SoundThinking Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 6 speakers on the call.

Operator

Afternoon, and welcome to Sound Thinking Second Quarter 2023 Conference Call. My name is Ina, and I will be your operator for today's call. Joining us are Sound Thinking's CEO, Ralph Clark and CFO, Alan Stewart. Please note that certain information discussed on the call today We'll include forward looking statements about future events and Sound Thinking's business strategy and future financial and operating performance. These forward looking statements are only predictions and are subject to risks and uncertainties and assumptions that are difficult to predict and may cause The actual results could differ materially from those stated or implied by those statements.

Operator

Certain of these risks and assumptions are discussed in Sound Thinking's SEC filings, including its registration statement on Form S-one. These forward looking statements reflect management's beliefs, Estimates and predictions as of the date of this live broadcast, August 8, 2023, and Strong Thinking undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances after the date of this call. Finally, I would like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company's website at ir.soundthinking.com. Now, I would like to turn the call over to Sound Thinking's CEO, Ralph Clark. Sir, please proceed.

Speaker 1

Good afternoon, and thank you for joining our Q2 2023 conference call. After Al and I give our views, we'll be happy to take your questions. However, before I get into the specifics of our Q2 2023 performance. I want to first share with you that overall our company is settling into our expanded platform vision And our new corporate identity of Sound Thinking. We're well on our way toward executing on the promising next phase of our growth journey and impact narrative.

Speaker 1

We continue to be bullish on the tremendous opportunity we have in partnering with law enforcement and their digital transformation, Which we believe is fundamental in improving the law enforcement profession and better connecting them to the communities they serve. And even with the current challenges they face with limited resources and increased scrutiny, we are committed in our purpose to help them become more efficient, Effective and equitable in closing the public safety gap that exists in communities worldwide. Turning to financial performance, Our Q2 2023 revenues were mostly in line with our expectations with $22,100,000 compared to Q2 2022 revenue of $20,000,000 Adjusted EBITDA was $2,400,000 or 11% of revenues compared to $4,100,000 or 20 As Alan will address in more detail, below the line expenses in this quarter Included increased investment in sales and marketing associated with our rebranding launch along with increased headcount and personnel related costs And a few one time other expenses. We had another phenomenal quarter of go live activity with 7 new city captures and 1 new university Along with 7 city expansions and a university expansion this quarter. These included, but were not limited to new customer captures of Erie, Pennsylvania, Deerfield Beach and Lauderhill, Florida.

Speaker 1

We also took live material expansion miles in Detroit, Cleveland and Virginia Beach. We are confident in our go live momentum and with what has already been taken live during the first half of this year, Combined with our current booked, contracted and staffed projects slated to go live in the next 60 to 90 days, We project to be at 140 ShotSpotter go live miles this year. There is a potential upside to this forecast that could put us north of 150 miles to the extent that we can book additional near term sales pipeline opportunities in Q3 That can be also deployed in Q4. I'm also quite happy to report that we have another quarter with 0 attrition. Let me provide a brief update on where we are in Chicago.

Speaker 1

Recent public statements and actions by the Mayor's office, including The formal budget appropriation and funding of the previously executed contract extension have been constructive. We believe this moves us beyond the potential 2020 And articulating the value of ShotSpotter in saving lives and enhancing downstream investigations as we continue to build upon strong police In fact, just this past weekend, local news reported on a 6 am ShotSpotter alert I led Chicago PD in finding a 14 year old gunshot wound victim who has quickly rushed to stronger hospital in critical condition. There was no corresponding 911 call. It is likely that this child is alive today due to the ShotSpot alert and the quick and brave This narrative is consistent with the feedback we've received in a recent modest community outreach campaign Conducted in and around Chicago. We are very pleased, but not at all surprised with the overwhelming positive response that was garnered, Including incredibly supportive comments and powerful personal testimonies of lives saved like the tragic incident I just shared from this past weekend.

