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spk01: Ladies and gentlemen, good morning and welcome to the Supercom third quarter 2022 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 the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a 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. I'd now like to turn the call over to Stephanie Prince of PCG Advisory.
spk04: Thank you, Operator, and thank you to everyone joining us. With me on the call today is Ordon Trabelsi, Supercom's President and Chief Executive Officer. I'd like to remind that 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. Forward-looking statements involve risks, uncertainties, and other factors that Supercom's actual results to differ material from those statements. For more information about these risks, uncertainties, and factors, Please refer to the risk factors described in Supercom's most recent periodic reports on Form 20F, Form 6K, and Supercom's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes IPADA, a non-GAAP financial measure that Supercom is 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, a comparable GAAP financial measure, see the reconciliation table located in Supercom's earnings press release that accompanies this call. Reconciliations for other non-GAAP financial measures and comparable GAAP financial measures are available there as well. The content of the call contains time-sensitive information that is accurate only as of today, October 26, 2022. Expect 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. It is now my pleasure to turn the call over to Supercom's president and CEO, Erdan Trabelski.
spk06: Thank you. Good morning, everyone. Thank you for joining us today. Earlier this morning, we issued a press release of our financial results for the third quarter of 2022. You can find a copy in the investor relations section of our website at supercom.com. We continue to maintain our commitment to timely quarterly reporting. And for our quarterly review, I'll start with a brief update on our recent business highlights, strategy, and Q3 results, followed by a Q&A session. The third quarter was a great quarter for Supercom, with 102% revenue growth year over year, 6.3 million revenues in Q3. We won several important contracts in the U.S. and Europe, and we're excited at the reception and early traction of our newest product, the Pure One, a highly innovative and best-of-breed one-piece GPS tracking device. I'll go into more details in a few moments. For those new to Supercom, since our founding in 1988, 34 years ago, Supercom has been a trusted partner providing cutting-edge electronic and digital security solutions to dozens of governments worldwide. As part of our mission, We strive to revolutionize the public safety sector worldwide through proprietary electronic monitoring technology, data intelligence, and complementary services. We always lead with our technology and entering 2022, we continued to invest heavily in research and development to ensure our product remains the most competitive in the market. We're continuing to introduce new features and technologies through our proprietary platforms, such as unique biometric and communication capabilities and much longer battery life. In parallel, we launched an entirely new solution for domestic violence. In recent years, we've become more and more aware of the immense challenges that nations and governments worldwide face when dealing with their offender populations. First, many countries suffer from high recidivism rates, where people relapse to more criminal behavior after finishing their sentence, clogging the criminal justice system. Second, overcrowding is a key contributing factor to poor prison conditions worldwide, resulting in prisoners sleeping in shifts on top of each other or sharing beds. In 2022, about $80 billion was spent in the U.S. to keep roughly 2.3 million people incarcerated, nearly 1% of the entire U.S. population. Beyond that, the societal cost of incarceration, lost earnings, adverse health effects, and more are estimated at three times these arrest costs, at least. Unfortunately, these issues aren't unique to the U.S. and are prevailing globally. It is evident that prisons are far from a deal for solving many challenges in criminal justice. To help meet these challenges, we have leveraged our technology and services, expertise in government security, and experience to focus on the public safety sector. We're seeing much success. And in just the past few weeks, we announced that we won and launched a $33 million national electronic monitoring project in Romania. As part of the project, the Supercom domestic violence solution will enhance the security for those getting hit or hurt by their own family members. With an immediate notification of the police, and to the victim if the offender has come within close range, posing a threat to their safety. With up to 15,000 monitored offenders per month, this project will help protect so many people, and we feel honored to have the opportunity to do this. The project alone can change so many lives. We also recently announced that Supercom was awarded Croatia's first National Electronic Monitoring Project, which we have already launched. In addition, we secured a new contract for students, juveniles, and National Electronic Monitoring Project, the third and final remaining national EM contract in Sweden, all held by Supercom as of now. In parallel to our success in the EU in the past quarter, we continue to expand into the U.S., and we won three additional new contracts across three different U.S. states, Texas, Southern California, and Idaho. These wins are great for Supercom, and they further increase Supercom's footprint in the U.S., facilitating more growth in the future. Furthermore, the recent win in Idaho represents our third win, and third in customer in Idaho in less than a year, adding to our organically growing customer base and signaling just how rapidly our technology can spread to new adjacent customers. Our strategy has been to build amazing technology, expand our presence, and deliver outstanding services. We have successfully executed that strategy by focusing on the following key factors. Our proprietary electronic monitoring technology scores highly in competitive RFPs and supports various programs such as house arrest, GPS monitoring, rehabilitation services, and more. Supercom has won over 50 New multi-year government project since 2018. Our strong reputation and recognition as a premium provider of electronic monitoring technology and services also contributes