Q2 2024 SoundThinking Inc Earnings Call
Shamali: Good afternoon, and welcome to SoundThinking's second quarter 2024 conference. My name is Shamali, and I will be your operator for today's call.
Operator: Good afternoon and welcome to SoundThinking second quarter 2024 conference call.
Good afternoon, and welcome to sound thinking second quarter 2024 conference call.
Operator: My name is Shemali, and I will be your operator for today's call.
Speaker Change: My name is symbolic and I will be your operator for today's call.
Ralph Clark: Joining us on the call today will be SoundThinking'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 SoundThinking's business strategy and future financial and operating performance. 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. Certain of these risk assumptions are discussed in SoundThinking's SEC filings, including its registration statement on Form S-1.
Operator: Joining us are SoundThinking CEO, Ralph Clark, and CFO, Alan Stewart. Please note that certain explanations discussed on the call today will include four looking statements about future events and SoundThinking's business strategy and future financial and operating performance. These four 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. Certain of these risks and assumptions are discussed in SoundThinking's FEC filing, including this registration statement on Form S-1.
Speaker Change: Joining us are thinking.
Speaker Change: Ralph Clark and CFO Alan Stewart.
Ralph Clark: These forward-looking statements reflect management's beliefs, estimates, and predictions as of the date of this live broadcast, August 6, 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, via a link available in the investigations section of the company's website at ir.sound.com. Now, I'd like to turn the call over to SoundThinking's CEO, Ralph Clark.
Speaker Change: Please note that certain information discussed on the call. Today will include forward looking statements about future events and South East.
Speaker Change: Business strategy and future financial and operating performance. These forward looking statements are only predictions are subject to risks uncertainties and assumptions that are difficult to predict and may cause the actual results to differ materially from those stated right those statements certain.
Speaker Change: Certain of these risks.
Speaker Change: Aren't discussed in something.
Speaker Change: Filings, including its registration statement on form S. One.
Operator: These four looking statements reflect management's beliefs, estimates, and predictions as of the date of this live broadcast, August 6th, 2024, and SoundThinking undertakes no obligations to me by or update any four looking statements to reflect the eventual circumstances after the date of this call.
Speaker Change: These forward looking statements reflect management's beliefs estimates and predictions as of the date.
Speaker Change: Okay.
Speaker Change: Four it sound thinking undertakes no obligation to revise or update any forward looking statements to reflect circumstances. After the date of this call.
Operator: Finally, I would like to remind everyone that this call will be recorded and made available for each via a link available in the Investigation section of the company's website at ir.downthinking.com.
Speaker Change: Finally, I would like to remind everyone that this call will be recorded and made available for replay.
Speaker Change: We are available.
Speaker Change: The maintenance section of the company's website IR, that's how I'm thinking.
Ralph Clark: Now, I'd like to turn a call over to SoundThinking CEO, Ralph Clark. Sir, please proceed. Good afternoon, and thank you for joining our second quarter of 2024 earnings call. I'm pleased to report another strong quarter marked by several positive operational and financial achievements. Before I turn the call over to Alan for a detailed financial review, I'll provide my thoughts on our operating performance and offer additional context on the key market drivers that underpin our optimistic outlook for the growth opportunity ahead. The need for public safety solutions has never been more critical, especially within the increasingly challenged law enforcement ecosystem.
Okay.
Speaker Change: Now I'd like to turn the call over to South deep.
Speaker Change: Ralph.
Ralph Clark: Sir Please proceed.
Ralph Clark: Good afternoon, and thank you for joining our second quarter 2024 earnings call. I'm pleased to report another strong quarter marked by several positive operational and financial achievements. Public safety officials are expected to address high crime levels with diminishing personnel resources, creating a structural public safety gap that only technology can fill.
Speaker Change: Good afternoon, and thank you for joining our second quarter 2024 earnings call I'm pleased to report another strong quarter marked by several positive operational and financial achievements.
Speaker Change: I turn the call over to Alan for a detailed financial review I'll provide my thoughts on our operating performance and offer additional context on the key market drivers that underpin our optimistic outlook for the growth opportunity ahead.
Speaker Change: The need for public safety solutions has never been more critical, especially within the increasingly challenged law enforcement ecosystem public.
Ralph Clark: Public safety officials are expected to address high crime levels with diminishing personal resources, creating a structural public safety gap that only technology can fill. We believe SoundThinking is uniquely positioned to bridge that gap with our integrated safety smart platform. We are a trusted partner to law enforcement agencies of all sizes, both domestically and internationally, as they embark on digital transformation strategies rooted in data-driven policing. We think public sentiment has significantly shifted from the de-policing movement to the investing in policing movement and holding policing accountable to protect and serve efficiently, effectively, and equitably. In fact, in a Gallup poll conducted just this year, American confidence in police increased 8 percentage points over the past year to 51 percent.
Alan Stewart: Public safety officials are expected to address high crime levels with diminishing personnel resources, creating a structural public safety gap that only technology can sell.
Alan Stewart: We believe sound thinking is uniquely positioned to bridge that gap with our integrated safety smart platform.
Alan Stewart: We are a trusted partner to law enforcement agencies of all sizes, both domestically and internationally as they embark on digital transformation strategies rooted and data driven policing.
Speaker Change: We think public sentiment has significantly shifted from the deeply say loopnet to the investing in policing movement and holding policing accountable to protect and serve efficiently effectively and equitably.
Speaker Change: In fact in a Gallup poll conducted just this year Americans confidence in police decreased eight percentage points over the past year to 51% the largest year over year change in public perceptions of the 17 major U S institutions measured by Galebs annual update.
Ralph Clark: The largest year-over-year change in public perceptions of the 17 major U.S. institutions measured by Gallup's annual update. What was very telling was a confidence increase among the persons of color subgroup whose confidence group even faster, increasing 1,300 basis points from 2023 to 2024. This is a particularly significant counterbalance to the headline noise generated by some selected media outlets, but is entirely consistent with what we're seeing on the ground in the markets we serve. We believe this demonstrates strong support for constitutional policing amongst residents in the most vulnerable communities that our agency partners are serving every single day.
