SuperCom Ltd. (SPCB) Q4 2015 Earnings Report, Transcript and Summary

Good day and welcome to today's SuperCom Fourth Quarter and Year-End 2015 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Rob Fink. Please go ahead sir.

Good morning everyone. Thank you very much for joining us for SuperCom's fourth quarter and year-end 2015 conference call. Joining us on the call today are Arie Trabelsi, President and Chief Executive Officer; [indiscernible] VP of Finance and Controller and Ordan Trabelsi, President of SuperCom of Americas. A press release disclosing the financial results for the fourth quarter and full-year was released earlier today and is available on the company's website. Following comments by management, we will open the floor for questions. Before we start, I'd like to point out that this conference call may contain certain projections or other forward-looking statements regarding future events or future performance of the company. These statements are only predictions and SuperCom cannot guarantee that they will in fact occur. SuperCom does not assume any obligation to update that information. Actual events or results may differ materially from those projected, including as a result of changing market trends, reduced demand and the competitive nature of the security system industries, or due to risks identified in the documents filed by the company with the SEC. At this time, I'd like to turn the call over to Ordan. Ordan, the floor is yours.

Thanks Rob. This is a busy and productive year for SuperCom highlighted by several important issues that helped to bolster our strategic position in key markets, by giving us a more comprehensive suite of closely-related security, identification, payment and location solutions to sell to government customers and enterprise around the globe. Make no mistake; we're not satisfied with the results for 2015. However, the fundamentals of our underlying business remain strong. We continue to see growing demand for our solutions. Our e-ID pipeline continues to mature despite long sales cycle involving often slow moving municipalities and methodical bureaucracies. As a result, we continue to believe we are well positioned to begin the deployment of new projects in the near to midterm. As we await clearance to begin these large scale deployments, we have continued to expand our pipeline and I am encouraged by our progress. During the second half of 2015 we actually bid on new e-ID tenders that will further strengthen and extend our longer term pipeline. In addition, we also won new electronic monitoring contracts and advanced initiatives to expand our solution capabilities and prospects in our M2M, mPay and Cyber Security divisions. Subsequent to the end of the fourth quarter, we closed on two accretive and highly strategic acquisitions. These additions significantly increase our capabilities, expand our customer base and extend our reach into the electronic monitoring and cyber security markets. This provides complimentary product lines that we can cross-sell into the government agency channel. As we enter into 2016 I firmly believe SuperCom is in a prudent strategic position. We have a strong and growing pipeline of opportunities, demand for our solutions as increasing global events are driving attention and budgets and direction that supports our positive outlook and our long term prospects with a broader suite of solutions to sell to customers give us more and more ways to breakdown this long sales cycle and penetrate the market and geographies we are targeting and enter new ones. Based on the predictable nature of sales and revenues from existing e-ID customers, deployment revenues from our electronic monitoring contracts we announced over the past month, and expected revenue contributions from acquisitions of LCA, Prevision and Safend, we are confident that 2016 will be a year of growth for SuperCom. More importantly, we have opportunities to accelerate and build on the businesses we expect and have in hand with incremental opportunities in each of our operating areas. Our potential customers are discerning. But our experience has shown us they are highly loyal as well once they find the right partner. We have been studying most of their most critical and complex needs in order to build a robust value offering that provides multiple layers of unparalleled value. Through this fact, we are becoming more and more integral to our current customers and are filling in more and more ways to new customers attracted to our portfolio of interconnected solutions. This initiative underscores the importance and the relevance of acquisitions made during 2015 and subsequent the end of the year as we expanded our in-house offerings giving us more solutions to sell to the same customers. As a result our integral offering is increasingly attractive to customers and we have more ways to approach the same customer to initiate relationship from which we can expand over time. I will now touch upon each division, e-ID, M2M, Cyber Security and mobile payments. Our e-ID technology and expertise bodes experience of 20 national governments in over 26 years in the field and in recent times has allowed us to successfully compete against giants, who believe they have secured spots with certain government customers. While these competitors have sought to stall our growing presence, we believe that our customer focus approach and dedication to providing value through true innovation will prevail as it has many times in SuperCom's past when we beat these same set of players and won large e-ID projects in various countries around the world. It is a similar story with our M2M division which has utilized innovative technology and a customer focus to overcome established participants in the electronic monitoring for offender space with four new government customers selected our proprietary Pure Security technology since the summer of 2015 alone we believe that customers will not settle for [indiscernible] incumbents and instead choose the true highest value provider to be by their side. To complement our technology and offer solutions backed by deep industry expertise and experience we enhance our value proposition to exceed over 25 years of experience tracking over 15,000 offenders in California with the acquisition of LCA. Once are intimated with a government customer with our M2M solutions we are one step closer to the point our e-ID or Cyber Security projects as these established relationships help us cross-sell. In Cyber Security as well, our recent acquisitions of Safend and Prevision give us a platform of longer term relationships that deep expertise we can leverage in conjunction with our other product offerings with both governmental customers and large customer base of enterprises around the globe. And in payments we signed MOUs to pilot our innovative technology also in regions of the world where our strong customer presence and understanding allow us to deploy new solutions on top of the existing e-ID infrastructures. We are methodically building our base of customers, signing MOUs for pilots in different regions around the world and utilizing the presence and strong reputation that the e-ID division and the Cyber Security division has built in much of these regions. In essence in e-ID electronic monitoring, cybersecurity, and mobile payments every day we further position our self as a partner that can offer cutting edge technology combined with deep expertise acquired through experience of numerous customers over the long run. This is a valuable intersection to be at, not only because we can offer solutions in each of these domains, but because each division is interrelated to the other. Our work is together to provide a synergistic effect to amplify our ability to build stronger, more valuable relationships and offerings with our customers around the world. Let's look at each division a bit more in detail. We entered 2015 with an opportunity pipeline of e-ID opportunities in various stages around the globe. Some of these opportunities were significantly larger than what we have seen in the past despite the progress we made with governments, with SuperCom in a process negotiating and closing largest opportunities continues to take a longer amount of time, not just for SuperCom, but for all the companies, large and small who operate in this space. Efforts to better predict the timing of these opportunities has proven difficult. As such, while we continue to be encouraged by the size of each opportunity and the progress with each customer and potential customers is encouraging we shall refrain from providing specific guidance at this stage. It is important to note that some of the large opportunities that were in our pipeline in 2015 are still there. The process to complete these has just taken longer than we originally anticipated. We continue to generate recurring revenues with existing customers and