DGLY - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the 2019 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]

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. trends anticipate, and may, predictions identify other indicated events expect, plan, could, of forward-looking believe, not future continue do future, expressions and statements. words intend, historical should, estimate, will, or relate The to that matters and that are

future Therefore, and known These statements are number various cautioned actual forward-looking on risks and control. could place of which subject differ this the our unknown largely of statements. be uncertainties, affected are expectations reliance or on to from results forward-looking can our statements by document, materially and beyond undue forward-looking a such and based not in contained forecast are readers events inaccurate assumptions are business to

publicly whether events could forward-looking Digital contribute or can accurate. update will, variety and Ally A will transpire revenues, as or and result this future information, document revise factors statements, undertake prove or profitability, in differences new assurance otherwise. of impact statements in to flows forward-looking of wide to be to obligation no the cause a be or any cash adversely could contained such There fact, needs. capital no that

speaker the Please like for now to Thank I would today, CEO. conference go over Ross, to hand Stan your you. ahead.

Stanton Ross

everybody XX-Q today our early a quarter release I press believe wanted I’ll But the have minute. turn sure call Stephanie, Tom and everyone make Heckman, this him us today. And filed in or call Thanks joining a and thank call, out our you. the today. over for that, obviously, later well had we CFO that the is as on to here to third tomorrow. knows there is we’ll

to obviously as have spurred a to second growth our on press regards we that So our point continued zTrip DVM-XXXs. reoccurring of And morning had. release expansion well, with the I partnership revenue anyways, ran a we that in-car also concerning sort system of want exciting did in we this that out

press that as what of one what point the on out including is wanted the out to what and XXXX I Not touch that that like things many open first accomplished track, release was and And for sure the that this But also, fourth guidance. bit well. I public so quite looks will quarter be in giving time our only a reason also far going also and in years, well, the the our The and we’ve be that will because year. sales we to make partnerships litigation to here.

a So we we’ll future. recap, right let’s the then now, do little and talk foresee what about in

Tom Heckman

in Thank please today. brief review you, the I full appreciate remarks, information. and be Form to with XX-Q refer that I the SEC’s to for site filed do SEC. us filing to joining I’ll welcome visit the you you the want just everybody. additional do we but EDGAR Stan, my and

the quarter the overall, for an point turning important guess, I was third company.

some think were revenues a very, that. And and hitting very bottoming a us. seeing last I little about seeing quarter, trend bottom bit us in we we’re out I approaching and good lines talked or

results. So report and – prove did moving are in quarter improving to and those trend that our I’m that the our pleased third lines really direction business

timeframe. quarter quarter product it you previous in right obviously. remind will that quarter, the XXXX, the EVO-HD, the at this in out And third importantly, that launched was Most was of in is enforcement there. that than DVM-XXX of happened year, like launch second law thing more of the the second was introduced June XXXX end which that the our I

technology. X, So old that’s X year

that our newer with had has would be what happy as competitors EVO-HD The we’ve evaluated technology. in revenue I’m seeing expected. on challenged products I’m we’re with the lines, report were leapfrogged But features we because lead excited newer to a released had the So and results there. of some and amazing very agencies by by different being is the number into back EVO-HD,

the our engineering. is with design own importantly, We this did reliability Most there.

So are very and It’s the all end it we on that scratch, built time. pretty product. a connected it we and efficient from troubleshooting chipset started servicing the fully proud is picked standpoint, the of because very from much

having our remote in, out site. it on here dial Kansas can our we rather seats to from occurring, So or occurring in and City issues or view fix whatever than in not go

evaluated So It’s because we’re important state it a going see and is evaluate before, take which returns improved we as in very troubleshooting police improvement. hearing the SG&A, reliability said number very good of in it, being our there. think what Again, early very – that’s very agencies, their will they’re technology, And efficiency I including because are time a agencies, encouraging. good and new and by result results to far. of I so our is the

