TeleNav 2015 Annual Report Download - page 51

Table of Contents
Key components of our results of operations
Sources of revenue
We classify our revenue as either product or services revenue. Product revenue consists primarily of revenue we receive from the delivery
of customized software and royalties from the distribution of this customized software in certain automotive navigation applications. Services
revenue consists primarily of revenue we derive from our brought-in automotive navigation services, advertising services and mobile navigation
services.
We report operating results in three business segments: automotive, advertising and mobile navigation. Our CEO, the chief operating
decision maker, reviews revenue and gross margin information for each of our reportable segments. See " -
Results of operations" and Note 13 to
the financial statements in this Form 10-K for more information about our business segments.
Revenue from our automotive segment represented 64% , 50% and 37% of our revenue in fiscal 2015, 2014 and 2013, respectively. Ford
represented 61% , 46% and 36% of our revenue in fiscal 2015, 2014 and 2013, respectively. Our contract with Ford expires in December 2017.
The agreement may be renewed for successive 12-
month periods if either party provides notice of renewal at least 45 days prior to the expiration
of the applicable term, and the other party agrees to such renewal.
We provide both on-board and brought-in connected navigation solutions to Ford. Our on-board solution consists of software, map and
POI data loaded in the vehicle that provides voice-guided turn by turn navigation displayed on the vehicle screen. Our brought-in connected
solution enables a mobile device that is paired with the vehicle to activate in-vehicle text-based and voice-guided turn by turn navigation. We
recognize revenue from our brought-in connected solutions monthly based on annual subscriptions, which are subject to a maximum annual fee
with Ford. This revenue is classified as services revenue and represented less than 5% of overall automotive navigation solutions revenue. In
January 2015, GM launched the new version of its OnStar RemoteLink® mobile application powered by our location-based services platform.
We earn a one-time royalty for each new vehicle owner who downloads the RemoteLink® application. We record the royalty earned as deferred
revenue and recognize this revenue over the estimated service period.
Our product revenue is primarily derived from our automotive on-board solutions as the related customized software is delivered to, and
accepted by our customers. In addition, we recognize royalties earned from our on-board solutions as the software is reproduced for installation
in vehicles. We anticipate that we will continue to depend on Ford for a material portion of our revenue for the foreseeable future .
Revenue from our advertising segment, which includes the delivery of search and display, location-based ads, represented 11% , 8% and
2% of our revenue in fiscal 2015 , 2014 and 2013 , respectively. Our advertising revenue is derived from ad insertion orders contracted with
advertising agencies, direct customers, and channel partners. Our ad search revenue is earned from the delivery of location-based ad impressions
targeted to end users engaged in a specific search task utilizing our mobile navigation solutions. Such ad search revenue represented less than
10% of our overall advertising revenue. Our display revenue relates to the advertising business developed via our Thinknear acquisition that
delivers targeted location-based impressions to end users of third party developer applications.
We also offer voice-guided, real-time, turn by turn, mobile navigation service under several brand names including Scout by Telenav and
Telenav GPS as well as under wireless carrier brands (or “white label” brands). Revenue from our Mobile Navigation segment represented 25%
,
42% and 61% of our revenue in fiscal 2015 , 2014 and 2013
, respectively. Subscription fee revenue from our mobile navigation service declined
from fiscal 2013 through fiscal 2015 , primarily due to the termination of the fixed fee arrangement with Sprint in September 2013 and a
substantial decrease in the number of paying subscribers for navigation services provided through AT&T and others, including T-Mobile USA,
or T-Mobile, U.S. Cellular Corporation, or USCC, and Comunicaciones Nextel de Mexico, S.A. de C.V., a subsidiary of NII Holdings, Inc., or
NII Mexico.
AT&T represented 15% , 24% and 28% of our revenue in fiscal 2015 , 2014 and 2013 , respectively. In March 2015, our agreement with
AT&T was automatically renewed, under its existing terms through March 2016, and provides that we will continue to be the exclusive provider
of white label GPS navigation services to AT&T. AT&T is not required to offer our navigation services. During fiscal 2016, we anticipate that
we will continue to depend on AT&T for a material portion of our revenue; however, we have seen substantial declines in the number of paying
subscribers for our services through AT&T over the past few years and we expect them to continue to decline substantially .
Sprint represented less than 10% of our revenue in each of fiscal 2015 and 2014 , and represented 16% of our revenue in fiscal 2013 .
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