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Ituran Location and Control Lt$33.16($.57)(1.69%)

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 Ituran Location and Control Ltd. Presents Results for the Full Year & Fourth Quarter 2017
   Tuesday, February 27, 2018 6:30:00 AM ET

Ituran Location and Control Ltd. (ITRN, TASE: ITRN ), today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2017.

Highlights of 2017

-- Net subscribers adds amounted to 103,000, with 1,160,000 subscribers at year-end;

-- Revenue of $238.5 million, up 20% year-over-year;

-- Gross margins of 50.0% and operating margins of 23.7%;

-- EBITDA of $70.1 million (29.4% of revenues);

-- Generated $43.9 million in operating cash flow;

-- Total dividends of $20 million declared to shareholders for 2017;

-- Ended 2017 with $40.4 million in net cash (including marketable securities);

Highlights of the Fourth Quarter of 2017

-- Net subscribers adds in the quarter amounted to 23,000;

-- Revenue of $61.3 million, up 22% year-over-year;

-- Gross margins of 49.8% and operating margins at 23.9%;

-- EBITDA of $18.2 million or 29.7% of revenues;

-- Generated $14.7 million in operating cash flow;

-- Dividend of $5 million declared for the quarter;

Fourth Quarter 2017 Results

Revenues for the fourth quarter of 2017 were $61.3 million, representing an increase of 22% from revenues of $50.4 million in the fourth quarter of 2016. 73% of revenues were from location based service subscription fees and 27% were from product revenues.

Revenues from subscription fees increased by 19% over the same period last year. The growth was driven primarily by the increase in the subscriber base, which expanded from 1,057,000 as of December 31, 2016, to 1,160,000 as of December 31, 2017.

Product revenues increased by 29% compared with the same period last year. While product revenues can be volatile between quarters, the main contribution to growth was the higher product sales in Israel.

Gross profit for the fourth quarter of 2017 was $30.6 million (49.8% of revenues), an increase of 16% compared with $26.4 million (52.4% of revenues) in the fourth quarter of 2016.

The gross margin in the quarter on subscription fees improved to 67.0% compared with 65.5% in the same period last year. The gross margin in the quarter on products was 4.5%

compared with 14.9% in the same period last year. The lower margin on products during the quarter was due to the mix of product sales in the quarter.

Operating profit for the fourth quarter of 2017 was $14.7 million (23.9% of revenues), an increase of 13% compared with an operating profit of $13.0 million (25.8% of revenues) in the fourth quarter of 2016.

Taxes in the quarter amounted to $5.3 million compared with taxes of $3.9 million in the fourth quarter of last year. The increase was due to tax assessments in Brazil and Israel of past year’s liabilities.

During the quarter, share in affiliates, net was an income of $3.0 million versus an income of $0.1 million in the same quarter of last year. The majority was due to a capital gain amounting to $2.3 million from an investment round at Bringg, one of Ituran’s early stage mobility technology companies, which was offset partially by Ituran’s share in Bringg’s results.

EBITDA for the quarter was a record $18.2 million (29.7% of revenues), an increase of 13% compared to an EBITDA of $16.0 million (31.9% of revenues) in the fourth quarter of 2016.

Net profit was $9.8 million in the fourth quarter of 2017 (16.0% of revenues) or fully diluted EPS of $0.47, an increase of 6% compared with a net profit of $9.3 million (18.4% of revenues) or fully diluted EPS of $0.44 in the fourth quarter of 2016.

Cash flow from operations for the quarter was $14.7 million.

Full Year Results

Revenues for 2017 reached a record $238.5 million, an increase of 20% compared with revenues of $199.6 million in 2016. The subscriber base grew by 103,000 or 10%, net during 2017. 71% of revenues were from location based service subscription fees and 29% from product revenues.

Revenues from subscription fees increased by 20% over those of last year, driven primarily by the increase in the subscriber base. Product revenues increased by 19% over those of last year.

Gross profit for 2017 was $119.4 million (50.0% of revenues), an increase of 17% compared with $102.0 million (51.1% of revenues) in 2016.

The gross margin in the year on subscription fees improved to 66.7% compared with 65.5% in the same period last year. The gross margin in the quarter on products was 9.0% compared with 15.6% in the same period last year. The generally lower margin on products in 2017 was due to the product mix sold in Israel.

Operating profit for 2017 was a record $56.5 million (23.7% of revenues), an increase of 18% compared with an operating profit of $48.0 million (24.1% of revenues) in 2016.

EBITDA for the year was a record $70.1 million (29.4% of revenues), an increase of 17% compared to an EBITDA of $59.6 million (29.9% of revenues) in 2016.