follow-on orders of the government that are currently using our systems are in line with what we have historically achieved. Steady-state revenues from existing e-ID customers grew by over 25% from approximately $12 million in 2014 to over $15 million in 2015 and we expect that number to grow. Steady-state revenues consist of maintenance, licensing, consumables and software and hardware upgrades, all which are delivered through existent customers which are past their initial deployment phase. Some of these revenues are contracted and recurrent while others are based on consumption and use. In 2016 we expect the contribution of these revenues to grow. The macroeconomic environment in commodity prices have impacted a number of the regions where we are bidding for and positioned well for new deployment of projects which in some cases accelerated our ability to deploy new projects. Our systems help governments advance the development of their economy, provide them with new revenue streams and offer high return on investment. We remain confident that our value proposition and the critical need for our systems will ultimately move these projects forward. More and more global events are making our solutions a necessity. The recent terrorist attacks in Brussels has put an even greater focus on the importance of global security, border control and secure verifiable identification. Europe continues to face well documented challenges related to the border security and the existence of forged identification. Other countries including the United States are contemplating these challenges as well. The situation supports ongoing demand for our expertise and solutions. During 2015 we took a number of important steps to strengthen our internal processes to more effectively bid, negotiate and compete for tenders and particularly large tenders. We strengthened our proposed development teams and upgraded our IT systems to more efficiently manage our processes. In addition, we also gained a lot of experience now beginning with tender appeal process in this climate. As we've discussed in previous calls, we have faced challenges from competitors who have contested processes that we won and as a result we had to divert attention away from negotiations to deal with these distractions. We have on multiple occasions successfully handled these situations and as we continue to enhance our ability to do so we hope this will be less and less of an issue for SuperCom in the future. On the M2M side of our business subsequent to that in the fourth quarter we announced an accretive large strategic acquisition which we believe transforms our electronic monitoring business and provides us with valuable expertise with a strong reference able base of long term government customers in the United States and we believe we can leverage to expand our electronic monitoring business globally. Leaders in Community Alternatives or LCA which we acquired is one of the leading cyber criminal justice organizations in the United States and a pioneer of community based services and electronic monitoring programs to government agencies in California since 1991. The acquisition brings together LCA's ability to provide proven, industry leading, full service offender based electronic monitoring programs and methodologies with SuperCom's proprietary electronic monitoring, Pure Security technologies which has been selected several times - over other established solutions. In 2015 LCA generated more than $9 million in revenues, was profitable, achieved double-digit revenue growth. The company's revenue base is largely recurrent and primarily derived from contracts with various government agencies in the U.S. In recent years, LCA has generated single digit operating margins. However, we expect to grow these margins through a process similar to our management team has undertaken with SuperCom and OTI in the past years which includes utilizing key leverage from margin expansion, including synergies with SuperCom and the opportunity to utilize SuperCom's propriety electronic monitoring solution in place of those coming from third party vendors. I am pleased to announce we have just been selected to deploy our peer security electronic monitoring solution by another national government in Europe, a brand new government customer for SuperCom. This since last summer is the fourth independent project we've been selected for by a national government in this space and we believe this showcases our ability to utilize technology to overcome competitors in regions where our presence is lacking. Furthermore, I am also pleased that in 2016 for the first time our Pure Security electronic monitoring solution is running a live USA public offenders under surveillance and the program has been excellent thus far. While the aggregate incremental revenues associated with these current EM projects is still small, we have a significant opportunity to expand each of these programs and with the growing base of sensible customers we are now able to bid more effectively and rapidly ramp revenues in upcoming quarters. Recently we have responded to an increasing number of tenders for new electronic monitoring programs in the U.S., Latin America and Europe. These tenders range in size from annual recurrent revenues of hundreds of thousands dollars and millions of dollars and given our progress and communication with potential government customers and the addition of LCA we are expecting to accelerate this growth of the business in 2016. We are also excited about our prospects and progress in our Mobile Pay division. Over the past four months we have signed three MOUs, memorandums of understandings, with leading mobile network operators in Africa, Latin America and Asia to implement and deliver mobile solution SuperPay technology. It is important to note that two of these MOUs are regions where we already have in place an e-ID presence. There has always been a payment component associated with our e-ID solution offering. Historically, we had integrated third party technology and service platform and all payments systems began to proliferate. We sought opportunities to develop flexible and term solution that is more secure and effective to what we had seen in the regions where we operate. Our strategy was to create a home grown solution that could be used to not only support and improve our e-ID offerings, but that could also package on a standalone basis and generate high margin revenues. Similarly cyber security encryption and data protection have also been an important component of our e-ID platform. Last month we announced accretive acquisition of Safend, a global data security company with a broad range of competitive and well known encryption and data protection solution. Safend has thousands of customers in the United States, Europe and Asia including multinational enterprises, government agencies and small-to-mid sized companies around the globe, highly valuable potential for us with our SuperCom’s innovative product offerings. Safend was a subsidiary of Wave Systems Corp, which had acquired Safend in 2011 for more than $12.7 million. Safend's average annual revenues in recent years, is approximately $5 million in typical software license in gross margins. The majority of these sales were generated through its parent worldwide distribution network which is no longer available to distribute Safend products. Going forward, while the high level services and support will continue as usual by the Safend team, new sales will be generated through Safend and SuperCom’s global distribution channel. As a result of this transition annual average for Safend products in the near future is uncertain, but expected to grow and exceed historical levels after proper absorption into the new sales channel. It is noteworthy to mention that over 50% of the billings in 2014 and 2015 of Safend both for maintenance and support a strong recurring base we look forward to building on. This integrates our many sales channels up and running effectively already through SuperCom and Safend around the globe. In consideration for the acquisition SuperCom provided Safend commitments up to $1.5 million of working capital to support its activity and growth through a structured debt to equity vehicle given the high margin recurring base of sales over the recent cost structure of Safend. We expect this acquisition to be quickly accretive and with significant growth to catch on. I would like to turn the call over to [indiscernible] our VP of Finance and Chief Accounting Officer to review our financial results for the fourth quarter and full year. [Indiscernible] joined us in early Q1 from [indiscernible] and now is back with the company where he was the group controller. Prior to that, he was at KPMG for 10 years some of which were served in the USA. Following [indiscernible] review I will return to summarize the strategy and provider update. Oren [ph], please?

