Immunoprecise Antibodies Ltd (IPA) 2023 Q1 法說會逐字稿

We have already [done the intro] (technical difficulty) so you can go ahead and get started if you want to pop up your presentation, give a brief little background on yourself. Please, the floor is yours.

Alright. Thanks a lot, and sorry for the delay, guys. My name is Ordan Trabelsi, I'm the CEO and President of SuperCom, and I'm happy to give a corporate update on how things have been going on lately. Then I'll share the screen here -- one second -- alright. You guys can see it?

Looks great.

Alright, great. Thanks again for joining everyone. We'll run through our corporate presentation of dated February 2022. Safe Harbor statement. So, SuperCom, since 1988 have been a global provider of electronic security solutions to governments around the world, including biometric identification, passports, ID cards, driver's licenses.

And lately, over the past five or six years, we actually shifted our focus towards offender electronic monitoring services, mainly in developed country in the US and in Europe. Trading on NASDAQ capital market, SPCB. We had last year, roughly $1 billion of annual trading volume.

High volume in our stock -- insider ownership of 90% roughly, our chairman announced acquisition of roughly 900,000 shares on the market in the past few months. Some other highlights, over 83% of our revenue is recurring, and we've been EBITDA positive since -- the year 2020 reports.

We invested over $30 million in R&D over the past years, developed a product which is giving us a competitive landscape, and a competitive advantage in our landscape today. New management, myself as CEO and others joined last February. So it has been a year now of implementing our new business plan. And we have a strong track record -- dealing with over 50 governments around the world and hundreds of thousands of individuals that we serve.

Our mission, as it stands today is to revolutionize public safety around the world through proprietary electronic monitoring of offenders technology, [data intelligence], and complementary services. And this is the problem we're trying to solve. There are significant challenges around the world with [the] criminal justice systems.

Mainly, high recidivism rates, the rate at which people re-offend after leaving prison, prison overcrowding, excessive costs for incarceration. And all this leads to unsafe communities around the world.

I'll start with our recidivism rates in the US, there's high 76.6%. So over 76% of all that leave prison within five years are at real risks to going back in. That doesn't help you reduce the amount of people in prison when they keep coming back. The main problem with this is once people go to prison, they sometimes learn -- and improve their ways in committing certain crimes.

But beyond that, the more serious problem is the disconnect from their community. They have a harder time finding employment and when they come out, they end up be recommitting crimes and coming back.

In the US today, there is the highest prison population in the world. 700 out of 100,000, that's almost 1% of the people in the US are incarcerated. It's a big problem and it's a growing problem. And you could see in other countries around the world, in comparison, on England, there's 130, for 100,000; in Belgium, [93 91]. The US has a number which is many multiples of that, also because of the high recidivism rate.

And the US was roughly 106% prison occupancy. There's not enough room in the prisons for the amount of prisoners and these numbers are growing as we just described. And this is a problem that is popular around the world, not just in the US, also in England, in Belgium, Italy and Sweden and Denmark and all these countries, there's prison overcrowding, there's not enough beds for the amount of prisoners that are there.

And a very high and excessive costs, which are growing every year in the US. The last year, over $8 billion annually were spent operating prisons. There's roughly 2.3 million people incarcerated in the US. And here we start to see the advantage of going to alternatives to incarceration such as house arrests.

To operate a prison cost roughly $36,000 a year, per prisoner; versus a little under $3,000, including all the services and technology to keep someone on house arrest and that's potential savings of over 90%, just with this alternative of house arrests [compared] to prisons.

What is our solution for this global problem? We provide our PureSecurity 3, technology that we developed here in house at SuperCom proprietarily, which composes of software on the cloud, secure monitoring here, which helps the officers see where the people are and manage their locations where there are allowed to be and not allowed to be.

It's a full site system on the cloud, which has all the capabilities to run these kind of programs. We have a PureTrack bracelet, which is our version of ankle bracelet, much lighter and smaller version than what you may have seen in the past. PureTrack smartphone, Purecom base station and the PureBeacon.

This together is a PureSecurity suite and to that -- with that we're able to offer and support a wide array of programs of alternatives to incarceration. House arrests, GPS monitoring, alcohol monitoring, which verifies through the sweat that the person has not drunk alcohol for a certain period of time.

Rehabilitation services that we provide, domestic filing services, and programs and inmate monitoring of programs tracking people actually, while they are in -- incarcerated in the prisons. We have over 40 project wins in the space using this technology, and that [compartmentory] services that we have.

We've been able to achieve a very high win rate, mainly we attribute to our technology. We have over 65%-win rates in Europe, competitive our fees, these are national RFPs. We compete versus the -- up to 10 other players in the industry around the world. And some of our technological advantages are -- significantly longer battery life, no tag charging required whatsoever.

