Ladies and gentlemen, thank you for standing by. Welcome to SuperCom’s fourth quarter 2016 conference call. All participants are in a listen-only mode. Following management’s formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. Joining us on the call are Arie Trabelsi, President and Chief Executive Officer, and Ordan Trabelsi, President of SuperCom of Americas. A press release disclosing the financial results was released earlier today and is available on the company’s website at www.supercom.com. Following comments by management, we will open up 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 certain performance of the company. These statements are only predictions and SuperCom cannot guarantee that they will in fact occur. Furthermore, the company will provide non-GAAP information, and we refer investors to the non-GAAP reconciliation provided in the earnings release. 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 systems industry, or due to risks identified in the documents filed by the company with the Securities and Exchange Commission. At this time, I would like to turn the call to Mr. Trabelsi. Ordan, the floor is yours.

Good morning. I’d like to thank everyone for joining us today. First, I would like to apologize for having to reschedule the earnings call. Given the complexity of the audit, we were unfortunately not at a point to announce results last week [indiscernible] to get it done. This is not the first time it’s happened, but we are confident that we now move forward beyond 2016, we’ll be more consistently and timely with our reporting. 2016 was a busy year for SuperCom, one in which we made dramatic progress and positioned the company for long-term growth, but also faced challenges which impacted our performance. By virtue of the five acquisitions which we made in late 2015 and the first half of 2016, our business has been transformed. Growing pains have come along with this, but we are creating a more valuable enterprise which is better positioned to drive sustained long-term value creation. At a high level, there were three changes at SuperCom since the beginning of 2016. We have dramatically expanded and improved our addressable markets. SuperCom has expanded from being primarily a secure electronic ID company for government identity programs dependent on where we were awarded large government contracts, to being a leading provider of secure ID and security solutions across multiple high-growth markets, including national identity, electronic monitoring, and cyber security, complemented by new Wi-Fi and secure mobile payment technologies to support these core markets. The more diverse markets for the new SuperCom share the common characteristics of high growth rates, recurring revenue opportunities, attractive margin dynamics, and high barriers to entry. Secondly, we have grown our technology and IP. We have gone from having seven patents at the beginning of 2016 to 119 patents at the end of 2016. Our IP is valuable and in many cases…

[Operator instructions] Our first question comes from the line of Rob Stone with Cowen & Company. Please go ahead with your questions.

Hi guys. I have a couple of questions. The first one is the press release indicates that you’re expecting revenues above $8 million in Q1 of ’17, gross margins were a little bit below 12% on a non-GAAP basis in the second half ’16 results, and you mentioned that there was one project with essentially no gross margin. What color can you provide on the expected margin profile for Q1?

Yes, you’re right. I did not--to answer the question, I didn’t have a chance to see on the prepared remarks that we do have--from the information available to us today, have an outlook for surpassing $8 million in revenues for Q1 of 2017, which represents growth of roughly 35% year over year. At this time, we have not yet finalized the financials for Q1, so it’s a little hard to give you specific detail on the gross margin. There was some impact from that government customer as well in Q1, I’m talking about the customer which was impacted by increased import tax, but there’s other things that are in Q1, such as the new project in Colombia and others, which will help significantly improve gross margins as well as operating efficiencies and improvements, which were very hard to see last year, 2016. But in 2017, in Q1 and going forward, our expectation is that a lot of things will clean up and gross margins will be higher.

So besides the import tax in one country for that major customer, where there other factors that depressed the gross margin in the second half of ’16? It’s considerably below what we thought of as sort of your target margin model, so what else was going on?

Okay, sorry, I have a cold, so it’s going to be very difficult to hear my voice. In general, what you see here is that the results in six months, we have consolidation or cost of goods from our new subsidiary. A lot of them had some change in inventory from [indiscernible] require them. At the end, we had some clean-up to do in most of them, and what you see, that we have very low revenue from those subsidiaries, almost nothing. On the other hand, we had the cost of goods [indiscernible] and labor that are all in, and these really affected the gross margin of the whole group. You should look at SuperCom [indiscernible] compared to last year, the gross margin would be much better than that. We believe that [indiscernible] clean up with inventory and some other issues with the new subsidiaries [indiscernible] end of the year, you can see that being affected in those numbers, and we start the fresh year with all subsidiaries [indiscernible] in for the next year, so I expect to not see these kind of fluctuations constantly in the future. On the core [indiscernible], we see already in the first quarter that we just concluded that we are back to very high revenue, and our gross margin is going to be similar to what we used to have in the past at SuperCom. Although we have a consolidation, we will try now [indiscernible] to give some information on sectors, which will be easier for you to analyze it and do predictions for the future. Each sector will have a different type of gross margin as its peer. The [indiscernible] e-government has a multiplication of current revenue margin of 80%, the cyber security has 80%, but on the connectivity we will see a number which is around 50% just because it includes also a lot of hardware and contracts. So I think that once we will--you will have our audited years’ filing, you’ll see more information about the gross margin in each sector.

Okay, that’s very helpful, thank you. With respect to operating expenses, just taking the second half ’16 non-GAAP number if we loaded it level into the two quarters, it looks like the run rate is around $4.1 million per quarter. You mentioned consolidation and cost reduction, so how should we think about the quarterly run rate for non-GAAP expenses this year?

Okay. First of all, the real operating expenses [indiscernible] the R&D segment and G&A, the number was higher in the second half of the year, however was offset by a one-time [indiscernible] that we had this [indiscernible] to take it out, the number is higher, it’s about [indiscernible] that we’re pretty sure that we have addressed here. Our R&D is very, very high - we’re talking about $6.7 million for R&D that was somehow [indiscernible] for us, somehow aligned products from this division into our product line offering. These numbers will be reduced dramatically and we believe the R&D is going to be reduced to a level of about similar to year as we [indiscernible] in the past. Total marketing and G&A should be [indiscernible] as well and we believe that our goal is to reach operating margin to be between $3.6 million to $4 million for the coming year.

I’m sorry - operating margin or operating expenses?

Sorry - operating expenses. Sorry, sorry.

Yes, okay, so $3.6 million to $4 million on a non-GAAP per quarter basis?

Correct, correct.

Okay. My last question is with respect to the cash position, which was relatively low on the Q4 balance sheet. You had a little over $11 million receivables. Can you provide any comment on the direction of the cash position since then?

Yes, okay. Obviously we cannot disclose the level of cash we have today, but I’ll say that we passed the lowest point from a cash flow point of view management last year, [indiscernible] acquisition investments [indiscernible] and we are back in fact of [indiscernible]. We are also collecting a lot of the receivables and I believe about 40% of [indiscernible] we had at the end of the year [indiscernible] already be collected. So we expect the cash level to grow at a nice growth level, and we believe to reach a level of at least $10 million of cash flow just from [indiscernible] at the end of third quarter or fourth.

Great, that’s all I had. Thank you.

Thank you.

Thank you. This concludes our question and answer session. I would like to turn the floor back to management for closing comments.

Okay, thank you. Though our financial performance for 2016 was below what we all wanted it to be, however I hope you can see our revenues are now more diverse, our customer base is more diverse, our technology platform across all divisions is exceptional, and we are making good strides in effectively cross-selling our capability to drive sales as well as efficiency. We are confident that we are making strategic progress and this progress will be reflected in our financial results going forward. With that said, I would like to thank you all for joining the call, and we’ll be happy to see you back in our conference call for the first quarter. Thank you.

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.