TeleNav 2015 Annual Report Download - page 62

Table of Contents
Research and development . Our research and development expenses increased 12% to $68.1 million in fiscal 2015 from $60.6 million in
fiscal 2014 . The increase was due primarily to the inclusion of $10.4 million of product management department costs that are classified in
research and development expense beginning in fiscal 2015. Previously, product management departments reported into our sales and marketing
organization and were included in sales and marketing expense for fiscal 2014. The $10.4 million increase due to the inclusion of product
management costs was partially offset primarily by a $3.8 million decrease in compensation and benefits expense. As a percentage of revenue,
research and development expenses increased to 42% in fiscal 2015 from 41% in fiscal 2014 . The total number of research and development
personnel decreased 4% to 413 at June 30, 2015 from 431 at June 30, 2014 . A total of 34 product management personnel were included in
research and development expense at June 30, 2015 . The decrease in total research and development headcount is due primarily to a decrease
resulting from our ongoing cost optimization efforts, including our restructuring efforts in the second half of fiscal 2014, partially offset by
increased headcount with our acquisition of skobbler in January 2014 and the inclusion of product management personnel in fiscal 2015. We
believe that as we deliver our contracted customer requirements for our automotive customers, establish relationships with new automotive
manufacturers and OEMs, enhance our service offerings around our OSM capabilities, and develop new services and products for advertisers,
revenue from those investments and development efforts will lag the related research and development expenses. .
Sales and marketing . Our sales and marketing expenses decreased 19% to $27.0 million in fiscal 2015 from $33.1 million in fiscal 2014 .
The decrease was primarily due to a decrease of $10.4 million related to product management costs that were classified in sales and marketing
expense in fiscal 2014. Beginning in fiscal 2015, these costs are now included in research and development expense. The $10.4 million decrease
related to the classification of product management costs was partially offset primarily by a $4.3 million increase in compensation and benefits
and commissions costs. As a percentage of revenue, sales and marketing expenses decreased to 17% in fiscal 2015 from 22% in fiscal 2014
. The
total number of sales and marketing personnel decreased 23% to 78 at June 30, 2015 from 101 at June 30, 2014 . A total of 40 product
management personnel were included in sales and marketing expense at June 30, 2014 . We expect that our sales and marketing expenses will
continue to increase over time in absolute dollars as we add sales personnel to support our advertising business. .
General and administrative . Our general and administrative expenses decreased 10% to $23.6 million in fiscal 2015 from $26.2 million
in
fiscal 2014 . The decrease was primarily due to decreases in compensation and benefits expense of $0.9 million, professional and outside
services of $0.7 million and stock-based compensation expense of $0.5 million. The total number of general and administrative personnel
decreased 5% to 62 at June 30, 2015 from 66 at June 30, 2014 . As a percentage of revenue, general and administrative expenses decreased to
15% in fiscal 2015 from 17% in fiscal 2014 . We anticipate that our general and administrative expenses may vary substantially from period to
period as we incur legal expenses associated with ongoing intellectual property litigation and requests for indemnification related to intellectual
property litigation proceed.
Restructuring costs . We incurred restructuring costs of $1.2 million in fiscal 2015 associated with facility lease impairment in connection
with the consolidation of our Sunnyvale headquarters facilities in fiscal 2014. We incurred restructuring costs of $4.4 million in fiscal 2014 in
order to further align our resources and consolidate facilities. We initiated a restructuring plan consisting of reductions of approximately 108
full-
time positions in the U.S. and China and we recorded restructuring charges of $2.4 million related to severance and benefits for the positions
eliminated. In addition, we closed our Boston office and consolidated our Sunnyvale headquarters facilities from two buildings into one and
recorded restructuring charges of $2.0 million related to the impairment of our facility leases.
Other income, net . Our other income, net was $2.3 million in fiscal 2015 and $1.3 million in fiscal 2014 . Other income, net in fiscal 2015
included foreign currency transaction gains of $1.6 million and interest income of $1.0 million, which were partially offset by a $1.3 million loss
from the impairment of long-term equity investments. The impairment of long-term equity investments of $1.3 million included $0.8 million
from an investment in connection with the spin off of a product line developed by our Shanghai, China team.
Provision (benefit) for income taxes . Our benefit for income taxes increased to $13.0 million in fiscal 2015 from $4.0 million in fiscal
2014 . Our effective tax rate was 36% in fiscal 2015 compared to 12% in fiscal 2014 . Our effective tax rate in fiscal 2015 was attributable
primarily to tax benefits recorded from the anticipated refund of $5.4 million resulting from the carryback of fiscal 2015 losses, of which $1.3
million was recognized in fiscal 2014; the recognition of a state income tax refund of $3.0 million and a refund of $1.1 million from a change in
tax accounting method, both related to prior years and received in fiscal 2015; and the reversal of tax reserves of $4.2 million due to loss
carryback, expiration of the statute of limitations, and settlement of our California audit.
Due to the limitations of the two year loss carryback for federal tax purposes, we do not anticipate any refunds for losses incurred in fiscal
2016 or thereafter.
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