~ on a prospective basis that changes the reporting for certain aspects of share-based payments. One aspect of the guidance requires that the income tax effects of share-based awards be recognized in the income tax provision in the consolidated statement of operations when the awards vest or are settled. Under the previous guidance, excess tax benefits and deficiencies were recognized in additional paid-in capital in the consolidated balance sheets when the awards vested or were settled. For the nine months ended September 30, 2017, the amount of excess tax benefits recognized in the income tax provision was approximately $41.8 million. For the nine months ended September 30, 2016, the amount of excess tax benefits recognized in additional paid-in capital was not material. In addition, because excess tax benefits are no longer recognized in additional paid-in capital under the new guidance, such amounts are no longer included in the determination of assumed proceeds in applying the treasury stock method when computing earnings per share.

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

A net cumulative-effect adjustment of $2.1 million, which was an increase to retained earnings and the deferred tax asset balance as of January 1, 2017, was recorded to reflect the recognition of the previously unrecognized excess tax benefits using the modified retrospective method.

Another aspect of the new guidance requires that excess tax benefits be classified as a cash flow from operating activities, rather than a cash flow from financing activities, in the consolidated statement of cash flows. For the nine months ended September 30, 2017, the amount of excess tax benefits presented as a cash flow from operating activities was $41.8 million; this amount is included within the change of other current assets~~, net of excess tax benefit from stock-based award activity line item in the consolidated statement of cash flows~~. ~~For the nine months ended September 30, 2016, the amount of excess tax benefits~~ presented as a cash flow from financing was not material. The presentation requirements for cash flows related to excess tax benefits were adopted prospectively. Accordingly, the operating activity cash flows were not adjusted for the year ended December 31, 2016.

~~The new standard also provides an accounting policy election to account for forfeitures as they occur.~~ ~~We elected to account for forfeitures as they occur, rather than estimate expected forfeitures.~~ ~~The impact of this was not material.~~

Another aspect of the new guidance clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on our consolidated statements of cash flows. The presentation requirements for cash flows related to employee taxes paid for withheld shares were adopted retrospectively. The Company did not withhold shares for employee taxes in fiscal 2016; as such, there was no change to the December 31, 2016 consolidated statement of cash flows related to employee taxes. The Company accrued $0.8 million of employee taxes in the first quarter of 2017 for withheld shares, which were classified as a financing activity on our consolidated statements of cash flows when paid in the second quarter of 2017.

~~The other aspects of the new guidance did not have any material effect on the Company’s consolidated financial statements.~~

~~Inventory Measurement Principle~~

In July 2015, the FASB issued ASU 2015-11, a new accounting standard which changed the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value for entities that do not use the last-in, first-out (LIFO) or retail inventory method. The changes also eliminate the requirement to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory for entities that do not use the LIFO or retail inventory method. The changes were effective for the Company in the first quarter of 2017 using a prospective transition approach. The adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.

~~Accounting Guidance Not Yet Adopted~~

~~Revenue Recognition~~

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(ASU 2014-09) an updated standard on revenue recognition. This ASU will supersede the revenue recognition requirements in Accounting Standards Codification Topic 605,~~ ~~Revenue Recognition~~, and most industry-specific guidance. ASU 2014-09 provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using U.S. GAAP and International Financial Reporting Standards. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, the companies may be required to use more judgment and make more estimates than under current authoritative guidance.

During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. ASU 2014-09 will be effective for the Company beginning January 1, 2018 and may be applied retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective approach).

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The Company has completed the review of its material contracts and performed a preliminary assessment of the impact of the new standard. While the Company has not finalized its evaluation of the impact of the adoption of this standard on its consolidated financial statements and related disclosures, it does not anticipate a material impact on the financial statements when the standard is adopted in 2018. The Company currently plans to adopt under the modified retrospective method. However, a final decision regarding the adoption method has not been made at this time.

~~Leases~~

In February 2016, the FASB issued ASU 2016-02, a new accounting standard for leases. The new standard generally requires the recognition of financing and operating lease liabilities and corresponding right-of-use assets on the balance sheet. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. For operating leases, a lessee recognizes its total lease expense as an operating expense over the lease term. The amendments are effective for the Company in the first quarter of 2019 using a modified retrospective approach with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

~~Goodwill Impairment~~

In January 2017, the FASB issued ASU 2017-04, a standard which simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance will become effective on a prospective basis for the Company on January 1, 2020 and is not expected to have a material impact on the Company’s consolidated financial statements.

~~Definition of a Business~~

In January 2017, the FASB issued ASU 2013-12, guidance that changes the definition of a business for accounting purposes. Under the new guidance, an entity first determines whether substantially all of the fair value of a set of assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set of assets is not deemed to be a business. If this threshold is not met, the entity then evaluates whether the set of assets meets the requirement to be deemed a business, which at minimum, requires there to be an input and a substantive process that together significantly contribute to the ability to create outputs. The guidance will become effective on a prospective basis for the Company on January 1, 2020 and is not expected to have a material impact on the Company’s consolidated financial statements.

~~Subsequent Events~~

~~We are not aware of any material subsequent events or transactions that have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements.~~

2.	~~Acquisitions~~

~~We have accounted for all of our acquisitions under the acquisition method of accounting in accordance with the provisions of FASB ASC Topic No. 805~~ ~~Business Combinations~~.

~~ShippingEasy Acquisition~~

On July 1, 2016, we completed our acquisition of ShippingEasy Group, Inc. (ShippingEasy) when our wholly owned subsidiary was merged with and into ShippingEasy, resulting in our 100% ownership of ShippingEasy. The merger agreement provided for us to pay $55.0 million in aggregate merger consideration to the former owners of ShippingEasy, payable in cash. The purchase price was subject to adjustments for changes in ShippingEasy’s net working capital. The net purchase price including adjustments for net working capital totaled approximately $55.4 million and was funded from current cash and investment balances.

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

In connection with the acquisition, we issued performance-based inducement equity awards to each of the General Manager and Chief Technology Officer of ShippingEasy. These inducement awards cover an aggregate of up to 43,567 common shares each if earnings targets for ShippingEasy are achieved over a two and one-half year period that began July 1, 2016. The two and one-half year period is divided into three phases consisting of the six months ended December 31, 2016 and each of the twelve months ending December 31, 2017 and 2018. The awards are subject to proration if at least 75% of the applicable target is achieved and are subject to forfeiture or acceleration based on changes in employment circumstances over the performance period. We recognize stock-based compensation expense associated with the performance-based inducement equity award ratably over each phase based on the estimated probable achievement of each financial target. The awards were a material inducement to the General Manager and Chief Technology Officer entering into employment agreements with Stamps.com in connection with the acquisition of ShippingEasy. In fiscal 2016, we determined the achievement of 100% of the earnings target for the six months ended December 31, 2016 was probable, therefore, we recognized approximately $1.9 million of stock-based compensation expense, representing 21,783 shares, for these inducement equity awards during the six months ended December 31, 2016. The $1.9 million of stock-based compensation expense recognized represents 100% of the total performance-based inducement equity award for the first phase. The equity award for the first phase was issued in the first quarter of 2017 with 15,113 shares distributed and 6,670 shares withheld to satisfy income tax obligations. In the first, second and third quarters of 2017, we determined the achievement of 100% of the earnings target for the twelve months ended December 31, 2017 is probable, therefore, we recognized approximately $1.2 million and $3.7 million of stock-based compensation expense for these inducement equity awards during the three and nine months ended September 30, 2017, respectively. The $3.7 million of stock-based compensation expense recognized in the nine months ended September 30, 2017 represents 75% of the total performance-based inducement equity award for the second phase.

We also issued inducement stock option grants for an aggregate of approximately 62,000 shares of Stamps.com common stock to 48 new employees in connection with our acquisition of ShippingEasy. Each option vests 25% on the one year anniversary of the July 1, 2016 grant date with the remaining 75% vesting in approximately equal monthly increments over the immediately succeeding thirty-six months provided that the option holder is still employed by the Company on the vesting dates. The stock options have a ten year term and an exercise price equal to the closing price of Stamps.com common stock on the grant date of July 1, 2016. The stock options were granted as inducements material to the new employees entering into employment with Stamps.com in connection with the acquisition of ShippingEasy. The related stock-based compensation expense we recognized in fiscal 2016 and for the three and nine months ended September 30, 2017 was not material.

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The total net purchase price for the ShippingEasy acquisition was allocated to the assets acquired and the liabilities assumed based on their fair values. The following table is the final allocation of the purchase price (in thousands, except years):

Fair Value Fair Value
Useful Life
(In Years)

Weighted
Average
Estimated
Useful Life
(In Years)

Trade accounts receivable $ 1,194
Other assets 76
Property and equipment 40
Goodwill 40,953
Identifiable intangible assets:
Trade name $ 1,304 8
Developed technology 6,948 5
Customer relationships 6,316 5
Non-compete agreements 1,111 3 to 5
Total identifiable intangible assets 15,679 5
Accrued expenses and other liabilities (707 )
Deferred revenue (185 )
Deferred tax liability (1,603 )
Total purchase price 55,447
Less: settlement of preexisting relationship (accounts receivable) 1,194
Purchase price, net of settlement $ 54, 253

Goodwill represented the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in the business combination and the potential acquisition related synergies. Such synergies include leveraging Stamps.com’s resources, personnel, expertise and capital to grow ShippingEasy’s revenue faster than it otherwise would have as a standalone company. The identified intangible assets consisted of trade names, developed technology, non-compete agreements and customer relationships. The estimated fair values of the trademark and developed technology were determined using the “relief from royalty” method. The estimated fair value of the non-compete agreements was determined using the “with and without” method. The estimated fair value of customer relationships was determined using the “excess earnings” method. The rate utilized to discount net cash flows to their present values was approximately 23% and was determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to the generation of future cash flows. Trademark, developed technology, non-compete and customer relationships are each amortized on a straight-line basis over their estimated useful lives. The amortization of acquired intangibles is approximately $761,000 per quarter for the remaining estimated useful lives. The goodwill recorded in this acquisition was not deductible for tax purposes.

3.	~~Commitments and Contingencies~~

~~Legal Proceedings~~

In the ordinary course of business, we are subject to various routine legal proceedings and claims incidental to our business, and we do not believe that these proceedings and claims would reasonably be expected to have a material adverse effect on our financial position, results of operations or cash flows.

Although management at present believes that the ultimate outcome of the various routine proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or other events could occur. An unfavorable outcome for an amount in excess of management’s present expectations may result in a material adverse impact on our business, results of operations, financial position, and overall trends.

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Commitments~~

The Company leases facilities pursuant to noncancelable operating lease agreements expiring through fiscal 2021. Rent expense is recognized on a straight-line basis over the lease term. Lease incentives are amortized over the lease term on a straight-line basis. Leasehold improvements are capitalized and amortized over the shorter of the useful life of the asset or the remaining term of the lease. Rent expense for the three and nine months ended September 30, 2017 was approximately $1.0 million and $2.8 million, respectively. Rent expense for the three and nine months ended September 30, 2016 was approximately $900,000 and $2.2 million, respectively.

The following table is a schedule of our significant future contractual obligations and commercial commitments (other than debt commitments), which consist of future minimum lease payment under operating leases as of September 30, 2017 (in thousands):

Twelve Month Period Ending September 30,
Operating
Lease Obligations

2018 $ 3,909
2019 1,625
2020 1,393
2021 1,097
2022 116
Thereafter —
Total $ 8,140

4.	~~Net Income per Share~~

~~The following table reconciles share amounts utilized to calculate basic and diluted net income per share (in thousands, except per share data):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
Net income $ 46,225 $ 18,672 $ 110,403 $ 46,201

Basic - weighted average common shares 17,073 17,218 16,969 17,319
Diluted effect of common stock equivalents 1,475 902 1,313 1,006
Diluted - weighted average common shares 18,548 18,120 18,282 18,325

Earnings per share:
Basic $ 2.71 $ 1.08 $ 6.51 $ 2.67
Diluted $ 2.49 $ 1.03 $ 6.04 $ 2.52

~~The calculation of dilutive shares excludes the effect of the following options that are considered anti-dilutive (in thousands):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
Anti-dilutive stock option shares 30 514 24 269

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

5.	~~Stock-Based Compensation~~

We account for share-based employee compensation plans under the fair value recognition and measurement provisions in accordance with applicable accounting standards, which require all share-based payments to employees, including grants of stock options and restricted stock units (RSUs), to be measured based on the grant date fair value of the awards, with the resulting expense generally recognized on a straight-line basis over the period during which the employee is required to perform service in exchange for the award.

~~As described in~~ ~~Note 1 – “Summary of Significant Accounting Policies,”~~ ~~we adopted ASU 2016-09, which among other items, provides an accounting policy election to~~ We account for forfeitures as they occur, rather than to account for them based on an estimate of expected forfeitures. We elected to account for forfeitures as they occur and therefore, share-based compensation expense for the three and nine months ended September 30, 2017 has been calculated based on actual forfeitures in our consolidated statements of income, rather than our previous approach which was net of estimated forfeitures. The net cumulative effect of this change did not have a material impact on the consolidated financial statements. Share-based compensation expense for the year ended December 31, 2016 was recorded net of estimated forfeitures, which were based on historical forfeitures and adjusted to reflect changes in facts and circumstances, if any.

occur.

We use the Black-Scholes-Merton option valuation model to estimate the fair value of share-based payment awards on the date of grant, which requires us to use a number of ~~complex~~ estimates and subjective assumptions, including stock price volatility, expected term, and risk-free interest ~~rates and projected employee stock option exercise behaviors.~~rates. In the case of options we grant, our assumption of expected volatility is based on the historical volatility of our stock price over the term equal to the expected life of the options. We base the risk-free interest rate on ~~U.S.~~US Treasury zero-coupon issues with a remaining term equal to the expected life of the options assumed at the date of grant. The estimated expected life represents the ~~weighted-average~~weighted average period the stock options are expected to remain outstanding, determined based on an analysis of historical exercise behavior.

Trademarks, Trade Names, and Other Intangible Assets (excluding Goodwill)

~~Compensation expense for employee stock options granted is generally recognized using the straight-line method over their respective vesting periods of up to five years. Starting~~Acquired trademarks, trade names, and other intangibles (excluding goodwill) include both amortizable and non-amortizable assets and are included in intangible assets, net in the ~~third quarter~~accompanying consolidated balance sheets. Intangible assets are carried at cost less accumulated amortization. Cost associated with internally developed intangible assets is typically expensed as incurred as research and development costs. Amortization of ~~fiscal 2016, our stock-based compensation expense included performance-based inducement equity awards relating~~amortizable intangible assets is calculated on a straight-line basis, which is consistent with the expected future cash flows.

