VirTra (VTSI)

Robert Ferris CEO, President & Chairman
Judy Henry CFO, Secretary & Treasurer
Jaeson Schmidt Lake Street Capital Markets
Richard Baldry ROTH Capital Partners
Allen Klee National Securities Corporation
Call transcript
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Good afternoon, and welcome to VirTra's third quarter 2020 earnings conference call. My name is Christie, and I'll 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 questions from VirTra's institutional analysts and investors.

Before we begin the call, I would like to revise VirTra's safe harbor statement that includes cautions regarding forward-looking statements made during this call.

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

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

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

Robert Ferris

earnings highly our thank base. all for tenacity well say We by everyone, it's you. joined last of that unimpaired. is we today XXXX call. simulation Judy success, with anything to and afternoon, that continues integral serve law and changing Henry, Thank personnel need to With highly and and we've performance have our XXXX organization relatively But a VirTra, been least. joining well-being enforcement X to I'm you military an through year Good quarters a volatile customer vital circumstances the demonstrated training. adaptable mission of us, CFO. the also for therefore, and the us talented if improving has of the our personnel robust training adapted quarter effective for VirTra's incredibly ensured are third for

did year. good. XXXX results in XXXX achieve third our the able due Bear about same fact, in the to in revenue last significant we mind, despite COVID-XX, to faced of quite we half as first were were In the challenges quarter we

history fact, our a last company, high of XX-year quarter the the was R&D. best In very second in QX year

were essentially our our you results ago. in know, year As have our results pandemic, installation complicated our process, you despite those with has third particularly a already the release, of earnings quarter seen which line

positive For our earned which the quarter, drove EPS third revenue $X.X earned $X.XX, adjusted we $X.X of million in EBITDA. million. net income, We was and

are a year as at pandemic. restrictions backlog. lining last there this result, year were we Yet, very that in similar travel no for when a time our same the despite or also As we we is the VirTra increased strong the silver were revenues, position

As was backlog continues this and second with of quarter. $XX.X third at which of consistent service obstacles sell XXXX, higher COVID-XX. our theme September essential our Financial of despite $X.X quarter year. to by than VirTra created it last is the million, a million results the was XX, time the underscore customers needs

restrictive effectively we less able the regulatory obstacles. install lifted state guidelines unlike product past became were we quarter more customers at and our various domestic as this However, customers became ship to as QX, and to lockdowns more proficient as and navigating

portals. been be is and not canceled online travel International business me so to year, ones, in each orders, a VirTra large are additional for to particularly delayed QX, and us international clear, XXXX. challenges converted continued or Trade domestic Let which unique QX than due obviously complications shows, are focus more restrictions. with immune have to from

are quarter last COVID-XX. sales as that the as highlighted in we this be And press that past, from important pace sales it we continues lost when true and more installation accelerated. directly ability despite year's backlog this worth not our year, few our said I've to far have this have a that headwinds sales releases indicates today. exceed mentioning our taking However, know, into account with We of to

than to of the Homeland law center or XX order, career Training the U.S. October second centers be in simulators more with we and of nation's last FLETC. year. this provides million federal $X.X the installed year. will enforcement They Securities end largest of The And Federal agencies customer first training the training received in FLETC provider of training. their the by Enforcement order our from Law VirTra a long of at Department became enforcement is professionals law is all X

Given FLETC's partnership to on choice reputation, a sends double with their strong prospective customers. down signal to their us,

VirTra Our serves which range to our And grow partnership is reach those channel brand awareness as with of a a with through a agencies. who can educate could wide with great FLETC it purchasing police concentrated provides us of we example and how influence decisions. able

Border was During for that VirTra. and, some that reputation Innovation followed and advantage. Protection, to and innovation. order VirTra to our U.S. kits. products from simulation latest constant of the see of upgrade a at drop newer the part share officers tools recoil training. market customers always simulation received our long-term heart you the and train the in have judgmental we included been competitive de-escalation leader is is know the $XXX,XXX our rewarding customer in some worth has time expanding maintaining and it of of force with provide training use It's noting, of DNA best But and their requires an to for long Customs VirTra available. who often time large and for a the our satisfied will quarter, also order Those This story long services

remarks. since year my company to release relates directly of a third some Infoscitex, market, larger a the the opportunities But growth IST. relates to called Our new military save we discussion to partnership this this with I'm discussion going in for or press closing have that

the results of financial now, Judy? XXXX. Henry, of going overview provide the for our an Judy For to turn the to to call CFO, third quarter I'm over

