Earnings call transcript Q1 2023

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Operator

Good afternoon, and welcome to VirTra's First Quarter 2023 Earnings Conference Call. My name is Claudia, and I will be your operator for today's call.

Joining us for today's presentation are the company's Chairman and Co-CEO, Bob Ferris; Co-CEO, John Givens; and Chief Financial Officer, Alanna Boudreau.

Following their remarks, we will open the call for questions from VirTra's institutional analysts and investors.

Before we begin the call, I would like to provide 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

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

Now call you and and Chairman to I'd Thank proceed CEO, may like sir. turn over to you Ferris. the Mr. Bob VirTra's

Bob Ferris

closed our Claudia release you Thank and accomplishments. today, along results us financial everyone issued thank this business highlighted a XXXX the March that XX, joining ended press first the with quarter provided you, for we for market afternoon. After

filed at is the our SEC We with which discretion. your today, XX-Q also review for available

financial call, progress. I'll discuss a update military an business our before developments to discuss the more summarize over recent overview our As far operations has moving brief and of discuss been passing that some I'll XXXX then for Q&A. how in market on will Alanna the to our come provide back quarter to results detail. After begin XXXX to first on call going before highlights and I'll so for providing by John today's

best with achieved growth million the in time XXth downward with a $XX by year revenue pushing growth to pressures. accomplishment at on recent our of achieving difficult And build the momentum QX begin. consecutive while performance of this our that a let's same continue We inflationary we remarkable costs remarkable ever. quarterly revenue

This XX% by significant expenses achieved revenue. of control best gross a Our to led a our profit margin quarter growth of gross We to net $X.X and our to scale the of impressive profitability an XX% on income company record. led total increased efforts also and million.

part, large last to are technology have quarters, effective by and for the in Our remain made strong over training field. the that which our in have investments realistic preparing our we providing thanks of market the scenarios several top in highly individuals and results financial infrastructure, ensured that solutions are talent teams

investments In QX, leverage VX technology we called our in technology our set. continue integrating solution to including made the further our we into breakthrough

of discussed characters high-definition during comprehensive training advancing Volumetric As potential enables previous training uniquely industry. and which provides for library presents retain XD affordability an and for is the VirTra Video customers' advantage level our adaptable a point quality video to in to VirTra our and headset and us build for of based combination This screen-based customers. The content distinct VX significant both attract platforms, and a update, a stands and content. library unmatched

believe major not and And realistic competitive most in reusable strengthens training in beyond. training We capability stop position firmly we our enhancing aspects this of edge and will simulation here. XXXX our all

of effective world work and the performance XXXX into products training in the and We expected to are our at hard elevate new elevate on financial future.

effective results new to systems quarters team for positioned and Turning recent show us have were efforts across in long-term us beginning attention leadership our new operations our team in up key have implemented staffing. to better members our issue of strengthen the our to well. success. The made as more These

had Orlando our results we few operations impact Over have and which prospects. Arizona our financial on has positive the a facilities, past in centralized our quarters, and

equipment includes enable and in efficiency. improve more Our new demand meet employees, accommodating further to scalability. the our facilities capacity and support recent to and offer production resources increases overall and necessary This space growth

state-of-the-art equipment. facilities Both equipped our awe-inspiring with of are

before, seeking and training especially environment created products. ever As a more the and and impressive simulation leading collaborative us company world's result have and our efficient creative. be for a facility facilities innovative police and more our those These for than tours more military to allowing are employees

short-term larger quarters there in help the realize and gains were move These we costs gains our eliminate to with patient run associated production as years come. we shareholders and scale long our rewarding will processes. optimize in the While in us redundancy should permit the faithful and

our And now updates each in provide some to markets. of I'd like

in achieved revenue we to to Internationally, by the success an our $X the testament in increased revenue of improved as contracts. from the was result and as effort in to hard-working strong exceptional government prior staff Our The XX% a is million over $X.X well increase year. our million. police performance law dedication million by This government $X.X of market substantial growth progress million members. increasing federal $X.X reach the enforcement

market, improve impressive quarter While comparison rather with. underpenetrated international the this like might keep was sound and We implementing to are an have area. in we to mind that changes the increase, in we feel light this begin

future. offers our strong We Partnership, Subscription perhaps including an constrained revenue for in of the budget the VirTra, program, on-ramp to this from are revenue solution, revenue, outright quarterly sales but purchase. or This tool which staff recurring growth expect also our but closing and have represents the reported easier for for STEP Currently, an also gives revenue, recurring agencies total smaller Training sale. provides warranty in our our Equipment interested increase another we in XX%

our great behind we focused our employees and much a our growth competition, customers, foundation rewarding targets With throughout operational on us In opportunities are see shareholders profitable though of for XXXX. in lagging investments to improvement record-setting a the and still laid we XXXX, our strong has market for summary, and for position quarter achieve us path our organization. financial and continue many

to now turn I John. will the call over

John Givens

like and our Bob, on the operations activity Thank provide company to you I'd good in an military and everyone. you overall afternoon our update market.

the than half quarter of we'd the into and decision-making to like It's the lower note quarter second budget uncommon quarter, second the though, sales to due important our first are bookings the lower effort, expected -- regarding year. cycles and than to First, skewing bookings were have. not first in to in that,

it said, is acceptable trend to continue. we being want That an not

efforts, We ramping up more are sales prioritizing and restructuring territories adding and staff. sales our actively sales

expansion Canada, South to Asia grow and efforts pipeline. Africa, Europe international include sales breaking Central Our cultivate further cover well America, the and to territories adding as as salespeople up domestic the

increased increase the of efforts, the our restructuring The the of particularly in of is we comes footprint. process working predict, sales and streamlining the see volume. off to improvement our opportunities our the these While success and timing difficult to international pipeline to effort are heels good sales operations handle

noting on target presents additional opportunities our we our progress provide ongoing in sales step will executions remains new as the reporting which and Alanna, increasing in backlog recurring shareholders, a of transparent second revenue. quarter, It's robust In for will that leadership as and backlog you our initiatives. our moment, we view brief worth implement these a

are our additional the We cultivate revenue pipeline. efforts generate in ability confident sales to through our and

reductions. in and install increased higher cost identifying resulted are Additionally, capacity for customer in of in our investments service have systems, to scalability areas opportunity ERP our and assisting capabilities us

management improve improve We or are steps which disruptions to to our potential any further delays also our serve to supply chain mitigate will performance. taking

pleased engaged military building is have in conveniently providing facility been access to Speaking opportunities to strong prove and that relationships we near actively key pipeline to decision-makers person. specifically a which industry our invaluable in Orlando about QX, us and build report in located military we leads connections, of continues operations our are in the and to

and tours, prospects. Our meeting with key industry conducting team has stakeholders and demos been busy

significant us. any optimistic announced yet contract military however, available not have to market we remain We in opportunities the the about

to best-in-class leads We build products the and relationships continue on as we military introduce promising to community. our

XXXX, key traction which for the strong timeline to of Department continue a and in fiscal the of October market. as year military target We meaningful XXXX demonstrating Defense begins

for us have Our growth competitive operational the position solid placed and and years technological our advancements on ahead. trajectory bolstered

our capitalize Overall, markets. on the confident in law ability we robust to of opportunities and international enforcement, pipeline in military are

future. We developments in progress on you our and will continue to keep the updated

while we just getting Our product ways drive to started. team and have many we're a a quality understands, mission in training revenue delivering

on Progress good haven't happening. we're not but be getting the should just history, arrived we market looks but closer, product it quality, where performance, quarter is This given yet. position And its staff. exceptional historical based is company and

turn Alanna, to to financial over call now update. provide the I'll

Alanna Boudreau

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

in Our in accessories, XXXX. domestic curriculum international increased $X.X by total training, revenue XXXX XX% the sales, law The quarter was quarter result markets. sales, of of revenue to for simulator first and in both the of enforcement STEP from the increase the million driven $XX first increases and million