Treasury Stock

During the three months ended March 31, 2021 and March 31, 2020, we repurchased approximately 136,000 shares and 80,000 shares for $27.0 million and $8.6 million, respectively.

Accounting Guidance Adopted in 2021

Income Taxes

In December 2019, the FASB issued ASU 2019-12, a standard which eliminates certain exceptions to the ~~ShippingEasy acquisition~~general principles of ASC Topic 740 Income Taxes. The guidance became effective for the Company on January 1, 2021. The adoption of the guidance did not have a material impact on the Company's consolidated financial statements.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounting Guidance Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued 2020-04, optional accounting guidance for a limited period of time to ease the potential burden in accounting for reference rate reform. The new standard provides expedients and exceptions to existing accounting requirements for contract modifications and hedge accounting related to transitioning from discontinued reference rates, such as the London Interbank Offered Rate (LIBOR), to alternative reference rates, if certain criteria are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. We are currently evaluating the impact of the transition from LIBOR to alternative reference interest rates on our Amended and Restated Credit Agreement, as described in Note 12 - "Debt", but do not expect a significant impact to our operating results, financial position or cash flows.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Commitments and Contingencies

Legal Proceedings

We are subject to various routine legal proceedings and claims incidental to our business, and we do not believe that these proceedings and claims would reasonably be expected to have a material adverse effect on our financial position, results of operations, or cash flows.

On February 28, 2019 and March 13, 2019, 2 ~~- “Acquisitions.”~~ ~~Stock-based compensation expense~~putative class action complaints were filed against us in the United States District Court for the Central District of California, Western Division. NaN of the 2 putative class actions was dismissed without prejudice, and in the other case, styled as Karinski v. Stamps.com, Inc. et al, Case 2:19-cv-01828 (the “Securities Class Action”), the Court appointed a lead plaintiff and approved lead plaintiff’s selection of lead counsel. Lead plaintiff filed a consolidated complaint in August 2019, purportedly on behalf of all those who purchased, or otherwise acquired, Stamps.com common stock between May 3, 2017 and May 8, 2019, alleging violations of the Securities Exchange Act of 1934 based on public disclosures that were purportedly rendered misleading based on certain uses of reseller rates. We filed a motion to dismiss in October 2019, and our motion to dismiss was granted in part and denied in part in January 2020. The Court granted plaintiff's motion for class certification on November 9, 2020, and the Court of Appeals granted our request to appeal that order on March 10, 2021. The parties are currently engaged in fact discovery with trial scheduled for March 2022. We believe that the case is without merit and intend to defend it vigorously. Due to the early stage of the case, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.

On May 16, 2019 and May 21, 2019, 2 purported shareholder derivative suits were filed in the United States District Court for the Central District of California, Western Division, alleging breaches of fiduciary duties by officers and/or directors, unjust enrichment, abuse of control, waste of corporate assets, and violations of the Securities Exchange Act of 1934, and seeking unspecified damages, attorneys' fees and costs. The 2 cases were consolidated as In re Stamps.com Stockholder Derivative Litigation, Case 2:19-cv-04272 and co-lead plaintiffs and co-lead counsel were appointed, and the case was subsequently transferred to the United States District Court for the District of Delaware. On February 3, 2021, the case was consolidated with Harvey v. Kenneth T. McBride, et al (described below). The defendants believe that the case is without merit and intend to defend it vigorously. Due to the early stage of the case, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.

On August 19, 2019, a purported shareholder derivative suit was filed against us in a case titled City of Cambridge Retirement System v. Kenneth T. McBride, et al, Case No. 2019-0658-AGB, in the Delaware Court of Chancery, alleging breaches of fiduciary duties by officers and/or directors, insider trading, waste of corporate assets, and unjust enrichment. We filed a motion to dismiss in October 2019, and our motion to dismiss was granted in part and denied in part in March 2021. The defendants believe that the case is without merit and intend to defend this case vigorously. Due to the early stage of the case, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.

On October 3, 2019, a purported shareholder derivative suit was filed against us in a case titled Harvey v. Kenneth T. McBride, et al, Case No. 1:19-cv-01861-CFC, in the United States District Court for the District of Delaware, alleging breaches of fiduciary duties by officers and/or directors, unjust enrichment, waste of corporate assets, and violations of the Securities Exchange Act of 1934. The Court had entered a stipulation to stay the derivative case pending the outcome of the derivative lawsuit pending in the Delaware Court of Chancery. On February 3, 2021, the Court lifted the stay and consolidated the case with In re Stamps.com Stockholder Derivative Litigation (described above), and vacated a prior order appointing lead counsel. The cases are consolidated as In re Stamps.com Stockholder Derivative Litigation, Case No. 1:19-cv-01861-CFC. The defendants believe that the case is without merit and intend to defend this case vigorously. Due to the early stage of the case, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.

The Company had 0t accrued any material amounts related to ~~the ShippingEasy performance-based inducement equity awards is equal to the grant date fair value~~any of the ~~common stock~~Company’s legal proceedings as of March 31, 2021 or December 31, 2020, respectively.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Although management at present believes that the ultimate outcome of the various proceedings, individually and ~~is recognized over~~in the ~~required performance period. Total compensation expense related~~aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends, legal proceedings are subject to ~~ShippingEasy’s performance-based equity awards during~~inherent uncertainties, and unfavorable rulings or other events could occur. An unfavorable outcome for an amount in excess of management's present expectations may result in a material adverse impact on our business, results of operations, financial position, and overall trends.

Commitments

Our significant contractual obligations and commercial commitments (other than debt commitments, which are summarized in Note 12 - "Debt") consist of operating lease obligations as of March 31, 2021. Please see Note 10 - “Leases” for additional information.

3. Net Income per Share

The following table reconciles share amounts utilized to calculate basic and diluted net income per share (in thousands, except per share data):


	Three Months Ended March 31,
	2021		2020
Net income	$	34,244	$	16,494

Basic - weighted average common shares	18,362		17,064
Dilutive effect of common stock equivalents	1,282		1,125
Diluted - weighted average common shares	19,644		18,189

Earnings per share:
Basic	$	1.86	$	0.97
Diluted	$	1.74	$	0.91

The calculation of dilutive shares excludes the ~~three and nine months ended September 30, 2017 was approximately $1.2 million and $3.7 million, respectively.~~effect of the following options that are considered anti-dilutive (in thousands):


	Three Months Ended March 31,
	2021	2020
Anti-dilutive stock options	449	1,527

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Stock-Based Compensation

The following table sets forth the stock-based compensation expense that we recognized for the periods indicated (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
	2017		2016		2017		2016			2021		2020
Stock-based compensation expense relating to:									Stock-based compensation expense relating to:
Stock options	$	11,065	$	8,525	$	32,923	$	23,960	Stock options	$	8,136	$	10,242
Employee stock purchases		269		297		746		795	Employee stock purchases	554		483
Total stock-based compensation expense	$	11,334	$	8,822	$	33,669	$	24,755	Total stock-based compensation expense	$	8,690	$	10,725

Stock-based compensation expense relating to:									Stock-based compensation expense relating to:
Cost of revenues	$	444	$	476	$	1,437	$	1,351	Cost of revenues	$	921	$	919
Sales and marketing		1,915		1,734		6,197		5,322	Sales and marketing	2,162		2,307
Research and development		2,337		1,916		7,054		4,696	Research and development	2,990		2,878
General and administrative		6,638		4,696		18,981		13,386	General and administrative	2,617		4,621
Total stock-based compensation expense	$	11,334	$	8,822	$	33,669	$	24,755	Total stock-based compensation expense	$	8,690	$	10,725

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~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The following are the weighted average assumptions used in the Black-Scholes-Merton option valuation model for stock options granted in the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016			2017			2016				2021		2020
Expected dividend yield		—			—			—			—		Expected dividend yield	0	%	0	%
Risk-free interest rate		1.5	%		1.0	%		1.5	%		1.0	%	Risk-free interest rate	0.2	%	1.3	%
Expected volatility		47.9	%		47.0	%		46.9	%		47.9	%	Expected volatility	89.6	%	82.4	%
Expected life (in years)		3.3			3.4			3.4			3.4		Expected life (in years)	3.3		3.3
Forfeiture rate		—			6.0	%		—			6.0	%

6.	~~Goodwill and Intangible Assets~~

5. Goodwill ~~was approximately $239.7 million~~and Intangible Assets

The following table summarizes goodwill as of ~~September 30, 2017 and~~ December 31, ~~2016, respectively.~~2020 and March 31, 2021 (in thousands):


	Stamps.com Segment		Metapack Segment		Total
Goodwill balance at December 31, 2020	$	241,984	$	146,769	$	388,753
Foreign currency translation	0		1,600		1,600
Goodwill balance at March 31, 2021	$	241,984	$	148,369	$	390,353

Beginning October 1, 2020, the Stamps.com segment includes operations in Atlanta, Georgia that were previously reported as part of the Metapack segment. All prior periods have been updated to conform to current year presentation of goodwill by segment.

We have amortizable and non-amortizable intangible assets consisting of trademarks, trade names, developed technology, non-compete agreements, customer relationships, and ~~other totaling approximately $125.4 million in~~other. The gross carrying amount as of ~~both September 30, 2017~~amortizable and non-amortizable intangible assets was $233.4 million at March 31, 2021 and $232.3 million at December 31, ~~2016.~~2020. Non-amortizable assets of $11.4 million as of both ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 consist primarily of the trade name relating to the Endicia acquisition.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes our amortizable intangible assets as of ~~September 30, 2017~~March 31, 2021 (in ~~thousands)~~thousands, except years):


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining weighted average amortization period (years)
Patents and others	$	8,195	$	8,195	$	0	0.0
Customer relationships	113,934		63,069		50,865		6.7
Technology	83,870		35,295		48,575		8.3
Non-compete	2,211		2,157		54		0.2
Trademarks and trade names	13,808		4,056		9,752		8.2
Total amortizable intangible assets at March 31, 2021	$	222,018	$	112,772	$	109,246	7.4

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Patents and Others $ 8,889 $ 8,809 $ 80
Customer Relationships 60,816 19,677 41,139
Technology 40,048 9,998 30,050
Non-Compete 2,211 1,154 1,057
Trademark 2,004 720 1,284
Total amortizable intangible assets at September 30, 2017 $ 113,968 $ 40,358 $ 73,610

The following table summarizes our amortizable intangible assets as of December 31, ~~2016~~2020 (in ~~thousands)~~thousands, except years):

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Patents and Others $ 8,889 $ 8,774 $ 115
Customer Relationships 60,816 12,199 48,617
Technology 40,048 6,100 33,948
Non-Compete 2,211 777 1,434
Trademark 2,004 479 1,525
Total amortizable intangible assets at December 31, 2016 $ 113,968 $ 28,329 $ 85,639

~~Table of Contents~~

~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining weighted average amortization period (years)
Patents and others	$	8,195	$	8,195	$	0	0.0
Customer relationships	113,398		59,762		53,636		7.0
Technology	83,427		33,248		50,179		8.5
Non-compete	2,211		2,104		107		0.5
Trademarks and trade names	13,689		3,746		9,943		8.4
Total amortizable intangible assets at December 31, 2020	$	220,920	$	107,055	$	113,865	7.7

We recorded amortization of intangible assets totaling approximately ~~$4.0 million and $12.0~~$5.5 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2021. We recorded amortization of intangible assets totaling approximately ~~$4.0 million and $10.5~~$5.5 million for the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~March 31, 2020. Amortization of intangible assets is included in general and administrative expense in the accompanying consolidated statements of ~~income.~~operations.

~~As of September 30, 2017, the remaining weighted average amortization period for our amortizable intangible assets is approximately 4.9 years.~~ Our estimated amortization expense for the next five years and thereafter is as follows (in thousands):

Twelve Month Period Ending September 30,
Estimated
Amortization
Expense

2018 $ 15,954
2019 15,623
2020 15,545
2021 14,421
2022 5,498
Thereafter 6,569
Total $ 73,610


Twelve Month Period Ending March 31,	Estimated Amortization Expense
2022	$	17,475
2023	10,525
2024	10,082
2025	8,993
2026	7,019
Thereafter	55,152
Total	$	109,246

7.	~~Income Taxes~~

Our income tax benefit was $11.4 million and $873,000 for the three and nine months ended September 30, 2017, respectively, which is primarily attributable to our pre-tax book income multiplied by an estimated annual effective tax rate and discrete tax benefits relating to exercises

Table of ~~options in the three and nine months ended September 30, 2017.~~ Contents

STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Income Taxes

Our income tax expense was ~~$12.1 million and $30.0~~$9.9 million for the three ~~and nine~~ months ended September 30, 2016, respectively, which is primarily attributable to our pre-tax income including our current tax expense consisting of federal alternative minimum tax and various state taxes and our deferredMarch 31, 2021. Our income tax expense was $7.1 million for the ~~utilization of net operating losses and other temporary differences. As described in~~ ~~Note 1- “Summary of Significant Accounting Policies”~~ we adopted the new accounting guidance that changes the reporting for certain aspects of share-based payments. One aspect of the guidance requires that the income tax effects of share-based awards be recognized in the income tax provision in the consolidated statements of income when the awards vest or are settled. Under the previous guidance, excess tax benefits and deficiencies were recognized in additional paid-in capital in the consolidated balance sheets when the awards vested or were settled. For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020. Income taxes expected at the amount of excess tax benefits recognized in the income tax provision was approximately $23.5 million and $41.8 million, respectively. For the three and nine months ended September 30, 2016, respectively, the amount of excess tax benefits recognized in additional paid-in capital was not material.

~~Our effective~~US federal statutory income tax rate ~~differs~~of 21 percent differ from the ~~statutory~~reported income tax ~~rate~~expense primarily as a result of permanent tax adjustments for non-deductible expenses, state taxes, and tax benefits from ~~stock options exercised and~~ research and development tax credits ~~as well as permanent tax adjustments~~and exercises of stock awards.

As of March 31, 2021 and December 31, 2020, we have recorded a valuation allowance of $2.6 million and $2.5 million, respectively, against certain state research and development credits for ~~nondeductible items, such as stock-based compensation and state taxes. We evaluated the appropriateness of our~~which we believe it is more likely than not that these deferred tax assets ~~and related valuation allowance in accordance with~~ ~~Income Taxes~~ ~~based on all available positive and negative evidence. As of September 30, 2017 and December 31, 2016, we do~~will not ~~have any valuation allowance against our deferred tax assets.~~be realized.

