Market Overview

VirTra Reports Second Quarter 2018 Financial Results

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TEMPE, Ariz., Aug. 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 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       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 June 30, 2018       (112,109 )       (112,109 )
  and December 31, 2017.                
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  
                   
                   


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  
                   
                   


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     $   -     
           
   

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