Stamps.com 2001 Annual Report Download - page 31

Results of Operations
Years Ended December 31, 2001 and 2000
Revenue. Revenue was derived primarily from three sources: (1) service fees charged to customers for the ability to print postage directly from
their printer, (2) professional contract revenue, received from Mail Boxes Etc. USA, Inc., for shipping tools used by Mail Boxes Etc. USA, Inc.
franchise locations and (3) on-line store revenue, comprised of fees paid for customer referrals, revenue share on sales to referred customers
and slotting fees.
Total revenue increased from $15.2 million to $19.4 million for the years ended December 31, 2000 and 2001, respectively. The increase in
revenue is primarily due to service fee price increases which began in November of 2000. The professional contract revenue in 2000 and 2001
relates to the Mail Boxes Etc. USA, Inc. agreement that was initiated in 2000 and terminated in January 2001. Other revenue consists primarily
of bounties and commissions on sales of products to our customers by third parties. The bounty and commission agreements were also initiated
in 2000 and continued through 2001.
Cost of Revenues. Cost of revenues principally consists of customer service, promotional expenses, and system operating costs. Cost of
revenues decreased from $23.7 million for the year ended December 31, 2000, to $8.0 million for the year ended December 31, 2001. The
decrease is primarily due to automation and reduced labor costs in our customer support operations. We also reduced promotional expenses by
decreasing the amount of free postage given to each customer. In addition, we implemented an expiration feature for free postage so that any
unused portion of a free postage offer expires after the first 30 days, resulting in less postage used by each individual customer.
Sales and Marketing. Sales and marketing expenses principally consist of costs associated with strategic relationships, advertising and
promotional expenditures, and compensation and related expenses for personnel engaged in marketing and business development activities.
Sales and marketing expenses decreased from $73.0 million for the year ended December 31, 2000, to $9.7 million for the year ended
December 31, 2001. The decrease in sales and marketing expenses resulted from a reduction in sales and marketing personnel, the termination
of fixed-cost marketing deals as well as a more focused spend of discretionary marketing dollars on programs that provide a higher return on
investment.
Research and Development. Research and development expenses principally consist of compensation for personnel involved in the
development of the Internet Postage and enterprise shipping service and expenditures for consulting services and third-party software. Research
and development expenses for the year ended December 31, 2000 decreased from $33.1 million to $12.6 million for the year ended December
31, 2001. The decrease in research and development expenses is primarily due to increased cost control efforts and the reduction in headcount.
General and Administrative. General and administrative expenses principally consist of compensation and related costs for executive and
administrative personnel, fees for legal and other professional services, depreciation of equipment and software used for general corporate
purposes and amortization of goodwill and deferred compensation. General and administrative expenses for the years ended December 31,
2001 and 2000 were $196.7 million and $102.2 million, respectively. The increase is due to a non-cash charge of $163.6 million in the first
quarter of 2001 to reduce goodwill and other intangibles associated with the purchase of iShip to reflect the present value of future cash flows,
net of estimated transaction costs.
Restructuring Charge. In October 2000, we began our restructuring to more effectively focus on core business opportunities in the postage and
shipping industries. As a part of that restructuring, we eliminated approximately 88% of the workforce through 3 rounds of layoffs, terminated
our fixed-cost marketing agreements and disposed of excess assets. The resulting restructuring charge for the years ended December 31, 2001
and 2000 were $26.0 million and $11.5 million respectively. These charges consist primarily of employee
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2002. EDGAR Online, Inc.