Tucows 2015 Annual Report Download - page 89

Domain Services
Wholesale
Costs for Wholesale for Fiscal 2015 decreased by $1.9 million to $72.7 million, when compared to Fiscal 2014.
This reduction in costs is primarily the result of an ongoing shift in product mix to higher margin domain services and with
growth in the core wholesale domain services business being off-set with a few large clients migrating their business to
their own accreditations.
Retail
Costs for Retail for Fiscal 2015 increased by $1.0 million, to $5.5 million, when compared to Fiscal 2014. This
increase resulted primarily from the increased cost of additional volume in Hover services.
Portfolio
Costs for Portfolio decreased by $0.2 million for Fiscal 2015, to $0.7 million when compared to Fiscal 2014,
primarily the result of our decision not to renew certain domain names acquired in the June 2006 acquisition of
Mailbank.com Inc. as described under impairment of indefinite life intangible assets below.
Network Expenses
Network costs for Fiscal 2015 increased by $1.4 million to $6.6 million when compared to Fiscal 2014. This
increase is largely the result of the additional costs we incur as a result of our now providing high speed Internet access,
Internet hosting and network consulting services to customers.
SALES AND MARKETING
Sales and marketing expenses consist primarily of personnel costs. These costs include commissions and related
expenses of our sales, product management, public relations, call center, support and marketing personnel. Other sales and
marketing expenses include customer acquisition costs, advertising and other promotional costs.
Year ended December 31,
2015 2014
Sales and marketing $ 18,537,810 $ 15,394,065
Increase over prior period $ 3,143,745
Increase - percentage 20%
Percentage of net revenues 11% 10%
Sales and marketing expenses for Fiscal 2015 increased by $3.1 million, or 20%, to $18.5 million as compared to
Fiscal 2014. This increase primarily related to workforce expenses incurred in connection with supporting and acquiring
network access services customers. As we exceeded our adjusted EBITDA target set for Fiscal 2015 under our
overachievement bonus program, sales and marketing workforce related costs in Fiscal 2015 also include a provision of
$0.6 million due to this higher performance attainment.
Excluding movements in exchange rates, we expect sales and marketing expenses for the fiscal year ending
December 31, 2016 (“Fiscal 2016”) to increase in absolute dollars, as we adjust our marketing programs and sales and
customer support personnel costs to support our network access services marketing and customer service needs.
TECHNICAL OPERATIONS AND DEVELOPMENT
Technical operations and development expenses consist primarily of personnel costs and related expenses
required to support the development of new or enhanced service offerings and the maintenance and upgrading of existing
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