Q1 2024 SoundThinking Inc Earnings Call

Operator: Good afternoon, and welcome to Sound Thinking's first quarter 2024 conference call. My name is Joe, and I will be your operator for today's call.

Good afternoon.

Joe: Welcome to sound think Inc's first quarter 2024 conference call. My name is Joe and I'll be your operator for today's call.

Joe: Joining us are some thinking CEO, Ralph Clark and CFO Alan Stewart Please.

Ralph A. Clark: Joining us are Sound Thinking's CEO, Ralph Clark, and CFO, Alan Stewart. Please note that certain information discussed on the call today will include forward-looking statements about future events and Sound Thinking's business strategy, and future financial and operating performance. These forelooking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict and may cause actual results to differ materially from those stated or implied by those statements.

Joe: Please note that certain information discussed on the call. Today will include forward looking statements about future events and sound thinking business strategy and future financial and operating performance.

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

SEC: Certain of these risks and assumptions are discussed in some thinking and SEC filings, including its registration statement on form S. One.

SEC: These forward looking statements reflect management's beliefs estimates and predictions as of the date of this live broadcast may 14th 2024.

SEC: I'm thinking undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.

SEC: Finally, I would like to remind everyone that this call will be recorded and made available for replay via a link available in the.

Speaker Change: That's the relations section of the company's website at IR Dot sound thinking Dot com now I would like to turn the call over to Tom thinking CEO Ralph Clark Sir. Please go ahead.

Ralph A. Clark: Certain of these risks and assumptions are discussed in Sound Thinking's SEC filings, including 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, May 14, 2024, and Soundthinking 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 CEO, Ralph Clark. Sir, please go ahead.

Ralph A. Clark: Good afternoon, and thank you for joining our Q1 2024 Earnings Conference call. Before I review the specifics of this quarter's results, I want to first share with you how very excited we are about the growth prospects for this year and our strong start to 2024. As we highlighted in Sound Thinking's recent investor letter, our growth strategy can be summarized as a land, expand, cross-sell, and retain model. Our land opportunities, or new customer acquisitions, have greatly expanded beyond our historical acoustic gunshot detection business.

Ralph A. Clark: Good afternoon, and thank you for joining our Q1 2024 earnings conference call.

Speaker Change: Before I review the specifics of this quarter's results I want to first share with you how very excited we are about the growth prospects for this year and our strong start to 2024.

Ralph A. Clark: As we highlighted in sound thinking recent investor letter our growth strategy can be summarized as a land expand cross sell and retain.

Speaker Change: Our lean opportunities or new customer acquisitions have greatly expanded beyond our historical acoustic gunshot detection business.

Ralph A. Clark: We're now going to market with five offerings that comprise our safety smart platform announced last year. As we land new customers on any specific solution on the platform, our goal is to maximize the value those customers experience. We believe this strategy drives retention, and if there's an identified need, it can also potentially lead to appropriate expansions and or cross-sell opportunities.

Speaker Change: We're now going to market with five offerings that comprise our safety smart platform announced last year.

Speaker Change: As we land new customers on any specific solution on the platform. Our goal is to maximize the value those customers experience.

Speaker Change: We believe this strategy drives retention and if theres an identified need it can also potentially lead to appropriate expansions and or cross sell opportunities.

Ralph A. Clark: We believe we're early in the law enforcement and now commercial security digital transformation market, and that this opportunity remains extremely attractive and significantly under- We believe our go-to-market strength as a trusted advisor uniquely positions us to capitalize on this opportunity as we're now able to offer relevant solutions that address the pressing needs of this large and growing market. Here's what we accomplished in Q1 of this year. Revenues were in line with our expectations of $25.4 million compared to Q1 2023 revenue of $20.6 million, representing over 23% year-over-year growth. Adjusted EBITDA was $3 million or 12% of revenues compared to $2.9 million or 14% of revenues for Q1 2023.

Speaker Change: We believe we're early in the law enforcement and now commercial security digital transformation market.

Speaker Change: And that this opportunity remains extremely attractive and significantly underpenetrated.

Speaker Change: We believe our go to market strength as a trusted advisor uniquely positions us.

Speaker Change: To capitalize on this opportunity as we're now able to offer relevant solutions that addresses the pressing needs of this large and growing market.

Ralph A. Clark: Our revenue attainment was primarily the result of our previously booked and deferred revenue, professional services revenue from our Technologic Solutions business, combined with net new business from the platform. That new business included go live traction with 11 new Shotspotter customers in the quarter, including one campus security deployment at the University of Georgia. For new public safety customers, we're in New Jersey, which is specifically budgeted for acoustic gunshot detection at the state level.

Speaker Change: Here's what we accomplished in Q1 of this year.

Ralph A. Clark: We also went live with a strategic deployment in Philadelphia with the Philadelphia Housing Authority. This gives us an important strategic foothold in the city of Philadelphia with the possible future expansion opportunity in a major Tier One city. Shotspotter also saw two expansions in Boston and Suffolk County.

Speaker Change: Revenues were in line with our expectations of $25 $4 million compared to Q1, 2023 revenue of $26 million, representing over 23% year over year growth.

Adjusted EBITDA was $3 million or 12% of revenues compared to $2 $9 million or 14% of revenues for Q1 2023.

Speaker Change: Our revenue attainment was primarily the result of our previously booked in deferred revenue professional services revenue from our Technologic solutions business combined with net new business from the platform.

Speaker Change: Net new business included go live traction with 11, new shotspotter customers in the quarter, including one campus security deployment at University of Georgia.

Speaker Change: For the new public safety customers, we're in New Jersey, which is specifically budgeted for acoustic gunshot detection at the state level.

Speaker Change: We also went live with a strategic deployment in Philadelphia with the Philadelphia housing Authority. This gives us an important strategic foothold in the city of Philadelphia with the possible future expansion opportunity and a major tier one city.

Speaker Change: Shotspotter also saw two expansions in Boston in Suffolk County.

Ralph A. Clark: ResourceRouter went live in three new cities in the quarter, and we're seeing exceptional pipeline and bookings traction and new customer captures and cross-sell opportunities for ResourceRouter this year. In addition, we added two new crime tracer data providers, growing our already exceptionally large data footprint. We continue to make progress on our New York City Department of Corrections case builder implementation, which has led to several new corrections opportunities, including Orleans Parish, which has been booked and is expected to go live in the next 60 days, along with a case builder deployment within the California Department of Justice.

Resource router: Resource router went live in three new cities in the quarter and we are seeing exceptional pipeline and bookings traction in new customer captures and cross sell opportunities for resource router. This year.

Speaker Change: In addition, we added two new crime tracer data providers growing our already exceptionally large data footprint.

Speaker Change: We continue to make progress on our New York City Department of Corrections case builder implementation, which has led to several new corrections opportunities, including Orleans parish, which is been book and it's expected to go live in the next 60 days along with a case builder deployment within the California Department of Justice.

Ralph A. Clark: Lastly, we landed four new SafePoint customers consisting of a hospital, a gaming venue, and two schools. Looking forward, we have 16 Shotspotter go live projects underway, representing eight new customers and eight expansions. We believe all these developments further validate the demand that we are seeing in the marketplace and strong execution on our key growth initiatives. On the international side, we were very pleased to report on the rapid adoption of best practices by our Montevideo Uruguay Shotspotter customer in the first 90 days of deployment.

Safeway representative: Lastly, we landed four new Safeway customers, consisting of a hospital a gaming venue and two schools.

Safeway representative: Looking forward, we have 16 Shotspotter go live projects underway, representing eight new customers and eight expansions. We believe all of these developments further validate the demand that we're seeing in the marketplace and the strong execution on our key growth initiatives.

Speaker Change: On the international side, we were very pleased to report on the rapid adoption of best practices by our Montevideo, Uruguay Shotspotter customer in the first 90 days of deployment.

Ralph A. Clark: The client went live in mid-December 2023 with an array totaling 4.6 square miles. In the first 90 days of deployment, the agency has begun to effectively leverage Shotspotter data to allocate policing resources to impacted areas and to support investigations, including the use of Shotspotter data as evidence in a recent tragic killing of a police officer. In addition, the agency is fully embracing integrating Shotspotter with other digital tools used in their policing and community engagement efforts.

Speaker Change: The client went live in mid December 2023, with an array totaling $4 six square miles in.

Speaker Change: In the first 90 days of deployment. The agency has begun to effectively leverage shotspotter data to allocate policing resources to impacted areas and to support investigations.

Speaker Change: The use of Shotspotter data as evidenced in a recent tragic killing of a police officer.

The agency: In addition, the agency is fully embracing integrating shotspotter with other digital tools used in their policing and community engagement efforts.

Ralph A. Clark: We believe these positive results and the client's willingness to broadly share their successes with other countries will seed the potential market opportunity for Shotspotter in the larger South American market. In fact, we're making steady progress to book and go live with another major South American city in early Q3 of this year. Overall, we continue to refine and enhance the SafePoint solution, including a major software upgrade coming this quarter. We're leveraging the existing Smart Thinking software stack in order to provide a new and more modern user experience.