to our win rate. With each customer win and project deployment, we further strengthen our reputation, making us even more competitive. Lastly, our strategic focus and management attention have shifted to our IoT tracking business with recurring revenues in developed countries. The electronic monitoring market was valued around $1.1 billion in 2020 and estimated to reach $1.6 billion by 2025. The U.S. and Europe constitute about 95% of this market. In Europe, we have recently seen an uplift in RFC activity with an expected over 200 million in upcoming bid opportunities in the next 18 months. Altogether, these successes and opportunities have resulted in a growing pipeline of business and a recurring revenue rate of above 80%. More broadly, we see a global trend of government turning to innovative solutions and alternatives to incarceration to ensure public safety. And our peer security technology solutions address these trends by providing solutions an effective way to institutions to enforce home confinement while easing prison overcrowding. In addition, it allows them to significantly reduce the associated costs of housing and inmates. For example, the total daily cost for monitoring an offender on home confinement or GPS monitoring is approximately $10 to $35, substantially lower than $100 to $140 cost a day at a correctional facility. More importantly, home confinement has been shown to reduce recidivism highlighting its effectiveness in helping offenders improve their lives and making communities safer. Throughout the year, we've announced many new project wins, some in the U.S., some in Europe, where we have been continuously displacing incumbent vendors with an over 65% win rate in the European competitive RFPs. We are proud to have won so many new contracts in such a short period, especially in times of uncertainty and volatility in the markets due to the living threat of recession and unstable geopolitics. Our business is recession-resistant in nature, and the possibility of potential With such increases, we have multiple tailwinds to support resilience and growth in our business. In 2022, we strengthen the operational infrastructure of our workforce and maintain our technology leadership. For example, amidst the ongoing instability in the global economy in the past few months, we successfully finalized the development of a new product, PeerOne, as mentioned earlier. In addition, we have further owned our business plan, secured new contracts, and raised the needed financial resources to support our company during a time of volatility and uncertainty in the capital markets. We have also strengthened the company's global sales division, recruiting a new sales team with industry expertise as we continue shifting from passive bidding to an active outreach sales strategy. The new wins and our improved sales teams are the first steps in executing the company's U.S. market expansion strategy and have already driven increased activity with existing customers and numerous new demos and evaluations of potential new ones. As part of our growth plan, we believe there's an opportunity to enhance our growth in the U.S. through strategic acquisition of local electronic monitoring service providers, who have developed a strong reputation and customer base in their respective 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. An example of this strategy is reflected through our $3 million acquisition of LCA back in 2016 and the immense strategic value and new projects win it has provided us. We have won over $25 million in new projects in California since that acquisition in 2016 alone. Turning to our financials, in our last conference call, I know that we expect revenue from the project mentioned above to continue to our financial results, to contribute to our results in Q3 and Q4 financials. As mentioned before, I'm happy to share that we recorded 102% year-over-year revenue growth, $6.3 million in the third quarter, with our IoT division as the main growth engine, achieving 150% growth in the third quarter compared to the third quarter of last year. Revenue from developed countries continues to increase, reflecting the completion of our five-year business plan to transform our business from unstable emerging countries to developed countries. As a reminder, the legacy business comprised of one-time project revenues in Africa and South America, which is a sharp contrast to our IT tracking business in developed countries, which generates recurring revenue of about 80%. Gross profit nearly doubled as well, increased by 96% to $2.1 million compared to $1.1 million in the third quarter of last year. due to high growth of project volume. Compared to the corresponding quarter last year, we increased our research and development investments by $332,000, while we continued to develop new products and improve existing ones, keeping us at the edge of innovation and technology leadership in our space. Our sales and marketing expenses increased by $195,000 to support the company's new proactive growth strategy, and general administrative expenses increased by $262,000 as we continued to expand our management team. had a positive EBITDA of $413,000 compared to a $53,000 loss in the corresponding period last year, reflecting the benefits of economies of scale associated with deploying new IoT projects and the continued shift away from legacy business. We ended the third quarter with $3.1 million in cash and cash equivalent average to cash, which includes cash from approximately $1.74 million in gross proceeds we raised in July through the exercise of warrants by a single-credit institutional investor. This task provides us with the liquidity we need to continue investing in sales, marketing, and R&D to drive revenue growth and expand our global footprint. In closing, as reflected in our financials, we are starting to recognize a significant return on our years in the variety sector. We believe that we are well positioned to continue growth and capitalizing on new opportunities fueled by these multiple drivers, including a strong presence and reputation in the U.S. and European markets. The counter-cyclical nature of our industry, public policy shifts to monitoring instead of incarceration, and returning to post-COVID levels of business activity. Our recent announcement of new contracts in Europe and the U.S. are compelling examples of a successful business plan execution within a vertical that was super common, a strong presence, and an excellent reputation. With that, I'll turn the call over to Operator. It's open for questions. Operator?
