Ituran Location and Control Ltd. 2026 Q2 Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Kenny Green, and I'm part of the investor relations team at Ituran. I'd like to welcome all of you to Ituran's Results Zoom webinar, and I would like to thank Ituran's management for hosting this conference call. All participants other than the presenters are currently muted. Following the formal presentation, I'll provide some instructions for participating in the live question and answer session. I would like to remind everyone that this conference call is being recorded, and the recording will be available from the link in the earnings press release and on Ituran's website from tomorrow. 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.

Eyal will begin with a summary of the quarter's results, followed by Eli with a summary of the financials. We'll then open the call for the question and answer session. You should have all received by now the company's press release. If not, please view it on the company's website. I would like to remind everyone that the safe harbor statement in today's press release also covers the contents of this conference call and the associated presentation. Now, Eyal, would you like to begin, please?

Thank you, Kenny. I'd like to welcome all of you to our second quarter 2026 results call, and thank you for joining us today. We are very pleased to report an excellent second quarter for Ituran, with record revenue and profitability, with strong growth across every line of our income statement. For the quarter, overall revenue grew 21% year-over-year to a record of $104.8 million. Our recurring subscription revenue grew by 25% to $80 million, making up 76% of our total revenues. Beyond that, we grew all of our profit metrics, operating income, EBITDA, and net income, all ahead of revenue, allowing the operating leverage built into our business model to shine through. During the quarter, we added 41,000 net new subscribers, bringing our total subscriber base to 2,711,000 at the end of June 2026.

This is in line with our expected run rate and shows continued healthy organic growth across our core markets. Our long-term success is growing our global subscriber base constantly. It's due to our ongoing efforts in offering new products and value-added services to our customer base, while at the same time, tapping into new market segments and new regions. Our OEM relationships remain a key growth driver. During the second quarter, we continued to ramp our existing OEM program across South America, including Connect Fiat, our new program with Stellantis, launched earlier this year, exclusive to the Fiat Strada. We remain in active discussions with additional OEMs that you do not see on this list, while at the same time looking to expand our existing relationships with Nissan, Renault, General Motors, Yamaha, BMW, and others.

Growing our OEM roster has been, and continues to be, the main vector for Ituran long-term growth. Beyond our core subscriber-based telematics business, we continue to advance the growth initiatives I have discussed on previous calls, which we believe can become meaningful long-term contributors to Ituran. These include IturanMOB, our car rental solution, which we recently launched in the U.S. market; Credit Carbon, our platform that lets drivers of electric and zero-emission vehicles generate and sell verified carbon savings, connecting them with the companies that need to offset emissions; and leveraging our big data capabilities, all of which significantly grow our addressable markets. On the big data side, following the initial agreement we announced last quarter, we are continuing in advanced discussions with a number of potential customers, and we are active on a number of pilot projects.

We would hope to be able to announce a further big data agreement with one of these in the near term. Our big data capabilities have significant long-term potential to support governments, transport authorities, commercial centers, OEMs, and other customers, enabling them to make better decisions based on vast amounts of transportation data while creating revenue opportunities that can grow beyond our traditional subscription model. Ituran continues to be a strongly cash-generating business, and we generated our highest-ever cash flow from operations during the quarter, amounting to $32.2 million. Reflecting our continuing strong profitability, ongoing and significant positive cash flow, and strong balance sheet, the board of directors declared a dividend of $10 million for the quarter, which represents $0.50 per share, in line with our standard dividend policy.

In addition, $3 million in shares were purchased under our buyback program, which is another return of capital to shareholders to enhance value. We see our ongoing dividends and buyback program as a reward to our shareholders for their loyalty and long-term support of our company. In summary, we are very pleased with our performance in the second quarter with record revenue and record profitability and continued healthy subscriber additions. At the same time, we continue to look for new revenues to drive further growth across all of our regions. Our expanding OEM programs, our growth engines, and opportunities to monetize our big data assets are all example of this. We remain confident in our ability to deliver continued growth and profitability through 2026, and in our long-term strategy to transform Ituran into a significantly larger company. With that, I hand over to Eli. Eli, please go ahead. Thanks, Eyal.

I will provide a short summary of the financial results. You can find the more detailed results in the press release that we issued earlier today. Second quarter revenues were a record $104.8 million, a 21% increase compared with revenues of $86.8 million in the second quarter of last year. Revenues from subscription fees in the quarter were $79.8 million, an increase of 25% year-over-year, and represented 76% of total revenues. Product revenues in the quarter were $25 million, an increase of 8% year-over-year. The subscriber base expanded to 2,711,000 by the end of the second quarter, an increase of 41,000 from the end of the previous quarter. The geographic breakdown of revenues in the second quarter was as follows. Israel, 56%; Brazil, 22%; rest of world, 22%.

EBITDA for the quarter was $28.5 million or 27.2% of revenues, an increase of 24% compared with EBITDA of $22.9 million or 26.4% of revenues in the second quarter of last year. Finance expenses in the second quarter were $1.3 million, in line with finance expenses of $1.3 million in the second quarter of last year. The expense this quarter was mainly due to the strengthening of the Israeli shekel against the US dollar, which lowered the value of US dollar-linked deposits held in Israel, resulting in a finance expense on those deposits. Net income for the second quarter was $17.3 million, or 16.5% of revenues, or diluted earning per share of $0.88, an increase of 29% compared with $13.5 million or 15.5% of revenues, or diluted earning per share of $0.68 in the second quarter of last year.

Cash flow from operation for the second quarter of 2026 was $32.2 million. As of June 30, 2026, the company had net cash including marketable securities of $103.7 million, which includes no debt. This is compared with net cash including marketable securities of $107.6 million as of year end 2025. The board of directors declared a dividend of $10 million for the quarter, or $0.50 per share. The current dividend takes into account the company's continuing strong profitability, ongoing positive cash flow, and a strong balance sheet. During the quarter, $3 million in shares were purchased under the buyback program. The total remaining authorization is about $10 million. Share buybacks will be funded by available cash and will be made in line with SEC Rule 10b-18. With that, I'd like to open the call for a question and answer session.

Operator? Okay. We'll now open the call for the question and for the question.

We'll open the call for the question and answer session.

We'll give a- On behalf of the management of Ituran- All right.

I would like to thank- Yeah.