Q3 2023 Ituran Location and Control Ltd Earnings Call
Speaker 1: The o Stud ure the o Stud, but that is needed.
Good evening everybody.
[music].
Speaker 2: Ladies and gentlemen, thank you for standing by. Welcome to the ITURAN third quarter 2023 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.
Ladies and gentlemen, thank you for standing by welcome to the two run third quarter 2023 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 for operator assistance during the conference. Please press Star zero.
Speaker 2: For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact each of Ron's investor relations team at ekglobalinvestorrelations.com.
Mind you. This conference is being recorded you should have all received by now the Companys press release, if you have not received it please contact <unk> Investor Relations team at E. K Global Investor Relations at one to one to $3 788040 or view it in the news section of the company's website www.
Speaker 2: 1-212-378-8040 or view it in the news section of the company's website www.eturan.co.il
Got to run that C O that I am I will now hand over the call to Mr. Kenny Green of Ek Global Investor Relations. Mr. Green would you like to begin.
Speaker 2: I will now hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin? Thank you.
Thank you.
Speaker 3: Good day to all of you and welcome to ITERUN's conference call to discuss the third quarter 2023 results. I would like to thank ITERUN's management
Good day to all of you and welcome to each Rums conference call to discuss the third quarter 2023 results.
<unk> management for hosting this conference call with me today on the line are Mr. Al <unk> CEO, Mr. Mizrahi, Deputy CEO, and VP finance and Mr. <unk> and Mr. Eddie camera CFO of each one.
Speaker 3: With me today on the line are Mr. Eyal Sharatsky, CEO , Mr. Udi Mizrahi, Deputy CEO and VP Finance, and Mr. Eli Kamar, CFO of Ituran.
Speaker 3: A.L. will begin with a summary of the quarter's results, followed by Ellie with a summary of the financials. We will then open the call for the question and answer.
Hey, I'll begin with a summary of the quarter's results followed by an even a summary of the financials. We will then open the call for a question and answer session.
I'd like to remind everyone that the safe Harbor statements in the press release, we issued earlier today also covers the contents of this conference call.
Speaker 3: I'd like to remind everyone that the Safe Harbour Statement in the press release we issued earlier today also covers the contents of this conference.
Speaker 4: And now, Eyal, would you like to begin, please? Thank you, Kenny. I'd like to welcome all of you to our third quarter 2023 call. And I would like to thank you for joining us today.
Now would you like to begin please thank you Kenny I'd like to welcome all of you to our third quarter 2000, Twenty's recall and I would like to thank you for joining us today.
Speaker 4: We are pleased with our results of the third quarter. T1 business remains strong and in a solid growth phase. Our subscriber base continues to show strong growth, adding 45,000 aftermarket subscribers, as well as 3,000 OEM subscribers.
We are pleased with our results of the third quarter to one business remained strong and solid growth space. Our subscriber base continued to show strong growth, adding 45000 aftermarket subscribers as well as 3000 OEM subscribers.
Speaker 4: net which is well ahead of our long-term rate we had in 2021 and earlier of between $20,000 to $25,000 per quarter.
Net which is well ahead of our long term rate we had.
In 2021 in earlier of between 20 to 25000 per quarter.
Speaker 4: The ongoing growth in our subscriber base continues to benefit our financial results, and Q3 subscription revenues grow at 12% year-over-year.
The ongoing growth in our subscriber base continues to benefit our financial results and Q3 subscription revenues grow at 12% year over year.
For the past few quarters, our subscription fees have been constantly.
Speaker 4: For the past few quarters, our subscription fees have been constantly at new record levels and our profits, measured in either net income or EBITDA, have been at multi-year highs.
A new record levels in our brokerage measured in Ada and net income or EBITDA had been at multi year highs.
Speaker 4: As you can imagine, we are pleased with our results and the progress we have made in 2020.
As you can imagine we're pleased with our results and the progress we have made in 2023.
Speaker 4: As we discuss our quarterly results, I would like to discuss the recent war in Israel.
As we discuss our quarterly results I would like to discuss the recent war in Israel.
Speaker 4: First and foremost, our thoughts are with those affected by this event.
First and foremost our thoughts are with those affected by these events.
Speaker 4: As I said a few weeks ago, Israel is a small country, such that everyone knows a family that has either had a son, daughter, parent or grandparent murdered or kidnapped by Hamas.
As I said, a few weeks ago, Israel is a small country such that everyone knows a family that has had his son and daughter parents or grandparents matter, while keeping up by how much.