sales of of in quarter first compared XX% services increased from total the the cost defined quarter. the in due revenue XXXX. product in quarter XX.X%, favorable quarter million in of with for first maintaining of profit margin cost line XXXX. XX.X% in achieved This sales primarily while increase The first from XXXX profit sold increased $X.X the the an accessories levels. gross to margin was Gross increased XXXX mix was gross resulted improvement gross Our systems, less of to as and million sales $X.X the profit of to

costs Orlando XX% was Our to was operating XXXX to related in million, R&D The last year. increase first to net expenses, in old to a $X.X operating quarter the facility, million $X company of expense costs of into offsetting in and quarter operating one-time first expense will increase one-time severance Beginning in due expense old for revenue the compared an entered our for sublease new net mainly expenses. March for the new facility, currently which staff hire X, new us give in lease the the staff. our

profitability measures. to our Turning

in the a share the of million share, jump net which increase quarter in $X.XX the $X.X to quarter or diluted income million to for the income quarter of per of first XXXX, saw quarter from XXX,XXX of diluted $X.XX represents income we XXXX, totaled For $X.X first $X.X operating of million XXXX. first per XXXX. Net compared or significant first

non-GAAP XXXX first XXXX. a $X adjusted quarter from quarter increased in to $X of million Our the million first EBITDA, the of for metric

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

started recognized in quarter first contracts signed of the the of purchase be totaling that yet as incomplete For backlog bookings not period. are and we until as received cannot from define a $X.X accumulation bookings million. delivered and revenue future XXXX, orders or we And

XX, seven totaled and years. our which $X.X our strength being XXXX, backlog STEP Despite and next a for this to of and million products services. represents recognized is is XXXX, includes a The backlog March revenue breakout XX, to service compared of of warranties $XX.X QX. will our this lower $X.X in a $XX.X Service million, still on in the demand testament March capital, million warranties robust sales As basis million that contracts. in be backlog and over in straight-line STEP the backlog

In addition next renewable is STEP greater would a to revenue in contracts contracts. Historically, we on the additional million five years. STEP the $X have backlog, our XX% there rate than renewal represent for that

Finally to our sheet. balance

million, cash working $XX.X As at $XX.X we at working of cash million March From an XXXX, of quarter, standpoint had XX, had the from of end increase in increase and XXXX. first a from QX. XX, of capital million at capital, equivalents an unrestricted $XX.X December we end the $XX.X million

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

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

Bob Ferris

right business by processes, they best Thanks, increased new first acknowledge believe the the do Alanna. quarter, our end potential. Though key firmly I'd onboarding fully out our talent that reflect true the of like we current achieving positive history. quarter that the financial not we in witnessed company's while implementing and our to volume support pointing of results, to

encompass our and which in enforcement opportunities law and military which can increasing are unlock pipeline business of are There all systems to in further growth. further momentum these positioned in Still The significant, to opportunities international. our greater ahead in we mostly well develop and focused place, areas even with numerous key are improve on we for remain markets. operational markets, enhance these we

allows rightfully challenges that We the of public to are our resolving shareholders This address approach proactively, eager customers, loved us their to quality and culture that commitment arise. the our a to improvement of fulfill our areas to deserve. shifting level ones swiftly provide and

entire of quarter to are to The an on we capitalize all that provides serve enhance perspective our results the business. the facets on as continue work first doing best of quarter every plan our look many lie results to team, our the so opportunities customers ahead We These objective first XXXX due and day. hard to far. VirTra our to success,

up call up wrap my going open your provide for the we'll to and instructions. I'm prepared that, with remarks appropriate questions. And the please Operator,

Operator

Thank you.

question, Richard Please a first question Baldry proceed from We from will MKM. now be The with Instructions] your comes ROTH [Operator conducting session. question-and-answer Richard.

