Q1 2025 Ituran Location and Control Ltd Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. The conference will begin shortly. Ladies and gentlemen, thank you for standing by.
Ladies and gentlemen, thank you for standing by the conference will begin shortly.
Thank you.
Sure.
Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the to run first quarter 2025 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 Companys press release, if you have not received it please contact me.
Operator: Welcome to the Turan First Quarter 2025 Results Conference. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session.
Operator: You should have all received by now the company's press release.
Operator: If you have not received it, please contact Ituran's investor relations team at ekglobalinvestorrelations at 1-212-378-8040 or view it in the news section of the company's website www.ituran.co.il.
Kenny Green: Runs Investor Relations team at Ek Global Investor Relations at one to one to 3788040 or view it in the news section of the company's website www dot each Rhonda <unk> I will now hand, the call over to Mr. Kenny Green of Ek Global Investor Relations. Mr. Green would you like to begin.
Kenny Green: I will now hand the call over to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin? Thank you.
Kenny Green: Good day to all of you and welcome to Ituran's conference call to discuss our first quarter 2025 results. I would like to thank Ituran's management for hosting this conference call. With me today on the call are Mr. Eyal Sheratzky, CEO, Mr. Uzi Mizrahi, Deputy CEO and VP Finance, Mr. Eli Kamer, CFO of Ituran.
Kenny Green: Thank you good day to all of you and welcome to <unk> Conference call to discuss our first quarter 2025 results I would like to thank each one's management for hosting this conference call with me today on the call are Mr. Al <unk> CEO, Mr. <unk>, Mizrahi, Deputy CEO and VP finance, Mr. <unk> CFO.
Kenny Green: Eyal will begin with a summary of the quarter's results followed by Eli with a summary of the financials. We'll then open the call for the question and answer session.
Ron: Rob It's Ron.
Speaker Change: Ill begin with a summary of the quarter's results followed by early with a summary of the financials. We will then open the call for the question and answer session.
Kenny Green: I would like to remind everyone that the Safe Harbour Statement in today's press release also covers the contents of this conference call.
Speaker Change: I would like to remind everyone that the safe Harbor statement in today's press release also covers the contents of this conference call.
Eyal Sheratzky: And now, Eyal, would you like to begin please? Thank you, Kenny. I'd like to welcome all of you to our first quarter 2025 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, amounting to 99,000 net. With this strong jump, we reached a major milestone, crossing 2.5 million subscribers ahead of our expectations. The significantly growth in the subscriber base during the quarter was partially due to an additional contribution from a new telematics service agreement that we signed with major car OEM manufacturer Stellent.
Speaker Change: Now would you like to begin please.
Speaker Change: Thank you Kenny and like to welcome all of you to our first quarter 2025 results call. Thank you for joining us today.
Speaker Change: 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 amounting to 99000 that was this strong jump we reached a major milestone.
Speaker Change: Two 5 million subscribers ahead of our expectation.
Speaker Change: The significantly growth in the subscriber base during the quarter was partially due to an additional contribution from a neutral and Master service agreement that we signed with a major car OEM on a victory.
Speaker Change: <unk>.
Eyal Sheratzky: As an initial part of this agreement, in March, Stalentis switched their SVR subscriber base to Ituran and Ituran began providing services to the ISF-1. Given the jump in subscribers, we increased our expectations for 2025 subscriber goals to between 220,000 and 240,000 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, products and services has brought these highly positive results. Looking ahead, we believe over the long term, the 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 US dollar terms, – on the support and strengthened impact of the dollar versus many of the local currencies in which we operate.
Speaker Change: As an initial part of this agreement in March still lengthy switch the SVR subscriber based way to run any to run began providing services to the subscribers.
Speaker Change: Given the jumped in subscribers, we increased our expectations for 2025 subscriber goals to between 220000 and 240000 net new subscribers, implying a further 120000 to 140000 net new subscribers in the upcoming <unk>.
Speaker Change: The quarters.
Speaker Change: <unk> work, we've done over the past year, and bringing new and attractive applications products and services.
Speaker Change: His broad these highly positive results looking ahead, we believe over the long term the net subscribers Ed will trend upward.
Speaker Change: 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.
Speaker Change: Head of Deflating impact on our financial results when denominated in U S dollar.
