VirTra, Inc.

Good afternoon and welcome to Vertra's fourth quarter and full year 2024 earnings call. My name is Diego and I'll be your operator for today's call. Joining us for today's presentation are the company's CEO, John Givens, and CFO, Alana Boudreau. Following their remarks, we will open the call for questions. Before we begin the call, I would like to provide Vertra'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 as required by law. Finally, I'd like to remind everyone that this call will be made available for replay via a link in the investor relations section on the company's website at www.Vertra.com. Now, I'd like to turn the call over to Vertra's CEO, Mr. John Givens. Thank you, and you may proceed, sir.

Thank you, Diego, and thank you, everyone, for joining us this afternoon. After the market closed today, We issued a press release that provided our financial results for the fourth quarter and full year ended December 31, 2024, along with highlighted business accomplishments. Virtra provides immersive training solutions for law enforcement and military agencies, helping personnel develop critical decision-making skills in high-pressure situations. Our technology advances officer safety, response times, and mission readiness, making our solution an essential part of effective modern training programs. 2024 was a challenging year due to persistent funding delays at the federal level. After starting 2024 under a continuing resolution, which limited new contract awards, we focused on adapting to these constraints while positioning VRTRA for long-term growth. Despite the challenges, we still made meaningful progress. We delivered sequential bookings growth in every quarter, expanded our backlog, and deepened our engagement with government and military customers. In contrast to our strong performance in 2023, which was driven by clearing a substantial backlog, this past year required us to be more flexible and proactive in navigating a constrained funding environment. Throughout the year, We strengthened our sales pipeline, secured international contracts, and maintained a strong financial position to support long-term growth. Importantly, we closed the year with a $22 million backlog. So while the funding environments remain somewhat fluid and unpredictable, we are well positioned for revenue conversion as market conditions stabilize. Our sales pipeline continues to grow. supported by our ability to help law enforcement agencies navigate the grant process and secure funding. While federal grant disbursement delays have impacted near-term order conversion timing, these funds remain available and we are actively working to ensure that our agencies can access them. In the past several months, I have personally met with over 25 policymakers Department of Justice officials, and leaders in the federal grant offices to advocate for clearer, more structured funding processes that prioritize modern training programs. These discussions remain ongoing, and we are encouraged by the traction that we're gaining in Washington, D.C. At the federal level, we continue to strengthen our longstanding partnership with Customs and Border Protection, the Secret Service, and the Federal Law Enforcement Training Center. key customers that rely on our solutions to meet their evolving training needs. Internationally, we secured contracts that government and law enforcement agencies in Europe and Latin America. Our training solutions are now operating in 44 countries with much more room for Virtra to expand into security training programs around the world. Additionally, we recorded our first VXR platform sale in Canada signaling early adoption of our extended reality training technology. The rollout of the VXR platform remains a strategic priority and a key part of our long-term growth strategy. Early customer reception has been strong, with positive feedback at the SHOT Show and IACP and with the initial delivery underway. Looking ahead, we are working to enhance hardware compatibility, ensure that the platform remains adaptable across different XR headsets. The system provides agencies with flexible training options that meet a range of budgetary needs. Bertra is committed to leveraging extended reality technologies for delivering our certified training courses. As we firmly believe, XR provides unparalleled immersive learning experience, tactical accuracy, significantly enhances training effectiveness, and positions us to meet evolving customer requirements and industry standards. One of Virtra's greatest competitive strengths is our unmatched library of high-quality, immersive training content. In Q4, we significantly expanded our scenario catalog, introducing dynamically trained tailoring specifically for hospital security teams across both our innovative VXR and traditional screen-based platforms. We are also leveraging AI efficiencies to significantly accelerate content production. By automating parts of our video editing and scenario development processes, we have cut our production times from days to minutes, allowing us to scale content output faster than ever before. Our content expansion strategically reinforces Virtua's leadership in immersive training so that our customers receive the most realistic, adaptable, and forward-looking training experience available. In the military sector, we continue to expand our engagement, particularly through our work with the U.S. Army and other Department of Defense channels. Our final development phase for the U.S. Army's Integrated Visual Augmentation System, or IVAS, program was completed 42 days ahead of schedule. Due to our product's strong performance, the Army finalized testing early and canceled the remaining soldier assessments, satisfied that the product was ready for production. The transition of IBAS to Anduril, a prominent defense technology leader with a proven history in Department of Defense contracting, marks a significant and favorable milestone for both the program and for Virtra. We are currently conducting reliability testing on recall kits as part of the final prototyping phase and maintain confidence in our sustained participation, strategically positioning us for effective support with the forthcoming production stage initiatives. As we continue scaling, our operational infrastructure is more robust than ever. Over the past two years, We have made significant improvements in our manufacturing capabilities, including establishing a state-of-the-art production facility, implementing a new ERP system to streamline operations, and investing in automation within our machine shop, allowing for round-the-clock production while improving quality. These investments position us to handle large-scale contracts effectively, ensuring that we can meet growing demand while maintaining our operational flexibility. As we look ahead, we are closely monitoring macroeconomic factors, particularly those that impact government funding cycles. Federal budget negotiations and evolving department adjusted grant structures remain key areas of focus. While these factors create some near-term variability, we believe our strong backlog and disciplined approach to executing our position puts us well as market conditions evolve. Vertra is laser-focused on accelerating sales growth through a disciplined, strategic approach that directly aligns with shareholder value. Specifically, we're implementing initiatives designed to enhance our sales performance, including expanding our high-performance sales force by strategically recruiting top talent with proven industry success and ensuring we have the right team to drive sustained growth. Optimizing sales efficiency through refined lead generation, streamlining pipeline management, and targeted outreach efforts to maximize revenue opportunities and shorten our sales cycles. And increasing our market presence by leveraging strategic partnerships and targeted marketing campaigns to deepen penetration within both law enforcement and military sectors. We remain committed to executing these actions decisively, confident they will deliver measurable results and enhance return for our shareholders. With that, I'll turn the call over to Alana for the detailed financial review. Alana?

