Telenav's (TNAV) CEO HP Jin on Q1 2018 Results - Earnings Call Transcript

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About: Telenav, Inc. (TNAV)
by: SA Transcripts

Telenav, Inc. (NASDAQ:TNAV) Q1 2018 Results Conference Call November 2, 2017 5:30 PM ET

Executives

Michael Look - Investor Relations

HP Jin - President and CEO

Mike Strambi - CFO

Hassan Wahla - Co-President-Automotive

Analysts

Josh Nichols - B. Riley

Operator

Good day, and welcome to the Telenav First Quarter Fiscal 2018 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Michael Look, Telenav Investor Relations. Please go ahead, sir.

Michael Look

Thank you, operator. I’m pleased to welcome you to Telenav’s conference call to discuss its first quarter fiscal 2018 earnings results. Joining me today are, HP Jin, President and CEO; Mike Strambi, CFO; and Hassan Wahla, Co-President of the Automotive Business. After the market closed today, Telenav issued a press release through GlobalNewswire and published a quarterly commentary on the investor relations section of our corporate website. We encourage listeners to go to our website for a copy of these materials.

During the course of today’s presentation, our executives will make forward-looking statements, including statements regarding, among others, the Company’s expected financial performance for the second quarter of fiscal 2018, 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 results may differ materially. We refer you to the documents we file on the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended June 30, 2017, 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 forecasts for the quarter or any other forward-looking information on this call as a result of new developments or otherwise.

Today, we’ll be discussing our results on a GAAP as well as non-GAAP basis. We use these additional non-GAAP measures as we believe they give useful operating information in addition to the GAAP results. There are a number of limitations related to the use of billings versus revenue calculated in accordance with GAAP.

We compensate for those limitations by providing specific information regarding GAAP revenue and evaluating billings together with revenue calculated in accordance with GAAP, as well as considering whether we are likely to satisfy the criteria required to recognize revenue to convert deferred revenue into revenue and the costs that we will incur over time to provide the services related to the deferred revenue. We provide visibility to investors to understand how we define billings by providing a reconciliation of billings to revenue calculated in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial statements is available in our press release and on our Investor Relations website.

I'll now open up the call for questions, operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Josh Nichols with B. Riley.

Josh Nichols

I just wanted to ask a little bit about any visibility you have with regards to the GM ramp particularly as we start getting into like the second half of the year, I was really into the press release and it does look they are going to release in some new models and in new countries, but any light you could shed on that would be helpful?

Mike Strambi

This is Mike Strambi, Chief Financial Officer. I am happy to try to answer that for you Josh. So we characterize our fiscal year '18 which is commensurate with model year '18 vehicles with most of the auto OEMs is the year where we are ramping up a bit more with General Motors, just to summarize the context of that relationship today we have a relationship that we've had for a few years on the GM RemoteLink product we announced last quarter our launch of a lower end embedded navigation solution in Europe that is extended as we announced in our prepared commentary on four models. We also announced in these remarks that we are on five models in the U.S. and then with the announcement in China for model year '18 vehicles and as we look forward into model year '19 and fiscal year '19, which we expect to survive robust models with General Motors. So fiscal year '19 is really the year with GM where we see the very significant ramp up and expected unit volumes.

Josh Nichols

Thanks and then I wanted to ask like. What are you seeing as far as besides just auto production numbers and sales? But how that's been offset or impacted by navigation takeaways in the U.S., but if you could also broadly provide any commentary about outside of the U.S. or the country's geographic expansion kind of continues?

Mike Strambi

Yes, so with regard to the September quarter, it's not really a perfect proxy for run rates when you look at a full year because the September quarter is generally more seasonably weaker just because of the fact that many of the auto OEM plants will shut down for vacations and holidays or they will be retooling lines for the launch of the next model year. Now generally that's only going to affect those auto OEM relationships where our unit volume is based on production. Now, that's certainly the case with Ford, and so we did have the expected seasonality with regard to our Ford business. Having said that, we did see some encouraging positive impacts from a broadened offering on the Ford Fiesta model in Europe and then as we look forward into the upcoming quarter, we're anticipating as we announced in our earnings release the launch of General Motors in China and then our other, our four top ten auto OEM in China we expect to be launching in the December quarter as well.

Josh Nichols

That's helpful, thank you. And then I was going to ask lastly obviously you know you mentioned in the release that you're in negotiations with Ford, you're expecting a satisfactory outcome but you can't be sure of any structural changes. I guess how does this negotiation compare in your mind relative to the last time around whenever you signed the extension also you know shortly before the contract was expiring.

HP Jin

Hassan, can you comment on that?

Hassan Wahla

Sure, so Josh as we mentioned we are working closely with Ford on the negotiation and if you recall last time we did announce the extension roughly one month before our contract was expiring so with Ford we are actively engaged and going through a very similar process as we did last time.

Operator

[Operator Instructions] And we'll take our next question from Mike Latimore with Northland Capital Markets.

Unidentified Analyst

Hi, this is Rishi for Mike. Thanks for taking my call, have a couple of questions. Ford has discussed its strategy to connect a 100% of its cars in U.S. by like 2019 given you're doing connector navigation there. What percent of cars will you serve like around under or over half?

HP Jin

Is this related to GM or Ford?

Unidentified Analyst

Ford.

HP Jin

Okay, Ford.

Hassan Wahla

Hey Rishi, this is Hassan. So I think for us overall the fact that Ford is making all of its cars connected by 2019 based on their public statement. It is a very positive movement because one of the big challenges we've had at Ford is, we haven't been able to offer a true hybrid or embedded type of solution since the embedded modems weren't there. So as more and more Ford cars become connected, we are going to be able to work with our long term partner Ford to offer more compelling services, which are not only good within automotive industry but can provide even greater value when compared to mobile navigation, things like map updates, IP-based traffic. So while there isn't any one percentage number on what percentage of cars will have embedded connectors, once the cars are connected the overall value to the end consumer increases. So we are excited about that.

Unidentified Analyst

Thanks. And the second question -- so do you plan to use OSM for Ford or GM connected services map info going forward?

HP Jin

Hassan you want to comment or you want me to comment on it?

Hassan Wahla

Ah, yes certainly. So OSM right now we are using OSM for Toyota and we also announced that the new deal we have from Daimler last quarter we're also leveraging OSM. With our other automotive OEMs we are in active discussions on what is the right time to bring OSM to market, but certainly we cannot comment on the timing on exactly when each OEM will be bringing OSM to market but there is a high level of interest and we continue to work on concepts with several OEMs around OSM.

Operator

[Operator Instructions] We have no further questions at this time. I'd like to turn the conference back over to Michael Look for any additional or closing remarks.

Michael Look

Well thank you everyone for joining us today and we look forward to talking to you in the coming weeks.