Ladies and gentlemen, good morning and welcome to SuperCom's Third Quarter 2024 Financial Results and Corporate Update Conference Call. A t this time, all participants are on a listen-only mode. Should you need assistance, please signal a conference specialist by the star key followed by zero. After today's presentation, there 'll be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, you may press star, then two. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. Joining me on SuperCom's leadership team is Ordan Trabelsi, SuperCom's president and chief executive officer.
I'd like to remind you that during this call, SuperCom management may make forward-looking statements, including statements that address SuperCom's expectations for the future performance or operational results. Forward-looking statements involve risks, uncertainties, and other factors that may cause SuperCom's acts or results to differ materially from those statements. For more information about these risks, uncertainties, and factors, please refer to the risk factors described in SuperCom's most recently filed periodic reports on Form 20-F and Form 6-K, and Super Com's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes EBITDA, a non-GAAP financial measure that SuperCom believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in advance with GAAP.
A reconciliation of this non-GAAP financial measure to net loss, a comparable GAAP financial measure. Please see the reconciliation table located on SuperCom's earnings press release that accompanies this call. Reconciliations for other non-GAAP financial measures and comparable GAAP financial measures are available there as well. The content of this call contains time-sensitive information that is accurate only as of today, November 14th, 2024. Except as required by law, SuperCom disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to SuperCom's President and CEO, Ordan Trabelsi.
Thank you, operator. Good morning, everyone. Thank you for joining us today. Earlier this morning, we issued a press release of financial results for the third quarter and nine months ended September 30th, 2024. You'll find a copy in the investor relations section of our website at www.SuperCom.com. Today, I'll start my comments with a brief update on our recent business highlights, strategy and future results, followed by a Q&A session. The third quarter was another quarter of significant achievements for SuperCom, showcasing the continued strength and resilience in our business. Our financial results for the third quarter and first nine months of 2024 reflect a successful execution of our strategic initiatives, which have been driving revenue growth, improving profitability, and enhancing cash flows. Year-to-date, revenue increased to $21.3 million.
Gross profit surged by 35% to $10.7 million, and our gross profit margin improved dramatically to 50.1% from 30.7% in the prior year period. Additionally, our free cash flows increased to positive $1.2 million from a negative number in Q3 of last year. We are pleased with our results and look forward to the following quarters. This quarter was particularly exciting as we solidified our leadership position with key contract wins, including a prestigious national Israeli electronic monitoring project. We also expanded into new regions, including New York, West Virginia, and Maryland, further strengthening our footprint in the U.S. market. These wins not only reflect the exceptional value of our technology but also help position us for sustained expansion in the years ahead. Our commitment to financial decisions, operational efficiencies, and technology innovation has translated into tangible results.
An improvement in net income to $2.52 million for the nine-month period compared to a net loss of $2.48 million in the prior year period. Free cash generation of $1.2 million this quarter and a cash balance of $6.23 million at the end of it underscore these tangible results along with our ability to support further potential growth opportunities. We are also particularly proud to have continued our successful integration of PureOne solution into multiple new markets during this period, reflecting our continued commitment to innovation and our ability to meet the evolving needs of our clients. This, along with other strategic initiatives, has positioned us to deliver sustained profitability and expansion. For those new to SuperCom, our mission is to revolutionize public safety sector worldwide with our proprietary electronic monitoring technology, our data intelligence, and suite of complementary services.
With over 36 years of experience since our founding in 1988, we've been a trusted partner to dozens of national governments worldwide, providing cutting-edge electronic and digital security solutions. Our strategic blueprint is straightforward yet powerful. We lead with innovative technology: our proprietary electronic monitoring technology, which has scored highly in competitive government tenders for various programs such as house arrest, GPS monitoring, rehabilitation services, domestic violence prevention, and more. Moreover, we have recently brought in our portfolios to include advanced AI-driven analytics, which are an integration into our electronic monitoring system. This addition enhances our ability to provide predictive insights and improve outcomes for our clients. We've developed superior solutions, and since 2018, we've secured over 50 new multi-year government projects leading these solutions.
