Q3 2025 Ituran Location & Control Ltd Earnings Call
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Speaker #1: This meeting is being recorded.
Speaker #2: Ladies and gentlemen, thank you for standing by. My name is Kenny Green. I am part of the Investor Relations team at Ituran. I would like to welcome all of you to Ituran's Result Zoom webinar, and I would like to thank Ituran's management for hosting this call.
Speaker #2: All participants, other than the presenters, are currently muted and following the formal presentation, I'll provide some instructions for participating in the live Q&A session.
Speaker #2: I would like to remind everyone that this conference call is being recorded and the recording will be available from the link in the earnings press release and on Ituran's website from tomorrow.
Speaker #2: 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 Ituran.
Speaker #2: 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.
Speaker #2: You should have all by now received the company's press release, if not, please view it on the company's website. I'd like to remind everyone that the Safe Harbor Statement in today's press release also covers the contents of this conference call and the associated presentation.
Speaker #2: And now, Eyal, would you like to begin, please?
Speaker #3: Thank you, Kenny. I'd like to welcome all of you to our third-quarter 2025 results call, and thank you for joining us today. We are very happy with the results of the third quarter, which were strong across all key parameters.
Speaker #3: In particular, we are very pleased with the revenue growth. And we continue to grow, driven by our long-term efforts and success in bringing existing as well as newest customers value, adding telematics and connected car product and services.
Speaker #3: In addition, we are also constantly bringing additional OEM partners to our growing roster, an example of which was Stellantis last quarter, and we are in active discussions with others.
Speaker #3: Our results show an ongoing expansion across our target geographies in our large subscriber base of over 2.5 million subscribers. In the third quarter, we added 40,000 net subscribers.
Speaker #3: We are on track to add between 220 and 240,000 net new subscribers in 2025, which will represent a very strong year of subscriber growth.
Speaker #3: We had a good third quarter, and I want to summarize some of our activities which contribute to our growth and success. We continue to see solid demand for our location-based products and telematics services in all our regions.
Speaker #3: As well as traction from our new initiative and services. In Israel, the high car theft rate continued to provide strong demand for our services in the country, and we are reaching additional new subscribers from parts of the market that were previously untapped by us.
Speaker #3: Such as lower-priced new vehicles or the second-hand car market. Our usage-based insurance business in Israel is also seeing good traction and bringing continued strong subscriber growth.
Speaker #3: In Latin America, we continue to expand our reach. Our new product targeting the motorcycle market is gaining strong traction across South America especially on the back of our partnership with BMW Motorrad in Brazil.
Speaker #3: Motorcycles are a significant market opportunity, being the top mode of transportation in many parts of the world. They've significantly increased our total addressable market, with Brazil as our starting point.
Speaker #3: We plan to scale into other high-growth motorcycle markets through partnerships with local OEMs, as well as sales to the aftermarket. Our Ituran mob, smart mobility platform, is a unique technology and solution enabling remote vehicle access, real-time telematics, and efficient fleet management for shared mobility and rental fleet applications.
Speaker #3: Ituran Mob was launched first in Brazil and has been gaining solid traction here, where it is being adopted by a growing number of fleet operators and rental companies.
Speaker #3: Based on the strong market interest and success, we've seen in Brazil we are now introducing it to the United States market. We recently established operation for Ituran mob in the United States with identified a strong need in the US for our solution, particularly among the thousands of small to medium car rental companies which include hundreds of thousands of cars.
Speaker #3: Companies could benefit from this type of technology. These solutions make the rental process more user-friendly and efficient. This creates a new long-term avenue of growth alongside our core telematics and subscriber-based businesses.
Speaker #3: Ituran generated a high level of cash in the quarter amounting to 21.3 million dollars in operating cash flow during the quarter. Due to our continued profitability and strong cash generation, we declared a dividend of 10 million dollars to shareholders for the quarter.
Speaker #3: I remind you that at the end of last year, we increased our dividend policy by 25% from issuing 8 million dollars per quarter to 10 million dollars per quarter.
Speaker #3: This represents 50 cents per share. Our dividend yield on an analyzed basis represents a return of around 5%, which is a very solid return from a strong and stable company.
Speaker #3: During the quarter, we purchased $1.5 million in shares under our buyback program. As of the end of the quarter, we had around $5.2 million still available under this program.
Speaker #3: We see our ongoing dividend and buyback as a reward to our shareholders for their loyalty and long-term support of our company. And in summary, we remain very pleased with Ituran's performance in the first quarter.
