SuperCom (NASDAQ: NASDAQ:SPCB), a global provider of secure solutions for the e-Government, IoT, and Cybersecurity sectors, has reported a positive shift in its financial performance during the third quarter of 2024. The company's President and CEO, Ordan Trabelsi, announced on November 14, 2024, that year-to-date revenue rose to $21.3 million, with a significant increase in gross profit to $10.7 million, marking a 35% rise.
The gross profit margin improved notably to 50.1%, up from 30.7% in the previous year. Net income showed a remarkable recovery to $2.52 million, contrasting with a loss of $2.48 million in Q3 2023. Additionally, SuperCom secured a 5-year contract with the Israeli Prison Service for electronic monitoring, which could potentially extend for another nine years.
Key Takeaways
- Year-to-date revenue increased to $21.3 million.
- Gross profit rose by 35% to $10.7 million.
- Gross profit margin improved to 50.1%.
- Net income turned positive at $2.52 million.
- Signed a 5-year contract with the Israeli Prison Service, with a 9-year extension potential.
- Expanded operations into New York, West Virginia, and Maryland.
- Launched PureProtect and PureOne products, targeting the growing electronic monitoring market.
Company Outlook
- SuperCom expects to continue its expansion in the U.S. and European markets through new contracts and potential acquisitions.
- The company is optimistic about future growth opportunities due to a strong reputation and ongoing investments in technology.
Bearish Highlights
- Q3 gross profit margins decreased to 46% due to project mix and timing.
Bullish Highlights
- Over $13.5 million in new orders secured in Europe.
- Positive feedback for PureOne solution in the U.S. market.
- Annual recurring revenue from new contracts in West Virginia and Maryland is approximately $250,000.
Misses
- There were no specific misses discussed during the earnings call.
Q&A Highlights
- No specific questions and answers were highlighted in the summary.
SuperCom's strategic focus remains on innovation and operational efficiency, with plans to further expand its presence in the U.S. and Europe. The company's success in Europe, particularly in Romania, has been significant, managing a substantial electronic monitoring project with over $13.5 million in new orders. The U.S. market has also seen growth, with SuperCom enhancing its outbound sales efforts since 2022 and receiving positive feedback following the deployment of its PureOne product.
The company's financial health has improved, with a positive free cash flow at $1.2 million and a reduction in cash burn from negative $9.7 million to positive over three years. SuperCom has also maintained a stable share count with no new shares issued during the third quarter for debt-to-equity conversions, reporting outstanding shares at approximately 2 million.
SuperCom's leadership is confident in the company's future, especially given the potential for higher margins on additional units in Israel and a positive relationship with the Israeli government. The company's approach to software development and customization for large customers is expected to increase margins significantly after initial adaptations.
The company's electronic monitoring solutions are increasingly relevant amid global economic uncertainties, offering cost-effective alternatives to traditional correctional facilities. With the electronic monitoring market projected to reach $2.3 billion by 2028, SuperCom is well-positioned to capitalize on this growth through strategic initiatives and a focus on technological advancements.
InvestingPro Insights
SuperCom's recent financial performance aligns with several key metrics and insights from InvestingPro. The company's reported increase in revenue to $21.3 million year-to-date is reflected in the InvestingPro data, which shows a revenue of $26.84 million for the last twelve months as of Q2 2024, with a growth rate of 5.23%. This growth trajectory supports the company's positive outlook and expansion plans.
The significant improvement in gross profit margin to 50.1% reported by SuperCom is consistent with the InvestingPro data, which indicates a gross profit margin of 51.8% for the last twelve months. This aligns with the company's focus on operational efficiency and its ability to generate higher margins from its electronic monitoring solutions.
InvestingPro Tips highlight that SuperCom is "Trading at a low Price / Book multiple" with a P/B ratio of 0.51. This could suggest that the stock is undervalued relative to its book value, which may be of interest to value investors considering the company's improved financial performance and growth prospects in the electronic monitoring market.
Another relevant InvestingPro Tip notes that SuperCom has been "Profitable over the last twelve months," which is consistent with the company's reported shift to positive net income in Q3 2024. This profitability is further supported by the adjusted operating income of $0.52 million for the last twelve months, as reported by InvestingPro.
