Q1 2025 SoundThinking Inc Earnings Call
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Speaker Change: Good afternoon, and welcome to SoundThinking's first quarter, 2025 Earnings Conference call.
Kevin: My name is Kevin and I'll be your operator for today's call.
Speaker Change: Joining us are SoundThinking CEO Ralph Clark and CFO Alan Stewart.
Speaker Change: Please note that certain information discussed on the call today will include forward-looking statements for our future events and SoundThinking's business strategy in future financial and operating performance.
Speaker Change: These four-looking statements are only predictions or are subject to risks of certainties and assumptions that are difficult to predict and may cause actual results to differ materially from those stated or implied by those statements.
Speaker Change: Certain of these risks and assumptions are discussed in SoundThinking's SEC filings, including its registration statement on form S1.
Speaker Change: These forward-looking statements reflect management's beliefs, estimates and predictions as of the date of this live broadcast May 13, 2025, and SoundThinking undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.
Speaker Change: Finally, I'd like to remind everyone that this call be recorded and made available for replay via a link available in the Invest Relations section of the company's website at ir.soundthinking.com With that, I'll turn the call over to Ralph. Ralph, please go ahead.
Ralph Clark: Good afternoon, and thank you for joining SoundThinking's Q1 2025 earnings call.
Ralph Clark: I'll start by providing some high-level commentary on our financial results, progress we're making on our key strategic initiatives, and then share some thoughts on the headwinds and tailwinds we're seeing in the public safety and security marketplace.
Ralph Clark: On Plaser Report that we're off to a strong start in 2025, delivering disciplined growth and expanding our platform and data aggregation capabilities to help position SoundThinking as a clear leader in the public safety technology space.
Ralph Clark: Our work matters and we believe it's resonating in the market.
Ralph Clark: I'm proud of the momentum we've built and even more excited about what's ahead.
Ralph Clark: In the first quarter we delivered 12% revenue growth year over year of $28.3 million driven by solid new sales and renewal activity.
Ralph Clark: As a reminder, there was approximately $3.5 million of catch-up revenue in the quarter, based on the renewal of two delayed contracts with New York City Police Department, including ShotSpotter and Technologic, which totaled $64 million over a three-year term.
Ralph Clark: Our Justin EBITDA Group 50% year-over-year to $4.5 million highlighting our operational leverage and profitable growth strategy.
Ralph Clark: ShotSpotter remains a core part of our Safety Smart portfolio and is trusted by public safety agencies across the country. In Q1, that trust was reaffirmed with NYPD's decision to extend their ShotSpotter contract for an additional three years.
Ralph Clark: We believe that this renewal with one of our largest and longest standing customers, 12 years in county, speaks volumes about the sustained value and operational reliability of our gunshot detection platform in America's largest city.
Ralph Clark: We also went live with four new cities plus one expansion in the quarter.
Ralph Clark: We will now have two strong and important reference customers in both Spanish speaking and Portuguese speaking Latin America.
Ralph Clark: We expect to see accelerated traction with shotspotter internationally in the second half of this year and early 2020 sets based on these touchdowns.
Ralph Clark: Let me also take a moment to address the recent five-year Chicago Gunshot Detection Arcade, which we bid on in April .
Ralph Clark: We believe our submission represents a comprehensive and compelling proposal that reflects our deep experience, proven performance, and long-standing partnership with the city which spanned well over a decade.
Ralph Clark: We fully respect the integrity and objectivity of the procurement process, but quietly feel confident in the strength of our offering and the differentiated value that we will bring back to the city of Chicago.
Ralph Clark: And while we await the outcome of the formal beta-judication process, I must also emphasize that our current outlook does not include any contribution from Chicago. Any potential re-engagement with Chicago would represent pure upside.
Ralph Clark: Our prime tracer's solution is evolving into one of the most powerful AI enhanced law enforcement tools in the country.
Ralph Clark: We warehouse over 1 billion seedless compliant documents for more than 1,000 law enforcement agencies and federate to billions more through in-depth Navy links and Thompson Reuters clear, giving investigators access to an expansive depth of structured and unstructured data.
Ralph Clark: But what we believe makes crime tracer truly unique is how we can apply generative AI in soon the large language models and agents to make that data just not searchable but contextually insightful.
