Q3 2019 Earnings Call

Good afternoon, and welcome to Shotspotter third quarter 2019 earnings Conference call. My name is over and I will be your operator for today's call.

Joining us or Shotspotter C O, Ralph Clark and CFO Allen Stuart.

Please note that certain information discussed on the call. Today will include forward looking statements about future events.

And Shotspotter business strategy and future financial and operating performance.

These forward looking statements are only predictions and are subject to risks uncertainties assumptions that are difficult to predict and may cause the actual results to differ materially from those stated or implied by those statements.

Certain of these risks and assumptions are discussed in Shotspotter, that's easy filings, including its registration statement on form S. One.

These forward looking statements reflect managements beliefs estimates and predictions as of the date of this live broadcast November 12, 2019, and Shotspotter undertakes.

No obligation to revise or update any forward looking statements to reflect events or circumstances.

After the date this call.

Finally, I would like to remind everyone that this call will be recorded and made available for replay yeah. You link available in the Investor Relations section of the company's website at <unk> IR Dot Shotspotter Dot com.

No I would like to turn the call over two shots Butters CEO Ralph Clark Sir. Please proceed.

Thanks, very much and Hello to everyone on the call as usual I'll provide a general overview of the business and Alan will cover our Q3 results in more detail before we take your questions.

There's a theme for this quarter. It's the same theme we've been stressing since going public.

So as far as business. Its best you drew a longer term strategic land rather than from a shorter term quarterly perspective.

We can't experienced lumpy results, especially when our deals get pushed out in time due to the bureaucratic procurement process eastern contract negotiations to watch our public agency customers are sometimes subject.

This thing continue to be in play in Q3 elsewhere on the cost of securing a few but material contracts that have had their final signings push sport for a variety of reasons.

As a result, we only added 20 gross miles for the quarter, which was below our original expectations. These miles were primarily driven by expansion projects and six cities in Piscataway, New Jersey has a new customer.

We reported Q3 revenues of $10 million and net income of $446000 or four cents per share.

We also generated positive cash flow from operations again, proving the operational leverage in our business.

Well this quarter's results did not reflect our strong growth potential shop as far as long term business fundamentals remain strong.

Pipeline for our core Shotspotter Flex service continues to grow broader and deeper with expansion opportunities from existing customers and a growing number of deals being formally bed with new public safety agency customers. Additionally, our south Florida ambitions operating is gaining traction in nearing the point of making measurable revenue contributions to our financial results.

We believe given our first mover advantage and lack of any serious competition shotspotter remains the only viable candidate to effectively serve this market.

Although we never take anything for granite, we rarely lose to an alternative solution in a true bakeoffs situation and don't see any other company or technology that can deliver the proven efficacy of gunshot detection services that shots far provides a recent experience with Puerto Rico is an illustrative case study on the competitive in timing dynamics of our.

Business, Puerto Rico, originally published an RFP for gunshot detection back in July 2018 post Hurricane Maria and after Bina successful Shotspotter customer from 2014 to 2017.

After receiving no other bets that they determined to be viable besides ours. They reissue to second RFP almost a full year later in June of this year was slightly modified requirements in an effort to induce more competition.

We're pleased to have recently received official notification.

South Florida was awarded the project a 4.6 million dollar three year deal, which is still subject to successful contract negotiation that we hope to conclude by year end.

Based upon the agencies publish the valuation we've already learned that the second RFP yielded only one other deemed Bible proposal as compared to ours that proposal scored much lower in the agencies technical evaluation, while the price. They did was over two times the shotspotter price.

We're very excited to be Reengaged in Puerto Rico, and I'm looking forward to the collaborative work in helping make those communities become sake.

We continue to see strong evidence there are core value proposition is still very much intact is increasingly being validated by independent research. The urban Institute a nationally respected nonprofit research group publishing evaluation last month on how shots fires gunshot detection system is being used by police departments in the value that provides wouldn't occur.

Company with fundamental best practices in.

It illustrates the positive impact that fast accurate detection can have on response and investigative efficiency. The overall reduction of firearms violence in the ultimate cost benefit to the community.

They separate retrospective study published in October of this year in science direct showed a 52% decrease in shootings in Camden, New Jersey in the year after installing shotspotter in house Shotspotter has been a part of a set of new policing techniques.