Thank you, John, and good afternoon, everyone. Let's now review our audited financial results for the fourth quarter and full year, ended December 31, 2024. Our total revenue for fourth quarter was $5.4 million compared to $10.9 million in the prior year period. This decrease reflects the impact of federal budget delays and grant distribution pauses, which slowed contract execution and order conversion. Despite these challenges, bookings for the fourth quarter grew to $12.2 million, a 37% sequential increase from Q3 2024. However, many of these orders came late in the quarter, limiting our ability to fulfill and recognize revenue within this period. As a reminder, bookings are defined as the total of newly signed contracts and purchase orders received in a defined period. Our bookings for the full year, 2024, total $29.6 million. While total bookings declined year over year by $4.2 million, it is important to note that excluding our 2023 design and prototype contracts, bookings for all federal service and step contracts actually increased 24% or 5.8 million. For the full year 2024, revenue was 26.4 million compared to 38.8 million in 2023. This reflects the softened bookings environment early in the year, largely due to the federal government's continuing resolution. which delayed funding decisions and contract approvals. However, our ability to consistently grow bookings each quarter demonstrates a strong recovery in demand and sales execution. Additionally, we did have to record a $750,000 revenue adjustment related to a prior international sale from 2021, which reduced reported 2024 revenue and increased our 2023 revenue. Breaking revenue down by market, Our government revenue for the year ended 2024 was $22.9 million compared to $31 million in the prior year period, reflecting the funding environment's impact on law enforcement agency purchases. International revenue for the year was $3.1 million compared to $6.5 million in the prior year period. And while revenues in this category were lower than in 2023, the bookings number in international market have increased by 68%. mostly supported by strong traction in Latin America and Europe where we secured major contracts in Q4. Our gross profit for the fourth quarter was $3.7 million or 69% of total revenue compared to $9.2 million or 84% in the prior year period. The decline primarily reflects the lower revenue. For the full year 2024, gross profit totaled $19.4 million or 74% of total revenue compared to $27.4 million or 71% in 2023. The improvement in full year gross margin reflects a shift in product mix and operational efficiencies through the Q4, though the Q4 decline highlights the impact of lower sales volume on fixed costs. That operating expense for the fourth quarter was $4.2 million, a 13% increase from $3.7 million in the prior year period. This increase was driven by investments in high-level personnel to support long-term growth, expanded sales and marketing efforts to reinforce our pipeline, and enhancement to IT infrastructure and compliance measures to support current and future contracts. For the full year 2024, our net operating expense was $17.4 million compared to $17 million in 2023, reflecting targeted investments in growth initiatives while maintaining cost disciplines. Our operating loss for the fourth quarter was half a million compared to operating income of $1.7 million in the prior year period. And then for the full year 2024, operating income was $2 million compared to $10.4 million in 2023, reflecting lower revenues and increased operating expenses. Net loss for the fourth quarter was $0.9 million or negative $0.08 per diluted share compared to net income of $3.5 million or positive $0.32 per diluted share in the fourth quarter of 2023. Included in this loss was a one-time payment for $275,000 from a lease settlement related to a legacy facility contract which contributed to that loss. For the full year 2024, net income was $1.4 million or $0.12 per diluted share compared to $9.2 million or $0.85 per diluted share in 2023. For the full year 2024, adjusted EBITDA was $2.9 million compared to $12.4 million in 2023. As of December 31, 2024, cash and cash equivalents were $18 million compared to $18.8 million in December of 2023, positioning us well to navigate market conditions while continuing to invest strategically. Looking at our backlog, which we define as the accumulations of bookings from signed contracts and purchase orders that are not yet started or incomplete and cannot be recognized as revenue until delivered in a future period. As of December 31st, 2024, our backlog totaled 22 million. This breakout of backlog includes 10.6 million in capital, 6.6 million in service and warranties, and 4.8 million in stock contracts. Additionally, our renewable stock contracts, which extend over multiple years, represent a potential additional 5.3 million in revenue. For additional details for financial results, please reference our 10-K. That concludes my prepared remarks, and now I'll turn the call back over to John. John?