Eyal Sheratzky: In local currencies, in each of our regions, I note that we grew ahead of what our U.S. dollar denominated results suggest. Our success reflects ongoing and growing demand for a location-based product and telematic services in all our regions, as well as traction for new initiatives and services.
Speaker Change: In local currencies in each of our regions I note that we grew ahead of what our U S. Dollar denominated results suggest.
Speaker Change: Our success reflects ongoing and growing demand for relocation based products and telematics services in all our region as well as structured for a new initiative in services, we had a good first quarter and I want to summarize some of our activities, which will continue to contribute.
Eyal Sheratzky: We had a good first quarter and I want to summarize some of our activities which will continue to contribute to our growth and success. Israel. The high cost of trade. 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 others. such as lower-priced new vehicles or the second-hand car market. 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. Our product for motorcycles is gaining traction across all our geographies in South America.
Speaker Change: Our growth and success Israel the high cost of trade is providing strong demand for our services and enabling us to reach additional new subscribers from bulk of the market that we previously untapped by us.
Speaker Change: <unk> is lower priced new vehicles, all the secondhand car markets.
Speaker Change: Usage based insurance business in Israel continue to gain strong traction, bringing us new subscribers and is one of the reasons why we continue to see strong subscriber growth and easily.
Speaker Change: Our product for multiple cycles is gaining traction across all our geographies in South America.
Eyal Sheratzky: Motorcycles significantly increase our total addressable market and continue to represent a very significant untapped market for us in all our regions. And as I mentioned earlier, during the first quarter, we were very pleased to have signed a new OEM agreement. Stalentis, our new OEM customer, made a strategic decision to begin working with Ituran for telematic services and in March we started providing our services to their subscriber base. Stylentis 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 with our technological and service capabilities.
Speaker Change: Model cycle significantly increase our total addressable market and continue to represent a very significant untapped market for us in all our regions.
Speaker Change: And as I mentioned earlier during the first quarter, we were very pleased to have assigned a new OEM agreement.
Speaker Change: We still anticipate our new OEM customer.
Speaker Change: Made the strategic decision to begin working with the two one for telematics services and in March we started providing our services to their subscriber base.
Speaker Change: <unk> is the largest communist fixtures in Latin America, which includes Fiat Jeep visual and many others they choose to work with us because of their satisfaction with our technological and service capabilities.
Eyal Sheratzky: While contributing to both our top and bottom line, because we currently have with them an initial and limited OEM SVR service agreement The Stalentis subscribers are at lower ARPU than the Ituran average. Following this initial agreement, we expect in the near future to broaden our scope of services to Stellantis. We view this new OEM agreement as an important milestone in expanding our OEM relationships globally. We believe it opens the door to further collaborations with talentees in additional geographies, as well as the potential to provide additional telematic services to the customer. We remain in discussion with a number of other major OEM car manufacturers, in addition to those that we already work with, in order to bring our services to their subsidiaries elsewhere in South America.
Speaker Change: While contributing to both our top and bottom line because we currently have wisdom in initial and limited OEM SVR service agreement.
Speaker Change: <unk> subscribers are at lower our pool than day to run average.
Speaker Change: Following this initial agreement we expect in the near future to broaden our scope of services to sell antiques.
Speaker Change: We view this.
Speaker Change: New OEM agreement is an important milestone in expanding our OEM relationships globally. We believe it opens the door to further collaborations with the Atlantis in additional geographies as well as the potential to provide additional telematics services to their customer base.
Speaker Change: We remain in discussion with a number of other major OEM car manufacturer. In addition to dose that we already work with in order to bring our services to their subsidiaries elsewhere in South America.
Eyal Sheratzky: Ituran is a cash generating company and we generated 15.5 million dollars 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 million to shareholders. I remind you that in Q4 2024, we increased our dividend policy by 25% from issuing $8 million per quarter to $10 million. This represents 50 cents per share. Our dividend yield on an analyzed basis represents a return around. 6% which is a very solid return from a strong and stable. We see our ongoing dividend as a reward to our shareholders for their loyalty and long-term support of our organization.
Speaker Change: It run is a cash generating company and we generated $15 $5 million in operating cash flow during the quarter.
Speaker Change: To Ron is focused on shareholder value creation, and as such board of directors decided to issue a dividend of $10 million to shareholders.
Speaker Change: Mind, you that in Q4 two.
Speaker Change: 2024, we increased our dividend policy by 25% from issuing $8 million per quarter to $10 million.
