Classmates.com 2009 Annual Report Download - page 68

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Table of Contents
Classmates Media General and Administrative Expenses. Classmates Media general and administrative expenses increased by
$1.8 million, or 5%, to $39.7 million, for the year ended December 31, 2009, compared to $38.0 million for the year ended December 31, 2008.
Classmates Media general and administrative expenses as a percentage of Classmates Media revenues increased to 16.8% for the year ended
December 31, 2009, compared to 16.5% for the prior-year period. The increase of $1.8 million was primarily due to a $3.3 million non-income
tax favorable settlement in 2008, a $2.2 million charge in the quarter ended December 31, 2009 related to a reserve for a pending lawsuit, a
$1.0 million increase in professional services and consulting fees and a $0.9 million increase in personnel-related expenses. The increase was
partially offset by the expensing of $3.9 million in deferred transaction costs related to the potential initial public offering ("IPO") of Classmates
Media Corporation ("CMC") in the year ended December 31, 2008, a $1.5 million decrease in 2009 in recruiting and relocation-related expenses
and a $0.4 million decrease in overhead-related expenses.
Classmates Media Restructuring Charges. Classmates Media restructuring charges totaled $2.1 million for the year ended December 31,
2009. There were no restructuring charges in our Classmates Media segment for the year ended December 31, 2008. Restructuring charges for
the year ended December 31, 2009 were associated with a reduction in headcount in the fourth quarter of 2009. In connection with this reduction
in headcount, we eliminated 71 positions within our Classmates Media segment.
Communications Segment Results
The following table presents the Communications segment's results of operations as a percentage of Communications revenues for the years
ended December 31, 2009 and 2008.
Communications Revenues. Communications revenues decreased by $46.2 million, or 18%, to $211.2 million for the year ended
December 31, 2009, compared to $257.4 million for the year ended December 31, 2008. The decrease in Communications revenues was
primarily due to a $43.2 million decrease in services revenues as a result of a 24% decrease in our average number of dial-up Internet access pay
accounts from 1.6 million for the year ended December 31, 2008 to 1.2 million for the year ended December 31, 2009, partially offset by an
increase in ARPU. The decrease in Communications revenues was also due to a $3.0 million decrease in advertising revenues resulting from a
decrease in pay accounts. In 2010, we expect that Communications pay accounts and segment revenues, including advertising revenues, will
continue to decline.
Communications Cost of Revenues. Communications cost of revenues decreased by $9.2 million, or 16%, to $48.7 million, for the year
ended December 31, 2009, compared to $57.9 million for the year
65
Year Ended
December 31,
2009
2008
Revenues
100.0
%
100.0
%
Operating expenses:
Cost of revenues
23.1
22.5
Sales and marketing
18.9
23.4
Technology and development
9.2
9.4
General and administrative
15.7
13.6
Restructuring charges
—
0.3
Impairment of goodwill, intangible assets and
long lived assets
—
0.1
Total operating expenses
66.9
69.2
Segment income from operations
33.1
%
30.8
%