Speaker 4: We pray for the victims as well as their families, friends and loved ones.
We pray for the victims as well as their families friends and loved ones.
Speaker 4: I stress that we are resilient people and unfortunately have much experience in working and overcoming challenging times.
I stress that we are resilient people and unfortunately have much experience in working in overcoming challenging times.
Speaker 4: E-Turan is a globally diverse business with operations primarily in Israel and Brazil, but also in many other countries in Latin America, as well as elsewhere in the world. And therefore, any impact in one specific region will have a limited effect on E-Turan's overall performance.
It's run as a globally diverse business with operations, primarily in Israel, and Brazil, but also in many other countries in Latin America as well as elsewhere in the world and therefore any impact in one specific region, we let a limited effect on.
It runs overall business.
Any impact is obviously localized to Israel only occurring in Q4, we would expect the overall subscriber growth rate to slow somewhat to between 30030 5000.
Speaker 4: Any impact is obviously localized to Israel only, currently. In Q4, we would expect the overall subscriber growth rate to slow somewhat to between 30,000 and 35,000.
Speaker 4: This will be due to the longer period of lower car sales in Israel in October , initially due to the holiday season, which seasonally recurs every year, and following that, an extended fuzz, to the breakout of war. There will also be some additional expenses related to mitigating some of the negative effects of the war and in supporting our communities that have been affected.
This will be due to the longer period slower car sales in Israel in October initially due to the holiday season, which seasonally recurs every year and falling debt and extend its close to the breakout of fall. There will also be some additional expenses related to mitigating some of the negative FX Gupta.
A war and in supporting <unk>.
Our communities that have been affected overall, we extent, we expect that the impact from the war on our performance for the EU will not be significant at all.
Speaker 4: Overall, we expect that the impact from the war on our performance for the EU will not be significant at all.
Speaker 4: Naturally, the safety and well-being of our employees remains our highest priority.
Naturally the safety and wellbeing of our employees remains our highest priority. We continue to closely monitor the situation and we have in place measures to ensure the safety of our employees, while maintaining global business continuing.
Speaker 4: We continue to closely monitor the situation and we have in place measures to ensure the safety of our employees while maintaining global business continuity.
I am very proud of the courage and commitment of each run scheme, both in Israel and globally and wish to personally thank them for their resilience and dedication during these times.
Speaker 4: I am very proud of the courage and commitment of the Ituran team, both in Israel and globally, and wish to personally thank them for their resilience and dedication during the pandemic.
Speaker 4: Given our ongoing cash generation and our strongly increasing net cash level, starting from the current quarter we have decided to revert to our former dividend policy and increase our dividend from $3 million per quarter to $5 million per quarter.
Given our ongoing cash generation and our strongly increasing net cash level starting from the current quarter, we have decided to revert to a formal dividend policy and increased our dividend from $3 million per quarter to $5 million per quarter.
Speaker 4: We are very pleased to share the fruits of our ongoing profitable growth and it is a reward to our loyal shareholders for their long-term support of our company.
We are very pleased to share the fruits of our ongoing profitable growth.
And as a reward to our loyal shareholders for their long term support of our company.
In summary.
Speaker 4: 2023 continues to be a solid year of performance for it to run in all respects.
2023 continues to be a solid year of performance for it to run in all respects.
Speaker 4: Solid performance in our traditional aftermarket business as well as stability in the OEM business. And especially the growth engines we have seeded in the past years are all driving our strong subscriber growth and record revenue.
Solid performance in our traditional aftermarket business as well as stability in the OEM business and especially the growth engines, we have seen it in the past few years are all driving our strong subscriber growth and record revenue.
While the war in Israel, we left some marginal impact only to run our growing two point Tor $2 2 million <unk> subscriber base globally paying us continuously on an ongoing monthly basis for our ongoing services.
Speaker 4: While the war in Israel will have some marginal impact on Tehran, our growing 2.2 million close subscriber base globally is paying us continuously on an ongoing monthly basis for our ongoing services.
Speaker 4: provided us with significant resilience, even in more challenging environments.
Provided us with significant resilience, even in a more challenging environment.
Speaker 4: as has been true throughout our long history, and will continue ahead.
As has been true throughout our long history, and we'll continue ahead.
Our constantly growing subscriber growth will continue to translate into increased revenues with faster growing profitability over the long term due to the operating leverage inherent to our business.
