TNAV 03.31.2015 10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended March 31, 2015

or 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission file number: 001-34720
 
TELENAV, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
77-0521800
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)

950 De Guigne Drive
Sunnyvale, California 94085
(Address of principal executive offices, including zip code)
(408) 245-3800
(Registrant’s telephone number, including area code)
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
¨
 
Accelerated filer
 
ý
 
 
 
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
As of March 31, 2015, there were approximately 40,294,232 shares of the Registrant’s Common Stock outstanding.


Table of Contents

TELENAV, INC.
TABLE OF CONTENTS
 
 
 
Page No.
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.


Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements.

TELENAV, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
 
 
 
March 31,
2015
 
June 30,
2014*
 
 
(unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
18,585

 
$
14,534

Short-term investments
 
113,090

 
122,315

Accounts receivable, net of allowances of $150 and $206 at March 31, 2015 and June 30, 2014, respectively
 
36,805

 
25,762

Deferred income taxes
 

 
784

Restricted cash
 
5,085

 
5,995

Income taxes receivable
 
4,578

 
6,932

Prepaid expenses and other current assets
 
5,112

 
9,491

Total current assets
 
183,255

 
185,813

Property and equipment, net
 
7,275

 
8,814

Deferred income taxes, non-current
 

 
550

Goodwill and intangible assets, net
 
38,280

 
40,733

Other assets
 
5,559

 
3,931

Total assets
 
$
234,369

 
$
239,841

Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
1,388

 
$
502

Accrued compensation
 
7,794

 
12,874

Accrued royalties
 
14,554

 
3,671

Other accrued expenses
 
11,641

 
12,343

Deferred revenue
 
1,955

 
2,381

Income taxes payable
 
722

 
804

Total current liabilities
 
38,054

 
32,575

Deferred rent, non-current
 
5,128

 
7,129

Deferred revenue, non-current
 
3,467

 
55

Other long-term liabilities
 
5,635

 
7,677

Commitments and contingencies (Note 5)
 

 

Stockholders’ equity:
 
 
 
 
Preferred stock, $0.001 par value: 50,000 shares authorized; no shares issued or outstanding
 

 

Common stock, $0.001 par value: 600,000 shares authorized; 40,294 and 39,462 shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively
 
40

 
40

Additional paid-in capital
 
137,964

 
129,278

Accumulated other comprehensive income (loss)
 
(1,619
)
 
576

Retained earnings
 
45,700

 
62,511

Total stockholders’ equity
 
182,085

 
192,405

Total liabilities and stockholders’ equity
 
$
234,369

 
$
239,841

* Derived from audited consolidated financial statements as of and for the year ended June 30, 2014
See accompanying Notes to Condensed Consolidated Financial Statements.

1

Table of Contents

TELENAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2015
 
2014
 
2015
 
2014
Revenue:
 
 
 
 
 


 


Product
 
$
28,915

 
$
17,689

 
$
71,292

 
$
55,347

Services
 
13,371

 
16,782

 
45,761

 
60,581

Total revenue
 
42,286

 
34,471

 
117,053

 
115,928

Cost of revenue:
 
 
 
 
 
 
 
 
Product
 
15,475

 
8,535

 
38,477

 
27,211

Services
 
5,364

 
5,704

 
17,855

 
18,251

Total cost of revenue
 
20,839

 
14,239

 
56,332

 
45,462

Gross profit
 
21,447

 
20,232

 
60,721

 
70,466

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
17,384

 
15,837

 
51,002

 
44,553

Sales and marketing
 
6,869

 
8,853

 
19,775

 
24,309

General and administrative
 
5,682

 
6,895

 
17,592

 
19,468

Restructuring costs
 
422

 

 
987

 
831

Total operating expenses
 
30,357

 
31,585

 
89,356

 
89,161

Loss from operations
 
(8,910
)
 
(11,353
)
 
(28,635
)
 
(18,695
)
Other income (expense), net
 
900

 
(344
)
 
3,073

 
1,059

Loss before benefit for income taxes
 
(8,010
)
 
(11,697
)
 
(25,562
)
 
(17,636
)
Benefit for income taxes
 
(3,243
)
 
(4,142
)
 
(10,135
)
 
(6,093
)
Net loss
 
$
(4,767
)
 
$
(7,555
)
 
$
(15,427
)
 
$
(11,543
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.12
)
 
$
(0.19
)
 
$
(0.39
)
 
$
(0.30
)
Diluted
 
$
(0.12
)
 
$
(0.19
)
 
$
(0.39
)
 
$
(0.30
)
Weighted average shares used in computing net loss per share:
 
 
 
 
 
 
 
 
Basic
 
40,140

 
38,777

 
39,863

 
38,698

Diluted
 
40,140

 
38,777

 
39,863

 
38,698

 
 
 
 
 
 
 
 
 
Stock compensation expense included above:
 
 
 
 
 
 
 
 
Cost of revenue
 
$
15

 
$
17

 
$
66

 
$
83

Research and development
 
1,243

 
1,131

 
3,868

 
3,203

Sales and marketing
 
699

 
757

 
2,193

 
2,223

General and administrative
 
675

 
970

 
2,432

 
2,512

Total stock compensation expense
 
$
2,632

 
$
2,875

 
$
8,559

 
$
8,021

See accompanying Notes to Condensed Consolidated Financial Statements.

2

Table of Contents

TELENAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)


 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Net loss
 
$
(4,767
)
 
$
(7,555
)
 
$
(15,427
)
 
$
(11,543
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax
 
(883
)
 
(80
)
 
(1,888
)
 
(35
)
Available-for-sale securities:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on available-for-sale securities, net of tax
 
254

 
30

 
(50
)
 
270

Reclassification adjustments for gain on available-for-sale securities recognized, net of tax
 
(1
)
 
(26
)
 
(257
)
 
(112
)
Net increase (decrease) from available-for-sale securities, net of tax
 
253

 
4

 
(307
)
 
158

Other comprehensive income (loss), net of tax:
 
(630
)
 
(76
)
 
(2,195
)
 
123

Comprehensive loss
 
$
(5,397
)
 
$
(7,631
)
 
$
(17,622
)
 
$
(11,420
)
 
 
 
 
 
 
 
 
 

See accompanying Notes to Condensed Consolidated Financial Statements.


3

Table of Contents

TELENAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
Nine Months Ended
 
 
March 31,
 
 
2015
 
2014
Operating activities
 
 
 
 
Net loss
 
$
(15,427
)
 
$
(11,543
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
4,054

 
5,119

Amortization of net premium on short-term investments
 
1,099

 
2,720

Stock-based compensation expense
 
8,559

 
8,021

Loss due to impairment
 
460

 
250

Loss on disposal of property and equipment
 
10

 
105

Bad debt expense
 
33

 
20

Excess tax benefits from employee stock option plans
 

 
270

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
(11,076
)
 
1,233

Deferred income taxes
 
1,334

 
(3,047
)
Restricted cash
 
910

 
(3,417
)
Income taxes receivable
 
2,354

 
(3,474
)
Prepaid expenses and other current assets
 
4,379

 
1,323

Other assets
 
(1,711
)
 
369

Accounts payable
 
889

 
1,699

Accrued compensation
 
(5,080
)
 
(395
)
Accrued royalties
 
10,882

 
(4,933
)
Accrued expenses and other liabilities
 
(2,951
)
 
(3,030
)
Income taxes payable
 
(82
)
 
(291
)
Deferred rent
 
(1,149
)
 
(740
)
Deferred revenue
 
2,986

 
(4,802
)
Net cash provided by (used in) operating activities
 
473

 
(14,543
)
Investing activities
 
 
 
 
Purchases of property and equipment
 
(650
)
 
(754
)
Purchases of short-term investments
 
(101,394
)
 
(54,662
)
Purchase of long-term investments
 
(450
)
 
(600
)
Proceeds from sales and maturities of short-term investments
 
109,215

 
87,348

Acquisition, net of cash acquired
 

 
(19,245
)
Net cash provided by investing activities
 
6,721

 
12,087

Financing activities
 
 
 
 
Proceeds from exercise of stock options
 
3,321

 
758

Repurchase of common stock
 
(2,519
)
 
(7,899
)
Tax withholdings related to net share settlements of restricted stock units
 
(2,057
)
 
(535
)
Excess tax benefits from employee stock option plans
 

 
(270
)
Net cash used in financing activities
 
(1,255
)
 
(7,946
)
Effect of exchange rate changes on cash and cash equivalents
 
(1,888
)
 
(34
)
Net increase in cash and cash equivalents
 
4,051

 
(10,436
)
Cash and cash equivalents, at beginning of period
 
14,534

 
25,787

Cash and cash equivalents, at end of period
 
$
18,585

 
$
15,351

Supplemental disclosure of cash flow information
 
 
 
 
Income taxes paid (received), net
 
$
(10,981
)
 
$
255

See accompanying Notes to Condensed Consolidated Financial Statements.

