Ituran (ITRN) has delivered a robust third quarter for 2024, with notable increases in revenue and profit, and a significant expansion in its subscriber base. The company, specializing in vehicle location and telematics services, reported a 3% year-over-year growth in revenue, reaching $83.5 million. This growth is more pronounced in local currencies, at 7%. Net income has also seen an uptick, rising by 9% from the previous year to $13.7 million. Ituran's achievement in adding 40,000 net subscribers is particularly noteworthy, as it aligns with the higher end of its projections, even amidst the headwinds of a strong U.S. Dollar.
Key Takeaways
- Ituran's Q3 2024 revenue grew to $83.5 million, with a 3% increase from the previous year.
- The company's EBITDA stands at $23.3 million, which is 27.9% of the revenue.
- Net income rose by 9%, amounting to $13.7 million.
- A strong net cash position of $67.3 million was maintained, along with an $8 million dividend declaration.
- Ituran secured a 5-year contract with Nissan (OTC:NSANY) Chile and is focusing on expanding its South American market presence.
- The company is advancing in usage-based insurance solutions and is looking to grow through new OEM partnerships.
Company Outlook
- Ituran reaffirmed its full-year EBITDA guidance to be between $90-95 million.
- The company is optimistic about its long-term growth potential, driven by subscriber growth and operating leverage.
Bearish Highlights
- Encountered challenges due to the strength of the U.S. Dollar, impacting financial outcomes.
Bullish Highlights
- Achieved the high end of subscriber growth expectations by adding 40,000 net subscribers.
- Signed a significant contract with Nissan Chile, bolstering its presence in South American markets.
- Sees an increasing attraction in markets with security concerns, potentially leading to higher trade cut-offs.
Misses
- No specific misses were highlighted in the provided summary.
Q&A Highlights
- CEO Eyal Sharatzky emphasized the consistent subscriber growth translating into better profitability.
- Sharatzky noted the opportunity in markets with security issues, where Ituran gains more attraction.
- Expansion plans include new OEM partnerships and broadening services in South America.
In conclusion, Ituran's third quarter of 2024 demonstrates a solid performance with a strategic focus on growth and expansion, particularly in the Latin American markets. The company's proactive approach to securing contracts and exploring new partnerships, alongside its innovative solutions such as usage-based insurance, positions Ituran favorably for continued success in its industry.
Full transcript - Ituran Location and Control Ltd (ITRN) Q3 2024:
Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Ituran Third Quarter of 2024 Results Conference Call. All participants are at present in listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded.
You should have all received by now the company's press release. If you have not received it, please contact Ituran's Investor Relations team at IK Global Investor Relations at 1212 3788040 or view it in the News section of the company's website, www.ituran.co.il. 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, Investor Relations, EK Global Investor Relations: Thank you, operator. Good day to all of you, and welcome to Ituran's conference call to discuss the Q3 2024 results. I would like to thank Ituran's management for hosting this call. With me today are Mr. Eyal Sharatzky, CEO Udi Mizrahi, Deputy CEO and VP, Finance and Mr.
Eli Kamar, CFO, Obituan. 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 call for the question and answer session. I would like to remind everyone that the Safe Harbor statement in today's press release also covers the contents of this conference call. And now Eyal, would you like to begin please?
Eyal Sharatzky, CEO, Ituran: Thank you, Kenny. I'd like to welcome all of you to our Q3 2024 call and thank you for joining us today. We are pleased with our Q3 results presenting steady growth in revenue and profit across the geographies in which we operate. We are also happy to report a high level of 40,000 net subscribers ahead in the quarter which came in at the top end of our expectations. The results were achieved despite the negative impact of the U.
S. Dollar strength in the quarter which lowered our local currency denominated results when presented in U. S. Dollars. In fact, in local currency terms our growth in most of the geographies in which we operate was even higher.
We increased our subscriber base by a net of 40,000 in the quarter at the high end of our expectation which is between 35,040,000. Our ongoing success reflects continued demand for our location based product and cinematic services as well as traction from the new initiatives and services we continue to launch in the various geographies in which we operate. Last week we announced a 5 year contract with Nissan Chile. We have a long term partnership with Nissan, one of the world's leading automakers and OEMs and have partnered with them for many years in Mexico. Under our new contract with them Ituran will provide Nissan Chilean customers with vehicle location unit pre installed in 3 new vehicle models which potentially is tens of thousands of vehicles over the years.
