Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Ituran’s Second Quarter 2023 Results Conference Call. [Operator Instructions] 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 EK Global Investor Relations at 1-212-378-8040 or view it in the news section of the company’s website at www.ituran.co.il.

the to hand now will call Mr. over I Investor Green of Global EK Kenny Relations. Mr. like begin? would to Green, you

Kenny Green

Kamer, Thank and Good the CEO; Eyal to Ituran’s me Ituran’s CEO results. you, on and Deputy would Mr. management conference Mr. you operator. I VP CFO today conference and call Udi day for to the hosting of Mizrahi, to call. to line Ituran. Sheratzky, discuss like second Eli this XXXX of quarter Finance; thank all With welcome Mr. are

with will results, Eyal of of followed by a begin summary the the Eli summary quarter’s with a financials.

then this everyone the question-and-answer that conference call. will covers today’s session. remind harbor the safe also to in statement like We call the press open of I contents for release would the

to you that, would And with Eyal, begin, please? like

Eyal Sheratzky

I’d Kenny. like I And to today. welcome XXXX all for us to would quarter second like joining of our you, you call. to you thank Thank

very as growing clearly in the rate clearly sales This are fast business years. pleased is the the strong achievements been in grow we now as growth for as Ituran’s jump past year benefiting base subscriber far is We our excellent results. with financial so in quarter Ituran. our XXXX twice growth with in second an

few record income our or at For levels the EBITDA profits past been in new have net added quarters, highs. each subscription our constantly at fees measured quarter and X-year

results with As the you can our we’ve and made. imagine, pleased very are progress we

are expect current long-term will visibility throughout well into Given and clear monthly X provides, XXXX a the beyond. trends and we million retainer and a core stable subscriber way business over positive very base that of with XXXX our continue is to structured the and the reason this paying

the experienced subscribers, which from we perspective, net and of subscribers, were total growth XX,XXX a X,XXX XX,XXX from of were aftermarket OEM. strong strategic in the adding a From

the subscription is even revenue. mentioned, I record the dollar being our in despite this currency This to As now headwind strength XXXX. reflected is strong due in subscriber growth

when revenue effects exchange calculated grew subscription growth the currencies, or rate local XX% growth. the in QX on our which at naturalized XX% year-over-year of

entered as Over new They performing acting engines. our as into of are a the that are a years, grow main well one few business, continued financing such growth and which business well. reasons past verticals, we’ve to few the

we Santander ownership aim During automatic for solidified Ituran alliance Telematics financing financing Bank, with the our financing the Services entered in automotive rates partnership quarter, faciliating Brazilian the the announced credit subsidiary market which with approval attractive broaden credit a firmly that This presence and car market. insurance. Santander’s the by Brazilian strategic to and at

with deals finance geographies finance performing new demonstrate and that and our Furthermore, to well overall see cover further looking customers. and additional subscriber is markets potential vertical and These growth. are we this supporting other we existing

In have a due terms increase general rates. the strong Israeli of to seen in market, the macroeconomic limit, set we the

the our good Due vehicle years use to it stolen over our performance companies increases in of to this of the need services. vertical many insurance recovery,

companies. trends similar an to very increase much in car an in contributed for with This case While from Israel, see Latin rates. also general throughout leading demand to ultimately climate economic services this set is is the in our America, we the insurance increase

This also provides our in economic business of with slowdown. some the face defense an

sector. proposition stolen in motorcycles only, America of very presents of a XXXX, In sold in for sector for which motorcycle new a X.X product launched new we’ve Latin new were focused an market, vehicle the recovery a we is believe Latin our for and million America, estimated solution Finally, on connectivity this there attractive record us.

years. be in we quarter up is record and And the insurance in product to strong see potential the we We new XXXX seeing from are We interest already service from very the coming shaping of pleased respects. this discussions. with results a manufacturers our all are summary, for companies, and year in and already and region are in for Ituran

well business that seen in and and subscriber engines, especially the record business recovery in in as years strong performance the all growth as traditional OEM Solid revenue. growth the our are our aftermarket we’ve past driving

to a increasing beyond While set monitor the increase we services and continue for ahead, potential tend talk economic found it. slowdown global economic we demand downturns, to rates our the of historically, in

gives Our X.X economic million an paying environment. our us significant subscriber in basis, on ongoing results base, us monthly

we growth continue inherent due to the ahead, leverage profitability recent with to translate growing operating our increased expected business. Looking will subscriber to faster our into accelerated revenues

will excited anticipate quarters are beyond. XXXX and coming for continue and We trend the the throughout positive

