SuperCom (SPCB) 26 Oct 222022 Q3 Earnings call transcript

Ladies and gentlemen, good morning, and welcome to the SuperCom Third Quarter 2022 Financial Results and Corporate Update Conference Call. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. I'd now like to turn the call over to Stephanie Prince of PCG Advisory.

Thank you, operator, and thank you to everyone joining us. With me on the call today is Ordan Trabelsi, SuperCom's President and Chief Executive Officer. results. that statements, call, SuperCom's including future or remind be management expectations to performance forward-looking making statements operational like during SuperCom's this may for I'd that address

factors Forward-looking that differ statements from statements. those uncertainties involve and materially address actual results risks, SuperCom's to other

the the periodic SuperCom's information risks, particularly reports evaluating includes Today's this XX-F, X-K and to on release it. more described that in call, factors, please performance. uncertainties its financial Form statements For factors and SuperCom's press conference accompanies a about EBITDA, in refer measure these in risk cautionary most recent Form useful that call non-GAAP

You substitute should prepared GAAP. in information in consider additional with for isolation or results this as accordance a not

net occur For located a is comparable only are call. today, measures to to to law, call publicly this the October by Expect required that obligation as any President loss, circumstances disclaims as SuperCom's It reconciliation pleasure CEO, meets call GAAP SuperCom's GAAP in Reconciliations time-sensitive SuperCom financial or of well. measures information The accurate reconciliation or that table that events the and revise call. any update as reflect financial for now XX, information Trabelsi. of my XXXX. is over after comparable this accompanies to turn and to press financial measure a Ordan release earnings non-GAAP this contains there other non-GAAP available conference financial

third quarter we you, results the our a XXXX. on for us press financial Thank joining today. Earlier everyone. morning, issued this morning, and good you Thank for of release

copy our in a Investor the can of supercom.com. Relations website at You section find

review, for with results, followed maintain to to time I'll on business brief by highlights, quarterly to update QX reporting our and continue Q&A a and recent our commitment session. start strategy our a We quarterly

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from justice. to aren't in many a solving estimated are that adverse cost death earnings, the for that, incarceration, these prisons To prevailing of globally. Xx the deal is at least. are issues are and unique Unfortunately, lost health criminal challenges It and U.S. Beyond more evident suicidal, cause affect seeing at Electronic focus on million a we project much our won government success. National few security sector. help in We're launched the that and And leveraged expertise services public and $XX meet have team technology and Monitoring just announced these challenges, Romania. experience weeks, in and safety past we we the far

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that we which National also Croatia's SuperCom announced recently awarded first have already launched. project, was We Electronic Monitoring

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National technology SuperCom, recent Idaho Romanian different Idaho adjacent held Furthermore, and tried expand Idaho. U.S. facility Southern to certain in third and to customers into the Contract year adding Texas, customer the by in final, last further These U.S. to states, SuperCom's base is three our rapidly of how increase growth the win footprint future. contracts represents parallel now. SuperCom just for in in All to U.S. the great in Sweden. in customers. California quarter, and new as signaling more the organically they and third and growing EU in we past The win EM new our success our in we wins the additional across won are three In continue and

amazing expand services. Our strategy our and outstanding technology, has been deliver presence a build

key strategy executed focusing on successfully We the have factors. our following by

new projects RFPs over monitor such electronic multiyear competitive scores SuperCom's and services programs XXXX. GPS and proprietary house supports Our as various arrest, highly since won rehabilitation more. governmental monitoring, technology XX and

also is even deployment, to making With customer win services of reputation electronic each and provider a recognition we and strong our premium contribute our technology strengthen project rate. more reputation, win monitoring competitive. and further Our us

the have reach manger's in valued to Europe, XXXX. an billion $X.X business upcoming estimated in Lastly, tracking of in an million with by activity monitoring innovative over The recently these constituted $XXX RFP XX% uplift easing countries. revenues Altogether, have into revenue in Europe in and our recurring global broadly, to recurring by and while solutions safety. address successes have billion expected of And market. opportunities U.S. a seen XXXX this our and attention of a to around shifted in bid Electronic we focus overcrowded. market alternatives In incarceration turn our and and strategic with an developed of trends IoT solutions XX%. was pipeline we $X.X providing home to next ensure Technology rate and see enforce government way business PureSecurity are institutions opportunities trend More growing XX above public resulted confinement these prison a effective months.

