Prepared remarks
Ladies and gentlemen, good morning, and welcome to SuperCom's Second Quarter 2026 financial results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet. Joining me from SuperCom's leadership team is Ordan Trabelsi, SuperCom's president and chief executive officer. I would 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 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, 8/13/2026. 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.
Hello, everyone. We are pleased to report another record quarter for SuperCom. In the second quarter of 2026, we achieved more than eight-year records for revenue, gross profit, and EBITDA. We are marking our ninth record quarter of the last 10 since the company turnaround began in 2021. These results build on the progress we have delivered over the past several quarters and demonstrate the increasing scale and operating leverage of our business model. As we expand the delivery of our proprietary electronic monitoring and public safety technologies to local and national governments around the world, we are seeing continued improvement across our key financial and operational metrics. This performance is being driven by greater operational efficiency, continued investment in our technology, and our strategy of simultaneously expanding both into new markets and within the markets we already serve. Combined with our significantly strengthened balance sheet, these advancements provide us with a strong foundation to continue scaling the business. I will now turn to our financial results for the second quarter of 2026. Revenue increased 13.3% to $8.1 million compared with $7.1 million in the second quarter of 2025. Gross profit increased 16% to $4.9 million. Gross margin also expanded by approximately 90 basis points to 60%. Operating income was $900 thousand compared to $1.1 million in the prior year period, and this was largely impacted by the Israeli foreign currency headwinds. During the second quarter, our Israel operations experienced foreign currency headwinds from approximately 17% year-over-year increases in the average Israeli currency to the U.S. dollar exchange rate, the shekel to the dollar. Despite these pressures, we sustained GAAP net income levels at roughly $1.1 million for the quarter, similar to the same quarter in the prior year period. On a non-GAAP basis, net income increased to $2.9 million compared with $300 thousand in the prior year period. EBITDA increased by 55.6% to $4 million this quarter compared to $2.5 million in the second quarter of 2025, representing our highest quarterly EBITDA in more than a decade. GAAP earnings per share were approximately $0.20, and non-GAAP earnings per share were $0.52. We have also made substantial progress in strengthening our balance sheet. Over the past several years, we have reduced our net debt from close to $35 million to under $10 million. Our outstanding long-term debt now carries a blended interest rate of approximately 6%, with no cash payments due until the end of 2028. This structure provides us with greater flexibility to invest in growth. Cash and cash equivalents totaled approximately $7.4 million as of 6/30/2026 compared to $9.8 million at the end of June 30, 2025. During the quarter, we strategically deployed capital to support working capital needs and accelerate customer onboarding, installations, and technology integration across new contracts in the United States and Europe. Subsequent to quarter end, in early July, we raised approximately $7.5 million in gross proceeds from a common shares-only registered direct offering with a few institutional investors. This additional capital further strengthens our financial position and provides us with increased flexibility to support new deployments and continue executing against our growing pipeline. Finally, our book value of equity totaled approximately $48 million as of June 30, an increase of 28% from approximately $37 million at 6/30/2025. Next, I would like to spend some time discussing the operating leverage in our business and the factors contributing to our profitability and margin expansion. The economics of our programs improve as they mature. At the outset of a new program, we incur upfront costs associated with onboarding, training, development, and deployment. As additional monitoring units are deployed, those initial costs are spread across a larger recurring revenue base. This increases the contribution from each incremental unit and creates meaningful operating leverage. As more of our customer relationships mature, we are seeing the benefits of this dynamic reflected in our gross margins. We have also taken several important steps to improve our operational efficiencies. In Europe, we have consolidated logistics, equipment handling, and shipments through a centralized hub in Romania. At the same time, we have brought more IT and customer support responsibilities in-house from our subcontractors. This has reduced our reliance on local partners and we have established our own 24-hour support capabilities across multiple projects. These initiatives give us greater control over the customer experience while also improving the efficiency of our operations and building our customer support network. We also continue to incorporate AI capabilities into our operational processes. AI has already helped accelerate development, introduce new automation, and improve efficiency across deployment and customer support activities. We believe these are still in the early stages of AI adoption. As we continue to introduce new