Document
false--06-30FY201900014744390.250.500.50P50D1700070000.00160000000044871000469110004487100046911000000P5YP3Y0.00150000000000P5YP3YP3YP4YP4Y100000100000 0001474439 2018-07-01 2019-06-30 0001474439 2019-07-31 0001474439 2018-12-31 0001474439 2019-06-30 0001474439 2018-06-30 0001474439 us-gaap:ProductMember 2018-07-01 2019-06-30 0001474439 2017-07-01 2018-06-30 0001474439 2016-07-01 2017-06-30 0001474439 us-gaap:ServiceMember 2017-07-01 2018-06-30 0001474439 us-gaap:ServiceMember 2018-07-01 2019-06-30 0001474439 us-gaap:ProductMember 2017-07-01 2018-06-30 0001474439 us-gaap:ProductMember 2016-07-01 2017-06-30 0001474439 us-gaap:ServiceMember 2016-07-01 2017-06-30 0001474439 us-gaap:CommonStockMember 2018-07-01 2019-06-30 0001474439 us-gaap:CommonStockMember 2018-06-30 0001474439 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-06-30 0001474439 us-gaap:RetainedEarningsMember 2017-06-30 0001474439 us-gaap:CommonStockMember 2016-07-01 2017-06-30 0001474439 us-gaap:RetainedEarningsMember 2019-06-30 0001474439 us-gaap:AdditionalPaidInCapitalMember 2016-07-01 2017-06-30 0001474439 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001474439 2016-06-30 0001474439 us-gaap:AdditionalPaidInCapitalMember 2018-07-01 2019-06-30 0001474439 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001474439 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-07-01 2017-06-30 0001474439 us-gaap:RetainedEarningsMember 2017-07-01 2018-06-30 0001474439 us-gaap:AdditionalPaidInCapitalMember 2016-06-30 0001474439 us-gaap:AdditionalPaidInCapitalMember 2017-07-01 2018-06-30 0001474439 us-gaap:CommonStockMember 2017-06-30 0001474439 us-gaap:RetainedEarningsMember 2018-07-01 2019-06-30 0001474439 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001474439 us-gaap:AccountingStandardsUpdate201616Member 2017-07-01 0001474439 us-gaap:CommonStockMember 2017-07-01 2018-06-30 0001474439 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-07-01 2019-06-30 0001474439 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001474439 2017-06-30 0001474439 us-gaap:CommonStockMember 2016-06-30 0001474439 us-gaap:AccountingStandardsUpdate201616Member us-gaap:RetainedEarningsMember 2017-07-01 0001474439 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-06-30 0001474439 us-gaap:CommonStockMember 2019-06-30 0001474439 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-07-01 2018-06-30 0001474439 us-gaap:AdditionalPaidInCapitalMember 2017-06-30 0001474439 us-gaap:RetainedEarningsMember 2016-07-01 2017-06-30 0001474439 us-gaap:RetainedEarningsMember 2018-06-30 0001474439 us-gaap:RetainedEarningsMember 2016-06-30 0001474439 us-gaap:AccountingStandardsUpdate201409Member 2016-06-30 0001474439 tnav:FordMotorCompanyMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2017-07-01 2018-06-30 0001474439 tnav:FordMotorCompanyMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2016-07-01 2017-06-30 0001474439 tnav:MobileNavigationMember 2017-07-01 2018-06-30 0001474439 tnav:GeneralMotorsHoldingsMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-06-30 0001474439 tnav:GeneralMotorsHoldingsMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-06-30 0001474439 tnav:GeneralMotorsHoldingsMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2017-07-01 2018-06-30 0001474439 tnav:FordMotorCompanyMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-06-30 0001474439 us-gaap:FurnitureAndFixturesMember 2018-07-01 2019-06-30 0001474439 us-gaap:CostOfSalesMember 2018-07-01 2019-06-30 0001474439 tnav:XevoIncMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-06-30 0001474439 tnav:FordMotorCompanyMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2017-07-01 2018-06-30 0001474439 tnav:FordMotorCompanyMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-06-30 0001474439 us-gaap:CostOfSalesMember 2016-07-01 2017-06-30 0001474439 tnav:ComputerSoftwareMember 2018-07-01 2019-06-30 0001474439 tnav:AdvertisingSegmentMember 2018-07-01 2019-06-30 0001474439 us-gaap:CostOfSalesMember 2017-07-01 2018-06-30 0001474439 srt:RestatementAdjustmentMember us-gaap:AccountingStandardsUpdate201409Member 2017-07-01 2018-06-30 0001474439 srt:ScenarioPreviouslyReportedMember 2016-07-01 2017-06-30 0001474439 us-gaap:ProductMember srt:RestatementAdjustmentMember us-gaap:AccountingStandardsUpdate201409Member 2016-07-01 2017-06-30 0001474439 srt:RestatementAdjustmentMember us-gaap:AccountingStandardsUpdate201409Member 2016-07-01 2017-06-30 0001474439 us-gaap:ProductMember srt:ScenarioPreviouslyReportedMember 2016-07-01 2017-06-30 0001474439 us-gaap:ServiceMember srt:RestatementAdjustmentMember us-gaap:AccountingStandardsUpdate201409Member 2017-07-01 2018-06-30 0001474439 us-gaap:ServiceMember srt:ScenarioPreviouslyReportedMember 2017-07-01 2018-06-30 0001474439 us-gaap:ServiceMember srt:RestatementAdjustmentMember us-gaap:AccountingStandardsUpdate201409Member 2016-07-01 2017-06-30 0001474439 srt:ScenarioPreviouslyReportedMember 2017-07-01 2018-06-30 0001474439 us-gaap:ProductMember srt:RestatementAdjustmentMember us-gaap:AccountingStandardsUpdate201409Member 2017-07-01 2018-06-30 0001474439 us-gaap:ServiceMember srt:ScenarioPreviouslyReportedMember 2016-07-01 2017-06-30 0001474439 us-gaap:ProductMember srt:ScenarioPreviouslyReportedMember 2017-07-01 2018-06-30 0001474439 tnav:DevelopmentMember 2018-07-01 2019-06-30 0001474439 tnav:DevelopmentMember 2018-06-30 0001474439 tnav:ContentMember 2019-06-30 0001474439 tnav:ContentMember 2018-06-30 0001474439 tnav:ContentMember 2018-07-01 2019-06-30 0001474439 tnav:DevelopmentMember 2019-06-30 0001474439 tnav:OnBoardAutomotiveNavigationSolutionsMember us-gaap:TransferredAtPointInTimeMember 2017-07-01 2018-06-30 0001474439 tnav:AdvertisingServicesMember us-gaap:TransferredAtPointInTimeMember 2018-07-01 2019-06-30 0001474439 tnav:BroughtinAutomotiveNavigationSolutionsMember us-gaap:TransferredOverTimeMember 2018-07-01 2019-06-30 0001474439 tnav:MobileNavigationMember us-gaap:TransferredOverTimeMember 2018-07-01 2019-06-30 0001474439 tnav:BroughtinAutomotiveNavigationSolutionsMember us-gaap:TransferredOverTimeMember 2016-07-01 2017-06-30 0001474439 tnav:OnBoardAutomotiveNavigationSolutionsMember us-gaap:TransferredAtPointInTimeMember 2018-07-01 2019-06-30 0001474439 tnav:AdvertisingServicesMember us-gaap:TransferredAtPointInTimeMember 2017-07-01 2018-06-30 0001474439 tnav:OnBoardAutomotiveNavigationSolutionsMember us-gaap:TransferredAtPointInTimeMember 2016-07-01 2017-06-30 0001474439 tnav:MobileNavigationMember us-gaap:TransferredOverTimeMember 2016-07-01 2017-06-30 0001474439 tnav:AdvertisingServicesMember us-gaap:TransferredAtPointInTimeMember 2016-07-01 2017-06-30 0001474439 tnav:AutomotiveMaintenanceAndSupportMember us-gaap:TransferredOverTimeMember 2017-07-01 2018-06-30 0001474439 tnav:MobileNavigationMember us-gaap:TransferredOverTimeMember 2017-07-01 2018-06-30 0001474439 tnav:AutomotiveMaintenanceAndSupportMember us-gaap:TransferredOverTimeMember 2018-07-01 2019-06-30 0001474439 tnav:BroughtinAutomotiveNavigationSolutionsMember us-gaap:TransferredOverTimeMember 2017-07-01 2018-06-30 0001474439 tnav:AutomotiveMaintenanceAndSupportMember us-gaap:TransferredOverTimeMember 2016-07-01 2017-06-30 0001474439 srt:ScenarioPreviouslyReportedMember 2018-06-30 0001474439 srt:RestatementAdjustmentMember us-gaap:AccountingStandardsUpdate201409Member 2018-06-30 0001474439 us-gaap:AccumulatedTranslationAdjustmentMember 2018-07-01 2019-06-30 0001474439 us-gaap:AccumulatedTranslationAdjustmentMember 2017-07-01 2018-06-30 0001474439 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-07-01 2019-06-30 0001474439 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-30 0001474439 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-07-01 2018-06-30 0001474439 us-gaap:AccumulatedTranslationAdjustmentMember 2017-06-30 0001474439 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-06-30 0001474439 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-06-30 0001474439 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-30 0001474439 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-06-30 0001474439 us-gaap:AutomobilesMember 2018-07-01 2019-06-30 0001474439 srt:MaximumMember 2018-07-01 2019-06-30 0001474439 srt:MinimumMember 2018-07-01 2019-06-30 0001474439 us-gaap:ComputerEquipmentMember 2018-07-01 2019-06-30 0001474439 us-gaap:EmployeeStockOptionMember 2018-07-01 2019-06-30 0001474439 us-gaap:EmployeeStockOptionMember 2017-07-01 2018-06-30 0001474439 us-gaap:RestrictedStockMember 2017-07-01 2018-06-30 0001474439 us-gaap:RestrictedStockMember 2018-07-01 2019-06-30 0001474439 us-gaap:RestrictedStockMember 2016-07-01 2017-06-30 0001474439 us-gaap:EmployeeStockOptionMember 2016-07-01 2017-06-30 0001474439 us-gaap:CommercialPaperMember 2018-06-30 0001474439 us-gaap:AssetBackedSecuritiesMember 2018-06-30 0001474439 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2018-06-30 0001474439 us-gaap:MunicipalNotesMember 2018-06-30 0001474439 us-gaap:USTreasurySecuritiesMember 2018-06-30 0001474439 us-gaap:CorporateBondSecuritiesMember 2018-06-30 0001474439 us-gaap:MoneyMarketFundsMember 2018-06-30 0001474439 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-06-30 0001474439 us-gaap:MunicipalBondsMember 2018-06-30 0001474439 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-06-30 0001474439 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-06-30 0001474439 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2019-06-30 0001474439 us-gaap:CorporateBondSecuritiesMember 2019-06-30 0001474439 us-gaap:AssetBackedSecuritiesMember 2019-06-30 0001474439 us-gaap:USTreasurySecuritiesMember 2019-06-30 0001474439 us-gaap:CommercialPaperMember 2019-06-30 0001474439 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2019-06-30 0001474439 us-gaap:MunicipalNotesMember 2019-06-30 0001474439 us-gaap:MoneyMarketFundsMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:CommercialPaperMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:AssetBackedSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:AssetBackedSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:MunicipalNotesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:AssetBackedSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:CommercialPaperMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:CorporateBondSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateBondSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:MoneyMarketFundsMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:CommercialPaperMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:USTreasurySecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:MunicipalNotesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:MunicipalNotesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:CorporateBondSecuritiesMember 2019-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:USTreasurySecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:CommercialPaperMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:AssetBackedSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:AssetBackedSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:USTreasurySecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:CommercialPaperMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:MunicipalNotesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member 2018-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:CorporateBondSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:USTreasurySecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:CorporateBondSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:AssetBackedSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel2Member 2018-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:MunicipalNotesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:MoneyMarketFundsMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:MunicipalNotesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel2Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateBondSecuritiesMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:CommercialPaperMember 2018-06-30 0001474439 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2018-06-30 0001474439 us-gaap:AutomobilesMember 2019-06-30 0001474439 tnav:ComputerSoftwareMember 2018-06-30 0001474439 us-gaap:LeaseholdImprovementsMember 2019-06-30 0001474439 us-gaap:ComputerEquipmentMember 2018-06-30 0001474439 us-gaap:FurnitureAndFixturesMember 2018-06-30 0001474439 us-gaap:AutomobilesMember 2018-06-30 0001474439 us-gaap:LeaseholdImprovementsMember 2018-06-30 0001474439 us-gaap:ComputerEquipmentMember 2019-06-30 0001474439 tnav:ComputerSoftwareMember 2019-06-30 0001474439 us-gaap:FurnitureAndFixturesMember 2019-06-30 0001474439 tnav:AdvertisingSegmentMember 2019-06-30 0001474439 tnav:AutomotiveSegmentMember 2019-06-30 0001474439 tnav:AutomotiveSegmentMember 2018-07-01 2019-06-30 0001474439 tnav:AdvertisingSegmentMember 2018-06-30 0001474439 tnav:AutomotiveSegmentMember 2018-06-30 0001474439 srt:MinimumMember 2019-07-01 2019-06-30 0001474439 srt:MaximumMember 2019-07-01 2019-06-30 0001474439 tnav:VehicleIPLLCMember us-gaap:IndemnificationGuaranteeMember 2017-01-12 2017-01-12 0001474439 2017-01-01 2017-01-31 0001474439 tnav:LocationBasedServicesLLCCaseMember us-gaap:PendingLitigationMember 2017-07-01 2018-06-30 0001474439 tnav:AvayaSubleaseMember 2017-08-31 0001474439 tnav:LocationBasedServicesLLCCaseMember us-gaap:PendingLitigationMember 2017-11-22 2017-11-22 0001474439 us-gaap:IndemnificationGuaranteeMember 2017-08-31 0001474439 us-gaap:IndemnificationGuaranteeMember 2017-07-01 2018-06-30 0001474439 tnav:VehicleIPLLCMember us-gaap:IndemnificationGuaranteeMember 2015-07-01 2016-06-30 0001474439 tnav:AvayaSubleaseMember 2017-07-01 2018-06-30 0001474439 us-gaap:SellingAndMarketingExpenseMember 2017-07-01 2018-06-30 0001474439 us-gaap:GeneralAndAdministrativeExpenseMember 2017-07-01 2018-06-30 0001474439 us-gaap:SellingAndMarketingExpenseMember 2018-07-01 2019-06-30 0001474439 us-gaap:ResearchAndDevelopmentExpenseMember 2017-07-01 2018-06-30 0001474439 us-gaap:GeneralAndAdministrativeExpenseMember 2018-07-01 2019-06-30 0001474439 us-gaap:ResearchAndDevelopmentExpenseMember 2018-07-01 2019-06-30 0001474439 us-gaap:ResearchAndDevelopmentExpenseMember 2016-07-01 2017-06-30 0001474439 us-gaap:SellingAndMarketingExpenseMember 2016-07-01 2017-06-30 0001474439 us-gaap:GeneralAndAdministrativeExpenseMember 2016-07-01 2017-06-30 0001474439 us-gaap:RestrictedStockUnitsRSUMember 2018-07-01 2019-06-30 0001474439 us-gaap:RestrictedStockUnitsRSUMember 2019-06-30 0001474439 us-gaap:RestrictedStockUnitsRSUMember 2018-06-30 0001474439 us-gaap:RestrictedStockUnitsRSUMember 2016-07-01 2017-06-30 0001474439 us-gaap:EmployeeStockOptionMember 2018-07-01 2019-06-30 0001474439 us-gaap:EmployeeStockOptionMember 2017-07-01 2018-06-30 0001474439 us-gaap:EmployeeStockOptionMember 2016-07-01 2017-06-30 0001474439 us-gaap:RestrictedStockUnitsRSUMember 2017-07-01 2018-06-30 0001474439 tnav:NonqualifiedStockOptionsMember 2018-07-01 2019-06-30 0001474439 srt:MaximumMember us-gaap:PerformanceSharesMember tnav:PerformanceShareProgram2015Member 2018-10-01 2018-10-31 0001474439 tnav:EquityIncentivePlan2009Member 2018-07-01 2019-06-30 0001474439 us-gaap:PerformanceSharesMember tnav:PerformanceShareProgram2015Member 2017-06-30 0001474439 2019-02-28 0001474439 us-gaap:PerformanceSharesMember 2018-10-01 2018-10-31 0001474439 2019-02-01 2019-02-28 0001474439 us-gaap:PerformanceSharesMember 2016-12-01 2016-12-31 0001474439 us-gaap:PerformanceSharesMember us-gaap:ShareBasedCompensationAwardTrancheThreeMember 2018-10-01 2018-10-31 0001474439 us-gaap:PerformanceSharesMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2018-10-01 2018-10-31 0001474439 us-gaap:PerformanceSharesMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2018-10-01 2018-10-31 0001474439 us-gaap:StateAndLocalJurisdictionMember us-gaap:ResearchMember 2019-06-30 0001474439 2017-05-31 0001474439 us-gaap:InternalRevenueServiceIRSMember us-gaap:ResearchMember 2019-06-30 0001474439 us-gaap:ValuationAllowanceOperatingLossCarryforwardsMember 2018-07-01 2019-06-30 0001474439 us-gaap:ForeignCountryMember 2019-06-30 0001474439 us-gaap:TaxYear2012Member 2016-07-01 2017-06-30 0001474439 us-gaap:InternalRevenueServiceIRSMember 2019-06-30 0001474439 us-gaap:StateAndLocalJurisdictionMember 2019-06-30 0001474439 2018-01-01 2018-01-01 0001474439 tnav:AdvertisingSegmentMember 2017-07-01 2018-06-30 0001474439 tnav:MobileNavigationMember 2016-07-01 2017-06-30 0001474439 tnav:MobileNavigationMember 2018-07-01 2019-06-30 0001474439 tnav:AutomotiveSegmentMember 2016-07-01 2017-06-30 0001474439 tnav:AutomotiveSegmentMember 2017-07-01 2018-06-30 0001474439 tnav:AdvertisingSegmentMember 2016-07-01 2017-06-30 0001474439 us-gaap:NonUsMember 2016-07-01 2017-06-30 0001474439 country:US 2018-07-01 2019-06-30 0001474439 us-gaap:NonUsMember 2017-07-01 2018-06-30 0001474439 us-gaap:NonUsMember 2019-06-30 0001474439 country:US 2017-07-01 2018-06-30 0001474439 country:US 2019-06-30 0001474439 us-gaap:NonUsMember 2018-06-30 0001474439 us-gaap:NonUsMember 2018-07-01 2019-06-30 0001474439 country:US 2016-07-01 2017-06-30 0001474439 country:US 2018-06-30 0001474439 2018-07-01 2018-09-30 0001474439 2017-10-01 2017-12-31 0001474439 2019-04-01 2019-06-30 0001474439 2019-01-01 2019-03-31 0001474439 2018-04-01 2018-06-30 0001474439 2017-07-01 2017-09-30 0001474439 2018-01-01 2018-03-31 0001474439 2018-10-01 2018-12-31 0001474439 srt:ProFormaMember 2018-07-01 2019-06-30 0001474439 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember tnav:AdvertisingDeliveryPlatformMember 2019-06-30 0001474439 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember tnav:AdvertisingDeliveryPlatformMember us-gaap:SubsequentEventMember 2019-08-19 0001474439 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember tnav:AdvertisingDeliveryPlatformMember us-gaap:SubsequentEventMember 2019-08-01 2019-08-19 0001474439 us-gaap:AllowanceForCreditLossMember 2017-07-01 2018-06-30 0001474439 us-gaap:AllowanceForCreditLossMember 2016-07-01 2017-06-30 0001474439 us-gaap:AllowanceForCreditLossMember 2018-07-01 2019-06-30 0001474439 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2016-06-30 0001474439 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2019-06-30 0001474439 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-07-01 2019-06-30 0001474439 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-06-30 0001474439 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-06-30 0001474439 us-gaap:AllowanceForCreditLossMember 2019-06-30 0001474439 us-gaap:AllowanceForCreditLossMember 2017-06-30 0001474439 us-gaap:AllowanceForCreditLossMember 2016-06-30 0001474439 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2016-07-01 2017-06-30 0001474439 us-gaap:AllowanceForCreditLossMember 2018-06-30 0001474439 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-07-01 2018-06-30 tnav:reporting_unit tnav:security xbrli:pure tnav:segment xbrli:shares iso4217:USD iso4217:USD xbrli:shares tnav:vote tnav:settlement_agreement tnav:milestone tnav:patent tnav:pending_and_settled_claim
Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
 
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2019

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

4655 Great America Parkway, Suite 300
Santa Clara, California 95054
(Address of principal executive offices) (Zip Code)
(408) 245-3800
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
Title of each class 
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 Par Value per Share
TNAV
The NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act:
None
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes    No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth" company in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
 
Accelerated filer
 
Non-accelerated filer
 
 
 
Smaller reporting company
 
 
 

 
Emerging growth company
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   No  

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of December 31, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $111 million (based on the closing sale price of $4.06 per share as reported on the NASDAQ Global Market) on December 31, 2018. For purposes of this calculation, shares of common stock held by officers and directors and shares of common stock held by persons who hold more than 10% of the outstanding common stock of the registrant have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the registrant’s Common Stock, $0.001 par value per share, outstanding as of July 31, 2019 was 47,223,144.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement relating to its 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K where indicated. Such Proxy Statement will be filed with the United States Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.



