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ShotSpotter Reports Record Third Quarter 2018 Financial Results

November 13, 2018

NEWARK, Calif., Nov. 13, 2018 (GLOBE NEWSWIRE) -- ShotSpotter, Inc. (NASDAQ: SSTI), the leader in gunshot detection solutions that help law enforcement officials and security personnel identify, locate and deter gun violence, today reported financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Financial and Operational Highlights

-- Revenues increased 35% to a record of $9.2 million, up from $6.8 million in the third quarter of 2017. -- Gross profit was 55%, up from 50% from the third quarter of 2017. -- Net loss totaled $1.4 million, an improvement from the net loss of $1.6 million for the same period in 2017. -- Adjusted EBITDA(1) totaled $199,000 versus a loss of ($156,000) in the same period of 2017. -- Added 36 net new “go-live” square miles of coverage during the quarter. -- Increases 2018 revenue guidance to a range of $34.4 million to $34.6 million, a 45% increase compared to the prior year. -- Establishes initial 2019 revenue guidance of $45 million to $47 million.

__________________(1) See the section below titled “Non-GAAP Financial Measures” for more information about adjusted EBITDA.

Management Commentary

“We made excellent progress in our long-term pursuit of serving the needs of law enforcement and municipal customers focused on addressing gun violence with our unique and patent-protected gunshot detection platform. This quarter we successfully increased revenues by 35% to a record $9.2 million and increased gross margin to 55% enabling gross profit to increase 49% from the prior year period. We added three new cities, a college campus, a highway project and expanded coverage in four existing city customers for a total of 36 net new go-live miles,” said Ralph Clark, CEO of ShotSpotter. “We also completed the acquisition of HunchLab, shortly after the quarter close, which we believe is synergistic with our platform, while materially expanding our addressable market. Further, we believe we have significantly increased our potential go-to-market footprint with our reseller arrangement with Verizon. Our focused execution on these and other strategic initiatives only increase our enthusiasm about ShotSpotter’s market relevance and prospects to deliver long-term growth.”

Third Quarter 2018 Financial Results

Revenues for the third quarter of 2018 increased 35% to a record $9.2 million from $6.8 million for the same period in 2017. The increase in revenues was due to growth in the number of miles covered, which was driven by expanded deployments for current customers as well as the addition of new customers.

Gross profit for the third quarter of 2018 was $5.0 million (55% of revenues), a ­­49% increase from $3.4 million (50% of revenues) for the same period in 2017. Third quarter 2018 gross margin was negatively impacted by the write-off of remaining inventory related to the company’s exit of the indoor sensor business. Excluding these impairment costs, third quarter 2018 gross margin would have been approximately 58%.

Total operating expenses for the third quarter of 2018 increased 58% to $6.6 million from $4.2 million for the same period last year. The increase in operating expenses was due primarily to the company settling a lawsuit and expenses related to the acquisition of HunchLab, as well as the company’s higher headcount, particularly in sales and marketing.

Net loss totaled $1.4 million, or ($0.13) per share (based on 10.8 million basic and diluted weighted average shares outstanding) compared to a net loss of $1.6 million, or ($0.17) per share (based on 9.6 million basic and diluted weighted average shares outstanding), for the same period in 2017. The loss in the third quarter of 2018 reflects the additional costs primarily associated with settling a lawsuit and expenses related to the acquisition of HunchLab.

Adjusted EBITDA (Earnings before interest, taxes, depreciation, amortization and stock-based compensation) for the third quarter of 2018 was $199,000 compared to an adjusted EBITDA loss of ($156,000) in the same period last year.

As of September 30, 2018, the company had cash, cash equivalents and restricted cash of $16.4 million, up from $14.9 million at the end of the second quarter of 2018 due to adding $3.4 million in cash flow from operations. During the third quarter of 2018, the company entered into a $10 million line of credit agreement but has not drawn on the line. As of September 30, 2018, the company remained debt free.

Financial Outlook

For the full year of 2018, the company is increasing its full year revenue outlook to a range of $34.4 million to $34.6 million. Additionally, the company continues to expect to achieve GAAP profitability by the fourth quarter of 2018.

The company is establishing initial 2019 revenue outlook of $45 million to $47 million.

The company’s financial outlook statements are based on current expectations. The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Safe Harbor Statement” below.

Conference Call

ShotSpotter will hold a conference call today, November 13, 2018 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss these results and provide an update on business conditions.

ShotSpotter management will host the presentation, followed by a question and answer period.

Date: Tuesday, November 13, 2018 Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)U.S. dial-in: 1-877-451-6152International dial-in: +1-201-389-0879

The conference call will be broadcast simultaneously and available for replay via the investor section of the company’s website at www.shotspotter.com.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern Time on the same day through December 13, 2018.