products, technologies, and automation, we see the potential to further reduce labor, support, and administrative requirements associated with operating and scaling our programs. The centralized deployment model we have developed in the United States provides another important operational advantage and leverages economies of scale. Our cloud-based platform, integrated inventory management, and 24-hour support capabilities allow us to serve programs throughout the country with a unified infrastructure, a shared language, and a common operating environment, directly reducing project costs. European national programs often require country-specific infrastructure, local language customization, and more decentralized support. And while our experience enables us to manage that complexity effectively, the more standardized U.S. model allows us to launch and support new country- and state-level programs more efficiently and cost-effectively. As the U.S. presence expands, we believe its model can support fast deployments and attractive margin potential, potentially even more attractive than it is today. Underlying all these efforts is the strength of our technology. Many European national programs are awarded through rigorous technology-based evaluation processes. In markets including Sweden, Germany, Israel, and Norway, we have displaced incumbent providers that have supported these programs for approximately 20 to 25 years. Our wins across all five Nordic countries, often against longstanding incumbents, provide compelling validation of the performance, reliability, and capabilities of our technology, as well as our ability to meet the demanding requirements of national electronic monitoring programs. I will now turn to our growth and diversification strategy, which remains focused on expanding both into new markets and within the markets where we are currently established. Over the four-year period until 12/31/2025, revenue from our electronic monitoring business grew at a compound annual rate of approximately 30% per year, while EBITDA grew at a compound annual rate of approximately 47%. This performance reflects the continued expansion of our recurring revenue base and the increase in operating leverage in our business. In Europe, our results can fluctuate between periods because our revenue mix includes several large multiyear national programs with each customer's ordering cycle potentially affecting the timing of revenue recognition. Romania, for example, represented a significant portion of our European revenue in prior periods but ordering activity temporarily moderated amid political uncertainty. As our EMEA contract base has grown, the Romanian contract represents less of our revenue blend. The Romanian program remains active, though. And it is important to note the temporary decline in Romania masked strong growth across the rest of our electronic monitoring business. Excluding the impact of Romania's decline, our underlying revenue would have grown approximately 40% between 2024 and 2025. Until today, we have secured more than 20 wins across European national electronic monitoring programs and maintain a presence in all five Nordic countries. These accomplishments give us a strong regional foundation, but we have continued to see meaningful opportunities to expand further within our existing markets and in new ones. Several significant European opportunities are expected to come to market over the next 18 to 24 months, including the opportunity in Italy among others. We have also discussed the opportunity in England previously, which remains a substantial opportunity for SuperCom valued at over £150 million. We competed for this England opportunity historically and came in second place when SuperCom had a less developed reference base and a significantly more leveraged balance sheet. Since then, we have strengthened our financial position, expanded our European presence, and established a broader record of successfully executing national electronic monitoring programs, which makes us a more viable candidate for the England program win. There can be no assurance regarding the outcome of any individual procurement; however, our success in markets that rely mostly on objective, technology-based evaluation processes—for example, across the Nordic region—gives us confidence that our technology is better positioned today for this and other large national opportunities. The United States remains another important driver for our growth. Our strategy is not only to enter additional states, but also to expand into more counties, agencies, and programs within each state where we already have an established presence. Since mid-2024, we have secured more than 45 new U.S. electronic monitoring contracts and entered 19 new states with access to additional markets through our 18 new regional service provider partnerships. We are also seeing the scale of our contracts increase over time, from smaller initial deployments to more recent awards involving approximately 100 to 250 simultaneous units. We are building our references and moving up in project sizes similar to the pattern we experienced when we started our European expansion—only this time it is faster. Many of these wins have involved agencies and service providers transitioning from incumbent vendors and legacy systems to our pure security platform. We have seen this pattern in markets including Alabama, Utah, and Virginia, where customers have selected our technology to modernize their electronic monitoring programs. These wins demonstrate the reliability, flexibility, and