Table of Contents

TELENAV, INC.
FORM 10-K
TABLE OF CONTENTS
 
 
 
 
 
 
Page
PART I
 
 
 
 
 
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
 
 
 
PART II
 
 
 
 
 
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
 
 
 
PART III
 
 
 
 
 
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
 
 
 
PART IV
 
 
 
 
 
ITEM 15.
ITEM 16.


Table of Contents

Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, or this Form 10-K, contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the sections entitled “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.” Forward-looking statements include information concerning our possible or assumed future results of operations, use of cash, accounting for and future sources of revenue, expectations regarding expenses, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and areas of decline, regulatory environment and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Risk Factors” and elsewhere in this Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this Form 10-K.
Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect.
Corporate Information
Our predecessor company, TeleNav, Inc., incorporated in the State of Delaware in 1999 and we incorporated in the State of Delaware in 2009 as TNAV Holdings, Inc. Pursuant to stockholder approvals received in December 2009, our predecessor company merged with and into us on April 15, 2010. As the entity surviving the merger, upon completion of the merger, we changed our name to TeleNav, Inc. In November 2012, we changed our name to Telenav, Inc. Our executive offices are located at 4655 Great America Parkway, Suite 300, Santa Clara, California 95054, and our telephone number is (408) 245-3800. Our website address is www.telenav.com. The information on, or that can be accessed through, our website is not part of this Form 10-K.
We file or furnish periodic reports, including our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K, our proxy statements and other information with the Securities and Exchange Commission, or the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically. Our reports, proxy statements and other information are also made available, free of charge, on our investor relations website at http://investor.telenav.com/financials.cfm as soon as reasonably practicable after we electronically file such information with the SEC. The information posted on our website is not incorporated into this Form 10-K.
In this Form 10-K, "Telenav," “we,” “us” and “our” refer to Telenav, Inc. and its subsidiaries.
The names Chatbaka™, Geolink™, HopOver™, LivingMap™, ONMYWAY®, OpenTerra™, RealReach™, RoadSense™, Scout®, Scout GPS Link™, Sipity®, skobbler®, Telenav®, Telenav GPS Navigator™, Telenav Navigator™, Telenav Scout™, TrueDelta™, and TurnStream™, as well as the Telenav, Scout and skobbler logos are our trademarks. All other trademarks and trade names appearing in this Form 10-K are the property of their respective owners.



ii

Table of Contents

PART I.


ITEM 1.
BUSINESS
Overview
Telenav is a leading provider of location-based products and services for connected cars. We utilize our connected car platform to deliver these products and services. Our connected car platform allows us to deliver enhanced location-based navigation services to automobile manufacturers and tier one suppliers, or tier ones. In addition, as discussed below, until August 2019, we utilized our advertising platform, which we refer to as our Ads Business, to deliver highly targeted advertising services to advertisers and advertising agencies by leveraging our location expertise. We reported results through June 30, 2019 in three business segments: automotive, advertising and mobile navigation. Our fiscal year ends June 30. In this Form 10-K, we refer to the fiscal years ended June 30, 2017, 2018 and 2019 and ending June 30, 2020 as fiscal 2017, fiscal 2018, fiscal 2019 and fiscal 2020, respectively. Our total revenue was $209.7 million in fiscal 2017, $218.5 million in fiscal 2018 and $220.9 million in fiscal 2019. Our net loss was $29.5 million in fiscal 2017, $40.8 million in fiscal 2018 and $32.5 million in fiscal 2019.
We derive revenue primarily from automobile manufacturers and tier ones whose vehicles or systems incorporate our proprietary personalized navigation software and services. These manufacturers and tier ones generally do not provide us with any volume or revenue guarantees.
Our legacy mobile navigation business has declined steadily since fiscal 2013, and we expect it to continue to decline and represent less than 10% of our consolidated revenue in fiscal 2020. Our mobile navigation business generates revenue from our partnerships with wireless carriers who sell our navigation services to their subscribers either as a standalone service or in a bundle with other data or services. The mobile navigation business has declined both in absolute dollars and as a percentage of revenue from $116.4 million, or 61% of our revenue, in fiscal 2013 to $9.8 million, or 4% of our revenue, in fiscal 2019, as subscriptions for paid navigation services declined in favor of free or freemium navigation services offered by our competitors with greater resources and name recognition, such as Google and Apple. We have experienced and anticipate that we will continue to experience the non-renewal of our agreements for these services by our wireless carrier customers as demand from their subscribers declines. In the event our mobile navigation business ceases to be profitable, we may ultimately elect to terminate our legacy wireless carrier mobile navigation business to the extent allowable under our contractual arrangements.
We offer four variations of our connected car products and services to our automobile manufacturer and tier one customers for distribution with their vehicles and systems. First, we offer on-board navigation systems that are built into vehicles with all key elements of the system residing in the vehicle as a self-contained application along with the related software and content. Our on-board navigation products do not require access to the Internet or wireless networks to function. Second, we offer advanced navigation solutions that contain on-board functionality and also add cloud functionality such as cloud search, cloud routing, map updates and “live” data. We refer to these solutions as hybrid navigation. Third, we offer mobile phone-based navigation solutions that run on the phone and provide an interactive map and navigation instructions to the vehicle's video screen and audio system, which we refer to as brought-in navigation. Finally, we offer a Navigation Software Development Kit, or SDK, that enables our customers to add mapping and location capabilities to their cloud, mobile and on-board automotive applications. We believe our history as a supplier of cloud-based navigation services combined with our proven track record of delivering navigation solutions to three of the top five global automobile manufacturers provides a unique advantage in the automotive navigation marketplace over our competitors.
We provide our connected car products and services directly to automobile manufacturers such as Ford Motor Company and affiliated entities, or Ford, which represented 55% of our revenue in fiscal 2019, General Motors Holdings and its affiliates, or GM, which represented 18% of our revenue in fiscal 2019, and Toyota Motor Corporation, or Toyota. We also provide our products and services indirectly through tier ones such as Xevo, Inc., or Xevo, for certain Toyota solutions; LG Electronics, Inc., or LG, for certain Opel solutions; and Panasonic Automotive Systems Company of America, or Panasonic, for certain Fiat Chrysler Automobiles, or FCA, solutions.
In August 2019, we sold the Ads Business to inMarket Media, LLC, or inMarket, a provider of digital advertising services (the "inMarket Transaction"). Upon the terms and subject to the conditions of the Asset Purchase Agreement, inMarket acquired substantially all of the assets and assumed certain liabilities related to and used in the Ads Business. In exchange, inMarket issued to Telenav units of inMarket representing a 14.5% member interest in inMarket at the time of closing of the transaction. In addition, inMarket granted to Telenav a perpetual, non-exclusive, irrevocable, royalty-free, license back to the software and

1

Table of Contents

other intellectual property rights being assigned to inMarket as part of the inMarket Transaction. We will report the operating results of the Ads Business as discontinued operations in our condensed consolidated financial statements for the first quarter of fiscal 2020 and for all prior comparative periods.
In August 2019, we entered into certain agreements with affiliates of Grab Holdings, Inc., which, collectively with certain of its affiliates, we refer to as Grab, including: (i) a services agreement pursuant to which we agreed that we will provide certain services to Grab through certain of our employees designated to work on our OpenTerra location-based services platform, which we refer to as our OpenTerra Platform; (ii) a license agreement pursuant to which we have granted to Grab a perpetual license to certain intellectual property associated with the OpenTerra Platform; and (iii) an asset purchase agreement pursuant to which we will sell certain intellectual property associated with the OpenTerra Platform to Grab and facilitate the making of offers for employment or consulting arrangements by Grab of certain of our OpenTerra employees. The transactions contemplated by the services agreement, license agreement and asset purchase agreement together comprise the “Grab Transaction.” The consideration for the services agreement, license agreement and asset purchase agreement is a mix of cash and Grab Holdings, Inc. ordinary shares. The asset purchase component of the Grab Transaction is subject to customary closing conditions and is expected to close before June 30, 2020.
Automotive Navigation
Industry background
The automotive industry is going through a significant transformation due to the convergence of connectivity, autonomy, shared mobility and electrification, or CASE. In addition, due to high consumer expectations set by mobile phones, consumers are demanding user friendly products that are well integrated, always up-to-date and easy to use. Our market research has shown that in-vehicle infotainment is one of the features that drivers value most when purchasing a new car.
We believe, and market studies by Strategy Analytics, a leading automotive market research firm, indicate, navigation has been and will continue to be one of the highest demanded features within in-vehicle infotainment systems. With the current CASE trends, navigation and the navigation platform will become increasingly important because the services used for in-vehicle infotainment either stem from or must work with the navigation system. Therefore, navigation will become integral to providing a seamless infotainment experience. For example, driver safety continues to be a key priority for government regulators and automobile manufacturers globally, and the European New Car Assessment Program, or NCAP gives safety incentive points to vehicles with Speed Assist Systems, or SAS features, some of which require mapping and navigation software. Due to these pressures, automobile manufacturers are adding navigation as a standard feature on more vehicles.
In addition, navigation is an essential aspect of autonomous vehicles, as mapping and navigation are required to localize the vehicle and guide it to its destination. For shared mobility, finding the nearest vehicle to a rider and routing the vehicle requires mapping and navigation. For electric vehicles, range planning, optimization of energy use and finding charging stations along the route are enabled by mapping and navigation. For these reasons, navigation is becoming increasingly important and a key element of future vehicle infotainment and safety systems.
Industry challenges
The automotive industry is experiencing increasing pressures from new entrants, such as Tesla, and other industries, such as the software industry, that have fast innovation and execution, which enable them to capitalize on current trends. As a result, traditional automobile manufacturers are striving to keep up with consumer demands for new and updated content on the infotainment system, which previously was not capable of being updated without inconveniencing the consumer. According to Strategy Analytics, customers consider on-board access to connected applications an important factor in determining their purchase decision. Consumers are strongly indicating their desire to access connected apps through their vehicle’s controls and displays. Automobile manufacturers that enhance the in-vehicle experience with cloud connectivity and improved infotainment capabilities can find greater acceptance from consumers, but the delivery of these capabilities is technically challenging and not a traditional part of the automobile manufacturer's capabilities or supply chain. This challenge is driving automobile manufacturers to seek new partners to create differentiated in-car experiences. Automobile manufacturers are also under pressure because of the proliferation of brought-in platforms and products such as Apple's CarPlay and Google's Android Auto along with other initiatives, including Open Automotive Alliance, which take control of the products and platforms away from automobile manufacturers and tier ones and could diminish brand loyalty to the automobile manufacturer. To counter this, automobile manufacturers are investing heavily in their infotainment solutions and leveraging their ability to provide better integration of the various automobile systems resulting in easy-to-use hybrid navigation services that are seamlessly integrated with in-vehicle displays (center screen, cluster, heads up display, rear-seat), speakers, voice recognition and vehicle sensors.

2

Table of Contents

Our competitive strengths
Automobile manufacturers procure various elements of each vehicle that they manufacture from third party suppliers directly and through tier ones. We work directly with automobile manufacturers such as Ford, GM and Toyota, as well as through tier ones. Our strong track record as a provider of connected and personalized navigation services to mobile phones and our history of working with large wireless carriers has helped us develop skills and technology that are well suited to meet the demands faced by today's automobile manufacturers and tier ones. The sales cycle for automotive navigation systems is long, consultative and requires direct and continuous engagement with the automobile manufacturer and tier ones to succeed in securing business. Often the automobile manufacturer uses the sales process to help it define the ultimate product that it delivers to its end users in a way that not only enhances customer experience but also allows the automobile manufacturer to differentiate itself from the competition. We believe that our success with on-board, brought-in and hybrid navigation solutions at Ford and GM, and the continuing shift in emphasis to connected services has demonstrated the strength of our offerings to other automobile manufacturers and tier ones. Through our ongoing collaboration with automobile manufacturers, we remain aligned with their goals and offer solutions that allow them to differentiate themselves from other competitors, providing their users with a superior experience and, as a result, creating brand loyalty among their customers.
Our automotive products and services
We entered the automotive navigation services business in fiscal 2008, initially with Ford, and our first on-board navigation product was launched in Ford's model year 2010 vehicles. Since that time, we have been working with Ford and other automobile manufacturers and tier ones to deploy our various navigation products and services worldwide through on-board, brought-in and hybrid systems.
Ford currently distributes our on-board product as a standard or optional feature in certain of its models and locations. More recently, this solution has been enhanced with a phone-based connectivity feature providing key search capabilities. Our navigation products are now included in Ford models principally manufactured and sold in North America, South America, Europe and China, as well as distributed in models sold in Australia and New Zealand. In each geography where we provide navigation products to Ford, Ford also provides a map update program under which Ford owners in North America, South America, China and Europe with SYNC® 3 and in Australia and New Zealand with SYNC® 2 or SYNC 3 are eligible to receive annual map updates at no additional cost through the contractual period with the respective entity.
In December 2017, we announced that Ford had chosen Telenav to provide its next generation navigation solution in North America, subject to certain conditions and execution of an agreement regarding those solutions. The terms of this next generation navigation solution were embodied in an amendment executed in December 2018. We were not awarded the contracts for Europe, South America and Australia and New Zealand.
We also have agreements with GM to provide our on-board and hybrid navigation solutions in its vehicles. Our navigation SDK powers GM's OnStar RemoteLink, and associated branded mobile applications, MyBuick, MyCadillac, MyChevrolet and MyGMC. In February 2017, GM launched its first model featuring integration of our hybrid navigation solution in North America, the 2017 Cadillac CTS and CTS-V. Our solution is currently available in North America on select 2019 models of Cadillac, GMC, Chevrolet and Buick. GM has also launched vehicles with our hybrid navigation solution in China and the Middle East. Our hybrid navigation solution is scheduled to become available in additional regions and GM models for model years 2020 to 2025.
We provide entry level on-board navigation through LG, a tier one supplier for the Opel and Vauxhall line of vehicles, for the European market, even after the sale of the Opel and Vauxhall brands to PSA Group in August 2017. This solution launched in Opel's Adam, Corsa, Karl and Zafira model vehicles in July 2017. Our solution is expected to be made available in select vehicles for model years 2020 to 2022.
We have a partnership with Toyota for brought-in navigation services where our Scout GPS Link mobile application is enabled to connect with select Toyota and Lexus models in the United States and Canada. Toyota and Lexus vehicles enabled to connect with our Scout GPS Link began shipping in August 2015 and September 2016, respectively. In addition, we have an agreement with Xevo, Inc., a tier one supplier to Toyota, whereby our Scout GPS Link and XevoTM Engine Link provide brought-in navigation services, including a fully interactive moving map, for select Toyota vehicles equipped with Entune 3.0 Audio, as well as select Lexus vehicles equipped with Lexus Enform. Our fully interactive solution first became available on select model year 2018 Toyota Camry and Sienna and Lexus NX and RC models, and was recently expanded to select model year 2019 Toyota Corolla hatchback, Avalon, CHR and RAV4 models, as well as Lexus UX and select model year 2020 Corolla sedans and Prius Prime. On these same Toyota and Lexus models, a premium embedded connected navigation option is also available that provides cloud-based search, powered by our navigation SDK.

3

Table of Contents

While we saw expansion of our latest version of Scout GPS Link solution across more Toyota and Lexus models in fiscal 2019, we expect Toyota to limit or reduce the number of models or vehicles on which Scout GPS Link is offered by Toyota and Lexus, beginning in model year 2021, due in part to the offering of alternative brought-in solutions such as Apple’s CarPlay, which Toyota is offering across certain Toyota models, and the expanded offering of Google’s Android Auto solution across more automobile manufacturers.
During the fourth quarter of fiscal 2019, Telenav entered into an amended agreement with Xevo. The amended agreement provides that we will receive a one-time $17.0 million cash pre-payment in the first quarter of fiscal 2020 in exchange for removing a contractual minimum unit commitment that otherwise would have resulted in a payment to us in fiscal 2027. We recorded the receivable as deferred revenue in the fourth quarter of fiscal 2019, and it will be recognized as revenue over future periods. Our contract with Xevo relating to the implementation of our solutions in Toyota and Lexus vehicles is expected to remain in place through 2026, and we are exploring additional opportunities with Xevo and Toyota as well.
In August 2017, Daimler AG, or Mercedes, selected Telenav’s enhanced OpenStreetMap, or OSM, platform and navigation SDK to power its Mercedes-Benz COMAND TOUCH® Rear Seat Entertainment system throughout the world. In May 2019, we announced that our solution will provide fully interactive mapping for rear seat entertainment and will be launched as optional equipment on the current Mercedes E-class and S-class models.
We also have an agreement to offer our on-board navigation solution in select Jeep and Chrysler vehicles in the China market through Panasonic. Our on-board navigation solution was initially included in the 2018 Jeep Grand Cherokee, which had its China launch in August 2017, and is now included in other Jeep Cherokee and Compass models in China.
Going forward, we anticipate more automobile manufacturers and tier ones will offer our hybrid navigation solutions with up-to-date data such as traffic, fuel prices, maps and points of interest, or POIs, to deliver an enhanced user experience. In addition, as the market transitions to cars that are “always connected,” we expect our product and service offerings to become more personalized, safer and seamlessly integrated with other functions in the infotainment system, resulting in a better overall user experience.
Platform and architecture
Our automotive navigation product architecture is designed with flexibility in mind such that we may deliver custom solutions efficiently, to meet the unique requirements of automobile manufacturers and tier ones. We have created and continue to enhance our automotive reference product, or ARP, which serves as the foundation for our custom solutions and allows us to show automobile manufacturers our latest on-board, brought-in and hybrid navigation capabilities. In addition, we provide our cloud services via a standard application programming interface, or API, via our navigation SDK for those manufacturers seeking cloud services only, such as GM's mobile companion app.
We have developed proprietary technologies to provide location-based on-board, brought-in and hybrid mapping and navigation services. Our on-board navigation products include a broad set of services including local search for addresses and business, converting addresses to latitude and longitude coordinates known as geocoding, routing, map rendering, traffic decoding and processing, multi-level map matching, map updates, navigation and guidance. We have also developed customized technology to improve the quality of speech recognition for address and POI searches.
Our cloud location-based services platform includes our engines for routing, mapping, local search, voice recognition, geo data aggregation, traffic, personalization, and sensor processing. We leverage our existing back-end cloud technologies for deployment to automobile manufacturer and tier one applications.
Our proprietary location-based services platform provides fast route and map generation while optimizing the route based on real-time traffic conditions. It also includes a local search technology so users can find addresses and POIs easily, to which users can then be routed. Because our proprietary platform uses computing resources efficiently, we are able to scale our servers economically for our automotive solutions.
Our back-end cloud services allow us to deliver up-to-date location based data and services to support our on-board navigation technologies. Our platform is designed to be content agnostic and offers the flexibility to use various data providers for maps, POIs, traffic and other location-based content services. This enables the automobile manufacturer or tier one to offer best of breed content, by region, to delight their drivers. It also allows more competitive content pricing by offering the automobile manufacturer or tier one the option of seeking bids from more than one content provider. We have expanded our navigation offering to add Advanced Driver Assistance Systems, or ADAS, capabilities. Our initial ADAS feature, called e-horizon, predicts the path of the user and extracts relevant map attributes to tell the vehicle about upcoming road characteristics

4

Table of Contents

such as curvature and elevation. This information may be used by the vehicle to alert the driver of unsafe conditions, actuate the car and also improve fuel economy.
In January 2014, we acquired skobbler GmbH, or skobbler, a leading provider of technologies that enhance the collection and use of OSM mapping data. By combining skobbler's technologies with other proprietary Telenav technologies, we have developed our OpenTerra Platform, which includes a range of OSM capabilities that allow us to use crowd sourced maps for more advanced services such as navigation. We deployed OSM as part of our Toyota Entune Audio Plus and Lexus Display Audio multimedia products. In addition, the agreements entered into with Grab in August 2019 provide for the license to Grab of certain intellectual property underlying our OpenTerra Platform and represent an important step in monetizing the OpenTerra platform. While the agreements with Grab also provide for the sale of that intellectual property to Grab, we plan to leverage the license back to that intellectual property that we will receive from Grab to continue the development of the OpenTerra Platform and may potentially enter into similar licensing arrangements relating to our OSM mapping technologies with other third parties in the future.
Infrastructure and operations
Automotive Navigation
Our end users rely on our services primarily while on the road. As a result, we strive to ensure the continuous availability of our services through our high quality hosting platform and operational excellence.
Data center facilities. We developed our infrastructure with the goal of maximizing the availability of our applications, which are hosted on a highly scalable and available network located in Amazon Web Services, or AWS, facilities in California, Oregon, Virginia, Germany, Ireland and South Korea.
We entered into hosted service agreements with AWS for primary resource capacity and disaster recovery capacity. Pursuant to the service agreements, AWS provides leased facility space, power, cooling and Internet connectivity for a term of one year, and such agreements are subject to renewal.
We have similar arrangements with Alibaba Group Holding Limited’s cloud computing business unit, Alibaba Cloud, to provide hosting services for our location services in China.

