Virtuix Holdings Inc. Class A Common Stock 2027 Q1 Earnings Call

Please go ahead, sir. Thank you, operator.

Good morning, everyone. Thank you for joining us. First, let me share a brief note on timing. We recently changed auditors. We appointed EisnerAmper as our independent registered public accounting firm. They are consistently recognized as a leading mid-tier accounting and advisory practice, so we are really excited to work with them. The transition required additional time to complete the quarterly review, and that is what pushed back our filing by a few days. Our Form 10-Q has now been filed. Let us review our results for the first quarter of fiscal year 2027. I would say that this first quarter was one of the strongest commercial quarters in our company's recent history. I want to spend most of my time this morning here on why that is. Before I do, let me share a brief overview for those of you who are new to our story.

We're Virtuix. We're a leading developer of AI-driven full-body simulation systems. We're trading on the Nasdaq Global Market under the ticker VTIX since our debut on January 27, 2026. Our technology enables natural full-body movements in 360 degrees, walking, running, crouching, strafing, and jumping in every direction inside video games, simulations, and other AI-generated worlds. Our flagship product is Omni One, which is our most advanced omnidirectional treadmill to date. Our portfolio comprises of five products now, protected by more than 25 patents. We have Omni One, Omni One for Quest, and Omni One Core on the consumer side. We have Omni One Enterprise for industrial training, robotics, healthcare, and other enterprise applications. We have Virtual Terrain Walk, VTW, which is our defense simulation system. We are hardware experts with a proven track record of execution.

Our manufacturing facility is established and is ready to support increased levels of production. We're pursuing a multi-use platform strategy with high-volume consumer sales that we aim to supplement with high-value defense and enterprise contracts, all with recurring revenue from software licensing, subscriptions, and our custom simulation development. What I would highlight about this quarter in particular is the high caliber of the parties now working with our technology. In the space of just a few months, we sold our first Omni One Enterprise system to Tesla. We were selected by NASA for a year-long Moon and Mars mission. We became the lead systems integrator on a U.S. Marine Corps training project. Of course, we launched our Made for Meta certified product in collaboration with Meta. That's a meaningful validation for a platform that initially began in consumer gaming and now is expanding across various end markets.

Let me walk you through the quarter's highlights before we take a deeper dive. On the demand side, the headline number here is orders. New orders for Omni One systems increased 72% year over year. New orders are up approximately 150%, roughly 2.5 times compared to the same period last year since our June launch of Omni One for Quest in collaboration with Meta. Those are some great growth numbers on the order side. On unit economics, gross profit increased 29% year over year, and gross margin expanded to 30% from 17% in the prior year period. Approximately 13 percentage points of improvement. We ended the quarter with $7.4 million of cash. Strategically, this was a very eventful quarter.

We launched our Made for Meta products in collaboration with Meta, which is off to a great start, resulting in strong order growth in our consumer business. Our defense business continues to expand. We were selected as the lead systems integrator for the development of an Infantry Fireteam Virtual Trainer for the U.S. Marine Corps, and we also entered the counter-drone training space for the Marine Corps. In our enterprise business, as mentioned, we're now working with Tesla, with NASA, and we also signed a partnership with Sirica Therapeutics for use of Omni One in autism therapy for children. One point of clarification before Thomas gets into the numbers later. Our reported net sales actually declined year over year to approximately $800,000 from $1 million. That is a result of timing, not of demand.

The prior year quarter included the final shipments of our legacy Omni One order backlog that included orders accumulated since our pre-order period began in August 2023, and that is now cleared. This quarter's revenue, however, came from sales to new customers. We believe new orders are the better forward indicator of the demand we are seeing today. Let me stay on that point, because I think that's the most important trend in our business right now. We officially launched Omni One for Quest in collaboration with Meta in late June. Through that Made for Meta program, Omni One is certified for the Meta ecosystem and for the Quest ecosystem. Meta sold more than 20 million Quest headsets, giving Omni One access to the world's largest XR user base with an estimated 6 million active users.

Those users now can pair Omni One with their existing headsets and game library that they already own in a plug-and-play experience. This materially expands our addressable markets. The effect on our order profile was immediate. New orders are up approximately 150% since that launch. That's a trend that we see continuing in the current quarter. We also see a room for additional growth there. We're exploring joint marketing opportunities with Meta, and most importantly, bundling the Meta and the Virtuix products where we can offer a complete system, Omni One for Quest, plus a Quest headset together to customers. We believe we've only scratched the surface of the opportunities of our collaboration with Meta.

Turning to defense, as I mentioned, Virtuix is serving as the lead systems integrator for the development of an Infantry Fireteam Virtual Trainer for the U.S. Marine Corps, supported by our strategic partner, KBR. This is an important distinction. This is not Virtuix simply supplying a component of this system. We are responsible for integrating the full solution and delivering the complete training system to the Marine Corps. That system puts a four-person, a four-Marine fire team on omnidirectional treadmills using M4 rifle surrogates and Meta Quest headsets, training together in scenarios that include close-quarter battles, patrols, and tactical decision-making. During this past quarter, we selected ABRT as our partner to provide a tracked weapon system, an instructor tool, and immersive training content for this program. Delivery to the U.S. Marine Corps in Quantico, Virginia, is expected in the fourth quarter of 2026.

To clarify, this Infantry Fireteam Virtual Trainer, that's in addition to our Virtual Terrain Walk system, or VTW, and that's that system that uses AI-driven Gaussian splatting to convert 360-degree camera footage into photorealistic, walkable, geo-specific terrain. It cuts the time to build virtual worlds from weeks to merely hours. That's VTW. That's the system that uses the slogan, "Walk the terrain before you fight on it, and explore the battlefields before we put boots on the ground." VTW, that's the system for which we received a phase I SBIR award from the U.S. Air Force, which we are working on as we speak. We also entered a hot, new defense market this quarter, the counter-drone training. Omni One has been integrated into LeadTech's C-UAS Personnel Trainer, which is an AI-enabled platform that recreates military training ranges for realistic counter-drone marksmanship training.

Combined with the Omni, the trainees walk naturally through virtual environments. They navigate buildings, and they can communicate over tactical radios, all while engaging drones with realistic ballistics across both individual and multi-user scenarios. That system will be evaluated by the U.S. Marine Corps Training and Education Command in Quantico, Virginia, with teams from Twentynine Palms and Camp Pendleton. Counter-drone training, needless to say, is among the fastest-growing priorities of Western militaries today. This is an exciting development for us. Here is the overview of our expanding defense business. We now have active engagements across the U.S. Air Force, Marine Corps, Army, and Navy, as well as this quarter, the Air National Guard. With U.S. Air Force, we hold an AFWERX SBIR Phase 1 award for VTW, and we have also sold test units to the U.S. Air Force Academy and to Yokota Air Force Base.

During the quarter, we also delivered, as I mentioned, the first Omni One system to a Pennsylvania Air National Guard unit in Horsham for evaluation of our system for virtual reality military training, and that is our first Air National Guard deployment. As mentioned previously, we are also the lead systems integrator on the Infantry Fireteam Virtual Trainer with U.S. Marine Corps, and also our counter-drone trainer is entering evaluation by the Marine Corps Training and Education Command. With U.S. Army, we have sold Omni One to U.S. Military Academy at West Point. With U.S. Navy, we signed a cooperative research and development agreement with the Naval Postgraduate School. Lots of momentum there in just a short timeframe, and our goal is to keep this strong early momentum going and moving that forward towards bigger awards and contracts.