Summary of business and significant accounting policies

Description of business

Telenav, Inc., also referred to in this report as “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. We are a leader in personalized mobile navigation. We help on the go people by creating products that (1) provide easily-accessed, relevant, and personalized information for discovery, traffic, local search, and navigation and (2) are available across multiple platforms and devices, including mobile phones, tablets, computers and cars. We operate in three segments - automotive, advertising and mobile navigation. Our fiscal year ends on June 30 and in this report we refer to the fiscal year ended June 30, 2014 as “fiscal 2014” and the fiscal year ending June 30, 2015 as “fiscal 2015.”

Basis of presentation

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The condensed consolidated financial statements include the accounts of Telenav, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements include all adjustments (consisting only of normal recurring adjustments) that our management believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period. Certain prior period amounts in the consolidated financial statements have been reclassified to conform to current period presentation for comparative purposes.

Our condensed consolidated financial statements also include the financial results of Shanghai Jitu Software Development Ltd., or Jitu, located in China. Based on our contractual arrangements with the shareholders of Jitu, we have determined that Jitu is a variable interest entity, or VIE, for which we are the primary beneficiary and are required to consolidate in accordance with Accounting Standards Codification, or ASC, subtopic 810-10, or ASC 810-10, Consolidation: Overall. The results of Jitu did not have a material impact on our overall operating results for the three and nine months ended March 31, 2015 and 2014.

The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for fiscal 2014, included in our Annual Report on Form 10-K for fiscal 2014 filed with the U.S. Securities and Exchange Commission, or SEC.

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Form 10-K.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include the determination of revenue recognition and deferred revenue, the recoverability of accounts receivable, the determination of acquired intangibles and goodwill, the fair value of stock awards issued, the determination of income taxes and the recoverability of deferred tax assets. Actual results could differ from those estimates.

Concentrations of risk and significant customers

Revenue related to services provided through Ford Motor Company, or Ford, comprised 68% and 50% of revenue for the three months ended March 31, 2015 and 2014, respectively, and comprised 60% and 45% of revenue for the nine months ended March 31, 2015 and 2014, respectively. As of March 31, 2015 and June 30, 2014, receivables due from Ford were 60% and 47% of total accounts receivable, respectively. Revenue related to services provided through AT&T Mobility LLC, or AT&T, comprised 13% and 25% of revenue for the three months ended March 31, 2015 and 2014, respectively, and comprised 17% and 25% of revenue for the nine months ended March 31, 2015 and 2014, respectively. Receivables due from AT&T were 11% and 19% of total accounts receivable at March 31, 2015 and June 30, 2014, respectively. No other customer represented 10% of our revenue or 10% of our accounts receivable for any period presented.

Certain of our licensed map, points of interest, or POI, and traffic data have been provided principally by TomTom North America, Inc., or TomTom, and HERE North America, LLC, or HERE, a Nokia Corporation, or Nokia, company, in the three and nine months ended March 31, 2015 and 2014. To date, we are not aware of circumstances that may impair either party’s intent or ability to continue providing such services to us.

Restricted cash

As of March 31, 2015 and June 30, 2014, we had restricted cash of $5.1 million and $6.0 million, respectively, on our consolidated balance sheets, comprised primarily of an overpayment from a customer that is expected to be refunded.

Accumulated other comprehensive income (loss), net of tax

The components of accumulated other comprehensive income (loss), net of related taxes, during the nine months ended March 31, 2015, were as follows (in thousands):



	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, net of tax as of June 30, 2014	$	321		$	255		$	576
Other comprehensive loss before reclassifications, net of tax	(1,888		)	(50		)	(1,938		)
Amount reclassified from accumulated other comprehensive loss, net of tax	—			(257		)	(257		)
Other comprehensive loss, net of tax	(1,888		)	(307		)	(2,195		)
Balance, net of tax as of March 31, 2015	$	(1,567	)	$	(52	)	$	(1,619	)

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

The amount of income tax benefit allocated to each component of accumulated other comprehensive income (loss) was not material for the nine months ended March 31, 2015, and 2014, respectively.

Long-term investments

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

During the nine months ended March 31, 2015, we recorded a $0.2 million gain in other income, net from the sale in fiscal 2014 of an investment in a privately-held company, for which the proceeds were received in fiscal 2015.

Recent accounting pronouncements

In February 2015, the Financial Accounting Standards Board, or FASB, issued new guidance related to consolidations. The new standard amends the guidelines for determining whether certain legal entities should be consolidated and reduces the number of consolidation models. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on our financial statements.

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

In June 2013, the FASB, ratified Emerging Issues Task Force (EITF) Issue 13-C, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” which concludes an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law. We adopted this amendment in the first quarter of fiscal 2015, and the adoption did not have a material effect on our consolidated financial statements.