Research and development
Our research and development organization is responsible for the design, development and testing of our services and products. Our engineering team has deep expertise and experience in in-car embedded software, mobile software, location technologies and cloud services and we have a number of personnel with longstanding experience with location services applications and scaling hosted service models.
Our current research and development efforts are focused on:
timely execution and delivery of contracted customer solutions;
enhancing our unified platform that enables more efficient deployment of our solutions across multiple customers and programs;
improving and expanding features, functionality and performance of our existing services;
creating new applications, services and functionality for vehicles and mobile phones;
developing key technology and content to reduce third party costs; and
building features and functionality that allow OSM to be enhanced.
Our development strategy is to identify features, services and products that are, or are expected to be, needed or desired by end users and provide our customers with a means to differentiate themselves against their competitors.
As of June 30, 2019, our research and development team consisted of 653 people, 159 of whom were located in Santa Clara and Culver City, California and 494 of whom were located in Cluj, Romania; Shanghai and Xi'an, China; Berlin, Germany; and Incheon, South Korea. Our U.S., China and Romanian research and development teams function together to provide service and product development for our automotive customers. Our research and development expenses were $67.4

5

Table of Contents

million, $85.6 million and $84.0 million for fiscal 2017, 2018 and 2019, respectively. In August 2019, in connection with the inMarket Transaction, 11 employees engaged in research and development in our Culver City, California location left the Company.
Marketing and sales
Automotive Navigation
In connection with sales efforts directed at automobile manufacturers and tier ones, we employ a sales team that focuses on targeted customers and responds to requests for proposals and related sales opportunities.
The development and sales cycle for automotive navigation products and services is long. The automotive sales cycle is consultative and requires direct and continuous engagement with the customer to succeed in securing a design win. A typical sales cycle is 12 to 18 months long. Often the automobile manufacturer uses the sales process to help it to define the ultimate product that it chooses to deliver to its end users. Generally, design wins for vehicles are awarded 24 to 36 months prior to the anticipated model year launch of the vehicle, as it takes this much time to develop and integrate the software and cloud services. Once we launch services with an automobile manufacturer, our application and services are typically bundled with vehicles for multiple years.
Customers
We derive revenue primarily from automobile manufacturers and tier ones whose vehicles contain our proprietary software and are able to access our navigation services. To a lesser extent, we have legacy relationships with wireless carrier customers to provide mobile navigation services to their subscribers through mobile phones.
We generate revenue from automobile manufacturers and tier ones for delivery of customized software and royalties from the distribution of this customized software for on-board and hybrid automotive navigation solutions. In addition, we earn royalties from brought-in navigation services for vehicle applications powered by our location-based services platform. We typically enter into long term supply arrangements with our automotive customers to provide our solutions across multiple car models in multiple regions around the world.
Our revenue from customers located in the United States comprised 90%, 90% and 81% of our total revenue for fiscal 2017, 2018 and 2019, respectively.
We are substantially dependent on Ford and GM for our billings and revenue. In fiscal 2017, 2018 and 2019, Ford represented 71%, 67% and 55% of our revenue, respectively, and 68%, 66% and 50% of billings, respectively. In fiscal 2017, 2018 and 2019, GM represented less than 10%, less than 10% and 18% of our revenue, respectively, and less than 10%, less than 10% and 19% of billings, respectively. We expect Ford and GM to represent a significant portion of our revenue and billings for the foreseeable future.
Ford
Our contract with Ford covers a broad range of products and services that we provide to Ford. On March 28, 2018, we entered into an amendment with Ford that extends the term of the agreement from December 31, 2018 to December 31, 2020 for each jurisdiction in which we currently provide our products to Ford. On December 14, 2017, Ford also selected us to provide its next generation navigation solution in North America, subject to certain conditions and execution of an agreement regarding those solutions. The terms of this next generation navigation solution were embodied in an amendment executed in December 2018. With respect to North America production, this amendment extended the term of the agreement to December 31, 2022, which term may be further extended at Ford’s option subject to certain conditions. We were not awarded the contracts for Europe, South America and Australia and New Zealand.
We are the preferred provider for on-board navigation integrated with Ford's SYNC 2 and SYNC 3 platforms during the term of the agreement.
We have also entered into amendments with Ford such that Ford Europe and Ford Australia and New Zealand also provide a map update program under which Ford owners with SYNC 2, with respect to Australia and New Zealand only, or SYNC 3 in all geographies where we provide SYNC 3 products are eligible to receive annual map updates at no additional cost through the contractual period.
In fiscal 2017, we also entered into amendments of our agreement with Ford pursuant to which Ford’s joint venture in China, Changan Ford Automobile Co., Ltd., became the primary contracting party for our relationship with Ford in that region.

6

Table of Contents

Our agreement with Ford relating to navigation solutions integrated with Ford's SYNC 2 and SYNC 3 platforms allows for renewals for successive 12-month periods if either party provides notice of renewal at least 45 days prior to the expiration of the applicable term, and the other party agrees to such renewal. Either party may terminate the agreement if the other party is insolvent or materially breaches its obligations and fails to cure such breach. Under our agreement with Ford, we are required to become certified under a set of technical standards for the computer software development process in the automobile industry, which requirement currently requires certification by the fall of 2019. We do not currently have any such certification, and we may not be able to obtain it in a timely manner, if at all, for our software to be included in Ford’s model year 2021 vehicles.
GM
Our contract with GM includes the provision of our on-board, hybrid, and brought-in navigation solutions across a wide assortment of GM vehicles. Our mobile navigation SDK powers GM’s branded mobile and web-based applications and is covered under a services agreement that was entered into June 13, 2014 and extends to December 31, 2019. Our on-board and hybrid navigation solutions for GM are covered under a product and services agreement that became effective February 1, 2017. These solutions began shipping in a limited number of vehicles beginning with model year 2017 and are gradually expanding across additional regions and models. In May 2017, additional vehicles through model year 2025 were added to this products and services agreement, which terminates on December 31, 2026. Our agreement with GM allows either party to terminate the agreement if the other party is insolvent or breaches its obligations and fails to cure such breach, and permits GM to terminate at its convenience.
Our hybrid navigation solutions are available on select model year 2019 GM vehicles in markets including North America, Australia and New Zealand, and in China with Shanghai-GM, or SGM. Our on-board navigation solutions are available on select model year 2019 Opel vehicles. We have also started offering our hybrid and on-board navigation solutions in select model year 2020 GM vehicles. Under our agreements with GM, we are obligated to provide our navigation products and services for additional models and regions through model year 2025.
Indemnification under automotive customer agreements
Under our agreements with Ford and GM, we have obligations to indemnify each of them against, among other things, losses arising out of or in connection with any claim that our technology or services infringe third party proprietary or intellectual property rights. Our agreements with each of Ford and GM may be terminated in the event an infringement claim is made against us and it is reasonably determined that there is a possibility our technology or service infringed upon a third party's rights.
Safeguards against unauthorized data usage
We employ administrative, physical and technical safeguards as part of our efforts to prevent unauthorized collection, access, use and disclosure of our end users' private data and to comply with applicable federal, state and local laws, rules and regulations. We do not use any end user data for direct marketing or promotions without the consent of the user and do not store any user location information that personally identifies the end user except to deliver and support our services. We are also required to comply with our customers' privacy and data securities policies.
Intellectual property
We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights. These laws, procedures and restrictions provide only limited protection and the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving. Furthermore, effective patent, trademark, copyright and trade secret protection may not be available in every country in which our services and products are available.
We seek to patent key concepts, components, protocols, processes and other inventions. As of June 30, 2019, we held 163 U.S. patents and 155 foreign patents expiring between April 11, 2020 and April 27, 2036, and have 62 U.S. and 106 foreign patent applications pending. Of the pending 62 U.S. patent applications, 49 are nonprovisional utility patent applications. These patents and patent applications may relate to features and functions of our services and the technology platforms we use to provide them. We have filed, and will continue to file, patent applications in the United States and other countries where there exists a strategic technological or business reason to do so. Any future patents issued to us may be challenged, invalidated or circumvented. Any patents that may issue in the future with respect to pending or future patent applications may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers.

7

Table of Contents

We endeavor to enter into agreements with our employees and contractors and with parties with which we do business in order to limit access to and disclosure of our proprietary information. We cannot be certain that the steps we have taken will prevent unauthorized use or reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive with ours or that infringe our intellectual property. The enforcement of our intellectual property rights also depends on the success of our legal actions against these infringers, but these actions may not be successful, even when our rights have been infringed.
We also enter into various types of licensing agreements to obtain access to technology or data that we utilize in connection with our navigation services. Our contracts with certain licensors include minimum guaranteed royalty payments, which are payable regardless of the ultimate volume of revenue derived from the number of paying end users. Our most important agreements are with the providers of maps pursuant to which we generally pay a monthly fee per end user or copy or a per transaction fee. We obtain map data from HERE North America, LLC, or HERE, pursuant to a master data license agreement dated December 1, 2002. HERE is principally owned by a consortium consisting of Audi AG, or Audi, BMW AG, or BMW, and Mercedes. Our agreement with HERE was automatically renewed under its existing terms through January 31, 2019, and automatically renews for successive one year periods unless either party provides notice of non-renewal at least 180 days prior to the expiration of the applicable term. In addition, we have entered into separate territory license agreements with HERE under which we are licensed to use certain map data for particular programs with certain of our current automotive customers to fulfill their requirements. The term of these territory licenses with HERE vary based on the customer and program, and can be extended for additional periods. Our agreement with HERE also allows a party to terminate the agreement if the other party materially breaches its obligations and fails to cure such breach.
In addition, we obtain other data such as map, weather updates, gas prices, POI and traffic information from additional providers.
Competition
The markets for development, distribution and sale of location services are highly competitive. Many of our competitors have greater name recognition, larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than we do.
We compete in the automotive navigation market with established automobile manufacturers and tier ones and providers of on-board navigation services such as AISIN AW CO., Ltd, or AISIN, AutoNavi Software Co., Ltd., or AutoNavi, Robert Bosch GmbH, or Bosch, Elektrobit Corporation, or Elektrobit, Garmin Ltd., or Garmin, HERE, Navinfo Co., Ltd., or Navinfo, NNG LLC, or NNG, Shenyang MXNavi Co., Ltd., or MXNavi, and TomTom North America, Inc., or TomTom, as well as other competitors such as Apple and Google.
Competition in our markets is based primarily on pricing and performance including features, functions, reliability, flexibility, scalability and interoperability; automobile manufacturer and tier one relationships; technological expertise, capabilities and innovation; price of services and products and total cost of ownership; brand recognition; and size and financial stability of operations. We believe we compete favorably with respect to these factors based upon the performance, reliability and breadth of our services and products and our technical experience.
Some of our competitors and potential competitors enjoy advantages over us, either globally or in particular geographic markets, including with respect to the following:
significantly greater revenue and financial resources;
ownership of mapping and other content allowing them to offer a more vertically integrated solution;
stronger brand and consumer recognition in a particular market segment, geographic region or worldwide;
the capacity to leverage their marketing expenditures across a broader portfolio of products;
access to core technology and intellectual property, including more extensive patent portfolios;
access to custom or proprietary content;
quicker pace of innovation;
stronger automobile manufacturer or tier one, advertising agency and advertiser relationships;

8

Table of Contents

more financial flexibility and experience to make acquisitions;
lower labor and development costs; and
broader global distribution and presence.
Our competitors’ and potential competitors’ advantages over us could make it more difficult for us to sell our navigation services, and could result in increased pricing pressures, reduced profit margins, increased sales and marketing expenses and failure to increase, or even the loss of, market share or expected market share, any of which would likely cause harm to our business, operating results and financial condition.
Employees
As of June 30, 2019, we employed 784 people, including 653 in research and development, 49 in sales and marketing, 25 in customer support, data center operations, and advertising operations, and 57 in a general and administrative capacity. As of that date, we had 241 employees in the United States, 288 in China, 237 in Romania, 11 in Germany, six in South Korea and one in Japan. In connection with the inMarket Transaction, 46 employees left the Company in August 2019. We also engage a number of temporary employees and consultants. As of June 30, 2019, none of our employees were represented by a labor union or were a party to a collective bargaining agreement. However, in January 2019, our employees in Romania designated certain employee representatives to represent their interests in the negotiation of a future collective bargaining agreement under the Social Dialogue Law of Romania.
Information about our Executive Officers
The following table sets forth the names, ages (as of July 31, 2019) and positions of our executive officers:
Name
 
Age
 
Position
Dr. HP Jin
 
55
 
President, Chief Executive Officer and Chairman of the Board of Directors
Adeel Manzoor
 
44
 
Chief Financial Officer, Treasurer and Assistant Secretary
Salman Dhanani
 
46
 
Co-President, Automotive Business Unit
Philipp Kandal
 
36
 
Senior Vice President, Engineering
Steve Debenham
 
57
 
General Counsel and Secretary
Hassan Wahla
 
47
 
Co-President, Automotive Business Unit
Dr. HP Jin is a cofounder of our company and has served as our president and a member of our board of directors since October 1999. Dr. Jin has also served as our chief executive officer and chairman of our board of directors from October 1999 to May 2001 and since December 2001. Prior to Telenav, Dr. Jin served as a senior strategy consultant at the McKenna Group, a strategy consulting firm. Prior to that time, Dr. Jin was a business strategy and management consultant at McKinsey & Company, a management consulting firm. Dr. Jin was also previously a technical director at Loral Integrated Navigation Communication Satellite Systems, or LINCSS, a division of Loral Space & Communications, Inc., a GPS service and engineering company. Dr. Jin holds a B.S. and M.S. in Mechanical Engineering from Harbin Institute of Technology in China and a Ph.D. in Guidance, Navigation and Control, with a Ph.D. minor in Electrical Engineering, from Stanford University.
Adeel Manzoor has served as our chief financial officer, treasurer and assistant secretary since July 2019. From November 2016 to June 2019, Mr. Manzoor served as Vice President and Controller of the Storage, Big Data and Value Compute business unit at HPE. He also served as Vice President and Controller of the Converged Infrastructure business unit at HPE from August 2015 to November 2016. Previously, Mr. Manzoor served as Director of Strategy and Planning at HP from June 2014 to August 2015 and Director of Investor Relations at HP from September 2012 to June 2014. Prior to joining HP, Mr. Manzoor was an auditor at Ernst and Young LLP. Mr. Manzoor holds a degree in Business/Commerce from the University of the Punjab, an MBA from the Asian Institute of Technology and an MS, Accounting and Finance from New Mexico State University.
Salman Dhanani is a cofounder of our company and has served as co-president of our automotive business unit since January 2014. Mr. Dhanani served as our vice president, growth strategy and partnerships from July 2012 to January 2014, as our vice president, products from August 2010 to July 2012 and as our vice president, products and marketing from August 2009 to August 2010. Mr. Dhanani served as our executive director of marketing from March 2009 to July 2009 and as our senior director of marketing from November 1999 to February 2009. From January 1999 to November 1999, Mr. Dhanani served as a consultant at the McKenna Group, a strategy consulting firm. From July 1996 to December 1998, Mr. Dhanani

9

Table of Contents

served as an application engineer at Schlumberger Ltd., a technology consulting services company. Mr. Dhanani holds a B.S. in Electrical Engineering from the University of Washington.
Philipp Kandal has served as our senior vice president, engineering since January 2017. In August 2019, Mr. Kandal resigned from Telenav, effective October 4, 2019. From October 2016 to January 2017, Mr. Kandal served as our vice president, engineering for automotive and OSM. From January 2014 to October 2016, Mr. Kandal served as our general manager, EU and head of OSM. From September 2008 to January 2014, Mr. Kandal served as co-founder and CTO of skobbler, prior to our acquisition of skobbler. Mr. Kandal holds an M.B.A. from the University of Cologne.
Steve Debenham has served as our general counsel and secretary since August 2019. Prior to joining Telenav, Mr. Debenham served as vice president, general counsel and corporate secretary of Aerohive Networks, Inc. from January 2013 to August 2019. Previously, Mr. Debenham served in senior leadership roles at various other technology companies, including: vice president corporate development, general counsel and secretary of Silicor Materials Inc. from August 2010 to January 2013; senior vice president, general counsel and secretary of Asyst Technologies, Inc. from September 2003 to September 2009; and senior vice president, general counsel and secretary of Harris MyCFO Inc. from May 2000 to June 2003. Mr. Debenham began his legal career with the law firm of Jackson Tufts Cole & Black, LLP, where he was a partner practicing intellectual property litigation. Mr. Debenham holds an A.B. in History from Stanford University and a J.D. from the University of California, Hastings College of the Law.
Hassan Wahla has served as co-president of our automotive business unit since January 2014. Mr. Wahla served as our vice president, business development and carrier sales from August 2009 to January 2014 and served as our executive director of business development from May 2005 to August 2009. From April 2003 to May 2005, Mr. Wahla served as a senior product manager at Nextel Communications, a wireless communications company that merged with Sprint Corporation, or Sprint. From February 2002 to April 2003, Mr. Wahla served as vice president of business development of Wireless Multimedia Solutions, a privately held wireless software platform company. From September 1999 to February 2002, Mr. Wahla served as director of business development at MicroStrategy, Inc., a business intelligence software company. Prior to that time, Mr. Wahla served as a senior consultant at Maritime Power, a maritime equipment company. Mr. Wahla holds a B.S. in Industrial Engineering from Virginia Tech, an M.S. in Management from Stevens Institute of Technology and a Masters of International Affairs from Columbia University.

10

Table of Contents

ITEM 1A.
RISK FACTORS
We operate in a rapidly changing environment that involves numerous uncertainties and risks. The following risks and uncertainties may have a material and adverse effect on our business, financial condition or results of operations. You should consider these risks and uncertainties carefully, together with all of the other information included or incorporated by reference in this Form 10-K. If any of the risks or uncertainties we face were to occur, the trading price of our securities could decline, and you may lose all or part of your investment.
Risks related to our business
We incurred losses in each period since fiscal 2015. We expect that we will incur losses during fiscal 2020 and we do not know when, or if, we will return to profitability, as we make further expenditures to enhance and expand our operations in order to support growth and diversification of our business.
As a percentage of revenue, our net loss was 15%, 19% and 14% in fiscal 2019, 2018 and 2017, respectively. Our revenue from paid wireless carrier mobile navigation has substantially declined and we expect it to continue to do so and we may be unable to generate sufficient revenue from our automobile navigation business to return Telenav to profitability in the short-term, if at all.
We anticipate that we will continue to incur net operating losses during fiscal 2020. These expected losses are also due to the expected continued decline in our higher margin mobile navigation revenue and the costs we expect to incur prior to generating revenue in connection with new automotive navigation products and services that will not be integrated into production vehicles for several years, if at all. The time required to develop, test and deploy products between the time we secure the award of a new contract with any automobile manufacturer or tier one, and the timing of revenue thereunder, as well as a substantial required upfront investment in research and development resources prior to entering into contracts with automobile manufacturers and tier ones contribute to these expected losses. We also expect to continue to experience pressure on pricing in our negotiations with automobile manufacturers and tier ones as we enter into negotiations for contract renewals or new products where we are competing with larger suppliers that are competing on price, rather than features, or for vehicles where customers are price sensitive regarding navigation solutions or where the automobile manufacturer is offering or is considering brought-in solutions such as Apple’s CarPlay or Google’s Android Auto.
Although we are working to replace the continued decline in wireless carrier revenue, our efforts to develop new services and products and attract new customers require investments in anticipation of longer-term revenue. For example, the design cycle for automotive navigation products and services is typically 18 to 24 months, and in order to win designs and achieve revenue from this growth area, we typically have to make investments two to four years before we anticipate receiving revenue, if any. This is the case for our relationship with GM. In addition, the revenue commencement at initial launch may not be significant depending on the automobile manufacturer’s or tier one’s launch timing schedule across vehicle models and regions. For example, although our hybrid product with GM launched in February 2017, it has only launched in select vehicle models and we do not have any control over when and whether it launches in other GM models. Although we recently entered into a series of agreements with Grab with respect to the intellectual property underlying our OpenTerra Platform, we cannot provide any assurance that we will be able to enter into other arrangements for our OSM mapping technologies in the future.
We are required to recognize certain automotive revenue over time if there are contractual service periods or other obligations to fulfill, such as specified contractual deliverables. Certain contractual service periods or other obligations currently extend up to eight years. We intend to make additional investments in systems and continue to expand our operations to support diversification of our business, but it is likely that these efforts at diversification will not replace our declining wireless carrier revenue in the short-term, if at all. As a result of these factors, we believe we will incur a net operating loss and we will incur net losses during fiscal 2020, and we cannot predict when, or if, we will return to profitability. Our investments and expenditures may not result in the growth that we anticipate.
Our quarterly revenue and operating results have fluctuated in the past and may fluctuate in the future due to a number of factors. As a result, we may fail to meet or exceed the expectations of securities analysts or investors, which could cause our stock price to decline.
Our quarterly revenue and operating results may vary significantly in the future. Therefore, you should not rely on the results achieved in any one quarter as an indication of future performance. Period to period comparisons of our revenue and operating results may not be meaningful. Our quarterly results of operations may fluctuate as a result of a variety of factors, including, but not limited to, those listed below, many of which are outside of our control:
the ability of automobile manufacturers to sell automobiles equipped with our products;

