Supercom Ltd (SPCB) 2022 Q1 法說會逐字稿

Ladies and gentlemen, good morning, and welcome to SuperCom's First 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.

女士們，先生們，早上好，歡迎來到 SuperCom 2022 年第一季度財務業績和公司更新電話會議。 （操作員說明）。本次電話會議的參與者請注意，本次電話會議的音頻將通過互聯網進行現場直播，同時也會被錄製下來以供播放。

Joining me from SuperCom's leadership team is Ordan Trabelsi, SuperCom's President and Chief Executive Officer.

與我一起來自 SuperCom 領導團隊的是 SuperCom 總裁兼首席執行官 Ordan Trabelsi。

During this call, SuperCom's management may be making forward-looking statements, including statements that address SuperCom's expectations for future performance or operational results. These statements are only predictions and SuperCom cannot guarantee that they will, in fact, occur. 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's most recently filed periodic reports on Form 20-F and Form 6-K and SuperCom's press release that accompanies this call, particularly the cautionary statements in it.

在此電話會議期間，SuperCom 的管理層可能會做出前瞻性陳述，包括針對 SuperCom 對未來業績或運營結果的預期的陳述。這些陳述只是預測，SuperCom 不能保證它們會在事實上發生。前瞻性陳述涉及可能導致實際結果與這些陳述存在重大差異的風險和其他因素。有關這些風險的更多信息，請參閱 SuperCom 最近提交的 20-F 表和 6-K 表定期報告中描述的風險因素，以及隨本電話會議發布的 SuperCom 新聞稿，尤其是其中的警示性聲明。

Today's conference call includes EBITDA, a non-GAAP financial measure that SuperCom believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located on SuperCom's earnings press release. Reconciliations for other non-GAAP financial measures to their most directly comparable GAAP financial measure are available in there as well.

今天的電話會議包括 EBITDA，這是 SuperCom 認為可用於評估其業績的非 GAAP 財務指標。您不應孤立地考慮此附加信息或將其作為根據 GAAP 編制的結果的替代。有關此非 GAAP 財務指標與其最直接可比的 GAAP 財務指標淨虧損的調節，請參閱 SuperCom 收益新聞稿中的調節表。其他非 GAAP 財務指標與其最直接可比的 GAAP 財務指標的對賬也可在其中獲得。

The content of this call contains time-sensitive information that is accurate only as of today, May 12, 2022. Except as required by law, SuperCom disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

本次電話會議的內容包含時效性信息，截至今天，即 2022 年 5 月 12 日，這些信息都是準確的。除法律要求外，SuperCom 不承擔任何公開更新或修改任何信息以反映本次電話會議後發生的事件或情況的義務.

It is now my pleasure to turn the call over to SuperCom's President and CEO, Ordan Trabelsi.

現在我很高興將電話轉給 SuperCom 的總裁兼首席執行官 Ordan Trabelsi。

Thank you, operator, and good morning, everyone, and thank you for joining us today. Earlier, we issued a press release with financial results for the first quarter of 2022. A copy of which will be available on the Investor Relations section of our website. We did have our 2021 annual earnings call about 6 weeks ago only. We maintain our commitment to timely quarterly reporting, and today, I'll provide a brief update on recent business highlights and strategy followed by a Q&A session.

謝謝接線員，大家早上好，感謝您今天加入我們。早些時候，我們發布了一份包含 2022 年第一季度財務業績的新聞稿。其副本可在我們網站的投資者關係部分獲取。大約 6 週前，我們確實召開了 2021 年年度收益電話會議。我們保持對及時季度報告的承諾，今天，我將簡要介紹最近的業務亮點和戰略，然後是問答環節。

We actually just secured another contract in the U.S., a second one in the state of Idaho, and a PR with more details will be released. With every quarter that passes, we get further along and capitalize on the transition from the legacy business to our new focus with IoT Tracking business, serving public safety government customers in developed countries.

實際上，我們剛剛在美國獲得了另一份合同，在愛達荷州獲得了第二份合同，並且將發布包含更多細節的 PR。每過一個季度，我們都會走得更遠，並利用從傳統業務到我們新重點的 IoT 跟踪業務的過渡，為發達國家的公共安全政府客戶提供服務。

While going through this process, we managed to demonstrate stable performance and are poised for the future growth of our IoT division. Last year, for the first time in 5 years, we achieved growth in annual revenues. And in this quarter as well, we were able to offset the decline from the legacy business with growth in the IoT business.

