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TeleNav (NASDAQ:TNAV)
Q2 2020 Earnings Call
Feb 06, 2020, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the Telenav second-quarter 2020 financial results conference call. Today's conference is being recorded. [Operator instructions] At this time, I would like to turn the conference over to Mike Bishop, with the company's Investor Relations. Please go ahead, sir.

Mike Bishop -- Investor Relations

Good afternoon. I'm Mike Bishop, and I lead investor relations for Telenav. I would like to welcome you to our fiscal 2020 second-quarter earnings conference call to discuss the financial results and the overall business performance during the quarter. Joining me today are HP Jin, president and CEO; Adeel Manzoor, chief financial officer; and Hassan Wahla, co-president, automotive.

The format of today's call will be, opening remarks from HP and Adeel, followed by opening the call to your questions. After the market closed today, Telenav issued a press release and published supplemental earnings materials on the Investor Relations section of its website. 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 third quarter of fiscal 2020, 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 and results may differ materially.

We refer you to documents we file with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended June 30, 2019, 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 quarter or any other forward-looking information on 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.

We use these additional non-GAAP measures as we believe they provide 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 these 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 that deferred revenue. A reconciliation of GAAP to non-GAAP financial statements is available in our press release and on our Investor Relations web page.

And with that, I'd like to turn the call over to HP.

HP Jin -- President and Chief Executive Officer

Thanks, Mike, and welcome, everyone, to the call. Telenav had a very strong second quarter with revenue of more than $67 million. A growth of 34% year-over-year. Adjusted EBITDA of positive $7.8 million and positive net income on a GAAP basis of more than $6 million.

The results are evidence of acceleration and our continued strength in the automotive industry. Adeel will cover the detailed numbers later. And I would like to provide an industry update and an operational overview. The connected car market is in the early stages of development.

And there are three major industry trends, driving an accelerated momentum in the connected car space. First, navigation penetration continues to increase, and is a primary application in connected vehicles. And Telenav has the highest market share for navigation software and services in North America. Second, the concept of the in-vehicle infotainment system is expanding beyond simple navigation into a highly integrated, seamless infotainment solution across all interfaces and all connected content types, entertainment, and the driving services.

Telenav's VIVID platform is meant to capitalize on that trend. Third, new business models to monetize the forth screen and the vehicle data are emerging. We believe it will be a $500 billion market, and we are strategically positioned to capture our fair share of the opportunity. Our in-car commerce solution is a pioneer in the industry in this effort, with the evidence of early success, which I will share in a moment.

In order to capture this immense connected car opportunity, we continue to make progress on our three-pillar connected car platform strategy in the second quarter. As a reminder, the three pillars are in-car software and services, in-car commerce and communications, and the road intelligence. For our in-car software and services pillar, we are expanding beyond navigation and have developed an all-in-one infotainment system VIVID. We are exploring opportunities worldwide with aftermarket manufacturers to quickly introduce this product to the market.

We are also working with OEMs to offer our VIVID solutions as our embedded platform along OEMs, the flexibility to customize and retain customer data and relationship. In our platform, second pillar, in-car commerce and communication. The goal is to monetize the forth screen and the big data generated by cars and drivers. A major U.S.

credit card provider estimates the annual in-car commerce opportunity to be $200 billion in the U.S. alone, assuming only one commute per day. In the quarter, we were able to achieve our first ICC in-car commerce win with our Japanese OEM that we expect to launch in fiscal year 2021. For this initiative, we are enabling commerce functionality while driving, including purchasing coffee, gasoline, parking, and food with advanced ordering and quick pickup from restaurants.

I would like to note that this was a competitive bid process, and we won over a competitor that was recently acquired for more than $300 million. Meaning, we have organically developed a highly competitive, valuable asset in the ICC space. We are seeing many more opportunities and are confident about winning more. We believe this food creates significant value for all our shareholders.

To continue building the ecosystem around our platform, we also made a strategic investment in a company called SYNQ3 Restaurant Solutions. A leading service provider, focused on order processing and guest relationships for the restaurant industry, including quick service restaurants. Since we currently have relationships with more than 30 restaurant brands, giving us access to thousands of restaurant locations that tie in with automotive space via Telenav is synergistic to both companies, funding to swift execution. We're actively integrating SYNQ3 for launch with our first ICC OEM customers.

