Ituran Location and Control Ltd. Presents Results for the Full Year & Fourth Quarter 2016
Monday, February 27, 2017 6:15:00 AM ET
Ituran Location and Control Ltd. (ITRN ), today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2016.
Highlights of 2016
-- Net subscribers adds amounted to 109 thousand, with 1.057 million subscribers at year-end;
-- Revenue of $199.6 million;
-- Gross and operating margins of 51.1% and 24.1%, respectively;
-- EBITDA of $59.6 million (29.9% of revenues);
-- Generated $41.5 million in operating cash flow;
-- Total dividends of $20 million issued to shareholders for 2016;
-- Ended 2016 with $31.5 million in net cash (including marketable securities);
Highlights of the Fourth Quarter of 2016
-- Net subscribers adds in the quarter amounting to 22 thousand;
-- Revenue of $50.4 million;
-- Gross margins of 52.4% and operating margins at 25.8%;
-- EBITDA of $16.0 million or 31.9% of revenues;
-- Generated $14.4 million in operating cash flow;
-- Dividend of $8.5 million declared for the quarter;
-- Board of Directors updates dividend policy going forward to increase dividend predictability and transparency, guaranteeing at minimum $5 million per quarter;
Fourth Quarter 2016 Results Revenues for the fourth quarter of 2016 were $50.4 million, representing an increase of 15.0% from revenues of $43.8 million in the fourth quarter of 2015. 74% of revenues were from location based service subscription fees and 26% were from product revenues.
Revenues from subscription fees increased by 16% over the same period last year. The growth was driven primarily due to the increase in the subscriber base, which expanded from 948,000 as of December 31, 2015, to 1,057,000 as of December 31, 2016.
Product revenues increased by 12% compared with the same period last year. The main contribution to growth was due to higher product sales in Israel.
Gross profit for the fourth quarter of 2016 was $26.4 million (52.4% of revenues), an increase of 18% compared with $22.3 million (50.9% of revenues) in the fourth quarter of 2015. The gross margin in the quarter on subscription fees improved to 65.5% compared with 62.9% in the same period last year. The gross margin in the quarter on products was 14.9% compared with 17.8% in the same period last year.
Operating profit for the fourth quarter of 2016 was a record $13.0 million (25.8% of revenues), an increase of 26% compared with an operating profit of $10.3 million (23.6% of revenues) in the fourth quarter of 2015.
During the quarter, share in affiliates, net was an income of $105 thousand versus a loss of $957 thousand in the same quarter of last year.
EBITDA for the quarter was a record $16.0 million (31.9% of revenues), an increase of 13.4% compared to an EBITDA of $14.2 million (32.3% of revenues) in the fourth quarter of 2015.
Net profit was a record $9.3 million in the fourth quarter of 2016 (18.4% of revenues) or fully diluted EPS of $0.44, an increase of 50% compared with a net profit of $6.2 million (14.1% of revenues) or fully diluted EPS of $0.29 in the fourth quarter of 2015.
Cash flow from operations for the quarter was a record $14.4 million.
Full Year Results Revenues for 2016 reached a record $199.6 million, an increase of 14% compared with revenues of $175.6 million in 2015. The subscriber base grew by 109,000 or 11%, net during 2016. The significant strengthening of the US Dollar versus the Brazilian Real and the Argentinean Peso, compared with the levels in 2015, reduced the overall revenue level in US Dollars. Excluding the exchange rate impact, the increase in revenues would have been 20.0% over 2015. 71% of revenues were from location based service subscription fees and 29% from product revenues.
Gross profit for 2016 was a record $102.0 million (51.1% of revenues), an increase of 13.5% compared with $89.9 million (51.2% of revenues) in 2015.
Operating profit for 2016 was a record $48.0 million (24.1% of revenues), an increase of 18.1% compared with an operating profit of $40.6 million (23.1% of revenues) in 2015. Excluding the impact of exchange rates, operating profit would have increased by 28.4% versus last year.
EBITDA for the year was a record $59.6 million (29.9% of revenues), an increase of 13.4% compared to an EBITDA of $52.6 million (30.0% of revenues) in 2015. Excluding the impact of exchange rates, EBITDA would have increased by 23.4% versus last year.
Share in the loss of affiliates, net was $449 thousand in 2016, compared with $2.4 million last year.
Net income in 2016 was a record $32.1 million (16.1% of revenues) or fully diluted earnings per share of $1.53. This is an increase of 29% compared with a net income in 2015 of $25.0 million (14.2% of revenues) or fully diluted earnings per share of $1.19. Excluding the impact of exchange rates, net income would have increased by 40.5% versus last year.
