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DATE

  • Wednesday, May 28, 2025 at 9 a.m. ET

CALL PARTICIPANTS

  • Co-CEO — Eyal Sheratzky
  • Chief Financial Officer — Eli Kamer

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TAKEAWAYS

  • Total Revenue. $86.5 million revenue for Q1 2025, up 2% year over year; with 7% growth in local currencies reflecting currency headwinds.
  • Subscription Revenue: $62.2 million in subscription fee revenues for Q1 2025, an increase of 2% year over year; and 9% year-over-year growth in local currency.
  • Product Revenue: $24.3 million in product revenues for Q1 2025, an increase of 1% year over year; and 3% year-over-year growth in local currencies.
  • Subscriber Base: Reached 2,508,000 subscribers as of Q1 2025, adding 99,000 net new subscribers, driven by initial onboarding from Stellantis’s SVR base.
  • Subscriber Guidance: Raised 2025 net new subscriber forecast to 220,000–240,000, driven by the Stellantis contract and ongoing growth across regions.
  • OEM Agreement: Stellantis became a new telematics service customer in Latin America, with current services at a lower ARPU than average, but the potential to expand scope.
  • Revenue Breakdown: Israel generated 55% of revenue in Q1 2025. Brazil accounted for 23% of revenue, and the rest of the world accounted for 22% of total revenue.
  • EBITDA: $23.3 million in EBITDA for Q1 2025, an increase of 4% year over year and representing 26.9% of revenue; In local currencies, EBITDA grew 12% year over year.
  • Net Income: Net income (GAAP) was $14.6 million for Q1 2025, representing diluted EPS of $0.73, an increase of 12% compared to $13 million in the first quarter of last year; In local currency, net income grew 20% year over year.
  • Operating Cash Flow: $15.5 million in operating cash flow for Q1 2025, with period-end net cash plus marketable securities at $75.7 million as of March 31, 2025—down slightly from $77.2 million at year-end 2024.
  • Dividend: $10 million dividend declared ($0.50 per share), matching new policy set in Q4 2024, equivalent to a 6% annualized dividend yield.
  • Telematics Services Margins: CFO Kamer said, "gross margin improved a little bit, and this is due to the operating leverage that we have, as long as we continue to increase our subscriber base, I don't see any reason why the gross margin should [not] improve a little bit."
  • Telematics Product Margins: CFO Kamer cited cost savings and quarter-to-quarter volatility from product mix as factors influencing improved gross margin.
  • Capital Expenditures (CapEx): Q1 was higher than average due to concentrated purchases; CFO Kamer stated, "Looking forward, CapEx should decrease in Q2 2025 and beyond."

SUMMARY

Ituran Location and Control (ITRN -0.08%) management highlighted that local currency growth outpaced U.S. dollar-reported metrics in Q1 2025, as the strong dollar relative to the Brazilian real and Mexican peso suppressed translated results. The initial bulk intake of Stellantis subscribers significantly boosted net additions but is not expected to recur at the same scale in coming periods, with future growth to resemble historical trends absent one-time events. There is a strategic intent to expand OEM relationships, both geographically and in scope of services, with the Stellantis agreement positioned as a long-term growth driver despite early-stage lower ARPU. The company continues to see strong demand for usage-based insurance, and has identified motorcycles as a growing market opportunity in South America. Product revenue pipeline management is ongoing, with sufficient inventory and a 20%-25% targeted gross margin range for telematics products, depending on mix.

  • Co-CEO Sheratzky said the initial Stellantis agreement is limited in scope and ARPU but creates a pathway for broader collaboration and higher-value services over time.
  • CFO Kamer confirmed R&D costs remain stable quarter to quarter, with future levels expected to be similar barring unforeseen changes.
  • On subscriber churn post-OEM contract, management clarified that renewals are priced at higher rates once free periods end, and margin contribution is higher for these direct-to-consumer transitions.
  • The company does not expect substantial uptake of usage-based insurance in Brazil or Mexico in the near term, citing local insurers' reluctance to shift actuary methods; Argentina remains the exception for such deals.
  • Management presented the dividend as a direct result of strong profitability and operating cash flow, with an intent to maintain shareholder returns.

