SoundThinking's Q3 2025: Contradictions Emerge on Sales Execution, Margins, and Revenue Guidance

Date of Call: November 12, 2025

Financials Results

• Revenue: $25.1M, down 4% YOY from $26.3M in Q3 2024 (Q3 2024 included approx $2.8M related to Chicago)
• EPS: GAAP net loss of $0.16 per diluted share, compared to a $0.11 loss in prior year (GAAP net loss ~$2.0M vs $1.4M)
• Gross Margin: 54% of revenue (gross profit $13.6M), compared to 58% (gross profit $15.2M) in prior year

Guidance:

• Full year 2025 revenue guidance lowered from $111–$113M to approximately $104M.
• Full year 2025 adjusted EBITDA margin guidance lowered from 20–22% to 14–15%.
• Management attributes ~$6.4M of 2025 revenue shortfall to three delayed bookings (Crime Tracer, Brazil CapEx, Puerto Rico) with ~70% flow-through to EBITDA expected if they close.
• Full year 2026 revenue guidance set at $114–$116M with adjusted EBITDA margin 18–20%.
• ARR guidance to be provided in February Q4 report.

Business Commentary:

* Revenue Performance and Sales Execution: - SoundThinking's third quarter revenues were $25.1 million, lower than expected due to delays in a ShotSpotter renewal in Puerto Rico and a statewide Crime Tracer booking. -

The company is addressing sales execution challenges by realigning its sales organization, refreshing the go-to-market playbook, and tightening accountability around forecasting and conversion metrics.

• AI and Operational Improvements:
• SoundThinking is investing in AI modeling and tools to enhance platform capabilities, with R&D expenses increasing from 13% of total revenue in Q2 2024 to 16% in Q3 2025.

• AI is being used to anticipate customer needs proactively, improving renewal predictability and customer retention, as indicated by an NPS score of plus 70 and over 90% satisfaction in critical partnership areas.

• Product Innovations and Market Opportunities:

• The upcoming release of Crime Tracer Gen 3 is expected to provide a significant competitive advantage, having integrated over 1 billion law enforcement and public records across 2,000-plus agencies.

• The SafePoint weapons detection system is gaining momentum due to regulatory mandates, with the company actively supporting hospitals in compliance efforts and securing favorable pilot programs and contracts.

• Guidance Adjustments and Strategic Focus:

• SoundThinking reduced full-year 2025 revenue guidance to approximately $104 million due to expected booking delays in large contracts.
• Despite the adjustments, the company remains optimistic about its growth potential, focusing on deeper penetration in existing accounts, expanding to mid-sized and smaller municipalities, and driving operational leverage.

Sentiment Analysis:

Overall Tone: Neutral

• Management lowered FY2025 revenue and adjusted EBITDA guidance citing execution-related delays and three specific deferred bookings, yet repeatedly emphasized an "encouraging" pipeline, improving sales hygiene, NPS +70 (up 4 points), AI-driven customer success wins, and confidence in medium-to-long-term prospects.

Q&A:

• Question from Richard Baldry (Roth Capital Partners): Why is 2026 margin guidance lower despite modestly higher revenue guidance vs 2025; will Q4 be down sequentially; do sales leadership changes address closing execution?
  Response: Guidance is conservative because it excludes potential upside from Chicago and Brazil; Q4 is expected to be relatively flat, and a sales reorganization (interim SVP returning, simpler GTM, tighter forecasting) is underway to improve conversion.

• Question from Mike Lattimore / Vijay Devar (Northland Capital Markets): How many enterprise security/gunshot detection deals are in the pipeline and what %; how has SafePoint sales cycle changed versus prior quarters?
  Response: Management reported a strong pipeline for gunshot detection and considerable international opportunity but will provide counts later; SafePoint deals close faster (roughly ~12 months) versus ShotSpotter (~12–18 months).

• Question from Trevor Walsh (Citizens): Are GTM changes reactionary to the three delayed deals or indicative of broader execution issues; how does DFR/drone integration influence pipeline and customer adoption?
  Response: Sales execution challenges are broader than the three delayed deals; the company is refocusing on point-solution selling, salesforce hygiene and forecasting, and adopting an open, customer-driven approach to DFR/drone integrations to accelerate wins.

• Question from Max McCalys (Lake Street Capital Markets): What is projected ARR for end of 2025/2026 and why was the Crime Tracer deal delayed?
  Response: ARR will be disclosed in the Q4 (February) report; Crime Tracer delay stems from complex quasi-state, multi-agency procurement and bureaucracy despite available funding and active engagement.

