SOUNDTHINKING, INC. Q1 FY2026 earnings call

• Overall Q1 2026 Performance

  • Q1 revenue was $24.2 million, in line with analyst consensus. Q1 is structurally the company's lowest revenue and highest cost quarter annually, as one-time annual costs (audit, legal, tax, shareholder meeting fees) are absorbed in Q1, and revenue ramps through the year due to deployment and renewal timing.

• Customer Retention and Competitive Positioning

  • The Cleveland ShotSpotter renewal, which faced public speculation of a competitive loss, is progressing. Local public safety leadership has publicly credited ShotSpotter for contributing to Cleveland's 80% homicide solve rate. Management emphasized that 25 years of ground truth deployment data, independently verified 97% accuracy (against a 90% contractual standard), and deep operational integration create a durable competitive moat that new entrants cannot match. Net retention and Net Promoter Score remain ahead of plan.

• Product Innovation and Platform Expansion

  • 16 cities now have live ShotSpotter integrations with drones from Skydio and Brink, with 8 new deployments added in the past two months. Integrations enable faster, more effective first response, including real-time incident observation and locating wounded victims. Management is focused on increasing platform stickiness through deeper operational integration, with planned bi-directional data sharing to unify drone footage with ShotSpotter alerts and other platform tools.
  • The new AI-powered Safety Smart Field Agent feature launched in beta with more than 1 dozen agencies, with broad launch targeted for summer 2026. The tool enables any authorized user to query unified public safety data (ShotSpotter gunfire, LPR reads, crime data) in plain English to generate customized insights, maps, and briefings. It builds on the prior launch of Crime Tracer Gen 3 and is part of a broader rollout of AI capabilities across the Safety Smart platform.
  • The early-stage sniper threat detection solution for critical infrastructure (developed in SoundThinking Labs) has achieved early technical success for utility substation perimeter protection.

• International Expansion

  • Existing deployments in Montevideo, Uruguay and Niteroi, Brazil have served as successful proof points for Latin American expansion. A newly hired in-country sales executive is building regional pipeline, with international expected to deliver multi-year long-term growth.

• SafePoint Growth

  • SafePoint monthly recurring revenue more than doubled between January and March 2026, with key go-lives at Moffitt and Morgan State. This week, the company signed a 3-year $3.2 million SafePoint contract (>$1 million ARR) with a top 5 U.S. hospital chain for all in-state facilities, and expects to close a 3-year >$1 million contract (>$300,000 ARR) with a Northeast clinic. These wins validate the hospital vertical market opportunity. California's AB 2975 mandate requires weapons detection for over 400 California hospitals by March 2027, creating significant near-term demand. SafePoint's discreet passive wide-lane technology with a low false positive rate is tailored for healthcare and casino verticals, which prioritize unobstructed, dignified access for visitors and patrons, giving the company a competitive advantage over checkpoint-style solutions in these markets.

• Capital Allocation Strategy

  • The consolidated adjusted EBITDA profile reflects the deliberate choice to invest the core business's free cash flow into growing the high-potential SafePoint early-stage segment. Management expects SafePoint to reach profitability at the end of 2027 or early 2028.

The company operates two core segments: the mature core public safety platform (including ShotSpotter, Crime Tracer, Plate Ranger, Resource Router, and Case Builder) and the early-stage SafePoint weapons detection segment. Consolidated Q1 2026 total revenue was $24.2 million, down from $28.3 million in Q1 2025. The year-over-year decline was driven by the absence of $1.5 million in non-recurring Puerto Rico contract revenue and $3.5 million in prior-year catch-up revenue from large NYPD contract renewals that were recognized in Q1 2025. The core public safety platform is profitable and generates positive adjusted EBITDA; excluding SafePoint investment costs, core adjusted EBITDA increased year-over-year in Q1 2026. SafePoint, the early-stage weapons detection segment, is generating an annualized adjusted EBITDA loss of $8 million in 2026, down from a $9 million annualized loss in 2025. SafePoint annualized revenue is expected to grow from ~$3.6 million in 2025 to over $6.5 million in 2026. For Q1 2026, consolidated gross profit was $11.3 million (47% of revenue), down from $16.6 million (59% of revenue) in Q1 2025. Consolidated adjusted EBITDA was negative $100,000, down from positive $4.5 million in Q1 2025.

