Stamps.com 2006 Annual Report Download - page 30

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General and Administrative . General and administrative expense 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 intangible assets. General and administrative expense increased from $9.6 million in fiscal 2005 to $11.6 million
in fiscal 2006, an increase of 21%. The increase in general and administrative expense is primarily due to the increase in salary expense and
insurance expense. Additionally, included in general and administrative for fiscal 2006 was approximately $1.2 million of stock-based
employee compensation expense related to our adoption of the new accounting pronouncement effective on January 1, 2006. We did not incur
a similar charge in fiscal 2005. As a percentage of total revenue, general and administrative expense decreased two percentage points to 14% in
fiscal 2006 as compared to 16% in fiscal 2005. We currently expect general and administrative expenses to increase in fiscal 2007 as compared
to fiscal 2006 as we expect an increase in legal activity and spending as a result of increased activity in existing litigation.
Other Income, Net . Other income, net consists of interest income from cash equivalents and short-term and long-term investments. Other
income, net increased from $2.2 million in fiscal 2005 to $5.1 million in fiscal 2006, an increase of 128%. As a percentage of total revenue,
other income, net increased two percentage points to 6% in fiscal 2006 as compared to 4% in fiscal 2005. The increase, both on an absolute
basis and as a percentage of total revenue is due to the increase in interest rates and invested balance as we maintain our profitability.
Years Ended December 31, 2005 and 2004
The following table sets forth our results of operation as a percentage of total revenue for the periods indicated:
Revenue . Revenue is derived primarily from four sources: (1) service fees charged to customers for use of our PC Postage service;
(2) PhotoStamps revenue from the sale of PhotoStamps; (3) product sales consisting of Supplies Store revenue from the direct sale of
consumables and supplies; and (4) other revenue consisting of advertising revenue from controlled access advertising to our existing customer
base, insurance revenue from our branded insurance offering, and licensing revenue. Revenue increased from $38.1 million in fiscal 2004 to
$61.9 million in fiscal 2005, an increase of 62%.
27
Twelve Months Ended
December 31,
2005 2004
Total Revenues
Service
%
%
Photostamps
%
6
%
Product
%
%
Other
5
%
6
%
Total revenues
100
%
100
%
Cost of revenues
Service
%
%
Photostamps
9
%
4
%
Product
3
%
4
%
Other
1
%
2
%
Total cost of revenues
%
%
Gross profit
%
%
Operating expenses:
Sales and marketing
%
%
Research and development
%
%
General and administrative
%
%
Total operating expenses
%
%
Income (loss) from operations
%
(18
)%
Other income, net
4
%
6
%
Income (loss) before income taxes
%
(12
)%
Provision for income taxes
—
—
Net income (loss)
%
(12
)%