SuperCom Ltd. Aktie

Ladies and gentlemen, good morning, and welcome to SuperCom's First Quarter 2026 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 Ordan Trabelsi, SuperCom's President and Chief Executive Officer.

I'd like to remind you that during this call, SuperCom 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 and non-GAAP financial measures that SuperCom believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a 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, May 14, 2026. Except as 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 call over to SuperCom's President and CEO, Ordan Trabelsi.

Thank you, operator, and thank you, everyone, for joining today. Since we just had an earnings conference call 2 weeks ago, we're going to keep today's call shorter with a brief overview of the business financials and then open it up for Q&A. For those of you who are new to SuperCom, we provide electronic monitoring and public safety technology to local and national governments around the world.

For over 3 decades, we have partnered with national governments across the globe to deliver secure, scalable and innovative technology solutions. In recent years, our focus has shifted sharply towards criminal justice, where we leverage our proprietary PureSecurity product suite, where we invested over $45 million for offender electronic monitoring, including domestic violence prevention technology and alcohol detention through lightweight ankle braces with extraordinarily long battery life and other connected monitoring devices and capabilities.

Two weeks ago, we reported our financials for fiscal year 2025, which reflected the completion of a very successful 4-year transformation, representing a compounded annual growth rate in revenues of approximately 30% in our electronic monitoring business and a CAGR of approximately 47% in company EBITDA, reaching an annual 2025 EBITDA level of $9.4 million from $2 million in 2021. We also reduced our debt in this period by approximately 45% and lowered our blended interest rate from double digits to slightly below 6% as well as increased our cash and short-term deposit balance to over $12 million.

Entering 2026, we are pleased to begin with record gross profit, record operating income and record EBITDA of $3.3 million for the first quarter of the year, reflecting continued execution across our business and the scalability of our recurring revenue model. We continue expanding in Europe with 2 new national contracts, including a $17 million national contract for Sweden's Ministry of Justice. And at the same time, our U.S. electronic monitoring technology annualized recurring revenue or ARR run rate has expanded by over 180% year-over-year from May 2025, reflecting the accelerated impact of a rapid deployment and expanding customer footprint across the United States.

Year-over-year financial highlights from our Q1 report compared to the same period last year are summarized as follows: Revenue increased 8% to $7.6 million from $7.05 million. Gross profit increased 8% to $4.8 million from $4.5 million, an over 10-year record. Gross margin remained robust at slightly above 63%. Operating income increased to $1.23 million from $1.21 million, another over 10-year record. Excluding the extraordinary financial gains of $4.1 million recorded in Q1 2025, our GAAP net income surged to $1.33 million in Q1 '26 from $0.1 million in Q1 2025. These gains are related to conversions of debt to equity and negotiated premium prices of up to $43 per share done in Q1 2025.

Excluding the extraordinary financial gains of $4.1 million recorded in Q1 '25, again, non-GAAP net income surged 155% to $2.78 million in Q1 '26 from $1.1 million in Q1 '25. EBITDA increased 32% to $3.34 million from $2.53 million, another over 10-year record. GAAP EPS was roughly $0.24. Non-GAAP EPS was $0.61. Cash and cash equivalents increased to roughly $11 million and book value of equity increased to $45.6 million from $43.5 million at the end of 2025.

As you've noticed, significant improvements in profitability. I want to give a brief -- some more color on the -- what's driving this profitability. Beyond the clear benefits from economies of scale and operating leverage, our improvements in profitability are being driven also by the following: Firstly, consolidation activities in Europe. As you know, our projects in Europe are in many different countries. And historically, we team up with a local partner who would handle the training, the language, the on-country presence, the deployment on on-premise services and others. And we continue to consolidate and centralize our operations in Europe.

We established a central European hub in Romania for logistics, equipment handling, shipments and RMA. We're also expanding our scope by taking over more IT and more support responsibilities directly, reducing our reliance on local partners and improving our margins. We now provide also our own 24/7 multi-sphere technology support across projects, centralizing these functions is significantly improving margins across contracts.

We're also leveraging AI to accelerate development, introduce new automations, improve operational efficiency and reduce costs across development and customer operations. Our new products and technology advances can reduce costs dramatically given improved architectures requiring less labor in replacement, support and other processes that overhead the cost for our business.

And our expansion to the U.S. The expansion in the U.S. market is in itself an improvement to profitability because everything is centralized to the cloud in English and usually consisting of simple product mix as opposed to Europe, which has a lot of different products, project deployment and language complexities in the national projects. As we enter and grow U.S. electronic monitoring technology revenues, more profitability is expected to improve.

Our U.S. growth and expansion was one of the central developments in recent years. Since mid-2024, we have signed more than 40 new electronic monitoring contracts, entered 16 new states and built 17 new service provider partnerships. There is an inherent lag between the contract signing and revenue recognition. In some of these contracts, it takes up to 6 months or more to fully deploy since they have to swap out their existing units and this could take time. Sometimes they just swap out organically to avoid the installer overhead such that every new offender is put on SuperCom technology and as existing offenders end their monitoring terms, the incumbent provider's tech is returned and replaced by SuperCom's technology for the next offender with the same unit.

Hence, when we announced new projects in 2024, or 2025, there's a lag until you see it. And in 2026 in Q1, we've seen this nice growth in ARR, which continues to improve as the months go by in the year. We're experiencing acceleration in our expansion numbers here. Our SuperCom electronic monitoring technology quarterly recurring revenues for the first quarter in the U.S. increased approximately 88% for the whole first quarter, while as of May 2026, the annualized recurring revenue run rate grew by over 180% compared to May of 2025.

As you may have noticed, the majority of our revenues are still coming from the EMEA region, Europe, Israel. And a lot of our projects there are from the over 15 national project wins that we have announced in recent years. They provide a strong base for continued growth. And with an active and growing pipeline of meaningful opportunities, customer relationships are very sticky. And our expansion, we displaced very long-term incumbents such as a 25-year incumbent in Sweden and over 20-year incumbents in Israel and Germany and also successfully entered brand-new EM countries like Romania, where we won the country's first electronic monitoring contract with an initial value of over $33 million in 2022.

In Sweden, we recently won national project with initial value of over $17 million with substantial opportunity for expansion beyond that. This brings us over $25 million in aggregate initial value of contracts we won in Sweden in electronic monitoring. Several years back, we started off with projects of $100,000 in Lithuania and Latvia. And since then, we've been growing in scale to $3.6 million in Finland, another $7 million in Sweden, another $17 million in Sweden, $33 million in Romania. As we grow up the ladder, we hope to win larger and larger opportunities. And we know that in the market, there are many out there, including an opportunity that we're expecting to come up in Italy for expected over $20 million and opportunity over GBP 150 million expected to come out as the initial RFP sometime in 2027.

With that, I'd like to turn the call over to operator for any questions from our participants at this time.

[Operator Instructions] The first question today will be from Matthew Galinko from Maxim Group.

Maybe firstly, can you expand a little bit on what the competitive environment looks like today and winning clearly a lot in the U.S. and Europe. So are you seeing anybody new? Or can you go over what's supporting your ability to win these greenfield opportunities and displace the incumbents?

Matthew, great question. We just announced 4 new county wins, contracts in New York. We displaced 3 incumbents. These are established industry veterans. There's still roughly 10 players in the industry globally. There's high barriers to entry. You can't enter if you haven't shown experience and references for 5, 10 years in the industry. So that keeps the industry kind of barrier even though it continues to grow.

We displaced 3 different incumbents. And usually, we score much higher in technology. In Europe, we were doing this on a national level with long-term evaluation processes, which took months and months. And in the U.S., a lot of it is through live demos and trials. They take our equipment, they run it, they compare it to what they have. And as you saw, we had 100% conversion in these 4 opportunities that we faced in New York and many others around the U.S., we have very high conversion rates. And we believe it's because of our technology and our good track record.

In New York, for example, we had an initial county give very strong references to these 4 new counties. So we're doing good work, good deployments. Those references are coming to new customers, and that together with the trial demos and the technology capabilities are helping us to win new projects in the U.S. and in Europe. And I remind you that in Europe, we had over 65% win rate in RFPs. In the U.S., in a lot of these direct counties, we're even seeing higher numbers than that. And it's still early on. We'll see how this rolls out for the rest of our expansion into the U.S. market.

And then I think you shared a 180% growth rate in ARR for the U.S. market. Can you just mention whether that includes or excludes services delivered by LCA? Or is that purely from the new initiative in the U.S.

So it's a great question. And in the U.S., as you might remember, we have a lot of our revenues coming from California from our LCA business. What's new in the recent year, 1.5 years is us providing our PureSecurity technology to customers in the U.S. and these increases in ARR numbers are of that technology. So SuperCom's ARR technology and SuperCom's electronic monitoring technology, they are not the recurring revenues at LCA, which have been running for many years, which include a lot of services as well. This is only for EM technology.

Okay. I appreciate that. That's helpful. And then maybe one last question for me, and then I'll jump back in the queue. You highlighted a couple of the large European national programs that are coming up for bid. Can you talk about how SuperCom is maybe positioned differently from the last time these programs were up for bid? And do you think you have a stronger chance of winning them this time around?

