ShotSpotter (SSTI) 9 May 232023 Q1 Earnings call transcript

Good afternoon, and welcome to SoundThinking's First Quarter 2023 Conference Call. My name is Ali, and I will be your operator for today's call.

Joining us are 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. and registration discussed statement risks filings, SoundThinking's these its including on of assumptions in are SEC Certain Form S-X. reflect of date call. May to reflect statements of of revise or undertakes this forward-looking management's or forward-looking and to estimates These statements any predictions no the obligation date XXXX, circumstances this X, broadcast, events update live and SoundThinking beliefs, as after the

this link call for Finally, in will recorded remind I would section available a like and website Relations replay Investor everyone via company's at available to the made the be of ir.soundthinking.com.

now turn like I over would Clark. to to Ralph SoundThinking's CEO, proceed. call please Sir, the

very thank positive employees conference for first investors. and called from our we've excited afternoon, our QX our rebranding We're seen partners, earnings you effort and about call and response prospects, our the and many XXXX quarterly clients, public you, Good SoundThinking. of joining as

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Turning performance. to financial

our revenues $XX.X $X.X division. catch-up to was XX% from flowed of million of of QX material the for with XXXX compared Again, QX in compared XX% EBITDA QX from to XXXX line. QX was revenue due the Adjusted to were $X.X XXXX revenue our mostly expectations million or LEEDS revenue $XX.X in revenues to million elevated or by this XXXX. line LEEDS with some driven bottom revenues million mostly primarily that Our catch-up

miles live new projects expansion went with delivered with have County in projects miles ShotSpotter Cape months currently within modest XX over We This X process placing by XX deployed and this them cities Africa. deployment Detroit quarter. as the of plus, total. including largest represented of approximately in We XX being third next X recently going included X South miles expansion our the contracted XX over the approximately Town, solution the of the in quarter, ShotSpotter square XX Suffolk a miles contracted and live

within with Alderman scene alert press held the CCTV of Town, Speaking the conference of we the would during successful JP minutes the very the the a view South Cape have Cape livestream session, had is the where Mayor the press assembled as who of a And alert. showing response X tactical ShotSpotter Hill-Lewis; came and portfolio responsible for City opportunity fate footage it, in Town. for Smith, Africa, Q&A the to security to

has extremely on much X individuals led discussions needed larger for that positive arrested drive arrests, this to in expansion around Town. strong We we opportunity the subsequently charges. those and believe and created to murder a showing The investigation Cape learned were prior coverage momentum on-scene lam and press

public budget allocates his of Town publicly yesterday, safety. will Cape budget that along with for request technologies Just additional dollars that expansions, more improve the ShotSpotter presented other mayor help

of substantial in and pipeline of of discussed forward The made previous feel to Corrections along been opportunity having we with and million is fee. solutions, large a investigative formally cloud and negotiated subscription annual We X-year statement CaseBuilder service $XX level another documented. with our we CrimeTracer that expected agreement an support This work continue all professional work, Department be about. have delivery, a step to services that very positive and elements contract deal calls agreement strong build and has a that includes good

Given the and properly risk intentional negotiated of the were complexity fairly on allocation expectations been have deal, the suring size we and very and documented.

this of contract process We to procurement process. is the call. within by earnings and our Office a to now registered QX part this in execution the OMB, announce publicly Management The able hope of agreement be XXXX of formally getting particular as Budget, the of proposed customer's

we despite Brandon of coverage of Johnson. to We're also ran canceling contract. publicly that report to a pleased Johnson reported attrition the press ShotSpotter mayoral recent that led called Chicago election election Mayor-elect the the on had no platform specifically progressive the of for very the significant that

Lightfoot's of $X and extended recurring under Mayor Our was million annual revenue, through administration. ShotSpotter XXXX deployment represents current the mid-February of contract recently

among measured be where up city council, a going currently to funds Department view support the for and encouraged better We propers and position public uses he "there shore Police Mayor-elect the to of Chicago have that, Johnson, steps our recent residents, ShotSpotter." with taken we're the more might

issues Rico, year $XX full year of This this full revenues. our of term the to and in recent our by us well before very to rate. expect is That demonstrate the been a value. retention front, overall still of being we've potential and led for said, pivots to the and Puerto our That margin adjust that felt on February high the To range EBITDA which be XX% of reduce to the successful indicated guidance of million. equipped are contract to some We the will discourse with having $XX to of and we range cancellation around revenue needed articulate value its risk experienced contracted adjustment, million XXXX. date, end we discussion, of XX% we public adjusted our have in in payment renewal combined contract in

to let me And with call that, turn the over Alan.

