Q4 2020 Supercom Ltd Earnings Call
[music].
Ladies and gentlemen, thank you for standing by.
Good morning, and welcome to the Supercomm, 2020 financial results and corporate update conference call.
At this time all participants are in a listen only mode.
Should you need assistance, please signal a conference specialist by pressing star <unk>.
And he followed by zero.
After todays presentation, there will be and opportunity to ask questions to ask the question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
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. A webcast replay of the call will be available approximately one hour. After the end of the call through July 30th 2021.
I would now like to turn the call over to Scott Gordon President of core IR, The company's Investor Relations firm. Please go ahead Sir.
Thank you Hobart.
Good morning, and thank you for participating on today's conference call. Joining me from Supercomm leadership team are ordering Trabelsi Chief Executive Officer.
During this call management will be making forward looking statements, including statements that address your per comms expectations of future performance and operational results.
Forward looking statements involve risks and other factors.
And may cause actual results to differ materially from.
Those statements.
For more information about these risks please refer to the risk factors described and Supercomm. Its most recently filed periodic reports on.
On form 20-F, and form 6K, and Supercars and press release.
Last evening, and particularly the cautionary statements and.
Okay.
Today's conference call includes EBITDA, and non-GAAP financial measure and Supercomm believes can be useful and evaluating its performance you should not consider this additional information and isolation or as a substitute for results prepared in accordance with GAAP.
For a reconciliation of the.
On the GAAP financial measure to net loss its most directly comparable GAAP financial measure.
Please see the reconciliation table located and Supercars earnings press release.
The content of this call contains time sensitive information that is accurate only as of today April 30th 2021.
As required by law Supercomm disclaims any obligation to publicly update or revise any information to them.
The events or circumstances that occur after this call.
And it is now my pleasure to turn the call over to order and Trabelsi working please go ahead.
Thank you Scott.
On February 21st of this year I began my new role as CEO.
Supercomm attributes of the company since 2013 already of Trabelsi, our prior president and CEO of will continue to contribute to the company's success and.
And the member of the board of directors.
I'm excited to have the op.
And as the lead Supercomm and focus on the company's current initiatives.
Shareholder value.
And this new role focused on line for the company used to grow revenues and expand our customer footprint.
Much of our index that'll be in the Iot segment.
And we believe like the greatest opportunity given the market dynamics of our competitive capabilities.
Currently we have of high win rate and our project spend.
Oh BCP five per cent of Europe, and the recent past, which is the result of outscoring other competitors with the help of superior technology.
With every new project and the wet.
Whether it be Sweden, and Denmark, Czech Republic, and many others continue to develop more cutting edge capabilities and features.
Two of our technology suite.
And we'll continue to lead with strong technology.
And then to start investing more of our sales and marketing teams got revenue growth.
Whereas in recent years on.
And in sales and marketing was minimal.
And Iot compared to our competitors.
Additionally, we're.
We're getting and the first quarter of 2021, we plan to return to reporting our results on the quarterly basis and investing in our finance department and the effort to improve the quality of our financial management and five minutes of our reported we'll be providing more transparency to the street.
Furthermore, in 2020, one together with our enhanced cost of the ship the product offering and gradual and the ease of COVID-19 patients and the restrictions we're seeing increased activity on our targeted markets and are excited about the direction, which we are adults.
Yes.
COVID-19 and initiatives negative impacts.
Impacts of Iot business, and governmental agencies and many of their operations and of course closed there's less use of on electronic margin devices from inmates being moved to home confinement and on.
After the unit count decreased however.
Due to higher and bounds of COVID-19 cases of any correctional facility, given the challenges and maintain proper social distancing.
And close quarters, we saw a general industry try and towards the increasing use of all of them find then that's the way to address overpopulated pause.
This trend of increased demand for our tier of security electronic monitoring the suite of products.
Particularly if the government agencies are being.
And beginning to reopen.
We expect this trend to benefit the segment in 2020, one and a couple of years.
And then 2021 were seeing the growth towards our.
Free COVID-19 activities and that many of our customer region. We're also seeing increased RFP and bid activity as restrictions related to COVID-19 are gradually getting to go east.
Okay.
We have been gaining significant traction in recent years and both 20 and 19 in 2020, we secured over 10, new multi your government projects each.
