VirTra Q1 2025 Earnings Report

VirTra EPS Results

• Actual EPS: $0.11
• Consensus EPS: $0.01
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: N/A

VirTra Revenue Results

• Actual Revenue: $7.16 million
• Expected Revenue: $5.46 million
• Beat/Miss: Beat by +$1.71 million
• YoY Revenue Growth: N/A

VirTra Announcement Details

• Quarter: Q1 2025
• Date: 5/12/2025
• Time: After Market Closes
• Conference Call Date: Monday, May 12, 2025
• Conference Call Time: 4:30PM ET

VirTra (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.

VirTra Q1 2025 Earnings Call Transcript

Key Takeaways

• VirTra returned to GAAP profitability in Q1 with strong 73% gross margins and demonstrated progress in sales efficiencies and operational scalability despite ongoing government budget pressures.
• Q1 financial results: Revenue was $7.2 million (down 3% year-over-year), net income rose to $1.3 million ($0.11 per diluted share, up 170%), adjusted EBITDA grew 22% to $1.7 million, bookings reached $6.4 million, and backlog stood at $21.2 million.
• The sales and marketing function was revamped with a regional sales model, entry into the GSA procurement channel, standardized product bundles, and a rebuilt digital strategy that doubled qualified lead generation and shortened sales cycles.
• The VXR extended reality platform achieved its first two sales with deliveries slated for Q2, and VirTra is expanding headset compatibility and its immersive content library (now over 120 certified hours) to accelerate next-generation training adoption.
• VirTra advanced its U.S. Army IVAS partnership by completing recoil kit validation and supporting contract novation to Anduril, positioning the company to capitalize on DoD acquisition reforms and modular open-system requirements.

Presentation

[Operator]

Good afternoon, and welcome to VirTra's First Quarter twenty twenty five Earnings Conference Call. My name is Maria, 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 would like to provide VirTra's Safe Harbor statement that includes cautions regarding forward looking statements made during this call.

[Operator]

During 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. John Gibbons. Thank you, and you may proceed, sir.

[John Givens, CEO & Chairman at VirTra]

Thank you, Maria, and thank you, everyone, for joining us this afternoon. After the markets closed today, we issued a press release that provided our financial results for the first quarter ending 03/31/2025, along with the highlighted business accomplishments. We began the year with a continued focus on operational execution and saw encouraging signs across several areas. While the quarter was not without its challenges, we posted a return to GAAP profitability, strong gross margins and continued progress in both sales efficiencies and operational scalability. In today's environment where many customers are still facing delayed budget approvals and grant allocations, I view this as a positive step forward.

[John Givens, CEO & Chairman at VirTra]

The broader operating environment, including economic uncertainty, shifting agency priorities and tightening government budget, demands proactive focus and adaptability. At VirTra, we view these challenges as opportunities to sharpen our value proposition and reinforce our role as a trusted training partner. By aligning our offerings and high priority agency needs, anticipating procurement cycles and maintaining fiscal discipline, we continue to strengthen our market position while delivering mission critical solutions that meet the evolving demands of law enforcement, military, and federal agencies. While it was a productive Q1, we remain fully aware of the macro headwinds shaping our customers' decisions. The reality is that many government agencies are still navigating uncertainty around appropriations and budget cuts.

[John Givens, CEO & Chairman at VirTra]

Sales cycles are taking longer. In some cases, funding is being held back entirely while internal reviews or leadership transitions play out. That said, training mandates are not going away. If anything, they're becoming more urgent. Agencies still need to demonstrate readiness, meet annual certification standards, and manage escalating risks within their communities.

[John Givens, CEO & Chairman at VirTra]

What's changing is how they plan for that training. We're seeing more interest in flexible purchasing pathways, including subscription based models like our STEP and bundled offerings that eliminate friction during the approval process. We believe that our immersive training solution and industry leading content library are increasingly aligned with what agencies need in their environment, systems that are effective, affordable, and easy to deploy. Our ability to support both large capital projects and reoccurring lower footprint programs allows us to remain engaged across the range of buyer profiles even as broader spending softens. Despite ongoing pressures with on federal and state agency budgets, we successfully expanded our presence through targeted engagements, disciplined pipeline management, and deep alignment with procurement schedules.

