SoundThinking, Inc. (SSTI) Earnings Call Transcript & Summary

Good afternoon. Thank you all for joining. Today, you'll be hearing from ShotSpotter President and CEO, Mr. Ralph Clark; and ShotSpotter Legal Counsel, Mr. Tom Clare of Clare Locke LLP. Following their opening remarks, both Mr. Clark and Mr. Clare will be available to answer questions. [Operator Instructions] At this time, I would like to turn it over to Josh Galper of Trident DMG.

Thank you, operator, and welcome, everyone. My name is Josh Galper, and I'm with Trident DMG. We work with ShotSpotter, the precision policing technology company with the leading acoustic gunshot detection solution. Thanks for joining us today for this important legal news. I'm joined by Ralph Clark, the President and CEO of ShotSpotter and Tom Clare, Founder and Partner of Clare Locke, the First Amendment and defamation litigation law firm. Before we hand it over to Tom to detail today's news, I'm going to ask Ralph Clark to say a few words to introduce ShotSpotter for those on the line who may not be familiar with the company. We'll then have time for a few questions. Ralph, I'd like to yield the floor to you now. Thanks.

Thanks, Josh. Good afternoon. My name is Ralph Clark, and I've had the privilege of leading ShotSpotter as its President and CEO for just over 11 years. We're here today so that ShotSpotter can stand up for truth and facts and hold VICE accountable for the false and negative narrative that they've been promoting by suing them for defamation. Tom will go into the details of our defamation suit, but before he does, I would like to provide you with some background on our company for those of you who are less familiar. ShotSpotter was founded 25 years ago based on the inspiration of our founder, Dr. Bob Showen, whose core belief was and is, the highest and best use of technology is when it can be harnessed for social good. That social good or purpose for our company is to help provide equal protection under the law by equipping law enforcement and the communities they serve to deal with the costly scourge of gun violence. Simply put, our innovative technology alerts police and first responders to incidents of gunfire so that they can better respond precisely and quickly to shooting scenes. The reason this is so critically important is that 80% to 90% of incidents of gunfire do not result in a 911 call to police, which means that 9 out of 10 times that a gun is criminally fired in some of our most vulnerable communities, there is no call to 911 and therefore, no response. That lack of response leads to missed opportunities, missed opportunities to locate potential gunshot wound victims and save lives, identifying serial shooters, collecting evidence and conducting witness interviews, and most importantly, there's a missed opportunity to show a community that they matter and that the police are there to serve and protect them. Our technology solves that problem by augmenting the traditional 911 system that is not working for communities grappling with chronic gun violence. The historical utility of our service is evident in lives saved and safer neighborhoods in more than the 120 cities that we serve. VICE deliberately undermined the trust in ShotSpotter that has been built up over 25 years with law enforcement and the communities they serve with their false narrative.

Thanks for that opening, Ralph. I now would like to turn to Tom Clare of Clare Locke to detail today's news. Tom?

