Stamps.com Inc. (NASDAQ:STMP) Q4 2018 Results Earnings Conference Call February 21, 2019 5:00 PM ET
Company Participants
Suzanne Park - Senior Director of Finance
Ken McBride - Chief Executive Officer
Kyle Huebner - President
Jeff Carberry - Chief Financial Officer
Conference Call Participants
George Sutton - Craig-Hallum
Zach Cummins - B. Riley FBR
Tim Klasell - Northland Securities
Allen Klee - Maxim Group
Kevin Liu - K Liu & Company
Operator
Good day, ladies and gentlemen, and welcome to the Stamps.com Inc. Fourth Quarter 2018 Financial Results Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference, Ms. Suzanne Park, Senior Director of Finance. Ma’am, you may begin.
Suzanne Park
Thank you. On the call today is Ken McBride, CEO; Kyle Huebner, President; and Jeff Carberry, CFO. The agenda for today's call is as follows. We will review the results of our fourth quarter and fiscal year 2018. We'll provide an update on elements of our business model and partnerships.
We'll provide details on new business initiative for 2019. And finally, we'll discuss our financial results and talk about our business outlook. But first, I’ll start the Safe Harbor statement.
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. This release includes forward-looking statements about our anticipated financial metrics and results, all of which involve risks and uncertainties. Important factors, including the Company's ability to successfully integrate and realize the benefits of its past or future strategic acquisitions or investments, including the Company's ability to complete and ship its products, maintain desirable economic for the products, the timing of when the Company will utilize its deferred tax assets and obtain or maintain regulatory approval, which could cause actual results to differ materially from those in the forward-looking statements are detailed in filings with the Securities and Exchange Commission made from time-to-time by Stamps.com, including its annual report on Form 10-K for the fiscal year ended December 31, 2017, quarterly reports on Form 10-Q and current reports on Form 8-K.
Stamps.com undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The financial results we will discuss on the call today include non-GAAP financial measures. GAAP net income was $42.7 million in the fourth quarter and $168.6 million in fiscal year 2018. GAAP net income per fully diluted share was $2.30 in the fourth quarter and $8.99 in the fiscal year 2018.
Our non-GAAP financial measures exclude the following fourth quarter and fiscal year 2018 items, $10 million of non-cash stock-based compensation expense in the fourth quarter and $36.3 million in 2018. $5.6 million of non-cash amortization expense of acquired intangibles and debt issuance costs in the fourth quarter and $18.7 million in 2018 and $4.2 million of acquisition and litigation settlement expenses in 2018.
Our non-GAAP financial measures include an $11.1 million non-GAAP income tax benefit in the fourth quarter and $6.9 million of additional non-GAAP income tax expense in 2018.
Our mailing and shipping numbers include service revenue, product revenue and insurance revenue and do not include any revenue from customized postage. Additionally, our fiscal year 2018 financial results unless otherwise noted, include MetaPack results from August 15 through December 31.
Please see our fourth quarter 2018 earnings release and 2018 metrics posted on our investor website for reconciliations of our non-GAAP financial measures to the corresponding GAAP measures.
Now, let me hand the call over to Ken.
Ken McBride
Hi, good afternoon. So before we begin today, I’d like to announce the retirement of our President, Kyle Huebner. Kyle has been at Stamps for more than 20 years and during that period he has really been my partner in every way and we, the whole management team took a .com failure and rebuilt it into a world leader in global e-commerce shipping software and his contributions as our Chief Financial Officer, as our President, key member of our senior management team and a leader in the company have really been invaluable.
So, we’re wishing Kyle a great retirement as he transitions to spend more time with his family and we’re really happy because Kyle has agreed to continue to serve the company in a part-time consulting role, so we can continue to benefit from his extraordinary strategic expertise and his deep knowledge of our industry. So thank you, Kyle.
With that let me turn to our financial results. Today we announced our fourth quarter and fiscal 2018 results, which included fourth quarter GAAP revenue of $170.2 million which was up 29% year-over-year, fiscal 2018 GAAP revenue of $586.9 million which is up 25% year-over-year.
Fourth quarter non-GAAP adjusted EBITDA of $71.3 million, was up 11% year-over-year and fiscal 2018 non-GAAP adjusted EBITDA of $258 million, which was up 12% year-over-year. We are very pleased with our financial performance and with the investments we made throughout our multi-carrier shipping businesses including the successful acquisition of MetaPack earlier in 2018.
With that let’s turn to more detailed discussion of our mailing and shipping business. Mailing and shipping revenue was $165.4 million in the fourth quarter that was up 29% year-over-year. Revenue growth was driven by strong growth in average revenue per unit or per paid customer ARPU, which was driven by continued strong organic growth in our shipping business and from contributions from MetaPack.
Total paid customer metric was 736,000 and paid customers were flat versus the fourth quarter of 2017. The more modest performance of paid customers in recent quarters is consistent with our strategic shift to focusing on the acquisition of shippers, which are numerically fewer numbers, but where each customer have much higher lifetime value. And with that shift in focus, our revenue has been more driven by growth in our ARPU than it has been driven by growth in our paid customers.
Our average monthly churn rate during the fourth quarter was 2.9%. And that was in line with the churn rates we've seen over the past several quarters down slightly compared to the 3.0% churn rate in the fourth quarter of 2017. The ARPU or average monthly revenue prepaid customer was $74.93 in the fourth quarter. That was up 29% versus the fourth quarter of 2017. Growth in ARPU benefited from continued organic growth in the shipping focused areas of the business and the inclusion of MetaPack.
Shipping customers generally pay higher subscription fees than the small business mailers and we typically also collect additional revenue tied to the packages that we process on behalf of our shippers.
Total fourth quarter USPS postage printed was 1.8 billion that was up 5% versus the fourth quarter of 2017. The total USPS postage printed metric includes both the higher growth shipping volume and the traditional non-package mail volume, which continues to see a steady decline.
For 2018, our customers collectively printed 6.5 billion in USPS postage and over 2 billion total mail pieces in packages. Of that number packages shipping represented over 1 billion total packages.
We also continue to make strides in our diversification of our carrier relationships including UPS, FedEx and DHL and with international post including Royal mail, French post, Australia post and with non-traditional carriers including Amazon and our own consolidated services. Management team and all of our employees are very proud of the continued financial and business success we generate for the shareholders.
So with that let me turn to an update on some of the initiatives we're focusing on in 2019. First, we plan to leverage the portfolio of mailing and shipping solutions to drive the growth. With the multi-carrier shipping offerings through MetaPack, ShippingEasy, ShipWorks and ShipStation brands and our USPS mailing and shipping offerings through Stamps.com and Endicia, we believe we have a complete product solution that will meet the needs of our current and our target customers both in the United States and abroad.
Our goal is to be able to meet the needs of as many customers as possible so that we can maximize our customer acquisition, maximize our average annual revenue prepaid customer, ARPU, reduce our monthly customer cancellation rates or churn and increase our overall customer usage.
Second in our plan, we plan to invest for growth in the shipping part of the business. Our shipping customers include e-commerce merchants, warehouses, fulfillment houses, large retailers and other types of shippers.
We devote a large percentage of our company’s investments to target e-commerce shippers. For 2019 and beyond we expect to continue making these large investments in order to attract these types of shippers to our solutions.
Shipping customers are more expensive to acquire than small business customers. However, they yield higher long term returns on investment with their typical characteristics including higher ARPU, lower churn, higher usage when compared to other small business mailers that predominantly use our services to send mail.
