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VirTra (VTSI)

Participants
Bob Ferris Chairman and CEO
Judy Henry CFO
Alan Klee Maxim Group
Call transcript
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Operator

Good afternoon. Welcome to VirTra's Second Quarter 2018 Earnings Conference Call. My name is Devin and I will be your operator for today's call.

Joining us for today's presentation are the company's Chairman and CEO, Bob Ferris; and CFO, Judy Henry.

Following their remarks, we will open up the call for your questions Before we begin the call, I would like to provide VirTra's Safe Harbor statement that includes cautions regarding forward-looking statements made during this call.

which may products projections, or of and statements statements the management about or otherwise risks presentation, and made. differ about company's statements materially could the services future, results and this uncertainties discuss a cause information, financial expectations make subject that During to forward-looking actual number to are or the markets, from as does undertake any required them by not update law. company The to obligation

available www.virtra.com. made replay everyone of that Finally, in this Investor via I would to the was link like the remind call company's for Relations' section website on

Now, the Please Chairman go VirTra's like I Ferris. and sir. would to call over ahead Bob turn CEO, Mr. to

Bob Ferris

for us thank afternoon and Good today. joining everyone you

in available We of Both results a as have second perspective, issued the financial in from for well operational our of posted XXXX press we which a a copy results our is the Relations' of Investors quarter outstanding section release, as XXXX. website. the financial quarter for second

In the highest history revenue adjusted the of fact, we as EBITDA the company. the of achieved as highest in well level

we three financial law agencies in VirTra also a in training at the release. a accessories important new in Vegas. $X.XX Las number than success, the Francisco U.S., largest contracts wins we officers; this press our In Beyond Southern sold Academy and more Police representing aggregate, over simulators the Dallas highlighted valued San Department, of are of the Police Regional the quarter to as X,XXX million. secured Police Department, enforcement Desert the and

the marksmanship using than researching to simulator, to product departments refinement. and The own right. V-XXX Police the world's of XX efficient. and receive VirTra's the At in all we extremely our continue upon to each Also platform SFPD available. highly years three another conclusion that of its use and three of of V-XXX but sophisticated and VirTra all in intellectual first calculator that proud portfolio for contracts is spent instructors build as with one these the the are products, training our that both their of feedback also are core simulation that extremely their our more we needs. simulator. training these as a product this marksmanship-focused Department veteran marksmanship they force from is continue San ballistics same is chose year are items from improve now offerings judgmental products simulator Francisco over do included for training receive program. departments came vetting a to use to quarter. It was simulators training in We much XXX not All scenarios property Ultimately, our degree often purchase attention exceptional each many premier plans accurate VirTra's

about outlook our Now, dive for Afterwards, walk months in to over operational talk our as I'd progress the results before quarter six CFO, to financial on further Judy? rest for turn I'll progress, more call of quarter year. to Henry, back well through I our our of us first the jump the XXXX. like and as Judy our this the to

Judy Henry

afternoon Bob. Good you, Thank everyone.

in a second This for from record QX million. quarter recognized revenue XXXX XX% was million $X.X of we last the $X.X of Our revenue a was the total increase year.

both June due higher $XX.X periods months million ended XX% six increased $X.X services. revenue XX, our was for in simulators, The year. XXXX, in of million to For the the to increase other total total from of and six our accessories, sales revenue first months warranties, last

XX.X% to revenue of XX.X% million $X.X in second of of or increased quarter [ph] $X.X XXXX Our quarter of the million XXXX. gross profit for from the revenue second [XX%] or

to $X revenue. XX.X% from The for XX% months of period different six $X.X of or first of revenue a from total the variation For million of year, sold. each margin million mix total accessories profit or increased gross and the resulted gross XX.X% our systems

XXXX quarter year. expense increased to XX% QX operating the in of of last $X.X $X.X net million Our from million for second

net staffing was SEC first a service company increased six and G&A of ago. In professional expenses. registration the increases public XX% directly period, the related in in and expense, year-over-year the as $X.X administrative in increase fees non-recurring Exchange result expenses our million expense in as increase in The For months and resulted the and of for operating professional and professional from XXXX, $X.X same to in operating each our expense payroll million period general well levels up-listing. other increases services. and The to included benefit public legal year each NASDAQ company net and and period in expanding fees, increase from increases legal costs accounting services expenses primarily

million year. Turning last of to million the XX% from our $X profitability quarter QX measures, operations income increased in of to from second $X.X XXXX for

six operations million For XXXX, income increased months $X.X XXXX. the six $X.X from to the million first XX% of from months first of in

year. for XXXX income improvement an share. share totaled diluted million Our or $X.X the in was or quarter from income net $X.XX of This per net diluted QX of of $X.X second $X.XX per last million

of taxes, tax the As this deferred management's expense QX in a assessments of of result $XXX,XXX recognized in reporting of we year. income and an changes

the our June the X.XX diluted in ended year or a months diluted per million income ago. XXXX, per net $X.XX totaled $X million to period comparable compared share XX, For $X six share or

