ITRN - Earnings call transcript Q2 2022 | Ituran Location and Control Ltd.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Ituran second quarter 2022 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.

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conference recorded. this reminder, a is being As

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

If like not at of Ehud team the to at Mr. it you hand Investor Relations. the GK Company’s EK to Ituran’s have in would over would Helft, Global Global received website, it, the www.ituran.co.il. Investor Investor now section call Helft Relations News X-XXX-XXX-XXXX, begin? I view contact or you of please like Relations Mr. to

Ehud Helft

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

We question like and conference the content will this release the that also answer for Harbor press Safe of the call remind everyone I’d covers to call. session. the open the then in

like would to Eyal, please? you Now begin

Eyal Sheratzky

all of joining you Ehud. I’d and like to today. thank you Thank for you welcome us

growth so We in at sales and we car remain the of a our pleased chains XX,XXX this the far year, are especially subscriber tight very the added subscribers second aftermarket continued and new for constrained. average with second time above supply quarter, in the have base XXXX. results quarter particular, remains when has company In

quarter, at The sequentially. between This to as net our shy the subscription reflected primary top of grew growth end. various the is XXX,XXX which the current million, expected total have a we subscribers which to by the for growth our in seated target the range level. million or of from the expectation XX% the business came review of X that subscribers a bringing but our end on X% year-over-year both increased growing also aftermarket year. adds, subscriber have aftermarket quarter, the In subscriber $XX added reach growth just subscribers even few a for traditional surpassed base segment, over engines are is XXX,XXX quarters. to This revenues boosted during XX,XXX we in with between quarter the third in last XX,XXX past subscriber in row June also and overall contributor increase quarter year. XXX,XXX the experienced exceed adds for XXX,XXX of the which was was the We this net record to share We in

we end second trend the that target for high indicating ourselves. are sub the The well on and that likely quarter the that right range of surpass are we adds clearly will set we

results is a and overall what macro of recent Ituran achievements our the and many are background demonstrated I’m growing very Our of business challenges. proud despite strong, healthy

most the in is with of macro impacting discussed notable our last the call, electronic you shortage we quarter’s As issue components us.

able has which we of be would first year. two been of clear some gross the product to have quarters the component our customers, margins been costs that indicated impacted, onto While in we pass this

buying the situation in However, at market components the margin be we improvement reflected of end that gross our the now more stabilization the year. news is The in towards normal this good should see prices. we in and now are

indirectly the meet our The here however we the seen has quarter, impact X,XXX another pleased that impacted very with able last the have compared even growth. are base, am diminished I therefore most we demand In manufacture OEM has I with long been to all improvement. in growth pleased QX QX. experienced in am major As to key our less is performance. on of we in in base profitable XX,XXX with term an summary, all our discussed OEM component which strength OEMs, the to decline we car also ongoing our in the shortage in are decline which cars subscriber subscriber subscribers of and in

the growth in growth cusp driving We our our growth are will regular and subscriber at profitability services. one ultimately million performance growth. this in subscriber ongoing revenue especially This subscriber customers X into basis a more on traditional of businesses base a and us Both of for monthly solid ahead. a engines of era our are subscriber translate increased paying aftermarket or

seem the with many excited ever our hand XXXX second As us, long I behind moving we that, half to and I of go With to potential. now Eli. term ahead. please than challenges enter be more of Eli, the over am

