SuperCom, Ltd.

Ladies and gentlemen, good morning and welcome to Supercom's first quarter 2026 financial results and corporate update conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 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 being recorded for playback purposes. Joining me from Supercom's leadership team is Ordan Trabelsi, Supercom's President and Chief Executive Officer. I'd like to remind you that during this call, Supercom management may be making forward-looking statements, including statements that address Supercom's expectations for future performance or operational results. Forward-looking statements involve risks, uncertainties, and other factors that may cause Supercom's actual results to differ materially from those statements. For more information about these risks, uncertainties, and factors, please refer to the risk factors described in Supercom's most recently filed periodic reports on Form 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 and non-GAAP financial measures 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, May 14, 2026. Except as required by law, Supercom disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Supercom's President and CEO, Ordon Trevelsi.

Thank you, Operator, and thank you everyone for joining today. So we just had an earnings conference call two weeks ago. We're going to keep today's call shorter with a brief overview business, financials, and then open up for a Q&A. For those of you who are new to Supercom, we provide electronic monitoring and public safety technology for local and national governments around the world. For over three decades, we have partnered with national governments across the globe to deliver secure, scalable, and innovative technology solutions. In recent years, our focus has shifted sharply towards criminal justice, where we leverage our proprietary peer security product suite, where we invested over $45 million in for offender electronic monitoring, including domestic violence prevention technology and alcohol detention through lightweight ankle bracelets with extraordinary long battery life and other connected monitoring device and capabilities. Two weeks ago, we reported our financials for fiscal year 2025, which reflected the completion of a very successful four-year transformation, representing a compounded annual growth rate in revenues of approximately 30% in our electronic monitoring business and a CAGR of approximately 47% and company EBITDA, reaching an annual 2025 EBITDA level of $9.4 million from $2 million in 2021. We also reduced our debt in this period by approximately 45% and lowered our blended interest rate from double digits to slightly below 6%, as well as increased our cash and short-term deposit balance to over $12 million. Entering 2026, we are pleased to begin with a record gross profit record operating income, and record EBITDA of $3.3 million for the first quarter of the year, reflecting continued execution across our business and the scalability of our recurring revenue model. We continue expanding in Europe with two new national contracts, including a new $17 million national contract from Sweden's Ministry of Justice. And at the same time, our U.S. Electronic Monitoring Technology Annualized Recurring Revenue, or ARR, run rate has expanded by over 180% year over year, from May 2025, reflecting the accelerated impact of a rapid deployment and expanding customer footprint across the United States. Year over year, financial highlights from our Q1 report compared to the same period last year are summarized as follows. Revenue increased 8% to $7.6 million from $7.05 million. Gross profit increased 8% to $4.8 million from $4.5 million. an over 10-year record. Gross margin remained robust at slightly above 63%. Operating income increased to $1.23 million from $1.21 million, another over 10-year record. Excluding the extraordinary financial gains of $4.1 million recorded in Q1 2025, our gap net income surged to $1.33 million in Q1 26 from $0.1 million in Q1 2025. These gains are related to conversions of debt to equity and negotiated premium prices of up to $43 per share done in Q1 2025. Assuming extraordinary financial gains of $4.1 million recorded in Q1 2025 again, non-GAAP net income surged 155% to $2.78 million in Q1 2026 for $1.1 million in Q1 2025. EBITDA increased 32% to $3.34 million from $2.53 million, another over 10-year record. Gap EPS was roughly $0.24, non-gap EPS was $0.51, cash and cash equivalents increased to roughly $11 million, and book value of equity increased to $45.6 million from $43.5 million at the end of 2025. As you've noticed, significant improvements to profitability. I want to give a brief, some more color on the what's driving this profitability. Beyond the clear benefits from economies of scale and operating leverage, our improvements in profitability are being driven also by the following. Firstly, consolidation of activities in Europe. As you know, our projects in Europe are in many different countries. And historically, we would team up with a local partner who would handle the training, the language, the on-country presence, the deployment on on-premise services, and others. And we continue to consolidate and centralize our operations in Europe. We established a central European hub in Romania for logistics, equipment handling, shipments, and RMA. We're also expanding our scope by taking over more IT and more support responsibilities directly, reducing our reliance on local partners and improving our margins. We now provide also our own 24-7 multi-tier technology support across projects. Centralizing these functions is significantly improving margins across contracts. We're also leveraging AI to accelerate development, introduce new automations, improve operational efficiency, and reduce costs across development and customer operations. Our new products and technology advances can reduce costs dramatically, given improved architectures requiring less labor in replacement, support, and other processes that overhead the cost for our business. And our expansion to the U.S., The expansion of the US market is in itself an improvement to profitability because everything is centralized through the cloud in English and usually consisting of simple product mix as opposed to Europe, which has a lot of different products, project deployment, and language complexities in the national projects. As we enter and grow US electronic monitoring technology revenues, more profitability is expected to improve. Our US growth and expansion was one of the central developments in recent years. Since mid-2024, we have signed more than 40 new electronic monitoring contracts, entered 16 new states, and built 17 new service provider partnerships. There is an inherent lag between the contract signing and revenue recognition. In some of these contracts, it takes up to six months or more to fully deploy, since they have to swap out their existing units, and this could take time. Sometimes they do swap out organically to avoid the installer overhead, such that every new offender is put on SuperConf technology, and as existing offenders and their monitoring terms, the incumbent provider's tech is returned and replaced by SuperConf's technology for the next offender with the same unit. Hence, when we announce new projects in 2024 or 2025, there's a lag until you see it. And in 2026, in Q1, we've seen this increase Nice growth in ARR, which continues to improve as the months go by in the year. We're experiencing acceleration or expansion numbers here. Our Supercom's electronic monitoring technology quarterly recurring revenues for the first quarter in the U.S. increased approximately 88% for the whole first quarter, while as of May 2026, the annualized recurring revenue run rate grew by over 180% compared to May of 2025. As you may have noticed, the majority of our revenues are still coming from the EMEA region, Europe, Israel, and a lot of our projects there are from the over 15 national project wins that we have announced in recent years. They provide a strong base for continued growth. And with an active and growing pipeline of meaningful opportunities, customer relationships are very sticky. In our expansion, we displaced very long-term incumbents, such as a 25-year incumbent in Sweden, and over 20 year incumbents in Israel and Germany. And also successfully entered brand new EM countries like Romania, where we won the country's first electronic monitoring contract with initial value of over $33 million in 2022. And Sweden recently won national project with initial value over $17 million with substantial opportunity for expansion beyond that. This brings us over $25 million in aggregate initial value of contracts we won in Sweden in electronic monitoring. Several years back, we started off with projects of $100,000 in Lithuania and Latvia, and since then we've been growing in scale to $3.6 million in Finland, another $7 million in Sweden, another $17 million in Sweden, $33 million in Romania. As we grow up the ladder, we hope to win larger and larger opportunities. And we know that in the market, there are many out there, including an opportunity that we're expecting to come up in Italy for expected over $20 million and an opportunity over 150 million pounds expected to come out the initial RFP sometime in 2027.

With that, we'd like to turn the call over to operator for any questions from our participants at this time.