Cost of Sales
Cost of sales increased to 190.5 million for the year ended December 31, 2017, from 162.6 million for the year ended
December 31, 2016, an increase of 17%. Cost of sales was 39% of revenue for each of the years ended December 31, 2017, and 2016. The increase in cost of sales related to our overall revenue growth and data center expansion projects,
including (i) an increase of 10.6 million in energy usage costs, (ii) an increase of 7.9 million in costs for operation and support personnel, (iii) an increase of 2.0 million in gross rent,
(iv) an increase of 1.7 million in security costs, and (v) an increase of 1.3 million in maintenance costs commensurate with growth. Equipped space increased by approximately 11,700 square meters during the year ended
December 31, 2017, as a result of expansions to existing data centers in Paris, Marseille, Amsterdam, Vienna, Copenhagen and Stockholm, and to the construction of new data centers in Frankfurt.
Other Income
Other
income represents income that we do not consider part of our core business. It includes transaction
break-fee
income, income from the subleases on unused data center sites, and any increase/(decrease) in
provisions for site restoration.
Sales and Marketing Costs
Our sales and marketing costs increased to 33.5 million for the year ended December 31, 2017, from 29.9 million for
the year ended December 31, 2016, an increase of 12%. Sales and marketing costs were 7% of revenue for each of the years ended December 31, 2017 and 2016.
The increase in sales and marketing costs was primarily a result of increased compensation and related costs as a result of increases in
employee headcount and marketing expenses associated with our continued investment in our go to market strategy.
General and
Administrative Costs
General and administrative costs consist of depreciation and amortization, share-based payments, M&A
transaction costs and other general and administrative costs.
Depreciation, amortization and impairments increased to
108.3 million for the year ended December 31, 2017, from 89.8 million for the year ended December 31, 2016, an increase of 20%. Depreciation, amortization and impairments was 22% of revenue for the year ended
December 31, 2017, and 21% for the year ended December 31, 2016. The increase was a result of our ongoing investment in new data centers and data center expansions.
In determining Adjusted EBITDA we add back share-based payments. For the year ended December 31, 2017, we recorded share-based payments
of 9.9 million, an increase of 26% from the year ended December 31, 2016. In determining Adjusted EBITDA we also add back M&A transaction costs, which amounted to 4.6 million in 2017 and 2.4 million in 2016.
Other general and administrative costs increased to 44.4 million for the year ended December 31, 2017, from
38.4 million for the year ended December 31, 2016, an increase of 16%. Other general and administrative costs were 9% of revenue for the years ended December 31, 2017 and December 31, 2016. The increase in the other general
and administrative costs was due to increases in professional advisory services, in software licenses, and in salaries associated with a larger headcount and higher external hires.
Net Finance Expense
Net
finance expense increased to 44.4 million for the year ended December 31, 2017 from 36.3 million for the year ended December 31, 2016, an increase of 22%. Net finance expense was 9% of revenue for the year ended
December 31, 2017 and December 31, 2016. The increase in net finance expense for the year ended December 31, 2017, was primarily due to the full-year interest expense on the additional 150.0 million 6.00% Senior Secured
Notes due 2020 which we issued in April 2016, utilization of the 100.0 million 2017 Senior Secured Revolving Facility, a positive adjustment of a financial lease obligation in France in 2016, additional financing fees, and increased
foreign currency exchange losses. In the year ended December 31, 2017, we capitalized 3.1 million of borrowing costs during the period of construction of new data center space, compared with 3.5 million in the year ended
December 31, 2016.
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