Supercom Ltd (SPCB) 2025 Q4 法說會逐字稿

Ladies and gentlemen, good morning, and welcome to SuperCom's fourth quarter and year-end 2025 financial results and corporate update conference call. (Operator Instructions) Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes.

Joining me from SuperCom's leadership team is Mr. Ordan Trabelsi, SuperCom's President and Chief Executive Officer. I'd like to remind you that during this call, SuperCom's management may be making forward-looking statements, including statements that address SuperCom's expectations for future performance or operational results. Forward-looking statements involve risks, uncertainties and other factors that may cause SuperCom's actual results to differ materially from those statements.

For more information about these risks, uncertainties and factors, please refer to the risk factors described in SuperCom's most recently filed periodic reports on Form 20-F and Form 6-K and SuperCom's press release that accompanies this call, particularly the cautionary statements in it.

Today's conference call includes EBITDA, a non-GAAP financial measure that SuperCom believes can be useful in evaluating its performance. You should consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliation of this non-GAAP financial measure to net loss, a comparable GAAP financial measure, please see the reconciliation table located in SuperCom's earnings press release that accompanies this call.

Reconciliations for other non-GAAP financial measures and comparable GAAP financial measures are available there as well. The content of this call contains time-sensitive information that is accurate only as of today, April 28, 2026. Except required by law, SuperCom disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

It is now my pleasure to turn the floor over to SuperCom's President and Chief Executive Officer, Mr. Ordan Trabelsi. Sir, the floor is yours.

Thank you, operator, and good morning, everyone. Thank you for joining us today. Earlier this morning, we issued a press release with our financial results for the fourth quarter and full fiscal year of 2025, along with our 2025 annual report filed on Form 20-F.

You can find copies in the Investor Relations section of our website at supercom.com. Before getting into our results, I want to provide a brief overview for those new to SuperCom and then walk through what was a record year across the business.

At SuperCom, we provide electronic monitoring and public safety technology for local and national governments around the world. For over three decades, we have partnered with national governments across the globe to deliver secure, scalable and innovative platforms.

In recent years, our focus has shifted sharply towards criminal justice, where we leverage our proprietary PureSecurity product suite for offender electronic monitoring, including domestic violence prevention technology, lightweight ankle braces with extraordinary long battery life and other connected monitoring embedded devices.

Our strategy rests on three core pillars. Firstly, our innovative technology. We have invested over $45 million in our electronic monitoring platforms and our proprietary solutions consistently outperform in competitive tenders.

In Europe, we achieved a win rate above 65% in competitive tenders. And in our recent US expansion, we're experiencing very high win rates as well. Our platform supports GPS tracking, house arrest, domestic violence prevention, alcohol monitoring and rehabilitation services, among other programs. We issued 119 patents, and they help differentiate our technology from global competitors.

Secondly, on a global presence, our strategic focus is electronic market projected to reach $2.3 billion by 2028. The US and Europe represent the core markets we're actively pursuing. We currently hold active contracts across three continents. And as a result, over 85 government project wins to deploy our proprietary technology.

And thirdly, our outstanding service. Our reputation as a trusted partner grows with each new deployment. Some of our government customers have been acquired by displacing a former incumbent who was with them for more than 20 years, often starting with a single program and expanding into multiple solutions over time.

In December, on top of other new sales execs with industry experience that we brought on to the team, we welcomed Eran Hadad to lead our international sales partnership development. Eran brings direct industry competitive experience from 3M, NICE, and Comverse with a track record of building long-term government sales partnerships that drive sustained revenue growth and market expansion.

2025 was a defining year we broke many new records for top line and profitability. Over the past few years, leading to this, our revenue has grown at a compounded annual rate of approximately 23% over the last three years to four years, and our annual EBITDA reached $9.4 million in 2025, representing approximately 34% EBITDA margin.

In 2025, we continued that progress, delivering record full year results, record revenues, record EBITDA, record net income. We expanded gross margins and a series of landmark contract wins across Europe and the US.

Many of these new contracts led to follow-on contracts with the same customers, demonstrating SuperCom's strength as an incumbent and the durability of our customer relationships. This record year for new contracts helped SuperCom diversify and grow revenue despite geopolitical uncertainty in some operating regions.

As our contract base continues to diversify, we believe we are positioned for continued and more meaningful expansion into more regions and larger contracts. Staring with the US, US growth is one of the central developments in 2025 and early 2026.