Speaker #3: And more generally, Ituran's long-term and ongoing performance. At the same time, we look for more avenues to bring further growth to our business across all our regions and the recent launch of Ituran mob is an example for this.
Speaker #3: We constantly aim to bring new products and services to both existing customers and new customers as well as partnerships with new OEMs. New financing companies and other leading companies.
Speaker #3: 2025 marks 20 years as a public company and 30 years as a company. We look forward to opening the nursing market on Tuesday next week, November 25th, and we thank both the nursing team as well as our shareholders for their long-term support of our business.
Speaker #3: And with that, I hand over to Eli. Eli, please go
Speaker #3: ahead. Thanks,
Speaker #2: Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issue in the press release earlier today.
Speaker #2: Third quarter revenues were 92.3 million dollars and 11% increase compared with 83.5 million dollars in Q3 of last year. Subscription fees were 67.6 million dollars up 13% year over year and representing 73% of total revenues.
Speaker #2: Product revenues were 24.7 million dollars up 4% year over year. Our subscriber base reached 2,588,000 at quarter end and increased of 40,000 in the quarter.
Speaker #2: Year over year, the subscriber base grew by 219,000. The geographic breakdown of revenues in the third quarter was as follows. Israel 55%, Brazil 23%, rest of world 22%.
Speaker #2: EBITDA was 24.6 million dollars 26.7% of revenues up 6% year over year compared with EBITDA of 23.3 million dollars 27.9% of revenues in the third quarter of last year.
Speaker #2: Net income for the third quarter was 14.6 million dollars or diluted earning per share of 74 cents and increased of 7% compared to 13.7 million dollars or diluted earning per share of 69 cents in the third quarter of last year.
Speaker #2: Cash third quarter of 2025 was 21.3 million dollars. As of September 30, 2025, the company had net cash including multiple securities of 93.1 million dollars.
Speaker #2: This is compared with net cash including multiple securities of 77.3 million dollars as of year end 2024. The board of directors declared a dividend of 10 million dollars for the quarter.
Speaker #2: The current dividend takes into account the company's continuing strong profitability ongoing positive cash flow and strong balance sheet. During the quarter, we purchased 1.5 million dollars in shares under our buyback program.
Speaker #2: As of the end of the quarter, we had around 5.2 million dollars available under this program. And with that, I'd like to open the call for the question and answer session.
Speaker #2: Operator.
Speaker #3: Thank you. At this time, we'll begin the question and answer session. If you have a question, please raise your hand by the Zoom platform.
Speaker #3: I will introduce you and ask you to unmute after which you may ask your question. We'll take a few moments to poll for your questions.
Speaker #3: Our first question will be from Chris Ramer of Barclays. Chris, you may go ahead and ask your
Speaker #3: question. Oh, hi.
Speaker #4: Thanks for taking my question and congratulations on the strong results. I was wondering if you could give a little more color on the launch in the US, what's the target market, do you have any idea of the how big it is and when might you expect it to bear fruit?
Speaker #1: Okay, absolutely. Thank you. Before we decide to go from Brazil directly to the US market, which is, I think, the most luxury market for this kind of solutions, we did a survey and we get information that in the United States, there are tens of thousands of rental companies is true that about five of them are representing more than 60% of the market and these are the big names.
Speaker #1: The first and the beginning, we are not aiming them as our segment. But the other, represent hundreds of thousands of rental cars we are talking about small and medium rental companies from a one family that holds 10 or 15 cars that they are rented or some mid companies with 100, 200, 300 cars.
Speaker #1: All of them are local; all of them are or most of them are not nationwide. And they have a very strong demand for a solution that, first of all, will allow them to save their cost, and I will explain.
Speaker #1: In order to today for a business that has 20 or 30 cars to meet the customers, they have to go and meet each customer, give him the key of the car, then bring it back.
Speaker #1: It's required drivers. It's required service. Or in the worst case, they have to open a office put a deck, put a people, put softwares, etc.
Speaker #1: And when you have 20 or 30 cars, it's a dramatically high expense, and it's dramatically lowering the chance to make money from your rental company.
Speaker #1: What we provide is that you don't have to do almost anything except having the cars. Because everything done on the streets, everything done that you have a dashboard as a rental company owner, small rental company owner, and you can know every minute what is with the cars, who is driving the car, how much money this car will provide you, and that's done by having a smart key in the car, having the system that we developed through Eat Run Mob, our small subsidiary for this technology and innovation.
Speaker #1: And in Brazil, by the way, we have been doing it for almost three years. It's a very successful solution. Additionally, even in Israel, the largest leasing and rental company, Shlomo, Shlomo Lease Car, changed to a technology that he found in the world because we didn't have it in the past, to our technology.