Judy Henry

Bob, and afternoon, everyone. you, good Thank

quarter third XXXX X% last million of year. in a recognized the QX million. $X.X from for we revenue total was revenue of Our This was $X.X decrease of

the in the the was in year. recorded total we first XX, X and was September installations in revenue a equipment XX, compared same last COVID-XX period our X% decrease result million. ending the $XX.X XXXX, months the ended a of revenue months of was September travel the from a of X X months XXXX. to For X in million to $XX.X reduction number restrictions due decrease for XXXX, The This

Our of quarter The the million revenue from to reduced XX.X% direct and revenue costs, in third gross lower million of XXXX was travel increase quarter costs, profit due XX.X% $X.X service X% in increased or for material XXXX. and of warranty $X costs. or primarily product gross third of mix, profit to the the

of increase of was in For total fairly primarily XX.X% tends annually. due remain when or to profit year, increased The profit from revenue X our or total mix, the of revenue sales revenue. gross first and to slight product million as a X% percentage months million $X.X gross XX% compared total $X.X volume the consistent to which of

expense QX third we the year. of million operating last $X.X reported XXXX Our of was quarter $X.X for the in from a million, increase XX%

of was travel months of general to trade our ago. and offset TEC, included operating TEC a investment as known also which X expense increased costs X% first the also months to selling, Corp., expense. $X.X the the shows. from investment impairment by in for operating period X-month expense, Eatertainment period from a the in recorded $XXX,XXX in For the a an XXXX reduced restrictions XXXX, The The as in expense X operating year $X.X on administrative an $XXX,XXX as million in recorded increase That's ending COVID-XX operating due was impairment XX, same million September

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

loss For operations the from reported from X the operations for of loss above XXXX. $XX,XXX we first the X of of first $XXX,XXX, months slightly months XXXX, was

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

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

EBITDA quarter QX $X.X improved year. compared EBITDA Our and of non-GAAP million third in million $X.X adjusted measure in XXXX last financial to of the adjusted to

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

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

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

we at backlog up $X.X million, our from XX% XXXX, June ago a reported million was and year of the $XX.X end XX, the of As was million $XX.X up September XXXX. million XX, which or $XX.X from

Finally, end, which ended million at our and receivable in equivalents the XXXX. At in at of balance to working million second million a quarter at XX, $X.X in at total ended cash working approximately $X.X XXXX. December we up with to compared $X.X XX, XXXX. the end December sheet. $X.X equivalents, million compared working and quarter unbilled capital approximately capital was cash standpoint, had and to in we of million certificate million cash cash to and December combined quarter from Accounts revenue XXXX deposits XX, end $X.X the $X.X From period capital

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

Robert Ferris

Judy. Thanks,

an effective years see again. What's hard is VirTra exciting began As training the calls, incredibly for police. as work became idea we've just for after standard gold prior happening discussed it and on to then simulation of

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says fighters' improves one which ago, simulation simulators result to develop community the world, our Saltz loved There one and police new together work military They this war the technology to to the how. shows vehicle piece can the has it to world of effective We're The major war previously accelerate the federal high like the work guarantees, capabilities. sound, but by seen. value The we our so have market world excited loss, to value expertise improvement this market We're We're it to contract him fighters, program. board. on military this could market, appetite no our and offer business into a into we working contract believed in to simulation quarter, know, make our great government, To whereas reached. the important, Airmen for are expected will help when training about aspirations strategic award-winning Never world. $X.X possible to solutions mourning won penetration our the that VirTra Decision records a as but world-class market track firm technical efforts XX grow of military paramount total decades The business the of us proven of VirTra's providing year. likely week, honored and, of an from the moments addition and idea Mitch unveiling the positioning ensure obviously been training of Interface, to few our his a a experience the development on police have particular, board push others. this passed the an help been a created of his a highly about executive ADMIRE, the that more and owed we from made develop Laboratory's to his receiving prominent the market. won last $XXX approach companies training to mentioned combined I we noble to and as built our engaged our decision-making, just contract the is with marksmanship and best in years the we're the the Through use is the very and our foothold know added an a the a milestones family XX when years' simulation plan start to great we this result XXXX a John key what's we've those Making ever It critical the Corporation, especially experts we purpose train technology. IST, his O'Connell puzzle. for Mitch not and skills, the or that on you and XXXX. now in military building but board are and our Givens, prayers establishing are bring be the military's revenues Matt to military concentrated our million the example in in I complete. goal. market, end are military. very the to so unique in support organization ones. is partnership, VirTra last The or and military And & in thoughts Research and simulation directors. simulation upon the before with is I'd and entire and accomplish is military. simulation with VirTra we In board experience the started progress experience. JL has board. DCS to military then in most Burlend next-generation industry John independent substantial military towards and the confident is our attention John's Infoscitex, move Force require a with with Last remain partnership training support IST the well-regarded made away our of accomplished best our also is with market. and it of has in we're who member, and Air As have regarded project with VirTra a million we system country of simulation REsearch, to of about content of we what year, most Associates, incredibly skill of and contract subsidiary DoD

