Good afternoon, and welcome to ShotSpotter's Third Quarter 2019 Earnings Conference Call. My name is Omer, and I will be your operator for today's call. 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 the actual results to differ materially from those stated or implied by those statements.
Certain of these including its registration statement on Form S-1. 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, November 12, 2019, 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 would like to remind everyone that this call will be recorded and made available for replay via e link available in the Investor Relations section of the company's website at ir.shotspotter.com. Now, I would like to turn the call over to ShotSpotter's CEO, Ralph Clark.
Sir, please proceed.
Thanks very much and hello to everyone on the call. As usual, I'll provide a general overview of the business and Alan will cover our Q3 results in more detail before we take your questions. If there's a theme for this quarter, it's the same thing we've been stressing since going public. ShotSpotter's business is best viewed through a longer term strategic lens rather than from a shorter term quarterly perspective. We can experience lumpy results especially when our deals get pushed out in time due to the bureaucratic procurement processes and contract negotiations to which our public agency customers are sometimes subjected to.
This thing continued to be in play in Q3 as we're on the cusp of securing a few but material contracts that have had their final signings push forward for a variety of reasons. As a result, we only added 20 gross miles for the quarter, which was below our original expectations. These miles were primarily driven by expansion projects in 6 cities and Piscataway, New Jersey as a new customer. We reported Q3 revenues of $10,000,000 and net income of $446,000 or $0.04 per share. We also generated positive cash flow from operations, again proving the operational leverage in our business.
While this quarter's results did not reflect our strong growth potential, ShotSpotter's long term business fundamentals remain strong. The pipeline for our core ShotSpotter Flex service continues to grow broader and deeper with expansion opportunities from existing customers and a growing number of deals being formally bid with new public safety agency customers. Additionally, our ShotSpotter Missions offering is gaining traction and nearing the point of making measurable revenue contributions to our financial results. We believe given our first mover advantage and lack of any serious competition, ShotSpotter remains the only viable candidate to effectively serve this market. And although we never take anything for granted, we rarely lose an alternative solution in a true bake off situation and don't see any other company or technology that can deliver the proven efficacy of gunshot detection services that ShotSpotter provides.
Our recent experience with Puerto Rico is an illustrative case study on the competitive and timing dynamics of our business. Puerto Rico originally published an RFP for gunshot detection back in July 2018 post Hurricane Maria and after being a successful ShotSpotter customer from 2014 to 2017. After receiving no other bids that they determined to be viable besides ours, they reissued a second RFP almost a full year later in June of this year with slightly modified requirements in an effort to induce more competition. We're pleased to have recently received official notification that ShotSpotter was awarded the project, a $4,600,000 3 year deal, which is still subject to successful contract negotiations that we hope to conclude by year end. Based upon the agency's published evaluation, we've already learned that the second RFP yielded only one other deemed viable proposal as compared to ours.
That proposal scored much lower in the agency's technical evaluation, while the price they bid was over 2 times the ShotSpotter price. We're very excited to be reengaged in Puerto Rico and are looking forward to the collaborative work in helping make those communities become safer. We continue to see strong evidence that our core value proposition is still very much intact is increasingly being validated by independent research. The Urban Institute, a nationally respected nonprofit research group published an evaluation last month on how ShotSpotter's gunshot detection system is being used by police departments and the value it provides when accompanied with fundamental best practices. It illustrates the positive impact that fast accurate detection can have on response and investigative efficiency, the overall reduction of firearms violence and the ultimate cost benefit to the community.
A separate retrospective study published in October of this year in ScienceDirect showed a 52% decrease in shootings in Camden, New Jersey in the year after installing ShotSpotter and how ShotSpotter has been a part of a set of new policing techniques. We also regularly see and hear third party endorsements for ShotSpotter from our many clients. For example, Cincinnati Mayor John Cranley recently called out ShotSpotter in his 2019 State of the City address asserting that In Avondale, we saw 50% reduction in shootings using ShotSpotter. And the Las Vegas Metropolitan Police Department, which is soon going live on an in process 17.5 Square Mile ShotSpotter expansion revealed at their press conference a 26% reduction in violent crime in the areas covered by ShotSpotter. Collectively, these validations and others are indicators of the approaching tipping point for gunshot detection becomes a standard of care solution.
