Ituran Location and Control Ltd. Presents Results for the Second Quarter of 2020
AZOUR, Israel, Aug. 25, 2020 /PRNewswire/ -- Ituran Location and Control Ltd. (NASDAQ: ITRN), today announced its consolidated financial results for the second quarter of 2020.
Highlights of the second quarter of 2020
-- The results were impacted by the global Covid-19 pandemic;
-- Revenue of $53.3 million;
-- Adjusted EBITDA was $13.9 million, a decline of 9% on a sequential
basis;
-- Generated $19.3 million in quarterly operating cash flow;
-- Total subscribers reached 1,751,000 at the end of the quarter
Management Comment
Eyal Sheratzky, Co-CEO of Ituran said, "We are happy with Ituran's second quarter results which were ahead of expectations, particularly given the unprecedented global macroeconomic situation with full shutdowns in the geographies that we operate in. We took early steps- reducing and matching expenses to the lower expected revenue level and placed focus on cash preservation. Our second quarter results demonstrate these efforts were successful. I would like to thank all Ituran's employees around the world for their exceptional execution despite tremendous difficulties. It is an honor to work with such a great team."
Continued Sheratzky, "The non-cash impairment in Road Track is an accounting effect mainly due to the sharp increase in the macro risk factors of the various countries in which Road Track operates and not related to Road Track's long-term performance or outlook specifically. The increase in country risk caused an increase in the weighted average cost of capital (WACC) calculation, which lowered the valuation of this business on our balance sheet."
"Excluding the non-cash impairment charges, Ituran remains profitable and continues to be cash generating. In fact, we had one of our strongest quarters of cash generation, with a positive operating cash flow of $19.3 million. Ituran's stability during this unprecedented global crisis, demonstrates the overall resilience of our business model," added Sheratzky.
Mr. Sheratzky concluded, "The global uncertainty caused by the ongoing Corona pandemic is expected to continue for the immediate future. We will remain proactive and continue to align our expenses to expected revenue levels. Looking ahead, we therefore expect similar levels of performance in our third quarter results. Longer-term, given the challenges that we have already overcome, I am confident that Ituran will emerge this period a stronger and more efficient company. I believe that once we can all put this pandemic behind us, we will have an improved platform for long-term sustainable and profitable growth."
Second quarter 2020 Results
Revenues for the second quarter of 2020 were $53.3 million, a decrease of 25% compared with revenues of $71.2 million in the second quarter of 2019.
The lower revenue level was due to the impact of the Covid-19 pandemic on new car sales, particularly in Brazil, Israel and also in the other geographies in which Ituran operates. Furthermore, the higher average level of the US dollar exchange rate versus the Brazilian real during the quarter compared with the same period last year, reduced the overall revenue level in US dollar terms and had a negative impact on the revenue growth rate. In local currency terms, second quarter revenue declined by 19% year-over-year.
82% of revenues were from location-based service subscription fees and 18% were from product revenues.
Revenues from subscription fees were $43.7 million, a decrease of 15% over second quarter 2019 revenues. In local currency terms, subscription fees declined by 7% year-over-year.
The subscriber base amounted to 1,751,000 as of June 30, 2020. This represents a decrease of 43,000 net, over that of the end of the prior quarter. During the quarter, there was a decline of 16,000 in the aftermarket subscriber base and a decline of 27,000 in the OEM subscriber base. Ituran expects the aftermarket subscriber base to resume growth on a net basis once the main impacts of the Covid-19 pandemic is over.
Product revenues were $9.6 million, a decrease of 51% compared with that of the second quarter of 2019. The decline was primarily due to limited installations of Ituran's products due to the Covid-19 pandemic shutdown implemented in many of the geographies in which Ituran operates, during most of the second quarter.
Gross profit for the quarter was $27.7 million (51.9% of revenues), a 17% decrease compared with gross profit of $33.5 million (47.0% of revenues) in the second quarter of 2019.
The gross margin in the quarter on subscription revenues was 58.5%, compared with 56.4% in the second quarter of 2019. The gross margin on products was 21.8%, compared with 22.3% in the second quarter of 2019.
During the second quarter, Ituran's operating expenses were $32.5 million. The operating expenses included a non-cash impairment charge of $14.2 million, related to the acquisition of Road Track. Excluding the non-cash impairment charge, operating expenses amounted to $18.3 million. This is compared with $19.9 million in operating expenses in the second quarter of 2019 and $20.9 million in the prior quarter.
