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

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

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(1)	Our solutions allow customers to easily access more than 450 regional, national and international carriers;

(2)	Our solutions integrate with more than 300 partners including shopping carts, marketplaces, e-commerce tools and various other software products;

(3)	Our solutions provide customers with advanced order management features including inventory management, combined and split orders, order filters and alerts;

(4)	Our solutions provide customers with sophisticated automation features such as custom hierarchical rules, batch processing, packing slips, customs forms and emails;

(5)	Our solutions provide customers with robust product management features including product catalog support and product categorization support; and

(6)	Our solutions provide customers with a variety of other features including customer marketing, end-to-end package tracking, rate comparisons, and returns labels.

(1)	Our solutions provide customers with access to discounted carrier rates including from USPS and UPS;

(2)	Our solutions allow customers to optimize carrier services by selecting the lowest cost option based on package size, weight, destination distance and delivery times; and

(3)	Our solutions allow customers to reduce their customer support costs by automatically generating and sending package delivery status emails to customers.

(1)	Our USPS solutions allow customers to receive discounts on single piece First Class letter postage rates and most USPS packages compared to USPS post offices and other retail USPS locations;

(2)	Our USPS solutions allow customers to calculate the exact amount of postage that is required for a mail piece or package depending on mail class, mail form, weight and distance to the destination which allows our customers to avoid overpaying for postage;

(3)	Our USPS solutions allow customers to automatically check and validate destination addresses against the USPS address database so customers do not waste postage on undeliverable-as-addressed mail;

(4)	Our USPS solutions provide customers with advanced reporting and administrative controls that improve the tracking and control of postage spend allowing customers to proactively manage and reduce their postage spend; and

(5)	Our USPS solutions allow customers to save up to 50% or more versus the total cost of an entry or mid-level traditional postage meter. The total cost of a traditional postage meter can include hardware rental fees, including items such as a postage meter and scale, maintenance and repair costs, insurance fees, fees to purchase postage and the cost to purchase proprietary ink cartridges.

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(1)	Our USPS solutions allow small business customers to mail or ship from their home, office, warehouse or business 24 hours a day, 7 days a week avoiding the time that would ordinarily be spent on a trip to the post office or other retail shipping locations;

(2)	Our USPS solutions allow customers to generate mass mailings quickly and easily by printing the address and postage together in a single step process. In addition, printing the address and postage together saves customers time on a single mail piece or package by combining a two-step process into a one-step process that produces more professional looking mail;

(3)	Our USPS solutions integrate with most small business productivity applications such as word processors, financial applications and address books so our customers can save time by utilizing these integrations to print postage through their existing applications; and

(4)	Our USPS solutions provide customers with advanced reporting so they can easily access and manage their records in one place. This reporting also provides greater visibility into postage activity compared to other USPS solutions such as post offices and traditional meters.

(1)	Affiliate Channels. We utilize the traffic and customers of smaller websites and other businesses or individuals that are too small to qualify for a partnership directly with us by offering financial incentives for these small businesses and individuals to drive traffic to our website through a third party affiliate management company;

(2)	Direct Mail. We send direct mail pieces to prospective customers with prospect lists purchased from third parties or obtained from partners;

(3)	Direct Sales. We utilize a direct sales force that sells our mailing and shipping solutions to large enterprises and higher volume shippers;

(4)	Offline Marketing Programs. We utilize various other offline advertising and marketing programs including telemarketing, tradeshows, retail and other programs;

(5)

Partnerships. We work with strategic partners in order to leverage their website traffic, marketing programs and existing customer base to distribute our mailing and shipping software. For example, these partnerships may result in a link to our website from a partner’s website, a copy of our software included along with a partner’s software product, the distribution of our software at a retail location or the bundling of our software with a hardware device;

(6)	Remarketing. We remarket our solutions to former customers. Our remarketing efforts are generally focused on new features that may relate to the reasons former customers stopped using our service. We utilize email and regular mail to communicate new features of our products to our former customers;

(7)	Shipping Integrations. We market our solutions through partner integrations with e-commerce platforms, multi-carrier shipping management solutions, shopping cart software and other order-entry management applications;

(8)	Traditional Media. We utilize television commercials and a variety of traditional and internet-based radio endorsements to advertise our solutions;

(9)	Online Advertising. We work with companies to advertise our services online through paid searches, banner ads, permission-based emails and other online advertising vehicles; and

(10)	Carrier Referrals. We market to USPS and other carrier account managers with the goal of receiving customer referrals.

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(1)	Direct Sales. Direct sales where we target businesses and not-for-profit organizations for high volume orders;

(2)	Online Advertising. Online advertising including paid search and other online advertising methods;

(3)	Partnerships. Partnering with various entities, including partnerships with online portals for photograph management and personalized products and services; and

(4)	Marketing. Marketing to customers who have purchased customized postage in the past.

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•	subject us to significant fines, penalties, criminal and civil lawsuits, forfeiture of significant assets, and other enforcement actions in one or more jurisdictions;

•	result in additional compliance and licensure requirements;

•	increase regulatory scrutiny of our business;

•	restrict our operations; and

•	force us to change our business practices, make product or operational changes or delay planned product launches or improvements.

•	expose us to significant liability;

•	impose significant costs;

•	require us to expend substantial resources;

•	increase the cost and complexity of compliance;

•	damage our brands and business;

•	make our products and services less attractive;

•	result in the loss of customers;

•	limit our ability to grow the business;

•	adversely affect our results of operations; and

•	harm our reputation.

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•	to develop, license or acquire leading technologies useful in our business;

•	to enhance our existing services;

•	to develop new services or features and technology that address the increasingly sophisticated and varied needs of our current and prospective users; and

•	to respond to technological advances and emerging industry and regulatory standards and practices in a cost-effective and timely manner.

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•	political instability, and the possibility of deteriorating relationships involving countries in which we operate;

•	the imposition of new or modified international trade restrictions, tariffs, import and excise duties or other taxes;

•	import and export requirements, including restrictions on sales to certain end customers;

•	restrictions on foreign ownership and investments, including potential intervention by the Committee on Foreign Investment in the United States (CFIUS) or by other applicable administrative review boards to block strategic transactions that might otherwise be in shareholders’ interests;

•	restrictions on repatriation of cash earned in foreign countries;

•	changes in local political, economic, social and labor conditions;

•	a less developed and less certain legal and regulatory environment in some countries, which, among other things, can create uncertainty regarding contract enforcement, intellectual property rights and liability issues; and

•	inadequate levels of compliance with applicable anti-bribery laws, including the Foreign Corrupt Practices Act.

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•	the costs of our marketing programs to establish and promote our brands;

•	the demand for our services and products;

•	our ability to develop and maintain strategic distribution relationships; the number, timing and significance of new products or services introduced by us and by our competitors;

•	our ability to develop, market and introduce new and enhanced products and services on a timely basis;

•	the level of service and price competition;

•	our operating expenses;

•	USPS regulation and policies relating to PC Postage;

•	the modification or termination of financial compensation arrangements with the USPS, strategic business partners and other carriers; and

•	general economic factors.

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•	disruption of our ongoing business, including loss of management focus on existing businesses;

•	impairment of other relationships;

•	variability in revenue and income from entering into, amending, or terminating such agreements or relationships; and

•	difficulty integrating under the commercial agreements.

