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…

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…

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.