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VirTra (VTSI)

Participants
Bob Ferris Chairman and Chief Executive Officer
Marsha Foxx Chief Accounting Officer
Richard Baldry ROTH Capital
Jason Smith Lake Street
Call transcript
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Operator

Good afternoon, and welcome to VirTra's First Quarter 2021 Earnings Conference Call. My name is Matthew, 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 Chief Accounting Officer, Marsha Foxx.

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

Bob Ferris

earnings thank for am year everyone, first you. this last quarter of today completing call. with and afternoon, strong Thank continued momentum XXXX to the very pleased joining year's I We you Today Good momentum successful XXXX. into after entered for and that us announce a very quarter VirTra's XXXX. first through

the $X.XX first translates share we per revenue, in EBITDA earnings to $XXX,XXX, million of income $X.X of positive $XXX,XXX. net which adjusted of During and generated quarter,

While each from year, first ability million. backlog our improvement to particularly record a of year-over-year is a last grow our year's of $XX.X to XX% metrics encouraged by last results year-over-year while substantial we're beat quarter and the revenues these our grew XX%

and After grow successfully a improved our for been our $XX critical. to Demand exited with call, pitch to is cash an We cash $X that executing to quarter solutions fulfill reaching million. the never equivalents. capital in our $XX.X also has demand ability our and raise continue million million position more has cash last fever following and

ability quarter reflection a let's predominantly our dig we we're of sales, However, ship fundamental attributes first of despite COVID success, attributed The been. before as and direct where our VirTra company. success limitations. which simulators be to of improve the to increased install review where our can headed, we've two into

the First, partners. training people our our believe and in our deliver people unique VirTra to made and of end have long in We effective de-escalation our users we worked industry the shareholders. to headlines. value ability fundamentally alongside most talented some and training a has before

force Second, marksmanship decision-making performance of and the negative hear the is use top surprises training why agencies enforcement law outcomes. or In people which no easy inescapable that when better it's enforcement all. our which with the for need improves about We've subject to are skills, how of high-tech mediocre end see frequently enforcement military should training. unfortunately solutions can of mind, training officers by officers the all made improve at and knows personnel. decisions the it climate headlines law and can is seen to or law Everyone how that in this some okay

implementing can meeting a there under is an actually advantages VirTra’s best-in-class of in And country. are affordable the our model, products nearly of are subscription solutions. different despite a ability decisions story. training of our advantage agency And certified the still within quality duress, single our improving not from offer However, agencies budgets thousands every to officer's with make taking currently to requirements, very department, training to all now VirTra

not Something use trained to if seriously responsibility. force, for is society deadly is in authorized monumental broken officer police such a our sufficiently it's but

also one to just be for your the or of ever status sense. changing. training industry. If part is it reviewing enforcement law makes may legally simulation become that officer, were actions our requirement required of a change one, could However, becoming maintaining completely a It

years into may large a change be such many the While future.

simulated a before a civilian the direction. is board our Arizona person the member right could we of Recently, products that for future, realism and starting of home the well state, that complete our peace of This mandated bode in pioneered becomes XX customers of And hours that in event several have state enjoy evidence unmatched and of direction law in requirements. reviews the tide must officers some a one that shift them actions that of have a We in to is training step enforcement VirTra in something person effectiveness. legislation are kind our curriculum given and training. of that that certified patented certainly their

lead upgrade Less our comes than be in the our sales ago, that more to And addition, Today, demand mark months first XXX-employee two expand more more a and for we enhanced need we the have systems XXX In appropriate processes for of company internal time. to and sales to and passed and with improvements marketing the profit. size. to employees. our

investing success extends future content increases in day, operations expansion next beyond departments just in across increases grading Our remarkable training and R&D. production and more many into more products. our and in are to our from our staff And with passing staff we areas each generation

addition staff nearly system quarter, touches management all enhancing first during In the that also enterprise our upgrading of completed to resource software our our processes. we internal

demanded Today, these behind transitional systems. now highlighting, that focused attention which however, this a worth were backend we improvements demonstrates this preparing growth. our to now to major us, our ever-larger is and work much overhaul company are size typically of logistical Now, means doing an on scale of our not is so