Looking forward into Q4, we'll continue building out our 3rd expansion in Cincinnati and complete the 17.5 Square Mile Las Vegas expansion, which at 23.5 Square Miles will make Las Vegas our 3rd largest deployment after Chicago and New York. I also want to recognize the University of California at Irvine, which is recently contracted for our campus security solution. Irvine will be our 3rd campus in the University California system when it goes live later this year. With every single customer engagement, we set out to keep that customer for a life time, but we also recognize that attrition is a natural part of any subscription based business. So we do bake in some attrition in our annual forecasting.
As noted in last quarter's call, we called out some limited expected attrition of approximately $500,000 of annual recurring revenue involving 3 cities that decided to not renew. In one case, it was primarily driven by a department leadership change. In another case, a city publicly stated their intention of deploying a smart city based alternative that claims to do gunshot detection. We'll be paying very close attention to see how closely the vendors claims match up to the real world challenges of delivering I want to reiterate that we continue to sharpen and expand our sales organization and go to market approach. We recently added a VP of Domestic Sales reporting to Gary Bunyard, our current Senior VP of Sales.
Our 5 territory sales directors will report to this new VP who will provide more day to day direction designed to increase deal cadence and enable those deals to move forward more expeditiously. Additionally, we've also established a sales overlay organization, which is led by a recently promoted sales VP who will also report to Gary. Our overlay sales group will develop and maintain deep functional consultative sales expertise in flex security and missions and will collaborate with the territory sales directors to drive our solutions through their respective territories. These collective organizational adds and changes will free up critical cycles for Gary to focus on highly leveraged strategic sales initiatives, including taking the lead on a selected number of Tier 1 opportunities. We're also elevating our critical customer success practice by breaking out the customer success team from the sales organization.
A recently hired VP level leader will direct our customer success organization and collaborate with the senior leadership team while reporting directly to me. We've invested in expanding the capacity and capabilities of our customer success organization so they can continue to execute a best of breed onboarding process in order to generate even more net promoters providing even more positive customer referrals. Before I conclude, I want to update you on Missions and ShotSpotter Labs. We've made solid progress with Missions. We've added 2 new customer bookings to date and expect to close another 3 to 5 by year end.
The pipeline for Missions has grown ahead of plan we're especially encouraged to see a high degree of interest from non current ShotSpotter customers. Last quarter, I discussed our ShotSpotter Labs anti poaching initiative in Kruger National Park in South Africa. And I'm very pleased that the results have exceeded our expectations. In very short order, ShotSpotter alerts have led to at least 2 successful coaching interventions. The area where there is a ShotSpotter dome of protection has gone from 3 poaching events per month to 0 poaching events over the last several months.
Officials believe that the chilling effect of ShotSpotter's precise real time alerts has been a game changer. As a result, it is possible that some of the poaching activity has been displaced to other adjacent private reserve properties that currently lack ShotSpotter protection. These private reserves have the financial resources to engage in any poaching strategy and are becoming viable commercial opportunities for our business. Just a final couple of points before I turn it over to Alan. Factoring in where we are, we decided to tighten our full year 2019 guidance even further, cutting the top line expectation to $40,000,000 to $40,500,000 while ending the year with almost $43,000,000 of annual recurring revenue.
Looking forward, our 2020 guidance of $48,000,000 to $50,000,000 reflects our expectation that we can add another $5,000,000 to $7,000,000 of GAAP revenue on top of our year end revenue run rate. This includes expected GAAP revenue of over $1,000,000 from Puerto Rico and a reasonable assumption for attrition. As you can probably ascertain from these remarks, my optimism about the future for ShotSpotter continues to be strong. It may be taking longer to get business across the line, but I'm very confident that when we see the conversion of our expanding pipeline, our growth will reaccelerate as we continue to drive adoption of our solutions and positively impact public safety outcomes. Okay, that's it for me.
