Telenav, Inc., also referred to in this report as "Telenav," “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. We are a leading provider of automotive software and services providing both in-vehicle and cloud-based solutions. We focus on navigation and location-based services (LBS), where we pioneered many innovations including the market’s first mobile cloud-based navigation service. Navigation and LBS are the primary applications for in-vehicle infotainment (IVI) systems and we are using our strengths and core competencies to address the growing demand for overall connected car services. We provide our connected-car products and services directly to automobile manufacturers, as well as tier-one suppliers. Our fiscal year ends on June 30, and in this report we refer to the fiscal years ended June 30, 2020, 2019 and 2018 as fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

Commencing July 1, 2019, we operate in a single segment, automotive. Through June 30, 2019, we operated in three segments: automotive, advertising and mobile navigation. In August 2019, we disposed of our digital advertising operations (the "Ads Business") and have presented the results of operations for the Ads Business as discontinued operations for all prior periods presented (see Note 11). Our mobile navigation services business represented less than 5% of total revenue for fiscal 2020 and we expect the business to continue to decline. Our chief executive officer, or CEO, the chief operating decision maker, does not review mobile navigation revenue and cost of revenue separately. As a result, we have combined the mobile navigation business with the automotive business in a single segment.

The consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The consolidated financial statements include the accounts of Telenav, Inc. and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified to conform to the current year presentation.

Our 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 fiscal 2020, fiscal 2019 or fiscal 2018.

Effective July 1, 2019, we adopted the requirements of Accounting Standards Update, or ASU, No. 2016-02, Leases (ASC 842) as discussed in the section titled “Recently adopted accounting pronouncements” of this Note 1. All amounts and disclosures set forth in this Form 10-K have been updated to comply with this standard.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include the determination of revenue recognition and deferred revenue, including estimating and allocating the transaction price of customer contracts, the recoverability of accounts receivable and short-term investments, the determination of acquired intangibles and assessment of goodwill for impairment, 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.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus first identified in China in late 2019 (COVID-19) as a pandemic, which continues to spread throughout the U.S. and the world. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume, all of which are uncertain and we cannot predict. During the year ended June 30, 2020, this uncertainty resulted in a higher level of judgment related to our estimates and assumptions concerning short-term investments, long-lived assets, non-marketable equity and debt investments, goodwill, and variable consideration related to revenue recognition. We expect uncertainties around our key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.

The core principle of ASC 606 is to recognize revenue to depict the transfer of products or services to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. This principle is achieved through applying the following five-step approach:

We generate revenue primarily from software licenses, service subscriptions and customized software development fees. We evaluate whether it is appropriate to recognize revenue based on the gross amount billed to our customers or the net amount earned as revenue. Since we control the products or services prior to their transfer to the customer, we report our automotive revenue on a gross basis. This assessment is based primarily on our ultimate primary responsibility for fulfilling the promises made with respect to the products and services as well as the degree of discretion we have in establishing pricing.

Royalties for on-board navigation solutions are generally earned at various points in time, depending upon the individual customer agreement. We earn each royalty upon either the re-imaging of the software on each individual memory card or the time at which each vehicle is produced. Royalties for brought-in navigation solutions are earned upon vehicle sales reporting or upon initial usage by the end user.

We recognize revenue from on-board automotive navigation solutions upon transfer of control of the customized software and any associated integrated content together forming a distinct performance obligation. Transfer of control generally occurs at a point in time upon acceptance. We recognize any royalties for the use of distinct software combined with integrated content, 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, at the later of when we earn the royalties or when we transfer control of the related performance obligation.

For hybrid automotive solutions, we generally recognize as product revenue the transaction price we allocated to the on-board component as described above, and we generally recognize as services revenue the transaction price allocated to the included cloud functionality based on SSP. Since the on-board software is still the predominant item in the hybrid solution, the royalties recognition guidance applies as it does for on-board navigation solutions described above. Our brought-in automotive navigation solutions as described below are subject to variable consideration and constraint guidance.

for our brought-in automotive navigation solutions typically contain a substantial amount of variable consideration that does not meet the allocation objective of ASC 606 and is required to be estimated and included in the transaction price, we include in the transaction price only variable consideration such that it is probable that a risk of significant revenue reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Total variable consideration to be received is estimated at contract inception and updated at each reporting date. We utilize the expected value method and consider expected unit volume combined with a risk-based probability based on factors including, but not limited to: model year cycles, customer history, technology life cycles, nature of competition and other contract-specific factors. 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, generally 8 to 12 years, as this provides a faithful depiction of the transfer of control.

