Ituran Location and trol .(ITRN)2023-03-03 21:08Financial Data and Key Metrics Changes - Ituran reported record full year revenue of $293 million, an 8% increase from $270.9 million in 2021 [13] - EBITDA for 2022 was a record $78.9 million, representing a 9% increase compared to $72.7 million in 2021 [16] - Net income for 2022 was $37.1 million, an 8% increase from $34.3 million in 2021, with diluted earnings per share rising to $1.82 from $1.65 [17] Business Line Data and Key Metrics Changes - Subscription revenue for Q4 2022 was $53.9 million, a 10% increase year-over-year, with local currency growth of 14% [12] - The subscriber base reached 2,066,000 by the end of 2022, with a net increase of 185,000 year-over-year [14] - Product revenues for Q4 2022 were $21.1 million, a 2% decrease compared to Q4 2021, but a 4% increase in local currency terms [15] Market Data and Key Metrics Changes - Geographic revenue breakdown for Q4 2022: Israel 50%, Brazil 25%, rest of the world 25% [16] - The company experienced strong subscriber growth in its traditional aftermarket business, contributing significantly to overall revenue growth [9] Company Strategy and Development Direction - Ituran aims to continue its accelerated subscriber growth, projecting annual net new subscriber adds between 180,000 to 200,000 [6] - The company is focusing on enhancing its operating leverage model, which allows for increased profitability without a corresponding rise in costs [8] - Ituran is expanding its service offerings, including UBI and financial services for car loans, to drive future growth [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the improvements made in the business over the past few years will sustain subscriber growth [10] - The company anticipates that the positive trends observed in 2022 will continue into 2023 and beyond [10] - Management acknowledged challenges such as increased costs of components but expects improvements in margins as these costs stabilize [26] Other Important Information - Cash flow from operations for 2022 was $45.1 million, down from $55.8 million in 2021, primarily due to growth in the Brazilian business [18][19] - As of December 31, 2022, the company had cash and marketable securities of $28.2 million and net cash of $16 million [21] - A dividend of $3 million was declared for Q4 2022, and the company repurchased 357,000 shares totaling $8.4 million during the year [22] Q&A Session Summary Question: Subscriber mix and OEM characteristics - Management noted that OEM sales depend on car producers, while aftermarket sales allow for more influence and diversification in customer base [24][25] Question: Future gross margin outlook - Management expects improvements in hardware margins in 2023 due to changes in component markets and operating leverage from new subscribers [26] Question: Growth drivers for aftermarket in 2023 - Key growth drivers include increased subscriber base, higher demand from insurance companies, and expansion into new service segments [28] Question: Operating margin trajectory - Management indicated that gross and operating margins are expected to grow due to recurring revenue and improved component costs [29] Question: Cash management and debt repayment - The company plans to pay off its remaining debt by September 2023, after which it will have no debt [33] Question: Investment strategy and share repurchase - Management confirmed an additional $10 million for share buybacks in 2023, indicating confidence in cash position [35]