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VirTra (VTSI)

Participants
Bob Ferris Chairman and Chief Executive Officer
Judy Henry Chief Financial Officer
Jaeson Schmidt Lake Street Capital Markets
Call transcript
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Operator

Good afternoon. Welcome to VirTra’s Third Quarter 2018 Earnings Conference Call. My name is Hector 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.

call, that like statements includes this the Safe provide made begin call. statement Harbor cautions we I to would VirTra’s during Before regarding forward-looking

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

Finally, replay I to via that website section everyone for the will in Company’s this Relations’ Investor call would like link of available be www.virtra.com. made the remind at

to and the VirTra’s please like to Sir, Ferris. turn CEO, Bob over Chairman proceed. call Now, I Mr. would

Bob Ferris

successful pleased that a quarter, Good today. our us Investor nature of financial of of Thank reported we a website. for A were quarter in press financial from for every and issued After business our not Relations’ for release. the due our was of be everyone, metric. XXXX cautiously we as while the call, financial results would record you. nearly our last aware also quite you our in closed, On we the third is quarter And the available we a results thank joining last were section afternoon, VirTra that in QX which with to quarter every market copy perspective.

Rather results discussed which our should long-term should nature current of these our merely not surprising, calls. for reflect they on story business, nor these you prospects. the those for results followed our have have from growth deter we prior time, However, be who of some

a can steady quarterly demand financial at topline and is particularly results While recognized a our our granularity. in not our growing solutions total addressable market fluctuate format increasing, quarter-over-quarter and revenue is is for considerably often our our

However, for an financial annual basis when backtesting smooth on out. looking and our years, to many at VirTra results

a growth has have from XX% same XXXX, perspective, compounded fact we income the annually net period. while over an achieved XX% grown topline since In rates our

that with solid to on annual track mind, still we’re basis, a So year. in have an on

to revenues nine-month million nine the $XX.X XX% of increased million a last from record Our first $XX.X year. months in

to million gross to Our same in profit $X.X the backlog $X.X the also On Due in first cash recognition direct important recognize always months to increased of our year. the increased our from last X% mind it’s of the $XX XXXX of million a quarter. nine in of quarter in and is keep by million. $X.X period revenue this, same $X.X our position method, increased top million we make not to in reflection that progress to that million revenue operational we each

had quarter extending further operationally. and of increase perspective, a but So our backlog made topline towards in strength to we advantages. slower in from a The our encouraging, competitive to while that, we continue addition the versus products we execute increasing progress will is

simulation training experts VirTra industry we training Homeland purchase content the propel the customers. V-VICTA, products Interactive carefully our to new Training from or This heights States Further, training Coursework the for when customized of to Academy curriculum to a secured from $X.X Protection. Border order new a Security to the top benefit Customs in United and of incorporates world’s delivered accomplished the we million and develop crafted we and simulators the Department potential launched quarter first VirTra-Virtual which

help areas of we made best and authorities to breadth produce the the into also substantial depth these simulators our trained human cooperation with respected from our progress key Moreover, knowledge training simulators of can performance. industry’s police planet. and some We in experts the expand most the incorporated of police of how in our

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

Judy Henry

Bob, afternoon, you, everyone. good Thank and

last recent $X.X quarter of decrease last to total scenarios for due the in revenue for recognized revenue million total QX of year. year. third $X.X XX% Our to the was This the quarter decreased relative revenue in of the quarter million. simulators, third XXXX was reduce assessed from of was of we a The sales

total ended of months in of a the nine-month ended increase nine in services. months $XX.X last For million first XX, to XX% other from total nine revenue XXXX sales simulators, September The the our period for due the revenue in good and XX, million year. warranties licensing September increased was fees, increase $XX.X XXXX, accessories,

of third of XX% to XX.X% or third quarter the $X.X from million million or gross in $X.X of revenue revenue of XX.X% for decreased Our XXXX. XXXX the profit quarter

gross to of and million accessories the For of sold. total XX.X% or the $XX year, months from or The revenue. revenue from resulted systems differences in XX.X% type nine for the of margin period first profit X% increased total million each gross $X.X our quantity variation of of

from the expenses third year. the last primarily of net and of $X to legal XXXX was in expenses. consultant in the decrease XX% result in million The of reduced Our QX million quarter accounting, net expense $X.X quarter operating decreased for operating

as non-recurring known company XXXX. operating formerly in the Modern Round Entertainment to listing for ago. of was period increased services expenses and TEC, expense a public recorded months XX% impairment related and in and Corp expense The nine investments same as increases our administrative to increased increase operating first $X.X net registration to in million month general directly $X.X due the million nine on expenses Company’s and and from loss period For SEC the March the including qualification XXXX, and professional NASDAQ legal of year in

quarter to $XX,XXX XX% decreased Turning to in of from the our QX XXXX operations $XXX,XXX last profitability year. for measures, income of third from

