VirTra, Inc.

Good afternoon. Welcome to Virtra's second quarter 2021 earnings conference call. My name is Jess, and I will be your operator for today's call. Joining us for today's presentation are the company's chairman and CEO, Bob Ferris, and Chief Accounting Officer, Marsha Fox. Following their remarks, we will open the call for questions from Virtra's institutional analysts and investors. Before we begin the call, I would like to provide Virtra's safe harbor statement that includes cautions regarding forward-looking statements made during this call. During this presentation, management may discuss financial projections, information or expectations about the company's products, services, or markets, or otherwise make statements about the future, which are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them as required by law. Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at www.Vertra.com. Now I'd like to turn the call over to Vertra's Chairman and CEO, Mr. Bob Farris. Sir, please proceed.

Thank you, Operator, and thank you, everyone, for joining us this afternoon. After the market closed today, we issued our financial results for the second quarter and six months ended June 30, 2021. As you can see from our release, we delivered strong results across the board in the second quarter, highlighted by a 90% increase in total revenue and a 99% increase in gross profit. Our continued focus on driving profitable growth also enabled us to deliver another quarter of positive net income and adjusted EBITDA, which totaled $1 million, or 19% of our total revenue. Demand for Virch's world-class training solutions continues to build as reflected by the 6% sequential and 19% year-over-year increase in our backlog, totaling a record $17 million at quarter end. Our strong financial performance in Q2 also demonstrates our team's consistent operational excellence, as well as the value and effectiveness that Virch's products provide to our end users and partners. Our results also reflect the continued execution of key strategic initiatives to drive business scale. I'm very proud of the exceptional team we have assembled at Virtra who continue to perform despite the ever-changing COVID-19 limitations. Before I go into more detail about our operational initiatives and progress within the context of our growth strategy, I'm going to turn the call over to our Chief Accounting Officer, Marsha Fox. to walk you through our financial performance for Q2 and the first six months of 2021. Marcia.

Thank you, Bob, and good afternoon, everyone. It's a pleasure to be speaking to you today to review our financial results for the second quarter and six months ended June 30th, 2021. Our total revenue for the second quarter of 2021 was $5.3 million. This was a 90% increase from the $2.8 million of revenue we recognized in Q2 of last year. For the first six months of 2021, total revenue increased 59% to $9.7 million from $6.1 million for the first six months of 2020. The increase in total revenue for both the second quarter and the first six months of 2021 was due to an increase in the number of simulators and accessories completed and delivered and therefore revenue recognized compared to the same periods in 2020. Our gross profit for the second quarter of 2021 increased 99% to $3.1 million from $1.6 million in Q2 last year. Gross profit margin for Q2 2021 was 59.7%, an improvement compared to 57% in Q2 last year. For the first six months of 2021, gross profit increased 80% to $5.7 million from $3.2 million for the first six months of 2020. Gross profit margin for the first six months of 2021 was 58.8%. and improvement compared to the 51.9% in the same period last year. The improvement in gross profit and gross profit margin for both the second quarter and the first six months of 2021 was due to decreased costs and a more favorable product mix of systems, accessories, and services sold. Our net operating expense for the second quarter of 2021 was $2.3 million compared to $2.4 million in Q2 last year. For the six-month period, net operating expense was $4.3 million compared to $4.5 million for the first six months of 2020. The decrease in net operating expense for Q2 and the first six months of 2021 was primarily due to the impairment rate down in 2020 offset by an increase in software license fees in 2021. Turning to our profitability measures. Our income from operations in the second quarter of 2021 totaled $821,000, compared to a loss of $822,000 in Q2 last year. For the six-month period, operating income was $1.4 million, an improvement compared to an operating loss of $1.3 million for the first six months of 2020. Net income for the second quarter of 2021 totaled $529,400, or five cents per diluted share, an improvement compared to the net loss of $601,300, or a loss of eight cents per diluted share in the second quarter of 2020. For the six-month period, net income totaled $1.2 million, or 13 cents per basic and diluted share, an improvement compared to a net loss of $990,700, or a loss of 13 cents per basic and diluted share for the first six months of 2020. Adjusted EBITDA, a non-GAAP metric, for the second quarter of 2021 totaled $1 million, an improvement from a loss of $579,200 in Q2 last year. For the first six months of 2021, adjusted EBITDA totaled $1.8 million, an improvement from a loss of $978,300 for the first six months of 2020. Turning to our bookings and backlog. We define bookings as the total of newly signed contracts and purchase orders received in a defined period. For the six month period ending June 30th, 2021, we received bookings totaling $13.5 million. Furthermore, we define backlog is the accumulation of bookings from signed contracts and purchase orders that are not yet started or are uncompleted and cannot be recognized as revenue until delivered in a future period. Backlog also includes extended warranty agreements and step agreements that are deferred revenue recognized on a straight line basis over the life of each respective agreement. As of June 30th, 2021, our backlog totaled $17 million, which was up 6% from the prior quarter and 19% from Q2 last year. Finally, to our balance sheet. As of June 30th, 2021, we had unrestricted cash and cash equivalents of $23.8 million compared to $5 million at the end of the prior quarter. From a working capital standpoint, at the end of Q2, we had $27.7 million in working capital, an improvement from $10.8 million at March 31, 2021. For additional details of our financial results, please reference our Form 10-Q, which was filed earlier today. That concludes my prepared remarks. I'll now turn it back to Bob.