Ladies and gentlemen, thank you for standing by. Welcome to the Ituran First Quarter 2025 Results Conference Call. All participants are present in listen only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. You should have all received by now the company's press release. If you have not received it, please contact the Ituran’s Investor Relations team at EK Global Investor Relations at 1-212-378-8040 or view it in the News section of the company's website, www.ituran.co.il. I will now hand the call over to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin?

Thank you. Good day to all of you, and welcome to Ituran's conference call to discuss our first quarter 2025 results. I would like to thank Ituran's management for hosting this conference call. With me today on the call are Mr. Eyal Sheratzky, CEO; Mr. Udi Mizrahi, Deputy CEO and VP Finance; 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. 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 now Eyal, would you like to begin, please?

Thank you, Kenny. I'd like to welcome all of you to our first quarter 2025 result call, and thank you for joining us today. We are pleased with our first quarter results, presenting another quarter of year-over-year growth in revenue and profit across the geographies in which we operate. In the first quarter, we added a very high level of new subscribers, amounting to 99,000 net. With this strong jump, we reached a major milestone, crossing 2.5 million subscribers ahead of our expectation. The significantly growth in the subscriber base during the quarter was partially due to an additional contribution from a new telematics service agreement that we signed with major car OEM manufacturer Stellantis. As an initial part of this agreement in March, Stellantis switched their SVR subscriber base to Ituran, and Ituran began providing services to these subscribers. Given the jump in subscribers, we increased our expectations for 2025 subscriber goals to between 220,000 and 240,000 net new subscribers, implying a further 120,000 to 140,000 net new subscribers in the upcoming three quarters. The hard work we've done over the past year in bringing new and attractive applications, product, and services has brought these highly positive results. Looking ahead, we believe over the long term, the net subscribers add will trend upward. Even while presenting excellent results, I want to add that similar to the last quarter's, while showing growth in U.S. dollar terms, the strengthening of the dollar versus many of the local currencies in which we operate and in particular, the Brazilian real and the Mexican peso had a deflating impact on our financial results when denominated in U.S. dollar. In local currencies, in each of our regions, I know that we grow ahead of what our U.S. dollar denominated results suggest. Our success reflects ongoing…

Thanks, Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issued in the press release earlier today. First quarter revenues were a record $86.5 million, a 2% increase compared with revenues of $85 million in the first quarter of last year. The strengthening of the U.S. dollar in the first quarter versus various local currencies in which it run operated in impacted the revenues when translated into U.S. dollar. In local currency, revenues grew by 7% year-over-year. Revenues from subscription fees in the quarter were $62.2 million, an increase of 2% year-over-year, and in local currency, an increase of 9%. Product revenues in the quarter were $24.3 million, an increase of 1% year-over-year, and in local currencies, an increase of 3%. The subscriber base expanded to 2,508,000 by the end of the first quarter, an increase of 99,000 from the end of the previous quarter. The geographic breakdown of revenues in the first quarter was as follow: Israel, 55%; Brazil, 23%; rest of world, 22%. EBITDA for the quarter was $23.3 million or 26.9% of revenues, an increase of 4% compared with EBITDA of $22.3 million or 26.3% of revenues in the first quarter of last year. In local currencies, EBITDA grew 12% year-over-year. Net income for the first quarter was $14.6 million or diluted early per share of $0.73, an increase of 12% compared to $13 million or diluted earning per share of $0.66 in the first quarter of last year. In local currency, net income grew 20% year-over-year. Cash flow from operation for the first quarter of 2025 was $15.5 million. As of March 31, 2025, the company had net cash including marketable securities of $75.7 million, this is compared with the net cash including marketable securities of $77.2 million as of year-end 2024. The Board of Director declared a dividend of $10 million for the quarter. The current dividend takes into account the company's continuing strong profitability, ongoing positive cash flow, and strong balance sheet. And with that, I'd like to open the call for the question-and-answer session. Operator?

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question is from Sergey Glinyanov of Freedom Capital Markets. Please go ahead.

Good day, gentlemen. Do you hear me well?

Yes. Loud and clear.

So great. In terms of new agreements, does it imply you set up, new equipment and provide services for each produced car by Stellantis in Latin America or you have some options for them?