In certain instances, due to the nature and timing of monthly revenue and reporting from our customers, we may be required to make estimates of the amount of revenue to recognize from a customer for the current period. Estimates for revenue include our consideration of certain factors and information, including subscriber data, historical subscription and revenue reporting trends, end user subscription data from our internal systems, and data from comparable distribution channels of our other customers. We record any differences between estimated revenue and actual revenue in the reporting period when we determine the actual amounts. To date, actual amounts have not differed materially from our estimates.

In order to further depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors, the following table depicts the disaggregation of revenue according to revenue type and pattern of recognition, and is consistent with how we evaluate our financial performance (in thousands):



	Fiscal Year Ended June 30,
	2020		2019		2018
Product
On-board automotive navigation solutions (point in time)⁽¹⁾	$	191,253	$	168,619	$	163,599
Total product revenue	191,253		168,619		163,599
Services
Brought-in automotive navigation solutions (over time)⁽²⁾	36,406		17,161		14,209
Automotive maintenance and support (over time)	3,181		1,055		34
Mobile navigation services (over time)	9,511		9,820		13,392
Total services revenue	49,098		28,036		27,635
Total revenue	$	240,351	$	196,655	$	191,234
⁽¹⁾Includes i) royalties earned and recognized at the point in time usage occurs, ii) map updates and iii) customized software development fees.
⁽²⁾Includes royalties earned and recognized over time from the allocation of transaction price to service obligations.

Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative SSP basis. We determine SSP based on, if available, observable prices for those related products and services when sold separately. When observable prices are not available, we determine SSP based on our overall pricing trends and objectives, taking into consideration market conditions and other factors, including the value of the contracts, the products and services sold, and stated prices for renewal. In such instances, we apply the expected cost plus margin method and the residual method in cases where we have not yet established a price and the product or service has not previously been sold on a standalone basis.

Deferred revenue consists primarily of amounts that have been invoiced, and for which we have the right to bill, in advance of performance obligations being satisfied and revenue being recognized under our contracts with customers. Deferred revenue associated with performance obligations that are anticipated to be satisfied during the succeeding 12 months is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue in our consolidated balance sheets.

In instances where the timing of revenue recognition differs from the timing of invoicing, we do not adjust consideration for the effects of a significant financing portion for periods of one year or less, for example, in the case of customized software development fees paid in advance of acceptance of the software. Substantially all brought-in automotive navigation solutions contain consideration paid significantly in advance of our provision of the services. In these cases, we have determined such contracts do not include a significant financing component, since neither we nor the applicable automobile manufacturer or tier one is substantially in control of such consideration, as revenue from these contracts is driven by future sales demand of a particular vehicle.

Our cost of revenue consists primarily of the cost of third-party royalty based content, such as map, points of interest, or POI, traffic, gas price and weather data, and voice recognition technology that we use in providing our personalized navigation services. Our cost of revenue also includes the cost of third-party exchange ad inventory as well as expenses associated with outsourced hosting services, data center operations, customer support, the amortization of capitalized software, recognition of deferred customized software development costs, stock-based compensation and amortization of acquired developed technology.

We capitalize and defer recognition of certain third-party royalty-based content costs associated with the fulfillment of future automotive product and services obligations, and we recognize these deferred content costs as cost of revenue as we transfer control of the related performance obligation. Deferred costs are classified as current or non-current consistent with the periods over which the performance obligations are anticipated to be satisfied.

Deferred costs also include the cost of customized software we develop for customers. We begin deferring development costs when they relate directly to a contract or specific anticipated contract and such costs are incurred to satisfy performance obligations in the future, provided they are expected to be recovered. We recognize these deferred software development costs as cost of revenue upon transfer of control of the associated performance obligation. We evaluate contract cost deferrals for impairment on a quarterly basis or whenever events or changes in circumstances indicate that a project may require recognition of a contract loss. We did not record any impairment losses during fiscal 2020, 2019 and 2018.

In connection with our usage of licensed third-party content, 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. These contracts contain obligations for the licensor to provide ongoing services and, accordingly, we record any minimum guaranteed royalty payments as an asset when paid and amortize the amount to cost of revenue over the applicable period. Any additional royalties due based on actual usage are expensed monthly as incurred.



