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CST: 23/08/2019 09:05:07   

VirTra Reports Second Quarter and Six Month 2019 Financial Results

9 Days ago

TEMPE, Ariz., Aug. 13, 2019 (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 and six months ended June 30, 2019. The unaudited financial statements and notes thereto are available on VirTra’s website and here.

Second Quarter 2019 and Recent Highlights:

  • Received two new orders for driving simulators from the Department of State for Pakistan in support of U.S. Foreign Assistance programs, with a total contract value of approximately $782,000
  • Expanded simulator deployments across Southern California with recent contract wins and installations in four separate departments for a cumulative value of nearly $780,000
  • Received a follow-on order from the U.S. Department of Homeland Security for Customs and Border Protection (CBP) valued at approximately $630,000 for annual service agreements
  • Engaged JL O’Connell & Associates, a highly regarded business development consultancy, to expand VirTra’s sales and marketing efforts in the military market

Second Quarter and Six Month 2019 Financial Highlights:

 All figures in millions, except per share data   Q2 2019     Q2 2018   % Δ       YTD 2019     YTD 2018   % Δ  
Total Revenue $ 3.05   $ 8.71   -65 %   $ 6.11   $ 12.00   -49 %
               
Gross Profit $ 1.52   $ 5.74   -74 %   $ 3.32   $ 8.01   -59 %
Gross Margin   49.6 %   66.0 % -25 %     54.3 %   66.7 % -19 %
               
Net (Loss)/Income $   (0.63 ) $   2.11   N/A     $   (0.95 ) $   2.03   N/A  
Diluted EPS $   (0.08 ) $   0.26   N/A     $   (0.12 ) $   0.25   N/A  
                               

Management Commentary

“In the second quarter of 2019, we continued implementing new business expansion initiatives, which will take time to mature, but which we believe will increase our competitive advantage, expand and diversify our revenue base, and ultimately, create a more stable and robust business,” said Bob Ferris, Chairman and CEO of VirTra. “While our financial results for the second quarter were lighter than we would have liked, we made significant progress against our strategic, long-term growth plan.

“Due to our traditional hardware sales model and the way in which revenue is recognized, our business has historically experienced fluctuations from quarter-to-quarter. From a financial perspective, the second quarter was an extreme example of these quarterly oscillations. Our year-over-year results were exacerbated by a tough comparison from the second quarter of 2018, in which we recognized a $4.2 million order for simulators and accessories from one of our federal customers. This was further exacerbated by several installation postponements from multiple customers in Q2 2019.  However, the good news is our new sales are robust as evidenced by our record backlog of approximately $10.1 million.

“Nevertheless, we made substantial operational progress this past quarter generating new business, increasing our sales pipeline, and pursuing our strategic initiatives. We expanded our presence in Southern California and recently received two new orders from the Department of State for driving simulators. We’ve also made progress building our recurring revenue base by securing multiple STEP contracts. We hired an experienced consultant to help propel our sales and marketing efforts in the massive military market. In addition, we’ve strengthened VirTra’s brand by expanding our relationships with strategic partners, performing a record number of product demonstrations for potential customers, and exhibiting at a variety of trade shows.

“Ultimately, we remain encouraged by the operational success we’ve experienced in the first half of the year and are confident that the strategic initiatives we’ve implemented will have positive, material impacts on our business over the long-run. We’re excited about what the future holds for VirTra as we work diligently to scale these new programs, improve the quality of training worldwide, and grow our business over the next several quarters and years.”

Second Quarter 2019 Financial Results

Total revenue was $3.1 million compared to $8.7 million in the second quarter of 2018. The decrease in total revenue was due to a reduction in the number of simulators and accessories delivered compared to the same period in 2018.

Gross profit was $1.5 million (49.6% of total revenue) compared to $5.7 million (66.0% of total revenue) in the second quarter of 2018. The decrease in gross profit was primarily due to differences in the product mix and the quantity of systems, accessories, and services sold.

Net operating expense was $2.4 million compared to $2.8 million in the second quarter of 2018. The decrease in net operating expense was due to reduced selling, general and administrative expenses (“SG&A”), costs for labor, benefits, professional services, and public company expense compared to the second quarter of 2018.

Loss from operations was $883,000 compared to income from operations of $3.0 million in the second quarter of 2018.

Net loss totaled $634,000, or $(0.08) per diluted share, compared to net income of $2.1 million, or $0.26 per diluted share in the second quarter of 2018.

Adjusted EBITDA loss, a non-GAAP financial measure, was $604,000 compared to positive adjusted EBITDA of $3.2 million in the same period a year-ago.

As of June 30, 2019, cash and cash equivalents and certificates of deposit totaled $3.3 million compared to $4.6 million at the end of the prior quarter and working capital was $4.8 million.

Financial Results for the Six Months Ended June 30, 2019

Total revenue was $6.1 million compared to $12.0 million in the first six months of 2018. The decrease in total revenue was due to a reduction in the number of simulators and accessories delivered compared to the same period in 2018.

