Ituran Location and trol .(ITRN) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an adjusted EBITDA of $13.9 million, which was about 9% below the first quarter of 2020, and excluding currency impacts, the decline would have only been 2% [6][32] - Revenue for Q2 2020 was $53.3 million, a decrease of 25% compared to $71.2 million in Q2 2019 [26] - Net loss for Q2 2020 was $6.3 million, or a loss per share of $0.30, while net income excluding impairment charges was $7.2 million, representing a decrease of 7% compared to $7.7 million in Q2 2019 [35][36] - Cash flow from operations for Q2 2020 was $19.3 million, with cash including marketable securities amounting to $57.2 million as of June 30, 2020 [37] Business Line Data and Key Metrics Changes - The subscriber base amounted to 1,751,000 as of June 30, 2020, representing a decrease of 53,000 net subscribers over the previous quarter [27] - The aftermarket business saw a net decline of 16,000 subscribers, while the OEM segment experienced a decline of 27,000 subscribers [28][14] - Product revenues were $9.6 million, a decrease of 51% compared to Q2 2019 [26] Market Data and Key Metrics Changes - Geographic breakdown of revenues in Q2 2020 was as follows: Israel 51%, Brazil 25%, and the rest of the world 24% [28] - In Brazil, new car registrations in June were up from the lows of April but still down 40% compared to June of the previous year [19] Company Strategy and Development Direction - The company aims to leverage its subscriber base of 1.8 million for long-term sustainable growth, despite challenges in new car sales impacting subscriber recruitment [11][12] - The company is focusing on cost-cutting measures and efficiency improvements to weather the economic downturn caused by the pandemic [9][25] - The UBI offering is gaining traction, with five insurance companies signed in Israel, and the company is exploring similar agreements in Argentina and Brazil [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term resilience of the business model and expects to emerge from the pandemic as a stronger company [10][25] - The company anticipates that new car sales will recover as markets reopen, but growth may not return to pre-pandemic levels in the short term [52] - Management emphasized a conservative approach to capital allocation during uncertain times, with plans to consider dividends and share buybacks once stability returns [56][58] Other Important Information - The company recorded a non-cash impairment loss of $14.2 million related to the acquisition of Road Track due to increased country risk in Latin America [29][16] - The company has a strong balance sheet, with net debt of $3.6 million as of June 30, 2020, down from $13.6 million at the end of 2019 [37] Q&A Session Summary Question: OEM positioning going into the second half of the year - Management expects to restart selling new products and services to OEMs as production lines reopen, with subscriber recognition occurring upon installation in end-user cars [39] Question: Gross margin performance and modeling margins - Management attributed strong gross margins to cost-cutting measures and a favorable mix between service and product revenues [41][42] Question: Sequential momentum and market outlook - Management indicated that while car sales may recover, they will not return to 2019 levels in the short term due to economic conditions [52] Question: Capital allocation regarding dividends and share buybacks - Management stated that they will be conservative with cash until the economic situation stabilizes, but are confident in their financial position for future capital allocation decisions [56][58] Question: Stake in SaverOne post-dilution - The company holds approximately 11% in SaverOne after dilution, which is a startup focused on reducing driver distractions [65]