NASDAQ:VTSI VirTra Q1 2024 Earnings Report $4.18 +0.15 (+3.72%) Closing price 04:00 PM EasternExtended Trading$4.18 0.00 (-0.12%) As of 07:55 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast VirTra EPS ResultsActual EPS$0.11Consensus EPS $0.18Beat/MissMissed by -$0.07One Year Ago EPS$0.27VirTra Revenue ResultsActual Revenue$8.09 millionExpected Revenue$10.03 millionBeat/MissMissed by -$1.94 millionYoY Revenue GrowthN/AVirTra Announcement DetailsQuarterQ1 2024Date5/14/2024TimeAfter Market ClosesConference Call DateTuesday, May 14, 2024Conference Call Time4:30PM ETUpcoming EarningsVirTra's Q1 2025 earnings is scheduled for Tuesday, May 13, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by VirTra Q1 2024 Earnings Call TranscriptProvided by QuartrMay 14, 2024 ShareLink copied to clipboard.There are 4 speakers on the call. Operator00:00:00Good afternoon, and welcome to Virtruis First Quarter 2024 Earnings Conference Call. My name is Robert, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, John Gibbons and CFO, Alana Boudreaux. Following their remarks, we will open the call for questions. Before we begin the call, I'd like to provide VirTra's Safe Harbor statement that includes cautions regarding forward looking statements made during this call. Operator00:00:29During this presentation, management may discuss financial projections, information or expectations about the company's products and services or markets or otherwise make statements about the future, which are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them as required by law. Finally, I'd like to remind everyone that this call will be made available for replay via a link in the Investor Relations section on the company's website at www. Virtra.com. Now I'd like to turn the call over to VirTra's CEO, Mr. Operator00:01:14John Gibbons. Thank you, and you may proceed, sir. Speaker 100:01:19Thank you, operator, and thank you, everybody, for joining us this afternoon. After the markets closed today, we issued a press release that provided our financial results for the Q1 ending March 31, 2024, along with the highlighted business accomplishments. Today, I'll begin by discussing our Q1 performance and strategic achievements, including our progress with the VXR platform and our military market engagements before handing over to Alana for a detailed financial review. After that, I'll provide some concluding remarks before we move on to questions and answers. Our Q1 performance was not where we want it to be. Speaker 100:01:58Revenue dipped to $8,100,000 a figure that frankly reflects our current challenges as much as it highlights our potential. While we maintain a strong gross margin of 67%, the decrease in revenue was an indicator that our new sales initiatives need to be accelerated. We are facing external headwinds notably from cyclical budget decisions and the impact from the U. S. Government's continuing resolutions. Speaker 100:02:26These are not excuses, but the realities and we are tackling them head on. We are not sitting idle. The substantial effort in 2020 3 to clear out the significant backlog was essential. However, it has temporarily impacted our revenue streams to start this year. In recent months, we've been hard at work implementing our sales initiatives, ramping up our grant assistance programs and pursuing sales growth. Speaker 100:02:53While these actions take time to yield results, they will be important for our continuing progress and further penetrating the global markets and supporting the upcoming VXR launch. As an update, our VXR launch preparations advanced on schedule this quarter and we are targeting deliveries in the coming months. Our new extended reality solution is set to disrupt and improve the professional training environments. It is designed to enhance soft skills training across applications in law enforcement, healthcare, education and other related sectors. We are tailoring VXR to meet the diverse needs of all agency sizes, budgets and training requirements. Speaker 100:03:38By extending beyond the shoot, don't shoot scenario based training, VXR focuses on the development of critical interpersonal skills enabling professionals to better navigate sensitive situations, diffuse potential conflicts and build strong community relationships. Its wide array of application positions VXR as a key pillar in our long term growth strategy. With this launch, we are prepared to moderate our strong profit margins temporarily to secure a more substantial market share and ensure sustained growth. As we progress through 2024, advancing our sales and marketing strategy is key priority. To efficiently bring our core screen based simulators and new innovations like VXR to market, we've streamlined our sales approach to boost productivity and customer success. Speaker 100:04:34By establishing additional territories and optimizing our sales staff's focus, we're enhancing customer engagement and operational efficiencies. Our revised sales initiative program incentive program and the strategic