Rosetta Stone 2012 Annual Report Download - page 63
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Table of Contents
The following table sets forth cost of product revenue and subscription and service revenue, as well as gross profit for the year ended
December 31, 2011 and 2010:
Cost of product revenue for the year ended December 31, 2011 was $36.5 million, an increase of $3.9 million, or 12%, from the year ended
December 31, 2010. As a percentage of product revenue, cost of product revenue increased to 19% for the year ended December 31, 2011 compared to
15% for the prior year period. The dollar increase in cost was primarily attributable to a $2.9 million increase in expense associated with product support
activities, a $0.6 million increase in freight, and a $0.4 million increase in commission expenses associated with our partners and affiliates. This increase
was slightly offset by a $0.6 million decrease in inventory obsolescence and scrap associated with the U.S. Version 4 launch in the third
quarter of 2010.
Cost of subscription and service revenue for the year ended December 31, 2011 was $12.6 million, an increase of $6.2 million, or 96% from the
year ended December 31, 2010. As a percentage of subscription and service revenue, cost of subscription and service revenue increased to 17% for the
year ended December 31, 2011 compared to 15% for the prior year period. The increase in cost was primarily attributable to our web-based service
offerings in our Version 4 and products that include a component of dedicated online language conversation coaching and higher
direct costs to deliver to customers than our previous software solutions.
60
Product $ 195,382 $ 215,590 $ (20,208) (9.4)%
Subscription and service 73,067 43,278 29,789 68.8%
Total revenue 268,449 258,868 9,581 3.7%
Cost of product revenue 36,497 32,549 3,948 12.1%
Cost of subscription and service revenue 12,619 6,450 6,169 95.6%
Total cost of revenue 49,116 38,999 10,117 25.9%
$ 219,333 $ 219,869 $ (536) (0.2)%
Gross margin percentages 81.7% 84.9% (3.2)%
Sales and marketing $ 161,491 $ 130,879 $ 30,612 23.4%
Research and development 24,218 23,437 781 3.3%
General and administrative 62,031 53,239 8,792 16.5%
Lease abandonment — (583) 583 100.0%
Total operating expenses $ 247,740 $ 206,972 $ 40,768 19.7%