It's a great question. So in England, the project is very large. As I said before, we're expecting it to come out next year, a very large budget. In the past, we competed for this, and we didn't win first place, even though we did do well on a lot of the scoring. Some of the things that we dealt with was our weak balance sheet and financial position and low references.

So back then, we had less references and also other vendors tried to point to the fact that the company had maybe only a few million dollars of cash, a market cap of $4 million, a lot of debt, high interest rates and the stability of the company was that question. Today, our balance sheet is much stronger. We have a much larger reference base. The company is much more stable. We have a lot of cash on hand. I think they'll make it much easier this time around with that England opportunity.

And there's many other ones, like we said, Italy and other countries we haven't entered yet. But as we continue to deploy more projects in Europe, we not only continue to deploy more projects in those regions like we saw in Sweden, it's the first contract already, but we also increase our opportunity and our capability to win other projects in other regions in Europe, similarly, as we're going to be seeing in the U.S. as well.

[Operator Instructions] And the next question is coming from Greg Mesniaeff from Kingswood Capital.

Two quick questions. Can you share with us the percentage of your revenues in the first quarter that came from the U.S. and how that has trended versus last year?

I don't have the exact percentages, but it's been similar to what you see on the annual report. The U.S. is still much smaller than Europe because of the project size, but the numbers coming from the SuperCom technology are growing very fast, and that -- if that growth continues, of course, the U.S. will be much more substantial. And we expect over time, the U.S. to actually grow past Europe because the market in the U.S. is $1.8 billion by 2028 compared to $300 million in Europe.

Great. And can you give us an update on the Romania situation?

Can you elaborate when you say on the Romania situation?

Well, you had quite a bit of business there. And is that still continuing at the same run rate? Or has it slowed down temporarily? Or like what's the...

Okay. Great. Great. So we won the Romania project in 2022 over $33 million. And like in many projects, when we do good work, the deployment is faster than originally expected, and they deployed relatively fast and ordered a lot of units. Last year, there was a decline from that specific customer, and we described that without that decline, the growth last year would have been approximately 40% for the business because of everything else that was happening.

Romania this year continues to work. We're getting new orders right now, and we'll see what size those orders will come out for the year. But it's still active customers of ours and satisfied customer. The ordering levels can move around based on their own needs. But like we've seen with any other customers that we -- either we displaced or that we have for many years, once you have a customer, they stay if you're doing a good job, they stay with you for a very long time and continue to order more units and add more programs and more capabilities. So right now, we have been receiving orders from Romania, and we're supplying them as we speak. We're working on supplying those orders.

And Ordan, when you get follow-on orders, I'm assuming the margin profile is better. Is that right?

Yes, it's a great point. As we progress -- within any project, as we progress further and further, the margins are better. And a lot of the projects we have today are later stage, and that's why you're seeing improved profitability in general. But at the beginning, you have a lot of training and installations and development and adjustments and slowly in the server farms and then afterwards, just additional units with high contribution margins. And that's why it's so interesting in the U.S. market because in a way, it's one deployment on the cloud in English. And even those different counties and different regions, it's all on the same platform and has a higher gross margin, and it's all charged per unit per day. And in essence, it's easier to track in a consistent manner. It's much more diversified. And so we're very excited about the expansion to the U.S.

And that does conclude our Q&A session today. At this time, I will pass the call back to Ordan for closing remarks.

Okay. Please pause. We just got a couple of more questions in. The next question is coming from Song Lim from Sapience Investments.

Given the AI, how AI has been impacting the tech industry, could you give us more color on how that impacted your company and your industry?

Right. So we did -- I did share on the prepared remarks that we're using AI also in our ongoing operations and development, logistics and our processes to help improve profitability. But also, we've been integrating AI into our technology offerings, and that's at various stages in its life cycle. We gave one update a couple of years back, and we plan to give another update on this. But that's also something that through our offerings, we plan to also leverage the power of AI for some meaningful things, and we'll give future updates on that.

And I noticed that I only have annual figures for your free cash flow or your cash flow numbers. Could you -- but not on a quarterly basis. And I've realized that in the past couple of financial years, free cash flow has been negative, and I think operating cash flow as well. Could you give us more color on that with cash flows going forward?

Yes. Regarding cash flows, we -- it depends on the mix of projects. You see, when we have projects like Romania producing the majority of the revenues because of the nature of purchase there, higher cash flows, but margins are lower than other projects like in the U.S. where it's recurring revenue and you're manufacturing more and receiving cash over time. So there's a mix. And based on the revenue mix, you'll see a shift in cash use and profitability margins.

[Operator Instructions] And there are no other questions at this time. At this time, I'll hand the call back to Ordan for closing remarks.

Thank you, operator. I want to thank all of you also 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. This does conclude today's conference. You may disconnect your lines at this time. Have a wonderful day. Thank you for your participation.

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 report 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 include EBITDA, a non-GAAP financial measure, but 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 a 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 on 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 3 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 pure security product suite for offender electronic monitoring, including domestic violence prevention technology, lightweight and crates with extraordinary long battery life and other connected monitoring embedded devices. Our strategy rests on 3 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 U.S. 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 U.S. and Europe represent the core markets we're actively pursuing. We currently hold active contracts across 3 continents and as a result of our 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 the 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 Ron Haddad to lead our international sales partnership development. Ron brings direct industry competitive experience from 3M, nice and converse with track record building long-term government sales partnerships that drive sustained revenue growth and market expansion. 2025 was defining a 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 3 to 4 years. And our annual EBITDA reached $9.4 million in 2025, representing approximately 34% EBITDA margin. In 2025, we continue 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 U.S.

Many of these new contracts have 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 to become 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.

So with the U.S. U.S. growth was 1 of the central developments in 2025 and early 2026. Since mid-2024 when we began our U.S. 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 U.S. progress around 5 themes and capture the structure of this expansion.

Firstly, new state entry, we entered 6 new states as we said, since mid-2024, including Alabama, Arizona, Louisiana, Maryland, Misora, Nebraska, New York, North Carolina, Ohio, South Dakota, Tennessee, Texas, New tall Virginia, is Virginia and Wisconsin. In many of these states, we replaced this incumbent vendors. Taxes were notable late 2025 when our first contract was signed in December 2025, with a second 1 following within weeks in January 2026, both Juvenile provision agencies and both displace incumbents. Louisiana secured in February 2026, marked our 16 new state and 17th 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 3 county level deployments since September 2025 through a Midwest regional service partnership using Pier 1 and Pier Shield technologies. Alabama added 2 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 Tier 1 deployment with the 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 pure security platform. our Texas, Kentucky, Alabama and Missouri wins, among many others, displaced 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 our experts in 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 as another strong validation to the capabilities and advantages that we provide to the industry.

In the U.S., we are moving up the customer ladder. We started the U.S. expansion of resellers in very small county tier. throughout 2025, we operate increase on the at the county level, slowly growing to larger and larger county and larger programs. A nice breakthrough moment came in November 2025. And when we secured our first state-level Department of Correction contract in the United States awarded under Arizona's statewide Behavioral Health Services. The DOC and state agency tier represents a step-up from the regional and county level wins have built our U.S. presence.

Implementation began in January 2026, and we expect this contract to serve as strategic reference point for state-level pursuits across the country. Beyond these 5 themes, our only owned subsidiary, LCA, was awarded reentry services contract in Northern California valued up to $2.5 million for over 5 years. Since the acquisition of LCA, our California presence has accumulated more than $35 million in total wins. The framework we 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 the Western European country, marks on the tenth 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 filings. The contract is structured as a multiyear framework with a term of at least 3 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 original 219 deployments with the same customer, and they've shared their expectation to grow the program significantly. The word came through a long -- year-long competitive valuation involving 5 companies, including a 25-year former incumbent. And once it could stand still period which it has, it's becoming 1 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 ethane 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 want 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 actually 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 will become more attainable.

In 2025, our largest customer presented 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. There is an outcome of our U.S. 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 U.S.A. during 2025, we're still at early stages. We -- but we expect them to grow in size and need 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. And 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 our 6 million registered offering at common only registered offering at $11 per share. Net processes 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 strengthen the 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 towards higher-margin recurring revenue contracts and the impact of technology investments on cost reduction. 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 4 years since we have more than doubled revenues to record levels, which is our strongest GAAP profitability since to lead to record net income, record non-GAAP net income and record EBITDA levels and build a contract base spanning 3 continents with the 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 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. Just better to look at these things on an annual basis. and got 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 6 new North American contracts in the first 4 months of 2026. Our $17 million national content Sweden, the new 1 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 repositioned for continued revenue growth and expansion in coming years.

Our growth strategy across 2026 rest on 5 drivers. Win versus win large-scale national contracts in Europe, our pipeline in Europe remains active. The 17 million Sweden is now secured, and that's just the first stage. We believe there's substantial upside from adding new programs into this program into this contract. Several large EU contracts are up for award over the next 24 months, and our 65% win rate gives us confidence in ability -- are to convert more opportunities into projects.

We're expanding our U.S. footprint by entering through direct bids and partnerships. We have these 17 service provider partnerships. They help bring us into local new opportunities. as well as direct bids with accounting agencies of various sizes, and we're also looking at the state level. The Arizona DC 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 complements. 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 1 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 LC acquisition is 1 example of the strategy. where we continue to actively evaluate U.S. acquisition opportunities that fit some more profiles?

