Q3 2025 SuperCom Ltd Earnings Call
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Speaker #1: 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 forward-looking statements including statements that address Supercom's expectations for future performance or operational results.
Speaker #1: 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 20F and Form 6K.
Speaker #1: 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.
Speaker #1: 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 this call.
Speaker #1: 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, November 13th, 2025.
Speaker #1: 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.
Speaker #1: It is now my pleasure to turn the call over to Supercom's president and CEO, Ordan Trabelsi.
Speaker #2: 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 30th, 2025.
Speaker #2: You can find a copy of the press release and 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.
Speaker #2: Since mid-2024, we have secured over 30 new electronic monitoring contracts in the US alone, including entry into 12 new states and 14 partnerships with regional service providers.
Speaker #2: These wins reflect growing demand for advanced, scalable EM solutions and validate our ability to rapidly expand our US footprint. Importantly, many of these new partnerships involve replacing incumbent vendors, a recurring theme that speaks to the strength of our pure security platform and the trust that continues to earn from agencies seeking modernization.
Speaker #2: We've seen this in states like Virginia, Utah, and have transitioned from legacy systems to Alabama, where multiple agencies Supercom's technology within a short time span.
Speaker #2: In Alabama, for example, we recently launched our third and fourth
Speaker #1: Program . After evaluating competing technologies . And in Virginia , another service provider , fully transitioned its operations to GPS Supercom Ltd , marking our second reseller partnership in that state .
Speaker #1: 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 .
Speaker #1: Our ability to serve both direct government agency contracts and third-party services gives us the versatility to operate effectively in varied regions, supporting distinct program structures.
Speaker #1: addition to In these wins , our US presence is the reinforced by continued success of leaders and community alternatives . LCA . Our wholly subsidiary owned in California , which recently secured a five year reentry services contract valued at up to $2.5 million .
Speaker #1: 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 .
Speaker #1: While our progress in the US 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 .
Speaker #1: This milestone marks a strategic foothold in a highly advanced market , achieved by displacing a vendor that had served the German government for more than 20 years .
Speaker #1: 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 .
Speaker #1: We now support nine nations with domestic violence programs across the US , Europe and other regions . Governments increasingly rely on our pure track and pure shield technologies to support victim protection and offender accountability .
Speaker #1: 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 with a single project and expand into multiple programs as trust and performance are established in Europe .
Speaker #1: We've seen this in countries such Sweden as and Latvia , where an initial deployment has evolved into broader national coverage . We're similar now seeing a pattern play out in the US , 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 .
Speaker #1: 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 US .
Speaker #1: A core operational advantage for us in the US is based our cloud , centralized platform , as well as integrated inventory management , and 24 over seven support .
Speaker #1: This centralization enables us to support nationwide deployments efficiently unified from a infrastructure in one language . In contrast , European projects often require country specific servers , local language customizations , and decentralized support models , which introduce additional complexity .
Speaker #1: Local partner support and costs increased . As a result , we can launch new programs in the US more rapidly and cost effectively , whether at the county level or statewide , enabling faster time to revenue and higher margin potential .
Speaker #1: 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 US market , targeting established local service providers can help us accelerate our market penetration , enhance vertical integration and unlock operational synergies .
Speaker #1: 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 .
Speaker #1: And as we scale , we see meaningful potential to replicate this success in additional regions in the US . Alongside these expansion remain focused on strategies , we addressing the core challenges facing modern justice systems .
Speaker #1: Our solutions directly address some of the most pressing challenges facing criminal justice systems worldwide , including high rates , prison recidivism overcrowding , and excessive costs , and unsafe communities .
Speaker #1: At the end , by providing modern , scalable alternatives to incarceration , are helps governments technology improve supervision , enhance public safety , and reduce the long term public and burden on correctional systems .
Speaker #1: Tackling systemic challenges requires continuous innovation , and that's where our leadership technology plays a central role sustained . Our investment in innovation has been key to our success over the years .
Speaker #1: We've 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 .
Speaker #1: ongoing This 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 .
Speaker #1: Their contributions are a core reason why continues to Supercom win competitive tenders globally , often displacing long standing legacy providers . Capabilities advance .
Speaker #1: So, does our ability to capture, share, and rapidly grow the 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.
Speaker #1: Notably , the US market is estimated to be more than six times the size of the European market , making it it particularly attractive driver for long term growth .
Speaker #1: 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 .