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•	disruption of our ongoing business, including loss of management focus on existing businesses;

•	problems retaining key personnel;

•	additional operating losses and expenses of the businesses we acquired or in which we invested;

•	the potential impairment of tangible and intangible assets and goodwill, including as a result of acquisitions;

•	the potential impairment of customer and other relationships of the company we acquired or in which we invested or our own customers as a result of any integration of operations;

•	the difficulty of completing such transactions and achieving anticipated benefits within expected timeframes, or at all;

•	the difficulty of incorporating acquired operations, technology, and rights into our offerings, and unanticipated expenses related to such integration;

•	the difficulty of integrating a new company’s accounting, financial reporting, management, information and information security, human resource, and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented;

•	for investments in which an investee’s financial performance is incorporated into our financial results, either in full or in part, the dependence on the investee’s accounting, financial reporting, and similar systems, controls, and processes;

•	the difficulty of implementing at companies we acquire the controls, procedures, and policies appropriate for a larger public company;

•	the risks associated with businesses we acquire or invest in, which may differ from or be more significant than the risks our other businesses face;

•	potential unknown liabilities associated with a company we acquire or in which we invest; and

•	for foreign transactions, additional risks related to the integration of operations across different cultures and languages, and the economic, political, and regulatory risks associated with specific countries.

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•	require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other elements of our business strategy and other general corporate purposes, including share repurchases and payment of dividends;

•	increase our vulnerability to adverse changes in general economic, industry and competitive conditions;

•	limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;

•	restrict us from exploiting business opportunities;

•	make it more difficult to satisfy our financial obligations, including payments on our indebtedness;

•	make it more likely that we experience an event of default or other event that could result in the acceleration of our obligations to repay our indebtedness;

•	place us at a competitive disadvantage compared to our competitors that have less indebtedness;

•	limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes; and

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adversely affect our financial results as the interest rate on our current debt is subject to changes in the London Interbank Offered Rate (LIBOR) and changes in certain financial measures, and the interest rate on any indebtedness we may incur in the future may be subject to similar interest rate changes and thus could increase in future periods. The LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform, which may cause LIBOR to disappear entirely after 2021 or to perform differently than in the past, and while we expect that reasonable alternatives to LIBOR will be implemented prior to the 2021 target date, we cannot predict the consequences and timing of these developments, and they could include an increase in our interest expense and/or a reduction in our interest income.

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•	changes in jurisdictions in which our profits are determined to be earned and taxed;

•	the resolution of issues arising from tax audits;

•	a lack of, or decrease in, exercises of employee stock options;

•	changes in the valuation of our deferred tax assets and liabilities, and in deferred tax valuation allowances;

•	adjustments to income taxes upon finalization of tax returns;

•	increases in expenses not deductible for tax purposes, including impairments of goodwill;

•	changes in available tax credits;

•	changes in our ability to secure new or renew existing tax holidays and incentives;

•	changes in U.S. federal, state, or foreign tax laws or their interpretation; and

•	changes in accounting standards.

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•	difficulties and costs associated with staffing and managing foreign operations;

•	management distraction;

•	political or social unrest and economic instability;

•	compliance with U.S. laws such as the Foreign Corrupt Practices Act, export controls and economic sanctions, and local laws prohibiting corrupt payments to government officials;

•	difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions;

•	regulatory requirements or government action against our services, whether in response to enforcement of actual or purported legal and regulatory requirements or otherwise, that results in disruption or non-availability of our services in the applicable jurisdiction;

•	less favorable foreign intellectual property laws;

•	adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain;

•	fluctuations in currency exchange rates, against which we do not use foreign exchange contracts or derivatives to hedge, and which could impact revenues and expenses of our international operations and expose us to foreign currency exchange rate risk;

•	profit repatriation and other restrictions on the transfer of funds;

•	differing payment processing systems as well as consumer use and acceptance of electronic payment methods, such as payment cards;

•	new and different sources of competition;

•	low usage and/or penetration of internet-connected consumer electronic devices;

•	different and more stringent user protection, data protection, privacy and other laws, including data localization requirements;

•	availability of reliable broadband connectivity and wide area networks in targeted areas for expansion; and

•	integration and operational challenges as well as potential unknown liabilities in connection with companies we may acquire or control.

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•	variations in our operating results;

•	variations between our actual operating results and the expectations of securities analysts investors and the financial community;

•	sales by stockholders holding larger blocks of our stock;

•	announcements of developments affecting our business, systems or expansion plans by us or others; and

•	market volatility in general.

•	authorizing our board of directors to issue “blank check” preferred stock without stockholder approval;

•	providing for a classified board of directors with staggered, three-year terms;

•	prohibiting us from engaging in a “business combination” with an “interested stockholder” (as such terms are defined in Section 203 of the Delaware General Corporation Law) for a period of three years after the date of the transaction in which the person became an interested stockholder unless certain provisions are met;

•	prohibiting cumulative voting in the election of directors;

•	requiring a two-thirds vote of our outstanding shares to amend our bylaws;

•	affording the ability to call special meetings of stockholders exclusively to our board of directors; and

•	establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

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•	issue additional equity securities that would dilute our stockholders;

•	use cash that we may need in the future to operate our business; and

•	incur additional debt or refinance existing debt that could have terms unfavorable to us or that we might be unable to repay.

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ITEM 2.	PROPERTIES.

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ITEM 4.	MINE SAFETY DISCLOSURES.

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ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

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ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

ITEM 9B.	OTHER INFORMATION.

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ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11.	EXECUTIVE COMPENSATION.

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES.

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ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

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(1)	Incorporated herein by reference to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 26, 1999 (File No. 333-77025).

(2)	Incorporated herein by reference to Amendment No. 1 to the Company’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on May 13, 1999 (File No. 333-77025).

(3)	Incorporated herein by reference to the Company’s Form 10-Q filed with the Securities and Exchange Commission on November 9, 2018 (File No. 000-26427).

(4)	Incorporated herein by reference to Amendment No. 4 to the Company’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on June 22, 1999 (File No. 333-77025).

(5)	Incorporated herein by reference to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 28, 1999 (File No. 333-81733).

(6)	Incorporated herein by reference to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 30, 2000 (File No. 333-33648).

(7)	Incorporated herein by reference to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 1, 2000 (File No. 333-42764).

(8)	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).

(9)	Incorporated by reference to the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 28, 2017 (File No. 333-216990)

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(11)	Incorporated herein by reference to the Company’s Form 10-Q filed with the Securities and Exchange Commission on August 8, 2008 (File No. 000-26427).

(12)	Incorporated herein by reference to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 15, 2010 (File No. 000-26427).

(13)	Incorporated herein by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 30, 2018 (File No. 000-26427).

(14)	Incorporated herein by reference to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 28, 2010 (File No. 333-168360).

(15)	Incorporated herein by reference to the Company’s Form 10-Q filed with the Securities and Exchange Commission on November 8, 2010 (File No. 000-26427).

(16)	Incorporated herein by reference to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 14, 2012 (File No. 000-26427).

(17)	Incorporated herein by reference to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 1, 2017 (File No. 000-26427).

(24)	Incorporated herein by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on August 21, 2018 (File No. 000-26427).

(26)	Filed with, or furnished to, the Securities and Exchange Commission with this Annual Report on Form 10-K.

+	Confidential treatment requested and received as to certain portions.

ITEM 16.	FORM 10-K SUMMARY.

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Stamps.com® is a leading provider of Internet-based mailing and shipping solutions in the United States (U.S.) and Europe. Our portfolio of solutions are marketed under the brand names Stamps.com®, Endicia®, MetaPack®, ShippingEasy®, ShipEngine®, ShipStation®, and ShipWorks®. Our software solutions allow customers to print mailing and shipping labels for multiple carriers around the world through downloadable software, web-based user interfaces (UIs) and application programming interfaces (APIs). Our solutions provide our customers with access to discounted carrier rates for select carriers, including USPS® and UPS® and advanced functionality users can leverage for both improved operational efficiency and financial savings.  Our customers primarily include small businesses, home offices, medium-size businesses, large enterprises, e-commerce merchants, large retailers and high volume shippers including warehouses, fulfillment houses and omni-channel retailers.

