SoundThinking(SSTI) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements This section presents ShotSpotter, Inc.'s unaudited condensed consolidated financial statements for Q1 2021, reporting a 44% revenue increase to $15.0 million and net income of $79,000 Condensed Consolidated Balance Sheets As of March 31, 2021, total assets decreased to $64.4 million from $66.3 million at year-end 2020, primarily due to reduced cash, with total liabilities and equity also slightly lower Condensed Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,940 | $16,043 | | Total current assets | $29,700 | $31,136 | | Total assets | $64,443 | $66,320 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $29,762 | $30,979 | | Total liabilities | $30,672 | $32,015 | | Total stockholders' equity | $33,771 | $34,305 | | Total liabilities and stockholders' equity | $64,443 | $66,320 | Condensed Consolidated Statements of Operations For Q1 2021, revenues increased 44% to $15.0 million, leading to a gross profit of $8.7 million and a net income of $79,000, or $0.01 per diluted share Q1 2021 vs. Q1 2020 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenues | $15,013 | $10,458 | | Gross Profit | $8,688 | $6,116 | | Operating Income (Loss) | $169 | $(23) | | Net Income | $79 | $13 | | Net Income per Share, diluted | $0.01 | $0.00 | Condensed Consolidated Statements of Cash Flows Q1 2021 saw a net cash outflow of $5.1 million, with $1.5 million used in operations, $1.2 million in investing, and $2.4 million in financing, reducing cash to $10.9 million Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,496) | $5,726 | | Net cash used in investing activities | $(1,231) | $(1,141) | | Net cash used in financing activities | $(2,374) | $(289) | | Increase (decrease) in cash and cash equivalents | $(5,101) | $4,296 | Notes to Condensed Consolidated Financial Statements The notes detail the company's SaaS business model, significant accounting policies, $53.1 million in remaining performance obligations, the LEEDS acquisition, and the stock repurchase program - The company provides precision-policing solutions, including ShotSpotter Respond, Connect, and Investigate, primarily through a SaaS-based subscription model to law enforcement agencies[23] Remaining Performance Obligations as of March 31, 2021 (in thousands) | Period | Amount | | :--- | :--- | | Remainder of 2021 | $34,403 | | 2022 | $11,174 | | 2023 | $4,985 | | Thereafter | $2,560 | | Total | $53,122 | - In November 2020, the company acquired LEEDS, LLC for a total estimated purchase consideration of $23.8 million, including cash, stock, and a contingent earnout of up to $5.0 million[38] - During Q1 2021, the company repurchased 56,162 shares of its common stock for $2.2 million, with $4.5 million remaining available for repurchase under the program as of March 31, 2021[55] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, highlighting a 44% revenue increase, strategic acquisitions, COVID-19 impacts, and the company's liquidity position Overview The company provides precision-policing solutions, achieving 44% YoY revenue growth to $15.0 million in Q1 2021, with significant customer concentration in New York and Chicago - The company's flagship product is ShotSpotter Respond, an outdoor gunshot detection system, with expanded offerings including ShotSpotter Connect (patrol management) and ShotSpotter Investigate (case management)[68] Key Performance Metrics Q1 2021 | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues (in millions) | $15.0 | $10.5 | +44% | | Net New 'Go-Live' Cities | 6 | (1) | N/A | - Customer concentration remains high, with the City of New York and the City of Chicago representing 47% of total revenues for the three months ended March 31, 2021[77] Impact of COVID-19 and Social Unrest on our Business COVID-19 and social unrest, including 'Defund the Police' movements, adversely impact business operations by hindering deployments, affecting customer funding, and disrupting supply chains - The COVID-19 pandemic has adversely impacted the company's ability to deploy customer solutions since mid-March 2020 due to work-from-home policies and travel restrictions[72][88] - Social unrest and movements such as 'Defund the Police' may directly or indirectly affect police agency budgets and funding available to current and potential customers[89][166] Results of Operations Q1 2021 revenues increased by $4.5 million (44%) due to new customers and acquisitions, while cost of revenues and operating expenses rose by $2.0 million and $2.4 million, respectively Comparison of Operations (in thousands) | Item | Q1 2021 | Q1 2020 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenues | $15,013 | $10,458 | $4,555 | 44% | | Gross Profit | $8,688 | $6,116 | $2,572 | 42% | | Total Operating Expenses | $8,519 | $6,139 | $2,380 | 39% | | Operating Income (Loss) | $169 | $(23) | $192 | (835%) | - The $4.5 million revenue increase was primarily due to new customers, expansions of existing coverage, renewals delayed from the prior quarter, and revenue from the LEEDS acquisition[117] - Sales and marketing expenses increased by $1.4 million, driven by higher personnel costs ($0.6 million) and other costs including commissions and amortization related to the LEEDS acquisition ($0.9 million)[119] Liquidity and Capital Resources The company's liquidity relies on $10.9 million in cash and a $20.0 million undrawn credit facility, with $2.2 million used for stock repurchases in Q1 2021 - The company's principal source of liquidity is cash and cash equivalents of $10.9 million as of March 31, 2021[124] - A revolving credit facility of $20.0 million is available, with no outstanding balance as of March 31, 2021[124] - The company repurchased 56,162 shares for $2.2 million in Q1 2021, with $4.5 million remaining under its stock repurchase program[128] Item 3. Qualitative and Quantitative Disclosures About Market Risk No material changes in market risk exposure, primarily related to interest and foreign exchange rates, were reported for Q1 2021 compared to the 2020 Annual Report - There were no material changes in the company's market risk during the first quarter of 2021[141] Item 4. Controls and Procedures Management deemed disclosure controls effective as of March 31, 2021, noting the LEEDS acquisition's internal control integration as a material change - Management concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective[142] - The integration of internal controls from the November 2020 acquisition of LEEDS, LLC is considered a material change in internal control over financial reporting[143] PART II. OTHER INFORMATION Item 1A. Risk Factors This section details significant risks, including COVID-19 impacts, 'Defund the Police' movements, reliance on government contracts, lengthy sales cycles, competition, and technology and supply chain vulnerabilities - The COVID-19 pandemic has had a material adverse effect on the business, with future impacts on deployment ability, customer funding, and supply chains remaining uncertain[148] - Ongoing social unrest, protests, and movements such as 'Defund the Police' may negatively affect police agency budgets and funding available to customers[166] - The company's sales cycle can be lengthy and unpredictable, often lasting up to nine months or more, especially when dealing with government entities[175] - The company relies on a single contract manufacturer for its proprietary ShotSpotter sensors, creating a significant supply chain risk[230] - The company must upgrade its sensors from 3G to LTE technology, which is estimated to be a significant capital expenditure of approximately $5.0 million in total[228] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents