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spk03: Ladies and gentlemen, good morning and welcome to Supercom's third quarter of 2023 Financial Results and Corporate Update conference call. At this time, all participants are on a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also recorded for playback purposes. With me on the call today is Ordone Trabelsi, Supercom's President and Chief Executive Officer. I'd like to remind you that during this call, Supercom's management may be making forward-looking statements, including statements that address Supercom's expectations for future performance or operational results. Forward-looking statements involve risks, uncertainties, and other factors that may cause Supercom's actual results to differ materially from those statements. For more information about the risks, uncertainties, and factors, please refer to the risk factors described in Supercom's most recently filed periodic reports on Form 20F and Form 6K 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 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, November 14, 2023. 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, Ordon Trabelsi.
spk04: Thank you, Operator. Good morning, everyone, and thanks for joining us today. Earlier this morning, we issued a press release with our financial results for the third quarter of 2023, which you can find in the investor relations section of our website at supercom.com. On this call, we'll briefly discuss our business highlights, our growth strategy, and the results for the quarter before moving into a Q&A session. Today, I'm excited to share with you that Supercom's outstanding performance for Q3. which reflects the tremendous strides we've made in our operations and financial position. The third quarter of 2023 was a landmark period for us, where we achieved an incredible 550% growth in EBITDA, reaching $2.7 million for the quarter and a five-year record net profit. We're proud to report non-GAAP EPS of positive 24 cents for the third quarter of 2023 as well. I want to take a moment to remind everyone that not too long ago, In the year of 2020, after years of continuous declines in the business, we reached a low of annual revenues of less than $12 million and net losses of nearly $8 million. Since then, we've worked very hard to turn things around. And annualizing our Q3 2023 numbers, you'll reach a current annualized run rate of $27 million in revenues and EBITDA of $10.8 million. Our annualized EBITDA today is close to our annual revenues for 2020. These, of course, are meaningful achievements that we're proud of. And I'd like to thank our wonderful global team at Supercom for their hard work and dedication for making this all possible. These financial metrics not only underline our strong execution, but also the increasing efficiency and scalability of our operations. During the past year, we won several important contracts in the U.S. and Europe. And we're excited about the opportunities we see ahead. I'll go into more details in a few moments. But for those who are new to Supercom, our mission is to revolutionize public safety sector across the globe with a proprietary electronic monitoring technology, data intelligence, and suite of complementary services. With over 35 years of experience since our founding in 1988, we've been a trusted partner to dozens of national governments worldwide, providing cutting-edge electronic and digital security solutions. Our strategic blueprint is straightforward yet powerful, leading with innovative technology, developing superior solutions, expanding our global presence, and delivering outstanding service. The strategy is backed by our proprietary electronic monitor technology, which scores highly in competitive government tenders and support various programs such as house arrest, GPS monitoring, rehabilitation services, domestic violence prevention, and more. And since 2018, Supercomma secured over 50 new multi-year government projects with project wins valued at over $40 million in 2022 alone. Our strong growing reputation as a premium provider of electronic monitoring solutions and services with each new customer win enhancing our market position. And lastly, our strategic focus on the IoT tracking business in developed markets where the opportunity is the greatest. With the electronic monitoring market projected to reach $2.1 billion in 2026, The U.S. and Europe constitute about 95% of these markets. These successes and opportunities have resulted in growing business pipeline with strong recurring revenues at a level of over 70% of total revenues in 2022, for example. In Q3 of 23, we continue to amplify our technological leadership with significant R&D investments, leading to a launch of advanced solutions like PeerProtect and PeerOne. These offerings are already making headway into various markets, including the U.S., and are pivotal in Supercom's market expansion. PeerProtect is a life-saving domestic violence monitoring solution. This solution strongly offers strong protection to families suffering from domestic violence. This innovative