We also regularly see in here third party endorsements first shotspotter from our many clients for example, Cincinnati Merit, John Cranley recently called out Shotspotter in its 2019 state of the city address asserting that quote in Avondale, we saw 50% reduction in shootings using shotspotter in quote.

And the Las Vegas Metropolitan Police Department would you assume going live on an end process 17.5 square mile Shotspotter expansion revealed at their press conference a 26% reduction in violent crime and the areas covered by Shotspotter.

Collectively these validations and others are indicators of the approaching tipping point, where gunshot detection becomes a standard of care solution.

Looking forward into Q4 will continue building out our third expansion in Cincinnati incomplete, the 17.5 square mile Las Vegas expansion, which at 23.5 square miles well make Las Vegas, our third largest deployment after Chicago and New York.

I also want to recognize the University of California at urban which has recently contracted for our campus security solution.

Urban will be our third campus in the University of California system. When it goes live later this year.

With every single customer engagement, we set out to keep that customer for lifetime, but we also recognize that attrition as a natural part of any subscription based business. So we do bacon some attrition in our annual forecasting.

As noted in last quarter's call, we called out some limited expected attrition of approximately $500000 of annual recurring revenue involving three cities that decided to not renew.

In one case it was primarily driven by Department leadership change in another case the city publicly stated their intention of deploying a smart city based alternative that claims to do gunshot detection, we'll be paying very close attention to see how closely the vendors claims snapshot sort of real world challenges of delivering precise reliable guns.

Detection services and municipal scale.

Looking beyond our technology I want to reiterate that we continue to sharpen expand our sales organization and go to market approach. We recently added a VP of domestic sales reporting to Gary Bonier, our current senior VP of sales.

Our five territory sales directors will report to this new VP, who will provide more day to day direction designed to increase the okay and enable those deals to move forward more expeditiously.

Additionally, we've also establish the sales overlay organization, which is led by a recently promoted sales VP, who will also report to Gary.

Our overlay sales group will develop and maintain deep functional consultative sales expertise in flat security admissions and will collaborate with the territory sales directors to drive our solutions through their respective territories.

These collective organizational absent changes will free up critical cycles for Gary to focus on highly leveraged strategic sales initiatives, including taking the lead on a selected number of tier one opportunities.

We're also elevating our critical customer success practices by breaking out the customer success team from the sales organization. A recently hired VP level leader will direct our customer success organization in collaborate with the senior leadership team while reporting directly to me.

We've invested in expanding the capacity and capabilities of our customer success organization. So they can continue to execute a best of breed onboarding process in order to generate even more net promoters, providing even more positive customer referrals.

Before I conclude I want to update you on missions and Shotspotter less we've made solid progress with missions. We've added two new customer bookings to date and expect to close another three to five by year end. The pipeline permissions has grown ahead of plan and were especially encouraged to see a high degree of interest from non current shotspotter.

Customers.

Last quarter I discussed our shots fire labs, anti poaching initiative and Kruger National Park in South Africa, and I'm very pleased that the results have exceeded our expectations in very short order shotspotter alerts have led to at least two successful coaching interventions.

The area, where there's a shotspotter Delmar protection has gone from three poaching events per month to zero poaching events over the last several bots officials believed that the chilling effect of shots fighters precise real time alerts has been a game changer as a result, it it's possible that some of the poaching activity has been displays the other adjacent private reserve pop.

Ladies that currently lacks shots fire protection.

These private reserves have the financial resources to engage in any poaching strategy and are becoming Bible commercial opportunities for our business.

Just a final couple points before I turn it over to Alan.

Factoring in where we are we decided to tighten our full year 2019 guidance, even further cutting the topline expectation to 40 to 40.5 million, while ending the year with almost $43 million of annual recurring revenue.

Looking forward, our 2020 guidance of 48 to 50 million reflects our expectation that we can add another $5 million to $7 million of GAAP revenue on top of our year end revenue run rate.

This includes expect a GAAP revenue of over a million dollars from Puerto Rico, and a reasonable assumption for attrition.

