SoundThinking, Inc. (Nasdaq: SSTI) a leading
public safety technology company, today reported financial results
for the third quarter ended September 30, 2023.
Third Quarter 2023 Financial and Operational
Highlights
- Revenues increased
28% to $24.0 million, compared to $18.8 million for the same
quarter of 2022.
- Gross profit
increased 33% to $13.8 million (57% of revenues), compared to $10.3
million (55% of revenues) for the same quarter of 2022.
- GAAP net loss
totaled $1.9 million, compared to GAAP net income of $4.0 million
for the same quarter of 2022.
- Adjusted EBITDA1
was $4.3 million (18% of revenues), compared to $3.1 million (16%
of revenues) for the same quarter of 2022.
- Went “live” with
ShotSpotter in seven new cities as well as expanded with two
current customer cities and one university customer.
- Acquired SafePointe
LLC (SafePointe), an AI-based weapons detection technology company,
which expanded SoundThinking’s SafetySmart™ Platform while
adding a strong base of commercial and enterprise products.
- Launched ShotCast™
to provide key details of local gunfire incidents, increase
awareness about the impact of gun violence, and promote community
engagement in public safety.
- Released second
annual Environmental, Social, and Governance (ESG) Report,
emphasizing commitment to engaging law enforcement with technology
solutions for positive public safety outcomes.
- Repurchased 93,012
shares at a cost of $1.9 million during the quarter.
1 See the section below titled “Non-GAAP
Financial Measures” for more information about Adjusted EBITDA and
its reconciliation to GAAP net income (loss).
Financial Outlook
The company reaffirms its full year 2023 revenue
guidance range of $92 million to $94 million, representing
approximately 15% year-over-year growth at the midpoint compared to
2022. Management retains its expectation for Adjusted EBITDA to be
approximately 16% to 18% of revenue in 2023. The company expects
its annual recurring revenue (ARR) on 12/31/2023 to have increased
over 17% to approximately $93.5 million, up from $79.7 million on
12/31/2022.
The company’s financial outlook statements are
based on current expectations. The preceding statements are
forward-looking, and actual results could differ materially
depending on market conditions and the factors set forth under
“Safe Harbor Statement” below. The company has not reconciled its
Adjusted EBITDA outlook to GAAP net income (loss) due to the
uncertainty and variability of interest income (expense), income
taxes, depreciation and amortization, stock-based compensation
expenses and acquisition-related expenses, which are reconciling
items between Adjusted EBITDA and GAAP net income (loss). Because
the company cannot reasonably predict such items, a reconciliation
to forecasted GAAP net income (loss) is not available without
unreasonable effort. Such items could have a significant impact on
the calculation of GAAP net income (loss). For more information,
see “Non-GAAP Financial Measures” below.
Management Commentary
“The third quarter marked another strong period
for SoundThinking, highlighted by a 28% increase in revenue and 33%
increase in gross profit compared to the prior year quarter along
with solid Adjusted EBITDA profitability,” said President and CEO
Ralph Clark. “Our record quarterly revenue was driven by new and
expanding customer subscriptions, including deployments in seven
new cities and expansions in three current customers. We still
expect to go live in over 140 miles in 2023. Based on our results
for the first nine months of the year, we remain confident in
achieving our guidance and entering 2024 with solid momentum.
“Our recent acquisition of SafePointe extended
our SafetySmart Platform and ability to positively impact public
safety outcomes while expanding our addressable market and
potentially accelerating SoundThinking’s growth potential. We are
already benefiting from the various synergies that SafePointe
provides, including some cross-selling opportunities across our
combined customer base.
“We remain committed to driving positive public
safety outcomes for communities across the country. Our second
annual ESG report showcases our mission to facilitate law
enforcement’s application of technology solutions to promote social
good. We are proud of the work we are doing at SoundThinking and
look forward to continuing to help innovate and transform the
public safety and private sectors. Overall, with the expansion of
our product portfolio and a growing need for public safety
solutions, we remain confident in our ability to drive profitable
growth.”