The win I referenced a minute ago. We are focused on building the ICC ecosystem via strategic investments and partnerships and are creating new sustainable revenue streams including in-car arrival ads with our partner inMarket Media and insurance solutions through our other partner, Motion Auto. Again, our strategy for this pillar is to offer value-added innovative solutions to our customers and consumers through strategic investments in innovative companies. Moving on to our third pillar, road intelligence.

We completed the Grab transaction in January, and now owns a minority equity stake in Grab. We're exploring additional sizable opportunities with other ride-hailing companies across the globe. The goal for this pillar is to leverage our AI technology to derive useful insights from cost sensor data and serve customers across multiple industries beyond just auto OEMs. Next, I'll share key accounting updates.

We continue to ramp up in GM, General Motors, included in their newest models. Telenav is included on GM's newest marquee launch, the Cadillac Escalade, which is one of the best-selling luxury SUVs in the world. The new model includes the latest technology from Telenav and the functionality on GM's unique form factor of super wide-curved OLED display. We expect to see additional models roll out with Telenav software as our current contract with GM extends through 2025.

Ford remained our largest customer in our second quarter. We are contractually Ford's preferred navigation supplier in North America for next-gen Sync, which is a plan to launch later this year. We expect to have the majority of navigation market share in Ford North America portfolio, which includes the best-selling pickup truck, the F150. In summary, I'm very pleased with another solid quarter by achieving a five-year high in revenue, GAAP net income and non-GAAP adjusted EBITDA.

I'm very confident of our midterm financial performance with a large backlog of $1 billion as a solid foundation. And excited about the momentum we are creating with our three-pillar connected car platform strategy for long-term growth, especially with our first in-car commerce win with the Japanese OEM. I will now turn the call over to Adeel for a quick overview of the financial results.

Adeel Manzoor -- Chief Financial Officer

Thank you very much, HP. Although, I'll be making brief comments about the numbers, please refer to our earnings deck and the press release for the detailed financial statements. I'll be referencing the slides from our earnings presentation to better highlight our performance in the past quarter. Starting with slide number four.

I would like to talk about key highlights for the quarter. The main points are, first, we delivered another solid quarter and remain focused on creating value for our shareholders over the long term. In Q2 '20, we had five-year high revenue and positive adjusted EBITDA. That, too, on the heels of a six week-long strike at GM.

We grew revenue by 34%, while expanding our GAAP gross margin by eight points year-over-year. Second, we exited the quarter with a record high cash position of $129 million in cash, cash equivalents and short-term investments. This is a lack of any share repurchases and equity investments that we made in the quarter. Our current cash balance at the end of the quarter, represented over half of Telenav's market gap.

This does not include the $20 million we have in equity investments in multiple companies. Third, Telenav has tremendous value under our current contracts with the group existing customers. Our current estimate is approximately $1 billion in backlog from existing customer engagements. Last but not the least, we continue to make progress on our strategy, evident from some major wins and milestones we ended up hitting in the past quarter.

Number one, the first ICC win with Japanese OEM. Number two, the agreement with Sync 3 to get instant access to thousands of restaurants; and number three was the partnership with Motion Auto to provide insurer solutions. Looking at slide number six. In Q2 '20, our revenue increased 34% year-over-year to $67.3 million from $50.2 million a year ago.

This is a significant increase year-over-year. The main drivers of our remarkable performance year-over-year and of the performance versus the guide or the continued ramp within GM, grab revenue in the quarter. Broad-based automotive strength, including our Shanghai GM, and we executed better than anticipated and closed a vendor contract in Q2 that we originally expected to close in Q3 '20. Total non-GAAP billings in the second quarter of fiscal 2020 were $64 million, a 14% increase year-over-year, compared with $57 million in the second quarter of fiscal 2019 primarily driven by continued ramp in GM, including year-over-year volume increases in Shanghai GM.

Account level mix is trending as we expected as GM continues to ramp up, in Q2, Ford was 42% of revenue and 51% of billings, while GM was 34% of revenue and 34% of billings. GAAP gross margin as a percent of revenue for the second quarter of fiscal 2020 was strong at 49.9%, compared with 42.4% in the second quarter of fiscal 2019. Gross profit increased to $33.6 million in the second quarter of fiscal 2020. A 58% increase, compared with $21.3 million in the second quarter of fiscal 2019.

The improvement in gross margin was primarily driven by the graph transaction. Moving on to the operating expenses. Total GAAP operating expenses in the second quarter of fiscal 2020 were $28.3 million, compared with $25.8 million in the second quarter of fiscal 2019, down nine points year-over-year as a percent of revenue, but up 10% year-over-year in absolute dollars, mainly due to increase in compensation and benefits and strategic headcount investments. Income from operations for the second quarter of fiscal 2020 was $5.3 million, compared with a loss of $4.5 million in the second quarter of fiscal 2019.

