SuperCom Reports 50% Revenue Growth, 70% Gross Margin Improvement, and Positive EBITDA in Second Quarter 2017 Results

HERZLIYA, Israel, July 31, 2017 /PRNewswire/ -- SuperCom (NASDAQ: SPCB), a global provider of secure solutions for the e-Government, Public Safety, HealthCare, and Finance sectors, announced results for the second quarter ended June 30, 2017.  

Second Quarter 2017 Financial Highlights As Compared to Second Quarter 2016

• Revenue of $7.5 million compared to $5.0 million, an increase of 50%
• Gross Margin of 46% compared to 27%, an increase of 70%
• Non-GAAP Gross Margin of 49% compared to 30%
• EBITDA  totaled $0.8 million compared to ($0.34 million)
• Non-GAAP Net Profit of  $0.23 million compared to Net Loss of ($0.62 million)
• Non-GAAP EPS of $0.02 compared to ($0.04)
• R&D operating expenses of $2.0 million compared to $1.5 million

Six Months Ended July 30, 2017 Highlights As Compared to the Prior Year Period

• Revenue of $15.83 million compared to $10.88 million, an increase of 45.5%
• Gross Margin of 41 % compared to 20%, an increase of 102.5%
• Non-GAAP Gross Margin of 44% compared to 24%
• EBITDA loss totaled ($0.2 million) compared to ($1.3) million
• Non-GAAP Net Loss of ($0.88 million) compared to ($0.35 million)
• Non-GAAP EPS of $(0.06) compared to ($0.02)
• R&D operating expenses of $3.6 million compared to $2.7 million

Arie Trabelsi, SuperCom's President and CEO commented, "This quarter marks the second quarter of dramatically improved financial performance for SuperCom.  During 2016 we executed four acquisitions which enhanced our offering to the chief security officer of a nation or enterprise and transformed our business model.  These second quarter results demonstrate that our transformation is working as we achieved traction against all of our operating goals.  First, we continued to see growth in our predicable, steady-state revenue which is a core tenant of our long term strategy to build sustained shareholder value.  We remain comfortable with our previously stated expectation that the percentage of our steady-state revenue from developed markets will grow from less than 5% in 2015 to close to 50% in 2017.  Second, our revenue continued to diversify to a broader base of developed countries, U.S. municipalities and enterprises.  This broader and higher quality revenue base reduces the volatility we saw in our concentration in national governments in emerging markets.  For example, following the close of the quarter we announced two new contracts for the provision of electronic monitoring services in Denmark and California.  The composition of our pipeline encourages us that this improvement and diversification in our revenue base will continue.

Mr. Trabelsi continued, "In parallel to growth and diversification of revenue, margins have dramatically improved over the past couple quarters.  A key goal after we executed the acquisitions in 2016 was to drive margin improvement across our business. Compared to the second quarter of 2016, gross margins have increased 70%, SG&A costs are down 18%, and for the first time in several quarters, we've achieved positive Non-GAAP EPS and EBITDA, important milestones in our business plan and recent transformation."   

Mr. Trabelsi concluded, "We are committed to expanding our proprietary technology into new markets while driving integration and realizing operating efficiencies moving forward. We are pleased to have continued the momentum of our first quarter, and we intend to continue this trend for the balance of the year and beyond."

Second Quarter 2017 Highlights by Segment: 

e-ID:

• $9M Secure Web Land Geographical Information System project in Colombia continued, on track for deployment completion and transition to steady-state in July 2018.
• Large-scale e-iD deployment in Africa which recently transitioned to steady-state, generated recurring revenue that contributed to improved performance. Another large-scale e-ID deployment in Africa is expected to transition to steady state as well in the near future.

M2M:

• Following the close of the quarter, SuperCom secured a contract with Denmark's Ministry of Justice for a multi-year comprehensive national EM program, set to encompass all electronic monitoring of offender programs within the country and planned to monitor up to 1000 enrollees simultaneously.
• Following the close of the quarter, LCA was awarded a contract valued at up to $3.4M to provide pretrial and early intervention court services, as well as EM services, to the Alameda County Probation Department in Northern California.

Cyber Security:

• Significant progress in the development of new advanced cyber security products including anti-malware to be added to the Safend cyber security platform.
• Safend experienced year-over-year growth in sales and continued to make progress strengthening its global distribution channels and relationships with sophisticated Fortune 500 enterprises.

Connectivity and Payments

• Initiated sales of Alvarion Wi-Fi technology in the U.S., gaining traction in purchase orders.
• Began selling VeloPOS, the secure point of sales platform, to large new customers in Central America and the United Kingdom.

Financial Outlook

Based on the current information available to the Company, management re-affirms its belief that revenue for the full year 2017 will surpass $35 million, approximately a 75% increase compared to 2016.

Results Conference Call

The Company will host a conference call, today, Monday, July 31, 2017, at 10 a.m. Eastern time to review the Company's second quarter financial results and business outlook.

To participate, interested investors should call one of the following telephone numbers. It is recommended that participants dial in at least five minutes before the start of the call:

A webcast of the call will be available on the SuperCom investor relations website at http://www.supercom.com.

About SuperCom

Since 1988, SuperCom has been a leading 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.

SuperCom's website is http://www.supercom.com  

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 16, 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.

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