Ralph Clark: This quarter we deployed new features that allow investigators to ask natural language queries like, show me persons of interest who match known patterns in recent thefts involving white bands in three counties.
Ralph Clark: and received actual insights that would take hours if not days to surface manually. The combination of search, summarization, and synthesis is transforming what's possible for digital taste work in crime linking.
Ralph Clark: Furthermore, we also pay progress integrating crime tracers large data footprint with plate rangers ALPR data to unlock powerful response and investigative use cases for our customers.
Ralph Clark: We believe that this integration provides a force multiplier for real time and retrospective investigations, allowing investigators to seamlessly move back and forth from narrative-based incident search to connect at license plate recognition.
Ralph Clark: We believe this ability will enable agencies to help solve cases faster with fewer resources.
Dr. Walsh, Eric Martinuzzi, Aditya Dagaonkar,
Ralph Clark: The early feedback has been extremely positive and has proven to be a powerful differentiator in driving plate ranger traction.
Ralph Clark: More importantly, we view this as foundational to move into building a truly multimodal investigative intelligence platform that combines people, places, vehicles and incidents in a single pain of glass.
Ralph Clark: We continue to scale Resource Router, our proactive patrol planning tool, with strong adoption and demonstrable results. Resource Router is currently deployed in over 20 agencies, more than double its install base less than 18 months ago.
Ralph Clark: Agencies are using it to allocate limited officer resources to areas with the highest probability of criminal activity, and we're seeing real-world impact in both community engagement and crime suppression.
Ralph Clark: As public safety agencies face mounting pressure to do more with less, resource router seems to be an essential capability, not just a nice to have.
Ralph Clark: Following the passage of California Assembly Bill 2975, hospitals are now required to employ weapon protection systems at all public entrances by 2027.
Ralph Clark: This is a seismic shift in healthcare security policy and plays directly to safe point strength.
Ralph Clark: Our system uses passive low-frequency magnetic field detection, not invasive scanners or disruptive walkthrough gates or intimidating checkpoints.
Ralph Clark: That means hospitals can maintain patient dignity, visitor experience and operational throughput all while meeting the new legal compliance standard for safety.
Ralph Clark: We've already engaged with multiple large health care systems in California and we see similar legislation advancing in Maryland, New Jersey and beyond.
Ralph Clark: We believe SafePoint can become a category defining solution in this space, not only for hospitals, but for any environment where high-flow, high-fake security is required.
Ralph Clark: As we move further into 2025, we remain bullish and focus on executing to our growth strategy and strategic roadmap.
Ralph Clark: And while there have been very positive tailwinds to our business, driving strong demand for our capabilities, we remain acutely vigilant around lingering headwinds, especially those related to municipal funding and budgets.
Ralph Clark: We're taking appropriate risk mitigation efforts, including doubling down on our customer success and engagement efforts, adding a grant-writing resource in modeling higher levels of attrition than what we have historically experienced to account for that volatility.
Ralph Clark: To that end, we continue to believe that we're a well-positioned to drive both revenue and ARR growth for 2025.
Ralph Clark: to account for the modest impact of the current tariff regime, along with investments we're making in AI modeling and tools in AWS, that are being incorporated in our products as well as for our internal operational use.
Ralph Clark: I will now turn the call over to Alan to discuss our financial results for the first quarter 2025, as well as guidance for the full year 2025 in detail, and then we will be happy to take your questions.
Alan Stewart: Thank you, Ralph, and good afternoon, everyone. As Ralph mentioned, we are pleased with our first quarter of 2025 results. Our strong financial performance reflects the success of our ongoing strategic initiatives, operational efficiency measures, and our commitment to delivering value to our shareholders.
Alan Stewart: Revenue to a $28.3 million dollars representing a 12% increase over the $25.4 million dollars in the first quarter of 2024.
Alan Stewart: As Ralph mentioned, our 2024 year end financial results were impacted primarily due to the delayed renewal of two contracts with New York City Police Department.
Alan Stewart: The book use of all of our safety smart platform solutions, some of which are multi-year contracts are also growing healthily.
Alan Stewart: Rose profit was $16.6 million or $59% of revenue compared to $14.9 million or $59% of revenue
Alan Stewart: Our adjusted EBITDA was $4.5 million compared to $3 million in the first quarter of 2024.
