Ladies and gentlemen, thank you for standing by. Welcome to the Ituran's Second Quarter of 2024 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. You should have all received by now the company's press release. If you have not received it, please contact Ituran's Investor Relations team at EK Global Investor Relations at 1-212-378-8040 or view it in the news section of the company's website at www.ituran.co.il. I would now hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin?

Thank you. Good day to all of you and welcome to Ituran's conference call to discuss the second quarter 2024 results. I would like to thank Ituran's management for hosting this conference call. With me today on the line today are Mr. Eyal Sheratzky, CEO; Mr. Udi Mizrahi, Deputy CEO and VP Finance; and Mr. Eli Kamer, CFO of Ituran. Eyal will begin with a summary of the quarter's results followed by Eli with a summary of the financials. We will then open the call for the question-and-answer session. I would like to remind everyone that the Safe Harbor statements in today's press release also cover the content of this conference call. And now, Eyal, would you like to begin, please.

Thank you, Kenny. I'd like to welcome all of you to our second quarter 2024 call. And I would like to thank you for joining us today. We are pleased with our second quarter results, especially the ongoing growth in revenue across the geographies in which we operate. We've continued improvement in profit. We are also pleased with the solid level of additional net subscribers we brought in the quarter, which came in at the high-end of our expectations. These achievements come despite the negative impact of the sharp devaluation against the U.S. dollar in the quarter, which lower our local currency denominated results presented in U.S. dollars. In fact, we measured in local currencies, we have seen accelerated growth in most of the geographies in which we operate. Our results reflect ongoing solid demand growth for our broad location-based products and telematic services, and especially increased traction from many of our new initiatives. Our subscriber base added 38,000 subscribers in the quarter, at the high-end of our expectations of between 35,000 and 40,000 net new subscribers per quarter. This is due both to our more diverse global footprint, as well as the new services and initiative we are continuing to bring to our end markets. Over the past few years, we've launched a number of new initiatives and have seeded growth engines driving accelerated subscriber growth. We are actively engaged in new verticals adjustment to our core business of providing telematic services. At the same time, we are taking the successful initiatives, which have been limited to one of our geographies and expanding them to our other geographies. You may remember that we signed a landmark agreement with Santander Bank a year ago, and we are actively looking to broaden our solution into new markets with existing and other…

Thank you, Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issued in the press release earlier today. Second quarter revenue were $84.9 million, a 4% increase, compared with revenue of $81.6 million last year. The strengthening of the U.S. dollar in the second quarter versus the various local currencies in which it runs operates in, impact the revenues when translated into U.S. dollar. In local currency, revenue grew by 6% year-over-year. Revenue from subscription fees in the quarter were $60.4 million, an increase of 2% year-over-year, and in local currencies an increase of 5%. Product revenues in the quarter were $24.5 million, an increase of 9% year-over-year, and in local currency an increase of 10%. The subscriber base expanded to 2,329,000 by the end of the second quarter, an increase of 38,000 from the end of the previous quarter. The geographic breakdown of revenues in the second quarter was as follows: Israel 51%; Brazil 24%; rest of the world 25%. EBITDA for the quarter was $23.1 million or 27.2% of revenue, an increase of 6%, compared with EBITDA of $21.8 million or 26.7% of revenue in the second quarter of last year. In local currency EBITDA grew 9% year-over-year. Net income for the second quarter was 13.1 million or diluted earnings per share of $0.66, an increase of 7%, compared with $12.2 million or diluted earnings per share of $0.61 from the second quarter of last year. In local currency, net income grew 10% year-over-year. Cash flow from operations for the second quarter of 2024 was $22.9 million. As of June 30, 2024, the company had cash including multiple securities of $63.3 million and a debt of $0.2 million amounting to a net cash position of $63.1 million. This is compared with the cash, including marketable securities of $53.6 million and a debt of $0.6 million, amounting to a net cash position of $53 million as of year-end 2023. The Board of Directors declared a dividend for the quarter of $8 million. The current dividend takes into account the company's continuing strong profitability, ongoing positive cash flow and strong balance sheet. And with that, I'd like to open the call for the question-and-answer session. Operator?

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] The first question is from Chris Reimer of Barclays. Please go ahead.

Thanks for taking my questions and congratulations on the solid quarter. I was wondering if you could talk about some of what contributed to the stronger product growth this quarter?

Mainly, if I remind you that we have a subsidiary, which is a focus -- a company called DRM, which is first of all our main supplier, but also has many third-party customers, which they are mainly focused on hardware and they had a strong quarter. Since they are selling almost only hardware, we have to remember they have some volatility among quarters, because it's really depend on different customers from around the world.

Got it. And on pricing I was wondering if -- in this macro environment you're seeing any pricing pressures or changes in the pricing environment in any of your geographies?

No. The answer is no. We have to, again to remember that it runs the main revenue source is the subscriber's fees. We have to understand that the average ARPU is about $10. So the sensitivity among the end user, as much as I can say, is quite low. Regard the hardware itself, if you look on our historical numbers, the margin that we are sell are very low in order to get more and more subscribers and in that case our prices are quite low by definition and we don't see pressure in this field as well.

Got it. And just one more housekeeping bit, and I apologize if I missed this on the first release, but you previously had been giving the aftermarket and OEM breakout for subscribers. So I didn't see it this quarter. Is that a change in reporting?

Actually I'm not sure that we did it constantly, but yes we will try to do it. I think because the differences, when the differences are very high, we are divided. I think that…

Oh, okay. Got it.