Based on our analysis and our trends, we expect to get a strong return in our investment from our mailing and shipping customers because they have a high expected lifetime value relative to the expected cost of acquisition.
Accordingly, we plan to continue to increase our total sales and marketing expense in 2019 versus 2018. We continue to increase our investments, we plan to continually increase the investments in direct sales, direct mail, traditional media, radio, television, search engine marketing, search engine optimization as well as refining our customer acquisition process through affiliates, partners, telemarketing and other areas.
Third, for our 2019 plan, we plan to expand the features and functionality of our solutions particularly in the shipping part of our business. We plan to continue to enhance our technology and solutions for our target customers that include e-commerce merchants, warehouses, fulfillment houses, large retailers and other types of shippers. And we plan to enhance and add new features and functionality that will improve the value proposition of our solutions for shippers.
We plan to continue to add new integrations for easier data export and import from the tools the customers used and add new carrier and partner integrations. And we plan to continue to build our support for new product features such as inventory management, customer management and mobile solutions.
We also plan to continue launching new services such as our international shipping program which bundles international shipping with valuable customer benefit such as free package, pickup, free insurance, upgraded delivery speeds, enhanced tracking, simpler customs procedures and other benefits. This program is otherwise known as the GAP program and global advantage program.
Fourth in our plan, in the international area, we plan to continue to develop partnerships and business and market our solutions in international markets. ShipStation’s international growth was strong in 2018 with 77% growth in shipments and we grew our customer base by 64%.
In 2018, we launched 17 new partnerships internationally including Hermes, DPD, ParcelForce, New Zealand Post, Shopware, Wal-Mart Canada and [WEX]. We expanded our FedEx advantage solutions provider and logistics partner programs internationally. We’ve also deepened our relationship with Amazon launching Amazon Australia and offering the shipping of Amazon services in the UK for Amazon prime sellers.
We’ve begun working on the technical design and integration to connect the 450 MetaPack carrier services to the ShipStation international platform. We’ve also done integrations in the UK including things like Magento, Big Commerce, Move Commerce, Square Space, Open Cart and Press the Shop in order to support the e-commerce customers there.
With that let me turn to a high level discussion. So, as we move into 2019 and we look at the strategic plan for our company over the next five years, we thought it would be helpful to step back and take a broad look at some of the trend that are affecting the shipping industry worldwide.
So today I’d like to cover the following topics in this order. First, I would like to discuss the state of the current shipping industry and the trends we see playing out over the next five years.
Next, I’d like to discuss the significant assets we’ve developed and our position in the shipping market. Then, we’d like to discuss our international expansion efforts. And finally, we’d like to discuss changes to our USPS partnership in a new strategic direction for the company.
So first let me start with our view of the shipping industry. So things are changing really rapidly in the shipping industry and as we look five years out, we see the shipping industry being dramatically different than it is today. Today the U.S. industry is still largely controlled by the three big traditional carrier companies; UPS, FedEx, and USPS.
E-commerce driven packages have become a larger and larger portion of the total worldwide package industry, the growth and trends in e-commerce are the most significant factor driving the growth in the shipping markets. E-commerce shipping is the fastest growing part of the mailing and shipping industry.
According to the U.S. Commerce Department, e-commerce sales grew approximately 16% year-over-year in the United States and according to some data cited by UPS, the U.S. industry package revenue is expected to grow by 40% from 2017 to 2022 and cross-border e-commerce volume is expected to grow by 28% over the next three years.
The incumbents in the U.S. shipping business have been getting more and more aggressive in their approach to e-commerce. In September 2018, UPS publicly stated that it's implementing an enterprise-wide transformation program that will enable and accelerate its enhanced business strategy and they cited four priority growth areas.
One, the continued expansion of their high-growth international markets. Two, the profitable expansion of B2B and B2C e-commerce. Three, further penetration of the healthcare and life sciences logistics business. And four, enhanced services and value for small and medium sized businesses as the company repositions its commercial and service strategies to help the growing economic segment of the semi-market.
Clearly, we agree that UPS is right to focus on e-commerce and to focus on the small and medium business initiatives. We would note that UPS partnered with Shopify in late 2017 to integrate UPS services directly into Shopify, a strategic move by UPS and Shopify, which supports UPS's efforts to penetrate e-commerce in the small and medium business market.
FedEx has also come out with some very aggressive programs that are very well suited for our e-commerce customers. Some of our customers have been offered a new special pricing program called FedEx One Rate, which is a heavily discounted new service that offers two day guaranteed flat rate shipping to anywhere in the country at very aggressive pricing.
Priority mail from the USPS does not offer guaranteed delivery and so this is a significant aggressive move by FedEx to capture e-commerce volumes. FedEx is also investing aggressively in global initiatives. They're working aggressively on cross-border solutions. Those solutions originated from their acquisition of Bongo.
We've also invested in their logistics backbone with FedEx fulfillment and logistics. For example, they're doing FedEx Freight which moves them into a very much larger fulfillment items. Other things that FedEx has done include an alliance they form with Walgreens for FedEx on-site, an alliance with Wal-Mart which anticipates adding 500 FedEx locations in Wal-Mart stores by May 2020. And U.S. consumers can now pick up their packages at more than 9,700 FedEx retail locations at Walgreens across the country.
DHL have also been working on e-commerce logistics. The product called DHL Max they're trying to expedite their service that utilizes parcel select which is the last mile delivery solution of the USPS. They're overlying their own network providing faster delivery of packages at lower cost by injecting packages more deeply into the USPS delivery network or faster overall delivery times.
DHL Metro is another product that's providing a local day and time definite window delivery service. It's cost-effective and transparent. In DHL Metro they're offering same-day, next day, and two hour delivery services per packages up to 25 pounds.
We've also seen really strong growth in carriers that focus only on smaller geographic regions which we call regional carriers. These carriers focus on pickup and delivery in a small number of states. They optimize their operations to be as cost-effective as possible within those states. Thus they offer, often they're able to undercut the prices of the national carriers for similar service times.
For example, here in California were served by On Track that delivers packages to California, Nevada, Arizona, and New Mexico. Other regional carriers include companies like Golden State Overnight, Lone Star, DICOM, Laser Ship, Pitt Ohio, United Delivery and U.S. cargo. All of the most populous states have some kind of regional carrier that serve their business and regional carriers are becoming a larger and larger factor in the overall shipping business.
Regional carriers all offer next day delivery at very cost-effective prices in their entire regions and thus that is one of their key competitive advantages. There's also been a significant number of new entrants that take an aim at the package business particularly the same-day shipping business. We expect that some of them could be success -- in taking share.
Uber has become delivering packages in the trunks of its -- Uber drivers making their own post mate and to live – also doing deliveries in less than an hour. There are several other companies that are focused on the same-day delivery market and are receiving VC funding in order to focus on that business.
And of course, the most significant driver of the e-commerce package business is Amazon. There are over 100 million prime customer base represents a powerful business position in e-commerce and it's currently estimated that they now represent nearly 50% of all e-commerce in the US. Amazon has built an internal captive last mile truck, air, rail, truck brokerage and air ocean global freight forwarding operation and this has given it a global end-to-end delivery network from manufacturer to customer.
Starting in August of 2016, Amazon also began building out a national air package network that they call Amazon Air. Currently they're operating 27 planes with contracts to have 40 planes by June of this year. With only the 27 planes that are currently in service Amazon is already flying 4,000 flights per quarter and they already shipped 25% of their North American packages on its own planes. It already flies routes that could potentially compete with 67% of the routes of the volumes flown by UPS and FedEx combined.
