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Telenav Inc. (NASDAQ:TNAV)

F2Q 2014 Earnings Conference Call

January 30, 2014 5:00 PM ET

Executives

HP Jin - Co-Founder, President and CEO

Michael Strambi - CFO

Cynthia Hiponia - IR, The Blueshirt Group

Analysts

Greg Burns - Sidoti and Company

Operator

Good day everyone and welcome to the Telenav Second Quarter Fiscal 2014 Earnings Results Conference Call. Today's call is being recorded.

At this time, I would like to turn things over to Cynthia Hiponia. Please go ahead.

Cynthia Hiponia

Thank you, Sarah. This is Cynthia Hiponia, Telenav Investor Relations and I'm pleased to welcome you to our conference call to discuss the second quarter fiscal 2014 earnings results, the acquisition of skobbler, and Telenav's partnership, we are announcing today, with one of the top five largest global automobile manufacturers.

After the market closed today, Telenav issued press releases and an 8-K. The releases and the 8-K are also available on the Telenav website. During the course of today's presentations, 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 year 2014, anticipated sources and mixes 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 that actual events or results may differ materially. We refer 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 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 include adjusted EBITDA, also sometimes called pro forma results, exclude stock-based compensation expenses and assume that our preferred stock was converted for common stock on a 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 statements is available in our press release and on our Investor Relations webpage.

As a reminder, we completed the sale of our enterprise business on April 1st, 2013 and its net operating results are classified as discontinued operations. The following discussions, unless otherwise indicated are for our continuing operations and excludes discontinued operations related to the enterprise business.

Let me now turn the call over to HP Jin, Telenav's President and CEO.

HP Jin

Thank you for joining Telenav second quarter fiscal year 2014 earnings call. With me on the call today is our Chief Financial Officer, Mike Strambi. In addition to our second quarter earnings release, Telenav had made two major announcements this afternoon. The first one, is a new partnership with another one of the top five largest global auto manufacturers. The second one is our acquisition of skobbler, the world leader of OSM mapping and navigation technology based in Europe.

Before I go into the details of these exciting announcements, let me first discuss the highlights of our second quarter, and provide an update on our progress in our strategic growth areas.

We have achieved solid results in the second quarter, with revenue of $37.2 million, exceeding our guidance of $35 million to $37 million. Revenue from strategic growth areas, which are automotive, mobile advertising and premium services, in the second quarter was $23.1 million, up 29% year-over-year. This represented 62% of total revenue, which was up from 38 of the total revenue in the second quarter of fiscal 2013. The strength of our revenue performance was driven by our automotive and mobile advertising business.

Auto revenue was $19 million in the second quarter, 51% of total revenue and up from 32% year-over-year. Our relationship with Ford continues to be strong. Telenav is now embedded in 18 of 24 Lincoln models in North America. We expect to be on the remaining models in North America by summer of 2014, and we remain on track to launch with Ford Europe in the fall of 2014.

We also saw significant growth in China with Ford. In the second quarter, China Ford revenue was approximately 20% of total Ford revenue, but (inaudible) quarter-by-quarter.

We continue to have great momentum with Thinknear, our mobile advertising business unit, which represents our fastest growing market. Revenue was up over 200% year-over-year. We are on track for mobile advertising to achieve approximately 10% of total revenue in the fiscal third quarter and 10% for the full fiscal year.

Let me now review mobile advertising metrics in the December quarter; we grew advertising revenue approximately 38% quarter-over-quarter, and we believe that our advertising revenue in the second half of fiscal 2014 is on track to more than double, over the first half of fiscal 2014. We added 15 new national advertisers, bringing the total of 266 national advertisers. We expanded our mobile ad inventory partnerships, and now provide advertisers with a single point of access to over 60 billion monthly location enabled ad impressions, up from 22 billion in the September quarter.