4

Table of Contents

TELENAV, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.
Summary of business and significant accounting policies
Description of business
Telenav, Inc., also referred to in this report as “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. We are a leader in personalized mobile navigation. We help on the go people by creating products that (1) provide easily-accessed, relevant, and personalized information for discovery, traffic, local search, and navigation and (2) are available across multiple platforms and devices, including mobile phones, tablets, computers and cars. We operate in three segments - automotive, advertising and mobile navigation. Our fiscal year ends on June 30 and in this report we refer to the fiscal year ended June 30, 2014 as “fiscal 2014” and the fiscal year ending June 30, 2015 as “fiscal 2015.”
Basis of presentation
The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The condensed consolidated financial statements include the accounts of Telenav, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements include all adjustments (consisting only of normal recurring adjustments) that our management believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period. Certain prior period amounts in the consolidated financial statements have been reclassified to conform to current period presentation for comparative purposes.
Our condensed consolidated financial statements also include the financial results of Shanghai Jitu Software Development Ltd., or Jitu, located in China. Based on our contractual arrangements with the shareholders of Jitu, we have determined that Jitu is a variable interest entity, or VIE, for which we are the primary beneficiary and are required to consolidate in accordance with Accounting Standards Codification, or ASC, subtopic 810-10, or ASC 810-10, Consolidation: Overall. The results of Jitu did not have a material impact on our overall operating results for the three and nine months ended March 31, 2015 and 2014.
The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for fiscal 2014, included in our Annual Report on Form 10-K for fiscal 2014 filed with the U.S. Securities and Exchange Commission, or SEC.
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Form 10-K.
Use of estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include the determination of revenue recognition and deferred revenue, the recoverability of accounts receivable, the determination of acquired intangibles and goodwill, the fair value of stock awards issued, the determination of income taxes and the recoverability of deferred tax assets. Actual results could differ from those estimates.
Concentrations of risk and significant customers
Revenue related to services provided through Ford Motor Company, or Ford, comprised 68% and 50% of revenue for the three months ended March 31, 2015 and 2014, respectively, and comprised  60% and  45% of revenue for the nine months ended March 31, 2015 and 2014, respectively. As of March 31, 2015 and June 30, 2014, receivables due from Ford were 60% and 47% of total accounts receivable, respectively. Revenue related to services provided through AT&T Mobility LLC, or AT&T, comprised 13% and 25% of revenue for the three months ended March 31, 2015 and 2014, respectively, and comprised  17% and 25% of revenue for the nine months ended March 31, 2015 and 2014, respectively. Receivables due from AT&T were 11% and 19% of total accounts receivable at March 31, 2015 and June 30, 2014, respectively. No other customer represented 10% of our revenue or 10% of our accounts receivable for any period presented.
Certain of our licensed map, points of interest, or POI, and traffic data have been provided principally by TomTom North America, Inc., or TomTom, and HERE North America, LLC, or HERE, a Nokia Corporation, or Nokia, company, in the three

5

Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

and nine months ended March 31, 2015 and 2014. To date, we are not aware of circumstances that may impair either party’s intent or ability to continue providing such services to us.
Restricted cash
As of March 31, 2015 and June 30, 2014, we had restricted cash of $5.1 million and $6.0 million, respectively, on our consolidated balance sheets, comprised primarily of an overpayment from a customer that is expected to be refunded.
Accumulated other comprehensive income (loss), net of tax
The components of accumulated other comprehensive income (loss), net of related taxes, during the nine months ended March 31, 2015, were as follows (in thousands):
 
 
Foreign Currency
Translation
Adjustments
 
Unrealized
Gains (Losses) on
Available-for-Sale
Securities
 
Total
Balance, net of tax as of June 30, 2014
 
$
321

 
$
255

 
$
576

Other comprehensive loss before reclassifications, net of tax
 
(1,888
)
 
(50
)
 
(1,938
)
Amount reclassified from accumulated other comprehensive loss, net of tax
 

 
(257
)
 
(257
)
Other comprehensive loss, net of tax
 
(1,888
)
 
(307
)
 
(2,195
)
Balance, net of tax as of March 31, 2015
 
$
(1,567
)
 
$
(52
)
 
$
(1,619
)

The amounts reclassified from accumulated other comprehensive income (loss), net of tax, were determined using the specific identification method and the amounts were included in other income, net, for the nine months ended March 31, 2015, and 2014, respectively.

The amount of income tax benefit allocated to each component of accumulated other comprehensive income (loss) was not material for the nine months ended March 31, 2015, and 2014, respectively.
Long-term investments
As of March 31, 2015, our investments in privately-held companies totaled $1.8 million. These investments are accounted for as cost-basis investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. Our investments are in entities that are not publicly traded and, therefore, no established market for the securities exists. Our cost-basis investments are carried at historical cost in our condensed consolidated balance sheets and measured at fair value on a nonrecurring basis when indicators of impairment exist. If we believe that the carrying value of the cost-basis investments is in excess of estimated fair value, our policy is to record an impairment charge to adjust the carrying value to estimated fair value, when the impairment is deemed other-than-temporary. We regularly evaluate the carrying value of these cost-basis investments for impairment. We recorded a $0.5 million impairment charge for cost-method investments during the three and nine months ended March 31, 2015. We did not record any impairment charges for the three and nine months ended March 31, 2014.

During the nine months ended March 31, 2015, we recorded a $0.2 million gain in other income, net from the sale in fiscal 2014 of an investment in a privately-held company, for which the proceeds were received in fiscal 2015.
Recent accounting pronouncements
In February 2015, the Financial Accounting Standards Board, or FASB, issued new guidance related to consolidations. The new standard amends the guidelines for determining whether certain legal entities should be consolidated and reduces the number of consolidation models. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on our financial statements.



