SoundThinking, Inc.

Good afternoon, and welcome to Sound Thinking's second quarter 2023 conference call. My name is Ina, and I will be your operator for today's call. Joining us are Sound Thinking CEO Ralph Clark and CFO Alan Stewart. Please note that certain information discussed on the call today will include forward-looking statements about future events and Sound Thinking's business strategy and future financial and operating performance. These forward-looking statements are only predictions and are subject to risks and uncertainties and assumptions that are difficult to predict and may cause the actual result to differ materially from those stated or implied by those statements. Certain of these risks and assumptions are discussed in Sound Thinking's SEC filings, including its registration statement on Form S-1. These forward-looking statements reflect management's beliefs, estimates, and predictions As of the date of this live broadcast, August 8, 2023, and Sound Thinking undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Finally, I would like to remind everyone that this call will be recorded and made available for replay via link available in the investor relations sections of the company's website at ir.soundthinking.com. Now, I would like to turn the call over to SoundThinking CEO, Ralph Clark. Sir, please proceed.

Good afternoon, and thank you for joining our second quarter 2023 conference call. After Al and I give our views, we'll be happy to take your questions. However, before I get into the specifics of our Q2 2023 performance, I want to first share with you that overall, our company is settling into our expanded platform vision and our new corporate identity of SoundThinking. We're well on our way toward executing on the promising next phase of our growth journey and impact narrative. We continue to be bullish on the tremendous opportunity we have in partnering with law enforcement and their digital transformation, which we believe is fundamental in improving the law enforcement profession and better connecting them to the communities they serve. And even with the current challenges they face with limited resources and increased scrutiny, We're committed in our purpose to help them become more efficient, effective, and equitable in closing the public safety gap that exists in communities worldwide. Turning to financial performance, our Q2 2023 revenues were mostly in line with our expectations with $22.1 million compared to Q2 2022 revenue of $20 million. Adjusted EBITDA was $2.4 million or 11% of revenues compared to $4.1 million or 20% of revenues for Q2 2022. As Alan will address in more detail, below the line expenses in this quarter included increased investment in sales and marketing associated with our rebranding launch, along with increased headcount and personnel related costs and a few one-time other expenses. We had another phenomenal quarter of go-live activity with seven new city captures and one new university, along with seven city expansions and a university expansion this quarter. These included, but were not limited to, new customer captures of Erie, Pennsylvania, Deerfield Beach, and Lauder Hill, Florida. We also took live material expansion miles in Detroit, Cleveland, and Virginia Beach. We are confident in our go-live momentum, and with what has already been taken live during the first half of this year, combined with our current booked, contracted, and staff projects slated to go live in the next 60 to 90 days, we project to be at 140 shot spot or go-live miles this year. There is a potential upside to this forecast that could put us north of 150 miles to the extent that we can book additional near-term sales pipeline opportunities in Q3 that can be also deployed in Q4. I'm also quite happy to report that we have another quarter with zero attrition. Let me provide a brief update on where we are in Chicago. Recent public statements and actions by the Mayor's Office, including the formal budget appropriation and funding of the previously executed contract extension, have been constructive. We believe this moves us beyond the potential 2023 cancellation risk that we had previously inappropriately factored. We're still very focused on working with Chicago PD on demonstrating and articulating the value of ShotSpotter in saving lives and enhancing downstream investigations as we continue to build upon strong police department and city council support. In fact, just this past weekend, local news reported on a 6 a.m. ShotSpotter alert that led Chicago PD in finding a 14-year-old gunshot wound victim who was quickly rushed to a stronger hospital in critical condition. There was no corresponding 911 call. It is likely that this child is alive today due to the shot spot alert and the quick and brave response of Chicago PD first responders. This narrative is consistent with the feedback we've received in a recent modest community outreach campaign conducted in and around Chicago. We were very pleased but not at all surprised with the overwhelming positive response that was garnered, including incredibly supportive comments and powerful personal testimony of lives saved like the tragic incident I just shared from this past weekend. Importantly, we believe the capabilities ShotSpotter helps bring about are consistent with Mayor Johnson's expressed values and his focus on community engagement. We're hopeful and looking forward to continuing our partnership with the city and citizens of Chicago. We also have positive news to share in regards to Puerto Rico. As you may recall, we reluctantly terminated our service to Puerto Rico earlier this year due to the contract expiration and the customer's inability to extend our multi-year contract. Puerto Rico has since contracted for a 90-day interim extension to resume service. They use this period not only to develop but also issue an RFP and evaluate competitive bids. We are highly confident about our prospects for a multi-year contract award given our stellar track record and value to the Puerto Rico Police Department. We're very excited to continue our work in Puerto Rico and build upon our relationship representing over 10 years should this new contract be awarded and formally executed. ShotSpot Momentum is clearly building, and we continue to invest in widening our competitive moat with key new features that support increased law enforcement transparency and effectiveness. The first of these, our Ground Truth feature, provides responding officers the ability to quickly annotate the alert in their mobile app with a metadata description of the disposition of that incident, such as showcasing evidence found or victim attended. Our ShotCast feature is a media-ready digital alert that can be shared with local broadcast media that shows the approximate location of the gunfire event on a map with an animated dot representing round count combined with a recorded audio snippet of the alert. And lastly, our new cop the dot feature automatically measures and tracks the time from alert to dispatch officer response that agency management can analyze to show overall response times to shot spotter alerts. We're also deploying a new acoustic gunshot detection sensor platform that includes a robust azimuth capability and a neural network filtering feature that will further improve our already high accuracy rate. We believe these cumulative enhancements demonstrate our commitment to further invest in innovation and maintain our dominant position in the wide area acoustic gunshot detection space. We are further encouraged by several cross-sale and bundle opportunities we see across our four solution offerings of the safety smart platform. In the second quarter alone, we closed three cross-sale slash bundle deals. The cross-sale and bundle pipeline is growing along with new buying center opportunities that we believe will become a bigger part of our growth story going forward. And lastly, on the product front, I'm excited to share that we are negotiating an agreement with PredPol, an early pioneer in developing AI-based patrol management solutions to transition their customers to SoundThinking's resource router solution as well as acquire their patents in certain intellectual property. We've already hired their engineering team, who will be working on the transition plan, as well as accelerating the current Resource Router product roadmap. Resource Router provides a unique and proven way to allocate patrol resources in a way to deter crime without making arrests or over-policing. In this era of early retirement recruitment challenges and understaffed departments, We view these capabilities as key in helping agencies do more with less by leveraging technology. While not material in the near term, over time, we believe the combination of cross-selling PredPol customers to multiple sound thinking solutions and the application of this patent to enhance our platform will be a meaningful value contributor to the company and facilitate our application of AI and machine learning technology to public safety. In conclusion, we're maintaining our full-year revenue guidance in the range of $92 to $94 million for 2023, while adjusting our full-year adjusted EBITDA margin to be in the range of 16 to 18% of revenues.

And with that, let me turn the call over to Alan. Thank you, Ralph. We're pleased with our performance in the second quarter.