Basis of Consolidation

The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of Stamps.com Inc. and the entities in which we have 100% voting and/or economic control. In August 2018, we completed our acquisition of 100% of the outstanding shares of MetaPack. Please see Note 3 - “Acquisitions” in our Notes to Consolidated Financial Statements for further description. References in this Report to "we" "us" "our" or "Company" are references to Stamps.com Inc. and its 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. 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. There are significant estimates and judgments inherent in the preparation of the consolidated financial statements including the fair value of assets and liabilities for allocation of the purchase price of companies acquired.

Prior Period Reclassifications

Certain amounts in prior periods have been reclassified to conform with current period presentation.

Accounts Receivable

Our accounts receivable relate to mailing and shipping services, postage purchasing and invoicing, customized postage sales, and branded insurance provided to customers prior to billing and other receivables. Accounts receivable are recorded at the invoiced amount, net of allowances for uncollectible accounts of approximately $6.9 million and $6.6 million as of December 31, 2019 and 2018, respectively.

We evaluate the collectability of our accounts receivable 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. For all other customers, we recognize allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and our historical experience. If the financial condition of our customers deteriorates, resulting in their inability to make payments, additional provisions are recorded in that period. Accounts receivable are written off against the allowance for uncollectible accounts when we determine amounts are no longer collectible. There were no material write offs against the allowance for uncollectible accounts during fiscal 2019 and 2018, respectively.

Increases in allowance for doubtful accounts totaled approximately $0.4 million and $2.6 million for 2019 and 2018, respectively.

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Advertising and Trade Show Costs

Advertising expense, which includes direct mail, online, radio, television, and others, is recorded in sales and marketing expense on the consolidated statements of operations. We expense the costs of producing advertisements as incurred, and expense the costs of communicating and placing the advertising in the period in which the advertising space or airtime is used. For the years ended December 31, 2019, 2018 and 2017, advertising and trade show costs were $60.9 million, $51.6 million, and $45.0 million, 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. Acquisition-related expenses are recognized in our consolidated financial statements as incurred.

Contingencies and Litigation

In the ordinary course of business, we are subject to various 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.

Cash Equivalents and Investments

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.

Our cash equivalents consisted of money market funds at December 31, 2019 and 2018. Cash equivalents are carried at cost, which approximates fair value.

There were no material investments at December 31, 2019 or 2018. Realized gains and losses are reflected in interest and other income, net while unrealized gains and losses are recorded in accumulated other comprehensive income as a component of stockholders’ equity.

Concentration of Risk

Our cash and cash equivalents are potentially subject to concentration of credit risk. Cash and cash equivalents are placed with financial institutions that management believes are of high credit quality in order to mitigate this risk. From time to time, cash and cash equivalents held with financial institutions may exceed Federal Deposit Insurance Corporation insurance limits.

Our outstanding borrowings under our Credit Agreement are subject to market risk, primarily interest rate risk. Interest rate fluctuations impact the interest expense incurred on borrowings under the Credit Agreement, as the interest rate is based on the London Interbank Offered Rate (LIBOR).

During 2019, 2018 and 2017, we did not recognize revenue from any one customer that represented 10% or more of revenues.

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Cost of Revenue

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 and the related costs of shipping and handling. For the periods presented prior to October 1, 2018, the cost of insurance revenue principally consists of parcel insurance offering costs through our third party insurance providers as described in the Revenue Recognition section below. Cost of customized postage revenue principally consists of the face value of postage, customer service, image review costs, and printing and fulfillment costs.

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 $6.3 million of revenue recognized in the year ended December 31, 2019 was included in the deferred revenue balance at December 31, 2018. Approximately $2.9 million of revenue recognized in the year ended December 31, 2018 was included in the deferred revenue balance at December 31, 2017.

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 Company’s outstanding debt held by third party financial institutions is carried at cost, adjusted for debt issuance costs. 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 Note 6 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 U.S. 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 U.S. dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the period.

General and Administrative

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

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. 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. 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.

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Goodwill is reviewed for impairment annually on October 1 utilizing either a qualitative assessment or a two-step process. 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. When we perform the two-step process, the first step requires us to compare the fair value of 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 the 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 December 31, 2019, 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, 2019, October 1, 2018, or October 1, 2017 reviews.

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 December 31, 2019, 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, 2019, October 1, 2018, or October 1, 2017 reviews.

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.

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 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.

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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 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.

Inventories

Inventories consist of finished products sold through our supplies stores and are accounted for using the lower of cost (first-in, first-out method) or net realizable value. Inventories reported as a component of other current assets on the consolidated balance sheets were $3.9 million and $3.8 million at December 31, 2019 and 2018, respectively.

Leases

On January 1, 2019, we adopted a new lease accounting standard (ASC Topic No. 842, Leases) (Leases) that sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors. For information regarding the impact of adoption, see “Summary of Significant Accounting Policies - Accounting Guidance Adopted in 2019.”

Under 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 our leases do not provide an implicit rate, the interest rate used to determine the present value of future lease payments is an estimated incremental borrowing rate. Many of our 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 and liabilities.

We also elected to recognize the associated lease payments for leases with an initial term of 12 months or less in the consolidated statements of operations on a straight-line basis without recognizing a ROU asset or liability.

Operating leases are included in lease right-of-use assets, current portion of lease right-of-use liabilities, and long-term portion of lease right-of-use liabilities on our consolidated balance sheets. Operating lease expense is recognized on a straight-line basis over the lease term in income from operations on our consolidated statements of operations.

Net Income per Share

Net income per share represents net income attributable to common stockholders divided by the weighted average number of common shares outstanding during a reported period. The diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options (commonly and hereafter referred to as “common stock equivalents”), were exercised or converted into common stock. Diluted net income per share is calculated by dividing net income during a reported period by the sum of the weighted average number of common shares outstanding plus common stock equivalents for the period.

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

	Year Ended December 31,
	2019				2018				2017
Net income	$	59,229			$	168,642			$	150,603
Basic - weighted average common shares	17,260				17,952				17,099
Dilutive effect of common stock equivalents	535				810				1,288
Diluted - weighted average common shares	17,795				18,762				18,387
Earnings per share:
Basic	$	3.43			$	9.39			$	8.81
Diluted	$	3.33			$	8.99			$	8.19

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

	Year Ended December 31,
	2019			2018			2017
Anti-dilutive stock options	1,940			285			22

Other Current Assets

Other current assets principally consist of prepayments for postage and shipping labels and inventory. Prepayments for postage and shipping labels totaled $17.4 million at December 31, 2019 and $4.8 million at December 31, 2018.

Other Liabilities

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

Research and Development Costs

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

Revenue Recognition

We recognize revenues when we transfer control of promised goods or services to our 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 rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is 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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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, 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 have been, and in the future potentially could 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 same month that the relevant labels are printed; (3) we may earn revenue from customers when they purchase postage, print shipping labels or 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 revenue that may take the form of some or all of the spread between the rate a customer pays and the rate the carrier or integration partner receives, either charged directly or paid by our 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, 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 2019, 2018 or 2017.

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.

During the second quarter of 2019, we became aware of potential adverse amendments, renegotiations, changes, or termination of certain contracts between the USPS and certain of our strategic partners who are part of the USPS’s reseller program, and through which we derive material revenues and profits. During the fourth quarter of 2019, we became aware that the USPS successfully renegotiated with certain of their reseller partners. While we no longer expect adverse amendments, renegotiations, changes, or termination of these contracts in the foreseeable future, the risk of such events remains.

Product revenue 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. Beginning on October 1, 2018, insurance revenue represents the amount we receive from customers net of the costs paid to our insurance providers. For the periods presented prior to October 1, 2018, insurance revenue represented the gross amount charged to the customer for purchasing insurance and the insurance cost of revenues represented the amount paid to our insurance providers. We recognize insurance revenue on insurance purchases upon the ship date of 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 customized postage sheets and rolls is recognized upon transfer of control of the product to the customer, which occurs upon our delivery to the carrier.

