INVESTOR PRESENTATION investor presentation _ ju… · integrated OTI & grew by 3x • Founded: 1988 • Headquarters: Herzliya, Israel • Ticker: SPCB • Market Cap (5/31/2016):

1 Property of SuperCom © 2016 NASDAQ: SPCB

NASDAQ: SPCB | www.supercom.com

INVESTOR PRESENTATION JUNE 2016


This presentation 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) regarding SuperCom Ltd. (SuperCom) and/or its subsidiaries. Forward-looking statements are based on management’s expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results, performance and trends may differ materially from these forward looking statements due to a variety of factors, including, without limitation: product and technology development; the uncertainty of the market for SuperCom's products; changing economic conditions; delay, cancellation or non-renewal, in whole or in part, of contracts or of purchase orders (including as a result of budgetary cuts resulting from automatic sequestration under the Budget Control Act of 2011); and other risk factors detailed in SuperCom's most recent Annual Report on Form 20-F for the fiscal year ended December 31, 2015 and other filings with the Securities and Exchange Commission. SuperCom assumes no obligation to update any forward-looking statement.

Safe Harbor Statement


1988 2006

SuperCom established

Key Facts

• SuperCom is a global provider of secure electronic ID, M2M/IoT, cyber security and mobile payment solutions

• Since 1988, SuperCom deployed full end-to-end solutions in over 20 governments across the world

• Proven track record of successful acquisition integration with substantial margin expansion and revenue growth

• Established base of long-standing government customers with growing base of recurring revenues

Company Overview

2010

Arie Trabelsi joined SuperCom as

Chairman and CEO; implemented

turnaround strategy

Sold majority of the Company’s e-ID

Division to OTI

2014

Successfully integrated OTI & grew by 3x

• Founded: 1988

• Headquarters: Herzliya, Israel

• Ticker: SPCB

• Market Cap (5/31/2016): ~$57M

Reacquired SmartID

division of OTI

SUPERCOM AT A GLANCE

2013

(a) Reflects non-GAAP gross margin for 2015; refer to page 28 of presentation (b) EBITDA is a non-GAAP financial measure generally defined as earnings before interest, taxes, depreciation and amortization and other unrelated expenses. Refer to page

29 of presentation

Deployments in different regions in Europe, Asia and Africa

2015

Expanded portfolio of complementary & interconnected

products & solutions to provide more integrated offering to

customers

Acquired Prevision

2016

Acquired LCA

Acquired Safend

Acquired PowaPOS

Revenue $28.3M

Gross Margin 65.5%

EBITDA $6.9M

EBITDA Margin 24.2%

FY 2015 (b)

(b)

(a)


Strategically positioned in massive and underpenetrated high-growth end markets (e-ID, M2M/electronic monitoring, cyber security, mobile payments)

+27-year proven track record in eID establishes a secure market position in an industry with high barriers to entry

Strong, growing recurring revenue base from stable long-term government contracts provides baseline of profitability

Mature pipeline of large eID government tenders supports long-term growth opportunity

Complementary acquisitions expands solutions suite of interrelated offering providing incremental cross-selling opportunity

Strong referenceable customer base and global network of established local partners

INVESTMENT HIGHLIGHTS


• Committed to growth; 30+% CAGR in revenue since 2012

• Attractive balance sheet – no debt, minimal CapEx requirements & NOL tax shields

• Solid profit margins and strong cash flow

2015 Gross margin: 65.5% (a)

2015 EBITDA margin: 24.2% (b)

• Strong, growing, predictable and recurring revenues from existing steady state e-ID government customers

$12M in steady-state revenues in 2014

$15M in steady-state revenues in 2015

Steady-state revenues expected to grow in 2016

• Steady-state revenue are high margin and mostly recurring

• Management owns ~26% of company; incentivized to build shareholder value

FINANCIAL HIGHLIGHTS

(a) Reflects non-GAAP gross margin for 2015; refer to page 28 of presentation (b) EBITDA is a non-GAAP financial measure generally defined as earnings before interest, taxes, depreciation and amortization and other unrelated expenses. Refer to page