As you can probably ascertain from these remarks my optimism about the future for Shotspotter continues to be strong it may be taking longer to get business across the line, but I'm very confident that when we see the conversion ever expanding pipeline our growth will reaccelerate as we continue to drive adoption of our solutions and positively impact public safety outcome.

Yes.

Okay. That's it for me here is out.

Thank you Raul good afternoon, everyone as Ralph mentioned, our third quarter revenue results were below expectations again, reducing our full year 2019 revenue outlook.

We're disappointed and reduction in our revenue outlook, However, as Ross presses comments and primary initiatives then the elongation in cell cycle and delays.

Checking process on a few material deals, which we view as you win not yeah.

Puerto Rico being example, this where we expected sign that deal much earlier in the year and I'm pleased to finally announced that Weve hormone been awarded the contract and are aimed to sciences.

Despite the lumpy growth this year that leverage on our motto has allowed us to maintain profitability both in a third quarter and year to date.

And we continue to stand behind her guidance actually the full year 2019 profitability.

Revenue for the third quarter was $10 million, an 8% increased 9.2 million in the third quarter 2018.

Our year to date revenue growth was 19% over 2018 southwest.

It's also important to remember that the 2018 results reflect the very large deployments in Chicago, New York that drove the 2018 mileage growth.

However for 2019, we completed a large expansion of over 15 miles Miami Dade County, this quarter and have another large expansion of 17.5 miles underway in Las Vegas. These large tier two cities manson's are encouraging even as we pursue new tier one contracts.

The quarterly results were also impacted by July and well see some deals and a couple of delayed renewals, which is not unusual in our third quarter.

We added 20 gross two miles chronic corridor, but lost nine three small customers, who did not renew or 11 net new miles added in the quarter.

Note that we discussed last quarter that we anticipated to these losses, including these losses. Our overall churn is still expected to be less and our plan 3% for 2019.

Oh, no. We had originally expected Las Vegas to deploy their entire 17.5 miles of expansion during the third quarter, but at the request the agency we delayed most of the deployment to Q4.

The balance of their snaps and she's Allied this month.

Gross profit for the third quarter was $6 million or 60% of total revenues up from $5 million or 55% in the third quarter of 2018.

We continue to invest appropriately to fund our long term growth well benefiting from the unique leverage in our model.

Our operating expenses for the third quarter were $5.6 million or 50, 56% never having new versus 6.6, $9 or 72% of revenues last year.

Note that the operating expenses in the third quarter 2018 included approximately 900000 hours, a 200000 hours, respectively related to nonrecurring litigation and M&A expenses.

We still expect overall operating expenses increased less than a random topline revenue growth leading to increased operating margins in 2020.

Looking at age that line item sales and marketing expenses for the third quarter were $2.4 million or 24% of the total revenues.

Just $2.5 million for 27% I'm sort of right with the prior year period.

We expect this level spending to increase slightly on a dollar basis for the balance of the year.

R&D expenses for the third quarter were $1.4 million or 14% of total revenues compared to $1.2 million were 13%.

Total revenues for the prior year period.

We continue to invest in R&D to add features and functionality to our pilots and improve our software and raise an application.

We expect this level spending to increase slightly on a dollar basis for the balance of the.

Gina expenses for the quarter $1.8 million or 18% of total revenues compared to $2.9 million were 32% total revenues for the prior year period.

We expect energy and expenses will continue modestly increase on a dollar basis throughout the balance of the year.

Our GAAP net income for the third quarter was $446000 or four cents per share based on 11.4 million basic and 11.9 million diluted weighted average shares outstanding.

This compares to GAAP loss of $1.4 billion or 13 cents per share loss. The prior year period based on 10.8 million basic and diluted weighted average shares outstanding.

As I noted above we're particularly pleased to maintain profitability, even with the increased spending that is funding our future growth.

Adjusted EBITDA for the quarter, which is calculated by taking our GAAP net income and adding back taxes interest depreciation amortization and stock based compensation was $2.3 million up from $200000 in the third quarter of 2018.

We ended the quarter with 696 miles live and 99 cities and 11 campuses and sites at the ended the third full quarter, we had approximately 720 miles.

And 12 campuses and sites under contract.

Deferred revenue at the end of third quarter was $21.4 million.