Amazon also announced in January of 2017 that they're investing 1.5 billion on a new Kentucky air hub to house their aircraft and that hub can support up to a 100 planes. One analyst report estimated that with those 100 planes Amazon could be flying 55% of its U.S. packages by 2021. And now most significantly Amazon has taken direct aim at the package business.
They recently announced their top four new strategic initiatives for expansion in 2019, and that included grocery, healthcare, online advertising and most significantly and top amongst their focus areas with shipping and logistics. With their own packages covering the high fixed costs of running their own captive logistics and package systems their marginal costs of carrying additional packages will be low and we expect that they will be able to offer their shipping services to third parties at a low price and still be able to make good margins.
They've already begun this process with their efforts in what they call Shipping With Amazon or SWA. So according to the media and analyst reports, SWA launched a test pilot in Los Angeles and in London in November 2018. Also according to media reports Amazon has launched SWA with pricing that is 10% below UPS and FedEx on average. They've also promised to cut out the additional surcharges and fees that the traditional carriers charge to their customers. For example, the residential delivery surcharge.
There's also been some analyst reports that have said that Amazon is under pricing UPS and FedEx by as much as 50% in some areas. We're expecting that shipping with Amazon may follow a similar strategy as Amazon did with their Amazon Web Services business where they offered up excess capacity in their own highly reliable systems and because the infrastructure was already built, they were able to offer this solution at very attractive rates.
Amazon's track record of disrupting an industry is well established. So their threat should be taken very seriously by every player in the shipping industry. We are setting our corporate strategy assuming Amazon will be a big global player in shipping.
Beyond just becoming a direct competitor to FedEx, UPS and USPS in the U.S., the Amazon effect as it's called is having a big impact on how traditional retailers have been approaching their own e-commerce businesses. In order to compete with Amazon, retailers will be forced to get better and better at returns, at tracking, at showing in cart delivery options, at providing real-time delivery intelligence and in offering cost-effective and reliable cross-border shipping and other aspects of providing the best possible customer experience in order to compete with Amazon's amazing customer experience.
A good note here that one of MetaPack's key assets in their software which can provide a turnkey Amazon like solution traditional to traditional retailers. We expect that retailers will also increasingly utilize ship from store which will serve to help neutralize the advantage that Amazon has with their ubiquitous fulfillment network by utilizing the distributed geographic location of their stores.
Note also that ship from store typically does not utilize traditional last-mile carriers like the USPS, but rather it uses its own local drivers. We've already seen a big push on ship from store by Wal-Mart and Target and others and so we're also sending our corporate strategy assuming the Amazon effect will continue to drive rapid change in these types of trends in retail and U.S. commerce.
So as we look at how the USPS will fare as these rapid and dynamic changes happen in shipping, we have concerns that they may become less competitive over time and it's really through no fault on their own. While USPS is officially an independent organization that is supported by its own revenue from mail and packages, it has many-many rules and regulations and governmental requirements that do not allow its flexibility to react to business trends as rapidly as it needs to do in order to keep up with the rapid pace of change in e-commerce. The USPS continues to report significant financial losses including a loss of 1.5 billion in their most recently reported quarter.
The USPS is hamstrung by the very large financial burden placed on them from the unreasonable requirement implemented in the 2006 Postal Accountability and Enhancement Act the requirements that they pre-fund retiree health benefits to the tune of more than 5.5 billion each year. The USPS also has a significant financial burden in its requirement to support over 600,000 postal retirees that receive health and pension benefits.
The USPS has oversight by Congress, oversight by the Postal Regulatory Commission, and by its own Board of Governors and all of these organizations have approval rights on various aspects of everything the USPS does. One of the critical aspects in today's very dynamic e-commerce industry is how quickly new products can come to market and how quickly an organization can make adjustments. All of these oversight bodies slow that process down for the USPS dramatically.
Additionally, the executive branch has taken a keen interest in trying to fix the issues at the postal service and the task force that President Trump formed in April 2018 to study the postal service came out with some recommendations that were made public in December 2018 in the 70 page report.
The report had many recommendations but one of its key recommendations was that the USPS should narrow its business and only provide essential services that are not already served by the private business community. Since the majority of its packaged business is already served by the private business community, it is unclear to us if the future direction of the USPS will include a strong strategic focus on growing packages at all.
While the recommendations in the report are not binding on the USPS and many of them would require an act of Congress to implement, they do represent one viewpoint that the USPS and the executive branch and other organizations like Congress are likely to consider.
Finally, one more comment with regard to the USPS, the standard delivery times in e-commerce have really been set by Amazon at two-day guaranteed delivery. The bar was set by Amazon and its Prime service and now everyone in the e-commerce industry needs to match the two-day delivery in order to compete in the e-commerce market. UPS, FedEx, DHL; all the regional carriers all have two day guaranteed delivery solutions. And the USPS does not have two day guaranteed delivery solutions.
Our customers are demanding and need two day delivery guaranteed in order to be competitive in e-commerce in general, and thus in order to meet that need they need to have carriers other than the USPS.
As you look outside the U.S., the worldwide shipping business is very-very different. In the U.S., the business is still dominated by the big three carriers; the UPS, FedEx and USPS, but the shipping business outside the U.S. is very fragmented and the customer preferences and expectations in those businesses are very different.
Like the U.S., international markets and especially European markets require a much broader carrier footprint in order to provide a competitive service offering. This is why MetaPack supports over 450 carriers. That's what is needed in the international markets. For example, in our MetaPack solution, we support 85 carriers just in the UK in order to provide a complete solution in that business, in that market.
Additionally, consumers in Europe have much different preferences. For example, they prefer to pick up and drop off their packages at local locations. These are known as PUDO or pickup drop-off locations. Also ship from store and ship to PUDOs is a critical success factor for retailers in Europe.
So when you take a look at the assets we've acquired and built over the past 18 years, we've amassed a significant number of assets in worldwide e-commerce shipping software. That put us in a great position to succeed as all of these rapidly changing global shipping business tends on full.
Worldwide, the volume of shipping done by our customers is enormous. In 2018, our customers all over the world sent 1.5 billion packages. The total dollar value of shipping done through our various software products exceeded 11 billion. We have over 5.5 billion in U.S. Postal Service shipping in the U.S., including packages going to both domestic and to international destinations from the U.S.
We also have an additional 2 billion in U.S. shipping from all of the other carriers that we support in the U.S. And we have more than 4 billion in shipping volume outside of the U.S. in our MetaPack business group.
We are currently by far the largest shipping partner of the USPS with the 5.5 billion in packages that we generate for the USPS. Those represent over 35% of all of their U.S. domestic priority mail packages. They also represent approximately 50% of all of their U.S. domestic first-class packages and we process approximately 30% of all of the international packages; packages going from the U.S. to international destinations.
We also have significant strengths in our partnership network worldwide with over 450 partnerships where our solutions are embedded into or integrated with a partner software solution. For example, we integrate with all the major selling channels such as Amazon, eBay, Etsy and others. We also integrate with e-commerce tools, small business software solutions, order and management fulfillment, ERP and CRM solutions, warehouse management solutions, and transportation management solutions, and we work very closely with all of our partners to make sure they succeed and the strength of our partnership network is unmatched.
