Digital Ally, Inc. (NASDAQ: DGLY) 2024 10-K Review: Struggling to Turn the Corner

Welcome to our deep dive into Digital Ally, Inc.’s (DGLY) 2024 10-K. The Kansas-based technology company operates three distinct segments—Video Solutions, Revenue Cycle Management and Entertainment—and has reported significant headwinds in 2024. In this detailed review, we’ll cover:

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• Business overview: what the company does, its markets and products
• Segment breakdown: revenues, margins and trends for each business line
• 2024 financial results and 2023 comparisons
• Key events and notable acquisitions in 2024
• Liquidity, cash flow and going-concern warning
• Risks, impairment charges and 2025 outlook

Let’s get started.

1. Company Background and Segments

Digital Ally’s roots go back to 2004. It now divides its operations into three reportable segments:

1. Video Solutions (Legacy Business) – In-car digital video recorders, body-worn cameras, auto-activation (VuLink™), cloud evidence management and disinfectant devices (Shield™) for law enforcement and commercial fleets.
2. Revenue Cycle Management – Back-office services and working-capital solutions for healthcare providers through majority-owned Nobility Healthcare, LLC.
3. Entertainment – Secondary ticket marketplace (TicketSmarter.com), ticket acquisition & resale, plus live event production via Kustom 440 and the Country Stampede festival.

Video Solutions Segment

• Products: EVO-HD, DVM-800 series, FirstVu Pro/II/HD, VuLink™ auto-trigger, thermo screeners (ThermoVu™), Shield™ disinfectants.
• Customers: Federal/state/local police, private security, ambulance fleets, taxi, mass transit, commercial fleets.
• Revenue mix: Hardware sales plus multi-year warranty & cloud subscriptions (recognized ratably).

Revenue Cycle Management Segment

• Specialty: Medical billing, coding, claims & collections.
• Model: Fee based on a percentage of client collections.
• Coverage: Radiology, oncology, orthopedics and other specialties.

Entertainment Segment

• Marketplace: TicketSmarter.com, ~125,000 events, 48 M+ tickets.
• Services: Resale fees (agent model), ticket inventory buys (principal model), live event production (Country Stampede).

2. 2024 vs. 2023 Segment Revenues & Margins

Segment	2024 Revenue	2023 Revenue	YoY Change	2024 Gross Margin	2023 Gross Margin
Video Solutions	$ 5.76 M	$ 7.47 M	–23%	47%	17%
Revenue Cycle Management	$ 6.13 M	$ 6.71 M	–9%	39%	41%
Entertainment	$ 7.76 M	$ 14.06 M	–45%	5%	12%
Total	$ 19.65 M	$ 28.25 M	–30%	28%	20%

• Video Solutions saw product revenue fall 53% (hardware deals) but cloud subscriptions rose 29%. Margins improved as service mix expanded.
• Revenue Cycle Management fell 9%; margins dipped slightly on costs, but remains near break-even.
• Entertainment sold fewer tickets to focus on profitability; revenue down 45% and razor-thin margins.

3. Key Drivers Behind the 30% Revenue Decline

1. Product headwinds – Mirror and recorder sales face price-cutting from legacy competitors, with inventory backlogs and supply chain cost pressures.
2. Segment refocus – TicketSmarter right-sized its portfolio away from lower-margin events, sacrificing top line for margin targets.
3. Macro uncertainty – Cautious public budgets have slowed police technology upgrades and law-enforcement capital spending.

4. 2024 Consolidated Income Statement Highlights

• Revenue: $19.65 M vs. $28.25 M in 2023 (-30%)
• Gross Profit: $5.49 M, 28% margin vs. 20% in 2023
• Operating Loss: $(15.20 M) vs. $(22.24 M)
• Net Loss: $(21.72 M) vs. $(25.46 M)
• Net Loss per Share (Basic & Diluted): $(5.58) vs. $(9.22)

Major Non-Recurring Charges

• Goodwill & Intangible Impairment: $4.83 M
• Legal Settlement: $1.96 M expense for judgment against Culp McAuley
• Debt Extinguishment: $0.75 M loss on refinancing merchant advances
• Gain on Sale of Headquarters: $0.40 M

These items drove the plummeting bottom line, though improving operating loss reflects tighter expense control.

5. Cash Flow & Liquidity

• Operating cash burn: $(5.11) M in 2024 vs. $(9.89) M in 2023 (43% improvement)
• Investing cash: +$0.39 M vs. –$0.24 M (sale of HQ building & aircraft)
• Financing cash: +$4.40 M vs. +$7.38 M (equity raises, merchant advances, new debt)
• Cash balance: $0.45 M at year-end vs. $0.78 M

Net Working Capital was a negative $19.38 M as of December 31, 2024, driven by trade payables and lease and contract liabilities on the balance sheet. A substantial going-concern note warns that 2025 cash flow and refinancing will be critical.

6. Recent Events & Capital Raises

• June ’24: $5.1 M raised via Series A & B warrants + pre-funded warrants; underwriter Aegis Capital
• Nov ’24: $2.97 M private placement of secured promissory notes
• ’22–’23: Accommodation of multiple acquisitions (TicketSmarter, Nobility Healthcare, Country Stampede)

Equity dilution and rising debt gauges the Company’s desperate bid to stay funded. Lubricating operations with merchant cash advances and bridge financings signals precarious financial health.

7. Risks & Impairments

• Going Concern: Recurring losses and negative working capital raise substantial doubt about survivability without new capital.
• Goodwill Impairment: $5.48 M of video-gen goodwill was written down by $4.63 M, and $0.51 M of indefinite-lived tmarks impaired in 2024.
• Legal Judgment: $3.99 M judgment recorded against Culp McAuley, offset by $1.96 M reserve and insurance recoveries.
• Concentration: International distribution and pledged receivables pose collectability issues; municipal budgets for 2025 may slash police tech spending further.

8. Outlook & Analyst Take

Digital Ally9s 2024 10-K tells a cautionary tale of one-time gains and charges, theatre-style pivoting and an intensifying cash burn. The strategy to diversify beyond law enforcement — medical billing and ticketing — has yet to achieve profitable scale. With net equity approaching zero and meaningful borrowings and warrants weighted heavily on the cap table, Digital Ally9s stock requires out-of-the-box catalysts in 2025: an EBITDA turn or a breakthrough contract win. Meanwhile, capital raises come at steep dilution and expanding coupon rates.

Investment Score: 3.2 / 10
Lack of profitability, negative net working capital, high leverage and going concern risks can’t be offset by modest margin improvements or non-core asset sales. A distressed stock pick, not a “buy.”

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