Thank you, Ordan. I will now walk you through our financial results for the fourth quarter and full-year 2015. Revenues for the first quarter 2015 were $8.3 million slightly higher compared to fourth quarter 2014 revenue of $8.2 million. Revenue for the full year 2015 were about $30 with no change compared to 2014 on a full year basis. I will be presenting the rest of the financial results on an non-GAAP basis which exclude stock based compensation expenses, amortization of software, IT and customer contracts, income tax expenses, expenses related to transactions and of due diligence cost and bad debt allowance. For the full reconciliation from GAAP to non-GAAP number you can refer to the press release we issued this morning. Our gross margin in fourth quarter of 2015 was 53% a decrease of a 69.4% in the fourth quarter of last year and below the 58% margin in the third quarter of 2015. On a full year basis our gross margin for 2015 was 62% compared to a 77% for the full year 2015. The decline in gross margin was mainly attributed to new projects, high costs and taxes levied and changes in our product mix. On a normalized basis we expect our gross margin to trend between 60% and 70% mark. Operating income in the fourth quarter of 2015 was $1.1 million or 13% of revenue compared to an operating income of 7 [ph] million last year, an increase of $0.1 million from $1 million in the third quarter of 2015. For the full year 2015 operating income was $7.5 million or 36% of revenue compared to $10.7 million or 36% above 2014 year. Net income was $0.9 million for the fourth quarter of 2015 compared to $2.2 million in the fourth quarter of last year. For the full year 2015, net income was $7.3 million compared to $10.6 million for the full year 2014. Earnings per share were $0.06 in the fourth quarter of 2015 versus $0.17 in the fourth quarter of 2014 and $0.06 in the third quarter of 2015. Earnings per share for the full year 2015 were $0.48 compared to $0.81 for the full year 2014. EBITDA for the fourth quarter 2015 were $1.3 million compared to EBITDA of $2.3 million in the fourth quarter of last year and $1.1 million in the third quarter of 2015. For the full year 2015, EBITDA was $7.9 million compared to $11 million for 2014. Turning to the balance sheet, at the end of the fourth quarter, cash and cash equivalent increased by $7.5 million compared to December 31, 2014. Trade receivable net increased by $5.6 million mainly related to our current e-ID projects. We increased our working capital to $40.8 million at the end of December versus $12.7 million at the end of 2014 due to mainly increase in our cash balance at the end of period and accounts receivables. Shareholders’ equity increased to $56 million at the end of the fourth quarter, up from $28 million at the end of 2014. During the quarter, we had several non-recurring charges that impacted our profitability of the company, most notably with due-diligence expenses of $0.6 million for M&A transaction that were not yet matured, bad debt expenses of $0.6 million, and stock based compensation of $0.5 million, grants pertaining to service providers. With our deferred tax assets we come to correspond with our management operating loss capital, SuperCom has approximately $24 million remaining on a consolidated basis. As a reminder, the tax expenses and non-cash transactions going forward we will continue to evaluate those NOLs and annualize the establishment of additional tax assets. With that, I will now turn the call back to Ordan. Ordan?