在此過程中，我們成功地展示了穩定的性能，並為我們物聯網部門的未來發展做好了準備。去年，我們 5 年來首次實現年收入增長。同樣在本季度，我們能夠通過物聯網業務的增長來抵消傳統業務的下滑。

We continue to enhance our operational infrastructure, strengthen our workforce and maintain technology leadership. In addition, we honed our business plan and raised the needed financial resources to support during the time of volatility and uncertainty in the capital markets. With our SuperCom's 33-year history, since its founding in 1988, and has always been a trusted partner providing cutting-edge electronic and digital security solution to dozens of governments worldwide. In recent years, we've become more and more aware of the immense challenges that nations worldwide face in dealing with their offender population. We have leveraged our technology, expertise and government security and excellent team towards our current focus in the public safety sector.

我們繼續加強我們的運營基礎設施，加強我們的員工隊伍並保持技術領先地位。此外，我們完善了業務計劃並籌集了所需的財務資源，以在資本市場動盪和不確定的時期提供支持。憑藉我們 SuperCom 的 33 年曆史，自 1988 年成立以來，一直是值得信賴的合作夥伴，為全球數十個政府提供尖端的電子和數字安全解決方案。近年來，我們越來越意識到世界各國在處理其罪犯人口方面面臨的巨大挑戰。我們利用我們的技術、專業知識和政府安全以及優秀的團隊來實現我們目前在公共安全領域的重點。

As part of our mission, we strive to revolutionize the public safety sector worldwide through proprietary electronic monitoring technology, data intelligence and complementary services. Many governments around the globe are facing severe challenges when dealing with our offender population. Firstly, many countries suffer from high recidivism rates where persons after finishing their sentence relapse more criminal behavior. This clouds the criminal justice system. For example, in the U.S., within a few years that they're released, 3 out of every 4 former prisoners are rearrested. Lower recidivism rates benefit society by reducing prison population, saving taxpayer's dollars and most pertinently, improving public safety in our communities.

作為我們使命的一部分，我們努力通過專有電子監控技術、數據智能和補充服務徹底改變全球公共安全部門。在處理我們的罪犯群體時，全球許多政府都面臨著嚴峻的挑戰。首先，許多國家的累犯率很高，服刑期滿的人再次犯罪。這給刑事司法系統蒙上了陰影。例如，在美國，在他們獲釋後的幾年內，每 4 名前囚犯中就有 3 人再次被捕。較低的累犯率通過減少監獄人口、節省納稅人的錢以及最有針對性地改善我們社區的公共安全來造福社會。

Secondly, prisoner crowding is one of the key contributor factors to poor prison conditions worldwide. Prisons in over 118 countries exceeded their maximum occupancy rate. It is also arguably the most significant problem prisons are facing, resulting in prisoners sleeping in shifts on top of each other or sharing the beds.

其次，囚犯擁擠是造成全球監獄條件惡劣的關鍵因素之一。超過 118 個國家的監獄超過了最大入住率。這也可以說是監獄面臨的最嚴重的問題，導致囚犯輪流睡覺或共用床鋪。

Thirdly, in 2020, about $80 billion were spent in the U.S. to keep roughly 3.3 million people behind bars, meaning that nearly 1% of the entire U.S. population is incarcerated at any given time. Beyond that, it's a size of cost in incarceration, loss earnings, adverse health effect and more are estimated at 3x as direct cost.

第三，2020 年，美國花費了約 800 億美元將大約 330 萬人關在監獄裡，這意味著在任何特定時間都有近 1% 的美國人口被監禁。除此之外，監禁、收入損失、不良健康影響等成本規模估計是直接成本的 3 倍。

Unfortunately, these issues aren't unique to the U.S. and are prevailing globally. It is clear that prisons are far from ideal for solving difficult challenges. SuperCom provides top-notch solutions to solve these challenges effectively using our technology and complementary services. Our PureSecurity technology solutions provide an effective way for institutions to enforce home confinement while easing overcrowded prisons.

不幸的是，這些問題並非美國獨有，而且在全球範圍內普遍存在。很明顯，監獄遠非解決困難挑戰的理想選擇。 SuperCom 提供一流的解決方案，利用我們的技術和配套服務有效解決這些挑戰。我們的 PureSecurity 技術解決方案為機構提供了一種有效的方式來強制執行家庭限制，同時緩解過度擁擠的監獄。

In addition, it allows them to reduce associated costs of housing an inmate significantly. For example, the total daily cost for monitoring an offender on home confinement through GPS monitoring is approximately $10 to $35, substantially lower than the $100 to $140 of a cost of a daily offender in correctional facilities. Most importantly, home confinement has been shown to reduce recidivism, highlighting its effectiveness in helping offenders improve their lives and making communities safer.