We expand our global presence and our strong growing reputation as a premium provider of electronic monitoring solutions and services, which enhance our market position with each new customer win, and we deliver outstanding services. Our strategic focus on the IoT tracking business in developed markets is where the opportunity is greatest. With electronic monitoring market projected to reach $2.3 billion by 2028, the U.S. and Europe concentrate about 95% of this global market. We continue to amplify our technological leadership with significant R&D investments, leading to the launch of advanced solutions like PureProtect and PureOne. These offerings are already making headway in various markets, including the U.S., and are pivotal in SuperCom expansion. PureProtect is a lifesaving domestic violence monitoring solution, providing preventive measures to families suffering from domestic violence or stalking, thereby increasing their safety.
We offer a unique lightweight bracelet, long-term battery life, and a solution architecture like no other to offer domestic violence protection in a unique way, which is spreading rapidly around the world with more wins in different regions. PureOne is an all-in-one GPS tracking ankle bracelet monitoring solution, integrating comprehensive monitoring capabilities into a single device. Like many of our products, it offers top-notch features, placing it above the competition in most metrics. And this product has been key for our expansion in the U.S., which is on its way. Our cloud-based software PureSecurity product line has been particularly effective in monitoring offenders and managing real-time information. This real-time advantage is a game changer, empowering authorities with actionable insights and timely intervention to mitigate potential risks and enhance public safety. These products have significantly expanded the company's addressable market.
We've been very pleased with their reception and traction and expect them to help facilitate the accelerated expansion of SuperCom into the U.S. market and further European countries. We've fortified our operational infrastructure to support our growth and have revamped our sales strategy with a proactive outreach approach. Our sales team, with deep industry expertise, has been instrumental in achieving new wins and driving growth. Last month, we announced that together with our prime partner, Electra in Israel, we have been awarded a five-year contract by the Israeli Prison Service State Agency, or IPS, to deploy our PureSecurity electronic monitoring suite. This nationwide program is expected to cover all electronic monitoring offender programs in the country, with an estimated 1,500 enrollees simultaneously and potential for expansion. SuperCom will deploy its cutting-edge EM solutions, including PureCom, PureTrack, PureTag, and PureBeacon.
The five-year contract is already in effect and includes the option for up to four one-year extensions for a total of a nine-year potential contract term. The project was won through a highly competitive bid process, including several rounds of negotiations, demonstrations, and system evaluations required and supervised by the IPS. We displaced an Israeli incumbent that has held the contract for many years, and this win exemplifies our commitment to excellence, technology leadership, and strong partnerships. Our comprehensive set of offerings positions us well for a multifaceted national project such as this one that is set to encompass all electronic monitoring programs within the country. We have a broad array of solutions, and with one contract and one provider ourselves, we can support all the programs. Over the past month, we announced many new orders and new project wins in the U.S. and Europe.
In recent years, SuperCom has continuously displaced incumbent vendors and achieved an over 65% win rate in European competitive tenders. Looking to the EU market, SuperCom has secured several new national tracking programs across Europe over the past two years, with bids and contracts at various stages of execution. Notably, the company's large-scale domestic violence offender tracking programs, like the one launched in Romania, have the potential to catalyze further uptake from existing European customers. As more European countries adopt these technologies, we anticipate a broader expansion of our solution across the continent. In the European market, SuperCom expanded its business into over 10 countries and secured significant new contracts, which are typically awarded through a competitive tender process. Besides winning new projects, we continue to execute and receive ongoing orders from our existing partners.
