Stamps.com 2013 Annual Report Download - page 32

Operating Expenses
The following table outlines the components of our operating expense and their respective percentages of total revenue for the periods indicated
(in 000s except percentage):
Sales and Marketing
Sales and marketing expense principally consists of spending to acquire new customers and compensation and related expenses for personnel
engaged in sales, marketing, and business development activities. Sales and marketing expense increased 2% to $39.5 million in 2013 from
$38.8 million in 2012. The increase is primarily due to increased marketing spending to acquire customers in our Core PC Postage business
while spending in our Non-Core PC Postage and PhotoStamps business both decreased compared to 2012. Ongoing marketing programs include
the following: customer referral programs, customer re-marketing efforts, direct mail, online advertising, partnerships, telemarketing, and
traditional advertising. Sales and marketing expenses as a percent of total revenue decreased from 34% in 2012 to 31% in 2013 as revenue grew
at a faster pace than sales and marketing expenses. The decrease is primarily attributable to sales and marketing spend not increasing as much as
originally planned due to a more competitive environment in the traditional advertising and online marketing areas in 2013 as compared to 2012.
Research and Development
Research and development expense principally consists of compensation for personnel involved in the development of our services, depreciation
of equipment and software and expenditures for consulting services and third party software. Research and development expense increased 7%
to $11.0 million in 2013 from $10.2 million in 2012. The increase is primarily due to an increase in headcount-
related expenses to support our
expanded offerings. Research and development expense as a percentage of revenue was consistent at 9% in both 2012 and 2013.
General and Administrative
General and administrative expense principally consists 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 7% to $15.8 million in 2013 from $14.8 million in 2012. The increase is primarily due to
increase in headcount and related expenses and infrastructure investments to support the growth in the business. General and administrative
expense as a percentage of revenue decreased slightly from 13% in 2012 to 12% in 2013. The decrease was primarily attributable to fixed cost
leverage associated with our revenue growth.
Interest and Other Income, Net
Interest and other income, net primarily consists of interest income from cash equivalents, short-term and long-term investments and rental
income from our corporate headquarters in El Segundo, California. Interest and other income, net decreased 11% to $480,000 in 2013 from
$541,000 in 2012. The decrease is primarily due to lower yields on our investment balances including certain investments in our portfolio that
matured and were replaced with lower yield investments.
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Table of Contents
2013 2012
Operating Expenses:
Sales and marketing
$
39,449
$
38,755
Research and development
10,958
10,243
General and administrative
15,794
14,750
Total operating expenses
$
66,201
$
63,748
Operating expenses as a percentage of total revenue:
Sales and marketing
31
%
34
%
Research and development
9
%
9
%
General and administrative
12
%
13
%
Total operating expenses
52
%
55
%