Our Justity Vida increase was related to the delay contracts.
Alan Stewart: As a reminder of Justin Ibiza, a non-GAAP financial measure is calculated by taking our gap in it and come our loss.
Alan Stewart: Restructuring Costs and losses including those related to fixed acid disposal, stock-based conversation expenses, and acquisition related expenses including adjustments to our contingent
Alan Stewart: It's one time event happens only once a year, generally in the first quarter.
Alan Stewart: Our legal and accounting expenses are also historically higher in the first quarter as we complete our annual financial audit and our preparation for and filing of our 10K and as Ralph mentioned we are investing more in our AI capabilities as well.
Alan Stewart: Our operating expenses were $17.8 million or $63% of revenues compared to $17.5 million or $69% of revenues in the first quarter of 2024.
Alan Stewart: Breaking down our expenses, sales and marketing expense to the first quarter was $7.3 million or 26% of total revenue compared to $7.1 million or 28% of total revenue in line with the prior year period.
Alan Stewart: Our R&D expenses were $4.19 million or 14% of total revenue compared to $3.6 million or 14% total revenue in the prior year period.
Alan Stewart: G&A expenses of the quarter were $6.5 million or $23% of total revenue compared to $6.8 million or $27% of total revenue for the prior year period. As a reminder, we expect our G&A expenses to grow less than a revenue on a percentage basis as our company grows.
Alan Stewart: is important to recognize that the percentage of revenue of each of our op-ex categories is at or below the level of the first quarter of last year.
Alan Stewart: Our GapNet loss was approximately $1.5 million or loss of $0.12 per basic and diluted share for the quarter, based on $12.6 million basic and diluted weighted average shares
Alan Stewart: This compares to net loss of $2.9 million or 23 cents for basic and eluded share based on $12.8 million basic and eluded weighted average shares outstanding for the prior year period.
Alan Stewart: Deferred revenue as of March 31st, 2025 was largely in line at $45.4 million, compared to $44.2 million at the end of 4th Glitter 2024.
Alan Stewart: We ended the first quarter with $11.7 million in cash and cash equivalence compared to $13.2 million at the end of fourth quarter of 2024 and much higher than the $5.7 million that we had at the end of 2023.
Alan Stewart: We repurchased $33,493 of our shares at an average price of $15.04 for approximately $504,000 in the first quarter of 2025.
Alan Stewart: Currently, we have approximately $21 million available on our line of credit, as we have approximately $4 million in debt outstanding, all of our line of credit.
Alan Stewart: Now turn to our guides for the full year of 2025.
Alan Stewart: We are reaffirming our four-year revenue guidance range of $111 to $113 million.
Alan Stewart: Related to potential costs associated with tariff changes and the investments that we are making in AI modeling and tools that we are incorporating in our products and internal operational
Alan Stewart: We are reaffirming our expectation for our annual recurring revenue, our ARR, to increase from $95.6 million at the beginning of 2025 to approximately $110 million at the beginning of
Alan Stewart: As a reminder, this guidance is in spite of the loss of approximately $9.7 million from the loss of the Chicago Shots butter contract in 2024.
Alan Stewart: Overall, we are pleased with the progress we've made on each of our strategic initiatives in Operation Forms of the Business.
Alan Stewart: With that, we're now happy to open the call for questions. Operator, will you please open the line for Q&A?
Alan Stewart: Certainly, when now be conducting a question and answer session, if you'd like to be placed into question Q, please press star one on your telephone keypad.
Alan Stewart: We ask you please ask one question and one follow-up that return to the queue. Once again that star want to be placed in the question queue.
One moment, please, while we pull for questions.
Speaker Change: Our first question today is coming from Richard Baldry, from Ralph Capital Partners, your line is now live.
Richard Baldry: Thanks. Now that you've got a broader suite of tools, can you talk about how you manage the pipeline there to make sure you're not overweighting or underweighting resources in each of those areas?
Richard Baldry: We're targeting kind of three to four X coverage based on the annual contract value quotas that we've issued out to the sales team.
Richard Baldry: Then they're looking at safe points specifically. I think you revamped that product in the past year. So is there any early feedback on that? Maybe any like customer cases, is there any without naming names, maybe verticals you sold into at that?