We have integrations with over 40 carriers in the U.S. and a total of more than 450 carriers worldwide. Our goal is to bring the best carrier to the customer and having such a broad license on servers allows us to meet that goal. We built a U.S. sales force that is over 100 strong. They are all highly knowledgeable in shipping, logistics, software and technology.
We’ve significant internal expertise in marketing where we spend more than $65 million per year and we have significant internal expertise in technology and software development where we spend more than $55 million a year and we have significant internal expertise in customer on-boarding and customer support.
Our track record in driving growth for our partners is undeniable. Under our partnership with the USPS over the past 10 years we have driven a 21% compounded growth rate for their total shipping volume. We've grown shipping through our solutions from approximately 300 million ten years ago to over 5.5 billion today. In contrast to that, all of the other USPS shipping channels combined have only grown shipping by a compounded growth rate at 6% in the past decade.
With the acquisition of MetaPack, we've started to build a very strong position outside the U.S. as well and MetaPack is by far the leading multi carrier solution the leading multi-carrier solution worldwide.
Our MetaPack software supports over 450 parcel carriers that operated more than 200 countries around the world. It's really challenging to negotiate with and integrate with the large number of carriers necessary to be considered a complete solution in each market.
And MetaPack has completed all these steps, it's a huge part of why we bought MetaPack. MetaPack's Application Programming Interface or API is highly available, secure, reliable and they process more than 550 million packages last year.
In addition to their core multi-carrier API, they also offer significant number of sophisticated software capabilities such as the track and trade system that provides unified and standardized tracking of a parcel journey. A delivery analysis engine which provides reporting and analytics to track individual carrier's performance.
Across border shipping solution which manages international shipping, customs decoration and duty payments and a dynamic delivery solution which offers package delivery options based on package to package factors such as size; weight; stock availability; location; and customer preference right at the point-of-purchase in the shopping card.
We expect MetaPack will provide a significant acceleration in time to market for our current ecommerce solutions given MetaPack's large carrier library and their international expertise. As mentioned previously, all of the software features and capabilities offered by MetaPack are in demand by traditional retailers because they're trying to compete with Amazon and they're trying to replicate the Amazon customer experience.
Our MetaPack asset has also positioned us very well to begin to take our multi-carrier strategy worldwide. We also expect to bring MetaPack solutions back to the U.S. aggressively. Our 100% sales team will provide MetaPack with a turnkey sales solution with which to pursue the U.S. business market.
Also our significant expertise in marketing in the U.S. will help us build the MetaPack business in the U.S. Additionally, note that because of its European focus, MetaPack significant expertise in ship from store and Pickup Drop-Offs or PUDO will be a huge asset in the U.S. business as the U.S. market also begins to go that direction.
MetaPack solution currently supports more than 250,000 PUDO points worldwide. With the background in some of the most relevant transient shipping, as we look at the next five years, our goal is to position this company for the best long-term outcome as all of these trends play out in shipping.
And as we look to the future of shipping, we no longer see an exclusive partnership with the USPS as the right strategy for Stamps.com. We have to align our organization to be well positioned as the significant changes in the shipping business at core over the next five years.
One of the core principles that our team has always held up is to always focus on what's best for the customer. What is best for our customers today will not likely be what is best for them five years from now. We need to bring the most cost effective, the best the most reliable package services to our customers.
Because if they don’t succeed in shipping their products to their customers, then their business won't succeed and if their business doesn't succeed, then we won't succeed because we lose the customer. When our customers are offered services such as Shipping with Amazon, FedEx one way, UPS's new products, Regional Carriers, Uber Shipping, Ship from Store, and everything else.
We have to bring those solutions to our customers so that they can always choose the best alternative for their business. The USPS is working hard to compete in the ecommerce shipping industry but as we just mentioned they have many constituents and they have many issues to deal with that the more nimble product carriers do not.
As everyone knows, we've been in discussions with the USPS about the renewal of our long-standing revenue share agreement that we utilized to drive their shipping business. We have proposed our terms of renewal to the USPS. One of our nonnegotiable items is that within our significant single carrier efforts offered under the brand name Stamps.com Endicia offered by our large national sale team.
We will no longer be exclusive to the USPS and that's nonnegotiable. USPS has not agreed to accept these terms or any other terms of our partnership proposal. So, at this point we decided to discontinue our shipping partnership with the USPS so that we can fully embrace partnerships with other carriers who we think will be well positioned to win in a shipping business in the next five years.
And we now plan to turn our significant assets such as our technology and product development, our salesforce, our significant marketing budget and our marketing organization towards the focus on partnerships with the carriers that will help our customers succeed over the next five years. We're going to align ourselves with the carriers that we think are going to be the winners in the shipping business.
We will continue to bring USPS products to our customers where it makes sense but in many segments of the business we will start bringing in the more competitive products from other carriers. We are currently in discussions or already have partnerships with all of the major incumbent private carriers and we’re also in discussion with many of the new entrants into the U.S. shipping business.
Note that our decision to discontinue our exclusive partnership with the USPS does not in any way impact our regulatory relationship with them or the products and services we are able to offer our customers. The USPS regulatory group is governed in a separate part of the organization. We will continue to work constructively with them and we will comply with all their requirements as we always have.
We've already begun redirecting the activities of our development teams, of our national salesforce and redirecting our marketing budget and other activities to support our new multi-carrier focused partnership model. The short-term financial impact we experience as we forego our shipping revenue share with the USPS will represent some short-term pay in for us over the next few years.
But as our approach to the changing times plays out over the next five years and beyond, we think those of you who continue to hold our stock for the long run will agree with our change in direction. That being said, we will take some immediate steps in 2019 to help ease the financial burden of this strategy change.
First, we will immediately implement a new volume-based customer surcharge for some of our higher volume customers that are on negotiated service agreements which we refer to as in as a customers. As you may know, all of the private carriers including FedEx and UPS offer their software to their customers for free and they pay the cost of developing and supporting that software by bundling that cost into the shipping they offer when they set their shipping rates.
Our software which is the primary software for the USPS has also typically been free or low-cost in the businesses for these NSA customers as the USPS revenue share has allowed us to make that solution free. The revenue share we received from the USPS helped to fray the significant cost we spend it on technology, on customer support and on customer onboarding.
Since our revenue share partnership has now ended, we will no longer be able to offer our software for free to all of the NSA customers. So, we will be forced to begin charging some customers a surcharge. Today, we begin informing some customers that they will need to pay a surcharge of 3% of their shipping volumes to us in order to help us to fray the cost of their shipping software since the USPS no longer is paying for the software.
Second, we're going to begin aggressively driving the revenue of other carriers where we already have revenue share agreements in place. We're also in various stages of discussion some of which are very advanced with both traditional and nontraditional carriers both domestically and internationally.
The discussions are generally favorable regarding our strong value proposition driven by the strength of our multi-carrier properties, the level and number of our partnerships in our integrations to size and strength of our national salesforce and the scale and the success of our broad marketing programs.
Settling our exclusive relationship with the USPS, has opened up our ability to partner more deeply with other more strategic carriers. Three, we will also bring our multi-carrier offerings into the forefront of our sales process. This is ShipStation, ShippingEasy, ShipWorks and MetaPack and we will be leading with those solutions in the sales calls we make.
Finally, we will continue with the business and continue to sell in market our global advantage program. And that results in revenue to us as we participate in the workshare discount offered by the USPS for international package.
To sum it up, we have built an extraordinary company that is exceptionally well positioned to continue to succeed in a multi-carrier ecommerce shipping industry worldwide. And our decision to discontinue our exclusive partnership with the USPS will have a short-term negative financial impact. However, we have always and will continue to always run the company for the benefit of our customers and our long-term shareholders.