8.	~~Fair Value Measurements~~

7. Fair Value Measurements

Financial assets measured at fair value on a recurring basis are classified in one of the three ~~following~~ categories ~~which are~~ described below:

Level 1 - Valuations based on unadjusted quoted prices for identical assets in an active market

Level 2 - Valuations based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets

Level 3 - Valuations based on inputs that are unobservable and involve management judgment and our own assumptions about market participants and pricing

~~Table of Contents~~

~~STAMPS.COM INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The following tables summarize our financial assets measured at fair value on a recurring basis as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016, respectively~~2020 (in thousands):


			Fair Value Measurement at Reporting Date Using									Fair Value Measurement at Reporting Date Using
Description	September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Description	March 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash and cash equivalents	$	183,538	$	183,538	$	—	$	—	Cash and cash equivalents	$	567,471	$	567,471	$	0	$	0
Available-for-sale debt securities		—		—		—		��
Total	$	183,538	$	183,538	$	—	$	—	Total	$	567,471	$	567,471	$	0	$	0

Fair Value Measurement at Reporting Date Using

Description

December 31,
2016

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Cash and cash equivalents $ 106,932 $ 106,932 $ — $ —
Available-for-sale debt securities 1,511 — 1,511 —
Total $ 108,443 $ 106,932 $ 1,511 $ —


			Fair Value Measurement at Reporting Date Using
Description	December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	443,552	$	443,552	$	0	$	0
Total	$	443,552	$	443,552	$	0	$	0

~~The fair value~~

Table of our available-for-sale debt securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset classContents

STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Cash and ~~may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers.~~Cash Equivalents

9.	~~Cash, Cash Equivalents and Investments~~

Our cash equivalents ~~and investments consist~~consisted of money market ~~asset-backed securities and public corporate debt securities~~funds at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~2020. We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. ~~All of our short-term investments are classified as available for sale~~At March 31, 2021 and ~~are recorded at fair value using the specific identification method. Realized gains and losses are reflected in other income, net using the specific identification method. There was~~December 31, 2020, we had no material ~~unrealized or realized gain or loss with respect to~~investments.

The following tables summarize our ~~short-term investments during~~cash and cash equivalents as of March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents:
Cash	$	560,638	$	0	$	0	$	560,638
Money market	6,833		0		0		6,833
Cash and cash equivalents	$	567,471	$	0	$	0	$	567,471


	December 31, 2020
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents:
Cash	$	436,720	$	0	$	0	$	436,720
Money market	6,832		0		0		6,832
Cash and cash equivalents	$	443,552	$	0	$	0	$	443,552

9. Segment Information and Geographic Data

Segment Information

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the ~~nine months ended September 30, 2017. Unrealized gains~~chief operating decision maker (CODM) for purposes of allocating resources and ~~losses are included~~evaluating financial performance. The Company's Chairman and Chief Executive Officer has been identified as ~~a separate component of stockholders' equity. We do not intend to sell investments with an amortized cost basis exceeding fair value and it is not likely that we will be required to sell~~ the ~~investments before recovery~~CODM as defined by guidance regarding segment disclosures.

The Company’s reportable segments have been determined based on the distinct nature of their ~~amortized cost bases.~~operations and customer bases, and the financial information that is evaluated regularly by the CODM.

The Stamps.com segment derives revenue from external customers from offering mailing and multi-carrier shipping labels online and shipping software solutions to consumers, small businesses, e-commerce shippers, enterprise mailers, and high volume shippers. The Stamps.com reportable segment includes the results of brand names Stamps.com, Endicia, ShippingEasy, ShipEngine, ShipStation, and ShipWorks. Stamps.com's customers are primarily located in the US.

Beginning October 1, 2020, the Stamps.com segment includes operations in Atlanta, Georgia that were previously reported as part of the Metapack segment. Prior period segment revenues and income (loss) from operations have not been restated as the impact was not material.

The Metapack segment consists of the operations of Metapack which derives revenues from external customers from offering multi-carrier enterprise-level shipping software solutions to large e-commerce retailers and brands. Metapack's customers are primarily located in Europe.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(UNAUDITED)~~(Unaudited)

Revenues, cost of revenues, and operating expenses are generally directly attributed to our segments. Inter-segment revenues are not presented separately, as these amounts are immaterial. Our CODM does not evaluate operating segments using asset information, and therefore total segment assets are not presented.

The following ~~tables summarize~~table presents our ~~cash~~segment information and ~~cash equivalents and investments as~~includes a reconciliation of ~~September 30, 2017 and December 31, 2016~~income from operations to income before income taxes (in thousands):

September 30, 2017

Cost or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Cash and cash equivalents:
Cash $ 177,039 — — $ 177,039
Money market 6,492 9 (2 ) 6,499
Total cash and cash equivalents 183,531 9 (2 ) 183,538
Short-term investments:
Corporate bonds and asset backed securities — — — —
Total short-term investments — — — —
Cash and cash equivalents and short-term investments $ 183,531 9 (2 ) $ 183,538

December 31, 2016

Cost or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Cash and cash equivalents:
Cash $ 101,987 — — $ 101,987
Money market 4,945 — — 4,945
Total cash and cash equivalents 106,932 — — 106,932
Short-term investments:
Corporate bonds and asset backed securities 1,500 13 (2 ) 1,511
Total short-term investments 1,500 13 (2 ) 1,511
Cash and cash equivalents and short-term investments $ 108,432 13 (2 ) $ 108,443


	Three Months Ended March 31,
	2021		2020
Segment revenues
Stamps.com	$	172,610	$	137,545
Metapack	16,480		13,801
Total revenues	$	189,090	$	151,346

Segment income (loss) from operations
Stamps.com	$	44,482	28,227
Metapack	(161)		(4,056)
Total income from operations	$	44,321	$	24,171






Company's total segment income from operations	$	44,321	$	24,171


Foreign currency exchange gain (loss), net	(89)		(138)
Interest expense	(95)		(467)
Interest income and other income (loss), net	28		26
Income before income taxes	$	44,165	$	23,592

Stamps.com segment income from operations included depreciation and amortization expense of ~~September 30, 2017,~~$4.7 million and $4.9 million in the ~~amortized cost~~three months ended March 31, 2021 and ~~estimated fair value~~March 31, 2020, respectively. Metapack segment loss from operations included depreciation and amortization expense of $1.7 million and $1.7 million during the three months ended March 31, 2021 and March 31, 2020, respectively.

Stamps.com segment income from operations included share-based compensation expense of $7.0 million and $9.0 million in the three months ended March 31, 2021 and March 31, 2020, respectively. Metapack segment loss from operations included share-based compensation expense of $1.7 million and $1.7 million during the three months ended March 31, 2021 and March 31, 2020, respectively.

Geographic Data

No sales to an individual customer or country other than the US accounted for more than 10% of revenue for the three months ended March 31, 2021 or March 31, 2020.

The following table presents our revenues by geography, based on the billing addresses of our ~~marketable fixed-income securities due within one year and due after one year was immaterial.~~customers (in thousands, unaudited):


	Three Months Ended March 31,
	2021		2020
Revenues
United States	$	170,987	$	137,070
International	18,103		14,276
Total revenues	$	189,090	$	151,346

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Leases

The Company's material lease contracts are generally for corporate office space. The Company leases facilities pursuant to noncancelable operating lease agreements expiring through 2032.

Operating lease cost for the three months ended March 31, 2021 was approximately $2.6 million. Operating lease cost for the three months ended March 31, 2020 was approximately $1.2 million.

The following table is a schedule of maturities of operating lease liabilities as of March 31, 2021 (in thousands):


Twelve Month Period Ending March 31,	Operating Lease Obligations
2022	$	1,920
2023	9,637
2024	8,809
2025	6,724
2026	7,074
Thereafter	43,848
Total undiscounted cash flows	78,012
Less amount representing interest	(18,162)
Present value of lease liabilities	$	59,850

The table above reflects payments for noncancelable operating leases with initial or remaining terms of one year or more, net of cash reimbursements for tenant improvements which the Company reasonably expects to receive, as of March 31, 2021. The table above does not include obligations for leases that have not yet commenced and does not include lease payments that were not fixed at commencement or modification.

As of March 31, 2021, the weighted-average remaining lease term (in years) and discount rate related to the operating leases were as follows:

~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
		March 31, 2021
Weighted-average remaining lease term		9.8
Weighted-average discount rate		4.7	%

11. Accounts Payable and Other Current Liabilities

The following table summarizes our accounts payable and other current liabilities as of March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021		December 31, 2020
Accounts payable	78,654		$	69,912
Customer prepayments for postage and shipping labels	93,131		92,852
Income taxes payable	8,782		7,268
Payroll and related accruals	36,175		29,108
Short-term financing obligations	12,435		15,071
Other accruals	1,785		1,756
Accounts payable and other current liabilities	$	230,962	$	215,967

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. Debt

During the second quarter of 2020, the Company repaid the existing term loan balance outstanding under the Credit Agreement dated November 18, 2015. The optional prepayment satisfied the $47.5 million term loan balance, gross of debt issuance costs, in full.

Revolving Credit Facility

On June 29, 2020, we entered into a $130 million revolving credit facility under an amended and restated credit agreement (the “Amended and Restated Credit Agreement”) with a group of banks. Our Amended and Restated Credit Agreement matures on June 29, 2022 (the “Maturity Date”). The Amended and Restated Credit Agreement contains an option, subject to certain conditions, to arrange with existing lenders and/or new lenders to provide up to an aggregate of an additional $75 million in revolving loans. The Amended and Restated Credit Agreement is secured by substantially all of our assets.

In connection with entering into the Amended and Restated Credit Agreement, we incurred approximately $762,000 in creditor and third-party fees which were recorded as deferred expense and are being amortized as interest expense over the two year life of the Amended and Restated Credit Agreement.

There were 0 amounts drawn on the revolving credit facility as of March 31, 2021 or December 31, 2020. Because we have a letter of credit outstanding totaling approximately $60,000 relating to a facility lease, we have approximately $129.9 million of available and unused borrowings under the revolving credit facility as of March 31, 2021.

Borrowings under the Amended and Restated Credit Agreement are payable on the Maturity Date. The borrowings bear interest, at our option, at the base rate, as defined, plus an applicable margin or at LIBOR plus an applicable margin, in each case such margin will be between 1.25% and 3.00% and is determined by certain financial measures. We will also pay commitment fees on the average daily unused portion of the revolving credit facility, as defined, based upon certain financial measures through the Maturity Date in addition to other fees customary to a credit facility of this size and type.

We are subject to certain customary affirmative and negative covenants under our Amended and Restated Credit Agreement, including quarterly financial covenants such as a maximum Consolidated Total Leverage Ratio and a minimum Consolidated Interest Coverage Ratio, as defined therein. As of March 31, 2021, we were in compliance with the covenants of the Amended and Restated Credit Agreement.

The Amended and Restated Credit Agreement also includes negative covenants, subject to exceptions, restricting or limiting our ability to among other things, incur additional indebtedness, grant liens, repurchase stock, pay dividends and engage in certain investment, acquisition and disposition transactions. The Amended and Restated Credit Agreement imposes certain requirements in order for us to make any dividend payments. As of March 31, 2021, we were in compliance with these financial covenants.

Potential Impact of LIBOR Transition

The Chief Executive of the UK Financial Conduct Authority (the “FCA”), which regulates LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. That announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. Moreover, it is possible that LIBOR will be discontinued or modified prior to the end of 2021.

Under the terms of the Company's Amended and Restated Credit Agreement, in the event of the discontinuance of the LIBOR Rate, a mutually agreed-upon alternate benchmark rate will be established to replace the LIBOR Rate. The Company and the Administrative Agent (as defined in the Amended and Restated Credit Agreement) shall, in good faith, endeavor to establish an alternate benchmark rate that gives due consideration to prevailing market convention for determining a rate of interest for similar credit arrangements in the US at such time. The Company does not anticipate that the discontinuance or modification of the LIBOR Rate will materially impact its liquidity or financial position.

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STAMPS.COM INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. Subsequent Events

We are not aware of any material subsequent events or transactions that have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this ~~“Report”~~"Report") contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the ~~“Securities Act”~~"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act"). ~~These statements relate to expectations concerning matters that are not historical facts.~~ You can find many (but not all) of these statements by looking for words such as ~~“approximates,” “believes,” “expects,” “seeks,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “could,” ”should,” “will,” “may”~~"approximates," "believes," "expects," "anticipates," "estimates," "projects," "seeks," "intends," "plans," "could," "would," "may" or other similar expressions in this Report. Our forward-looking statements relate to future events or our future performance and include, but are not limited to, any statements that refer to future responses to and effects of COVID-19,statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans and the adequacy of our funding. Other statements contained in this Report that are not historical facts are also forward-looking statements.

We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of ~~1995 with respect to forward-looking statements.~~1995. We caution investors that any forward-looking statements presented in this Report, or that we may make orally or in writing from time to time, are based on beliefs and assumptions made by us and information ~~currently~~ available to us at the ~~respective times they are~~time made. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, ~~and~~ uncertainties and ~~other~~ factors that ~~may be~~are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, our actual future results ~~may~~can be expected to differ from our expectations, and those differences may be material. ~~We are not undertaking any obligation to update any forward-looking statements after the date of this Report.~~ Accordingly, investors should use caution in relying on forward-looking statements ~~which are based on known results and trends at the time they are made,~~ to anticipate future results or trends.

Please refer to the risk factors under ~~“Item~~"Item 1A. Risk ~~Factors”~~Factors" of our Form 10-K for the year ended December 31, ~~2016~~2020, as well as those described elsewhere in this Report (if any) and in our other public filings. Some important factors which could cause actual results to differ materially from those in the forward-looking statements include: (i) direct and indirect effects of the ongoing COVID-19 pandemic and any changes or end to it; (ii) our ability to monetize our customers’ transactions with carriers, including uncertainties regarding the duration, renegotiation and ultimate impact of existing and potential future arrangements with carriers and partners and our success in implementing our strategy over the long term, (iii) our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments, (iv) our ability to diversify our relationships with carriers, (v) the impact of foreign exchange fluctuations and geopolitical risks, and (vi) other important factors that are detailed in our filings with the Securities and Exchange Commission made from time to time. The risks included are not exhaustive, and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Without limiting the foregoing, the 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 us, our customers, our carrier and integration partners and the global economy, 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. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of the other risks we face. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Report.

Our registered trademarks include Stamps.com, Auctane, Endicia, Metapack, NetStamps, PhotoStamps, ShipEngine, ShippingEasy, ShipStation, ShipWorks, ~~ShippingEasy, NetStamps, PhotoStamps, PictureItPostage,~~ and the Stamps.com logo. This Report also references trade names and trademarks of other entities. References in this Report to ~~“we” “us” “our”~~"we" "us" "our" or ~~“Company”~~"Company" are references to Stamps.com Inc. and its subsidiaries.

