VirTra, Inc. Common Stock 2026 Q2 Earnings Call

Thank you, Drew, and thank you everyone for joining us this afternoon. After the market closed today, we issued a press release that provided our financial results for the second quarter ended June 30, 2026, along with an update on our business and operating environment. For the quarter, revenue totaled $5.8 million, bookings were $5.5 million, and backlog remained strong at approximately $24.9 million. These results reflected improved revenue conversion compared to the first quarter, particularly within our international business, while customer funding and procurement timing continued to influence our overall performance. As we discussed over the last several quarters, the fundamental demand environment for VirTra solution has remained intact. The primary challenge has not been demand, but rather the timing associated with the funding awards, the procurement approvals, and customer acceptance processes. During the second quarter, we continued to see evidence that these processes are moving forward.

Multiple grant programs have reopened, funding allocations are moving through the system, and customers are actively submitting applications and advancing procurement efforts. While there are still several steps between an application and revenue recognition, we believe these developments represent meaningful progress compared with the constrained funding environment we've experienced over the last two years. Importantly, once funding is awarded and purchase orders are issued, our team remains well-positioned to fulfill orders quickly. The uncertainty today is less about the customer's interest and more about the timing of administrative and procurement processes outside of our control. This quarter provided additional evidence that many of those processes are beginning to move. We saw stronger bookings, improved revenue conversion, and renewed activity from customers that had been largely inactive for extended periods.

We also maintained a healthy backlog while converting revenue during the quarter, which speaks to the underlying level of customer interest we continue to see across our markets. Turning to bookings, we generated $5.5 million during the quarter, up from $3.8 million in the first quarter. Activity included STEP agreements, capital system orders, renewed federal activity, and contributions across multiple domestic territories. One encouraging development was a return of activity from certain federal customers that had delayed purchasing decisions while funding remained constrained. Our team is also seeing progress across all of our domestic sales territories as the funding environments evolve. While individual orders may vary in size and timing, the broader participation reinforces the continued need for realistic scenario-based training solutions. Our backlog ended the quarter at approximately $24.9 million. We replenished much of what we delivered through new booking activities.

We believe this reflects continued customer engagement and provides an important foundation as funding and procurement activities continue to advance. Internationally, we recognized revenue from previously awarded deployment during the quarter and continue to see encouraging activity across our pipeline. These opportunities often involve long procurement cycles and can be difficult to forecast, but we believe our international opportunities are set to strengthen. We are submitting proposals more frequently than in the past and are seeing favorable outcomes across a number of these opportunities. The level of engagement we are seeing today gives us confidence that this market will remain an important contributor to our long-term growth strategy. In the military market, we recently achieved an important milestone with our acceptance into the U.S. Army's marketplace across three sections: Weapons Skills Development, Joint Fires Training, and Counter-Unmanned Aircraft Systems capability areas.

While it remains too early to predict the timing or magnitude of these resulting opportunities, this acceptance validates the capability and operational relevance of our technology while demonstrating that our solutions are aligned with the evolving mission requirements of the U.S. military. It significantly strengthens our position within the military training ecosystem, and it expands our visibility with key stakeholders and enhances our ability to compete for future programs and long-term opportunities. As we've said before, military opportunities tend to involve lengthy procurement cycles and can take significant time to move from initial engagement to contract award. However, we continue to participate in evaluations, proposal activities, and discussions across a number of military and defense-related opportunities, and we believe our position within that market continues to improve.

We also significantly expanded our long-term presence within the military training and simulation market through the acquisition of our Orlando campus during the quarter. Strategically located within Central Florida's premier defense and modeling and simulation and training ecosystem, the facility serves as VirTra's program management office and positions the company in close proximity to the U.S. Army's simulation acquisition organizations located in Research Park, as well as the simulation acquisition and program management organizations supporting the other military services. This location substantially enhances our ability to collaborate with government customers throughout the acquisition life cycle, respond rapidly to program opportunities, and support customer demonstrations, develop training content, and conduct collaborative engineering and program execution.

In addition to strengthening our operational presence and competitive position within the defense community, the property provides operational flexibility and includes tenant leases expected to contribute positively to future financial performance. From a product standpoint, we continue to focus on expanding the ways customers can apply VirTra's technologies. Beyond our core training business, we have also begun evaluating opportunities to leverage our immersive content production capabilities and other internal resources for adjacent commercial applications. While these efforts remain in the early stages, they reflect our ongoing focus on identifying complementary revenue opportunities that can further leverage the infrastructure, expertise, and technologies we have built over time. In addition, we continue investing in one of our key competitive differentiators, our content. During the quarter, we produced approximately 10 new scenarios, significantly above historical levels.

This investment expands the value of our platform for existing customers. It supports future booking opportunities and helps ensure agencies have access to training content aligned with evolving operational requirements. Overall, we believe the second quarter demonstrated continued progress across several areas of the business. Revenue conversion improved, bookings increased, international activity contributed meaningfully to results, and customers continue moving through grant and procurement processes. We recognize that external funding timings remain the largest variable affecting near-term performance. However, the activity we're seeing today, combined with our backlog, pipeline, military initiatives, and growing international opportunities, reinforces our view that the underlying demand environment remains healthy. Our focus remains on helping customers navigate funding and procurement processes, delivering best-in-class training solutions, and converting opportunities into bookings, revenue, and long-term shareholder value. I'll now turn the call over to Alanna to go over the financial results in more detail.

Alanna? Thank you, John, and good afternoon, everyone.

Let's now review our unaudited financial results for the second quarter and six-month ending June 30, 2026. Our total revenue for the second quarter was $5.8 million, compared to $7 million in the prior year period. Revenue increased significantly from $3.5 million in the first quarter of 2026, reflecting improved revenue conversion and contributions from international deliveries during the quarter. Breaking it down by market, government revenue for the second quarter was $3.5 million, compared to $5.4 million in the prior year period. International revenue for the second quarter was $2.2 million, compared to $1.4 million in the prior year period. Our total revenue for the first six months was $9.2 million, compared to $14.1 million in the prior year period.

The decrease primarily reflects the delayed customer funding procurement timelines and the customer acceptance activity that impacted the timing of our revenue recognition. Gross profit for the second quarter was $3.4 million, or 59% of the total revenue, compared to $4.8 million, or 69% of the total revenue in the prior year period. Our gross margin continued to reflect the impact of lower revenue volume and our ongoing investments in content production and product development initiatives. During the quarter, we continued producing new training content at an accelerated pace to support future customer deployments and platform adoption. Our gross profit for the first six months was $5.5 million, or 60% of the total revenue, compared to $10 million or 71% of the total revenue in the prior year period.

That decrease was driven by those lower revenue volumes and our continued investment in strategic content and development initiatives to support future growth opportunities. Our net operating expense for the second quarter was $3.6 million compared to $3.9 million in the prior year period. Our net operating expense for the first six months was $7.1 million compared to $7.7 million in the prior year period. This reflects disciplined expense management while continuing to invest in our key growth initiatives. Loss from operations for the second quarter was approximately $0.2 million compared to operating income of $2.2 million in the prior year period. Loss from operations for the first six months was approximately $1.5 million compared to operating income of $1.5 million in the prior year period.