We're enhancing our proactive sales efforts and streamline cycles as more contracts moved 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 to us with us to other projects. Our domestic violence solutions are a clear example of how product innovation creates entirely new 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 market is projected to reach $2.3 billion by 2028. The prison systems in the United States and across developed world to face high operating costs and meaningful capacity constraints. And electronic monitoring offer substantial cost advantage relative to interation 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 the most aggressive global expansion in our company's modern history. We delivered 1 of our largest electronic motion contract wins since the transformation started in 2021. Our first day level Department of Corrections contract in the United States and entered new U.S. states at a faster pace than any prior moment. We entered 2026 with more contracts, a broader U.S. footprint, deeper international activity and a stronger foundation than any prior point in our moderate 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] Our first question is coming from Matthew Galinko with Maxim Group.

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 that helpful for getting more countries into the EM pipeline? I'm just curious if you have any big picture thoughts on that.

Yes. I was just a little -- you're just a little mogul. You said the trend we've seen and then I didn't hear that you broke out the trend we're seeing in Europe around?

Fewer euro or EU skeptic politicians.

We're seeing -- I can't answer specifics where 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 advances that have happened in recent years, and they expect their program to grow 6x6 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 for the U.S., what are your opportunities? What does that look like in 2026? Do you think that's sustainable and that you'll add to the signal that you signed or is it still more scattered as far as being able to move up market in the U.S.

In the U.S. just like we did in Europe, we started with very small counties, and we already have a lot of contracts over 35 and now and actually we're growing in size. We have the smaller ones and a bit larger and medium and we had the first TOC contract in Arizona, and we're bidding on others on the state level and also some -- there's some large county opportunities like L.A. County, Cook County and others. These are tens of millions of dollars and programs. So there's great opportunities in the U.S., and we're bidding kind of saying it's scattered away, but in areas that we think are more 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 it'll just be opportunistic when you can.

I think we have the 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.

Our next question is coming from Greg Mesniaeff with Kingswood Capital.

Thank you. Question on your recent wins in the U.S. Arden, 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.

Greg, great question. In most of the wins that we had in the U.S., 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.

Would you say that that's been a template that you can then bring to other regions of the world as well -- realized 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.

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. There's 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.

Prices are 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 didn't focus on.

[Operator Instructions] Our next question is coming from Brendan McCarthy with Sidoti & Company.

Congrats on the strong results. Just wanted to look at the pipeline across Europe and the U.S. which pipeline looks relatively more attractive heading into 2026.

So in Europe, we're later stage. We started projects, as I noted, with sort of $100,000 in size. I mean grew to several million and the $7 million and $17 million and over $33 million. We're in the stage 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 U.S. is 6x the size of Europe. The margins are much higher. Everything is recurring revenue per unit per day. Everything that central 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 U.S. 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.

Got it. That makes sense.

In terms of value, at least, the number of opportunities in the U.S. are more than Europe, but the total value in Europe is still larger.

Understood. And then from a competitive standpoint, does 1 market tend to carry like a more favorable competitive bidding process because I'm curious as to how many competitive bidders that are during each procurement process.

It's interesting. This market is very highly barrier. We see 10 players around the world, whether max of the M10 players in Europe or in the U.S., and we've had a very successful record in winning these RFPs in Europe and in the U.S. We're doing very well as well. Some of these are through direct contracts with service providers and some of them are to 4P processes, and we're able to score highly on these bids, whether they're very, very technical with long evaluations as you'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. 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 to the U.S.

[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.

Ladies and gentlemen, good morning, and welcome to SuperCom's Third Quarter 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 Ordan Trabelsi, SuperCom's President and Chief Executive Officer.

I'd like to remind you that during this call, SuperCom 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 not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

For a reconciliation of this non-GAAP financial measure to net loss, a comparable GAAP financial measure, please see the reconciliation

[Audio Gap]

'25. Except as 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 call over to SuperCom's President and CEO, Ordan Trabelsi.

Thank you, operator, and good morning, everyone. Thank you for joining us today.

Earlier this morning, we released our financial results for the third quarter ended September 30, 2025. You can find a copy of the press release in the Investor Relations section of our website at SuperCom.com.

We continue to deliver strong operational performance and strategic momentum across key markets, building our record-breaking -- building on top of our record-breaking first half of the year. Since mid-2024, we have secured over 30 new electronic monitoring contracts in the U.S. alone, including entry into 12 new states and 14 partnerships with regional service providers.

These wins reflect growing demand for advanced scalable EM solutions and validate our ability to rapidly expand our U.S. footprint. Importantly, many of these new partnerships involve replacing incumbent vendors, a recurring theme that speaks to the strength of our PureSecurity platform and the trust it continues to earn from agencies seeking modernization.

We've seen this in states like Virginia, Utah and Alabama, where multiple agencies have transitioned from legacy systems to SuperCom's technology within a short time span.

In Alabama, for example, we recently launched our third and fourth deployments in less than a year. In Utah, a second sheriff agency selected our platform to overhaul its GPS tracking program after evaluating competing technologies.

And in Virginia, another service provider fully transitioned its GPS operations to SuperCom, marking our second reseller partnership in that state this year. These examples illustrate a growing trend as agencies seek more reliable, flexible and cost-effective solutions they increasingly turn to SuperCom for both technology and long-term partnership.

Our ability to serve both direct government agency contracts and third-party service providers gives us the versatility to operate effectively in varied regions and support distinct program structures.

In addition to these wins, our U.S. presence is reinforced by the continued success of leaders in community alternatives, LCA, our wholly owned subsidiary in California, which recently secured a 5-year reentry services contract valued at up to $2.5 million.

LCA remains an important part of our integrated offering, supporting rehabilitation and compliance outcomes alongside our core EM technology. Since our acquisition of LCA, we've secured over $35 million in new contracts in California alone.

While our progress in the U.S. has been substantial, we've also continued to expand our presence internationally. We strengthened our presence in Europe with an award of a $7 million national electronic monitoring project in Germany, Europe's largest economy.

This milestone marks a strategic foothold in a highly advanced public safety market, achieved by displacing a vendor that had served the German government for more than 20 years. We see this award as a clear validation of our competitive edge and execution capabilities on a global stage.

Our leadership in domestic violence, electronic monitoring continues to grow. We now support 9 nations with domestic violence programs across the U.S., Europe and other regions. Governments increasingly rely on our PureTrack and PureShield technologies to support victim protection and offender accountability.

Beyond new market entry, we're also seeing our proven track record lead to deeper engagement in existing territories. A key growth pattern for SuperCom has been our ability to enter new countries as a single project and expand into multiple programs as trust and performance are established.

In Europe, we've seen this in countries such as Sweden and Latvia, where initial deployment has evolved into broader national coverage. We're now seeing a similar pattern play out in the U.S., where we have entered states like Utah, Kentucky and Virginia and more with pilot or regional projects and have since expanded into additional counties and service areas.

This repeatable expansion model remains a key driver of our long-term growth strategy.

Our ability to replicate our expansion model efficiently also ties into how we operate at scale, especially in the U.S. A core operational advantage for us in the U.S. is our cloud-based centralized platform as well as integrated inventory management and 24/7 support.

This centralization enables us to support nationwide deployments efficiently from a unified infrastructure in one language. In contrast, European projects often require country-specific servers, local language customizations and decentralized support models, which introduce additional complexity, local partner support and increased costs.

As a result, we can launch new programs in the U.S. more rapidly and cost-effectively, whether at the county level or statewide, enabling faster time to revenue and higher margin potential. This operational advantage supports not only organic growth, but also potential expansion through other means.

In parallel, we continue to evaluate strategic acquisition opportunities in the U.S. market. Targeting established local service providers can help us accelerate our market penetration, enhance vertical integration and unlock operational synergies.

A proven example is our acquisition of LCA in 2016, which, as I said earlier, has contributed to over $35 million in project wins in California alone. And as we scale, we see meaningful potential to replicate this success in additional regions in the U.S.

Alongside these expansion strategies, we remain focused on addressing the core challenges facing modern justice systems. Our solutions directly address some of the most pressing challenges facing criminal justice systems worldwide, including high recidivism rates, prison overcrowding and excessive costs and unsafe communities at the end.

By providing modern scalable alternatives to incarceration, our technology helps governments improve supervision, enhance public safety and reduce the long-term burden on public safety and correctional systems.

Tackling these systematic challenges requires continuous innovation and that's where our technology leadership plays a central role.

Our sustained investment in innovation has been key to our success. Over the years, we invested more than $45 million in R&D for electronic monitoring solutions alone, enabling us to develop one of the most advanced and versatile electronic monitoring platforms in the world.

This ongoing commitment to innovation is powered by our stellar research and development team, a group of highly skilled electrical engineers, software developers, product managers, QA personnel and other domain experts who continue to push the boundaries of what's possible in public safety technology.

Their contributions are a core reason why SuperCom continues to win competitive tenders globally, often displacing long-standing legacy providers.

As our capabilities advance, so does our ability to capture share in a rapidly growing market. The electronic monitoring market is projected to reach $2.3 billion by 2028, with approximately 95% of that opportunity concentrated in the U.S. and Europe.

Notably, the U.S. market is estimated to be more than 6x the size of the European market, making it particularly attractive driver for long-term growth. As more jurisdictions adopt electronic monitoring as a core public safety strategy, SuperCom is well positioned to capture this growing demand through our proven solutions and expanding footprint.

