And gentlemen, thank you for standing by. Welcome to the Ituran 4th Quarter and Full Year 2017 Results Conference Call. All participants are at present in a listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. 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-six forty six-six eighty eight 3,559 or view it in the News section of the company's website at www.iturannacudacio.il. I will now hand the call over to Mr. Gabriel Froein of GK Investor Relations. Mr.
Froein, would you like to begin?
Thank you, operator. Good day to you all, and welcome to Ituran's conference call to discuss the Q4 and full year 2017 results. I would like to thank Futurolands' management for hosting this call. With me today on the call are Mr. Eyal Sharotsky, CEO Mr.
Eli Yacommer's CFO and Mr. Udi Mizrahi, VP of 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 in the press release also covers the contents of the conference call.
And now Eyal, would you like to speak again?
Thank you, Gabriel. I'd like to welcome all of you and thank you for joining us today. We are pleased with our performance in 2017 as well as our Q4 results. We showed another quarter of solid subscriber growth despite Q4 typically being seasonally the slowest quarter of the year. At the end of the year, we had 1,160,000 subscribers, adding 103,000 subscribers during 2017.
And that excludes the additional 100 of 1000 of subscribers we've been adding through IRT in Brazil and Argentina in the past 2 years. Looking ahead, we expect to grow our subscriber base with a similar net addition on an annual basis as we have done in the past year. Our subscriber growth led to record subscriber revenue amounting to almost $170,000,000 in 2017, up 20% over last year. We also reported a solid level of profit for the year and net income for 2017 was at a record $43,800,000 up 36% over last year. A strong contributing factor this year to our net profit versus last year was the contribution from our share in affiliates, which this year provided us with additional income of $8,500,000 versus an expense of $400,000 last year.
This amount primarily includes a capital gain due to Ituran's investments in Brink, net of our portion of the loss in Brink's results as well as the contribution of Ituran's joint venture in Brazil and Argentina, Ituran Road Track. As you know, IRT, Ituran Road Track, is a joint venture that we have already been successfully operating for 2 years, which is 50% owned by us. Hi RPA has an OEM agreement with 1 of the major and global auto carmakers in Brazil to provide their customers with telematics services on various new car models they sell for the 1st year. I note that as a 50% owner, we do not consolidate IRT's results into our own, including the subscriber numbers. IRT continues to perform in line with our expectations, and we are bringing new subscribers constantly to the service.
IoT has the potential for Ituran to bring additional hundreds of thousands of sales using our services in Brazil and Argentina. In fact, it position us as the clear market leaders in Brazil. Earlier in 2017, in India, together with Lumax Auto Technologies, we established a joint venture for sale of telematics products and services to the Indian automotive industry. With over 200,000,000 registered cars in the country, the market potential for it to run is phenomenal in India and is in its infancy. We believe that over the coming years, we can establish ourselves as market leaders together with Lumax, and I believe we can achieve a result similar to what we have achieved in Brazil.
I would also like to a little about our contacted car activities. After a number of years in R and D, as we move through 2018, we are beginning to reap the fruits of some of our investments in the connected car technologies we have developed. In Israel, we have a program with Toyota called Toyota Connect, built on the Ituran Connected Car solution, which we launched in 2017. Since the launch with Toyota a few months ago, we have already gained some 1,000 subscribers using our solutions and we are gaining traction quickly. So far, launched with Toyota and we are now in discussions with other car importers in Israel as well as at other car manufacturers internationally.
Another interesting aspect of our results was the capital gains from our investments in early stage companies in 2017 that I mentioned earlier. Already over the past few years, Ituran has been actively seeking out and investing in some of the companies which are building tomorrow's mobility technologies and solutions. We see ourselves as a leader in SVR and vehicle telematics. With over 1,000,000 subscribers globally, we are well positioned to make a significant contribution in what is very exciting, emerging mobility technology space. To date, we have invested in 3 very promising early stage mobility technology companies, each of which we believe has the strong potential to become a future leader.
Bring is one of those companies, which is currently at the most advanced stage, having been founded in 2013. It is a software as a service next generation supply chain and delivers technology platform for enterprises. During 2017, we reported capital gains from our investments in Brink totaling $4,600,000 an amount which was offset partially by our share in Brink results. We are currently the largest shareholders of Brink with around 25% of the equity. This capital gain is an example of the initial fruit of success from a nearly stage investments that we have made.