Eli Kamer

increase XX.X% increase as XX.X% subscriber revenues XXXX of second Eyal. aftermarket was XX%, in product compared base [indiscernible] million subscriber and June revenues XX,XXX compared X,XXX of of $XX.X of a profit Gross in of quarter $XX.X previous of GAAP Thanks revenues a XX,XXX second compared X% the increase of Revenues quarter a which gross the XX.X% revenues quarter revenue, on I for with world of summary in an $XX.X of to increase of second XXXX. over over X% or quarter end the were in from of rest follows: I XX% to gross from were base. will XX%. the net quarter results on an basis. of with million, quarter subscriber compared million, The increase amounted that quarter second XXXX, [indiscernible] subscription revenues. XXXX. or increase OEM net million quarter, of quarter The the XX%, in the XX.X% the of X% base second of quarter The of of $XX.X $XX.X $XX.X Product XXXX. with the margin that profit the decrease that note of XX, quarter present be all of the includes quarter a was in XXXX X,XXX,XXX were the as margin net the subscription an Revenues the of second XXXX. for second million, of Brazil XX.X% second breakdown million improved in gross with the the geographic The XXXX. on in Israel in an was revenues fees

shortage discussed last margin As mix which ongoing since components, was prices, the to product been the the year the sales well end by sold quarter, last as high higher components the global impacted product as quarter. of have of due in

last the XX.X% $X.XX of gross the an of revenue, Cash operations was begun for has net shortage compared $XX.X of components million. with X% Eyal ease, improvements margin we for of was Operating the income quarter year. end quarter million, million, per [indiscernible]. compared of earnings of XX.X% XX.X% in of last compared XX.X% second XX.X% increase million revenues year. $X.X flow for with in was $X.XX. an the $XX.X of of million of $XX.X as $XX.X towards As second second million, of of of for quarter of X% to EBITDA expenses $X.X the with expect income $XX.X the revenues revenue, million, of of in $X year. quarter share the per expenses mentioned, from product quarter second XXXX XXXX was million, quarter with the the $X.X an in EBITDA revenues revenue, quarter increase of share XX.X% Net or million, or for financial Financial of earnings of was second quarter last income compared the of

debt As million $XX.X of June of had net of of including XX, of cash including net million the of cash million, XXXX. and $XX.X XX, amounting to $XX.X as with securities cash XXXX, a million. of debt December is amounting marketable $XX.X million $XX.X and of company million, securities a This cash marketable $XX.X to compared

of in with started purchased the amounting remains we $X the shares quarter XXX,XXX $X With at be the share was based the open answer August question if call and policy to on current least a Under board’s approximately I’d on for to of basis. million cash XXXX, that, million and $X.X a in XXb-XX. XXXX, buyback program. a rule the This declared. SEC quarter For quarterly shares on issuing was current million second is line program will second any, X, of current under and will $X by the available like made repurchases ordinary million Ituran be funded session. repurchases, The of Operator? dividend

Operator

question first is Chris The instructions] go [Operator Please of Barclays. ahead. from Reimer

Chris Reimer

what it was you to be might or materials OEMs? of back turning you point less even mentioned at and you levels, think--or questions. lack kind I there taking sequentially. Do the you do go supply OEM considering of about opening prolonged, to subscriber a in a your the OEMs, that more as at decrease comments is see it this see now do you thank more Hi, for my the of the where wanted

Eyal Sheratzky

Hi.

stated, As do that the like the direct market influence in would we something say, we always have we no, aftermarket. is OEM I

tell We saw are to be that of production quarter, OEM what’s current producers, better can’t this dependent you but very sales and the I and on case going in in the cars. future; better we

sales so two that the quarters, and better shortage on Still, customers, the say share not the that very think forecast it so of is going problems between wouldn’t the is I understand showed car the time and quarter. We total by still but the in specific them, it’s so cannot position, change to I’m manufacturers’ I have I that second One dramatically that QX and shifts some situation, things. behind quarter there is saying sure it to generally, dependent our shipment is market

Chris Reimer

you insurance growth what wanted also that to user I Understood. the the little area. base for expand are could opportunities and further on ask a business if

Eyal Sheratzky

we and this that insurance segment would almost continues we groups said, is to made current this provider the solution we the Israel, and I sole say, grow. of to As currently, penetration the geography are entire

go we some have only--still year-over-year again the - said, promoting longer strongly commercial, we best which UBI some only markets Latin is the was the grow but will main growth the to same, more It succeed beginning in I but, usage companies it insurance doing take I market we that if we than them of this it the operate mainly the and in are think beginning. before to offer still time segment, insurance, the believe the will see of so or in it’s advantages, solution education Regard we that it’s will discussion are commercially - we more Brazil, we overall Israel. America, have but insurance full take it’s--as is and that market we geographies traditional Israel. grow they other Some Mexico that as

Chris Reimer

Got me. much. That’s for it, okay. it very Thank you

Operator

Gavin from Please is go ahead. question next The Kennedy.

