VirTra(US:VTSI)2021-11-16 02:56Financial Data and Key Metrics Changes - Total revenue for Q3 2021 was $6.1 million, a 5% decrease from $6.4 million in Q3 2020 [11] - For the first nine months of 2021, total revenue increased 21% to $15.8 million from $12.5 million in the same period of 2020 [12] - Gross profit for Q3 2021 decreased 28% to $2.9 million from $4.0 million in Q3 2020, with a gross profit margin of 47.2% compared to 61.9% in Q3 2020 [12][13] - Net income for Q3 2021 was $1.3 million or $0.12 per diluted share, an improvement from $868,000 or $0.11 per diluted share in Q3 2020 [17] - Adjusted EBITDA for Q3 2021 totaled $520,000, down from $1.6 million in Q3 2020 [18] Business Line Data and Key Metrics Changes - Record bookings of $11 million in Q3 2021, leading to a record backlog of $21.7 million, up 28% from the previous quarter and 51% from Q3 2020 [6][20] - International revenue for Q3 2021 was $860,000, nearly double the total international revenue for all of 2020 [28] Market Data and Key Metrics Changes - The company experienced challenges in closing international deals due to COVID-19 restrictions, but recent wins indicate a recovery in international markets [7][25] - The military segment shows potential for growth as the company partners with established firms to access military contracts [29] Company Strategy and Development Direction - The company plans to expand its international business and has made significant contract wins in the Middle East and Europe [25][26] - An acquisition of a new headquarters in Chandler, Arizona, is expected to enhance operational efficiencies and increase production capacity [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery from COVID-19 and the potential for increased international sales as travel restrictions ease [42] - The company aims to maintain healthy margins despite fluctuations due to product mix and inventory reserves [33][44] Other Important Information - The company reported a nonrecurring $1.3 million gain from the forgiveness of PPP loans, which positively impacted net income [17][18] - The backlog includes multi-year warranties, contributing to a recurring revenue stream [70] Q&A Session Summary Question: Supply chain challenges and component shortages - Management acknowledged occasional supply chain challenges but expressed confidence in meeting customer demand [40] Question: Competitors in the international market - Management noted that existing competitors are similar to those in the domestic market, with no significant new entrants [41] Question: Expectations for gross margin recovery in Q4 - Management indicated that gross margins may fluctuate based on product mix but aims to maintain healthy margins [43][44] Question: Benefits of the new headquarters - The new facility is expected to increase production capacity and operational efficiencies [48][49] Question: Catalysts for military market expansion - Management highlighted ongoing partnerships with established companies and the potential for growth in military contracts [51][54] Question: R&D expenses and future run rates - R&D expenses increased due to government contracts, and management is investing in next-generation technologies [58] Question: Inventory build and safety stocks - Inventory increases are partly due to safety stock measures in response to supply chain issues [60] Question: Sales capacity and bookings growth - Management is monitoring sales capacity closely and is open to increasing sales staff if justified [62][64] Question: Bookings breadth between existing clients and new customers - Management indicated that bookings are driven by both existing clients and new customer wins as COVID-19 restrictions ease [66][68] Question: Recognition of backlog and revenue acceleration - Management explained that some backlog is time-locked due to warranties, but they have a good track record of converting backlog to recognized revenue [70][74]