SuperCom Reports Significant Improvements in Earnings, EPS, and EBITDA together with a 200% Improvement in Gross Profit for Q1 2018

Non-GAAP gross margin 58.3%; EBITDA margin 17.4%;EBITDA $1.2 million; Non-GAAP EPS $0.07

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Jul 16, 2018, 07:46 ET

HERZLIYA, Israel, July 16, 2018 /PRNewswire/ -- SuperCom (NASDAQ: SPCB), a global provider of secure solutions for the e-government, public safety, healthcare, and finance sectors, reported results for the first quarter of 2018.

First Quarter 2018 Financial Highlights (Sequentially compared to the Fourth Quarter of 2017)

Revenue decreased to $7.01 million from $7.8 million.
Gross Profit increased 200% to $3.9 million from 1.3 million.
Non-GAAP Gross Margin increased to 58.3% from 37.4%.
Non-GAAP core operating expenses decreased 27% to $3.5 million from $4.8 million.
EBITDA improved to $1.2 million compared to an EBITDA loss of $(1.2) million.
Non-GAAP Net Profit improved to $1 million or $0.07 per share from non-GAAP Net Loss of $1.6 million or $(0.11) per share.
Working Capital increased 13% to 10.6 million from $9.4 million.
Current Ratio increased 9% to 1.66 from 1.53

First Quarter 2018 Financial Highlights (Compared to the First Quarter of 2017)

Revenue decreased to $7.01 million from $8.30 million.
Gross Profit increased 30% to $3.9 million from $3 million.
Non-GAAP Gross Margin increased to 58.3% from 39.4%.
Non-GAAP core operating expenses decreased 22% to $3.5 million from $4.5 million.
EBITDA improved to $1.2 million compared to an EBITDA loss of $(0.6) million.
Non-GAAP Net Profit improved to $1 million or $0.07 per share from non-GAAP Net Loss of $913,000 or $(0.06) per share.
Working Capital Increased 11% to 10.6 million from $9.6 million.

First Quarter 2018 and Recent Operational Highlights by Business Segment:

e-Gov:

In April 2018, signed a new contract worth approximately $4 million in value with an existing national government customer in Africa. Built around SuperCom's Magna platform, the deployment will allow for quick expansion of additional e-Gov modules, which would lead to potential increases in the overall contract size. The majority of the new contract is expected to be recognized over the next two years and will grow SuperCom's steady-state recurring revenues.
Continued progress on national project deployments as well as transition of recent projects in Africa into Steady State.

IoT and Connectivity:

In January 2018, secured an additional contract to provide PureSecurity EM Suite in Idaho.
In March 2018, secured an additional contract to provide PureSecurity EM Suite in South Carolina.
In April 2018, secured an additional contract to provide PureSecurity EM Suite in eastern Texas to an established service provider.
In April 2018, awarded a $7 million project with the national government of Sweden to deploy PureSecurity EM Suite.
In June 2018, announced the deployment of an innovative protection from domestic violence project with the Sweden national police, a second national EM project win in Sweden within two months.
Continued progress on 13 EM project deployments, including those in Denmark, Czech Republic, Bulgaria, Sweden, Canada and the USA.

Cyber Security:

Safend maintains over 15 Fortune 500 customers and a greater than 90% retention rate in the US, driven by sustained customer satisfaction and continued technological improvements.
Continued progress in the development of new advanced cyber security products, adding more capabilities, including anti-malware to be incorporated into the Safend cyber security platform. Also began the process of piloting features to new customers in the U.S. and Europe.

Management Commentary

"We are pleased with our first quarter 2018 results, highlighted by a dramatic improvement in our financial performance. As we continue to execute successfully on our business plan, SuperCom is becoming leaner and more focused every day, and the quarterly results are showing this," said Arie Trabelsi, President and CEO of SuperCom. "With Non-GAAP gross margins above 58% and quarterly Non-GAAP core operating expenses of $3.5 million, we are getting close to the lean operating structure that we have not seen since 2015, before the strategic acquisitions took place. Yet today, I believe our business prospects are multiples greater, with 2 additional business segments, over 50% growth in our steady-state recurring revenue, a major presence in developed markets, and significant enhancements to our technology portfolio backed by 119 patents."

"We continue to execute on our growth strategy across our business segments. In the recent past we have been expanding organically into new countries and governments faster than ever before with an exceptionally high win rate, including 8 new multi-year project wins in the last 6 months alone. This brings us to over 16 concurrent multi-year project deployments globally, which are expected to generate long term recurring revenues for years to come as well as additional business from customer references. This in turn has increased our working capital needs, and given my confidence in SuperCom and its future, I have continued to personally provide zero-interest loans to the Company. I see a clear path for the creation of sustainable and growing shareholder value for years to come."

Conference Call

The company will hold a conference call today (July 16, 2018) at 10:00 a.m. Eastern time (7:00 a.m. Pacific time / 5:00 p.m. Israel time) to discuss these results and financial outlook.

SuperCom management will host the call, followed by a question and answer period.

U.S. toll-free: 1-877-407-9124

Israel-toll free: 1-809-406-247

International: 1-201-689-8584

Conference ID: 13681296

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

About SuperCom

Since 1988, SuperCom has been a global provider of traditional and digital identity solutions, providing advanced safety, identification and security solutions to governments and organizations, both private and public, throughout the world. Through its proprietary e-government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, SuperCom has inspired governments and national agencies to design and issue secure Multi-ID documents and robust digital identity solutions to its citizens and visitors. SuperCom offers a unique all-in-one field-proven RFID & mobile technology and product suite, accompanied by advanced complementary services for various industries including healthcare and homecare, security and safety, community public safety, law enforcement, electronic monitoring, livestock monitoring, and building and access automation. For more information, visit www.supercom.com.

Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements preceded or followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Forward-looking statements in this release also include statements about business and economic trends. Investors should also consider the areas of risk described under the heading "Forward Looking Statements" and those factors captioned as "Risk Factors" in the Company's periodic reports under the Securities Exchange Act of 1934, as amended, or in connection with any forward-looking statements that may be made by the Company. These statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 20-F filed with the SEC on May 21, 2017. The Company undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release.

Use of Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this release of operating results also contains non-GAAP financial measures, which SuperCom believes are the principal indicators of the operating and financial performance of its business. Management believes the non-GAAP financial measures provided are useful to investors' understanding and assessment of the Company's on-going core operations and prospects for the future, as the charges eliminated are not part of the day-to-day business or reflective of the core operational activities of the Company. Management uses these non-GAAP financial measures as a basis for strategic decisions, forecasting future results and evaluating the Company's current performance. However, such measures should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Reconciliation of the non-GAAP measures to the most comparable GAAP measures are provided in the schedules attached to this release.

SUPERCOM LTD.

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

	March 31,	December 31,
	2018	2017
	Unaudited	Audited

CURRENT ASSETS
Cash and cash equivalents	1,377	1,037
Restricted bank deposits	1,038	1,063
Trade receivable, net	13,378	12,456
Patents	5,283	5,283
Other accounts receivable and prepaid expenses	705	2,698
Inventories, net	4,818	4,876

Total current assets	26,599	27,413

LONG-TERM ASSETS
Severance pay funds	314	319
Deferred tax long term	4,548	4,505
Customer Contracts	3,386	3,640
Software and other IP	4,817	5,006
Other Asset, net	5,181	5,071
Goodwill	7,026	7,026
Property & equipment, net	959	1,218
Total long-term assets:	26,231	26,785

Total Assets	52,830	54,198


CURRENT LIABILITIES
Short-term Bank credit	731	738
Trade payables	4,971	5,838
Employees and payroll accruals	4,199	4,910
Related parties	91	61
Accrued expenses and other liabilities	3,666	3,739
Deferred revenues ST	1,258	1,511
Short-term liability for future earn-out	1,095	1,163

Total current liabilities	16,011	17,960

LONG-TERM LIABILITIES

Long-term bank loan	0	0
Accrued severance pay	580	585
Related Parties	2,932	2,082
Deferred tax liability	41	49
Deferred revenues	662	668
Long-term liability for future earn-out	132	147

Total long-term liabilities	4,347	3,531

SHAREHOLDERS' EQUITY:
Ordinary shares	1,026	1,026
Additional paid-in capital	82,242	82,157
Accumulated deficit	(50,796)	(50,476)

Total shareholders' equity	32,472	32,707

Total liabilities and equity	52,830	54,198

SUPERCOM LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands)


	3 months ended
		March 31 2018	December 31 2017
	Unaudited		Unaudited

REVENUES		7,014	7,797
COST OF REVENUES		3,127	6,483

GROSS PROFIT (LOSS)		3,887	1,314

OPERATING EXPENSES:
Research and development		1,341	1,902
Selling and marketing		1,701	2,104
General and administrative		1,348	1,720
Other expenses		50	383

Total operating expenses		4,440	6,109

OPERATING LOSS		(553)	(4,795)
FINANCIAL INCOME (EXPENSES), NET		52	(105)

LOSS BEFORE INCOME TAX		(501)	(4,900)
INCOME TAX EXPENSES (BENEFIT)		(181)	(282)

NET LOSS FOR THE PERIOD		(320)	(4,618)

SUPERCOM LTD.

Reconciliation Table of GAAP to Non-GAAP Figures and EBITDA to Net Income

(U.S. dollars in thousands, except per share data)

	3 months ended
	31-Mar-18	31-Dec-17
	Unaudited	Unaudited

GAAP gross profit	3,887	1,314
Realization of Deferred Revenue	-	1,384
Amortization of Software and IP	154	154
Stock-based compensation expenses	41	64
Non-GAAP gross profit	4,082	2,916

GAAP operating Loss	(553)	(4,795)
Amortization of Software/IP, Customer Contracts and Brand, and Stock-based compensation expenses	1055	1106
Foreign Currency Loss	445	1,729
Expense related transaction DD	-	111
Expense for doubtful debt	-	327
Non-GAAP operating Income(Loss)	947	(1522)
GAAP net Loss	(320)	(4,618)
Amortization of Software/IP, Customer Contracts and Brand, and Stock-based compensation expenses	1055	1106
Foreign Currency Loss	445	1,729
Expense related transaction DD	-	111
Expense for doubtful debt	-	327
Income tax expense (benefit)	(181)	(282)
Non-GAAP net Profit(Loss)	999	(1627)

Non-GAAP EPS	0.07	(0.11)

NET LOSS FOR THE PERIOD	(320)	(4,618)
Income tax expenses (benefit), net	(181)	(282)
Financial expenses (income), net	(52)	105
Depreciation, amortization and stock-based compensation expenses	1,321	1,421
Foreign Currency	445	1,729
Expense related transaction DD	-	111
Expense for doubtful debt	-	327
EBITDA *	1213	(1,207)
* *EBITDA*is a non-GAAP financial measure generally defined as earnings before interest, taxes, depreciation and amortization.

SUPERCOM LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands)


	3 months ended
		March 31 2018	March 31 2017
	Unaudited		Unaudited

REVENUES		7,014	8,327
COST OF REVENUES		3,127	5,285

GROSS PROFIT (LOSS)		3,887	3,042

OPERATING EXPENSES:
Research and development		1,341	1,681
Selling and marketing		1,701	1,934
General and administrative		1,348	1,675
Other expenses(Income)		50	(400)
Gain on Bargain Acquisition		-	-

Total operating expenses		4,440	4,890

OPERATING LOSS		(553)	(1,848)
FINANCIAL INCOME (EXPENSES), NET		52	(176)

LOSS BEFORE INCOME TAX		(501)	(2,024)
INCOME TAX EXPENSES (BENEFIT)		(181)	(28)

NET LOSS FOR THE PERIOD		(320)	(1,996)

SUPERCOM LTD.

Reconciliation Table of GAAP to Non-GAAP Figures and EBITDA to Net Income

(U.S. dollars in thousands, except per share data)


	3 months ended
	31-Mar-18	31-Mar-17
	Unaudited	Unaudited

GAAP gross profit	3,887	3,042
Amortization of Software and IP	154	154
Stock-based compensation expenses	41	53
Non-GAAP gross profit	4,082	3,249

GAAP operating Loss	(553)	(1,848)
Amortization of Software/IP, Customer Contracts and Brand, and Stock-based compensation expenses	1055	910
Foreign Currency Loss	445	201
Non-GAAP operating Income(Loss)	947	(737)
GAAP net Loss	(320)	(1,996)
Amortization of Software/IP, Customer Contracts and Brand, and Stock-based compensation expenses	1055	910
Foreign Currency Loss	445	201
Income tax expense (benefit)	(181)	(28)
Non-GAAP net Income(Loss)	999	(913)

Non-GAAP EPS	0.07	(0.06)

NET LOSS FOR THE PERIOD	(320)	(1,996)
Income tax expenses (benefit), net	(181)	(28)
Financial expenses (income), net	(52)	176
Depreciation, amortization and stock-based compensation expenses	1,321	1,086
Foreign Currency Loss	445	201
EBITDA *	1213	(561)
* *EBITDA*is a non-GAAP financial measure generally defined as earnings before interest, taxes, depreciation and amortization.