Vonage 2008 Annual Report Download - page 41

S
elling,
G
eneral and Administrativ
e
F
or the Years Ended December 31
,
D
o
ll
ar
C
hang
e
2008
v
s.
200
7
D
o
ll
ar
Change
200
7v
s
.
2006
P
ercent
C
hang
e
2008
v
s.
2007
P
ercent
Change
200
7v
s
.
2006
(
in thousands, except percentages
)
2008 200
7
2006
Selling, general and administrative
$
298,985
$
461,768
$
272,826
$
(162,783)
$
188,942 (35%) 69%
2008
compare
d
to
200
7
S
elling, general and administrative
.
Th
e
d
ecrease
i
nse
lli
ng,
g
eneral and administrative expenses of $162,783, or 35%, was
due to several reasons. A decrease in settlement expenses o
f
$
132,232 related to our patent litigation with Sprint, AT&T, Ver
-
izon and others for the
y
ear ended December 31, 200
7
accounted
f
or a the majorit
y
o
f
the decrease. Pro
f
essional
f
ees
,
p
rimarily related to legal fees for our patent infringement liti-
g
ations, decreased by $26,932. There were decreases in sal-
aries and emplo
y
ee-related benefits of
$
6,078, a decrease of
$
4
,
305 in workforce reduction costs and a decrease of our
f
acilit
y
maintenance and other administrative expenses o
f
$
2,920. This was offset b
y
the increase in share-based expense
of
$
4,696 due to the large number of forfeitures in connectio
n
with terminated emplo
y
ees recorded for the
y
ear ende
d
D
ecember 31
,
2007. As we continued to add customers
,
our
credit card, debit card and ECP fees have increased by
$
1,285
.
Our kiosk sales channels increased our expense b
y
$1,938, and
t
here was an increase in our outsourced labor costs of
$
2
,
691
.
200
7 compare
d
to
2006
S
elling, general and administrative
.
The increase in selling,
g
eneral and administrative expenses of $188,942, or 69%, was
due to several reasons. Settlement expenses of $134,30
0
r
elated to our patent litigation with Sprint, AT&T, Verizon and
others was recorded in the year ended December 31, 2007 and
account for a substantial majority of the increase. The pro-
f
essional fees, primarily related to le
g
al fees for our paten
t
infringement litigations, increased by
$
21,110. There wer
e
increases in outsourced labor costs of
$
21
,
707 and in salaries
and employee- related benefits of $6,871. We cut our workforc
e
by
10% in 2007 and incurred a one-time cost of $5,162 in th
e
y
ear ended December 31, 2007. As we continued to ad
d
customers
,
our credit card
,
debit card and ECP fees hav
e
increased as well by $6,174. Also, our facility maintenance and
other administrative expenses increased b
y
$5,860. We started
our kiosk sales channels in 2007, which increased our expens
e
b
y
$
8,576 for operating and start-up related expenses in 2007,
which was offset by the decrease in expense for share-base
d
awards of $19,438 due to the lar
g
e number of forfeitures in
connection with terminated employees and in recruitin
g
expens
e
of
$
2
,
382.
M
arketin
g
F
or t
h
e
Y
ears
E
n
d
e
dD
ecem
b
er
3
1,
Dolla
r
Change
2008
vs.
2
00
7
D
ollar
Change
200
7 vs.
2
006
P
ercent
C
hang
e
2008
vs
.
200
7
Percent
Change
200
7 vs.
2
00
6
(in thousands, except percenta
g
es
)
2
008 2007 200
6
Marketin
g
$253,370 $283,968 $365,349 $(30,598) $(81,381) (11%) (22%)
2008 com
p
ared to 2007
M
arketing
.
T
he decrease in marketing expense of
$
30,598
,
or 11%, was driven by the plan to balance growth with profit-
abilit
y
. This was primaril
y
comprised of a reduction in alternative
m
edia of
$
15,063, in online advertising of
$
1,636, in televisio
n
advertising of
$
9,594, in retail advertising of
$
5,616 and in othe
r
m
arketin
g
expense of $2,477, which was offset by an increase in
direct mail of
$
3
,
880
.
2007 com
p
ared to 2006
M
arketing
.
T
he decrease in marketing expense of
$
81,381
,
or 22%, was driven by the plan to balance growth with profit-
a
bili
ty w
i
t
hd
ecreases
i
nte
l
ev
i
s
i
on, on
li
ne, reta
il
,te
l
emar
k
et
i
n
g
and direct mail advertising, which was o
ff
set by an increase i
n
a
l
ternat
i
ve me
di
aa
d
vert
i
s
i
ng.
D
eprec
i
at
i
on an
dA
mort
i
zat
i
on
F
or the Years Ended December 31
,
D
o
ll
a
r
Chang
e
2008
v
s
.
200
7
D
o
ll
ar
Change
200
7v
s
.
2
006
P
ercent
C
hang
e
2008
v
s.
200
7
P
ercent
Change
200
7v
s
.
2
00
6
(
in thousands, except percentages
)
2008 2007 2006
Depreciation and amortization
$
48,612
$
35,718
$
23,677
$
12,894
$
12,041 36% 51
%
33