Richard Baldry

year-over-year you line? sustainable, better. nearly the XX% the Thanks. Is to Any higher a drill it's on fourth were do a want highest to below maybe into actually cost just you years performance. level lot onetime would revenues. goods of flat in Can You're and on outlier almost quarter key What an two you look think drivers it, that there How the -- the is? increase at very there? anything think about? help. It's there Any color much over way

Bob Ferris

that for thanks question. Yes,

get in other cost that's that on are sold, efficiencies streamlined, have to been be some reflection that different some we've and regard. a and specific down There that amortized costs Obviously, not of we -- overhead occurred So of will things. down are that's certain of believe go that centralize our we in mix. timings, headquarters, mix as some will in reductions goods the that able onetime have words started our to across in infrastructure to go costs gain

But our of on kind based cost costs as we do also then can particular as fluctuate a order. of our do and far that what we and deals what on somewhat are structurally, to expect goods

particular was mix us. a favorable it So for

will the of from it, that sold can. is find cost We that we saying are quarter-to-quarter. focus And it vary increasing profitability we but mean is try indefinitely, number. our I cost of we will yeah this to sustain possibly are not with decreasing ways happy to even where that but goods

Richard Baldry

another we drove it a Then have is? about few that for Do Are this bridge that? level building considerable opportunistic order a -- that been from the pretty which sourcing? to quarter. why or that float you've Okay. think new into over about will down stay, up amount things want you and it It something stocks near-term there inventory, do way shipments to that for as visible some safety visible stepped quarters. time? Was How talk or

John Givens

at orders on John. Well, for some chain this we that so issues identified had future to in on trying we some take -- we I that put and more because done some quarters, found supply see suppliers. our blanket those is distributed can't and you'll have and fashion the in would we've that but are much across say one-off a really ourselves those do we've we a risk, the purchased where it's of taking

market. how I that's given it So you need that. to the that. had will cameras. mean, think about just with a time resolved we One problem fluctuate We

Now will and And we comes up. that another then a another we with have problem there one screens. be one have

chain So supply it's just a matter closely and our of anticipating. watching

Richard Baldry

to revenue you'd this don't quarter's over booking the typical Maybe a You about little switching guidance. which give how below which be formal impacts, on side, outperformance expect seasonality the talk trend. And to is then side?

impact of big full et How feel like year. pipeline your that's terms do years? you versus been tracking has bookings quarter Thanks. typically prior a in The on your cetera third for

John Givens

say the keyword pretty in that sentence would apropos, is used it's I you seasonality. that

still based going So on budgets. that be to way it's

Now where win once a multiple that option on previous about contract I becomes like, large calls we base plateau. talked we're a military for years, in in

here's I we've why we backlog if out our the everything base show would that time transparency that in those revenue could STEP, says, That's of raise execute capital the the base contracts. the one investors they done we'll reasons of So what broke be. Alanna get that one their each of the STEP. well, so

military flatten that about increase that we just do. is there's you and increase we then and forward so what But program try see something will out. try seasonal as going STEP do it can our STEP, the -- now base to we our can we to Well, that's it contracts and

Richard Baldry

Okay. bookings, has And like it then looking at company. because the maybe other volatility any

expectations near-term enter it there terms deals come like some trends in, the or help other talked think feel one You quarter, like? does tougher bookings you what that versus about in have you should quarter our with to factors on next a look of that long-term about when are push-out

John Givens

Yeah.

and sales in is on was This like the said and focus prepared bookings, the quarter performance. in comments, my the the territories, I disappointing staffing my

but and where performance it no our I'll it, into something and on the always now, right as quarters, have redundant I coming sounds a bit it base but with and my federal it's digging now, It's because to that military that our on revenue. use we would want we're there's hate So something say in term is, contracts, probably using more to Long sit I disappointing. those topic yes, digging say I like into.

looking staff. -- we more but another of police and there's a lower much there at less can departments much -- product We're line out budgets have of that them lot many

we in the table. we're trying products put So to don't on so that range leave anything

we think those that, I report into these at on initiatives. based So and we I'll performance look the on more dig as

give than So, any I that. can't more

Richard Baldry

help. your for Thanks Great.

