Classmates.com 2009 Annual Report Download - page 69

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Table of Contents
ended December 31, 2008. Communications cost of revenues as a percentage of Communications revenues increased to 23.1% for the year
ended December 31, 2009, compared to 22.5% for the prior-year period. The decrease of $9.2 million was largely due to a $6.0 million decrease
in telecommunications costs associated with our dial-up Internet access services primarily due to a decrease in the number of pay accounts, a
decrease in hourly usage per pay account and lower average hourly telecommunications costs. In addition, Communications cost of revenues
decreased as a result of a $2.8 million decrease in customer support- and billing-related costs due to a decrease in the number of dial-up Internet
access pay accounts, a $0.7 million decrease in costs associated with our Web hosting business primarily as a result of the closure of our Orem,
Utah facility in 2008, a $0.6 million decrease in personnel-related costs as a result of reduced headcount and a $0.4 million decrease in costs
associated with our VoIP service as a result of our previous decision to exit this business. These decreases were partially offset by a $1.4 million
increase in costs associated with our broadband services due to the increase in the number of subscribers to our services.
Communications Sales and Marketing Expenses. Communications sales and marketing expenses decreased by $20.4 million, or 34%, to
$39.9 million, for the year ended December 31, 2009, compared to $60.2 million for the year ended December 31, 2008. Communications sales
and marketing expenses as a percentage of Communications revenues decreased to 18.9% for the year ended December 31, 2009, compared to
23.4% for the prior-year period. The decrease in expenses reflected the continued decline in dial-up Internet access pay accounts and revenues.
The decrease of $20.4 million was attributable to a $15.1 million decline in advertising, promotion and distribution costs related to our dial-up
Internet access services and, to a lesser extent, a $6.9 million decrease in personnel- and overhead-related expenses as a result of reduced
headcount. The decrease was partially offset by a one-time, out-of-period adjustment of $1.4 million related to marketing expenses.
Communications Technology and Development Expenses. Communications technology and development expenses decreased by
$4.7 million, or 20%, to $19.5 million, for the year ended December 31, 2009, compared to $24.2 million, for the year ended December 31,
2008. Communications technology and development expenses as a percentage of Communications revenues decreased to 9.2% for the year
ended December 31, 2009, compared to 9.4% for the prior-year period. The decrease in expenses was primarily the result of a $6.0 million
decrease in personnel-related expenses as a result of reduced headcount, partially offset by a $1.2 million increase in overhead-related expenses.
Communications General and Administrative Expenses.
Communications general and administrative expenses decreased by $1.7 million,
or 5%, to $33.2 million, for the year ended December 31, 2009, compared to $34.9 million for the year ended December 31, 2008.
Communications general and administrative expenses as a percentage of Communications revenues increased to 15.7% for the year ended
December 31, 2009, compared to 13.6% for the prior-year period. The decrease of $1.7 million was primarily due to a $2.0 million decrease in
personnel-related costs as a result of reduced headcount and a $1.3 million decrease in professional services and consulting fees, partially offset
by a $0.9 million increase in bad debt expense. The increase as a percentage of revenues was largely attributable to continued declines in
revenues as a result of continuing declines in the number of dial-up Internet access pay accounts.
Communications Restructuring Charges. There were no Communications restructuring charges for the year ended December 31, 2009,
compared to $0.7 million for the year ended December 31, 2008. Restructuring charges for the year ended December 31, 2008 were primarily
associated with the closure of our Orem, Utah facility.
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