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AutoNavi Holdings Ltd (NASDAQ:AMAP)

Q4 2012 Earnings Call

February 27, 2013 8:00 am ET

Executives

Serena Shi – Investor Relations

Congwu Cheng – Chief Executive Officer

Catherine Qin Zhang – Chief Financial Officer

Analysts

Stan Lee – Goldman Sachs

Vivian Hao – Deutsche Bank

Brad D. Erickson – Pacific Crest Securities

Andy Yeung – Oppenheimer Securities

Operator

Good evening and thank you for standing by for AutoNavi Holdings Limited’s Fourth Quarter and Full Year 2012 Earnings Conference Call. At this time all participants are in a listen-only mode. After management's prepared remarks there will be a Q&A session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time.

I will now like to turn the meeting over to your host for today's conference, Ms. Serena Shi, AutoNavi's Investor Relations Manager. Please go ahead.

Serena Shi

Hello, everyone, and thank you for joining us today for AutoNavi's Fourth Quarter and the Fiscal Year 2012 Earnings Conference Call. The Company's fourth quarter and fiscal year 2012 earnings results were released earlier today and they are available on the Company's IR website at ir.autonavi.com, as well as on Newswire Services.

Today, you will hear from our Chief Executive Officer, Mr. Congwu Cheng, who will speak about Company's strategy and business operations; and Ms. Catherine Zhang, our Chief Financial Officer, who will take you through our financial results and some key operating metrics. After their prepared remarks, Mr. Cheng, Ms. Zhang, and our Executive Vice President, Mr. Yongqi Yang will be available for your questions.

Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provision of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in the public filings with the SEC including our Annual Report on Form 20-F. AutoNavi does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Our earnings release and this call include discussion of unaudited non-GAAP financial measures. Our earnings release contained a reconciliation of unaudited non-GAAP measures to the unaudited mostly direct comparable GAAP measures. As a reminder, this conference is being recorded. In addition, a webcast of this conference call is available on AutoNavi's Investor Relations website at ir.autonavi.com.

I will now turn the call over to our CEO, Mr. Cheng. Mr. Cheng will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Cheng.

Congwu Cheng

[Foreign Language]

Hello everyone, and welcome to AutoNavi’s earnings conference call for the fourth quarter and full year 2012. We recently celebrated Chinese New Year and this past weekend was China’s Lantern Festival. On behalf of AutoNavi team, I’d like to wish you and your family good luck and a good health in the year of snake.

In 2012, AutoNavi’s net revenue hit another record high, reaching a $159 million which represented a 26% year-over-year increase beating management expectations. Non-GAAP net income attributable to AutoNavi’s shareholder were 20% year-over-year to $49 million in 2012.

Cash generated by operating activities was $58.3 million in 2012, an increase of 22% year-over-year. In addition to these robust financial numbers, our mobile business made a great progress in terms of market share, market consistent development and an overall operating capabilities of product and services in 2012.

[Foreign Language]

According to Analysys International, AutoNavi’s premium navigation app ranks number one in China’s mobile navigation application market for the second consecutive year in 2012, with a market share of 27.3%. Furthermore and that continued to lead the mobile map application market for the fifth three quarter with a market share of 29.6%.

[Foreign Language]

AMAP surpassed 100 million users in early January of 2013. According to announces international, AutoNavi joined only five other Chinese companies with mobile applications with greater than 100 million users. The other companies are Tencent, Alibaba Group, Qihoo 360, SINA Corporation and UCWeb.

[Foreign Language]

In 2012, and for the third consecutive year, AutoNavi’s premium navigation app was the best selling iPhone navigation application in China, according to the Apple App Store as of 2012, a list of Apple’s best selling apps of the year.

[Foreign Language]

As of 2012, the number of third party developers of AutoNavi’s map API services stood at more than 130,000.

[Foreign Language]

In 2012, AutoNavi made great progress in booting up a two echoMAP system with our strategic partners, which includes Internet companies, device makers, telecom operators and vertical content service providers. These partners have helped to introduce our product and services to millions of additional users, thereby significantly raising our company profile.

For example, we launched the first location based social networking service platform, the SINA Weibo enabling interconnection between SINA Weibo and AMAP apps. Now AMAP users are able to view location based Weibo content functions and make comments through our apps. At the same time, more than 500 million SINA Weibo users have free access to the content and the functionality of AMAP app.