29 of presentation (c) Enterprise Value calculated as market cap (as of May 31, 2016) minus cash & restricted cash as of December 31, 2015. LTM non-GAAP EBITDA as of December 31, 2015

• Attractive valuation – Enterprise Value / LTM EBITDA of 4.6x (c)


COMPANY OVERVIEW

e-ID Government Electronic ID

National IDs, Driver Licenses, Passports, Voter Registration & other e-Gov. systems

• Profitable, growing & cash-generating • Solid base of growing recurring revenues from

long term gov’t customers

M2M / IoT Electronic

Monitoring

Field-proven, proprietary, long-range RFID technology

• Opportunity for meaningful margin expansion • Growing pipeline of domestic and global

deployment opportunities

Cyber Security

Advanced Cyber Security services and capabilities • Profitable, growing & cash-generating • Company has advantages due to synergistic technologies &

shared customer base with other divisions

mPay Mobile Payments

Mobile wallet solution & mobile money services

• Emerging growth area with large addressable market • Technology offering mobile payments everywhere,

complemented by recent PowaPOS acquisition

http://www.registrocivil.gob.ec/index.php?option=com_content&view=article&id=213:animacion-cedula&catid=76&Itemid=269


M2M / IoT Closed Acquisition of LCA (January 2016)

Accretive acquisition of established, 25 year-old electronic monitoring and community-based services company with strong recurring revenues from U.S. government customers

Won 5 new government customers with Electronic Monitoring technology and awarded PureLock Suite in South America for the tracking and monitoring of assets

Cyber Security Closed Acquisition of Safend (March 2016)

Accretive acquisition of an international provider of cutting-edge endpoint data protection, encryption methodologies, and comprehensive device and port control with a customer base of over 3,000 organizations

Launched SafeMobile Cyber Security Pilot with Two Commercial Banks & a large European telecom

mPay Closed acquisition of PowaPOS Business (April 2016)

Accretive acquisition of unique hardware solution to accelerate adoption of mobile point-of-sale technologies

$1.1M in orders in first month from Latin America customers

Signed multiple MoU’s for Cooperation to Build Mobile Money Solution

RECENT DEVELOPMENTS


United Kingdom (Passport)

Hong Kong (Passport)

Iceland (ePassport & e-ID)

Israel (Drivers license)

Ecuador (e-ID & Population Registry)

China (Re-entry permit)

Tanzania (Electronic Drivers License)

Ethiopia (Passport, Visa & ID)

Panama (Biometric Visa & Border Control)

Poland (ePassport)

SuperCom provides governments with a comprehensive ,end-to-end solution for the deployment & management of secure government identity programs

Multiple Secure Government Identity Programs

e-ID / MAGNA Platform

National e-IDs

Driver & Vehicle

Licenses

E-Gov‘t Services

Population Registries &

CensusesBiometric

Border Control &

Immigration

Voter Registration

and Elections

Healthcare & Pension

Mgmt.

Biometric Passports and Visas

Deployed globally across 20+ countries, including:

e-ID SOLUTIONS: WHAT WE DO

http://www.registrocivil.gob.ec/index.php?option=com_content&view=article&id=213:animacion-cedula&catid=76&Itemid=269


High levels of fraud and counterfeiting

National Security Breaches

Disparate government data sets

Inefficient manual processes driving overlapping costs

Establishes a reliable, secure national registry database and infrastructure

Provides solutions streamlining production of eDocuments integrated with biometrics capabilities

Implements e-Identification systems which minimize identity fraud and provide platforms to stimulate economic growth

Delivers improved revenue collection, accountability and cost savings to governments

“… capturing the full potential of government digitization could free up to $1 trillion annually in economic value worldwide, through improved cost and operational performance.”

— McKinsey & Company

Market Issues SuperCom’s Solution

Source: Wall Street industry research reports

e-ID MARKET OPPORTUNITY


10%

34%

2012 2017

Global Government eDocument Penetration (c)

(a) Source: Biometrics Research Group, 2013; Acuity, 2014 (b) Source: Company estimates (c) Source: Wall Street industry research reports

e-ID MARKET OPPORTUNITY (cont.)