Highlighting our value add and also setting the stage for increased recurring revenue and couple of years.
Our primary focus and the Iot segment, which has been gaining traction and addressing the two challenges directly and indirectly associated with COVID-19.
First and many areas of the COVID-19 outbreak has force local authority to reduce the prison population.
Through a transition to home confinement per security suite solution directly addresses the challenge with the comprehensive offender tracking per hour for them.
The real time, the electronic monitoring and tracking for national and municipal criminal agencies.
By being able to accurately and effective and we track and meet.
Our therapies are able to safely come sign in front of us while minimizing the risk of COVID-19 spread and already overpopulated prison.
The solution not only enables the magic of it made better.
Debt or at home.
But also reduces the cost of maintaining those are the main by providing a safer environment.
The facility.
During the second half of 2021 and several contract awards validating the value of this technology.
On September 32020 of the converted a pilot and the Caribbean and two of new contracts for our peers of Kt sweep all electronic monitoring and tracking platform the.
The solution insurance public safety by securing.
Monitoring and offender location of restrictions, providing the platform of tools that aid and the reduction of offender for citizens.
On November 30th 2020 after a lot of in front of the part of it you could give any new electronic monitoring contract and the state of Wisconsin.
What's your security of electronic monitoring suite.
On December 1st 2020, we announced the launch of of one $2 million five year contracts of the government of Latvia, and Europe from National Electronic monitoring those monthly what should provide a recurring revenue stream.
The contract also includes our purification and I'll try and monitoring suite.
Which will monitor of subjects under house arrest with G. P. S. Shrek.
On December 3rd 2021 of the new juvenile of electronic offender monitoring contracts and the state of Alabama.
Our free trial G P acquisition, which also bill as it were.
The current revenue the resource based on day and the Street.
On the seventh day on December 7th the one of the new electronic monitoring contract with the state of health.
Before and yet with the private company, serving the traditional services of the market and other electronic monitoring contract on the <unk>.
And the guidance.
And sports and one of the Sheriff office and South East U S. Each of your track solution.
[laughter].
Our pure health technology.
And so that's also been and.
The man and became an effective tool to implement quarantine measures to reduce the spread of COVID-19 and <unk>.
March of 'twenty, 'twenty, one and lots of pilot using the solution Israel Ministry of Health sure sure traveler quantity compliance the pile.
Pilot of enabled people arrive at the Israel the option of performing of the quarantine for 10 and 14.
And 14 day at home instead of having to go with the specific isolation location or color on the hotel in this case.
That's the medical and out of itself.
And the program of hundreds of your care on the pure health devices and prices were installed on non vaccinated travelers, who entered Israel from other countries to ensure compliance with the government quarantine requirements. After the pilot proved successful.
Israeli government issued of competitive RFP and simple problems award of the contract.
Our awarded the tender with an estimated value of three of $9 per month and recurrent revenues and then.
The short terms and the project of the three months with the option to extend up to 36 months, we believe this.
The project validates, our pure health technology, and effective solution and fighting COVID-19, and hope for continued momentum as the other countries continue to address the start of the buyers.
Additionally, supercomm the R&D Department has been focused on building. The next generations of our people monitoring products, which are expected to be released July of 'twenty, 'twenty, one and years to come.
These new products walking on the overall solution and ensure we keep on technology.
He didn't want and this industry.
You also have the supply chain capabilities and.
The order to support increased demand for Iot products, we have adjusted our manufacturing capacity and enable more flexibility now with the scale up to.
1000, new units per day of production, the very high of balance for our industry.
Furthermore, the.
And I've made on global supply chain more resilience by reducing our dependencies on specific suppliers and <unk>.
Geographic regions and light of the difficulties faced in 2020.
COVID-19 pandemic.
While our primary focus is on the Iot segment and continue to drive value through our secure I V and cyber solutions segments.
In fact over the year. The Securities segment is complete and more than 20 and national government projects and implementing electronic identification and biometrics for entire countries located in South America Africa, and Europe and Asia. These.
These projects provides the book on the strong track record and the opportunity to win additional business after having established the strong reputation and build sustainable relationships.
Our revenues and these types of projects and shifted from being project based and onetime nature the recurrent revenue model.
And our cyber security solution safe and continues to perform well also evidenced by the five year, one point of $2 million contract one in December and Israel.