During the fourth quarter we also upgraded our Internet map service and co-launched PC based map search platform with a number of search engines including Cheeko, [Vsol and Vica] that allow their users to access and search AutoNavi’s location-based content via their personal computers.

Furthermore we extended AutoNavi’s mapping service to Cheeko mobile browser and the ESL Mobile Solution for the strengthening of the leading position in mobile space.

[Foreign Language]

Currently Apple iOS 6, China Mobile and the China Telecom’s native map apps or use our solutions and the China Unicom rendered map apps useful and adopt our solutions as well.

On the iOS 6 operating system, our map service powers both Apple developed and third party developed applications, meaning that these applications require map displace. The system will automatically utilize our map service. The same is the case for China Mobile branded smartphones. When they develop apps, the map displays. The system would utilize AutoNavi map service. As of today, the total daily map, we’ve had for AutoNavi’s map ATI service surpassed $54 million and we expect this continued and direct growth in this area.

In addition, AutoNavi’s premium navigation app and AMAP app are the number one choice amongst all midstream Android based smartphone brands. For example, all of Samsung major smartphones released in China in 2012 features our product preinstalled.

[Foreign Language]

We are also actively working with a wide range of third parties on the content integration. We worked with vertical service providers such as China Bing, Ctrip, Velo LaShou Group. We also work with a number of top logistic companies, restaurants, banks, insurance companies, retailers, and many others.

These partnerships allowed AutoNavi to mask 100s of millions of addresses and related contents for local businesses with a variety of third-party content integrated in to our database. We continue to improve the service and the quality of AutoNavi offerings.

Our users are now able to view user generated contents on AMAP point of interest page and they can buy movie tickets, find the group by discounts and then make hotel reservations. These value added services not only deepen the user engagements but also promote monetization.

[Foreign Language]

AutoNavi’s premium navigation and AMAP apps now operate on all major operating systems, including Android, iOS 6 and the Windows. AutoNavi’s premium navigation product is the first English language mobile navigation application available in China markets and supports downloads of data for specificities.

In 2012, we provided a total of 38 upgrades and enhancements across all versions of AMAP app and we launched a mobile browser version of AMAP, mo.amap.com. We also introduced dozen of new features including informative map layers, 3D view, traffic information broadcast, indoor mapping, location sharing, cloud storage, voice commands, bus stop information for nearby POI’s and the personalized user archives for favorite locations.

As the number of AutoNavi active user increase and people spent more time with our product, we will capture more user feedback on our cloud service platform.

These user generated information will allow the AMAP app to provide smarter route planning and online navigation service. Thereby helping users to avoid traffic jams and estimate the arrival times based on road conditions.

These new features attracts more active users which internally hands our feedback collection (inaudible). In addition, the increasing numbers of active users available for evaluating user behavior, for example, we have found that POI searches are quite varied. Users not only search for address and location information, but also for dining, hotel, shopping, banking on ancient services, medical care, and other services related information.

These findings are very important to us. In that we can provide direction for our future monetization efforts and the related product development.

[Foreign Language]

Looking back to 2012, according to Analysys International, the number of mobile Internet users in China reached 561 million, increasing 30% year-over-year. 2012 was the first year of what we can call a mobile mapping era. The mapping services became firmly established as important gateways to the fully connected mobile internet. The popularity and the success of social networking and to online and offline services play the groundwork for the development of mapping services in China.

AutoNavi is over 10 years experienced and has a strong track record in mapping and the location based industry now has tremendous opportunities.

In 2013, AutoNavi will continue to focus on and significantly increase our investments in our mobile business, especially in the area of brand awareness, channel downloads and app reinstallation. In order to increase market share for both AMAP and AutoNavi’s premium navigation app, we are further certifying our leading positions in China LBS markets.

Meanwhile, we will continue to improve AutoNavi’s cloud-based map service platform to allow easy integration for a wide range of third-party content, including better use of generic contents, due to our greater positioning, accuracy and the improved real-time traffic technology, thereby further improving the quality of our mobile offerings in term of content, features and the user interface.

With these initiatives, we expect to further increase user engagements of our mobile offerings.

[Foreign Language]

Now, I will turn the call over to our CFO, Catherine Zhang, who will provide a review of our financial performance for the quarter.

Catherine Qin Zhang

Thank you, Mr. Cheng. Hello everyone and thank you for joining us. 2012 was another successful year for AutoNavi with continued momentum in our mobile related LBS initiatives. AutoNavi’s fourth quarter net revenue rose 25.7% year-over-year to $43.6 million, representing a net revenue for full year 2012 of $159.7 million. This represented year-over-year growth of 25.8%, handsomely beating our guidance.

