Stamps.com 2005 Annual Report Download - page 30

Years Ended December 31, 2004 and 2003
The following table sets forth our results of operation as a percentage of total revenue for the periods indicated:
Revenue. Revenue was derived primarily from three sources: (1) service fees charged to customers for use of our PC Postage service; (2)
PhotoStamps revenue from the direct sale of PhotoStamps; and (3) product sales and other revenue, consisting of Supplies Store revenue from
the direct sale of consumables and supplies, advertising revenue from controlled access advertising to our existing customer base, insurance
revenue from our parcel insurance offering, and licensing revenue. Revenue increased from $21.2 million in fiscal 2003 to $38.1 million in
fiscal 2004, an increase of 80%.
Service fee revenue increased from $17.6 million in fiscal 2003 to $27.9 million in fiscal 2004, an increase of 59%. As a percentage of
total revenue, service fee revenue decreased ten percentage points from 83% in fiscal 2003 to 73% in fiscal 2004. The increase in service fee
revenue is primarily due to the increase in the size of the customer base. Furthermore, during fiscal year 2004 our customer base included a
greater percentage of Power Plan customers compared to fiscal year 2003. This resulted in higher service fee revenues per customer. The
decrease in service fee revenue as a percentage of total revenue is attributable to the addition of revenue from our new PhotoStamps product.
As of December 31, 2004, Power Plan customers accounted for 51% of total registered customers as compared to 30% at the end of December
31, 2003.
PhotoStamps revenue was approximately $2.3 million in fiscal 2004, which represented six percent of total revenue; we had no
PhotoStamps revenue in fiscal year 2003. In July 2004, we received authorization from the US Postal Service to proceed with a limited market
test of PhotoStamps. In September 2004, the USPS asked us to conclude our market test effective on October 1, 2004, to allow the USPS to
conduct a review of the results of the test run. We concluded the market test with more than 138,000 total sheets, or 2.8 million individual
PhotoStamps, ordered.
Product sales and other revenue increased from $3.6 million in fiscal 2003 to $7.8 million in fiscal 2004, an increase of 116%. As a
percentage of total revenue, product sales and other revenue increased four percentage points from 17% in fiscal 2003 to 21% in fiscal 2004.
The increase is primarily due to the expansion of our consumable and supplies sales through our Supplies Store and a new licensing revenue
stream which was approximately $450,000 in each of the third and fourth quarters of fiscal 2004. We expanded the number of available
products from approximately eighteen skus as of December 31, 2003 to approximately eighty-six skus at the end of December 31,
27
Twelve Months
Ended December 31,
2004 2003
Total Revenues
Service
73
%
83
%
Photostamps
6
% —
Product and other
21
%
17
%
Total revenues
100
%
100
%
Cost of revenues
Service
25
%
34
%
Photostamps
4
% —
Product and other
6
%
5
%
Total cost of revenues
35
%
39
%
Gross profit
65
%
61
%
Operating expenses
Sales and marketing
33
%
30
%
Research and development
16
%
23
%
General and administrative
34
%
68
%
Total operating
expenses
83
%
121
%
Loss from operations
(18
)%
(60
)%
Other income, net
6
%
16
%
Net loss
(12
)%
(44
)%