The number of ad impressions we are serving today, is still a small percentage of the total inventory we had. This provides us tremendous opportunity to continue growing our mobile advertising business. Also, expanding our initiatives to provide robust ROI analysis for our national and local advertisers. This quarter, we announced our partnership with local insights leader, Placed, to provide retailers with available insights into the effectiveness of mobile ads, in driving offline store visits. This will allow advertisers to measure the correlation between mobile ad exposure and brick and mortar shopping.

As an update to our location based (inaudible) product, GeoCookie. In the second fiscal quarter, we had some successful trials, which produced better than expected click-through rates, and we anticipate rolling this product out in a larger scale in the near future.

Now, I'd like to discuss announcements we made today. Our strategy in our automotive business is to bring our advanced embedded and connected navigation products directly to global auto OEMs. As we mentioned before, we have been actively pursuing with our partnerships. Today, I am very pleased to announce, we have successfully partnered with another one of the top five global automotive manufacturers.

Today's car buyers are demanding connected navigation, with fresh and accurate content, which results in a more reliable and better user experience in the car. Together with our partners, we are leading the transformation inside the connected cars, with cloud and personalization technologies. Today's leading OEMs need to innovate faster than before, in bringing more customer friendly products to meet customer demand, while saving overheads in managing multiple vendors in different regions. Telenav has become the preferred partner, because we bring our Silicon Valley based innovative culture and speed to market, along with the flexibility and ability to collaborate in developing cutting edge products, to meet fast changing customer demands, and we provide global coverage to be the single solution provider for OEMs.

The agreement would cover an initial three year production cycle, starting with select 2017 models that will be available beginning in calendar year 2016, and when fully deployed, will support navigation in more than 100 countries. The automaker will use a unique version of Scout for Cars, Telenav embedded and connected navigation reference product, that includes a customized user interface depending on the region. It will provide point of interest, and real time data, such as traffic, local weather and gas prices, and will also work with or without connectivity.

Similar to our Ford partnership, the revenue will be small in calendar year 2016, and we anticipate increased revenue contribution, when car shipments begin to ramp in volume worldwide in calendar 2017. We believe that this partnership serves as a validation for our investments we made in our automotive business, which has now resulted in our stronger portfolio of automotive customers.

We are pleased that our technology leadership in this phase has led to our growing presence in automotive industry, which will drive future revenue growth. We continue to have active discussions with other large global automotive manufacturers to extend our partnership, and further strengthen our leadership.

In our vision, there will be hundreds of millions of connected cars in the future, converging with hundreds of millions smartphones, and gives tremendous opportunity to leverage our unique location-based expertise and technology, and our current position in automotive, advertising and mobile industry to capitalize on this trend.

In support of this vision, we announced our another major acquisition today, skobbler, a European based navigation company with the highest rated OSM-based GPS navigation app in the world. skobbler's primary operation are in Germany and Romania. Their mobile apps are available in app stores covering 49 regions and provides users with worldwide map coverage.

The OSM community has considerably doubled year-over-year to more than 1.5 million registered editors, becoming a global community of local editors in every corner of the world. Its crowd-sourced model publishes edits every minute on openstreetmap.org, resulting in maps that are very detailed and up to date, and has become a strong alternative to Google Maps for many developers to use, including companies like FourSquare, Pinterest, (inaudible) and others.

With these acquisitions, Telenav brings together the most successful OSM navigation experts in the world as one team, including the founder of OSM, Steve Coast, who joined Telenav last year, and will continue to be a major contributor to the continued evolution of the world's most comprehensive map of [itself].

We are excited to welcome the more than 80 skobbler employees to Telenav. This includes CEO Peter Scheufen and the other co-founder of skobbler. Before starting skobbler, the co-founders held senior roles at Navigon, which was one of largest GPS device manufacturers in Europe, and eventually purchased by Garmin. In fact, Scheufen served as a CEO of Navigon.