Speaker 1

Importantly, we believe the capabilities ShotSpotter helps bring about are consistent with Mayor Johnson's Express values and is focused on community engagement. We're hopeful and looking forward to continuing our partnership with the city and citizens of Chicago. We also have positive news to share in regards to Puerto Rico. As you may recall, we reluctantly terminated our service to Puerto Rico earlier this year Due to the contract expiration and the customer's inability to extend our multiyear contract, Puerto Rico has since contracted for a 90 day interim extension to resume service. They use this period not only to develop, but also We are highly confident about our prospects for a multi year contract award Given our stellar track record and value to the Puerto Rico Police Department, we're very excited to continue our work in Puerto Rico and build upon our relationship Representing over 10 years should this new contract be awarded and formally executed.

Speaker 1

ShotSpotter momentum is clearly building and we continue to invest in widening our competitive moat with key new features that The ability to quickly annotate the alert in their mobile app with a metadata description of the disposition of that incident Such as shell casing, evidence found or victim attended. Our ShotKast feature is a media ready digital alert That can be shared with local broadcast media that shows the approximate location of the gunfire event on a map with an animated dot representing round count Combined with a recorded audio snippet of the alert. And lastly, our new COP2DOT feature automatically measures and tracks the time from alert to dispatch officer that agency management can analyze to show overall response times to ShotSpotter alerts. We're also deploying a new acoustic gunshot detection sensor platform that includes a robust azimuth capability and a neural network filtering feature that will further improve our already high accuracy rate. We believe these cumulative enhancements demonstrate our commitment to further invest in innovation and maintain our dominant position in the wide area acoustic gunshot detection We are further encouraged by several cross sell and bundle opportunities we see across our 4 solution offerings of the Safety Smart platform.

Speaker 1

In the Q2 alone, we closed 3 cross salebundle deals. The cross sale and bundle pipeline is growing along with new buying We believe will become a bigger part of our growth story going forward. And lastly, on the product front, I'm excited to share that we are negotiating an agreement with PredPol, an early pioneer in developing AI based patrol management solutions To transition their customers to Sound Thinking's resource router solution as well as acquire their patents in certain intellectual property. We've already hired their engineering team who will be working on the transition plan as well as accelerating the current Resource Router product roadmap. ResourceRouter provides a unique and proven way to allocate patrol resources in a way to deter crime without making arrest or over policing.

Speaker 1

In this era of early retirements, recruitment challenges and understaffed departments, we view these capabilities as key in helping agencies do more with less By leveraging technology, while not material in the near term, over time, we believe the combination of cross selling PredPol customers To multiple sound thinking solutions and the application of this patent to enhance our platform will be a meaningful value contributor to the company And facilitate our application of AI and machine learning technology to public safety. In conclusion, we're maintaining our full year revenue guidance in the range of $92,000,000 to $94,000,000 for 2023, While adjusting our full year adjusted EBITDA margin to be in the range of 16% to 18% of revenues. And with that, let me turn the call over to Alan. Thank you, Ralph. We're pleased with our performance in the 2nd quarter.

Speaker 1

As Ralph mentioned, this quarter we went live in 7 new ShotSpotter cities and 1 new university and expanded in 7 current cities And one current university. We're continuing to see an increase in the interest of our solutions across our Safety Smart platform. At this point, we expect to add approximately 140 new miles of ShotSpotter coverage this year, Almost 40% higher than 2022. In Q2, we also contracted with 2 new Case Builder customers And 3 new CrimeTracer customers. Our bundled product strategy appears to be working well As we are starting to see a dramatic increase from customers who would like to contract with multiple products from our Safety Smart platform.

Speaker 1

Let me provide more details on the quarter, and then I will share some thoughts around the balance of the year. 2nd quarter revenues were slightly ahead of expectations at $22,100,000 a 10% increase over $20,000,000 In the Q2 of 2022, revenue increased as our deployed miles are up year over year. Gross profit for the Q2 of 2023 was $12,700,000 or 57 percent of revenue Versus $11,600,000 or 58 percent of revenue for the prior year period. We expect gross margins to improve In the second half of the year, after we are awarded the large case builder contract with the Department of Corrections customer, Our adjusted EBITDA was down to $2,400,000 this year from $4,100,000 last year for the 2nd quarter Due to some one time expenses that totaled approximately $1,700,000 As a reminder, Adjusted EBITDA, a non GAAP financial measure, is calculated by taking our GAAP net income or loss and adjusting out interest income, Income taxes, depreciation, amortization and impairment, stock based compensation expenses and acquisition related expenses, including adjustments to our contingent consideration obligation. Turning to our expenses.

