Automotive Navigation Net Revenues Increased by 62.6% Year-Over-Year
Company Raises Guidance for Full Year 2010
BEIJING, Nov. 17, 2010 (GLOBE NEWSWIRE) -- AutoNavi Holdings Limited ("AutoNavi" or the "Company") (Nasdaq:AMAP), a leading provider of digital map content and navigation and location-based solutions in China, today announced its unaudited financial results for the quarter ended September 30, 2010.
Third Quarter 2010 Highlights
- Net revenues in the third quarter of 2010 were $24.0 million, an increase of 47.6% year-over-year from $16.3 million in the third quarter of 2009.
- Gross profit in the third quarter of 2010 was $16.9 million, an increase of 48.4% year-over-year from $11.4 million in the third quarter of 2009.
- Operating income in the third quarter of 2010 was $7.7 million, an increase of 16.3% year-over-year from $6.6 million in the third quarter of 2009.
- Net income attributable to AutoNavi shareholders was $6.2 million in the third quarter of 2010, an increase of 16.4% year-over-year from $5.3 million in the third quarter of 2009.
Year-to-Date 2010 Highlights
- Net revenues in the first nine months of 2010 were $62.7 million, an increase of 51.3% year-over-year from $41.5 million in the first nine months of 2009.
- Gross profit in the first nine months of 2010 was $42.5 million, an increase of 53.5% year-over-year from $27.7 million in the first nine months of 2009.
- Operating income in the first nine months of 2010 was $16.6 million, an increase of 38.3% year-over-year from $12.0 million in the first nine months of 2009.
- Net income attributable to AutoNavi shareholders was $13.3 million in the first nine months of 2010, an increase of 46.3% year-over-year from $9.1 million in the first nine months of 2009.
"We delivered a strong set of results in the third quarter driven by exceptional sales in our automotive navigation business with net revenues for this business line increasing by 62.6% year-over-year," said Mr. Congwu Cheng, AutoNavi's chief executive officer. "We remain highly optimistic about the prospects of our wireless and internet business line, as we are well-positioned to identify and take advantage of new opportunities in this emerging market. This past quarter also marked the beginning of a long-term, strategic partnership with TomTom - one which will allow us to enhance our global presence as a leading provider of digital map content and navigation solutions in China."
Third Quarter 2010 Results
Revenues
Net revenues in the third quarter of 2010 were $24.0 million, representing an increase of 47.6% year-over-year from the third quarter of 2009 and 8.4% sequentially from the second quarter of 2010.
Automotive Navigation
Net revenues from the automotive navigation market in the third quarter of 2010 were $17.8 million, an increase of 62.6% year-over-year and 7.1% sequentially. The increases were mainly due to increases in the number of copies of digital map data licensed for use in in-dash navigation systems, which is directly linked to the number of vehicles sold in China that are equipped with these systems.
Public Sector and Enterprise Applications
Net revenues from the public sector and enterprise applications market in the third quarter of 2010 were $3.3 million, a decrease of 14.7% year-over-year and an increase of 60.4% sequentially. The year-over-year decrease in revenues was mainly due to a decrease in revenues from the aerial photogrammetry business, partially offset by an increase in revenues from the enterprise solutions business. The year-over-year decrease in revenues from the aerial photogrammetry business was primarily attributable to a relatively large portion of revenues in the third quarter of 2009 associated with the central government's second national land survey project. The year-over-year increase in revenues from enterprise solutions was largely due to an increased number of new contracts that were entered into over the second and third quarters of this year. The sequential increase in revenues from the public sector business was primarily a result of better progress made on the Company's contracted aerial photogrammetry projects in the third quarter of 2010, as compared with the project delays in the previous quarter caused by unfavorable weather conditions. The sequential increase in revenues from the enterprise solutions business was mainly due to new contracts that were entered into in the third quarter of 2010.
Wireless and Internet Location-based Solutions
Net revenues from the wireless and Internet location-based solutions business in the third quarter of 2010 were $2.6 million, an increase of 87.7% year-over-year and 2.4% sequentially. The increase in revenues derived from pre-installing the Company's navigation solutions on certain mobile phone models as well as from the Internet map application business continued to drive the year-over-year revenue growth.
