Supercom at Sidoti Conference: Electronic Monitoring Growth Strategy

On Wednesday, 21 May 2025, Supercom Ltd (NASDAQ:SPCB) presented its strategic vision at the Sidoti May Micro-Cap Virtual Conference. CEO Ordan Trebelsi outlined the company’s shift from legacy identification to electronic monitoring solutions, emphasizing robust growth in revenue and EBITDA. While the outlook is promising, Trebelsi acknowledged market challenges impacting stock performance.

Key Takeaways

• Supercom has transitioned to electronic monitoring, achieving a 31% CAGR in topline revenue.
• The company focuses on the US market, which is significantly larger than the European market.
• Financial health is strong, with a $17 million cash balance and reduced debt.
• Supercom’s technology, Pure Security Suite, offers competitive advantages in tracking and battery life.
• The company is pursuing acquisitions and partnerships to expand its market presence.

Financial Results

• 2024 revenue reached $27 million, with Q1 revenue at $7.1 million.
• Gross profit for 2024 was $13 million, with a Q1 gross profit margin of 63%.
• 2024 EBITDA was $6.3 million, showing significant growth from $200,000 in 2022.
• The company reduced its debt by a third, extending maturity to December 2028.

Operational Updates

• Supercom signed 20 new contracts and entered nine new US states since last summer.
• The company displaced long-standing incumbents in Sweden and Israel.
• It secured over $35 million in bids in California since 2016.
• Supercom’s Pure Security Suite features a year-long battery life for ankle bracelets.

Future Outlook

• Supercom aims to win large-scale national projects in Europe and expand in the US.
• The electronic monitoring market is expected to grow to $2.3 billion by 2028.
• The company’s recurring revenue from government projects provides stability.

Q&A Highlights

• Opportunities in the immigration sector were discussed, notably with ICE.
• Trebelsi noted no competitive disadvantages as an Israeli-based company.
• The stock’s lower trading multiples are attributed to market transition delays.
• The extended debt maturity provides a financial runway for future growth.

In conclusion, readers are encouraged to refer to the full transcript for a comprehensive understanding of Supercom’s strategic initiatives.

Full transcript - Sidoti May Micro-Cap Virtual Conference:

Greg Burns, Analyst, Sidoti: Alright. Let’s let’s get going. My name is Greg Burns. I’m an analyst at Sidoti. I’d like to welcome everyone here to Sidoti’s May Microcap Conference, and thank you to, Supercom, ticker SPCB, for presenting, for us here this afternoon.

Today from the company, we have Ordon Trebelsi, the company’s president and CEO. He’s gonna run through a presentation, and then we’ll get to as much q and a at the end. If you do have a question, just enter it through Zoom. We’ll get to as many of those as possible. Ordon, the the presentation just closed out if you wanna just pop it open again.

Ordan Trebelsi, CEO, Supercom: Okay. Got it. Yep. How’s that?

Greg Burns, Analyst, Sidoti: Yep. Just started up, so you could take it away.

Ordan Trebelsi, CEO, Supercom: Okay. Great. Thanks for having me, and thanks everyone for joining. Today, I said I’m I’m a c Supercom’s CEO or Don Trebelsi. I’m gonna happily run you through our investor deck as of May 2025.

So interesting updates in progress, and then at the end, we’ll have a q and a session. Safe harbor statement, general for a moment. And now about Supercom. So those of you who don’t know, Supercom has been around since 1988, and we’re a global provider of electronic monitoring solutions for governments around the world. Our current focus in recent years have been on a fender electronic monitoring, which essentially ankle bracelets to track fenders at home while they’re moving around in GPS against alcohol, domestic violence, and so forth.

And we’ll get into that very shortly. Our ticker is SPCB. And I myself, the global CEO, have entered this position in 2021 together with others with new management that has come in, and we’ve tried to, you know, improve and change some of things of the company, hopefully, for the better. In in this period, since we came at the the company’s grown at a 31% CAGR top line, and EBITDA has grown multiples. We reached an EBITDA of $6,900,000 over the last trailing twelve months.

We’re also expanding our our reach to to many new projects around the world. In Europe, we have had a very nice win rate and continuously won, and we’ll see that soon. We reached the seventh national domestic violence project globally. And in The US, where we saw expansion in the recent year, we’ve been experiencing rapid US expansion with over 20 new contracts and in nine new states since the summer of twenty four. We have a nice track record, over 70 government projects that we we’ve won, and we’ve issued around 20 patents.

