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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 quarterly period ended March 31, 2017

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)

4655 Great America Parkway, Suite 300
Santa Clara, California 95054
(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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth 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
 
¨
 
 
 
 
 
 
 
Emerging growth company
 
¨
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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, 2017, there were approximately 43,734,500 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,
2017
 
June 30,
2016*
 
 
(unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
20,763

 
$
21,349

Short-term investments
 
76,368

 
88,277

Accounts receivable, net of allowances of $54 and $111 at March 31, 2017 and June 30, 2016, respectively
 
48,294

 
42,216

Restricted cash
 
3,925

 
5,109

Income taxes receivable
 
646

 
687

Deferred costs
 
6,735

 
1,784

Prepaid expenses and other current assets
 
3,358

 
4,448

Total current assets
 
160,089

 
163,870

Property and equipment, net
 
4,690

 
5,247

Deferred income taxes, non-current
 
442

 
661

Goodwill and intangible assets, net
 
35,218

 
35,993

Deferred costs, non-current
 
29,481

 
10,292

Other assets
 
1,552

 
2,184

Total assets
 
$
231,472

 
$
218,247

Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Trade accounts payable
 
$
10,703

 
$
4,992

Accrued expenses
 
35,313

 
36,274

Deferred revenue
 
12,268

 
4,334

Income taxes payable
 
288

 
88

Total current liabilities
 
58,572

 
45,688

Deferred rent, non-current
 
979

 
1,124

Deferred revenue, non-current
 
48,916

 
19,035

Other long-term liabilities
 
1,246

 
2,715

Commitments and contingencies
 

 

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; 43,735 and 42,708 shares issued and outstanding at March 31, 2017 and June 30, 2016, respectively
 
44

 
43

Additional paid-in capital
 
157,119

 
149,775

Accumulated other comprehensive loss
 
(2,586
)
 
(1,767
)
Retained earnings (accumulated deficit)
 
(32,818
)
 
1,634

Total stockholders’ equity
 
121,759

 
149,685

Total liabilities and stockholders’ equity
 
$
231,472

 
$
218,247

* Derived from audited consolidated financial statements as of and for the year ended June 30, 2016.
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,
 
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 


 


Product
 
$
24,426

 
$
33,936

 
$
91,653

 
$
96,205

Services
 
10,639

 
12,342

 
37,640

 
39,387

Total revenue
 
35,065

 
46,278

 
129,293

 
135,592

Cost of revenue:
 
 
 
 
 
 
 
 
Product
 
13,174

 
20,957

 
53,533

 
57,404

Services
 
4,493

 
5,149

 
16,337

 
16,621

Total cost of revenue
 
17,667

 
26,106

 
69,870

 
74,025

Gross profit
 
17,398

 
20,172

 
59,423

 
61,567

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
19,106

 
16,990

 
53,425

 
51,630

Sales and marketing
 
5,980

 
6,793

 
16,525

 
20,315

General and administrative
 
5,485

 
5,521

 
17,848

 
16,850

Legal settlement and contingencies
 

 

 
6,424

 
750

Restructuring
 

 
107

 

 
(1,361
)
Total operating expenses
 
30,571

 
29,411

 
94,222

 
88,184

Loss from operations
 
(13,173
)
 
(9,239
)
 
(34,799
)
 
(26,617
)
Other income (expense), net
 
142

 
(610
)
 
1,152

 
(277
)
Loss before provision (benefit) for income taxes
 
(13,031
)
 
(9,849
)
 
(33,647
)
 
(26,894
)
Provision (benefit) for income taxes
 
663

 
(11
)
 
805

 
429

Net loss
 
$
(13,694
)
 
$
(9,838
)
 
$
(34,452
)
 
$
(27,323
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.31
)
 
$
(0.23
)
 
$
(0.80
)
 
$
(0.66
)
Weighted average shares used in computing net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
43,528

 
42,047

 
43,189

 
41,226

 
 
 
 
 
 
 
 
 
Stock-based compensation expense included above:
 
 
 
 
 
 
 
 
Cost of revenue
 
$
32

 
$
39

 
$
96

 
$
110

Research and development
 
1,557

 
1,483

 
3,944

 
4,712

Sales and marketing
 
515

 
582

 
1,545

 
2,257

General and administrative
 
521

 
516

 
1,569

 
1,808

Total stock-based compensation expense
 
$
2,625

 
$
2,620

 
$
7,154

 
$
8,887

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,
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Net loss
 
$
(13,694
)
 
$
(9,838
)
 
$
(34,452
)
 
$
(27,323
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax
 
149

 
394

 
(446
)
 
(183
)
Available-for-sale securities:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on available-for-sale securities, net of tax
 
61

 
362

 
(376
)
 
129

Reclassification adjustments for gain (loss) on available-for-sale securities recognized, net of tax
 
13

 
14

 
3

 
20

Net increase (decrease) from available-for-sale securities, net of tax
 
74

 
376

 
(373
)
 
149

Other comprehensive loss, net of tax
 
223

 
770

 
(819
)
 
(34
)
Comprehensive loss
 
$
(13,471
)
 
$
(9,068
)
 
$
(35,271
)
 
$
(27,357
)
 
 
 
 
 
 
 
 
 

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,
 
 
2017
 
2016
Operating activities
 
 
 
 
Net loss
 
$
(34,452
)
 
$
(27,323
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
1,886

 
2,696

Accretion of net premium on short-term investments
 
326

 
523

Stock-based compensation expense
 
7,154

 
8,887

Write-off of long-term investments
 

 
977

Gain on disposal of property and equipment
 
(3
)
 
(15
)
Bad debt expense
 
149

 
59

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
(6,227
)
 
(3,000
)
Deferred income taxes
 
219

 
48

Restricted cash
 
1,184

 
191

Income taxes receivable
 
41

 
616

Deferred costs
 
(24,140
)
 
(7,276
)
Prepaid expenses and other current assets
 
1,090

 
(720
)
Other assets
 
386

 
895

Trade accounts payable
 
5,774

 
5,485

Accrued expenses and other liabilities
 
(2,369
)
 
(2,143
)
Income taxes payable
 
200

 
(487
)
Deferred rent
 
49

 
(505
)
Deferred revenue
 
37,815

 
13,879

Net cash used in operating activities
 
(10,918
)
 
