Q1 2024 Ituran Location and Control Ltd Earnings Call

Okay.

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Ladies and gentlemen, thank you for standing by welcome to the two ones first quarter 2024 results conference call. All participants are at present in listen only mode.

Following managements formal presentation instructions will be given for the question and answer session for operator assistance during the conference. Please press Star zero.

As a reminder, this conference is being recorded.

Have all received by now the Companys press release, if you have not received it please contact <unk> Investor Relations team at 8-K Global Investor Relations at one to one to 3788040.

All view it in the news section of the company's website.

And how about Ww.

Hey, Turan.

Speaker Change: But I am.

I would now hand over the call to Mr. Kenny Green.

VK Global Investor Relations, Mr. Green would you like to begin thank you operator Saar.

Good day to all of you and welcome to <unk> conference call to discuss the first quarter 2024 results.

I would like to thank <unk> management for hosting this conference call.

With me on the line today are Mr. <unk> <unk> CEO Mr. Levine.

<unk>, Deputy CEO, and VP finance and Mr. <unk> <unk> CFO of each one.

<unk> will begin with a summary of the quarter's results followed by heavy with the summary of the financials.

Then open the call for the question and answer session I would like to remind everyone that the safe Harbor statements. In today's press release also covers the contents of this conference call and now I am pleased please begin.

Kenny: Thank you Kenny I'd like to welcome all of you to our first quarter 2024 call and I would like to thank you for joining us today.

We are pleased with our results, especially in the ongoing growth in revenues and continued improvement in profits as well as the additional net subscribers were brought in the quarter, which came in at the high end of our expectations.

As our strong financial results demonstrate our business remains in good shape and continue to be resilient against challenges.

I also want to highlight the bulk of our desires is due to it run being a globally diverse business with a loyal subscriber base of $2 3 million customers in Israel, Brazil, and other countries in Latin America, and they're around the world.

Our subscriber base.

Kenny: <unk> 9000 subscribers in the quarter.

High end of our expectation of between 35040 thousand net new subscribers per quarter.

This is well in advance of the long term rate we had in prior years, which was typically between 20020 5000 per quarter and has come about due to a more diverse global footprint as well as the new service, we continue to bring to our end markets I.

Speaker Change: I would like to highlight what is happening in the Israeli market.

In recent quarters, we've seen steady rise in <unk>.

Which has somewhat identified in the last quarter.

As a result, the insurance companies are pushing their customers to install an SCR unit and connect to the theft prevention service even in vehicles that are not new or have a lower initial value than in the past.

The outcome of this is that the SPL penetration has gone up and our them has grown and we as the clear market leader are enjoying an accelerated growth of subscribers in Israel.

Given the strong net cash position of $53 9 million and our ongoing growth in our solid profitability. We are pleased to again declared a quarterly dividend of $8 million in line with the dividend policy. We updated just last quarter. We are very pleased to share there.

The fruits of our success and we see our ongoing debate.

There's a reward to our loyal shareholders for their long term support of our company.

Given the stability of our business last quarter, we began to provide EBITDA guidance. In addition to the guidance on subscriber growth, which we used to do it.

As a reminder for 2024, our guidance is fully EBITDA of between 90 and $95 million and we expect to cross the $100 million EBITDA landmark in 2025, we believe that our first quarter results put us well on track and we re trade.

This expectation.

We expect subscriber growth to continue growing at around current rates of between 35, and 40000 net new subscribers per quarter.

Note that this expectation as of today, our EBITDAX dictations out based on relevant currency levels remaining around current average rates and assumed this current global macro economic situation globally and political situations specifically in Israel the lost significantly worsen.

In summary, the first quarter of 2024 has started very well with solid performance and we believe the 'twenty 'twenty four will continue on this trend.

Leave a dollar a constantly growing subscriber growth will continue to translate into increased revenues increased gross profit with faster growing profitability over the long term due to the operating leverage inherent to our business.

And with that I hand over to an early season go.

Got it.

Thanks.

I will provide a short summary of the financial results you can find a more detailed.

Without that we issued in the press release earlier today.

First quarter revenues were $85 million and.

7% increase compared with revenue of $79 5 million last year.

Revenues from subscription fees in the quarter were $69 million.

An increase of 9% over the first quarter 2023 revenues.

Product revenue at the end of the quarter were $24 1 million, an increase of 2% year over year.

The subscriber base expanded to $2 million 291000 by the end of the first water and.

An increase of 39.

Tell them.

From the end of the previous quarter during the quarter. There wasn't an increase of 33000 net and the aftermarket subside subscribers base and an increase of 6000 net and the Oems are frightening thing.

The geographic breakdown of revenues in the first quarter was this fall he Israel, 52%, Brazil, 26% rest of world 22%.

EBITDA for the quarter was $22 $3 million.

Or 26, 3% of revenue.

An increase of 7% compared with EBITDA of $28 million or $26.

Speaker Change: Percentage of revenue in the first quarter of last year.

Net income for the first quarter was $13 million or diluted earnings per share of <unk> 66 per ads.

An increase of 15% compared to $11 4 million or diluted earnings per share.

56 cents in the first quarter of last year.

Cash flow from operations for the first quarter of 'twenty Homewood.

11 point for me and this law.

As of March 31st 2024, the company had cash, including marketable securities of $54 $2 million and desktop zero point $3 million.

Mounting to a net cash position of $53 $9 million. This is compared with cash, including marketable securities of $53 6 million in.