Thanks Oren [ph]. To summarize, we faced a number of challenges in 2015, but we’re not satisfied with the results we delivered, our underlying fundamentals remain strongly intact and we continue to see growing demand for our solutions, and the solutions we have brought to the market remain best in class resonating with customers' needs around the world. The long sales cycle, potential for delays and erratic timing of large scale government contracts, [indiscernible] when operating in developing nations with lots of [indiscernible] e-ID is expected to continue to be at the center of what we do as an organization and we expect new deployment to materially augment our growth trajectory. We intend to continue to refine and expand our solution suite to better capitalize on existing government relationships and forge new ones expanding our global footprint and giving us more comprehensive integrated offerings to cross-sell. We continue to focus our efforts on our long-term margin focus strategy, wider suite of focus and related security, identification, payment and location solutions to governments around the world. I would now like to provide an update on the buyback program. In September 2015 and January 2016, we announced an approval of the board for share repurchase program which is extended up to 2 million shares total. Currently, and on that program we have repurchased and retired 1.25 million shares since launch. We believe current market as we see the stock valuations are attractive and provide us an additional channel for allocation of funds which we believe should increase shareholder value over time. We plan to continue to purchasing shares through this program. At this point, Arie will join us, our Global CEO, I would like to open the call for questions and afterwards Arie will make closing statement. Operator?