What was very telling what's our confidence increase among the persons of color subgroup, whose confidence grew even faster increasing 1300 basis points from 2023 to 2024.
Speaker Change: This is a particularly significant counter balance to the headline noise generated by some selected media outlets, but is entirely consistent with what we're seeing on the ground in the markets we serve.
Speaker Change: We believe this demonstrates strong support for constitutional please see amongst residents and the most vulnerable communities that our agency partners are serving every single day.
Ralph Clark: Within this positive opportunity set with strong macro tailwinds, we've been able to successfully execute another strong quarter performance that was overall in line with our expectations. In our core Kusagunsad Detection Business, ShotSpotter was taken live in three new cities and expanded in four cities. Additionally, Shotspotter was deployed outside of our traditional local law enforcement buy center with two new commercial customers in one university as a part of their security framework. The International Shotspotter business is also quite promising. They soon to be awarded expansion in Uruguay and a re-win in Nelson Mandela Bay in South Africa.
Speaker Change: Within this positive opportunity set with strong macro tailwind, we've been able to successfully execute another strong quarter of performance that was overall in line with our expectations and our core acoustic gunshot detection business Shotspotter was taken live in three new cities and expanded in four cities.
Speaker Change: Additionally, shotspotter was deployed outside of our traditional local law enforcement by center with two new commercial customers and one university as a part of their security framework.
Speaker Change: The International Shotspotter business is also quite promising with a soon to be awarded expansion in Uruguay, and a re win and Nelson Mandela day in South Africa.
Ralph Clark: We still believe we can book and go live with ShotSpotter in Brazil later this year and are very encouraged with the recent elections, information of the National Unity Government in South Africa. We believe this represents a significant path forward for opportunities beyond the current D.A. led municipalities by directly engaging South African Police or SAPs at the national level. Domestically, we're on track to exceed 100 new ShotSpotter go live miles this year with an outside shot of getting to the previously forecast of 120 miles. We continue to outperform on the retention front and believe we will see potential upside to our overall revenue forecast with better-than-forecast retention rates for the full year, further contradicting the rhetoric being platformed by few news outlets.
Speaker Change: We still believe we can book you can go live with Shotspotter in Brazil. Later this year and are very encouraged with the recent elections and formation of the National Unity government in South Africa.
Speaker Change: We believe this represents a significant path forward for opportunities beyond the current D. Let municipalities buy directly engaging south African police or steps at the national level.
Speaker Change: Domestically, we are on track to exceed 100, New Shotspotter go live miles this year with an outside shot of getting to the previously forecast at 120 miles.
Speaker Change: We continue to outperform on the retention front and believe we will see potential upside to our overall revenue forecast with better than forecasted retention rates for the full year further contradicting the rhetoric being platform by a few news outlets.
Ralph Clark: Resource router our AI based patrol management solution is also performing above expectations and gaining market acceptance for its capabilities that enhance community safety while protecting residents from over policing. We currently have over seven resource router implementations in the queue for Q3 go-lives. We're also thrilled that Resource Router is making important inroads into community-based violence and eruption organizations. These organizations such as the Uma Futures International in Miami-Dade, Florida are adopting our community facing version of resource router as a part of their violence and eruption efforts such as the walking one stop. UFI President Mr. Wayne Rollins has been a vocal advocate and innovative user of resource router to more proactively focused their limited resources using a proven data-driven approach.
Speaker Change: Resource router, our AI based patrol management solution is also performing above expectations and gaining market acceptance for its capabilities that enhance community safety, while protecting residents from over policing.
Speaker Change: We currently have over seven resource rider implementations in the Q for Q3 go lives.
Speaker Change: We're also thrilled that resource router is making important inroads into community based violence interruption organizations.
Speaker Change: These organizations such as the futures International in Miami Dade, Florida are adopting our community facing version of resource router as a part of their violence interruption efforts such as the walking one stop.
Speaker Change: U S President Mr. Wayne Rollins has been a vocal advocate and innovative user of resource router to more proactively focus their limited resources using a proven data driven approach.
Ralph Clark: Mr. Rollins has been spreading the word both nationally and internationally that community violence intervention work cannot simply be done to the highest caliber without applying innovative technology as a force multiplier. Case builder subscription-based revenue grew approximately 700% for the second quarter year over year with the kickoff of the New York City Department of Corrections project, which is ahead of schedule. We will be recognizing another $1 million of maintenance AR in early Q3 with the delivery of the first major application or use case of Priya, the Prison Rate Elimination Act, to be followed by nine other divisions within the DOC.
Speaker Change: Mr. Rollins has been spreading the word both nationally and internationally that community bounds intervention work and not simply be done to the highest caliber without applying innovative technology as a force multiplier.
Speaker Change: Haynesville their subscription base revenue grew approximately 700% from the second quarter year over year with the kickoff of the New York City Department of Corrections project, which is ahead of schedule.
Speaker Change: We will be recognizing another $1 million of maintenance or are in early Q3 with the delivery of their first major application or use case of Korea. The prison rape elimination at to be followed by nine other divisions within the D C.
Ralph Clark: Some of the overarching goals of the significant initiative include improving efficiency and compliance in the case management process at DOC, and increasing transparency and accountability by implementing a modern application that replaces disparate case management systems in manual paper-based documentation currently in use across DOC's organizational divisions. Case Builder was also successfully deployed at the California Department of Justice in Q2 for investigations and insurance fraud and has the potential to grow users by expanding the other divisions within CalDOJ and utilizing Case Builder for new use cases. Finally, we expect to go live with Orleans Parishing in September and have a healthy pipeline of new case builder opportunities for the remainder of 2024 and early 2025.
Speaker Change: Some of the overarching goals of this significant initiatives include improving efficiency and compliance and the case management process of DLC and increasing transparency and accountability by implementing a modern application that replaces desperate case management systems and manual paper based documentation currently in use across D.
Speaker Change: <unk> organizational divisions.
Speaker Change: Case builder was also successfully deployed at the California Department of Justice in Q2 for investigations and insurance fraud and has the potential to grow users by expanding to other divisions within Cal Doj and utilizing case builder for new use cases.
Speaker Change: We expect to go live with Orleans parish in September and have a healthy pipeline of new tastes builder opportunities for the remainder of 2024 and early 2025.