Since mid-2024 when we began our US expansion rapidly, we have signed more than 35 new electronic monitoring contracts, entered 16 new states and built 17 new service provider partnerships. Rather than walk through each state individually, I want to organize our US progress around five themes and capture the structure of this expansion.

Firstly, new state entry. We entered 60 new states, as we said, since mid-2024, including Alabama, Arizona, Louisiana, Maryland, Missouri, Nebraska, New York, North Carolina, Ohio, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wisconsin. In many of these states, we replaced discumbent vendors. Texas a notable late 2025 win.

Our first contract was signed in December 2025, with a second one following within weeks in January 2026, both juvenile probation agency and both displaced incumbents. Louisiana secured in February 2026 marked our 16 new state and 17 service provider partnership.

Secondly, we're looking at density in existing states. Beyond entering new states, we have been deepening our presence in states we've already entered. Wisconsin has seen three county level deployments since September 2025 for a Midwest regional service partnership using PureOne and PureShield technologies. Alabama added two new contracts in November 2025 on top of an earlier direct agency contract. Kentucky added a fourth contract in March 2026 through a direct county agency.

North Carolina followed an initial December 2025 PureOne deployment with a third North Carolina contract in January 2026. In addition to the statewide procurement vehicle we won earlier in 2025 from North Carolina Share Association.

Thirdly, incumbent displacement. Many of these wins have come by replacing established incumbent providers, validating the competitive strength of our PureSecurity platform. Our Texas, Kentucky, Alabama and Missouri wins, among many others, displace incumbents.

We have built 17 new service provider partnerships since mid-2024. These partnerships help us reach local agencies and county level customers more efficiently together with local providers who have known and worked with these customers for many years.

And these providers, it's important to note, are experts in the electronic monitoring field. They've tried most of the technology, if not all, and then choosing to put on our technology and to displace their incumbents is another strong validation to the capabilities and advantages that we provide to the industry. In the US, we are moving up the customer ladder.

We started the US expansion of resellers in very small county tier. Throughout 2025, we operate increasingly at the county level, slowly growing to larger and larger counties and larger programs. A nice breakthrough moment came in November 2025, when we secured our first state level department of corrections contract in the United States, awarded under Arizona statewide Behavioral Health services.

The DOC and state agency tier represents a step-up from the regional and county level wins have built our US presence. Implementation began in January 2026, and we expect this contract to serve as a strategic reference point for state-level pursuits across the country.

Beyond these five themes, our wholly owned subsidiary, LCA, was awarded reentry services contract in Northern California valued up to $2.5 million for over five years. Since the acquisition of LCA, our California presence has accumulated more than $35 million in total wins. The framework we have described to you over the past year is unfolding as expected.

On the international side, we continue to deliver expansion of existing programs and entry into new geographies. In January 2026, we secured a national EM contract in a Western European country, marking the 10 nation globally to adopt our domestic violence monitoring solution, proprietary solution that we have introduced to the market to help towards our goal to assist in eradicating domestic violence.

The contract is structured as a multiyear framework with a term of at least three years and began deployment in Q1 2026. The partner has indicated plans to transition its entire EM program portfolio to our proprietary solutions and technology.

In March 2026, we were awarded the Swedish Prison and Probation Service National contract valued at a whopping $17 million. This represents 6x the scale of our original 2019 deployments with the same customer, and they've shared their expectation to grow the program significantly. The work came through a long -- year-long competitive evaluation involving five companies, including a 25-year former incumbent.

And once it clears the standstill period, which it has, so it's becoming one of the largest deployments in our company's modern history. Our European contract history shows how the scale of our program has increased over time. We started in Lithuania and Latvia with projects valued at only a few hundred thousand dollars.

We grew to Denmark with 1,000 units, Finland, $3.6 million, then our first contract in Sweden back in 2018 and 2019 valued at $7 million only. We won Romania of over $33 million in 2022, a program with 15,000 offenders, which serves as a great reference for us for additional large programs. And now we achieved our fourth award in Sweden, a new $17 million contract with potential for substantial growth beyond that as we add additional programs.

Several large EU contracts are up for award in the upcoming 24 months, and we're actively pursuing them. Our deployment with Israel Prison Service continues to advance after displacing a 20-year incumbent here as well.

The national EM contract covers all EM programs, including home detention, GPS tracking, among other programs. One of the structural change goals for our business is the increased diversification of our revenue base as we grow to more and more customers to more geographies around the world.