The year-over-year improvement in the operating profit was primarily due to the increased revenue and strong gross margins. While our gross margin was significantly higher this quarter. We expect it to return to the trend line developed in recent quarters. Likewise, net income turned to profit in the second quarter of fiscal 2020 at $6.5 million, compared with a net loss of $4.6 million for the second quarter of fiscal 2019.

The year-over-year improvement was primarily due to the increased revenue, gross margin, profit and other income and expense, which we achieved positive adjusted EBITDA, a non-GAAP measure of $7.8 million for the second quarter of fiscal 2020, compared with a loss of $1 million for the second quarter of fiscal 2019. Adjusted EBITDA in Q2 '20 was a five-year high, and it benefited from the GM brand, opex favorability and the Grab transaction. Given the strong performance of the company in the quarter, cash was also a high point. In the second quarter of fiscal 2020, we generated a non-GAAP free cash flow of $12 million.

Overall, our cash and cash equivalents position improved in the quarter to $129 million as of December 31, 2019, an increase of $7.2 million versus the $122 million reported in the first quarter of fiscal 2020 and an increase of $29.5 million from $99.5 million on June 30, 2019. This quarter end, cash balance of approximately $129 million was net of approximately $4 million in cash that we used to repurchase 767,000 shares. Our large cash business position of $129 million, combined with the value of our equity investments of $20 million represented approximately 65% of market cap at the end of the quarter. We continue to expand our footprint of connected cars.

Our total connected card installed base increased to more than 17 million, up 46% year-over-year, and we shipped 1.3 million connected cars within the second quarter. Our overall installed base reached 27 million cars, up 28% year-over-year. This large installed base provides yet another significant opportunity for us to explore. Looking at slide number seven.

We saw encouraging momentum in both products and services revenue in the past quarter, up 31% and 54% year-over-year. Services represented 18% of our total revenue mix versus 15% in the prior year and 15% in the prior quarter. Mix of services business view year-on-year. Services revenue is a standard component of our contracts with OEMS, and we expect it to continue to be a healthy portion of our revenue going forward.

Generally speaking, we continue to expect services revenue to be in the range of 15% to 20% of total revenue for the balance of fiscal year 2020. Services is an area of focus for us, and we intend to grow into over the next three years to further increase our recurring revenue stream. Referencing slide number nine. When we look at our existing customer engagements, we continue to see a healthy backlog of approximately $1 billion.

Backlog is composed of forecasted unit volume-based on OEM projections, deferred revenues and management estimates. We expect to recognize approximately 75% of our backlog over the next three and a half years from the second half of fiscal '20 through fiscal '23, which provides us a line of sight into sustainable revenue streams. Please note that our estimate of backlog is purely based on existing customer engagements and does not include any new expected revenue streams, including any new OEMS, in-car commerce, OPTIMA market riveters or auto insurance. I'm very pleased with our overall execution and operational settlement in the past quarter, and we see the following six opportunities in the short to medium term.

Number one, in-car commerce, it's a huge opportunity for us, and we are just getting started with our first customer win. Number two, aftermarket with our all-in-one VIVID solution located the untapped millions of cars in the aftermarket channel. Number three, exploring meaningful Grab like opportunities across the globe, focusing on ride-hailing companies. Number four, VIVID as an embedded platform with OEMs, allowing them the flexibility to customize and retain customer data and relationship.

Number five, increase our share within Ford. Number six, TNAV's large and growing installed base and the opportunity to monetize it with creative offerings such as white label auto insurer solutions. Moving on to slide number 11 and looking at the third quarter. In the current forecast, we assume that GM will return to a normal run rate coming out of the strike impacted second quarter.

Secondly, our current estimates as used business as usual and no material impact from the coronavirus. For Q3, we expect total revenue to be $61.5 million to $63.5 million. Billings are non-GAAP measure to be between $62.5 million to $64.5 million. GAAP gross margin to be within 42% to 44%.

GAAP operating expenses to be between $29 million to $31 million. GAAP net income to be between $4.5 million to $6.5 million. Adjusted EBITDA, a non-GAAP measure to be within negative $1.5 million to positive $0.5 million. For the full-year 2020, we expect to be adjusted EBITDA positive.

With that, I will open up the call for your questions.