(7,213
)
Investing activities
 
 
 
 
Purchases of property and equipment
 
(867
)
 
(1,775
)
Purchases of short-term investments
 
(51,258
)
 
(38,010
)
Proceeds from sales and maturities of short-term investments
 
62,468

 
45,686

Proceeds from sales of long-term investments
 
246

 

Net cash provided by investing activities
 
10,589

 
5,901

Financing activities
 
 
 
 
Proceeds from exercise of stock options
 
2,354

 
1,536

Repurchase of common stock
 

 
(570
)
Tax withholdings related to net share settlements of restricted stock units
 
(2,163
)
 
(2,755
)
Net cash provided by (used in) financing activities
 
191

 
(1,789
)
Effect of exchange rate changes on cash and cash equivalents
 
(448
)
 
(183
)
Net decrease in cash and cash equivalents
 
(586
)
 
(3,284
)
Cash and cash equivalents, at beginning of period
 
21,349

 
18,721

Cash and cash equivalents, at end of period
 
$
20,763

 
$
15,437

Supplemental disclosure of cash flow information
 
 
 
 
Income taxes paid, net
 
$
1,861

 
$
150

See accompanying Notes to Condensed Consolidated Financial Statements.

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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 leading provider of connected car and location-based platform products and services. Our automotive and mobile navigation platform allows us to deliver enhanced location-based services to auto manufacturers, developers and end users through various distribution channels. Our advertising delivery platform delivers highly targeted advertising services leveraging our location expertise. 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, 2016 as “fiscal 2016” and the fiscal year ending June 30, 2017 as “fiscal 2017.”
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 financial statements for the three and nine months ended March 31, 2017 and 2016.
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 2016, included in our Annual Report on Form 10-K for fiscal 2016 filed with the U.S. Securities and Exchange Commission, or SEC, on August 22, 2016.
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Form 10-K for fiscal 2016.
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 and short-term investments, the determination of acquired intangibles and goodwill, the fair value of stock-based 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 and affiliated entities, or Ford, comprised 68% and 72% of revenue for the three months ended March 31, 2017 and 2016, respectively, and 69% and 69% of revenue for the nine months ended March 31, 2017 and 2016, respectively. As of March 31, 2017 and June 30, 2016, receivables due from Ford were 68% and 64% of total accounts receivable, respectively. Revenue related to services provided through AT&T Mobility LLC, or AT&T, comprised 10% of revenue for the nine months ended March 31, 2016. Revenue from AT&T was less than 10% of revenue for all other periods presented.

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

Restricted cash
As of March 31, 2017 and June 30, 2016, we had restricted cash of $3.9 million and $5.1 million, respectively, on our consolidated balance sheets, comprised primarily of prepayments from a customer.
Accumulated other comprehensive loss, net of tax
The components of accumulated other comprehensive loss, net of related taxes, and activity as of March 31, 2017, 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, 2016
 
$
(1,889
)
 
$
122

 
$
(1,767
)
Other comprehensive income (loss) before reclassifications, net of tax
 
(446
)
 
(376
)
 
(822
)
Amount reclassified from accumulated other comprehensive loss, net of tax
 

 
3

 
3

Other comprehensive loss, net of tax
 
(446
)
 
(373
)
 
(819
)
Balance, net of tax as of March 31, 2017
 
$
(2,335
)
 
$
(251
)
 
$
(2,586
)

The amounts reclassified from accumulated other comprehensive loss, net of tax, were determined using the specific identification method and the amounts were included in other income (expense), net, for the three and nine months ended March 31, 2017.

The amount of income tax benefit allocated to each component of accumulated other comprehensive loss was not material for the three and nine months ended March 31, 2017.
Long-term investments
As of March 31, 2017, the carrying value of our investments in privately held companies totaled $708,000. These investments are accounted for as cost method 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. We regularly evaluate the carrying value of these cost method investments for impairment. We recorded impairment charges of $500,000 and $750,000 for cost method investments during the three and nine months ended March 31, 2016, respectively.
In addition, during the three and nine months ended March 31, 2016, we recorded an impairment charge of zero and $227,000, respectively, to write down to zero the carrying value of a convertible note issued in connection with the spin off of a product line developed by our Xi'an, China team.
Recent accounting pronouncements
In November 2016, the Financial Accounting Standards Board, or FASB, issued new guidance to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The new guidance requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning and ending total amounts shown in the statement of cash flows. The new standard is effective for us in our first quarter of fiscal 2019 and requires a retrospective method of adoption. Early adoption is permitted. We are evaluating the effect that this new standard will have on our consolidated financial statements.
In October 2016, the FASB issued new guidance which is intended to eliminate diversity in practice and provide a more accurate depiction of the tax consequences on intercompany asset transfers (excluding inventory). The new guidance removes the current prohibition against immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The new standard is effective for us in our first quarter of fiscal 2019 and requires a modified retrospective method of adoption. Early adoption is permitted, but only in the first quarter of an entity’s annual fiscal year. We are evaluating the effect that this new standard will have on our consolidated financial statements.
In August 2016, the FASB issued new guidance which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The new standard is effective for us in our first quarter of fiscal 2019 and

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

early adoption is permitted. We are evaluating the effect that this new standard will have on our consolidated financial statements.
With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended March 31, 2017, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for fiscal 2016, that are of significance or potential significance to us, other than the following update:
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 new guidance, ASC 606, Revenue from Contracts with Customers, or ASC 606, 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. In August 2015, the FASB deferred the effective date of this guidance by one year; however, early adoption is permitted. The updated standard will be effective for us in the first quarter of our fiscal year ending June 30, 2019. We are in the process of selecting a transition method and determining the effect that this new standard will have on our consolidated financial statements and related disclosures.
We currently anticipate early adoption of ASC 606 effective July 1, 2017. Our ability to early adopt is dependent, in part, on the completion of our analysis of information necessary to restate prior period financial statements or adjust retained earnings, depending on the transition method we select. While we are in the process of selecting a transition method, we anticipate this standard will have a material impact on our consolidated financial statements. Even though our assessment of the impact of this standard is not complete, we currently believe the most significant impact will be to the recognition of revenue for certain of our automotive value-added and combined offerings, such as on-board navigation with map updates. We anticipate our revenue recognition for certain value-added offerings may change and we may no longer recognize revenue associated with certain software-related elements over the life of our contractual obligations.
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 and restricted stock units using the treasury-stock method.
The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share amounts):
 