此外，它還使他們能夠顯著降低安置囚犯的相關成本。例如，通過 GPS 監控在家中監禁的罪犯的每日總成本約為 10 至 35 美元，大大低於懲教設施中每天 100 至 140 美元的成本。最重要的是，家庭監禁已被證明可以減少累犯，這凸顯了其在幫助罪犯改善生活和使社區更安全方面的有效性。

We see a global trend of governments turning to innovative solutions rather than incarceration to ensure public safety. Offenders' electronic monitoring is becoming more and more in demand as it solves most of the mentioned challenges. The electronic monitoring market was valued at about $1.1 billion in 2020 and is estimated to reach $1.6 billion by 2025. The U.S. and Europe constitute about 95% of this market. With the strong price and certification in both markets, we are well positioned for continued growth and capitalizing on new opportunities.

我們看到政府轉向創新解決方案而不是監禁以確保公共安全的全球趨勢。罪犯電子監控的需求越來越大，因為它解決了上述大部分挑戰。電子監控市場在 2020 年的價值約為 11 億美元，預計到 2025 年將達到 16 億美元。美國和歐洲約佔該市場的 95%。憑藉兩個市場的強勁價格和認證，我們為持續增長和利用新機遇做好了充分準備。

In Europe, we have recently seen an uplift in RFP activity with over $200 million in expected upcoming bid opportunities in the next 18 months. In parallel, we continue to score well on competitive tenders. For example, we recently announced that we launched Croatia's first full-scale electronic monitoring project, and we'll deploy our PureSecurity Electronic Monitoring Suite. The project was formally awarded earlier this year in a formal bid process by Croatia's Ministry of Justice and Administration. The projects launched followed by the successful completion of the government approval process and contract institution. This project increases our hold in the European market and comes after a consistent streak of wins in this market, displacing incumbent vendors time after time with an over 65% win rate in competitive RFP in Europe.

在歐洲，我們最近看到 RFP 活動有所增加，預計在未來 18 個月內將有超過 2 億美元的投標機會。與此同時，我們繼續在競爭性招標中取得好成績。例如，我們最近宣布我們啟動了克羅地亞的第一個全面電子監控項目，我們將部署我們的 PureSecurity 電子監控套件。今年早些時候，克羅地亞司法和行政部在正式投標過程中正式授予該項目。啟動的項目隨後成功完成了政府審批程序和合同製度。該項目增加了我們在歐洲市場的佔有率，並且在該市場連續獲勝之後，一次又一次地以超過 65% 的歐洲競爭性 RFP 獲勝率取代現有供應商。

In the U.S., we announced that our fully owned subsidiary, Leaders in Community Alternatives, want to launch projects that are either up to over $5 million over 5 years to provide various programming and rehabilitation services. In addition, we secured contracts in 3 new states: Texas, Idaho and Wyoming for the PureTrack GPS tracking platform serving adults and juveniles, thus further expanding our footprint in the U.S. We actually just secured an additional contract in Idaho based on a good referral from our first customer in the state.

在美國，我們宣布我們的全資子公司 Leaders in Community Alternatives 希望在 5 年內啟動價值超過 500 萬美元的項目，以提供各種規劃和康復服務。此外，我們在 3 個新州獲得了合同：德克薩斯州、愛達荷州和懷俄明州，為成人和青少年提供 PureTrack GPS 跟踪平台，從而進一步擴大我們在美國的足跡。實際上，根據來自愛達荷州的良好推薦，我們剛剛在愛達荷州獲得了額外合同我們在該州的第一個客戶。

Our recent announcement of new contracts in Europe and the U.S. are compelling examples of our successful business plan execution within a vertical in which we have a strong presence and an excellent reputation. Our success in winning these projects is a function of two main factors. We attribute our wins mainly through our proprietary technology, which scores very highly in the competitive RFPs and our strong reputation recognition as a premier provider of electronic monitoring technology and services.

我們最近在歐洲和美國宣布的新合同是我們在我們擁有強大影響力和良好聲譽的垂直領域成功執行商業計劃的令人信服的例子。我們贏得這些項目的成功歸功於兩個主要因素。我們的勝利主要歸功於我們的專有技術，該技術在競爭激烈的 RFP 中得分非常高，而且我們作為電子監控技術和服務的主要供應商享有很高的聲譽。

Our electronic monitoring technology supports various programs such as house arrest, GPS monitoring, rehabilitation services and more and has won over 40 multiyear government projects since 2018 alone. Also, our strategic focus shifted from our legacy business with onetime project revenues in Africa and South America to focus on our IoT business with recurring revenues from developed countries. However, we see more and more RFPs and procurement activity from our potential government IoT customers.