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Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

In May 2014, the FASB issued guidance related to revenue from contracts with customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updated standard will replace most existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the full retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard will be effective for us in the first quarter of our fiscal year ending June 30, 2018. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

In June 2013, the FASB, ratified Emerging Issues Task Force (EITF) Issue 13-C, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” which concludes an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law.  We adopted this amendment in the first quarter of fiscal 2015, and the adoption did not have a material effect on our consolidated financial statements.
2.
Net income (loss) per share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options, restricted stock units and restricted common stock using the treasury-stock method.
The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share amounts):
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2015
 
2014
 
2015
 
2014
Net loss
 
$
(4,767
)
 
$
(7,555
)
 
$
(15,427
)
 
$
(11,543
)
Weighted average common shares used in computing net loss per share, basic and diluted
 
40,140

 
38,777

 
39,863

 
38,698

Net loss per share, basic and diluted
 
$
(0.12
)
 
$
(0.19
)
 
$
(0.39
)
 
$
(0.30
)

The following outstanding shares were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an antidilutive effect (in thousands):


 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2015
 
2014
 
2015
 
2014
Stock options
 
5,001

 
5,835

 
5,001

 
5,835

Restricted stock units
 
4,308

 
4,361

 
4,308

 
4,361

Restricted common stock
 

 
155

 

 
155

Total
 
9,309

 
10,351

 
9,309

 
10,351




7

Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

3.
Cash, cash equivalents and short-term investments
Cash and cash equivalents consist of highly liquid fixed-income investments with original maturities of three months or less at the time of purchase, including money market funds. Short-term investments consist of readily marketable securities with a remaining maturity of more than three months from the date of purchase. We classify all of our cash equivalents and short-term investments as “available for sale,” as these investments are free of trading restrictions. These marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as accumulated other comprehensive income (loss) and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized. When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in earnings. Gains and losses are determined using the specific identification method. We had no material realized gains or losses in the three or nine months ended March 31, 2015 and 2014.
Cash, cash equivalents and short-term investments consisted of the following as of March 31, 2015 (in thousands):
 
 
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Cash
 
$
17,624

 
$

 
$

 
$
17,624

Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
961

 

 

 
961

Total cash equivalents
 
961

 

 

 
961

Total cash and cash equivalents
 
18,585

 

 

 
18,585

Short-term securities:
 
 
 
 
 
 
 
 
U.S. treasury securities
 
561

 

 


 
561

Asset-backed securities
 
16,202

 
9

 
(4
)
 
16,207

Municipal securities
 
13,008

 
10

 
(3
)
 
13,015

Commercial paper
 
1,994

 
2

 

 
1,996

Agency bonds
 
10,489

 
14

 
(1
)
 
10,502

Corporate bonds
 
70,751

 
88

 
(30
)
 
70,809

Total short-term investments
 
113,005

 
123

 
(38
)
 
113,090

Cash, cash equivalents and short-term investments
 
$
131,590

 
$
123

 
$
(38
)
 
$
131,675


Cash, cash equivalents and short-term investments consisted of the following as of June 30, 2014 (in thousands):
 
 
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Cash
 
$
12,912

 
$

 
$

 
$
12,912

Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
622

 

 

 
622

Commercial paper
 
1,000

 

 

 
1,000

Total cash equivalents
 
1,622

 

 

 
1,622

Total cash and cash equivalents
 
14,534

 

 

 
14,534

Short-term investments:
 
 
 
 
 
 
 
 
Municipal securities
 
96,522

 
330

 
(4
)
 
96,848

Commercial paper
 
997

 
2

 

 
999

Corporate bonds
 
24,402

 
68

 
(2
)
 
24,468

Total short-term investments
 
121,921

 
400

 
(6
)
 
122,315

Cash, cash equivalents and short-term investments
 
$
136,455

 
$
400

 
$
(6
)
 
$
136,849



8

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TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated maturities as of March 31, 2015 (in thousands):
 
 
 
Amortized
Cost
 
Estimated
Fair Value
Due within one year
 
$
47,836

 
$
47,834

Due between one and two years
 
46,701

 
46,737

Due after two years
 
18,468

 
18,519

Total
 
$
113,005

 
$
113,090


Declines in fair value judged to be other-than-temporary on securities available for sale are included as a component of other income, net. In order to determine whether a decline in value is other-than-temporary, we evaluate, among other factors: the duration and extent to which the fair value has been less than the carrying value and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair market value. As of March 31, 2015, we did not consider any of our investments to be other-than-temporarily impaired.
4.
Fair value of financial instruments
We measure certain financial instruments at fair value on a recurring basis. We have established a hierarchy, which consists of three levels, for disclosure of the inputs used to determine the fair value of our financial instruments.
Level 1 valuations are based on quoted prices in active markets for identical assets or liabilities.
Level 2 valuations are based on inputs that are observable, either directly or indirectly, other than quoted prices included within Level 1. Such inputs used in determining fair value for Level 2 valuations include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Where applicable, we use quoted prices in active markets for similar assets to determine fair value of Level 2 short-term investments. If quoted prices in active markets for identical assets are not available to determine fair value, we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. If quoted prices for identical or similar assets are not available, we use third party valuations utilizing underlying assets assumptions.

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TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement. All of our cash equivalents and short-term investments are classified within Level 1 or Level 2. The fair values of these financial instruments were determined using the following inputs at March 31, 2015 (in thousands):
 
 
 
Fair Value Measurements at March 31, 2015 Using
 
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
 
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
Description
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
$
961

 
$
961

 
$

 
$

Total cash equivalents
 
961

 
961

 

 

Short-term investments:
 
 
 
 
 
 
 
 
U.S. treasury securities
 
561

 
561

 

 

Asset-backed securities
 
16,207

 

 
16,207

 

Municipal securities
 
13,015

 

 
13,015

 

Commercial paper
 
1,996

 

 
1,996

 

Agency bonds
 
10,502

 

 
10,502

 

Corporate bonds
 
70,809

 

 
70,809

 

Total short-term investments
 
113,090

 
561

 
112,529

 

Cash equivalents and short-term investments
 
$
114,051

 
$
1,522

 
$
112,529

 
$

The fair values of our financial instruments were determined using the following inputs at June 30, 2014 (in thousands):
 
 
 
Fair Value Measurements at June 30, 2014 Using
 
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
 
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
Description
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
$
622

 
$
622

 
$

 
$

Commercial paper
 
1,000

 

 
1,000

 

Total cash equivalents
 
1,622

 
622

 
1,000

 

Short-term investments:
 
 
 
 
 
 
 
 
Municipal securities
 
96,848

 

 
96,848

 

Commercial paper
 
999

 

 
999

 

Corporate bonds
 
24,468

 

 
24,468

 

Total short-term investments
 
122,315

 

 
122,315

 

Cash equivalents and short-term investments
 
$
123,937

 
$
622

 
$
123,315

 
$

Amortization of net premium on short-term investments totaled $1.1 million and $2.7 million in the nine months ended March 31, 2015 and 2014, respectively.
There were no transfers between Level 1 and Level 2 financial instruments in the nine months ended March 31, 2015 and 2014, respectively.
We did not have any financial liabilities measured at fair value on a recurring basis as of March 31, 2015 or June 30, 2014.

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Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

5.
Commitments and contingencies
Operating lease and purchase obligations
As of March 31, 2015, we had future minimum non-cancelable financial commitments primarily related to office space under non-cancelable operating leases and license fees due to certain of our third party content providers, regardless of usage level. The aggregate future minimum commitments, net of sublease income, were comprised of the following (in thousands):
 
 
 
Payments Due by Period
 
 
Total
 
Fiscal 2015
 
Fiscal 2016
 
Fiscal 2017
 
Fiscal 2018
 
Fiscal 2019
 
Thereafter
Operating lease obligations, net of sublease income
 
$
24,569

 
$
1,648

 
$
6,014

 
$
4,471

 
$
4,842

 
$
5,355

 
$
2,239

Purchase obligations
 
2,439

 
965

 
1,193

 
281

 

 

 

