AutoNavi Holdings Earnings Call Insights: Carrier Service, Gross Margin Increase

On Tuesday, AutoNavi Holdings Ltd. ADR (NASDAQ:AMAP) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Carrier Service

Sam Li – Goldman Sachs: Hi. Management team, thanks for taking my questions. I have two questions here, first, could you give us some more color on the mobile business, like how many smartphone pre-installs, I mean, free and not free, and what brands, I mean, besides Samsung? And what about the carrier service side, you mentioned about the China Mobile yield numbers, but what about the China Telecom, and the partnership with the China Unicom Wo shop? Yeah, first question.

Catherine Qin Zhang – CFO: Let me handle the first question, and I’ll refer to Mr. Cheung to handle the carrier question. On the mobile business, as you know, we do not really disclose the number of installs for both the pre-installs or the paid navigation or the free handset apps. But maybe just to give you some colors, the number in total for these installs have now reached over ($70 million). This is combining both paid and the free handset apps.

Sam Li – Goldman Sachs: Okay. That’s for first quarter right?

Catherine Qin Zhang – CFO: No, no, I am sorry. This is cumulative numbers.

Sam Li – Goldman Sachs: Okay. I got you. Yes. I understand.

Congwu Cheng – CEO and Director: [Foreign Language] For the carrier business, China Mobile we are pretty – this quarter we maintained relatively speaking the same kind of numbers from last quarter. Although I would like to mention that we are currently working with China Mobile on a new business model which details we are not able to disclose but might potentially change our current revenue sharing model., but that negotiation is going on, not fully concluded yet. So on the Unicom we have a strategic cooperation with the Wo Store where we are promoting our Map API to their developer stores. That’s pretty much what’s going on but not so much in terms of financial impact. And in terms of China Telecom, the user base of our navigation app that we tailor made for them has reached 1 million users right now. So this is update on the carrier business.

Sam Li – Goldman Sachs: My second question is about the in-dash business. It seems the first quarter is a little bit under our estimate. You currently mentioned about the ASP factors and mid-range cars. So what’s your view on the seasonality of the second quarter?

Yongqi Yang – EVP, Automotive Business: Normally the ASP decline will happen on a yearly basis. So second quarter ASP will remain same as the first quarter.

Sam Li – Goldman Sachs: So what about (indiscernible), do you expect 2Q to be a better quarter than first quarter on the shipment?

Yongqi Yang – EVP, Automotive Business: Traditionally the first quarter is always the lowest quarter because of the Chinese New Year. We expect the second quarter volume will be more than first quarter.

Gross Margin Increase

Anita Chen – Jefferies: Can we know the reasons for the large increase of gross margin again and do you think gross margin kind of increase going forward from the current level that is my first question?

Catherine Qin Zhang – CFO: Anita it will be nice if you also repeat your question in Chinese.

Anita Chen – Jefferies: [Foreign Language].

Catherine Qin Zhang – CFO: Gross margin was relatively higher in the first quarter primarily due to the seasonal factor because of the Chinese New Year holidays where our (outfield terrain) work was much less compared to the rest of the year, so that’s the main factor. Overall on a yearly basis, we continue to believe that we should be able to maintain the margin that we have achieved the last year, the minimum.

Anita Chen – Jefferies: My last – my second question is that can we know the daily unique user of the (AMI) publication? [Foreign Language]

Catherine Qin Zhang – CFO: Approximately 1 million, actually exceeded a million users now on a daily basis.