Richard Baldry: We've seen really success across the board, particularly in the healthcare vertical, where I think our discrete architecture is critically important to a healthcare concern.
Richard Baldry: I think we talked about on our last call that we have a couple of proof-of-concept deployments going in on one of the top five top 10 healthcare chains here in the U.S. One of those is actually kicked off and is going pretty well. We're hoping to light up the second one here in Q2.
Richard Baldry: So, more to come on a safe point in the healthcare vertical.
Great, thanks.
Speaker Change: Thank you. Next question today is coming from Michael Latimore, from Northern Capital. Your line is now live.
Speaker Change: Say hi, this is Aditya on behalf of Michael Atimore. Could it give some color on, if
Do you want to take that, Alan?
Bookings, we have a significant amount of pipeline in there.
Speaker Change: but so I would say it is still going to be somewhere.
Speaker Change: Bookings, and we're expecting slightly less than that in revenue this year, but significant increase in revenue into next year. We are seeing a lot of interest there, and we are running a couple different kinds of marketing aspects to get more customers into the actual contracts.
Speaker Change: Got it. And do you see additional expansion in Porto Rico this year?
Yeah, this is Ralph, I think we're- [inaudible]
Go ahead, Ralph. No, go ahead. Sorry.
Speaker Change: No, I was saying that Puerto Rico, as we mentioned before, the concept we have right now ends at the end of June .
We are in ongoing discussions with them.
Speaker Change: to not only extend that contract, but to make that into a multi-year extension renewal.
Speaker Change: We are also in discussion with them. We'll give you two minutes more details on that, but with some potential expansions beyond the 30 miles that we have there. So, things are going positive there, but as we all know it just takes some time, especially dealing with Puerto Rico.
Gordon, thank you.
Speaker Change: Thank you. As a reminder, that star 1 to be placed in the question Q, our next question is coming from Trevor Walsh from Citizens Your Line Is Not Live.
Trevor Walsh: Thanks, Alan, and Ralph. Thanks for taking the questions. Maybe rotating back to the safe point piece. Great to hear the legislative sort of win, I guess, in California. Can you maybe, Ralph, just give us a sense of based on kind of where you see...
Trevor Walsh: The sales cycle around safe point, kind of executing now currently and then based on that 2027 requirement when you think...
Trevor Walsh: Deals really start to materialize around that. I would imagine maybe more into 2026 just based on the timing, but I guess how far an advanced new customers need to start prepping for that new requirement.
Trevor Walsh: Fred would do nothing because now at least 400 hospitals have to do something.
Trevor Walsh: along the Weapons Detection Space. And we think because the uniqueness of our offering with respect to the passive sensors is discrete deployment and not having a checkpoint that we're well positioned to get our fair share of that particular market. But we're going to have to invest some time and energy certainly working with Cal OSHA and the various participants that were kind of behind getting this bill passed in the first place along with hospital chains in California.
So we're pretty excited about it as you might imagine.
Speaker Change: Awesome, great, thanks for the color there, and Alan made me my follow-up for you if I can't. I recall from last quarter when we were discussing the New York kind of...
Speaker Change: of pushing up the deals, I guess, into this quarter that there was going to be some at least benefits of the deal sliding around the margins because of kind of a cost being already outlaid, and then the revenue is hitting kind of later. But it didn't seem like that necessarily materialized by at least just kind of looking at kind of where gross margins lined up in the quarter. So he's wondering if...
Speaker Change: What, you know, maybe it was other things of the things that you had called out on the quarter around for the other cost and the annual meeting, etc. that maybe kind of washed that out a little bit, but just curious kind of what, how that materialized in the numbers. Thanks.
Our all-hands meeting was north to $700,000.
Speaker Change: That increased our actual bandwidth usage of like AWS and Azure. That was probably a couple hundred thousand dollars as well. So when you start adding the million dollars in terms of expenses,
Speaker Change: There was still some things that we had to cost a little bit related to some actual commissions that were owed to prior company was doing some of that as well as a little bit of a cost to a good-sold cost for into that.
Speaker Change: Got it. Okay, super helpful. We'll get back in the queue.
Eric Martinucci: Thank you. Next question is coming from Eric Martinuzzi, from Lake Street, your life is now live.