Overview

Stamps.com® is a leading provider of Internet-based mailing and shipping solutions in the United ~~States. Under~~States (US) and Europe. Our portfolio of solutions is marketed under the ~~Stamps.com~~brand names Stamps.com®, Endicia®, Metapack®, ShippingEasy®, ShipEngine®, ShipStation®, and ~~Endicia® brands,~~ShipWorks®. Our software solutions allow customers ~~use our USPS only solutions~~ to mail and ship a variety of mail pieces and packages through the USPS. Customers using our solutions receive discounted postage rates compared to USPS.com and USPS retail locations on certain mail pieces such as First Class letters and domestic and international Priority Mail® and Priority Mail Express® packages. Stamps.com was the first ever USPS-approved PC Postage vendor to offer a software onlyprint mailing and shipping ~~solution in 1999. Endicia became a USPS-approved PC Postage vendor in 2000. Under the ShipStation®, ShipWorks® and~~ ~~ShippingEasy® brands, customers use our multi-carrier solutions to ship packages through~~labels for multiple carriers ~~such as~~around the ~~USPS, UPS, FedEx~~world through downloadable software, web-based user interfaces (UIs) and ~~others.~~application programming interfaces (APIs). Our solutions provide our customers with access to discounted carrier rates for select carriers, including the

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United States Postal Service (USPS) and United Parcel Service (UPS). Our solutions also offer customers improved operational efficiency and financial savings. Our customers primarily include ~~individuals,~~ small businesses, home offices, medium-size businesses, large enterprises, e-commerce merchants, large retailers and ~~warehouse shippers.~~high volume shippers including warehouses, fulfillment houses and omni-channel retailers.

Segment Information and Geographic Data

~~Table~~Our operations consist of ~~Contents~~

two segments: Stamps.com and Metapack. The Stamps.com segment includes the results of brand names Stamps.com, Endicia, ShippingEasy, ShipEngine, ShipStation and ShipWorks. Stamps.com's customers are primarily located in the US. The Metapack segment offers multi-carrier enterprise-level shipping software solutions to large e-commerce retailers and brands who are primarily located in Europe.

Mailing and Shipping Business References

When we refer to our ~~“mailing~~"mailing and shipping business,”" we are referring to our mailing and shipping products and services including our ~~USPS~~USPS® and multi-carrier mailing and shipping solutions, consolidation services, mailing and shipping integrations, mailing and shipping supplies stores and branded insurance offerings. We do not include our historical customized postage business when we refer to our mailing and shipping business. When we refer to our ~~“mailing~~"mailing and shipping revenue,”" we are referring to our service, product and insurance revenue generated by our mailing and shipping customers. We do not include our customized postage revenue generated by our customized postage business in our ~~“mailing~~"mailing and shipping revenue.

Services and Products

Mailing and Shipping Business

We offer the following mailing and shipping ~~products and~~ services to our customers under the Stamps.com, Endicia, Metapack, ShipEngine, ShippingEasy, ShipStation ~~ShipWorks~~ and ~~ShippingEasy~~ShipWorks brands:

~~USPS~~ Mailing ~~and Shipping~~ Solutions

~~Under the Stamps.com and Endicia brands, customers use~~As part of our ~~USPS-approved~~ mailing and shipping business, we offer our USPS-approved solutions to mail and ship a variety of domestic and international mail pieces and packages through the USPS. Customers can purchase and print postage 24 hours a day, seven days a week, through our software or web interfaces. Typically, customers fund an account balance prior to using our service. The customers then draw down their prepaid account balance as they print postage and repurchase postage as necessary.

Our USPS mailing ~~and shipping~~ solutions enable ~~users~~our customers to print ~~“electronic postage” directly onto envelopes, plain paper, or labels~~"electronic postage" using only a ~~standard~~ personal ~~computer,~~computing device, printer and Internet connection. Our solutions support a variety of USPS mail classes including First Class Mail®, ~~Priority Mail, Priority Mail Express,~~ Media Mail®, Parcel Select®, Priority Mail®, Priority Mail Express, and others. Customers can also add USPS Special Services to their mail pieces, ~~USPS Special Services~~ such as ~~USPS Tracking®, Signature Confirmation~~^TM~~, Registered Mail~~^TM, Certified ~~Mail~~^TMMail®, ~~Insured Mail, Return Receipt,~~ Collect on Delivery, Insured Mail, Registered Mail®, Restricted Delivery, Return Receipt, Signature Confirmation™ and ~~Restricted Delivery.~~USPS Tracking®. Our customers can print postage on (1) on NetStamps® ~~or DYMO Stamps®~~ labels, which can be used just like regular stamps, (2) ~~directly on~~ envelopes and postcards or on labels in a single step process that saves time and provides a professional look, (3) on plain ~~8.5”~~8.5" x ~~11”~~11" paper, ~~or on~~(4) special labels for packages, and ~~(4)~~(5) on integrated customs forms for international mail and packages.

Our USPS mailing ~~and shipping~~ solutions ~~incorporate address verification technology that verifies each destination address for mail or packages sent using~~also provide our ~~solutions against a database of all known addresses in the United States. Our mailing and shipping solutions are also integrated~~customers with common small business and productivity software applications such as word processing, contact and address management, and accounting and financial applications. Our shipping solutions feature integrations with hundreds of partners and carriers including popular shipping management products, shopping carts, online marketplaces and other e-commerce solutions.

We target different customer categories with service plans that provide various features and capabilities. We target smaller offices, home offices, and smaller online sellers that need a more basic set of mailing and shipping features. We target larger enterprises that need a richer set of mailing capabilities such as multiple-user functionality, automated Certified Mail forms, additional reference codes and higher allowable postage balances. We target shippers such as e-commerce merchants, online retailers, fulfillment houses, warehouses, and large retailers that need shipping specific features such as direct integration into the customer’s order databases, faster label printing speed and the abilityaccess to customize and save shipping profiles. We target large corporations with multiple geographic locations that need enhanced reporting and the ability for a central location, such as a corporate headquarters, to have greater visibility and control over postage expenditures across their distributed network of locations. We target large volume mailers that need features designed for presort mail, Certified Mail, and bulk address updating.

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Customers typically pay us a monthly subscription fee which varies depending on their service plan. In certain circumstances, customers may be on a plan where they do not owe us any monthly service fees. Under certain plans or arrangements, customers or integration partners pay a fee per transaction for shipping labels printed. We have arrangements with the USPS under which if a customer or integration partner prints a certain amount of domestic or international First Class, Priority Mail or Priority Mail Express shipping labels, the USPS compensates us directly. We may waive or refund our service fees for these or other customers. In addition, we also have service plans with lower monthly subscription fees which offer more limited functionality and are targeted at retaining customers who print a lower volume of postage. We offer service plans where customers are not charged a monthly fee but instead purchase labels for use as needed. We also offer high volume mailing products for a one time upfront fee. We also earn compensation by offering customers a discounted postage ~~rate that is provided to the customers by our integration partners, and we may earn other types of revenue share or other compensation from specific customers or partners.~~

rates on certain mail classes.

Multi-Carrier Shipping Solutions

As part of our mailing and shipping business, we offer our industry leading domestic and international multi-carrier e-commerce shipping solutions. Our multi-carrier solutions collectively enable our customers to print approved shipping labels for more than 350 regional, national and international carriers and integrate with more than 300 partners including shopping carts, marketplaces, e-commerce tools and various other software products. Our multi-carrier solutions also provide our customers with access to discounted carrier rates, including with USPS and UPS®.

Consolidation Services

As ~~a result~~part of our ~~acquisitions,~~mailing and shipping business, we offer ~~multi-carrier~~domestic and international shipping ~~solutions~~services through our ShipStation, ShipWorks and ShippingEasy brands. ShipStation, ShipWorks and ShippingEasy offer leading multi-carrier solutions for shippers including e-commerce merchants, online retailers, warehouses, fulfillment houses, large retailers and other types of shippers that use multiple carriers such as the USPS, UPS, FedEx and others.

~~ShippingEasy, which we acquired on July 1, 2016, offers web-based multi-carrier shipping solutions that allow online retailers and e-commerce merchants to organize, process, fulfill~~consolidator partners, who group packages by destination and ship ~~their orders quickly~~the packages directly or through partners. These services seek to take advantage of economies of scale by accessing lower carrier rates that apply to larger volume freight and ~~easily. ShippingEasy's solutions feature over 50 integrations~~are not otherwise accessible to smaller shipments, with ~~partners and carriers, including marketplaces, shopping carts and e-commerce platforms, allowing its customers to import and export fulfillment and tracking data in real time across all~~the goal of ~~their selling channels. ShippingEasy's solutions download orders from all selling channels and automatically map custom~~yielding lower shipping ~~preferences, rates and delivery options across all~~costs for our customers.

Table of its supported carriers. ShippingEasy's easy-to-use solutions also include complimentary access to ShippingEasy customer service shipping specialists helping merchants to streamline workflow and save on shipping costs.Contents

ShipWorks, which we acquired on August 29, 2014, offers software-based multi-carrier shipping solutions that target e-commerce merchants, online retailers, fulfillment houses and warehouses. ShipWorks offers simple, powerful and easy to use solutions for shippers. ShipWorks’ solutions feature over 100 integrations with partners and carriers, including marketplaces, shopping carts and e-commerce platforms. ShipWorks offers multi-carrier shipping options and features including importing orders from any marketplace or shopping cart, easily comparing shipping rates and services, sending email notifications to buyers, updating online order status, generating reports and many more.

ShipStation, which we acquired on June 10, 2014, offers web-based multi-carrier shipping solutions under the brand names ShipStation and Auctane that target e-commerce merchants, online retailers, fulfillment houses and warehouses. ShipStation’s solutions feature over 150 integrations with partners and carriers, including marketplaces, shopping carts and e-commerce platforms. ShipStation offers multi-carrier shipping options and automation features like custom hierarchical rules and product profiles that allow customers to easily and automatically optimize their shipping. Using ShipStation, an online retailer or e-commerce merchant can ship their orders from wherever they sell and however they ship.

~~Mailing and Shipping~~Back-End Integrations

As part of our mailing and shipping services, we offer our back-end integration solutions where we provide the electronic postage for transactions to partners who manage the front-end users. Our solutions integrate directly into the most popular e-commerce platforms, allowing web store managers to ~~completely~~ automate their order fulfillment process by processing, managing and shipping orders from virtually any e-commerce source through a single interface without manual data entry. Managers can retrieve order data and print ~~complete~~ shipping labels for all types of packages.

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Stamps.com had an integration partnership with Amazon.com that made Stamps.com domestic and international shipping labels for certain USPS package classes available to Amazon.com Marketplace users, which ended in the third quarter of 2017. The integration had allowed Marketplace users to automatically pay for postage using their Marketplace Payments account, set a default ship-from address so they would not have to type or write it for each shipment, and automatically populate the ship-to address on the label. Domestic and international mail classes were supported and Marketplace users could request carrier pickup from the USPS. A transaction fee per shipping label printed was charged to Marketplace users who were not Stamps.com subscription customers. We do not believe the termination of Stamps.com’s integration partnership with Amazon will have any material effect on our results.

We have an integration ~~partnership~~partnerships with the USPS where we provide electronic postage for mailing and shipping transactions generated by ~~Click-N-Ship Business Pro~~^TM ~~and~~certain USPS-branded programs. For example, we provide the electronic postage for Click-N-Ship®, a web-based service available at USPS.com that allows USPS customers to purchase and print shipping labels for certain domestic and international ~~Priority Mail and Priority Mail Express~~mail classes or packages at no additional mark-up over the cost of postage.

In addition, ShipStation, ShipWorks and ShippingEasy have hundreds of integrations with partners and carriers, including marketplaces, shopping carts and e-commerce platforms as part of their multi-carrier shipping solutions. Integrations with partners include Amazon, eBay, PayPal, Shopify, Bigcommerce, Magento, Volusion, ChannelAdvisor, Yahoo! Stores and many others. Carrier integrations include USPS, FedEx, UPS, DHL, Canada Post, UPS Canada, FedEx Canada and many others.

Mailing & Shipping Supplies ~~Stores~~

~~Stamps.com~~As part of our mailing and ~~Endicia’s~~shipping services, we offer mailing ~~& shipping~~and shipping-focused office supplies ~~stores (our “Supplies Stores”) are available~~ to our customers ~~from~~through our online supplies stores. Our supplies stores are available within our mailing and shipping solutions and sell a variety of products including NetStamps ~~labels, DYMO Stamp~~ labels, shipping labels, ~~other~~ mailing labels, ~~dedicated~~ postage printers ~~scales,~~ and other mailing and shipping-focused office supplies. Our Supplies Stores feature store catalogs, messaging regarding free or discounted shipping promotions, cross-selling product recommendations during the checkout process, product search capabilities and same-day shippingscales.

Branded Insurance

As part of ~~orders with expedited shipping options. Our multi-carrier solutions do not have~~our mailing and shipping ~~supplies stores as part of their solutions.~~

~~Branded Insurance~~

Weservices, we offer branded insurance for ~~USPS~~ packages to our customers ~~so that they may insure their mail or packages~~ in ~~a fully~~an integrated, online process that eliminates any trips to ~~the post office~~retail carrier locations or the need to complete any special forms. Our branded insurance, which is provided by third party insurance providers with which we contract, is offered by ~~all our~~certain brands including Stamps.com, Endicia, ShippingEasy, ShipEngine, ShipStation, ~~ShipWorks~~ and ~~ShippingEasy~~ShipWorks as part of their ~~USPS and multi-carrier~~ solutions. ~~Our branded insurance is provided by our insurance providers.~~

~~International~~

~~We offer International postage solutions through our subsidiaries to certain international posts including the French Post and Canadian Post.~~

Customized Postage

~~We offer~~Prior to the third quarter of 2020, we offered customized postage under the PhotoStamps® ~~and PictureItPostage®~~ brand ~~names.~~name. Customized postage is a patented form of USPS postage that ~~allows~~allowed consumers to turn digital photos, designs or images into valid USPS-approved postage. With ~~these products,~~this product, individuals or businesses ~~can~~could create customized USPS-approved postage using pictures of their children, pets, vacations, celebrations, business logos and more. Customized postage can be used as regular postage to send letters, postcards or packages. PhotoStamps ~~and PictureItPostage are~~was available from our ~~separately marketed websites at~~ www.photostamps.com website. As previously disclosed, in the second quarter of 2020, we received notification from the US Postal Service (USPS) that it was eliminating its customized postage program and ~~www.pictureitpostage.com, respectively.~~

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~~Acquisitions~~

~~ShippingEasy~~

Onalso revoking our authorization to offer products pursuant to that program effective June 16, 2016, we entered into a definitive agreement to acquire ShippingEasy for approximately $55.0 million. ShippingEasy, an Austin, Texas based company, offers web-based multi-carrier shipping solutions. On July 1, 2016, we completed our acquisition of ShippingEasy. The purchase price was subject to adjustments for changes in ShippingEasy’s net working capital. The net purchase price including adjustments for net working capital totaled approximately $55.4 million and was funded from current cash and investment balances.2020.