	Deferred Costs
	Content			Development			Total
Balance, June 30, 2018	$	48,946		$	9,479		$	58,425
Content licensing costs incurred	123,493			—			123,493
Customized software development costs incurred	—			2,537			2,537
Less: cost of revenue recognized	(100,973		)	(3,680		)	(104,653		)
Balance, June 30, 2019	$	71,466		$	8,336		$	79,802
Content licensing costs incurred	113,030			—			113,030
Customized software development costs incurred	—			4,015			4,015
Less: cost of revenue recognized	(110,898		)	(5,280		)	(116,178		)
Balance, June 30, 2020	$	73,598		$	7,071		$	80,669

We translate the financial statements of certain of our foreign subsidiaries whose functional currency is their local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as part of a separate component of comprehensive income in stockholders’ equity. Foreign currency transaction gains and losses are included in our net income for each year. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average monthly exchange rates during the year. Equity transactions are translated using historical exchange rates. Foreign currency transaction gains (losses) were $28,000, $(215,000) and $254,000 in fiscal 2020, 2019 and 2018, respectively.



	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Available- for-Sale Securities			Total
Balance, net of tax as of June 30, 2018	$	(1,162	)	$	(693	)	$	(1,855	)
Other comprehensive income (loss) before reclassifications, net of tax	(461		)	816			355
Amount reclassified from accumulated other comprehensive income (loss), net of tax	—			23			23
Other comprehensive income (loss), net of tax	(461		)	839			378
Balance, net of tax as of June 30, 2019	(1,623		)	146			(1,477		)
Other comprehensive income (loss) before reclassifications, net of tax	(211		)	1,270			1,059
Amount reclassified from accumulated other comprehensive income (loss), net of tax	—			(59		)	(59		)
Other comprehensive income (loss), net of tax	(211		)	1,211			1,000
Balance, net of tax as of June 30, 2020	$	(1,834	)	$	1,357		$	(477	)

Cash and cash equivalents consist of unrestricted cash and highly liquid fixed-income investments with original maturities of three months or less at the time of purchase, including money market funds and commercial paper. Short-term investments consist of readily marketable debt securities with a remaining maturity of more than three months from time of purchase and marketable equity securities. Short-term investments are classified as current assets, even though maturities may extend beyond one year, because they represent investments of cash available for operations. We classify all of our cash equivalents and short-term investments as “available-for-sale,” as these investments are free of trading restrictions. We may or may not hold securities with stated maturities greater than 12 months until maturity. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these securities prior to their stated maturities. As we view these securities as available to support current operations, we classify securities with maturities beyond 12 months as current assets under the caption short-term investments in the accompanying consolidated balance sheets.

Marketable debt securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as accumulated other comprehensive income and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized. When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in earnings. Gains and losses are determined using the specific identification method. Our net realized gains (losses) were $55,000, $11,000 and $(64,000) in fiscal 2020, 2019 and 2018, respectively. Interest income totaled $2.5 million, $1.7 million and $1.4 million in fiscal 2020, 2019 and 2018, respectively.

At June 30, 2019, short-term investments also included marketable equity securities, which are carried at fair value with unrealized gains and losses recognized in other income (expense), net. Our net realized gains (losses) from marketable equity securities were zero in fiscal 2019. We did not hold any marketable equity securities in fiscal 2020 and 2018.

Financial instruments that subject us to significant concentrations of credit risk primarily consist of cash, cash equivalents, short-term investments and accounts receivable. We maintain our cash, cash equivalents and short-term investments with well-capitalized financial institutions. At times, such deposits may be in excess of federally insured limits. Cash equivalents consist primarily of money-market accounts and commercial paper with original maturities of three months or less at the time of purchase. Our primary customers are automobile manufacturers and tier ones, and we do not require collateral for accounts receivable. To manage the credit risk associated with accounts receivable, we evaluate the creditworthiness of our customers. We evaluate our accounts receivable on an ongoing basis to determine those amounts not collectible. To date, we are not aware of circumstances that may impair a specific customer’s ability to meet its financial obligations to us, other than those customers for which an allowance for doubtful accounts has been established.

Revenue related to products and services provided through Ford Motor Company, or Ford, comprised 44%, 62% and 76% of revenue for fiscal 2020, 2019 and 2018, respectively. Receivables due from Ford were 39% and 33% of total accounts receivable at June 30, 2020 and 2019, respectively.

Revenue related to products and services provided through General Motors Holdings and its affiliates, or GM, comprised 34% and 20% of revenue for fiscal 2020 and 2019, respectively, and less than 10% of revenue for fiscal 2018. Receivables due from GM were 44% and 15% of total accounts receivable at June 30, 2020 and 2019, respectively.