Here's Alan. Thank you, Ralph. Good afternoon, everyone. As Ralph mentioned, our Q3 revenue results were below expectations. We are again reducing our full year 2019 revenue outlook.
We're disappointed in the reduction in our revenue outlook. However, as Ralph stressed in his comments, the primary issue has been the elongation of sales cycle and delays in the final contracting process on a few material deals, which we view as a win, not an if. Puerto Rico being example of this where we expected to sign that deal much earlier in the year and are pleased to finally announce that we have formally been awarded the contract and are aiming to sign it as soon as possible. Despite the lumpy growth this year, the leverage on our model has allowed us to maintain profitability both in the Q3 and year to date. And we continue to stand behind our guidance as to the full year 2019 Revenue for the Q3 was $10,000,000 an 8% increase from $9,200,000 in the Q3 of 2018.
Our year to date revenue growth was 19% over 2018. It's also important to remember that the 2018 results reflect the very large deployments in Chicago and New York that drove the 2018 mileage growth. However, for 2019, we completed a large expansion of over 15 miles of Miami Dade County this quarter and have another large expansion of 17.5 miles underway in Las Vegas. These large Tier 2 city expansions are encouraging even as we pursue new Tier 1 contracts. The quarterly results were also impacted by delay in closing some deals and a couple of delayed renewals, which is not unusual in our Q3.
We added 20 gross new miles during the quarter, but lost 9 from 3 small customers who did not renew or 11 net new miles added in the quarter. Note that we discussed last quarter that we anticipated 2 of these losses. Including these losses, our overall churn is still expected to be less than our planned 3% for 2019. Of note, we had originally expected Las Vegas to deploy their entire 17.5 miles of expansion during the Q3. But at the request of the agency, we delayed most of the deployment to Q4.
The balance of their expansion should be live this month. Gross profit for the Q3 was $6,000,000 or 60% of total revenues, up from $5,000,000 or 55% in the Q3 of 2018. We continue to invest appropriately to fund our long term growth, while benefiting from the unique leverage in our model. Our operating expenses for the Q3 were $5,600,000 or 50 6 percent of revenue versus $6,600,000 or 72% of revenues last year. Note that the operating expenses in the Q3 of 2018 included approximately $900,000 $200,000 respectively related to non recurring litigation and M and A expenses.
We still expect overall operating expenses to increase less than our rate of top line revenue growth leading to increased operating margins in 2020. Looking at each of the line items, sales and marketing expenses for the Q3 were $2,400,000 or 24% of the total revenues versus $2,500,000 or 27 percent of total revenue in the prior year period. We expect this level of spending to increase slightly on a dollar basis for the balance of the year. Our R and D expenses for the Q3 were $1,400,000 or 14% of total revenues compared to $1,200,000 or 13 percent of total revenues for the prior year period. We continue to invest in R and D to add features functionality to our products and improve our software algorithms and applications.
We expect this level of spending to increase slightly on a dollar basis for the balance of the year. G and A expenses for the quarter were $1,800,000 or 18% of total revenues compared to $2,900,000 or 32% of total revenues for the prior year period. We expect that our G and A expenses will continue modestly to increase on a dollar basis throughout the balance of the year. Our GAAP net income for the Q3 was $446,000 or $0.04 per share based on 11,400,000 basic and 11,900,000 diluted weighted average shares outstanding. This compares to a GAAP loss of $1,400,000 or $0.13 per share loss the prior year period based on 10,800,000 basic and diluted weighted average shares outstanding.
As I noted above, we are particularly pleased to maintain profitability even with the increased spending that is funding our future growth. Adjusted EBITDA for the quarter, which is calculated by taking our GAAP net income and adding taxes, interest, depreciation, amortization and stock based compensation was $2,300,000 up from $200,000 in the Q3 of 2018. We ended the quarter with 6 96 miles live in 99 cities and 11 campuses and sites. At the end of the Q3, we had approximately 7 20 miles and 12 campuses and sites under contract. Deferred revenue at the end of the 3rd quarter was $21,400,000 of this amount $20,600,000 was short term and $800,000 was long term.
