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DA

DIGITAL ALLY, INC. (DGLY)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue fell 28% year over year to $5.53M, while gross profit held essentially flat at $1.52M; operating loss improved to $(3.64)M as SG&A was reduced by 33% .
  • Deferred revenue reached $10.6M at March 31, 2024 (current $3.30M; long-term $7.29M), supported by growing subscription plans and multi-year contracts .
  • Segment dynamics: Entertainment revenues decreased 41% YoY as management “right-sized” the business; Revenue Cycle Management (RCM) revenues decreased 19% YoY; video solutions segment improved segment gross profit YoY .
  • Management highlighted progress on the Kustom Entertainment SPAC transaction (Clover Leaf S-4/A filed May 13) and reiterated expected stock dividends to DGLY shareholders upon closing, a potential near-term stock catalyst .

What Went Well and What Went Wrong

What Went Well

  • Gross profit resilience: $1.52M vs $1.54M YoY despite a $2.17M revenue decline, reflecting disciplined cost control and mix improvements .
  • SG&A down materially: $5.16M vs $7.72M YoY (−33%), driven by reduced sponsorships/marketing and ongoing “rightsizing” initiatives .
  • Management tone on subscription traction and pipeline: “It is exciting to see our deferred revenue balance reach $10.6 million…continuing to build upon our existing subscription plans” .

What Went Wrong

  • Top-line pressure: revenue decreased 28% YoY to $5.53M, primarily from Entertainment service revenue reductions during the profitability focus .
  • Entertainment segment: revenues fell 41% YoY to $2.38M as marketing spend was curtailed; segment gross profit was $494k (up YoY but still modest) .
  • Profitability still negative: operating loss $(3.64)M and net loss $(3.94)M; interest expense rose to $(649)k and warrant derivative marked to market at $(349)k, weighing on results .

Financial Results

Consolidated P&L trends (oldest → newest)

MetricQ2 2023Q3 2023Q1 2024
Revenue ($USD)$8,279,632 $6,337,699 $5,529,351
Cost of Revenue (% of Revenue)67% 81% 72%
Gross Profit ($USD)$2,737,040 $1,226,149 $1,523,699
SG&A ($USD)$7,677,744 $6,374,192 $5,162,733
Operating Loss ($USD)$(4,940,704) $(5,148,043) $(3,639,034)
Operating Loss (% of Revenue)60% 81% 66%
Net Loss ($USD)$(8,320,549) (loss before NCI; see below) $(3,679,043) $(3,943,268)
Net Loss Attrib. to Common ($USD)$(8,393,304) $(3,708,673) $(3,931,020)
Diluted EPS ($)$(3.01) $(1.32) $(1.37)

Note: “Cost of Revenue (% of Revenue)” shown as reported; Q1 2024 operating loss as % of revenue explicitly disclosed (66%) .

Segment breakdown and YoY comparison

Segment MetricQ1 2023Q1 2024
Entertainment Revenues ($USD)$4,016,236 $2,376,460
RCM Service Revenues ($USD)$1,781,590 $1,434,598
Video Solutions Gross Profit ($USD)$534,195 $565,694
Entertainment Gross Profit ($USD)$234,663 $494,274
RCM Gross Profit ($USD)$775,934 $463,731

KPIs and balance sheet items

KPIQ1 2024
Deferred Revenue – Current ($USD)$3,299,714
Deferred Revenue – Long-term ($USD)$7,285,206
Cash & Equivalents ($USD)$927,861
Inventories, net ($USD)$3,148,689
Accounts Payable ($USD)$11,212,697
Total Assets ($USD)$45,164,195
Total Stockholders’ Equity ($USD)$7,545,822

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Financial guidance (Revenue, margins, OpEx, tax)Q2–FY 2024None providedNone providedMaintained (no formal guidance)
Corporate actions (Kustom SPAC dividend to DGLY holders)Upon business combination closingPreviously discussed dividends to DGLY shareholdersManagement reiterated expected stock dividends tied to closing; S-4/A filed May 13, 2024Update on process (no dates in Q1; reiterated)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023, Q3 2023)Current Period (Q1 2024)Trend
Subscription/Deferred RevenueDeferred revenue grew to ~$9.5M by Q2 2023; ~$9.9M by Q3 2023 Deferred revenue reached $10.6M (build from subscription contracts) Positive growth, recurring base strengthening
Entertainment Segment StrategyRight-sizing; Q2 2023 festival (Country Roots) boosted product revenue; overall segment revenues lowered with less marketing Revenues fell 41% YoY as focus shifted to profitability; acquired Country Stampede (Mar 1) Focused profitability; event platform additions
Video Solutions Product MomentumEVO-HD, FirstVu Pro, QuickVu traction repeatedly highlighted Continued traction cited; segment gross profit improvement YoY Sustained momentum
Revenue Cycle Management (RCM)Ongoing roll-up strategy; revenue declines YoY in 2023 as portfolio “rightsized” RCM revenues down 19% YoY; segment remains profitable per management Stable operations with lower revenue
Corporate/Capital Markets (SPAC)Kustom/Clover Leaf S-4 filed Oct 2023; active work to address SEC comments S-4/A filed May 13, 2024; management expects closing steps and shareholder dividends Advancing towards closing
Cost DisciplineSG&A reductions cited (Q2, Q3 2023) SG&A −33% YoY in Q1 2024 Ongoing reductions

Management Commentary

  • “We are very pleased to keep our momentum from the end of 2023 into the first quarter of 2024, with greatly improved gross profits compared to the first quarter of 2023…exciting to see our deferred revenue balance reach $10.6 million at March 31, 2024” — Stanton E. Ross, CEO .
  • “We are very excited about…Form S-4/A…to create Kustom Entertainment, Inc…We expect that this business combination will provide clarity…showing two distinct, stand-alone entities, Digital Ally and Kustom Entertainment” — Stanton E. Ross, CEO .
  • “Our gross profit remained flat at $1.5 million…exactly what we are hoping for…our total SG&A…$5.2 million compared to $7.7 million in the prior year…a large improvement in our operating loss” — Brody Green, President .
  • “Our deferred revenue is up to $10.6 million at March 31, ’24 compared to $8.9 million…at this time last year” — Brody Green, President .

Q&A Highlights

  • The Q1 2024 transcript captured prepared remarks and updates; no distinct Q&A section was available in the retrieved transcript –.
  • Notably, the Q3 2023 call explicitly lacked a Q&A due to technical issues, suggesting limited precedent for detailed Q&A disclosure .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 EPS and revenue was unavailable in our attempt; therefore, estimate comparisons are not provided. Values would be retrieved from S&P Global if accessible.

Key Takeaways for Investors

  • Mix and cost discipline offset top-line pressure: gross profit held flat despite a 28% revenue decline; SG&A fell 33%, improving operating loss trajectory .
  • Recurring revenue visibility improving: deferred revenue reached $10.6M, reinforcing subscription traction and multi-year contract base .
  • Entertainment segment is strategically “rightsized”: near-term revenue impact (−41% YoY) as marketing spend is reduced, but acquisitions like Country Stampede and platform launches aim to bolster medium-term growth .
  • Video solutions momentum continues: EVO-HD/FirstVu Pro pipeline supports segment gross profit expansion YoY; watch for incremental margins from manufacturing and scale efficiencies .
  • Corporate catalyst: the Kustom/Clover SPAC process advanced with S-4/A filing; stock dividends to DGLY shareholders upon closing could be a valuation unlock and trading catalyst as timelines firm up .
  • Risk factors remain: negative EPS and operating losses persist; interest expense and warrant derivative volatility affected Q1; liquidity and leverage warrant monitoring (AP $11.2M; debt current portion $2.40M) .
  • Near-term trading lens: headlines on SPAC progress and event execution (Country Stampede in late Q2) may drive sentiment; medium-term thesis depends on sustained margin improvements and recurring revenue growth .

Additional sources reviewed for trend context:

  • Q2 2023 Operating Results (revenues $8.28M; gross profit $2.74M; SG&A $7.68M; operating loss $(4.94)M) .
  • Q3 2023 Operating Results (revenues $6.34M; gross profit $1.23M; SG&A $6.37M; operating loss $(5.15)M) .