It's worth noting that InvestingPro offers 13 additional tips for SuperCom, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable given SuperCom's recent contract wins and expansion into new markets.
Full transcript - Supercom Ltd (SPCB) Q3 2024:
Operator: Ladies and gentlemen, good morning, and welcome to SuperCom's Third Quarter 2024 Financial Results and Corporate Update Conference Call. [Operator Instructions], and is also being recorded for playback purposes. Joining me on 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 make forward-looking statements, including statements that address SuperCom's expectations for the 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 advance with GAAP. 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. 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 14, 2024. 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.
Ordan Trabelsi: Thank you, operator. Good morning, everyone. Thank you for joining us today. Earlier this morning, we issued a press release of our financial results for the third quarter and 9 months ended September 30, 2024. You can find a copy in the Investor Relations section of our website at www.supercom.com. Today, I'll start my comments with a brief update on our recent business highlights, strategy and future results, followed by a Q&A session. The third quarter was another quarter of significant achievements for SuperCom, showcasing the continued strength and resilience in our business. Our financial results for the third quarter and first 9 months of 2024 reflect the successful execution of our strategic initiatives, which have been driving revenue growth, improving profitability and enhancing cash flows. Year-to-date, revenue increased to $21.3 million. Gross profit surged by 35% to $10.7 million, and our gross profit margin improved dramatically to 50.1% from 30.7% in the prior year period. Additionally, our free cash flow increased to positive $1.2 million from a negative number in Q3 of last year. We are pleased with our results and we look forward to the following quarters. This quarter was particularly exciting to solidfy our leadership position with key contracts wins including the prestigious National Israeli electronic monitoring project, also expanded into new regions, including New York, West Virginia and Maryland, further strengthening our footprint in the U.S. market. These wins not only reflects the exceptional value of our technology could also help position us for sustained expansion in the years ahead. Our commitment to financial development, operational efficiencies and technology innovation has related to tangible results. An improvement in net income to $2.52 million in month period compared to a net loss of $2.48 million in the prior year period. Free cash flow generation of $1.2 million this quarter and a cash balance of $6.2 million at it, underscore the tangible results along with an ability to support further potential growth opportunities. We are also particularly proud to have continued our successful integration and Pier 1 solution into multiple new markets during the period, reflecting our continued commitment to innovation and our ability to meet the evolving needs time. This, along with our strategic initiatives has positioned us to over sustained profitability and expansion. For those new SuperCom. Our mission is revolutionize public safety sector worldwide with our proprietary electronic module technology, our data intelligence and suite of complementary services. With over 36 years of experience since our founding in 1988, we've been a trusted partner for dozens of national governments worldwide, providing cutting-edge electronic and digital security solutions, our strategic is straightforward, is powerful. We did with innovative technology. Our proprietary electronic technology, which just scores highly competitive government tenders for various programs that just come to us. GPS monitoring rehabilitation services, domestic bios prevention and more. Moreover, we have recently brought in our portfolio to include advanced AI-driven analytics, which are integration into our electronic monitoring system. This addition enhances our ability to provide predictive insights and improve outcomes for our core. We developed superior solutions since 2018, we've secured over 50 new multiyear projects with this solution. We expand our global presence and our strong growing reputation as a premium provider of electronic monitoring solutions and services, enhances our market position in each new customer win. And we deliver outstanding services and strategic focus on IoT tracking business in developed markets is where the opportunity is for us. The electronic monitoring market projected to reach $2.3 billion by 2028, the U.S. and Europe constitute about 95% of the global market. We continue to amplify our technological leadership with significant R&D investments setting to the launch of [indiscernible] solutions like PureProtect and PureOne, these offerings are already making headway in various markets in the U.S. and our pivotal and SuperCom expansion. PureProtect is a life-saving domestic silence monitoring solution, providing perfective measures to families suffering from domestic filing or stock, thereby increasing their safety. We offer a unique, lightly base long-term battery life and solution architecture with no other to offer domestic by protection in a unique way, which is spreading rapidly around the world with more wind in different regions. PureOne is an all-in-one