Q4 2022 Shotspotter Inc Earnings Call

Speaker 1: Good afternoon and welcome to ShopSpotter's fourth quarter and full year 2022 earnings conference call.

Speaker 1: My name is Joe and I will be your operator for today's call. Joining us are ShotSpotter CEO Ralph Clark and CFO , Alan Stewart. Please note that certain information discussed on the call today will include forward looking statements about future offense and ShotSpotter's business strategy in future financial and operating performance. These forward looking statements are only predictions and are subject to risks.

Speaker 1: uncertainties, and assumptions that are difficult to predict and may cause actual results to differ materially from those stated or implied by those statements. Certain of these risks and assumptions are discussed in ShotSpotter's SEC filings included in its registration statement on Form S-1. These forward-looking statements reflect management's beliefs, estimates, and predictions as of the date of this live broadcast, February 22, 2023, and ShotSpotter 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.shotspotter.com. Now I would like to turn the call over to ShotSpotter CEO Ralph Clark. Sir, please proceed. Good afternoon, and thank you for joining us today. Before I report on the company's Q4 fiscal year 2022 outcomes and our fiscal year 2023 outlook.

Speaker 1: I want to first start by expressing my gratitude for being entrusted to lead this incredible company on a remarkable journey in engaging local law enforcement agencies in their digital transformation. We have assembled a powerful suite of complementary solutions in a precision policing platform that agencies are demanding in their pursuit of driving smarter, more efficient, effective, and equitable policing strategies. Our opportunity remains significantly attractive and under-penetrated, despite some selected headline noise from a vocal but increasingly discredited Defund the Police movement. We continue to see success because of the strong support from community residents, their elected officials, and our buying center of local police departments that understand and appreciate the value of investing technology in order to drive better community-focused public safety outcomes.

Speaker 1: Turning to financial performance, our Q4 2022 revenues increased 50 percent to $21 million from the prior year's $14 million in Q4 2021. Adjusted EBITDA increased 131 percent to $4.3 million, or 20 percent of revenues, compared to $1.9 million, or 13 percent of revenues, for Q4 2021. Revenues for the full year increased 39 percent to $81 million, with $15.9 million of adjusted EBITDA, or 20 percent of revenues. We finished the year with over 100 miles taken live for the second year in a row. In the quarter, we took four new cities live and implemented five expansion projects, in addition to a security deployment at a college campus in Virginia. Starting in 2023, we have 21 projects representing over 80 new contracted miles that are in the process of being deployed. Over 15 of the 80 miles are already live as of today. These miles do not include the 30-plus awarded but yet to be contracted miles from both Cleveland and Suffolk County, which when executed will be added to the project list.

Speaker 1: One notable new city go live was our international recapture of Cape Town, South Africa, which has already seen remarkable success that has been publicly trumpeted by Alderman J.P. Smith, who owns the security portfolio for the city of Cape Town. As recently as late last week, ShotSpotter led to the arrest of several shooters in the recovery of firearms and spare ammunition. In addition, a number of ShotSpotter alerts have led to gunshot wound victims that have been successfully treated due to those ShotSpotter alerts. The city of Cape Town, along with the provincial government of the Western Cape, are in early discussions to motivate for an expansion to several other suburbs of Cape Town that are equally challenged with respect to gun violence. Overall, we had another strong bookings year with 145 new miles and 77 subscription renewals booked with 37.5% of those transactions representing multi-year agreements.

Speaker 1: Of note was the exceptional performance of our Tier 4, Tier 5 initiative, which represented over 20 percent of the domestic new miles booked for 2022. We view this specific segment as a significant untapped CAM expansion opportunity and are in the process of significantly increasing our direct sales account to further penetrate and grow that business. CopLink X also relies strong bookings with a Link Q4 2022 multiyear seven-figure deal representing $1.2 million in annual recurring revenue. We're taking intentional steps to more tightly integrate the CopLink X solution and sales motion into ShotSpotter sales, customer success and support, and product management infrastructure in order to accelerate ShotSpotter Respond upsell opportunities in combination with the state and federal agency pipeline that our acquisition of forensic logic brought to the company. Our customer retention results remain best in class as an operating SaaS company. In 2022, we're able to realize negative gap revenue attrition, net of pricing increases. As they're reported in our last earnings call, our customer success organization, robust customer onboarding program, and our diligent net promoter score process.