Hi, Sergey. This agreement that we report, that we published is currently at this stage as we said is to provide services based on technology which was already implemented in the past in the cars of Stellantis. Of course we see this agreement as an opportunity to broaden the relationship and probably in the future we hope that we will have the ability to add other services as well as hardware in some models. But this what we published yesterday is to provide services.

Okay. Got it. And is total effect on your subscription base in place? It seems you raised your subscription based guidance range by 40,000 in midpoint exactly what we saw in Q1 considering previous run rates. So --

This agreement was -- hello?

Yes.

This agreement is in place since March. Meaning in Q1 there is no -- almost zero influence. But it's also important for me to mention, when we talk about services and specifically OEM deals which with a large quantities but which is with a lower ARPU. So it's taking time that it become material. Because don't forget we had before this quarter about 2.4 million subscribers. The additional influence in the short term is smaller, but the important thing in each and one of these contracts is that we're talking about longer term relationship. We're talking about growing customer base from this customer and when it's exponentially increase, the margins increase, so the contribution to the total results of Ituran will appear in the future, but then it will be more material. But I don't think that it's the right way to judge a contract now, for this quarter or for the next quarter, because the customer base, the revenues that we have from subscribers fee at all are much higher than only this. But in the future, this contract will ramping up every month, every quarter, and it will be more contribution to our results.

Okay. But what did primarily affect your ramp up of subscription base? Because, recently, it was roughly 40,000 per quarter and now we see that it's roughly 100,000.

Actually, the agreement includes the first stage gain to Ituran bulk of Stellantis car owners, okay, as a first stage and then they will continue on an annual basis based on their sales. So the number that we show at Q1, it's not a typical number. This is why we provide expectation that the next quarters will continue to be about 40,000 per quarter and not as Q1 almost 100,000. We got initial bank of customers at one time now. Of course, they will be with us a few years according to the contract, but now every month Stellantis will continue to add subscribers, but it will be not on the same level that the initial one was.

Yeah. I got it. That's exactly what I interested in. And now turning to your financial figures. Eli, that's question for you, I I guess. Product gross margin is, increases substantially. Have Ituran taken some steps to improve that and what should we think about it for next couple of quarters?

Gross margin, if we split it to two. We're talking about the gross margin related to the telematics services is actually improved a little bit. And this is due to the operating leverage that we have in our business model. So if you are asking me for the future as long as we continue to increase our subscriber base, I don't see any reason why the gross margin on the Telematics Services should improve a little bit. Regarding the Telematics Products gross margin that increased then it relates to cost savings that we are doing all the time and volatility between the quarters because there is a mix of product that sometimes change from that you are selling one or more product with a different gross margin, so that is a little bit of volatility as well.

Yeah. Thank you. Got it. And what's about operation expenses? It seems your R&D and marketing expenses rise faster than revenue. What should we think about it?

If I'm looking at the R&D expenses, it more or less represents about 5.5% of the revenues and it's quite stable along the time. So if you're asking me going forward, that's a reasonable assumption to use for the future.

Okay. Understood. And, I think the last question, is increased CapEx attributable to new agreements and what level should we expect for 2025?

Yeah. Regarding CapEx, you have to remember that it includes a lot of consideration of volatility due to the fact of couple of things. One, the company is making purchases of machines, vehicles and how it is not spread equally among the quarters. And second, also inventory, I will not say fixed assets or inventory that we are using in Brazil and Argentina that usually depends on that we can buy it on valves and things like that. Q1 for your question was higher than the average, but looking forward the CapEx should go down if we compare I mean the second quarter and moving forward.

Okay. Thank you. Got it. And, yeah, I have one more question about, insurance market in LatAm. Just wondering and, would like to hear your thoughts about it. What do you expect from LatAm insurance market? For instance, in Brazil, despite car thefts, are declining, insurance cost rises rapidly, especially for the most popular cars like, Fiat. Do you consider it as a potential opportunity for Ituran, in terms of consumer demand transitioning to UBI insurance? What are your perspectives for the next couple of years on that sales field?

