Q1 2022 Supercom Ltd Earnings Call
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Yeah.
Ladies and gentlemen, good morning, and welcome to the Super Com's first quarter 2022 financial results and corporate update conference call.
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Joining me from Super comps leadership team is or Don Trabelsi Super Com's, President and Chief Executive Officer.
During this call Super comps management may be making forward looking statements, including statements that address super comps expectations for future performance or operational results.
These statements are only predictions and supercomm 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 Super comps. Most recently filed periodic reports on form 20-F, and form 6K, and Super comps press release that accompanies this call, particularly the cautionary statements in it.
Today's conference call includes EBITDA, a non-GAAP financial measure that Supercomm believes can be useful in evaluating its performance.
Would 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 Supercuts earnings press release.
Conciliations for other non-GAAP financial measures to their most directly comparable GAAP financial measure are available in there as well.
The content of this call contains time sensitive information that is accurate only as of today may 12, 2022, except as required by law Supercomm disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.
It is now my pleasure to turn the call over to Super Com's, President and CEO or Don Trabelsi.
Okay.
Okay.
Yeah.
Thank you operator and.
And good morning, everyone.
And thank you for joining us today earlier, we issued a press release, our financial results for the first quarter of 2022.
Copy of which will be available on Investor Relations section of our website.
We did have our 2021 and your earnings call about six 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.
We actually just secured another contract in the U S.
Actually I wanted to state of Idaho.
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.
<unk> gone through this process, we managed to demonstrate stable performance and are poised for future growth of our Iot Division last year for the first time in five 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.
We continued 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.
<unk> 33 year history since its founding in 1988, it 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 many challenges that nation's worldwide face in dealing with their finger population.
We have leveraged our technology expertise and government securities and excellent team towards our current focus.
And the public safety sector.
Okay.
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, while dealing with their offender populations firstly.
Many countries suffer from high recidivism rates were persons after finishing their centered relapsed one criminal behavior. This closet criminal Justice system. For example in the U S. Within a few years that they're released three out of every four former prisoners are rearrested.
Lower recidivism rates benefit society by reducing prison population savings taxpayers' dollars and most importantly, improving public safety in our communities.
Secondly, prisoner overcrowding as one of the key contributor.
Factors to pour prison conditions worldwide prisons, and over 118 countries exceeded their maximum occupancy rates.
Also arguably the most significant signal problem prison.
Are facing resulting in prisoners sleeping in shifts on top of each other sharing the beds.
And 'twenty.
'twenty about $80 billion of spend in the U S to keep roughly $2 3 billion people behind bars.
Meaning that nearly 1% of the entire U S population is incarcerated at any given time.
Beyond that the societal cost of incarceration lost earnings adverse health effects and more are estimated at three times those direct costs.
Unfortunately.
These issues arent unique to the U S and a prevailing globally. It is clear that prisons are far from ideal for solving to discuss challenges supercomm provide topnotch solution to solve these challenges effectively using our technology and complementary services.
Our pure security technology solutions provide an effective way for institutions to enforce home confinement, while easing overcrowded.
In addition, it allows us to reduce the associated cost of housing and made significantly for example, the total daily cost for monitoring and offender on home confinement for GPS monitoring is approximately 10% to $35 substantially lower than the 100 to $100 $40.
Of the cost of a daily.
And on a correctional facility. Most importantly, how can find has been shown to reduce recidivism highlighting its effectiveness in helping offenders improve their lives and making communities safer.
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 them mentioned challenges, but I'll.
Trying to monitor the 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 .
Constant to about 95% of this market.
The trough presence reputation both markets, we are well positioned for continued growth and capitalizing on the opportunities in Europe . We have recently seen an uplift in RFP activity RFP activity.
With over $200 million and expected upcoming bid opportunities in the next 18 months in parallel we continue to score well on competitive tenders for example.
Recently announced that we launched Croatia first full scale electronic monitoring project and will deploy our pure security electronic monitoring suite.
<unk> was formally awarded.
Earlier, this year and a formal bid process migrations Ministry of Justice administration.
The project launch followed by the successful completion of the government approval process and contract execution.
This project increases our hold in the European market and comes after a consistent streak of wins in this market displacing an incumbent vendors time after time.
With an over 65% win rate in competitive Rfps in Europe .
In the U S. We announced that our fully owned subsidiary leaders and community alternatives one in large projects valued at up to over $5 million.
Over five years to provide various programming and rehabilitation services. In addition, we secured contracts in three new States, Texas, Idaho, and Wyoming for the pure track GPS tracking platform, serving the adult and juvenile thus further expanding our footprint in the U S. We actually just secured an additional contract in Idaho based on our good referral from our first cut.
And the state.
Our recent announcements.
New contracts in Europe .
In the U S. A compelling example 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 a few main factors, we attribute our wins mainly to a proprietary technology, which scores very highly competitive rfps and our strong reputation recognition as a premier provider of electronic monitoring technology and services are all electronic monitoring technology supports various programs such as <unk>.
Stressed GPS monitoring rehabilitative services and more and has won over 40 multiyear government projects since 2018 alone.
Also our strategic focus shifted from our legacy business with one time project revenues in Africa, and South America to focus on our Iot business with recurring revenues from developed countries. Moreover, we see more and more rfps in procurement activity from our potential government Iot customers.
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 large reference base 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 projects. 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 project.
We have strengthened the company's global sales division recruiting a new VP of sales and.
And sales managers with the industry experience and a shift from passive bidding.
Active outreach sales tax strategy. Moreover, we continue to invest in 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 this space.
The investment we have made thus far.
Been driving increased activity and existing with existing customers and numerous new demos and evaluation of potential new ones. We operated a small niche market with customers know each other.
A solid reputation they've been a central factor in the business when selecting a vendor.
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 our strategic acquisition of resellers in key locations as part of our growth plan our strategy and this has been to build amazing technology expand our presence and deliver outstanding services each customer with each.
Deployed further strengthened our reputation making us even more competitive we're further progress in each of these elements and achieve recognition for such.
By awards from existing customers and new ones and the distributions.
Our strategy has always been to lead with technology as mentioned and entered 2022, we continue to invest in research and development.
<unk> 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 as evidenced 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.
Our R&D teams continue to innovate and disrupt the status quo, whether it's new features and biometric capabilities battery life communication capabilities are entirely new solutions for domestic violence alcohol monitoring and smartphone electronic monitoring within dense hard to monitor urban areas and sublease, we believe theres opportunity to enhance our <unk>.
Both in the U S through the <unk> acquisition of local electronic monitoring service providers, who have developed a strong reputation and a customer base and the respective in local communities.
We constantly monitor the market for potential acquisitions that could generate significant value by immediately expanding market presence and providing vertical integration synergies and example of this strategy is reflected through our $3 million acquisition of LCA back in 2016.
That strategic value and new projects it has provided us.
Moving over to the 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.
The reported this quarter. We've also acted to strengthen our balance sheet on March one.
2020 to raise approximately 465 million gross proceeds in a registered direct offering with a single accredited institutional investor providing us additional capital to execute on their business plan.
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.
<unk> to progress with the transition from the legacy business, so the Iot tracking business.
<unk> Q1, 'twenty two results last year.
Corresponding period, we see gross margin of 43, 3% compared to 55, 3% also affecting.
Traditional costs associated with the deployment of new Iot projects ahead of recurrent revenue streams to count we increased our research and development spending by $300000 quarterly.
Working on development, new products, keeping us at the cutting edge of innovation and technology leadership in this space, our sales and marketing expenses increased by $300000.
To support the company's new proactive growth strategy in general.
Administrative expenses increased by 400000, Dodge and broad management team. The company had an operating loss of $1 $5 million versus an operating loss of 200000 and an EBITDA of 300000.
Negative $300000 compared to positive $600000 in the previous year, reflecting an increase.
Our investment in R&D by 30% and an increase.
Over 90% in sales and marketing, our cash and restricted cash balance at the end of.
Q1 was around $6 6 billion.
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 our business plan.
And with that I.
I will turn the call over to the operator and open the call for questions.
Operator.
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.
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One moment please for the first question.
Once again, ladies and gentlemen, if you have any questions or comments. Please press Star then one on your phone at this time.
Yeah.
Okay.
Once again, ladies and gentlemen, if you have any questions or comments. Please press Star then one on your phone at this time, please hold while we poll for questions.
Yes.
Okay.
At this time, we will pass the call back to <unk> for closing remarks.
I want to thank you all for participating in today's call and for your interest in <unk>, We look forward to sharing our progress on our next conference call filings and press releases. Thank you and have a good day.