Vistaprint 2013 Annual Report Download - page 44

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The decrease in the cost of revenue as a percentage of total revenue from fiscal 2011 to fiscal 2012 was
primarily attributable to higher overhead absorption resulting from increased product sales and increased labor
efficiency, partially offset by inflation and shifts in product mix.
Technology and development expense
Technology and development expense consists primarily of payroll and related expenses for our employees
engaged in software and manufacturing engineering, information technology operations, content development,
amortization of capitalized software, website development costs and certain acquired intangible assets, including
developed technology, hosting of our websites, asset depreciation, patent amortization, legal settlements in
connection with patent-related claims, and other technology infrastructure-related costs. Depreciation expense for
information technology equipment that directly supports the delivery of our digital marketing services products is
included in cost of revenue.
The growth in our technology and development expenses of $35.7 million for fiscal 2013 was primarily due
to increased payroll and facility-related costs of $30.0 million as a result of a planned increase in headcount in our
technology development and information technology support organizations. At June 30, 2013, we employed 786
employees in these organizations compared to 657 employees at June 30, 2012. Share-based compensation
attributable to technology and development personnel increased by $4.0 million as compared to the prior
comparative period partially due to a full period of expense associated with restricted shares granted as part of the
Webs acquisition. In addition, other technology and development expenses increased $6.1 million as compared to
the prior comparative period due to increased employee travel and training costs, recruitment costs, and increased
depreciation, hosting services, and other costs related to continued investment in our website infrastructure. These
expense increases were partially offset by decreased expense related to capitalized software costs of $5.7 million,
due in part to our change in the estimated useful life of our capitalized software and website development costs
from 2 to 3 years of $2.7 million as discussed in Note 2 of the accompanying consolidated financial statements, as
well as an increase in current costs that qualify for capitalization during the fiscal year. The fiscal year ended June
30, 2013 includes $1.3 million of additional amortization of acquired developed technology assets from the
acquisitions of Albumprinter and Webs as compared to fiscal 2012.
The increase in our technology and development expenses of $35.5 million for fiscal 2012 was primarily
due to increased payroll and facility-related costs of $28.4 million associated with increased headcount in our
technology development and information technology support organizations, an integral part of our long-term growth
strategy. At June 30, 2012, we employed 657 employees in these organizations compared to 454 employees at
June 30, 2011. In addition other technology and development expenses increased $4.1 million as compared to the
prior comparative period due to increased employee travel and training costs, recruitment costs and increased
depreciation, hosting services and other costs related to continued investment in our website infrastructure.
Furthermore, the year ended June 30, 2012 includes amortization of certain acquired intangible assets related to
the Albumprinter and Webs transactions of $2.3 million. The increase in other website related expenses during
fiscal 2012 was partially offset by a legal settlement of a patent claim in fiscal 2011.
Marketing and selling expense
Marketing and selling expense consists primarily of advertising and promotional costs; payroll and related
expenses for our employees engaged in marketing, sales, customer support and public relations activities;
amortization of certain acquired intangible assets, including customer relationships and trade names; and third-
party payment processing fees.
The growth in our marketing and selling expenses of $70.6 million for fiscal 2013 as compared to fiscal
2012 was driven primarily by increases of $34.4 million in advertising costs and commissions related to new
customer acquisition and promotions targeted at our existing customer base, an integral component of our long-
term growth strategy. We continued to expand our marketing organization and our customer service, sales and
design support centers and at June 30, 2013, we employed 1,672 employees in these organizations compared to
1,515 employees at June 30, 2012, resulting in increased payroll and facility-related costs when compared to prior
periods of $24.8 million. For fiscal 2013, share-based compensation costs attributable to marketing and selling
personnel increased $3.7 million as compared to the prior comparative period due primarily to a change in the
functional classification of a portion of the share-based compensation expense to selling and marketing expense in
fiscal 2013 as a result of a change in role by certain employees, as well as a full period of expense associated with
restricted shares granted as part of the Webs acquisition. Other marketing and selling expenses also increased by
Form 10-K