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Table of Contents
automotive customers, which generally has higher associated content costs and resulting lower gross margins than our mobile navigation
services provided through our wireless carrier customers.
Revenue concentrations . In fiscal 2014 and 2013, revenue from Ford represented 46%
and 36% of our total revenue, respectively, revenue
from AT&T represented 24% and 28% of our total revenue, respectively, and revenue from Sprint represented less than 10% and 16% of our
total revenue, respectively.
We primarily sell our services in the United States. In fiscal 2014 and 2013, revenue derived from U.S. sources represented 94% and 92%
of our total revenue, respectively.
Segments information.
Automotive. Automotive revenue increased 5% to $75.2 million in fiscal 2014 from $71.5 million in fiscal 2013. The increase was due
primarily to an increase in production royalty revenue of $16.9 million , partially offset by a decrease in customized software revenue and map
content update revenue from Ford of $14.3 million . Automotive revenue in fiscal 2014 and fiscal 2013 included $2.8 million and $9.2 million ,
respectively, of customized software revenue from Ford. Automotive revenue in fiscal 2014 and 2013 also included $0.9 million and $8.7
million , respectively, related to a map content update separately purchased by Ford. Automotive revenue represented 50% and 37% of total
revenue in fiscal 2014 and 2013, respectively.
Cost of automotive revenue decreased 3% to $37.1 million in fiscal 2014 from $38.2 million in fiscal 2013. The decrease was due
primarily to a decrease in amortization of capitalized software and recognition of deferred costs of $4.0 million associated with the decrease in
customized software revenue and map content update revenue from Ford, partially offset by an increase in third party content costs of $2.6
million associated with the increased royalty revenue from automotive navigation solutions.
Automotive gross profit increased 14% to $38.0 million in fiscal 2014 from $33.2 million in fiscal 2013. Automotive gross margin
increased to 51% in fiscal 2014 from 46% in fiscal 2013. The increase in gross margin was due primarily to the lower margin customized
software revenue and map content update revenue from Ford in fiscal 2013 that did not recur in fiscal 2014.
Advertising . Advertising revenue increased 197% to $11.7 million fiscal 2014 from $3.9 million in fiscal 2013. The increase was due
primarily to an increase in the value of contracted insertion orders along with the number of impressions delivered. Advertising revenue
represented 8% and 2% of total revenue in fiscal 2014 and 2013, respectively.
Cost of advertising revenue increased 180% to $7.0 million in fiscal 2014 from $2.5 million
in fiscal 2013. The increase was due primarily
to increased third party ad exchange inventory costs of $2.5 million and increased third party hosting service fees of $0.7 million associated with
the increased impressions delivered, as well as increased amortization of developed technology acquired.
Advertising gross profit increased 228% to $4.7 million in fiscal 2014 from $1.4 million
in fiscal 2013. Advertising gross margin increased
to 40% in fiscal 2014 from 36%
in fiscal 2013. The increase in gross margin was due primarily to an increase in the value of contracted insertion
orders along with the number of impressions delivered.
Mobile Navigation . Mobile navigation revenue decreased 45% to $63.5 million in fiscal 2014 from $116.4 million in fiscal 2013. Of the
decrease, a decline of $51.8 million was due to the termination of our fixed fee revenue from Sprint for bundled users, lower subscription
revenue resulting from decreases in the number of paying subscribers for mobile navigation services provided through AT&T, T-Mobile and
USCC, and a decrease in mobile navigation revenue internationally. Mobile navigation revenue represented 42% and 61% of total revenue in
fiscal 2014 and 2013, respectively.
Cost of mobile navigation revenue decreased 41% to $16.7 million in fiscal 2014 from $28.4 million in fiscal 2013. The decrease was due
primarily to a decrease in third party content costs of $7.4 million and decreased network operations, customer support and data center costs of
$2.3 million.
Mobile navigation gross profit decreased 47% to $46.8 million in fiscal 2014 from $88.0 million in fiscal 2013. Mobile navigation gross
margin decreased to 74% in fiscal 2014 from 76% in fiscal 2013.
Research and development . Our research and development expenses were comparable at $60.6 million in fiscal 2014 and $60.3 million in
fiscal 2013. The change was primarily comprised of decreased compensation and benefits costs of $0.9 million associated with decreased
average headcount, primarily in our China offices, a decrease in amortization and depreciation expense of $0.7 million and a decrease in rent
expense of $0.3 million, primarily due to lease impairment restructuring charges recorded separately in restructuring costs, partially offset by a
decrease in capitalization and deferral of software development
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