Thanks, Josh, and thank you, Ralph. My name is Tom Clare, and I'm a partner at the law firm of Clare Locke LLP. Late yesterday, ShotSpotter filed a $300 million defamation lawsuit in Delaware Superior Court in Wilmington, Delaware against VICE Media. The defamation complaint is based on a coordinated disinformation campaign that VICE has waged through its Motherboard imprint, through tweets promoting its false articles and a podcast. In this multimedia defamatory campaign, VICE has deliberately misrepresented court records and other facts in order to falsely accuse ShotSpotter of conspiring with police to frame innocent people. This is one of the most serious and damaging accusations that you can make against a company like ShotSpotter. And VICE was unabashed in doing it. VICE targeted ShotSpotter as part of its stated strategy to generate advertising revenue by pushing stories about inequality and technology. They state, right on their website, the preconceived narratives that they have and the stories that they run and they want to run, and they applied this false preconceived narrative to ShotSpotter through its articles, tweets and podcasts. The complaint alleges that this was no accident. VICE was repeatedly confronted with the facts before and after it published but they refused to do the right thing, correct the record and tell the truth or in the first instance, to put forward an honest and truthful account of the court records. ShotSpotter provides juries with facts about where and when guns were fired. The forensic reports generated by ShotSpotter have been successfully used in over 190 court cases and counting. But you wouldn't know any of that from reading the VICE article or the imprints, tweets, and the podcast. They make it sound like ShotSpotter is an unreliable technology that has never been subjected to court scrutiny and that is used only to frame innocent people. VICE was well aware prior to publication that its report -- that ShotSpotter's reports have been used both by prosecutors and by defense attorneys and that ShotSpotter technology has helped exonerate innocent people by providing the facts about what happened. Juries decide whether someone is convicted or acquitted, prosecutors decide who are charged, ShotSpotter provides the facts. That is all. As we've laid out in our complaint, VICE did this and spread this false narrative by misrepresenting court records. This is not a situation where what VICE did was take court files and report on them accurately. No court has ever found anything close to the conclusion that VICE reached on its own and falsely reported. The conclusion that VICE sought to draw, that ShotSpotter conspired with officials to frame innocent people, is 100% on VICE and the court records that we've cited in the complaint show exactly the opposite. 190 court cases plus where ShotSpotter technology was repeatedly tested by the most rigorous expert evidentiary standards to make sure that only reliable information is admitted. It's -- the court records show that it's used by prosecutors and defendants. And in order to put forward this false narrative, what VICE had to do was fundamentally distort the court records and in many instances, report exactly the opposite of what those court records show. For example, in the Williams case out of Chicago that we talked about in our complaint, the court records, the very same court record that they screenshot in their article and that they had in their possession prior to publication, prove the opposite conclusion that they reported. It proves that ShotSpotter did not change the gunfire location by more than a mile at the request of prosecutors or for any other reason. The court records proved that ShotSpotter located the gunshot initially at the very same intersection that it later identified in its detailed forensic report. That is the exact opposite of what they reported, and they used that false conclusion to support their false theme. Yet even to this day, VICE has continued to double down and mislead people about ShotSpotter's technology. The defamation campaign that VICE engaged on has caused and is continuing to cause enormous damage to the company. And so we are seeking more than $200 million in compensatory damages and $100 million in punitive damages. These numbers come from the fact that VICE, through this reckless and irresponsible reporting, has endangered ShotSpotter's current and future contracts, damaged its business relationships, damaged the enterprise value of the company and damaged the company's reputation. As a result of the false reporting, the company's overall value and stock price have fallen, short sellers have capitalized on this opportunity to manipulate the market to their benefit, and people are calling for cities to cancel their contracts based on false information spread by VICE, damaging the company even further. All of this was brought to VICE's attention after they published. We gave them every opportunity to avoid this lawsuit. We asked them to retract, we sent them detailed information, including the court records that fundamentally cut against and reject the false things that they reported, but they refuse to do the right thing. So VICE left ShotSpotter with no other choice but to bring this lawsuit to set the record straight and to protect its reputation.

Thank you, John. Ralph, I'd now like to turn back to you with a few final words before we move into questions.

Sure. Thank you, Josh, and thank you, Tom. I just want to add the following. We did not take the decision to sue lightly. Before the article was published, we provided VICE with the facts that refuted their claims, but they chose not to include those facts. After the article was published, we made attempts to have them retract the false reporting. When they refused, we were left with no choice but to set the record straight and file this lawsuit. VICE crossed a serious line. We couldn't let this pass, and we are forced to set the record straight and recover our damages through this lawsuit. I would like to close with 3 facts about ShotSpotter. One, we provide a critical innovation that augments traditional 911, which helps to save lives and protect communities; two, we're proud to have a strong stakeholder alignment built on purpose and trust; and three, we're prepared to take any necessary actions to protect that trust in order to continue to do the work that we do, which is helping to save lives and protect communities.

Thanks, Ralph. Operator, we can now turn to members of the media for questions, if there are any.

[Operator Instructions] We'll take our first question from Lachlan Cartwright with The Daily Beast.

Tom. Clare Locke, obviously, have a formidable reputation in these matters. And I'm curious from these egregious reporting errors that are in the complaint, compared to what you saw in the Rolling Stone Rape on Campus matter, which obviously Clare Locke was involved in and also the dominions of where you've highlighted publicly the damage done by some of the reporting and opinion aired there, where does VICE's reporting on ShotSpotter sit on the scale of journalism that you've contested?

Well, thanks, Lachlan, for the question. I mean, this is some of the most egregious defamation that we've seen in our practice for -- one of the reasons that I alluded to in my opening remarks is, you know, of course, and all the reporters on the line know, that it's an important public function, an important public trust for the reporters to be the eyes and ears of the public in looking at court records and reporting to the court -- to the public accurately about what's going on in the court system. And what happened here and the reason why I think this is one of the most egregious examples, is that, that trust was breached in an incredible way, in that the court records were fundamentally distorted and misrepresented in order to reach this conclusion. And so I think from my vantage point, obviously, I represent ShotSpotter, and they've done enormous harm to the company and the good people that work there and put at risk this technology that I think is really doing some tremendous good in these communities. But also, they've done a tremendous disservice to the public, who has now been misinformed about what's going on in the court system. And at a time when I think we should all be looking for accurate pictures of the way our institutions of justice function, this is doing an enormous disservice to that and casting doubt on those institutions in a way that really makes the public -- does the public a disservice.