 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
2017
 
2016
 
2017
 
2016
Net loss
 
$
(13,694
)
 
$
(9,838
)
 
$
(34,452
)
 
$
(27,323
)
Weighted average common shares used in computing net loss per share, basic and diluted
 
43,528

 
42,047

 
43,189

 
41,226

Net loss per share, basic and diluted
 
$
(0.31
)
 
$
(0.23
)
 
$
(0.80
)
 
$
(0.66
)

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
March 31,
 
Nine Months Ended
March 31,
 
 
2017
 
2016
 
2017
 
2016
Stock options
 
5,982

 
5,492

 
5,982

 
5,492

Restricted stock units
 
3,088

 
3,640

 
3,088

 
3,640

Total
 
9,070

 
9,132

 
9,070

 
9,132


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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. Short-term investments are classified as current assets, even though maturities may extend beyond one year, because they represent investments of cash available for operations. 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, 2017 and 2016.
Cash, cash equivalents and short-term investments consisted of the following as of March 31, 2017 (in thousands):
 
Description
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Cash
 
$
16,355

 
$

 
$

 
$
16,355

Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
3,160

 

 

 
3,160

Commercial paper
 
1,248

 

 

 
1,248

Total cash equivalents
 
4,408

 

 

 
4,408

Total cash and cash equivalents
 
20,763

 

 

 
20,763

Short-term investments:
 
 
 
 
 
 
 
 
U.S. treasury securities
 
991

 

 
(2
)
 
989

U.S. agency securities
 
1,932

 

 
(15
)
 
1,917

Asset-backed securities
 
8,002

 
10

 
(9
)
 
8,003

Municipal securities
 
11,541

 
5

 
(1
)
 
11,545

Commercial paper
 
749

 

 

 
749

Foreign government securities
 
750

 

 
(1
)
 
749

Corporate bonds
 
52,517

 
26

 
(127
)
 
52,416

Total short-term investments
 
76,482

 
41

 
(155
)
 
76,368

Cash, cash equivalents and short-term investments
 
$
97,245

 
$
41

 
$
(155
)
 
$
97,131


Cash, cash equivalents and short-term investments consisted of the following as of June 30, 2016 (in thousands):
 
Description
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Cash
 
$
14,308

 
$

 
$

 
$
14,308

Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
5,641

 

 

 
5,641

U.S. agency securities
 
1,400

 

 

 
1,400

Total cash equivalents
 
7,041

 

 

 
7,041

Total cash and cash equivalents
 
21,349

 

 

 
21,349

Short-term investments:
 
 
 
 
 
 
 
 
U.S. treasury securities
 
1,699

 
3

 

 
1,702

U.S. agency securities
 
5,907

 
22

 

 
5,929

Asset-backed securities
 
10,160

 
17

 
(2
)
 
10,175

Municipal securities
 
6,004

 
14

 

 
6,018

Commercial paper
 
3,494

 
1

 

 
3,495

Corporate bonds
 
60,754

 
217

 
(13
)
 
60,958

Total short-term investments
 
88,018

 
274

 
(15
)
 
88,277

Cash, cash equivalents and short-term investments
 
$
109,367

 
$
274

 
$
(15
)
 
$
109,626


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, 2017 (in thousands):
 
 
 
Amortized
Cost
 
Estimated
Fair Value
Due within one year
 
$
36,515

 
$
36,514

Due between one and two years
 
25,672

 
25,645

Due between two and three years
 
14,295

 
14,209

Total
 
$
76,482

 
$
76,368


Declines in fair value judged to be other-than-temporary on securities available for sale are included as a component of other income (expense), 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, 2017, 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 utilize 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.
All of our cash equivalents and short-term investments are classified within Level 1 or Level 2. As of March 31, 2017 and June 30, 2016, we did not have any investments that require Level 3 valuations. The fair values of these financial instruments were determined using the following inputs at March 31, 2017 (in thousands):

9

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


 
 
 
Fair Value Measurements at March 31, 2017 Using
 
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
$
3,160

 
$
3,160

 
$

 
$

Commercial paper
 
1,248

 

 
1,248

 

Total cash equivalents
 
4,408

 
3,160

 
1,248

 

Short-term investments:
 
 
 
 
 
 
 
 
U.S. treasury securities
 
989

 
989

 

 

U.S. agency securities
 
1,917

 

 
1,917

 

Asset-backed securities
 
8,003

 

 
8,003

 

Municipal securities
 
11,545

 

 
11,545

 

Commercial paper
 
749

 

 
749

 

Foreign government securities
 
749

 

 
749

 

Corporate bonds
 
52,416

 

 
52,416

 

Total short-term investments
 
76,368

 
989

 
75,379

 

Cash equivalents and short-term investments
 
$
80,776

 
$
4,149

 
$
76,627

 
$

The fair values of our financial instruments were determined using the following inputs at June 30, 2016 (in thousands):
 
 
 
Fair Value Measurements at June 30, 2016 Using
 
 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
Description
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market mutual funds
 
$
5,641

 
$
5,641

 
$

 
$

U.S. agency securities
 
1,400

 

 
1,400

 

Total cash equivalents
 
7,041

 
5,641

 
1,400

 

Short-term investments:
 
 
 
 
 
 
 
 
U.S. treasury securities
 
1,702

 
1,702

 

 

U.S. agency securities
 
5,929

 

 
5,929

 

Asset-backed securities
 
10,175

 

 
10,175

 

Municipal securities
 
6,018

 

 
6,018

 

Commercial paper
 
3,495

 

 
3,495

 

Corporate bonds
 
60,958

 

 
60,958

 

Total short-term investments
 
88,277

 
1,702

 
86,575

 

Cash equivalents and short-term investments
 
$
95,318

 
$
7,343

 
$
87,975

 
$

Amortization of net premium on short-term investments totaled $326,000 and $523,000 in the nine months ended March 31, 2017 and 2016, respectively.
There were no transfers between Level 1 and Level 2 financial instruments in the nine months ended March 31, 2017 and 2016, respectively.