We will also provide telematics and stolen vehicle recovery services. Following a Nissan Chile customer's car purchase they will enjoy a year's free trial of ituran services paid by Nissan after which they will have the option to continue with their service which they will pay to Nissan and Ituran. Customers will have access to comprehensive Nissan branded on vehicle application. Additionally, the customer will also have access to Ituran Chile's 24 hour contract center, assistance in the event of vehicle theft and emergency services such as breakdown assistance and towing. This new agreement in Chile is the culmination of well over used discussions on how we can replicate our strong service for Nissan in Mexico and bring this service to the customers in Chile.
This new agreement shows the very strong satisfaction that Nissan has from our corporation in Mexico and I believe that this will enable us to expand to additional regions with Nissan in future. We are also aiming to build a strong aftermarket business in Chile, leveraging the strong experience we have in this market in many of the other regions in which we operate. We are also in active discussions with a number of major OEM car manufacturers in addition to those that we already work with. 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.
From a financial perspective, even with the currency headwinds throughout the past year we remain on track to meet our targets. We reiterate that for 2024 our guidance is full year EBITDA of between $90,000,000 $95,000,000 We continue to expect that for the quarter subscriber growth will be between $35,040 net new subscribers. Given the strong net cash position of over $67,000,000 our ongoing cash generation which came to $17,200,000 in the quarter, we continue to share a strong quarterly dividend of $8,000,000 with our shareholders. This dividend at the same level that we issued last quarter and 60% increase over debt of the year ago quarter. Our dividend yield on an annualized basis represent a return of over 6% which is a very solid return 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 Ituran. In summary, we remain pleased with Ituran's performance. Our consistently growing subscriber growth will continue to translate into increased revenue, improved margins and better profitability growth over the long term due to the operating leverage inherent to our business. We aim to enhance our subscriber growth and we are currently engaged in active discussions with a number of major OEMs, car manufacturers, both current and new potential customers to bring our services to additional countries in South America as well as new OEM customer across all our regions. 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 Kamar, CFO, Ituran: Thanks, Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issued in the press release earlier today. This quarter revenues were $83,500,000 a 3% increase compared with revenue of $81,100,000 last year. The strengthening of the U.
S. Dollar in the 3rd quarter versus the various local currencies in which Ituran operates in impacted the revenues when translated into U. S. Dollar. In local currencies, revenues grew by 7% year over year.
Revenues from subscription fees in the quarter were $59,600,000 a decrease of 1% year over year and in local currencies an increase of 4%. Product revenues in the quarter were $23,900,000 an increase of 14% year over year and in local currencies an increase of 15%. The subscriber base expanded to 2,369,000 by the end of the third quarter, an increase of 40,000 from the end of the previous quarter. The geographic breakdown of revenues in the Q3 was as follows: Israel 53%, Brazil 23%, rest of world 24%. EBITDA for the quarter was $23,300,000 or 27.9 percent of revenue, an increase of 4% compared with EBITDA of $22,500,000 or 27.8 percent of revenues in the Q3 of last year.
In local currencies, EBITDA grew 9% year over year. Net income for the Q3 was $13,700,000 or diluted earnings per share of $0.69 an increase of 9% compared to $12,500,000 or diluted earnings per share of $0.63 in the Q3 of last year. In local currency, net income grew 14% year over year. Cash flow from operations for the Q3 of 2024 was $17,200,000 As of September 30, 2024, the company had cash including marketable securities of $67,500,000 and a debt of $200,000 amounting to a net cash position of $67,300,000 This is compared with cash including marketable securities of $53,600,000 and a debt of $600,000 amounting to a net cash position of $53,000,000 as of year end 2023. The Board of Directors declared dividends for the quarter of $8,000,000 The current dividend takes into account the company's continuing 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?
Conference Operator: Thank you. The first question is from Sergey Golginov from Freedom Capital. Please go ahead.
Sergey Golginov, Analyst, Freedom Capital: Hello, everyone. So it's obviously a result of results, but we see price combined decline in service segment might be caused not only product fluctuation but something else? Thank you.
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: Service revenues as you mentioned, you are talking comparing to the last year or comparing to the previous quarter?
Sergey Golginov, Analyst, Freedom Capital: Comparing previous year.
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: To the previous year, yes. So service revenues did went down by almost $600,000 but the main reason is the currency exchange effect. So if you exclude it, you are getting only the currency on that was about an effect of $3,000,000 So basically their service revenues went up as expected.
Sergey Golginov, Analyst, Freedom Capital: Okay. Thank you.
Eli Kamar, CFO, Ituran: They also say
Sergey Golginov, Analyst, Freedom Capital: operating margin better operation margin due to G and A decrease. What is the main component which impacted on it? It?