I'll now turn to the financials, reviewing our performance for the third year -- third quarter and first 9 months of 2025 compared to the same period last year in 2024. In the third quarter '25, we achieved continued profitability and margin expansion, driven by operational efficiencies and improved cost structures.

While revenue for the quarter came in at $6.2 million compared to $6.9 million in Q3 of last year, we delivered significantly improved profitability across all key metrics. Gross profit actually increased this quarter to $3.8 million with gross margins expanding to 60.8%, up from 45.6% a year ago.

This marks one of the highest quarterly gross margins in our history, driven by disciplined cost management, operational automation and reduced reliance on third-party service providers. It also reflects a favorable revenue mix with a growing share of higher margin international project phases and U.S. programs also contributing to the results.

As we continue to bring more work in-house and streamline deployment and adoption processes, we're seeing operating leverage as well as margin expansion. Operating income surged to $640,000 this quarter, up from around $30,000 in Q3 of last year, with operating margins increasing to 10.3%.

EBITDA doubled to $2.2 million from $1.1 million in Q3 2024, reflecting EBITDA margins of 34.6%. Net income reached $700,000, a turnaround from a net loss of $400,000 in the prior year and non-GAAP net income surged to $1.9 million, up from $35,000 -- $350,000 last year. Non-GAAP EPS came at $0.39 compared to $0.17 in the third quarter of 2024.

And now let's have a look at the 9-month performance of 2025 compared to the same period of 2024. Revenue was $20.4 million compared to $21.3 million in the first 9 months of '24, reflecting a modest decrease due to revenue mix and timing of contract launches.

However, despite the lower top line, we delivered strong improvements in margin and profitability. Gross profit actually increased to $12.5 million, up from $10.7 million with gross margins expanding to 61% compared to 50.1% last year.

Operating income nearly tripled to $3 million, with operating margin improving to 14.7%, up from 5.3% last year. EBITDA reached $7.2 million, a 56% increase from $4.6 million in the prior year, reflecting an EBITDA margin of 35.4% and net income more than doubled to $6 million from $2.5 million in the first 9 months of 2024, supported by our improved cost structure, disciplined execution and the positive impact of certain nonoperational financial gains recorded during the period.

Non-GAAP net income increased to $9.3 million with net margin more than doubling to 45.7%. And non-GAAP EPS for the period was $2.17.

We also made progress in strengthening our balance sheet. In the past 2 years alone, we reduced our net debt by nearly $25 million. This was achieved also through a combination of strategic debt-to-equity exchanges executed at premiums of up to 100% or more above market price and amendments to our senior debt agreement, which extended maturity to December 2028 and lowered the interest rate significantly.

In parallel, we raised over $16 million in gross proceeds, including $6 million through a registered direct offering completed at the beginning of 2025 and an additional $10.2 million for warrant exercises. These steps in unison contributed to a stronger cash position and enhance our financial flexibility to support future growth opportunities, including new project deployments, continued investment in technology and potential M&A activity.

As of September 30, 2025, working capital stood at $41.8 million, up from $26.1 million just a year ago. Book value tripled -- book value of equity tripled to $40.8 million, up from $13.3 million a year ago and cash and cash equivalents surged by 111% to $13.1 million, up from $6.2 million a year ago.

While current margins reflect a favorable mix of projects and contracts, they're not yet at a steady-state level. That said, we believe our progress in streamlining operations, automating processes and improvement in launch execution is sustainable and positions us for long-term margin resilience and expansion as we scale.

Before closing, I'd like to highlight the broader transformation that continues to define SuperCom's trajectory. Since implementing our new strategic road map in 2021, we've consistently strengthened the business across revenue growth, profitability and balance sheet health.

We find the results even more compelling when viewed over a multiyear horizon. Revenue more than doubled from a 5-year consistent decline, reaching $11.8 million in 2020 to 4 years of continued growth, reaching $27.6 million in 2024.

As of the first 9 months of 2025, we reached $20.4 million in revenue, reflecting continued scale relative to previous years. Gross profit grew by 140% from $5.6 million in 2020 to $13.4 million in 2024 and gross profit for the first 9 months of 2025 reached $12.5 million, closely aligned with the 2024 full year figure.

GAAP net income turned from a loss of $7.9 million in 2020 to $660,000 profit in 2024 and has since surged to $6 million in the first 9 months of 2025. Non-GAAP net income improved by over $10 million, turning from a loss of $1.7 million to a $6.3 million profit and stands at $9.3 million year-to-date in 2025.

EBITDA has improved from $2.8 million in 2020 to $6.3 million in all of 2024 and has already reached $7.2 million in the first 9 months of 2025. These improvements were achieved while navigating macroeconomic headwinds, a global pandemic, supply chain disruptions, rising interest rates, a regional war and they underscore the strength of our operating model, technology differentiation and long-term execution strategy.

Furthermore, they underscore the essential role of our solutions, which is resilient through market cycles. And as we continue to scale, we believe this foundation positions us well for long-term value creation.

In closing, we are proud of our execution this quarter and trust our customers to continue to place in us. I'd also like to thank our global team for their dedication and performance. Their expertise, commitment and hard work continue to drive our success.

And as we look ahead, we remain focused on leveraging our momentum to expand strategically, deepen customer relationships and continue delivering innovative solutions that improve public safety outcomes around the world.

With that, I'll turn the call over to operator to open for questions. Operator?

[Operator Instructions] Your first question for today is from Matt Galinko with Maxim Group.

I'd like to start with the market opportunity in Germany. It sounds like a nice, I think, first step into that market. Is there opportunity to expand there? And what would the process look like to expand within that market?

Great question. And we announced the win in Germany just a couple of months ago and it's a great win in a very lucrative market. The project already that we won has 4 different types of projects in it, including alcohol monitoring, GPS monitoring, domestic violence and house arrest.

And like we've seen in many other nations in Europe, once we enter with a initial project and we do good work and that's what we typically do, we have an impeccable record for our deployments, we end up winning more projects and expanding the existing ones.

So while it's our first one in Germany and it's valued at a budget of $7 million, just like we've seen in the past, we expect this to potentially grow in numbers and to grow in scale as we add additional capabilities from our ongoing growing product offering.

Great. Second question is, I think you mentioned a service provider in the U.S. that completely switched their GPS tracking over to SuperCom products. Can you maybe expand a little bit on is that a repeatable opportunity? And how do you see that sort of engagement with the service provider versus M&A like with an LCA?

Great question. And we actually had 14 service providers just this year that signed on. And the model in the U.S. is so fragmented. It's not like in Europe, but it's just a national project.

There's many different counties and each have their own programs, multiple programs in each county. And what's beautiful is that there's these service providers who have become mini experts in the field and they've tried all the technology.

And then we come to them, we show them our technology and they're able to quickly evaluate just how much more advanced and superior it is in many aspects to what they've tried. So in many of these service providers, they actually completely replaced the technology they have with our technology.

Sometimes it's all immediately, sometimes it's in process, but they swap out from live offenders, they bring them back in to swap the technology because the advantage is so significant that we want to go through that.

Now when you go directly to an agency and some of the larger agencies have the personnel in-house to run these programs, they know how to put the bracelet on, to write the report, they run the technology, then we sell directly to that agency.

When it's a service provider, they aggregate 5, 10, 20 or more agencies. And so that's an advantageous angle as well. Both of them are valuable. Both have great strategies for expansion and both have been working very well for us.

Great. And final question for me before I jump back in the queue. It looks like your debt position declined by about $2 million in the third quarter. I know you mentioned historically doing those debt-to-equity swaps, but I'm curious if you can talk about if there was another one in the third quarter.

So as we discussed in the past, we strategically with our lenders have been doing conversions of debt to equity. It's small ones. And then in aggregate, they become meaningful to the company as you've seen over the last few years.

And we typically do them at a premium and that helps reduce our debt balance as described. And you see that as well in the numbers as you follow the quarters.

And one thing I wanted to add about your question with the service providers. Another thing that's unique in the U.S. that we're doing because we're already in 9 countries around the world with our domestic violence solution and we have a very small bracelet with long battery life, it becomes very effective to put on people and ensure that after someone hits his wife, for example, he doesn't come anywhere close to the victim.

And our technology does a great job in that. And many other vendors have struggled with this. In the U.S., of course, like any other place, there is domestic violence. And the fact that we can offer this with such a high level of experience and seamlessness allows our service providers to add a whole new solution to everything they're offering today.

So that's also something else that helps us with the service providers, together with the normal GPS and house arrest that you've been asking.

Your next question is from Greg Mesniaeff with Kingswood Capital Partners.

A couple of questions. When you kind of analyze your revenue number of $6.2 million, if you break that down by geography, how does that compare to a year ago? It seems to me and correct me if I'm wrong, that your U.S. business has been quite strong. And it appears to me that the softness has come from other geographies in the world. Can you kind of give us some color on that?

Yes. It's a great question. In Europe, most of our revenues are still from Europe and other geographies outside the U.S. and that's where our focus was originally. We won over 15 national programs around the world with our PureSecurity Suite.

And these projects are multiyear projects and they have various phases, some phases more deployment and then scaling and then afterwards, additional add-ons and changes and so forth.

