SOUNDTHINKING, INC. Q3 FY2024 earnings call

• Strong third quarter revenue growth, with $26.3 million in Q3 and $78.6 million YTD.
• SafetySmart platform has 6 data-driven tools leveraging AI/ML: ShotSpotter, ResourceRouter, CaseBuilder, CrimeTracer, SafePointe, and PlateRanger.
• ShotSpotter had go-lives in new cities and expansions, with over 100 new go-live miles expected domestically this year.
• ResourceRouter has five implementations in Q4 queue, performing above expectations.
• CaseBuilder subscription revenue grew ~1000% Y/Y, with PREA go-live and healthy pipeline.
• CrimeTracer deployed with six new customers.
• SafePointe next-gen upgrade launched, with strong pipeline.
• Strategic partnership with Rekor for PlateRanger, TAM growing at 15% CAGR.
• International expansion with three-year agreement in Uruguay for ShotSpotter.
• Contract renewals in process with NYPD, expected to be executed by year-end.
• Chicago ShotSpotter situation with RFI and ongoing civic debates.

In the third quarter, SoundThinking reported revenues of $26.3 million, up 10% from the same period last year. Year-to-date, revenues were $78.6 million, an increase of 18% from the prior year. The SafetySmart platform is a key area, with the ShotSpotter offering having go-lives in four new cities and expansions in eight current cities. ResourceRouter had five implementations in the queue for Q4 go-lives. CaseBuilder saw subscription-based revenue grow approximately 1000% year-over-year. CrimeTracer was successfully deployed with six new customers. SafePointe had a major upgrade to next-gen, with a strong pipeline. The co-branded PlateRanger ALPR solution with Rekor targets a $2.5 billion TAM growing at 15% CAGR.

• Maintaining 2024 revenue guidance at $104 million to $106 million, with adjusted EBITDA margin 18% to 20%.
• Q4 revenues expected over $26 million despite Chicago contract loss.
• 2025 guidance: Revenue range $107 million to $109 million, adjusted EBITDA margin 19% to 21%.
• ShotSpotter expected to have over 100 miles of go-lives, including international opportunities.

• Supply constraints for SafePointe's NVIDIA chipset in next-gen platform.
• Uncertainty around Chicago ShotSpotter contract termination and RFI process.
• Dependence on public safety technology market dynamics and competition.

Q: The RFI is fairly specific on the Chicago side. I'm kind of curious, if you run into an RFI of that specificity, have any other vendors never sort of shown up able to compete with those characteristics? Or do you feel fairly unique in that group?

A: Yes. So we've had a chance to dissect the RFI, and it does look quite familiar to us. We've seen similar RFIs or RFPs. I think in one particular case, there is RFP from the agency in New Jersey that we successfully bid on and won twice. So we're pretty encouraged by the list of requirements that were listed in that RFI, but do understand that this is an RFI, not RFP. So they're basically trying to get input on ideas. And so that's where that whole process is in Chicago.

Q: And could you drill into sort of SafePointe for a minute on you've got a major upgrade now out in the market. How is the pipeline looking or early close deals? Any feedback on the upgrade to think about that one heading out of the year and into 2025?

A: Yes. So the pipeline looks very strong. It continues to grow and build. I think people are really keen on the next-gen platform and additional features and capabilities we're providing to contactless weapons detection. So we're pretty excited. And there's a number of deals that we're looking to close in Q4 going into 2025, with the wind at our back with respect to SafePointe. So we're pretty pleased with that business and how it's developing.

Q: And sort of building on that, when you think about your 2025 guidance, how much change sort of year-to-year does that assume for go-lives for either ShotSpotter, so your legacy offering for gunshot detection and SafePointe for weapons detection?

A: Yes. So this is Alan, and Ralph you're correct. We were still expecting our ShotSpotter to be around 100 miles plus, might be higher than that as well once we add in some of the international opportunities that we have. So that's on the ShotSpotter side. On the SafePointe side, to be clear, as Ralph mentioned, the pipeline is strong there. And just to give you some stats that I think are really important. We added, in terms of bookings, those -- some are multi-year, but about $0.5 million in Q1, north of that in Q2, over $1 million in Q3 and already over that in Q4. That's for SafePointe alone. So when we look at guidance, it's not just ShotSpotter, which is going to continue to grow, but the other solutions that we have are adding significant bookings across the Board and helping our diversification help our revenue grow.

Q: I just wanted to size up the Chicago impact on 2024. I know you said $8.5 million annualized. But based on the 2024 guide, what is the actual expected revenue contribution in 2024?

A: Yes. So this is Alan. The actual revenue in 2024 is about $9.2 million. So we -- it's definitely less than the $8.5 million because we did have some revenue that we recognized before we got the $8.5 million contract in January and February of this year.

