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2015 2014
CostofRevenues    
Service $ 27,967 $ 19,687
Product  5,971  5,516
Insurance  3,984  3,210
CustomizedPostage  6,013  4,493
Totalcostofrevenues $ 43,935 $ 32,906
Costaspercentageofassociatedrevenue    
Service 16%  17%
Product 33%  33%
Insurance 34%  35%
CustomizedPostage 83%  82%
Totalcostasapercentageoftotalrevenues 21%  22%
TABLE OF CONTENTS
Cost of Revenue
Thefollowingtableshowscostofrevenuesandcostofrevenuesasapercentageofitsassociatedrevenuefortheperiodsindicated
(inthousandsexceptpercentage):
Costofservicerevenueprincipallyconsistsofthecostofcustomerservice,certainpromotionalexpenses,systemoperatingcosts,
creditcardprocessingfeesandcustomermisprintsthatdonotqualifyforreimbursementfromtheUSPS.Costofproductrevenue
principallyconsistsofthecostofproductssoldthroughourSuppliesStoresandtherelatedcostsofshippingandhandling.Thecostof
insurancerevenueprincipallyconsistsofparcelinsuranceofferingcoststhroughourthirdpartyinsurancepartners.Costofcustomized
postagerevenueprincipallyconsistsofthefacevalueofpostage,customerservice,imagereviewcosts,andprintingandfulfillment
costs.
Costofservicerevenueincreased42%to$28.0millionin2015from$19.7millionin2014.Theincreasewasprimarily
attributabletohighercustomerservicecoststosupportourgrowingcustomerbase,highercreditcardprocessingfeesassociatedwith
ourhigherrevenueandhigherpromotionalexpenses.Promotionalexpenses,whichrepresentsamaterialportionoftotalcostofservice
revenue,isexpensedintheperiodinwhichacustomerqualifiesforthepromotionwhiletherevenueassociatedwiththeacquired
customerisearnedoverthecustomer'slifetime.Asaresult,promotionalexpensefornewlyacquiredcustomersmayexceedthe
revenueearnedfromthosecustomersinthatperiod.Promotionalexpenseincreased11%to$3.4millionin2015from$3.1millionin
2014.Theincreaseinourpromotionalexpensewasprimarilyduetohighercustomeracquisition.The42%increaseincostofservice
revenuewaslessthanthe53%increaseinservicerevenueoverthesametimeperiod.
Costofproductrevenueincreased8%to$6.0millionin2015from$5.5millionin2014.The8%increaseincostofproduct
revenuewasconsistentwiththe8%increaseinproductrevenueoverthesametimeperiod.
Costofinsurancerevenueincreased24%to$4.0millionin2015from$3.2millionin2014.Theincreaseincostofinsurance
revenueresultedfromgrowthinthenumberofinsurancetransactions,whichwasprimarilyattributabletoouracquisitions.The24%
increaseincostofinsurancerevenuewaslessthanthe27%increaseininsurancerevenue.
Costofcustomizedpostagerevenueincreased34%to$6.0millionin2015from$4.5millionin2014.Thecostofcustomized
postagerevenueresultedfromthegrowthinhighvolumebusinessorders.The34%increaseincostofcustomizedpostagerevenuewas
consistentwiththe33%increaseincustomizedpostagerevenueoverthesametimeperiod.
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