Kenny Green - GK Investor Relations Eyal Sheratzky - Co-Chief Executive Officer Eli Kamer - Chief Financial Officer Udi Mizrahi - Vice President, Finance.

Ladies and gentlemen, thank you for standing by. Welcome to the Ituran Fourth Quarter and Full Year 2014 Results Conference Call. All participants are at present in listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session.

[Operator Instructions] 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 call GK Investor Relations at 1-646-201-9246. I will now handover the call over to Mr. Kenny Green of GK Investor Relations..

Thank you. Good day to all of you and welcome to Ituran’s conference call to discuss the fourth quarter 2014 results. I would like to thank Ituran’s management for hosting this conference call. With me on the call today are Mr. Eyal Sheratzky, Co-CEO; Mr. Eli Kamer, CFO; and Mr. Udi Mizrahi, VP, Finance.

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.

And now, Eyal, would you like to begin please?.

Thank you, Kenny. I would like to welcome all of you and thank you for joining us today. We are pleased with our results of the fourth quarter, ending the best year in our history. Ituran has been in business for two decades and this quarter we experienced the fastest growth in subscribers in our history.

We added 22,000 net new subscribers in the quarter. This very much demonstrates that our business continues to grow soundly and is strong as ever. Our continued improvement in margins, in particular, our gross margins of 54.4% continues to demonstrate the strong operating leverage inherent in our model.

The additional cost of servicing every new subscriber that we add is low. So as our subscriber numbers grow, we expect to continue the general trend of improving our gross margins.

Like other companies that sell outside the United States, but report revenue in US dollars, due to the strong appreciation of the US dollar over the past year, it has diminishing effects on our revenues.

I know that in local currency terms, our subscription revenues grew by 14.5% over those of the fourth quarter last year, driven by strong growth in our subscribers over that time. We are therefore very happy with the overall trend in our business.

We generated operating cash flow in the quarter of $7.2 million, for this is after the payment of $4.5 million in legal fees related to our successful dismissal of the appeal by the State Revenue Services of Sao Paulo against Brazilian subsidiary over unpaid taxes. We ended the quarter with $40.8 million in cash and equivalents.

As you know, we have a policy to share at least half of our net profit with our shareholders and for the fourth quarter, we issued a dividend of $7 million, representing close to 100% of our net profit in this quarter.

For the year, we have issued $19.5 million in dividend, representing about 64% of our full year’s net income and 8% more than last year. I’d like to provide you a brief update with regard to our performance in our two main regions, Brazil and Israel.

Our business continues to grow very nicely and Brazil remains a strong contributor to our overall subscriber growth. We achieved record subscriber acquisitions in the quarter. As you know, we had a legal victory in our issue with the Sao Paulo tax authorities and that claim was rejected.

While our argument with the tax authorities has never negatively affected our strategy in Brazil, it was always in the [indiscernible] takes a large rate of our shareholders and removes a long-standing overhanging legal issue with large potential associated costs.

Additionally, this victory makes clear slightly we will clear similar issues with the Brazilian tax authorities in the future. We’re pleased to put this issue behind us and look forward to continuing our growth and expansion in Brazil.

Throughout 2014, we have continued to market our brand strongly in the region and we’re seeing increased interest and growth from the private market allowing us to move away from dependency on the insurance companies.

Looking ahead, as more and more cars in this major market incorporate Telematics technology, we expect to continue growing and we look forward to further realizing our full potential in the region. In Israel, as the major player, our business continues to grow in line with the new car sales, which has recently been reported at record levels.

At the same time, we continued to penetrate the lower segments of the markets through our Ituran service. This has enabled us to show solid growth in our subscriber numbers in our local market. Overall, we remain pleased with the strength and stability of the Israeli business and it is supporting our overall growth in net subscribers.

In summary, 2014 was a fantastic year for Ituran and our performance is the best it has ever been. Even given the recent currency headwind, we still showed record revenues combined with record gross operating and net margins. This all makes us confident that 2015 will be a good year.

Barring any unusual exchange rate fluctuation, I expect to see our revenue growth continue. We look forward to further seeing the reward of our past efforts and maintaining our growth trend, while continuing to improve our profitability. I will now hand the call over Eli for the financial review.

Eli?.

Israel 49%, Brazil 38%, Argentina 9%, and United States 4%. Gross margin in the quarter was a record 54.4% compared with gross margin of 52.9% in the fourth quarter of last year. Operating profit for the fourth quarter of 2014 was $10 million, an increase of 24% compared with an operating profit of $8 million in the fourth quarter of 2013.

Excluding the impact of the change in exchange rate over the period, the operating profits would have increased 44% over the fourth quarter of last year. EBITDA for the quarter was $14.1 million or 32.3% of revenues, a decrease of 4% compared to an EBITDA of $14.6 million or 33.5% of revenues in the fourth quarter of 2013.

