Kenny Green - GK Investor Relations Eyal Sheratzky - Co-CEO Eli Kamer - CFO Udi Mizrahi - VP, Finance

Ladies and gentlemen, thank you for standing by. Welcome to the Ituran's First Quarter 2015 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 hand the call over to Mr. Kenny Green of GK Investor Relations. Mr. Green, please begin.

Thank you. Good day to all of you and welcome to Ituran’s conference call to discuss the first quarter 2015 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 content 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 I thank you for joining us today. We're very pleased with our results of the first quarter, particularly with a strong growth in our subscriber base in the past three months. Ituran has been in business for over two decades, and this quarter we experienced the fastest growth in subscribers by a long stretch in our history. We added 28,000 net new subscribers in the quarter. This very much demonstrates that our core business continued to grow very soundly and remains as strong as ever. Subscriber base demonstrates that fundamentals underpinning our business are especially strong. The substantial strengthening of the U.S. dollar versus the local currencies in which we sell in, in particular the Brazilian Real, which has devaluated by 25% in one [year] [ph], and the Israel Shekel which is devaluated by about 13% made it hard to show growth in U.S. dollar terms. However, in local currency terms, revenues overall grew by 11%, while subscription revenues grew by 15%. Our operating income would have shown 9% growth over the last year. As I've talked about in the past, every new subscriber has a minimal cost to us as we already have the infrastructure to support them. So as our subscriber base grows, our margins grow, and this is fairly apparent in the longer term changes in our gross margin. In the two years since the end of 2012, we've grown our gross margins by 400 basis points from around 49% to 53% now. Given the accelerating growth in the subscriber base, I expect to continue the trend of improving margins. We're generating operating cash flow in the quarter of $8.7 million, ending the quarter with $35.3 million in cash and equivalents. During the first quarter, we declared a dividend of $3.4 million, representing 50% of our net profit in the quarter. I would like to provide you with a brief update with regard to our performance in our two main regions, Brazil and Israel. Firstly in Brazil, we're growing very nicely and the worsening economic environment there is not having a significant effect on our success there. We've broadened our corporation with insurance companies and this enabled us to expand the audience we're marketing. At the same time, we also see increased interest in growth from the private market, allowing us to move away from dependency on the insurance companies. This has allowed us to achieve record subscriber acquisitions, and Brazil remains a major contributor to our overall subscriber growth. Looking ahead, U.S. [ph] the Brazilian economy is weak. We see more and more costs in this major market incorporate Telematic technology in this huge market. We see our business as still at an early stage in the market with low penetration, with potential to grow substantially, and we expect to continue growing quickly for a foreseeable future even in the face of a slowing economy. In Israel, as the major player, our business continues to grow in line with new car sales, which remain at high levels. At the same time, we continue to penetrate the lower segment of the market through our Ituran save service. 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, we've started 2015 in excellent shape, and we're very pleased with our performance. Despite the recent currency headwinds, we couldn’t be better positioned to benefit in the coming quarters from our strong growth in subscribers. While the dollar strength has masked the financial strength of our business performance, we remain very pleased with our start to 2015. Baring negative exchange rate fluctuation, we're confident that 2015 will be another year of growth and improved profitability and I'll now hand the call over to Eli for a financial review, Eli?

Thanks, Eyal. Revenues for the first quarter of 2015 were $44.2 million, down 2.8% when compared to revenues of $45.5 million in the first quarter of 2014. When excluding the currency impact of the strengthening U.S. dollar, our year-over-year growth in revenue would have been 11%. Revenue breakdown for the quarter was $31.9 million coming from subscription fee, a 1% year-on-year decrease. In local currency, revenues from services increased by 15% over the first quarter of last year. Product revenues decreased by 8% compared with the same period last year. This was due to the significant weakening of the various currencies in which Ituran sells its products, mainly the Israeli Shekel versus the U.S. dollar. In local currency terms, product revenues grew by 2% compared with product revenues reported in the first quarter in 2014. The geographic breakdown of revenues in the first quarter was as follows; Israel 51%, Brazil 35%, Argentina 10%, and United States 4%. Gross margin in the quarter was 52.9% compared with a gross margin of 52.2% in the first quarter of last year. Operating profit for the first quarter of 2015 was $10.5 million, a decrease of 10% compared with an operating profit of $11.7 million in the first quarter of 2014. Excluding the impact of the change in exchange rates over the period, the operating profit would have increased 9% over the first quarter of last year. EBITDA for the quarter was $13.2 million or 29.9% of revenues, a decrease of 8% compared to EBITDA of $14.4 million or 31.7% of revenues in the first quarter of 2014. Excluding the impact of the change in exchange rate over the period, the EBITDA would have increased 11% over the first quarter of last year. Net profit was $6.8 million in the quarter or fully diluted EPS of $0.33. This is compared with a net profit of $7.3 million or fully diluted EPS of $0.35 in the first quarter of 2014. Cash flow from operation during the quarter was $8.7 million. As of March 31, 2015, the company had net cash, including marketable securities of $35.3 million or $1.68 per share. This is compared with $40.8 million or $1.94 per share as at December 31, 2014. For the first quarter, a dividend of $3.4 million was declared. The dividend record date is June 17, 2015, and the dividend will be paid on July 2, 2015 net of taxes and leverage at the rate of 25%. 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 Matthew Hander [ph] from Harbor Asset Management. [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? : :

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 First Quarter 2015 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.