SoundThinking lowers 2025 revenue guidance to $104M while launching CrimeTracer Gen3 and expanding SafePointe

Earnings Call Insights: SoundThinking (SSTI) Q3 2025

MANAGEMENT VIEW

* Ralph Clark, President and CEO, reported lower-than-expected third quarter revenues at $25.1 million, attributing this to the absence of a ShotSpotter renewal in Puerto Rico and a delay in a statewide CrimeTracer booking. Clark highlighted expanded deployments of core ShotSpotter technology, growth in AI-powered investigative tools, and increased traction in healthcare security driven by California's AB 2975 weapons detection mandate as key achievements.
* Clark announced the upcoming launch of CrimeTracer Gen3, calling it a “quantum leap in AI-powered law enforcement technology” that integrates over 1 billion records across 2,000-plus agencies. He noted, “Early customer feedback has been exceptionally positive with agencies particularly excited about the platform’s ability to transform fragmented data systems into unified actionable intelligence.”
* The company is realigning its sales organization, refreshing its go-to-market playbook, and increasing accountability around forecasting and conversion metrics. Clark stated, "We've asked our former Senior Vice President of Sales to step back in on an interim basis as we launch a national search for a permanent leader."
* Clark emphasized strong customer retention and satisfaction, highlighting a Net Promoter Score of plus 70 and over 90% satisfaction in partnership areas.
* Clark described progress in SafePointe, citing accelerated interest due to the legislative mandate and recent bookings, including a 26-lane project with a Florida hospital. International expansion was also noted, with Uruguay deployments and optimism about the Brazil market.
* Alan Stewart, CFO, stated: “Our third quarter 2025 results are behind our expectations due to delays in several large contracts that we had hoped to have completed prior to the end of the quarter. That said, our cash generation, positive adjusted EBITDA and continued growth in all of our products reflects our ongoing strategic initiatives, operational efficiency measures and our commitment to delivering value to our shareholders.”

OUTLOOK

* The company lowered its full year 2025 revenue guidance from $111 million to $113 million to approximately $104 million. Adjusted EBITDA guidance was also reduced from 20%-22% to 14%-15%.
* Stewart explained the guidance reduction: “This shortfall is primarily attributed to delays in 3 expected bookings and deployments.” These include an $2.5 million CrimeTracer deal, a $2.5 million CapEx ShotSpotter deployment in Brazil, and a $1.4 million ShotSpotter renewal in Puerto Rico.
* For 2026, SoundThinking set revenue guidance at $114 million to $116 million and adjusted EBITDA margin guidance at 18%-20%.

FINANCIAL RESULTS

* Q3 2025 revenues were $25.1 million, representing a 4% decrease from Q3 2024. Gross profit was $13.6 million (54% of revenue), down from $15.2 million (58%) the previous year. Adjusted EBITDA was $3.5 million versus $4.5 million in Q3 2024.
* Operating expenses declined to $15.7 million (63% of revenues), down from $16.3 million (62%) in Q3 2024 and lower than Q2 2025. Net loss was $2 million, or ($0.16) per share, compared to a net loss of $1.4 million, or ($0.11) per share, in Q3 2024.
* SoundThinking ended the quarter with $11.8 million in cash and cash equivalents and repurchased 160,271 shares for approximately $2 million. Deferred revenue was $43.9 million at quarter-end.

Q&A

* Richard Baldry, ROTH Capital Partners: Questioned why 2026 margin guidance is lower than previously expected and asked about Q4 sequential revenue. Alan Stewart responded that guidance excludes potential Chicago and Brazil CapEx deals, and explained a conservative approach given deal timing uncertainty.
* Baldry asked about changes in sales leadership and process improvement. Clark replied that realignment is underway, focusing on fewer products per salesperson and improved sales force hygiene, stating, “We’re encouraged about some of the recent changes that we’re seeing.”
* Baldry inquired about SafePointe pipeline magnitude. Clark expressed excitement about its hospital vertical, noting strong product-market fit and substantial medium- to long-term potential.
* Vijay Devar, Northland Capital Markets: Asked about enterprise security deal pipeline and SafePointe sales cycle. Clark described strong pipeline and noted SafePointe deals have a faster, roughly 12-month cycle compared to ShotSpotter’s 12-18 months.
* Trevor Walsh, Citizens JMP Securities: Probed go-to-market changes and sales execution. Clark clarified sales conversion challenges are additive to the three delayed deals, and acknowledged revenue impact from fewer ShotSpotter square miles going live than expected.
* Walsh asked about DFR integration. Clark emphasized broad integration history, noting openness to all drone platforms and customer-centric approach.
* Walsh inquired about gross margin slippage. Stewart explained it was primarily due to deal delays but highlighted strong cost controls.
* Maxwell Michaelis, Lake Street Capital Markets: Requested annual recurring revenue (ARR) outlook. Stewart said ARR guidance will be provided in Q4 earnings, pending resolution of large contracts.
* Michaelis and Jeremy Hamblin, Craig-Hallum Capital Group, asked about specific deal delays, cost structure, and Puerto Rico contract. Management cited bureaucratic complexity, high gross margins on delayed deals, and no expectation of retroactive payments for Puerto Rico.
* Hamblin inquired about Chicago RFP timeline and R&D spend. Clark noted encouraging budget signals and public support in Chicago, while Stewart projected R&D growth to be lower than revenue growth in 2026.

SENTIMENT ANALYSIS

* Analyst tone was pressing and focused on the impact of delays, sales execution, gross margins, and guidance reductions, indicating slightly negative sentiment.
* Management’s prepared remarks were confident but became more defensive and explanatory in Q&A, particularly regarding sales performance and deal delays. Phrases such as “we’re encouraged by the recent changes” and “we’re trying to be appropriate in the fact that we’re still working on some of these delays” reflected a pragmatic and cautious tone.
* Compared to the previous quarter, both analysts and management displayed more caution and concern around revenue predictability and sales execution.

QUARTER-OVER-QUARTER COMPARISON

* Revenue guidance was lowered from the previous range of $111 million to $113 million down to $104 million. Adjusted EBITDA guidance decreased from 20%-22% to 14%-15%.
* The previous quarter focused on pipeline growth and reaffirmed guidance, while the current call emphasized sales execution challenges and deal delays.
* The tone shifted from optimism and confidence to caution and pragmatism, with management more focused on operational discipline and immediate execution.
* Analysts in both quarters pressed on deal timing and margin impacts, but the current quarter’s questions were more pointed regarding execution and risk factors.

RISKS AND CONCERNS

* Management cited delays in large contracts, including CrimeTracer, Brazil CapEx, and Puerto Rico renewal, as the main revenue headwinds.
* Realignment of sales organization and leadership transition are underway to mitigate conversion challenges.
* International opportunities remain subject to governmental changes and tariffs, introducing further uncertainty.
* Analysts raised concerns about sales execution, gross margin variability, and the risk of non-recurrence or delay of significant deals.

FINAL TAKEAWAY

SoundThinking highlighted expanded product offerings, strategic wins in healthcare security, and upcoming launches such as CrimeTracer Gen3, but the company faces execution headwinds reflected in reduced revenue and margin guidance for 2025. Management is acting to strengthen the sales organization and remains confident about medium- to long-term growth, emphasizing operational improvements, positive customer retention metrics, and robust pipelines in both domestic and international markets as foundations for future momentum.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ssti/earnings/transcripts]

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