So there are many different projects that are running at the same time around the world and we need to -- when we report the financials, we aggregate the revenues from each of them. And that can mix differently in different quarters.

It's not a consistent monotonous growth or monotonous decline. It's just one quarter, there would be more of this project and less of the other one. So the volatility that you would see between the quarters, a lot of that comes from those projects.

In the U.S. market, which is newer for us, we have a strong base in California that we've been running for years. And then over the last 12 months, we've signed over 30 new contracts. And some of them start small, some of them start at a medium size, but they typically continue to grow and add more and more units.

And what's beautiful about the U.S. market is that almost everything is recurring revenue per unit per day. Now the majority of our business is recurring revenue, but there's still components that are not, especially in Europe.

In the U.S. market, those numbers will grow and grow. And over time, because the U.S. market is 6x that of Europe, we expect more recurring revenue to be the prevailing part of our revenues and we've got more consistency upon the quarters together with improved margins.

So we continue to grow in Europe and around the world, but the U.S. is becoming and will become in the future based on our expectations and plans, a more consistent and predictable element for our total revenues and our financials.

Great, Ordan. And if I could expand on that just a bit. As you win contracts in the U.S., what are typically their time spans compared to similar wins in, say, Europe? And you had mentioned that the U.S. opportunities have been much more recurring in nature, which is a good thing.

But if you could just kind of give us some idea of how long -- what's the typical length of one of these contracts? And also, what is the renewal rate that you've been seeing on them as a -- on a percentage basis?

Okay. Great questions. And let me try to structure it in a way. First of all, in the European market, these are national projects with long bid cycle and with a competitive process for RFPs and that could take from 4 months to 24 months or even more sometimes to win these.

And usually, the projects are structured at a 5-year span, 9-year span, something like that, between 5 and 10 years. And typically, the incumbent vendor wins it over and over again. I mean, when we displaced the incumbent vendor in Sweden, they were there for 24 years.

Since then we won 2 more projects in Sweden. When we displaced the incumbent vendor in Israel, they were there for over 20 years. When we displaced the incumbent vendor in Germany right now, they were there for over 20 years. So even though the initial contract is for 5 years or 10 years, you typically see the incumbent winning again and again.

Now for someone to come and displace them, you have to have a significant value proposition that's more advantageous than what they have today. And that's exactly what we've been doing with SuperCom in Europe. We've been coming in, displacing long-term incumbents, showing that there's a better way to do things with newer technology and that's helped us enter the market and then expand.

And naturally, once you win 1 project or 2, you have a easier time winning the next projects. So in Europe, when there's projects coming out in countries where we already exist, we have a much higher likelihood to win them than it was originally. And originally, we had in our expansion, roughly a 65% win rate in Europe. Now that's the European market.

In the U.S. market, you have a mix. You also have -- of course, there's these large RFPs like for ICE and you have it for some state-level contracts. And some counties are very large. Some county projects in the U.S. are $30 million, $40 million, $50 million alone.

But there's also many smaller counties and many smaller programs. And then you could start with them, especially if it's with a service provider, it's not a government RFP, it's a private company at the end and they sign a contract with you. And the idea is they continue running with you indefinitely.

The contract just continues to renew and they run with you for many years just like in Europe because once they're comfortable with you and they've worked with you and they like the technology, then there have to be a big change for them to teach everyone brand new technology.

So in the U.S., it's faster to deploy, especially with the smaller programs. We're able to deploy them faster. They might even start with less units and then grow the amount of units, whether different from in Europe where you start with a large amount pretty quickly on.

And over the years, because we've been deploying so many programs, we have such a high win rate and we've been expanding so fast, we've reached very fast deployment rates. Some of our projects in Europe, we deploy within a few weeks and we're able to manufacture very fast and deploy very fast and do it with an impeccable record of doing it seamlessly without causing issues, whereas some other vendors take a much longer time for the deployment. That's one of our advantages.

But in the U.S. market, almost everything is recurring. We usually charge per unit per day. So it'd be $4, $5, $3.5, depends what services are included. And you just -- they like their technology, they start with you and then you see the numbers.

Right now, we're doing the U.S. with over 30 contracts in over 12 different states because we're just putting the seeds in different states. And you can see that after we do a deployment, shortly afterwards, there's another deployment in the same state.

And then in some states, already a third and fourth deployment. And I think that speaks to the satisfaction of the customers and to the work that we're doing there. So there's a mix and it's a little bit different between Europe and the U.S.

But in the U.S., as the projects grow in size, just like they did in Europe, then you also see the RFPs and the larger project sizes. But we'll -- hopefully, as we do continuously, the speed of the deployment will continue to improve as we get better and better at doing more deployments.

Okay. Great. So is it fair to say that as more and more of your revenues come from the U.S., your revenue volatility should decrease over time?

Yes. That's a great statement. And also, over time, the margins should expand. So predictability, margin expansion. As I said in the prepared remarks, everything in the U.S. is on the cloud.

Everything is in English. We have inventory managers centralized, a 24/7 monitoring center that's centralized. As you can imagine, that's much more simple than having a server farm in Sweden and another one in Denmark and another one in Finland, another one in Germany with local partners in different languages and different inventory management systems in different -- so.

The U.S. has a lot of advantages in that remark and we're very excited that we're able to expand so effectively into the U.S. market with our technology.

Your next question is a follow-up question from Matt Galinko.

Just wanted to touch on operating expenses for a moment. It looks like R&D has been steady for a pretty long time as well as sales and marketing has been pretty level. I'm just wondering, as you continue expanding in U.S. market, should we expect to see operating expenses pick up at all to help support that effort?

Or if you put more spending into boots on the ground in the U.S., would that help to accelerate kind of your uptake into the U.S. market?

Good question, and it depends on how much growth you're talking about. The beauty in this market and in our industry is that the contribution margin of each additional bracelet into an existing region is extremely high.

It's just that there's fixed costs from running these operations in server farm, on the cloud, with inventory management with the 24/7 support. And so now that we're in the U.S. market, we have a good hold.

Adding additional units doesn't require a lot of additional costs. Our sales team is still fairly small and maybe there could be some expansion to it. But we won most of these projects around the world based on our technology.

We come technology first, less leveraging some relationships that other vendors might have. We come with new technology that works and that's been resilient and successful in many other projects around the world and that's how we enter these new markets. There could be some expansion, but minimal to our operating expenses in order to achieve the continued plan that we're seeing.

And in terms of research and development, we're doing very well. We already put over $45 million in technology. We're far ahead than most of our vendors in almost all aspects and we continue to invest to make sure that we are ahead of them.

And even if a competitor comes with a brand new technology that they spent tens of millions of dollars on, it's still going to take them 5 to 6 years to get that operational to the level that a large contract will take it. They want to see it first run in smaller projects for a year or 2 and then another project, another project and only afterwards, they'll take it on for larger projects.

And we're already in the large projects. Some of our projects like Romania, over 15,000 units. So we're in a very good place with our technology. We continue with every new project to add more capabilities. We continue to add more seamless integration.

We're able to bring a lot of the things that are service that our local partners do. We're able to bring a lot of that in-house. We're able to bring all the technology that third-party vendors have developed in-house.

We're able to optimize to make the promise more seamless to have lower cost and also to make things much more efficient as we continue to deploy and improve our product offering.

[Operator Instructions] Your next question for today is from John Mason with Aegis [ Co ].

I guess in terms of the -- sorry, can you hear me?

Yes. Yes.

Okay. Great. In terms of the revenue year-over-year, I know you've been winning all these contracts in the U.S. Like when do you expect to sort of return to growth year-over-year on a quarterly basis as those contracts sort of start to flow in?

And I know you mentioned that they're essentially fees at this point. But I guess, one, when do you expect that to inflect? And then I guess, b), is it essentially that there's turnover on the European markets or like lower usage? Like what is causing that kind of year-over-year decline? And I have a second question, sorry, but...

Okay. Good question. Good question. So we don't really -- we're not really losing customers essentially. As I said, many of these customers stay for a very long period of time. And as you see, we continue to announce more wins in the same region, either with the same government or with sister agencies in the same government.

So it's not that we're losing customers, it's that some projects that are not recurring have phases where they're more heavy, more deployments, more expansion, more work. And then there's phases that require less work.

And then until they again purchase more equipment and more expansion and more capabilities and more units. In the U.S. market, that's less of a metric because everything is pretty much recurring per unit per day and that helps you just consistently grow, just like with any Software-as-a-Service model.

We lease our equipment, but a lot of it is software on the cloud and that's the model that's prevailing in the U.S. As I said, the U.S. is 6x the size of Europe. So over time, we expect that our financials look very much in that way.

Currently, there's still some volatility and it's because the mix of different projects at different stages that some have recurring revenue and some have purchases and other one-time items and that can create naturally some volatility.

Now we don't give specifically guidance. And I said that some of them are seeds, but some of the projects in the U.S. are also larger. It's just that any project that's in a new territory and all of these are brand new, we see as a seed that can grow into many different plants or very large trees.

Just like when we started in Europe, the projects in Lithuania have $100,000 a lot, we have $100,000. And now we're talking about projects that are $7 million, $33 million and there's others that we're bidding on that are also fairly large.

