SuperCom Reports Record Annual Revenue with 66% Organic Growth and 200% Gross Margin Improvement for Full Year 2017

SuperCom Reports Record Annual Revenue with 66% Organic Growth and 200% Gross Margin Improvement for Full Year 2017

93% Organic Revenue Growth in the Fourth Quarter of 2017

HERZLIYA, Israel, May 14, 2018 /PRNewswire/ -- SuperCom (NASDAQ: SPCB), a global provider of secure solutions for the e-government, public safety, healthcare, and finance sectors, reported results for the fourth quarter and twelve months ended December 31, 2017.

Twelve-Months Ended December 31, 2017 Financial Highlights (Compared to the Prior Year Period)

    --  Non-GAAP revenue, increased 73% to record $34.6 million from $20.0
        million
    --  Revenue increased 66% to record $33.3 million from $20.0 million
    --  Revenue growth across all three business segments: e-Gov, IoT and
        Connectivity, and Cyber Security
    --  Revenue growth across all of the company's major geographic markets:
        Africa, Europe, Latin America, U.S., Israel and Asia Pacific
    --  Steady-state recurring revenue reached a record level, increasing 41% to
        approximately $24 million from approximately $17 million
    --  Non-GAAP gross margin increased by 170% to 45.5% from 16.9%
    --  Non-GAAP gross profit increased 350% to $15.1 million from $3.4 million
    --  Research and development, sales and marketing, and general and
        administrative expenses as a percentage of total revenue decreased to
        22%, 24% and 18% respectively, in 2017, from 34%, 50% and 36%
        respectively, in 2016
    --  EBITDA increased to $188,000 compared to an EBITDA loss of $(6.6)
        million
    --  Non-GAAP net loss totaled $(2.2) million or $(0.14) per share, an
        improvement from non-GAAP net loss of $(7.8) million or $(0.52) per
        share

Fourth Quarter 2017 Financial Highlights (Compared to the Same Year-Ago Period)

    --  Non-GAAP revenue, increased 130% to $9.2 million from $4.0 million in
        the same year-ago quarter
    --  Revenue increased 93% to $7.8 million from $4.0 million in the same
        year-ago quarter
    --  Non-GAAP gross margin increased to 31.9% from (23.1%) in the same
        year-ago quarter
    --  Non-GAAP gross profit increased to $2.9 million from a gross loss of
        ($0.9) million in the same year-ago quarter
    --  Research and development, sales and marketing, and general and
        administrative expenses as a percentage of revenue decreased to 24%, 27%
        and 22% respectively, from 28%, 47% and 38% respectively, in the same
        year-ago quarter
    --  EBITDA loss improved to $(1.2) million compared to an EBITDA loss of
        $(3.7) million in the same year-ago quarter
    --  Non-GAAP net loss improved to $(2.1) million or $(0.14) per share from
        non-GAAP net loss of $(4.1) million or $(0.28) per share in the same
        year-ago quarter

Fourth Quarter 2017 and Recent Operational Highlights by Business Segment:

e-Gov:

    --  In April 2018, signed a new contract worth approximately $4 million in
        value with an existing national government customer in Africa. Built
        around SuperCom's Magna platform, the deployment will allow for quick
        expansion of additional e-Gov modules, which would lead to potential
        increases in the overall contract size. The majority of the new contract
        is expected to be recognized over the next two years and will grow
        SuperCom's steady-state recurring revenues.
    --  In early 2018, announced the company is developing various
        cryptocurrency capabilities for its SuperPay secure mobile money suite.
        Upon completion, SuperPay users will be able to purchase and sell
        Bitcoin, Ethereum and other cryptocurrencies through the suite.