Speaker 1: are central to our customer retention strategy. In addition to helping drive positive outcomes that promote stickiness, it also contributed to a best in class sales and marketing spend of $0.40 worth of annualized contract value for 2022. This is the second year in a row our sales and marketing spend per ACV has been below 50 cents. Our demand drivers remain strong as there is increasing pressure on cities to deal with the rising violent crime in a transparent and community inspired fashion.

Speaker 1: As a reference point, we published over 250,000 gunshot alerts in 2022. The overwhelming percent of those alerts did not have a corresponding 911 call. And without ShotSpotter, it would have hobbled the efforts of any agency to respond to and investigate criminal gunfire. Our ACUSA Gunshot Detection technology helps improve the speed and response to criminal gunfire in order to save lives and deter shooters. Our complementary investigative solutions accelerate the investigative process and helps improve case closure rates. And our Patrol Management Solution democratizes the crime analyst function in order to drive scientifically proven

Speaker 1: smarter, and more effective patrol strategies without over-policing. These force-multiplying solutions are critical as agencies remain significantly below their budgeted staffing levels as they grapple with the great resignation, which has resulted in a 3.5% decline in police officers over 2020 and 2021. We believe the combination of these factors create a unique opportunity for proven technology solutions like ours to address the growing gap between increasing demand for policing services versus the limited and shrinking supply of those services.

Speaker 1: The funding and budgetary environment continues to be constructive, not only at the local and state level, but also at the federal level. The Biden administration has committed $10 billion in American rescue plan funds to public safety of which $450 million have been allocated to public safety technology, including gunshot detection, which was specifically called out in a White House press release of May 2022.

Speaker 1: For example, Detroit Mayor Mike Duggan and Police Chief James White allocated $7 million of ARP funds expressly for gunshot detection, which resulted in a 20-mile expansion of shots. Given these demand drivers and the robust funding environment, we are very bullish on our ability to drive profitable growth for the foreseeable near and medium term. We have the breadth and depth of a high-quality suite of proprietary technology solutions that are proven, and in the case of our acoustic gunshot detection core, remain mostly unchallenged from a competitive point of view. Our solution suite meets the needs of the market, and our brand reputation positions us as a trusted provider of these solutions to our buying center core and their appropriators.

Speaker 1: We're starting the year on a strong footing with approximately $80 million in ARR, a large book in growing pipeline of domestic and international coupsagunshat detection deals, along with a growing pipeline of investigative and patrol management transactions which exhibit faster and compressed contract revenue time months. These factors give us some degree of confidence in reaffirming our $94 to $96 million revenue guidance for the year which Allen will outline in more detail. And with that, let me turn the call over to Allen. Thank you, Ralph. I'll cover highlights for both fourth quarter and 2022 as a whole. In fourth quarter, we won live in four new cities, one of which was international and caped on South Africa, and one new security customer, a university in Virginia. We also won live with five response to the expansions.

Speaker 1: and achieved revenue growth of 50% compared to the fourth quarter of 2021. We did lose one small city with three miles of coverage. That said, our 2022 gap revenue attrition, net of price increases will actually be negative. We're also pleased to report that we had total book use for the year of approximately $75 million, including three new investigate contracts that have not yet gone live. Let me provide more details on the quarter, and then I will share some thoughts around 2022 and guidance for this year. Fourth quarter revenues came in at $21 million, a 50% increase over the 14 million in the fourth quarter of 2021. Revenues increased as our deployed miles increased year over year, and we had a full quarter of revenues from Forensic Logic. Gross profit for the fourth quarter of 2022 was 11.9 million, or 57% of revenue versus 7.5 million.

Speaker 1: or 54% of revenue for the prior year period. Gross margin was higher than last year as our revenue-based grows, but slightly lower than expected due to the increase in sensor maintenance costs that were slightly delayed during a replacement of 3G sensors that we also completed in the fourth quarter. Our net loss for the fourth quarter was $1 million or loss of nine cents per share on 12.2 million weighted average shares outstanding on both a basic and diluted basis. This compares to a net loss of $3.3 million or loss of $20 cents per share on an 11.7 million weighted average shares outstanding on both a basic and diluted basis outstanding for the prior year period. In Q4 and similar to Q2 and Q3 of 2022, our expenses for the quarter quarter were reduced due to reduction in the contingent consideration liability.