We: We believe these positive results in the client willingness to broadly share their successes with other countries, we will see the potential market opportunity for shotspotter in the larger South American market.

Speaker Change: In fact, we're making steady progress to book and go live with another major South American City in early Q3 of this year.

Speaker Change: Overall, we continue to refine and enhance the safe point solution, including a major software upgrade coming this quarter.

Speaker Change: We're leveraging the existing sound banking software stack in order to provide a new and more modern user experience. For example, we're making it easier to monitor multiple facilities and entrances into quickly find historical incidents of interest.

Ralph A. Clark: For example, we're making it easier to monitor multiple facilities and entrances and to quickly find historical incidents of interest. Moving to this new code base will make future enhancements faster to deliver as well. We also expect to deliver an upgrade later in the year to the object detection classifier by integrating a new camera system and machine learning model using the company's deep experience in artificial intelligence and machine learning, which we believe will enhance safe point detection efficiency.

Speaker Change: Moving to this new code base will make future enhancements passenger deliver as well.

Speaker Change: We also expect to deliver an upgrade later in the year to the object detection classifier by integrating a new camera system in machine learning model using the company's deep experience in artificial intelligence and machine learning, which we believe will enhance safe points detection efficacy in.

Ralph A. Clark: In fact, we've been granted a new fundamental patent on using passive magnetic moment in motion to detect weapons, which allows the systems to be unobtrusive, helping to provide a better experience for visitors and employees, all the while providing an important layer of security protection.

The company: In fact, we've been granted a new fundamental pattern on using passive magnetic moment in motion to detect weapons, which allows the systems to be unobtrusive, helping to provide a better experience for visitors and employees all the while providing an important layer of security protection.

Ralph A. Clark: Our SafePoint demand generation engine is fully operational, with two dedicated BDRs who are assigned to drive over 250 discovery calls for the year, of which they have successfully delivered on 65 calls in a compressed Q1 2024. As a reminder, we also have in place five seasoned territory sales professionals combined with two recently hired and experienced security experts as customer success directors to help guide our go-to-market discussions, as well as onboard new live customers.

DDR: Our safe point demand generation engine is fully operational with two dedicated Ddr's, who are assigned to drive over 250 discovery calls for the year.

DDR: Which they have successfully delivered on 65 calls in a compressed Q1 2024.

Speaker Change: As a reminder, we also have in place five season territory sales professionals combined with two recently hired an experienced security experts as customer success directors to help guide our go to market discussions as well as onboard new live customers.

Ralph A. Clark: So far this year, we've secured business from our top three verticals, healthcare systems, casinos, and enterprise corporate accounts. And our momentum in healthcare is particularly impressive, with us having either secured lanes or being in advanced contract negotiations with multiple healthcare systems. We've seen security professionals in the healthcare system vertical who have already deployed competing products turning to SafePoint due to its lower total cost of ownership and discrete footprint.

Multiple speakers: So far this year, we've secured business from our top three verticals healthcare systems casinos and enterprise corporate accounts and our momentum in healthcare is particularly impressive with having either secured liens are being in advanced contract negotiations with multiple health care systems.

security professionals: We have security professionals in the health care system vertical that have already deployed competing products turning to safe point due to its lower total cost of ownership and discrete footprint.

security professionals: The safe point pipeline continues to grow in these key verticals and is currently over $12 million. We believe this provides solid coverage to meet the $5 million target for book a are forecasted for safe point this year.

Alan R. Stewart: The SafePoint pipeline continues to grow in these key verticals and is currently over $12 million. We believe this provides solid coverage to meet the $5 million target for Book ARR forecasted for SafePoint this year. With respect to our full-year outlook, we are reaffirming our revenue guidance of $104-$106 million for 2024, along with our adjusted EBITDA margin guidance of 18-20% for the year. Now, Alan, over to you. Thank you, Ralph.

security professionals: With respect to our full year outlook, we are reaffirming our revenue guidance of $104 million to $106 million for 2024, along with our adjusted EBITDA margin guidance of 18% to 20% for the year.

Alan R. Stewart: Now Alan over to you.

Alan: Thank you Ralph.

Alan R. Stewart: We are pleased with our performance in the first quarter. As Ralph mentioned, this quarter we went live with our Shotspotter Gunshot Detection Solution in 10 new cities and at one university, expanded our Shotspotter coverage in two cities, and added seven new customers with our other software solutions, as well as several previously booked customers that have now gone live. Revenue is in line with our expectations, and it was attained from deferred revenue previously booked, being recognized in the quarter, professional services revenue from our technology solutions business, and also from new business mentioned above that went live. We had minor attrition of only six miles.

Alan R. Stewart: We're pleased with our performance in the first quarter as Ralph mentioned this quarter, we went live with our Shotspotter gunshot detection installation and 10, new cities and one University expanded our size better coverage in two cities and added seven new customers with our other software solutions as well as several previously booked.

Speaker Change: <unk> did have now gone live.

Ralph A. Clark: Revenue was in line with our expectations and it was obtained from deferred revenue previously booked in <unk>.

Ralph A. Clark: Recognized in the quarter professional services revenue from our Technologic solutions business and also from new business mentioned above that went live.

Alan R. Stewart: We had minor attrition of only six miles this quarter.

Alan R. Stewart: Let me provide more details on the quarter, and then I will share some thoughts around the balance with you. First quarter revenues were slightly above expectations at $25.4 million; revenue is over 23% higher than the first quarter of 2023. As we continue to grow in all aspects of our business, Gross profit for the first quarter of 2024 was $14.9 million, or 59% of revenue versus $11.3 million, or 55% of revenue, for the prior year period.

Alan R. Stewart: Let me provide more details in the quarter and then I'll share some thoughts around the balance of the year.

Alan R. Stewart: First quarter revenues were slightly above expectations at $25 4 million revenue is over 23% higher than first quarter of 2023, as we continue to grow in all aspects of our business.

Speaker Change: Gross profit for the first quarter of 2024, it was $14 9 million or 15, 9% of revenue versus $11 3 million or 55% of revenue for the prior year period.

Alan R. Stewart: We expect gross margins to continue to improve as the year progresses. Our adjusted EBITDA for the first quarter of 2024 was $3 million, up slightly from $2.9 million in the first quarter of 2023. Our Justice Evita is lower than analyst expectations primarily because of continued higher than expected legal costs.

Speaker Change: We expect gross margins to continue to improve as the year progresses.

Speaker Change: Our adjusted EBITDA for the first quarter of 2024 was $3 million up slightly from $2 $9 million in the first quarter of 2023.

Speaker Change: Our adjusted EBITDA is lower than analyst expectations, primarily because of continued higher than expected legal costs.

Alan R. Stewart: Some other one-time expenses, and also because we conducted our company all-hands meeting in the first quarter, which added a one-time cost of almost $1 million. It is important to understand that we do not provide guidance on a quarterly basis for revenue or adjustments. Addressing EBITDA, a non-GAAP financial measure, is calculated by taking our GAAP net loss and adding back interest expense, income taxes, depreciation, amortization, and impairment, Stock-Based Compensation, and Acquisition-Related Expenses, including adjustments to our contingent consideration obligations.

Speaker Change: Some other one time expenses and also because we conducted our company all hands meeting in the first quarter, which added a one time cost of almost $1 million.

Speaker Change: It is important to understand we do not provide guidance on a quarterly basis for revenue or adjusted EBITDA.

Speaker Change: Adjusted EBITDA, a non-GAAP financial measures calculated by taking our GAAP net loss and adding back interest expense income taxes, depreciation amortization and impairment.

Speaker Change: Stock based compensation acquisition related expenses, including adjustments to our contingent consideration obligation.

Alan R. Stewart: Turning to our expenses, our operating expenses for the first quarter were $17.5 million, or 69% of revenues versus $13.1 million, or 64% of revenues in the first quarter of 2023. Operating expense increases were primarily related to higher headcount and employee-related costs, including personal cost increases related to expected save point growth.

Speaker Change: Turning to our expenses, our operating expenses for the first quarter were $17 $5 million or 69% of revenues versus $13 $1 million or 64% of revenues in the first quarter of 2023.

Speaker Change: Operating expense increases were primarily related to higher head count and employee related cost, including personnel cost increases related to expected safe point growth.

Alan R. Stewart: Breaking down our expenses, sales and marketing expense for the first quarter was $7.1 million, or 28% of total revenue, versus $5.8 million, also 28% of total revenue for the prior year period. Our sales and marketing teams continue to build our sales pipelines and expand our marketing. We also continue to focus on maintaining high levels of customer satisfaction, which helps keep our attrition rates low. Our R&D expenses for the first quarter were $3.6 million, or 14% of total revenue, compared to $2.7 million, or 13% of total revenue for the prior year period.