So it's just a process. We entered the U.S. just a year ago. We've been doing great and we've won many different projects and we're winning against incumbents that are in the U.S. market for a very long period of time and have very strong relationships and we're still able to come in brand new with our technology and displace them.

And I think that speaks monuments to the potential that we'll see going forward. And so over time, we hope that everyone will see the benefits of our progress.

Great. And then last question, I guess, I think there's been quite a buildup of accounts receivable or trade receivable on the balance sheet. And I know, obviously, it's a testament to the increased book value growth.

But I guess what -- how do you see the cadence of release of that, right? I think it's been a pretty big drag on free cash flow. I think you've reported operating cash flow on like a semiannual basis. But I would love to know kind of how you expect that to flow through and when you expect to see that free cash flow.

Yes. Good question. It's not -- and I don't know if you followed SuperCom historically, but there was a period of time where we were working in Africa and South America. And over there, collections are sometimes delayed and it was more of a matter to look at here.

We actually don't experience that in the U.S. market and the European market. Things are timely. If we do see expansion to our AR, it's because sometimes you have percentage of completion in these projects and the amount of time and effort to recognize revenues is different from the time when you get paid.

So there's a misalignment in timing with the percentage of completion projects, which is mainly coming from the, again, the long multiyear project deployments at a national scale in the European market.

We don't see a issue there. If they're paying on time, we don't have any -- we haven't had to have bad debt or anything of that sort in a significant manner like we had in Africa and -- sorry, South America. And when you look at the bad debt that's done on an annual basis, that's typically from the eGov business, from all debt from those regions, not from the electronic monitoring business in the U.S. and Europe.

And one of the reasons why we expanded and shifted into this market was because of the very good collectability and predictability with these customers.

Your next question for today is from [ A.J. Hoffman ], a private investor.

Congratulations on everything. I may have missed this earlier, but did you state a win rate so far for all these contracts are getting in the U.S. for the ones where the bids have closed? Is it as high as Europe? Is it lower? And -- yes.

It's a good question. We haven't yet assessed. In the U.S., we've been doing very well. It's probably higher than Europe, but we haven't assessed it because we're still looking at such a large variety of projects in different sizes.

So we're going to wait till we have more consistent flow and size of projects before we start to do analysis. But so far, as you see, we're announcing many wins in many new states with many new resellers with direct agencies and we have very good feedback from our customers.

And as far as scalability in the United States, have you guys calculated what your -- let's say, after you launch everything, after you put everything on the ground and you're expanding inside of that state, maybe to different municipalities and at that point, all you're doing is adding just bracelets to the equation, what is the breakeven for putting that bracelet on somebody to recouping the cost of that bracelet?

Like is it 1 quarter? Is it a year to recoup your costs? Can you break that down for us so we can kind of understand the longevity of these contracts versus when the ROI is complete on actually assigning the bracelet to somebody?

Yes, it's a great question. And I'd love to share that with you. But for competitive reasons, we don't share that specific number. As you can imagine, there's 10 other players in the industry and everyone is trying to understand the cost structure and the exact prices per bracelet that the competition and all the customers as well.

So we -- at a aggregate level, you can see from our financials, when there's a new project, large one, there's cash that's outlaid to manufacture them. And then over the lease, we bring it back.

But the margins, especially the additional contribution margins for additional bracelets are high. And over time, we expect to see margin expansion in our business as we continue to have the same cost leverage for higher revenues. Yes.

I can appreciate that response. Final question. There have been rumors circulating that you guys have been approached for a buyout. I take it with a grain of salt, but is getting bought out something that you guys are considering?

I don't know where these rumors come from, but I'll share and I've shared before that we've been approached by a variety of strategic or financial firms to acquire us. Our decision of the Board, as always, will be what is best for the shareholders.

So I can't get any specifics on that, but I have shared that that is a situation that has occurred to us. And it's natural considering our performance in the market. We're a very high competitive rate. We're expanding very nicely in our technology, I believe, is highly coveted by other players and it could perform very well to help disrupt the criminal justice industry.

At this time, I will pass the call back to Ordan for closing remarks.

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

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Ladies and gentlemen, good morning, and welcome to SuperCom's Second Quarter 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 Ordan Trabelsi, SuperCom's President and Chief Executive Officer.

I'd like to remind you that during this call, SuperCom 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 not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, a comparable GAAP financial measure, please see the reconciliation table located on SuperCom's earnings press release that accompanies this call. Regulations 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, August 14, 2025. Except as 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 call over to SuperCom's President and CEO, Ordan Trabelsi.

Thank you, operator, and good morning, everyone. Thank you for joining us today. Earlier this morning, we released our financial results for the second quarter and first half ended June 30, 2025. You can find a copy of the press release in the Investor Relations section of our website at supercom.com.

Today, I'll walk through our financial and operational highlights for the first quarter and first half year of 2025 as well as recent business developments and strategic progress. We'll then open the call for a Q&A session. We delivered another strong quarter, marked by continued margin expansion and growth and operating profitability. Our gross margin expanded year-over-year to 59.1% and operating income nearly tripled to $1.1 million. First half 2025 GAAP net income reached $5.3 million, marking an approximate 80% increase from our prior year period, a new first half record for the company.

However, it's important to remember that we are talking and working with numerous governments around the world to drive transformative changes in public safety infrastructure. These efforts often on a national scale take time, coordination and are structured as long-term multiyear contracts. As a result, individual quarters may not fully reflect the long-term trajectory of our business, which is shaped by the cumulative effect of many projects advancing in parallel. For example, this quarter's gross margin of 59% is above our recent average. In future quarters, margins will fluctuate depending on the project mix, but we believe that our long-term margin potential is even higher given operating leverage, economies of scale and other elements of our expansion.

I'll try to give a high-level view for those of you to understand our goals, our progress and what levers to track to understand that progress. At SuperCom, our mission remains clear, to revolutionize public safety through cutting-edge electronic monitoring technology and data-driven solutions. For over 3 decades, we have partnered with dozens of national governments across the globe to deliver secure, scalable and innovative platforms that enhance security for their country. Our focus in recent years has increasingly shifted towards criminal justice and offender electronic monitoring solutions.

Our strategy is centered around 3 pillars: first, innovative technology, we invested over $45 million in our technology platform and our proprietary solutions consistently outperform in competitive tenders, particularly in Europe, where we've had a win rate of over 65% in competitive RFPs. Our platform supports critical programs such as GPS tracking, house arrest and domestic violence prevention. Recently, we have integrated AI-driven analytics to enhance predictive insights and client outcomes, and we'll have more information about that in the near future. Second pillar is to expand our global presence. Our global presence is significant and expanding rapidly with more and more geographies adopting electronic monitoring technology. Our strategic focus in the electronic monitoring market where we see growing demand and where the market is projected to reach $2.3 billion by 2028. Estimates show the U.S. and Europe account for 95% of this market. And our third pillar is to deliver outstanding service.

Our reputation as a trusted partner grows with each new deployment. Some of our government customers have been with us for more than 20 years, often starting with a single program and expanding into multiple solutions over time. Since 2018, we've secured over 70 multiyear government projects across multiple regions. In the past year, we've experienced accelerated expansion whereby we added over 30 new contracts across North America, alongside 5 strategic partnerships -- 9 strategic partnerships with leading regional service providers in the U.S. We continue to amplify our technological leadership with significant R&D investments, leading to the launch of advanced solutions like PureProtect, also branded as PureShield, our domestic violence prevention solution and PureOne. These offerings are making headway in various markets, including the U.S. and are pivotal in SuperCom's expansion.

PureProtect or PureShield is a life-saving domestic violence monitoring solution providing preventive measures to families suffering from domestic violence or stalking, thereby increasing their safety. PureOne is an all-in-one GPS ankle bracelet monitoring solution, integrating comprehensive monitoring capabilities into a single device. Like many of our products, it offers top-notch features placing it above the competition in most metrics. Our tethered ankle bracelet technology, together with our cloud-based software-enabled PureSecurity product line has been particularly effective in continuously monitoring offenders and managing real-time information.

This real-time advantage is a game changer, empowering authorities with actionable insights and timely interventions to mitigate potential risks and enhance public safety. Our technology is not just enabling better outcomes. It's actively redefining industry standards. We consistently displaced long-standing incumbents, such as a 24-year incumbent EM provider in Sweden and a nearly 20-year incumbent EM provider in Israel. In both cases, our technology, agility and innovation provided decisive wins in competitive tenders.

We've also helped governments establish our first ever national electronic monitoring programs as seen in countries such as Romania, where we're supporting a program up to 15,000 simultaneously monitored individuals and Croatia, where we were selected to lead the country's first step into modern electronic supervision. These wins underscore the adaptability of our platform and the growing demand for comprehensive EM solutions around the world. Our continued investment in product innovation is driving measurable market expansion. Successful adoption of our PureOne and PureProtect has expanded our addressable market, supporting deeper penetration to existing geographies and entry into new ones, particularly in the U.S. and Europe.

We also reinforced our operational infrastructure and enhanced our go-to-market approach. Our sales team composed of industry veterans has played a key role in securing wins and building our pipeline. In the fourth quarter, together with our partner Electra Security, we secured a multinational -- multiyear national contracts with Israel Prison Service to deploy our PureSecurity suite. The program encompasses all offender monitoring nationwide and this one followed a rigorous competitive process and replaced a provider that held the contract for nearly 2 decades, underscoring our technological advantage and proven execution capabilities.