Speaker 1

Our operating expenses for the 2nd quarter We're $15,000,000 or 68 percent of revenues versus $8,400,000 or 42 percent of revenues in the Q2 of 2022. Operating expenses included higher costs, primarily due to personnel expansion, continued high legal expenses And approximately $1,700,000 related to items such as approximately $500,000 related to a company wide all hands meetings Tied to our company name and product rebranding launch, over $800,000 in accelerated intangible amortization Related to our Forensic Logic acquisition, a write off related to unpaid invoices from Puerto Rico and a couple other less material items. That said, operating expenses for the Q2 were offset by contingent consideration adjustment, a reduction of approximately $1,000,000 Related to the potential earn out payments associated with our Forensic Logic acquisition, which have been reduced for 2023 Due to reduction in the value of some expected contracts. Breaking down our expenses, sales and marketing expense for the 2nd quarter The $7,400,000 or 34 percent of total revenue versus $5,800,000 or 29% of total revenue for the prior year period. The increase in costs was related to the above mentioned items.

Speaker 1

Our R and D expenses for the Q2 were $3,100,000 14% of total revenue compared to $2,500,000 or 13% of total revenue for the prior year period. We continue to invest in increasing the functionality of all of our products. G and A expense For the quarter were $5,500,000 or 25 percent of total revenue compared to $3,600,000 or 18% of total revenue for the prior year period. G and A expenses do not include any changes in the fair value of the contingent consideration. The increase in G and A expenses was primarily related to increased legal costs, increased personnel related costs, Higher consulting fees and some business acquisition costs.

Speaker 1

We expect RG and A expenses will continue to stay similar Q2 in absolute dollars as our company grows. That said, for the 3rd and 4th quarters, we expect that they would decrease As a percentage of revenues from what we experienced in Q2, our GAAP net loss was $2,700,000 Or $0.22 per basic and diluted shares for the quarter based on 12,200,000 basic and diluted weighted average shares outstanding. This compares to net income of $3,000,000 or an income of $0.25 per basic share And $0.24 per diluted share for the 2nd quarter based on $12,100,000 and 12.3 1,000,000 basic and diluted weighted average shares outstanding respectively for the prior year period. Our adjusted net income for the 2nd quarter Was a loss of $3,500,000 or a loss of $0.28 per share based on 12,200,000 basic and diluted weighted average shares outstanding. This compares to a loss of $427,000 or a loss of $0.04 per share based on 12.1 1,000,000 basic and diluted weighted average shares outstanding for the prior year period.

Speaker 1

Adjusted net income, a non GAAP financial measure, It's calculated by taking our GAAP net income and adding back acquisition related expenses including adjustments to our contingent consideration obligation. Deferred revenue at the end of the quarter decreased to $39,000,000 from $43,700,000 at the end of the Q4 2022, And the decrease was primarily related to the timing of renewals. We ended the quarter with $3,900,000 in cash and cash equivalents versus $10,500,000 at the end of Q4 2022. The decrease is primarily related to almost $27,600,000 in accounts receivable that we had at the end of the second quarter, some of which has already been collected. Our current cash balance is greater than $10,000,000 During the Q2, we also repurchased 100,401 of our shares at an average price of $23.79 For approximately $2,400,000 We have approximately $25,000,000 available on our line of credit If ever needed, so we still have no short or long term debt outstanding.

Speaker 1

Turning to our full year 2023 outlook. We're maintaining our full year revenue guidance range at $92,000,000 to $94,000,000 but reducing our adjusted EBITDA margin The 16% to 18% based on the increased expenses incurred during the quarter and the ongoing legal costs that are higher than expected. Now back to Ralph for some final thoughts and then we'll be happy to take your questions. Thanks, Alan. Before we take your questions, I want to give a personal shout out and thank you to our project management and field services teams And really stepped up and had a phenomenal first half performance of go live activity this year.