And Eli. please Eli, go with I that, ahead. hand over to

Eli Kamer

short provide I a Eyal. will of summary results. the financial Thanks,

more find for the today. second the growth $XX.X with XX% can was press results we earlier that year. You year-over-year increase the release currency, the issued $XX.X In million detailed XXXX in local last XX%. of an compared of million, quarter Revenues revenues were

XX%. period increase fees were million, increase XXXX. XX% revenues. over increase of over XX, XXX,XXX to second the was subscription that currency, from revenues year-over-year. $XX.X end amounted base year-over-year This represents an XXX quarter the X,XXX, quarter Second net June an Prior of local growth the and XXXX quarter of of of of an of In the XX,XXX as

subscriber an increase base increase and the aftermarket the X,XXX of quarter, was XX,XXX OEM an in in subscriber base. During there of the

in revenues, quarter year. quarter $XX.X or of of as or rest quarter quarter follows: revenues an EBITDA second EBITDA Second $XX.X XX.X% XX%. of million of last geographic of revenue increase the XX% product of the XX%; world, that The of X% million, Israel, breakdown was compared of million of Brazil, second XXXX. revenue for of quarter was in second were the increase XX%; the $XX.X with compared XX.X% with an

income revenue second or $X.XX, revenues $X.XX In last was XX.X% quarter year-over-year million $XX.X of per diluted XX% year-over-year for local XX% in or of local was compared diluted to million share year. the $X.X the Net currency, the per an of earnings quarter In currencies, share of of XX%. second XX%. the growth or growth or was of increase earnings

was of million. for XXXX Cash second flow $XX.X from operations quarter the

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

quarter XXX,XXX dividend of by were shares million were and ordinary repurchases funded purchased our Rule second on cash a second a available XXXX, – for Ituran declared. In is Share million. the SEC under of was repurchases one For buyback $X.X based total program, quarter, $X the of shares share of XXb-XX. made

session. a for And with to like I’d Operator? the open that, call question-and-answer

Operator

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

Chris Reimer

results. Yes. the Hi. Thanks and congratulations for strong taking on my question

the expansion and how operational wondering much I have possible you You conditions operational mentioned leverage, the was under in is current past right now?

Eyal Sheratzky

to This to future. numbers we actually trend and they short expect when from today, a look is XX% allow do we carrying so in XX.X% you period, very actually will us in Practically, the model this the increased continue. what revenue on we that

Chris Reimer

subscriber growth? Okay. view, underpinning the your And in is consistent what

Eyal Sheratzky

you it Can repeat subscribers? regarding

Kenny Green

please? Chris, can repeat you your question,

Chris Reimer

consistent underpinning view, what In is Yes, I’m your growth? subscriber the sorry.

Eyal Sheratzky

that generally, it. I said Actually, think I

car growth So cost request as and And on insurance the which a in more of more of owner last we to secure the – needs rate. the are quarters. it’s It’s the the well create I even companies would first all, depend in a traditional see, say, as from, which mode very, segments, [indiscernible]. car strong as

in America financing credibility So the drivers, which regular from as strongest in on recently. the very market, our that the the there And we of depends as And this penetration, penetrate from just this BXB in we that is growth this brand see other as BXC players in solution. is something Latin in well after as course, well other and is it Brazil region, are high one interesting such the as customers. countries always economy

segments the subscribers. the good lead So this the recently. growth feedback we will from We demonstrate believe continue entered market to a plus will of new that have or we that

Chris Reimer

Got it. That’s color. lot. a Thanks good really

Operator

The next Please from go is question [indiscernible]. ahead.

Kenny Green

we ahead Josh, you but and ask hear go don’t can you, a question.

