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Executives

David Niederman - Investor Relations

H.P. Jin - President and Chief Executive Officer

Mike Strambi - Chief Financial Officer

Analysts

H.P. Jin - President and Chief Executive Officer

Ron Shuttleworth - M Partners

Greg Burns - Sidoti & Company

TeleNav, Inc. (TNAV) F2Q 2013 Earnings Conference Call January 31, 2013 5:00 PM ET

Operator

Good day and welcome to the TeleNav’s Second Quarter 2013 Fiscal Earnings Conference Call. Today’s conference is being recorded. At this time I’d like to turn the conference over to Mr. David Niederman. Please go ahead sir.

David Niederman - Investor Relations

Thank you, operator. This is David Niederman, TeleNav Investor Relations and I’m pleased to welcome you to TeleNav’s conference call to discuss its second quarter fiscal 2013 earnings results. After the close of market today TeleNav issued a press release through Globe Newswire. The release is also available on the TeleNav website at telenav.com. During the course of today’s conference call our executives will make forward-looking statements including statements regarding among others the company’s expected financial performance for the third quarter of fiscal 2013 and full fiscal 2013 anticipated sources and mix of revenue, expected profitability, product and business strategies, and strategic relationships. We wish to caution you that such statements are just predictions based on management’s current expectations or beliefs and then actual events or results may differ materially. We refer you to documents we filed with the Securities and Exchange Commission including our annual report on Form 10-K and other periodic filings.

These documents identify important risk factors that could cause our actual results to differ materially from those contained in our forward-looking statements. We assume no duty to confirm, update or revise the financial forecast for the year or any other forward-looking information in this call as a result of new developments or otherwise. Today we will be discussing our results on a GAAP as well as non-GAAP basis. These non-GAAP results also sometimes called pro forma results exclude stock-based compensation expense and other items net of tax effect if applicable and assume that our preferred stock was converted for common stock on the state of issuance for calculations of earnings per share. We use these additional non-GAAP measures as we believe they give useful operating information in addition to the GAAP results. A reconciliation of GAAP to non-GAAP financial measures is available in our press release and on our Investor Relations web page.

Let me now turn the call over to H.P. Jin, TeleNav’s President and CEO.

H.P. Jin - President and Chief Executive Officer

Thank you, David, and thank you all for joining TeleNav’s second quarter fiscal 2013 earnings call. With me on the call today is our Chief Financial Officer Mike Strambi. I will provide some comments on our fiscal second quarter and discuss our progress on several of our key initiatives then I would turn the call over to Mike to discuss our financial results in more detail and provide our outlook. We had solid results for the fiscal second quarter, revenues were $50.6 million which is at the high end of our guidance, adjusted EBITDA of $7.3 million and a non-GAAP net income of $4.7 million both exceeded our guidance.

Strategic growth and international revenue in the second quarter was over $25 million which is 50% of total revenue as compared to 40% of total revenue in the prior quarter and 22% of total revenue in the prior year. We are pleased with our continued success in diversifying our revenue as we work to buildup our portfolio of business lines that target higher growth opportunities long-term.

Let me start with our traditional carrier paid mobile business where we continue to see a decline trend in our revenue or arrangement with Sprint unbundling will expire at the end of June 2013, which we expect to have a significant short term negative financial impact on revenue, margin and the profitability. Our strategic partnership with Sprint remains effective and through the end of calendar 2015, the partnership includes pre-load and joint marketing of our Scout branded product to be monetized through revenue share of advertising and premium up-sell opportunities.

Our automotive business continues to drive this trend with revenue from this segment in the second quarter reaching $15.1 million representing 30% of total revenue and the growth of 61% quarter-over-quarter and 273% year-over-year. As a reminder we continue to anticipate that revenue from automotive were double year-over-year to more than $50 million representing 25% to 30% of total revenue for our fiscal year ending June 2013. We are pleased with our progress and penetrating most of Ford’s U.S. domestic model and we look forward to the early stages of international rollout which are anticipated to begin in China in calendar 2013 and then move to Europe in calendar 2014 and beyond. As I mentioned last quarter we remain on track to be in 14 out of 18 models in North America this month and the remainder shortly thereafter.

