Q1 2024 Digital Ally Inc. Q1 2024 Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Digital Ally First Quarter Earnings Conference Call. At this time, all lines are in a listen-only mode.
Good morning, ladies and gentlemen, and welcome to the digital Ally's first quarter earnings Conference call.
Speaker Change: At this time all lines in a listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, May 21st, 2024. This conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We may use words and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters.
Speaker Change: Following the presentation, we will conduct a question and answer session. If at any time. During this call do you require immediate assistance. Please press star zero for the operator.
Speaker Change: This call is being recorded on Tuesday may 21st when she spent before.
Speaker Change: This conference May contain forward looking statements within the meaning of section 27 eight of the Securities Act of 1933 and section 21 E of the Securities Exchange Act of 1934.
Speaker Change: I mean, they use alerts and other expressions that are predictions or indicate future events and trends and that do not relate to extra called mothers rather it represents further looking statements.
Speaker Change: These forward looking statements are based largely on our expectations or forecasts of future events can be affected by inaccurate assumptions and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control.
Speaker Change: Therefore actual results could differ materially from the forward looking statements expressed in this.
Speaker Change: Conference call and readers are cautioned not to place undue reliance on such forward looking statements.
Speaker Change: We generally do not publicly update or revise any forward looking statements expressed in this conference call whether as a result, our new information future events or otherwise.
Speaker Change: There can be no assurance that the forward looking statements contained in this document will in fact transfer are proved to be accurate I would now like to the conference over to Stan Ross CEO. Please go ahead.
Operator: Rather, they represent forward-looking statements. Such forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the foregoing statements expressed in this conference call, and readers are cautioned not to place undue reliance on such foreclosing statements. We generally do not publicly update or revise any forward-looking statements expressed in this conference call, whether as a result of new information, future events, or otherwise.
Operator: There can be no assurance that the foregoing statements contained in this document will, in fact, transfer or prove to be accurate. I will now like to turn the conference over to Stanton Ross, CEO. Please go ahead.
Stanton E. Ross: Thank you thanks, everybody for joining us today, I know, we had a call not too far.
Stanton E. Ross: Back in regards to our year end numbers and gave you everyone.
Speaker Change: <unk> update obviously, our this is our first quarter call.
Stanton E. Ross: Thank you. Thank everybody for joining us today. I know we had a call not too far back in regards to our year-end numbers and gave everyone an update. Obviously, this is our first quarterly call, and while it's been such a short period of time in between our two calls, I'm really excited about what has happened since we last had a chance to talk to you. Obviously, you've seen some press releases on Digital Ally and some of the video solutions contracts that they've received, including ones with the Kansas City Chiefs, and also, you probably have seen that we've had another very quick turn on an S4 filing that was done by Clover in regards to the purchase of custom entertainment from Digital Ally concerning the SPAC acquisition.
Speaker Change: And while it's been such a short period of time in between our two calls are really excited what always has happened since we.
Speaker Change: Laughs had a chance to talk to you obviously, you're seeing some press releases on digital ally and some of the video solutions contracts that they've received and clean.
Speaker Change: The ones with the Kansas City Chiefs.
Speaker Change: And also you probably have seen that.
Speaker Change: We've had another very quick turn on it.
Speaker Change: And S. Four filing that was done by Clover in regards to.
Speaker Change: The purchase of custom entertainment from digital ally.
Speaker Change: Considering the <unk> acquisition. So we're really pleased that that is progressing along very nicely.
Stanton E. Ross: So we're really pleased that that is progressing along very nicely. I hope to hear something in the coming days that we're getting close to having this completed, and then we'll move on obviously to all the votes and stuff necessary to get it finalized, and then move forward. For those of you that may be new to the call, you do realize that there will be stock dividends that would be shared with the Digital Ally shareholders upon completion of that.
I'm hopeful to hear something in the coming days.
Speaker Change: That we're getting close to having this completion and then we'll move on obviously to all the votes and stuff necessary to.
Speaker Change: Get it finalized and then.
Speaker Change: Move forward for those of you that may be new to the call.
Speaker Change: You do realize that there will be a <unk>.
Speaker Change: Dividends that would be.
Speaker Change: Shared with the digital ally shareholders.
Stanton E. Ross: So, really excited about it. Clover stock is still holding very strong, up around the $12 point. We're still real close to about a 4 to 1 ratio in regards to what the Digital Ally shareholders will get. So, we've just been moving forward on it. Like I said, I hope we hear something back rather quickly from the SEC and get this thing buttoned up in the coming days. With that being said, we'll go ahead and do a recap of the first quarter numbers. Brody Green is here with me and is president of Digital Ally. So, Brody, I'll let you take it.
Speaker Change: Upon completion of that so real excited about it clever stock is still holding very strong around the $12.
Speaker Change: We're still real close to about a four to one ratio, but in regards to what they.
Speaker Change: The digital ally shareholders will get so just been.
Speaker Change: Moving forward on it and like I said, hopefully you hear something back rather quickly from the FCC and get this thing buttoned up in the coming days.
Speaker Change: With that being said, we'll go ahead and do a recap of the first quarter numbers Brody Green is here with me and this is the president of <unk>.
Brody J. Green: Digital ally, so Brody I'll, let you take it.
Brody J. Green: Thank you, Stan, and as Stan mentioned, it's only been probably 45 days since we last spoke, so not a whole lot of substantial changes, at least as far as the balance sheet goes, and we'll run through the Q1 P&L as well and compare it to 2023's first quarter numbers. You guys probably noticed we filed our queue a couple days late; that was just due to some, You know, right after the 10K and the annual audit, it gets a little fast-paced to get this queue wrapped up in time along with all the S4 filings we've been working through for the business combination. So, just a 48 hour delay on that. We do apologize.
Thank you Stan and as Stan mentioned.
Speaker Change: Only then probably 45 days since we last spoke so.
Brody J. Green: Not a whole lot of substantial changes at leases as far as the balance sheet goes and will run through the Q1, P&L as well and compare it to 2023 first quarter numbers.
Brody J. Green: You guys, probably noticed we filed our Q a couple of days late.
Brody J. Green: That was just due to some.
Speaker Change: Right after the Q or sorry, there after the 10-K and annual audit it gets a little fast pace to get this wrapped up in time, along with all the S. Four filings we've been working through for the business combination so.
Brody J. Green: We don't anticipate that being a trend here moving forward. Going through the balance sheet at Q1 of 2024, our total current assets were $15.1 million compared to $15.6 million a year in, so really a half-million-dollar change in total current assets, mostly due to just that's mostly attributable to inventory decreases as far as, You know, what we have in stock here, along with probably a couple more write-offs included within that as well, as far as our reserve goes, total assets at quarter-end were $45.2 million compared to $47 million at year-end.
Speaker Change: I'm, just a 48 hour delay on that we do apologize.
Speaker Change: Anticipate that being a trend here moving forward.
Speaker Change: The only through the balance sheet at Q1 of 2024.
Speaker Change: Our total current assets were $15 1 million compared to $15 six at year end, so really a half million dollar change in total current assets.
Speaker Change: Mostly due to just that's mostly attributable to our inventory decreases as far as what we have in stock here along with probably a couple more write offs included with them that as well as far as our reserve goes.
Speaker Change: Total assets at quarter end were four.
Speaker Change: <unk> $45 2 million compared to 47 million at year end.
Brody J. Green: A lot of that's related to an asset sale we had during the quarter. Total current liabilities were slightly up to $24.7 million compared to $22.5 million at year end, largely related to accounts payable and some debt obligations taken on during the first quarter as well.
Speaker Change: A lot of that's related to an asset sale, we had during the quarter.
Speaker Change: Total current liabilities was slightly up to $24 7 million compared to $22 5 million at year end.