performance our with pleased We're the quarter. first Ralph. in you, Thank

mentioned, X university. X our this live went with cities, ShotSpotter solution detection quarter, in and Ralph new we X cities ShotSpotter gunshot coverage expanded our As in

and added also CaseBuilder for new solution. X CrimeTracer customers added state We our agency new a

from is quarter explained related XXXX. QX, experiencing are significant at delay the our flat which renewals fourth this to of Puerto by in of Revenue with in some is that the said, a revenue had Rico end no to catch-up XXXX. we relatively We QX of That partially ended couple quarter. attrition a renewal

a negatively renewal on new affected ultimately due the renewal will over Rico original they expect the the awarded, be if of the our start to annual is get we date. revenue While million, permitted are and deployment revenue Puerto to $X not

details quarter, more I balance of provide me and Let the thoughts will around on year. the then share some the

million. Revenue versus in less XXXX were quarter QX to of catch-up First than the expected $XX.X XXXX first QX subsidiary of million at of expectations that this slightly revenues of QX resulting than year's onetime increase, was year revenue being primarily our LEEDS in XXXX. the higher that is our $XX.X have XX% approximately of onetime XXXX. been approximately revenue recognized due Without behind from approximately for last million, quarter would of QX $X.X

and of million adjusted positively of also QX additional The income gross revenue year net associated $XXX,XXX margin, affected $X.X about had of costs. only EBITDA last as it in

cover year. see will this as last the financials I of impacts rest of those QX You year's versus

XX% XX% revenue of quarter revenue the for prior versus XXXX first or for or $XX.X year was million profit of million of $XX.X Gross the period.

margin gross from additional in million first quarter for the of noted, benefited the As $X.X XXXX revenue.

expect year. gross margin to rest throughout the We improve of this

$X.X million down from for quarter XXXX was of EBITDA in the first quarter million, first $X.X adjusted Our of XXXX. the

taking by As adjusted expenses is and GAAP EBITDA, income income a interest amortization, expenses. acquisition-related reminder, income, financial a calculated back depreciation, our stock-based compensation measure, adding taxes, net non-GAAP and

expenses. our to Turning

higher XX% Sales employee-related revenues of were versus total the revenues quarter period. $XX.X and the operating costs. our expenses. for million expenses million headcount the or increases of prior revenue revenue $XX.X were first the expense XXXX. Our in total Breaking for XX% versus and or million million was XX% $X.X of marketing of expenses XX% quarter $X.X of year related or primarily first down Operating first for quarter or to

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

maintaining also low. of to attrition our continue which keep on helps high focus rates levels satisfaction, We customer

the for million or of year of for revenue XX% total the $X.X revenue XX% million or versus were prior expenses total quarter R&D Our $X.X period. first

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

and were million XX% revenue other for due headcount the $X.X higher revenue $X.X of million period. or to quarter were G&A to of increase expenses XX% costs. employee-related total G&A year expenses compared the for total or prior

grows. G&A our dollars the as expect continue company in absolute expenses We increase to will

$X.XX or net adjusted share year This based for non-GAAP for million on taking Our quarter average million shares and diluted net net $X.XX acquisition-related on weighted period. income, expenses. XX.X or Adjusted million and our outstanding. basic weighted $X.X share based to adding was by financial compares per of income loss income first a net calculated $XXX,XXX shares adjusted and basic loss diluted prior the back $XX.X average outstanding measure, GAAP million XX.X is per the

fourth versus sellers bonuses and $XX.X $X.X million XXXX XXXX. our acquisition-related of of LEEDS was company and the of renewals million million quarter. the the and for The fourth million the is related of and $XXX,XXX GAAP quarter per was quarter of to payment XXXX, earnout XXXX $XX.X quarter. primarily of timing income last million revenue cash achievement related net $XX.X and at end primarily decrease expenses, diluted with billings. to for end of accounting $X.XX the quarter for the We to the paid end ended $X.X versus at at during the basic Deferred the their quarter When cash of equivalents related decrease or was year's share the in the

average During our at million. or the repurchased XX,XXX $XX.XX price shares we of of also an $X.X approximately quarter, first

today, have million $XX we of approximately in cash. As

short our of million outstanding. needed. $XX discussed, approximately ever no available debt as or have if in we We credit And previously possessed long-term line