Speaker 1: 54 percent of revenue for the prior year period. Gross margin was higher than last year as our revenue base grows, but slightly lower than expected due to the increase in sensor maintenance costs that were slightly delayed during a replacement of 3G sensors that we also completed in the fourth quarter. Our net loss for the fourth quarter was $1 million, or a loss of nine cents per share, on 12.2 million weighted average shares outstanding on both a basic and diluted basis. This compares to a net loss of $3.3 million, or a loss of 28 cents per share, on an 11.7 million weighted average shares outstanding on both a basic and diluted basis outstanding for the prior year period. In Q4, and similar to Q2 and Q3 of 2022, our expenses for the quarter are reduced due to a reduction in the contingent consideration liability related to the forensic logic earnout.

Speaker 1: build our sales pipeline and expand our marketing efforts. We continue to focus on maintaining high levels of customer satisfaction.

Speaker 1: which helps keep our attrition rates low. Our R&D expenses for the fourth quarter were $2.5 million or 12% of total revenue compared to $1.9 million or 13% of total revenue for the prior year period. We continue to invest in increasing the functionality of all of our products. G&A expenses for the quarter were $4 million or 19% of total revenue compared to $5.2 million or 37% of total revenue for the prior year period. G&A expenses in absolute dollars were reduced to $3.7 million due to the $300,000 reduction.

Speaker 1: in the contingent consideration liability related to the forensic logic acquisition. Our revenue results for 2022 were $81 million, an increase of over 39% from 2021. The increase was due to revenues related to forensic logic and significant expansion in customers using our gunshot detection solutions, having added over a hundred miles live during the year. Gross profit for 2022 was $46.8 million or 58% of revenue versus $32.5 million or 56% of revenue for the prior year period. Challenges with the global supply chain did not prevent us from completing our 3G sensor replacement or even slow down the deployment of newly contracted respond miles or expansions. Our net income for 2022 was $6.4 million or income of 52 cents per share on 12.2 million weighted average shares outstanding basic and 12.3 million weighted average shares outstanding computed on a diluted basis. This compares to a net loss of $4.4 million or 38 cents per share based on 11.6 million weighted average shares outstanding.

Speaker 1: on both a basic and diluted basis for the prior year period. Adjusted EBITDA for 2022 was $15.9 million, a 54% increase from the $10.4 million in 2021. Our revenue retention rate remains outstanding at 124% in 2022, essentially the same as the 125% in 2021. Additionally, our sales and marketing cost to acquire $1 of annualized contract value for the next 12 months stayed impressive at only $0.40 per dollar in 2022 versus $0.37 per dollar in 2021. Deferred revenue as of December 31 was $43.7 million, which was up from $26.7 million at the end of 2021. We ended Q4 with $10.5 million in cash and cash and cash equivalence versus $9.6 million.

Speaker 1: at the end of the third quarter. We have no short or long-term debt outstanding and approximately $25 million available on our line of credit if we ever need it. Our annual current revenue started on January 1st, 2023 was $79.7 million up significantly from the 63.2 million that we started with in 2022. The 63.2 million does not include additional recurring revenue of $6 million from forensic logic that was acquired after January 1st, 2022. Our revenue guidance for 2023 is $94 to $96 million. To provide a bit more explanation as to how we got to that range, the following may be helpful. We start with almost $80 million in ARR, adding approximately $4.5 million of gap revenue from the pace of expected go live miles and $4 million of professional services from our leads division totals over $88 million. The gap revenue from international expansion and the $2.5 million

Speaker 1: and increased sales of Investigate, Connect, Security, and CopLinkX make up the difference to get to our revenue guidance. We're also providing guidance for our 2023 adjusted EVITA. We expect to increase our adjusted EVITA from the 20% we achieved in 2022 to between 24 and 26% adjusted EVITA in 2023. Now back to Raul for some final thoughts, and then we'll be happy to take your questions. As you can tell, there's a lot to be excited about in growing our business and having positive impact on public safety outcomes in communities globally. I think we're now ready to take your questions. We will now begin the question and answer session.