INDUSTRY GLOSSARY

  • SVR (Stolen Vehicle Recovery): A telematics service that enables remote tracking and recovery of stolen vehicles for subscribers.
  • OEM (Original Equipment Manufacturer): An automotive company that manufactures and sells vehicles, now engaging directly with Ituran Location and Control Ltd. for integrated services.
  • ARPU (Average Revenue Per User): The mean monthly revenue generated per subscriber, used to assess revenue quality in subscriber-based businesses.
  • UBI (Usage-Based Insurance): An insurance model that prices policies based on real-time driving behavior and vehicle usage data, enabled by telematics.

Full Conference Call Transcript

Eyal Sheratzky: Thank you, Kenny. I would like to welcome all of you to our first quarter 2025 results call, and thank you for joining us today. We are pleased with our first quarter results, presenting another quarter of year-over-year growth in revenue and profit across the geographies in which we operate. In the first quarter, we added a very high level of new subscribers, amounting to 99,000 net. With this strong jump, we reached a major milestone, crossing 2.5 million subscribers ahead of our expectation. The significant growth in the subscriber base during the quarter was partly due to an additional contribution from a new telematics service agreement that we signed with a major car OEM manufacturer, Stellantis.

As an initial part of this agreement in March, Stellantis switched their SVR subscriber base to Ituran Location and Control Ltd. and Ituran Location and Control Ltd. began providing services to these subscribers. Given the jump in subscribers, we increased our expectations for 2025 subscriber goals between 220,000 and 240,000 net new subscribers, implying a further 120,000 to 140,000 net new subscribers in the upcoming three quarters. The hard work we have done over the past year, bringing new and attractive applications, products, and services, has brought these highly positive results. Looking ahead, we believe, over the long term, the net subscribers added will trend upward.

Even while presenting excellent results, I want to add that similar to the last quarters, while showing growth in US dollar terms, the strengthening of the dollar versus many of the local currencies in which we operate, and in particular, the Brazilian real and the Mexican peso, had a deflating impact on our financial results when denominated in US dollars. In local currencies, in each of our regions, I know that we grew ahead of what our U.S. dollar-denominated results suggest. Our success reflects ongoing and growing demand for location-based products and telematics services in all our regions, as well as traction for new initiatives and services.

With a good first quarter, I want to summarize some of our activities which will continue to contribute to our growth and success. In Israel, the high tariff trade is providing strong demand for our services and enabling us to reach additional new subscribers from parts of the market that were previously untapped by us, such as lower-priced new vehicles or the secondhand car markets. Our usage-based insurance business in Israel continues to gain strong traction, bringing us new subscribers, and is one of the reasons why we continue to see strong subscriber growth. In Italy, our product for motorcycles is gaining traction across all our geographies.

In South America, motorcycles significantly increase our total addressable market and continue to represent a very significant untapped market for us in all our regions. As I mentioned earlier, during the first quarter, we were very pleased to have signed a new OEM agreement with Stellantis. Our new OEM customer made a strategic decision to begin working with Ituran Location and Control Ltd. telematics services, and in March, we started providing our services to their subscriber base. Stellantis is the largest car manufacturer in Latin America, which includes Fiat, Jeep, Peugeot, and many others. They chose to work with us because of their satisfaction with our technological and service capability, contributing to both our top and bottom line.

Because we currently have with them an initial and limited OEM SVR service agreement, the Stellantis subscribers are at a lower ARPU than Ituran Location and Control Ltd.'s average. Following this initial agreement, we expect in the near future to broaden our scope of services to Stellantis. We view this new OEM agreement as an important milestone expanding our OEM relationships globally. We believe it opens the door to further collaborations with Stellantis in additional geographies as well as the potential to provide additional telematics services to the customer base.

We remain in discussion with a number of other major OEM car manufacturers in addition to those that we already work with in order to bring our services to their subsidiaries elsewhere in South America. Ituran Location and Control Ltd. is a cash-generating company, and we generated $15.5 million in operating cash flow during the quarter. Ituran Location and Control Ltd. is focused on shareholder value creation, and as such, the board of directors decided to issue a dividend of $10 million to shareholders. I remind you that in Q4 2024, we increased our dividend policy by 25% from issuing $8 million per quarter to $10 million. This represents $0.50 per share.