Speaker #1: He threw away about 2,000 hardware units that he paid for and installed in his rental cars, and now we are partners. Our units and services are also in Israel.
Speaker #1: I'm not, I'm talking about the US because Israel, by definition, it's a small market. It's maybe attractive, but it's not having a major influence on our future results.
Speaker #1: But the U.S. market, and it's important to mention, we are, I think, the first. I mean, we had or we know about companies that tried; they have a very not the same technology, let's be, I don't want to be arrogant, and when they tried the technology, it didn't work.
Speaker #1: They tried to do it in small city, one small city, but there are not really big technology or communication player that develop or represented to the US market.
Speaker #1: So we are in the beginning of this industry, I would say, in the States. There are companies that deal with remote rentals, but not the renting of the car itself.
Speaker #1: There are companies that provide services to rental companies, like integrators and software companies. That's good. This, by the way, is an advantage for us because we can partner with them.
Speaker #1: But before we do it, we have a solution which we can go independently by ourselves. We already have pilots in the area of Orlando and New York.
Speaker #1: With some small rental companies that are very satisfied, they respond that we get is a very, very good. I'm saying it's not something that will happen tomorrow.
Speaker #1: We are opening a new, I think, a new niche, a new segment, a new market. It's also required adaptations. But I think that, let's say, the dream here is huge.
Speaker #2: Got it. Thanks, that's really great color. Maybe just touching on OpEx, what was driving the increase in operating expenses this quarter, and how should we be looking at margin expansion into next year?
Speaker #3: If we are talking about the increase in the OpEx, the big majority of it is coming from the FX, as and that, of course, increased the absolute numbers of the OpEx.
Speaker #3: And if we are talking about the margins, again, I don't see any reason that as long as we continue to increase our subscriber base, and this is exactly according to the guideline and I'm assuming next year the same, that the margins will increase as
Speaker #3: well. Got it.
Speaker #2: Thank you. And maybe if I could just one more, how do you feel the subscriber momentum is performing versus your original guidance for the year and can you give any color on where you're seeing the most traction?
Speaker #3: As I said in my speech is that we provide kind of guidance of 200,000, 220 to 248,000. And according to the nine months, and add the current data that we have is that we will meet this range, which is the highest I think ever in the 30 years of Eat Run.
Speaker #3: And the drivers are absolutely across all the regions, and it includes also from the OEM, it includes the aftermarket that we do in Brazil which is including the insurance companies, and it's also including the financial solution that we provide to banks.
Speaker #3: And also, with a very major influence on the subscribers that we add during 2025 is Israel. And this is thanks to the requirement by insurance companies relatively to the cars of rate is very high.
Speaker #3: So, more and more new cars are being issued, but more importantly, secondhand cars that in the past didn't require a security system now do. Eat Run is by far the first choice in Israel for any other security solution, and this will allow us to grow dramatically in 2025, especially in Israel.
Speaker #3: And I will add that the UBI also has some volatility to 2023. We did a very high growth in subscribers. In 2024, we had to expand the customers that we are approaching, and in 2025, we had another large insurance company for whom we developed a solution. They also, during the second quarter of 2025, started using our UBI solution in high numbers.
Speaker #3: So overall, this is the
Speaker #3: drivers. Great.
Speaker #2: Great. Thanks. That's it for me.
Speaker #2: guys. Thanks,
Speaker #3: Thank you.
Speaker #1: Chris, our next question is going to be from Alan Klee of Maxim Group. Alan, you may go ahead.
Speaker #1: ask. Yes.
Speaker #4: Hi. Can you hear me?
Speaker #4: Yes. Oh, Yes. great. You talked about how motorcycles are important in South America and your partnership with BMW. What are you could you talk about kind of how you're looking at increasing the uptake in this market?
Speaker #4: Yes. Brazil and especially, but also the rest of Latin America, is a very motorcycle, and I'm talking about mid to heavy engine motorcycles which is quite expensive vehicle, is very popular.
Speaker #4: The ratio between four-wheel drive and two-wheel drive is very different than, for example, in other countries in the Western world. Many people are using motorcycles.
Speaker #4: Eat Run always has a solution, but our solution was a little bit, I would say, not reliable enough to provide insurance companies with a low premium for motorcycles.
Speaker #4: This is first. Second, even the motorcycles themselves was in a situation that they didn't want to add cost to their motorcycles. But in the last two years, we developed thanks to our against innovative teams a unit which is a state-of-the-art for security system and application for the driver on a motorbike.
