Executive Summary / Key Takeaways

• SoundThinking, formerly ShotSpotter, has evolved from a single-product company to a diversified public safety technology platform, SafetySmart, leveraging AI/ML across solutions for law enforcement and security.
• The company is demonstrating solid revenue growth, including a 12% year-over-year increase in Q1 2025 driven partly by significant contract renewals, and expects continued growth in 2025 despite the loss of a major customer.
• Strategic expansion into new verticals (healthcare, gaming, corporate) with SafePointe and the launch of PlateRanger via partnership are key drivers for future growth and revenue diversification beyond the core ShotSpotter business.
• Management is guiding for full-year 2025 revenue of $111 million to $113 million and adjusted EBITDA margins of 20% to 22%, anticipating ARR growth from $95.6 million to approximately $110 million by early 2026.
• Key factors for investors to monitor include execution on new product rollouts, success in international markets, managing sales cycle elongation, addressing the identified material weakness in internal controls, and potential impacts from municipal funding dynamics and public perception challenges.

The Evolution of SoundThinking: Building a Platform for Safer Communities

SoundThinking, Inc., a name adopted in April 2023 to signify a broader mission beyond its foundational offering, stands at the intersection of technology and public safety. What began over 28 years ago as ShotSpotter, a pioneering solution for detecting outdoor gunfire, has strategically expanded into a multi-faceted platform addressing the complex needs of law enforcement, security teams, and civic leaders. The company's core mission, rooted in the belief that technology can promote social good, now centers on delivering data-driven solutions to enhance public safety outcomes in an efficient, effective, and equitable manner.

At the heart of SoundThinking's strategy is the SafetySmart platform, a suite of six interconnected, data-driven tools. This platform approach represents a significant evolution, moving beyond a single point solution to offer a comprehensive ecosystem designed to support various aspects of public safety and investigative work. The platform includes the flagship ShotSpotter system, CrimeTracer (a law enforcement search engine), CaseBuilder (investigative management), ResourceRouter (patrol deployment), PlateRanger (ALPR powered by Rekor (REKR)), and SafePointe (weapons detection). This integrated offering aims to provide a unified client experience, leveraging shared data and AI/ML capabilities to create a force multiplier for agencies facing challenges like understaffing and increased demands for accountability.

Technological differentiation is foundational to SoundThinking's competitive standing. The core ShotSpotter technology relies on a network of acoustic sensors and sophisticated cloud-based software. When potential gunfire is detected, the system precisely locates the incident and routes the audio to the Incident Review Center (IRC) for human review and validation, typically sending an alert within approximately 45 seconds. This blend of machine classification and human expertise is critical for accuracy (averaging 94% in 2024 for NYPD) and speed, enabling rapid response to incidents, many of which go unreported through traditional 911 calls (80-90% according to independent research). This capability is a significant differentiator, providing first responders with critical minutes to aid victims, secure evidence, and potentially apprehend suspects.

Beyond ShotSpotter, AI and machine learning are increasingly integrated across the platform. ResourceRouter utilizes AI to analyze crime patterns and optimize patrol deployment, aiming to maximize the impact of limited resources. CrimeTracer is evolving into an AI-enhanced search engine, applying generative AI and large language models to make vast datasets contextually insightful for investigators, transforming digital case work and crime linking. The recently launched SafePointe next-gen weapons detection system leverages AI at the edge, combining data from passive magnetic field sensors and 3D cameras to classify weapons, pinpoint location, and track movement. This passive detection method is a key differentiator against traditional metal detectors, offering a low-friction, discrete security solution crucial for environments like hospitals and casinos. While specific quantifiable performance metrics for the AI enhancements in CrimeTracer, ResourceRouter, and SafePointe next-gen beyond their stated goals (e.g., contextual insights, optimized deployment, weapon classification) are not detailed, the strategic intent is clear: to enhance efficiency, accuracy, and operational effectiveness across the platform. SoundThinking Labs also continues to explore innovative applications of its technology, demonstrating a commitment to ongoing R&D.

In the competitive landscape, SoundThinking operates alongside larger, more diversified technology providers like Axon Enterprise (AXON) and Motorola Solutions (MSI), as well as data analytics specialists like Verint Systems (VRNT) and Palantir Technologies (PLTR). While precise, directly comparable market share figures for all niche segments are not publicly detailed, SSTI holds an estimated 10-15% aggregate market share in public safety AI tools. Compared to these rivals, SSTI often demonstrates niche efficiency, such as the rapid, validated alerting of ShotSpotter or the discrete detection method of SafePointe. However, it generally lags in overall scale and, in some cases, profitability metrics like net margins (SSTI's TTM net margin is -7.39% compared to AXON's 18%, MSI's 15%, VRNT's 9%, and PLTR's 16% in their latest reported annual periods), indicating less overall operational efficiency or higher investment needs relative to revenue compared to larger players. SSTI's strategic response is to differentiate through specialized, integrated solutions and deep domain expertise in public safety workflows, leveraging its established relationships with over 300 customers and approximately 2,100 agencies. The company's network effects within law enforcement, built over years of partnership, act as a competitive moat, fostering customer loyalty and supporting recurring revenue streams.