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 2019, 2018 or 2017.

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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. Ongoing marketing programs include the following: traditional advertising, partnerships, customer referral programs, customer re-marketing efforts, telemarketing, direct sales, direct mail, and online advertising.

Segment Information

Our operations consist of two segments: Stamps.com and MetaPack. Please see Note 13 - “Segment and Geographical Information” in our Notes to Consolidated Financial Statements for further description. 

Short-Term Financing Obligations

We utilize short-term financing, which is separate from our debt as described in Note – 7 “Debt,” to fund certain Company operations. Short-term financing obligations are included in accounts payable and other current liabilities in the accompanying consolidated balance sheets. As of December 31, 2019, we had $1.0 million in short-term financing obligations and $69.5 million of unused credit. As of December 31, 2018, we had $23.8 million in short-term financing obligations and $96.7 million of unused credit.

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. We account for forfeitures as they 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 estimates and subjective assumptions, including stock price volatility, expected term, and risk-free interest 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. 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 period the stock options are expected to remain outstanding, determined based on an analysis of historical exercise behavior.

In 2017 and 2018, our stock-based compensation expense included performance-based inducement equity awards relating to the ShippingEasy acquisition. Starting in the third quarter of fiscal 2018, our stock-based compensation expense included inducement equity awards relating to the MetaPack acquisition as described in Note 3 - “Acquisitions.”

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

	2019				2018				2017
Stock-based compensation expense relating to:
Stock options	$	40,936			$	34,773			$	39,781
Employee stock purchases	2,004				1,576				1,048
Total stock-based compensation expense	$	42,940			$	36,349			$	40,829
Stock-based compensation expense relating to:
Cost of revenues	$	3,083			$	2,955			$	1,773
Sales and marketing	9,716				6,892				7,289
Research and development	10,521				8,120				9,035
General and administrative	19,620				18,382				22,732
Total stock-based compensation expense	$	42,940			$	36,349			$	40,829

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

	2019			2018			2017
Risk-free interest rate	1.9	%		2.6	%		1.6	%
Expected volatility	73.6	%		50.2	%		47.3	%
Expected life (in years)	3.3			3.3			3.4

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

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 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 2019, 2018, and 2017, we repurchased approximately 720,000, 755,000, and 988,000 shares for $64.9 million, $136.8 million, and $133.8 million, respectively. Also, in the first quarters of 2019, 2018, and 2017, we withheld 1,039, 21,076 and 6,670 of shares, respectively, to satisfy income tax obligations related to performance-based inducement equity awards issued to the General Manager and the then Chief Technology Officer of ShippingEasy.

Website Development Costs

We develop and maintain our websites. Costs associated with the operation of our websites consist primarily of software and hardware purchased from third parties and administrative costs relating to the maintenance and development of the respective website. Costs related to the purchase of software and hardware are capitalized based on our property and equipment capitalization policy. These capitalized costs are amortized based on their estimated useful life. Administrative costs related to the maintenance and development of our Company websites are expensed as incurred.

Accounting Guidance Adopted in 2019

Disclosure Update and Simplification

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company adopted the new presentation for its consolidated statements of stockholders' equity in the first quarter of 2019.

Leases

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases, a new accounting standard for leases. The new standard generally requires the recognition of financing and operating lease liabilities and corresponding ROU assets on the balance sheet. For financing leases, a lessee recognizes amortization of the ROU 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.

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We adopted the new guidance on January 1, 2019 using the modified retrospective transition approach. We elected the practical expedient to apply the new standard to all leases existing at the date of initial application and not restating comparative periods. We also elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification of finance or operating lease, our assessment on whether a contract was or contains a lease, and our initial direct costs for any leases that existed prior to January 1, 2019.

The adoption of the new standard on January 1, 2019 resulted in recording operating lease ROU assets and operating lease liabilities of approximately $11.8 million and $13.6 million, respectively. The adoption did not impact our beginning retained earnings, or our prior year consolidated statements of operations and cash flows.

For information regarding the accounting policy and required disclosures under the new standard, see “Summary of Significant Accounting Policies - Leases” and Note 14 - “Leases,” respectively.

Accounting Guidance Not Yet Adopted

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.

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, a standard that replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We will be required to use a forward-looking expected credit loss model for accounts receivable, loans, and other financial instruments. The guidance will become effective for the Company on January 1, 2020 using a modified retrospective approach with early adoption permitted. We are finalizing our evaluation of the impact of adopting this guidance on the Company's consolidated financial statements. We do not expect the adoption of this guidance will have a material impact on the Company's consolidated financial statements.

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3.	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.

MetaPack Acquisition

On August 15, 2018, we, through our wholly owned subsidiary Pacific Shelf 1855 Limited (Pacific Shelf), completed the acquisition of MetaPack Limited, a private limited company incorporated in England and Wales, pursuant to a share purchase agreement dated July 24, 2018, as amended (the “Agreement”), by and among certain key sellers named in the Agreement (the “Key Sellers”), MetaPack, Pacific Shelf, and Stamps.com Inc. as Pacific Shelf’s guarantor. MetaPack provides multi-carrier enterprise-level solutions to many of the world’s preeminent e-commerce retailers and brands.

Pursuant to the Agreement and a related agreement to purchase Minority Shares (as defined below), Pacific Shelf acquired 100% of MetaPack’s issued and to be issued share capital by purchasing (i) all of the Key Sellers’ shares of MetaPack, representing approximately 80% of the total outstanding shares and (ii) all other issued and to be issued shares of MetaPack (Minority Shares), for a final adjusted purchase price, for all such shares, of approximately £171 million, or $217.7 million using the August 15, 2018 GBP to USD exchange rate. Total cash paid for the acquisition was funded from cash and investment balances.

Stamps.com granted inducement stock options for an aggregate of 320,250 shares of Stamps.com common stock to 72 new employees after completion of its acquisition of MetaPack. The stock options were granted as inducements material to the new employees entering into employment with Stamps.com, pursuant to the Stamps.com 2018 MetaPack Equity Inducement Plan, which was approved by Stamps.com’s Compensation Committee. The awards were granted without stockholder approval in accordance with Nasdaq Listing Rule 5635(c)(4). Each option vests 25% on the one year anniversary of the grant date with the remaining 75% vesting in approximately equal monthly increments over the succeeding thirty-six months, provided that the option holder is still employed by Stamps.com or one of its subsidiaries on the vesting dates. The stock options have a ten year term and an exercise price equal to closing price of Stamps.com common stock on the grant date of August 15, 2018.

Under the acquisition method of accounting under ASC 805, the total purchase price of the acquired company is allocated to the assets acquired and the liabilities assumed based on their fair values. We have made significant estimates and assumptions in determining the allocation of the purchase price.

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The final purchase price of MetaPack has been allocated as follows to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values based on the August 15, 2018 GBP to USD exchange rate (in thousands, except years):

	Fair Value				Fair Value				Useful Life (In Years)		Weighted Average Estimated Useful Life (In Years)
Cash and cash equivalents	$	9,186
Trade accounts receivable	9,767
Other current assets	2,776
Property and equipment	1,039
Goodwill	138,956
Identifiable intangible assets:
Trade names					$	10,936			12
Developed technology					40,691				16
Customer relationships					49,211				16
Total identifiable intangible assets	100,838										16
Accounts payable and other current liabilities	(13,519		)
Deferred revenue	(1,145		)
Revolving credit facility	(12,716		)
Deferred income tax liability	(15,963		)
Other liabilities	(1,533		)
Total purchase consideration	$	217,686

The fair value of the assets acquired and liabilities assumed were determined using income, cost and market participant approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820. The identified intangible assets consist of trade names, developed technology, and customer relationships. The estimated fair values of the trade names and developed technology were determined using the “relief from royalty” 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 15% 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. Intangible assets are being amortized on a straight-line basis over their estimated useful lives. Based on the August 15, 2018 exchange rate, we expect the amortization of acquired intangibles will be approximately $1.6 million per quarter for the remaining estimated useful lives.