During March 2017, we also made 2 additional investments in 2 Israeli start up companies, both in the transportation sector, one of which is mobile app and the other a machine vision company. And these investments amounted to about $1,000,000 in total. Earlier last year, we also invested and partnered in the launch of the DRiV Innovation Center and Start Up Incubator in Tel Aviv to promote the development of smart mobility technology. Our partners in this venture are Myers Cars and Trucks as well as leading car companies Hertz, Honda and Volvo. Our involvement will gain us early access to some of these most advanced ideas and technologies that are born within Innovation Center.
I see tremendous importance in the investment and development of new technologies that will drive it to run-in the long term to the forefront of technological advancements in an ever changing and now fast developing market. In summary, we are pleased with our performance in 2017, and we look forward to continued strong performance in 2018 and beyond. I will now hand the call over to Eli for the financial review. Eli?
Thanks, Eyal. Revenues for the Q4 of 2017 were $61,300,000 up 22% when compared to revenues of $50,400,000 in the Q4 of 2016. Revenue breakdown for the quarter was $44,500,000 coming from subscription fees, a 19% year on year increase. Product revenues were $16,800,000 which were a 29% increase over the same quarter last year. The geographic breakdown of revenues in the 4th quarter was as follows: Israel 52%, Brazil 39%, Argentina 6% and United States 3%.
Gross margin in the quarter was 49.8 percent compared with a gross margin 52.4 percent in the Q4 of last year. The gross margin in the quarter on subscription fees improved to 67% compared with 65.5% in the same period last year. The gross margin in the quarter on products was low at 4.5% compared with 14 point 9% in the same period last year. The lower margin in product during the quarter was due to the mix of the product sales in the quarter. Operating profit for the Q4 of 2017 was $14,700,000 an increase of 13% compared with an operating profit of $13,000,000 in the Q4 of 2016.
EBITDA for the quarter was $18,200,000 an increase of 13% compared to an EBITDA of $16,000,000 in the Q4 of 2016. Net profit was 9 point $8,000,000 in the quarter or fully diluted EPS of $0.47 This is compared with a net profit of 9 $300,000 or fully diluted EPS of $0.44 in the Q4 of 2016. Cash flow from operations during the quarter was $14,700,000 in terms of our full year 2017 numbers. Revenues for 2017 reached a record of $238,500,000 an increase of 20% compared with revenues of 199 $600,000 in 2016. Utilizing the effect of a change in currencies between the U.
S. Dollar versus the various currencies in which Ituran operates compared with their levels in 2016, Ituran would have shown a 13 percent increase in revenues versus last year. Revenue breakdown for the year was 169 $800,000 coming from subscription fees, up 20% year over year and product revenues were $68,800,000 up 19% year over year. Gross margin in the year was at 50% compared with 51.1% last year. Operating profit for 2017 was $56,500,000 up 18% compared with an operating profit of $48,000,000 in 2016.
EBITDA for the year was $70,100,000 an increase of 17% compared to an EBITDA of $59,600,000 in 2016. Sharing and Affiliates net was an income of $8,500,000 in 20.17 compared with a loss of $400,000 last year. This includes capital gain of $4,600,000 due to additional rounds of investments that were made in Brink, and this was offset partially by our share in Brink's results. Net income in 2017 was a record $43,800,000 of fully diluted earnings per share of $2.09 This is an increase of 36% compared with a net income in 2016 of $32,100,000 of fully diluted earnings per share of $1.53 Cash flow from operations for 2017 was a record 53 $900,000 As of December 31, 2017, the company had net cash of $40,400,000 or $1.93 per share. This is compared with $31,500,000 or 1.5 dollars per share in December 31, 2016.
For the 4th quarter, a dividend of 5,000,000 dollars was declared. For the full year of 2017, the total dividend declared including the debt of the Q4 of 2017 was $20,000,000 representing 46% of the full year net income. The dividend's record date is March 27, 2018, and the dividends will be paid on April 11, 2018, net of taxes and levies at the rate of 25%. And with that, I'd like to open the call for the question and answer session. Operator?
Thank The first question is from Eitan Etzioni of Etzioni Portfolio Management. Please go ahead.
