Ituran Location and Control Ltd. Presents Results for The Third Quarter of 2019
AZOUR, Israel, Nov. 25, 2019 /PRNewswire/ -- Ituran Location and Control Ltd. (NASDAQ: ITRN), today announced its consolidated financial results for the third quarter ended September 30, 2019.
Highlights of the third quarter of 2019
-- Revenue of $69.0 million, up 29% year-over-year;
-- Adjusted EBITDA of $18.7 million (26.8% of revenues), up 10%
year-over-year
-- Generated $11.5 million in quarterly operating cash flow;
-- Dividend of $5 million declared for the quarter;
-- Ituran added 20,000, net after-market subscribers and no change to OEM
subscribers;
Management Comment
Eyal Sheratzky, Co-CEO of Ituran said, "While Ituran's aftermarket business in Brazil has been recovering and returning to its growth trend, the OEM segment remains weak as a result of the difficult environment that the car manufacturers in the region are facing. 2019 has been a transitional year for us and we are working on realizing the synergies from the recently acquired OEM business across all our geographies. We are focusing on cross selling our services into new geographies as well as combining the operating footprint which will result in cost saving that will offset any decline in OEM revenues."
Continued Mr. Sheratzky, "In the aftermarket business, the subscriber quarterly growth rate has returned to its long-term target level of around 20,000 subscriber-adds per quarter, which we are very pleased with. We expect that the resumption of aftermarket subscriber growth will translate into improved operating results in the coming year."
The results include the consolidated non-GAAP financial results of Ituran, which exclude revenues and costs related to the purchase price allocation. For further details with regard to the reconciliation between the non-GAAP and GAAP results please see the financial tables with the press release.
Third quarter 2019 Results
Revenues for the third quarter of 2019 were $69.0 million. Non-GAAP revenues for the quarter were $70.0 million representing an increase of 31% compared with revenues of $53.4 million in the third quarter of 2018.
The higher average level of the US dollar exchange rate versus the Brazilian real and the Argentinean peso, during the quarter versus the same period last year reduced the overall revenue level in US dollar terms and had a negative impact on the reported year-over-year revenue growth rate. In local currency terms, third quarter non-GAAP revenue grew 33% year over year.
73% of revenues were from location-based service subscription fees and 27% were from product revenues.
Non-GAAP revenues from subscription fees were $51.2 million, representing an increase of 31% over the same period last year. In local currency terms, subscription fees grew 32% over the same period last year. The subscriber base amounted to 1,781,000 as of September 30, 2019. Ituran added 20,000, net after-market subscribers during the quarter and there was no change to the number of OEM subscribers.
Non-GAAP product revenues were $18.7 million, representing an increase of 31% compared with the same period last year.
Gross profit for the quarter was $31.9 million (46.2% of revenues). Non-GAAP gross profit for the quarter was $32.9 million (47.0% of revenues). This represents an increase of 14% compared with gross profit of $28.9 million (54.1% of revenues) in the third quarter of 2018.
The non-GAAP gross margin in the quarter on subscription fees was 56.3% compared with 61.8% in the same period last year. The lower margin was due to the lower average gross margin on the recently acquired OEM subscribers as well as a decrease in the gross margin from Brazil and Argentina.
The non-GAAP gross margin in the quarter on products was 21.5% compared with 33.0% in the same period last year. The variance in the gross margin between quarters was due to the product mix sold.
Operating profit for the quarter was $11.9 million (17.2% of revenues). Non-GAAP operating profit for the quarter was $13.7 million (19.6% of revenues). This is compared with an operating profit of $14.0 million (26.3% of revenues) in the third quarter of 2018. In local currency terms, the non-GAAP operating profit was unchanged compared with that of last year.
Adjusted EBITDA for the quarter was $18.7 million (26.8% of revenues), an increase of 10% compared to $17.0 million (31.8% of revenues) in the third quarter of 2018. In local currency terms, the increase in adjusted EBITDA was 17% year-over-year.
Net income in the third quarter of 2019 was $6.4 million (9.3% of revenues) or fully diluted earnings per share of $0.30. Net income on a non-GAAP basis in the third quarter of 2019 was $7.8 million (11.0% of revenues) or fully diluted earnings per share of $0.37.
Net income in the third quarter of 2018 was $26.0 million (48.8% of revenues) or fully diluted earnings per share of $1.24 in the third quarter of 2018. This included a one-time other income of $13.8 million, 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. The net income on a non-GAAP basis in the third quarter of 2018 was $12.5 million (23.4% of revenues) or fully diluted earnings per share of $0.60.
Cash flow from operations for the quarter was $11.5 million.
As of September 30, 2019, the Company had cash, including marketable securities, of $56.5 million and debt of $74.5 million, amounting to a net debt of $18.0 million or $0.86 per share. This is compared with cash, including marketable securities, of $53.3 million and debt of $73.2 million, amounting to a net debt of $19.9 million, or $0.93 per share, as of December 31, 2018.
Dividend
For the third quarter of 2019, 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.
Share Buy Back
On May 21, 2019, the board of directors approved a share buyback program, which Ituran has commenced. Under the program, the Company is able to repurchase Ituran shares in an amount up to $25 million by December 31, 2020. As of September 30, 2019, Ituran repurchased a total of 121,000 shares amounting to approximately $3.5 million.
Conference Call Information
The Company will also be hosting a conference call later today, November 25, 2019 at 9am 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: 1 888 407 2553
ISRAEL Dial-in Number: 03 918 0610
CANADA Dial-in Number: 1 866 485 2399
INTERNATIONAL Dial-in Number: +972 3 918 0610
at:
9:00am Eastern Time, 6:00am Pacific Time, 4:00pm 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 approaching 2 million subscribers using its location based services with a market leading position in Israel and Latin America. Established in 1995, Ituran has approximately 3,000 employees worldwide, with offices in Israel, Brazil, Argentina, Mexico, Ecuador, Columbia, India, Canada and the United States.
CONDENSED CONSOLIDATED BALANCE SHEETS
US dollars
September 30, December 31,
(in thousands) 2019 2018
--- ---
Current assets
Cash and cash equivalents 56,254 51,398
Investments in marketable
securities 233 1,897
Accounts receivable (net of
allowance for doubtful
accounts) 48,667 54,261
Other current assets 48,200 52,983
Inventories 25,642 28,367
_______
_______
178,996 188,906
Long-term investments and other assets
Investments in affiliated
companies 2,086 4,872
Investments in other company 3,126 2,772
Other non-current assets 3,325 3,222
Deferred income taxes 10,410 12,127
Funds in respect of employee
rights upon retirement 11,316 9,497
_______
_______
30,263 32,490
Property and equipment, net 48,438 50,460
Operating lease right-
of-use assets, net 6,331
Intangible assets, net 37,822 39,040
Goodwill 62,343 62,896
===
Total assets 364,193 373,792
===
CONDENSED CONSOLIDATED BALANCE SHEETS (cont.)
US dollars
September 30, December 31,
(in thousands) 2019 2018
---
Current liabilities
Credit from banking
institutions 20,599 10,559
Accounts payable 19,733 23,987
Deferred revenues 30,183 37,671
Operating lease
liabilities, current 2,313 -
Other current liabilities 29,883 32,475
_______
_______
102,711 104,692
Long-term liabilities
Long term loan 53,924 62,622
Liability for employee
rights upon retirement 17,084 14,801
Provision for contingencies 158 201
Deferred income taxes 4,875 6,458
Deferred revenues 8,816 8,221
Operating lease
liabilities, non-current 4,018 -
Obligation to purchase non-
controlling interests 15,916 16,272
Others non-current 129 325
________
________
104,920 108,900
Stockholders' equity 150,032 153,693
Non-controlling interests 6,530 6,507
Total equity 156,562 160,200
_______
_______
Total liabilities and
equity 364,193 373,792
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) 2019 2018 2019 2018
---
Revenues:
Location-based services 155,086 126,315 50,261 39,126
Wireless communications
products 58,755 47,855 18,734 14,250
_______
_______
_______
_______
213,841 174,170 68,995 53,376
Cost of revenues:
Location-based services 67,497 45,994 22,403 14,938
Wireless communications
products 46,318 38,899 14,714 9,545
_______
_______
_______
_______
113,815 84,893 37,117 24,483
Gross profit 100,026 89,277 31,878 28,893
Research and development
expenses 10,335 3,727 3,207 1,628
Selling and marketing
expenses 9,593 8,423 3,290 2,941
General and administrative
expenses 41,155 33,385 13,558 10,795
Other income, net (72) (308) (77) (190)
_______
_______
_______
_______
Operating income 39,015 44,050 11,900 13,719
Other income (expense), net (37) 13,833 11 13,833
Financing income (expense),
net (2701) 2,134 (847) 1,566
_______
_______
_______
_______
Income before income tax 36,277 60,017 11,064 29,118
Income tax expenses (10,869) (12,416) (3,680) (3,906)
Share in gains (losses) of
affiliated companies ,net (2,781) 3,868 (810) 1,644
_______
_______
_______
_______
Net income for the period 22,627 51,469 6,574 26,856
Less: Net income
attributable to non-
controlling interest (477) (2,124) (175) (805)
_______
_______
_______
_______
Net income attributable to
the Company 22,150 49,345 6,399 26,051
Basic and diluted earnings
per share attributable to
Company's stockholders 1.05 2.35 0.3 1.24
Basic and diluted weighted
average number of shares
outstanding (in thousands) 21,112 20,982 21,041 21,010
RECONCILIATION OF NON-GAAP RESULTS
US dollars US dollars
(in thousands Nine months Three months
ended ended
September 30, September 30,
except per share data) 2019 2018 2019 2018
---
GAAP Revenues: 213,841 174,170 68,995 53,376
Valuation adjustment
on acquired deferred
revenue 2,989 985
________
________
________
________
Non -GAAP revenue 216,830 174,170 69,980 53,376
