EX-99.1 2 exhibit_99-1.htm EXHIBIT 99.1
 
Exhibit 99.1

 
ITURAN LOCATION AND CONTROL LTD. PRESENTS
RESULTS FOR THE THIRD QUARTER 2018

Net profit of $26.1m; EBITDA of $17.0m;
Closed Acquisition of RT Holdings; Number of Subscribers at 1.75 million
 
AZOUR, Israel – November 26, 2018 – Ituran Location and Control Ltd. (NASDAQ: ITRN, TASE: ITRN), today announced its consolidated financial results for the third quarter ended September 30, 2018.

Highlights of the third quarter of 2018
·
Closed acquisition of the majority stake in Road Track Holdings in mid-September with minimal impact on the financial results of the quarter;
·
Revenue of $53.4 million and operating profit of $13.7 million (margin of 25.7%)
·
Net profit of $26.1 million (including one-time income of $13.8 million);
·
EBITDA of $17.0 million (31.8% of revenue); in local currency terms, EBITDA grew by 13%;
·
Dividend of $5 million declared for the quarter;

Third Quarter 2018 Results
The closing of the acquisition of Road Track Holdings on September 13, 2018, brought slightly over half a million subscribers and the subscriber base reached 1,752,000 subscribers as of September 30, 2018 compared with 1,137,000 subscribers as of September 30, 2017. Because the acquisition happened toward the end of the third quarter, there was minimal impact on the consolidated profit and loss statement for the quarter.

Revenues for the third quarter of 2018 were $53.4 million, compared with revenues of $60.6 million in the third quarter of 2017. 73% of revenues were from location based service subscription fees and 27% were from product revenues.

The significant strengthening of the US dollar versus the Brazilian real and the Argentinean peso during the third quarter versus the prior quarter as well as the third quarter of 2017 reduced the overall revenue level in US dollars and impacted the growth rate of the revenues in US dollar terms.

Revenues from subscription fees were $39.1 million, compared with $43.8 million in the third quarter last year. Excluding the exchange rate impact, the revenues from subscription fees would have grown by 3.4% year-over-year.

Revenue from products were $14.3 million compared with $16.8 million in the third quarter of last year. The New Year holiday season in Israel fell fully in the third quarter of 2018, while it was divided between the third and fourth quarter of last year, leading to less days of sales in Israel and lower product revenue during the current quarter. In addition, the above mentioned exchange rate volatility also impacted the product revenues. In local currency terms, product revenues would have declined by 13% year-over-year.

Gross profit for the third quarter of 2018 was $28.9 million (54.1% of revenues), compared with $30.5 million (50.4% of revenues) in the third quarter of 2017.
 
The gross margin on subscription fees were 65.3% compared with 66.7% in the same period last year. The gross margin on product sales were 23.4% compared with 7.6% in the same period last year. The change in gross margin was mainly due to the product sales mix sold during the quarter.

Operating profit for the third quarter of 2018 was $13.7 million (25.7% of revenues), compared with an operating profit of $13.9 million (22.9% of revenues) in the third quarter of 2017. Excluding the impact of the change in exchange rates over the period, the operating profit would have increased 15% over the third quarter of 2017.

During the quarter, Ituran had a one-time other income of $13.8 million. This was related to an accounting gain from an acquisition following the gain of control of Ituran’s joint venture with Road Track Holdings in Brazil and Argentina, which under GAAP rules, is accounted for at market value and was therefore revalued. The total gain is net of transaction related expenses.

During the quarter, share in affiliates, net was an income of $1.6 million versus an income of $1.0 million in the same quarter of last year.

EBITDA for the quarter was $17.0 million (31.8% of revenues), compared to an EBITDA of $17.4 million (28.7% of revenues) in the third quarter of 2017. Excluding the impact of the change in exchange rates over the period, the EBITDA would have increased by 13%.

Net profit was $26.1 million in the third quarter of 2018 (48.8% of revenues) or fully diluted EPS of $1.24. This is compared with a net profit of $10.5 million (17.4% of revenues) or fully diluted EPS of $0.50 in the third quarter of 2017.