~$20B+ e-ID Market (a)

$1.5 B $9.7B

$10.2B

$0.3B

~$20.2B

National e-ID ePassports Automated Border Control

• The e-ID market presents massive opportunity, approximately over $20B in 2015, including National e-ID, e-Passport and Automated Border Control markets.

• Government eDocument penetration is projected to increase ~3.5x by 2017, driven by security precautions post 9/11

• As SuperCom continues to bid on larger tenders, the company projects its ~$2B(b) TAM to grow into the ~$20B+ general e-ID market

• SuperCom’s e-ID division has been executing its strategy of capturing global market share, and is well-positioned to capitalize on the massive global e-ID growth opportunity


Capture, verify and store information, demographics & biometrics in a secure gov’t registry

Authorities use ID credentials based on SuperCom’s authentication tools & biometric data

SuperCom deploys a comprehensive end-to-end solution that government agencies operate to enroll, issue and authorize secure citizen identification

Issue

Authorize

Enroll

1 2

3

Gov‘t agency issues e-ID card tied to secure registry database

END-TO-END e-ID SOLUTIONS


Initiative & RFP

(6-24 months)

Deployment & Implementation

(6-24 months)

Maintenance & Support

(5-25 years)

e-ID: TYPICAL DEPLOYMENT

Maintenance & Support

• Average customer in this stage has been with SuperCom for over 10 years

• Recurring revenues, on average 20-30% of initial deployment contract size, are recognized each year from mix of:

• Consumables (per card)

• Maintenance & Support

• Software Licenses

• Steady-state revenues are high margin and mostly recurring

Deployment & Implementation

• System design & code development based on customers' requirements

• Ship equipment & begin test implementation prior to broad roll out

• Recognize revenues based on % of completion method — typically majority (50+%) of contract revenues are recognized in first 9 months deployment

• Install equipment & train staff

• Recurring revenues begin as cards/consumables are printed & sold and sub systems begin to operate

Initiative & RFP

• Gather information from local reps

• Identify best-in-breed suppliers based on customer requirements

• Submit a customized proposal and get selected as the winner

• Negotiate pricing and terms; set deployment & implementation timeline

• Sign contract and begin project deployment & implementation


Growing Base of Steady-State Revenues

20-30% of revenue from deployment contract size tends to become annual recurring revenue after initial deployment phase is completed

Steady-state revenues from existing e-ID customers consists of: • Maintenance (recurring)

- Post-implementation customer service includes maintenance and support services under separate customized agreements

• Consumables (recurring) - ID cards, laminates, booklets for printing based on customer

usage. Related sales can vary year-to-year but not replaceable through another vendor

• Software and Hardware Upgrades - Software upgrades can include additional modules using same

system (i.e. addition of Drivers License, Visa, Passport etc.)

- Hardware upgrades can include new printers, stations, readers or related solutions for new office branch or increased capacity

Steady-state Revenues Breakdown by Year ($ in millions)

$12

$15

$0

$5

$10

$15

$20

$25

2014 2015 2016 E

YoY Growth Expected

(a) We are not providing guidance on 2016E steady-state revenues except to state we expect year-on-year growth

(a)


Customer: Un-named European Country

Situation Analysis • Identification was all based on paper forms with no electronic data

• Deployment of end-to-end solution including of training, maintenance and raw materials

for all national documents

Modules Deployed • National ID , driver’s license , passport , e-passport, vehicle licenses, and border control

Timeline

Key Facts • Customer of SuperCom for 20 years

• Contract renewed multiple times

• Continuous recurring revenues with high margins

• Leveraging of one platform to deploy multiple modules over the years

1996

Project deployment

1997 2009 Present

Maintenance and support began

1997 – 2009: Multiple additional modules deployed

First e-passport issued A customer in the

maintenance and support stage

e-ID CASE STUDY: EUROPEAN COUNTRY


• Focused on underserved, rapidly growing customer base as well as mature markets

• Highly differentiated offering, optimized through proprietary chip design & software

M2M/IoT: WHAT WE DO

Leveraging our proprietary e-ID technology platform to grow into adjacent M2M/IoT applications