reduce it significantly of housing them an allows the associated to costs inmate. addition, In

lower For on for the $XX through GPS $XXX home total monitoring cost daily monitoring in cost example, the daily approximately a $XX, an substantially is to $XXX to than of correctional offender facilities. confinement

effectiveness More the importantly, where we've some an and displacing run the improve the highlighting home recidivism, safer. their have continuously many helping been announced year, communities confinement making competitive has European its lives in in we new in Europe, XX% rate some in over been offenders in wins, to U.S., shown RFPs. incumbent reduce Throughout project vendors

of and in to especially in the new proud won period threat recession geopolitics. contracts of volatility the unstable a store living We and times market uncertainty many are due to in so have

tailwinds nature In operational our in resilience maintained XXXX, our have Our recession-resistant to grew of and leadership. support our business workforce infrastructure business. potential in the recession we strengthen possibility technology is and growth multiple and increases we

mentioned few amidst X, product new example, Pure instability For the finalized past the global ongoing earlier. in economy the development we which successfully in the the we months, of a

support improved The have we owned expertise of sales existing bidding markets. to We've and addition, U.S. active including with shift and resources activity in sales time a driven to outreach plan, customers new have sales new wins further expansion strategy. with steps of the valuations company's sales ones. first In and we raised in teams contracts numerous the executing company's secured division, demos new from new our company also team the already the uncertainty volatility the the and an our and during needed continue stated in passive and new industry as strategy increased potential financial business global market capital are our to

of acquisitions to LCA and U.S. is local it monitoring that the and have customer back the integration We and this value electronic acquisition generate growth constantly part base there's reputation potential of XXXX vertical strong and our new by opportunity local significant in could the growth monitor a immediately As market win providing market expanding in of our synergies. strategic example our provided who million developed plan, project strategic of in acquisition enhance has providers $X us. to communities. service through value believe immense for the reflected we respective presence An strategy

projects in new We $XX acquisition have XXXX since over in alone. in million won California that

to that conference to we I'm our to call, XXX% QX our growth financial the year-over-year mentioned financials. million In results to before. happy to expect from know revenue revenue our we mentioned continue results financials share contribute developed countries. our project to and IoT in as last third transform completion Revenue main to quarter our recorded QX Turning growth business business that quarter countries as - last the I above compared developed to a achieving our reflecting in the countries of to division unstable from third quarter from the to of with engine [XXX]% to year. in emerging five-year our third growth continue increase plan the $X.X

doubled comprised of of of investments the develop business project to which and continue year $X.X face. $X.X in quarter which $XXX,XXX, XX%. while increased South products in due Compared is million onetime research tracking contrast last countries, and of new existing innovation third in corresponding revenue developed technology improve Africa a America, ones, profit XX% quarter business about nearly to leadership the revenues As our high increased and we legacy recurring our in year, compared to IT to a to growth last our by we keeping development at edge reminder, and million the sharp Gross volume. to us the of well of as generates project

expenses as $XXX,XXX, new new This reflected as R&D reflecting and the management third years expenses sector. new in sales, growth to year, revenue significant gross to that $XXX,XXX restricted period EBITDA monitoring benefits believe We cash, we provides to expand general cash European investing investors. associated we our million on July these and continue positioned a Our to returning for shift exercise which of million including to with well of and raised return industry, which safety expand our away activity. to and reputation the nature continued cash scale our continued federal economies sales need and liquidity and drivers, last warrants and growth our closing, continue growth and we are by in us quarter the footprint. the company's a and marketing our credit global we equivalents post-COVID in on $X.X by levels The countercyclical approximately in multiple U.S. policy to the $XXX,XXX opportunities a We corresponding increased fueled stable positive IoT drive strong in productive and shift incarceration business. of cash institutional and the The recognize with financials, for In and company the team. ended starting from strategy loss are marketing proceeds of presence cash to markets. in capitalizing by had projects by from includes with in administrative legacy $XX,XXX increased [$X.XX] and due deploying the compared business

announcement recent that, plan to operator execution contracts over of an U.S. open excellent reputation. in as within was I'll turn and successful presence business a to our With are and SuperCom vertical new call the examples for that Our Operator? a compelling strong questions. the Europe of

today [Operator first is Matthew question Your from Galinko. Instructions] for coming

morning, and congrats strong Hi, quarter. the good on

Thank you.