In terms of our revenue mix, our AutoNavigation business earned $21.6 million in the fourth quarter, a slight decrease on a year-over-year basis. The decrease was due to lower blended ASP’s as we started to engage with more mid-ranged cars with lower ASPs, which offset continued volume growth. Nonetheless looking at full year 2012, our automotive navigation business reported $22.1 million in revenues up 7.3% year-over-year.

In 2012, the number of vehicles adopting of navigation solution continued to grow at a healthy rate, outpacing China’s overall automotive market growth rates of 4.3% year-over-year. Our year-over-year volume growth was attributable to both organic growth and new customer acquisition. As mentioned we were pleased to see that some mid-range auto manufacturers such as Rongwei and Renault significantly increased their orders from us in 2012.

We also started to provide customized in-dash navigation solutions for Jaguar Land Rover last year. Going forward, we anticipate a year-on-year decrease in revenues from our auto business in 2013 due to continuous lower rented ASPs as a result of both lower pricing and a larger number of midrange automobile manufacturers, with lower ASPs as part of our total auto customer mix.

However, we’ve anticipated new auto projects on the horizon in 2014. We remain confident in the long-term future of our auto business. Moreover according to IHF, a leading source of information, insights and analytics, by the end of 2014 every vehicle sold is expected to offer some sort of connectivity.

We are well-positioned to capitalize on our future opportunities within the Auto Navigation business given our strong track record, deep customer relationship and exposure and experience in mobile and location related solutions.

Moving on to mobile and internet, our mobile and internet based solutions business continued to show strong year-over-year growth with an earnings increase of 63.4%, accounting for $15.5 million in Q4 2012. For full year 2012, the mobile and internet business generated a total of $47.6 million, representing a 73.5% year-over-year increase.

In 2012, this revenue stream accounted for 29.8% of our total net revenue compared to 21.6% of total net revenue a year ago, which reflects the Company’s progress in developing a consumer facing model.

With the success and popularity of AutoNavi’s premium navigation app, we’re seeing an increasing number of mobile device partners choosing us to be the default navigation app on their mobile devices. This level of accomplishments and recognition was the key driver for the growth of our mobile and Internet business in Q4 2012 and full year 2012. By the end of 2012, there were more than 100 Android based smartphone models featuring AutoNavi’s premium navigation app preinstalled.

During the fourth quarter, we also launched the first navigation app for Windows Phone 8 in China to reach even more users and expand our footprints in China’s fast growing smartphone market. Well we continued to enjoy China’s best selling iPhone navigation app status in 2012 for the third consecutive year of Apple’s Apple Store.

Our public sector and the enterprise application business hit record quarterly and yearly highs in Q4 and full year 2012, growing approximately 110% year-over-year to $5.8 million in the fourth quarter and 44.1% year-on-year to $17.7 million in 2012. The year-over-year increases were largely attributable to certain new aerial photogrammetry and 3-D modeling and map data licensing contracts entered in 2012.

At the end of 2012, we had collected aerial images covering over 1.6 million square kilometers and developed 3D digital city models for 35 cities in China, compared to approximately 1.2 million square kilometers and 26 city models as of the end of 2011.

At the same time, the relevant government authority have shown greater flexibility in it’s policies regarding the display of aerial images, as a result we expect to leverage our previous investments in this area and incorporate more of this kind of data in many of our premium offerings.

Moving on to cost and expenses. Please note that the following discussion will be on the non-GAAP basis, which excludes stock-based compensation. Our cost of revenues, which reflects the cost related to maintaining and expanding our digital map database was $12.6 million in Q4, compared to $9.4 million in the year ago period.

For full year 2012, we spent approximately $42.8 million on our digital map database, compared to $34.8 million last year. Half of revenues represented 26.8% of our net revenue in 2012 versus 27.4% in 2011. Our investments continued to yield encouraging results. AutoNavi’s offerings are now widely recognized among users and across the industry with their accuracy and comprehensive coverage particularly in terms of point of interest, as our data base contains vast amounts of field surveyed POI’s with physical co-ordinates. With more in-depth contents available, both through third party integration and user generated content, were further enriching our offerings which drive daily usage among end users.

