Ituran Location and Control Ltd (ITRN) 2013 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Ituran First Quarter 2013 Results Conference Call.

All participants are at present, in-listen only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded May 13, 2013. You should have all received by now the Company's press release. If you have not received it, please call CCG investor relations at 1-646-201-9246.

I will now hand the call over to Mr. Ehud Helft of CCG Investor Relations.

Mr. Helft, would you like to begin?

Thank you, operator.

Good day to all of you and welcome to Ituran's conference call to discuss the first quarter 2013 results. I would like to thank Ituran management for hosting this conference call.

With me today on the call are Mr. Eyal Sheratzky, the co-CEO, Mr. Eli Kamer, the CFO; and Mr. Udi Mizrahi, the VP of Finance.

Eyal will begin with a summary of the quarter results followed by Eli with a summary of the financials. We will then open the call for the question-and-answer session.

Before we begin I would like to remind everyone the Safe Harbor in the press release also covers the contents of this conference call.

Now Eyal, would you like to begin please?

Thank you, Ehud.

I would like to welcome all of you and thank you for joining us today. We are very pleased with our results this quarter and it is a great start to 2013. Our subscriber growth was strong in the quarter adding a net 17,000 subscribers since the beginning of the year and bringing us to a total of 684,000 subscribers.

Very clear this quarter is our strong improvement in both gross and operating margins. With gross margins reaching 51%, our highest ever, mainly due to a strong marginal subscription fees which reached 63%, also the highest in our history.

At the same time, our ongoing operating expenses increased at a slower rate than our revenues, which means much of the increase in our revenue, combined with our higher gross margins and record gross profit was able to fall substantially to the operating line.

This is very much a clear demonstration of how our business going forward is primed to benefit from the clear operating leverage in our model. All these improvements are as a result of the fruits of our efforts and the changes we implemented last year, which as you can see have been a great success for us.

Product revenues also grew strongly to $9.6 million up 12% over the last year. We generated a strong operating cash flow in the quarter of $8.9 million and our net income was $6 million. As you know, we have a policy to share at least half of our net profit with our shareholders, and we distributed $3 million in dividends this quarter.

I'd like to provide you an update with regard to our performance in our two main regions, Brazil and Israel. In Brazil, our business is continuing to grow strongly, and Brazil remains the major contributor to our subscriber growth. We are also seeing strong interest from the private market and we are already reaping the fruit of our efforts of the last two years.

In Brazil, we are at the point where there is already strong market awareness of our brand. In line with our success, we see further opportunities to increase this brand awareness and we have decided to increase our marketing and sales efforts in this country.

Another positive development was that we were recently involved and successfully completed a test which was run by the regulation authority responsible for the implementation of the 245 Regulation.

Looking ahead in Brazil, we do believe that as more and more cars in this major market in corporate telemarkets technology, we will continue our strong growth and we look forward to further realizing the potential for growth in this region.

In Israel, our business remains strong and stable. We continue to grow our subscriber base in the quarter and business remains robust and cash generating.

In summary, our business performance remains on solid footing with stability and cash generation in Israel and in Brazil. Our ongoing growth engine, we are continuing to grow strongly. We have much to look forward to over the coming year, and we believe 2013 will be a strong year for us.

I will now hand the call over to Eli for the financial review. Eli?

Thank you, Eyal.

Revenues for the first quarter of 2013 the reached $41 million representing a 9% increase compared with the revenue of $37.7 million in the first quarter of 2012.

Revenue breakdown for the quarter was $31.4 million coming from subscription fees, a 7.5% year-on-year increase. Product revenues were $9.6 million which were a 12.5% increase over the same quarter last year.

The geographic breakdown of revenues in the first quarter was as follows. Israel 48%, Brazil 40%, Argentina 9%, United States 3%.

Gross margin in the quarter was 51.2% compared with gross margin of 48.7% in the first quarter of last year. Operating profit for the first quarter of 2013 was $9.3 million or 22.6% of revenues, an increase of 24% compared with an operating profit of $7.5 million or 19.7% of revenues in the first quarter of 2012.

EBITDA for the quarter was $12.4 million or 30.3% of revenues, an increase of 10% compared to EBITDA of $11.3 million or 29.8% of revenues in the first quarter of 2012.

Net profit was $6 million in the first quarter of 2013 or 14.7% of revenues compared with the net profit of $5.1 million or 13.5% of revenues in the first quarter of 2012.

Fully diluted EPS in the first quarter of 2013 was $0.29 compared with fully diluted EPS of $0.24 in the first quarter of 2012. Cash flow generated from operations during the quarter was $8.9 million.

As of March 31st, 2013, the Company had net cash including long-term deposits of $38.3 million or $1.83 per share. This is compared with $34.2 million or $1.63 per share as at December 31st, 2012.

For the first quarter, a dividend of $3 million was declared in line with the Company stated policy of issuing at least 50% of net profit in a dividend on a quarterly basis.

The dividend's record date in June is of June 26, 2013, and the dividend will be paid on July 11, 2013, net of taxes and levies up at the rate of 25%.

And with that, I'd like to hand you back over to Eyal.

Thank you, Eli.

Looking ahead, we remain very well-positioned as the leader in our main two markets in Brazil and Israel. Further, we see continued potential in both these markets and our business performance remains on solid footing.

With that, I will now be happy to take your questions.

Operator?

Thank you. Ladies and gentleman, at this time we will begin the question-and-answer session. (Operator Instructions)

There are no questions at this time.

Before I asked Mr. Sheratzky to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on Ituran website www.ituran.co.il.

Mr. Sheratzky, would you like to make your concluding statement?

Yes, on behalf of the management of Ituran, I would like to thank you for your continued interest and long-term support of our business. I do look forward to speaking with you and updating you again next quarter. Thanks and bye.

Thank you. This concludes the Ituran First Quarter 2013 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.