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VirTra Reports First Quarter 2024 Financial Results

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VirTra (Nasdaq: VTSI) announced its Q1 2024 financial results, showing a 19% drop in revenue to $8.1 million compared to $10 million in Q1 2023. Net income also fell to $1.2 million from $2.9 million, while gross profit decreased by 21% to $5.5 million. The gross margin slightly declined to 67% from 69% due to increased costs from a Microsoft contract. Operational highlights included preparations for the V-XR platform launch, expanded content delivery capabilities, and improved production efficiencies. The company maintained a strong working capital of $33.2 million and continued to enhance its operational processes and ERP systems.

Positive
  • Maintained robust working capital at $33.2 million.
  • Enhanced operational efficiencies through production optimization and ERP upgrades.
  • Expanded content library, improving training effectiveness.
  • Launch preparations for the V-XR platform, targeting new sectors like healthcare and education.
  • Recurring revenue streams, including STEP program, reached 23% of total revenue.
Negative
  • Revenue decreased by 19% to $8.1 million compared to $10 million in Q1 2023.
  • Net income fell to $1.2 million from $2.9 million.
  • Gross profit decreased by 21% to $5.5 million.
  • Gross margin declined to 67% from 69%.
  • Higher operating expenses, up 17% due to increased payroll, IT spending, and expanded travel.
  • Adjusted EBITDA dropped to $1.9 million from $4.0 million.

Insights

VirTra's Q1 2024 financial results present a mixed picture for investors. The company reported a -19% YoY decrease in total revenue, dropping from $10.0 million to $8.1 million. This decline is attributed to delays in federal funding and the U.S. government’s continuing resolution, which paused numerous contracts. While the revenue decrease is concerning, the company maintains a gross margin of 67%, only slightly down from 69% the previous year, indicating effective cost management despite revenue challenges.

Investors should pay close attention to the 21% drop in gross profit, which fell from $6.9 million to $5.5 million. This was influenced by increased costs associated with key contracts, such as the Microsoft IVAS contract and not simply operational inefficiencies. Yet, the company's focus on strategic procurement and production optimization has helped mitigate some of these cost pressures.

Operating expenses rose 17% YoY to $4.1 million, driven by higher payroll and benefits as well as increased IT spending and travel. While these expenses are necessary for strategic growth, they also pressure the bottom line. As a result, operating income shrank from $3.5 million to $1.4 million and net income fell from $2.9 million to $1.2 million. The decline in adjusted EBITDA from $4.0 million to $1.9 million further underscores the challenging quarter.

Investors should note the strong working capital of $33.2 million and cash and cash equivalents of $22.4 million, which provide financial stability and support for future initiatives, such as the V-XR platform launch. However, the drop in earnings per share from $0.27 to $0.11 is something to watch, as it reflects the broader financial pressures faced by the company.

Looking ahead, investors should weigh the potential for improved bookings and backlog stabilization against the ongoing revenue challenges and rising operational costs. The company's strategic initiatives, including V-XR, could pave the way for long-term growth, but short-term volatility remains a key risk.

The impending launch of VirTra's V-XR platform marks a significant step forward for the company. This extended reality (XR) training platform, which aims to enhance soft skills development, expands VirTra’s capabilities beyond its traditional law enforcement market into healthcare and education sectors. This diversification is strategically sound, as it opens new revenue streams and reduces the company's reliance on government contracts, which can be unpredictable.

The integration of more comprehensive and diverse scenarios into their content library is another important development. By improving the range and quality of training scenarios, VirTra enhances the effectiveness of its training solutions, making them more attractive to a broader range of clients. This can potentially lead to higher customer satisfaction and retention, key drivers of recurring revenue.

Operationally, VirTra's consolidation into a single production facility and the implementation of an upgraded ERP system are noteworthy. These enhancements should improve production efficiency, quality and delivery times, directly impacting customer satisfaction and operational scalability. Such improvements are essential for handling increased demand as the company penetrates new markets.