In depth of zero point $6 million.

Amounting to a net cash position of $53 million as of year end 2023.

The board of directors declared a dividend for the quarter of <unk>.

$8 million in line with the company's recently updated dividend policy, which was increased by 60% in the quarter.

The current dividend it takes into account the company's continued strong for stability 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. 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 kind of lift the handset before pressing the numbers.

Speaker Change: Your questions will be pulled in the order that they're received please standby while we poll for your questions.

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

Yeah, Hi, Thanks for taking my questions and congratulations on the strong results I wanted to ask if you could comment about the product mix.

As clean as it pertains to the gross margin.

Any comment on I'm moving parts around that would be helpful.

Hi, so.

Basically during the.

The first quarter of 2024.

Our sales, which are derived from the Israeli air.

The market was a much higher than the average since we had to compensate Q4 when the war. He was started and there was almost a shutdown of a two months, which wherever our October and November so I think that takes.

Not a typical quarter in terms of the ratio between yourselves and the services.

This is basically the major different it's not represent a full award the sales amount.

Got it.

And more specifically also around Israel can you comment on any of the trends you're.

You're seeing Ah versus last quarter, and if maybe you're seeing some traction that you're seeing.

Now outperforming your expectations.

Yes, so the situation in Israel, and it's a decent start.

Cause of the war so it's kind of a trend that started soon after the COVID-19 and need say ramped up in the last two years and.

Today, we are facing a material I would say our growth in cost of freight when costs afraid. He is high it's I mean, the insurance companies are increasing the insurance premiums and they're also much more.

And needs.

Security solutions for the car to prevent these cost saves and in that case.

When we are the dominant player.

In Israel by providing the solution, we see a high traction I request and as I said in my speech, we are even facing something that we never faced in the 30 years of since the inception of the company is dipped even car models, which.

Let's call it second hand that when they are and what's bolt is a brand new cars, three and five years ago and they didn't.

<unk> installed security and look in the S&P our solution today, when they come to renew their insurance policy that we're required to put a location in SVR solutions and it's mean that are as you mentioned we are see.

Growth in Israel, which is a more than we expected for D. C. Yes.

Oh, that's great. Thanks, that's it for me.

Ladies and gentlemen, if there are any additional questions. Please press star one if you wish to cancel your request. Please press star two please.

Please standby, while we poll for more questions.

The next question is from.

Boris Snyder.

A more mutual funds. Please go ahead.

Yes, hi.

Just a question on your 20-F.

And the growth in Brazil, which is actually even higher than that the girls in Israel.

If you could speak on.

What's driving that.

And how do you see this going forwards.

Just to be clear the 20-F is actually.

Representing.

<unk> 2023.

And I can Oh of course.

Given formation regarding 2023.

And as you remembered.

During the end of 'twenty, two we signed a contract with a center their bunk regards providing gas solution for a finance.

The financing to date provide for car.

For car buyers and this and support our growth in Brazil in 2023, each continue by the way because it's under the contract also in 2024, but we have to take into consider that there is always after 18 months. This is the contracts it should so the gross.

From Santander by by definition will will decrease although we are selling at the same quantities.

But the growth is is not the same as when the contract started because always at the beginning there was no children. After 18 months in the Chinese come so I'm not expecting that at 24 in Brazil will be the same growth as it was in 'twenty three.

But on the other segments, we are not see any dramatic changes, meaning are we continue to sell our research solution. There is always some volatility between months isn't the expectations are to keep the same man numbers and looking forward.

And we are doing a lot of Ah I would say the work in order to penetrate new segments and expanded financial.

Yeah.

Customers, So I fault.

Docking for it mid and longer term I am expecting that we will continue to show growth in Brazil.

Okay.

And previously you mentioned also.

Several calls I think you mentioned it.

On the insurance.

Motorcycles.

Speaker Change: <unk>, which is the vertical that you didn't penetrate in Brazil.

Is there any update on this.

Yes of course, he said there was no uptick we just started to sell Oh.

Solutions for motorcycles is something quite new so we'd still not has a dramatic influence our subscriber base in Brazil, but we see again that it's ramping up and I believe that as always when you issue a new solution for in your segment each.

And when we were talking about subscribers and when the company has a $2 3 million. So it's taking time until it's something that needs to become more material. So I believe that during 2025 2026 day, a multiple cycles segments, we support.

The additional growth that we expect.

Speaker Change: Unless two final questions.

Gross margin for your product.

No even though then during the.

The crisis of the supply chain.

Well, so as you think about the future quarters.

Yeah, It was a little bit low like 4% less but you need to remember that usually there is a mixture of products that we are selling all over the countries. So basically this is the range more or less of let's say gross margin of 20% a little bit up or down but that that's the range.

Thanks.

Okay.

There are no further questions at this time.

Speaker Change: Before I ask Mr. Sharon I forget to go ahead with his closing statement.

I would like to remind participants that a replay of this call will be available tomorrow on its website at www dot two onto T O I L. B.

Ehud Helft: So ask me would you like to make a closing statement.

Yes on behalf of the management of it to Ron I would like to thank you our shareholders for your continued interest and long term support of our business, we hope to speak with some of you over the coming quarters. If you are interested in meeting or speaking with us feel free to reach out to our investor relations team and with that we end our call.

And have a good day.

Thank you. This concludes the first quarter of 'twenty 'twenty four results conference call.

You for your participation you May now go ahead and disconnect.

Ehud Helft: Yes.

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