[John Givens, CEO & Chairman at VirTra]

Key actions include early coordination with agencies during their budgeting process, allowing us to shape requirements and provide tailored solutions aligned with upcoming funding allocations. For example, our government sales team collaborated closely with law enforcement agencies seeking to utilize fiscal twenty four burn JAG and homeland security grant funding positioning VirTra systems as priority. Additionally, we strategically timed proposal submissions in alignment with key procurement windows such as DHS's SAFR grant and DOD's Q1 obligation targets resulting in increased quote activity and new contract awards. By maintaining active communications with procurement officers and leveraging our GSA schedule and so forth pathways where applicable, we minimize delays and maximize contract efficiencies. Alana will walk you through in detail our financials.

[John Givens, CEO & Chairman at VirTra]

We ended Q1 with $6,400,000 in bookings and a $21,200,000 backlog. From a strategic standpoint these numbers are encouraging as they show the trust our customers continue to place in Fortress even amidst a slower contracting environment. So while the top line revenue can still fluctuate quarter to quarter based on delivery, timing and funding schedules, the underlying engine, bookings, backlog and pipeline momentum, they continue to reinforce our forward trajectory. We've made notable progress restructuring our sales organization. Entering the year, our key sales initiatives were to expand our high performing sales force, optimize sales efficiency and increase our market presence through a revamped marketing strategy.

[John Givens, CEO & Chairman at VirTra]

In respect to our expanding our high performance sales force, we transitioned to a regional sales model with new leadership, improving both accountability and responsiveness across key territories. This structure ensures that our top performers are empowered to lead within their zones and that customers benefit from closer, more consistent engagement. In regards to optimizing sales efficiency, our team is now operating with more focus, supported by improved leadership management systems, refined outreach strategies, and clearer follow-up processes. These changes are already driving higher quality engagements and shortening the average time between first contact and signed contract. To further reduce friction, we've entered the GSA general services administration procurement channel in Q1.

[John Givens, CEO & Chairman at VirTra]

This enabled agencies at all levels of government to purchase directly from a pre approved federal catalog, eliminating the need for lengthy negotiations. In tandem, we introduced standardized product bundles that streamline quoting and speed up fulfillment, improvements that enhance predictability and scalability across our pipeline. To increase our market presence, we've taken steps to improve our marketing function. We've started by overhauling our digital strategy, rebuilding our corporate website to improve usability and lead capture, enhancing how we track engagements from campaigns and increasing return on investment from partner platforms. Early signs are encouraging.

[John Givens, CEO & Chairman at VirTra]

Our team captured more than double the expected number of qualified leads at recent events like Border Expo and SHOT Show. And we're seeing increased traction from previously underperforming channels. Virtu continues to build a disciplined, data driven approach to lead generation and customer acquisition with a sharp focus on maximizing return on investment. We have implemented structured lead capture methods supported by detailed systematic follow-up to ensure each opportunity is matured with purpose and clarity. This deliberate approach allows us to improve conversion rates while maintaining a strong pipeline of qualified prospects.

[John Givens, CEO & Chairman at VirTra]

Our marketing efforts are guided by common sense, targeted campaigns that speak directly to the needs of law enforcement and military agencies. These campaigns are closely aligned with our sales strategies, ensuring we are not only attracting the right leads, but doing so efficiently, fully aware of the cost required to capture and sustain each customer relationship. To this end, we've invested in specialized personnel with the expertise to design and execute these critical initiatives. We are also fostering a more collaborative relationship between sales, marketing, and our customers. This integrated approach has led to increased internal alignment, improved messaging consistency, and more meaningful engagement throughout the customer journey.

[John Givens, CEO & Chairman at VirTra]

Through the use of our enhanced CRM reporting, we've added greater accountability and visibility, allowing us to track touch points, monitor performance, and continuously improve the customer experience. As we move forward, this strategic focus on high quality lead generation, campaign precision and customer alignment will be key to sustain momentum and driving long term growth. Our VXR extended reality platform continues to generate growing interest. Two units have been sold to date with the first customer deliveries expected in Q2. Several more are in active discussions with customers responded positively to the system's flexibility, accessibility, and immersive fidelity.

[John Givens, CEO & Chairman at VirTra]

We're also working to expand headset compatibility and streamline deployment, ensuring the system scales efficiently across varied training environments. As we discussed in recent quarters, VXR reflects our long term strategy to lead the industry in next generation headset based immersive training. These early sales are encouraging and we're actively gathering customer feedback to help refine the VXR platform and support broader adoption. For many agencies, incorporating XR based training into their long term plans requires budget alignment, grant application updates, and internal approvals. Virtual will continue to play a key role in that process by helping agencies understand how BXR meets evolving training mandates and equipping them with the data and documentation needed to pursue grant funding and approvals.