COVID-19

In ~~connection with~~March 2020, the ~~acquisition, we issued performance-based inducement equity awards to~~World Health Organization declared the ~~General Manager and Chief Technology Officer~~outbreak of ~~ShippingEasy. These inducement awards cover an aggregate of up to 43,567 common shares each to the General Manager and Chief Technology Officer if earnings targets for ShippingEasy are achieved over~~ a ~~two and one-half year period which began July 1, 2016. The awards are subject to proration if at least 75%~~novel strain of the ~~applicable target~~coronavirus (“COVID-19”) to be a pandemic. The pandemic is ~~achieved~~having widespread, rapidly evolving impacts on economies, financial markets, and business practices. We are ~~subject to forfeiture or acceleration based~~closely monitoring the impact of COVID-19 on changes in employment circumstances over the performance period. The awards were a material inducement to the General Manager and Chief Technology Officer entering into employment agreements with Stamps.com in connection with the acquisition.all aspects of our business.

In fiscal 2016, we determined the achievement of 100% of the earnings target for the six months ended December 31, 2016 was probable, therefore, we recognized approximately $1.9 million of stock-based compensation expense, representing 21,783 shares, for these inducement equity awards during the six months ended December 31, 2016. The $1.9 million of stock-based compensation expense recognized represents 100% of the total performance-based inducement equity award forSince the first ~~phase. The equity award for~~quarter of 2020, we have taken a number of precautionary measures to help minimize the ~~first phase was issued~~risk of exposure to our employees, including significantly revising travel policies and implementing temporary office closures as all employees are advised to work remotely where possible.

We experienced a net financial benefit in the first quarter of ~~2017 with 15,113 shares distributed~~2021 resulting from continued increased shipping volume and ~~6,670 shares withheld~~newly acquired customer subscription fees compared to ~~satisfy income tax obligations. In~~prior years which we believe is related to shelter in place orders. We cannot predict how long these circumstances will continue, and it should not be assumed that they will yield any net financial benefit to us beyond the first ~~second~~quarter of 2021. Further, it is not possible to determine the duration and ~~third quarters of 2017, we determined the achievement of 100%~~scope of the ~~earnings target for~~pandemic, including any recurrence, the ~~twelve months ended December 31, 2017 is probable, therefore, we recognized approximately $1.2 million~~actions taken in response to the pandemic, the scale and ~~$3.7 million~~rate of ~~stock-based compensation expense for these inducement equity awards during~~economic change from the ~~three~~pandemic, any ongoing effects on consumer demand and ~~nine months ended September 30, 2017, respectively. The $3.7 million of stock-based compensation expense recognized in the nine months ended September 30, 2017 represents 75%~~spending patterns, or other impacts of the ~~total performance-based inducement equity award for~~pandemic, and whether these or other currently unanticipated consequences of the ~~second phase.~~

~~We also issued inducement stock option grants for an aggregate~~pandemic are reasonably likely to materially affect our results of ~~62,000 shares of Stamps.com common stock~~operations. See "Risk Factors - Risks Related to ~~48 new employees in connection with our acquisition of ShippingEasy. The stock options were granted as inducements material to the new employees entering into employment with Stamps.com.~~

~~Please see~~ ~~Note 2 – “Acquisitions”~~ COVID-19" within Item 1A in our ~~Notes to Consolidated Financial Statements~~Annual Report on Form 10-K, filed with the SEC on February 26, 2021, for ~~further description.~~a discussion of some of the risks posed by the COVID-19 pandemic, and uncertainties we, our customers, business partners, and the national and global economies face as a result.

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Results of Operations

The results of our operations during the three and nine months ended September 30, 2017 include the operations of ShippingEasy. The results of our operations during the three months ended September 30, 2016 include the operations of ShippingEasy. The results of our operations during the six months ended June 30, 2016 do not include the operations of ShippingEasy. Please see ~~Note 2 – “Acquisitions”~~ in our Notes to Consolidated Financial Statements for further description. Accordingly, care should be used in comparing periods that include the operations of ShippingEasy with those that do not include such operations.

Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~March 31, 2020

Total revenue increased ~~24%~~25% to ~~$115.1~~$189.1 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$92.6~~$151.3 million in the three months ended ~~September 30, 2016. Total revenue increased 30% to $336.2 million in the nine months ended September 30, 2017 from $258.4 million in the nine months ended September 30, 2016.~~March 31, 2020. Mailing and shipping revenue, which includes service revenue, product revenue, and insurance revenue, was ~~$106.5~~$189.1 million in the three months ended ~~September 30, 2017,~~March 31, 2021, an increase of ~~21%~~28% from ~~$87.6~~$148.3 million in the three months ended ~~September 30, 2016~~March 31, 2020. The USPS eliminated its customized postage program and ~~was $320.9 million~~also revoked our authorization to offer products pursuant to that program effective June 16, 2020. Therefore, customized postage revenue decreased 100% to $0 in the ~~nine~~three months ended ~~September 30, 2017, an increase of 29%~~March 31, 2021 from ~~$248.3 million in the nine months ended September 30, 2016. Customized Postage revenue increased 75% to $8.6~~$3.1 million in the three months ended ~~September 30, 2017 from $4.9 million in~~March 31, 2020.

Revenue by Segment

The following table sets forth the revenue by segment for the three months ended ~~September 30, 2016~~March 31, 2021 and ~~was $15.3 million~~March 31, 2020 and the resulting percentage change (revenue in thousands):


	Three Months Ended March 31,
	2021		2020		% Change
Segment revenues
Stamps.com	$	172,610	$	137,545	25.5	%
Metapack	16,480		13,801		19.4	%
Total revenues	$	189,090	$	151,346	24.9	%

The majority of the ~~nine months ended September 30, 2017, an~~25% increase ~~of 53%~~in total revenue is due to a 25% increase in total revenue from ~~$10.0 million in~~ the ~~nine months ended September 30, 2016.~~Stamps.com operating segment.

23Consolidated Revenue

~~Table of Contents~~

The following table sets forth the breakdown of revenue for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~March 31, 2020 and the resulting percentage change (revenue in thousands):


	Three months ended September 30,							Nine months ended September 30,								Three Months Ended March 31,
	2017		2016		% Change			2017		2016		% Change				2021		2020		% Change
Revenues															Revenues
Service	$	97,529	$	78,871		23.7	%	$	292,634	$	220,567		32.7	%	Service	$	179,020	$	139,136	28.7	%
Product		4,824		4,703		2.6	%		15,301		15,109		1.3	%	Product	5,513		5,956		(7.4)	%
Insurance		4,099		4,050		1.2	%		12,932		12,643		2.3	%	Insurance	4,557		3,180		43.3	%
Mailing and shipping revenue	$	106,452	$	87,624		21.5	%	$	320,867	$	248,319		29.2	%	Mailing and shipping revenue	189,090		148,272		27.5	%
Customized postage	$	8,588	$	4,912		74.8	%	$	15,306	$	10,016		52.8	%	Customized postage	—		3,074		(100.0)	%
Other		22		23		(4.3	)%		69		74		(6.8	)%

Total revenues	$	115,062	$	92,559		24.3	%	$	336,242	$	258,409		30.1	%	Total revenues	$	189,090	$	151,346	24.9	%

We define “paid customers” for the quarter as ones from whom we successfully collected service fees or otherwise earned revenue at least once during that quarter, and we define average monthly revenue per paid customer (ARPU) as one-third of quarterly mailing and shipping revenue divided by paid customers. We define lost paid customers (Lost Paid Customers) as customers from whom we successfully collected service fees or otherwise earned revenue at least once during the previous quarter but not during the current quarter, less recaptured paid customers. We define monthly paid customer cancellation rate as a fraction, the numerator of which is the quotient of Lost Paid Customers in a quarter divided by the sum of paid customers in the prior quarter and new paid customers in the current quarter, and the denominator of which is 3 months.

The following table sets forth the number of paid customers in the period for our mailing and shipping business (in thousands):

Year
First
Quarter

Second
Quarter

Third
Quarter

2017 722 738 736
2016 649 646 648


Year						First Quarter
2021						991
2020						777

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The following table sets forth the ~~growth~~change in paid customers and ~~average monthly revenue per paid customer~~ARPU for our mailing and shipping business (in thousands except ~~average quarterly revenue per paid customer~~ARPU and percentage):


	Three months ended September 30,								Three Months Ended March 31,
	2017		2016		% Change				2021		2020		% Change
Paid customers for the quarter		736		648		13.6	%	Paid customers for the quarter	991		777		27.5	%
Average monthly revenue per paid customer	$	48.23	$	45.05		7.1	%
ARPU								ARPU	$	63.58	$	63.60	—	%
Mailing and shipping revenue	$	106,452	$	87,624		21.5	%	Mailing and shipping revenue	$	189,090	$	148,272	27.5	%

The number of paid customers increased by 27.5% in the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily as a result of our customer acquisition efforts which we believe were positively impacted by shelter in place orders.

~~Table~~Our ARPU in the three months ended March 31, 2021 remained consistent with ARPU in the three months ended March 31, 2020. The relative consistency of ~~Contents~~

~~The~~ARPU was due to an increase in ~~paid~~revenue among our shipping customers, ~~is primarily the result of increased sales and marketing spend and better performance in our marketing programs.~~

~~The increase in our average quarterly revenue per paid customer was primarily the result of the~~offset by disproportionate growth in the number of our mailing customers, who generally have much lower ARPUs than our shipping ~~business where we have the ability to better monetize postage volume as compared to monthly flat rate subscription fees.~~customers.

Revenue by Product

The following table shows ~~our~~the components of ~~revenue~~our revenues and their respective percentages of our total revenue for the periods indicated (in thousands except percentage):


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016			2017			2016				2021			2020
Revenues													Revenues
Service	$	97,529		$	78,871		$	292,634		$	220,567		Service	$	179,020		$	139,136
Product		4,824			4,703			15,301			15,109		Product	5,513			5,956
Insurance		4,099			4,050			12,932			12,643		Insurance	4,557			3,180
Customized postage		8,588			4,912			15,306			10,016		Customized postage	—			3,074
Other		22			23			69			74

Total revenues	$	115,062		$	92,559		$	336,242		$	258,409		Total revenues	$	189,090		$	151,346
Revenue as a percentage of total revenues													Revenue as a percentage of total revenues
Service		84.8	%		85.2	%		87.0	%		85.4	%	Service	94.7		%	91.9		%
Product		4.2	%		5.1	%		4.6	%		5.8	%	Product	2.9		%	4.0		%
Insurance		3.5	%		4.4	%		3.8	%		4.9	%	Insurance	2.4		%	2.1		%
Customized postage		7.5	%		5.3	%		4.6	%		3.9	%	Customized postage	—		%	2.0		%
Other		0.0	%		0.0	%		0.0	%		0.0	%

Total revenue		100.0	%		100.0	%		100.0	%		100.0	%	Total revenue	100.0		%	100.0		%

Our revenue is derived primarily from five sources: (1) service and transaction related revenues from our ~~USPS~~ mailing ~~and shipping~~ services, our multi-carrier shipping services, and our mailing and shipping integrations; (2) product revenue from the direct sale of consumables and supplies through our ~~Supplies Stores;~~supplies stores; (3) package insurance revenue from our branded insurance offerings; (4) customized postage revenue from the sale of ~~PhotoStamps and PictureItPostage~~customized postage labels; and (5) other revenue, consisting of advertising revenue derived from advertising programs with our existing customers. Other revenue was not material to our consolidated financial statements in the three months ended March 31, 2021 and March 31, 2020.

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Service revenue is recognized over time for each month that customers have access to our platform or at a point in time when assets are transferred to the customer. We earn service revenue from our mailing and shipping operations in several different ways: (1) customers may pay us a monthly fee, based on a subscription plan which may be waived or refunded for certain ~~customers;~~customers, for which we provide them access to our platform, in which case revenue is earned over the period of time that the customers have access to the platform which is typically month-to-month; (2) we may be compensated directly by our carriers for shipping labels printed that meet certain requirements, in which case revenue is earned over time, which is typically in the ~~USPS for certain qualifying customers under our USPS partnership;~~same month that the relevant labels are printed; (3) we may earn ~~transaction related~~ revenue ~~based on~~from customers ~~purchasing~~when they purchase postage, print shipping labels or ~~printing shipping labels;~~perform other transactions using our solutions, in which case revenue is earned at the point in time we transfer an asset to the customer and have a present right of payment for the asset transferred; (4) we may earn ~~compensation by offering customers~~revenue that may take the form of some or all of the spread between the rate a ~~discounted postage~~customer pays and the rate ~~that is provided to~~ the ~~customers~~carrier or integration partner receives, either charged directly or paid by our ~~integration partners;~~partners, in which case revenue is earned at a point in time, which is typically when the customer purchases postage or prints a shipping label; and (5) we may earn other types of revenue shares or other compensation from specific customers that have access to our platform or through integration ~~partners.~~partners, in which case revenue is recognized at a point in time, which is when we have fulfilled our performance obligations.

In the case of monthly fees based on subscription plans, the Company recognizes a reduction of revenue in the period for which a waiver is granted or when a refund is processed, which is typically the same period in which the associated subscription revenue is recognized or, in the case of refunds, could be a later period. Waivers and refunds were not material to the consolidated financial statements in the three months ended March 31, 2021 or March 31, 2020, respectively.

Customers may purchase delivery services from carriers through our mailing and shipping solutions. When funds are transferred directly from customers to the carrier, these funds are not recognized as revenue. We also provide mailing and shipping services for which the cost of postage or delivery is included in the cost of the service and, therefore, is recognized as service revenue.

Service revenue increased ~~24%~~29% to ~~$97.5~~$179.0 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$78.9~~$139.1 million in the three months ended ~~September 30, 2016 and increased 33% to $292.6 million in the nine months ended September 30, 2017 from $220.6 million in the nine months ended September 30, 2016.~~March 31, 2020. The increase in service revenue during the three months ended ~~September 30, 2017 consisted of a 14% increase in~~March 31, 2021 was driven by the ~~number of our average paid customers and a 9% increase~~growth in our ~~average service revenue per paid customer. The increase in~~shipping business where we have the ~~number~~ability to better monetize shipping volume as compared to monthly flat rate subscription fees, a portion of ~~our paid customers was attributable~~which we believe is due to the ~~factors described~~impact of increased shipping volumes related to shelter in ~~the previous section. The increase~~place orders, in ~~our average service revenue per paid customer was attributable~~addition to (1) the factors that resulted in an increase in the average total mailing and shipping revenue per paid customer described in the previous section and (2) the renewal of two of our agreements with the USPS with improved economics.increased recurring monthly subscription revenues from newly acquired customers.

