Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 3, 2018
TELENAV, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
001-34720
(Commission File Number)
77-0521800
(I.R.S. Employer Identification No.)

4655 Great America Parkway, Suite 300
Santa Clara, California 95054
(Address of principal executive offices) (Zip code)
(408) 245-3800
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ☐




Item 2.02. Results of Operations and Financial Condition

On May 3, 2018, Telenav, Inc. (the “Company”) issued a press release announcing its financial results for the three months ended March 31, 2018 and an investor letter regarding the results of the quarter ended March 31, 2018. Copies of the press release and investor letter are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference. On the same day, the Company will host an investor conference call and live webcast at 2:30 p.m. Pacific Time (5:30 p.m. Eastern Time).
The information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
The Company is making reference to non-GAAP financial information in the press release, investor letter and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release, investor letter and the financial tables attached to each.


Item 9.01    Financial Statements and Exhibits.
(d)    Exhibits
Exhibit Number
Description
 
 
99.1
99.2








EXHIBIT INDEX



Exhibit Number
Description
99.1
Press release of Telenav, Inc. dated May 3, 2018
99.2
Investor letter of Telenav, Inc. dated May 3, 2018








SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
TELENAV, INC.
 
 
 
 
Date: May 3, 2018
By:    /s/ Michael Strambi
 
Name:    Michael Strambi
 
Title:     Chief Financial Officer
 
 


Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12228639&doc=4


Telenav Reports Third Quarter Fiscal 2018 Financial Results
SANTA CLARA, Calif., May 3, 2018 -- Telenav®, Inc. (NASDAQ:TNAV), a leading provider of connected car and location-based platform services, today released its financial results for the third fiscal quarter ended March 31, 2018 by issuing this press release and posting a letter to stockholders on the quarter on its website. Please visit Telenav’s investor relations website at http://investor.telenav.com to view the Q3 fiscal year 2018 financial results and letter to stockholders.
“We are pleased to deliver a record number of Telenav enabled cars to the market during the quarter,” said HP Jin, Chairman and CEO of Telenav. “There are now more than 8 million connected cars on the road powered by Telenav’s location-based services platform.”
Financial Highlights for the third quarter ended March 31, 2018
Total revenue for the third quarter of fiscal 2018 was $13.8 million, compared with $35.1 million in the same prior year period. As previously announced, the decline was primarily due to the change in revenue recognition as a result of the Company’s commencement of offering multi-year value-added map services in all major markets to Ford®, its largest customer, effective January 1, 2018, which results in significant deferral of amounts that would have previously been recognized as revenue when the vehicle is produced. When Telenav adopts ASC 606 as of July 1, 2018, it expects it will be able to recognize substantial revenue from Ford as our product is delivered.
Billings for the third quarter of fiscal 2018 were $58.7 million, compared with $60.2 million in the same prior year period.
GAAP net loss for the third quarter of fiscal 2018 was $(30.8) million, compared with a GAAP net loss of $(13.7) million for the third quarter of fiscal 2017, with the decrease due primarily to the change in revenue recognition criteria for the Ford agreement.
Adjusted EBITDA on billings for the third quarter of fiscal 2018 was a $(4.1) million loss compared with a $(2.3) million loss in the third quarter of fiscal 2017. 
Ending cash, cash equivalents and short-term investments, excluding restricted cash, were $88.6 million as of March 31, 2018. This represented cash and short-term investments of $1.98 per share, based on 44.7 million shares of common stock outstanding as of March 31, 2018. Telenav had no debt as of March 31, 2018.

Recent Business Highlights
A record 1.4 million Telenav equipped cars were deployed into the market during the quarter ended March 31, 2018 of which 1.2 million units were capable of connected services
Ford entered into an agreement to extend Telenav’s offering for SYNC 3 for calendar years 2019 and 2020 for all current geographies
Ford launched Telenav’s connected services across select model year 2018 SYNC 3 vehicles in Europe and China using its FordPass mobile phone application





Fiat Chrysler Automobiles (FCA) launched Telenav’s embedded navigation solution on Jeep’s 2018 Grand Cherokee, Grand Commander, Wrangler and Grand Voyager models in China
Thinknear® by Telenav launched GeolinkTM, a self-serve mobile advertising platform that utilizes Thinknear’s proven location-targeting and campaign-optimization technology at scale

Q4 Fiscal 2018 Business Outlook
For the quarter ending June 30, 2018, Telenav offers the following guidance:
Total revenue is expected to be $15 to $16 million
Billings are expected to be $55 to $58 million
Deferred revenue is expected to increase by $40 to $42 million
Deferred costs are expected to increase by approximately $19 to $20 million
GAAP gross profit is expected to be approximately $6 million
GAAP gross margin is expected to be approximately 40 percent
Direct contribution from billings is expected to be approximately $27 to $28 million
Direct contribution margin from billings is expected to be approximately 48 percent
GAAP operating expenses are expected to be $34 to $35 million
GAAP net loss is expected to be $(29) to $(31) million
Adjusted EBITDA loss is expected to be $(25) to $(27) million
Adjusted EBITDA loss on billings is expected to be $(3.5) to $(5.5) million
Automotive is expected to be 40 to 45 percent of total revenue and 85 percent of billings
Advertising is expected to be approximately 40 percent of total revenue and 11 percent of billings
Weighted average diluted shares outstanding are expected to be approximately 45.0 million

Subject to anticipated volumes, take rates and timing of model expansion under Telenav’s various automotive OEM programs, including the potential impact, if any, from Ford’s recent announcement of its intention to modify its North American passenger car portfolio, Telenav anticipates that adjusted EBITDA on billings will be positive for fiscal 2019.
The above information concerning guidance represents Telenav's outlook only as of the date hereof, and is subject to change, as a result of amendments to material contracts and other changes in business conditions.  Telenav undertakes no obligation to update or revise any financial forecast or other forward-looking statements, as a result of new developments, or otherwise.
Conference Call and Quarterly Commentary
Telenav will host an investor conference call and live webcast on Thursday, May 3, 2018 at 2:30 p.m. Pacific Time (5:30 p.m. Eastern Time). Management has posted its letter to stockholders in combination with Telenav’s Third Quarter Fiscal 2018 Financial Results press release on its investor relations website in lieu of management providing remarks at the start of the conference call. Instead, management will respond to questions during the call. To listen to the webcast and view Telenav’s quarterly commentary, please visit Telenav's investor relations website at http://investor.telenav.com.  Listeners can also access the conference call by dialing 866-548-4713 (toll-free, domestic only) or 323-794-2093 (domestic and international toll) and entering pass code 6005339. A replay of the conference call will be available for two weeks beginning