Just about four weeks ago, we announced we received new orders valued at over $2.9 million from European governments, totaling over $13.5 million new orders in the past period as described. Last year, we secured a new national program with the Finnish government to deploy our domestic violence monitoring solution. The deployment of our PureSecurity suite, consisting of PureProtect, PureTrack, PureTag, and PureMonitor, demonstrates the versatility and effectiveness of our solutions and underscores our leadership in the electronic monitoring space. Our collaboration with Finland is a prime example of the confidence that clients have in SuperCom, and those experienced our services often choose to broaden their engagement with our diverse array of solutions. That means they start with one program like house arrest, they expand to GPS for domestic violence or alcohol monitoring, and that gives us, of course, opportunities for growth and margin improvement with the same customer.
Notably, at the end of 2022, the company won the largest industry award of the year for a national electronic monitoring project in Romania, valued at over $33 million, including up to 15,000 monitored offenders simultaneously per month for up to six years. The project has been progressing smoothly and demonstrating substantial advancements, further extending our engagement in the country's national EM projects. The large-scale projects reinforce the strength of our PureSecurity suite and cement our position as a trusted partner for governments worldwide. We've also launched our domestic violence solutions in other European regions and have recently launched them as well in the U.S. Now, looking to the U.S. market, while the European market continues to grow, it's important to note that the U.S. market offers a new and larger opportunity, being approximately three to five times the size of the European market for electronic monitoring.
With the introduction of our PureOne electronic monitoring product now available in the U.S. and the expansion of our domestic violence tracking solutions, we believe SuperCom is well positioned to unlock substantial growth potential in this untapped market. Although SuperCom already does business in multiple U.S. states, we are actively focused on further expanding our presence in the U.S. Our wholly-owned subsidiary, , located in California, is actively expanding the size and scope of existing programs, winning rebids with existing customers and winning new programs with brand new customers. The company strategically prioritizes PureOne's expansion into new markets and geographies. The PureOne has already received high praise during its introduction to various regions of the U.S. where it has been successfully deployed and is actively utilized to monitor live offenders. Moreover, sales activities for PureOne have commenced in promising markets outside Europe and North America.
Despite our long-standing presence in parts of California, the U.S. market remains largely untapped for us. Since we began investing in outbound sales efforts in 2022 for the U.S., we've secured wins in California, Idaho, Texas, Kentucky, and Wyoming, to name a few. This quarter, we just announced a few more, which we'll reiterate, and the launch of PureOne in 2023, coupled with top positive feedback from initial deployment, positions us to accelerate market capture across the U.S., unlocking significant growth opportunities. Our strategic new sales team, a new win, has been the first step to execute the company's U.S. market expansion strategy and has already driven increased activity with existing customers in multiple new demos, resulting in a significant increase in the company's pipeline. Launching our PureOne solution in the U.S. market in late 2023 was a significant milestone in our expansion strategy.
Since our last earnings call alone, we've announced multiple new projects in North America to provide the solution. SuperCom secured multiple new contracts with the Sheriff's Agency across West Virginia. These contracts leverage SuperCom's innovative PureOne suite with both cellular and Wi-Fi communication abilities, and these contracts are already generating recurring revenue, further solidifying our presence and footprint in the U.S. market. We've also secured a new contract with a leading Baltimore-based service provider in Maryland, and the contract, which was launched in June 2024, estimates generating an annual recurring revenue of approximately $250,000, and we secured our first new contract in a county in New York State recently. This win, achieved through a competitive selection process, further strengthening SuperCom's strategic expansion across the U.S. and marks another milestone in our business plan. As I mentioned earlier, the introduction of PureOne was a game changer in securing these contracts.
It underscores our competitive edge and commitment to delivering innovative and superior technology solutions. Our securing these contracts further reinforced our position as a market leader in various fields. We reviewed these recent wins as indicators of our growing influence and expansion potentially in North America and worldwide. In conclusion, despite macroeconomic uncertainties and ongoing global challenges, including those in Israel, SuperCom's solutions are being increasingly relevant. We continue to see growth driven by high recidivism rates, escalating costs of incarceration, and the surge in the adoption of victim protection solutions worldwide. The company's PureSecurity technology has been designed to address these trends, offering an effective way for institutions to enforce home confinement, ease prison overcrowding, and lower costs significantly.