[John Givens, CEO & Chairman at VirTra]

We continue to focus on the VXR content library converting our massive scenario based training for the use of our headset. We are receiving continued interest in the approach and will see more sales conversion as funding lines start to flow. Beyond the XR, we continue to strengthen our core technology platform. In Q1, we expanded scenario packaging efforts to better match customer needs with relevant real world training modules. We also continue to increase the use of our AI tools to accelerate content development, cutting production time significantly, and allowing our team to generate higher volumes of certified training faster than ever before.

[John Givens, CEO & Chairman at VirTra]

VirTra is proud to report significant progress in the expansion of our certified training content with over a hundred twenty hours of certified courses now available. This milestone reflects our ongoing commitment to delivering high impact standards aligned training that directly addresses the needs of our law enforcement and military partners. We remain focused on building scenarios that are not only realistic but shaped by the evolving challenges faced in the field, from emerging threat dynamics to community interactions and de escalation. Our scenarios developed development is informed by current events and direct customer feedback ensuring maximum relevance and training effectiveness. Our content library continues to grow at an accelerated pace both in size and in quality, driven by the integration of advanced video production, motion capture, and AI enhanced animation tools.

[John Givens, CEO & Chairman at VirTra]

This unexpected acceleration in scenario creation is allowing us to respond more quickly to shifting training demands, offering a broader range of immersive experience with a higher level of realism than previously possible. VirTra's commitment to content excellence supported by innovation and direct agency collaboration positions us as a clear leader in scenario based training solutions. As part of our broader operational upgrades, we're reconfiguring our facility to support future scalability, adding dedicated space for reliability testing and expanding our assembly line and integrating lean manufacturing processes speed throughput. These changes were informed by lessons learned during last year's testing cycles related to IVAS and they will help ensure consistent quality as volumes grow. Speaking of IVAS, we continue to advance our partnership with the U.

[John Givens, CEO & Chairman at VirTra]

S. Army during Q1. We completed advanced recoil kit validation and began implementing reliability testing protocols as we prepare for potential production. The Army has now officially novated the IVAS contract from Microsoft to Andro, a key milestone that clarifies next steps for the program's future. As we shared last quarter, our technology performed exceptionally well during the final R and D phases with the Army conducting soldier assessments concluding soldier assessments early due to our systems exceeding expectation.

[John Givens, CEO & Chairman at VirTra]

With the DoD now evaluating overlapping programs for consolidation, our track record and strong technical performance leaves us well positioned to support expanded work under IVAS or similar initiatives. The Department of Defense is undergoing a strategic shift in acquisition priorities, emphasizing speed, modernization and mission readiness. Key initiatives such as DOD's adaptive acquisition framework and the increased use of other transaction authority agreements and the push for modular open system architecture are accelerating procurement timelines and enabling faster adoption of innovative technologies like those developed by VirTra. This alignment directly benefits VirTra by reducing traditional barriers to entry and allowing for more agile contracting mechanisms. As a technology forward company delivering mission critical training solutions, VirTra is well positioned to take advantage of these changes.

[John Givens, CEO & Chairman at VirTra]

Our emphasis on modular, scalable systems combined with growing partnerships opportunities enables us to more efficiently meet evolving training requirements across the services. Additionally, DOD's focus on readiness and immersive training to address modern threats environments increases demand for realistic high fidelity simulation, VirTra's core competency. As acquisitions reform continues to prioritize capability over bureaucracy, VirTra expects to see stronger engagement, faster procurement cycles and expanded market access within the defense sector. Overall, Q1 reflected continuing progress in our operational execution. While funding constraints remain a headwind for the industry at large, we're building a more agile and effective organization.

[John Givens, CEO & Chairman at VirTra]

We're able we are better equipped to convert backlog, support scalable growth and meet the evolving training needs of our customers. We are executing these actions decisively, confident they will deliver measurable results and enhance returns for our shareholders as the macro environment shift. With that, I'll turn it over to Alana for a detailed financial review. Alana?