Our mission, so taking a step back, is to revolutionize public safety worldwide with innovative electronic monitoring technology and complementary services. Now to understand what that means, we’re gonna look at the worldwide challenges in the criminal justice system. We’re seeing high recidivism rates, prison overcrowding, excessive costs, and at the end, unsafe communities. We’ll dive a little bit into each of them. So recidivism rates, the likelihood to to be rearrested for crime within five years in The US is seventy five percent.

That leads to very high prison population rates, and The US is the highest in the world with a five hundred seventy one out of a hundred thousand, which is more than half a percent of the population in The US currently incarcerated. You see the numbers are much higher than those of England and Belgium and other European countries. But in The US, like the other countries, we still see prison overcrowding. It’s a big problem. Many nations around the world, there’s no room for people to sleep, and they end up sleeping in turns or fighting over the same bed, and the scarcity of resources create even more conflict within the prison environment.

And, of course, running these prisons is very costly over $80,000,000,000 annually spent running prisons in The US alone. And if you moved everyone, for example, to house arrest, we would save 90% of those costs. And you see the the cost per person for operating in prison of 36,000 cuts down to around 3,000 for house arrest. And when someone is at home, you’re not just saving costs, you’re also providing them an opportunity to study, to raise kids, to help their parents, to help others, or contribute to society rather than being in prison where they just learn bad habits and, you know, progress the problem that that has started in the first place that brought them to prison. So the market, we see it’s growing consistently in many different regions.

Projects that started off ten years ago have been growing and growing and growing, whether it’s in California or in Florida or in Sweden or in other place around the world, and that leads to a general market growth of roughly 7% expected in the coming years, and that’s expected to reach $2,300,000,000 in 2028. See The US is roughly six times the size of the European market in in the slide, and that’s what excites us with some of the growth we’re seeing recently and some of the expansion is into the actual US market. The market is barrier highly barrier. There’s only 10 players around the world, high barriers to entry, and takes five to ten years of experience deploying exactly these solutions to even bid on a on a project like this. So you’re not gonna see a Google or or Amazon tomorrow comments are bidding in the industry.

You have to show experience. You have to show that your technology works, and it’s been tracking offenders effectively for a long period of time. And we’ve been building that track record, building that experience that what makes us, you know, a very effective player today when we compete on these opportunities worldwide. Here’s our technology proprietary tech that we developed in house, Pure Security Suite. We have Pure Monitor software that runs on the cloud that essentially tracks and shows you where the offenders are at a given moment.

And there’s exclusion zones and inclusion zones. We also see here the PureTag ankle bracelet, which is a lightweight bracelet with battery life of up to a year and more, longest battery life in the industry, and that, you know, synchronizes with the PureTrack. On the PureTrack, the software on the on the phone, we have the PureTrack PureProtect, the domestic violence solution. We have the PureComm house station and the PureOne, which is all in one one piece tracking device, which doesn’t require the phone, which we added to our our arsenal of capabilities and of of tools, and that’s been very popular in The US market and has been helping in our expansion. With our technology, we’re able to support a wide array of programs from house arrest to GPS monitoring, domestic violence, inmate monitoring, alcohol monitoring, and rehabilitation services.

And domestic violence is an interesting one. As I said earlier, we we’ve won our seven national domestic violence program in the world. We’re, you know, a a leader in this space, and our technology with the smartphone together with the ankle bracelet allows us to create a architecture. Whereas, if we put a bracelet on a on a fender, they can’t come close to the victim because their phone was alert. And that creates a new paradigm, new architecture, which is very effective utilizing our technology to do domestic violence more effectively in various places in the world.

Our solutions create positive social impact, and they improve public safety. It’s not just a theory. We see it in practice. We’re able to help eradicate domestic violence, increase public safety. They offer rehabilitation proper reentry to society with our services where you can reduce your cross street population sizes in the regions where we work.

And we’ve seen the electronic monitoring as improvement to reduce recidivism from the number I talked about seventy five percent all the way down to thirty five percent. So with all this, we’re also cutting significantly government expenditures. So how do we win? We get asked a lot. And we have a nice slide here that describes with our technology, we put over 45,000,000 into the r and d over the past years, and we have that helped us develop this pure security suite proprietary technology.

We’re able to offer significant advances compared to the competition and such as significantly long battery life and since the programs yeah. Our battery runs for up to a year and more. And since the programs run for less than a year, you never have to charge it during the program. Ultra lightweight, next gen location tech. We can track subways within buildings, within cities.

