Wednesday, SoundThinking (NASDAQ: SSTI) shares experienced a revision in financial outlook as Craig-Hallum adjusted the price target to $16.00 from $17.50, while maintaining a Hold rating on the stock. The adjustment followed the company's mixed third-quarter results, which showed a slight revenue increase but a miss on adjusted EBITDA, primarily due to lower gross margins.
The company reaffirmed its full-year 2024 guidance as it expanded its presence, going live in four new cities and one university, and grew its partnerships with eight existing allies. SoundThinking also marked its territory internationally with a significant expansion into Uruguay. The firm's SafetySmart platform witnessed robust growth with 15 new implementations during the third quarter.
Management expressed confidence in the renewal of its ShotSpotter contract in New York City, which is set to expire in mid-December. Analysts believe that securing this contract extension could potentially trigger a relief rally in the company's shares.
Despite the positive developments, initial guidance for fiscal year 2025 fell short of consensus expectations. The most pressing risk as the company heads into fiscal year 2025 is the potential delay in the extension of the New York City contract.
The analyst from Craig-Hallum noted that the stock is nearing a point where it could move past the uncertainty surrounding its two largest customer contracts, which has affected the stock's multiple throughout 2023 and 2024, and overshadowed progress in new segments like SafePointe. The firm reiterated its Hold rating but reduced the price target, reflecting these considerations.
In other recent news, technology firm SoundThinking reported a promising third quarter, demonstrating a steady growth trajectory. The company's Q3 2024 revenue rose by 10%, amounting to $26.3 million, while year-to-date revenues increased by 18% to $78.6 million. Despite the recent loss of a contract, the company maintains an optimistic outlook for its SafetySmart platform, projecting a positive growth trend.
SoundThinking's Q3 gross profit stood at $58% of revenue, or $15.2 million, with an adjusted EBITDA of $4.5 million. The company also reported a decreased GAAP net loss of $1.4 million, with a positive cash balance of $15.3 million after share repurchases. The full-year revenue guidance is set between $104 million and $106 million.
Looking ahead, SoundThinking expects Q4 revenues to exceed $26 million, with a steady full-year guidance. The company anticipates its 2025 revenue to be between $107 million and $109 million, even considering an $8.5 million loss from the Chicago contract. Adjusted EBITDA margins for 2025 are forecasted at 19% to 21%.
In addition to these financial highlights, the company noted the effectiveness of its ShotSpotter technology and the successful adoption of its solutions in new markets. The company also reported strong bookings for its SafePointe solution and nearly $7 million in PlateRanger bookings. These recent developments underscore the company's potential for sustained growth.
InvestingPro Insights
SoundThinking's recent financial performance and future outlook can be further illuminated by data from InvestingPro. Despite the company's revenue growth of 24.16% over the last twelve months, InvestingPro Tips indicate that net income is expected to drop this year, aligning with the analyst's cautious stance. This is further supported by the fact that the company was not profitable over the last twelve months, with a negative operating income margin of -3.69%.
The company's market capitalization stands at $153.27 million, with a price-to-book ratio of 2.04. While SoundThinking operates with a moderate level of debt, InvestingPro data shows that short-term obligations exceed liquid assets, which could pose challenges in the near term.
On a positive note, the company's valuation implies a strong free cash flow yield, according to InvestingPro Tips. This could be a silver lining for investors looking beyond the current profitability concerns.
For readers seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for SoundThinking, providing a deeper understanding of the company's financial health and market position.
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