Q1 2025 Digital Ally Inc Earnings Call
Okay.
Good morning, ladies and gentlemen, and welcome to the digital ally first quarter earnings and corporate update conference call.
This time all lines are in listen only mode.
At any time during this call you require immediate assistance. Please press star zero for the operator note that this call is being recorded on Wednesday May 28, 2025 East Conference call may contain forward looking statements within the meaning of section 27 of the Securities Act of 1933 and section 21 E.
All of the Securities Exchange Act of Nike like before we May use words and expressions that I forget since all or indicate future events and trends and that do not relate to historical matters, rather they represent forward looking statements.
These forward looking statements are based largely on our expectations or forecasts of future events can be affected by it accurate 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 forward looking statements expressed in this conference call and readers are cautioned not to place undue reliance on such forward looking statements.
Generally we do not publicly update or revise any forward looking statements expressed in this conference call.
As a result of new information future events or otherwise.
Can be no assurance that forward looking statements contained in this document will in fact, that's fine it proves to be accurate.
I'd now like to turn the conference over to Mr. Stan Ross CEO. Please go ahead.
Stan Ross: Thank you. Thank you everybody for joining us today also have TV company.
Speaker Change: With me today are Tom.
Speaker Change: Shortly will go over a little bit of a recap of our.
Speaker Change: Our first quarter numbers.
Put out last week, probably thought it'd be a great time for finally first of all to get all of them on the call. It's been sometime since we've been able to.
Speaker Change: You know the last couple of years have been a little bit of a challenge.
It would be an understatement, what digital ally has been through but I think with me.
Speaker Change: The moves that have been made over the last six months the numbers reflected.
Speaker Change: And we are getting into a scenario where.
Speaker Change: Although there's been a lot of a lot of the.
Speaker Change: But.
Speaker Change: Our kitchen and Rocky festival on the past behind Us and we can look forward to the things that we set out to achieve.
Speaker Change: And rebuilds.
Speaker Change: You know that the company towards more of its glory days not only with video.
Speaker Change: Video solutions sector about what companies like custom entertainment side as well.
Speaker Change: Although we do still have on the books.
Speaker Change: Medical billing entity, which.
Speaker Change: I think it's been a break that.
Speaker Change: We have had discussions about.
Speaker Change: That's still a possibility that we will entertain conversations on so you really get focused on the core businesses.
Speaker Change: Yeah.
Speaker Change: Other issues that we can now so anyways really appreciate but definitely getting on here with quite a large audience, which is really good.
Speaker Change: I'll try to address all open items and give you a real clear picture on the group.
Speaker Change: Believe we were able to.
Speaker Change: He had in his accomplishments where it should be.
Speaker Change: Setting a goal for 25 and beyond.
Paul: That being said I'll turn it over to Paul.
Paul: Thank you Stan and good morning, everybody I appreciate you joining us today.
Paul: We did file our Form 10-Q for the first quarter on May 20th.
Paul: I really encourage everyone to check it.
Paul: Look at that.
Paul: Many many things changed.
Paul: And finally for the better.
Paul: And I'm going to hit the highlights.
Paul: In this presentation, but if you really want to see everything in and go through the details obviously, the 10-Q as a place to do that.
Paul: Right off the bat I'd like to acknowledge that we have received many calls and emails from.
Paul: Interested investors.
Paul: In the last several weeks and unfortunately, we just Oh, we got to answer all those.
Speaker Change: The ones that are requesting now.
Speaker Change: Public material nonpublic information.
Paul: You cannot piecemeal information like that out to individual shareholders without holding a public forum like today, we'll be talking about a lot of the information requests that have been coming in on shares and reversals and all that stuff.
Paul: Well talk to that today.
Paul: In a public forum.
Paul: As I look at the first quarter. It really it looks to me like it was a watershed quarter for us we're.
Paul: We're in the we're moving on from the staff days, which consumed it for almost the last two years.
Paul: And really really got focused on the legacy business that.
Paul: The spec deal died in the third quarter last year and in 2024 and in the first quarter as the first quarter, we really got a chance to focus back on the legacy business and really really make some improvements and changes and I think that the first part to really shows the pro.
Paul: Yes, we've made in that regard.
Paul: Well our view on the P&L I want to compare year over year numbers. The first quarter of 2025 as of March 31st versus the first quarter 'twenty four ended March 31 2024.
Paul: At the top.
Paul:
Paul: The year over year revenues were down a little over million box or 19%, but here's really the story on that if you look at the video product sales.