Oh, this amount 20.6 million with short term.

And $800000 was long term.

Our balance sheet remains strong we ended the quarter with $26.1 million in cash and short term investments.

Down only slightly from the 27.4 million at the end of Q2.

You should note. So this was after spending approximately three and a half million dollars repurchasing shares under our authorized share repurchase program.

We added one new city in the third quarter for a total of 10, new cities year to date.

As we shared last quarter, we expect our second half growth.

Would be driven primarily by expansions and not new cities.

Finally, as mentioned above we repurchased 120000 of our shares under our corporate repurchase program during the quarter.

Turning for full year guidance with the Las Vegas miles coming into late in the year in some of our other delayed customers.

We were reducing our fiscal year revenue outlook to 40 million to $40.5 million.

We've been clear that the cadence in customer adds, especially in international markets was slower than we originally expected.

But again, we do not see this business as being lost a competitor and we are optimistic that much of it will close in the near future.

Ralph is shared our 2020 full year guidance of $40 million to $50 million, which would represent over 20% growth at the midpoint.

Let me add just a few more details we expect revenue cadence will be similar to the historic trends with first quarter relatively flat with fourth quarter unless were able to deploy Puerto Rico rapidly.

An increase from Q1 to Q2.

Flat to the third quarter and an uptick again in the fourth quarter.

Expenses will increase on a dollar value across all operating expense categories with the most pronounced increase in sales and marketing.

We also expect to remain profitable on a go forward basis and expense, both gross and net margins to continue to improve.

Although there may be some quarterly variation.

We continue to evaluate the upcoming replacement of our Threed sensors L. T E sensors, and we'll begin incurring some expenses related to that process in the fourth quarter.

Overall, we expect this to cost between four and $6 million throughout the entire process. We're evaluating your timing of this rollout and we'll keep you posted.

Lastly, we're planning to have an analyst Investor day on Tuesday December 17th.

We will provide more details as we get closer to that date Oh. Please mark your calendars, but added that we'd love to see you all there.

Now I'll turn the call back to Ralph and then we'll be happy to answer your questions.

Great. Thank you very much down I think we're just prepared to out go directly to questions.

Thank you very much for joining.

Thank you at this time, we will be conducting a question answer session. If he would like to ask your question. Please press star one under telephone keypad. It confirmation total indicate your line is in the question Q you May Press Star too if you would like to remove your question from the Q4 participants using speaker equipment, it maybe necessary to pick up or has that before pressing the star Keith one on that please.

All we pull for questions.

Our first question is from Matt Fall William Blair. Please proceed with your question.

Hey, guys. Thanks for taking my questions first wanted to ask about the 2020 guidance and was wondering if you can give us any sort of additional details in terms of what is factored into that guidance and how much visibility you have in that and to that number basically just trying to figure out if some of the delays that of.

Sort of a play do during 2019 have has the potential to the impact that 2020 guidance as well.

Sure. This is Alan I think if you look at what Ralph just mentioned in terms of how we're going to end 2019.

We know we're gonna have about $43 million, an annual recurring revenue at the start of the year.

In addition to that we expect at somewhere between four and $5 million in GAAP revenue between our new domestic go lives and Puerto Rico, assuming we can a light up Puerto Rico as quickly as we believe we can and then on top of that there's probably another a million dollars in mrna.

This new gap and GAAP revenue related to missions security. Several other projects, we have and then the balance to be filled in by international So international at that point somewhere around a million after $2 million, which frankly less than we had started within our guidance last year.

And even though we have more.

Proposals and more bids out there and are much more optimistic going into 2020.

Got it thanks for the thanks for the additional detail there it's helpful.

And the Puerto Rico deployment, Yeah. I know you are you guys had a fairly sizable deployment there prior to the hurricane coming in a few years ago is this deployment reactivating those same areas or or is this an area that you previously I'm warrant deployed in.

Yeah. This is realtime great question, So I think it matches up pretty well with our original deployment, it's approximately 20 or so miles and again, it's a three year contract for us. So we're we're quite excited to get that reengaged in Puerto Rico and to enter into.

Another relationship with them, providing gunshot detection services.

Got it and last one from me on the on the missions product you mentioned, you're seeing some nice interest from non.