Our licensed map, POI and traffic data have been provided principally through HERE North America, LLC, a company owned by a consortium of German automobile manufacturers, or HERE, and TomTom North America, Inc., or TomTom, in fiscal 2020, 2019 and 2018. To date, we are not aware of circumstances that may impair either party’s intent or ability to continue providing such services to us.



	Fiscal Year Ended June 30,
	2020		2019		2018
Revenue
United States	$	175,427	$	157,422	$	169,318
International	64,924		39,233		21,916
Total revenue	$	240,351	$	196,655	$	191,234

			June 30,
			2020		2019
Property and equipment, net
United States			$	2,519	$	2,679
International			1,800		2,904
Total property and equipment, net			$	4,319	$	5,583

Level 2 valuations are based on inputs that are observable, either directly or indirectly, other than quoted prices included within Level 1. Such inputs used in determining fair value for Level 2 valuations include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Computers, software and equipment have useful lives of three years and automobiles, furniture and fixtures have useful lives of five years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the term of the related lease.

We evaluate our long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value.

Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net assets acquired. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These tests are based on our operating segment and reporting unit structure.

We performed our annual goodwill impairment test as of April 1, 2020 by comparing the fair value of our reporting unit with its carrying amount. Based upon a qualitative assessment indicating that it was not more likely than not that the fair value of our reporting unit was less than its carrying value, we determined that no impairment was indicated.

Subsequent to the completion of our April 1, 2019 annual assessment of our three reporting units, during which we determined that no impairment was indicated, 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, during fiscal 2019 we recognized a $2.6 million impairment of the goodwill associated with our advertising business segment, which is reported as discontinued operations for fiscal 2020 and for all prior comparative periods.

Revenue from our mobile navigation business has been declining substantially over the last few years. 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. 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 our goodwill impairment test, the carrying value of our mobile navigation business segment exceeded its estimated fair value and, accordingly, during fiscal 2018, we recognized a $2.7 million impairment of all of the goodwill associated with our mobile navigation business segment.

On July 1, 2019, we adopted ASC 842 using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after July 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting.

We elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward our historical lease classification, our assessment on whether a contract was or contains a lease, and our initial direct costs for any leases that existed prior to July 1, 2019. We also elected to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.

Upon adoption, we recognized total ROU assets of $11.7 million, with corresponding liabilities of $13.0 million on the consolidated balance sheet. The adoption did not impact our beginning retained earnings, or our prior year consolidated statements of operations and statements of cash flows.

We recognize operating lease ROU assets and operating lease liabilities at the commencement date based on the present value of the future minimum lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments we made and excludes lease incentives and initial direct costs we incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We account for stock-based employee compensation arrangements under the fair value recognition method, which requires us to measure the stock-based compensation costs of share-based compensation arrangements based on the grant-date fair value, and recognize the costs in the financial statements over the employees’ requisite service period. We recognize compensation expense for the fair value of these awards with time-based vesting on a straight-line basis over the employee’s requisite service period of each of these awards, net of estimated forfeitures.

We utilize the asset and liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount that will more likely than not be realized.

We expense research and development costs as incurred. For costs incurred under ASC 985-20, Costs of Software to be Sold, Leased, or Marketed, we typically do not achieve technological feasibility prior to incurring such costs and, as a result, all such costs are expensed as incurred. We account for the costs of computer software we develop for internal use by capitalizing qualifying costs, which are incurred during the application development stage, and amortizing those costs over the application’s estimated useful life, which generally ranges from three to five years depending on the type of application. We did not capitalize or amortize any software development costs during fiscal 2020, 2019 or 2018.

In August 2018, the Financial Accounting Standards Board, or FASB, issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, or ASU 2018-15, which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to defer and recognize as an asset. We early adopted ASU 2018-15 on July 1, 2019 on a prospective basis, and it did not have a material impact on our financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842) which supersedes the guidance in topic ASC 840, Leases. The new standard, including subsequent amendments, requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to previous guidance for operating leases under ASC 840, Leases.

We adopted ASC 842, effective July 1, 2019. We adopted the standard using the modified retrospective transition approach applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The most significant impact was the recognition of right-of-use, or ROU, assets and lease liabilities for operating leases that were not previously recorded. For information regarding the impact of ASC 842 adoption, see Leases and Note 6.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies accounting for income taxes by revising or clarifying existing guidance in ASC 740, as well as removing certain exceptions within ASC 740. This guidance is effective for us on July 1, 2021 with early adoption permitted. We are evaluating the impact of the adoption of this standard on our consolidated financial statements, but we do not expect it to have a material impact.