SuperCom Ltd. Q1 FY2026 earnings call

Four-Year Transformation Completion (Fiscal 2025)

• Completed a successful four-year corporate transformation, delivering 30% compound annual growth rate (CAGR) for EM revenue and 47% CAGR for company EBITDA
• Grew 2025 annual EBITDA to $9.4 million, up from $2 million in 2021
• Reduced total debt by ~45% and lowered the blended interest rate from double digits to below 6%, while growing cash and short-term deposits to over $12 million

Q1 2026 Core Financial Achievements

• Opened 2026 with record gross profit, operating income, and EBITDA, reflecting strong execution of the company's scalable recurring revenue model
• Secured two new national EM contracts in Europe, including the $17 million national contract from Sweden's Ministry of Justice that displaced a 25-year incumbent provider
• Maintained robust gross margin at slightly above 63%, a 10-year record

Margin Improvement Drivers

• European Operations Consolidation: Established a central European hub in Romania for logistics, equipment handling, shipments, and returns management; brought IT and customer support in-house to reduce reliance on local partners, and now provides 24/7 multi-tier support directly, which has improved margins across all European contracts
• AI Operational Efficiency: Leveraging AI to accelerate product development, automate workflows, and reduce labor and overhead costs across development and customer operations; improved product architectures cut costs for replacement, support, and other routine processes
• U.S. Market Expansion Benefits: U.S. EM operations are centralized on a single cloud platform with a simplified product portfolio (no multi-language or fragmented national project complexity), which delivers higher margins than European projects; continued U.S. growth will drive incremental company-wide margin improvements

U.S. Expansion Progress

• Since mid-2024, Supercom has signed over 40 new U.S. EM contracts, entered 16 new states, and built 17 new service provider partnerships
• There is an inherent 6+ month lag between contract signing and full revenue recognition, as customers typically replace incumbent technology gradually by swapping units only when existing monitoring terms end, which delays full revenue recognition; accelerated ARR growth in Q1 2026 reflects past contract deployments coming online

Pipeline of Future Opportunities

• Has steadily grown contract size from small early projects in the Baltics to large national contracts, with a strong active pipeline of new opportunities in Europe, including a >$20 million opportunity in Italy and a large >£150 million opportunity in England expected to release an RFP in 2027

Supercom operates two core geographic segments for its core electronic monitoring (EM) business: EMEA and the U.S. 1) EMEA Segment: This segment remains the largest contributor to total revenue in Q1 2026, comprising the majority of the company's $7.6 million total quarterly revenue. It is supported by over 15 won national projects, including a $33 million initial contract in Romania and a new $17 million national contract in Sweden won in Q1 2026. 2) U.S. Segment: The U.S. segment is still smaller in total revenue contribution than EMEA as of Q1 2026, but is growing rapidly. Excluding long-standing recurring revenue from the legacy LCA business, U.S. EM technology annualized recurring revenue (ARR) run rate grew over 180% year-over-year as of May 2026, and quarterly recurring revenue for U.S. EM increased ~88% quarter-over-year in Q1 2026. Total company-wide Q1 2026 results: Total revenue $7.6 million (+8% YoY); gross profit $4.8 million (+8% YoY), gross margin 63%; operating income $1.23 million (+2% YoY, 10-year record); adjusted non-GAAP net income $2.78 million (+155% YoY excluding 2025 extraordinary debt conversion gains); EBITDA $3.34 million (+32% YoY, 10-year record).

Management did not release formal numeric full-year 2026 guidance, but provided the following qualitative forward-looking statements:

• U.S. EM revenue growth will continue to accelerate, with the U.S. market expected to eventually surpass EMEA as the company's largest revenue segment, as the total addressable U.S. EM market is projected to reach $1.8 billion by 2028, compared to just $300 million in Europe
• Profitability and margins will continue to improve as the U.S. business scales and more European contracts mature to later stages (which carry higher contribution margins than initial project deployments)
• Supercom's significantly strengthened balance sheet and expanded reference base will materially improve its positioning for large upcoming national bid opportunities in Europe, compared to prior bid cycles when the company had a weaker financial position and limited market references

No new material risks beyond those already disclosed in Supercom's previously filed Form 20-F and Form 6-K reports were discussed on the call. Forward-looking statements regarding future growth, profitability, and bid outcomes are explicitly noted to be subject to risks and uncertainties that could cause actual results to differ materially from expectations. The only operational volatility discussed was variable quarterly ordering levels for the Romania project, which is tied to the customer's internal needs and not a sign of customer dissatisfaction or lost business.

Q: What is the current competitive landscape for EM, and what enables Supercom to consistently displace long-tenured incumbents in new opportunities? / A: There are roughly 10 global industry players, with high barriers to entry that require 5+ years of proven experience and customer references to compete. Supercom wins new contracts because its technology scores higher than competitors in formal bids and live U.S. trials, it maintains a very high win rate (over 65% for European RFPs, and even higher for U.S. county opportunities), and strong performance from existing customers generates positive references that drive new wins. /

Q: Does the reported 180% YoY U.S. ARR growth include legacy LCA business revenue? / A: No, the 180% ARR growth only reflects growth in Supercom's core proprietary PeerSecurity electronic monitoring technology, the new U.S. expansion initiative. It excludes long-standing recurring revenue from the legacy LCA business that has operated in California for many years. /

Q: How is Supercom positioned differently for large upcoming European national bids compared to past cycles? / A: In prior bids for large programs like the upcoming UK tender, Supercom was disadvantaged by a weak balance sheet, low cash reserves, high debt, and limited customer references that led customers to question company stability. Today, Supercom has a much stronger balance sheet with over $11 million in cash, a large global reference base from won projects, and far greater financial stability, which significantly improves its odds of winning these large opportunities. /

Q: What is the current status of the Romania national project, and what are the margin characteristics of follow-on project orders? / A: The Romania project remains an active, satisfied customer, and new orders are currently being fulfilled after a period of lower ordering following an initial faster-than-expected deployment. Early-stage project deployments carry lower margins due to upfront training, installation, and platform development costs, but follow-on orders for additional units have much higher contribution margins, which contributes to overall improving company profitability.