Ladies and gentlemen, thank you for standing by. Welcome to the Ituran Third Quarter 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 hand the call over to Mr. Kenny Green of GK Investor Relations. Mr. Green, would you like to begin?

Thank you, operator. Good day to all of you and welcome to Ituran’s conference call to discuss the third quarter 2014 results. I would like to thank 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 would like to remind everyone that the Safe Harbor statement made 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 very pleased with our results today. It very much demonstrates the strong operating leverage inherent in our model by our record margins across the board. Furthermore, the addition of 20,000 net new subscribers in the quarter is also one of the highest for us and demonstrates that our business continued to grow soundly. Revenues grow by 10% over last year to $46.5 million with subscription revenue growing 10% and product revenues growing 9%. Compared with last quarter, subscriber revenues increased by $0.3 million. As you know, towards the end of the third quarter until to-date, the dollar has strengthened significantly against the Israeli shekel and Brazilian real. This will likely affect our revenues in dollars in the coming quarter, which in local currencies we expect to continue growing. Most noticeably, this quarter we reported very strong profitability. Our gross margin level was at a record of 53.5%. The additional cost of servicing with 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. We grew our operating income by 12% year-over-year and reported our highest ever operating margin at 26.1% versus 25.5% a year ago. This is a clear demonstration of the strong inherent operating leverage built into our business model. Our current business infrastructure can support any new subscriber we add. We generated an excellent level of operating cash flow in the quarter of $12.9 million. We ended the quarter with $45.5 million. As you know, we have a policy to share at least half of our net profit with our shareholders and for the third quarter, we issued a dividend of $4.5…

Thanks, Eyal. Revenues for the third quarter of 2014 were $46.5 million, representing a 10% growth from revenues of $42.4 million in the third quarter of 2013. Revenue breakdown for the quarter was $34.4 million coming from subscription fees. At 10% year-on-year increase, product revenues were $12 million, which were a 9% increase over the same quarter last year. The geographic breakdown of revenues in the third quarter was as follows: Israel 51%, Brazil 38%, Argentina 7%, and United States 4%. Gross margin in the quarter was 53.5% compared with gross margin we had in the third quarter of last year at 51.8%. Operating profit for the third quarter of 2014 was $12.1 million, an increase of 12% compared with an operating profit of $10.8 million in the third quarter of 2013. EBITDA for the quarter was $15 million or 32.2% of revenues, an increase of 10% compared to an EBITDA of $13.6 million or 32.1% of revenues in the third quarter of 2013. Net profit was $8.7 million in the third quarter of 2014 or 18.7% of revenues or fully diluted EPS of $0.41. This is compared with a net profit of $7 million or 16.5% of revenues or fully diluted EPS of $0.33 in the third quarter of 2013. Cash flow from operations during the quarter was $12.9 million. This strong cash flow in the quarter was due to the strong level of operating profit as well as a delay in the payment of approximately $1 million to a supply in Brazil, which will be made in the fourth quarter. As of September 30, 2014, the company had net cash, including marketable securities of $45.5 million or $2.17 per share. This is compared with $44 million or $2.10 per share as of June 30, 2014. For the third quarter of 2014, a dividend of $4.5 million was declared in line with the company’s stated policy of issuing at least 50% of net profit in the dividend on a quarterly basis. The dividend’s record date is December 23, 2014 and the dividend will be paid on January 7, 2015, net of taxes and leverage at the rate of 20%. And with that, I would like to hand you back over to Eyal. Eyal?

Thank you, Eli. We remain very well positioned as the leader in our main two markets, Israel and Brazil and we continue to experience growth in both markets. As we grow the operating leverage inherent in our business model is very much in place and we look forward to continuing our strong growth trend in both revenue and profits. And with that, I would now be happy to take your questions. Operator?

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

Yes, good afternoon. Thank you for taking my question. I have three. As you look at the business kind of over the next 3 to 5 years, what is the most significant growth opportunity, is it SVR, continued SVR penetration in Brazil? I would love to hear your thoughts on that and then I will follow up with my other questions.

Hi. First, based on our current geographies and the current business model, the answer is yes. Stolen vehicle recovery is specifically in Brazil allowing us to continue and grow the total penetration of the industry that we represent is very, very low compared to the potential and we will continue to count on this market, yes.

And just related to that, when I look – when you look at your total Brazil business, is the preponderance of that SVR versus fleet?

Actually, our main application, main segments that we are focusing in Brazil is the SVR, no doubt that since we have on our shelf all the other let’s call it friendly applications such as the fleet management, driver diagnostic and safety etcetera, we still have other solutions to offer and this will allow us to of course to maybe to increase our growth in Brazil, but since the market is so big and we are spending a lot of efforts in continue and adding SVR customers, we are not yet ready to invest in the fleet segments, but no doubt, first of all, actually we started no doubt that in more mid and long-term, it will contribute to additional growth in Brazil.

Okay, understood. And could you just address the overall competitive environment on the SVR segment in Brazil, it seems that the fleet business at least in other geographies is a lot more competitive and you read about a lot of new entrants, what is the current competitive environment in Brazil like especially I guess on the SVR side where your business is a lot more weighted?

Okay. First of all, I think you are right the fleet management field is more competitive I would say from our point of view or from our specialists. Also in Brazil, there are more companies or large companies at least around our size, which are more focusing and controlling the fleet area. By the way, most of them in the history, where our competitors also for the SVR, I don’t want to be seem arrogant, but in the last 3 to 5 years, most of them, I would say almost quit the SVR segment. I don’t know if it’s – thanks to our leadership or competitive advantages, etcetera, but they transfer their focus to fleet management, while on the same time we continue focusing on SVR. So, in the fleet management, there are more players or more larger players to-date. When we talk about SVR, so still there is, of course, competitors, but we are really leading the market in terms of customer base and also on the incremental customer in the market. The main competitors are the local I would say licensor of LoJack, which historically was there when we came to the market. It is also a mature player. Car System, which is using a specific and different technology, it’s more a changing technology, less location, much less enforcement, people etcetera, but still we consider them as a competitor, of course, smaller than us. Those are the two main players. There are as we know additional two players. One of them is Sascar that was acquired by Michelin a few months ago for about $700 million, which again based on their published they have about 40,000 SVR customers, the rest of fleet management customers and Zatix, which its company owned by Patria, a local private equity. Also, again based on public information that we sold about 40,000, 50,000 SVR customers, so practically, these represent the major part of the SVR service providers in Brazil.

Okay, thank you. That’s very helpful. And I guess related to that you have a very profitable business and what’s curious or at least to think through is why do you think it is that there is not – competitors aren’t rushing more into the SVR market in Brazil to take advantage of what seems to be a very large and growing opportunity? What’s preventing them from – what’s preventing others from kind of coming in and competing more aggressively with you?

Let me be a bit sarcastic, why there is no second entrant. Practically, I know the answer, we do what we think is the best. We do what think will keep us leaders. I don’t think it’s only the technology, but to operating this kind of service, specifically in Brazil, it’s included from one end the technology and from the other end is the models of operation in the field. I mean, like having the right ability connections capability to recover the car to work with the authorities, also now which we I think experienced many years before we went to Brazil and Israel, although it’s different mentality, but again on the field, the experience is helping a lot. Don’t forget that in Brazil what we experienced is the last – in the last 15 years is a lot, for example, IT problems that we had to overcome. If a new player comes today to Brazil, he has to build his own IT solutions for operating the system and Brazil is really different than do it in the U.S. or in the UK or even in Israel. It’s a lot of barriers that we suffered, spend a lot of money, a lot of time, but once we overcome it, it’s an advantage for against others that will penetrate the market. So, not everything is the market itself, right, the market is big, the potential is huge, but in the end of the day, you have to be perfect player, you have to be leader and that’s what I am happy that we succeed to do, but perhaps no.

Okay, thank you. And the last question I have is on margins, obviously you are being able to leverage the infrastructure and systems we have in place now again looking down the road a couple of years what do you think is possible in terms of margins for the company assuming you don’t go into new geographies and you just came with leverage what you have?

Look, if we look historically and I am not talking about specific trends per quarter, but if I am taking every 2, 3 years, no doubt that we will continue to extend the margins. We only less than 2 years ago we have been in the gross margin around 50% and now you see we are closer – we are more closer to 55%. On the exponential looking point of view, you see almost 10% between them, 50% to 54%, almost it’s a 9%. So, I believe that every 2 or 3 years, we have to go few percentage in each sector of profitability, the gross margins, the EBIT and the EBITDA to give you the exact numbers or guideline is very difficult to do, but no doubt that it will go on this trend and will be higher profitability.

Great. Thank you very much.

You are welcome.

[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?

Thanks. On behalf of the management of Ituran, I would like to thank you all for your continued interest and long-term support of our business and I do look forward to speaking with you and updating you again next quarter. Thanks. Bye.

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