solution addresses domestic violence issues and further enhances the company's portfolio of products and services. PeerProtect has undergone rigorous testing and has been successfully implemented in multiple projects, including Romania's $33 million EM project, the first electronic monitoring project in the nation. In Romania, the police place our bracelets on those who hit the family members, and if they come in close proximity of them, an alert is sent to the police immediately and to the victim's phone. This offers a new layer of protection that has not existed before. Another product we launched recently recently is the Tier 1. It's an all-in-one GPS tracking ankle monitoring solution that integrates comprehensive monitoring capabilities into a single device. Like many of our products, it offers top-notch features, placing it above the competition on most metrics. This product also expands the company's addressable market. We've been very pleased with the early reception and traction of the newest solutions and expect them to help facilitate our rapid expansion of Supercom into the U.S. market. We fortified our operational infrastructure to support our growth and have revamped our sales strategy with a proactive outreach approach. Our sales team with deep industry experience has been instrumental in achieving these new wins and driving growth. Throughout the past month, we announced many new project wins in the US and Europe. Supercom has continuously displaced income of vendors and achieved an over 65% win rate in European competitive tenders. Despite macroeconomic uncertainty, Supercom solutions are becoming increasingly relevant. Factors like high recidivism rates and the escalating cost of incarceration make our solutions not only cost-effective, but also essential for governments looking to enhance public safety and reduce costs. The company's fear security technology solution has been designed to address this trend, offering an effective way for institutions to enforce home confinement, ease prison overcrowding, and lower costs significantly. For example, The total daily cost for monitoring an offender on home confinement or GPS monitoring is approximately $10 to $35, compared to the much higher cost of $100 to $140 per day at a correctional facility. Most importantly, home confinement has been shown to reduce recidivism, highlighting its effectiveness in helping offenders improve their lives and communities. On top of these growth drivers, We have witnessed a surge in the adoption of victim protection solutions worldwide. We align perfectly with our strategic plan and the launch of our new product, PureProtect. In the European market, Supercom expanded its business into over 10 countries and secured significant new contracts, which are typically awarded through a competitive tender process. Supercom launched a $3.6 million national EM project in Finland. the national government in Q1 of 2023, and by May 2023, the Peer Security EM Suite was fully deployed in Finland, covering all EM offender programs, house arrest, GPS, and inmate monitoring for the country. In Q3 2023, we have secured a new national program with the Finnish government to deploy our domestic violence monitoring solution. The deployment of our Peer Security Suite consisting of Peer Protect, Peer Tracks, PureTag and PureMonitor demonstrates the versatility and effectiveness of our solution and underscores our leadership in the electronic monitoring space. Our collaboration with Finland is a prime example to the confidence that clients have in SuperCom. And those who experience our services often choose to broaden their engagement with our diverse array of solutions. Notably, the company won the largest industry award of the year for national electronic monitoring projects in Romania, valued at $33 million, which includes to 15 000 monitored offenders per month from the six years and that's just one project in one country so imagine the breadth and spread of our solutions around the world listen beyond q3 recently announced a third order valued at over 3.4 million dollars for the romania's ministry of interior further extending our engagement in the country's national project this subsequent ORDA reinforces the strength of our peer security suite and cements our position as a trusted partner for governments worldwide. We've also launched our domestic violence solutions in other European regions and are planning to launch them in the USA very soon. In Israel, there is a high potential for new domestic violence projects as the government has passed a law requiring domestic violence offenders to be monitored with technology such as ours. Although Supercom already does business in multiple U.S. states, We are actively focused on further expanding our presence in the U.S. The company strategically prioritizes the expansion of Tier 1 into new markets and geographies. Hold on for a second. Apologies, there's an alarm here. We're out of Tel Aviv, Israel. Just going to continue this from the shelter. I'll give you a minute. Apologies for that, everyone.
spk01: Okay, continuing from the shelter.