Ralph Clark: Although the safe point top of funnel pipeline remains strong and continues to grow, we're experiencing slower than expected sales, primarily being delayed as prospects wait for a key new functionality that will be a part of a major September release. This major release includes a new 3D camera integration enhance machine learning object classification, a major upgrade to the user interface along with soft to inhibit compliance, which are table stakes for larger hospital chain prospects. We believe these enhancements will significantly improve the overall customer experience and reduce customer's operational cost. It will also enable efficiencies in our processes within the alert review center or ARC, which is the safe point equivalent of the shots fodder incident review center or IRC.
Speaker Change: Although the safe point and top of funnel pipeline remains strong and continues to grow we're experiencing slower than expected sales primarily being delayed as prospects wait for key new functionality that will be a part of a major September release.
Speaker Change: This major release includes a new three D camera integration enhanced machine learning object classification, a major upgrade to the user interface, along with Sop, two and HIPAA compliance, which are table stakes for larger hospital chain prospects.
Speaker Change: We believe these enhancements will significantly improve the overall customer experience and reduce customers' operational costs. It will also enable.
Speaker Change: Patient sees in our processes within the alert review center or a R. C, which is the safe point equivalent of a Shotspotter incident review center our IRC.
Ralph Clark: Unfortunately, unlocking much of the feature set was dependent upon a specific 3D camera, whose availability, qualification, and integration experience a 4 plus month delay. During this period, we have taken the opportunity to retool our safe point sales leadership and further integrate safe point supply chain and customer success and support into sound thinking operations while we continue to build the safe point sales pipeline.
Speaker Change: Unfortunately unlocking much of the feature set was dependent upon a specific breeding camera, whose availability qualification and integration experience a four plus months delay.
Speaker Change: During this period, we have taken the opportunity to retool, our safe point sales leadership.
Speaker Change: Are there any rates eight point supply chain and customer success and support in the sound thinking operations, while we continue to build the same point sales pipeline.
Ralph Clark: So I wanted to take a brief moment to share with you how Sound Thinking has been leveraging artificial intelligence and machine learning to drive innovation and enhance our services. For over a decade, our machine learning algorithms have been at the core of our shots fodder incident filtering process for acoustic gunshot detection technology. By regularly training our models with our diverse and extensive data sets, we're improving the filtering capability of our gunshot detection system, which importantly allows us to significantly scale our customer and coverage area footprint while effectively managing the cost of our incident review center.
Speaker Change: So I wanted to take a brief moment to share with you how sound thinking has been leveraging artificial intelligence and machine learning to drive innovation and enhance our services.
Speaker Change: For over a decade, our machine learning algorithms have been at the core of our Shotspotter incident filtering process for acoustic gunshot detection technology.
Speaker Change: By regularly training our models with our diverse and extensive datasets, we're improving the filtering capability of our gunshot detection system, which importantly allows us to significantly scale, our customer and coverage area and footprint, while effectively managing the cost of our incident review center.
Ralph Clark: In addition, artificial intelligence and machine learning are core to our resource router solution, which is used to analyze patterns and trends in crime, providing valuable insights, data-driven patrol strategies, and community safety initiatives. Lastly, recent developments in cloud-based AI tools make it possible for our safe point team to train neural networks using large label data sets with detailed features from our safe point centers, capturing the magnetic moment and the 3D camera tracking speed, direction, and skeletal model in order to use these features in real time to classify weapons, pinpoint the individual carrying the weapon, along with the weapon location.
Speaker Change: In addition, artificial intelligence and machine learning are core to our resource router solution, which is used to analyze patterns and trends in crime, providing valuable insights data driven control strategies and community safety initiatives.
Speaker Change: Lastly, recent developments in cloud based AI tools make it possible for our safe point team to train neural networks using large labeled datasets with detailed features from our safe point sensors, capturing the magnetic moment and the three D camera tracking speed direction and skeletal model in order to use.
Speaker Change: These features in real time to classified weapons pinpoint the individual carrying the weapon along with the weapon location.
Ralph Clark: was very exciting, and we know this from our over decade-plus of work on shop spotter is that the safe point system has the potential to continue to improve by incorporating new data and refining its models. We believe we're in the early second inning of what's possible with artificial intelligence and machine learning and harnessing it for the benefit of our customers and investors.
Speaker Change: What is very exciting and we know this from our over a decade plus of work on from Shotspotter is at the same point system has the potential to continue to improve by incorporating new data and refining. Its models. We believe we are in the early second inning of what's possible with artificial intelligence and machine learning and harnessing that for the benefit of.
Speaker Change: Our customers and investors.
Ralph Clark: We recently announced a strategic partnership with Recore, a leader in roadway intelligence technology and vehicle recognition solutions. This collaboration brings together two industry leaders, combining SoundThinking's expertise and acoustic gunshot detection and investigative solutions with Recore's best-in-class vehicle and LPR solutions. Our new product, Plate Ranger, is now available for demonstration and quotation and is expected to be part of the Safety Smart platform starting in September 2024, marking our expansion into the growing LPR market. This market is estimated to be $3.2 billion globally, according to Emergent Research. We are highly encouraged with the initial response to our launch announcement and have already booked several discovery calls with accounts that literally stretch across the United States.
Speaker Change: We recently announced a strategic partnership with three core a leader in roadway intelligence technology and vehicle recognition solutions.
Speaker Change: This collaboration brings together two industry leaders, combining sounds thinking its expertise and acoustic gunshot detection and investigative solutions with recourse best in class vehicle and L. P. Our solutions.
Speaker Change: Our new product like Ranger is now available for demonstration and quotation and is expected to be part of the safety Smart platform starting in September 2024, marking our expansion into the growing L. P. R market. This.
Speaker Change: This market is estimated to be $3 $2 billion globally, According to Enbridge and research.
Speaker Change: We are highly encouraged with the initial response to our launch announcement and have already booked several discovery calls with accounts that literally stretch across the United States.
