SPCB

Overall Financial Performance & Balance Sheet Strength

• Reported a ninth record quarter in the last 10 years post-2021 company turnaround, achieving 8-year records for revenue, gross profit, and EBITDA.
• GAAP net income remained flat YoY at ~$1.1 million, while non-GAAP net income jumped to $2.9 million from $300,000 YoY. GAAP EPS was $0.20, non-GAAP EPS was $0.52.
• Net debt reduced from ~$35 million to under $10 million over the past several years; outstanding long-term debt has a 6% blended interest rate with no principal payments due until 2028, providing flexible growth capital.
• Raised $7.5 million in gross proceeds via a registered direct offering of common stock shortly after quarter end, further strengthening the balance sheet to support new deployments.
• Book value of equity increased 28% YoY to $48 million as of June 30, 2026.

Operational Efficiency Improvements

• Consolidated European logistics, equipment handling, and shipping through a centralized Romanian hub, and brought IT and customer support in-house from subcontractors, reducing reliance on local partners and establishing 24/7 multi-project support capabilities.
• Incorporated AI into internal operational processes, accelerating development, enabling new automation, and improving efficiency across deployment and customer support; management notes AI adoption is still in early stages with additional upside expected.
• Deployed a centralized, cloud-based standardized operating model for the U.S. that leverages economies of scale, reducing project costs compared to the more customized, decentralized model required for European national programs, enabling faster, lower-cost launches of new programs.

Market Progress & Growth Strategy

• Successfully displaced 20-25 year incumbent providers in multiple European markets including all five Nordic countries, validating the performance and reliability of the company's technology.
• Over the four years ending December 31, 2025, EM revenue grew at a 30% CAGR, while EBITDA grew at a 47% CAGR, driven by expanding recurring revenue and increasing operating leverage as programs mature.
• In Europe, temporary ordering moderation in Romania (driven by political uncertainty) masked underlying 40% overall EM revenue growth between 2024 and 2025; the Romania program remains active, and the company has secured 20+ national program wins across the region. Multiple large European opportunities (including Italy and a £150 million national program in England) are expected to launch over the next 18-24 months, with the company now far better positioned to win after strengthening its balance sheet and execution track record.
• In the U.S., the company has secured 45+ new EM contracts, entered 19 new states, and established 18 new regional service provider partnerships since mid-2024, growing to operate in 22 states total. Contract sizes have increased from smaller initial deployments to 100-250 unit awards, with meaningful room for further expansion. U.S. annualized recurring EM revenue grew 290% from July 2025 to July 2026, with an inherent lag between contract signing and revenue recognition as deployments ramp.
• The company's wholly owned California subsidiary Leaders in Community Alternatives (LCA), which provides complementary reentry and rehabilitation services, recently secured a $2.5 million five-year contract; Supercom has secured over $35 million in new California contracts since acquiring LCA.
• Signed a new national EM project with the Swedish Prison and Probation Service, with total estimated value ranging from $17 million (base case) to $75 million (full budget including expansion to 6,000 active offenders and additional capabilities like alcohol monitoring).

Management did not issue formal quantitative full-year or quarterly financial guidance in this call. Key forward-looking qualitative statements include:

• U.S. revenue growth will continue as the company scales from smaller to larger contract sizes, following the same expansion path used in Europe but at a much faster pace.
• Gross margins are expected to continue expanding over time, supported by increasing operating leverage from a growing recurring revenue base, further operational efficiency improvements from AI adoption, and growing contributions from the higher-margin centralized U.S. business model.
• The company expects to continue winning new large national programs in Europe, which will remain a meaningful source of large-sized growth opportunities, while the U.S. market (which is 6x larger than Europe) is expected to become an increasingly large contributor to long-term growth.
• The company is actively pursuing expansion into new regions including APAC and LATAM, with initial focus on Australia and New Zealand, to capture additional long-term growth opportunities.

Supercom reports only one core product segment for this quarter: electronic monitoring (EM) and public safety technologies. In Q2 2026, the segment generated total revenue of $8.1 million, a 13.3% increase year-over-year from $7.1 million in Q2 2025. Gross profit for the segment grew 16% YoY to $4.9 million, with gross margin expanding 90 basis points to 60%. Adjusted EBITDA for the segment increased 55.6% YoY to a record $4 million, up from $2.5 million in the prior year quarter. No separate absolute or percentage contributions are provided for additional business segments.

• Foreign exchange headwinds from a 17% year-over-year strengthening of the Israeli shekel against the U.S. dollar negatively impacted Q2 2026 operating income, pressuring margins for the company's Israel-based operations.
• Revenue recognition in both Europe and the U.S. is subject to timing variability: large European national programs have variable ordering and deployment cycles, and U.S. contracts have an inherent 6+ month lag between signing and full revenue recognition as deployments ramp, leading to potential period-over-period fluctuation in reported results.
• There is no guarantee that the company will win large pending procurement opportunities, including the England national program and other upcoming European bids, even with an improved competitive position.
• Penetrating new geographic markets (including new U.S. states, new European countries, and new regions like APAC and LATAM) carries inherent execution risk, and the company's track record in existing markets does not guarantee success in new markets.
• All forward-looking statements are inherently uncertain, and actual results may differ materially from expectations due to a range of additional risk factors detailed in the company's recent SEC filings on Form 20F and Form 6K.

Q: Will U.S. EM recurring revenue growth continue to accelerate as the company scales to larger deployments? What is the current trajectory? / A: Growth has already accelerated from 180% to 290% year-over-year in the last 12 months. While acceleration will naturally slow as the base grows, overall growth will continue. The company is following the same scaling trajectory it used in Europe (starting small and moving to larger projects) but is expanding much faster, having entered 19 new U.S. states in just two years.

Q: What is driving the current strong 60% gross margin, and is this level sustainable? / A: Margin expansion comes from three core factors: bringing previously outsourced European operations in-house to cut subcontractor costs; higher-margin contributions from the growing centralized U.S. business; and higher incremental margins from maturing European projects, where upfront deployment costs are already incurred and new units carry very high contribution margins. Additional margin expansion is expected over time as revenue grows and AI-driven operational efficiencies deliver more gains, so current strong levels are sustainable and have upside.

Q: What is the typical contract structure, length, cybersecurity requirements for new EM contracts in the U.S. and Europe? / A: U.S. contracts are generally standardized: 3-5 year initial terms, priced per active unit per day with consistent recurring revenue and monthly cash payments, and carry higher margins than most European contracts. European contracts are more variable, often include upfront infrastructure deployment fees in addition to ongoing maintenance revenue, and may have multi-year deployment timelines. Cybersecurity is a core evaluation requirement for all government contracts; the company has deep cybersecurity experience, relevant certifications, and consistently scores well on required security audits, which is a key competitive advantage.

Q: What are the company's plans for expansion into APAC and LATAM, after posting sales director openings for those regions? / A: The company has 38 years of global experience serving 40+ countries, and its proven EM technology works across global markets. Initial focus in APAC will be on Australia and New Zealand, where the electronic monitoring market is already developed and the same incumbent providers the company displaces in Europe and the U.S. operate. The company is building out its sales team to pursue these new long-term growth opportunities.