Ladies and gentlemen, thank you for standing by. Welcome to the Ituran fourth quarter 2021 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's investor relations team at GK Investor and Public Relations at 1-212-378-8040, or view it in the news section of the company's website, www.ituran.co.il. I would now like to hand the call over to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, would you like to begin?
Yeah, thank you, operator. Good day to all of you, and welcome to Ituran's conference call to discuss the fourth quarter and full year 2021 results. I would like to thank Ituran management for hosting this conference call. With me today on the call are Mr. Eyal Sheratzky, the Co-CEO, Mr. Udi Mizrahi, Deputy CEO and VP Finance, and Mr. Eli Kamer, the CFO of Ituran. Eyal will begin with a summary of the quarter results, followed by Eli with a summary of the financials. We will then open the call for the questions and answer session. I'd like to remind everyone that safe harbor in the press release also covers the contents of this conference call. Now, Eyal, would you like to begin, please?
Thank you, Ehud. I'd like to welcome all of you and thank you for joining us today. We are very pleased with our financial results. They represent a year of recovery and growth, returning to double-digit revenue growth, as well as strong profitability and double-digit EBITDA growth. We reported full-year revenues of $271 million and EBITDA of $73 million. A level we have only surpassed once in our history. I would like to focus on the very solid growth in the subscriber base, which was the most notable aspect of our fourth quarter, 2021 results. We grew our subscriber base at the highest rate we have seen in our history with 44,000 net adds, bringing the total of almost 1.9 million subscribers. The aftermarket segment added 50,000 subscribers during the quarter and is approaching 1.5 million subscribers.
The growth in subscribers came from both our traditional businesses and was boosted by our growth engines. These include increased traction from our usage-based insurance, UBI business in Israel, working with car financial companies in Brazil and Mexico, new activities with rental companies in South America, as well as growth from our U.S. business. We expect this type of subscriber growth to continue into next year, and we have raised our expectation, which were typically 20,000-25,000 net subscriber growth per quarter or 80,000-100,000 per year to between 140,000-160,000 per year in 2022. I want to discuss Ituran's overall ARPU. The new growth engines are at a lower revenue per user than the average of our traditional aftermarket business, which will have the effect of lowering our overall ARPU.
However, I highlight that our gross margins on the lower ARPU subscribers are similar to that of the existing business. In addition, as our business scale up faster, we can better harvest the operating leverage, which is inherent to our business model, where typically each individual subscriber add does not require any growth in operating expenses. Those subscribers tend to stay with us for a long period. I would like to stress that while 2021 has so far been a strong year for Ituran in terms of new subscriber growth, the real benefit from the additional subscribers that we gained in the past year will benefit us more toward the end of 2022, 2023 and beyond. With regard to the UBI business, in 2021 we won significant business, and we are now working with all seven major insurance companies in Israel.
We continue to see increased traction as the Israeli consumer market become 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 the typical commute. The corona slowdown created plenty of new markets and opportunities, and over that time, new car sales around the world went down. As I explained last quarter, we identified a strong secondhand car market in many of our geographies in Latin America, and new fintech startups, as well as the large banks, have come in to provide the financing in this market. However, they need a provider of location-based and connected car technology, such as Ituran, to monitor the cars and driver behavior, and by this, lower the risk of the loan against the car.
We are quickly moving forward and are already working with financing companies with our solution. We're excited about this business and see great potential for additional growth in the coming years. I would like to address the electronic component shortage that has been widely reported over the past year and remains an issue for everyone. Despite the demand vastly exceeding the supply and high prices, we have successfully been managing through the shortage to date. In the current quarter, Q1 2022, we will see increased cost for raw components for our products, which will temporarily lower our product gross margins in the first half of 2022. It is important to note that as primarily a subscriber service business, the impact on Ituran to date has been low and has primarily been on the product revenue side, which has smaller effects on our bottom line.
Our continued profitability and ongoing cash generation enable us to share the rewards of our success with our shareholders. We have two programs. One is our regular dividends of $3 million to shareholders, and we issued a total of $12 million in 2021. Our second program is our share buyback. During 2021, we purchased $7.3 million worth 280,000 shares of Ituran. In summary, I'm very pleased with our performance, both our traditional business and especially our growth engines, which we have seeded over the past few quarters, which we expect will accelerate our growth in the years ahead. The solid performance can be seen in the jump in our subscriber base, which has grown well ahead of our expectations and has allowed us to increase those expectations for the current year.