of see, year, despite you a a financial while to we quite line were our a to results pandemic. rare were able we with that we'll possible. optimistic achievement, business able trend are the XXth no be of can And the line guarantee last are achieve As the year we top to cautiously year, year consecutive where is that X-month our this had we that growth. in given There's continue ago state hill it world, climb but

did grid has same we to year year, commitment the deliver team have and our We excellence this pressure. proven our as to under certainly and last ability

larger bookings, in the sales we We the generated converted quarter, hardworking of revenue ago. than And into likely will be majority during did quarter. in have team a our backlog a which the third fourth $X.X million year

revenue. navigating response could happen install challenges therefore, challenging the Europe that a U.S., second this with in headwinds recognize And in pick we remarkably seen We've has and ourselves installation the clean As in ability recent that up, and long-term certainly and remains our and history materially government's successfully the prospects call, I customers economic it balance of Regardless hit the echo weeks. said the business remain at than for of faced fact a to should of company could that our we impact find start situations sheet stable better quarter. the during product ever our before. environments. proven to a VirTra pandemic lockdowns the whether

in your the note instructions. the the and last We year up with PPP debt will have we new loan, of to time work quality fully matches that my financial remarks, other positive day. year. due and sales optimistic the we'll cautiously progress going which be to and provide call up exceeding please to year, this cash, our and exceptional than a put wrap appropriate open expect team essentially that mix no remain but our end backlog And Operator, $X.X on We that, with to for last the continues I'm in we the questions. forgiven, personal million every


now Instructions]. questions. for is The floor [Operator open

Our first from Street. with question Jaeson Lake Schmidt comes

Jaeson Schmidt

remaining Bob, QX. backdrop the I know macro here of of sort you're mindful in

pulling if COVID noise, you of to be of whether some customers from curious sort it election, Just get cases, benefited whether et think spiking in ahead be the potentially potential QX it in cetera. orders

Robert Ferris

Yes. Great question.

I think that years concerns. some realize definitely also there's potential had past, those of in there, but they've kind

wasn't So VirTra's back in event. go history, unusual year, there an even is an you though years if there election X

I So though, years I there been but in way it's past. think, is it kind of do with think was do handled line some that in the that, of

Jaeson Schmidt

always Okay. is What really seeing being That's a opportunity talked of do sort military you you've helpful. significant recently? market for then guys. the you've you traction some about been the driving And of think

Robert Ferris

a -- of Well, We've very be We've and military ambitions been products into by of XXXX, result on can our for late. first as we've really, it working of lot it simple years. around But built the a as hard market in released military work specifically on them designs many focused talented market. the had people?

is Now off lot generally up XXXX. The we much bat to market, right known right time. market police contacts, taking though, takes more opportunities. develop, military to the in to right ended longer finding It find just in get success more for the the the a

where major virtual they not doing and So simulation they're have center travel X how has reality some the where training, fighters products though it war recently idea the every gone looking simulation be the immersive into we get in And and need once I point the of get training. to of a do how transform situation really months a train. transformation on really have way do at military fighters that have focused through actual war think they that a meaning to does of the that, hands

is, has actual because that has firearms products device to XX that that lot I so and a create at recoil with And rounds. kits in drop done of believe, from shift opened simulates opportunities our threatfire back work fire up return or this our fire return really VirTra electric can lock

So be you ammunition, scars. an proper MX, out and training locks avoiding shooting of back training would it when if for you're

have think more within been that So have is training the to commercial today sector. the a I companies in lot maybe that have also the little a the and innovative military military refined applicability -- of products that open sector for actually of commercial

to So OTA executed by if other you transactional the OTA of is concept that look at defense that's that large opportunity. authority, around they the a then idea the been traditionally not getting have product the supplier being taking whole them a into a awards, great innovative of for department, And military, the great companies of at getting if military, queue. advantage that have price

ultimately up we want take product little exceeds that it in are what So the board past. and can can the our then lot possibly they've And military leverage opportunity that for with the but as on see we've advantage of tweak a with need, to what incredible of an accomplished decision-makers done already philosophy is an concept. their area think they an where they end that I VirTra military where a