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: Margin the margin for the 3rd quarter operating margins were 22% comparing to last year was 20.8%. So basically the margin went up and the main reason is the operating leverage in the business model.
Sergey Golginov, Analyst, Freedom Capital: Okay, got it. And you mentioned that recently you've seen an agreement with Nissan Chile. May any further agreements boost product revenue sales?
Eyal Sharatzky, CEO, Ituran: The contract is a typical contract that we have for many years with Nissan in Mexico. Of course Chile is a smaller market than Mexico but still since it's a longer term contract we are talking about tens, thousands of new customers subscribers because the contract include hardware and services that Nissan are paying directly to us. Add to that our experience with renewals that allow us to extend the contract also with the renewals to a higher profits and profitability along the years.
Sergey Golginov, Analyst, Freedom Capital: Okay, thank you a lot. That's all my questions.
Conference Operator: The next question is from Allen Klee from Maxim Group. Please go ahead.
Allen Klee, Analyst, Maxim Group: Yes, hello. Could you talk a little like your partnerships with potential ones or whatever with automakers, financing companies and auto insurance companies? What would you say are the major hurdles to get through to get someone to sign up? And what are the most compelling arguments that you can make to them for someone to decide to sign up? Thank you.
Eyal Sharatzky, CEO, Ituran: There are several reasons that the let's call it the sales cycle in this B2B segment is long. 1st of all, and this is the basic, is a marketing or strategy of each one of these brand or industries leaders that you mentioned, if we consider a car brand manufacturer which is a very international or if it's a bank such as Santander (BME:SAN) or its insurance companies that can be again MAPFRE, Generali (BIT:GASI), HDI, etcetera. So first of all, it's their decision to go and offer and invest because they have to pay in the end of the day for those solutions in their strategy. So this is their own decision of course. We have a strong rule here to convince them that it will be something with benefits.
2nd, once they decide they have to choose the right partner and then we get into technology aspect, installations, facilities, and how it's spread around large regions such as Brazil, Mexico, and other countries. So this takes a lot of time, it includes validation, it includes pilots. And third is how the contract look like, then there is a negotiation that takes time. Usually customer want to pay less, suppliers want to get more, there are the KPIs, etcetera. So when you take these three aspects, it's taking a long time.
And the last one, which is another thing that we should create confidence, when a company such as Nissan has to attach their brand and their large marketing expenses with a brand of a supplier like it to run because everybody know in Mexico for example that we are the supplier and every driver that drive a Nissan car and has a problem, it's a Nissan problem. So they have to know that they attach their brand to a brand which they can trust that it will not downgrade their own brand as this is one of the most important thing that we are very, very I think happy with and respected. I hope I answered it.
Eli Kamar, CFO, Ituran: Thank you.
Allen Klee, Analyst, Maxim Group: Yes, that was great. Could you talk about some of the bigger countries that you're in? What is about the environment there that makes it attractive for your product? And are there other countries that you see as big opportunities that you also see to set up positive?
Eyal Sharatzky, CEO, Ituran: There is the basic for us is that we have a lot of experience and we have a lot of, let's say, a large operation and our brand is strong in almost most of the countries in Latin America. This is something very important. Then the needs in those countries is stronger. The security people are more have more security problems. They need more, I would say, someone or a solution that will provide them more confidence and this is the main reason.
This is, I would say, the main driver. Then each country has a different mentality. In Brazil, for example, most of the people cannot afford themselves a full insurance as an example. So we found a solution like you know the ICS which is kind of a to run with insurance and in that case we are selling something very unique which is only car thefts insurance, monthly payment and this is something that allowed a large segment that do not insure his car and on the other hand it attach other insurance companies to do it with us and not create cannibalism for their main business. And also when you talk about if we go to other segment, again which is the car manufacturers or car dealers, they want to offer and to show their customer that they care for their security, they care for their car even after they took it out from the dealer.
So this is the reason why Latin America, I would say it's more globally emerging market are a vertical ground for it to run businesses.
Allen Klee, Analyst, Maxim Group: Thank you. My last question is, you look at you're involved in usage based insurance. And can you talk about how what you do and where you see the opportunity there?
Eyal Sharatzky, CEO, Ituran: It comes from a basic idea that as much as the driver drive more mileage or is driving skills are better and more secure, so insurance companies will have less expenses because they will have less accidents and they will have less payment of claims. So on the other end, insurance companies can get something which they can customize the premium. So when you attach these to I think to 2 components, it's something that we thought going to be very interesting for insurance companies. It takes also time, it's a longer sales cycle because we know that insurance companies is something very traditional, very large corporates. So it takes time to change from the traditional methods to something which is more customized, depend on technology.