spk04: Okay, so we've also launched our domestic violence solutions in other European regions, and plan tossing us soon. You said there's a high potential for domestic violence projects with the government has just passed a law requiring domestic violence offenders to monitor the technology such as ours. Okay, our expansion, the US market has been marketed by another significant milestone with securing a $3 million contract in California through our subsidiary, LCA. This contract for alcohol monitoring technologies reaffirms our commitment to delivering high-quality services and is a testament to our robust reputation in the electronic monitoring industry. With this contract, we anticipate a steady stream of recurring revenue over the initial three-year term and the potential for future extensions. And as we've mentioned before, we believe there's also an opportunity to enhance our U.S. growth through strategic acquisitions of local electronic monitoring service providers with a strong reputation and customer base in the respective local markets. We are constantly monitoring the market for potential acquisitions that could generate significant value by immediately expanding market presence and providing vertical integration strategies. Our acquisition of LCA in 2016, for example, for $3 million was a great example of this. This successful acquisition has proven to be a great strategic value through the over $30 million of new project wins it has generated since then in California alone. During the third quarter, we completed a successful close of $2.5 $75 million public offering to support the company's continued innovation and growth initiatives, a testament to the investment community's trust in our vision and strategic trajectory. I'll now turn to financial. During our previous conference call, I mentioned that we anticipate contributing to our financial results in the next quarters as our ongoing project matures. I'm delighted to share that we've seen remarkable operating improvements, as evidenced by the increase in our gross margins to 59.4%, Again, our gross margins improved to 59.4% from 34% last year, and in many of the previous quarters, that was a level. We've also achieved a five-year record GAAP net income, positive for the first time in some years. This is driven by our projects moving into later stages of the life cycle, where higher margins are typically achieved. This trend can continue when project timelines align nicely. I'd also like to note that for the nine-month year-over-year revenue, increased by 67%, $20 million, with our IoT division being the primary growth engine. In perspective, while the global electronic monitoring market grows at approximately 11% per year, Supercom IoT revenues outpace global market growth by multiples. This growth is a testament to the fact that the market prefers our solution over the alternative, time and time again. Furthermore, we are proud to have sustained positive EBITDA in each of the last three years 2020 to 2022, and achieved EBITDA increase by 550% to $2.7 million in third quarter of 2023, to a level of EBITDA of $3.9 million in the first nine months of 2023, which resulted from operating leverage, targeted outspending, and high year-over-year increases in revenue. The following is a comparison between the financial results of the third quarter of 2023 and third quarter of 2022. We'll do this brief comparison and then open up for Q&A. All right, let's go. So, gross profit increased by 89% to $4 million compared to $2.1 million, which is a direct outcome of the progress we maintain across our projects. Our margins typically enhance as projects mature. We achieved a $580,000 decrease in total operating expenses, excluding one-time other expenses through a corporate operational optimization plan that was implemented gradually in the last six months. We decreased our R&D expenses by $180,000 while we continued to develop and launch new products and improve existing ones, keeping us at the edge of innovation and technology leadership in our space. In addition, our sales and marketing expenses decreased by $120,000 and general administrative expenses decreased by $280,000. The company had an operating profit of $840,000 versus an operating loss at $850,000, resulting from the significant increase in our gross margin and profit and a decrease in our operating expenses. The company's EBITDA improved by $2.3 million to $2.7 million compared to $0.4 million, reflecting the benefits of operating leverage associated with high revenues deploying new IoT projects and continued progress in the phases of our ongoing projects. This achievement underscores our focus on sustained growth and profitability. Our net income improved by 107% to $0.15 million profit compared to a $2.2 million loss. And our non-GAAP net income improved by $2.6 million to $1.6 million profit compared to a $1 million loss. Positive non-GAAP EPS improved to positive $0.24 compared to negative non-GAAP EPS of $0.02. Our cash position improved been stable. We have credit facilities and reduce our need for cash as we continue to win and execute large projects. In addition, the company had one-time expenses of $800,000, mainly pertaining to legacy business settlements and allowance of doubtful debt. In closing, we're excited about the growth we're experiencing and about the growing demand for our product. After five years through which we transitioned from our legacy business of identification to the IOC tracking of offenders' business, we're happy to show the shift to rapid growth in revenue and profit margins. We believe that we're well positioned for continued growth by capitalizing on the many new opportunities that lay before us. These are being driven by multiple factors, including a strong presence reputation in the US and European markets, the counter-cyclical nature of electronic monitoring industry, the growing public policy shift to monitoring instead of incarceration, and the growing adoption of domestic violence prevention solutions. We anticipate sustained growth by further expanding our market share in the U.S. and Europe. Our commitment to preserving our technological advantages and our robust growth foundation remains steadfast as we continue to invest in these areas. With that, I'll now turn the call over to the operator for questions. Operator? Operator?