Paul: It was down significantly year over year, but at the same time, our backlog was over $2 million from backlog. We had we had to get our supply chain back in order to get us products to be able to fulfill backlog. So theres $2 million of backlog there was gonna be able.
Paul: To work off in the second third and probably even the fourth quarter. This year that would have really changed the complexion of the revenue figure.
Paul: So that the video video product sales, which was down but the service was up so it was a good trend from that standpoint, if you look at the entertainment segment, we've refocused tickets smarter our ticketing solution.
Paul: Business to.
Paul: To shed some of the uneconomical sponsorships that he got involved and so we're really pared some non non gross margin, providing generating businesses sponsorships out of ticket slaughter. So the revenues were down but profits were up.
Paul: And then obviously custom 440, which is our production.
Paul: Production.
Paul: And in the Entertainment segment.
Paul: It has not had any two.
Paul: 2025 events, yet and the first one is having the countries KFC, which I'm sure Stan I'll talk more about it at June 26 to 29, so the second quarter, it's going to be impacted heavily.
Paul: By the first customer.
Paul: Custom for 40 of that.
Paul: Called the country Stampede. So we think the second quarter revenue figures will turn around immensely and show a very good comparative year over year number.
Paul: Even though we dropped.
Paul: 19% in revenue our gross margin dollars.
Paul: Improved by 78000 at 5%. So if you can tell that the refocusing of the ticket smarter business into economical and efficient sponsorships as well as his paring down some of the P&L or some of these.
Paul: Video segment overhead that hits us in cost of goods so has come back.
Paul: The gross overall gross margin percentage improved to 36% versus 28% last year, So we're going into right direction.
Paul: On the gross margin dollars, if you look at the SG&A expenses.
Paul: You'll notice that there was a very large decline across the board in all areas and all segments in sheer dollar by your last year's SG&A with a total of $3 $6 billion. This year was less than a million dollars. So yeah, that's a $2 $6 million pick up for 72%.
Paul: Truman inner SG&A dollars.
Paul: We focus on pretty much everything in the SG&A line.
Paul: Your line items, we reduced headcount across or we improved our facilities expense, we sold our building and moved into smaller quarters.
Paul: And then just our general overhead items, we've we've really.
Paul: Be patient.
Paul: Louis.
Paul: We believe that year over year, we've cut out almost $7 million of SG&A costs.
Paul: Sort of annualized basis, so you'll look at it with 7 million out of S.
Paul: SG&A line items.
Paul: Pretty impressive and we're very happy with that.
Paul: I believe we've been very successful in.
Paul: And reducing our SG&A overhead.
Paul: As a result to be improved a.
Paul: SG&A expense.
Paul: Expense as well as gross margin or operating loss improved to a night almost a million dollars from the $3 $6 million in the prior year at 73% improvement year over year. So obviously, where we're seeing some good results from that standpoint, if you walk down a bit.
Paul: Non operating items are really the factors that hit us there or not yet.
Paul: Provided nonoperating income was influenced by the liquidity the liquidity that came in on our $14 million public offering that we closed in February.
Paul: 25.
Paul: As a result of that we had bonds and liquidity to make our offers and extinguish debt or gain from extinguishment of debt with a million to 50 during the first quarter of 225, a big gain on the extinguishment of liabilities that counts.
Paul: Accrued expenses, what have you was $2 2 million in the first quarter and then our warrant derivative value.
Paul: Gain was $2 5 million and that's the change in the value of the warrant derivative liability, which is kind of a fictional accounting.
Paul: Number, but it is really recognized as a solution from the offering.
Paul: It occurred.
Paul: So from a net income standpoint, we had net income of $4 2 million in the first quarter of $25 41 per share versus a $3 9 million another loss in 2020 or all of our $27 48, a share. So we had a turnaround of 8 million plus in it.
Paul: Net income was we're very happy with that.
Paul: Really as I said before I think it was a watershed moment.
Paul: In the first quarter and hopefully we can build on those results through the rest of the year.
Paul: And I'll be talking about some of the initiatives focus where we're planning on for operations in the remainder of 2025.
Paul: If you turn over to the balance sheet, our balance sheet really reflects the liquidity injection, we got from the $14 million.
Paul: Closed in February of.
Paul: 2025.
Paul: As we said.
Paul: Now it is.
Paul: At March 31st we had $3 eight millions of dollars of cash on the balance sheet versus 400000 S. F.
