Q4 2024 Ituran Location and Control Ltd Earnings Call
Ladies and gentlemen, thank you for standing by.
Welcome to the ITURAN fourth quarter of 2024 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.
If you 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.
Speaker Change: www.eturon.co.il I will now hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin?
Speaker Change: Thank you. Good day to all of you and welcome to ITERUN's conference call to discuss the fourth quarter 2024 results. I would like to thank ITERUN's management for hosting this conference call.
Speaker Change: With me today on the call are Mr. Eyal Sheratzky, CEO, Mr. Udi Mizrahi, Deputy CEO and VP, Finance, and Mr. Eli Kamer, CFO of Eto'an. 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 question and answer session.
Speaker Change: 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, and thank you for joining us today.
Eyal Sheratzky: 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.
Eyal Sheratzky: I want to add that while we still showed growth in U.S. dollar terms, 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.
Eyal Sheratzky: In local currencies, in each of our regions, we grew ahead of what our U.S. dollar-dominated results suggest.
Eyal Sheratzky: In the fourth quarter, we were very happy to report a high level of 40,000 net subscribers ads in the quarter, which came in at the top end of our expectations of between 35,000 and 40,000 net per quarter.
Eyal Sheratzky: This is actually the third quarter in a row where subscriber heads were above or at the very top of our expected range.
Eyal Sheratzky: The hard work we have done over the past year in bringing new and attractive applications, products and services has brought us positive results and looking ahead we believe the subscriber rate will be even higher.
Eyal Sheratzky: For 2025, we believe the subscriber ads will accelerate to between 180,000 and 200,000 for the year, over 20% ahead of the 2024 rate.
Eyal Sheratzky: Our success reflects ongoing and growing demand for our location-based products and telematic services in all our regions, as well as traction from our new initiatives and services.
Eyal Sheratzky: Looking back, we had a very good 2024 and I just want to summarize some of the main success of the year, which will contribute to the accelerated growth in our subscriber base in the coming years.
Eyal Sheratzky: 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.
Eyal Sheratzky: Daimler fully tested it runs 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.
Paid for by Nissan Chile.
Speaker Change: Ituran will provide a pre-installed vehicle location unit and a suite of telematics and stolen vehicle recovery services to Nissan and its customers throughout Chile.
Speaker Change: 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.
Speaker Change: And just to touch on our relationship with Nissan in Mexico, in October we were awarded their Supplier of the Year in the after-sales accessory category.
Speaker Change: demonstrating how happy they are with the high quality service we are supplying.
to them and their customers.
Thank you.
Speaker Change: We are also in active discussions with a number of major OEM car manufacturers, in addition to those that we already work with.
Speaker Change: We are looking to bring new OEM partners as well as broaden the services we provide existing OEMs to additional countries in South America.
We see strong long-term growth potential via this initiative.
Speaker Change: Our usage-based insurance business in Israel continues to gain strong traction, bringing us new subscribers and is one of the reasons why we continue to see strong subscriber growth in Israel.
Speaker Change: We launched the product for motorcycles early in 2024 and it has gained strong traction across all the geographies in South America in which we have launched it.
Speaker Change: Motorcycles represent a very significant untapped market for us in the region which significantly increases our total addressable market.
Speaker Change: The Board of Directors decided that, from this quarter, to increase the quarterly dividend payment to shareholders by 25%, from $8 million per quarter to $10 million per quarter.
Speaker Change: Our dividend yield on an analyzed basis represents a return of 5%, which is a very solid return.
Speaker Change: 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 the Turan's performance.
Speaker Change: 2024 represented a record for it to run in terms of top-line revenue and subscriber costs and we believe 2025 will be even better.
Speaker Change: While currencies impact us, because our business is fundamentally strong in each of our regions, over a long period, the impacts should balance out.
Speaker Change: Most importantly, our effort to accelerate our subscriber growth is gaining traction. And we can see this in the strong subscriber's net ads in 2024 and accelerated growth we expect in 2025.
Speaker Change: At the same time, we look for more avenues for accelerating our business even further across all our regions.
Speaker Change: I look forward to updating you on our progress again in the coming quarter and with that I hand over to Eli. Eli, please go ahead.
Eli Kamer: Thanks Eyal. I will provide a short summary of the financial results.
Eli Kamer: You can find the more detailed results that we issued in the press release earlier today.
Eli Kamer: Quarter revenues were $82.9 million, a 7% increase compared with revenue of $77.8 million in the fourth quarter of last year.