This goal become more attainable. In 2025, our largest customer represented approximately 25% of revenue. Despite this decline in concentration from our largest customer of recent years, total revenue still grew.

As new contracts and growth from other customers offset the prior year's contribution from and add incremental growth on top underlying growth, excluding the impact of this customer decline is approximately 40% year-over-year, and I'll explain that again shortly in the financials. This is diversification we are working toward. It is an outcome of our US expansion and broader European wins. We expect to see further contract activations and continued diversification through coming years.

The new customers and projects in the USA during 2025 were still at early stages, but we expect them to grow in size and lead to more contracts of various sizes through strong networking effects and referrals as our momentum continues.

Turning briefly to our capital structure and corporate actions in 2025 and 2026. The company reduced its long-term debt by approximately 45% since the start of 2024, mainly through premium price share issuances, including a $4.3 million reduction at $43 a share, enhancing its ability to capitalize on growth opportunities. Amended debt terms also improved the company's debt annual interest rates from double digits to a blended annual rate below 6%.

In January 2025, we completed a $6 million registered offering at common only registered offering at $11 per share. Net proceeds were used for working capital, R&D and potential acquisitions as part of our general strategy.

Over the course of 2025, we also executed a meaningful restructuring of our debt as described, including the conversions into shares at premiums. Shareholders' equity has grown substantially to $43.5 million at the end of 2025 from $11.7 million at the end of 2024, reflecting both improved profitability and strengthened balance sheet.

Looking to the rest of our financials. For the full year ended December 31, 2025. Revenue of $27.9 million compared to $27.6 million in fiscal 2024, demonstrating stability and modest growth despite geopolitical headwinds in certain operating regions.

It's interesting to note, while revenue has only increased 1% year-over-year, this period reflects a lower contribution from our largest customer. Excluding this impact, the underlying revenue growth was approximately 40% year-over-year.

So essentially, the decline from that customer was made up for and more by other customers that are growing and new ones that joined. Gross margin expanded to 55% from 48.4% in 2024, reflecting the continued shift toward higher-margin recurring revenue contracts and the impact of technology investments on cost reductions.

EBITDA in 2025 reached $9.4 million compared to $6.3 million in 2024, a 49% year-over-year improvement and a record number for us. Other expenses of $2.7 million for the full year compared to $2 million in 2024, an increase of approximately 34%.

This is primarily attributable to provision for doubtful accounts, mainly related to long overdue receivables from African government customers from our legacy business of e-government, which amounted to roughly $1.8 million in bad debt expense in 2025 versus $1.2 million in 2024.

Doubtful accounts related to our current main markets in the United States and Europe remain extremely low as the payments and collections are doing very well in these markets. GAAP net income for the year was $3.7 million, a record for us compared to $661,000 in the prior year.

Non-GAAP net income was $11.2 million, and non-GAAP EPS was $2.47, which also a nice achievement that shows our improvements in our profitability. To put these results in context, when we began executing our current strategy in 2021, revenues were $12.3 million, and the company carried a GAAP net loss of approximately $6.7 million.

Over the four years since we have more than doubled revenues to record levels, achieved our strongest GAAP profitability since -- to lead to record net income, record non-GAAP net income and record EBITDA levels and built a contract base spanning three continents with a growing momentum in many different regions.

For the first quarter, the financial results, fourth quarter ended December 31, 2025, our revenue was $7.5 million compared to $6.3 million in Q4 2024, representing 18% year-over-year growth. Gross profit of $2.9 million, representing a gross margin of 39%.

And this reflects some of the volatility we have in gross margin between the quarters. As we've described many times in the past, the mix of revenues depends on many different contracts that are consolidated for the quarterly results, and there could be fluctuations between quarters.

It's better to look at these things on an annual basis. And GAAP net loss of $2.3 million compared to a net loss of $1.9 million over $4 million of this was impacted by onetime expenses, including bad debt expense of $1.9 million related to legacy eGov operations in Africa and approximately $1 million expense related to the change of fair value in warrant derivatives. In this quarter, EBITDA was $2.2 million compared to $1.6 million in the previous year period, and non-GAAP EPS was $0.36.

As we look ahead to 2026, we're encouraged by the momentum we are carrying into the new year. We've already secured over six new North American contracts in the first four months of 2026. Our $17 million national contract in Sweden, the new one that we just described for March is expected to begin contributing to revenue as deployments progress.