We believe the skobbler team will provide strong industry leading software expertise in location based services, navigation and mapping, and we expect to leverage that expertise across all our (inaudible) products and services, including our automotive and mobile advertising business. Our skobbler acquisition, similar to our Thinknear acquisition, is a part of our overall strategy.

We continue to grow our talent pool at Telenav. We recently hired two new Scout product leaders; Rohan Chandran has joined Telenav as Head of Consumer Products and global services, and Hossam Bahlool has joined Telenav as Head of Automotive products. Rohan joined Telenav from Technorati, where he was Senior Vice President. He was also Head of Consumer Products at Yellow Pages.

Hossam was co-founder of Jingu Apps, the first mobile-only social discovery platform, with more than 50 million downloads. Prior to that, he was a director of product management for BB Messenger at BlackBerry. We are excited to welcome these new additions to our team, and we continue to attract top talent to Telenav.

In summary, we are pleased that the investments we made early on in our automotive business, have led to a partnership with another one of the top five largest global automotive manufacturers. We are also pleased that our acquisition of Thinknear is already contributing meaningful revenue in fiscal 2014. We are excited about the acquisition of skobbler to extend our OSM initiatives, which we believe are important investment areas and we are looking to lower costs and bring differentiated solutions to our customers. We plan to leverage the expertise of our new skobbler team, to strengthen our solutions across all our products and services.

We also understand that, we must keep a focus on profitability, and we will continue to work diligently to make sure that our investments regarding substantial (inaudible) returns to all of our stakeholders.

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

Michael Strambi

Thanks HP. As a reminder, we completed the sale of our enterprise business on April 1, 2013, and its net operating results are reported as income for discontinued operations net of tax as of fiscal 2013, and the remainder of our business is reported as income from continuing operations net of tax.

Let me now discuss results for the second quarter in more detail. These discussions, unless otherwise indicated are for our continuing operations. Revenue in the second fiscal quarter was $37.2 million, which exceeded the guidance we provided. This compares with $44.3 million of revenue in the prior sequential quarter, and $47.2 million in the second quarter of fiscal year 2013. The decrease was a result of the expected continuing decline in our carrier business, including the termination of our Sprint bundle revenue arrangement, effective September 30, 2013.

Revenue from our product business, which primarily consists of the delivery of customized software and royalties earned from our navigation solutions with Ford and Delphi was $18.4 million in the second quarter, down from $19.3 million in the prior quarter and up from $14.5 million in the year ago quarter. The sequential decline as expected, would be primarily to lower revenue from customized engineering services.

Revenue from our services business was $18.8 million, down from $25 million in the prior quarter and $32.7 million in the year ago quarter. The decrease in our services revenue was a result of the continuing pressure on our carrier business, including the termination of our Sprint bundle revenue arrangements. Revenue from our strategic growth areas in the second quarter, which includes automotive, mobile advertising and premium mobile navigation services was $23.1 million or 62% of total revenue in the quarter, compared to $23.4 million or 53% from the prior quarter, and $17.8 million or 38% in the second quarter of last year.

To provide you a little more granularity, automotive revenue was $19.0 million, down from $19.9 million sequentially, and up from $15.1 million year-over-year. The sequential decline was due to the reasons I mentioned earlier, related to lower revenue from customized engineering services.

Advertising and premium revenue was $4.1 million, up from $3.5 million in the prior quarter, and $2.7 million from the prior year. In the second quarter, Ford comprised 46% of revenue, compared to 32% in the year ago quarter. AT&T comprised 26% of revenue, compared to 31% in the year ago quarter.

Gross margin for the quarter was 59%, down from 64% in the prior quarter and down from 63% in the same quarter last year. The decrease in gross margin is consistent with our expectations, based on the combined effect of lower overall revenue and our shift in revenue mix towards automotive, which has lower margins, due to relatively higher map and POI content costs.

Research and development expenses in the quarter were $14.3 million, down from $14.8 million in the prior quarter, and flat with the December quarter of last year. Sales and marketing expenses were $7.9 million, up from $7.8 million in the September quarter and $7.6 million in the same quarter last year. General and administrative expenses were $6.8 million, which compares to $6.0 million in the prior quarter and $7.4 million in the second quarter of fiscal 2013. The sequential increase was related primarily to due diligence costs associated with the skobbler acquisition, as well as slightly higher compensation related costs.

The year-over-year decrease was a result of charges we incurred in the prior year quarter, related to a legal settlement related to a previously disclosed royalty dispute. We experienced a net loss in the second quarter of $4 million or $0.10 per diluted share, as compared to our guidance of a net loss of $4.5 million to $5.5 million or $0.11 to $0.14 net loss per diluted share. This compares to net income of $9,000 or breakeven in the prior quarter, and net income of $418,000 or $0.01 per diluted share for the second quarter of fiscal year 2013. The decrease in net income, which resulted in a net loss for the December quarter, was a result of lower revenue and gross margins, for the reasons I mentioned earlier.

We generated an EBITDA loss of $2.7 million in the second quarter within our guidance, as compared to $3.9 million in profit in the prior quarter and $6.5 million in profit in the second quarter of fiscal year 2013.

Turning to the balance sheet, we continue to be debt free and ended the December quarter with approximately $176 million in cash, cash equivalents and short term investments, and $13.6 million in restricted cash. This compares to $182 million in cash, cash equivalents and short term investments, and $8.6 million in restricted cash, as of the September 30th quarter end. The increase in restricted cash, resulted from the continuation of royalty payments received in advance of [monies owed] from Ford.

This decrease in cash is primarily due to the result of $3.1 million (inaudible) loss of $2.7 million. We ended the quarter with 646 full time employees and increased from 644 at the September 2013 quarter end.

Now on to our outlook; our business outlook for the March quarter is as follows; total revenue is expected to be $34 million to $36 million. Automotive revenue is expected to be approximately 50% of total revenues. Mobile advertising revenue is expected to be approximately 10% of total revenue. GAAP gross margin is expected to be 56% to 57%. Non-GAAP gross margin is expected to be 59% to 60%, and represents GAAP gross margin, adjusted for the add back of the amortization of capitalized software, and developed technology of approximately $1 million.

GAAP operating expenses are expected to be $33 million to $34 million. Non-GAAP operating expenses are expected to be $30 million to $31 million and represents GAAP operating expenses adjusted for the add back of approximately $3 million of stock-based compensation expense. GAAP net loss is expected to be $8 million to $9 million. GAAP diluted net loss per share is expected to be $0.20 to $0.23. Non-GAAP net loss is expected to be $5 million to $6 million and represents GAAP net loss adjusted for the add back of the tax affected impact of approximately $3 million of stock based compensation expense, and approximately $1 million of capitalized software in developed technology amortization expenses.

Non-GAAP diluted net loss per share is expected to be $0.12 to $0.15 and represents GAAP net loss per share adjusted for the add back of the tax effective approximately $3 million of stock based compensation expense and approximately $1 million of capitalized software in developed technology expenses. Adjusted EBITDA loss is expected to be $7 million to $8 million, and represents GAAP net loss adjusted for the add back of approximately $3 million of stock based compensation expense and approximately $2 million of depreciation and amortization expenses, other income expense, and income taxes. Weighted average diluted shares outstanding are expected to be 39 million to 40 million shares.

For the fiscal year ending June 30, 2014, our business outlook is as follows; total revenue is expected to be $149 million to $153 million. Automotive revenue is expected to be approximately 50% of total revenue. Included in this, is royalty revenue, which is expected to grow 30% to 35% year-over-year. Mobile advertising revenue is expected to be approximately 10% of revenue. GAAP gross margin is expected to be 57% to 58%. Non-GAAP gross margin is expected to be 59% to 60% and represents GAAP gross margin adjusted for the add back of the amortization of capitalized software and developed technology of approximately $4 million. GAAP operating expenses are expected to be $123 million to $126 million. Non-GAAP operating expenses are expected to be $111 million to $114 million, and represents GAAP operating expenses adjusted for the add back of $11 million to $12 million of stock based compensation expense.