Our balance sheet remains strong. We ended the quarter with $26,100,000 cash and short term investments, down only slightly from the $27,400,000 at the end of Q2. You should note that this was after spending approximately $3,500,000 repurchasing shares under authorized share repurchase program. We added 1 new city in the Q3 for a total of 10 new cities year to date. As we shared last quarter, we expect our second half growth would be driven primarily by expansions and not new cities.
Finally, as mentioned above, we repurchased 120,000 of our shares under our corporate repurchase program during the quarter. Turning to our full year guidance. With the Las Vegas miles coming in so late in the year and some of our other delayed customers, we were reducing our fiscal year revenue outlook to $40,000,000 to $40,500,000 We've been clear that the cadence in customer adds, especially in international markets, was slower than we originally expected. But again, we do not see this business as being lost to a competitor and we are optimistic that much of it will close in the near $48,000,000 to $50,000,000 which would represent over 20% growth at the midpoint. Let me add just a few more details.
We expect the revenue cadence will be similar to the historic trends with Q1 relatively flat with Q4 unless we're able to deploy Puerto Rico rapidly, an increase from Q1 to Q2, flat to the Q3 and an uptick again in the Q4. Expenses will increase on a dollar value across all operating expense categories with the most pronounced increase in sales and marketing. We also expect to remain profitable on a go forward basis and expect both gross and net margins to continue to improve, although there may be some quarterly variation. We continue to evaluate the upcoming replacement of our 3 gs sensors with LTE sensors and we'll begin incurring some expenses related to that process in the Q4. Overall, we expect this to cost between $4,000,000 $6,000,000 throughout the entire process.
We're evaluating the timing of this rollout and we'll keep you posted. Lastly, we are planning to have an Analyst Investor Day on Tuesday, December 17. We will provide more details as we get closer to that date, but please mark our calendars for that event. We'd love to see you all there. Now I'll turn the call back to Ralph, and then we'll be happy to answer your questions.
Great. Thank you very much, Alan. I think we're just prepared to go directly to questions at this point in time. So thank you very much for joining.
Thank you. At this time, we will be conducting a question and answer session. Our first question is from Matt Pfau, William Blair. Please proceed with your question.
Hey, guys. Thanks for taking my questions. First, I wanted to ask about the 2020 guidance and I was wondering if you can give us any sort of additional details in terms of what is factored into that guidance and how much visibility you have in that number? Basically, just trying to figure out if some of the delays that have sort of plagued you during 20 19 have the potential to impact that 2020 guidance as well?
Sure. This is Alan. I think if you look at what Ralph just mentioned in terms of how we're going to end 2019, we know we're going to have about $43,000,000 in annual recurring revenue at the start of the year. In addition to that, we expect to add somewhere between $4,000,000 $5,000,000 in GAAP revenue between our new domestic go lives and Puerto Rico, assuming we can light up Puerto Rico as quickly as we believe we can. And then on top of that, there's probably another $1,000,000 in miscellaneous new GAAP revenue related to mission security, some other projects we have.
And then the balance would be filled in by international. So international at that point somewhere around $1,500,000 to $2,000,000 which is frankly less than we had started within our guidance last year. And even though we have more proposals and more bids out there and are much more optimistic going into 2020.
Got it. Thanks for the additional detail there. It's helpful. On the Puerto Rico deployment, I know you guys had a fairly sizable deployment there prior to the hurricane coming in a few years ago. Is this deployment reactivating those same areas or is this in areas that you previously weren't deployed in?
Yes, this is Ralph. Great question. So I think it matches up pretty well with our original deployment. It's approximately 20 or so miles. And again, it's a 3 year contract for us.
So we're quite excited to get reengaged in Puerto Rico and to enter into another relationship with them providing gunshot detection services.
