[ad_1]
SuperCom Ltd. (NASDAQ:SPCB) This autumn 2021 Earnings Convention Name March 31, 2022 4:30 PM ET
Firm Contributors
Ordan Trabelsi – President and Chief Govt Officer
Convention Name Contributors
Operator
Women and gents, good day and welcome to the SuperCom 2021 Annual Monetary Outcomes and Company Replace Convention Name. Right now, all members are in a listen-only mode. [Operator Instructions] After in the present day’s presentation, there can be a possibility to ask questions. [Operator Instructions] Contributors of this name are suggested that the audio of this convention name is being broadcast dwell over the Web and can be being recorded for playback functions.
Becoming a member of me from SuperCom’s management workforce is Ordan Trabelsi, SuperCom’s President and Chief Govt Officer. Throughout this name, SuperCom administration could also be making forward-looking statements, together with statements that deal with SuperCom’s expectations for future efficiency or operational outcomes. These statements are solely predictions and SuperCom can’t assure that they are going to in actual fact happen.
Ahead-looking statements contain dangers and different elements that will trigger precise outcomes to vary materially from these statements. For extra details about these dangers, please confer with the Danger Components described in SuperCom’s most lately filed periodic studies on Type 20-F and Type 6-Ok and SuperCom’s press launch that accompanies this name, significantly the cautionary statements in it.
At the moment’s convention name consists of EBITDA, a non-GAAP monetary measure that SuperCom believes might be helpful in evaluating its efficiency. You shouldn’t think about this extra info in isolation or as an alternative to outcomes ready in accordance with GAAP. For a reconciliation of this non-GAAP monetary measure to internet loss, a comparable GAAP monetary measure, please see the reconciliation desk positioned on SuperCom’s earnings press launch. Reconciliations for different non-GAAP monetary measures to comparable GAAP monetary measures can be found in there as properly.
The content material of this name accommodates time-sensitive info that’s correct solely as of in the present day, March 31, 2022. Besides as required by regulation, SuperCom disclaims any obligation to publicly replace or revise any info to replicate occasions or circumstances that happen after this name.
It’s now my pleasure to show the decision over to SuperCom’s President and CEO, Ordan Trabelsi.
Ordan Trabelsi
Thanks, operator. Good afternoon, everybody, and thanks for becoming a member of us in the present day. Earlier, we must always in a press launch our monetary outcomes for the fourth quarter and full yr 2021. A duplicate of which can be accessible within the Investor Relations part of our web site. We’re happy with our achievements over the previous yr and since I enter the brand new function as President and CEO in February 2021.
For the primary time in 5 years, as a substitute of double-digit p.c declines in annual revenues, we achieved progress in annual revenues. We additionally generated over $2 million in EBITDA enhanced our operational infrastructure, strengthened my workforce in the direction of future progress and keep expertise management. We additionally raised the wanted monetary assets to help the implementation of our marketing strategy with new longer-term financings with preferable firm phrases.
We settled all disputes, cleaned up all payable and reorganized legacy elements of our firm for improved effectivity. We owned our marketing strategy and aligned our clients, companions, and staff with our mission and objectives and in a worldwide surroundings riddled with the uncertainty of a worldwide pandemic and geopolitical disaster. We’re humbled to say, we really feel assured about our future.
All through SuperCom’s 33-year historical past since its founding in 1988, it has at all times been a trusted companion offering leading edge digital and digital safety options to dozens of governments worldwide. In recent times, we have now change into an increasing number of conscious of the immense challenges that nations world wide are going through and coping with their offender populations. And now we leverage our expertise experience in authorities safety, a superb workforce in the direction of our present deal with the general public security sector.
As a part of our mission, we attempt to revolutionize the general public security sector worldwide to proprietary digital monitor and expertise, knowledge intelligence and complimentary companies. Many governments world wide are going through extreme challenges in coping with their offender populations. Firstly, many nations are affected by excessive recidivism charges. For instance, within the U.S., inside a number of years of the discharge, three out of 4 former prisoners are rearrested. Recidivism clogged the felony justice system with out employment alternatives and naked requirements reminiscent of housing, meals and clothes, habits administration and substance abuse management profitable reentry into society appears almost not possible for former prisoners.
Reducing the recidivism charges, the charges of which somebody reoffend, profit society by lowering the speed of crime and jail populations, saving taxpayer {dollars} and most personally guaranteeing that prisons serve their function of reform and enchancment. Secondly, jail overcrowding is likely one of the key contributing elements help jail situations worldwide. Prisons in over 118 nations exceeded their most capability occupancy charge with 11 nationwide jail methods at greater than double their capability. It’s also arguably essentially the most important single drawback jail methods are going through and inconsequence can at worse be life threatening and at finest forestall prisons from success of our perform.