Speaker 1: To ask a question, you may press star, then one, on your telephone keypad. If you're using a speaker phone, please pick up your headset before pressing the keys. Into a draw question, please press star, then two. At this time, we will pause this momentarily to assemble our roster. And our first question here will come from Brian Wittenberg with Imperial Capital. Please go ahead. Great. Thank you very much. So I had a couple questions around the South African situation. Can you walk us through the history? How long you were there? How long a contract you currently have? How long contract you had before it was canceled and how long it was canceled? Just walk us through the history and how long the contract is kind of going forward and what the opportunity is.

Speaker 1: So the current contract is a three-year contract, I believe, and correct me if I'm wrong, they're Allen. We're covering a number of communities in and around the Cape Town area. And we expect that there is going to be some expansion opportunity there. This is being paid for by the local city, Cape Towns-Up Africa, although they are engaged with the National Police Force Saps to respond to these gunfire alerts that we're producing. Our previous deployment in Cape Town, and I don't recall the exact dates, but I think I want to say 2015 to maybe 2019, who were there for approximately four years before. And they ran out of money. They basically had a funder outside of the country that funded that initial deployment. And they weren't able to motivate themselves to get local funding to continue that deployment, although the need for the technology has been ongoing in Cape Town. And frankly, a large portion of South Africa, we think there's some other cities there that could leverage this service. Okay, just one other follow-up on that. Outside of Cape Town internationally, can you talk about any other pipeline that you have? On the international basis.

Speaker 1: Sure, so this year we had a fairly major expansion in Bahamas, which is international. We have an ongoing dialogue going with a few Latin American countries, and we expect that we're going to land one or two of those opportunities this year, 2023. Great. And then last question, number of miles, and I didn't catch it, that you're projecting in 2023. Yes, I don't think we said that. I think what we did state is that we currently have approximately 21 projects totaling 80 or so miles that are already under contract and in the process of being deployed. In fact, we've gone live. I reported on the call that we've gone live with 17 of those 80 miles already, and I just got an email saying that we just went live with another four square miles in Detroit. So we're making really good progress. There's another 30 square miles that have been awarded but have yet to be formally contracted between Suffolk County and Cleveland, and we expect those to be coming online from a contractual basis in the next 30 days or so, and we'll add those to the project list. So we basically have a pipeline of about 110 miles.

Speaker 1: that we're going to be working on as of this particular moment. Great, thank you. Our next question will come from Richard Baldry with Roth MKF. Please go ahead. Thanks. When you look at your deferred revenue growth year over year, it's pretty sharp and it's something on the order of $1.25 to $1.30 per share in just cash generation from your deferred growth. Can you talk about how and why it spiked in the fourth quarter? Where you see the long term trends there and maybe with that significant receivables likely to come in in the first quarter, how likely you'd be to maybe be aggressive on a buyback or some other way to deploy that cash. Thanks. Yeah, sure. This is Alan. I'll go ahead and start. I think, well, first off, comparing where we are now versus where we end at 21, we also have a deferred revenue from forensic logic. So that helps a significant amount. That said, we also have some expansions and renewals that we have already included in and you see it in our AR. AR went from $16 million last year to over almost $31 million already. So that's the offset related to the additional deferred revenue.

Speaker 1: So that's primarily why that has increased significantly. In terms of what that will cause us to do or determine whether we do any kind of share or buyback, we have authorization to do so. We have historically repurchased shares in the past when we thought the market wasn't properly viewing our valuation. I don't see things being much different going forward. Our cash is good, we haven't used that. It's always something that we would consider, of course, and work with the board to see if we're gonna do that. Thanks, and with the sensor replacement cycle done, was that a drag somewhere in the P&L that would sort of ease off in 23, and where would we see that impact? Yeah, great question. This is Alan again. The biggest thing that you would see is in our CapEx. Our CapEx was over $10 million related to that. So we had to replace 5,500 sensors, started halfway through 21, finished and did the majority of them in 22. So our actual CapEx being north of $10 million is gonna go back to somewhat normal, somewhere between six and $7 million per year. So you'll see improvement there. Then, you're starting the year with a lot of contracted and soon to be finalized contracted miles. Can you maybe speak to what's also out there in the pipeline of things that are less visible? Are there any sort of tier one cities that you're working with? Do you feel like that pipeline has really come in and that's why you have such a strong backlog right now, or is it still building going forward? Thanks.

Speaker 1: in the process for us. I mean, we were pretty intentional this year in terms of like tightly integrating our respective sales organizations between ShotSpotter and then our Forensic Logic colleagues. So this year, we're going to see a lot more integration between those organizations. Our current territory sales reps on the ShotSpotter side are now carrying specific Forensic Logic quota.