Got it. And last one for me on the Missions product. You mentioned you're seeing some nice interest from non current ShotSpotter customers. Do those customers that are showing interest have the potential to eventually use the core ShotSpotter solution as well for gunshot detection or these customers that are just using Missions? Just trying to get an idea if this could be potentially a customer onboarding tool for your core gunshot detection product as well.
Yes. So great question. Again, so the interest is really coming from 2 types of non ShotSpotter customers. Those that would probably never be Shot Spotter customers because they maybe lack concentrated violent crime in their area. So they're looking at that solution more as a property crime solution.
And then those customers that have both property crime and violent crime where they could potentially become ShotSpotter customers in the future. I think it does bear mentioning that our focus really is in these first set of customers that we're signing up and hopefully be deploying over the next few months that we're really focused on making sure they have an incredibly positive experience and represent net promoters that can help us bring on board the next set of customers. So this is something that's relatively new for our company and frankly for customers that are using this kind of precision leasing capability around kind of patrol management and the like. So we want to be very intentional around making sure we're kind of tracking the value that they're seeing from that deploying that solution and kind of using that positive experience and bringing on the next wave of customers. So I wouldn't expect us to really engage even though we are seeing interest from non ShotSpotter customers.
I think our first priority has to be on really working with this handful or 2 handfuls of customers that were signed up between now and the end of the year.
Great. That's all I had. Thanks a lot guys.
Thank you. Thank you.
Our next question is from Chris Van Horn, B. Riley FBR. Please proceed with your question.
Hello, everyone, and thanks for taking my call.
You're welcome.
I guess just on the margin front, it seems like margins are going to continue to expand. And I'm wondering if there's a main driver there or if it's just a lot of different things you're doing, whether it's pricing or cost controls. And how do you feel about your kind of longer term goal of somewhere around $100,000,000 in revenue and potentially 40% EBITDA margins?
Sure. This is Alan. I would say we continue to spend where it's appropriate. I think we're going to be increasing our spend as Ralph mentioned earlier in our sales and marketing as we have been ramping that up over the last year to 18 months. We're not necessarily going to be increasing at the same rate of revenue in G and A and R and D.
We feel pretty good about where our level of expenses are there. There will be selective investments there. So you see 2 things. You see control throughout the operating expenses, but you also see as the revenue grows, some of our semi fixed costs in our cost of goods sold aren't growing as much as the revenue is. So the gross margins are going to continue to improve as well.
So improving gross margins and improving or controlling the operating expenses are going to lead to continued improving in our overall margins. I would say, on that path to that $100,000,000 sure, we still feel pretty comfortable about getting that 40% or $40,000,000 in EBITDA when we hit that $100,000,000 mark.
Okay, got it. Thanks for that detail. And from a competitive landscape perspective, we do our due diligence. I think the more you dig into the competitors that you have, there's some stark differences. And just want to confirm with you, maybe how you stack up either from a pricing perspective or from a solutions perspective, now that there's been some chatter that the competitive landscape is getting is ramping up?
Yes. So this is Ralph. Great question. I think at this point in time, it is just a bunch of chatter. I mean, we haven't seen any successful deployments of any kind of scale in any other customer situations.
Of course, we all saw the recent news with Canton that decided not to renew their ShotSpotter solution because they're going to try another solution, which we haven't actually seen deployed anywhere. I think architecturally, I think it's important to note that the folks that are out there claiming to do gunshot detection are doing it on a proximity based sensor basis, which is a very challenging thing to do at scale. One of the significant architectural advantages we have is using kind of multiple sensors and using our really robust machine classification and human review classification to make sure that we're delivering not only fast, but precise alerts, right? Precise in terms of location and precise in terms of really minimizing false positives, things that are claimed to be gunshots that aren't gunshots, which is difficult for proximity based sensor to figure out and also reduce false negatives as well, things that you don't claim are gunshots that actually are gunshots. And so our ability to deploy kind of multiple sensors over a square mile working together along with our machine and human review classification, we think builds a best of breed solution.