approximately two hours after its completion. To access the replay, dial 888-203-1112 (toll-free, domestic only) or 719-457-0820 (domestic and international toll) and enter pass code 6005339.
Use of Non-GAAP Financial Measures
Telenav prepares its financial statements in accordance with generally accepted accounting principles for the United States, or GAAP. The non-GAAP financial measures such as billings, direct contribution from billings, direct contribution margin from billings, change in deferred revenue, change in deferred costs, adjusted EBITDA, adjusted EBITDA on billings and free cash flow included in this press release are different from those otherwise presented under GAAP. Telenav has provided these measures in addition to GAAP financial results because management believes these non-GAAP measures help provide a consistent basis for comparison between periods that are not influenced by certain items and therefore, are helpful in understanding Telenav’s underlying operating results. These non-GAAP measures are some of the primary measures Telenav’s management uses for planning and forecasting. These measures are not in accordance with, or an alternative to, GAAP and these non-GAAP measures may not be comparable to information provided by other companies.
Billings measure GAAP revenue recognized plus the change in deferred revenue from the beginning to the end of the period. Direct contribution from billings reflects GAAP gross profit plus change in deferred revenue less change in deferred costs. Direct contribution margin from billings reflects direct contribution from billings divided by billings. Telenav has also provided a breakdown of the calculation of the change in deferred revenue by segment, which is added to revenue in calculating its non-GAAP metric of billings. In connection with its presentation of the change in deferred revenue, Telenav has 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 its operating results, Telenav believes these metrics are useful in evaluating cash flows.
Telenav considers billings, direct contribution from billings and direct contribution margin from billings to be useful metrics for management and investors because billings drive revenue and deferred revenue, which is an important indicator of its business. Telenav believes direct contribution from billings and direct contribution margin from billings are useful metrics because they reflect the impact of the contribution 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, direct contribution from billings and direct contribution margin from billings versus revenue, gross profit, and gross margin calculated in accordance with GAAP. First, billings, direct contribution from billings and direct contribution margin from billings include amounts that have not yet been recognized as revenue or cost and may require additional services or costs 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, including certain third-party technology and content license fees as applicable. Accordingly, direct contribution from billings and direct contribution margin from billings do not include all costs associated with billings. Second, Telenav may calculate billings, direct contribution from billings, and direct contribution margin from billings in a manner that is different from peer companies that report similar financial measures, making comparisons between companies more difficult. When Telenav uses these measures, it attempts to compensate for these limitations by providing specific information regarding billings, direct contribution





from billings and direct contribution margin from billings and how they relate to revenue, gross profit and gross margin calculated in accordance with GAAP.
Adjusted EBITDA measures 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, deferred rent reversal and tenant improvement allowance recognition due to sublease termination, net of tax and goodwill impairment. Stock-based compensation expense relates to equity incentive awards granted to its employees, directors, and consultants. Legal settlements and contingencies represent settlements and offers made to settle litigation in which Telenav is a defendant and royalty disputes. Deferred rent reversal and tenant improvement allowance recognition represent the reversal of Telenav’s deferred rent liability and recognition of Telenav’s deferred tenant improvement allowance, as amortization of these amounts is no longer required due to the termination of our Santa Clara facility sublease and subsequent entry into a new lease agreement with our landlord for this same facility effective September 2017. Goodwill impairment represents the impairment charge related to Telenav’s Mobile Navigation segment.
Adjusted EBITDA and adjusted EBITDA on billings are key measures used by Telenav’s management and board of directors to understand and evaluate Telenav’s core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, Telenav believes that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of Telenav’s core business. In addition, adjusted EBITDA is a key financial measure used by the compensation committee of Telenav’s board of directors in connection with the development of incentive-based compensation for Telenav’s executive officers. Accordingly, Telenav believes that adjusted EBITDA generally provides useful information to investors and others in understanding and evaluating Telenav’s operating results in the same manner as its management and board of directors.
Adjusted EBITDA on billings measures adjusted EBITDA plus the effect of changes in deferred revenue and deferred costs. Telenav believes adjusted EBITDA on billings is a useful measure, especially in light of the impact it continues to expect on reported GAAP revenue for certain value-added offerings the company provides its 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 Telenav defines as net cash provided by (used in) operating activities, less purchases of property and equipment. Telenav considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash (used in) generated by its business after purchases of property and equipment.
To reconcile the historical GAAP results to non-GAAP financial metrics, please refer to the reconciliations in the financial statements included in this earnings release.
In this press release, Telenav has provided guidance for the fourth quarter of fiscal 2018 on a non-GAAP basis, for billings, change in deferred revenue, change in deferred costs, direct contribution from billings, direct contribution margin from billings, adjusted EBITDA and adjusted EBITDA on billings. Telenav does not provide reconciliations of its forward-looking





non-GAAP financial measures of billings, change in deferred revenue, change in deferred costs, direct contribution from billings, direct contribution margin from billings, adjusted EBITDA and adjusted EBITDA on billings to the corresponding GAAP measures due to the high variability and difficulty in making accurate forecasts and projections with respect to deferred revenue, deferred costs, stock-based compensation and tax provision (benefit), which are components of these non-GAAP financial measures. In particular, stock-based compensation is impacted by future hiring and retention needs, as well as the future fair market value of Telenav’s common stock, all of which is difficult to predict and subject to constant change. The actual amounts of these items will have a significant impact on Telenav’s GAAP net loss per diluted share and GAAP tax provision (benefit). Accordingly, reconciliations of Telenav’s forward-looking non-GAAP financial measures to the corresponding GAAP measures are not available without unreasonable effort.
Forward Looking Statements
This press release contains forward-looking statements that are based on Telenav management's beliefs and assumptions and on information currently available to its management.  Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties. These potential risks and uncertainties include, among others: Telenav's ability to develop and implement products for Ford, GM and Toyota and to support Ford, GM and Toyota and their customers; the impact of Ford’s recent announcement regarding the elimination of various sedans in North America over the near term; Telenav's success in extending its contracts for current and new generation of products with its existing OEMs and automotive manufacturers, particularly Ford; Telenav’s ability to achieve additional design wins and the delivery dates of automobiles including Telenav's products; adoption by vehicle purchasers of Scout GPS Link; Telenav's dependence on a limited number of automotive manufacturers and OEMs for a substantial portion of its revenue; reductions in demand for automobiles; potential impacts of OEMs including competitive capabilities in their vehicles such as Apple Car-Play and Android Auto; Telenav's ability to grow and scale its advertising business; Telenav’s ability to develop new advertising products and technology while also achieving cash flow break even and ultimately profitability in the advertising business; Telenav incurring losses and operating expenses in excess of expectations; failure to reach agreement with customers for awards and contracts on products and services in which Telenav has expended resources developing; competition from other market participants who may provide comparable services to subscribers without charge; the timing of new product releases and vehicle production by Telenav's automotive customers, including inventory procurement and fulfillment; possible warranty claims, and the impact on consumer perception of its brand; Telenav's ability to develop and support products including OpenStreetMap (“OSM”), as well as transition existing navigation products to OSM and any economic benefit anticipated from the use of OSM versus proprietary map products; the potential that Telenav may not be able to realize its deferred tax assets and may have to take a reserve against them; Telenav’s reliance on its automotive manufacturers for volume and royalty reporting; the impact on revenue recognition and other financial reporting due to the amendment of contracts or changes in accounting standards, such as the implementation of ASC 606; and macroeconomic and political conditions in the U.S. and abroad, in particular China. Telenav discusses these risks in greater detail in "Risk factors" and elsewhere in its Form 10-Q for the quarter ended December 31, 2017 and other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available at the SEC's website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent management's beliefs and





