Support.com 2011 Annual Report Download - page 30

Download and view the complete annual report

Please find page 30 of the 2011 Support.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 82

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82


Cost of Revenue
   

   

  
Cost of services $ 29,919 12% $ 26,737 61% $ 16,620
Cost of software and other 1,744 28% 1,358 2,202% 59
Total cost of revenues $ 31,663 13% $ 28,095 68% $ 16,679
 Cost of services consists primarily of salary–related and contractor expenses for people providing services, technology and
telecommunication expenses related to the delivery of services and other personnel-related expenses in service delivery. The increase of $3.2 million in
cost of services for the year ended December 31, 2011 compared to 2010 was mainly driven by $3.1 million of costs associated with higher numbers
of service delivery personnel added to support program growth. The increase of $10.1 million in cost of services for the year ended December 31,
2010 as compared to 2009 was primarily due to increases in salary and related expense of $9.0 million as a result of growing our workforce of
Personal Technology Experts, as well as a corresponding increase of $400,000 in direct technology costs to support this growing workforce. In
2012, we expect cost of services to continue to increase to support higher anticipated service volumes.
 Cost of software and other fees consists primarily of third-party royalty fees for our software products. Certain of
these products were developed using third-party research and development resources, and the third party receives royalty payments on sales of
products it developed. The increase of $386,000 in cost of software and other for the year ended December 31, 2011 compared to 2010 was primarily
due to higher third-party royalty payments driven by higher software revenues. The increase of $1.3 million in cost of software and other for the year
ended December 31, 2010 compared to 2009 was primarily driven by an increase in royalty payments associated with a full year of product sales for
the products we acquired in December 2009. In 2012, we expect gross margin from software revenue and other to be relatively consistent with 2011.
Operating expenses
   

   

  
Research and development $ 6,057 16% $ 5,214 (10)% $ 5,795
Sales and marketing 21,791 20% 18,091 136% 7,675
General and administrative 12,005 10% 10,963 (22)% 14,119
Total operating expenses $ 39,853 16% $ 34,268 24% $ 27,589
 Research and development expense consists primarily of compensation costs, third-party consulting expenses and
related overhead costs for research and development personnel. Research and development costs are expensed as they are incurred. The increase of
$843,000 in research and development expense for the year ended December 31, 2011 compared to 2010 resulted primarily from an increase in salary
and related expenses of $615,000 and an increase in stock-based compensation expense of $228,000. The decrease of $581,000 in research and
development expense for the year ended December 31, 2010 compared to 2009 resulted from a decrease in salary and related expenses of $300,000
due to fewer research and development personnel and a decrease in office expenses of $165,000 driven primarily by lower facility costs for an office
outside the United States. In 2012, we expect research and development spending to increase modestly as we continue our investment in our
technology.
 Sales and marketing expense consists primarily of compensation costs, including salaries and sales commissions for
sales agents and business development, program management and marketing personnel, as well as expenses for lead generation and promotional
activities, including public relations, advertising and marketing. The increase of $3.7 million in sales and marketing expense for the year ended
December 31, 2011 compared to 2010 resulted from $3.0 million related to additional personnel expense, primarily for our expanding Comcast
program, and $1.7 million of additional marketing expense associated with higher software sales. This increase was offset by a decrease of $1.6
million in partner marketing fees for our channels due to contractual reductions in marketing fee rates. The increase of $10.4 million in sales and
marketing expense for the year ended December 31, 2010 compared to 2009 resulted from an increase in compensation costs of $2.2 million,
primarily due to higher sales and marketing personnel, and an increase in marketing spending of $8.4 million to drive sales of software products
acquired in 2009. In 2012, we expect sales and marketing spending levels to be determined by a number of factors including software marketing
costs, sales agent costs and investments in small business programs.
28
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.