XXXX to full outlook. Turning year our

of reducing also Rico XXXX, compared in related in risk and of any our million approximately February delay $XX revenue XXXX XXXX. XX% range our midpoint $XX full the at current potential with a contract guidance to to growth representing to Chicago million, are the factoring renewal ShotSpotter year date a the end of to year-over-year primarily our change We to Puerto before

our be We to to of EBITDA adjusted expectation for XX% forecasted in revenue are XXXX. XX% approximately reaffirming

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

to Officer, you, Alan. acknowledge Chicago tragic Police sacrifice Areanah the publicly Preston. want We of Thank

a the Police Department. and wanted work help thoughts family prayers go her out Chicago world do matters. Our to make to and and the better place She that

We'll questions. it up now for open your

is coming from first with [Operator Capital. Brian Ruttenbur Our Instructions] question Imperium

fourth or the that up adjusted core adjusted make to You the or up happened being of talk in that there in underperformance the second, XXs. EBITDA first going third terms for that quarter EBITDA delta? something to that you're quarters of in maintained Is about in make kind for where

This bit terms go had hopefully, as Yes. We us go Alan. the we start, you forward. and That first can of a terms well. is we still Rico. will in -- is I'll reduction of revenue ahead have to little quarter related then of get add as Puerto depreciation. that in Well, costing Ralph, improved and

though first year. our the through of The marketing, not that other sales added need the and already to thing to R&D rest is of significantly add the amount costs of going already quarter. a significant any We're we've to and for G&A

revenue to continues be hit guidance, up although expenses relatively closely flat, the as revenue we operating little to are as a going go bit. So up to our

increase to going that's of adjusted our EBITDA. All

than weighted quarters? that about Great. a follow-on third we be be thinking versus see second should Are How and Will first a to improvement quarter it going EBITDA fourth in adjusted to dramatic we quarter? just expansion? the margin weighted

especially third quarter, the more in up. finally we'll weighted likely going of the the Department more in third live we although primarily, get talk as quarter fourth most miles. than increase is to a contract It help come The to about question. great exercised potentially revenue Q&A, majority going in That's Corrections we is us. and of are Yes, going that lot and of ramping fourth and

question next Richard ROTH from with Baldry Our MKM. coming is

then. that Maybe to follow on up

would today, implementation, of cycles, like deployment whether Department front-end deliverables, about loaded look on loaded us as of sort sort like, deal weighted, the recognition. it what that can timings, types the of understand it's you that would Corrections sits back-end recognition On talk of annually, revenue help on that, equal things

you so play over period. Just how out a of expect idea we that have that multiyear to an

to Do take you want that, Alan?

sure. Yes,

we've $XX guess the the I point, of total that million, said So this we've approximately Alan. last mentioned to is before. is which increase. as contract has news couple amount the is, the quarters, We be good continued at highest the will know this

Out services. of but that, X will expect the a a X-year than there's we professional those professional years. complete X.X be approximately within $X $X which It's million bit little services contract, more million, probably of that, to first is

relatively We almost is significant up year a in then is and basically and and ramp will year us million, which that lower think QX. that and doubles X quickly. that QX X, balance revenue of a remaining So The little X. $X $XX in X X subscription, a will for as million add of in amount the

getting negotiation on And Rico unusual had Great. Or risky sometimes timing, really is of documents right more the think in you makes right these just that this Puerto a things you place? it others? the process history anything out. renewal Is renewal, push a of there about it's matter than

one. that Yes, this I'll take is Ralph.

to go, you do Sorry, want Alan?