Turning to our partnership with Delphi our Scout for Cars white label solution is currently shipping in the United States on the GMC Acadia and Chevrolet Traverse and Buick Enclave with additional models in future regions to follow. We are particularly excited with this rollout with Delphi on GM Automobile as it is a validation of our capability and our strong position as an emerging leader in the automotive space. As example both Ford and Delphi will also be taking TeleNav technology to market in China the fastest growing automotive market in the world.

We continue to see encouraging momentum in our conversation with other automotive OEMs and our strategic partners. At the recent Consumer Electronics Show in Las Vegas with future demos of our current technology from Ford, Delphi and Sony as well as demos of our next generation technologies. We are very pleased with the favorable response we received from existing and potential customers. In October Scout for Cars was selected as a finalist for Automotive News PACE Award in information technology category. The PACE Award program honors automotive suppliers who embrace innovation, the final winners will be announced in April and we are delighted to be included as a finalist in this prestigious technology category as we believe it validate our strategy to deliver disruptive technology with a entirely new experience into the automotive space.

We continue to believe that our mobile heritage and our ability to innovate quickly provide ongoing competitive advantages over traditional players in the auto space. We’ve also seen strong momentum this quarter with Scout performance as we continue to focus on delivering the best and daily personalized navigation to mobile customers. For example we recently updated Scout for iPhone adding free voice navigation for all users in October and our Things To Do local event category in January or further extend its lead over competitive offering with unique features such as Things To Do category which gives users easy access to live local events such as concert, outdoor activities and kid’s events. We continue to provide these kinds of enhancements in order to deliver our mission to provide a viable daily service that delights our users. To further make our product more personal and easy to use we have also added one-button access to my favorite and recent clips on the app dashboard, customer ratings and reviews of our most recent version are extremely positive maintaining an average of 4.5 star rating.

We are also pleased to note that Apple is now currently featuring Scout in the app store in the navigation category, I strongly encourage you to try our product and I guarantee you will be delighted. In our advertising business I would like to provide a brief update regarding our recent acquisition of ThinkNear. As a reminder we have combined ThinkNear’s Hyper-Local Targeting platform with TeleNav’s Drive-To Advertising platform to create a new mobile local advertising platform called Scout Advertising. The Scout Advertising platform leverages TeleNav’s millions of subscribers and ThinkNear’s Hyper-Local Targeting technology with over 8 billion impressions to fulfill large location targeted campaigns for brick and mortar advertisers.

Our integration of ThinkNear with our advertising business has been very successful to-date. Eli Portnoy one of ThinkNear’s co-founders will assume the newly credit position of General Manager of Scout Advertising. We are excited for Eli to lead Scout Advertising to become a market leader in the fast growing hyper-local advertising industry. While our advertising initiative is still at a relatively early stage we are encouraged by all momentum to-date and the positive response we are receiving from new advertisers such as Dennys and Holiday Inn and also repeat advertisers such as Olive Garden and Pizza Hut. We believe that Scout Advertising is well positioned to benefit from the continued evolution of the mobile advertising market which is expected to exhibit robust growth over next many years to come. However we do not expect advertising revenue to be a significant contributor to revenue until later part of fiscal 2014.

In summary, we are pleased with the progress we have achieved this quarter in our strategic areas a 00:29 for future growth. We’ll continue to execute on our strategy to diversify our business and to build up on a success we have enjoyed in our strategic growth areas in the first half of our fiscal year. As I mentioned last quarter we continue to anticipate our strategic growth in the international areas will grow to the above 50% of our total revenue for the second half of fiscal year 2013.

Let me now turn the call over to Mike Strambi our CFO. Mike?

Mike Strambi - Chief Financial Officer

Thanks H.P. Revenue in the second fiscal quarter was $50.6 million compared to $46.0 million in the prior sequential quarter and $53.2 million in the December quarter last year. The sequential increase in revenue was driven primarily by overall growth in our automotive business. In conjunction with this growth we saw a positive impact for revenue from the recognition of $2.7 million from a map content upgrade with Ford.