Cash flow from operations for the quarter was $14.8 million.

As of September 30, 2018, the Company had cash, including marketable securities, of $57.4 million. The company also had short and long-term debt of $84.9 million. On a net basis, the net debt of the company was $27.5 million, compared with net cash of $40.4 million as of December 31, 2017.

Ituran consolidated non-GAAP Pro-Forma Financials

On September 13, 2018, Ituran closed its acquisition of 81.3% of Road Track Holdings. In order to aid investor’s understanding of how to model Ituran following the acquisition, the consolidated non-GAAP pro-forma financials of Ituran and Road Track Holdings for the first nine months of 2018 are included in the table below.

US$ millions
  
Actual
results
(9 months ended
September 30, 2018)
    
Non-GAAP
Pro-forma results
(9 months ended
September 30, 2018)
    
Non-GAAP pro-forma at constant currency ex-rates
(based on average
2017 exchange rates)
  
Revenue
    
174.2
      
270.4
      
286.8
  
EBIT
    
44.1
      
59.2
      
65.9
  
Net profit
    
49.3
*
    
41.9
      
46.6
  

*Please note that the actual net profit in the table above includes a $13.8 million one-time income while the non-GAAP pro-forma does not include this.

Dividend
For the third quarter of 2018, 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.

Management Comment
Eyal Sheratzky, Co-CEO of Ituran said, “Ituran continues to grow and is performing well. Again, significant local currency weakness versus the dollar had an impact on our financials. As the solid improvement in our margins indicates, the health of the underlying business is strong and allows us to continually grow profitably for the long-term, independent of the short-term volatility.”

Continued Mr. Sheratzky, “We closed the third quarter consolidating Road Track, a company we had been working with closely for five years in Brazil and Argentina. Ituran is now a Company on a completely new scale adding significant operations throughout Latin America. While the impact on our P&L was not significant in the current quarter, we ended the quarter with over 1.7 million subscribers. In only a few weeks since the close, we are already working on leveraging the synergies, given our new scale in the telematics market in Latin America. We look forward to our continued growth and expansion for the foreseeable future.”

Conference Call Information

The Company will also be hosting a conference call later today, November 26, 2018 at 10 am 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 0610
CANADA Dial-in Number: 1 888 604 5839
INTERNATIONAL Dial-in Number:  +972 3 918 0610
At:
10:00am Eastern Time, 7:00am Pacific Time, 5:00pm 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 for the retail, insurance industry and car manufacturers. Ituran is the largest OEM telematics provider in Latin America. 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 1.7 million subscribers using its location based services with a market leading position in Israel and Latin America. Established in 1995, Ituran has over 3,400 employees worldwide, with offices in Israel, Brazil, Argentina, Mexico, Ecuador, Columbia, 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
udi_m@ituran.com
VP Finance, Ituran
(Israel) +972 3 557 1348
  
Ehud Helft
ituran@gkir.com
GK  Investor & Public Relations
(US) +1 646 201 9246

 
ITURAN LOCATION AND CONTROL LTD.
 
Condensed Consolidated Interim Financial Statements
as of September 30, 2018
 
ITURAN LOCATION AND CONTROL LTD.
 
Condensed Consolidated Interim Financial Statements
as of September 30, 2018
 
Table of Contents
 
 
Page
Condensed Consolidated Interim Financial Statements:
  
2-3
4
5-6
7-8

ITURAN LOCATION AND CONTROL LTD.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
US dollars
  
   
September 30,
    
December 31,
  
(in thousands)
  
2018
    
2017
  
             
Current assets
            
Cash and cash equivalents
    
55,743
      
36,906
  
Investments in marketable securities
    
1,674
      
3,559
  
Accounts receivable (net of allowance for doubtful accounts)
    
62,782
      
41,009
  
Other current assets
    
45,591
      
41,394
  
Inventories
    
35,066
      
14,244
  
     
200,856
      
137,112
  
Long-term investments and other assets
                
Investments in affiliated companies
    
4,088
      
14,839
  
Investments in other company
    
2,400
      
1,382
  
Other non-current assets
    
2,998
      
939
  
Deferred income taxes
    
14,550
      
8,398
  
Funds in respect of employee rights upon retirement
    
9,588
      
9,627
  
     
33,624
      
35,185
  
                 
Property and equipment, net
    
52,607
      
39,047
  
                 
Intangible assets, net
    
29,389
      
38
  
                 
Goodwill
    
70,875
      
3,777
  
                 
Total assets
    
387,351
      
215,159
  

- 2 -
ITURAN LOCATION AND CONTROL LTD.
 
CONDENSED CONSOLIDATED BALANCE SHEETS (cont.)
 
   
US dollars
  
   
September 30,
    
December 31,
  
(in thousands)
  
2018
    
2017
  
             
Current liabilities
            
Credit from banking institutions
    
8,022
      
48
  
Accounts payable
    
27,990
      
23,264
  
Deferred revenues
    
42,135
      
12,796
  
Other current liabilities
    
38,236
      
29,644
  
     
116,383
      
65,752
  
Long-term liabilities
                
Long term loan
    
76,895
      
-
  
Liability for employee rights upon retirement
    
15,020
      
14,062
  
Provision for contingencies
    
326
      
400
  
Deferred income taxes
    
3,079
      
-
  
Deferred revenues
    
7,030
      
1,241
  
Others non-current
    
390
      
475
  
     
102,740
      
16,178
  
                 
Stockholders’ equity
    
155,130
      
125,790
  
Non-controlling interests
    
13,098
      
7,439
  
Total equity
    
168,228
      
133,229
  
                 
Total liabilities and equity
    
387,351
      
215,159
  
 
- 3 -
ITURAN LOCATION AND CONTROL LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

   
US dollars
    
US dollars
  
   
Nine month period
 ended September 30,
    
Three month period
 ended September 30,
  
(in thousands except per share data)
  
2018
    
2017
    
2018
    
2017
  
                         
Revenues:
                        
Location-based services
    
126,315
      
125,284
      
39,126
      
43,847
  
Wireless communications products
    
47,855
      
48,774
      
14,250
      
16,764
  
   
174,170
      
174,058
      
53,376
      
60,611
  
                               
Cost of revenues:
                                
Location-based services
    
41,408
      
41,889
      
13,569
      
14,584
  
Wireless communications products
    
43,485
      
43,362
      
10,914
      
15,483
  
     
84,893
      
85,251
      
24,483
      
30,067
  
                                 
Gross profit
    
89,277
      
88,807
      
28,893
      
30,544
  
Research and development expenses
    
3,727
      
2,444
      
1,628
      
676
  
Selling and marketing expenses
    
8,423
      
9,551
      
2,941
      
3,273
  
General and administrative expenses
    
33,385
      
35,096
      
10,795
      
12,705
  
Other income, net
    
(308
)
    
(146
)
    
(190
)
    
(3
)
Operating income
    
44,050
      
41,862
      
13,719
      
13,893
  
Other income, net
    
13,833
      
-
      
13,833
      
-
  
Financing income, net
    
2,134
      
1,091
      
1,566
      
250
  
Income before income tax
    
60,017
      
42,953
      
29,118
      
14,143
  
Income tax expenses
    
(12,416
)
    
(12,388
)
    
(3,906
)
    
(3,944
)
Share in gains of affiliated companies ,net
    
3,868
      
5,487
      
1,644
      
998
  
Net income for the period
    
51,469
      
36,052
      
26,856
      
11,197
  
Less: Net income attributable to non-controlling interest
    
(2,124
)
    
(2,082
)
    
(805
)
    
(667
)
Net income attributable to the Company
    
49,345
      
33,970
      
26,051
      
10,530
  
                                 
Basic and diluted earnings per share attributable to Company’s stockholders
    
2.35
      
1.62
      
1.24
      
0.50
  
                                 
Basic and diluted weighted average number of shares outstanding (in thousands)
    
20,982
      
20,968
      
21,010
      
20,968
  
 
- 4 -
ITURAN LOCATION AND CONTROL LTD.
 
RECONCILIATION OF NON-GAAP RESULTS
 
   
US dollars
    
US dollars
  
 
Nine months ended
 September 30,
    
Three months ended
 September 30,
  
(in thousandsexcept per share data)
  
2018
    
2017
    
2018
    
2017
  
                         
GAAP Revenues:
    
174,170
      
174,058
      
53,376
      
60,611
  
Valuation adjustment on acquired deferred revenue
    
-
      
-
      
-
      
-
  
Non –GAAP revenue
    
174,170
      
174,058
      
53,376
      
60,611
  
                                 
GAAP gross profit
    
89,277
      
88,807
      
28,893
      
30,544
  
Valuation adjustment on acquired deferred revenue
    
-
      
-
      
-
      
-
  
Non –GAAP gross profit
    
89,277
      
88,807
      
28,893
      
30,544
  
                                 
GAAP operating income
    
44,050
      
41,862
      
13,719
      
13,893
  
Operation profit adjustments
                                
Amortization of other intangible assets
    
310
      
-
      
310
      
-
  
Non-GAAP operating income
    
44,360
      
41,862
      
14,029
      
13,893
  
                                 
GAAP net income attributable to the company's shareholders
    
49,345
      
33,970
      
26,051
      
10,530
  
Operation income adjustment
    
310
      
-
      
310
      
-
  
Other income, net
    
(13,833
)
    
-
      
(13,833
)
    
-
  
Non-GAAP net income attributable to sapiens' shareholders
    
35,822
      
33,970
      
12,528
      
10,530
  


- 5 -
ITURAN LOCATION AND CONTROL LTD.
 
Summary of NON –GAAP Financial Information
 
   
US dollars
    
US dollars
  
 
Nine months ended
 September 30,
    
Three months ended
 September 30,
  
(in thousands except per share data)
  
2018
    
2017
    
2018
    
2017
  
                         
revenue
    
174,170
      
174,058
      
53,376
      
60,611
  
Gross profit
    
89,277
      
88,807
      
28,893
      
30,544
  
Operation income
    
44,360
      
41,862
      
14,029
      
13,893
  
Net income to shareholders
    
35,822
      
33,970
      
12,528
      
10,530
  
Adjusted EBITDA
    
54,016
      
51,844
      
16,996
      
17,408
  
                                 
Basic and diluted earnings per share
    
1.71
      
1.62
      
0.60
      
0.50
  

Adjusted EBITDA Calculation
 
   
US dollars
    
US dollars
  
 
Nine months ended
 September 30,
    
Three months ended
 September 30,
  
(in thousands except per share data)
  
2018
    
2017
    
2018
    
2017
  
                         
GAAP operation profit:
    
44,050
      
41,862
      
13,719
      
13,893
  
Non –GAAP adjustments
                                
                                 
Amortization of other intangible assets
    
310
      
-
      
310
      
-
  
                                 
Non –GAAP operating profit
    
44,360
      
41,862
      
14,029
      
13,893
  
                                 
Depreciation
    
9,656
      
9,982
      
2,967
      
3,515
  
Adjusted EBITDA
    
54,016
      
51,844
      
16,996
      
17,408
  
 
- 6 -
ITURAN LOCATION AND CONTROL LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   
US dollars
    
US dollars
  
   
Nine month period
 ended September 30,
    
Three month period
 ended September 30,
  
(in thousands)
  
2018
    
2017
    
2018
    
2017
  
             
Cash flows from operating activities
                        
Net income for the period
    
51,469
      
36,052
      
26,856
      
11,197
  
                                 
Adjustments to reconcile net income to net cash from operating activities:
                                
Depreciation and amortization
    
9,966
      
9,982
      
3,277
      
3,515
  
Losses (gain) in respect of trading marketable securities
    
(321
)
    
(201
)
    
20
      
(134
)
Increase in liability for employee rights upon retirement
    
290
      
827
      
363
      
339
  
Share in gains of affiliated companies, net
    
(3,868
)
    
(5,487
)
    
(1,644
)
    
(998
)
Deferred income taxes
    
1,411
      
(268
)
    
(408
)
    
(488
)
Capital gains (losses) on sale of property and equipment, net
    
107
      
(57
)
    