assumptions only as of the date made. You should review our SEC filings carefully and with the understanding that actual future results may be materially different from what Telenav expects.
ABOUT TELENAV, INC.
Telenav is a leading provider of connected car and location-based platform services, focused on transforming life on the go for people - before, during, and after every drive. Leveraging our location platform, global brands such as Ford, GM, Toyota and AT&T deliver custom connected car and mobile experiences. Fortune 500 advertisers and local advertisers can now reach millions of users with Telenav’s highly-targeted advertising platform. To learn more about how Telenav’s location platform powers personalized navigation, mapping, big data intelligence, social driving, and location-based advertising, visit www.telenav.com.
Copyright 2018 Telenav, Inc. All Rights Reserved.
"Telenav," "Scout," “Thinknear” and the Telenav, Scout and Thinknear logos are registered trademarks of Telenav, Inc.  Unless otherwise noted, all other trademarks, service marks, and logos used in this press release are the trademarks, service marks or logos of their respective owners. 
TNAV-F
TNAV-C

Investor Relations:
Michael Look
408-990-1232
IR@telenav.com

Media:
Raphel Finelli
408-667-5970
raphelf@telenav.com










Telenav, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
 
 
 
 
 

 
March 31,
2018
 
June 30,
2017*

 
(unaudited)
 

Assets
 

 

Current assets:
 

 

Cash and cash equivalents
 
$
17,509

 
$
20,757

Short-term investments
 
71,086

 
77,598

Accounts receivable, net of allowances of $73 and $75, at March 31, 2018 and June 30, 2017, respectively
 
51,207

 
57,834

Restricted cash
 
3,207

 
3,401

Income taxes receivable
 
32

 
34

Deferred costs
 
23,745

 
11,703

Prepaid expenses and other current assets
 
3,742

 
3,988

Total current assets
 
170,528

 
175,315

Property and equipment, net
 
7,630

 
4,658

Deferred income taxes, non-current
 
1,027

 
900

Goodwill and intangible assets, net
 
31,329

 
34,844

Deferred costs, non-current
 
95,503

 
42,389

Other assets
 
1,878

 
1,454

Total assets
 
$
307,895

 
$
259,560

Liabilities and stockholders’ equity
 

 

Current liabilities:
 

 

Trade accounts payable
 
$
17,578

 
$
6,151

Accrued expenses
 
39,577

 
51,528

Deferred revenue
 
37,843

 
20,345

Income taxes payable
 
266

 
197

Total current liabilities
 
95,264

 
78,221

Deferred rent, non-current
 
1,074

 
996

Deferred revenue, non-current
 
154,634

 
67,056

Other long-term liabilities
 
1,116

 
1,139

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; 44,744 and 43,946 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively
 
45

 
44

Additional paid-in capital
 
165,690

 
159,666

Accumulated other comprehensive loss
 
(1,491
)
 
(1,934
)
Accumulated deficit
 
(108,437
)
 
(45,628
)
Total stockholders' equity
 
55,807

 
112,148

Total liabilities and stockholders’ equity
 
$
307,895

 
$
259,560

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





Telenav, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,

 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
Product
 
$
4,014

 
$
24,426

 
$
53,285

 
$
91,653

Services
 
9,809

 
10,639

 
36,276

 
37,640

Total revenue
 
13,823

 
35,065

 
89,561

 
129,293

Cost of revenue:
 
 
 
 
 
 
 
 
Product
 
3,105

 
13,174

 
32,832

 
53,533

Services
 
5,115

 
4,493

 
18,546

 
16,337

Total cost of revenue
 
8,220

 
17,667

 
51,378

 
69,870

Gross profit
 
5,603

 
17,398

 
38,183

 
59,423

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
22,212

 
19,106

 
65,197

 
53,425

Sales and marketing
 
5,654

 
5,980

 
15,854

 
16,525

General and administrative
 
5,618

 
5,485

 
16,343

 
17,848

Goodwill impairment
 
2,666

 

 
2,666

 

Legal settlement and contingencies
 
115

 

 
425

 
6,424

Total operating expenses
 
36,265

 
30,571

 
100,485

 
94,222

Loss from operations
 
(30,662
)
 
(13,173
)
 
(62,302
)
 
(34,799
)
Other income, net
 
229

 
142

 
400

 
1,152

Loss before provision for income taxes
 
(30,433
)
 
(13,031
)
 
(61,902
)
 
(33,647
)
Provision for income taxes
 
330

 
663

 
611

 
805

Net loss
 
$
(30,763
)
 
$
(13,694
)
 
$
(62,513
)
 
$
(34,452
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.69
)
 
$
(0.31
)
 
$
(1.41
)
 
$
(0.80
)
Weighted average shares used in computing net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
44,637

 
43,528

 
44,396

 
43,189

 
 
 
 
 
 
 
 
 





Telenav, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 
Nine Months Ended
March 31,

 
2018
 
2017
Operating activities
 

 

Net loss
 
$
(62,513
)
 
$
(34,452
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 

Depreciation and amortization
 
2,476

 
1,886

Deferred rent reversal due to lease termination
 
(538
)
 

Tenant improvement allowance recognition due to lease termination
 
(582
)
 

Accretion of net premium on short-term investments
 
156

 
326

Stock-based compensation expense
 
7,614

 
7,154

Goodwill impairment
 
2,666

 

Loss (gain) on disposal of property and equipment
 
13

 
(3
)
Bad debt expense
 
(17
)
 
149

Changes in operating assets and liabilities:
 

 

Accounts receivable
 
6,706

 
(6,227
)
Deferred income taxes
 
(68
)
 
219

Restricted cash
 
194

 
1,184

Income taxes receivable
 
2

 
41

Deferred costs
 
(65,156
)
 