Our dividend yield on an annualized basis represents a return of around 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 our company. In summary, we remain pleased with Ituran Location and Control Ltd.'s performance. The first quarter was a quarter of continued growth for Ituran Location and Control Ltd., particularly in terms of top-line revenue and subscriber growth as well as from a strategic perspective, bringing a new OEM relationship and deal to Ituran Location and Control Ltd. We believe we will continue to see growth throughout 2025, adding between 220,000 and 240,000 new subscribers in 2025.

At the same time, we look for more avenues for accelerating our business even further across all our regions. We are very pleased to have reached a major milestone of Ituran Location and Control Ltd. with 2.5 million paying subscribers, and I would like to thank and congratulate all our employees for this amazing achievement. And with that, I hand over to Eli. Eli? Please go ahead.

Eli Kamer: 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. First quarter revenues were a record $86.5 million, a 2% increase compared with revenues of $85 million in the first quarter of last year. The strengthening of the U.S. dollar in the first quarter versus various local currencies in which Ituran Location and Control Ltd. operated impacted the revenue when translated into U.S. dollars. In local currency, revenues grew by 7% year over year. Revenues from subscription fees in the quarter were $62.2 million, an increase of 2% year over year and in local currency an increase of 9%.

Product revenues in the quarter were $24.3 million, an increase of 1% year over year, and in local currencies, an increase of 3%. The subscriber base expanded to 2,508,000 by the end of the first quarter, an increase of 99,000 from the end of the previous quarter. The geographic breakdown of revenues in the first quarter was as follows: Israel, 55%; Brazil, 23%; rest of the world, 22%. EBITDA for the quarter was $23.3 million or 26.9% of revenues, an increase of 4% compared with EBITDA of $22 million or 26.3% of revenues in the first quarter of last year. In local currencies, EBITDA grew 12% year over year.

Net income for the first quarter was $14.6 million or diluted earnings per share of $0.73, an increase of 12% compared to $13 million or diluted earnings per share of $0.66 in the first quarter of last year. In local currency, net income grew 20% year over year. Cash flow from operations for the first quarter of 2025 was $15.5 million. As of March 31, 2025, the company had net cash, including marketable securities, of $75.7 million. This is compared with net cash, including marketable securities, of $77.2 million as of year-end 2024. The board of directors declared a dividend of $10 million for the quarter.

The current dividend takes into account the company's continuing strong profitability, ongoing positive cash flow, and strong balance sheet. With that, I would like to open the call for the question-and-answer session. Operator?

Operator: Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please use the raise hand button located at the bottom of your screen. The first question is from Sergey Glinyanov of Freedom Capital Markets. Please go ahead.

Sergey Glinyanov: Good day, gentlemen. Do you hear me well?

Operator: Yes. Loud and clear.

Sergey Glinyanov: So great. In terms of new agreements, does it imply you set up your equipment and provide services for each produced car by Stellantis in Latin America, or do you have some options for them?

Eyal Sheratzky: Hi, Sergey. This agreement that we report that we published is currently at this stage, as we said, is to provide services based on technology which was already implemented in the past in the cars of Stellantis. Of course, we see this agreement as an opportunity to broaden the relationship, and probably in the future, we hope that we will have the ability to add other services as well as hardware in some models. But this what we have published yesterday, it's to provide services.

Sergey Glinyanov: Okay. Got it. And is the total effect on your subscription base in place? It seems you raised your subscription-based guidance range by 40,000 in midpoints, exactly what we saw in Q1, considering previous run rates.

Eyal Sheratzky: This agreement was, hello? Yeah. This agreement is in place since March, meaning in Q1, there is almost zero influence. But it's also important for me to mention we talk about services, and specifically OEM deals, which, with the large quantities, but which is with a lower ARPU. So it's taking time that it becomes material because don't forget, we had before this quarter about 2.4 million subscribers. The additional influence in the short term is smaller. But the important thing in each and one of these contracts is that we're talking about longer-term relationships.

