Q4 2022 VirTra Inc Earnings Call
Good afternoon, welcome to versus fourth quarter and full year 2022 earnings Conference call. My name is dog and I'll be your operator for today's call joining.
Joining us for today's presentation are the company's chairman and.
Co CEO , Bob terrorists co CEO , John Gibbons, and Chief Financial Officer, Atlanta Boudreaux.
Following their remarks, we will open the call for questions from virtuous interest institutional analysts and investors.
Before we begin the call I would like to provide virtually safe Harbor statement that includes cautions regarding forward looking statements made during this call.
During this presentation management may discuss financial projections information or expectations about the company's products and services or markets or otherwise make statements about the future, which are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.
The company does not undertake any obligation to update them as required by law.
Finally, I'd like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at Www Dot virtual dot com.
Now I'd like to turn the call over to <unk>, Chairman and co CEO , Mr. Bob Ferris Sir Please proceed.
Thank you Doug and thank you everyone for joining us. This afternoon. After the market close today, we issued a press release that provided our audited financial results for the full year ended December 31, 2022, along with highlighted business accomplishments. We also filed our 10-K with the SEC today, which is available.
For a review at your discretion.
As a brief overview for today's call I'll begin by providing highlights for the fourth quarter and full year 2022, and I'll summarize some of our recent business developments before passing the call over to John to discuss operations and provide an update on our military market progress after that <unk> will discuss our financial results in more detail.
I'll then come back on to discuss how 2023 has been going so far before moving to Q&A and with that let's get started two.
2022 was a successful year for virtual on many fronts.
Our strong performance was the result of executing on our business strategy to drive profitable growth in a police and military markets for our industry, leading products, we generated record bookings and grew revenue for the 17th consecutive year, increasing the top line, 16% to a record $28 3 million on top of this we did.
Let her in another year of solid profitability generating $3 6 million of adjusted EBITDA and 2 million of net income.
In addition to the strong financial performance, we delivered last year, we achieved several significant operational milestones that have positioned us for long term success.
We made judicious investments in our technology that from a competitive standpoint further differentiated our products in the market.
We have meaningfully increased the breadth and effectiveness of our training offerings and bolstered our competitive edge in the industry.
These efforts included refinements to our software and upgrades to certain accessories like our V threat fire device and drop in recoil kit capabilities, which make our solutions more indispensable and effective.
In November we showcased our latest technology at the <unk> trade show in Orlando, where we received strong feedback and interest.
In fact, I'd, even state that anyone who attended sick and try it out all small arms training options at the show would walk away realizing that Berkshire is the gold standard.
An accomplishment that as a result of an enormous investment in both time and resources.
Much of the financial investment is in the rearview mirror like our vault virtual volumetric video or <unk>, enabling technology, but we will continue to prioritize cost effective enhancements.
To ensure exceptional value for our customers.
I'd like to highlight important investments in our content department during 2022.
In Q4, we introduced our breakthrough technology, <unk>, which has the potential to provide a step function advancement in training content for our customers.
E. III combines the advantages of high definition video and three D characters and empowers us to affordably build a comprehensive library of training content suitable for screen based or headset based platforms.
High quality realistic content is a key differentiator for attracting and retaining customers in our market and B III helps us to continue building upon our advantage in this essential area and.
In fact around virtual we often say content is king or.
Our investments have strengthened our position in every major aspect of training simulation, making us more competitive for 2023 and beyond.
Another highlight in 2022 was our substantial efforts center around scaling our business.
The move into our Chandler, Arizona headquarters is near complete and we are looking forward to having the core of our operations centralized under one roof.
In addition to driving efficiencies the 48, I'm sorry, the 83000 square foot facility houses and most advanced development and production facilities in the industry, an attractive selling point for customers and partners alike.
In the fourth quarter. We also officially opened our facility in Orlando, Florida, We hosted an open house event in October where we showcased our products and provided immersive training demonstrations to military law enforcement industry contractors and government officials.
The reception has been great. Thus far and we believe the new facility will be instrumental in growing our military business John will give further updates in this area shortly.
In recent months, we have made key additions to our leadership team and board of directors that will be instrumental for our growth going forward and.
In December we appointed a lineup of drove.
Well you will hear from shortly as our new CFO . Our lineup brings with her over 20 years of experience in managerial financial and operating functions.
She has extensive experience overseeing accounting activities for public companies and most recently led accounting activities for a publicly listed global industrial laser company.
Our experience with public company reporting and her strong management skill set make her a great fit for her and she has already begun to make meaningful contributions to our financial operations.