Ralph Clark: Our shop spotter service in Chicago ends in late September, with a formal contract termination in late November. And while there's still a significant civic debate between the mayor and the city council on extending the service beyond November 2024, we continue to focus on providing what we believe to be and data suggests is a life-saving solution, as we've done for the past 10 plus years. Chicago's non-renewal in Q4 2024 is already factored into our 2024 guidance, which is being maintained at $104 million to $106 million in revenue with an 18 to 20 percent adjusted EBITDA margin.
Speaker Change: Our Shotspotter service in Chicago and in late September with a formal contract termination in late November and while there is still a significant civic debate between the mayor and city Council on extending the service beyond November 2024, we continue to focus on providing what we believe to be and data suggests is a lifestyle.
Speaker Change: <unk> solution as we've done for the past 10 plus years Shaquille.
Speaker Change: Chicago is non renewal in Q4 2024 is already factored into our 2024 guidance, which has been maintained at 104 million to $106 million in revenue with 18% to 20% adjusted EBITDA margin.
Ralph Clark: We are confident that we can achieve our 2024 guidance and believe we are well positioned to drive profitable growth in 2025 and beyond.
Speaker Change: We're confident that we can achieve our 2020 for guidance and believe we are well positioned to drive profitable growth in 2025 and beyond.
Ralph Clark: Thank you for your attention.
Speaker Change: Thank you for your attention I'll now turn the call over to Alan for a detailed look at our financial performance.
Alan Stewart: I'll now turn the call over to Alan for a detailed look at our financial performance. Thank you, Ralph. We're very pleased with our performance in the second quarter. As Ralph mentioned, our safety smart platform product strategy appears to be working well, as we're seeing strong demand for our public safety solutions across the platform. Let me provide more details in the quarter, and then I will share some thoughts around the balance of the year. Second quarter revenues were a record at $27 million and included the revenue associated with our Case Builder department correction contract. The $27 million is a 22 percent increase over the $22.1 million in the second quarter of 2023.
Alan Stewart: Thank you Ralph.
Alan Stewart: We're very pleased with our performance in the second quarter as Ralph mentioned, our system smarter platform product strategy appears to be working well as we're seeing strong demand for our public safety solutions across the platform.
Alan Stewart: Let me provide more details of the quarter and then I will share some thoughts around the balance of the year.
Speaker Change: Second quarter revenues were a record at $27 million and included the revenue associated with our case fill or department of corrections contract the $27 million is a 22% increase.
Speaker Change: But the $20 million to $21 million in the second quarter 2023.
Alan Stewart: Revenue increased as sales of all of our Safety Smart platform solutions are growing. Our diversification of revenues is also working. For example, our domestic shots by the revenue was only 66 percent of revenue this quarter, or 60 percent in second quarter of 2023. Gross profit for the second quarter of 2024 was 16.1 million dollars, or 60 percent of revenue. 2, versus $12.7 million, or 57% of revenue for the prior period. We expect gross margins to be similar to Q2 for the remainder of the year, ending the year at or near the 60% that we have indicated last quarter.
Speaker Change: Revenue increased as sales of all of our safety Smart platform solutions are growing.
Speaker Change: Our diversification of revenues is also working for example, our domestic Shotspotter revenue was only 66% of revenue this quarter versus 70% in second quarter of 2023.
Speaker Change: Gross profit for the second quarter of 'twenty, 'twenty, four was $16 $1 million or 60% of revenue.
Speaker Change: First is $12 $7 million or 57% of revenue for the prior year period.
Speaker Change: We expect gross margins to be similar to Q2 for the remainder of the year ending the year at or near the 60% that we have indicated last quarter.
Alan Stewart: Our adjusted EBITDA was up over 110% from the second quarter of last year to $5.1 million, up from $2.4 million. This is also significantly higher than the $3 million in the first quarter of this year. Our adjusted EBITDA increase was related to revenue growth in all of our solutions, as well as some expense reductions in various categories. As a reminder, adjusted EBITDA non-GAAP financial measure is calculated by taking our GAAP net income or loss and adjusting our interest, income taxes, depreciation, amortization, and impairment, stock-based compensation expenses, restructuring expenses, and acquisition-related expenses, including adjustments to our contingent consideration obligations.
Speaker Change: Our adjusted EBITDA was up over 110% from the second quarter of last year to $5 $1 million up from $2 $4 million.
Speaker Change: This is also significantly higher than the $3 million in the first quarter of this year.
Speaker Change: Our adjusted EBITDA increase was related to revenue growth.
Speaker Change: Of all of our solutions as well as some expense reductions at various categories.
Speaker Change: As a reminder, adjusted EBITDA non-GAAP financial measure.
Speaker Change: Calculated by taking our GAAP net income or loss and adjusting up interest income income taxes, depreciation amortization and impairment stock based compensation expenses restructuring expenses and acquisition related expenses, including adjustments to our contingent consideration obligations.
Alan Stewart: According to our expenses, our operating expenses for the second quarter were $16.1 million or 60% of revenues versus $15 million or 68% of revenues in the second quarter of 2023. Breaking down our expenses, sales and marketing expense for the second quarter was $7.3 million or 27% of total revenue, down from $7.4 million or 34% of total revenue for the prior year period. Our R&D expenses for the second quarter were $3.5 million, or 13% of total revenue, compared to $3.1 million, or 14% of total revenue, for the prior year period. G&A expenses for the quarter were $5.9 million, or 22% of total revenue, up from $5.5 million, or 25% of total revenue for the prior year period.
Speaker Change: Turning to our expenses, our operating expenses for the second quarter were $16 $1 million or 60% of revenues.
Speaker Change: Versus $15 million or 68% of revenues in the second quarter of 2023.
Speaker Change: Breaking down our expenses sales and marketing expense for the second quarter was $7.3 million or 27% of total revenue down from $7 $4 million or 34% of total revenue for the prior year period.
Alan Stewart: Offsetting our G&A expenses included the approximately $600,000 reduction in Q2 of this year related to the change in the fair value of the contingent consideration related to the safe point burnout expectations. In Q2 of last year, our G&A expenses were offset by approximately $1 million reduction related to the change in fair value of the contingent consideration related to the forensic logic burnout expectations. We do expect our G&A expenses will continue to increase of beds in absolute dollars as our company grows. Lastly, we had approximately $350,000 in costs related to restructuring efforts that took place that reduced some personnel and office lease costs.