Speaker 1

I also want to thank our incident review center, Customer service and DevOps teams for executing to one of the smoothest, drama free July 4th holidays We have ever experienced in the 10 plus years I've been with the company. The company wide collaborations and collective passion for our purpose sets us apart It is literally saving lives every single day. Thank you. And with that, we'll now take your questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. One moment please for your first question. Your first question comes from the line of Richard Baldry. Please go ahead.

Speaker 2

Thanks. You sort of mentioned that there could be upside to another 10 miles in the second half added. Can you Talking about sort of what the swing factors there are, is it time to get to contract still or is it more deployment or maybe a little bit of both?

Speaker 1

Yes, this is Ralph Richard. Thank you very much for that question. It's a little bit of both. We have a number of deals that are in the Last stage are being negotiated. And to the extent that we're able to kind of bring those over the wire and book them soon enough to be able to Staff them with project managers and get them deployed before the year end.

Speaker 1

That's what that extra 10 plus miles could potentially be.

Speaker 2

Okay. And I think I heard that the large Case Builder deal contract was actually closed in the second quarter, If I heard that correctly, could you maybe talk about the factors around deploying that, what needs to be done to deploy it sort of around rev rec, when it could start to impact the P and L, does it scale over time? Just any color around how that will work in the future?

Speaker 1

Yes. So this is Ralph again. Yes. So let me correct you. We haven't formally closed that transaction yet.

Speaker 1

That's still very much In the pipeline in being worked. In fact, we ran into a bit of a delay, which is the bad news. I guess the good news is that part of the delay was due to negotiating Another year of contract on that deal. Previously, I think we had talked about it being a 5 year kind of $16,000,000 deal. It's now been extended to 6 years and will come in at approximately $18,000,000 So that is still very much In the pipeline, and we're hoping to get that closed in the next quarter.

Speaker 2

Okay, great. And then on the

Speaker 3

bundled sales, can you maybe talk

Speaker 2

a little bit about how that process is working? Are you leading with that? Are you finding that there's Sort of inbound interest when you're approaching on that. And is that a few of your sales people are sort of running with that As a primary or is that really across the board for your sales guys?

Speaker 1

Yes. So this is Alan. I'll answer and then Ralph can add too. It's across the board for all of our sales people. The commissions plans we set up Includes all of the different products that we're selling right now.

Speaker 1

And we're finding that when we talk about one particular solution The customer says, well, I also heard about this or in that case, we currently tell them about the other solutions. And even if they have not asked for the additional information, we can say, oh, by the way, we also have this and this that also might be interesting to you Such as it was to customer X, Y or Z. So it is something that we're hearing a lot more interest in And people that are looking for the bundled products.

Speaker 2

And in pushing that, is there some sort of concept of if you Take it both upfront and do it that there's a discount or a better pricing associated with that? Or do you Just feel that when you're in implementing, it's just easier to do both at the same time, so the clients are just happy to get it done in one shot.

Speaker 1

Yes, this is Alan. Again, great question. We are offering a slight discount. It's not significant When you start adding the additional contracts, but it is a slight discount and enough that people are taking advantage of it.

Speaker 2

Thanks.

Operator

Thank you. And your next question comes from the line of Mike Latimore From Northland Capital, please proceed.

Speaker 4

Hi. This is Aditya on behalf of Mike Latimore. Could you tell me what percentage of the bookings in the first half of the year came from the Tire IV and Tire V

Speaker 1

Yes, I think I'll try to answer your question. I'm not sure if we heard it Correctly. So please jump in if we're wrong. I think we're saying that we booked a number of cities, both new cities as well as expansion cities Along with a couple of new universities, I think sum total, when you look at our go live activity for Q1 and Q2 plus what we have on tap currently that's booked and staffed and project, we think we could get To 140 square miles of deployment, which is 20 miles ahead of what I think we originally talked about in terms of the plan. So We're well ahead on the core part of our business with respect to domestic acoustic gunshot miles going live.

Speaker 1

Does that answer your question?