some During to as the market. pertains our military details our strategy it last call, the I sales of of discussed

as press industry competitiveness many patented we that reminder, players VirTra industry-leading frustrating sense disclosing We decision-makers. perspective of are we our the how. are the current who client growth from lack of large As be related investors learn well about details prohibited of of is some success details numbers growing are for with products, our areas. eager can who partnering understand find by more as relationships, by to where contracts, to and our nature to often already ingrained releases larger with of leveraging and often a of Due the

put VirTra much the our too first, especially material However, at the opportunities. customer releasing when too and to business information endanger can early mentality is

we We there disclosing very words. of louder one made we is Unfortunately, when speak much in can, instances. that also are details. this from as can which we as But instances say the prohibited are those progress real in confirm I we've market. believe but actions than can We military

In fact, the have in to show fruits up in way. started our material of that a labor backlog

not quality to As long well accelerate. a success strategy, as that able We the the being continue. also well. on as our spotlight headlines and know an could performance, of in training our XXXX. for provide our financial over is Marsha to when but insight the and prioritized, shine the the results tragic now Marsha? turn the first improving on It believe quarter To results long more might is we're need it overview of I'll to of call our that proper provide the for training exists, day for quality into as we reflected execute training as even results financial need

Marsha Foxx

And everyone. you to be ended pleasure for Bob. speaking review quarter XX, to afternoon, you, our a today to It's March XXXX. Thank good results the financial first

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

differences in of of for profit gross $X.X XX% in costs Our as was XX.X% gross XXXX. the first profit of revenue systems, or increase well the from XXXX or mix of revenue increased The first XX.X% and quarter million quarter million product due services to decrease of sold. the accessories primarily to $X.X in as

Our the and in operating due The from QX X% XX, was decrease in of $X.X expenses last first for professional operating March three of million, by quarter we the months a reported expense million expense. to reduced selling an services partially XXXX was mainly in offset for traveling expense increase decrease ended the $X XXXX year.

Turning to of a first quarter in improved for $XXX,XXX $XXX,XXX QX XXXX of from of operations of the to measures. profitability year. last from our loss operations Income

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

financial a of increased measure loss first in EBITDA, $XXX,XXX XXXX QX of to positive non-GAAP quarter from last $XXX,XXX in the a adjusted Our year.

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

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

from As million $XX.X backlog a December $XX.X XX, million, was the we our from at XX% $XX.X and reported XX, of million year up March XXXX, XXXX. ago is which up

shares the common offering million we March end, quarter’s our at At compared completed gross combined million to receivable equivalents [indiscernible] proceeds Finally Accounts at cash and million December revenue of XX, we quarter, raised XXXX. end X $X.X balance $XX total public first to at XX, the Subsequent cash which to of cash to $X.X compares which XXXX. XXXX, our approximately million million to in a $X.X December approximately stock. for of equivalent, in we sheet. and and cash had in XX, unbilled

first at From million capital As at ended $XX.X XXXX. million capital the the a shares and XX, our working $XX.X equivalents million of standpoint, compared December XX.X million working approximately to result in today, capital a working cash cash approximately $XX.X XXXX in company has we in with outstanding. quarter

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

Bob Ferris

Marsha. how for on We extremely consecutive decide must extremely position since best best and our are year take our best organically to doing work XXXX we with capital that the solid A investment, our By years diligent market been term, business able opportunities. to try be VirTra to to the public when of of advantage there's for allocate to unique for hallmark ROI, every we areas Thank we doubt avoid deploy investors. so. the for products in that cash do that, is the hard and highest grow will the you, to no nearly ready clients going effective in that but be the XX and returns of profit, capital margins burn yield and we showing return a long we've

occasionally Over our ourselves the constraint our history, we had means. we plans our to according capital course adjust found to have of and

we've ever on larger requirements. and larger growth missing captured we've with out Sometimes that meant contracts various capital succeeded, Also, opportunities. as increasing

