Good morning, ladies and gentlemen, and welcome to Digital Ally, Inc. 2022 operating results conference call. At this time, all lines are in 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 zero for the operator. This call is being recorded on Monday, April 3rd, 2023. 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. We may use words and other expressions that are predictions of our indicate future events and trends and that do not relate to historical matters. They represent forward-looking statements. These forward-looking statements are based largely on our expectation.
Our forecasts of future events can be affected by inaccurate assumptions and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Actual results could differ materially from the forward-looking statements expressed in this conference call, and readers are cautioned not to place undue 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 transpire 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 gonna 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. 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. Thank you all for joining us, and I'll turn this over to Brody.
Yeah, thanks, Stan. 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, March 31st. It was nice to get that one out on time this year. I would advise you guys all to review that at your convenience, 'cause it'll go into much greater detail than we'll be covering on this call. A few corporate matters before we jump into the financials, just to discuss some of the 8-Ks that have gone out since our past discussion back going over Q3. We did regain our Nasdaq compliance on February 6th, 2023.
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 effective, I believe, February 8th. That was a 20-to-1 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. It was nice to get those off the books. 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 did $8.3 million in revenue for the year, 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 2021 in comparison to 2022. In that same segment, Video Solutions, our deferred revenue number jumped from $4.3 million at year-end of 2021 up to $8 million in year-end 2022. It provides us comfort that our plan to do the subscription model is really starting to build up quite a bit and really stack on to each other for the three-to-five-year plans that we have in place right now. It shows our new products as far as the EVO-HD and FirstVu PRO and docking stations are also gaining traction in the marketplace.
We anticipate that number to continue to rise as it almost doubled in just one year. Hopefully it will continue to 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% to 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 in January 1st of 2022 as well as February 1st of 2022. Really got a full year of the 2021 acquisitions and essentially a full year as well for both of our 2022 transactions.
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 roll-up strategy we previously discussed. Lastly, our entertainment segment, that's really the TicketSmarter subsidiary for now. 2023, we'll start seeing that build up even further. For 2022, the entertainment segment did $20.9 million in revenue, up 95% over 2021. Again, similar to the revenue cycle management, that has to do with the full year of operations as TicketSmarter was acquired September 1st, 2021. We really only got to see four months of operations back in 2021. This year we got to see a full 12 months. 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, you know, haven't done an acquisition since February of 2022. We've been able to get our hands a little dirtier in each one of these acquisitions to rightsize them and, you know, find the synergies between all of them to make this thing everybody row in the right direction. In the 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. Obviously COVID's 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 2022. They had gross margins of $3.3 million. That was very nice to see. Then the entertainment division had a gross profit of about $300,000. You know, they run on a thinner margin, but we've 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. Onto the balance sheet side.
At 12/31, we had $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 a matter of three years post-acquisition, and then one SBA loan Digital Ally got back during COVID. Minimal debt on our books, which is nice. You have $36.3 million in equity. You know, we're just gonna continue to try and rightsize everything and maximize profitability for the best interest of the company as well as the shareholders. With that, I'm gonna turn it back over to Stan.
Thanks a lot, Brody. You can obviously see why we're a little bit excited about going into 2023. You know, when I talk to different parties, that show an interest in Digital Ally, you know, sometimes it's hard for them to understand the, you know, the overall picture that, you know, the company has, and it's understandable. I mean, it's no different than if you had multiple panes of glass and had a painting on each one of those, but they were stacked on top of each other. It's very difficult to see through them to really see what a good, clear picture is.
This way, with us doing the spin-out, I think that's gonna help separate those panes of glass and show that, you know, you have a much better story and a lot cleaner picture of what each of these entities are. When you really get to digging into them, if you look at some of the analyst reports that have been out there and some of the valuations of our peer groups, you can see that Digital Ally has a story that has, you know, value and potential growth ahead of it in 2023. I'll just give you a little bit of a recap.
Again, I'm not, you know, trying to say this is where the stock ought to be at today, but, you know, just trying to give you some ideas where these entities fall in their peer group. There was a real nice story, both Aegis Capital and EF Hutton both did real nice follow-ups on us and sat there and looked at the core businesses, the three main ones that, you know, Brody really touched on there. I'll start with TicketSmarter, the ticketing platform, because there's quite a few entities out there, including one that's gotten a lot of press in Live Nation's Ticketmaster division. There's also SeatGeek and Vivid and others that are out there that are publicly held.
If you can sit there and look at, you know, the multiples that they're getting and realize that, you know, TicketSmarter did approximately $21 million in revenue, you do something similar in a ratio or even discounted a little bit to about a 2.5x revenue, you know, you're coming in right at a, at a $50 million valuation for the ticketing platform. Now that's sort of a value side of things. When I get into talking more about the Kustom Entertainment and Kustom 440 that will be part of that entity that gets spun off, you'll see the growth side.
What I'm talking about there is recently Pollstar came out with a report and indicated that it appeared that, you know, both ticket sales and concerts were up almost 20% so far in the 1st quarter, which is a very good sign on what this, the summer activity looks like far as, the concerts are concerned. Kustom 440 is a production company. We've already announced our first concert. That'll be May 13th. We have identified at least, we hope at least four more, possibly five before the year is out. The ticket sales have been very sharp and very in line with what our expectations were on that as well. That's the growth side that comes into the ticketing.
Not only will we be adding value through doing our own events, but we also will be able to handle and control the ticketing through TicketSmarter, which again, will add value there. If you look at the Nobility, they, you know, they've really done a real good job. I mean, the whole task at hand in the very beginning on the medical billing side. Again, you've got, you know, Cerner was out there, R1 RCM was out there. There's some, you know, again, publicly held entities that are out there, and you can look at, you know, again, the revenue that they've done, look at the numbers they're throwing to the bottom line. They'll continue to improve on that.
These are acquisitions that they're getting, you know, a little bit of time to make the changes and adjust to their model that ends up throwing more money to the bottom line. Excited about that. Again, you know, through that peer group, if you just used a, you know, number similar to what's out there, and you know, and even discounted a little bit, a lot of them are given a number that's close to, you know, 4x revenue, at 4.5x revenue. Realizing we only own roughly 51% of it, that puts that in somewhere around $18 million in valuation based upon the reports that were out there.
Excited about that and excited the fact that they've got additional targets out there that they wanna continue to acquire and bring into the fold to continue to build on their model that they've got. Obviously, the core business, it's a little tougher to use this because the real only entity that's out there that's similar is Axon, and they trade at a very, very high multiple. It's not quite fair to use that by any means. You know, really beating it up and just doing maybe something close to just a 2x revenue, which I struggle with the 2x revenue because, you know, they're on track to having well over $11 million in reoccurring revenue or deferred revenue, I should say.
You know, the inventory of very good products that they can sell. I find this number, you know, may be on the small side if I just use a 2x revenue and only give it about a $16 million in valuation. When you talk about the growth that they're looking at, obviously, and Brody touched on this, you know, the law enforcement continues to get a lot of traction with our new products that we've introduced there. I think the big shot in the arm that they could see yet this year is in the commercial division, where they will be announcing a new in-car system for the commercial side of things. It really will allow them to focus on all the many fleets that are out there.
Some of the partnerships that they have, will enhance their capability of getting in front of a tremendous amount of potential customers. It too has a very exciting future, you know, not just the existing value. I sit here and I look at, you know, what the number of shares we have outstanding. I look at the value that's out there and, you know, add up the three that are together right now, just those three, and, you know, you come in north of $80 million. It's roughly $84 million in comparable values or implied values, compared to our peers.
The number of shares that we have outstanding, you know, is only 2.75, now you're looking at a, you know, a price per share number that's, you know, right around $30. Those are big numbers. Those are all based upon, you know, if we were to be valued close to some of our peer groups in regards to the revenue side of things. I know that, you know, Brody has and I have both touched on, and we'll continue to touch on, the bottom line, making sure that we have strong EBITDAs and cash flow that will also come into the, I guess, the valuation and the outlook of where the company's going. I love our story right now. I love our position where we're at.
The one thing I do wanna touch on is a little bit of timing of, you know, the anticipated spin-off, provided everything continues to come together. We should be completing the 2021 necessary audits that will be required for us to spin off the ticketing and entertainment division. That being said, the proper timing from feedback with the SEC and Nasdaq and all the parties, you know, possibly could be a June date. If we're that far or we get very far into June, just to make it a cleaner separation or spin out to our shareholders, we would most likely go ahead and make it like a July first so that it would be at the end of a quarter.
