Rosetta Stone 2014 Annual Report Download - page 43
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Table of Contents
Product
$ 136,251
$ 156,792
$ (20,541)
(13.1)%
Subscription and service
125,602
107,853
17,749
16.5 %
Total revenue
261,853
264,645
(2,792)
(1.1)%
Cost of product revenue
34,192
32,191
2,001
6.2 %
Cost of subscription and service revenue
18,862
13,523
5,339
39.5 %
Total cost of revenue
53,054
45,714
7,340
16.1 %
$ 208,799
$ 218,931
$ (10,132)
(4.6)%
Gross margin percentages
79.7%
82.7%
(3.0)%
Cost of Product Revenue
Cost of product revenue for the year ended December 31, 2014 was $34.2 million, an increase of $2.0 million, or 6% from the year ended December 31,
2013. As a percentage of product revenue, cost of product revenue increased to 25% from 20% for the year ended December 31, 2014 compared to the prior
year period. The increase in cost as a percentage of revenue was primarily attributable to a decline in the price per unit combined with an increase in the
volume of units sold. The dollar increase in cost of product is primarily due to increased payroll and benefits as a result of the acquisitions that occurred
during the first quarter of 2014.
Cost of Subscription and Service Revenue
Cost of subscription and service revenue for the year ended December 31, 2014 was $18.9 million, an increase of $5.3 million, or 39% from the year
ended December 31, 2013. As a percentage of subscription and service revenue, cost of subscription and service revenue increased to 15% from 13% for the
year ended December 31, 2014 compared to the prior year period. The dollar increase in cost of subscription and service revenue is due to increased payroll
and benefits, primarily as a result of the acquisitions that occurred during the first quarter of 2014 and second and third quarters of 2013. There was an
increase in hosting expense due to the support of additional companies and a transition to cloud-based platforms. An increase in depreciation and
amortization on acquired intangible assets also contributed to the overall increase in cost of subscription and service revenue.
Sales and marketing
$ 173,208
$ 146,104
$ 27,104
18.6 %
Research and development
33,176
33,995
(819)
(2.4)%
General and administrative
57,120
56,432
688
1.2 %
Impairment
20,333
—
20,333
100.0 %
Lease abandonment and termination
3,812
842
2,970
352.7 %
Total operating expenses
$ 287,649
$ 237,373
$ 50,276
21.2 %
41