EVO-HD a agencies, important the the hybrid upgrade and locations their remote for expected That to their of early because wanted out a is of be state very that’s important to is coming very solutions, especially that and improvements to come decentralized One XXXX. in operations. cloud seems police

that hope that the with point EVO-HD and cloud terms it hearing product we overall. bottom-line product. see that the is so we’re are hybrid evaluation And we guess important So that everything thought really is they would and customers for that period, is through going are be of will be. a far, selling I us in solution an will we good that but

So, total revenues second best quarter were since the actually the XXXX.

in will and that line into They that So trend continue are year – I increase the best revenues future. a over think to starting the EVO-HD up. are tick the

versus revenues versus service the XXXX in revenues were total year is to generated XX% are XX% continuing to a are million date to that almost in Service XXXX. That’s more The to increase. news revenues the year. big prior year increase. margins million though importantly, by date And $X year that XX% date $X.X service

– we’re our focusing that the reason So, you Clearly, and on and can our the in service revenues. that. seeing we’re as is see service working, revenues the important strategy results we’re of it of

Caribbean noticed quarter, this cruise re-upped the Royal service programs. earlier have their might You lines

that good future. with announce service will the we which fleet-view our order zTrip, so XXX did also So has increase today, looks that revenues. And commercial unit connectivity, for the

will We also EVO-HD that the will accelerate revenues you I connected, tell since future. service deployed the as that our being is field, fully based. in it’s also that is it the cloud in it think

are lines in that’s $XX.X to total good Board of the million Stan reasons at and So XXXX. for able one the least trend guidance revenues of were the that and provide

we are and at guidance So $XX.X with comfortable we improvement see see the million. trend lines the and the there

currently the want delay as delivery presented mention, delayed Motor may by I to Ford be that’s are – interceptors short-term, of in interceptors in do there The Company. our the that of in Ford is though, Police are results caused a being the delays the in a delays field, version, there well. with being challenge product which obviously, that movement

is will maybe quarter. shift will deliver QX shift, those does end not to quarter into by of quarter it do a just revenues affected of a XXXX. warn it the XXXX you end the cure that want Ford But unable to the interceptors. I It be – that, So if if be by fourth by the

QX XXXX. the $X.X QX If total XXXX, $X see control excludes was million million – was you SG&A costs, $X.X million prior the also and second But to million XXXX quarter QX the decline total SG&A quarter. look about they compared was in million. That settlement. at so the $XXX,XXX remain sequentially. you WatchGuard $X.X XXXX under from $X.X

the on trend is SG&A. good So line very

really our WatchGuard has is have The status which appeal. large drivers, been in is Axon, obviously, Axon patent SG&A docketed. and the the litigation The of in litigation settlement of abated, Appellate of the litigation. Court because predominant somewhat drivers it the fees, the

to expecting We’re supposed this in final file late-January. month. arguments we’re And end the briefs of oral to mid- by

is So litigation moving appeal, the since somewhat in things forward, are it been abated but XXXX. have fees in

mentioned this in The June other EVO-HD is driver launch We year. expenses. R&D I earlier as of our did

QX that commercial do that XXXX. decline will that in expenses derivative QX, we’re of seeing slight to the we think But lend So a be we accelerate EVO-HD believe the from R&D QX itself in will products area. and may in some there

return won’t launch products. that get through in derivative product to until levels R&D the So we the XXXX

look that. that’s in forward So

We If almost with at the issue sheet. We capital. convertible working million $X.X positive the already of the converted. million you quarter debt by balance been quarter did quarter. of ended of $X.X And million look $XXX,XXX had the the of $X.X cash, during end

from moving trends regain the standpoint. are see help in that a winner that are that confident share So help us EVO-HD, which we revenue to us in XXXX. will and we in Overall, hoping market we’re things have

to back it give let I’ll Stan. that, With

Stanton Ross

in a actually, going again, it. Yeah. up, I’m I to $XX.X us know agreements believe of we with what exceed Fantastic, have Tom, I on reoccurring million. go place, we be I to – – looking million, is, already is the good regards the the the that else. at all And already we let that little we the coming we’re about how a on to saying me and we trend the have tell appreciate to with going improve that just came that number, set you, first real on, that that everything going gave what we’re have guidance in to Yeah, in base know, we’re think, revenue believe generating. to there and what we then bit how to on the number. going we throughout with touch ability and Tom. subscription $XX.X Obviously,

