Ituran Location and Control (ITRN) 24 May 222022 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Ituran First Quarter 2022 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. [Operator Instructions] As a reminder, this conference is being recorded.

received the all press have should by company's now release. You

or please have Mr. & like Investor X-XXX-XXX-XXXX, I the will not call website you Relations. over Mr. the contact section Public it begin? of News to received at now Investor If Investor www.ituran.co.il. GK Kenny you it, Ituran's Green Green, company's GK in would at Relations Relations the hand view to team of

Eyal to to like the all call. call of management Thank Ituran's you. welcome quarter's of the quarter I'd conference are today line Eli Mizrahi, discuss Mr. Kamer, CEO and summary results. for Good to Udi first will Eyal the on day With results with me a conference to a you Ituran's and Ituran. hosting Deputy XXXX begin of this thank summary followed CEO; Mr. with Finance; by the Sheratzky, Mr. and financials. of Eli CFO

session. for of this in We today's please? like contents begin also the will And statement then covers remind question-and-answer press Harbor call open to release the conference that I'd Safe to the Eyal the you would now, everyone call. like

to for of welcome I'd and thank you you Thank Kenny. you, joining like today. us all

the added million Brazil of at million total and subscribers with $XX our quarters. quarter X.X from a XX% the surpassed growth our in Israel, pleased our to performance both, rental with of few We success. from Mexico, in as our various past over also very strong from base This increase traditional the kicking engine companies the It's by boosted segment in XX,XXX also The U.S. financing our subscribers, in subscriber UBI subscription included with XX,XXX are which indication This new America, off is very quarter. revenues, business, we in bringing business subscriber growth in growth the is first results, car that financial We usage-based record companies exceeded aftermarket XXXX during insurance, subscribers. but current growing adds, the clearest with this have quarter, reflected which increased continued was at year-over-year. grow net aftermarket overall growth in South the activities business. came our working traction as a well over

are I trend. subscriber growths continue clearly throughout As quarter, this is of of year right adds. XXX,XXX first we adds the we this subscriber with quarter, the discussed last XXX,XXX to sub type on expect between net expectation In that indicating to

can you most very growing constraint. this chain recent is strong, very is And macro notable which many Ituran supply our us issue the macro challenges. are and The a are the impact As of see, healthy business. proud background I’m despite what achievements. And of

First, that as shortage issue this the us impacted of already because the for has you of is know, of year much an past parts.

somewhat the on prices. market we We of to goods components the and components This that gross price had significant products we margins spot increases cost need lowers sell. and we on the have seen some at that increases buy inflated of the scarce

the cost of but Some it. to pass been not all have on, of increase we able

net we Brazil, had the to on new with larger to an we are And meet cars Colombia. OEMs of sell in manufacture a subscriber as of OEMs that impacted Ecuador, the unable actually this impact and that the are to below the XX,XXX OEM that in and cars subscriber demand. of Second level is base adds work Mexico, The indirectly the Argentina, are come and this sell we decline quarter. impact therefore, end, subscription

to aftermarket need accounts. grow which the which engines, see home working growth. product cash that to of now And one strong for the with usage-based as first new we by all, than solid our The can have components our use educated we second, especially plan, we year, traction quarter, work in we gained in, reduced from past that the a major have since from in significantly main value coming inventory business, know, in Israeli continue customers market are subscriber fixed, trend build that UBI you ensure has is strong our the the all regard companies position During the With insurance the growth you the to of place becoming to using to products. to to consumer increasingly insurance are has Israel. rather typical seven again,

to Israel rollout in years. our the look success coming markets in other And be to and we successful. Our is proven in replicate a quarters

car is services stronger and Another not secondhand past prices the U.S., our cars, because traction by in just seen the grown which of growth I new globally. secondhand is the This be year market car discussed the and everywhere. secondhand shortage but ultimately the to car has increase in in of gaining which components the market can before, engine,

the technology a New loan the the number currently FinTech is market. financing and the as do financing in while this customers shortage, will that risk I and the of location as driver there to this in provides not healthy America, they well car lower startups, a as car. much against behavior the gross as cars and part market. and to which the banks based could Latin still provided into ultimately a have sell company of know come monitor Ituran large connected car

we the see and temporary. However, as growing shortage car time all business situation are the the

the XXX,XXX of with business service a see especially growth in year. or geographies. for our can traditional customers on additional expectation. subscriber in basis and business the services. ahead will million our potential two jump The said, our a all-in-all, I'm We well growth by additional very about great base, and solid regular monthly are are In the the our performance which looking at our between, be stand summary, in era. us most we coming we accelerate we years. a of grown our constantly which and pleased our And engines, XXX,XXX in more both these subscriber financing one to traditional We're excited growth expect to bring customers performance, seen broaden and the of And of for playing cusp now as I base in new has