Unidentified Analyst

with I mute. whether any for was color going not what’s taking I Good happening but wondered you on call. or that provide terrific bad. what’s guys. this was I Bringg? if Good And curious investment, morning. I my on could private on mean thanks it’s my get you quarter, know a passive see to that you color Sorry, to investment? provide any I on want with

Eyal Sheratzky

and quite going well it, call business is internal privately all Bringg with let’s plan, and Practically, projections. its

in the years have provide the our of really all before markets did more it’s as call I that than But balance and to the on when market we think remind the again, the the that – – the company results we right zero that let’s side company and move financial right something is only we adjustment thought those – company the to adjust years our year, balance the to course, sheet. it’s because markets. to did last the did the and before for changes it proceeds X.X use the we I ago, we beginning round at about X financial stock from – in sheet, the view, the of to of the it’s value well, operational want it’s you had

which P&L. And we say that that I it’s future, influence course, in hiding don’t our So of count profits. we will it’s assets, anything the would provide in

Unidentified Analyst

Got it. Got it.

thing seeing the looking you. some forward to thank at that monetized future. Okay, getting Well, in point

debt. was guys conservative historically levered to in was the The up Track. had of second had you’ve back, order question I your sheet paying buy been you which years been because unlike And back years, over you balance management the team, you’ve slightly, Road couple pretty

is Your debt is gross – your zero. debt almost

Your you of to some that of the But may how business. forward, or to and time. chest going on I’m been small it going early-stage that given the not for positive the companies more the for Israeli has very I’m thankful in have? just And investment Is and war same the buybacks net occasional VC relate change plans curious your may an be debt dividends. cash

So a your what can us over give plans the on are of color couple years? you next just

Eyal Sheratzky

say, the in of said, to, for the investment mobility all, not The it’s the It’s that with acquire it’s that to use. to arrogant potential as needs is – nothing that has material it. we First linked we way, did let’s you do main or took systems we start-ups, which a we as you cash on Road see cash Track. because we that said, an small, something loan market, our was

last and cash X years, course, increase it’s our of flow of the cash flow payment our after simultanically and Now loan position these generation.

not did have the in to So the we the any keep in past, actually, as nothing for intent money we bank.

– this find use it, that we means to first of the of most we the like things the best to all, will for So growth, we first is and is which priority. acquisition, do But our time this. something generate find not easy. for money partnerships for this If

We create we synergy we to are is we did. that today, are and And it conservative way, it something our money don’t Road way, spend It’s and do will We of very The If happy as on everything today find growth, integrated a inorganic do. and it did for want just be run. to By we fully it. good did regard sought it will since now succeeded. it’s emerged contribution a say first. the and that we Track Track, we we called the we business Road conservative. that to

not, long this let of as all Of course, cash, our or to will as flow. course, of we shareholders, from course, generate cash benefit we if meanwhile,

for it dividend not course, grow I always how recommend or growth, Board We more for this you we the depend example, simultanically buy But As least way, of with $X will if the you shareholders money. to or buyback. to at need – And will keep buyback, our almost not or or take this back course, and quarter, million on increase we will will see situation. did with we think generate can, because went debt this the the by dividend that if money. to of we we will cash the

Unidentified Analyst

Great.

well, Good Okay, much. thank very luck, guys. you

Eyal Sheratzky

Thank you very much.

Operator

Instructions] from is [Operator Abba School Partners. The question from Horwitz Old Please next ahead. go

Abba Horwitz

do a drill to I on you may opportunity. on quite is And and quarter amazing I real really selling cycle years. to This – And the you. being anything implemented? the last of Thank can you how it an to if motorcycle relative milestone. down where be overall market? the wanted rapidly this the to couple business? congratulations motor how meaningful ask, how Hi are see And

Eyal Sheratzky

Okay.

One is we markets. in is the America, I that of So than people Israeli it two sell buy the a But divide and trend market expensive is motorcycle meaning years for than different for low, Israel, cars product motorcycles. quite have to for we, which few service will a Latin the understand motorcycle. different where the most in already

we the to Millions that So car It’s companies and of situation sometimes not here Israel, again, only for – the this and environment insurance the It’s very difficult growth mean, year cars of us, what nature with dealers. very or motorcycle example, similar. in for is that, with motorcycle we after do every in understood being it’s some we additional is company but in I America, Brazil, around ratio ensure to more Latin realized it and is We sell risky and market world. the segments. a – the motorcycles. niche. insurance The in the similar, cover looked But for is motorcycle. almost in we Brazil. all

of the find want and the segment motorcycle it’s on to for other So leave. which customers. dealers solution other – And a high. a the their to insurance believe very on prices want the But company don’t to are want hand, hand, don’t producers insurance

drivers. as we past, fleet were lot the first we which includes And a start, of in And very, application is with and of will with customized other cycle, management and this a driver see the So build course, benefit market, unit, internally the attraction. for we include motor we went as with create finance, we motorcycle to of very the which a market. or the these we did which develop to sensors, which to did a SVR, to included the

since or when something say, material takes be Now to more share show as to announce this tomorrow, our segments, will It subscribers. it be do best with found it terms today understand in that believe I this future, for, and X.X something reason material specifically we which start, segment, to are who Brazil this or America. we insurance other the let’s in now in we is if have that it to companies. already potential coming I’m And because that in we in be substance numbers and and not see that But decided in penetrate can results. it customers material, about in we be segment, the we coming Latin manufacturer every the feel saying the of is I And million lead time will really, substance and really will But will to this in can’t the something it why to believe, more the attraction. I happen to or future years. talk