Speaker Change: Nursing costs related to restructuring efforts that took place that reduced some personnel and office lease costs.
Alan Stewart: A portion of the restructuring expenses were related to severance paid to terminate employees that represented less than 5% of a workforce that we expect should save approximately $2 million annually. These costs were added back to the overall adjusted EBITDA amount for the quarter. Our GAP net loss was approximately $800,000 for six cents per basic and diluted chair for the quarter based on $12.8 million basic and diluted weighted average years outstanding. This compares to a net loss of $2.7 million or a loss of 22 cents per basic and diluted share based on 12.2 million basic and diluted weighted average shares outstanding for the prior year period.
Speaker Change: A portion of the restructuring expenses related to severance paid to terminated employees that represented less than 5% of a workforce that.
Speaker Change: We expect should save approximately $2 million annually.
Speaker Change: These costs were added back to the overall adjusted EBITDA amount for the quarter.
Speaker Change: Our GAAP net loss was approximately $800000 or six cents per basic and diluted share for the quarter based on $12 8 million basic and diluted weighted average shares outstanding.
Speaker Change: This compares to a net loss of $2.7 million.
Speaker Change: Or a loss of 22 cents per basic and diluted share based on $12 2 million basic and diluted weighted average shares outstanding for the prior year period.
Alan Stewart: Our adjusted net loss for the second quarter was a loss of $955,000, or a loss of $0.7 per share based on 12.8 million basic and diluted weighted average shares outstanding. This compares to a loss of 3.5 million dollars or a loss of 28 cents per share based on 12.2 million basic and diluted weighted average shares outstanding for the prior year period. Adjusted net loss and non-GAAP financial measure is calculated by taking our GAAP net income or loss and adding back acquisition-related expenses, including adjustments to our contingent consideration obligation and restructuring expenses. The third revenue at the end of the quarter decreased to $49.4 million from $50.8 million at the end of the first quarter of 2024.
Speaker Change: Our adjusted net loss for the second quarter was a loss of $955000 or a loss of seven cents per share based on $12 8 million basic and diluted weighted average shares outstanding.
Speaker Change: This compares to a loss of $3 5 million or a loss of 28 cents per share based on $12 2 million basic and diluted weighted average shares outstanding for the prior year period.
Speaker Change: Adjusted net loss a non-GAAP financial measure is calculated by taking our GAAP net income or loss and adding back acquisition related expenses, including adjustments to our contingent consideration obligation and restructuring expenses.
Alan Stewart: This decrease was primarily related to the timing of renewals. We ended the quarter with $9.8 million in cash and cash equivalence versus $8.5 million at the end of the first quarter of 2024. The cash balance is higher than the end of the first quarter, even after we repurchased $134,150 of our shares at an average price of $14.86 for approximately $2 million. In fact, after the quarter close, we repaid $3 million of our line of credit, and our current cash balance is still approximately $12 million. Currently, after our recent repayment, we have only approximately $4 million in short and long-term debt outstanding and have approximately $21 million still available on our line of credit.
Alan Stewart: Turning to our full year 2024 outlook, we're maintaining our full year revenue guidance range at $104 to $106 million, which means that the second half revenues are expected to be between $51.5 and $53.5 million. We are expecting that Q3 revenues will be sequentially down from Q2 related to an acceleration of professional services in Q2 from Q3 related to our case builder and NYPD technological projects. We then expect Q4 revenue to be sequentially higher from Q3, including a loss of $1.2 million from Chicago Q4, which currently is expected to end on November 22nd, assuming no contract renewal.
Speaker Change: Any loss of $1 $2 million from Chicago in Q4, which currently is expected to end on November 22nd assuming no contract renewal.
Alan Stewart: We are maintaining our justly of the margin guidance at 18 to 20%.
Speaker Change: We are maintaining our adjusted EBITDA margin guidance at 18% to 20% now.
Ralph Clark: Now back to Ralph for some final thoughts, and then we'll be happy to take your questions. Thanks, Alan. I would be remiss if I did not give a shout out to my colleagues for our sixth Great Places to Work designation. I'm incredibly grateful to everyone in the company that is doing work that matters in making a difference across the globe.
Speaker Change: Now back to Ralph for some final thoughts and then we'll be happy to take your questions.
Ralph Clark: Thanks, Allen I would be remiss, if I did not give a shout out to my colleagues for our sixth great places to work designation.
Ralph Clark: Incredibly grateful to everyone in the company that is doing work that matters and making a difference across the globe.
Operator: We're now happy to take your questions. Thank you.
Speaker Change: We're now happy to take your questions.
Speaker Change: Thank you.
Operator: At this time, we'll be conducting a question in here. If you'd like to ask a question, please first start one on your telephone keypad. A confirmation tone or indicate a line is in the question key. You may first start to if you would like to remove your question from the key. It participates using key per equipment and may be necessary to pick up your handset before pressing the start keys.
Speaker Change: At this time, we will be conducting a question and answer session.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question you.
Ralph Clark: You May press Star two 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 star keys.
Operator: And one moment please, as we pull for questions.
Speaker Change: And one moment, please pull for questions.
Richard Baldry: And our first question comes from the line of Richard Baldry with Ralph Capital Partners. Please let's see what your question is. Thanks. When you look at the range of goal lives between the 100 to 120 for the year possibly, what really makes up the difference there? Is it, you know, the pace of deployments on deals that are already one, or is it dependent on some, you know, early wins in the second half, sort of turning live before the end of the year?
Ralph Clark: And our first question comes from the line of Richard Baldry with Roth Capital Partners.
Richard Baldry: With your question.
Ralph Clark: Yeah, thanks for that question.
Ralph Clark: Rich, this is Ralph. I think it's more the latter than the former. We have some really interesting deals in the pipeline.
Ralph Clark: So it's just a question of how quickly we can convert the pipeline to a book deal and then give ourselves time to be able to get permissions into point centers and effectively turn on a service, recognizing that December is a pretty tough month to take customers live, to take customers live during the winter months and kind of during the holiday period. So that's what we're running up against.
