TeleNav 2011 Annual Report Download - page 52

Table of Contents
December 31, 2010 as the amendment was in effect for the entire quarter. Over time, we anticipate that our amended agreement with Sprint will
result in further declines in ARPU due to anticipated increases in the number of Sprint bundle subscribers with access to our services and the
significant reduction in revenue from Sprint for bundled basic navigation services compared to the quarters prior to implementation of the
amendment. Although we are entitled to receive a greater share of revenue from enterprise LBS, mobile commerce and premium navigation
services than we were previously, we may not be able to realize these benefits in the short term or at all. We cannot predict the ultimate financial
impact of our amended agreement with Sprint. As a result of this amendment to our agreement with Sprint providing for a fixed annual fee, we
believe that future ARPU will no longer provide a meaningful indicator of our financial performance. Accordingly, we do not intend to use the
ARPU metric beginning in fiscal 2012, but will continue to report the number of paying end users for our services.
In September 2010, we also amended our agreement with TomTom Maps, to change the fee structure for map and POI data we provide as
part of our navigation services in Sprint’s bundled offerings. The material impact of the amendment is to align the manner in which we pay fees
to TomTom Maps with the manner in which we receive revenue from Sprint. Pursuant to the amended agreement, we will pay TomTom Maps a
percentage of fees we collect from Sprint for basic navigation services and our gross advertising and mobile commerce revenue, as well as a flat
monthly fee per subscriber for premium navigation services. We also agreed to certain guaranteed minimum payments to TomTom Maps for
such services. These amendments affected our results of operations commencing in fiscal 2011. Although we have taken action to increase the
predictability of certain of our third party map and POI data costs for services that we provide on an annual fixed fee basis that are not dependent
on the number of subscribers, we may not have adequately aligned our fee structure for map and POI data with revenue from Sprint’s bundled
offerings, and may not be successful in reducing the impact of the recent Sprint amendment on our gross margin.
In January 2011, we entered into an amendment to our agreement with AT&T, one of our wireless carrier customers whose payments to us
represent a substantial portion of our revenue. This amendment extended our existing agreement with AT&T through March 2013 and provided
that we will continue to be the exclusive provider of white label GPS navigation services to AT&T. The amendment did not impact our revenue
for fiscal 2011 and our amended agreement with AT&T retained the prior terms, including the fee per subscriber per month model. For fiscal
2010 and 2011, AT&T represented 34% and 37% of our total revenue, respectively. AT&T is not required to offer our LBS. We anticipate that
we will continue to depend on AT&T for a material portion of our revenue for the foreseeable future .
In March 2011, we entered into amendments to our agreement with Ford, to which we provide an on-board navigation solution. The
amendments modified the nature of certain of our obligations under our original agreement, and provided for additional payments to us. As a
result of these modifications, we now recognize revenue from customized software upon delivery to, and acceptance by, Ford of our on-board
navigation solutions, and we recognize royalty revenue earned from the distribution of our customized software in vehicles as the vehicles are
produced. In addition, we recognize third party content and related costs of revenue when revenue is recognized.
Our total revenue grew from $110.9 million in fiscal 2009 to $171.2 million in fiscal 2010 and to $210.5 million in fiscal 2011. Our net
income also increased from $29.6 million in fiscal 2009 to $41.4 million in fiscal 2010 and to $42.6 million in fiscal 2011.
Key components of our results of operations
Sources of revenue
We primarily derive our revenue from our wireless carrier customers for their customers’ subscriptions to our LBS, as well as from
activation fees for certain of our services. Our wireless carrier customers pay us based on several different revenue models, including (1) a
monthly subscription fee per end user, (2) a fixed annual fee
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