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Product revenue ~~increased 3%~~decreased 7% to ~~$4.8~~$5.5 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$4.7~~$6.0 million in the three months ended ~~September 30, 2016 and increased 1% to $15.3 million in the nine months ended September 30, 2017 from $15.1 million in the nine months ended September 30, 2016.~~March 31, 2020. Product revenue is primarily driven by ~~labels,~~label sales, such as NetStamps, ~~and DYMO Stamps,~~ which are used for mailing. ~~As our growth in postage has been driven more by shipping than mailing over the recent years, our year-to-date growth~~The decrease in product revenue ~~has been lower than our growth~~ in ~~total revenue.~~the three months ended March 31, 2021 was not material to the consolidated financial statements.

Insurance revenue ~~was $4.1~~increased 43% to $4.6 million in the three months ended ~~September 30, 2017, which was consistent with the three months ended September 30, 2016. Insurance revenue increased 2% to $12.9 million in the nine months ended September 30, 2017~~March 31, 2021 from $12.6 million in the nine months ended September 30, 2016. The growth in insurance revenue is less than the growth in service revenue primarily due to the increase in high volume shipper customers. High volume shipper customers often self-insure, so while the high volume shipping business results in higher service fee revenue, it may not result in higher insurance revenue.

~~Customized postage revenue increased 75% to $8.6~~$3.2 million in the three months ended ~~September 30, 2017 from $4.9 million~~March 31, 2020. The increase in insurance revenue in the three months ended ~~September 30, 2016 and increased 53%~~March 31, 2021 was not material to ~~$15.3 million~~the consolidated financial statements.

There was no customized postage revenue in the ~~nine~~three months ended ~~September 30, 2017 from $10.0 million in~~March 31, 2021 due to the ~~nine months ended September 30, 2016.~~elimination of the program by the United States Postal Service effective June 16, 2020. The ~~increase was primarily attributable to increases in high volume customer orders. High volume order sales are unpredictable and vary from quarter to quarter.~~Company does not expect material customized postage revenue or cost of revenue after June 2020.

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Cost of Revenue

The following table shows cost of revenues and cost of revenues as a percentage of associated revenue for the periods indicated (in thousands except percentage):


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016			2017			2016				2021			2020
Cost of revenues													Cost of revenues
Service	$	11,882		$	9,903		$	37,284		$	28,054		Service	$	41,375		$	36,527
Product		1,535			1,579			4,930			5,019		Product	1,848			1,738
Insurance		966			1,291			3,547			3,920
Customized postage		7,151			3,954			12,600			8,076		Customized postage	—			2,115
Total cost of revenues	$	21,534		$	16,727		$	58,361		$	45,069		Total cost of revenues	$	43,223		$	40,380
Cost as percentage of associated revenue													Cost as percentage of associated revenue
Service		12.2	%		12.6	%		12.7	%		12.7	%	Service	23.1		%	26.3		%
Product		31.8	%		33.6	%		32.2	%		33.2	%	Product	33.5		%	29.2		%
Insurance		23.6	%		31.9	%		27.4	%		31.0	%
Customized postage		83.3	%		80.5	%		82.3	%		80.6	%	Customized postage	—		%	68.8		%
Total cost as a percentage of total revenues		18.7	%		18.1	%		17.4	%		17.4	%	Total cost as a percentage of total revenues	22.9		%	26.7		%

Cost of service revenue principally consists of the cost of customer service, certain promotional expenses, system operating costs, credit card processing fees, vendor costs and expenses, and customer misprints that do not qualify for reimbursement from the USPS. Cost of product revenue principally consists of the cost of products sold through our ~~Supplies Stores~~supplies stores and the related costs of shipping and handling. ~~The cost of insurance revenue principally consists of parcel insurance offering costs through our third party insurance providers.~~ Cost of customized postage revenue principally ~~consists~~consisted of the face value of postage, customer service, image review costs, and printing and fulfillment costs.

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Cost of service revenue increased ~~20%~~13% to ~~$11.9~~$41.4 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$9.9~~$36.5 million in the three months ended ~~September 30, 2016 and increased 33% to $37.3 million in the nine months ended September 30, 2017 from $28.1 million in the nine months ended September 30, 2016.~~March 31, 2020. The increase ~~during~~in cost of service revenue in the three months ended ~~September 30, 2017~~March 31, 2021 was primarily attributable to higher credit card processing fees, which increased by $2.0 million, directly related to our higher revenue. The increase during the nine months ended September 30, 2017 was primarily attributable to (1) higher credit card processing fees, which increased by $5.8 million, directly related to our higher revenue; (2) highersystem operating and customer service costs ~~which increased by $1.9 million,~~ to support our growing ~~customer base; and (3) higher system operating costs, which increased by $1.4 million, to support our growing~~ business. ~~Promotional expenses were not material in the three or nine months ended September 30, 2017 and 2016.~~

Cost of service revenue as a percent of service revenue ~~was 12%~~decreased to 23% in the three months ended ~~September 30, 2017 and 13%~~March 31, 2021 from 26% in the three months ended ~~September 30, 2016. Cost~~March 31, 2020. The decrease in cost of service revenue as a percent of service revenue ~~was 13%~~ in the ~~nine~~three months ended ~~September 30, 2017, which~~March 31, 2021 was ~~consistent with~~due to the ~~nine~~increase in service revenue as described above.

Cost of product revenue increased 6% to $1.8 million in the three months ended ~~September 30, 2016.~~

~~Cost~~March 31, 2021 from $1.7 million in the three months ended March 31, 2020. The increase in cost of product revenue in the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 was ~~consistent with~~not material to the ~~cost of product revenue in three and nine months ended September 30, 2016, respectively.~~ consolidated financial statements.

Cost of product revenue as a percent of product revenue ~~was 32% in the three months ended September 30, 2017 and~~increased to 34% in the three months ended ~~September 30, 2016. Cost~~March 31, 2021 from 29% in the three months ended March 31, 2020. The increase in cost of product revenue as a percent of product revenue ~~was 32%~~ in the ~~nine~~three months ended ~~September 30, 2017 and 33% in~~March 31, 2021 was not material to the ~~nine~~consolidated financial statements.

For the three months ended ~~September 30, 2016.~~March 31, 2021, we had no customized postage revenue and no cost of customized postage revenue for the reason described above.

Income (Loss) from Operations by Segment

The following table sets forth income (loss) from operations and the resulting percentage change by segment for the three months ended March 31, 2021 and March 31, 2020 (in thousands, except percentage):


	Three Months Ended March 31,
	2021		2020		% Change
Segment income (loss) from operations
Stamps.com	$	44,482	$	28,227	57.6	%
Metapack	(161)		(4,056)		96.0	%
Total income from operations	$	44,321	$	24,171	83.4	%

~~Cost~~

Table of ~~insurance revenue decreased 25%~~Contents

Our Stamps.com segment income from operations increased by 58% to ~~$1.0~~$44.5 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$1.3~~$28.2 million in the three months ended ~~September 30, 2016 and decreased 10% to $3.5 million~~March 31, 2020. The increase in ~~the nine months ended September 30, 2017~~our segment income from ~~$3.9 million in the nine months ended September 30, 2016. The decrease was primarily attributable to lower cost as a result of a renegotiated contract.~~

~~Cost of insurance revenue as a percent of insurance revenue was 24% in~~operations for the three months ended ~~September 30, 2017 and 32%~~March 31, 2021 was primarily due to the 25% increase in total revenue from the Stamps.com operating segment, partially offset by the following items described further in the ~~three months ended September 30, 2016. Cost~~preceding or following sections: (a) the increase in cost of ~~insurance~~service revenue ~~as a percent of insurance revenue was 27%~~primarily attributable to higher system operating and customer service costs to support our growing business; (b) the increase in discretionary and sales volume-based partner marketing spend; (c) the ~~nine months ended September 30, 2017~~increase in research and ~~31%~~development headcount-related expenses including stock-based compensation; and (d) the increase in ~~the nine months ended September 30, 2016. The decrease is the combination of~~sales and marketing headcount-related expenses including stock-based compensation.

Our Metapack segment loss from operations decreased ~~costs of insurance revenue and increased insurance revenue.~~

~~Cost of customized postage revenue increased 81%~~ to ~~$7.2~~$0.2 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$4.0~~$4.1 million in the three months ended ~~September 30, 2016 and increased 56% to $12.6 million~~March 31, 2020. The change in ~~the nine months ended September 30, 2017~~Metapack segment loss from $8.1 million in the nine months ended September 30, 2016. The increase in cost of customized postage revenue during the three and nine months ended September 30, 2017 is primarily due to the increase in our customized postage revenue. Cost of customized postage revenue as a percent of customized postage revenue was 83%operations in the three months ended ~~September 30, 2017 and 81%~~March 31, 2021 was primarily due to the 19.4% increase in total revenue from the Metapack operating segment for the three months ended September 30, 2016. Cost of customized postage revenue as a percent of customized postage revenue was 82% in the nine months ended September 30, 2017 and 81% in the nine months ended September 30, 2016. The increase, both on an absolute and as a percentage of customized revenue,March 31, 2021 which was primarily attributable to the ~~result~~growth in our shipping business, a portion of which we believe is due to the ~~increase~~impact of increased shipping volumes related to shelter in ~~high volume orders which have a lower profit margin compared to website sales.~~place orders.

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Consolidated Operating Expenses

The following table outlines the components of our operating expense and their respective percentages of total revenues for the periods indicated (in thousands except ~~percentage)~~percentages):


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016			2017			2016				2021			2020
Operating expenses:													Operating expenses:
Sales and marketing	$	20,588		$	18,229		$	66,018		$	59,708		Sales and marketing	$	43,866		$	37,004
Research and development		12,037			9,111			34,187			25,579		Research and development	28,510			21,323
General and administrative		25,243			16,901			65,676			49,276		General and administrative	29,170			28,468
Total operating expenses	$	57,868		$	44,241		$	165,881		$	134,563		Total operating expenses	$	101,546		$	86,795
Operating expenses as a percent of total revenues:													Operating expenses as a percent of total revenues:
Sales and marketing		17.9	%		19.7	%		19.6	%		23.1	%	Sales and marketing	23.2		%	24.4		%
Research and development		10.5	%		9.8	%		10.2	%		9.9	%	Research and development	15.1		%	14.1		%
General and administrative		21.9	%		18.3	%		19.5	%		19.1	%	General and administrative	15.4		%	18.8		%
Total operating expenses as a percentage of Total revenues		50.3	%		47.8	%		49.3	%		52.1	%
Total operating expenses as a percentage of total revenues													Total operating expenses as a percentage of total revenues	53.7		%	57.3		%

Sales and Marketing

Sales and marketing expense principally consists of spending to acquire new customers and compensation and related expenses for personnel engaged in sales, marketing, and business development activities. Our sales and marketing programs include direct sales, customer referral programs, customer re-marketing efforts, direct mail, online advertising, partnerships, telemarketing, and traditional advertising.

Sales and marketing expense increased ~~13%~~19% to ~~$20.6~~$43.9 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$18.2~~$37.0 million in the three months ended ~~September 30, 2016 and increased 11% to $66.0 million in the nine months ended September 30, 2017 from $59.7 million in the nine months ended September 30, 2016.~~March 31, 2020. The increase during the three months ended ~~September 30, 2017~~March 31, 2021 was primarily attributable to ana $4.0 million increase in discretionary and sales volume-based partner marketing spend and a $2.6 million net increase in headcount-related expenses including stock-based compensation of $1.2 million and an increase in discretionary marketing spending of $0.8 million. The increase during the nine months ended September 30, 2017 was primarily attributable to an increase in discretionary marketing spending of $3.9 million and an increase in headcount-related expenses including stock-based compensation of $2.2 million. The increase in headcount-related expenses was due to the issuance of stock options to additional employees as part of the ShippingEasy acquisition, as well as the increased number of employees in the rest of the Company. Please see ~~Note 2 – “Acquisitions”~~ ~~in our Notes to Consolidated Financial Statements for further description of the ShippingEasy acquisition.~~compensation.

Sales and marketing expense as a percent of total revenue ~~was 18%~~decreased to 23% in the three months ended ~~September 30, 2017 which was down compared to 20%~~March 31, 2021 from 24% in the three months ended ~~September 30, 2016. Sales~~March 31, 2020. The decrease in sales and marketing expense as a percent of total revenue was 20% in the nine months ended September 30, 2017, which was down compared to 23% in the nine months ended September 30, 2016. The decline during both the three and nine months ended September 30, 2017 was primarily attributable to ~~our ability to leverage our~~increased total revenue in excess of increased sales and marketing ~~spend, which is expensed as incurred relative to the year-over-year growth in our average monthly revenue per paid customer.~~expense.

Research and Development

Research and development expense principally consists of compensation for personnel involved in the development of our services, depreciation of equipment and software, and expenditures for consulting services and third party software.

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Research and development expense increased ~~32%~~34% to ~~$12.0~~$28.5 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$9.1~~$21.3 million in the three months ended ~~September 30, 2016 and increased 34% to $34.2 million in the nine months ended September 30, 2017 from $25.6 million in the nine months ended September 30, 2016.~~March 31, 2020. The increase during the three months ended ~~September 30, 2017~~March 31, 2021 was primarily attributable to ~~an increase in headcount-related expense including stock-based compensation of $2.0~~a $3.9 million ~~and an increase in facilities expense of $0.2 million. The increase during the nine months ended September 30, 2017 was primarily due to an~~net increase in headcount-related expenses including stock-based compensation with the majority of ~~$6.6 million~~the remaining increase due to increases in consulting services and ~~an increase in facilities expense of $0.8 million.~~third party software expense. The increases in headcount-related expenses were ~~due to increased headcount resulting from the ShippingEasy acquisition as well as increased headcount in the rest of the Company~~incurred to support our expanded product offerings and technology infrastructure investments. ~~The increase in facilities expense was associated with the increase in headcount.~~

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Research and development expense as a percent of total revenue ~~during~~increased to 15% in the three ~~and nine~~ months ended ~~September 30, 2017 and 2016~~March 31, 2021 from 14% in the three months ended March 31, 2020. The increase in R&D expense as a percent of total revenue was ~~10%.~~primarily due to the increase in headcount-related expenses.