10

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

We did not have any financial liabilities measured at fair value on a recurring basis as of March 31, 2017 or June 30, 2016.
5.
Balance sheet information
Goodwill and intangible assets, net
Goodwill as of March 31, 2017 and June 30, 2016 was $31.3 million.
Intangible assets consisted of the following (in thousands):
 
 
March 31,
2017
 
June 30,
2016
Acquired developed technology
 
$
13,875

 
$
13,875

Less accumulated amortization
 
(9,986
)
 
(9,210
)
Intangible assets, net
 
$
3,889

 
$
4,665

Acquired developed technology is amortized on a straight-line basis over the expected useful life. Amortization expense related to intangibles was $258,000 and $307,000 for the three months ended March 31, 2017 and 2016, respectively, and $776,000 and $1.3 million for the nine months ended March 31, 2017 and 2016, respectively.
As of March 31, 2017, remaining amortization expense for intangible assets by fiscal year is as follows: $255,000 in fiscal 2017, $1.0 million in fiscal 2018, $1.0 million in fiscal 2019, $1.0 million in fiscal 2020 and $592,000 in fiscal 2021.
Accrued expenses
Accrued expenses consisted of the following (in thousands):
 
 
March 31,
2017
 
June 30,
2016
Accrued compensation and benefits
 
$
8,478

 
$
9,308

Accrued royalties
 
17,854

 
15,331

Accrued legal settlement and contingencies
 

 
1,576

Other accrued expenses
 
8,981

 
10,059

 
 
$
35,313

 
$
36,274

6.
Commitments and contingencies
Operating lease and purchase obligations
As of March 31, 2017, 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 2017
 
Fiscal 2018
 
Fiscal 2019
 
Fiscal 2020
 
Fiscal 2021
 
Thereafter
Operating lease obligations
 
$
12,636

 
$
858

 
$
3,778

 
$
3,433

 
$
2,161

 
$
1,808

 
$
598

Purchase obligations
 
5,655

 
993

 
2,415

 
934

 
590

 
207

 
516

Total contractual obligations
 
$
18,291

 
$
1,851

 
$
6,193

 
$
4,367

 
$
2,751

 
$
2,015

 
$
1,114

Joint venture investment commitment
In September 2015, we entered into an agreement with Ningbo Huazhong Holdings Company Limited, or Huazhong, a subsidiary of a publicly traded automotive original equipment manufacturer, or OEM, supplier in China, whereby we and Huazhong agreed to form a joint venture limited liability company in China for the development, manufacture and sale of connected navigation systems for the China automotive aftermarket and local OEMs. We did not make any capital

11

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

contributions to the joint venture, and the joint venture was not formed. On January 31, 2017, we and Huazhong agreed not to form or fund the joint venture and the agreement with Huazhong was terminated.
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. 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 tendered the defense of the litigation to us and we defended the case on behalf of AT&T. During fiscal 2016, we accrued $850,000 related to this litigation. On January 12, 2017, we entered into a settlement and license agreement with Vehicle IP. In connection with the agreement, we made a one-time payment of $8.0 million and recorded $7.2 million of this amount as legal settlement and contingencies expense in our consolidated statement of operations in the nine months ended March 31, 2017. On January 31, 2017, Vehicle IP's claims against Telenav and AT&T were dismissed. We are not obligated to make any future payments with respect to the settlement or license. We also will have no further obligation to indemnify AT&T with respect to the case.
On July 28, 2016, Nathan Gergetz filed a putative class action complaint in the U.S. District Court for the Northern District of California, alleging that Telenav violated the Telephone Consumer Protection Act, or TCPA. The complaint purports to be filed on behalf of a class, and it alleges that Telenav caused unsolicited text messages to be sent to the plaintiff from July 6, 2016 to July 26, 2016. Plaintiffs seek statutory and actual damages under the TCPA law, attorneys’ fees and costs of the action, and an injunction to prevent any future violations. Telenav moved to dismiss the complaint on November 21, 2016. On April 7, 2017, the Court entered a 90 day stay in the case at the parties' request. Trial is currently scheduled for January 2020. Due to the preliminary nature of this matter and uncertainties relating to litigation, we are unable at this time to estimate the effects of this lawsuit 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 requested that we indemnify them in connection with such cases.
In 2008, Alltel Communications LLC, or Alltel, AT&T, Sprint Corporation, or 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 U.S. Patent and Trademark Office, or 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. In January 2017 we resolved this indemnification dispute with AT&T. We do not anticipate any additional liability from this matter.
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; however, Telenav and AT&T disagreed as to whether any additional amounts were owed to AT&T for legal fees and expenses related to the defense of the matter. In January 2017 we resolved this indemnification dispute with AT&T. We do not anticipate any additional liability from this matter.

12

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

In connection with our resolution of certain indemnification disputes with AT&T in January 2017, we reversed a total accrued liability of $726,000 previously expensed for these and other contingencies.
7.
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.
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.
8.
Stock-based compensation
Under our 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 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, 2016
 
5,370

 
$
6.80

 
 
 
 
Granted
 
1,345

 
$
5.31

 
 
 
 
Exercised
 
(370
)
 
$
6.36

 
 
 
 
Canceled
 
(363
)
 
$
6.58

 
 
 
 
Options outstanding as of March 31, 2017
 
5,982

 
$
6.51

 
6.69
 
$
13,556

As of March 31, 2017:
 
 
 
 
 
 
 
 
Options vested and expected to vest
 
5,543

 
$
6.55

 
6.51
 
$
12,364

Options exercisable
 
3,218

 
$
6.84

 
5.15
 
$
6,537

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, 2016
 
3,302

 
 
 
 
Granted
 
1,232

 
 
 
 
Vested
 
(1,012
)
 
 
 
 
Canceled
 
(434
)
 
 
 
 
RSUs outstanding as of March 31, 2017
 
3,088

 
1.43
 
$
26,709

As of March 31, 2017:
 
 
 
 
 
 
RSUs expected to vest
 
2,590

 
1.31
 
$
22,402


13

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



During the nine months ended March 31, 2017, pursuant to the annual increase provisions of our 2009 Equity Incentive Plan, the number of shares available for grant under this plan increased by 1,666,666 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, 2016
 
