Ituran Location and trol .(ITRN) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Non-GAAP revenue for Q1 2019 was $74.6 million, an 18% increase compared to $63.1 million in Q1 2018, with local currency revenue growing 32% year-over-year [17] - Non-GAAP operating profit for Q1 2019 was $16.2 million, a 4% increase from $15.5 million in Q1 2018, with a 24% growth in local currency terms [18] - Net profit for the quarter was $10.7 million, or fully diluted EPS of $0.50, a decline of 5% year-over-year [19] Business Line Data and Key Metrics Changes - Active subscriber base at the end of Q1 2019 was 1,783,000, with retail subscribers at 1,229,000 and OEM subscribers at 554,000 [11] - Net additions in Q1 2019 totaled 13,000, with 8,000 from retail and 5,000 from OEM [11] - Subscription fee revenue was $54.2 million, representing a 19% year-on-year increase, with local currency growth of 36% [17] Market Data and Key Metrics Changes - Geographic revenue breakdown for Q1 2019: Israel 38%, Brazil 37%, and the rest of the world 25% [18] - The economic situation in Brazil has led to a slowdown in subscriber recruitment due to increased insurance premiums and customer filters [5][6] Company Strategy and Development Direction - The company aims to leverage its telematics services across Latin America, expanding its subscriber base beyond Israel and Brazil [3][4] - A new agreement with Harel Insurance in Israel is expected to accelerate subscriber growth through a usage-based insurance program [7][8] - The company is focusing on cross-selling capabilities and launching additional services in new geographies [13] Management's Comments on Operating Environment and Future Outlook - Management expects subscriber growth in Brazil to return to historical levels by Q2 2019, although financial impacts may take longer to materialize [30] - The company is optimistic about the potential of usage-based insurance (UBI) agreements, anticipating significant market interest and expansion opportunities [9][34] Other Important Information - A quarterly dividend of $5 million was declared, with a share buyback program of up to $25 million approved until December 2020 [14][15] - The company is experiencing currency translation impacts, particularly from the Brazilian Real, affecting reported revenues [12] Q&A Session Summary Question: Revenue per subscriber trends and future trajectory - Management noted that OEM subscribers have lower margins and ARPU, impacting overall revenue per subscriber [22][24] Question: Impact of pricing model changes in Brazil - Management expects immediate subscriber growth normalization in Brazil, with financial impacts materializing in the second half of the year [29][30] Question: UBI contract size and market potential - Management highlighted the strategic importance of the UBI contract with Harel and the potential for significant growth in the Israeli market [31][34] Question: Subscriber net additions and market maturity - Management clarified that the forecast of 15,000 to 20,000 net additions is specific to the retail aftermarket segment, with OEM growth being less predictable [41][42] Question: OEM partner behavior and subscriber base risks - Management acknowledged potential risks in the OEM subscriber base due to economic conditions but emphasized the importance of retail growth [44][45] Question: Future OEM partnerships and timelines - Management indicated ongoing discussions with new OEM partners, with expectations for potential announcements in the mid-term [46]