Performance Reflecting Strategic Momentum

SoundThinking's recent financial performance reflects both the traction of its expanded platform strategy and the inherent volatility of its market. In the first quarter of 2025, the company reported revenues of $28.3 million, a 12% increase compared to $25.4 million in the same period of 2024. This growth was significantly boosted by approximately $3.5 million in catch-up revenue from the successful renewal of two delayed, multi-year contracts with the New York City Police Department (NYPD), totaling $64 million over three years. This renewal, particularly for the ShotSpotter service which NYPD has used for nearly a decade, underscores the sustained value the technology provides to one of the largest law enforcement agencies in the US.

While revenue saw a lift from these renewals, profitability metrics in Q1 2025 showed nuances. Gross profit increased to $16.6 million from $14.9 million year-over-year, maintaining a stable gross margin of 59%. However, operating expenses increased slightly to $17.8 million from $17.5 million, primarily driven by higher research and development costs related to SafePointe consulting and increased headcount/IT, as well as a modest rise in sales and marketing expenses. General and administrative expenses saw a decrease, mainly due to lower legal and consulting fees. The company reported a net loss of $1.5 million in Q1 2025, an improvement from the $2.9 million net loss in Q1 2024. Adjusted EBITDA grew to $4.5 million in Q1 2025 from $3.0 million in Q1 2024, although it was noted to be lower than some expectations due to approximately $1 million in additional expenses, including costs for the annual all-hands meeting and increased bandwidth usage for AI modeling.

Liquidity remains a key focus. As of March 31, 2025, SoundThinking held $11.7 million in cash and cash equivalents, down from $13.2 million at the end of 2024, but significantly higher than the $5.7 million at the end of 2023.

Cash flow from operations was a modest net use of $0.1 million in Q1 2025, a shift from the $5.0 million provided in Q1 2024, largely influenced by changes in deferred revenue timing (impacted by the Chicago contract termination) and working capital fluctuations. Investing activities used $0.9 million, primarily for property and equipment for customer deployments. The company also continues its share repurchase program, buying back approximately $0.5 million of stock in Q1 2025, with $12.9 million remaining under the authorization. Management believes existing cash, operating cash flow, and the available credit facility are sufficient to meet working capital and capital expenditure needs for at least the next 12 months.

Operational highlights underscore the company's execution. In Q1 2025, ShotSpotter went live in 4 new cities and had one expansion. The company's 2024 revenue retention rate stood at a healthy 105%, and it boasts a strong historical renewal ratio of over 40:1 (renewals to non-renewals) since 2020, excluding the notable loss of the Chicago contract in November 2024, which represented approximately $9.2 million in revenue in 2024. This high retention rate, even amidst public scrutiny and political challenges, speaks to the perceived value and operational reliability of the core ShotSpotter service for its customers.

Strategic Growth Drivers and Future Outlook

SoundThinking's growth strategy hinges on expanding the reach of its core ShotSpotter product and accelerating the adoption of its newer SafetySmart platform solutions. International expansion is a key focus, with recent successes in Uruguay (doubling footprint), a return to Brazil with a deployment in Niteroi, and ongoing opportunities in South Africa and the Caribbean. Management expects accelerated international traction in the latter half of 2025 and early 2026, noting that international deals typically command pricing leverage (3x domestic pricing).

The newer platform solutions are gaining momentum. ResourceRouter has more than doubled its installed base in less than 18 months, now deployed in over 20 agencies, and saw 100% ASP growth from 2023 to 2024, with a $4 million pipeline for 2025. CaseBuilder subscription revenue grew significantly year-over-year in Q3 2024, boosted by large projects like the NYPD Department of Corrections contract. CrimeTracer continues to expand its customer base and data footprint, positioning itself as a powerful investigative tool leveraging AI.