Security & tracking of prisoners and home detainees

Patient & equipment management

ELECTRONIC MONITORING HEALTHCARE & HOMECARE ASSET TRACKING


• Prison overcrowding is a major global issue

• ROI supports electronic monitoring

‒ Inmate cost ~$30 - $60K / year

‒ Electronic monitoring ~$1 - $3K / year

‒ ~85%+ cost savings per year

• Monitored home detention provides a surveillance solution for juvenile, pre-trial & low risk offenders

• SuperCom solution uses proprietary technology to pair RFID monitoring device with mobile phone

• SuperCom solution architecture offers battery life of multiple years vs. incumbent market solutions of 2 days – a significant competitive advantage

M2M/IoT: ELECTRONIC MONITORING

Highly energy efficient with extended battery life

Ultra long range, active RFID technology

(a) Source: Incucomm, 2011

Global Market Size for Electronic Marketing (a)

Current M2M Products

Electronic Offender Monitoring


LCA Overview

Established electronic monitoring (EM) & services company with strong recurring revenues from U.S. government customers to bolster SuperCom's market share in Public Safety sector

• 25 years experience tracking over 15,000 offenders

• Proven, industry-leading solutions

• Recurring revenue due to strong, referenceable base of long-term government customers in the U.S.

• Generated $9+ million in 2015 revenues

• Achieved 20%+ CAGR in annual revenues and profitability over past three years

• Significant opportunities to expand past single-digit operating margins, including pairing LCA services with PureSecurity, SuperCom’s proprietary EM solution

Leaders in Community Alternatives (LCA) Overview

Transaction Overview

LCA Market Overview

• ~600k correctional population in CA, with only ~3% EM penetration (a)

• Policy changes dramatically increasing need for alternatives to incarceration

• Proven model ready and able to scale nationwide

• Immediately accretive acquisition

• Acquired for 0.33x 2015E revenues (less earnouts)

• Enables SuperCom to leverage LCA’s customer references and capabilities to expand EM division across the U.S.

• Can cross-sell our e-ID and Cyber Security products to EM customers

(a) Source: Federal Bureau of Justice Statistics


Customer: Un-named California county

Situation Analysis • Long-term provider of Juvenile Day Reporting Services with multiple renewed contracts

• Expanded relationship to include multiple other services

• Positive experience with customer likely to lead to future expansion

Services Deployed

• Juvenile Day Reporting, Employment Services, Electronic Monitoring

Timeline

Key Facts • Customer of LCA for 18 years

• Contract renewed multiple times, approximately every three years

• Growing revenues with increasing penetration

• Leveraging relationship to deploy multiple additional services over the years, with potential for further penetration

• Key reference for LCA for other bids

1998

Juvenile Day Reporting Established

2014 2015 Present

1998 – 2014: Expanded to two sites

Employment Services awarded to LCA over

incumbent vendors; now grown to three sites

Fully-integrated customer with opportunity to

provide further services

LCA CASE STUDY: CALIFORNIA COUNTY

Electronic Monitoring contract awarded to LCA


Advanced Cyber Security services and capabilities focused on protecting strategic assets for governments and large enterprises

CyberSecurity: WHAT WE DO

• Cyber Security is a fast-growing market where SuperCom has advantages due to synergistic technologies and shared customer base to our eID and M2M divisions

• Acquired Prevision in Q4 2015, a company with a strong

presence in the market and a broad range of competitive and well-known Cyber Security services

• Acquired Safend in Q1 2016, an international provider of cutting-edge endpoint data protection guarding against corporate data loss and encryption

Recent acquisitions provide platform of long-term relationships and deep expertise we can leverage in conjunction with our other product offerings with both

governmental customer and large customer base of enterprises around the globe


Safend Overview

Established Encryption & Data Protection Company to broaden SuperCom Cyber Security Offering

• Established global data security company with a broad range of competitive & well-known encryption & data protection solutions

• 50% of the billings in 2014 and 2015 were for maintenance, and support a strong recurring base

• Founded in 2003, Safend has over 3,000 customers in the U.S., Europe, and Asia

• 3+ million software license seats deployed by multinational enterprises, government agencies and small to mid-size companies around the globe

