VirTra, Inc.

Good afternoon and welcome to Vertra's fourth quarter and full year 2025 earnings conference call. My name is Diego 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 Boudreau. Following the 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 CEO, Mr. John Givens. Thank you. You may proceed, sir.

Thank you, Diego, and thank you, everyone, for joining us this afternoon. After the market closed today, we issued the press release that provided our financial results for the fourth quarter. and the full year ending December 31st, 2025, along with an update of our business and operating environment. 2025 was defined by an extended and highly atypical disruption in federal funding. These delays affected the timing of awards, procurement activities, and ultimately system deliveries across our core markets. As a result, our reported revenue does not fully reflect the level of underlying demand or activity across the business. What I want to do this afternoon is walk you through what drove the disconnect, what we are seeing change in the funding environment, and how we are positioned as these conditions begin to normalize. Let me start with the funding environment, because that has been the primary driver for our results. The federal funding freeze that began in 2024 was unlike anything that we've seen. Budget approvals that were expected to flow in fiscal year 25 were held and agencies were limited to their ability to move forward with procurement. That dynamic persisted through the fourth quarter. What has changed more recently in the last several days is that we are now seeing those programs begin to reopen. Specifically, just in the past week, the Justice Assistance Grant, or JAG, and the COPS Fund have both reopened for applications Importantly, this includes fiscal year 2025 funding that was approved in the federal budget back in October of 2024 and has been frozen since. It is only now being made available, but that gives you an indication of the extent of the delays we've been operating through. Behind that, additional funding cycles are progressing as of fiscal year 2026 and expected fiscal year 2027 allocations are moving through the system at the exact same time. As a result, we are seeing a meaningful increase in customer engagement and applications across our base. We are actively working alongside those customers as they move through the grant application and approval process. As we've noted before, this remains a multi-step process. Customers must apply, awards must be determined, and purchase orders must be issued, and then the systems must be delivered and accepted. We are staying closely engaged throughout the process to help conversions wherever we can. Based on what we're seeing today, that process is likely to play out over the coming quarters rather than all at once. So while the environment is clearly improving, the timing of revenue conversions will continue to be driven by those external funding timelines. One point I want to be clear on is that demand has remained strong throughout the period. We closed 2025 with $25.6 million in backlog and generated $26.7 million in bookings during the year. In many cases, orders have been already placed, but customers are not yet in a position to take delivery, either due to funding timing or the readiness on their end with buildings and space. We are also seeing this dynamic internationally where contracts are in place across markets in EMEA and Latin America, but deliveries are tied to customer side funding or operational readiness to accept. So the core dynamic we've been operating in is not a lack of demand, but the delay in conversion. We are ready for that conversion. We have used this period to align our operations, inventory, production capacity so that we can fulfill orders quickly. as they come through. Our inventory levels are where they need to be, our production processes are optimized, and our team is positioned to execute. As funding is secured and purchase orders are issued, we expect to be able to move quickly from order to delivery. At the same time, we have made targeted investments in our sales organization in recent quarters. We are adding a second dedicated federal sales resource to increase coverage in that channel, which has a longer and more relationship-driven sales cycle. This allows the rest of our team to stay focused on law enforcement, where we already are seeing re-engagement as the grant programs open. We have also recently added an experienced director of marketing with deep simulation and defense industry roots Our marketing cadence has increased meaningfully at the start of 2026, building on the website redesign we completed last fall. We are seeing early signs of improved engagement, including higher volumes of inbound activity and demo requests, increased time spent on our website, and more qualified leads. We are also planning to expand our presence at key industry events to further strengthen visibility and pipeline development in 2026. Additionally, we continue to progress through the GSA reentry process, which we believe should be completed by Q3, and will shorten the path for agencies from interest to order once completed. We are continuing to engage with federal training stakeholders, including agencies with DHS, where we believe our solutions align well with evolving use cases around immersive judgment, de-escalation, and scenario-based readiness training. On the product side, our focus has been on increasing the value of our platform and delivering the best possible training outcomes in the industry. I want to highlight several developments that I believe are meaningful for our competitive position in long-term growth. First, our APEX analytics platform is now integrated across our system, enabling customers to capture and analyze performance data in real time and generate actionable insight around accuracy, reaction time, and decision making. APEX is a meaningful step forward from traditional training environments and has already been a strong differentiator in recent customer wins. APEX also created the opportunity for ongoing engagement through customization and servicing, which could support a meaningful additional revenue model over time. We've also continued to advance our integration with BBS4 allowing for more flexibility and customized training environments tailored to specific customer requirements. We've demonstrated these capabilities with multiple U.S. military groups in real-world training settings where feedback has been encouraging and highlights the relevance of our platform in a more advanced training use case. Over time, this integration should further expand our role within the military training ecosystem and support additional services and development opportunities. In addition, we've introduced a drone defense training solution recently, which is designed for correction professionals, helping agencies prepare for the growing threat of unauthorized drones in secure environments. This represents an expansion of our addressable market into a new and evolving use case where we are beginning to see early interest and engagement. Adoption of the VXR platform continues to grow as well, with multiple systems sold in recent months and additional demand building in the pipeline. Across our product initiatives, the common theme is improving the value of our platform and deepening integration into agencies' training workflow. Our military pipeline continues to develop with active programs and evaluations underway across the Army, Navy, and Marine Corps. We currently have multiple opportunities in process, including demonstrations of our capability in real-world training environments. These opportunities are supported by our enhanced reporting, analytics, and customizable training environments. And in this period of lower revenue conversions, we have been focused on ensuring our solutions remain aligned with evolving military programs and requirements. To summarize, 2025 was a challenging year driven by external funding disruptions that impacted timing. We are now seeing clear signs that funding is moving again with multiple cycles of progress. We've maintained a strong customer engagement, built backlog, strengthened our commercial organization, and prepared our operations to execute. As those fund cycles translate into awards and purchase orders, Our focus is on converting that activity into revenue in a disciplined but efficient way. With that, I'll turn the call over to Alana for detailed financial review. Alana?

