Good afternoon, everyone and welcome to ShotSpotter's Second Quarter 2022 Earnings Conference Call. My name is Jamie and I will be your operator for today's conference. Joining us are; ShotSpotter's CEO, Ralph Clark; and CFO, Alan Stewart. Please note that certain information discussed on the call today will include forward-looking statements about future events and ShotSpotter's business strategy and future financial and operating performance. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict and may cause actual results to differ materially from those stated or implied by those statements. Certain of these risks and assumptions are discussed in ShotSpotter's SEC filings including its registration statement on Form S-1. These forward-looking statements reflect management's beliefs, estimates and predictions as of the date of this live broadcast August 9, 2022. And ShotSpotter undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Finally, I'd like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company's website at ir.shotspotter.com. At this time, I'd like to turn the conference call over to ShotSpotter's CEO, Ralph Clark. Sir, you may proceed.

Good afternoon and thanks for joining us today. Let's dive right in and review the second quarter. After Alan and I give our overviews, we'll be happy to take your questions. But before we discuss the second quarter, I want to just take a moment to tell you how ShotSpotter is doing in general. And even though we have a tremendous amount of work to do, I'm happy to report that we're doing quite well. This is an exciting time for us here at the midpoint of 2022. Not only is this our fifth, year anniversary as a public company it's also nearly two years into our effort to accelerate the company's revenue and profit growth through the build-out of our precision policing platform. As most of you know this strategy was inspired by our goal to provide value and impact beyond acoustic gunshot detection into adjacent capabilities including investigative and AI-based analysis tools. We now have several quarters under our belt. And based on our experience to-date, we believe the decision to build out this broader platform in order to grow our revenue and TAM opportunity was strategically sound. We're seeing that with the steady growth of our core gunshot detection customer base and coverage footprint. And we're seeing it with the emerging adoption and growing interest from the market in our multi-product solution set. ShotSpotter is a critical solution provider to law enforcement agencies around the country. Customer insight and intimacy is our currency. We know many of the key decision-makers in law enforcement and are intimately familiar with the funding and political environment in which they operate. And we know how their needs are changing and we are grateful for their trust in our ability to meet those needs. Our strong execution on a tactical basis was…

Thank you, Ralph. We're very pleased with our performance in the second quarter. As Ralph mentioned, this quarter we went live in four new Respond cities and expanded in six current cities. We are seeing an increase in the interest of our solutions. In fact, we already have 20 new Respond contracts executed. Of these 12 are contracts with new cities and eight are expansions with current customers. And Ralph also mentioned our two new international contracts. This is the highest level of new contracts that we have had in any earnings release since going public. In fact, several of them have already gone live since the end of the second quarter. Let me provide more details on the quarter and then I will share some thoughts around the balance of the year. Second quarter revenues were slightly ahead of expectations at $20 million, a 37% increase over the $14.6 million in the second quarter of 2021. Revenue increased as our deployed miles are up year-over-year and we also had a higher level of professional services in our leads division. Gross profit for the second quarter of 2022 was $11.6 million or 58% of revenue versus $8.3 million or 57% of revenue for the prior year period. Gross margin may continue to be impacted to a slightly small extent as we continue to replace 3G sensors throughout the end of the year. We also saw impressive growth in adjusted EBITDA for the second quarter, which was $4.1 million, a 39% increase from the $2.9 million in the second quarter of 2021. As a reminder, adjusted EBITDA, a non-GAAP financial measure, is calculated by taking our GAAP net income and adjusting out interest income, income taxes, depreciation, amortization, stock-based compensation expenses and acquisition-related expenses, including adjustments to our contingent consideration obligations.…

Thanks Alan. In closing, we believe that we have the wind at our back operationally with very constructive macro market trends. Our annual revenue rate is strong and durable. Our unit economics are compelling. And we believe we have developed a large and sustainable competitive moat. In addition, our scale and operational efficiency continued to expand. So here at the midpoint of 2022, we're feeling quite optimistic not only for a strong finish for the year, but also a robust and quick start into 2023. And so with that, let's open it up for questions.

Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] And our first question today comes from Richard Baldry from Roth Capital. Please go ahead with your question.

Thanks. So I know you've announced, you've got a large number of contracted deals for the second half, I think you said 12 new cities and eight expansions. So curious, if you can talk about the pipeline outside of that, that would obviously impact more either fourth quarter if they close soon or more like 2023? How you feel about that given the large number of wins you've had both in the first half and already signed for the second half? Thanks.