IoT and Connectivity:

    --  In October 2017, began the deployment of PureSecurity Electronic
        Monitoring (EM) Suite for GPS and home detention offender tracking and
        monitoring in Tennessee. SuperCom has already received initial orders
        under the agreement as well as follow-on orders, which should continue
        to ramp up over time. The project is billed at a per-unit daily rate and
        is already generating steady-state recurring revenues.
    --  In November 2017, announced the deployment of PureSecurity EM Suite in
        Atlanta, Georgia. The project has already received initial and follow-on
        orders and also began generating steady-state recurring revenues before
        year end 2017.
    --  In November 2017, selected by the national government of Bulgaria to
        deploy PureSecurity EM Suite. The comprehensive nationwide program is
        expected to initially monitor 250 enrollees simultaneously.
    --  In December 2017, secured a contract to provide PureSecurity EM Suite in
        Western Kentucky. SuperCom has already completed the initial deployment
        and began generating steady-state recurring revenue.
    --  In January 2018, secured an additional contract to provide PureSecurity
        EM Suite in Idaho.
    --  In March 2018, secured an additional contract to provide PureSecurity EM
        Suite in South Carolina.
    --  In April 2018, secured an additional contract to provide PureSecurity EM
        Suite in eastern Texas to an established service provider.
    --  In April 2018, awarded a $7 million project with the national government
        of Sweden to deploy PureSecurity EM Suite.
    --  Continued sales of Alvarion Wi-Fi technology in the U.S. and globally,
        as well as gaining traction securing new purchase orders with
        distributors and integrators, which have expanded its
        multi-million-dollar pipeline.

Cyber Security:

    --  Continued progress in the development of new advanced cyber security
        products, adding more capabilities, including anti-malware to be
        incorporated into the Safend cyber security platform. Also began the
        process of piloting features to new customers in the U.S. and Europe.
    --  Safend concluded 2017 with a greater than 90% retention rate in the
        U.S., driven by sustained customer satisfaction and continued
        technological improvements.

Management Commentary

"2017 was a banner year for SuperCom, highlighted by a dramatic transformation in our financial performance as well as growth across all of our strategic business segments and major geographic markets globally," said Arie Trabelsi, President and CEO of SuperCom. "Thanks to the successful integration efforts of the previous year's acquisitions, we were able to generate record annual revenue, while also optimizing our costs in certain key areas of our business leading to a greater than 400% increase in gross profit. In the fourth quarter specifically, we grew our revenue 93% over the prior year, while also significantly reducing our expenses as a percentage of total revenue across the board."

"Operationally, we have continued to execute on our growth strategy across all our business segments. In our e-Gov division, we secured an eight-year contract with Iceland for an ePassport and National ID Card system back in September. And more recently, we signed a new contract with an existing national government customer in Africa, representing approximately $4 million in value and expected to increase our steady-state recurring revenue. This contract is in addition to other recent large-scale e-Gov deployments in Africa, which have already transitioned to steady-state and are generating recurring revenue that contributed to our improved performance. Within our IoT division, we continue to win new business in the U.S. and globally. In fact, we have announced additional wins in six locations in the last few months alone and have 11 EM deployments currently ongoing globally. And in our Cyber Security division, we ended the year with a greater than 90% retention rate in the U.S., thanks to both sustained customer satisfaction as well as continued technological improvements."

"Moving forward, we are increasingly confident in our prospects for the current year and beyond. As we have now been able to demonstrate consistently over the course of a full year, placing an emphasis on certain key areas within our business can lead to long-term revenue expansion and a solid foundation to reliably and successfully scale our operations. Additionally, we are focused on growing our margins to greater levels by winning new business and transitioning our various ongoing deployments into consistent steady-state recurring revenue generators. In all, our ultimate goal continues to be the creation of sustainable and profitable growth and value for our shareholders for the many years ahead."

Conference Call

The company will hold a conference call today (May 14, 2018) at 10:00 a.m. Eastern time (7:00 a.m. Pacific time / 5:00 p.m. Israel time) to discuss these results and financial outlook.

SuperCom management will host the call, followed by a question and answer period.

U.S. toll-free: 1-800-289-0438
Israel toll-free: 972-1809-212-883
International: 1-323-794-2423
Conference ID: 7892404

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

About SuperCom

Since 1988, SuperCom has been a global provider of traditional and digital identity solutions, providing advanced safety, identification and security solutions to governments and organizations, both private and public, throughout the world. Through its proprietary e-government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, SuperCom has inspired governments and national agencies to design and issue secure Multi-ID documents and robust digital identity solutions to its citizens and visitors. SuperCom offers a unique all-in-one field-proven RFID & mobile technology and product suite, accompanied by advanced complementary services for various industries including healthcare and homecare, security and safety, community public safety, law enforcement, electronic monitoring, livestock monitoring, and building and access automation. For more information, visit www.supercom.com.

Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements preceded or followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Forward-looking statements in this release also include statements about business and economic trends. Investors should also consider the areas of risk described under the heading "Forward Looking Statements" and those factors captioned as "Risk Factors" in the Company's periodic reports under the Securities Exchange Act of 1934, as amended, or in connection with any forward-looking statements that may be made by the Company. These statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 20-F filed with the SEC on May 23, 2016. The Company undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release.

Use of Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this release of operating results also contains non-GAAP financial measures, which SuperCom believes are the principal indicators of the operating and financial performance of its business. Management believes the non-GAAP financial measures provided are useful to investors' understanding and assessment of the Company's on-going core operations and prospects for the future, as the charges eliminated are not part of the day-to-day business or reflective of the core operational activities of the Company. Management uses these non-GAAP financial measures as a basis for strategic decisions, forecasting future results and evaluating the Company's current performance. However, such measures should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Reconciliation of the non-GAAP measures to the most comparable GAAP measures are provided in the schedules attached to this release.

[Tables to follow]


                                           SUPERCOM LTD.
                                           -------------

                                    CONSOLIDATED BALANCE SHEETS
                                    ---------------------------

                                    (U.S. dollars in thousands)



                                                 December 31,          December 31,

                                                                  2017                   2016
                                                                  ----                   ----

                                                   Unaudited              Audited
                                                   ---------              -------


    CURRENT ASSETS

       Cash and cash equivalents                                 1,037                  1,708

    Restricted bank deposits                                     1,063                  1,110

    Trade receivable, net                                       12,456                 10,310

    Patents                                                      5,283                  5,283

    Other accounts receivable and
     prepaid expenses                                            2,698                  2,500

    Inventories, net                                             4,876                  5,492
                                                                 -----                  -----


    Total current assets                                        27,413                 26,403
                                                                ------                 ------


    LONG-TERM ASSETS

    Severance pay funds                                            319                    282

    Deferred tax long term                                       4,505                  4,223

    Customer Contracts                                           3,640                  4,684

    Software and other IP                                        5,006                  5,987

    Other Asset, net                                             5,071                  3,230

    Goodwill                                                     7,026                  7,026

    Property & equipment, net                                    1,218                  1,638
                                                                 -----                  -----

    Total long-term assets:                                     26,785                 27,070


    Total Assets                                                54,198                 53,473
                                                                ------                 ------

    CURRENT LIABILITIES

        Short-term Bank credit                                     292                      -

    Trade payables                                               5,838                  3,958

    Employees and payroll accruals                               4,910                  2,948

    Related parties                                                 61                     56

    Accrued expenses and other
     liabilities                                                 3,739                  3,497

    Deferred revenues ST                                         1,661                  1,633
                                                                 -----                  -----

    Short-term liability for future
     earn-out                                                    1,163                    679
                                                                 -----                    ---


    Total current liabilities                                   17,664                 12,771
                                                                ------                 ------


    LONG-TERM LIABILITIES


       Long-term bank loan                                         446                      -

       Accrued severance pay                                       585                    453

       Related Parties                                           2,082                      -

    Deferred tax liability                                          49                    156

    Deferred revenues                                              518                    423

    Long-term liability for future
     earn-out                                                      147                    946


    Total long-term liabilities                                  3,827                  1,978
                                                                 -----                  -----


    SHAREHOLDERS' EQUITY:

    Ordinary shares                                              1,026                  1,024

    Additional paid-in capital                                  82,157                 81,515

    Accumulated deficit                                       (50,476)              (43,815)
                                                               -------                -------


    Total shareholders' equity                                  32,707                 38,724
                                                                ------                 ------


    Total liabilities and equity                                54,198                 53,473
                                                                ------                 ------


                                    SUPERCOM LTD.
                                    -------------

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                        -------------------------------------

                             (U.S. dollars in thousands)


                              Twelve months ended

                                  December 31,
                                  ------------

                                             2017                       2016
                                             ----                       ----

                                   Unaudited               Unaudited
                                   ---------               ---------


    REVENUES                                                         33,264     20,025

    COST OF REVENUES                                               (20,351)  (17,461)
                                                                    -------    -------


