SuperCom Ltd.
Q4 2020 Earnings Call Transcript

Published: 30 Apr 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. Good morning and welcome to the SuperCom 2020 Financial Results and Corporate Update Conference Call. At this time all participants are in a listen only mode. A webcast replay of the call will be available approximately one hour after the end of the call through July 30, 2021. I would now like to turn the call over to Scott Gordon, President of Core IR, the company's Investor Relations firm. Please go ahead sir.

[Scott Gordon:]

Thank you, Hobart. Good morning and thank you for participating in today's conference call. Joining me from SuperCom leadership team are Ordan Trabelsi, Chief Executive Officer. During this call management will be making forward-looking statements including statements that address SuperCom's expectations for future performance and operational results. Forward-looking statements involve risks, and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in SuperCom most recently filed periodic reports on Form-20F, and Form-6K and SuperCom's press release last evening, particularly the cautionary statements in it.

[Ordan Trabelsi:]

Thank you, Scott. February 21 of this year, I began my new role as CEO for Ordan Trabelsi after being with the companies since 2013. Arie Trabelsi, our prior President and CEO will continue to contribute to the company's success as a member of the Board of Directors. I'm excited to have the opportunity to lead SuperCom disclaims and focus on the company's current initiatives to enhance shareholder value. In this new role, focus on mines and companies to grow revenues expand our customer footprint. Much of our investment will be in our IoT segment, we believe it lies the greatest opportunity given the market dynamics and our competitive capabilities. Currently, we have a high win rate in our projects bids. Over 65% year up in the recent past, this is a result of outscoring our competitors with the help of superior technology. With every new project we win, whether it be Sweden, Denmark, Czech Republic, or many others, we continue to develop more cutting edge capabilities and features to our technology suite. We will continue to lead with strong technology. We plan to start investing more in our sales and marketing teams to guide revenue growth. Whereas in recent years, our investment in sales and marketing was minimal in IoT compared to our competitors. Additionally, beginning in the first quarter of 2021, we plan to return to reporting our results on a quarterly basis. We have invested in our finance department and effort to improve the quality of our financial management and timeliness of our reporting, and we'll be providing more transparency to the street. Furthermore, in 2021, together with our enhanced cost division new product offerings and gradual release of COVID-19 limitations and restrictions, we are seeing increased activity in our target markets and are excited about the direction in which we are going.

[Operator:]

Your first question comes from the line of Kevin Dede with Rodman & Renshaw. Please proceed with your question.

[Kevin Dede:]

Thank operator Kevin Dede, H.C Wainwright. Well done, congratulations on the new position. And thank you very much for taking my questions. I was hoping first, you could sort of characterize your win rate. I mean, granted COVID, but I think you mentioned 20-odd IoT deals; can you tell us how many you won in '19 and how many you won in '20?

[Ordan Trabelsi:]

We've won over 10 in each of the years for the amount.

[Kevin Dede:]

Okay. Could you give us a little more insight on the technological differences between pure health and pure care?

[Ordan Trabelsi:]

Sure. Pure Care is part of your health. It's required in time compliance, Pure Health also has anti-wandering capabilities and other solutions which serve the healthcare industry. That makes sense.

[Kevin Dede:]

Yes, sure. Pure Care is just.

[Ordan Trabelsi:]

Quality compliance.

[Kevin Dede:]

Okay, got it. Yes. So just a little on the balance sheet, the short term debt was up versus the last time we saw the balance sheet in June. And I'm just sort of wondering what the thinking is, and how you're managing the cash flow, that you'll need to sponsor the initial rollout. Understand that there, when you get a new deal, they're a little capital intensive upfront.

[Ordan Trabelsi:]

Right. You're correct we launched new products in IoT, because we need to manufacture the units require some cash but after six to 12 months, those projects become cash flow positive. And as you continue to win the projects; all projects are generating positive cash flow. But I hope, of course, is the project size continues to grow. And then we will need to leverage external financing to help like this project that we just were awarded in Israel. So depending on stock price, we've been leveraging a lot of debt because we believe the company's undervalued and the stock represents the value properly. So you saw our debt levels raised in the future, and they also utilize equity to support the project.