Share in affiliates, net was an income of $8.5 million in 2017, compared with a loss of $0.4 million last year. This included capital gains due to Ituran’s investment in Bringg in the amount of $4.6 million which was offset partially by Ituran’s share in Bringg’s results. The balance of the contribution to share in affiliates was primarily due to Ituran’s joint venture in Brazil and Argentina, Ituran Road Track.

Net income in 2017 was $43.8 million (18.4% of revenues) or fully diluted earnings per share of $2.09. This is an increase of 36% compared with a net income in 2016 of $32.1 million (16.1% of revenues) or fully diluted earnings per share of $1.53.

Cash flow from operations for 2017 was a record $43.9 million.

As of December 31, 2017, the Company had net cash, including marketable securities, of $40.4 million or $1.93 per share. This is compared with $31.5 million or $1.50 per share as at December 31, 2016.

Dividend

For the fourth quarter of 2017, a dividend of $5.0 million was declared in line with the Company’s stated current policy of issuing at least $5 million on a quarterly basis.

For the full year of 2017, the total dividend declared including that of the fourth quarter of 2017, was $20 million, representing 46% of the full year net income.

Management Comment

Eyal Sheratzky, Co-CEO of Ituran said, "We are pleased with our fourth quarter results ending the strongest year in our history with record revenue and profit. Our growth has been driven primarily by the ongoing growth in our subscriber base which looks to Ituran for its high quality connected car and stolen vehicle recovery services. Our IRT joint venture also continues to perform well and made an increasingly positive contribution to our profit during the year."

Continued Mr. Sheratzky, "Another highlight of 2017 was the investments into one of our early stage technology holdings, Bringg, which led us to record to a $4.6 million in capital gains in 2017. Earlier in the year, we founded the Tel-Aviv based DRIVE startup incubator and innovation center to promote the development of smart mobility technology, together with leading car companies, Mayer, Hertz, Honda and Volvo. We see transportation and mobility technology as the next frontier of major technological advancement in the coming decade, and we aim to position Ituran as central player in this sphere. We look forward to continued strong growth and increasing profitability in 2018 and beyond."

Conference Call Information

The Company will also be hosting a conference call later today, February 27, 2018 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 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.

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. 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 well over 1 million subscribers using its location based services with a market leading position in Israel and Brazil. Established in 1995, Ituran has over 1,700 employees worldwide, with offices in Israel, Brazil, Argentina, India, Canada and the United States.