Goodwill represents the excess of the consideration given over the sum of the fair values assigned to identifiable assets acquired less liabilities assumed in a business combination. The goodwill balance is primarily attributable to the expanded market opportunities for the Company internationally and MetaPack in the United States and the Company's ability to generate future technology. None of the goodwill recognized is expected to be deductible for income tax purposes. The goodwill recorded as part of this acquisition is included in the MetaPack segment (see Note 4 - “Goodwill and Intangible Assets” in our Notes to Consolidated Financial Statements).

Immediately following the acquisition, we repaid in full MetaPack's existing revolving credit facility balance of approximately $12.7 million.

We incurred approximately $2.5 million in transaction costs included in general and administrative expense and $1.0 million of nonrecurring foreign currency exchange loss directly related to the acquisition during the year ended December 31, 2018.

MetaPack revenues and net income included in the Consolidated Statements of Operations for the year ended December 31, 2018 were $20.3 million and $1.5 million, respectively, reflecting activity since the acquisition date.

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During the quarter ended September 30, 2019, the Company identified additional information about facts and circumstances that existed as of the date of the acquisition. As a result, the Company adjusted the value of current and deferred income taxes and other income tax related liabilities. The net effect of these changes, in addition to other immaterial adjustments, resulted in a corresponding decrease to goodwill of $2.5 million based on the August 15, 2018 exchange rate. These adjustments are reflected in the table above.

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 business combinations.

Changes in the carrying amount of goodwill for the year ended December 31, 2019 were as follows (in thousands):

	2019
	Stamps.com Segment				MetaPack Segment				Total
Goodwill balance at December 31, 2018	$	239,705			$	142,005			$	381,710
Acquisition of MetaPack (see Note 3 - "Acquisitions")	—				(2,512		)		(2,512		)
Foreign currency translation	—				5,342				5,342
Goodwill balance at December 31, 2019	$	239,705			$	144,835			$	384,540

Changes in the carrying amount of goodwill for the year ended December 31, 2018 were as follows (in thousands):

	2018
	Stamps.com Segment				MetaPack Segment				Total
Goodwill balance at December 31, 2017	$	239,705			$	—			$	239,705
Acquisition of MetaPack (see Note 3 - "Acquisitions")	—				141,468				141,468
Foreign currency translation	—				537				537
Goodwill balance at December 31, 2018	$	239,705			$	142,005			$	381,710

We have amortizable and non-amortizable intangible assets consisting of trademarks, trade names, developed technology, non-compete agreements, customer relationships, and other. The gross carrying amount of amortizable and non-amortizable intangible assets was $229.4 million at December 31, 2019 and $226.5 million at December 31, 2018. Non-amortizable assets of $11.4 million as of both December 31, 2019 and December 31, 2018 consist primarily of the trade name relating to the Endicia acquisition.

The following table summarizes our amortizable intangible assets as of December 31, 2019 (in 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
Customer Relationships	111,997				46,503				65,494				7.7
Technology	82,269				25,240				57,029				9.4
Non-Compete	2,211				1,889				322				1.5
Trademarks and Trade Names	13,378				2,549				10,829				9.9
Total amortizable intangible assets at December 31, 2019	$	218,050			$	84,376			$	133,674			8.5

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The following table summarizes our amortizable intangible assets as of December 31, 2018 (in thousands, except years):

	Gross Carrying  Amount				Accumulated  Amortization				Net Carrying Amount				Remaining weighted average amortization period (years)
Patents and Others	$	8,889			$	8,866			$	23			0.5
Customer Relationships	110,194				33,299				76,895				8.6
Technology	80,878				17,451				63,427				10.3
Non-Compete	2,211				1,668				543				2.4
Trademarks and Trade Names	12,977				1,395				11,582				10.8
Total amortizable intangible assets at December 31, 2018	$	215,149			$	62,679			$	152,470			9.4

We recorded amortization of intangible assets totaling approximately $22.2 million, $18.3 million, and $16.0 million for the years ended December 31, 2019, 2018, and 2017, respectively. Amortization of intangible assets is included in general and administrative expense in the accompanying consolidated statements of operations.

Our estimated amortization expense for the next five years and thereafter is as follows (in thousands):

Year Ended December 31,	Estimated Amortization Expense
2020	$	22,199
2021	19,806
2022	10,627
2023	9,836
2024	9,513
Thereafter	61,693
Total	$	133,674

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Our cash equivalents consisted of money market funds at December 31, 2019 and 2018. 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. At December 31, 2019 and 2018, we had no material investments.

The following tables summarize our cash and cash equivalents as of December 31, 2019 and 2018 (in thousands):

	December 31, 2019
	Cost or Amortized Cost				Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	149,508			—			—			$	149,508
Money market	6,799				—			—			6,799
Cash and cash equivalents	$	156,307			—			—			$	156,307

 

	December 31, 2018
	Cost or Amortized Cost				Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	107,118			—			—			$	107,118
Money market	6,639				—			—			6,639
Cash and cash equivalents	$	113,757			—			—			$	113,757

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Financial assets measured at fair value on a recurring basis are classified in one of the three categories 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

The following tables summarize our financial assets measured at fair value on a recurring basis as of December 31, 2019 and 2018 (in thousands):

					Fair Value Measurement at Reporting Date Using
Description	December 31, 2019				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	$	156,307			$	156,307			—			—
Total	$	156,307			$	156,307			—			—

					Fair Value Measurement at Reporting Date Using
Description	December 31, 2017				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	$	113,757			$	113,757			—				—
Total	$	113,757			$	113,757			$	—			—

On November 18, 2015, we entered into a 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. Our Credit Agreement matures on November 18, 2020. The Credit Agreement is secured by substantially all of our assets. In connection with entering into the Credit Agreement, we incurred approximately $1.8 million in debt issuance costs which were recorded as debt discount and are being accreted as interest expense over the life of the Credit Agreement. Interest expense associated with debt issuance costs was approximately $373,000 in each of the years ended December 31, 2019 and 2018.

As of December 31, 2019 our outstanding debt under the Credit Agreement, gross of debt issuance costs, was approximately $50.5 million under our term loan. In December 2017, we repaid all of our revolving credit facility outstanding debt of $62.0 million. Because we have a letter of credit totaling approximately $60,000 relating to a facility lease, we have approximately $82.4 million of available and unused borrowings under the revolving credit facility as of December 31, 2019.

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Borrowings under the term loan are payable in quarterly installments which began on December 31, 2015. We pay interest on our Credit Agreement equal to the LIBOR plus an applicable margin, between 1.25% and 2.00%, based upon certain financial measures. As of December 31, 2019, our applicable margin was 1.25% and the interest rate on our outstanding loan was approximately 3.05%. We are subject 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 December 31, 2019, we were in compliance with the covenants of the Credit Agreement.

The Credit Agreement 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 Credit Agreement imposes certain requirements in order for us to make dividend payments. As of December 31, 2019, such requirements were: (1) our Consolidated Total Leverage Ratio, as defined in the Credit Agreement, must be less than 2.50 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 December 31, 2019, our Consolidated Total Leverage Ratio was 0.31 to 1.00, our Fixed Charge Coverage Ratio was 2.07 to 1.00 and our Liquidity was approximately $239 million. 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.

