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VirTra (VTSI)

Participants
Robert Ferris CEO, President & Chairman
Judy Henry CFO, Secretary & Treasurer
William Gibson Roth Capital Partners
Call transcript
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Operator

Good afternoon. Welcome to VirTra's Third Quarter 2019 earnings Conference Call. My name is Cynthia, 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. [Operator Instructions].

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

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

Robert Ferris

everyone, third After today. financial Thank is section website. Investor Relations thank you. the results XXXX of issued a our in Good the of quarter for release, in we market afternoon, joining you press copy our for us the available and closed, which a

in we and boundaries and since an focus business push leader this for this to ever establish to use ultimately edge the uncertainties primary this the the they over continued of most during and and We is and at position simulation improve military by moment and advance primary first help world's practice lives safely That's decade a and careers. space. VirTra as innovate our prepare training. law At personnel any providing half been their solutions market industry and mission a our with to technological responders risks save effective enforcement cutting entered we've for may face

to second ingenuity much rewarded long-term last history that In as our in the the of quarter This most requires diligence we company's as for is quarter saw there third best over of as and an and few well is XXXX success. quarters no successful overnight our shortcut quarter date. our the process perseverance ongoing recognized as third we patience consistent

we XXXX, million. $XXX,XXX and quarter net $XX.X generated $X.X our revenues results a to an revenue, inverse record we third $X.X seen and backlog we income. have EBITDA these million our our Furthermore, Typically, recognized while in in and million backlog. increasing correlation generated During between we in

For prior example, when we the In shipment increases. little product on both that year. the year, differently the caused changed in recognized backlog third however, immediate parallel us did backlog do simply begs naturally of the changed customers both we This have quarter quarters? this request metrics What these were revenues quarters? of question, delayed revenues at of initiatives increase in major continued what quarter the increase from executing to but we tandem. beginning increase third moved outlined has that, answer The is really to in future as quarter benefit not and

a revenues result, To have bolster that objective if our markets, quarter-to-quarter. a our to And anything, than business And, an before a evaluate is the of new expand rather to and fact basis. most in the tendency financial fluctuate as that this get current as we've both and the about our suite spoken our footprint technological Since positive the message. second XXXX, annual we've quarterly into from prior revenues order. way large of on products orders, then, delivered witnessed and results as should result. financial quarters, effects our downwards results we've flex quarter, experienced quarters, of of customers we our results pushed reinforce later seen like volatility financial a In quarter delay a as the this

not material of our previous from significant also delays Further, quarters. we over pipeline year and building able the the unlike some to did federal few after saw in we've We work been any through contracts portion quarters, the quarter. quarter, some sales paid the this past throughout of efforts in were third come We hard the recognize the a off. considerable production both experience revenues robust past over customer in Then year.

points are take the away to therefore, from both of might in can for the One VirTra performance that most directions, accurate fact results insights. these and longer-term view a fluctuate the quarterly yield

at should be simply tide being for that Now in the waiting passively our point are turn said, operating it no favor. stressed and it that to we

expand to to serve markets new working improve constantly and are current our and better our in our products We customers. presence

highlighting were So the are X while the that changed to financial contributors there the strategy success has from prior major factors of quarter. quarters, not worth third

we effect the call, orders simulators an of for additional had quarter with driving Department simulators. announced with driving first We late conjunction of State in is introduction initial first simulators. driving last I for the contract in the X million inaugural Republic XXXX, $X.X this our order, Mexico. our originally addition that received of The to the in On of of mentioned

much available law We're market's encouraged recognized we we're quarter the to just financial these in the program product We reaction and certainly our by of from success. initial and line have optimistic about to revenues this revenue future those of recently made new domestic to topline as the enforcement. orders U.S. third it contributed this

add and as in to orders the in the U.S., early well validate to buzz this products appear enter as to required investment seen VirTra's market. initial conversations these we've the These here offerings

the in for initial as time arms sales take not of will I force of we of our size been core augmenting great there should has the use rate. an alternately of it to and expect training do and We we is product of driving to run serve this but continue grow while potential small means reaction suite to could at believe mature. our excellent simulators, its current exciting, and contracts long that simulators stress number think the However, some

of our market's company. The perception contributed our to changing is second factor that we quarter the this believe success broader

has in a me explain. been leader Let Berkshire training. long simulation

the additions well our prospective products been customers. recognized Our we've but by recently becoming name and for and market more program years, the the appreciated changes made the alternative more in respected We've recently been and with hardware made and the certified implementing markets. market curriculum. are simulation more business VirTra become with a and awarded our another tools to of our our in these in have advancements model, the to our advancements we've first. the our patent the of apparent that purchased, of leader Combined, including immense position realistic kits more patents simulators our state-of-the-art traditional of the simulation helped our it's ever technology, we that the to product TASER training And ultra-high from suite definition with Xk driving recoil sales these subscription and launch is for utilize increase V-VICTA this industry introduction Tiberius to accessible simulators, training have year, STEP as than introduction all Technologies our

on it detail outlook, more and sentiment mean about business what progress forward. turn this the our for about operational our our to back more I'll us changing call through updates. going Judy? the positioning results I'd about Judy we our like speak to and too before may But further I'll for over into much go CFO, our and jump provide Henry, Afterwards, talk walk quarter. to to financial