As of today, over 1,500 units of SuperCom's PureSecurity suite have been delivered under this program, reflecting recent growth with opportunity for more growth remaining. I remind this program encompasses all offender monitoring in Israel. So as more programs and more units, growth will continue. More broadly, we continue to gain momentum in competitive tenders across Europe and the U.S. often displacing incumbents. Our strong track record and reliable delivery remain core to our growth.

We view every new deployment as a start of a long-term relationship by planting seeds in multiple regions and consistently delivering value, we've seen customers deepen their engagement with us over time, often evolving into multiple long-term projects. In Europe, our strategic execution continues to drive long-term growth. Over the past few years, we secured over 15 national electronic monitoring project wins through competitive tenders, including large-scale domestic violence initiatives aligned with regional public safety priorities.

Notably, in Romania, we were awarded the largest industry a Board of 2022 in Europe over a $33 million program covering up to 15,000 individuals simultaneously. This program remains active and demonstrate the scalability of our PureSecurity platform. Another great example of our long-term expansion strategy, which reflects the strength of our reputation is Sweden. Since our initial award from the Ministry of Justice in 2019, we've been selected again and again by Swedish government agencies, including the Swedish Police Authority and Juvenile Justice System. This ongoing trust reflects our consistent delivery and high-level satisfaction with our technology and support.

We also expanded in Finland with the national deployment of our domestic violence solution and recently launched our third national project in Latvia, ordered via formal tender to support the state police for offender of compliance and victim protection. Earlier this year, we announced our seventh National domestic violence monitoring program, further expanding our presence in the EMEA region and signaling to our leadership in domestic violence monitoring solutions. In parallel, we continue to actively run programs in other European countries such as Denmark and Bulgaria and continue to receive follow-on orders from existing European partners. These follow-ons highlight the reliability of our technology and the strength of our relationships.

As governments increasingly adopt proactive monitoring policies, we believe our proven model positions us well for sustained success in the region. While Europe remains an important growth driver, the U.S. market presents even greater long-term opportunity projected to grow to 6x the size of the European market in coming years. With the launch of PureOne in our domestic violence solutions, we believe SuperCom is well positioned to unlock substantial potential in this untapped market. Although SuperCom has already done business in multiple U.S. states, we are actively focused on further expanding our presence in the U.S. Our U.S. subsidiary, LCA, continues to win in California new and existing customers.

In June, LCA was awarded a reentry services contract in Northern California valued up to $2.5 million for over 5 years. This project builds on LCA's long-standing track record in community reentry and rehabilitation, further solidifying our presence in the region. Beyond California, our broader U.S. expansion strategy has gained significant traction. Since mid-2024, we've secured over 30 new electronic monitoring contracts, entered 11 new states and established 9 strategic partnerships with regional partner providers to accelerate market access.

In the second quarter, we expanded into Tennessee, Virginia and Nebraska and were selected as the only new EM provider for a statewide procurement vehicle in North Carolina, enabling streamlined access to counties across the state. We also signed a new agreement with a Southeastern service provider to introduce our EM technology in Florida and Mississippi adding 2 additional growth markets for our platform. These milestones add to our previously announced expansions in Utah, Kentucky, Alabama, South Dakota, Arizona, Ohio and others. We are already actively expanding into Wisconsin, Minnesota and Michigan through our Midwest focus agreement and launched a GPS modernization initiative in Canada with a long-standing provider.

These wins demonstrate our growing ability to displace legacy offenders and deliver recurring revenue from both urban and rural jurisdictions. Our technology leadership, particularly the capabilities of our PureSecurity suite combined with a proactive go-to-market approach continues to differentiate SuperCom in competitive bids. Our expanded sales organization has driven a sharp increase in demos, pilot programs and qualified opportunities, resulting in the growing U.S. pipeline of recurring revenue opportunities. With sustained demand and good execution, we believe we are well positioned to further scale our U.S. footprint throughout 2025 and beyond.

A core operational advantage in the U.S. is our cloud-based centralized system, including inventory management and 24/7 support, allowing us to efficiently support nationwide deployments. This structure significantly improves operational efficiency and lowers costs compared to Europe where projects typically require country-specific servers, local language adaptations and centralized support. As a result, we're able to launch programs in the U.S. more quickly and cost effectively, whether at small scale or statewide, enabling greater flexibility, faster time to revenue and higher margin potential.

But despite macroeconomic uncertainties and ongoing global challenges, including those in Israel, SuperCom's solutions are becoming increasingly relevant. We continue to see growth driven by high recidivism rates escalating cost of incarceration and the surge in the adoption of victim protection solutions worldwide. The company's PureSecurity technology solutions have been designed to address these trends offering an effective way for institutions to enforce home confinement, ease prison overcrowding and lower costs significantly.

For example, monitoring an offender on home confinement or GPS cost about $10 to $35 a day, which is 90% less than the $100 to $140 daily costs at a corrections facility. Moreover, home confinement helps to reduce repeat offenses, highlighting its effectiveness in helping offenders improve their lives and communities. In parallel, we continue to evaluate strategic acquisition opportunities in the U.S. market. Acquiring an established local service providers can expand our footprint, unleash synergies and enhance vertical integration. A proven example is our 2016 acquisition of LCA, which has since generated over $35 million in project wins in California alone.

And in regards to artificial intelligence, we gave a glimpse in the recent past that we started integrating AI into our technology and solutions. And we'll have more news about this in the near future. Meanwhile, AI is already being leveraged significantly also in our ongoing operations, research and development and other processes.

Before diving into the quarterly results, it's worth noting that we achieved record profitability for the first half of 2025 with net income rising nearly 80% year-over-year to $5.3 million. Our operating margin also more than doubled to 16.2% during the period, reflecting the strength of our operating model and ongoing transition into higher-margin contracts and revenue mix.

I'll now turn to the financials considering this quarter, Q2 2025 in comparison to the same period last year, Q2 2024. Revenue for the quarter was $7.14 million compared to $7.5 million in Q2 of 2024. While revenue was modestly lower, our continued shift towards higher-margin contracts and revenue mix drove meaningful improvements in profitability. Gross profit increased by 12.7%, for example, to $4.2 million, up from $3.7 million and gross margin expanded by 9.5 percentage points reaching 59.1% compared to 49.6% last year. This improvement reflects a strong contribution of high-value technology-led projects and higher mix of revenue with higher margins.

Operating income rose sharply by 187% to $1.1 million compared to $0.4 million with operating margin nearly tripled to 15.1% from 5.3% in the previous year period. This significant improvement in operating margin reflects not only our shift to higher-margin projects, but also the results of management's continued efforts to streamline operations and drive greater efficiencies across the business and different projects. Net income for the quarter was $1.1 million compared to $2.2 million in the same quarter last year, which included approximately $1.8 million in nonrecurring financial income that did not repeat in the same fashion.

Non-GAAP net income was $2.2 million compared to $3.3 million and non-GAAP EPS was $0.49 compared to $1.81 in the prior year period also which entails $1.8 million of financial gains, which did not recur in this quarter. EBITDA increased by 56%, reaching $2.5 million this quarter, up from $1.6 million in Q2 of last year marking our 12th consecutive quarter of positive EBITDA and further demonstrating the resilience of our operating model.

From a balance sheet perspective, we ended the quarter with a strong position. Cash and cash equivalents totaled $15 million, up from $5.7 million at the end of Q2 2024, reflecting improved cash generation and financing ability. Working capital improved to $40.8 million and book value of equity rose to $37.3 million, each up significantly from $26.1 million and $13.8 million, respectively, at the end of Q2 2024. These improvements in our balance sheet were driven by a combination of disciplined cash management, capital raises and proactive debt structuring along with an improved operational capabilities that we've been showing. Results reflect our continued progress into enhanced profitability, expanding margins and building a foundation for long-term sustainable expansion.

In closing, I want to thank our global team for their continued commitment and execution. We've entered 2025 with strong momentum, delivering record financial results, accelerating expansion in key markets and further validating the effectiveness of our solutions. As governments seek smarter, more humane and cost-effective alternatives to incarceration, SuperCom is uniquely positioned to lead. Our proven technology, growing contract base and scalable infrastructure provide us with a strong foundation to continue our growth across the U.S. Europe and beyond. We encourage stakeholders to track key indicators in our business, such as our win rate and competitive tenders, expansion into new geographies and new projects from existing customers.

Another important thing to remember is the project mix. This quarter, gross margin reached 59.1%, reflecting the increased contribution of higher-margin revenues, while not yet our steady state, it offers a glimpse into our long-term profitability potential, where projects tend to achieve higher margins over time as they mature and grow and economies of scale together with operating leverage are utilized. We remain focused on advancing public safety, creating long-term value and building on the consistent progress we've achieved in recent years.

And with that, I'll turn the call over to the operator to open for questions. Operator?

[Operator Instructions] Your first question is coming from Matthew Galinko from Maxim Group.

Congratulations on the strong results in the quarter and half. Can we start with where the opportunity is for expansion with the contract in Israel? Is there just kind of a layering in of your devices on the existing system? Or do you need sort of expansion in the use of monitoring in the country to kind of expand within that contract?