For more information, please visit Ituran’s website, at: www.ituran.com

Company Contact          International Investor Relations
Udi Mizrahi              Ehud Helft
udi_m@ituran.com         ituran@gkir.com
VP Finance, Ituran       GK Investor & Public Relations
(Israel) +972 3 557 1348 (US) +1 646 201 9246
CONSOLIDATED BALANCE SHEETS
                                                             US dollars
                                                             December 31,
(in thousands)                                               2017      2016
Current assets
Cash and cash equivalents                                    36,906    31,087
Investment in marketable securities                          3,559     398
Accounts receivable (net of allowance for doubtful accounts) 41,009    33,865
Other current assets                                         47,932    35,522
Inventories                                                  14,244    14,351
                                                             143,650   115,223
Long-term investments and debit balances
Investments in affiliated companies                          14,839    11,975
Investments in other companies                               1,382     85
Other non-current assets                                     939       1,515
Deferred income taxes                                        1,860     2,280
Funds in respect of employee rights upon retirement          9,627     7,868
                                                             28,647    23,723
Property and equipment, net                                  39,047    35,644
Intangible assets, net                                       38        23
Goodwill                                                     3,777     3,406
Total assets                                                 215,159   178,019
CONSOLIDATED BALANCE SHEETS
                                              US dollars
                                              December 31,
(in thousands)                                2017      2016
Current liabilities
Credit from banking institutions              48        3
Accounts payable                              23,264    18,624
Deferred revenues                             12,796    10,762
Other current liabilities                     29,644    26,738
                                              65,752    56,127
Long-term liabilities
Liability for employee rights upon retirement 14,062    11,751
Provision for contingencies                   400       435
Deferred revenues                             1,241     1,034
Other non-current liabilities                 475       501
                                              16,178    13,721
Equity:
Stockholders’ equity                          125,790   102,229
Non - controlling interest                    7,439     5,942
Total equity                                  133,229   108,171
Total liabilities and shareholders’ equity    215,159   178,019
CONSOLIDATED STATEMENTS OF INCOME
                                        US dollars        US dollars
                                        Year ended        Three months period
(in thousands                           December 31,      ended December 31,
except per share data)                  2017     2016     2017      2016
Revenues:
Location-based services                 169,752  141,940  44,468    37,267
Wireless communications products        68,773   57,634   16,822    13,094
                                        238,525  199,574  61,290    50,361
Cost of revenues:
Location-based services                 56,572   48,916   14,683    12,850
Wireless communications products        62,569   48,627   16,030    11,139
                                        119,141  97,543   30,713    23,989
Gross profit                            119,384  102,031  30,577    26,372
Research and development expenses       3,160    2,895    716       813
Selling and marketing expenses          12,246   10,074   2,695     2,603
General and administrative expenses     47,590   40,228   12,494    10,115
Other expenses (income), net            (147)    836      (1)       (137)
Operating income                        56,535   47,998   14,673    12,978
Financing income (expenses), net        (989)    2,056    (2,080)   810
Income before income taxes              55,546   50,054   12,593    13,788
Income tax expenses                     (17,705) (14,877) (5,317)   (3,932)
Share in gains (losses) of affiliated   8,520    (449)    3,033     105
company, net
Net income for the period               46,361   34,728   10,309    9,961
Less: Net income attributable to non-   (2,567)  (2,589)  (485)     (704)
controlling interest
Net income attributable to the  company 43,794   32,139   9,824     9,257
Basic and diluted earnings per share    2.09     1.53     0.47      0.44
attributable to Company’s stockholders
Basic and diluted weighted average      20,968   20,968   20,968    20,968
Number of shares outstanding (in
thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                 US dollars        US dollars
                                                                 Year ended        Three months period
                                                                 December 31,      ended December 31 ,
(in thousands)                                                   2017     2016     2017      2016
Cash flows from operating activities
Net income for the period                                        46,361   34,728   10,309    9,961
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation, amortization and impairment of goodwill            13,519   11,635   3,537     3,065
Loss (gains) in respect of trading marketable securities         (397)    (115)    (196)     (20)
Increase in liability for employee rights upon retirement        1,025    890      198       (70)
Share in losses (gains) of affiliated company, net               (8,520)  449      (3,033)   (105)
Deferred income taxes                                            (516)    (1,114)  (248)     (278)
Capital (gain) losses  on sale of property and equipment, net    (1)      (52)     56        (34)
Decrease (increase) in accounts receivable                       (4,769)  (4,552)  4,139     2,918
increase in other current and non-current assets                 (11,517) (5,033)  (3,323)   4,047
Decrease (increase) in inventories                               1,632    (1,424)  1,087     (698)
Increase in accounts payable                                     3,751    5,884    2,084     1,048
Increase (decrease) in deferred revenues                         2,238    (1,122)  (448)     (2,779)
Increase (decrease) in other current and non-current liabilities 1,101    1,298    566       (2,690)
Net cash provided by operating activities                        43,907   41,472   14,728    14,365
Cash flows from investment activities
Increase in funds in respect of employee rights upon
retirement, net of withdrawals                                   (844)    (644)    (225)     (62)
Capital expenditures                                             (16,159) (13,645) (5,363)   (4,596)
Investment in marketable securities                              (8,623)  (3,154)  (2,016)   (1,078)
Investments in affiliated companies                              (900)    (8,920)  (803)     (1,739)
Investments in other companies                                   (1,274)  -        (213)     -
Repayment of  loans from affiliated companies                    6,982    1,512    2,677     1,512
Proceed from long term deposit                                   450      16       318       -
Sale of marketable securities                                    5,368    4,633    1,944     1,018
Proceeds from sale of property and equipment                     315      342      10        209
Net cash used in investment activities                           (14,685) (19,860) (3,671)   (4,736)
Cash flows from financing activities
Short term credit from banking institutions, net                 23       (152)    (102)     -
Dividend paid                                                    (22,645) (17,088) (5,032)   (3,774)
Dividend paid to non-controlling interest                        (1,644)  (994)    (472)     (54)
Net cash provided by (used in)  in financing activities          (24,266) (18,234) (5,606)   (3,828)
Effect of exchange rate changes on cash and cash equivalents     863      693      (366)     (346)
Net Increase (decrease) in cash and cash equivalents             5,819    4,071    5,085     5,455
Balance of cash and cash equivalents at beginning of period      31,087   27,016   31,821    25,632
Balance of cash and cash equivalents at end of period            36,906   31,087   36,906    31,087

Supplementary information on financing and investing activities not involving cash flows:

During the years 2017 and 2016, the company purchased property and equipment in an amount of US$ 373 thousand and US$ 224 thousand, respectively, using a directly related liability.

In November 2017, the Company declared a dividend in an amount of US$ 5 million. The dividend was paid in January 2018.

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SOURCE Ituran Location and Control Ltd

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