addition of sales support specialists in key locations are already improving our pipeline visibility and customer interactions, ensuring that our sales force is as advanced and efficient as our technologies. We are strategically investing in content and technology to ensure all of our training solutions, including VXR, provide effective training modules across various applications and scenarios. Our investment in content development continues to strengthen our competitive position. We have expanded our scenario library to include more real world situations like crisis intervention and active shooter responses developed in consultation with industry experts. Speaker 100:05:33This expansion is enhancing our training effectiveness and solidifying our early mover advantage in the industry. Our proprietary V3 technology fuels these developments, making our training solutions comprehensive and realistic. Much of our content is also certified through Iatalyst, ensuring it meets the rigorous national standards. Each hour of our training curriculum saves approximately 65 hours of research and preparation for our clients, demonstrating significant value and efficiency. Growing our content library will continue to be a key priority in the years ahead as quality content continues to be the crucial differentiator for securing new customers, improving current customers' experience and driving positive training outcomes. Speaker 100:06:25We are ramping up content development across our training solutions and continuously growing our output rates. These enhancements in content are paralleled by continuous improvements in our internal operations. We've been optimizing our production process and further enhancing our ERP system to improve our operational agility, which is a crucial factor in fulfilling our backlog in 2023. As a result, throughput significantly increased demonstrating our ability to handle larger volumes more efficiently, which is crucial as we scale operations. We've improved our book to ship times and product quality, reducing production errors and we're seeing much better cooperation between departments. Speaker 100:07:14Together, these advances are achieving financial efficiencies and ultimately leading to greater customer satisfaction, which we expect to continue strengthening as our customers' success initiatives take hold. Looking closer at how our end markets performed in Q1. In the Q1, our government revenue increased by 7% to $6,700,000 from $6,300,000 in the prior year. This growth is attributed to design and prototyping revenue. As law enforcement budgets face continuous cuts, they rely heavily on the grant funding from the federal government. Speaker 100:07:53We have implemented the GrantWatch program, which monitors and matches department needs with grants required to fund needed equipment for training. Internationally, our revenue was $1,300,000 a decrease from $3,200,000 in 2023. The dip in this segment can primarily be attributed to the longer lead times in our international pipeline. With our international pipeline continues to grow, the U. S. Speaker 100:08:22Government continuing resolution and budget issues along with the current geopolitical landscape has affected the expected release dates of many opportunities, which rely heavily on government funding. We expect a higher close rate in the next several quarters as budgets are approved and the continuing resolution was resolved. As part of our sales team restructuring, the appointment of dedicated international sales personnel is beginning to show results. These changes are enhancing our ability to forecast and stabilize future revenue streams within this segment as we continue to build out a more predictable international pipeline. Turning to our progress in the military. Speaker 100:09:05The recent award of a $5,900,000 prototype contract from the U. S. Army's Integrated Visual Augmentation System or IBAS program underscores our strategic alignment with military needs and our pivotal role in advancing training technologies. This contract secured through our collaboration with Microsoft as the prime contractor is an important continuation of our involvement with the IVAS program. Included in the order are our industry leading recoil hardware kits, high pressure air fill stations and magazines, all engineered to meet the U. Speaker 100:09:43S. Army's stringent requirements. This partnership reaffirms the reliability and performance of our technology and also highlights our capability to innovate and adapt in response to the demanding needs of military training. Over the past 2 years, we have significantly expanded our production capacity preparing VirTra for mass production and enabling us to meet the growing demands of the U. S. Speaker 100:10:11Army. Our work on this project has advanced our technological capabilities and provided us with valuable insights into effectively serving military markets globally. Through initiatives like IVAS, VirTra is not merely participating in the defense sector. We are