For example, monitoring confinement, offender at home, or GPS, costs about $10-$35 a day, which is 90% less than a $100-$140 daily cost at a correction facility. Moreover, home confinement helps to reduce repeat offenses, highlighting its effectiveness in helping offenders improve their lives and communities. As we mentioned in previous calls, we believe there's also an opportunity to enhance U.S. growth through strategic acquisitions of local electronic monitoring service providers with a strong reputation and customer base in the local markets. We constantly monitor the market's potential acquisitions that could generate significant value at a good price by immediately expanding market presence and providing vertical integration synergies. Our acquisition of LCA in 2016, which is the last of this sort, for $3 million, is a great example.
This successful acquisition has been great strategic value to the company and allowed us to win over $35 million in new project wins in California alone since acquisition. I'll now turn briefly to the financials. Considering this quarter, Q3, and the first nine months of 2024, in comparison to the same period of last year, note that our multi-year projects are not run on a quarterly scale and can have fluctuating effects when analyzed quarterly. We'll start with the nine-month performance, which helps neutralize some of these fluctuations, and then look at three months, so for nine months, revenue for the first nine months increased to $21.3 million, up from $20.9 million in the same period last year. Gross profit surged 35% to $10.7 million, with an improved gross margin of 51%, up from 37.7% last year.
Net income improved significantly to $2.52 million compared to a net loss of $2.48 million in the prior year. Non-GAAP net income grew to $4.88 million, demonstrating the strength of our cooperation. EPS reached $1.6, and non-GAAP EPS reached $3.1, the difference being the attributed amortization of past acquired assets and businesses. Quarterly performance, Q3, revenue increased to $6.91 million, up from $6.78 in Q3 of last year, driven by new project wins and expansions of existing contracts. Gross profit for the quarter was $3.2 million, reflecting a margin of 46%, compared to $4 million and a margin of 59% in Q3. This margin decrease was primarily due to project mix and timing. EBITDA totaled $1.1 million, compared to $2.5 million in Q3 of last year, also mainly due to project mix and timing.
Positive free cash flow of $1.2 million in Q3 of this year further underscores a strong financial discipline and comparison to negative free cash flows for the same period last year. Note, this is very interesting, that our cash flow from operations the first nine months of the year were positive. This is a big improvement from recent years, if we look at it and keep track. In 2021, we had negative $9.7 million in operating cash flows. In 2022, we had negative $4.7 million in operating cash flows. And in 2023, we had negative $2.4 million in operating cash flows. And again, for the first nine months of 2024, we have positive operating cash flows. These are great results and a great trend that we'd like to see. And this supports our strategic plan and a testament to the success we are achieving in it.
The quarter's results highlight our ability to seize the high margin potential of our project portfolios through successful execution and progression at different stages of these projects, showcasing our focus on sustained growth and profitability. Typically, initial project stages incur higher expenses, while advanced stages yield higher gross margins, causing fluctuations in our gross profit depending on project composition and deployment stages. We are running multiple projects in different stages throughout the world, and that's why you can see these fluctuations in the quarters, depending on how each one falls in that specific quarter. As the project pipeline matures, we expect an upward trend in gross margins based on the evolving project portfolio. As we deploy additional braces and regions where we run existing projects on our existing infrastructure, the contribution margin for each additional brace can be as high as 70% or more.
Operating expenses in the quarter stayed in line with those the first half of the year as we continue with our existing strategy, and also interesting to note, we've made considerable strides in reducing our long-term liabilities by up to $4.5 million year-over-year, which includes exchanges with our creditors of debt to equity and negotiated premiums of up to 100% premium to market price. Our operating cash flows improved to $1.2 million year-over-year, and our cash position grew to $6.2 million at the end of the quarter. This marks our highest reported cash position in recent years, and we remain focused on reducing our cash need for external funding as we continue to win and execute projects. These improvements further strengthen our financial foundation to support our ongoing growth initiatives and strategic investments.