Thank you, John, and good afternoon, everyone. Now let's review our audited financial results for the fourth quarter and full year ended December 31st, 2025. Our total revenue for the fourth quarter was $2.9 million compared to $4.7 million in the prior year period. The decrease was driven by those continued delays in government funding, the timing of customer procurement cycles, and deferred deliveries across both domestic and international customers. For the full year, our total revenue was 22.4 million compared to 26.4 million in 2024. The decline was primarily due to extending funding delays throughout the year. Breaking our full revenue down by market, our government revenue for the year was $17.8 million compared to $22.9 million in 2024. International revenue for the year was $4.2 million compared to $3.1 million in 2024. And commercial revenue was approximately $400,000, consistent year over year. Our gross profit for the fourth quarter was 1.7 million or 58% of total revenue compared to 2.9 million or 62% in the prior year period. The decline was primarily due to that lower revenue volume. For the full year, gross profit totaled 15.2 million or 68% of revenue compared to 19.4 million or 74% in 2024. Our net operating expense for the fourth quarter was 3.3 million, a 23% decrease from 4.2 million in the prior year period. For the full year, net operating expense was 14.8 million compared to 17.4 million in 2024, representing a 15% reduction as we actively managed costs while continuing to invest in key areas of the business to help re-accelerate our growth. Operating loss for the fourth quarter was 1.6 million compared to 1.3 million in the prior year period. And for the full year operating income was 0.4 million compared to 2 million in 2024. Net loss for the fourth quarter was 1 million or 9 cents per diluted share consistent with the prior year period. And for the full year net income was 3 million or 2 cents per diluted share compared to 1.4 million or 12 cents per diluted share in 2024. Our adjusted EBIT after the full year was 1.6 million compared to 2.9 million in the prior year period. As we turn to the balance sheet, we ended the year with 18.6 million in cash and 30.8 million in working capital. This provides flexibility to navigate the current timing dynamics in the business. Fertra defines our bookings as the total of newly signed contracts, awarded RFPs, and purchase orders received in a given period. And our bookings for the fourth quarter totaled $7.3 million, contributing to the full-year bookings of $26.7 million. Virtua defines our backlog as the accumulations of bookings from signed contracts and purchase orders that are not yet started or are incomplete in their performance obligations and therefore cannot be recognized as revenue until delivery in a future period. So we segment that backlog into three primary categories. Capital, which includes our simulators, our accessories, installation, training, custom content, and our design work. Service, which is primarily extended warranty and support contracts. Step, which is our long-term subscription-based program. Our backlog at December 31st, 2025 stood at $25.6 million. That included $13.8 million in capital, $5.1 million in service, and $6.7 million in step. So that concludes my prepared remarks, and I'll turn the call back over to John for his closing comments. John?