Total contractual obligations
 
$
27,008

 
$
2,613

 
$
7,207

 
$
4,752

 
$
4,842

 
$
5,355

 
$
2,239

Contingencies
From time to time, we may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. When we believe a loss or a cost of indemnification is probable and can be reasonably estimated, we accrue the estimated loss or cost of indemnification in our consolidated financial statements. Where the outcome of these matters is not determinable, we do not make a provision in our financial statements until the loss or cost of indemnification, if any, is probable and can be reasonably estimated or the outcome becomes known. We expense legal fees related to these matters as they are incurred.
On December 31, 2009, Vehicle IP, LLC, or Vehicle IP, filed a patent infringement lawsuit against us in the U.S. District Court for the District of Delaware, seeking monetary damages, fees and expenses and other relief. Verizon Wireless, or Verizon, was named as a co-defendant in the Vehicle IP litigation based on the VZ Navigator product and has demanded that we indemnify and defend Verizon against Vehicle IP. At this time, we have not agreed to defend or indemnify Verizon. AT&T was also named as a co-defendant in the Vehicle IP litigation based on the AT&T Navigator and Telenav Track products. AT&T has tendered the defense of the litigation to us and we are defending the case on behalf of AT&T. After the district court issued its claim construction ruling the defendants filed motions for summary judgment of noninfringement. On April 10, 2013 the district court granted AT&T and our motion for summary judgment of noninfringement. Plaintiff appealed the district court's claim construction and summary judgment rulings to the U.S. Court of Appeals for the Federal Circuit. On November 18, 2014 the U.S. Court of Appeals for the Federal Circuit reversed the district court’s claim construction and overturned the district court’s grant of summary judgment of noninfringement. The case has been sent back to the U.S. District Court for the District of Delaware and trial is currently scheduled for February 2017. Due to the uncertainties related to litigation, we are unable to evaluate the likelihood of either a favorable or unfavorable outcome. We believe that it is reasonably possible that we will incur a loss; however, we cannot currently estimate a range of any possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the effects of this lawsuit on our financial condition, results of operations, or cash flows.
On April 30, 2010, Traffic Information, LLC, or Traffic Information, filed a patent infringement lawsuit against us in the U.S. District Court for the Eastern District of Texas, seeking monetary damages, fees and expenses, and other relief. The patent at issue was subject to reexamination by the U.S. Patent and Trademark Office, or PTO, and the reexamined claims were found invalid. Plaintiff appealed this finding and on May 30, 2013, the Patent Trial and Appeal Board, or PTAB, confirmed the invalidity of these claims. Plaintiff filed a request for reconsideration of this decision with the PTAB, which was denied on January 13, 2014. In light of the reexamination and plaintiff's appeal of the reexamination findings, the court stayed the case and the case will remain stayed and administratively closed unless the plaintiff obtains a favorable decision on appeal before the PTAB or Federal Circuit Court of Appeals. Traffic Information filed an appeal with the U.S. Appeals Court for the Federal Circuit, and on January 20, 2015, the court affirmed the PTO's finding of invalidity. On April 28, 2015, Traffic Information filed a dismissal of all claims against Telenav. On May 6, 2015, the District Court entered the dismissal.
On October 10, 2014, PanTaurus LLC filed a patent infringement lawsuit against us in the U.S. District Court for the Eastern District of Texas, alleging that we infringe the patent in suit by operating a Hadoop distributed file system. The complaint seeks unspecified monetary damages, fees and expenses and injunctive relief against us. On January 9, 2015 we entered into a confidential license and settlement agreement, and on January 21, 2015 the parties moved to dismiss the lawsuit. On January 26, 2015 the district court dismissed the case.

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Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

On November 24, 2014 Rothschild Location Technologies, LLC filed a complaint against us in the U.S. District Court for the District of Delaware, alleging that Telenav Track infringes U.S. Patent No. 8,606,503. The patent in suit claims a method and system for the remote entering, storing and sharing of location information. On March 17, 2015, Plaintiff dismissed all claims against Telenav. The court entered the dismissal and closed the case on March 18, 2015.

On February 6, 2015, Location Services IP LLC filed a complaint against AT&T, Inc. and Telenav, Inc. in the U.S. District Court for the Eastern District of Texas, alleging that the AT&T Navigator, Telenav GPS Plus, and Telenav Scout Mobile applications infringe 4 U.S. patents. On April 16, 2015, Location Services IP LLC dismissed all claims against AT&T, Inc. and Telenav, Inc. in that case and filed a new complaint against AT&T Mobility, AT&T Services, Inc. and Telenav, Inc. in the same court, alleging that the AT&T Navigator, Telenav GPS Plus, Telenav GPS Navigator, and Telenav Scout Mobile applications as well as AT&T Store Locator and the myAT&T Mobile Application infringe the same 4 U.S. patents. The complaint seeks unspecified monetary damages, fees and expenses and injunctive relief. AT&T has requested that we defend and indemnify them in this matter as it relates to the AT&T Navigator product and we have agreed to do so. Due to the preliminary status of the lawsuit and uncertainties related to litigation, we are unable to evaluate the likelihood of either a favorable or unfavorable outcome. We believe that it is reasonably possible that we will incur a loss; however, we cannot currently estimate a range of any possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the effects of this complaint on our financial condition, results of operations or cash flows.

In addition, we have received, and expect to continue to receive, demands for indemnification from our customers, which demands can be very expensive to settle or defend, and we have in the past offered to contribute to settlement amounts and incurred legal fees in connection with certain of these indemnity demands. A number of these indemnity demands, including demands relating to pending litigation, remain outstanding and unresolved as of the date of this Form 10-Q. Furthermore, in response to these demands we may be required to assume control of and bear all costs associated with the defense of our customers in compliance with our contractual commitments. At this time, we are not a party to the following cases; however our customers have requested that we indemnify them in connection with such cases.
In 2008, Alltel, AT&T, Sprint and T-Mobile USA, or T-Mobile, each demanded that we indemnify and defend them against patent infringement lawsuits brought by patent holding companies EMSAT Advanced Geo-Location Technology LLC and Location Based Services LLC (collectively, EMSAT) in the U.S. District Court for the Northern District of Ohio. In March 2011, EMSAT and AT&T settled their claims. The PTO reexamined two of the patents in suit, confirming the validity of only two of the asserted claims from those patents. All patent claims that EMSAT alleged to be infringed by the Telenav GPS Navigator product were cancelled during reexamination. In the suits against T-Mobile, Alltel and Sprint, EMSAT amended its allegations to remove allegations of infringement of the patent claims that were cancelled during reexamination. EMSAT and T-Mobile stipulated to a dismissal and their case was dismissed on January 28, 2015. On March 20, 2015, the Court dismissed and closed the Alltel case and on April 10, 2015 the Court dismissed and closed the Sprint case. We have not yet determined the extent of our indemnification obligations to AT&T. We believe that it is reasonably possible that we will incur additional loss; however, we cannot currently estimate a range of other possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the overall effects of this matter on our financial condition, results of operations, or cash flows.

In March 2009, AT&T demanded that we indemnify and defend them against a patent infringement lawsuit brought by Tendler Cellular of Texas LLC, or Tendler, in the U.S. District Court for the Eastern District of Texas. In June 2010, AT&T settled its claims with Tendler and we came to an agreement with AT&T as to the extent of our contribution towards AT&T's settlement and the amount of our contribution was not material; however, there continues to be a disagreement as to whether any additional amounts are owed to AT&T for legal fees and expenses related to the defense of the matter. We believe that it is reasonably possible that we will incur additional loss; however, we cannot currently estimate a range of other possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the overall effects on our financial condition, results of operations, or cash flows.
6.Guarantees and indemnifications
Our agreements with our customers generally include certain provisions for indemnifying them against liabilities if our products and services infringe a third party’s intellectual property rights or for other specified matters. We have in the past received indemnification requests or notices of their intent to seek indemnification in the future from our customers with respect to specific litigation claims in which our customers have been named as defendants. The maximum amount of potential future indemnification is unlimited.