The year over year decrease in total revenue reflects the effect of our amended contract with Sprint and which the quarterly revenue under the Sprint bundle is reduced by approximately $10 million which began with the first fiscal quarter of 2013 as well as declines in revenue from other paid carrier navigation services. We are pleased to report that this decrease was offset by the growth in the automotive business.

Revenue from our product business which primarily consists of delivery of customized software and royalties earned from our navigation solution with Ford was $14.8 million in the second quarter up from $9.3 million in the prior quarter and $4 million in the year ago quarter. This represents 59% product growth sequentially and 273% growth year-over-year. Revenue from our services business was $35.8 million down from $36.7 million in the prior quarter and $49.2 million in the year ago quarter again reflecting the effect of our revised Sprint Agreement mentioned earlier and the continuing pressure on our other carrier business including AT&T.

Strategic growth in international revenue in the second quarter was $25.3 million up 37% from $18.4 million from the prior quarter and up a 120% from a $11.5 million in quarter two of last year. Strategic growth in international represented 50% of total revenue in the quarter. To provide you a little more granularity automotive revenue was $15.1 million up from $9.4 million sequentially and $4.1 million year-over-year.

Advertising and premium revenue was $2.7 million up from $2.2 million in the prior quarter a sequential increase of 23%. International revenue was $4.1 million up from $3.4 million sequentially and $2.9 million year-over-year. For the December quarter AT&T comprise 33% of revenue compared to 39% on a year ago quarter. In regards to AT&T we are pleased to announce that in March 2013 our agreement with AT&T will be automatically renewed under its existing terms through March of 2014.

Ford represented 30% of revenue in the quarter compared with 8% in the year ago quarter. Sprint comprise 19% of revenue compared to 38% than the year ago quarter. Gross margin for the quarter was 65% down from 73% in the prior quarter and 81% than the same quarter last year. The decrease in gross margin sequentially and year-over-year was a result of the increased mix of automotive revenue and from the map content upgrade for which we incurred lower gross margin from higher related map cost. Excluding the effect of this map upgrade which contributed $2.7 million of revenue, gross margin for the fiscal second quarter would have been 67%. As we expand into the automotive navigation market we continue to anticipate overall gross margin will trend lower due to continuing higher mix of auto and the smaller margins associated with this business.

Non-GAAP gross margin for the quarter was 67% down from 74% in the prior quarter and 82% in the same quarter last year. Research and development expenses in the quarter were $14.9 million down from $15.6 million in the September quarter and $17.3 million in the December quarter of last year. The decrease in expenses during the quarter is slightly lower head count and the reimbursement of $1 million related to cost incurred in connection with the cost recovery contract with a third-party. Sales and marketing expenses were $9 million up from $8.6 million in the September quarter and $8.4 million in the same quarter last year.

General and administrative expenses were $7.4 million which compares with $6 million in the prior quarter and $5.8 million in the second quarter of fiscal 2012. In the December quarter we incurred $1.3 million in charges for a legal settlement with NAVTEQ related to a previously disclosed royalty dispute. Stock-based compensation expense for the December quarter was $2.2 million. As we continue to evolve our business we believe that is appropriate to take the prudent stance with regard to managing our OpEx cost structure. In light of the continuing decline in our traditional pay navigation business, we will continue to realign our investment resources into our strategic growth areas as we have demonstrated in recent quarters.

On a GAAP basis our net income for the quarter was $0.9 million or $0.02 per diluted share. The decrease in net income for the second quarter was primarily a result of lower gross margin for the reasons I mentioned earlier. This compares with $2.7 million or $0.06 per diluted share in the September quarter and $10.2 million or $0.23 per diluted share in the December quarter last year. Non-GAAP net income for the second quarter was $4.7 million or $0.11 per diluted share which compares with $4.5 million or $0.10 per diluted share in the first quarter of fiscal 2013 and $11.7 million or $0.27 per diluted share in the second quarter of fiscal 2012. We generated adjusted EBITDA of $7.3 million in the quarter.

Turning to the balance sheet. We continue to be debt free and ended December with approximately $208 million in cash, cash equivalents and short term investments. This was a decrease from $217 million from the prior quarter primarily as a result of the impact of the ThinkNear acquisition for $18.3 million in cash and by $9 million utilized from our stock repurchase plan offset by cash generated from operations. We ended the quarter with 874 full-time employees, a decrease from 889 at September 2012 quarter end.

Total subscribers for December 2012 were $33.7 million down from $34.3 million for September 2012. Beginning next quarter we will no longer provide our number of total paid and premium subscribers as we do not believe that provides a meaningful measure of our business as revenue from our strategic growth in international areas exceed more than 50% of total revenue. This subscriber metric is no longer indicative of the status of the overall business. For example we have access to over 8 billion impressions from tenth of millions of unique users through our Scout Advertising platform alone. Also the number of auto navigation units sold is approaching 1 million in number. Both are not accounted for in the total number of subscribers, in the future we will look to provide you with more meaningful measures of our business.

Now on to our business outlook for the March quarter and full fiscal year ending June 30, 2013. Our business outlook for the March quarter, total revenue is expected to be $52 million to $54 million. Revenue from strategic growth areas in international is expected to be approximately 55% to 60% of total revenue. This includes $9 million of revenue related to customized engineering services provided to our automotive customers. This type of engineering work took place over several quarters but is only recognized subject to delivery in certain customer acceptance criteria. Going forward it is possible that we will experience similar revenue recognition events of varying amounts and timing in the future in connection with new and existing automotive customers.

GAAP gross margin is expected to be 64% to 65%. Non-GAAP gross margin is expected to be 66% to 67% and excludes adjustments which include the amortization of capitalized software and developed technology of approximately $1 million. GAAP operating expenses are expected to be $32 million to $33 million. Non-GAAP operating expenses are expected to be $29.5 million to $30.5 million and exclude approximately $2.5 million in stock-based compensation. GAAP net income is expected to be breakeven to $1 million. GAAP diluted net income per share is expected to be breakeven to $0.02. Non-GAAP net income is expected to be $3 million to $4 million and excludes the impact of approximately $2.5 million of stock-based compensation expense and approximately $1 million of capitalized software and developed technology amortization expenses.

Non-GAAP diluted net income per share is expected to be $0.07 to $0.09. Adjusted EBITDA earnings before interest taxes, depreciation, amortization and stock-based compensation expense is expected to be in the range of $6 million to $7 million and excludes the impact of approximately $2.5 million in stock-based compensation expenses and $2.5 million of depreciation and amortization expenses. Weighted average diluted shares outstanding are expected to be approximately $42.5 million.

For the fiscal year ending June 30, 2013 our business outlook is follows. Total revenue is expected to be $193 million to $197 million. Revenue from strategic growth areas in international is expected to be approximately 50% of total revenue for the fiscal year. GAAP gross margin is expected to be 65% to 66%. Non-GAAP gross margin is expected to be 67% to 68% and exclude adjustments which include the amortization of capitalized software and developed technology of approximately $4 million. GAAP net income or loss is expected to be in the range of breakeven to $1 million or per diluted share a range of breakeven to $0.02. Non-GAAP net income is expected to be a $11 million to $14 million were approximately $0.26 to $0.33 per diluted share and excludes the impact of approximately $9 million to $10 million of stock-based compensation expense. Net of taxes legal settlement cost of $1.3 million and approximately $4 million of capitalized software in developed technology amortization expenses.

Adjusted EBITDA is expected to be in the range of $18 million to $21 million and excludes the impact of $9 million to $10 million in stock-based compensation expenses $9 million to $10 million of depreciation and amortization expenses and $1.3 million of legal settlement costs. Weighted average diluted shares outstanding are expected to be $42 million to $43 million.

Finally, although we are not giving guidance today on fiscal ’14 I’d like to provide some qualitative information about our expectations. As you know fiscal 2013 and 14 are transition years for TeleNav due to the significant reduction in revenue for paid carrier navigation. Going forward we expect paid carrier navigation to consist primarily of revenue sharing arrangements, premium subscription fees and advertising revenue.

Fiscal 2013 revenue from Sprint declined substantially but we expect to offset a significant portion of the decline with growth in strategic areas such as automotive. As of July 1, 2013 we expect that we will not be receiving any material revenue for bundle navigation services from Sprint. Although we expect revenue from strategic growth areas to replace the Sprint bundle revenue in the long term we do not expect this revenue to do so in the short term including fiscal 2014. Despite these pressures we strongly believe in the long term opportunities in our strategic growth areas and we will continue to invest to maintain our momentum by realigning our resources to focus on long term growth opportunities.

