"We're doing what we should, and I understand that it's appreciated," SuperCom Inc. (Nasdaq: SPCB) president, CEO, and principal shareholder Arie Trabelsi said this week. Technology company SuperCom's share has price soared, and its market cap has jumped from less than $10 million to $167 million in less than two years. The company 's third quarter financials showed continuation of its growth trend and improvement in profit, due among other things to the 2013 acquisition of a division of OTI. Less than a year after completing that acquisition, Trabelsi reveals that SuperCom is already getting ready to make another. "We're considering a major acquisition, which will triple our sales if it goes through," he told "Globes". The agreement has not yet been signed, and Trabelsi is therefore unwilling to disclose further particulars, but he says that the acquisition candidate is "very profitable," and is expected to expand SuperCom's electronic identification (EID) business (ID cards and smart passports) for Western countries. SuperCom is currently active mainly in Africa and Latin America.
SuperCom has $6 million in cash and a shelf prospectus for raising up to $50 million. "At the moment, we don’t need to raise money, because our cash flow is good," Trabelsi says. "If we acquire this company, we'll almost certainly finance the deal with cash and by taking debt for a limited period."
"Globes": Is the company you are planning to acquire better known than SuperCom? How is it that you are the ones making the acquisition?
Trabelsi: "The OTI division also sold more than we did. There are considerations involving the shareholders, and the question is not who is making the acquisition, but only whether the acquisition is logical."
SuperCom is active in the EID segment and the machine to machine (M2M) segment using various RFID and WiFi technologies. In EID, the company recently won two large government contracts (amounting to an aggregate $50 million), and Trabelsi believes that there will be more such contracts in the near future. In M2M, SuperCom has target markets: public security, such as electronic handcuffs for monitoring prisoners on parole; hospitals - monitoring patients and equipment; and agriculture - monitoring pets and livestock. According to Trabelsi, contracts in all three markets are large and long-term, usually with government agencies, as is also the case with the EID segment.
"Both organic growth and acquisitions"
In its third quarter reports, SuperCom reported $9.1 million revenue, up 352%, compared with the corresponding quarter last year, which preceded the acquisition of the OTI division. The company also posted 29% growth in comparison with the preceding quarter, which included the results of the acquired division. Net profit in the quarter totaled $3.7 million, 148% more than in the corresponding quarter in 2013 and 74% more than in the preceding quarter.
EBITDA (earnings before interest, taxes, depreciation, and amortization) as $4.2 million. Trabelsi says, "We're moving ahead with our business plan in all of its elements, and our sales and profit margins results are far beyond the original business plan. Our expenses are fairly constant, so when our revenue increases, we can assume the bottom line will also rise."
SuperCom does not provide quantitative forecasts but Trabelsi predicts that the trend of growth and expanding profit margins will continue in the fourth quarter and in 2015. The company's revenue since the beginning of the year totaled $21.5 million, and SuperCom is still aiming at annual revenue of $250 million in 2018. "We believe we'll reach it, maybe even earlier. Growth will be both organic, by winning large tenders, and through acquisitions, which will shorten time-to-market," Trabelsi says.
Published by Globes [online], Israel business news - www.globes-online.com - on November 6, 2014
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