Speaker 4: Our constantly growing subscriber growth will continue to translate into increased revenue.
Speaker 4: with faster growing profitability over the long term due to the operating leverage inherent to our blockchain.
Speaker 4: For the foreseeable future, we anticipate the overall growth trend that have characterized Yituan over many years will continue.
For the foreseeable future, we anticipate the overall growth trend.
Characterized each one over how many years will continue.
Speaker 5: And with that, I hand over to Eli. Eli, please go ahead. Thanks, Eyal. I will provide a short summary of the financial results. You can find the more detailed...
And with that I hand over to it early.
Always.
Thanks Al.
I will provide a short summary of the financial results you can find the more detailed results.
Issues in the press release earlier today.
Speaker 5: Revenue for the third quarter of 2023 was $81.1 million.
Revenue for the third quarter of 2023 were $81 1 million daus.
Speaker 5: 12% increase compared with revenue of $72.7 million last year.
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Percent increase compared with revenue of $72 $7 million last year.
In local currency the year over year growth was 13%.
Speaker 5: In local currencies, the year-over-year growth was 13%.
Third quarter revenue from subscription fees were $62 million, an increase of 13% over the third quarter 2022 revenue.
Speaker 5: Third quarter revenue from subscription fees were $60.2 million, an increase of 13% over the third quarter 2022 revenue.
Speaker 5: In local currency, the year-over-year growth was 40%.
In local currency the year over year growth was 14%.
The subscriber base amounted to $2 million 210000 as of September 32, 20 class III.
Speaker 5: The subscriber base amounted to 2,210,000 as of September 30, 2021.
Speaker 5: This represents an increase of 48,000 nets over that of the end of the period quarter and an increase of 190,000 year-over-year.
This represents an increase of 48000 net over that of the end of the third quarter and an increase of 190000, there year over year.
Speaker 5: During the quarter, there was an increase of 45,000 in the aftermarket subscriber base and an increase of 3,000 in the OEM subscriber base.
During the quarter there was an increase of 45000 in the after market.
Scribe birthdays and an increase of 3000 and the Oems are thriving.
This quarter products revenue were $29 million, an increase of 7% compared with that of the third quarter of 2022.
Speaker 5: Third quarter product revenue were $20.9 million, an increase of 7% compared with that of the third quarter of 2020.
Speaker 5: The geographic breakdown of revenues in the third quarter was as follows. Israel 47%, Brazil 28%, rest of world 25%.
The geographic breakdown of revenues in the third quarter was as follows Israel, 47%, Brazil, 28% rest of 425%.
Speaker 5: EBITDA for the quarter was $22.5 million or 27.8% of revenues, an increase of 15% compared with an EBITDA of $19.6 million or 27% of revenues in the third quarter.
EBITDA for the quarter was $22 $5 million or 27, 8% of revenues an increase of 15% compared with.
EBITDA of $19 6 million or 27% of revenues in the third quarter.
Last year.
Speaker 5: local currencies, the year-over-year growth was 14%.
Local currency the year over year growth was 14%.
Speaker 5: Net income for the third quarter was $12.5 million or 15.4% of revenue.
Net income for the third quarter was $12 $5 million or 15, 4% of revenue or diluted earnings per share of 63%.
Speaker 5: or diluted earning per share of $0.63, an increase of 24% compared to $10.1 million
An increase of 24% compared to $10 $1 million.
Speaker 5: or 13.9% of revenues of the loser's earnings per share of $0.49 in the third quarter of last year.
Or 13, 9% of revenues our diluted earnings per share of <unk> 49 cents in the third quarter of last year.
Speaker 5: In local currencies, the year-on-year growth was the same at 24%.
Local currency the year over year growth was saying and 24%.
Speaker 5: Cash flow from operations for the third quarter of 2023 was $20.5 million.
Cash flow from operation for the third quarter or 23 $125 million.
Speaker 5: On the balance sheet, as of September 30, 2023, the company had cash including marketable securities of $40 million and a debt of $2 million, amounting to a net cash of $38 million. This is compared with cash including marketable securities of $20 million.
On the balance sheet as of September 23, the company had cash, including marketable securities of $40 million and a depth of $2 million amounting to a net cash of $38 million. This is compared with cash including marketable securities.
Securities of 28.
Speaker 5: 8.2 million dollars and a debt of 12.2 million dollars amounting to a net cash of 16 million dollars as of December 31, 2021.
$8 $2 million and a depth of $12 2 million daus amounting to a net cash of $16 million as of December 31st 2022.