With that H.P. and I are available to take your questions. Operator, if you can please open the lines for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We’ll take our first question from Brad Erickson with Pacific Crest Securities.

Brad Erickson - Pacific Crest Securities

Hi, thanks for taking my questions. I just had a couple, first on the custom works that you guys are doing for the auto OEMs, can you kind of talk about sort of how variables the amounts and the timing of the revenue rent on that is and give us if you can any sense of how much custom development work you’ve accumulated so that may or may not be recognize your 3:51 in the coming quarter two.

Mike Strambi

Sure. So I might spot out by saying our business model with our automotive customers is comprised of customized engineering and royalties that we receive on the respective navigation units as they are procured and installed in to the DFO. Well we have our standard navigation solutions for all of our automotive customers we’re providing customized work provide them unique look in feel without getting in to the complexity of the underlying accounting rules as we perform this work over time and achieve certain milestones and receive direct visit underlying acceptance from the auto manufacturers is that point in time that we will recognize that revenue. So we do expect to have recurring revenue of that manner though because they are very discrete activities they were come over very during timeframes in the lifecycle of our relationship with that automotive carrier. The revenue that I’d given guidance on in the third quarter is always been part of our fiscal ‘13 guidance and we do anticipate receiving that acceptance this work is mostly with regard to Ford some of that is with Delphi and we expect to receive that acceptance in the March quarter and accordingly we’ll recognize revenue at that time.

Brad Erickson - Pacific Crest Securities

Great, that’s helpful. And then just on the expense front just looking out at the fiscal guidance and obviously price kind of the – looks like a bit of a step up in OpEx in the June quarter, is that I mean you mentioned obviously the carrier revenues are at least from Sprint anyway is largely going away starting in the September quarter I mean can you kind a give us a sense of how we should be thinking about OpEx levels going forward there about thinking that obviously they need to come down but trying to get a sense for looking at fiscal ’14.

Mike Strambi

I’ll take the first part of the question. We expect some very minimal incremental OpEx spending in quarters three and four in accordance with the guidance that I provided. With regard to our ongoing philosophy with regard to operating cost structure I let H.P. speak to that.

H.P. Jin

Stating overall 1:28 on 2013 looking forward we have been investing and realigning our resource in to strategic growth areas for the past two some years so we have been very happy with the progress we made in achieving more than 50% of revenue from this strategic growth areas due to our investment and we’ll continue to do so in a way to make sure we secure our leadership in the – this areas including auto and mobile advertising which we believe have a huge upside and a growth opportunity for TeleNav. In terms of short term OpEx management we’ll be prudent but that’s we’ll now be managing our cost purely for a short term gains rather than focusing long term.

Brad Erickson - Pacific Crest Securities

Got it, that’s helpful. And then one final just housekeeping question, I missed the amount of revenue related 2:32 international in the quarter, if you could just repeat it that would be helpful.

Mike Strambi

Alright. So EBIT was $4.1 million.

Brad Erickson - Pacific Crest Securities

Got it, that’s great. Thanks very much.

Mike Strambi

Yeah.

Operator

We’ll go next to Ron Shuttleworth with M Partners.

Ron Shuttleworth - M Partners

Good afternoon, gentlemen.

Mike Strambi

Hi Ron.

H.P. Jin

Hi, Ron.

Ron Shuttleworth - M Partners

Just a couple of questions as it relates to the automotive business. Am I right in assuming that there is another automotive company that you are bringing online to fiscal year ’14. And I’m thinking if there was a – I just want to confirm that in fact the case.

Mike Strambi

So we have previously announced through Delphi our Tier 1 supplier that we have in fact a third automotive end customer that will be supplying a navigation solution through Delphi 4 and we’ve only given guidance through that third customer is a Chinese auto manufacturer within China that sells out internationally.

Ron Shuttleworth - M Partners

Okay.

Mike Strambi

So that’s the third one.

Ron Shuttleworth - M Partners

Okay, that’s what I think I’m talking about. Then – is that have you expect to begin recognizing revenue in the fiscal year ’14 time period or is that for the…

Mike Strambi

That will be for the second half of fiscal ’14 if what we’re anticipating.

Ron Shuttleworth - M Partners

Okay. And do you expect it will evolve along the same lines as Ford and GM in terms of rollouts?

Mike Strambi

So, we’re not giving any specific guidance for fiscal’14. We are hopeful that we’ll see nice run rates over time so it’s too early to tell exactly how that will manifest in to ’14 and beyond. But I would anticipate that any pickup will take place over a period of time not initially all in one month.

Ron Shuttleworth – M Partners

Yeah.

Mike Strambi

And this is a fall and just a – this is a fall only the China market and this China Chinese OEM has global presence as well right.

H.P. Jin

That’s right. So there were to expand regionally outside of China that would just take place over time.

Ron Shuttleworth - M Partners

Okay.

H.P. Jin

One of the big challenges was trying to forecast all of this with all these auto manufacturers is the alignment of the launch dates reached specific model because they’re generally aligned with a specific vehicle model launching once a year and so there can be desperate dates across a whole portfolio of vehicles within the auto manufacturer.

Ron Shuttleworth - M Partners

Okay. And the Delphi deal is that sort of similar kind of like to the Ford deal or they – because you have a third party involved are they materially different.

Mike Strambi

So we’re not going to get in to specific differentiating between auto manufacturers but what I will speak to is the fact that it’s a per unit royalty based approach.

Ron Shuttleworth - M Partners

Okay.

H.P. Jin

Similar to the way Ford is in that regard.

Ron Shuttleworth - M Partners

Okay. And my final – my final question is related to on the ThinkNear acquisition and they moved in to in a sort of hyperlocal sort of ad serving. I know as your sales and marketing team – your sales and marketing budget as increased a little bit quarter-over-quarter sequentially. Are you bringing on – are you adjusting your sales force to be in a more aggressively selling to potential direct sales to some potential advertisers or you still looking at going through ad networks?

H.P. Jin

Well we have a two channels, one is direct to national local business like the Pizza Hut Danny's. And we also have indirect channel from a small business through other partners so we will be more aggressive to the indirect sales.

Ron Shuttleworth – M Partners

In indirect sales, okay. Alright, thank you. I’ll go back in the queue.

H.P. Jin

Sorry, let me just make sure you’re clear. We will be aggressive in the direct sales force.

Ron Shuttleworth - M Partners

Direct sales, okay.

H.P. Jin

That’s right, that’s right.

Ron Shuttleworth – M Partners

Alright. Now what’s your headcount, do you mind that disclosing what your headcount is in direct sales for advertising rate down and where do you expect to go?

H.P. Jin

Well we’re not disclosing that right now, it’s not the big amount it is a number right now but we are trying to ramp them up.

Ron Shuttleworth - M Partners

Okay.

H.P. Jin

As we see more of success.

Ron Shuttleworth - M Partners

Alright thanks – yeah hopefully. Okay, great. Thanks a lot. Good quarter.

H.P. Jin

Thanks Ron.

Ron Shuttleworth - M Partners

Yeah, thank you.

Operator

(Operator Instructions) We’ll take our next question from Greg Burns with Sidoti & Company.

Greg Burns - Sidoti & Company

Good afternoon. Just a question around the AT&T contract, is that pricing set for the year or can AT&T at any point in time during this contract adjust pricing – adjust a pricing and do you receive – is there a minimum guarantee payment that you received from AT&T?

Mike Strambi

Yeah, these are sort of minimum guarantee for each subscribers that’s number one it is 3:33 and then also in terms of pricing change they would definitely certain freedom for them to change the pricing although we don’t see any reason to do the price change right now.

Greg Burns - Sidoti & Company

Okay. And in terms of the I guess the new offering then the free navigation on the iPhones are now if I understand correctly your offering of the services – turn by turn on the iPhone and now I think I believe on the Android platform. So are you just completely moving away from the kind of the premium subscription model in the mobile space?

