8x8 2006 Annual Report Download - page 38

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development costs, including software development costs, are expensed as incurred.
The increase in research and development expenses for fiscal 2006, as compared to fiscal 2005, was primarily due to
a $2.7 million increase in personnel costs due to additional employee and contractor headcount.
The increase in research and development expenses for fiscal 2005, as compared to fiscal 2004, was primarily due to
a $0.9 million increase in personnel costs due to additional employee and contractor headcount. These increases
were offset by decreases in depreciation, tooling and maintenance expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales,
marketing, customer support, finance, human resources and general management. Such costs also include
outsourced customer service call center operations, sales commissions, trade show, advertising and other marketing
and promotional expenses.
The increase in selling, general and administrative expenses for fiscal 2006, as compared to fiscal 2005, was
primarily attributable to a $2.5 million increase in compensation expense for personnel due to headcount additions, a
$1.0 million increase in advertising, public relations and other marketing and promotional expenses, a $1.2 million
increase in contractor expenses relating to the increase in staffing of our telemarketing and customer service
organizations, a $3.6 million increase in sales agent and retailer commissions and a $0.9 million increase in credit
card transaction processing fees. These increases were partially offset by a $0.3 million decrease in consultant and
auditor expenses related to compliance with Sarbanes Oxley Section 404 and a $0.6 million decrease in legal fees
attributable to reduced patent and regulatory legal expenses.
The increase in selling, general and administrative expenses for fiscal 2005, as compared to fiscal 2004, was
primarily attributable to a $1.4 million increase in compensation expense for personnel due to headcount additions, a
$4.9 million increase in advertising, public relations and other marketing and promotional expenses, a $1.8 million
increase in contractor expenses due to the increase in staffing of our telemarketing and customer service
organizations, a $1 million increase in sales agent and retailer commissions, a $0.8 million increase in consultant
and auditor expenses related to compliance with Sarbanes Oxley Section 404, a $0.5 million increase in legal fees
and a $0.4 million increase in credit card transaction processing fees.
Subscriber acquisition costs increased to $122 for fiscal 2006 from $113 for fiscal 2005. Subscriber acquisition cost
increased for fiscal 2006 as compared to fiscal 2005 due to an increase in overall marketing program spending in the
retail distribution channel and spending on a per acquired subscriber basis and higher one-time bounty payments to
sales agents. We did not compute or analyze subscriber acquisition costs for fiscal 2004, as Packet8 was an
insignificant portion of our business.
OTHER INCOME, NET
Year Ended March 31, Year-Over-Year Change
2006 2005 2004 2005 to 2006 2004 to 2005
(dollar amounts in thousands)
Selling, general and administrative........
.
$ 27,863 $ 18,534 $ 6,060 $ 9,329 50.3% $ 12,474 205.8%
Percentage of total revenues..................
.
87.4% 161.5% 65.1%
Year Ended March 31, Year-Over-Year Change
2006 2005 2004 2005 to 2006 2004 to 2005
(dollar amounts in thousands)
Other income, net.....................................
.
$ 847 $ 558 $ 822 $ 289 51.8% $ (264) -32.1%
Percentage of total revenues..................
.
2.7% 4.9% 8.8%