Logan Lowry

$SPCB: I believe SuperCom’s underlying business is growing at a rapid 80% yoy, but this is currently hidden by the accounting of the Romanian contract. Because of specific rules, 80% of that contract’s value was recognized during 2023 and 2024. Let me explain why: SuperCom uses a cost based accounting method. At the beginning of a contract, they estimate the total cost of the project; they then recognize revenue as a percentage of the costs incurred. Because the company's European contracts are heavily weighted toward the beginning, SuperCom incurs most costs early when producing and delivering hardware. As a result, the majority of revenue is recognized at the start of the contract. The Romanian contract was worth $33m with a four year duration. The annual report shows a massive jump in revenue and a customer concentration of 50% in 2023 and 53% in 2024. I am confident this customer is the Romanian government. By my calculations, roughly 80% of the total contract value was recognized as revenue in 2023 and 2024. If we assume that 10% of the contract is recognized in 2025 and 10% in 2026, we can normalize the data. By excluding the 53% from the Q3 2024 YTD figure and my estimate of $2.25m from the Q3 2025 YTD figure, we see adjusted revenues of $10m and $18m. This indicates that excluding the Romanian deal, the company actually grew 80%. This growth likely stems from the U.S. business, as gross margins have expanded from 48% in 2024 to 61% YTD Q3. I posted a full write-up about SuperCom on my substack. Link in bio