    GROSS PROFIT                                                     12,913      2,564
                                                                     ------      -----


    OPERATING EXPENSES:

       Research and
        development                                                   7,238      6,718

       Selling and
        marketing                                                     8,099      9,970

       General and
        administrative                                                6,113      7,277

       Other expense
        (income), net                                               (2,021)       713
                                                                     ------

       Gain on Bargain
        Acquisition                                                       -  (10,515)


    Total operating
     expenses                                                        19,429     14,163
                                                                     ------     ------


    OPERATING LOSS                                                  (6,516)  (11,599)

    FINANCIAL EXPENSES,
     NET                                                                538        303
                                                                        ---        ---


    LOSS BEFORE INCOME
     TAX                                                            (7,054)  (11,902)

    INCOME TAX BENEFIT
     (EXPENSE)                                                          393    (2,091)
                                                                        ---     ------


    NET LOSS FOR THE
     PERIOD                                                         (6,661)  (13,993)
                                                                     ------    -------


                               SUPERCOM LTD.
                               -------------

    Reconciliation Table of GAAP to Non-GAAP Figures and EBITDA to Net Income
    -------------------------------------------------------------------------

                        (U.S. dollars in thousands)




                                                   Twelve months ended

                                                       December 31,
                                                       ------------

                                                                    2017           2016
                                                                    ----           ----

                                                   Unaudited   Unaudited
                                                   ---------   ---------


    GAAP revenue                                                  33,264         20,025

      Realization of
       Deferred Revenue                                            1,384              -


    Non-GAAP revenue                                              34,648         20,025


    GAAP gross profit                                             12,913          2,564

    Amortization of
     Software and IP                                                 615            544

    Stock-based
     compensation
     expenses                                                        217            267
                                                                     ---            ---

    Realization of
     Deferred Revenue                                              1,384              -


    Non-GAAP gross
     profit                                                       15,129          3,375
                                                                  ------          -----


    GAAP Operating
     Loss                                                        (6,516)      (11,599)

      Amortization of
       Software and IP                                               738            632

      Amortization of
       Customer
       Contracts and
       Brand                                                       1,341          1,437

      Stock-based
       compensation
       expenses                                                      631            924

      Restructuring
       Costs related to
       newly acquired
       operations                                                      -           340

      Foreign Currency
       Loss                                                        1,729            164

      Expense related
       transaction DD                                                111            165

      Expenses for
       doubtful debt                                                 327            438


    Non-GAAP
     operating Loss                                              (1,666)       (7,499)
                                                                  ------         ------

    GAAP net Loss                                                (6,661)      (13,993)

        Amortization of
         Software and IP                                             738            632

        Amortization of
         Customer
         Contracts and
         Brand                                                     1,314          1,437

        Stock-based
         compensation
         expenses                                                    631            924

        Restructuring
         Costs related to
         newly acquired
         operations                                                    -           340

        Foreign Currency
         Loss                                                      1,729            164

        Expense related
         transaction DD                                              111            165

        Expense for
         doubtful debts                                              327            438

                                                                   (393)         2,091

        Income tax
         expense(benefit)



    Non-GAAP net Loss                                            (2,204)       (7,802)
                                                                  ------         ------


    NET LOSS FOR THE
     PERIOD                                                      (6,661)      (13,993)

        Income tax expense
         (benefit)                                                 (393)         2,091

        Financial expenses
         (income), net                                               538            303

        Foreign Currency
         Loss                                                      1,729            164

        Depreciation,
         amortization and
         stock-based
         compensation
         expenses                                                  4,537          3,929

        Restructuring
         Costs related to
         newly acquired
         operations                                                    -           340

        Expense for
         doubtful debt                                               327            438

        Expense related
         transaction DD                                              111            165

    EBITDA *                                                         188        (6,563)
                                                                     ---         ------

    * EBITDA is a non-GAAP financial measure generally defined as earnings before
     interest, taxes, depreciation and amortization.