These contract awards and the second half of last year and the corresponding rapid recurring right.
The strong momentum into 2020, one well clearly validating the value of our product offerings.
We are confident we will.
We'll continue to build on this momentum.
We have taken action and the second half and beyond and strengthen our balance sheet and July of 2020.
All of the 3.2 million private placement with two points on the chairs.
And the February of 2021 we closed the 7 million dollar.
Ordinated notes financing of the 5% coupon and providing us additional liquidity to execute on our business line.
In terms of financial performance in 'twenty, and 'twenty, one 2020 Rev.
The decline 29 per cent for the full year of 2020 and the decline was primarily the COVID-19 related.
The governmental agency and shut down there and back and our customers' ability to process. It.
The home confinement.
And the agency at the beginning to reopen and we are seeing an increase in activity and 2020 of them.
During 2020 and focused on cost improvements.
And optimization the address the uncertainty related to the pandemic.
Our gross margin improved to 47 per cent.
Up from 39% from the prior year.
Primarily driven by improvements made to our service and fun.
And would you start of research and development spend by $1 $6 million and 'twenty from me.
Or for 24 per cent of revenue to 20% of them are.
Sales and marketing expenses declined by $1 million in 2020, one from 'twenty one per cent of revenue to the 15% of revenue and our general and administrative expenses declined by 1.3 and $9, although increasing kind of revenue of 33% to 35% of.
Cash and restricted cash balance of the end of 2020 was around $4 million.
And as we see economic economies begin to open back up we will invest and our sales and marketing to drive revenue growth.
And with that I'll turn the call over the operator to open the call for questions.
Right.
Thank you, ladies and gentlemen, if you wish to ask a question on today's call you will need to press Star then the number one on your telephone.
If your question has been answered and you wish to withdraw your request you may do so by pressing Star then two.
If youre using a speakerphone please pick up your handset before entering your request and speaking on the call. One moment. Please for the first question.
Your first question comes from the line of Kevin Dede with Rodman and Renshaw. Please proceed with your question.
Our operator, Kevin D D. H C Wainwright, now where Don congratulations on the new position and thank you very much for taking my questions.
I and I was hoping the sure I was hoping first you could sort of characterize your win rate I mean granted COVID-19, but I think you mentioned 20 odd Iot deals can you tell us how many of you wanted and 19 and how many one and 20.
We've won over 10 and each of the years.
Well you know okay.
Could you give us a little more insight on the technological differences between pure health and beauty care.
Sure.
The pure care is part of your health and so from a quarantine and compliance true health also has and you're wondering how capabilities and the other solutions.
Solutions, which serve the health care industry.
That makes sense.
Yeah sure sure sure.
Your pure care is just.
Quantum comply.
Okay. Okay.
Yeah, Okay got it got it got it okay.
Yeah, Yeah, yeah. So.
The just a little on the balance sheet.
The short term debt was was up versus the last time, we saw the balance sheet and June and I'm, just sort of wondering what the thinking is.
And how you're managing.
Our cash and cash flow.
You'll need to sponsor of the initial rollout understand that there you know when you get a new deal or a little capital intensive upfront.
Right.
And you're correct the.
When we launched the new projects and Iot, because we needed to manufacture the units.
Require some cash but after six to 12 months those projects become cash flow positive.
And as we continue to win the projects all the projects are generating positive cash flow.
And of course as the project size continues to grow and then we will need to leverage some external financing to help like the south project that we just of.
The awarded and Israel.
So it depends on all of them and stock price.
And we've been leveraging a lot of debt because we believe the hundreds of companies and undervalued and the stop and represent.
On the value of properly. So you saw all of our debt levels range.
And the future and there.
And also utilized equity to support of the project.
So does the $15 million does.
Does that represent the fortress loan.
Yes, the 15th.
And balance.
Okay.
The.
Yeah, Thanks for that so the.
The next question really has to do with revenue mix and sort of your strategic thinking.
No mention obviously the E gov or the software side of business and I'm just sort of wondering.
Whether or not you could characterize that their contribution in 2019 versus 2020 and how you're thinking about those business capabilities as supercomm moves forward.
Okay.
Just a moment.
And she does numbers the breakout.
Mark on that please.
Okay.
Thanks are down yes, yes, so and you'll see our 20-F on.
File and then we'll have these numbers but.
