SoundThinking(SSTI) - 2024 Q4 - Annual Report

Customer Base and Market Penetration - As of December 31, 2024, the company had approximately 328 customers and had worked with about 2,100 agencies to enhance public safety outcomes[16] - The company serves law enforcement agencies in three of the ten largest U.S. cities as ShotSpotter customers, indicating early-stage penetration in the public safety market[118] - The two largest customers, the City of New York and the City of Chicago, accounted for 23% and 10% of revenues, respectively, for the year ended December 31, 2024[131] - Approximately 39% of ShotSpotter customers have expanded their coverage areas by an average of almost eight square miles, contributing to a revenue retention rate of 105% for 2024[119] - The company has identified a significant demand for its ResourceRouter solution, estimating a market of up to 1,500 cities with an average investment of $50,000 to$100,000 per year per customer[113] Product Offerings and Innovations - The SafetySmart platform includes six data-driven tools, with ShotSpotter® being the flagship product trusted by 177 cities and 20 universities and corporations[17] - The company has introduced PlateRanger™ powered by Rekor®, an advanced license plate recognition solution launched in July 2024[17] - The integration of solutions with drones and video surveillance enhances situational awareness and improves evidence collection for law enforcement[60] - The CrimeTracer search engine allows law enforcement to access over 1.3 billion structured and unstructured data points, facilitating immediate tactical leads[74] - The CaseBuilder solution aims to improve homicide clearance rates, which were below 50% in 2021, by providing a complete digital case management system[81] - ResourceRouter utilizes AI-driven analysis to optimize patrol deployment, ensuring officers are in the right place at the right time for crime prevention[91] - The PlateRanger solution, launched in partnership with Rekor Systems, enhances investigative efficiency through real-time data sharing and vehicle identification[95] - Detailed Forensic Reports provide comprehensive, court-admissible analysis of shooting incidents, supporting investigations and legal proceedings[61] - The ShotSpotter Insight application allows users to view, search, and filter historical incident data, aiding in investigative efforts[59] - The company invested in enhancing its advanced signal processing and classification algorithms, and deployed a complete overhaul of its SafePointe solution called NextGen in September 2024[137] Financial Performance and Revenue - The company reported a net loss of $9.2 million for the year ended December 31, 2024, with an accumulated deficit of$104.3 million[180] - The company recognizes subscription revenues ratably over the term of contracts, which can lead to fluctuations in reported revenues[174] - The company estimates that a customer in the domestic market for public safety solutions could invest approximately $400,000 per year for ShotSpotter, while smaller cities may invest between$50,000 to $100,000 annually[110] - The company has increased its revolving credit commitment from$20.0 million to $25.0 million and extended the maturity date of its credit agreement to October 15, 2025[227] - As of December 31, 2024, there was$4.0 million outstanding on the company's line of credit[227] Strategic Partnerships and Acquisitions - The acquisition of SafePointe has expanded the total addressable market (TAM) into the estimated $20 billion weapons detection market, broadening the customer base into healthcare, casinos, and enterprise-level corporations[125] - The strategic partnership with Rekor to launch the PlateRanger™ solution is expected to tap into a fast-growing advanced license plate recognition (ALPR) market, with an additional TAM expansion of$3.2 billion[116][125] - The company has acquired complementary technologies or businesses, including LEEDS, LLC in November 2020, Forensic Logic in January 2022, and SafePointe in August 2023[183] Challenges and Risks - The company faces risks related to funding availability for its customers, particularly local governments, which could impact sales[185] - The company’s contract with the City of Chicago ended in November 2024, representing a significant revenue loss of 10%[186] - Macroeconomic pressures, such as inflation and rising interest rates, could adversely affect the company’s ability to maintain or increase revenues[188] - Economic uncertainties, including geopolitical tensions and inflation, may impact customer funding and purchasing decisions, leading to unpredictable revenue growth[205] - A significant portion of customers rely on federal funding for purchasing solutions, and any reduction in such funding could adversely affect sales[200] - New competitors entering the public safety solutions market could increase competition and impact revenue growth[208] - Privacy concerns regarding government surveillance may deter potential customers from purchasing the company's solutions[209] - The ongoing social unrest may adversely affect police agency budgets and funding available to current and potential customers, impacting the company's revenues and operations[211] Growth Strategy and Market Expansion - The company plans to increase investment in international product, sales, and marketing efforts to penetrate new geographies, with only four current ShotSpotter customers outside the U.S.[120] - The company aims to build a global sales organization to further penetrate the market for ShotSpotter and expand its security solutions customer base[132] - The company focuses on new customer acquisition, customer renewal, add-on sales, and coverage expansion through its direct sales teams[132] - The company aims to increase cross-selling efforts to existing customers but faces uncertainty regarding their receptiveness to new solutions[213] Employee Relations and Corporate Culture - The company has been designated a Great Place to Work® Company for the last six years, reflecting its commitment to employee relations and well-being[152] - As of December 31, 2024, the company employed 316 people, with a total attrition rate of less than 20%[152] - The company has a three-pronged strategy to grow diversity over time, focusing on attracting diverse talent, creating an inclusive workplace, and collaborating with customers and partners[154] Research and Development - The company has engaged in research and development activities with manufacturing partners and outsourced certain activities to engineering firms to supplement its internal team[137] - The company continues to evaluate new technologies for integration, aiming to enhance the value of its solutions for customers[60] - The marketing function's largest investment is in demand generation, aimed at driving a new and qualified pipeline for each product in the SafetySmart platform[133] Compliance and Regulatory Issues - Compliance with CJIS standards is necessary for certain customers, and failure to meet these requirements could harm sales and reputation[197] - Changes in federal funding availability and political landscapes may lead to operational changes in federal agencies, impacting the company's business[206]