I am more excited now than ever with our long-term potential over the coming years. I will now hand the call over to Eli for a 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 fourth quarter of 2021 were $74 million, an 11% increase compared with revenues of $66.3 million in the fourth quarter of 2020. Revenues from subscription fees were $48.8 million, up 7% year-over-year. Revenues for 2021 were $270.9 million, 10% above the $245.6 million reported in 2020. Revenues from subscription fees were $189.6 million, representing an increase of 4% over 2020.
The subscriber base amounted to 1,881,000 end of December 31st, 2021, an increase of 44,000 net over that of the end of the prior quarter and an increase of 113,000 since the end of the fourth quarter last year. Fourth quarter product revenues were $21.6 million, up 21% year-over-year. Full year 2021 product revenues were $81.2 million, representing an increase of 30% compared with the same period last year. The geographic breakdown of revenues in the fourth quarter was as follows. Israel 52%, Brazil 20%, rest of world 28%.
EBITDA for the quarter was $18.9 million or 26.9% of revenue, an increase of 14% compared with an EBITDA of $16.6 million, or 26.1% of revenues in the fourth quarter of last year. EBITDA for 2021 was $72.7 million, 26.8% of revenues, an increase of 56% compared to $46.7 million, 26.7% of revenues in 2020. Net income for the fourth quarter of 2021 was $9.6 million, 13.6% of revenues, or diluted earnings per share of $0.46 compared with $6.8 million, 10.7% of revenue for diluted earnings per share of $0.33.
Net income in 2021 was $34.3 million, 12.6% of revenue, for fully diluted earnings per share of $1.65, an increase of 113% compared with net income of $16.1 million, 6.6% of revenue for fully diluted earnings per share of $0.77 in 2020. In 2020, there was impairment charge of $13.5 million. Excluding the impairment charge, in 2021, the net profit increased by 16%. Cash flow from operations for the fourth quarter of 2021 was $16 million. Cash flow from operations for the year was $55.8 million.
As of December 31st, 2021, the company had cash, including marketable securities, of $54.7 million and a debt of $31.4 million, amounting to a net cash of $23.3 million. This is compared with cash including marketable securities of $78.8 million and a debt of $54.5 million, amounting to a net cash of $24.3 million as of December 31st, 2020. For the first quarter of 2021, a dividend of $3 million was declared. In the fourth quarter, u nder the renewed program, 208,000 shares were purchased for a total of $5.4 million.
During 2021, a total of 280,000 shares were purchased, totaling $7.3 million. Shares repurchased were funded by available cash, and repurchases of Ituran ordinary shares were made based on SEC Rule 10b-18. With that, I'd 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 your handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Tavy Rosner of Barclays. Please go ahead.
Hi, this is Chris Reimer on for Tavy. Thank you for taking my questions. First off, congratulations on a strong quarter. I wanted to touch on gross profit. You alluded to some of the supply chain issues in your comments. Could you just give some color on the moving parts into costs and what kind of things you're seeing in terms of cost inflation and supply chain issues?
As of today, as you mentioned, and we mentioned it on the screen, the component shortage all over the world is getting bigger. Of course, as of now, we managed to deal with that in a good way. I believe, and as we mentioned, that during the first semester of 2022, we'll see some effects of this component shortage, and that, of course, will decrease the gross margin of the hardware segment a little bit. It's not something that we see as significant or material for our business as the main 70% of our revenues is coming from the service revenues, and over there is no effect.
Got it. Just in the subscriptions guidance, can you give any granularity into where you see the largest growth either by product or geography?
Okay. As I said, we have, I would say, two type of growth in our subscriber base. One is the traditional, which is mainly SVR, stolen vehicle recovery, which is quite having lower growth. The markets which we already dominate many years, such as Israel and Brazil. On the other hand, during the last 2 years-3 years, mainly during the Corona, we identified other needs, or we also looked for other segment which will allow us again to come and grow again when the Corona relieve us. As I mentioned in the last quarter and now, we identified main two segment. One is a finance company and even commercial bank that provide loans for people to buy cars.
We do it mainly in Brazil and in Mexico, and we actually, I would say, almost invented this segment, and we see a lot of interest. This contribute few thousand per month in each of those countries, Brazil and Mexico. The second segment, which in the past, specifically in Latin America, we didn't focus, we decided to focus during the Corona, is the B2B, the fleet management solution. We are now having some strong channels such as leasing company and commercial rental cars companies, which are pushing our solutions to many fleets. This is again a new segment that in the past we approach it only in the Israeli market. In Israel, we are for many years, we are dominating the fleet management segment.
Now we want to copy it to Latin America, and we do it very fruitfully in Brazil and Mexico. This is why we succeed to show higher growth than in the past. The third one, which it started also three years ago, is the usage-based insurance, which is currently available or currently has traction only in the Israeli market. We started three years ago, and today, as I said, we have contracts, and we distribute our solution among almost 100% of the Israeli insurance companies. The Israeli market is still under, I would call it, a stage of educating the audience to buy insurance based on their mileage, based on their driver behavior. This is something that we have to understand. It's changing the market totally.
We have to educate the brokers. We have to educate the centers of the insurance companies. We do it quite impressive. Still, we expect a strong growth. This is another segment which provide new subscribers that we didn't have in the past. Having said all this. I beg you at the beginning of your question, those segments and those specific B2B businesses required us to provide the services for these specific solutions with the lower ARPU. If you consider the current ARPU of the group, you wouldn't see almost any change because when you have 1.8 million subscribers, even if you grow 100,000, the influence is quite low. The new subscribers are with a lower ARPU.
When I'm saying lower, it's not dramatically lower, it's about two-thirds. If we have an average of $9-$10 ARPU of the group, here we are talking about a new ARPU for this new customer of $6-$7. It's very important to mention that since it's a B2B business or it's a B2B segment, our cost of maintenance, our cost to support each one of the subscriber is much lower, meaning on the profit side, we hope and we see that it will have at least the same profitability margins.
Mm-hmm.
In the revenue growth, it will be lower than the number of subscribers expected, but on the profit side, it should contribute to us as our historical operating leverage contribution.
Got it. Thank you. That was good color. I'll go back to the queue now.
The next question is from David Kelley of Jefferies. Please go ahead.
Hey, good afternoon, guys. Thanks for taking my questions. Maybe to follow up on the earlier supply chain discussion, I guess, are you seeing any shortages that are limiting volumes on the product side? Or is the impact solely tied to input cost inflation at this point?
At the beginning, there was, of course, some problem to understand where the market goes, where the prices goes, what is the needs of our customers. Today, I'm happy to say that even in Q4, we succeed to deliver any request, and what we did during the last six months is we prepared, and we signed contract with suppliers for the next year and ahead of it with specific terms. I'm not expecting any shortage from our side to our customers. We are answering all the requests. We have to understand that the request, specifically in the OEM market, is lower because if car manufacturers has their own problems with components.
We know that there are some plants in the world that even close their doors. We are not seeing this situation with our customers in Latin America, but of course, they sell less. I think that there is a decrease of 20%-25% in new car sales, which affect our OEM business. Back to your main question, we don't see or we are not expecting, as of today, of course, any shortage from our side to our customers. We will provide any unit that they will ask. Of course, we increased our sales, we increased our inventory. The minus is, or the disadvantage is it cost us more.
This is something that we said, and also Udi answered, we have additional costs to our hardware, which means it's lowering some portion of our gross margins on the hardware. If you go to our financial reports, you will see that it's a. Of course, every dollar is material, but generally speaking, it will not cause a high influence on our profits. I think we will have it a part of the business today.
Okay, great. That's helpful. Thank you. Back to the raised full-year subscriber growth forecast. It's about 50,000 subscribers above your kind of historic typical core outlook for the year. I was just hoping you could provide a bit more color on the core aftermarket business, how you're thinking about that. You know, if there's any upside there, if this is solely raised due to some of the growth engines such as your UBI opportunity.
I think that the numbers and the forecast speaks for itself because if we expecting to do on average something like 150,000 this year. It's about, I think that, it represent historically something between 2 years-3 years in the past. This, I think is the strong proof of, first, that we choose the right, the right segment, the right ways, and now we're reaping the fruit.
No doubt that when you have a subscriber-based business, it's taking time, I would say, to change from subscriber growth to revenue and profits. This is why I said that we will see it more material toward the end of this year and for sure for 2023, because then we will see the package of all these 100,000 new subscribers provide revenues on the same months, on the same quarter. I believe that those numbers of subscriber growth a year will turn shortly to a higher growth, mainly in the profits, as I said, because we are operating leverage model. Sometimes when people judge growth, they judge revenue-based.
I think that in operating leverage business, it's very important, and this is how I see it, is to judge the company based on the profits and profitability because we don't have to grow a lot in the revenues to grow materially in the profits, and this is what I'm expecting to happen.
Okay. Thank you. Last one for me, and then I'll pass it along. The financing opportunity you referenced in the prepared remarks, is that mostly U.S. related via your buy here, pay here exposure, or are you also seeing opportunities in other regions as well?
The answer is absolutely not. In the U.S., for almost 10 years, that's what we do. This is our main segment because the SVR in the U.S. is not a business, it's not attractive, and that's the segment that we are focused in the last 10 years. The U.S. business is a focus on a buy here, pay here, and meaning financing the car, and then they use our system or other telematics company systems in order to secure the car loan. It hasn't been part of financing in Latin America, and we learn the fintech market, we learn the subprime loans in Brazil and in Mexico, and we decided, it's a fertile ground for us to offer it to our finance companies, and that's what we did during the last year.