Richard Baldry: Then, if we look specifically at the fourth quarter, you're facing factoring in a drag of, I think it's about two million from Chicago, but you'd still be up sequentially. So, you know, if you netted that out, there's something like a three million sequential organic implied.
Richard Baldry: You know, we've never really seen that in the past. That would be a pretty breakout incremental growth in a 90-day period for you.
Alan Stewart: You could kind of go through the components of that, so we can understand how that's happening and then, you know, whether there's some one-time things in there or just feel like your capacity to grow is stepping up given the myriad of products you're now offering.
Alan Stewart: So this is Alan, and I'll go ahead and answer that, and Ralph and Adder correct as well. I think the big thing is, you know, we've said Q3 might be just lower than Q2 because of the acceleration that we had. The pull forward of some of the professional services from Q3 into Q2, but still Q3 is going to be, you know, significant. So I don't think you're, we're really going to need to get a three million dollar growth from Q3 to Q4 to hit our guidance. But what we are going to get is related to miles that are going on as well as some additional things.
Richard Baldry: Isn't that we had the pull forward of some of the professional services from Q3 into Q2, but still Q3 is going to be you know significant so I don't think you're really going to need to get a 3 million dollar growth from Q3 to Q4 to hit our guidance, but what we are going to get is related to.
Speaker Change: Miles that are going live as well as some additional things we did Ralph mentioned in his script as well we did get another million dollars raised at the department of corrections are subscription.
Alan Stewart: We did Ralph mentioned in his script as well. We did give another million dollars raised to the Department of Corrections subscription to that's also going live, as well as all the miles that are going live between now and then, and as also Ralph mentioned, across the board, every one of our solutions is improving. So that's really why we still feel comfortable about the guidance and believe the Q4 will be significant.
Speaker Change: Subscription. So that's also going live as well as all the miles that are going live between now and then and as also Ralph mentioned across the board every one of our solutions is improving so that's really why we still feel comfortable about the guidance and believe the Q4 will be a significant.
Speaker Change: Yeah.
Richard Baldry: And last for me on the safety point side, he talked about a major upgrade getting ready for September and the availability of the cameras being issued. You know, are those now flowing into inventory, and you're pretty much ready?
Speaker Change: And last for me on on the safety point in time, he talked about a major upgrade and be ready for September and the availability of the cameras being an issue.
Speaker Change: Or are those now flowing into inventory and you're pretty much ready. It's just a soft first her a go live date ahead of you or you know is there some concern still about getting those available this September and I would call. It launch of the newer upgraded service. Thanks.
Ralph Clark: It's just the software sort of go live date ahead of you or, you know, there's some concerns still about getting those available for the September. I know it's called Launch of the newer upgraded service.
Ralph Clark: Yeah, so this is Ralph again, Rich. I'll try to answer that question. I wouldn't say it's a concern. I think we have, we've kind of exited the camera identification and qualification, and some of the integration work. I think we're on track with the HIPAA and soft to compliance. Our expectation is that we'll be deploying a couple of those 3D cameras in some customer environments this month, prior to the September launch date. So we're feeling pretty confident. In that September launch date and think that it's going to really be a super impactful delivery of new capability to the marketplace.
Alan Stewart: This is Alan. Thank one thing I would add to Ralph. His comments, and Toby agree with everything he said. We're still going live with some, some lanes. Even now, while we're waiting for this, the other thing is the pipeline for the safe point continues to grow. You may recall that after Q1, we said it was about $12 million. That pipeline is now north of $15 million. So we're still getting a lot of interest. It's our own things that we're slowing things down a little bit to make sure we can add to new technology.
Unknown Attendee: Thanks and congrats on the step up to profitability. Thanks.
Unknown Attendee: Thank you.
Mike Latimore: Our next question comes from the line of Mike Latimore with North and Capital Markets. Please proceed with your question.
Alex Latimore: Hey guys, this is actually Alex Latimore on from Mike Latimore. First of all, congratulations on the great quarter. Looks awesome here. I just got two questions for you. The first one being what percent of new miles going forward to expect to come from expansions.
Alan Stewart: Yes, so this is Alan. Yes, sure. So every year what we normally see is new customers and expansions, and it shifts between about 40 to 60 percent back to 60 to 40 percent. So it's no different this year. We're probably going to see around half of them will be expansions, and the other half will be new customers. Pretty typical for us.
Alan Stewart: Okay, awesome. And then what percent of bookings in the quarter and also down in the pipeline are with tier two to four or with tier four to five cities.
Speaker Change: And also down in the pipeline are with tier four are with tier four to five cities.
Alan Stewart: Yeah, so this is Alan again. We are seeing a significant increase in the interest in tier four to five, which is fantastic because that really does expand the town for us. I would say that there's probably about 60 to 70 percent of some of the miles that are going live that are related to your four to five. That may go down a little bit because we know some expansions from some larger cities that are going to happen in the second half of the year. But it's still growing quite nicely, and we expect that to continue.
Speaker Change: Yeah. So this is Alan again, we are seeing.
Speaker Change: And if he can increase in the interest in tier four tier five which is fantastic because that that really does expand the tam for us I would say that there's probably about 60% to 70% of some of the miles that are going live that are related to tier four tier five that may go down a little bit because we know some.
Speaker Change: <unk> seen some larger cities that are going to happen in the second half of the year, but it's still growing quite nicely and we expect that to continue.
Alex Latimore: Awesome. That's all for me.
Speaker Change: Awesome.
Unknown Attendee: Thank you.
Speaker Change: All for me. Thank you guys.
Speaker Change: Yeah.
Speaker Change: Thank you.
Max Michael: Our next question comes from the line of Max Michael. Is with the three capital market.
Speaker Change: Our next question comes from the line of Max Michael.
Speaker Change: Michael This with Lake Street Capital markets. Please proceed with your question.
Max Michael: Please proceed with your. Hey guys, thanks for taking my questions. Just two from me.
Max Michael: Hey, guys. Thanks for taking my questions just two for me if we look at the city expansion in the quarter of three I mean, how does that line up with internal expectations, maybe going into the quarter.
Max Michael: If we look at the city expansion in the quarter of three, I mean how does that line up with internal expectations maybe going into the quarter?