Questions & Answers:


Operator

[Operator instructions] We'll take our first question from Josh Nichols from B. Riley FBR. Your line is open. Please go ahead.

Mike Bishop -- Investor Relations

Hey, Josh.

Operator

One moment, please.

Mike Bishop -- Investor Relations

Hey, Josh. Are you there?

Operator

One moment. I'm opening Josh's line now. Josh, your line is open. Please go ahead.

Josh Nichols -- B. Riley FBR -- Analyst

Sorry, it looks like we had a little bit of technical difficulties for a second, but it looks like from back on. Great. And congratulations on the company's first, like, Japanese OEM for the -- this in-car commerce. I realize that's not going to be ramping until fiscal '21.

But could you kind of give us the framework for what the economics look like on these type of deals, and how material they could be to the company going forward?

Adeel Manzoor -- Chief Financial Officer

So, Josh, I'll start and then probably HP can chime in. So Josh, ICC, overall, it's a big opportunity for us. And I think as HP said in his opening remarks, it's a massive opportunity. One of the U.S.

-- major U.S. credit card provider, they had a study on just one single trip from home to office. Just one single trip. And their estimate is, on average, in the U.S., that equates to about $200 billion.

Just that one single trip. So I think the art of possibility is pretty large. What we are doing is, right now, the focus, Josh, really is on building the ecosystem, getting down to the things that we want to offer to our customers to give them a delightful experience. I think that the monetization of how this would pan out and how big that would be, it's too early to quantify and share.

HP, would you add anything?

HP Jin -- President and Chief Executive Officer

In agreement.

Josh Nichols -- B. Riley FBR -- Analyst

And then, I guess, how much confidence do you have in the company's ability to really expand the VIVID platform into these more entry-level vehicles that are 60% to 70% largely kind of unpenetrated or using a type of broader navigation solution.

HP Jin -- President and Chief Executive Officer

So, right now, our strategy on the VIVID product is to start with aftermarket first. So there are still tens of million vehicles without a good infotainment system on it, so that's our first target. And we also like to use that as a way to quickly iterate, to improve the usability performance to get to MPI 70, that's our internal goal. And then after that, we offer the platform to OEMs to allow them to get into, basically, across all tiers: high end, low end, mid end.

And we also will offer the new business model, together with in-car commerce and others to allow them to monetize on that experience as well. So we are pretty confident. I mean that's our very strategic bet in terms of expanding beyond just navigation and with our rich experience plus new business model. So we're very confident in penetrating in all classes.

Adeel Manzoor -- Chief Financial Officer

So just to add to this, Josh. I think -- so just to add Josh, I know HP sounded well. But I think you have -- while you are thinking about different classes and different levels of models, be it entry, mid or high end, but you also think beyond just embedded into aftermarket as well. Because we are not only going after all categories that HP said within the embedded solution as an all-in-one play, which would include navigation, infotainment, entertainment, ICC, which is in-car commerce, but also think beyond embedded into aftermarket because it's a big opportunity for us.

There are millions of cards out there that we can go tap on with our VIVID offerings.

Josh Nichols -- B. Riley FBR -- Analyst

And then any framework you could provide about, since you did mention, one, the aftermarket opportunity and also the company's previously mentioned experienced footprint more into China given the much larger vehicle sales there and kind of talk about the opportunity and how you see that playing out potentially?

HP Jin -- President and Chief Executive Officer

Let's talk about VIVID and then to China. So the VIVID we are -- as I mentioned about aftermarket trial or the first launch, we are doing that at the same time in China market and U.S. market. So that's coming soon to test out the market and allow us to learn, iterate, and then promote that to OEM customers.

So the opportunity is still there. It is still exciting and we are attacking those two markets in the same way.

Josh Nichols -- B. Riley FBR -- Analyst

Thanks. And then could you talk about where the company stands right now as far as its penetration with GM? I know several quarters ago, you mentioned you're still in the single digits, but where that -- where you think that stands today and where that could go?

HP Jin -- President and Chief Executive Officer

So do you want to go?

Adeel Manzoor -- Chief Financial Officer

Yeah. I'll take it. So you're right, Josh. I think that in the past, we have said it's single digits.

But if you look at it today, I think it's maybe in the low 20s is the current penetration rate with GM. And I think we continue to ramp with GM, and you can look at our results. And Hassan is on the call as well. Hassan, do you want to add something to the band rate?

Hassan Wahla -- Co-President, Automotive

No. I think, Adeel, you have summed it up well. We are still ramping up. And I think a lot of the vehicles that we're launching in this fiscal year, and we'll start to see a bigger impact in the upcoming quarters.

