8x8 2013 Annual Report Download - page 36

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34
The following table illustrates our net revenues by geographic area. Revenues are attributed to countries based on the
destination of shipment (in thousands):
2013 2012 2011
United States $ 104,387 $ 83,841 $ 69,455
Other locations 3,227 1,962 708
$ 107,614 $ 85,803 $ 70,163
Years Ended March 31,
COST OF REVENUE
2013 2012 2011
Cost of service revenue $ 22,201 $ 18,065 $ 14,508 $ 4,136 22.9% $ 3,557 24.5%
Percentage of service revenue 22.6% 23.0% 22.3%
(dollar amounts in thousands)
Year-over-Year ChangeYears Ended March 31,
2011 to 20122012 to 2013
Cost of service revenue primarily consists of costs associated with network operations and related personnel, telephony
origination and termination services provided by third party carriers and technology license and royalty expenses.
The increase in cost of service revenue for fiscal 2013 from fiscal 2012 was primarily due to a $2.6 million increase in third
party network service expenses, a $0.8 million increase in payroll and related expenses, a $0.7 million increase in depreciation
expenses, a $0.4 million increase in amortization expense due to intangibles acquired in acquisitions, a $0.1 million increase in
consultant and outside service expenses. The increase in cost of service revenues was partially offset by a $0.3 million
reduction in license and fee expenses, a $0.1 million decrease in expensed computer equipment and furniture and fixtures and a
$0.1 million reduction in other cost of service expenses.
The increase in the cost of service revenue for fiscal 2012 from fiscal 2011 was primarily due to a $1.2 million increase in third
party network service expenses, a $1.1 million increase in payroll and related expenses, a $0.4 million increase in consultant
and outside service expenses, a $0.4 million increase in amortization expense due to intangibles acquired in the acquisitions of
Contactual, Inc. and Zerigo, Inc., a $0.3 million increase in depreciation expenses, a $0.2 million increase in expensed
computer equipment and furniture and fixtures, and a $0.1 million increase in repair and maintenance expenses. The increase in
cost of service revenues was partially offset by a $0.2 million reduction in license and fee expenses and a $0.1 million decrease
in recruiting expenses.
2013 2012 2011
Cost of product revenue $ 11,801 $ 9,822 $ 8,115 $ 1,979 20.1% $ 1,707 21.0%
Percentage of product revenue 125.5% 132.4% 157.1%
2012 to 2013
Years Ended March 31, Year-over-Year Change
2011 to 2012
(dollar amounts in thousands)
The cost of product revenue consists of costs associated with systems, components, system manufacturing, assembly and
testing performed by third party vendors, estimated warranty obligations and direct and indirect costs associated with product
purchasing, scheduling, shipping and handling. We allocate a portion of service revenues to product revenues but these
revenues are less than the cost of the product.
The increase in the cost of product revenue for fiscal 2013 from fiscal 2012 was primarily due to a $1.8 million increase in the
shipment of equipment to our business customers, a $0.1 million increase in warranty expense, and a $0.1 million increase in
freight costs.