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Digital Ally Inc. (DGLY) reported its first-quarter 2025 earnings, showcasing a significant turnaround with improved gross margins and a return to profitability. According to InvestingPro data, the company’s market capitalization stands at $2.92 million, with the stock showing modest movement in response to the financial results.
Summary Paragraph
Digital Ally’s Q1 2025 earnings call highlighted a notable improvement in financial performance, with revenues down 19% year-over-year but gross margins rising from 28% to 36%. This improvement comes against a broader context of -20.52% revenue decline over the last twelve months, as reported by InvestingPro. The company reported a net income of 4.2 million dollars, translating to 1.41 dollars per share, a stark contrast to the previous year’s loss of 3.9 million dollars. Despite the positive earnings report, Digital Ally’s stock saw a slight increase of 0.36% immediately following the announcement, closing at 1.7262 dollars per share. InvestingPro analysis suggests the stock is currently trading below its Fair Value, with 14 additional ProTips available for subscribers.
Key Takeaways
- Digital Ally achieved a net income of 4.2 million dollars, reversing a loss from the previous year.
- Gross margin improved significantly, rising to 36% from 28%.
- The company reduced SG&A expenses by 72%, contributing to profitability.
- Stock price experienced a modest increase of 0.36% post-announcement.
- Strategic focus on video solutions and entertainment sectors continues.
Company Performance
In Q1 2025, Digital Ally demonstrated a strong recovery in financial health, driven by improved operational efficiency and cost management. The company reduced its SG&A expenses by 72%, which significantly contributed to its return to profitability. Although revenues declined by 19% year-over-year, the improvement in gross margin and elimination of approximately 7 million dollars in annual SG&A costs bolstered the bottom line.
Financial Highlights
- Revenue: 5.63 million dollars, down 19% year-over-year
- Earnings per share: 1.41 dollars, compared to a loss in the prior year
- Gross margin: 36%, up from 28% in the previous year
Market Reaction
Digital Ally’s stock experienced a slight increase of 0.36% following the earnings announcement, closing at 1.7262 dollars per share. The company’s stock price remains near its 52-week low of 1.66 dollars, with InvestingPro data showing significant price volatility and a concerning current ratio of 1.01. Despite the positive earnings report, the stock has fallen nearly 99% over the past six months. In premarket trading, the stock rose by 3.55%, reaching 1.75 dollars, suggesting some optimism among investors. Get access to the comprehensive Pro Research Report for deeper insights into DGLY’s valuation and financial health metrics.
Executive Commentary
CFO Tom Hickman noted, "We’re moving on from the SPAC days, which consumed us for about the last two years," signaling a shift in strategic focus. CEO Stan Ross added, "We’re looking forward to accomplishing some things and continuing to build on a lot of the legacy that we originally established." These statements underscore the company’s commitment to rebuilding and refocusing on core business areas.
Risks and Challenges
- Continued revenue decline in video product sales could impact future performance.
- Market competition from companies like Live Nation and Axon remains intense.
- Strategic refocusing on profitable sponsorships in the entertainment sector may take time to yield results.
- Potential sale of the medical billing entity introduces uncertainty.
- Operational adjustments, including headcount reductions, may affect employee morale.
Digital Ally’s Q1 2025 earnings report reflects significant progress in improving financial performance and operational efficiency. While the stock’s modest movement suggests a cautious market response, the company’s strategic initiatives and focus on core business areas position it for potential future growth.
Full transcript - Digital Ally Inc (DGLY) Q1 2025:
Conference Operator: Good morning, ladies and gentlemen, and welcome to the Digital Ally First Quarter Earnings and Corporate Update Conference Call. At this time, all lines are in listen only mode. Note that this call is being recorded on Wednesday, 05/28/2025. 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, rather they represent forward looking statements.
These forward looking statements are based largely on our expectations or forecast 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 forward looking statements expressed in this conference call, and readers are cautioned not to place undue reliance on such forward looking 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. There can be no assurance that forward looking statements contained in this document will, in fact, transpire or prove to be accurate. Would now like to turn the conference over to Mr.
Stan Ross, CEO. Please go ahead.
Stan Ross, CEO, Digital Ally: Thank you. Thanks, everybody, for joining us today. I also have Tom Hickman, the company’s CFO, with me today. Tom certainly will go over a little bit of the recap of our first quarter numbers that we put out last week. But probably decided to be a great time for finally for resolving to get on a call.