So we're going to be watching very carefully at least this Canton implementation to see in fact how closely the vendors claims match up to reality. We've seen other attempts at some of these proximity based sensors companies to try to do things. They haven't been very successful. In one particular case, we've really kind of gone behind this one particular vendor in 3 cities at least and kind of cleaned up, I guess, the original deployment, if you will. So we'll continue to kind of focus on doing what we do and kind of watch these competitors to date.
But we really haven't seen much pressure at all from them at this point because they don't have any successful deployments.
Okay, got it. Thank you for that commentary and thanks for the time.
Yes, thank you.
Our next question is from Joseph Osha, JMP Securities. Please proceed with your question.
Hello. This is actually Hillary on for Joe. I just wanted to kind of circle back to the sales headcount. I know you guys had the one you hired this quarter. I was just kind of wondering kind of thoughts on if you're comfortable with your current headcount or if we might see you bring on another 1 or 2 sales people as you look to pursue some of these different growth strategies?
Yes. So great question. So we did bring on a VP of Sales that our current 5 territory sales directors are reporting to that individual. And we're formally building out a sales overlay organization, taking one of our very successful sales directors and promoting him to the VP role where he's now going to build out an overlay organization that will have kind of very precise skill sets around selling Flex Services, our security solution and so most importantly, our mission solutions and working collaboratively with the sales organizations on kind of pushing those solutions through the respective territories. We'll continue to invest in and build out our customer success organization.
I think in many ways that's a little bit of the secret sauce around how we do what we do in terms of really building these loyal net promoter customers out there that then really help us from a kind of referenceability point of view, help sell other customers. That's a critically important process for us. We'll probably grow that headcount even faster than what we're going to do on the direct sales because I think in this particular market, to the chiefs of police that deploy ShotSpotter. So we want to make absolutely 100% sure that when a customer deploy ShotSpotter, they're having a positive experience. And I think I would point no further and no more recent than the Las Vegas press release.
If you have an opportunity to look at that, you can see what a loyal committed customer implementing best practices that we help bring about with our customer success organization, how they talk about that ShotSpotter solution, what difference it's made in their particular city, in this particular case, Las Vegas. That's marketing and sales goal. And so that's the area that we'll focus on mostly is that customer success organization.
Okay, great. And then just secondly, when we were in Chicago, we spent some time over at the NIBEN booth. And I was just wondering if you could provide some color, thoughts around how that might play into your growth strategy over the next couple of years?
Great. Yes. So we're always this is Ralph again. I mean, we're always better when a customer adopts our solution and is integrating it with other technologies and bringing about other processes. It's literally kind of 2 plus 2 equals 5.
For those of you on the call that aren't familiar with NIBEN, you can think of it as their ATS kind of fingerprinting of shell casings. And what makes this NIBEN so critical in the prevention and reduction of gun violence is ShotSpotter is getting cops the dot. And because the vast majority of gunfire events go without a 911 call, we're able to help police departments recover much more forensic evidence in the form of shell casings. Those shell casings then get processed by NIBEN and then you could literally connect the dots. You can see the movement of a crime gun in various parts of the city.
That combined with the additional intelligence that ShotSpotter is bringing about because now you're able to interview witnesses and you're able to see the cadence of gunfire. You're more quickly able to identify the very few serial shooters that drive most of the gun violence problem. So there's overall concept out there called Crime Gun Intelligence Centers and it's basically the philosophy of combining ShotSpotter along with NIBEN and taking a very robust intentional approach to investigating all shootings, just not shootings that result in a homicide or gunshot wound victim, but even shootings that just don't have a physical blood trail, but they might leave a shell case in which can be critically important in your investigation and stopping that serial shooter before they ultimately shoot and hurt or kill someone. So it's a great question and we love NIBEN and we love to be integrated with that because it makes it more sticky and makes it more valuable to the customer that's going to combine those technologies and processes.
Our next question is from Will Power, Baird.
This is actually Charlie Ehrlich on for Will. I just wanted to ask on Puerto Rico. What exactly is still left between where we are now and getting that completely across the finish line and starting to generate revenue?