Speaker Change: Largely related to accounts payable and.
Speaker Change: Some debt obligations taken on during the first quarter as well.
Brody J. Green: Total liabilities, a similar increase up to $37.6 million compared to $35.6 million at year-end, so up about $2 million. Again, related to accounts payable and some debt taken on during that first quarter. You'll see our stockholders' equity is $7.5 million in the first quarter compared to $11.5 million at year-end. You know, that's just in line with a small decrease in assets and a small increase in liabilities. As far as the P&L goes, revenues were down in Q1 of 24 to about $5.5 million compared to $7.7 last year in the first quarter.
Speaker Change: Total liabilities are similar increase up to $37 6 million.
Compared to $35 six at year end so.
Speaker Change: $2 million.
Speaker Change: Again related to accounts payable and some some debt taken on during that first quarter.
Speaker Change: And you'll see our stockholders' equity is $7 5 million at first.
Speaker Change: First quarter compared to $11 five at year end.
Speaker Change: No. That's just in line with a small decrease in assets and a small increase in liabilities.
Speaker Change: As far as the P&L goes revenues were down in Q1 of 24 to about $5 5 million compared to $7 seven last year in the first quarter. However, the real sticking point is our gross profit remained flat at $1 5 million compared to the first quarter of 'twenty.
Brody J. Green: However, the real sticking point is our gross profit remained flat at $1.5 million compared to the first quarter of 23, which is really a testament to us really focused on right sizing and working towards profitability and focusing on profitable revenues rather than just revenues for the sake of revenue.
Speaker Change: <unk>, which is really a testament to us really focus on right sizing and working towards profitability.
Speaker Change: Right and focusing on profitable revenues, rather than just revenues for the sake of revenue. So seeing that gross profit number remain at one and a half million with two and $2 $2 million decrease in total revenue is exactly what we're hoping for as far as the gross profit comes and then.
Brody J. Green: So seeing that gross profit number remain at $1.5 million with a $2.2 million decrease in total revenue is exactly what we are hoping for as far as gross profit is concerned. And then another big change is that our total SG&A for the quarter was $5.2 million compared to $7.7 million in the prior year. So a $2.6 million, $2.5, $2.6 million decrease in SG&A, which is very substantial and brings our operating loss to 3.6 compared to 6.2 last year.
Speaker Change: Another big change as our total SG&A for the quarter was $5 2 million compared to $7 7 million in the prior year.
Speaker Change: So a $2 6 million $2 $5 million to $6 million decrease in SG&A.
Speaker Change: Which is very substantial which brings our operating loss to three six compared to $6 two last year. So.
Speaker Change: Large improvement in our operating loss for compared to our first quarter of 2023.
Brody J. Green: So a large improvement in our operating loss compared to our first quarter of 2023. Obviously, there is still a lot of work to be done, but that's definitely a big step in the right direction to keep our gross profit flat and our operating loss substantially lower. You'll see in our stockholders' equity section that there was really no change in that section, just some minor stock grants during the quarter about it. We're really trying to keep that ratio for the... Business Combination, as Stan mentioned, as close to four to one as we can. We're close to the finish line there.
Speaker Change: Still a lot of work to be done, but that's definitely a big step in the right direction to keep our gross profit flat and our operating loss substantially lower.
Speaker Change: Some of them, you'll see in our share.
Speaker Change: Stockholders equity section really no change in that section.
Speaker Change: Some minor stock grants during the quarter.
Speaker Change: About it.
Speaker Change: We're really trying to keep that ratio for the.
Stanton E. Ross: Business combination as Stan mentioned is close to 401 as we can.
Speaker Change: We are close to the finish line there.