Overcrowding might be so extreme that prisoners sleep and shift on prime of one another or share beds. Thirdly, in 2020, about $80 billion have been spent on working prisons within the U.S. alone to maintain roughly $2.3 million individuals behind bars, which means that 0.7% of your entire U.S. inhabitants is incarcerated at any given second. Almost 1% of the U.S. inhabitants is in jail behind bars. The societal value of incarceration, misplaced earnings, adversarial well being results, and the harm to the households of incarcerated are estimated at as much as 3 occasions these direct prices.
Sadly, these points aren’t distinctive to the U.S. and are prevailing globally. It’s clear that prisons are removed from supreme for fixing the mentioned challenges. SuperCom, we offer topnotch options to resolve these challenges successfully utilizing our expertise and complimentary companies. Our pure safety resolution present an efficient method for establishments to handle their populations at offenders whereas considerably lowering the related prices of housing and inmate. We offer home decision with finish aim displays and complementary applied sciences.
The fee save related to our options are substantial. Whole value of monitoring an offender or dwelling confinement or GPS digital monitoring for each expertise and companies and manpower is roughly $10 to $35 a day, considerably decrease than a $100 to $140 each day value for every inmate in a correctional facility. Most significantly, dwelling confinement has been proven to scale back recidivism, highlighting its effectiveness in serving to offenders enhance their lives.
As well as, our PureSecurity Digital Monitoring Suite of merchandise offers an environment friendly and efficient solution to implement dwelling confinement whereas easing overcrowded prisons. We see establishments more and more evaluating dwelling confinement options to deal with these points. There’s a worldwide development that we see of governments turning to progressive options aside from incarceration to make sure public security, offenders, digital monitoring is changing into an increasing number of in demand and it solves a lot of the talked about challenges.
The digital monitoring market was valued at about $1.1 billion in 2020, and estimated to succeed in $1.6 billion by 2025. The U.S. and Europe represent about 95% of those markets in the present day. With a powerful presence status in each markets, SuperCom is well-positioned for continued progress and capitalizing on new alternatives.
In Europe, we have now lately seen an uplift in RFP bid exercise with a whopping over $200 million in anticipated upcoming undertaking bid alternatives within the subsequent 18 months. In parallel, we proceed to attain properly on aggressive tenders. For instance, final week, we introduced a win by way of a aggressive RFP and have been awarded Croatia’s first Nationwide Digital Monitoring Challenge additional rising our maintain within the European market.
This win comes after a constant streak of wins within the European market, displacing incumbent distributors, time after time and boasting over 65% win charge in aggressive RFPs in Europe. We’ve gained the $7 million nationwide digital monitoring undertaking with Ministry of Justice in Sweden. $1 million undertaking within the discipline of home violence with the Swedish voice. The nationwide digital monitor initiatives in Denmark, Estonia, Finland, Bulgaria and Latvia, simply to call a number of in Europe. We lately introduced a number of contract wins and enlargement into three extra U.S. states, Texas, Idaho and Wyoming.
For the pure cost GPS monitoring platform, serving grownup and juveniles. As well as, we introduced that our fully-owned subsidiary Leaders in Group Options or LCA launched a brand new undertaking with probation division in Central Coast California to supply rehabilitative companies. The undertaking is valued at roughly $1 million over three years or roughly $340,000 per yr, and has already been launched.
Our latest announcement of latest contracts in Europe and U.S. are thrilling examples of the profitable execution of our marketing strategy with a vertical by which we have now a powerful presence and a very good status. Our success in profitable these initiatives is a perform of some essential elements. We attribute our wins primarily to the proprietary expertise, which developed in-house right here in Israel, which scores very extremely within the aggressive RFPs and over time to our robust status and recognition as a premium supplier of digital monitoring expertise and companies. Our digital monitoring expertise helps numerous packages reminiscent of home arrest, GPS monitoring, rehabilitation companies and extra, and has gained over 40 new multiyear authorities initiatives since 2018.
Additionally over the previous years, our basic strategic focus has been to maneuver away from our legacy enterprise with one time undertaking revenues in Africa and South America, and focus extra on recurrent revenues in developed nations with our IoT monitoring enterprise. In 2021, we noticed a gradual world restoration from the pandemic with an increasing number of RFPs and procurement exercise from our potential authorities clients.
As well as, we acquired an digital monitoring felony justice enterprise in 2016, LCA it’s headquartered in Oakland, California. And we acquired in 2016 with a powerful presence it has within the state since 1991. A big reference base, relationships and expertise inherited by way of this acquisition. And integration has allowed us to enter the area with new applied sciences and capabilities on these helpful synergy and generate steady stream of latest multiyear recurring income initiatives. However an institution in California, we’re properly positioned for progress into extra areas and bigger initiatives.