Thank you. [Operator Instructions] We will go ahead and take our first question from Josh Nichols with B. Riley. Please go ahead. Your line is open.

Yes, first question, I understand the company is not providing guidance for 2016, but I was wondering given that Q1 is already over, any high level insight you could provide regarding the start up?

Sorry at this stage I’m not going to provide additional information on the first quarter and for the full year 2016. May be later on this year we will provide additional guidance, but at this stage we have decided not to provide it.

Okay and just looking for a little bit more detail, I know so the cash balance looks like it decreased around like $7.5 million sequentially. I know the company has spent a good amount of capital repurchasing shares in the quarter, but since there is an cash flow statement could you provide more background on what’s behind that $7.5 million sequential decrease in cash?

In general we have about $5 million for repurchasing the shares, additionally $1.5 million for the purchasing provision and the other is general working capital that we put into interest on inventory and for other projects.

Great thank you, that’s helpful and then last question for me, I don’t want to have the queue too long, is so those $50 million in steady-state revenues, do you have anything that you could mention about what the trend is for that, I know in recent years, it has been increasing, what you might think about steady-state revenues for 2016?

Okay. In general what we have seen, we’ve seen above 25% increase in steady-state revenues from the year 2014 to 2016, we believe that we are going to see some additional growth into the year 2016.

Great, in the press release it does say that steady-state revenues grew from $12 million in 2012 to $15 million in 2015, is that number right or is it $12 million in 2014?

2014 that’s a typo, sorry.

Okay, no problem thank you, I appreciate it. That’s it from me. I will let the next person jump in.

Thank you.

Thank you. And we will go ahead and take our next question from Josh Elving with Feltl. Please go ahead. Please go ahead, your line is open.

Hi good morning or good afternoon. Trade receivables continue to climb every quarter for the past two years. My assumption was that you would start to collect on some of those contracts and thus without new deployments that number would start trending lower, can you maybe try to give me a little bit more color and help me understand why that number continues to climb despite a lack of new contract announcements?

Okay. I will say that in general we had from this point we had collected over $4 million during the first two months and Josh, what we see at the end of the year that we collect less cash and we get the cash at the beginning of the year [indiscernible] in our business and we believe that as the year will progress we will see one large part of this being collected.

And I’m sorry, again I’m having trouble on hearing or understanding what that was, you said that exactly you are sure started to see that number come down is that accurate, as you collect cash?

Yes.

