Ituran Location and Control Ltd. Presents Results for the Third Quarter 2018

AZOUR, Israel, Nov. 26, 2018 /PRNewswire/ -- Ituran Location and Control Ltd. (NASDAQ: ITRN, TASE: ITRN), today announced its consolidated financial results for the third quarter ended September 30, 2018.

Highlights of the third quarter of 2018

    --  Closed acquisition of the majority stake in Road Track Holdings in
        mid-September with minimal impact on the financial results of the
        quarter;
    --  Revenue of $53.4 million and operating profit of $13.7 million (margin
        of 25.7%)
    --  Net profit of $26.1 million (including one-time income of $13.8
        million);
    --  EBITDA of $17.0 million (31.8% of revenue); in local currency terms,
        EBITDA grew by 13%;
    --  Dividend of $5 million declared for the quarter;

Third Quarter 2018 Results

The closing of the acquisition of Road Track Holdings on September 13, 2018, brought slightly over half a million subscribers and the subscriber base reached 1,752,000 subscribers as of September 30, 2018 compared with 1,137,000 subscribers as of September 30, 2017. Because the acquisition happened toward the end of the third quarter, there was minimal impact on the consolidated profit and loss statement for the quarter.

Revenues for the third quarter of 2018 were $53.4 million, compared with revenues of $60.6 million in the third quarter of 2017. 73% of revenues were from location based service subscription fees and 27% were from product revenues.

The significant strengthening of the US dollar versus the Brazilian real and the Argentinean peso during the third quarter versus the prior quarter as well as the third quarter of 2017 reduced the overall revenue level in US dollars and impacted the growth rate of the revenues in US dollar terms.

Revenues from subscription fees were $39.1 million, compared with $43.8 million in the third quarter last year. Excluding the exchange rate impact, the revenues from subscription fees would have grown by 3.4% year-over-year.

Revenue from products were $14.3 million compared with $16.8 million in the third quarter of last year. The New Year holiday season in Israel fell fully in the third quarter of 2018, while it was divided between the third and fourth quarter of last year, leading to less days of sales in Israel and lower product revenue during the current quarter. In addition, the above mentioned exchange rate volatility also impacted the product revenues. In local currency terms, product revenues would have declined by 13% year-over-year.

Gross profit for the third quarter of 2018 was $28.9 million (54.1% of revenues), compared with $30.5 million (50.4% of revenues) in the third quarter of 2017.

The gross margin on subscription fees were 65.3% compared with 66.7% in the same period last year. The gross margin on product sales were 23.4% compared with 7.6% in the same period last year. The change in gross margin was mainly due to the product sales mix sold during the quarter.

Operating profit for the third quarter of 2018 was $13.7 million (25.7% of revenues), compared with an operating profit of $13.9 million (22.9% of revenues) in the third quarter of 2017. Excluding the impact of the change in exchange rates over the period, the operating profit would have increased 15% over the third quarter of 2017.

During the quarter, Ituran had a one-time other income of $13.8 million. This was related to an accounting gain from an acquisition following the gain of control of Ituran's joint venture with Road Track Holdings in Brazil and Argentina, which under GAAP rules, is accounted for at market value and was therefore revalued. The total gain is net of transaction related expenses.

During the quarter, share in affiliates, net was an income of $1.6 million versus an income of $1.0 million in the same quarter of last year.

EBITDA for the quarter was $17.0 million (31.8% of revenues), compared to an EBITDA of $17.4 million (28.7% of revenues) in the third quarter of 2017. Excluding the impact of the change in exchange rates over the period, the EBITDA would have increased by 13%.

Net profit was $26.1 million in the third quarter of 2018 (48.8% of revenues) or fully diluted EPS of $1.24. This is compared with a net profit of $10.5 million (17.4% of revenues) or fully diluted EPS of $0.50 in the third quarter of 2017.

Cash flow from operations for the quarter was $14.8 million.

As of September 30, 2018, the Company had cash, including marketable securities, of $57.4 million. The company also had short and long-term debt of $84.9 million. On a net basis, the net debt of the company was $27.5 million, compared with net cash of $40.4 million as of December 31, 2017.

Ituran consolidated non-GAAP Pro-Forma Financials

On September 13, 2018, Ituran closed its acquisition of 81.3% of Road Track Holdings. In order to aid investor's understanding of how to model Ituran following the acquisition, the consolidated non-GAAP pro-forma financials of Ituran and Road Track Holdings for the first nine months of 2018 are included in the table below.