Current shotspotter customers. It did those customers that are showing interest have the potential to eventually use the.

The core Shotspotter solution as well for gunshot detection or these customers.

That are just using missions just trying to get an idea this could be potentially a customer onboarding tool for your core gunshot detection product as well yeah. So great. Great question again, so that the interest is really coming from two types of Don Shotspotter customers those that would probably never be shotspotter customers because they may be lack.

And traded violent crime their areas. So they're looking at that solution more as a property crime solution and then those customers that have both property crime and violent crime, where they could potentially become shotspotter customers in the future I think it does bear mentioning that our focus really isn't these first set of customers that that we're signing up in.

We'd be deploying over the next few months that we're really focused on making sure. They have an incredibly positive experience and represents net promoters that can help us bring onboard. The next set of customers. So this is something thats relatively new up for for our company and frankly for customers that are using this kind of precision leasing capex.

Billy around kind of patrol management alike. So we want to be very intentional around making sure. We're kind of tracking the value that they're seeing from that are deploying that solution in kind of using that that positive experience and bringing on the next wave of customers. So I wouldn't expect us to really engage even though we are.

Seeing interest from non Shotspotter customers I think our first priority has to be on really a working with these handful or two handfuls about customers that were signed up between now and ended the year.

Okay, Great no that's all I had things like us.

Thank you make it.

Our next question is from Chris Van Horn B. Riley FBR. Please proceed with your question.

Hello, everyone and thanks for taking my call.

Okay.

I guess just on the margin front you know it seems like margins are going to continue to expand and I'm wondering if there's a main driver there or if it's just a lot of a lot of different things, you're doing whether its pricing or cost controls and how do you feel about your kind of longer term goal of of somewhere around 100 million in revenue and potentially 40 per.

Yes, and EBITDA margins.

Sure. This is Alan a I would say, where we continue to spend where its appropriate I think we're going to be increasing our spend as Ralph mentioned earlier in our sales and marketing as we have been wrapping that up over the last year to 18 months.

We're not necessarily going to be anything at the same ran a revenue and DNA and R&D, we feel pretty good about where our level of expenses are there there will be selected investments. There. So you see two things you see control throughout the operating expenses, but you also see as the revenue growth some of our semi fixed.

Costs in our cost of goods sold aren't growing us as much as the revenue is so the gross margins are going to continue to improve as well so improving gross margins improving or controlling the operating expenses are going to lead to a continued improving in our overall margins I would say on.

That path to that 100 million share, we still feel pretty comfortable about getting that 40, 40% or $40 million and EBITDA when we hit that hundred million dollar Mark.

Okay got it thanks for that detail and from a from a competitive landscape perspective, you know we do our due diligence I think the more you dig into the quote competitors that you have on there is some stark differences and just want to come from with you you'll maybe how you stack up either from a pricing perspective or from a solutions perspective, I'm now that there's been some chad.

So that the competitive landscape is getting is ramping up.

Yes. So this is Ralph I'm great. Great question I think at this point in time. It is just a bunch of chatter I mean, we haven't seen any successful deployments of any kind of scale in any other customer situations of course.

We all saw the recent news with that canton that decided not to do their shotspotter solution, because they're going to.

Try another solution, which we haven't actually seeing deployed anywhere I think architecturally I think it's important note that the folks that are out there are claiming to do gunshot detection or doing it on a proximity based sensor basis, which is a very challenging thing to do add scale. One of the significant architectural advantages. We have is using kind of multi.

A couple sensors and using our really robust machine classification in human review classification to make sure that we're delivering not only fast but precise alerts right precise in terms of location and precise in terms of really minimizing false positives things that are claim to be gunshot there aren't gunshots, which is difficult for products.

Many based sensor to figure out and also reduce false negatives as well things that you don't claim or gunshots that actually our gunshots and so our ability to deploy kind of multiple sensors over square mile working together, along with our machine and human review classification, we think built a best of breed solution. So we're going to be watching.

Really at least this canton implementation to see impact how closely the vendors claims match up to reality, we seen other attempts at some of these proximity based sensor companies to try to do things. They haven't been very successful in one particular case, we've really kind of gone behind this one particular vendor in three cities at leasing kind of.