Eli Kamer: The shrinking of the U.S. dollar in the fourth quarter versus the various local currencies in which it ran operating impacted the revenues when translated into U.S. dollars.
In local currency, revenues grew by 11% year over year.
Eli Kamer: Revenue from subscription fees in the quarter were 61.5 million dollars, an increase of 4% year-over-year, and in local currency, an increase of 9%.
Eli Kamer: The subsidiary 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.
Eli Kamer: The geographic breakdown of revenues in the fourth quarter was as follows. Israel 52%, Brazil 25%, rest of the world 23%.
Eli Kamer: EBITDA for the quarter was $22.5 million or 27.2% of revenues.
Eli Kamer: An increase of 3% compared with EBITDA of $21.9 million or 28.2% of revenues in the fourth quarter of last year.
In local currency, EBITDA grew by 10% year-over-year.
Eli Kamer: Net income for the fourth quarter was $13.8 million, or the looted earnings per share of $0.70, an increase of 15% compared to $12 million, or the looted earnings per share of $0.60 in the fourth quarter of last year.
In local county, net income grew by 22% year-over-year.
Eli Kamer: Cash flow from operation for the fourth quarter of 2024 was $22.7 million.
Eli Kamer: A 5% increase over the $320 million reported in 2023. 72% of revenues were from location-based service subscription fees, and 28% were from product revenues.
In local currency, revenues grew by 8% year-over-year.
Eli Kamer: Revenues from subscription fees were $242.5 million, representing an increase of 3% over 2023. In local currency, subscription fees revenues grew by 7% year-over-year.
Eli Kamer: Product revenues were $93.8 million, 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 $91.3 million, 27.1% of revenue.
Speaker Change: an increase of 5% compared to $87 million, 27.2% of revenues.
Eli Kamer: in 2023. In local currency, EBITDA grew by 8% year over year.
Net income in 2024 was $53.7 million, 16% of revenues.
or fully diluted earnings per share of $2.70.
Eli Kamer: an increase of 11% compared with net income of $48.1 million, 50% of revenues of fully diluted earnings per share of $2.41 in 2023.
Eli Kamer: In local county, net income grew by 15% year over year.
Cash flow from operation for the year was $74.3 million.
Eli Kamer: As of December 31, 2024, the company had cash including multiple securities of $77.4 million and a debt of $0.1 million, amounting to a net cash position of $77.3 million.
Eli Kamer: This is compared with cash including multiple securities of $53.6 million and a debt of $0.6 million amounting to a net cash position of $53 million as of year-end 2023.
Eli Kamer: The Board of Directors increased the dividend policy for the current quarter and quarters ahead. A dividend of $10 million was declared for the quarter and upcoming quarters, representing a 25% increase over the dividends issued in the period quarters.
Eli Kamer: The current dividend takes into account the company's 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?
Speaker Change: Thank you. 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. Remember to unmute yourself before speaking.
The first question is from Sergei Limiano. Please go ahead.
Speaker Change: Yeah, hello everyone. And in the press release, you mentioned product mix impacted on gross margin. Would you put some colors about that? Is the primary effect from sales for two-wheeled vehicles?
Speaker Change: 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, we are 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.
Speaker Change: Okay, got it. And I would like to talk a little bit about interim perspectives.
Speaker Change: You outlined a pretty positive subscriber base growth expectation. What is the main point of growth this year or the year 2025?
Speaker Change: I will divide it from the different geographies and I will start with Israel. In Israel, we are gaining more and more market share in one hand.
It started during the end of 23
Speaker Change: 2024 as well. And now we see it's continued. When this situation happened, it's mean that more people look for security systems.
and as long as we provide state-of-the-art technology and services.
Speaker Change: solution and more and more increase among insurance companies in Israel and we see recently also a higher and growing demand which we believe will contribute more materially during 2025.
Speaker Change: This is regarding the Israeli market, which, just to remind, represents about 50% of the total revenues that we publish. Regarding Brazil...
The motorcycle solution is also taking more and more attraction.
We are talking with...
Speaker Change: motorcycle manufacturers, as well as insurance companies that are usually afraid.
the right solution to increase...
the security of a
motorcycles
Speaker Change: As you remember, we started with Saint-Andre, which we hope that we will continue to expand this contract, as well as now offering it to more and more banks.
Speaker Change: which we feel and we think that during 2025 we will have and we will sign a contract or we...
Speaker Change: We're aiming to attract and sign with more banks, more subscribers.