we’d from and and new in in really the that such we products not there such. the reoccurring additional what throw from generating did DVM-XXX product be other is And revenue sales the EVO as

was plus million. again of sort the $XX.X the side So of that

a have with we’ve great The had Letterman from business is, some relationship that our other NASCAR great everyone’s And to division. thing with know, Racing. you partnerships MetLife Stadium development to all relationships, Lanigan we Rahal as

finding And and a lot of their needs solutions in amazing big we’re to to with adapt a segments different need. what are able is video what we’re engineering finding where when us. do we team, have coming an ourselves they’re We’re

team, to we that’d cameras system. have at business whether potential in be solutions, big needs with development companies for have big an So body are have there or out regards they’re that talking in-car but or the levels fleets with highest video and/or small agencies a that

million. $XX.X been So our has in calculated really that not too

contribute if development does side of we’re any side about. of again the of part be the would XXXX that part talking So plus what in business

in a products introducing to have we’d also look couple there We new be XXXX. of

The with that body on systems. As cameras our patents, it’s that existing particular patent several a because breathalyzers. you in in-car are all that exciting, have such as in very one both works received solutions know, is and we areas received video additional patents

to able And whether or document influence. someone gathering being stronger the gathering truth so evidence it regards becomes in a under actually much or the not to was

that So excited also product about wireless excited and about our TASER patent.

I with think, to few you’ll regards associated announcements next is see Digital Ally. the weeks over what continued in sales

partnerships, able of will to – partnerships the then sales again, time on things development see back some to everything an You to there. you being $XX.X of going also be gets that from announcements side to and and are the those probably thrown of concerning licensing And insight delivery the products, side we’ve agreements. product out million see have the plus

exceeding have we in confidence level high our that. So million $XX.X a

now, And clearly, if I the right seeing trends we’re that. do think, continue we’ll we that

positive they did not or a the appeal. the EBITDA getting be that’s to because company to later flow as on able really timing of filing month, litigation. our back is thing, that and to soon. Tom of touch one TASER/Axon’s and the we I – on We our on touch that cash or profitability, it But associated this the whether Now did around be response fairly be that will timing should filing the mentioned, do

an then as arguments We of everybody – to oral sure make we’ll mid- it. soon know late-January, actual date, as will and is we’ll aware have probably we

probably down And then, ruling. it come we oral XX with – takes about that after they days arguments, normally to have a what will is

litigation I to believes reason end-user. that going that that, hopeful one say we’re that proceed arguments the when second truly talk not it��s I quarter. of We in with that or the very our our going know were about we’re the way patent, the patent. the how ones And out is Axon to they’re surrounding other sometime, violating how So even is proceed there the we’re the one

bus, not saying, of sort is violate put would we’re that just my opinion the build these the their they’re all doing what throwing them ones we together, So under which customer the products, well, patent. possibly

believe just they actual customer, violating could my be that standing in their they that legal So they they’re documents that the but opinion, by it. users is put – say in end their possibly one the

how appeals there court to what and see then protect from monetize we’ll our go continue we’ll know and says. And IP. the So to

to next and coming be lot lot next the quarters some few see we’ve of forward weeks, few a working mentioned, So will exciting on. the of lot and you I to, looking with think, couple things of things to months, again, of a I clearly forefront us a as things the be on to real the in next and insight our other litigation rulings the having within

Anyway, we’re Q&A, and there. see ahead if to Stephanie, go if want this probably some for there’s I questions think, ready to you up open out

Operator

is of first investor. Instructions] [Operator from Disiplu] line question the Your private [Donald a [ph],

Unidentified Analyst

you hear me? can Mr. Ross,

Stanton Ross

you. hear can We

Unidentified Analyst

Directors of stockholders? wondering Okay. or Is Digital who company? individual the Board the I owns the was Ally it

Stanton Ross

obviously shareholders. It’s the

Unidentified Analyst

to suggestions listen any an Okay. to shareholders? Then obligation the have from you

