Ituran Location and Control Ltd. Q2 FY2025 earnings call

• Celebrated 30th birthday, with 20 years as a public company.
• Added 40,000 net subscribers in the second quarter and on track for 220,000 to 240,000 net subscribers in 2025.
• Launched new motorcycle product with solid traction.
• War with Iran caused 2-week economic suspension in Israel, impacting new car sales but strong demand for services due to high car theft rate.
• Usage-based insurance in Israel seeing good traction.
• Partnership with BMW Motorrad in Brazil for motorcycle market, expanding total addressable market.
• Generated $22.4 million in operating cash flow during the quarter.
• Board declared a $10 million dividend, with $6 million still available under buyback program.

Second quarter revenues were a record $86.8 million, a 2% increase compared with the second quarter of last year. In local currencies, revenues grew by 4% year-over-year. Revenues from subscription fees in the quarter were $63.8 million, an increase of 6% year-over-year, and in local currencies, an increase of 7%. Product revenues in the quarter were $23 million, a decrease of 6% year-over-year. The geographic breakdown of revenues in the second quarter was as follows: Israel, 54%; Brazil, 23%; Rest of World, 23%. The subscriber base expanded to 2,548,000 by the end of the second quarter, an increase of 40,000 from the end of the previous quarter.

• Management expects 2025 subscriber growth to reach between 220,000 and 240,000 net subscribers.
• Remain on track with the forecast for subscriber growth in the second half of the year.

• War between Israel and Iran led to a 2-week suspension of economic activities in Israel, impacting new car sales.

Q: How should we be looking at growth into the second half? And would you say you've seen a bounce back in Israel?

A: Actually, we're still on track with our forecast of 220,000 to 240,000 subscribers. So I believe that this will be the growth in subscribers in the second -- according to this, we will have the growth in the second half of the year.

Q: Can you provide any more color on the BMW deal? What's the potential scope of customers? And when might we see impact?

A: Actually, BMW motorcycles in Brazil are signed with us the kind of a partnership agreement, and they're going to install our motorcycle solution with their motorcycle, with the BMW motorcycle. It's a very strong brand in Brazil. In terms of numbers, usually, when we sign OEM contracts, we get kind of roughly projections for numbers, but they never commit. But based on the relationship, the negotiation and the discussions, we are quiet confidence that we are talking about tens of thousands of new subscribers every year in the coming years.

Q: How should we be looking at the financial expenses going forward?

A: Chris, financial expenses, usually, if you look at the past, our average is around breakeven or a little bit positive, like up until $0.5 million, but the financial expenses/income is really linked to the FX and our deposits of cash that we have. This quarter, specifically, we had deposits linked to the U.S. dollars here in Ituran Israel, which were attributed to the dividend that we are going to pay. And due to the fact that in the end of June, the shekel got stronger significantly that affected our financial expenses. So basically, it's not in cash flow, but this is. So going forward, it's hard to say.