VirTra, Inc.

And welcome to Virtra's third quarter 2025 earnings conference call. My name is Julian, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, John Givens, and CFO, Alana Boudreaux. Following their remarks, we will open the call for questions. 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 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. You may proceed, sir.

Thank you, Julian, 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 quarter and nine months ending. September 30th, 2025, along with highlighted business accomplishments. In Q3, Virtra continued to manage through a slower federal funding cycle while keeping strong engagement with our customers and expanding our reach. The timing of federal award and customer acceptance affected revenue recognition in Q3, but our backlog grew again during the quarter. We also entered Q4 with a larger pipeline of opportunities tied to grant awards. Our operational discipline and continued focus on sales and marketing position us well as funding flows improve and pent-up demand converts to orders and deliveries. The operating environment is still being shaped by federal funding delays. Agency procurement cycles are still moving slower than normal as agencies wait for budget clarity and grant awards. While this timing has affected the short-term revenue recognition, agency engagement remains strong and we see demand building in the background. Regarding the funding environment, the Department of Justice COPS Grants Program has already identified the agency slated to receive funding based on applications that closed on June 30. Announcements were delayed by the federal shutdowns. We believe VRTRA will be among the beneficiaries once those awards are posted and spending authority normalizes We've also seen progress as key federal director roles are being filled, which should facilitate authorizations and releases of funds. We've been active in Washington, D.C., helping policymakers understand the importance of the immersive training and supporting funding initiatives that benefit our customers. When the government shutdown ends, the grant awards resume, we expect revenue conversions to improve. We made solid progress in Q3 in how we reach and support customers. Our redesigned website launched in September and the early results are encouraging. Visitors are spending more time evaluating products and requesting information, and we are generating more qualified leads than ever. Meanwhile, our sales model continues to improve accountability and responsiveness across territories. We've made targeted personnel changes to ensure we have the right people in the right roles, which is strengthening our customer engagement and follow-through. We also remain positioned to benefit from our recent entry into the GSA procurement cycle of channel, which streamlines sales processes and shortens delivery timelines. This is another positive step forward in our long-term go-to-market strategy. In parallel, our marketing cadence has increased as we placed a greater focus on press, trade events, and targeted industry awareness such as law enforcement leadership gatherings. I also want to note that we've appointed Grant Barber to our advisory board. Grant brings over three decades of financial leadership, including public company CFO experience, to our board. He will be instrumental in supporting our team as we scale. Turning to STEP, the program remains a strong selling point, especially for smaller agencies that may not have access to full federal funding. Agencies are using STEP to ensure they have the critical training they need, which has driven consistent adoption and high renewal rates. It also creates reoccurring revenue for Virtra and provides us with stronger baseline revenue performance from quarter to quarter. On the product side, our focus remains on delivering best-in-class training for agencies of all sizes. At the IACP last month, we introduced the V1 portable simulator designed specifically for smaller departments. The early response reinforces how important it is to offer high-quality training across a wide range of budgets. This product expands our addressable market and positions us to serve departments that may have previously been priced out of advanced simulation technology. Our focus on product quality continues to be a major differentiator. Customers consistently report that our systems deliver superior training capabilities and withstands years of rigorous real-world use. This validation reinforces our reputation as trusted long-term training partner and helps drive repeated business and renewals. It's worth noting that we are driving initiatives in our sales organization to accelerate adoption of our new systems. We continue to strengthen our value proposition, ensuring that virtual remains well positioned to win and retain customers across multiple market segments. International markets continue to gain momentum in Q3. As we more than doubled revenue compared to the same period last year, while international activity can be lumpy, we're encouraged by new developments in Canada and Colombia These wins demonstrate the growing global recognition of Virtra's training solutions as they diversify our revenue beyond our core U.S. market. Our military work is also progressing. Early this month, we demonstrated our next-generation Soldier Virtual Trainer, or SVT, system for the U.S. Army at our Orlando training facility. The system exceeded expectations and showed how our portable V-100, can deliver a complete, ready-to-deploy solution for weapon skills, joint fires, and the use of force training. We also introduced our new analytics platform, APEX, which tracks performance in real time, measuring accuracy, reaction time, and decision making. APEX gives commanders valuable insight into soldier readiness. Every new virtual simulator will now include APEX at no additional cost. further demonstrating our commitment to provide data-driven, science-based training aligned with the Army's modernization goals. While these sales cycles are longer than our traditional law enforcement market, we are building strong relationships with our military partners as part of our long-term growth strategy. Overall, Q3 showed continuous progress despite ongoing funding timing challenges. Our core law enforcement business remains a central focus as we are seeing stronger engagement across our customer base. Our meaningful backlog expanded, product portfolios, improved marketing foundation, and international momentum give us a solid base to convert opportunities into revenue as grant awards and customer acceptance pick back up. With that, I'll turn it over to Alana for the details of the financial review. Alana?

Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the third quarter and nine months ended September 30th, 2025. Our total revenue for the third quarter was 5.3 million compared to 7.5 million in the prior year period. The decrease can primarily be attributed to lower revenues from the government sector due to those funding delays. Breaking this down by market, our government revenue for the third quarter was 4.1 million compared to 6.9 million in the prior year period. International revenue for the third quarter was 1.2 million compared to 0.4 million in the prior year period. Our total revenue for nine months was 19.5 million compared to 20.9 million in the prior year period. Gross profit for the third quarter was 3.5 million or 66% of total revenue. compared to $5.5 million or 73% of total revenue in the prior year period. Last year's unusually high gross margin reflected capitalized labor on development of the XR and the IVAS program and a greater mix of high margin service and step revenue. Our gross profit for the nine months was $13.5 million or 69% of total revenue. compared to 15.7 million or 75% of total revenue in the prior year period. The change in gross margin reflects that higher mix of capital sales in 2025 relative to the service and staff revenue as well as the absence of unusual low cost of sales recorded in 2024 due to the capitalized labor and development projects. Our net operating expense for the third quarter was 4 million down 16% from $4.7 million in the prior year period. Our net operating expense for the nine months was $11.7 million or down 11% from the $13.2 million in the prior year period. These decreases reflect our disciplined cost management while maintaining investment in our core growth initiatives. The operating loss for the third quarter was $0.5 million compared to operating income of $0.8 million in the prior year period. Operating income for the nine months was $1.8 million compared to $3.3 million in the prior year period. Net loss for the third quarter was $0.4 million or three cents per diluted share compared to net income of $0.6 million or five cents per diluted share in the prior year period. Net income for the nine months was $1.1 million or nine cents per diluted share compared to $2.3 million or 21 cents per diluted share in the prior year period. Adjusted EBITDA, a non-GAAP metric, was $0.1 million for the third quarter and $2.5 million for the first nine months of 2025. As of September 30th, our cash and cash equivalents totaled $20.8 million compared to $18 million at December 31st, 2024. Working capital was $32.9 million, and we maintained a debt-light balance sheet. Bertra that defines bookings as the total of newly signed contracts, awarded RSTs, and purchase orders received in a given period. Bookings through the third quarter was $8.4 million, up from $4.6 million in Q2. Bertra defines backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started or are incomplete in their performance obligations, and therefore cannot yet be recognized as revenue until delivered in a future period. We segment these backlog into three primary categories. Capital, which includes our simulator systems, accessories, installation, training, custom content, and design work. Service, which is primarily extended warranties and support contracts. And Step, our long-term subscription-based program. Our backlog as of September 30th, 2025, stood at 21.9 million. This includes 10.2 million in capital, 5.3 million in service, and 6.4 million in step contracts. Additionally, we are continuing to track renewable step contract options, which are not yet included in the backlog total. New capital bookings are largely expected to convert to revenue in the upcoming quarters due to customers having requested deferred deliveries. As always, our ability to convert backlog into revenue remains dependent on customer-driven installation timelines, which can shift based on factors outside of our control. So, in review, our backlog, recurring revenue base, and strong balance sheet provide flexibility as funding will resume. Looking forward, we believe the combination of our disciplined cost management and enhanced contract structures and ongoing demand recovery will support support continued progress. Our updated STEP program, with its three-year commitments and strong 95% renewal trends, improves recurring revenue, visibility, and reinforces long-term customer relationships and positions Bertra for sustainable growth. That concludes my prepared remarks, and I'll turn the call back over to John for his closing comments. John?