TeleNav 2012 Annual Report Download - page 56

Table of Contents
U.S., for fiscal 2009 through fiscal 2012 in state jurisdictions, and for fiscal 2008 through fiscal 2012 in foreign jurisdictions. Fiscal years outside the
normal statute of limitations remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried
forward and may be audited in subsequent years when utilized.
We believed it is reasonably possible that, as of June 30, 2013, the gross unrecognized tax benefits could decrease (whether by payment,
release, or a combination of both) by as much as $800,000 in the next 12 months. We recognize interest and penalties related to unrecognized tax
benefits as part of our provision for income taxes. We had $314,000 and $181,000 accrued for the payment of interest and penalties at June 30, 2013
and 2012, respectively.
Due to expected net losses in fiscal 2014, we expect to record a tax benefit as we believe it is more likely than not that we will realize the
benefit of these losses due to our ability to carryback net operating losses within the carryback period.
On January 2, 2013, the President signed into law The American Taxpayer Relief Act of 2012. Under prior law, a taxpayer was entitled to a
research tax credit for qualifying amounts paid or incurred on or before December 31, 2011. The 2012 Taxpayer Relief Act extends the research
credit for two years to December 31, 2013. The extension of the research credit is retroactive and includes amounts paid or incurred after December
31, 2011. The retroactive fiscal 2012 and fiscal 2013 benefits of $1.2 million have been reflected in the fiscal 2013 effective tax rate.
Comparison of the fiscal years ended June 30, 2012 and 2011
Revenue
Product revenue . Our product revenue increased 125% to $24.2 million in fiscal 2012 from $10.8 million in fiscal 2011. The increase was due
primarily to increased revenue from automotive navigation solutions we provide for Ford vehicles, including the launch of our solutions in additional
Ford and Lincoln models.
Services revenue . Our services revenue decreased 4% to $181.3 million in fiscal 2012 from $188.4 million in fiscal 2011. The decrease was
due primarily to decreases in revenue from Sprint bundle users resulting from our September 2010 Sprint amendment, whereby we transitioned to a
fixed fee, and decreases in the number of paying subscribers for mobile navigation services provided through AT&T, T-
Mobile and Alltel, which has
gradually discontinued offering our services in conjunction with its acquisition by Verizon in early 2009. These decreases were partially offset by
growth in monthly subscription fees from end users of our mobile navigation services provided through U.S. Cellular, growth in revenue from
monetization of freemium offerings through wireless carriers and application stores, and growth in mobile navigation revenue internationally.
Revenue concentrations . In fiscal 2012 and 2011, revenue from Sprint represented 36% and 41% of our revenue, respectively, and revenue
from AT&T represented 35% and 37% of our revenue, respectively. In fiscal 2012, Ford represented 13% of our revenue. No other customer
represented more than 10% of our revenue in either period.
Subscription fees from our GPS Navigator service represented 84% and 93% of our revenue in fiscal 2012 and 2011, respectively. Revenue
from our automotive navigation solutions represented 13% and 6% of our revenue in fiscal 2012 and 2011, respectively.
We primarily sell our services in the United States. In fiscal 2012 and 2011, revenue derived from U.S. sources represented 94% and 95% of
our revenue, respectively.
Cost of revenue
Cost of product revenue . Our cost of product revenue increased 114% to $13.6 million in fiscal 2012 from $6.4 million in fiscal 2011. The
increase was primarily due to a 189% increase in third party content costs. The increase in third party content costs was partially offset by a decrease
in deferred development costs expensed, as fiscal 2011 included deferred development costs expensed in connection with revenue from Ford. Our on-
board navigation revenue from Ford generally has higher associated third party content costs than our mobile navigation services provided through
wireless carriers.
Cost of services revenue . Our cost of services revenue decreased 3% to $30.8 million in fiscal 2012 from $31.8 million in fiscal 2011, which
was comparable to the 4% decrease in services revenue.
Gross profit . Our gross profit was comparable at $161.0 million in fiscal 2011 and $161.1 million in fiscal 2012. Our gross margin decreased
from 81% in fiscal 2011 to 78% in fiscal 2012. The decrease in gross margin was due to the increased proportion of revenue contributed from our on-
board navigation solutions provided to Ford, which generally have higher associated content costs and resulting lower gross margins than our mobile
navigation services provided through our wireless carrier customers.
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