VirTra, Inc.

Good afternoon. Welcome to Virtua's third quarter 2021 earnings conference call. My name is Holly and I will be the 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 up the call for questions from Virtua's institutional analysts and investors. Before we begin the call, I would like to provide Virtua'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 and services or markets, or otherwise make statements about the future which are forward-looking and 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 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.Virtua.com. Now I'd like to turn the call over to Virtua's Chairman and CEO, Mr. Bob Ferris. Sir, please proceed.

Thank you, Holly, and thank you everyone for joining us this afternoon. After the market closed today, we issued our financial results for the third quarter and nine months ended September 30, 2021. The third quarter represented a record-setting pace of new sales of Virta's world-class training solutions. We delivered a 16% sequential increase in revenue and ended the quarter with record bookings of $11 million. culminating in another record backlog at quarter end of 21.7 million, which was up 28% over last quarter's prior record backlog figure. In parallel, we are seeing the light at the end of the COVID tunnel. As I have previously mentioned, limitations in certain markets related to COVID-19 protocols created difficulties in closing international deals. Our recent international wins are a testament to our sales pipeline, and the lifting of some COVID restrictions. We certainly hope this is a sign of things to come. Anyone who has trained on our equipment and then tried out the equipment of our competitors can attest to how important head to head demonstrations are to our sales process. So you can imagine how excited we are to see in-person trade shows beginning to resume. In fact, in two weeks from today, we will be demonstrating some of our latest products at ITSEC, a large simulation training trade show in Orlando, Florida. More broadly, I continue to be impressed with the exceptional team we have put together at Virtua, which outperform their peers in our industry. We have a growth mentality and realize that even as we've become the gold standard for simulation training for so many top agencies, there are still so many more in need of effective training that only Virtua provides. 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 Q3 and the first nine months of 2021. Marsha.

Thank you, Bob, and good afternoon, everyone. It's a pleasure to be speaking to you today to review our financial results for the third quarter and nine months ended September 30th, 2021. Our total revenue for the third quarter of 2021 was $6.1 million. This was a 5% decrease from the 6.4 million of revenue we recognized in Q3 of last year. The decrease in revenues resulted from the product mix of sales and delivery schedules to accommodate our customers' needs. For the first nine months of 2021, total revenue increased 21% to $15.8 million from $12.5 million for the first nine months of 2020. The increase in revenues for the first nine months of 2021 was due to an increase in the number of simulators and accessories completed and delivered. Our gross profit for the third quarter of 2021 decreased 28% to $2.9 million from $4.0 million in Q3 last year. Gross profit margin for Q3 2021 was 47.2%, which was lower than the 61.9% in Q3 last year. For the first nine months of 2021, Gross profit increased 20% to $8.6 million from $7.1 million for the first nine months of 2020. Gross profit margin for the first nine months of 2021 was 54.3%, which was lower than the 57.0% in the same period last year. The decrease in gross profit margin for the quarter and nine month period was due to an increase in reserve for inventory as the scale of our operation grows. Our net operating expense for the third quarter of 2021 was $2.6 million compared to $2.7 million in Q3 last year. For the nine-month period, net operating expense was $6.9 million compared to $7.3 million for the first nine months of 2020. The decrease was primarily due to the impairment rate down in 2020, offset by the transition to a company-wide ERP system in 2021, which included software fees, consulting, and time invested by company staff. Turning to our profitability measures, our income from operations for the third quarter of 2021 totaled $266,000, compared to $1.2 million in Q3 last year. For the nine-month period, our income from operations was $1.7 million, an improvement compared to an operating loss of $115,000 for the first nine months of 2020. Net income for the third quarter of 2021 totaled $1.3 million, or 12 cents per diluted share. an improvement compared to net income of $868,000 or 11 cents per diluted share in the third quarter of 2020. For the nine-month period, net income totaled $2.5 million or 26 cents per basic and 25 cents per diluted share, an improvement compared to a net loss of $123,000 or a loss of two cents per basic and diluted share for the first nine months of 2020. It is important to note that both our third quarter and nine month periods in 2021 benefited from a non-recurring $1.3 million gain on forgiveness of the company's PPP loan. Adjusted EBITDA, a non-GAAP metric for the third quarter of 2021 totaled $520,000 compared to $1.6 million in Q3 last year. For the first nine months of 2021, adjusted EBITDA totaled $2.3 million, an improvement from the $615,000 for the first nine months of 2020. Turning to our bookings and backlogs. We define bookings as the total of newly signed contracts and purchase orders received in a defined period. For the nine-month period ending September 30, 2021, we received bookings totaling $24.4 million. Furthermore, we define backlog as the accumulation of bookings from signed contracts and purchase orders that are not 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 September 30th, 2021, our backlog totaled $21.7 million which was up 28% from the prior quarter and 51% from Q3 last year. And finally, to our ballot sheet. As of September 30th, 2021, we had unrestricted cash and cash equivalents of $21.5 million compared to 23.8 million at the end of June 2021. From a working capital standpoint, At the end of Q3, we had $25.8 million in working capital, a slight decrease from $27.7 million at the end of Q2. For additional details of our financial results, please reference our 10-Q, which was filed earlier today. That concludes my prepared remarks. I'll now turn it back to Bob.