Third Quarter 2023 Financial
Results
Revenues for the third quarter of 2023 were
$24.0 million, compared to $18.8 million for the same quarter of
2022. The increase in revenues was primarily due to new and
expanding customer subscriptions as well as contribution from the
SafePointe acquisition, which was acquired on August 18, 2023.
Gross profit for the third quarter of 2023 was
$13.8 million (57% of revenues), compared to $10.3 million (55% of
revenues) for the same period in 2022.
Total operating expenses for the third quarter
of 2023 were $15.2 million, compared to $6.2 million for the same
period in 2022. Operating expenses increased primarily due to
higher personnel-related costs as we continue to grow our business
and higher than expected legal expenses. Additionally, operating
expenses for the third quarter of 2022 was offset by a contingent
consideration reduction of $5.4 million related to the Forensic
Logic acquisition.
Net loss for the third quarter of 2023 totaled
$1.9 million or $(0.15) per basic and diluted share (based on 12.5
million basic and diluted weighted-average shares outstanding),
compared to net income of $4.0 million or $0.33 per basic and
diluted share (based on 12.2 million basic and 12.4 million diluted
weighted-average shares outstanding, respectively), for the same
period in 2022.
Adjusted EBITDA for the third quarter of 2023
totaled $4.3 million, compared to $3.1 million in the same period
last year.
At quarter end, the company had $5.8 million in
cash and cash equivalents, $25.0 million in accounts receivable and
contract assets, net, $38.3 million in deferred revenue, $7.0
million in debt related to our SafePointe acquisition, and
approximately $18.0 million available on its credit facility.
Conference Call
SoundThinking will hold a conference call today
November 7, 2023 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
to discuss these results and provide an update on business
conditions.
SoundThinking management will host the
presentation, followed by a question-and-answer period.
U.S. dial-in: 1-855-327-6837International
dial-in: 1-631-891-4304Conference ID: 10022590
A live audio webcast of the conference call will
be available in listen-only mode simultaneously and available for
replay via the investor relations section of the company’s website
at www.soundthinking.com.
Please call the conference telephone number five
minutes prior to the start time. An operator will register your
name and organization.
A replay of the call will be available after 7:30 p.m. Eastern
time on the same day through December 7, 2023.
U.S. replay dial-in: 1-844-512-2921International replay dial-in:
1-412-317-6671Replay ID: 10022590
Non-GAAP Financial Measures
Adjusted net income (loss):
Adjusted net income (loss), a non-GAAP financial measure,
represents the company’s net income (loss) before
acquisition-related expenses, including adjustments to the
company's contingent consideration obligation.
Adjusted EBITDA: Adjusted
EBITDA, a non-GAAP financial measure, represents the company’s net
income (loss) before interest (income) expense, income taxes,
depreciation, amortization and impairment, stock-based compensation
expense and acquisition-related expenses, including adjustments to
the company's contingent consideration obligation. Adjusted EBITDA
is a measure used by management internally to understand and
evaluate the company’s core operating performance and trends across
accounting periods and in connection with developing future
operating plans, making strategic decisions regarding the
allocation of capital and considering initiatives focused on
cultivating new markets for its solutions. In particular, the
exclusion of these expenses in calculating Adjusted EBITDA
facilitates comparisons of the company’s operating performance on a
period-to-period basis.
SoundThinking believes adjusted net income
(loss) and Adjusted EBITDA also provide useful information to
investors and others in understanding and evaluating its operating
results in the same manner as its management and board of
directors. For example, SoundThinking adjusts EBITDA for
stock-based compensation expense and acquisition-related expenses
because such expenses often vary for reasons that are generally
unrelated to financial and operational performance in a particular
period. Stock-based compensation is utilized by SoundThinking to
attract and retain employees with a goal of long-term retention and
the alignment of employee interests with those of the company and
its stockholders, rather than to address operational performance
for any particular period’s financial performance measures, in
particular net income (loss), or its other GAAP financial
results.
