VirTra Reports Fourth Quarter and Full Year 2021 Financial Results

Rhea-AI Summary

VirTra (NASDAQ: VTSI) reported a 28% revenue growth for 2021, totaling $24.4 million, with $32.9 million in bookings. The year ended with a record backlog of $23.1 million, an increase of 58% year-over-year. In Q4 2021, revenue rose by 32% to $8.6 million, but gross profit fell to $2.8 million due to a military contract impacting margins. Despite a net income of $2.5 million, figures suggest potential concerns with operating income and adjusted EBITDA.

Positive

• Revenue increased by 28% in 2021, reaching $24.4 million.
• Record backlog of $23.1 million as of December 31, 2021.
• Bookings of $32.9 million for the full year, up 44% year-over-year.

Negative

• Gross profit decreased to $11.4 million from $11.9 million, a 4% decline.
• Gross profit margin dropped to 46.7%, compared to 62.3% in 2020.
• Adjusted EBITDA fell to $2.1 million from $2.8 million.

28% Revenue Growth for Full Year 2021; Ended the Year with Record Backlog of $23.1 Million

CHANDLER, Ariz., Aug. 02, 2022 (GLOBE NEWSWIRE) -- VirTra, Inc. (NASDAQ: VTSI) (“VirTra”), a global provider of judgmental use of force training simulators, firearms training simulators for the law enforcement and military markets, reported results for the fourth quarter and full year ended December 31, 2022. The financial statements are available on VirTra’s website and here.

Fourth Quarter 2021 and Full Year 2021 Highlights:

• Bookings of $8.4 million in the fourth quarter of 2021 and $32.9 million in full year 2021, representing growth of 53% and 44% from the prior year comparable periods, respectively
• Record backlog at December 31, 2021 of $23.1 million, 58% higher than December 31, 2020
• Purchased industrial building in Chandler, Arizona on August 25, 2021, for new VirTra headquarters to scale manufacturing capabilities and improve operational efficiencies
• Cash and cash equivalents as of December 31, 2021 totaled $19.7 million

Fourth Quarter 2021 Financial Summary:

• Total revenue increased 32% to $8.6 million
• Gross profit was $2.8 million, or 33% of total revenue
• Net income was $13,000
• Adjusted EBITDA loss totaled $(220,000)

Full Year 2021 Financial Summary:

• Total revenue increased 28% to $24.4 million
• Gross profit was $11.4 million, or 47% of total revenue
• Net income was $2.5 million
• Adjusted EBITDA totaled $2.1 million

Fourth Quarter and Full Year 2021 Financial Highlights:

		For the Three Months Ended					For the Full Year Ended
All figures in millions, except per share data		December 31, 2021	December 31, 2020	% ∇			December 31, 2021	December 31, 2020	% ∇
Total Revenue		$8.6	$6.6	32%			$24.4	$19.1	28%
Gross Profit		$2.8	$4.8	-41%			$11.4	$11.9	-4%
Gross Margin		32.7%	72.5%	-55%			46.7%	62.3%	-25%
Net Income (Loss)		$0.0	$1.6	N/A			$2.5	$1.5	N/A
Diluted EPS		$0.00	$0.21	N/A			$0.25	$0.19	N/A
Adjusted EBITDA		($0.22)	$2.18	N/A			$2.05	$2.79	N/A

Management Commentary
“Our 2021 results demonstrate the strength of our business and growth opportunities we are executing upon as we generated record revenue and bookings of $24.4 million and $32.9 million, respectively, while ending the year with record backlog of $23.1 million,” said Bob Ferris, chairman and co-CEO of VirTra. “We continue to successfully compete in the law enforcement market and saw impressive international and military market revenue growth during 2021 as we delivered on contracts and COVID restrictions eased internationally. We expect continued healthy growth from these sectors and are particularly excited about the commercial market, which includes military opportunities through a prime contractor. Keep in mind our new co-CEO, John Givens, has significant military experience and relationships that we expect to greatly benefit VirTra shareholders as we execute on our growth plans.

