8x8 2013 Annual Report Download - page 37

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35
The increase in the cost of product revenue for fiscal 2012 from fiscal 2011 was primarily due to a $1.8 million increase in the
shipment of equipment to our business customers and a $0.1 million increase in freight costs. The increase in cost of product
revenues was partially offset by a $0.2 million decrease in payroll and related expenses due to reduction in headcount.
RESEARCH AND DEVELOPMENT EXPENSES
2013 2012 2011
Research and development $ 8,147 $ 6,745 $ 4,819 $ 1,402 20.8% $ 1,926 40.0%
Percentage of total revenue 7.6% 7.9% 6.9%
(dollar amounts in thousands)
2012 to 2013 2011 to 2012
Year-over-Year ChangeYears Ended March 31,
Historically, our research and development expenses have consisted primarily of personnel, system prototype design, and
equipment costs necessary for us to conduct our development and engineering efforts. We expense research and development
costs as they are incurred.
The increase in research and development expenses for fiscal 2013 from fiscal 2012 was primarily attributable to a $1.1 million
increase in payroll and related expenses, a $0.1 million increase in recruiting expenses, and a $0.2 million increase in other
research and development expenses.
The increase in research and development expenses for fiscal 2012 from fiscal 2011 was primarily attributable to a $1.5 million
increase in payroll and related expenses, a $0.3 million increase in consulting and outside service expenses and a $0.1 million
increase in other research and development expenses.
SALES AND MARKETING EXPENSES
2013 2012 2011
Sales and marketing $ 46,244 $ 37,980 $ 31,744 $ 8,264 21.8% $ 6,236 19.6%
Percentage of total revenue 43.0% 44.3% 45.2%
2011 to 2012
(dollar amounts in thousands)
2012 to 2013
Years Ended March 31, Year-over-Year Change
Sales and marketing expenses consist primarily of personnel and related overhead costs for sales, marketing, and customer
service. Such costs also include outsourced customer service call center operations, sales commissions, as well as trade show,
advertising and other marketing and promotional expenses.
The increase in sales and marketing expenses for fiscal 2013 from fiscal 2012 was primarily due to a $6.2 million increase in
payroll and related expenses from an increase in our sales force, a $0.4 million increase in third party sales commissions, $0.3
million increase in sales promotion expenses, a $0.3 million increase in bad debt expense, a $0.2 million increase in
amortization expense due to intangibles acquired in acquisitions, and a $0.9 million net increases in other sales and marketing
expenses.
The increase in sales and marketing expenses for fiscal 2012 from fiscal 2011 was primarily due to a $4.3 million increase in
payroll and related expenses due to an increase in our sales force, a $0.7 million increase in advertising expenses, a $0.5
million increase in sales promotion expenses, a $0.3 million increase in amortization of customer relationship intangible, a $0.2
million increase in temporary personnel, consulting and outside service expenses, a $0.2 million increase in travel and meal
expenses, a $0.2 million increase in tradeshow expenses, a $0.1 million increase in public relation expenses, a $0.1 million
increase in bad debt expense and a $0.1 million increase in credit card processing fees. This increase was partially offset by a
$0.6 million reduction in legal expenses, as fiscal 2011 included a $0.6 million accrual related to the memorandum of
understanding to settle a lawsuit against us in fiscal 2011.