Speaker Change: Breaking down our expenses.

Speaker Change: Sales and marketing expense for the first quarter was $7 $1 million or 28% of total revenue versus $5 $8 million.

Speaker Change: Also 28% of total revenues in the prior year period.

Speaker Change: Our sales and marketing teams continue to build our sales pipelines and expand our marketing efforts.

Speaker Change: We also continue to focus on maintaining high levels of customer satisfaction.

Speaker Change: Which helps keeps our attrition rates.

Speaker Change: Our R&D expenses for the first quarter were $3 $6 million or 14% of total revenue compared to $2 $7 million or 13% of total revenue for the prior year period.

Alan R. Stewart: We continue to invest in increasing the functionality of all of our programs. DNA expenses for the quarter were $6.8 million, or 27% of total revenue, compared to $4.6 million, or 22% of total revenue for the prior year period. DNA expenses were higher due to legal costs, our headcount increased, and other employee-related costs, such as our all-hands meeting mentioned previously.

Speaker Change: We continue to invest in increasing the functionality of all of our products.

Speaker Change: G&A expenses for the quarter was $6 $8 million or 27% of total revenue.

Speaker Change: Compared to $4 $6 million or 22% of total revenue for the prior year period.

Speaker Change: G&A expenses were higher due to legal costs, our head count increase and other employee related costs, such as our all hands meeting mentioned previously.

Alan R. Stewart: We expect our G&A expenses to fluctuate quarterly throughout the year in absolute dollars, as the company's growth will require some investment that will be offset by the expected reductions of certain one-time expenses incurred during Q1. Our net loss for the first quarter was $2.9 million, or $0.23 per share, based on 12.8 million basic and diluted weighted average shares outstanding. This compares to a net loss of $1.8 million, or $0.15 per share, based on 12.3 million basic and diluted weighted average shares outstanding for the prior year period.

Speaker Change: We expect our G&A expenses will fluctuate quarterly throughout the year in absolute dollars.

Speaker Change: As the company growth will require some investment that will be offset by the expected reductions of certain one time expenses incurred during Q1.

Speaker Change: Our net loss for the first quarter was $2 $9 million or 23 per share based on $12 8 million basic and diluted weighted average shares outstanding.

Speaker Change: This compares to a net loss of $1 $8 million or <unk> 15 per share based on $12 3 million basic and diluted weighted average shares outstanding for the prior year period.

Alan R. Stewart: The third revenue at the end of the quarter was $50.8 million, versus $42.1 million at the end of the fourth quarter of 2023. We ended the quarter with $8.5 million in cash and cash equivalents, versus $5.7 million at the end of the fourth quarter of 2023. The increase is primarily related to AR collection, partially offset by the payment of the company's annual bonuses in February. We have approximately $7 million of debt outstanding on our $25 million line of credit, related to cash used to partially fund the SafePoint acquisition last year.

Speaker Change: Deferred revenue at the end of the quarter was $58 million versus $42 $1 million at the end of the fourth quarter of 2023.

Speaker Change: We ended the quarter with $8 $5 million in cash and cash equivalents.

Speaker Change: Versus $5 $7 million at the end of the fourth quarter of 2023.

Speaker Change: The increase was primarily related to a our collections.

Speaker Change: Partially offset by the payment of the company annual bonuses in February.

Speaker Change: And approximately $7 million of debt outstanding on our $25 million line of credit.

Speaker Change: The cash used to partially fund the safe point acquisition last year.

Alan R. Stewart: Turning to our full 2024 outlook, we are reaffirming our full year 2024 revenue guidance range of $104 million to $106 million, representing over 13% year-over-year growth at the midpoint compared to 2023. We are also reaffirming our expectation for adjusted EBITDA margin to be approximately 18% to 20% of forecasted revenues in 2024.

Speaker Change: Turning to our full 2024 outlook, we are reaffirming our full year 'twenty 'twenty four revenue guidance range of 104 million to $106 million, representing over 13% year over year growth at the midpoint compared to 2023.

Speaker Change: We are also reaffirming our expectations for adjusted EBITDA margin to be approximately 18% to 20% of forecasted revenues in 2024.

Ralph A. Clark: Now back to Ralph for some final thoughts, and then we'll be happy to take your questions. Thanks, Alan. And just to close my prepared remarks, it was exactly one year ago when we acknowledged the ultimate sacrifice of Chicago police officer Ariana Preston, who was tragically killed in an attempted carjacking when returning home from work. Sadly, we are here again, one year later, with the killing of another Chicago police officer, Luis Huesca, this past month in another attempted carjacking.

Speaker Change: Now back to Ralph for some final thoughts and then we'll be happy to take your questions.

Ralph: Thanks, Alan and just to close my prepared remarks, it was exactly one year ago. When we acknowledged the ultimate sacrifice of Chicago Police Officer, Arie unimpressed and who was tragically killed in an attempted car Jackie when returning home from work.

Ralph: Sadly we are here again, one year later with the killing of another Chicago Police officer. Louis Westcott. This past month in another attempted carjacking.

Ralph A. Clark: Our sincere thoughts and prayers go out to his family, loved ones, and the Chicago Police Department. We believe these tragic incidents require us to be even more determined to do our part in providing tools and critical expertise to help law enforcement, first responders, and the communities they serve to save lives and to drive better public safety outcomes. We're now prepared to take your questions.

Alan: Our sincere thoughts and prayers go out to his family loved ones in the Chicago Police Department.

Alan: We believe these tragic incidents requires to even be more determined to do our part in providing tools and critical expertise to help law enforcement first responders in the communities they serve to save lives and to drive better public safety outcomes.

Ralph: We're now prepared to take your questions.

Operator: Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. And our first question comes from Richard Baldry of Roth Capital Partners. Please proceed.

Ralph: Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Ralph: You May press Star two if you would like to remove your question from the queue.

Ralph: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Richard Kenneth Baldry: Thanks. I wonder if you can go into a little more detail on the Philadelphia win.

Ralph: And our first question comes from the line of Richard Baldry with Roth Capital Partners. Please proceed.

Ralph A. Clark: I noted it was with the Housing Authority. How will they work between themselves and the local police? Yeah, is it something where you have the ability to grow outside of the housing authority relatively easily? Or do you have to build new relationships outside of that to grow into other areas of Philadelphia? So we sort of understand what that initial employment represents.

Ralph: Thanks.

Richard Kenneth Baldry: If he can go into a little more detail on the Philadelphia win I noted it was what the housing authority, how how will they work.

Richard Kenneth Baldry: Between themselves and the local police.

Richard Kenneth Baldry: Is it something where you have the ability to grow outside of the housing authority relatively easily or do you have to build new relationships outside of that to grow into other areas of Philadelphia.

Richard Kenneth Baldry: Sorry, I understand what that initial deployment represents.

Richard Kenneth Baldry: Yeah, thanks for that question, Rich. This is Ralph. So there's a very strong collaboration between the Philadelphia Housing Authority, which is the buyer of the Shotspotter services for this particular implementation, and the broader Philadelphia Police Department. So we're really quite encouraged that they're, in fact, working very closely together, and we very much think that it will open up a potential opportunity for us to expand beyond Philadelphia Housing Authority to other parts of Philadelphia because they can certainly use technology like Shotspotter and other solutions to help them address the crime problem in Philadelphia.

Rich: Yeah. Thanks for that question Rich. This is route so there is very strong.

Rich: Collaboration between Philadelphia housing authority, which is the buyer of the Shotspotter services for this particular implementation and the broader Philadelphia a police department. So we're really quite encouraged that they are in fact, working very closely together and we very much think that it will open up a potential opportunity for us to expand beyond filling.

Speaker Change: Delphia housing authority to broader Philadelphia cause they can certainly.

Rich: Use a technology like Shotspotter another solutions to help them address the client problem in Philadelphia.

Rich: Yeah.

Ralph A. Clark: Thanks. And can you remind us of the $12 million in identified pipeline on SafePoint? The economics around, I think I recall, it's like $20,000 a lane, which would imply something like $600. Where was that pipeline when you bought the company, so we can sort of gauge how quickly it's expanding?

Analyst: Thanks, and can you remind us in terms of the 12 million in identified pipeline unsafe point, the economics are and I think I recall at.

Speaker Change: $20000 of lane, which would imply something like 600.

Speaker Change: Where was that that pipeline when you bought the company. So we can target how quickly it is expanding.

Ralph A. Clark: Yeah, so when we bought the company, they had a pipeline, and we've gone through the vetting process to have that pipeline match up to our standards. So there were some puts and takes there.

Speaker Change: Yes, so when we bought the company they had a pipeline and we've gone through the vetting process.

BTR investment: That pipeline match up to our standards. So there are some puts and takes there and so I think what you see in the current pipeline is some subtraction of the pipeline that we inherited we kept some but I think theres been a lot of healthy growth with the BTR investment that we've made and also.

