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.

 

   
 

 

 


The following information was filed by Virtra, Inc (VTSI) on Monday, August 13, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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