1,719

Additional shares authorized
 
1,667

Granted
 
(2,577
)
RSUs withheld for taxes in net share settlements
 
355

Canceled
 
591

Shares available for grant as of March 31, 2017
 
1,755

The following table summarizes the stock-based compensation expense recorded for stock options and RSUs issued to employees and nonemployees (in thousands):
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31,
 
March 31,
 
 
2017
 
2016
 
2017
 
2016
Stock option awards
 
$
555

 
$
518

 
$
1,582

 
$
1,369

RSU awards
 
2,070

 
2,102

 
5,572

 
7,518

Total stock-based compensation expense
 
$
2,625

 
$
2,620

 
$
7,154

 
$
8,887

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,
 
 
2017
 
2016
 
2017
 
2016
Expected volatility
 
46
%
 
43
%
 
39
%
 
47
%
Expected term (in years)
 
5.35

 
4.58

 
4.25

 
4.53

Risk-free interest rate
 
1.89
%
 
1.23
%
 
1.28
%
 
1.35
%
Dividend yield
 
%
 
%
 
%
 
%

Performance-based RSUs
We established a 2015 Performance Share Program under our 2009 Equity Incentive Plan, under which RSUs and/or cash bonuses may be earned based on the achievement of specified performance conditions measured over periods ranging from approximately 15 to 21 months. Holders of performance-based awards generally have the ability to receive 0% to 100% of the target number of RSUs or cash bonus originally granted. The expense associated with performance-based RSU grants is recorded when the performance condition is determined to be probable. Fully vested restricted stock units and/or cash bonuses will be awarded upon management’s certification of the level of achievement.
We previously granted 106,000 performance-based RSUs under the 2015 Program, of which no RSUs had been earned and 36,000 RSUs had been canceled. As of December 31, 2016, the remaining 70,000 RSUs were canceled as the performance conditions were not met. The cancellation of these RSUs resulted in a credit to stock-compensation expense of $546,000 during the three months ended December 31, 2016, which is reflected in our results of operations for the nine months ended March 31, 2017.

14

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

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 provision (benefit) for income taxes was $805,000 in the nine months ended March 31, 2017 compared to $429,000 in the nine months ended March 31, 2016. In July 2016, the state of New York completed its audit of our income tax returns for fiscal 2010 through fiscal 2012. We paid $442,000 to settle the audit and recorded a tax benefit of $1.0 million in July 2016 to reverse the remaining related tax reserves. Our provision from income taxes of $805,000 for the nine months ended March 31, 2017 was comprised primarily of foreign withholding taxes on revenue generated in China and foreign taxes, partially offset by the aforementioned $1.0 million reversal of tax reserves. Our effective tax rate of 2% and 2% for the nine months ended March 31, 2017 and 2016, respectively, was less than the tax amount computed at the U.S. federal statutory income tax rate due primarily to losses for which no benefit will be recognized since they are not more likely than not to be realized due to the lack of current and future income and the inability to carryback losses within the two year carryback period.
We record liabilities related to unrecognized tax benefits in accordance with authoritative guidance on accounting for uncertain tax positions. As of March 31, 2017 and June 30, 2016, our cumulative unrecognized tax benefits were $6.2 million and $6.7 million, respectively. Included in the balance of unrecognized tax benefits at March 31, 2017 and June 30, 2016 was $420,000 and $1.6 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 accrued $261,000 and $570,000 for the payment of interest and penalties at March 31, 2017 and June 30, 2016, 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 filing obligations. The statute of limitations remains open for fiscal 2012 through fiscal 2016 in the U.S., for fiscal 2012 through fiscal 2016 in state jurisdictions, and for fiscal 2011 through fiscal 2016 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.
Due to operating losses in previous years and continued earnings volatility, we maintain a valuation allowance on the majority of our deferred tax assets. Our valuation allowance at June 30, 2016 was $29.8 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.
10.
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 chief executive officer, or CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments. In addition, with the exception of accounts receivable and goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments.

We report results in three business segments:

Automotive - Our automotive segment provides our automotive and mobile navigation platform to vehicle manufacturers and original equipment manufacturers, or OEMs, for distribution with their vehicles. We provide both embedded, or on-board, and mobile phone-based wireless connectivity, or brought-in, navigation solutions, as well as integrated on-board and connected navigation solutions. Our on-board solutions consist of software, map and point of interest, or POI, data loaded in the vehicle that provides voice-guided turn by turn navigation displayed on the vehicle screen. These solutions are often enhanced with connected services which leverage our cloud to provide real-time traffic, online search and map updates. Our brought-in connected solutions enable a mobile device that is paired with the vehicle to activate in-vehicle and voice-guided turn by turn navigation.

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.


15

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

Mobile Navigation - Our mobile navigation segment provides our mobile 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 segment results for the three and nine months ended March 31, 2017 and 2016 were as follows (dollars in thousands):

 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
2017
 
2016
 
2017
 
2016
Revenue
 
 
 
 
 
 
 
 
Automotive
 
$
25,476

 
$
34,717

 
$
94,487

 
$
98,306

Advertising
 
5,284

 
5,156

 
20,037

 
16,695

Mobile Navigation
 
4,305

 
6,405

 
14,769

 
20,591

Total revenue
 
35,065

 
46,278

 
129,293

 
135,592

Cost of revenue
 
 
 
 
 
 
 
 
Automotive
 
14,112

 
21,495

 
56,095

 
58,947

Advertising
 
2,224

 
2,788

 
9,669

 
9,538

Mobile Navigation
 
1,331

 
1,823

 
4,106

 
5,540

Total cost of revenue
 
17,667

 
26,106

 
69,870

 
74,025

Gross profit
 
 
 
 
 
 
 
 
Automotive
 
11,364

 
13,222

 
38,392

 
39,359

Advertising
 
3,060

 
2,368

 
10,368

 
7,157

Mobile Navigation
 
2,974

 
4,582

 
10,663

 
15,051

Total gross profit
 
$
17,398

 
$
20,172

 
$
59,423

 
$
61,567

Gross margin
 
 
 
 
 
 
 