Stanton Ross

And we and and getting through form or they’re end often, up assess try e-mail in, that to whether We them a be look from. absolutely through writing, questions Donald, it’d where sent an do. at are take coming

Unidentified Analyst

wireless Okay, projectile in patent subject. to to administer development from is Question, to number a stage XXXXXXX description, electroshock is testing the a XXXX, in? direct-contact futuristic of the the what December this wireless shock weapon subject or XX, issued conducted weapon; launcher regard

Stanton Ross

So, yeah, question. a great

that in development and mentioned we’ve or have up further the road. get able that had with, let’s earlier to been to that issued down come we’ve I us my to As need the the concepts patents obviously, comments, early say been

to talking a quicker. we in so, marketplace the expedite the portfolio, us actively able development so have we these or been could of that some parties be might of has assist proper to company patents And lot get that the to that our

with engineers, as mean, larger there, our Donald, and forth. much as what million them, limited them to one is have and really look, have so I a impact into you enter $XXX And that capital, to here a you But little significant arena explain are of that bit effort in know, on we’ve a companies allow this regards to we player bandwidth so as what got to year got industry a is it. that and could that patent far dominates. engineering us and when there a you go out we’ve

a in in this will we parties. earlier And So, talks statements, again, particular product, point, at by hope partnership this we as and or having relationships developing this I surrounded mentioned I have been with that my additional with be announcing patent ones.

Unidentified Analyst

have My the are contact suggestion see they to the Board of make Directors obsolete attorneys of is weapon. our in buying equipment. an Axon TASER piece patent this useless to Axon will the interested if to to That

agreed and not will exchange damage Axon Digital an Ally in reasonable Ally amount a ask pay will acknowledge a for on infringing triple will in damages. which body cameras document will which upon Digital settlement, out-of-court contain

Ally figures. developed triple contain Digital and the repeat, on WatchGuard damages royalties WatchGuard will and during not to me agree based Let pay formula reasonable further sales

selling this to further to patent interested this I foresee testing. result equipment and to only parties proposal submitted the there development other a Axon be constellation depending to law. will Ally a of to by in Digital Axon, X will on open and coming cameras related the dominant or agree proposal Failure patents industry. companies tested X Within regarding court in left, body-worn in years,

royalties. million per $XXX to and are based minimum Board offers worth the awards those are stream Directors on Digital and at publically least meet Ally The that court a share. steady not acknowledge patents required do of $XX reject all sales, of

have take to X the about I If splitting. a my and of one years. camera have would $XXX that… Develop all Board price more suggestion. would implement before the stock on suggestions, This I over Directors able I was was

Stanton Ross

that I’d other with lines well. along go we I’m and you a them us, will – Don, to and else to go we and and those submit some move to you’ve questions. ahead that directors. on on sorry, be had like we’re this But your anything definitely ahead glad send that here had to have you’d I And you this as call would to tell share time-limit take brought that that we the to will suggestions to

the thank So giving for call you in.

Operator

from Lubitz Aegis. Your with Bryan next question is

Bryan Lubitz

guys. morning, Good

Stanton Ross

Bryan. morning, Good

Tom Heckman

Good morning, Bryan.

Bryan Lubitz

is off, exciting $XX.X correct? guys. finally The is on you revenue. don’t expectations Stan, now first remember at said additional And it’s from get So congrats that you adding beating where without I I’ve had the that million obviously, for pretty have contracts, Street’s you guidance point stand that with you to involved any guidance. stock any that been given earlier guys

Stanton Ross

million, currently core feel are we we’re have the that just and business at very chasing. – we say we Well, confident $XX.X we’d that

Bryan Lubitz

Okay.

want zTrip. is X,XXX vehicles first is I zTrip discuss correct? nationwide, has that with what to here the So contract roughly

Stanton Ross

That correct. is

Bryan Lubitz

Okay.