Ralph A. Clark: And so I think what you see in the current pipeline is some subtraction of the pipeline that we inherited. We kept some, but I think there's been a lot of healthy growth with the BDR investment that we've made. And also, our five quota-carrying salespeople are also developing their own pipeline, so it's been fairly strong and really quite encouraged, and we're seeing that pipeline develop across those three key verticals that I spoke about earlier.

BTR investment: Sure.

BTR investment: Sex or excuse me up five quota carrying salespeople are also developing their own pipeline. So it's a it's been fairly strong and really quite encouraged and we're seeing that pipeline develop across those three key verticals that I spoke about earlier.

Ralph A. Clark: And maybe last for me, following on SafePoint, any challenges you'll see ahead or areas you might need to smooth out in the supply chain in order to kind of scale up your ability to do those deployments? Are there any custom deliverables you need to make sure you have access to?

Speaker Change: And maybe last for me.

Speaker Change: Following on safe point.

Speaker Change: Any challenges you'll see ahead or are areas, you might need to smooth out and supply chain in order to kind of scale up.

Speaker Change: Your ability to do those deployments are there any custom deliverables you need to make sure you have access to.

Speaker Change: Or is it something you feel that the friction to growth should be pretty minimal.

Operator: Pretty minimal. I think we're in pretty good shape from a supply chain point of view. So there are no constraints.

Ralph A. Clark: Or is it something you feel that the friction to grow should be pretty minimal? Pre-minimal. I think we're in the pre-minimal stage.

Speaker Change: Pretty minimal I think we're in pretty good shape from a supply chain point of view.

Speaker Change: So no constraints.

Speaker Change: Great. Thanks.

C.J. Dippolino: And our next question comes from the line of C.J. Dippolino with Craig Hallam Capital Group. Please proceed.

Speaker Change: And our next question comes from the line of C. J dip arena with Craig Hallum Capital Group. Please proceed.

Alan R. Stewart: Hey everyone, I'm on for Jeremy Hamblin tonight. Thanks for taking my questions. First, I wanted to touch on the income statement. It looks like you guys made some nice progress with gross margin expansion. Is there anything specifically that you could point to that led to the increase year over year and actually sequentially too?

Speaker Change: Hi, everyone I'm on for Jeremy Hamblin Tonight, Thanks for taking my questions.

Speaker Change: First wanted to touch on the income statement. It looks like you guys made some nice progress with gross margin expansion is there anything specifically that you could point to that led to the the increase year over year and actually sequentially too.

Alan R. Stewart: Yeah, so this is Alan. Thanks for the question. Yeah, if you think about it, we've gone up 23 as a whole, and our gross margin was about 57%. Q4 was 58%. Now we're 58.6%. So it continues to improve, and as we expect, it's going to continue to go higher. And that's for a lot of things. As we continue to grow revenues, we don't have to increase the cost of goods sold as much across the board for pretty much any of the software solutions that we have. So revenue growth is going to continue to help drive that gross margin a lot higher. We do expect to end the year closer to 60%.

Speaker Change: Yes. So this is Alan thanks for the question Yeah. If you think about it we've got up 23 as a whole had a gross margin about 57%.

Alan: Q4 was 58% now we're 68, 6%. So it continues to improve as we expect it's going to continue to go higher and that's where a lot of things.

C.J. Dippolino: Okay, great. Thank you.

Alan: As we continue to grow the revenues.

Alan: Don't have to increase the cost of goods sold as much across the board.

Alan: Pretty much any of the software solutions that we have so our revenue growth is going to continue to help us drive that that gross margin a lot higher we do expect to end the year closer to 60%.

Alan R. Stewart: And then I, you know, one more on the income statement. I know you cited G&A being higher due to some one-time expenses. Would you mind just trying to quantify how much of the G&A increase of, we'll call it, you know, 2.2 million year over year came from the increase in headcount, just so we have, you know, sort of a baseline moving forward. Absolutely.

Alan: Okay, great. Thank you.

Alan: And then you know what.

Speaker Change: One more on the income statement I know you cited G&A being higher due to some what sounded like some one time expenses.

Alan: Do you mind, just trying to quantify how much of the G&A increase.

Alan: Call It $2 2 million year over year came from the increase in head count just so we have sort of a baseline moving forward.

Alan R. Stewart: Absolutely, great questions. Alan again as well. It's almost significantly in two major categories. Number one, last year we did our all-hands meeting in Q2. So you would see G&A go higher in Q2 last year. This year we did it in Q1, and that was almost a million dollars. The company has grown. We have over 300 people now, so it costs a lot more to do that. That was done in Q1.

Alan: No absolutely great questions, Alan again as well.

Alan: It's almost significantly into two major categories number one last year, we did our all hands meeting in Q2. So you would see G&A go higher in Q2 last year.

Alan: This year, we did it in Q1 and that was almost a $1 million. The company has grown we have over 300 people now so it's a cost a lot more to do that that was done in Q1, so out of that $1 million was there.

Alan R. Stewart: So out of that, a million dollars was there. We also had additional legal costs related to some issues we had with two of our employees that did things that were inappropriate. We're continuing to defend ourselves on that. That was about almost a quarter million dollars as well. So just between those two alone, which are certainly the all hands on deck at one time, and the legal costs, we're hoping those continue to go down.

Alan: And additional legal costs related to some.

Speaker Change: Some issues that we had with two of our employees that did.

Speaker Change: Things that were inappropriate.

Speaker Change: Turning to defend ourselves on that and that was by almost a quarter million dollars as well. So just between those two alone which are certainly the all hands as one time and the legal costs. We're hoping those continue to go down that would've been accordingly.

Speaker Change: Delta is just slightly other hyatt things related to G&A with the growth of the company.

C.J. Dippolino: Okay, great. That's very helpful. And then one more on the Philadelphia Housing Authority contract, if you don't mind. Are there any details you could share on the economics surrounding that deal, maybe the contract length, things in that nature?

Speaker Change: Okay, Great. That's very helpful. And then one more on the Philadelphia housing authority contract. If you don't mind is there any details you could share on economics surrounding that deal may contract plank.

Speaker Change: Things of that nature.

Ralph A. Clark: Yeah, fairly standard. I mean, that's our standard MSRP pricing. We write annual contracts, so nothing unique there on the Philadelphia Housing Authority transaction. Okay.

Speaker Change: Yes fairly standard I mean, that's our standard MSRP pricing, we right Daniel contracts. So nothing unique there on the Philadelphia housing.

Speaker Change: Transaction.

C.J. Dippolino: Okay, got it. Thank you guys, that's all for me. And the next question comes from the line of Mike Latimore with Northland Capital. Please proceed.

Speaker Change: Okay got it. Thank you guys. That's all for me.

Speaker Change: And the next question comes from the line of Mike Latimore with Northland Capital. Please proceed.

Aditya: Hi, this is Aditya on behalf of Mike Latimore.

Michael James Latimore: Hi, This is on behalf of Mike Lattimore, but can you give some color on the sales cycle for a bunch of them.

Speaker Change: Production is instead blazing or can you give some color though.

Speaker Change: Yeah.

Ralph A. Clark: Yeah, this is Ralph. Thank you for that question. So the question, just to repeat it, is what we're seeing in terms of the sales cycle for our inclusive gunshot detection solution, otherwise known as Shotspotter. I think there are some interesting puts and takes there. We're certainly seeing a little bit of headwind that's lengthening the sales process in certain situations because of some of the noise coming out of Chicago, to be candid. But then also, we're seeing some shorter sales cycles as we more deeply penetrate Tier 4 and Tier 5.

Rob: Yes. This is Rob. Thank you for that question. So the question just to repeat it is what we're seeing in terms of sales cycle for our coosa gunshot detection solution otherwise known as Shotspotter I think there are some interesting puts and takes there we're certainly seeing a little bit of headwind that's at lengthening the sales process in certain situations.

Rob: Because of some of the noise coming out of Chicago.

Rob: Chicago to be candid, but then also we're seeing some collapsing sales cycles as we more deeply penetrate tier four and tier five and you'll probably notice that in this particular quarter, we put up a lot of new customers kind of 10 10 shotspotter customers in a number of those customers were smaller customers and they'll sell side.

Ralph A. Clark: You've probably noticed that in this particular quarter, we put up a lot of new customers, kind of 10 Shotspotter customers. And a number of those customers were smaller customers, and those sales cycles tend to happen much shorter. You can think about those sales cycles being, you know, 9 to 12 months and our other sales cycles being more of the traditional 8 months, with a little bit of headwind that's been added to the large Got it. And what percentage of your gunshot detection pipeline is international? Yeah, so this is Alan.

Speaker Change: <unk> tend to happen much shorter you can think about those sales cycles being you know nine to 12 months and our other sales cycles being more than traditional 18 months with a little bit of headwind that's been added to the larger deals.

Speaker Change: Got it and what percentage of your gunshot detection pipeline is international.

