VirTra Reports Second Quarter 2018 Financial Results

 

TEMPE, Ariz. — August 13, 2018 — VirTra, Inc. (NASDAQ: VTSI) (“VirTra”), a global provider of training simulators for the law enforcement, military, educational and commercial markets, reported results for the second quarter ended June 30, 2018. The financial statements are available on VirTra’s website and here.

 

Second Quarter 2018 Operational and Financial Highlights:

 

	●	Total revenue increased 66% year-over-year to $8.7 million
	●	Gross profit increased 53% year-over-year to $5.7 million
	●	Income from operations increased 82% year-over-year to $3.0 million
	●	Delivered training simulators and accessories valued, in aggregate, at more than $1.15 million to three of the largest U.S. law enforcement agencies representing over 6,000 officers
	●	Backlog totaled approximately $5.2 million
	●	VirTra’s common stock was added to the Russell Microcap Index

 

Second Quarter and Six Month 2018 Financial Highlights:

 

All figures in millions, except per share data		Q2 2018				Q2 2017				% Δ				YTD 2018				YTD 2017				% Δ
Total Revenue		$	8.7			$	5.3				66	%		$	11.9			$	9.5				26	%
Gross Profit		$	5.7			$	3.8				53	%		$	8.0			$	6.2				29	%
Gross Margin			65.9	%			71.4	%			-8	%			66.6	%			65.3	%			2	%
Net Income		$	2.1			$	1.6				28	%		$	2.0			$	2.0				-1	%
Diluted Earnings per Share (EPS)		$	0.26			$	0.2				30	%		$	0.25			$	0.24				4	%
Adjusted EBITDA		$	3.2			$	1.8				81	%		$	3.1			$	2.4				32	%

 

Management Commentary

 

“In the second quarter of 2018 we saw the hard work of the prior quarters come to fruition as we achieved several important financial milestones, including record total revenue and adjusted EBITDA, while maintaining solid gross margins,” said Bob Ferris, Chairman and Chief Executive Officer of VirTra. “To us, these figures validate the decisions we recently made to expand our staff and shift additional responsibilities of our production in-house. Our success in Q2 demonstrates that we are capable of both procuring and delivering larger volumes of orders, which we hope to continue in the coming years.

 

“We remain optimistic about the remainder of 2018 thanks to a strong first half of the year and opportunity pipeline but believe it is critical to bear in mind that our long sales cycle, as well as the timing of large contracts, necessitate evaluation of our results on a year-over-year rather than a quarter-by-quarter basis. This is because much of the revenue we recognized in one quarter is primarily a direct result of our work in prior quarters. That being said, we look forward to capitalizing on the momentum created by this quarter’s strong results. When combined with our recent up-listing to NASDAQ and inclusion in the Russell Microcap Index, we believe we are in an even stronger position today to continue expanding our business, with the ultimate goal of delivering lasting shareholder value over the long run.”

 

 

Second Quarter 2018 Financial Results

 

Total revenue increased 66% to $8.7 million from $5.3 million in the second quarter of 2017. The increase in total revenue was due to higher sales of VirTra’s simulators, accessories, warranties and other services.

 

Gross profit increased 53% to $5.7 million (65.9% of total revenue) from $3.8 million (71.4% of total revenue) in the second quarter of 2017. The increase in gross profit was primarily due to the increase in total revenue.

 

Net operating expense increased 31% to $2.8 million from $2.1 million in the second quarter of 2017. The increase in net operating expense was due to investments in sales and marketing personnel as well as higher non-recurring professional services fees related to VirTra’s qualification and completion of its NASDAQ exchange listing in March 2018.

 

Income from operations increased 82% to $3.0 million from $1.6 million in the second quarter of 2017.

 

Net income totaled $2.1 million, or $0.26 per diluted share, an improvement from $1.6 million, or $0.20 per diluted share in the second quarter of 2017. VirTra recognized an income tax expense of $865,000 in the second quarter of 2018 compared to none in the same period a year-ago as a result of a change in management’s assessment and reporting of deferred taxes.

 

Adjusted EBITDA, a non-GAAP financial measure, increased 81% to $3.2 million from $1.8 million in the second quarter of 2017.

 

As of June 30, 2018, cash and cash equivalents increased 9% to $4.9 million from $4.5 million at the end of the prior quarter.