It’s been some time since we’ve been able The last couple of years have been a little bit of a challenge. It would be an understatement to what Digital Ally has been through. But I think with the moves that have been made over the last six months, the numbers reflected, and we are getting into a a scenario where, hopefully, we’ve done a lot of lot of the things that that were attempted and were unsuccessful in the past behind us, and we can look forward to the things that we have set out to achieve and rebuild the company to its more of its glory days, not only with video solutions sector of our of our company, but the customer entertainment side as well. I know we do still have on on the books our our medical billing entity, which I think has been in print that, we have had discussions about allowing it to be sold off. So that’s still a possibility that we will entertain conversations on.
So we’re really focused on the core businesses and not have as many of the other issues that we’ve had out there. So, anyways, we really appreciate everyone getting on here. We have quite a large audience today, which is really good, and we’ll try to address all open items and give you a real quick picture on where we believe we’re able to be heading and the accomplishments we should be setting our goals for ’25 and beyond. So that being said, I’ll turn it over to Tom. Thank you, Stan, and good morning, everybody.
I appreciate you joining us today. We did file our Form 10 Q for the first quarter on May 20, and I really encourage everyone to take a good look at that. Many, many things changed and gladly for the better. And I’m going to hit the highlights in this presentation. But if you really want to see everything and go through the details, obviously, the 10 Q is the place to do that.
Right off the bat, I’d like to acknowledge that we’ve received many calls and e mails from interested investors in the last several weeks. And and, unfortunately, we we just we cannot answer all those, particularly the ones that are requesting not public material, nonpublic information. We just cannot piecemeal information like that out to individual shareholders without holding a public forum like today. So we’ll be talking about a lot of the information requests that have been coming in on shares and reverses and all that stuff. We’ll talk through that today in a public forum.
As I look at the first quarter, it really looks to me like it was a watershed quarter for us. We’re in we’re moving on from the SPAC days, which consumed us for about the last two years and really got us unfocused on the legacy business. That the SPAC deal died in the third quarter last year and in 2024. And the first quarter is 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 the first quarter Q really shows the progress we’ve made in that regard.
So anyway, what I want do on the P and L, I’m going to compare year over year numbers. First quarter of twenty twenty five ended March 31 versus the first quarter of ’twenty four ended 03/31/2024. At the top, the year over year revenues were down a little over $1,000,000 or 19%. But here’s really the story on that. If you look at the video product sales, it was down significantly year over year.
But at the same time, our backlog was over $2,000,000 our firm backlog. We had to get our supply chain back in order to give us product to be able to fulfill backlog. So there’s $2,000,000 of backlog that we’ll be able to work off in the second, third and probably even the fourth quarter of this year that would have really changed the complexion of the revenue figure. So the video product sales was down, but service was up. So it was a good trend from that standpoint.
If you look at the entertainment segment, we refocused TicketSmarter, our ticketing solution business, to shed some of the uneconomical sponsorships that we got involved in. So we really paired the non gross margin providing, generating businesses, sponsorships out of Sick and Smarter. So the revenues were down, but the profits were up. And then obviously, Custom four forty, which is our event production group in the entertainment segment, has not had any twenty twenty five events yet. And the first one is coming to Country Stamping, which I’m sure Stan will talk more about, is June ’29.
So the second quarter is going to be impacted heavily by the first Custom four forty event 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 and increase. Even though we dropped 19% of revenue, our gross margin dollars improved by $78,000 to 5%. So you can tell that the refocusing of the business into economical and efficient sponsorships as well carrying down some of the P and L or some of the video segment overhead that hits us and cost of goods sold has come back. Gross margin overall gross margin percentage improved to 36% versus 28% last year.
So we’re going in the right direction on the gross margin dollars. If you look at the SG and A expenses, you’ll notice that there was a very large decline across the board in all areas and all segments. In sheer dollar value, last year’s SG and A was a total of $3,600,000 This year, it was less than $1,000,000 So that’s a $2,600,000 pickup or 72% improvement in our SG and A dollars. We focused on pretty much everything in the SG and A line items. We reduced headcount across the board.
We improved our facility expense. We sold our building and moved into smaller quarters. And then just our general overhead items, we really improved the efficiency of those. We believe that year over year, we cut out almost 7,000,000 of SG and A costs. So that’s on a annualized basis.