Just one quick follow-up, if I may. Why have you guys referred in the complaint to the VICE people, the VICE journalists as agents as opposed to reporters or journalists? I'm just curious.

Well, I mean, it's in some ways a distinction without a difference. Agents is obviously a legal concept that is -- becomes important in certain elements of the legal case because VICE Media is responsible legally for the actions of its agents. And so it's a legal concept that's important for us to plead. But it really doesn't matter. We didn't mean it in a nefarious way other than to say that these are folks whose conduct finds VICE Media legally -- and we can hold them accountable for their conduct.

We'll take our next question from Chris Mills Rodrigo with The Hill.

I just wanted to get some clarity on whether the lawsuit focuses on just the allegation of editing court records or also on the arguments about the accuracy of ShotSpotter?

So look, the two are certainly intertwined. The core allegation of the lawsuit is that VICE distorted the court records in order to create this false narrative that it was collaborating with law enforcement to frame innocent people. That's, of course, the core allegation in the suit. But the undertone for all of it is that this is an unreliable technology that can't be subjected to scrutiny in court. And we've alleged in our complaint that, that is false as well. And the fact that this notion that they tried to put forward, that any time that the technology is subjected to the evidentiary challenges that are important for expert testimony to be admitted in these cases, that prosecutors pull back from them and the clear implication, which is both implicit and express in the article, is they do that because it's -- the technology is not accurate. So we certainly will be addressing that in the suit, but we're addressing it in the context of them having alleged falsely that we've shielded the technology and its accuracy from scrutiny. The exact opposite is true. It's been done over 190x.

[Operator Instructions] We'll take our next question from Valentina Pucarelli with Columbia Chronicle.

This is Valentina. My question was in regards to other reports that have made about ShotSpotter like in AP, MacArthur Center, or ACLU, so I was wondering like why is VICE now being -- why is the lawsuit now about VICE? And what is your opinion about everything else that has been reported for ShotSpotter?

Good question. Thank you. So today, we're focused on VICE. The lawsuit is, as Ralph said correctly, the goal is to hold VICE accountable for its false reporting. We're, of course, continuing to look at the full body of coverage about ShotSpotter and nothing has been ruled out. Nothing has been taken off the table. This is obviously a big step to go to VICE and hold them accountable, and we're focused on that. But I can tell you that one of the things that happened and it happened very clearly here, we've laid out in the complaint how much of the false reporting that has followed has been a result of VICE's original article. Unfortunately, in today's world, there are journalists who do not do their own work and get to ground truth before reporting on things. The fact that VICE put forward this false narrative and put forward these false facts gave a lot of other organizations, they felt the license to publish the same thing. And so in many, many ways, a lot of that reporting goes back to VICE, but we will be looking at all of it, and those may be questions for another day.

We'll take our next question from [ John Chu ] with [ MDC ].

Could you -- either of you go into any more detail about how much money the company has lost a result of these articles or contracts lost? I'm just looking for a little bit more granular detail about the losses that you're claiming.

Sure. Thanks for the question. I would invite your attention to Page 41 of our complaints, where we laid this out in as much granularity as we're going to today. That's the prayer for relief, where we lay out general damages that we're trying to recover of not less than $50 million, future lost profits of not less than $50 million, lost enterprise value of not less than $100 million and the expenses that the company has incurred in combating this disinformation campaign of not less than $100,000. That is, of course, before punitive damages, which will be determined by a jury and deciding whether to deter this sort of reporting through the imposition of punitive damages. But the specifics around each of those categories of damage will be the subject of expert reports and expert testimony in the court as the case go forward. But Page 41 has those buckets broken down for you in case you didn't get the numbers as I was going through it.

Does the $100,000 figure talk about sort of internal efforts to counteract the reporting? Is that what I mean? Like work being done within the company to, I guess, from your perspective, counteract the article?

There certainly is an enormous diversion of resources at the company that was required to combat this disinformation. And that is, of course, a distraction from the company's mission. And we will certainly be seeking to recover those amounts. Those are sometimes more difficult, at least in the first instance, to quantify than the external costs of consultants and lawyers and the kinds of things that are necessary to push out the true story of what happened, but we would intend to capture both internal and external by the time that the case goes to trial. And of course, these are the numbers that we have now as we sit here in October 2021. These numbers, especially the expenses that the company will have to incur in combating this disinformation will just continue to grow. So those numbers will be updated to reflect internal and external costs as the case goes forward over the next number of years.

And I'm showing we have no more questions in the queue at this time. I will now turn the call back over to today's speakers for any additional or closing remarks.

Thank you, operator. We have nothing to add beyond what we've talked about today. We want to thank everyone for joining. Thanks, and have a good day.

Thank you for your participation. The conference has now concluded. You may now disconnect.