Speaker Change: This represents 50 per share.
Speaker Change: The dividend yield on an annualized basis represents a return on their own.
Speaker Change: Of 6%, which is a very solid return from a strong and stable company.
Speaker Change: We see our ongoing dividend as a reward to our shareholders for their loyalty and long term support of our company.
Eyal Sheratzky: In summary, we remain pleased with Ituran's performance. The first quarter was a quarter of continued growth for Ituran, particularly in terms of top-line revenue and subscriber growth, as well as from a strategic perspective, bringing a new OEM relationship and deal to Ituran. We believe we will continue to see growth throughout 2025, adding between 220,000 and 240,000 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.
Speaker Change: In summary, we remain pleased with it runs performance. The first quarter was a quarter of continued growth for it to run, particularly in term of topline revenue and subscriber growth as well as from a strategic perspective, bringing a new.
Speaker Change: OEM relationship and deal to it to run.
Speaker Change: We believe we will continue to see growth throughout 2025, adding between 220 and 240000 new subscribers in 2025 at.
Speaker Change: At the same time, we look for more avenues for accelerating our business. Even further of course, all our regions. We are very pleased to have reached a major milestone of it to run with two and a half million paying subscribers and they would like to thank and congratulate all our employees.
Eyal Sheratzky: And I would like to thank and congratulate all our employees for this amazing achievement.
Ellie: For this amazing achievement and with that I hand over to Ellie Ellie. Please go ahead.
Eyal Sheratzky: And with that, I hand over to Eli. Eli, please go ahead.
Eli Kamer: Sensei Eyal, I will provide a short summary of the financial results. You can find the more detailed results that were issued in the press release earlier today. First quarter revenues were a record $86.5 million, a 2% increase compared with revenues of $85 million 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 $62.2 million, an increase of 2% year-over-year, and in local currency, an increase of 9%.
Speaker Change: Thanks.
Speaker Change: I will provide a short summary of the financial results.
Speaker Change: Can find the more detailed results that we issued in the press release earlier today.
Speaker Change: First quarter revenues were a record $86 5 million.
Speaker Change: 2% increase compared with revenues of $85 million in the first quarter of last year.
Speaker Change: The strengthening of the U S dollar in the first quarter versus various local currencies in which it was operated in impacted the revenue when translated into U S dollar and local currency revenues grew by 7% year over year.
Speaker Change: Revenues from subscription fees in the quarter were $62 2 million.
Speaker Change: An increase of 2% year over year.
Speaker Change: And in local currency and increase of 9%.
Eli Kamer: Product revenues in the quarter were $24.3 million, an increase of 1% year-over-year, and 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.
Speaker Change: Product revenues in the quarter were $24 $3 million, an increase of 1% year over year and in local currencies and increase of 3%.
Speaker Change: The subscriber base expanded to 2.508 million by the end of the first quarter, an increase of 99000 from the end of the previous quarter.
Eli Kamer: 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 $23.3 million, or 26.9% of revenues, an increase of 4% compared with EBITDA of $22.3 million, or 26.3% of revenues, in the first quarter of last year. In local currencies, EBITDA grew 12% year-over-year. Net income for the first quarter was $14.6 million, or diluted earnings per share of $0.73, an increase of 12% compared to $13 million, or diluted earnings per share of $0.66 in the first quarter of last year. In local currency, net income grew 20% year-over-year.
Speaker Change: The geographic breakdown of revenues in the first quarter waterfall, Israel, 55%, Brazil, 23% rest of world 22%.
Speaker Change: EBITDA for the quarter was $23 3 million.
Speaker Change: Or 26, 9% of revenue an increase of 4% compared with EBITDA of $22 3 million.
Speaker Change: Or 26, 3% of revenue in the first quarter of last year.
Speaker Change: In local currencies EBITDA grew 12% year over year.
Speaker Change: Net income for the first quarter was $14 6 million.
Speaker Change: Diluted earnings per share of <unk> 73.
Speaker Change: An increase of 12% compared to $13 million or diluted earnings per share of <unk> 66 in the first quarter of last year and.
Speaker Change: In local currency net income grew 20% year over year.
Eli Kamer: Cash flow from operation for the first quarter of 2025 was $15.5 million. As of March 31st, 2025, the company had net cash, including multiple securities, of $75.7 million. This is compared with the net cash, including multiple securities, of $77.2 million as of year-end 2024.