In the fourth quarter of last year, we added great Johnson to our board Greg as one of the top experts in the country and legal corporate compliance and senior management of high growth entrepreneurial companies of the size of virtual and larger.
As background, Greg was the primary adviser to our board on our successful effort to list our stock on NASDAQ.
And he was a member of <unk> Advisory Board.
In January of this year, we appointed Jim Mcdonald to the board Jim is a recognized public safety executive and law enforcement leader, having served the public for four decades and roles such as the Sheriff Los Angeles County, and Chief of police in Long Beach, California. He is one of the most accomplished.
Thoughtful and well connected leaders in the law enforcement industry and he brings a tremendous level of expertise and public safety tactical training operational growth and command accountability to our team.
And now I'd like to provide some updates in each of our markets.
Our government revenue increased by 33% from the prior year from $16 8 million to $22 $4 million due to improved success in our law enforcement market as well as an increase in federal government lease contracts.
Internationally, we saw a 6% decrease in our revenue to $4 2 million from $4 4 million, which was a result of contract timing.
We also continued to generate strong growth from our subscription training equipment partnership or step for short as a reminder, the step program provides recurring revenue for Berkshire that also offers an easier on ramp for smaller agencies interested in our solution, but are perhaps budget constrained for an outright purchase.
<unk>.
In 2002 step revenue was $2 9 million, representing 10% of total sales and growing 48% from the prior year.
We continue to focus on expanding this valuable recurring revenue stream going forward.
In summary, our financial and operational performance in 2022 with strong and left us well positioned to continue our profitable growth path into 2023 and beyond.
We are focused on generating ever higher levels of shareholder value as our business continues to expand.
I will now turn the call over to John to give an update on <unk> activity in the military market and overall company operations John .
Thank you Bob and good afternoon, everyone 2022 was an important operational year for virtual the processes, we implemented in the fourth quarter of 2022 and continue to prove daily are finally, beginning to bear fruit as Bob alluded to earlier in the call. The finalization of our move into our Chandler, Arizona headquarters and Additionally, our facilities in Orlando.
Helped in many ways, but especially as it pertains to product manufacturing sales order fulfillment and customer success.
First with product manufacturing, our new facility allow us to implement more streamlined production processes. These capabilities have already begun to show meaningful improvements in efficiency product quality, which allows us to fulfill orders quicker and reduce our backlog at a much higher rate.
Secondly.
These new centralized hubs will greatly help strengthen our relationships with current prospective customers as I talked about in the third quarter call. The Orlando facility as an extension of our military sales effort and serves as the east coast hub for customer service live demonstrations and meeting site for prospective customers with Orlando.
Being the acquisition epicenter of the military simulation market, we are in a strategic position to provide our expertise to the industry that is seeking cutting edge solutions, we have already begun to see benefits from the new space. The convenience factor is huge for major customers and prime contractors alike, and a live demonstration capability.
Just on the Street now that's our business developers dream.
The external competitive environment has really relaxed in 2022 and is supporting virtu, great opportunities to become the tier one preferred vendor for small arms stimulation to the military market. In fact, it's my opinion that as of today for the military market, Berkshire has more staff more expertise more technology.
More investments to benefit customers and more relevant capacity than any other company in the industry.
Regarding staff and operations, we worked diligently throughout 2022 to improve our ERP system and we are in a much better positioned to realize operating efficiencies going forward.
Our forecasting capabilities are better, allowing for our purchasing and production activities to become more optimized. This makes our operations more automated and it is to refine these it is improves.
And it is.
Improves our order fulfillment time, increasing customer satisfaction.
We will continue to refine these systems, but we are already seeing vast improvements across the organization.
Additionally, we are beginning to build out our teams to further support our customers in a scalable fashion, we introduced a dedicated quality team to ensure that we're putting out the best product possible and we have vastly improved our customer support function, including field service representatives that are not.
He meant to increase customer satisfaction, but increase our ability to install more systems, reducing the backlog. The additional field service Representatives also raised the number of touch points with our customers to improve our product feedback loop.
Moving specifically to military operations, we are seeing strong interest and had been hard at working build the pipeline I want to remind everyone of the three ingredients of success in the military market I mentioned in the Q3 call first is having.
Being a physical presence our new facility conveniently located Orlando site provides us with an invaluable access to the industry in its key decision makers.
<unk> is having a strong relationships in tandem with being able to build relationships in person with military and government officials, Mike spoke extensive experience in military simulation market and time certain U S. Army have brought me many strong connections that will be critical to our growth in this market. We also have added military veterans to the Orlando office.
With relationships as strong as my own and finally, having a strong product offering is critical to the success of this market as is true in any industry and as Bob and I have alluded to we have been laser focused on enhancing our technology and processes to ensure that our solutions are the gold standard and remained world class.
