TeleNav 2015 Annual Report Download - page 30

Table of Contents
Our lengthy sales cycle makes it difficult for us to predict when we will generate revenue from automobile manufacturer and OEM
customers.
Being selected to participate and being designed into new vehicle models is a lengthy and time consuming process and our navigation
services platform may not be included for factors beyond our control if we are participating in the vehicle design with an OEM. Because of these
lengthy cycles, we may experience delays from the time we begin the sales process and incur increased costs and expenses to obtain a partner as
a customer and integrate our navigation services platform until the time we generate revenue from such wireless carrier, OEM or automobile
manufacturer. These delays may make it difficult to predict when we will generate revenue from new customers. For example, we entered into
an agreement with GM in January 2014, but we do not anticipate generating meaningful revenue related to the distribution of our embedded and
connected navigation solutions in vehicles under this agreement until certain model year 2017 vehicles come to market. While we may launch
brought-in services, such as GM’
s OnStar RemoteLink application and Toyota's Scout GPS Link, more quickly, we may not be able to recognize
a significant portion of the revenue we generate from those services if we have obligations to provide support for a long period of time. Although
we may develop usage data to support a more rapid revenue recognition for those services, we may not have sufficient evidence to support
earlier revenue recognition.
A large percentage of our research and development operations are conducted in China and Romania, and our ability to introduce new
services and support our existing services cost effectively depends on our ability to manage those remote development sites successfully.
Our success depends on our ability to enhance our current services and develop new services and products rapidly and cost effectively. A
majority of our research and development personnel are in China and Romania. Although we have sought to retain certain key personnel, we
may be unable to retain them over the long-term. In addition, we have been experiencing significant increases in compensation costs in China
due to competitive market conditions for qualified staff, as well as higher risk of employee turnover in certain China markets.
We also expect that we may continue to consolidate certain of our operations or reduce our workforce if we are unable to continue to
replace wireless carrier revenue with other sources of high gross margin revenue. These reorganizations or reductions in force could result in
unexpected costs or delays in product development that could impair our ability to meet market windows or cause us to forego certain new
product opportunities.
Because our long term success depends on our ability to increase the number of end users located outside of the United States, our business
will be susceptible to risks associated with international operations.
As of June 30, 2015 , we had international operations in China, Romania, Germany, Mexico and Japan. Our experience with wireless
carriers, automobile manufacturers and OEMs and advertisers outside the United States is limited. Our revenue from customers in the United
States comprised 96% and 94% of our total revenue for fiscal 2015 and 2014 , respectively. However, our automotive navigation products are
distributed globally in many different regions outside the United States, including South America, Europe, Asia, Australia, China and New
Zealand. Our limited experience in operating our business outside the United States increases the risk that our current and future international
expansion efforts may not be successful. In particular, our business model may not be successful in particular countries or regions outside the
United States for reasons that we currently do not anticipate. In addition, conducting international operations subjects us to risks that we have not
generally faced in the United States. These include:
•
fluctuations in currency exchange rates;
•
unexpected changes in foreign regulatory requirements;
•
difficulties in managing the staffing of remote operations;
• potentially adverse tax consequences, including the complexities of foreign value added tax systems, foreign tax withholding,
restrictions on the repatriation of earnings and changes in tax rates;
•
dependence on foreign wireless carriers with different pricing models;
•
roaming charges to end users;
•
availability of reliable mobile networks in those countries;
•
requirements that we comply with local telecommunication regulations and automobile hands free laws in those countries;
•
the burdens of complying with a wide variety of foreign laws and different legal standards;
•
increased financial accounting and reporting burdens and complexities;
•
political, social and economic instability in some jurisdictions;
•
terrorist attacks and security concerns in general; and