Speaker Change: Cash flow from operations for the first quarter of 2025 was $15 5 million.
Speaker Change: As of March 31, 2025, the company had net cash, including marketable securities of $75 7 million.
Speaker Change: This is compared with a net cash including marketable securities of $77 2 million.
Speaker Change: As of year end 2024.
Eli Kamer: The Board of Directors declared a dividend of $10 million for the quarter. The current dividend takes into account the company's continuing strong profitability, ongoing positive cash flow, and strong balance sheet.
Speaker Change: The board of directors declared a dividend of $10 million for the quarter.
Current dividend takes into account the companies.
Speaker Change: <unk> strong profitability ongoing positive cash flow and strong balance sheets and with that I'd like to open the call for the question and answer session operator.
Eli Kamer: And with that, I'd like to open the call for the question and answer session.
Operator: Operator? 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.
Speaker Change: Thank you ladies and gentlemen at this time, we will begin the question and answer session. Thank.
Speaker Change: If you have a question. Please use the raise hand button located at the bottom of your screen.
Sergey Glinyanov: The first question is from Sergey Glinyanov of Freedom Capital Markets. Please go ahead. Good day, gentlemen. Do you hear me well? Yes, loud and clear. So, great.
Speaker Change: The first question is from Sergey Gil Yang.
Speaker Change: Freedom capital markets.
Speaker Change: Please go ahead.
Speaker Change: Good day gentlemen.
Speaker Change: Well.
Speaker Change: Yes, loud and clear.
Speaker Change: So right.
Eyal Sheratzky: 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 them? Hi, Sergey. 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 Svelantis. 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.
Speaker Change: In terms of new agreement.
Speaker Change: Does it imply you set top.
Speaker Change: Agreement and provide services for each produces gar biased Atlantis in Latin America, or you have some options for for them.
Sergey: Hi, Sergey.
Sergey: This agreement that we report that we published is a.
Speaker Change: Currently at this stage as we said is.
Sergey: To provide services based on technology, which was already implemented in the past in the cause of this.
Speaker Change: The Atlantis.
Speaker Change: Of course.
Speaker Change: We see.
Sergey: This agreement is in.
Sergey: Opportunity to.
Sergey: Broaden the relationship and probably in the future we hope that we will.
Sergey: Hey.
Sergey: The ability.
Sergey: To add other services as well.
Sergey: Hardware in some models.
Eyal Sheratzky: But this, what we published yesterday, is to provide a service.
Sergey: But this what we've published yesterday is to provide.
Sergey: Services.
Sergey: Sure.
Eyal Sheratzky: Okay, got it. And is total effect on your subscription base in place? It seems you raised your subscription base guidance range by 40,000 in midpoint, exactly what we saw in Q1, considering previous run rate. So, this agreement was, hello? Yeah, yeah, this agreement is in place since March, meaning in Q1, there is no almost zero influence. But it's also important for me to mention, when we talk about services, and specifically OEM this which was a large quantities but which is with with the lower R So, it's taking time that it become material, because... Don't forget, we had before this quarter about 2.4 million subscribers.
Sergey: Okay got it.
Sergey: And.
Sergey: It's total effect.
Sergey: On your subscription base in place.
Sergey: It seems you're right the U S a.
Sergey: <unk> guidance range by <unk>.
Sergey: 40000 in midpoint exactly what we saw in Q1 continued from previous run rates.
Sergey: So.
Sergey: This agreement was.
Sergey: Hello.
Sergey: This agreement is.
Sergey: In place since March meaning.
Sergey: In Q1, there is no almost.
Sergey: Zero influence, but it's also important for me to mention when we talk about services.
Sergey: And specifically.
Sergey: OEM deals, which was the large quantities, but which is with the lower ARPA.
Sergey: So, it's taking time that needs to become material because.
Sergey: Don't forget we had before this quarter about 2.4 million subscribers.
Sergey: Additional.
Sergey: Influence in the short term is smaller but the important thing in each one of these contracts is that we're talking about longer term relationship with talking about growing.
Eyal Sheratzky: 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 But then it will be more material but I don't think that it's the right way to judge a contract now for this quarter or for the next quarter because the customer base, the revenues that we have from subscribers at all are much higher than only this. But in the future, these contracts will ramp up every month, every quarter and it will be more contribution to our results. Okay, but what did primarily affect your ramp up of subscription base because recently it was roughly 40,000 per quarter and now we see that it's roughly 100,000.
