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): August 7, 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 August 7, 2018, Telenav, Inc. (the “Company”) issued a press release announcing its financial results for the three months and fiscal year ended June 30, 2018 and an investor letter regarding the results of the quarter and fiscal year ended June 30, 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 “Securities 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 7.01 Regulation FD Disclosure

Furnished herewith as Exhibit 99.3 is a presentation illustrating the effects of the Company’s adoption of the new revenue recognition standard, ASC 606, Revenue from Contracts with Customers.
The information contained in this Item 7.01 and in the accompanying Exhibit 99.3 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.

Item 9.01    Financial Statements and Exhibits.
(d)    Exhibits
Exhibit Number
Description
 
 
99.1
99.2
99.3






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: August 7, 2018
By:    /s/ Michael Strambi
 
Name:    Michael Strambi
 
Title:     Chief Financial Officer
 
 








EXHIBIT INDEX



Exhibit Number
Description
99.1
Press release of Telenav, Inc. dated August 7, 2018
99.2
Investor letter of Telenav, Inc. dated August 7, 2018
99.3
Presentation: Implications of ASC 606





Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12394897&doc=13


Telenav Reports Fourth Quarter and Fiscal 2018 Financial Results
SANTA CLARA, Calif., Aug. 7, 2018 -- Telenav®, Inc. (NASDAQ:TNAV), a leading provider of connected car and location-based services, today released its financial results for the fourth fiscal quarter ended June 30, 2018 by issuing this press release and posting a quarterly letter to stockholders on its website. Please visit Telenav’s investor relations website at http://investor.telenav.com to view the Q4 and fiscal 2018 financial results and letter to stockholders.
“We are pleased that we continue to increase penetration of our location-based services solution across more vehicles and brands, including new GM models such as the 2019 Chevrolet Silverado and GMC Sierra trucks and Chevrolet Equinox,” said HP Jin, Chairman and CEO of Telenav. “We continue to work to expand billings and revenue, with the goal of achieving positive adjusted EBITDA on billings in fiscal 2019.”
Financial Highlights for the fourth quarter ended June 30, 2018
Total revenue for the fourth quarter of fiscal 2018 was $16.6 million, compared with $13.8 million in the third quarter of fiscal 2018, and $40.3 million in the fourth quarter of fiscal 2017. Total revenue for fiscal 2018 was $106.2 million, compared with $169.6 million in fiscal 2017. As previously announced, the year-over-year decline resulted primarily from a change in revenue recognition due to the commencement of Ford's map update program, whereby revenue from certain on-board navigation products offered with map updates is deferred and recognized over the contractual period during which we provide map updates, as well as the deferral of all prospective Ford royalties beginning January 1, 2018 pending completion of milestone deliveries.
When we adopt ASC 606 as of July 1, 2018, we expect we will be able to recognize a substantial portion of revenue as automotive royalties are billed.
Billings for the fourth quarter of fiscal 2018 were $59.2 million, compared with $58.7 million in the third quarter of fiscal 2018 and $66.5 million in the fourth quarter of fiscal 2017. The year over year decline was due primarily to lower per unit pricing resulting from lower third-party content costs. Billings for fiscal 2018 were $253.9 million, compared with $233.6 million for fiscal 2017.
Net loss for the fourth quarter of fiscal 2018 was $(26.6) million, compared with $(30.8) million for the third quarter of fiscal 2018 and $(12.8) million for the fourth quarter of fiscal 2017, with the year over year increase in net loss primarily due to the change in revenue recognition criteria related to the Ford agreement. Net loss for fiscal 2018 was $(89.1) million compared with $(47.3) million for fiscal 2017.
Adjusted EBITDA on billings for the fourth quarter of fiscal 2018 was a $(2.5) million loss compared with a $(4.1) million loss in the third quarter of fiscal 2018 and a $(0.4) million loss in the fourth quarter of fiscal 2017. Adjusted EBITDA on billings for fiscal 2018 was a $(12.8) million loss, compared with a $(6.1) million loss in fiscal 2017.





Ending cash, cash equivalents and short-term investments, excluding restricted cash, were $84.9 million as of June 30, 2018. This represented cash and short-term investments of $1.89 per share, based on 44.8 million shares of common stock outstanding as of June 30, 2018. Telenav had no debt as of June 30, 2018.

Recent Business Highlights
1.2 million Telenav-equipped cars capable of connected services were deployed into the global market during the quarter ended June 30, 2018, now totaling 9.4 million cumulative units deployed to date.
GM launched Telenav’s hybrid navigation solution on additional model year 2019 truck and SUV/CUV models, including Chevy Silverado, GMC Sierra and Chevrolet Equinox.
On June 20, 2018, Ford Motor Company announced that it had earned its best-ever scores in the 2018 J.D. Power Initial Quality Study, which includes improvements in navigation technology. Telenav provides the embedded navigation solution for Ford SYNC®3 globally, including the recent availability of the connected services feature.
Telenav announced its first open-source machine-learning technology designed to detect navigation features in street-level imagery to more efficiently improve OpenStreetMaps.

