Ladies and gentlemen, thank you for standing by. Welcome to SuperCom’s first quarter 2017 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 result 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 question. 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 systems industry or due to risks identified in the documents filed by the company with the Securities and Exchange Commission. In addition to disclosing financial results calculated in accordance with the United States Generally Accepted Accounting Principles, this call also contains non-GAAP financial measures, which SuperCom believes are the principal indicators of the operating and financial performance of its business. Management believes that the non-GAAP financial measures provided are useful to investors understanding and the assessment of the company's ongoing core operation and prospects of 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. However, such measures should not be considered in isolation or as substitute 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 the earnings release. So, at this time, I would like to turn the call to Mr. Trabelsi. Ordan, the floor is yours.

Thank you. And good morning, everyone. We are excited about the progress we made in Q1, which in many ways is a breakout quarter for us and begins to reflect our transformed business model. We announced fiscal 2016 results three weeks ago. And what a difference you can see just three weeks later. We’re also continuing to make progress reporting our results on a more timely basis, which is a top priority for us. Given we just had our year-end call, we will try not to be too repetitive and focus more on the quarter's financial results and recent operational highlights. While there have been a lot of changes, acquisitions, and expansion at SuperCom over the past 18 months, I want to spend a moment on something that has stayed the same, the nature and characteristics of our customer. A unifying characteristic of SuperCom’s customers is the heavy burden they carry in selecting the technology to secure and protect millions of people in their nation or thousands in their enterprise. As the chief security officer and decision-maker, one missed detail, one misunderstood concept, one poor decision, and the ramifications can be catastrophic. And in the unfortunate developments in our global community today, the stakes are higher than ever. While these customers are highly discerning and it requires significant resources to attain, they provide immense value with their unparalleled loyalty and stickiness. And it has taken SuperCom not 1, not 5, not even 10, but 29 years to learn and reach this level of service for this unique customer. Through extremely challenging nationwide technology deployments and multi-decade relationships with governments that persist through multiple elections and leadership changes, we have developed a specific DNA at SuperCom. Our entire organization from sales and marketing to customer support and supply chain management to…

Thank you, Ordan. I’ll close by saying that our first quarter results show dramatic improvement in both revenue and margin performance and we look forward to building on this progress through the balance of the year. We’re focused on developing a baseline of steady-state or recurring revenue, with an improved mix of customer in high-growth markets. During the first quarter, we began to realize the [indiscernible] efficiency across the organization as promised. We still have a lot of work to do, but with the first quarter completed, and our ability today, we believe we are well-positioned to drive long-term growth and remain comfortable in our belief that revenue for the full year 2017 will exceed $35 million. With that said, I would like to open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of James Mendoff [ph] with Cowen & Company. Please proceed with your question.

Good morning. Can you hear me? Good morning. Are you able, at this point, to provide some segment detail in terms of revenue for the different – for the four segments?

We’re doing it only twice a year in the half year or the semi financial report and on the annual report, so not provided on a quarterly basis. And because we did not put it out on the PR, I don’t think we’re going to put out this segmentation here on this call.

Okay, thanks. And then, in terms of the revenue as it unfolds through the year, how does the seasonality play out this year?

No. The good thing about what development we had during the last year that – we have four growth engines with [indiscernible] that somehow smooths any seasonality and we believe that we will see going forward a growth in our revenue and we’re not expecting any seasonality.

Okay, thanks. And then in terms of gross margin, it came in significantly better than we had been looking for. And so, congratulations on that. And the question is, how – what were some of the drivers behind that 39% non-GAAP gross margin and how much of a drag was Ecuador? In other words, how much gross margin might be possible later in the year?

Okay, yeah. First of all, we had this Ecuador with negative gross margins completed in the first quarter. So, we do not have any similar contracts or projects with this kind of gross margin. We have right now our … Okay, hello.

Hello.

Yes, okay. And what remain with our contracts and revenue with the mix that we believe we will see an increase in gross margin going forward. I think our goal is to have more and more revenue from our recurring revenue, although we call it steady-state revenue, which has a very high margin. And we believe that, starting second quarter, you will see a large improvement in our gross margin going forward, and we expect to see a much better gross margin on every quarter going forward until we will reach some of our historical gross margin.

How much of a drag was Ecuador in the first quarter?

We haven’t shared the specific percentage, but that project, as we said –

I would just say that, without this project or having a replacement with similar contracts we have in line, I think that our gross margin will be higher by more than 5%.

Okay, great. Why don’t I get back in the queue and see maybe if I come back later with some more questions? Thanks.

Thank you.

Thank you. Our next question comes from the line of Tony Pollock with Aegis Capital. Please proceed with your question.

