DGLY - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Digital Ally 2021 First Quarter Operating Results Call. At this time, all participants are in listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] This conference call may contain forward-looking statements within the meaning Section of 27A of the Securities Act of 1933 and the Section 21E of the Securities Exchange Act of 1934. events anticipate, and may, predictions historical other of, indicate expect, plan, could, or matters believe, that or continue and future, expressions future identify words forward-looking intend, relate should, estimate, will, -- do statements. The not trends to and that are number or unknown business by which forward-looking and inaccurate of These expectations are are uncertainties, risks events control. future subject largely based of statements various and assumptions and known can a our to our beyond on forecast be are affected Therefore, contained actual undue readers not results forward-looking could statements. differ materially place in are from the to reliance statements forward-looking and on such this document cautioned future undertake will any whether result Ally events, forward-looking Digital statements, information, a or obligation or otherwise. to publicly update as revise new no of to of needs. could and cash wide differences or revenues, contribute capital flows adversely and A cause could such impact profitability, factors variety be will, this There transpire or can contained statements be to in forward-looking no that fact, in the accurate. document assurance prove now turn I Stan the to will call over Ross. go Please ahead.

Stan Ross

to that requirements -- on, the growth are a being and And and going you. our out first Heckman, a us we’ve better call. you us are with do also I’ve accounting today numbers, Tom a can more understand such. our get bit Thanks regards in got on. the quarter I potential of guess make in-depth some the for recap me new operations that numbers acquisitions will some imposed going also try try Tom prospects company’s CFO, of the joining little got to of everybody to currently Thank our well lay as that to upon help and for that

I to hand that said, a will being second. and then So, will it you here in join with over I Tom

Tom Heckman

tell brief, I remarks and last that, everyone. do will to be if you filed that morning. us joining this or Stan, take that’s appreciate but want first I at here Thank XX-Q evening. more right. first the I My know some me, impact you have you questions the you, -- will we All welcome file our during suggest results XX-Q overall, look are a with quarter, of the operating we the happened seeing but XXXX seeing on show what do quarter please continuing COVID-XX pandemic. still recovery, the SEC. the Excuse to now

subscription revenues we and the If detailed, did to the that But year-over-year events into year-over-year. situational revenues on our X% reflects service of revenues, and the installation have -- revenue. our $XXX,XXX increase by and our which increased that’s you other product of about at look that or if effects went some an overall quarter. the year-over-year, first restrictions you for travel program dig in COVID-XX revenues pandemic of And that X% due of success security affected the down revenue and around X% particular the primarily down

dig down If XX% sales, XX% detail, had a And of is sales if at revenues, increase costs remain in you as jump, service sales to the look which quite large you at of went overall, cost of of from we a XX%. percent substantial. XX%, our steady cost

hope of to of pandemic is well this the as this that inflation the products shortages on you’re industry and we in transitory the costs from shortages is XX% cost ago transitory the I particular sales product now some from salary and permanent. mean, and attributable in So chips Again, revenues, steady. apparent what use inflationary microprocessors well hope in But increased to product in costs, quarter somewhat nature. it’s really inventory COVID-XX our is there we is overall sold that our saw some and of not the cost trend in we shipping Product component hardware effects becoming and that seeing was an in goods that’s that increase so as I XX% year in -- in And costs, of that our as year. think as really products.

that. We of will keep everybody apprised

increased to If that increase cares again, of some at well, expense, We overall look we and wages our see and insurance their increase however, liability on increase personnel-related premiums a as did, COVID-XX-related expenses and you SG&A in huge coverages small in overall, have salaries, $XXX,XXX, our it and expenses. in general inflationary did we’re there. as particular, blaming as cover -- any increase COVID-XX a

a ago in first driver compared primary the in a was increase So quarter the overall SG&A. year that hold and took to really in

fact in captive we’re different on of but it. offshores looking in programs, are handling potentially that, ways insurance at We including

margins in We’re increase dropped the able expense. overall increases regardless price our a Overall, that’s $XXX,XXX our $XXX,XXX be going contain insurance remainder and in and increase gross drop to year-over-year, again, X% this operating income an $XXX,XXX revenues in on it down drive of to somewhat of SG&A in try our hopefully and and the XXXX.