The board of directors declared that starting from the third quarter 2023, the company will return to its former dividend policy, which had been in a place of continue until the fourth quarter of 'twenty.
Speaker 5: The Board of Directors declared that starting from the third quarter 2023, the company would return to the European Union.
Speaker 5: its former dividend policy which had been in a place of continue until the fourth quarter of 2019. The former dividend policy and dividend policy going forward from the current quarter will be for the issuance of five million dollars dividend per quarter. This represents a 67% increase.
2019, the former dividend policy and dividend policy going forward from the current quarter will be for the issuance of $5 million dividend per quarter. This represents a 67% increase.
Speaker 5: from the more recent policy of $3 million dividend.
The more recent policy.
$3 million dividend per quarter.
In the third quarter under the buyback program. It was purchased 76000 shares for a total of $1 9 million.
Speaker 5: In the third quarter, under the buyback program, it won purchase 73,000 shares for a total of $1.9 million.
Speaker 5: Share repurchases were funded by available cash and repurchases of its run ordinary share were made based on SEC Rule 10B-18.
Share repurchases were funded by our valuable cash and repurchases of at rock ordinary share what may based on FCC rule <unk> 18.
Speaker 5: And with that, I'd like to offer the call for the question and answer session.
And with that I'd like to open the call for the question and answer session operator.
Speaker 2: Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your question.
Thank you ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment can do lift the handset before pressing the numbers questions will be pulled in the order. They RSC. Please standby, while we poll for your question.
Yeah.
Speaker 2: The first question is from Chris Reimer of Barclays, please go ahead.
The first question is from Chris Reimer of Barclays. Please go ahead.
Speaker 6: Hi, thanks for taking my questions and congratulations on the strong results. I wanted to ask about Israel, given your exposure, both in terms of revenues and employee base. You noted the weakness in subscribers for the next quarter, but I was wondering if you could discuss a little further the impact and if it might impact margins, et cetera, you know, just how things are playing out.
Hi, Thanks for taking my questions and congratulations on the strong results.
I wanted to ask about Israel, given your exposure both in terms of revenues and employee base.
You know today, the weakness and subscribe issues in the next quarter, but I was wondering if you could discuss a little further the impact and if if it might impact margins et cetera. You know just just how things are playing out.
Hi, it's as I said it.
Speaker 4: Hi, as I said, as we are expecting, what we see on the daily work is that it will not be significant, as I said.
As we expecting is it what we see on the day. The work is that it will not be significant as I said, but we have to consider the situation in the car our showrooms and our first module this quarter, which was October.
Speaker 4: We have to consider the situation in the car showrooms and the first month of this quarter, which was October . And in October , we had two, I would say, influences on the Israeli car sales market. One was the holidays, which is something which happens almost every year between September or October .
October we had the two I would say influences on these rarely car sales.
Market, one was the holidays, which is something which is happen almost every year.
In September or October, which it's a holiday in most of the.
Speaker 4: It's a holiday, and most of the showrooms are closed. Add to this the situation that was started on October 7, which led to about two weeks of shutdown of all the Israeli, I would say, economic world. Today, we see again that everything is ramping up again.
Showrooms are closed.
Is the situation that we will started in October 7th which leads to about two weeks of shutdown of all these really I would say economic work.
Today, we see again that everything is ramping up again.
Speaker 4: Things are starting to come to a normal, let's say, a normal business base, but it's something that it's still not in 100 percent. And in order to be conservative, that's why we're expecting this.
The things are start to come.
Come to a normal let's say a normal business days.
But it's something that it's still not 100% and in order to be conservative. That's why we are expecting do you say.
Speaker 4: let's say, this slowdown for Q4. But when we look at the graph now, we absolutely see that this is a very, very, very, very, very slowdown for Q4.
Let's say you say slow down for Q4.
But when we look the the graph now we absolutely are.
Got it.
Speaker 4: We're expecting that it will be one quarter influence, or maybe one more month, because we see that, as I said, the Israeli people and the Israeli economy is now starting to come back.
Expecting that a it will be one quarter influence or may be one more months, because we see that the as I said these rarely people in the Israeli economy is now starting to coming back.
Speaker 4: So it will not be significant. Add to this some expenses, as I said, that in Israel we have people that went to reserve, so we have to support the families, et cetera, which is a one-time expenses. Again, it's not material, but I felt duty to mention it.