SafePointe represents one of the most exciting growth areas. The acquisition in August 2023 added an AI-based weapons detection system focused on verticals like healthcare, gaming, and corporate security. The passage of California Assembly Bill 2975, requiring hospitals to deploy weapon detection systems by 2027, creates a significant mandated opportunity in California alone (estimated 400 hospitals, ~10 lanes each, totaling ~4,000 lanes), with similar legislation advancing in other states. While sales were slower than expected in Q2 2024 as customers awaited the next-gen release, the launch in Q3 2024, featuring 3D camera integration, enhanced ML, and SOC 2/HIPAA compliance, is expected to drive adoption. The company is securing pilot wins with major hospital chains and sees a strong pipeline. SafePointe is priced at approximately $20,000 per year per lane, with a shorter deployment cycle (6-7 weeks) than ShotSpotter, offering the potential for faster revenue recognition once contracts are signed.

The strategic partnership with Rekor for PlateRanger, an ALPR solution, further diversifies the platform. Launched in July 2024, PlateRanger targets a $2.5 billion TAM and is expected to contribute over $1 million in bookings in 2025. Its integration with ShotSpotter and CrimeTracer data provides a unique differentiator for investigations.

For the full year 2025, SoundThinking is guiding for revenue in the range of $111 million to $113 million. This guidance incorporates the loss of approximately $9.7 million in annualized revenue from the Chicago contract termination in late 2024. Management expects annual recurring revenue (ARR) to increase from $95.6 million at the beginning of 2025 to approximately $110 million by the beginning of 2026, with ShotSpotter (including international) contributing $8 million to $9.5 million of the incremental growth and the remainder coming from other platform solutions. The company is guiding for adjusted EBITDA margins of 20% to 22% for 2025, a slight reduction from previous expectations, primarily to account for the modest impact of current tariffs and increased investments in AI modeling and tools. Revenue progression through 2025 is expected to see Q2 lower than Q1 (due to the Q1 catch-up revenue), followed by sequential increases in Q3 and a more significant step-up in Q4 as investments in SafePointe and other solutions begin to translate into recognized revenue.

Risks and Challenges

Despite the strategic momentum and positive outlook, SoundThinking faces notable risks. Customer concentration remains significant, with NYPD accounting for a substantial portion of revenue and receivables. The loss of the Chicago contract highlights the potential impact of losing a major customer, a risk inherent in relying heavily on governmental agencies whose budgets and priorities can shift due to political changes or economic conditions. The drying up of specific federal funding sources like ARPA could also constrain customer budgets.

The lengthy and complex government sales cycle, often taking 12-18 months or more, introduces unpredictability in revenue timing and increases customer acquisition costs. Public perception and negative publicity, particularly concerning privacy or the perceived accuracy of gunshot detection technology, can also impact sales cycles and customer relationships. Real or perceived false positives or negatives from ShotSpotter or SafePointe could damage the company's reputation and lead to customer dissatisfaction or liability.

Operational risks include reliance on a limited number of suppliers, including a single manufacturer for proprietary sensors, which could lead to supply constraints (like the noted issue with NVIDIA (NVDA) chipsets for SafePointe next-gen) and impact deployment timelines. International expansion introduces additional regulatory, economic, and political risks. The increasing use of AI/ML also presents potential challenges related to operational issues, legal liability, reputational concerns (e.g., biased results), and cybersecurity risks.

Furthermore, the company identified a material weakness in the design of controls related to the verification of the completeness and accuracy of data supporting financial statements as of December 31, 2024, which remained unremediated as of March 31, 2025. While management is implementing remediation measures, the inability to fully remediate this weakness could impact the accuracy and timeliness of financial reporting and investor confidence. Litigation exposure, including intellectual property claims and requests for data/information in legal proceedings, also poses potential financial and reputational risks.

Conclusion

SoundThinking is undergoing a significant transformation, successfully evolving from its core ShotSpotter offering to a diversified public safety technology platform. The SafetySmart suite, powered by increasing AI/ML integration, positions the company to address a broader range of critical needs for law enforcement and security teams facing resource constraints and demands for greater accountability. Recent performance, including strong renewals and growth in newer solutions, validates the platform strategy.

While challenges such as customer concentration, lengthy sales cycles, potential negative publicity, and operational risks persist, the company's strategic initiatives in international markets, emerging verticals like healthcare security with SafePointe, and new offerings like PlateRanger provide compelling avenues for future growth and revenue diversification. The reaffirmed 2025 guidance, anticipating significant ARR growth despite the loss of a major customer, reflects management's confidence in the underlying demand for their solutions and the potential of the expanded platform. Investors should weigh the opportunities presented by the company's technological differentiation and market expansion against the execution risks and the need to resolve the identified material weakness in internal controls. The ability to successfully execute on the rollout and adoption of newer solutions, particularly SafePointe in the mandated healthcare market, and continue expanding the core ShotSpotter footprint globally will be key determinants of SoundThinking's long-term success and the realization of its investment thesis.