TeleNav 2011 Annual Report Download - page 64

Table of Contents
12 months. We recognize interest and penalties related to unrecognized tax benefits as part of our provision for income taxes. We had $157,000
and $47,000 accrued for the payment of interest and penalties at June 30, 2011 and 2010, respectively.
Comparison of the fiscal years ended June 30, 2010 and 2009
Revenue . Revenue increased 54% from $110.9 million in fiscal 2009 to $171.2 million in fiscal 2010. The increase was due to growth in
the average monthly paying end users from 7.1 million in fiscal 2009 to 13.5 million in fiscal 2010, primarily due to adoption of Sprint’s Simply
Everything plans which include our LBS (Sprint Navigation), as well as an increase in end users of AT&T Navigator. Although our end users
increased substantially, our ARPU declined 19% from $1.28 in fiscal 2009 to $1.04 in fiscal 2010. This decline in ARPU was due in part to the
increasing proportion of end users accessing our services through our wireless carrier customers’ white label offerings, for which we receive
lower monthly fees per end user when compared to our branded offerings. The contractual terms of our bundled offerings with certain wireless
carrier customers also provide us a lower per end user fee as the absolute number of subscriptions to those bundled offerings increases, thereby
reducing ARPU. In addition, ARPU also declined as a result of the July 1, 2009 reduction of our monthly fees per end user for a majority of our
LBS that are bundled with other Sprint services.
Growth in revenue and number of end users for the periods presented primarily reflect Sprint’s decision to offer and promote certain
bundles in which all end users under those plans receive the right to use our LBS without additional charge. To benefit from increased numbers
of end users, we agreed to provide Sprint with lower monthly per end user fees for these bundles compared to other plans with Sprint. In fiscal
2010, we further lowered pricing on bundled offerings to Sprint, as discussed below. Because a substantial majority of our end users are able to
access our LBS through bundled offerings, our ARPU has declined; however, the substantial increase in number of end users has resulted in an
increase in revenue. In addition, AT&T’s decision to provide our GPS Navigator as a white label offering to its end users, for which we are paid
a lower monthly fee per end user compared to TeleNav branded offerings, also contributed to the decline in our ARPU. Although the migration
of AT&T to a white label offering reduced our ARPU, the number of end users subscribing to our services through AT&T has increased.
As a result of these pricing strategies, ARPU declined by $0.24 from $1.28 in fiscal 2009 to $1.04 in fiscal 2010; however, the average
monthly paying end users of our LBS increased by 91% and our revenue increased 54% during the same period. The impact of this $0.24 decline
in ARPU for our 7.1 million average monthly paying end users during fiscal 2009 was a reduction in revenue based on these end users of $20.1
million for fiscal 2010. The impact of this lower ARPU was more than offset by the 6.4 million increase in average monthly paying end users,
from 7.1 million for fiscal 2009 to 13.5 million for fiscal 2010, resulting in a net revenue increase of $60.3 million for fiscal 2010. We believe
we would not have achieved the $60.3 million increase in revenue had we not adopted these pricing strategies.
In fiscal 2009 and 2010, revenue from Sprint represented 61% and 55% of our revenue, respectively, and revenue from AT&T represented
29% and 34% of our revenue, respectively. No other wireless carrier or other customer represented more than 10% of our revenue in either
period.
Effective July 1, 2009, we amended our agreement with Sprint and agreed to receive a reduced monthly fee per end user for a majority of
our LBS that are bundled with Sprint services. We also agreed to provide certain activity based discount incentives to Sprint for the remainder of
calendar 2009. In return, Sprint agreed to extend our right to be its exclusive provider of Sprint Navigation, agreed not to terminate our
agreement without cause prior to December 31, 2010, agreed to increase the share of any future advertising revenue we are entitled to receive
and modified certain other terms. In September 2010, we further amended our agreement with Sprint, which changed the way in which we
receive revenue from the majority of the services we provide to Sprint’s subscribers. See “—Overview”.
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