Ralph. ahead, Go

Yes.

every we at expectation might retro date. different case, even by the customer going a in time risk comments some renew to are us to were because, they point time, for are if have that I will slightly services think that we kind they profile to the being represent this back made delivered a particular renew, they and that So have this does the compensate difficult in of

X revenue that's customers, back able are late, start And that time renew we're the always kind go adjustment and reason though that though term that in X of might even Typically that they to are. delivered in making contract we're time Puerto the renewed we the at so with of they be we for the point the services that the we to months catch-up making time or even represents some Rico that to going hard later. sure as lumpy And been to of year. be of negotiating We're experienced. from pretty kind of what that's and beginning that this compensated have going

Yes.

time, that's cancel do you creates think, compensated people. concluded a you've if firmer maybe aren't a been have guess they the left where little one the with harder you're in is service to in to you you've ball build not contract pay got I were that, got on terms position actually for, not that's so that to around, immediately which future, a So providing if that play question, for a these service deals

Yes.

So is mean a fairly I unusual think I conversation. this

this We it's before. haven't confronted be And still to yet resolved.

yet. we're up on not giving think it So I just

customer and $X be to negotiation. not going the not million risk. It delivered, represents was million clear, obviously it's us renew very of a term because of and contract to represent think matter of be us. the hit ARR I GAAP to would at sits then year, million for compensate it of we've But services the to the if $X chose to start revenue, already at this part about $X that that's a early

coming from Craig-Hallum. question Hamblin is next Our Jeremy with

to embedded the wanted revenue I just back what's year. come guidance for understanding to within the

about I at to the of think look we year, X, for midpoint it's quarter the for QX, of X. if So million getting $XX your remainder the guide a

on kind are the guess of just in then understand, in what's And revenue trying of I QX. that run have, per for embedded to XXXX about expected -- live I'm million -- deal embedded square contract $XX to terms an -- assuming that we were $XX And terms sorry, about million in guidance, Puerto Rico? assume annualized this on we $X.XX to miles catch-up if said I'm think what be in including guidance? what's that X-year roughly that we what go that million $XX,XXX XX rate on in are basis. got of typically you you've mile would you I

Yes. and respond and ahead question. that. to I'll go is Alan, This Great

over this given look just What haven't live, is QX just GAAP that we go-live did going you million additional about and if -- can that from to took times multiply and in year that by literally gone revenue we a revenue. miles that -- I but at just X, see what tell I is you're miles that, more. have revenue think $XX.X in actual million we're $X you the

in you new things yourself calculation of realize can and going So miles. do are terms well how the

Corrections, Department we the expect million. In of it be will several do

together, So million. $XX all expansions, our in additional you terms international, that by Forensic LEEDS new And like that we Logic going close actually is again expansion CaseBuilder time pretty to coming. things you're professional know year services revenue this some the lastly, add are of balance labs. to expansions, in The we're have

guidance. easy our all together, you So to pretty add it's that to get

the margin. other wanted in half sounds much helpful. like Got ramp a see the And the year. then on gross of you're a around I to you. it bigger was here going follow follow-up question And That's second to up

of of in thinking versus Can kind quarters, we've us kind you're of to back the you terms the level for about bit more margin help around year, high gross through kind like just about And range XXs probably terms range. more that. would been last of to in level? in looking rate, in I which in thinking mid-XXs like got run But the XX% the was Just walk little get for plus. XX% current of half color think a that imply hoping the that I few

I'll ahead of couple information. add and things. well. This give can as is Sure. and A Ralph some Al, go

little the margin primarily bit onetime more were related lower and a off, more year, were actual repair all doing of depreciation QX, XG we actual last we have because because, was gross really nature First that QX in little did of a costs maintenance replacements. and in terms

to That in and QX. maintenance of repair. in cost onetime the of had we some up was a kind So catch

that with higher go -- alone. margins actually, gross little So are to going should a

we a aspect more of other cost. The seeing are bit that is

up people to is that we the ramp-up the have revenue it related of for growth. set some of Some

to to gross cost flows and that actually firmly some success into that that related customer our are the by the of and were and that we've other to get as are there going sold margins of going QX, well. We revenues goods operational out up improve, we allocations where believe Some already to in certainly QX coming be that. involved in, the hired time are people

helpful. -- about you back How you you What per but where then forward? thinking went the share quick, I in capital maybe moving price Got on average noted potential terms it. XX,XXX like you think through bought allocation just was now? That's balance Last And shares. cash one, that I that? have you are it of

