Ladies and gentlemen, thank you for standing by. Welcome to the Ituran Location and Control Ltd. Fourth Quarter 2024 Results Conference Call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. 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, www.ituran.co.il. I will 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 Location and Control Ltd.'s conference call to discuss the fourth quarter 2024 results. I would like to thank Ituran's management for hosting this conference call. With me today on the call are Mr. Eyal Sheratzky, CEO, Mr. Udi Mizrahi, Deputy CEO and VP Finance, and Mr. Eli Kamer, CFO of Ituran Location and Control Ltd. Eyal will begin with a summary of the quarter's results followed by Udi 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 statement in the press release also covers the contents 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 fourth quarter and full year 2024 results call and thank you for joining us today. We are pleased with our fourth quarter results, presenting another quarter of year-over-year growth in revenue and profit across the geographies in which we operate. I want to add that while we still show growth in U.S. Dollar terms, the strengthening of the dollar versus many of the local currencies in which we operate, in particular, the Brazilian real and Mexican peso, had a negative impact on our financial results when denominated in US dollars. In local currencies, in each of our regions, we grew ahead of what our US dollar-denominated results suggest. In the fourth quarter, we were very happy to report a high level of 40,000 net subscriber adds in the quarter, which came in at the top end of our expectations of between 35,000 and 40,000 net per quarter. This is actually the third quarter in a row where subscriber adds were above or at the very top of our expected range. The hard work we have done over the past year in bringing new and attractive products and services has yielded these positive results. And looking ahead, we believe the subscriber adds will be even higher. In 2025, we believe the subscriber adds will accelerate to between 180,000 and 200,000 for the year, over 20% ahead of the 2024 rates. Our success reflects ongoing and growing demand for our location-based products and telematics services in all our regions, as well as traction from our new initiatives and services. Looking back, we had a very good 2024. And I just want to summarize some of the main successes which will contribute to the accelerated growth of our subscriber base in…

Please go ahead.

Thanks, 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. Fourth quarter revenues were $82.9 million, a 7% increase compared with revenue of $77.8 million in the fourth quarter of last year. The strengthening of the US dollar in the fourth quarter versus the various local currencies in which Ituran operates impacted the revenues when translated into US dollars. In local currency, revenues grew by 11% year over year. Revenue from subscription fees in the quarter was $61.5 million, an increase of 4% year over year and in local currency, an increase of 9%. Product revenues in the quarter were $21.3 million, an increase of 16% year over year and no difference in local currencies. The subscriber base extended to 2,409,000 by the end of the fourth quarter, an increase of 40,000 from the end of the previous quarter. Geographic breakdown of revenues in the fourth quarter was as follows: Israel 52%, Brazil 25%, Rest of world 23%. EBITDA for the quarter was $22.5 million or 27.2% of revenue, an increase of 3% compared with EBITDA of $21.9 million or 28.2% of revenue in the fourth quarter of last year. In local currency, EBITDA grew by 10% year over year. Net income for the fourth quarter was $13.8 million or diluted earnings per share of $0.70, an increase of 15% compared to $12 million or diluted earnings per share of $0.60 in the fourth quarter of last year. In local currency, net income grew by 22% year over year. Now taking a look at the full year 2024 results. Revenues for 2024 were a record $336 million, a 5% increase over the $320 million reported in 2023. Seventy-two percent of revenues were…

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please use the raise hand button located at the bottom of your screen. Remember to unmute yourselves before speaking. The first question is from Sergey Glinyanov. Please go ahead.

Yeah. Hello, everyone. In the press release, you mentioned product mix impacted on gross margin. Could you put some colors about that? Is the primary effect from sales for two-wheeled vehicles?

The gross margin is being affected by the mixture and the product mix that we have in what we sell. Basically, it depends on what we are selling in many regions, many different products. All of this is changing. There is volatility between the quarters and things like that. This is usually what is the main effect.

Okay. Got it. And I would like to talk a little bit about your interim perspectives. You outlined a pretty positive subscriber base growth expectation. What is the main point of growth you see over the year 2025, I mean?

I will divide it from the different geographies, and I will start with Israel. In Israel, we are gaining more and more market share on one end, while at the same time, the car theft rate in Israel is at a very high rate these days. It started during the end of 2023, continued in 2024, and now we see it's continuing. When this situation happens, it means that more people look for security systems. Insurance companies' demands are increasing, and as long as we provide state-of-the-art technology and services, and we keep our high rate of recovery, we fit the demand, and it allows us to grow in Israel. Also, the UBI, the usage-based insurance solution, is more and more increasing among insurance companies in Israel. And we see recently also a higher and growing demand, which we believe will contribute more materially during 2025. This is regarding the Israeli market, which, just to remind, represents about 50% of the total revenues that we publish. Regarding Brazil, the motorcycle solution is also gaining more and more traction. We are talking with motorcycle dealers as well as motorcycle manufacturers, as well as insurance companies that are usually afraid of providing insurance for motorcycles, but we succeeded to find the right solution to increase the security of motorcycles. As well as growing our finance segment. As you remember, we started with Santander, which we hope that we will continue to expand this contract as well as now offering it to more and more banks, which we feel and we think that during 2025, we will have it. We will sign a contract or we are aiming to attract and sign with more banks, more subscribers. Another thing which is relevant for 2025 in our expectations is the OEM, which, to remind everyone, up until now, we work with General Motors and with Nissan in some of our geographies. And we put a lot of focus in the OEM segment to attract more international brands, and we expect or we do our best that we will be able to sign contracts with more logos, and this also will contribute maybe more to the second half of 2025, but this is why we are positive and optimistic regarding the additional growth in the subscriber base during 2025.