[Alanna Boudreau, Chief Financial Officer at VirTra]

Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the first quarter ended 03/31/2025. Our total revenue for the first quarter was $7,200,000 compared to $7,300,000 in the prior year period. This 3% decrease was primarily due to delayed deliveries on several customer orders booked in late Q4 twenty twenty four, which pushed revenue recognition into future quarters. If we break this down by market, we've got government revenue for the first quarter was $5,200,000 compared to $6,700,000 in the prior year period, and international revenue for the quarter was $1,900,000 compared to $550,000 in the prior year period.

[Alanna Boudreau, Chief Financial Officer at VirTra]

Our gross profit for the first quarter improved to 5,200,000.0 or 73% of total revenue compared to $4,700,000 or 64% in the prior year period. The increase in gross margin reflects a 25% decrease in cost of sales driven by greater operational efficiencies. Our net operating expense for the quarter was $3,800,000 a 6% decrease from 4,100,000 in the first quarter of twenty twenty four. This decrease reflects our drive to maintain or lower overhead costs as we mitigate challenges associated with potential government pauses on contracts. We are optimizing internal resources while preserving investment in key growth initiatives.

[Alanna Boudreau, Chief Financial Officer at VirTra]

Our operating income for the quarter increased 110% to $1,400,000 compared to $650,000 in the prior year period. Net income for the quarter was 1,300,000.0 or $0.11 per diluted share based on 11,300,000 weighted average diluted shares outstanding. This represents 170% increase from 470,000 or $04 per diluted share based on 11,000,000 diluted shares outstanding in Q1 of twenty twenty four. Our adjusted EBITDA increased 22% to 1,700,000 compared to $1,400,000 in the prior year period, reflecting improved operating leverage and gross margin strength. As of March 31, cash and cash equivalents totaled $17,600,000 compared to $18,000,000 at December 31.

[Alanna Boudreau, Chief Financial Officer at VirTra]

Working capital increased to 35,300,000.0, and we maintain a debt light capital structure giving us both stability and flexibility as we execute against our growth strategies. BERTRA defines our bookings as the total of newly signed contracts, awarded RFPs, and purchase orders received in a given period. Bookings for the quarter totaled 6,400,000.0, more than double the 2,900,000.0 reported in Q1 of twenty twenty four. This strong year over year growth contributed to 33,400,000.0 in total bookings over the trailing twelve months and reflects continued traction despite the ongoing funding uncertainties. BERTRA defines backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started or are incomplete performance obligations and therefore cannot be recognized as revenue until delivered in a future period.

[Alanna Boudreau, Chief Financial Officer at VirTra]

We segment backlog into three primary categories capital, which includes our simulators, accessories, installation, training, custom content work and design work to our services, which are primarily extended warranties and support contracts. And then third is our STEP, which is our long term subscription based program. Our backlog then at 03/31/2025 stood at 21,200,000. This included 9,900,000.0 in capital, 5,800,000.0 in service and 5,500,000.0 in step contracts. Additionally, we continue to track approximately 5,000,000 in renewable step contract options, which are not included in the backlog total.

[Alanna Boudreau, Chief Financial Officer at VirTra]

Most of our new capital bookings from Q1 are expected to convert to revenue within the current calendar year. However, a portion of those, particularly from international customers, have requested deferred delivery into 2026. As always, our ability to convert backlog into revenue remains dependent on customer driven installation timelines, which are subject to change due to factors outside of our control. Looking forward, we believe the combination of our disciplined cost management, enhanced contract structures, and ongoing demand recovery will support continued progress. In particular, recent updates to our STEP program, which now feature full three year commitments, transform what was previously considered optional renewal potential into high confidence recurring revenue.

[Alanna Boudreau, Chief Financial Officer at VirTra]

Renewal trends remain strong with performance tracking around 95%, both within our older structured contract terms, as well as our first year step customers who are now signing new three year agreements. And that concludes my prepared remarks. I'll now turn the call back over to John for his closing comments. John?

[John Givens, CEO & Chairman at VirTra]

Thank you, Alana. We know the path forward requires both heightened focus and flexibility. Our customers continue to navigate uncertainty, but they're still training, still evaluating, and still planning for the future. We are staying ready to deliver when funding is released to adapt as priorities evolve and to continue building trust throughout the execution. The progress we've made in sales, product development, and operations reflects that mindset.

[John Givens, CEO & Chairman at VirTra]

And we believe it puts us in a stronger position with each passing quarter. We'll keep listening, adjusting and moving deliberately. That concludes my prepared remarks. Operator?