Speaker 1: We are also working on a fairly interesting internal transformation project to really think of ourselves more as a precision policing platform provider as opposed to an acoustic gunshot detection technology with side gigs on investigate and data services and patrol management solutions. So we are really focused on that area and that is what makes us really quite excited. On the marketing side, the pipeline continues to grow with those products and we are going to see some wins in 2023 that frankly are going to set us up for 2024 and beyond. We are not going to take 2023 for granted but as you can see from Alan's commentary, we have a lot of visibility to get to our guidance. So a lot of the work that we are doing really to drive growth is expanding out beyond domestic acoustic gunshot detection into these other interesting areas that are super compelling on their own and we think that is going to set us up pretty nicely for 2024.

Speaker 1: And the last for me is just in terms of trying to normalize their earnings, the impact of taxes as a result of the changes to your earnouts, that's a one-time impact, right? So for most people's purposes, they would look at that as a one-time event, not a long-term change to your tax structure. Yeah, this is Alan. That's correct. If there's any changes related to that, they would be small going forward. Great. Thanks. Our next question will come from Jeremy Hanselin with Grand Island Capital Group. Please go ahead. Hey, guys. Congrats on the strong results. I wanted to come back to the forensic logic deal. You noted that it wasn't quite tracking on a revenue basis where you expected it to be a year later. You get a reduction in the contingent, the earnout from that. But can you just talk us through a little more detail in terms of thinking about where you might be tracking lower than you expected a year ago? The pipeline is not as large in terms of opportunity, or it takes longer to get results on some of those deals.

Speaker 1: Yeah, so this is Ralph, I'll start now and jump in. I think what we're learning about Forensic Logic is that their buying center is a little bit different than our traditional buying center, whereas we've been very focused on, I'd say, local law enforcement, local policing agencies. They have a portion of their business associated with that. But the real kind of growth opportunities are some of these kind of much larger, I would call them state and federal opportunities. So for example, they had already brought on the state of Tennessee just prior to us acquiring them. Their deal that came a little bit later than we expected and therefore not contributing to gap revenue, but definitely contributing to ARR was this very large state deal with Massachusetts State Police. There's another deal in the state of California. There's a state agency in California they recently closed a deal on that is a multi-year, seven-figure deal, but from an ARR point of view is kind of in the $250,000 to $350,000 per year range. So we're seeing those deals come along. I think with those state-oriented deals and even some federal opportunities we see in the pipeline, it's just those are much more, I would say, long sell cycles than what we might find.

Speaker 1: at the local level with local police departments, but they're much bigger too, much chunkier and bigger. And are the contract lengths also longer? Well, they're about the same because what we're finding in our core business is we're getting multi-year contracts. I think I commented that about 37% of our transactions, both on new miles as well as renewals were multi-year and multi-year think, you know, two, three, as much as long as five years, we're getting a number of our transactions. So it's about the same, frankly, but I think that you might have a different view because I think there's an assumption that we don't have the multi-year contracts, and in fact, we do. We've got really good protection if you look across our mileage of 1,000-plus miles or so. There's a substantial portion of those miles that are covered with multi-year contracts. And for reference sake, would you be able to kind of, if it's 37% today, where would that have been, let's say, kind of pre-COVID basis, just to see how that's changed over time here? Wow. Yeah, this is Allen. I can say that last year we talked about, you know, between 37%, 40% in multi-years, which is fantastic. I would say maybe not pre-COVID, but certainly, you know, four or five years when we first went public, that would have been in the teens.

Speaker 1: in terms of multi-year. So it's significantly increased. And for several reasons, I mean, it's no longer people are concerning, does the technology work? They know it works. You know, so even when new customers that used to sign up for one year, now they're signing up for three to five-year contracts. Got it, no, that's helpful context. Just changing gears here, then wanted to get a sense, you know, operationally speaking, looking at the gross margins, you noted that, you know, the sensor upgrades, that replacement cycle, that's taken some time. It sounds like you're either at the end of that or you fully completed it, but wanted to get a sense for what you think the benefit will be, you know, to your gross margin once that's done. And then kind of post upgrade cycle, where would you anticipate, given your current revenue mix, your gross margins to be tracking? Are you still looking at 60%? Yeah, this is Alan, and it's a great question. Yeah, we did have, 22 was a little odd because we not only did almost 4,000 of those 3G sensors, which uses a lot of the same people, plus some of the vendors that we use to help do the normal go lives. So there was a little bit more cost in there and a little bit more cost, you know, per axle mileage going live, which increased the cogs, which lowered the gross margin. We do believe,