Paul: At the end of the year.
Paul: Recurring.
Paul: The March 31st 2025 balance sheet to the 12 December 31, 24 balance sheet.
Paul: Just on one quarter's time three months time, we went from 400000 of cash to three point almost $4 million of cash on our balance sheet. Our working capital is now positive at $3 $4 million versus a deficit of $19 $4 million at the end of the year in 'twenty.
Paul: 24, that's an improvement of almost $23 million, so very much of a turnaround in terms of the complexion of our balance sheet.
Paul: Liquidity now, it's probably better than it has been for several years.
Paul: And we're looking to build build on that strength.
Paul: If you look at our accounts payable we paid off $6 7 million.
Paul: <unk> payable during the quarter, we're now down to $4 8 million of other accounts payable our overall debt level is down over five $1 million to $2 $7 million.
Paul: March 31st So obviously, we've we've really we use the offering dollars come in and fix our our paydown of our debt.
Paul: Pay down payables.
Paul: Really is resulting in good.
Paul: Working capital position.
Paul: Our equity is now 11 $6 million positive.
Paul: [noise] versus 9 million negative at the end of 2024, that's an improvement of over $20 million now remember we've only we only.
Paul: <unk> received $14 million in the offerings. So there was another $6 million improvement.
Paul: The equity based on our operations from 2000, <unk> 2025, with the influx of liquidity over our balance sheet is now very strong.
Paul: Believe it gives us a good financial backing to to implement our operating plans for the rest of 2025 and beyond and we really needed to get that done and we were able to accomplish that in the first quarter.
Paul: Theres a couple of other items of interest or I want to go over in more detail I know this was a subject of discussion.
Paul: E mail and telephone calls as such.
Paul: We've made a.
Paul: A lot of progress of the NASDAQ NASDAQ issued a noncompliance notice to us several of them during the quarter.
Paul: And we met with them in April of 2025 and.
Paul: Discussed our plans to regain compliance and they agreed to give us that time. The items are non compliance work that we had a late filing of our Form 10-K for DRAM as well as our 930 10-Q, both of those were filed and our clients on that.
Paul: We had a two point we were below the $2 $5 million of equity threshold required for continued listing on the NASDAQ were obviously much better than that now we're almost a $12 million.
Paul: Positive equity so we are certainly in compliance there.
Paul: The last item is the item that we're still working on it it's a $1 minimum bid price.
Paul: And which we have to show for 10 consecutive days.
Paul: 10 consecutive business days, so we're now above that with the reverses that we.
Paul: We administered in the last several weeks.
Paul: We're trading around $4 $5 now so we believe that that.
Paul: The noncompliance issue, it's also going to be taken care of but we're what three or four days into that 10 day period. So we got to wait another seven or eight days trading days too.
Paul: To show compliance to the NASDAQ and hopefully we can get clearance from them that we know are in compliance and we will be.
Paul: <unk> continued with the listing on the NASDAQ exchange.
Paul: Here's.
Paul: The split numbers that a lot of people have asked about we affected to split one.
Paul: One on May 7th there was one share for every 20 outstanding now on May 23rd we issued a second reverse.
Paul: For one for 100 shares so it was very painful obviously, we understand and we recognize that but it was necessary in order to regain compliance with $1 bid price with NASDAQ had we not done that we probably would not not meet that requirement.
Speaker Change: Hey, listen.
Speaker Change: So it was a.
Paul: It was to avoid a very bad outcome from that standpoint.
Paul: As we sit today, our total common shares outstanding is $1 million 668735 shares again $1 million 668735 shares. So if you do the math or market capitalization, a little north of $7 billion as we sit today.
Paul: Obviously.
Paul: We wish we didn't have to do a reverse split but it was the.
Paul: The only responsible thing to do in order to get back into compliance with the NASDAQ. So again I appreciate everyones patience during the quarter and waiting until the public disclosures, we made today and with that I'll send it back to Stan Yeah. Thanks, Tom Yeah.
Stan Ross: You know obviously you've seen some.
Stan Ross: Pretty dramatic.
Stan Ross: Changes have been made and the effect that's had on you know not only the balance sheet, but the income statement. So we're real pleased with that but also I'm very excited about what we got ahead of us because it's.
Speaker Change: As Tom mentioned, you know, we had almost $2 2 million.
Stan Ross: In the back orders as we.
Stan Ross: We did the raise we're able to start.
Stan Ross: Getting our components in and.