Speaker 4

Yes. But what percentage of it comes from the tire 4 cities, tire 5 cities?

Speaker 1

Yes. I guess what we would say is In terms of the things that we had, there are a couple of contracts that went live or started to go live and We're assigned actually in Q2 that we were awarded by the cities in the second half of last year. So for example, if you talk about Suffolk County or Cleveland, we mentioned those in the Q4 last But they didn't actually get signed until the 1st and second quarters of this year. So we are seeing more New cities that are coming in, sometimes it takes them a little while to say they're approved at the city council to actually It's signed under contract though.

Speaker 4

All right. Got it. Could you give some color on what kind of gross Margins we can expect for the second half of the year?

Speaker 1

Yes, sure. So this is Alan again. So we did see an increase in gross margins. 1st quarter was only about 55%. We're now back up to 7%.

Speaker 1

We are expecting gross margins to increase continuing into Q3 and Q4. Some of those are related to We expect Puerto Rico to get back on the contract that will significantly improve the gross margin as well as the Department of Corrections contract, the large one. We've already incurred a lot of the costs related to that revenue that's coming in. So it's going to come in with a higher gross margin as well. We would expect and hope to have that gross margin pretty close to 60% by the time we end the year.

Speaker 4

Great. Thank you.

Operator

Thank you. And your next question comes from the line of Jeremy Hamblin from Craig Hallum Capital Group. Please proceed.

Speaker 5

Hey, guys. Thanks for taking the questions. I want to come back to the expense side of the business, the operating expenses, and just make sure That I had a good understanding of expectations going forward. So kind of starting with the sales and marketing Costs which accelerated, you noted that you've made some investments looking to drive the business. And I just wanted to understand $7,400,000 in Q2, I think probably one of the biggest step ups, maybe the biggest step up you guys have had in any quarter sequentially since you've been public.

Speaker 5

Is any of that one time, is that kind of $7,000,000 plus really the range that we would be Thinking about on a go forward basis and how should we be thinking about that Into 2024 as well?

Speaker 1

Jeremy, this is Alan. Excellent question and thank you for asking because It is a little hard to understand. When you go from $5,800,000 last year in Q2 So $7,400,000 it's about $1,600,000 increase. But here's the interesting thing about that is out of that 1.6, $1,500,000 of that is related to expenses that generally would not recur. Dollars 800,000 of that is directly related To an intangible amortization that we accelerated related to trademarks and forensic logic.

Speaker 1

When we change that from CopLink X To CrimeTracer, we had to adjust based on how purchase price allocations work. In addition, We had to accelerate that. Otherwise that $800,000 would have just been expensed over the next 10 years. So that $800,000 is not going to renew. So already 1.6 of that has been cut in half.

Speaker 1

About 500,000 of that was directly related to the rebranding launch The company name and the four products. We're not going to be doing that again. So that $500,000 is a one time cost as well. It's not going to recur. And then so basically, that's already $1,300,000 to $1,600,000 that takes you back down to almost exactly where we were last year.

Speaker 1

We have added some costs. We've added about $1,000,000 in terms of actual personnel and things like that. So you can see a couple of $100,000 that are increased in this quarter. That's what's going to continue. But the rest of that is not.

Speaker 1

That's incredibly important to understand. So when you think about sales and marketing at 34% this year, we're expecting that to go back down

Speaker 5

You're talking about in second half of twenty twenty three as a percent of revenue?

Speaker 1

Yes, I'm referring 28%. That was close to what it was in Q1. So we're expecting it to go back down Or maybe even a little lower as our revenues continue to increase. So it's definitely not going to be anywhere near the 34% that we have this quarter.

Speaker 5

Right. No, understood that. Okay. And then in the G and A though, it sounds like that is more of A step up, albeit that there is also some things that are maybe one time in nature, but just a little more color on that. It sounds like you're Yes.

Speaker 5

Go ahead.

Speaker 1

Again, this is Alan answering as well. There are some one time and it's A little hard to say one time because you can't always exactly say it's only one time. But when you have things that are related to bad debt or acquisition related, They rarely happen, but they're not necessarily one time. That said, there was almost $500,000 in Q2 related to those Two exact things. So those we hope to not recover.