So it will not be significant and to do some expenses as I said that are in Israel. We have people that went to reserve. So we have to support families et cetera, which is a one time expenses again, its not material, but they felt duty to mention it.
Speaker 6: Got it. Got it. Thanks. And then just about some of the market dynamics. Can you give any color in Brazil on how things are looking there and especially what kind of traction you're seeing with the deal with Santander?
Got it got it thanks.
And then just about coming to market dynamics can you give any color in in Brazil.
How things are looking there and especially what kind of traction you're seeing with the deal with Santander.
Speaker 4: Brazil is on the same, I would say, the same situation and trends, and we faced it during the last almost two years, which is a very strong demand, first of all from the stolen vehicle recovery needs, which is our, I would say, problem.
Brazil is a on the same I would say the same situation in trends and we faced during the last almost two years, which is a very strong demand first of all from the stolen vehicle recovery needs, which is where I would say.
Uh huh.
Bread and butter of our business.
Speaker 4: Second, the B2B businesses, which we started with Santander, as we, of course, as we...
Second the a and b to B businesses, which we started with sometime there is we are of course is if we are.
Reported these businesses are you said typical b to B based on contracts based on the numbers we have to consider.
Speaker 4: reported. This business is a typical B2B based on a contract, based on numbers. We have to consider.
Got a few things we check.
Speaker 4: few things which, since we started it as a pilot and then the contract was signed, but we almost, almost...
Since we started as a pilot and then the contracts were signed but we almost.
Almost.
Speaker 4: after 12 months working.
After 12 months working.
Speaker 4: with Santander in different phases of this contract, we have to understand that in a few months we start seeing also churn. So this will turn from a new contract to a very, I would say, material cash cow contract. But with this we go to, or we will do our best to expand it.
With Santander in different phases of this contract we have to understand that a in a few months. We start seeing also chair. So this will turn from a new contract to a very I would say a material cash cow contract.
But with this we go to or we will do our best to expand it to.
Speaker 4: to all other banks or other segments. And I would say now, with no any commitment, of course, that this deal makes a lot of attraction in the Brazilian market for solutions, not only for banks, it's for banks, for rental companies, et cetera, for our solutions. And we have today.
Two or other banks or other segments.
And I would say no.
Eh with no any commitment of course that this deal makes a lot of.
Attraction in the Brazilian market for solutions, not only for banks for banks for rental companies et cetera for our solutions and we have today.
A series of discussions with other players also from the OEM market and I hope that during 2024.
Speaker 4: seeds of discussions with other players also from the OEM market and I hope that during 2024 we will be in a position to have maybe a new contract, maybe a new deal.
We will be in a position to have a maybe a new contract maybe than you do.
Uh huh.
Speaker 4: which will again, which will allow us to grow to the next years.
Which will again, which will allow us to grow food.
The next two years so.
Speaker 4: To make this long story short, Brazil is in a very good situation, very good trend, and we have to take care for our future growth as well.
To make this a long story short Brazil is in a very good situation very good trend and we have to take care for our future growth as well.
Great. Thanks for that that's it for me.
Speaker 2: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions.
If there any additional questions. Please press star one if you wish to cancel your request. Please press star two please standby, while we poll for more questions.
There are no further questions at this time before I ask Mr. Sharansky to go ahead with his closing statement I would like to remind participants that a replay of this call will be available tomorrow I need to Ron's website Www Daddy to run that C. O that IL Mr. Chau Roski would you like to make is.
Speaker 2: There are no further questions at this time. Before I ask Mr. Sharotsky to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on EITURON's website, www.eituron.co.il. Mr. Sharotsky, would you like to make your concluding statement?
Concluding statement.
On behalf of the management of it to run it we'd like to thank you our shareholders for your continued interest and long term support for our business. We hope to be speaking with some of you all for the coming quarter and if you are interested in meeting or speaking with us feel free to reach out or investor relations team and was that window or call. Thank you and have a good day.
Speaker 4: On behalf of the management of Ituran, I would like to thank you, our shareholders, for your continued interest and long-term support for our business.
Speaker 4: We hope to be speaking with some of you over the coming quarter, and if you are interested in meeting or speaking with us, feel free to reach out or invest a relationship.
Speaker 4: And with that, we end our call. Thank you, and have a good day.
Speaker 1: Thank you. This concludes the Tehran third quarter 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.
Thank you. This concludes the to run third quarter 2023 results conference call. Thank you for your participation you May go ahead and disconnect.
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