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Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons upon the termination of their services with us, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. The maximum amount of potential future indemnification is unlimited. We have a directors and officers insurance policy that limits our potential exposure. We believe that any financial exposure related to these indemnification agreements is not material.
7.
Stock-based compensation
Under our 2002 Executive Stock Option Plan, 2009 Equity Incentive Plan and 2011 Stock Option and Grant Plan, eligible employees, directors and consultants are able to participate in our future performance through awards of nonqualified stock options, incentive stock options and restricted stock units through the receipt of such awards as authorized by our board of directors. In addition, we have granted restricted common stock in connection with certain acquisitions.
A summary of our stock option activity is as follows (in thousands except per share and contractual life amounts):
 
 
 
Number of
Shares

 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
(years)
 
Aggregate
Intrinsic
Value

Options outstanding as of June 30, 2014
 
5,697

 
$
5.59

 
 
 
 
Granted
 
504

 
 
 
 
 
 
Exercised
 
(673
)
 
 
 
 
 
 
Canceled
 
(527
)
 
 
 
 
 
 
Options outstanding as of March 31, 2015
 
5,001

 
$
5.37

 
4.76
 
$
14,141

As of March 31, 2015:
 
 
 
 
 
 
 
 
Options vested and expected to vest
 
4,829

 
$
5.32

 
4.71
 
$
13,909

Options exercisable
 
3,850

 
$
5.02

 
4.17
 
$
12,470

A summary of our restricted stock unit, or RSU, activity is as follows (in thousands except contractual life amounts):
 
 
 
Number of
Shares
 
Weighted
Average
Remaining
Contractual Life
(years)
 
Aggregate
Intrinsic Value
RSUs outstanding as of June 30, 2014
 
4,710

 
 
 
 
Granted
 
1,396

 
 
 
 
Vested
 
(802
)
 
 
 
 
Canceled
 
(996
)
 
 
 
 
RSUs outstanding as of March 31, 2015
 
4,308

 
1.59
 
$
34,118

As of March 31, 2015:
 
 
 
 
 
 
RSUs expected to vest
 
3,607

 
1.48
 
$
28,568


RSUs vested above includes approximately 290,000 shares withheld for taxes related to net share settlements of RSUs.


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Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

During the nine months ended March 31, 2015, pursuant to the annual increase provisions of our 2009 Equity Incentive Plan, we increased the number of shares available for grant under our stock option and equity incentive plans by approximately 1,578,000 shares. A summary of our shares available for grant activity is as follows (in thousands):

 
 
Number of
Shares
Shares available for grant as of June 30, 2014
 
605

Additional shares authorized
 
1,578

Granted
 
(1,900
)
RSUs withheld for taxes in net share settlements
 
290

Canceled
 
1,525

Shares available for grant as of March 31, 2015
 
2,098

The following table summarizes the stock-based compensation expense recorded for stock options, RSUs and restricted common stock issued to employees and nonemployees (in thousands):
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2015
 
2014
 
2015
 
2014
Stock option awards
 
$
446

 
$
847

 
$
1,680

 
$
3,131

RSU awards
 
2,186

 
1,572

 
6,373

 
3,522

Restricted common stock
 

 
456

 
506

 
1,368

Total stock-based compensation expense
 
$
2,632

 
$
2,875

 
$
8,559

 
$
8,021

We use valuation pricing models to determine the fair value of stock-based awards. The determination of the fair value of stock-based payment awards on the date of grant is affected by the stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and expected dividends. The weighted average assumptions used to value stock option awards granted were as follows:
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2015
 
2014
 
2015
 
2014
Expected volatility
 
55
%
 
%
 
54
%
 
62
%
Expected term (in years)
 
4.39

 

 
4.38

 
4.45

Risk-free interest rate
 
1.50
%
 
%
 
1.62
%
 
1.44
%
Dividend yield
 

 

 

 

No stock option awards were granted during the three months ended March 31, 2014.
8.
Stock repurchase program
In September 2014, we announced that our Board of Directors authorized a program for the repurchase of shares of our common stock up to an aggregate of $10.0 million through open market purchases. The timing and amount of repurchase transactions under this program depends on market conditions and other considerations. Under this program, we utilized $2.5 million of cash to repurchase 351,549 shares of our common stock at an average purchase price of $7.17 per share during the nine months ended March 31, 2015. As of March 31, 2015, the remaining authorized amount of stock repurchases that may be made under this repurchase program was $7.5 million.
Repurchased shares are retired and designated as authorized but unissued shares. We use the par value method of accounting for our stock repurchases. Under the par value method, common stock is first charged with the par value of the shares involved. The excess of the cost of shares acquired over the par value is allocated to additional paid-in capital, or APIC, based on an estimated average sales price per issued share with the excess amounts charged to retained earnings. As a result of

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Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

our stock repurchases during the nine months ended March 31, 2015, we reduced common stock and APIC by an aggregate of $1.1 million and charged $1.4 million to retained earnings.
9.
Income taxes
The effective tax rate for the periods presented is the result of the mix of forecasted fiscal year income earned or loss incurred in various tax jurisdictions that apply a broad range of income tax rates. Our effective tax rate, which resulted in the recognition of a tax benefit, was 40% in the nine months ended March 31, 2015 compared to an effective tax rate of 35% in the nine months ended March 31, 2014. Our effective tax rate of 40% for the nine months ended March 31, 2015 was greater than the tax benefit computed at the U.S. federal statutory income tax rate due primarily to tax benefits recorded discretely from the recognition of a $3.0 million state income tax refund, as discussed further below, true up adjustments totaling $1.5 million in connection with the filing of our fiscal 2014 tax return, and the reversal of tax reserves due to the expiration of the statue of limitations and settlement of our California audit, partially offset by an increase in the valuation allowance as a result of the limitations of benefit from the tax carryback. Our effective tax rate of 35% for the nine months ended March 31, 2014 was the same as the tax benefit computed at the U.S. federal statutory income tax rate due primarily to nondeductible stock compensation and nondeductible expenses offset by exempt interest income and research and development credits, and true ups.
In January 2015, we received $8.0 million of the total $8.6 million receivable due for a U.S. federal tax refund resulting from our ability to carryback fiscal 2014 losses and credits to previous years.
We also received a $3.0 million income tax refund in January 2015 from the state of California as a result of the filing and subsequent audit of our California amended returns for fiscal 2009 and 2010. We amended our fiscal 2009 and 2010 returns due to a favorable tax ruling we received with respect to an alternative apportionment method. The state refund was not previously recognized due to uncertainties with respect to the interpretation of the tax ruling, the outcome of the audit of the amended returns, and the method in which the overpayment would ultimately be settled. The $3.0 million state income tax refund has been recorded as a discrete tax benefit in the nine months ended March 31, 2015.
We record liabilities related to unrecognized tax benefits in accordance with authoritative guidance on accounting for uncertain tax positions. As of March 31, 2015 and June 30, 2014, our cumulative unrecognized tax benefits were $4.2 million and $6.9 million, respectively. Included in the balance of unrecognized tax benefits at March 31, 2015 and June 30, 2014 was $2.3 million and $5.5 million, respectively, that, if recognized, would affect the effective tax rate.
We recognize interest and penalties related to unrecognized tax benefits as part of our provision for federal, state and foreign income taxes. We had accrued $525,000 and $603,000 for the payment of interest and penalties at March 31, 2015 and June 30, 2014, respectively.
We file income tax returns with the Internal Revenue Service, or IRS, California and various states and foreign tax jurisdictions in which we have subsidiaries. The statute of limitations remains open for fiscal 2012 through fiscal 2014 in the U.S., for fiscal 2010 through fiscal 2014 in state jurisdictions, and for fiscal 2009 through fiscal 2014 in foreign jurisdictions. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized.
In fiscal 2014, we recorded a valuation allowance on the majority of our deferred tax assets, net of liabilities, since the assets were not more likely than not to be realized based upon our assessment of all positive and negative evidence. Realization of deferred tax assets is dependent upon future taxable earnings and losses, the timing of which is uncertain. Due to losses in fiscal 2014 and expected losses in fiscal 2015 and potentially future years in the U.S., we established commencing in fiscal 2014 a valuation allowance on deferred tax assets in the U.S. that we believe will not be realized by the carryback provisions of U.S. tax law. U.S. tax law allows for the two-year carryback of losses and one-year carryback of credits to previous tax years which can generate a tax refund to the extent taxes were paid. Due to foreign operating losses in previous years and continued foreign earnings volatility, we continued to maintain a full valuation allowance for our foreign deferred tax assets. Our valuation allowance at June 30, 2014 was $13.0 million. In evaluating our ability to recover our deferred tax assets each quarter, we consider all available positive and negative evidence, including current and previous operating results, ability to carryback losses for a tax refund, and forecasts of future operating results.
On September 13, 2013, the U.S. Treasury issued final tangible property regulations which broadly apply to amounts paid to acquire, produce or improve tangible property, as well as dispositions of such property. On August 18, 2014, the U.S. Treasury issued final tangible property regulations for dispositions of property subject to depreciation under Section 168 and general asset accounts and finalizes the asset disposition rules. The new tangible property regulations are effective for years

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TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

beginning after January 1, 2014, or our fiscal 2015. Since we expect to elect the de minimus safe harbor election which provides symmetry between book and tax for the capitalization of tangible assets, these new regulations will not have a material impact on our financial statements.