Gross profit was $3.3 million (54.3% of total revenue) compared to $8.0 million (66.7% of total revenue) in the first six months of 2018. The decrease in gross profit was primarily due to differences in the product mix and the quantity of systems, accessories, and services sold.

Net operating expense was $4.7 million compared to $5.2 million in the first six months of 2018. The decrease in net operating expense was due to reduced SG&A, costs for labor, benefits, professional services, and public company expense compared to the same period in 2018.

Loss from operations was $1.3 million compared to income from operations of $2.8 million in the first six months of 2018.

Net loss totaled $947,000, or $(0.12) per diluted share, compared to net income of $2.0 million, or $0.25 per diluted share in the comparable period a year ago.

Adjusted EBITDA loss was $883,000 compared to positive adjusted EBITDA of $3.1 million in the first six months of 2018.

Deferred revenue totaled $3.9 million as of June 30, 2019, compared to $2.9 million as of June 30, 2018. The current portion of deferred revenue was $2.7 million as of June 30, 2019, compared to $1.9 million as of June 30, 2018. The increase in deferred revenue was primarily due to customer deposits received on new orders, new service agreements, and new STEP agreements received.

Conference Call

VirTra management will hold a conference call today (August 13, 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: 888-428-7458
International number: 862-298-0702

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 August 27, 2019.

Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 52547

About VirTra
VirTra (NASDAQ: VTSI) is a global provider of judgmental use of force training simulators, firearms training simulators and driving 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 loss to Adjusted EBITDA is provided in the following table:

  Three Months Ended   Six Months Ended
  June 30,   June 30,   Increase   %   June 30,   June 30,   Increase   %
  2019   2018   (Decrease)   Change   2019   2018   (Decrease)   Change
                               
Net (loss) income $ (633,731 )   $ 2,112,937   $ (2,746,668 )   -130 %   $ (946,633 )   $ 2,027,150   $ (2,973,783 )   -147 %
Adjustments:                              
Depreciation and amortization   144,061       74,587     69,474     93 %     285,844       143,206     142,638     100 %
Non-cash stock option expense   -       4,860     (4,860 )   -100 %     -       4,860     (4,860 )   -100 %
Impairment loss on That's Eatertainment   -       134,140     (134,140 )   -100 %     -       134,140     (134,140 )   -100 %
Reserve for note receivable   102,473       -     102,473     100 %     102,473       -     102,473     100 %
(Benefit) provision for income taxes   (217,248 )     864,941     (1,082,189 )   -125 %     (324,248 )     835,747     (1,159,995 )   -139 %
                               
Adjusted EBITDA $ (604,445 )   $ 3,191,465   $ (3,795,910 )   -119 %   $ (882,564 )   $ 3,145,103   $ (4,027,667 )   -128 %
                               

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.

Investor Relations Contact:
Matt Glover or Charlie Schumacher
VTSI@gatewayir.com
949-574-3860

VIRTRA, INC.
CONDENSED BALANCE SHEETS

  June 30, 2019   December 31, 2018
  (Unaudited)    
 ASSETS      
Current assets:      
Cash and cash equivalents $ 1,393,701     $ 2,500,381  
Certificates of deposit   1,880,000       3,490,000  
Accounts receivable, net   2,066,428       1,302,010  
Interest receivable   24,295       21,385  
That's Eatertainment note receivable, net, related party   -       292,138  
Trade note receivable, net   -       96,282  
Inventory, net   2,513,878       1,612,002  
Unbilled revenue   1,044,691       689,153  
Prepaid expenses and other current assets   592,358       377,520  
       
Total current assets   9,515,351       10,380,871  
       
Long-term assets:      
Property and equipment, net   844,027       678,245  
Operating lease right-of-use asset   1,534,225       -  
Intangible assets, net   156,296       -  
That's Eatertainment note receivable, long term, related party   292,138       -  
Trade note receivable, long term   -       6,843  
Security deposits, long-term   19,712       339,756  
Other assets, long-term   372,566       292,298  
Deferred tax asset, net   2,729,000       2,400,000  
Investment in That's Eatertainment, related party   1,120,000       1,120,000  
       
Total long-term assets   7,067,964       4,837,142  
       
Total assets $ 16,583,315     $ 15,218,013  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 814,518     $ 429,949  
Accrued compensation and related costs   544,249       613,691  
Accrued expenses and other current liabilities   399,122       632,606  
Note payable, current   11,250       11,250  
Operating lease liability, short-term   278,628       -  
Deferred revenue, short-term   2,687,110       1,924,307  
       
Total current liabilities   4,734,877       3,611,803  
       
Long-term liabilities:      
Deferred revenue, long-term   1,188,196       962,356  
Deferred rent liability   -       46,523  
Operating lease liability, long-term   1,326,464       -  
       