So with other technologies you typically have to charge it like every day or two, and with us the battery runs for one or two years, you don't ever charge it -- throughout your program. It's lightweight, at least much less than the others. We have biometric authentication. We have video call, two-way communication, next generation communication track capabilities, and next generation [cellular] location technology.

We utilize the Samsung smartphone and leverage all the newest developments in location tracking there. And we've invested over $30 million since 2014 in R&D, which has always been a big focus of ours. And we've also with every project that went developed more features and more capabilities that we've take on with other projects going forward.

And our proposition is not just the technology, it also includes our track record of many projects around the world. Our expertise in the industry and a very good reputation for deploying these projects. Let's look at the nature of these projects, essentially, these are our long-term government projects.

It's a long cycle to win the projects, but also at the end -- you stay with a very sticky long-term customer with high recurring revenues. So, in the first stage, competitive bids that could take three months up to 24 months depending how large the project is. Essentially, we gather information, we submit our proposal to negotiate pricing that we're awarded. And then if there is no appeal, we sign the contracts and launch the project.

Then we go in deployment phase where we actually manufacture the bracelets and the tags and any customization that is necessary, we develop with our team, we train the [customer's] staff, and we launch the program. There's a small fee for doing this deployment. And then we shift into the -- that's called the [SaaS and lease] stage, which is the longest part, and this is the recurring revenue on average in the industry, roughly $2,900 per offender annually.

Here, essentially, we get paid every month for the amount of units that are tracking the offenders, for the software in the cloud and the equipment that is leased out to the customer. And we have revenues that run for many years. The initial contract is usually five years and then it can be extended once, twice, three times. We have some customers that are usually over 10 years or 15 years with us.

The market for electronic monitoring is submarket of the general criminal justice market, which is much larger. As we said, $80 billion for incarceration on prison spend in the year. But we're looking just at electronic monitoring alternatives, through the incorporate [slip] -- looking at $1.6 billion by 2025.

It's growing at a CAGR of roughly 8%. You could see that majority of it is in the US, North America, and Canada, a small portion. And then you have in Europe estimated to be $300 million and another $100 million estimated to reach in Lat-Am. These solutions around the world help decrease the costs, as we said, 90% savings, reduce recidivism, which is important part of bringing it down in the prison populations and solve the -- inflating problem, enhancing public safety through eradicating, also prison overcrowding.

Let's look at our traction thus far. We've been working on this industry with our technology over the past few years. And we've already been able to win over 10 national projects, including, Bulgaria and Estonia and Finland and Sweden. You can see how we climb up the ladder because when we started off, we couldn't bid on a project at $7 million in size and have the references to [various] industry you have to show. You've been doing this for five 10 years to even be able to bid on an opportunity.

And so we start off a very small projects like [me throwing in $100,000] for a short period of time. And then actually one more and more, we're able to go up the ladders, Latvia and Denmark and Finland and then Sweden, with $7 million largest of size we've had in Europe until now.

But -- coming up this year in 2022 and some into 2023, a lot of the largest RFPs in Europe are coming up for rebid. They were up for bid in 2017. For a lot of these you can't even bid because we didn't have the references, but now we do. And so the opportunities are large in these projects are of much larger size, some of them are $60 million, $70 million, $50 million in size.

And from our estimates, there's over $200 million in projects -- in -- due to coming up for bid upcoming 18 months. We had a win rate of 65% in the past, doesn't mean that that same rate is going to go forward on these new opportunities. But we do feel good about winning more projects, and we're excited about what's ahead.

In North America, we've had some progress as well, even though that's been of secondary market. We started with Europe and now we're expanding more and more into the US. We acquired a company in 2016 called LCA, and they have a strong footprint in California. And since that acquisition we were able to win projects valued at over $25 million in California.

And then we started expanding into Texas, Georgia, Tennessee, and Wisconsin, slow step-by-step through resellers in small counties. As we continue the ladder in the US, we'll expand into larger county projects and then go to the state and federal. California state, Florida state, Texas -- very large projects larger than many of the nation's in Europe as a whole. That's the progress that we're seeing in America and excited about that as well.

Our growth strategy is we started investing in our sales division more. We brought a new VP of Sales, global VP of sales, and sales management industry experience. We're shifting from being passive. Most of our wins in the past just to bid on an RFP. Once it came out, we didn't have an active team going out to customers and reaching out, and get them excited about our products. We were still able to win because of our technology and the high scores you would get.

And now we're shifting gears into more active approach or actually go into customer, showing them our products, explaining our advantages far before it is actually an RFP, and are considering our technology. In Europe, we're just continuing what we're doing. It's working very well going up the ladder to larger and larger national projects that we hope to win.

And North America expanding into more counties and states through the agencies, through resellers, and also considering potential accretive acquisitions of resellers. They're essentially our customers and we've had good success with this with our previous acquisition. And sometimes we can find very good deals in this space and increase the margins of these customers significantly because they'll be replacing their technology with our technology. We have some interesting vertical integration there.

