Santa Clara, Calif. - May 3, 2016 -Telenav®, Inc. (NASDAQ:TNAV), a leader in connected carservices, today announced its financial results for the third quarter that ended March 31, 2016.
“Telenav delivered solid results for the third quarter of fiscal 2016, achieving sequential and year-overyeargrowth in both revenue and billings,” said HP Jin, chairman and CEO of Telenav. “During thequarter, we benefited from the strength in orders from Ford SYNC 2 in Europe. More recently, SYNC 3with Ford has been officially launched in China following our release of SYNC 3 in North America in2015. We are very pleased with the positive reviews of the SYNC 3 platform as we progress through thetransition from SYNC 2. We believe the strengthening market leadership of our automotive businesscombined with the increasing momentum in the location-based advertising business are key to our futuresuccess in becoming a global leader in the fast growing connected car industry.”
“Following a successful launch in North America, we look forward to consumer adoption of SYNC 3 ininternational markets,” said Michael Strambi, CFO of Telenav. “As we have noted in the past, revenuerecognition for SYNC 3 differs from the SYNC 2 platform. As a result, we expect the transition to resultin a sequential decline in revenue for the June quarter, which is reflected in our outlook.”
Financial Highlights
- Total revenue for the third quarter of fiscal 2016 was $46.3 million, compared with $45.3 millionin the second quarter of fiscal 2016 and $42.3 million in the third quarter of fiscal 2015.
- Automotive revenue was $34.7 million, or 75 percent of total revenue, for the third quarter offiscal 2016, compared with $31.8 million, or 70 percent of total revenue, in the second quarter offiscal 2016 and $29.5 million, or 70 percent of total revenue, for the third quarter of fiscal 2015.
- Advertising revenue was $5.2 million, or 11 percent of total revenue, for the third quarter of fiscal2016, compared with $6.7 million, or 15 percent of total revenue, for the second quarter of fiscal2016, and $4.0 million, or 10 percent of total revenue, for the third quarter of fiscal 2015.
- Billings for the third quarter of fiscal 2016 was $53.1 million, compared with $48.4 million in thesecond quarter of fiscal 2016 and $42.5 million in the third quarter of fiscal 2015.
- Deferred revenue at March 31, 2016 was $20.7 million, compared with $13.9 million atDecember 31, 2015 and $5.4 million at March 31, 2015.
- Operating expenses for the third quarter of fiscal 2016 were $29.4 million, compared with $27.6million in second quarter of fiscal 2016 and $30.4 million in the third quarter of fiscal 2015.
- GAAP net loss for the third quarter of fiscal 2016 was ($9.8) million, or ($0.23) per diluted share,compared with a GAAP net loss of ($6.6) million, or ($0.16) per diluted share, in the secondquarter of fiscal 2016 and a GAAP net loss of ($4.8) million, or ($0.12) per diluted share, for thethird quarter of fiscal 2015.
- Adjusted EBITDA for the third quarter of fiscal 2016 was a ($6.4) million loss after adjusting ourGAAP net loss for the impact of stock-based compensation expense, depreciation andamortization expense, restructuring accruals and reversals, reversals of accruals related todeferred rent resulting from our lease termination, legal contingencies, interest and other income(expense), net and provision (benefit) for income taxes, compared with a ($4.1) million loss in thesecond quarter of fiscal 2016 and a ($4.7) million loss in the third quarter of fiscal 2015.
- Ending cash, cash equivalents and short-term investments, excluding restricted cash, were $108.6million, and Telenav had no debt as of March 31, 2016. This represented cash and short-terminvestments of $2.55 per share, based on 42.6 million shares of common stock outstanding as ofMarch 31, 2016.
- Free cash flow for the third quarter of fiscal 2016 was ($2.0) million, compared with ($0.9)million in the second quarter of fiscal 2016 and $5.8 million in the third quarter of fiscal 2015.
Business Outlook
For the fourth fiscal quarter ending June 30, 2016, Telenav offers the following guidance, which ispredicated on management’s judgments.