“Gross margins in 2021 and the fourth quarter in particular, were negatively impacted by materials and labor cost inflation, product mix and a strategically important military contract with initial work done at a materially lower margin than our historical results. The revenue from this military contract was heavily weighted to the fourth quarter and the lower margin was justified as it funded new VirTra product capabilities needed for military training. Further, we expect this experience will position us to be highly competitive for future military opportunities with margins more akin to our historical results.

“Looking ahead, our sales pipeline remains robust with tailwinds from a return to normalized business practices globally, allowing us to get more active with business development activities such as exhibiting at tradeshows and expanding demos for prospective customers. Additionally, our move-in to our new headquarters in Chandler, Arizona is progressing well and expected to be completed by the end of 2022. The operational efficiencies from this move, our industry-leading capabilities, and a strong balance sheet position us well to successfully compete in our targeted law enforcement and military growth markets in the years to come.

“While we are disappointed in the length of time it took to file our audited financial results for 2021, we are committed to getting our financial filings up to date this month as our ERP system is sufficiently integrated and we are operating with a more efficient process in tandem with our new independent auditors. Going forward, we expect to report our financial results in-line with our traditional cadence.”

Fourth Quarter 2021 Financial Results

Total revenue increased 32% to $8.6 million from $6.6 million in the fourth quarter of 2020. The increase in revenue was the result of increases in sales of simulators, STEP (Subscription Training and Equipment Partnership) subscriptions, accessories, curriculum and training sales, and recurring extended warranty revenue.

Gross profit was $2.8 million, compared to $4.8 million in the fourth quarter of 2020. Gross profit margin, defined as total revenue less cost of sales, was 32.7%, which was lower than the 72.5% in the fourth quarter of 2020. The decrease in gross profit was primarily due to a specific military contract with a lower margin profile, differences in the quantity and type of simulator systems, type of accessories and variety of services sold, combined with an increase in cost of sales.

Net operating expense was $3.0 million, compared to $3.4 million in the fourth quarter of 2020. The decrease in net operating expenses was due to a $434,000 impairment charge and $327,000 in bad debt expense in the fourth quarter of 2020, partially offset by increased depreciation associated with the new Chandler, Arizona headquarters and related moving expenses to the new office.

Operating loss totaled $196,000, compared to $1.3 million in operating income the fourth quarter of 2020.

Net income totaled $13,000, or $0.00 per diluted share (based on 10.0 million weighted average diluted shares outstanding), compared to net income of $1.6 million, or $0.21 per diluted share (based on 7.8 million weighted average diluted shares outstanding), in the fourth quarter of 2020.

Adjusted EBITDA, a non-GAAP metric, totaled $(220,000), compared to $2.2 million in the fourth quarter of 2020.

Full Year 2021 Financial Results

Total revenue increased 28% to $24.4 million from $19.1 million in 2020. The increase in revenue was due to an increase in the number of simulators and accessories completed, delivered and revenue recognized compared to the same period in 2020.

Gross profit was $11.4 million, compared to $11.9 million in 2020. Gross profit margin, defined as total revenue less cost of sales, was 46.7%, compared to 62.3% for the fiscal year of 2020. The decrease in gross profit margin was primarily due to a specific military project with a lower margin profile, differences in the quantity and type of simulator systems, type of accessories and variety of services sold, combined with an increase in cost of sales.

Net operating expense was $10.0 million, compared to $10.7 million for the fiscal year of 2020. The decrease was, primarily due to a $346,000 allowance for bad debt on accounts and note receivable and a one-time $840,000 impairment charge both incurred in 2020.

Operating income was $1.5 million, compared to $1.2 million in 2020.

Net income totaled $2.5 million, or $0.25 per basic and diluted share (based on 10.0 million weighted average basic shares and 10.1 million weighted average diluted shares outstanding), compared to net income of $1.5 million, or $0.19 per basic and diluted share (based on 7.8 million weighted average basic and diluted shares outstanding) in 2020.

Adjusted EBITDA, a non-GAAP metric, totaled $2.1 million, compared to $2.8 million in 2020.