General and Administrative

General and administrative expense principally consists of compensation and related costs for executive and administrative ~~personnel,~~personnel; fees for legal and other professional ~~services,~~services; depreciation of equipment, software, and building used for general corporate ~~purposes~~purposes; and amortization of intangible assets.

General and administrative expense increased ~~49%~~2% to ~~$25.2~~$29.2 million in the three months ended ~~September 30, 2017~~March 31, 2021 from ~~$16.9~~$28.5 million in the three months ended ~~September 30, 2016 and increased 33% to $65.7 million in the nine months ended September 30, 2017 from $49.3 million in the nine months ended September 30, 2016.~~March 31, 2020. The ~~increase~~change during the three months ended ~~September 30, 2017~~March 31, 2021 was primarily attributable to: (1) $6.0 million of executive consulting expense; and (2) an increase in headcount-related expense including stock-based compensation expense of $3.4 million; partially offset by (3) $1.9 million of one-time insurance proceeds relating to a prior legal settlement. The increase during the nine months ended September 30, 2017 was primarily attributable to: (1) an increase in headcount-related expense including stock-based compensation of $10.5 million; (2) $6.0 million of executive consulting expense; and (3) a $1.4 million increase in intangible amortization expense; partially offset by (4) $1.9 million of one-time insurance proceeds relating to a prior legal settlement; and (5) a $1.1 million decrease in professional expenses. The increases in headcount-related and stock-based compensation expenses were due to both the addition of headcount resulting from our ShippingEasy acquisition as well as increased headcount at the rest of the Company to support our growth in the business and corporate infrastructure investments. The increase in intangible amortization expense was due to our ShippingEasy acquisition. Professional fee expense was higher during the three and nine months ended September 30, 2016 comparednot material to the ~~same periods in 2017 due to acquisition related costs. We did not have any acquisition related costs in 2017.~~consolidated financial statements.

General and administrative expense as a percent of total revenue ~~was 22%~~decreased to 15% in the three months ended ~~September 30, 2017 and was 18%~~March 31, 2021 from 19% in the three months ended ~~September 30, 2016. General and administrative expense as a percent of total revenue was 20% in the nine months ended September 30, 2017 and was 19% in the nine months ended September 30, 2016.~~March 31, 2020. The ~~increases~~decrease in general and administrative expense as a percent of total revenue was primarily attributable to increased revenue in excess of increased general and administrative expense.

Foreign Currency Exchange Gain (Loss), Net

Foreign currency transaction gains and losses are included in foreign currency exchange gain (loss), net. The foreign currency exchange losses, net of $89,000 in the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and $138,000 in the three months ended March 31, 2020 were ~~attributable~~not material to the ~~factors described in the previous paragraph.~~

consolidated financial statements.

Interest Income and Other Income

Interest income and other income primarily consists of interest income from cash and cash ~~equivalents and short-term and long-term investments.~~equivalents. Interest income and other income ~~was $120,000 and $24,000~~increased to $28,000 in the three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2021 from $26,000 in the three months ended March 31, 2020. Interest and other income ~~was $309,000 and $98,000 in~~is not material to the ~~nine months ended September 30, 2017 and 2016, respectively.~~consolidated financial statements.

Interest Expense

~~Interest~~Through June 30, 2020, interest expense consists of interest expense from the debt under our credit facility dated November 18, 2015 and the associated accretion of debt issuance costs. During the second quarter of 2020, the Company repaid the existing debt. See Note 12 - "Debt" in our Notes to Consolidated Financial Statements and Liquidity and Capital Resources below for further description. Interest expense ~~was $967,000~~decreased to $95,000 in the three months ended ~~September 30, 2017 compared to $828,000~~March 31, 2021 from $467,000 in the three months ended ~~September 30, 2016. Interest expense was $2.8 million in~~March 31, 2020 as it reflects only accretion of creditor and third-party fees associated with the nine months ended September 30, 2017 compared to $2.6 million in the nine months ended September 30, 2016. The increase in interest expense is primarily attributable to higher average interest rates in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, partially offset by lower outstanding debt balances under our credit facility.Amended and Restated Credit Agreement.

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Provision for Income Taxes

~~For~~Our income tax expense was $9.9 million and $7.1 million for the three ~~and nine~~ months ended ~~September 30, 2017, our~~March 31, 2021 and March 31, 2020, respectively. Income taxes expected at the US federal statutory income tax ~~benefit was $11.4 million and $873,000, respectively. Our~~rate of 21 percent differ from the reported income tax ~~benefit was~~expense primarily ~~attributable to discrete tax benefits relating to exercises of options, net of our pre-tax book income multiplied by an estimated annual effective tax rate. As~~as a result of ~~our adoption of ASU 2016-09 in 2017, we recognize the full impact of the excess~~permanent tax adjustments for non-deductible expenses, state taxes, and tax benefits ~~associated with stock option~~from research and development tax credits and exercises ~~during the period, which decreases our effective tax rate for the three and nine months ended September 30, 2017, resulting in lower tax expense compared to prior year. Please see~~ of stock-based awards.

See Note ~~1 – “Summary of Significant Accounting Policies”~~ ~~and~~ ~~Note 5 – “Stock Based Compensation”~~6 — “Income Taxes” in our Notes to Consolidated Financial Statements for further ~~description~~discussion.

Table of ~~the impact of this accounting standard.~~Contents

Our income tax expense was $12.1 million and $30.0 million for the three and nine months ended September 30, 2016, respectively. Our tax expense was primarily attributable to our pre-tax income including our current tax expense consisting of federal alternative minimum tax and various state taxes and our deferred income tax expense consisting of temporary tax items including stock compensation and differences in the book and tax lives of amortizable intangibles.

Our effective tax rate differs from the statutory federal rate as a result of several factors including non-temporary differences from excess tax benefits from the exercise of stock options, as well as state income taxes and research and development tax credits.

We evaluated the appropriateness of our deferred tax assets and related valuation allowance in accordance with ASC 740 based on all available positive and negative evidence. As of September 30, 2017 and December 31, 2016, we do not have any valuation allowance against our gross deferred tax assets.

Liquidity and Capital Resources

Changes in cash and cash equivalents for the three months ended March 31, 2021 and March 31, 2020 were as follows (in thousands):


	Three Months Ended March 31,
	2021		2020		Change
Net cash provided by operating activities	$	137,014	$	46,658	$	90,356
Net cash used in investing activities	(1,233)		(1,921)		688
Net cash provided by (used in) financing activities	(11,976)		14,763		(26,739)
Effect of exchange rate changes	114		(183)		297
Net increase (decrease) in cash and cash equivalents	$	123,919	$	59,317	$	64,602

As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, we had ~~$183.5~~$567.5 million and ~~$108.4~~$443.6 million, respectively, primarily in cash and cash equivalents and short-term and long-term investments. We invest available funds in short-term and long-term securities, including money market funds, corporate bonds, asset backed securities, and US government and agency bonds, and do not engage in hedging or speculative activities.equivalents.

Net cash provided by operating activities was approximately ~~$149.0~~$137.0 million and ~~$104.0~~$46.7 million during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~March 31, 2020, respectively. The increase in net cash provided by operating activities was primarily attributable to the ~~(1)~~following changes in the consolidated statement of cash flows line items: a $33.3 million increase in cash flows from a decrease in other assets, a $23.8 million increase in cash flows from a decrease in other current assets, a $17.8 million increase in net income, ~~of $64.2 million; (2)~~and a $11.7 million increase in cash flows from a decrease in accounts ~~receivable of $14.1 million; (3) increase in stock-based compensation expense of $8.9 million;~~payable and ~~the (4) lack of a stock option windfall tax benefit, which was $9.8 million during the nine months ended September 30, 2016; partially offset by the (5) increase in~~ other current ~~assets of $30.3 million primarily due to prepaid income taxes; (6) decrease in the deferred income tax balance of $18.1 million; and the (7) decrease in deferred revenue balance of $2.4 million.~~liabilities.

Net cash used in investing activities was approximately ~~$4.5~~$1.2 million and ~~$51.9~~$1.9 million during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~March 31, 2020, respectively. The decrease in net cash used in investing activities was primarily ~~due~~attributable to ~~(1)~~ the ~~prior period acquisition of ShippingEasy on July 1, 2016 for $55.4 million; partially offset by (2) a $5.5 million~~ decrease in ~~cash from short-term investment sales;~~purchases of property and ~~(3) a $3.1 million increase in capital expenditures related to the build out of the Stamps.com headquarters.~~

equipment.

Net cash used in financing activities was approximately ~~$68.0 million and $36.1~~$12.0 million during the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2021, while net cash provided by financing activities was approximately $14.8 million during the three months ended March 31, 2020. The ~~increase~~decrease in net cash ~~used in~~flows from financing activities was primarily due to ~~the (1) $55.7~~a $18.5 million increase in common stock ~~repurchases; (2) recharacterization, pursuant to ASU 2016-09 of~~repurchases and a ~~stock option windfall tax benefit, which was $9.8~~$18.3 million decrease in ~~the prior period, to an operating activity in the current period; (3) $3.1 million increase in~~net proceeds from short-term financing ~~payments; (4) $1.5 million increase in term-loan principal payments;~~obligations, partially offset by ~~(5) the $38.3~~a $6.4 million increase in proceeds received from stock option exercises.

Significant contractual obligations as of March 31, 2021 were as follows (in thousands):


	Payments due by period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 years
Debt Obligations (1)	$	—	$	—	$	—	$	—	$	—
Estimated Interest on Debt Obligations (1)	—		—		—		—		—
Capital Lease Obligations	—		—		—		—		—
Operating Lease Obligations (2)	78,012		1,920		18,446		13,798		43,848
Purchase Obligations	—		—		—		—		—
Other Long-Term Liabilities	—		—		—		—		—
Total	$	78,012	$	1,920	$	18,446	$	13,798	$	43,848

(1) The Company has no outstanding debt obligations as of March 31, 2021. See additional details described below.

(2) Amounts represent the undiscounted cash lease payments under non-cancelable leases, net of tenant improvement allowance reimbursements reasonably expected to be received by the Company. In the third quarter of 2020, the Company entered into a new operating lease for commercial office space in Austin, Texas resulting in approximately $62.4 million of undiscounted net operating lease obligations through 2032.

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~~The following table is a schedule~~During the second quarter of ~~our significant contractual obligations and commercial commitments as of September 30, 2017 (in thousands):~~

Twelve Month Period Ending September 30,
Operating
Lease Obligations

2018 $ 3,909
2019 1,625
2020 1,393
2021 1,097
2022 116
Thereafter —
Total $ 8,140

On2020, the Company repaid the existing term loan balance outstanding under the Credit Agreement dated November 18, ~~2015,~~2015. The optional prepayment satisfied the $47.5 million term loan balance in full.

On June 29, 2020, we entered into aan amended and restated credit agreement (the "Amended and Restated Credit Agreement") with a group of banks, which provides for a ~~term loan of $82.5 million and a~~ revolving credit facility with a maximum borrowing of ~~$82.5 million (the “Credit Agreement”).~~$130.0 million. Our Amended and Restated Credit Agreement matures on ~~November 18, 2020.~~June 29, 2022 (the “Maturity Date”). The Amended and Restated Credit Agreement is secured by substantially all of our assets. In connection with entering into the Amended and Restated Credit Agreement, we incurred approximately ~~$1.8 million~~$762,000 in ~~debt issuance costs~~creditor and third-party fees which were recorded as ~~debt discount~~deferred expense and ~~are being~~will be accreted as interest expense over the life of the Amended and Restated Credit Agreement. ~~Interest expense associated with~~See Note 12 - "Debt" in our Notes to Consolidated Financial Statements for further description.

The COVID-19 pandemic and resulting global disruptions have caused significant market volatility. This disruption can contribute to defaults in our accounts receivable, affect asset valuations resulting in impairment charges, and affect the ~~debt issuance costs for~~availability of credit. We expect to continue to maintain financing flexibility in the ~~three and nine months ended September 30, 2017 was approximately $93,000 and $279,000, respectively.~~

~~Borrowings under the term loan are payable in quarterly installments which began on December 31, 2015. We pay interest on our Credit Agreement equal~~current market conditions. However, due to the London Interbank Offered Rate plus an applicable margin, between 1.25% and 2.00%, based upon certain financial measures. As of September 30, 2017, our applicable margin was 1.25% and the interest rate on our outstanding loan was approximately 2.49%. We are subjectrapidly evolving global situation, it is not possible to certain customary quarterly financial covenants under our Credit Agreement such as a maximum total leverage ratio and a minimum fixed charge coverage ratio. As of September 30, 2017, we were in compliance with the covenantspredict whether unanticipated consequences of the ~~Credit Agreement.~~

~~The Credit Agreement includes negative covenants, subject~~pandemic are reasonably likely to ~~exceptions, restricting or limiting~~materially affect our ~~ability to among other things, incur additional indebtedness, grant liens, repurchase stock, pay dividends~~liquidity and engage in certain investment, acquisition and disposition transactions. The Credit Agreement imposes certain requirements in order for us to make dividend payments. As of September 30, 2017, such requirements were: (1) our Consolidated Total Leverage Ratio, as definedcapital resources in the Credit Agreement, must be less than 2.75 to 1.00; (2) our Fixed Charge Coverage Ratio, as defined in the Credit Agreement, must be greater than 1.25 to 1.00; and (3) our Liquidity as defined in the Credit Agreement must be greater than $20 million. As of September 30, 2017, our Consolidated Total Leverage Ratio was 0.62 to 1.00, our Fixed Charge Coverage Ratio was 21.70 to 1.00 and our Liquidity was approximately $204 million, which includes cash and cash equivalent and investment balances, as well as the available balance under the revolving credit facility. Based on our actual financial condition and results of operations, we do not believe that the provisions of the Credit Agreement currently represent a restriction to our ability to pay dividends in permissible amounts.future.

~~The contractual maturities of our debt obligations due subsequent to September 30, 2017 are as follows (in thousands):~~

Year ending September 30, Amount
2018 $ 8,250
2019 10,312
2020 12,375
2021 103,240
Thereafter —
Total debt 134,177

Less: debt issuance costs 1,184
Total debt, net of debt issuance costs $ 132,993

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~~The estimated interest payments related to our debt due subsequent to September 30, 2017 are as follows (in thousands):~~

Year ending September 30, Amount
2018 $ 3,320
2019 3,097
2020 2,829
2021 570
Thereafter —
Total $ 9,816

The above estimated interest payments assume an interest rate of 2.49%, which is our interest rate as of September 30, 2017, and assume the entire remaining amount of our revolving credit facility is paid on the maturity date of November 18, 2020.