        US$ millions      
         
              Actual          
         
              Non-GAAP            
        
              Non-GAAP pro-forma at
                                                                                                   constant currency ex-rates
                          
         
              results       
         
            Pro-forma results
                                                                                                   
            (based on average
                           
         (9 months ended             
         (9 months ended
                                                                                                  
            2017 exchange rates)
                         
         September 30, 2018)         
         September 30, 2018)

    ---

              Revenue                              174.2                                  270.4                                       286.8

    ---

              EBIT                                  44.1                                   59.2                                        65.9

    ---

              Net profit     
            49.3*                                               41.9                                        46.6

    ---

*Please note that the actual net profit in the table above includes a $13.8 million one-time income while the non-GAAP pro-forma does not include this.

Dividend

For the third quarter of 2018, a dividend of $5.0 million was declared in line with the Company's stated current policy of issuing at least $5 million on a quarterly basis.

Management Comment

Eyal Sheratzky, Co-CEO of Ituran said, "Ituran continues to grow and is performing well. Again, significant local currency weakness versus the dollar had an impact on our financials. As the solid improvement in our margins indicates, the health of the underlying business is strong and allows us to continually grow profitably for the long-term, independent of the short-term volatility."

Continued Mr. Sheratzky, "We closed the third quarter consolidating Road Track, a company we had been working with closely for five years in Brazil and Argentina. Ituran is now a Company on a completely new scale adding significant operations throughout Latin America. While the impact on our P&L was not significant in the current quarter, we ended the quarter with over 1.7 million subscribers. In only a few weeks since the close, we are already working on leveraging the synergies, given our new scale in the telematics market in Latin America. We look forward to our continued growth and expansion for the foreseeable future."

Conference Call Information

The Company will also be hosting a conference call later today, November 26, 2018 at 10 am Eastern Time. On the call, management will review and discuss the results, and will be available to answer investor questions.

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls a few minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1 888 668 9141
ISRAEL Dial-in Number: 03 918 0610
CANADA Dial-in Number: 1 888 604 5839
INTERNATIONAL Dial-in Number: +972 3 918 0610
At:
10:00am Eastern Time, 7:00am Pacific Time, 5:00pm Israel Time

For those unable to listen to the live call, a replay of the call will be available from the day after the call in the investor relations section of Ituran's website.

Certain statements in this press release are "forward-looking statements" within the meaning of the Securities Act of 1933, as amended. These forward-looking statements include, but are not limited to, our plans, objectives, expectations and intentions and other statements contained in this report that are not historical facts as well as statements identified by words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates" or words of similar meaning. These statements are based on our current beliefs or expectations and are inherently subject to significant uncertainties and changes in circumstances, many of which are beyond our control. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors.

About Ituran

Ituran is a leader in the emerging mobility technology field, providing value-added location-based services, including a full suite of services for the connected-car. Ituran offers Stolen Vehicle Recovery, fleet management as well as mobile asset location, management & control services for vehicles, cargo and personal security for the retail, insurance industry and car manufacturers. Ituran is the largest OEM telematics provider in Latin America. Its products and applications are used by customers in over 20 countries. Ituran is also the founder of the Tel-Aviv based DRIVE startup incubator to promote the development of smart mobility technology.

Ituran's subscriber base has been growing significantly since the Company's inception to well over 1.7 million subscribers using its location based services with a market leading position in Israel and Latin America. Established in 1995, Ituran has over 3,400 employees worldwide, with offices in Israel, Brazil, Argentina, Mexico, Ecuador, Columbia, India, Canada and the United States.

For more information, please visit Ituran's website, at: www.ituran.com


                                                                       
       
       ITURAN LOCATION AND CONTROL LTD.