(24,140
)
Prepaid expenses and other current assets
 
177

 
1,090

Other assets
 
(614
)
 
386

Trade accounts payable
 
11,398

 
5,774

Accrued expenses and other liabilities
 
(12,079
)
 
(2,369
)
Income taxes payable
 
64

 
200

Deferred rent
 
1,145

 
49

Deferred revenue
 
105,076

 
37,815

Net cash used in operating activities
 
(3,880
)
 
(10,918
)

 

 

Investing activities
 

 

Purchases of property and equipment
 
(4,572
)
 
(867
)
Purchases of short-term investments
 
(42,849
)
 
(51,258
)
Proceeds from sales and maturities of short-term investments
 
48,690

 
62,468

Proceeds from sales of long-term investments
 

 
246

Net cash provided by investing activities
 
1,269

 
10,589


 

 

Financing activities
 

 

Proceeds from exercise of stock options
 
463

 
2,354

Tax withholdings related to net share settlements of restricted stock units
 
(2,052
)
 
(2,163
)
Net cash provided by (used in) financing activities
 
(1,589
)
 
191


 

 

Effect of exchange rate changes on cash and cash equivalents
 
952

 
(448
)
Net decrease in cash and cash equivalents
 
(3,248
)
 
(586
)
Cash and cash equivalents, at beginning of period
 
20,757

 
21,349

Cash and cash equivalents, at end of period
 
$
17,509

 
$
20,763


 

 

Supplemental disclosure of cash flow information
 

 

Income taxes paid, net
 
$
803

 
$
1,861

 
 
 
 
 





Telenav, Inc.
Condensed Consolidated Segment Summary
(in thousands, except percentages)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,

 
2018
 
2017
 
2018
 
2017
Automotive
 
 
 
 
 
 
 
 
Revenue
 
$
5,808

 
$
25,476

 
$
57,950

 
$
94,487

Cost of revenue
 
4,616

 
14,112

 
36,917

 
56,095

Gross profit
 
$
1,192

 
$
11,364

 
$
21,033

 
$
38,392

Gross margin
 
21
%
 
45
%
 
36
%
 
41
%
Advertising
 
 
 
 
 
 
 
 
Revenue
 
$
4,811

 
$
5,284

 
$
21,168

 
$
20,037

Cost of revenue
 
2,174

 
2,224

 
9,988

 
9,669

Gross profit
 
$
2,637

 
$
3,060

 
$
11,180

 
$
10,368

Gross margin
 
55
%
 
58
%
 
53
%
 
52
%
Mobile Navigation
 
 
 
 
 
 
 
 
Revenue
 
$
3,204

 
$
4,305

 
$
10,443

 
$
14,769

Cost of revenue
 
1,430

 
1,331

 
4,473

 
4,106

Gross profit
 
$
1,774

 
$
2,974

 
$
5,970

 
$
10,663

Gross margin
 
55
%
 
69
%
 
57
%
 
72
%
Total
 
 
 
 
 
 
 
 
Revenue
 
$
13,823

 
$
35,065

 
$
89,561

 
$
129,293

Cost of revenue
 
8,220

 
17,667

 
51,378

 
69,870

Gross profit
 
$
5,603

 
$
17,398

 
$
38,183

 
$
59,423

Gross margin
 
41
%
 
50
%
 
43
%
 
46
%







Telenav, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands)
 
Reconciliation of Revenue to Billings
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
2018
 
2017
 
2018
 
2017
Automotive
 
 
 
 
 
 
 
 
Revenue
 
$
5,808

 
$
25,476

 
$
57,950

 
$
94,487

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
44,855

 
25,123

 
105,302

 
37,930

Billings
 
$
50,663

 
$
50,599

 
$
163,252

 
$
132,417

Advertising
 
 
 
 
 
 
 
 
Revenue
 
$
4,811

 
$
5,284

 
$
21,168

 
$
20,037

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 

 

 

 

Billings
 
$
4,811

 
$
5,284

 
$
21,168

 
$
20,037

Mobile Navigation
 
 
 
 
 
 
 
 
Revenue
 
$
3,204

 
$
4,305

 
$
10,443

 
$
14,769

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
25

 
(36
)
 
(226
)
 
(115
)
Billings
 
$
3,229

 
$
4,269

 
$
10,217

 
$
14,654

Total
 
 
 
 
 
 
 
 
Revenue
 
$
13,823

 
$
35,065

 
$
89,561

 
$
129,293

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
44,880

 
25,087

 
105,076

 
37,815

Billings
 
$
58,703

 
$
60,152

 
$
194,637

 
$
167,108

 
 
 
 
 
 
 
 
 





Telenav, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands)
 
Reconciliation of Deferred Revenue to Change in Deferred Revenue
Reconciliation of Deferred Costs to Change in Deferred Costs
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
Deferred revenue, March 31
 
$
191,819

 
$

 
$
658

 
$
192,477

Deferred revenue, December 31
 
146,964

 

 
633

 
147,597

Change in deferred revenue
 
$
44,855

 
$

 
$
25

 
$
44,880

 
 
 
 
 
 
 
 
 
Deferred costs, March 31
 
$
119,248

 
$

 
$

 
$
119,248

Deferred costs, December 31
 
94,907

 

 

 
94,907

Change in deferred costs
 
$
24,341

 
$

 
$

 
$
24,341

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
Deferred revenue, March 31
 
$
60,083

 
$

 
$
1,101

 
$
61,184

Deferred revenue, December 31
 
34,960

 

 
1,137

 
36,097

Change in deferred revenue
 
$
25,123

 
$

 
$
(36
)
 
$
25,087

 
 
 
 
 
 
 
 
 
Deferred costs, March 31
 
$
36,216

 
$

 
$

 
$
36,216

Deferred costs, December 31
 
18,780

 

 

 
18,780

Change in deferred costs
 
$
17,436

 
$

 
$

 
$
17,436

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended March 31, 2018
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
Deferred revenue, March 31
 
$
191,819

 
$

 
$
658

 
$
192,477

Deferred revenue, June 30
 
86,517

 

 
884

 
87,401

Change in deferred revenue
 
$
105,302

 
$

 
$
(226
)
 
$
105,076

 
 
 
 
 
 
 
 
 
Deferred costs, March 31
 
$
119,248

 
$

 
$

 
$
119,248

Deferred costs, June 30
 
54,092

 

 

 
54,092

Change in deferred costs
 
$
65,156

 
$

 
$

 
$
65,156

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended March 31, 2017
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
Deferred revenue, March 31
 
$
60,083

 
$

 
$
1,101

 
$
61,184

Deferred revenue, June 30
 
22,153

 

 
1,216

 
23,369

Change in deferred revenue
 
$
37,930

 
$

 
$
(115
)
 
