SoundThinking Reports 4% Drop

SoundThinking (SSTI 16.28%), a public safety technology company focused on software and data solutions for law enforcement, released its second quarter 2025 results on August 12, 2025. The company reported Revenue of $25.9 million, which was below analyst expectations of $26.33 million. The main news was a year-over-year GAAP revenue decline of 4%—attributed primarily to the non-renewal of the City of Chicago contract—alongside gross margin compression. Despite missing consensus GAAP estimates, management maintained the full-year FY2025 outlook, citing underlying growth in recurring revenues and new customer deployments. The quarter reflects transitional challenges, but also highlights ongoing progress in diversifying SoundThinking’s product suite and market reach.

Source: SoundThinking. Note: Analyst estimates provided by FactSet.

What Does SoundThinking Do?

SoundThinking delivers cloud-based software-as-a-service (SaaS) tools for law enforcement and public safety agencies. Its portfolio includes advanced gunshot detection, license plate recognition, crime data analysis, digital case management, and resource routing. The heart of its platform is ShotSpotter, an acoustic gunshot detection system, but the company has expanded into investigative analytics, AI integrations, and proactive safety solutions.

Recently, the company's focus has shifted toward building an integrated SafetySmart platform, combining multiple technologies under one roof. Key strategies include developing new solutions such as SafePointe weapon detection and PlateRanger license plate recognition, expanding internationally, and cross-selling within a growing base of government customers. Success depends on recurring subscription revenues, scaling SaaS offerings, product innovation, and maintaining long-term customer relationships—often through multi-year municipal contracts.

Quarter in Review: Revenue Declines and Shifts in Product Performance

Revenue declined to $25.9 million, down 4% from the same period a year ago, largely due to the loss of a major contract with the City of Chicago. This single customer reduced revenue by approximately $2.8 million. Gross profit dropped more sharply, reflecting a lower GAAP margin (53% vs. 60%). The company attributed much of this margin compression to initial costs from deploying software at the New York Police Department (NYPD), for which revenue recognition is delayed until a sublicensing agreement is executed in the third quarter.

Despite dipping revenue and margin, the company continued to invest in operational growth. Operating expenses were roughly flat versus the prior year, with new spending on research and development—especially around artificial intelligence and SafePointe—partly offset by lower sales and marketing costs. Net loss (GAAP) widened to $3.1 million from $0.8 million a year earlier, while Adjusted EBITDA fell $1.7 million compared to the prior year, reflecting both revenue pressure and one-off expenses.

Product performance tells a mixed story. ShotSpotter—a gunshot detection technology—remains the company’s largest product and went live in four new cities and one university, in addition to customer expansions. Nevertheless, ShotSpotter growth is being challenged by turnover among legacy contracts. SafePointe, an AI-enhanced passive weapon detection solution, is gaining traction in non-police markets, notably with California hospitals following new state legislation mandating weapon screening. In addition, modest bookings are expected this year for PlateRanger, the company’s automatic license plate recognition tool developed in partnership with Rekor, which is building a sales pipeline.

The company also made progress with its CrimeTracer crime data analysis software and the ResourceRouter patrol deployment tool. These digital products are being enhanced by new artificial intelligence capabilities, supporting their integration within the broader SafetySmart platform. Internationally, SoundThinking reported a growing pipeline, particularly in Latin America, where deployments typically command higher fees than in the US. The company notes strong early adoption of its platform in Brazil and Uruguay, with other opportunities in South Africa and the Caribbean under discussion.

The company’s cash balance decreased to $9.0 million at quarter end, reflecting working capital changes and $0.5 million spent on share repurchases. Operating liquidity is supported by $21.0 million of remaining capacity on its credit facility, and management highlights deferred revenue of $43.5 million (GAAP), which supports its multi-year SaaS contracts. There was no change to dividend policy during the quarter—SSTI does not currently pay a dividend. Management also described ongoing efforts to manage expenses while scaling investments, especially in product development and artificial intelligence across the portfolio.

Looking Ahead: Guidance and Strategic Watchpoints

Despite recent challenges, management reaffirmed its FY2025 financial outlook. The company expects revenue for FY2025 to range from $111.0 to $113.0 million, representing a 10% increase at the midpoint compared to 2024, and adjusted EBITDA margin between 20% and 22% for FY2025. Annual recurring revenue (ARR), calculated based on expected GAAP revenue, is anticipated to reach approximately $110.0 million at the beginning of 2026, up from $95.6 million at the beginning of 2025. This highlights stability in SoundThinking's subscription-based business model.

Leadership did not provide explicit quarterly guidance but indicated that performance is expected to accelerate in the second half of the year, with the third quarter benefiting from catch-up NYPD licensing revenue. Key areas to watch include large contract wins in North America and abroad, margin progress as delayed revenues are recognized, and the ability to offset volatility from municipal contract turnover by scaling new solutions.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.