Great. Great. And I think it's supposed to you still expect $100 million EBITDA in 2025, is that right?

Actually, all our global operations in the local currencies in which they operate meet, and even exceed our expectations in many cases, by the way. We set the guidance in US dollars as a target a year ago, and we said, just to remind you, that it depends on today's currency level. Today's was February 2024. However, the currencies have significantly changed since then, which we think makes the guidance not really meaningful given the global strong recent currency volatility, especially since the new President in the US has taken over. It makes it even harder to make a meaningful prediction. So having said that, if currencies move back to their levels of beyond that they were when we first issued the guidance in February 2024, it is possible that we will meet and even exceed this target. So I do want to stress that even with all the currency volatility, because we do have some natural hedges in our business, since in each of our regions, revenues and most of the expenses are in local currencies, so the currency exposure is only the difference. The profit we make in each region. So while there is an impact of a few million dollars amounting to a single-digit percentage of EBITDA either up or down, it doesn't change the overall success. We decided that providing the EBITDA target for the year depends on currencies, which we have no control over, is not as useful to investors, especially if the currencies continue to be so volatile. And by the way, instead, we continue to provide guidance on something we do have much higher visibility on, which is the subscriber rate, which shows the strength of the business. I hope that is clear.

Yeah. Thank you, Eyal. And I think the last one, are you going to increase subscription fees in 2025? And if yes, what rate should we expect in local currencies for Israel and Brazil?

We always think about pricing, and just to remind, we have a lot of segments, a lot of customers, which is very diversified. So we always do the best to maximize the profitability and the profit. Along the year, we will review it again. And if we find that the prices or the cost or inflation is hurting us, so we will do as much as we can. But there is no new decision for right now.

Okay. Got it. Thank you a lot. That's all from me.

The next question is from Chris Reimer of Barclays. Please go ahead.

Hi. Thanks for taking my questions. Can you comment, sorry, you already mentioned a little bit your strategy relating to the OEMs. Could you give us any indication of what's the contribution of the OEMs of subscribers versus retail?

As I said a few quarters ago, we have today, after we created synergy between the OEM and the geographies that we acquired business of OEM. In our traditional businesses, there are many, I would say, overlapping between the services. Some of the OEM we make renewals and we offer them more. So today, it's a little bit more, I would say, confused to provide how it's divided. But I still will say two things. One is that the OEM part is growing at lower margins. This is the nature of doing a large B2B commitment. For example, if we work with Nissan and they provide us hundreds of thousands per year, so, of course, the margins are low compared to the retail market when we sell it to the end users such as in Brazil or in Israel. So we are not providing a specific breakdown of how it's divided. Still, by the way, the major portion of our growth is coming from the retail market. I hope that the retail market will continue to grow as it did in 2024. But as I said, and I put some color on new contracts or new customer base from other logos, this will be additional. So still the main growth will come from the retail, but we will add also from the OEM.

Got it. Thanks. That's great. Just one more. You pointed out traction in the new products, but could you give us a sense of how much the new products represent in revenues versus total product traditional product?

We have so many solutions and units, so there is no really something that I will disclose here. I just want to say again, when I said about the potential growth this year, I mentioned mainly SVR in Israel, which is the traditional business. Of course, we do it better. We have always new technologies, and we have to be always advanced, but the segment is a traditional one. I talked about UBI, UBI, of course, it's new, but still already almost four years part of Ituran's sales in Israel. When I speak about motorcycles, it's quite new, but it's only in the beginning. So the contribution is still not very high. And when we talk about the financial customers like banks that provide loans for car owners, this is something that we do almost three years. We started with Santander. This is something that we expect to grow. It has its own contribution, but when I want to provide the ratio among the entire segment, each one is not very big, but we are not disclosing how each device contributes.

Got it. Alright. Thanks. That's it for me.

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

Yes. Hello? So a couple of questions for me. Mostly on ARPU. Just to understand, in this first quarter, there was a growth of 7% in your subscribers, but 9% in constant currency in revenues from subscriptions. So is there any particular product or increase in prices you can point out that contributed to this increase in ARPU in constant currency?

So there is no specific reason other than the currency exchange effect. Other than that, we are in local currencies, the prices are more or less the same.

Okay. And how should we think on the ARPU excluding the currencies effect for 2025 given your increase in the number of subscriber additions?

Since we are having a customer base of 2.4 million, and we're expecting to grow something that will be closer to 200,000, so probably the mixture of the growth will be a little bit lower ARPU because part of it is new solutions and more OEM contracts that represent lower ARPU, but still, when we talk about the base of 2.4, the influence on the absolute ARPU will be very, very little. So I would consider the current ARPU as representing the ARPU of the group.

Great. Congratulations on that. The same thing. There is no specific strategic or economic reason that the ARPU will go down. Some of the mixture can change, but the influence on the total 2.4 or 2.5 or 2.6 million will be very, very nonmaterial.

Thanks. Congratulations on strong execution. As well as the presentation on Zoom. That's a great effort. Thanks.

There are no further questions at this time. The recording of the call will be available within 24 hours on our website. This concludes the Ituran Location and Control Ltd. fourth quarter 2024 results conference call. Thank you for your participation. There is a further question from Boris Schneider. Boris, would you like to ask another question?

No. Sorry. Sorry. No more questions.

Okay. This concludes the Ituran Location and Control Ltd. fourth quarter 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.