SoundThinking Inc.: Balancing Potential Growth with Current Financial Challenges

SoundThinking Inc. maintains a Hold rating from William Blair analyst Louie DiPalma due to a combination of factors, including a 4% YoY revenue decline and a drop in gross margin from 60% to 53%. Despite positive developments such as expected catch-up revenue and growing demand for the PlateRanger solution and SafePointe, the stock is likely to remain range-bound until financial performance improves.

SoundThinking Inc. (SSTI) reported its financial results for the second quarter of 2025, with revenues decreasing by 4% year-over-year (YoY) to $25.9 million. This decline was primarily attributed to the non-renewal of a contract with the City of Chicago [1]. Despite this, the company reaffirmed its full-year 2025 revenue guidance of $111 million to $113 million, representing a 10% YoY growth at the midpoint [3].

Gross profit decreased to $13.8 million, representing 53% of revenues, down from 60% in the prior year. This drop was largely due to increased maintenance costs for existing deployments [2]. The company also reported a GAAP net loss of $3.1 million, compared to a net loss of $0.8 million in the same quarter of 2024. Adjusted EBITDA was $3.4 million, down from $5.1 million in the prior year [1].

SoundThinking expanded its ShotSpotter service to four new cities, including New Orleans and Niteroi, Brazil, and added a new security deployment. The company also made significant progress in integrating drones with ShotSpotter alerts, enhancing real-time intelligence for law enforcement. Additionally, SoundThinking is advancing its AI capabilities, leading to productivity gains and new product integrations, such as the PlateRanger and CrimeTracer solutions [1].

However, bookings fell short of internal targets due to the timing of large deals, including a $2.5 million CrimeTracer transaction. The company faced bureaucratic delays in Puerto Rico, leading to a suspension of service and revenue recognition. These factors contributed to the revenue decline and gross margin decrease [1].

SoundThinking's SafePointe pipeline is healthy and growing, particularly in the healthcare and casino verticals. The company is optimistic about opportunities in California due to the AB 2975 initiative and is actively engaging in that market. In South America, SoundThinking has significant developments in Montevideo and Niteroi, Brazil, and sees potential in Mexico and South Africa [1].

The company expects Annual Recurring Revenue (ARR) to grow from $95.6 million at the beginning of 2025 to approximately $110 million at the beginning of 2026. Adjusted EBITDA margin guidance for the full year 2025 was reaffirmed at 20% to 22% [1].

Despite the mixed results, the stock is likely to remain range-bound until financial performance improves. William Blair analyst Louie DiPalma maintains a Hold rating for SoundThinking Inc. due to the 4% YoY revenue decline and the drop in gross margin from 60% to 53% [1].

References:
[1] https://finance.yahoo.com/news/soundthinking-inc-ssti-q2-2025-071148608.html
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_PLX4C09B9:0-soundthinking-q2-revenue-misses-estimates/
[3] https://finance.yahoo.com/news/soundthinking-inc-reports-second-quarter-200500738.html