Third Quarter Net Revenues Increase 41.2% Year-over-Year;
Mobile and Internet Location-based Solutions Business Grows 239.3% Year-over-Year
BEIJING, Nov. 17, 2011 (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 third quarter ended September 30, 2011.
Third Quarter 2011 Operational Highlights
- AutoNavi's free mobile map application had a total of 26 million users and over 10 million monthly active users as of the end of the third quarter of 2011, compared to a total of 17 million users and over 4 million monthly active users as of the end of the second quarter of 2011.
Third Quarter 2011 Financial Highlights
- Net revenues in the third quarter of 2011 were $33.9 million, an increase of 41.2% year-over-year.
- Gross profit in the third quarter of 2011 was $25.0 million, an increase of 48.3% year-over-year.
- Operating income in the third quarter of 2011 was $10.0 million, an increase of 30.3% year-over-year.
- Net income attributable to AutoNavi shareholders was $9.3 million in the third quarter of 2011, an increase of 49.0% year-over-year.
First Nine Months of 2011 Financial Highlights
- Net revenues in the first nine months of 2011 were $92.3 million, an increase of 47.0% year-over-year.
- Gross profit in the first nine months of 2011 was $66.7 million, an increase of 57.0% year-over-year.
- Operating income in the first nine months of 2011 was $29.0 million, an increase of 74.3% year-over-year.
- Net income attributable to AutoNavi shareholders was $29.5 million in the first nine months of 2011, an increase of 120.8% year-over-year.
"We are very pleased with our results in the third quarter, particularly the strong growth in our mobile and Internet business," said Mr. Congwu Cheng, chief executive officer of AutoNavi. "Driven by our continuous efforts to enhance our products and broaden our user base, we are seeing increased awareness of our brand as reflected by our 41% year-over-year growth in net revenues. At the same time, we continue to expand our comprehensive bank of stored online data to enable the development of our mapping services into a cloud service platform that will serve as the foundation for the location-based media and e-commerce platform we're building across multiple devices and mediums."
Mr. Cheng continued, "Our location-based products provide unique, attractive solutions for both our users and advertisers. As our user base continues to grow, we are able to collect even more data on user behavior which can be mined to provide users with valuable location-relevant information while allowing for smarter, more targeted location-based advertising that ultimately creates real value for businesses."
Third Quarter 2011 Results
Revenues
Total net revenues in the third quarter of 2011 were $33.9 million, an increase of 41.2% year-over-year from $24.0 million in the third quarter of 2010, and an increase of 2.9% from $32.9 million in the second quarter of 2011.
Automotive Navigation
Net revenues from the automotive navigation segment in the third quarter of 2011 were $21.9 million, an increase of 22.8% year-over-year and a decrease of 4.2% from the previous quarter. The year-over-year increase in net revenues was mainly due to an increase 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 equipped with these systems. The slight sequential decrease in the third quarter of 2011 was due to fewer copies of digital map data sold as compared to an exceptionally strong second quarter result.
Mobile and Internet Location-based Solutions
The mobile and Internet location-based solutions business in the third quarter of 2011 delivered another record result of $8.8 million in net revenues, representing an increase of 239.3% year-over-year and 63.4% over the previous quarter. The increases were primarily due to the growth in revenues derived from the pre-installation of the Company's navigation solutions on mobile phones.
Public Sector and Enterprise Applications
Net revenues from the public sector and enterprise applications market in the third quarter of 2011 were $2.9 million, a decrease of 11.2 % year-over-year and 31.0% sequentially. The decreases were primarily caused by a decline in aerial photogrammetry projects. During the third quarter of 2011, lag time between projects coincided with the rainy season in some of the geographic areas in which the Company flew, negatively impacting the quarterly result.
Cost of Revenues
Cost of revenues in the third quarter of 2011 was $8.9 million, representing an increase of 24.2% year-over-year and a decrease of 4.9% sequentially. The year-over-year increase was attributable to a rise in data collection and processing costs and the amortization of definite intangible assets acquired from PDAger in March 2011 which were relevant to revenue generated. The sequential decrease was mainly due to flight schedule delays for aerial photogrammetry projects.
Gross Profit and Gross Margin
Gross profit in the third quarter of 2011 was $25.0 million, an increase of 48.3% year-over-year from $16.9 million in the third quarter of 2010, and an increase of 5.9% quarter-over-quarter from $23.6 million in the second quarter of 2011. Gross margin, or gross profit as a percentage of net revenues, was 73.9% in the third quarter of 2011, compared to 70.3% in the year-ago period and 71.7% in the second quarter of 2011.
Operating Expenses
Total operating expenses in the third quarter of 2011 were $15.0 million, an increase of 63.3% year-over-year and 13.9% sequentially. Non-GAAP operating expenses, which exclude share-based compensation expenses, were $13.8 million, an increase of 62.0% year-over-year and 12.2% sequentially.