Safend Overview

Transaction / Financial Overview

Safend Market Overview

• Acquired for <0.3x average annual revenue (a) • Enables SuperCom to offer complementary security

products & solutions to Safend’s customer base • Can leverage Safend expertise & products to

enhance security on other existing product platforms in the IoT, secure payments, and e-Gov spaces

(a) Calculated as: Purchase price of up to $1.5 mm of working capital provided by SuperCom / average annual revenues of $5 million (Note: majority of these sales were generated through Wave Systems Corp. and its worldwide distribution network, but going forward this is no longer available so new sales will be generated through SuperCom’s global distribution channels. As a result, the level of annual revenues from Safend's products in the near future is uncertain, but expected to grow and exceed historical levels after proper absorption into the new sales channels)

• Fast-growing market where SuperCom has advantages due to synergistic technologies and shared customer base to our other divisions

• Sophisticated software systems & services result in premium prices & high margins


• Proprietary mobile payments platform allows mobile payment ubiquity supporting any phone and any point-of-sale

• Leverages SuperCom’s existing customer network to provide complete end-to-end mobile banking and payment solutions

Over 2.5 billion people globally do not have a bank account, although 1 billion of them have access to a mobile phone (a)

Super-Payment Suite SECURE PAYMENTS ANYWHERE WITH ANY DEVICE

Secure Mobile Payments: WHAT WE DO

(a) Source: 2014 State of the Industry – Mobile Financial Services for the Unbanked


• Market-leading POS platform purpose-built to meet market demand for mobile and tablet-based payments

• Acquired in April 2016 & generated $1.1M in orders in 1st month since acquisition

• Strategic entry-point into global POS market with potential deployments in 20+ countries

• Fully-integrated, robust design incorporates common retail peripherals into a compact & cost-effective footprint, including:

• Built-in thermal printer

• 2D barcode/QR code scanner

• Swiveling design

• Cash Drawer

• Management team has combined 150+ years of POS and payment experience

PowaPOS Overview

PowaPOS Overview

PowaPOS is a hardware solution to accelerate adoption of mobile point-of-sale (POS) technologies


Strategically acquire or build complementary & interconnected products & solutions to provide more integrated offering to customers

Deploy M2M/IoT, cyber security and mobile payment solutions in target verticals

Offer new e-ID services to existing customers

Further penetrate e-ID government customers 1

2

3

4

SuperCom’s Growth Strategy

Financial Overview


$0.1

$2.0 $1.6

$11.0

$6.9

$0.0

$5.0

$10.0

$15.0

$20.0

2011 2012 2013 2014 2015

$7.9 $8.9

$8.8

$29.7 $28.3

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

2011 2012 2013 2014 2015

Revenue EBITDA (a)

FINANCIAL OVERVIEW: Annual

2014 Revenue Growth Includes 50%+ Organic Growth

($US Millions) ($US Millions)

(a) EBITDA is a non-GAAP financial measure generally defined as earnings before interest, taxes, depreciation and amortization and other unrelated expenses. Refer to page 29 of presentation


Non-GAAP Gross Margins (a)

Non-GAAP Operating Profit Margins (a)

58.3%

81.9% 78.5% 76.6% 65.5%

0%

100%

2011 2012 2013 2014 2015

0.7%

22.4% 21.2%

36.2% 22.7%

0%

100%

2011 2012 2013 2014 2015

(a) Reflects non-GAAP margins; refer to page 28 of presentation

FINANCIAL OVERVIEW: Margin Profile


Select Balance Sheet Data

12/31/2015 12/31/2014

Current Ratio 4.7:1 2.2:1

Working capital (b) $37,844 $15,708

As of 12/31/2015

Cash & restricted cash (a) $25,520

Total current assets $48,082 Current liabilities $10,238

Long-term assets $17,860 Long-term liabilities $1,272

PP&E $888 Debt $0

Total assets $65,942 Total liabilities $11,510

Shareholders’ Equity $54,432

As of 12/31/2014

Cash & restricted cash (a) $9,984

Total current assets $28,374 Current liabilities $12,666

Long-term assets $14,500 Long-term liabilities $1,902

PP&E $616 Debt $0

Total assets $42,874 Total liabilities $14,568

Shareholders’ Equity $28,306

($US thousands)