XXX. So they’ve read and today glowingly I much CEO and and made They XXX their press think an period. as reduced to your relationship, an update release guys was claims as XX%. positive. pretty the X-month for they’re looking order time it where I over, looks by you That spoke about

Now my units. sorry, but – XX% there out why say, question could to you guys you to And order is, they you were do if as the what X, guys X,XXX their and number if go they X more order, as of X, reduce haven’t right Stan, fulfill able yet, away? Number for by of number that claims fleet them. outfitted much is as think were reason

Stanton Ross

question. good – I

been to unbelievable CEO, but So X not an Bryan. customer, they industry. and zTrip have who’s things, only great regards also their they Bill been their George, in

call spoke on we’ve it, about his conferences. business And and whatever. with and you that the has companies and out absolutely taxi relationship business, positive the is at glowingly that had had this in business, safety impact the Lyfts he to know Ubers paramount you or sharing are the car there, As want stuff whatever car

he just were – so, which and in month And less is named than in a obviously, we talks. his ago,

industry, a to wants lines introduce industry starting they want to gives viable, well, as less be it looked false to there, picture and having upon at as of because doing. much lines, a And reports did World their like looked safe they’re others seeing clearer So cruise to very by we’re cruise as claims us his and it out Caribbean be environment. what us in he this family-friendly a much

have would I us ramp units, question that So together. X,XXX but a up to ramp to of we up all back to to situation your be would realize on that think,

And look, that XXXX, let’s so here’s once our different going we’re to municipalities And they said, – could schedule meet outfit need. means okay, ramp to up for that let’s equipment. with We this say.

Bryan Lubitz

Okay.

Stanton Ross

We XXX. that box the that X supply have supply – us suppliers can for builds

So in getting installation hardware our the things. become obviously, these and issue in would install of people part get the out field could we and to the quickly relatively

in a get hardware We’d ramp handle, we to So mean, X,XXX have handle could done. little personnel to the quickly. we can the the a bit unit we confident could I installs on get yes, order. up I’m But

Bryan Lubitz

Super.

with business reoccurring guys? they did ask model was that, the order me the let cloud they’re So that with to you – staying just well uploading with where

Stanton Ross

did as Yeah, Florida? Yeah, did. was at and – did that upgrade they that so fact. a down they the They of in matter

Tom Heckman

Yeah.

Stanton Ross

software reoccurring revenue Yeah. and upgrade That was model. a a in

Bryan Lubitz

Super.

million what be So reoccurring some guys, of of next the as bringing kind well? obviously, revenue, That’s add $XX.X guidance amount the for they you’re that the factoring will year units, you your amount of to in. of

Stanton Ross

service is type the plus system them. you that back about also EVO. get you EVO The and to to side, on where with the of that’s talking cloud-based a utilize That’s we

will that too it to Correct. So number. add

Bryan Lubitz

right. All

year Television guys the well had So you earlier the mentioned guys with as that is sales with. secure the expectations. you ahead And DVM? along you too now in in My major been and you mentioned is contract, nationwide supplier pilot feel had EVO, had the since pilot of the of Bloomberg auto call or second were as in not with vehicles ago is, XX,XXX preorder on first you you last you long that were EVO program product question Stan, brought are fleet roughly up you’re something how going that And that soon? to is, that a for new program the my guys far part

Stanton Ross

the on more line particular it’s of more okay. DVM-XXX, that – line along So the the is pilot

little tweak it, going. continue as pleased. try very of companies, a pilots capability to give evaluate chance going. need, in that and with advantage how to them like gives doing. still that team that these just the are to the tend them sale. It’s that us lot Bryan, and engineering would getting of we to that they that’s is So And still then a They to we And again, do, an have it push products a meet to forward the have have they

XXX than FleetVu family EVO So it’s more in the family. the

But the and Now – lot having wanted a features EVO have interest. came little that company a lot a little because was the plan we’ll comfortable throughout I’m capabilities was, a that bit suggested I show of surprised what that EVO they a bit my level made tell it would little would But of current that clearly you, we to model been on – have they that’s with it surprise, of hand an that a it though, do going a sense, on not the of I’ve just on product. when companies this but they surprise of as few commercial bit has state. be

Bryan Lubitz

Okay.

curious how guys much of $X.X that the beat You analyst guys into you factored did expectations, revenue? had the great just I’m EVO a the you quarter, million with

Stanton Ross

think I mean contributions I was it just – had board. contributed. we the across think mean, everything I I