- Total revenue is expected to be $40 to $43 million;
- Automotive revenue is expected to be 72 to 75 percent of total revenue, including approximately$1.5 million of customized software development fee revenue;
- Advertising revenue is expected to be approximately 14 percent of total revenue;
- Billings are expected to be $43 to $46 million;
- GAAP gross margin is expected to be approximately 47 percent;
- Non-GAAP gross margin is expected to be approximately 48 percent;
- GAAP operating expenses are expected to be $29.5 to $30.5 million;
- Non-GAAP operating expenses are expected to be $26.5 to $27.5 million, and represent operatingexpenses adjusted for the impact of approximately $3.0 million of stock-based compensationexpense;
- Estimated provision (benefit) for income taxes is expected to be de minimis;
- GAAP net loss is expected to be ($9.5) to ($10.5) million;
- Diluted GAAP net loss per share is expected to be ($0.22) to ($0.24);
- Non-GAAP net loss is expected to be ($7.0) to ($8.0) million, and represents GAAP net lossadjusted for the add back of approximately $3.0 million of stock-based compensation expense;
- Non-GAAP diluted net loss per share is expected to be ($0.16) to ($0.19);
- Adjusted EBITDA is expected to be ($6.0) to ($7.0) million, and represents GAAP net lossadjusted for the impact of approximately $3.0 million of stock-based compensation expense, andapproximately $1.0 million of depreciation and amortization expense, interest and other income(expense), and provision (benefit) from income taxes; and
- Weighted average diluted shares outstanding are expected to be approximately 43 million.
The above information concerning guidance represents Telenav’s outlook only as of the date hereof, andis subject to change as a result of amendments to material contracts and other changes in businessconditions. Telenav undertakes no obligation to update or revise any financial forecast or other forwardlooking statements, as a result of new developments or otherwise.
Conference Call
The company will host an investor conference call and live webcast at 2:00 p.m. PT (5:00 p.m. ET) today.To access the conference call, dial 888-329-8862 (toll-free, domestic only) or 719-457-2664 (domesticand international toll) and enter pass code 9337624. The webcast will be accessible on Telenav's investorrelations website at http://investor.telenav.com . A replay of the conference call will be available for twoweeks beginning approximately two hours after its completion. To access the replay, dial 888-203-1112(toll-free, domestic only) or 719-457-0820 (domestic and international toll) and enter pass code 9337624.
Use of Non-GAAP Financial Measures
Telenav prepares its financial statements in accordance with generally accepted accounting principles forthe United States, or GAAP. The non-GAAP financial measures such as billings, change in deferredrevenue, change in deferred costs, non-GAAP net income (loss), non-GAAP net income (loss) per share,non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA and free cash flow includedin this press release are different from those otherwise presented under GAAP.
Telenav has provided these measures in addition to GAAP financial results because management believesthese non-GAAP measures help provide a consistent basis for comparison between periods that are notinfluenced by certain items and therefore are helpful in understanding Telenav’s underlying operatingresults. These non-GAAP measures are some of the primary measures Telenav’s management uses forplanning and forecasting. These measures are not in accordance with, or an alternative to, GAAP andthese non-GAAP measures may not be comparable to information provided by other companies.
Billings measure revenue recognized plus the change in deferred revenue from the beginning to the end ofthe period. We consider billings to be a useful metric for management and investors because billings drivedeferred revenue, which is an important indicator of the health and viability of our business. There are anumber of limitations related to the use of billings versus revenue calculated in accordance with GAAP.First, billings include amounts that have not yet been recognized as revenue and may require additionalservices to be provided over contracted service periods. For example, billings related to certain connectedsolutions cannot be fully recognized as revenue in a given period due to requirements for ongoingprovisioning of services such as hosting, monitoring and customer support. Second, we may calculatebillings in a manner that is different from peer companies that report similar financial measures. When weuse these measures, we compensate for these limitations by providing specific information regardingrevenue and evaluating billings together with revenue calculated in accordance with GAAP. We have alsoprovided a breakdown of the calculation of the change in deferred revenue by segment, which is added torevenue in calculating our non-GAAP metric of billings. In connection with our presentation of thechange in deferred revenue, we have provided a similar presentation of the change in the related deferredcosts. Such deferred costs primarily include costs associated with third party content and in connectionwith certain customized software solutions, the costs incurred to develop those solutions. As deferredrevenue and deferred costs become larger components of our operating results, we believe these metricsare useful in evaluating cash flow.
Non-GAAP net loss and non-GAAP gross margin exclude the impact of stock-based compensationexpense, capitalized software and developed technology amortization expense, and other applicable itemssuch as legal contingencies, benefit from income taxes due to change in tax accounting method andamended tax return, restructuring accruals and reversals, and deferred rent reversals due to leasetermination, net of taxes or tax benefits, as applicable to each non-GAAP financial metric. Stock-basedcompensation expense relates to equity incentive awards granted to our employees, directors, andconsultants. Stock-based compensation expense has been and will continue to be a significant recurringnon-cash expense for Telenav that we exclude from non-GAAP financial metrics. Legal contingenciesrepresent settlements and offers made to settle patent litigation cases in which we are defendants androyalty disputes. Deferred rent reversals represent the reversal of our deferred rent liability that is nolonger required due to our facility lease termination. Capitalized software amortization expenserepresents internal software costs that were capitalized and are charged to expense as the software is usedin our operations. Developed technology amortization expense relates to the amortization of acquiredintangible assets. Our non-GAAP tax rate differs from the tax rate due to the elimination of any tax effectof stock-based compensation expense, capitalized software and developed technology amortizationexpense, legal contingencies, restructuring accruals and reversals, and other applicable items that arebeing eliminated to arrive at the non-GAAP net loss.
Adjusted EBITDA measures our GAAP net loss excluding the impact of stock-based compensationexpense, depreciation and amortization, interest and other income (expense), provision (benefit) forincome taxes, and other applicable items such as legal contingencies, restructuring accruals and reversals,and deferred rent reversals due to lease termination. We believe this is a useful measure of profitabilitybefore the impact of certain non-cash expenses, interest income, income taxes, and certain other items thatmanagement believes affect the comparability of operating results. Adjusted EBITDA, while generally ameasure of profitability, can also represent a loss.
Free cash flow is a non-GAAP financial measure we define as net cash provided by (used in) operatingactivities, less purchases of property and equipment. We consider free cash flow to be a liquidity measurethat provides useful information to management and investors about the amount of cash generated by ourbusiness after purchases of property and equipment.
We determined that it would be meaningful to investors to develop a breakout of the operating results ofthe advertising business beyond the current GAAP segment reporting of revenue, cost of revenue andgross margin, and we are including such presentation in our non-GAAP reporting results. Thispresentation reflects operating expenses that are directly attributable to the advertising business. We areunable to provide a similar breakout of operating results for the automotive and mobile navigationbusinesses beyond the current GAAP segment reporting of revenue, cost of revenue and gross marginbecause these segments share many of the same technologies and resources and as such, compriseoperating expenses which are not fully attributable to either. In addition, the reported non-GAAPoperating results for the advertising business only include an allocation of certain shared corporategeneral and administrative costs that directly benefit the business, such as accounting and human resourceservices.
To reconcile the historical GAAP results to non-GAAP financial metrics, please refer to thereconciliations in the financial statements included in this earnings release.
Forward Looking Statements
This press release contains forward-looking statements that are based on Telenav management's beliefsand assumptions and on information currently available to our management. Actual events or results maydiffer materially from those described in this document due to a number of risks and uncertainties. Thesepotential risks and uncertainties include, among others; Telenav's ability to develop and implementproducts for General Motors ("GM") and Toyota and to support GM and Toyota and their customers;adoption by vehicle purchasers of Scout for Cars; Telenav's dependence on a limited number ofautomotive manufacturers and original equipment manufacturers ("OEM") for a substantial portion of itsrevenue; Telenav's ability to develop and implement products for Ford's Sync 3 system; the timingtransition of Ford to its Sync 3 system and the timing of revenue recognition in connection with the Sync3 due to different title transfer requirements, particularly outside of the U.S.; potential delays in neworders of Sync 3 as Ford uses its Sync 2 inventory in connection with the Sync 3 transition and the impactof the transition on order timing and delivery; automotive manufacturers, automotive OEM, andconsumer acceptance of Scout; Telenav's success in achieving additional design wins from OEM andautomotive manufacturers and the delivery dates of automobiles including Telenav's products; Telenav'sability to grow and scale its advertising business through the retention of additional, productive salespersonnel, new advertising sales and technology delivery while also achieving cash flow break even andprofitability in the advertising business; Telenav incurring losses; competition from other marketparticipants who may provide comparable services to subscribers without charge; Telenav's limitedhistory in the automotive navigation market and the advertising market; the timing of new productreleases and vehicle production by Telenav's automotive customers, including inventory procurement andfulfillment; Telenav’s ability to develop search products with Nuance; possible warranty claims, and theimpact on consumer perception of its brand; Telenav's ability to develop and support products includingOSM, as well as transition existing navigation products to OSM and any economic benefit anticipatedfrom the use of OSM versus proprietary map products; the potential that we may not be able to realize ourdeferred tax assets and may have to take a reserve against them; Telenav's ability to qualify for taxrefunds and credits; and macroeconomic and political conditions in the U.S. and abroad, in particularChina. We discuss these risks in greater detail in "Risk factors" and elsewhere in our Form 10-Q for thethree months ended December 31, 2015 and other filings with the U.S. Securities and ExchangeCommission (SEC), which are available at the SEC's website at www.sec.gov. Given these uncertainties,you should not place undue reliance on these forward-looking statements. Also, forward-lookingstatements represent our management's beliefs and assumptions only as of the date made. You shouldreview our SEC filings carefully and with the understanding that our actual future results may bematerially different from what we expect.
