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 products and 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 and nine months ended March 31, 2017 and 2016.

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-based 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 72% of revenue for the three months ended March 31, 2017 and 2016, respectively, and 69% and 69% of revenue for the nine months ended March 31, 2017 and 2016, respectively. As of March 31, 2017 and June 30, 2016, receivables due from Ford were 68% and 64% of total accounts receivable, respectively. Revenue related to services provided through AT&T Mobility LLC, or AT&T, comprised 10% of revenue for the nine months ended March 31, 2016. Revenue from AT&T was less than 10% of revenue for all other periods presented.

Restricted cash

As of March 31, 2017 and June 30, 2016, we had restricted cash of $3.9 million and $5.1 million, respectively, on our consolidated balance sheets, comprised primarily of prepayments from a customer.

Accumulated other comprehensive loss, net of tax

The components of accumulated other comprehensive loss, net of related taxes, and activity as of March 31, 2017, 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	(446		)	(376		)	(822		)
Amount reclassified from accumulated other comprehensive loss, net of tax	—			3			3
Other comprehensive loss, net of tax	(446		)	(373		)	(819		)
Balance, net of tax as of March 31, 2017	$	(2,335	)	$	(251	)	$	(2,586	)

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 and nine months ended March 31, 2017.

The amount of income tax benefit allocated to each component of accumulated other comprehensive loss was not material for the three and nine months ended March 31, 2017.

Long-term investments

As of March 31, 2017, 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 $500,000 and $750,000 for cost method investments during the three and nine months ended March 31, 2016, respectively.

In addition, during the three and nine months ended March 31, 2016, we recorded an impairment charge of zero and $227,000, respectively, to write down to zero the carrying value of a convertible note issued in connection with the spin off of a product line developed by our Xi'an, China team.

Recent accounting pronouncements

In November 2016, the Financial Accounting Standards Board, or FASB, issued new guidance to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The new guidance requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning and ending total amounts shown in the statement of cash flows. The new standard is effective for us in our first quarter of fiscal 2019 and requires a retrospective method of adoption. Early adoption is permitted. We are evaluating the effect that this new standard will have on our consolidated financial statements.

In October 2016, the 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 standard 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 nine months ended March 31, 2017, 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, other than the following update:

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 new guidance, ASC 606, Revenue from Contracts with Customers, or ASC 606, 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. In August 2015, the FASB deferred the effective date of this guidance by one year; however, early adoption is permitted. The updated standard will be effective for us in the first quarter of our fiscal year ending June 30, 2019. We are in the process of selecting a transition method and determining the effect that this new standard will have on our consolidated financial statements and related disclosures.

We currently anticipate early adoption of ASC 606 effective July 1, 2017. Our ability to early adopt is dependent, in part, on the completion of our analysis of information necessary to restate prior period financial statements or adjust retained earnings, depending on the transition method we select. While we are in the process of selecting a transition method, we anticipate this standard will have a material impact on our consolidated financial statements. Even though our assessment of the impact of this standard is not complete, we currently believe the most significant impact will be to the recognition of revenue for certain of our automotive value-added and combined offerings, such as on-board navigation with map updates. We anticipate our revenue recognition for certain value-added offerings may change and we may no longer recognize revenue associated with certain software-related elements over the life of our contractual obligations.