VirTra Reports Third Quarter and Nine Month 2018 Financial Results

Nine Month Revenue Increased 10% to $15.5 Million, Driving $2.1 in Net Income and $3.3 Million in Adjusted EBITDA

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

Third Quarter 2018 Operational and Financial Highlights:

  • Total revenue was $3.5 million
  • At September 30, 2018, backlog totaled approximately $6.8 million
  • Launched nationally accredited coursework, VirTra-Virtual Interactive Coursework Training Academy (V-VICTA), to provide law enforcement agencies the ability to effectively teach, train, test and sustain departmental training requirements
  • Rang Nasdaq Opening Bell to celebrate March listing on the exchange

Third Quarter and Nine Month 2018 Financial Highlights:

 All figures in millions, except per share data Q3 2018 Q3 2017 % Δ   YTD 2018 YTD 2017 % Δ
Total Revenue $ 3.5 $ 4.7 -24%   $ 15.5 $ 14.1 10%
               
Gross Profit $ 2.1 $ 3.1 -33%   $ 10.0 $ 9.3 8%
Gross Margin   58.8%   66.4% -12%     64.8%   65.7% -1%
               
Net Income $ 0.1 $ 0.7 -92%   $ 2.1 $ 2.8 -25%
Diluted Earnings per Share (EPS) $ 0.01 $ 0.09 -89%   $ 0.25 $ 0.33 -24%
               
Adjusted EBITDA $ 0.2 $ 0.9 -80%   $ 3.3 $ 3.3 2%

Management Commentary

“During the third quarter, we continued to profitably grow our business and are on pace for a record 2018,” said Bob Ferris, Chairman and Chief Executive Officer of VirTra. “While our topline recognized revenue for the quarter was down, these types of quarterly fluctuations are part of our current business. Still, we achieved another quarter of both net income and adjusted EBITDA profitability.

“Nevertheless, we 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 over a longer term. As such, we think attention to our financial performance for the first nine months of the year is appropriate, highlighted by 10% revenue growth to a record $15.5 million, $2.1 million in net income and $3.3 million in adjusted EBITDA. From an operational standpoint, we increased our backlog by $1.6 million to a total of $6.8 million. This improvement demonstrates the consistent execution by our expanded sales organization and the growing demand from law enforcement professionals around the world for our products.

“We are optimistic that in addition to this growing demand, the momentum we established in the first half of the year, the operational progress we’ve made this quarter by launching new products like the V-VICTA training courses and the additions to our backlog will result in another solid year for VirTra and continued growth and profitability over the long-run.”

Third Quarter 2018 Financial Results

Total revenue was $3.5 million compared to $4.7 million in the third quarter of 2017. The decrease in total revenue was due to lower sales of simulators, accessories, and scenarios.

Gross profit was $2.1 million (58.8% of total revenue) compared to $3.1 million (66.4% of total revenue) in the third quarter of 2017. The decrease in gross profit was primarily due to differences in the type and quantity of systems and accessories sold.

Net operating expense was $2.0 million compared to $2.4 million in the third quarter of 2017. The decrease in net operating expense was due to reduced accounting, legal, and consultant expenses quarter over quarter.

Income from operations was $80,000 compared to $752,000 in the third quarter of 2017.

Net income totaled $61,000, or $0.01 per diluted share, compared to $742,000, or $0.09 per diluted share, in the third quarter of 2017.

Adjusted EBITDA, a non-GAAP financial measure, totaled $174,000 compared to $874,000 in the third quarter of 2017.

As of September 30, 2018, cash and cash equivalents totaled $7.9 million, an improvement of $3.0 million from $4.9 million at the end of the prior quarter.

Financial Results for the Nine Months Ended September 30, 2018

Total revenue was $15.5 million compared to $14.1 million in the first nine months of 2017. The increase in total revenue was due to additional sales of simulators, accessories, licensing fees, warranties and other services.

Gross profit was $10.0 million (64.8% of total revenue) compared to $9.3 million (65.7% of total revenue) in the first nine months 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 was $7.2 million compared to $6.4 million in the first nine months of 2017. The increase in net operating expense was due to increases in general and administrative expenses.