Research and development expenses increased 68.6% year-over-year and 11.1% sequentially to $6.5 million. The increases were primarily due to higher salary and benefit expenses, a result of an increase in the number of R&D staff. Non-GAAP research and development expenses, which exclude share-based compensation expenses, increased 67.8% year-over-year and 9.6% sequentially to $5.9 million.
Selling and marketing expenses increased 88.5% year-over-year and 31.0% sequentially to $4.5 million. The year-over-year increase was primarily due to higher salary and benefit expenses, a result of increased sales headcount in the third quarter of 2011, increased marketing expenses associated with branding activities and increased business travel expenses. The sequential increase was primarily due to higher marketing expenses associated with branding activities in the third quarter of 2011. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased 91.1% year-over-year and 28.9% sequentially to $4.1 million.
General and administrative expenses increased 36.4% year-over-year and 3.3% sequentially to $4.1 million. The year-over-year increase was primarily due to higher salary and benefit expenses, a result of an increase in the number of general and administrative personnel, and professional service expenses in the third quarter of 2011. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, increased 33.2% year-over-year and increased 1.9% sequentially to $3.8 million.
Operating Income and Operating Margin
Operating income in the third quarter of 2011 was $10.0 million, an increase of 30.3% year-over-year from $7.7 million in the third quarter of 2010, and a decrease of 4.2% quarter-over-quarter from $10.5 million in the second quarter of 2011. Operating margin, or operating income as a percentage of net revenues, was 29.6% in the third quarter of 2011, compared to 32.0% in the year-ago period and 31.7% in the second quarter of 2011.
Non-GAAP operating income, which excludes share-based compensation expenses, in the third quarter of 2011, was $11.4 million, an increase of 34.4% year-over-year and a decrease of 0.7% sequentially. Non-GAAP operating margin, or non-GAAP operating income as a percentage of net revenues, was 33.5% in the third quarter of 2011, compared to 35.2% in the year-ago period and 34.7% in the second quarter of 2011.
Change in Fair Value of Forward Contract
In the third quarter of 2010, the Company engaged a bank to convert a certain amount of U.S. dollars into Japanese Yen and made a one-year fixed interest rate Japanese Yen deposit with the bank. The Company also entered into a one-year 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. The Company carries the forward contract at fair value on its balance sheet, and the change in fair value of the forward contract at each period end is recorded in the statement of operations. In the third quarter of 2011, pursuant to the forward contract with the bank, the Company converted the Japanese Yen deposit back into U.S. dollars upon the expiration of the one-year term. In the third quarter of 2011, the Company recorded a gain of $2.8 million in the change in fair value of the forward contract. Additionally, the Company recorded a foreign exchange loss of $2.6 million and interest income of $0.2 million related to the arrangement in the third quarter of 2011. Over the life of the forward contract, the Company recorded an accumulated foreign exchange loss of $0.6 million and accumulated interest income of $1.9 million in relation to the Japanese Yen deposit. The accumulated gain or loss from the change in the fair value of the forward contract was zero.
Net Income Attributable to AutoNavi Shareholders
Net income attributable to AutoNavi shareholders was $9.3 million in the third quarter of 2011, an increase of 49.0% year-over-year from $6.2 million in the third quarter of 2010, and a decrease of 3.3% quarter-over-quarter from $9.6 million in the second quarter of 2011. Diluted net income per American depositary share ("ADS") attributable to AutoNavi shareholders for the third quarter of 2011 was $0.18. One ADS represents four ordinary shares.
Non-GAAP net income attributable to AutoNavi shareholders, which excludes share-based compensation expenses, was $10.6 million in the third quarter of 2011, an increase of 51.9% year-over-year and an increase of 0.4% sequentially. Diluted non-GAAP net income per ADS attributable to AutoNavi shareholders for the third quarter of 2011 was $0.21.
Cash Flow
Net cash provided by operating activities was $9.3 million in the third quarter of 2011. As of September 30, 2011, the Company had $174.6 million in cash and cash equivalents.
Business Outlook
The Company maintains its full year 2011 net revenue guidance of approximately $122 million to $125 million, representing an increase of approximately 42% to 46% over fiscal year 2010 net revenues.
Conference Call Information
AutoNavi's management will hold an earnings conference call at 8:00 a.m. U.S. eastern standard time on November 17, 2011 (9:00 p.m. Beijing/Hong Kong time on November 17, 2011).
