Ituran Location and Control Ltd. Price & Performance (ITRN)

We'll then open the call for question and answer session. I would like to remind everyone that the Safe Harbor statement in the press release also covers the contents of this conference call. And now, Eyal, would you like to begin, please? Thank you, Kenny.

I'd like to welcome all of you to our fourth quarter and full year 2024 results call Thank you for joining us today. We are pleased with our fourth quarter results presenting another quarter of year over year growth in revenue, and profit across the geographies in which we operate. I want to add that while we still show growth in U. S. Dollar turns, the strengthening of the dollar versus many of the local currencies in which we operate in particular, the Brazilian real and Mexican peso had a negative impact on our financial results when denominated in U. S. Dollars. In local currencies, in each of our regions, we grew ahead of what our U. S. Dollar dominated results suggest. In the fourth quarter, we were very happy to report a high level of 40,000 net subscribers adds in the quarter, which came in at the top end of our expectations of between 75,000 net per quarter. This is actually the third quarter in row where some or at the very top of our expected range. The hard work we have done over the past year in bringing new and attractive applications product and services has rolled these positive results and looking ahead, we believe the subscriber head will be even higher.

Will accelerate to between 180,002 for the year, over 20% ahead of the 2024 rate.

Our success reflect ongoing and growing demand for our location based products and telematics services, in all our regions as well as traction from our new initiatives and services. Looking back, we had a very good 2024. And I just want to summarize some of the main success of the will contribute to the accelerated growth in our subscriber base in the coming years. In December, we announced that our JV in India with Lumax successfully concluded a validation and trial with Daimler India, commercial vehicles for its vehicles sold to the Indian market. Daimler fully tested it Ituran run's device on around 15,000 vehicles Operating in India, and we expect that over the time, we will sell tens of thousands of connected devices to Daimler annually. In November, we signed a five years contract with Nissan in Chile initially covering three vehicle models. Following their car purchase, Nissan's customer will have a use free trial of it to run service paid for by Nissan Chile. Ituran will provide a pre installed vehicle location unit and a suite of telematics and stolen vehicle recovery services to Nissan its customer throughout Chile. [indiscernible] This new agreement in Chile is the culmination of well overused discussions on how we can replicate our strong service for Nissan customers in Mexico and bring these services to their customers in Chile.

And just to touch on our relationship with Nissan in Mexico, October, we were awarded their supplier of the EU in their after sales accessory category demonstrating how happy they are with the high quality service we are supplying them and their customers. We are also in active discussions with a number of major OEM manufacturers in addition to those that we already work with.

We are looking to bring new OEM partners as well as broaden the services we provide existing OEMs to additional countries in South America. See strong long term growth potential via this initiative. Our usage based insurance business in Israel continued to gain strong traction bringing us new subscribers and is one of the reasons why we continue to see strong subscriber growth in Israel. This as well a high car theft rate in Israel is enabling us to reach additional subscribers from part of the market that were previously untapped by us. Such as lower priced new vehicles or the second hand car market. We launched a product for motorcycles yearly in 2024 and has gained strong traction across all the geographies in South America in which we have launched it.

Motorcycles represent a very significant and tough market for us. In the region, significantly increases our total addressable market. Given our strong net cash position, of over $77,000,000 our ongoing cash generation which came to almost $23,000,000 In the quarter, The Board of Directors decided that from this quarter, to increase the quarterly dividend payment to shareholders by 25% from $8,000,000 per quarter to $10,000,000 per quarter. Our dividend yield on an annualized basis represent a return of 5% which is very solid return from a strong and stable company. We see our ongoing dividend as a reward to our shareholders for their loyalty and long term support of our company. In summary, we remain pleased with Ituran's performance. 2024 represented a record for Ituran in term of top line revenue and subscriber growth, and we believe 2025 will be even better. While currencies impact us because our business is fundamentally strong in each of our regions, over a long period the impacts should balance out.

Most importantly, our effort to accelerate our subscriber growth is gaining traction. And we can see this in the strong subscribers net adds in 2024 and accelerated growth we expect in 2025. The same time, we look for more revenues for accelerating our business even further across all our regions. Look forward to updating you on our progress again the coming quarter. With that, I hand over to Elie.

Eli? Please go ahead.

Thanks, Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issued in the press release earlier today. [indiscernible] Fourth quarter revenues were $882,900,000.0 a 7% increase compared with revenue of $77,800,000 in the fourth quarter of last year. The tranpling of the U. S. Dollar in the fourth quarter versus the various local currencies in which it operates in impacted the revenues when translated into U. S. Dollar. In local currency, revenues grew by 11% over year. Revenue from subscription fees in the quarter were $61,500,000 an increase of 4% year over year and in local currency an increase of 9%. Product revenues in the quarter $21,300,000 an increase of 16% year over year and no different in local currencies. The Sub Friday base expanded to 2,409,000 by the end of the fourth quarter, an increase of 40,000 from the end of the previous quarter. The geographic breakdown of revenues in the fourth quarter was as follows: Israel, 52%, Brazil 25%, rest of world 23%. EBITDA for the quarter was $22,500,000 or 27.2% of revenue an increase of 3% compared with EBITDA of or 28.2% of revenues in the fourth quarter of last year.

In local currency, EBITDA grew by 10% year over year. Net income for the fourth quarter was $13,800,000 or diluted earnings per share of $0.7 an increase of 15% compared to $12,000,000 of diluted earnings earnings per share of $0.6 in the fourth quarter of last year. In local currency, net income grew by 22% year over year. Cash flow from operations for the fourth quarter of twenty twenty four was $22,700,000 Now taking a look at the full year 2024 results. Revenues for 2024 were a record $336,000,000 a 5% increase over the $320,000,000 reported in 2023. 72% of revenues were from location based service subscription fees and 28% were from product revenue. In local currency, revenues grew by 8% year over year. Revenues from subscription fees were $242,500,000.0 representing an increase of 3% over 2023. In local currency, subscription fees revenue grew by 7% year over year. Product revenues were $93,800,000 representing an increase of 10% compared with 2023. In local currency, product revenues grew by more or less the same at 10% year over year. EBITDA for 2024 was $91,300,000 27.1% of revenue an increase of 5% compared to $87,000,000 27.2% of revenue in 2023. In local currency, EBITDA grew by 8% year over year.

Net income in 2024 was $53,700,000 16% of revenues or fully diluted earnings per share of $2.7 an increase of 11% compared with net income of $48,100,000 50% of revenue or fully diluted earnings per share of $2.41 in 2023, In local currency, net income grew by 15% year over year. Cash flow from operation for the year was $74,300,000 As of December 31, 2024, the company had cash including marketable securities of $77,400,000 and a debt of $100,000 amounting to a net cash position of $77,300,000 This is compared with cash including multiple securities of $53,600,000 and a debt of $600,000 amounting to a net cash position of $53,000,000 as of year end twenty twenty three. [indiscernible] The Board of Directors increased the dividend policy for the current quarter and quarters ahead. A dividend of $10,000,000 was declared for the quarter and upcoming quarters. Representing a 25% increase over the dividend issued in the period quarter. The current dividend takes into account the company's accounting strong profitability, ongoing positive cash flow and strong balance sheet. And with that, I'd like to open the call for the question and answer session. Operator, Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session.

At the bottom of your screen. Remember to unmute yourselves before speaking. The first question is from Sergey Limiano. Please go ahead.

Yes. Hello, everyone. And in the press release, you mentioned product mix impacted.

On gross margin. Could you put some colors about that? Primary effect from sales for two wheeled vehicles.

The gross margin is being affected on the mixture and the product, the mixture that we have in what we sell. Basically, it depends on the we have selling in many regions, many countries, different type of products, all of this is changing. There is volatility between the quarters and things like that. This is usually what is the main effect.

Okay. Got it. And I would like to talk a little bit about Ituran own perspectives. And you outlined a pretty positive subscriber's best growth expectation. What is the main point of growth do you see or the [indiscernible] To 2025, I mean.

I will divide it from the different geographies and I will start with this Israel. In Israel, we are gaining more and more market share in one end while on the same time, the cost of freight in Israel is in a very high [indiscernible] these days It started during the end of twenty twenty three. 2024 as well, and now we see it continued. When this situation happened, it's mean that more people look for security systems insurance companies' demands increasing And as long as we provide state of the art technology and services, and we keep our high rate of recovery with fit the demand and it's allowed us to grow in Israel. Also the UBI, the usage based insurance [indiscernible] among insurance companies in Israel. And we see recently also a higher and growing demand, which we believe will contribute more materially during 2025. This is regard to Israeli market, which just remind me present about 50% of the total revenues that we [indiscernible] Regarding Brazil, The motorcycle solution also taking more and more [indiscernible] We are talking with motorcycles dealers as well as motorcycle manufacturers as well as insurance companies that are usually afraid of providing insurance for motorcycles, but we succeed to I think to find the right solution to increase the security of motorcycles as well as growing our finance segment you remember, we started with Santander which we hope that we will continue to expand this contract as well as now offering it to more and more banks which we feel and we think that during 2025, we will have and we will sign a contract or we we're aiming to attract and sign with more banks, more subscribers.

Another thing which relevant for 2025 in our expectations is the OEM, which to remind everyone, up until now, we worked with General Motors and with Nissan in some of our geographies And we put a lot of focus in the OEM segment to attract more international brands and we expect or we do our best that we will be able to sign contracts with more logos and this also will contribute maybe more to the second half of twenty twenty five, but this is why we are positive and optimistic regard the additional growing the subscriber base during 2025.

Great, great. And I think it's supposed to you still expect $100,000,000 EBITDA in 2025 is right?

