(Source: PRNewswire-FirstCall)
OVERLAND PARK, Kan., July 29 /PRNewswire-FirstCall/ -- Digital Ally, Inc. , which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial security applications, today announced its operating results for the second quarter and first half of 2009. An investor conference call is scheduled for 11:00 a.m. EDT tomorrow, July 30, 2009 (see details below).
"We are pleased to report that Digital Ally's second quarter revenue, while below prior-year levels, improved 60% when compared with revenue of approximately $4.4 million in the first quarter of 2009," stated Stanton E. Ross, Chief Executive Officer of the Company. "While we recorded a modest net loss equivalent to $0.01 per share in the most recent quarter, the Company would have been profitable were it not for non-recurring severance expenses of approximately $445,000 in the three months ended June 30, 2009. These results were in line with previously announced expectations and reflect strong customer demand for our newest and most advanced in-car digital video surveillance system, the DVM-750, and the latest upgrade to our DVM-500 series, the DVM-500 Plus."
For the three months ended June 30, 2009, the Company reported revenue of approximately $7.0 million, compared with revenue of approximately $8.9 million in the second quarter of 2008. International revenues decreased to $174,470 in the second quarter of 2009, compared with approximately $3.7 million in the quarter ended June 30, 2008. International orders are often larger in size than typical domestic orders, and timing of the receipt and shipment of such orders can have a significant impact upon sales in particular quarters. A net loss of ($164,654), or ($0.01) per share, was posted in the three months ended June 30, 2009, versus net income of $1,412,280, or $0.08 per diluted share, in the three months ended June 30, 2008.
Gross profits declined to $3,510,605 in the second quarter of 2009, compared with gross profits of $5,429,532 in the prior-year period and $1,859,540 in the first quarter of 2009. Gross profit margins approximated 50.0% of sales in the most recent quarter, versus 61.1% in the second quarter of 2008 and 42.3% in the first quarter of 2009. The decrease in gross profit margins was primarily due to costs associated with the introduction and ramp-up in production of the DVM-750 and DVM-500 Plus product lines. Production rates for the new models steadily improved throughout the quarter ended June 30, 2009, and the Company expects such production rates to improve dramatically during the second half of the year. New product offerings during 2009 will likely increase the Company's cost of goods sold as a percent of revenues for the balance of 2009, when compared with 2008 levels, but gross profit margins should improve when compared with the first two quarters of 2009.
Operating expenses increased 20% to $3,796,248 (54.1% of sales) in the second quarter of 2009, compared with $3,150,602 (35.4% of sales) in the year-earlier quarter. The majority of this increase was attributable to a non-recurring stock compensation charge of $358,104 associated with a separation agreement with an officer of the Company who resigned during April 2009. Research and development costs also increased in accordance with continued efforts to develop new products and line extensions. General and administrative expenses increased, as did other stock-based compensation expenses, while selling, advertising and promotional expense decreased due to lower sales commissions paid to independent agents.
For the three months ended June 30, 2009, the Company reported an operating loss of ($285,643), compared with operating income of $2,278,930 in the second quarter of 2008 and an operating loss of ($1,967,625) in the first quarter of 2009.
The Company reported a pretax loss of ($276,654) in the quarter ended June 30, 2009, versus pretax income of $2,301,280 in the quarter ended June 30, 2008 and a pretax loss of ($1,958,494) in the quarter ended March 31, 2009. After an income tax benefit $112,000, the Company recorded a net loss of ($164,654) in the second quarter of 2009, compared with net income of $1,412,280, after income tax expense of $889,000, in the second quarter of 2008. A net loss of ($1,300,494) was reported for the first quarter of 2009, including an income tax benefit of $658,000.
A basic and diluted loss per share of ($0.01) was recorded in the most recent quarter, versus prior-year basic and diluted earnings per share of $0.09 and $0.08, respectively, and a net loss per share of ($0.08) in the quarter ended March 31, 2009.
The Company reported adjusted net income (before income taxes, depreciation, amortization and stock-based compensation), a non-GAAP financial measure, of $644,589, or $0.04 per share, in the quarter ended June 30, 2009, versus adjusted net income of $2,752,962 ($0.16 per diluted share) in the quarter ended June 30, 2008. (Non-GAAP adjusted net income is described in greater detail in a table at the end of this news release).
"While our international sales were modest in the second quarter, we entered the third quarter having submitted bids on approximately $5 million in potential international contracts, along with outstanding bids on approximately $15 million in potential domestic contracts," continued Ross. "The third quarter should benefit from a full three months of DVM-750 shipments, and we are on track to commence marketing activities in September for our new FirstVu, a compact, solid state digital audio and video recorder that can be attached to a law enforcement officer's uniform and is designed to capture evidence of criminal activity on a "real-time" basis, and the DVM-500 Ultra video system for police motorcycles, boats, ATVs and other mobile applications. Shipments of these new products to customers should be underway in the fourth quarter of 2009."
For the six months ended June 30, 2009, the Company reported revenue of approximately $11.4 million, compared with revenue of approximately $17.5 million in the first half of 2008. Gross profits declined to $5,370,145 in the first half of 2009, versus $10,750,426 in the corresponding period of the previous year. An operating loss of ($2,253,269) was recorded in the six months ended June 30, 2009, compared with operating income of $4,774,770 in the year-earlier period. The Company reported a net loss of ($1,465,147), or ($0.09) per share, in the first half of 2009, versus net income of $3,089,067, or $0.18 per diluted share, in the six months ended June 30, 2008.
The Company reported an adjusted net loss (before income taxes, depreciation, amortization and stock-based compensation), a non-GAAP financial measure, of ($737,173), or $0.09 per share, in the six months ended June 30, 2009, versus adjusted net income of $5,531,475 ($0.32 per diluted share) in the six months ended June 30, 2008.
The Company used $69,094 of net cash in its operating activities during the first half of 2009, compared with $921,923 in net cash used in operating activities during the six months ended June 30, 2008. As of June 30, 2009, the Company had $324,367 of cash and equivalents in the bank, working capital totaled $13,236,535, there was no debt outstanding, and shareholders' equity totaled $16,252,425.
Non-GAAP Financial Measures
Digital Ally, Inc. has provided financial information in this release that has not been prepared in accordance with GAAP. This information includes non-GAAP adjusted net income. Digital Ally uses such non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Digital Ally's ongoing operational performance. Digital Ally believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measures with other companies in Digital Ally's industry, many of which present similar non-GAAP financial measures to investors.