First of all, we don't see declining cost of freight. We have to understand that with all the respect to Ituran, when we have a few hundred thousands of cars, when we talk about tens of million driving on the roads, still we usually have more better approach to cars which are more popular to be stealing whether it's insurance companies or even consumers. We don't see the trend that you mentioned. I know that some models sometimes it has a volatility, but overall we see a high demand in Brazil for car theft solution, specifically the insurance companies that we work with and especially the audience when we talk about Ituran Com Seguro that we approach. So we don't see that. Regarding UBI, I said it in the past, we always knocking on the doors of our partners, the insurance companies and provide them this solution. Unfortunately Brazil as well as Mexico which is the two largest countries in South America, the insurance companies are not willing to explore this journey which mean to change their actuary methodology and implement software and integration with this solution. So the only country by the way that we succeed to have some deals it's Argentina, but I think that the competition between insurance companies, digital insurance companies penetration prices that go went down and will continue probably will create more vertical ground for accepting a UBI solution. And once it will happen, I believe, and we do the best that we can to be there based on the strong relationship that we have with major players in the insurance industry. But currently, Brazil and Mexico in the short future are not the market that we expect to sell the UBI.

Okay, that’s all for me. Thank you for taking my question, gentlemen.

Thank you. The next question is from Chris Reimer of Barclays. Please go ahead.

Thank you for taking my questions. And congratulations on the strong results. I'd like to -- you mentioned the lower ARPU for customers on deals of the type of Stellantis with the bulk customers. I was wondering if you could talk a little bit about the attrition rates and customers that leave or are finished with their contracts does it work that you get new customers at a higher ARPU or because of these large deals are some of the new customers coming in at a lower ARPU than the ones that are leaving?

First of all, it should be clear that our customer is Stellantis. I mean all the accounts and the calculation and the ARPU and everything done through them. The customer get it as a free trial as a part of, let's say, like having the car, he has these services, which for us is good because we don't have to convince the customer. We don't have to work consumer by consumer. The checks come from one institutional player, et cetera. But once the time which is usually between two to three years, sometimes five years, of these free services. We have the ability to approach the customers when they finish the free trial and to offer them the services, which, by the way has two additional, I would say, benefits. First of all, the prices that we offer for the renewals are higher because to convinced Stellantis to pay for hundreds of thousand subscribers. Of course, it's related to a very high discount or high lower ARPU or to a lower ARPU. When you go customer by customer and when we do the renewals, if they had satisfaction with the three or five years of services, it will be easier for us to convince him to pay a higher service fee. So this is the situation here. We don't have -- the churn, I would say, is lower because there is no economic pressure on the driver or the owner.

Okay.

By the way, it's the situation with all the OEMs. Now with regard the ARPU, I don't -- I'm not sure if you ask this specifically, but I would add that the ARPU is lower because it's only service. There is no -- we are not at least any hardware, which we have to integrate it in the monthly service fees like we do, for example, with Nissan. So it's only the service, so it's lower. Second, we are talking about kind of services that since we don't have the hardware and all the back office related to the hardware. So the margins are dramatically higher than a typical service or full connected car services, which the ARPU is higher, but the gross cost also higher. The direct cost also higher. So the margin is high.

Got it. That's very helpful. And I was wondering if you could talk a little bit about the dynamics in the market for the product revenues and how you see the pipeline evolving throughout the year?

Theoretically, again, usually the pipeline regarding -- we have orders, but it's on a daily basis that we receive. Of course, there are some backlogs of orders that we know from OEMs that we plan and we manufacture the units in order to provide it. So we are ready always to promote or to provide the deliveries to the -- our customers. So we have stock -- in up stock whenever they need. Of course, based on demand, of course, we can increase the inventory or reduce the inventory based on that. Regarding the gross margins that you mentioned, that's really -- there is a lot of volatility overview along the quarter. And this is why it's very hard to say, but I would say even going forward around the 20%, 25% makes sense to me on a gross margin for the product revenue, but it depends on the product mix.

Got it. That’s it for me.

Thank you. There are no further questions at this time. Before I ask Mr. Sheratzky go ahead with his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on Ituran's website www.ituran.co.il. Mr. Sheratzky, would you like to make your concluding statement?

On behalf of the management of Ituran, I would like to thank you, our shareholders, for your continued interest and long-term support of our business. If you are interested in meeting or speaking with us, feel free to reach out to our Investor Relations team. And with that, we end our call. Thank you, and have a good day.

Thank you. This concludes the Ituran first quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.