VirTra(VTSI) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Full year 2023 revenue increased 34% to $38 million from$28.3 million in 2022 [25] - Q4 2023 revenue increased 17% to $10.1 million from$8.6 million in Q4 2022 [25] - Gross profit for 2023 increased 64% to $26.7 million (70$16.3 million (57% of revenue) in 2022 [26] - Q4 2023 gross profit increased 58% to $8.4 million (83$5.3 million (61% of revenue) in Q4 2022 [26] - Net income for 2023 was $8.4 million ($0.77 per diluted share), up from $2 million ($0.18 per diluted share) in 2022 [28] - Q4 2023 net income totaled $2.8 million ($0.25 per diluted share), up from $1.4 million ($0.13 per diluted share) in Q4 2022 [28] - Adjusted EBITDA for 2023 increased to $11.6 million from$4 million in 2022 [29] Business Line Performance - Government revenue increased 39% to $31 million in 2023 from$22.4 million in 2022 [18] - International revenue was $5.8 million in 2023, up from$4.2 million in 2022 [19] - Subscription training equipment partnership (STEP) program continues to grow, with recurring revenue representing 20% of total quarterly revenue [21] Market Performance - Domestic market benefited from strategic sales restructuring and improved customer success functions [8][9] - International market growth attributed to stronger simulator and accessory sales, though longer lead times persist due to geopolitical tensions and US government budget issues [19][20] - Military market penetration progressing, with a dedicated business development and training center opened in Orlando, Florida [17] Strategic Direction and Industry Competition - Focus on expanding market share through technological innovation, including the V-XR extended reality training platform [12][14] - Integration of AI into content creation and data analytics to enhance training experiences [36][38] - Emphasis on developing soft skills training to expand into adjacent markets like hospitals and care facilities [15] - Targeting military market with VBS integration and custom recoil kits for M4 and M249 weapons [16] Management Commentary on Operating Environment and Future Outlook - Backlog reduced to $19.4 million entering 2024, with growing bookings and pipeline critical for future growth [7] - Confidence in sales initiatives taking effect, with expected momentum in bookings [30] - Anticipated higher close rates in international market as budgets are approved and geopolitical tensions ease [20] - Strong foundation laid for 2024 success through operational, sales, and product development improvements [40] Other Important Information - Bookings for 2023 totaled$33.6 million, a year-over-year increase of $0.5 million [30] - Backlog as of December 31, 2023, was$19.4 million, with $10.5 million in capital,$6.3 million in service and warranties, and $2.6 million in STEP contracts [31] -$6.9 million in renewable STEP contracts expected to generate additional revenue over the next five years [32] - Unrestricted cash and cash equivalents stood at $18.9 million as of December 31, 2023 [33] Q&A Session Question: Impact of government funding on business - Continuing resolution impacted expected stronger Q4, particularly affecting international, military contracts, and police department grants [42] - Backlog helped navigate through the impact, with improved conditions expected in Q2 2024 and beyond [43] Question: Initiatives around grant programs - Focus on helping small police departments access grants for training equipment, with a dedicated trainer assisting in grant identification and application [44][45] Question: Traction with V-XR and revenue impact timeline - V-XR product release set for Q2 2024, with multiple orders already in place [46] - V-XR expected to complement rather than cannibalize V300 sales, targeting smaller organizations with operational funds [47] Closing Remarks - Confidence in continued innovation and strong growth trajectory for 2024 [49]