Speaker 1: that our gross margins are going to be 60 and 60 plus percent. And ultimately, we expect it's going to get closer to 70 or 70 plus percent over the next several years because the majority of, well, all of our projects right now, especially the three new ones, are all software of nature that are going to have gross margins closer to what you would see with a software product. And let me just clarify, because that's a huge jump. So the timeframe that you think you could be in the upper 60s or close to 70 percent total company gross margins is that's like four or five years? Yeah, you should think four years. Absolutely. And the 60 percent or 60 percent plus, you're talking about FY 23, correct? We're expecting to get close to 60 percent. You know, assuming we I mean, we are going live and, you know, more miles than we did in in 22. As we mentioned, we are expecting that, you know, we're going to be able to cut back on some of the costs related to some of the miles. So that will directly affect us going up. You know.

Speaker 1: We're like the 58% right now, so it's not going to be too hard to get us to the 59 and probably 60%. So I would say you should expect us to get somewhere between 59 and 60% in 23. Great thanks for taking all those questions guys best wishes this year. Thank you thanks. Our next question will come from Mike with Northland Capital Markets. Please go ahead. All right, thanks. Yeah, great results for. 2022 here in terms of the. Miles that are either under contract or seem to be the 110 miles talked about. How does that statistic compare to prior February like a year ago? Yeah, so this is Alan, I'll go ahead and start. I would say there's more. Sooner and we'll be going live faster. So, when you think about when I said adding 4 and a half 1Million dollars of. Of gap revenue for miles when we build our guidance last year in 2022. It was probably closer to about 3.7Million. So there's a significant increase because we're going live in more miles. We're going live faster.

Speaker 1: The pipeline for the Respond gunshot detection, can you talk a little bit about other opportunities for new wins or expansions? How does that pipeline look and has it grown year over year? It continues to grow. It is probably the healthiest it has ever been. There is a mix of tier 1, tier 2, and tier 3 opportunities. The thing we are really excited about is the success we have seen in the tier 4, tier 5 market. As I think we mentioned on our call, 20% of the book miles came from tier 4, tier 5. That was one salesperson across the entire United States. One of the things we are doing is quite intentionally expanding our go-to-market resources in terms of direct selling efforts. Our plan is to go from one sales rep to four sales rep and have them attached to each of the territory reps. We are already 50% there. We have two now. We will be adding another two. We are continuing to win business at that level. Move your One Amplified

Speaker 1: Just this year, I think we have added 3 new logos. On a booked basis that are kind of tier 4 tier 5, the cell cycles appear to be shorter. Than what we find in the higher tier sales is just, I guess, easier for. A chief of police, along with the city manager, mayor and city council to kind of come together really quickly and make a decision to move forward with the technology. I think it also helps and bears mentioning that the funding environment is very robust. Not at the federal level, but also at the state level, and even at the local level. So, you know, up and down the stack. Money and budget is available for technology at large and we're seeing a significant portion of those dollars being allocated. Toward gunshot detection, because that's a specific. Potential solution to address violent crime, which is on the up to. Across the board. Okay. Got it. And then did you give a. Kind of revenue churn assumption in your guidance on the passive. I'm sorry, I didn't hear the question revenue. Yeah. Revenue churn. Yeah. I think previously we talked about, you know, a 1%. 1% churn, and we've always done better than that. I think the last couple of years, it's been.

Speaker 1: You know, you know, 2020, I think it might have been a quarter, half a percent and then 2021. I think it was a quarter of a percent this year on a net attrition basis. It's actually negative. Because the price increases have been greater than the net gap revenue that we've lost. From 1 city, not renewing along with a security project, not renewing and then there's a super small city. Of less kind of 50,000 dollars of ARR that didn't renew, but we're able to execute fairly broad base price increases. Across a number of customers that more than offset that attrition from those customers. That decided not to renew those 3 customers that decided not to renew. And you baked in the normal kind of 1% in the forecast for 23 or. I think we actually, it's less than that. Yeah, with it with the price increases that we get and what we know right now, we expect it to be certainly less 1%, hopefully closer to 0. And then just last, what's the kind of appetite for additional acquisitions and what kind of. If you're looking around, what kind of value expectations are out there?