It's a great question. On our last quarterly results, we announced, I think, roughly 1,200 units that were delivered and now we surpassed 1,500. It's already growing in the amount of units. And before us, there's another company, another Israeli company, and they have been providing the solution for over 20 years. So we're new, and we've brought the technological advances that we've deployed all around the world in many different projects, and now we brought them here to the program in Israel. And the project is such that encompasses all EM programs in Israel.

So the company, in general, we have GPS tracking, which allows someone to also leave their house, go to work and other things while they're being tracked. We have a house arrest, there's alcohol monitoring, there's domestic violence, which we've been taking a strong lead globally on. And in Israel, whatever programs they decide to deploy, it would utilize our technology. So there's growth within existing programs that they had for a long time, which is mainly house arrest. And they are delving in and trying and looking to add additional ones, and we'll be there to support them in that expansion, as we've done with many countries around the world.

I remind you that in Romania and Croatia, for example, they've never done electronic monitoring before and we're able to deploy massive programs there very effectively. And so it's going to be potentially easier with a government office that has done this for a long time, just maybe not with all the different solution capabilities are out there. And now we look forward to deploy and help as much as possible with public safety using the PureSecurity suite together with our partner, Electra Security in Israel.

Got it. And as you think about the opportunities you have in Europe versus kind of the more fragmented U.S. market that I know you're investing in. Looking out over the next 4 to 6 quarters, is the balance more in the U.S.? Or is there -- are there national programs that you're competing for in Europe that could also land? Just curious kind of where we should think about growth coming from in the next few quarters?

It's a great question. So in Europe, we started several years ago in Europe. And we started with Latvia and Lithuania, which are small projects, and we grew into more and more projects. And lately, we had Latvia police, which is additional projects in Latvia; and Sweden, we had the second and third project. And so we are so active in Europe. And we've just been bidding over the recent months, and we continue to bid on projects in Europe. Some are smaller scale add-ons to existing deployments, some are brand-new projects and some are very large projects, larger also than the ones that we've won till date.

So there's a variety of opportunities in Europe, and we still plan to be active in the European market. Just that if you look at the U.S. market, we've also put a lot of focus on to it because it's expected to reach 6x the size of Europe. The economics are higher, you don't need a local partner to help you with language and deployment, everything is done centralized with the cloud, and it's all in English. And with our 24/7 monitoring and inventory management services and other support services, we're able to deploy units all across the U.S. with higher margins and the U.S. market is fragmented, as you mentioned, which is true.

So it takes a little bit more work on the sales process. More meetings, more demos, but it allows you also to grow faster. You don't have to wait for an RFP that comes out in 2, 3 years for the entire national project that we see in Europe. You can pick off counties one by one and small resellers that you work with? And as you've seen in the last year alone, we've signed over 30 contracts just in the U.S. for electronic monitoring. So the expansion potential is great there along with high-margin potential, higher than what we saw in Europe and higher than what we've seen yet today in the company. But over time, as we expand and we add more and more revenues in the U.S., not only are they almost entirely recurring in nature because the U.S. market is -- almost all the contracts are per unit per day, whereas in Europe, you have some that are per unit per day and some that include purchase and maintenance.

So not only is it more recurring in nature, which helps us with predictability and management. They're also a higher margin and also allow a potential faster growth. So we're excited about both the European market and the U.S. And there's still opportunities also outside Europe and the U.S. There's opportunities in many places around the world. We don't talk about them as much because they are more one-off here, one-off there, we look at them. And we've also won outside the U.S. and Europe until now, and there's more opportunities also around the world in APAC and in other locations in EMEA and also in South America.

So the market is large, and we see that almost in every region of the world once they start using electronic monitoring, they grow the program. In California 10, 15 years ago, you would have seen a fraction of what they have in the program today in California State, same in Florida and the same goes for other countries around the world. Once they see the cost savings, the effectiveness, the efficiency of such alternatives to incarceration, they usually grow their programs.

Got it. And final question for me before I jump back in the queue. You touched on the possibility of acquiring local service providers like you did with LCA, your balance sheet cash position is stronger than it's been in quite a few years. So I'm curious how close you're looking at M&A as potential for accelerating U.S. growth and kind of how you compare that to adding more salespeople in the U.S. to grow organically.

Great question again. Thank you for that. We talked about acquisitions for a while because we did do it back in 2016, that helped us enter in the market because there's very high barriers to entry. And for a long time, we've been focused in the European market and developing our technology. And now that we started entering into the U.S., where we've been aware of these value-added resellers for a long time to help aggregate the counties and they're very efficient and needed for the U.S. market. But our technology wasn't exactly there yet and also the balance sheet was in the same position now as that the technology is shown to be an amazing fit for the U.S. market, we continue to expand it with our sales people, a very small team. We've been able to grow secure over 30 different contracts.

It becomes even more of an opportunity, the path of acquisition of value-added resellers in the U.S. market. Because these resellers have the contracts and they're purchasing the technology from other vendors, there's top line synergies, there are cost synergies. There's opportunities to expand into more geographies faster and there's opportunities to get more of our technology into more markets faster. So there's a really nice opportunity there that we expect to capitalize on in the coming years. And we think now more than ever before, the opportunity and the value from doing that is there and it's effective. So we'll have more news on that, but we're in good relations with a lot of these resellers. As we said, we signed the 9 of them just for operations and deployment, but we also talked to them about the alternative of acquisition. And so there's an interesting growth channel there as well.

[Operator Instructions] Your next question is coming from Greg Mesniaeff from Kingswood Capital.

Orden, can you hear me?

Yes.

Good. Question on the quarter. Your strong earnings were really clearly a function of margin expansion, more than revenue growth. Can you give us a little bit of color regarding what the opportunities are for even higher margin expansion? You mentioned that briefly in your opening remarks. But also is the very strong margin expansion, a function of geographic mix? Or is it a function of first-time sales versus follow-on sales? And how do you see that playing out in the next couple of quarters in terms of your revenue growth as well?

Okay. So multifaceted question. Let me first talk about generally what we've been doing in Europe, we've been deploying projects in different regions and everyone teaming up with local partners. As you do this -- after we do this more and more for many years, we start to consolidate the various services. And that, of course, helps us with margins. We're always looking in our operations to improve profitability and margins with things that we do over and over and over again, like deploying more projects in Europe. In the U.S. market from the nature of it because it's in English and it's on the cloud and we've got one 24/7 Center, it already has inherent optimization of margins that is certainly going to be helpful. And so we are optimizing where we can. But at the same time, and this is what I noted also in the script in the opening remarks, we're deploying many projects around the world at the same time. We talked about 30 contracts in the U.S.

We talked about some existing customers in Europe and new add-ons. They all have their own time line and they are at different stages. So some early on have lower margins and then reach higher margins. Some early on have higher margins and reach stable margins, which are potentially lower. It depends on the structure of the program and whether it's a lease or a purchase of the monitoring and also what they're looking to do and the partnership. So while I would love to give a general answer to exactly how it's happened, how it's going, it's actually we're reporting the mix, but behind the curtain, there's many different things that are moving around every quarter. And so it's hard to predict exactly how that's going to fall into place. We are seeing general improvements across the board and operating leverage and economies of scale, and we'll continue to see that. And very long term, if you want to start with that, long term, we think that as more and more of the revenues come from the U.S. and more and more units deployed in existing contracts and more operational efficiencies, economies of scale and operating leverage, margins can expand even more than where they are today, and that's long term over the years.

But currently, we're still in a transition state where we're going from lower margins and now we're starting to bring in some higher-margin projects, some optimizations. And then the way things fall in the quarter, sometimes you'll see things that are a quarter of 60%. As you see now, and as you saw in the previous quarter, it was 63%. So it doesn't mean that every quarter is like that yet, there's still volatility in the quarters. But it's important to focus on the general trend and the general trend is definitely positive for what we're doing to improve our operations. But as -- when top line is higher and you have operating leverage more and economies of scales and more deployments than long term we expect to see good direction there.

Okay. And just a very quick follow-up, Ordan. Would you say that your visibility on margin expansion is a little better than your visibility on revenue growth? Or is it the other way around? Or any comments there?

That's a great question. With the projects on some of the previous questions, we bid on many projects also in Europe besides the ones in the U.S. and even the ones that we started in the U.S. They each are growing at different rates. We talked about Israel, that there's growth of the project, there's potential for more. It's still hard to know where the growth will come from and at what pace? And similarly for margins, the margins, it's a different challenge. We know that the margins in general, how to improve them. But per project, we can't know which stage of the project is going to happen and in which quarter. So it's on the back behind the curtain, it's a mix of a lot of different things happening together. It's still hard for us to predict. Over time, certainly, we expect to have more customers, more diversity in customers and we'll have much better visibility on also revenues and margins.

But that, of course, is together with us expanding into more and more locations and having a bigger, more diversified customer base across the world.

At this time, I will pass the call back to Ordan for closing remarks.

Operator, before you pass it back to me, can you please do another round to see if there's more questions.

Certainly.

And if there's nothing else, then we'll wrap up.

[Operator Instructions] And at this time, I'll pass the call back to Ordan for closing remarks.

Okay. Thanks. And I want to thank all of you for participating in today's call and for your questions and for your interest in SuperCom. Please contact us directly if you have any additional questions, and we look forward to sharing our progress with you on our next conference call, filings and press releases. Thanks to you once again, and have a great day.