Upcoming Earnings Release Timing

VirTra expects to release its first quarter 2022 results ended March 31, 2022 on August 11, 2022 after market close. The Company also expects to release its second quarter 2022 results ended June 30, 2022 on August 19, 2022 before market open. VirTra plans to host a conference call August 19, 2022 to discuss its first quarter 2022 and second quarter 2022 results. The Company expects these announcements and associated filings to meet the requirements for continued listing of its common stock on Nasdaq.

Conference Call

VirTra’s management will hold a conference call today (August 2, 2022,) 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 chief accounting officer, Marsha Foxx, will host the call, followed by a question-and-answer period.

U.S. dial-in number: 1-877-407-9208
International number: 1-201-493-6784
Conference ID: 13731787

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

The conference call will be broadcast simultaneously and is available for replay here.

A replay of the call will be available through Tuesday, August 16, 2022.

U.S. replay dial-in: 1-844-512-2921
International replay dial-in: 1-412-317-6671
Replay ID: 13731787

About VirTra, Inc.

VirTra (NASDAQ: VTSI) is a global provider of judgmental use of force training simulators and firearms 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 tables:  

			For the Years Ended
			December 31,				December 31,				Increase				%
			2021				2020				(Decrease)				Change
Net Income			$	2,540,089			$	1,478,403			$	1,061,686			72%
	Adjustments:
	Provision (Benefit) for income taxes			246,050				(218,800	)			464,850			-212%
	Depreciation and amortization			589,059				380,154				208,905			55%
EBITDA			$	3,375,198			$	1,639,757			$	1,735,441			106%
	Impairment loss on That's Eatertainment, former related party			-				840,000				(840,000	)		-100%
	Reserve for note receivable			-				311,367				(311,367	)		-100%
	Gain on forgiveness of note			(1,320,714	)			-				(1,320,714	)		100%
Adjusted EBITDA			$	2,054,484			$	2,791,124			$	(736,640	)		-26%

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 Securities and Exchange Commission (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 SEC 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 and Jeff Grampp, CFA
Gateway Group, Inc.
VTSI@gatewayir.com
949-574-3860

VirTra, Inc.
Condensed Balance Sheets

			December 31, 2021		December 31, 2020
ASSETS
Current assets:
	Cash and cash equivalents		$	19,708,565	$	6,841,984
	Accounts receivable, net			3,896,739		1,378,270
	Inventory, net			5,014,924		3,515,997
	Unbilled revenue			3,946,446		5,408,598
	Prepaid expenses and other current assets			940,887		382,445
	Total current assets			33,507,561		17,527,294
Long-term assets:
	Property and equipment, net			12,864,766		1,381,744
	Operating lease right-of-use asset, net			784,306		1,094,527
	Intangible assets, net			535,079		271,048
	Security deposits, long-term			19,712		86,500
	Other assets, long-term			189,734		500,114
	Deferred tax asset, net			1,674,234		1,892,000
	Total long-term assets			16,067,831		5,225,933
Total assets			$	49,575,392	$	22,753,227
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	789,394	$	345,573
	Accrued compensation and related costs			1,062,078		843,101
	Accrued expenses and other current liabilities			991,744		772,884
	Note payable, current			236,291		266,037
	Operating lease liability, short-term			347,772		321,727
	Deferred revenue, short-term			4,135,565		4,708,575
	Total current liabilities			7,562,844		7,257,897
Long-term liabilities:
	Deferred revenue, long-term			1,992,625		1,920,346
	Note payable, long-term			8,280,395		1,063,243
	Operating lease liability, long-term			505,383		853,155
	Other long term liabilities			5,436		-
	Total long-term liabilities			10,783,839		3,836,744
Total liabilities				18,346,683		11,094,641
Commitments and contingencies (See Note 9)
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; 10,807,130 shares
	issued and outstanding as of December 31, 2021 and 7,775,030 shares issued
	and outstanding as of December 31, 2020			1,081		778
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			-		-
Additional paid-in capital				30,923,391		13,893,660
Retained earnings (Accumulated deficit)				304,237		(2,235,852	)
Total stockholders' equity				31,228,709		11,658,586
Total liabilities and stockholders' equity			$	49,575,392	$	22,753,227

VirTra, Inc.
Condensed Statements of Operations
(Unaudited)