Brody J. Green: A few other things just to touch on: our deferred revenue is up to $10.6 million at March 31, 2024 compared to $8.9 million at this time last year, so up about $1.6 million, which is attributable to our subscription model that we talk about every quarter and just those contracts continuing to pile up as deferred revenue gets larger and larger each quarter as we anticipate continuing on here every quarter after this. Like I mentioned earlier, the decrease in inventory, down from 3.8 at year end to 3.1.
Speaker Change: I know a few other things just to touch on our deferred revenue is up to 10, a $10 6 million at March 31, 24, compared to $8 9 million.
Speaker Change: At this time last year, so up about $1 6 million, which is attributable to our subscription model that we talk about every quarter and just the.
Speaker Change: Those contracts continuing to pile up as deferred revenue gets larger and larger each quarter.
Speaker Change: As we as we anticipate continuing on here every quarter after this.
Like I mentioned earlier the decrease in inventory down.
Speaker Change: Down from $3 eight at year end to $3 one.
Brody J. Green: Our gross inventory was about 7.6 compared to 8.4 at year-end, so that's really attributable to the decrease in net inventory. One large item during the quarter, and I don't think Stan touched on this yet, was the acquisition of Country Stampede that we completed on March 1st of 24. So, Country Stampede, which I'm sure Stan will touch on further once I wrap up, is a very, very large country festival that's very popular in the Midwest.
Speaker Change: Our gross inventory was about $7 six compared to $8 four at year end. So that's really attributable to the decrease in net inventory.
Speaker Change: One large.
Speaker Change: Item during the quarter.
Stanton E. Ross: I don't think Sam touched on this yet was the acquisition of country Stampede that we completed on March 124, So country Stampede stems sure Stan will touch on further at once I wrap up with that.
Speaker Change: As a very very large country festival, that's very prominent in the Midwest.
Brody J. Green: It's a three-day festival that brings in, I mean, I think it's between 15 and 25,000 people a day throughout, so. It's a very well-established festival here in the Midwest that there's, I think there's June 25th through 27th this year. June 27th through 29th, I believe, this year. June 27th to 29th.
Speaker Change: Three day festival that brings and I mean, I think it's between 15 and 25000 people a day.
Speaker Change: So.
Speaker Change: It's a very well established vessel here in the Midwest that.
Speaker Change: Whatever the date is June 25 through 27th this year through 2019 of late June 27 to 29, so again, that's coming up here.
Brody J. Green: So again, that's coming up here in about a month. And that acquisition is very exciting for the company and for the customer entertainment sector as well. As you'll see in the 10-Q, we have our segment footnote; I think it's footnote 18. You'll see the revenues for each segment, so video did about 1.7, this quarter revenue cycle management did 1.4, and the entertainment section did about 2.4, so that brings the total revenues to 5.5.
Speaker Change: And about a month.
Speaker Change: That acquisition is very exciting for the company and for the customer entertainment sector as well.
Brody J. Green: You'll see our gross profit on the video side was almost $600,000. Revenue cycle management was about half a million, and the entertainment section was also about half a million. You'll see there's a large depreciation amortization on both the video solution side and the entertainment side. That's due to amortization with the acquisitions the entertainment section has done. So, with TicketSmarter, they have the large amortization that hits every quarter, which flows to the P&L, unfortunately. Now, on the video side, it's the depreciation of some assets on the books here on the video side.
Speaker Change: You'll see in the 10-Q, we have our segment.
Speaker Change: Footnote I think it is footnote 18.
Speaker Change: You'll see the net the revenues for each segments of video did about $1. Seven this quarter revenue cycle management did one four and the entertainment section did about two four so that brings a total revenues of $5 five.
Speaker Change: Yes, Sir.
Speaker Change: Gross profit in the video side was almost 600000 revenue cycle management. It was about half a million in the entertainment section was also about half a million.
Speaker Change: Youll see theres, a large depreciation and amortization on both the video solution side and the entertainment side, that's due to.
Speaker Change: Amortization with the acquisitions the entertainment section have done so with ticket smarter. They are the large amortization that hits every quarter, which flows through the P&L. Unfortunately now on the video side its depreciation of some assets on the on the books here on the video side.