Jaeson Schmidt

traction what could seeing color. I for you're Curious I'll STEP the update seeing appreciate jump program queue. last back in there? and and in one And that you're on if the you Okay. us any me, then if

Robert Ferris


an queued see on available have the program, to money is a program, for already it meaning certain We situational that traction may but equipment very they and purchase. STEP up agencies, continue

And of purchase -- program. the proceed offering will a STEP with they go equipment regardless so us

the a years to other equipment. do have It X do They there not capital to get them customers a have might have money. to be that for for X to out budget purchase. ability X We the no

right option so of started sometimes can so are away. program get absolutely And groups delighted we that those with our a have STEP some equipment they

noticing every little a seeing service. some a is a towards we're will move It's mix. just group as say we're that different. So simulation I

a concept. STEP times, ago subcontract cancel. the to a single fortunate And that's has every single signed time track issues up that had its they have a second so Every into X, we and that every And whole years program which needed second the But groundwork we right spent X-year to phenomenal heard, why begin definitely now, other research might feeds feel begun. And now simulation X do who a the have entering people single of for the STEP customer And last very person is a renewed. year. I who year, had as for the record. did service many one, renewed that STEP the

So great question. Thank you.


Capital. our from ROTH comes And next question Baldry with Richard

Richard Baldry

quarter. comment a I'm just linearity of the on bit if wondering the could you

of Sort of and curious deployments. terms in at both bookings the

the the beginning little So around of did fourth color pretty more open Or it of lot And quarter date? start and quarter a was the a end? up tight then the in flattish? the by kind it to of maybe beginning

Robert Ferris

clarify, throughout Just to speaking recognize are you revenue the to quarter?

Richard Baldry

a Sort backlog get you well out of the able actually had how because deploy -- you're but to quarter and [indiscernible]. revenue good and

sort guess, lot parts. where facilities that's I the but also are able how you I'm curious, to the X of ability could So because be to the in be sales were to later late now. It of reacted, -- how your to working and could deployments a access bookings quarter get gain that it and just

Judy Henry

-- me Want

Robert Ferris

-- Yes.

If you to Judy. want that, cover

Judy Henry

we've very some larger throughout terms mean, bookings, say. for have have the in quarter. the been to hard works In while. had the of I those contracts, They in it's consistently just and come a

a quite of contracts. our lead long time in larger for those pipeline, have especially We some

issued. be come And tend just off all to so the checked are the items contracts in and door of they when can the

Robert Ferris

think where mode is recognized there revenue, were more little -- constant those that we I a But that in planning. moments bit a of had As available. team far that as do travel

does that so based on customer. And the adjust

ready, that's shift on training. okay, times, based the So really, to staff have how people saying, equipment. going many open we're for at, on customers We're are

can't meet group then pivot in and we we've if the and another one it, production through to customer their some products deadlines. get products oh, who completed we -- time then for and -- look or if says, the for do can And so testing

the team sales think I that COVID a more our we team to flexibility. installs, them even has we've they the to last lot in despite had install that's think our they're doing that from where it given year, stop I were of sales surge where able get quarter. outperformed operation pivot to certain the would fact get another the where opportunity before end And an

yes, you're so And right.

We have a dual very we actually have situation sales and where despite COVID, quarter we be had because a to then but is inflow pivot that really able achievable incredible recognized also, revenue our high. were

choose So a major of we exacerbated where we not the then also, more through have on And in pick the working year is of of where as from we as this get customers we can domestic far that there had have course, headwinds had things we think of international do for international more lot to are been lines COVID delays from is the -- it kind than front, even better them new orders time could and year the have which a through. front.


[Operator Instructions].

comes Our Klee Securities. from with next question Allen National

Allen Klee

it today said improved had in to travel of kind XQ. remarks I'm and would in curious, just that how your ability your versus is say XQ? versus how you You that deliver that was XQ in

Robert Ferris

of Great similar. thanks. I question. today, -- it's Yes, as

domestic in cases, at quarter, front, unknown. the we quarter, all. some much impair didn't very not on Third did it's -- COVID Fourth not us

to quarter a is XXXX. then expecting third to fourth we're have good quarter, finish similar if So to

we of like it. getting adjusted COVID -- -- So everyone's ways found work that I news cases, the COVID-XX and people had to around heard have the reports have are you have to like and we've surging but of a heard also, lot watched