And combined with the continued ramp of our existing North American and European contracts under recurring revenue daily unit models, we believe we are well positioned for continued revenue growth and expansion in coming years. Our growth strategy across 2026 rests on five drivers.

Win versus win large-scale national contracts in Europe and our pipeline in Europe remains active. The $17 million in Sweden is now secured, and that's just the first stage. We believe there's substantial upside from adding new programs into this contract.

Our several large EU contracts are up for award over the next 24 months, and our 65% win rate gives us confidence in ability to convert more opportunities into projects. We're expanding our US footprint by entering through direct bids and partnerships. So we have these 17 service provider partnerships. They help bring us into local new opportunities as well as direct bids with county agencies of various sizes, and we're also looking at the state level.

The Arizona DOC win validates that our platform competes at the state and federal tier. We have a clear playbook for moving from resellers to small counties to large county projects to state and federal projects over time.

We're also looking at acquisitions, some inorganic growth to complement. A lot of these service providers have a great presence and have great relationships with a lot of these counties after we were to acquire one of these, we can replace their equipment costs by other vendor equipment with our equipment that drives a very strong growth to their operating profit and also gives us a good presence for additional top line growth.

The LCA acquisition is one example of the strategy, where we continue to actively evaluate acquisition opportunities that fit more profiles. We're enhancing our practice sales efforts and streamline cycles. As more contracts move past deployment, our recurring revenue base compounds.

Our sales organization is positioned to convert pipeline into revenue, and we have new industry experts, salespeople from the industry that are helping us get more demos out there and more projects to close. And lastly, we continue to innovate with every new project, we add additional features, additional capabilities that we take with us to other projects.

Our domestic violence solutions are a clear example of how product innovation creates entirely new above-market revenue streams. We expect to continue adding capabilities to support additional program types and customer needs. Underlining all the structural market opportunity, the global electronic monitor is projected to reach $2.3 billion by 2028.

The prison systems in the United States and across developed world face high operating costs and meaningful capacity constraints. And electronic monitoring offers a substantial cost advantage relative to incarceration while supporting public safety objectives such as reducing incarceration. As governments seek smarter, more cost-effective alternatives, we believe SuperCom is well positioned to compete. We will provide further updates on our progress throughout the year.

In closing, 2025 was a defining year for SuperCom, record full year results, a substantially strengthened balance sheet and most aggressive global expansion in our company's modern history. We delivered one of our largest electronic monitoring contract wins since the transformation started in 2021, our first state-level Department of Corrections contract in the United States and entered new US states at a faster pace than any prior moment.

We entered 2026 with more contracts, a broader US footprint, deeper international activity and a stronger foundation than any prior point in our modern history. The opportunity in front of us is meaningful, and our team has demonstrated the ability to execute against it. We are grateful for the continued trust of our government partners, our employees and our shareholders.

And with that, I'd like to open the call to questions. Operator, please go ahead.

(Operator Instructions)

Matthew Galinko, Maxim Group.

Thanks for taking my questions. Congrats on the great results. Given the trend we've seen towards sort of against euro skeptic politicians in Europe, I'm curious how that influences the big picture for your opportunities in Europe. Is that helpful for getting more countries into the EM pipeline? I'm just curious if you have any big picture thoughts on that.

Yes. Matt, you're just a little muffled. Did you say the trend we've seen -- and I didn't hear you broke out, the trend we're seeing in Europe around --

Fewer euro or euro skeptic politicians?

We're seeing -- I can't share specifics, but we're seeing a lot of activity in Europe. And there's -- as we did share for Sweden, they believe that there's going to be a lot of potential growth in crime because of various political and other events that have happened in recent years.

And they expect their programs to grow (inaudible) in the coming years and to add additional programs. We started with a $17 million win, and we can expect something on top of that. But the general trend that you're describing shouldn't impact us, except for what I described here.

Okay. And then I guess, secondly, as far as state-level programs, go to the US. What are your opportunities? What does that look like in 2026? Do you think that's sustainable and then you'll add to the single that you signed? Or is it still more scattered as far as being able to move up market in the US?

In the US, just like we did in Europe, we started with very small counties, and we already have lots of contracts over 35. And now actually, we're growing in size. And we have the smaller ones and the larger and medium and we had the first DOC contract in Arizona, and we're bidding on others on the state level and also some -- there's some large county opportunities like LA County, Cook County and others. These are tens of millions of dollars in programs. So there's great opportunities in the US, and we're bidding kind of say in a scattered way, but in areas that we think are strategic with low-hanging fruit.