So this is Alan. As we mentioned, we received a formal award document. To the final contract. Hopefully, this time will be a little faster than last time. The RFP did contain a sample contract.
So both parties are already at least cognizant of what most of the terms and conditions are going to be. That said, it is Puerto Rico. Things sometimes do take a little longer than we might expect. We certainly expect and hope to have that completely signed and executed before the end of the year with an opportunity to even start some of the go lives.
Great. And then I also just wanted to ask generally on the international pipeline. How close are we to the finish line of some of these other international deals? And how might they compare to Puerto Rico in size?
Yes. So this is Ralph. I'll answer the second part of your question first. So in terms of size, because we have the pricing leverage that we have internationally, these deals are sizable. You can think in terms of anywhere from on the low side of $500,000 of annual recurring revenue in as much as like $2,000,000 on a kind of reasonable size deployment of international We're super constructive about the size and depth of the market, I would say.
We're seeing an increased amount of interest. Just to remind folks, in Latin America, we're focused primarily on 4 countries, Brazil, Mexico, Colombia and Panama. And then we've been able to be successful in the Caribbean with the Bahamas, which came on, I think, this year. We also have had a very long standing relationship with a customer in South Africa, Cape Town, who's publicly discussed their need for expansion of ShotSpot. They continue to have a really tough time with gun violence and they also have a budget to address the issue.
So we're feeling quite constructive about it, but I think one lesson learned, if you will, from kind of 2019 this year is that as good as we're feeling about the size and depth of the market, I think we're being a little bit more intentional about the timing characteristics of what it actually takes to get a signed executed contract, because they're resembling much more kind of, I will call it, Puerto Rico behavior than maybe, say, even for an existing customer like Cape Town that's talked about expanding that knows us that we have an existing contract with. It's still very, very difficult from a procurement logistics point of view to kind of get paper across the line. So we're hopeful expecting we're hopeful and expectant of getting some amount of international revenue contributing to our GAAP revenue contribution in 2020. And we like the way the pipeline is developing.
Our next question is from Reed Motulsky, Imperial Capital. Please proceed with your question.
Hi, guys. Last quarter, you guys talked about prices increase price increases starting next year. Have you guys made any progress negotiating them? And has there been any pushback? Or is that going along smoothly?
Yes. So this is Alan. We have talked about and are intending to implement a base price increase from $65,000 per year per square mile to $70,000 per year per square mile. That will go into effect January 1. It will be phased in.
Basically, all new miles that are sold will be at that price. If customers have price points that are slightly below that from historical ones, they will have a cola increase until they reach that price. We haven't gotten any substantial pushback and it is something that's still on the dock to execute on. Yes. And I would just add, it's not like we have been increasing prices every year.
We haven't had a price increase in what, 4 years. So, we were due. We have had COLA increases in many cases, but not a broad based price increase to our standard price per month.
Got it. Great. And I know you guys have a lot of strong data on the success of ShotSpotter Flex impact. And now with the growing footprint of Missions, have you guys started to compile data on how it impacts the community and the policing there
and if it's positive or not?
Yes. So it's too early for that just yet because we just recently deployed our first customer. And again, we have another, I'd say kind of 3 to 6 that we hope to deploy over the next in the next few months. But that's very much on our roadmap is to provide that kind of narrative to help people understand the value in the various use cases of our mission solution.
Got it. Great. Thank you very much.
Thank you.
Our next question is from Tyler Wood, Northland Securities. Please proceed with your question.
Hey, thanks for taking
our questions. First off, on the lengthening sales cycles, you've talked a bit about how the international sales cycles longer domestically, what's driving that? Is there any impact you're seeing from competition getting more active on those? Thank you.
Yes. So this is Ralph and Alan jump in, of course. But we're not seeing any real impact from competition. Just to remind folks, the vast majority of our sales are sole sourced deals where we're basically going direct to the customer and they're not even issuing RFP. In other cases where RFP is issued, oftentimes we're the sole bidder on an RFP, all the first RFP for Puerto Rico.