HP Jin -- President and Chief Executive Officer

I guess, we just add advancement. I don't know whether you saw that the latest Cadillac Escalade is unveiled today, Tuesday. Right?

Adeel Manzoor -- Chief Financial Officer

Tuesday, yeah.

HP Jin -- President and Chief Executive Officer

So we are on that as well. That is also one of the good selling cars.

Josh Nichols -- B. Riley FBR -- Analyst

Great. Yeah. And I would imagine that the attachment rates on that are close to 100%. Right? On higher-end vehicles like that.

I would -- last question for me, and then I'll pass the torch. I -- just housekeeping, I think you mentioned it. Could you say or repeat again, what the percentage of revenue and billings was for Ford and GM for the quarter, please?

Adeel Manzoor -- Chief Financial Officer

Yeah. So the mix for the GM for the Ford was 42% of revenue and 51% of billing. And GM was 34% of revenue and 34% of billings.

Josh Nichols -- B. Riley FBR -- Analyst

Great. Thanks, guys. I'll pass the torch, and great to see the positive EBITDA guidance to your back.

Adeel Manzoor -- Chief Financial Officer

Thank you.

Operator

[Operator instructions] We'll take our next question from Ryan Sigdahl from Craig-Hallum Capital Group. Your line is open. Please go ahead.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Hey, guys. So first question for me, and maybe I missed it, kind of in the prepared remarks, but you guys exceeded your previous revenue guidance by $11 million. You noted some things, continued ramp of GM, Grab revenue, automotive strength. I mean, all that stuff seemed known at the time, I guess.

What exactly is that upside driven by?

Adeel Manzoor -- Chief Financial Officer

So maybe I'll take this. So if you look at our revenue, we delivered about $67 million, what we guided for the quarter was $55 million to $57 million. So it's roughly speaking, about $9 million to $10 million overperformance versus the guide. So the right way to think about it, they're like two components that grow the favorability versus our guidance.

So, number one, really is we were in the process of negotiating an amendment with one of our vendors. A vendor that we have been working with for a long time. And, basically, their solution shows up in our solution, overall solution of the combo. That was in the process of negotiation.

But as you know, in the normal course of the business, as you are negotiating better terms or amendments, you continue to ship. Right? You continue to solve. That vendor agreement was originally planned to be closed in Q3, but we executed better than we thought, and it got closed in Q2 '20. So that became the factor number one for overperformance relative to guide.

The number two was really the broad-based strength that we saw, especially in our Shanghai General Motors. We saw -- units came in better than what we thought. So the combination of the two helped us exceed our guidance.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Are you able to quantify what the amendment with the long time vendor? How much that contributed to the upside?

Adeel Manzoor -- Chief Financial Officer

I would say that amendment -- I would say, roughly -- I would say about 2/3 is the right way to think about.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

And just to be clear, was that in billings -- was that billed previously? Because billings beat by $3 million and revenue beef up by...

Adeel Manzoor -- Chief Financial Officer

So that's right. So not all of it was billable. Not all of it got billed in Q2. Some of it was already billed, but the revenue was in Q2 because a portion of it was a catch-up.

Because we, as I said, we continued to ship and then we recognized in the quarter.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Got it. And if we shift over to Q4 or Q3 guidance. Billings are expected to be down a million at the midpoint quarter-over-quarter despite, I mean, with GM ramping, as well as not having the UAW strike, which hit production this quarter. I guess, what's causing that decrease there?

Adeel Manzoor -- Chief Financial Officer

So I think it's tied to your previous question. Because if you look at what we are guiding for the quarter, and I think you said that it's about $1 million drop but in Q2, we have the benefit of this catch-up from a vendor contract. Right? And if you normalize for that vendor contract catch up, billings is actually they are growing quarter-over-quarter into Q3.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Got it. So the billings from the amendment was -- there was some billings in the quarter. It just feels like, billing should drill a lot more than that, given kind of the situation with GM.

Adeel Manzoor -- Chief Financial Officer

Yeah. So I think to GM, as you mentioned. Right? So it's really the two pieces. Right? One is really this benefit of the contract in Q2, but then you have the GM graph in Q3, coming off of a strike impact the quarter.

So the net of those two is what you see is the guidance, center-weighted guidance. And it is really about $1 million, down quarter-over-quarter.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

OK. Switching over to the $1 billion backlog, impressive number there. You expect to convert 75% of that backlog over the next three and a half years. It implies that math is $215 million in annual revenue, which is quite a bit below the current run rate with GM ramping as well.