you these start you sales the of Can deals ago. by couple from - of maybe a this started sort starting sort word convert to of result outreach? into still win Is new that did or talked the deals about the or we mouth that they of passive that quarters get with U.S. push is

which sales the is instead bidding it million. the have yes, more and is feet go results Romania, is we are $XX market answer kind opportunity-to-opportunity. the the [ph] million fragmented force. of $X which In There, Yes, large projects the the ground Sweden, U.S., is have of or like on on to of

of some And word a mouth. us it comes of to

share wins, technology reaching strategy. reading Some the to out have good previous and with with we've customers we either and an demos, in them active from public. some our results just they've of an sales because evaluations new it ensuring team proactive And been announcing active we need been and comes customers to how the doing comes projects to rest way, is that's unique of

Got launch the salespeople in indication violence about market? you an having component interest And U.S. is Are the domestic there it, conversations And there your U.S.? early -- on in piece? terrific. the is then are of having expected that

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and for we it thus in see high what very from it's far. So demand the process, there's

You if I understand don't mention percent essentially. it I works. how know how

Yes, you could? no, that, expand on please if

Yes okay.

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does. because day percent race mobile like it's So it phone is charge do uniquely it to and can't -- the doesn't ours big others the too with and every synergize

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Yes, yes, with the XP unit.

Okay, great.

a XP So for is that a solution, we have which without our small bracelet charging long time the very with communicates runs smartphone.

have this we we cutting security. Europe battery conference. Some customers have most We And hardware else, everything piece as make to of as industry, and the way, edge so X-piece leg the the that year, In phone first of features, it the developed earlier the the of best in just a best developed, launched well. trying latest connectivity long it the full no solution. have and life, the like we XP project won like course, we're domestic. There's also XP for to just and on the announced very are will in have of with monitoring we suite because will alcohol-monitoring they year. have know In they already solution to together a asking exciting U.S., tools have solution solution I solution. on it the in Sweden this, a it's we with earlier it that many They many, and the smartphone this customers

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Got it thank you.

Yes sure.

Your from today Ken is question for coming Weiner. next

I hi, about wanted Yes ask was the thing good listing morning first the requirements? you to

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so talk do it some going this coming mean, about in of an with like the I quarters. I set growth other that. - a and in aberration? Is you hitting you goals the seems But you're was let's Or No you. quarter it forward. future quarter In gaining expect the agree words, traction that you're obviously, seems quarter for out. breakthrough

think an don't I aberration. it's

at I IoT a a think we -- been from level, our business to of We strategy have close where high to was so which that of a to had declined to revenues of we strategy millions million in and grow and to million and e-Gov, revenues they've $XX tens close grew had growing $XX e-Gov on while of the was nothing. close keep our is that dollars.

a to don't in So to adjust we a Romania, quarter, is work That a the when we when in project, to a this we've quarter. will every just We the launch of depending unique future. contracts, project growth lines choosing recur this them milestone. and said, to when customers. that finish in in launched done on lot we growth dependent We're time something launch not don't government significant think the right, control on the being

them. we exactly revenues. the of other quarters, is control our many, each revenue world, continue not grow many the we're Europe Furthermore, to we and to also our work U.S. around expect be customers. following will and depends on many, be in our which in over to what do continue And we they on in quarter as base, work and win, to win projects layer on XX% bidding that to many We but able will done would recurring

what we'll to But is our to units. than tens that, units. just is to operating add XX,XXX is So leverage come, our structure revenues. will rates, add and it high. this more don't And profitability, see because and maybe for and tens without our that more thanks This of or our people with with immediately to let's a each significantly race our in example more everything This We to grow grow. units projects a say, will operating and almost to can our happen come changing and from of to much more presence margins grow operating need come cost contribution to very leverage thousands to impacts strategy consistently adding and up going structure, grow how person happen additional we the is could operating profitability will result anything will here there. nice

how what able on about maturities? the bad debt. priorities debt you to the service And Are And debt?

requirements majority and [indiscernible] they and creditors goals with it is believe adapt structure of in our around December And believe to the we company. and vision the our us they the see the to XXXX. worked

be the as on to current they as We believe But time. over That's handle our in very that be also and well. time, growth. focused debt will it right not we'll able much to focus service we're now able

your of right now? the terms what's -- your last is the are what question contract? What the receivable is, total And accounts

million. open around up PR, $XX the things Let's but

$XX I think million, exact have I it's to number. get around the

selling you receivable, terms? So your are and $XX accounts what if million have you're $X then million,

little large we're typically the million. normal we have project a a The deploying then Well, works, were than different you $XX.X deployment. is a And the project, get that receivables this way works reach paid that certain milestone. trade you when quarter business. large way

percentage as revenue the of So a we recognize completion. some of

deploy countries we the it's just get very for still revenue. of one Most been This and one and had ton away from more America, of South that that some our we timely a quarter, for our unbilled Not of it's -- to the paid. It delays. built can recognize work payers. customers developed overdue. for we in hasn't are don't revenue in and where moving example, So in goals Africa the is Europe work, U.S.