So look at it, dollars 7,000,000 out of SG and A line item is pretty impressive, and we’re very happy with that. We believe we’ve been very successful in reducing our SG and A overhead. As a result of the improved SG and A expense as well as the gross margin, our operating loss improved to almost $1,000,000 from the $3,600,000 in the prior year. That’s a 73% improvement year over year. So obviously, we’re seeing some good results from that standpoint.
If you walk down to the nonoperating items, really, the factors that hit us there or not hit us, but provided nonoperating income was influenced by the liquidity that came in on our $14,000,000 public offering that we closed in February 2025. As a result of that, we had funds and liquidity to make offers and it’s extinguished debt or gain from extinguishing of debt was $1.25 dollars during the first quarter of twenty twenty five. The gain on the extinguishment of liability that accounts payable accrued expenses, what have you, was $2,200,000 in the first quarter. And then our warrant derivative value gain was $2,500,000 And that’s the change in the value of the warrant derivative liabilities, which is kind of a fictional accounting number, but it really recognizes the solution from the offering that occurred. So from a net income standpoint, we had net income of $4,200,000 in the first quarter of ’20 ’5 dollars or $1.41 per share versus a $3,900,000 loss in 2024 out of our $27.48 a share.
So we had a turnaround of $8,000,000 plus in the net income line. So we’re very happy with that. And really, as I said before, I think it was a watershed moment in the first quarter. And hopefully, we can build on those results for the rest of the year. I know Stan will be talking about some of the initiatives and the focus we’re planning on for operations in the remainder of 2025.
If you turn over to the balance sheet, our balance sheet really reflects the liquidity injection we’ve got from the $14,000,000 offering that closed in February of twenty twenty five. As we sit now at March 31, we had $3,800,000 of cash on the balance sheet versus $400,000 at the end of the year. I’m comparing the 03/31/2025 balance sheet to the 12 the December ’4 balance sheet. So just in one quarter’s time, three months’ time, we went from $400,000 of cash to almost $4,000,000 of cash on the balance sheet. Our working capital is now positive at $3,400,000 versus a deficit of $19,400,000 at the end of the year at ’twenty four.
That’s an improvement of almost $23,000,000 So very much a turnaround in terms of the complexion of our balance sheet. Our liquidity now is probably better than it has been for several years, and we’re looking to build on that strength. If you look at our accounts payable, we paid off $6,700,000 of accounts payable during the quarter. We’re now down to $4,800,000 of accounts payable. Our overall debt level is down over $5,100,000 to $2,700,000 at March 31.
So obviously, we we really we use the offering dollars to come in and and fix our pay down our debt and pay down our payables and really is resulting in a good working capital position. Our equity is now $11,600,000 positive versus 9,000,000 negative at the end of twenty twenty four. That’s an improvement of over $20,000,000. Now remember, we’ve only we only received $14,000,000 in in the offering, so there’s another $6,000,000 improvement in the equity based on our operations from 02/2025. With the inflection, the liquidity over our balance sheet is now very strong.
We believe it gives us a good financial backing 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. There’s a couple of other items of interest I want to go over in more detail. I know this was a subject of discussion and questions from e mails and telephone calls and such. And we’ve made a lot of progress with the NASDAQ.
The NASDAQ issued a noncompliance notice to us, several of them during the quarter. And we met with them in April of twenty twenty five and discussed our plans to regain compliance, and they agreed to give us that time. The items noncompliance were that we had a late filing of our Form 10 ks from year end as well as our 09/3010 Q. Both of those were filed, and now we’re in compliance on that. We had a two point we were below the $2,500,000 equity threshold required for continued listing on the NASDAQ.
We’re obviously much better than that now. We’re almost at $12,000,000 of positive equity. So we’re certainly in compliance with that. The last item is the item that we’re still working on. It’s the $1 minimum bid price, which we have to show for ten consecutive days, ten consecutive business days.
So we’re now done that with the reversals that we administered in the last several weeks. We’re trading around $4.5 now. So we believe that, that noncompliance issue is also going to be taken care of. But we’re, what, three or four days into that ten day period. So we’ve got to wait another seven or eight days trading days to show compliance to the NASDAQ.
And hopefully, we can get clearance from them that we now are in compliance and we’ll be continued with the listing on the NASDAQ exchange. Here’s the split numbers that a lot of people have asked about. We affected two split. One on May 7, that it was one share for every 20 outstanding. Then on May 23, we issued a second reverse for one for 100 shares.
So it was very painful. Obviously, we understand and we recognize that it was necessary in order to regain compliance with the one dollar bid price with NASDAQ. Had we not done that, we probably would not meet that requirement and be delisted and not on exchanges. It was to avoid a very bad outcome from that standpoint. As we sit today, our total common shares outstanding is 1,668,735 shares.