So that's essentially an opportunity as well. Once we acquire a player in another location, we have a strong footprint there and then can grow more and more projects and application that helps complement our organic sales strategy.

Look at the annual revenue trends, essentially what's happened over the past years from 2015 or so, to today. The legacy business, which is biometric ID cards, driver's licenses, passports, voter registration systems. That was our focus, those in developing countries, those in Africa and South America, mainly. And we decided to shift away from that -- and we shifted -- you could see from 2015, the revenues were nearly $30 million in identification.

And we've shifted away and now in 2021 based in the first nine months. The identification is a very small portion of our revenues, less than $2 million annualized. And the public safety, our portion, which is what we've been talking about, tracking of offenders, has become a much larger part and it's been growing nicely, and we expect that to continue to grow into the future. So when you look at the revenue of the whole company, might see a decline. When you focus on the trend of public safety, the strong and interesting potential for more growth.

Other interesting development over the past few years with COVID, some governments around the world saw that we have the ability to maintain house arrests. And as you all know, for COVID, there was a quarantine requirement, as one of the measures to prevent the spread. And when someone is infected or is at risk of getting infected, have been infected, countries wanted to execute quarantine confirmation or quarantine compliant solution.

Our technology worked perfectly for that. And we actually shipped pilots in different countries around the world, which have potential -- as COVID still not beyond us -- potential to still be part of our revenues in the future -- that the COVID-19 quarantine solution.

To talk about highlights, just to summarize it up. We're looking at a market expected to reach $1.6 billion. High barriers to entry for only 10 players in the industry. And no one can answer if they don't have five to 10 years' experience doing exactly this tracking of offenders. We feel good in our space, a growing market, and we're taking market share from others consistently.

Just like we did in Sweden, just as we did in Denmark and Czech and Bulgaria. We have over 65%-win rate in Europe and there's $200 million and more in upcoming Europe bid opportunities, which we hope to compete for and do well on. We have over $25 million in [Pasedena] in California, and we're expanding in the US with new investment and sales to other counties and states throughout the US.

We have over $30 million invested in R&D, where we developed our proprietary technology, which gives us a strong competitive edge. Over 80% of our revenues are recurring there in the [SaaS and lease] stage that we described. We're EBITDA positive and we have 90% insider ownership such that we care a lot about creating shareholder value and increasing -- shareholder value.

Financial summary and highlight. So for the first nine months of 2021, revenue is roughly $9 million, gross profit of $4.5 million and the EBITDA was $1.3 million. You can see the reconciliation between net income and EBITDA. A lot of it is through financial expenses which have been non-cash and amortization, depreciation from acquisitions we made in the past.

Our cash levels are from $6.3 million, including restricted cash as of September 30, 2021, and the stock has been very volatile over the past years and we announced new projects, you sometimes see a very big movement in the stock, which always from $0.40 to close to $3. There's roughly 28 million outstanding shares as of the end of January 22, and the average trading volume today of 1.2 million shares.

With that, once I complete my presentation, I'm happy to open up the floor for any questions.

Thanks very much for John. If anyone has any questions, we have about one minute left -- before stopping -- before the next meeting. So please.

Yes, and I'll throw one out that's intriguing to me. So it seems like that it's a confluence of factors for growth. You have your active targets, which is your sales force. You have scaling through -- getting more contracts, but how do you improve this 65%? Like what's going to be the key strategy there?

Right. So we've -- we start off with the industry by our technology to develop proprietarily, and we're able to win projects based on our technology. That technology has been improving over the years and we continue to invest in every new project. If in Czech Republic, they wanted to alcohol monitoring or in Sweden, they wanted domestic clients monitoring. We keep adding to our capabilities that increases our competitive advantage compared to others.

Now we're also with every new projects that we have our track record grows. And more that our potential customers see that we're doing this exactly like they want in other countries, especially the ones that are close to them. We have an advantage and can improve those numbers. But 65% is not the most important metric as much as the absolute number of dollars we can bring in.

So even if the number does go down, we're looking for continued growth for adding on more recurring revenues on top of our base with every new customer that we bring.

Understood. thank you so much for that. So we're going to need to end it here just ensure that we can move smoothly to the next presentation. I want to thank Ordan and the SuperCom team for joining us today and presenting at Aegis Virtual Conference. We will post up a recording of this. We will share the presentation for anyone who wants it. And if there are any questions from the attendees, whether it's on YouTube live or those joining us through Zoom, please direct them to Jesse and myself and the Agios team, and we'll be happy to pass them along to the folks over at SuperCom.

Ordan, thank you so much. Look forward to staying abreast of your developments and how you guys are succeeding on your strategy. Thanks again.

Thank you very much for hosting us and thanks to the whole team in Aegis and for all the investors who joined this presentation. Thanks a lot, and we're around, you can reach out to ir@SuperComm.com, if you have any further interest in the company

Thank you, Ordan. (Multiple speakers)

Thanks.