You know kind of cleaned up I guess the original deployment, if you well so well continue to kind of focus on doing what we do and kind of watch. These these competitors.

To date, but we really haven't seen much pressure at all from from them at this point because they don't have any successful deployments.

Okay got it thank you for that commentary and thanks for the thanks for the time.

Yeah. Thank you.

As a reminder, we're now conducting a question answer session if you'd like to ask your question. Please press star one on your telephone keypad one moment. Please while we both question.

Our next question is from.

Joseph Osha JMP Securities. Please proceed with your question.

This is actually Hillary on for Joe.

Just wanted to circle back to the sales.

Can I know you guys had the one new higher this quarter.

Just kind of wondering kind of thoughts on you know if you're comfortable with your current head count or if we might see you bring on another.

One or two us sales people as you look to pursue some these different growth strategies.

Yes. So great question. So we did bring on a VP of sales that our current five territory sales directors are reporting to that individual and were formally building out a sales overlay organization, taking one of our very successful sales directors and promoting him to the BP role, where he is now going to build out an overlay.

Organization that will have kind of very precise skill sets around selling flex services, our security solution and so most importantly, our mission solutions and working collaboratively with the sales.

Organizations on kind of pushing those those solutions through the respective territories will continue to invest in and build out our customer success organization I think in many ways, that's a little bit of the secret sauce around you know how we do what we do in terms of really building. These loyal net promoter customers out there that then really help us from a.

I Kinda Referenceability point of view help sell other customers. That's a critically important a process for us will probably grow that headcount even faster than what we're going to do on the direct sales because I think in this particular market.

Other chiefs of police pay attention to the chiefs of police that deploy shotspotter. So we want to make absolutely 100% sure that when a customer deploys shotspotter, they're having a positive experience and I think I would point no further and no more recent then the Las Vegas Press release, if you have an opportunity look at that you can see what a.

You know loyal committed customer implementing best practices that we help bring about with our customer success organization, how they talk about that Shotspotter solution. What difference it's made in their particular city in this particular case Las Vegas, that's that's marketing and sales gold and so that's the area. That's the area that will focus on most.

Leads that customer success organization.

Okay, Great and then just secondly, one way or in Chicago, We spent some time over at the not had been do so just wondering if you could provide some color thoughts around how that might play into your your growth strategy over the next couple of years.

Right, Yes. So we're always this is Ralph again, I mean, we're always better when a customer adopts our solution in integrating it with other technologies and bringing about other processes. It's literally kind of two plus two equaled five up for those of you on the call there aren't familiar with NIE. Then you can think of it as their ats kind of fingerprinting of.

Well casings and what's make what makes the niven so critical and the prevention and reduction of gun violence is shotspotter is getting cops, the dot dot and because the vast majority of gunfire Vince go without a 911 call we're able to help police departments.

More physical forensic evidence in the form of shell casings. Those showcasing then get process by Niven and then you could literally connect the dots you can see the movement of a crime gun in various parts of the city that combined with the additional intelligence that shotspotter is bringing about because now you're able to interview witnesses and you're able to see the cadence of.

Gunfire you more quickly able to identify the very few serial shooters that drive most of the gun violence problem. So there's overall concept out there called crime gun intelligent centers and it's basically the philosophy of combining shotspotter, along with niven and taking a very robust intentional approached investigating all shootings.

Just not shootings that result in a homicide or gunshot wound back then, but even shooting that just don't have a physical.

Blood trail, but they might leave a showcase in which can be critically important in your investigation in stopping that cereal shooter before they ultimately shoot in hurt or kill someone so it's a great great question, and we love night been and we'd love to be integrated with that because it makes it more sticky and makes it more valuable to the customer that's going to combine those technologies and processes.

Yes.

Great. Thank you.

Our next question as from Willpower Baird. Please proceed with your question.

Hey, guys is actually Charlie really gone for well. Thanks for taking the question I just wanted to ask on Puerto Rico.

What what exactly it still left between where we are now and getting that completely across the finish line and starting to generate revenue.

So this is Alan.

As we mentioned we received they form award document we are in communications with them now to take the next steps actually go down there and do the negotiation to the final contract.