Eric Martinucci: I'm curious to know about the revenue progression, given the the outsize kind of a 3.5 million lumpiness that occurred in Q1. How should we be thinking about the progression to Q2? And at least what I've got for consensus is 27.8.
Eric Martinucci: which would be a step up from 28.3 minus 3.5. Just wanted to make sure you're comfortable with that step up.
Alan Stewart: Yes, so this is Alan. It's a great question. And having that that three and a half out, you know, would have put us back down around that.
Speaker Change: We need in order to hit our revenue guides for the year.
in the YouTube Comments section.
starts recognizing a lot more of the revenue.
Speaker Change: Yeah, it's another great question. We're still expecting our gross margins to stay around there for the year.
Speaker Change: As we continue to invest, we are seeing some of those costs.
Speaker Change: When you talk about the change in the adjusted EBITDA percentage, it's only a little over a million dollars, but you've got some of that's going to go through cost of goods sold, such as things like the increase in sensors.
Speaker Change: that we deploy for the shot spotter. That might be somewhere around 250, maybe $300,000 between new sensors.
and Replacement Sensors [inaudible]
So that's going to affect that a little bit.
Speaker Change: of all the appropriate things, especially for say point, into the algorithms and modeling.
Speaker Change: You know, so that's going to be, you know, from the bandwidth costs, AWS, Azure as well as personnel.
Speaker Change: You know, you can add that in another, you know, probably $700 plus thousand dollars throughout the year, not obviously quarter by quarter, but, uh...
Speaker Change: That's something that is going to keep the cost of goods sold a little lower, but I think it's still important to understand that overall our operating expense is growing and will continue to grow less than the revenue, even with those additional costs.
Speaker Change: So, it's something that we are managing, and you can even see that from, you know, Q1 will ask sure our total optics was 17.5, this year was down to 17.2, even though revenue went up.
Thanks for taking my questions.
Speaker Change: Thank you. Next question is coming from Jeremy Hamblin from Great Hallum, your line is now live.
Speaker Change: Thanks for taking the questions, and I wanted to come back to AB 2975, safe point, and just understand in terms of the total number of facilities within the state of California that you believe to be...
Speaker Change: required under this new law to put in place, you know, detection. That's kind of part one. And then part two is, I think you mentioned Maryland New Jersey, Virginia's other states looking at, you know, similar type of legislation.
Speaker Change: If you add those states in, then what kind of the total number of addressable facilities that we're talking about?
Speaker Change: Yeah, thanks, Jeremy. This is Ralph. With respect to the state of California, we're estimating, this is directionally true. I'd say we're estimating that there's about 400 hospitals.
Speaker Change: There is a car about certainly for a number of hospitals that are in rules settings or more kind of clinics that don't have to
Speaker Change: that are kind of in the early discussions of doing something similar to California might flip over and have similar legislation. We know in the state of Illinois, for example, although it doesn't apply to hospitals, there's a similar regime with respect to requiring weapons detections for casinos.
Speaker Change: in the state of Illinois. So this is something that's going to be, I think, part and parcel for this particular market around how.
Speaker Change: Certain entities need to become compliant and they can't afford to do nothing. So it's a bit of a kind of unfunded mandate that we're going to be tracking on, of course.
Speaker Change: The annualized cost of the safe point per entryway, compare versus kind of traditional solutions.
Speaker Change: You know, whether that's, you know, Garrett or Chea, you know, kind of traditional metal detector weapons detection, you know, or an evolved system that's a bit more, you know, AI tools.
Speaker Change: involved. Can you give us a sense, you know, in terms of bidding on these opportunities where you fall? Yeah, expect from.
Speaker Change: Yeah, thanks for that following question. So I can tell you what our pricing model is in business model. We're we're charging about $20,000 per year per lane.
Speaker Change: And that's kind of similar in many ways to a shotspotter when you think about our costs to deploy and how we recapture that cost investment is very similar to shotspotter. We're breaking even on a lane inside of 12 months.
Speaker Change: and then kind of the ongoing annual subscription fee to the extent that people with renew would be super high margin for us. Interestingly enough, we're finding and dealing with commercial opportunities that a number of these customers are signing up for multi-year deals.