[Kevin Dede:]

So does the $15 million is that represents the fortress loan?

[Ordan Trabelsi:]

Yes. $15 million I'll say in balance.

[Kevin Dede:]

Okay. Yes, thanks for that. So the next question really has to do with revenue mix and sort of your strategic thinking, no mention obviously a e-gov, or the software side of business. And I'm just sort of wondering whether or not you could characterize that their contribution in 2019 versus joining 2020 and how you're thinking about those business capabilities as SuperCom moves forward.

[Ordan Trabelsi:]

Just a moment, I will get you those numbers, the breakout. One moment, please.

[Kevin Dede:]

Thanks, Ordan.

[Ordan Trabelsi:]

Yes. So you will see our 20-F filed in that will have these numbers. But to further call, our e-gov actually say more or less the same the revenues from 2019 to 2020, from 1925 to 1911 as 1000, so $1.9 million, roughly in e-gov. In IoT, the revenues went from $1.6 million in 2019 to $7.6 in 2020. And a lot of that has contributed to a decrease in service revenues. And that's because a lot of ongoing services we can provide because we weren't getting as many offenders to track because of course repos in many parts of the US. And also in the projects that we do have, we can provide full service because people couldn't come and actually meet us because of COVID restriction. So the numbers went down with existing customers, even though we maintain the customers. And now when some of the restrictions have been alleviated, we're seeing those numbers actually jump right back up, not yet to the same levels pre COVID but they are increasing in that direction, which . And in cyber-security the revenues went from $2.8 million in '19 to $2.2 million in 2020.

[Kevin Dede:]

Okay, how are you, I guess a big part of the question is really how are you looking at those other two segments? Understand, based on your prepared remarks, the focus is on IoT Got that, clear. I'm just sort of wondering how you're looking at the other aspects of the business.

[Ordan Trabelsi:]

Yes, we analyze the competitive landscape. Actually the small note that probably should have been filed already by the way. But in terms of the competitive landscape, we analyze different divisions and in IOT tracking, a couple billion dollars in market size, only 10, players were able to generate a higher win rate and have opportunity to reach marketing positions if we invest properly and execute. On other divisions in identification and cyber-security, a little more challenging, we do believe that we can maintain our revenues and grow them. Firstly, the talk about identification, we launched over 20 projects to governments around the world, including China and Tanzania, and Panama and Ecuador. And these are national projects with very high sensitive data. And we're able to show governments around the world now that we're doing pure security and pure health, that we're able to manage all this data, and received such trust from these large nations. It provides an excellent track record, and helps us win more projects around the world. So the same DNA of serving these national government customers, supporting them and interacting with them, as well as winning bids have stayed between identification to attract new offenders, it just the underlying technology is a little different. And we maintain the customers, we have to try to maintain the relationship with them and support them. And they order additional expansions and enhancements and identification. Opportunistically we will bid on more projects as well, but we will try to use our capital resources more towards IoT. In terms of cyber security, we have a very strong sales and distribution channel, we have many enterprise customers dragged U.S and Europe, which utilize our technology for Endpoint Protection, essentially protecting sensitive data from leaking out of laptops and endpoints to enterprises. Very important that enterprise has to have a solution in today's world it's also new solutions, advanced persistent threat protection and anti-malware protection, and it's much easier for these enterprises to add more components to existing solutions and to bring on a completely new vendor. So we're trying to leverage that and to add our technology offerings to existing customer base and not only maintain high margin revenues, but potentially grow them in the coming years with minimal investment.

[Kevin Dede:]

Perfect, thank you. We're done. One last housekeeping question. Can you give me the share count at year end, please. I couldn't find it in the press.

[Ordan Trabelsi:]

Close to 20 million. One second please, 19.998 million; 19.999 million, if you round up.

[Kevin Dede:]

Okay. Yes, perfect. Okay, thank you so much for entertaining my questions.

[Operator:]

Ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call over to Mr. Ordan Trabelsi for closing remarks.

[Ordan Trabelsi:]

I want to thank you all for participating on today's call and for your interest in SuperCom. We look forward to sharing our progress on our next conference call. Thank you very much and have a good day.

[Operator:]

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a great day.