Hopefully this this time will be a little faster than last time. The the RFP did did contain a sample contract. So both parties are already.

And you know at least cognizant of what most of the terms and conditions are going to be that said. It is it is Puerto Rico things, sometimes do take a little longer than we might expect we certainly expect and hope to have that a completely side and executed before the end of the year with an opportunity to even.

Starts on the go lives.

Great and then also just wanted to has generally on the international pipeline.

You know how close are we to the finish line and some of these other international deals and and and how might they compare to Puerto Rico in size.

Yeah. So this is Ralph I'll answer the second part of your question first so in terms of size because we have the pricing leverage that we have internationally. These these deals are sizable you can think in terms of anywhere from you know in the low side of $500000 of annual recurring revenue in as much as like $2 million on.

Hey, I'm kind of reasonable size.

Deployment of a of international customers. So they they tend to be very large and chunky.

We're we're super constructive about the size in depth to the market I would say, we're seeing an increased amount of interest just to remind folks in Latin America. We're focused primarily on four countries, Brazil, Mexico, Colombia, and Panama and then we've been able to be successful in the Caribbean with the Bahamas.

Which came on I think this this year. We also have had a very long standing relationship with a customer in South Africa, Cape town, whose publicly discussed.

Their need for expansion Shotspotter. They continue to have a really tough time with gun violence and they also have a budget to address the issue. So we're we're feeling quite constructive about it but I think one lesson learned if you will from kind of 2019. This year is that as good as we're feeling about the size and depth to the market I think were being.

A little bit more intentional about the timing characteristics of what it actually takes to get a sign executed contract because they're resembling much more kind I will call. It Puerto Rico behavior, then maybe say.

Even for an existing customer like Cape town has talked about expanding that knows us that we haven't existing contract with its still very very difficult from a procurement logistics point of view that kind of get paper across the line. So we're hopeful expecting we're hopeful and expectant of getting some amount of international revenue contributing.

Our GAAP.

Revenue contribution in 2000 2020.

And we like the way the pipeline is developing.

Great that's really helpful. Thank that.

As a reminder, if you'd like to ask a question. Please press star one under telephone keypad.

Our next question is from read Matelski Imperial capital. Please proceed with your question.

Hi, guys last quarter, you guys talked about prices increased price increases starting next year have you guys made any progress negotiating them and has there been any pushback or is that going along smoothly.

Yes. So this is Alan we have talked about and are still intending to implement a a base price increased from 65000 per year per square mile to 70000 per year per square mile.

That will go into effect January 1st it'll be phased in basically all new miles that are sold will be at that price if customers have price points, so slightly below that.

From historical ones they'll have a call increase until they reach that price, we haven't gotten any substantial pushback and it is something that's still on on the doctor to execute on Yep and I'd just add its not like we have been increasing prices every year, we haven't had a price increase and what for four years. So we were.

Do we have had coli increases and in many cases I would not a not a.

Broad based price increase to our standard price per month.

Got a great and I know you guys have a lot of strong data on the success of Shotspotter flat impact and now with a growing footprint of missions have you guys started to compiled data on how it impacts the community and the policing there and if it's positive or not.

Yes, so it's too early for that just yet because we just recently deployed our first customer and again, we have another I'd say kind of three to six that we hope to deploy over the next in the next few months, but that's very much on our roadmap is to provide that kind of narrative to help people understand the value in the various use case.

As of our mission solution.

Okay, great. Thank you very much.

Oh no.

Question is from Tyler with Northland Securities. Please proceed with your question.

Hi, Thanks for taking my questions.

First off I'm, a lengthening sales cycles, you've talked a bit about how the international sales cycles are turning out longer than you expected, but what are you seeing domestically and.

If you are seeing sales cycles get longer.

Domestically, what's driving that is there any impact you're seeing from competition getting more active on those thank you.

Yes. So this is Ralph and Alan jump in of course, but we're not seeing any real impact from competition just to remind folks the vast majority of our sales our sole source deals, where we're basically going direct to the customer and they're not even issuing the RFP.

In other cases, where RFP is issued often times, where the sole bidder on an RFP all of the first RFP for up for Puerto Rico in a couple of cases, there might be another responded ask again as in the case of Puerto Rico, but oftentimes it's not.

