The Future of Domestic Violence? SuperCom $SPCB

Ten Bagger or Bust

It has been a little while since I had a new “Ten Bagger or Bust” company. I typically stay away from microcaps, they are known for having abusive management. But in this case, the financial backer gives me some confidence that the business will eventually grow to return capital to shareholders. I also find it hard to buy something after it has recently done a 4x, but given the current market capitalization is only $26 million, and the recent flurry of new contracts after opening their US office, I think there is a lot more opportunity to the upside.

SuperCom Ltd (SPCB) is 36 year-old Israeli security electronics company that has been focusing on sales to local governments. In the last ten years, technology has advanced, batteries can last a year without recharging, and the Internet of Things can track locations and send data in ways that weren’t possible before. These are not your parents’ ankle monitors. One of the more popular innovations is the ability to pair GPS trackers with restraining orders, so that the court mandated distance can be monitored in real time. This has significantly decreased repeat domestic violence when implemented.

SuperCom has a long history of being in the arena and trying things out, and with mixed success. They struggled last decade in eGovernment services in South America and South Africa. But the current management team went back to the drawing board, spent $40 million on research and development, and came back with a set of solutions that is taking enormous market share. SuperCom focused on the EU first, and in the last 12 months, won 65% of all government electronic monitoring contracts that they competed for in that market, despite it being a market with 10 credible competitors. With fits and starts, look at the purple portions of the bar graphs below which show the electronic monitoring revenue and growth with a focus on the EU. The past experiments with different markets is masking this new growth vector.

Toward the end of 2024, SuperCom expanded to the US market, and has been aggressively landing new contracts. Since the summer of 2024, SuperCom has landed 20 US contracts across six states.

Jan 13th 2025: Juvenile Probation in Ohio - displaced the incumbent

Jan 6th 2025: Domestic Violence in Alabama

Jan 2nd 2025: Kentucky - displaced the incumbent

Dec 30th 2024: County Sheriff’s Agencies in South Dakota

Sept 18th 2024: New York State

Sept 3rd 2024: Baltimore, Maryland

August 22nd 2024: West Virginia

May 23rd 2024: North California

And, SuperCom is still expanding in their core market, the EU, on December 23rd they secured a new contract with the State Police of Latvia. The contracts are all unique, and the terms are not available to retail investors, but a five to fifteen year length is relatively common in the industry. They also start small, but have the built in capacity to ramp up if the customer is satisfied. The fact that SuperCom can successfully displace entrenched competitors is a powerful signal that their $40 million research and development spend really did have a large impact.

The market in Europe and North America for electronic monitoring is about $1.5 billion annually, of which SuperCom earned $6.9 million last quarter, of which $1.2 million flowed through to free cash flow. As SuperCom proves itself, there is enormous room for growth, not just with new contracts but to expand with existing contracts.

The electronic monitoring revenue grew over 50% annually between 2021 and 2023, and is showing continued growth in 2024. The gross margin is also hovering around 50%, with EBITDA margin closer to 25%. The company has 73% recurring revenue, which is a highly desirable category of business. Applying growth stock multiples, SuperCom could easily trade at a price to sales ratio of between 4.0x and 8.0x, but they may need a couple more years of aggressive growth to prove themselves to the marketplace after their failed experiments in South American and South Africa.

SuperCom does have debt, $9.2 million with Streetview Capital, and $14 million with Fortress Investment Group. Fortress Investment Group is the same firm where New Fortress Energy (NFE) founder Wes Edens made his fortune, and they are known for being relatively savvy. SuperCom recently refinanced their Fortress debt from Libor +8% to SOFR +2.5%. This interest rate from Fortress is a very powerful signal that smart money considers SuperCom to be low risk. Perhaps this is due to their long term contracts with creditworthy municipalities and sovereigns. The precise details of the debt are not known, and Fortress recently purchased 100,000 shares of SuperCom at $43.71 per share to help pay down some of the outstanding debt. Since the stock is trading around $12 today, it isn’t obvious what Fortress received in compensation for their overpayment, but I suspect it’s either warrants, or the refinanced debt is a PIK, payment in kind, meaning that Fortress is accumulating SuperCom equity. While this would result in some future dilution in 2028 at maturity, in the meanwhile it is a very strong vote of confidence. Management has also guided toward a round of equity fundraising when their market capitalization reaches $75 million, a share price of around $36, and this money would be used to pay down the outstanding debt.

Putting a price target on SuperCom isn’t easy, while they are landing a lot of new contracts, we don’t really know the dollar amount. Predicting future growth isn’t easy either, but after growing at over 50% for two straight years, predicting a forward 20% growth rate isn’t unreasonable. A SuperCom that did $40 million in revenue in 2026, with 25% EBITDA margins, could easily have a $160 million to $320 million enterprise value. At the low end, that would imply a $53 price target for the end of 2026. And 4x price to sales is conservative for a high margin, high growth, high recurring revenue, high creditworthy client business. A couple more years of growth, or an 8x price to sales multiples, and SPCB could be a ten bagger by the end of 2028.

SuperCom (SPCB) is a very small, very illiquid company. The price can fluctuate wildly. Even my humble little Substack has the potential to move the stock price of a $26 million market capitalization company. Also, the stock price has already increased by 4x in the last two months, and while it did sell off with the recent DeepSeek drama, the technicals aren’t showing any kind of resistance level that I can identify. So please be prepared for the possibility that the stock price could misbehave in the near term. I did start a small position yesterday with an entry price just a bit above $12 a share.

SuperCom Ltd (SPCB) $12.30: $53 by end of year 2026