Tom Heckman

decision that accommodate takes going a in infrastructure state big if and that EVO, a make to a a The you not drivers their forward it, they’re it, in approve are it them agency, product and especially to for evaluate such Yeah. that. while take services. sales primary police commercial step and to The it’s – overnight technology change

reoccurring was impact, well our EVO revenue. as So some the did as service but commercial product larger impact have

Bryan Lubitz

Obviously, know or the in about and month About d all a of Street about me York in sided being Wall Times the direction. for et as case, Journal that court obviously cetera. it’s case corruption, running article Washington New Post being Axon. was an Judge sales admonished, so being The against extortion, – susceptible and time, excuse another missing – from Judge we as ago, well proceeded Murguia, publicly your to off-base

What are your or can regards presided thoughts you about feelings guys’ will of play how or your appeal? reports that your Judge over and it in it into the your to kind case how help those

Stanton Ross

Yeah, I January think, years, I could seen delay coming we’ve in guess, are I’m going think to X the that delay dance the filed. would our around is – line we’ve bottom this that had after be you through one, which years Bryan. I But tell X litigation it I

As to well in yet. to of we around represented, was be us. date he gotten but told represented only year, this assigned to not have January Axon/TASER was supposed And to it that were a that court well Ally hasn’t courtroom, Digital you recall, only in

around this June has got clearly and get – some docket. off So that comes to get then thing’s heat he’s possibly your

took material his evidence where when he his there. look And what and the he that see therefore, so even – other that we’ve hung of and the was past at in some hat stated didn’t hat, he you hung

looking there and disheartening, by people are affected a was the that thoroughly It evidence. not just very because all delays of are over lot

So really of sort going dance around just right that I’m now. to one

hit we were know it, But, it don’t national read papers. papers, the yeah, Kan And lot surprised. – I City article, any it so, I that I’ve a of hit of the us seen same the

Bryan Lubitz

guys Thank right, for and and luck your good hit guys, and Hopefully, you time. forecast. you All for well, them good talk the exceed, soon. quarter upcoming we’ll

Stanton Ross

Bryan. you, Thank

Operator

[Patrick the comes private investor. Your [ph], next of from question Gatard] line a

Unidentified Analyst

you are How morning. Good doing? guys

Stanton Ross

How Good, are you? Patrick. good,

Unidentified Analyst

was have vehicles? Lyft guys and installing I [stopping] you about [ph] the or Uber approach wondering, attempted their into good. Pretty to cameras

Stanton Ross

out yet. see that over We we’ve over And you’ll some them. that’s to want yeah, are – nobody ago. – well And is there there But and cameras that has inexpensive say, a very you company-wide to a year a that people real, talked are some almost solution what out there. have what have

with And so, we more them have little we’ve both there in is contacts the a that made would of, And comfort, end-user way with a what there more a keeps be given believe that preliminary them little honest. system a knowing shared maybe parties.

And this is is behave that are mean, I looking your going to if a And very those you little brother vehicle to are zTrip going better. in. in similar a over shoulder, big little to the what behave got you’re better.

So we a great a things try some be it’s come to figure problems they’re some the of a great the having. could for And to of think are out a to for for foreseeing. good is solution that hardware up continue program business possibly they way a opportunity, with will we that and that them solution affordable,

Unidentified Analyst

Okay, much. thank you very

Stanton Ross

Thank you.

Stanton Ross

Well, I’ll we’re tell you – Stephanie, I’ll tell you, right at time. the

thank to on any And allowing – again, Board like, insight us see all. participating. thank more watching. want you queue. our Please for employees keep all us what for look the – do want give I I for some holds in everybody I our don’t to again and also We’re my future questions the we’d to and

can we’re we making on forward the our best the And look of progress fronts. next you all doing to call. keep will We inform to

very you thank much. So

Operator

you. concludes conference. Thank This today’s

may You now disconnect.

Stanton Ross	Chief Executive Officer
Tom Heckman	Chief Financial Officer
Bryan Lubitz	Aegis Capital Corp.

Digital Ally (DGLY) 14 Nov 192019 Q3 Earnings call transcript