Summary
SUMMARYThis summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in the ADSs, you should carefully read this entire prospectus, including our financial statements and related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In this prospectus, unless the context indicates otherwise, “we,” “us,” “our company,” “our,” and “AutoNavi” refer to AutoNavi Holdings Limited, its subsidiaries and consolidated variable interest entities, and the variable interest entities’ subsidiaries; and “China” or the “PRC” refers to the People’s Republic of China excluding, for the purpose of this prospectus only, Hong Kong, Macau and Taiwan. This prospectus contains information from three reports commissioned by us and prepared by Analysys International, an independent market research firm, to provide information on the in-dash navigation market, portable navigation devices market and Internet location-based services market in China, respectively. We refer to these reports as the Analysys In-Dash Report, the Analysys PND Report and the Analysys Internet Report, respectively, in this prospectus. In addition, this prospectus contains information from a report commissioned by us and prepared by Frost & Sullivan, also an independent market research firm, to provide information on the wireless location-based services market in China. We refer to this report as the Frost & Sullivan Report in this prospectus.
We are a leading provider of digital map content and navigation and location-based solutions in China. At the core of our 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. Almost all of China’s 1.3 billion people live within the area covered by our digital map database. In addition, we have completed 3-D navigation maps of key areas in 19 major cities and photo-realistic 3-D models of 16 cities for public sector projects. We have also built a technology platform that enables us to develop tailored solutions for our customers.
Through our nationwide digital map database and proprietary technology platform, we have become a market leader in providing the following comprehensive, integrated navigation and location-based solutions optimized for the Chinese market and users:
In 2009, net revenues from our automotive navigation, public sector and enterprise applications and wireless/Internet location-based solutions businesses accounted for 63.3%, 25.1% and 9.0%, respectively, of our total net revenues. For the three months ended March 31, 2010, net revenues from our automotive navigation, public sector and enterprise applications and wireless/Internet location-based services businesses accounted for 73.8%, 13.8% and 10.7%, respectively, of our total net revenues.
Our net revenues increased from $29.7 million in 2007 to $45.5 million in 2008 and to $57.2 million in 2009, representing a compound annual growth rate, or CAGR, of 38.8% from 2007 to 2009, and increased by 42.7% from $11.6 million for the three months ended March 31, 2009 to $16.6 million for the three months ended March 31, 2010. Net income attributable to AutoNavi Holdings Limited shareholders decreased by 61.7% from $5.7 million in 2007 to $2.2 million in 2008, and increased by 371.7% from $2.2 million in 2008 to $10.4 million in 2009. Net income attributable to AutoNavi Holdings Limited shareholders decreased by 42.6% from $1.6 million for the three months ended March 31, 2009 to $897,000 for the three months ended March 31, 2010. In 2009, we incurred share-based compensation expenses of $4.8 million, including $2.9 million from our continuing operations. For the three months ended March 31, 2010, our share-based compensation expenses were $4.3 million, compared to nil for the three months ended March 31, 2009.
Digital map information has a wide range of applications, including navigation, location-based services and other geography-related applications. Navigation applications and location-based services not only help individual consumers find their way from one place to another, but also provide useful information about their current location or destination such as nearby businesses, restaurants, lodging and entertainment venues and public services. Governments and enterprises also use digital map data and related solutions in a wide range of applications such as infrastructure and assets planning, fleet and logistics management and location-based monitoring.
We believe that China’s digital map data, navigation and location-based services markets are poised for substantial growth.
2009 to 1.1 million units in 2012. Sales of portable navigation devices in China are expected to increase at a CAGR of 22.2% from 1.5 million units in 2009 to 2.8 million units in 2012, according to the Analysys PND Report.
We believe that the following strengths differentiate us from our competitors:
Our goal is to maintain our position as a leading provider of digital map content and become the largest location-based information and value-added solution provider in China. To achieve this goal, we intend to leverage our existing strengths and pursue the following strategies:
Our ability to achieve our goal and execute our strategies is subject to risks and uncertainties, including those relating to:
Please see “Risk Factors” and other information included in this prospectus for a discussion of these and other risks.
In April 2002, our founders began to carry out research and development activities relating to digital map data for in-dash navigation systems through AutoNavi Software Co., Ltd., or AutoNavi Software. In September 2002, we formed Beijing ADF Navigation Technology Co., Ltd., or ADF Navigation, a subsidiary of AutoNavi Software, to develop our automotive navigation business in China. In 2004, we obtained a Class A surveying and mapping qualification certificate issued by the State Bureau of Surveying and Mapping and began providing digital map data to a major automobile manufacturer in China. In 2005, we started supplying digital map data to portable navigation device manufacturers. In 2006, we entered the Internet location-based solutions market by acquiring control of Beijing MapABC Technology Co., Ltd., or MapABC Technology, a leading online map application solution provider in China. Also in 2006, we entered the wireless location-based solutions market by providing China Mobile with a nationwide digital map database for its location-based services. In December 2006, we commenced our aerial photogrammetry business by acquiring Beijing Xingtiandi Information Technology Co., Ltd., or Xingtiandi Technology, which holds a Class A surveying and mapping qualification certificate for aerial photogrammetry issued by the State Bureau of Surveying and Mapping.