Yeah. So thanks for that question. Maybe I'll start, and Alan jump in as appropriate. So we're actually feeling quite bullish about our bookings momentum, just not with Respond. There are some additional bookings that we expect to happen outside the ones that we referenced in our earnings report here. And we're continuing to see very strong pipeline build with our Connect solution and Investigate. And I think we talked a little bit about a fairly large booking transaction we had through our Forensic Logic acquisition with COPLINK X that we're expecting some additional traction there. So it's going to be a very busy second half for us this year. And I think that's what gives us a lot of confidence about how we're going to be thinking about 2023 and beyond.

And could you maybe talk about whether any of the deals that you've won or that are ahead have managed to tap any new funding sources, whether that's federal set asides in legislation or earmarks successfully used?

Yeah. So it's a fabric of funding sources that's all over the place. A lot of it's being driven by municipal budget health, but there's also some fairly robust support coming in from the Federal government. And we also just have the nominal support – continued support from the President that refers to acoustic gunshot detection, as being a viable solution to use some of these funding streams available that he's making available to address violent crime.

Then maybe last one for me. I guess, I assume that there is still some litigation costs in the second quarter. Can you talk about sort of the scale of that and if that all comes out for the third quarter and the second half or if there's any residual for mopping up of those expenses? Thanks.

Yeah. This is Alan. So I'll take that, and Ralph you can add as well. There were definitely legal expenses in the second quarter from a GAAP basis that was less than what we had in the first quarter. We did continue a little bit into Q3 as you expect when we were finalizing the final things with VICE. So those expenses are in for at least one month, but we do expect that our legal expenses are going to go down in Q3 and Q4 based on what we know right now.

All right. Thanks for that. Great start to the year.

Thank you.

[Operator Instructions] Our next question comes from Matt Pfau from William Blair. Please go ahead with your question.

Hey, guys. Thanks for taking my question. I wanted to ask on the pipeline and how do you feel about your ability to get those deals implemented this year particularly given it's more backlog than you've had historically as a public company?

Do you want to take that Alan?

Yeah. Sure. So this is Alan. I think we certainly feel really good about the fact they're already signed. So that's great. We are working – some have already gone live. Some of those are smaller contracts might be a Tier 4 or Tier 5, so maybe one or two miles. Those may go a little faster. The rest of them sometimes it's a little hard to tell when we get the access to hang the sensors exactly, how fast we'll be able to go live with those. But we've already said that, we're expecting to go live north of 120 miles by the end of the year. We still believe that to be true. The contracts that we have already signed are going to help us get there. But again until we actually get them live, we can't recognize the revenue. So we'll see how that goes. The entire team is working hard to make sure we can go as fast as we can on those because we have more in the pipeline that are going to get signed as well as the year goes on.

And I think, I would just add Alan that we're not seeing any supply chain constraints that would prevent us from a materials point of view to be able to accomplish 120 miles plus this year.

That's correct.

Okay. Great. And then I wanted to follow-up on the comments around Forensic Logic and the COPLINK X product. So you cited you're seeing good demand there and you called out the win with the State of Massachusetts, but there are also some comments on the contingent consideration around some delays. So just maybe a little bit more detail on what's going on in that business both on the positive side and then on the delay side as well?

Sure. This is Alan. I'll start and then Ralph can add too. You may recall that when we went into the year, we expected to get about $6 million in ARR related to the Forensic Logic acquisition. We will be north of that. We've also though not mentioned exactly what is required to get the earn-out considerations to both 2022 and 2023 they are getting new contracts. They might be just a little later than we would have expected for them to get a higher amount of the 2022 earn-out expectation, but it also increases the expectation that they'll get a little more revenue in 2023.

Okay. Great. Thanks guys for taking my questions. Appreciate it.

Sure.

And ladies and gentlemen, I'm showing no additional questions. We'll end today's question-and-answer session. If your question was not taken you may contact ShotSpotter's Investor Relations team by emailing ssti@gatewayir.com. I'd now like to turn the floor back over to Mr. Clark for closing remarks.

Great. Thank you very much for that. Really appreciate everyone dialing in. As Alan and I discussed, we're having a tremendous year -- this year and expect to finish out very strong. So I appreciate your interest and looking forward to chatting with many of you on our follow on calls.

And ladies and gentlemen with that we will conclude today's conference call. We thank you for joining us today. You may now disconnect your lines.