get tracking and price monitoring solution, creating comprehensive motor capabilities into a single device. Like many of our products that offers top line features placing it above the competitive competition in most metrics and this product is key for our expansion in the U.S., which is on our Iud-based offer peers product line has been particularly affected in monitoring the vendors and managing real-time information, this real-time advantage is a game engine, powering authorities with actionable insights timely it to mitigate potential risk and enhance offer safety. These products have significantly expanded the company's trust in market. We were very pleased with the reception and traction and acceptance to help facilitate accelerated expansion of SuperCom into the U.S. market for the European countries. We fortified our operational infrastructure to support our growth and have revamped our sales strategy with proactive outreach approach, our sales team with deep industry expertise has been instrumental in achieving new wins at driving growth. Last month, we announced that, together with our prime partner, Electra in Israel, we have been awarded a 5-year contract by the Israeli Prison Service Agency or IPS to deploy our pure security electronic monitoring. This nationwide program is expected to cover all electronic monitoring and center programs in the country with an estimated 1,500 enrollees simultaneously and potential for expansion. SuperCom will deploy cutting-edge EM solution including PureCom, PureTrack, PureTag and PureBeacon. The 5-year contract is already in effect and includes the option for a 1-year extension for a total of a 9-year potential contract term. The project is one through a highly competitive process, including several rounds of negotiations, demonstrations and system evaluations required and supervise by the IPS. We displayed the incumbent that has held the contracts for many years. And this one simplifies our commitment to excellence, knowledge leadership and strong partnerships. Our comprehensive set of offerings position us well to win multifaceted national projects such as this one, are set to encompass all electronic monitoring programs within the country. They have a broad array of solutions and with one contract and one provider ourselves, but we can support all the programs. Over the past month, we announced many new orders and the project wins in the U.S. and Europe. The recent years to predominance continues incumbent vendors and achieved an over 65% win rate in European competitive tenders. Looking to the EU market. SuperCom secured several new national tracking programs costs over the past 2 years with bids and conduct various stages execution. Notably, the company's large scale of methionine [indiscernible] tracker programs like the one launch in Romania have the potential to catalyze further uptake from existing European customers. As more European countries adopt these technologies to anticipate a broader expansion of our solutions as a continent, in the European market, SuperCom expanded its business into over 10 countries that secure significant new contracts, which is simply awarded to a competitor tender process. Besides winning new projects, we continue to execute and receive ongoing orders from our existing partners, just about formidable announced receiving new orders added over $2.9 million in European government, totaling over 13.5 million orders in the past period as described. Lab here, we secured national new national program is finished or employer domestic final long-term solution. The deployment of our pre-security suite consisting a PureProtect, PureTrack, PureTag and PureMonitor demonstrates the versatility and effectiveness of our solutions and underscores our leadership contract monitoring space. By collaborational affinity is a prime example of the confidence that they have in SuperCom and those experience or service as opportunities to broaden engagement with our diverse rated solution. That mine site program [indiscernible] GPS for domestic bio or alcohol monitoring and that gives us, of course, opportunities for growth and margin improvement with the same customer. Notably, at the end of 2022, the company won the largest industry over the year for National electronic monitoring project in Romania valued at over $33 million, including up to 15,000 monitor offenders simultaneously per month, put 6 years. The project has been progressed excluding and demonstrated substantial advancements further extending our location in the country's national EM project. The large scopes reinforced the strength of our superior security suite and cements our position as a trusted partner for government to worldwide. We've also launched domestic [indiscernible] solutions on the European regions and recently launched as well in the U.S. linked to the U.S. market. While the European market continues to grow, it's important to note that the UFR offers a larger opportunity being approximately 3x to 5x the size of the European market for electronic monitoring. With the introduction of our PureOne electronic monitored product, now available in the U.S. and expansion of our domestic violence traciking solution, we believe SuperCom is a position to unlock substantial growth potential in this untap market. Although SuperCom already does this in multiple U.S. states. We are actively focused on further expanding our products in the U.S., our wholly owned subsidiary, LTA, located in California that appetent in the size of scope existing