我們的電子監控技術支持軟禁、GPS 監控、康復服務等各種項目，僅 2018 年以來就贏得了 40 多個多年期政府項目。此外，我們的戰略重點從我們在非洲和南美的一次性項目收入的傳統業務轉移到我們的物聯網業務，從發達國家獲得經常性收入。然而，我們看到越來越多來自潛在政府物聯網客戶的 RFP 和採購活動。

In addition, we acquired an electronic monitoring and criminal justice business in 2016 named LCA, headquartered in Oakland, California, with a strong presence in the state since 1991. Through this acquisition and integration, the large references, relationships and experience we inherited in California have allowed us to enter the region with our new technologies and capabilities effectively unleash valuable synergies and generate a continuous stream of new multiyear recurring revenue project. Since this acquisition, we have won over $25 million worth of new projects in California. We are well positioned for growth into more locations and larger projects.

此外，我們在 2016 年收購了一家名為 LCA 的電子監控和刑事司法業務，總部位於加利福尼亞州奧克蘭，自 1991 年以來一直在該州開展業務。通過此次收購和整合，我們在加利福尼亞繼承的大量參考資料、關係和經驗使我們能夠以我們的新技術和能力進入該地區，有效地釋放寶貴的協同效應，並產生源源不斷的新的多年經常性收入項目。自此次收購以來，我們在加利福尼亞贏得了價值超過 2500 萬美元的新項目。我們有能力發展到更多地點和更大的項目。

We have strengthened the company's global sales division, recruiting a new VP of Sales and sales managers with industry experience and a shift from passive bidding to an active outreach sales set strategy. Moreover, we continue to invest in our R&D division, including a new VP of R&D and experienced engineers, product managers, quality assurance, and support personnel to serve the growing government customer needs for leading state-of-the-art technology in the space.

我們加強了公司的全球銷售部門，招聘了一位新的銷售副總裁和具有行業經驗的銷售經理，並將被動投標轉變為主動外展銷售策略。此外，我們繼續投資我們的研發部門，包括新的研發副總裁和經驗豐富的工程師、產品經理、質量保證和支持人員，以滿足政府客戶不斷增長的對該領域領先的最先進技術的需求.

The investment we have made thus far have been driving increased activity and -- with existing customers and numerous new demos and evaluations with potential new ones. We operate in small niche market with customers know each other and having a solid reputation is an essential factor in the business on selecting the vendor.

迄今為止，我們所做的投資一直在推動活動的增加——現有客戶和大量新的演示以及對潛在新客戶的評估。我們在小眾市場經營，客戶彼此認識，擁有良好的聲譽是企業選擇供應商的重要因素。

The new wins, combined with our improved sales teams, are the first step in executing the company's U.S. market expansion strategy. We also consider a strategic acquisition of resellers in key locations as part of our growth plan. Our strategy in this has been to build amazing technology, expand our presence and deliver outstanding services. Each customer win, each project deployed further strengthened our reputation, making us even more competitive. We have further progressed in each of these elements and achieved recognition for such by awards from existing customers and new one in this region and in huge.

新的勝利，加上我們改進的銷售團隊，是執行公司美國市場擴張戰略的第一步。作為我們發展計劃的一部分，我們還考慮在關鍵地點戰略性收購經銷商。我們在這方面的戰略是打造令人驚嘆的技術、擴大我們的影響力並提供出色的服務。每贏得一個客戶，部署的每一個項目都進一步增強了我們的聲譽，使我們更具競爭力。我們在這些要素中的每一個方面都取得了進一步的進步，並通過該地區現有客戶和新客戶的獎勵獲得了認可。

Our strategy has always been to lead the technology, as mentioned. And entering 2022, we continue to invest in research and development to ensure our products remain the most competitive in the market. Our reputation in the industry regarding our IoT solutions continue to be stellar due to these investments and is evidence that these efforts are paying off. We continue to introduce new features and new technologies into our proprietary platform, extending our lead in the market space.

如前所述，我們的戰略始終是引領技術。進入 2022 年，我們將繼續投資於研發，以確保我們的產品在市場上保持最具競爭力。由於這些投資，我們在 IoT 解決方案方面的行業聲譽繼續保持良好，並且證明這些努力正在取得回報。我們不斷將新功能和新技術引入我們的專有平台，擴大我們在市場空間的領先地位。

And our R&D teams continue to innovate and disrupt the status quo, whether there's new features and biometric capabilities, battery life, communication capability or entirely new solutions for domestic violent, alcohol monitoring and smartphone electronic monitoring within dense hard-to-monitor urban areas and subways. We believe there's opportunity to enhance our growth in the U.S. to the future acquisition of local electronic monitoring service providers, who have developed a strong reputation and a customer base in their respective and local communities. We constantly monitor the market potential acquisitions that could generate significant value by immediately expanding market presence and providing vertical integration synergies. An example of this strategies reflected to a $3 million acquisition of LCA back in 2016 and the amend strategic value and new project win that has provided us.