The dial-in numbers and passcode for the conference call are as follows:
| U.S. Toll Free: | +1-866-519-4004 |
| International: | +65-6723-9381 |
| Hong Kong: | + 852-2475-0994 |
| United Kingdom Toll-Free: | 0-808-234-6646 |
| Passcode: | AutoNavi |
A replay of the conference call may be accessed by phone at the following number until November 24, 2011:
| U.S. Toll Free: | +1-866-214-5335 |
| International: | +61-2-8235-5000 |
| Passcode: | 21358139 |
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 3.1 million kilometers of roadway and over 20 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, mobile 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 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 mobile/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 annual report on Form 20-F as well as in its other filings 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.
| AUTONAVI HOLDINGS LIMITED | ||
| Unaudited Consolidated Balance Sheet | ||
| (In thousands of U.S. dollars) | ||
| December 31, 2010 | September 30, 2011 | |
| Assets | ||
| Current assets | ||
| Cash | 103,105 | 174,570 |
| Restricted cash | 485 | -- |
| Term deposit | 62,716 | -- |
| Accounts receivable, net of allowance for doubtful accounts of $419 and $754 as of December 31, 2010 and September 30, 2011, respectively | 23,752 | 39,262 |
| Loans to related parties | 1,212 | 161 |
| Prepaid expense and other current assets | 5,415 | 13,962 |
| Deferred tax assets-current | 378 | 1,181 |
| Total current assets | 197,063 | 229,136 |
| Properties and equipment, net | 41,571 | 48,269 |
| Equity method investments | 5,102 | 4,637 |
| Acquired intangible assets, net | 996 | 7,356 |
| Goodwill | 3,242 | 8,632 |
| Deferred tax assets-non-current | 292 | 142 |
| Other long term assets | 357 | 392 |
| TOTAL ASSETS | 248,623 | 298,564 |
| Liabilities | ||
| Current liabilities | ||
| Accounts payable (including accounts payable of the consolidated variable interest entities without recourse to AutoNavi Holdings Limited $1,523 and $2,381 as of December 31, 2010 and September 30, 2011, respectively) | 1,523 | 2,468 |
| Deferred revenue (including deferred revenue of the consolidated variable interest entities without recourse to AutoNavi Holdings Limited $3,730 and $5,413 as of December 31, 2010 and September 30, 2011, respectively) | 5,895 | 7,164 |
| Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated variable interest entities without recourse to AutoNavi Holdings Limited $13,907 and $22,355 as of December 31, 2010 and September 30, 2011, respectively) | 14,690 | 23,908 |
| Income tax payable (including income tax payable of the consolidated variable interest entities without recourse to AutoNavi Holdings Limited $5,168 and $6,473 as of December 31, 2010 and September 30, 2011, respectively) | 5,215 | 6,406 |
| Forward contract (including forward contract of the consolidated variable interest entities without recourse to AutoNavi Holdings Limited nil and nil as of December 31, 2010 and September 30, 2011, respectively) | 2,465 | -- |
| Total current liabilities | 29,788 | 39,946 |
| Non-current liabilities | ||
| Deferred tax liability-non-current (including deferred tax liability of the consolidated variable interest entities without recourse to AutoNavi Holdings Limited $473 and $1,278 as of December 31, 2010 and September 30, 2011, respectively) | 473 | 1,443 |
| Total liabilities | 30,261 | 41,389 |
| Equity | ||
| Ordinary shares | 19 | 19 |
| Additional paid-in capital | 169,132 | 172,890 |
| Statutory reserve | 6,322 | 6,322 |
| Retained earnings | 28,023 | 57,482 |
| Accumulated other comprehensive income | 11,449 | 16,111 |
| Total AutoNavi Holdings Limited shareholders' equity | 214,945 | 252,824 |
| Non-controlling interest | 3,417 | 4,351 |
| Total equity | 218,362 | 257,175 |
| TOTAL LIABILITIES AND EQUITY | 248,623 | 298,564 |
| AUTONAVI HOLDINGS LIMITED | |||||
| Unaudited Consolidated Statements of Operations | |||||
| (In thousands of U.S. dollars, except per share data) | |||||
| For the three months ended | For the nine months ended | ||||
| September 30, 2011 | September 30, 2010 | June 30, 2011 | September 30, 2011 | September 30, 2010 | |
| Revenue | 34,609 | 24,342 | 33,628 | 94,202 | 63,990 |