programs, winning rebids with existing customers and winning new programs with brand-new customers. The company strategically prioritizes PureOne expansion into new markets and geographies. The PureOne has already received high praise during the reduction of various features in USA, whereas it successfully deployed and is actively utilized to monitor biofactors. Moreover, sales activities or PureOne have commenced in promises of market outside Europe and North America. Despite our long-standing presence in parts California and the U.S. market remains largely untapped for us. Since we began investing in outbound sales efforts in 2022 for the U.S. for secure wins in California, Idaho, Texas and Turkey and Wyoming to name a few this quarter, if we just announced a few more, which we'll reiterate and the launch of PureOne in 2023 with top positive feedback from mission deployment, positions us to accelerate market capture across the U.S., unlocking significant growth opportunities. Our strategic new sales team and new wins have been the first half in the company's U.S. market expense strategy and order driven increase in with existing customers and multiple new demos, resulting in a significant increase in companies in the pipeline. Launching our PureOne solution in the U.S. market late through a significant milestone in our expansion strategies. Since our last earnings call, we've announced multiple new projects in North America to provide solutions. SuperCom has secured -- multiple new contracts with the share agencies across West Virginia, these contracts leverage becomes innovative 31 sites with both solar and WiFi communication facilities. And these contracts are generating recurring revenue, further solidifying our presence and to turn in the U.S. market. We've all secured new contracts with leading Baltimore-based service provider in Maryland and the contracts we launched in June 2024 as demand generated an annual recurring revenue of approximately $250,000. And we secured first contract in the county in New York State. We achieve your competitive selection process, further strength to become strategic expansion across the U.S. markets on the milestone our business. As I mentioned earlier, introduced to PureOne was a game changer and securities contract that underscores our competitive edge and commitment to deliver an innovative superior technology solutions. These contracts further reinforce our position as a market leader in various fields, and we view these recent wins as indicators. We're growing influence and expansion potential in North America and worldwide. In conclusion, despite economic uncertainties, the ongoing global challenges, including those in Israel, SuperCom solutions are being increasing relevance. We continue to see growth dictates escalating cost of consideration and the surge in adoption of Victor protection solutions worldwide. The company's PureSecurity Technology is not online to address these trends offering effective way for institutions to enforce home confinement is present on recoding and lower cost in can. For example, monitoring compliment, tender at home or GPS cost about $10 to $35 a day, which is 90% less than $100,040 data cost at a correction facility. Moreover, a home confinement helps to distractedness help the offenders to improve their lives and communities. As we mentioned in previous calls, we lever also an opportunity to enter U.S. growth through strategic acquisition of local electronic monitoring service providers with a strong implication of customer base in the local markets. We constantly monitor the market potential acquisitions that could generate significant value at a good price. By immediately expanding our presence to provide our integration synergies. Our acquisition of LCA in 2016, which is the last of the store for $3 million of greater capital example. It has been great strategic value to the company and allowed us to win over $35 million of new projects win in California alone to its acquisition. I'll now turn briefly to the financials. During this quarter of Q3 and the first 9 months of 2024 in comparison to the same period of last year. Note that our multiyear projects should not run under the quarterly scale and cannot fluctuate in effect on NOI quarterly. We'll start with the 9-month performance. Which helps to drive some of these fluctuations in the 3 months. So for 9 months, revenue for the first time months increased $21.3 million, up from $20.9 million in the same period last year. Gross profit surged 35% at $10.7 million to gross margin, 51%, up from 37% last year. Net income improved significantly to $2.52 million compared to a net loss of $2.4 million in the prior year. Non-GAAP net income included $4.8 million in the trends of cooperations and EPS reached $1.6 and non-GAAP EPS reached 3.1%. The difference when attributed to amortization of tapered asset business. The quarterly performance in Q3, revenue Increased to $6.91 million, up from $6.78 million in Q2 of last year, driven new price wins and expansions of the is contract. Gross profit this quarter was $3.2 million, reflecting a margin of 46% compared to $4 million and margin of 59% in Q3. This margin decrease was primarily due to project mix and timing. EBITDA totaled $1.1 million compared to $2.5 million in Q3 of last year, also mainly due to project mix and timing. Positive free cash flow of $1.2 million in Q3 of this year, further underscore the strong financial discipline part to negative free cash flows for the same period last year. Note, this