Summary of business and significant accounting policies

Description of business

Telenav, Inc., also referred to in this report as “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. We are a leading provider of connected car and location-based platform services. Our automotive and mobile navigation platform allows us to deliver enhanced location-based services to auto manufacturers, developers, and end users through various distribution channels. Our advertising delivery platform delivers highly targeted advertising services leveraging our location expertise. We operate in three segments - automotive, advertising and mobile navigation. Our fiscal year ends on June 30 and in this report we refer to the fiscal year ended June 30, 2016 as “fiscal 2016” and the fiscal year ending June 30, 2017 as “fiscal 2017.”

Basis of presentation

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

Our condensed consolidated financial statements also include the financial results of Shanghai Jitu Software Development Ltd., or Jitu, located in China. Based on our contractual arrangements with the shareholders of Jitu, we have determined that Jitu is a variable interest entity, or VIE, for which we are the primary beneficiary and are required to consolidate in accordance with Accounting Standards Codification, or ASC, subtopic 810-10, or ASC 810-10, Consolidation: Overall. The results of Jitu did not have a material impact on our financial statements for the three months ended September 30, 2016 and 2015.

The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for fiscal 2016, included in our Annual Report on Form 10-K for fiscal 2016 filed with the U.S. Securities and Exchange Commission, or SEC, on August 22, 2016.

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Form 10-K for fiscal 2016.

Use of estimates

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

Concentrations of risk and significant customers

Revenue related to services provided through Ford Motor Company and affiliated entities, or Ford, comprised 68% and 69% of revenue for the three months ended September 30, 2016 and 2015, respectively. As of September 30, 2016 and June 30, 2016, receivables due from Ford were 61% and 64% of total accounts receivable, respectively. Revenue related to services provided through AT&T Mobility LLC, or AT&T, comprised 8% and 11% of revenue for the three months ended September 30, 2016 and 2015, respectively.

Certain of our licensed map, points of interest, or POI, and traffic data have been provided principally by TomTom North America, Inc., or TomTom, HERE North America, LLC, or HERE, and Nav2 (Shanghai) Co., Ltd. in the three months ended September 30, 2016 and 2015. 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 September 30, 2016 and June 30, 2016, we had restricted cash of $5.0 million and $5.1 million, respectively, on our consolidated balance sheets, comprised primarily of overpayments from a customer that are expected to be refunded.

Accumulated other comprehensive loss, net of tax

The components of accumulated other comprehensive loss, net of related taxes, during the three months ended September 30, 2016, were as follows (in thousands):



	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, net of tax as of June 30, 2016	$	(1,889	)	$	122		$	(1,767	)
Other comprehensive income (loss) before reclassifications, net of tax	66			(138		)	(72		)
Amount reclassified from accumulated other comprehensive loss, net of tax	—			(6		)	(6		)
Other comprehensive income (loss), net of tax	66			(144		)	(78		)
Balance, net of tax as of September 30, 2016	$	(1,823	)	$	(22	)	$	(1,845	)

The amounts reclassified from accumulated other comprehensive loss, net of tax, were determined using the specific identification method and the amounts were included in other income (expense), net, for the three months ended September 30, 2016 and 2015.

The amount of income tax benefit allocated to each component of accumulated other comprehensive loss was not material for the three months ended September 30, 2016 and 2015.

Long-term investments

As of September 30, 2016, the carrying value of our investments in privately held companies totaled $708,000. These investments are accounted for as cost method investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. We regularly evaluate the carrying value of these cost method investments for impairment. We recorded impairment charges of zero and $442,000 for cost method investments during the three months ended September 30, 2016 and 2015, respectively.

Warranty

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. We accrue costs related to warranty claims when they are probable and reasonably estimable. Our warranty costs have historically not been material. From time to time, we may receive information from users about our products where it may be necessary for us to expend resources to investigate and remedy a potential warranty claim.

Recent accounting pronouncements

In October 2016, the Financial Accounting Standards Board, or FASB, issued new guidance which is intended to eliminate diversity in practice and provide a more accurate depiction of the tax consequences on intercompany asset transfers (excluding inventory). The new guidance removes the current prohibition against immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The new standards is effective for us in our first quarter of fiscal 2019 and requires a modified retrospective method of adoption. Early adoption is permitted, but only in the first quarter of an entity’s annual fiscal year. We are evaluating the effect that this new standard will have on our consolidated financial statements.

In August 2016, the FASB issued new guidance which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The new standard is effective for us in our first quarter of fiscal 2019 and early adoption is permitted. We are evaluating the effect that this new standard will have on our consolidated financial statements.

With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended September 30, 2016, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for fiscal 2016, that are of significance or potential significance to us.