Speaker 1

The other stuff that's a little harder to say is In terms of the legal, the legal continues to be a little higher than we would have expected. We continue to get more subpoenas Then we have in the past, well not in the past year, they've been higher. But if you look at the past 4 to 5 years, it's significantly higher than that. But we're also getting better at how we are responding to those. So it is something that although legal expenses are probably going to stay a little higher than we had hoped, We're hoping that we can reduce those by being better at how with those.

Speaker 1

So G and A is going to stay a little higher In terms of actual dollars, but it's definitely going to be a lower percentage as the top line revenue continues to grow.

Speaker 5

Okay, got it. And then this is a little bit more long term thinking, but it's such a significant change here In the EBITDA margin expectations, right, where I think we have been looking at kind of mid-20s, now we're looking at 17% at the midpoint of your guide. On a go forward basis, it does sound like the business is just going to carry a little bit more expense than previously thought for a variety of reasons. What would your what's a more reasonable target? I I assume that you guys would plan to get back into the 20s next year.

Speaker 5

Is that fair?

Speaker 1

Yes, this is Alan and I'll start and Rob as well. Absolutely. And part of the reason is if you think about that $1,700,000 That we expensed, this is not going to recur. That's going to even if you just add that back, the number goes up. We're definitely going to be north of 20 as we go into next year.

Speaker 1

The other thing that's also really important is we have said this a couple of times is we've already staffed up the majority of the people that we're going to need To do this Department of Corrections contract, which brings in about $2,000,000 a year in subscription as well as Between $1,000,000 and $2,000,000 a year in professional services as well. So those are going to come with a significantly higher gross margin, Which is going to flow down at the bottom line and also increase adjusted EBITDA. Yes. Your contribution actually. Yes.

Speaker 1

Contribution margin, yes. I would just add too. I think we made very prudent investments by kind of putting the pedal to the metal on sales and marketing because we saw a unique to really scale and grow the business in this particular moment. And I think it's fair to say even in a very short term basis With respect to the performance we're seeing on go live miles cadence that is paying off. It was very prudent for us to do it.

Speaker 1

We've gone from going live with 100 miles for I think the past 2 years in a row. We're now stepping that up. We're talking about 140 to Possibly 150 miles, that's a 40% to 50% increase and that doesn't happen like magically. It happens because we're very intentional about Making investments in kind of go to market motion. And so we thought it was prudent to make those investments And be a little bit more, I would say kind of generous in terms of how we invested because we saw an opportunity to really accelerate our footprint And acoustic gunshot detection and it's paying off.

Speaker 1

It was a smart thing to do.

Speaker 5

Thanks for the color guys. Best

Operator

wishes. Thank you. Your next question comes from the line of Jonathan Rhyhaver from Cantor Fitzgerald. Please go ahead.

Speaker 3

Yes. Hi, guys. Good afternoon. So I believe there was a Pipeline of state and federal opportunities came along with Forensic Logic. I just want to be clear, that the accelerated amortization was it related to any potential loss customers there?

Speaker 1

Yes. So this is Alan reporting that the Acceleration of the asset is totally related to the name change, has nothing to do with that. That said, we also did have contingent consideration adjustment, which was about $1,000,000 that was related to Forensic Logic, a slight delay in some of the contracts that we are getting. But I also want to say, while We had to reduce that related to the numbers tied to the earn out that are also going to grow about 30% from last year In terms of the revenues that we're getting from Forensic Logic, so things are still going well. We just had to from an accounting perspective Make that adjustment related to the earnouts.

Speaker 3

Okay. That's helpful. So you it sounds like you still feel Pretty comfortable with the demand environment looking at that product specifically.

Speaker 1

Yes, absolutely. Yes, 100%. In fact, one of the bundle deals that we I was actually led with the CrimeTracer solution that actually brought in the Investigate solution behind it.

Speaker 3

Okay. Yes, that's great to hear. And also just to be clear, The write off related to Puerto Rico, is that a risk that you continue to see that? I know you touched on that contract briefly, but How do you view those potential further write downs on that contract?