So operating down income year-over-year. was

caution highly that income through warrants get the it’s the in P&L accounting of it did million this there’s a of fair at you the offerings, that the derivative change fix fair Thus, clarification requirements we and some warrant you Stan come increased income that as is requires some P&L. If It regarding with non-operating mark-to-market were loss $XX.X And the volatile causing $XX.X either the of$XXX,XXX until warrants out some mentioned, is versus our exercised under or be method Black-Scholes drivers look on with value like though that we a I you that these of the saw million the to that quarter. direct the a liability total. offering income though, they detachable that amended that from a the year SEC issued the goes ago. in in which liabilities. accounting get first will in will value mark-to-market registered has item public

be will in stock way, the its so of and the we linked. very perverse quarter and will So fair volatility, way equity because those next value the the improve, a improve could stock our hopefully operations in increase prices improve, see other some warrants as as easily it prices our

mark-to-market of that that the $X.X a I everybody will foreseeable again So, item $X.XX do year loss net our be Overall, for a we for by a for first derivatives were accounting ago in a the showing And required was long, our versus in that the million driven million a share or $XX.X our or income just future. in was long the volatile quarter. primarily P&L time best caution quarter $X.XX, to quarter. the

balance direct sheet $XX.X improved because has year million from balance investors. end look that at public XX/XX/XXXX. That’s our sheet, two dramatically were you primarily registered with in our offerings off-the-shelf If we raised

So cash. we of million raised $XX.X

at year $X.X you quarter If ago. cash balance, million look cash the we $XX.X have versus million our a of of the end at

$XX.X million positive year have of year $XX.X million and capital working a $XX versus ago improved million ago. equity a We our million $XX.X at versus

the So primarily that we the improvement dramatic due balance sheet, quarter. to the in you two did first our can see during public offerings

that lines, were a a closed, Again, have improvement, looking for within the our revenues no of down at in go $X our at product to allow acquisitions have informed will our million. enhancements we’re investments, if could acquisitions. we some product road. to position just that we I roughly nothing hopefully, office us that, the to will, cautiously industries industry looking nothing informed these we respect, improve our nature, also on of on course, and you of send will quarter over City of a With potential area everybody here in or looking And about any lines, you. but at Stan, from. we potential In will we we are enhancing more commitments, And where With we terms the it keep building at that’s acquisitions and us and binding at maybe path does fully both flexibility down that after it provide company help did no recently core term we back Kansas line we investors. value We closed sheets, that. organic definitive, the of doing keep several new potential you of the balance nothing the and there sheet lot warehouse looking adjacent all, little as

Stan Ross

Yeah. Thanks Tom. a lot Yeah.

can do filed key expansion our think whether growth. play. be it. that uniqueness the that there out one talking points some the as Tom of last current think say, of design as If acquisitions may line far that came some on that and regards electrostatic we’re we potential with I we is, of the, to have Also that product something growth still organic we looking that at with the that and of let’s our be could come into patents adjacent about was that’s that sprayer not, the organically in the of

Sometimes you to a good wanting to end out acquisition has a little up. helped where you’re eventually to get quicker

assist new for able hard insurance And been room a There’s also to the growth the of there. we side so us of take help facility quite And lot of us could industry instead year bottomline, just with having insurance. and there we the it’s high that things of in And a to the cost start sit us for also such believe out a a will study have bit. each then wide. really deficit into

industry as, have I itself Digital pandemic companies Ally. seeing mean, COVID, their it, I picked a the mainly and -- being position for capital the in. We’re and think, is concern because to they not shut lot doors It’s the of were on because, at with the of here that

be we’re So, where to we’re at. pretty blessed

see marketplace. in-car We’re HD the been system the very to received Evo excited has to continue well system, how in

market. have being very, are is getting That really reviews -- and next well. received body starting to version that our of We we is camera very good our

feel side continue that enforcement things the So to we of will grow. law

continue a to be quite of get the patents possibly more our and will of items to because the them. able We share surrounding uniqueness market bit

starting shield that a see do the the sort environment. start strong disinfectant, of green type and of the much concerns care to of around have product go understand pet-friendly and and the that products a now as we fact in safer, lighten to to does then that even importance are of kid-friendly, even food-friendly, alcohol. have wound People So type chemicals continues learn staying very up, cleanser, a to we bit It’s contain too the potential, COVID disinfectant. of still quite it, that we line call not

product products. made and would pleased for on acquisition we’ve So the the lines with to continue enhance right front that that the current now, portfolio of have lines our looking very, we to be opportunities product to the improvements very excited

I floor for the I up will think, So, go at this will Q&A. open and we time, ahead

Operator

question Instructions] [Operator Dionisio with of first Your comes the Capital. line Rommel from Aegis

Rommel Dionisio

Thanks. Good morning, everyone.

Stan Ross

Hi.

Rommel Dionisio

talked those about cost of to side. rising that of was the color Obviously, pass-through facing increases could I pressures? first pass the might terms or guys inbound give you these able little the So, on that those situation of of and pricing margin components the it what that if the on gross just more a and wonder sudden rest pressures hit offset costs pass during to us some think all kind to you on alone please? And degree in for you To inflationary and quarter weren’t pressures freight ships you’re -- be sort of of able along price a it and just industry sort you do not you margin prices rising of thing. the and

Stan Ross

XXXX, inflationary to pressures in The in came first quarter. were the XXXX building throughout Yeah. head of and kind a late really

shipping have started with new version economy havoc well we’ve caused cameras. from back the competition that. the on repackaged the of body Pacific newer shipping and and EVO to get as And up system, products the as our we we really, DVM-XXX costs now and Rim ships lanes the the are the to transitioning opening our and really As Orient being a

number So that different newer those components. in that systems the in industries a are of with not vendors updates a different matter. of are from These using and number older for in components we’re demand high

in industry our but like other So other other people competing we’re the with in industries. not vendors

POs times along to break. that looking always term situations But So, of some in of in in longer a and bid in are passing that. hemmed competitive industry any here many commitments and it can’t we’re we’re we’re very and we’re on that we that going event, terms in do up

point, trying but we’re increases but no going on, pass to yeah, this effect to it would little a always So, trying. at to those we’re be

Rommel Dionisio

there law Maybe and Okay. or of a wonder update was overseas-based about you’ve hold you just Fair any still in enforcement now? on a I the for foreign a that question, on follow-up enough. significant Thanks. pretty had sort with opportunity that I talked know if agency. that is kind past of

Stan Ross

ready one year sitting Yeah. out quarter of end the our on was that at That was first dock last go when the XXXX. the hit right COVID to of

continue delayed and police it’s actually that national to priorities We with been It’s with. has that some now or not a obviously they’re other dealing department deal. right dead a police they’ve work agency. It got

So where a we it’s it’s cancel, I delay a -- go do as that see but that down. will believe situation a we not

really predict same can’t hit. a that its situation seeing the I here is country the Now that with own. we’re COVID This as foreign United when dealing in might is States. It’s on not

if when just that hit might hit. predict So, I does can’t it

Rommel Dionisio

Okay. Fair much. enough. Thanks so

Stan Ross

Thank you.

Operator

the from line Charles question GTM Latario of next Your [ph] with Capital. comes

Unidentified Analyst

have simple call. I my Good questions. gentlemen. morning, taking you Thank just for two

or product, you to that? guys it legacy or want to just about is Are the subscription industry that. product. just customers color What’s your for outright your main to actual do more efficient I finding more The in do the switching a the your to first that that them cost you mainly are on over just model. buy actually it wanting know competitors you one police finding is are

Stan Ross

Yeah.

subscription I be to going regards on and bit model. at look tough cuts seeing tax think in they’re to a their budget more XXXX dollar. to role how pretty stretch the to was quite we’re a into go able happen and them Obviously,

model have as them them provide in to making complete and we we piecemeal very subscription the So outfitting a the with been, acquisition to position whole it had of as fortunate needs happen come instead and again, can their of at capital to departments once. where a far

into you received paid this, a this, all and stepped encouraging once down model some say and the of But, almost full. and quarter-over-quarter Tom, XX% while, up have to mean, and I a that seeing money or we’ve will went in capitals some they know say, growth… they and a yeah, may probably we’re sudden of on grant coffers long-term would started very ahead and every their I of path came a I growth went XX% model. in Now, ahead subscription have and the subscription lot but

Tom Heckman

Yeah.