Q1 Fiscal 2019 Business Outlook
For the quarter ending September 30, 2018, Telenav offers the following guidance. The Company is finalizing its application of ASC 606, Revenue from Contracts with Customers, effective July 1, 2018, as respects the accounting treatment of revenue and deferred revenue and the associated cost of revenue and deferred content costs. In addition, the Company has not concluded on its application of ASC 340-40, Other Assets and Deferred Costs, Contracts with Customers, effective July 1, 2018, as respects the accounting treatment regarding the potential capitalization of research and development costs and recognition therein as cost of revenue, as discussed below. Accordingly, for the quarter ending September 30, 2018, forward looking guidance on certain financial metrics is limited to a non-GAAP presentation.
Total revenue is expected to be $52 million to $56 million, including approximately $3 million of customized software development fees, which reflects the anticipated impact of Telenav’s adoption of ASC 606 on July 1, 2018.
Billings are expected to be $60 million to $62 million.
Deferred revenue is expected to increase by $8 million to $10 million, from a lower, restated balance that will reflect the adoption of ASC 606 on July 1, 2018.
Deferred costs are expected to increase by $5 million to $8 million, from a lower restated balance that will reflect the adoption of ASC 606 on July 1, 2018. Telenav has not yet finalized the accounting treatment of certain research and development costs as a result of its adoption of ASC 606 and 340-40 on July 1, 2018. Should we determine that we are required to capitalize certain research and development costs as deferred development costs under ASC 340-40 rather than expense them, such amounts for the three months ending September 30, 2018 are estimated to be $3 million to $5 million which would be in addition to the potential recognition during the quarter of approximately $2.5 million as cost of revenue from the balance of deferred development costs. This would result in a net increase in capitalized deferred development costs of $0.5 million to $2.5 million (such recognition and such capitalization, the “Capitalized Research and Development Costs”).
Non-GAAP gross profit is expected to be approximately $22 million to $24 million, and non-GAAP gross margin is expected to be approximately 45 percent, both of which





exclude the potential recognition of $2.5 million as cost of revenue from the balance of deferred development costs should the company determine such accounting treatment under ASC 340-40.
Direct contribution from billings is expected to be approximately $26 million to $27 million, which range excludes the potential impact of the Capitalized Research and Development Costs.
Direct contribution margin from billings is expected to be approximately 44%, which margin excludes the potential impact of Capitalized Research and Development Costs under ASC 340-40.
Non-GAAP operating expenses are expected to be $34 million to $35 million, which include $3 million to $5 million of potential capitalizable research and development costs.
Non-GAAP net loss is expected to be approximately $(9.5) million to $(11.5) million, which excludes the potential impact of the Capitalized Research and Development Costs.
Adjusted EBITDA loss is expected to be approximately $(5.5) million to $(7.5) million, which excludes the potential impact of the Capitalized Research and Development Costs.
Adjusted EBITDA on billings loss is expected to be approximately $(2.5) million to $(4.5) million, which excludes the potential impact of the Capitalized Research and Development Costs. In addition, effective September 30, 2018, the Company anticipates that the metric “adjusted EBITDA on billings” will be relabeled as “Adjusted Cash Flow from Operations.”
Automotive is expected to be approximately 80 percent to 85 percent of total revenue.
Advertising is expected to be approximately 12 percent of total revenue.
Weighted average diluted shares outstanding are expected to be approximately 45.5 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 (adjusted cash flow from operations) 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 Tuesday, Aug. 7, 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 Fourth Quarter and Fiscal Year 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 800-347-6311 (toll-free, domestic only) or 323-794-2094 (domestic and international toll) and entering pass code 5861321. 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 5861321.
ASC 606 Adoption
We anticipate that when we adopt ASC 606, significant amounts currently set forth in deferred revenue and deferred costs as of June 30, 2018 will be restated as revenue and cost of revenue in our prior period statements of operations and as accumulated deficit on our July 1, 2018 balance sheet.
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.
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.
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 whereby customized engineering fees are earned. 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 map updates and provisioning of services such as hosting, monitoring, customer support and, for certain customers, additional period content and associated technology costs. 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.
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 and the impact of future deliverables. Adjusted EBITDA and adjusted EBITDA on billings, while generally measures of profitability, can also represent losses. In addition, adjusted EBITDA on billings 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 on billings 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. Effective





September 30, 2018, the Company anticipates that the metric “adjusted EBITDA on billings” will be relabeled as “Adjusted Cash Flow from Operations.”
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.
In this press release, Telenav has provided guidance for the first quarter of fiscal 2019 on a non-GAAP basis for billings, change in deferred revenue, gross profit, gross margin, change in deferred costs, direct contribution from billings, direct contribution margin from billings, operating expenses, net loss, adjusted EBITDA and adjusted EBITDA on billings. Telenav does not provide reconciliations of these forward-looking non-GAAP financial measures 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. 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 CarPlay 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 ASC 340-40; 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 March 31, 2018 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 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:
Bishop IR
Mike Bishop
415-894-9633
IR@telenav.com

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






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

 
June 30,
2018
 
June 30,
2017*

 
(unaudited)
 

Assets
 

 

Current assets:
 

 

Cash and cash equivalents
 
$
17,117

 
$
20,757

Short-term investments
 
67,829

 
77,598

Accounts receivable, net of allowances of $17 and $75, at June 30, 2018 and 2017, respectively
 
