Stamps.com 2001 Annual Report Download - page 13

Our cost of revenues includes costs for systems operations, customer service, Internet connection and security services; all of these costs will
fluctuate depending upon the demand for our services. In addition, a substantial portion of our operating expenses is related to personnel costs,
marketing programs and overhead, which cannot be adjusted quickly and are therefore relatively fixed in the short term. Our operating expense
levels are based, in significant part, on our expectations of future revenues. If our expenses precede increased revenues, both gross margins and
results of operations would be materially and adversely affected. Moreover, our new business strategy of reducing expenses may directly and
correspondingly cause our revenues to substantially decline.
Due to the foregoing factors and the other risks discussed in this annual report, you should not rely on period-to-period comparisons of our
operating results as an indication of future performance.
We have a history of losses, expect to incur losses in the future and may never achieve profitability, which may reduce the trading price of our
common stock.
Since we began operations in 1998, we have incurred substantial operating losses in every period. As a result of accumulated operating losses,
we had an accumulated deficit of $483.2 million as of December 31, 2001. We expect to continue to incur significant sales and marketing,
research and development, and administrative expenses and therefore could continue to experience net losses and negative cash flows for
several years, and perhaps for the duration of our corporate existence. For the year ended December 31, 2001, we generated $19.4 million in
revenues. There are no guarantees that we will reach or be able to maintain profitability in the future.
Overall, we will need to generate significant revenues and successfully implement our new business strategy to achieve and maintain
profitability.
We implemented pricing plans that may adversely affect our future revenues and profitability.
Our ability to generate gross margins depends upon the ability to generate significant revenues from a large base of active customers. In
November 2000, we changed our pricing plans for our Internet postage services. In order to attract customers in the future, we may run special
promotions and offer discounts on fees, postage and supplies. We cannot be sure that customers will be receptive to this fee structure for our
Internet postage services or to future fee structures that we may implement. Even if we are able to establish a sizeable base of users, we still
may not generate sufficient gross margins to become profitable. In addition, our ability to generate revenues or achieve profitability could be
adversely affected by special promotions or additional changes to our pricing plans.
If our business strategy is not successfully implemented, our financial condition and results of operations will be adversely affected.
For the year ended December 31, 2001, we have continued to implement our business strategy begun in October 2000 to enhance our ability to
achieve profitability by focusing on our core business of Internet postage services. We have continued our cost cutting efforts, including a
reduction in headcount in August 2001 by 25%, the termination of fixed-cost marketing arrangements, and the redeployment of sales and
marketing expenditures to programs that have a higher return on investment.
Our business strategy entails risks relating to our ability to attract our targeted customers to offset potential customer losses in other areas and
the ability of our new management team to implement this strategy. There is no guarantee our new management team will be able to effectively
or efficiently implement our business strategy or that, if effectively implemented, our strategy will benefit us or help us achieve profitability.
Failure to execute our plan to significantly reduce expenses or to attract new customers in high margin lines of business in significant numbers
will adversely effect our financial condition and results of operations. In addition, our
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2002. EDGAR Online, Inc.