scalability of our platform. They also highlight the versatility of our operating model, which enables us to serve government agencies directly while also supporting regional service providers across a variety of program structures. We currently operate in 22 states, and in 12 of those we have already expanded to multiple counties. As you build a reputation and establish successful reference programs in each state, we believe there is significant opportunity to deepen our presence in those markets. Our U.S. platform is also supported by leaders in community alternatives, our wholly owned subsidiary in California, LCA, which provides reentry and rehabilitation services that complement our core monitoring technology and broaden the range of outcomes we can support for our customers. LCA recently secured a five-year reentry services contract valued at $2.5 million. Since we acquired LCA, SuperCom has secured more than $35 million in new contracts in California alone. Together, our electronic monitoring technology and complementary service capabilities allow us to support customers across a broader range of monitoring, compliance, and rehabilitation needs. Turning now to our pipeline, we continue to see a robust and growing range of opportunities across key markets. One of the most significant developments during the quarter was our expansion in Sweden. In June, we announced that we have signed and launched a new national electronic monitoring project with the Swedish Prison and Probation Service. The total estimated project value ranges from $17 million reflecting the previously announced base case scenario, to the $75 million budget published by the customer. That published budget reflects the potential for expansion through a higher number of active offenders and the addition of capabilities such as alcohol monitoring, our PureOne GPS solution, and the PureAll mobile device solution. The program is expected to expand to as many as 6,000 active offenders, representing approximately six times the number from the program we first launched with this customer in 2019, where we displaced the incumbent of 25 years, with more capabilities and more features this time around. Revenue recognized under the contract will ultimately depend on actual usage levels and the scope of the capabilities deployed. We are also continuing to build momentum in the United States. Recent contract wins in Michigan, Georgia, Ohio, New York, and Kansas demonstrate the increased demand for our technology and the continued expansion of our national footprint. It is important to remember that there is an inherent lag between the signing of a contract and recognizing the associated revenue—especially in the U.S., where everything is usually charged on a recurring per-unit-per-day model. In some cases, full deployment can take six months or longer, particularly when a customer must transition from an incumbent provider and replace existing monitoring units with our technology. In both Europe and the United States, deployment schedules and customer ordering patterns can affect the timing of revenue recognition from period to period. Despite this timing dynamic, the recurring revenue base associated with our U.S. electronic monitoring technology continues to grow. Our U.S. EM technology annualized recurring revenues have been accelerating, reflecting growth of approximately 290% from July 2025 to July 2026. This progression provides an encouraging indication of how our recent contract wins are beginning to translate into recurring revenue. We continue to see substantial room for expansion. There are many markets, both in the United States and Europe, that we have not entered yet. As we increase our scale, strengthen our financial position, and build a broader record of successful deployments, we believe we will be qualified to pursue an expanding range of opportunities. In summary, I am extremely pleased with the progress we delivered during the second quarter and with the consistent growth and profitability we have sustained over the past several quarters, as well as securing highly valuable new contracts such as the national projects announced in Sweden and Norway. We achieved record revenue, gross profit, and EBITDA while continuing to invest in new deployments, advancing our technology, and expanding our presence across the United States and Europe. We are also seeing increasing operating leverage as our programs mature and our recurring revenue base grows. We believe SuperCom is stronger today than at any point in its history, with an exceptional global team, a significantly improved balance sheet, proven and differentiated technology, and a growing range of opportunities to expand into new markets and within the markets we already serve. As we look ahead, we remain focused on executing our pipeline, supporting our customers, and building on our position as a global leader in electronic monitoring and public safety technology. This concludes our prepared remarks, and I will turn the call back to the operator for questions.
Questions and answers
Thank you. To ask a question on today's call, you will need to press star then the number 1 on your telephone. You are using a speakerphone, please pick up your handset before entering your request and speaking on the call. If your question has been answered and you wish to withdraw your request, you may do so by pressing star then 2. One moment, please, for the first question. And our first question today is coming from Matthew Evan Galinko with Maxim Group. Matthew, your line is live. Please go ahead.