Judy Henry

good and afternoon, everyone. Bob, you, Thank

ended the X XXXX, completed, and recognized from the of number the to quarter September simulators XX, for delivered, XXXX. the in same months last of million for XXXX revenue revenue revenue year. $X.X QX The million. third $X.X of total an period the revenues an accessories was resulted we This increase increase was and XX% recognized from in in compared of in Our increase

$XX.X For XX, onetime months from XXXX, million result XXXX, the the recur was ended September to of a first $XX.X in being in last our X the for XX, the XX% year. revenue of in million X months revenue not did decreased nine XXXX recognized The that months in ending large order decrease September total XXXX.

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

nine $XX.X nine revenue million XX.X% XX% months first of in year, of our to or revenue of XX.X% total decreased For profit XXXX. the months year the from the million gross $X.X the or of first

In systems, varying mix, differences increases due sold. the profit decreases both primarily our in of services the gross periods, and product was and accessories quantities to in

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

flat For for for and general, expense to the was $X.X expense first million professional a nine relatively to benefits, and labor, marketing months quarter at in development. compared year research costs the was in expense increases same period of services, XXXX, selling, net our administrative increase operating and The the sales ago. due third

in was profitability of operations $X.X our last the to year. for $XX,XXX QX from measures. from million quarter operations Turning third XXXX compared to of income Income of

of first was $XX,XXX operations million XXXX, For from XXXX. the nine of the to months first months operations in $X.X loss from of compared income nine

diluted Our compares This quarter income QX diluted for totaled of share. to third per in per XXXX year. or net of net share of $X.XX income the last $XX,XXX or $XXX,XXX $X.XX

months September diluted of period, per to per comparable compared or share net the income million loss share For the diluted ended $XX,XXX or XXXX, our XX, X net totaled XXXX. $X.XX $X.XX $X.X in

our As a expense in result of of the nine year-to-date $XX,XXX was income and the quarter months QX $XXX,XXX XXXX. deferred in tax third in tax is other and first income adjustments, the net

QX to Our third measure, in million compared XXXX was adjusted $XXX,XXX $X.X of a last the in financial non-GAAP year. of EBITDA, quarter EBITDA adjusted

adjusted EBITDA million compared For XXXX. was first $X.X months of the the our to $XXX,XXX nine in of XXXX, EBITDA first months of nine adjusted

time backlog, of the and purchase a in newly our signed period. define orders Turning bookings and received to contracts bookings of we total

received in life deferred delivered straight-line each For accumulation purchase as the started warranty we and from respective be million. basis recognized over bookings uncompleted recognized We the of are revenue bookings of ended that step XX, revenue that $X.X and Backlog backlog as the contracts signed are or not period. extended and agreements agreements X are XXXX, agreement. totaling orders cannot September months includes define the future on until also a

As XX, our of $XX.X September million. backlog XXXX, was

December million $XXX,XXX equivalents and XX, standpoint, period decrease and third the XXXX. had December deposit, our to capital XXXX the capital, balance the a working in of period quarter sheet. with from cash ended from end the of in XXXX. XX, down $X.X we which million certificates working From end end, of Finally, the of quarter cash $X.X we At of approximately was $XXX,XXX a

reference which today. our results, of our XX-Q, details please was additional earlier filed financial For

prepared my concludes it back turn remarks. That Bob. to I'll

Robert Ferris

Judy. Thanks,

mentioned we've component I a January. products in require this we streams which revenue course, great even strategy of of outlined But, added the earlier, year, was major salesmanship. As new expert

So effort we partnerships. tremendous some more few number a solutions market to of a months effectively, the our over as for key demos record number developed completed past in decision-makers ourselves well and an -- as

training, products the or presence for U.S. our policing we've huge and nationally Police notice for products, vendors new specifically It IACP most the law products industry, annual is certified only is upgraded which sets the We VirTra. largest including curriculum. to the for in competition's. important of the the kits, key further new variety a pleased of in the V-VICTA further designed Of our the newest events the one and we for most year, curriculum standard most alongside recoil our curriculum. certified the a and it by in success attended V-VICTA International many conference, apart the and this industry's and respected I'm new training that leverage of in metrics, the experts we standing Of report of our simulation us reasons definition the is and XK enforcement, showcased and simulators booth. conference of use-of-force introduced Association projectors, September. was, operate police from police all largest that working our the international had training the we the staff who ultra-high driving Chiefs simulator topics,

the attendees, officers remain company is conversations clear training positioned helped to possible, with prospective it the was of lives. customers, prove While unbiased as trying clients to from to VirTra save police best that and that IACP had as the I improve

really law trusted our of recent going reflect releases press we who XXXX most and see for training in proof VirTra reputation, name numerous enforcement our simulation of enforcement. on attendee VirTra. and particularly competitors some the contract other If the We've substantial wins, in federal compared any and of dominant we become with growing think more see advantages space. law can the ICP at to I would

continued of million both expansion announced expansions several We the piece first Homeland Training IDIQ with Recently, ultra-high Secret awarded we've Department is a of a received addition $X.X Federal received the order agencies. our for This famous the from from that We've Center significant Protection. federal $X XK definition contract our enforcement Law law from Customs relationship with is throughout major for new and million contracts the in were We FLETC. Border A $X.X a simulators new million our and Service. order Federal Center U.S. the Security we order Marshals expansion or news industry. Training to Enforcement Service.