Mike Strambi

No, actually we offering basic navigation free but we also offer premium up-sell. So the model is kind of a hybrid for the free model we’re going to have advertising to support it and then in the premium up-sell for example our – we got a onboard our navigation we got every – navigation everywhere concept that’s a sort of premium we charge that for the product.

Greg Burns - Sidoti & Company

Okay. And I might have missed it but I know you announced the other three platforms around GM to Delphi, could you – did you talk about the I guess the rollout plan there in terms of additional domestic models and other markets with that relationship?

Mike Strambi

So the relationship with GM through Delphi today for North America is just those three vehicles and while we hope it manifest into more models we don’t have in North America, we don’t have any of those commitments today but we will be launching in other geographic markets outside of North America in the coming 12 to 18 months. So it’s still too early to get a firm grasp on what that penetration and what those take rates will look like.

Greg Burns - Sidoti & Company

Okay. Thank you.

Mike Strambi

Yeah.

Operator

(Operator Instructions) We have a follow-up question from Ron Shuttleworth, M Partners.

Ron Shuttleworth - M Partners

Thanks for taking my follow-up. A quick question on Sprint, when you, when you exit the year right now you are saying that as of Q3 you are at, Sprint is around 19% of the total revenue stream. Is that correct?

Mike Strambi

Yes.

Ron Shuttleworth - M Partners

Exiting fiscal year 2014 where do you see that..

Mike Strambi

So we are not giving specific guidance into 2014 but what I will speak to is the great majority of that 19% today is coming through the fixed fee arrangement that we have with Sprint on the bundle.

Ron Shuttleworth – M Partners

Yeah.

H.P. Jin

And into 2014 on that bundle we don’t expect to get any material level of revenue from that offering.

Ron Shuttleworth - M Partners

And there isn’t..

H.P. Jin

But we’ll be looking – so as a preferred provider with Sprint our business model really converts to premium up-sell and advertising on our nav solution to them.

Ron Shuttleworth - M Partners

Okay.

Mike Strambi

And that relationship exists through the end of 2015.

H.P. Jin

Yeah explained to – so they would do growing marketing with that for the most sculpt branded product to freeload the channel and other campaign to promote the product because we have revenue share on that premium up-sell and advertising, so the relationship will turning to a more in our about once that payment is more like revenue share model.

Ron Shuttleworth - M Partners

Okay. And have your current 2.7 million is a revenue this quarter from advertising, is Sprint includes in that number.

H.P. Jin

Yeah, it’s a very small part of that but that’s correct so we have no fixed bundle arrangement with Sprint that we receive it beyond the Sprint has spoken too. And then there is a premium up-sell component on all those end users and that segment of revenue is included in that $2.7 million number you referred to.

Ron Shuttleworth – M Partners

Okay. And is Sprint – just real quickly is Sprint, are you aware that Sprint is committing marketing dollars to generally promote?

H.P. Jin

Yes, we are aware of that yeah.

Ron Shuttleworth – M Partners

Okay. Alright thank you.

Operator

Thank you. We’ll take our next question from Greg Burns with Sidoti & Company.

Greg Burns - Sidoti & Company

Hi. Just a real quick follow-up on the guidance, if I look at your full year revenue guidance it looks like if you backup the $9 billion in kind of one-time revenue from (indiscernible) for next quarter you will step down in revenue to around $44 million and the full year implies step backup to around $55 million in the fourth quarter, what’s driving that those – that delta there?

Mike Strambi

Yeah, Greg I don’t think your math is completely accurate there. So, we don’t anticipate a step up in the fourth quarter. I think you are referring to $55 million for – it’s actually $52 million to $54 million in the third quarter and then if you impute the fourth quarter revenue from our annual guidance you will see that the Q4 revenue actually declines from Q3.

Greg Burns - Sidoti & Company

Okay, excuse me. Alright, I apologize. Thank you

Operator

At this time I would like to turn the conference back over the H.P. Jin, CEO of TeleNav for any additional or closing remarks.

H.P. Jin - President and Chief Executive Officer

Alright, thank you for your time and good night, good evening. Alright that’s it.

Mike Strambi - Chief Financial Officer

Thank you.

Operator

That does conclude today’s conference. We thank you for your participation.

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