Speaker 1: This is Alan Alstarr. Go ahead, Ralph. No, go ahead. I was going to say that it's almost similar to what you were going to say. We have done acquisitions about one every two years. We're now fully past one year integrating the forensic logic acquisition. We're not the type of company that's going to acquire company just to staple on revenues. It's got to be a much greater reason to do that. But we're also always looking for something that makes strategic importance to be able to do that. If we find something that makes sense to do that, we would absolutely consider that. Great. Thanks very much. Our next question will come from Matt Fott with William Blair. Please go ahead. Great. Thanks for taking my questions. I'm going to circle back.

Speaker 1: to have it delayed, but yes, it did affect a little bit in our 22 guidance versus what we originally expected. Understood, got it. And then just a last one from me, just on the campus opportunity, you called out, you had a win there. Have you seen more interest in that segment, particularly with, you know, some of the other things that you've talked about?

Speaker 1: are excited about the linear freeway opportunities, frankly. And we're also quite excited about the potential of trying to take another run at more infrastructure protection, particularly around some of these substation grids that we're now seeing people are organizing themselves to try to attack those things through weapons discharges. So we've got a lot of stuff that we're working on in the security space that we're pretty excited about. And I would say the campus opportunity is there, but there are probably more pressing opportunities for us, near-term opportunities with freeways.

Speaker 1: Who's contracting for for those deals? Yeah, so we know in the case of highways, those tend to be kind of state oriented deals with respect to infrastructure. We don't have any of those deals done yet, but we're. Having conversations about how we can organize ourselves to go take a run at that particular market and those will be commercial enterprises. Utility company, thank you.

Speaker 1: Our next question will come from Eric Suppinger with JNP Securities. Please go ahead. Yeah, thanks for taking the question. In addition to the investigate, I think you also had some renewals that had slipped from Q3 into Q4. Can you give us a sense for what contribution those deals that slipped into Q4, what contribution that was in Q4? And then you talked about gross margins expanding towards 70. Can we still assume that you're anticipating EBITDA margins moving up into the 40% type range in kind of fiscal 27? Yeah, so this is Alan. I'll start and then Ralph, you can add too. Certainly, we always have. There will be some delays in terms of renewals.

Speaker 1: If a quarterly delay happens, it could be anywhere from a couple hundred thousand dollars to even a half a million dollars that gets caught up or picked up. We did get that in Q4. We now have those. There are other ones that if they are waiting for a December renewal and we don't get it until January or February , that will shift to Q1. That is something that is a little bit lumpy in nature and will always be there. To answer your second question, I think absolutely. We are expecting our adjusted EVA to go from 20% this year to 25% in Q3. We still believe that the next four-ish years will be at 40 to 45% adjusted EVA. There are several reasons for that. Number one, our gross margin continues to go up as the software products continue to grow. If you took a look and actually looked at our OpEx every quarter of this year, we are basically even lower right now than we were in Q1 in terms of our overall OpEx. We are going to continue to add appropriately in certain of the OpEx categories, but we don't need to add a ton as we continue to grow revenue. All of that flows and contributes towards that adjusted EVA continuing to grow.

Speaker 1: Can you parse out the organic growth that you're expecting in 23 or at least parse out the inorganic? contribution in fiscal 23 Well, yeah, this is Allen again, I would say at this point it's probably all organic since we've had everything more than a year Yeah, you know so from that perspective the the entire 17% Expected growth in the 14, you know plus million dollars is all going to be organic Okay, very good. Thank you At this time this concludes our question and answer session If your question was not taken you may contact shot spotters investor relations team by emailing ssti at gateway IR calm I Now like to turn the call back over to mr. Clark for his closing remarks Awesome great and thank you everyone for joining the call great questions as you can tell we're incredibly excited about 2023

Speaker 1: We're very pleased with our position in this vibrant and growing vertical market space. We have the people, we have the product, we have the processes, and most importantly, we have a brand reputation amongst our buying centers to be able to execute to the plan. And so with that, thank you all very much, and looking forward to chatting with you over the next several days. The conference is now concluded. Thank you very much for joining us on today's call. You may now disconnect your lines.