Additionally, the nine months ended September 30, 2018 included an impairment loss on investment in That’s Eatertainment Corp., f/k/a Modern Round, LLC, a wholly owned subsidiary of 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 $2.9 million compared to $2.8 million in the first nine months of 2017.

Net income totaled $2.1 million, or $0.25 per diluted share, compared to $2.8 million, or $0.33 per diluted share, in the comparable period a year ago. The decrease in net income is primarily due to a $769,000 increase in income tax expense.

Adjusted EBITDA totaled $3.3 million compared to $3.3 million in the first nine months of 2017.

Conference Call

VirTra management will hold a conference call today (November 13, 2018) 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 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 November 27, 2018.

Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 38838

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:

                                   
  RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
                                   
      Three Months Ended   Nine Months Ended
      September 30,   September 30,   Increase   %   September 30,   September 30,   Increase    
        2018     2017   (Decrease)   Change     2018     2017   (Decrease)   % Change
                                   
  Net Income/(Loss) $   61,000   $   742,125   $   (681,125 )   -92 %   $   2,088,150   $   2,792,104   $   (703,954 )   -25 %
    Adjustments:                              
    Depreciation and amortization     74,746       65,570       9,176     14 %       217,952       204,527       13,425     7 %
    Non-cash stock option expense     1,796       42,376       (40,580 )   -96 %       6,656       160,351       (153,695 )   -96 %
    Impairment loss on That’s                              
    Eatertainment (f/k/a MREC)     –        –        –      -100 %       134,140       –        134,140     -100 %
    Provision for income taxes     36,000       24,285       11,715     48 %       871,747       102,285       769,462     752 %
                                   
                                   
  Adjusted EBITDA $   173,542   $   874,356   $   (700,814 )   -80 %   $   3,318,645   $   3,259,267   $   59,378     2 %

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
[email protected]  
510-599-6555

Investor Relations Contact:
Matt Glover or Tom Colton
[email protected]
949-574-3860

  VIRTRA, INC.
  CONDENSED BALANCE SHEETS
  (Unaudited)
              September 30, 2018   December 31, 2017
                   
        ASSETS          
  CURRENT ASSETS              
    Cash and cash equivalents         $   7,873,980     $   5,080,445  
    Accounts receivable, net             1,871,919         1,478,135  
    Notes receivable, current             507,095         –   
    Inventory, net             1,868,047         1,720,438  
    Unbilled revenue             471,005         1,222,047  
    Prepaid expenses and other current assets             736,329         586,439  
                   
    Total current assets             13,328,375         10,087,504  
                   
  Property and equipment, net             752,148         677,273  
  Notes receivable, long-term             171,715         –   
  Deferred tax assets, net             1,850,000         2,710,182  
  Investment in That’s Eatertainment (f/k/a MREC)             1,240,793         1,374,933  
                   
  TOTAL ASSETS         $   17,343,031     $   14,849,892  
                   
        LIABILITIES AND STOCKHOLDERS’ EQUITY          
                   
  CURRENT LIABILITIES              
    Accounts payable         $   449,707     $   535,795  
    Accrued compensation and related costs             1,046,674         593,491  
    Accrued expenses and other current liabilities             653,272         243,573  
    Note payable, current             11,250         11,250  
    Deferred revenue, short-term             1,900,167         2,391,905  
                   
    Total current liabilities             4,061,070         3,776,014  
                   
  Long-term liabilities:              
    Deferred revenue, long-term             788,126         601,007  
    Deferred rent liability             34,352         75,444  
    Note payable, long-term             –          11,250  
                   
    Total long-term liabilities             822,478         687,701  
                   
  Total liabilities             4,883,548         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 September 30, 2018 and 7,927,774         794         793  
    issued and 7,904,307 shares outstanding as of December 31, 2017.          
    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 September 30, 2018     (112,109 )       (112,109 )
    and December 31, 2017.              
  Additional paid-in capital             14,939,718         14,954,563  
  Accumulated deficit             (2,368,920 )       (4,457,070 )
                   
  Total stockholders’ equity             12,459,483         10,386,177  
                   
  TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY       $   17,343,031     $   14,849,892  
                   
  See accompanying notes to unaudited condensed financial statements.