Congratulations on a great year. I wanted to ask about the finance charge on the $2,100,000 on the 4th quarter.
As we mentioned in the press release, in the Q4 of 2017, we received and we paid tax assessment from the Brazilian tax authorities. Some of the amount was related or linked to an interest which is appearing in the finance expenses.
I see. So this is of a onetime nature, I assume?
That's correct.
Okay. And going back to the profit and affiliate, so if I neutralize the 2.3% capital gain, we're left with 0.7%. So that's more or less the current run rate current quarterly run rate at the moment?
As you know, for commercial reason, we cannot elaborate about the performance on the results of the IRT joint venture. But other than the capital gain of the $2,300,000 in Q4, of course, Ituran is also taking its share in bring losses. And this is something that we do not elaborate at this point.
I see. Okay. Thank you very much.
The next question is from Charles Eliot of Inflection Point. Please go ahead.
Hi, congratulations on these results. A question about Bring. Did this markup results from a new investment round to your original investment was worth more? Or how did it occur?
Yes. Actually, we made a round of investment of $10,000,000 under evaluation, which is much bigger than our investments was.
The next question is from Lena Rogovin of Chardan Capital of Capital Markets. Please go ahead.
Thank you. Good afternoon. Congratulations to great results. My question is about subscribers geographical breakdown. Is this something you can provide now or we should wait for the 20 F?
Thank you.
You will have to wait for the 20 F. This is how we our practice for the rest of our historical numbers.
Okay. Thank you.
The next question is from Isaac Shapiro. Please go ahead.
Yes. If I understood you correctly, stripped of changes in currency valuations, your growth in operating income net operating income was about 13% per year. Is that kind of the run rate expected going forward?
You're right, Ker, regarding the 13% QO over the last year. We do not give any guidance going forward. So for us, it's not something that we can provide at this point.
Okay. Thank you.
The next question is from Patrick Buchanan of Fidelity. Please go ahead. Hi, guys. Nice results. I was wondering if you could elaborate on the wireless products, why the gross margin declined there and what's also driving the strong top line growth there?
So actually, this is something that we always having some volatility in the mixture of the product lines sometimes. And as you saw, we developed in the last few years some other applications and things which are elected to connected car solutions. Practically, the price or the margins for this hardware in Israel start with low margins in order to attract more and more users and subscribers. So it's appear on the sales of the products part of our P and L. But on the other end, you can see that our service margins are growing, and this is our main goal in our operating leverage business model.
Okay. And specifically, what kind of products are these?
For example, the connected cars I mentioned with Toyota in Israel, which become more and more we are penetrating more and more to Toyota models with it. And the cost for us and the sales price are more low. 2nd, also there is some different timing by selling or creating some sales activity to specific models of car in the end of the year and things like this. This is something that we are less has visibility regarding margins month over month. But again, I said that we are reacting upon request of mainly the car dealers, the car importers in Israel and some agencies in order to continue growing our subscribers.
So the hardware is part of the tool to attract subscribers. So sometimes, we give up some of the margins or we have some costs which are higher than other specific units.
Okay. And the product with Toyota, what is that solution offering for them?
It's offering a connected car. You get first from any vital sensors in the car through multimedia, through satellites, radio, through a screen with specific, I would call it, kind of a hit run app store. And all of this attached to the SVR or to accident notification or to UBI. It's various of applications that the car driver can choose based on this platform, which Toyota integrated in the I would say, in the not in their plans, but even their assembling places to the car.
Okay. And on the prior question about the finance expense in the 4th quarter, was that also linked to the higher tax rate in the 4th quarter? And maybe what was the total net impact of
That's correct. The tax rate around it was around $3,000,000 Some of it was reflected in the tax expenses and some of it was reflected in the finance expenses.
Okay. So the total amount related to the Brazil charge was how much if you include both?
Brazil and Israel together, both of them, it's approximately $3,000,000
There are no further questions at this time. Before I ask Mr. Sharotsky 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 at www.ituran.co.il. Mr. Sharotsky, would you like to make your concluding statement?
I would like to thank all my employees and my team for their hard work and effort in 2017. 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 look forward to speaking with you next quarter. Have a good day and pour in samir.
Thank you. This concludes the Ituran 4th quarter 2017 results conference call. Thank you for your participation. You may go ahead and disconnect.