Speaker Change: Yeah.
Ralph Clark: Yeah, this is Ralph. I think it's pretty much in line with what we expected for the quarter. Actually, I think overall performance across the entire Safety Smart platform has been pretty consistent with what we expected going into the quarter, notwithstanding the kind of 500 K plus pull forward on the professional service inside with our project at DOC, which is running way ahead of schedule. We're really, really good teams doing an outstanding job in supporting that particular customer. So pretty much, pretty much on par with what we expected.
Ralph Clark: Yeah, this is Ralph. I think it's pretty much in line with what we expected for the quarter.
Ralph Clark: Alright, and then last one for me. This partnership with the recourse seems pretty interesting. I know it's still early innings here, but have you guys given like a size of the revenue opportunity here, maybe on an annual basis with this partnership?
Ralph Clark: Yeah, so this is Ralph. I'll take a stab at answering the question, and now jump in and correct that on as appropriate. I would say my answer to that is we're incredibly excited about the market opportunity. The TAM is very large. We obviously spend a lot of time with law enforcement agencies around Acusa Gunshot Detection and have always sought to kind of integrate Acusa Gunshot Detection with other technologies, including LPR. So for us to be able to do that effectively, natively through this recourse partnership is really, really quite exciting. I don't think I have to educate you all out there about the tremendous success that some LPR companies have had around kind of changing the model to a managed services recurring revenue model, which we've always been about as ShotSpotter, at least with our core shotsfire solution.
Ralph Clark: So the ability for us to kind of bring the solution on a managed services basis, very cost effectively, nicely integrated with not only Acusa Gunshot Detection, but also some of our investigative solutions. We think is going to create a compelling value proposition for customers out there, and we're thrilled with the inbound activity that we're seeing along those lines, both domestically, and I'll say I was on the phone this morning with our partner in South Africa. That's really excited about what we're doing, which is a bit of an anticipated surprise. I don't think we're thinking about rolling out to South Africa that quickly, but it was interesting enough for him to call me at 3:30 this morning for us to chat about it.
Alan Stewart: So we're incredibly excited about it, and hopefully we'll be sharing some good news to come on that basis very soon.
Alan Stewart: Yeah, Mrs. Allen, just to answer the last part of the question, I agree with everything Ralph said. We don't know exactly yet in terms of how much revenue; we know that there's a lot of interest.
Alan Stewart: We know the market is quite large, and we're hoping that that's going to be at least a pretty exciting amount of revenue for the next couple of years.
Max Michael: That's it for me. Thanks, guys.
Lily: Thank you. Our next question comes from the line of Lily: the problem with William Blair. Please proceed with your question.
Speaker Change: Sign of Louie Dipalma with William Blair. Please proceed with your question.
Ralph Clark: Ralph and Allen, good afternoon. You highlighted how shots' butter went live in three new cities, and I think there was seven expansions that were referenced, and you referenced the plan to add 100 miles this year. Given that traction from new and existing customers have sales cycles generally improved from earlier in the year. I know on the last earnings call you commented that sales cycles were extended because of some of the noise and the different media articles, but has there been an improvement, and do you expect this recent momentum to carry over into 2025? Yeah, so this is Ralph. So I would say our win rate is as expected.
Speaker Change: Ralph and Allan and good afternoon.
Speaker Change: Good afternoon.
Speaker Change:
Speaker Change: You highlighted how Shotspotter went live in three new cities and I think there was.
Speaker Change: Seven expansions that were referenced then you referenced the the plan to add 100 miles this year given that traction from new and existing customers have sales cycles generally improved from.
Speaker Change: Earlier in the year I know on the last earnings call. You commented that sales cycles were extended because of some of the noise and the different media articles, but has there been.
Speaker Change: And improvement and do you expect this recent momentum to carry over into 2025.
Speaker Change: Yeah. So this is Ralph so I would say our win rate as is as expected I mean this is a marketplace that we essentially created and.
Ralph Clark: I mean this is a marketplace that we essentially created and effectively kind of own and lead, if you will, so we're not losing to anybody, so that's still very encouraging. Deal cycle times are, we say, elongating. We certainly have to spend more time with both existing customers; they're looking at expansions, plus new customers, really helping them better articulate the value of this technology and how to use the support of their critical response and investigative capability with respect to Guncrime.
Ralph Clark: I continue to believe that we expect that to continue, which is frankly one of the reasons we've taken our kind of expected mileage down from 120 square miles, which we had talked about earlier this year, to be north of 100 because we are seeing some stretching out of the sales cycle, but we're still winning and not losing, so that's incredibly encouraging.
Ralph Clark: Great, and as it relates to the Record Plate Ranger partnership, you provided more color in your answers to the previous question. But how is your solution going to stack up versus some of the existing solutions on the market? Is your solution going to be priced comparatively to some of the others, and are there any other differentiators that you're going to provide? So this is Ralph again. I'll take a crack at answering that. I would say, kind of feature function wise, we expect to be best to breathe just because we have additional assets we can bring, unique assets that we can bring to solving gun related crime to the extent that it involves an automobile or license plate that we're trapping. So that's going to be incredibly unique and highly differentiated. And then when you combine that with our investigative solution of both crime tracer as well as case builder, that's also very compelling. So once you get a hit, how you're kind of correlating that specific data with other pieces of data to then open up a case or investigate a particular situation is going to be, you know, kind of information at your fingertips almost, right? So you don't have to go and do separate systems and law bound different systems. We're going to offer a much more kind of seamless experience in that regard. I would say with respect to the pricing, we're going to price this on a very competitive basis. We're not going to price it at a premium, nor do we feel like we have to price it at a significant discount. I think we're going to be that competitive. And I think the other unique thing that we're bringing to the table here is the way we go about coaching customers up on customer success, how they develop kind of policies and practices to get the full utilization of the technology. We have a lot of experience along that, along those lines, and we have a lot of resources along those lines too. And I think that's going to be incredibly differentiated as well. So that's one of the reasons we're pretty excited about it. Great.
Ralph Clark: And the last one, what are the new features with the 3D cameras that are expected to be released in the third quarter, four year, safe point, solution, and how are they an upgrade versus the existing cameras that are used? So I'm going to describe it now.