trade from are e-Gov from business. still those the of receivables Some our old revenues

have off payers. happy We're them that. But new with IoT tracking the been business and Some been of actually discounted. very revenues have timely written the from

for is And when the on to contract start what for the do last XX, landed revenues that? recognize question -- you big you that

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And question stock is, an and for the is financial they other -- your or when price inhibitor dealing condition with your do landing governments deals? -- you're

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is [indiscernible]. coming Your from next question

know I valuable business. that how win, Romanian to the on Congratulations is your

you million. that much of recognized already to, As revenues. cash much tell it that in from was any us -- that Were said Can you how how you're relates -- generating and quarter actually the project the that, third $X.X revenues

at -- can't I start is continue point. recognizing recognize We're in readily have projects the following QX, share October. in the quarters. started in the available, project. we'll don't but the the We And only this that sharing did we per not revenues Yes. information cash

get certain of meet but milestones it that. takes a to So also into little to time have bit cash,

million Romanian of the receivable, was sequentially -- driver driver biggest project in about the that by increase went sequentially. Romania the Is the the the that? biggest Is $X.X up of receivables accounts

change it. I think just to started is this fair have, of quarter. project biggest we say. it's driver we biggest in I mean, It's and launching the the Romania

the the it including So impacted accounts all receivable. metrics,

And what period. for about gross margins nine-month the

you year-to-date, but on essentially line, increase, have a XX% So profit give-or-take top gross was flat. the

us a margins? some little a just that? impact And And you margin rolled you of can gross bit kind add you projects the on on the these out? for percentage you'll your background of all full of stabilize projects new could new these give scale where think when So, gross

I'll start with the end.

past for at will insignificant. funds way XX%. of the additional cost cost, If scale of else every you structure and cloud be margin the of the look and leverage, cost hardware variable fixed hardware to economies just will Operating XX%, cost, with our deployment servers the buy. Over there's very brace and the will the which is gross eventually data margin At during And business. new stage, everything And contribution there's projects. the and this the significantly deploying our operating lower communication margins. that be time, like to there's above. point, in above have this digital one, those be is the of project we're also business sent, just cost, above every There's those contribution buy, bracelet, IT, in

and can't this XX% of sell XX%. XX% come servers person or cables, off you get get you connect You're and paying work, IT in margin a to

the have lot of margin higher. components, as stage, seamlessly launching natural project initial be run revenues more you're at offenders, everything will starts and margins to lower-margin you're we'll and the and a when new flow So into a of recurring

that But impacted continue margin. big in convert business and this started, higher of quarters, core these is So the one, over same three to margins. will into time, new especially projects our we temporarily. the

be market new in it application? as you. other for seems domestic jurisdictions violence include domestic was in included Okay. that that project. And Obviously, attractive Romania you're very could it which many involved then a miles, that relates very, to the How

we counties that Europe to or were say many or at because U.S., of just be matter -- and top It's Off one names something the We it the core and of be just different asking we the of domestic is just want don't it. resources. needs yes, least and in my to that update the imprecise. a technologies, for we a the the of something domestic doing else core than I can adjustment and there's our anyone I have processes, technology But client. will two are different in is But it. believe do time countries need considering the market. violence won't to significant core in head, The can U.S. we other completed manner. able different states the what haven't that laws, to of probably better and different do

it is of me most excites growth. things that better and future the the one upcoming So

promising. from last alluded for And is, you sounds past. question And a customers tough That $X.X the I -- contract e-Gov to e-Gov you've release press having regarding had an a the the that presume receivables around time collecting million. Can in

one. this Not,

– this That's Not, what one.

more them it and this past, cash getting we're get to give their was any requirements on leverage Not there going and We're as much customer, this. upfront, request A for need not not to especially don't as from e-Gov us give to want the the to again, They support challenges focusing collections. you're pay. comfort. this it our have to not e-Gov, we been noticed, lot -- in cash great. they is this because much is stringent you We additional than focusing has for example. and equipment, ones and of want

Great what's Okay. Congratulations forward. positive hear. steps seemingly some to on

Thank very much. you

line from coming live. [Operator your Instructions] is Your Mike next Mike, question is Walters.

Hello Ordan, hear you me?

