Ladies and gentlemen, good morning. And welcome to SuperCom’s Third Quarter of 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also recorded for playback purposes. With me on the call today is Ordan Trabelsi, SuperCom’s President and Chief Executive Officer. I’d like to remind you 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 may cause SuperCom’s actual results to differ materially from those statements. For more information about the risks, uncertainties and factors, please refer to the risk factors described in SuperCom’s most recently filed periodic reports on Form 20-F and Form 6-K, and SuperCom’s press release that accompanies this call, particularly the cautionary statements in it. Today’s conference call includes EBITDA, a non-GAAP financial measure, that SuperCom believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for the results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, a comparable GAAP financial measure, please 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 this call contains time-sensitive information that is accurate only as of today, November 14, 2023. Except 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, Ordan Trabelsi.

Thank you, Operator. Good morning, everyone, and thanks for joining us today. Earlier this morning, we issued a press release with our financial results for the third quarter of 2023, which you can find in the Investor Relations section of our website at supercom.com. On this call, we will briefly discuss our business highlights, our growth strategy and the results for the quarter before moving into a Q&A session. Today, I am excited to share with you that SuperCom’s outstanding performance for Q3, which reflects the tremendous strides we have made in our operations and financial position. The third quarter of 2023 was a landmark period for us where we achieved an incredible 550% growth in EBITDA, reaching $2.7 million for the quarter and a five-year record net profit. We are proud to report non-GAAP EPS of positive $0.24 for the third quarter of 2023 as well. I want to take a moment to remind everyone that, not too long ago, in the year of 2020, after years of continuous decline in the business, we reached a low of annual revenues of less than $12 million and net losses of nearly $8 million. Since then, we worked very hard to turn things around and annualizing our Q3 2023 numbers, you will reach a current annualized run rate of $27 million in revenues and EBITDA of $10.8 million. Our annualized EBITDA today is close to our annual revenues for 2020. These, of course, are meaningful achievements that we are proud of and I’d like to thank our wonderful global team at SuperCom for their hard work and dedication for making this all possible. These financial metrics not only underline our strong execution, but also the increasing efficiency and scalability of our operations. During the past year, we won several important contracts…

[Operator Instructions] Your first question is coming from Matthew Galinko from Maxim Group. Your line is live.

Hey. Thanks for taking my question. Ordan, I hope you are staying safe. Also…

Excellent. Sorry about that. The other call.

No. no. Also congrats on the really nice quarter and year-to-date. It’s been very nice to see. Can you maybe touch on the -- just the -- I know you referenced recurring revenue and do you have a sense of what the baseline is? If you don’t get a kind of big project shipment out in the quarter, where do you kind of go down to if you don’t get a big shipment?

If we don’t get a big shipment this quarter?

Any future quarter. So beginning Q4, if you don’t get a big shipment to Romania or a big...

Oh! Actually -- our revenues in Romania are mainly through continued progress and this project is supposed to continue for years. So we expect to lead for the next few quarters for things to continue and they might even grow and we also expect new projects to come in. So we are at a pretty good level as you could see each of the last, I think, four or five quarters, revenues were about $6 million. We continue to deploy the project in Romania. And what’s very interesting in this quarter, as you noticed, we had a huge jump in gross margins, which is something that we have been forecasting for a long time. We mentioned that once the projects move into later stages, there’s not as much cost. You can just providing equipment, because you have all infrastructure ready already, you already trained every one and the system works very nicely. And in Romania, we have a very good relationship and things are working well and they are ordering more and more, and that’s what we see in other projects around the world as well. So when we have a big new projects, in the beginning, the margins are not as high, but over time, they shift up and that’s what we are starting to see here in the first quarter. It could be just the beginning of this potential for, like, Romania to have been multiple times over.

Got you. And I think you announced a $3.4 million order from Romania that’s supposed to ship in the fourth quarter. If I understood that right, can we kind of expect that since that project is pretty far down the track that the margin profile should be kind of similar to what we saw in Q3 or at least kind of higher than it was in the early stages?

Yeah. We expect the margins to be -- continue to be higher than what they were originally. And as you are aware, sometimes there are fluctuation between quarters, so it might be a little higher, it might be a little lower, but we certainly expect to be in this higher level of margin rather than how it was before when we were just shipping tons of hardware and installation and training or passive stage in Romania. Now based on what happens to new projects, that could shift, as you are aware, we are -- our revenues are a mix of many different projects around the world. If something massive, let’s say, a $100 million project that comes in and those are out there. So at the beginning, that would shift margin, but it would only be temporary because they are at the end of the deployment, margins will shoot up again. But the margins in this industry has capacity to be very high between 50% and 75% and even more if you continue to deploy more units in existing regions. And our strength has been, as you can see, as we just announced in Finland as well in other countries. Once we deploy one technology, we keep on deploying more technologies and more units and more abilities and work there, so deployments to set the infrastructure and now you are just generating high margin revenues with high margin products and offering great ability to the customer at low cost.

Got it. Thanks. And last one for me and then I will jump back in the queue. It sounds like you have moved through the Romania contract relatively quickly. I don’t know if you are comfortable talking about how close you are to that 15,000 number, but is there potential to expand the scope of what you are doing with Romania beyond kind of the initial baseline that could sort of maybe add more seats or units? I will leave it at that.

Of course. Of course. First of all, there’s always a potential for these kind of projects to grow. Romania is a very interesting case. They didn’t have electronic monitoring before. This is brand new for them and they are flying, they are moving very fast to the project with orders and deployments. I don’t have an exact number for you, but there’s definitely potential for the numbers to grow. There’s also the potential for additional capabilities with every project. So we -- Sweden, if you look back in time, we started with the project with $7 million, sorry, we started with a project of $1 million in Sweden, which was for the police and then we did a $7 million in the Ministry of Justice in Sweden and now we are just a juvenile in Sweden and we have all the projects currently out there and they might do more projects. Romania has just started. We create opportunities there and in many other countries. But our reputation, with every new projects we get, with every new region that we expand into the reputation continues to grow, continues to spread and now new customers like Romania and like Croatia, which is brand new as well. And now we are also getting request from other places in the world, even outside Europe and outside the U.S., all over the world, to be partnering in the name and they are coming to us. They have colleagues in different countries with similar roles and they see what we are doing, and of course, it’s much easier to pick someone that everyone has already picked. Originally, we had the hard times, this was five years, six years, seven years ago, but now things are much more consistent and much easier. Now we are focused on just continuing to operate effectively and maintain what we are doing.

Thanks, Ordan. I will jump back in the queue.

Okay.

Thank you. [Operator Instructions] Your next question is coming from Matthew Galinko from Maxim Group. Your line is live.

All right. I guess I will continue. And you talk about…

Hi, Matt.

Hi, again. What is the pipeline opportunity, I guess, as you see it now for PureOne in the U.S. market? Is the pipeline pretty well built today or where are we at in that kind of engaging with the potential customers and getting evaluations into their hands?

So great question. We talk a lot about PureProtect, which is domestic violence and just so we clarified the difference because we talked about both the script. Domestic violence, that’s not something that’s been very well addressed in the market. It’s mostly been house arrest and GPS monitoring. At home, using different technologies when if someone really come in to put on some of mandatory light and they don’t charge every day. That’s where our solution comes in very nicely in domestic violence and also our technique uses the smartphone. So that’s a mandatory device. If you get a brace on leg in Romania, as he comes close to the wife, the alarm alerts and also the police. That’s our PureProtect. PureOne, which I also mentioned on the call, is somewhat different. It’s also brand new, but it’s the GPS monitoring. It’s in the, let’s say, right in the breadth in the major part of the industry, which is GPS tracking, which we also won in Europe a lot and in the U.S., we have been expanding with our special smartphone solution and this is all-in-one solution. It doesn’t require a smartphone it’s called PureOne. And that’s just to help some of the judges and customers in the U.S. or feel the vary of the smartphone solution. They are not exactly understanding how it works well with the tag and now we have both options. So on the same software, on the same solution on the cloud, on the same exact system, you also have a PureOne, which works very well. The battery life is longer than those in the industry. It’s more lightweight. It has a rechargeable battery, which is mobile. You don’t need to connect your leg to the wall. That may sound funny, but that’s what they…

Got it. That sounds pretty encouraging, especially U.S. market’s feedback. Can you -- I know it’s still a little way off and I think you probably have a lot of irons in the fire, but in the past, we have talked about some of those large European contracts that might be coming up for bid in the next 18 months or so. Can you talk a little bit about that pipeline of large European deals and how that’s going as far as engagement?

Can you repeat the last part of the question? How far, what goes as far in the future?

I guess how do you feel from SuperCom on -- you have obviously had a very strong win rate in Europe in recent years. So are you confident that you are in a place where you can win the large deal that would be coming up in Europe and are any of them likely to be 2024 events that they get decided on? Just any expectation around the large European deals?

Yeah. There are some large European deals out there. There’s more -- we have over 10 countries in Europe, but there’s still plenty of others, plenty of other big ones. And some of them reached out to us to talk about domestic violence, because again, they don’t have -- our domestic violence solution is second to none, because of the know architecture. It doesn’t exist on the [inaudible] system reach out to that even though they have different programs and some aren’t going to have a bid for all the programs that are out there. Israel right now is planning to select for a new product -- for an updated project in normal electronic monitoring of offenders and also domestic violence, the law just passed in Israel. You could see in the [inaudible], in the Parliament in Israel, the centers -- the female centers are holding bracelets. They are holding a powered bracelet and they are petitioning and on the other end, they want domestic violence solution in Israel and they are right to do that, because it’s a very important solution that doesn’t exist right now in the land of Israel. So like that, you see other countries around the world that we are pushing for that and they are communicating with us. So there’s no opportunity that have never or new projects that never existed and there’s existing projects, which go out for bid every five years. And we displaced -- almost every one of our projects, we displaced a vendor that’s been there for 10 years, 15 years, 25 years, 40 years. It’s usually hard to be displaced but when the technology is significantly better than the existent one, that’s what happens. So we continue to invest in R&D to make sure we are always on top of technology at the cutting-edge and with the project opportunities that are coming out of Europe, we do expect there to be continued win rates. As a company, revenues grow and the company -- number of units grows and the company breath and customer base grows and geographic reach grows, it makes it easier to win. So we had a hard time at the beginning and then started getting easier and easier. And if all goes well, then in the future, things should be even easier in Europe and also new markets that we are entering into and building our base such as regions in the U.S.