spk01: Ladies and gentlemen, if you wish to ask a question, you will need to press the star, then the number one on your telephone. If you are using a speakerphone, please pick up your handset before entering your request and speaking on the call. If your question has been answered and you wish to withdraw your question, you may do so by pressing star 2. One moment for the first question. Your first question for today is coming from Matthew Galenko.
spk07: Hey, good morning and congrats on the strong quarter. Can we start with maybe the U.S. win? Did they result from the new sales push that you talked about that started a couple quarters ago? Is that starting to convert into these deals or is this sort of still the towards the deals you get by word of mouth or passive outreach?
spk06: Yes, the answer is yes. It is the result of the sales force. In the U.S., the market's more fragmented. Instead of bidding on large projects like Romania, which are $33 million, or Sweden, which is $7 million, there we have to kind of have feet on the ground and go opportunity to opportunity. And some of it comes to us by word of mouth because we have good results in our previous projects, and some comes from reaching out to new customers. But either way, we need an active sales team with an active proactive strategy. And they've been doing demos, evaluations, and showing customers just how unique our technology is. That's what they need to win, and we've been announcing them to share with the rest of the public.
spk07: Got it. Terrific. And then on the domestic violence component, is there an expected launch in the U.S.? Are you salespeople having conversations about that piece, and is there early indication of interest in the U.S. market?
spk06: Let me quote one of our customers. He's a service provider and a reseller around domestic violence, and he says, um, verbatim, if you provide me with a domestic violence solution, I will sell the bananas out of it here in the U S. Um, so maybe that answers your question. Many customers are waiting for it in the U S many resellers are waiting for it. Our focus naturally has been to provide it first to the regions with larger revenues, like the $33 million projects versus smaller ones. Um, and it's being adapted also to meet the U S market needs. And then it'll be spread out through California and the Midwest and, uh, other states and locations. It's in the process, and there's very high demand for it from what we see thus far. Do you understand how it works? I don't know if we mentioned for a second how it's actually done.
spk07: No, no, please expand on that if you could.
spk06: Yeah, okay. So different from our other solutions where you have a bracelet and you're on house arrest, domestic violence is a little different, and we're one of the only ones to do it in the world. Our bracelet, as you may remember, the battery runs for a very long time, over a year. So if someone is hit or there's violence in the family and they have a complaint, in many countries, they change the law to allow an immediate application of a bracelet, our bracelet, which is small and long battery life on their leg. If someone hits, let's say, his wife, for example, he gets a bracelet, and any time he comes within 100 meters of her, her phone will notify her and the police immediately, such that we are effectively and dynamically enforcing restraining orders, which has never been done before. So now people have the safety and peace of mind that they can actually complain if somebody hits them, and they'll be protected with the use of this, I think, amazing technology. So others can't do it because your bracelet's too big and the person has to charge it every day, and it doesn't uniquely synergized with the mobile phone like ours does. So this fits perfectly with our infrastructure and many customers are seeing it and we think it's going to have a big impact on the market around the world.
spk07: That's helpful and sounds like a great solution. Appreciate it. Last question for me is on the single piece bracelet that you, I think you mentioned you're seeing some early traction. Can you expand on that a little bit? You know, where is the traction and, you know, at what point will we see that flow through and fields that utilize it or uptake with an existing field?