We firmly believe that evolving our strategy to more fully embrace a multi-carrier partnership model is absolutely in the best long-term interest of this company. With that, let me hand the call over to Jeff for more detailed discussion of our financial results in our guidance.
Jeff Carberry
Thanks, Ken. We'll now review our fourth quarter and fiscal 2018 financial results. The discussion of our financial results today includes non-GAAP financial measures. As Ken described, a reconciliation of non-GAAP financial measures to the core spending GAAP measures to be found in our current release and our 2018 matrix on our Investor website.
Total revenue was $170.2 million in Q4; that was up 21% year-over-year versus Q4 '17. And was $536.9 million in 2018 up 25% versus 2017. Total revenue excluding MetaPack was a 155 or 1 million in Q4; that was up 17% year-over-year versus Q4 '17. And was $556.6 million in 2018 and that was up 21% versus '17. The strong growth in revenue in the fourth quarter and for the fifth for the year was primarily driven by strong growth in our mailing and shipping business combined with contributions and MetaPack.
Mailing and shipping revenue was a $165.4 million in Q4 and that was up 29% year-over-year versus Q4 '17 and was $567.3 million in 2018 and that was up 26% versus 2017. Mailing and shipping revenue excluding MetaPack was a $150.3 million in Q4 and that was up 17% year-over-year versus Q4 '17 and was $547.0 million and that was up 22% versus 2017.
The growth advantage in shipping revenue was driven by an increase in ARPU which is primarily driven by strong growth in our mailing and shipping business combined the contributions from MetaPack. We estimate that revenue to rise from our shipping customers as a percentage of total revenue in Q4 above 80% range and to the year-over-year in a mid-30% range.
We estimate that shipping revenue excluding MetaPack in Q4 was below 70% range, that's percentage of total revenue and grow year-over-year into low-20% range. We also estimate that our mailing and shipping revenue derive from our SOHO mailers as a percent of total revenue was in the mid-teens and was approximately flat year-over-year.
Mailing and shipping gross margin was 79.4% in Q4 versus 86.7% in Q4 '17. And was 81% in 2018 versus 86.3% in 2017. The decrease in growth margins was primarily attributable for the scaling of our rational offerings including global manage which could have lower gross margins than our other sort of --. Gross margins were also negatively impacted by the inclusion of MetaPack which under USPS generate a growth margin of approximately 71% in Q4 and approximately 68% for the period August 15th of 2018 through December 31st to 2018.
We experienced year-over-year increases in our Q4 cost of sales and marketing, R&D and G&A primarily related to strategic investments since port for strong growth and innovation in our mailing and shipping business and to the inclusion of MetaPack. Sales and marketing at R&D increased at rates greater than the rate of growth in revenue reflecting our strategic investments while G&A increased at a lower rate, do find weight of the catch up floor or sale tax that we have in the fourth quarter of '17.
Without the catch of accrual in the fourth of '17, G&A would have also increased at a rate greater than our revenue. Non-GAAP operating income was $59.6 million in Q4 another couple of 11% year-over-year versus Q4 of '17 and was $252.2 million in 2018 up 12% versus '17.
Adjusted EBITDA was $71.3 million in Q4 and that was up an 11% year-over-year versus Q4 of '17 and was $258 million in 2018, another 12% to '17. Adjusted EBITDA margin was 41.9% in Q4 versus 48.4% in Q4 '17 and was 44.0% in 2018 versus 49.1% in '17. The decrease in adjusted EBITDA margin was primarily attributable to the following.
Lower gross margins associated with the scaling of our international offerings, higher operating expenses associated with our shipping related investment and finally the inclusion of MetaPack which has lower gross margins. Non-GAAP adjusted income for fully diluted share was $3.73 in Q4 based on a non-GAAP tax benefit rate was 0.7%. That was down 20% year-over-year versus $4.68 per share in Q4 '17 based on a non-GAAP tax centered rate of 41.1%.
Non-GAAP adjusted income for fully diluted share was an $11.78 in 2018 based on a non-GAAP tax expense rate of an 11.7% that was up 4% versus an $11.33 in '17 based on a non-GAAP tax sense rate of 6%. Fully diluted shares used an APS calculation was 18.6 million for Q4 and 18.8 million for 2018. Q4 rating benefited from a reduction of a tax rate for 2018 from our previously estimated 15% to the lower actual tax rate for the year of an 11.7% which was primarily driven by auction exercises in the fourth quarter.
We ended Q4 with $114 million in cash and investments which was up $35 million from the $78 million at the end of Q3 rating. The increase in cash in investment was primarily driven by following: strong operating cash flow and changes in networking capital; and cash from option exercises. And it was partially offset by share repurchases and scheduled debt repayments.
During Q4, we made the prior principle repayment of $2.6 million resulting in total debt under our credit agreement excluding the addition with cost of $61.4 million. During Q4, the company repurchased approximately 531,000 shares and a total cost of approximately $89 million. After 2018, the company had purchased approximately 755,000 shares at a total cost of approximately $135 million.
On January 18th of 2019, the company completed it's on our current board approved reverse plan with a purchase of approximately 152,000 additional shares at a total cost of approximately $25 million. The current plan expired upon completion of the authorized purchase plan of $99 of stock and the board has not authorized it a successor to first plan to the currently expired plan.
That was from the guidance. We expect a 2019 revenue to be in the range of $540 million to $570 million which reflects the elimination of the USPS commission revenue for the entirety of 2019. We expect 2019 revenue continue to be driven by our continued focus on our ecommerce driven shipping business. However, with the elimination of USPS commission revenue, shipping revenue is expected to decline year-over-year.
We would also expect mailing and shipping revenue derive from our SOHO mailers to continue to grow in the flat to low-single digit range year-over-year. Finally, we would expect our customized postage revenue to be down 30% to 40% year-over-year as we expect the 2019 postage rate increase to have a meaningfully negative impact on customer orders for this discretionary product.
We expect operating expenses increase in 2019, reflecting the strategic investments we made in 2018 as well as the additional investments we anticipate making in 2019 as well as the inclusion of MetaPack of course. On a common side basis, we'd expect to see operating expenses as a percent of total revenue increase from approximately 36% in 2018 and 45% to 50% in 2019.
We would also expect to see the impact of investments to be frontloaded given the effect of 2018 headcount investments and MetaPack operating expenses and deeply impacting 2018 while the effect of additional investments in 2019 we intent to make will occur throughout the year. We expect fiscal 2019 adjusted EBITDA to be in the range of a $145 million to a $165 million, which implies a full-year adjusted EBITDA margin in the mid of a 20% range.
And that reflects our headcount investments, the inclusion of MetaPack and our lower revenue expectations associated with the elimination of USPS commission revenue. Similar to our R&D expenses, we would expect the adjusted EBITDA margin impact to be frontloaded for the same reason as we just discussed and the quarter we expect EBITDA margins in the first half of 2018 to be lower than in the back half of 2019.
We expect non-GAAP tax expense will be approximately 30% of non-GAAP pretax income for 2019. Our full-year 2019 effective tax rate could differ from our current estimates based on a number of factors including option exercises. We expect fully diluted shares to be between $18.3 million and $19.1 million in 2019. We expect fiscal 2019 non-GAAP adjusted income for fully diluted share to be in the range of $5.15 to $6.15.
With our increased focus of shipping, we expect our revenues and adjusted EBITDA to exit a seasonality reflective of our customers shipping usage during the year. In particular, we would expect fourth quarter revenue and adjusted EBITDA to be meaningfully higher than other the other three quarters due to the seasonally strong Q4 holiday shipping period and the scaling of our operating expenses.
Finally, we expect capital expenditures to be in the range of $2 million to $4 million in 2019.
So with that, let me hand the call over to Kyle for some additional comments.
Kyle Huebner
Thank you, Jeff. Having recently reached my 20th anniversary with the company, I made the decision to retire as President. I wanted to thank the Board of Directors, Ken; Senior Management Team; and all the employees; and the people who worked in my group for the past 20 years. It's been an honor to work with Ken for that period and with an amazing group of people overall.
I also want to thank our analysts and investors. It was a privilege working with the investment community while serving as CFO for 14 years. I'm excited to stay involved with the company and to help drive the company towards its bright future and worldwide multi-carrier shipping.
And with that, we'll open up for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from George Sutton from Craig-Hallum. Your line is now open.
George Sutton
Thank you. First, Kyle congratulations and enjoyed working with you, good luck.
Kyle Huebner
Thank you, George, you as well.
George Sutton
So, can any negotiations with the U.S. postal service, I assume your concerns of their capacity to perform in the future was met on their side by an inability or a lack of willingness to pay for your performance. Can you discuss the push and pull of those two points in the negotiation. And I assume you did an analysis of the line of benefits from your new partnership opportunities versus the impact you may see from this move sort of kind of a breakeven analysis.
And I'm curious if you did that analysis and what sort of time point you reached on that?
Ken McBride
Sure, George. I mean I think, generally speaking for us as we see the market direction going the way it is and we really see things changing so rapidly, we really see a dramatically different landscape in five years. And so, our goal in this negotiation was first and foremost and overall to set this company up for success in the next five years.
And so, in every discussion we have with the USPS, we were asking for things in our various terms that we're asking for which supported our long-term strategic view. And of course that included financial compensation which we did a tradeoff between the different revenue share relationships we already have in place with some of the other carriers and a potential revenue share relationship with the USPS and we did that financial tradeoff with the understanding that exclusivity with the USPS without the table.
That was a deal killer if that happen. So, we would walk based on that alone because our customers can no longer survive on just USPS and we don’t see that as a viable option for the next five years. Right now as you know we are exclusive to the USPS in our sales efforts when we offer the stamps and Endicia solution in our sales process.
So, it's basically that was our premise, is like no matter what, this company can no longer be exclusive given the trend in the shipping market and with all the various paths we had, that was number one. Obviously the financial tradeoffs and everything else were in there. But in the end the our offer was not accepted and so we decided that it's best to go our own separate ways, we remain partners, so we remain friends and we're still working with the USPS, their products still makes sense and certain segments of the market with certain customers.
So, we haven’t severed our partnership per se in working with them in the segments of the market where they offer solution that's in the best interest of the customer. But in other segments where their solution is not in the best interest of the customer or where perhaps another solution may be as good or better, we are no longer exclusively go into push customers to the USPS, we're not going to put them to other carriers based on essentially the overall goal of how we're focusing on the customer.
Kyle Huebner
The other thing I would add George is I think in terms of the breakeven, that's really was relevant than where are we five years from now. I know we're better off in this new strategic direction. So, I think we always look at the company and the strategy five years out and so that was really the focus of where our segments going to be in five years and are we going to be better positioned and better off five years from now.
George Sutton
You mentioned you were in late sales negotiations with a variety of different partners and carriers. I'm curious with your billions of dollars of postage shipped, I would assume there is somewhat of a feeding frenzy if I'm a potential partner wanting to go after that kind of volume.
Can you give us a sense of your relative position of strength or weakness in these negotiations, again I'm assuming strength given the volume.
Ken McBride
Yes, no. I mean a $11 billion in volume worldwide, that's pretty significant asset that I think any carrier anywhere would be more than happy to accept and covet that type of volume. So, that's really been the day, we've built the business to have that enormous volume by doing the acquisitions and the development and the customer acquisition over the last 20 years.
And we're now in the position where we have that volume. And other carriers certainly very interested in that volume. So, in the end our financial incentives have to be aligned with our customer focused business model, so that in the end you never win by doing anything other than what's right for the customer?
But if what's right for the customer aligns up with what the financial incentives or the company certainly we will move that volume to the right customer solution as well as whatever provides the best financial incentive for the company.
George Sutton
Last question if I could?
Jeff Carberry
Sorry. The only get out of that is the fact that in addition to the volume that's obviously quite attractive, it's the underlying technology, the integrations, the partnerships, the level involved have within the ecommerce ecosystem, through our acquisitions and through our technology development and through our marketing networks, that also critically important and quite attractive obviously for the other carriers.
It's that fundamental aspect that facilitates our customers businesses, that's also was also fundamentally attractive.
Kyle Huebner
And one more thing to add to what Jeff just said which is one of our key assets is our sales team. Our national sales team of over a 100 people and these people are experts in shipping and logistics and software and technology and that capability we can turn and focus on any carrier.
So, to the extent that we decide that a certain carrier has a better solution in a certain segment or that it's financially beneficial for us to drive in other carrier's solutions and products. We can take a 100 people and we can change their commission plan and drive them to drive another carrier tomorrow.
So, that team and that capability is the key asset and one of our big strengths; it took a long time to develop that team and they're very good and it's a very strong asset.
George Sutton
Last question relative to Amazon. You spent a fair amount of time discussing their opportunities in the shipping space which are obviously well documented. You have previously served them as a vendor, you've been a partner of theirs, and they've been a competitor at times.
Where is your potential relationship or current relationship with Amazon?
Ken McBride
Yes. I mean I think you heard us say like Amazon is the powerhouse, the gorilla in ecommerce. And so, we need to work with Amazon and really everybody needs to work with Amazon.
Amazon has an amazing network they built worldwide despite only having 27 going to 40 planes, they are, one analyst report put it as quote they're punching way above their weight in terms of their impact of being able to carry the packages across the country and across the world because really when you look at what they've done is they've built their network from scratch. And they built it in the last few years and they've built it with e-commerce in mind and a lot of the other carriers have networks that are much older.
And so, when Amazon built their network they focused on e-commerce and it's a very powerful network and so they were going to take that network and they're going to offer up the capacity, the excess capacity above their own packages to customers. It's just exactly like they did with AWS.
And so, we are going to work with Amazon, we want to work with Amazon in our multi-carrier solutions. We want them to be one of our portfolio of 40 carriers in the U.S. We want them to be one of our portfolio of 450 carriers worldwide and like we said, we would expect over the next five years that Amazon is going to become a significant force in the shipping business. They're going to do so by coming in with very aggressive pricing and so we have to bring that solution to our customers. They need that solution.
If we don't bring the lowest cost solution to our customers our customers will leave and go somewhere else to get it. So Amazon is a key strategic partnership for us to court and to have in our multi-carrier solutions.
George Sutton
Thanks guys.
Operator
Thank you. Our next question comes from Zach Cummins with B. Riley FBR. Your line is now open.
Zach Cummins
Hi good afternoon. Could you provide a little more color around some of the potential fees or surcharges that you may have to charge some of these vendors that have NSA agreements in place at this point?