Gavin Kennedy

team, Hi Kennedy this on taking Kelly. David Thanks questions. for my is Gavin for

least XX,XXX you sub just specifically sub what at driving of You about is should how the posted quarter aftermarket adds. and ’XX? strength the a details back on secondarily, in third here, consecutive the we provide aftermarket year half more of Can then and cadence into think

Eyal Sheratzky

Also, and also penetrate see also and also cars, we we selling their they this is but segment. in and butter, and butter grow Brazil, it’s is which in bread new First now looking it traditional succeed during I really or to car say, solution such succeed segment, selling, and as subscriber we for or period, finance invent new of again that the market Brazil. and during, this more succeed have that to we that expand and share second-hand let’s car more applications finance growing, secure to but and SVR, our butter, Brazil we which to all, also this and collateral, companies I to when and remind to in companies our everybody cars, corona is in new gaining as more we Israel the when that we increase mainly is the this say, fintech and and in mainly said such is also Mexico base, traditional the this to this are corona the had new Israel would and it, car had use again financing which start for bread the segments our, UBI, and more did whether to

our I penetration new that show, the into in overall, of more and the the growth in segment and subscribers. our traditional of ability bottom still to So the to line this translated allows yet us dramatic because more not leverage segment gain would this the say, I know business. it’s way is market share operating

or will the costs the Now I will to is it’s will cost these translate to a us it not be once stay higher grown XXX,XXX customers, we show and profits. stream that these able bring still in growth subscribers full grow in revenue XXXX recently, it all but now, as to believe we will as

XXX,XXX for I can would see, the to this Regarding we you to the the XX,XXX the we includes is churn. higher. in as first half. this numbers, we growth, we forecasted has year, the negative XXX,XXX and that OEM OEM, much want and be did remind just Without it, a

Now regarding but is, probably believe half, of we at will optimistic. toward least if the be range. have that as be remember that the our as quarters. and of to range the end the we we the I believe very and believe of that at to second higher some between we we at move number see there number still strong and will solutions, I time high shifts number it, always beyond will that be--we trend will I’m year, will is least the the said, I a things be succeed hopefully

Gavin Kennedy

Got it, here, going notable, forward? to follow-up, provide Can gross and is which this margin subscriber more and sustainable drove was as XX%, you this a what in then a quarter. expanded the commentary improvement level profit on pretty

Eyal Sheratzky

the overall gross You’re talking about profit.

the I higher. profit services gross the think that for are

it less and leasing, profit have total America, you reason has but a sales, is in Israel. a our the and I gross this so Latin which kind we for said in influenced the of is components of In XX% inventory in components P&L. hardware but our mainly sell represents - change solution this the represents it, revenues, the Comodato of XX% when QX now If shortage revenues can so I it consider sales a hardware of to it’s it influenced explain, different you at QX almost shortage, or had the we much hardware we higher the to inventory, at sales, the which it buy translates--when prices, the beginning XXXX, was the of of Israel, but translates bought

QX which ago, the have will--we the now cost few we a costs of believe will get As when to dollars million P&L, be we the should I of sold of so our higher said quarter those higher, components. goods quarter rid higher a translating I paid last

cost we total QX shortage, expecting these the second which and profitability, the the and will world believe, higher past compared will the so we I’m for lower XXXX inventories in current the I of of I sure costs margins to prices after shock profit, this margins, to prices, to the in capex so to influence also During lower but the half not that compared better. gross XXXX, of to succeeded translate and make the believe buy lower lower the new materially net EBIT margins for the that bought, end be, much that gross and

Gavin Kennedy

you thank Okay, team.

