Ladies and gentlemen, thank you for standing by. Welcome to Ituran's First Quarter 2022 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. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Ituran Investor Relations team at GK Investor & Public Relations at 212-378-8040, or view it in the news section of the company's website, www.ituran.com. I will now hand over the call to Mr. Kenny Green of GK 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 the first quarter 2022 results. I'd like to thank Ituran's management for hosting this conference call. With me today on the line 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 will then open the call for the question and answer session. I'd like to remind everyone that the safe harbor statement in today's press release also covers the contents of this conference call. Now, Eyal, would you like to begin, please?
Thank you, Kenny. I'd like to welcome all of you, and thank you for joining us today. We are very pleased with our financial results, kicking off 2022 with very strong subscriber growth in the first quarter, which is the clearest indication of our success. This is also reflected in the current quarter subscription revenues, which were $50 million, growing at 10% year-over-year. We grew our overall subscriber base at 43,000 net adds, bringing the total to over 1.9 million subscribers. The aftermarket segment added a record of 59,000 subscribers during this quarter. This increase in subscribers came from both the growth in our traditional aftermarket business, but was also boosted by the various growth engines that we have seeded over the past few quarters.
This included the increased transaction from our usage-based insurance, UBI business in Israel, working with car financing companies in Brazil and Mexico, new activities with rental companies in South America, as well as continued growth performance from our U.S. business. As I discussed last quarter, we expect this type of subscriber growth to continue throughout this year with expectation of between 140-160 thousand net subscriber adds. The first quarter sub adds is clearly indicating that we are on the right trend. As you can see, Ituran is a very strong, healthy, and growing business, and I'm very proud of our recent achievements. This is despite the background of what are many macro challenges. The most notable macro issue which impact us are the supply chain constraints.
First, as you know, this is an issue that has already impacted us for much of the past year. Because of the shortage of parts, we have seen significant price increases on scarce components that we need, and we had to buy some components on the spot market at inflated prices. This increases the cost of goods and lowers somewhat the growth margins of the products that we sell. Some of the cost increase we've been able to pass on, but not all of it. Second impact of this is actually on the large OEMs that we work with that sell cars in Brazil, Argentina, Mexico, Ecuador, and Colombia. The OEMs are unable to manufacture and sell cars to meet the demand, and therefore we are indirectly impacted as new subscriber adds are below the level of subscription that come to an end.
This impacted the OEM subscriber base, and we had a net decline of 16,000 in the quarter. During the quarter, we used our solid cash position to grow our inventory to ensure that first of all, we continue to have the components we need to build products. Second, to have the product in place for new customers that are coming in which you can see from the strong aftermarket subscriber growth. With regard to the UBI business, one of our main growth engines which has gained strong traction in the past year, as you know, we are now working with all seven major insurance companies in Israel. The Israeli consumer market is becoming increasingly educated to the value that they gain by using a usage-based insurance plan rather than fixed, especially since the work from home trend has significantly reduced typical commuting.
Our rollout in Israel has proven to be successful, and we look to replicate the success in our other markets in the coming quarters and years. Another growth engine which is gaining traction is our services to the second-hand car market. Because of the shortage of components and ultimately new cars, which I discussed before, the second-hand car market has grown stronger everywhere. This can be seen by the increase in second-hand car prices in the past year, and not just in the U.S., but globally. New fintech startups, as well as the large banks, have come in to provide the financing to this growth market.
Ituran provides the location-based and connected car technology to a number of financing customers in Latin America, which will monitor the cars and the driver behavior and lower the risk of the loan against the car. I know that while there is a part and ultimately car shortage, these companies still do not currently sell as much as they could in a healthy market. However, we are growing the business all the time and see the car shortage situation as temporary. We are looking constantly to bring in new financing customers and broaden the service to additional geographies. We're excited about this business and see great potential for additional growth in the coming years. In summary, all in all, I'm very pleased with our performance, both our traditional business and especially our growth engine, which we expect will accelerate our growth in the year end.
The solid performance can be seen most by the jump in our subscriber base, which has grown well ahead of our traditional expectation, and now stand between, as I said, 140 and 160 thousand in AU. We are at the cusp of a subscriber base of 2 million customers, paying us on a regular monthly basis for one or more of our services. We are pleased with our financial performance, and while as is often the case, there is some noise from currencies and mark-to-market financial expenses. The big picture shows that we clearly have a healthy and growing business. I'm more excited now than ever with our long-term potential over the coming years. I will now hand the call over to Eli for the financial summary. Eli?
Thanks, Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issue in the press release earlier today. Revenues for the first quarter of 2022 were $72.1 million, an increase of 7% compared with revenues of $67.4 million in the first quarter of 2021. Revenues from subscription fees were $60.2 million, an increase of 10% over first quarter 2021 revenues. The subscriber base amounted to 1,924,000 as of March 31, 2022. This represents an increase of 43,000 net over that of the end of the previous quarter and an increase of 136,000 year-over-year.
During the quarter, there was an increase of 59,000 in the aftermarket subscriber base and a decrease of 16,000 in the OEM subscriber base. The decrease in the OEM subscriber base was primarily due to lower car sales at OEM, primarily as a result of the global supply chain issue and parts shortage. Product revenues were $21.8 million, an increase of 0.5% compared with that of the first quarter of 2021. The geographic breakdown of revenues in the first quarter was as follows, Israel 53%, Brazil 21%, rest of world 26%. The gross margin in the quarter on subscription revenues was 55.9% compared with 55.1% in the first quarter of 2021.
The gross margin on product was 23.7% in the quarter, compared with 25.4% in the first quarter of 2021, and the product margin was somewhat impacted due to the product sales mix, as well as significantly increased cost prices of components due to the global shortage. EBITDA for the quarter was $19.3 million or 26.7% of revenues, an increase of 13% compared with EBITDA of $17.1 million or 25.4% of revenues in the first quarter of last year. I would like to address the financial expenses. Financial expenses for the quarter was $2.6 million compared with the financial expenses of $1 million in the first quarter of last year.
The increase was primarily due to the fall in the public market value of our holding in SaverOne, which amounted to $2.4 million in the current quarter. Net income for the first quarter of 2022 was $8.7 million or 12.1% of revenues, or diluted earnings per share of $0.43, compared with $8.3 million or 12.3% of revenue, or diluted earnings per share of $0.40. Cash flow from operations for the first quarter of 2022 was $7 million. As of March 31, 2022, the company had cash, including marketable securities, of $45.2 million and a short and long-term bank credit of $26.5 million, amounting to a net cash of $18.7 million.
This is compared with the cash, including marketable securities, of
$54.7 million and a short- and long-term bank credit of $31.4 million, amounting to a net cash of $23.3 million as of December 31, 2021. For the first quarter of 2022, a dividend of 14 cents per diluted share, approximately $3 million was declared. This is in line with the board's current policy of issuing at least $3 million on a quarterly basis. Under the newly renewed buyback announced August 4, 2021, in 2021, a total of 280,000 shares were purchased, totaling $73 million. The buyback was renewed on April 1, 2022, and we will announce purchases in the second quarter in next quarter results announcement.
Share repurchases were funded by available cash, and repurchase of Ituran ordinary shares were made based on SEC Rule 10b-18. With that, we would like to open the call for a question-and-answer session. Operator?
Thank you. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull through your questions. The first question is from David Kelley of Jefferies. Please go ahead.
David Kelley, thanks for taking my questions. It looks like OEM subs saw the biggest quarterly decline since the COVID-related downturn in early 2020. You touched on it briefly in the prepared remarks, but can you provide more details on what drove the sub losses here? I s it fair to assume that declines continue at this level, or should we expect improvement in the back half of the year as global auto production improves?
As you know, the OEM sales is the only thing which influence our OEM installations. Since the shortage influenced more dramatically the car industry, we see that in the markets that we operate, but also on the rest of the world, I understand and see the market, there is decline of approximately 20% in sales of new cars. When we finish the free trial that the OEMs buying from us, we are always working to renew on the basis of the customer that we have that start paying directly. This usually happen after about a year.
If we see that today the sales are 20% less than a year ago, assuming that the conversion rate of the renewals are in the same levels, but the new car sales is lower, it automatically create a net decline in in our subscriber base, and that's what we report now. Looking forward, nobody expect this segment to change in the next couple of quarters or a year because the shortage is not something that everybody can assure will change in this period of time. We assume that these numbers is something that we will continue to see during 2022. In the end of the day, we know that the demand is higher.
Like we faced in the end of the Corona in the markets that we saw one time of very high sales of cars, once the shortage of components will finish, we believe that the sales will grow dramatically higher at the first quarter after it, and then we will succeed to overcome this decline in customer base. I just want to add something which is very important. The profitability for Ituran on the OEM, each subscriber in the OEM, it's much, much lower than our profitability in the aftermarket subscribers. When you see today that we grow the aftermarket in more than 50,000, even closer to 60,000, and on the other hand, we lost 16,000 on the OEM, it's much better than the opposite. Of course, the best is to grow in all segments.