  VIRTRA, INC.
  CONDENSED STATEMENTS OF OPERATIONS
  (Unaudited)
                     
        Three Months Ended   Nine Months Ended
        September 30, 2018   September 30, 2017   September 30, 2018   September 30, 2017
  REVENUES              
    Net sales $   3,503,868     $   4,645,593     $   14,977,397     $   13,902,215  
    Royalties/licensing fees     42,718         40,852         518,300         245,082  
    Total revenue     3,546,586         4,686,445         15,495,697         14,147,297  
                     
    Cost of sales     1,461,754         1,573,384         5,452,906         4,853,796  
                     
    Gross profit     2,084,832         3,113,061         10,042,791         9,293,501  
                     
  OPERATING EXPENSES              
    General and administrative     1,681,668         2,050,395         6,167,952         5,515,455  
    Research and development     323,626         310,848         996,908         931,954  
                     
    Net operating expense     2,005,294         2,361,243         7,164,860         6,447,409  
                     
    Income/(loss) from operations     79,538         751,818         2,877,931         2,846,092  
                     
  OTHER INCOME (EXPENSE)              
      Other income     21,032         14,813         86,508         52,410  
      Other expense     (3,570 )       (221 )       (4,542 )       (4,113 )
                     
    Net other income     17,462         14,592         81,966         48,297  
                     
    Income/(loss) before income taxes     97,000         766,410         2,959,897         2,894,389  
                     
                     
    Income tax expense/(benefit)     36,000         24,285         871,747         102,285  
                     
  NET INCOME/(LOSS) $   61,000     $   742,125     $   2,088,150     $   2,792,104  
                     
  Earnings/(loss) per common share              
     Basic $   0.01     $   0.09     $   0.26     $   0.35  
     Diluted $   0.01     $   0.09     $   0.25     $   0.33  
                     
   Weighted average shares outstanding              
     Basic     7,911,807         7,918,114         7,907,864         7,924,475  
     Diluted     8,247,841         8,339,283         8,256,098         8,418,463  
                     
  See accompanying notes to unaudited condensed financial statements.

  VIRTRA, INC.
  CONDENSED STATEMENTS OF CASH FLOWS
  (Unaudited)
               
            Nine Months Ended  
          September 30, 2018   September 30, 2017
               
  Cash flows from operating activities:      
    Net income $   2,088,150     $   2,792,104  
    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     217,952         204,527  
                   Stock compensation     6,656         160,351  
                   Compensation associated with stock option repurchase     44,900         115,550  
    Changes in operating assets and liabilities:      
                   Accounts and notes receivable     (1,072,594 )       233,241  
                   Inventory     (147,609 )       (369,206 )
                   Deferred taxes     860,181         –   
                   Unbilled revenue     751,042         (1,617,346 )
                   Prepaid expenses and other current assets     (149,890 )       (410,221 )
                   Accounts payable and other accrued expenses     776,795         787,795  
                   Deferred revenue and deferred rent     (345,711 )       653,168  
               
  Net cash provided by operating activities     3,164,012         2,549,964  
               
  Cash flows from investing activities:      
    Purchase of property and equipment     (292,827 )       (83,410 )
               
  Net cash used in investing activities     (292,827 )       (83,410 )
               
  Cash flows from financing activities:      
    Repayment of debt     (11,250 )       (11,250 )
    Purchase of treasury stock     –          (96,633 )
    Repurchase of stock options     (76,900 )       (182,550 )
    Repurchase of stock warrants     –          (773,495 )
    Common stock issued for option exercise         10,500         –   
               
  Net cash used in financing activities     (77,650 )       (1,063,928 )
               
  Net increase/(decrease) in cash     2,793,535         1,402,626  
  Cash, beginning of period     5,080,445         3,703,579  
               
  Cash, end of period $   7,873,980     $   5,106,205  
               
  Supplemental disclosure of cash flow information:      
    Cash paid:      
    Taxes   $   102,543     $   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 unaudited condensed financial statements.