46,188

 
57,834

Restricted cash
 
2,982

 
3,401

Income taxes receivable
 

 
34

Deferred costs
 
31,888

 
11,703

Prepaid expenses and other current assets
 
3,867

 
3,988

Total current assets
 
169,871

 
175,315

Property and equipment, net
 
6,987

 
4,658

Deferred income taxes, non-current
 
867

 
900

Goodwill and intangible assets, net
 
31,046

 
34,844

Deferred costs, non-current
 
109,269

 
42,389

Other assets
 
2,372

 
1,454

Total assets
 
$
320,412

 
$
259,560

Liabilities and stockholders’ equity
 

 

Current liabilities:
 

 

Trade accounts payable
 
$
13,008

 
$
6,151

Accrued expenses
 
38,803

 
51,528

Deferred revenue
 
52,871

 
20,345

Income taxes payable
 
221

 
197

Total current liabilities
 
104,903

 
78,221

Deferred rent, non-current
 
1,112

 
996

Deferred revenue, non-current
 
182,236

 
67,056

Other long-term liabilities
 
1,115

 
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; 44,871 and 43,946 shares issued and outstanding at June 30, 2018 and 2017, respectively
 
45

 
44

Additional paid-in capital
 
167,895

 
159,666

Accumulated other comprehensive loss
 
(1,852
)
 
(1,934
)
Retained earnings (accumulated deficit)
 
(135,042
)
 
(45,628
)
Total stockholders' equity
 
31,046

 
112,148

Total liabilities and stockholders’ equity
 
$
320,412

 
$
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)

 
 
 
 
 
 
 
 
 

 
Three Months Ended
June 30,
 
Fiscal Year Ended
June 30,

 
2018
 
2017
 
2018
 
2017*
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
Revenue:
 
 
 
 
 
 
 
 
Product
 
$
5,858

 
$
28,132

 
$
59,143

 
$
119,785

Services
 
10,761

 
12,159

 
47,037

 
49,799

Total revenue
 
16,619

 
40,291

 
106,180

 
169,584

Cost of revenue:
 
 
 
 
 
 
 
 
Product
 
4,685

 
16,727

 
37,517

 
70,260

Services
 
6,167

 
5,738

 
24,713

 
22,075

Total cost of revenue
 
10,852

 
22,465

 
62,230

 
92,335

Gross profit
 
5,767

 
17,826

 
43,950

 
77,249

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
22,291

 
19,677

 
87,488

 
73,102

Sales and marketing
 
4,894

 
5,470

 
20,748

 
21,995

General and administrative
 
5,219

 
5,193

 
21,562

 
23,041

Goodwill impairment
 

 

 
2,666

 

Legal settlement and contingencies
 

 

 
425

 
6,424

Total operating expenses
 
32,404

 
30,340

 
132,889

 
124,562

Loss from operations
 
(26,637
)
 
(12,514
)
 
(88,939
)
 
(47,313
)
Other income (expense), net
 
433

 
(260
)
 
833

 
892

Loss before provision for income taxes
 
(26,204
)
 
(12,774
)
 
(88,106
)
 
(46,421
)
Provision for income taxes
 
401

 
36

 
1,012

 
841

Net loss
 
$
(26,605
)
 
$
(12,810
)
 
$
(89,118
)
 
$
(47,262
)
 
 
 
 
 
 
 
 
 
Net loss per share
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.59
)
 
$
(0.29
)
 
$
(2.00
)
 
$
(1.09
)
Weighted average shares used in computing net loss per share
 
 
 
 
 
 
 
 
Basic and diluted
 
44,806

 
43,806

 
44,498

 
43,343

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





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


 
Fiscal Year Ended
June 30,

 
2018
 
2017*
 
 
(unaudited)
 
 
Operating activities
 
 
 
 
Net loss
 
$
(89,118
)
 
$
(47,262
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 

Depreciation and amortization
 
3,609

 
2,647

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
 
192

 
403

Stock-based compensation expense
 
9,876

 
10,162

Goodwill impairment
 
2,666

 

Bad debt expense
 
(24
)
 
189

Loss (gain) on disposal of property and equipment
 
15

 
(14
)
Changes in operating assets and liabilities:
 

 

Accounts receivable
 
11,708

 
(15,807
)
Deferred income taxes
 
52

 
(239
)
Restricted cash
 
419

 
1,709

Income taxes receivable
 
34

 
654

Deferred costs
 
(87,065
)
 
(42,016
)
Prepaid expenses and other current assets
 
42

 
459

Other assets
 
(1,300
)
 
483

Trade accounts payable
 
6,836

 
1,195

Accrued expenses and other liabilities
 
(12,725
)
 
13,778

Income taxes payable
 
23

 
109

Deferred rent
 
1,178

 
66

Deferred revenue
 
147,706

 
64,032

Net cash used in operating activities
 
(6,996
)
 
(9,452
)

 

 

Investing activities
 

 

Purchases of property and equipment
 
(4,648
)
 
(1,225
)
Purchases of short-term investments
 
(49,287
)
 
(64,957
)
Proceeds from sales and maturities of short-term investments
 
58,404

 
74,878

Proceeds from sales of long-term investments
 

 
246

Net cash provided by investing activities
 
4,469

 
8,942


 

 

Financing activities
 

 

Proceeds from exercise of stock options
 
681

 
2,738

Tax withholdings related to net share settlements of restricted stock units
 
(2,327
)
 
(3,008
)
Net cash used in financing activities
 
(1,646
)
 
(270
)

 

 

Effect of exchange rate changes on cash and cash equivalents
 
533

 
188

Net decrease in cash and cash equivalents
 
(3,640
)
 
(592
)
Cash and cash equivalents, at beginning of period
 
20,757

 
21,349

Cash and cash equivalents, at end of period
 
$
17,117

 
$
20,757


 

 

Supplemental disclosure of cash flow information
 

 

Income taxes paid, net
 
$
1,053

 
$
1,872

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





Telenav, Inc.
Condensed Consolidated Segment Summary
(in thousands, except percentages)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Fiscal Year Ended June 30,
 
 
2018
 
2017
 
2018
 
2017*
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
Automotive
 
 
 
 
 
 
 
 
Revenue
 
$
7,609

 
$
29,297

 
$
65,559

 
$
123,784

Cost of revenue
 
6,244

 
17,828

 
43,161

 
73,923

Gross profit
 
$
1,365

 
$
11,469

 
$
22,398

 
$
49,861

Gross margin
 
18
%
 
39
%
 
34
%
 
40
%
Advertising
 
 
 
 
 
 
 
 
Revenue
 
$
6,061

 
$
6,804

 
$
27,229

 
$
26,841

Cost of revenue
 
3,353

 
3,055

 
13,341

 
12,724

Gross profit
 
$
2,708

 
$
3,749

 
$
13,888

 
$
14,117

Gross margin
 
45
%
 
55
%
 
51
%
 
53
%
Mobile Navigation
 
 
 
 
 
 
 
 
Revenue
 
$
2,949

 
$
4,190

 
$
13,392

 
$
18,959

Cost of revenue
 
1,255

 
1,582

 
5,728

 
5,688

Gross profit
 
$
1,694

 
$
2,608

 
$
7,664

 
$
13,271

Gross margin
 
57
%
 
62
%
 
57
%
 
70
%
Total
 
 
 
 
 
 
 
 
Revenue
 
$
16,619

 
$
40,291

 
$
106,180

 
$
169,584

Cost of revenue
 
10,852

 
22,465

 
62,230

 
92,335

Gross profit
 
$
5,767

 
$
17,826

 
$
43,950

 
$
77,249

Gross margin
 
35
%
 
44
%
 
41
%
 
46
%
 
 
 
 
 
 
 
 
 
*Derived from audited consolidated financial statements as of and for the year ended June 30, 2017









Telenav, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands)
Reconciliation of Revenue to Billings
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Fiscal Year Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Automotive
 
 
 
 
 
 
 
 
Revenue
 
$
7,609

 
$
29,297

 
$
65,559

 
$
123,784

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
42,751

 
26,434

 
148,053

 
64,364

Billings
 
$
50,360

 
$
55,731

 
$
213,612

 
$
188,148

Advertising
 
 
 
 
 
 
 
 
Revenue
 
6,061

 
6,804

 
27,229

 
26,841

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 

 

 

 

Billings
 
$
6,061

 
$
6,804

 
$
27,229

 
$
26,841

Mobile Navigation
 
 
 
 
 
 
 
 
Revenue
 
$
2,949

 
$
4,190

 
$
13,392

 
$
18,959

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
(121
)
 
(217
)
 
(347
)
 
(332
)
Billings
 
$
2,828

 
$
3,973

 
$
13,045

 
$
18,627

Total
 
 
 
 
 
 
 
 
Revenue
 
$
16,619

 
$
40,291

 
$
106,180

 
$
169,584

Adjustments:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
42,630

 
26,217

 
147,706

 
64,032

Billings
 
$
59,249

 
$
66,508

 
$
253,886

 
$
233,616








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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
 
 
Three Months Ended
June 30,
 
Three Months Ended
June 30,
 
Three Months Ended
June 30,
 
Three Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Deferred revenue, June 30
 
$
234,570

 
$
86,517

 
$

 
$

 
$
537

 
$
884

 
$
235,107

 
$
87,401

Deferred revenue, March 31
 
191,819

 
60,083

 

 

 
658

 
1,101

 
192,477

 
61,184

Change in deferred revenue
 
$
42,751

 
$
26,434

 
$

 
$

 
$
(121
)
 
$
(217
)
 
$
42,630

 
$
26,217

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred costs, June 30
 
$
141,157

 
$
54,092

 
$

 
$

 
$

 
$

 
$
141,157

 
$
54,092

Deferred costs, March 31
 
119,248

 
36,216

 

 

 

 

 
119,248

 
36,216

Change in deferred costs
 
$
21,909

 
$
17,876

 
$

 
$

 
$

 
$

 
$
21,909

 
$
17,876

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
 
Advertising
 
Mobile Navigation
 
Total
 
 
Fiscal Year Ended
June 30,
 
Fiscal Year Ended
June 30,
 
Fiscal Year Ended
June 30,
 
Fiscal Year Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Deferred revenue, ending
 
$
234,570

 
$
86,517

 
$

 
$

 
$
537

 
$
884

 
$
235,107

 
$
87,401

Deferred revenue, beginning
 
86,517

 
22,153

 

 

 
884

 
1,216

 
87,401

 
23,369

Change in deferred revenue
 
$
148,053

 
$
64,364

 
$

 
$

 
$
(347
)
 
$
(332
)
 
$
147,706

 
$
64,032

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred costs, ending
 
$
141,157

 
$
54,092

 
$

 
$

 
$

 
$

 
$
141,157

 
$
54,092

Deferred costs, beginning
 
54,092

 
12,076

 

 

 

 

 
54,092

 
12,076

Change in deferred costs
 
$
87,065

 
$
42,016

 
$

 
$

 
$

 
$

 
$
87,065

 
$
42,016



























Telenav, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands, except percentages)
Reconciliation of Gross Profit to Direct Contribution from Billings
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Fiscal Year Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Automotive
 
 
 
 
 
 
 
 
Gross profit
 
$
1,365

 
$
11,469

 
$
22,398

 
$
49,861

Gross margin
 
18
%
 
39
%
 
34
%
 
40
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
42,751

 
26,434

 
148,053

 
64,364

Change in deferred costs(1)
 
(21,909
)
 
(17,876
)
 
(87,065
)
 
(42,016
)
Net change
 
20,842

 
8,558

 
60,988

 
22,348

Direct contribution from billings(1)
 
$
22,207

 
$
20,027

 
$
83,386

 
$
72,209

Direct contribution margin from billings(1)
 
44
%
 
36
%
 
39
%
 
38
%
 
 
 
 
 
 
 
 
 
Advertising
 
 
 
 
 
 
 
 
Gross profit
 
$
2,708

 
$
3,749

 
$
13,888

 
$
14,117

Gross margin
 
45
%
 
55
%
 
51
%
 
53
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 

 

 

 

Change in deferred costs(1)
 

 

 

 

Net change
 

 

 

 

Direct contribution from billings(1)
 
$
2,708

 
$
3,749

 
$
13,888

 
$
14,117

Direct contribution margin from billings(1)
 
45
%
 
55
%
 
51
%
 
53
%
 
 
 
 
 
 
 
 
 
Mobile Navigation
 
 
 
 
 
 
 
 
Gross profit
 
$
1,694

 
$
2,608

 
$
7,664

 
$
13,271

Gross margin
 
57
%
 
62
%
 
57
%
 
70
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
(121
)
 
(217
)
 
(347
)
 
(332
)
Change in deferred costs(1)
 

 

 

 

Net change
 
(121
)
 
(217
)
 
(347
)
 
(332
)
Direct contribution from billings(1)
 
$
1,573

 
$
2,391

 
$
7,317

 
$
12,939

Direct contribution margin from billings(1)
 
56
%
 
60
%
 
56
%
 
69
%
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
Gross profit
 
$
5,767

 
$
17,826

 
$
43,950

 
$
77,249

Gross margin
 
35
%
 
44
%
 
41
%
 
46
%
Adjustments to gross profit:
 
 
 
 
 
 
 
 
Change in deferred revenue
 
42,630

 
26,217

 
147,706

 
64,032

Change in deferred costs(1)
 
(21,909
)
 
(17,876
)
 
(87,065
)
 
(42,016
)
Net change
 
20,721

 
8,341

 
60,641

 
22,016

Direct contribution from billings(1)
 
$
26,488

 
$
26,167

 
$
104,591

 
$
99,265

Direct contribution margin from billings(1)
 
45
%
 
39
%
 
41
%
 
42
%
 
 
 
 
 
 
 
 
 
(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 map updates and provisioning of services such as hosting, monitoring, customer support and, for certain customers, additional prepaid content and associated technology costs. 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
June 30,
 
Fiscal Year Ended
June 30,

 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(26,605
)
 
$
(12,810
)
 
$
(89,118
)
 
$
(47,262
)
 
 
 
 
 
 
 
 
 
Adjustments:
 

 

 
 
 
 
Goodwill impairment
 

 

 
2,666

 

Legal settlement and contingencies
 

 

 
425

 
6,424

Deferred rent reversal due to lease termination
 

 

 
(538
)
 

Deferred rent reversal due to lease termination
 

 

 
(582
)
 

Stock-based compensation expense
 
2,262

 
3,008

 
9,876

 
10,162

Depreciation and amortization expense
 
1,133

 
761

 
3,609

 
2,647

Other income (expense), net
 
(433
)
 
260

 
(833
)
 
(892
)
Provision for income taxes
 
401

 
36

 
1,012

 
841

Adjusted EBITDA
 
(23,242
)
 
(8,745
)
 
(73,483
)
 
(28,080
)
Change in deferred revenue
 
42,630

 
26,217

 
147,706

 
64,032

Change in deferred costs(1)
 
(21,909
)
 
(17,876
)
 
(87,065
)
 
(42,016
)
Adjusted EBITDA on billings(1)
 
$
(2,521
)
 
$
(404
)
 
$
(12,842
)
 
$
(6,064
)
 
 
 
 
 
 
 
 
 
(1) We expect to incur additional costs in the future due to requirements to provide ongoing map updates and provisioning of services such as hosting, monitoring, customer support and, for certain customers, additional prepaid content and associated technology costs. 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
June 30,
 
Fiscal Year Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Net loss
 
$
(26,605
)
 
$
(12,810
)
 
$
(89,118
)
 
$
(47,262
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
 
Change in deferred revenue(1)
 
42,630

 
26,217

 
147,706

 
64,032

Change in deferred costs(2)
 
(21,909
)
 
(17,876
)
 
(87,065
)
 
(42,016
)
Changes in other operating assets and liabilities
 
(658
)
 
2,060

 
6,267

 
2,407

Other adjustments(3)
 
3,427

 
3,875

 
15,214

 
13,387

Net cash provided by (used in) operating activities
 
(3,115
)
 
1,466

 
(6,996
)
 
(9,452
)
Less: Purchases of property and equipment
 
(76
)
 
(358
)
 
(4,648
)
 
(1,225
)
Free cash flow
 
$
(3,191
)
 
$
1,108

 
$
(11,644
)
 
$
(10,677
)
 
 
 
 
 
 
 
 
 
(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=12394897&doc=12
August 7, 2018
Fellow Stockholders,
Telenav continued toward its goal of building the largest network of connected cars in the world. During our fourth quarter ended June 30, 2018 (“Q4 Fiscal 2018”), we continued to launch more car models with our key global automobile manufacturer partners, resulting in an additional 1.2 million cars capable of Telenav connected services. Telenav now has 9.4 million cumulative connected units deployed to date.
The company’s growth engine continues to be the automotive business unit, and we have seen steady growth in direct contribution from billings, as reflected in the accompanying chart where in fiscal 2018 we drove four consecutive quarters of year-over-year growth. We expect fiscal 2019 to be a year of accelerating growth, with the goal of achieving positive adjusted EBITDA on billings for the full year.
Select Financial Data (unaudited)
Fiscal 2017
Fiscal 2018
(in thousands, except gross margin, direct contribution margin and growth)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Total Company
 
 
 
 
 
 
 
 
Revenue
$
42,227

$
52,001

$
35,065

$
40,291

$
36,658

$
39,080

$
13,823

$
16,619

Billings*
$
47,269

$
59,687

$
60,152

$
66,508

$
65,789

$
70,145

$
58,703

$
59,249

     Y/Y % growth
(1
)%
23
 %
13
 %
32
 %
39
 %
18
 %
(2
)%
(11
)%
Direct contribution from billings*
$
20,936

$
27,113

$
25,049

$
26,167

$
24,894

$
27,067

$
26,142

$
26,488

Direct contribution margin from billings*
44
 %
45
 %
42
 %
39
 %
38
 %
39
 %
45
 %
45
 %
Adjusted EBITDA on billings*
$
(4,663
)
$
1,274

$
(2,271
)
$
(404
)
$
(4,386
)
$
(1,801
)
$
(4,133
)
$
(2,521
)
Automotive
 
 
 
 
 
 
 
 
Revenue
$
30,267

$
38,744

$
25,476

$
29,297

$
25,304

$
26,838

$
5,808

$
7,609

Billings*
$
35,380

$
46,438

$
50,599

$
55,731

$
54,492

$
58,097

$
50,663

$
50,360

     Y/Y % growth
(1
)%
32
 %
21
 %
40
 %
54
 %
25
 %
 %
(10
)%
Direct contribution from billings*
$
13,978

$
19,153

$
19,051

$
20,026

$
18,559

$
20,914

$
21,706

$
22,207

Direct contribution margin from billings*
40
 %
41
 %
38
 %
36
 %
34
 %
36
 %
43
 %
44
 %
Cumulative units deployed to date**
9,819

10,953

12,182

13,323

14,476

15,830

17,278

18,547

     Y/Y % growth
78
 %
73
 %
67
 %
62
 %
47
 %
45
 %
42
 %
39
 %
Cumulative connected units deployed to date**
3,579

4,171

4,795

5,379

6,025

6,959

8,181

9,371

     Y/Y % growth
113
 %
105
 %
98
 %
91
 %
68
 %
67
 %
71
 %
74
 %
Advertising
 
 
 
 
 
 
 
 
Revenue
$
6,545

$
8,208

$
5,284

$
6,804

$
7,615

$
8,742

$
4,811

$
6,061

Billings*
$
6,545

$
8,208

$
5,284

$
6,804

$
7,615

$
8,742

$
4,811

$
6,061

     Y/Y % growth
35
 %
23
 %
2
 %
35
 %
16
 %
7
 %
(9
)%
(11
)%
Gross profit
$
3,019

$
4,289

$
3,060

$
3,749

$
4,203

$
4,340

$
2,637

$
2,708

Gross margin
46
 %
52
 %
58
 %
55
 %
55
 %
50
 %
55
 %
45
 %





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

$
5,049

$
4,305

$
4,190

$
3,739

$
3,500

$
3,204

$
2,949

Billings
$
5,344

$
5,041

$
4,269

$
3,973

$
3,682

$
3,306

$
3,229

$
2,828

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

$
3,679

$
2,974

$
2,608

$
2,189

$
2,007

$
1,774

$
1,694

Gross margin
74
 %
73
 %
69
 %
62
 %
59
 %
57
 %
55
 %
57
 %
* See "Use of non-GAAP Measures" for definitions and discussion.
** Deployment date is defined as the date upon which title has transferred.
Our goal is to build the largest network of connected cars to continuously improve the user experience, improve customer loyalty to our automobile manufacturer partners thereby enhancing their brand, and achieve revenue growth for Telenav.
Our strategy is to truly align ourselves with our automobile manufacturers and provide best of breed technology and content to serve their end users.  This will allow us to deeply integrate with car sensor data and utilize multiple screens to provide safe and user-friendly experiences, such as seamless transitions between autonomous and manual driving.
Automotive Results
1.3 million Telenav equipped cars were deployed into the market during Q4 Fiscal 2018 of which 1.2 million units were capable of connected services.
Telenav provides the embedded navigation solution for Ford SYNC®3 globally, including the recent availability of connected features. On June 20, 2018, Ford Motor Company announced that it had earned its best-ever scores in the 2018 J.D. Power Initial Quality Study for North America market, which includes improvements in navigation technology.  As we announced previously, Ford has selected Telenav to provide its next generation navigation solution in North America, but we were not awarded the contract for Europe. There is a competitive bidding environment for the remainder of the geographies and these geographies have not officially been awarded as of today.
Automotive revenue for Q4 Fiscal 2018 was $7.6 million, compared with $29.3 million in Q4 Fiscal 2017. For Fiscal 2018 as a whole, automotive revenue was $65.6 million, compared with $123.8 million in Fiscal 2017. As previously announced, the declines in both Q4 Fiscal 2018 and Fiscal 2018 as a whole were due primarily to a change in revenue recognition due to the commencement of Ford's map update program, whereby revenue from certain on-board navigation products offered with map updates is deferred and recognized over the contractual period during which we provide map updates, as well as the deferral of all prospective Ford royalties beginning January 1, 2018 pending completion of custom development milestone deliveries.
Total automotive billings in Q4 Fiscal 2018 were $50.4 million, compared with $55.7 million in Q4 Fiscal 2017, a decrease due primarily to lower per unit pricing resulting from lower third-party content costs. For Fiscal 2018 as a whole, automotive billings were $213.6 million, compared with $188.1 million in Fiscal 2017. In Q4 Fiscal 2018, Ford represented 34% and 64% of our total revenue and billings, respectively, and in Fiscal 2018 as a whole, Ford represented 55% and 66% of our total revenue and billings, respectively.





Automotive direct contribution from billings in Q4 Fiscal 2018 increased 11% year-over-year to $22.2 million. Q4 Fiscal 2018’s automotive direct contribution margin from billings was 44%, up 8 points from 36% in Q4 Fiscal 2017. The improvement in direct contribution margin from billings was primarily due to the lower third-party content costs on a per unit basis as discussed above. Automotive direct contribution from billings in Fiscal 2018 increased 17% year-over-year to $83.4 million. Fiscal 2018’s automotive direct contribution margin from billings was 39%, up from 38% in Fiscal 2017.
Our automotive manufacturer partners continue to expand their offerings of Telenav’s leading navigation solutions to more car models. GM launched Telenav’s hybrid navigation solution on additional model year 2019 truck and SUV/CUV models, including Chevy Silverado, GMC Sierra and Chevrolet Equinox. Toyota has expanded Telenav technology to its model year 2019 Corolla Hatchback, Avalon and CHR, in addition to the already announced Camry, Sienna, Lexus NX and RC models. While we expect expansion of our Scout GPS Link solution across more Toyota and Lexus models in Fiscal 2019, we recognize that the offering of alternative brought-in solutions such as Apple’s CarPlay, which Toyota recently announced it is offering across certain Toyota models, and the expanded offering of Google’s Android Auto solution across more automotive manufacturers, could impact the duration that Scout GPS Link is offered by Toyota and Lexus.
Advertising Results
Advertising revenue, which includes the delivery of display, location-based advertising impressions, was $6.1 million in Q4 Fiscal 2018, a decrease of $0.7 million from Q4 Fiscal 2017. For Fiscal 2018, advertising revenue was $27.2 million, compared with $26.8 million in Fiscal 2017. Gross Profit decreased to $2.7 million in Q4 Fiscal 2018, a decline of $1.0 million from Q4 Fiscal 2017, due primarily to lower revenue and higher relative inventory costs as measured on a CPM basis. Advertising gross profit for Fiscal 2018 was $13.9 million, compared with $14.1 million in Fiscal 2017. 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.
Mobile Navigation Results
Q4 Fiscal 2018 mobile navigation revenue was $2.9 million, compared with $4.2 million in Q4 Fiscal 2017. For Fiscal 2018, mobile navigation revenue was $13.4 million, compared with $19.0 million in Fiscal 2017. Gross profit was $1.7 million in Q4 Fiscal 2018, compared with $2.6 million from Q4 Fiscal 2017. Mobile navigation gross profit for Fiscal 2018 was $7.7 million, compared with $13.3 million in Fiscal 2017.
Direct Contribution from Billings and Direct Contribution Margin from Billings
Our direct contribution from billings was $26.5 million in Q4 Fiscal 2018, compared with $26.2 million in Q4 Fiscal 2017. Fiscal 2018 direct contribution from billings was $104.6 million, compared with $99.3 million in Fiscal 2017. Direct contribution margin from billings for Q4 Fiscal 2018 was 45%, compared with 39% in Q4 Fiscal 2017. Fiscal 2018 direct contribution margin from billings was 41% as compared with 42% in Fiscal 2017. The year over year improvement in direct contribution margin from billings in Q4 Fiscal 2018 was primarily driven by lower third-party content costs on a per unit basis as discussed above.
Operating Expenses
Operating expenses in Q4 Fiscal 2018 were $32.4 million, compared with $30.3 million in Q4 Fiscal 2017. The increase in operating expenses was primarily driven by an increase in research and development headcount, offset by the capitalization of approximately $0.8 million of internal development costs incurred in developing our Geolink ads self-serve platform. Operating expenses for Fiscal 2018 were $132.9 million, compared with $124.6 million for Fiscal 2017.





