Kustom Entertainment, Inc. (KUST) Earnings Call Transcript & Summary

Hello, everyone. We are pleased to have Brody Green in the studio with us today. Brody is taking over as the new President of Digital Ally in 2023. Brody, congratulations, and great to have you on the show today.

Thank you. I appreciate you having me today.

Brody, as the new President of Digital Ally, you are filling some big shoes, namely those of Stan Ross, who is going to remain as CEO. Tell us more about your new role.

Yes. Stan, obviously, was with the company for the past 17 years, and he's done a great job with the company, and it's going to be a big set of shoes to fill, but I'm looking forward to the opportunity, and Stan's going to take over the entertainment side and really follow his passion and what he runs after, which is truly -- entertainment is where he was born and raised, so it will be a new chapter for him, which I'm excited to see.

Tell us more about your passion for law enforcement. And I understand you have a family history.

Correct. Yes, I actually had a father that was in law enforcement for 37 years and an uncle -- I think he surpassed 41 years in law enforcement as well -- and a brother in the Air Force. So I'm the odd one out, but it's something I've been passionate about and grew up around for my entire life. So it's fun to be on this side of it.

All you did was grow up to run a company, right?

Exactly, yes.

Brody, the company that you are leading has been doing very well recently with some great revenue growth, 83% growth year-over-year in the third quarter of 2022. In particular, your video solutions, the legacy business of Digital Ally, and your health care billing are driving some strong growth. Give us some details, please.

Yes. The video solutions side has been doing great with the new products we brought to market earlier this year. More to come there as well, which is exciting to see all the R&D starting to pay off. And then the medical billing side, we started mid-2022, and through several accretive acquisitions in the past year or so, we're starting to see those pay off, and they'll really come together, both top line and bottom line for the medical billing side. And the video solutions side is also on a very nice upward trend. We're excited to see continue on.

It is always so impressive to see how much sense all these different segments of Digital Ally make. Let's look at one of them again, a little more in-depth, Brody, the health care, the Digital Ally Healthcare pursuing a roll-up strategy in the medical billing industry. Give us more details there.

Yes. So that one we started probably mid-'22 as I stated earlier, and that one we've done just a range of acquisitions of smaller family offices, different sizes ranging from $0.5 million to $3 million or $4 million. So it's any shape and size. We've looked at acquiring and then rightsizing then maximizing the profitability and the margins on them to really just bring in good revenues and good profitability as well.

One of the segments that must be near and dear to your heart, the video solutions segment has passed an important milestone recently, Brody, 200 subscriptions from law enforcement agencies. Congratulations on that. Give us more details, please.

Yes. It's a big milestone for us, and we're excited to get there, but that's just the beginning for us. The past few years, we turned to the subscription model that offers a 3- to 5-year subscription plan for these law enforcement agencies that will allow them a little more flexibility when it comes to their capital expenditures and meeting their budgets and whatnot. So it gives them the flexibility and nimbleness they need to make these purchases, which then also goes together with our new products that we brought to market, which has really shown a strong amount of momentum moving forward. So we're on the right trajectory here, and we're hoping to see it continue on.

Digital Ally with its many segments must have many partnerships. We haven't even mentioned one of your key partnerships yet, a name everyone knows, NASCAR. Tell us more about that key partnership with NASCAR and your other partnerships.

Yes, that partnership has been great for us. I think we're going on 6 or 7 years with them now, which has been great. And it's brought a lot of opportunities to us in our group as the business-to-business opportunities there are dramatic, not just with the partners that NASCAR has but also just customers and fans there that also get to see our products and see what they're capable of doing. So we've made some great relationships there as well as with RLL, the IndyCar sponsorship. So we've had some great opportunities come through those and one of them being an insurance broker being their preferred commercial video camera, which is a whole another part of our video solutions group that's excited to see a new product come out early '23. And we're really going to see that product hopefully take off.

Brody, it's a company with a lot of moving parts. I'm sure you would agree there. Tie it all together into an essential value proposition. Why should an investor take an interest in Digital Ally right now?

Right now, we just -- we finally have new products to offer. We're going on. I think we had 8 years of the same body camera. This past year, we've come out with 2 new body cameras, all new software back-end solutions as well as a new commercial product coming up. That's exciting for us. And I think that the market is going to take it very well. We also have the medical billing side, which is growing both top line and bottom line. So we're very excited about what the future holds. We're going to continue to innovate, and we're going to continue to focus on these groupings we currently have and really focus on driving profitability for the shareholders.

It is a great story, Brody, and congratulations again on this new opportunity for you. Thanks for being with us.

Absolutely. Thanks for the time.