Speaker #1: I'll now turn to the financials , reviewing our performance for the third year . Third quarter , and first nine months of 2025 compared to the same period last year in 2020 .
Speaker #1: For . In the third quarter 25 , we achieved continued profitability and margin expansion , driven by operational efficiencies and improved cost structures .
Speaker #1: 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 .
Speaker #1: Gross profit actually increased this 2:45 point $8 million , with gross margins expanding to 60.8% , up from 45.6% a year ago . This marks quarterly one of the highest gross margins in our history , driven by disciplined cost management , operational automation and reduced reliance on third party service providers .
Speaker #1: also reflects It a favorable revenue mix , with a growing share of higher margin international project phases . And US programs also contributing to the results .
Speaker #1: As we continue to bring in more work in-house and streamline deployment and adoption processes . We're seeing operating leverage as well as margin expansion income , operating searches $640,000 this quarter , up from around $30,000 in Q3 of last year , with operating margins increasing to 10.3% .
Speaker #1: EBITDA doubled to 2.2 million from 1.1 million in Q3 2020 . For reflecting EBITDA margins of 34.6% , year net net surged 400,000 in the prior from a of turnaround income loss reached 700,000 , net and non-GAAP $1.9 million , from 35,000 350,000 last year .
Speaker #1: non-GAAP EPs came at $0.39 , compared to $0.17 in the third quarter of 2020 . For . And now let's have a look at the nine month performance of 2025 compared to the same period of 2020 .
Speaker #1: Revenue was $20.4 million, compared to $21.3 million in the first nine months of 2024, reflecting a modest decrease due to revenue mix and timing of contract launches.
Speaker #1: However , despite the lower top line , we delivered strong margin and improvements in 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 .
Speaker #1: 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 nine months of 2020 .
Speaker #1: For supported by our improved cost structure , disciplined execution and the positive impact certain of non-operational financial gains recorded during the period . non-GAAP net income increased to $9.3 million , with net margin more than doubling to 45.7% , a non-GAAP EPs for the period was $2.17 .
Speaker #1: We also made progress in strengthening our balance sheet in the past two years alone . We reduced our net debt by nearly $25 million .
Speaker #1: 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 in December 2028 and lowered the interest rate significantly in parallel , we raised over $16 million in gross proceeds , including $6 million for registered direct offering completed at the beginning of 2025 and an additional $10.2 million to warrant exercises .
Speaker #1: These steps , in unison , contributed to a stronger cash position and enhance our financial flexibility to support future growth . Opportunities , including new project continued investment in deployments , technology and potential M&A activity .
Speaker #1: As a 30th 2025 working capital stood at $41.8 million , up from $26.1 million just a year ago . Book value is tripled .
Speaker #1: value of Book equity tripled to $40.8 million , up from 13.3 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 .
Speaker #1: That said , we believe our progress in streamlining operations , automating processes and improving in launch execution sustainable and us for long margin term resilience and expansion as we scale .
Speaker #1: Before closing , I'd like to highlight the broader transformation that continues to define Supercom trajectory . Since implementing our new strategic roadmap in 2021 , we've consistently strengthened the business across revenue growth , profitability , and balance sheet health .
Speaker #1: We results even more find the compelling when viewed over a multi-year horizon . Revenue more than doubled from a five year consistent decline , reaching $11.8 million in 2020 to 4 years of continued growth , reaching 27.6 million in 2024 .
Speaker #1: As of the first nine months of 2025 , we reached 20.4 million in revenue , reflecting continued scale relative to private 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 nine months of 2025 reached $12.5 million , closely aligned with the figure 2024 full year , 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 nine months of 2025 .
Speaker #1: non-GAAP net income improved by over $10 million , turning from a loss of $1.7 million . To a $6.3 million profit , and at 9.3 million year to date .
Speaker #1: 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 nine months of 2025 .
Speaker #1: These improvements were achieved while navigating macroeconomic headwinds . A global pandemic supply chain disruptions , rising interest rates and regional war , and the underscore the strength of our operating model technology long term differentiation and execution strategy .
Speaker #1: 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 value term creation .
Speaker #1: In closing , we are proud of our execution this quarter and trust our customers to continue place in to us . I'd also like to thank our global team for the dedication and performance , their expertise , commitment and hard work continue to drive our success and ahead , as we look we remain focused on leveraging our momentum to expand , strategically , deepen customer relationships and continue innovative delivering solutions that improve public safety outcomes world around the .
Speaker #1: that , I'll With turn the call over to operator to open for questions . Operator .
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Speaker #2: One moment for the first question . first question for Your today is from Matt Glencoe with Maxim Group .
Speaker #3: Hey , thanks for taking my question . I'd like to start with the market opportunity in Germany . Sounds like a nice , I think , first step into that market .
Speaker #3: There opportunity to expand there . And you know , what would the process look like to expand within that market ?
Speaker #1: Great question . And we announced the win in Germany just a couple months ago . And it's a great a very lucrative market .
Speaker #1: The the win and project already won has four different that we types of projects in it , alcohol including monitoring , GPS domestic monitoring , violence and house arrest .
Speaker #1: And like we've seen in many other nations in Europe , once we enter with initial project and we do good work , and that's what we typically do , we have an impeccable record for our deployments .
Speaker #1: We end up winning more projects and expanding the existing one . 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 to potentially grow in numbers and to grow in scale as the add additional capabilities for our ongoing growing product offering .
Speaker #3: Great. Thank you. The second question is, I think you mentioned a service provider in the U.S. that switched their complete GPS tracking to Supercom Ltd. products.
Speaker #3: maybe expand a Can you little bit on , you know , 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 ?
Speaker #1: Great question . we've And actually had 14 service providers just this year that signed on . And the model in the US is so fragmented .
Speaker #1: It's not like in Europe that it's just a national project . There's many different counties and they each have their own programs , programs in each multiple county .
Speaker #1: And beautiful is that there's these service providers who are become many 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 much more advanced and superior it is in many aspects to what they've tried .
Speaker #1: So in many of these service providers that 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 so significant , they're willing to advantage is go through that .
Speaker #1: Now, when you go directly to an agency in some of the larger agencies, they have the personnel in-house to run these programs. They know how to put the bracelet on to write the report.
Speaker #1: They run the technology . Then we sell directly to that agency . When it's a service provider , they aggregate five , ten , 20 or more agencies .
Speaker #1: And so that's an advantageous angle as well . Both of them are valuable . Both are great strategies for expansion . And both have been working very well for us .
Speaker #3: Great . Thanks . And final question for me , before I jump back in the Q , it looks like your debt position declined by about 2 million in the third quarter .
Speaker #3: 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 .
Speaker #1: So as we discussed in the past , we with our strategically have been doing lenders conversions of debt to equity . It's a small ones and and then in aggregate , they become meaningful company .
Speaker #1: to to the As you've seen over the last few years . And we typically do them at a premium . And that helps us reduce our debt balance as , as described .
Speaker #1: And you see that as well in in the numbers as you follow the quarters . And one thing I wanted to about your question add with the service providers , another thing that's unique in the US that we're doing because we're already in nine countries around the world with our domestic violence solution , and we have a very strong small bracelet with long battery life .
Speaker #1: 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.
Speaker #1: And our technology does a great job in that and many other vendors have struggled with this in the US . Of course , like any other place , there is domestic violence and the fact that we can offer this with such a such a of high level experience and seamlessness allows our service providers to add a whole new solution to everything they're offering today .
Speaker #1: 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 .
Speaker #3: Thank you .
Speaker #2: next Your question is from Greg Messina with Kingswood Capital Partners .
Speaker #4: Good morning guys Yes . . A couple of questions . When you kind of analyze your revenue , number of 6.2 million , if you break down that by geography , how does that compare to a year ago ?
Speaker #4: It seems to me correct me if I'm wrong , that you're US . Business has been quite strong and it appears to me that the the softness has come from other geographies in the world .
Speaker #4: Can you kind of give us some color on that ?
Speaker #1: Yes . It's a great question . In Europe , most of our revenues are still from Europe and other geographies outside the US .
Speaker #1: And that's where our focus was originally won over 50 national programs around the world with our Peer Security suite. These projects are multi-year projects and have various phases.
Speaker #1: Some phases , more And then deployment . then scaling . And additional afterwards and changes and so forth . So there are 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 .
Speaker #1: And that , you know , can mix differently in different quarters . It's not a consistent monotonic growth or monotonous decline . It's just one one quarter .
Speaker #1: There could be more of this project and less of the other ones . So the the volatility that see you would between the quarters , a lot of that comes from those projects in the US market , which is newer for us .
Speaker #1: We have a strong base in California that we've been running for years . And then over the last 12 months , we've over 30 new signed contracts and some of them , start small .
Speaker #1: 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 US market is that almost everything recurring is revenue per unit , per day .
Speaker #1: Now , the majority of our business is recurring revenue , but they're still components that are not , especially in Europe and the US market .
Speaker #1: Those numbers will grow and grow , and over time , because US market is six times that of Europe , we expect more recurring revenue to be the prevailing part of our revenues .
Speaker #1: And we expect more consistency upon the quarters , together with margins . improved So we continue to grow in Europe and around the world .
Speaker #1: But the U.S. has become, 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.
Speaker #4: Great . Thank you . And could if I expand on that just a bit , as you win contracts in the US , what are typically their time spans compared to similar wins in , say , Europe ?
Speaker #4: 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?
Speaker #4: And also what is the renewal rate that you've been seeing on them on a percentage basis ? Thanks .
Speaker #1: Okay , great . Great questions . And let me try to structure it in a First way . of all , in the in the , these are market projects with long bid and cycle with a competitive process for RFPs .
Speaker #1: And that could take from four months to 24 months or even more . Sometimes to win these and usually the projects are structured at a five year span , nine year span , something like that , between 5 and 10 years and typically then incumbent vendor wins it over and over again .
Speaker #1: I mean , we displace the incumbent vendor in Sweden . They were there for 24 years . Since then , we won two more projects in Sweden , and display the we incumbent vendor in Israel .
Speaker #1: They were there for over 20 years . We displaced the incumbent vendor in Germany right now . They were there for over 20 years .
Speaker #1: So even though the initial contract is for five years or ten 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 .
Speaker #1: 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 .
Speaker #1: And that's helped us enter the market . And then expand . And naturally , once you win one project or two , you have an easier time winning the next projects .
Speaker #1: So . 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 .
Speaker #1: Now that's the European market in the US have a market , you mix . You also have , of course , there's these large RFPs , like for Ice and you have some state level contracts .
Speaker #1: And some counties are very large , some county projects in the are 30,000,040 , US $50 million alone . But there's also many smaller counties and many smaller programs .
Speaker #1: And you could start with them, especially if it's with a service provider. It's not a government RFP; it's a private company.
Speaker #1: At the end , and they sign a contract with you . And the idea is they continue running with you . You know , indefinitely .
Speaker #1: The continues to contract just 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 they'll have to be a big change for them to teach everyone brand new technology .
Speaker #1: So US , it's in the faster to deploy , especially with a smaller programs . We're able to deploy them faster . They might even start with less units and then grow the amount of units , whether they're different from in Europe , where you start with a large amount pretty quickly on .
Speaker #1: over the years , because And we've been deploying so many have such a high win rate and we've been expanding so fast . We've reached very fast programs , you deployment rates .
Speaker #1: 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 at , you know , with an impeccable record of doing it seamlessly without causing issues .
Speaker #1: Whereas some other vendors take a much longer time for deployment . That's one of our advantages . But in the US market , almost everything is recurring .
Speaker #1: They usually charge per unit per day , so it'd be $4 , $5 , three and a half dollars . Depends what services are included and you just like your technology , they start with you and then you see the numbers .
Speaker #1: now , what we're Right doing in the US with over 30 and over 12 different contracts states , is 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 .
Speaker #1: And then in some 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 .
Speaker #1: so there's a mix and So it's a little bit different between Europe and the US , but in US , as the the in size , just projects grow like they did in Europe , then you also see the RFPs and the larger project sizes .
Speaker #1: 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 .
Speaker #4: Okay , great . So is it fair to say that as more and more of your revenues come from the US , your revenue volatility should decrease over time ?
Speaker #1: That's a Yes . great statement . And also over time , the margins should expand . So predictability margin expansion , as I said in the prepared remarks , everything in the US is on the cloud .
Speaker #1: Everything's in English . We have inventory management centralized . We have 24 over seven monitoring center . That's centralized . You can imagine that's much more simple than having a server farm in Sweden .
Speaker #1: And another one in Denmark , and another one in Finland , and another one in Germany with local partners in different languages and different inventory management systems .
Speaker #1: And different so the US has a lot of advantages in that regard . And we're very excited that we're able to expand so effectively into the US market with our technology .
Speaker #1: .
Speaker #4: Got it. Thank you.
Speaker #5: Yeah .
Speaker #2: next question is Your a follow question from Matt up . Your line is live .
Speaker #3: taking my thanks for follow up . Just Hey , wanted to touch on operating expenses for a moment . It looks like R&D has been steady for pretty long time , as well as you know , sales and marketing has been pretty level .
Speaker #3: I'm just wondering, as you continue expanding in the U.S. market, should we expect to see operating expenses pick up at all to help support that effort?
Speaker #3: Or, if you put more spending into boots on the ground in the U.S., would that help to accelerate uptake into your U.S. market?
Speaker #1: The good question , and it depends on how much growth you're talking about . The beauty in this market and our in industry is that the contribution margin of each additional bracelet into an existing region is extremely high .
Speaker #1: It's just that there are fixed costs from running these operations in a server farm on the cloud with inventory management, over seven 24/7 support.
Speaker #1: And so now that we're in the US market , we have a good hold that adding additional units doesn't require a lot of costs .
Speaker #1: Our sales additional still fairly small , and maybe there could be some expansion to it . And we've these projects around the world based on our technology .
Speaker #1: We come technology first , less leveraging some relationship that won most of that other vendors might have . And we come with new technology that that's been works .
Speaker #1: resilient and successful in many other projects around the world . And And that's how we enter these new markets . So we there could be some expansion , but minimal to our to our operating expenses in order to achieve the continued plan that we're seeing .
Speaker #1: And in terms of research and development , we're doing very well . We already poured over $45 million into technology . We're far ahead than most our vendors in almost all aspects , invest to continue to we and ahead of that we are make sure them .
Speaker #1: And even if a with a brand new technology that they spent , you know , tens of millions of dollars on , it's still going to take him 5 to 6 years to get that the level that a large contract would take it .
Speaker #1: They want to see it first run in smaller projects for two , and then another project , another project , and only afterwards they'll take it on to larger projects .
Speaker #1: 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 for our technology .
Speaker #1: We continue with 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 that are service , that are local partners do .
Speaker #1: We're able to bring a lot of technology in-house. We're able to bring all of the technology that third-party vendors have developed in-house.
Speaker #1: We're able to optimize to make the promise more seamless, to have lower costs, and also to make things much more efficient as we continue to deploy and improve our product offering.
Speaker #3: Great . Thank you .
Speaker #2: again , if you Once would like to ask a question , please press star one . Your next question for today is from John Mason Argus with Co .
Speaker #6: Hey , thanks for taking my question . I guess in terms of the revenue . Sorry , can you hear me ?
Speaker #1: Yes , yes .
Speaker #6: Okay . Great . In terms of the revenue the year over year , I know , you know , you've been winning all these US contracts in the .
Speaker #6: Like when , when do you expect to , you know , sort of return to growth year over year on a quarterly basis those as contracts sort of start to flow in .
Speaker #6: I And know you mentioned that , you know , they're essentially seeds at this point . But , you know , I guess one , when do you expect that to inflect ?
Speaker #6: And then , I guess , be 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 ?
Speaker #6: question . And then I have a second Sorry .
Speaker #7: okay But .
Speaker #1: question . Good question Good . 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 .
Speaker #1: And as you see , we continue to announce more wins in the either with the same government or with same region , sister agencies in the same government .
Speaker #1: So it's it's not that we're losing customers , it's that some projects that are not recurring have more heavy and more deployments , more expansion , more then there's work .
Speaker #1: phases that are that And require less work . And then until they they again purchase more equipment and more expansion and more capabilities and more units in the US market , that's less less of a of a metric because everything is recurring per much And per day .
Speaker #1: that helps you just with any Just like service software as a model , we lease our equipment , but a lot of is software on the cloud , and that's it that's the model prevailing in the the said , the size of Europe .
Speaker #1: six times over So time we that expect financials look very much in that our our currently , there's in that still some it's of As I projects and US .
Speaker #1: volatility and different different way that some have stages recurring revenue and some have purchases and other one time items . And that can create naturally some volatility .
Speaker #1: Now , we don't give guidance , and I said that some of them are seeds , but some of the projects in the US are also larger .
Speaker #1: It's just that any project that's in a new territory, and a lot 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 were Lithuania at $100,000 and Latvia at $100,000.
Speaker #1: And now we're talking about projects that are $7 million, that $33 million, and there are others that we're bidding on that are also fairly large.
Speaker #1: So it's just it's just a process . We entered the US just a year ago . We've been doing great and we've won many different projects , and we're winning incumbents that are in the US against market for a very long period of time and have very relationships , and strong we're still able to come in brand new with our technology and displace think that them .
Speaker #1: And I that speaks speaks monuments to the we'll see going potential that And so over we time , forward . hope that everyone the the will of see our progress .
Speaker #6: Great . Thank you . And then last question , I guess I think there's been quite a build up of accounts receivable or trade receivable on the balance sheet .
Speaker #6: And I know , you know , obviously it's a testament to the increased book value growth . But I guess what how do the cadence of of that .
Speaker #6: It's been a pretty big drag on free cash flow. I think you've reported operating cash flow on a semi-annual basis. But yeah, we'd love to know.
Speaker #6: Kind of how you expect that to flow through . And when you expect to see that free cash flow .
Speaker #1: Yes . question . It's Good not I don't know if I don't know if you followed the historically , but there was a period of time where we were working in Africa and South America , and over there sometimes delayed .
Speaker #1: And it was more of a matter to look at here . We actually don't experience that in the US market . In the European market , things are timely .
Speaker #1: If we do see expansion to to our AR , it's because sometimes you have percentage of completion in these projects and the amount of time and effort to recognize to revenues is different from the time when you get paid .
Speaker #1: the misalignment and So there's with percentage of completion projects , which is mainly coming from the long the again , multi-year project deployments , the national scale in the European market .
Speaker #1: But see an there . They're paying on time . issue We don't have any . We we don't have bad debt or anything of that sort in a significant manner , like we had in Africa .
Speaker #1: And and sorry , South America . And when you bad debt that's done on look at the an annual basis , that's typically from the e-gov business , from old debt , from those regions , not from the electronic monitoring business in the US and Europe .
Speaker #1: And one of the reasons why expanded and we shifted into into this market was because of the the very good collectability and predictability with these customers .
Speaker #6: Got it . Thanks . All right . I think that's all my questions . Thanks so much .
Speaker #1: you Thank .
Speaker #2: Your next question for today is AJ from Hoffman , a private investor .
Speaker #8: Hey man . Congratulations on everything . I may have missed this earlier , but . thank you . Did you did you state a a win rate so far for all these contracts you're getting in the US for for the ones where the bids have closed , is it as high as Europe ?
Speaker #8: Is it lower? And, yeah.
Speaker #1: That's a good question . We haven't yet assessed in the US . We've been doing very well . It's probably higher than Europe but but we haven't assessed it because we're still looking at such a large variety of projects in different sizes in wait till till we have more a consistent flow and size of projects before we start to do analysis .
Speaker #1: But so far as you see, we're announcing many wins and many new states with many new resellers and direct agencies. We have received very good feedback from our customers.
Speaker #1: .
Speaker #8: far And as as scalability in the United States have , 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 , you know , just bracelets to to the equation .
Speaker #8: break even for putting that bracelet on somebody to recouping the costs of that bracelet ? Like , is it one quarter ? Is it a year to recoup your costs ?
Speaker #8: Can you break that down for us so we can kind of understand the the longevity of these contracts versus when the ROI is complete on actually assigning the bracelet to somebody .
Speaker #1: Yes . It's a great question , and I'd love to share that with you . But for a competitive reasons , we don't share that specific number .
Speaker #1: As you can imagine , there's ten 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 .
Speaker #1: So, at our level, you can see from our financials that when there's a new project, a large one, there's cash that's outlaid to manufacture them.
Speaker #1: then over And the lease we we bring But the it back . 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 costs , leverage for higher revenues .
Speaker #1: Yeah .
Speaker #8: Thank you. I can appreciate that. Final question: there have been rumors circulating that you guys have been approached for, I take it, a buyout.
Speaker #8: salt , grain of is but getting bought out something that you guys are considering ?
Speaker #1: I don't know where these rumors come from , but but but I'll share . And I've shared before that we've been approached by , you know , a variety of strategics or financial firms to acquire us .
Speaker #1: you Our , know , the decision of the board , as always , will be what is what is best for the shareholders .
Speaker #1: 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 a natural considering our performance in the market .
Speaker #1: We're very high competitive rate . We're expanding very nicely in our technology , I believe is highly coveted by other players and could perform very well to help disrupt the criminal justice industry .
Speaker #8: Awesome, man. I appreciate your answers.
Speaker #1: Thank you very much .
Speaker #2: At this time , I will pass the call back to ordain for closing remarks .
Speaker #1: thank you I want to all for participating in today's call and for your interest in Supercom . Please contact us directly if you have any additional questions .
Speaker #1: We look forward to sharing our progress with you on our next conference calls , filings , releases . Thank you very have a good day .