It was more balanced this quarter probably.

Okay, that's it from me. Thank you.

The next question is from Sergey Glinyanov of Freedom Capital Markets. Please go ahead.

Hello, everyone. Pretty good results. Yes, maybe -- would you provide your outlook for product sales growth, growth rate for the foreseeable future?

Again, I would like to remind that our product sales mainly done all by our subsidiary that I mentioned or by the Israeli company in the rest of the world, which is more than 50% of our revenues. We almost, I can say at least, and we sell it as a program with the monthly fees. And when I talk about our subsidiary and about selling hardware to our, let's say, to our distributors, it's something that always had some volatility between quarters, because it's mainly depend on their inventory pressure, inventory decision, et cetera. So I think that we are not expecting any specific growth. I think that the average number is an annual basis. You have to judge it on an annual basis.

Okay. Is it related to all the markets when or where you have presence?

No because what you see in our P&L is that it's divided to services and products. More than 50% of the geography of our revenues is the hardware is integrated to our service fees. We lease it. So what you see is you see it in one-hand in the CapEx, okay, in the CapEx in the cash flow report, and here it's part of the service revenues. So you don't see the sales in more than 50% of our total revenues. But you see it's only in Israel and our subsidiary, which is a supplier of hardware.

Got it, thanks.

The next question is from Eli Goldberg of Oppenheimer. Please go ahead.

Hi, I wanted to know if you guys could provide some more insights about the motorcycle product you guys said you just launched? And how should we think about it going forward?

I think that I mentioned it also in our call in the Q1, but I will, of course, we'll do it again. We just started a few months ago to launch our solution in, I would say, two main channels. One is insurance companies in Brazil. We realized that Brazilian market, and I would say even mentality is that motorcycle is very common and there is a high portion of the motorcycle market with an expensive and high-end motorcycles by Yamaha and by Honda and in that case, insurance companies didn't or wasn't happy to provide insurance to those kind of vehicles, because the risk of theft is very high. Thanks to our solution, which we could show that it's reduced the risk, insurance companies are more interest in selling insurance policies to motorcycle owners. And in that case, we are now in discussions or we already start to sell our solutions for motorcycles. So I wouldn't say that it's not the contribution currently is high, but like we started with the ICS for cars, in the past, it start to ramp up, and I believe that in a year or two it can be much more material in the revenue and profit size. The second segment is OEM, which I cannot yet report for a final contract or a deal, but this segment is something which we are putting also focus in discussions with motorcycles manufacturers in order to convince them and in order to show them what we did with a car connectivity as an OEM and what benefits their customer can get from a telematic solution in a motorcycle. So this is something else which we now have to offer. I want to add that in Israel, for example, in the last more than a year, and this also contributes to our growth in subscribers, we already have a solution. It's a different solution than I now offer in Brazil, something which is more simple solution, mainly and only for cars -- for motorcycle thief. We already have sales of 1,000s of motorcycles and in Israel by the way motorcycles do not insure their motorcycle. So instead of having nothing, because they don't insure the insurance here, is very, very expensive. So they decide to find a solution which reduce their risk as a motorcycle owner by installing Ituran and of course join our customer base.

Okay, thank you. And another follow-up, how would you say investors should look at the growth going ahead, talking about ‘25 even for Ituran? What should we look at?

I'm always considering our growth in the profit side, the EBIT and the EBITDA, because it's very important when we are kind of a SaaS company and we have a customer base of close to 2.4 million subscribers, even if we grow 100,000 or 180,000 a year, the influence on the revenue is not so dramatic, but since we have an operating leverage model, it's mean that we expecting to grow, first of all, our profit margin, and second our EBIT and EBITDA. And in that point, we already provide kind of guidance for 2024 and also it's not a guidance, but still it's something that we put as a goal. And if we put as a goal, I believe that we believe that we will achieve it is to get EBITDA in 2025 of a $100 million. Now I have to put a note here since our operation and our revenues comes from different currencies type, and most of them are currencies of emerging market, it's something that we don't have any way to predict or to control the -- a like happened by the way in Q2. So when I say $100 million, of course it's based on the currencies as is now. But in terms of growth of profits I think that it's quite, this is a very impressive goal.

Okay, thank you.

The next question is from Boris Schneider of More Investment House. Please go ahead.

Yes, hello. My question is on ARPU this quarter, which declined, compared to previous quarters that were obviously there was roughly 12 quarters of growth? So what else is going there besides the depreciation in the currency against the dollar? Is it because of more sales to OEM or other lower ARPU margin products?

I think that if we eliminate the FX, you would see that the ARPU for Q2 is even higher. So this is the only reason that you see a lower ARPU. In local currencies, we have higher ARPU. Although you're right, the OEM is lower. There's some application that we sell, like a big data solutions for car dealers, it's lower, but still the variety, it's still taking our ARPU up in local currencies.

Okay, thank you.

[Operator Instructions] There are no further questions at this time. Before I ask 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 a concluding statement?

On behalf of the management of Ituran, I would like to thank you, our shareholders, for your continued interest and long-term support of our business. In the coming months, we will be meeting with investors and presenting at two conferences, LD, Micro and Needham, and we hope to see some of you there. If you are interested in meeting or speaking with us, feel free to reach out to our investor relations team. And with that, we end our call. Thank you and have a good day, guys.

Thank you. This concludes the Ituran second quarter of 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.