Alan R. Stewart: I think at this point, it's still relatively small. We have international deployments in the Bahamas, South Africa, and also in Uruguay. We are expecting, and if you just add all those together, it's pretty much just a couple million dollars. But we are also looking to expand, and hopefully, in Q3, we'll have another one in another country that we've talked about in the past. And that should add another $500,000 or $600,000 per year for the first deployment there. And we are still expecting some growth, both in the new one that we're going into, possibly in South Africa as well, as well as Uruguay.

Speaker Change: Yeah. So this is Alan I think at this point, it's still relatively small we have international deployments and in the Bahamas and in South Africa and also in Uruguay, we are expecting and if you just add all those together you know, it's it's pretty much just a couple of million.

Alan: But we are also looking to expand.

Alan: And hopefully in Q3, we'll have another one and another.

Alan: Country that we've talked about in the past and that should add another probably 500 $600000 per year.

Alan: First appointment there.

Alan: And we are still expecting some some growth both in the new one that we're coming into possibly in South Africa, as well as well as Uruguay.

Alan: Got it thank you.

Operator: And the next question comes from the line of Trevor Walsh with J&P Securities. Please proceed.

Alan: And the next question comes from the line of Trevor Walsh with JMP Securities. Please proceed.

Trevor Walsh: Great. Thanks, Jens, for taking my questions. Ralph, maybe I'll start with you.

Trevor Walsh: Great. Thanks for taking my question Ross, maybe I'll start with you.

Ralph A. Clark: You made some comments in your prepared remarks about just best practices. I think it was more in the context of international business, but I was just piggybacking off of that a little bit. If a customer was to kind of want to evaluate the cost-benefit analysis specific to Shotspotter, I know you've talked about in the past of not necessarily wanting to go down the slippery slope of kind of quantifying human life saved, even though we have some good examples of Shotspotter doing just that.

Trevor Walsh: You made some comments in your prepared remarks about just best practices I think it was more in the context of international business, but just piggybacking off of that a little bit if a customer was to kind of want to evaluate the cost benefit analysis specifics of shotspotter.

Ross: I know you've talked about in the past of not necessarily wanting to go down the slippery slope of kind of quantifying kind of human lives save even though you have kind of good examples of Shotspotter doing just that what in terms of best practices are you seeing customers that do you want to do that kind of costs that had been analysis, what what other metrics might be used to just help illustrate that and kind of just.

Ralph A. Clark: What, in terms of best practices, are you seeing customers that do want to do that kind of cost-benefit analysis? What other metrics might they use to just help illustrate that and kind of justify it to city councils, whoever they kind of might be, as kind of the spend being, saving officer time, whatever it might be? How do you measure that? Sure.

Ross: By two city council's wherever they might be as kind of a spending saving saving after time, whatever it might be how do you measure that.

Ralph A. Clark: Thank you very much for that question. There are a couple of things.

Ross: Sure Yeah. Thank you very much for that question. So it's a couple of things I think first there is the overall awareness of our criminal gunfire that takes place in neighborhoods and we know from years of experience across multiple deployments that 80% to 90% of criminal gunfire goes on reported via the traditional I would describe broken 91.

Ralph A. Clark: I think, first, there's the overall awareness of criminal gunfire that takes place in neighborhoods. And we know from years of experience across multiple deployments that 80 to 90 percent of criminal gunfire goes unreported via the traditional, I would describe as broken, analog 9-1-1 system. And so having the ability to have real-time alerts that are completely vetted, get to a dispatch center, and then dispatched to an officer in less than 60 seconds with a very precise location is a game changer.

Ross: One system analog manual system, and so having the ability to have real time alerts that are completely about it.

Police: Get to a dispatch center and then dispatched out to an officer in less than 60 seconds for the very precise location is a game changer. It shows a community that police from prioritizing the response, the gunfire and when police or responding to gunfire certainly.

Ralph A. Clark: It shows a community that police are prioritizing the response to gunfire. And when police are responding to gunfire, certainly they're getting there. If they're not encountering a perpetrator, perhaps they're aiding a victim, which is where you get into lives saved. We have lots of evidence that the physical forensic evidence collection process is significantly enhanced.

Speaker Change: They're getting there if they're not encountering a perpetrator perhaps are aiding a victim, which is where you get into lives saved.

Police Chief: Have lots of evidence that the physical forensic evidence collection process, it's significantly enhanced and of course, that's really critical for downstream investigations getting those shell casings and running them through the <unk> system and embracing.

Ralph A. Clark: And, of course, that's really critical for downstream investigations, getting those shell casings and running them through the NIBIN system and embracing a kind of very strong, robust gun crime intelligence platform where you're investigating shootings that don't necessarily lead to a gunshot wound victim and the like. We're very excited about our Data for Good initiative where we're repurposing the data. Our clients are repurposing the data and sharing it with other outside law enforcement agency resources that help get critical non-enforcement resources to these communities that are suffering through the trauma of gun crime.

Police Chief: Hum.

Speaker Change: A kind of very strong robust gun crime intelligence platform, where youre investigating shootings that don't necessarily lead to a gunshot wound victim and the like we're very excited about our data for good initiatives, where we're repurposing the data or I should say our clients are repurposing, the data and sharing it with.

Speaker Change: Other outside of law enforcement agency resources to help get critical non enforcement resources to these communities that are suffering through the trauma of gun crime. We're also seeing our customers being able to aggregate the data over time and really being able to.

Ralph A. Clark: We're also seeing our customers be able to aggregate the data over time and really be able to better plan their resource deployments based on exactly where gunfire is taking place over specific time windows. I think there's an overall theme of encouraging our customers to be much more transparent in sharing data and the outcomes that they're getting. And it really does get down to, you know, connecting the dots, recovering physical forensic evidence, recovering crime guns, recovering physical forensic evidence in the form of shell casings. And I'm very much leaning into the idea of valuing the saving of a life because, I mean, those lives are critically important and have value. They mean something.

Speaker Change: Better plan.

Speaker Change: Our resource deployment based on exactly where gunfire is taking place over specific time windows.

Speaker Change: There's the overall theme.

Speaker Change: Encouraging our data or excuse me, our customers to be much more transparent and sharing data and the outcomes that they're getting and it really does get down to getting cops adopts recovering physical forensic evidence recovering crime guns recovery physical forensic evidence in the form of shell casings, and I'm I'm very much leaning into the idea of valuing.

Speaker Change: Saving of a light because those lives are critically important and have value. They mean, something I think the line that we don't want to go down as much as taking on the responsibility for overall prevention and reduction of gun violence from a singular point of view, because we know that gun violence. In total is a very complex issue and it really does take.

Ralph A. Clark: I think the line that we don't want to go down as much is taking on the responsibility for overall prevention and reduction of gun violence from a singular point of view because we know that gun violence in total is a very complex issue. And it really does take a grouping of different technologies and processes all working together with very strong leadership that drives the effect of reductions in gun violence. You can't single out a particular technology to do that on its own.

Speaker Change: Hey.

Speaker Change: A grouping up kind of technologies and processes, all working together with very strong leadership that drives the effect of a reduction in gun violence and can't single out a particular technology to be able to do that on its own. So we do resist.

Ralph A. Clark: So we do resist that non-line of sight outcome, if you will. But I think there are several line of sight outcomes that our customers can embrace when they do implement best practices and really get cops to every single shooting and try to save lives, recover physical forensic evidence, and take gun crime seriously.

Speaker Change: That non line of sight I guess outcome, if you will but I think there are several line of sight.

Trevor Walsh: Great, thanks. Thanks for the color. Maybe one more higher-level question for you. And then I have a couple for Alan.

Speaker Change: Outcomes that our customers can embrace.

Speaker Change: When they do implement best practices and really get copies to every single shooting and.

Speaker Change: Try to save lives recovered physical forensic evidence and take a gun clients off the street.

Ralph A. Clark: You mentioned the kind of momentum within the state of New Jersey and how that's more state-funded. What do you think the appetite is for that type of funding profile to come from state government versus local kind, just more broadly across?

Speaker Change: Great. Thanks, Thanks for the color and maybe one more higher level question for you and then I have a couple for sure Alan.

Speaker Change: You mentioned, the kind of momentum within the state of New Jersey, and how Thats more state level funded what do you think the appetite is for that type of kind of funding profile can come from state government versus local kind of just more broadly across the U S.

Ralph A. Clark: Yeah, so there are a couple of states beyond New Jersey. I won't name them in this conference call, but we're working quite closely with a few states on copying, basically, what the governor of New Jersey did in terms of allocating some specific funding for Gunshot Detection.

Speaker Change: Yeah. So there's a couple of states beyond New Jersey, I won't name them and Thats conference call, but we're working quite closely with that.

Speaker Change: With a few states on copying basically what are the governor of New Jersey did in terms of allocating some specific funding core it thinks it gunshot detection because it is recognized how important this critical technology is and helping police better respond to criminal gunfire, so more to come there, but we.

Speaker Change: We're quite encouraged with some of the movement, we're seeing in a couple of other states.