The contractual maturities of our debt obligations due subsequent to December 31, 2019 are as follows (in thousands):

	Amount
2020	$	50,531
Thereafter	—
Total debt	50,531
Less: debt issuance costs	343
Total debt, net of debt issuance costs	$	50,188

Immediately following the acquisition of MetaPack, we repaid in full MetaPack's existing revolving credit facility balance of approximately $12.7 million.

The following table summarizes our accounts payable and other current liabilities as of December 31, 2019 and 2018 (in thousands):

	2019				2018
Accounts payable	$	47,783			$	51,037
Customer prepayments for postage and shipping labels	40,002				28,274
Payroll and related accrual	23,029				22,767
Short-term financing obligations	982				23,800
Other accruals	10,057				7,748
Accounts payable and other current liabilities	$	121,853			$	133,626

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Property and equipment is summarized as follows as of December 31, 2019 and 2018 (in thousands):

	2019				2018
Land	$	7,155			$	7,156
Building	4,886				4,886
Building improvements	20,018				20,018
Leasehold improvements	4,027				4,054
Furniture and equipment	3,611				4,197
Computers and software	21,970				31,566
	61,667				71,877
Less accumulated depreciation and amortization	(28,684		)		(35,540		)
Property and equipment, net	$	32,983			$	36,337

The income tax expense consists of (in thousands):

	2019				2018				2017
Current:
Federal	$	22,342			$	3,333			$	(5	)
State	6,913				5,561				1,834
Foreign	3,470				790				—
	32,725				9,684				1,829
Deferred:
Federal	1,753				15,396				9,029
State	387				(2,250		)		(1,213		)
Foreign	(3,345		)		(558		)		—
	(1,205		)		12,588				7,816
Income tax expense	$	31,520			$	22,272			$	9,645

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Income tax expense differs from the amounts computed by applying the U.S. federal statutory tax rate as a result of the following (in thousands):

	2019				2018				2017
Income tax at U.S. federal statutory tax rate	$	19,057			$	40,092			$	56,087
State income tax, net of federal benefit	5,332				3,488				1,825
Foreign rate differential	1,372				226				—
Stock-based compensation	2,352				(19,631		)		(57,358		)
Nondeductible items	2,611				1,119				1,181
Research and development	(2,379		)		(4,622		)		(6,418		)
Uncertain tax positions	2,714				2,699				850
Change in tax rate – other	—				(508		)		614
Change in tax rate – U.S tax reform	—				—				13,017
Change in valuation allowance	530				692				410
Other, net	(69		)		(1,283		)		(563		)
Income tax expense	$	31,520			$	22,272			$	9,645

The difference between the statutory federal income tax rate and the Company’s effective tax rate in 2019, 2018, and 2017 is primarily attributable to the effect of state income taxes, impact of tax reform, research and development tax credits, share-based compensation and other non-deductible permanent items.

The tax effect of temporary differences that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2019 and 2018 are presented below (in thousands):

	2019				2018
Deferred tax assets:
Net operating loss carryforward	$	4,006			$	2,893
Tax credit carryforwards	7,287				11,691
Lease right of use liabilities	4,537				—
Stock compensation	15,466				7,388
Accruals	6,496				9,276
Gross deferred tax assets	37,792				31,248
Less: Valuation allowance	(1,717		)		(1,189		)
Deferred tax assets, net of valuation allowance	36,075				30,059
Deferred tax liabilities:
Fixed assets	(127		)		(585		)
Intangibles	(15,331		)		(17,034		)
Lease right of use assets	(4,140		)		—
Federal benefit of state tax deferred tax assets	(876		)		(1,231		)
Gross deferred tax liabilities	(20,474		)		(18,850		)
Deferred tax assets, net	$	15,601			$	11,209

As of December 31, 2019, we have approximately $15.6 million of net deferred tax assets. We recognize valuation allowances on deferred tax assets if, based on the weight of the evidence, we believe that it is more likely than not that some or all of the deferred tax assets will not be realized. We have recorded a valuation allowance of $1.7 million and $1.2 million as of December 31, 2019 and 2018, respectively, against certain state research and development credits and foreign net operating loss carry-forwards.

As of December 31, 2019, we have federal net operating loss carry-forwards of approximately $2.0 million and state net operating loss carry-forwards of $8.1 million, expiring at various times starting in 2023 with certain losses carried over indefinitely. In addition, as of December 31, 2019, we have foreign net operating loss carry-forwards of $18.5 million that can be carried over indefinitely.

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We have no available tax credit carry-forwards for federal income tax purposes at December 31, 2019. We have available tax credit carry-forwards of approximately $7.2 million, net of unrecognized tax benefit for state income tax purposes at December 31, 2019, which can be carried forward to offset future taxable liabilities. Under California law, the California tax credits do not have an expiration date. Under Texas law, Texas R&D credits can be carried forward 20 years, and will begin to expire in 2034.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the years ended December 31, 2019, 2018 and 2017 (in thousands):

	Unrecognized Tax Benefits
Balance at December 31, 2016	$	(6,153	)
Addition for tax positions of prior years	(293		)
Reduction for tax positions of prior years	300
Addition for tax position of the current year	(3,504		)
Balance at December 31, 2017	$	(9,650	)
Additions for tax positions of prior years	(1,396		)
Reduction for tax positions of prior years	275
Additions for tax position of the current year	(2,418		)
Balance at December 31, 2018	$	(13,189	)
Additions for tax positions of prior years	(1,416		)
Reduction for tax positions of prior years	104
Additions for tax position of the current year	(1,522		)
Additions related to acquisitions	$	(523	)
Balance at December 31, 2019	$	(16,546	)

Included in the balance of unrecognized tax benefits as of December 31, 2019, 2018, and 2017 were $16.6 million, $13.2 million, and $9.7 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

Our policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. During 2019 and 2018, we recognized income tax expense on interest and penalties of $806,000 and $655,000, respectively, in connection with our unrecognized tax benefits. There was no material interest or penalty expense during the year ended December 31, 2017. The Company does not expect any material changes in the amount of unrecognized tax benefits within the next twelve months.

We are subject to taxation in the United States, various state jurisdictions, and various foreign jurisdictions. We are subject to income tax examination by U.S. and state tax authorities for the calendar year ended December 31, 2016 and forward. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and credits were generated and carried forward, and make adjustments up to the amount of the net operating losses and credits utilized in open tax years.

As of December 31, 2019, taxes were not provided for an immaterial amount of cumulative earnings of the foreign subsidiaries as we have invested or expect to invest the undistributed earnings indefinitely. If these earnings are repatriated to the United States, or if we determine that the earnings will be remitted in the foreseeable future, the unremitted earnings could be subject to withholding taxes and certain state taxes. Due to the complexities in the laws of foreign jurisdictions and assumptions that would have to be made, it is not practical to estimate the amount of foreign withholding or state taxes associated with such unremitted earnings.

The Tax Cuts and Jobs Act (Tax Reform Act), was enacted on December 22, 2017, which significantly changes the U.S. corporate income tax system by, among other things, effecting a Federal corporate rate reduction from 35% to 21%, includes limitations on certain deductions including executive compensation arrangements, reduces the maximum deduction of net operating loss with no carry-back but indefinite carry-forward provision, and repeals the corporate alternative minimum tax. Additionally, the Tax Reform Act created a tax on certain foreign sourced earnings known as the global intangible low-tax income (GILTI) tax for tax year 2018. The SEC staff has indicated that a company should make and disclose certain policy elections related to the accounting for GILTI. We have elected to account for the tax effect of GILTI as a current-period expense when incurred and will not establish deferred taxes.