Okay good and then I know you’re not providing 2016 guidance and I know you kind of commented from a high level about steady-state, at the end of the third quarter you talked about a chunk of revenue that was pushed out from the third quarter expected to be collected in the first part of 2016. I think you might have even mentioned the first quarter of 2016, can you give us an update, do you anticipate recognizing that revenue in the first quarter?

Okay, unfortunately at this stage we cannot [indiscernible] information about these contracts. We hope that in a few weeks we will be able to provide more information clearly the competition.

Okay. You delayed your earnings, couple hours before your conference call last week and unless I somehow missed it in the press release or on the call, I don’t remember hearing you kind of discuss the reasons for that, is there anything you can provide us with?

Okay, in general we are not discussing really, so we decided that we put a different separate press release about it. But I can say that the announcement or the impact there is no additional impact on our financials for the year 2015.

Okay. And then I think Ordan may have touched on this briefly, but the gross margins has been returning – turning lower obviously the past two quarters have been very low. I guess I kind of assumed steady-state gross margin higher closer to maybe 80% was the gross margin of 50% to 70% range and with low or very little in the way of deployment or I guess it has been lower deployment of revenues I guess that would assume that the gross margin would be much higher? Can you maybe go through it in a little bit more detail why the gross margin has been so low here the past few quarters?

In this case in the fourth quarter we had [indiscernible] that we had over $1 million revenue and no gross margins, especially because specific countries is a major [ph] follow and they increased their import taxes by almost 80% which caused some damage in the profit side. Besides that if you take this out of the equation I believe it will be similar to 58% which again was affected by some delays with completing the deployment. But I would say that, what we have disclosed is no indication of difficult quarters we see next year, we believe that is going to go back to what we had in the previous quarter.

All right, thank you. I will get back in queue.

Okay.

Thank you. [Operator Instructions] We will take our next question from Rob Stone with Cowen & Company. Please go ahead, your line is open.

Hi guys. I know you’re not providing guidance in general, but I wonder if you could just comment on how we should think about the run rate for operating expenses post the recent acquisitions?

Okay. If you look at the acquisitions that we have done, we’ve disclosed location and build. We are not going to increase our operation and the administration cost of G&A there the margins remained same as to date for over G&A and [indiscernible]. We did have an increase in the G&A because of the acquisition of LCA which is located, different occasions and New York. So we are going t fully exercise and increase maybe 5% of our G&A and so it is going to be compensated by the revenue and profit.

I think that just to add on that, the question is a bit difficult to answer so briefly, but in the next quarter or two, you will see how the different operating expenses from different acquisitions fall into place together with SuperCom, now just very difficult.

And then a follow-up question to Ordan’s comment about the $24 million in NOLs, should we assume then that you will end up seeing effectively zero cash tax rate for this year?

I believe so that most of the NOLs will be covered by the assets that we have on our balance sheet this year.

And then just one housekeeping question, I saw the weighted average shares for the full year, do you have that figure for the fourth quarter handy?

Rob could you repeat that please?

The fully diluted weighted average share count for Q4 of 2015 you had on the bottom of the quarterly statement?

Yes, I think we can achieve that. Earnings per share in the fourth quarter 2015 was $0.06, $6.6 [ph] and this is versus $0.17 in the fourth quarter of 2014. And weighted average on a fully diluted basis is $15.3 million or $16.259 million and this is based on a diluted basis.

$16.25 million?

$16.259 million.

Great, thank you. That’s all I had.

Right.

Thank you. [Operator Instructions] We will take our next question from Marcel Herbst with Herbst Capital Management. Please go ahead. Your line is open.

Good morning and thanks for taking the question. Can you give us the general idea of the level of activity you see so far this year in the e-ID space, for example have you booked any smaller e-ID contracts in Q1 so far?

Okay, the year 2015 later on this month you will see our annual report and you'll see that the majority of our income in 2015 was from e-ID. We did win some additional contracts, we know some of them, but we have decided to say that we are not announcing small contract only above $7 million and then $4 million. So we are continuous just coming in on the e-ID which have been full for mostly during the year or the following year.