| Business tax | (718) | (334) | (681) | (1,938) | (1,243) |
| Net revenues | 33,891 | 24,008 | 32,947 | 92,264 | 62,747 |
| Cost of revenues | (8,857) | (7,131) | (9,309) | (25,599) | (20,274) |
| Gross profit | 25,034 | 16,877 | 23,638 | 66,665 | 42,473 |
| Operating expenses | |||||
| Research and development | (6,503) | (3,858) | (5,854) | (16,239) | (9,140) |
| Selling and marketing | (4,462) | (2,367) | (3,405) | (10,509) | (6,779) |
| General and administrative | (4,061) | (2,978) | (3,930) | (10,939) | (9,996) |
| Total operating expenses | (15,026) | (9,203) | (13,189) | (37,687) | (25,915) |
| Government subsidies | 11 | 14 | 11 | 22 | 76 |
| Operating income | 10,019 | 7,688 | 10,460 | 29,000 | 16,634 |
| Gain on re-measurement of fair value of the equity method investment | -- | -- | -- | 995 | -- |
| Interest income | 1,228 | 666 | 1,466 | 3,843 | 864 |
| Change of fair value of forward contract | 2,753 | (1,291) | (1,298) | 2,465 | (1,291) |
| Foreign exchange (loss)/gains | (2,631) | 575 | 1,103 | (2,079) | 575 |
| Other Income | 47 | 47 | 47 | 141 | 47 |
| Income before income taxes and share of net income of equity accounted investment | 11,416 | 7,685 | 11,778 | 34,365 | 16,829 |
| Income tax expense | (1,643) | (1,099) | (1,698) | (3,704) | (2,744) |
| Share of net income of equity method investment | 13 | 12 | 40 | 65 | 113 |
| Net income | 9,786 | 6,598 | 10,120 | 30,726 | 14,198 |
| Less: Net income attributable to noncontrolling interest | 523 | 381 | 543 | 1,267 | 858 |
| Net income attributable to AutoNavi Holdings Limited shareholders | 9,263 | 6,217 | 9,577 | 29,459 | 13,340 |
| Net income per share | |||||
| Net income attributable to AutoNavi Holdings Limited shareholders | |||||
| Basic | 0.05 | 0.03 | 0.05 | 0.16 | 0.08 |
| Diluted | 0.05 | 0.03 | 0.05 | 0.15 | 0.08 |
| Weighted average number of shares used in calculating net income per ordinary share | |||||
| Basic | 190,404,199 | 188,273,000 | 189,886,340 | 189,760,381 | 136,580,641 |
| Diluted | 201,191,706 | 200,471,885 | 201,317,855 | 201,245,560 | 175,036,636 |
| AUTONAVI HOLDINGS LIMITED | |||
| Reconciliation of non-GAAP measures to most directly comparable GAAP measures | |||
| (In thousands of U.S. dollars, except percentage and per ADS data) | |||
| For the three months ended | |||
| September 30, | September 30, | June 30, | |
| 2011 | 2010 | 2011 | |
| Total operating expenses | 15,026 | 9,203 | 13,189 |
| Share-based compensation | (1,265) | (709) | (928) |
| Non-GAAP total operating expenses | 13,761 | 8,494 | 12,261 |
| R&D expenses | 6,503 | 3,858 | 5,854 |
| Share-based compensation | (589) | (333) | (460) |
| Non-GAAP R&D expenses | 5,914 | 3,525 | 5,394 |
| Selling and marketing expenses | 4,462 | 2,367 | 3,405 |
| Share-based compensation | (402) | (242) | (255) |
| Non-GAAP selling and marketing expenses | 4,060 | 2,125 | 3,150 |
| General and administrative expenses | 4,061 | 2,978 | 3,930 |
| Share-based compensation | (274) | (134) | (213) |
| Non-GAAP general and administrative expenses | 3,787 | 2,844 | 3,717 |
| Operating income | 10,019 | 7,688 | 10,460 |
| Share-based compensation | 1,338 | 764 | 981 |
| Non-GAAP operating income | 11,357 | 8,452 | 11,441 |
| Operating margin | 29.6% | 32.0% | 31.7% |
| Share-based compensation | 3.9% | 3.2% | 3.0% |
| Non-GAAP operating margin | 33.5% | 35.2% | 34.7% |
| Net income attributable to AutoNavi Holdings Limited shareholders | 9,263 | 6,217 | 9,577 |
| Share-based compensation | 1,338 | 764 | 981 |
| Non-GAAP net income attributable to AutoNavi Holdings Limited shareholders | 10,601 | 6,981 | 10,558 |
| For the three months ended September 30, 2011 | |||
| GAAP | Adjustments | Non-GAAP(a) | |
| Diluted net income per ADS attributable to AutoNavi Holdings Limited shareholders | 0.18 | 0.03 | 0.21 |
| (a) Non-GAAP diluted net income per ADS attributable to AutoNavi Holdings Limited shareholders is computed by dividing non-GAAP net income attributable to AutoNavi Holdings Limited shareholders by the weighted average number of diluted ordinary shares outstanding used in computing the GAAP diluted net income per ordinary share attributable to AutoNavi Holdings Limited shareholders for the respective periods (after adjusting for the ADS to ordinary share ratio). | |||