$
37,815

 
 
 
 
 
 
 
 
 
Deferred costs, March 31
 
$
36,216

 
$

 
$

 
$
36,216

Deferred costs, June 30
 
12,076

 

 

 
12,076

Change in deferred costs
 
$
24,140

 
$

 
$

 
$
24,140







Telenav, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands, except percentages)
Reconciliation of Gross Profit to Direct Contribution from Billings
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
2018
 
2017
 
2018
 
2017
Automotive
 
 
 
 
 
 
 
 
Gross profit
 
$
1,192

 
$
11,364

 
$
21,033

 
$
38,392

Gross margin
 
21
%
 
45
%
 
36
%
 
41
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
$
44,855

 
$
25,123

 
$
105,302

 
$
37,930

Change in deferred costs(1)
 
(24,341
)
 
(17,436
)
 
(65,156
)
 
(24,140
)
Net change
 
20,514

 
7,687

 
40,146

 
13,790

Direct contribution from billings(1)
 
$
21,706

 
$
19,051

 
$
61,179

 
$
52,182

Direct contribution margin from billings(1)
 
43
%
 
38
%
 
37
%
 
39
%
 
 
 
 
 
 
 
 
 
Advertising
 
 
 
 
 
 
 
 
Gross profit
 
$
2,637

 
$
3,060

 
$
11,180

 
$
10,368

Gross margin
 
55
%
 
58
%
 
53
%
 
52
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
$

 
$

 
$

 
$

Change in deferred costs(1)
 

 

 

 

Net change
 

 

 

 

Direct contribution from billings(1)
 
$
2,637

 
$
3,060

 
$
11,180

 
$
10,368

Direct contribution margin from billings(1)
 
55
%
 
58
%
 
53
%
 
52
%
 
 
 
 
 
 
 
 
 
Mobile Navigation
 
 
 
 
 
 
 
 
Gross profit
 
$
1,774

 
$
2,974

 
$
5,970

 
$
10,663

Gross margin
 
55
%
 
69
%
 
57
%
 
72
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
$
25

 
$
(36
)
 
$
(226
)
 
$
(115
)
Change in deferred costs(1)
 

 

 

 

Net change
 
25

 
(36
)
 
(226
)
 
(115
)
Direct contribution from billings(1)
 
$
1,799

 
$
2,938

 
$
5,744

 
$
10,548

Direct contribution margin from billings(1)
 
56
%
 
69
%
 
56
%
 
72
%
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
Gross profit
 
$
5,603

 
$
17,398

 
$
38,183

 
$
59,423

Gross margin
 
41
%
 
50
%
 
43
%
 
46
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
$
44,880

 
$
25,087

 
$
105,076

 
$
37,815

Change in deferred costs(1)
 
(24,341
)
 
(17,436
)
 
(65,156
)
 
(24,140
)
Net change
 
20,539

 
7,651

 
39,920

 
13,675

Direct contribution from billings(1)
 
$
26,142

 
$
25,049

 
$
78,103

 
$
73,098

Direct contribution margin from billings(1)
 
45
%
 
42
%
 
40
%
 
44
%
 
 
 
 
 
 
 
 
 
(1) Deferred costs primarily include costs associated with third party content and in connection with certain customized software solutions, the costs incurred to develop those solutions. 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. Accordingly, direct contribution from billings and direct contribution margin from billings do not reflect all costs associated with billings.





Telenav, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands)
 
 
 
 
 
 
 
 
 
Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDA on Billings
 
 
 
 
 
 
 
 
 

 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,

 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(30,763
)
 
$
(13,694
)
 
$
(62,513
)
 
$
(34,452
)
Adjustments:
 

 

 
 
 
 
Goodwill impairment
 
2,666

 

 
2,666

 

Legal settlement and contingencies
 
115

 

 
425

 
6,424

Deferred rent reversal due to lease termination
 

 

 
(538
)
 

Tenant improvement allowance recognition due to lease termination
 

 

 
(582
)
 

Stock-based compensation expense
 
2,246

 
2,625

 
7,614

 
7,154

Depreciation and amortization expense
 
963

 
626

 
2,476

 
1,886

Other income (expense), net
 
(229
)
 
(142
)
 
(400
)
 
(1,152
)
Provision for income taxes
 
330

 
663

 
611

 
805

Adjusted EBITDA
 
$
(24,672
)
 
$
(9,922
)
 
$
(50,241
)
 
$
(19,335
)
Change in deferred revenue
 
44,880

 
25,087

 
105,076

 
37,815

Change in deferred costs(1)
 
(24,341
)
 
(17,436
)
 
(65,156
)
 
(24,140
)
Adjusted EBITDA on billings(1)
 
$
(4,133
)
 
$
(2,271
)
 
$
(10,321
)
 
$
(5,660
)
 
 
 
 
 
 
 
 
 
(1) 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. Accordingly, adjusted EBITDA on billings does not reflect all costs associated with billings.








Telenav, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands)
 
 
 
 
 
 
 
 
 
Reconciliation of Net Loss to Free Cash Flow
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(30,763
)
 
$
(13,694
)
 
$
(62,513
)
 
$
(34,452
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Change in deferred revenue (1)
 
44,880

 
25,087

 
105,076

 
37,815

Change in deferred costs (2)
 
(24,341
)
 
(17,436
)
 
(65,156
)
 
(24,140
)
Changes in other operating assets and liabilities
 
3,620

 
(5,339
)
 
6,925

 
347

Other adjustments (3)
 
5,871

 
3,363

 
11,788

 
9,512

Net cash used in operating activities
 
(733
)
 
(8,019
)
 
(3,880
)
 
(10,918
)
Less: Purchases of property and equipment
 
(1,222
)
 
(336
)
 
(4,572
)
 
(867
)
Free cash flow
 
$
(1,955
)
 
$
(8,355
)
 
$
(8,452
)
 
$
(11,785
)
 
 
 
 
 
 
 
 
 
(1) Consists of product royalties, customized software development fees, service fees and subscription fees.
(2) Consists primarily of third party content costs and customized software development expenses.
(3) Consist primarily of depreciation and amortization, stock-based compensation expense and other non-cash items.


Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12228639&doc=4
May 3, 2018
Fellow Stockholders,
Building the largest network of connected cars in the world remains our long-term goal. During our third quarter ended March 31, 2018 (“Q3 Fiscal 2018”), we continued to make progress toward this goal as higher attach rates across more car models and geographies at our key global auto OEM partners resulted in a record 1.4 million Telenav enabled cars being deployed into the market. There are now more than 8.2 million cars in the market capable of being powered by Telenav’s location-based services platform. As a result, total billings for the third quarter were $58.7 million, and direct contribution from billings was $26.1 million.