Okay and many governments in developing countries as you state are currently kind of struggling which seems to have already been reflected in lengthening decision cycles. I’m wondering is this offer affecting past business that you are awaiting payment on? Have you observed the change in the risk profile of your currently remaining receivables because of this?

Okay first of all, the way we work with this government we are trying during the negotiations to secure payment. So, in most cases they are a large cash expense which will have a positive cash flow and the remaining would be of some other method. But we do recognize getting some slow in some countries mainly a country built a [indiscernible] and what we see that in general it is going to be a longer cycle and some time some delay in approving milestone which could delay in completing program. What we have done during last year, we tried to have more and more revenue and operation both in the U.S. and Europe to make sure that is in a [indiscernible] will have more robust revenue and income in the Western countries like in the U.S. and Europe and we were very successful in this time.

Okay, so but it sounds like you don’t think that remaining receivables are, had a higher risk profile at this point.

No we don’t, we don’t believe that any hiring than before.

And regarding Safend you mentioned the level of recurring revenue and I didn’t catch that, can you remind us again?

What was the question?

When you discussed Safend you said how much of the $5 million they had in cost is recurring revenue billed, I didn’t catch the number?

So we separate between revenues and billings because some of the billings and sales that were amortized over the period of the maintenance for software license sale and maintenance. In the previous two years over 50% of annual billings were actually for maintenance and support of recurrent nature.

I see okay, thank you for that and regarding my last question is in regards to that the last MOU that you signed on to build the mobile money solution in Latin America, can you talk a little bit more about this in regards to what is this exactly and what your expectation is for time to revenue generation and also may be touch on what type of revenue potential you would expect from something like that?

Okay, first of all it is still early in the process we are talking about is very large mobile operator with millions of subscribers. We are bringing together a system that we will be operative mobile payment or wallet and we believe the way we do it we are using revenue sharing model with them. And we believe this one the, for example initiate and deposit this – we will see, we’ll see millions of subscriber using our rollout and then we believe that we will see millions of dollars type of revenue in the same about two years from today. We have confidence that if this model will work in this country that single country with network provider it will use the same type of technology within our [indiscernible] model.

Okay, thank you.

Thank you. And we’ll go ahead and take our next question from Walter Ramsley with Southwest Capital. Please go ahead. Your line is open.

Thanks. I just have a couple of follow up questions. I think you mentioned earlier in the conference call today that there were a couple of e-ID projects where the company actually had won the deal but now they are being challenged by some competitors, could you discuss that a little bit and tell us how close to a resolution you might be on those deals?

Hey, Walter. Currently we can’t share any more information on the status of specific deals, but generally speaking, we have reached late stages in various projects and some of the appeals not just in e-ID and M2M all together in the business we have been able to successfully manage and overcome. And when we have final contract signing on a project then we will announce it to the general public.

Okay and could you break down the sales I guess for the whole company on a geographic basis, I am not sure exactly how you might do that, but U.S., Europe or something like that?

In general we provide this kind of information in our annual report and we are there on the, but we can say that the majority of the income 2015was major company.

Okay, and going forward you are probably going to see more revenues also coming in from the U.S. and other Western and more modern countries around the world.

Okay, that sounds encouraging and the last one whether any major 10% customers?

Can you repeat this question?

Whether any customers that had represented 10% or more of the company’s revenue in 2015?

Yes, there are two governments that each one of them represents more than 10% of our revenue.

Okay, thanks very much, I appreciate the chance to talk.

Thank you.

Thank you.

Thank you. And we’ll go ahead and take a follow up question from Josh Elving with Feltl. Please go ahead. Your line is open.

Hi, thanks can you call out or any revenues specific to electronic monitoring in the fourth quarter did you book any revenue in EM?

Yes, we are I believe about 15% as far as revenue in the fourth quarter coming from the…

I’m sorry coming from EM?