Mike. morning, Good Yes.

excitement, I of I I a everything few all say by quite -- a congratulations and love big And -- you your things I'm everything great your smile wanted I tell questions. quarter. on can fan the I question you and are, saw A are amazing. had you your way, webcast that you on for. stand the you just to do, the everything say

I believe on what we're doing.

contract ask I over know past question wanted so I -- can attitude, tell year. numerous had you've I a a to wins about the

reflection this quarter ending fourth? are million XX Or contracts reflected contract is into this be So some -- from will of in quarter? all there more the those the of $XX reflecting going are the in so revenues

Maybe have are your you in contracts speaking different a I'm to better, little going contracts -- we of question XX many understand which locations.

like quarters States in end XXXX. also, know. there and I into last And and the know are throughout going or they I year five United then the two, in Yes? so here going numerous six reoccurring? Yes, of then were and Like one

some of they $XXX,XXX clarify we and we explain every So bit. past grew million, XXXX, a latter, project. and in I revenue larger EM our because yes, a just XX We to million. me Sweden we help units Goals projects different in support revenue add of here based the to to one, we've current to component project In project them start based new been U.S., the at component. let $XXX,XXX, won scale dates. being protocol. Czech, the and That majority little the We to in their sometimes decade recurring to the the launching amount revenue on that's Since is in the $X.X is the $X.X actual projects, said, project and prevalent million. size their but in the per theory Canada, growing full and as aim per structure, the we latter. now a of won base recurring revenue and continue needs it's always in base. Every smallest everything a In is and revenues. $XX launching charged month in Europe, billed units. started project And two, purchase with almost Every then part a also in they that project Like smaller SX and we're and structures, want or it. recurring unit largest of a consistently up to million, recurring Denmark win Europe. keep there's projects, part on in The think day. on

million in. big a sometimes QX change of different is of revenues each they you other. revenue around in world South And why and the business. many The has Africa Romania phasing ID $XX business, rolled have project. and from structure, this growth keep also recurring QX revenue also growing e-Gov XXXX. to while are So is the in still be That's in phasing we slowdown projects together adding business Romania because and IoT the used is other America. back on a which We've passports that see card biometric and out been QX, projects, on reason this it's in we out top because the for

projects, launch. we continue expect and and quarter these revenues -- to many new from will are reflect this have revenues ones yes, So does this reflect to we with to different projects does many -- we reflect new revenue

bit it's go is I area of in you because the up if whatever, Or much little a you let on a on get sometimes webcast loading run -- in cell understood issues the issues land, and works And that -- Do Awesome, had an you me basically, that? you mind. great subways, -- if the you got I heard, -- service. I technical, system a might I air. high that? guys with know or underground Is in said, obviously, my -- pretty with like into like the ever have monitoring the it phones and like constant, I'll Like that the In works so just electronic that don't question. ever and awesome. that It's -- little I have lasts do like like accurate any bit is phone, buildings, if everywhere? dark correctly, where into trouble a very

step system But communication always is what to for important one be business at the rest. is above no all, perfect. plan of is First our least

else all with are location XX, own $XXX competing has companies value And of these past been they're technology And XX, years. with Samsung for largest services we We as own for the and much developed companies competition. but from Apple location services. it's in location world. our also and the the all location developing small proprietary their not companies tracking for location integrate million revenue. well, So XX $XXX million, Google everyone in the like Obviously,

provide we locations. services, So location when channels to offer multiple track we

networks do underground, using not using If you're the GPS, Google we're WiFi through network. we

can precisely track you're look else somebody and technologies, also frequency in When the within underneath have the our So ground in subway, monitoring where signals in nobody we you industry. have the floor. which to the almost low we for at we're it could in able building, someone

we've not forth. done So hints XX just the floor, building, floor and we done so the XXth

we these solution. been dealing into technology this So all since unique And and combine has lucky proprietary with SuperCom to have able XXXX. technologies and fortunate been location

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know It morning, seems was July, the congratulations company got I is an guys General for wondering, is extension missing. going like like in just everybody, you I Good environment $X? well.

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you. Thank

queue. back I [Operator this further pass time, will no for in this time, call Instructions] to At closing At the there questions Ordan remarks. are

you I today's in participating for your thank for want to interest call all SuperCom. and in

have big doing on big releases. are call, and and to forward a sharing look things impact, press a filings conference and we next making day. and We our progress you, Thank our good

Thank you, event. conclude ladies today's and gentlemen. This does

You have Thank at your may and you disconnect for a day. this your lines time, participation. wonderful phone