VirTra Reports Fourth Quarter and Full Year 2018 Financial Results

 

Full Year Revenue up 9% to Record $18.1 Million, Driving Increase in Adjusted EBITDA to $1.9 Million and Net Income to $0.8 Million

 

TEMPE, Ariz. — March 28, 2019 —

VirTra, Inc. (NASDAQ: VTSI) (“VirTra”), a global provider of training simulators for the law enforcement, military, educational and commercial markets, reported results for the fourth quarter and full year ended December 31, 2018. The financial statements are available on VirTra’s website and here.

 

Fourth Quarter 2018 and Recent Highlights:

 

  ●  Repurchased $382,000 of common stock from November 14, 2018 to December 31, 2018; in January 2019, the company’s board of directors increased the stock repurchase program from $1.0 million to $2.0 million; as of March 28, 2019, the company purchased an additional $261,000 of common stock
   
  Launched Subscription Training Equipment and Partnership (STEP) program, allowing agencies to utilize VirTra’s products on a subscription basis, thereby increasing VirTra’s total addressable market and recurring revenue
     
  Launched Driving Simulator product line and secured a $1.9 million, inaugural contract for driving simulators from the Department of State for the Republic of Mexico
     
  ●  Acquired simulated firearm technology patent portfolio to enhance its current product lineup of recoil kits as well as create new training equipment for both military and law enforcement simulation training
     
  ●  Launched new Law Enforcement training curriculum for high-risk vehicle stops

 

Fourth Quarter and Full Year 2018 Financial Highlights:

 

All figures in millions, except per share data  Q4 2018   Q4 2017   % Δ   FY 2018   FY 2017   % Δ 
Total Revenue  $2.5   $2.4    7%  $18.1   $16.5    9%
                               
Gross Profit  $1.0   $0.9    2%  $11.0   $10.2    8%
Gross Margin   37.8%   39.5%   -5%   61.1%   61.9%   -1%
                               
Net Income (Loss)  $(1.1)  $0.5    -325%  $0.8   $3.3    -75%
Diluted EPS  $(0.13)  $0.06    -317%  $0.10   $0.39    -74%

 

 
 

 

Management Commentary

 

“2018 was a milestone year as it marked the 25th anniversary as a company and was one of our most successful years ever,” said Bob Ferris, Chairman and Chief Executive Officer of VirTra. “Our progress operationally produced solid financial results, highlighted by 9% revenue growth to a record $18.1 million and an 8% increase in adjusted EBITDA, reflecting the leverage in our business model.

 

“We also achieved several operational milestones throughout the year, which included deploying simulators to three of the largest law enforcement agencies in the country, securing new contracts with the Department of State, as well as launching new products and services such as the internationally accredited curriculum, V-VICTA. From a capital allocation standpoint, thanks to our consistent positive cash flows and solid balance sheet, we acted opportunistically on our share repurchase program, acquiring $643,000 of our common stock in the open market since mid-November.

 

“Looking ahead, the decisions we made during 2018 placed us in an even stronger position for 2019 as we work to bolster our product suite, push more into the military market, and increase our recurring revenue with the STEP program. We’ve already made measurable progress in each of these areas, and we are optimistic that the changes we are implementing will have several positive effects for VirTra and our shareholders in 2019 and the years ahead.”

 

Fourth Quarter 2018 Financial Results

 

Total revenue increased 7% to $2.5 million from $2.4 million in the fourth quarter of 2017. The increase in total revenue was due to higher sales of simulators, accessories, and scenarios.

 

Gross profit increased 2% to $957,000 (37.8% of total revenue) from $940,000 (39.5% of total revenue) in the fourth quarter of 2017. The increase in gross profit was primarily due to differences in the type and quantity of systems and accessories sold.

 

Net operating expense increased 14% to $2.8 million from $2.5 million in the fourth quarter of 2017. The increase in net operating expense was due to increases in accounting, legal, consultant and bad debt expenses.

 

Loss from operations was $1.9 million compared to a loss of $1.5 million in the fourth quarter of 2017.

 

Net loss totaled $1.1 million or $(0.13) per diluted share, compared to net income of $470,000 or $0.06 per diluted share in the fourth quarter of 2017.

 

At December 31, 2018, backlog totaled approximately $6.8 million. Cash and cash equivalents and certificates of deposit totaled $6.0 million at quarter end.

 

Full Year 2018 Financial Results

 

Total revenue increased 9% to a record $18.1 million from $16.5 million in 2017. The increase in total revenue was driven by higher sales of simulators, accessories, licensing fees, warranties and other services.