is very interesting. On our cash flow from operations for the first 9 months of the year were positive. This is a big improvement from recent years. If we look at and keep track. In 2021, we had negative $9.7 million in operating cash flows. In 2022, we had negative $4.7 million in operating cash flows. And in 2023, we had negative $2.4 million in operating cash flows, and again, for the first 9 months of 2024, we have positive operating cash flows. These are great results and great trend that we'd like to see and this supports our strategic plan and a tap them into the success we are achieving in it. The quarter's results highlight our ability to seize the high-margin potential of our project portfolio through successful execution and progression at different stages of these projects showcasing our focus on sustained growth and profitability. Typically, initial project stages incur higher expenses while advanced stages yield higher gross margins, cost a fluctuations in our gross profit, depending on project competition and deployment stages. We are running multiple projects in different stages throughout the world, and that's how you can see the fluctuations in the quarters, depending on how each falls in that specific quarter. As the project pipeline matures, we expect an upward trend in gross margin based on the evolved project portfolio. Deploy additional braces and regions where we run into new projects on our existing structure. The contribution margin for each additional basis can be as high as 70% more. Our operating expenses in the quarter stayed in line with the first half of the year as we continue with our existing strategy. And also interesting to note, we've made considerable strides in reducing our long-term liabilities or up to $4.5 million year-over-year, which includes exchanges with our creditors of debt to equity and negotiated premiums of up to 100% premium to market price. Our operating cash flows improved to $1.2 million year-over-year, and our cash position grew at $6.2 million at the end of the quarter. This marks our highest reported cash position in recent years, and we remain focused on reducing our cash in the external funding as we continue to win and execute projects. These improvements further strengthened our financial foundation to support our ongoing growth initiatives and strategic investments. In closing, I'd like to thank our global team for the hard tireless work to achieve company's record setting performance. We have developed the right technology and products to help criminal justice system clients overcome challenges make better use of over $80 billion spent annually in the U.S.A. on operating rehabilitation centers near showing at approximately 75% inciting in the U.S. There's significant room for improvement when it fact program technology adopters. We're excited about the growth we are experiencing and about the growing demand of our products. After several years through which we transition from our legacy business to the IoT tracking number funders business, we're happy to show a shift, did nice growth in revenue and profit. We believe that we're well positioned to continue to expand and capitalize on many opportunities for us. These are being driven by multiple factors, including our strong presence reputation in the U.S. and European markets. The countercyclical nature of electronic monitoring industry, the growing public policy shift to monitor the setup incarceration and the growing adoption of domestic bio prevention solutions. We anticipate continued expansion in the U.S. and Europe and potential other regions. Our commitment to conserving our technological advantage and a robust growth brought foundation remains sedate as we continue to invest in these areas. With that, I'll turn the call over to operator, over to open for questions. Operator?
Operator: [Operator Instructions]. Your first question is coming from Matthew Galinko from Maxim Group.
Matthew Galinko: Can you maybe start off by just touching on what the pipeline looks for -- looks like for Europe in 2025. Are there any large national projects that are up for bid or that you're pursuing now that you think could close in 2025? Or what is your outlook like as you look out over the next year?
Ordan Trabelsi: Thanks, Matthew. Good question. Our -- as you may recall, when we entered the market several years ago, we have some small projects in Europe, like ASEAN which are $100,000, we grew to larger ones. Denmark as a ceded $7 million and now with the remaining of $33 million. Those are all access references and a track record that helps us basically beat an ERP Europa at this stage. So basically waiting for the one to come out and then we compete and use our usual leverage our stronger rate to help with those projects. In Europe, there's still many countries even though we had a one rate we won many countries, there's so many countries out that we haven't yet to enter. And we are continuously monitoring and bidding and progressing and being evaluated for various projects across our almost every Western European country has national project and where as many have entered yet like England, France, Germany and Norway and Spain. And so there are certain opportunities of various sizes, and there are many that are out there that are bigger than Romania projects. And Europe, while being smaller in the U.S., still a great market for us. We have a very good position, a regulation there, and we continue to be there because while in parallel, we enter the U.S. market.
