SoundThinking Inc. (SSTI:NASDAQ), a company in public safety technology, reported a 22% increase in revenue for the second quarter of 2024, reaching a record US$27.0 million. This growth, compared to US$22.1 million in the same quarter of 2023, was primarily driven by the expansion of both new and existing customer subscriptions and contributions from the company's CaseBuilder platform. Gross profit for the quarter also saw a significant increase of 27%, totaling US$16.1 million, which represented 60% of revenues. Despite these gains, the company recorded a GAAP net loss of US$0.8 million, an improvement over the US$2.7 million loss in the same quarter of the previous year.
In a separate development, SoundThinking announced four new contracts and expansions for its ShotSpotter gunshot detection system and ResourceRouter software, further enhancing public safety across key regions in Illinois and the Chicagoland area. The new agreements include a three-year contract for ShotSpotter coverage in Elmwood Park, Chicago Heights, and Freeport, Illinois. Additionally, Chicago Heights has adopted ResourceRouter to optimize patrol management, reflecting a broader trend of leveraging technology to address staffing shortages and improve responsiveness to gunfire incidents. These deployments underscore the growing recognition of ShotSpotter and ResourceRouter as critical tools in enhancing public safety.
SoundThinking's President and CEO, Ralph Clark, emphasized the strong momentum behind the company's SafetySmart™ Platform strategy, noting in the news release, "Our SafetySmart Platform strategy is gaining traction, empowering our law enforcement partners to deliver measurable, efficient, and equitable public safety outcomes in their communities." Clark also expressed pride in the continued adoption of ShotSpotter and ResourceRouter by municipalities of all sizes, further solidifying SoundThinking's position as a leader in public safety technology.
A Deeper Look Into Public Safety Technology
On July 31, Power DMS highlighted the profound impact that public safety solutions have had over the past couple of decades, noting that these technologies have helped agencies "prepare for and respond to emergencies of all sizes more effectively." This sentiment was echoed in the strong performance of SoundThinking, Inc. during the second quarter of 2024, where the company reported a 22% increase in revenue, driven by the expansion of its ShotSpotter and ResourceRouter technologies. These tools are instrumental in providing enhanced safety measures, including improved communications and real-time data sharing, which, according to Power DMS, benefit both first responders and citizens alike.
Roth MKM reiterated its "Buy" rating and maintained a 12-month price target of US$30.00 for SoundThinking's shares.
The importance of reliable and seamless technology in public safety was also underscored by Route Fifty on June 28. They reported that "the intersection of innovation and public safety is subtle, but crucial," emphasizing that when lives are on the line, the functionality of technology should not be a concern for first responders. This aligns with SoundThinking's ongoing efforts to ensure that their technologies, such as ShotSpotter, operate behind the scenes efficiently, allowing first responders to focus on their critical tasks without distraction.
Furthermore, the sector's focus on proactive mental health support for first responders has been gaining traction, as evidenced by Versaterm's recent acquisition of Mindbase. State Scoop reported in May that this move marked a significant advancement in public safety technology, enabling software to connect first responders with mental health resources after traumatic incidents. This is particularly relevant to SoundThinking's holistic approach to public safety, which not only involves deploying advanced technologies like ShotSpotter but also considers the well-being of the personnel who use these tools.
Overall, the public safety technology sector is becoming increasingly indispensable as agencies seek to modernize their operations and enhance their response capabilities. As Power DMS succinctly put it, "The future of public safety lies in harnessing the power of technology to create safer communities and better serve our citizens." SoundThinking, Inc.'s continued success and strategic expansions underscore its pivotal role in this ever-evolving sector, demonstrating the company's commitment to advancing public safety through innovative technology solutions.
SoundThinking's Key Catalysts
Several key catalysts contributed to SoundThinking's robust performance in the second quarter. The expansion of the SafetySmart™ Platform, including the integration of the CrimeTracer and CaseBuilder solutions with existing services, played a significant role in driving revenue growth. This strategic expansion reflects SoundThinking's commitment to broadening its market reach and enhancing its product offerings to meet the evolving needs of public safety agencies.
According to the company, the recently secured contracts for ShotSpotter and ResourceRouter in Illinois and the Chicagoland area further bolster SoundThinking's market position. These deployments, which include new agreements with Elmwood Park, Chicago Heights, and Freeport, are expected to enhance public safety and improve the efficiency of law enforcement agencies in these regions. The adoption of ResourceRouter by Chicago Heights is particularly notable as it addresses the challenges of staffing shortages by optimizing resource allocation and response times.
Furthermore, as noted by SoundThinking, the company's recently announced partnership to develop the "PlateRanger, Powered by Rekor" vehicle and License Plate Reader (LPR) public safety solution marks a significant milestone in SoundThinking's market expansion. This collaboration, set to launch in September 2024, will further strengthen the SafetySmart™ platform by incorporating advanced LPR technology, positioning SoundThinking to capitalize on the growing demand for comprehensive public safety solutions.
Despite facing challenges such as the non-renewal of the ShotSpotter contract in Chicago, the company remains confident in its ability to achieve its revenue growth targets and enhance profitability in the coming years.
Expert Analysis On SoundThinking
According to a February 2024 report by Roth MKM, SoundThinking, Inc. has demonstrated significant growth and potential despite recent challenges. The report highlighted that while the company faced the loss of its approximately US$8 million per year contract with Chicago, this event was perceived as overly punishing to the company's valuation.
Richard K. Baldry, CFA of Roth MKM, emphasized that the rest of SoundThinking's business ramped up well, with non-Chicago contract wins in the interim exceeding the value of the potential revenue loss from Chicago. As a result, Roth MKM reiterated its "Buy" rating and maintained a 12-month price target of US$30.00 for SoundThinking's shares.
The report also noted that SoundThinking set new records in the fourth quarter of 2023, with revenues growing 24% year-over-year to US$26.0 million, which matched Roth MKM's forecast closely. Additionally, the company achieved a record Adjusted EBITDA of US$4.8 million, although this was slightly below the estimate due to above-trend spending on sales and marketing to account for stronger-than-expected bookings.
Baldry highlighted SoundThinking's strong growth metrics, pointing out that the company added 155 "go live" gunshot detection miles in 2023, significantly surpassing previous years.
Streetwise Ownership Overview*The introduction of SafePointe, SoundThinking's new passive security screening service, was also seen as a key growth driver, with 30 "lanes" of security coverage added in the fourth quarter of 2023 alone. Baldry expressed confidence that SafePointe could materially improve SoundThinking's growth and predictability in the long term.
Ownership and Share Structure
According to Refinitiv, 62.82% of SoundThinking is owned by Institutions.
Of that, Federated Hermes Global Investment Management Corp holds 11.76%, Bares Capital Management Inc has 6.06%, Nine Ten Capital Management owns 5.02%, and EVR Research LP holds 4.77%.
Management and insiders own 24.67%. Of those, owner Gary Lauder owns the most with 17.63% and CEO Ralph Clark holds 3.69%.
The rest is retail.
SoundThinking has a market cap of 186.78 million with a 52 week range of US$26.92-US$11.00.
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