100,026 89,277 31,878 28,893
GAAP gross profit
Valuation adjustment
on acquired deferred
revenue 3,209 985
________
________
________
________
Non -GAAP gross profit 103,235 89,277 32,863 28,893
39,015 44,050 11,900 13,719
GAAP operating income
Operation profit
adjustments
Amortization of other
intangible assets 6,354 310 1,803 310
________
________
________
________
Non-GAAP operating
income 45,369 44,360 13,703 14,029
Depreciation and
amortization 17,210 9,656 5,030 2,970
________
________
________
________
Adjusted EBITDA 60,179 54,016 18,733 16,999
GAAP net income
attributable to
the company's
shareholders 22,150 49,345 6,399 26,051
Operation income
adjustment 6,354 310 1,803 310
Other adjustments, net (1,776) (13,833) (452) (13,833)
________
________
________
________
Non-GAAP net income
attributable to 26,728 35,822 7,750 12,528
Iturans' shareholders
Summary of NON -GAAP Financial Information
US dollars US dollars
---
(in thousands Nine months ended Three months
ended
September 30, September 30,
except per share data) 2019 2018 2019 2018
--- ---
revenue 216,830 174,170 69,980 53,376
Gross profit 103,235 89,277 32,863 28,893
Operation income 45,369 44,360 13,703 14,029
Net income to
shareholders 26,728 35,822 7,750 12,528
Adjusted EBITDA 60,179 54,016 18,733 16,999
Basic and diluted
earnings per share 1.27 1.71 0.37 0.6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars US dollars
Nine Month period Three month period
ended September 30, ended September 30,
(in thousands) 2019 2018 2019 2018
--- ---
Cash flows from operating activities
Net income for the period 22,627 51,469 6,574 26,856
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 17,210 9,966 5,631 3,277
Interest and exchange rate
differences on long term
credit 23 (8) -
Operating lease right-of-use
assets 2,255 219 -
Operating lease liabilities (2,255) (219) -
Losses (gain) in respect of
trading marketable securities 210 (321) 208 20
Increase in liability for
employee rights upon
retirement 1,294 290 115 363
Share in losses (gains) of
affiliated companies, net 2,781 (3,868) 810 (1,644)
Deferred income taxes 252 1,411 269 (408)
Capital gains (losses) on sale
of property and equipment,
net 47 107 33 38
Capital gains on Acquisition
of non-controlling interests (14,677) (14,677)
Decrease (increase) in
accounts receivable 6,526 (2,131) 1,968 3,623
Decrease in other current
assets 1,115 (5,265) (1,199) (1,286)
Decrease (increase) in
inventories 3,618 (2,852) 1,613 (2,867)
Increase (decrease) in
accounts payable (3,559) 191 (3,212) 2,054
Increase (decrease) in
deferred revenues (7,090) (2,065) (947) (138)
Increase (decrease) in other
current liabilities (3,341) 2,465 (663) (389)
Increase in obligation for
purchase non-controlling
interests 967 265 -
________
________
________
________
Net cash provided by operating
activities 42,680 34,720 11,457 14,822
Cash flows from investment activities
Increase in funds in respect
of employee rights upon
retirement, net of
withdrawals (1,117) (372) (161) (525)
Capital expenditures (13,658) (15,311) (3,283) (5,329)
Acquisitions of a subsidiary -
Appendix A (68,969) (68,969)
Investments in affiliated
companies (55) (1,250) -
Investments in other companies (129) (1,097) (200)
Sale of (Invest in) marketable
securities, net 1,454 1,428 (243)
Deposit (83) (175) 69 30
Proceeds from loans to
affiliated companies 7,317 4,055
Proceeds from sale of property
and equipment 203 341 168 125
________
________
________
________
Net cash used in investment
activities (13,385) (78,088) (3,207) (71,056)
Cash flows from financing activities
Short term credit from banking
institutions, net 387 (34) 998 (1)
Receipt (repayment) of long-
term credit from banking
institutions (4,436) 81,695 (4,436) 81,695
Dividend paid (14,798) (15,097) (5,050) (5,030)
Dividend paid to non-
controlling interest (1,557) (1,517) (748) (545)
Acquisition of company shares
purchased by a wholly owned
subsidiary (3,501) (3,501) -
________
________
________
________
Net cash provided by (used in)
financing activities (23,905) 65,047 (12,737) 76,119
Effect of exchange rate
changes on cash and cash
equivalents (534) (2,842) (1,650) (248)
===
Net increase (decrease) in
cash and cash equivalents 4,856 18,837 (6,137) 19,637
Balance of cash and cash
equivalents at beginning of
the period 51,398 36,906 62,391 36,106
________
________
_______
_______
Balance of cash and cash
equivalents at end of the
period 56,254 55,743 56,254 55,743
===
For more information, please visit Ituran's website, at: www.ituran.com
Company Contact International Investor Relations
Udi Mizrahi
Ehud Helft
udi_m@ituran.com
ituran@gkir.com
Deputy CEO & VP
Finance, Ituran GK Investor & Public Relations
(Israel) +972 3
557 1348
(US) +1 646 201 9246
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