However, investors should be aware of the risks associated with the adoption of new technologies like XR. While the potential market is vast, the competition is fierce and the success of V-XR will depend on its ability to meet or exceed market expectations. Additionally, the initial costs and learning curve associated with adopting and integrating new technologies can temporarily strain resources and finances.

Overall, VirTra's technological advancements and strategic diversification appear promising for long-term growth, though short-term execution risks should be closely monitored.

VirTra Advances Preparations for V-XR Deliveries

Strategic Military Training Initiatives Position Company for Continued Market Penetration

CHANDLER, Ariz., May 14, 2024 (GLOBE NEWSWIRE) -- VirTra, Inc. (Nasdaq: VTSI) (“VirTra” or the “Company”), a global provider of judgmental use of force training simulators, firearms training simulators for the law enforcement and military markets, reported results for the first quarter ended March 31, 2024. The financial statements are available on VirTra’s website and here.

First Quarter 2024 and Recent Operational Highlights:

  • Progressed V-XR launch preparations. VirTra readied its extended reality training platform focused on soft skills development, for market introduction in the coming months. This strategic launch is expected to broaden VirTra’s reach within core law enforcement markets and expand the company’s presence in new sectors such as healthcare and education.
  • Continued enhancing content delivery capabilities. VirTra expanded its content library across its multiple training platforms, integrating more comprehensive and diverse scenarios that address a wider range of real-world situations, thus improving training effectiveness across various use cases.
  • Continued improving operational efficiencies through production optimization processes and ERP enhancements, supporting faster order fulfillment and scalable growth.
  • Maintained robust working capital at $33.2 million, positioning the Company for sustained growth and operational agility.

First Quarter 2024 Financial Highlights:

 For the Three Months Ended
All figures in millions, except per share dataMarch 31,
2024
March 31,
2023
% Δ
Total Revenue$8.1$10.0-19%
    
Gross Profit$5.5$6.9-21%
Gross Margin67%69%-2%
    
Net Income$1.2$2.9N/A
Diluted EPS$0.11$0.27N/A
Adjusted EBITDA$1.9$4.0N/A
    

Management Commentary

CEO John Givens stated, “The first quarter of 2024, while showing a dip in revenue, marked another period of strategic execution as we continue to build on the transformative groundwork laid over the past two years. The anticipated revenue fluctuation was primarily due to the cyclical nature of budget allocations, often skewed towards year-end, coupled with the impact of the U.S. government’s continuing resolution, and the completion of a large portion of our capital backlog in 2023. We remain optimistic that the integration of new sales strategies and team members will begin to influence our financial results as the year progresses, especially as these initiatives mature and the U.S. government budget resolutions advance, catalyzing purchasing decisions.

“The forthcoming launch of V-XR is set to broaden the scope of our training solutions, tailored to all agency sizes and budgets. This new platform will also expand our market reach into sectors such as healthcare and education. With V-XR, we are cultivating a frontier for continued growth and reinforcing our position as a leader in producing effective training outcomes.

“Our operational enhancements, including our consolidation into a single state-of-the-art production facility and the implementation of an upgraded ERP system, have been pivotal in elevating our operational excellence. These improvements have enabled more efficient production, higher quality outputs, and quicker delivery times, thereby enhancing customer satisfaction. Additionally, the Microsoft IVAS contract has propelled our research and development efforts in the military market, advancing our technology and providing insights that aid in deeper market penetration both domestically and abroad. As our strategic initiatives continue to take root throughout 2024, we are well-positioned to capitalize on the opportunities presented by our upcoming technology introductions and growing content library.”

First Quarter 2024 Financial Results

Total revenue was $8.1 million, compared to $10.0 million in the prior year period. The 19% decrease was primarily due to delays in federal funding, attributed to the U.S. government’s continuing resolution, which caused numerous contracts to be placed on hold. This temporary challenge impacted bookings in both the fourth quarter of 2023 and the first quarter of 2024.