So in particular it's able before And to quarter. to to us negative with install. imagine, as us whether travelers. many slow exact potential And as the fourth have it's somewhat some problem we we're or then also with you could customer not that can really there times, no the of have to is states that, accepting tests we of course, down but requiring complying that

optimistic might we efforts definitely we about revenue that a a mean So is, is negative and some news could in company. that the that overall that is we're still but cautiously quarter, Good impact fourth hamper. have all not on realize delay

to that our lot continue products of throughout industry we only a and our future. and the see potentially traction services, accelerating gain So the with we into

Allen Klee

at look sequentially and you revenues, customized going I on over you your of nicely of been kind how quarters. the your content growing that tell and last software think particular customized what's has scenarios segments line? us about the X there When Could

Robert Ferris


I base install there. that's for a a a of very large requesting out result having think customizations And from of that's specific of us equipment also purpose. result clients certain their

their to install a strong a done just company large some that's the specifications. that's with exactly think I have some customization a got healthy wherewithal sign to base get of very customers that the and interest

that also themselves around certainly we from hire like want to our lot are certified we And who really country they the so nationally that, to V-VICTA as it -- a get that curriculum use experts a figure support have world-class lot of And and without clients of work support people we've things and out for can a fact we who sits. hard try from bunch of for them. that of lot VirTra de-escalation to a having done the

we our custom as company, clients comes. projects it very we the it support to our library want to much is while that use support, helpful also and those So

Allen Klee

becomes could why being deals you've comment to to travel spoken What on And better? that of maybe it just something COVID due impact. how reasons your it's turn once down about year-over-year in but the -- of more and future an business the international potential about the Could Okay. that? you general interest

Robert Ferris

that training accepting of becoming know this light level, has bullets ago, that is type I and technology. very world do using actually train sounds useful. is ago that very there paper Many at to any macro only instructors more a of growing. the I and more pushback outrageous, that but Yes. could targets We the -- thought and not be from think And and healthy that many years way how was years was with actually to think other

was normally type our are that accepted worldwide officers more more capability and and expected to it's have to accepted the unparalleled. we there XX, just younger was when Every the is issues, smartphones, and granted, year that younger instructors younger it every that and using is people Now, were a with not cost get available our that day, see more a to XX ago, often grows deliver also I but we wave because years cheaper and and of time acceptance items that so use we think the as city for and technology training, handle And and all that and certified really council better simulation with And that acceptance training learning training, help didn't technology more more people of the autism in have where de-escalation those of mayors and to the police. younger they essentially ways can approach push all is curriculum, and this before. to of it of use. how chiefs is components There components, powerful. and our help large mental -- of nowadays, many

level I is the another remains the friendly training, for only going of issue, just COVID very VirTra, an or VirTra's training having becomes if it's for good increase. future to of level to future story simulation believe, a issue VirTra. isolation. some but often is to approach So very not Also, And hazard macro years an biological of

technology training people a having have can through in lot of one group you large our of location. to without So a get done

question? also for be could as stage. So the answer international Does a helpful your that on -- -- that

Allen Klee

that's you the Yes. royalty that your and the is -- say how the One was mean Did one-time does in terms question. should why your there future? -- in impairment in to And charge of just then we get number expenses? that anything that $XXX,XXX change this related small should any you reason expense payments housekeeping

Judy Henry

quarterly the in on of and is basis and And the is performance, basis on it's looked of the on balance of have life impairment monthly The the an impairment impact modern cost sheet analyze the carrying we -- So of and the and based just ongoing royalty. around royalty for that's tested over terms ongoing royalty, the review it off a through quarterly that independent at investment. calculation or the investment calculation. quarterly of is to the is

Robert Ferris

And expense. Allen, it yes, is onetime a

Judy Henry


Robert Ferris

Yes. analyzed quarterly. No, it's

Judy Henry


Robert Ferris

you that onetime are of correct, could it. hit -- is is it as a think But you


time, question-and-answer this session. conclude over our back turn does remarks. to At like now Mr. Ferris his I'd this call closing for the to

Robert Ferris

we taking all the you virtual join ROTH we'll the participating in Thursday, Technology be event. appreciate us. As On time to always,

and investors forward soon. we to who are speaking with those For attending, look analysts you

like can and thoughts in service of the our be know, that safe, serve tomorrow, staff mission, make most volunteer As at shares XX, days take in you I are prayers building their ahead VirTra world's I way Be harm's the of of war talented to hard veterans. God their us. bless. care, to the all nearly the effort to who officer we those that life. simulation I'd honor the fallen, are VirTra who products of make potentially and so we now ask for peace professionals firmly remind fighter keep preserve best special safely. believe to those it way our of right accomplish work country, November the and that and XXX home the our own effective and training missing,


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

now You may disconnect.