GAAP net loss is expected to be $21 million to $24 million. GAAP diluted net loss per share is expected to be $0.53 to $0.62. Non-GAAP net loss is expected to be $9 million to $12 million and represents GAAP net loss adjusted for the add back of the tax effective impact of $11 million to $12 million of stock based compensation expense, and approximately $4 million of capitalized software in developed technology amortization expenses.

Non-GAAP diluted net loss per share is expected to be $0.22 to $0.31 and represents GAAP net loss adjusted for the add back of the tax affected impact of $11 million to $12 million of stock based compensation expense, and approximately $4 million of capitalized software in developed technology amortization expenses.

For the full year, our adjusted EBITDA loss outlook has been updated to reflect the costs associated with our acquisition of skobbler and with the resourcing of our new automotive deal. Adjusted EBITDA loss is expected to be $14 million to $17 million and represents GAAP net loss adjusted for the add back of $11 million to $12 million of stock based compensation expense, $7 million to $8 million of depreciation and amortization expenses, other income and expense and income taxes. Weighted average diluted shares outstanding are expected to be 39 million to 40 million shares.

Also, to reiterate what we announced on our earnings press release; as a result of the announced acquisition of skobbler, development costs related to our new top five automobile manufacturer relationship and other uncertainties, Telenav is no longer providing guidance on when it can achieve quarterly breakeven on an adjusted EBITDA basis.

With that, HP and I are available to take your questions. Operator, if you could please open the line for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. We will hear first from Greg Burns with Sidoti and Company.

Greg Burns - Sidoti and Company

Good afternoon.

HP Jin

Good afternoon.

Greg Burns - Sidoti and Company

Had a question about the new auto deal. I just wanted to better understand the scope and the similarities and differences to your existing deals with Ford and Delphi. In particular, just a direct relationship like Ford, and you will be handling all of the navigation for this OEM globally, or is that not the case?

HP Jin

To answer the last one first, it is a direct relationship with OEM, different from deals we have with Delphi, which is kind of tier one. So that's number one. Number two, it is a global deal. It covers like 100 countries. It is also -- most models, cannot say all models. Similar in that sense, this is like a new platform for them to incorporate into almost all of their cars. So its more similar to a Ford deal.

Michael Strambi

I might just add to that Greg, its an embedded and connected relationship, and so the services that will be provided in connection with a -- connection relationship plan works there, will result in some of the revenue being recognized over a period of time, the service period.

Greg Burns - Sidoti and Company

I am sorry, you cut out there. Can you just repeat that?

Michael Strambi

Sure. This relationship includes an embedded solution, similar to what we offer with Ford; but also, what I will refer to, as kind of a Gen-3 concept of connected services, real time data, and in connection with that, those services for which revenue will be derived, could be over a three year period. So not all of the revenue would be recognized upfront, as it would be on a typical embedded arrangement.

Greg Burns - Sidoti and Company

Okay. And in terms of that connected functionality, is that being brought into the cell phone or is that being brought in some other fashion?

HP Jin

It's brought in with -- some how with a connected modem inside the cars.

Greg Burns - Sidoti and Company

Okay. And then, I guess, you kind of alluded to the revenue, when we should start to see that to be recognized. But is the initial, I guess, blowout going to be in one specific geography. Do you have visibility into -- where it will be rolled out initially and then kind of the cadence of how it will be rolled out globally?

Michael Strambi

Yeah. So we are not ready to provide all of those specifics. It is a global launch that will likely be slightly different, depending on the region. Also, it will be a little -- we are cautiously optimistic, and may be a little different than Ford, in the sense that the launch on any given model with Ford was on the first year, that a new model was launched, and details are still being worked out, but we are cautiously optimistic that a launch could be in the mid term of an existing model.