11

Table of Contents

competitive in-car platforms and products, such as Apple’s CarPlay and Google’s auto initiatives, which are currently offered in North America on Ford vehicles equipped with its SYNC 3 platform and most GM models;
the decision by Toyota to expand Apple’s CarPlay compatibility to certain of its 2019 model year and beyond Toyota and Lexus vehicles;
Ford’s announced intentions to modify its North America and European passenger car portfolio whereby it has begun phasing out certain car models;
GM’s announced intentions to end production of certain passenger vehicles in North America;
the seasonality and unpredictability of new vehicle production, including tooling and assembly changes and plant shutdowns, such as the impact to production of certain Ford pickup truck models in U.S. factories due to a May 2018 fire at a supplier plant;
the potential disruption of the anticipated departure of the United Kingdom from the European Union on automotive supply chains and potential plant closures in the United Kingdom;
changes made to existing contractual obligations with a customer that may affect the nature and timing of revenue recognition, such as the adoption of our map update solution for Ford’s customers in multiple geographies and its impact on the timing of our revenue recognition;
competitive pressures on automotive navigation pricing from low cost suppliers and for vehicles where consumers are extremely price sensitive;
the introduction and success of in-car integration, such as Google's in-car integration of Android Auto with Google Maps which did not require a mobile handset;
investments made by HERE North America, LLC, or HERE, and TomTom North America, Inc., or TomTom, in high definition maps that may be leveraged to displace our products and services in new vehicle models;
the seasonality of new vehicle model introductions and consumer buying patterns, as well as the effects of economic uncertainty on vehicle purchases, particularly outside of the United States;
the impact of tariffs and other trade negotiations on vehicle prices and supply chains;
the impact on vehicle sales resulting from tariffs on imported vehicles and parts and disruption to automobile manufacturer supply chains resulting therefrom;
the effectiveness of our entry into new business areas;
the loss of our relationship, a change in our revenue model, a change in pricing, or a reduction in geographic scope with any particular customer;
poor reviews of automotive service offerings into which our navigation solutions are integrated resulting in limited uptake of navigation options by car buyers;
warranty claims based on the performance of our products and the potential impact on our reputation with navigation users and automobile manufacturers and tier ones;
the sale of vehicle brands by automobile manufacturers to an automobile manufacturer with which we do not have an existing relationship;
the timing and quality of information we receive from our customers and the impact of customer audits of their reporting to us;
the inability of our automobile manufacturer customers to attract new vehicle buyers and new subscribers for connected services;
the timing of customized software development and other deliverables such as map updates;
the amount and timing of operating costs and capital expenditures related to the expansion of our operations and infrastructure through acquisitions or organic growth;

12

Table of Contents

the timing of expenses related to the development, acquisition or divestiture of technologies, products or businesses;
the cost and potential outcomes of existing and future litigation;
the timing and success of new product or service introductions by us or our competitors and customer reviews of those products or services;
the timing and success of marketing expenditures for our products and services;
the extent of any interruption in our services;
potential foreign currency exchange gains and losses associated with expenses and sales denominated in currencies other than the U.S. dollar;
general economic, industry and market conditions, including the recent rise in U.S. interest rates, that impact expenditures for new vehicles, smartphones and mobile location services in the United States and other countries where we sell our services and products;
changes in interest rates and our mix of investments, which would impact our return on our investments in cash and marketable securities;
changes in our effective tax rates; and
the impact of new accounting pronouncements such as ASC 606.
Fluctuations in our quarterly operating results might lead analysts and investors to change their models for valuing our common stock. As a result, our stock price could decline rapidly and we could face costly securities class action lawsuits or other unanticipated issues.
We are dependent on Ford and GM for a substantial portion of our billings and revenue, and our business, financial condition and results of operations will be harmed if our billings and revenue from Ford and GM do not continue to grow or decline.
Ford represented approximately 55%, 67% and 71% of our revenue and 50%, 66% and 68% of our billings in fiscal 2019, 2018 and 2017, respectively. GM represented approximately 18%, less than 10% and less than 10% of our revenue and 19%, less than 10% and less than 10% of our billings in fiscal 2019, 2018 and 2017, respectively. During fiscal 2019, we experienced a decline in billings to Ford as compared to fiscal 2018 due primarily to a January 1, 2018 reduction in certain content costs that are passed through to Ford. Despite the decrease in Ford’s billings, we expect that Ford, GM, other automobile manufacturers and tier ones will account for an increasing percentage of our revenue and billings, as our revenue and billings from paid wireless carrier provided navigation continues to decline. However, our total revenue and billings could potentially decline if Ford or GM increases the cost to consumers of our navigation products, reduces the number of vehicles or the geographies in which vehicles with our products as an option are sold, or if their sales of vehicles fall below forecast due to competition, global macro-economic conditions or other factors. Ford offers Apple’s CarPlay and Google’s Android Auto on its vehicles in North America equipped with its SYNC 3 platform and announced that Waze is available on its vehicles equipped with the SYNC 3 platform, which may reduce the number of vehicle purchasers who purchase built-in navigation services. GM also offers Apple’s CarPlay and Google’s Android Auto on most of its vehicles in North America. We may not successfully increase our revenue and billings from Ford or GM if our products are replaced within vehicles by Ford or GM with our competitors’ products or from price competition from third parties. Moreover, Ford announced its intention to modify its North American passenger car portfolio strategy and has begun phasing out certain car models, and it recently indicated that it is also considering changes in its European portfolio strategy. This could lead to a significant reduction in the sales of vehicles with our products as an option. We may not be able to mitigate the effect of any lost billings and revenue and our business, financial condition, results of operations and prospects could be materially adversely affected, our stock price could be volatile, and it may be difficult for us to achieve and maintain profitability.
Our contract with Ford covers a broad range of products and services that we provide to Ford. On March 28, 2018, we entered into an amendment to the Ford Agreement that extends the term of the agreement to December 31, 2020 for each jurisdiction in which we currently provide our products to Ford. On December 14, 2017, Ford also selected us to provide its next generation navigation solution in North America, subject to certain conditions and execution of an agreement regarding those solutions. The terms of this next generation navigation solution were embodied in an amendment executed in December 2018, and this amendment extended the term of the agreement to December 31, 2022 for North America production; provided that Ford may extend the term further subject to certain conditions. We were not awarded the contracts for Europe, South

13

Table of Contents

America and Australia and New Zealand. The loss of any contracts awarded, or our failure to be awarded contracts for certain geographies, may adversely impact our business, financial condition and results of operations.
Our contract with GM includes the provision of our on-board, hybrid, and brought-in navigation solutions across a wide assortment of GM vehicles. Our mobile navigation SDK powers GM’s branded mobile and web-based applications and is covered under a services agreement that was entered into June 13, 2014 and extends to December 31, 2019. Our on-board and hybrid navigation solutions for GM are covered under a product and services agreement that became effective February 1, 2017. These solutions began shipping in a limited number of vehicles beginning with model year 2017 and are gradually expanding across additional regions and models. In May 2017, additional vehicles through model year 2025 were added to this products and services agreement, which terminates on December 31, 2026.
In addition, a substantial portion of our revenue and billings and, to a lesser extent, gross profit from Ford is impacted by the underlying licensed content cost negotiated through HERE and other content providers. We cannot predict the impact on our revenue, billings, and gross profit of any changes between the automobile manufacturers and the map or other content providers.
We have limited experience managing, supporting and retaining automobile manufacturers and tier ones as customers, and if we are not able to maintain Ford and GM as customers our revenue will decline.
If we fail to comply with our automobile manufacturer and tier one contracts, our business, financial condition and results of operations could suffer.
Our contracts with our automobile manufacturer and tier one customers include increasingly specialized, complex and strict performance requirements. We are experiencing increased challenges in achieving certain milestones under our contracts with our automobile manufacturer and tier one customers, including, among others, our largest automobile manufacturer customer. In particular, our agreement with our largest automobile manufacturer customer requires that we become certified under a set of technical standards for the computer software development process in the automobile industry, which requirement currently requires certification by the fall of 2019. We do not currently have any such certification, and we may not be able to obtain it in a timely manner, if at all, for our software to be included in that customer’s model year 2021 vehicles. In addition, our automobile manufacturer and tier one customers regularly evaluate our capabilities against those of our competitors and may even engage one or more of our competitors as a dual source supplier. Any failure by us to timely perform under our automobile manufacturer and tier one contracts could at any time result in the termination of those contracts, the awarding of work to one or more of our competitors, or other adverse actions being taken by the applicable automobile manufacturer or tier one customer. Further, any negative publicity related to our automobile manufacturer or tier one contracts or any proceedings surrounding them, regardless of its accuracy, may damage our business by affecting our ability to compete for new contracts. If one of our automobile manufacturer or tier one contracts is terminated, or if our ability to compete for new contracts is adversely affected, our business, reputation, financial condition and results of operations could suffer.
Our automotive revenue and earnings could fluctuate due to the complexities of revenue recognition and capitalization of expenses related to customized products.
We adopted ASC 606, Revenue from Contracts with Customers, effective July 1, 2018, utilizing the full retrospective transition method. Under this accounting methodology, royalty amounts earned are bifurcated when there exist various underlying obligations. Revenue is recognized upon fulfillment of the underlying obligation. Such obligations related to earned royalties generally can include an onboard navigation component recognized as revenue once delivered and accepted, a connected services component recognized to revenue over the applicable service period, and a map update component recognized as revenue upon periodic delivery. Due to the complexities of revenue recognition, we may be required to recognize certain revenue over extended periods. For example, because customers of our brought-in automotive navigation solutions simultaneously receive and consume the benefit from our performance, we recognize revenue ratably over the period the services obligation is expected to be fulfilled, which is generally 8 to 12 years, as this provides a faithful depiction of the transfer of control.
Revenue recognition could also be impacted by future amendments to automobile manufacturer and tier one agreements, such as providing our map update solution in other regions, changes in procurement patterns, shipping terms and title transfer. As our solutions encompass greater value-added services, there is potential for changes in the timing of revenue recognition. Investors and securities analysts may not understand the subtleties of these revenue recognition requirements, and the trading prices of our common stock may be negatively affected.
In addition, our revenue recognition is becoming increasingly more complex with the evolution of our value-added products and services, such as our hybrid navigation solutions. The agreements for these solutions can extend over several years and require multiple deliverables. Given the length of our contractual obligations, which often extend beyond the manufacture

14

Table of Contents

and sale of the vehicle when the royalty is determined and paid, we may have significant post-production obligations to provide brought-in navigation services or map updates over an extended period of time. These extended obligations can result in a delay in recognition of revenue, or the need to defer and recognize revenue over the period that we are required to provide these post-production obligations or other services.
In conjunction with the adoption of ASC 606, development costs subject to ASC 340-40 incurred to fulfill future obligations under certain actual or anticipated contracts for automotive solutions are capitalized, provided they are expected to be recovered, and then recognized as the related performance obligations are transferred. For on-board automotive solutions, such costs represent the customized portion of software development, which will continue to be recognized upon acceptance of the software under ASC 340-40 since acceptance is generally required for control of the software to transfer. As a result, our recognition of deferred costs may be lumpy and not tied to the production of the vehicles in which the software is installed. For brought-in automotive solutions, such costs will be amortized over the period the services obligation is expected to be fulfilled because software development does not represent a distinct performance obligation in the case of brought-in automotive solutions. Historically, we recognized such costs for brought-in automotive solutions upon acceptance of the software.
We may also incur significant expense to develop products for automobile manufacturers, such as under our worldwide connected navigation services agreement with GM, prior to receiving any significant revenue related to the sale of vehicles with our navigation services. As our offerings in automotive navigation expand, we may not correctly anticipate the financial accounting treatment for the various products.
We may not be successful at adapting our business model for the Chinese automotive navigation market, which may reduce our revenue per vehicle.
Expanding our initial automotive entry in the Chinese market is an important component of our global growth strategy. The automotive software market in China is highly competitive. This competition comes from large international automotive software providers as well as strong domestic providers. The Chinese navigation software market is seeing transition towards new business models by third-party navigation product vendors, such as substantially lower per unit license fees that are intended to be offset by opportunities to monetize navigation usage in additional ways that may include, but not be limited to, advertising, usage-based insurance and utilizing data to create high definition maps. Global platform navigation products tend to fare poorly in China. For example, our revenue from Ford China declined materially in fiscal 2018 and 2019, and we expect it to continue to decline in the absence of a new, localized product. We may need to change or modify our license fee model in China in order to compete effectively. Our inability to do so may have a material impact on our ability to expand into the Chinese market. Even if we adopt new license fee models for China based automobile manufacturers, we may not recognize revenue from those new models sufficient to compensate us for the costs of supporting those automobile manufacturers in the short-term, if at all. In addition, many of the same business model, pricing and licensing changes, could also impact us in additional markets including, but not limited to, North America and Europe.
We may not be successful in generating material revenue from automobile manufacturers and tier ones other than Ford and GM. As a result, our business, financial condition and results of operations will be harmed if we are unable to diversify our automotive revenue.
Although we have attempted to mitigate our dependence on Ford and GM by establishing relationships with other automobile manufacturers and tier ones, these relationships may not produce significant revenue if the products are launched in limited models or face competition from third parties. Even if we are able to diversify our automotive navigation business through new arrangements, customers may not elect to purchase automobile manufacturer and tier one navigation offerings that include our software and/or services for reasons unrelated to performance of our software or services. Even if we win new awards, once those programs go into production, consumers may not widely adopt our navigation offerings or may criticize the performance or quality of the navigation software and our reputation may be harmed. If customer purchase rates are less than anticipated, or if our relationships with one or more of these other automobile manufacturers and tier ones are terminated or not renewed or extended, we may be unable to effectively diversify our automotive navigation revenue and our business, financial condition and results of operations may be harmed.
We may be unable to enter into agreements to provide automotive navigation products if we do not offer navigation products that serve geographies throughout the world or automobile manufacturers and tier ones are uncomfortable with our ability to support markets outside of the United States. Our automobile manufacturer and tier one customers may choose to partner with providers of location services with extensive international operations. We may be at a disadvantage in attracting such customers due to our business being concentrated in the United States, and we may not be successful in other geographies if customers are uncomfortable with the look and feel of our solutions. If we are unable to attract or retain such automobile manufacturer and tier one customers, our revenue and operating results will be negatively affected.

15

Table of Contents

We may incur substantial costs when engaging with a new automotive navigation customer and may not realize substantial revenue from that new customer in the short-term, if at all.
The design and sales cycle for on-board or brought-in automotive navigation services and products is substantially longer than those associated with our mobile navigation services to customers of wireless carriers. As a result, we may not be able to achieve significant revenue growth with new customers from the automotive navigation business in a short period of time, or at all. In addition, these lengthy cycles make it difficult to predict if and when we will generate revenue from new customers. For example, design wins for vehicles may be awarded 12 to 36 months prior to the anticipated commercial launch of the vehicle. We also entered into a contract with GM in 2014 to provide worldwide hybrid navigation solutions beginning in model year 2017 and continuing through model year 2025, and our hybrid product launched in its first GM models, the Cadillac CTS and CTS-V, in February 2017. We cannot assure you that our products will be in a wide variety of geographic markets in which GM sells vehicles in or across a variety of models and brands. GM has not provided us with any volume or revenue guarantees, and we cannot assure you that we will continue to receive material revenue from these products and services.
We have a partnership with Toyota for Toyota and Lexus vehicles and a separate partnership with Xevo, a tier one supplier to Toyota, for another navigation solution for Toyota and Lexus vehicles. While we have seen expansion of our latest version of Scout GPS Link solution across more Toyota and Lexus models in fiscal 2019, we expect Toyota to limit or reduce the number of models or vehicles on which Scout GPS Link is offered by Toyota and Lexus, beginning in model year 2021, due in part to 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 automobile manufacturers. In addition, during the fourth quarter of 2019, Telenav entered into an amended agreement with Xevo. The amended agreement provides that we will receive a one-time $17.0 million cash pre-payment in the first quarter of fiscal 2020 in exchange for removing a contractual minimum unit commitment that otherwise would have resulted in a payment to us in 2027. We recorded the receivable as deferred revenue in the fourth quarter of fiscal 2019, and it will be recognized as revenue over future periods. Our contract with Xevo relating to the implementation of our solutions in Toyota and Lexus vehicles is expected to remain in place through 2026. We cannot assure you that we will receive significant revenue from the solutions for Toyota in the long-term. While we continue to invest in our existing and new relationships with automobile manufacturers, if our products do not meet the consumer’s expectations, automobile manufacturer customers may not continue to offer our solutions.
We also may not price our solutions in such a way that is profitable for us and enables us to recoup the development expenses we incurred to provide such solutions in the time we expect or at all. Development schedules for automotive navigation products are difficult to predict, and there can be no assurance that we will achieve timely delivery of these products to our customers. To the extent that we charge service fees beyond an initial fee at the time the vehicle is purchased, we may not be successful in gaining traction with customers to provide services and charge ongoing monthly or annual fees outside of the traditional on-board navigation service model.
Our ability to build demand for our automotive navigation products and services is also dependent upon our ability to provide the products and services in a cost-effective manner, which may require us to renegotiate map and POI content relationships to address the specific demands of our automotive navigation products and services. If we are unable to improve our margins, we may not be able to operate our automotive navigation business profitably. If we fail to achieve revenue growth in any of our automotive navigation solutions (whether on-board, brought-in or other), we may be unable to achieve the benefits of revenue diversification. In addition, our map and content suppliers, HERE and TomTom, are also becoming competitors through the offering of their own automotive navigation services.
The success of our automotive navigation products may be affected by the number of vehicle models offered with our navigation solutions, as well as overall demand for new vehicles.
Our ability to succeed long term in the automotive industry depends on our ability to expand the number of models offered with our navigation solutions by our current automobile manufacturer customers. We are also dependent upon our ability to attract new automobile manufacturers and tier ones. For automobile manufacturers with whom we have established relationships, such as Ford, our success depends on continued production and sale of new vehicles offered with, and adoption by end users of, our products when our product is not a standard feature. Our on-board and hybrid solutions may not satisfy automobile manufacturers’ or end customers’ expectations for those solutions. If automobile manufacturers and tier ones do not believe that our services meet their customers’ needs, our products and services may not be designed into future model year vehicles. As we move forward, our existing automobile manufacturers and tier ones may not include our solutions in future year vehicles or territories, which would negatively affect our revenue from these products. Production and sale of new vehicles are subject to delay due to forces outside of our control, such as natural disasters, parts shortages and work stoppages, as well as general economic conditions. For example, in May 2018, Ford ceased production of certain of its pickup trucks for several weeks due to a fire at a third-party supplier.