Select Financial Data (unaudited)
Fiscal 2017
Fiscal 2018
(in thousands, except gross margin and direct contribution margin)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Total Company
 
 
 
 
 
 
 
Revenue
$
42,227

$
52,001

$
35,065

$
40,291

$
36,658

$
39,080

$
13,823

Billings*
$
47,269

$
59,687

$
60,152

$
66,508

$
65,789

$
70,145

$
58,703

     Y/Y % Growth
(1
)%
23
 %
13
 %
32
 %
39
 %
18
 %
(2
)%
Direct Contribution from Billings*
$
20,936

$
27,113

$
25,049

$
26,167

$
24,894

$
27,067

$
26,142

Direct Contribution Margin from Billings*
44
 %
45
 %
42
 %
39
 %
38
 %
39
 %
45
 %
Adjusted EBITDA on Billings*
$
(4,663
)
$
1,274

$
(2,271
)
$
(404
)
$
(4,386
)
$
(1,801
)
$
(4,133
)
Automotive
 
 
 
 
 
 
 
Revenue
$
30,267

$
38,744

$
25,476

$
29,297

$
25,304

$
26,838

$
5,808

Billings*
$
35,380

$
46,438

$
50,599

$
55,731

$
54,492

$
58,097

$
50,663

     Y/Y % Growth
(1
)%
32
 %
21
 %
40
 %
54
 %
25
 %
 %
Direct Contribution from Billings*
$
13,978

$
19,153

$
19,051

$
20,026

$
18,559

$
20,914

$
21,706

Direct Contribution Margin from Billings*
40
 %
41
 %
38
 %
36
 %
34
 %
36
 %
43
 %
Cumulative Units Deployed to Date**
9,819

10,953

12,182

13,323

14,476

15,830

17,278

     Y/Y % Growth
78
 %
73
 %
67
 %
62
 %
47
 %
45
 %
42
 %
Cumulative Connected Units Deployed to Date**
3,579

4,171

4,795

5,379

6,025

6,959

8,181

     Y/Y % Growth
113
 %
105
 %
98
 %
91
 %
68
 %
67
 %
71
 %
Advertising
 
 
 
 
 
 
 
Revenue
$
6,545

$
8,208

$
5,284

$
6,804

$
7,615

$
8,742

$
4,811

Billings*
$
6,545

$
8,208

$
5,284

$
6,804

$
7,615

$
8,742

$
4,811

     Y/Y % Growth
35
 %
23
 %
2
 %
35
 %
16
 %
7
 %
(9
)%
Gross Profit
$
3,019

$
4,289

$
3,060

$
3,749

$
4,203

$
4,340

$
2,637

Gross Margin
46
 %
52
 %
58
 %
55
 %
55
 %
50
 %
55
 %





Select Financial Data (unaudited)
Fiscal 2017
Fiscal 2018
(in thousands, except gross margin and direct contribution margin)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Mobile Navigation
 
 
 
 
 
 
 
Revenue
$
5,415

$
5,049

$
4,305

$
4,190

$
3,739

$
3,500

$
3,204

Billings
$
5,344

$
5,041

$
4,269

$
3,973

$
3,682

$
3,306

$
3,229

     Y/Y % Growth
(29
)%
(22
)%
(32
)%
(29
)%
(31
)%
(34
)%
(24
)%
Gross Profit
$
4,010

$
3,679

$
2,974

$
2,608

$
2,189

$
2,007

$
1,774

Gross Margin
74
 %
73
 %
69
 %
62
 %
59
 %
57
 %
55
 %
* See "Use of non-GAAP Measures" for definitions and discussion.
** Deployment date is defined as the date upon which title has transferred.
Q3 Fiscal 2018 Highlights
A record 1.4 million Telenav equipped cars were deployed into the market during the quarter ended March 31, 2018 of which 1.2 million units were capable of connected services
Ford® entered into an agreement to extend Telenav’s offering for SYNC 3 for calendar years 2019 and 2020 for all current geographies
Ford launched our connected services across select model year 2018 SYNC 3 vehicles in Europe and China using its FordPass mobile phone application
Fiat Chrysler Automobiles (FCA) launched Telenav’s embedded navigation solution on Jeep’s 2018 Grand Cherokee, Grand Commander, Wrangler and Grand Voyager models in China
Thinknear® by Telenav launched GeolinkTM, the first self-serve mobile advertising platform that utilizes Thinknear’s proven location-targeting and campaign-optimization technology at scale
Automotive Results
Automotive revenue for the third quarter was $5.8 million, compared with $25.5 million in the same prior year period. As previously announced, the decline was primarily due to a change in revenue recognition as a result of Ford’s commencement of offering multi-year value-added map services in all major markets, effective January 1, 2018, which results in significant deferral of amounts that would have previously been recognized as revenue when the vehicle is produced. When Telenav adopts ASC 606 as of July 1, 2018, we expect we will be able to recognize substantial revenue from Ford as our products and services are delivered.
Total automotive billings for the third quarter were $50.7 million, essentially flat from the same prior year period due to the combined effect of higher unit growth offset by a significant decrease in lower pass-through third-party content costs. Our year-over-year unit growth reflected volume increases at Ford and Toyota, and to a lesser degree GM’s increase in production of Telenav equipped vehicles.
Automotive direct contribution from billings in the third quarter increased 14% year-over-year to $21.7 million. The third quarter’s automotive direct contribution margin on billings was 43%, up 5 points from 38% in the same prior year period. The improvement in direct contribution margin from billings was primarily due to the lower third-party content costs discussed above.
Our automotive OEM partners continue to expand and extend their offerings of Telenav’s leading navigation solutions to more car models and geographies. In the third quarter, Ford entered into an agreement to extend Telenav’s offering for SYNC3 through calendar year 2020 for all current geographies. In the third quarter, Ford represented 29% and 67% of Telenav’s total revenue and billings, respectively.






Advertising Results
Advertising revenue, which includes the delivery of display, location-based advertising impressions, was $4.8 million in the third quarter, a decrease of $0.5 million from the prior-year period. We continue to believe that our location-based advertising business is a strategic component of our connected car roadmap, especially as it relates to the potential new revenue streams from in-car ads.
Earlier today, we announced the release of Geolink, a self-serve mobile advertising platform that utilizes Thinknear’s proven location-targeting and campaign-optimization technology at scale. Geolink will allow users to plan their strategy based on real-world consumer data, execute campaigns successfully, and collect meaningful, in-depth reports on those campaigns.

Mobile Navigation Results
Third quarter mobile navigation revenue was $3.2 million, compared with $4.3 million in the same prior year period. During the third quarter, we recognized a non-cash $2.7 million impairment of all of the goodwill associated with our mobile navigation segment based upon our determination that the carrying value of our mobile navigation business exceeded its total estimated fair value.