spk03: Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press star, then the number 1 on your telephone. If you're 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 2. One moment, please, for the first question. Your first question is coming from Matthew Galenko from Maxim Group. Your line is live.
spk02: Hey, thanks for taking my question. I hope you're, you're staying safe. Um, also, thanks.
spk04: Sorry about that.
spk02: No, no, no. Uh, also congrats, you know, on the really nice quarter and year to date. Uh, it's been very, very nice to see. Can you maybe touch on the, um, just the, I know you referenced recurring revenue and, um, Do you have a sense of what the baseline is? You know, if you don't get a kind of big project shipment out in a quarter, where do you kind of go down to if you don't get a big shipment?
spk04: If we don't get a big shipment this quarter?
spk02: Any future quarter. So beginning Q4, if you don't get a big shipment to Romania or, you know, a big – Oh, we're going to rush it.
spk04: Our revenues in Romania are mainly through continued progress, and this project is supposed to continue for years. So we expect the next few quarters for things to continue, and they might even grow. And we also expect new projects to come in. So we're at a pretty good level. As you can see, each of the last, I think, four or five quarters, our revenues were about $6 million. We continue to deploy the projects in Romania. And what's very interesting in this quarter, as you notice, we had a huge jump in gross margins, which is something that we have been forecasting for a long time. We mentioned that once the projects move into later stages, there's not as much cost. You're just providing equipment. You have all the infrastructure ready. You already trained everyone, and the system works very nicely. In Romania, we have a very good relationship, and things are working well. We're ordering more and more. And that's what we see in other projects around the world as well. So when we have a big new project, the beginning margins are not as high, but over time they shift up and that's what we're starting to see here in the first quarter. It could be just the beginning. There's potential for like Romania to happen multiple times over.
spk02: Gotcha. And I think you announced a $3.4 million order from Romania that's supposed to ship in the fourth quarter. If I understood that right, can we kind of expect that since that project's pretty far down the track that, that, the margin profile should be kind of similar to what we saw in Q3 or at least kind of higher than it was in the early stages?
spk04: Yeah, we expect the margins to continue to be higher than what they were originally. And as you're aware, sometimes the fluctuations between quarters, so it might be a little higher, it might be a little lower, but we certainly expect to be in this higher level of margin rather than how it was before when we were just shipping tons of hardware and installations and training or past that stage in Romania. Now, based on what happened to do projects that could shift as you're aware of it, you know, our revenues are a mix of many different projects around the world. If something massive, let's say a hundred million dollar project comes in and those are out there at the beginning, that would shift margins, but it would only be temporary because then at the end of the deployment margins will shoot up again. But the margins of this industry have capacity to be very high between 50, and 75%, and even more if you continue to deploy more units in existing regions. Our strength has been, as you can see, as we just announced in Finland as well and other countries, once we deploy one technology, we keep on deploying more technologies and more units and more abilities, and we're already there, so the deployments are set, you have the infrastructure, and now you're just generating high-margin revenues with high-margin products and offering great abilities to the customer at low cost.
spk02: Got it. Thanks. And last one for me, and then I'll jump back in the queue. It sounds like, you know, you've moved through the Romania contract relatively quickly. I don't know if you're comfortable talking about how close you are to that 15,000 number, but is there potential to expand the scope of what you're doing with Romania beyond kind of the initial baseline that can sort of maybe add more seats or you know, units. Yeah, I'll leave it there.