spk06: I didn't hear the first part. You said something about traction where? With the Pier 1?
spk07: Yeah, yeah, with the one-piece unit.
spk06: Okay, great. So we have our two-piece solution, which is a small bracelet that runs for a very long time without charging. It communicates with a smartphone. Some customers like just a one-piece solution. There's no phone, just a piece of hardware on the leg. We developed that as well. We developed, of course, like everything else, we tried to make it the most cutting-edge in the industry so we have the best features, the latest weight, longest battery life, best connectivity and security. And we launched it first in the conference in Europe earlier this year, and we already want a project with it in Sweden that we announced earlier this year. In the U.S., it's also very exciting, and many, many customers are asking for it because together with this, they will have a full suite of tools. They'll have the domestic violence. They'll have the 2P solution on the smartphone, and they'll have the 1P solution. They'll have the alcohol monitoring solution. They'll have inmate monitoring solution. All this works together seamlessly on the same management platform. studio on the cloud. It's very, very helpful and effective for the officers who are using this technology. Rather than having to go to different software tools, for every different hardware here, they have all-in-one, and it makes their work much easier and much more effective.
spk10: Got it. Thank you. Sure.
spk01: Your next question for today is coming from Ken Weiner.
spk09: Yeah. Hi. Good morning. The first thing I wanted to ask you about was the listing requirements. Yes. And what is the question? Well, basically, it's, you know, I think you're deficient in meeting the exchange's listing requirements. Okay. So, yeah.
spk06: Let me answer, if I understand your question correctly. We have not met the $1 minimum requirement from the NASDAQ exchange. And we have essentially until, if I'm not mistaken, December 13th to correct that. We are taking the proper measures. It's more of an operational issue in order to get this done. And we are on it. We expect in time to have this resolved.
spk09: Well, when you say it's an operational issue, I mean, the stock's $0.26 and you say requirement, it's $1. So how do you fill the gap?
spk06: Excuse me? Right. We don't control the stock price, and if the stock price doesn't reach a level that is required, we also have an ability to do a reverse split and adjust the stock price that way to meet the requirements until December 13th.
spk09: Okay. And secondly, you know, obviously it's a tough market out there and a tough environment, but You know, the company has a market cap of $9 million. You know, I've been a stockholder of the company for some time and own a fair amount of shares. And I was wondering, you know, what's your thoughts on that and, you know, what one can do to explain your story better so maybe, you know, more people can get interested in the stock. Right. Good question.
spk06: In the past, we had more time to meet with more investors and conferences and see more institutions and get the word out there. Lately, we've been extremely busy, as you can see, and we try to first focus on operations. That's why we're running these new projects. We just announced a few weeks ago the largest project in Europe this year. We won it, $33 million. We just announced this quarter double the revenues from last year and from the previous quarter. The stock has not adjusted. Does that mean the market is valuing us correctly? I think not, but that creates opportunities for new investors to come in at this time and hopefully grow with the company as the stock over time will adjust to the proper value. I'm at a conference right now at an LD Micro conference in California where we'll be meeting investors all day, and we will try to integrate these conferences and these communications with investors as much as we possibly can. But again, our focus will be on operations, and we have to create the long-term value of the company which is more important than a general strategy than maintaining the immediate stock price at every given moment.
spk09: No, I agree with that. But so let's talk about going forward. I mean, obviously, you know, it seems like this quarter was a breakthrough quarter for you. In other words, it seems that you're gaining traction and you're hitting some of the, you know, the goals you set out. Is the quarter an aberration, or do you expect future growth in the coming quarters?