16

Table of Contents

We rely on our customers for timely and accurate vehicle and subscriber sales information. A failure or disruption in the provisioning of this data to us would materially and adversely affect our ability to manage our business effectively.
We rely on our automobile manufacturers and tier one customers to provide us with reports on the number of vehicles they sell with our on-board, brought-in and hybrid navigation products and services included, depending on the nature of our contractual relationship, and to remit royalties for those sales to us. We also rely on our wireless carrier customers to bill subscribers and collect monthly fees for our mobile navigation services, either directly or through third-party service providers. The risk of inaccurate reports may increase as our customers expand internationally and increase the number of manufacturing locations. For example, in the three months ended March 31, 2017 and September 30, 2017, Ford determined that it had misreported the production of vehicles to us in certain factories. If our customers or their third-party service providers provide us with inaccurate data or experience errors or outages in their own billing and provisioning systems when performing these services, our revenue may be less than anticipated or may be subject to adjustment with the customer. In the past, we have experienced errors in reporting from automobile manufacturers and wireless carriers. If we are unable to identify and resolve discrepancies in a timely manner, our revenue may vary more than anticipated from period to period, which could harm our business, operating results and financial condition.
Our business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.
Our automotive navigation services depend on our ability to collect, store and use such information as we deliver personalized navigation. Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect across our navigation platform. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data protection. However, it is possible that these requirements may be interpreted and applied in a manner that is inconsistent with our practices. Any failure, or perceived failure, by us to comply with such laws could result in proceedings or actions against us by governmental entities, consumers or others. Such proceedings or actions could hurt our reputation, force us to spend significant amounts to defend ourselves, distract our management, increase our costs of doing business, adversely affect the demand for our services and ultimately result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless our users from the costs or consequences of inadvertent or unauthorized disclosure of data that we store or handle as part of providing our services.
The regulatory framework for privacy issues worldwide is still evolving. For example, the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) took effect in May 2018. The GDPR replaces Directive 95/46/EC of 1995 and is directly applicable in EU member states. Among other things, the GDPR regulates data controllers and processors outside of the EU whose processing activities relate to the offering of goods or services to, or monitoring the behavior within the EU of, EU data subjects. Complying with the GDPR may cause us to incur substantial operational costs or require us to change our business practices. Despite our efforts to bring practices into compliance before the effective date of the GDPR, we cannot assure you that we are fully compliant. In addition, because the GDPR is new, it may be subject to new or changing interpretations by courts, and our interpretation of the law and efforts to comply with the rules and regulations of the law may be ruled invalid. The GDPR imposes significant penalties of up to the greater of 4% of worldwide turnover and €20 million for violations of the GDPR. Similarly, in June 2018, California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which will become effective in January 2020. The CCPA will, among other things, require covered companies to provide new disclosures to California consumers and afford such consumers new rights to opt-out of certain sales of personal information. The CCPA creates a private right of action for statutory damages for certain breaches of information. Legislators have proposed amendments to the CCPA, of which nearly a dozen continue to progress through the Senate committee. In addition, the Office of the California Attorney General will be promulgating regulations to establish procedures to facilitate these new rights.  The proposed regulations are anticipated to be published in the fall of 2019, and the deadline for the California Attorney General to release final regulations is July 1, 2020. As such, it remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted and enforced. In addition, other states have enacted or proposed legislation that regulates the collection, use, and sale of personal information, and such regimes might not be compatible with either the GDPR or the CCPA. We cannot yet predict the impact of the CCPA or impending legislation on our business or operations, but it may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. If we fail to implement practices and procedures deemed necessary by regulators or consumers or to comply with the GDPR, CCPA or other applicable regimes, we may be subject to fines, penalties, litigation, and reputational harm and our business may be seriously harmed. In addition, various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices, including some directed at the mobile and advertising industries in particular. It is possible that new laws, regulations, standards, recommendations, best practices or requirements will be adopted that would affect our business, particularly with regard to location-based services, collection or use of data to target ads and communication with consumers via mobile devices. To the extent that we or our clients are subject to new laws or recommendations or choose to adopt new standards, recommendations, or other requirements, we may have

17

Table of Contents

greater compliance burdens. If we are perceived as not operating in accordance with industry best practices or any such guidelines or codes with regard to privacy, our reputation may suffer, and we could lose relationships with developer partners.
Changes to United States tax, tariff and import/export regulations may have a negative effect on global economic conditions, financial markets and our business.
The current administration, along with Congress, has created significant uncertainty about the future relationship between the United States and other countries with respect to the trade policies, treaties, taxes, government regulations and tariffs that would be applicable. It is unclear what changes might be considered or implemented and what response to any such changes may be by the governments of other countries. These changes have created significant uncertainty about the future relationship between the United States and China, as well as other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade between the United States and other nations. For example, in 2018, the Office of the U.S. Trade Representative, or the USTR, enacted new tariffs on imports into the United States from China. Since then, additional tariffs have been imposed by the USTR on imports into the United States from China and China has also imposed tariffs on imports into China from the United States. The countries continue to negotiate a trade deal. If additional tariffs or other restrictions are placed on Chinese imports or any additional counter-measures are taken by China, our revenue and results of operations may be materially harmed. Furthermore, current or future tariffs imposed by the United States may negatively impact the automobile manufacturers to which we provide our automotive navigation products and services, thereby causing an indirect negative impact on our own sales. Any reduction in the sales of our customers and business partners, and/or any apprehension among our customers and business partners of a possible reduction in such sales, would likely cause an indirect negative impact on our own sales. Even in the absence of further tariffs, the related uncertainty and the market's fear of an escalating trade war might create forecasting difficulties for us and could cause our customers and business partners to place fewer orders for our products and services, which could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between these nations and the United States. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on our business, financial condition and results of operations and affect our strategy in China and elsewhere around the world. Given the relatively fluid regulatory environment in China and the United States and uncertainty how the U.S. administration or foreign governments will act with respect to tariffs, international trade agreements and policies, a trade war, further governmental action related to tariffs or international trade policies, or additional tax or other regulatory changes in the future could directly and adversely impact our financial results and results of operations.
Our legacy wireless carrier mobile navigation business is declining and may be eliminated altogether in the future. As it continues to decline, our revenue and net income or loss will continue to be adversely affected.
Although we historically received a majority of our revenue from wireless carriers whose subscribers received our services through bundles or by purchasing our navigation services, consistent with industry trends, our wireless carrier revenue has declined significantly. In the last three fiscal years, wireless carrier subscribers have materially decreased their subscriptions for, and usage of, our paid navigation services and our revenue from our relationship with wireless carriers has declined accordingly. We anticipate that wireless carrier subscribers will continue to decrease their subscriptions for paid navigation services in favor of free or freemium offerings and that revenue from our relationship with wireless carriers will continue to decline and may be eliminated altogether in the future. In the event that our mobile navigation business ceases to be profitable or we determine that it diverts resources from growing areas of our business, we may ultimately elect to terminate our legacy wireless carrier mobile navigation business. In addition, our wireless carrier customers may determine that the cost of offering our service to their subscribers outweighs the benefits and may decide to terminate our business relationship. Our other sources of revenue from our location-based platforms, including automotive navigation, have substantially lower margins than wireless carrier mobile navigation revenue and, as a result, we would have to generate substantially more revenue from those services to replace the declining wireless carrier revenue.

18

Table of Contents

Our customer requirements and content management obligations are complex. If we inadvertently include content for which we have liability to the vendor but may not be entitled to payment from our customer, our financial condition and results of operation could be harmed.
The nature and extent of content that is delivered as part of our navigation solutions is complex to manage. Matching the requirements of our customers with the content offered by our vendors may result in our inclusion of content which we believe is necessary to meet our customers’ requirements for which the customer may not have agreed to make payment to us. In addition, our customers speak directly to our vendors and often those conversations influence the expected content for our end products; however, customers may not be fully informed as to the license costs associated with the various components. Therefore, there is some risk that we may include content for which we have liability to the vendor but may not be entitled to payment from our customer. If these situations were to occur, our business, financial condition and results of operations could be adversely affected.
We face intense competition in our market, especially from competitors that offer their location services for free, which could make it difficult for us to acquire and retain customers and end users.
The market for development, distribution and sale of location services is highly competitive. Many of our competitors have greater name recognition, larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than we do. Competitors may offer location services that have at least equivalent functionality to ours for free. For example, Google offers free voice-guided turn by turn navigation as part of its Google Maps and Waze products for mobile devices, including those based on the Android and iOS operating system platforms, and Apple offers proprietary maps and voice-guided turn by turn directions. Microsoft Corporation also provides a free voice-guided turn by turn navigation solution on its Windows Mobile and Windows Phone operating systems. Competition from these free offerings may reduce our revenue, result in our incurring additional costs to compete and harm our business. If our wireless carrier customers can offer these mobile location services to their subscribers for free, they may elect to cease their relationships with us, similar to Sprint, alter or reduce the manner or extent to which they market or offer our services or require us to substantially reduce our fees or pursue other business strategies that may not prove successful. In addition, new car buyers may not value navigation solutions built in to their vehicles if they believe that free (brought-in) offerings, such as Apple’s CarPlay or Google’s auto initiatives, are adequate and may not purchase our solutions with their new cars. Ford offers Apple’s CarPlay and Google’s Android Auto on its vehicles in North America equipped with its SYNC 3 platform and announced that Waze will be available on its vehicles equipped with the SYNC 3 platform, which may reduce the number of vehicle purchasers who purchase on-board navigation solutions. GM also offers Apple’s CarPlay and Google’s Android Auto on most of its vehicles in North America. While we have seen expansion of our latest version of Scout GPS Link solution across more Toyota and Lexus models in fiscal 2019, we expect that Toyota may limit the number of future models or vehicles on which Scout GPS Link is offered by Toyota and Lexus due in part to the offering of alternative brought-in solutions such as Apple’s CarPlay, which Toyota announced it is offering across certain Toyota models, and the expanded offering of Google’s Android Auto solution across more automobile manufacturers. We may not successfully increase our revenue from Ford or Toyota, and our revenue could decrease, if our products are replaced within vehicles by Ford or Toyota with our competitors’ products or due to price competition from third parties.
We compete in the automotive navigation market with established automobile manufacturers and tier ones and providers of on-board navigation services such as AISIN AW CO., Ltd, AutoNavi Software Co., Ltd., Robert Bosch GmbH, Elektrobit Corporation, Garmin, Ltd., HERE, Navinfo Co., Ltd., NNG LLC, Shenyang MXNavi Co., Ltd., and TomTom, as well as other competitors such as Apple and Google. Lear announced in April 2019 that it had agreed to acquire Xevo, with which we provide an offering to Toyota, which could result in Xevo moving into the on-board navigation services space. Some of our competitors’ and our potential competitors’ advantages over us, either globally or in particular geographic markets, include the following:
significantly greater revenue and financial resources;
ownership of mapping and other content allowing them to offer a more vertically integrated solution;
stronger brand and consumer recognition in a particular market segment, geographic region or worldwide;
the capacity to leverage their marketing expenditures across a broader portfolio of products;
access to core technology and intellectual property, including more extensive patent portfolios;
access to custom or proprietary content;
quicker pace of innovation;

19

Table of Contents

stronger automobile manufacturer and tier one relationships;
more financial flexibility and experience to make acquisitions;
ability or demonstrated ability to partner with others to create stronger or new competitors;
stronger international presence, which could make our larger competitors more attractive partners to automobile manufacturers and tier ones;
lower labor and development costs; and
broader global distribution and presence.
Our competitors’ and potential competitors’ advantages over us could make it more difficult for us to sell our navigation services, and could result in increased pricing pressures, reduced profit margins, increased sales and marketing expenses and failure to increase, or the loss of, market share or expected market share, any of which would likely cause harm to our business, operating results and financial condition.
If we are unable to integrate future acquisitions successfully, our operating results and prospects could be harmed.
In the future, we may make acquisitions to improve our navigation services offerings or expand into new markets. Our future acquisition strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions and, if necessary, to obtain satisfactory debt or equity financing to fund those acquisitions. Mergers and acquisitions are inherently risky, and any mergers and acquisitions we complete may not be successful. Future mergers and acquisitions we may pursue would involve, numerous risks, including the following:
difficulties in integrating and managing the operations, technologies and products of the companies we acquire, that are geographically remote from our existing operations;
diversion of our management’s attention from normal daily operation of our business;
our inability to maintain the key business relationships and the reputations of the businesses we acquire;
our inability to retain key personnel of the companies we acquire;
uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions;
our dependence on unfamiliar affiliates and customers of the companies we acquire;
insufficient revenue to offset our increased expenses associated with acquisitions;
our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate; and
our inability to maintain internal standards, controls, procedures and policies.
We may be unable to secure the equity or debt funding necessary to finance future acquisitions on terms that are acceptable to us. If we finance acquisitions by issuing equity or convertible debt securities, our existing stockholders will likely experience dilution, and if we finance future acquisitions with debt funding, we will incur interest expense and may have to comply with financial covenants and secure that debt obligation with our assets.
We may be required to recognize a significant charge to earnings if our goodwill or other intangible assets become impaired.
We have recorded goodwill related to our prior acquisitions and may do so in connection with any potential future acquisitions. Goodwill and other intangible assets with indefinite lives are not amortized, but are reviewed for impairment annually or on an interim basis whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.  Factors that may indicate that the carrying value of our goodwill or other intangible assets may not be recoverable include a persistent decline in our stock price and market capitalization, reduced future cash flow estimates and slower growth rates in our industry.  We may be required to record a significant charge in our financial statements during the period in which any impairment of our goodwill or other intangible assets is determined, which would adversely impact our results of operations. We are required to allocate goodwill and intangibles to each of our business segments. As a result, we conduct our impairment review each year or on an interim basis by segment, which can result in a different outcome than if assessed on an overall consolidated basis. We have recognized goodwill impairments in fiscal 2019 and 2018.

20

Table of Contents

We performed our annual goodwill impairment test as of April 1, 2019 by comparing the fair value of our three reporting units with their respective carrying amounts. Based upon a qualitative assessment indicating that it was not more likely than not that the fair value of each of our reporting units was less than its carrying value, we determined that no impairment was indicated. Subsequent to the completion of our annual assessment, in May 2019 we entered into substantive discussions with inMarket regarding the sale of certain assets and the assumption of certain liabilities associated with the Ads Business in exchange for an equity interest in inMarket. In June 2019, we considered it more likely than not that a sale would occur, and we concluded that this represented a triggering event that required an interim goodwill impairment assessment. Accordingly, in June 2019, we performed an interim goodwill impairment test for our advertising business segment. In assessing its fair value, we made assumptions regarding our estimated future cash flows, weighted average cost of capital and timing over which the cash flows will occur, among other factors. Based on the results of this interim goodwill impairment test, the carrying value of our advertising business segment exceeded its estimated fair value and, accordingly, in fiscal 2019 we recognized a $2.6 million impairment of the goodwill associated with our advertising business segment.
During the three months ended March 31, 2018, certain mobile navigation customer contracts were amended and certain other customers indicated their intent with respect to terminating services in the near term. Based upon a qualitative assessment indicating that it was more likely than not that the fair value of the mobile navigation reporting unit was less than its carrying value, we performed an interim goodwill impairment test for our mobile navigation business segment during the three months ended March 31, 2018. Based on the results of our test, the carrying value of our mobile navigation business segment exceeded its estimated fair value. Accordingly, during the three months ended March 31, 2018, we recognized a $2.7 million impairment of all of the goodwill associated with our mobile navigation business segment.
We may make similar determinations regarding the impairment of goodwill in the future, which could have a material and adverse effect on our profitability.
Warranty claims, product liability claims, product recalls and regulatory liability claims could subject us to significant costs and adversely affect our financial results.
We warrant our automotive navigation products to be free from defects in materials, workmanship and design for periods ranging from three months to seven years. If our navigation services or products contain defects, there are errors in the maps supplied by third-party map providers or if our end users do not heed our warnings about the proper use of these products, collisions or accidents could occur resulting in property damage, personal injury or death. If any of these events occurs, we could be subject to significant liability for personal injury and property damage and under certain circumstances could be subject to a judgment for punitive damages. In addition, if any of our designed products are defective or are alleged to be defective, we may be required to participate in a recall campaign. These recall and warranty costs could be exacerbated to the extent they relate to global platforms or we are unable to deliver software updates over the air. Furthermore, recall actions could adversely affect our reputation or market acceptance of our products, particularly if those recall actions cause consumers to question the safety or reliability of our products. Warranty claims, a successful product liability claim or a requirement that we participate in a product recall campaign may adversely affect our results of operations and financial condition.
We accrue costs related to warranty claims when they are probable of being incurred and reasonably estimable. Our warranty costs have historically not been material. From time to time, we experience incidents where it may be necessary for us to expend resources to investigate and remedy a potential warranty claim.
We maintain limited insurance against accident related risks involving our products. However, we cannot assure you that this insurance would be sufficient to cover the cost of damages to others or will continue to be available at commercially reasonable rates. In addition, our errors and omissions insurance policy excludes coverage for certain consumer protection regulatory claims, including any future claims brought under the Telephone Consumer Protection Act. We may also be named as a defendant in litigation by consumers individually or on behalf of a class if their handsets or automobiles suffer problems from software downloads from our customers. If we are unable to obtain indemnification from our customer for any damages or legal fees we may incur in connection with such complaints, our financial position may be adversely impacted. In addition, insurance coverage generally will not cover awards of punitive damages and may not cover the cost of associated legal fees and defense costs. If we are unable to maintain sufficient insurance to cover product liability or regulatory liability costs, or if we experience losses not covered by our insurance, our business, financial condition and results of operations could be adversely affected.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, damages caused by defective software and other losses.
Our agreements with our customers include indemnification provisions. We agree to indemnify them for losses suffered or incurred in connection with our navigation services or products, including as a result of intellectual property infringement,

21

Table of Contents

damages caused by defects and damages caused by viruses, worms and other malicious software. The term of these indemnity provisions is generally perpetual after execution of the corresponding agreement, and the maximum potential amount of future payments we could be required to make under these indemnification provisions is generally substantial and may be unlimited. In addition, some of these agreements permit our indemnitees to terminate their agreements with us if they determine that the use of our navigation services or products infringes third-party intellectual property rights.
We have received, and expect to receive in the future, demands for indemnification under these agreements. These demands can be very expensive to settle or defend, and we have in the past incurred substantial legal fees and settlement costs in connection with certain of these indemnity demands. Furthermore, we have been notified by several customers that they have been named as defendants in certain patent infringement cases for which they may seek indemnification from us. Large future indemnity payments and associated legal fees and expenses, including potential indemnity payments and legal fees and expenses relating to the current or future notifications, could materially harm our business, operating results and financial condition.
We may in the future agree to defend and indemnify our customers in connection with the pending notifications or future demands, irrespective of whether we believe that we have an obligation to indemnify them or whether we believe that our services and products infringe the asserted intellectual property rights. Alternatively, we may reject certain of our customers’ indemnity demands, which may lead to disputes with our customers and may negatively impact our relationships with them or result in litigation against us. Our customers may also claim that any rejection of their indemnity demands constitutes a material breach of our agreements with them, allowing them to terminate such agreements. Our agreements with certain customers may be terminated in the event an infringement claim is made against us and it is reasonably determined that there is a possibility our technology or services infringed upon a third party’s rights. If, as a result of indemnity demands, we make substantial payments, our relationships with our customers are negatively impacted or if any of our customer agreements is terminated, our business, operating results and financial condition could be materially adversely affected.
Our investment portfolio may become impaired by deterioration of the financial markets.
Our cash equivalent and short-term investment portfolio as of June 30, 2019 consisted of corporate bonds, asset-backed securities, municipal securities, U.S. agency securities, commercial paper and money market mutual funds. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.
Should financial market conditions worsen in the future, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of June 30, 2019, we had no material impairment charges associated with our short-term investment portfolio. Although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.
Our effective tax rate may fluctuate, which could reduce our anticipated income tax benefit in the future.
Our effective tax rate could be adversely affected by several factors, many of which are outside of our control. Our effective tax rate may be affected by the proportion of our revenues and income (loss) before taxes in the various domestic and international jurisdictions in which we operate. Our revenue and operating results are difficult to predict and may fluctuate substantially from quarter to quarter. We are also subject to changing tax laws, regulations and interpretations in multiple jurisdictions in which we operate, as well as the requirements of certain tax and other accounting body rulings. Since we must estimate our annual effective tax rate each quarter based on a combination of actual results and forecasted results of subsequent quarters, any significant change in our actual quarterly or forecasted annual results may adversely impact the effective tax rate for the period. Our estimated annual effective tax rate may fluctuate for a variety of reasons, including:
changes in forecasted annual operating income or loss by jurisdiction and forecasted withholding taxes;
changes in relative proportions of revenue and income or loss before taxes in the various jurisdictions in which we operate;
requests by customers to bill their foreign subsidiaries and related entities, which may subject us to income tax withholding requirements on sales made in such jurisdictions;
changes to the valuation allowance on net deferred tax assets;

22

Table of Contents

changes to actual or forecasted permanent differences between book and tax reporting, including the tax effects of purchase accounting for acquisitions and non-recurring charges which may cause fluctuations between reporting periods;
impact from any future tax settlements with state, federal or foreign tax authorities;
impact from increases or decreases in tax reserves due to new assessments of risk, the expiration of the statute of limitations or the completion of government audits;
impact from changes in tax laws, regulations and interpretations in the jurisdictions in which we operate, as well as the expiration and retroactive reinstatement of tax holidays;
impact from withholding tax requirements in various non-U.S. jurisdictions and our ability to recoup those withholdings, which may depend on how much revenue we have in a particular jurisdiction to offset the related expenses;
changes in customer arrangements where the customer’s domicile may impose withholding tax on our revenue that we previously were not subject to;
impact from acquisitions and related integration activities or divestitures; or
impact from new FASB requirements.
Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in future periods. In fiscal 2014, we recorded a valuation allowance on the majority of our deferred tax assets, net of liabilities since the assets are not more likely than not to be realized based upon our assessment of all positive and negative evidence. Realization of deferred tax assets is dependent upon future taxable earnings, the timing of which is uncertain. Due to operating losses in previous years and expected losses in fiscal 2020 and potentially future years in the United States, we continue to maintain a full valuation allowance on deferred tax assets in the United States. Due to operating losses in previous years and expected losses in future years in the United Kingdom, we continue to maintain a full valuation allowance for our foreign deferred tax assets in the United Kingdom. In the event deferred tax assets in Germany cannot be realized based upon the ability to generate future income in Germany, our effective tax rate will be negatively impacted.
Changes in accounting principles, or interpretations thereof, could have a significant impact on our financial position and results of operations.
We prepare our consolidated financial statements in accordance with GAAP. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Additionally, the adoption of new or revised accounting principles, such as ASC 842, Leases, may require that we make significant changes to our systems, processes and controls.
It is not clear if or when other potential changes in accounting principles may become effective, whether we have the proper systems and controls in place to accommodate such changes and the impact that any such changes may have on our financial position and results of operations.
We rely on a proprietary provisioning and reporting system for our navigation products and services to track end user activation, deactivation and usage data and any material failures in this system could harm our revenue, affect our costs and impair our ability to manage our business effectively.
Our provisioning and reporting system that authenticates end users and tracks the number of end users and their use of our services is a proprietary and customized system that we developed internally. Although we believe that the flexibility of this service to integrate tightly with automobile manufacturers' reporting and provisioning systems gives us a competitive advantage, we might lose revenue and the ability to manage our business effectively if the system were to experience material failures or be unable to scale as our business grows. In addition, we may not be able to report our financial results on a timely basis if our customers question the accuracy of our records or we experience significant discrepancies between the data generated by our provisioning and reporting systems and data generated by their systems, or if our systems fail or we are unable to report timely and accurate information to our third party data providers. The inability to timely report our financial results would impair the quality of our financial reporting and could result in the delisting of our common stock.

23

Table of Contents

We rely on third party data and content to provide our services and if we were unable to obtain content at reasonable prices, or at all, our gross margins and our ability to provide our services would be harmed.
We rely on third-party data and content to provide our services, including map data, POI, traffic information, gas prices and weather information. If our suppliers of this data or content were to enter into exclusive relationships with other providers of location services or were to discontinue providing such information and we were unable to replace them cost effectively, or at all, our ability to provide our services would be harmed. Our gross margins may also be affected if the cost of third-party data and content increases substantially. Although we have integrated OSM data into our products, we may experience difficulty with customer acceptance if the quality of the consumer generated data within OSM is lower than that of paid maps. We introduced mobile phone-based navigation with OSM and launched our first brought-in automotive navigation service with OSM in 2015. In addition, the entry into the transactions with affiliates of Grab, which transactions include, among other things, the performance of certain OSM development services for Grab during fiscal 2020 and the subsequent planned hiring by Grab of certain of our employees focused on OSM development activities, may limit the amount of OSM development work that will be completed for internal purposes during fiscal 2020. As a result, we may not have sufficient data for automobile manufacturers and tier ones to feel comfortable electing to use OSM in the products and services we provide them.
We obtain map data from TomTom and HERE, which are companies owned by our current and potential competitors. Accordingly, these third-party data and content providers may act in a manner that is not in our best interest. For example, they may cease to offer their map and POI data to us. The termination dates of our licenses to data from TomTom utilized in our mobile and automotive products generally approximate the respective termination dates of our obligations to provide map data to the applicable wireless carriers and automobile manufacturers. Our master data license agreement with HERE was automatically renewed under its existing terms through January 31, 2020, and automatically renews for successive one-year periods unless either party provides notice of non-renewal at least 180 days prior to the expiration of the applicable term. However, individual territory licenses with distinct term, termination and renewal provisions further govern the license of map data to support individual programs and products for our automobile manufacturers and tier ones.
We may identify other requisite content and content-related technologies, including certain geocoding data necessary for our OSM products, that we may be unable to license or develop internally.  If we are unsuccessful in these endeavors, we may be unable to successfully launch our OSM-based products globally and across all desired product offerings.
We may not be able to upgrade our navigation services platform to support certain advanced features and functionality without obtaining technology licenses from third parties. Obtaining these licenses may be costly and may delay the introduction of such features and functionality, and these licenses may not be available on commercially favorable terms, or at all. The inability to offer advanced features or functionality, or a delay in our ability to upgrade our navigation services platform, may adversely affect consumer demand for our navigation services and, consequently, harm our business.
We may be subject to our automobile manufacturer or tier one’s selection of map and other content providers, and our ability to negotiate and enter into a license with such provider(s) may be dependent on the timing of such automobile manufacturer or tier one’s official nomination for such content providers. Accordingly, we may have contractual obligations to provide certain products and services for certain model years or periods to our automobile manufacturer or tier one partners, prior to our ability to enter into agreements with our map and other content providers to support such products and services. We may be unable to obtain data licenses with the necessary content providers to support these products and services, or we may not be able to secure such data licenses without additional, unplanned costs or delays.
We also use our proprietary provisioning and reporting system to record and report royalties we owe to third-party providers of content used by end users in connection with our services. Certain of the third-party content providers have the right to audit our use of their services and, if we are found to have under or incorrectly reported usage, we may be required to pay the third-party content providers for the actual usage, as well as interest and the cost of the audit. Any significant error in our recording and payment of royalties to our third-party content providers could have a material and adverse effect on our financial results. We may also incur losses as a result of any significant error.

24

Table of Contents

Network failures, disruptions or capacity constraints in our third party hosted data center facilities could affect the performance of our navigation services and harm our reputation and our revenue.
We use hosted services provided by AWS and wireless carrier networks to deliver our navigation and advertising platform services. Our operations rely to a significant degree on the efficient and uninterrupted operation of the third-party data centers we use. In the event that AWS or wireless carrier networks experience a disruption in services or a natural disaster, our ability to continue providing our services would be compromised. Depending on the growth rate in the number of our end users and their usage of our services, if we do not timely complete the negotiation for and scale of additional hosting services, we may experience capacity issues, which could lead to service failures and disruptions. In addition, if we are unable to secure third-party hosting services with appropriate power, cooling and bandwidth capacity, we may be unable to efficiently and effectively scale our business to manage the addition of new automobile manufacturers and tier ones, increases in the number of our end users or increases in data traffic.
AWS hosting services are potentially vulnerable to damage or interruption from a variety of sources, including fire, flood, earthquake, power loss, telecommunications or computer systems failure, human error, terrorist acts or other events. We have not yet completed a comprehensive business continuity plan, and there can be no assurance that the measures implemented by us to date, or measures implemented by us in the future, to manage risks related to network failures or disruptions in our data centers will be adequate, or that the redundancies built into our servers will work as planned in the event of network failures or other disruptions. In particular, if we were to experience damage or interruptions to AWS hosting services our ability to provide efficient and uninterrupted operation of our services would be significantly impaired.
We could also experience failures of our data centers or interruptions of our services, or other problems in connection with our operations, as a result of:
damage to or failure of our computer software or hardware or our connections and outsourced service arrangements with third parties;
errors in the processing of data;
computer viruses or software defects;
physical or electronic break-ins, sabotage, intentional acts of vandalism and similar events; or
errors by our employees or third-party service providers.
Poor performance in or disruptions of our services could harm our reputation, delay market acceptance of our services and subject us to liabilities. Our automobile manufacturer and tier one agreements for on-board and hybrid solutions require us to meet at least 99.9% operational uptime requirements, excluding scheduled maintenance periods, or be subjected to penalties. Any outage in a network or system, or other unanticipated problem that leads to an interruption or disruption of our navigation services, could have a material adverse effect on our operating results and financial condition.
We may not be able to enhance our location services to keep pace with technological and market developments, or develop new location services in a timely manner or at competitive prices.
The market for location services is characterized by rapid technological change, evolving industry standards, frequent new product introductions and short product life cycles. To keep pace with technological developments, satisfy increasing customer requirements and achieve product acceptance, our future success depends upon our ability to enhance our current navigation services platform and to continue to develop and introduce new navigation services and other location-based product offerings and enhanced performance features and functionality on a timely basis at competitive prices. Our inability, for technological or other reasons, to enhance, develop, introduce or deliver compelling services and products in a timely manner, or at all, in response to changing market conditions, technologies or consumer expectations could have a material adverse effect on our operating results or could result in our services becoming obsolete. Our ability to compete successfully will depend in large measure on our ability to maintain a technically skilled development and engineering team and to adapt to technological changes and advances in the industry, including providing for the continued compatibility of our services platform with evolving industry standards and protocols and competitive network operating environments.

25

Table of Contents

Because our long term success depends on our ability to increase the number of end users located outside of the United States, our business will be susceptible to risks associated with international operations.
As of June 30, 2019, we had international operations in China, Romania, Germany, Japan and South Korea. Our experience with wireless carriers, automobile manufacturers and tier ones, and advertisers outside the United States is limited. Our revenue from customers in the United States comprised 81% and 90% of our total revenue in fiscal 2019 and 2018, respectively. However, our product is distributed globally in many different regions outside the United States, including Australia and New Zealand, China, Europe and South America. Our limited experience in operating our business outside the United States increases the risk that our current and future international expansion efforts may not be successful. In particular, our business model may not be successful in certain countries or regions outside the United States for reasons that we currently do not anticipate. In addition, conducting international operations subjects us to risks that we have not generally faced in the United States. These include:
fluctuations in currency exchange rates;
unexpected changes in foreign regulatory requirements or delays in obtaining necessary foreign regulatory approvals;
difficulties in managing the staffing of remote operations;
potentially adverse tax consequences, including the complexities of foreign value added tax systems, foreign tax withholding, restrictions on the repatriation of earnings and changes in tax rates;
difficulties in collecting accounts receivable balances in a timely manner;
dependence on foreign wireless carriers with different pricing models;
roaming charges to end users;
availability of reliable mobile networks in those countries;
requirements that we comply with local telecommunication regulations and automobile hands free laws in those countries;
requirements that we comply with local privacy regulations;
the burdens of complying with a wide variety of foreign laws and different legal standards;
increased financial accounting and reporting burdens and complexities;
political, social and economic instability in some jurisdictions;
terrorist attacks and security concerns in general; and
reduced or varied protection for intellectual property rights in some countries.
The occurrence of any one of these risks could negatively affect our international business and, consequently, our operating results. Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required to establish, acquire or integrate operations in other countries will produce desired levels of revenue or profitability and we may incur larger losses as a result.
The United Kingdom’s vote to leave the European Union will have uncertain effects and could adversely affect us.
On June 23, 2016, the electorate in the United Kingdom, or UK, voted in favor of leaving the European Union, or EU, (commonly referred to as the “Brexit”). Thereafter, on March 29, 2017, the country formally notified the EU of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Although the withdrawal of the UK from the EU was scheduled to take effect on March 29, 2019, the withdrawal date was extended until April 12, 2019 and further extended until October 31, 2019, although it could occur earlier if the UK so determines.
The effects of Brexit will depend on agreements the UK makes to retain access to EU markets either during a transitional period or more permanently. Brexit creates an uncertain political and economic environment in the UK and potentially across other EU member states for the foreseeable future, including during any period while the terms of Brexit are being negotiated and such uncertainties could impair or limit our ability to transact business in the member EU states.

26

Table of Contents

Further, Brexit could adversely affect European and worldwide economic or market conditions and could contribute to instability in global financial markets, and the value of the Pound Sterling currency or other currencies, including the Euro. We are exposed to the economic, market and fiscal conditions in the UK and the EU and to changes in any of these conditions. Depending on the terms reached regarding Brexit, it is possible that there may be adverse practical and/or operational implications on our business.
A significant amount of the regulatory regime that applies to us in the UK is derived from EU directives and regulations. For so long as the UK remains a member of the EU, those sources of legislation will (unless otherwise repealed or amended) remain in effect. However, Brexit could change the legal and regulatory framework within the UK where we operate and is likely to lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. Consequently, no assurance can be given as to the impact of Brexit and, in particular, no assurance can be given that our operating results, financial condition and prospects would not be adversely impacted by the result.
We rely on our management team and need specialized personnel to grow our business, and the loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business.
Our success and future growth depend on the skills, working relationships and continued services of our management team. We have experienced significant turnover in our management team since the beginning of fiscal 2019, including the departure of our Chief Financial Officer in January 2019 and our General Counsel in October 2018. In addition, our Senior Vice President, Engineering has notified us of his decision to resign, effective in October 2019. Although we recently hired a new Chief Financial Officer and a new General Counsel, our future performance will depend on our ability to retain these and other members of our senior management, particularly in the growth areas of our business, such as hybrid or brought-in automotive navigation.
Our future success also depends on our ability to attract, retain and motivate highly skilled personnel in the United States and internationally. All of our U.S. employees work for us on an at will basis. Competition for highly skilled personnel is intense, particularly in the software industry and for persons with experience with GPS and location services. The high degree of competition for personnel we experience has resulted in and may also continue to result in the incurrence of significantly higher compensation costs to attract, hire and retain employees. We have from time to time experienced, and we expect to continue to experience, difficulty in attracting, hiring and retaining highly skilled employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors, their former employers may attempt to assert that these employees or we have breached the former employees’ legal obligations to the former employer, resulting in a diversion of our time and resources. In addition, existing employees often consider the value of the stock awards they receive in connection with their employment. If our stock price performs poorly, it may adversely affect our ability to retain highly skilled employees. Our inability to attract and retain the necessary personnel could adversely affect our business and future growth prospects.
We rely on network infrastructures provided by our wireless carriers, mobile phones and in-car wireless connections for the delivery of our navigation services to end users.
We generally provide our navigation services from third-party hosted servers, which require close integration with the wireless carriers’ networks. We may be unable to provide high quality services if the wireless carriers’ networks perform poorly or experience delayed response times. Our future success will depend on the availability and quality of our wireless carrier customers’ networks in the United States and abroad to run our mobile navigation services. This includes deployment and maintenance of reliable networks with the speed, data capacity and security necessary to provide reliable wireless communications services. We do not establish or maintain these wireless networks and have no control over interruptions or failures in the deployment and maintenance by wireless carrier customers of their network infrastructure. In addition, these wireless network infrastructures may be unable to support the demands placed on them if the number of subscribers increases, or if existing or future subscribers increase their use of limited bandwidth. Market acceptance of our mobile navigation services will depend in part on the quality of these wireless networks and the ability of our customers to effectively manage their subscribers’ expectations.
In addition, certain automotive navigation applications rely on wireless connections between the vehicle and our network. We have no influence or control over the vehicle’s wireless equipment and if it does not operate in a satisfactory manner, our ability to provide those services would be impaired and our reputation would be harmed.
Wireless communications have experienced a variety of outages and other delays as a result of infrastructure and equipment failures and could face outages and delays in the future. These outages and delays could affect our ability to provide our navigation services successfully. In addition, changes by a wireless carrier to its network infrastructure may interfere with the integration of our servers with their network and delivery of our navigation services and may cause end users to lose

27

Table of Contents

functionality for services they have already purchased. Any of the foregoing could harm our business, operating results and financial condition.
We cannot control the quality standards of our wireless carriers, their mobile phone providers, automobile manufacturers and other technology infrastructure providers. We cannot guarantee that the mobile phones or in-car wireless equipment are free from errors or defects. If errors or defects occur in mobile phones or services offered by our wireless carrier customers, it could result in consumers terminating our services, damage to our reputation, increased customer service and support costs, warranty claims, lost revenue and diverted development resources, any of which could adversely affect our business, results of operations and financial condition.
Mergers, consolidations or other strategic transactions in the mapping data industry could weaken our competitive position, reduce the number of our map providers and adversely affect our business.
The mapping data industry continues to experience consolidation. Should one of our map providers consolidate or enter into an alliance with another navigation provider, this could have a material adverse impact on our business. Currently, two of our map suppliers are owned by competitors in the navigation space. Such a consolidation may cause us to lose a map supplier or require us to increase the royalties we pay to map vendors as a result of enhanced supplier leverage, which would have a negative effect on our business. In the event that we lose a map supplier, we may be unable to replace our map suppliers, and the remaining map suppliers may increase license fees. In addition, if we continue to use more OSM-based maps and no longer purchase maps from those suppliers, we may be unable to purchase other data that is integral to our navigation products from our existing map suppliers.
Changes in business direction and market conditions could lead to charges related to structural reorganization and discontinuation of certain products or services, which may adversely affect our financial results.
In response to changing market conditions and the desire to focus on new and more potentially attractive opportunities, we may be required to strategically realign our resources and consider restructuring, eliminating, or otherwise exiting certain business activities. Any decision to reduce investment in, dispose of, or otherwise exit business activities may result in the recording of special charges, such as workforce reduction and excessive facility space costs.
Risks related to our intellectual property and regulation
We operate in an industry with extensive intellectual property litigation. Claims of infringement against us, our customers, or other business partners may cause our business, operating results and financial condition to suffer.
Our commercial success depends in part upon us, our partners and our customers not infringing intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures and/or need to alter our technologies or cease certain activities. We operate in an industry with extensive intellectual property litigation and it is not uncommon for our automobile manufacturers and tier ones and competitors to be involved in infringement lawsuits by or against third parties. Many industry participants that own, or claim to own, intellectual property aggressively assert their rights, and our customers and other business partners, who we agree in certain circumstances to indemnify for intellectual property infringement claims related to our services, are often targets of such assertions. We cannot determine with certainty whether any existing or future third-party intellectual property rights would require us to alter our technologies, obtain licenses or cease certain activities.
We have received, and may in the future receive, claims from third parties alleging infringement and other related claims. Current and future litigation may make it necessary to defend ourselves and our customers and other business partners by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. Some of our competitors may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us, our wireless carrier customers or our other business partners. These companies typically have little or no product revenue and therefore our patents may provide little or no deterrence against such companies filing patent infringement lawsuits against us. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time consuming and costly to evaluate and defend and could:
adversely affect our relationships with our current or future customers and other business partners;
cause delays or stoppages in the shipment of Telenav-enabled or preloaded mobile phones or vehicles, or cause us to modify or suspend the provision of our navigation services;

28

Table of Contents

cause us to incur significant expenses in defending claims brought against our customers, other business partners or us;
divert management’s attention and resources;
subject us to significant damages or settlements;
require us to enter into settlements, royalty or licensing agreements on unfavorable terms; or
require us or our business partners to cease certain activities and/or modify our products or services.
In addition to liability for monetary damages against us or, in certain circumstances, our customers, we may be prohibited from developing, commercializing or continuing to provide certain of our navigation services unless we obtain licenses from the holders of the patents or other intellectual property rights. We cannot assure you that we will be able to obtain any such licenses on commercially reasonable terms, or at all. If we do not obtain such licenses, our business, operating results and financial condition could be materially adversely affected, and we could, for example, be required to cease offering our navigation services or be required to materially alter our navigation services, which could involve substantial costs and time to develop.
Unauthorized control or manipulation of our systems in vehicles may cause them to operate improperly or not at all, or compromise their safety and data security, which could result in loss of confidence in us and our products, cancellation of contracts with certain of our automobile manufacturer or tier one customers and harm our business.
There have been reports of vehicles of certain automobile manufacturers being “hacked” to grant access and operation of the vehicles to unauthorized persons and would-be thieves. Modern vehicles are technologically advanced machines requiring the interoperation of numerous complex and evolving hardware and software systems, including the navigation system, and with respect to vehicles with autonomous driving features, control of the vehicle. We have agreed with some of our automobile manufacturer and tier one customers to adopt certain security procedures and we may be subject to claims or our contracts with those automobile manufacturers and tier ones may be terminated if we do not comply with our covenants or if our products are the source of access to the systems in their vehicles by intruders.
Although we have designed, implemented and tested security measures to prevent unauthorized access to our products when installed in vehicles, our information technology networks and communications with vehicles in which our products are installed may be vulnerable to interception, manipulation, damage, disruptions or shutdowns due to attacks by hackers or breaches due to errors by personnel who have access to our networks and systems. Any such security incidents could result in unexpected control of or changes to the vehicles’ functionality and our products’ user interface and performance characteristics. Hackers may also use similar means to gain access to data stored in or generated by the vehicle, such as its current geographical position, previous and stored destination address history and web browser “favorites.” Any such unauthorized control of vehicles or access to or loss of information could result in legal claims or proceedings and negative publicity, which would negatively affect our brand and harm our business, prospects, financial condition and operating results.
Our business is subject to online security risks, including potential security and privacy incidents.
Our business involves the collection, storage, processing and transmission of information about our users, including users' locations, routes mapped and taken. Additionally, our apps transmit information to users’ personal devices, which creates opportunities for hackers to exploit vulnerabilities, if any, in our apps. An increasing number of organizations, including large online and offline merchants and businesses, other large Internet companies, financial institutions, and government institutions, have disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks, including on portions of their websites or infrastructure. While we are investing significant resources to evaluate and improve our security, we have been subject to such attacks in the past, although they have not, to our knowledge, resulted in a breach of security involving unauthorized acquisition of users' personal information. A breach of security or privacy could have negative consequences to our reputation, which could result in users discontinuing or reducing their use of our products and our automotive customers terminating their agreements with us, and could have significant out-of-pocket financial impact, which could harm our business. Similarly, a breach of security or privacy in vehicles in which our navigation products are installed could result in a reduction in adoption of our navigation products.
The techniques used to obtain unauthorized, improper or illegal access, disable or degrade service, or sabotage systems or access data change frequently, may be difficult to detect quickly, and often are not recognized until launched against a target. Certain efforts may be state-sponsored and supported by significant financial and technological resources and may therefore be even more difficult to detect. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures. Unauthorized parties also may attempt to gain access to our systems or facilities through various means, including

29

Table of Contents

hacking into our systems or facilities, fraud, trickery or other means of deceiving our employees, contractors and temporary staff. A party that is able to circumvent our security measures could misappropriate our, our customers’ or our employees’ personal or proprietary information, cause interruption in our operations and damage our computers and systems or those of our customers. In addition, our customers have been and likely will continue to be targeted by parties using fraudulent “spoof” and “phishing” emails to misappropriate user names, passwords, payment card numbers, GPS data or other personal information or to introduce viruses or other malware, including through “trojan horse” programs, to our users’ phones and vehicles. Also, our information technology and infrastructure may be vulnerable to cyberattacks or security incidents, and third parties may be able to access our customers’ personal or proprietary information and payment card data that are stored on or accessible through our systems. Any security or privacy incident at a company providing services to us or our tier one customers, or integrated with our products and services, could have similar effects. We may also need to expend significant additional resources to protect against security or privacy incidents or to redress problems caused by such incidents. These issues are likely to become more difficult and costly as we expand the number of markets where we operate. Additionally, our insurance policies carry low coverage limits, which may not be adequate to reimburse us for losses caused by security incidents, and we may not be able to collect fully, if at all, under these insurance policies.
Vulnerabilities in our products and services have been publicly disclosed before, and if we are unable to adequately detect and address vulnerabilities in our products and services, it may result in harm to our business.
As with any application, our products may contain known and unknown vulnerabilities, coding errors, design flaws, or other issues that could allow an attacker to maliciously exploit our software. Vulnerabilities in our software and applications have been publicly exposed in the past, although they have not, to our knowledge, resulted in the disclosure of user information or been maliciously exploited. While we are investing significantly to evaluate and improve our security on the vulnerabilities we have identified, addressing vulnerabilities in our software is an ongoing process. Malicious exploitation of our products could result in the introduction of malicious software onto our users’ devices, the theft of confidential or private information, damage to users’ devices, and harm to our reputation, among other issues. Successful exploitation of a vulnerability in our software may subject us to numerous lawsuits or regulatory inquiries. Additionally, the disclosure of any vulnerability may result in a loss of confidence in us or our products, the cancellation of contracts with certain of our automotive tier one customers, discontinued use of our products, and harm to our business and reputation. These events could have significant out-of-pocket financial impact.
Changes in government regulation of the wireless communications, automobile and in car commerce industries may adversely affect our business.
It is possible that a number of laws and regulations may be adopted in the United States and elsewhere that could restrict the wireless communications industry, further regulate the automobile industry or impair the ability to conduct in car commerce, including laws and regulations regarding lawful interception of personal data, hands free use of mobile phones or navigation services within autos, autonomous driving or the control of such use, privacy, taxation, content suitability, copyright and antitrust. Furthermore, the growth and development of electronic storage of personal information may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours that store personal information. We anticipate that regulation of the industries in which our products and services are used will increase and that we will be required to devote legal and other resources to address this regulation. In addition, governments have recently begun to consider and adopt laws regarding vehicles using ADAS and semi-autonomous driving capabilities and those laws may curtail or preclude using the services our products provide. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere regarding the wireless communications or automobile industries may make operation more costly, and may materially reduce our ability to increase or maintain sales of our products and services.
Government regulation designed to protect end user privacy may make it difficult for us to provide our services or provide in car commerce services.
We transmit and store a large volume of information collected or about end users or their devices in the course of providing our products and services. This information is increasingly subject to legislation and regulations, such as the GDPR, in numerous jurisdictions around the world. This government regulation is typically intended to protect the privacy and security of personal information about its residents or that is collected, stored and transmitted in or from the governing jurisdiction.
We could be adversely affected if domestic or international legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business. For example, the USA PATRIOT Act provides certain rights to U.S. law enforcement authorities to obtain personal information in the control of U.S. persons and entities without notifying the affected individuals. If we are required to allocate significant resources to modify the delivery of our services to enable enhanced legal interception of the personal information that we transmit and store, our results of operations and financial condition may be adversely affected.

30

Table of Contents

In addition, because various foreign jurisdictions have different laws and regulations concerning the storage and transmission of personal information, we may face unknown requirements that pose compliance challenges in new international markets that we seek to enter. Such variation could subject us to costs, delayed service launches, liabilities or negative publicity that could impair our ability to expand our operations into some countries and therefore limit our future growth.
As privacy and data protection have become more topical issues, we may also be subject to increased scrutiny or potential liabilities as a result of developing views on the relevance of privacy or sensitivity of personal information. These and other privacy concerns could adversely impact our business, results of operations and financial condition.
If we are unable to obtain the required government licenses or approvals to comply with government regulation relating to map data and location-based services, we may not be able to provide our products and services and our business could be adversely impacted.
A number of countries and local jurisdictions require certain licenses and/or government approvals in order to comply with regulations governing the creation or distribution map data and/or the provision of location-based services, including the collection of location information. If we are unable to obtain the necessary licenses or approvals or fail to comply with the regulations in each jurisdiction where we or our partners offer location-based products and services, we may be unable to offer to our partners or customers the full scope of planned products and services. In addition, should any map or location-based services related regulations change, we may incur additional expense in modifying our existing products and product roadmaps to comply with the requirements of individual jurisdictions. Such laws or regulations or the imposition of new laws and regulations regarding the provision of map data or location-based services may make operation more costly, and may materially reduce our ability to increase or maintain sales of our products and services.
If we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be harmed.
We rely primarily on a combination of patent laws, trademark laws, copyright laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technology. However, our issued patents and any future patents that may be issued may not survive a legal challenge to their scope, validity or enforceability, or provide significant protection for us. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer similar products or technologies. In addition, patents may not be issued from any of our current or future applications.
Monitoring unauthorized use of our intellectual property is difficult and costly. The steps we have taken to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Any failure by us to meaningfully protect our intellectual property could result in competitors offering products that incorporate our most technologically advanced features, which could seriously reduce demand for our navigation services. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination favorable to us.
Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information.
We have devoted substantial resources to the development of our proprietary technology, including the proprietary software components of our navigation services and related processes. In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our employees, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of our confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of our confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
Our use of open source software could negatively affect our ability to sell our service and subject us to possible litigation.
We use open source software in our navigation services platform and client applications and may use more open source software in the future. Use of open source software may subject our navigation services platform and client applications to general release or require us to re-engineer our navigation services platform and client applications, which may cause harm to our business. From time to time, there have been claims challenging the ownership of open source software against companies

31

Table of Contents

that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. If we combine our proprietary software products with open source software in a certain manner, we could, under certain of the open source licenses, be required to release our proprietary source code. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. Open source license terms may be ambiguous and many of the risks associated with usage of open source cannot be eliminated, and could, if not properly addressed, negatively affect our business. If we were found to have inappropriately used open source software, we may be required to release our proprietary source code, re-engineer our navigation services platform and client applications, discontinue the sale of our service in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, operating results and financial condition.
Risks related to being a publicly traded company and holding our common stock
As a public company, we are obligated to develop and maintain effective internal control over financial reporting. We may not always complete our assessment of the effectiveness of our internal control over financial reporting in a timely manner, or such internal control may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
The Sarbanes-Oxley Act requires that we test our internal control over financial reporting and disclosure controls and procedures annually. For example, as of June 30, 2019, we performed system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 requires that we incur substantial expense and expend significant management time on compliance-related issues.
During the three months ended December 31, 2018, we identified certain errors related to our implementation of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) due to our internal control over financial reporting relating to supervision and review of the financial models supporting our revenue recognition accounting and disclosures not operating effectively. We concluded that, because this deficiency created a more than remote likelihood of a material misstatement not being prevented or detected on a timely basis, this deficiency constituted a material weakness in internal control over financial reporting.
As further described in Part II, Item 9A of this Annual Report on Form 10-K, we have taken specific steps to remediate the material weakness by implementing and enhancing our internal controls. The material weakness will not be deemed remediated until all of those steps have been implemented and the affected internal controls have been tested and determined to be operating effectively. In addition, we may need to modify these steps or implement additional remediation measures to address the material weakness, and we cannot be certain that the measures we have taken, and expect to take, will be sufficient to address the issues identified, to ensure that our internal controls are effective, or to ensure that the identified material weakness will not result in a future material misstatement of our annual or interim consolidated financial statements.
If we are unable to remediate this material weakness in a timely manner and otherwise comply with the requirements of Section 404 in the future, or if we or our independent registered public accounting firm identify additional deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price and trading liquidity of our stock may decline, investors may lose confidence in our reported financial information, we could be subject to civil and criminal investigations and penalties by the NASDAQ Global Market, the SEC or other regulatory authorities, and our business and financial condition could otherwise be materially and adversely impacted.
We will continue to incur high costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.
As a public company, we incur significant legal, accounting, investor relations and other expenses, including costs associated with public company reporting requirements. We also have incurred and will continue to incur costs associated with current corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the stock exchange on which our common stock is traded. We are generally not eligible to report under reduced disclosure requirements or benefit from longer phase in periods for “emerging growth companies” as such term is defined in the Jumpstart Our Business Act of 2012. The expenses incurred by public

32

Table of Contents

companies for reporting and corporate governance purposes have increased dramatically over the past several years. We expect these rules and regulations to continue to impact our legal and financial compliance costs substantially and to make some activities more time consuming and costly. We are unable currently to estimate these costs with any degree of certainty. We also expect that, over time, it may be more expensive for us to obtain director and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers if we cannot provide a level of insurance coverage that they believe is adequate.
Regulations relating to investments in offshore companies by Chinese residents may subject our Chinese-resident beneficial owners or our Chinese subsidiaries to liability or penalties, limit our ability to inject capital into our Chinese subsidiaries, limit our Chinese subsidiaries’ ability to increase their registered capital or limit their ability to distribute profits to us.
On July 4, 2014, the State Administration of Foreign Exchange of the People’s Republic of China, or SAFE, promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or Circular 37, which replaced the former Circular on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Round Trip Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Vehicles (commonly known as “SAFE Circular 75”) promulgated by SAFE on October 21, 2005. Circular 37 requires Chinese residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such Chinese residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose vehicle.” Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by Chinese individuals, share transfer or exchange, merger, division or other material event. In the event that a Chinese shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the Chinese subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out all subsequent cross-border foreign exchange activities in worst scenario, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its Chinese subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under Chinese law for evasion of foreign exchange controls. On February 13, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or Circular 13, which became effective on June 1, 2015.  Pursuant to Circular 13, entities and individuals are required to apply for foreign exchange registration of overseas direct investment, including those required under Circular 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision of SAFE, will directly review the applications and conduct the registration.
We attempt to comply, and attempt to ensure that our stockholders who are subject to Circular 37 and other related rules, comply with the relevant requirements under Circular 37. However, we cannot provide any assurances that all of our stockholders who are Chinese residents have complied or will comply with our request to make or obtain any applicable registrations or comply with other requirements required by Circular 37 or other related rules. Any failure or inability of any of our stockholders who is a Chinese resident to comply with relevant requirements under Circular 37 could subject such stockholders or our Chinese subsidiaries to fines and legal sanctions imposed by the Chinese government and may also limit our ability to contribute additional capital into our Chinese subsidiaries or receive dividends or other distributions from our Chinese subsidiaries. As a result, these risks may have a material adverse effect on our business, financial condition and results of operations.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.
We expect that the trading price for our common stock will be affected by any research or reports that industry or financial analysts publish about us or our business. As of June 30, 2019, only three research analysts regularly publish reports regarding our company. If one or more of these analysts cease coverage of our company, our stock may lose visibility in the market, which in turn could cause its price to decline. In addition, if any analysts who may elect to cover us downgrade their evaluations of our stock, the price of our stock could decline. For example, in late July 2011, following our earnings release for the three months and fiscal year ended June 30, 2011, several financial analysts published research reports lowering their price targets of our stock. After our earnings announcement and the publication of these reports, our stock price fell more than 40%. If one or more of these analysts cease coverage of our company, our stock may lose visibility in the market, which in turn could cause its price to decline. During a portion of fiscal 2019, our stock traded at prices below $5.00 per share. If our stock were to trade at prices below $5.00 per share for an extended period of time, financial analysts might terminate coverage of our company due to internal policies within their investment banks, which could result in further stock price declines.

33

Table of Contents

Our stock price has fluctuated significantly and may continue to fluctuate in the future.
Our common stock was sold in our initial public offering at $8.00 per share. Although our common stock has traded at prices as high as $22.07 per share, it has also traded at prices as low as $3.35 per share and has tended to have significant downward and upward price movements in a relatively short time period. Future fluctuations or declines in the trading price of our common stock may result from a number of events or factors, including those discussed in the preceding risk factors relating to our operations, as well as:
actual or anticipated fluctuations in our operating results;
changes in the financial projections we may provide to the public or our failure to meet these projections;
announcements by us or our competitors of significant technical innovations, relationship changes with key customers, acquisitions, strategic partnerships, joint ventures, capital raising activities or capital commitments;
announcements by automobile manufacturers regarding use of free, third-party navigation platforms in their vehicles;
the public’s response to our press releases or other public announcements, including our filings with the SEC;
lawsuits threatened or filed against us; and
large distributions of our common stock by significant stockholders to limited partners or others who immediately resell the shares.
General market conditions and domestic or international macroeconomic factors unrelated to our performance, such as the continuing unprecedented volatility in the financial markets, may also affect our stock price. For these reasons, investors should not rely on recent trends to predict future stock prices or financial results. Investors in our common stock may not be able to dispose of the shares they purchased at prices above the initial public offering price, or, depending on market conditions, at all.
In addition, during portions of fiscal 2019, our stock traded at prices below $5.00 per share. If the market price of our common stock were to stay below $5.00 per share for an extended period of time, under stock exchange rules, our stockholders would not be able to use such shares as collateral for borrowing in margin accounts. Further, certain institutional investors are restricted from investing in shares priced below $5.00 per share. This inability to use shares of our common stock as collateral and the inability of certain institutional investors to invest in our shares may depress demand and lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common stock.
In the past, the market price for our common stock has traded only slightly above the cash value of our common stock. If investors do not value our company as an ongoing business and only value it for the cash on our balance sheet, our stock price may decline if we continue to incur net losses and use our cash to fund operations. We may also attract investors who are looking for short-term gains in our shares rather than being interested in our long-term outlook. As a result, the price of our common stock may be volatile.
The concentration of ownership of our capital stock limits your ability to influence corporate matters.
Our executive officers and directors and entities affiliated with them beneficially owned (as determined in accordance with the rules of the SEC) approximately 33.9% of our common stock outstanding as of June 30, 2019, which includes approximately 10.2% of our common stock held by Nokomis Capital. These stockholders, acting together, may be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change of control would benefit our other stockholders.

34

Table of Contents

Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions:
providing for a classified board of directors whose members serve staggered three-year terms;
authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to the rights of our common stock;
limiting the liability of, and providing indemnification to, our directors and officers;
limiting the ability of our stockholders to call and bring business before special meetings;
requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;
prohibiting stockholder action by written consent; and
providing that certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws can be amended only by supermajority vote (a 66 2/3 % majority) of the outstanding shares. In addition, our board of directors can amend our amended and restated bylaws by majority vote of the members of our board of directors.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding capital stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding common stock not held by such stockholder.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock, and could also affect the price that some investors are willing to pay for our common stock.

ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.

ITEM 2.
PROPERTIES
Facilities
Our corporate headquarters are located at 4655 Great America Parkway, Suite 300, Santa Clara, California in an office consisting of approximately 55,000 square feet pursuant to a lease that expires in September 2023. This headquarters facility houses the majority of our U.S. research and development, support, marketing and general and administrative personnel. We lease approximately 30,000 square feet of space in Shanghai, China for our research and development, sales and support operations pursuant to a lease expiring in November 2020, approximately 20,000 square feet in Xi’an, China, for research and development operations pursuant to a lease expiring in September 2020, and approximately 34,000 square feet in Cluj, Romania, for research and development operations pursuant to leases that expire in September 2022. We lease approximately 12,000 square feet in Culver City, California for research and development and sales and marketing operations pursuant to a lease expiring in February 2022, which we intend to either assign to inMarket or terminate in connection with the inMarket Transaction. We also lease various office spaces of less than 5,000 square feet throughout the world for our sales, marketing and business development personnel located in those areas. We believe our current facilities will be adequate or that additional space will be available on commercially reasonable terms for the foreseeable future.

35

Table of Contents


ITEM 3.
LEGAL PROCEEDINGS
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We have received, and may in the future continue to receive, claims from third parties asserting infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. From time to time, we also may be subject to claims from our third-party content providers that we owe them additional royalties and interest, which claims may result in litigation if we and the third-party content provider are unable to resolve the matter. There can be no assurance with respect to the outcome of any current or future litigation brought against us or pursuant to which we have indemnification obligations and the outcome could have a material adverse impact on our business, operating results and financial condition.
In addition, we have received, and expect to continue to receive, demands for indemnification from our customers, which demands can be very expensive to settle or defend, and we have in the past offered to contribute to settlement amounts and incurred legal fees in connection with certain of these indemnity demands. In response to these demands we may be required to assume control of and bear all costs associated with the defense of our customers in compliance with our contractual commitments.
Large future indemnity payments and associated legal fees and expenses, including potential indemnity payments and legal fees and expenses relating to our wireless carrier and other customers’ indemnity demands with respect to pending litigation, could materially harm our business, operating results and financial condition.

ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.


36

Table of Contents

PART II.

ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the NASDAQ Global Market under the symbol “TNAV.”
We had approximately 29 stockholders of record as of June 30, 2019. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions. We have never declared or paid dividends on our common stock and do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used for the operation and growth of our business.
Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.  
Issuer Purchases of Equity Securities
On February 7, 2019, we announced that our board of directors had approved a stock repurchase program to facilitate our repurchase up to $20.0 million worth of our issued and outstanding common stock in the open market. The timing and amount of repurchase transactions under this program will depend on market conditions, cash flow and other considerations. The repurchase authorization will expire on August 4, 2020.
The following table summarizes stock repurchase activity during the three months ended June 30, 2019:
 
 
Total Number of
Shares Purchased
 
Average Price
Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value that May Yet be Purchased Under the Plans or Programs
April 1 – April 30, 2019
 

 
$

 

 
$
18,695,600

May 1 – May 31, 2019
 

 

 

 
18,695,600

June 1 – June 30, 2019
 

 

 

 
18,695,600

Total
 

 
 
 

 
$
18,695,600




37

Table of Contents

STOCK PERFORMANCE GRAPH
This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Telenav, Inc. under the Securities Act or the Exchange Act.
The following graph shows a comparison from July 1, 2014 through June 30, 2019 of cumulative total return for our common stock, the NASDAQ Composite Index and the Russell 3000 Index. Such returns are based on historical results and are not intended to suggest future performance. Data for the NASDAQ Composite Index and the Russell 3000 Index assume reinvestment of dividends.

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13076984&doc=18


38

Table of Contents

ITEM 6.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-K. We have derived the statement of operations data for fiscal years ended June 30, 2019, 2018 and 2017 and the balance sheet data as of June 30, 2019 and 2018 from the audited consolidated financial statements included elsewhere in this Form 10-K. The statement of operations data for the fiscal years ended June 30, 2016 and 2015 and the balance sheet data as of June 30, 2017, 2016 and 2015 were derived from audited consolidated financial statements that are not included in this Form 10-K. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The results of operations of our enterprise business, which were previously presented as a component of our consolidated operating results, have been classified as discontinued operations in our statement of operations for all periods presented. We have not declared or distributed any cash dividends on our common stock. Historical results are not necessarily indicative of results to be expected for future periods.
 
Consolidated Statements of Operations Data:
(in thousands, except per share data)
 
Fiscal Year Ended June 30,
2019
 
2018
As Adjusted(1)
 
2017
As Adjusted(1)
 
2016
 
2015
Revenue
 
$
220,896

 
$
218,463

 
$
209,715

 
$
183,346

 
$
160,239

Cost of revenue
 
124,675

 
128,071

 
120,436

 
100,797

 
78,784

Gross profit
 
96,221

 
90,392

 
89,279

 
82,549

 
81,455

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research and development
 
83,953

 
85,646

 
67,406

 
68,911

 
68,060

Sales and marketing
 
19,322

 
20,748

 
21,995

 
25,587

 
26,975

General and administrative
 
23,811

 
21,562

 
23,041

 
23,059

 
23,606

Goodwill impairment
 
2,556

 
2,666

 

 

 

Legal settlement and contingencies
 
700

 
425

 
6,424

 
935

 

Restructuring
 

 

 

 
(1,362
)
 
1,150

Total operating expenses
 
130,342

 
131,047

 
118,866

 
117,130

 
119,791

Operating loss
 
(34,121
)
 
(40,655
)
 
(29,587
)
 
(34,581
)
 
(38,336
)
Other income (expense), net
 
2,916

 
833

 
892

 
(229
)
 
2,267

Loss from operations
 
(31,205
)
 
(39,822
)
 
(28,695
)
 
(34,810
)
 
(36,069
)
Provision (benefit) for income taxes
 
1,283

 
1,012

 
841

 
511

 
(13,006
)
Net loss
 
$
(32,488
)
 
$
(40,834
)
 
$
(29,536
)
 
$
(35,321
)
 
$
(23,063
)
Net loss per share, basic and diluted
 
$
(0.71
)
 
$
(0.92
)
 
$
(0.68
)
 
$
(0.85
)
 
$
(0.58
)
Weighted average shares used in computing net loss per share, basic and diluted
 
45,577

 
44,498

 
43,343

 
41,567

 
39,991

 
Consolidated Balance Sheets Data:
(in thousands)
 
As of June 30,
2019
 
2018
As Adjusted(1)
 
2017
As Adjusted(1)
 
2016
 
2015
Cash, cash equivalents and short-term investments
 
$
99,478

 
$
84,946

 
$
98,355

 
$
109,626

 
$
119,916

Working capital
 
99,672

 
76,996

 
107,817

 
118,182

 
138,415

Total assets
 
297,015

 
237,680

 
240,894

 
218,247

 
223,922

Common stock and additional paid-in capital
 
182,396

 
167,940

 
159,710

 
149,818

 
140,447

Total stockholders’ equity
 
90,640

 
108,883

 
141,704

 
149,685

 
176,183

___________________________ 
(1) The summary consolidated financial data for the fiscal years ended and as of June 30, 2018 and 2017 have been retrospectively restated to reflect the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) and subsequent amendments to the initial guidance. In conjunction with Topic 606, a new subtopic, ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers, was also issued. Collectively, we refer to Topic 606 and Subtopic 340-40 as “ASC 606.” See Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a summary of adjustments related to ASC 606. The selected financial data for the fiscal years ended and as of June 30, 2016 and 2015 have not been updated to reflect the adoption of ASC 606.

