Ituran Location and Control Ltd. (NASDAQ: ITRN) Q1 2025 Earnings Call | 05/28/2025

Ituran Location and Control Ltd. Q1 2025 Earnings Summary

Ituran Location and Control Ltd. (Ituran) reported a strong first quarter for 2025, showing continued year-over-year growth in revenue and profit across all operating regions. The company achieved a significant milestone by surpassing 2.5 million subscribers, driven in part by a new telematics service agreement with Stellantis.

Financial Highlights:

• Record Revenues: Achieved $86.5 million in Q1 2025, a 2% increase year-over-year. In local currencies, revenues grew by 7%.
• Subscription Fees: Grew by 2% year-over-year to $62.2 million (9% in local currency).
• Product Revenues: Increased by 1% year-over-year to $24.3 million (3% in local currency).
• EBITDA: Rose by 4% to $23.3 million (26.9% of revenues), a 12% increase in local currencies.
• Net Income: Increased by 12% to $14.6 million ($0.73 diluted EPS), a 20% increase in local currencies.
• Operating Cash Flow: Generated $15.5 million in Q1 2025.
• Net Cash: Stood at $75.7 million as of March 31, 2025.
• Dividend: Declared a dividend of $10 million for the quarter, representing $0.50 per share and an annualized yield of approximately 6%.

Operational Highlights:

• Subscriber Growth: Added a record 99,000 net new subscribers in Q1, reaching a total of 2,508,000 subscribers.
• Stellantis Agreement: A new telematics service agreement with Stellantis, Latin America's largest car manufacturer, significantly contributed to subscriber growth. Ituran began providing SVR services to Stellantis' subscriber base in March. While initial ARPU (Average Revenue Per User) from this agreement is lower than the Ituran average, it's expected to expand in scope and contribute more materially in the future.
• Subscriber Outlook: Increased 2025 net new subscriber guidance to between 220,000 and 240,000, implying another 120,000 to 140,000 net new subscribers in the remaining three quarters.
• Israel Market: High car theft rates and the growing usage-based insurance (UBI) business continue to drive strong subscriber growth.
• Motorcycle Product: Gaining traction across South America, significantly expanding the total addressable market.
• OEM Relationships: The Stellantis agreement is seen as a key milestone for expanding OEM relationships globally and opens doors for further collaborations and additional telematics services. Discussions with other major OEM car manufacturers are ongoing.

Market Dynamics & Future Outlook:

• Currency Impact: The strengthening of the US dollar against local currencies (especially Brazilian Real and Mexican Peso) had a deflating impact on reported USD results; growth in local currencies was stronger.
• Gross Margins: Telematic services gross margin is expected to improve with continued subscriber base growth due to operating leverage. Product gross margins have some volatility due to product mix but are generally around 20-25%.
• Operating Expenses: R&D expenses are stable at around 5.5% of revenues.
• Capital Expenditures (CapEx): Q1 CapEx was higher than average due to non-evenly spread purchases of machines, vehicles, and hardware. CapEx is expected to decrease in subsequent quarters of 2025.
• Latin American Insurance Market: While car theft solutions remain in high demand, particularly for popular car models, UBI adoption in Brazil and Mexico faces challenges due to insurance companies' reluctance to change actuarial methodologies. Argentina has seen some success with UBI. Ituran believes increased competition and digital insurance penetration could create more fertile ground for UBI in the future.