Sergey: Customer base from this customer and when it's exponentially increase the margins increase so the contribution to the total results of it run will appear in the future, but then it will be more material, but I don't.
Sergey: I think that is.
Sergey: The right way to judge the contract now for the next call for this quarter or for the next Walter because.
Sergey: The customer base the revenues that we have from subscribers.
Sergey: All are much higher than only this but in the future this contract.
Sergey: <unk>.
Sergey: Ramping up every month every quarter and it will be more contribution to our results.
Speaker Change: Okay, but.
Sergey: Sure.
Sergey: Well what did primarily.
Sergey: <unk> your.
Sergey: Ramp up of subscription base because.
Sergey: Recently with roughly 40 thousands per quarter and now we see that it's roughly.
Sergey: 100 thousands.
Eyal Sheratzky: Actually, the agreement includes at the first stage a... gaining to run a bulk of Stelentis car owners Ok, 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 an initial bank of customers at one time now, of course they will be with us.
Sergey: Actually the agreement includes the first stage.
Sergey: Gaining jewelry to run a bulk.
Sergey: Yes.
Sergey: The Atlantis car owners.
Sergey: Yes.
Sergey: The first stage.
Sergey: And then they will continue on an annual basis based on their sales. So there is a number that we show at Q1, it's not a typical number. This is why we provide expectation that the next quarters.
Sergey: We'll continue to be about 40000 per quarter and not as Q1 almost 100000, we got.
Sergey: Initial.
Sergey: Bank of customers.
Sergey: At one time now of course, there will be with us.
Sergey: <unk> according to the contract, but now every must Atlantis will continue to add subscribers, but it will be.
Eyal Sheratzky: Ctrl V, Zafir Naftali, Yann Tzvi, Yann Tzvi, Yann Tzvi, Yann Tzvi, Yann Tzvi, Yann Tzvi, Yeah, I got it. That's, that's exactly what I'm interested in.
Sergey: Not on the on the same level that they.
Michel: Michel <unk>.
Speaker Change: Yes got it.
Speaker Change: That's exactly what they are interested in.
Speaker Change: <unk>.
Eli Kamer: And now turning to your financial figures. Eli, that question for you, I guess, product growth margin is increasing substantially. Have Ituran taken some steps to improve that? And what should we think about it for next couple of quarters? Gross margin, if we split it to two, we're talking about the gross margin relates to the telematic services is actually improved a little bit and this is due to the operating leverage that we have in our business model. So if you're asking me for the future, as long as we continue to increase our subscriber base, I don't see any reason why the gross margin on the telematic services should improve a little bit.
Speaker Change: Now turning to financial vigorous.
Speaker Change: Any of that question for you I guess.
Speaker Change: The gross margin is increasing.
Speaker Change: Increases substantially.
Speaker Change: Habits around taken some steps to improve that and what should we think about it for next couple of quarters.
Speaker Change: Okay.
Speaker Change: Gross margin.
Speaker Change: If we split into two we're talking about the gross margin relates to the telematic services is actually improved a little bit and this is due to the operating leverage that we have in our in our business model. So if you are asking me for the future as long as we continue to increase our subscriber base.
Speaker Change: I don't see any reason why the gross margin on the telematic services should improve a little bit regarding the telematics product gross margins that the increase.
Eli Kamer: Regarding the telematic products, the gross margin that they increase. then it relates to cost savings that we are doing all the time and and Volatilities between the quarters because there is a mix of products that sometimes change from that you are selling one or more products with a different growth margin so that is a little bit of volatility as well.
Speaker Change: Then it relates to cost savings that we are doing all the time.
Speaker Change: And.
Speaker Change: And volatility between the quarters, because there is a mix of products that sometimes the change from that you are selling one or more product with a different gross margin. So that is a little bit be a little bit of volatility as well.
Eli Kamer: Yeah, thank you, got it.
Speaker Change: Yeah. Thank you got it.
Eli Kamer: And what about operation expenses? Since your R&D and marketing expenses rise faster than revenue, what should we think about? If I'm looking at the R&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's a reasonable assumption to use for the future. Okay, understood.
Speaker Change: And what about <unk>.
