Deferred revenue at December 31, 2012 increased by 5% compared to the same period of the prior fiscal year. This increase appears lower than the increases recorded in a 20% range in the previous three quarters. The increase in the current quarter is lower due to the timing of the renewal and invoicing of two significant contracts. Whereas in the previous fiscal year, these contracts were renewed and included in our third quarter's deferred revenue balance, in the current fiscal year, the renewal has been deferred to and is expected to be captured in our fourth quarter's deferred revenue balance.
If we were to include these renewals in the current quarter's deferred revenue balance, to provide a normalized comparison, we would notice that the increase at December 31, 2012 compared to the same period of the previous fiscal year, would follow a similar trend as in the previous three quarters of increasing by approximately 23%.
PROFESSIONAL SERVICES REVENUE
CMG recorded professional services revenue of $1.4 million for the three months ended December 31, 2012, representing a decrease of $0.09 million compared to the same period of the previous fiscal year, resulting from a slight decrease in project activities by our clients and the associated consulting activities in the current quarter. Professional services for the nine months ended December 31, 2012 amounted to $4.0 million compared to $4.2 million recorded in the same period of the previous fiscal year. The year-to-date revenue related to consulting activities actually increased slightly; however, this increase was not evident due to the inclusion of a $0.3 million grant in the professional services revenue during the first quarter of the previous fiscal year, which was received from the CMG Reservoir Simulation Foundation ("Foundation CMG") for the DRMS project. The grant was fulfilled during that same quarter; hence, no additional amounts related to the grant have been subsequently recorded as professional services.
Professional services revenue consists of specialized consulting, training, and contract research activities. CMG performs consulting and contract research activities on an ongoing basis, but such activities are not considered to be a core part of our business and are primarily undertaken to increase our knowledge base and hence expand the technological abilities of our simulators in a funded manner, combined with servicing our customers' needs. In addition, these activities are undertaken to market the capabilities of our suite of software products with the ultimate objective to increase software license sales. Our experience is that consulting activities are variable in nature as both the timing and dollar magnitude of work are dependent on activities and budgets within client companies.
ExpensesFor the three months endedDecember 31, 2012 2011 $ change % change($ thousands)----------------------------------------------------------------------------Sales, marketing and professional services 3,778 3,536 242 7%Research and development 3,136 2,747 389 14%General and administrative 1,612 1,522 90 6%----------------------------------------------------------------------------Total operating expenses 8,526 7,805 721 9%----------------------------------------------------------------------------Direct employee costs(i) 6,716 6,063 653 11%Other corporate costs 1,810 1,742 68 4%---------------------------------------------------------------------------- 8,526 7,805 721 9%----------------------------------------------------------------------------For the nine months endedDecember 31, 2012 2011 $ change % change($ thousands)----------------------------------------------------------------------------Sales, marketing and professional services 11,333 9,703 1,630 17%Research and development 9,061 7,635 1,426 19%General and administrative 4,534 4,070 464 11%----------------------------------------------------------------------------Total operating expenses 24,928 21,408 3,520 16%----------------------------------------------------------------------------Direct employee costs(i) 19,802 17,028 2,774 16%Other corporate costs 5,126 4,380 746 17%---------------------------------------------------------------------------- 24,928 21,408 3,520 16%----------------------------------------------------------------------------(i) Includes salaries, bonuses, stock-based compensation, benefits, commissions, and professional development.