39

Table of Contents

ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with our consolidated financial statements and the notes to those statements included elsewhere in this Form 10-K. This discussion contains forward-looking statements based on our current expectations, assumptions, estimates and projections about Telenav and our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully described in “Risk factors” in Item 1A of this Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-K. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
Overview
Telenav is a leading provider of location-based products and services for connected cars. We utilize our connected car platform to deliver these products and services. Our connected car platform allows us to deliver enhanced location-based navigation services to automobile manufacturers and tier one suppliers, or tier ones. In addition, as discussed below, until August 2019, we utilized our advertising platform, which we refer to as our Ads Business, to deliver highly targeted advertising services to advertisers and advertising agencies by leveraging our location expertise. We reported results through June 30, 2019 in three business segments: automotive, advertising and mobile navigation. Our fiscal year ends June 30. In this Form 10-K, we refer to the fiscal years ended June 30, 2017, 2018 and 2019 and ending June 30, 2020 as fiscal 2017, fiscal 2018, fiscal 2019 and fiscal 2020, respectively. Our total revenue was $209.7 million in fiscal 2017, $218.5 million in fiscal 2018 and $220.9 million in fiscal 2019. Our net loss was $29.5 million in fiscal 2017, $40.8 million in fiscal 2018 and $32.5 million in fiscal 2019.
We derive revenue primarily from automobile manufacturers and tier ones whose vehicles or systems incorporate our proprietary personalized navigation software and services. These manufacturers and tier ones generally do not provide us with any volume or revenue guarantees.
Our legacy mobile navigation business has declined steadily since fiscal 2013, and we expect it to continue to decline and represent less than 10% of our consolidated revenue in fiscal 2020. Our mobile navigation business generates revenue from our partnerships with wireless carriers who sell our navigation services to their subscribers either as a standalone service or in a bundle with other data or services. The mobile navigation business has declined both in absolute dollars and as a percentage of revenue from $116.4 million, or 61% of our revenue, in fiscal 2013 to $9.8 million, or 4% of our revenue, in fiscal 2019, as subscriptions for paid navigation services declined in favor of free or freemium navigation services offered by our competitors with greater resources and name recognition, such as Google and Apple. We have experienced and anticipate that we will continue to experience the non-renewal of our agreements for these services by our wireless carrier customers as demand from their subscribers declines. In the event our mobile navigation business ceases to be profitable, we may ultimately elect to terminate our legacy wireless carrier mobile navigation business to the extent allowable under our contractual arrangements.
We offer four variations of our connected car products and services to our automobile manufacturer and tier one customers for distribution with their vehicles and systems. First, we offer on-board navigation systems that are built into vehicles with all key elements of the system residing in the vehicle as a self-contained application along with the related software and content. Our on-board navigation products do not require access to the Internet or wireless networks to function. Second, we offer advanced navigation solutions that contain on-board functionality and also add cloud functionality such as cloud search, cloud routing, map updates and “live” data. We refer to these solutions as hybrid navigation. Third, we offer mobile phone-based navigation solutions that run on the phone and provide an interactive map and navigation instructions to the vehicle's video screen and audio system, which we refer to as brought-in navigation. Finally, we offer a SDK that enables our customers to add mapping and location capabilities to their cloud, mobile and on-board automotive applications. We believe our history as a supplier of cloud-based navigation services combined with our proven track record of delivering navigation solutions to three of the top five global automobile manufacturers provides a unique advantage in the automotive navigation marketplace over our competitors.
We provide our connected car products and services directly to automobile manufacturers such as Ford, which represented 55% of our revenue in fiscal 2019, GM, which represented 18% of our revenue in fiscal 2019, and Toyota. We also provide our products and services indirectly through tier ones such as Xevo for certain Toyota solutions; LG for certain Opel solutions; and Panasonic for certain FCA solutions.

40

Table of Contents

We generate product revenue from the delivery of customized software and royalties from the distribution of this customized software in certain automotive navigation applications, map updates to the software and customized software development. We generate services revenue from brought-in automotive navigation solutions, advertising services and mobile navigation services.
Ford utilizes our on-board automotive navigation product in its Ford SYNC® platform. Ford pays us a royalty fee on SYNC 2 on-board solutions as the software is imaged onto an SD card and shipped for installation in vehicles and pays us a royalty fee on SYNC 3 on-board solutions as our software is installed in the vehicle. We also derive product revenue from map update fees.
We generate automotive services revenue primarily from our brought-in automotive navigation solutions. We earn a fee for each new vehicle owner who downloads and activates the associated mobile application featuring GM's branded mobile and web-based applications, whereby we provide enhanced search capabilities for contracted service periods. We also earn a fee for each new Toyota and Lexus vehicle sold and enabled to connect with our Scout GPS Link mobile application, similarly provided over a contracted service period.
For its hybrid navigation solutions, GM pays us a royalty fee as the SD card is shipped for installation in vehicles; this royalty includes a fee for the initial connected service to be provided once the vehicle is sold. GM will pay us an additional service fee for connected solution subscriptions for each end user that elects to renew their OnStar Connected Navigation or Connected Navigation subscription with GM.
Through August 2019, we generated revenue from advertising network services through the delivery of advertising impressions based on the specific terms of the advertising contract. In fiscal 2019, we recognized a $2.6 million impairment of the goodwill associated with our advertising business segment. Subsequent to June 30, 2019, we entered into the inMarket Transaction described above.
We also generate a declining portion of our services revenue from subscriptions to access our mobile navigation services, which are generally provided through our wireless carrier customers that offer our services to their subscribers. Our wireless carrier customers typically pay us based on a revenue sharing arrangement or a monthly subscription fee per end user. This revenue continues to decline and in fiscal 2018 we recognized a $2.7 million impairment of all of the goodwill associated with our mobile navigation segment.
In August 2019, we sold the Ads Business to inMarket. Upon the terms and subject to the conditions of the Asset Purchase Agreement, inMarket acquired substantially all of the assets and assumed certain liabilities related to and used in the Ads Business. In exchange, inMarket issued to Telenav units of inMarket representing a 14.5% member interest in inMarket at the time of closing of the inMarket Transaction. In addition, inMarket granted to Telenav a perpetual, non-exclusive, irrevocable, royalty-free, license back to the software and other intellectual property rights being assigned to inMarket as part of the inMarket Transaction. We will report the operating results of the Ads Business as discontinued operations in our condensed consolidated financial statements for the first quarter of fiscal 2020 and for all prior comparative periods.
In August 2019, we entered into certain agreements with affiliates of Grab, including: (i) a services agreement pursuant to which we agreed that we will provide certain services to Grab through certain of our employees designated to work on our OpenTerra Platform; (ii) a license agreement pursuant to which we have granted to Grab a perpetual license to certain intellectual property associated with the OpenTerra Platform; and (iii) an asset purchase agreement pursuant to which we will sell certain intellectual property associated with the OpenTerra Platform to Grab and facilitate the making of offers for employment or consulting arrangements by Grab of certain of our OpenTerra employees. The transactions contemplated by the services agreement, license agreement and asset purchase agreement together comprise the “Grab Transaction.” The consideration for the services agreement, license agreement and asset purchase agreement is a mix of cash and Grab Holdings, Inc. ordinary shares. The asset purchase component of the Grab Transaction is subject to customary closing conditions and is expected to close before June 30, 2020.
Adoption of ASC 606
We adopted ASC 606 effective July 1, 2018, utilizing the full retrospective transition method. All prior period amounts and disclosures for the three years ended June 30, 2019 set forth in this Form 10-K have been adjusted to comply with ASC 606. See Note 1 to our consolidated financial statements for a summary of adjustments.
The effect of adopting ASC 606 on fiscal 2018 was material to our statements of operations and balance sheets as a result of its impact on the recognition of revenue and associated third-party content costs for certain of our on-board and brought-in automotive navigation solutions. The adoption of ASC 606 had no significant impact on our advertising and mobile navigation

41

Table of Contents

business segments. The adoption of ASC 606 resulted in reductions to deferred costs (asset) and deferred revenue (liability) balances, and accelerated the recognition of revenues and deferred costs in the automotive segment. Such impact on our statements of operations will continue going forward.
The adjustments required to transition to ASC 606 resulted in $160.6 million of deferred revenue and $86.9 million of deferred costs of the total originally reported on our balance sheet as of June 30, 2018 being recorded instead as revenue and cost of revenue, respectively, in our adjusted prior periods. In addition, the adoption of ASC 606 required us to capitalize an additional $4.2 million, net, of deferred development costs on our adjusted June 30, 2018 balance sheet, resulting in a net decrease in deferred costs of $82.7 million.  In total, our accumulated deficit decreased by $77.8 million as of June 30, 2018. All prior period amounts presented have been adjusted to comply with ASC 606. See Note 1 to our condensed consolidated financial statements.
With respect to on-board automotive solutions, historically we recognized revenue and associated content costs over the life of our contractual obligations when map updates were included, and we deferred substantially all revenue and associated content costs pending the delivery of future specified upgrades. Instead, as of July 1, 2018, we recognize revenue related to royalties for distinct software and content that has been accepted as transfer of control takes place, with an allocation of the transaction price based on the relative standalone selling price, or SSP, of map updates, specified upgrades, and other services as applicable, which we will recognize with the associated content costs at a point in time or over time as we transfer control of the related performance obligation.
Regarding brought-in automotive solutions, historically we recognized revenue for each royalty over the expected remaining term of the service obligation. Effective July 1, 2018, since these contracts contain variable consideration we estimate the total transaction price each reporting period using a probability assessment, and then recognize revenue ratably over the period the services obligation is expected to be fulfilled.
Development costs subject to ASC 340-40 incurred to fulfill future obligations under certain actual or anticipated contracts for automotive solutions are capitalized, provided they are expected to be recovered, and then recognized as control of the related performance obligations is transferred. Historically, such costs were not capitalized until receipt of a signed contract or purchase order for a fixed amount, provided the costs were probable of being recovered. Under ASC 340-40, we are required to capitalize such costs in anticipation of a contract, provided the costs are expected to be recovered; thus, increasing the amount of costs we capitalize under ASC 340-40. For on-board automotive solutions, such capitalized costs represent the customized portion of software development, which will continue to be recognized upon acceptance of the software under ASC 340-40 since acceptance is generally required for control of the software to transfer. For brought-in automotive solutions, such costs will be amortized over the period the services obligation is expected to be fulfilled, since software development does not represent a distinct performance obligation in the case of brought-in automotive solutions. Historically, we recognized such costs for brought-in automotive solutions upon acceptance of the software.
Key operating and financial performance metrics
We monitor the key operating and financial performance metrics set forth in the tables below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. Certain of these measures such as billings, direct contribution from billings, direct contribution margin from billings, changes in deferred revenue and deferred costs, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, adjusted cash flow from operations and free cash flow are not measures calculated in accordance with GAAP, and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures of other companies because other companies may not calculate them in the same manner that we do.
Our key operating and financial performance metrics are as follows (in thousands, except percentages and per share amounts):


42

Table of Contents

 
 
Fiscal Year Ended June 30,
 
 
2019
 
2018
As Adjusted
(1)
 
2017
As Adjusted
(1)
 
 
(in thousands, except percentages and per share amounts)
Revenue
 
$
220,896

 
$
218,463

 
$
209,715

Revenue from Ford as a percentage of total revenue
 
55
%
 
67
%
 
71
%
Revenue from GM as a percentage of total revenue
 
18
%
 
< 10%

 
< 10%

Billings (Non-GAAP)
 
$
281,493

 
$
253,887

 
$
233,749

Billings to Ford as a percentage of total billings (non-GAAP)
 
50
%
 
66
%
 
68
%
Billings to GM as a percentage of total billings (non-GAAP)
 
19
%
 
< 10%

 
< 10%

Increase in deferred revenue
 
$
60,597

 
$
35,424

 
$
24,034

Increase in deferred costs
 
$
21,377

 
$
22,999

 
$
19,814

Gross profit
 
$
96,221

 
$
90,392

 
$
89,279

Gross margin
 
44
%
 
41
%
 
43
%
Direct contribution from billings (Non-GAAP)
 
$
135,441

 
$
102,817

 
$
93,499

Direct contribution margin from billings (Non-GAAP)
 
48
%
 
40
%
 
40
%
Net loss
 
$
(32,488
)
 
$
(40,834
)
 
$
(29,536
)
Diluted net loss per share
 
$
(0.71
)
 
$
(0.92
)
 
$
(0.68
)
Adjusted EBITDA (Non-GAAP)
 
$
(18,024
)
 
$
(25,199
)
 
$
(10,354
)
Adjusted cash flow from operations (Non-GAAP)
 
$
21,196

 
$
(12,774
)
 
$
(6,134
)
Net cash provided by (used in) operating activities
 
$
7,514

 
$
(7,411
)
 
$
(11,155
)
Free cash flow (Non-GAAP)
 
$
6,115

 
$
(12,059
)
 
$
(12,380
)
(1) Certain amounts have been adjusted to reflect the adoption of ASC 606. See Note 1 to our consolidated financial statements for a summary of adjustments.

Gross margin is our gross profit, or total revenue less cost of revenue, expressed as a percentage of our total revenue. Our gross margin has been and will continue to be impacted by the increasing percentage of our revenue base derived from automotive navigation solutions and advertising network services, which generally have higher associated third party content costs and third party display ad inventory costs, respectively, than our mobile navigation offerings provided through wireless carriers.
Billings equals revenue recognized plus the change in deferred revenue from the beginning to the end of the applicable period. Direct contribution from billings reflects GAAP gross profit plus change in deferred revenue less change in deferred costs from the beginning to the end of the applicable period. Direct contribution margin from billings reflects direct contribution from billings divided by billings. We have also provided a breakdown of the calculation of the change in deferred revenue by segment, which is added to revenue in calculating our non-GAAP metric of billings. In connection with our presentation of the change in deferred revenue, we have provided a similar presentation of the change in the related deferred costs. Such deferred costs primarily include costs associated with third party content and certain development costs associated with our customized software solutions whereby customized engineering fees are earned. As we enter into more hybrid and brought-in navigation programs, deferred revenue and deferred costs become larger components of our operating results, so we believe these metrics are useful in evaluating cash flows.
We consider 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 our business. We believe 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 to be provided over contracted service periods. For example, billings related to certain brought-in 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, we 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 we use these measures, we attempt to

43

Table of Contents

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 our GAAP net loss excluding the impact of stock-based compensation expense, depreciation and amortization, other income (expense), net, provision (benefit) for income taxes, and other applicable items such as goodwill impairment, legal settlements and contingencies, deferred rent reversal and tenant improvement allowance recognition due to sublease termination, and merger and acquisition, or M&A, transaction expenses, net of tax. Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants. Legal settlements and contingencies represent settlements, offers made to settle, or loss accruals relating to litigation or other disputes in which we are a party or the indemnitor of a party. Deferred rent reversal and tenant improvement allowance recognition represent the reversal of our deferred rent liability and recognition of our 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. M&A transaction expenses related primarily to transaction costs associated with the inMarket Transaction and the Grab Transaction. Goodwill impairment represents the impairment charge related to our mobile navigation business segment recorded in the third quarter of fiscal 2018 and the impairment charge related to our advertising business segment recorded in the fourth quarter of fiscal 2019.
Adjusted cash flow from operations measures adjusted EBITDA plus the effect of changes in deferred revenue and deferred costs. We believe adjusted cash flow from operations is a useful measure, especially in light of the impact we expect on reported revenue from certain value-added offerings we provide our customers, including map updates and the impact of future deliverables.
Adjusted EBITDA and adjusted cash flow from operations, while generally measures of profitability and the generation of cash, can also represent losses and the use of cash, respectively. Adjusted EBITDA and adjusted cash flow from operations are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA and adjusted cash flow from operations can provide a useful measure for period-to-period comparisons of our core business.
In addition, adjusted cash flow from operations is a key financial measure used by the compensation committee of our board of directors in connection with the development of incentive-based compensation for our executive officers and other employees. Accordingly, we believe that adjusted EBITDA and adjusted cash flow from operations generally provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Free cash flow is a non-GAAP financial measure we define as net cash provided by (used in) operating activities less purchases of property and equipment. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash (used in) generated by our business after purchases of property and equipment.
These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for our financial results as reported under GAAP. Some of these limitations are:
We expect to incur additional costs in the future due to requirements to provide ongoing provisioning of services such as hosting, monitoring and customer support; accordingly, direct contribution from billings, direct contribution margin from billings and adjusted cash flow from operations do not reflect all costs associated with billings;
assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures;
adjusted EBITDA and adjusted cash flow from operations do not reflect the potentially dilutive impact of equity-based compensation;
adjusted EBITDA and adjusted cash flow from operations do not reflect the use of cash for net share settlements of RSUs;
adjusted EBITDA and adjusted cash flow from operations do not reflect tax payments that historically have represented a reduction in cash available to us or tax benefits that may arise as a result of generating net losses; and
adjusted EBITDA, adjusted cash flow from operations, free cash flow or similarly titled measures may be calculated by other companies differently, which reduces their usefulness as comparative measures.

44

Table of Contents

Because of these and other limitations, billings, direct contribution from billings, direct contribution margin from billings, adjusted EBITDA, adjusted cash flow from operations and free cash flow should be considered alongside other GAAP-based financial performance measures.

We reconcile the most directly comparable GAAP financial measure to each non-GAAP financial metric used. The following tables present reconciliations of revenue to billings, deferred revenue to the change in deferred revenue, deferred costs to the change in deferred costs, gross profit to direct contribution from billings, net loss to adjusted EBITDA and adjusted cash flow from operations, and net loss and net cash flow used in operating activities to free cash flow for each of the periods indicated (dollars in thousands):

Reconciliation of Revenue to Billings
 
 
Fiscal Year Ended June 30,
 
 
2019
 
2018
 
2017
Automotive
 
 
 
 
 
 
Revenue
 
$
186,835

 
$
177,842

 
$
163,915

Adjustments:
 
 
 
 
 
 
Change in deferred revenue
 
60,640

 
35,771

 
24,366

Billings
 
$
247,475

 
$
213,613

 
$
188,281

Advertising
 
 
 
 
 
 
Revenue
 
$
24,241

 
$
27,229

 
$
26,841

Adjustments:
 
 
 
 
 
 
Change in deferred revenue
 

 

 

Billings
 
$
24,241

 
$
27,229

 
$
26,841

Mobile Navigation
 
 
 
 
 
 
Revenue
 
$
9,820

 
$
13,392

 
$
18,959

Adjustments:
 
 
 
 
 
 
Change in deferred revenue
 
(43
)
 
(347
)
 
(332
)
Billings
 
$
9,777

 
$
13,045

 
$
18,627

Total
 
 
 
 
 
 
Revenue
 
$
220,896

 
$
218,463

 
$
209,715

Adjustments:
 
 
 
 
 
 
Change in deferred revenue
 
60,597

 
35,424

 
24,034

Billings
 
$
281,493

 
$
253,887

 
$
233,749


Reconciliations of Deferred Revenue to Change in Deferred Revenue and Deferred Costs to Change in Deferred Costs
 
 
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,
 
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Deferred revenue, ending balance
 
$
134,641

 
$
74,001

 
$
38,230

 
$

 
$

 
$

 
$
494

 
$
537

 
$
884

 
$
135,135

 
$
74,538

 
$
39,114

Deferred revenue, beginning balance
 
74,001

 
38,230

 
13,864

 

 

 

 
537

 
884

 
1,216

 
74,538

 
39,114

 
15,080

Change in deferred revenue
 
$
60,640

 
$
35,771

 
$
24,366

 
$

 
$

 
$

 
$
(43
)
 
$
(347
)
 
$
(332
)
 
$
60,597

 
$
35,424

 
$
24,034

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred costs, ending balance
 
$
79,802

 
$
58,425

 
$
35,426

 
$

 
$

 
$

 
$

 
$

 
$

 
$
79,802

 
$
58,425

 
$
35,426

Deferred costs, beginning balance
 
58,425

 
35,426

 
15,612

 

 

 

 

 

 

 
58,425

 
35,426

 
15,612

Change in deferred costs
 
$
21,377

 
$
22,999

 
$
19,814

 
$

 
$

 
$

 
$

 
$

 
$

 
$
21,377

 
$
22,999

 
$
19,814



45

Table of Contents

Reconciliation of Revenue to Billings - Ford and GM
 
 
Fiscal Year Ended June 30,
 
 
2019
 
2018
 
2017
Revenue from Ford
 
$
121,207

 
$
145,408

 
$
149,308

Adjustments:
 
 
 
 
 
 
Change in deferred revenue attributed to Ford
 
18,240

 
22,299

 
10,174

Billings to Ford
 
$
139,447

 
$
167,707

 
$
159,482

Billings to Ford as a percentage of total billings
 
50
%
 
66
%
 
68
%
 
 
 
 
 
 
 
Revenue from GM
 
$
40,131

 
$
14,142

 
$
6,957

Adjustments:
 
 
 
 
 
 
Change in deferred revenue attributed to GM