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

Our for of XXXX This QX in year. per or of diluted last in last or recognized this $XX,XXX net $X.XX year. income the tax of diluted quarter QX income $XXX,XXX compares of an $X.XX income of share year, in We totaled net to per to QX of share. third compared $XX,XXX expense $XX,XXX

$X.XX $XXX,XXX tax the XXXX XXXX, for of diluted ago. months in provision to months a share a September We For the $X.XX our diluted year share totaled million compared comparable per XX, first nine to nine $X.X nine $X.X period compared of or million months recognized first per or income the XXXX. net in of $XXX,XXX for income ended the

third in XX% $XXX,XXX Our and non-GAAP adjusted in $XXX,XXX quarter year. last from financial quarter to measure XXXX of EBITDA third decreased the

X% $X.X For of EBITDA nine million in million from slightly the first XXXX. months over our XXXX, $X.X the nine increased to adjusted months of first

received, backlog delivery extended occur quarters. recognized backlog, the totaled to scheduled including services Turning million. approximately the in in future, quarter our includes to to or revenue be resulting company’s for products and backlog end, future warranties. our in At bookings all which and of Backlog is $X.X contracts consists earned

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

results, concludes financial filed our of please Form which XX. details over prepared now Bob. additional it That back my I’ll remarks. XX-Q, will turn be to For reference November Wednesday, our on

Bob Ferris

discussing our We believe our Thanks, strategic call, VirTra partners, these Judy. On spent well customers, the strengthen a the of importance relationships and I will partnerships. our brand. amount our of as last expand as good time help

possible. simulation Institute highest encompassing for to and massive and past partners, apart goal our and the our our reputation, content in including years expand offer present recognize To all remain is industry. training time and consequences. founded satisfying products, it ourselves And and human actively death early to use quality between quality the remain current but are ’XXs, finding us top critical help keen of VirTra the We have XX standard require the solution the that distinguish the history the trends. immersive in was to our a from while gold anticipated requires Science training the We for efficacy of working make deescalation future we eye We the industry. on innovating, Strategic life for We I products competition. that the the the in my a simulators future force constant demands attention our Force of effective the at balance edge most apart our set set and our further only and and or to as of money and for with planning Haley in encounters strong and with grounding expanding company VirTra, cutting investment evolving

International in as research products injured immersive we’ve has is out the market and are most police I’m to of concepts, law VirTra-Virtual content by now of what In manipulation. in largest and the threat, simulators. this stands next And which taken of new Academy. enforcing Training with our these Program, to designed learning best encompassing courses Certification and and creating law they’re working fits be built that our V-VICTA, training of The and We Our differentiated consist partners say five and conjunction is for integrate on be development case into the of training. another step. for advantage. National all training with the V-XXX the met have to for this tourniquet Standards diligently Association Enforcement the training of of the competitive order cover simulator to maximize been factors we handgun our educational exacting world the enforcement. simulation Law under nature believe coursework materials perfectly Directors counter’s, in and V-VICTA targeting believe application education value what the standards and the with consist comprehensive specific we contacts of the and courses Coursework of and used scientific enforcement Interactive adult We’ve behaviors to in proud human impact logical library officer training Training

have officers the coursework, now testing as this that other results use addition for we of simulator combines a of of the nationally all products. long-term ensure solution that to departments benefits beneficial means With and classroom and a accredited our

We’re on the U.S. work will potential to with line Recently, actually advanced VirTra technology easily platforms, military demand with army marines their or changes and the Mixed products we cases, Reality. simulation originally. order AR also acute design much In futuristic military in the the space requirements. need focus flexible market. we the in to in announced simulation products such training. these new modifications on are way growing made U.S. But current and occurring Reality very involved in modify our We Augmented or are need our the given anticipated for products. products some

So modular. we technology our precisely be built to

We for military portions of this tested industry VirTra we and simulation well are that a effective news excited and the think products growing for are fit leading, extremely simply appetite training. by offers perfect

continue from products Although line great markets and And selling customers. develop predominantly in current success of our working we market. generated have we’re law to garnering to revenue enforcement those the in new interest new always our is products, to

