SOUNDTHINKING, INC. Annual Report - How They Did This Year

I’ve put together this guide to help you understand SoundThinking, Inc.’s latest annual report. My goal is to explain what is happening at the company in plain English so you can decide if it fits your investment goals.

1. What does this company do?

SoundThinking (formerly ShotSpotter) provides public safety technology. Think of them as the "eyes and ears" for police departments. They started with gunshot detection, but they have built a "SafetySmart" platform that includes crime data analysis, case management, and license plate recognition.

They use a subscription model, which provides predictable, recurring income. As of December 31, 2025, they serve over 250 municipal agencies. Their core gunshot detection technology alerts police to gunfire within 45 seconds, covering about 170 square miles of urban territory.

2. The "Land and Expand" Strategy

SoundThinking aims to become an "all-in-one" operating system for police. Their growth strategy has two parts:

• Land and Expand: They start with gunshot detection and then sell additional tools like CaseBuilder (investigative management), ResourceRouter (patrol management), and PlateRanger (license plate recognition). By the end of 2025, about 35% of their customers used more than one product.
• New Markets: They are moving into corporate security, hospitals, and casinos. They recently launched a sniper-detection tool for utility substations. They are also targeting California, where a new law requires hospitals to use weapons detection systems by 2027. This creates a potential market of over 400 acute care facilities.

3. Financial Health: The "Red Flags"

Investors should note a few concerns:

• Profitability: The company is still losing money. In 2025, they reported a $9.4 million loss, similar to their $9.2 million loss in 2024. Their total losses over time have reached $113.7 million due to heavy spending on research and sales.
• Revenue Growth: Revenue reached $104.1 million in 2025, up 2% from $102.1 million in 2024. This is a slow crawl compared to their past growth.
• Customer Concentration: They rely heavily on a few large clients. The City of New York accounts for 29% of their total revenue. Losing a major city is a real threat; for example, losing the Chicago contract in 2024 cost them $9 million in annual revenue.
• Retention: Their "net revenue retention rate" fell from 105% in 2024 to 99% in 2025. This means existing customers are spending slightly less or leaving, which suggests their "expand" strategy is stalling.

4. The "Cash Flow" Reality Check

Because they sell to government agencies, their cash flow is inconsistent. They usually bill 50% of a contract upfront and the rest when the service goes live. If a city is slow to start a project, SoundThinking’s cash flow suffers.

They also spent $28.5 million on research and development in 2025 to build new products. While this is necessary for growth, it keeps their expenses high. Additionally, they are currently addressing "material weaknesses" in their accounting, which is a significant risk factor for investors to monitor.

5. New Risks: The Legal and Data Minefield

• Sales Cycles: Selling to governments is slow and expensive, often taking 9 to 18 months. Budget cuts at the city or state level threaten their revenue, as public safety budgets are often the first to be cut.
• Litigation & Reputation: They face civil rights lawsuits alleging their technology leads to over-policing in minority communities. Negative publicity or bad court rulings could cause clients to cancel contracts, making it harder to grow in major cities.

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Investor’s Takeaway: SoundThinking is at a crossroads. While they are successfully diversifying their product line, their slow revenue growth and reliance on a few massive city contracts create significant risk. Before investing, consider whether you believe their "expand" strategy into hospitals and corporate security can offset the potential loss of major municipal contracts and the ongoing legal challenges.