DIGITAL ALLY, INC. (DGLY)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $4.4M, down 19% year-over-year; gross margin expanded to 35.8%, and operating loss improved 73.2% to $(0.97)M . EPS swung to $1.41 versus $(27.48) in Q1 2024 on significant non‑operating gains and cost reductions .
• Non‑operating gains totaled $5.24M, driven by gains on extinguishment of debt ($1.25M), extinguishment of liabilities ($2.2M), and warrant derivative value ($2.5M), enabling positive net income of $4.26M .
• Liquidity and balance sheet strengthened: cash rose to $3.8M, working capital turned positive at $3.4M, and equity improved to +$11.6M vs. a $(9.0)M deficit at year‑end; AP reduced by $6.7M and debt by $5.1M .
• Management highlighted ~$2.0M firm backlog to be worked down across Q2–Q4 and “in excess of $10M” deferred revenue tied to subscriptions; entertainment revenue expected to improve around the late‑June Country Stampede festival .
• Corporate actions: completion of ~$15M capital raise in February, and reverse stock splits in May to regain Nasdaq compliance; shares outstanding ~1.67M post‑splits, trading above the $1 minimum bid threshold during the 10‑day compliance window .

What Went Well and What Went Wrong

What Went Well

• SG&A declined materially: Q1 SG&A was < $1.0M vs. $3.6M last year; annualized SG&A reduced by nearly $7M, supporting the 73% improvement in operating loss .
• Strong non‑operating contribution post‑offering: $1.25M gain on extinguishment of debt, $2.2M gain on extinguishment of liabilities, and $2.5M warrant derivative value gain drove positive net income and equity turnaround .
• Management quote (operating focus): “Operating leverage… from substantial decreases in overhead… focus on our subscription based sales model… successful restructuring of our law enforcement products sales organization.”

What Went Wrong

• Top‑line decline: Revenue fell 19% YoY to $4.4M due to video product sales softness and supply chain catch‑up, though service revenue improved .
• Negative operating income persisted despite improvement: Q1 2025 operating loss remained $(0.97)M, reflecting still‑challenging law enforcement budgets and competitive market dynamics .
• Prior backlog build and supply constraints: Firm backlog exceeded $2M entering Q2, indicating fulfillment delays from earlier operational challenges (management working to resolve through supply chain improvements) .

Financial Results

Quarterly Trend (oldest → newest)

Values marked with * retrieved from S&P Global.

Q1 YoY Comparison and Estimates

Note: S&P Global consensus for Q1 2025 EPS and revenue was unavailable; we attempted retrieval but no estimates were returned [GetEstimates].

KPIs and Balance Sheet Highlights

Guidance Changes

No formal numerical guidance ranges were provided for revenue, margins, OpEx, OI&E, or tax rate .

Earnings Call Themes & Trends

Management Commentary

• CEO Stanton Ross (Q1 PR): “Operating leverage... resulted from substantial decreases in overhead... focus on our subscription based sales model... successful restructuring of our law enforcement products sales organization.”
• CEO (Q1 PR): “We anticipate our entertainment segment will improve its revenues and operating profits as we approach our June 26–28, 2025, Country Stampede Music Festival.”
• CFO Tom Heckman (Call): “A watershed quarter… moving on from the SPAC days… revenues down 19% YoY but gross margin improved to 36% vs. 28% last year; SG&A reduced ~72% YoY… operating loss improved 73%.”
• CFO (Call): “Liquidity from the ~$14M offering enabled $1.25M gain on extinguishment of debt, $2.2M gain on extinguishment of liabilities, and $2.5M warrant derivative value gain; net income $4.2M, $1.41 per share.”

Q&A Highlights

• The call was a corporate update with prepared remarks; there was no distinct analyst Q&A segment captured in the transcript .
• Management clarified reverse split mechanics and listing compliance: 1-for-20 (May 7) and 1-for-100 (May 23); shares outstanding ~1,668,735; aiming for 10 consecutive trading days above $1 bid price .
• Balance sheet clarifications: AP reduced by $6.7M; total debt down $5.1M to $2.7M; equity +$20M vs. year‑end; cash improved to $3.8M .

Estimates Context

• We attempted to retrieve S&P Global Wall Street consensus for Q1 2025; consensus EPS and revenue estimates were unavailable, and the feed only returned actual revenue for Q1 2025, not estimates [GetEstimates].
• Implication: With no published consensus, we cannot formally label beats/misses versus Street. Investors should focus on operational drivers (margin improvement, backlog fulfillment, non‑operating gains) and forthcoming Q2 event‑driven revenue inflection .

Key Takeaways for Investors

• The EPS swing to $1.41 was predominantly driven by non‑operating gains and aggressive SG&A reduction; sustained profitability will depend on core operating margin expansion and revenue growth .
• Near‑term catalyst: Q2 event revenue from Country Stampede and backlog fulfillment; watch for sequential revenue acceleration and conversion of deferred revenue to recognized sales .
• Balance sheet reset reduces risk: cash up to $3.8M, AP and debt reduced materially, and equity back positive; enhances flexibility to execute operating plans .
• Listing risk mitigated via reverse splits; monitor completion of 10‑day $1 bid compliance window and any residual overhang from warrants and derivatives .
• Video solutions subscription model remains a strategic focus with “> $10M” deferred revenue; product roadmap and patents could support mid‑term margin and growth .
• Entertainment segment right‑sized sponsorships and pipeline expansion (securing 2026 headliners) provide visibility into future renewals and event count growth into 2026 .
• Potential healthcare divestiture could streamline the portfolio and sharpen capital allocation toward core video and entertainment segments .

Disclosures

• Financial trend values marked with * are retrieved from S&P Global.