[Operator]

Thank you. We will now be conducting a question and answer session. Our first question comes from Jason Schmidt with Lake Street Capital Markets. Please proceed with your question.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Hey, guys. Congrats on the strong results in a challenging environment. Just want to start with some of those macro dynamics. Do you think that contributed to any orders being pulled into Q1?

[John Givens, CEO & Chairman at VirTra]

Not really sure if the macros did that. I think there were monies that were in budgets that they were trying to spend before it got swept or totally shut down. I think that there were some grants that grant monies that were awarded, and then there was one set of grants that they actually distributed funding even during the shutdown or the holdback or no delivery of the funding. So I'm not quite sure each agency is different. That's why it's hard to answer.

[John Givens, CEO & Chairman at VirTra]

And there's just so many so much dynamic. Some of the agencies have their leadership in place, and others are dealing with an assistant to the assistant to the assistant. So some are kind of shy of putting stuff out, approving budgets or approving any of the funding releases or purchases.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Okay. That makes sense. And then looking at the VXR, I know the health care market was a vertical that this made a lot of sense in, but are you seeing demand from other end market verticals? I guess relatedly, is some of this demand being driven by any grant activity?

[John Givens, CEO & Chairman at VirTra]

Yeah, two separate questions, but good ones. So grant activity under de escalation and training curriculum absolutely are driving the VXR for us. Secondly is some of the adjacent markets, healthcare, and it depends on what training objective that police, even fire and even the military will be using the headset for. So we're seeing interest in a lot of areas. Some of them are asking for things that the technology just doesn't do yet, but we're making note of that as the technology catches up, we'll be able to adapt quickly to those needs.

[John Givens, CEO & Chairman at VirTra]

So we're keeping that backlog and those leads as part of our development cycle and requirements. But I think there's other markets that are opening up, private security and others that a headset just makes much more sense.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Okay. That's good to hear. And just the last one for me, and I'll jump back into queue. Then on the STEP program and sort of these three year agreements, just want to clarify, are you forcing all customers over to these three year agreements or is it now just an option?

[John Givens, CEO & Chairman at VirTra]

Well, we're kind of forcing them into a three year to move the purchase cycle forward. With all technologies and the advances that are being made both in hardware and software and the advent of AI. Some of the things that we'll produce, not just us but others in any industry are finding that any equipment that's older than three years has a problem running and maintaining a level of performance that's acceptable. So two things, main reason, move our sales cycle in from five years to three and see where they go. We do give them an option.

[John Givens, CEO & Chairman at VirTra]

It's more of a sales tactic that year four and five can be purchased if they're running, you know, if they're having problems with their funding or, you know, it's taking longer than it was taking before. We just have a lot of new technology that we want to get out there in their hands and keeping the system five years just it's moving faster about eighteen months where it used to be three years. So we're just trying to get ahead of the technology curve and then bring the customers along and its financial reasons for both bookings and opportunities. It's a combination.

[Alanna Boudreau, Chief Financial Officer at VirTra]

To add as well, I would add Jason that the reason we changed our terms to that three year was not giving them an easy out. Like they had a little bit too much of an easy out in my opinion for the original ones. And it was we were potential revenue, potential future revenue, as opposed to now where I feel we're way more confident in what those terms say that it's guaranteed for three years.

[John Givens, CEO & Chairman at VirTra]

Okay. That's really helpful. Thanks a lot, guys. Thanks, Jason.

[Operator]

At this time, this concludes our question and answer session. And I'd now like to turn the call back over to Mr. Gibbons for his closing remarks.

[John Givens, CEO & Chairman at VirTra]

Thank you. As we wrap up our Q1 twenty twenty five call, I want to take a moment to reflect on the incredible progress we've made and the promising journey ahead. Thanks for all your unwavering support and dedication. We've achieved remarkable milestones that position us strongly for the future. Our commitment to innovation and excellence continues to drive our success, and the strategies we've implemented are beginning to bear fruit.

[John Givens, CEO & Chairman at VirTra]

With a talented team and a clear vision, we're confident that the best is yet to come. As we look forward, the opportunities ahead are vast, and I truly believe that together we will navigate the challenges and celebrate future successes. Thank you for your trust and partnership. The future looks bright, and I'm excited on what lies ahead. God bless you all, and let's continue to make great strides together.

[Operator]

Thank you for joining us today for VirTra's first quarter twenty twenty five conference call. You may now disconnect.

Participants

Executives

• John Givens, CEO & Chairman
• Alanna Boudreau, Chief Financial Officer

Analysts

• Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital