TeleNav 2010 Annual Report Download - page 62

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adjustment in the liability for unrecognized income tax benefits. We do not believe that it is reasonably possible
that the unrecognized tax benefits would materially change in the next 12 months.
We file income tax returns in the U.S. federal jurisdiction, California and various state and foreign tax
jurisdictions in which we have subsidiaries. Fiscal 2000 through 2010 remain open to examination by U.S. and
state tax authorities, and fiscal 2005 through 2010 remain open to examination by the foreign tax authorities. The
Internal Revenue Service, or IRS, commenced an examination of our U.S. income tax returns for fiscal years
2008 and 2009 during fiscal 2010 and such examination has not yet been completed. As of June 30, 2010, the
IRS has not formally proposed any significant adjustments to our tax positions. While we regularly assess the
likelihood of adverse outcomes from such examinations and the adequacy of our provision for income taxes,
there can be no assurance that such provision is sufficient and that a determination by a tax authority will not
have an adverse effect on our results of operations.
We recognize interest and penalties related to unrecognized tax benefits as part of our provision for income
taxes. We had $47,000 and $0 accrued for the payment of interest and penalties at June 30, 2010 and 2009,
respectively.
Comparison of the fiscal years ended June 30, 2009 and 2008
Revenue. Revenue increased 131% from $48.1 million in fiscal 2008 to $110.9 million in fiscal 2009. The
increase was due to an increase in end users primarily from Sprint’s Simply Everything plans which include our
LBS (Sprint Navigation), as well as an increase in end users of AT&T Navigator. Our average monthly paying
end users increased from 1.1 million in fiscal 2008 to 7.1 million in fiscal 2009. Although end users increased
substantially, our ARPU declined 64% from $3.58 in fiscal 2008 to $1.28 in fiscal 2009 due to the increased
adoption of our services through our wireless carrier partners’ bundled offerings, for which we receive lower
monthly per end user fees.
Growth in revenue and number of end users for the periods primarily reflects Sprint’s decision to offer and
promote a bundled strategy, and our support of this strategy with lower unit pricing, resulting in a lower ARPU
for fiscal 2009. ARPU declined by $2.30 from $3.58 for fiscal 2008 to $1.28 for fiscal 2009. The impact of this
$2.30 decline in ARPU for our 1.1 million average monthly paying end users during fiscal 2008 was a reduction
in revenue based on these end users of $30.1 million for fiscal 2009. However, the impact of this lower ARPU
was more than offset by the 6.0 million increase in average monthly paying end users from 1.1 million during
fiscal 2008 to 7.1 million for fiscal 2009, resulting in an increase of $62.8 million in revenue for fiscal 2009.
In fiscal 2008 and 2009, revenue from Sprint represented 62% and 61%, respectively, of our revenue and
revenue from AT&T represented 26% and 29%, respectively, of our revenue. No other customer represented
more than 10% of our revenue in fiscal 2008 or 2009.
Subscription fees from our GPS Navigator service, including carrier white label versions such as Sprint
Navigation and AT&T Navigator, represented 84% and 92% of revenue in fiscal 2008 and 2009, respectively.
Revenue from our MRM services comprised 15% and 7% of revenue in fiscal 2008 and 2009. Activation fees
represented 1% of our revenue in each of fiscal 2008 and 2009. In fiscal 2008 and 2009, revenue derived from
U.S. sources represented 97% and 96% of our revenue, respectively.
Cost of revenue. Our cost of revenue increased 78% from $11.4 million in fiscal 2008 to $20.2 million in
fiscal 2009. As a percentage of revenue, cost of revenue declined from 24% in fiscal 2008 to 18% in fiscal 2009.
The substantial majority of our cost of revenue related to costs of third party content and technology that we use
in providing our LBS, such as map, POI, traffic, gas price and weather data and voice recognition technology.
The remaining portion of our cost of revenue included expenses associated with data center operations, customer
support, the amortization of capitalized software and stock-based compensation. Cost of revenue increased at a
lower rate than the 131% increase in revenue for the comparable period due to the use of lower cost content and
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