Matthew Galinko: Got it. And when you've been on new projects in Europe, is it usually displacing or to displace or replace legacy kind of old ankle brace it? Or what's the -- are they looking for additional functionality generally in one go, such as the domestic violence stuff? Or what are the new bids generally looking for?
Ordan Trabelsi: The natural programs many times encompass all the track monitoring programs like the house arrest, GPS monitoring, domestic violence alcohol, we also do make monitoring in the prison themselves. Usually there is an incumbent because track monitor has been around for long time. In some countries like Romania, which is the first program, they didn't have electronic monitoring since. Similarly, in Croatia, we did the first almost every other one we're displacing in core we did that and come in 24 years. We displaced that. Initial a company for very long time as well, and we displaced that. So it does require capital and work and investment for our country to switch over to a new vendor. You need to do that when they see a value proposition, which is significant to what they are experiencing today. So we don't just have to marginally improve what they have, but given big improvement because they have to now retrain all their staff and change their systems and integrate and looks at the whole project. We're going to do that. But firstly, offering significant improvements to existing programs to have, whether it's house or as or GPS monitoring technology and architecture is completely different and offers much longer battery life and very other whole scale of other capabilities and features. That are important to them. And we're able to offer branded solutions that they haven't had before, like domestic violence or PureProtect program. So it's a mix. to get a better version of the existing program and the opportunities to go to new programs. And they find a team which is used together usually a local partner, which provides them top line support, great execution, effective time lines, good communication and all the things that they're looking to see from a government contractor that we bring with over 36 years of experience as the government contractor here at SuperCom.
Matthew Galinko: Got it. And then last question for me, and then I'll jump back in the queue. I guess, with respect to the U.S. market, it seems like you're expanding your footprint into new states within the U.S. and North America. What do you expect to -- do you need to add resources to that effort to accelerate North America? Or do you expect to add like more boots on the ground to try to push that faster? Or just curious how you think about going after that bigger opportunity in the U.S.
Ordan Trabelsi: You're -- just to clarify, you as we're putting more workers on the ground to accelerate it or for do others? .
Matthew Galinko: Yes, yes, exactly.
Ordan Trabelsi: Okay. Good question. So it's a trade-off in the U.S. market, things is much faster than Europe because you're looking at counting sometimes in retailers, three towers -- not government agencies have to go through an RFP process, take a decide on their own. Resellers that have 10 counties that they're controlling and they are running all electronic monitoring. Those countries if they want a technology, it is their products to sell. So they could find in the technology to a company like ours that switch and happens quickly. So within 2 months, 3 months time switching over, they can start small, we go over. They don't do everything to have one to give them a lot of flexibility and it allows us to move faster. That does require though. On the other hand, more feet on the ground because market is fragmented. And instead of just looking at one national project you have thousands and even hundreds of projects spread across the U.S. throughout different counties and some count have multiple projects because they'll have the program for base, we'll have early production work, a co monitoring. It's very fragmented and requires more relationships. But the resellers do aggregate some of these and work for the sellers, we have putter expansion. And we try, as you can see we try to keep an eye also on our cash use and our profitability. We were looking to grow faster. We could raise or, let's say, a venture capital back fund company. We could have raised more money and try to put many, many feet on the ground to expand faster and faster. We at the same time, though, we're trying to maintain our profitability. We try to optimize our cash use, which you may have heard on the script from 3 years ago, where you had a negative $9.7 million in cash burn, this year, cash flow positive, so forth. So we're trying to manage everything at the same time. We are cognizant of how many sales people we put on the ground. And we have seen great growth already even as we work very efficiently with our capital and try to optimize and utilize our salespeople and our sales expenses as optimally as we can.
Matthew Galinko: Great. Well, I appreciate all the answers, and I'll be back if there are no other questions in the queue. Thank you.
Operator: Your next question is coming from Dan Shades.
Unidentified Analyst: Ordan, First of all, it sounds like another great quarter of execution. We really appreciate that. I have, I guess, a couple of questions. First one would be how -- in the debt-to-equity conversion, how many new shares were issued and at what price? .