The following table presents a reconciliation of
GAAP net income (loss), the most directly comparable GAAP measure,
to adjusted net income (loss), for each of the periods indicated
(in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
GAAP net income (loss) |
|
$ |
(1,874 |
) |
|
$ |
4,033 |
|
|
$ |
(6,361 |
) |
|
$ |
7,430 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related expenses |
|
|
689 |
|
|
|
— |
|
|
|
864 |
|
|
|
101 |
|
Change in fair value of contingent consideration |
|
|
82 |
|
|
|
(5,405 |
) |
|
|
(923 |
) |
|
|
(8,842 |
) |
Adjusted net income
(loss) |
|
$ |
(1,103 |
) |
|
$ |
(1,372 |
) |
|
$ |
(6,420 |
) |
|
$ |
(1,311 |
) |
Adjusted net income (loss) per
share, basic |
|
$ |
(0.09 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.12 |
) |
Adjusted net income (loss) per
share, diluted |
|
$ |
(0.09 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.11 |
) |
Weighted average shares used
in computing adjusted net income (loss) per share, basic |
|
|
12,480,830 |
|
|
|
12,167,632 |
|
|
|
12,320,119 |
|
|
|
12,156,980 |
|
Weighted average shares used
in computing adjusted net income (loss) per share, diluted |
|
|
12,480,830 |
|
|
|
12,167,632 |
|
|
|
12,320,119 |
|
|
|
12,156,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents a reconciliation of
Adjusted EBITDA to GAAP net income (loss), the most directly
comparable GAAP measure, for each of the periods indicated (in
thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
GAAP net income (loss) |
|
$ |
(1,874 |
) |
|
$ |
4,033 |
|
|
$ |
(6,361 |
) |
|
$ |
7,430 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
|
42 |
|
|
|
(11 |
) |
|
|
(64 |
) |
|
|
(26 |
) |
Income taxes |
|
|
299 |
|
|
|
— |
|
|
|
643 |
|
|
|
— |
|
Depreciation and amortization |
|
|
2,475 |
|
|
|
2,286 |
|
|
|
8,126 |
|
|
|
6,824 |
|
Stock-based compensation expense |
|
|
2,573 |
|
|
|
2,157 |
|
|
|
7,272 |
|
|
|
6,145 |
|
Change in fair value of contingent consideration |
|
|
82 |
|
|
|
(5,405 |
) |
|
|
(923 |
) |
|
|
(8,842 |
) |
Acquisition-related expenses |
|
|
689 |
|
|
|
— |
|
|
|
864 |
|
|
|
101 |
|
Adjusted EBITDA |
|
$ |
4,286 |
|
|
$ |
3,060 |
|
|
$ |
9,557 |
|
|
$ |
11,632 |
|
|
Safe Harbor Statement
This press release contains "forward-looking
statements" within the meaning of the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995, including but
not limited to statements regarding the company’s expectations for
its estimated revenue and Adjusted EBITDA for 2023, ability to
drive profitable growth and build upon existing contracts and
partnerships, operating momentum, financial visibility, sales
pipeline, revenue growth, operating leverage and margin expansion
in 2023 and beyond. Words such as "expect," "anticipate," "should,"
"believe," "target," "project," "goals," "estimate," "potential,"
"predict," "may," "will," "could," "intend," or variations of these
terms or the negative of these terms and similar expressions are
intended to identify these forward-looking statements.