38
      
4
  
Capital gains on Acquisition of non-controlling interests
    
(14,677
)
    
-
      
(14,677
)
    
-
  
Decrease (increase) in accounts receivable
    
(2,131
)
    
(8,908
)
    
3,623
      
(3,391
)
Decrease in other current assets
    
(5,265
)
    
(8,194
)
    
(1,286
)
    
(2,383
)
Decrease (increase) in inventories
    
(2,852
)
    
545
      
(2,867
)
    
2,009
  
Increase in accounts payable
    
191
      
1,667
      
2,054
      
180
  
Increase (decrease) in deferred revenues
    
(2,065
)
    
2,686
      
(138
)
    
450
  
Increase (decrease) in other current liabilities
    
2,465
      
535
      
(389
)
    
1,603
  
Net cash provided by operating activities
    
34,720
      
29,179
      
14,822
      
11,903
  
                                 
Cash flows from investment activities
                                
Increase in funds in respect of employee rights upon retirement, net of withdrawals
    
(372
)
    
(619
)
    
(525
)
    
(256
)
Capital expenditures
    
(15,311
)
    
(10,796
)
    
(5,329
)
    
(4,047
)
Acquisitions of a subsidiary – Appendix A
    
(68,969
)
    
-
      
(68,969
)
    
-
  
Investments in affiliated companies
    
(1,250
)
    
(97
)
    
-
      
-
  
Investments in other companies
    
(1,097
)
    
(1,061
)
    
(200
)
    
-
  
Investment in marketable securities
    
(22,618
)
    
(6,607
)
    
(243
)
    
(3,418
)
Sale of marketable securities
    
24,046
      
3,424
      
-
      
1,305
  
Deposit
    
(175
)
    
132
      
30
      
94
  
Proceeds from loans to affiliated companies
    
7,317
      
4,305
      
4,055
      
3,743
  
Proceeds from sale of property and equipment
    
341
      
305
      
125
      
124
  
Net cash used in investment activities
    
(78,088
)
    
(11,014
)
    
(71,056
)
    
(2,455
)
                                 
Cash flows from financing activities
                                
Short term credit from banking institutions, net
    
(34
)
    
125
      
(1
)
    
132
  
Receipt of long-term credit from banking institutions
    
81,695
      
-
      
81,695
      
-
  
Dividend paid
    
(15,097
)
    
(17,613
)
    
(5,030
)
    
(5,032
)
Dividend paid to non-controlling interest
    
(1,517
)
    
(1,172
)
    
(545
)
    
(420
)
Net cash provided by (used in) financing activities
    
65,047
      
(18,660
)
    
76,119
      
(5,320
)
                                 
Effect of exchange rate changes on cash and cash equivalents
    
(2,842
)
    
1,229
      
(248
)
    
577
  
                                 
Net increase in cash and cash equivalents
    
18,837
      
734
      
19,637
      
4,705
  
Balance of cash and cash equivalents at beginning of the period
    
36,906
      
31,087
      
36,106
      
27,116
  
Balance of cash and cash equivalents at end of the period
    
55,743
      
31,821
      
55,743
      
31,821
  
 
Supplementary information on financing and investing activities not involving cash flows:
 
In August 2018, the Company declared a dividend in an amount of US$ 5 million. The dividend was paid in October 2018.
 
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ITURAN LOCATION AND CONTROL LTD.
 
Appendix A -  Acquisitions of a subsidiary

   
US dollars
  
   
Nine and three months ended September 30, 2018
  
(in thousands)
    
       
Working capital (excluding cash and cash equivalents), net
    
(858
)
Related parties
    
2,855
  
Intangible assets, net
    
29,610
  
Property and equipment , net
    
13,766
  
Liability for employee rights upon retirement
    
(1,337
)
Goodwill
    
67,067
  
Consideration paid by issues of treasury stock
    
(12,038
)
Deferred income taxes
    
4,700
  
Other non-current assets
    
2,132
  
Previous investments in acquired companies
    
(24,734
)
Deferred revenues
    
(6,514
)
Non-controlling interests
    
(5,680
)
         
Net cash used to pay for the Acquisition
   
68,969
  

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