Hey. Congratulations on another strong quarter. Can you maybe touch on—sure. We can obviously see the momentum, I think, in the U.S. market in terms of expanding your territory, and appreciate the metrics you provided on growth rates. At what point, I guess, do you expect that to mean—maybe firstly, do you expect that to accelerate as you, to your point, move into higher scale deployments in the U.S. market? So, as you move into higher offender count or monitoring counts, do you anticipate that number could actually accelerate from the current rate of growth?
The number's been accelerating this year. I think, in the last quarter, we announced up to 180%. Now we are at 290% year-over-year ARR. At some point, naturally, as the numbers get larger and larger, the acceleration will stop, and the growth will continue, though. In the U.S. market, we started with smaller county projects and then grew in size, and now we are at a level of roughly 100 to 250 units per deployment. Of course, there are much larger projects in the U.S. and some of our projects in Europe as we discussed—Sweden was 1,000 units and expected to reach 6,000 this time around. Romania was 15,000 units. So we have deployed much larger projects in Europe, but originally in Europe it also started with 50 units or 100 units, and we still scaled those projects, and that is what we are doing in the U.S. We are just doing it much faster this time around. Over the last two years, we expanded into 19 new states; it took us much longer to reach that kind of presence in Europe.
Got it. Well, very good. I think you touched on Romania headwinds, but is it reasonable—can you maybe characterize where that opportunity is today as far as maybe expansion of scope or is there potential to bring orders back from Romania or how does that look today?
So Romania is still an active customer of ours. Like many of our customers, when we start the program, if the relationship is good and deployment is successful, as it was, they can order at a planned rate or faster than planned, and that is what we saw there. We saw an initial fast ramp. At some point, there were elections, and those elections happened twice, and some things slowed down a little bit, and you saw a decline of revenues in Romania in 2025, which masked an underlying growth of 40% for revenues that year for the rest of the business if you avoid that decline. But Romania is still active, and there are expansion opportunities just like any of our contracts, and we only started with them in 2022. Many of these contracts we have provided, for example, in Israel, Sweden, and Norway, are over 20 or 25 years with the same incumbent provider. So once you start a relationship with them, and you are doing well—as we believe we are doing there—there is more expansion and more opportunities, and we are excited about the path ahead.
Thanks. Alright. Last question for me, and I will jump back in the queue. Your gross margin has been very strong for the last couple of quarters. Can you point to any drivers—is it predominantly the revenue mix and where you are in the contract cycle? Or is it the implementation of AI and efficiency contributing to that gross margin? And I guess how sustainable are we in the 55% to 60% range?
So we touched on some of this also in the past. We have been taking a lot of the projects in Europe that previously relied on local subcontractors and taking more of that in-house, and that lowers the cost that we would otherwise pay to subcontractors, so that improves margins. The U.S. market, where we are having more revenues, has higher margins than in Europe because it is all centralized on the cloud and in English. Also, the existing projects that we have in Europe are reaching a later stage—maturing—and the more the project matures, the more you are just adding additional units at a very high gross margin compared to the initial deployment where you have a lot of installations, hardware, training, and adaptations. So when you are in later-stage projects, as your projects mature, gross margins are naturally higher. We still have opportunity in the business to grow margins more, especially when revenues are higher, because there is significant operating leverage in this business model. AI also, as we described—I am talking about AI from our operations, not in the products, which is a separate thing—is automating many processes. A lot of things are becoming more automated and seamless, and that is improving everything in terms of inventory management and other processes that we have to do. It is helping us deploy a lot of efficiencies, and we think that is just the beginning. We think there is much more that can be done, and we will provide updates along the way as those things progress.
Thank you. Your next question is coming from Gregory Mesniaeff from Kingswood. Gregory, your line is live. Please go ahead.
Thank you. Hi, Ordan. How are you?
I am great. How are you doing? Good. Thanks for joining.