Speaker Change: Another thing which relevant for 2025 in our expectations is the OEM which to remind everyone
Speaker Change: Until now, we worked with General Motors and with Nissan in some of our geographies.
Speaker Change: And we put a lot of focus in the OEM segment.
Speaker Change: 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.
Thank you.
Speaker Change: Great, great, and I think it's supposed to you still expect 100 million EBITDA in 2025, is it right?
Speaker Change: Actually, all our global operations are in the local currencies. It really operates...
Speaker Change: meet and even exceed our expectation in many cases by the way.
Speaker Change: We set a 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.
Speaker Change: which we think that it's make the guidance not really meaningful in US dollar terms anymore so
Speaker Change: 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,
Speaker Change: If currencies move back to their levels of Bayon that they were when we first issued the guidance in February 2024, it is possible that we will meet
and even exceed this target.
Speaker Change: 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 to the difference.
Speaker Change: The profit we make in each region, so while there is an impact of a few million dollars
amounting to single-digit percentage of EBITDA either up or down
It doesn't change the overall success.
Speaker Change: So we decided that providing the EBITDA a target for the year that depends on currencies which we have no control over is not that useful to investors especially in the currencies continue to be so volatile.
I hope this has been helpful.
Translated by www.subsedit.com
Speaker Change: Thank you, Eyal. And I think the last one, are you going to increase subscription fees in 2025? And if yes, what rate should we expect in local currencies for Israel and Brazil?
Speaker Change: We always think about pricing and just to remind, we have a lot of segments, a lot of
a customer which is very diversified.
Speaker Change: So, we always do the best to maximize the profitability and the profit. Along the year, we will view it again, and if we find that the prices or 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 guys, thank you a lot. That's all from me.
Speaker Change: The next question is from Chris Reimer of Barclays. Please go ahead.
Chris Reimer: 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 contribution of the OEM subscribers versus retail?
Speaker Change: As I said a few quarters ago, we have today, after we created Synergy,
Chris Reimer: between the OEM, the geographies that we acquired business of OEM.
many
Chris Reimer: 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.
Chris Reimer: But I still will say two things. One, is that the OEM...
growing at the lower margins.
Eyal Helft, Eyal Sheratzky, Eli Kamer, Kenny Green
Speaker Change: such as in Brazil 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
Speaker Change: This will be additional, so still the main growth will come from the retail, but we will add also from the OEM.
Speaker Change: Could you give us a sense of how much the new products represent in revenues versus total product, traditional product?
We have so many, uh, so many, uh,
Speaker Change: solutions and units so there is no really something that I will disclose here. I just want to say again when I said about the potential growth this year I mentioned mainly SVR in Israel
Speaker Change: 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 when I talked about UBI UBI, of course, it's new but still already almost four years
Speaker Change: Part Number of e-to-run sales in Israel when I speak about a motorcycle It's quite new, but it's only in the beginning so the contribution is still not very high
The next question is from Boris Schneider of Moore Investments.
Boris Schneider: Hello, so a couple of questions for me, mostly on ARPU, just to understand in this fourth
Boris Schneider: There was a growth of 7% in your subscribers, but 9% at constant currency in revenues for subscriptions. So is there any particular product?
Boris Schneider: or increasing prices, if you can point out that contributed to this increase in ARPU in constant currency.
Boris Schneider: So, there is no specific reason other than the currency exchange effect. Other than that, in local currencies, the prices are more or less the same.
Boris Schneider: Okay and how should we think of the ARPU excluding the currency defect for 25 given your interest in
in a number of subscriber additions.
Boris Schneider: So, probably the mixture of the growth will be in a little bit lower output because part of it is new solutions and more OEM contracts that represent lower output. But still, when we talk about the base of 2.4, the influence on the
Boris Schneider: Absolute output will be very very little so I would consider the current output as the representing output of the group.
Great, congratulations. There is no any specific...
Boris Schneider: strategic or economic reason that the output will go down. Some of the mixture can, can change, but the influence on the total 2.4 or 2.5 or 2.6 million will be very, very non-material.
Speaker Change: Thanks. Congratulations on strong execution, as well as the presentation on Zoom. That's a great effort. Thanks.
There are no further questions at this time.
Speaker Change: The recording of the call will be available within 24 hours on our website.
Speaker Change: This concludes the Tehran 4th Quarter 2024 Results Conference Call. Thank you for your participation.
There is a further question from Boris Schneider.
Speaker Change: Boris, would you like to ask another question? No, sorry. No more questions.