Again, million 668,735 shares. So if you do the math, our market capitalization is a little north of $7,000,000 as we sit today. So obviously, we wish we didn’t have to do the reverse split, but it was the only responsible thing to do in order to get back into compliance with the NASDAQ. So again, I appreciate everyone’s patience during the quarter and waiting until the public disclosures we made today. And with that, I’ll send it back to Stan.
Yes. Thanks, Tom. Yes. Obviously, we’ve seen some pretty dramatic changes that have been made and the effect they’ve had on not only the balance sheet, but the income statement. So we’re real pleased with that, but also very excited about what we’ve got ahead of us because as Tom mentioned, we had almost $3,200,000 in back orders.
When we did the raise, we’re able to start getting the components in and fulfill those orders. We still have, Tom, correct me if I’m wrong, in excess of the $10,000,000 in deferred revenue. And so that’s still out there, which is the subscription model. So that’s still very, very attractive and growing. So we’re happy about that.
We continue to look at and exploit some of the new products and patents that we have in our portfolio. And those products will be being announced over the coming quarters as well. And from what we can see and from what the market is requesting, They all be very, very well received, not only in the, let’s call it, the long haul side of events, but also in the commercial markets. So the legal solutions side is really starting to be able to get a lot of momentum behind it again, and we have a lot of great hopes for it moving forward. In regards to the entertainment side, we’re also very excited because we now have a real clear path on how to go ahead and develop customer entertainment beside the dip.
And just to give you an example on how some of this works, for instance, a focus on country DNP because it it’s an event that’s held annually. This is its twenty ninth year. And over the last, let’s say, six years, they have not been able and not been in the position where at the event, they were able to announce the following year’s headliners. That’s a big, big step. I mean, they went through two different moves from Manhattan, Kansas to Topeka, Kansas and the Farmer Springs, Kansas.
And that involved 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 in Manhattan. I’m very pleased to announce that going into this year’s 2025 company’s BNP, we have, just as of yesterday, secured our twenty twenty six headliners, and I mean for all three days. So that is very exciting, very dramatic in regards to how it plays out also to your cash flow. The way it works, at least at company CMP is while you’re there, if you’re participating in that particular festival and you like the headliners that you’re seeing that are going to be performing the following year, you have the ability to redo your seats right then and there.
Otherwise, if you like not to, then they’ll go on sale to the general public, you know, within the following couple of weeks. So this has been the first time at least since the the allies owned Country CMP that, that has got put in place. We also now have created a pretty good a lot of respect in the industry and have other venues contacted us wanting us to bring Customs and to websites. So while we anticipate only doing maybe eight different events here in 2025, That number is going to be multiples bigger in 2026 as we now have a little bit of runway to work with. And so there should be some good growth that you can see from ’twenty five to ’twenty six along those lines too.
So you can tell while there’s a lot of excitement going forward, we regret money current and some of the pain of the past, but that’s not where our focus is. We’re looking forward to accomplishing some things and continuing to build on a lot of the legacy that we originally established and how we can expand on that. And I think you’ll see that in the coming quarters, and we will be doing more of these calls. You’ll see myself and others out there participating in conferences that we’ve not been able to participate in while we were associated with the past with staff and such. We just were somewhat our hands were sort of tied in that we can get out there and be talking about.
But a lot of that is behind us, and we couldn’t be more excited. There’s a lot of companies out there that you could take a look at that. And if you wanna try to get comps and understand a little bit about the business, whether it be Live Nation or or Venue or, and, obviously, you know, the law enforcement side, there’s a video solution side, you know, there’s still the the axons in the world that are out there as well. So we’re excited about the future. We’ve got a lot to still accomplish, and we’re ready to take on that task.
So with that being said, I want to thank you all again for attending today and look forward to you guys participating in the second quarter call when we announce it. I will tell you one more thing before partying is that it is anticipated that next year, which would be the June, we will be holding a shareholder conference back here in Kansas City. So therefore, when we have the shareholder meeting here in Kansas City, hopefully, everyone can stick around a few days and participate in the company stampede event and sort of see firsthand what it looks like for a custom four forty production. So wish you all the best. Thank you again for your time today.
We look forward to talking to you soon. Thank you.
Conference Operator: Thank you. And this concludes today’s call. Thank you for participating. You may now disconnect.
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