actively shaping the next generation of military training solutions. Our efforts ensure that service members are equipped to handle the complexities of modern combat scenarios and this contract serves as a foundation for future innovations in Army training technologies. Speaker 100:10:48I'll now turn the call over to Alana to discuss our financial results in further detail. Alana? Speaker 200:10:55Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the Q1 ended March 31, 2024. Total revenue was $8,100,000 compared to the $10,000,000 in the prior year period. The 19% decrease was primarily due to delays in federal funding attributed to the U. S. Speaker 200:11:14Government's continuing resolution, which caused numerous contracts to be placed on hold. This temporary challenge impacted bookings in both the Q4 of 2023 and the Q1 of 2024. Our gross profit totaled $5,500,000 67 percent of total revenue compared to $6,900,000 69 percent 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. Speaker 200:11:49Specifically, the milestone payment in December 2023, which incurred minimal costs, previously boosted margins. However, costs associated subsequent milestone payment in the Q1 of 2024 adversely affected those gross margin. Effective cost management and other system sales partially offset this effect. Net operating expense was $4,100,000 marking a 17% increase from the $3,500,000 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. Speaker 200:12:38Our operating income decreased $1,400,000 from $3,500,000 Our net income was $1,200,000 or $0.11 per diluted share based on 11,000,000 weighted average diluted shares outstanding compared to net income of $2,900,000 or $0.27 per diluted share based on the 10.9 1,000,000 weighted average diluted shares outstanding in the prior year period. Our adjusted EBITDA, a non GAAP metric, was 1,900,000 $4,000,000 in the prior year period. Now turning to our bookings and backlog. We define bookings as the total of newly signed contracts and purchase orders received in a defined period. For the Q1 of 2024, we received bookings totaling $2,900,000 Looking at our backlog, which we define as the accumulation of bookings from signed contracts and purchase orders that are not yet started or incomplete and cannot be recognized as revenue until delivered in a future period. Speaker 200:13:43As of March 31, 2024, our backlog totaled $14,000,000 The breakout of this backlog includes 5 point $4,000,000 in capital, dollars 6,400,000 in service and warranties and $2,200,000 in step contracts. As a reminder, service warranties and step backlog is revenue that will be recognized on a straight line basis over the coming years. In addition to the backlog, there are $6,800,000 in renewable step contracts that would represent additional revenue for the next 5 years. Historically, we have had greater than a 95% renewal rate on our STEP contracts. Finally, to our balance sheet. Speaker 200:14:27As of March 31, 2024, we had unrestricted cash and cash equivalents of 22 $400,000 an increase from $18,900,000 at December 31, 2023. From a working capital standpoint, the end of first quarter, we had $33,200,000 in working capital, consistent with the $33,200,000 at the end of Q4 2023. For additional details on our financial results, please reference our 10 Q, which was filed earlier today. That concludes my prepared remarks. And now I'll turn over to John for his closing remarks. Speaker 200:15:04John? Speaker 100:15:04Thank you, Alana. As we review this past quarter, it's clear that while we are not satisfied with our current performance, we are actively addressing these challenges. Our upcoming launch of the VXR platform and the growth in our strategic military engagements are important components to this response and they will be key to our success in the rest of 2024. Looking ahead, we're focused on converting our robust pipeline into tangible outcomes. We may see similar sales figures in Q2 as we did in Q1, but as government budget resolutions take shape, this could change. Speaker 100:15:43We are positioned to capitalize on our healthy pipeline of opportunities in the months ahead. Relationships remains a top priority, particularly as we extend our global reach and rollout new products. In conclusion, despite the temporary hurdles, VirTra remains at the helm of the training industry, driven by innovation and a commitment to excel training outcomes. We are optimistic about what 2024 holds and we look forward to sharing our progress. We appreciate your continued support and interest. Speaker 100:16:18And with that, we'll open up the call for questions. Operator, please provide the appropriate instructions. Operator00:16:25Thank you. At this time, we'll be conducting a question and answer Our first question comes from Jaeson Schmidt with Lake Street Capital. Please proceed with your question. Speaker 300:17:02Hey, guys. Thanks for taking my questions. John, just want to start with sort of your comments on kind of Q2 maybe similar to Q1. I guess maybe to expand on that a