Management reaffirmed all full-year 2026 guidance, with no upward or downward revisions:

• Full-year revenue guidance maintained at $109 million to $111 million, representing 5% to 7% year-over-year growth (approximately 6% at the midpoint).
• Full-year adjusted EBITDA margin guidance maintained at 16% to 18%.
• End-of-year 2026 annual recurring revenue (ARR) guidance maintained at $110 million, representing 15% full-year ARR growth.
• Full-year 2026 profitability is expected to be driven by: lower operating expenses in remaining quarters (Q1 is seasonally the highest cost quarter), $2.5 million in cost savings from the April 2026 workforce optimization for the remainder of 2026, and over 90% of incremental new revenue beyond the Q1 run rate flowing directly to adjusted EBITDA.
• Revenue and profitability remain back-end loaded for 2026, with management targeting ~$50 million in revenue for the first half and ~$60 million for the second half. Key second half growth drivers include a $2.5 million large statewide Crime Tracer deal and the expected recapture of the $2.7 million ARR Puerto Rico ShotSpotter contract, both targeted to close early in the second half.

• Customer renewals face increased headwind from the expiration of federal ARPA funding that many local agencies used to purchase public safety technology in prior years, leading to higher expected attrition in 2026.
  • Large high-value deals (the Puerto Rico contract renewal and the statewide Crime Tracer deal) depend on third-party internal government approval processes, and delays could impact 2026 revenue results.
  • New competitors continue to enter the gunshot detection market, creating pricing and renewal competitive pressure despite management's view that operational performance creates a durable moat.
  • SafePoint investment continues to create downward pressure on consolidated adjusted EBITDA in 2026, with the segment not expected to reach profitability until late 2027 or early 2028.

Q: How much 2026 remaining year growth is already contracted vs. still needing to be signed and deployed, and what is the size and pipeline outlook for SafePoint hospital deals? / A: The company is ahead of schedule on SafePoint growth, with two large hospital contracts signed just this week adding $1.4 million in annual ARR, already putting the company well on track to hit its 2026 target of $4 million in new SafePoint ARR. The full-year target of $50 million first-half revenue and $60 million second-half revenue remains on track, with two large deals (a $2.5 million statewide Crime Tracer contract and the $2.7 million Puerto Rico renewal) expected to close early in the second half. SafePoint pipeline is growing quickly, with a mix of small 10-lane and large 50+ lane deals expected, with the large recent $3.2 million contract representing a whole-state consolidation for a multi-state hospital chain, and future expansion expected as customers standardize on the platform.

Q: How does ShotSpotter drone-first responder (DFR) integration drive incremental value, and is Safety Smart Field Agent offered as a paid add-on? / A: DFR integration is currently focused on improving customer value and increasing retention and platform stickiness rather than driving immediate incremental revenue, by embedding ShotSpotter deeper into first responder operational workflows. Future bi-directional integration that unifies drone footage with other platform data will create additional long-term value. Similarly, the initial rollout of Safety Smart Field Agent is focused on adding cross-platform value and increasing stickiness by enabling more users to interact with company data, rather than immediate incremental monetization, with long-term upside as AI capabilities expand across all product lines.

Q: What explains the recent large SafePoint hospital wins, and how is ARR growth split across product segments for 2026? / A: SafePoint won these deals because its discreet passive sensor wide-lane design offers a low-friction, dignified experience for hospital visitors, with a much lower false positive rate than competing checkpoint-style solutions, which aligns with hospital priorities for patient and staff experience. The company is focused on healthcare and casinos, where it has a competitive advantage, ceding stadium/arena opportunities to checkpoint-focused competitors. For 2026 full-year new ARR growth of ~$15 million: $4 million is expected from SafePoint, $7.3 million from ShotSpotter (including $2.7 million from the Puerto Rico recapture), $3.2 million from Crime Tracer (including $2.5 million from the large new statewide deal), and ~$1.5 million from Plate Ranger.

Q: What is the status of the delayed Puerto Rico and large Crime Tracer deals, and what proactive changes have been made to the renewal process following past high-profile non-renewals? / A: The large statewide Crime Tracer deal is currently exchanging final contract language, and management expects it to close within 30-45 days. The Puerto Rico renewal is also progressing well, with recent organizational and political changes that are net positive for the company, though some work remains. Management has become more proactive on large renewals, starting engagement earlier than in the past, and helping customers identify alternative funding sources after the expiration of ARPA. Upcoming large renewals in the next six months include Detroit (already submitted an RFP response, expected award in the next few months) and Suffolk County, with no other large at-risk renewals of note.