Ken McBride
Sure, yes. I mean, it comes down to all the carriers in the market, they offer free software. They go into pitch the customer on their shipping capabilities, their logistics capabilities, their delivery times, the value of what they bring in terms of the cost of the shipping versus the delivery times, the guaranteed delivery. They come in and they pitch their shipping capabilities.
And then, when the customer agrees to use that they do not say, and oh, by the way it's going to cost you X for our software. They say, here install this on your computer and you're up and running. It's a free software solution from all the carriers and up until now the USPS has been free as well because we have made it free for these larger customers in particular because the USPS has paid us that rev-share and of course when they stop paying for the rev-share we can no longer offer a free solution.
So we need to go back and basically tell these customers like since USPS stopped subsidizing your technology, you now have to pay for it and in the end you kind of look at how UPS and FedEx and other organizations get paid for that technology.
They just bundle it into their price and that's what USPS was effectively doing as well is they were bundling into their price and they were taking the turnaround and pay us a percentage of their shipping. So their shipping cost was a little bit higher so they could pay us. And so, what they've done is basically decided not to pay us that fee. So effectively, the customers’ cost is going up by more than their rate increase this year by an additional 3%. So that's just going to be the technology fee that we have to charge because with our significant spend on development and technology in on-boarding and sales, we can't afford to give it away for free, if we're not being paid.
Zach Cummins
Understood and in terms of your guidance for the upcoming year, is there anything from other carrier partnerships that's baked in the guidance or potential relationships that could materialize that could present some potential upside to the guidance you provided?
Jeff Carberry
Well as Ken mentioned, we have some remunerations to some carriers that of course has already baked in. Things that are currently still in negotiation obviously are not baked in on any probability weighted basis. So I think that obviously as we execute on the strategies that can kind of went through today that certainly represents upside for the business for 2019 and beyond. But the budget incorporates really what we currently have on the table in terms of agreements and revenue arrangements and not what we don't currently have but what we expect to have.
Zach Cummins
Understood. And then finally for me, to just clarify is all the USPS transaction revenue that you had in place, is that all gone at this point. So is it fair to almost consider you as a peer subscription business?
Jeff Carberry
No. So as we've talked in the past there are two components to the revenue with regard to USPS volume. The first is our director arrangement with the USPS, which is the commission agreement that we talked about that we've walked away from and is terminated. The others are commercial arrangements with various parties in the ecosystem that support the USPS principally the resellers. So those revenue sharing arrangements still exist. So there is still transactional revenue to use the term that used that's still in our guidance and our numbers, but to be clear the commission component which is our direct relationship with post office on a revenue basis that has now gone.
Zach Cummins
Understood, that's helpful. Well thanks again for taking my questions.
Operator
Thank you. Our next question comes from Tim Klasell with Northland Securities. Your line is now open.
Tim Klasell
Hi guys and my congratulations Kyle, well good to hear you’ll still be around for a little while. First question, the way I understand it is, you had multiple contracts with the USPS they came up for negotiation at various different times. Have all those been bundled or all those sort of the direct fees from the USPS all being terminated at the same time or will that be sort of a phased or gradual thing? Thank you.
Ken McBride
Now there are a variety of engagement agreements with the USPS. The principal revenue agreement is the commission agreement and that is gone. There are other more what I would call more operating agreements and to be clear as well our PC posters license that of course continues. That's completely separate. So this is really just the direct revenue sharing arrangement with the USPS. That is at issue today, the other agreements I would not expect to have any issue with.
Tim Klasell
And is it possible in the back and forth that the USPS comes to some form of agreement with you or do you think it's a done issue at this point?
Ken McBride
Well I mean, like I said it's a done issue for us unless exclusivity is taken off the table because we have to embrace other carriers now. We can't afford to continue to just be exclusive to the USPS. It's just not in the best interest of our customers and in the end if our customers can't receive the best solution, don't get the best offer in the market then they will leave us and in the end we will lose no matter what.
So exclusivity is off the table. That's been a real sticking point and you can always, somebody can always come back to the table, but at this point we've walked and we have no expectations that we will have an agreement going forward.
Tim Klasell
Fair enough. Then you mentioned the fee, the volume fee that you're going to charge for some of the larger shippers I believe it was 3% if I wrote this down correct. Do you think the USPS will compensate them for that so it's relatively neutral to those large volumes, those large shippers or do you think they will basically get hit with an extra 3% fee? Thanks.
Ken McBride
I mean, certainly they could go start paying those customers direct and they could turn around and sign the check over to us. I mean, it seems kind of an odd thing to do, but they could approach it that way. In the end, in order to compete in the market, you really need free software and so it will confuse the sales process for the USPS to have to say, hey use our solution and these are all the reasons why we're better than other carriers.
But once you agree to use it here's another fee on top of that that you'll have to pay because the technology isn't free. Certainly a more confusing sales cycle and I think that that will cause them to have more issues when they go in to accounts up against FedEx and UPS you don't have to say that.
So certainly will be an encumbrance to their sales process. It really makes no sense but in the end UPS and FedEx pay for their solutions by spending money on development and then they bundle the cost of that solution into their shipping rates. And up until now that's what the USPS did as well, but they've decided to walk away from that and so there will be a little bit more of a confusing message in the market but that's what they've decided to do.
Tim Klasell
And then sort of as we jump over to the other carriers out there UPS, FedEx and others do you believe that they will ultimately sort of use your software as their solution, you would in essence sort of be developing it for free?
And then well, sort of the follow-on to that could there be, what sort of a rev-share if you will. Are they proposing, are you guys negotiating with them, is it similar to what you've been – the agreement you had with the USPS or the similar, maybe you could help us understand how those commercial relationships will develop? Thanks.
Ken McBride
Yes. I mean, I think as you look at what offering in the market makes the most sense for e-commerce it's really our multi-carrier solutions depending on who you are, it could be ShipStation, it could be ShippingEasy, it could be ShipWorks and if you're a large retailer could be MetaPack for that type of segment. So, I think the carriers will want to offer the best solution to the customer and the best solution for e-commerce is ShipStation, ShippingEasy, ShipWorks and MetaPack.
And so, when we go into these accounts with UPS or FedEx or any other carriers Amazon or the regional carriers all of the carriers as we approach these accounts if that shipping solution makes sense for that customer and we sell them on moving their volume to that carrier, we will couple that with an offer for utilizing ShipStation or ShippingEasy or ShipWorks depending on what that customer need in their operations is. So, ultimately we expect that the offer for technology will be one of our multi-carrier solutions.
Tim Klasell
And then one final question, why now obviously this has been something that's been percolating out there for a while. Was there a specific event that caused you to make this move now or maybe can help us understand that? Thank you.
Ken McBride
Well yes, I mean something pretty significant happened in the last month which is Amazon came out and they said, hey we're going after shipping and it was the first time they publicly acknowledged that. There were some rumors and questions and statements in Wall Street Journal articles that kind of hinted that this may happen but then Amazon came out and said it point blank. This is one of our four focus areas and we're now competing in the shipping market and in fact they in their 10-K for the first time they included shipping and logistics as one of the markets they compete in that got filed last week.
So Amazon has announced that they're now in air and shipping and we expect them to be based on their track record and the industries they've gone after and the mile long list of companies that they've managed to disrupt and drive down to, in some cases zero revenue we expect them to be very successful in the market. So that is a big catalyst for us demanding that we remove the exclusivity from our agreement and that's where the talks broke down.
Tim Klasell
That's very helpful. Thank you.
Operator
Thank you. Our next question comes from Allen Klee with Maxim Group. Your line is now open.