On December 19, 2014, the Tax Increase Prevention Act of 2014 became effective, which provides one year retroactive tax relief for businesses by reinstating retroactively to January 1, 2014, certain tax benefit and credits that had expired. These provisions automatically expired again on December 31, 2014. The research and development credit was retroactively extended in this legislation. We have recorded a discrete tax benefit of $0.4 million for the research and development credit for the period January through June 2014 due to our ability to carryback the credit and receive a refund. We have not recorded a tax benefit for the research and development credit in the current year due to our current loss and the lack of carryback refund opportunity.
10. Acquisitions
skobbler GmbH
On January 29, 2014, we completed our acquisition of all of the shares of privately held skobbler GmbH, or skobbler, a navigation company based in Germany. We acquired skobbler for consideration of approximately $23.8 million, consisting of approximately $19.2 million in cash and $4.6 million in shares of our restricted common stock. We believe the acquisition of skobbler will enable us to combine its OpenStreetMap (OSM)-based GPS navigation technology with our existing automotive and mobile navigation solutions. The transaction was accounted for under the acquisition method of accounting. We recorded the assets acquired and liabilities assumed at their estimated fair value, with the difference between the fair value of the net assets acquired and the purchase consideration reflected as goodwill.
The total purchase consideration of $23.8 million was comprised of $19.2 million in cash and 731,623 shares of our common stock valued at $4.6 million. The 731,623 shares of our common stock are held in escrow and will be released at the rate of 50% per year on each anniversary date of closing. The first 50% of these shares were released from escrow on January 29, 2015. These shares are released from escrow solely with the passage of time and do not contain a service or performance requirement. In addition to the total purchase consideration, we issued 634,920 inducement RSUs to the founders of skobbler. The fair value of the 634,920 RSUs issued in connection with the acquisition was $4.0 million, which has been accounted for as post-combination stock-based compensation and is being amortized over a weighted average period of 2.0 years.
The fair value of our common stock issued in connection with the acquisition was determined to be $6.32 per share, the closing price of our common stock on the acquisition measurement date, which is the date the acquisition closed.
The following table reflects the preliminary values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):
Cash
 
$
100

Accounts receivable
 
177

Other assets
 
209

Customer relationships
 
400

Developed technology
 
7,100

Goodwill
 
16,907

Liabilities assumed
 
(1,135
)
    Total value of assets acquired and liabilities assumed
 
$
23,758

We determined the fair value of developed technology and customer relationships to be $7.1 million and $0.4 million, respectively. The fair value of the developed technology and customer relationships is being amortized using the straight-line method over the estimated life of 7.0 years and 18 months, respectively. Developed technology and customer relationships are included in goodwill and intangible assets, net of amortization on the consolidated balance sheets.
Goodwill of $16.9 million was recorded as the excess of the fair value of the purchase consideration over the fair value of the net assets acquired. This asset is attributed to buyer-specific value resulting from synergies that are not included in the fair value of assets. No goodwill was deemed to be deductible for income tax purposes.
Included in the purchase consideration is $3.7 million in cash that was paid by us and deposited in escrow to satisfy potential indemnification claims.

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Table of Contents
TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)

11. Restructuring costs
During fiscal 2014, in order to further align our resources and consolidate facilities, we initiated a restructuring plan consisting of the elimination of 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 fiscal 2014, we also commenced our consolidation of our Sunnyvale, California headquarters facilities from two buildings into one and closed our Boston, Massachusetts office. As a result, we recorded restructuring charges of $2.0 million related to the impairment of the facility leases. Of this amount, $831,000 related to facility lease impairment was charged to restructuring expenses in the nine months ended March 31, 2014.
In the fourth quarter of fiscal 2013, in order to better align and focus our resources around our strategic growth areas, we initiated a restructuring plan consisting of the elimination of 83 full-time positions in the U.S. and China and we recorded restructuring charges of $1.5 million related to severance and benefits for the positions eliminated. In addition, we consolidated our Shanghai office facilities and recorded restructuring charges of $124,000 related to the forfeiture of our lease deposit. We also recorded restructuring charges of $99,000 related to the write-off of certain assets that were no longer useful to us based upon the changes in our business. Total restructuring charges related to this plan were $1.7 million.
The fiscal year 2015 activity related to the restructuring liabilities established is presented in the following table (in thousands):
 
 
Severance and Benefits
 
Facility Exit Costs and Asset Impairment
 
Total
Balance at June 30, 2014
 
$
2,126

 
$
2,743

 
$
4,869

Restructuring expenses
 

 
1,325

 
1,325

Cash payments
 
(2,123
)
 
(1,151
)
 
(3,274
)
Other
 
(3
)
 
61

 
58

Balance at March 31, 2015
 
$

 
$
2,978

 
$
2,978


The $1.3 million charge to our restructuring liabilities was due primarily to a reassessment of our facility impairment costs in accordance with our restructuring plans in fiscal 2014 and 2013. This charge was partially offset by the reversal of a deferred rent liability related to the impaired facilities, resulting in restructuring expense of $987,000 recognized in our statement of operations for the nine months ended March 31, 2015.
12. Segments
We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.

Our CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments. In addition, with the exception of goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments.

Commencing July 1, 2014, we began to report results in three business segments:

Automotive - Our Automotive segment provides our map and navigation platform to auto manufacturers and original equipment manufacturers, or OEMs, for distribution with their vehicles. Our automotive solutions are typically a self-contained solution including software and related services and content within the car, or on-board, and are often enhanced through connection to data services for additional real time capabilities such as maps, POI, or traffic.

Advertising - Our Advertising segment provides interactive mobile advertisements on behalf of our advertising clients to consumers based specifically on the location of the user and other sophisticated targeting capabilities. Our customers include advertising agencies, direct advertisers and channel partners.

Mobile Navigation - Our Mobile Navigation segment provides our map and navigation platform to end users through mobile devices. We distribute our services through our wireless carrier partners, and directly to consumers through mobile application stores and marketplaces.

Prior to July 1, 2014, we operated in a single segment: location-based platform services. We have conformed our single segment results for the three and nine months ended March 31, 2014 to the current period presentation for comparative purposes.