Operating Expenses
Operating expenses in the third quarter were $36.3 million, up $5.7 million from the same prior year period. The increase in operating expenses was primarily driven by an increase in R&D headcount and the $2.7 million write-off of goodwill associated with the mobile navigation business.

Adjusted EBITDA on Billings
Adjusted EBITDA on billings in the third quarter was a negative $4.1 million as compared to a negative $2.3 million in same period a year ago. Our direct contribution profit from billings increased $1.1 million to $26.1 million from the same prior year period. Direct contribution margin from billings for the third quarter was 45%, compared with 42% from the same prior year period. The improvement in direct contribution margin from billings was primarily driven by the lower third-party content costs we discussed earlier.

Free Cash Flow
Free cash flow in the third quarter was a negative $2.0 million, compared with a negative $8.4 million in the same period a year ago. Fiscal 2017’s third quarter free cash flow included an $8.0 million payment to settle our Vehicle IP, LLC lawsuit and AT&T related indemnification claims.

Business Outlook
Effective July 1, 2018, Telenav will adopt the new revenue recognition standard, ASC 606. We expect that this will enable us to once again recognize substantial revenue and gross profit from our auto OEM partners as our products and services are delivered.
Subject to anticipated volumes, take rates and timing of model expansion under Telenav’s various automotive OEM programs, including the potential impact, if any, from Ford’s recent announcement of its intention to modify its North American passenger car portfolio, Telenav anticipates that adjusted EBITDA on billings will be positive for fiscal 2019.
With the context of these assumptions as a backdrop, Telenav’s guidance for the fourth quarter of fiscal 2018 is as follows:






Guidance
Q4 Fiscal 2018
(as of May 3, 2018)
(dollars and shares in millions)
Revenue
$15 to $16
Billings*
$55 to $58
Change in Deferred Revenue
$40 to $42
Change in Deferred Costs
$19 to $20
Gross Profit
$6
Gross Margin
40%
Direct Contribution from Billings *
$27 to $28
Direct Contribution Margin from Billings *
48%
Operating Expenses
$34 to $35
Net Income (Loss)
$(29) to $(31)
Adjusted EBITDA on Billings*
$(3.5) to $(5.5)
Automotive Revenue as % of Total Revenue
40% to 45%
Automotive Billings as % of Total Billings*
85%
Advertising Revenue as % of Total Revenue
40%
Advertising Billings as % of Total Billings*
11%
Weighted Average Diluted Shares Outstanding
45.0
* See "Use of non-GAAP Measures" for definitions and discussion.
Q3 Fiscal 2018 Financial Results Q&A Conference Call, May 3, 2018 at 5:30 p.m. ET.
Management will host an investor conference call and live webcast at 2:30 p.m. PT (5:30 p.m. ET) on the same day. To access the conference call, dial 866-548-4713 (toll-free, domestic only) or 323-794-2093 (domestic and international toll) and enter pass code 6005339. The webcast will be accessible on Telenav's investor relations website at http://investor.telenav.com.

Use of Non-GAAP Financial Measures
Telenav prepares its financial statements in accordance with generally accepted accounting principles for the United States, or GAAP. The non-GAAP financial measures such as billings, direct contribution from billings, direct contribution margin from billings, change in deferred revenue, change in deferred costs, adjusted EBITDA, adjusted EBITDA on billings and free cash flow included in this press release are different from those otherwise presented under GAAP. Telenav has provided these measures in addition to GAAP financial results because management believes these non-GAAP measures help provide a consistent basis for comparison between periods that are not influenced by certain items and therefore, are helpful in understanding Telenav’s underlying operating results. These non-GAAP measures are some of the primary measures Telenav’s management uses for planning and forecasting. These measures are not in accordance with, or an alternative to, GAAP and these non-GAAP measures may not be comparable to information provided by other companies.
Billings measure GAAP revenue recognized plus the change in deferred revenue from the beginning to the end of the period. Direct contribution from billings reflects GAAP gross profit plus change in deferred revenue less change in deferred costs. Direct contribution margin from billings reflects direct contribution from billings divided by billings. Telenav has also provided a breakdown of the calculation of the change in deferred revenue by segment, which is added to revenue in calculating its non-GAAP metric of billings. In connection with its presentation of the change in deferred revenue, Telenav has 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 its operating results, Telenav believes these metrics are useful in evaluating cash flows.
Telenav considers billings, direct contribution from billings and direct contribution margin from billings to be useful metrics for management and investors because billings drive revenue and deferred revenue, which is an important indicator of its business. Telenav believes direct contribution from billings and direct contribution margin from billings are useful metrics because they reflect the impact of the contribution 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, direct contribution from billings and direct contribution margin from billings versus revenue, gross profit, and gross margin calculated in accordance with GAAP. First, billings, direct contribution from billings and direct contribution margin from billings include amounts that have not yet been recognized as revenue or cost and may require additional services or costs 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, including certain third-party technology and content license fees as applicable. Accordingly, direct contribution from billings and direct contribution margin from billings do not include all costs associated with billings. Second, Telenav may calculate billings, direct contribution from billings, and direct contribution margin from billings in a manner that is different from peer companies that report similar financial measures, making comparisons between companies more difficult. When Telenav uses these measures, it attempts to compensate for these limitations by providing specific information regarding billings, direct contribution from billings and direct contribution margin from billings and how they relate to revenue, gross profit and gross margin calculated in accordance with GAAP.
Adjusted EBITDA measures 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, deferred rent reversal and tenant improvement allowance recognition due to sublease termination, net of tax and goodwill impairment. Stock-based compensation expense relates to equity incentive awards granted to its employees, directors, and consultants. Legal settlements and contingencies represent settlements and offers made to settle litigation in which Telenav is a defendant and royalty disputes. Deferred rent reversal and tenant improvement allowance recognition represent the reversal of Telenav’s deferred rent liability and recognition of Telenav’s deferred tenant improvement allowance, as amortization of these amounts is no longer required due to the termination of our Santa Clara facility sublease and subsequent entry into a new lease agreement with our landlord for this same facility effective September 2017. Goodwill impairment represents the impairment charge related to Telenav’s mobile navigation segment.
Adjusted EBITDA and adjusted EBITDA on billings are key measures used by Telenav’s management and board of directors to understand and evaluate Telenav’s core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, Telenav believes that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of Telenav’s core business. In addition, adjusted EBITDA is a key financial measure used by the compensation committee of Telenav’s board of directors in connection with the development of incentive-based compensation for Telenav’s executive officers. Accordingly, Telenav believes that adjusted EBITDA generally provides useful information to investors and others in understanding and evaluating Telenav’s operating results in the same manner as its management and board of directors.
Adjusted EBITDA on billings measures adjusted EBITDA plus the effect of changes in deferred revenue and deferred costs. Telenav believes adjusted EBITDA on billings is a useful measure, especially in light of the impact it continues to expect on reported GAAP revenue for certain value-added offerings the