Allen Klee
Yes hello. If you could take a shot at this new base revenue run rate, if we were to look out five years and you were able to meet your goals what do you think kind of a revenue growth rate and margins, how margins could be, how would you view that?
Jeff Carberry
Yes that's – it's a very good question. I think at the end of the day when you look at what fundamentally underpins our business, our e-commerce trends that's what we're correlated with. So if you're looking longer-term once we have additional revenue deals in place whatever those economics may be. Ultimately, what that growth and revenue is going to be predicated on is and correlated with is going to be e-commerce trends and those look to be systemically quite strong.
I mean, we're seeing e-commerce trends in the U.S. in the mid-teens or in Eurostats, the European Union is growing sales at about 17% last year and that's been growing in the mid-teens as well for the last several years. So you're looking at strong fundamentals that underpin our business that being e-commerce consumption. So you also look at our business when we were a purely subscription-based that was quite a bit of time in history now, but we were growing 10% to 15% and had EBITDA margins of around 30%.
So if you look at the fundamentals of our business and the underpinnings of what ultimately drives our business with our laser focus on shipping, I think the future that business is extraordinarily bright. As Ken mentioned it's going to be a few years here where obviously things are going to be challenged from a financial standpoint relative to our historical performance and given the realignment of our strategies which will take time to effectuate and given the size of the commission revenue obviously it'll take some time. But in terms of a five-year window and growth rates and margin profile I think that window looks extraordinarily bright.
Ken McBride
Well, I would just add that I think there's a new, over the next five years U.S. market aside which we have all the trends that we talked about in the U.S. market in terms of Amazon and the other carriers getting much more aggressive. The uprising of regional carriers and the new entrants to the market, lot of dynamics happening in just the U.S. market.
When you look at the international market, it's kind of a greenfield for us. There is no solution out there like ShipStation or ShippingEasy or any of our multi-carrier properties. There is nothing as we look worldwide that solution doesn't exist. And like I mentioned, in order to have that solution and market that solution in all of the European countries and really worldwide, you can't do that unless you have a very broad carrier portfolio for instance in the UK in order to market a product like ShipStation, we have to support those 85 carriers for that specific market.
And we also have to support all the consumer demands and preferences like the pickup, drop-off and the ship from store that market in the UK as an example is a lot more complicated from just the sheer size carriers and the way the network works and the customer preferences, market is very different. And because of our MetaPack acquisition we think we have an incredible first mover advantage in that market as we pair ShipStation and its incredible UI and capabilities on the frontend with MetaPack and its very broad carrier library on the backend, we put those two together and we have a solution for really every market in the world where we want to go after where it makes sense.
And so that in the next five years is a brand new opportunity. If you look at the US like where we are today really USPS focused, USPS the 20 billion a year in shipping and as you look worldwide, the worldwide market for shipping is 260 billion. So you can see the total addressable market going up dramatically for this company as we focus on worldwide multi-carrier shipping.
Allen Klee
Thank you and then I'm not sure if you mentioned this, but what does your guidance imply then for gross margins and operating margins?
Jeff Carberry
So for EBITDA margins it implies mid upper 20% range and then obviously compression on the gross margin side as well, given the elimination of the commission revenue as well as the lower gross margin for a file of MetaPack. So, congressionable.
Allen Klee
And then, you used up your buyback and you didn't reauthorize it, what's the rationale behind that? Is there a consideration may be to up it again?
Ken McBride
Yes I know, I think the board is -- there was no sense of urgency in terms of opting it again. I think some of the changes in the business model I think we just wanted to kind of get those out there and explain them given some of the dramatic changes we didn't feel like we could really implement a new repurchase plan until those changes are discussed publicly. So now that they are, we'll go back and revisit our repurchase plan with the board.
Allen Klee
Thank you so much.
Operator
Thank you. And our next question comes from Kevin Liu with K Liu & Company. Your line is now open.
Kevin Liu
Hi, good afternoon. I have a point of clarification. When you're talking about the exclusivity that was in place with the USPS, was that something that's always been present or are you now only reaching agreements with other carriers because you terminated the contract?
Ken McBride
That's always there, so we have five brand, well six I guess. We have Stamps.com, we have Endicia, ShippingEasy, ShipWork, ShipStation, and now MetaPack and so the exclusivity we had was for the offering of our USPS only solutions which are offered under the brands Stamps.com and Endicia. And so those were the solutions we led within the sales process with our 100 salespeople, those are the solutions we offer to the customer we would go into these accounts and once we convinced them to use the USPS the offer would be and here's your Stamps.com or Endicia software in order to implement that for free of course.
And so, as we go forward we will be leading with other carriers and ShipStation or ShippingEasy or ShipWorks like I mentioned each of those products has a different feature set and a different capability. But we weren't able to do that with under the exclusivity. Our products, our Stamps and Endicia products had to be USPS only and so now as we go into these accounts, we can lead with any of our brands that include any carriers and it's really whatever suits the customer best in our sales process as we push other carriers, we offer whatever products suits that customer best.
We can now support other carriers within the Stamps.com and Endicia products and so it really untied our hands to be able to focus on what is really in the best interest of the customer both from a package perspective and also from a technology perspective.
Kevin Liu
Understood and for one of your multi carrier solutions, you guys do have a USPS NSA would [indiscernible] able do that for the remainder of the multi carrier solutions or those kind of the current status of your relationship with the USPS will put that in doubt?
Ken McBride
Yes, now we do, we've been transparent about one of our properties. ShippingEasy has a NSA agreement with the USPS and that agreement is really between ShippingEasy and the USPS. In our other properties we work with the third-party resellers and we receive revenue share in working with them like any other partner.
In order to align our interests with our partnerships in the reseller market, we get a share of their revenue. So it's really only the ShippingEasy solution where we have a direct negotiated service agreement with the USPS.
And by the way that product is primarily, the volume in that product is almost exclusively USPS. So that organization even though it's multi-carrier really focuses on driving USPS volume.
Kevin Liu
Understood and I'm sure you probably won't provide this specific number around this. But any sense you can give us in terms of what percentage of your customer postage printed is tied to the larger folks with negotiated service agreements that you don't have to pay the surcharge?
Ken McBride
Yes, I'm afraid Kevin, we really can't break that detail out.
Kevin Liu
And then, just lastly for me what's kind of assumed for MetaPack contribution to your fiscal 2019 revenue guidance?
Ken McBride
Yes, so we don't break about separately in guidance. But if you look at the results and you kind of annualize the results which obviously is public as a segment and our filings will be in the upcoming K. You're looking at revenue between $50 million and $60 million on a U.S. dollar basis assuming static FX rates. So we don't break it out separately but looking at year-to-date results, one could extrapolate at $50 million to $60 million business.
Kevin Liu
Understood. Thanks for taking those questions and Kyle great working with you over the years.
Kyle Huebner
Thank you Kevin and great working with you too.
Ken McBride
Thanks Kevin.
Operator
Thank you and I am showing no further questions at this time. I'd like to turn the call back over to Ken McBride, CEO for any closing remarks.
Ken McBride
Thanks everyone and thanks for sticking with us for an hour and 40 minutes. And so, if you have any follow-up questions as always you can contact us through our Investor Relations website, investor.stamps.com or you can call our Investor Relations number at 310-482-5830. Thank you and congratulations Kyle.
Kyle Huebner
Thank you, Ken.
Operator
Ladies and gentlemen, thank you for your participation in today's conference. This does conclude your program and you may all disconnect. Everyone have a great day.
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