We're talking about growing customer base from this customer, and when it exponentially increases, the margins increase, so the contribution to the total results of Ituran Location and Control Ltd. will appear in the future, but then it will be more material. But I don't think that it's the right way to judge a contract now for this quarter or for the next quarter, because the customer base, the revenues that we have from subscriber fees at all, are much higher than only this. But in the future, these contracts will ramp up every month, every quarter, and it will be more contribution to our results.

Sergey Glinyanov: Okay. But what primarily affected your ramp-up of the subscription base? Because recently, it was roughly 40,000 per quarter, and now we see that it's roughly 100,000.

Eyal Sheratzky: Actually, the agreement includes the first stage gaining Ituran Location and Control Ltd. a bulk of Stellantis car owners as a first stage. And then they will continue on an annual basis based on their sales. So the number that we show at Q1 is not a typical number. This is why we provide the expectation that the next quarters will continue to be about 40,000 per quarter and not as Q1 almost 100,000.

We got an initial bank of customers at one time now, of course, they will be with us for a few years according to the contract, but now every month, Stellantis will continue to add subscribers, but it will not be on the same level that the initial one was.

Sergey Glinyanov: Yeah. I got it. That's exactly what I was interested in. Now turning to your financial figures. Eli, that's a question for you, I guess. Product gross margin is increasing substantially. Have you taken some steps to improve that, and what should we think about it for the next couple of quarters?

Eli Kamer: If we split it into two, we're talking about the gross margin related to the telematics services, it actually improved a little bit, and this is due to the operating leverage that we have in our business model. So, if you are asking me for the future, as long as we continue to increase our subscriber base, I don't see any reason why the gross margin on the telematics services should improve a little bit. Regarding the telematics products gross margins, that increased and it relates to cost savings that we are doing all the time.

And volatility between the quarters because there is a mix of products that sometimes change from that you are selling one or more products with a different gross margin, that is a little bit of volatility as well.

Sergey Glinyanov: Yeah. Thank you. Got it. And what about operation expenses? It seems your R&D and marketing expenditures rise as fast as in revenue. What should we think about it?

Eli Kamer: If I'm looking at the R&D quarter, it's quite stable along the time. So if you're asking me going forward, that's a reasonable assumption to use for the future.

Sergey Glinyanov: Okay. Understood. And I think the last question is increased CapEx attributable to new agreements and what level should we expect for 2025?

Eli Kamer: Yeah. Regarding CapEx, you have to remember that it includes a lot of consideration of volatility due to the fact of a couple of things. One, the company is making purchases of machines, vehicles, and hardware, it's not spread equally among the quarters. And second, also inventory or not a fixed asset or inventory that we are using in that usually depends on the we can buy it in bulk and like that. Q1 for your question, was higher than the average. But looking forward, the CapEx should go down if you would compare, I mean, the second quarter and moving forward.

Sergey Glinyanov: Okay. Thank you. Got it. And yeah, I have one more question about the insurance market in LatAm. Just wondering and would like to hear your thoughts about it. What do you expect from the LatAm insurance market? For instance, in Brazil, despite car thefts declining, insurance costs rise rapidly, especially for the most popular cars like Fiat. Do you consider it as a potential opportunity for Ituran Location and Control Ltd. in terms of consumer demand transition into UBI insurance? What are your perspectives for the next couple of years on that sales field?

Eyal Sheratzky: First of all, we don't see declining costs of theft. We have to understand that with all the respect we run, when we have a few hundred thousand cars when we talk about tens of millions driving on the roads, still we usually have a better approach to cars which are more popular to be stolen, whether it's insurance companies or even we are we don't see the trend that you mentioned. I know that some models sometimes it has volatility, but overall, we see a high demand in Brazil for car sales solutions specifically the insurance companies that we work with. And especially the audience when we talk about Ituran Location and Control Ltd. and Consequoro, that we approach.

So we don't see that regard UBI. I said it in the past, we always knocking on the doors of our partners. Insurance companies, and provide them the solution. Unfortunately, Brazil, as well as Mexico, which are the two largest countries in South America, the insurance companies are not willing to explore this journey, which means to change their actuary methodology and implement software and an integration with this solution. So the only country, by the way, that we succeed to have some deals, it's Argentina.