Actually, all our global operations in the local currencies [indiscernible] meet and even exceed our expectation in many cases by the way. We set the guidance in U. S. Dollars as a target a year ago and we said just to remind you that it depends on today's currency levels today's was February 2024. However, the currencies have significantly changed since then which we think that it's make the guidance not really meaningful given the global strong recent currency volatility, especially since the new President in The U. S. Has taken over, makes it even harder to make a meaningful prediction. So Having said that, if currencies move back to their levels of beyond that they were when we first issued the guidance in February 2024, it is possible that we will meet and even exceed this target. So I do want to stress that even with all the currency volatility because we do have some natural hedges in our business, Since in each of our regions, revenues and most of the expenses are in local currencies, so the currency exposure is only the difference.

The profit we make in each region. So while there is an impact of few million dollars amounting to single digit percentage of EBITDA either up or down it doesn't change the overall success. So we decided that providing the EBITDA target for the year, That depends on currencies which we have no control over is not as useful to investors especially in the currencies continued to be so volatile. And by the way, instead we continue to provide the guidance on something we do have much higher visibility which is the subscriber rate we chose the strength of the business I hope clear.

Yes. Thank you, El. And I think the last one what rate should we expect in local currencies for Israel and Brazil?

We always think about pricing and just to remind, we have a lot of segments, a lot of customer, which is very diversified. So we always do the best to maximize the profitability and the profit. Along the year, we will view it again if we find that the prices of the cost or inflation hurting us, so we will do as much as we can.

But there is no any new decision for right now.

Okay, got it. Thank you a lot. That's all from me.

The next question is from Chris Reimer of Barclays. Please go ahead.

Hi. Thanks for taking my questions. Can you comment sorry, you already mentioned a little bit your strategy relating to the OEMs. Could you give us any indication of what's the retail?

As I said a few quarters ago, that We have today after we created synergy between the OEM, the geographies that we acquired business of OEM In our traditional businesses, there are many I would say, overlapping between the services, some of the OEM we make renewals and we offer them more. So today, it's a little bit more, I would say, confused to provide it how it's divided. But I still will say two things. One, is that the OEM growing as lower margins. This is the nature of do a large B2B commitment. For example, if we work with Nissan and they provide us 100 of thousands per year, so of course the margins are low compared to the retail market when we sell it to the end users such as in Brazil or or in Israel. So we are not providing a specific how it's divided. Still by the way still the major portion of our growth is coming from the from the retail market I hope the retail market will continue to grow as it grows in 2024 But as I said and I put some color on new contract or new customer base from other logos that this will be additional.

So still the main growth will come from the retail, but we will add also from the OEM.

Got it. Thanks. That's great. Just one more. You pointed out traction in the new products, but could you give us a sense of of how much the new product represent in revenues versus total product traditional product?

We have so many so many solutions and units there is no really something that I will will disclose here I just want to say again, when I said about the potential growth this year, I mentioned mainly SVR in Israel, which is the traditional business. Of course, we do it better We have always new technologies and we have to be always advanced, but the segment is a traditional one I UBI, of course, it's new, but still almost four years part number of Ituran sales in Israel When I speak about motorcycle, it's quite new, but it's only in the beginning. So the contribution is still not very high. And when we talk about financial customers like banks that provide loans for [indiscernible] owners, this is something that we do almost three years with Santander. This is something that we expect to grow it has its own contribution. But when I want to provide the ratio among the team [indiscernible] each one is not very big, but we are not disclosing how it's divide. Got it. All right. Thanks. That's it for me.

The next question is from Boris Schneider of More Investments. Please go ahead. [indiscernible] So couple of questions for me. Mostly on ARPU. Just to understand, in this first quarter, there was a growth of 7% in your subscribers, but 9% in constant currency in revenues from subscriptions. So is there any particular product or increase in prices you can point out that contributed to this increase in ARPU in constant currency?

So there is no specific reason Other than the currency exchange effect, Other than that, we are in local currencies, the prices are more or less the same.

Okay. And how should we think on the ARPU excluding the Currencies effect for '25 given your increase in in number of subscriber additions.

Since we are having a customer base of 2,400,000 and we're expecting to grow something that will be closer to 200,000 So probably the mixture of the growth will be in a little bit lower output part of it is new solutions and more OEM contracts that are represent lower ARPU, but still when we talk about the base of 2.4, The influence on the absolute ARPU be very, very little. So I would consider the current ARPU as the representing ARPU of the group.

Great. Congratulations on that.

There is no any specific strategic or economic reason that the ARPU will go down. Some of the mixture can change but the influence on the total €2,400,000 or €2,500,000 or €2,600,000 will be very, very nonmaterial.

Thanks. Congratulations on strong execution. As well as the presentation on Zoom. That's great effort.

Thanks.

There are no further questions at this time. The recording of the call will be available within twenty four hours on our website. This concludes the Turan Fourth Quarter twenty twenty four Results Conference Call. Thank you for your participation. There is a further question from Boris Schneider. Boris, would you like to ask another question?

No, sorry, sorry. No more questions.

Okay. This concludes the Turan Fourth Quarter twenty twenty four Results Conference Call.