Non-GAAP operating expenses for the fourth quarter of 2012 were $20.5 million, compared to $15 million in the corresponding period in 2011. Total non-GAAP operating expenses for the full year of 2012 were $68.5 million, up 36.47% from $50.1 million last year. The year-over-year increases were mainly driven by increased personnel related expenses particularly in product development as we continued to strengthen our technology and product development capabilities and laid the ground work for the progress that Mr. Cheng just discussed.

We ended 2012 with a total of approximately 900 R&D personnel with a net increase of more than 100 for the year. Even with this continued investments in the Company’s LBS initiatives, we managed to maintain our non-GAAP operating margins up to 2011 levels and in line with management’s original expectations.

An update on our share repurchase program. We have continued to execute on our previously announced share repurchase plan of up to $50 million as of yesterday, February 26. We have repurchased a little over 2.5 million ADS’ representing approximately 10 million ordinary shares, with a total consideration of $29 million at a price range of $10.03 to $12.57 per ADS including brokerage commission.

Before moving onto guidance I want to reiterate a few points. We were encouraged by the changes made in our business during the past year, but it is important to recognize at a location based industry is still in the early stages of development. Fueling this transitional period, it remains our priority to continue to position ourselves for long-term success by investing in growth opportunities.

The entire industry continues its shift to the mobile space and this is an area in which we believe AutoNavi has clear advantages. After two years of thorough strategic planning, preparation and executions, the AutoNavi brand is well recognized by end users and industry peers and has become synonymous with quality and reliability in mobile maps and location based information and services in China.

Looking ahead to 2013, we will look to built on our progress and achievements to-date, while positing AutoNavi’s location based offerings of China’s number one choice for people on the go. To help capture this market opportunities we see ahead, we will continue to invest in top R&D talents this year. We will also deepen collaborations with our channel partners and use them to promote our mobile products aggressively.

The LBS industry continues to evolve in exciting ways and we continue to evolve with it. Just a couple of years ago, a substantial majority of our revenues were from the automotive navigation business. Despite significant growth in this line of our business, we have diversified our revenue mix by developing new businesses in exciting growth areas such as mobile and Internet.

We expect our mobile and Internet based solutions and public sector and enterprise applications to continue to grow and account for a greater proportion of our business going forward.

As for our guidance, we expect total net revenue for the full year of 2013 to be between $168 million and $176 million, representing a year-over-year increase of approximately 5% to 10%. This forecast reflects AutoNavi’s current and preliminary view and is subject to change.

Thank you again for joining us today. We will now open the call to questions. Operator?

Question-and-Answer Session

Operator

Thank you very much. The Q&A session of this conference call will start in a moment. (Operator Instructions) We will now begin the question-and-answer session. (Operator Instructions) The first question comes form the line of Stan Lee from Goldman Sachs. Please ask your question.

Stan Lee – Goldman Sachs

Thanks operator. [Foreign Language] Thanks for taking my questions. My first question is, what kind of effect do we see of the partnership we’ve seen with [Sino], does they help us to increase the user base or increase our user activities? Thanks.

Congwu Cheng

[Foreign Language]

Stan Lee – Goldman Sachs

Okay, thanks. And then my second question would be – could you give a little bit more color on the wireless settlement in the fourth quarter? We see some pick up in the quarter, what is purely because of the similarity or maybe coming from pre-install or mobile API? Thanks.

Congwu Cheng

[Foreign Language]

Serena Shi

Okay, your first question, let me translate it for Mr. Cheng. In regards to the SINA Weibo partnership, we see this partnership as the stage to development, it’s a long-term partnership. So the first stage of this is involving the SINA Weibo contents being incorporated in our app. So as you are using AMAP’s, you are able to see enriched contents in terms of Weibo user’s comments.

So this is the first step and there is a second step, which will be for users to utilize we brought up to be able to activate the relative spending and navigation directly from SINA Weibo app, so that stage has not been developed yet. So right now, we completed the first stage. So the entire partnership we see this is to enhance maps social element. So obviously this will gradually increase the activity level, but since we only started the partnership, we launched the function of the user comments for over a month period.

So it’s not long, the impact has not been very significant, although we do see the activities being increased at this time and it’s just we are not able to disclose specific numbers.

Now in regards to the second question, the fourth quarter growth in the mobile revenue it is indeed the pre-installed that is the remaining driver as in the pervious quarters not specifically the API related business.

Operator

Thank you very much. The next question comes from the line of Vivian Hao from Deutsche Bank. Please ask your question.