                                                                     
       
       CONDENSED CONSOLIDATED BALANCE SHEETS




                                                                                                                        US dollars



                                                                                                                   
     
     September 30,  
     
     December 31,



       
                (in thousands)                                                                                              2018               2017

    ---






       
                Current assets



       Cash and cash equivalents                                                                                              55,743             36,906



       Investments in marketable securities                                                                                    1,674              3,559



       Accounts receivable (net of allowance for doubtful accounts)                                                           62,782             41,009



       Other current assets                                                                                                   45,591             41,394



       Inventories                                                                                                            35,066             14,244



                                                                                                                              200,856            137,112



       
                Long-term investments and other assets



       Investments in affiliated companies                                                                                     4,088             14,839



       Investments in other company                                                                                            2,400              1,382



       Other non-current assets                                                                                                2,998                939



       Deferred income taxes                                                                                                  14,550              8,398



       Funds in respect of employee rights upon retirement                                                                     9,588              9,627



                                                                                                                               33,624             35,185





       
                Property and equipment, net                                                                               52,607             39,047



       
                Intangible assets, net                                                                                    29,389                 38



       
                Goodwill                                                                                                  70,875              3,777






       
                Total assets                                                                                             387,351            215,159


                                                        
       
           ITURAN LOCATION AND CONTROL LTD.


                                                      
       
       CONDENSED CONSOLIDATED BALANCE SHEETS (cont.)




                                                                                                              US dollars



                                                                                                            September 30, December 31,



       
                (in thousands)                                                                                  2018          2017

    ---




       
                Current liabilities



       Credit from banking institutions                                                                            8,022            48



       Accounts payable                                                                                           27,990        23,264



       Deferred revenues                                                                                          42,135        12,796



       Other current liabilities                                                                                  38,236        29,644



                                                                                                                  116,383        65,752





       
                Long-term liabilities



       Long term loan                                                                                             76,895             -



       Liability for employee rights upon retirement                                                              15,020        14,062



       Provision for contingencies                                                                                   326           400



       Deferred income taxes                                                                                       3,079             -



       Deferred revenues                                                                                           7,030         1,241



       Others non-current                                                                                            390           475



                                                                                                                  102,740        16,178







       
                Stockholders' equity                                                                         155,130       125,790



       
                Non-controlling interests                                                                     13,098         7,439




       
                Total equity                                                                                 168,228       133,229









       
                Total liabilities and equity                                                                 387,351       215,159


                                                      
              
          ITURAN LOCATION AND CONTROL LTD.


                                    
              
                CONDENSED 
          CONSOLIDATED 
                STATEMENTS OF INCOME




                                                                                                                                         US dollars                     US dollars

                                                                                                                                                     ---

                                                                                                                                         Nine month period                     Three month period


                                                                                                                                         ended September 30,                     ended September 30,



             
                (in thousands except per share data)                                                              2018      2017           2018         2017

    ---                                                                                                                                                          ---




             
                Revenues:



             Location-based services                                                                                     126,315   125,284         39,126       43,847



             Wireless communications products                                                                             47,855    48,774         14,250       16,764

                                                                                                                                                                 ---

                                                                                                                          174,170   174,058         53,376       60,611





             
                Cost of revenues:



             Location-based services                                                                                      41,408    41,889         13,569       14,584



             Wireless communications products                                                                             43,485    43,362         10,914       15,483

                                                                                                                                                                 ---

                                                                                                                           84,893    85,251         24,483       30,067

                                                                                                                                                                 ---




             Gross profit                                                                                                 89,277    88,807         28,893       30,544



             Research and development expenses                                                                             3,727     2,444          1,628          676



             Selling and marketing expenses                                                                                8,423     9,551          2,941        3,273



             General and administrative expenses                                                                          33,385    35,096         10,795       12,705



             Other income, net                                                                                             (308)    (146)         (190)         (3)

                                                                                                                                                                 ---


             Operating income                                                                                             44,050    41,862         13,719       13,893



             Other income, net                                                                                            13,833                  13,833            -



             Financing income, net                                                                                         2,134     1,091          1,566          250

                                                                                                                                                                 ---


             Income before income tax                                                                                     60,017    42,953         29,118       14,143



             Income tax expenses                                                                                        (12,416) (12,388)       (3,906)     (3,944)



             Share in gains of affiliated companies ,net                                                                   3,868     5,487          1,644          998

                                                                                                                                                                 ---


             Net income for the period                                                                                    51,469    36,052         26,856       11,197



             Less: Net income attributable to non-controlling interest                                                   (2,124)  (2,082)         (805)       (667)

                                                                                                                                                                 ---


             Net income attributable to the Company                                                                       49,345    33,970         26,051       10,530

                                                                                                                                                                 ===




             Basic and diluted earnings per share attributable to                                                           2.35      1.62           1.24         0.50
        Company's stockholders

                                                                                                                                                                 ===




             Basic and diluted weighted average number of shares                                                          20,982    20,968         21,010       20,968
        outstanding (in thousands)

                                                                                                                                                                 ===


                                                 
      
      ITURAN LOCATION AND CONTROL LTD.


                                                
      
      RECONCILIATION OF NON-GAAP RESULTS




                                                                                                         US dollars            US dollars

                                                                                                                           ---

                                                                                                         Nine months ended          Three months ended



       
                (in thousands                                                                       September 30,          September 30,



       
                except per share data)                                                  2018    2017           2018         2017

    ---                                                                                                                        ---




       
                GAAP Revenues:                                                       174,170 174,058         53,376       60,611



       Valuation adjustment on acquired deferred                                                                                -



       revenue



       Non -GAAP revenue                                                                 174,170 174,058         53,376       60,611





       GAAP gross profit                                                                  89,277  88,807         28,893       30,544



       Valuation adjustment on acquired deferred                                                                                -



       revenue



       Non -GAAP gross profit                                                             89,277  88,807         28,893       30,544

                                                                                                                               ---




       GAAP operating income                                                              44,050  41,862         13,719       13,893



       Operation profit adjustments



       Amortization of other intangible assets                                               310                   310            -




       Non-GAAP operating income                                                          44,360  41,862         14,029       13,893

                                                                                                                               ===




       GAAP net income attributable to



                the company's shareholders                                                49,345  33,970         26,051       10,530



       Operation income adjustment                                                           310                   310            -



       Other income, net                                                                (13,833)             (13,833)           -




       Non-GAAP net income attributable to                                                35,822  33,970         12,528       10,530


                sapiens' shareholders

                                                                                                                               ===


                                              
              
          ITURAN LOCATION AND CONTROL LTD.





       
                Summary of NON -GAAP Financial Information




                                                                                                                     US dollars                         US dollars

                                                                                                                          ---

                                                                                                                     Nine months ended                         Three months
                                                                                                                                            ended



       
                (in thousands                                                                       September 30,                         September 30,



       
                except per share data)                                                         2018       2017        2018        2017

    ---                                                                                                                              ---






       revenue                                                                                  174,170    174,058      53,376      60,611



       Gross profit                                                                              89,277     88,807      28,893      30,544



       Operation income                                                                          44,360     41,862      14,029      13,893



       Net income to shareholders                                                                35,822     33,970      12,528      10,530



       Adjusted EBITDA                                                                           54,016     51,844      16,996      17,408





       Basic and diluted earnings per share                                                        1.71       1.62        0.60        0.50









       
                Adjusted EBITDA Calculation




                                                                                                                     US dollars                         US dollars

                                                                                                                          ---

                                                                                                                     Nine months ended                         Three months
                                                                                                                                            ended



       
                (in thousands                                                                                   September 30,                         September 30,



       
                except per share data)                                                         2018       2017        2018        2017

    ---                                                                                                                              ---




       
                GAAP operation profit:                                                       44,050     41,862      13,719      13,893



       
                Non -GAAP adjustments

    ---




       Amortization of other intangible assets                                                      310                   310           -





       
                Non -GAAP operating profit                                                   44,360     41,862      14,029      13,893





       Depreciation                                                                               9,656      9,982       2,967       3,515

                                                                                                                                     ---


       
                Adjusted EBITDA                                                              54,016     51,844      16,996      17,408

                                                                                                                                     ===


                                                                
              
                ITURAN LOCATION AND CONTROL LTD.


                                                  
              
                CONDENSED 
                CONSOLIDATED STATEMENTS OF CASH FLOWS




                                                                                                                                                       US dollars                    US dollars

                                                                                                                                                                  ---

                                                                                                                                                       Nine month period                    Three month period


                                                                                                                                                       ended September 30                    ended September 30
                                                                                                                                                                ,                             ,



             
                (in thousands)                                                                                                  2018      2017           2018        2017

    ---                                                                                                                                                                       ---




             
                Cash flows from operating activities



             Net income for the period                                                                                                  51,469    36,052         26,856      11,197





             
                Adjustments to reconcile net income to net cash from
        operating activities:





             Depreciation and amortization                                                                                               9,966     9,982          3,277       3,515



             Losses (gain) in respect of trading marketable securities                                                                   (321)    (201)            20       (134)



             Increase in liability for employee rights upon retirement                                                                     290       827            363         339



             Share in gains of affiliated companies, net                                                                               (3,868)  (5,487)       (1,644)      (998)



             Deferred income taxes                                                                                                       1,411     (268)         (408)      (488)