In closing, I'd like to thank our global team for the hard, tireless work to achieve our company's record-setting performance. We have developed the right technology and products to help criminal justice system clients overcome challenges and make better use of the over $80 billion spent annually in the U.S. on operating rehabilitation centers and prisons. With research showing an approximately 75% recidivism rate in the U.S., there is significant room for improvement when effective programs and technology are adopted. We're excited about the growth we are experiencing and about the growing demand of our product. After several years through which we transitioned from our legacy business to the IoT tracking and offenders business, we're happy to show a shift in nice growth in revenue and profit. We believe that we're well positioned to continue expanding and capitalizing on many opportunities before us.
These are being driven by multiple factors, including our strong presence and reputation in the U.S. and European markets, the countercyclical nature of the electronic monitoring industry, the growing public policy shift to monitoring instead of incarceration, and the growing adoption of domestic violence prevention solutions. We anticipate continued expansion in the U.S. and Europe and potential other regions. Our commitment to preserving our technological advantage and our robust growth foundation remains steadfast as we continue to invest in these areas. With that, I'll turn the call over to Operator to open for questions. Operator?
Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press star, then the number one on your telephone. If you're using a speakerphone, please pick up your handset before entering your request and speaking on the call. If your question has been answered and you wish to withdraw your request, you may do so by pressing the pound key. One moment, please, for the first question. Thank you. Your first question is coming from Matthew Galinko from Maxim Group. Your line is live.
Hey, thanks for taking my questions. And congrats on the strong year to date. Can you maybe start off by just touching on what the pipeline looks like for Europe in 2025? Are there any large national projects that are up for bid or that you're pursuing now that you think could close in 2025? Or what does your uplook like as you look out over the next year? Thanks, Matthew. Good question. As you may recall, when we entered the market several years ago, we had started with small projects in Europe, like Latvia and Lithuania, which were $100,000.
We grew to larger ones, like Denmark, and then Sweden of $7 million, and now we're with Romania of $33 million. Those all act as references and track records that helps us basically compete on any RP in Europe at this stage. So we're basically waiting for the ones to come out, and then we compete and usually leverage our strong win rate to help win those projects. In Europe, there's so many countries. Even though we had a 5% win rate and we won many countries, there's so many countries that we have yet to enter. And we are continuously monitoring and bidding and progressing and being evaluated for various projects across Europe. Almost every Western European country has national EM projects, and there are many we haven't entered yet, like England, France, Germany, Norway, and Spain.
There are certainly opportunities of various sizes, and there are many out there that are bigger than Romania projects. Europe, while being smaller than the U.S., is still a great market for us. We have a very good position, a very good reputation there, and we continue to bid there while in parallel we enter the U.S. market.
Got it. Thanks.
When you bid on new projects in Europe, is it usually displacing or to displace or replace legacy kind of old ankle bracelets? Or are they looking for additional functionality generally in one go, such as domestic violence stuff? Or what are the new bids generally looking for?
The national programs many times encompass all the electronic monitoring programs, like house arrest, GPS monitoring, domestic violence, alcohol. In Sweden, we also do inmate monitoring in the prisons themselves. Usually, there is an incumbent because electronic monitoring has been around for a long time. In some countries like Romania, we did the first program. They didn't have electronic monitoring. Similarly, in Croatia, we did the first. But almost every other one, we're displacing an incumbent. In Sweden, they had an incumbent for 24 years, and we displaced them. In Israel, they had an incumbent for a very long time as well, and we displaced them. So it does require capital and work and investment for a country to switch over to a new vendor. Usually, they do that when they see a value proposition which is significant to what they are experiencing today.
