Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SoundThinking Inc (SSTI, Financial) reported a 23% year-over-year revenue growth, reaching $25.4 million in Q1 2024.
- The company successfully went live with 11 new ShotSpotter customers, including a strategic deployment with the Philadelphia Housing Authority.
- SoundThinking Inc (SSTI) expanded its offerings beyond acoustic gunshot detection, now marketing five solutions under its safety smart platform.
- The company saw significant international adoption, with positive results from its Montevideo, Uruguay deployment.
- SoundThinking Inc (SSTI) reaffirmed its full-year revenue guidance of $104 million to $106 million and adjusted EBITDA margin guidance of 18% to 20%.
Negative Points
- Adjusted EBITDA for Q1 2024 was slightly below expectations due to higher labor costs and one-time expenses, including a $1 million cost for an all-hands meeting.
- Operating expenses increased to $17.5 million, or 69% of revenues, up from $13.1 million, or 64% of revenues, in Q1 2023.
- The company experienced minor attrition of six miles in its coverage area during the quarter.
- Net loss for Q1 2024 was $2.9 million, or $0.23 per share, compared to a net loss of $1.8 million, or $0.15 per share, in Q1 2023.
- SoundThinking Inc (SSTI) is facing some headwinds in sales cycles due to noise from Chicago, potentially lengthening the sales process for larger deals.
Q & A Highlights
Q: Can you provide more details on the Philadelphia win with the Housing Authority and its potential for expansion?
A: Ralph Clark, CEO: There is strong collaboration between the Philadelphia Housing Authority and the broader Philadelphia Police Department. This partnership could potentially open opportunities for expansion beyond the Housing Authority to the broader Philadelphia area.
Q: What is the current status and growth of the SafePointe pipeline?
A: Ralph Clark, CEO: The SafePointe pipeline has grown significantly, with a current value of $12 million. This growth is driven by investments in business development representatives (BDRs) and sales professionals, focusing on key verticals such as healthcare, casinos, and enterprise corporate accounts.
Q: Are there any supply chain challenges for scaling SafePointe deployments?
A: Ralph Clark, CEO: There are minimal supply chain constraints, and the company is well-positioned to scale SafePointe deployments without significant friction.
Q: What led to the gross margin expansion in the first quarter?
A: Alan Stewart, CFO: The gross margin improvement to 58.6% was driven by revenue growth without a proportional increase in the cost of goods sold. This trend is expected to continue, with gross margins projected to reach closer to 60% by year-end.
Q: Can you quantify the impact of one-time expenses on G&A costs?
A: Alan Stewart, CFO: The G&A increase included almost $1 million for an all-hands meeting and approximately $250,000 in legal costs. These one-time expenses significantly contributed to the year-over-year increase.
Q: What is the sales cycle for the gunshot detection business, and how has it been affected recently?
A: Ralph Clark, CEO: Sales cycles for ShotSpotter vary, with smaller customers having shorter cycles of 9-12 months, while larger deals may take 18 months or more. Recent noise from Chicago has slightly lengthened some sales processes, but overall momentum remains strong.
Q: How significant are the software enhancements for SafePointe, and how do they impact detection efficacy?
A: Ralph Clark, CEO: Significant investments are being made in SafePointe's technology platform, leveraging SoundThinking's expertise in AI and machine learning. These enhancements aim to improve detection efficacy and provide a seamless user experience.
Q: How does the company view the impact of Chicago's situation on its overall business?
A: Ralph Clark, CEO: The situation in Chicago, primarily driven by the Mayor, does not impact the 2024 guidance. The company continues to see strong support from other stakeholders in Chicago and maintains momentum with new customer acquisitions.
Q: What is the outlook for international deployments of ShotSpotter?
A: Alan Stewart, CFO: International deployments are currently small but growing, with existing deployments in the Bahamas, South Africa, and Uruguay. A new deployment in another South American city is expected in Q3, adding further growth potential.
Q: How does the company plan to achieve its long-term gross margin and EBITDA margin targets?
A: Alan Stewart, CFO: The company aims to increase adjusted EBITDA by approximately 5% per year, targeting close to 70% gross margin and 40% EBITDA margin within the next 3.5 to 4 years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