Last potential a is long-standing one of larger on who the Just a CBP. Border follow And or client. currently us IDIQ for products this we're a from example new indefinite in for Protection new which posted business. and supply is has multiple not CBP quantity to one To vehicle. Customs order reordered solicitation contract, clarify, have with a from won talks U.S. us them occasions. indefinite we Friday, VirTra on or delivery, through they yet a contract

if opportunities we over win that one agencies out This successful company spread period. shows of be it, not for to to positioned investors of in million worth growing to keep are could be However, $XX.X alone. underscore enforcement and from and take it ensure the clearly the up of interest our to aggressively progresses, law continues. but We'll largest business a they how advantage do it growth world, this need help five-year the helps appraise new strong of

the results, sheet So and opportunity we drastically to add annual our respond at business March, took saw the the it. market our cash an we to of balance end by value raising when the to of arose,

accelerate of we That gross on stock. opportunities Marsha million capitalizing various At approximately high in and proceeds $XX.X company million means that funds VirTra of large shares is X us level, has to our As today million front just aid a growth. a these cash. our mentioned, $XX our in total the of purpose in raised the for common in of

went in products a head-to-head to when larger manner. against customer orders While we our business due certainly to competitor, compete concerns ability over want over fulfill lose to after timely a our we customer don't much

the prime We that agencies government contracts. for also seek size out firms understand and well-capitalized larger contractors

this believe we into as capabilities, needs. mind increase that the those can should solutions track through our coming potential will need we our have may decades, with bolstered simulators, our We for peace spans our curriculum, kits, of provide the larger production our balance larger three concerns which sheet, sales capital market the record grown recoil So eliminate their much our With well. training meet size. future in for secure nearly and our and prospects customer while also of help

With from production community and fulfill seen the orders amount we to enforcement intend law expand our of the both demand we've the faster. to military, larger capabilities

I to demand help is for In you from raise adding be I VirTra expansion never efforts the it is than VirTra tuned today, in opening as next the in invest second proceeds keep on With in In to department our take our will this as the to today better VirTra how has an in products, for balance updates this sheet, production to and we has grow. further our with shift used staff fact, speak to products. market position stay front. our company level. a enhanced the Please in The discussed my also our expanded. up remarks, been infrastructure

While revenue it the first year. $XX.X million through strong with and we business a the track million that for we're in evaluate another backlog, in long-term lens always quarter in on $X.X appears

In current fact, our in few and based the cash, prospects passed the on we in believe are grow of next there front substantially business the to us, position years. market

but that is it cautiously today. that we course, optimistic not based what we achievable is Of on guaranteed, are know

which tailwinds well are sales. law there company, positioned appears back country to enforcement opening our military for may to The And and both up, Specifically extremely in our we're be accelerate compete. help the markets.

world. lives VirTra’s questions. need the for up Operator, that, I'm certified with my call appropriate surface, future we up the improves day incredibly provide real believe seems we high supply to we instructions. save going deliver for and and please remarks remains And passing open core, that at But and tech bright. to with further The wrap the prepared in solutions. the your extend this effective skills On each training our we'll

Operator

coming Richard [Operator Capital. from Instructions] Now, proceed. Baldry you. question is Thank our ROTH Please from first

Richard Baldry

sort you Thanks. And organic maybe year? a you've a of what or growth year-over-year, Maybe from bookings a could either XX%, believe you talk while. ballpark level B numbers very backlog up about growth be, than lot a for level, A level, could XX, rate high it's your got we've a your higher on XX% up is for seen

So maybe near two? just curious been I'm the last of the feel year or versus you about organic growth it's sort over term how in where

Bob Ferris

for Yes, thank question. that you

for the in we with various on So range. we're very – The is a we've of we or seen XXXX. have potentially. that predict. that of six-digit a those excited the in once But multi-million extremely Whereas we increase on one prospects growth And smaller hand, while. exact what's law often get one seeing timing on a steady have to challenge side in XXXX other those both are that higher come hand, the in enforcement, agency difficult purchases the seven we're is digits the

has our our So noticed we base customer company grown. and have as we've as in year-over-year a that grown revenue

of seeing rather acceleration last this think in look rate. had stable rate, large do pretty a growth solid rate right, a the our company have a range. you is on are We the during through a double-digit growth average I years, the increase XX growth in little but you're of back bit we if more

made in rate posted. well a existence. while for still has difficult this commit pandemic result especially it's XXXX, with after first so There growth to for during we're be us a an growth a global that to very guarantee, definite a quarter especially double-digit aggressive as positioned been rate argument And to is

the if of an that impossible And XXXX is pandemic it's for possibility, out certainly of first such of to be but potential but great an the predict of within estimate, be if would there's other may rest realm headwinds indication or based – we also obviously on fantastic. that the the that's it's or control. factors quarter just exactly So unfortunately, refined our

Richard Baldry

of implementation like off. working Maybe how restrictions you up challenges following mask your coming feels things talk sort with are could up on a about little bit opening now? It that,

steadily, feel – year? any maybe and some marketing? second ability to that's So building how this the of It's half, and maybe in-person first pretty change be whether backlog will do like been to down do about that you some worked half,

Bob Ferris

that question. Yes. for Thanks

So tough it's in-person – our internationally, still marketing. for

hoping see an ability are is is There do in that marketing to for ease. in-person to within States, the specific. the We but that increase locale us United somewhat

are were pandemic. XXXX, which encouraged and we had deliver the where where be very So have that COVID-XX hampered at quarters might that install than in by XXXX more ability we we a – to year equipment were we

yes. So

Richard Baldry

the funding potential you funding worried any for about. I been of last saw sort at positioned with you a they do like maybe a think earmarks, pushed Thanks. top customers traditional feel feel ones? their on how money incremental municipalities I'll a than to do given, over, better turn actually well mechanism of the about backdrop of And actually of me a also your but be environment, there's lot that who Maybe of and use return of are revenues,

Bob Ferris

So need our into to recurring great would has and training having has not customers at space have our we them. the useful that of VirTra convinced do option and gotten sales valuable the revenue to subscription devices that access model is hands otherwise a we in generated and and team remain who trainees our

to that So pleased we're the of main hitting. program, were and two those objectives seems it be of

you Eventually those impossible I'm done seems our up staff have lots that to of model, forever. amazing report it's every it that fact, has has of sometimes not It's like pleased one that who keep that's of had [ph]. things to that subscription In not customer somebody, change. we've one

change they policies. training in have a their Sometimes

every has on subscription stayed had that model. subscription a switch Sometimes far that we've on a to single so model client the system, buying they but started

and everything renewed So, renewed is so – as far. everyone

need making encouraged that client other main I does willing simulators quality considerable VirTra, we do really that. have of there training resources we're be of client So there does while, a value their training level But is simulators is entails. an and that coming department. challenge more use funding no dealing the area. that's using time trained challenge. a down the end agencies believe all, they're that and agree for where some and improve very We out assessment or than towards have do with from any think mediocre in on-ramp their that think And still focus. by that's put getting that We out our decisions to there, that a lethal you're Once that are sure the see I to it's to our really the effort with really your that funding should force high-quality that the responsibilities into training to at at when at

Richard Baldry

me I for one could. one Maybe last if

quarter before – ago That's year Let compare first grew almost a QX. tough XX%. is on COVID up a because made you tough actually a XX%

revenues to – with QX whatever year seasonality of better? way Is to a about down. say QX you were from last let's think it there worse stays It or what sequentially, just think normal as doesn't is. So get COVID

sequential a like of the So progression what start pretty would to after Thanks. what a year? sort strong was normal feel

Bob Ferris

and by the that budget by into the timing question. it see that. Many sometimes one But of has federal into federal that quarter, to been of That's gets quarter it happy those first larger the we cycle. last Generally, gets can and were side times, second quarter the and definitely first us increase. challenging for and you're Congress international is – be a right – good influenced

still that. for a bit you we're side some there give do often bit and we are second a we for our to quarter. see correct dissipates first of the is sadly, experience, quarter, But on before, we've and now you visibility but company, a a some first So as that generally generally smaller noted scaled-up seasonality are sometimes challenge with more that in ratio with scaling starting years the up have of to been I seasonality quarters don't many great

Richard Baldry

Great. Congrats start to the strong the on year.