Cash flow from operations for 2016 was a record $41.5 million.
As of December 31, 2016, the Company had net cash, including marketable securities, of $31.5 million or $1.50 per share. This is compared with $28.9 million or $1.38 per share as at December 31, 2015.
Dividend For the fourth quarter of 2016, a dividend of $8.5 million was declared in line with the Companys stated current policy of issuing at least 50% of net profits in a dividend, on a quarterly basis.
For the full year of 2016, the dividend issued including that of the fourth quarter of 2016, was $20 million, representing 62.3% of the full year net income.
Dividend Policy Update
The Board of Directors approved a change to the dividend policy.
The new policy calls for a dividend of $5 million, at minimum, per quarter. This policy goes into force starting from the dividend for the first quarter of 2017.
Until the fourth quarter of 2016, the dividend policy provided for an annual dividend distribution in an amount not less than 50% of the Companys annual net income.
According to the Companys dividend policy and Israeli law, an annual dividend will only be declared and paid if, in the discretion of the Board of Directors, there is no reasonable foreseeable concern that the distribution will prevent the Company from being able to meet the terms of Companys existing and contingent liabilities, as and when due, all based on Companys needs as will be determined from time to time.
The distribution of dividends is further limited by Israeli law to the greater of retained earnings and earnings generated over the two most recent years. The Companys dividend policy may change from time to time at the discretion of the Board of Directors.
The payment of dividends may be subject to Israeli withholding taxes.
Management Comment Eyal Sheratzky, Co-CEO of Ituran said, "We are very pleased with our fourth quarter results ending the strongest year in our history with $200 million in revenue, despite the year-over-year negative effect of currency variations. Our results demonstrate strong improvements in gross and operating margins, which are built on the leverage inherent to our business model from our continually growing subscriber base. Our end-markets in Israel and Brazil continue to demonstrate strength through ongoing demand an interest in our products and solutions. I look forward to continued growth as we move through 2017 and beyond."
Continued Mr. Sheratzky, "Our dividends allow us to share the fruit of our success with our shareholders. Today, the Board of Directors updated our dividend policy in order to make our distributions more predictable and transparent going forward. We believe our new policy demonstrates our ongoing commitment to our shareholders which continue to support us over the long-term."
Conference Call Information
The Company will also be hosting a conference call later today, February 27, 2017 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: 1 888 604 5839 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 Iturans 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 provides location-based services, consisting predominantly of stolen vehicle recovery and tracking services, as well as wireless communications products used in connection with its location-based services and various other applications. Ituran offers mobile asset location, Stolen Vehicle Recovery, management & control services for vehicles, cargo and personal security. Iturans subscriber base has been growing significantly since the Companys inception to over 1 million subscribers distributed globally. Established in 1995, Ituran has over 1,500 employees worldwide, provides its location based services and has a market leading position in Israel, Brazil, Argentina and the United States.
ITURAN LOCATION AND CONTROL LTD. AND ITS SUBSIDIARIES
Consolidated Financial Statements
as of December 31, 2016
CONSOLIDATED BALANCE SHEETS
(in thousands) 2016 2015
Cash and cash equivalents 31,087 27,016
Investment in marketable securities 398 2,035
Accounts receivable (net of allowance for doubtful accounts) 33,865 27,436
Other current assets 35,522 22,437
Inventories 14,351 12,781
Long-term investments and debit balances
Investments in affiliated company 11,975 4,705
Investments in other company 85 78
Other non-current assets 1,515 1,166
Deferred income taxes 2,280 2,279
Funds in respect of employee rights upon retirement 7,868 7,174
Property and equipment, net 35,644 31,514
Intangible assets, net 23 26
Goodwill 3,406 3,356
Total assets 178,019 142,003
CONSOLIDATED BALANCE SHEETS
(in thousands) 2016 2015
Credit from banking institutions 3 155
Accounts payable 18,624 10,466
Deferred revenues 10,762 9,210
Other current liabilities 26,738 21,750
Liability for employee rights upon retirement 11,751 10,637
Provision for contingencies 435 622