little further, can you just discuss how bookings have been tracking through the 1st 2 weeks of this quarter? Speaker 100:17:18Yes. So bookings are tracking. We have quite a few opportunities out there that are relying on the federal funding. And so depending on when those monies slow down from the release of the funds after the continuing resolution was resolved, we're not sure on those timings. So I just wanted to give a little bit of notice there that says it may, but we're optimistic as we start to see things, they're starting to move now. Speaker 100:17:49We should be okay, but again, timing is everything. Speaker 300:17:56Okay. That makes sense. And then just following up on your comments on the I vest win. I mean that definitely sounds like a pretty significant milestone for you guys. How should we think about the kind of high level, big picture opportunity with this program? Speaker 100:18:14Well, so as most people know, I mean, it was it is a proto type contract. So we took our existing technology and based on their incredibly stringent requirements and the reliability testing from humidity, salt, they want to use them outdoors and all of that. We passed many, many of those milestones and that contract represented field testing going out to soldiers and they're doing that as part of a much larger effort. I mean, if everything works the way they want, ammunition and ranges and those sorts of things are very hard to get and to put soldiers out there and train and for safety reasons. So they're looking to equip soldiers and the numbers aren't there today, but that's part of why they're going through this program is they're looking for alternative method to train in those environments, both in the field and back at home station. Speaker 300:19:15Got it. And then just last one for me and I'll jump back into queue. It sounds like the VXR is right on track for launch. How many customers will be receiving this? Is it a couple, half dozen, a dozen? Speaker 300:19:29How should we be thinking about that? Speaker 100:19:37Let's see. Give me one second, Jason. So we have active POs and we're working with the manufacturer of the headset for terms and conditions and pricing and stuff. So we have a good bit of new customers and a lot of current customers that are looking for the headset. And keep in mind, the reason there's two reasons why they would use the headset. Speaker 100:20:06One is to do well, the main one is to do soft skills and they don't need much space in order to do that. And as I've stated in the past, we're not pursuing the shoot, don't shoot at this time because the technology just isn't there and it introduces negative training. So a lot of our existing customers are looking at it to augment the system, but not cannibalize our that part of our revenue stream. So it's looked at as 2, so it's looking to augment their training. So I'm not going to give you numbers or anything, but we are having significant interest and we have quotes out there and POs. Speaker 300:20:48Okay. No, that's really helpful. Thanks a lot guys. Speaker 100:20:52Thank you, Jason. Operator00:21:11At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Gibbons for his closing remarks. Speaker 100:21:20Thank you. VirTra is dedicated to our customers and their crucial missions is as strong as ever. Our passion, hard work and dedication of our team, we are the cornerstone of our success and I'm confident in our ability to provide thought leadership to our customers, continue innovating at the top of the industry and making a meaningful difference. To our shareholders, thank you for your continued support. As we move forward into the rest of 2020 4 and beyond, I'm looking forward to sharing our success and progress with you. Speaker 100:21:58Thanks for all of your ongoing support. Operator? Operator00:22:03Thank you for joining us today for VirTra's Q1 2024 Conference Call. You may now disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallVirTra Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) VirTra Earnings HeadlinesVirTra Sets First Quarter 2025 Conference Call for Monday, May 12, 2025 at 4:30 p.m. ETApril 28 at 4:16 PM | globenewswire.comVirTra, Inc. (VTSI) Stock Moves -1.29%: What You Should KnowApril 17, 2025 | msn.comMassive new energy source found in UtahNEW THIS WEEK: Huge Energy Discovery In Utah The Department of Energy say it could power America for millions of years. And both grizzled oilmen and clean energy supporters love it: Energy Secretary Chris Wright called it "an awesome resource," while Warren Buffett, Jeff Bezos, Mark Zuckerberg, and Bill Gates are all directly invested.April 28, 2025 | Stansberry Research (Ad)VirTra Full Year 2024 Earnings: Misses ExpectationsMarch 29, 2025 | finance.yahoo.comVirTra, Inc. (NASDAQ:VTSI) Q4 2024 Earnings Call TranscriptMarch 29, 2025 | insidermonkey.comVirTra price target lowered to $9.50 from $12.50 at Roth MKMMarch 28, 2025 | markets.businessinsider.comSee More VirTra Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like VirTra? Sign