EX-99.1 2 exhibit_99-1.htm EXHIBIT 99.1
 Exhibit 99.1
 
 
ITURAN LOCATION AND CONTROL LTD. PRESENTS
RESULTS FOR THE SECOND QUARTER OF 2020

AZOUR, Israel – August 25, 2020 – Ituran Location and Control Ltd. (NASDAQ: ITRN), today announced its consolidated financial results for the second quarter of 2020.

Highlights of the second quarter of 2020

•
The results were impacted by the global Covid-19 pandemic;
•
Revenue of $53.3 million;
•
Adjusted EBITDA was $13.9 million, a decline of 9% on a sequential basis;
•
Generated $19.3 million in quarterly operating cash flow;
•
Total subscribers reached 1,751,000 at the end of the quarter;

Management Comment

Eyal Sheratzky, Co-CEO of Ituran said, “We are happy with Ituran’s second quarter results which were ahead of expectations, particularly given the unprecedented global macroeconomic situation with full shutdowns in the geographies that we operate in. We took early steps- reducing and matching expenses to the lower expected revenue level and placed focus on cash preservation. Our second quarter results demonstrate these efforts were successful. I would like to thank all Ituran’s employees around the world for their exceptional execution despite tremendous difficulties. It is an honor to work with such a great team.”

Continued Sheratzky, “The non-cash impairment in Road Track is an accounting effect mainly due to the sharp increase in the macro risk factors of the various countries in which Road Track operates and not related to Road Track’s long-term performance or outlook specifically. The increase in country risk caused an increase in the weighted average cost of capital (WACC) calculation, which lowered the valuation of this business on our balance sheet.”

“Excluding the non-cash impairment charges, Ituran remains profitable and continues to be cash generating. In fact, we had one of our strongest quarters of cash generation, with a positive operating cash flow of $19.3 million. Ituran’s stability during this unprecedented global crisis, demonstrates the overall resilience of our business model,” added Sheratzky.

Mr. Sheratzky concluded, “The global uncertainty caused by the ongoing Corona pandemic is expected to continue for the immediate future. We will remain proactive and continue to align our expenses to expected revenue levels. Looking ahead, we therefore expect similar levels of performance in our third quarter results. Longer-term, given the challenges that we have already overcome, I am confident that Ituran will emerge this period a stronger and more efficient company. I believe that once we can all put this pandemic behind us, we will have an improved platform for long-term sustainable and profitable growth.”
Second quarter 2020 Results

Revenues for the second quarter of 2020 were $53.3 million, a decrease of 25% compared with revenues of $71.2 million in the second quarter of 2019.

The lower revenue level was due to the impact of the Covid-19 pandemic on new car sales, particularly in Brazil, Israel and also in the other geographies in which Ituran operates. Furthermore, the higher average level of the US dollar exchange rate versus the Brazilian real during the quarter compared with the same period last year, reduced the overall revenue level in US dollar terms and had a negative impact on the revenue growth rate. In local currency terms, second quarter revenue declined by 19% year-over-year.

82% of revenues were from location-based service subscription fees and 18% were from product revenues.

Revenues from subscription fees were $43.7 million, a decrease of 15% over second quarter 2019 revenues. In local currency terms, subscription fees declined by 7% year-over-year.

The subscriber base amounted to 1,751,000 as of June 30, 2020. This represents a decrease of 43,000 net, over that of the end of the prior quarter. During the quarter, there was a decline of 16,000 in the aftermarket subscriber base and a decline of 27,000 in the OEM subscriber base. Ituran expects the aftermarket subscriber base to resume growth on a net basis once the main impacts of the Covid-19 pandemic is over.

Product revenues were $9.6 million, a decrease of 51% compared with that of the second quarter of 2019. The decline was primarily due to limited installations of Ituran’s products due to the Covid-19 pandemic shutdown implemented in many of the geographies in which Ituran operates, during most of the second quarter.

Gross profit for the quarter was $27.7 million (51.9% of revenues), a 17% decrease compared with gross profit of $33.5 million (47.0% of revenues) in the second quarter of 2019.

The gross margin in the quarter on subscription revenues was 58.5%, compared with 56.4% in the second quarter of 2019. The gross margin on products was 21.8%, compared with 22.3% in the second quarter of 2019.

During the second quarter, Ituran’s operating expenses were $32.5 million. The operating expenses included a non-cash impairment charge of $14.2 million, related to the acquisition of Road Track. Excluding the non-cash impairment charge, operating expenses amounted to $18.3 million. This is compared with $19.9 million in operating expenses in the second quarter of 2019 and $20.9 million in the prior quarter.

Operating loss for the quarter was $4.9 million. Excluding the above-mentioned non-cash impairment charge in the operating expenses, the operating income was $9.3 million (17.5% of revenues). This is compared with $13.6 million (19.1% of revenues) in the second quarter of last year. This is a decline of 31% year-over-year. In local currency terms, excluding the impairment, the operating income decline would have been 25% year over year.

Adjusted EBITDA for the quarter was $13.9 million (26.1% of revenues), which excludes the above-mentioned impairment charge, a decrease of 28% compared with $19.4 million (27.2% of revenues) in the second quarter of last year. In local currency terms, the decline would have been 20% year over year.

It is noted that versus the prior quarter, the decline in adjusted EBITDA was 9%, in local currency terms the decline would have been only 2%, which was ahead of management’s expectation of a 10-20% sequential decline in EBITDA versus the first quarter.

Net loss for the second quarter of 2020 was $6.3 million or loss per share of $0.30. Excluding the above-mentioned non-cash impairment charge and excluding a $0.7 million financial gain due to a reduced minority liability related to the impairment of Road Track, net income for the quarter was $7.2 million (13.4% of revenues) or fully diluted earnings per share of $0.34. Net income excluding the impairment charges represent a decrease of 7% compared with $7.7 million (10.8% of revenues) or fully diluted earnings per share of $0.36 in the second quarter of last year. In local currency terms, the gain would have been 1% year over year.

Cash flow from operations for the second quarter of 2020 was $19.3 million.

As of June 30, 2020, the Company had cash, including marketable securities, of $57.2 million and debt of $60.8 million, amounting to a net debt of $3.6 million. This is compared with cash, including marketable securities, of $54.3 million and debt of $67.9 million, amounting to a net debt of $13.6 million, as of December 31, 2019.

Conference Call Information

The Company will also be hosting a conference call later today, August 25, 2020 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: 1 866 485 2399
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, as well as factors related to the global COVID-19 pandemic.

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 approaching 2 million subscribers using its location based services with a market leading position in Israel and Latin America. Established in 1995, Ituran has approximately 3,000 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
Deputy CEO & 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 Financial Statements
as of June 30, 2020
ITURAN LOCATION AND CONTROL LTD.
 
Condensed Consolidated Financial Statements
as of June 30, 2020

Table of Contents
 
 
Page
   
Condensed Consolidated Interim Financial Statements:
  
2-3
4
5
 
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ITURAN LOCATION AND CONTROL LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

   
US dollars
  
   
June 30,
    
December 31,
  
(in thousands)
  
2020
    
2019
  
   
(unaudited)
        
Current assets
            
Cash and cash equivalents
    
56,782
      
53,964
  
Investments in marketable securities
    
374
      
358
  
Accounts receivable (net of allowance for doubtful accounts)
    
37,766
      
45,090
  
Other current assets
    
36,863
      
49,201
  
Inventories
    
25,175
      
25,537
  
     
156,960
      
174,150
  
Non- Current investments and other assets
                
Investments in affiliated companies
    
839
      
1,666
  
Investments in other companies
    
4,740
      
3,260
  
Other non-current assets
    
2,840
      
3,365
  
Deferred income taxes
    
9,927
      
10,385
  
Funds in respect of employee rights upon retirement
    
11,811
      
11,476
  
     
30,157
      
30,152
  
                 
Property and equipment, net
    
38,595
      
48,866
  
                 
Operating lease right-of-use assets, net
    
11,190
      
12,626
  
                 
Intangible assets, net
    
20,225
      
23,355
  
                 
Goodwill
    
39,568
      
50,086
  
                 
Total assets
    
296,695
      
339,235
  

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ITURAN LOCATION AND CONTROL LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (cont.)

   
US dollars
  
   
June 30,
    
December 31,
  
(in thousands)
  
2020
    
2019
  
   
(unaudited)
        
Current liabilities
            
Credit from banking institutions
    
20,176
      
18,110
  
Accounts payable
    
16,991
      
22,656
  
Deferred revenues
    
24,023
      
29,146
  
Other current liabilities
    
31,044
      
31,153
  
     
92,234
      
101,065
  
Non- Current liabilities
                
Long term loan
    
40,630
      
49,803
  
Liability for employee rights upon retirement
    
17,859
      
17,000
  
Deferred income taxes
    
2,682
      
2,867
  
Deferred revenues
    
9,769
      
9,763
  
Others non-current liabilities
    
216
      
241
  
Operating lease liabilities, non-current
    
7,932
      
10,839
  
Obligation to purchase non-controlling interests
    
10,900
      
11,743
  
     
89,988
      
102,256
  
Stockholders’ equity
    
108,027
      
129,330
  
Non-controlling interests
    
6,446
      
6,584
  
Total equity
    
114,473
      
135,914
  
                 
Total liabilities and equity
    
296,695
      
339,235
  

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ITURAN LOCATION AND CONTROL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

   
US dollars
    
US dollars
  
   
Six month period
ended June 30,
    
Three month period
ended June 30,
  
(in thousands except per share data)
  
2020
    
2019
    
2020
    
2019
  
                         
Revenues:
                        
Telematics services
    
92,707
      
104,825
      
43,731
      
51,666
  
Telematics products
    
28,978
      
40,021
      
9,580
      
19,576
  
     
121,685
      
144,846
      
53,311
      
71,242
  
Cost of revenues:
                                
Telematics services
    
40,501
      
45,094
      
18,159
      
22,517
  
Telematics products
    
22,558
      
31,604
      
7,495
      
15,214
  
     
63,059
      
76,698
      
25,654
      
37,731
  
                                 
Gross profit
    
58,626
      
68,148
      
27,657
      
33,511
  
Research and development expenses
    
7,305
      
7,128
      
3,419
      
3,377
  
Selling and marketing expenses
    
5,899
      
6,303
      
2,840
      
3,373
  
General and administrative expenses
    
25,999
      
27,597
      
12,076
      
13,151
  
Impairment of goodwill
    
10,508
      
-
      
10,508
      
-
  
Impairment of intangible assets and other expenses, net
    
3,700
      
5
      
3,673
      
1
  
Operating income (loss)
    
5,215
      
27,115
      
(4,859
)
    
13,609
  
Other income (expense), net
    
3
      
(48
)
    
13
      
25
  
Financing income (expense), net
    
863
      
(1,854
)
    
1,517
      
(839
)
Income (loss) before income tax
    
6,081
      
25,213
      
(3,329
)
    
12,795
  
Income tax expenses
    
(4,817
)
    
(7,189
)
    
(2,891
)
    
(3,692
)
Share in gains (losses) of affiliated companies ,net
    
(887
)
    
(1,971
)
    
16
      
(1,103
)
Net income (loss) for the period
    
377
      
16,053
      
(6,204
)
    
8,000
  
Less: Net income attributable to non-controlling interest
    
(343
)
    
(302
)
    
(129
)
    
(306
)
Net income (loss) attributable to the Company
    
34
      
15,751
      
(6,333
)
    
7,694
  
                                 
Basic and diluted earnings (losses) per share attributable to Company’s stockholders
    
0.01
      
0.74
      
(0.30
)
    
0.37
  
                                 
Basic and diluted weighted average number of shares outstanding (in thousands)
    
20,813
      
21,146
      
20,813
      
21,041
  


- 4 -

ITURAN LOCATION AND CONTROL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   
US dollars
    
US dollars
  
   
Six month period
ended June 30,
    
Three month period
ended June 30,
  
(in thousands)
  
2020
    
2019
    
2020
    
2019
  
             
Cash flows from operating activities
                        
Net income (loss) for the period
    
377
      
16,053
      
(6,204
)
    
8,000
  
                                 
Adjustments to reconcile net income to net cash from operating activities:
                                
Depreciation and amortization
    
9,826
      
11,579
      
4,603
      
5,464
  
Interest and exchange rate differences on loans
    
(542
)
    
31
      
56
      
44
  
Losses (gain) in respect of trading marketable securities
    
(16
)
    
2
      
(106
)
    
(26
)
Gain in respect of investments in other companies
    
(1,524
)
    
-
      
(1,524
)
    
-
  
Increase in liability for employee rights upon retirement
    
895
      
1,179
      
61
      
905
  
Share in losses (gains) of affiliated companies, net
    
887
      
1,971
      
(16
)
    
1,103
  
Deferred income taxes
    
(369
)
    
(17
)
    
(1,167
)
    
(101
)
Capital loss on sale of property and equipment, net
    
87
      
14
      
27
      
8
  
Decrease (increase) in accounts receivable
    
3,487
      
4,558
      
7,978
      
(371
)
Decrease in other current assets
    
2,949
      
2,314
      
3,477
      
2,615
  
Decrease in inventories
    
229
      
2,005
      
607
      
713
  
Increase (decrease) in accounts payable
    
(2,245
)
    
(347
)
    
(2,435
)
    
1,249
  
Decrease in deferred revenues
    
(3,710
)
    
(6,143
)
    
(2,307
)
    
(3,595
)
Increase (decrease) in other current and non-current liabilities
    
6,178
      
(2,678
)
    
2,798
      
100
  
Impairment of goodwill
    
10,508
      
-
      
10,508
      
-
  
Impairment of other intangible assets
    
3,661
      
-
      
3,661
      
-
  
Increase (decrease) in obligation for purchase non-controlling interests
    
(698
)
    
702
      
(749
)
    
208
  
Net cash provided by operating activities
    
29,980
      
31,223
      
19,268
      
16,316
  
                                 
Cash flows from investment activities
                                
Increase in funds in respect of employee rights upon retirement, net of withdrawals
    
(363
)
    
(956
)
    
(255
)
    
(881
)
Capital expenditures
    
(5,579
)
    
(10,375
)
    
(2,128
)
    
(3,445
)
Investments in (return from) affiliated and other companies
    
(492
)
    
(184
)
    
4
      
(171
)
Sale of marketable securities, net
    
-
      
1,454
      
-
      
1,070
  
Investments in long term deposit
    
(35
)
    
(152
)
    
(13
)
    
(74
)
Proceeds from sale of property and equipment
    
196
      
35
      
30
      
8
  
Net cash used in investment activities
    
(6,273
)
    
(10,178
)
    
(2,362
)
    
(3,493
)
                                 
Cash flows from financing activities
                                
Short term credit from banking institutions, net
    
2,660
      
(611
)
    
-
      
1,207
  
Repayment of long term loan
    
(8,802
)
    
-
      
(4,517
)
    
-
  
Purchase of shares from minority shareholders
    
(750
)
    
-
      
(750
)
    
-
  
Dividend paid
    
(9,967
)
    
(9,748
)
    
(4,917
)
    
(4,839
)
Dividend paid to non-controlling interest
    
-
      
(809
)
    
-
      
(271
)
Net cash used in financing activities
    
(16,859
)
    
(11,168
)
    
(10,184
)
    
(3,903
)
                                 
Effect of exchange rate changes on cash and cash equivalents
    
(4,030
)
    
1,116
      
202
      
422
  
                                 
Net increase in cash and cash equivalents
    
2,818
      
10,993
      
6,924
      
9,342
  
Balance of cash and cash equivalents at beginning of the period
    
53,964
      
51,398
      
49,858
      
53,049
  
Balance of cash and cash equivalents at end of the period
    
56,782
      
62,391
      
56,782
      
62,391
  

- 5 -