Department a on new quarter scenarios ports with of $XXX,XXX. this custom facilities Protection nearly add specific received quarter, order training United we and CVP and major entry content training purchase in deployed During the States dozen The distributed Homeland airports, for received across materials. Border order Security will Customs provide the officers we new the be training of Purchase three to custom at international from to training valued more now the for country. create third

maintain a are products this While on relationships to each revenues of customers quality like our our are and minority we our additional with revenues good purchases. the orders recurring, initial the of add need beyond example one quarter how of

keep out to at we XX% pointed pace $X.X previously us anticipate by have end a on backlog million. I I’m the year, recognizing that revenues, our of in the report for pleased XXXX. new these record to increased would of Speaking which year bookings of least

remain backlog, strong. continues In position to our our addition to cash

that a We exploring beyond of excess sheet. that fit to acquisition with leveraging we balance strong opportunities are business. are To ways end, benefits considering our currently generate uniquely cash potential would purchase

still in material. when the share will We process, any of early but phase are information acquisition if immediately this it I becomes and

to of cash uses we potential In so is buy return not the was do will VirTra We most financial stock are also cash. our markets continue the of a given shares as current as as common – price, back QX reserve summary, levels, stock to stock's optimal and based looking of the and on QX. although quarter what the other strong

The quarter operational our of was be third record track the is solid VirTra, quarterly quarter to annual expected. still a current and variability business

So the optimistic perspective, our the reported given steadfast. performance strength company of increased remainder in this balance the sheet, about remains the financial the this half we quarter year, high XXXX beyond. and first of strong have a of we are backlog the of level From the intent and

we be, the the will greater manner responders shareholder we’re the appropriate providing the the with of deploy, create. its The focused the successfully continue Operator, value for and to your the it we shareholder the instructions. And will We the the our in expand name, our rest most and to simulators questions. be will please high VirTra open first best the products call efficient value that provide more that, long run, safer in effective us more tech better safer a we way products believe to we ready of mission make drive possible. remain on the

Operator

Jaeson with time, this Capital a Thank first your question line comes you. the question-and-answer At [Operator Schmidt question. session. Our Markets. be of we will proceed from Please Street Lake with conducting Instructions]

Jaeson Schmidt

backdrop your last Hey in taking over Wondering seen change could if three macro my the any visibility the you’ve significant given months change comment guys, thanks questions. the here? for to you if

Bob Ferris

we this any the visibility macro seen backdrop not our that’s given At point, to have occurring. change

say negative not at would I not we’ve impact no, least So seen any, the any from macro.

Jaeson Schmidt

regarding with that QX? your delivered do helpful. you that’s Security, expect win be here And Homeland Okay, to in

Judy Henry

date year. future that No, next a into has contract

Jaeson Schmidt

and queue. I’ll one me, back into And Okay. the from last jump

to current significantly engagement headcount needing to do to year add pipeline, address Given of your opportunities? you all envision next these

Bob Ferris

on our we based exactly be some need might that depending secure. increase believe We wins. headcount contract would national currently But what contracts on

and adequate is sitting well right now headcount with that Our is at under. were XX about the contracts currently

Jaeson Schmidt

Okay, guys. Thanks helpful. that’s lot a

Bob Ferris

you. Thank

Operator

Our Private question with the your Instructions] Please question. of next from proceed Investor. comes line [indiscernible] [Operator

Unidentified Analyst

any question, you information of can any us coming pipeline a just Bob, Hey maybe? into on up the update or go product

Bob Ferris

under Ralph, comes the we when it really that – wraps. to product we pipeline, keep

for passed and internally any the we product information that prime to try give time. So not until is testing all is ready

also that I And of important point. we can’t make comment that work we’re competitive competitors adjustments for to until ready also It’s obviously reasons really at so we’re our if accordingly. can and type signal allow the doing

So I more but pipeline our several I unfortunately can’t in say give currently, that you product we items specifics. can’t have

Unidentified Analyst

Thanks. great. Okay,

Operator

for the our turn At And session. Mr. this question-and-answer this remarks. closing call concludes over back like time, to Bob Ferris I’d to

Bob Ferris

the many I commitment involved our have people a the I very and and from to and at tremendous without VirTra This time, time could done certainly is our want you. our veterans of country shareholders. built this recognize was employees, the the God realize you can upon and support on partners, you look what fact VirTra customers, are of Thank their exciting at takes women not we extraordinary it sacrifice I pride of at we our and serve. that updating forward Thank believe us our and express. great men families. service thank adequately and bless. to in every call. days beyond best and serving I I who you employee next those ahead know VirTra words with