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Stock Incentive Plans

Our 1999 Stock Incentive Plan (the “1999 Plan”), which became effective in June 1999, was the successor to the 1998 Stock Plan (the “1998 Plan”). Upon approval of the 1999 Plan, all outstanding options under the 1998 Plan were transferred to the 1999 Plan, and no further option grants were made under the 1998 Plan. All outstanding options under the 1998 Plan continue to be governed by the terms and conditions of the existing option agreements for those grants, unless our compensation committee decides to extend one or more features of the 1999 Plan to those options. In June 2009, our 1999 Plan expired and no further options grants were made under the 1999 Plan. Our 2010 Equity Incentive Plan (the “2010 Plan”) was approved by our stockholders in June 2010. Under the 2010 Plan, we were initially authorized to issue 3,500,000 shares of common stock and stock units, although “full value” awards (such as restricted stock and restricted stock units) will be counted against the 2010 Plan’s overall limits as two shares (rather than one), while options and stock appreciation rights will be counted as one share. On September 9, 2014, our board of directors approved an amendment (the “2014 Amendment”) to our 2010 Plan, which was approved by our shareholders on June 17, 2015. Pursuant to the 2014 Amendment, the maximum aggregate number of shares of common stock and stock units available for the grant of awards under the 2010 Plan was increased by an additional 2,100,000 shares. On April 28, 2016, our board of directors adopted an amendment (the “2016 Amendment”) to increase the maximum aggregate number of shares of common stock and stock units available for grants by an additional 1,200,000 shares, which was approved by our shareholders on June 13, 2016. On April 25, 2018, our board of directors adopted an amendment (the “2018 Amendment”) to our 2010 Plan, which was approved by our shareholders on June 11, 2018. The 2018 Amendment: (i) increased the maximum aggregate number of shares of common stock and stock units available for the grant of awards under the 2010 Plan by 2,200,000 shares; (ii) extended the term of the 2010 Plan through April 25, 2028; (iii) added a requirement that, except in the case of substitute awards which may be granted in connection with certain business combinations, any awards granted after the effective date of the 2018 Amendment (except for 5% of the shares reserved under the 2010 Plan) shall be granted with a minimum vesting period of at least 12 months, subject to the Compensation Committee's discretionary authority to accelerate such awards in the event of the participant's retirement, death or disability, or upon a change in control of the company; and (iv) prohibits the payment of dividends on awards that are unvested or subject to restrictions. At December 31, 2019, the number of shares of common stock remaining available for future issuance under the equity compensation plans was 449,000 excluding the number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights. Except for the 2014, 2016, and 2018 Amendments to the 2010 Plan described above, the 2010 Plan otherwise remains materially unchanged.

On April 9, 2015, pursuant to the 2014 Amendment, our compensation committee approved additional performance-based stock option grants for certain employees. These additional option awards granted under the 2014 Amendment vest monthly in equal parts over a 36-month period that commenced on the closing of our acquisition of Endicia, except for the awards for a former employee which were fully expensed on an accelerated basis in the third quarter of 2017 based on specific events and circumstances of the employee’s status change to a consultant in the third quarter of 2017. The number of options issued was approximately 175,000. For these awards subject to performance conditions, the fair value per award was fixed at the grant date on June 17, 2015, the date the 2014 Amendment was approved by the shareholders. In the year ended December 31, 2019 there was no stock-based compensation expense for these performance-based awards. For the years ended December 31, 2018 and 2017, the total stock-based compensation expense for these performance-based awards was approximately $878,000 and $2.4 million, respectively.

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A summary of stock option activity is as follows:

	Options (in thousands)			Weighted Average Exercise Price				Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2016	3,292			$	49.95			7.9 years		$	213,066
Granted	1,167			$	133.19
Forfeited or expired	(102	)		$	94.68
Exercised	(1,612	)		$	39.15
Outstanding at December 31, 2017	2,745			$	89.99			8.2 years		$	269,018
Granted	851			$	221.58
Forfeited or expired	(171	)		$	139.99
Exercised	(784	)		$	60.45
Outstanding at December 31, 2018	2,641			$	137.88			8.1 years		$	104,348
Granted	2,043			$	42.77
Forfeited or expired	(350	)		$	152.17
Exercised	(53	)		$	57.41
Outstanding at December 31, 2019	4,281			$	92.31			8.1 years		$	100,494
Exercisable at December 31, 2019	1,667			$	114.54			6.7 years		$	18,506

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing stock price of $83.52 at December 31, 2019, the last trading day of 2019, which would have been received by award holders had all award holders exercised their awards that were in-the-money as of that date.

    

The weighted average fair value of stock options granted for 2019, 2018 and 2017 using the Black-Scholes valuation method are as follows:

	2019				2018				2017
Weighted average fair value of stock options with an exercise price equal to the market price on the grant date	$	23.64			$	84.55			$	47.17
Weighted average fair value of stock options with an exercise price greater than the market price on the grant date	—				—				—
Total	$	23.64			$	84.55			$	47.17

Weighted average exercise prices for stock options exercised in 2019 are as follows:

	2019
Weighted average exercise price of stock options with an exercise price equal to the market price on the grant date	$	57.41
Weighted average exercise price of stock options with an exercise price greater than the market price on the grant date	—
Total weighted average exercise price	$	57.41

The weighted average grant date fair value of options vested during 2019, 2018 and 2017 was $54.87, $43.30 and $32.52, respectively. The total intrinsic value of options exercised during 2019, 2018 and 2017 was approximately $3.5 million, $125.3 million and $240.0 million, respectively.

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The following table summarizes the status of our non-vested stock options as of December 31, 2019:

	Non-vested Number of Stock Options (in thousands)			Weighted Average Grant Date Fair Value per Option
Non-vested at December 31, 2018	1,578			$	63.13
Granted	2,043			$	23.64
Vested	(657	)		$	54.87
Forfeited / Cancelled	(350	)		$	62.40
Non-vested at December 31, 2019	2,614			$	34.40

As of December 31, 2019, there was $78.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted average period of approximately 2 years.

Equity Inducement Plans

In connection with the ShippingEasy acquisition, we issued performance-based inducement equity awards to two executives of ShippingEasy covering an aggregate of up to approximately 87,000 shares of common stock if earnings targets for ShippingEasy are achieved over a two and one-half year period which began July 1, 2016. The awards were subject to proration if at least 75% of the applicable target was achieved and were subject to forfeiture or acceleration based on changes in employment circumstances over the performance period.

In addition, in connection with the ShippingEasy acquisition we made inducement stock option grants for an aggregate of 62,000 shares of Stamps.com common stock to 48 employees. Each option vested 25% on the one year anniversary of the grant date and the remaining 75% vest in approximately equal monthly increments over the 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.

In 2018, we granted inducement stock options to purchase 60,000 shares of Stamps.com common stock to a newly hired executive officer. Such option vests 25% on the one year anniversary of the grant date with the remaining 75% vesting in approximately equal monthly increments over the 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 February 26, 2018.

Further, in connection with the MetaPack acquisition we made inducement stock option grants for an aggregate of 320,250 shares of Stamps.com common stock to 72 employees. Each option vests 25% on the one year anniversary of the grant date with the remaining 75% vesting in approximately equal monthly increments over the 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 August 15, 2018.

The inducement plans were exempt from stockholder approval requirements as an employment inducement grant plan under applicable Nasdaq Listing Rule 5635(c)(4) as inducements material to the new employees entering into employment with Stamps.com.

Employee Stock Purchase Plan

In June 1999, our board of directors adopted an Employee Stock Purchase Plan (ESPP), which allows our eligible employees to purchase shares of common stock, at semi-annual intervals, with their accumulated payroll deductions.

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Eligible participants may contribute up to 15% of cash earnings through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share is equal to 85% of the fair market value per share on the participant’s entry date into the offering period or, if lower, 85% of the fair market value per share on the semi-annual purchase date.

Upon adoption of the ESPP, 150,000 shares of common stock were reserved for issuance. This reserve automatically increases on the first trading day in January each year, by an amount equal to 1% of the total number of outstanding shares of our common stock on the last trading day in December in the prior year. In no event will any annual increase exceed 260,786 shares.