spk04: Of course. Of course. First of all, there's always the potential of these kind of projects to grow. Romania is a very interesting case. They didn't have electronic modeling before. This is brand new for them and they're flying. They're moving very fast through the project with orders and deployments. I don't have an exact number for you, but there's definitely potential for the numbers to grow. There's also the potential for additional capabilities with every project. So we, Sweden, if you look back in time, we started with a project of $7 million. Sorry. We started with a project of $1 million in Sweden, which was for the police. And then we did a $7 million in the ministry of justice in Sweden. And now we're just a juvenile in Sweden. And we have all the, all the projects currently out there and they might do more projects. Romania is just, it just started because of the great opportunities there and in many other countries. Uh, but our reputation with every new project we get with every new region that we expand into the reputation. continues to grow, continues to spread. And now when new customers like Romania, like Croatia, which is brand new as well. And now we're also getting requests from other places in the world, even outside of Europe and outside the U S all over the world, people are hearing the name and they're coming to us. Uh, they're, they have colleagues in different countries with different similar roles and, uh, they see what we're doing. And of course it's much easier to pick someone that everyone's already picked. Uh, originally we had the hard times. This was five, six, seven years ago. Uh, but now, Things are much more consistent and much easier. Now we're focused on just continuing to operate effectively and maintain what we're doing.
spk02: Thanks. All right. I'll jump back in the queue.
spk03: Thank you. Once again, everyone, if you have any questions or comments, please press star, then one on your phone.
spk01: Please hold while we poll for questions. Your next question is coming from Matthew Galenko from Maxim Group.
spk03: Your line is live.
spk02: All right, I guess I'll continue. Can you talk about, hey again, what is the pipeline opportunity, I guess, as you see it now, for Pure One in the U.S. market? Is the pipeline pretty well built today, or where are we at in that kind of engaging with the you know, potential customers and getting evaluations into their hands.
spk04: So, great question. We talked a lot about peer protect, which is domestic violence. And just so we clarify the difference, because we talked about both in the script. Domestic violence is not something that's been very well addressed in the market. It's mostly been house arrest and cheap desk monitoring. At home, you need different technologies. When it's someone, you need something to put on someone's leg that's very light and they don't have to charge every day. That's where our solution comes in very nicely in domestic violence. And also, our tag communicates with a smartphone. So let's say a man hits his wife, he gets a brace on the leg in Romania, and he comes close to the wife, you know, on front alerts, and also the police. That's our Pure Protect. Pure One, which I also mentioned on the call, is somewhat different. It's also brand new, but it's a GPS monitoring. It's in... the right in the breath in the major part of the industry, uh, which is GPS tracking, which we also want to give up a lot. And in the U S we've been expanding with our special smartphone solution. And this is an all in one solution. It doesn't require a smartphone. It's called pure one. And that's just to help some of the judges and customers in the U S or build a weary of the smartphone solution. They're not exactly understanding how, how it works well with the, with the tag. And now we have both options. So on the same software, on the same solution, on the cloud, on the same exact system, you also have the Pure One, which works very well. The battery life is longer than those in industry. It's more lightweight. It has a rechargeable battery, which is mobile. You don't need to connect your leg to the wall. That doesn't sound funny, but that's what they do. And most of the products in industry, people connect their legs to the wall every day. It doesn't sound safe, but that's what they do here. We have mobile chargers. You put on your legs. It's very convenient, very comfortable. We started deploying it also already in California and we're giving it to very various, uh, resellers and customers in the U S so far, we're getting amazing feedback. People love it. It works very well. And they're excited to continue spreading it out to the U S a platform in the U S is more fragmented. It's not like Europe, but it will be, uh, when you reach the state level and the federal level right now, we're still at the County level and the resellers level. We have our hands a lot of different places and we want it. We want it that way because this is how you get good feedback before potentially making a wrong move with a customer like California state or Florida state. So we're, we're just like we've done many times over. We've been doing this for many, many products on this peer security suite. Give it out to smaller customers. We get feedback, we get attention and we update and we improve and we add more features. We have more capabilities that we had just, things to streamline the whole solution, and then as it gets more and more stable, more and more robust, we start doing larger projects. The latter. In Europe, we started with a $100,000 project. In Latvia and then Lithuania, and then slowly moved up to projects like Finland with $3.6 million, or Denmark and Sweden with $7 million, and then Romania with $33 million. Here in the U.S., over time, the market in the U.S. is four to five times bigger than the European market. So everything you've seen up to now, the nice growth, Because if you remember, until 2020, the company was declining revenues for a few years. Now we shifted that. And since 2021, we've just been growing. And now we've reached this very nice operating profitability margin as well. So that could continue several times over when you put the U.S. market into play. And we think the Pure Protect, the Pure One, together with the Pure Protect, are going to be very influential in this.