Q: One of the things that you talked about last quarter was sales cycle elongation, just really due to more education and constituent deliberation that was impacting the pipeline conversion, specifically on ShotSpotter. Any further color you can give us there? Has that elongation flexed at all? Or is it pretty much it was captured in the Q2 comments?

A: Yes, this is Ralph. I think it stabilized. It's pretty much where it was in Q2. We're looking at kind of 12 months to 18 months sales cycles still with respect to ShotSpotter. But offsetting that, which is kind of interesting, we're seeing much more closed sales cycles for SafePointe kind of given it's a different buying center on the commercial security side versus the kind of public safety public government side. So we're pretty encouraged by the mix of sales cycles we see across the portfolio with things happening a lot quicker, I would say, on the SafePointe side and kind of still these kind of 12-month to 18-month sales cycles on things like ShotSpotter. And now we put kind of PlateRanger or expectation as PlateRanger is going to be something kind of in the middle because it is a defined category that has defined budget dollars associated with it. I think people pretty much understand the ALPR space pretty well.

Q: Great. Hi team, thanks for taking my questions. Just piggybacking a little bit off the SafePointe and the PlateRanger commentary from last couple of questions. Ralph and/or Alan, could you just give us a sense of sort of -- I understand the pipeline is strong, but could you maybe give us a sense of kind of where the rev rec as those deals sort of flow, in kind of what that looks like just from a timing perspective? Is it going to take some time to deploy? If it's similar to kind of what you see similar to the ShotSpotter type of deals? Or I guess, how in the context of the 2025 guide, you've seen those revenues kind of flowing in once you actually do win those deals?

A: Yes. So this is Alan. So the short answer is normally with like a ShotSpotter, it takes about 3 months to 4 months after contract is signed until we go-live. We're finding a much shorter cycle for that for SafePointe. When we get a contract signed, provided the customers ready to go, we can get things as low as six weeks to seven weeks and go-live. So that's actually when we get the bookings, and as I mentioned, we've already gotten over $4 million in bookings in SafePointe this year. Those are going to come in and help achieve the revenue a little faster than what a ShotSpotter would.

Q: Great. Thanks. That's helpful. And then also around that 2025 preliminary guide, looked nice, kind of above expectation around the EBITDA side of the house. Can you just maybe give us a sense from kind of where you're seeing some of that leverage kind of heading into next year as we think about modeling kind of going forward?

A: Yes. Sure. This is Alan again. So there are several things that are going on. Number one, as we've said in other quarters, some of the last couple of acquisitions we did, we're still investing. The new technology acquisitions, we're still investing. And as the revenue grows with them, the actual profitability grows as well. So we're starting to see that. If you just talk about four of them, not even counting PlateRanger having almost $7 million in bookings already, helps us grow each one of those. And that $7 million is what we've had in 2024. We're going to have additional in 2025. So that's going to help. We also had some reductions and some costs that were appropriate, we thought, actually quite small, but that's going to add a little bit as well. So revenue is going to grow, costs and actual expenses are going to go down a little bit in those categories. That's how the adjusted EBITDA is going to improve.

Q: You guys put out a press release last month, maybe a couple of months ago now actually, around a study you did in conjunction with the City of Oakland around just product efficacy. Just wondering kind of is that kind of part of the -- your kind of maybe new or revised PR playbook of just kind of getting ahead of where you see potential kind of more political city type of questioning of the tool or some other purpose of that study being put out there? Just curious kind of what the, I guess, the overall strategic kind of rationale was for doing that.

A: Yes. Thank you very much for that question. It's a great question. Yes. So we're trying to be a lot more intentional around helping our law enforcement agency partners tell their story about the efficacy and value that the acoustic gunshot detection technology delivered by ShotSpotter provides them as a first responder agency getting to the scenes of gun crime. I think fundamentally, it's really important that people understand that 80% to 90% of criminal gunfire goes unreported. And if it wasn't for an acoustic gunshot detection technology like ShotSpotter, these incidents would be -- would have no response. And so we're enabling a quick, fast response that are getting first responders to these scenes. They're finding victims and they're able to get victims to trauma care centers to save their lives or recovering evidence. They're seeing improved community engagement because now these communities see police responding very quickly and precisely to these events. And it gets lost in the shuffle sometimes. So what we're trying to do with our agency partners is helping them kind of get in front of those City Council meetings by kind of gathering those -- gathering that data and developing the narrative and story around the value and why people should be paying attention to it. And it worked very well for us in Oakland. We're really proud of the fact that we got almost unanimous approval from the City Council and Oakland is a fairly progressive city. There's a little bit of noise coming from, I would say, large -- a small group of activists, small but loud group of activists that were trying to challenge ShotSpotter. But at the end of the day, we were able to get those facts out there. The City Council, we think, made the appropriate decision with only one dissenting vote in a place like Oakland. So that's hopefully, a good harbinger of things to come within other places as well, getting that renewal across the line with that playbook of helping agencies tell their story better.