And for the call are eat the actually stayed more or less the same the revenues from 2019, the 2021 from a 19 252 was 19, one one is the thousands of one $9 million roughly and ego.
And Iot the revenues went from 11 6.002 million 19 to seven six and 2021 of.
A lot of that and contributed to a decrease and service revenues and.
And that's because of lot of ongoing services. The can provide because we weren't getting the plenty of offenders to truck because of course, we're close.
And many parts of the U S and also the in the projects of the you have we can provide the full service because people couldn't come in and.
And actually beat us and because of a COVID-19 restrictions.
So the numbers went down with existing customers and then that would mean here and the customers and now and some of the restrictions have been.
And I wish he and the numbers actually jumped right back up and not yet to the same levels pre COVID-19, but they are increasing and that direction with the problem.
And the cyber security the revenues went from $2 8 million 19 of it to a 2.2 and 2020.
Okay.
Okay. How how are you I guess sort of out of the big part of the question is really how are you looking at those other two segments understand you know based on your prepared remarks, the focus is on.
Got that.
Clear I'm, just sort of wondering how youre looking at the other aspects of the business.
Okay. Good.
So, yes, and when we analyze the competitive.
Landscape.
Actually the small no third part of it should've been solved already.
But.
And in terms of the competitive landscape, we are analyzing the different divisions, and then and Iot tracking and you know of.
A couple of billion dollars and market size. So the only time fliers, we're able to generate a high win rate and have the opportunity to reach our marketing and physicians are clean and best properly and execute.
And the other divisions <unk> and <unk>.
Densification and cyber security and a little bit more challenging and we do believe that we can maintain our revenue and grow them. Firstly, the talk about identification and launched over 20 projects the governments around the world, including and.
China and Tanzania and.
And I'm on that corridor and ease.
The national projects with very high sensitive data and we're able to show of governments around the world now that we're doing share of security and Pier House, and we were able to manage all of this data and received such trust from these large nations.
And the excellent track record and helps us win more projects around the world. So the same DNA of serving the national government customers.
Supporting the and interacting with that and as well as one of your bids has stayed between identification to attract more of offenders.
And the underlying all of these little different and we maintain the customers. We have we try to each of the relationship with them and support them and the order additional expansions and enhancements.
And identification.
Opportunistically, a little bit of more projects as well, but we will try to use R. R.
A couple of resources more towards Iot AR and.
In terms of cyber security, we have a very strong sales and distribution channel, we have plenty of enterprise customers drive U S and Europe, which.
And our technology for endpoint protection and essentially protecting.
Sensitive data from leaking out of laptops and endpoints of enterprises very important out of your enterprise doesn't have the solution myself and.
And today's World is also new solutions and advanced persistent threat protection of the anti malware protection and it's much easier for these enterprises too.
And more components of the existing solution and to bring on a completely new vendor and so we're trying to leverage that and.
So the at our technology offerings and existing customer base and are not only maintained high margin revenues with the country grow them in the coming years with a minimal investment.
Perfect. Thank you word on one last housekeeping question can you give me the share count at at year end, Please I couldnt find it and Nebraska.
Close to 20 million.
And fast.
Yeah.
The number of completed.
19 million 998.
One nine got nine eight.
On $9 99.
And I and $19 99, nine net could you round out the point.
Yeah Yeah.
Per se okay.
Okay, Yeah perfect. Okay. Thank you so much for interchange of my questions.
Okay. Thank you.
As a reminder, if you'd like to ask the question. Please press star one on your telephone keypad and now as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad now one moment, please and I'll be pulled from more questions.
Okay.
Yeah.
Ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call over to Mr. Horta <unk> Trabelsi for closing remarks.
I want to thank you all of participating on today's call and for your interest and Super Com, We look forward to sharing our progress on our next conference call. Thank you very much and have a good day.
Ladies and gentlemen that does conclude today's conference. Thank you for your participation and have a great day.
Okay.
Yeah.
[music].
Yeah.
[music].
Yeah.
Uh huh.
[music].
Uh huh.
And then.
[music].
Yeah.
[music].
Yeah.
Yeah.
Yeah.
[music].
Yeah.
[music].
Yeah.
Yeah.
And then.
And then.
Yeah.
Right.
Yeah.
[music].
Hum.
And.
[music].