			For the Years ended
			December 31, 2021				December 31, 2020
Revenues:
	Net sales		$	24,434,056			$	19,038,074
	That's Eatertainment royalties/licensing fees, former related party			-				45,247
	Other royalties/licensing fees			-				4,310
	Total revenue			24,434,056				19,087,631
	Cost of sales			13,028,844				7,187,210
	Gross profit			11,405,212				11,900,421
Operating expenses:
	General and administrative			8,085,295				9,070,730
	Research and development			1,865,880				1,603,379
	Net operating expense			9,951,175				10,674,109
	Income from operations			1,454,037				1,226,312
Other income (expense):
	Other income			97,100				49,539
	Gain on forgiveness of note payable			1,320,714				-
	Other expense			(85,712	)			(16,248	)
	Net other income			1,332,102				33,291
	Income before provision for income taxes			2,786,139				1,259,603
	Provision (Benefit) for income taxes			246,050				(218,800	)
Net income			$	2,540,089			$	1,478,403
Net income per common share:
	Basic		$	0.25			$	0.19
	Diluted		$	0.25			$	0.19
Weighted average shares outstanding:
	Basic			10,007,386				7,757,037
	Diluted			10,060,748				7,835,830

VirTra, Inc.
Condensed Statements of Cash Flows
(Unaudited)

					Year Ended December 31,
						2021				2020
	Cash flows from operating activities:
		Net income			$	2,540,089			$	1,478,403
		Adjustments to reconcile net income to net cash (used in) provided by operating activities:
			Depreciation and amortization			589,059				380,154
			Right of use amortization			310,221				296,346
			Reserve for note receivable			-				291,110
			Deferred taxes			217,766				(100,000	)
			Impairment of investment in That's Eatertainment, former related party			-				840,000
			Gain on forgiveness of note payable			(1,329,280	)			-
			Employee stock compensation			223,716				-
		Changes in operating assets and liabilities:
			Accounts receivable, net			(2,518,469	)			929,702
			Interest receivable			-				7,340
			Inventory, net			(1,498,927	)			(2,291,394	)
			Unbilled revenue			1,462,152				(1,828,656	)
			Prepaid expenses and other current assets			(558,442	)			(28,470	)
			Other assets			310,380				(148,878	)
			Security deposits, long-term			66,788				(66,788	)
			Accounts payable and other accrued expenses			881,662				394,193
			Payments on operating lease liability			(321,727	)			(297,244	)
			Deferred revenue			(500,731	)			2,389,819
	Net cash provided by (used in) operating activities					(125,743	)			2,245,637
	Cash flows from investing activities:
		Redemption of certificates of deposit				-				1,915,000
		Purchase of intangible assets				(287,106	)			(62,007	)
		Purchase of property and equipment				(3,448,678	)			-
	Net cash provided by (used in) investing activities					(3,735,784	)			1,852,993
	Cash flows from financing activities:
		Repurchase of stock options				-				(31,183	)
		Principal payments of debt				(78,212	)			-
		Stock issued for cash in offering, net				16,795,000				-
		Stock options exercised				11,320				30,166
		Note payable-PPP Loan				-				1,329,280
	Net cash provided by financing activities					16,728,108				1,328,263
	Net increase (decrease) in cash and restricted cash					12,866,581				5,426,893
	Cash and restricted cash, beginning of period					6,841,984				1,415,091
	Cash and restricted cash, end of period				$	19,708,565			$	6,841,984

FAQ

What was VirTra's revenue for the full year 2021?

VirTra reported a revenue of $24.4 million for the full year 2021.

What were the bookings for VirTra in 2021?

Bookings for VirTra in 2021 totaled $32.9 million, representing a 44% increase year-over-year.

How did VirTra's net income change from 2020 to 2021?

VirTra's net income for 2021 was $2.5 million, up from $1.5 million in 2020.

What impact did military contracts have on VirTra's margins in 2021?

Military contracts negatively impacted VirTra's gross profit margins, contributing to lower margin profiles.

When is VirTra expected to release its Q1 2022 earnings?

VirTra is expected to release its first quarter 2022 results on August 11, 2022.