Gross profit totaled $5.5 million (67% of total revenue), compared to $6.9 million (69% of total revenue) in the prior year period. The 21% decrease in gross profit was primarily due to the change in sales. Gross margin decreased mainly due to cost increases from the Microsoft contract. Specifically, a milestone payment in December 2023, which incurred minimal costs, previously boosted margins. However, costs associated with a subsequent milestone payment in the first quarter of 2024 adversely affected the gross margin. Effective cost management in other system sales partially offset this effect.

Net operating expense was $4.1 million, marking a 17% increase from $3.5 million in the prior year period. This rise was driven by higher payroll and benefits associated with recruiting senior-level staff for strategic growth, increased IT spending to enhance compliance for potential government contracts, and expanded travel to broaden sales territory coverage.

Operating income was $1.4 million, compared to $3.5 million in the first quarter of 2023.

Net income was $1.2 million, or $0.11 per diluted share (based on 11.0 million weighted average diluted shares outstanding), compared to net income of $2.9 million, or $0.27 per diluted share (based on 10.9 million weighted average diluted shares outstanding), in the first quarter of 2023.

Adjusted EBITDA, a non-GAAP metric, was $1.9 million, compared to $4.0 million in the first quarter of 2023.

Cash and cash equivalents were $22.4 million at March 31, 2024.

Financial Commentary

CFO Alanna Boudreau remarked, “The first quarter demonstrated the effectiveness of our operational enhancements in maintaining a strong gross margin. Despite a challenging revenue environment, we implemented rigorous cost management strategies, focusing on optimizing our production processes and strategic procurement to mitigate the impacts of increased costs from key contracts and operational expansions. Our recurring revenue streams, including the STEP program, services, and warranties, continued to grow in Q1, reaching 23% of total revenue and representing an increasingly predictable revenue base. Looking ahead, we remain focused on improving bookings performance and stabilizing backlog amidst order seasonality. With strategic initiatives underway, particularly the launch of V-XR, we are positioning ourselves to improve our revenue growth for the remainder of 2024 compared to Q1. Our robust working capital shows our financial strength and supports strategic initiatives, including scaled production of the V-XR.”

Conference Call
VirTra’s management will hold a conference call today (May 14, 2024) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results. VirTra’s Chief Executive Officer John Givens and Chief Financial Officer Alanna Boudreau will host the call, followed by a question-and-answer period.

U.S. dial-in number: 1-877-407-9208
International number: 1-201-493-6784
Conference ID: 13746016

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 949-574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of the Company’s website.

A replay of the call will be available after 7:30 p.m. Eastern time on the same day through May 28, 2024.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13746016

About VirTra, Inc.
VirTra (Nasdaq: VTSI) is a global provider of judgmental use of force training simulators, firearms training simulators for the law enforcement, military, educational and commercial markets. The company’s patented technologies, software, and scenarios provide intense training for de-escalation, judgmental use-of-force, marksmanship, and related training that mimics real-world situations. VirTra’s mission is to save and improve lives worldwide through practical and highly effective virtual reality and simulator technology. Learn more about the company at www.VirTra.com.

About the Presentation of Adjusted EBITDA
Adjusted earnings before interest, income taxes, depreciation, and amortization and before other non-operating costs and income (“Adjusted EBITDA”) is a non-GAAP financial measure. Adjusted EBITDA also includes non-cash stock option expense and other than temporary impairment loss on investments. Other companies may calculate Adjusted EBITDA differently. VirTra calculates its Adjusted EBITDA to eliminate the impact of certain items it does not consider to be indicative of its performance and its ongoing operations. Adjusted EBITDA is presented herein because management believes the presentation of Adjusted EBITDA provides useful information to VirTra’s investors regarding VirTra’s financial condition and results of operations and because Adjusted EBITDA is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in VirTra’s industry, several of which present a form of Adjusted EBITDA when reporting their results. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of VirTra’s results as reported under accounting principles generally accepted in the United States of America (“GAAP”). Adjusted EBITDA should not be considered as an alternative for net income, cash flows from operating activities and other consolidated income or cash flows statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. A reconciliation of net income to Adjusted EBITDA is provided in the following tables:

  For the Three Months Ended 
  March 31,  March 31,  Increase  % 
  2024  2023  (Decrease)  Change 
             
Net Income $1,216,173  $2,946,373  $(1,730,200)  -59%
Adjustments:                
Provision for income taxes  511,437   641,345   (129,908)  -20%
Depreciation and amortization  236,547   227,570   8,977   4%
Interest (net)  (177,898)  48,183   (226,081)  -469%
EBITDA  1,786,259   3,863,471   (2,077,212)  -54%
Right of use amortization  127,893   121,774   6,119   5%
                 
Adjusted EBITDA $1,914,152  $3,985,245  $(2,071,093)  -52%
                 

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this document are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in the reports we file with or furnish to the Securities and Exchange Commission (the “SEC”). You should carefully consider these risks and uncertainties described and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

Investor Relations Contact:

Matt Glover and Alec Wilson
Gateway Group, Inc.
VTSI@gateway-grp.com
949-574-3860

- Financial Tables to Follow -

 
VIRTRA, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
 
  March 31, 2024  December 31, 2023 
ASSETS        
Current assets:        
Cash and cash equivalents $22,415,177  $18,849,842 
Accounts receivable, net  10,300,165   15,724,147 
Inventory, net  12,292,460   12,404,880 
Unbilled revenue  1,681,375   1,109,616 
Prepaid expenses and other current assets  832,712   906,803 
Total current assets  47,521,889   48,995,288 
Long-term assets:        
Property and equipment, net  16,799,459   15,487,012 
Operating lease right-of-use asset, net  588,794   716,687 
Intangible assets, net  565,318   567,540 
Security deposits, long-term  35,691   35,691 
Other assets, long-term  201,670   201,670 
Deferred tax asset, net  3,663,357   3,630,154 
Total long-term assets  21,854,289   20,638,754 
Total assets $69,376,178  $69,634,042 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $1,695,042  $2,282,427 
Accrued compensation and related costs  2,176,078   2,221,416 
Accrued expenses and other current liabilities  4,382,361   3,970,559 
Note payable, current  226,655   226,355 
Operating lease liability, short-term  323,038   317,840 
Deferred revenue, short-term  5,538,525   6,736,175 
Total current liabilities  14,341,699   15,754,772 
Long-term liabilities:        
Deferred revenue, long-term  3,004,418   3,012,206 
Note payable, long-term  7,751,585   7,813,021 
Operating lease liability, long-term  289,687   432,176 
Total long-term liabilities  11,045,690   11,257,403 
Total liabilities  25,387,389   27,012,175 
         
Commitments and contingencies (See Note 11)        
         
Stockholders’ equity:        
Preferred stock $0.0001 par value; 2,500,000 authorized; no shares issued or outstanding  -   - 
Common stock $0.0001 par value; 50,000,000 shares authorized; 11,109,730 shares issued and outstanding as of March 31, 2024 and 11,107,230 shares issued and outstanding as of December 31, 2023  1,110   1,109 
Class A common stock $0.0001 par value; 2,500,000 shares authorized; no shares issued or outstanding  -   - 
Class B common stock $0.0001 par value; 7,500,000 shares authorized; no shares issued or outstanding  -   - 
Additional paid-in capital  32,108,513   31,957,765 
Retained earnings  11,879,166   10,662,993 
Total stockholders’ equity  43,988,789   42,621,867 
Total liabilities and stockholders’ equity $69,376,178  $69,634,042 


