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Ladies and gentlemen, thank you for standing by. Welcome to the Ituran First Quarter twenty twenty five Results Conference Call. All participants are present in listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. You should have all received by now the company's press release. Have not received it, please contact Ituran's Investor Relations team at EK Global Investor Relations at +1 (212) 378-8040 or view it in the News section of the company's website, www.ituran.co.il. I will now hand the call over to Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin?
17m 26s
Thank you. Good day to all of you, welcome to Ituran's conference call to discuss our first quarter twenty twenty five results. I would like to thank Ituran's management for hosting this conference call. With me today on the call are Mr. Eyal Shoratsky, CEO mister Udi Mizrahi, Deputy CEO and VP Finance mister Eli Kamar, CFO of Ituran. Eyal will begin with a summary of the quarter's results followed by Eli with a summary of the financials. We will then open the call for the question and answer session. I would like to remind everyone that the Safe Harbor statement in today's press release also covers the contents of this conference call. And now, Eyal, would you like to begin, please?
18m 7s
Thank you, Kenny. I'd like to welcome all of you to our first quarter twenty twenty five result call and thank you for joining us today. We are pleased with our first quarter results, presenting another quarter of year over year growth in revenue and profit across the geographies in which we operate. In the first quarter, we added a very high level of new subscribers. [indiscernible] to 99,000 net. With this strong jump, we reached a major milestone, crossing 2,500,000 subscribers ahead of our expectation. The significantly growth in the subscriber base during the quarter partly due to an additional contribution from a new telematics service agreement that we signed with Major Car OEM manufacturer Stellantis. As an initial part of this agreement in March, Stalenti switched their SVR subscriber base to Ituran and Ituran began providing services to the subscriber. [indiscernible] Given the jump in subscribers, we increase our expectations for twenty twenty five subscriber goals to between 460,000 net new subscribers. Implying a further 120,000 to 140,000 net new subscribers in the upcoming three quarters. The hard work we've done over the past year in bringing new and attractive applications, product, and services has brought these highly positive results.
19m 37s
Looking ahead, we believe over the long term, net subscribers ad will trend upward. Even while presenting excellent results, I want to add that similar to the last quarters, while showing growth in U. S. Dollar terms, the strengthening of the dollar versus many of the local currencies in which we operate, and in particular, the Brazilian real and the Mexican peso, a deflating impact on our financial results when denominated in US dollar. In local currencies, in each of our regions, I know that we grow ahead of what our US dollar nominated results suggest. Our success reflects ongoing and growing demand for relocation based product and telematics services in all our region. As well as traction for our new initiatives and services. We had a good first quarter, and I want to summarize some of our activities will continue to contribute to our growth and success. Israel, the high car theft rate, is providing strong demand for our services and enabling us to reach additional new subscribers from part of the market that we previously untapped by us. Such as lower priced new vehicles or the second hand car markets. Our usage based insurance business in Israel continue to gain strong traction.
21m 6s
Bringing us new subscribers and is one of the reasons why we continue to see strong subscriber growth in Israel. Our product for Motorcycle is gaining traction across all our geographies in South America, motorcycle significantly increased our total addressable market. And continue to represent a very significant untapped market for us in all our region. And as I mentioned earlier, during the first quarter, we were very pleased to have assigned new OEM agreement. With Talentis, our new OEM customer. Made a strategic decision to begin working with Ituran for telematics service and in March, started providing our services to their subscriber base. Stalentis is the largest car manufacturer in Latin America. Which includes Fiat, Jeep, Peugeot, and many others. They choose to work with us because of their satisfaction our technological and service capabilities. [indiscernible] contributing to both our top and bottom line, because we currently have wisdom and initial and limited OEM SVR service agreement, the Stalenti subscribers are at lower ARPU than day to run average. Following this initial agreement, we expect the near future to broaden our scope of services to Stellentis. We view this new OEM agreement as an important milestone expanding our OEM relationships globally.
22m 43s
We believe it opens the door to further collaborations with Talentis in additional geographies as well as the potential to provide additional telematics services to the customer base. We remain in discussion with a number of other major OEM car manufacturer in addition to those that we already work with. In order to bring our services to their subsidiaries elsewhere in South America. Ituran is a cash generating company and we generated $15,500,000 in operating cash flow during the quarter. Ituran is focused on shareholder value creation and as such, board of directors decided to issue a dividend of $10,000,000 to shareholders. I remind you that in q four, 2024, we increased our dividend policy by 25%, from issuing $8,000,000 per quarter to $10,000,000. This represent 50¢ per share. Our dividend yield on an annualized basis represents a return around of 6%, which is a 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. The first quarter was a quarter of continued growth for Ituran. Particularly in term of top line revenue and subscriber growth, as well as from a strategic perspective, bringing a new OEM relationship and deal to Ituran.
24m 25s
We believe we will continue to see growth throughout 2025, adding between two hundred twenty and two hundred forty thousand new subscribers. In 2025. At the same time, we look for more avenues for accelerating our business even further across all our regions. We are very pleased to have reached a major milestone of Ituran with two and a half million paying subscribers. I would like to thank and congratulate all our employees for this amazing achievement. And with that, I hand over to Eli.
25m 3s
Eli, please go ahead.
25m 5s
Thanks, Eyal.
25m 7s
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. First quarter revenues a record $86,500,000 a 2% increase compared with revenues of $85,000,000 in the first quarter of last year. The strengthening of the U. S. Dollar in the first quarter versus various local currencies in which Ituran operated in impacted the revenue when translated into U. S. Dollar. In local currency, revenues grew by 7% year over year. Revenues from subscription fees in the quarter were $62,200,000 an increase of 2% year over year and in local currency an increase of 9%. Product revenues in the quarter were $24,300,000 an increase of 1% year over year. In local currencies an increase of 3%. The subscriber base expanded to 2,508,000 by the end of the first quarter. An increase of 99,000 from the end of the previous quarter. The geographic breakdown of revenues in the first quarter was as follows: Israel, 55% Brazil, 23% rest of world 22%. EBITDA for the quarter was $23,300,000 or 26.9% of revenues. An increase of 4% compared with EBITDA of $22,300,000 or 26.3% of revenues. In the first quarter of last year.
27m 2s
In local currencies, EBITDA grew 12% year over year. Net income for the first quarter was $14,600,000 or diluted earnings per share of $0.73 an increase of 12% compared to $13,000,000 of diluted earnings per share of $0.66 in the first quarter of last year. In local currency, net income grew 20% year over year. Cash flow from operation for the first quarter of twenty twenty five was $15,500,000 As of 03/31/2025, the company had net cash including multiple securities of $75,700,000 This is compared with net cash including marketable securities of $77,200,000 as of year end twenty twenty four. The Board of Directors declared a dividend $10,000,000 for the quarter. The current dividend takes into account the company's continuing 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?
28m 28s
Thank you.
28m 29s
Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please use the raise hand button located at the bottom of your screen. The first question is from Sergey of Freedom Capital Markets. Please go ahead.
28m 58s
Good day, gentlemen. Do you hear me? Well?
29m 4s
Yes. Loud and clear.
29m 6s
So great. In terms of new agreements, does it imply you set up, your equipment and provide services for each produced car by Stellantis in Latin America or you have some options for for them, Hi, Sergei.
29m 30s
This agreement that we report that we published is currently at this stage as we said, is to provide services based on technology, which was already implemented in the past in the cars of [indiscernible] Of course, we see this agreement as an opportunity to broaden the relationship and probably in the future we hope that we will have the ability to add other services as well as hardware in some models. But this what we published yesterday is to provide services.
30m 28s
Okay. Got it. And is total effect on your subscription base in place It seems you raised your subscription base guidance range by 40 thousands in mid points, exactly what we saw in q one. Considering previous run rate So This this this agreement was hello? Yeah. Yeah. This agreement is in place since March, meaning in Q1, there is no almost almost zero influence. But it's also important for me to mention when we talk about services and specifically OEM deals, which was a large quantities, but which is with a lower ARPU. So it's taking time that it become material because don't forget, we hit we had before this quarter about 2,400,000 subscribers. The additional influence in the short term is smaller. But the important thing in each and one of these contracts is that we're talking about longer term relationship. We're talking about growing customer base from this customer and when it's a exponentially [indiscernible] the margins increase, so the contribution to the total results of Ituran will appear in the future but then it will be more material. But I don't think that it's it's the right way to judge a contract now for the next or for this quarter or for the next quarter [indiscernible] the customer base, the revenues that we have [indiscernible] at all are much higher than only this.
32m 34s
But in the future, these contracts will ramping up every month, every quarter it will be more contribution to our results.
32m 46s
Okay. But what what's what did primarily affect your ramp up of subscription base? Because recently, it was roughly 40 thousands per quarter, and now we see that it's roughly 100 thousands.
