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Recent Accounting Pronouncements
See Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, Recent Accounting Policies
of our accompanying
consolidated financial statements for a full description of recent accounting pronouncements and our expectations of their impact on our
consolidated financial position and results of operations.
Results of Operations
Years Ended December 31, 2009, 2008 and 2007
The following table sets forth, for the years ended December 31, 2009, 2008 and 2007, information derived from our statements of
operations as a percentage of revenues. This information should be read in conjunction with the accompanying financial statements and the
Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10
-K.
Revenues
Subscriber Revenues
. Subscriber revenues consist of both a fixed monthly recurring subscription component and a variable component
that is driven by the actual usage of our service offerings. Over the past three years the fixed portion of our subscriber revenues has contributed
an increasing percentage to our subscriber revenues of 82%, 79% and 76% for 2009, 2008 and 2007, respectively. Subscriber revenues were
$241.9 million, $236.8 million and $212.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. The increase in
subscriber revenues over this three-
year period was due primarily to an increase in the number of our paying subscribers. The increase in our
base of paying subscribers was primarily the result of new sign-ups derived from subscribers coming directly to our Websites, free-to-
paid
subscriber upgrades, small to mid-
sized corporate and enterprise sales, direct large enterprise and government sales, direct marketing spend for
acquisition of paying subscribers, international sales and business acquisitions, in each case net of cancellations.
Other Revenues.
Other revenues were $3.6 million, $4.7 million and $8.4 million for the years ended December 31, 2009, 2008 and
2007, respectively. Other revenues consist primarily of patent licensing revenues, patent sale-
related revenues and advertising revenues
generated by delivering email messages to our customers on behalf of advertisers. The decrease in other revenues from 2008 to 2009 resulted
primarily from lower licensing revenues due to the Company acquiring licensees and reduced advertising revenues as customers have lowered
spending in 2009. The decrease in other revenues from 2007 to 2008 resulted primarily from a $2.0 million paid up patent license fee relating to
past periods, earned during 2007, as well as lower advertising revenues in 2008.
Cost of Revenues
Cost of revenues is primarily comprised of costs associated with data and voice transmission, telephone numbers, network operations,
customer service, online processing fees and equipment depreciation. Cost of revenues was $44.7 million, or 18% of revenues, $46.3 million, or
19% of revenues, and $44.0 million, or 20% of revenues, for the years ended December 31, 2009, 2008 and 2007, respectively. Cost of revenues
as a percentage of revenues decreased from 2007 to 2008 to 2009 primarily due to increased efficiency of network operations and customer
service.
Year Ended December 31,
2009
2008
2007
Revenues
100%
100%
100%
Cost of revenues
18
19
20
Gross profit
82
81
80
Operating expenses:
Sales and marketing
15
17
18
Research, development and engineering
5
5
5
General and administrative
18
18
18
Loss on disposal of long
-
lived asset
1
—
—
Total operating expenses
39
40
41
Operating earnings
43
41
39
Other
-
than
-
temporary impairment losses
4
—
—
Interest and other income
1
2
4
Interest and other expense
—
1
—
Earnings before income taxes
40
42
43
Income tax expense
13
12
12
Net earnings
27
%
30
%
31
%
-
27
-