Brody J. Green: So overall, you know, a lot of positive signs in this quarter, getting our gross profit to remain flat compared to this time last year, even on lower revenues, is very exciting because that means our goal to right-size everything and focus on profitability is coming together. Obviously, we still have some work to do, but at least we're turning in the right direction and very excited about, you know, the future as we continue on here.
Speaker Change: So overall it was.
Speaker Change: A lot of positive signs in this quarter getting our gross profit to remain flat compared with this time last year, even on lower revenues is very exciting because it means our our goal to rightsize everything and focus on profitability is coming together.
Speaker Change: There's still some work to do but.
Speaker Change: At least we're training the regular erection and very excited about the future as we continue on here.
Brody J. Green: One last item, as Stan mentioned, the S-IV, we continue to file those, and we're on Amendment 4 now with the SEC. We got that on file on May 13th, so just eight days ago. We expect to hear comments back from the SEC this week. They only had six comments on this last version.
Dan: One last item as Dan mentioned the S. Four continued we continue to file those and Thats, where an amendment for now with the SEC. We got that on file on May 13th So just eight days ago.
Speaker Change: Back to your comments back yet this week from the SEC. They only had six comments on this last version. So hopefully those are wrapped up and then we can once we get hear back from them will promptly file another version with our Q1 numbers included.
Brody J. Green: So hopefully those are wrapped up, and then we can, once we get here back, and then we'll promptly file another version with our Q1 numbers included, as our numbers are now stale. So, we'll get their responses to those six comments, drop in Q1 numbers for both custom and the SPAC, and hopefully that version can go effective shortly thereafter. And we'll obviously keep you guys posted on that, and I encourage you to do so.
Speaker Change: As our numbers are now stale. So we'll we'll get their responses on those six comments drop in Q1 numbers for both custom and the stack.
Speaker Change: And hopefully that version he'll effective shortly thereafter.
Speaker Change: And we'll obviously keep you guys posted on that and encourage you to.
Brody J. Green: Let's look at Clover's filings. They're C-L-O-E on NASDAQ. That's where the S-4s will be filed within the SPAC. And then for any further details on our financials for the first quarter of 2024, please. Jump into Edgar and read our form 10Q for more details about our activity throughout the year. I'll turn it back over to Stan.
Speaker Change: Look at Clover as filings CLO E on NASDAQ or the S. Fours will be filed within the stack and then for any further details on our financials for the first quarter.
Speaker Change: 2024 please.
Speaker Change: Jumping to Edgar and read our Form 10-Q for more details about our activity throughout the quarter.
Stanton E. Ross: I'll turn it back over to Stan thank.
Stanton E. Ross: Thanks, Brody. Yeah, a couple things. You know, obviously, Digital Ally and its video solutions and its position in law enforcement are still strong and still thriving in those areas, and they continue to pursue new customers with the commercial division, and they're very excited about that. The acquisition that Brody was talking about, Country Stampede, that particular festival has been around for 28 years, and everyone from, you know, the Taylor Swifts of the world, Blake Shelton, many others have performed at this festival In the past, it used to be at a state park.
Robert: Thanks, Robert Yeah, a couple of things obviously.
Stanton E. Ross: As you outlined its video solutions and its <unk>.
Speaker Change: <unk> and law enforcement is still strong and still are thriving.
Speaker Change: In those areas and they continue to.
Speaker Change: And.
Speaker Change: Pursue new customers with the commercial division and so very excited about that the acquisition that produce talking about country Stampede.
Speaker Change: That particular festival has been around for 28 years and everyone from the.
Speaker Change: The Taylor Swift the World Blake Shelton and many others have performed at this festival over the years and it has drawn big numbers.
Speaker Change: In the past and depending on I think a lot of it is the venue that it's at in the past it used to be at a state Park.