Bob Ferris

much. so Thank you

Operator

Instructions] [Operator next is coming from Jason from Smith question proceed. you. Thank Street. Please Your Lake

Jason Smith

law for Thanks you like guys. momentum sounds questions. enforcement my the Hey really Bob, side. nice seeing taking it on are some

existing from if mainly systems? curious or that's new or their Just coming are upgrading customers replacing customers these

Bob Ferris

I quite you sorry, Could I'm didn't that. of repeat all question? catch the

Jason Smith

Yes.

that new Just or by it's are who really are existing their you current curious if on seeing the upgrading if being or systems? driven that's law enforcement customers, customers replacing momentum

Bob Ferris

both. We've we've that customers marketing through also for customers coming is question. that on in police sales there side, been been maintaining the you of our new Thank that It's our the a efforts. fortunate but and combination

it's keep it of do And having any still been very and So, solution. is the key business current combination, – trying that's customers both a customers happy elsewhere. very we're customers a combination opportunities of of being customers yes, able but your competition, mindful have to aspect maintaining We of But a to go we our while we've other is those. to current pursuing to fortunate have. your convince new gravitate to

And this fortunate so, testament very put keep ones constant we've into that in are I've customers, investment customers a the there it's But battle market. and real we've mentioned – a the of VirTra calls previous decades been there. to still the to is

Jason Smith

any constraints obtaining supply components? any helpful. on That's seeing you And any friction or are Okay.

Bob Ferris

readily the products and to Many in-house time components that have we we supply available to able from sell to that been From alternatives. make time make find we've of sure products there constraints we are are alternatives. are try unique that

So to that been been far but some able the fortunately able keep are of we've flowing. continue of mindful we with the we supply so to that, supply to issues, But good computer have ship.

customers. And do inventory. order supply bit point able continue So, we at this a to are more we sometimes to

during see for months. more But of But a operations level. is on put in And there us the part that to on we that so position far our bit so components. that so more concerns bolster we've certain good sheet do last a six inventories far, when effort opportunity stronger into balance gives good having have But so, that. our been yes,

Jason Smith

one queue. and just the any me, on last And then the is a big or seeing you just Okay. focus? are us and I'll if jump back no that you there, Can update if for into traction STEP longer program

Bob Ferris

as with we've see valuable We impressed customers with yes. we've traction been still Jason, we for the very Sure a gotten our team. STEP and it. sales option And

we do the sales single for future. continuing have into that our every So, of was has have renewed STEP since see of which that first XXXX, that and we've testament And the that been customer our success, their operation STEP to agreement, contract very fortunate team us. we not And team so. real February news to is wonderful kind a

Jason Smith

I Thanks a appreciate lot, guys. color. Okay. the all

Bob Ferris

you. Thank

Operator

session. remarks. Thank his closing this question-and-answer you. for the turn over call I like our to this Mr. At to now back time concludes Ferris

Bob Ferris

Two currently We men service year’s women country. with country, is I'd the far give products our and so to both? served vision special training everyone us and Does the Our the detect particularly take special war or progress superior tools determination some the time with possible helping made home to accomplish a tribute celebrated simulation peace or serve every investor world's and choose hope pay to future. have more future supply than in to most Forces of women really the I financial trainees to country a safely. remain much headlines? appreciate is days fighter ask ago, helps a into solve our company products moment forces and make Armed you. today. for the that an like ever can who armed with most in their innovative our This Thank it realism serve taking VirTra’s that it can train more tragic never their them men before. our to I of join celebration a say, the as Day, effective the you and advantage have company with mission to officer leader the is evermore bright to

part I story. measure I believe days day, for are every us. best me firmly for beyond blessed VirTra the VirTra’s Thank and being ahead As you for of feel of

are God Be We support. And your safe, take honored care. bless. by

Operator

first joining Thank on quarter VirTra’s call. today us conference you for XXXX

now may You disconnect.