 
Automotive
 
45
%
 
38
%
 
41
%
 
40
%
Advertising
 
58
%
 
46
%
 
52
%
 
43
%
Mobile Navigation
 
69
%
 
72
%
 
72
%
 
73
%
Total gross margin
 
50
%
 
44
%
 
46
%
 
45
%





16

Table of Contents

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, accounting for and future sources of revenue, expectations regarding 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 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, 2016 as “fiscal 2016" and the fiscal year ending June 30, 2017 as "fiscal 2017.”
Overview

Telenav is a leading provider of connected car and location-based platform products and services using our automotive and mobile navigation platform and our advertising delivery platform. Our automotive and mobile navigation platform allows us to deliver enhanced location-based services to auto manufacturers, developers and end users through various distribution channels. Our advertising delivery platform delivers highly targeted advertising services leveraging our location expertise. We operate in three segments: automotive, advertising and mobile navigation.
We derive revenue primarily from automobile manufacturers and OEMs and advertisers and advertising agencies. We receive revenue from automobile manufacturers whose vehicles contain our proprietary software and are able to access our personalized navigation services. These manufacturers generally do not provide us with any volume or revenue guarantees. In addition, we have a growing business in mobile advertising where our customers are primarily advertising agencies, which represent national and regional brands, and channel partners, which work closely with local and small business advertisers. We also derive a declining portion of revenue from our partnerships with wireless carriers, who pay us to enable their subscribers to use our mobile navigation services.
For our automotive segment customers, we offer our automotive and mobile navigation platform products and services to vehicle manufacturers and original equipment manufacturers, or OEMs, for distribution with their vehicles. We believe our history as a supplier of cloud-based navigation services provides a unique advantage in the automotive navigation marketplace over our competitors.
Our primary automotive customer to date, Ford Motor Company and affiliated entities, or Ford, currently distributes our embedded, or on-board, product as a standard or optional feature with its models. Our automotive products are now included in Ford models manufactured and sold in North America, Europe and China, as well as distributed in models sold in South America, Australia and New Zealand. Ford Australia and New Zealand also offers a map update program under which Ford owners with SYNC® 2 or SYNC® 3 in Australia and New Zealand are eligible to receive annual map updates at no additional cost through the contractual period. In the three months ended March 31, 2017, we also entered into an agreement with Ford to provide annual map updates to Ford SYNC 3 customers in Europe. See "Recent Developments - Ford Map Updates."
We have agreements with General Motors Holdings and its affiliates, or GM, which include our mobile phone-based wireless connectivity, or brought-in, services for GM's vehicles as well as integration of our on-board and connected navigation solutions in its vehicles. Our brought-in services for GM vehicles include GM's OnStar RemoteLink® and associated branded

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mobile applications powered by our location-based services platform, which includes mapping and one-box search. GM recently added new branding to the provisioning of this service which included MyBuick, MyCadillac, MyChevrolet and MyGMC, or the MyBrand applications. GM also offers a localized version of its OnStar RemoteLink in Europe for GM's Opel and Vauxhall brands. We anticipate this agreement will include model years 2018 to 2023. GM recently announced the sale of its Open and Vauxhall brands to PSA group.
In November 2016, we were selected to provide entry level on-board navigation through LG Electronics, Inc., or LG, a Tier 1 supplier for GM's select line of vehicles, for the European market launching in the next few months. We anticipate this agreement will include model years 2018 to 2022.
In February 2017, GM launched its first model featuring integration of our on-board and connected navigation solution, the 2017 Cadillac CTS and CTS-V. Due to additional delivery obligations in connection with the model year 2017 launch, we do not expect to recognize any revenue from GM on-board and connected navigation solutions in fiscal 2017, although we do expect an increase in deferred revenue. Our on-board and connected navigation solution is scheduled to become available in additional regions and GM models for model year 2018. We anticipate this agreement will include model years 2018 to 2019. See "Recent Developments - General Motors Extension."
We have a partnership with Toyota Motor Corporation, or Toyota, for brought-in navigation services where our Scout® GPS Link mobile application is available in Entune™ Audio Plus equipped Toyota vehicles in the United States. In August 2016, we and the Lexus division of Toyota announced that Lexus will begin offering Scout GPS Link in certain of its Lexus models equipped with Lexus Display Audio multimedia, and in September 2016, Lexus began shipping vehicles enabled to connect with our Scout GPS Link mobile application. In January 2017, Telenav and Xevo Inc. announced that Scout GPS Link and Xevo Engine Link were chosen to provide brought-in navigation services, including a fully interactive moving map, for select model year 2018 Toyota vehicles equipped with Entune 3.0, as well as certain Lexus vehicles. We do not expect shipments to commence until fiscal 2018. We anticipate this agreement will include model years 2018 to 2023.
For our advertising segment customers, we believe our advertising delivery platform offers 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 believe we 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 advertising exchanges using programmatic real-time bidding, or RTB, tools.
We generate automotive 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. Ford pays us a royalty fee on SYNC 2 on-board solutions as the software is imaged onto an SD card and shipped for installation in vehicles and pays us a royalty fee on SYNC 3 on-board solutions as our software is installed in the vehicle.
In addition, we earn a royalty for each new vehicle owner who downloads the GM OnStar RemoteLink or associated application, whereby we provide enhanced search capabilities for contracted service periods. For our on-board and connected solutions, GM pays us a royalty fee as the software is imaged onto an SD card and shipped for installation in vehicles; this royalty includes a fee for the initial connected service to be provided once the vehicle is sold. GM will pay us an additional fee for connected solution subscriptions for each end user that elects to renew their OnStar Connected Navigation subscription with GM.
We also earn a royalty for each new Toyota and Lexus vehicle sold and enabled to connect with our Scout GPS Link mobile application, similarly provided over a contracted service period.
We generate advertising revenue from the delivery of display advertising impressions based on the specific terms of the advertising contract.
We also generate a declining portion of our revenue from subscriptions to certain of our mobile navigation services. 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.

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Recent Developments

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.  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 tendered the defense of the litigation to us and we defended the case on behalf of AT&T. During fiscal 2016, we accrued $850,000 related to this litigation. On January 12, 2017, we entered into a settlement and license agreement with Vehicle IP. In connection with the agreement, Telenav made a one-time payment of $8.0 million and we recorded $7.2 million of this amount as legal settlement and contingencies expense in our consolidated statement of operations in the three months ended December 31, 2016, which is reflected in our results of operations for the nine months ended March 31, 2017. On January 31, 2017, Vehicle IP's claims against Telenav and AT&T were dismissed. We are not obligated to make any future payments with respect to the settlement or license. We also will have no further obligation to indemnify AT&T with respect to the case.
Our legal settlement and contingencies expense for the nine months ended March 31, 2017 also reflects the reversal of an accrued liability of $0.7 million previously expensed related to other ongoing indemnification matters, which were also resolved in January 2017.

Ford Map Updates

We and Ford entered into an agreement to provide our map update solution in conjunction with our on-board navigation product for the Europe region, similar to Ford's offering in Australia and New Zealand, commencing in the three months ended March 31, 2017. Under this agreement, we agreed to provide map updates to Ford for distribution to its SYNC 3 navigation customers in Europe, which will increase our royalty amount per unit going forward. However, because map updates are provided over a contractual period, certain revenue related to the on-board navigation product, which we had been recognizing upon delivery, is now recognized over time along with the new map updates.
Offering map updates in Europe resulted in a substantial decline in our revenue under current U.S. generally accepted accounting principles, or GAAP, and a substantial increase in our deferred revenue and deferred cost balances for the three months ended March 31, 2017. We anticipate early adoption of the Financial Accounting Standard Board's, or FASB's, new accounting standard, ASC 606, Revenue from Contracts with Customers, effective July 1, 2017. With the adoption of ASC 606, we believe that our revenue recognition for certain value-added and combined offerings, such as on-board navigation with map updates, may change and we may no longer recognize revenue associated with certain software-related elements over the life of our contractual obligations. Our ability to early adopt is dependent, in part, on the completion of our analysis of information necessary to restate prior period financial statements or adjust retained earnings, depending on the transition method we select. While we are in the process of selecting a transition method, we anticipate this standard will have a material impact on our consolidated financial statements.
As a result of offering map updates in Europe in conjunction with our on-board navigation product, during the three months ended March 31, 2017 we began to experience the effects noted below as compared to the three months ended March 31, 2016 as described further in “ - Results of operations.” For the three months ending June 30, 2017 we anticipate the following continued effects as compared to the three months ended June 30, 2016:
Revenue is expected to decline substantially as certain revenue that we have been recognizing upon product delivery will now be recognized over the contractual period during which we provide map updates;
Gross profit is also expected to decline in conjunction with the decline in revenue;
Gross margin is expected to increase, as the royalties earned on on-board navigation solutions for the Europe region that were recognized upon delivery in previous periods and carry a higher relative map cost and lower gross margin will now be deferred and recognized over the contractual period. This increase in gross margin will be partially offset by declining mobile navigation revenue that carries a higher relative gross margin;
Net loss is expected to increase due to the decrease in revenue recognized;
Deferred revenue and deferred costs are expected to increase as we invoice and defer revenue related to the map updates offering in Europe; and
Adjusted EBITDA, a non-GAAP metric, is expected to decrease as our loss increases.

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General Motors Extension

In May 2017, GM extended its partnership with Telenav to provide GM's next generation on-board and connected navigation solution on select cars for model years 2020 to 2025.

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 such as billings, non-GAAP gross profit on billings, non-GAAP gross margin on billings, changes in deferred revenue and deferred costs, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, adjusted EBITDA on billings and free cash flow are not measures calculated in accordance with 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.
We have previously provided billings metrics, and beginning with the three months ended December 31, 2016 we began providing three new metrics: non-GAAP gross profit on billings, non-GAAP gross margin on billings and adjusted EBITDA on billings. We anticipate providing non-GAAP gross profit on billings, non-GAAP gross margin on billings and adjusted EBITDA on billings for at least the next quarter to assist investors in evaluating the financial performance of our business. Once we adopt ASC 606, we do not expect that we will continue to provide the metrics non-GAAP gross profit on billings, non-GAAP gross margin on billings and adjusted EBITDA on billings. See "Recent Developments - Ford Map Updates."
Our key operating and financial performance metrics are as follows (in thousands, except percentages and per share amounts):

 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
2017
 
2016
 
2017
 
2016
Revenue
 
$
35,065

 
$
46,278

 
$
129,293

 
$
135,592

Billings (Non-GAAP)
 
$
60,152

 
$
53,134

 
$
167,108

 
$
149,471

 
 
 
 
 
 
 
 
 
Increase in deferred revenue
 
$
25,087

 
$
6,856

 
$
37,815

 
$
13,879

Increase in deferred costs
 
$
17,436

 
$
2,974

 
$
24,140

 
$
7,276

 
 
 
 
 
 
 
 
 
Gross profit
 
$
17,398

 
$
20,172

 
$
59,423

 
$
61,567

Non-GAAP gross profit on billings
 
$
25,049

 
$
24,054

 
$
73,098

 
$
68,170

 
 
 
 
 
 
 
 
 
Gross margin
 
50
%
 
44
%
 
46
%
 
45
%
Non-GAAP gross margin on billings
 
42
%
 
45
%
 
44
%
 
46
%
 
 
 
 
 
 
 
 
 
Net loss
 
$
(13,694
)
 
$
(9,838
)
 
$
(34,452
)
 
$
(27,323
)
Diluted net loss per share
 
$
(0.31
)
 
$
(0.23
)
 
$
(0.80
)
 
$
(0.66
)
 
 
 
 
 
 
 
 
 
Adjusted EBITDA (Non-GAAP)
 
$
(9,922
)
 
$
(6,353
)
 
$
(19,335
)
 
$
(16,887
)
Adjusted EBITDA on billings (Non-GAAP)
 
$
(2,271
)
 
$
(2,471
)
 
$
(5,660
)
 
$
(10,284
)
Free cash flow (Non-GAAP)
 
$
(8,355
)
 
$
(1,994
)
 
$
(11,785
)
 
$
(8,988
)

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.
Billings measure revenue recognized plus the change in deferred revenue from the beginning to the end of the period. Non-GAAP gross profit on billings reflects GAAP gross profit plus change in deferred revenue less change in deferred costs. Non-GAAP gross margin on billings reflects non-GAAP gross profit on billings divided by billings. We have also provided a breakdown of the calculation of the change in deferred revenue by segment, which is added to revenue in calculating our non-

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GAAP metric of billings. In connection with our presentation of the change in deferred revenue, we have provided a similar presentation of the change in the related deferred costs. Such deferred costs primarily include costs associated with third party content and certain development costs associated with our customized software solutions. As deferred revenue and deferred costs become larger components of our operating results, we believe these metrics are useful in evaluating cash flow.
We consider billings, non-GAAP gross profit on billings and non-GAAP gross margin on billings to be useful metrics for management and investors because billings drive deferred revenue, which is an important indicator of the viability of our business. We believe non-GAAP gross profit on billings and non-GAAP gross margin on billings are useful metrics because they reflect the impact of the gross profit to be earned over time for such billings, exclusive of the incremental costs incurred to deliver any related service obligations. There are a number of limitations related to the use of billings and non-GAAP gross profit on billings versus revenue and gross profit calculated in accordance with GAAP. First, billings and non-GAAP gross profit on billings include amounts that have not yet been recognized as revenue or cost and may require additional services to be provided over contracted service periods. For example, billings related to certain connected solutions cannot be fully recognized as revenue in a given period due to requirements for ongoing provisioning of services such as hosting, monitoring and customer support. Similarly, there may be timing differences between when billings occur for customized software and when the related costs are incurred to develop that customized software. Accordingly, non-GAAP gross profit on billings does not include all costs associated with billings. Second, we may calculate billings, non-GAAP gross profit on billings and non-GAAP gross margin on billings in a manner that is different from peer companies that report similar financial measures, making comparisons between companies more difficult. When we use these measures, we attempt to compensate for these limitations by providing specific information regarding billings, non-GAAP gross profit on billings and non-GAAP gross margin on billings and how they relate to revenue and gross profit calculated in accordance with GAAP.
Adjusted EBITDA measures our GAAP net loss excluding the impact of stock-based compensation expense, depreciation and amortization, other income (expense), provision (benefit) for income taxes, and other applicable items such as legal settlements and contingencies, restructuring accruals and reversals, and deferred rent reversals due to lease termination, net of tax. Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants. Legal settlements and contingencies represent settlements and offers made to settle patent litigation cases in which we are defendants and royalty disputes. Deferred rent reversals represent the reversal of our deferred rent liability that is no longer required due to our Sunnyvale facility lease termination in fiscal 2016. Adjusted EBITDA, while generally a measure of profitability, can also represent a loss.
Adjusted EBITDA is a key measure 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 adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. In addition, adjusted EBITDA is a key financial measure 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 adjusted EBITDA generally provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. However, for at least the next quarter we do not believe Adjusted EBITDA will be a meaningful metric due to the significant revenue recognition impact of the Ford map update offering in Europe. See "Recent Developments - Ford Map Updates" for further discussion.
Adjusted EBITDA on billings measures adjusted EBITDA plus the effect of changes in deferred revenue and deferred costs. We believe adjusted EBITDA on billings is a useful measure, especially in light of the significant impact we expect on reported GAAP revenue for certain value-added offerings we provide our customers, including Ford map updates. Adjusted EBITDA and adjusted EBITDA on billings, while generally measures of profitability, can also represent losses.
Free cash flow is a non-GAAP financial measure we define as net cash provided by (used in) operating activities less purchases of property and equipment. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash (used) generated by our business after the purchases of property and equipment.
We determined that it would be meaningful to investors to develop a breakout of the operating results of our advertising business beyond the current GAAP segment reporting of revenue, cost of revenue and gross margin, and we are including such presentation in our non-GAAP reporting results.  This presentation reflects operating expenses that are directly attributable to the advertising business. We are unable to provide a similar breakout of operating results for the automotive and mobile navigation businesses beyond the current GAAP segment reporting of revenue, cost of revenue and gross margin because these segments share many of the same technologies and resources and as such, comprise operating expenses which are not fully attributable to one segment versus the other.   In addition, the reported non-GAAP operating results for the advertising business

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only include an allocation of certain shared corporate general and administrative costs that directly benefit the business, such as accounting and human resource services.
These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for our financial results as reported under GAAP. Some of these limitations are:
We expect to incur additional costs in the future due to requirements to provide ongoing provisioning of services such as hosting, monitoring and customer support, or customized software development; accordingly, non-GAAP gross profit on billings, non-GAAP gross margin on billings and adjusted EBITDA on billings do not reflect all costs associated with billings;
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;
adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;
adjusted EBITDA does 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
adjusted EBITDA, free cash flow or similarly titled measures may be calculated by other companies differently, which reduces their usefulness as comparative measures.
Because of these and other limitations, you should consider billings, gross profit on billings, gross margin on billings, adjusted EBITDA, adjusted EBITDA on billings and free cash flow alongside other GAAP-based financial performance measures.
We reconcile the most directly comparable GAAP financial measure to each non-GAAP financial metric used. The following tables present reconciliations of revenue to billings, gross profit to non-GAAP gross profit on billings, non-GAAP gross margin on billings, deferred revenue to the change in deferred revenue, deferred costs to the change in deferred costs, net loss to adjusted EBITDA and net loss to free cash flow for each of the periods indicated (dollars in thousands):
Reconciliation of Revenue to Billings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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,
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Revenue
 
$
25,476

 
$
34,717

 
$
5,284

 
$
5,156

 
$
4,305

 
$
6,405

 
$
35,065

 
$
46,278

Adjustments:
   Change in deferred revenue
 
25,123

 
6,992

 

 

 
(36
)
 
(136
)
 
25,087

 
6,856

Billings
 
$
50,599

 
$
41,709

 
$
5,284

 
$
5,156

 
$
4,269

 
$
6,269

 
$
60,152

 
$
53,134

 
 
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,
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Revenue
 
$
94,487

 
$
98,306

 
$
20,037

 
$
16,695

 
$
14,769

 
$
20,591

 
$
129,293

 
$
135,592

Adjustments:
   Change in deferred revenue
 
37,930

 
14,243

 

 

 
(115
)
 
(364
)
 
37,815

 
13,879

Billings
 
$
132,417

 
$
112,549

 
$
20,037

 
$
16,695

 
$
14,654

 
$
20,227

 
$
167,108

 
$
149,471

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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Reconciliation of Gross Profit to Gross Profit on Billings