I guess technically a strong as our solution in the pricing isn't isn't there. So I think from a competitive point of view, we're feeling really quite good.

I think from a domestic sales cycle point of view I think we're still feeling like this is a long sales cycle 12 to 18 months were seen transactions bounce all around that kind of timeframe with respect to our 2019 performance I think some of that can really be or not at some of it but I would say a material.

Part of that really is the delay of some existing relationships. So Puerto Rico being a very big example of that along with delaying of going live with Las Vegas is already sold already deployed to some degree, but our ability to kind of go live in a timely fashion cost us some GAAP revenue so.

I don't think were quite prepared to draw any conclusions about lengthening sales cycles. At this point in time domestically outside of international I think there we would have to acknowledge that it's taking longer than we originally anticipated and that those are big numbers to said it has it has quite an impact potentially to certainly had an impact to our revenue.

New performance in 2000.

2009.

And that was again wouldn't speculate because that was five so.

2020, as a part of our guidance.

Thanks, that's helpful. And then on that 2020 guidance have you updated your goals for New go live miles and can you just kind of give us a ballpark what.

The what you would need in that new go live and 2020 to get.

Well you're targeting on revenue. Thanks, that's all for me.

Yeah. This is Alan I think are they the amount of information that I think we want to really break it out into as what we gave earlier in the queue anyway in terms of adding between four and $5 million of GAAP revenue.

Of which we already did say that about a million plus if that's going to come from from Puerto Rico.

Other than that we haven't really given anymore guidance in terms of actual go live Myles.

Hi, Thank you yeah, yeah, and maybe if I can add Alan if it's okay. Because it's really a matter of just not the number of go live miles, but when the lot when when the mild go live. So timing is very very important so 25 miles going live in Q1 is worth more than.

50 miles going live in kind of Q4 for for next year for next year's revenue yet for GAAP revenue yeah.

Okay. That's helpful. Thank you.

As a reminder, if you would like to ask a question. Please press star one under telephone keypad.

Our next question is from Matt Galinko National Securities.

Please proceed with your question.

Hey, Thanks for taking my questions a couple of for you.

First let me maybe just on capital allocation.

You did buyback some stock in the quarter, Chris I think the first for you.

On the other half and it sounds like you have some capital needs with respect to the.

Three d. sensor replacement cycle so.

Just curious how your Vicki.

Thinking about capital allocation looking out into 2020. Thanks.

Sure. This is Alan a as you mentioned, yes, we did start repurchasing some of our shares a this last quarter I I would anticipate that we might be in the market again, if we continue to see our price below where we think the intrinsic value as the $4 million to $6 million that I mentioned in terms of.

Capital wrote for Threed, you replacement, although it might start it's going to start slowly and a extend over a couple of years. So that's not necessarily going to be materially affecting our cash spend so I think from that perspective, we feel pretty good about where we sit.

This last quarter, we generated cash.

The only went down about a net $1.3 million after spending three and a half in repurchases as well. So we feel good about that and we continue to grow and put more money towards the bottom line, which is also going to improve our cash position.

Got it thanks, and I guess, just a follow up question about guidance with respect to the.

The price increases we talked about earlier in the queue in a I wasn't sure if you hadn't factored that into.

The 2020 guidance. Thanks.

Yeah. This is Alan <unk>, we have in terms of that a new domestic.

GAAP revenue, although it's important to understand that the miles that are being sold right. Now are booking through the end of year are being sold at a 65000 dollar price tag or price point, so as those get deployed throughout the first it's called first half a year those are still going to be at the lower price point.

Until the ones where were sold a 70 start getting deployed more towards the second half of next year.

Got it thank you.

At this time. This concludes our question and answer session. If your question was not taken you may contact shots partners Investor Relations team by Emailing S. S. T I at Gateway IR Dot com.

I'd now like to turn the call back over to Mr. Clark for closing remarks.

Great. Thank you very much and thank you all for joining this conference call I'm, we're looking forward to getting Reengaged in Puerto Rico, hopefully here very soon and continuing to do the work of helping agencies and communities that prevent and reduced gun violence see in about 90 days or I guess, we'll see before then at our.

Investor Conference. So thank you very much.

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

[noise].