Cost of Revenues
Cost of revenues in the third quarter of 2010 was $7.1 million, representing an increase of 45.6% year-over-year and a decrease of 4.6% sequentially. The year-over-year increase was largely attributable to an increase in direct production costs as well as an increase in salary and benefit expenses, which rose as a result of the expansion of the Company's data collection and processing work force as the Company continued to enhance the quality, coverage and depth of its digital map database. The sequential decrease was primarily due to higher production costs associated with 3D digital city models in the previous quarter, partially offset by the increase in direct production costs and salary and benefit expenses.
Gross Profit and Gross Margin
Gross profit in the third quarter of 2010 was $16.9 million, an increase of 48.4% year-over-year and 15.1% sequentially. Gross margin, or gross profit as a percentage of net revenues, was 70.3% in the third quarter of 2010, compared to 69.9% in the year-ago period and 66.2% in the previous quarter.
Operating Expenses
Total operating expenses in the third quarter of 2010 were $9.2 million, an increase of 84.1% year-over-year and 23.6% sequentially. Non-GAAP operating expenses, which exclude share-based compensation expenses, were $8.5 million, an increase of 97.0% year-over-year and 30.6% sequentially.
Research and development ("R&D") expenses increased by 135.1% year-over-year and by 37.2% sequentially to $3.9 million. The increases were primarily due to higher salary and benefit expenses and outsourced development expense to improve the efficiency of the Company's technology platform and expand its technological capabilities. Non-GAAP R&D expenses, which exclude share-based compensation expenses, increased by 139.3% year-over-year and by 53.1% sequentially to $3.5 million.
Selling and marketing expenses increased by 92.3% year-over-year and by 10.8% sequentially to $2.4 million. The year-over-year increase was primarily due to increased travel and marketing activities associated with promoting the Company's solutions, higher salary and benefit expenses as a result of an increased sales headcount as well as an increase in share-based compensation expenses. The sequential increase was mainly attributable to higher marketing expenses and salary and benefit expenses in comparison to those in the second quarter of 2010. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased by 80.2% year-over-year and by 15.1% sequentially to $2.1 million.
General and administrative expenses increased by 40.0% year-over-year and by 19.3% sequentially to $3.0 million. The increases were primarily due to the increase in professional service expenses and salary and benefit expenses, which were partially offset by lower share-based compensation expenses in the third quarter of 2010. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, increased by 71.4% year-over-year and 20.8% sequentially to $2.8 million.
Operating Income and Operating Margin
Operating income in the third quarter of 2010 was $7.7 million, an increase of 16.3% year-over-year and 6.4% sequentially. Operating margin, or operating income as a percentage of net revenues, was 32.0% in the third quarter of 2010, compared to 40.6% in the year-ago period and 32.6% in the previous quarter.
Non-GAAP operating income, which excludes share-based compensation expenses, in the third quarter of 2010 was $8.5 million, an increase of 14.3% year-over-year and 1.9% sequentially. Non-GAAP operating margin, or non-GAAP operating income as a percentage of net revenues, was 35.2% in the third quarter of 2010, compared to 45.5% in the year-ago period and 37.5% in the previous quarter.
Change in Fair Value of Forward Contract
In the third quarter of 2010, the Company engaged a bank to convert certain amount of U.S. dollars into Japanese Yen and made a one-year fixed interest rate Japanese Yen deposit with the bank. Furthermore, the Company entered into a forward contract with the bank to convert the Japanese Yen deposit back into U.S. dollars upon the expiration of the one year term at a pre-determined exchange rate. The forward contract was accounted for under derivative accounting, which requires the changes in fair value of the forward contract at each period end be recorded in the statement of operations. For the third quarter of 2010, the Company recorded a loss of $1.3 million in change in fair value of forward contract.
Net Income Attributable to AutoNavi Shareholders
Net income attributable to AutoNavi shareholders in the third quarter of 2010 was $6.2 million, an increase of 16.4% year-over-year and a decrease of 0.1% sequentially. Diluted net income per American depositary share ("ADS") attributable to AutoNavi shareholders for the third quarter of 2010 was $0.12. One ADS represents four ordinary shares.
Non-GAAP net income attributable to AutoNavi shareholders, which excludes share-based compensation expenses, in the third quarter of 2010 was $7.0 million, an increase of 2.1% year-over-year and a decrease of 4.3% sequentially. Diluted non-GAAP net income per ADS attributable to AutoNavi shareholders for the third quarter of 2010 was $0.14.