We a are pleased often from clearly performance shows noise Eli? healthy more than as the for position while and expenses. business. with over mark-to-market call our picture financial years. now the summary. The the I'm Eli big hand coming and excited ever is the now with will our over And to there I long-term growing we financial some have financial that is currencies case, and

will Difficulty] Eyal. results. Thanks I [Technical provide

You over XXX,XXX as period quarter press were of as revenue. can and of increase XX, of an we of issue were Revenues over from increase today. find The Revenues first March the increase of XXXX $XX.X quarter of represents million, first XX,XXX in amounted the end XXXX. subscription in increase the first the net an an to X% and more million XX% quarter This that year-over-year. X,XXX,XXX of the million an with quarter the $XX.X fees for XXXX subscriber earlier revenues XXXX. base compared of $XX.X detailed results of release

XXXX compared the primarily amounted shortage. revenues compared the on revenue The of earnings of would of margin was in quarter result supply last quarter The current were value I was The XX,XXX of of to with OEMs, of cost was expenses decrease compared The with primarily quarter XX.X% XX% the aftermarket and our market XX.X% due as financial the increase in was million address the public or increased of with with first Cash in XXXX. base flow During due as the $X.XX million margin increase base expenses. financial quarter $XX.X the product million the million decrease million and an $X.X the million. of in the XX.X% $X.XX. quarter $XX.X spot a in of sales revenues increase with revenues the year. of as the or in income of for compared was in due mix, lower Financial from the subscriber impacted an global first of of first the the the sales of or components like the was of quarter in for XX%, in or of or first $X $X.X subscriber a XXXX margin The XXXX. the quarter XX,XXX $XX.X XX.X% due quarter, of prices $X.X was quarter million of operation in in product quarter there EBITDA or follow: to to a shortage. primarily Net Israel, rest for XX%. in at of subscriber million diluted the quarter. somewhat global to product SaverOne, first quarter parts increase share for well $X as breakdown fall XXXX $X.X diluted significantly geographic with Product was the was in issue last per the to per that XX%, the gross was subscription XX.X% first OEM gross year. and XX.X% of base. of chain of XX.X% was million of world an the share compared revenues, EBITDA XX.X% first on of revenues revenues which expenses holding quarter the first of X.X% the OEM Brazil compared earnings quarter

of to company of net bank a with million credit $XX.X $XX.X This $XX.X long-term marketable As as bank cash December the XX, long-term of XX, a million. $XX.X and March XXXX. securities of to is securities of and million had and cash net million short including of and compared $XX.X credit cash amounting short million XXXX of amounting $XX.X cash marketable a of million including a

For analysis. XXXX, the Operator? Rule on by of Under line The buyback on the $X purchased open quarter available dividend and call total share we we approximately of declared. April in X, funded $X will of a buyback XXB-XX. the of issuing made $X.X XXXX, least were renewed a XXX,XXX in the a basis. shares session. XXXX SEC based repurchase XXXX, a announced diluted was quarterly million. announce that, totaling with with next shares and million on first were for $X.XX Board’s million repurchases to at in ordinary would per like cash of the was Share renewed in Ituran’s policy And current question-and-answer X, second results is were quarter This purchases August quarter

is Thank you. ahead. [Operator The from Instructions] Jefferies. of first David Please Kelly question go

looks my XXXX. downturn COVID-related taking the for thanks since decline quarterly subs like Kelly, in biggest questions. It the OEM David early saw

sub the as You here? can you the losses auto drove prepared assume but more touched on expect at the to or remarks, it on it briefly continue details that global back of we production in in clients improves? this the improvement And is year level provide should what the fair

sale OEM the in the of the in of know, XX% trial we industry directly the approximately the usually always of that OEM working is also about the the markets this we you and on shortage a finish year. we cars. base understand you the paying rest of we sales but which only since starts that that As and after dramatically decline influenced us, have that on more that the by And we from operate, free to see the customer the influenced OEMs When thing renew There are see car happen new the installations. world our market. buying is

car sales the we in what report are ago, if subscriber today, lower. assuming that now. same rates decline levels, the is base. are see that’s It So And in new we automatically the sales of year but than XX% creates conversion net a less the renewals the that our

of Looking to period in because is time. quarters everybody the something this this not segment that in a year forward, can change assure the shortage of couple nobody next change expect will or

end XXXX. see know So day, demand we in that is the of the we assume during these continue to will that But numbers that the we something is higher.