They don't just have to marginally improve what they have, but to give them a big step of improvement because they have to now retrain all their staff and change their systems and integrate and go through the whole process. We're able to do that by firstly offering significant improvements to existing programs they have, whether it's house arrest or GPS monitoring, because our technology and our architecture is completely different and offers much longer battery life and a whole scale of other capabilities and features that are important to them. We're able to offer brand new solutions that they haven't had before, like domestic violence, with our PureProtect program. It's a mix.
They get a better version of their existing programs and the opportunity to go to new programs, and they find a team, which is us together, usually with a local partner, which provides them top-notch support, great execution, effective timelines, good communication, and all the things that they're looking to see from a government contractor that we bring with over 36 years of experience as a government contractor here at SuperCom.
Got it. Thank you, and then last question for me, and then I'll jump back in the queue. I guess with respect to the U.S. market, it seems like you're expanding your footprint into new states within the U.S. and North America. What do you expect to do? Do you need to add resources to that effort to accelerate North America? Or do you expect to add more boots on the ground to try to push that faster? Or, I'm just curious how you think about going after that bigger opportunity in the U.S.
Just to clarify, you're asking for putting more boots on the ground to accelerate it or for doing other strategic moves?
Yeah, yeah, exactly.
Okay. Good question, so it's a trade-off. In the U.S. market, things are much faster than Europe because you're looking at counties sometimes and resellers. Resellers, not government agencies, have to go through an RFP process. They get to decide on their own. Resellers have 10 counties that they're controlling, and they are running all the electronic monitoring programs for those counties. If they want to switch the technology, it is their product to do so. So they get to find a new technology, a new company like ours, and switch, and it happens quickly, so within two months, three months, sometimes you see them switching over.
They could start small, move over. They don't have to do everything at once. So it gives them a lot of flexibility, and it allows us to move faster. That does require, though, on the other hand, more feet on the ground because the market's fragmented. And instead of just looking at one national project, you have dozens and even hundreds of projects spread across the U.S. throughout different counties. And sometimes the same county will have multiple projects because they'll have the sheriff program, the probation, they'll have early intervention courts, they'll have alcohol monitoring. It's very fragmented and requires more relationships. But the resellers do aggregate some of these and work with resellers. We have a quicker expansion. And as you can see, we try to keep an eye also on our cash use and our profitability. We were looking to grow faster.
We could have raised if we were, let's say, a venture capital backed fund company, we could have raised more money and tried to put many, many feet on the ground to expand faster and faster. We at the same time, though, are trying to maintain our profitability. We're trying to optimize our cash use, which you may have heard on the script from three years ago where you had a -$9.7 million in cash burn. This year, we're cash flow positive so far. So we're trying to manage everything. At the same time, we are cognizant of how many salespeople we put on the ground, and we have seen great growth already, even as we work very efficiently with our capital and try to optimize and utilize our salespeople and our sales expenses as optimally as we can. Great.
I appreciate all the answers, and I'll be back if there's no other questions in the queue, but thanks.
Thank you. Your next question is coming from Dan Shates. Your line is live.
Hi, Ordan. First of all, it sounds like another great quarter of execution. We really appreciate that. I have, I guess, a couple of questions. First one would be, in the debt to equity conversion, how many new shares were issued and at what price?
We don't have that. It's not one conversion. So over the course of the year, we've done several conversions, and usually at a premium, sometimes up to 100%. And that would be, as you saw in the numbers, that helped reduce our long-term liability by $4.5 million. We think it's a benefit to shareholders, of course, because we're getting forgiveness together with that.
We reduced the debt while using a significant premium to the stock price.
I'm more concerned about this particular quarter. How many new shares as part of that conversion were issued?
This quarter, nothing. Nothing was done this quarter.
Zero in the third quarter? Yeah. Okay. Great.
Third quarter, nothing. It's just an update. We just gave annual updates, and compared to the last year, we see the long-term liability has been reduced because of conversions done through previous quarters. Previously.