我們的研發團隊不斷創新和顛覆現狀，無論是新功能和生物識別能力、電池壽命、通信能力還是針對密集難以監控的城市地區的家庭暴力、酒精監控和智能手機電子監控的全新解決方案，地鐵。我們相信有機會加強我們在美國的增長，以在未來收購當地的電子監控服務供應商，這些供應商在各自和當地社區建立了良好的聲譽和客戶群。我們不斷監控市場潛力的收購，這些收購可以通過立即擴大市場佔有率和提供垂直整合協同效應來產生重大價值。這種戰略的一個例子反映了 2016 年以 300 萬美元收購 LCA 以及為我們提供的修正戰略價值和新項目勝利。

Moving over to financial discussion. As mentioned, in our previous earnings call and apparent now, the company has invested in its financial reporting resources and returned to timely quarterly reporting. This quarter, we've also acted to strengthen our balance sheet on March 1, 2022, raised approximately $4.65 million gross proceeds in a registered direct offering with a single accredited institutional investor, providing us additional capital to execute on the business plan.

轉到財務討論。如前所述，在我們之前的財報電話會議和現在看來，該公司已投資於其財務報告資源並恢復及時的季度報告。本季度，我們還於 2022 年 3 月 1 日採取行動加強我們的資產負債表，通過與單一認可機構投資者的註冊直接發售籌集了約 465 萬美元的總收益，為我們提供了執行業務計劃的額外資金。

Revenue in the first quarter of 2022 was approximately $3 million. Once again, our IoT division grew faster than the decrease in the legacy identification business, and we continue to progress with the transition in the legacy business to the IoT Tracking business. When comparing Q1 '22 results with last year corresponding period, we see gross margin of 43.3% compared to 55.3%, also reflecting traditional costs associated with the deployment of new IoT projects ahead of the current revenue streams to come.

2022年第一季度的收入約為300萬美元。再一次，我們的物聯網部門的增長速度快於遺留識別業務的下降速度，並且我們繼續推進遺留業務向物聯網跟踪業務的過渡。將 22 年第一季度的結果與去年同期進行比較時，我們看到毛利率為 43.3%，而毛利率為 55.3%，這也反映了與在當前收入流到來之前部署新物聯網項目相關的傳統成本。

We increased our research and development spending by $300,000 quarterly. Working on developing new products keeping us at the cutting edge of innovation and technology leadership in the space. Our sales and marketing expenses increased by $300,000 to support the company's new proactive growth strategy. In general, administrative expenses increased by $400,000 due to our management team. The company had an operating loss of $1.5 million versus an operating loss of $200,000 and an EBITDA of $200,000 -- negative $200,000 compared to a positive $600,000 in the previous period, reflecting an increase of investment in R&D by 30% and an increase of 90% in sales and marketing.

我們每季度增加了 300,000 美元的研發支出。致力於開發新產品，使我們始終處於該領域創新和技術領先地位的前沿。我們的銷售和營銷費用增加了 300,000 美元，以支持公司新的積極增長戰略。總的來說，由於我們的管理團隊，管理費用增加了 400,000 美元。公司經營虧損 150 萬美元，而經營虧損為 200,000 美元，EBITDA 為 200,000 美元 - 負 200,000 美元，而上一期為正 600,000 美元，反映了研發投資增加了 30% 和 90%在銷售和營銷方面。

Our cash and restricted cash balance at the end of Q1 was around $6.6 million. We will continue to invest in our sales and marketing as well as R&D to drive revenue growth, expand our global footprint and execute on our business line.

我們在第一季度末的現金和受限現金餘額約為 660 萬美元。我們將繼續投資於我們的銷售和營銷以及研發，以推動收入增長、擴大我們的全球足跡並執行我們的業務線。

And with that, I'll turn the call over to the operator and open the call for questions. Operator?

然後，我會將電話轉給接線員並打開問題電話。操作員？

(Operator Instructions) At this time, we will pass the call back to Ordan for closing remarks.

（操作員說明）此時，我們會將電話轉回 Ordan 以進行結束語。

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

我要感謝大家參加今天的電話會議以及對 SuperCom 的關注。我們期待在下一次電話會議、文件和新聞稿中分享我們的進展。謝謝你，有一個美好的一天。