Abba Horwitz

without product cheaper someone insurance the insurance that using willing Okay. product what company, product that’s Would Or now mean And more do this an even this provide this to a this be would it get is alternative. insurance would doing? even?

Eyal Sheratzky

Okay.

rented one with able – I it’s it And especially, call of Ituran our right to ridesharing or let’s they around very, segment rent that, solution, and for for the process to in would like rental motorcycles. of In kind [indiscernible] insurance the motorcycles actually course, hourly companies Brazil, leasing. it’s it’s to So will whether companies spread two. join, hand, divide also ICS manufacturers common also renting be renting, some and right of the motorcycles this the country for it, very like

to their I case, it. would secure So they and assets, their also in to, a interesting that dealers manufacturers solution assets, in those say, rent

those financial a damage when still. a a being want is they high solution motorcycle – because financial So

Abba Horwitz

will same assume leverage the that from to part you monitoring of Okay. you have be able it that would be the the infrastructure to And business safe currently?

Eyal Sheratzky

that Of way. it’s we any the black first. course. the This want. run Everything At can box day, of do, say by end we the where would today get box a I frame black it

black box same the people, our take then segments. black will we segment, other develop to offered a find to which we when be allow firmware they [ph], give So, it to the and box, R&D this

modules. So, it’s like

always technology, create technology. why same of use the operating terms can we technology. leverage why those That’s This we in leverage can we is for it. So,

the do for talk talk On is must side, that of the But us, we something service be are what job train but specialty. the other excellent. course, about when we about other on hand, services, needs learn that we service of so SVR, when we our in company, the it’s this we the market, and a is we

always So, the of use in current integrate end infrastructure. of we day, the course and our

Abba Horwitz

than be, it is is a cheaper a same And Okay. or price as car? would car it the

Eyal Sheratzky

the product. It motorcycles depends the the includes you whether we for billing example, X or don’t terms as company car managing it of will ago, sharing in remind, the type want, application, it’s the The easier Ituran nature which is whether a But only is of will cheaper for be It’s on you cost, to of and same part is unit. also car a because services. you company and developed cutting in it it’s cheaper that are know, acquired service a I than car. you Brazil, installation, as install If SVR, a which riding, years installation already when what the of solution. – is side, know,

as it of offer a black box. now we that, after So, part our

for is needs. in this motorcycles the with So, renting or we what when that more, service example, technology, a case, charge about customer renting that we cars, depends talk

Abba Horwitz

Good thank luck. Okay. Thank much, Eyal. you Well, very you.

Eyal Sheratzky

Thank you much. very

Operator

of Josh question go Please [indiscernible]. is Traut ahead. The next from

Unidentified Analyst

call. my taking for Thanks Hi.

doing reaccelerating long-term, any So, noting. know there you talked about Brazil. wondered if on And if it are I don’t reestablishing the OEMs in about the call talked was business you progress worth research past, with additional I in you associated this

Eyal Sheratzky

just America is the manufacturer longer HNA validation every the because geographies, much something validation, to can by is from manufacturers the cycle usually believe succeed way, car that that to to are OEM exceed, say to current our expand and do we in other working quantities. we know that that future to say or least we with specific but mainly that the I country, other I yet tell to course, it. on segment. and relationship will the countries. be based at [ph] traction will contract have believe of I has know to near see all a approve at the we what don’t country, Actually, that to in expand will the discuss and or But we I Latin which OEM other believe, it to be And countries to want we see I able to we

Unidentified Analyst

you trying just hands of Okay. making And market. material for part around you? early I the to And end how big my can for insurance opportunity am progress elsewhere institutions But are are the the in Brazil with both customer and be years developing in companies that understand I what Brazil ahead? subprime to in trying customer? is what get about financial that still know the to am our the in monitor we that and market I trying have really serve for how