spk06: I don't think it's aberration. I think we have a strategy to grow our revenues from where they've been. So at a high level, we had a business of e-gov, which had revenues of close to $30 million. And IoT was close to nothing. We grew that to close to $10 million while e-Government declined. And our strategy is to keep on growing that to tens of millions of dollars. So we don't think this growth is something unique that will not reoccur in the future. That being said, we don't control the growth in every quarter. We're dependent on the timelines of our government customers. We're dependent on them choosing when to award the contracts, when to launch a project, and when to finish a significant milestone. We just launched a project in Romania. We've done a lot of work in this quarter. We continue to do work in the following quarters, but we will not be able to control exactly what work will be done in each quarter. That also depends on our customer. Furthermore, we're bidding on many, many, many other projects around the world, in Europe, in the U.S., and we expect to win many of them. As we win, they will layer on to our recurring revenue base, which is over 80%, and continue to grow our revenues. Our strategy is consistently to grow our presence. With that, we'll grow our revenues, and with that, the company will grow. This is just a nice example for people to see what can happen and much more than this can happen and how it immediately impacts on profitability thanks to operating leverage because we don't need to grow our operating cost structure significantly to add more projects and more units this is up to 15 000 units we could add tens and tens of thousands more units without changing almost anything to operating structure maybe adding a person here or there but everything will result from operating leverage profitability will come and the contribution margins of each additional bracelet, let's say, is very high.
spk09: And what about the debt maturities? Are you able to service the debt? And how about the securities on debt?
spk06: With Fortress, our current majority is around December 2024. We believe our creditors see our vision, and they believe in it, and they've worked with us to adapt the structure and the requirements to the goals of the company. We will be able to service the debt over time. That's not our current focus right now, as we're also very much focused on growth. But in time, we'll be able to handle it, and they believe that as well.
spk09: And the last question is, what are your terms of the contract? What's your accounts receivable total right now? Let's open up the PR, but I think it's around $13 million.
spk10: How much?
spk06: Hold on a second. I think it's around $13 million. I have to get the exact number.
spk09: So if you're selling $6 million and you have accounts receivable $13 million, then what are your terms?
spk06: Well, the way that works is a little different than a normal business. The trade receivables at the end of this quarter were $13.7 million. The way that typically works, we have large project deployments. And when you're deploying a large project, you get paid when you reach certain milestones. So we recognize some of the revenues as percentage of completion. So, for example, we can deploy in one quarter a ton of the work, recognize some revenue for that work, and we still don't get paid. Not that it's overdue. It's just that it's unbuilt revenue. Most of our customers in the U.S. and in Europe are very timely payers. This is one of our goals for moving to the developed countries away from Africa and South America where we have more delays. Some of our trade receivables are still from those old revenues from the e-gov business. Some of them have been written off and discounted. But the new revenues from the IT tracking business have actually been very timely payers that we're happy with that.
spk09: And the last question is, on the big contract that you landed for 33, when do you start to recognize revenues for that? We already have started. Did you see that? No, you haven't.
spk06: Yep. The go-live was early October. It was probably one of the fastest go-live projects in the world in the space. And it's a brand-new EM country. They've never done electronic monitoring. And we were excited that we were able to support them to launch such a huge project so fast without any experience in EM for them. It was a great win for us and for them. They did a great job. And we take this as another capability that we bring with us to future projects. Not just great technology and great services, but also great execution with a very timely deployment.
spk09: And the other question is, you know, when you're dealing with governments and, you know, is your financial condition or your stock price an inhibitor for landing deals?
spk06: It depends if they talk to us, and they usually do. Once they talk to us, they get comfortable. If they have technical limitations, we can team up with other vendors. They usually have a local partner who speaks the language, who works for the government. They're usually much larger companies, telecom providers, IT providers. Speaking up with them, the financials look perfect.
spk10: All right. Thank you very much. Good luck. Thank you.
spk11: Your next question is coming from Zvi Rine.
spk03: Hey, good morning, Ordon. Congratulations on the Romanian win. I know how valuable that is to your business. As it relates to, you said that you're already generating revenues. Were any revenues from that project actually recognized in the third quarter? Yes. In the $6.3 million? Can you tell us how much of that was and how much cash was actually received?
spk06: We can't share that at this point. We're not sharing the revenues per project. I don't have the information readily available. We did start recognizing Q3. We'll continue recognizing in the following quarters. And the cash is – the project only started in October, so it takes a little bit of time to get the cash, but I'll see if it meets certain milestones to get that.
spk03: Was the Romanian project the biggest driver of the increase sequentially in the accounts receivable? The receivables went up by about $1.2 million sequentially. Is Romania the biggest driver of that?
spk06: I think it's fair to say. I mean, it remains the biggest driver of change in this quarter. It's the biggest project we have, and we just started launching it, so it impacted all the metrics, including the cash receivable.