Speaker 1

Well, this is Alan. We don't expect any right for the right terms of that. That was really tied to the uncollected collectible receivable. And we are now, as Ralph mentioned, waiting for the results of a multiyear contract with them again. We don't expect that to recur.

Speaker 3

Okay. That's good to hear. And then just the go to market Initiatives, you touched on this briefly, but specifically the initiatives to add more reps per territory. I'm just curious How you're tracking to those plans? And then I guess even more importantly, how are you managing account conflict as you add more reps per territory?

Speaker 3

What's the delineation, Mark? I assume it relates to the different tiers, but how are you managing that?

Speaker 1

Yes, great. This is Ralph. I'll answer that and great question. I think it first starts with amazing sales leadership, which we're incredibly grateful to have in our Company with our sales leader, Gary Banyard. As you recall, the way we're organized is we have territory reps that are responsible for Geographic territories and they're collaborating with overlay reps, if you will, that have specialties, be it crime tracer, case builder, Akoustik Gunshot Detection with respect to ShotSpotter.

Speaker 1

So they're basically quarterbacking the opportunities within their particular territories. What's been exciting about some of our platform extensions is that we're now being able to we're now in a place that we can go after Different buying centers than what we've traditionally been able to execute towards. So there's obviously the state and local or very let's say local law enforcement agencies That has been really a part of our DNA for a number of years. We're adding on to that new buying centers that are these kind of state level agencies. In fact, We've seen some success already with the CrimeTracer solution with very successful state sales.

Speaker 1

We talked, I think, late last year About a 7 figure deal that was taken down for the state of Massachusetts, we're now seeing some state level opportunities for a case builder solution. We actually won an award at a state investigative agency for a case builder investigative case management solution, Completely different buying center than our traditional local law enforcement. And then there's another opportunity that opens up for us To go after a local law enforcement agency that don't have the ongoing persistent gun crime that we've been traditionally focused on with respect to ShotSpotter. So There's a lot of opportunity out there for us and we're finding kind of going into markets with a kind of Platform discussion is very, very helpful because oftentimes we find that we're thinking they might be interested in one thing, but when they see the entire Suite story, They're actually interested in maybe 1 or 2 other things as well. So that pipeline is continuing to grow and build.

Speaker 1

We're going to see you're going to see more from us in terms of how we're actually integrating these products technically to make them work more effectively with one another. So We're in the early stages of this and very excited about the response that we've seen today.

Speaker 3

Yes, that's great. Very helpful. Thank you.

Operator

Thank you. Thank you. At this time, this concludes our question and answer session. If your question Once not taken, you may contact Sound Thinking's Investor Relations team by emailing sstigatewaygrp.com. I'd now like to turn the call back over to Mr.

Operator

Clark for his closing remarks. Thank you.

Speaker 1

Great. Thank you very much. We really appreciate everyone's questions and engagement and looking forward to continuing our conversations with you on 1 on 1 calls. Thank you very much.

Operator

Thank you for joining us for today's call. You may now

Powered by Quartr

Key Takeaways

  • Sound Thinking delivered Q2 2023 revenue of $22.1 million and adjusted EBITDA of $2.4 million (11% margin), with the margin impacted by one-time rebranding, personnel investments, and other below-the-line expenses.
  • Deployment momentum remained strong with 7 new cities, 1 new university, and 7 expansions in Q2, and a projected 140-150 miles of ShotSpotter coverage by year-end.
  • Key market updates include a constructive contract extension in Chicago—highlighted by a ShotSpotter alert that aided in saving a child—and a 90-day interim service renewal in Puerto Rico with high confidence in a multiyear award.
  • Sound Thinking is enhancing its competitive moat with new features like ShotKast, COP2DOT, metadata annotation, upgraded acoustic sensors, and is seeing growing cross-sell and bundle deals across its SafetySmart platform.
  • The company is negotiating to acquire PredPol’s AI-based patrol management technology—including patents and engineering talent—to accelerate its ResourceRouter solution and expand cross-selling opportunities.
AI Generated. May Contain Errors.
Earnings Conference Call
SoundThinking Q2 2023
00:00 / 00:00