 

Gross profit increased 8% to $11.0 million (61.1% of total revenue) from $10.2 million (61.9% of total revenue) in the 2017. The increase in gross profit was primarily due to differences in the type and quantity of systems and accessories sold.

 

Net operating expense increased 13% to $10.0 million from $8.9 million in 2017. The increase in net operating expense was due to increases in general and administrative and research and development expenses.

 

 
 

 

Additionally, the fiscal year ended December 31, 2018 included an impairment loss on investment in That’s Eatertainment Corp., formerly known as, Modern Round Entertainment Corp., a related party, recorded as operating expense. The year-over-year increase in professional services included non-recurring legal and public company expense directly related to the Company’s qualification and Securities and Exchange Commission registration and Nasdaq listing in March 2018.

 

Income from operations was $1.0 million compared to $1.3 million in 2017.

 

Net income totaled $0.8 million, or $0.10 per diluted share, compared to $3.3 million, or $0.39 per diluted share, in the comparable period a year ago. The decrease in net income was primarily due to a $2.5 million tax benefit recorded in 2017 compared to a $310,000 income tax expense in 2018.

 

Adjusted EBITDA increased 8% to $1.9 million from $1.8 million in 2017.

 

Conference Call

 

VirTra management will hold a conference call today (March 28, 2019) at 4:30 p.m. Eastern time (1:30 p.m. Pacific 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 VirTra’s IR team 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 April 11, 2019.

 

Toll-free replay number: 877-481-4010

International replay number: 919-882-2331

Replay ID: 45322

 

About VirTra

 

VirTra (NASDAQ: VTSI) is a global provider of training simulators for the law enforcement, military, educational and commercial markets. The company’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 practical 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:

 

   Year Ended 
 
 
 
 
December 31, 2018  
 
 
 
December 31, 2017  
 
 
 
Increase
(Decrease)
 
 
 
 
%
Change
 
 
                 
Net Income/(Loss)  $818,092   $3,262,282   $(2,444,190)   -75%
Adjustments:                    
Depreciation and amortization   291,855    270,881    20,973    8%
Non-cash stock option expense   7,124    167,475    (160,351)   -96%
Impairment loss on That’s                    
Eatertainment (f/k/a MREC)   254,933    613,241    (358,309)   -58%
Unrealized loss reserve-note receivable   266,813    -    266,813    -100%
Provision for income taxes   309,998    (2,505,292)   2,815,290    -112%
                     
Adjusted EBITDA  $1,948,815   $1,808,587   $140,228    8%

 

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 document 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 Charlie Schumacher

VTSI@liolios.com

949-574-3860

 

 
 

 

VIRTRA, INC.

BALANCE SHEETS

 

   December 31, 2018   December 31, 2017 
         
ASSETS          
CURRENT ASSETS           
Cash and cash equivalents   $2,500,381   $5,080,445 
Certificates of deposit   3,490,000    - 
Accounts receivable, net    1,302,010    1,478,135 
Interest receivable   21,385    - 
Notes receivable, net   388,420    - 
Inventory, net   1,612,002    1,720,438 
Unbilled revenue   689,153    1,222,047 
Prepaid expenses and other current assets   377,520    586,439 
           
Total current assets    10,380,871    10,087,504 
           
LONG-TERM ASSETS          
Property and equipment, net    678,245    677,273 
Unbilled revenue   6,843    - 
Security deposits, long-term   339,756    - 
Other assets, long-term    292,298    - 
Deferred tax asset, net    2,400,000    2,710,182 
Investment in That’s Eatertainment (f/k/a MREC)    1,120,000    1,374,933 
           
Total long-term assets    4,837,142    4,762,388 
           
TOTAL ASSETS  $15,218,013   $14,849,892 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY           
           
CURRENT LIABILITIES           
Accounts payable   $429,949   $535,795 
Accrued compensation and related costs   613,691    593,491 
Accrued expenses and other current liabilities    632,606    243,573 
Note payable, current    11,250    11,250 
Deferred revenue, short-term    1,924,307    2,992,912 
           
Total current liabilities    3,611,803    4,377,021 
           
Long-term liabilities:           
Deferred revenue, long-term    962,356    - 
Deferred rent liability   46,523    75,444 
Note payable, long-term   -    11,250 
           
Total long-term liabilities    1,008,879    86,694 
           
Total liabilities    4,620,682    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; 7,827,651 shares issued and 7,816,944 shares outstanding as of December 31, 2018 and 7,927,774  issued and 7,904,307 shares outstanding as of December 31, 2017.    783    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; 10,707 shares outstanding as of December 31, 2018 and 23,467 shares outstanding as of December 31, 2017.   (37,308)   (112,109)
Additional paid-in capital    14,272,834    14,954,563 
Accumulated deficit   (3,638,978)   (4,457,070)
           
Total stockholders’ equity    10,597,331    10,386,177 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $15,218,013   $14,849,892 

 

See accompanying notes to financial statements.