Vivian Hao – Deutsche Bank

Hi, Congwu Cheng and Catherine. Thank you for taking my question. I have two questions, first of all is, the mobile app and LBS base has become increasingly competitive, while the map service alone looks like making it viable for profitability model. So we’re kind of an active margin impact we should expect due to the heavy investment in personnel and also front building efforts in this area for the coming year. And also if possible what percentage of R&D and other OpEx are allocated to this initiative? This is my first question. I’ll follow with the second after.

Catherine Qin Zhang

Okay, yes it is true we are facing a much more intensified competition. The margin, in terms of our margin for 2013, although we do not really guide on a margin level, but what I can tell you is our further investments would – the results would dilute the margin because we guided a top line growth of 5% to 10% so we do anticipate the increase of expense to be more than that.

Vivian Hao – Deutsche Bank

Okay.

Catherine Qin Zhang

But as I said, we don’t disclose or guide on specific operating expense line, so I am not able to really answer how much in terms of percentage of R&D increase would be at this moment?

Vivian Hao – Deutsche Bank

Okay. The second question is regarding your strategy, can you share with us what’s the AMAP’s current daily active user and also can you provide us on the competitive landscape especially how AutoNavi can differentiate with renown player Baidu and what do you think is AutoNavi’s advantage and disadvantage in the marketing space. As a vertically integrated player versus other internet tycoons, especially like BIDU?

Serena Shi

Let me translate your question for Mr. Cheng. Hold on for a second.

Congwu Cheng

[Foreign Language]

Vivian Hao – Deutsche Bank

Okay, thank you.

Serena Shi

Thank you very much.

Catherine Qin Zhang

In terms of the daily active user, we are at this point not able to disclose that, but over the time, we do see that number being increasing and also our strategic movements with, for example, the alignment with the third party and the content providers when the third parties and also in reaching the contents in the location based data or the map data and also like the social elements we just talked about, all of this movements are targeting towards increasing the active user base. So we do see that.

We have been seeing a good progress in that area. And also in this year, we will have more enhanced versions coming up and better qualities and all that aimed towards this goal. So about 18 months ago, we talked to our ourselves that 18 months is probably our window of opportunities before the big guys coming in. So we think we were right and the big guys are coming as we see them.

Thus we do see ourselves have clear advantages in many areas, particularly with the map data ownership. This is very important. The map data ownership allowed us to provide the unbiased and professional mapping services that is much easier to work with third parties because they see us as the professional map providers, not as a competitor with themselves. And what we are doing with these partners is to develop a eco-system not just a competition on the application level, but in terms of the disadvantage obviously the big guys have a better branding awareness and they have much bigger resources and also stronger integrated resources. But from this stand point it almost pushed us to work or think about working strategically with some of them. So there will be some activities we’re planning that will happen particularly in 2013 to enhance in both strategic level and the business co-operation levels.

Vivian Hao – Deutsche Bank

Thank you.

Operator

The next question comes from the line of Brad Erickson from Pacific Crest. Please ask your question.

Brad D. Erickson – Pacific Crest Securities

Hi thanks for taking my questions, just a couple of follow ups. First can you kind of talk about where you think you are in terms of penetration levels for the market on the – particularly in the pre-installations of Android heading into 2013, I mean historically you guys have obviously been able to sort of normal seasonality with just constantly increasing number of design-ins in that business. Do you start to see an increased potential for seasonality in the wireless Internet business or do you continue to be able to show likely sequential increases here going forward.

Catherine Qin Zhang

We have seen more of a sequential growth going forward than the seasonality factors. So we are growing together with – it’s consistent with the smartphone user growth, we don’t really disclose specific penetration rates as we do measure those by mobile rents.

Brad D. Erickson – Pacific Crest Securities

Great, that’s helpful. And then on the public segment, obviously related to your prepared remarks, I mean you talked about upside of those, it sounds like ramping, modeling projects as well as the government’s increased flexibility to incorporate greater amount of data, I mean obviously that business is ramped up pretty nicely over the last several quarters, I mean is that kind of the way we should be thinking about here going forward, given that that historical could have been viewed as sort of a more lumpy business or is that the right way to think about it going forward?

Catherine Qin Zhang

Yeah, it is the correct way of thinking about it, which is what we anticipate to see continued growth actually in that area.

Brad D. Erickson – Pacific Crest Securities

Great, thank you.