Stanton E. Ross: It's been moved a couple of times, and we'll look at what we need to do to get back to a larger venue than what we have the capabilities of right now, but very excited. The numbers will hit in this quarter, the second quarter, with it being the last weekend of June. We will also be announcing the 2025 lineup. We also have additional festivals that Custom Entertainment will be doing this year, and we're so excited for, you know, its growth as well, let alone the ticketing platform that we're able to utilize, such as Country Stampede.
Speaker Change: It's got moved a couple of times and we will look at what we need to do to get back to a larger venue than what we have the capabilities of right now but.
Speaker Change: Very excited the numbers will hit in the in this quarter the second quarter.
Speaker Change: With it being the last weekend of June we also will be announcing the 2025 lineup we have.
Speaker Change: Also have additional festivals that we're going to that customer entertainment will be due in yet this year.
Speaker Change: So excited for its growth as well let alone the.
Speaker Change: The ticketing platform that we're able to utilize such as country Stampede, we're using our own ticketing platform through ticket smarter and so its nice because I've said this time and time again as we do these events.
Stanton E. Ross: We're using our own ticketing platform through TicketSmarter, and so it's nice because, and I've said this time and time again, you know, as we do these events, provided the venue doesn't have something already in place, we will also be doing the ticket sales as well, which is just an added benefit and also helps to the profits associated with the events. So, very excited that we're close to the finish line on the business combination agreement.
Speaker Change: Providing the venue doesn't have something already in place.
Speaker Change: We will also be due on the ticket sales as well, which is just a matter of benefit and also helps to the.
Speaker Change: The profits associated with the events.
Speaker Change: So very excited.
Speaker Change: We're close to the finish line on.
Stanton E. Ross: And as soon as we do hear back and we plug in these numbers, we can turn that right back around to them and, hopefully, then go effective. So, Julie, we'll go ahead and open this up for any type of questions that we may have with our listeners. Thank you, ladies and gentlemen.
Speaker Change: The business combination agreement.
Speaker Change: As soon as we do hear back when we plug in these numbers.
Speaker Change: We could turn that right back around to them and hopefully then go effective so.
Julie: Julie will Grand open this up for any type of.
Questions that we may have with our listeners.
Operator: Thank you. Ladies and gentlemen, should you have a question, please press star 1. To withdraw your question, press star 2. Again, to ask a question, press star 1. One moment, please, for your first question. Again, if you'd like to ask a question, press star 1. And there are no questions at this time. I will turn the call back over to Stan Ross for closing remarks.
Speaker Change: Thank you ladies and gentlemen should you have a question. Please press star one to withdraw your question Press Star two again to ask a question Press Star one one moment. Please for your first question.
Speaker Change: Again, if <unk> like to ask a question press star one.
And there are no questions at this time I will turn the call back over to Stan Ross for closing remarks.
Stanton E. Ross: Again, thank you everybody for joining us. And like we said, you know that it was only about 45 days ago that we were having this call, and a lot of things have happened very positively. We know that there's going to be potentially another exciting call here in the coming weeks, so we can share with everybody.
Stanton E. Ross: Well again, thanks, everybody for joining us.
Speaker Change: Yes.
Stanton E. Ross: Like we said we know that it was only about 45 days ago that we were having this call in a lot of things have happened very positively we know that.
Operator: So anyways, thank you. Have a wonderful day, and we'll wrap this up. Thank you. Ladies and gentlemen, this concludes your conference call for today. Thank you. You may now disconnect.
There's going to be potentially another exciting call here in the coming weeks. So that we can share with everybody. So anyway. Thank you have a wonderful day.
Stanton E. Ross: We'll wrap this up thanks Julie.
Operator: Ladies and gentlemen, this concludes your [inaudible] Thanks for watching!
Speaker Change: Ladies and gentlemen, this concludes your conference call for today. Thank you you may now disconnect.
Okay.
Speaker Change: Sure.
Speaker Change: Yes.