up for Earnings360's daily newsletter to receive timely earnings updates on VirTra and other key companies, straight to your email. Email Address About VirTraVirTra (NASDAQ:VTSI) provides use of force training and firearms training simulators for the law enforcement, military, and commercial markets worldwide. Its patented technologies, software, and scenarios provide intense training for de-escalation, judgmental use-of-force, marksmanship, and related training that mimics real-world situations. It offers V-300 simulator, a 300 degree wrap-around screen for simulation training; V-180 simulator, a 180 degree screen for smaller spaces or budgets; V-100, a single-screen based simulator system; V-100 MIL, a single-screen based simulator system; and V-ST PRO, a realistic single screen firearms shooting and skills training simulator. The company also provides Virtual Interactive Coursework Training Academy (V-VICTA), which enables law enforcement agencies to teach, train, test, and sustain departmental training requirements; and Subscription Training Equipment Partnership, a program that allows agencies to utilize its simulator products, accessories, and V-VICTA interactive coursework on a subscription basis. In addition, it offers V-Author software that allows users to create, edit, and train with content specific to agency's objectives and environments; Simulated Recoil Kits, a range of realistic and reliable simulated recoil kits/weapons; Threat-Fire, a device that applies real-world stress on the trainees during simulation training; and TASER, an OC spray and low-light training devices that interact with its simulators for training. The company sells its simulators and related products through a direct sales force and distribution partners. The company was founded in 1993 and is headquartered in Chandler, Arizona.View VirTra ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 4 speakers on the call. Operator00:00:00Good afternoon, and welcome to Virtruis First Quarter 2024 Earnings Conference Call. My name is Robert, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, John Gibbons and CFO, Alana Boudreaux. Following their remarks, we will open the call for questions. Before we begin the call, I'd like to provide VirTra's Safe Harbor statement that includes cautions regarding forward looking statements made during this call. Operator00:00:29During this presentation, management may discuss financial projections, information or expectations about the company's products and services or markets or otherwise make statements about the future, which are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them as required by law. Finally, I'd like to remind everyone that this call will be made available for replay via a link in the Investor Relations section on the company's website at www. Virtra.com. Now I'd like to turn the call over to VirTra's CEO, Mr. Operator00:01:14John Gibbons. Thank you, and you may proceed, sir. Speaker 100:01:19Thank you, operator, and thank you, everybody, for joining us this afternoon. After the markets closed today, we issued a press release that provided our financial results for the Q1 ending March 31, 2024, along with the highlighted business accomplishments. Today, I'll begin by discussing our Q1 performance and strategic achievements, including our progress with the VXR platform and our military market engagements before handing over to Alana for a detailed financial review. After that, I'll provide some concluding remarks before we move on to questions and answers. Our Q1 performance was not where we want it to be. Speaker 100:01:58Revenue dipped to $8,100,000 a figure that frankly reflects our current challenges as much as it highlights our potential. While we maintain a strong gross margin of 67%, the decrease in revenue was an indicator that our new sales initiatives need to be accelerated. We are facing external headwinds notably from cyclical budget decisions and the impact from the U. S. Government's continuing resolutions. Speaker 100:02:26These are not excuses, but the realities and we are tackling them head on. We are not sitting idle. The substantial effort in 2020 3 to clear out the significant backlog was essential. However, it has temporarily impacted our revenue streams to start this year. In recent months, we've been hard at work implementing our sales initiatives, ramping up our grant assistance programs and pursuing sales growth. Speaker 100:02:53While these actions take time to yield results, they will be important for our continuing progress and further penetrating the global markets and supporting the upcoming VXR launch. As an update, our VXR launch preparations advanced on schedule this quarter and we are targeting deliveries in the coming months. Our new extended reality solution is set to disrupt and improve the professional training environments. It is designed to enhance soft skills training across applications in law enforcement, healthcare, education and other related sectors. We are tailoring VXR to meet the