Two questions. The first one's kind of general. On the newer contracts that you have announced recently, what is the typical duration period of the contract and how is it structured? Is there a percentage of the contract that is earmarked for service and support and is that optional, or is that included in the overall contract? And, also, what kind of cybersecurity guarantees are you required to provide, given the sensitive nature of some of this data and the fact that you are dealing with law enforcement and governments?
I will start with the latter because it is interesting to remind everyone that we have ISO 27000-series certifications and other certifications, but also at SuperCom, historically, we have strong cyber capabilities. We used to do penetration testing and advise various organizations on cyber matters. We have cybersecurity software as part of our operation. We are very sensitive to cybersecurity given the very sensitive data we handle. Prior to our electronic monitoring focus, SuperCom did national identification work—a full census of a country, including taxes, criminal records, and passports—so we have deep experience in protecting sensitive government data. That expertise overlays onto our electronic monitoring work. Especially for on-premise deployments in Europe, cybersecurity is a significant part of the evaluation, and we are able to demonstrate strong capabilities that help us score highly in the technology portions of bids. Customers provide penetration tests and perform cybersecurity audits. In European national projects there are several levels of evaluation, and besides testing our product accuracy and reliability, they assess cybersecurity capabilities as a major component. Now, regarding the contracts and structure...
I do not know if you are asking about Europe or the U.S., so I will speak in general with the two models.
In the U.S., the market is more homogeneous. Typically, projects are priced on a per-unit-per-day basis for each active offender being tracked, and that is consistent across our customers in the U.S., whether it is a direct agency customer or through a service provider. In the U.S., we do not rely on subcontractors the way some European deployments do, so when we receive payments, they are already at a higher margin and they are recurring per unit per day, with cash payments typically monthly. In Europe, you have a mix: some projects are purchased outright, where the customer acquires equipment, and other projects are leased but involve a large deployment. On-premise deployments in Europe involve buying servers, installing firewalls and infrastructure, connecting into the customer's databases, and providing deployment work that could take as quick as three weeks for initial stages—as we did in Romania—or much longer, up to a year. In Europe, we are paid for that deployment work in addition to ongoing recurring revenues for maintenance and additional unit deployments. Each European contract can differ and is less homogeneous than the U.S. model, and we conform to the different structures customers prefer.
And what is typically the renewal period of the newer contracts, particularly in the U.S.?
Typically, initial terms are three to five years. It could be a three-year initial term with expansions, or it could be five years with options or expansions, and then it goes up for rebid. If the customer likes you and you perform well, you have a good chance of winning again, which is why some vendors we displaced had been incumbents for 20 to 25 years in Europe. Many of these contracts are sticky: once you are in and doing well, renewals and long-term relationships are common, which builds a strong moat for the business. That is why winning national and service-provider contracts is so valuable—it's hard to penetrate but very sticky once established.
Great. Thanks. And just one quick follow-up, Ordan. Are you capitalizing any of the new customer onboarding costs?
Regarding new customer onboarding costs, some projects are recognized on a percentage-of-completion basis rather than capitalized in the traditional sense. For certain components, revenue and costs are recognized based on project milestones and progress, in accordance with ASC 606 and how the projects are categorized and classified. So you will see those recognized as project revenues tied to completion rather than as capitalized onboarding costs in many cases.
Got it. Thank you.
Your next question is coming from Jack Gvili from Blaven Capital Management. Jack, your line is live. Please go ahead.
Hey, Ordan. Thanks for letting me join the call, and congrats on the results. Just two quick questions from us. Firstly, in terms of opportunities outside of Europe and the Americas, we noticed that you hired two directors of sales and are actively hiring two directors of sales in APAC and LatAm. Could you potentially tell us about the opportunities you are seeing there and the timing on those as well?
Okay. Interesting that you saw those. Yes—we have posted hires on our careers portion of our website. We believe there are interesting markets outside of the U.S. and Europe as well. SuperCom has over 38 years of experience serving more than 40 nations around the world on different types of government, large-scale deployments, and we think we are well-positioned to expand. The technology has been tested successfully in different regions of Europe and the U.S., and many of the same physical and technological requirements apply to other regions. It is often more about bringing countries up to speed on running electronic monitoring programs, and we have done that in countries like Croatia and Romania, which were new programs for them. So we think we can be great partners in LATAM and APAC. Our initial APAC focus will be Australia and New Zealand, where electronic monitoring programs are developed and where some of the same competitors we face in Europe and the U.S. are present. We look forward to competing there as well.