Eyal Sheratzky

a one the potential an is Brazilian the through very Brazil. basis Santander important very we and on about the this currently market in that exclusive finance luxury currently. did month think talk of customer base Santander with So, banks largest I or we a Santander in about, reported and will we cars, regard ago, contract world,

Latin all Of around we Santander has offices know, America. as course,

us. attraction, mutual what want when this material very now, did Brazil. learn the want a with much say other sides. see or I contract But of Brazilian to about for is believe that we bank use I to the out under the both other it. find course, course banks finance they, copy this or time companies when contract contract – we Santander, Regard to way leverage that And the a to is market, with we see commercial exclusivity when So, very from of I only – contract see, for of

finance in regard we Brazil will So, other we a coming not companies, of commercial but we of have will will to, – bank. kind course have or the find years,

I that in commercial decide world. Santander is for open basis. is Josh, it’s go largest it’s the this opened the think other banks Anyway, of segment. mention segments we Just course, is Brazil that. places why in – to on a to and And this other of

Unidentified Analyst

Thank much. am you almost I I No, very sorry. appreciate of I had all it. this. Great.

Eyal Sheratzky

Thanks.

Operator

Fred next University. Boston from Foulkes ahead. Please question is of go The

Fred Foulkes

and is outstanding Good now, morning. country all on I informative having troubles etcetera? curious, recruiting, challenges was just and any an quarter your Congratulations very impact retention, given call. productivity of worker on that in the right

Eyal Sheratzky

in side. also as political situation economy solutions concentrate much think Actually when unfortunately, influenced is And increasing. a – so needs said, directly and in mainly not would here no, Israel from I And have increasing Ituran I more request yet. situation, this the say the the that I the in the it’s violence our is the strong. for the shape, is bad the become in historically,

it’s we So, you influenced, is it happened but way. Tel-Aviv, the not life. the to a than currently, press have now not by come am am I expecting nothing not But the yes, will we that challenge influence. I feel here. – But But different that if

Fred Foulkes

congratulations on your and you leadership. Thank

Eyal Sheratzky

Thank you much. very

Operator

ahead. The IBI. go from Elliott next question of Charles is Please

Unidentified Analyst

in And With provide would sharing. DD Ituran’s but sounds acquired this wondered be by July. their SVR ask about platform Hi. I you Rideshare deal deal BYD that a be for into like because a [indiscernible], company being XX models. in step a pretty it significant first on announced car you itself, like I could will it would small to where if

Eyal Sheratzky

carriers from we where report Just you what point, mean a it? did did

Unidentified Analyst

it the in I on was of think newspaper, July. Brazilian was our XXth It

Eyal Sheratzky

a SEC way. because was not material mutual together But and of And of kind marketing Okay. from right, BYD it the say, us. did, launched deal a brand We with they aspects Brazil, you are it’s their currently. didn’t report in didn’t – what for I it a Nasdaq we mutual, course, would

to or in to to our it, around they As course, of needs to an BYD hourly rent, I said, have order on control daily it Paulo order secure and Sao units in it it. cars bill and rent spread

program. So, this marketing for But would was we BYD or are partners their I at penetration it stage, Brazil. say, BYD

So, it’s but Brazil, as that something – for lead, OEM will example, specific yet we we not say campaign. been partners have for an deal that to in can their choosing can it this

let’s future, the see. For

it’s luxury again. for also said, Very strong transaction, very for I luxury Of that a And because OEM future. and very think relationship very luxury, just way the long now which a Latin has for BYD it’s to we is know course, deals marathon also America, the penetration is and something we started. as in but long long cycles. But the

with started we So, this.

We have what nothing announce happen. will for now. to But future, we the see

Unidentified Analyst

you. Thank Great.

Operator

questions There are no time. at this further

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

Eyal Sheratzky

our We to your interested our for and interest quarter. I our some good with call. reach to with of Ituran, a we feel Investor you speaking behalf shareholders, day. that, and business. over Relations to please you us, in or meeting And you, thank of team. like And would support Thank On you are the of free out our with continued end to ought of have coming Yes. long-term management speaking be if

Operator

Okay. Ituran’s call. quarter second results XXXX participation. concludes Thank your you. for Thank This conference you

disconnect. and ahead go now may You

Ituran Location and Control (ITRN) 15 Aug 232023 Q2 Earnings call transcript