diverse needs of all agency sizes, budgets and training requirements. Speaker 100:03:38By extending beyond the shoot, don't shoot scenario based training, VXR focuses on the development of critical interpersonal skills enabling professionals to better navigate sensitive situations, diffuse potential conflicts and build strong community relationships. Its wide array of application positions VXR as a key pillar in our long term growth strategy. With this launch, we are prepared to moderate our strong profit margins temporarily to secure a more substantial market share and ensure sustained growth. As we progress through 2024, advancing our sales and marketing strategy is key priority. To efficiently bring our core screen based simulators and new innovations like VXR to market, we've streamlined our sales approach to boost productivity and customer success. Speaker 100:04:34By establishing additional territories and optimizing our sales staff's focus, we're enhancing customer engagement and operational efficiencies. Our revised sales initiative program incentive program and the strategic addition of sales support specialists in key locations are already improving our pipeline visibility and customer interactions, ensuring that our sales force is as advanced and efficient as our technologies. We are strategically investing in content and technology to ensure all of our training solutions, including VXR, provide effective training modules across various applications and scenarios. Our investment in content development continues to strengthen our competitive position. We have expanded our scenario library to include more real world situations like crisis intervention and active shooter responses developed in consultation with industry experts. Speaker 100:05:33This expansion is enhancing our training effectiveness and solidifying our early mover advantage in the industry. Our proprietary V3 technology fuels these developments, making our training solutions comprehensive and realistic. Much of our content is also certified through Iatalyst, ensuring it meets the rigorous national standards. Each hour of our training curriculum saves approximately 65 hours of research and preparation for our clients, demonstrating significant value and efficiency. Growing our content library will continue to be a key priority in the years ahead as quality content continues to be the crucial differentiator for securing new customers, improving current customers' experience and driving positive training outcomes. Speaker 100:06:25We are ramping up content development across our training solutions and continuously growing our output rates. These enhancements in content are paralleled by continuous improvements in our internal operations. We've been optimizing our production process and further enhancing our ERP system to improve our operational agility, which is a crucial factor in fulfilling our backlog in 2023. As a result, throughput significantly increased demonstrating our ability to handle larger volumes more efficiently, which is crucial as we scale operations. We've improved our book to ship times and product quality, reducing production errors and we're seeing much better cooperation between departments. Speaker 100:07:14Together, these advances are achieving financial efficiencies and ultimately leading to greater customer satisfaction, which we expect to continue strengthening as our customers' success initiatives take hold. Looking closer at how our end markets performed in Q1. In the Q1, our government revenue increased by 7% to $6,700,000 from $6,300,000 in the prior year. This growth is attributed to design and prototyping revenue. As law enforcement budgets face continuous cuts, they rely heavily on the grant funding from the federal government. Speaker 100:07:53We have implemented the GrantWatch program, which monitors and matches department needs with grants required to fund needed equipment for training. Internationally, our revenue was $1,300,000 a decrease from $3,200,000 in 2023. The dip in this segment can primarily be attributed to the longer lead times in our international pipeline. With our international pipeline continues to grow, the U. S. Speaker 100:08:22Government continuing resolution and budget issues along with the current geopolitical landscape has affected the expected release dates of many opportunities, which rely heavily on government funding. We expect a higher close rate in the next several quarters as budgets are approved and the continuing resolution was resolved. As part of our sales team restructuring, the appointment of dedicated international sales personnel is beginning to show results. These changes are enhancing our ability to forecast and stabilize future revenue streams within this segment as we continue to build out a more predictable international pipeline. Turning to our progress in the military. Speaker 100:09:05The recent award of a $5,900,000 prototype contract from the U. S. Army's Integrated Visual Augmentation System or IBAS program underscores our