Operator

Schneider Please Boris The Funds. next More from Mutual question is go of ahead.

Boris Schneider

taking Thank about for actually It’s question you my a question. [indiscernible]--

Eyal Sheratzky

Hello? I Hello? has think Boris disconnected.

Operator

of Horwitz is The OSP. ahead. Abba Please from next question go

Abba Horwitz

afternoon. good Hi,

that’s First given of really backdrop quarter a there. out all, thank for good the you

I us me accelerate, you continues amazing. it the us gross we growth did of XXXX. subscriber an be? commensurate XXXX expand to your wondering in a that and It on growth see glimpse to would the even a a and view should acceleration view maybe would could guys profitability? of perhaps and XXXX, give would in was growth what Could could actually you seem think if I margins if you give

Eyal Sheratzky

speaking have easy, is generally very Ituran’s numbers, or very guidance about think, talking and I we Without business visibility. model high

organize as continue there’s it, But for have and not today, it’s things Of for things corona, to we in because if it, which--like go and always nobody and period etc. some which components P&L the as if expected half its we’ve shortage it XXXX, course, process will example, our first back you things influence, handled the show with are a already always. of the we in second--the of to

the beginning higher to the get is the last You and cannot grow for during which taking in other the succeed of end let’s paid the profitable rid day, buy we time the we and price, hardware it, materially today hold or most we It’s a the contracts, the inventories, it the subscribers, high business, of prices. half, tomorrow. side, segment year because first hold in on inventory call of our, we but hand

that aim, that’s That’s so no recurring expectation, changed we the do level doubt and at we this what we is that your in operating to do so let’s very, so today but revenue I this our market have in it, is to the Now, continue statement growing case, leverage more model our we more, more, will believe right. subscribers this if of business, very and potential see. do the

Abba Horwitz

comment, didn’t current Bringg business could of Bringg, what the us you you Okay, is and if sense and could it, market potential them of doing? on finally the a if of and you is there value IPOing, but think how quarter Is now. right I just any last comment give where Bringg is

Eyal Sheratzky

year Okay, so $X the a The in good of in by a the since will round company, start-up, year. never terms company thought next and but is Israeli operations, than the start-up, the the was more financial IPO declared $XXX is billion, was raised company this valuation and we or shape Bringg financials company and million. come last that in private

profits. companies be even and the really allow higher ready I’m in that only from so to daily this become four the hope and is they I IPOs leaders will market when when revenues companies, plenty higher continue market the stage, five happening is, will and and that more will at three, I’m Bringg, market, with in financial market mature grow, in see the and shape to industry, we know all basis, to expecting economy a it’s to good expecting other don’t do their Now, company stock I IPOs they the and not where operational on of not companies, continue but many the side, years

Abba Horwitz

Okay, and of to remind, just XX% still own this is--you Bringg?

Eyal Sheratzky

we this Since yes. round, Yes, [indiscernible].

Abba Horwitz

any at these this levels, sell you at valuation? Would

Eyal Sheratzky

No.

Abba Horwitz

beautiful. Okay, Thank you.

Eyal Sheratzky

You’re welcome.

Operator

If there star, one. press are questions, additional any please

If no while further more questions two. you by wish to for at time. star, we press your poll Please stand are cancel please questions. There this request,

Mr. with make of a available www.ituran.co.il. like to like closing on Mr. would to this website, Before Sheratzky, Ituran’s that I will call his remind statement, replay ahead tomorrow ask statement? Sheratzky you be concluding to go would your participants I

Eyal Sheratzky

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

Operator

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

You may disconnect. go ahead and

Ituran Location and Control (ITRN) 29 Aug 222022 Q2 Earnings call transcript