Carbonite 2011 Annual Report Download - page 43

Table of Contents
Subscription renewals may vary during the year based on the date of our customers’ original subscriptions. As we recognize subscription revenue
ratably over the subscription period, this generally has not resulted in a material seasonal impact on our revenue, but may result in material monthly and
quarterly variances in one or more of the key business metrics described above.
Performance Highlights
The following table presents our performance highlights for the periods presented:
Our total customers and bookings increased over the periods presented and we are continuing to invest substantially in customer acquisition in an
effort to drive future growth in total customers and bookings. While we expect our total customers to continue to increase on an absolute basis, we
expect that our annual percentage increase in total customers will decline as our customer base grows.
In June 2010, we decided to cease distribution of our consumer solutions through third-party distribution channels, and we terminated most of our
distribution agreements at that time. During 2010, subscriptions purchased through third-party distributors accounted for 8% of our revenue.
Historically, renewal rates for subscriptions purchased through third-party distributors were lower than for direct sales. Excluding renewal activity
related to third-party distributor sales, our annual retention rates for the years ended December 31, 2011, December 31, 2010, and December 31, 2009
were 86%, 85%, and 83% respectively.
Our free cash flow over the periods presented has improved due to economies of scale and the impact of higher per customer profitability
associated with customers who continue beyond a single year. Free cash flow for the year ended December 31, 2011 improved by $6.2 million and $2.1
million compared to the years ended December 31, 2010 and December 31, 2009, respectively.
Key Components of our Consolidated Statements of Operations
Revenue
We derive our revenue from subscription fees from consumers and SMBs. We typically charge a customer’s credit card the full price of the
subscription at the commencement of the subscription period and at each renewal date, unless the customer decides not to renew the subscription. We
initially record a customer subscription fee as deferred revenue and then recognize it ratably, on a daily basis, over the life of the subscription period.
Cost of revenue
Cost of revenue consists primarily of costs associated with our data center operations and customer support centers, including wages and benefits
for personnel, depreciation of equipment, rent, utilities and broadband, equipment maintenance, software license fees, and allocated overhead. The
expenses related to hosting our services and supporting our customers are related to the number of customers and the complexity of our services and
hosting infrastructure. We expect these expenses to increase in absolute dollars as we continue to increase our number of customers. On a per subscriber
basis, our costs have been decreasing as we achieve economies of
40
Years Ended December 31,
2011
2010
2009
(in thousands, except percentage data)
Key metrics:
Total customers
1,223
951
590
Annual retention rate
82
%
83
%
79
%
Renewal rate
82
%
81
%
78
%
Bookings
$
80,900
$
54,141
$
32,857
Free cash flow
$
(5,972
)
$
(12,204
)
$
(8,045
)