 

 
 

 

VIRTRA, INC.

STATEMENTS OF OPERATIONS

 

   Three Months Ended   For Years Ended December 31, 
   December 31, 2018   December 31, 2017   2018   2017 
REVENUES                    
Net sales  $2,495,333   $2,332,062   $17,522,913   $16,234,278 
Royalties/licensing fees   38,913    44,865    557,213    289,947 
Total revenue   2,534,246    2,376,927    18,080,126    16,524,225 
Cost of sales   1,577,380    1,437,084    7,030,286    6,290,879 
Gross profit   956,866    939,843    11,049,840    10,233,346 
                     
OPERATING EXPENSES                    
General and administrative   2,473,822    2,126,310    8,691,957    7,641,765 
Research and development   361,074    353,110    1,357,982    1,285,064 
Net operating expense   2,834,896    2,479,420    10,049,939    8,926,829 
Income/(loss) from operations   (1,878,030)   (1,539,577)   999,901    1,306,517 
                     
OTHER INCOME (EXPENSE)                    
Other income   46,250    15,427    132,757    67,837 
Other expense   (26)   (10)   (4,568)   (4,123)
Impairment loss on TEC (f/k/a MREC)   -    (613,241)   -    (613,241)
Net other income/(expense)   46,224    (597,824)   128,189    (549,527)
Income/(loss) before income taxes   (1,831,806)   (2,137,401)   1,128,090    756,990 
                     
Income tax expense/(benefit)   (771,749)   (2,607,577)   309,998    (2,505,292)
                     
NET INCOME/(LOSS)  $(1,060,057)  $470,176   $818,092   $3,262,282 
                     
Earnings per common share                    
Basic  $(0.13)  $0.06   $0.10   $0.41 
Diluted  $(0.13)  $0.06   $0.10   $0.39 
                     
Weighted average shares outstanding                    
Basic   7,891,570    7,905,597    7,903,801    7,919,568 
Diluted   7,891,570    8,277,958    8,254,376    8,397,377 

 

See accompanying notes to financial statements.

 

 
 

 

VIRTRA, INC.

STATEMENTS OF CASH FLOWS

 

   For Years Ended December 31, 
   2018   2017 
         
Cash flows from operating activities:          
Net income  $818,092   $3,262,282 
Adjustments to reconcile net income to net cash provided by operating activities          
Impairment in That’s Eatertainment (f/k/a MREC)   254,933    613,241 
Depreciation   291,855    270,881 
Stock compensation   7,124    167,475 
Compensation associated with stock option repurchase   -    160,050 
Changes in operating assets and liabilities:          
Accounts and notes receivable   (219,138)   1,766,716 
Interest receivable   (21,385)   - 
Security deposits   (339,756)   - 
Inventory   108,435    (400,494)
Deferred taxes   310,182    (2,710,182)
Unbilled revenue   532,894    (1,114,750)
Prepaid expenses and other current assets   208,920    (336,372)
Other assets   (292,298)   - 
Accounts payable and other accrued expenses   303,387    92,930 
Deferred revenue and deferred rent   (135,170)   880,325 
           
Net cash provided by operating activities   1,828,075    2,652,101 
           
Cash flows from investing activities:          
Purchase of certificates of deposit   (3,960,000)   - 
Redemption of certificates of deposit   470,000    - 
Purchase of property and equipment   (292,827)   (133,831)
           
Net cash used in investing activities   (3,782,827)   (133,831)
           
Cash flows from financing activities:          
Repayment of debt   (11,250)   (11,250)
Purchase of treasury stock   (381,937)   (112,109)
Repurchase of stock options   (242,625)   (244,550)
Repurchase of stock warrants   -    (773,495)
Common stock issued for options exercise    10,500    - 
           
Net cash used in financing activities   (625,312)   (1,141,404)
           
Net increase/(decrease) in cash   (2,580,064)   1,376,866 
Cash, beginning of period   5,080,445    3,703,579 
           
Cash, end of period  $2,500,381   $5,080,445 
           
Supplemental disclosure of cash flow information:          
Cash paid:          
Taxes   $10,074   $78,000 
           
Supplemental disclosure of non-cash investing and financing activities:          
Conversion of accounts to notes receivable  $693,044   $- 
Investment in That’s Eatertainment (f/k/a MREC)  $-   $1,516,246 

 

See accompanying notes to financial statements.

 

 
 

 


The following information was filed by Virtra, Inc (VTSI) on Thursday, March 28, 2019 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-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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