We're still on track there. We haven't deviated from the plan. It still looks like it'll be a one for one. For every share of Digital Ally you have, you'd also end up with a share of Kustom Entertainment. That would include the ticketing company, TicketSmarter, and also the Kustom 440 production side of things. I think we've got a very bright future, even with it sounds like the economy, at least in the entertainment side, is still performing pretty strong from the polls that we've seen. We've also know that, you know, Live Nation, a competitor of ours, has announced previously that they were anticipating a record year. We're looking forward to continuing to march through 2023 and beyond.
Julie, if you got time, I think we'll go ahead and open it up for Q&A.
Thank you. Ladies and gentlemen, should you have a question, please press the star followed by the one on your touchtone phone. If you'd like to withdraw your request, please press the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Rommel Dionisio from Aegis Capital. Please go ahead.
Good morning. Thanks for taking my question. Stan, I wonder if you could delve into the entertainment ticketing side of the business, you know, in terms of the potential going forward. You know, you guys have had, you know, a lot of experience with live events, music, sports, NASCAR. I wonder if you could just maybe just give us a feel for what those relationships, what that experience could kind of translate to on the live ticketing side, you know, in terms of opportunities going forward for proprietary events, you know, especially given that, you know, world's kind of getting back to normal now. Thank you.
Yeah. Thanks for the question. You really did hit on a very unique question because a lot of the opportunities that are in front of the Kustom Entertainment division and the ticketing are an extension of what we've been doing over the past several years, and that is, you know, providing video solutions for everyone from entities, obviously like NASCAR, we do stuff at Arrowhead Stadium, MetLife Stadium. I think there's some 200 colleges that we have relationships with, you know, from the ticketing and security side of things. If you look at, for instance, just the Country Roots concert that we're doing here in May, it essentially is a minor league ballpark. Because of our capabilities, we're able to literally go out there, utilize the ballpark.
Obviously, there'd be some suites, there's some seats, but there's also a lot of GA and VIP areas, and also we have the capability to build out. You don't need a massive arena or a, you know, amphitheater to sit there and be able to do a very, very nice concert that, you know, could draw 10, 12, 15,000 people. You know, those are very nice because you also have a good control over your food and beverage, your parking, and, you know, even the VIP capability of building unique experiences for them. That was a great question because we really are utilizing the relationships that we have created over the years with NASCAR and Indy and different stadiums and municipalities.
Look at the fact that we probably sold to over half the police agencies in the country at some point in time. Even if you take the relationship that Digital Ally has with these city leaders and chiefs of police and, you know, you want to visit with them about being able to utilize their city park to throw an event that would draw business to their community and to their, you know, local shops that they have there. They're very receptive and very appreciative of, you know, and have a lot of belief in us. They've been utilizing our in-car video and body cameras for numerous years. We really are gonna leverage those relationships that we have with everything from city leaders to county to state.
You know, the, the situations that we have in, you know, with the MetLife Stadiums or Arrowheads, those will be available for us too. Ramil, you know me a little better than most on this call, but, you know, my upbringing was around music. The relationships that we have along those lines are very strong as well. It just feels like the complete package is coming together. I couldn't be more excited about, you know, doing a half a dozen concerts this year and continuing just to magnify that going forward. Because if you do look at, like I mentioned just a second ago, let's say we do six concerts, you know, that would generate about an extra $10 million in revenue.
You got your ticketing platform out there, and let's say, you know, easy numbers, they're doing $20 million. We add another $10 million from the production side of things. You add probably a 10% in additional ticket sales. I mean, that entity went from, you know, just, you know, last year they did $21 million, let's say, to now where you're doing well over $30 million. What happens if I can sit there and now do 18 concerts the following year? I mean, I can continue to grow this entity very strongly. Also relationships that we have with certain venues, doesn't mean just one concert a year. You could, you know, two, three, four and, you know, have that good relationship with all the local vendors and community and can build on it.
very excited about that side of it and the ticketing side.
I appreciate the feedback, Stan. Thank you.
Thank you.
Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. Presenters, there are no further questions at this time. Please proceed with your closing remarks.
I appreciate everyone that did get on. I know that, you know, with this doing the reverse when we did it and everything else, obviously there's fewer shares out there and quite a few less shareholders as well. We're excited, you know, about Digital Ally's future. We're excited about the potential spin off with Kustom Entertainment. We think that we've really positioned both companies in a, in a really good position to maximize the relationships that are already out there and continue to look real strongly on the efforts that we need to do to continue to improve the bottom lines on everything. Thank you all so much for joining us.
We look forward to visiting with you again probably in the next 40 days or so as we will be reporting our first quarter numbers. Thank you all.
Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines. Thank you.