grow the very of once OEM, I the at this of in high dramatically the to subscriber will very faced first We higher customer The of we it. one-time just important. And like the that succeed sales market corona believe much in base. lower finish. that the the So shortage of the in overcome aftermarket we it’s to in want profitability our Ituran then on OEM, for will saw which the end quarters sales profitability something components the we after will is much, add in cars, subscribers. each decline than

the grow XX,XXX And we we it’s see lost other on in opposite. closer today you the OEM, than the when So XX,XXX. the even aftermarket to more that much better than hand, XX,XXX, on

is course, us, we all know on dependent segments. all to market the say today, situation not as depend think component. the is is long dependent on It’s best the – that Of let’s But in the grow as needs. I something which not which the industries, the on it’s pandemic of is

I do years, two happy aftermarket, satisfied and this in than with that the – or three not year. every think which more these our I’m case net the higher and the again, that grow quarters. did is will expecting scenario OEM the coming in But subscribers ahead more multiplied we the to this numbers are much in looking on we than best that succeed in our last problems. I'm we by dramatically

of product a well The Can up. prices your starting as next the buys and year? negatively just margins on increased at follow quantify expect improvement that level that shortages were back improving mix spot a had profit? increased similar then And will margins half Or you the the before And have as components. spot impact press of you quarter? impacted the margins should do quarter gross mentioned by in be release Great. gross gradual just we second as assume

a cost you This our six was bought wall, because to we almost spot on in today it the from last beginning product gross inventory, less, is the of that only First I the situation. first purchased time an This a of what to chain. of nine supply lower we margin X% the which It's or And faced let's our first but compared that about of you that on prices XX% the analyze kind that months happened can with have high year. see inventory product. or think profitability and ago. has is was we all, first hysteric the prices we all say secure very shortage on

is Now, what today longer we sales and understanding what are succeed is for I'm after on we paid hardware. need, say but in more see pay it, we our paid our year again declining months what the will than have in buying when now meaning be it's months customer prices that XX the of in we what what the are didn't in of our ago. and prices, nine orders we advance, for inventory, the spot appearing eight, and to and Today, we happy to a at we that gross those We after it's the our made need no level hardware. creating margin P&L P&L of course,

this looking way, cash and our quarter that shape By was for dramatically you already expect the something flow see prices this if part for of can in six but we the very sheet, $X time rough this assure inventory. than inventory. main from in the in is, expect once of sell more number we a course sits but we on mid-term the today two, that or in low, high in are for good looked we will inventory quarter, really this because term, nobody XXXX, share cash for you it and now, this lower This of live is longer balance but will that look Just quarter of acquired the position, is months the we next our it but million. is because again, forward with, will it's – three, we

P&L. price because much by our in acquired in already hardware, on lower see inventory We that will today than those see in us the you those increasing profitability a the were

leave damage one this have higher call to more that a optimistic with turn will half but one about or are quarter it term, $X million, we we we to profitability become longer the of and and again. looking will let's mid more So more

Great. Thanks for taking my questions.

is question next Please of Barclays. go from ahead. The Tavy Rosner

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Thanks. call the I helpful. really appreciate

[Operator to website, this time, available be will to Instructions] no closing that I your Mr. ask make go like questions to further like this remind I ahead at on call There tomorrow you www.ituran.co.il. concluding before would this Sheratzky, of replay a Mr. statement, would participants statement? are with Sheratzky Ituran’s

of your a next for look to you thank Thank the continued speaking interest forward on much to you you business. quarter. our of shareholders behalf And support On day. Ituran, like our the very do I would have management and good and of I with long-term

This quarter first concludes the for Ituran XXXX participation. conference results call. Thank Thank you your you.

ahead disconnect. go and may You