Deferred revenues 1,034 973
Other non-current liabilities 501 369
Stockholders equity 102,229 83,698
Non - controlling interest 5,942 4,123
Total equity 108,171 87,821
Total liabilities and shareholders equity 178,019 142,003
CONSOLIDATED STATEMENTS OF INCOME
US dollars US dollars
(in thousands Year ended Three months period
December 31, ended December 31,
except per share data) 2016 2015 2016 2015
Location-based services 141,940 127,683 37,267 32,088
Wireless communications products 57,634 47,945 13,094 11,703
199,574 175,628 50,361 43,791
Cost of revenues:
Location-based services 48,916 46,823 12,850 11,897
Wireless communications products 48,627 38,924 11,139 9,616
97,543 85,747 23,989 21,513
Gross profit 102,031 89,881 26,372 22,278
Research and development expenses 2,895 2,401 813 702
Selling and marketing expenses 10,074 9,303 2,603 2,391
General and administrative expenses 40,228 37,801 10,115 9,126
Other expenses, net 836 (268) (137) (251)
Operating income 47,998 40,644 12,978 10,310
Financing income, net 2,056 1,189 810 415
Income before income taxes 50,054 41,833 13,788 10,725
Income tax expenses (14,877) (12,822) (3,932) (3,165)
Share in gains (losses) of affiliated company, net (449) (2,439) 105 (975)
Net income for the period 34,728 26,572 9,961 6,603
Less: Net income attributable to non-controlling interest (2,589) (1,601) (704) (421)
Net income attributable to the company 32,139 24,971 9,257 6,182
Basic and diluted earnings per Share of attributable to companys Stockholders 1.53 1.19 0.44 0.29
Basic and diluted weighted average Number of shares outstanding 20,968 20,968 20,968 20,968
CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars US dollars
Year ended Three months period
December 31, ended December 31 ,
(in thousands) 2016 2015 2016 2015
Cash flows from operating activities
Net income for the period 34,728 26,572 9,961 6,603
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, amortization and impairment of goodwill 11,635 11,962 3,065 3,840
Gain from sale of subsidiary, net - (951) - (951)
Loss (gains) in respect of trading marketable securities (115) (666) (20) (238)
Increase in liability for employee rights upon retirement 1,024 717 64 215
Share in losses (gains) of affiliated company, net 449 2,439 (105) 957
Deferred income taxes (1,114) (85) (278) (1,025)
Capital (gain) losses on sale of property and equipment, net (52) (31) (34) (21)
Decrease (increase) in accounts receivable (6,115) 117 1,355 201
Decrease (increase) in other current and non-current assets (10,473) (879) (1,393) (794)
Decrease (increase) in inventories (1,424) (658) (698) (909)
Increase (decrease) in accounts payable 7,814 (1,176) 2,978 (84)
Increase (decrease) in deferred revenues 1,496 (246) (161) 618
Increase (decrease) in other current and non-current liabilities 3,619 (1,201) (369) (739)
Net cash provided by operating activities 41,472 35,914 14,365 7,673
Cash flows from investment activities
Increase in funds in respect of employee rights upon
retirement, net of withdrawals (644) (804) (62) (229)
Capital expenditures (13,645) (18,724) (4,596) (3,592)
Investment in marketable securities (3,154) (11) (1,078) (11)
Investments in affiliated company (8,920) (5,966) (1,739) (1,327)
Repayment of loans from affiliated companies 1,512 - 1,512 -
Sale of subsidiary - (266) - (266)
Proceed from (invest in) long term deposit 16 (341) - (20)
Sale of marketable securities 4,633 - 1,018 -
Proceeds from sale of property and equipment 342 406 209 (277)
Net cash used in investment activities (19,860) (25,706) (4,736) (5,722)
Cash flows from financing activities
Short term credit from banking institutions, net (152) 160 - (287)
Dividend paid (17,088) (17,590) (3,774) (2,861)
Dividend payment to non-controlling interest (994) (1,229) (54) -
Net cash used in financing activities (18,234) (18,659) (3,828) (3,148)
Effect of exchange rate changes on cash and cash equivalents 693 (2,951) (346) (1,221)
Net Increase(decrease) in cash and cash equivalents 4,071 (11,402) 5,455 (2,418)
Balance of cash and cash equivalents at beginning of period 27,016 38,418 25,632 29,434
Balance of cash and cash equivalents at end of period 31,087 27,016 31,087 27,016
Supplementary information on financing and investing activities not involving cash flows:
During the years 2016 and 2015, the company purchased property and equipment in an amount of US$ 224 thousand and US$ 40 thousand, respectively, using a directly related liability.
In November 2016, the Company declared a dividend in an amount of US$ 4.1 million. The dividend was paid in January 2017.
Company Contact International Investor Relations
Udi Mizrahi Ehud Helft
VP Finance, Ituran GK Investor Relations
(Israel) +972 3 557 1348 (US) +1 646 201 9246
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SOURCE Ituran Location and Control Ltd