spk02: Got it. That sounds pretty encouraging, especially U.S. markets feedback. I know it's still a little ways off, and I think you probably have a lot of irons in the fire, but in the past we've talked about some of those large European contracts that might be coming up for bid in the next 18 months or so. Can you talk a little bit about that pipeline of large European deals and how that's going as far as engagement?
spk04: Can you repeat the last part of the question? How far what goes as far as engagement?
spk02: I guess, how do you feel from Supercom on, you know, you've obviously had a very strong win rate in Europe in recent years. So, you know, Are you confident that you're in a place where you can win the large deals that would be coming up in Europe? And, you know, are any of them likely to be 2024 events that they get decided on? Just any expectations around the large European deals?
spk04: Yeah, there's some large European deals out there. There's more. There's, you know, we have over 10 countries in Europe, but there's still plenty of others and plenty of other big ones. And, uh, some of them reach out to us to talk about domestic violence. Cause they, again, they don't have our domestic violence solution is the whole architecture. It doesn't exist. Some reach out to that, even though they have existing programs and some are going to have a bid for all the programs that are out there. Israel right now is, uh, is, uh, planning to select for a new product for an updated project in normal, uh, electronic monitoring of offenders and also domestic violence. The law just passed in Israel. You could see in the Knesset, in the parliament in Israel, the senators, the female senators are holding bracelets. They were holding our bracelets and they were petitioning and yelling that they want solutions in Israel. And they're ready to do that because it's a very important solution that doesn't exist right now in the land of Israel. So like that, you see other countries around the world who are pushing for that and they're communicating with us. So there's new opportunities that have never, new projects that never existed. And there's the existing projects which go out for bid every five years. And we've displaced, you know, almost every one of our projects we've displaced a vendor that's been there for 10, 15, 24 years. It's usually hard to be displaced, but when there's technology that's significantly better than the existing one, that's what happens. So that's why we continue to invest in R&D to make sure we're always at the top of technology at the cutting edge. And with the project opportunities that are coming up in Europe, we do expect there to be continued win rates. As a company, Revenues grow and the company, you know, number of units grows and the company breasts and customer base grows and the geographic reach grows. It makes it easier to win. So we had a really hard time at the beginning and then it started getting easier and easier. And if all goes well, then in the future, things should be even easier in Europe and also new markets that we're entering into and building our base, such as some regions of the U.S.
spk02: Thanks. A couple quick additional ones for me. One, I think you, in your press release, you talked about a secure ID card. When in Iceland, I know that's not your core business, but can you talk a little bit about, you know, what that is and when you expect that to impact results?
spk04: What is a secure ID? Can you put the last one in here? Secure country to anywhere?
spk02: Secure ID.
spk04: Repeat the whole lesson. Which project that you were talking about?
spk02: Oh, sorry. So that's Iceland national ID.
spk01: We did have a... Sorry, just one moment. Sorry. Sound quality here. Just give me one moment. Hey, sorry. Do you hear me better now? Apologies for that.
spk02: Yeah, you're coming in clear. Can you hear me?