company provides its 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 Telenav defines as net cash provided by (used in) operating activities, less purchases of property and equipment. Telenav considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash (used in) generated by its business after purchases of property and equipment.
To reconcile the historical GAAP results to non-GAAP financial metrics, please refer to the reconciliations in the financial statements included in this letter to stockholders.
In this letter to stockholders, Telenav has provided guidance for the fourth quarter of fiscal 2018 on a non-GAAP basis, for billings, change in deferred revenue, change in deferred costs, direct contribution from billings, direct contribution margin from billings, adjusted EBITDA and adjusted EBITDA on billings. Telenav does not provide reconciliations of its forward-looking non-GAAP financial measures of billings, change in deferred revenue, change in deferred costs, direct contribution from billings, direct contribution margin from billings, adjusted EBITDA and adjusted EBITDA on billings to the corresponding GAAP measures due to the high variability and difficulty in making accurate forecasts and projections with respect to deferred revenue, deferred costs, stock-based compensation and tax provision (benefit), which are components of these non-GAAP financial measures. In particular, stock-based compensation is impacted by future hiring and retention needs, as well as the future fair market value of Telenav’s common stock, all of which is difficult to predict and subject to constant change. The actual amounts of these items will have a significant impact on Telenav’s GAAP net loss per diluted share and GAAP tax provision (benefit). Accordingly, reconciliations of Telenav’s forward-looking non-GAAP financial measures to the corresponding GAAP measures are not available without unreasonable effort.

Forward Looking Statements
This letter to stockholders contains forward-looking statements that are based on Telenav management's beliefs and assumptions and on information currently available to its management.  Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties. These potential risks and uncertainties include, among others: Telenav's ability to develop and implement products for Ford, GM and Toyota and to support Ford, GM and Toyota and their customers; the impact of Ford’s recent announcement regarding the elimination of various sedans in North America over the near term; Telenav's success in extending its contracts for current and new generation of products with its existing OEMs and automotive manufacturers, particularly Ford; Telenav’s ability to achieve additional design wins and the delivery dates of automobiles including Telenav's products; adoption by vehicle purchasers of Scout GPS Link; Telenav's dependence on a limited number of automotive manufacturers and OEMs for a substantial portion of its revenue; reductions in demand for automobiles; potential impacts of OEMs including competitive capabilities in their vehicles such as Apple Car-Play and Android Auto; Telenav's ability to grow and scale its advertising business; Telenav’s ability to develop new advertising products and technology while also achieving cash flow break even and ultimately profitability in the advertising business; Telenav incurring losses and operating expenses in excess of expectations; failure to reach agreement with customers for awards and contracts on products and services in which Telenav has expended resources developing; competition from other market participants who may provide comparable services to subscribers without charge; the timing of new product releases and vehicle production by Telenav's automotive customers, including inventory procurement and fulfillment; possible warranty claims, and the impact on consumer perception of its brand; Telenav's ability to develop and support products including OpenStreetMap (“OSM”), as well as transition existing navigation products to OSM and any economic benefit anticipated from the use of OSM versus proprietary map products; the potential that Telenav may not be able to realize its deferred tax assets and may have to take a reserve against them; Telenav’s reliance on its automotive manufacturers for volume and royalty reporting; the impact on revenue recognition and other financial





reporting due to the amendment of contracts or changes in accounting standards, such as the implementation of ASC 606; and macroeconomic and political conditions in the U.S. and abroad, in particular China. Telenav discusses these risks in greater detail in "Risk factors" and elsewhere in its Form 10-Q for the quarter ended December 31, 2017 and other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available at the SEC's website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent management's beliefs and assumptions only as of the date made. You should review our SEC filings carefully and with the understanding that actual future results may be materially different from what Telenav expects.

About Telenav, Inc.
Telenav is a leading provider of connected car and location-based platform services, focused on transforming life on the go for people - before, during, and after every drive. Leveraging our location platform, global brands such as Ford, GM, Toyota and AT&T deliver custom connected car and mobile experiences. Fortune 500 advertisers and local advertisers can now reach millions of users with Telenav’s highly-targeted advertising platform. To learn more about how Telenav’s location platform powers personalized navigation, mapping, big data intelligence, social driving, and location-based advertising, visit www.telenav.com.
Copyright 2018 Telenav, Inc. All Rights Reserved.
"Telenav," "Scout," “Thinknear” and the Telenav, Scout and Thinknear logos are registered trademarks of Telenav, Inc.  Unless otherwise noted, all other trademarks, service marks, and logos used in this management update are the trademarks, service marks or logos of their respective owners.
 
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Contacts
Investor Relations:
Michael Look
408-990-1232
IR@telenav.com

Media:
Raphel Finelli
408-667-5970
media@telenav.com








Telenav, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
 
 
 
 
 

 
March 31,
2018
 
June 30,
2017*

 
(unaudited)
 

Assets
 

 

Current assets:
 

 

Cash and cash equivalents
 
$
17,509

 
$
20,757

Short-term investments
 
71,086

 
77,598

Accounts receivable, net of allowances of $73 and $75, at March 31, 2018 and June 30, 2017, respectively
 
51,207

 
57,834

Restricted cash
 
3,207

 
3,401

Income taxes receivable
 
32

 
34

Deferred costs
 
23,745

 
11,703

Prepaid expenses and other current assets
 
3,742

 
3,988

Total current assets
 
170,528

 
175,315

Property and equipment, net
 
7,630

 
4,658

Deferred income taxes, non-current
 
1,027

 
900

Goodwill and intangible assets, net
 
31,329

 
34,844

Deferred costs, non-current
 
95,503

 
42,389

Other assets
 
1,878

 
1,454

Total assets
 
$
307,895

 
$
259,560

Liabilities and stockholders’ equity
 

 

Current liabilities:
 

 

Trade accounts payable
 
$
17,578

 
$
6,151

Accrued expenses
 
39,577

 
51,528

Deferred revenue
 
37,843

 
20,345

Income taxes payable
 
266

 
197

Total current liabilities
 
95,264

 
78,221

Deferred rent, non-current
 
1,074

 
996

Deferred revenue, non-current
 
154,634

 
67,056

Other long-term liabilities
 
1,116

 
1,139

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; 44,744 and 43,946 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively
 
45

 
44

Additional paid-in capital
 
165,690