Adjusted EBITDA on Billings
Adjusted EBITDA on billings in Q4 Fiscal 2018 was a loss of $(2.5) million as compared to a loss of $(0.4) million in Q4 Fiscal 2017. Adjusted EBITDA on Billings for Fiscal 2018 was a loss of $(12.8) million, compared with a loss of $(6.1) million in Fiscal 2017.
Free Cash Flow
Free cash flow in Q4 Fiscal 2018 was a negative $3.2 million, compared with a positive $1.1 million in Q4 Fiscal 2017 and the change was primarily attributable to a larger loss experienced in Q4 Fiscal 2018. Free cash flow for Fiscal 2018 was a negative $11.6 million, compared with a negative $10.7 million in Fiscal 2017.
Business Outlook
Effective July 1, 2018, we will adopt the new revenue recognition standard, ASC 606. We expect that adoption of ASC 606 will enable us to once again recognize substantial revenue and gross profit from our automobile manufacturer partners as our products and services are delivered.
We have prepared a brief slide deck on our IR website that further explains the change in accounting as a result of the adoption of ASC 606 and the resulting impact on the recording of revenue and deferred revenue. We anticipate that upon the adoption of ASC 606, significant amounts currently set forth in deferred revenue and deferred costs as of June 30, 2018 will be restated as revenue and cost of revenue in our prior period statements of operations and as accumulated deficit on our July 1, 2018 balance sheet.
The Company is finalizing its application of ASC 606, Revenue from Contracts with Customers, effective July 1, 2018, as respects the accounting treatment of revenue and deferred revenue and the associated cost of revenue and deferred content costs. In addition, the Company has not concluded on its application of ASC 340-40, Other Assets and Deferred Costs, Contracts with Customers, effective July 1, 2018, as respects the accounting treatment regarding the potential capitalization of research and development costs and recognition therein as cost of revenue, as discussed below. Accordingly, for the quarter ending September 30, 2018, forward looking guidance on certain financial metrics is limited to a non-GAAP presentation.
Subject to the factors set forth above, including 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, we anticipate that adjusted EBITDA on billings (adjusted cash flow from operations) will be positive for Fiscal 2019.
With the context of this information as a backdrop, our guidance for Q1 Fiscal 2019 is as follows:







Guidance
Q1 Fiscal 2019
(as of August 7, 2018)
(dollars and shares in millions)
Revenue*
$52 to $56
Billings**
$60 to $62
Change in deferred revenue
$8 to $10
Change in deferred costs
$5 to $8
Non-GAAP gross profit**
$22 to $24
Non-GAAP gross margin**
45%
Direct contribution from billings **
$26 to $27
Direct contribution margin from billings **
44%
Non-GAAP Operating expenses***
$34 to $35
Non-GAAP net loss**
$(9.5) to $(11.5)
Adjusted EBITDA**
$(5.5) to $(7.5)
Adjusted EBITDA on billings**
$(2.5) to $(4.5)
Automotive revenue as % of total revenue
80% to 85%
Advertising revenue as % of total revenue
12%
Weighted average diluted shares outstanding
45.5
* Reflects the adoption of ASC 606 on July 1, 2018
** See "Use of non-GAAP Measures" for definitions and discussion
*** Operating expenses include $3 million to $5 million of research and development expenses that Telenav may be required to capitalize as deferred development costs under ASC 340-40
Q4 Fiscal Year 2018 Financial Results Q&A Conference Call, August 7, 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 800-347-6311 (toll-free, domestic only) or 323-794-2094 (domestic and international toll) and enter pass code 5861321. 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 investor letter 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.
To reconcile the historical GAAP results to non-GAAP financial metrics, please refer to the reconciliations in the financial statements included in this investor letter.
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 whereby customized engineering fees are earned. 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 map updates and provisioning of services such as hosting, monitoring, customer support and, for certain customers, additional period content and associated technology costs. 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.
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 and the impact of future deliverables. Adjusted EBITDA and adjusted EBITDA on billings, while generally measures of profitability, can also represent losses. In addition, adjusted EBITDA on billings 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 on billings 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. Effective September 30, 2018, the Company anticipates that the metric “adjusted EBITDA on billings” will be relabeled as “Adjusted Cash Flow from Operations.”
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.
In this letter, Telenav has provided guidance for the first quarter of fiscal 2019 on a non-GAAP basis for billings, change in deferred revenue, gross profit, gross margin, change in deferred costs, direct contribution from billings, direct contribution margin from billings, operating expenses, net loss, adjusted EBITDA and adjusted EBITDA on billings. Telenav does not provide reconciliations of these forward-looking non-GAAP financial measures 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. 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 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 CarPlay 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





ASC 340-40; 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 March 31, 2018 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 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. 
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Contacts
Investor Relations:
Bishop IR
Mike Bishop
415-894-9633
IR@telenav.com

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









Telenav, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
 
 
 
 
 
 
 
June 30,
2018
 
June 30,
2017*
 
 
(unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
17,117

 
$
20,757