Trevor Walsh: Right, terrific. Alan, maybe for you, I appreciated the ARR guidance, kind of how you build to your 2024 number. Was there, and I know you don't necessarily guide on a quarterly basis to that metric, but was there anything in the quarter, from a trending perspective, that gave you kind of more or less less confidence around that 2024, call it just 100 million a year on.

Speaker Change: Great terrific.

Alan: Alan maybe for you I appreciate it.

Speaker Change: Our our guidance kind of how you built your 2024 number.

Alan: Was there and I know you don't necessarily guide on a quarterly basis to that to that metric, but was there anything in the quarter from a trending perspective that gave you kind of a more or less confidence around that 2020 for call it $100 million.

Alan R. Stewart: No, thanks for the question. So, no, there's nothing that has changed. We are still struggling a bit with Puerto Rico, trying to get that in there or back online, but we already included that. So, the ARR goal of getting north of 100 already included that we didn't get Puerto Rico at all. So, we're still working with that, hoping that we can be positive there. Everything else has really changed based on the build-up to get that north of 100.

Speaker Change: No. Thanks for the question so.

Speaker Change: No theres nothing that changed we're still struggling a bit with Puerto Rico trying to get that and there are back online, but we already included that so the air are growing and getting north of 100 already included that we didn't get Puerto Rico at all so we're still working with that hoping that we can be positive there.

Speaker Change: Nothing else has really changed based on the buildup to get that north of 100, you already heard about the pipeline with Sailpoint. We're excited we're excited about that.

Trevor Walsh: You've heard about the pipeline with SafePoint. We're excited about that. We heard about the 10 cities going live and the university. So, things are going well there. Everything else seems to be going really well across the other products as well. So, no major changes.

Speaker Change: You talked you've heard about 10 cities going live and the universities and things are going well there everything else seems to be going really well across the other products as well so no major changes there.

Ralph A. Clark: Okay, great. Maybe just one more, just kind of piggybacking on some of the SafePoint questions. Appreciate the comments earlier around just the overall pipeline build. Have you seen, kind of maybe asked in a different way, have you seen a noticeable change in sales cycles, particular for SafePoint, kind of compare and contrast from when the company was kind of standalone versus the short time that it's been kind of part of the sound thinking family? Have you seen any kind of acceleration, I guess, there in terms of just the overall deal flow?

Speaker Change: Okay, Great and then maybe just one more just kind of piggybacking on some of the same questions. I. Appreciate the comments earlier around just the overall pipeline build have you seen kind of maybe asking a different way have you seen a noticeable change in sales cycles particular to safe point kind of comparing and contrasting from when the company was.

Speaker Change: On a standalone versus in the.

Speaker Change: In the short time that it's been kind of part of the sound thinking family, if you've seen any kind of acceleration I guess there in terms of just the overall the deal flow.

Trevor Walsh: Yes, I think I would first acknowledge that this is still relatively new for us, but I think one of the approaches that we take is a very consultative approach in really making sure that we're thoughtful and intentional around doing diagnostics and discovery calls, if you will, with our customers and really making sure that we understand what they're trying to accomplish and then making sure that our solution can fit with what they're trying to accomplish. So we take a little bit more of a deliberate approach.

Speaker Change: Yes, so I think I would first acknowledge that this is still relatively new for us, but I think one of the approaches that we take as a very consultative approach and really making sure that we're thoughtful and intentional around doing diagnostics and discovery calls if you will with our customers are really making sure that.

Speaker Change: We understand what they're trying to accomplish and then making sure that our solution can fit with what they're trying to accomplish so we take a little bit more of a deliberate approach we're not trying to be transactional that's never really been a part of the DNA of this company.

Trevor Walsh: We're not trying to be transactional. That's never really been a part of the DNA of this company. We like it sticky. And so we like to get in, solve a problem, and be able to be with a customer for really decades. And so we're not into transactional sales. So more to come there. We're pretty comfortable with the way we see the pipeline building. This is a huge market opportunity for us.

Speaker Change: We like and sticky and so we'd like to get in and solve a problem and be able to be where the customer really over decades, and so we're not into the transactional sales so more to come there we're pretty comfortable with the way we see the pipeline building. This as a huge market opportunity for US there is certainly a very strong compare.

Trevor Walsh: There's certainly a very strong, compelling need out there, particularly in the verticals that we're addressing, to be able to provide a layer of security but then also have a fairly seamless experience for visitors and employees and the like, where you don't want them to have to go through the friction of, you know, getting pressed down, going through a traditional metal detector. So we're going to be picky and diligent, and I think our idea is that when we get a customer,

Speaker Change: Selling need out there, particularly in the verticals that we're addressing to be able to provide a layer of security. But then also have a fairly seamless experience for visitors and employees and the like that you don't want them to have to go through the friction of.

Speaker Change #102: Getting pressed down going through a traditional metal detector. So we're gonna be we're gonna be picky and diligent and I think our idea is that when we get a customer we're going to have a customer for life.

Trevor Walsh: Great. Thanks both for the questions. I appreciate it.

Speaker Change: Great. Thanks, both for the questions I appreciate it.

Speaker Change #100: Thank you.

Operator: And the next question comes from the line of Yifu Li with Cantor Fitzgerald. Please proceed.

Speaker Change: And the next question comes from the line of Hugh.

Speaker Change #101: Food Lee with Cantor Fitzgerald. Please proceed.

Yi Fu Lee: Thank you for taking my question. Hello, Ralph and Alan. So the first question is really on the go-live customer on the way, you know, for sound thinking. And I think, I think, Ralph, I think Alan mentioned the 16 of them. Can you guys give us a little more color on this pipeline, you know, whether it be Tier 1, Tier 2, Tier 3 cities, and, you know, what kind of profile are these?

Speaker Change #103: Thank you for taking my question Hello, Ralph and Alan. So first question is really on the go live customer underway.

Speaker Change #104: So it sound thinking.

Speaker Change #101: And I think I think Ralph I think Alan mentioned, the 16 of them can't can you just give us a little more color on this pipeline you know whether it be tier one tier two tier three cities and you know what what.

Speaker Change #101: What kind of profile.

Ralph A. Clark: So, I think we stated earlier, this is Ralph. I'll try to answer the questions as much as I can. So, we're trying to give people a flavor for, obviously, Q1 went very well with the customers that went live. We've got 16 customers, excuse me, 16 projects, I would say, in Q for Shotspotter. And I think eight of those customers are expansion customers, so we know the customers very well. And that's a mix of various types of customers on the expansion side.

Ralph: So I think we can state here. This is Ralph I'll try to answer the question.

Speaker Change #105: As I can so we're trying to give people a flavor for oxo Q1 went very well with the customers that went live we've got 16 customers excuse me 16 projects I would say in Q4 Shotspotter.

Speaker Change #101: And I think eight of those customers are expansion customers. So we know the customers very well and that's a mix of various types of customers in that.

Speaker Change #101: Expansion side, and then on the new customers I think it's another mix of customers.

Ralph A. Clark: And then on the new customers, I think it's another mix of customers. You know, certainly, if there were a huge kind of tier zero or tier one city, we would call that out. But I think there's a combination of tier two, threes, and fours in there. I think you're going to see us kind of put up more higher customer numbers, new customer acquisitions. And there'll be smaller customers, but in aggregate, they'll add up to the miles. So, we're still holding to our target of 120 miles going live this year for Shotspotter across the board. And we're on track.

Speaker Change #107: Certainly if there were huge kind of tier zero or tier one city, we would call that out, but I think there's a combination of tier two tier threes and fours and there I think youre going to see us kind of put up more.

Speaker Change #107: Higher customer numbers customer, new customer acquisitions, and there'll be smaller customers, but in aggregate they will add up to the mile. So we're still holding to our target of 120 miles going live this year for shotspotter across the board.

Speaker Change #107: We're on track.

Yi Fu Lee: Okay, thanks for that, Ralph. And then, along the same lines, right, great job on the cross-sell for the Case Builder and Crime Tracer on the Virginia win. And I understand you guys have done that in New York City as well, as well as looking to California. I was wondering if you could give us more color in terms of like, you know, the cross-selling opportunities now that you have more experience in this motion. How frictionless is this selling experience now that your sales team has a couple of these deals under their belts?

Speaker Change #109: Okay. Thanks for that Ralph and then along the same line site great job on the cross sell for a kiss builder and crime chaser on the Virginia win and I understand you discussed on that in New York City as well as what I was looking to California. I was wondering if you could give us more color in terms of like you know the.

Speaker Change #106: Cost selling opportunities now that you have more experience right and this motion.

Speaker Change #108: Uh huh.

Speaker Change #110: How frictionless selling experience now that your sales team has a couple of these deals under your belt already.

Speaker Change #108: Yeah.

Unknown Speaker: Unknown Speaker Yeah, do you want me to take that, Alan? Unknown Speaker Yeah. I mean, either one of us. This is Alan.