U.S. replay dial-in: 1-844-512-2921International replay dial-in: +1-412-317-6671Replay ID: 13684056

Non-GAAP Financial Measures

Adjusted EBITDA: ShotSpotter discloses the following non-GAAP financial measure in this release and the earnings call referencing this press release: Adjusted EBITDA, which represents the company’s net loss before interest (expense) income, income taxes, depreciation and amortization and stock-based compensation expense. Adjusted EBITDA is a measure used by management internally to understand and evaluate the company’s core operating performance and trends across accounting periods and in connection with developing future operating plans, making strategic decisions regarding the allocation of capital and considering initiatives focused on cultivating new markets for our solutions. In particular, the exclusion of these expenses in calculating adjusted EBITDA facilitates comparisons of the company’s operating performance on a period-to-period basis.

ShotSpotter believes adjusted EBITDA also provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. For example, ShotSpotter adjusts EBITDA for stock-based compensation expense because that expense often varies for reasons that are generally unrelated to financial and operational performance in any particular period. Stock-based compensation is utilized by ShotSpotter to attract and retain employees with a goal of long-term retention and the alignment of employee interests with those of the Company and its stockholders, rather than to address operational performance for any particular period.

Adjusted EBITDA is not a measure calculated in accordance with GAAP. Accordingly, use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of ShotSpotter’s financial results as reported under GAAP. Some of these limitations are: (1) adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; and (2) other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces the usefulness of the metric as a comparative measure. Because of these and other limitations, you should consider adjusted EBITDA alongside our GAAP-based financial performance measures, in particular net loss, and our other GAAP financial results.

The following table presents a reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP measure, for each of the periods indicated:

Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2018 2017 2018 2017 -------- -------- -------- -------- (unaudited) (unaudited) GAAP net loss $ (1,441 ) $ (1,611 ) $ (3,027 ) $ (7,477 ) Less: Interest (income) expense (23 ) 358 (72 ) 1,167 Income taxes (76 ) — (32 ) — Depreciation and amortization 991 866 2,766 2,274 Stock-based compensation expense 748 231 1,823 306 - ------ - ------ - ------ - ------ Adjusted EBITDA $ 199 $ (156 ) $ 1,458 $ (3,730 ) - ------ - ------ - ------ - ------

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding the company’s overall business, total addressable market, international expansion, expectations regarding future sales and expenses, and revenue expectations and guidance for 2018 and 2019. Words such as “expect,” “anticipate,” “should,” “believe,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the company’s control. The company’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to: the company’s ability to maintain and increase sales; the availability of funding for the company’s customers to purchase the company’s solutions; the complexity, expense and time associated with contracting with government entities; the company’s ability to maintain and expand coverage of existing public safety customer accounts and further penetrate the public safety market; the company’s ability to sell its solutions into new markets; the lengthy sales cycle for the company’s solutions; changes in federal funding available to support local law enforcement; the company’s ability to deploy and deliver its solutions; and the company’s ability to maintain and enhance its brand, as well as other risk factors included including the company’s most recent annual report on Form 10-K and other SEC filings. These forward-looking statements are made as of the date of this press release and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Except as required by law, the company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations.

About ShotSpotter Inc.

ShotSpotter (NASDAQ: SSTI) provides precision-policing solutions for law enforcement to help deter gun violence and make cities, campuses and facilities safer. The company’s flagship product, ShotSpotter® Flex™, is the leading gunshot detection, location and forensic system trusted by more than 90 cities. ShotSpotter® Missions™ (formerly HunchLab) uses artificial intelligence-driven analysis to help strategically plan patrol missions and tactics for maximum crime deterrence.

Company Contact:

Alan Stewart, CFOShotSpotter, Inc. +1 (510) 794-3100 astewart@shotspotter.com

Investor Relations Contacts:

Matt GloverLiolios Group, Inc.+1 (949) 574-3860 SSTI@liolios.com

JoAnn HorneMarket Street Partners+1 (415) 445-3240 jhorne@marketstreetpartners.com

ShotSpotter, Inc.Condensed Consolidated Statements of Operations(In thousands, except share and per share data)(Unaudited)

Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2018 2017 2018 2017 ------------ ----------- ------------ ----------- Revenues $ 9,211 $ 6,846 $ 25,045 $ 17,244 Costs Cost of revenues 3,898 2,791 10,795 8,154 Impairment of property and equipment 271 666 632 666 - ---------- - --------- - ---------- - --------- Total costs 4,169 3,457 11,427 8,820 - ---------- - --------- - ---------- - --------- Gross profit 5,042 3,389 13,618 8,424 Operating expenses Sales and marketing 2,453 1,792 6,202 4,269 Research and development 1,196 1,063 3,687 3,024 General and administrative 2,912 1,305 6,764 3,206 - ---------- - --------- - ---------- - --------- Total operating expenses 6,561 4,160 16,653 10,499 - ---------- - --------- - ---------- - --------- Operating loss (1,519 ) (771 ) (3,035 ) (2,075 ) - ---------- - --------- - ---------- - --------- Other income (expense), net Remeasurement of convertible preferred stock — — — (3,725 ) warrant liability Loss on early extinguishment of debt — (479 ) — (479 ) Interest income (expense), net 23 (358 ) 72 (1,167 ) Other expense, net (21 ) (3 ) (96 ) (31 ) - ---------- - --------- - ---------- - --------- Total other income (expense), net 2 (840 ) (24 ) (5,402 ) - ---------- - --------- - ---------- - --------- Loss before income taxes (1,517 ) (1,611 ) (3,059 ) (7,477 ) Provision (benefit) for income taxes (76 ) — (32 ) — - ---------- - --------- - ---------- - --------- Net loss $ (1,441 ) $ (1,611 ) $ (3,027 ) $ (7,477 ) - ---------- - --------- - ---------- - --------- Net loss per share, basic and diluted $ (0.13 ) $ (0.17 ) $ (0.29 ) $ (1.49 ) - ---------- - --------- - ---------- - --------- Weighted average shares used in computing net loss per 10,780,996 9,619,659 10,481,901 5,016,825 share, basic and diluted - ---------- - --------- - ---------- - ---------

ShotSpotter, Inc.Condensed Consolidated Balance Sheets(In thousands)

September December31 30, , 2018 2017 --------- --------- (Unaudited ) Assets Current assets Cash and cash equivalents $ 16,348 $ 19,567 Accounts receivable and unbilled revenue 7,400 3,928 Prepaid expenses and other current assets 1,598 839 Restricted cash 60 30 - ------- - ------- Total current assets 25,406 24,364 Property and equipment, net 15,668 11,596 Intangible assets, net 91 95 Other assets 2,079 143 - ------- - ------- Total assets $ 43,244 $ 36,198 - ------- - ------- Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 2,342 $ 1,627 Deferred revenue, short-term 19,170 15,780 Accrued expenses and other current liabilities 4,691 3,815 Total current liabilities 26,203 21,222 Deferred revenue, long-term 1,177 2,710 Other liabilities 85 104 - ------- - ------- Total liabilities 27,465 24,036 Stockholders’ equity: Common stock 54 48 Additional paid-in capital 113,458 109,708 Accumulated deficit (97,598 ) (97,595 ) Accumulated other comprehensive income (loss) (135 ) 1 - ------- - ------- Total stockholders’ equity 15,779 12,162 - ------- - ------- Total liabilities and stockholders’ equity $ 43,244 $ 36,198 - ------- - -------

ShotSpotter, Inc.Condensed Consolidated Statements of Cash Flows(In thousands)(Unaudited)

Nine Months Ended September 30, --------------------- 2018 2017 -------- --------- Cash flows from operating activities: Net loss $ (3,027 ) $ (7,477 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 2,766 2,274 Impairment of property and equipment 632 666 Stock-based compensation 1,823 306 Amortization of debt issuance costs — 132 Remeasurement of convertible preferred stock warrant liability — 3,725 Loss on early debt extinguishment of debt — 479 Provision for doubtful account — 140 Changes in operating assets and liabilities: Accounts receivable and unbilled revenue (3,472 ) (3,735 ) Prepaid expenses and other assets (891 ) (263 ) Accounts payable 715 429 Accrued expenses and other current liabilities 860 486 Deferred revenue 3,109 4,398 - ------ - ------- Net cash provided by operating activities 2,515 1,560 - ------ - ------- Cash flows from investing activities: Purchase of property and equipment (7,426 ) (4,547 ) Investment in intangible and other assets (36 ) (55 ) - ------ - ------- Net cash used in investing activities (7,462 ) (4,602 ) - ------ - ------- Cash flows from financing activities: Proceeds from initial public offering, net of commissions and discounts — 32,426 Proceeds from notes payable — 1,500 Repayment of notes payable — (13,500 ) Repayment of debt issuance costs — (30 ) Payment of line of credit costs (10 ) — Payment of debt extinguishment costs — (149 ) Payment of offering costs — (1,858 ) Proceeds from exercise of stock options 523 41 Proceeds from exercise of warrants 988 — Proceeds from employee stock purchase plan 421 — - ------ - ------- Net cash provided by financing activities 1,922 18,430 - ------ - ------- Increase (decrease) in cash, cash equivalents and restricted cash (3,025 ) 15,388 Effect of exchange rate on cash and cash equivalents (164 ) 2 Cash, cash equivalents and restricted cash at beginning of year 19,597 3,895 - ------ - ------- Cash, cash equivalents and restricted cash at end of period $ 16,408 $ 19,285 - ------ - -------

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