• Question from Jeremy Hamblin (Craig-Hallum Capital): The guide implies a larger EBITDA reduction than revenue shortfall—what explains the gap; will Puerto Rico produce catch-up revenue; any timeline on Chicago and R&D trajectory?
  Response: The EBITDA shortfall is driven by absence of several high-margin bookings (Puerto Rico, Crime Tracer, Brazil) that would have largely flowed to EBITDA; Puerto Rico is not expected to be backdated so no catch-up revenue; Chicago progress is encouraging but timing uncertain; R&D/AI spend will remain elevated but should grow slower than revenue.

Contradiction Point 1

Sales Execution and Deal Timing

It involves the company's ability to execute sales and the timing of deals, which directly impacts revenue and profitability expectations.

Are the sales execution challenges specific to the three deals, or are there broader issues? - Trevor Walsh(Citizens)

2025Q3: We are below expectations on ShotSpotter's domestic side, and adjustments are being made to improve sales execution. - Ralph Clark(CEO)

Based on mid-point revenue guidance, there's a potential $2 million sequential acceleration each quarter. How much is already committed versus backlog? - Richard Kenneth Baldry(ROTH Capital Partners)

2025Q2: We have a substantial portion of the guidance already committed, with some large contracts potentially impacting timing. We are confident in achieving our guidance. - Alan Stewart(CFO)

Contradiction Point 2

Gross Margin and Profitability Expectations

It involves changes in financial forecasts, specifically regarding gross margin and profitability expectations, which are critical indicators for investors.

Can you explain the $8 million EBITDA change due to delays in key contracts? - Jeremy Hamblin(Craig-Hallum Capital)

2025Q3: The $8 million change in EBITDA is due to a mix of reduced margin expectations on the Crime Tracer deal and changes in Puerto Rico's renewal, which impacts profitability. - Alan Stewart(CFO)

How is the international market, particularly in South America and Latin America, developing? - Richard Kenneth Baldry(ROTH Capital Partners)

2025Q2: We expect a gross margin of approximately 54% to 55% for Q2, with full-year guidance to be in the 55% to 56% range. - Alan Stewart(CFO)

Contradiction Point 3

Pipeline and Sales Execution for ShotSpotter

It highlights differences in the characterization of the sales pipeline and execution for ShotSpotter, which are crucial for revenue projections and market perception.

Are the sales execution challenges specific to the three deals or do they indicate a broader issue? - Trevor Walsh(Citizens)

2025Q3: We're below expectations on ShotSpotter's domestic side, and adjustments are being made to improve sales execution. - Ralph Clark(CEO)

How do you manage the pipeline for your tools to avoid over- or under-allocating resources in each area? - Richard Baldry(Roth Capital Partners)

2025Q1: We have a strong pipeline in ShotSpotter as well. - Ralph Clark(CEO)

Contradiction Point 4

Sales Cycle for SafePoint

It involves the changes in the sales cycle time for SafePoint, which directly impacts revenue projections and growth expectations.

How has SafePoint's sales cycle changed compared to previous quarters? - Vijay Devar (Northland Capital Markets)

2025Q3: The sales cycle time for SafePoint is faster, around 12 months, compared to ShotSpotter's 12-18 months. SafePoint deals with commercial enterprises like hospitals, which have a different sales process. - Ralph Clark(CEO)

Are the multimillion-dollar opportunities with hospital chains related to SafePointe included in the 2025 guidance, or are they still pending due to the current stage of the sales cycle? - Trevor Walsh (Citizens JMP)

2024Q4: There is no more new business when it comes to crime detection. There's just the one customer in Puerto Rico and we have had no problem with the integration of the system. And the only customer we're waiting for the RFP is Chicago. - Ralph Clark(CEO)

Contradiction Point 5

Revenue and EBITDA Guidance

It involves changes in financial forecasts, specifically regarding revenue and EBITDA expectations, which are critical indicators for investors.

If your 2026 revenue guidance is $2 million higher than your 2025 guidance, why is the margin guidance lower than expected in 2025? - Richard Baldry (Roth Capital Partners)

2025Q3: The revenue guidance does not include deals from Chicago or the $2.5 million in Brazil CapEx. We are being more conservative with adjusted EBITDA expectations. We anticipate the fourth quarter to be relatively flat, considering unknown timelines for large deals. - Alan Stewart(CFO)

Estimate the incremental growth contribution from the gunshot detection category? - Michael Latimore (Northland Capital Markets)

2024Q4: For 2025, we're raising our revenue guidance to $110 million and expecting an adjusted EBITDA margin around 20%. - Alan Stewart(CFO)