We we could synchronize with multiple methods of biometric authentication and multiple methods of track, WiFi tracking, including the Bluetooth and RF, and together with GPS and GNSS and video calls, two way communication, and the domestic violence protection. And that altogether in Europe has led to additive edge and a win rate of over 65% in national government tenders in Europe. In Europe, as we’re newer to to the industry, we started with small projects like Lithuania and Latvia, which were a hundred thousand dollars or so and slowly grew to Denmark and Finland to 3,600,000.0. For Sweden, a Ministry of Justice of 7,000,000. And Romania, a project of over $33,000,000, which is mainly domestic violence project, which we announced several years back.

There’s still opportunities in Europe that are large of the size that we won and and much larger also. And after we have this track record that’s growing, Europe with over 15 national project wins, we’re able to much better compete. We also today have a strong balance sheet of $70,000,000 in cash. We lowered our our debt balance, and we’ve been able to show more stability, which is important to some of these government customers. And our our performance over recent years not only reflect a stronger track record and great technology, but also a more stable and more predictable base, which get gives comfort to a potential dominant customer.

We’re expanding in existing geographies and in new ones. And it’s interesting to note that in many of these geographies, once we put our foot in the door, like in Sweden, we displaced an incumbent vendor of twenty four years. Twenty four years, they were serving the government. We came in with our technology, showed our capabilities, and we displaced them and won. And after we won the first project, the Ministry of Justice, we shortly after that won another project for the Swedish police, the domestic clients.

And then we won Juvenile. And now there’s another, you know, RFP out. It’s within for for another project, which is the substantial size that we’re looking to compete for. But the idea is once you put your foot in the door, you can add more and more projects. Romania, we launched the first project, which is 15,000 enrollees simultaneously, which is massive.

And we expect and hope that they’ll do more projects just like in Finland. We saw that they’ve done another project in Croatia. The first project was ours and also Romania. So we’re we’re either the first in the country or we’re displacing incumbents, and then we add more and more projects. In Israel, they had a twenty year incumbent here, nearly twenty years.

We’re just awarded the project of five to ten years. Now we’ll encompass all electronic monitoring programs in the country. The original estimate was 1,500 enrollees enrollees simultaneously, And the the rapid deployment was completed at record speed, and there’s potential for growth, especially when you have something that’s all of the EM programs in the country. As the country evolves and wants to put more and more EM solutions, we will be the the natural vendor to do that. In The US market, which we saw is six times estimated to be six times the size of European market, we’ve been experiencing accelerated expansion speed faster than we had in Europe.

And since the last summer alone, we saw 20 new contracts and entry into nine new states. And that’s very exciting for us. And some of these contracts are are smaller because their initial needs to start small and then grow. But they’re putting they’re helping us plant seeds into many different locations throughout The US. And then with our technology, perform as well as it has in the past, you know, we get more references and more word-of-mouth marketing and more expansion within every one of these, you know, regions and adjacent regions.

So we’ve also signed six regional service provider partnerships. And these service providers are important because they have been in the market for years. They’ve tried all the technology. And if they chose us, that means that they like our technology after seeing everything else. It’s sometimes even more of a signal to to to your success than having a new government customer, which might not know all the technology that’s out there.

So we’ve signed on direct contracts. We’ve signed partnerships, and we are you know, just yesterday, we announced another one in Virginia, which is nine nine states in the last year. And we continuously displace the incumbents. And together with that, we’ve been maintaining our presence in California through an acquisition back in 02/2016. We acquired LCA.

And after that acquisition, not only do we replace their technology with ours, we also were able to win over $35,000,000 in in bids in California since the acquisition. So you can see here, we’re entering into many new states, expanding with the existing states, and starting our our expansion into The US market, which we which we’re excited about. Now it’s important to know that The US, not just larger in size, but off the margins, are larger because everything is on the same platform on the cloud. It’s all centralized. It’s all in the same language.

It’s easier than one in Europe. We have to customize the language, customize the program, launch the software on different server farms with different governments. Here, everything is much more streamlined, and so it offers for higher contribution margins per bracelet. And we expect over time to see, as revenues in The US grow, to see expansion of margin as well for The US market. Our growth strategy has multiple layers.

We’re, on one hand, looking to win more large scale national projects in Europe. We have a good reference, good track record. We know how to work in Europe well. We’re looking to expand our footprint in The US through entering more states, the direct bids, through partnerships with the service providers. We are open to acquiring service providers as we did in California, and there’s others throughout The US.

And that would strengthen our market presence because we would have not only immediate synergies by replacing the technology of other vendors with ours, but also a presence in those locations where we could win more contracts in a more effective manner. We’re enhancing our sales. We used to be just passive and bidding on. Now we’re more active, and we’re enhancing these proactive sales efforts to streamline our sales cycles. And we’re innovating continuously to unlock new growth opportunities, such as domestic violence solution, which is a submarket that we really capitalized on it and showed how our technology, our architecture could work extremely effectively in tracking and preventing domestic violence.