Total long-term liabilities   2,514,660       1,008,879  
       
Total liabilities   7,249,537       4,620,682  
       
Commitments and contingencies (See Note 10)      
       
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; 7,739,255 shares issued and outstanding as of June 30, 2019 and 7,827,651 issued and 7,816,944 shares outstanding as of December 31, 2018   774       783  
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; nil shares outstanding as of June 30, 2019 and 10,707 shares outstanding as of December 31, 2018.   -       (37,308 )
Additional paid-in capital   13,918,615       14,272,834  
Accumulated deficit   (4,585,611 )     (3,638,978 )
       
Total stockholders' equity   9,333,778       10,597,331  
       
Total liabilities and stockholders' equity $ 16,583,315     $ 15,218,013  
       

VIRTRA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Revenues:              
Net sales $ 3,002,381     $ 8,278,579     $ 6,014,082     $ 11,521,402  
That's Eatertainment royalties/licensing fees, related party   32,795       427,433       72,432       473,401  
Other royalties/licensing fees   19,137       2,180       19,137       2,180  
Total revenue   3,054,313       8,708,192       6,105,651       11,996,983  
               
Cost of sales   1,539,267       2,964,997       2,790,136       3,991,152  
               
Gross profit   1,515,046       5,743,195       3,315,515       8,005,831  
               
Operating expenses:              
General and administrative   2,044,860       2,480,851       3,946,791       4,534,156  
Research and development   353,665       305,738       709,306       673,282  
               
Net operating expense   2,398,525       2,786,589       4,656,097       5,207,438  
               
(Loss) income from operations   (883,479 )     2,956,606       (1,340,582 )     2,798,393  
               
Other income (expense)              
Other income   33,449       22,177       75,732       65,475  
Other expense   (949 )     (905 )     (6,031 )     (971 )
               
Net other income   32,500       21,272       69,701       64,504  
               
(Loss) income before provision for income taxes   (850,979 )     2,977,878       (1,270,881 )     2,862,897  
               
(Benefit) provision for income taxes   (217,248 )     864,941       (324,248 )     835,747  
               
Net (loss) income $ (633,731 )   $ 2,112,937     $ (946,633 )   $ 2,027,150  
               
Net (loss) income per common share:              
Basic $ (0.08 )   $ 0.27     $ (0.12 )   $ 0.26  
Diluted $ (0.08 )   $ 0.26     $ (0.12 )   $ 0.25  
               
Weighted average shares outstanding:              
Basic   7,735,303       7,907,390       7,750,370       7,905,849  
Diluted   7,735,303       8,255,299       7,750,370       8,251,640  
               

VIRTRA, INC.
CONDENSED STATEMENTS OF CASH FLOWS

    Six Months Ended
  June 30, 2019   June 30, 2018
       
Cash flows from operating activities:      
Net (loss) income $ (946,633 )   $ 2,027,150  
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:    
Depreciation and amortization   285,844       143,206  
Deferred taxes   (329,000 )     824,182  
Impairment of investment in That's Eatertainment, related party   -       134,140  
Stock compensation   -       4,860  
Reserve for note receivable   102,474       -  
Changes in operating assets and liabilities:      
Accounts receivable, net   (764,418 )     (3,412,430 )
Trade note receivable, net   651       -  
Interest receivable   (2,910 )     -  
Inventory   (901,876 )     (80,650 )
Unbilled revenue   (355,538 )     922,730  
Prepaid expenses and other current assets   (214,838 )     (141,378 )
Other assets   (80,268 )     -  
Security deposits, long-term   320,044       -  
Accounts payable and other accrued expenses   81,643       787,124  
Payments on operating lease liability   (116,288 )     -  
Deferred revenue   988,643       (1,081,018 )
       
Net cash (used in) provided by operating activities   (1,932,470 )     127,916  
       
Cash flows from investing activities:      
Purchase of certificates of deposit   (1,880,000 )     -  
Redemption of certificates of deposit   3,490,000       -  
Purchase of intangible assets   (160,000 )     -  
Purchase of property and equipment   (309,921 )     (287,773 )
Proceeds from sale of property and equipment   2,631       -  
       
Net cash provided (used in) investing activities   1,142,710       (287,773 )
       
Cash flows from financing activities:      
Repurchase of stock options   (4,367 )     (32,000 )
Stock options exercised   5,651       10,500  
Purchase of treasury stock   (318,204 )     -  
       
Net cash used in financing activities   (316,920 )     (21,500 )
       
Net decrease in cash   (1,106,680 )     (181,357 )
Cash, beginning of period   2,500,381       5,080,445  
       
Cash, end of period $ 1,393,701     $ 4,899,088  
       
Supplemental disclosure of cash flow information:      
Cash paid:      
Taxes $ 4,752     $ 96,574  
       
Supplemental disclosure of non-cash investing and financing activities:      
Conversion of accounts to note receivable   -       693,044  
Conversion of  That's Eatertainment note receivable to long term, related party   292,138       -  
               

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