We succeed to convince some fintech companies that opens a marketing platform plus finance for secondhand cars, as well as banks that finance new car sales. All of them or most of them really like our model, and we explain how they can save money and make money from their finance deals. I'm happy that today this is one of our main growths, and we just started it in April 2021. We have to understand, we are only in the beginning, and look how influence it has our current customer growth, and we only started.
Okay. Got it. Thanks, again for taking my questions. Appreciate it.
The next question is from Eli Bernstein of Ezioni Portfolio Management. Please go ahead.
Yes, guys. I wanted to ask regarding the new segment of the banks and the finance companies, just to get more idea, why do they really need your services? I mean, a bank that would like to give new loans to a customer, why does he need to know the location of the vehicle or how he's driving? Thank you.
Explain what is their interest. When they give a loan to someone and this someone most of the times or sometimes he has a subprime, he has no enough credit in his bank, and their confidence is based only on the car value. When someone stop paying the monthly payments or the quarterly payments, they need to bring the car back usually, and one of the things that we learn also in the U.S. in the last decade is that people, they don't pay, and they continue. They are not criminal. Most 95% of the situation, they are not criminals. 5% is like SVR because someone cheat the dealer.
Most of the time, you're talking about normal people that just have no money to pay the banks, and they continue to drive the car, and they behave like the car belong to them, and they are not paying. Now, when we talk about countries as the size of Brazil, Mexico, or the U.S., they will not sell the car, and the car is their only asset. By controlling the place and, by the way, controlling the ignition and by the capability that we provide to send a buzzer with a notification to the customer, "Please pay or else we'll take the car," most of the time it help, and at the worst case, there is a repossession that we do for the banks. So this is the...
By the way, we showed in the U.S., which is a very large segment, there are many companies such as that do it. In Brazil already, with any pilot that we did, we showed a very high return, let's call it return on their equity of the finance groups.
Okay. I see. Got it. Thank you. Another question. I wanted to know about the UBI proposition. In Israel, it's obviously very strong with seven insurance companies. Can you take it to other places? I mean, I would guess that insurance companies all over the world would like to make this kind of insurance or mileage-based. Is it possible to take it to Europe, for example, to penetrate new places, Latin America?
Okay. We started in Israel, but be sure that the first thing after we have one or two years of operation in Israel, we are trying now to expand it to other markets, first to the geography that we already operate. It's always better because it's first of all, it's like upsell, is dealing with the same customers that we have a very good relationship, so we try to do it in Latin America. I must say that with a lot of experience with insurance companies, insurance companies are very traditional. I would say are very heavy machines to change models, which include billings, actuary. Also in Israel, it took us many years to convince the insurance companies that this can contribute to their offers and to their profits.
Now I must say that it's not easy now to penetrate Brazil, Argentina and Mexico. We have some pilots, but I see something that was at the beginning in Israel. It will change once the digital insurance companies will penetrate the market. It's just starting now in Latin America, and when this will start, the traditional insurance companies will have to find ways to be more advanced and more attractive with prices. This is the window that allow us to penetrate so aggressively in Israel in less than two years with all the markets. I believe that it will take one or two more years, but of course, everything that related to insurance industry in Israel, it will fit other markets. We are now putting the seeds. We're creating the presentations, some pilots.
I don't want now to say that in 2022 we will see UBI customers from Latin America, but it will happen one day, of course.
Okay. Thank you. Last question I guess for Eli. On the cash flow statement this quarter, $11.3 million settlement of obligation to purchase non-controlling interest. Can you please remind us what it is and if any other payment is necessary in the future?
Yeah. If you remember, in 2018, we acquired 81, almost 82% of Road Track, and according to the agreement in October, we finalized the rest of the shares. Actually as of today, we are holding 100% of Road Track, the OEM operation.
Okay. Right. In the minority, what will be left there to see?
There is no minority. I'm sorry. We purchased from the minority the 18%. The rest of the minority, we're talking about ERM, our subsidiary? Yes. Which is about 49%.
Okay. Got you. Thank you.
If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please standby while we call for more questions. There no further questions at this time.
Before I ask Mr. Sheratzky to go ahead with his concluding 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?
Yes. On behalf of management of Ituran, I would like to thank you, our shareholders, for your continued interest and long-term support of our business. I do look forward to speaking with you next quarter. Have a good day. Thanks.
Thank you. This concludes the Ituran fourth quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.