HP Jin

And market will release at once, it is one region at a time.

Michael Strambi

Yeah. There are generally 13 regions, so those details are still to be determined.

Greg Burns - Sidoti and Company

Okay. But more than one at a time? So this could be rolled out faster than Ford has been rolled out?

Michael Strambi

Yeah. We are cautiously optimistic that's how it will play out.

Greg Burns - Sidoti and Company

Okay. And then, in terms of skobbler and what your plans are with Open Street Maps? I understand the cost savings and being able to buy a low cost solution. But what are -- just trying to better understand the functional -- is there any functional advantages to Telenav from using Open Street Maps? Is there any other value that's breeding to Telenav's platform from using Open Street Maps, other than the cost saving?

HP Jin

The advantage of using crowd-sourced kind of data, we can get much more detailed attributed maps, like street details on a park, also like (inaudible) the new Olympic games and areas, and the timeliness of mapping of new regions is also an advantage over Google Maps or traditional map providers.

Greg Burns - Sidoti and Company

Okay. And bringing skobbler --

HP Jin

Another revenue synergy that's out here. The other reason for us to have that, have skobbler, is leveraging their expertise in mapping and navigation technologies, and support our global expansion for auto business. That way, drive the more of these global deals, so the support in each region will be more and more demanding and critical. So I think having a company over there, for our European operation will be a tremendous advantage for us. Go ahead, next question.

Greg Burns - Sidoti and Company

Okay yeah. And then, I guess this is -- also related to the sequential increase in OpEx in your guidance, can you just break down how much is skobbler versus how much is the development of the overall platform for the new OEM and in terms of the OEM development costs, does that ramp up over time, or is it at this level for a number of quarters and it rolls off? I just want to get a sense of the spend relation?

Michael Strambi

Yeah. Well you are absolutely asking the right question. Those are the key drivers. Why our guide is on operating expenses is increasing for the full fiscal year, we are certainly in the planning stages of resourcing for the additional workload involved with this new automotive customer. And then certainly, the cost of integrating skobbler. We are bringing on board 80 new employees to Telenav, and then of course, we continue to hire aggressively in supporting our high growth advertising business. So they are all the key drivers in those OpEx numbers that you see for fiscal 2014.

HP Jin

But regarding -- in terms of the expense for the auto solutions. Of course, its not going to be last forever. Once product development is done, then you don't need to continue to invest as much. We will be in maintenance mode.

Greg Burns - Sidoti and Company

Okay. So is that like a year long -- generally, how long is that product development?

HP Jin

Can be year long. It depends on the product cycle here. Can be year long. And also just to let you know, we are also leveraging a lot of resource on moving away from the (inaudible) support. Its coming here. So we are not really hiring a lot of people for this new deal. We are increasing some, but not a lot, mostly leveraging the internal, existing employees.

Greg Burns - Sidoti and Company

Okay. And on the advertising side of the business, you mentioned about the GeoCookies. Could you just explain how it differs from a typical cookie? How does a GeoCookie work and how do you monetize the information that you are selecting?

HP Jin

Well the (inaudible) advertising we are retargeting on mobile, is -- this (inaudible) solution we are retargeting. Based on your usage, based on your kind of behavior. On the web, you can do that, right, you have cookies there. So for mobile side, GeoCookies is more kind of remembering the history of a particular user. Their history of visiting a particular POI. So then, we don't have to do -- let the real-time geo-sensing based, location targeting. For example, at this moment, user can be at office. But if he has been to Starbucks like three times last week, then if some advertisers, either Starbucks or like Starbucks competitors want to reach those users who have been to Starbucks, we can do that. So it is a tremendous increase of a reach of users, and it also, actually is better targeting; because we kind of understand user more than your location association. Your interest association is also reflected in the history of places you visited.