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TELENAV, INC.
Notes to Condensed Consolidated Financial Statements—(Continued)
(unaudited)


Our segment results for the three and nine months ended March 31, 2015 and 2014 were as follows (dollars in thousands):


 
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
 
2015
 
2014
 
2015
 
2014
Revenue
 
 
 
 
 
 
 
 
Automotive
 
$
29,472

 
$
18,297

 
$
73,051

 
$
57,151

Advertising
 
4,019

 
2,905

 
12,726

 
7,853

Mobile Navigation
 
8,795

 
13,269

 
31,276

 
50,924

Total revenue
 
42,286

 
34,471

 
117,053

 
115,928

Cost of revenue
 
 
 
 
 
 
 
 
Automotive
 
15,759

 
8,681

 
39,395

 
27,357

Advertising
 
2,690

 
1,740

 
8,528

 
4,819

Mobile Navigation
 
2,390

 
3,818

 
8,409

 
13,286

Total cost of revenue
 
20,839

 
14,239

 
56,332

 
45,462

Gross profit
 
 
 
 
 
 
 
 
Automotive
 
13,713

 
9,616

 
33,656

 
29,794

Advertising
 
1,329

 
1,165

 
4,198

 
3,034

Mobile Navigation
 
6,405

 
9,451

 
22,867

 
37,638

Total gross profit
 
$
21,447

 
$
20,232

 
$
60,721

 
$
70,466

Gross margin
 
 
 
 
 
 
 
 
Automotive
 
47
%
 
53
%
 
46
%
 
52
%
Advertising
 
33
%
 
40
%
 
33
%
 
39
%
Mobile Navigation
 
73
%
 
71
%
 
73
%
 
74
%
Total gross margin
 
51
%
 
59
%
 
52
%
 
61
%

13. Subsequent events
Subsequent to March 31, 2015, we entered into an agreement to spin off a product line of our Shanghai, China location, including certain assets and technology as well as seven employees, and to invest $1 million in the form of a convertible note. We anticipate that we will continue to consolidate this entity with the accounts of Telenav, Inc. and its wholly owned subsidiaries, as we are the primary investor.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read together with our condensed consolidated financial statements and the notes to those statements included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the sections entitled “Risk Factors” and this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements include information concerning our possible or assumed future results of operations, future sources of revenue, expectations of expenses, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts, “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Risk factors” and elsewhere in this

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Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Form 10-Q.
Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.
In this Form 10-Q, “we,” “us,” “our” and "Telenav" refer to Telenav, Inc. and its subsidiaries. We operate on a fiscal year ending June 30 and refer to the fiscal year ended June 30, 2014 as “fiscal 2014" and the fiscal year ending June 30, 2015 as "fiscal 2015.”
Overview

Telenav is a leading provider of location-based platform services. These services consist of our map and navigation platform and our advertising delivery platform. Our map and navigation platform allows Telenav to deliver enhanced location- based services to developers, auto manufacturers and end users. Our advertising delivery platform delivers highly targeted advertising services leveraging our location expertise. Recently, we have focused on enhancing our map and navigation platform by closely aligning our technology to the OpenStreetMap, or OSM, community. In January 2014, we completed our acquisition of all of the shares of privately held skobbler GmbH, or skobbler, a location-based services company based in Germany. We believe the acquisition of skobbler will enable us to combine its OSM-based GPS navigation technology with our existing automotive and mobile navigation solutions.
We offer our map and navigation platform to customers in a number of ways. We distribute our services through our wireless carrier partners, including AT&T Mobility LLC, or AT&T, and directly to consumers through mobile application stores and marketplaces. Generally, we provide our basic services to consumers for free and provide consumers the opportunity to purchase premium versions of the product. We refer to the free to premium distribution as the “freemium” model of distribution. Our free products are designed to be monetized through delivery of advertising to consumers. Our success with the freemium model depends upon our ability to generate a substantial active user base as well as the ability to generate revenue from advertising and conversion of users from free to premium services.
We offer our map and navigation platform to auto manufacturers and original equipment manufacturers, or OEMs, for distribution with their vehicles. Our automotive solutions are typically a self-contained solution including software and related services and content within the car, or on-board, and are often enhanced through connection to data services for additional real time capabilities such as maps, points of interest, or POI, and traffic. We believe that our history as a cloud-based supplier of navigation services provides a unique advantage in the marketplace over our competitors. Our primary customer to date, Ford Motor Company, or Ford, currently distributes our on-board product as an optional feature with the majority of its models in the U.S. Our product is now included in models manufactured in the U.S., Canada, Mexico, Europe and China, as well as offered in models in South America, Australia and New Zealand. We also have a relationship with an automotive OEM, Delphi Automotive Systems LLC, or Delphi, that distributes our on-board product with another major global auto manufacturer and a major China auto manufacturer. In January 2014, we entered into an agreement with General Motors Corporation, or GM, for integration of our embedded and connected solutions in its vehicles, which we expect to be launched in model year 2017. We do not expect to receive any revenue from the launch of those vehicles until fiscal 2017 at the earliest, and in the course of the development of those vehicles we may be designed out altogether. Our relationship with GM also includes off-board and cloud-based services for vehicles, commencing in calendar 2015, and in January 2015 GM launched the new version of its OnStar RemoteLink® mobile application powered by our location-based services platform, which includes mapping and one-box search. Under the terms of the agreement, we expect our connected services to support navigation in more than 100 countries. GM has not provided us with any volume or revenue guarantees.

Our advertising delivery platform offers advertisers significant audience reach, sophisticated targeting capabilities and the ability to deliver interactive and engaging ad experiences to consumers on their mobile devices. We are experts in location-based advertising and offer unique value to brick-and-mortar and brand advertisers through our location targeting capabilities. Our technology focuses on managing the complexity and scale associated with mobile location data to deliver better mobile campaigns for our advertising partners. We deliver mobile advertisements by leveraging our proprietary in-house ad serving technology. Our inventory, or accessible market, is comprised of thousands of mobile applications and mobile websites that are accessed through programmatic real-time bidding, or RTB, tools. In March 2015, our platform had access to over 254 billion potential ad impressions.

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We derive revenue primarily from wireless carriers, automobile manufacturers and OEMs, and advertisers and advertising agencies. We primarily derive our revenue from automobile manufacturers whose vehicles contain our proprietary software and are able to access our personalized navigation services. We also derive revenue from our partnerships with wireless carriers who sell our mobile navigation services to their subscribers. In addition, we have a growing business in mobile advertising where our customers are primarily advertising agencies that represent national and regional brands and channel partners that work closely with local and small business advertisers.
We generate revenue from the delivery of customized software and royalties from the distribution of this customized software in automotive navigation applications. For example, Ford utilizes our on-board automotive navigation product in its Ford SYNC platform, which includes MyFord Touch and MyLincoln Touch. Our navigation solution is currently deployed in 20 different Ford and Lincoln models in North America. Ford and Lincoln models with our on-board automotive navigation product began shipping to South America with the 2012 model year, China with the 2013 model year and Australia and New Zealand with the 2014 model year. We began shipments to Ford for the launch of our solution in Europe in September 2014, for the 2015 model year. Our automobile manufacturer and OEM customers pay us a royalty fee as the software is reproduced for installation in vehicles with our automotive navigation solutions.
We generate revenue from mobile navigation services, based upon our map and navigation platform, through service subscriptions. End users with subscriptions for our services are generally billed for our services through their wireless carrier or through mobile application stores and marketplaces. Our wireless carrier customers pay us based on several different revenue models, including (1) a revenue sharing arrangement that may include a minimum fee per end user, (2) a monthly or annual subscription fee per end user, or (3) based on usage.
We generate revenue from advertising network services through the delivery of search and display advertising impressions based on the specific terms of the advertising contract, which can include arrangements based on cost per impression, cost per click, or cost per drive.
Recent Developments

Commencing on July 1, 2014, we began to report results in three business segments:

Automotive - Our Automotive segment provides our map and navigation platform to auto manufacturers and OEMs, for distribution with their vehicles. Our automotive solutions are typically a self-contained solution including software and related services and content within the car, or on-board, and are often enhanced through connection to data services for additional real time capabilities such as maps, POI or traffic.

Advertising - Our Advertising segment provides interactive mobile advertisements on behalf of our advertising clients to consumers based specifically on the location of the user and other sophisticated targeting capabilities. Our customers include advertising agencies, direct advertisers and channel partners.

Mobile Navigation - Our Mobile Navigation segment provides our map and navigation platform to end users through mobile devices. We distribute our services through our wireless carrier partners, and directly to consumers through mobile application stores and marketplaces.

Our CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments.

In January 2015, GM launched the new version of its OnStar RemoteLink® mobile application powered by our location-based services platform, which includes mapping and one-box search. This is part of a broader global strategic relationship with GM that we entered into in January 2014.

In January 2015, we announced that we were selected to power the navigation experience of the next generation Ford SYNC®3 infotainment system. We expect to provide SYNC®3 users with an enhanced driving and navigation experience, including simplified one-box search functionality, multi-touch map technology, and more.