Excluding the impact of the change in exchange rates over the period, the EBITDA would have increased 4% over the fourth quarter of last year. Net profit was $7 million in the quarter or fully diluted EPS of $0.33. This is compared with a net profit of $4 million or fully diluted EPS of $0.19 in the fourth quarter of 2013.

Cash flow from operations during the quarter was $7.2 million. During the fourth quarter, the company paid $4.5 million in legal fees as mentioned earlier. In terms of full year 2014 number, revenue for 2014 reached $182.1 million, an increase of 7% over revenues of $170.2 million in 2013.

Excluding the impact of the change in exchange rates over the past year, the revenues would have increased 14% over last year. The subscriber base grew by a record 76,000 net subscribers during 2014.

Revenue breakdown for the year was $133.7 million coming from subscription fees, a 5% increase year over year; product revenues were $48.4 million, a 12% increase year over year. Gross margin in the year was at 53.3% compared with 52.5% last year. Operating profit for 2014 was $45.9 million compared with an operating profit of $38.3 million in 2013.

Excluding the impact of the change in exchange rates over the period, the operating profit would have increased 29% over last year. EBITDA for the year was $58.1 million or 31.9% of revenues compared to an EBITDA of $54.3 million or 31.9% of revenues in 2013.

Excluding the impact of the change in exchange rates over the past year, the EBITDA would have increased 13% over last year. Net income in 2014 was $30.4 million or fully diluted earnings per share of $1.45. This is compared with a net income in 2013 of $23.8 million or fully diluted earnings per share of $1.13.

Cash flow from operations for 2014 was $37.7 million. As of December 31, 2014, the company had net cash, including investment in marketable securities, of $40.8 million or $1.94 per share. This is compared with $46.6 million or $2.22 per share as at December 31, 2013. For the fourth quarter, a dividend of $7 million was declared.

For the full year of 2014, the total dividend declared including that of the fourth quarter of 2014, was $19.5 million, representing 64% of the full year net income. The dividend’s record date is March 24, 2015 and the dividend will be paid on April 8, 2015, net of taxes and leverage at the rate of 25%.

And with that, I’d like to open the call for question-and-answer session.

Operator?.

[Operator Instructions] The first question is from [Bernard Manor of RL].

I wanted to know where do I see in the P&L or in the cash flow the fee that was paid, the $4.5 million in legal fees.

Is it in general and administrative expenses?.

For the provision that was done in 2010, actually in the P&L you will not see it, but you will see in the cash flow. So in the cash flow statement, you saw it in the operational cash flow..

In the operational cash flow, it was deducted?.

That’s correct..

So in the EBITDA, I see the influence of that tree?.

No, it’s inside..

So the EBITDA....

This amount was provisioned two years ago, so actually there’s no effect on the....

No cash effect, all right.

Another question, can you tell us about the Brazilian market, do you see it evolve this year and a bit of – how do you see the legislation there evolving regarding the mandatory of Ituran products in the car market there?.

Okay. So first of all, we don’t see any decreasing or change against that regard, our penetration to the retail market, which is the car owners, which is direct sales, also we are not seeing any decreasing in our continuing collaborating with the insurance companies as well. This is the general view about our segments in the market.

Regard, I believe, you meant 245 regulation, which is not yet enforced after many years that it was declared, it was delayed during 2014 for at least two years. So I wouldn’t count on having any influence during 2015 and to be sarcastic, I would say that wouldn’t count on this regulation for Ituran at all in the short term for sure..

And something about the other markets, the Brazil or Israel, something new?.

No, as we said in the past, we are always looking for adding services, we’re using our new launch of application and services. We’re offering these to different segments in the market. We’re continuing to look for cooperation, collaboration with car manufactures as we do in Israel with the car importers.

And I can’t give any notice about specific new issue, but we believe that during this time, as we grow our subscribers and our brands, we will add additional services, as I said, like car diagnostic, car safety, what we call the concierge services like we do in Israel, which is growing and growing.

So we basically continue to build program for Brazil as well..

Can you tell us about your assessment of growth rate for the years to come, the short term, the longer term?.

Currently, we’re not providing guidelines.

I can just give a general phrase to tell you that since our model is an operating leverage model and we have a customer base growing very material in the last years, it means that in our revenue line, it’s very difficult to grow or to continue to grow double digit or in the total number, we’re growing highest ever, I still can say that based on the operating leverage model, our growth in profitability or more likely to say in the profits like the net income and EBIT can grow in double digits..

[Operator Instructions] 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.co.il. Mr.

Sheratzky, would you like to make your concluding statement?.

Thank you. On behalf of the management of Ituran, I would like to thank you for your continued interest and long-term support of our business. We look forward to 2015 with continued growth in revenue and growing profitability. I do look forward to speaking with you and updating you again next quarter. Have a good day. Bye..

Thank you. This concludes the Ituran Fourth Quarter 2014 Results Conference Call. Thank you for your participation. You may go ahead and disconnect..