In July 2009, our board of directors amended our ESPP to extend it for a period of ten years beyond its original expiration date of July 31, 2009. Under this amendment, the total shares available for issuance may not increase. In October 2018, the board of directors further amended our ESPP to extend its expiration date for an additional period of ten years to July 31, 2029. As of December 31, 2019 and 2018, we had approximately 1.5 million and 1.5 million shares available for issuance under our ESPP, respectively. Total shares of common stock issued pursuant to the ESPP during 2019, 2018 and 2017 were approximately 31,000, 25,000, and 36,000, respectively.

Savings Plan

We have a savings plan for all eligible employees which qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute any percentage of their pretax salary, but not more than statutory dollar limits. We match participant contributions up to certain limitations. We expensed approximately $2.0 million, $1.7 million and $1.4 million in 2019, 2018 and 2017, respectively, related to this plan.

In Europe where applicable, we have savings plans for all eligible employees which conform to country-specific regulations. Participating employees may contribute any percentage of their salary, but not more than statutory dollar limits. We match participant contributions up to certain limitations. Matching contributions to these plans were not material in 2019 or 2018.

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 8, 2018, a putative class action complaint was filed against us in a case entitled Juan Lopez and Nicholas Dixon v. Stamps.com, Inc., Case No. 2:18-cv-01101, in the United States District Court for the Central District of California, Western Division, alleging wage and hour claims on behalf of our current and former “non-exempt” hourly call center employees. The complaint sought class certification, unspecified damages, unpaid wages, penalties, restitution, interest, and attorneys’ fees and costs. On July 24, 2018, we entered into a preliminary settlement that would resolve this matter for a non-material payment to be distributed to the participating class members. On May 20, 2019, the court granted final approval of the settlement. 

On February 28, 2019 and March 13, 2019, two putative class action complaints were filed against us in the United States District Court for the Central District of California, Western Division. One of the two 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. 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.

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On May 16, 2019 and May 21, 2019, two 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 two cases have been consolidated as In re Stamps.com Stockholder Derivative Litigation, Case 2:19-cv-04272 and co-lead plaintiffs and co-lead counsel have been appointed. The case has been stayed since July 2019. 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 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.  We believe that the case is without merit and intend to defend this case vigorously. Due to the recent filing date 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 has entered a stipulation to stay the derivative case pending the outcome of the derivative lawsuit pending in the Delaware Court of Chancery. We believe that the case is without merit and intend to defend this case vigorously. Due to the recent filing date 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 not accrued any material amounts related to any of the Company’s legal proceedings as of December 31, 2019 or 2018.

Although management at present believes that the ultimate outcome of the various 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.

Commitments

Our significant contractual obligations and commercial commitments (other than debt commitments, which are summarized in Note 7 - “Debt”) consist of operating lease obligations as of December 31, 2019. Please see Note 14 - “Leases” for additional information.

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Segment Information

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (CODM) for purposes of allocating resources and evaluating financial performance. The Company's Chairman and Chief Executive Officer has been identified as the CODM as defined by guidance regarding segment disclosures.

The Company’s reportable segments have been determined based on the distinct nature of their operations and customer bases, and the financial information that is evaluated regularly by the CODM. Following the MetaPack acquisition (see Note 3) in 2018, the Company added a new segment for the MetaPack business. Previously, the Company had a single reportable segment.

The Stamps.com segment derives revenue from external customers from offering mailing and 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, ShipStation, and ShipWorks. Stamps.com's customers are primarily located in the US.

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.

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.

In 2019, the Company allocated share-based compensation expense to the Stamps.com and MetaPack segments. Previously, share-based compensation expense was allocated to the Stamps.com segment only. Amounts in prior periods have been reclassified to conform with current period presentation.

Information about segments during the periods presented were as follows (in thousands):

	Year Ended December 31,
	2019				2018				2017
Segment revenues
Stamps.com	$	519,088			$	566,580			$	468,709
MetaPack	52,762				20,350				—
Total revenues	$	571,850			$	586,930			$	468,709
Segment income (loss) from operations
Stamps.com	$	105,242			$	195,409			$	163,503
MetaPack	(11,679		)		(1,010		)		—
Total income from operations	$	93,563			$	194,399			$	163,503
Company's total segment income from operations	$	93,563			$	194,399			$	163,503
Foreign currency exchange loss, net	(506		)		(992		)		—
Interest expense	(2,513		)		(2,595		)		(3,669		)
Interest income and other income, net	205				102				414
Income before income taxes	$	90,749			$	190,914			$	160,248

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Geographic Data

No sales to an individual customer or country other than the US accounted for more than 10% of revenue for the years ended December 31, 2019, 2018, or 2017.

The following table presents our revenues by geography, based on the billing addresses of our customers (in thousands, unaudited):

	Year Ended December 31,
	2019				2018				2017
Revenues
United States	$	517,987			$	564,731			$	468,709
International	53,863				22,199				—
Total revenues	$	571,850			$	586,930			$	468,709

The Company's material lease contracts are generally for corporate office space. The Company leases facilities pursuant to noncancelable operating lease agreements expiring through 2029.

Operating lease cost was approximately $4.9 million, $4.2 million, and $3.8 million, for the years ended December 31, 2019, 2018 and 2017, respectively. 

The following table is a schedule of maturities of operating lease liabilities as of December 31, 2019 (in thousands):

Twelve Month Period Ending December 31,	Operating Lease Obligations
2020	$	5,420
2021	4,907
2022	3,898
2023	3,638
2024	842
Thereafter	2,419
Total undiscounted cash flows	21,124
Less amount representing interest	(2,321		)
Present value of lease liabilities	$	18,803

The table above reflects payments for noncancelable operating leases with initial or remaining terms of one year or more as of December 31, 2019. 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 December 31, 2019, the weighted-average remaining lease term (in years) and discount rate related to the operating leases were as follows:

	December 31, 2019
Weighted-average remaining lease term	4.7
Weighted-average discount rate	4.9	%

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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, except as described in Note 12 – “Commitments and Contingencies” in our Notes to Consolidated Financial Statements.

	Quarter Ended
	March				June				September(1)				December (1,2)
	(in thousands except per share data)
Fiscal Year 2019:
Revenues	$	136,003			$	138,773			$	136,172			$	160,902
Gross profit	99,664				102,332				97,970				116,668
Income from operations	23,241				22,425				15,651				32,246
Net income	15,755				13,992				9,148				20,334
Net income per share:
Basic	$	0.90			$	0.81			$	0.53			$	1.19
Diluted	$	0.87			$	0.79			$	0.52			$	1.13
Weighted average shares outstanding:
Basic	17,547				17,291				17,144				17,064
Diluted	18,015				17,809				17,441				17,923
Fiscal Year 2018:
Revenues	$	133,565			$	139,627			$	143,507			$	170,231
Gross profit	108,038				110,185				110,383				131,415
Income from operations	49,201				46,869				44,292				54,037
Net income	47,044				45,524				33,413				42,661
Net income per share:
Basic	$	2.67			$	2.53			$	1.84			$	2.37
Diluted	$	2.54			$	2.41			$	1.75			$	2.30
Weighted average shares outstanding:
Basic	17,644				18,015				18,161				17,983
Diluted	18,511				18,906				19,046				18,578

Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year shown elsewhere in our Annual Report on Form 10-K.

(1) The third and fourth quarter results of 2018 through the results of 2019 include the impact of the Company's acquisition of MetaPack.

(2) Beginning on October 1, 2018, insurance revenue represents the amount we receive from customers net of the costs paid to our insurance providers. For the periods presented prior to October 1, 2018, insurance revenue represented the gross amount charged to the customer for purchasing insurance and the insurance cost of revenues represented the amount paid to our insurance providers.

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