                               SUPERCOM LTD.
                               -------------

                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   -------------------------------------

                        (U.S. dollars in thousands)



                                                      3 months ended

                                                       December 31,
                                                       ------------

                                                                    2017     2016
                                                                    ----     ----

                                                   Unaudited   Unaudited
                                                   ---------   ---------


    REVENUES                                                       7,797    4,036

    COST OF REVENUES                                               6,483    5,368
                                                                   -----    -----


    GROSS PROFIT (LOSS)                                            1,314  (1,332)
                                                                   -----   ------


    OPERATING EXPENSES:

       Research and development                                    1,902    2,607

       Selling and marketing                                       2,104    2,965

       General and administrative                                  1,720    1,906

       Other expenses                                                383    2,454
                                                                     ---    -----

    Gain on Bargain Acquisition                                        - (5,556)
                                                                     ---  ------


    Total operating expenses                                       6,109    4,376
                                                                   -----    -----


    OPERATING LOSS                                               (4,795) (5,708)

    FINANCIAL EXPENSES, NET                                          105      117
                                                                     ---      ---


    LOSS BEFORE INCOME TAX                                       (4,900) (5,825)

    INCOME TAX EXPENSES (BENEFIT)                                  (282)   3,529
                                                                    ----    -----


    NET LOSS FOR THE PERIOD                                      (4,618) (9,354)
                                                                  ------   ------


                           SUPERCOM LTD.
                           -------------

    Reconciliation Table of GAAP to Non-GAAP Figures and EBITDA to Net Income
    -------------------------------------------------------------------------

        (U.S. dollars in thousands, except per share data)



                                                        3 months ended

                                                         December 31,
                                                         ------------

                                                          2017            2016
                                                          ----            ----

                                                    Unaudited      Unaudited
                                                    ---------      ---------


    GAAP revenue                                         7,797           4,036

      Realization of
       Deferred Revenue                                  1,384               -


    Non-GAAP revenue                                     9,181           4,036


    GAAP gross profit                                    1,314         (1,332)

        Realization of
         Deferred Revenue                                1,384               -

        Amortization of
         Software and IP                                   154             325

        Stock-based
         compensation
         expenses                                           64              76
                                                           ---             ---

    Non-GAAP gross
     profit                                               2916           (931)
                                                          ----            ----


    GAAP operating
     Loss                                              (4,795)        (5,708)

      Amortization of
       Software and IP                                     185             208

       Amortization of
        Customer
        Contracts and
        Brand                                              344             364

      Stock-based
       compensation
       expenses                                            154             215

      Foreign Currency
       Loss                                              1,729             164

      Expense related
       transaction DD                                      111              36

      Expense for
       doubtful debt                                       327           1,238

    Non-GAAP
     operating Loss                                    (1,945)        (3,483)
                                                        ------          ------

    GAAP net Loss                                      (4,618)        (9,354)

        Amortization of
         Software and IP                                   185             208

        Amortization of
         Customer
         Contracts and
         Brand                                             344             364

        Stock-based
         compensation
         expenses                                          154             215

        Foreign Currency
         Loss                                            1,729             164

        Expense related
         transaction DD                                    111              36

        Expense for
         doubtful debt                                                    700

                                                           327
                                                           ---

        Income tax expense
         (benefit)                                       (282)          3,529
                                                          ----           -----

    Non-GAAP net Loss                                  (2,050)        (4,138)
                                                        ------          ------


    Non-GAAP EPS                                        (0.14)         (0.28)
                                                         -----           -----


    NET LOSS FOR THE
     PERIOD                                            (4,618)        (9,354)

        Income tax
         expenses
         (benefit), net                                  (282)          3.529

        Financial expenses
         (income), net                                     105              67

        Depreciation,
         amortization and
         stock-based
         compensation
         expenses                                        1,421           1,141

        Foreign Currency
         Lossncy
         (benefit)20F
         annual report. k
         out the  APAC.om
         ssing                                           1,729             164

        Expense related
         transaction DD                                    111              36

        Expense for
         doubtful debt                                     327             700
                                                           ---             ---

    EBITDA *                                           (1,207)        (3,717)
                                                        ------          ------

    * EBITDA is a non-GAAP financial measure generally defined as earnings before
     interest, taxes, depreciation and amortization.

SuperCom Corporate Contact:
Ordan Trabelsi, President, Americas
Tel: 1-212-675-4606
ordan@supercom.com

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