Alan: Yeah, do you want to take that Alan or I mean Heathrow.

Alan: This is Alan I think the good news is we've been doing cross selling and bundling products now for over a year and it is working I mean, we've had I think we've got about probably close to 17, almost 20 of our customers that have more than one at this point and a couple of them have three of our products and one of them has four.

Alan R. Stewart: I think that the good news is that we've been doing cross-selling and bundling products now for over a year, and it is working. I mean, we've had, I think we've got about, probably close to 17, almost 20 of our customers that have more than one at this point, and a couple of them have three of our products, and one of them has four. So the good news is that the more that we're doing this, the better our sales team is getting.

Alan: Hum.

Alan: Is there some more that we're we're doing this.

Alan: Better our sales team is getting at doing it. So it's working well, we're just going to keep doing what we're doing and not saying too much of that we do give a slight discount for when they go from that product.

Alan: A very small town and.

Alan: That hasn't really hurt us at all as you can see in terms of the revenue growth.

Yi Fu Lee: Got it, got it. And then on the Puerto Rico incident, in terms of, I understand, both of you gents are trying to get this back online. What needs to happen? I understand, like, in the past, you mentioned there wasn't a second, like, competitor, right? You know, I guess, what's the holdup to get this contract back online?

Speaker Change #111: Got it got it and then on the on the Perrigo incident in terms of I understand both.

Speaker Change #121: Hopefully you guys have tried to get this back on line what needs to happen I understand like in the past you mentioned that wasn't on the second like competitor right. You know I guess, what's what's the hold up to get this contract back life.

Ralph A. Clark: Yeah, 100% funding. It's a funding issue.

Speaker Change #112: Yes, 100% funding, it's a funding issue plus a funding issue. Okay. That's nice N easy and then lastly, I'll as small as the numbers are.

Alan R. Stewart: That's a funding issue. Okay, that's nice and easy, Alan.

Alan: Is this the long term guidance you gave.

Alan: In terms of 70% gross margin and obviously, 40% EBITDA margin, what's the time horizon that we should think about this because right now we are about.

Yi Fu Lee: And then last one, Alan, is more of a numbers game, is the long-term guidance you gave in terms of 70% gross margin and, obviously, 40% EBITDA margin. What's the time horizon over which we should think about this? Because right now, we are about, you know, the high 50s in terms of the GM gross margin, and probably low double digits, right, high single digits in the EBITDA margin, right? So how should we think about the time horizon? And that's it for me.

Alan: High Fifty's intensity G M cost margin.

Alan: And probably the low double digits or high single digits in the EBITA margin rate, how should we think about the time horizon and that's it for me.

Alan R. Stewart: Yeah, that's a great question. I mean, we've guided 18 to 20% of Just Diva there right now. You can expect, and we are going to expect that it's going to go up about 5%. So maybe sometime in the next three and a half, four years, I would expect us to be close to that 40, and at the same time...

Alan: Yeah. This is Alan that's a great question I mean.

Speaker Change #120: We've guided for 2018% to 20% adjusted EBITDA right now.

Speaker Change #113: Exactly and we're going to expect that that's going to go up about 5% a year. So maybe 5% anytime in the next 354 years I would expect us to make that work.

Speaker Change #113: And so five out of five.

Speaker Change #113: 5% per year for the GM expansion gross margin, Yeah I think.

Alan R. Stewart: To be clear, we're not giving you guidance on that right now. We're just trying to give you the long term in terms of where we think we can get there. So the short answer is probably about four years. We would expect that gross margin to be close to that 70 and the adjustability to be that close. Got it. Thanks for that.

Speaker Change #116: To be fair, we're not giving you guidance on that right now, we're just kind of giving a long term in terms of where you think we can get actually the short answer is that probably about four years, we would expect margins to be close to that 70, and our adjusted EBITDA closer to that number.

Yi Fu Lee: Got it. Thanks for that, Alan. And thank you, Ralph. Congratulations, again, on a strong start to 2024.

Speaker Change #114: Got it thanks for that Alan and thank you Ralph Congrats again on a strong start to controlling for.

Speaker Change #118: Thank you.

Operator: As a reminder, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. And our next question comes from the line of Louis DePalma with William Blair. Please proceed.

Speaker Change #117: As a reminder, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change #123: And our next question comes from the line of Louis Dipalma with William Blair. Please proceed.

Unknown Attendee: Ralph and Alan, good afternoon. I'm doing well. From a bookings perspective, at the end of 2023, I think you ended with 170 cities under contract and 19 campuses for gunshot detection. Did those figures move higher in the first quarter, despite the noise from Chicago and the elongated sales cycle? This is Alan.

Louis Dipalma: Ralph and Allen good afternoon.

Speaker Change #119: Uh huh.

Louis Dipalma: I'm doing well from a bookings perspective at the end of 'twenty two 'twenty three I think you ended with.

Louis Dipalma: 170 cities under contract and 19 campuses for gunshot detection did those.

Louis Dipalma: Figures move higher in the first quarter despite.

Louis Dipalma: The noise from Chicago, and the elongated sales cycles.

Alan R. Stewart: Yes, they did move higher. They did not move a lot higher, just to be honest, but that it is somewhat lumpy. I mean, we have quarters where we add a lot, and then we have quarters where we're executing, going live with a lot, and the bookings maybe just take a little longer, but they go up. Great, and you discussed cross-selling of CaseBuilder and Crime Tracer specifically with the Newport News account, which I believe is also a Shotspotter customer, but how many of your existing Shotspotter cities use multiple solutions and, you know, are there a lot of opportunities there in the pipeline for that?

Alan: This is Alan yes, they did move higher they did not move a lot higher just to be honest.

Louis Dipalma: But that is it is somewhat lumpy I mean, we have quarters, where we had a lot and then we have quarters, where we're executing going live in a lot and bookings, maybe just taking a little longer but it went up.

Speaker Change #122: Great and.

Speaker Change #126: You discussed cross selling of case still there and crime tracers, specifically with the Newport News account, which I believe is also a shotspotter customer, but how many of your <unk>.

Speaker Change #127: Existing shot spotter.

Speaker Change #125: Our cities use.

Speaker Change #122: Multiple solutions and you know is there a lot of opportunities there and in the pipeline for that.

Alan R. Stewart: It was down at this point, there are about 20 of them that are using more than one. And we do expect that there's a pretty strong pipeline we're seeing for relatively strong growth in some of the resource routers that we have not necessarily seen in the past years, which is excellent. And, of course, case builder as well. So we're excited about where things are going. So the short answer is we are seeing more opportunities in the pipeline.

Alan: Yeah. This is Alan at this point is about 20 of them that are using more than one.

Speaker Change #124: And we do expect that there's a pretty strong pipeline we're seeing for.

Speaker Change #124: A relatively strong growth in some of their resource router that we have not necessarily seen in the past years, which is excellent.

Speaker Change #124: And of course, the case motor as well.

Speaker Change #124: We're excited about where things are going so the short answer is we are seeing more opportunity there in the pipeline.

Ralph A. Clark: Great. And for a safe point, how significant are the software enhancements that you are implementing? Does the effectiveness of the solution continue to improve over time with the Machine Learning Technology in terms of the different types of weapons that people attempt to bring past the scanners and how your technology works with that?

Speaker Change #131: Great and.

Speaker Change #132: For first safe point, how significant are the software enhancements that you are implementing and <unk>.

Speaker Change #128: Does the effectiveness.

Speaker Change #128: Of the solution to continue to improve over time with the machine learning technology in terms of.

Speaker Change #129: You know the different types of weapons that people attempt to.

Speaker Change #129: Bring past the scanners and how your technology works with that.

Ralph A. Clark: So, we're making a fairly significant investment in the technology platform for SafePoint, and we're really encouraged by the fact that we are starting in a really good place.

Speaker Change #135: So we're making a fairly significant investment in the technology platform for safe point, where we're really encouraged by the fact that we're starting in a really good place I think that the innovation.

Ralph A. Clark: I think that the innovation around using kind of the magnetic moment in motion as a kind of passive sensor technology that can be completely unobtrusive is really, really interesting and highly differentiated. And our plan is to continue to build on that, not only in terms of the core, in terms of improving the overall detection efficacy, but also in terms of the applications that are built around it. We have a lot of experience in applying that to Shotspotter.

Speaker Change #135: Round using kind of magnetic moment in motion as a kind of a passive a sensor technology that can be completely unobtrusive.

Speaker Change #135: Princess is really really interesting and highly differentiated and our plan is to continue to build on that not only in terms of the core in terms of improving the overall detection efficacy, but also the kinds of applications that are built around it we have a lot of experience and applying that to satisfy everyone.

Ralph A. Clark: When you think about Shotspotter detecting and locating gunfire in all the apps that we've built around that, that have really moved that solution forward, we're going to apply the same playbook to SafePoint. And we have a strong collaboration with the various engineering groups kind of working together. We're really excited about the fact that we can leverage the existing sound thinking software stack used for Shotspotter that can be applied to the application that SafePoint is going to be coming out to market with. So, we're in a really good place, and we'll continue to invest in this because it's such a significant market opportunity.