All right. Thanks. A couple quick additional ones for me. One, I think, you -- in your press release, you talked about a secure ID card win in Iceland. I know that’s not your core business, but can you talk a little bit about what that is and when you expect that to impact results?

What is -- a secure -- can you repeat the last one here -- secure contract win anywhere?

Secure ID.

Repeat the whole -- which projects you were talking about? What are you talking about?

Iceland national ID?

We did have a -- sorry, just one moment. Sorry, if we get a sound quality here, just give one moment. Hey, sorry. Do you hear me better now? Apologies for that.

Yeah. Yeah. You are coming in clear. Can you hear me?

Okay. Yeah. I was just. I am in the shelter. Sorry about that. Apologies. The communications are off, but it’s okay. The alarm has stopped. Yeah. So I said we have projects there for years. We do passports for Iceland and we expand the modules and capabilities they want. And we expanded -- we had a new expansion recently that we have been working on and also we are developing their ID retained customer and that’s been going -- that’s been moving along and in 2024 we expect that to be finished. Customer has been with us for over 15 years. Small customer, but it’s been with us for a long time. Of course, every customer is important and especially ones that have been with you for a long time, they have a lot of good things to say after all the years. So we try to provide great service to all of them and when they want to update from Passport to ID, ID to other things, we do that. Even though it’s not part of our legacy business, we still support our customers and once in a while new projects come in also in identification. It’s not where our sales focus is, it’s not where we rely, but still there.

Got it. All right. Last two, one being it looks like you are -- on your balance sheet receivables were up in the third quarter. So it looks like that was a kind of investment in working capital. I guess, don’t know if it’s something you could talk about, but it’s probably a higher number because revenue has been up, but is there -- can we kind of expect that receivable number to come in, in the fourth quarter or for that to come down into 2024 as a source of capital or just curious how you think about?

It could be. Yeah. We -- since we shifted to the legacy business, to the new business, collections have actually been good. So guys doing better at that. It’s been great. So we are actually and security might be assessed to in SuperCom from seven years or eight years ago. That being said, in time, the working capital grows because of the payments of the projects at the same time line that the revenue progression. Revenue progression is upon delivery and upon a percentage of completion sometimes and the collections are in certain milestones have happened to reach. So there -- it could be -- there could be a decline in Q4, it could also be in Q1. It depends when those milestones are concluded by the customer’s point of view and we are continuously working on them for many different customers at the same time.

Got you. And maybe just another way to frame the same question. EBITDA, very strong for the third quarter and positive year-to-date. Is that a good proxy to use for your operating cash flow? So $2.7 million of EBITDA, is it reasonable to expect to be breakeven to positive on an operating cash flow basis?

Sometimes there is the -- just as what we talk now, sometimes you have revenue recognition before we actually collect the cash and then that’s going to be an offset in timing when the cash comes in. So the operating cash flows will be more dependent on the payments of the customers and with these projects that are complicated and have multiple stages, the payments are not always aligned with revenues. That’s why you will see a little bit off that. But if you take many quarters into account and you average them, then, yeah, it exclude the one-time EBITDA, yeah, the one-time going to be included EBITDA do you have some cash requirements like settlements of all things from all business or write-offs. They do come out of EBITDA, but they cost us cash flow type. But as things stabilize in the legacy business and more of legacy and things are continuously steady in the new business. The offset with different project collection to all emerge into an average that fluctuates very small between the quarters. And that’s where we start to see a more predictable business, a more consistent revenue cash generating business and a more consistent growth expanding business, which will be supported with our most of leading technology and a continuous pipeline of opportunities around the world.

Got it. Thank you. And final question, 2024 realized, again, might not be ready to provide any forward commentary on that. But after a very strong 2023, what can investors expect from 2024? It sounds like you have a lot in the pipeline, but is it a good year if you kind of hold the level with 2023 or are you looking to grow off that very strong base?

We are always looking to grow and if you look at what we have done in the last few years, new manager and myself and others, then new members came into the company. In 2021 we have been pushing very hard, which is reflected by the numbers. That being said, I will talk very diligently to under promise and over deliver. So we will under promise now and hopefully over deliver and excite investors in the quarters to come.

All right. Terrific. Thank you for taking my questions.

Thank you.

Thank you. [Operator Instructions] At this time, we will be passing the call back to Ordan for closing remarks. Your line is live.

I want to thank all of you for participating in today’s call and for your interest in SuperCom. Please contact us directly if you have any additional questions and we look forward to sharing our progress with you on our next conference call, filings and press releases. Thank you very much and have a good day.

Thank you, everyone. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.