Source: Company filings (a) Includes cash and restricted bank deposits (b) Calculated as Current Assets – Current Liabilities

($US thousands)


Reconciliations: Gross Profit & EBIT

Non-GAAP Gross Profit Reconciliation

Year ended December 31, 2015 2014

GAAP Gross Profit $17,894 $22,402

Amortization of Software & IP $354 $354

Stock-based compensation expenses $309 $0

Non-GAAP Gross Profit $18,557 $22,756

% of Revenue 65.5% 76.6%

($US thousands)

Source: Company press release dated May 18, 2016 “SuperCom Announces Availability of its Annual Report on Form 20-F”; section “Reconciliation Table of GAAP to Non-GAAP figures and EBITDA to Net income”

Non-GAAP Operating Income Reconciliation


GAAP Operating Income $1,493 $8,009

Expenses related to doubtful debts $1,576 $1,225

Amortization of Software & IP $354 $354

Stock-based compensation expenses $1,528 $0

Amortization of Customer Contracts $917 $1,158

Expense-related transaction DD $598 $0

Non-GAAP Operating Income $6,446 $10,746

% of Revenue 22.7% 36.2%

($US thousands)


Reconciliations: EBITDA

($US thousands)

Source: Company press release dated May 18, 2016 “SuperCom Announces Availability of its Annual Report on Form 20-F;” section “Reconciliation Table of GAAP to Non-GAAP figures and EBITDA to Net income”

(a) EBITDA is a non-GAAP financial measure generally defined as earnings before interest, taxes, depreciation and amortization and other unrelated expenses

Non-GAAP EBITDA (a) Reconciliation


GAAP Net Income $1,019 $6,201

Income tax expense $197 $1,675

Financial expenses, net $277 $133

Expenses related to doubtful debts $1,576 $1,225

Depreciation & Amortization $3,201 $1,788

Expense-related transaction DD $598 $0

EBITDA (a) $6,868 $11,022

% of Revenue 24.2% 37.1%


•Former CTO of OTI-Smart ID •Top expert in Smart card and e-ID technology

Igor Merling CTO

OTHER KEY TEAM MEMBERS

•Former head of Smart ID Division at OTI •Expert in e-ID & e-Gov solutions

Eli Basson VP, eID

Judy Robert Director Business

Development, Lat. Am.

•15 years of sales and marketing for technology companies In Lat. Am. and Europe

Experienced Management Team

Billy Gurevitch Chief Legal

Officer

•Over 13 years experience in legal consulting for global technology corporations

MANAGEMENT Arie Trabelsi

Chief Executive Officer

•30 years experience in Wireless, Internet and Communication Industries

•Led multiple synergistic acquisitions, corporate restructurings and IPOs as CEO

•Led SuperCom’s turnaround to profitability & growth

•BSc and MSc in Computer Engineering

Shahar Marom

Acting Chief Financial Officer

•Certified Public Accountant in Israel

•Previously controller of SuperCom and before that of 012 Smile Telecom Ltd

•B.A. in Economics and Accounting from the University of Tel-Aviv

Ordan Trabelsi

President, Americas •Led synergistic acquisitions, ventures,

corporate restructurings and public offerings

•Former Founder & 6-year CEO of Klikot.com

•Security R&D leader – Israeli intelligence

•MBA (Columbia University) & BSc. Computer Engineering (Technion), graduated at age 19

Ziv Koren VP Business Development,

Africa

•15+ years of experience in global business development, including in emerging countries


Strategically positioned in massive and underpenetrated high-growth end markets (e-ID, M2M/electronic monitoring, cyber security, mobile payments)

+27-year proven track record in eID establishes a secure market position in an industry with high barriers to entry

Strong, growing recurring revenue base from stable long-term government contracts provides baseline of profitability

Mature pipeline of large eID government tenders supports long-term growth opportunity

Complementary acquisitions expands solutions suite of interrelated offering providing incremental cross-selling opportunity

Strong referenceable customer base and global network of established local partners

Investment Highlights

Thank you