In November 2014, a top 10 global automotive OEM selected us as its preferred navigation provider for the China market. This is not a binding award and in the coming months, we expect to work to negotiate and enter into a binding agreement. This program is targeted to launch in the first half of calendar year 2017.


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Key operating and financial performance metrics
We monitor the key operating and financial performance metrics set forth in the tables below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. Certain of these measures, non-GAAP net income (loss), adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, and diluted non-GAAP net income (loss) per share are not measures calculated in accordance with U.S. generally accepted accounting principles, or GAAP, and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures of other companies because other companies may not calculate them in the same manner that we do (in thousands, except percentages and per share amounts):

 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2015
 
2014
 
2015
 
2014
Revenue
 
$
42,286

 
$
34,471

 
$
117,053

 
$
115,928

Gross margin
 
51
%
 
59
%
 
52
%
 
61
%
Non-GAAP gross margin
 
53
%
 
61
%
 
54
%
 
63
%
Automotive gross margin
 
47
%
 
53
%
 
46
%
 
52
%
Automotive non-GAAP gross margin
 
47
%
 
53
%
 
47
%
 
52
%
Advertising gross margin
 
33
%
 
40
%
 
33
%
 
39
%
Advertising non-GAAP gross margin
 
44
%
 
55
%
 
43
%
 
55
%
Mobile navigation gross margin
 
73
%
 
71
%
 
73
%
 
74
%
Mobile navigation non-GAAP gross margin
 
74
%
 
74
%
 
74
%
 
76
%
Net loss
 
$
(4,767
)
 
$
(7,555
)
 
$
(15,427
)
 
$
(11,543
)
Non-GAAP net loss
 
$
(1,177
)
 
$
(4,365
)
 
$
(8,044
)
 
$
(2,171
)
Adjusted EBITDA
 
$
(4,678
)
 
$
(6,783
)
 
$
(15,035
)
 
$
(4,724
)
Diluted net loss per share
 
$
(0.12
)
 
$
(0.19
)
 
$
(0.39
)
 
$
(0.30
)
Diluted non-GAAP net loss per share
 
$
(0.03
)
 
$
(0.11
)
 
$
(0.20
)
 
$
(0.06
)
Gross margin is our gross profit, or total revenue less cost of revenue, expressed as a percentage of our total revenue. Our gross margin has been and will continue to be impacted by the increasing percentage of our revenue base derived from automotive navigation solutions and advertising network services, which generally have higher associated third party content costs and third party display ad inventory costs, respectively, than our mobile navigation offerings provided through wireless carriers.
Non-GAAP gross margin measures our GAAP gross margin, excluding the impact of stock-based compensation expense and capitalized software and developed technology amortization expenses. Non-GAAP net income (loss) measures GAAP net income (loss), excluding the impact of stock-based compensation expense, capitalized software and developed technology amortization expenses, and other items such as legal settlements, certain unique tax matters and restructuring costs, net of taxes or tax benefits. Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants. Stock-based compensation expense has been and will continue to be a significant recurring non-cash expense for us. While we include the dilutive impact of such equity awards in weighted average shares outstanding, the expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net income (loss), non-GAAP net income (loss) per share, and adjusted EBITDA. Capitalized software amortization expense represents internal software costs that are previously capitalized and charged to expense as the software is used in our operations. Developed technology amortization expense relates to the amortization of acquired intangible assets. Legal settlements represent settlements from patent litigation cases in which we are defendants and royalty disputes.  Unique tax matters relate to items such as changes in tax accounting methodology, effects of amended tax returns due to new tax rulings and the write-off of deferred tax assets resulting from valuation allowances recorded against our deferred tax assets.   Restructuring costs represent recognition of the estimated amount of costs associated with restructuring activities. Our non-GAAP tax rate differs from the GAAP tax rate due to the elimination of any tax effect of the GAAP stock-based compensation expenses, capitalized software and developed technology amortization expenses, legal settlements, restructuring costs, and other items, including unique tax matters, that are being eliminated to arrive at the non-GAAP net income (loss).
Adjusted EBITDA measures our GAAP income (loss) excluding the impact of stock-based compensation expense, depreciation, amortization, interest income, other income (expense), provision (benefit) for income taxes, and other items such

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as legal settlements and restructuring costs, net of tax. Adjusted EBITDA, while generally a measure of profitability, can also represent a loss and this metric excludes certain non-cash expenses, interest and other income (expense), income taxes, and certain other items that management believes affect the comparability of operating results.
Non-GAAP gross margin, non-GAAP net income (loss) and adjusted EBITDA are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the expenses eliminated in calculating non-GAAP gross margin, non-GAAP net income (loss) and adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. In addition, non-GAAP net income (loss) and adjusted EBITDA are key financial measures used by the compensation committee of our board of directors in connection with the development of incentive-based compensation for our executive officers. Accordingly, we believe that non-GAAP gross margin, non-GAAP income (loss) from continuing operations, net of tax, and adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Diluted non-GAAP net income (loss) per share is calculated as non-GAAP net income (loss) divided by the diluted weighted average number of shares outstanding during the period.
These non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. Some of these limitations are:
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures;
non-GAAP gross margin, non-GAAP net income (loss) and adjusted EBITDA do not reflect the potentially dilutive impact of equity-based compensation;
Non-GAAP net income (loss) and adjusted EBITDA do not reflect the use of cash for net share settlements of RSUs
adjusted EBITDA does not reflect tax payments that historically have represented a reduction in cash available to us or tax benefits that may arise as a result of generating net losses; and
other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Because of these and other limitations, you should consider non-GAAP gross margin, non-GAAP net income (loss), adjusted EBITDA and diluted non-GAAP net income (loss) per share alongside other GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP financial results.
The following tables present reconciliations of gross margin to non-GAAP gross margin, net income (loss) to non-GAAP net income (loss) and net income (loss) to adjusted EBITDA for each of the periods indicated (dollars in thousands):
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
 
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
Three Months Ended
March 31,
 
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Gross margin
 
47
%
 
53
%
 
33
%
 
40
%
 
73
%
 
71
%
 
51
%
 
59
%
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capitalized software and developed technology amortization
 
%
 
%
 
11
%
 
15
%
 
1
%
 
3
%
 
2
%
 
2
%
Non-GAAP gross margin
 
47
%
 
53
%
 
44
%
 
55
%
 
74
%
 
74
%
 
53
%
 
61
%
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
 
 
Nine Months Ended March 31,
 
Nine Months Ended March 31,
 
Nine Months Ended March 31,
 
Nine Months Ended March 31,
 
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Gross margin
 
46
%
 
52
%
 
33
%
 
39
%
 
73
%
 
74
%
 
52
%
 
61
%
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capitalized software and developed technology amortization
 
1
%
 
%
 
10
%
 
16
%
 
1
%
 
2
%
 
2
%
 
2
%
Non-GAAP gross margin
 
47
%
 
52
%
 
43
%
 
55
%
 
74
%
 
76
%
 
54
%
 
63
%

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The impact of adjusting for stock-based compensation in determining non-GAAP gross margin is less than 1% for all periods presented.

 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
2015
 
2014
 
2015
 
2014
Net loss
 
$
(4,767
)
 
$
(7,555
)
 
$
(15,427
)
 
$
(11,543
)
Adjustments:
Benefit for income taxes due to changes in tax accounting method and amended tax returns
 

 

 
(4,061
)
 

Restructuring costs
 
422

 

 
987

 
831

Capitalized software and developed technology amortization
 
753

 
947

 
2,523

 
2,666

Stock-based compensation expense:
 
 
 
 
 
 
 
 
Cost of revenue
 
15

 
17

 
66

 
83

Research and development
 
1,243

 
1,131

 
3,868

 
3,203

Sales and marketing
 
699

 
757

 
2,193

 
2,223

General and administrative
 
675