 

Financial Results for the Six Months Ended June 30, 2018

 

Total revenue increased 26% to $11.9 million from $9.5 million in the first six months of 2017. The increase in total revenue was due to higher sales of VirTra’s simulators, accessories, warranties and other services.

 

Gross profit increased 29% to $8.0 million (66.6% of total revenue) from $6.2 million (65.3% of total revenue) in the first six months of 2017. The increase in gross profit was primarily due to the increase in total revenue.

 

Net operating expense increased 26% to $5.2 million from $4.1 million in the first six months of 2017. The increase in net operating expense was due to investments in sales and marketing personnel as well as higher non-recurring professional services fees related to VirTra’s qualification and completion of its NASDAQ exchange listing in March 2018.

 

Income from operations increased 34% to $2.8 million from $2.1 million in the first six months of 2017.

 

 

Net income totaled $2.0 million, or $0.25 per diluted share, compared to $2.0 million, or $0.24 per diluted share in the comparable period a year ago.

 

Adjusted EBITDA increased 32% to $3.1 million from $2.4 million in the first six months of 2017.

 

Conference Call

 

VirTra management will hold a conference call today (August 13, 2018) at 4:30 p.m. Eastern time (1:30 p.m. local time) to discuss these results.

 

VirTra’s Chairman and CEO Bob Ferris and CFO Judy Henry will host the call, followed by a question and answer period.

 

U.S. dial-in number: 877-407-8031

International number: 201-689-8031

 

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

 

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

 

A replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through August 27, 2018.

 

Toll-free replay number: 877-481-4010

International replay number: 919-882-2331

Replay ID: 36073

 

About VirTra

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

 

About the Presentation of Adjusted EBITDA

 

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

 

 

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA

 

		Three Months Ended																Six Months Ended
		June 30,				June 30,				Increase				%				June 30,				June 30,				Increase				%
		2018				2017				(Decrease)				Change				2018				2017				(Decrease)				Change
Net Income		$	2,112,937			$	1,648,091			$	464,846				28	%		$	2,027,150			$	2,049,979			$	(22,829	)			-1	%
Adjustments:
Depreciation and amortization			74,587				70,572				4,015				6	%			143,206				138,957				4,249				3	%
Non-cash stock option expense			4,860				48,812				(43,952	)			-90	%			4,860				117,975				(113,115	)			-96	%
Impairment loss on That’s Eatertainment (f/k/a MREC)			134,140				-				134,140				-100	%			134,140				-				134,140				-100	%
Provision for income taxes			864,941				-				864,941				-100	%			835,747				78,000				757,747				971	%
Adjusted EBITDA		$	3,191,465			$	1,767,475			$	1,423,990				81	%		$	3,145,103			$	2,384,911			$	760,192				32	%

 

Forward-Looking Statements

 

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in the reports we file with or furnish to the SEC. You should carefully consider these risk and uncertainties described and other information contained in the reports we file with or furnish to the Securities and Exchange Commission before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

 

Media Contact:
Susan Lehman

Slehman@virtra.com

510-599-6555

Investor Relations Contact:

Matt Glover or Tom Colton

VTSI@liolios.com

949-574-3860

 

 

VIRTRA, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

 

		June 30, 2018				December 31, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	4,899,088			$	5,080,445
Accounts receivable, net			4,223,217				1,478,135
Notes receivable, current			495,633				-
Inventory, net			1,801,088				1,720,438
Unbilled revenue			299,317				1,222,047
Prepaid expenses and other current assets			727,817				586,439
Total current assets			12,446,160				10,087,504
Property and equipment, net			821,840				677,273
Notes receivable, long-term			171,715				-
Deferred tax assets, net			1,886,000				2,710,182
Investment in That’s Eatertainment (f/k/a MREC)			1,240,793				1,374,933
TOTAL ASSETS		$	16,566,508			$	14,849,892
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	531,054			$	535,795
Accrued compensation and related costs			1,147,303				593,491
Accrued expenses and other current liabilities			481,626				243,573
Note payable, current			11,250				11,250
Deferred revenue			1,938,264				2,992,912
Total current liabilities			4,109,497				4,377,021
Long-term liabilities:
Deferred rent liability			49,074				75,444
Note payable, long-term			11,250				11,250
Total long-term liabilities			60,324				86,694
Total liabilities			4,169,821				4,463,715
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock $0.0001 par value; 2,500,000 authorized; no shares issued or outstanding			-				-
Common stock $0.0001 par value; 50,000,000 shares authorized; 7,935,274 shares issued and 7,911,807 shares outstanding as of June 30, 2018 and 7,927,774 issued and 7,904,307 shares outstanding as of December 31, 2017.			794				793
Class A common stock $0.0001 par value; 2,500,000 shares authorized; no shares issued or outstanding			-				-
Class B common stock $0.0001 par value; 7,500,000 shares authorized; no shares issued or outstanding			-				-
Treasury stock at cost; 23,467 shares outstanding as of June 30, 2018 and December 31, 2017.			(112,109	)			(112,109	)
Additional paid-in capital			14,937,922				14,954,563
Accumulated deficit			(2,429,920	)			(4,457,070	)
Total stockholders’ equity			12,396,687				10,386,177
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	16,566,508			$	14,849,892