Hi there. Could you go into a little more depth on the research and development? I see they went up about $0.5 million, where that is and what type of return on investments you expect and how soon we can expect a return on investment on that?

Okay. First of all, as you can see, along the years – the last four years and beyond, we as a company invested a lot of our resources in R&D. Originally, it was in the ∑ID or the government area. And that’s when we developed a new line for the M2M and going forwards. Last year, we invested over $8 million in R&D, some of it capitalized, and the other is on our P&L. We’re not going to see this kind of investment in R&D this year because we somehow have put together the right product line, the right interface between them, so we believe the R&D will go down to half of this level of last year. We invested in ∑ID, M2M, cyber security, and connectivity. On the connectivity, our main development is to have our connectivity products secure, so we took IP and specific algorithms from Safend together with access point algorithm that Alvarion has, and we developed a unique secure Wi-Fi product that we believe will be a great, great growth engine. On M2M, we continue to develop and to enhance our product line to a more and more market, and we see an excellent feedback from our customers, in most of the cases, when we go into a tender or we show our product. Our customers are very happy with our technology and the way we build it around the customer. And on the ∑ID and on the LAN, which is part of the e-government, we enhance our product with our platform, with the Magna platform. We had more and more modules and we have today a more scalable modular platform that works together with all the other component that we [indiscernible] division. With the cyber security, we continue to invest in our [indiscernible] mobile solution, SafeMobile, in our product [indiscernible] endpoint protection that we have [indiscernible].

Okay. It sounds – can we expect $1.5 million to $1.7 million in R&D for the quarters going forward or is this a higher quarter than normal?

We believe our goal is to reach $4 million R&D investment this year, which is about half of what we had last year because of transition year. And I think that it is about the level that we believe we’ll continue to see going forward. We do not need as much R&D as we had in the last two years when we build our product line, when we [indiscernible] working together. And we believe that the level of R&D should go to a normal level that the company in our size, supporting that product and interfacing that a new technology should have.

Okay. One other question, you talked about you’re getting a lot more business from corporations versus governments. Could you quantify that in terms of this quarter or going forward?

Let me answer that one. If you look at the 20-F for 2016, you will see that there’s segmentation provided towards the end. Out of the $20 million, roughly $3 million or so of recognized revenues was from the connectivity and cyber divisions. The vast majority of that is enterprises. So, we’re roughly at 15%. We’re expecting those numbers to potentially grow throughout the quarters, but it depends on, of course, the projects that come in to different divisions. But on a steady-state level, that’s around the number where we’re at.

Okay, thank you. I’ll get back into queue.

I just would like to mention. Our connectivity business, together with the cyber security business, aiming to enterprises around the world, those two growth engines, we’ll see more and more revenue coming from enterprises along with the growth that we have on the M2M and ∑ID. So, I think the number that we have seen last year are going to improve this year toward cyber security and connectivity or revenue from enterprises around the world.

Okay, thank you.

Thank you. Our next question comes from the line of Brian Kinstlinger with Maxim Group. Please proceed with your question.

Yeah, great. Thanks. If we took a three-year kind of outlook, which of your four businesses do you think will generate the most growth over those years and maybe which of your businesses might be a little bit slower? Thanks.

Okay. First of all, if you look at our four growth engines, first one, ∑ID or the government, it is our legacy. This one is characterized by nice steady-state revenue, together with the large contracts that we’re bidding on. And in this case, we can win a very large contract and we will see a different picture from revenue point of view for this division. And in general, the size of those contracts are very high. Two years ago, we had two large contracts that aggregated to about $50 million together. The other area which is probably one of the promising growth engines we have, the public safety, we see the – also very large contracts with government or municipal contracts or tender that again can range from a few hundred thousand dollars, but also can reach €50 million. And here, again, each contract like this gives you a large revenue for many years and you have the contract about five years, plus additional five years as an option. So, it’s really a very nice stream of revenue from very strong customers, governments or counties in the US. We believe that the M2M is going to be a very fast-growing engine for us, both because we had very good success of integrating a lot of our great technology. And the other is, again, there is a large demand to this kind of solution in the US, Europe and around the world. So, we are – with the right solution, on time for that. The other two growth engines are [indiscernible] and they are providing us a few million dollars each at this stage, but we do believe that the cyber security division will become very meaningful in our revenue because more and more government and enterprises are looking for cyber…

Thank you.

Thank you. This concludes our question-and-answer session. I would like to turn the call back over to management for closing remarks.

Okay. Thank you for joining us today. We’re looking forward to meet you next quarter, which we believe is going to be relatively soon. Thank you again.

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