 
VIRTRA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
         
  Three Months Ended 
  March 31, 2024  March 31, 2023 
       
Revenues:        
Net sales $8,094,398  $10,026,935 
Total revenue  8,094,398   10,026,935 
         
Cost of sales  2,632,257   3,077,997 
         
Gross profit  5,462,141   6,948,938 
         
Operating expenses:        
General and administrative  3,370,422   2,711,337 
Research and development  693,380   766,296 
         
Net operating expense  4,063,802   3,477,633 
         
Income from operations  1,398,339   3,471,305 
         
Other income:        
Other income  329,271   183,642 
Gain on forgiveness of note payable  -   (67,229)
Other income        
         
Net other income  329,271   116,413 
         
Income before provision for income taxes  1,727,610   3,587,718 
         
Provision for income taxes  511,437   641,345 
         
Net income $1,216,173  $2,946,373 
         
Net income per common share:        
Basic $0.11  $0.27 
Diluted $0.11  $0.27 
         
Weighted average shares outstanding:        
Basic  10,959,298   10,917,311 
Diluted  10,961,188   10,919,391 


 
VIRTRA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
       
  Three Months Ended March 31 
  2024  2023 
Cash flows from operating activities:        
Net income $1,216,173  $2,946,373 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  236,547   227,570 
Right of use amortization  127,893   121,774 
Employee stock compensation  139,999   24,063 
Bad Debt Expense  245,089   - 
Stock issued for service  -   75,000 
Changes in operating assets and liabilities:        
Accounts receivable, net  5,178,893   (1,686,838)
Inventory, net  112,420   (1,155,466)
Deferred taxes  (33,203)  (865,745)
Unbilled revenue  (571,759)  (430,488)
Prepaid expenses and other current assets  74,091   (1,675)
Other assets  -   (792)
Accounts payable and other accrued expenses  (246,905)  1,610,884 
Operating lease right of use  (137,291)  (126,592)
Deferred revenue  (1,205,438)  240,535 
Net cash provided by operating activities  5,136,509   978,603 
         
Cash flows from investing activities:        
Purchase of property and equipment  (1,546,772)  (163,441)
Net cash (used in) investing activities  (1,546,772)  (163,441)
         
Cash flows from financing activities:        
Principal payments of debt  (35,152)  (57,750)
Proceeds from Stock based options  10,750   16,726 
Net cash (used in) financing activities:  (24,402)  (41,024)
         
Net increase in cash  3,565,335   774,138 
Cash and restricted cash, beginning of period  18,849,842   13,483,597 
Cash and restricted cash, end of period $22,415,177  $14,257,735 
         
Supplemental disclosure of cash flow information:        
Cash paid:        
Income taxes paid $24,002  $108,777 
Interest paid $61,552  $3,345 

 


FAQ

What were VirTra's revenues for Q1 2024?

VirTra reported revenues of $8.1 million for Q1 2024, a 19% decrease compared to $10 million in Q1 2023.

How did VirTra's net income for Q1 2024 compare to Q1 2023?

Net income for Q1 2024 was $1.2 million, compared to $2.9 million in Q1 2023.

What was the gross profit margin for VirTra in Q1 2024?

VirTra's gross profit margin was 67% in Q1 2024, slightly down from 69% in Q1 2023.

What were some operational highlights for VirTra in Q1 2024?

Operational highlights included V-XR platform launch preparations, expanded content delivery capabilities, and improved production efficiencies.

What was VirTra's working capital at the end of Q1 2024?

VirTra maintained a robust working capital of $33.2 million at the end of Q1 2024.

What caused the increase in operating expenses for VirTra in Q1 2024?

Operating expenses increased by 17% due to higher payroll, IT spending, and expanded travel.

How did adjusted EBITDA for Q1 2024 compare to Q1 2023 for VirTra?

Adjusted EBITDA was $1.9 million in Q1 2024, compared to $4.0 million in Q1 2023.

VirTra, Inc.

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