spk03: And what about gross margins? For the nine-month period, so year-to-date, you have a 33% increase, give or take, on the top line, but gross profit was essentially flat. So... Can you give us just a little bit of background on the impact of some of these new projects on your gross margins and where you think the gross margin percentage should kind of stabilize at and when you're at a full scale for all these new projects you've rolled out?
spk06: I'll start with the end. If you look at the cost structure of our hardware and the data cost and the cloud cost, the contribution margin of every additional bracelet way above 50%. Over time, with economies of scale and operating leverage, those will be the gross margins for the business. The operating costs, the fixed ones, will be very insignificant, and everything else will just be the contribution of the variable cost, which is every additional bracelet, above 50%, significantly above. At this point, we're deploying new projects, and just like in our past business, also in this one, during the project deployment stage, there's hardware to buy, there's servers to buy, there's communications to install, there's IT, and those naturally have lower margins. You're paying an IT person to come in and sell servers and connect cables. You can't get a 50% margin off of his work. You get 15% or 20%. So when you launch a new project, the initial stage will have a lot of lower margin components. And as everything starts to run seamlessly and you're more into just natural flow of recurring revenues and monitoring of offenders, the margins will be higher. So in these three quarters, new projects started, especially this big one, and that impacted the margins. But over time, we will continue to converge into the same core of our business, which is higher margin.
spk03: Okay. And as it relates to domestic violence, which seems it could be a very, very attractive new market for you, obviously that was included in the Romania project. How many other jurisdictions that you're involved in include that domestic violence application?
spk06: Yeah. off the top of my head, there's at least one or two other countries in Europe that were doing domestic violence. I won't say the names because I don't want to be imprecise. But in the U.S., many states and counties are asking for it. We just haven't completed the adjustment to the U.S. market. There's different technologies, different needs, there's different processes, different laws, and we just have to update it. It's just a matter of time and resources.
spk02: Okay.
spk06: But, yeah, it is something that we believe can... Inserting the core of our technology and the core of what we can do and the core need of domestic violence is something that we will be able to do probably better than anyone else in a significant manner. So it is one of the things that excites me the most about our upcoming future and growth.
spk03: That sounds promising. And the last question is, you had a press release regarding an EGov contract for around $1.7 million, and you've alluded to having a tough time collecting money the receivables from eGov customers in the past. Can I presume that... Not this one. Not this one. Okay, that's what I thought. No, not this one.
spk06: This one's been great. We're not focusing as much as eGov, as you noticed, especially not the ones we're going to give as challenges and collections. eGov is there to support, but our requirements and requests for cash is much more stringent than it was in the past, again, because we're not focusing on this. We don't want to give up any Any additional comfort, they want to get the equipment, they need to pay. A lot of it's up front, and we have leverage in getting cash from this customer, for example.
spk03: Great to hear. Well, congratulations on what's seemingly some positive steps forward.
spk10: Thank you very much.
spk11: Once again, if there are any questions or comments, please press star 1 on your phone at this time. Ladies and gentlemen, as a reminder, if you have any questions, please press star 1. Ladies and gentlemen, as a reminder, if you have any questions, please press star 1.
spk10: Your next question is coming from Mike Walters.
spk11: Mike, your line is live.
spk10: Hello, Odette. Can you hear me?
spk06: Yes. Good morning, Mike.
spk05: Hi. I wanted to say congratulations on the great quarter. I'm a big fan of everything you are, everything you do, and everything you stand for. And I had just a few questions. I love your excitement, by the way. I can tell you I saw your webcast and your smile and everything. all the things that you say are quite amazing. Um, uh, question on, uh, I could tell I do too.
spk02: Yeah.
spk05: Um, I wanted to ask a question about, uh, uh, so I know you've had numerous contract wins over the past year. Uh, so some of the revenues from the $33 million contract are reflected in So in this quarter ending, is all 10 of those contracts reflecting in this quarter, or will there be more reflection going into the fourth?
spk06: Maybe help me understand your question a little better. Which 10 contracts are you speaking of? We have many contracts in different locations.
spk05: Yeah, I know. So I know there were like five or six in the United States going into the end of last year, and then in quarters one and two, and then numerous here going throughout 2022. And also, they are reoccurring, yes?