Stan Ross

that of on … subscription side things.

So it’s well-received. very very, been

Unidentified Analyst

So right over which going just quarter, time, the correct? be so first that’s isn’t be be revenue. not revenue -- upfront long-term technically to going to It’s show is the that’s it’s going to going out that on to on spread all

Stan Ross

That is correct.

Unidentified Analyst

everything? is, have the next And -- question the system I have thermal lines there the that your with obviously, I guys and of know events. lot a involved you sporting I cruise and know out And were you the

open interest you Some guys to leeway, Have that you are for starting any to any back coming now. seen up stuff? in

Stan Ross

in am need whether they you outside and to Yeah. talked with any situational body that for starting concert outfit XXX cameras sporting regards particular security, Matter and where about security, that type had be conduct to have event. individuals it or fact, Absolutely. event venues of of a I to venue situational we’ve talking when about or a our is I basically

and those We’re inbound a starting quite to calls get that few surrounding concerning opportunities.

picked definitely up has that without doubt. a So

Unidentified Analyst

do And as you I on your it’s to going had where moment? sheet you do at you enough your far find Right situation, $XX feel million, this take to basically sufficient sufficient now you cash as balance want that that know forward? go you

Stan Ross

do. Yeah. We do. We

Unidentified Analyst

Great. Great. Okay.

you merging options some guys -- to look I you looking stage at with as open on you’re guys buying forward, as can Do other you on something. out? next tell that your alternatives what actually are that So as coming what what have whether something, all there products are going investors position? to far forward to out know

Stan Ross

Yeah.

of that some have again, lines. I already get we sit think, the I all that think all ability opportunities mean, the there we do not quite have. But those and is to sudden network broad. all and into of it’s utilize open. best have network seriously something the market conditioning trying say air looking infrastructure, mean, that to we’re or heating meaning to type options And at along I I a that we’re

the the If you country. look not amount of but in enforcement, a -- we’re fleet throughout only law tremendous at fleets

-- whether cabs, We’re buses. it be that in would taxi ambulances,

because here. corporations the really a them We -- has -- large Hospital that up Children’s within thermal and few government view thermal of hospitals quite of have several have view the been opened lot avenues are local, buildings, utilizes a Mercy

to able network be the -- in and have trying immediately opportunities that network launch. recognize we’re be is regards once and day what what have make funneled that product So positive a acquisition impact positive we infrastructure in we to could to and do new look throughout plugged to be that and/or one then our be at

Unidentified Analyst

Great.

Sounds great.

buyback got of with obviously, is have you you new just going the the considered last the What thank question questions pickup kind now? get and that? distribution? warehouse. question And are and manufacturing you right those program So to in with that your is, And cash books will as I have you know final be, guys purpose ever help a actually actually the I final a the very the Is you share of the much. on

a doing great job You’re everything. with

Stan Ross

it that on mean, we each the I address available right we’re two we the single I appreciate cubicle don’t building. top very have. much. that now, I know will have other. of buildings within But a I

us little for more get area us one definitely allows expansion. into building more a this lot to area, So and a gives

handy. very shield come it other for or enforcement, in will the whether the law even the additional of company some have And products be the of do space in mind, that branch we

of acquisition we’re was it’s that -- a into pulled it. in potential not just So doing anticipation maybe this

so around, well real lines lines and also I in again, just now. I home looking to And be way. off-site that need talented including right those product many it like for from a don’t know that our very people work and that bringing scenario the this we guys particular in room have Board to be in locations. for tank on white board innovative very the room of one and at expanding the in product am, so some unfortunately, more those really facility, people existing engineers and think type personnel and a of as I be talented We’re for have that able

I So where I the to am In buyback. one of building, where in needed. regards it’s the those to can, everyone prefer have that

Tom Heckman

Yeah.