Operating loss for the quarter was $4.9 million. Excluding the above-mentioned non-cash impairment charge in the operating expenses, the operating income was $9.3 million (17.5% of revenues). This is compared with $13.6 million (19.1% of revenues) in the second quarter of last year. This is a decline of 31% year-over-year. In local currency terms, excluding the impairment, the operating income decline would have been 25% year over year.
Adjusted EBITDA for the quarter was $13.9 million (26.1% of revenues), which excludes the above-mentioned impairment charge, a decrease of 28% compared with $19.4 million (27.2% of revenues) in the second quarter of last year. In local currency terms, the decline would have been 20% year over year.
It is noted that versus the prior quarter, the decline in adjusted EBITDA was 9%, in local currency terms the decline would have been only 2%, which was ahead of management's expectation of a 10-20% sequential decline in EBITDA versus the first quarter.
Net loss for the second quarter of 2020 was $6.3 million or loss per share of $0.30. Excluding the above-mentioned non-cash impairment charge and excluding a $0.7 million financial gain due to a reduced minority liability related to the impairment of Road Track, net income for the quarter was $7.2 million (13.4% of revenues) or fully diluted earnings per share of $0.34. Net income excluding the impairment charges represent a decrease of 7% compared with $7.7 million (10.8% of revenues) or fully diluted earnings per share of $0.36 in the second quarter of last year. In local currency terms, the gain would have been 1% year over year.
Cash flow from operations for the second quarter of 2020 was $19.3 million.
As of June 30, 2020, the Company had cash, including marketable securities, of $57.2 million and debt of $60.8 million, amounting to a net debt of $3.6 million. This is compared with cash, including marketable securities, of $54.3 million and debt of $67.9 million, amounting to a net debt of $13.6 million, as of December 31, 2019.
Conference Call Information
The Company will also be hosting a conference call later today, August 25, 2020 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: 1 888 668 9141
ISRAEL Dial-in Number: 03 918 0609
CANADA Dial-in Number: 1 866 485 2399
INTERNATIONAL Dial-in Number: +972 3 918 0609
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, as well as factors related to the global COVID-19 pandemic.
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.
For more information, please visit Ituran's website, at: www.ituran.com
ITURAN LOCATION AND CONTROL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
US dollars
June 30, December
31,
(in thousands) 2020 2019
---
(unaudited)
Current assets
Cash and cash equivalents 56,782 53,964
Investments in marketable securities 374 358
Accounts receivable (net of allowance for doubtful accounts) 37,766 45,090
Other current assets 36,863 49,201
Inventories 25,175 25,537
156,960 174,150
Non- Current investments and other assets
Investments in affiliated companies 839 1,666
Investments in other companies 4,740 3,260
Other non-current assets 2,840 3,365
Deferred income taxes 9,927 10,385
Funds in respect of employee rights upon retirement 11,811 11,476
30,157 30,152
Property and equipment, net 38,595 48,866
Operating lease right-of-use assets, net 11,190 12,626
Intangible assets, net 20,225 23,355
Goodwill 39,568 50,086
Total assets 296,695 339,235
ITURAN LOCATION AND CONTROL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS (cont.)
US dollars
June 30, December 31,
(in thousands) 2020 2019
---
(unaudited)
Current liabilities
Credit from banking institutions 20,176 18,110
Accounts payable 16,991 22,656
Deferred revenues 24,023 29,146
Other current liabilities 31,044 31,153
92,234 101,065
Non- Current liabilities
Long term loan 40,630 49,803
Liability for employee rights upon retirement 17,859 17,000
Deferred income taxes 2,682 2,867
Deferred revenues 9,769 9,763
Others non-current liabilities 216 241
Operating lease liabilities, non-current 7,932 10,839
Obligation to purchase non-controlling interests 10,900 11,743
89,988 102,256
Stockholders' equity 108,027 129,330
Non-controlling interests 6,446 6,584
Total equity 114,473 135,914
Total liabilities and equity 296,695 339,235
ITURAN LOCATION AND CONTROL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
US dollars US dollars
---
Six month period Three month period
ended June 30 ended June 30
, ,
(in thousands except per share data) 2020 2019 2020 2019
--- ---
Revenues:
Telematics services 92,707 104,825 43,731 51,666
Telematics products 28,978 40,021 9,580 19,576
---
121,685 144,846 53,311 71,242
---
Cost of revenues:
Telematics services 40,501 45,094 18,159 22,517
Telematics products 22,558 31,604 7,495 15,214
---
63,059 76,698 25,654 37,731
===
Gross profit 58,626 68,148 27,657 33,511
Research and development expenses 7,305 7,128 3,419 3,377
Selling and marketing expenses 5,899 6,303 2,840 3,373
General and administrative expenses 25,999 27,597 12,076 13,151
Impairment of goodwill 10,508 10,508 -
Impairment of intangible assets and other expenses, net 3,700 5 3,673 1
---
Operating income (loss) 5,215 27,115 (4,859) 13,609
Other income (expense), net 3 (48) 13 25
Financing income (expense), net 863 (1,854) 1,517 (839)
---
Income (loss) before income tax 6,081 25,213 (3,329) 12,795
Income tax expenses (4,817) (7,189) (2,891) (3,692)
Share in gains (losses) of affiliated companies, net (887) (1,971) 16 (1,103)
---
Net income (loss) for the period 377 16,053 (6,204) 8,000
Less: Net income attributable to non-controlling interest (343) (302) (129) (306)
---
Net income (loss) attributable to the Company 34 15,751 (6,333) 7,694
===
Basic and diluted earnings (losses) per share attributable 0.01 0.74 (0.30) 0.37
to Company's stockholders
===
Basic and diluted weighted average number of shares 20,813 21,146 20,813 21,041
outstanding (in thousands)
===
ITURAN LOCATION AND CONTROL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars US dollars
Six month period Three month period
ended June 30 ended June 30
, ,
(in thousands) 2020 2019 2020 2019
---
Cash flows from operating activities
Net income (loss) for the period 377 16,053 (6,204) 8,000
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 9,826 11,579 4,603 5,464
Interest and exchange rate differences on loans (542) 31 56 44
Losses (gain) in respect of trading marketable securities (16) 2 (106) (26)
Gain in respect of investments in other companies (1,524) (1,524) -
Increase in liability for employee rights upon retirement 895 1,179 61 905
Share in losses (gains) of affiliated companies, net 887 1,971 (16) 1,103
Deferred income taxes (369) (17) (1,167) (101)
Capital loss on sale of property and equipment, net 87 14 27 8
Decrease (increase) in accounts receivable 3,487 4,558 7,978 (371)
Decrease in other current assets 2,949 2,314 3,477 2,615
Decrease in inventories 229 2,005 607 713
Increase (decrease) in accounts payable (2,245) (347) (2,435) 1,249
Decrease in deferred revenues (3,710) (6,143) (2,307) (3,595)
Increase (decrease) in other current and non-current liabilities 6,178 (2,678) 2,798 100
Impairment of goodwill 10,508 10,508 -
Impairment of other intangible assets 3,661 3,661 -
Increase (decrease) in obligation for purchase non-controlling (698) 702 (749) 208
interests
---
Net cash provided by operating activities 29,980 31,223 19,268 16,316
---
Cash flows from investment activities
Increase in funds in respect of employee rights upon retirement, (363) (956) (255) (881)
net of withdrawals
Capital expenditures (5,579) (10,375) (2,128) (3,445)
Investments in (return from) affiliated and other companies (492) (184) 4 (171)
Sale of marketable securities, net - 1,454 1,070
Investments in long term deposit (35) (152) (13) (74)
Proceeds from sale of property and equipment 196 35 30 8
---
Net cash used in investment activities (6,273) (10,178) (2,362) (3,493)
---
Cash flows from financing activities
Short term credit from banking institutions, net 2,660 (611) 1,207
Repayment of long term loan (8,802) (4,517) -
Purchase of shares from minority shareholders (750) (750) -
Dividend paid (9,967) (9,748) (4,917) (4,839)
Dividend paid to non-controlling interest - (809) (271)
---
Net cash used in financing activities (16,859) (11,168) (10,184) (3,903)
---
Effect of exchange rate changes on cash and cash equivalents (4,030) 1,116 202 422
===
Net increase in cash and cash equivalents 2,818 10,993 6,924 9,342
Balance of cash and cash equivalents at beginning of the period 53,964 51,398 49,858 53,049
---
Balance of cash and cash equivalents at end of the period 56,782 62,391 56,782 62,391
===
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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SOURCE Ituran Location and Control Ltd