In a couple of cases, there might be another respondent, again, as in the case of Puerto Rico. But oftentimes, it's not, I guess, technically as strong as our solution and the pricing isn't there. So I think from a competitive point of view, we're feeling really quite good. I think from a domestic sales cycle point of view, I think we're still feeling like this is a long sales cycle, 12 to 18 months. We're seeing transactions bounce all around that kind of timeframe.
With respect to our 2019 performance, I think some of that can really be not at some of it, but I would say a material part of that really is the delay of some existing relationships. So Puerto Rico being a very big example of that along with delaying of going live with Las Vegas is already sold, already deployed to some degree, but our ability to kind of go live in a timely fashion cost us some GAAP revenue. So I don't think we're quite prepared to draw any conclusions about lengthening sales cycles at this point in time domestically. Outside of international, I think there we would have to acknowledge that it's taking longer than we originally anticipated. And those are big numbers too.
So it has quite an impact potentially to certainly had an impact to our revenue performance in 2019. And we think we're expecting to see about another $1.25 of each sales for 2020 as a part of our guidance.
Thanks. That's helpful. And then on that 2020 guidance, have you updated your goals for new go live miles? And can you just kind of give us a ballpark what you would need in that new go live in 2020 to get to where you're targeting on revenue? Thanks.
That's all for me.
Yes. This is Alan. I think the amount of information that I think we want to really break it out into is what we gave earlier in the Q and A in terms of adding between $4,000,000 $5,000,000 of GAAP revenue, of which we already did say that about $1,000,000 plus of that's going to come from Puerto Rico. Other than that, we haven't really given any more guidance in terms of actual go live miles.
All right. Thank you.
Yes. And maybe if I can add, Alan, if it's okay, because it's really a matter of just not the number of go live miles, but when the miles go live. So timing is very, very important. So 25 miles going live in Q1 is worth more than 50 miles going live in Q4 for next year's revenue. For next year's revenue, yes, for GAAP revenue, yes.
All
right. That's helpful. Thank you.
Our next question is from Matt Galinko, National Securities. Please proceed with your question.
Hey, thanks for taking my questions. A couple for you. Firstly, maybe just on capital allocation. You did buyback some stock in the quarter, which was I think a first for you. On the other hand, it sounds like you have some capital needs with respect to the 3 gs sensor replacement cycle.
So just curious how you're thinking about capital allocation looking out into 2020? Thanks.
Sure. This is Alan. As you mentioned, yes, we did start repurchasing some of our shares this last quarter. I would anticipate that we might be in the market again if we continue to see our price below where we think the intrinsic value is. The $4,000,000 to $6,000,000 that I mentioned in terms of capital for 3 gs replacement, although it might start, it's going to start slowly and extend over a couple of years.
So that's not necessarily going to be materially affecting our cash spend. So I think from that perspective, we feel pretty good about where we sit. This last quarter, we generated cash, only went down about net $1,300,000 after spending $3,500,000 in repurchases as well. So we feel good about that. And we continue to grow and put more money towards the bottom line, which is also going to improve our cash position.
Got it. Thanks. And I guess just a follow-up question about guidance with respect to the price increases we talked about earlier in the Q and A. I wasn't sure if you had
domestic GAAP revenue. Although it's important to understand that the miles that are being sold right now are booking through the end of the year are being sold at a $65,000 price tag or price point. So as those get deployed throughout the first, let's call it, first half of the year, those are still going to be at the lower price point until the ones were sold at $70,000,000 start getting deployed more towards the second half of next year.
Got it. Thank you.
At this time, this concludes our question and answer session. If your question was not taken, you may contact ShotSpotter's Investor Relations team by emailing ssti at gatewayir.com. I'd now like to turn the call back over to Mr. Clark for closing remarks.
Great. Thank you very much and thank you all for joining this conference call. We're looking forward to getting reengaged in Puerto Rico hopefully here very soon and continuing to do the work of helping agencies and communities prevent and reduce gun See you in about 90 days. I guess we'll see you before then at our Investor Conference. So thank you very much.
Thank you for joining us today for today's call. You may now disconnect.