On of equivalents. the putting -- our well, in we’re cash terms and where

now at right looking $XX,XXX individual We’re was that lot did interest was anything to equivalents But beginning days. to we the of we the hard get with want $XX again exposure the in out the one again, keep -- original within banks. the the quarter and at those there safety try at and yield. the and offering it’s offerings. cash you idle in with banks than placed that XX the limit a primarily there of bounds from funds first earnings was less of and climate we have maturities interest two and several to February. And cash or that make But, back have from of if with January rate to it We look almost of in second that middle

out So they the quarter. there whole went

out earnings. going by. to get get quarter of will interest letting and the But investments anything and real by we’re as of rules there in not short-term some income yield go the bounded expect I So that would exotic we’re improve that terms safety

So the we’re that’s on cash. at what

Unidentified Analyst

very much. fast. you a now. new get like big and I moving those let place know looks get back will everyone motivate COVID and warehouse but it will actually you’ve the set I everything sounds the It especially go in guys, And you got like it again help. Well. Thank everything be

very will Keep move Thank revenues have you work, everything some great much. in everything good the guys. there. can You get place. up consolidating, out one and you Hopefully forward

Stan Ross

Thank you very much.

Operator

Aegis Your with next the Bryan from Lubitz of question comes line Capital.

Bryan Lubitz

morning, guys. Good

Stan Ross

Good morning, Bryan.

Tom Heckman

Good morning, Bryan.

Bryan Lubitz

quarter. Nice

Stan Ross

Thanks.

Bryan Lubitz

least came of not the if after you guys the that’s quarter was it the things last I if color a product. if never finish, feels company? LIDAR guys revenue right patent that new And a new Is for had or not of sales. coincided quarter any type it it And announced but noticed you recently year one terms in at stream I on something two. the am the sure seen like last that with a of for that But release, we’ve have a

Stan Ross

and LIDAR those again and systems. cameras have No. towards the priorities been of you body very in-car agencies well, products it’s that strongly The out and shifted there as some -- know time one Bryan, video for

cameras out So patented the I in get where to, scanning mean have market due really that I them one just fact that on in-car LIDAR not street. will officers be regards had and it’s backburner you’re agencies out to let outfitted put to body telling you to going we used talking right am mandated to the sort know, the and there there and the I that the on demand. We’ve out to what you say, I of as they’re getting those to the it’s and our get now LIDAR. and able think or with about their

up focus, level figure speed with capital agencies their primary that and by has come that out detection. focus how not to trying So much to on been interest of so

Bryan Lubitz

Okay.

business. you a have just that? Have type thought financing of I the or about there, giving this got turned I get quarter. the get away that said, to in the Have we’re internal option that So Senate guys terms to residue just these obviously, I guys camera discussions of being to that you you demand know of guys. be if leasing the long-term hope for for on, -- payment am money still has sticky federal passes no have you option waiting and down will.

Stan Ross

bit do fair subscription they Well, mean, be for anticipate very the tight I they budget things them will absorb to of, XXXX we is, and know again, model be and normal able what that a should little we let’s to little recover, say, has being a a to back restraints costs that let’s better, with our be model. -- a is model. XXXX department therefore subscription associated XXXX to going is say,

when can like So to five for over talk front be and sit going we to the five to try on end. end to and have up about even there subscription on years. okay, mean, help will I the say, then it payments we’re we make -- don’t a model, have, we back you we okay,

capital So not we their flexibility a only very well can are model abilities the regards to to received their has product really in package. that play. subscription have of live the such they just financing have financing comes our up type structure being a straight to. needs with And into departments meet been that quality grateful such and But the have fact to a

it’s to a six them the like their package like, that. first you months want But new don’t when or go need. for free meet I So can buy something to curtail say, truck, we a

Bryan Lubitz

flexibility. have you So

Amazon, I the package. great for the that right. that’s VuVault. partnering if subscription a way, with model, You have am That’s package By

Stan Ross

We Correct. utilize Amazon, far and yes. as AWS as storage the cloud management, the

Bryan Lubitz

Okay.

bank, like at that, but you longer bank, program? out guys a cash you or and doing doing guys been you product. are for area have With looking the years to a that I such let’s and these you that know marketing So, in got things have good help webinars there new six a say, the you expansion. compared in now flush been got the guys five you’ve you’ve years where cash in last, probably to you’ve new where

them. you of and get we have not you You forefront, the you get translating be know should name guys out But Digital’s will? just to doing to in there so The if what more COVID. and we doing what sales have are many

Stan Ross

Right.

am glad that, to I so, say And Bryan.