EBITDA adjusted of million measure to the year. financial XXXX XX% from of QX $X.X increased non-GAAP million last Our second in quarter in $X.X

million first first increased XXXX. $X.X to our the $X.X XX% EBITDA in six six from million the For of adjusted months of XXXX, months

backlog, for to sign is future yet our delivery not company's contracts been consists bookings for has the of place, where or date backlog but in Turning a scheduled scheduled.

$X.X not been Backlog including totaled or quarter has all backlog includes and million. services At extended revenue recognized. our products So, earned warranties. end, approximately

a was million from at the working end, the $X.X sheet. approximately of of cash cash end quarter improvement with At balance working XXXX prior up working our in capital, equivalents, capital second in $X.X ended end we an million prior we capital quarter. at $X.X quarter to from had the the the From Finally, which million quarter. $X.X standpoint, in of million and

For additional filed our XX-Q, today. which That to financial reference remarks. please Bob. our results, concludes was on details turn prepared earlier back it now Bob? I'll my

Bob Ferris

few Russell discussed million a with in to Thanks Judy. and we bringing continues call, investors At the Index, stock into our That us attention a Microcap trading volume last excitement of up-listing to recent with $X for excitement NASDAQ. the the over our inclusion new responsible likely days. associated over

have technology though, continue to an make as we critical liquidity, ultimately business and while greater long-term through executing and saving will within company, most the progress driver society. of to is But to our to credibility, our of a expansive to relevance business to to element move One vision, extend and partner anticipate ultimately, lead the our our still grow improving our contribute on make value. lives value While our is significant build network presence, we to mistake which the much we is no plan NASDAQ awareness, industry. more shareholder ability

courses. Institute, know of our with a As training one key law Science some enforcement you recognized Force is world-leader in of partnerships

the and to is the curriculum education as customers. uniquely offers vital training well Science our as developed have courses VirTra we newly simulators which of Science are into integrated now officers, Force training to research our why Force

courses; agencies four-part to QX, first two past and kind based We've training has dogs. of During both law culmination the simulator held law on enforcement LAPD on program second one Also important the simulation new Sheriffs already experts quality new in to police, law training and system years. National we and opportunity to other the launched developed called Science St. nationally the the the its training LEDET. quarter, gave which the was of partnership a enforcing Louis science, learn recognized that counter's science we training of of of of the Force teachings Further, military between and for series XX on of a experience the Partners. performance, another officers our that safe VirTra's partners Strategic human research, recognize training we leading with expand based aspects team the Force with protocols and content. during one courses applications or human over Association factors The with enforcement, PD, years County our domestic to events any interaction Science. most enforcement V-XXX with VirTra with program the is VirTra continue collaboration two our help create expert Haley of the

world closely relevance. to designers possesses [Indiscernible] with in customers are and our hardware engaging superior training combination The content scenario-based VirTra experts the top immersion, our intense, our using and team industry-leading software. and can customers create VirTra's quality, scenarios works of a which As displayed realistic content ensure attest,

at We time. of our VirTra's content, improving training not reaching of and for help library our which partners, impact quality provide, and training only life and the product can our of and can content is the customers death are the differentiator. new greater on constantly any makes a said, while That face expanding our library it's huge situations levels of with we key today,

products first world's introduced electric we whether proud fire world's is years, our of or degree the world's introduction undeniable. have it scenario-offering VirTra's the the train be first the that Over platform, revolutionized truly tradition returned have device, industry, XXX fastest software, the

there. However, we stopping aren't

our refine on selling best announced are market. to to working new products, continue we the once busy that we developments released While be will also

summary, innovative VirTra continue recognize we business, in for prior quarter much both In direct the internationally. period. keep that high and Please great during growing mind QX industry a the we're of domestically work proud we is new result drive quarters. from presence, revenue of and a of was Our what to our quarter this technology, accomplished and deployments profile

and our XXXX. have about the of we we remainder optimistic recent strong the Given performance remain reported, backlog

is our of worldwide. can second XXXX accommodate large facilities evidence of The simulators staff deployments quarter and that

of be, call invest is long We Our to the safer deploy, that the remain to our that, run with focused decisions us VirTra moved tech The the way light rest questions. and we will more recent better products, possible. we ready best and the the pure the will staff will we most the of value most products on in make expand production in-house the safer first expand the of more sound and the quarter. high shareholder in successfully the value to manner be, our shareholder our the we're of best mission your create. to in the greater open we more growing believe to drive providing this responders VirTra name, for and efficient And simulators awareness the

Operator

you. Thank

We [Operator Group. of comes Please with from the be Instructions] with question will now first Maxim Our conducting Klee question-and-answer session. your proceed line a Alan question.