Speaker #4: And what we did first, we use our OEM capabilities and teams and we start negotiating, as you remember, maybe the first one was with Yamaha.
Speaker #4: Yamaha is our first customer for almost two years, 18 months. And then now, as we publish, we sign an OEM deal with BMW Motorrad in Brazil.
Speaker #4: The idea is that this is an untapped market for a telematic solutions. And we're talking about potential of millions of motorbikes that fitting these needs and can pay it compared to the price of the motorbike.
Speaker #4: So we started with an OEM, this allowed us to create reliability, this allowed us to partner with brands the guys of motorbike is like sports car.
Speaker #4: If somebody is driving a BMW, you will be very loyal. The same goes for Honda, Yamaha, etc., specifically in Brazil. So we knew that partnering with a big brand in the OEM would again provide reliability. Now, what we see is attraction also from the aftermarket, because if someone comes to a dealer of BMW to have some treatment for the motorbike or to buy something, now he is asking or he will see that there is a solution by Eat Run.
Speaker #4: So we really believe that we just started. I am expecting that it will bring us tens of thousands of subscribers of new subscribers starting 2026 and it will grow as we will expand the segment and our customer, whether it will be B2B with other motorbike manufacturers, there are other names that we are starting to talk with.
Speaker #4: I'm not saying whether it will finish with a deal or not, but we see attraction and a major portion of this market is the second market, the aftermarket, and this is something again that I believe that can be very important with influence again on the results in two to three years from
Speaker #4: now. Thank
Speaker #3: You know, I understand that Israel is an attractive market, but it's not that large, and you have a large opportunity in Latin America and South America.
Speaker #3: How do you think about first the size of the opportunity in South America, and then also is it possible over the next couple of years that there could be other geographies that might make sense?
Speaker #4: not passing any opportunity, but by talking about how we focus so the Latin America market, whether it's Central or South America, it's a huge market which is, by the way, it's kind of an emerging market.
Speaker #4: So there is still growing segment that we couldn't penetrate, whether it's because of price or whether it's because awareness. So for us, the first online is to expand and continue expanding our business in Latin America.
Speaker #4: Because of the synergy that we can create—the relationship, the brand—and we are still, I think, in the beginning of tapping this market. So this is regarding how we focus.
Speaker #4: But on opportunistic way, of course, when we are going to some when we look on the rest of the world, we are more looking of do it by M&A, by acquisition because for us to start a new business from scratch, for example, in UK or in Europe, it will require high resources because we have zero resources now there.
Speaker #4: And until the moment that we turn it into major revenue and major profits, it will take a long time. At the size of Eat Run, the way that we are looking at other geographies is through M&A, but of course, we are looking.
Speaker #4: It should be something that meets our DNA and meets our criteria. Our criteria is not too small a company, but on the other hand, the company should have assets that we can leverage.
Speaker #4: Such as partners or customers, systems of employees, control centers, etc. But to make a long story short, we still focus on Latin America and in the U.S., as I said.
Speaker #3: Okay. Thank you very much.
Speaker #4: You're welcome.
Speaker #1: Our next question will be from Sergey Glinov from Freedom Capital Markets. Sergey, please go ahead.
Speaker #5: Good morning, and can you hear me?
Speaker #1: Yes.
Speaker #4: Yeah, yeah. Yeah.
Speaker #5: Great, great. So first of all, my applause to Eat Run and other successful quarters. You guys beat market expectations; revenue didn't meet expectations, but now I'm interested in revenue dynamics.
Speaker #5: It seems you ARPU is increasing; is it basically product and service mix or something more fundamental as the core?
Speaker #1: Hi, Sergey. ARPU is going up due to the fact of the FX. FX has been better in Q3 this year. Therefore, the ARPU went up as well.
Speaker #5: Okay. And some kind of follow-up about your Eat Run MOP in North America. So, do you have any expectation about revenue next year?
Speaker #4: We never provide guidance about revenues, but I must tell you that we do all we can to make more revenues than this
Speaker #4: year. Yeah.
Speaker #5: Sounds great. Sounds great. Thank you. Thank you. That's all for me.
Speaker #4: You're welcome. You're welcome. Thank
Speaker #1: you. Thanks, Sergey. Our next question hold on one sec. Our next question will be from Evan Tindell of Bahrain Capital. Evan, you may ask your question.
Speaker #6: My question is, I've heard that some theft insurance providers in Israel are not requiring Teslas to have your system. I'm just wondering, is that true?
