SoundThinking, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Revenues were $25.0 million for the quarter ended September 30, 2026, compared to $25.1 million in the same period of 2025, representing a flat year-over-year performance.
• Gross profit decreased 13% to $11.9 million (48% of revenues) from $13.6 million (54% of revenues) in the prior year quarter.
• GAAP net loss totaled $8.5 million ($0.64 per share) compared to a net loss of $2.0 million ($0.16 per share) in the prior year quarter.
• Adjusted EBITDA was $2.2 million (9% of revenues), down from $3.5 million (14% of revenues) in the prior year quarter.
• Total operating expenses increased to $20.1 million from $15.7 million in the prior year quarter, driven by acquisition-related costs and higher sales and marketing expenses.
• Cash and cash equivalents were $9.5 million at quarter end, down from $15.8 million as of December 31, 2025.
• Deferred revenue totaled $41.7 million at quarter end, with $39.3 million classified as short-term and $2.5 million as long-term.
• Total debt was $4.0 million, with approximately $36.0 million available on the credit facility.
• Accounts receivable and contract assets were $29.2 million at quarter end.

Guidance and Future Outlook:

• SoundThinking will not provide forward-looking guidance or updates to previously issued guidance due to the pending Transom Transaction.
• The company will not host an earnings conference call or webcast for the third quarter 2026 results or for any future quarters.

Business Segments and Product Lines:

• Revenue decline was primarily attributed to a $1.0 million reduction from non-renewals or delays in renewals with multiple customers.
• New bookings and expansions with existing customers contributed $0.7 million, partially offsetting revenue losses.
• Catch-up revenue from various customers added $0.2 million.
• The company expanded its customer base with three existing customers during the quarter.
• Research and development costs decreased due to a reduction in headcount.

Market and Competitive Landscape:

• The company serves over 300 customers and has worked with approximately 2,100 agencies in the public safety sector.
• The company's SafetySmart platform includes ShotSpotter, CrimeTracer, CaseBuilder, ResourceRouter, PlateRanger, Field Agent, and SafePointe.

Risks and Challenges:

• Key risks include the satisfaction of closing conditions for the Transom Transaction, uncertainty regarding shareholder tendering, and the possibility the acquisition may not close.
• Risks include the potential negative effect of the acquisition announcement on business relationships with partners, customers, and employees, and the diversion of management attention.
• Challenges include the ability to enter into new contracts or renew existing ones, the lengthy sales cycle for solutions, and changes in federal funding for local law enforcement.
• Risks also encompass the complexity of government contracting, global macroeconomic conditions, and negative publicity.

Management Commentary and Tone:

• Management noted that gross profit margins declined due to lower revenue volume, specifically lower catch-up revenue, and increased information technology and facility costs.
• Operating expense increases were attributed to acquisition-related costs for the Transom Transaction and increased sales and marketing expenses.

Other Key Points:

• SoundThinking entered into a definitive merger agreement with affiliates of Transom Capital Group, LLC to be acquired via a tender offer.
• The transaction offers $8.00 per share in cash plus one non-transferable contingent value right (CVR) worth up to $3.00 per share, for a total potential consideration of up to $11.00 per share.
• The implied enterprise value based on up-front cash consideration is approximately $114 million, rising to approximately $159 million with maximum CVR payment.
• The transaction is expected to close in the fourth quarter of 2026, subject to customary closing conditions, including a majority tender of shares.
• Upon closing, SoundThinking will become a privately held company.
• Acquisition-related expenses for the quarter totaled $5.1 million, contributing to the increase in operating expenses.