VirTra signals near-term revenue acceleration amid $21.9M backlog and grant-driven demand recovery

Earnings Call Insights: VirTra, Inc. (VTSI) Q3 2025

MANAGEMENT VIEW

* CEO John Givens highlighted that "VirTra continued to manage through a slower Federal funding cycle while keeping strong engagement with our customers and expanding our reach." He cited a larger pipeline of opportunities tied to grant awards entering Q4 and emphasized operational discipline, ongoing sales and marketing investments, and successful expansion in international and military markets.
* Givens stated, "The timing of Federal award and customer acceptance affected revenue recognition in Q3, but our backlog grew again during the quarter." He also noted the launch of a redesigned website, targeted personnel changes for improved customer engagement, and the appointment of Grant Barber to the Advisory Board, bringing extensive public company CFO experience.
* Givens announced the introduction of the V-One Portable Simulator, broadening the addressable market, and the rollout of APEX, an analytics platform included with all new simulators at no additional cost.
* CFO Alanna Boudreau reported, "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." She added, "Our net operating expense for the third quarter was $4 million down 16% from $4.7 million in the prior year period."

OUTLOOK

* Management expects revenue conversions to improve as Federal grant awards resume and customer acceptance picks up. Givens explained, "When the government shutdown ends, the grant awards resume, we expect revenue conversions to improve."
* The backlog as of September 30, 2025, was $21.9 million, with significant portions expected to convert to revenue in upcoming quarters, contingent on customer-driven installation timelines.
* The company anticipates continued progress supported by disciplined cost management, enhanced contract structures, and ongoing demand recovery. CFO Boudreau stated that "our updated STEP program with its 3-year commitment and strong 95% renewal trends improves recurring revenue, visibility and reinforces long-term customer relationships."

FINANCIAL RESULTS

* Total revenue for Q3 2025 was $5.3 million. Government revenue was $4.1 million, and international revenue was $1.2 million.
* Gross profit for Q3 was $3.5 million or 66% of total revenue. Net operating expense was $4 million. The operating loss for the quarter was $0.5 million. Net loss was $0.4 million or ($0.03) per diluted share.
* Adjusted EBITDA was $0.1 million for the quarter. Cash and cash equivalents totaled $20.8 million at quarter end. Working capital was $32.9 million.
* Bookings for the quarter were $8.4 million, up from $4.6 million in Q2, and the backlog was $21.9 million, segmented into $10.2 million in capital, $5.3 million in service, and $6.4 million in STEP contracts.

Q&A

* Richard Baldry, ROTH Capital Partners, asked about booking strength and the impact of multiyear deals. CFO Boudreau responded, "at the end of the quarter was when we received a booking of about $4.8 million that we anticipate most of becoming revenue in 2026, and it did skew to the international customer."
* Baldry also inquired about funding shutdown impacts. CEO Givens said, "Most of the agencies that we're dealing with have -- they rely a lot on government funding... there's a lot of pent-up demand and there's a lot of folks looking at our systems and wanting to talk the SVT program that we reported on."
* On backlog conversion, Givens explained that the $10.2 million in capital is affected by factors such as customer readiness, and service and STEP contracts include out-year commitments.
* Baldry questioned strategic use of the balance sheet. Givens replied, "we'll eye technologies companies that would add something that's accretive to the balance sheet, accretive to our product offering without bearing too far off from our main focus."
* Jaeson Schmidt, Lake Street Capital Markets, asked for updates on the BXR product. Givens said, "We're seeing the same headwinds for funding. It really doesn't matter how much it is, whether it's the funding or directorship or the leadership making those decisions. A lot of good market acceptance."
* Schmidt also queried about gross margin trends. CFO Boudreau stated, "You would anticipate that our gross margins stay similar to what we are seeing in this quarter and potentially going down a little bit more? Like we've always kind of talked about the fact that we'd like it to be somewhere between 60% and 65%, right?"

SENTIMENT ANALYSIS

* Analysts expressed cautious optimism but focused on bottlenecks and revenue timing, frequently pressing for clarity on booking composition, backlog conversion, and margin outlook.
* Management maintained a matter-of-fact and steady tone, acknowledging headwinds while consistently pointing to backlog growth, cost controls, and future opportunities. Givens used phrases such as "we believe" and "we expect" when discussing funding normalization, signaling a slightly cautious but generally constructive stance.
* Compared to the previous quarter, both analysts and management maintained a similar tone, but current analyst questions were more focused on near-term revenue visibility and strategic use of liquidity, reflecting increased scrutiny.

QUARTER-OVER-QUARTER COMPARISON

* The company’s Q3 revenue was lower compared to Q2, with funding delays continuing to impact government sector sales, but bookings rose substantially, driven by a large international deal.
* Management reiterated strong cost discipline, as operating expenses declined further quarter-over-quarter.
* The backlog expanded from $18.8 million in Q2 to $21.9 million in Q3, with a significant increase in capital bookings.
* Analysts in Q3 were more focused on backlog conversion and liquidity strategy, while in Q2 they probed product pipeline and partnership opportunities.
* Management's tone remained consistent, emphasizing readiness to convert backlog as funding resumes and highlighting improvement in recurring revenue programs.

RISKS AND CONCERNS

* Management identified ongoing delays in Federal funding as a primary risk, directly impacting short-term revenue recognition and the timing of order conversions.
* Backlog conversion remains dependent on customer-driven installation timelines, which can be unpredictable.
* Analysts raised concerns about margin compression and the pace at which backlog can be recognized as revenue, especially with large deals weighted toward future periods.
* The company is monitoring market conditions before pursuing acquisitions or share buybacks, prioritizing stability amid funding uncertainties.

FINAL TAKEAWAY

VirTra management stressed that while Q3 faced revenue recognition headwinds due to persistent Federal funding delays, the company’s growing backlog, disciplined cost management, new product launches, and international expansion provide a strong platform for renewed revenue growth as government spending resumes. Management remains confident in converting pent-up demand into orders and sees its updated STEP program and advisory board appointment as pivotal for long-term stability and market leadership.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vtsi/earnings/transcripts]

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* Historical earnings data for VirTra [https://seekingalpha.com/symbol/VTSI/earnings]