Speaker #6: And then secondarily, a follow-up to that is over 10, over 5 to 10, 15 years, something like that. Do you guys worry that more manufacturers will be able to sort of figure out how to do the internal telematics systems and anti-theft systems well enough to disintermediate you guys?
Speaker #6: Thanks so much.
Speaker #4: Okay.
Speaker #4: So just to explain how is the process specifically in Israel, because there is a regulation, in Israel, insurance company cannot decide for their insurers or to require in their policy a specific brand, a specific solution.
Speaker #4: What they allow to do is, for example, if they want to have a location unit with a real-time alert, with a 24/7 control center, that’s what they put in the policy.
Speaker #4: Now, in the U.S., the insurer has to decide which company you choose. So, never since the inception of Eat Run have insurance companies said to install Eat Run or install another name.
Speaker #4: This is what's nice with Eat Run: we are not the chosen of the insurance company. We are the chosen of millions of subscribers in Israel.
Speaker #4: This is what the story is and how we do it with our channels, and the channels in that case are car dealers and car importers. Just to remind you, in Israel, there are no manufacturers.
Speaker #4: But in Israel, there are car importers that represent manufacturers. So, Eat Run has a very strong partnership relationship over the years, and this is the reason why 20 years ago, Eat Run was declared a monopoly in the telematics business in Israel.
Speaker #4: And this is why I can say and publish that Eat Run has something like 85 to 90 percent market share. So it's saying that 10% of the industry by other companies.
Speaker #4: But for us, it's good. We have competition, but we lead the competition very, very strongly. So this regards this question. Regarding the second question, as we proved in the OEM business in Latin America, for example.
Speaker #4: Historically, we started by selling hardware and services. But Eat Run has always been built on a recurring revenue model; we have always operated as a service-oriented company.
Speaker #4: For us, the hardware in the car is a tool; it is a tool to bring customers. But I would say our gold medal is to have a customer many years paying every month.
Speaker #4: For that, we don't need the hardware, but yes, we need a car manufacturer or, in Israel, a car dealer or a shop to say, "Okay, I'm selling a car with a telematics solution."
Speaker #4: But the company that can provide the services, and for example, when we talk about SVR, this is a market that we are very active in.
Speaker #4: Israel and Latin America are very hostile environments. No technology will recover the car. The recovery of the car is done by people sitting in a control center who provide information to enforcement personnel in the field. We have intelligence, and we have drones.
Speaker #4: Don't think our aside the technology. So along as long as we can sell and specifically in emerging market, our technology as the state of the art, it's very the companies, for example, that sell cars in Israel, even the Chinese companies, they are not providing communication telematics solution.
Speaker #4: For example, in Hebrew, they are not providing the data that's relevant, and then they will not integrate it for those small markets.
Speaker #4: On the other end, in Brazil, and in Mexico, we are connecting to those manufacturers from the first level. So I think that for us, it's more important to provide the service to have the recurring revenues.
Speaker #4: Today, 95% of our customers, which include car dealers, car manufacturers, and any other customers, still buy our hardware. However, there are a few percentage points who use their own hardware.
Speaker #4: We willing it's for us, it's okay. For us, it's okay. So it may be grow this percentage will grow. I agree with you. In the next decade, but still, it's not something that we see as aiming the business of Eat
Speaker #4: Run. Great.
Speaker #1: Thank you. Thank you for that. And one other question. Can you update us on your efforts in India?
Speaker #2: I didn't talk about India today specifically because there were a few quarters that I mentioned this joint venture that we have in India. Since this growing market is very, very slow, I didn't find a reason to repeat things that I have said in the past.
Speaker #2: But for you, I can say we have a joint venture in India. We signed a large contract with Mercedes-Benz for commercial cars, but with a low margin. The current problem in India is that the market is premature.
Speaker #2: The financial capabilities of businesses, as well as retail, are very low. So, we have to find very specific deals to make money. But India is for the long term.
Speaker #2: India has a lot of potential as we see it for the future. And we are the main telematics or one of the main telematics players that they're on the ground.
Speaker #1: Okay. Thank you.
Speaker #2: welcome. Thanks,
Speaker #3: Evan: So that will end our question-and-answer session. Eyal, if you would like to make your concluding statements.
Speaker #4: On behalf of the management of Eat Run, I would like to thank you, our shareholders, for your continued interest and long-term support of our business.
Speaker #4: We look forward to continuing our accomplishments over the next decade. If you are interested in meeting or speaking with us, feel free to reach out to our Investor Relations team.
Speaker #4: And with that, we end our call. Thank you and have a good