As long as we know that the situation is not depend on us, it's not depend on market needs, it's depend on something which today, I think it's let's say the pandemic of the oil industries, which is the components. I think that this is the best case scenario on this with these problems. I'm not expecting that we will grow our net subscribers in the OEM. Looking ahead in the coming quarters. Again, I'm much more happy or satisfied if we succeed to do our numbers in the aftermarket, which are dramatically higher and multiplied by more than two or three than we did in the last years, every year.
Great. Just as a follow-up, the press release mentioned that product margins were negatively impacted by mix as well as increased spot prices of components. Can you just quantify the impact the shortages and increased spot buys have had on your gross profit? Should we assume that second quarter gross margins will be at a similar level before improving the back half of the year? Do you expect gradual improvement in margin starting next quarter?
First of all, I think that you can analyze it from the gross margin that we have on product compared to last year. It's about 2% less, which is almost 10% lower profitability on product. This has happened only because of the cost of our inventory. What you see today is an inventory that we purchased six or 9 months ago. This was the beginning or the first time that we faced the shortage and all the world, let's say, was in kind of historic situation. We first bought on spot prices with very high prices first to secure our supply chain. Now, today, when we are 8-9 months after it, I'm happy to say that we are no longer buying at those prices.
Meaning we succeed after understanding what will be needed and what our customer needs, and what is the level of sales of hardware. We made the orders for more than 18 months in advance, and we didn't have to pay again the spot prices that we paid a year ago. Today, what we see in our P&L is what we paid for the inventory, but now it's appearing in the P&L and it's of course creating a decline in our gross margin on hardware. Just rough number for this quarter is worth more than $1 million. This is something that we will live with in the next quarter or two, but looking forward, we expect. Again, we expect, nobody really can assure for longer term, but for the midterm and for 2023, that we are in a very good shape of inventory.
By the way, if you look at our cash position, this cash flow this quarter, you will see that it looks dramatically low, but part of it is because we already acquired high inventory at lower prices. This, of course, today sits in the balance sheet. Once we resell it in three, six months from now, because this is the time of our inventory, we will see an increase in our profitability on the hardware because those inventory already were acquired by us at a much lower price than those that you see today in the P&A. We will have to live one or one and a half quarter more with this, let's call it damage of about $1 million.
Looking more mid and longer term, we are more optimistic that we will turn the profitability to become higher again.
Great. Thanks for taking my questions.
The next question is from Tavy Rosner of Barclays. Please go ahead.
Hi. Thanks for the presentation. Most of my questions have been asked. I wanted to talk about UBI. It sounds like a real differentiator. I'm wondering, you know, what's your go-to-market? Are you going—I mean, I know you're very present in Israel, but outside of Israel, you know, are you marketing these solutions to kind of new logos? You know, what do you see as the potential there down the road?
Ituran, by definition, is today. I would say we are providing kind of a black box with tens of new deals in our black box, and it depend on the market needs and the customer needs, and those things are changing between geographies. Israel today, we're educated, and I think that the insurance industry in Israel changed to be much more customized, and this fit the Israeli market. Of course, for us, it's more than a commercial wide solution and a revenue generator. Of course, it's also providing us with a kind of a local pilot, let's say, for the rest of the world. We realize other segments, for example, in Latin America, as I mentioned, the finance market, that they want to secure their collaterals.
When we talk with the same customers, which can be insurance companies or finance companies, about UBI or customized, the customers. Some of them now start to understand what we are talking about. Those are very heavy companies. Insurance, it's a very traditional industry, and it will take more time. We do some pilots in Brazil, we do some pilot in Argentina, but I wouldn't count that this will contribute to sell UBI out of Israel in 2022 and for the first half of 2023. A year from now, based on the movements of the markets, I hope and I want to believe that what we will achieve in Israel will support our exporting this solution also to other geographies. This is by the way, always was with Ituran.
When we started with our main traditional segment, which is stolen vehicle recovery in Israel, no one in the world did it. We came to Brazil, we came to Argentina. It took us about 3-5 years to convince insurance companies that this is a solution, and today, Ituran in São Paulo and stolen vehicle recovery in Brazil, it's a generic solution. I'm totally believe that in a year from now or a little bit more than this, we will lead the UBI markets also in Latin America, but it will take more time. Okay?
Thanks. I appreciate the color. Very helpful.
If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we poll for more questions. There are no further questions at this time. Before I ask Mr. Sheratzky to 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.com. 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, and I do look forward to speaking with you on the next quarter. Thank you very much, and have a good day.
Thank you. This concludes the Ituran first quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.