spk04: Okay. Yeah, I was just filling the shelter. Sorry about that. The communication is a little off, but it's okay. The alarm stopped. Yeah, so Iceland, we have projects there for years. We do passports for Iceland, and we expand the modules and capabilities they want, and we expanded. We had a new expansion recently that we've been working on, And also, we're developing their ID for the same customer. And that's been moving along. And in 2024, we expect that to be finished. Customer has been with us for over 15 years. Small customer, but has been with us for a long time. Of course, every customer is important. And especially ones that have been with you for a long time, they have a lot of good things to say after all the years. So we try to provide great service to all of them. And when they want updates, passport to ID, ID to other things. We do that. Even though it's part of our legacy business, we still support our customers. Once in a while, new projects come in, also an identification. It's not where our sales focus is. It's not where we lie, but it's still there.
spk02: Got it. All right. Last two. One being, it looks like on your balance sheet, receivables were up in the third quarter. So it looks like that was a, you know, kind of investment in working capital. I guess, don't know if it's something you could talk about, but it's probably a higher number because revenue has been up, but is there, can we kind of expect that receivable number to come in? in the fourth quarter or for that to come down into 2024 as a source of capital or just curious how you think about?
spk04: It could be, you know, since we shifted right from the legacy business to the new business, collections have actually been good. Sometimes even better than good. Great. So we're experiencing the same thing that you might be accustomed to in Supercom from seven, eight years ago. That being said, sometimes, the working capital grows because of the payments of the projects. That's the same timeline that the revenue progression. Revenue progression is upon delivery and upon percentage of completion sometimes. And collections are when certain milestones of acceptance are reached. So it could be declining Q4. It could also be in Q1. It depends when those milestones are concluded by the customer's point of view. And we're continuously working on them. for many different customers at the same time.
spk02: Gotcha. And maybe just another way to frame the same question. EBITDA, very strong for the third quarter and positive year to date. Is that a good proxy to use for your operating cash flow? So at $2.7 million of EBITDA, is it reasonable to expect to be breakeven to positive on an operating cash flow basis?
spk04: Sometimes. Sometimes there is the, just, just think what we talked now. Uh, sometimes you have revenue recognition before we actually collect the cash. And then that's gonna, it's going to be, uh, an offset in timing when the cash comes in. So the operating cash flow is, will be more dependent on the payments of the customers. And with these projects that are complicated and have multiple stages, the payments are not always aligned with revenues. So you'll see a little bit offset, but if you take many quarters into account and you average them, then yeah, um it takes through the one time there's the one time things be occluded even they do have some cash requirements like settlements of uh old things from the old business or write-offs um they do come out of either that but they they cost us uh cash sometimes but as things stabilize and the legacy business is more legacy and things are continuously steady in the new the new business uh the offsets with different project collections will all merge into an average that fluctuates very small between the quarters. And that's where we start to see a more predictable business, a more consistent revenue cash generating business, and a more consistent growth expanding business, which will be supported with our modes of leading technology and a continuous pipeline of new opportunities around the world.
spk02: Got it. Thank you. And final question, 2024 realized again, might not be ready to provide any forward commentary on this, but after a very strong 2023, what can investors expect from 2024? It sounds like you have a lot in the pipeline, but you know, is it a good year if you kind of hold the level with 2023 or are you, you know, looking to grow off that, you know, very strong base.
spk04: We're always looking to grow. And if you look at what we've done in the last few years, you know, new manager and myself and others and new members came into the company. In 2021, we've been pushing very hard as which is reflected in the numbers. That being said, I was I was taught very diligently to under promise over deliver. So we'll under promise now and hopefully over deliver. and exciting ventures in the quarters to come.
spk02: All right. Terrific. Thank you so much for taking my question.
spk03: Thank you. Thank you. Once again, everyone, if you have any questions or comments, please press star, then one on your phone.
spk01: Please hold while we poll for questions. Once again, everyone, if you have any questions or comments, please press star, then 1 on your phone. Please hold while we poll for questions. At this time, we'll be passing the call back to Ordon for closing remarks.
spk04: I want to thank all of you for participating in today's call and for your interest in Supercom. Please contact us directly if you have any additional questions, and we look forward to sharing our progress with you at our next conference calls, filings, and press releases. Thank you very much, and have a good day.
spk03: Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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