33m 11s
Actually, the agreement includes the first stage gaining to Ituran a bulk of Stellantis car owners okay, as a first stage And then they will continue on an annual basis based on their sales. So the number that we show at Q1 it's not a typical number. This is why we provide expectation that the next quarters will continue to be about 40,000 per quarter and not as Q1 almost 100,000. We got initial bank of customers at one time now Of course, they will be with us a few years according to the contract. But now every month, Stellantis will continue to add subscribers, but it will be not on the same level that the initial one was.
34m 18s
Yeah. I got it. That's that's exactly what I in. And now turning to your financial figures. Eddie, that's question for you. I I guess, product gross margin is increases substantially Have Ituran taken some steps to improve that, and what should we think about it for next couple of quarters?
34m 51s
Gross margin, if we split it to two, if we're talking about the gross margin relates to the [indiscernible] is actually improved a little bit and this is due to the operating leverage that we have in our business model. So if you are asking me for the future as long as we continue increase our subscriber base, I don't see any reason why the gross margin on the Telematics Services should improve a little bit. Regarding the telematics products gross margins, that increased then it relates to cost savings that we are doing all the time. [indiscernible] between the quarters because there is a mix of product that sometimes change from that you are selling one or more products with a different gross margin So that is a little bit of volatility as well.
35m 50s
Yeah. Thank you. Got it. And and what's about expenses? It seems your r and d and marketing expenditures rise faster than revenue. What what should we think about it? If I'm looking at the r and d expenses, it more or less represents about 5.5% of the revenues and it's quite stable along the time. So if you're asking me going forward that that's a reasonable assumption. To use for the future.
36m 25s
Okay. Understood. And think the last question is increased CapEx attributable to new agreements and what level, should we expect throughout 2025?
36m 43s
Yes. Regarding CapEx you have to remember that that's it includes a lot of consideration of volatility due to the fact of couple of things. One, the company is making purchases of machines vehicles and hardware. It's not [indiscernible] equally among the quarters. And second also inventory, will not say fixed assets inventory that we are using in Brazil and Argentina. That usually depends on that we can buy it on bulks and things like that. Q1 your question, was higher than the average.
37m 19s
But looking forward the CapEx should go down you would compare I mean the second quarter and moving forward.
37m 30s
Okay. Thank you. Got it. And yeah, I have one more question about insurance market in LatAm. Just wondering and would like to hear your thoughts about it. What do you expect from LATAM insurance market For instance, in Brazil, despite despite car thefts are declining, Insuring insurance cost rises rapidly. Especially for the most popular cars like Fiat. Do you consider it as a potential opportunity for Ituran in terms of consumer demand transitioning to UBI? Insurance What do you perspectives for the next couple of years on on that sales field?
38m 20s
First of all, we see declining cost of freight. We have to understand that with all the respect to Ituran, when we have a few hundred thousands of cars, when we talk about tens of millions driving on the roads, still we usually have more a better approach to cars which are more popular to be distilling, whether it's insurance companies or even [indiscernible] We are we don't see the trend that you mentioned. I know that some models sometimes it has a volatility, but overall we see high demand in Brazil for car sales solution. Specifically the insurance companies that we work with and especially the audience we talk about IntoOne Conseguro, that we approach. So we don't see the Regard UBI, I said it in the past, we're always knocking on the doors our partners, the insurance companies, [indiscernible] and provide them this solution Unfortunately, Brazil as well as Mexico, which is the two largest countries in South America the insurance companies are not willing to explore this journey, which mean to change their [indiscernible] methodology. And implement software and integration with this solution. So the only country, by the way, that we succeed to have some deals, it's Argentina.
40m 10s
But things I think that the competition between insurance companies the digital insurance companies' penetrations prices that should that go went down and will continue probably will create more vertical ground for accepting a UBI solution. And once it will happen, I believe and we do the best that we can to be there based on the strong relationship that we have with major players in the insurance But currently, Brazil and Mexico in the short future are not the market that we expect to sell the UBI.
40m 57s
Yeah. That's all from me. Thank you for taking my question, gentlemen.
41m 4s
Thank you. The next question is from Chris Reimer of Barclays. Please go ahead.
41m 13s
Hi, thanks for taking my questions and congratulations on the strong results. I'd like to you mentioned the lower ARPU for customers on deals of the type of of Stellanis with the bulk. [indiscernible] I was wondering if you could talk a little bit about the attrition rates and customers that, leave or are finished with their contracts is the does it work that you get new customers at a higher ARPU or because of these large deals, are some of the new customers coming in at a lower ARPU than the ones that are leaving?
41m 58s
First of all, it should be clear. The our customer is Stellantis. I mean all the accounts and the calculation and the ARPU and everything done through them. The customer get it as a free trial as a part of, let's say, like having the car, he has this services. Which for us is good because we don't have to convince the customer, we have to work consumer by consumer The checks come from one institutional player, etcetera. But once the time, which is usually between two to three years, sometimes five years, of this free [indiscernible] We have the ability to approach the customers when they finish the free trial and to offer them the services, which by the way has two additional, I would say, benefits. First of all, the prices that we offer the renewals are higher [indiscernible] convince talent is to pay for hundreds of thousands subscribers, of course, it's it's related to a very high discount or high lower ARPU or to a lower ARPU When you go customer by customer, when we do the renewals, if they had satisfaction with the three or five years of services it will be easier for us to convince him to pay a higher service fees.
43m 37s
So this is this is the situation here. We don't have the churn, I would say, is lower because there is no economic pressure on the driver or the car owner.
43m 53s
Got it. Yeah. Okay.
43m 55s
The way, the situation is all the OEM deals. Now regarding the ARPU, I don't I'm not sure if you ask me specifically, but I will add that the output is lower because it's only service. There is no we are not at least any hardware, which we have to integrate it in the monthly service fees. Like we do, for example, with the Nissan. So it's only the service, so it's lower. Second, we are talking about kind of services that since we don't have the hardware and all the back office related to the hardware, So the margins are dramatically higher than a typical service or full connected car services which the ARPU is higher, but but the gross cost also higher. The direct cost also higher. So the margin is higher here.
44m 56s
Got it. Thanks. That's that's really helpful. And I was wondering if you could talk a little about the dynamics in the the market for the product revenues and how you see the pipeline evolving throughout the year?
45m 13s
Theoretically, again, usually the pipeline regarding we have ordered but it's on a daily basis that we receive. Of course, are some backlogs of orders that we know from OEMs that we plan and we manufacture the units in order to provide it. So we already always to promote or to provide the deliveries to our customers. So we have stock, enough stock whenever they need. Of course, based on demand, of course, we can increase the inventory or reduce the inventory based on that. Regarding the gross margins that you mentioned, that's really there is a lot of volatility over here. Along the quarter. And this is why it's very hard to say, but I would say even going forward around 20%, 25% makes sense to me on a gross margin for the product revenues. But it depends on the product mix.
46m 23s
Thank you.
46m 24s
There are no further questions at this time. Before I ask Mr. Sharotsky, to go ahead his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on Ituran's website www.ituran.co.il. Mr. Chiratsky, you like to make your concluding statement?
46m 46s
On behalf of the management of Ituran, I would like to thank you our shareholders for your continued interest and long term support of our business. If you are interested in meeting or speaking with us, feel free to reach out to our Investor Relations team.
46m 59s
And with that, we end our call. Thank you and have a good day.
47m 5s
Thank you. This concludes the Ituran first quarter twenty twenty five results conference call. Thank you for your participation. You may go ahead and disconnect.
Key Insights
Ituran reported record Q1 2025 revenues of $86.5M, up 2% year-over-year (7% in local currencies), with subscription revenues of $62.2M (+2% YoY, +9% in local currencies) and product revenues of $24.3M (+1% YoY, +3% in local currencies).
The company added 99,000 net new subscribers in Q1, reaching a milestone of 2,508,000 total subscribers, driven by a new telematics service agreement with Stellantis, the largest car manufacturer in Latin America.
Ituran raised its 2025 net new subscriber guidance to 220,000–240,000 (implying 120,000–140,000 net adds over the next three quarters), noting that Q1 included a one-time bulk addition from Stellantis and future quarters will return to a more typical run rate.
Q1 EBITDA was $23.3M (26.9% margin, +4% YoY; +12% in local currencies), and net income was $14.6M ($0.73/share, +12% YoY; +20% in local currencies). Operating cash flow was $15.5M; net cash at quarter-end was $75.7M.
The Board declared a $10M quarterly dividend ($0.50/share, ~6% annualized yield), reflecting strong profitability and cash flow; CapEx is expected to decrease in coming quarters after a higher Q1, and gross margins are expected to remain stable or improve slightly due to operating leverage and cost savings.