Okay. Small amounts, not just one conversion?
Small little conversions with optimal terms that we try to achieve with our relationships.
Okay. Wonderful. That's excellent to hear. Can you give me a count of how many shares are outstanding at the end of the third quarter?
We had a semi-annual report that we put out recently, but roughly two million outstanding shares.
Okay. Great.
A little bit more than 2 million outstanding shares.
Okay. Wonderful. Well, I'm thrilled to hear that there wasn't any additional dilution. Been a long-term shareholder, and I believe in your product and your mission, but it's been a little disheartening to see the continual dilutions over the last couple of years. I hope that's behind us. And just one final comment. The market will, once that is common knowledge and is out there, your stock performance will change because right now, that's what's been holding you back. And that's all I got to say.
I understand. Yes. Yeah. I understand. Thank you for that. And so I want to know that we have been working to grow our infrastructure and expand, and we've been reducing our use of cash.
Over time, as I said, we went from -$9.7 million to -$4.7 million to $2.4 million, now positive for the cash flows. We don't control exactly the project stages and how things will roll out, and we hope to win more projects. Sometimes we need to use cash to support this growth. But we are trying to be cognizant, and that's why these conversions that we've described with the debt, we've done them at a premium up to 100%. That provided great value for shareholders. We're trying to be cognizant and delaying. We've extended and pushed the maturity of our debt, and we've worked closely with various partners and parties to help get the best terms and to be able to execute and grow and implement our business plan while trying to optimize shareholder value. I appreciate your support to come over the years.
Thank you. Your next question is coming from Matthew Galenko from Maxim Group. Your line is live.
Hey. Thanks for taking another couple of questions for me. Can we expand a little bit more on the deal you have now in Israel, particularly maybe a little bit more about the structure? Is it more of a purchase or kind of a recurring structure? And what are the opportunities for expanding that project over time?
Good question. And just make sure I have some of this information organized for you. So we'll start with the high level. The project was through an incumbent. There's an incumbent for many years in Israel, a partnership that was holding the project. And we came up with a different partnership, us together with Electra, and we won bid. The first period is five years. There's four one-year extensions. That's nine years.
If we do well, that could be extended for another nine years, as we see in many regions in the world. Initially, it starts with house arrest, which is RF-based, and that is an initial program. It's expected to have 1,500 offenders, and it's not a purchase-lease model that we see many times in the U.S. market and in some parts of Europe. There are other types of programs that, as we discussed on the call, like domestic violence and others, that we believe the Israeli Prison Service IPS, what they're called, they plan to use more of these programs to help with criminal justice in Israel. There's been a law passed last year around domestic violence, which will allow and complement the use of electronic monitoring for domestic violence, and there's other things that are in process.
This project gives us the right for all the electronic monitoring projects in the country over these years. So as the government decides to deploy more projects, we will be the vendor deploying them. And we have experience, as noted, in many of these programs in many countries around the world of various sizes, including 15,000 unit projects in Romania, which is many domestic violence. We've seen even in house arrest increases to the quantities every year, and we expect those numbers to grow. That's just for the initial program. But beyond the initial program, which grows, we're expecting potential additional programs to be added on to the projects, which would be very valuable.
Got it. As we think about additional units on the house arrest or additional programs under that win, so if you add incremental units, what does the margin look like if you go beyond 1,500, I guess? So I guess if there are benefits to add?
Yeah. So there's a lot of costs with deploying a new system that includes installation and hardware and teaching and setting up support and manuals and setting up software that includes development of the software and adaptations and specific programs that the customer wants. We do that with not every customer, but every large customer that has specifications. We have to put our effort in that, and that lowers our margins.