But things I think that the competition between insurance companies, digital insurance company's penetration prices that should that go went down and will continue probably will create more virtual ground for accepting a UBI solution. And once it will happen, I believe and we do the best that we can to be there based on the strong relationship that we have with major players in the insurance industry. But currently, Brazil and Mexico in the short future, are not the markets that we expect to sell the UBI.

Sergey Glinyanov: Yeah. That's all for me. Thank you for taking my questions, gentlemen.

Operator: Thank you. The next question is from Chris Reimer of Barclays. Please go ahead.

Chris Reimer: Hi. Thanks for taking my questions, and congratulations on the strong results. I'd like to you mentioned the lower ARPU for customers on deals of the type of Stellantis with the bulk customers. I was wondering if you could talk a little bit about the attrition rates and customers that leave or are finished with their contracts. Does it work that you get new customers at a higher ARPU or because of these large deals, are some of the new customers coming in at a lower ARPU than the ones that are leaving?

Eyal Sheratzky: First of all, it should be clear. Our customer is Stellantis. I mean, all the accounts and the calculation and the ARPU and everything are done through them. The customer gets it as a free trial as a part of, let's say, like, having the car, he has the services. Which for us is good because we don't have to convince the customer. We don't have to work consumer by consumer. The checks come from one institutional player, etcetera. But once the time, which is usually between two to three years, sometimes five years, of these free services.

We have the ability to approach the customers when they finish the free trial and to offer them the services, which by the way, has two additional, I would say, benefits. First of all, the prices that we offer the renewals are higher. Because to convince Stellantis to pay for hundreds of thousands of subscribers, of course, it's related to a very high discount or lower ARPU. When you go customer by customer, when we do the renewals, if they had satisfaction with the three or five years of services, it will be easier for us to convince them to pay a higher service fee. So this is the situation here.

We don't have the chain, I would say, is lower. Because there is no economic pressure on the driver or the car owner.

Chris Reimer: Right. Yeah. Okay.

Eyal Sheratzky: By the way, it's the situation with all the OEMs. Now regarding the ARPU, I don't I'm not sure if you ask me specifically, but I would add that the ARPU is lower because it's only service. There is no we are not leasing any hardware which we have to integrate into the monthly service fees. Like we do, for example, with Nissan. So it's only the service, so it's lower.

Second, we are talking about kinds of services that since we don't have the hardware, all the back office related to the hardware, so the margins are dramatically higher than a typical service of full connected car services, which the ARPU is higher, but the gross cost is also higher. Direct cost is also higher. So the margin is higher here.

Chris Reimer: Got it. Thanks. That's really helpful. And I was wondering if you could talk a little about the dynamics in the market for the product revenues and how you see the pipeline evolving throughout the year.

Eli Kamer: Theoretically, again, usually the pipeline regarding, you know, we have orders but it's on a daily basis that we receive. Of course, there are some backlogs of orders that we know from OEMs that we plan and we manufacture the units in order to provide them. So we are ready always to promote or to provide the deliveries to our customers. So we have stock, enough stock, whatever they need. Of course, based on demand, of course, we can increase the inventory or reduce the inventory based on that. Regarding the gross margins that you mentioned, that's really there is a lot of volatility over here. Along the quarter.

And this is why it's very hard to say, but I would say you know, even going forward, around the 20-25% makes sense to me on a gross margin for the product revenue. But it depends on the product mix.

Chris Reimer: Alright. Thanks. That's it for me.

Operator: Thank you. There are no further questions at this time. Before I ask Mr. Sheratzky 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 Location and Control Ltd.'s website www.ituran.co.il. Mr. Sheratzky, would you like to make your concluding statement?

Eyal Sheratzky: On behalf of the management of Ituran Location and Control Ltd., I would like to thank you, our shareholders, for your continued interest and long-term support of our business. 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. Thank you, and have a good day.

Operator: Thank you. This concludes the Ituran Location and Control Ltd. first quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.