strategic alignment with military needs and our pivotal role in advancing training technologies. This contract secured through our collaboration with Microsoft as the prime contractor is an important continuation of our involvement with the IVAS program. Included in the order are our industry leading recoil hardware kits, high pressure air fill stations and magazines, all engineered to meet the U. Speaker 100:09:43S. Army's stringent requirements. This partnership reaffirms the reliability and performance of our technology and also highlights our capability to innovate and adapt in response to the demanding needs of military training. Over the past 2 years, we have significantly expanded our production capacity preparing VirTra for mass production and enabling us to meet the growing demands of the U. S. Speaker 100:10:11Army. Our work on this project has advanced our technological capabilities and provided us with valuable insights into effectively serving military markets globally. Through initiatives like IVAS, VirTra is not merely participating in the defense sector. We are actively shaping the next generation of military training solutions. Our efforts ensure that service members are equipped to handle the complexities of modern combat scenarios and this contract serves as a foundation for future innovations in Army training technologies. Speaker 100:10:48I'll now turn the call over to Alana to discuss our financial results in further detail. Alana? Speaker 200:10:55Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the Q1 ended March 31, 2024. Total revenue was $8,100,000 compared to the $10,000,000 in the prior year period. The 19% decrease was primarily due to delays in federal funding attributed to the U. S. Speaker 200:11:14Government's continuing resolution, which caused numerous contracts to be placed on hold. This temporary challenge impacted bookings in both the Q4 of 2023 and the Q1 of 2024. Our gross profit totaled $5,500,000 67 percent of total revenue compared to $6,900,000 69 percent 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. Speaker 200:11:49Specifically, the milestone payment in December 2023, which incurred minimal costs, previously boosted margins. However, costs associated subsequent milestone payment in the Q1 of 2024 adversely affected those gross margin. Effective cost management and other system sales partially offset this effect. Net operating expense was $4,100,000 marking a 17% increase from the $3,500,000 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. Speaker 200:12:38Our operating income decreased $1,400,000 from $3,500,000 Our net income was $1,200,000 or $0.11 per diluted share based on 11,000,000 weighted average diluted shares outstanding compared to net income of $2,900,000 or $0.27 per diluted share based on the 10.9 1,000,000 weighted average diluted shares outstanding in the prior year period. Our adjusted EBITDA, a non GAAP metric, was 1,900,000 $4,000,000 in the prior year period. Now turning to our bookings and backlog. We define bookings as the total of newly signed contracts and purchase orders received in a defined period. For the Q1 of 2024, we received bookings totaling $2,900,000 Looking at our backlog, which we define as the accumulation of bookings from signed contracts and purchase orders that are not yet started or incomplete and cannot be recognized as revenue until delivered in a future period. Speaker 200:13:43As of March 31, 2024, our backlog totaled $14,000,000 The breakout of this backlog includes 5 point $4,000,000 in capital, dollars 6,400,000 in service and warranties and $2,200,000 in step contracts. As a reminder, service warranties and step backlog is revenue that will be recognized on a straight line basis over the coming years. In addition to the backlog, there are $6,800,000 in renewable step contracts that would represent additional revenue for the next 5 years. Historically, we have had greater than a 95% renewal rate on our STEP contracts. Finally, to our balance sheet. Speaker 200:14:27As of March 31, 2024, we had unrestricted cash and cash equivalents of 22 $400,000 an increase from $18,900,000 at December 31, 2023. From a working capital standpoint, the end of first quarter, we had $33,200,000 in working capital, consistent with the $33,200,000 at the end of Q4 2023. For additional details on our financial results, please reference our 10 Q, which was filed earlier today. That concludes my prepared remarks. And now I'll turn over to John for his closing remarks. Speaker 200:15:04John? Speaker 100:15:04Thank you, Alana. As we review this past quarter, it's clear that while we are not satisfied with our current performance, we are actively addressing these challenges. Our upcoming launch of the VXR platform and the growth in our strategic military engagements are important components to this response and they will be key to our success in the rest of 2024. Looking ahead, we're focused on converting our robust pipeline into tangible outcomes. We may see similar sales figures in Q2 as we did in Q1, but as government budget resolutions take shape, this could change. Speaker 100:15:43We are positioned to capitalize on our healthy pipeline of opportunities in the months ahead. Relationships remains a top priority, particularly as we extend our global reach and rollout new products. In conclusion, despite the temporary hurdles, VirTra remains at the helm of the training industry, driven by innovation and a commitment to excel training outcomes. We are optimistic about what 2024 holds and we look forward to sharing our progress. We appreciate your continued support and interest. Speaker 100:16:18And with that, we'll open up the call for questions. Operator, please provide the appropriate instructions. Operator00:16:25Thank you. At this time, we'll be conducting a question and answer Our first question comes from Jaeson Schmidt with Lake Street Capital. Please proceed with your question. Speaker 300:17:02Hey, guys. Thanks for taking my questions. John, just want to start with sort of your comments on kind of Q2 maybe similar to Q1. I guess maybe to expand on that a little further, can you just discuss how bookings have been tracking through the 1st 2 weeks of this quarter? Speaker 100:17:18Yes. So bookings are tracking. We have quite a few opportunities out there that are relying on the federal funding. And so depending on when those monies slow down from the release of the funds after the continuing resolution was resolved, we're not sure on those timings. So I just wanted to give a little bit of notice there that says it may, but we're optimistic as we start to see things, they're starting to move now. Speaker 100:17:49We should be okay, but again, timing is everything. Speaker 300:17:56Okay. That makes sense. And then just following up on your comments on the I vest win. I mean that definitely sounds like a pretty significant milestone for you guys. How should we think about the kind of high level, big picture opportunity with this program? Speaker 100:18:14Well, so as most people know, I mean, it was it is a proto type contract. So we took our existing technology and based on their incredibly stringent requirements and the reliability testing from humidity, salt, they want to use them outdoors and all of that. We passed many, many of those milestones and that contract represented field testing going out to soldiers and they're doing that as part of a much larger effort. I mean, if everything works the way they want, ammunition and ranges and those sorts of things are very hard to get and to put soldiers out there and train and for safety reasons. So they're looking to equip soldiers and the numbers aren't there today, but that's part of why they're going through this program is they're looking for alternative method to train in those environments, both in the field and back at home station. Speaker 300:19:15Got it. And then just last one for me and I'll jump back into queue. It sounds like the VXR is right on track for launch. How many customers will be receiving this? Is it a couple, half dozen, a dozen? Speaker 300:19:29How should we be thinking about that? Speaker 100:19:37Let's see. Give me one second, Jason. So we have active POs and we're working with the manufacturer of the headset for terms and conditions and pricing and stuff. So we have a good bit of new customers and a lot of current customers that are looking for the headset. And keep in mind, the reason there's two reasons why they would use the headset. Speaker 100:20:06One is to do well, the main one is to do soft skills and they don't need much space in order to do that. And as I've stated in the past, we're not pursuing the shoot, don't shoot at this time because the technology just isn't there and it introduces negative training. So a lot of our existing customers are looking at it to augment the system, but not cannibalize our that part of our revenue stream. So it's looked at as 2, so it's looking to augment their training. So I'm not going to give you numbers or anything, but we are having significant interest and we have quotes out there and POs. Speaker 300:20:48Okay. No, that's really helpful. Thanks a lot guys. Speaker 100:20:52Thank you, Jason. Operator00:21:11At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Gibbons for his closing remarks. Speaker 100:21:20Thank you. VirTra is dedicated to our customers and their crucial missions is as strong as ever. Our passion, hard work and dedication of our team, we are the cornerstone of our success and I'm confident in our ability to provide thought leadership to our customers, continue innovating at the top of the industry and making a meaningful difference. To our shareholders, thank you for your continued support. As we move forward into the rest of 2020 4 and beyond, I'm looking forward to sharing our success and progress with you. Speaker 100:21:58Thanks for all of your ongoing support. Operator? Operator00:22:03Thank you for joining us today for VirTra's Q1 2024 Conference Call. You may now disconnect your lines.Read morePowered by