Sequire Spotlight Presents: Supercom (SPCB) - Public Safety Innovation

Exactly right. Now, so tell us a bit, just I'm sure there's more to the business than just that, but tell us about it.

Yeah, SuperCom, we innovate in the public safety space. We have ankle bracelets and monitor offenders. We also have innovations in domestic violence, that's the product you were talking about. If somebody hits their wife or if a wife hits her husband, the police come home. If they see damage on the body, they'll put a bracelet on immediately before there's even conviction because the bracelet is lightweight, long battery life, it doesn't intrude or interfere in your life, sits in your sock, and it basically just enforces that the person doesn't come close to the victim anymore and enforces a restraining order essentially. And if they come close, then there will be an alert for the victim's phone and also the police. This gives the victims the confidence to actually complain and say that there's something wrong going on. And that's how we're trained, changing slowly the society and the environment in many different places around the world.

So the public safety market is expected to reach $2.3 billion in 2028. And what falls into that whole category? Everything that has to do with alternatives to criminal justice. So besides being in prison, which, you know, governments are spending tens of billions of dollars a year, there's alternatives. It's when you keep someone at home on house arrest for some prison, you're saving 90% of the costs. And also you want the person to work and to raise their kids and to help their parents, to actually become a contributing member of society. So all the alternatives, whether it's alcohol monitoring, someone has too many DUIs, you can put them on an alcohol monitoring program that we have, a bracelet that tests the alcohol in their sweat to prove that they're okay and they're under control rather than continuing the, you know, driving under the influence. We have house arrest, we have GPS monitoring, and we have domestic violence. And we do that in many countries around the world. We just won a project recently in Romania of over $33 million. We're tracking up to 15,000 offenders every month. So over the course of a six-year project, we can help up to a million victims, a million women usually, that have been exposed to domestic violence. We're protecting them from that, and that protects their kids and it protects the environment around them. That's how you get safer communities and better environments.

Yes, because they already have the device on. There's a big problem in domestic violence around the world that, you know, even though people know they're not supposed to do it, they do it and nothing happens to them. But they go to trial, it takes years. Here, immediately, once the police come and they see that there's a problem, they immediately put a bracelet on you. We work with the parliament, with the governments around the world to change the laws such that if there's any risk, any threat, automatically a bracelet comes on. And the bracelet never has to be charged, not like the old bracelets. The technology is, I hope you haven't tried, but if you've seen maybe somewhere they have an old, brick-heavy one on your leg, you have to charge your leg to the wall every single day. And if you don't, you're off the program. Here, it's a lightweight bracelet, goes on, the battery lasts for a year, you never have to charge it, you don't take it off when you're showering. All it does is make sure that you don't go next to the victim. So we're revolutionizing, we're probably the leader in the world in that space of domestic violence. And we're in Romania, and we're in Finland and Estonia and Sweden, in the US and Canada. We continuously win more and more projects around the world as we expand our business.

We have probably five or six different programs. We have probably five or six different products. You have the PureOne product, you have the house arrest product, we have the alcohol product, and we have the PureProtect product. We also have software on the cloud that allows the officers to track all the offenders. And we have over 50 different projects around the world. But our company's been growing very rapidly lately. We had a CAGR over the last years of over 62%. We've been reaching record revenue and record profitability for many quarters in the recent quarters. We've had a 400% EBITDA growth, 500% EBITDA growth, record profitability. We're right now at, this year of 2024, we're at a run rate already of an EBITDA of above $7 million and a net income of above $6 million and revenue of $26 to $30 million run rate.

We lease them.

Yeah, SaaS model. We lease the equipment and per unit per day.

Ministry of Interior, Ministry of Justice, the probation departments. So long sales cycle stuff. Now that you're in there, then you're in there for a while. It's a moat around the product. Takes a year or two to get in. Once you're in, you're there for 5 years, 10 years, 15 years of predictable revenues from the same customer. Now we have over 70% of our revenues recently have been recurring revenues from these customers. We keep on winning more customers, more projects every year. We announce more and more wins, and that builds our recurring revenue base and allows us to have more presence around the world. Every time you win another project, you have more references, more track record, which makes it easier to win more. We have very good momentum. Technology is doing great. The entire industry of electronic monitoring, well, there's only 10 players around the world, only 10. And it's a highly barriered industry. They're very, they're tracking sometimes murderers, rapists, others. It's, if they don't want to, around, you're tracking murderers, I hope you're in jail, you know, after you're in jail for 20, 25 years before they come out. They're not just released into society, right? They're on probation and they have the bracelet to make sure where they are at any given point. Before they're released, at some point, some of them get released back into society and you make sure that the re-entry is done in a proper way. So we help them also with re-entry services, drug abuse, anger management, we help them vocational training. When people come out of prison, whether it's for murder or for stealing at a grocery store, you have to help them re-enter to make sure that they don't recommit crime. Right. In the US, recidivism is over 75%. So you're likely within 5 years to recommit crime, go right back into prison. Really. And that's what inflates the prisons. And in the US, the prison population is over half a percent. So over half a percent of the people in the US are in prison. It's the highest in the world, almost 10 times that of other countries around the world. And we're trying to help in the US and many other countries around the world with technology, with these new programs, with these alternatives to incarceration.

It's a ladder. In Europe, we started with projects of $100,000 in Lithuania, Latvia, $200,000. You can't start off with a $30 million project. They don't know who you are and they're not going to give you so many offenders to track. But now after five or six years already doing great projects in the industry, we won a project of $33 million in Romania, 15,000 offenders at any given moment. It's one of the largest projects in the world and that opens up doors for us to win other large projects. In the US, there's projects like Texas state, California state, Florida state. And Europe is probably a quarter of the size of the US market. We're just now entering the US market. We developed technology specifically tailored for the US market, the PureOne product. And once you're already in the market and you already have the language and the support and the monitoring, every new bracelet could bring on additional revenues at a high contribution rate, 60-70% contribution rate of recurring revenue. And we're excited to expand more into US market, into more locations.

We believe we're fairly undervalued. I mean, our equity, our market cap is, you know, roughly or less of our annual EBITDA, less than one times P/E.

Yeah, we have debt as well. Long-term debt that's expected to be paid years down the line. We're going to, right now, pay it. And that, we have good terms and the flexibility to change. But yes, even with the debt, enterprise value is so low, multiple of roughly four times of EV to EBITDA.

And we're generating cash. We're cash positive this quarter. We keep breaking records on revenue and profitability side. We keep expanding our, we spent over $40 million in R&D over the last few years in these products. We continue to invest.

You can cut it off, and then there is an optic cable that's cut and there's an alert to the police immediately that this was removed.

We continuously invest in R&D so that our products are top of the line. I mean, there's in Europe, which we focused on the last years, we won over 65% of all the RFPs. So one company, SuperCom, won more than the other nine companies put together. We won 65, they won 35. And that's just in Europe. Now we're entering the US. We expect and hope to do very well as well because of our technology, because of our unique propositions that we've invested a lot into in our offerings with better biometrics, better tracking. We could track someone in the subway, we could track someone when they're in buildings, we could track people in ways that never been possible before. And that's how you make these programs more stable and more acceptable and more reliable. And that's what allows to make a big shift in the industry as we've been seeing past years.

We reach recidivism rates as low as 30-35% when you employ these kind of programs versus the 75% before. So it's making the world safer, it's saving a lot of cost for governments, cost that can be used for healthcare and other important problems. And it's changing the shift of how people see the public safety industry altogether.