Great. And then last question would just be on the debt. Obviously, you've done a great job at bringing that down. Anything you could say about plans to continue managing that in 2026? Or you'll just be opportunistic when you can?

I think we have a good relationship with our debt holders, and we're able to pay down meaningful parts of the debt. And we have right now in the latest amendment until end of 2028, to pay down the debt without any -- all the interest is picked. That being said, we hope to opportunistically pay down the debt and lower the balance over time, and we work with them to do that in various specific periods of time where it makes sense.

Thank you.

Greg Mesniaeff, Kingswood Capital.

Question on your recent wins in the US Ordan, how much does price negotiation enter into the equation? I mean, is that really what drives the displacement of legacy vendors? Or is it a combination of price -- aggressive pricing and feature richness of the product?

Hey, Greg, great question. In most of the wins that we had in the US, we displaced an incumbent vendor, as you might be aware. And we typically try to come in with similar prices. We offer newer, more innovative technology with better capabilities, much longer battery life, lighter weight, more accurate tracking and try to match prices not to come in aggressively, and it's been very successful in that fashion.

And would you say that, that's been a template that you can then bring to other regions of the world as well? I realize in Europe --

Template in terms of -- we come in with a similar pricing, and we offer a better solution at that price, better accuracy, better features, more innovation in Europe.

So it sounds like competitive pricing is sort of a starter, but what really clinches the deal at the end of the day is the feature richness.

We don't come in with special pricing. The pricing in the industry, we can see what the prices are, especially if we're working with a reseller, he tells us what he's paying, and we can give them at a similar price, a much better solution, more innovative and better technology. We don't need to come in with a lower price to win the projects because of our technology.

In Europe as well, we had the processes in Europe are national government processes that the valuation of technology is very lengthy and stringent and they look into the capabilities and they like what we have to offer so much, so they're able to displace their incumbents for 15 years, 20 years, 25 years. Price is scored, of course, and you don't want to come in with the highest price of the competition. But if you have a similar price and you have much better technology, that's enough to win. That's what I'm focused on.

Okay. Thank you. That's all I have.

Thank you.

Brendan McCarthy, Sidoti & Company.

Good morning, thanks for taking my questions. Congrats on the strong results. Just wanted to look at the pipeline across Europe and the US, which pipeline looks relatively more attractive heading into 2026?

So in Europe, we're later stage. We started the projects, as I noted, with $100,000 in size, and we grew to several million and $7 million and $17 million and over $33 million. We're in the stage right now in Europe that we can bid on practically any size. We have great references there. And so naturally, the pipeline is larger in Europe. That being said, the opportunity in the US is 6x the size of Europe. The margins are much higher. Everything is recurring revenue per unit per day. Everything is centralized on the cloud, everything is in English.

So it's -- and it's much more diversified. So we're, of course, very interested in the US market, and we're expanding into it as well. And we think over time, that will be a larger part of our business. But at this point, since we have a lot of experience in Europe and we're very well entrenched in Europe, the pipeline in Europe is larger. In terms of value, at least, the number of opportunities in the US are more than Europe, but the total value in Europe is still larger.

Understood. And then from a competitive standpoint, does one market tend to carry like a more favorable competitive bidding process? I guess I'm curious as to how many competitive bidders there are during each procurement process?

It's interesting. This market is very highly barriered. We see 10 players around the world, whether a max of the 10 players in Europe or in the US And we've had a very successful record in winning these RFPs in Europe. And in the US, we're doing very well as well.

Some of these are through direct contracts with service providers and some of them are for RFP processes. And we're able to score highly on these bids, whether they're very, very technical with long evaluations as we've seen in Europe or if they're shorter.

And what I mean shorter is sometimes a service provider will ask you to send the technology, they'll demo it, they'll try it out. And very quickly, they could see that it's much different and hopefully much better than what they've tried to date, and that's how we can bring on these contracts relatively fast in the US.

(Operator Instructions)

At this time, as we have no further questions in queue, I'd like to hand it back to management for any closing remarks.

I want to thank you all for participating in today's call and for your interest in SuperCom. We look forward to sharing our progress on our next conference call, filings and press releases. Thank you very much, and have a good day.

Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.