 

See accompanying notes to unaudited condensed financial statements.

 

 

VIRTRA, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended								Six Months Ended
		June 30, 2018				June 30, 2017				June 30, 2018				June 30, 2017
REVENUES
Net sales		$	8,275,309			$	5,091,148			$	11,473,530			$	9,256,623
Royalties/licensing fees			429,613				160,417				475,581				204,229
Total revenue			8,704,922				5,251,565				11,949,111				9,460,852
Cost of sales			2,964,997				1,501,467				3,991,152				3,280,412
Gross profit			5,739,925				3,750,098				7,957,959				6,180,440
OPERATING EXPENSES
General and administrative			2,477,581				1,850,561				4,486,284				3,465,060
Research and development			305,738				278,917				673,282				621,106
Net operating expense			2,783,319				2,129,478				5,159,566				4,086,166
Income from operations			2,956,606				1,620,620				2,798,393				2,094,274
OTHER INCOME (EXPENSE)
Other income			22,177				35,254				65,475				41,488
Other expense			(905	)			(7,783	)			(971	)			(7,783	)
Net other income			21,272				27,471				64,504				33,705
Income before income taxes			2,977,878				1,648,091				2,862,897				2,127,979
Income tax expense			864,941				-				835,747				78,000
NET INCOME		$	2,112,937			$	1,648,091			$	2,027,150			$	2,049,979
Earnings per common share
Basic		$	0.27			$	0.20			$	0.26			$	0.26
Diluted		$	0.26			$	0.20			$	0.25			$	0.24
Weighted average shares outstanding
Basic			7,907,390				7,927,610				7,905,849				7,927,692
Diluted			8,255,299				8,600,201				8,251,640				8,634,247

 

See accompanying notes to unaudited condensed financial statements.

 

 

VIRTRA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

		Six Months Ended
		June 30, 2018				June 30, 2017
Cash flows from operating activities:
Net income		$	2,027,150			$	2,049,979
Adjustments to reconcile net income to net cash provided by operating activities
Investment in That’s Eatertainment (f/k/a MREC)			134,140				-
Depreciation and amortization			143,206				138,957
Stock compensation			4,860				117,975
Compensation associated with stock option repurchase			44,900				50,250
Changes in operating assets and liabilities:
Accounts and note receivable			(3,412,430	)			(480,579	)
Inventory			(80,650	)			(13,749	)
Deferred taxes			824,182				-
Unbilled revenue			922,730				(2,260,108	)
Prepaid expenses and other current assets			(141,378	)			(55,466	)
Accounts payable and other accrued expenses			787,124				439,559
Deferred revenue and deferred rent			(1,081,018	)			762,792
Net cash provided by operating activities			172,816				749,610
Cash flows from investing activities:
Purchase of property and equipment			(287,773	)			(70,923	)
Net cash used in investing activities			(287,773	)			(70,923	)
Cash flows from financing activities:
Treasury stock			-				(13,800	)
Repurchase of stock options			(76,900	)			(85,250	)
Stock options exercised			10,500				-
Net cash used in financing activities			(66,400	)			(99,050	)
Net increase (decrease) in cash			(181,357	)			579,637
Cash, beginning of period			5,080,445				3,703,579
Cash, end of period		$	4,899,088			$	4,283,216
Supplemental disclosure of cash flow information:
Cash paid:
Taxes		$	96,574			$	78,000
Supplemental disclosure of non-cash investing and financing activities:
Conversion of accounts to notes receivable		$	693,044			$	-

 

See accompanying notes to unaudited condensed financial statements.