             Capital gains (losses) on sale of property and equipment, net                                                                 107      (57)            38           4



             Capital gains on Acquisition of non-controlling interests                                                                (14,677)               (14,677)          -



             Decrease (increase) in accounts receivable                                                                                (2,131)  (8,908)         3,623     (3,391)



             Decrease in other current assets                                                                                          (5,265)  (8,194)       (1,286)    (2,383)



             Decrease (increase) in inventories                                                                                        (2,852)      545        (2,867)      2,009



             Increase in accounts payable                                                                                                  191     1,667          2,054         180



             Increase (decrease) in deferred revenues                                                                                  (2,065)    2,686          (138)        450



             Increase (decrease) in other current liabilities                                                                            2,465       535          (389)      1,603

                                                                                                                                                                              ---


             Net cash provided by operating activities                                                                                  34,720    29,179         14,822      11,903





             
                Cash flows from investment activities



             Increase in funds in respect of employee rights upon                                                                        (372)    (619)         (525)      (256)
        retirement, net of withdrawals



             Capital expenditures                                                                                                     (15,311) (10,796)       (5,329)    (4,047)



             Acquisitions of a subsidiary - Appendix A                                                                                (68,969)               (68,969)          -



             Investments in affiliated companies                                                                                       (1,250)     (97)



             Investments in other companies                                                                                            (1,097)  (1,061)         (200)



             Investment in marketable securities                                                                                      (22,618)  (6,607)         (243)    (3,418)



             Sale of marketable securities                                                                                              24,046     3,424                     1,305



             Deposit                                                                                                                     (175)      132             30          94



             Proceeds from loans to affiliated companies                                                                                 7,317     4,305          4,055       3,743



             Proceeds from sale of property and equipment                                                                                  341       305            125         124

                                                                                                                                                                              ---


             Net cash used in investment activities                                                                                   (78,088) (11,014)      (71,056)    (2,455)





             
                Cash flows from financing activities



             Short term credit from banking institutions, net                                                                             (34)      125            (1)        132



             Receipt of long-term credit from banking institutions                                                                      81,695                  81,695           -



             Dividend paid                                                                                                            (15,097) (17,613)       (5,030)    (5,032)



             Dividend paid to non-controlling interest                                                                                 (1,517)  (1,172)         (545)      (420)

                                                                                                                                                                              ---


             Net cash provided by (used in) financing activities                                                                        65,047  (18,660)        76,119     (5,320)





             Effect of exchange rate changes on cash and cash equivalents                                                              (2,842)    1,229          (248)        577

                                                                                                                                                                              ---




             Net increase in cash and cash equivalents                                                                                  18,837       734         19,637       4,705



             Balance of cash and cash equivalents at beginning of the period                                                            36,906    31,087         36,106      27,116

                                                                                                                                                                              ---


             Balance of cash and cash equivalents at end of the period                                                                  55,743    31,821         55,743      31,821

                                                                                                                                                                              ===




             
                Supplementary information on financing and investing activities not involving cash flows:



             In August 2018, the Company declared a dividend in an amount of US$ 5 million. The dividend was paid in October 2018.



       Appendix A -   Acquisitions of a subsidiary




                                                                     
       
       US dollars



                                                                   
       
       Nine and three


                                                                    
       
       months ended


                                                                                      September 30
            ,



       
                (in thousands)                                                                     2018

    ---




       Working capital (excluding cash and cash equivalents), net                                     (858)



       Related parties                                                                                2,855



       Intangible assets, net                                                                        29,610



       Property and equipment , net                                                                  13,766



       Liability for employee rights upon retirement                                                (1,337)



       Goodwill                                                                                      67,067



       Consideration paid by issues of treasury stock                                              (12,038)



       Deferred income taxes                                                                          4,700



       Other non-current assets                                                                       2,132



       Previous investments in acquired companies                                                  (24,734)



       Deferred revenues                                                                            (6,514)



       Non-controlling interests                                                                    (5,680)





       Net cash used to pay for the Acquisition                                                      68,969



       
                Company Contact    
     
                International Investor Relations

    ---


       Udi Mizrahi                     
     Ehud Helft


       
                udi_m@ituran.com   
     
                ituran@gkir.com


       
                VP Finance, Ituran 
     
                GK  Investor & Public Relations


       (Israel) +972 3 557 1348        
     (US) +1 646 201 9246

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SOURCE Ituran Location and Control Ltd.