In August 2006, in order to facilitate international financing, our founders formed AutoNavi Holdings Limited, a Cayman Islands company, to be our holding company. We also formed AutoNavi International Limited, a British Virgin Islands company, to be our intermediate holding company and AutoNavi Information Technology Co., Ltd., or AutoNavi Technology, a wholly-owned subsidiary of AutoNavi International Limited, under PRC law. In October 2006, we issued 40 million Series A convertible preferred shares, or Series A preferred shares, to a group of private equity investors. In January 2008, we established a Hong Kong company, AutoNavi Asia Limited, to be the direct holding company of AutoNavi Technology.
In December 2009, we distributed the equity interests in Shanghai AutoNavi Software Co., Ltd., or AutoNavi Shanghai, to all of our shareholders or their designated persons. AutoNavi Shanghai, then a wholly-owned subsidiary of AutoNavi Software, had been engaged in the telematics business, which was not part of our core business, and had accounted for 1.3%, 0.7% and 1.2% of our total revenues in 2007, 2008 and 2009, respectively. The results of the telematics business have been presented as discontinued operations in this prospectus.
Due to certain restrictions under PRC law on foreign ownership of entities engaged in surveying and mapping and Internet businesses, we conduct our operations in China principally through contractual arrangements among our wholly-owned PRC subsidiary, AutoNavi Technology, our affiliated entities in China, AutoNavi Software and MapABC Technology, and the shareholders of AutoNavi Software and MapABC Technology. These contractual arrangements enable us to:
As a result of these contractual arrangements, we are the primary beneficiary of AutoNavi Software and MapABC Technology and treat them as our variable interest entities under the generally accepted accounting principles in the United States, or U.S. GAAP. We have consolidated the financial results of these companies and their subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
The following diagram illustrates our corporate structure immediately upon the completion of this offering, assuming the underwriters do not exercise their over-allotment option:
Our principal executive offices are located at 18/F, Daheng Scitech Mansion, South Section, No. 3 Suzhou Street, Haidian District, Beijing 100080, the People’s Republic of China. Our telephone number at this address is +86-10-5985 9900. Our registered office in the Cayman Islands is located at International Corporation Services Ltd., Harbour Place 2nd Floor, 103 South Church Street, PO Box 472, George Town, Grand Cayman KY1-1106, Cayman Islands.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.AutoNavi.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017.
The following assumes that the underwriters will not exercise their option to purchase additional ADSs in the offering, unless otherwise indicated.
We do not expect to pay dividends in the foreseeable future. If, however, we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares, after deducting its fees and expenses.
You may turn in your ADSs to the depositary in exchange for ordinary shares. The depositary will charge you fees for any exchange.
We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the deposit agreement as amended.
To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.
We intend to use the net proceeds from this offering to expand our data processing facilities and build a research and development center, to fund the capital expenditure for our aerial photogrammetry business and for general corporate purposes, including funding potential acquisitions of complementary businesses, although we are not currently negotiating any such transactions. See “Use of Proceeds” for more information.
We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.
The number of ordinary shares that will be outstanding immediately after this offering:
Except as otherwise indicated, all information in this prospectus assumes no exercise by the underwriters of their option to purchase additional ADSs.
The following summary consolidated statements of operations data for the years ended December 31, 2007, 2008 and 2009 and the summary consolidated balance sheet data as of December 31, 2008 and 2009 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated balance sheet data as of December 31, 2007 have been derived from our audited financial statements not included in this prospectus. The following summary consolidated statement of operations data for the three months ended March 31, 2009 and 2010 and the summary consolidated balance sheet data as of March 31, 2010 have been derived from our unaudited condensed financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited consolidated financial statements. Our unaudited results for the three months ended March 31, 2010 may not be indicative of our results for the full year ending December 31, 2010.
You should read this Summary Consolidated Financial Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP.
The following table presents a summary of our consolidated balance sheet data as of December 31, 2007, 2008 and 2009 and March 31, 2010:
public offering price of $ per ADS, the midpoint of the estimated range of the initial public offering price, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us and assuming the underwriters’ over-allotment option is not exercised. A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the amounts representing cash, total current assets, total assets, total equity, and total liabilities, Series A convertible redeemable preferred shares and equity by $ million.