Alan Klee

much Could you into much me how for maybe the now quarter. Great we've new the timing $X-ish earned? have was And and backlog the then it about get to Congratulations. quarter the maybe you maybe think you start backlog had afternoon. going million, And the that with were? earned Good during how Yes. helping you. takes understand that's Thank the how bookings quarter? the of that

Judy Henry

your you Thank question for Alan.

the totaling quarter, signed $X.X during recognized million. the million. company At have revenue bookings new we So, -- we the received of end, $X.X quarter

accounting the of XX% of straight of our So, bookings as a in XXXX. from XX-Q, term they in line backlog to -- the with over million. management discussion be majority December backlog $X.X analysis quarter convert revenue But period. the our management over And million rolls take believes on the the of different prior included be by the basis amount of will had we longer had warranties we going approximately balance to being XX remaining or convert our as may forward number the the extended quarter, approximately because of in to that and converted received warranty a percent method in the $X.X such second

Alan Klee

that? it's Okay. much. much quarter could in and then you Thank a about any revenue how you about that you little how guys And trended? think of increasing think very the of was like And about actions -- recurring talk we how

Bob Ferris

the question. Judy the I'll Well, of your first part. last will part answer answer

service part, about increase of more are refresh and component. for think for scenarios mixes we it to and a new include components last much need so constantly and considering -- an are the recurring very to revenue is focus has that to we plans, recurring revenue with the some that's warranty, current Obviously, do far methods, component. content our warranty revenue. as also on can and revenue. new sometimes that There as cases, revenue generate important And people On recurring based some recurring product recurring involving we how different topical

receives use occurs is Tasers department changes changes, the don't purchase but in or which weapons simulated thing a is -- is value lifecycle. orders they necessarily, case. to they decline a people a through force have when component there entirely so VirTra revenue firearms, that a corresponding and of other It's the is it The lot or overall of had understand of recurring then not

our as revenue best as recurring would far in our Judy -- financial that. answer So, be the to component actual of statements,

Judy Henry

We don't revenues that component is that available break today. in our currently not so and out readily -- information here

Alan Klee

Okay.

of simulators? gifting you of been for potentially much foreign your outlook how For department of give update the states -- how the could of of of contract, used additional it's aid kind your an of and

Alan Klee

certainly that one government qualified I government that include can received. for well IDIQ exact company companies number is they so that give that, being And update extend dollar not figure at us of competitor's have the has the was VirTra set what of it on both what that, what the IDIQ -- an The has I you. other has and companies. cancel can general are at IDIQ; two been we're Well, awards been do five-year government. those used caps at But we of we as $XX than that that, a can a -- early that considered Yes. to the know it mean There also that words, will under would a that, that -- in halfway number. would received has VirTra million. it's and in if, IDIQ the and I expand two the a $XX currently two in be as It's are it is combination to I say, would been does that encouraged still IDIQ the continue not it's is it that But a an combination it have competitive been sense, completely other awarded VirTra of million of more. has. of In stages hopeful the We've less companies. by obviously that $XX sort see given the million. fact, of what of again along discretion certainly point

Alan Klee

extent you of three that know wins give sense the a And large to they you long I for then in but And what discuss potentially you what have confidence don't you. think and Thank confidence maybe other the large Thank can trialed right word is, could that other us have do you create, do were could your more of with for? large the police to you. agencies departments, agencies sales kind if pipeline that? -- to how extent

Bob Ferris

the simulators. to that's quality, space. agencies programs think established wins is value within looking way reassuring implement markets and very, VirTra more I training product the to to long very more and important that go becoming a using ways, Those many Yes, as high trained large question. that are a agencies affirming and affordable high

of amount involved the in say would I time varies. So, that

the of is also way that think responsible agencies the products markets. leaders I from gamut U.S. largest one -- that's those of But a for include our all are some lot which have with the criminals enforcement span the groups law generally Service researching on of the Secret year to the or more references apprehension, spend hardened the CBP, we the various that also agency the the now securing Marshals -- a Some [indiscernible] responsible most to of countries. one

is helpful is agencies three sales very future no not very in know America, that is large you departments to believe, way I departments crisscross very, large covering those the with affirming. It's decide our VirTra -- to, but it efforts. XX,XXX everything. we So, police Obviously, go having VirTra is

Alan Klee

interest you'd highlight Okay. like Is in offerings think stand of out new from in there your anything terms customers? will to that you of in library terms

Bob Ferris

Yes, release to single of our dating it's new to how putting granted back out effort industry. and the kind quarter-after-quarter we development first But we is take every much research quarter, -- we it in has that how XXXX. relevancy -- are and put content much in for

It's very Institute; of the that we're NSA, three to with. to from take experts very, curriculum-oriented. level. just the incorporating Haley Strategic, it's top most to training a world designed in content higher Science some Our working is the It's professional recent Force

how high combined that So, or with want with simulation to situations. for every our real-world our those I for think partnership very, we entrusted standards decision-making skills very life minute very and in to translate product best death

Alan Klee

competitive do to way that to trying as what on environment simulators of little the How a some win. flavor maybe they're price extent other seeing? you're about terms And you and a the use companies in some or having to Okay. think multiscreen

Bob Ferris

Yes.

So, will ones we a that us. we very are think always companies think paranoid are most little on and -- the competition successful and considering be that we diligent I be our to are should believe I the to dangerous

had in that the with we So, minimize had still have compete while make to we training we that most lot effective I the fact a we out ever the have way that enjoyed appreciate seen, key just other every vision And to no create because simulator happen. a day world -- in the want companies. have had that we the go and competition. have there areas to fact really to leads We of

of mindful our extend So, A work lead. we're lot very, that. we the do very of to is

your have best-selling we think years always we've part new I than make and invest just what -- Our been products in creating focus better to in times so the competitors the products. copy of do is way to many they've is things how done continuing edge our tried competitive and And past.

VirTra they reference is many lot the product say times, themselves. is So, to within times they space. cheaper, those the they of enforcement, -- call for is our don't difference or VirTra and they product between that's trust helped that a -- other that actually us the large try but they law equal in really And recognize when what's really products

a the they a they those based they with lives and type and their and of try lot simulators do seriously. has people take on on the that the then want time the that of investment So, But major they understand of it go half. impact a and competitions. will to seriously experience, they They it on do that to out take so decide head-to-head agency and And of people training wanted in very what -- go cost money they just over which of enormous what an well come and it's VirTra at a company happens employ. decade

Alan Klee

Okay, talked about things some from bringing great. you in-house. benefits And of some then the

you So, some do and impacted seems cost bringing things things could with when but the you the add goods in maybe general, tariffs all in-house. moving one of I'm a wondering lot pieces, that, margins be trend the think but be could efficiencies moving by, to also parts be other. maybe just in up things you're there gross or in of if some maybe the direction getting

Bob Ferris

not of are tariffs we margins. impacting our gross seeing now as As right

so we're -- impact. is I of seeing sort And now, all I of right can that say as not

company. very we is gross that. is when It's an that shrinking future margins, that's we -- absolute not as to not expectation gross growing is -- of comment dependent I on I don't our ball far of -- margins. As are I against cannot comes will really that there but the based on gross a on possible. it lot as there -- can't where a is a of fight a crystal margins, idea we variables obviously --

great average we and grow have we've have manner. a have margins growth. a margins, would but certainly and to great strive gross and it certainly we gross gross margins, we also gross we say could we overall quarter for it -- strive strong And want but had might the responsible for at very that I for we but in prudent that higher may strive company or certainly margins -- So, XX%

Alan Klee

great. Okay,

restaurants operate to be business license the now for modern grew. I be related current potentially on? there For getting round, that number the will royalties operating your or that that of they expectation they'll you that What's notice royalty

Bob Ferris

with one operate two to currently three believe they lucky and locations They two have strike. or I restaurant I licensee -- think

intent at that's information are be would so grow, where now. know they And for the on they that to I but plans. is resource their best their growth

Alan Klee

Okay.

were out at there one during -- mentioned that was? how point non-recurring time Could expenses. call, you also the You you some much maybe that

Judy Henry

but don't the to I for here amount related right up-listing. the exact registration expense expense the legal me, have dollar it NASDAQ and in SEC was and of accounting and front

Operator

question-and-answer turn remarks. to concludes this [Operator Ferris and to for I Bob call our Instructions] session would the closing At his this back time, over like Mr.

Bob Ferris

Thank you.

mention Tuesday prestigious work, This Before of bell to we the to our solutions of through on determination, York NASDAQ do the God certainly culmination partners, lives recent in forward best would I look intended to next is and that VirTra New and market scheduled updating on The shareholders. years This are to call, like and we our commemorate problems. creating customers, conclude exchange. and August our hard are an and to exciting opening today's City XXst. and event our support the time the a focus at XX is us you employees, we listing extraordinary on stock days ceremony bless. ring of you symbolize improving I valued on from without we and call. commitment superior believe couldn't ahead saving it difficult will Thank

Operator

VirTra's conference of quarter for second today us joining for you Thank call. XXXX

You may disconnect. now