the eyes that X,XXX So, we to got more brand And yes, the talented behalf meets forefront possibly new a for to in very helping not in will and That national draw to company. can fit, market X,XXX law enforcement some commercial there working large up fleet that first have on that take we’re impact to on going a their to -- in the and to that the just level only names vehicles getting individuals help showing cameras shareholders a manage regards The people as and our, with body say, responders. us software that’s regards the a player say, inroads mainly their very we and and and be and see, very you’re even the of out the that different name of let’s we’re let’s personnel. far some market we whole XXXX of exposure. recognizable make Bryan, that sure to to definitely on of would name, with hard get to engineers very we’re think of open national type you companies. are that design really needs products some some when But lot fleet our very to thing I the going are attention in national into start going strong is, making a to commercial the

Bryan Lubitz

trucks about? of Okay. like you’re that That’s sound Penske exciting. Those are the fleet caliber talking is what and big guys

Stan Ross

Exactly. Exactly, Bryan.

Bryan Lubitz

me have of for your for about asking received We they’re annual and a have I voting see your last us you congratulations again, before. for about cash and lot guys, The they’ve calling shareholders the quarter. Very you I on that proxy have for right. that’s of happy then information specifically to clients, such. moving up with flushed they’re and that talked thing All great and forward. for it just guys the things

in million hand. the $XX got guys You cash

the just do pill You’ve shareholders? protect with market a of poison cap and that. about slightly I of you’re how got trying north that. mean, north to Can what will it you talk

Tom Heckman

you think those of have put only on by that Blank majority I you non-routine the Yeah. shareholders. for voted. unfortunately, the -- get and The to the item a Check a talking we’ve Preferred are not And specifically ballot that it’s approval to

You have the of shareholders majority a to if all not. regardless or get outstanding they’ve voted

situation reality very that it’s try out go would solicitors gather not have to votes if we tender and to get is flexibility Board to to Blank a But be or a So Obviously, the done negate pill task in tender and give convince that offer. that issue and poison all shares difficult hired not at to that Preferred a has hospital type us the approved. tender a there Check people. would

voted defenses. the those more outstanding. to our just able that XX% trying than plurality four always a never had past. unfortunate we’ve yes had probably, to in row that in had we or of a gosh, Its proxy, in three or shares voted, a we’re We’ve on been majority years haven’t of So, all We’ve for and years put it.

it’s been done will just I this don’t hope tabulation I get this year. know, So fact tough be passed a can we process. the is it’s hopefully My in that -- fight. in it don’t early year. it

Stan Ross

Okay. Bryan …

Bryan Lubitz

Essentially Is Is -- it the acquiring do? am guys sorry, open from associated market? someone to it’s in you’re that you entire I Stan. what looking

Stan Ross

almost our we us position mean, out. cash we’re us with clever shareholders what’s hate there cap in And Well, -- where want hell, you I much as But the have. almost someone for use that I is that, where entities market to they -- best look, you a say maximize but and as value. want I to it, I mean, leverage cash out mentioned, and own buy could we as their our there’s some to

so, just are think we see momentum. to starting And we really some

hole coming of the COVID. the of We’re and pandemic out

are we’ve been being workforce had that the to bring able coming opportunities. are and Our us get back to customers, have longtime more down shut -- that customers

that didn’t we’ve some we hands for products we’re to into. our and unique designed going really on alone, able sit get to be new markets Let

in and by and a continue someone that man, come the else to group have and benefits, improve value to so, for step reap such sure that build them. in we have long so we not we pull And to when great for would that this of like and shareholders organically on have us stood together want

Bryan Lubitz

you of again to wish Congrats anything know am the get I guys I I guys best luck help, you Well, quarter. and on do can here. to votes the

guys. soon, speak will We

Stan Ross

good, you. today. Sounds thanks, And us Thank joining everybody, for Bryan.

call. really going appreciate to and this ahead up wrap We’re it. go We

of to norm. a coming are little We’re glad see really excited more a and hopefully that to bit things back

things and XXXX the Digital we’re be our year looking going to to finish forward bring the I Ally -- to able shareholders. and some We’re introduce to to this and also think of that yet good

and everyone So thank you you so talk be safe and much please soon. all to

Operator

conference concludes call. today’s This

disconnect. You may now

Digital Ally (DGLY) 18 May 212021 Q1 Earnings call transcript