Catherine Qin Zhang

This is the governments and all different levels of the government agencies, they are increasing their investments in the digital city and the basic infrastructure type of investment. So we do anticipate that part of the business to continue to grow.

Operator

Thank you very much. The next question comes from the line of Andy Yeung from Oppenheimer. Please ask your question.

Andy Yeung – Oppenheimer Securities

Hi good evening, happy Chinese New Year. I have two questions on your mobile LBS segment. My first question is about your products strategy there. As you add more features and functionalities for your AMAP application, how do you differentiate your AMAP free applications and your premium navigation solution?

Congwu Cheng

[Foreign Language]

Catherine Qin Zhang

Okay, so in terms of differences between the free map app and the paid premium navigation apps is the paid navigation app is primarily a off-line model where all the data and the software is downloaded to the device. The advantage of that is basically because the limited or restricted network performance in different areas in China. So the handset makers ask a offline version which will be much more reliable regardless of the network performance the product can guide you to where you want to be.

So that is the paid app, but the free map app is a online version where every thing will be downloaded from the back-end server. Obviously it has more updated information, but it would heavily rely on the network performance. Hope that answers your question.

Andy Yeung – Oppenheimer Securities

Yeah. My next question is about your mobile LBS business, which is about your channel strategy, I think previous question you mentioned one of your competitors have been pretty aggressive in the map app space and they have been, I think paying handset OEM, who actually pre-install that apps on smartphone. So in term of your customer decisions what’s your current distribution between pre-installations versus user download and partner referrals and also how do you see that distribution trending?

Congwu Cheng

[Foreign Language]

Serena Shi

So in terms of our channel partners and investments in the channel distribution, we already see our online downloads in terms of the numbers of users are more than the activated users from the pre-installs. So this tells us first of all the user downloads, this is more active than the pre-loads. So we see in 2013 we wanted to increase the investments probably more significantly than before in the online channel promotion type of activities.

Andy Yeung – Oppenheimer Securities

Great, thank you so much.

Operator

[Jake] your line is open

Unidentified Analyst

Hi, Cheng and Catherine, thanks for taking my call. Two questions, first on the cash I believe that the share buyback program is completed, at this point, do you have further plans to introduce a new share buyback program if you can give us a sense of what the plans would be for that cash. The second question is, in your revenue forecasts for 2013, I don’t necessarily need the exact numbers, but are you expecting much API revenues within that number?

Catherine Qin Zhang

For the first question on the share buy back, we do not currently – yes, you’re right, our current share buyback plan has been completed as of today and we do not currently have another plan to have another share buyback program open but when it is time we will definitely announce.

The second question on the revenue forecast, I am sorry, I actually missed the last part of your question.

Unidentified Analyst

If you look at the revenue forecast on the mobile and internet LBS, and I know that you haven’t broken that out but just trying to get a sense, as you are looking into 2013 on the mobile and internet LBS. Are your forecast expecting that to be carried by the pre-installs revenues or is there a significant late-larger component coming from LPS?

Catherine Qin Zhang

It’s a very good question. We right now in our forecast or the guidance, we were more focusing on the organic type of growth. So the mobile and the internet business, we are few just looking from the main drivers, that is the pre-install business.

Unidentified Analyst

Okay, thank you very much.

Catherine Qin Zhang

Sure.

Operator

Thank you very much. The next question comes from the line of [Eric Jew] from Goshen Security. Please ask your question.

Unidentified Analyst

Good evening to management team. My question is related to the revenue from the public service. I saw it also reached quite quickly, do you expect that these trend will continue for next year? And my second question is regarding to the government subsidy, this year we received very large government subsidy, do you also think this will be the trend going into next year? Thank you.

Catherine Qin Zhang

Yeah, on your first question, the government business, right, yes, this year we did see a bigger growth. In the future, although the growth rate might not be as big as what we saw in 2012, but we do anticipate it to continue to grow. And the second question on the government subsidies; each year, there is certain kind of subsidies that we enjoy. In terms of amounts, I don’t think you need to expect it to be bigger than this.

Unidentified Analyst

Okay, got it. Thank you.

Catherine Qin Zhang

Sure. Thank you.

Operator

Thank you very much. We are now approaching the end of the conference call. I will now turn the call over to AutoNavi's Investor Relations Manager, Ms. Serena Shi, for her closing remarks.

Serena Shi

Thank you very much all for joining us today. If you have any questions please do not hesitate to contact us. Bye.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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