Ordan Trabelsi: Don't have exactly one conversion over the course of the year. We've done several conversions and they're usually at a premium to hint 100%. And that would be as you saw in the numbers, that helped reduce our long-term liability by $4.5 million. We think it's a benefit to shareholders, of course, because we got to forgive together with that. we reduce the debt when you're seeing a significant premium on the stock price.
Unidentified Analyst: So well, how many -- I'm more concerned about this particular quarter? How many new shares were as part of that conversion were issued this quarter.
Ordan Trabelsi: This quarter, nothing in this quarter.
Unidentified Analyst: Zero in the third quarter.
Ordan Trabelsi: Yes. Third Quarter nothing, it's just an update, we just give annual updates and compared to the last year. you see the long-term liabilities to reduce because of conversions done to the previous quarters. Small amount, not just one version or the conversions with optimal in terms what we try to achieve with our it.
Unidentified Analyst: Okay. Wonderful. That's excellent to hear. How many -- can you give me an account of how many shares are outstanding at the end of the third quarter?
Ordan Trabelsi: We did report, we had a semiannual work that we ran roughly 2 million outstanding shares. A little bit more on [indiscernible] share.
Unidentified Analyst: Okay. Wonderful. I'm thrilled to hear that there wasn't any additional dilution than a long-term shareholder. And I believe in your product and your mission, but it's been a little disheartening to see the continual dilutions over the last couple of years. I hope that's behind us. And just one final comment. The market will -- once you -- once that is common knowledge and is out there, your stock performance will change because right now, that's what's been holding you back. And that's all I got to say. .
Ordan Trabelsi: I understand. Thank you for that answer. I want to know that we have been working to grow our infrastructure and expand and we've been reducing our use of cash and over time, as I said, we want a negative $9.7 million to negative $4.7 million to $2.4 million, now positive free cash flows. We don't control exactly the project stages and how things roll out and we hope to win more projects. And sometimes we need to use cash to support this growth, but we are trying to be cognizant and that's why these conversions that we have described in the debt, we've done a premium up to 100%, that provided great value to shareholders. We're trying to be cognizant and delaying extended on maturity of our debt. And we've worked closely with various partners, and creditors and parties to help at terms and to be able to execute and grow and implement our business plan while trying to optimize shareholder value. And I appreciate your support to come the years. .
Operator: Your next question is coming from Matthew Galinko from Maxim Group.
Matthew Galinko: Another couple of questions from me. Can we expand a little bit more on the deal you have now in Israel, particularly maybe a little bit more about the structure? Is it more of a purchase or kind of a recurring structure? And what are the opportunities for expanding that project over time? .
Ordan Trabelsi: Good question, and I'll just make sure on the information organized for you. So we'll start with a high level. The project was through an incumbent, there's incumbent for many years in Israel partnership. I was holding the project and we came with a different partnership together with Electra, and we won a bid, first period is 5 years. There's four 1-year extensions that's 9 years. if we do well, it could be extended for another 9 years as we see in many regions in the world. Initially, it starts with house arrest, which is based, and that is the initial program is expected to have 1,500 vendors and is not a purchase the lease model that we see many times in the U.S. market and in some parts of Europe. There are other types of programs that, as we discussed on the call, like domestic liens and others that we believe that is really a present IPS, they call -- they plan to use more of these programs to help with criminal justice. In Israel there's been a low path last year around domestic clients, which is allows and complement the use of electronic monitoring for defensive miles and there's other things that are in process. This project gives us the right for all the electronic monitoring projects in the country. over these years. So as the government decides to deploy more projects, we will be the vendor deployment. And we have experience, as noted in many of these programs, in many countries around the world. of various sizes, including 15,000 units invested projects in Romania, which is minute. We've seen even in house rest increase it for the quantities every year. and we expect those numbers to grow. That's just for the initial program. But beyond the initial program, which grows, we're expecting potential additional programs to be added on support to the projects, which should be very valuable.
Matthew Galinko: Got it. And as we think about additional units on the House rest or additional programs under that win. So if you add incremental units, what does the margin look like if you go beyond the 1,500, I guess? But I guess is there a benefit to end?