Speaker Change: <unk> expenses, it seems your R&D and marketing expenditures.
Speaker Change: It's faster than revenue.
Speaker Change: Should we think about it.
Speaker Change: If I'm looking at the R&D expenses is more or less represent about five 5% of the revenues and it's quite stable along the time. So if you are asking me going forward.
Speaker Change: That's it.
Speaker Change: A reasonable assumption to use for the future.
Speaker Change: Okay, and this dude and.
Eli Kamer: And I think the last question, is increased CAPEX attributable to new agreements? And what level should we expect for 2025? Yeah, regarding CapEx, you have to remember that it includes a lot of consideration of volatility due to the fact of a couple of things. One, the companies making purchases of machines, vehicles, and hardware is not spread equally among the quarters. And second, also inventory, I'll not say fixed assets or inventory that we are using in Brazil and Argentina, that usually depends on, we can buy it on box and things like that. Q1, for your question, was higher than the average, but looking forward, the CapEx should go down if we compare them in the second quarter and moving forward.
Speaker Change: I think the last question.
Speaker Change: He's increased capex attributable to new agreements.
Speaker Change: What level should we expect through 2025.
Speaker Change: Yes regarding Capex you have to remember that it includes a lot of consideration of volatility due to the fact of couple of things one.
Speaker Change: The company is making purchases of machines vehicles in hardware that is not the spread.
Speaker Change: Equally.
Speaker Change: Amongst the quarters and second also inventory I'll, not say fixed assets and inventory that we are using in Brazil, and Argentina Thats usually.
Speaker Change: Hands on that we can buy it on Bulks and things like that Q1 for your question was higher than the average.
Speaker Change: But.
Speaker Change: Looking forward the Capex should go down if you compare I mean, the second quarter and moving forward.
Eli Kamer: Okay, thank you. Got it.
Speaker Change: Okay.
Speaker Change: Got it.
Eyal Sheratzky: 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 markets? For instance, in Brazil, despite car thefts are declining, 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?
Speaker Change: Yeah.
Speaker Change: I have one more question about the.
Speaker Change: Insurance market in Latam.
Speaker Change: I'm just wondering.
Speaker Change: We'd like to hear your thoughts about how that would be expect from what Dom instruments markets for instance in Brazil.
Speaker Change: Despite.
Speaker Change: Yes.
Speaker Change: Declining.
Speaker Change: Insurance insurance cost rises rapidly, especially for the most popular cards like off yet.
Speaker Change: Do you consider it as a potential opportunity for it to run in terms of consumer demand transitioning into UBI insurance.
Eyal Sheratzky: What are your perspectives for the next couple of years on that sales field? First of all, we don't see a 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 a better approach to cars which are more popular to be stealing, whether it's insurance companies or even consumers. We don't see the trend that you mentioned. I know that some models, sometimes it has a volatility, but overall we see a high demand in Brazil for car theft solutions, specifically the insurance companies that we work with, and especially the audience when we talk about Ituran Consiguro that we approach.
Speaker Change: What do you perspective for the next couple of years some on that field.
Speaker Change: First of all we.
Speaker Change: We don't see declining cost of freight we have to understand that.
Speaker Change: A result of the respect to Ron when we have a few hundred thousands of cars.
Speaker Change: When we're talking about tens of million driving on the roads.
Speaker Change: Still we usually have more.
Speaker Change: Yes.
Speaker Change: A better approach to.
Speaker Change: Cause which are more popular to be stealing whether it's insurance companies or even consumers. We are we don't see that trend that you mentioned I know that some models, sometimes it has a volatility but overall, we see a high demand in Brazil for <unk> solution specifically.
Speaker Change: The insurance companies that we work with and especially the audience when we talked about into one configurable.
Eyal Sheratzky: So we don't see that. Regarding UBI, I said it in the past, we're always knocking on the doors of our partners, the insurance companies, and providing them the 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 means to change their actuarial methodology and implement a... Software, and integration with this solution.
Speaker Change: That we approach so we don't see regard Upi.
Speaker Change: I said it in the past, we always knocking on the doors of our default is the insurance companies and.
Speaker Change: And provide them the solution.
Speaker Change: Fortunately, Brazil, as well as Mexico, which is the two largest countries in the.
Speaker Change: South America, the insurance companies are not.
Speaker Change: <unk>.
Speaker Change: Willing to explore this journey, which mean to change there.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: Technology.