Because our bracelet that we put on the offender, it’s lightweight, nonintrusive. You don’t have to charge it, and it could track and make sure that that offender is not close to the victim when there is domestic violence situations. It’s interesting to note a lot of our revenues are recurring, because a lot of these projects are recurring in nature. In The US, almost everything you get paid per unit per day. In Europe, there’s a mix.

Sometimes they have these, know, ongoing recurring revenues. Sometimes it’s it’s reoccurring revenues of a of a company of countries that keep on buying in a consistent manner. But either way, you’re looking at long term projects. Like I said, in Sweden, we displaced an incumbent that was there for twenty four years. In Israel, that was there for almost twenty years.

And many of our customers also in The US, have been with us for ten, fifteen, or and more years. And so as we enter these markets and put our foot into more locations, we expect there to be long term revenues. Even if the initial contract is five years or nine years, usually rebids, and you have a, higher likelihood to win if you’re already there and doing a good job. So long term government projects helps create a nice base for us as we go into the future. The revenue trends are interesting.

For those who have looked at the business, we’ve been around since 1988, and most of the history was a legacy business of identification. Right around 02/1516, we decided to shift away legacy business, which was mainly in developing countries, mainly in Africa and South America. We moved to this tracking offenders business. We call it electronic monitoring, IoT tracking, or public safety. And that has been growing since 02/2015 at a CAGR of 55% nearly and have been shown a very nice shift away from the legacy to the existing business today, where we’re seeing not only growth, but also a very high presence in the developed markets where collections and predictability is higher.

The industry has grown in the last few years at 14% on average, and we grew almost three times that speed. So within the industry, we’re growing faster than others. We’re displacing others, and the industry is growing altogether. We’re able to optimize and and show operating leverage and grow our EBITDA from $200,000 in ’22 to 6,300,000.0 in ’24, showing multiples of growth of EBITDA over these years together with, as I said before, top line growth CAGR of 31% for the company in total in the last three years. Some investment highlights.

To remind you, we’re looking at a nice market of $2,300,000,000, which is highly barrier in size, and there’s large growth potential there. The US market, which we’re entering into now effectively, is six times out of Europe. So there’s there’s a nice opportunity there also with better margins in Europe because of the the structure of The US market, which is all one language, centralized on the cloud, and very similar in nature. We’re seeing rapid expansion to The US market. As I said, over 20 new contracts and nine new states since last summer alone, high revenue growth.

The electronic monitoring business was tracking offenders, which is, you know, roughly 90% of our business today, experienced 41.7% CAGR in recent years. And our trailing twelve months EBITDA is roughly $6,900,000 with a 25% EBITDA margin. Q1 that we just announced a week or two ago showed a net income of $4,200,000 and an EPS of $1,200,000 We have high recurring revenues, long term government contracts, and we have a very strong r and d based, strong moat, competitive edge through our technology that we invested over $45,000,000 developed, and we have a nice patent portfolio as well. Looking into financials, just for a moment, we’ll start with the balance sheet. So as I said, this is important for us as we compete around the world with larger projects.

And there are various large projects out there. You know, there’s the ICE project of over a hundred thousand units for for the federal project in in in The US. There’s projects such as in England that they’re that they’re expecting large projects to come out. And when you’re looking at these large projects, having a nice cash base and improved balance sheet is helpful. So we we have a cash balance of $17,000,000.

Our debt has been paid down. A third of it’s been paid down over the last year or so. And right now, our book value of equity is roughly $35,000,000 with total assets of 64,000,000. Stock price has been moving recently, but we’re looking at roughly 4,400,000.0 shares and some pretty nice volume of 225,000 shares. And our our financials, our p and l in 2024, ’20 ’7 million dollars, which is the fourth year of growth Systemally, after three years of decline before new management came in in 2021, we had gross profit of $13,000,000 and EBITDA of 6.3.

And q one on 7,000,000 7,100,000.0, which is slight revenue increase from the previous year. In our q one, we had a gross profit of 4.5. That’s, you know, gross profit of 63%, which is a bit of record level for us. And net income of 4,200,000.0 and EBITDA of $2,500,000. With that, through the presentation, I’ll open

Greg Burns, Analyst, Sidoti: I agree.

Ordan Trebelsi, CEO, Supercom: Call if you’re able to take questions.

Greg Burns, Analyst, Sidoti: Yeah. Thanks, Arun. Got us some some time here for some some q and a. So maybe we could start off with you mentioned maybe some immigration opportunities with ICE domestically, and maybe there’s some in Europe. Maybe you could talk about the opportunity there for you.

And there was a question which in the the chat, which maybe aligns with this. But do you do you have any disadvantage competing for US business being an Israeli based company?

Ordan Trebelsi, CEO, Supercom: Okay. So the the opportunity in ICE that was the was the the the the detaining people across the border physically in detention centers, they’re trying to move a lot of them through to to track them with ankle bracelet. It’s been going on with some time. There’s been huge growth in in that specific project over the years. We’ve we’ve had incoming requests for potential offers from representatives of the government or from the vendor who has it today, which is BI.

They but the the government has shown interest in expanding that to multiple vendors, and also that opportunity is up for bid again soon. In Europe, I said I said England, they have they have a big opportunity coming up. But it’s not just them. There’s always these projects, God forbid, and there’s subprojects in various aspects of of it. We, as a Israeli company, have not had problems winning projects in Europe and also projects in The US.

As you’ve seen, we announced 20 new contracts directly with with various counties in The US and also partnerships that we’re deploying units through. So been performing well, and I think the technology speaks for itself. Before the customers take the technology, they try it out and they see how it performs. And I think based on on the we see it performs very well, they talk to other colleagues in the street and more and more growth. So we we like to under promise and over deliver, so we’re not gonna promise any anything specific except for the fact that we’re gonna continue executing and try to expand our presence.

But there are massive opportunities out there, like the ICE project, like like if you look at England or France or Italy or Germany, there’s big projects out there that we not yet won. And we think with our capabilities, we have the ability to do so in the future. And so we’ll continue competing. And in The US, we just started with the smaller projects, and we’re growing in size just like we’ve seen in Europe. We’ll be able to hopefully expand the size of project wins and all the small ones that we win today, see them grow and grow to larger projects.

Greg Burns, Analyst, Sidoti: Alright. Great. And then maybe you could talk about a little bit about the stock’s performance relative to the improvements you’ve seen in terms of revenue and EBITDA growth and the improvement you’ve made on your balance sheet. What do you think is driving maybe the disconnect in the market versus, you know, how the company’s been performing?

Ordan Trebelsi, CEO, Supercom: So for we’ve gone through a transition that I talked about. We were in the legacy business of of identification tracking, and we shifted from that business almost completely just to the the electronic monitoring business. And there are some periods of, you know, blurriness. It’s hard to understand what exactly was going on. But, you know, when I came into this role, 2021 was after the cash burn was roughly 9 or $10,000,000 a year at the time.

If for operations in this last year, 2024, our cash burn for operations is roughly a million. That’s even improved significantly, and it took people a little while to to see that. Still think there’s a lot of unawareness in the market. And just in the last period of time, less than a year, with the announcements in The US and with meetings with investors, people are starting to get more accustomed to the story. We’re still trading at multiples, which is significantly lower than than our peers.

If you look at companies like Geo Group or Big Technologies, PLC, see that their multiples of revenues, multiples of earnings are significantly higher than ours. And even even though in the industry, we’re we’re growing at higher, I would say roughly three times, almost three times the industry general growth. So we’re performing well, and we have a win rate of over 65% win in Europe. We’re performing well. We’re doing well.

And over time, people understand the story. And I think the things will start to balance out. But but it’s a process. And some of the transition over the recent years, I think, has has made it a little tricky for people to understand. Also, outstanding outstanding debt, we had a pretty high debt balance, and that’s been we paid a third of it down.

And our latest amendment in the debt that we announced in January pushes the debt out December 3 December 2028, our senior debt. And, you know, we we we the payments are due at that time, so we have a nice runway. And the interest rates on our debt currently is low. It’s between, you know, 5% to so for plus two and a half percent. So I think we’re in a very good position in terms of that, and we have a good good position on our cash on our balance sheet.

And we have a good track record that we’re leveraging. So our situation is pretty good for continued expansion.

Greg Burns, Analyst, Sidoti: Alright. Great. Thanks thanks for that. We’re at the the end of our allotted time. So if you had a question we didn’t get to, hopefully, you you have a one on one scheduled with the company.

You could have it answered in person. But with that, we’ll wrap it up. Thanks, Rodan, for presenting. Thanks, everyone else, for for listening in.

Ordan Trebelsi, CEO, Supercom: Thank you, Gregory, and thanks, everyone. Have a good conference.

Greg Burns, Analyst, Sidoti: Thanks. Bye.

Ordan Trebelsi, CEO, Supercom: Bye bye.

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