Greg Burns - Sidoti and Company

Okay. So that's just for users of your mobile map platform, or is it attached to the phone? How is the data collected?

HP Jin

This is not related to our mobile map app. This is through our Thinknear platform, reaching -- we mentioned about reaching 60 billion impression locations -- location enabled impressions. So that's really -- so we do not really use a phone number ID. But with a phone ID, we can associate this history with; because its private and protected.

Greg Burns - Sidoti and Company

Okay. And then, you think you might at some point start disclosing the number of users you have on your mobile platform? Maybe monthly active users, number of downloads, any kind of information around that user base?

HP Jin

Yeah we will, once we are -- that influx of uncertainty from all these -- the international numbers, our internal old brand numbers, the new brand numbers. So we are not in very steady number yet for our branded products. So once we have all clean and nice, then we will disclose that.

Michael Strambi

I might just add Greg that, we are giving specific guidance on our advertising revenue for the third quarter, and going forward, we will be reporting actuals on advertising revenue. They may become other relevant financial metrics, particularly, around that business, that we are giving great thought to disclose again externally as well. Once it becomes that as scale, that's meaningful.

Greg Burns - Sidoti and Company

Okay great. And then, I guess just lastly back to the auto OEM. Do you foresee them, given the scope of the deal, being your largest OEM partner? Was it fully scaled?

HP Jin

Its hard to say at this point, but it will be a large one. But its hard to say, whether it will be the largest one or not. Its also based on timing, right. So at some point may be, its hard to say.

Michael Strambi

We are hopeful. Obviously we see navigation becoming more ubiquitous across the connected vehicle. So we are hoping, even with our existing automotive customers, that we will see take rates grow rapidly. So its an issue of the number of vehicles being produced, when they launch, and as we indicated, Ford will be launching in Europe. So they are going to have a large headstart with a number of units that we are deployed on.

Greg Burns - Sidoti and Company

In terms of the broader auto space, are OEMs leaning more towards platforms like Telenav or towards open platforms, like an Android or an iOS for the car? Do you have a sense of where OEMs are thinking in terms of moving? Obviously this deal is positive for, I guess, the proprietary type of system. But are we seeing a move with more open platforms at all?

HP Jin

I think this is through the content. One, platform-wide, whether its open or closed, it always will be -- very tight controlled by OEMs, because there is a lot of legal issues in the car. So even though its open platform, they will be kind of controlled by OEMs, and that's number one. Number two is, regarding the navigation, the approach right, whether its embedded connected approach, versus purely like brought in with the phone. That I think OEM will always -- our view is, we are deployed in better connected solutions, and that will -- that (inaudible) exist. And it's all a matter of, which one will have higher adoption. In some point, may be 10 years later, maybe 2020, it's hard to predict. But those will be, I think, will be significant numbers. And we play in both ways. We have embedded connected solutions, regardless of a connectivity used, whether you embed it inside the car, use modem or with a phone, with a broadband -- also we have a cloud installation with our mobile phone Scout, so that will work with the cars as well.

So we are in a good position to back on both trends.

Greg Burns - Sidoti and Company

Thank you.

HP Jin

Thank you.

Operator

[Operator Instructions]. And it appears, we have no further questions at this time. Mr. Jin, I will turn the conference back to you.

HP Jin

All right. So let me summarize here. As we have mentioned before, Telenav is undergoing a transitional period, in which we are elaboration 13 years of expertise, in traditional mobile navigation, to expand our automotive and mobile advertising businesses and provide the most accurate and a comprehensive map of the world, through our OSM initiative. This transition has required us to make investments in companies like skobbler, and encourage initial costs, when we win new deals. As a result of this investment, we believe our experience and that the investment we make today will drive significant growth in our top line, bring us back to strong profitability, and diversify our business for long term sustainable growth.

Thank you very much for joining the call.

Operator

Ladies and gentlemen, that does conclude today's conference. Again, we do thank you all for your participation.

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