Speaker Change: And implement.
Speaker Change: Yes.
Speaker Change: Software and integration with this solution so the only country by the way that we succeed to have some.
Eyal Sheratzky: So the only country, by the way, that we succeed to have some deals, it's Argentina. But I think that the competition between insurance companies, digital insurance companies' penetrations, prices that 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 industry.
Speaker Change: Is it Argentina.
Speaker Change: But.
Speaker Change: Things I think that the competition between insurance companies.
Speaker Change: Yes.
Speaker Change: Digital insurance company's penetration.
Speaker Change: Prices that should wind down and will continue probably we will create more fertile ground for.
Speaker Change: Accepting youll be a solution.
Speaker Change: And whilst it will happen.
Speaker Change: Beliefs, and we do the best that we can to get there based on the strong relationship that we have with the major players in the insurance industry, but currently Brazil and Mexico.
Eyal Sheratzky: But currently, Brazil and Mexico, in the short future, are not the market that we expect to sell the UBI. Yeah, that's all from me. Thank you for taking my questions. Thank you.
Speaker Change: In the short future or not.
Speaker Change: The market, we expect to sell to UBS.
Speaker Change: That's all from me.
Speaker Change: Thank you for taking my question gentlemen.
Speaker Change: Thank you. The next question is from Chris Reimer of Barclays. Please go ahead.
Chris Reimer: The next question is from Chris Reimer of Barclays. Please go ahead. Hi, thanks for taking my questions and congratulations on the strong results. I'd like to ask, you mentioned the lower ARPU for customers on deals of the type of Stellanus with the bulk customer.
Chris Reimer: Hi, Thanks for taking my questions and congratulations on the strong results.
Speaker Change: I'd like you mentioned the lower our Q4.
Speaker Change: Customers on deals at the Titans stellar and as with the bulk cut.
Speaker Change: Customer.
Eyal Sheratzky: I was wondering if you could talk a little bit about the attrition rates and customers that leave or are finished with their contract. Is it, 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?
Speaker Change: I was wondering if you could talk a little bit about the attrition rates and customers that.
Speaker Change: Leave or are finished with their contract.
Speaker Change: Does it work that you get new customers at a higher <unk> or because of these large deals are some of the new customers coming in at a lower <unk> than the ones that are in the evening.
Eyal Sheratzky: First of all, it should be clear. Ctrl V, Ideal Camera, Xperia ZX Spectrum, Xperia ZX Spectrum, Xperia ZX Spectrum, Xperia ZX Spectrum, which for us is good because we don't have to convince the customer, we don't have to work consumer by consumer. The checks come from one institutional player, etc. But once the time, which is usually between two to three years, sometimes five years of these free services, 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.
Speaker Change: First of all.
Speaker Change: Should be cleared.
Speaker Change: Our customer is.
Speaker Change: <unk> I mean.
Speaker Change: All of the accounts.
Speaker Change: The calculation in the auto and everything done through them.
Speaker Change: Customer again.
Speaker Change: Free trial.
Speaker Change: Part of let's say like having the car. He has these services, which for US is good because we don't have to convince the customer we don't have to work.
Speaker Change: Consumer by consumer the chicks come from one.
Speaker Change: And institutional players et cetera.
Speaker Change: But once.
Speaker Change: The time, which is usually between two to three years, sometimes five years of this saw free free services.
Speaker Change: We have the ability to approach the customers when they finish the food try and offer them the <unk>.
Speaker Change: Services, which by the way.
Speaker Change: Two additional I would say benefits first of all the prices that we offer the renewals are higher.
Eyal Sheratzky: First of all, the prices that we offer the renewals are higher because to... Convinced talent is to pay for hundreds of thousands of subscribers. Of course, 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 service will be easier for us to convince him to pay higher.
Speaker Change: Because too.
Speaker Change: Convinced Atlantis to pay for hundreds of thousands subscribers of course it is.
Speaker Change: Related to a very high discount or high and lower our ortho a lower or.
Speaker Change: When you go customer by customer when we do the renewals.
Speaker Change: If the head satisfaction with the three or five years of services.
Speaker Change: It will be easier for us to convince them to pay higher.
Speaker Change: Yeah.
Speaker Change: Service fee.