fact, driving U.S., In police of simulators it the in houses name largest X just number to distinction. the

who can each them find their contracts, For with in of you those curious are these associated details releases. respective individual about press the

However, speaking, by we're broadly successfully in our establishing crucial foothold contracts in strategy markets on these broadening our substantial law enforcement. current continuing execute a branch demonstrate of that a to of and presence new

what military the switch about that ago VirTra future. when back see possible as several look VirTra to us the first we years decided gives As new clients supplier, is optimism we in to our to parallels for their market government federal

know, in the leverage this our goal we've to market. and one the you federal broad of range of with reputation our has one goals And from of means presence law our working expand agencies. a is enforcement expertise military of As been achieving to developed

as additional we've various the been industry, like military with high-profile this as of been making initiatives progress of in well hiring military. result the in towards decision-makers of this the a We've demos top As one goal. multiple conducting branches consultants expertise,

At moment, we have results share. the don't any tangible can we

federal contract combined including However, believe therefore, on continue with lines built will optimistic the to this and past we've the develop. our changes product given we've on We, we our with the in bringing positioned they well share we as from opportunities continue military. the respected here, updates recent about to capitalize remain the government, various wins are consultant made cautiously within prospects in momentum year, we area, a and enhancing to

end understand when be begin our As we we XXXX think of about shape up about that and to year investors XXXX. will to to some the focus how full year the XXXX, may curious shift the compared

achieved And to year. are on If the Currently, our has XX you to clearly outlook revenues. moments have but continue of that for guidance would ground cover. a or rest the have years the like ground the up our we X take a quarterly either to results, to doing we lot make VirTra power consecutive despite of months few we within to speak increasing streak. everything we compare about provide basis, some annual I don't

quarter Third XXXX with of there suspect substantial record good during while mix which strong increase the we a reason a is was witnessed is quarter Due believe of top backlog, million. we in -- a year of there strong uniquely our the a line, our quarter to to finish exiting current we $XX.X good in that position. the will a backlog

out the how guarantee quarter at cannot will obviously this pan We fourth time.

every the of to our As based our the work a delay And cautiously that, backlog open on and incredible appropriate we're team positive variety questions. that in please put quantity customers and that and end spoken there Yet, I'm impact up the past, remarks, provide Operator, for our instructions. a to my with of we've note. the year optimistic wrap we financial continues ready call in believe prepared remain I on will going to to we cause day, can hard are shipment the orders, of can which of results. factors mix

Operator

Instructions]. [Operator

Our Partners. first Roth question Capital comes from William Gibson of

William Gibson

update on Bob, the program, could or people now a even little the number up. progress insights us perhaps STEP signed are you that more give into of the

Robert Ferris

Yes.

revenue. progressing enforcement STEP and to continue both customers. it relatively So a of It's well, small but to our military remains sell law amount we

go came bit we were best allowing traditional did market equipment what with we debate STEP, on or internal the and to STEP forward. a customers and either with quite go the explain that route, purchase when after go that to way we So started testing is of

with news that we continues the into to pricing good streamlined to way fairly. of our to a for is The that is, taking get be believe, is strategy people time pipeline So very STEP it purchase. it But STEP.

right value a people out, STEP lot to time, giving a But then So breaking not found STEP we're not able at and were contract and a information to contracts that we're there activate contracts we're will away. portion looking dollar are or about our of the changing of hopefully, it about right out this the STEP that of larger but as it, of forward amount now, STEP become revenue.

William Gibson

does And in net up in-licensing that show or sales income?

Judy Henry

Net sales.

William Gibson

sales. you. then Net X And follow-up, please. Thank

that as Is simulators. driving method the well? a pay-as-you-go mentioned You on available

Robert Ferris

out available working STEP of program. details but that, to be definitely simulators still our We're the driving Yes. have hope on the is

Operator

to over session. time, his turn question-and-answer Instructions]. back the Ferris I'd like at our closing for [Operator And now remarks. concludes this Mr. this to call

Robert Ferris

extra you. a the time customers, here was from Day, the very extraordinary certainly the the VirTra, That we those us, be of commitment Thank and training partners. privilege exciting serve in bless. and country exceptional forward who would the with industry. and is updating country customer of days employees, on absolute how our a shareholders providing you is at in Yesterday, you responsibility serve Veterans This have we we God believe by look reputation our Thank earned. our ahead I and found mile our simulators not to it going next and call. is reminder our best solemn support our and are without best celebrated to service and best

Operator

us joining Third Thank Call. you Quarter for for Conference XXXX VirTra today

You may now disconnect.