We believe our available cash and marketable securities, together with the cash flow from operations, will be sufficient to fund our business for at least the next twelve months.

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Business Outlook and Forward-Looking Statements

The following forward-looking statements are accompanied by, and should only be read in conjunction with, the qualifications and limitations described in the forward-looking statements discussion at the beginning of this Item 2 and the risks and other factors set forth in Item 1A ~~“Risk Factors”~~"Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020, filed with the SEC on ~~March 1, 2017.~~February 26, 2021.

~~We expect our mailing~~The strong increases in e-commerce based consumption in response to the COVID-19 pandemic have contributed to meaningful financial benefits to the Company in 2020. Despite those financial benefits, there is substantial uncertainty in 2021 from the myriad of macroeconomic factors associated with the ongoing pandemic, and ~~shipping revenue to increase in 2017 compared to 2016. We expect our mailing and shipping revenue growth in 2017 to be less than~~ the ~~growth we achieved in 2016 now that we have passed the one year anniversary of our Endicia acquisition. Our ability to grow our mailing and shipping revenue is partly dependent~~resulting effect on ~~our ability to increase our sales and marketing spend to acquire new customers and to retain our existing customers. To the extent~~global e-commerce. As such, for 2021 we are not ~~able to achieve our target increase in spending and acquire or retain customers,~~at this ~~would negatively~~time providing specific guidance.

The aforementioned uncertainties surrounding 2021, while making specific guidance with meaningful ranges of potential outcomes difficult, do not impact our ~~2017 mailing~~overall operating strategies. As such, we plan to continue to invest in our global technology platforms and ~~shipping revenue growth expectations.~~would expect our operating expenses in 2021 to increase, reflecting annualization of investments made during 2020 as well as additional investments expected in 2021.

~~Customized~~As previously disclosed, in the second quarter of 2020, we received notification from the USPS that it was eliminating its customized postage ~~revenue increased in 2017 compared~~program and also revoking our authorization to ~~2016, as~~offer products pursuant to that program effective June 16, 2020. As such we do not expect customized postage revenue for the nine months ended September 30, 2017 exceeded customized postage revenue for the twelve months ended December 30, 2016. High volume business orders for customized postage can fluctuate significantly from quarter to quarter and therefore historical trends may not be indicative of future results for customized postage revenue.

in 2021.

We expect our sales and marketing ~~expense~~expenses to be higher in 2021 as compared to 2020. The increases are primarily a result of the annualized effect of our headcount investments in 2020, our plan to increase our investments in ~~2017 compared~~headcount resources in 2021 to ~~2016. We expect the percent~~drive growth, and our plan to increase indiscretionary sales and marketing ~~expense~~spending in ~~2017 to be less than the percent increase in 2016, as 2016 reflected a full year of Endicia results, as opposed to approximately one and a half months in 2015.~~various customer acquisition channels. We will continue to monitor our customer metrics and the state of the economy and adjust our level of spending accordingly. Sales and marketing spend is expensed in the period incurred, while the revenue and profits associated with the acquired customers are earned over the customers’ lifetimes. As a result, increased sales and marketing spend in future periods could result in a reduction in operating profit and cash flow compared to past periods.

We expect research and development expenses to be higher in ~~2017~~2021 as compared to ~~2016. We expect~~2020. The increases are primarily a result of the ~~percent~~annualized effect of our headcount investments in 2020, and our plan to increase our investments in ~~research and development expense~~headcount resources in ~~2017~~2021 to be less than the percent increase in 2016, as 2016 reflected a full year of Endicia results, as opposed to approximately one and a half months in 2015. We expect to hire additional research and development personnel in 2017.

drive growth.

We expect general and administrative expenses to be higher in ~~2017~~2021 as compared to ~~2016. We expect~~2020. The increases are primarily a result of the ~~percent~~annualized effect of our headcount investments in 2020, and our plan to increase our investments in ~~general and administrative expense~~headcount resources in ~~2017 to be less than the percent increase in 2016, as 2016 reflected a full year of Endicia results, as opposed to approximately one and a half months in 2015.~~

2021.

We expect our effective tax rate for ~~2017~~2021 to be ~~lower~~higher than ~~2016 as we benefitted from excess tax benefits related to the exercise of stock options in 2017. However,~~2020; however, there are ~~other~~ factors that impact taxable income compared to book income which can be difficult to predict and can change from quarter-to-quarter.

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As discussed earlier in this Report, our expectations are subject to substantial uncertainty and our results are subject to macro-economic factors and other factors which could cause these trends to be worse than our current expectation or which could cause actual results to be materially different than our current expectations. These expectations are “forward-looking statements,” are made only as of the date of this Report and are subject to the qualifications and limitations on forward-looking statements discussion in the beginning of Item 2 of this Report and the risks and other factors set forth in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 26, 2021, including those related to the ongoing COVID-19 pandemic. Our business has grown through acquisitions during 2014 through ~~2016;~~2018; however the expectations above do not assume any future acquisitions or dispositions, any of which could have a significant impact on our current expectations. As described in our forward-looking statements discussion, we do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Report.

Critical Accounting Policies and Judgments

~~Management’s~~Management's discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements. The preparation of these financial statements is based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make judgments, estimates, and assumptions that affect the amounts reported in the financial statements and notes. ~~Except as noted below, for~~For more information regarding our critical accounting estimates and policies, see Part II, Item 7, ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of ~~Operations—Critical~~Operations-Critical Accounting Policies and ~~Judgments”~~Judgments" of our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, filed with the SEC on ~~March 1, 2017.~~

February 26, 2021.

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~~ITEM 3.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~On November 18, 2015, we entered into a~~Borrowings under our Amended and Restated Credit Agreement ~~with~~bear interest, at our option, at the base rate, as defined, plus an applicable margin or a group of banks, which provides for a term loan of $82.5 million and a revolving credit facility with a maximum borrowing of $82.5 million. Our Credit Agreement matures on November 18, 2020. As of September 30, 2017, the debt outstanding under our Credit Agreement, gross of debt issuance costs, was $134.2 million. Borrowings under the term loan are payable in quarterly installments which began on December 31, 2015. We pay interest on our Credit Agreement at a rate equal to the London Interbank Offered Rate (LIBOR) plus an applicable margin, ~~which is~~in each case such margin will be between 1.25% and ~~2.00%, based upon~~3.00% and is determined by certain financial measures. AsThere were no amounts drawn on the revolving credit facility as of ~~September 30, 2017,~~March 31, 2021. See Note 12 - "Debt" in our ~~applicable margin was 1.25%~~Notes to Consolidated Financial Statements for further description.

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the ~~interest rate on~~US dollar, primarily the British Pound Sterling. Accordingly, changes in exchange rates could negatively affect our ~~outstanding loan was approximately 2.49%. Interest expense~~results. We have experienced and will continue to experience fluctuations in our net income as a result of transaction gains or losses related to revaluing monetary asset and liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded.

We do not hold or issue financial instruments for trading purposes. We do not have material exposure to market risk with respect to investments. We do not use derivative financial instruments for speculative or trading purposes. Nor do we use forwards, options or other derivative instruments to hedge our forecast cash flow currency exposures, our foreign currency intercompany transactions or otherwise. However, we may adopt specific hedging strategies in the future. Our cash balances would not be ~~significantly~~materially affected by ~~either a 10% increase or decrease~~significant changes in ~~the rates of interest on our debt.~~exchange rates.

~~We have not used derivative financial instruments in our investment portfolio. None of the instruments in our investment portfolio are held for trading purposes.~~ Our cash equivalents ~~and investments~~ consist of money market ~~U.S. government obligations, asset-backed~~ securities and ~~public corporate debt securities with~~had a weighted average ~~maturities~~maturity of ~~31 days at September 30, 2017. Our cash equivalents~~1 day and ~~investments approximated $183.5 million at September 30, 2017 and had~~ a weighted average interest rate of ~~0.9%.~~0.04% at March 31, 2021. The aggregate value of our cash and cash equivalents was $567.5 million at March 31, 2021. Interest rate fluctuations impact the carrying value of the portfolio. The fair value of our portfolio of marketable securities would not be significantly affected by either a 10% increase or decrease in the rates of interest due primarily to the short-term nature of the portfolio. We do not believe that the future market risks related to the above securities will have a material adverse impact on our financial position, results of operations, or liquidity.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

As of the end of the period covered by this Report, our management evaluated, with the participation of our Principal Executive Officer and Principal Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded, as of that time, that our disclosure controls and procedures were effective.

Changes in ~~internal controls~~Internal Controls

During the quarter ended ~~September 30, 2017,~~March 31, 2021, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II –- OTHER INFORMATION

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

See Note ~~3 –~~ ~~“Commitments~~2 - "Commitments and ~~Contingencies – Legal Proceedings”~~Contingencies" of our Notes to Consolidated Financial Statements, which is incorporated herein by reference.

~~ITEM 1A.~~

~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

We are not aware of any material changes to the risk factors included in Item 1A ~~“Risk Factors”~~"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020 filed with the SEC on ~~March 1, 2017.~~

February 26, 2021.

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~~ITEM 2.~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Period
Total Number of
Shares Purchased

Average Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Approximate Dollar
Value of Shares That
May Yet be
Purchased Under the
Plans or Programs
(in 000’s)

July 1, 2017 –
July 31, 2017
46,300 $ 147.35 46,300 $ 61,659
August 1, 2017 –
August 31, 2017
23,400 $ 196.06 23,400 $ 57,071
September 1, 2017 –
September 30, 2017
19,000 $ 199.77 19,000 $ 53,276


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (in 000's)



January 1, 2021 - January 31, 2021	28,183	$	218.80	28,183	$	1,380
February 1, 2021 - February 28, 2021	18,902	$	204.89	18,902	$	117,000
March 1, 2021 - March 31, 2021	89,478	$	189.84	89,478	$	94,000

On ~~October 25, 2016,~~August 3, 2020, our Board of Directors approved termination of the previous share repurchase program ahead of schedule and approved a new share repurchase program that took effect on August 11, 2020, following such termination. The new program authorized us to purchase up to $40 million of stock over approximately six months following its effective date. On February 11, 2021, our Board of Directors approved a new ~~stock~~share repurchase ~~plan,~~program, which became effective ~~November 7, 2016,~~February 22, 2021, that ~~replaced our prior stock repurchase plan and~~ authorized us to repurchase up to $90 million of stock over the six months following the effective date of the plan. On April 24, 2017, our Board of Directors approved a new stock repurchase program that took effect upon expiration of the prior plan on May 8, 2017 and authorizes the Company to repurchase up to ~~another $90~~$60 million of stock over ~~the~~approximately six months following its effective date. On ~~October 24, 2017, the~~February 26, 2021, our Board of Directors ~~approved a new stock~~amended the share repurchase program then in effect to increase the maximum aggregate dollar amount of shares that ~~will take effect upon~~may be repurchased through its expiration in August 2021 from $60 million to $120 million.

From time to time we withhold shares of our stock to satisfy income tax obligations related to performance-based or restricted equity awards. Such shares are not reflected in the ~~current plan on November 10, 2017 and authorizes the Company~~table above. However, such shares, if any, would be described in Note 1 - "Summary of Significant Accounting Policies-Treasury Stock" in our Notes to ~~repurchase up to $90 million of stock over the six months following its effective date.~~

Consolidated Financial Statements included elsewhere in this filing.

We will consider repurchasing stock in the future by evaluating such factors as the price of the stock, the daily trading volume and the availability of large blocks of stock and any additional constraints related to material inside information we may possess. Our repurchase of any of our shares will be subject to limitations that may be imposed on such repurchases by applicable securities laws and regulations and the rules of The NASDAQ Stock Market, as well as restrictions under our Amended and Restated Credit Agreement. Repurchases may be made in the open market, or in privately negotiated transactions from time to time at our discretion. We have no commitment to make any repurchases.

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 5.~~

~~OTHER INFORMATION~~

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS

~~ITEM 6.~~

~~EXHIBITS~~

~~10.1~~	~~Consulting Agreement, dated as of July 31, 2017, between James Bortnak and Stamps.com Inc. (1)~~

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *

~~101.INS~~
101.INS			XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*
*			Furnished, not filed.

~~(1)~~

~~Incorporated herein by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on August 2, 2017 (File No. 000-26427).~~

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~STAMPS.COM INC.~~

~~(Registrant)~~STAMPS.COM INC.

(Registrant)

~~November 9, 2017~~

~~By:~~

Date: May 7, 2021

By:

/s/ KEN MCBRIDE

Ken McBride

Chairman and Chief Executive Officer

~~November 9, 2017~~	~~By:~~
Date: May 7, 2021		By:	/s/ JEFF CARBERRY
			Jeff Carberry
			Chief Financial Officer

	Fair Value			Fair Value		Useful Life (In Years)		Weighted Average Estimated Useful Life (In Years)
Trade accounts receivable	$	1,194
Other assets		76
Property and equipment		40
Goodwill		40,953
Identifiable intangible assets:
Trade name				$	1,304		8
Developed technology					6,948		5
Customer relationships					6,316		5
Non-compete agreements					1,111	3 to 5
Total identifiable intangible assets		15,679							5
Accrued expenses and other liabilities		(707	)
Deferred revenue		(185	)
Deferred tax liability		(1,603	)
Total purchase price		55,447
Less: settlement of preexisting relationship (accounts receivable)		1,194
Purchase price, net of settlement	$	54, 253

Twelve Month Period Ending September 30,	Operating Lease Obligations
2018	$	3,909
2019		1,625
2020		1,393
2021		1,097
2022		116
Thereafter		—
Total	$	8,140

	September 30, 2017
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value


Cash and cash equivalents:
Cash	$	177,039		—		—		$	177,039
Money market		6,492		9		(2	)		6,499
Total cash and cash equivalents		183,531		9		(2	)		183,538
Short-term investments:
Corporate bonds and asset backed securities		—		—		—			—
Total short-term investments		—		—		—			—
Cash and cash equivalents and short-term investments	$	183,531		9		(2	)	$	183,538

	December 31, 2016
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	101,987		—		—		$	101,987
Money market		4,945		—		—			4,945
Total cash and cash equivalents		106,932		—		—			106,932
Short-term investments:
Corporate bonds and asset backed securities		1,500		13		(2	)		1,511
Total short-term investments		1,500		13		(2	)		1,511
Cash and cash equivalents and short-term investments	$	108,432		13		(2	)	$	108,443

Year	First Quarter		Second Quarter		Third Quarter

2017		722		738		736
2016		649		646		648

Year ending September 30,	Amount
2018	$	8,250
2019		10,312
2020		12,375
2021		103,240
Thereafter		—
Total debt		134,177

Less: debt issuance costs		1,184
Total debt, net of debt issuance costs	$	132,993