Ordan Trabelsi: Yes, yes, yes. So there's a lot of costs with two new system that includes installation and hardware, teaching and setting up support such manuals and setting up the software that includes development of the software adaptations and specific programs the customer wants. We'll do that with every customer in every large customer that have specifications but our effort and then lower our margins. But as you know, that every additional rates that we put on has very high margins, much higher than the original ones because you don't have to do any additional customization, whether you're doing 1,500 or 10,000 units, it's mainly to say if you add more units and the margin on each digital unit is very high, so time 30% higher. It depends on the specific pricing of the specific program because sometimes you have one brace and one tone, one brace and two tone, sometime on or also have base business you have [indiscernible] has different calls and different cellular costs and margins could change, but they are much higher when you add additional units to each insisted contract. And what's nice about besides Israel, which is going to put more programs, and it's going to be interesting in a good margin. In the U.S., among all the programs run on the cloud and they run the same language and are the same infrastructure, the same protocol. So it's very nice of the market there, which is already 3 to 5x a year. Besides Europe, we will utilize the same systems allowing us to reach higher margins versus in Europe where each nation has A lot of it was purchasing and auto have different languages, different protocols, different laws, and it made a little bit more complex there from nation to nation. Here in the U.S., we're actually seeing more consolidation and more similarities between programs, that's going to be a benefit for us going forward in the future.
Matthew Galinko: Got it. And then final question on that. I don't know if you can answer this, but is there a number of track defender. Do you think the Israel deal can reach over the initial 5-year period. So we started at 1,500 and maybe that ends at like 3,000? Or is it impossible to answer that at this point?
Ordan Trabelsi: With the population in Israel as of end of '23, it was close to 10 million, and the remainder you look at 90 million population without getting into the specifics, of different laws and processes programs. You can see that in Romania started at 50,000, and they're still talking are growing. They're certainly move to much more than 1,500 in Israel. There's a lot of potential to be done. It's not just the population of the country. It also depends on the processes and the government's propensity to go quickly. Our experience in Israel and our headquarters are here is a lot of the different product visual and the government processes like technology that are comfortable with technology. We had a program in Israel for the COVID-19 tracking, and we have good operations to work closely together with them and with Electra to deploy effective solutions. And as these numbers as the decisions work well, they grow their numbers. and it's a lease projects so they continue to grow it as they see it working effectively and improving the numbers.
Matthew Galinko: And sorry, one last follow-up. For the initial 1,500, do they turn on as soon as you're implemented? Or is there kind of a ramp-up period to that initial number where you need to go in and swap the old for the new? Or what's the process towards go-live and reaching that point? .
Ordan Trabelsi: We already started with the project deployment. It takes time. And now processes a different issue in the planning. And it should take 6 months or so for the -- some of the initial deployment test the beginning number, is expected to be a little less than 1,500, and then maybe somewhere between 1,000 to 1,500 at the beginning and then it grows 500 quick but it does happen through swaps. And Israel is a smaller region. It's easier than you spend to across large regions like California, so you have easier touch points and access to the offenders are able to do the swap from one on to another relatively quickly it could do in a month for exactly. That number is in. . But first, you have to set up the infrastructure, run the task train everyone, everyone ready and that's a bit to do in the 6 months, while the program is running right now with different vendors. So it's a watch handover process, which we're very familiar with that we've done other declines around the world successfully. And of course, that's what gives our customers confidence that they choose the first one. So we're doing that here as well just a little closer to some of our staff to make it actually easier than normal. And I mentioned our -- we have a local partner, Ultra, which is a large corporation here in Israel, and they're spread out throughout the country. And they're going to be doing and handling a lot of the services and swapping and so forth. And it's going to -- it's an interesting endeavor for anyone. We feel confident governments well that this process should be smooth like many others that we've taken as to our partnerships.
Operator: At this time, I will pass the call back to Ordan for closing remarks.
Ordan Trabelsi: I want to thank you all for participating in today's call and for your interest in SuperCom. Please contact us to act if you have any additional questions. We look forward to sharing our progress with you in our next conference call filings and press releases. Thank you, and have a good day.
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