We already gained over $25 million value of initiatives in California since this acquisition thus far. We’re setting the corporate’s world gross sales division, recruited new VP of Gross sales and gross sales managers with the business expertise and a shift from passive bidding to an lively outreach of the gross sales technique. The implication of this transfer is already beginning to replicate in our income because it elevated for the primary time since 2017, annual progress year-over-year.
Though the gross sales cycle in our enterprise are lengthy and it’ll take years to see the complete impact of this modification. The period of the relationships with the purchasers can final for years. One of the best we have now made so far have been driving elevated exercise with present clients and quite a few new demos and evaluations with potential new clients. We function in a small area of interest market with our clients know every of different and having the strong status is an important issue within the enterprise when choosing the seller.
The brand new wins mixed with the improved gross sales workforce and the primary steps in executing the corporate’s U.S. market enlargement technique. We additionally think about a possible deal with by strategic acquisition, our resellers in two areas as part of our progress plan. Our technique that has been to construct superb expertise, develop our presence and ship excellent companies. Every buyer gained and undertaking deployed additional strengthens our status, making us much more aggressive.
And up to now yr, we have now additional progressed on every of those parts and have achieved recognition for such by awards with present clients and new ones in present areas and new areas. Our technique has at all times been lead with expertise and this yr we proceed investing in analysis and improvement to make sure our merchandise stay essentially the most aggressive out there. Our status business concerning IoT options continues to be stellar on account of these investments and is proof that these efforts are paying off. With these product investments, we proceed to introduce new options and new applied sciences into our proprietary platform, extending our lead within the market.
Our R&D groups proceed to innovate and disrupt whether or not it’s new options in biometric capabilities, battery life, communication capabilities are completely new options for home violence, alcohol monitoring and smartphone digital monitoring inside dense, onerous to watch city areas and subways. Our R&D groups proceed to innovate and disrupt the established order.
We consider there is a chance to additional improve our progress by way of strategic acquisitions and their native help suppliers with robust status buyer base within the native communities. A lot of whom we all know by way of prior offers. An instance of this technique mirrored by way of our $3 million acquisition of LCA in 2016 and their meant strategic worth and new undertaking to its suppliers.
Right now, let’s transfer over to the monetary dialogue. As talked about within the earlier earnings name and apparently now the corporate has invested in its monetary reporting assets and returned to quarterly and well timed reporting final yr. We’re blissful to have our annual earnings name in March for the primary time in 10 years.
We’ve got entry to strengthen our steadiness sheet. All through 2021 the corporate secured by way of the issuance of a number of notes an mixture proceeds of $12 million subordinate debt. In March 2022, the corporate raised $4.65 million in a registered direct providing with a sure single accredited institutional investor offering us further liquidity to execute our marketing strategy.
As well as, our financials embody PPP and ERTC, that are given as incentives throughout the coronavirus act reduction and financial safety act. We intend to encourage employers to maintain their workforce staff throughout COVID-19 disaster.
Our income elevated 4% for the complete yr of 2021 for the primary time, since 2017. Income progress – this improve represents our continued shift from the legacy identification enterprise to public security enterprise. And for the primary time, our IoT division grew quicker than the lower within the legacy enterprise, thus offering whole annual income progress. EBITDA in 2021 decreased to $2.1 million in comparison with $2.8 million in 2020. We had a upkeep contract with one in every of our African purchasers come to completion on the finish of Q2, 2021, which accounted for round $300,000 in revenues per quarter, negatively impacting income progress within the third quarter. However nonetheless altogether, we had progress of 4% offset by new initiatives in Europe and the U.S.
In 2021, we targeted on value enhancements to deal with to uncertainty associated to the pandemic. Our gross margins improved to 51% in 2021 off from the 47% the prior yr, primarily pushed by enhancements made to our Companies section. Gross margins have been additionally negatively impacted by the rolling off and upkeep contracts in Africa. Price and upkeep associated revenues this was a excessive margin enterprise, which was changed with many different initiatives, decrease margins, a minimum of of their earlier levels, together with numerous began deployment prices.
We elevated our analysis and deployment spending by $400,000 from 20% to 23% of income. Our gross sales and advertising and marketing bills declined by $30,000 in 2021 and basic and administrative bills elevated by $80,000. Our money restriction and money steadiness on the finish of 2020 was $4.6 million. As well as, the corporate had one-time bills of roughly $4.4 million pushed primarily by reorganization bills retained into legacy enterprise and allowance of uncertain debt of $3 million.
The corporate had an working lack of $6.7 million versus an working lack of $3.7 million in 2020, once more primarily due to these onetime bills. And as we see economies start to open again up, we’ll proceed to take a position our gross sales and advertising and marketing drive income progress.
And with that, I’ll flip the decision over to operator to open the decision for questions. Operator?