Tom: But feel those the orders we still have Tom correct me, if I'm wrong there.
Tom: The $10 million in differed revenue yeah. So.
Tom: So that's still out there, which as you know the subscription model. So that's still a.
Tom: Very very attractive.
Tom: The attractive and growing so we're happy about that.
Tom: We continue to look at and exploit some of the new products and patents that we have.
Tom: In our portfolio and those products will be being announced over the coming quarters as well and from.
Tom: From what we can see from what the market is requesting.
Tom: They ought to be very very well received not only in the in the let's call. It the law enforcement side of things, but also in the commercial markets.
Tom: <unk> video solution side.
Tom: It's really starting to be able to get a lot of momentum behind it again, and we have a lot of great hopes for it in moving forward in regards to the entertainment side.
Tom: We're also very excited because we now have a real clear path on how to go ahead and develop.
Tom: Entertainment beside the bed and just to give you. An example on on how some of those works.
Tom: For instance, at all or no.
Tom: Focus on countries CFP because it.
Tom: It's an event.
Tom: Held annually. This is its 20 <unk> year and over the last let's say a <unk>.
Tom: Six years they have.
Tom: <unk> not been able and not been in a position where at the event because they were able to announce the following year's headliners, what's a big big step I mean, they went through two different moves from Manhattan, Kansas, Topeka, Kansas City Bomber Springs, Kansas.
Tom: And that along with some other issues. They just never had it laid out to where you could take advantage of it like they they were in the past when they were at Manhattan.
Tom: Very pleased to announce that going into this years 2025 companies Stampede, we have just as of yesterday secured our 2026 headliners and I mean for all three days so that is very.
Tom: Very exciting very dramatic in regards to how it plays out also to your cash flow.
Tom: The way it works you know at least one company Stampede.
Tom: While you are there if you are participating in that particular festival and you'd like the headliners that youre seeing that are going to be for me. The following year you have the ability to renew your seats right then and there otherwise.
Tom: If you like not too in the Oklahoma sale from the general public.
Tom: Following a couple of weeks. So this is going to be the first time since the dollar has owned stampede, but then you've got put in place. We also now have created a pretty good.
Tom: A lot of respect in the industry.
Tom: They have other venues contacting us wanting us to.
Tom: Bring customer for 40 and production.
Tom: Those sites, so while we anticipate only doing maybe.
Speaker Change: A different.
Speaker Change: Vince here in 2025 that number is gonna be multiples bigger in.
Tom: In 2026, as we now have a bit of runway.
Tom: To work with and so there should be some.
Tom: Good growth that you can see from 'twenty five 'twenty six.
Tom: Those lines too.
Tom: So you can tell there's a lot of excitement going forward.
Tom: We regret the learning curve and just some of the pain of the past, but that's not.
Tom: Where our focus is we're looking forward to accomplishing some things and continuing to build on.
Tom: A lot of them with the legacy debt.
Tom: Originally established and how we can expand on that and I think.
Tom: You'll see that in the coming quarters, and we will.
Tom: We do have more of these calls youll see.
Speaker Change: Myself and others out there.
Tom: Participating in conferences that we've not been able to participate in while we were associated with the.
Tom: Pass the fact and such we've just we're somewhat.
Tom:
Tom: Our hands are tied on what we can get out there and you're talking about but.
Tom: A lot of that is behind us and we couldn't be more excited there's a lot of companies out there that you can take a look at that.
Tom: If you want to try to get comps and understand a little bit about the business, whether it be live nation or a menu or.
Tom: And obviously you know the law enforcement side, there's a video solution side.
Tom: So it'll be the axons in the world that are out there as well. So we're excited about the future we got a lot to sell.
Tom: [noise] accomplish.
Tom: We're ready to take on that task and so with that being said I want to thank you all again for attending today.
Tom: Look forward to you guys participating in the.
Tom: Our second quarter call when we announced it I will tell you one more thing before party is that it is anticipated that next year, what should be the last weekend of June.
Tom: We will be holding a.
Tom: Shareholder conference back here in Kansas City. So therefore.
Tom: When we have a shareholder meeting here in Kansas City, hopefully, everyone, who stick around a few days and participating in the company's stampede.
Tom: And sort of see firsthand, what what it looks like for a customer where 40 production.
Tom: So wish you all the best Thank you again for your time today.
Tom: We look forward to talking soon thank you.
Tom: Thank you and this concludes today's call. Thank you for participating you may now disconnect.
Tom: Yes.
Tom: [music].