Cash Flow
Net cash provided by operating activities was $7.7 million for the third quarter of 2010. As of September 30, 2010, the Company had $153.7 million in cash and term deposit.
Recent Business Updates
TomTom Joint Venture
In October 2010, AutoNavi announced a joint venture with TomTom, the world's leading provider of location and navigation solutions. The joint venture is 51% held by AutoNavi and 49% held by TomTom. The partnership provides AutoNavi the opportunity to expand its relationships with international automakers, system integrators and global handset makers, allowing the Company to further grow its business in automotive navigation as well as wireless and Internet location-based solutions.
Office Building Purchase
In September 2010, the Company made full payment for an office facility in Beijing with total office area of approximately 4,900 square meters for a total cash consideration of approximately $20 million. The office facility will serve as the Company's new headquarters to accommodate its on-going expansion. The new office is expected to be put into use in the second quarter of 2011.
Business Outlook
The Company estimates that its net revenues for the full year of 2010 will be approximately $80 million, an increase of approximately 40% on a year-over-year basis.
Conference Call Information
AutoNavi management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on November 17, 2010 (9:00 p.m. Beijing/Hong Kong Time on November 17, 2010) to discuss results and highlights from the quarter and answer questions.
The dial-in numbers and passcode for the conference call are as follows:
A replay of the conference call may be accessed by phone at the following number until November 24, 2010:
Additionally, an archived web-cast of this call will be available on the Investor Relations section of AutoNavi's website at http://ir.autonavi.com.
About AutoNavi Holdings Limited
AutoNavi Holdings Limited (Nasdaq:AMAP) is a leading provider of digital map content and navigation and location-based solutions in China. At the core of its business is a comprehensive nationwide digital map database that covers approximately 2.8 million kilometers of roadway and over 12.5 million points of interest across China. Through its digital map database and proprietary technology platform, AutoNavi provides comprehensive, integrated navigation and location-based solutions optimized for the Chinese market and users, including automotive navigation solutions, public sector and enterprise applications, wireless location-based solutions and Internet location-based solutions. For more information on AutoNavi, please visit http://www.autonavi.com.
The AutoNavi Holdings Limited logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8262
Forward Looking Statements
This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the Business Outlook section and quotations from management in this press release, as well as AutoNavi's strategic and operational plans, contain forward-looking statements. AutoNavi may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about AutoNavi's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: AutoNavi's ability to adequately maintain and update its digital map database and minimize errors in its solutions; its current reliance on the automotive navigation market and a small number of customers for a substantial portion of its revenues; the project-based nature of its public sector and enterprise applications business; its limited operating history in the wireless/Internet location-based solutions markets; compliance with a complex set of laws, rules and regulations governing its surveying and mapping and other businesses in China; competition in the navigation and location-based solutions businesses in China; and its ability to manage its growth effectively and efficiently. Further information regarding these and other risks is included in AutoNavi's registration statement on Form F-1 filed with the Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and AutoNavi undertakes no duty to update such information, except as required under applicable law.
About Non-GAAP Financial Measures
To supplement AutoNavi's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), AutoNavi uses in this press release the following non-GAAP financial measures: (1) non-GAAP operating expenses, (2) non-GAAP R&D expenses, (3) non-GAAP selling and marketing expenses, (4) non-GAAP general and administrative expenses, (5) non-GAAP operating income, (6) non-GAAP operating margin, (7) non-GAAP net income attributable to AutoNavi shareholders, and (8) non-GAAP diluted net income per ADS attributable to AutoNavi shareholders, each of which excludes share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
AutoNavi believes that these non-GAAP financial measures facilitate investors' and management's comparisons to AutoNavi's historical performance and assist management's financial and operational decision making. A limitation of using these non-GAAP financial measures is that share-based compensation expenses are recurring expenses that will continue to exist in AutoNavi's business for the foreseeable future. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying table has more details on the reconciliation between non-GAAP financial measures and their most directly comparable GAAP financial measures.
CONTACT: For investor and media inquiries please contact: In China: Serena Shi AutoNavi Holdings Limited +86-10-5985-9538 serena.shi@autonavi.com Derek Mitchell Ogilvy Financial, Beijing +86-10-8520-6284 amap@ogilvy.com In the U.S.: Jessica Barist Cohen Ogilvy Financial, New York +1-646-460-9989 amap@ogilvy.com