Forward-looking statements are subject to a number of risks and
uncertainties, many of which involve factors or circumstances that
are beyond the company’s control. The company’s actual results
could differ materially from those stated or implied in
forward-looking statements due to a number of factors, including
but not limited to: the company’s ability to successfully negotiate
and execute contracts with new and existing customers in a timely
manner, if at all; the company’s ability to maintain and increase
sales, including sales of the company’s newer product lines; the
availability of funding for the company’s customers to purchase the
company’s solutions; the complexity, expense and time associated
with contracting with government entities; the company’s ability to
maintain and expand coverage of existing public safety customer
accounts and further penetrate the public safety market; the
potential effects of negative publicity; the company’s ability to
sell its solutions into international and other new markets; the
lengthy sales cycle for the company’s solutions; changes in federal
funding available to support local law enforcement; the company’s
ability to deploy and deliver its solutions; the company’s ability
to maintain and enhance its brand; and the company’s ability to
address the business and other impacts and uncertainties associated
with macroeconomic factors, as well as other risk factors included
in the company’s most recent annual report on Form 10-K and other
SEC filings. These forward-looking statements are made as of the
date of this press release and are based on current expectations,
estimates, forecasts and projections as well as the beliefs and
assumptions of management. Except as required by law, the company
undertakes no duty or obligation to update any forward-looking
statements contained in this release as a result of new
information, future events or changes in its expectations.
About SoundThinking,
Inc.SoundThinking, Inc. (Nasdaq: SSTI) is a leading public
safety technology company that delivers AI and data-driven
solutions for law enforcement, civic leadership, and security
professionals. We are trusted by more than 250 customers and 2,000
agencies to drive more efficient, effective, and equitable public
safety outcomes. Our SafetySmart™ platform includes ShotSpotter®,
the leading acoustic gunshot detection system; CrimeTracer™, the
foremost law enforcement search engine; CaseBuilder™, a one-stop
investigation management system; ResourceRouter™, software that
directs patrol and community anti-violence resources to help
maximize their impact; and SafePointe®, a next-generation concealed
weapons detection system. SoundThinking has been designated a Great
Place to Work® Company.
Company Contact:
Alan Stewart, CFOSoundThinking, Inc. +1 (510) 794-3100
astewart@soundthinking.com
Investor Relations Contacts:
Matt GloverGateway Group, Inc.+1 (949)
574-3860SSTI@gateway-grp.com
SoundThinking, Inc. |
|
Condensed Consolidated Statements of
Operations |
|
(In thousands, except share and per share
data) |
|
(Unaudited) |
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenues |
|
$ |
23,977 |
|
|
$ |
18,775 |
|
|
$ |
66,672 |
|
|
$ |
60,005 |
|
Costs |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
10,225 |
|
|
|
8,473 |
|
|
|
28,881 |
|
|
|
25,130 |
|
Impairment of property and equipment |
|
|
— |
|
|
— |
|
|
|
72 |
|
|
|
— |
|
Total costs |
|
|
10,225 |
|
|
|
8,473 |
|
|
|
28,953 |
|
|
|
25,130 |
|
Gross profit |
|
|
13,752 |
|
|
|
10,302 |
|
|
|
37,719 |
|
|
|
34,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
6,289 |
|
|
|
5,357 |
|
|
|
19,580 |
|
|
|
16,727 |
|
Research and development |
|
|
3,186 |
|
|
|
2,409 |
|
|
|
8,896 |
|
|
|
7,570 |
|
General and administrative |
|
|
5,677 |
|
|
|
3,866 |
|
|
|
15,806 |
|
|
|
11,710 |
|
Change in fair value of contingent consideration |
|
|
82 |
|
|
|
(5,405 |
) |
|
|
(923 |
) |
|
|
(8,842 |
) |
Total operating expenses |
|
|
15,234 |
|
|
|
6,227 |
|
|
|
43,359 |
|
|
|
27,165 |
|
Operating income (loss) |
|
|
(1,482 |
) |
|
|
4,075 |
|
|
|
(5,640 |
) |
|
|
7,710 |
|
Other income (expense),
net |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
|
(42 |
) |
|
|
11 |
|
|
|
64 |
|
|
|
26 |
|
Other expense, net |
|
|
(51 |
) |
|
|
(53 |
) |
|
|
(142 |
) |
|
|
(306 |
) |
Total other (expense), net |
|
|
(93 |
) |
|
|
(42 |
) |
|
|
(78 |
) |
|
|
(280 |
) |
Income (loss) before income
taxes |
|
|
(1,575 |
) |
|
|
4,033 |
|
|
|
(5,718 |
) |
|
|
7,430 |
|
Provision for income
taxes |
|
|
299 |
|
|
|
— |
|
|
|
643 |
|
|
|
— |
|
Net income (loss) |
|
$ |
(1,874 |
) |
|
$ |
4,033 |
|
|
$ |
(6,361 |
) |
|
$ |
7,430 |
|
Net income (loss) per share,
basic |
|
$ |
(0.15 |
) |
|
$ |
0.33 |
|
|
$ |
(0.52 |
) |
|
$ |
0.61 |
|
Net income (loss) per share,
diluted |
|
$ |
(0.15 |
) |
|
$ |
0.33 |
|
|
$ |
(0.52 |
) |
|
$ |
0.60 |
|
Weighted-average shares used
in computing net income (loss) per share, basic |
|
|
12,480,830 |
|
|
|
12,167,632 |
|
|
|
12,320,119 |
|
|
|
12,156,980 |
|
Weighted-average shares used
in computing net income (loss) per share, diluted |
|
|
12,480,830 |
|
|
|
12,357,136 |
|
|
|
12,320,119 |
|
|
|
12,306,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SoundThinking, Inc. |
|
Condensed Consolidated Balance Sheets |
|
(In thousands) |
|
(Unaudited) |
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2023 |
|
|
2022 |
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
5,800 |
|
|
$ |
10,479 |
|
Accounts receivable and contract asset, net |
|
|
24,966 |
|
|
|
30,957 |
|
Prepaid expenses and other current assets |
|
|
3,514 |
|
|
|
3,225 |
|
Total current assets |
|
|
34,280 |
|
|
|
44,661 |
|
Property and equipment,
net |
|
|
21,717 |
|
|
|
21,988 |
|
Operating lease right-of-use
assets |
|
|
2,549 |
|
|
|
3,240 |
|
Goodwill |
|
|
33,728 |
|
|
|
22,971 |
|
Intangible assets, net |
|
|
37,898 |
|
|
|
27,318 |
|
Other assets |
|
|
2,785 |
|
|
|
2,570 |
|
Total assets |
|
$ |
132,957 |
|
|
$ |
122,748 |
|
Liabilities and Stockholders'
Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
3,285 |
|
|
$ |
1,633 |
|
Line of credit |
|
|
7,000 |
|
|
|
— |
|
Deferred revenue, short-term |
|
|
37,221 |
|
|
|
41,907 |
|
Accrued expenses and other current liabilities |
|
|
10,482 |
|
|
|
9,965 |
|
Total current liabilities |
|
|
57,988 |
|
|
|
53,505 |
|
Deferred revenue,
long-term |
|
|
1,125 |
|
|
|
1,813 |
|
Deferred tax liability |
|
|
937 |
|
|
|
685 |
|
Other liabilities |
|
|
4,797 |
|
|
|
5,800 |
|
Total liabilities |
|
|
64,847 |
|
|
|
61,803 |
|
Stockholders' equity |
|
|
|
|
|
|
Common stock |
|
|
64 |
|
|
|
62 |
|
Additional paid-in capital |
|
|
167,169 |
|
|
|
153,573 |
|
Accumulated deficit |
|
|
(98,761 |
) |
|
|
(92,400 |
) |
Accumulated other comprehensive loss |
|
|
(362 |
) |
|
|
(290 |
) |
Total stockholders' equity |
|
|
68,110 |
|
|
|
60,945 |
|
Total liabilities and stockholders' equity |
|
$ |
132,957 |
|
|
$ |
122,748 |
|
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