SSTI

• Cost Optimization

  • Completed workforce and business optimization initiatives, expected to deliver $4 million in structural annualized savings, not a one-time headcount cut.
  • Reduced Q2 2026 total operating expenses to $16.2 million, down from $16.7 million in Q2 2025, driven by lower sales, marketing, and G&A costs, partially offset by increased AI R&D investment.
  • Moved adjusted EBITDA from negative ~$100,000 in Q1 2026 to positive $1.2 million in Q2 2026, building a more scalable lower cost base to reduce expense burn while protecting growth investments.

• Customer Retention & New Business Wins

  • Closed over $23 million in total contract value across multiple multi-year ShotSpotter renewals, including a long-term renewal for Fayetteville, NC funded through 2029 and a 9-month extension for Detroit to bridge its upcoming RFP process.
  • Won back ShotSpotter deployments in Erie, PA (funded via outside support after a January lapse) and Cambridge, MA (after a high-profile tragedy following the city's withdrawal, with coverage provided for free during a 90-day reevaluation period).
  • Closed the previously-teased large state CrimeTracer contract for the Texas Anti-Gang Program, with potential to triple the initial footprint after successful early deployment.

• Chicago ShotSpotter Update

  • The city of Chicago's gunshot detection RFP process remains ongoing, with a final decision potentially delayed until February 2027.
  • A non-binding referendum on restoring gunshot detection will be included on the November 2026 ballot, and four of nine declared 2027 mayoral candidates (including the two frontrunners) have included restoring the technology in their policy platforms.

• Balance Sheet & Liquidity

  • Ended Q2 2026 with $6.4 million in cash and cash equivalents, $36 million in deferred revenue, $93.1 million in total contractually committed revenue, and $36 million in available borrowing capacity under the company's credit facility, providing flexibility for strategic investments.

• Full-year 2026 GAAP revenue guidance was revised downward from the original range of $109 to $111 million to a new range of $99 to $100 million.
• The $10 million revenue guidance reduction is approximately 70% timing-related (pushed to 2027) rather than lost revenue, with 30% driven by slower-than-expected new ShotSpotter sales conversion. Specific drivers of the revision include: ~$3 million from delayed Technologic professional services projects with the NYC Department of Corrections, $2 million from delayed SafePoint deployments, and $1.5 million from the pushed-out Puerto Rico ShotSpotter contract recapture.
• Full-year 2026 adjusted EBITDA margin guidance was reduced to a range of 8% to 9%, reflecting the lower expected top-line revenue.
• Management maintains its expectation that ARR will grow from $95.4 million at the start of 2026 to over $100 million entering 2027.
• Guidance continues to assume no revenue contribution from a renewed Chicago ShotSpotter contract in 2026.

Sound Thinking does not break out full segment-level financial performance with absolute revenue and contribution percentage in this call. The call discusses the performance of its three core offerings:

• ShotSpotter: Q2 2026 bookings and go-lives came in well below management expectations, with delayed conversion of the qualified pipeline due to external and internal factors. The company secured multiple high-value multi-year renewals and two key win-backs (Erie, PA and Cambridge, MA) during the quarter, demonstrating strong customer retention for the segment.
• SafePoint: Bookings and hospital pipeline remain strong, with over 100 lanes in various stages of deployment representing more than $2 million in annual recurring revenue (ARR). Revenue recognition is delayed due to lumpy go-live timing dependent on customer-side readiness, pushing associated revenue into 2027.
• CrimeTracer: Secured a new multi-year $2.5 million ARR state-level contract with the Texas Anti-Gang Program, the company's fourth statewide CrimeTracer deal, with potential for future expansion of the footprint.

• ShotSpotter faces elongated sales cycles due to increased political scrutiny and politicization of gunshot detection technology, additional stakeholder and budget review requirements, and reduced availability of ARPA funding for municipal deployments, slowing pipeline conversion.
• Internal sales execution and sales hygiene issues have also contributed to lower-than-expected ShotSpotter bookings and go-lives in recent quarters.
• SafePoint revenue recognition is inherently lumpy and dependent on customer-side facility readiness, IT coordination, construction timelines, and multi-site rollout sequencing, all largely outside the company's control, leading to unexpected revenue timing shifts.
• Customer-driven delays to booked professional services projects push revenue into future periods, creating short-term top-line misses even when contracts remain secured.
• ShotSpotter is increasingly caught up in broader political debates around law enforcement surveillance tools, including unrelated controversies around ALPR technology and unsubstantiated claims of ties to immigration enforcement, lengthening decision timelines for new and renewal contracts.

Q: How much of ShotSpotter's underperformance stems from controllable internal issues versus external factors, and how much visibility do you have into the $51-52 million second half revenue needed to hit the new guidance range? / A: Both factors contribute. External headwinds include reduced ARPA funding, political scrutiny, and canceled awarded contracts like the Cape Town tender. Internal issues include sales execution and hygiene gaps that slow conversion; management is pulling levers to improve this and hired external resources to help customers secure funding. Management has strong visibility to the second half target: ~$3 million in delayed contracted professional services will recognize in H2, over $2 million ARR of booked but undeployed SafePoint lanes are in flight, and ShotSpotter guidance conservatively only counts 7 of 15 booked/soon-to-be-booked go-lives, leaving a buffer to hit the range.

Q: Why are SafePoint deployments slowing now, and is this an unexpected change to the business dynamic? Is the remaining guidance reduction driven by specific delayed deals or general pipeline conservatism? / A: The slowdown is an expected dynamic of scaling: as the business moves from 1-2 lanes per customer to 10-20 lanes per enterprise, coordinating with large customer IT teams for network access, construction, and sequencing adds more process time than earlier smaller deployments. 70% of the $10 million total guidance reduction is timing-related, not lost revenue, with most delayed booked revenue shifting to 2027. The remaining 30% stems from slower-than-expected new ShotSpotter sales movement, and management built conservatism into guidance to ensure it can hit the revised range.

Q: How many headcount reductions were made as part of Q2 workforce optimization, and has the company discussed strategic alternatives following the earlier activist investor effort? / A: Approximately 28 roles were eliminated, alongside additional non-personnel expense cuts to marketing and other programs. Management states there are no updates on strategic alternatives to disclose publicly, and all stakeholders are aligned with leadership on refocusing the business to return to growth and profitability.

Q: Has increased political pushback against ShotSpotter contributed to elongated sales cycles beyond just funding delays, and how does the current political environment compare to past opposition? / A: The company is facing qualitatively higher public and political scrutiny than in the past, and is often swept into broader debates about surveillance tools like ALPR and unsubstantiated claims of ties to immigration enforcement. This has stretched out decision timelines as council deliberations become more politically charged. Management has built a dedicated community engagement team to work with violence prevention groups and civil rights organizations to educate stakeholders, which is starting to deliver progress, particularly after high-profile tragedies that demonstrate the cost of removing the technology.