Digital Ally, Inc.

Good morning, ladies and gentlemen, and welcome to the Digital Ally Inc. 2022 Operating Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we'll conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Monday, April 3, 2023. This conference call may contain forelooking 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 forelooking statements. These forward-looking statements are based largely on our expectation or forecast of future events can be affected by inaccurate assumptions and are subject to various business risks 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 on their 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 the forward-looking statements contained in this document will in fact transfer or prove to be accurate. I would now like to turn the conference over to Stan Ross. Please go ahead.

Thank you, Julie. Thanks, everybody, for joining us today. I've got Brody Green, the company's president, with us here, and Brody will be covering the numbers. Just sort of want to make sure and enlighten you a little bit on what we're going to try to accomplish here today. As many of you have heard and have seen us talk about, you know, the different segments that we have within the Digital Ally family and the intention to try to go ahead and looks like we may spin off the entertainment side of the business, allowing the medical billing and the video solutions to remain within Digital Ally. So we'll try to elaborate on that, but also want to make sure and cover each of these segments. They are the three pillars right now of Digital Ally, although there are a couple other smaller activities that are going on within the company. So thank you all for joining us, and I'll turn this over to Brody.

Yeah, thanks, Dan. And like Stan said, thanks, everyone, for jumping on this call. I hope everyone had the chance over the weekend to review our Form 10-K. That went out Friday, the 31st of March. It was nice to get that one out on time this year. And so I would advise you guys all to review that at your convenience because it will go into much greater detail than we'll be covering on this call. So a few corporate matters before we jump into the financials. just to discuss some of the AKs that have gone out since our past discussion back going over Q3. We did regain our NASDAQ compliance on February 6th of 2023. So we've got that behind us. And really that came through this other matter, which was the reverse stock split. We completed at a similar time back in February that went effectively February 8th. And that was a 20 to one split, which we, got shareholder approval to do so in our annual meeting back in December. Since then, we've also extinguished pretty much all of our warrants through a warrant extinguished back in Q3 as well. I think we discussed that on our last call, which brought our outstanding warrants from 1.3 million down to about 67,000. So it was nice to get those off the books. And you'll see a $3.6 million gain on extinguishment reflected in these financials as well. That's due to derivative accounting that we have to account for just for our books. Jumping into the financials, video had a year, did 8.3 million in revenue for the year. We're down about 9% of recognized revenue. That has a little bit to do with our subscription model as well as some shield sales that were larger in 21 in comparison to 22. However, in that same segment, video solutions, our deferred revenue number jumped from 4.3 at year end of 2021 up to 8 million in year end 22. So it provides us comfort that our plan to do this subscription model is really starting to build up quite a bit and really stack onto each other for the three to five year plans that we have in place right now. And it shows our new products as far as the EVO and FirstView Pro and docking stations are also gaining traction in the marketplace. So we anticipate that number to continue to rise as it almost doubled in just one year. So hopefully we'll continue to double and double and just build it up and recognize that over the life of those contracts. The revenue cycle management segment had a great year, up 393%, almost $8 million for the year. That's largely due in part to having a full year of operations for most of our acquisitions as we did one on January 1st of 22, as well as February 1st of 22. So really got a full year of the 21 acquisitions and essentially a full year as well for both of our 22 transactions. So we continue to see that as being a wise segment for us and really starting to stack onto one another and right-sizing those operations in that role of strategy we previously discussed. And lastly, our entertainment segment, That's really the TicketSmarter subsidiary for now. 23 will start seeing that build up even further. So for 22, the entertainment segment did $20.9 million in revenue, up 95% over 21. And again, similar to the revenue cycle management, that has to do with the full year of operations as TicketSmarter was acquired September 1st of 21. So we really only got to see four months of operations back in 2021. So this year we got to see a full 12 months. So that reflects the large jump year over year for that segment. It's been nice to get those acquisitions behind us and allow us to focus on the operation of all those entities since we haven't done an acquisition since February of 22. We've been able to get our hands a little dirtier in each one of these acquisitions to right-size them and find the synergies between all of them to make this thing everybody row in the right direction. Into gross margins, the video solutions segment had a negative gross margin of $1.25 million this year. That's largely due in part to a large inventory reserve we placed on their inventory at year end, mostly due to PPE products that were bought back during the COVID times and obviously COVID since subsided, which is, you know, luckily, just not luckily for the inventory piece on hand right now. Revenue cycle management, they had great gross margins. We're very excited about that for 22. They had gross margins of 3.3 million. So that was very nice to see. And then the entertainment division had a gross profit of about $300,000. And, you know, they run on a thinner margin, but we obviously are taking some corrective actions to enhance that margin. As the revenues are there, we just need to make sure we're maximizing profitability of those revenues. And on to the balance sheet side. At 1231, we have 3.5 million in cash and 11.4 million in positive working capital. Compared to only 900,000 interest-bearing debt obligations, those are related to the acquisitions on the medical billing side and just the earn-out notes that are contingent on collections and whatnot over the matter of, I think, three years post-acquisition, and then one SBA loan digital got back during COVID. So minimal debt on our books, which is nice. And then, you know, $36.3 million in equity. And, you know, we're just going to continue to try and right-size everything and maximize profitability for the best interest of the company as well as the shareholders. And with that, I'm going to turn it back over to Stan.