Yes they were, yes…

50% of revenue? Okay and then there is another question about SafeMobile and some of the MOUs and I guess I missed some of what I was hoping to get and I don’t know if you spoke to it directly, but if you maybe just give us a sense for how long these pilot programs last, what the expectations are, if you were to assume a successful pilot, what are the opportunities and what are the expectations following the completion of the successful pilot?

You are asking about the pilot with SafeMobile?

Yes.

I’ll talk about it briefly. So we have a third MOU signed recently which is, around the world, this one is in Latin America right. And the process for much these MOUs is similar. Typically, we would sign a MOU which describes some of the structure of the pilot that we would do together with the telecom provider or other partner in the region. So that the pilot we would integrate our software and front end solution with their back end servers so that they can integrate it and send it out to their customer base. They would select a group of customers to try it on. Assuming if things work well and the product is accepted properly into the market they would integrate it into their marketing campaigns. And these are usually very large corporations. They have a very large user base of millions if not, tens of millions of users in that region and they will deploy the new mobile wallet, which is our technology to the users we will have some sort of revenue share most typically based on the payment that is done through our platform. So, while it may take the first six months to do the pilot and deploy it, the six months after that, we would expect to see starting level of customers joining the platform and the best, based on the marketing and on the success of the product the revenues would increase. But they can be very, very substantial.

That’s helpful, thank you. In the press release you make reference to an impact to revenue from devaluing currencies in the quarter. Could you give us any kind of size of impact to revenue?

I don’t think that this quarter has any material impact from devaluation of the currency. I think probably it is like $50,000 a quarter I don’t think that it is something that is material.

Okay. You mentioned about in your prepared remarks talking about the opportunity to deploy large scale systems in the near to midterm is that in the ID space?

There are opportunities in…

We have, both and we have [indiscernible] and we have also in the ID. This is about a large scale project.

Yes, I’m sorry, I’m having trouble understanding you. That’s I'll just interrupting, both in EM?

The project is EM, M2M and the ID, in both divisions we have some of our large opportunity this stage.

And can you size what a large scale system like revenue associated what is a large scale system?

Yes, I don’t want to resist, but this can be between $20 million to even a higher number, so I don’t want to mislead, announce it or talk about it, but as we do it discussing the part in the ID project and there are opportunities that are over $100 million and we have seen latterly that in the electronic monitoring we have opportunities that are between $20 million to $60million worth.

Yes that’s great. Last question, I think in some of the prepared remarks, you were talking about why the cash or maybe with an responsible question regarding why cash was down sequential quarter and I believe the comment was that a large percentage of that cash decline had to do with share purchase and if I look at the average share account from third quarter to fourth quarter that would suggest sequential quarter declines of about a hundred thousand shares.

No, the reason for that is the majority I mean the weighted average were fine. And because a majority of the share purchase was in the last two weeks of December the impact on the weighted average is not good enough.

Okay, great. But I definitely had my timing right, so you purchased a bunch of stock in the last two weeks?

Yes, but…

And also during, I think generally I think overall we have purchased and we filed over 1.25 million shares.

Great. Thank you very much. I appreciate it.

Thank you and it does appear we have no further questions at this time. I will now hand the program back over to Arie for any – your CEO for any additional or closing remarks.

Yes okay, thank you. We finished 2015, but we remain [indiscernible] and the growth of our pipeline and we are making progress with customers and potential customers despite their current headwinds and in certain emerging countries. So will be large scale in the late stage that we are in our pipeline for the start of 2016 continue to move forward. The process or the progress to close these is taking longer than we originally anticipated. But these opportunities coupled with our growing base of steady-state revenue and contribution from acquisition made in the last few months gave us confidence that 2016 will be a year of growth for SuperCom. I look forward to speaking with you again when we report our first quarter results in the coming weeks. Have a good day, thank you.

And that does conclude today's program. We'd like to thank you for your participation. Have a wonderful day and you may disconnect at any time.