TiVo 2008 Annual Report Download - page 52

Table of Contents
Hardware revenues, net of allowance for sales returns and net of rebates for the fiscal year ended January 31, 2008 remained relatively flat at $41.8
million, as compared to $41.6 million in the same prior year period. For the fiscal year ended January 31, 2008, while we sold approximately 192,000 fewer
TiVo DVR's than in the same prior year period, the average selling price of these DVR's was higher, due to the introduction of our TiVo HD DVR. Our
rebates and revenue share costs, which are netted against our hardware revenues, declined during the year as we did not offer (and still do not offer) rebates on
our TiVo HD DVR.
For the fiscal years ended January 31, 2009, 2008, and 2007, one retail customer (Best Buy) generated $10.4 million, $13.1 million, and $30.5 million
of hardware revenues or 4%, 5%, and 12% of net revenues, respectively.
Cost of service revenues.
Fiscal Year Ended January 31,
2009 2008 2007
(In thousands, except percentages)
Cost of service revenues $ 44,603 $ 42,976 $ 43,328
Change from same prior year period 4% -1% 27%
Percentage of service revenues 24% 20% 22%
Service gross margin $ 143,805 $ 168,520 $ 155,596
Service gross margin as a percentage of service revenues 76% 80% 78%
Costs of service revenues consist primarily of telecommunication and network expenses, employee salaries, call center, credit card processing fees,
certain licensing, and other expenses related to providing the TiVo service. Cost of service revenues for the fiscal year ended January 31, 2009 increased $1.6
million as compared to the prior fiscal year. These increases are primarily related to increased costs of advertising and audience research expenses associated
with our expanded advertising and audience research measurement product offerings.
Cost of service revenues for the fiscal year ended January 31, 2008 remained relatively flat as compared to the same prior year period.
Cost of technology revenues.
Fiscal Year Ended January 31,
2009 2008 2007
(In thousands, except percentages)
Cost of technology revenues $ 12,300 $ 17,367 $ 16,849
Change from same prior year period -29% 3% 2055%
Percentage of technology revenues 61% 90% 92%
Technology gross margin $ 7,826 $ 2,015 $ 1,560
Technology gross margin as a percentage of technology revenues 39% 10% 8%
Cost of technology revenues decreased by 29% or $5.1 million as compared to the same prior fiscal year. Technology gross margin for the fiscal year
ended January 31, 2009 increased by $5.8 million as compared to the prior fiscal year. This increase in technology gross margin is primarily related to the
Comcast development work and the methodology used to recognize revenues related to this work. During fiscal year ended January 31, 2008, we recognized
revenues and costs for the initial development of TiVo service software and TiVo Interactive Advertising Management System based on a zero profit model,
which resulted in the recognition of equal amounts of revenues and costs. Additionally during the fiscal year ended January 31, 2008 we recognized $1.1
million of costs for Comcast development work for which no corresponding revenues were recognized as the Company did not have evidence of an
arrangement and the fees for the related development were not fixed. During the fiscal year ended January 31, 2009, the engineering work performed under
the amended August 2007 statement of work for Comcast was recognized using the percentage-of-completion method.
The increase in cost of technology revenues of 3% or $518,000 for the fiscal year ended January 31, 2008 as compared to the prior fiscal year is related
new development work primarily for our new international projects.
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