So I guess, what does that backlog include for GM and Ford assumptions?

Adeel Manzoor -- Chief Financial Officer

So the GM and forward assumptions, it's basically the current contracts that we have in place. So as we said, the computation or the estimation of the backlog included three things in it. One is really the estimates, EDI that we get from our vendors, such as the Ford or GM. And then what we do is we apply management estimates on top of it, plus we have deferred revenue sitting on our balance sheet.

And what you have to believe over the next three and a half years in terms of what kind of billings you will get and would get added to the deferred revenue. So some of those three pieces resulted in this $1 billion, and this is just Ford and GM. And the current contracts are in place, nothing new, it does not include anything about the in-car commerce play that we talked about or the win we talked about. This does not assume anything about aftermarket debit opportunities that we're talking about.

This does not include any new OEMs that we may win over the next couple of years. So it is just the existing customer engagements.

HP Jin -- President and Chief Executive Officer

Even with a Ford, we only assumed the contract that we have, which is only for until 22. So the 23%, that's not even counted yet for this new generation, I think. So forth will -- can potentially have a higher total revenue potential than the backlog indicates.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Yeah. OK.

Adeel Manzoor -- Chief Financial Officer

And then this was also...

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Yeah. Go ahead.

Adeel Manzoor -- Chief Financial Officer

Go ahead. Go ahead.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

No, finish it off, I have something else to add.

Adeel Manzoor -- Chief Financial Officer

No, no. I think HP sounded well. I think it's also -- and in our estimation, we just relied on our existing arrangements that we have with the customers. And, basically, that also assumed some would ramp down, some would stay flat.

And then the mix of all that is really over the years, it generates $1 billion number.

HP Jin -- President and Chief Executive Officer

And the way to think about it is it set the floor for us as a foundation for us to even grow more. So the purpose of the business today, the distance is grow beyond that. Right? That is a pure just delivery thing. And then with that $1 billion if you think about gross margin out of that that is much bigger than the value of the market cap of the company today.

But we are here to build a lot more value on top of it, including GM. We are working on new opportunities within GM and Ford, which will be on top of the backlog.

Adeel Manzoor -- Chief Financial Officer

And I think, just to add to HP's comments and thoughts. This is a non-GAAP measure. Right? And this was something that we saw -- it has tremendous value for Telenav, and I think it's one of the metrics that's so underappreciated. And when we saw the value in our existing customer engagements, we thought we should share it with our current not only current but also potential investors because they need to see it.

These are the numbers that even if we just show up to work nine to five, this is the floor. Right? No new business. This is how we would look like over the next three to four years.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Got it. And so when you say floor, there's no termination potential or anything like that with those agreements? Those are booked and in hand?

Adeel Manzoor -- Chief Financial Officer

No. There's always risk for termination.

HP Jin -- President and Chief Executive Officer

This is very minimum. I mean, this is the one we have in hand already.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

OK. Just one final one for me. You mentioned forward through 2022. You also said in your prepared remarks, I didn't quite catch it, but you said the F-Series that you're on the next-generation, I believe, with the connected embedded navigation.

So presumably that's -- is that an award that you have well beyond 2022 effectively? Or I guess, what was the commentary on the F150?

HP Jin -- President and Chief Executive Officer

Well, the current contract, actually, the one we are delivering this year is their next-generation product. So we are a preferred supplier of their next-gen Sync. Right? So that's actually the contract we have today is for '21, '22, just the way they do contract. But this Sync -- this is Sync, next-gen Sync will last more than -- beyond '22.

However, the contract is only covered until '22.

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

Got it. Thanks, guys. I'll pass it on. Good luck.

HP Jin -- President and Chief Executive Officer

Thank you.

Operator

Thank you. It appears there no further questions at this time. I'd like to turn the conference back to the management for any additional or closing remarks.

Mike Bishop -- Investor Relations

Thank you. I would like to thank everyone for participating in today's second-quarter fiscal 2020 financial results call. We appreciate your continued support. You may now disconnect.

Duration: 42 minutes

Call participants:

Mike Bishop -- Investor Relations

HP Jin -- President and Chief Executive Officer

Adeel Manzoor -- Chief Financial Officer

Josh Nichols -- B. Riley FBR -- Analyst

Hassan Wahla -- Co-President, Automotive

Ryan Sigdahl -- Craig-Hallum Capital Group LLC -- Analyst

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