But as you noted, every additional brace that we put on has very high margins, much higher than the original ones because you don't have to do any additional customizations. Whether you're doing 1,500 or 10,000 units, it's mainly the same. You add more units, and the margin on each additional unit is very high, sometimes 70% or higher. It depends on the specific pricing of the specific program. Sometimes you have one brace and one phone, sometimes you have one brace and two phones. Sometimes you don't have a phone at all. You just have a brace system. Sometimes you have a house unit. So each one has different costs and different seller costs, and the margins could change, but they are much higher when you add additional units to each existing contract.
What's nice about, besides Israel, which is going to put more programs and it's going to be interesting and good margins, in the U.S., almost all the programs run on the cloud, and they run with the same language and are the same infrastructure and the same protocols. It's very nice that the market there, which is already three-to-five times the size of Europe, will utilize the same systems, allowing us to reach higher margins versus in Europe, where each nation had a lot of it was purchasing, and a lot of them had different languages, different protocols, different laws, and it made it a little bit more complex there from nation to nation. Here in the U.S., we're actually seeing more consolidation and more similarities between programs, and that's going to be a benefit for us going looking forward to the future.
Got it. Thank you. And then the final question on that. I don't know if you can answer this, but is there a number of tracked offenders you think the Israel deal can reach over the initial five-year period? So we start at 1,500, and maybe that ends at like 3,000, or is it impossible to answer that at this point?
I'm trying to give you a rough estimate without telling you. So the population in Israel, as of end of 2023, was close to 10 million, and Romania, you're looking at a 19 million population. Without getting into the specifics of different laws and processes and different programs, you can see that if Romania started with 15,000 and they're still talking, considering growing, there's certainly room for much more than 1,500 in Israel. There's a lot of potential to be done, but it's not just the population of the country.
It also depends on the processes and the government's propensity to move quickly. Our experience in Israel and our headquarters are here, is a lot of the different programs in Israel and the government and processes like technology. They're comfortable with technology. We had a program in Israel for the COVID event tracking, and we have good aspirations to work closely together with them and with Electra to deploy effective solutions. And as these numbers, as the solutions work well, they grow their numbers. And it's a lease project, so they continue to grow it as they see it working effectively and improving their numbers.
Thanks. And sorry, one last follow-up. For the initial 1,500, do they turn on as soon as you're implemented, or is there kind of a ramp-up period to that initial number where you need to go in and swap the old for the new? Or what's the process towards go -live and reaching that point?
We already started with the project deployment. It takes time right now, the processes, the definitions, the planning. And it should take six months or so for some of the initial deployment steps. The beginning number is expected to be a little less than 1,500, and then it can grow. Maybe somewhere between 1,000 to 1,500 at the beginning, and then it grows to 1,500 quickly. But it does happen through swaps. And Israel is a smaller region. It's easier than when you expand to, let's say, across large regions like California or so. You have an easier touchpoint and access to the offenders. You're able to do the swap from one vendor to another relatively quickly. It can be done in a month, for example, that number of units.
But first, you have to set up the infrastructure, run the test, train everyone, get everyone ready, and that's what we're looking to do in the six months while the program is running right now with different vendors. So it's a switch and swap with a handover process, which we're very familiar with and we've done dozens of times around the world successfully. And of course, that's what gives our customers the confidence when they choose us in the first place. So we're doing that here in Israel, just a little closer to some of our staff, which will make it actually easier than normal.
Great. Thanks again,
I mentioned we have a local partner, Electra, which is a large corporation here in Israel, and they're spread out throughout the country. They're going to be doing and handling a lot of the services and the swapping and so forth. It's going to be an interesting endeavor for anyone. We feel confident, government as well, that this process should be smooth like many others that we've seen in the past through our partnerships.
Congrats. Sounds like a great win. And thanks again.
Thank you.
Thank you. At this time, we'll pass the call back to Ordan for closing remarks.
I want to thank you all for participating in today's call and for your interest in SuperCom. Please contact us directly if you have any additional questions. We look forward to sharing our progress with you on our next conference call, filings, and press releases. Thank you, and have a good day.