Speaker Change: We've learned a lot from our experience in shotspotter in terms of just not providing the base capability of detecting weapons, but also the reporting in analytics that go along with that. So we have an insight solution. Well, it's not kind of like insight. It is insight that you'd be familiar with with shotspotter. We reimagine that to the safe point solution. Now where agencies can, if she's me corporate entities can basically check their ingress flow. Well, let's take a closer look at this.
Speaker Change: Risk of potential workplace violence in hospitals.
Speaker Change: Great, great color. I wanted to also just ask a little bit more about the international opportunities that you mentioned.
Alright, so Deploying in Brazil, here in Q2.
Speaker Change: And then, as you think about some of the other opportunities, I know you've probably looked at some expansion in South Africa.
Speaker Change: You've noted previously, so the other Latin American countries that you might be looking at as well as the Caribbean, and just to get a sense for timing, I know typically the international. [inaudible]
Speaker Change: Bidding is a little bit longer sales cycle, so I wanted to get a sense for how we should be thinking about that.
Speaker Change: Yeah, so you're absolutely correct. The international sales cycles tend to even be longer than the long sales cycles domestically, but they're super impactful, just to remind you and others that are pricing leverage fairs. We typically charge three X.
Speaker Change: to what we charge domestically. So when the deals happen, they happen in fairly big ways.
Speaker Change: Hey look, we're really excited about Latin American, particularly kind of going back to Brazil. We were in Brazil in a couple of cities back what I joined the company in 2010 on our legacy business model, so to be able to return to Brazil is really exciting because of all the Latin American countries.
Speaker Change: Our first mover in Nita Roy Brazil, which is importantly that, excuse me, Portuguese speaking is going to be important for us to hopefully reopen that market opportunity. And we're all ready in discussions without...
Speaker Change: Thank you much more. We're already in discussions with a couple of other cities in Brazil kind of doing a quick follow hopefully to
Speaker Change: Early adopter, a customer in Spanish-speaking Latin America. We've had a number of municipalities from other neighboring Latin America, Spanish-speaking Latin American countries, South American countries, excuse me, that have visited much of the day, and they've actually gone out to various Latin America security conferences, talking about their success.
Speaker Change: I do also want to point out that it's just not shotspotter but we're really excited about a couple of pretty interesting opportunities.
Speaker Change: with a resource router in both an existing Latin American country, where that's already a shotspotter customer, and then one non-shotspotter customer that's pretty substantial, and then also true with a plate ranger as well.
Speaker Change: And if you follow our press at anything or follow the press in South Africa, you'll see that there is...
Speaker Change: A real, real need for an expanded footprint in and around Cape Town that we're hopefully going to get the Western province to support, so we've got a lot of interesting activities going on. Timing-wise, I think the best way to think about this is late, late.
Speaker Change: 2025, early 2026, for some of those cards to flip over. Did that answer your question?
Speaker Change: Yeah, very helpful. Last one for me is back to the operating expenses for a second. So you saw an uptick in R&D costs, both on a run rate from last year, but also from the end of the 24.
Speaker Change: Was that where you're reflecting some of the AI tool investments? Is that falling into that bucket? Or is there any other color you might be able to share on whether or not that kind of $4 million run rate in R&D is kind of where we should be thinking?
Speaker Change: helping us with the AI algorithms. We're doing a lot of modeling right now.
Related to Safe Point Primarily.
Most of the cost is related to that.
Speaker Change: So, that's basically where it is. Also, some of the AWS and some of the other family type costs end up in the R&D bucket itself.
Speaker Change: That's primarily where it is. I do think you're going to see these.
Speaker Change: for a little more than 4.1 go down a little bit as we stabilize those but it's not going to significantly throughout the rest of the year, but it will definitely still grow less than the
Thanks for taking on my questions and good luck.
Ralph Clark: Thank you. We've reached out to our question and answer session. I'd like to turn the floor back over to Ralph for any further closing comments.
Ralph Clark: Great, yeah thank you very much and thank you all for joining us again today. As you've heard, we're executing well across the board. We're expanding our platform, deepening customer relationships, and pursuing new opportunities in AI-driven public safety.
Ralph Clark: We certainly appreciate your continued support and look forward to keeping you updated in our progress. Thanks again for joining the call.
Ralph Clark: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.