spk06: So, yes. Let me help clarify and explain a little bit. Since, I think, 2018, we've won 50 new projects, the latter. We started with the smallest $100,000, $300,000 project, and it grew in size to $1.8 million. In Canada, $3.7 million. In Czech, Denmark, and in Sweden, $7 million. We aim to continue growing the scale and the ladder, and we just want a project of $33 million, our largest project in the past decade and largest EM project right now in Europe. Every project that we win, in theory, adds to recurring revenue base because there's always a recurring revenue component in every project. In some projects, it's the majority of the component. Like in the U.S., almost everything is charged and billed per unit per day. In Europe, that's also prevalent, the structure, but sometimes they want to purchase units and then The recurring revenue part is the smaller part of the actual full revenues. That being said, we've been launching projects consistently at different start dates. Every month or two, we keep launching, and they add on to our recurring revenue base. The amount of units is up to them based on their current needs, based on their political goals and structures, and we're here to support. So Q3 has revenues from many different projects around the world, and a big change in Q3 is this Romania project. Before, we had Scutermania and other projects that also rolled in. And because of the recurring revenue structure, they keep on adding on top of each other. The reason why you sometimes see a slowdown in revenue growth is also because we are still phasing out the e-gov business, which the business used to be $30 million back in 2015. That's for biometric passwords and ID cards in Africa and South America. We've been phasing that out while together growing this IoT business. So, yes, this revenue does reflect This quarter does reflect many revenues from many different projects, and we expect to continue to reflect these revenues and to have new ones with new projects that we will launch.
spk05: Awesome. Awesome. In the webcast that I heard, you had said basically, if I understood correctly, the electronic monitoring project, uh, works on land, obviously, uh, in subways. So underground and in buildings, uh, high up in the air. Um, yeah, is, um, is that, do you guys ever have any issues with that? Like, is the, is, uh, um, like if the, cause I know like on phones, my cell phone, sometimes I'll go into an area where it's a little bit dark or whatever. And I might have trouble with like the, um, the loading of the service, do you ever run into issues like that? Or is it just a constant, very accurate system that works pretty much everywhere?
spk06: It's a great question. And let me get a little bit technical, if you don't mind. First of all, no communication system is perfect. But what is important, at least for our business plan, is to always be one step above the rest. So everyone else has been developing their own proprietary systems. location tracking technology for the past 10, 15, 20 years. And these are small companies with $100, $200 million in value or revenue. They're competing with companies like Samsung and Apple for location and Google for location services. Obviously, it's not much competition. We developed our own location as well, but we also integrate all the location services from all the largest companies in the world. So when we provide location services, we offer multiple channels to track locations. If you're underground, we're not using GPS. We're using Wi-Fi networks. through the Google network. So you could track someone underneath the ground in the subway, which almost nobody else can in our industry. When you're in the building, we also have inmate monitoring technologies where we have low frequency signals and we're able to locate where someone is precisely within the floor. So not just he's in this building, he's on the 12th floor, he's on the 20th floor and so forth. So Supercom has been dealing with location technology since 2005 and we have been able and lucky and fortunate to combine all these technologies into this unique proprietary solution. So when it comes to testing our technology or location capabilities, I feel the customers are blown away. When they test the weight of our product, I feel the customers are blown away. When they take the security of our product, many of our employees and staff have been in the military in intelligence and security, and we bring top-notch security to our product. So once again, I believe our customers are blown away. And this is what helps us win more and more projects. I think the more projects we deploy, and more customers will see why we are unique, and that will allow us to grow even faster throughout the world.
spk05: Awesome. It's very exciting. It's like Star Trek stuff to me, almost like I can see the possibilities are pretty vast and they keep going. I don't really see a lack of need for things that not just people, but also places and things that need monitored on a continuous basis. And that leads me to my next question, which is do you foresee in the future this being just limited to, I know, inmate tracking and the house arrest is an amazing market for that. But I have a great imagination, and I speculate that there's probably other ways Opportunity application. Yeah, for application. Like, I was wondering, I don't know, like, maybe, because I know, like, I know they monitor, you know, like, athletes need monitoring sometimes when they're doing their practices. Military, obviously, when they're in training or in the field. Senior citizens may be monitoring. Because I know another question, I leave it question after question. I'm sorry. apologize, but with the biometrics, how extensive are your biometrics? Like, are you measuring heartbeat? Are you able to measure heartbeat and stuff like that?
spk06: Okay, great. Let me answer both your questions. First of all, on the application, I'm a big believer in focus, and we have to understand the size of our company and the resources that we have. And while our technology is great, every application, every industry requires a sales force, product team, marketing team. You have to understand the nuances for every different market if you want to be the best. In the past, in 2005, we've been developing location technology and we have components which will work great in almost any market. Just like we're tracking offenders, we can track livestock and medical equipment and children and athletes and we can take all the signals that are being, let's say, amplified and projected from people's bodies And we can take those signals and we can analyze them and process them and use that for intelligent decision-making for many different markets applications. All that being said, we cannot lose our focus. And right now we're looking at a $1.6 billion industry. We have unique solutions, unique technologies, and we can change and disrupt it. And that's exactly what we're doing. And we still have a far way to go. $1.6 billion, our annual revenues recently were $12 million. Now they're growing. When we get a larger market share, we team up with more companies and our technology, is more prevalent throughout the world, and we know that we are creating a huge impact, just like we're doing with Romania right now, for tens of thousands of families, then we'll be ready to move on to the next industry and the next industry and the next industry, leveraging exactly the same technology, but using a different application. That's my first question. The second, in terms of heart rate data, anything that you see, that you've seen online or on TV, any technology that has been advertised, we have the access to it. unless it's something that you haven't seen, like proprietary military grade, and I was in the military as well. Secrets, we would not be able to access those easily, but all the heart rate, beats, even brain signals, EEG, energy, all those things that you see on wearables, we have access to that just like any other company would, and we have a team that could analyze that data very efficiently. But we're not there yet, and we're focusing first. on this current market, and we don't need the heart rate to track offenders. That's not part of our solution today.
spk05: Okay. I love it, though. Your vision, I like that you have the focus. You mentioned your focus is laser-focused vision, and what's in front of you right now, that's nice. I think that probably answers, but it doesn't really answer all my questions for sure. I have lots, but I appreciate your time, Morden, and congratulations to you. uh, the super calm team. Thank you very much, Mike. Have a good day.
spk10: Thanks for being with me too.
spk11: Your next question is coming from Jesus IRR.
spk08: Good morning. Congratulations. Like everybody's been saying, it seems like the company is going well. I was just wondering, uh, I know in July, you guys got an extension for, uh,
spk06: Minimum requirement for $1, yeah.
spk08: Yes, exactly. Do you guys have any plan to work on that? I mean, I know the company is going well, but there's always a short seller and so on. Is there a plan in case, you know, by December, isn't that above the $1?
spk06: December 13th is the timeline we have. If the price doesn't reach there on its own, we have measures in place to resolve it through reverse splits and other mechanisms.
spk08: Okay, so you guys are working something, but there's nothing that's been decided so far.
spk06: Nothing that's been announced yet, but of course we've been working on it in the back channel. It's a very common and well-known situation. It's not something that's unique to us. It happens to companies sometimes, especially when our stock was only around $1.10, $1.20 before the market conditions came, which impacted many stocks around the world, hit us as well. Now we're under a dollar, but again, we have measures in place to resolve it.
spk08: Wonderful. And another question just related to that, just considering, I mean, the price that is so low, have you guys considered doing buybacks before it starts going up or that's not part of the plans?
spk06: We haven't announced a new, if you're talking about corporate buyback, we haven't announced a new one. We've done that in the past. It all depends on the cash on hand. Right now, as you see, we need our cash because we're launching new projects and we have to manufacture new equipment consistently. This latest one is 15,000 units in potential. So we're not very eager to do a corporate buyback. That being said, sometimes insiders, like our chairman, Ari Jogalski, have been buying back, and we announce that to the market once in a while. As you can see on the press releases in the last year or two, you'll see some announcements of insiders buying.
spk10: Cool. Okay. That's all I have. Thank you very much. Thank you.
spk01: Ladies and gentlemen, as a reminder, if you have any questions or comments, please press star 1 on your phone at this time. There are no further questions in queue. At this time, I will pass the call back to Ordan for closing remarks.
spk06: I want to thank you all for participating in today's call and for your interest in SuperConf. We are doing big things and making a big impact, and we look forward to sharing our progress on our next conference call, filing, and press releases.
spk10: Thank you, and have a good day.
spk11: Thank you, ladies and gentlemen.
spk01: This does conclude today's event. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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