Operator

you. Instructions] from Jaeson question, Lake question proceed Street. Jaeson. comes [Operator The your Thank next Schmidt from with Please

Jaeson Schmidt

for to or really want benefit sense on questions. quarter of guys. outs to follow-up from from quarter of buck I the guys from sort my Thanks pull-ins outperformance. get June? drove seasonality push just taking what Did the to you a of trying Just here? Hey, any December sort able being March

John Givens

had kind what that's really into We revenue. we the government pull kind streamlining that of like piece the quite that large working operations anything card -- for early. Yeah, contracts and of quarter. you I first drove of report our our revenue said backlog is came significant But two in off other the and the know the -- itself was that we pushed those as unique those out because didn't

Jaeson Schmidt

margin, assuming top say based obviously fluctuate And it to just you on helpful. able on this the to fair XX% mentioned that level? mix to there's massive and on is know you performance going based then it's That's line on or But of gross up better just off keep recent revenue level. Okay. I following not and drop a should sort gross margin be of the guys at sort

John Givens

taking speculate would in And would and I looking QX our that, opportunities that I why is that we're with that. range. really between cost if areas have supply chain. on reason keep QX say of on previous those are the it -- somewhere buys say because at ERP of we the performance our the wouldn't we that it performance our you're and I I identifying advantage

a get out. better we'll So that idea to flush as starts

Jaeson Schmidt

Okay. And be one then me queue. STEP longer helpful. it or coming back That's to piece for program like revenue I'll last much In be target percentage of in to the just program, that is there the a and how big of a you'd how regards from of term? should the jump pie

Bob Ferris

recognize also We lot subscription have that's but and we what capital love a approved need actually to folks they're they for. of there revenue, grant spend out or money money

that but the make outright acceptable. great a or also support, over willing are upcoming people subscription service are get or sure it's XX% our track but cash also money for a great buy take to XX% but It's we're a to whether We also to a -- tool would it's -- subscription us want orders preference. is very tools certainly on upfront and So best large great to sure like that an tool quarters. training to tool. very higher revenue the us waiting can keep cash -- the be delivery. purchase, that or see our just on arrangement on great of willing with just for Those have We'd preference we're and some to

John Givens

are about year that the specific how can revenue when I first more from at little actually the want you think to is the be on for you revenue And lower. take STEP that. need STEP be the XX% and to I the a reason margins on of

in away margins higher. we outer the it gross year Once too So years we margins to because our a want those increase much. to every want take from on I much because our don't are get STEP we replace

that keep the us years kind and of moving So level and the margins the will year after. multiple throughout

Jaeson Schmidt

Okay. a Thanks That sense. makes guys. lot

Bob Ferris

Thank you, Jaeson.

John Givens

Thank you,

Operator

Thank now the turn Mr. concludes remarks. you, Thank call over to Ferris the you. – session. closing time, I'd At Harris sir. Mr. like question-and-answer this for apologies, this to

Bob Ferris

to Thank company extend like We and to thank No have a you support. problem, for you. our express those all in Claudia. investors who their an would interest gratitude to shown unwavering our special our

delivering VirTra the shareholder simulation team is products. developing world's most value fully committed to training effective success, and financial

Our core world safely. and to forces with equip the need men the around brave the armed return It the agencies of mission missions why enforcement complete law women serve we at and tools to they home is and country, their their is exist. of

support. thank continued you again, Once and for your interest

best at increase work shareholders. the VirTra and god take our We to bless. off us. results I strong believe of are outstanding are for delivering Be With start, a firmly safe, chances XXXX days hard care to for the of ahead

Operator

XXXX very for much, joining and first Thank VirTra's call. conference us very for you quarter sir you much thank today

You may your lines. now disconnect

VirTra (VTSI) 15 May 232023 Q1 Earnings call transcript