Vistaprint 2014 Annual Report Download - page 42

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38
The following table summarizes our comparative operating expenses for the period:
In thousands
Year Ended June 30,
2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Cost of revenue . . . . . . . . . . . . . . . . . . . $ 451,093 $ 400,293 $ 355,205 13 % 13%
% of revenue . . . . . . . . . . . . . . . . . . . . . . 35.5% 34.3% 34.8%
Technology and development expense $ 176,344 $ 164,859 $ 129,162 7 % 28%
% of revenue . . . . . . . . . . . . . . . . . . . . . . 13.9% 14.1% 12.7%
Marketing and selling expense . . . . . . . $ 440,311 $ 446,116 $ 375,538 (1)% 19%
% of revenue . . . . . . . . . . . . . . . . . . . . . . 34.6% 38.2% 36.8%
General and administrative expense . . $ 116,574 $ 110,086 $ 105,190 6 % 5%
% of revenue . . . . . . . . . . . . . . . . . . . . . . 9.2% 9.4% 10.3%
Cost of revenue
Cost of revenue includes materials used to manufacture our products, payroll and related expenses for
production personnel, depreciation of assets used in the production process and in support of digital marketing
service offerings, shipping, handling and processing costs, third-party production costs, costs of free products and
other related costs of products sold by us. Cost of revenue as a percent of revenue increased during fiscal 2014 as
the People & Print Group and Pixartprinting operations we acquired in fiscal 2014 have a lower gross margin profile
than our traditional business; however, these companies have lower marketing and selling costs.
The increase in cost of revenue of $50.8 million for the year ended June 30, 2014, as compared to the prior
period, was primarily due to additional manufacturing costs of $29.7 million associated with the acquired People &
Print Group and Pixartprinting operations. Excluding those costs, cost of revenue generally increased as we
produced more revenue volume in fiscal 2014 as compared to fiscal 2013. We incurred incremental shipping and
overhead related costs in fiscal 2014 of $3.6 million and $9.7 million, respectively. These expense increases were
offset by a decline in materials related costs of $1.1 million and other productivity and efficiency gains. In addition,
the fiscal 2013 period included a benefit from a non-cash gain related to a free piece of equipment of $1.4 million in
our European operations that did not occur in fiscal 2014.
The $45.1 million increase in cost of revenue from fiscal 2012 to fiscal 2013 was primarily due to additional
manufacturing costs for increased product sales. Specifically, we incurred additional expense of $26.5 million for
material and overhead related costs, as well as $7.2 million of shipping cost during the year ending June 30, 2013
as compared to the prior period. Cost of revenue also increased by $9.9 million in fiscal 2013 as Albumprinter and
Webs were only included for a portion of our fiscal 2012 results. These fiscal 2013 expense increases were offset
by a $1.4 million benefit from a non-cash gain related to a free piece of equipment.
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 $11.5 million for fiscal 2014 was primarily due
to increased payroll and facility-related costs of $9.5 million as a result of an increase in headcount in our
technology development and information technology support organizations. At June 30, 2014, we employed 887
employees in these organizations compared to 786 employees at June 30, 2013. Other technology and
development expenses increased $4.0 million in fiscal 2014 as compared to the prior comparative period primarily
due to restructuring charges of $1.3 million as well as increased recruitment, hosting services and other costs
related to continued investment in our infrastructure. In addition, amortization expense increased by $1.1 million as
a result of the People & Print Group and Pixartprinting acquisitions. These expense increases were partially offset