I am happy that in Israel we succeed to do it about 2, two and a half years ago by convincing the first insurance company that adopt our solution. Since then, I would say that major portion of the insurance industry and the insurance companies in Israel decide to join this train and adopt our technology. And in terms of technology, we have 2 types of offer. One offer includes using our hardware and service that our hardware for this solution has a module that provide the data that allow to evaluate the risk of the driver online and then create the right billing methods for his risk. And the second is without a hardware using the iPhone or the Android application that we attach to our software and also with some partners that we integrated in order to do it without hardware in the car.
In terms of our own, I would say profitability, it's very equal. The prices are different, different depend what is the contract and the program that each insurance companies did with us. We started it in Israel and it's something that very grow and we start putting some seeds also in insurance industries in Argentina and now in Mexico. It's not yet I would say, mature enough the needs in those markets or how insurance companies still look at that. It's something that will take more time because we have to convince them and it's also in Israel took us a few years.
Our experience and track record in Israel will I think OIC will support a faster penetration also to other geographies that we operate.
Allen Klee, Analyst, Maxim Group: That's great. I actually did have one other question I just thought of. For your announcement with Santander, could you just explain what you think the size of that opportunity could be?
Eyal Sharatzky, CEO, Ituran: The announcement with Santander was, I think, almost 2 years ago. This is when we started the contract, by the way, also after almost a year of pilot and we are talking about 100 of 1000 of subscribers that derive from their needs to secure their collateral when they provide loans to car buyers. This is something that we aim to expand to extend to more years, and it means that on an annual basis it provides us tens of thousands of subscribers, but we have to be aware that those subscribers are for 18 or 24 months and when they finish their loan or their risk to pay the loan going or decreasing then of course Santander released them from the service we see to run, so it's kind of a cycle. So in the end it will be 100 of 1000 of subscribers. The net should be around 100,000 or 150,000 in the end of the on average every year.
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: Only in Brazil
Eyal Sharatzky, CEO, Ituran: by the way, only in Brazil I hope and we are doing our efforts to extend it to other Santander regions in Latin America.
Allen Klee, Analyst, Maxim Group: Thank you very much.
Conference Operator: The next question is from Chris Reimer from Barclays (LON:BARC). Please go ahead.
Chris Reimer, Analyst, Barclays: Yes, hi. Thanks for taking my questions. A couple of quick ones for me. Can you just remind us if there's any seasonality with either of your revenue volumes?
Eyal Sharatzky, CEO, Ituran: No. Most of our first of all we have a diversified business, diversified between segments, very diversified between geographies. So even if there is something which is not material in one area which I cannot appoint specifically, but I'm saying in general, still it will be edged by others. There is no seasonality as a group.
Chris Reimer, Analyst, Barclays: Got it. Yes. And just touching on the motorcycle insurance products, can you give any color as to how that's trending? What's the initial reaction been like?
Eyal Sharatzky, CEO, Ituran: It started then motorcycle insurance is a very risky segment for insurance because there is a lot of cars. It's easy to steal a motorcycle more than steal a car, but we succeed to develop a solution which provide more security to those motorcycles. And even here we have 2 different, I would say, drivers. In Israel for example, people that buy motorcycles they do not insure their motorcycle, so they use our solution to reduce their risk as a motorcycle owners because we have high rate of recovery in motorcycle based on the technology and using AI with it to run back office software. And in Brazil, since the motorcycle market is very, very large compared to the total vehicle market, an insurance company needs and want to insure motorcycles, but the risk was very high, so we succeed to reduce it and we came out with this proposal about a year ago and we see more and more attraction, which ramping up our customer base that gets also motorcycles driver and motorcycle insurers.
Chris Reimer, Analyst, Barclays: Got it. Thanks. That's it for me.
Conference Operator: The next question is from Josh Strauss from Pekka and Hardie. Please go ahead.
Josh Strauss, Analyst, Pekka and Hardie: Yes, I had a couple of questions. First, I'd like to talk about the core market of Israel. It's rather impressive that you guys have had the consistency of business in the face of the biggest war since the CO2 war and in the face of pretty rough economy in Israel right now, GDP down double digits. And so I guess I can't imagine there's a lot of importing of new cars coming in right now. And I'm just trying to get my arms around how you're able to keep the business as stable as it is.
So let's start there.
Eyal Sharatzky, CEO, Ituran: Okay. So first of all, you're right, the car importers went down. It's because of the situation, because of the dollar and the cost for cars here, etcetera. But the thing that support our growth in Israel even at these tough times is that the cathode rate went dramatically high and this is not something unique. We have to understand in countries where there is no or there is security problems or economic problems, usually the violence is growing and when the violence is growing, it means that also cut off trade going.
And at this situation in Turan, I would say you know getting more attraction and the needs of solutions such as we provide become stronger. So just to explain, this is the 1st year after almost a decade that we get tens of thousands of cars that when they were bought a year or 2 years ago, the insurance companies didn't ask for a security system. Now When they want to renew their insurance policy, they send us to install security system when 90% of them install it to 1. So in one hand, we are losing brand new cars, but on the other hand, we get a more let's call it kind of a second hand or old car. Regard the rest of the business, I'm not sure as long as I remember, I'm not sure that the GDP to run went down when we talk about a year, but of course there were at the beginning of 2024 and of course October, November, December 'twenty three everything here was shut down, but we recovered and except living not in a very quiet area, the things are moving and the commercial life almost become to normal.
Josh Strauss, Analyst, Pekka and Hardie: Right, right. Well, that's helpful. Certainly,
Eyal Sharatzky, CEO, Ituran: most of
Josh Strauss, Analyst, Pekka and Hardie: the population in the Tildee, Jerusalem area, that's not particularly surprising, but it just for us on the other side of the pond, it's hard to imagine such a stable business than the middle of this war, but thanks for the color. Can we talk about Bring? Is there any updates here on what's going on with Bring?
Eyal Sharatzky, CEO, Ituran: I of course cannot provide specific numbers and everything, it's a private entity. We have only 17%, but talking general information, Brink has a business plan and this year they are succeed to achieve the business plan. It's a growing SaaS company. We understand that the last round that was done on evaluation of $1,000,000,000 and the investment that led by Insight Partners of more than $100,000,000 there was different times in terms of financial markets for startups. So of course it's not a thing that we can do now for example to liquid our holdings whether it's by IPO or by M and A or by sell it in the market.
So we prefer to be wise and be wait. Of course we are part of the Board members. We know what's going on and we're really optimistic regard being in a good position in the future to do it.
Josh Strauss, Analyst, Pekka and Hardie: I just
Eyal Sharatzky, CEO, Ituran: want to remind you that bring value in our balance sheet is 0. So I believe that in the future it will contribute or will be a bonus of profits.
Josh Strauss, Analyst, Pekka and Hardie: Right, right, right. No, no, I remember all too well. And the market value is at 0, too, and they shouldn't. I agree. One more question.
So I was looking at your cash flow statement and you've got almost a $4,000,000,000 gap in terms of increasing in other current and non current assets. And I just year over year and I wanted to know what's going on there? What does that mean?
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: Which item you're talking about? For which period?
Josh Strauss, Analyst, Pekka and Hardie: In your cash flow statement, year over year, it doesn't show much of a it's not much of a difference from a 9 month standpoint, but in a 3 month standpoint, there's a $4,000,000 difference in terms of increase in other current and non current assets. This year, you had an increase of 9 $57,000 last year was a decrease of $2,900,000
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: I'm trying to find it so I can help you.
Josh Strauss, Analyst, Pekka and Hardie: It's not a cash flow statement.
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: Let me check and we can get back to you on that because there is nothing specific. There's probably it's working capital that there is a volatility between quarters or between periods. There is nothing specific that on this item that can change. But again, we can check it and get back to you.
Josh Strauss, Analyst, Pekka and Hardie: I mean, yes, I'm very curious on whether or not it's revenues on the balance sheet that have not yet hit the income statement or something like that. So, yes, please just shoot
Udi Mizrahi, Deputy CEO and VP, Finance, Ituran: me a note or give me
Josh Strauss, Analyst, Pekka and Hardie: a call and let me know what the story is there. Okay. But that's it for now. Great quarter, guys. Keep going.
I'm looking forward to seeing stock going over 40.
Conference Operator: There are no further questions at this time. Before I ask Mr. Charettezky 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. Mr. Sharansky, would you like to make your concluding statement?
Eyal Sharatzky, CEO, Ituran: 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. In the coming months, we will be meeting with investor and presenting at LD Microglot and EDAM and we hope to see you soon there. If you are interested in meeting or speaking with us feel free to reach out to our Investor Relations team. And with that, we end our call and have a good day.
Conference Operator: Thank you. This concludes the Ituran Q3 of 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.
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