Eyal Sheratzky: So this is a this is the situation here we don't have The chain I would say is lower because there is no economic pressure on the driver or the car owner By the way, the situation with all the OEM deals, now, regarding the output, I'm not sure if you asked this specifically, but I would add that the output is lower because it's only service. There is no, we are not leasing any hardware, which we have to integrate in the monthly service fees, like we do, for example, with the NIST. So it's only the service, so it's lower.
Speaker Change: Okay.
Speaker Change: So this is this is a situation here we don't have.
Speaker Change: The churn I would say is lower.
Speaker Change: There is no economic pressure.
Speaker Change: Pressure on the driver of the car owners.
Speaker Change: Alright, so yes.
Speaker Change: Either way, it's the situation with all the Oems now regard the output.
Speaker Change: I'm not sure if you ask specifically, but I would add there.
Speaker Change: Output is lower because it's only service there is no we are not at least any hardware, which we have to.
Speaker Change: Integrated in their monthly service fees like we do for example, with the Nissan.
Speaker Change: So it's only the service so it's slower.
Eyal Sheratzky: 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 output is higher, but the gross cost also higher. The direct cost also higher, so the margin is higher here. Got it.
Speaker Change: Again, we are talking about kind of services that since we don't have their hardware and all the back office related to the hardware so the margins.
Speaker Change: And dramatically higher than a typical.
Speaker Change: Hey.
Speaker Change: Service or full connected car services, which the output is higher but.
Speaker Change: But the gross cost also.
Speaker Change: Direct costs also higher so the margin is.
Speaker Change: Is higher.
Eyal Sheratzky: Thanks. That's that's really helpful.
Speaker Change: Got it. Thanks, that's really helpful and I was wondering if you could talk a little about the dynamics in the.
Eli Kamer: And I was wondering if you could talk a little about the dynamics in the market for the product revenues and how you see the pipeline evolving throughout the year. Theoretically, again, usually the pipeline regarding, you know, we have orders, but it's on a daily basis that we receive. Of course, there 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 are ready always to promote or to provide the delivery to our customers. So we have stock, enough stock, whenever they need.
Speaker Change: For the product revenues and how you see the pipeline evolving throughout the year.
Speaker Change: Theoretically again, usually the pipeline regarding we have ordered but it's on a daily basis that we receive of course there are some backlog of orders that we know from Oems that we plan and we manufactured the units in order to provide it.
Speaker Change: So we are ready always to promote or to provide the deliveries to the our customers. So we are stocking up stock whenever they need of course based on demand of course, we can increase the inventory, we'll reduce the inventory based on that regarding the.
Eli Kamer: Of course, based on demand, of course, we can increase the inventory or reduce the inventory based on that.
Speaker Change: The gross margins as you mentioned, that's really there is a lot of volatility over heel.
Eli Kamer: Regarding the gross margins that you mentioned, that's really, there is a lot of volatility over here along the quarters. And this is why it's very hard to say, but I would say, you know, even going forward, around the 20-25% makes sense to me on a gross margin for the product revenues. But it depends on the product mix. All right, thanks.
Speaker Change: Along the quarter and this is why it's very hard to say, but I would say even going forward around the 20%, 25% makes sense to me on a gross margin for the product revenues, but it depends on the Miguel on the product mix.
Operator: That's it for me. Thank you. There are no further questions at this time.
Speaker Change: Alright, Thanks, that's it for me.
Speaker Change: Thank you 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 on <unk> website, www dot each who ran that Seo.
Kenny Green: Before I ask Mr. Sheratzky to go ahead with 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.
Eyal Sheratzky: Mr. Sheratzky, would you like to make your concluding statement? 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.
Speaker Change: Mr. <unk> would you like to make your concluding statement.
Speaker Change: On behalf of the management to free to run I would like to thank you our shareholders for your continued interest and long term support of our business.
Speaker Change: If youre interested in meeting or speaking with us feel free to reach out to our Investor Relations team.
Speaker Change: Or is that.
Operator: We end our call. Thank you and have a good day. Thank you.
Speaker Change: We end our call. Thank you and have a good day.
Speaker Change: Okay.
Speaker Change: Thank you. This concludes the two Ron first quarter 2025 results conference call. Thank you for your participation you May go ahead and disconnect.
Operator: This concludes the Turan first quarter 2025 results conference. Thank you for your participation. You may go ahead and disconnect.
Operator: Goodbye!
Speaker Change: Goodbye.