Sounds great. And secondly, regarding Europe, beyond Italy and the U.K., what are you seeing in terms of other opportunities in Europe?
There are many opportunities in Europe. Historically we've had over a 65% win rate in Europe, and recently we've won three out of three programs we bid on. Sometimes that win rate is even higher over certain periods. We don't always want to give a heads up to competition, so we limit the specific names and where we plan to bid, but be assured there are multiple opportunities. England remains a significant market—beyond the national opportunity there are regional opportunities—and there are others across Europe. Our team has done an amazing job winning contracts in new regions and displacing incumbents who had been in place for 10, 15, or even 20-plus years. We expect Europe to continue to be a strong source of growth. Meanwhile, the U.S. market is ramping quickly and is six times larger than Europe, so both regions are important to our future growth potential.
Sounds great. Thanks, Ordan.
Your next question is coming from Sean Weston from DeepSale Capital. Sean, your line is live. Please go ahead.
Thank you. Thanks, Ordan, for having the call and a good quarter here. Just wanted to touch on Sweden a little bit. I am wondering on contract ramp. I know you have a nine-year contract there. Is it going to be very front-loaded in 2026 and 2027, kind of similar to what we saw in Romania? Or do you think it is going to be more spread out? How is that looking?
We cannot at this point express exactly how the ramp will look on a specific program, but we have shared that many times: when a program is launched and the customer likes what we are doing, they often order and deploy much faster than originally planned, and we have the experience to handle rapid deployments. We deploy many contracts, probably more than many other vendors in Europe, and we can support fast and large-scale rollouts. For Sweden, note they already have a program with us and are deploying a new one. They are also looking to add capabilities like alcohol monitoring and other modules, which we already provide in other countries. We can add those modules easily. While we cannot say exactly how fast it will be, we know we have the capacity to support significant growth in that program.
And the fact that you already have an appointment there, does that mean it is a little faster and a little cheaper for you to deploy this additional larger contract there?
By standard competitive processes, customers cannot give an advantage to one vendor over another, even if that vendor is the incumbent. However, when you have experience in the country, a strong reputation, and an understanding of how things work locally, you can plan better and execute more quickly and effectively. That operational familiarity typically enables faster and more cost-effective deployments.
Great. That makes sense. Just wanted to touch then on U.S. growth. In the press release you noted the 171% recurring revenue growth. Can you talk about what is driving that? Is that mainly contracts you won from last year ramping? Or is that some of these larger contracts you won more recently coming into play, or is it a mix of everything?
It's a mix. Initial projects when we started in mid-2024 were much smaller in size, and they are growing. Our sales team is focusing on larger contracts and winning them, and then we use those references to pursue even larger opportunities. Also, current customers are increasing units—service providers sometimes start with 100 or 150 units and then add more as they see the technology working well. Some county contracts are larger than what we had in the past. We still have a lot to deploy with the contracts we have announced; most are not at full capacity yet. Those deployments will continue to scale, and we expect additional contracts as well. The recurring revenue figures reflect actual deployed active units billed on the per-unit-per-day model.
Great. Thanks a lot. That is all I had.
Should anyone have any further questions at this time, you may press 1 on your telephone keypad. Once again, if there are any further questions at this time, please press 1 on your keypad to join the queue. Please hold a moment while we repoll for questions. There are no further questions in queue at this time, and this does conclude our question-and-answer session. At this time, I will pass the call back to Ordan for closing remarks.
Thank you, operator. And I want to thank all of you for participating in today's conference call and for your continued 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 great day.
Thank you. This does conclude today's conference call. You may disconnect at this time. Have a wonderful day. Thank you once again for your participation.