Query-and-Reply Session
Operator
[Operator Instructions] One second please, for the primary query. There are not any questions within the queue right now. [Operator Instructions] Your query is coming from Michael Summerton [ph]. Your line is dwell.
Unidentified Analyst
Hello. Are you able to simply inform us a bit bit extra concerning the contract that you simply closed in Croatia?
Ordan Trabelsi
Sure. Thanks for the query. Very excited, as we talked about earlier than we had a protracted stream of latest nationwide contract in Europe, together with Sweden and Denmark, Czech Republic, Bulgaria, Latvia. A few of these nations are beginning out with EM, reminiscent of in Croatia that is their first full scale nationwide EM contract. And we be competed in opposition to a number of different distributors who’ve presence in Europe and we scored the best and gained the undertaking. We obtained the award final week and we introduced it, and we’ll present comply with on bulletins on undertaking launch and ultimate contract signing once they happen.
Unidentified Analyst
Thanks very a lot.
Ordan Trabelsi
You’re welcome.
Operator
Thanks. [Operator Instructions] Your subsequent query’s coming from [indiscernible] from Sabre Capital. Your line is dwell.
Unidentified Analyst
Thanks. Hey, Ordon. Simply actual fast query on the Finland contract, I don’t assume we’ve seen that go dwell but. Is that appropriate? And if not, what’s been the delay there and would we anticipate comparable delays because it pertains to Croatia?
Ordan Trabelsi
Sure. Good query. We don’t anticipate comparable delay with Croatia. Typically after we, we have now awards there’s an attraction course of the place rivals have the precise to attraction and that typically delay the method a bit bit, reminiscent of, as we’ve seen in Finland, however we really feel assured each in Finland and in Croatia that we’ll proceed to undertaking launch and we’ll present updates accordingly as such, simply as we have now with Sweden and different initiatives that we introduced. First we introduced the award after which we introduced the official undertaking launch.
Unidentified Analyst
And only for housekeeping; do you will have this accessible because it pertains to revenues from e-Gov for yr finish and cyber safety? Do you will have that off hand?
Ordan Trabelsi
Let me look. One second, please. Okay, I’ve one thing right here. One second. And also you guys will see this quickly in our annual submitting, which we’d love to complete up quickly and put out, however it’s basically e-Gov declined from $1.9 million to $1.7 million, cyber safety from $2.2 million to $1.6 million and IoT grew from $7.6 million to $8.9 million.
Unidentified Analyst
Okay, thanks.
Ordan Trabelsi
These are nonetheless unaudited numbers. Our audited numbers will come into 20F filings which we anticipate to finish quickly.
Unidentified Analyst
Okay. Thanks.
Ordan Trabelsi
Welcome.
Operator
Thanks. [Operator Instructions] Your subsequent query’s coming from Dylan Gallagher. Your line is dwell. Dylan, please proceed.
Unidentified Analyst
So in a PR on March ninth you set out that you simply plan to launch a brand new model of a confirmed sturdy and scalable cybersecurity software program expertise with enhanced safety from cyber assaults. Do you will have any updates on while you plan to launch out of any type? And likewise my second query, for those who do have time to reply that, as do you will have any income projections for the yr of 2022 general?
Ordan Trabelsi
Thanks. Dylan, to begin with we at the moment don’t present steerage and income projections. We’ve gone to a development from our legacy enterprise to our new enterprise first yr with progress, and we’re nonetheless placing issues in place. However we do anticipate to have extra undertaking wins and to proceed deploying and subsequent feeding our marketing strategy. Relating to the cyber safety options we have now shut to fifteen years of expertise with our software program and our consultancy – cyber consultancy follow.
And as of late within the earlier months, we see loads heightened demand in want from enterprise world wide to safe themselves from numerous threats. We’re releasing new model, which is safer and extra personalized to a few of the present threats. We don’t have actual timeline on that later in 2022. However in the meantime, our present options and software program would supply nice help for the threats as of in the present day and up to now, as they’ve been doing for a few years. And we’re blissful to be there to help our potential present and new clients world wide with their cyber safety wants, given our in depth expertise and experience on this house.
Unidentified Analyst
Okay. Thanks.
Operator
Thanks. [Operator Instructions] Thanks. Right now, we’ll go the decision again to Ordan for closing remarks.
Ordan Trabelsi
I need to thank all of you for taking part on in the present day’s name and in your curiosity in SuperCom. We look ahead to sharing our progress on our subsequent convention name, filings and press releases. Thanks very a lot and have a very good remainder of the night. Goodbye.
Operator
Thanks, girls and gents. This concludes in the present day’s occasion. It’s possible you’ll disconnect right now and have a beautiful day. Thanks in your participation.
[ad_2]
Source link