It so a end $XX are Yes. a ended of little over where balance even north the per was close from that, actually slightly the Today's -- quarter $XX the that after year cash doing north cash. But paying little earnout in bonuses share, Great we out LEEDS million. we $X still they to earned, now. is question. of and paying million

So share in very Board do to we that did to market did at some terms Historically, use of we million continue has thought about it repurchase. we've repurchase a approve would I would of shares. if well surprising the be $XX stock, not our what the that looked more cash. say and

it. Got

Lake coming with question Jaeson is next from Street. Our Schmidt

curious traditional think of of year things maybe doesn't is of with contract year? delay this this Puerto follow seasonality. Just the Do case -- sort the such you of as cadence Rico, and the in that's Department Corrections this the

in rolled that odd like Yes, little that QX hopefully time. got the flat 'XX and million into have go $X.X looked the we because odd year. pretty contract had this throughout and come Alan. year say should is into QX what have I'll was was XXXX Last because -- much was made absolutely. Basically, in ahead we a

the You're QX into we going much We to in quarters increase following here. would QX. the cadence opposite the significantly up into 'XX, see of we start expect each exact of to and and revenue pretty as look see going 'XX.

about I think Okay. That's But if apologize helpful. missed how OpEx the of And trending it. remainder should year? we this

the terms things that and again. Yes, are X been adding for investing products for wise. of years. still are that Well, R&D significantly now, to We in be a bit to go although is because it's up having more Alan have going related last basically personnel, -- this capability particularly this year, X related not we are marketing significant. software in will some there costs adding sales it we

a as be bit should will well. G&A up flat relatively but go

categories. So I invested that have already of mentioned in X those all earlier we

though up. than amount they're bit, the to even to are of a up they go revenue So going going go less go continues to up

Our from Company. coming & with Miller next Willow question Blair is William

Just question renewed. Puerto How a guidance Rico to revenue is be Rico? contract Puerto if revision versus clarifying first. as you know I driven is could much that the million of $X Chicago as mentioned not much by

color would really be there So any helpful.

I'll This Yes. one. that take is Ralph.

mid-February that the renewed even nor Rico to cancel approximately us completely essentially So total say, up though a -- million if them as revenue. $X.X and That's of, $X.X if stuff. the exposure, not GAAP little exposed to X, we're contracted catch Chicago through July contract Puerto on for were technically, XXXX, were us bit a of totally past provided we to services about million in to

risk we a basis, number nor we're risk-adjusted to felt basically basis in, a million risk kind useful combined to like $X.X appropriate We kind the one so don't million. use and that one. of We cross-border. the decided think think all on of It factoring was do by do we a for it's isn't of of exposure. us X And pull together it kind exposure million $X it's on $X exercise of

X then you expand. X can Tier strong Okay. is you that do Tier going? next is, expand the and believe And in based How just That called looking makes you sense. on X And performance out called question were and beyond reps one out you the to you my previously? cities salesperson, that initiative last quarter,

question. Terrific Yes.

there. we progress X, focused good on reps X. now Tier really that have XXX% Tier Currently, X made are we've So

out success I maybe I that mention mean, that and impressive cities, customers, Gardens; our Holyoke; I for Manchester; now it's work. I call, didn't I'll -- pretty hopefully, think, Cleveland, in Ohio; we Florida. mean, lighting but heard you've [Palatka], up Hawaiian in just had customers I think folks, -- the X call new this the is

expansions of initial Tier actually we that the actually, in of X, we some And well. customers were had, there as a Tier X footprint that couple expanded their

that initiative is us very for well. So going

I think appears there. heard the sales take cycles talk you've to about shortened us previously that place

fourth team. excited very anxiously the looking for and still sales Tier round Tier are out X, we're X to So rep that

time, At question-and-answer this our session. concludes this

was If it closing not SoundThinking's may by your now Clark any taken, you have. Mr. question Relations I contact Investor team ssti@gatewayir.com. he hand back comments may to will e-mailing for

you Thank very Great. much.

be very you We Just to we're very asking in opportunity all and know questions this the space. some really excited making much good a thank about difference, and in dialing business. for

to forward a Looking calls here one-on-one in the bit.

Thank you. does conclude This today's call.

We disconnect may a wonderful participation. have you your at for You this time, your thank lines and day.