Speaker Change #130: Do you think about shotspotter, detecting and locating gunfire and all the apps that we built around that.

Speaker Change #130: It really moves at a solution forward, where and apply the same playbook to safe point and we have strong collaboration with the various engineering groups kind of working together, we're really excited about the fact that we can leverage the existing software excuse me existing sound thinking software stack.

Speaker Change #130: For Shotspotter that can be applied to.

Speaker Change #130: The application that same point is going to be coming out to market with where we're in a really good place and we'll continue to invest in this because it's such a significant market opportunity.

Unknown Attendee: Great, and one final one for me. Do you expect the Chicago noise to die down, in that it seems that Chicago is an anomaly here and that you have 170 cities under contract, and you know there's one very loud one here that seems to be opposed, but do you expect that to die down and for the sales cycles to return to normal this year and in terms of you meeting your guidance in terms of adding another 120 miles of coverage?

Speaker Change #139: Great and one final one for me do you expect the Chicago noise to die down and that it seems that Chicago is an anomaly here and that you have 170.

Speaker Change #138: Cities under contract and you know, there's one very loud one here that seems to be oppose but do you expect that to die down and before the <unk>.

Speaker Change #130: Sales cycles too.

Speaker Change #130: Return to normal this year in terms of you meeting your.

Speaker Change #136: Your guidance in terms of adding another 120 miles is coverage.

Speaker Change #136: Yeah.

Ralph A. Clark: Yeah, well, the first thing I'll say is Alan owes me $10 because I made him a bet that we weren't going to get through this call without someone asking about Chicago. But thank you. Thank you for that question.

Speaker Change #134: Yeah, well the first thing I'll say is Alan notes me $10, because I made him a bet that we weren't going to get through this call without someone asking about Chicago, but.

Ralph A. Clark: So let me make it perfectly clear with Chicago. First and foremost, our guidance is not dependent. Our two thousand twenty four guidance is not impacted at all by Chicago's actions. And in fact, when you talk about the subject of Chicago, what you're really talking about is the mayor of Chicago, Mayor Brandon Johnson. I think if anyone's kind of following the news there, it's Brandon Johnson kind of versus what his superintendent has been fairly public in supporting Shotspotter, along with the city councilmen or the vast majority of the aldermen in the city of Chicago.

Speaker Change #133: Thank you for that question.

Alan: Let me make it perfectly clear with Chicago first and foremost.

Speaker Change #133: Our our guidance not dependent or 2024 guidance is not impacted at all by Chicago's actions and in fact, when you talk about the subject of Chicago, what you're really talking about is the mayor of Chicago Mayor Brandon Johnson, I think if anyone's kind of following the news there.

Speaker Change #133: It's Brandon Johnson kind of versus what is superintendent has been fairly public and supporting Shotspotter along with the city Council and then are the vast majority of the ultimate of the city of Chicago, and we know the residents of Chicago are being quite vocal along with the local press around the need for this technology we've been deployed.

Ralph A. Clark: And we know the residents of Chicago are being quite vocal, along with the local press, about the need for this technology. We've been deployed now in Chicago since 2011, and our focus is to continue to build on that great service tradition through the end of the current contract period with 2000.

Speaker Change #133: Now in Chicago.

Speaker Change #133: 2011, and our focus is to continue to build on that great service tradition through the end of the current contract period with 2000 excuse me that will take us through November of 2024 with respect to the impact around it I think they are.

Ralph A. Clark: That'll take us through November of twenty-four. With respect to the impact around it, I think there might have been a little bit more noise late last year as we kind of move into this. We don't see customers, you know, really slowing down ultimately from jumping on the platform. We have to answer more questions. But I think, you know, people are understanding this to be a fairly kind of isolated situation. I mean, to wit, we had ten new customers in Q1 and we're working on, you know, eight new customers for Q2. So the momentum is still there, and ten is the highest.

Speaker Change #140: Might have been a little bit more noise.

Speaker Change #133: Late last year as we kind of move into this we don't see customers.

Speaker Change #137: Really slowing down ultimately from jumping on the platform we have to answer more questions, but I think people are understanding this to be a fairly kind of isolated situation I mean to wet.

Speaker Change #137: We added 10, new customers in Q1, and we're working on.

Speaker Change #137: Eight new customers for Q2, so the momentum is still there and 10 is the highest we've ever had in the quarter.

Unknown Attendee: And is RFP activity similar or greater or less than this year versus last year? How would you assess just the RFP activity?

Speaker Change #144: Okay, and as far as RFP activity, similar or greater or less than this year versus last year. How would you access just the RFP activity.

Ralph A. Clark: Yeah, so RFPs, with respect to Shotspotter, if that was your question related to Shotspotter, RFPs have never really been a significant portion of our business, because this is viewed fairly much as a kind of sole source technology, a technology solution that we invented, and we continue to kind of, I guess, lead the category, if you will. So, I don't know, RFP stuff is really just And the RFPs that we have, the few RFPs that we have tended to respond to, I don't think we've ever lost one. Yeah, if they selected someone, they selected us. They might have moved forward with the RFP, but if they made a decision to execute against the RFP, we'd have been the winner.

Speaker Change #143: Yes, so rfps with respect to Shotspotter. If that was your question related to shots fire ease of never really been a significant portion of our business. Because this is viewed fairly much as they kind of sole source technology.

Speaker Change #143: Technology solution that we invented and we continue to kind of I guess lead the category. If you will so I haven't the RFP stuff is really kind of kind of noise in the rfps that we have.

Speaker Change #145: A few rfps that we have tended to respond too I don't think we've ever lost one.

Speaker Change #137: They ended up selecting someone if they selected someone they selected that they may be did move forward with the RFP, but if they made a decision to execute against the RFP. We've been we've been in the winter.

Unknown Attendee: Yeah, no, the context of my question is how some emerging competitors in the market are bundling gun detection with ALPR cameras. And I was wondering if that has had any impact on... The Wind Raid or even the pipeline expanding in terms of RFP activity.

Speaker Change #147: Yeah no.

Speaker Change #146: Text of my my question is how at some emerging competitors in the market they are <unk>.

Speaker Change #137: Underlying gun detection.

Speaker Change #137: West L. P. R of cameras and I was wondering if that has had any impact on.

Speaker Change #137: The win rate or even like the pipeline and expanding in terms of RFP activity.

Ralph A. Clark: No real impact on wind rate, no impact on pipeline. I mean, there's questions that we have to answer about this, especially in some of the smaller cities, but I think that people recognize that you probably don't want to combine your ears with eyes on the same platform, the exact same physical platform. It's pretty challenging, so we're pretty comfortable that we're in a good space from a competitive landscape. Great. Thanks, Ralph.

Speaker Change #149: No real impact on win rate no impact on our pipeline I mean, there's questions that we have to answer about this especially at some of the smaller cities, but I think that people recognize that you probably don't want to combine your ears with eyes on the same platform.

Speaker Change #137: Exact same physical platform, it's pretty challenging so we're pretty we're pretty comfortable that we're in a good space from a competitive landscape point of view.

Unknown Attendee: Great. Thanks, Ralph and Alan.

Speaker Change #141: Great, Thanks, Paul and Alan Yes.

Speaker Change #150: Thank you.

Operator: Thank you. Ladies and gentlemen, this concludes our question and answer session. If your question was not taken, you may contact Salton Thinking's investor relations team by emailing ssti at gateway-grp.com. Now I'd like to turn the call back over to Mr. Clark for his closing remarks.

Speaker Change #142: Thank you.

Speaker Change #149: This concludes our question and answer session. If your question was not taken you may contact so I'm thinking of US relations team by Emailing <unk> at.

Ralph A. Clark: Gateway Hyphen G. R. P dot com now I'd like to turn the call back over to Mr. Clark for his closing remarks.

Ralph A. Clark: Great, thank you very much. Alan and I want to thank everyone that took the time to dial in and thank you all very much for your questions. We are looking forward to a number of follow-on calls with you all in the next few hours. Thank you all very much. Be safe.

Ralph A. Clark: Great. Thank you very much Alan and I want to thank everyone that took the time to dial in and thank you all very much for your questions and looking forward to a number of follow on.

Ralph A. Clark: Calls with with you all in the next few hours. Thank you all very much can you say.

Operator: This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation. Alan Stewart, Ralph Clark, Unknown Attendee, Rustam Kanga, Larry Jackson, Nasim Golzadeh, Sam Klepper, Shotspotter Inc.

Speaker Change #151: This concludes today's conference you may now disconnect your lines at this time. Thank you for your participation.

unknown: [inaudible]

Speaker Change #151: Uh-huh.

Speaker Change #151: [music].

Speaker Change #151: Okay.

Speaker Change #151: [music].

Speaker Change #151: Hmm.