Ralph Clark: I'll probably quickly get out of my element here, and because we have a lot of PhDs and scientists in this regard. But I think the way to think about it is the 3D camera is going to give us a much higher resolution view of both kind of speed and direction of the object moving through the magnetic field. We're going to actually be able to take snapshots of kind of skeletal movement. And so one of the unique features we're bringing to the table is the location of the gun that the magnetic moment finds. And so being able to be able to kind of parse out, you know, individuals moving through the magnetic fields person by person or I would say not person because we don't know the specific identity of the person.
Ralph Clark: But I'll say kind of skeleton by skeleton, the speed at which they're moving, the direction at what they're moving, their height, their gait, all that stuff being combined with this other very interesting feature rich data that we are capturing and kind of running through these models is going to give us some very unique capabilities. And again, just to remind folks that our weapons detection technology is completely covert. So it's not like you're going through a metal detector. So to the friction point of having people stop through it even go through a fancy evolved system, which is, you know, very fancy one, but it's a metal detector and it's left it slows down the traffic with us.
Speaker Change: And kind of running through these model is going to give us some very unique capabilities and again just to remind folks that our weapons detection technology is completely covered so it's not like you're going through a metal detector. So to the the friction point of having people stopped through it.
Speaker Change: Even go through a fancy evolve system, which as you know very fancy, one, but its a metal detector. Nevertheless, it slows down the traffic with us you're you're not even knowing that you're passing the metal detector, because it's completely innocuous too to the traffic. So that's that's pretty interesting and cool and we think and it's gonna be very differentiated and <unk>.
Ralph Clark: You're not even knowing that you're passing the metal detector because it's completely innocuous to the traffic. So that's that's pretty interesting and cool, we think.
Ralph Clark: And it's going to be very differentiated and super important to specific verticals like hospitals and gaming enterprises that don't want people to walk through metal detectors, even really fancy ones.
Speaker Change: Super important to specific verticals like hospitals and gaming enterprises that don't want people to walk through metal detectors, even really fancy ones.
Unknown Attendee: Excellent. So thanks, Ralph and Alan. Thank you.
Speaker Change: Excellent. Thanks.
Rafael: Thanks Rafael.
Speaker Change: Thank you.
Thank you.
C. J.: Thank you. Our next question comes from the line of C. J.
CJ Bolino: Our next question comes from the line of CJ Bolino with Craig Allen Capital Group. Please proceed with your question. Hey guys, CJ Bolino on for Jeremy Ham on this afternoon. Just had two questions.
Speaker Change: It does.
Speaker Change: Pollino with Craig Hallum Capital Group. Please proceed with your question.
C J: Hey, guys C J definitely know on for Jeremy Hamblin. This afternoon.
Speaker Change: Just had two questions I'm going to break the first one and two are two different parts. So congrats.
Alan Stewart: I'm going to break the first one into two different parts. So, you know, congrats on seeing some good gross margin expansion. Just wanted to see if there was anything that you'd really call out that led to that expansion. And then, you know, second part of the question is, I know you mentioned there's going to be kind of a sequential dip in Q3 for revenues and then a rebound of Q4. Are you expecting gross margins to kind of track and line with sales, or, you know, would do more likely see continued gross margin expansion?
Speaker Change: Congrats on seeing some good gross margin expansion just wanted to see if there's anything that you'd really call out that that led to that expansion and then some.
Speaker Change: A good part of the question is I know you mentioned that can be kind of a sequential dip in Q3 for revenues and then a rebound in Q4 are you expecting gross margins to kind of track in line with sales or are you now would you.
Alan Stewart: Yeah, this is Alan. Great question. I appreciate that. I think the most important thing to see is, like, Q2 last year our gross margins were about a little over 57 percent, and now around 60 percent. Some of that is, of course, related to some of professional services being pulled into Q2 from Q3, but not that significant. So, it's not going to change a lot. You may see gross margin go down just slightly in Q3 but then back up again in Q4, and we still think we're going to hit the 60 percent or 60 percent plus for the entire year.
Unknown Attendee: Okay, awesome.
Unknown Attendee: That's great to hear.
Ralph Clark: And then the second and last question before I hop back into the queue. I know you've talked about a New York City contract that you guys are currently working on. Is there anything you can share in terms of time hunt, or when you expect that to be finished? And I guess the second part of that question is, do you, are you still expecting somewhere around 90 miles of coverage for that contract?
Ralph Clark: Yeah, so this is Ralph. I would say that, you know, first of all, Shop Spotter is a critical tool in the NYPD, NYPD toolbox to better respond to an investigate gun crime. And we've already put forward a renewal proposal to NYPD. They've been a customer for a very long time. Our expectation is that we're going to continue the service as currently configured over 90 square miles at roughly the same price, maybe with a slight COLA bump on the upside, but we expect that deal to be fully transacted before the term ends later in queue four.
Unknown Attendee: Okay. Awesome. That's very helpful. Thank you, guys, and good luck with the rest of the year.
Unknown Attendee: Okay, awesome.
Unknown Attendee: That's very helpful.
Unknown Attendee: Thank you, guys, and good luck with the rest of the year.
Unknown Attendee: Thank you very much. Thank you.
Operator: At this time, this concludes our question-and-answer session.
Operator: If your question was not taken, you may contact Sound Thinking and Restoration team by emailing STI at gateway-grp.com.
Ralph Clark: I'd now like to turn the call back over to Mr. Clark for his closing remarks.
Ralph Clark: Great. Just want to thank everyone for dialing in. We know it's a really busy day across both the financial world as well as the political world, so we'll let everybody get back to it. I'm looking forward to our one-on-one calls in just a bit. Thanks, everyone, and have a nice evening. Bye-bye.
Ralph Clark: Great.
Ralph Clark: Just want to thank everyone for dialing in. We know it's a really busy day across both the financial, the financial world as well as the political world. So we'll let everybody get back to it, and looking forward to our one-on-one calls in just a bit.
Operator: Thanks everyone, and have a nice evening. Bye-bye.
Operator: Thank you for joining us today for today's call.
Operator: You may now disconnect. Thank you very much.