<unk>.
Our October open House event was a great success in sport, new promising leads while introducing and more importantly, a mature leading product from the law enforcement industry to our military community in existing customer contacts.
Over the last few months, we have been very busy at Orlando office with tourist demos and meetings with key industry stakeholders and prospects as I spoke about on our Q3 call. We are optimistic about the department of defense fiscal year, 'twenty, four which begins in October of 'twenty. Three that is the timeline, we would continue to target for demonstrating strong and.
Meaningful traction.
Looking ahead, our operational and technological advancements in 2022 that bolster our competitive position and placed us on solid growth trajectory for the years ahead, the growing demand and constructive funding environments for virtuous innovative training solutions gives us confidence in our ability to capitalize on the robust pipeline of.
<unk> and law enforcement military and international markets I look forward to.
Hi, afforded to keeping you all up to date and developments of our business in the future.
Sorry, Bob I'm going to kind of go off script here I don't want to read this anymore.
So now that I'm approaching a year of the company I'd like to reflect on my findings in our corrective actions regarding the Companys performance expectations and the focus that we brought to the table the company's made some huge mistakes, including the ERP implementation.
I don't know, but that was so harmful to the company at all levels that it was quite daunting.
Inexperience staff in key leadership positions lack of processes lack of timely financial.
Porting this all added too.
Problems, but despite the major business setbacks. The company has managed to show some modest growth.
There were two reasons for that modest success in my opinion, a superior product, that's second to none and aligned staff dedicated to those they serve.
Quake camaraderie between the company and those individuals that were serving and.
Unfortunately for me change doesn't happen quickly enough.
And as much as often as I wanted it to.
Keep in mind, we weren't able to really start working on significant change until our filings were completed we removed the red flags.
And after the reorganization in August of 2022.
And we still have a lot of work to improve sales supply law and inventory management.
And finalizing our capital improvements and Bob said, we're almost done the last item that we need to move over as our machine shop, it's a little bit more coordination to do that and timing. So that we don't interrupt our production and our delivery.
We've been hard working to re implement the ERP and we've replaced those key leader positions with strong proven talent, we've implemented processes to contain cost and we provided real time matrix to improve our communication and finally filed a timely Q3 of 2022 Q3, and a 10-K report.
This company has incredible potential and we intend to build a market share and expand our offering which you'll hear about later.
But for the record we're not happy with our performance yet and we will continue to build that pipeline closed more deals drive cost down and deliver products faster make.
Make sure we provide superior customer experience and protect shareholder value.
Thank you for your patience and your investment virtual I'll.
I will now go back on script Alanna I will turn the call over to you to provide financial update.
Thank you Dan.
Good afternoon, everyone. It's a pleasure to be speaking to you today and to review our audited financial results for the fourth quarter I'm not full year ended December 31st 2022.
In my first few months of her child I've already seen our team's remarkable dedication to our customers and equally strong commitment to our mission and I'm looking forward to keeping you updated our progress for many years to come.
With that I'll get started on the Q4 and full 2022 financial update.
Total revenue for the fourth quarter of 2022 was $8 7 million, which was up slightly from the $8 6 million of revenue we recognized in the fourth quarter of last year.
For 2022 total revenue increased 16% to a record $28 3 million from $24 4 million in 2020 one.
The increase in revenue resulted from a 48% increase in our step revenue and a 54% increase in our simulator sales driven by the law enforcement market.
As a result of our operation operational streamlining we were able to deliver the first 16 system of a large federal contract within 90 days, that's purchase order receipt.
Our gross profit for the fourth quarter of 2022 increased to $5 3 million from $2 8 million in the fourth quarter of last year.
Gross profit margin for the fourth quarter of 2022 was 61, 4% an improvement from 32, 7% in the fourth quarter of last year.
And for 2022 gross profit increased to $16 3 million from $11 4 million in 2020 one.
Gross profit margin for 2022 with 57, 4% an increase from 40, 617% for 2021 the increase in gross profit was due to a 7% decrease in our cost of goods sold combined with a 16% increase in right now.
Our net operating expense for fourth quarter of 2022 was $3 4 million as compared to $3 million in the fourth quarter last year for 2022 net operating expense was $13 7 million compared to 10 million in 2021.
The increase was primarily due to a 74% increase in our sales and marketing spend from our increased participation in industry trade shows and the associated travel as well as a 39% increase in R&D expenses.
And an increase in one time costs related to the facility moves and re launching our ERP system.
Now turning to profitability measures for the fourth quarter of 2022, we recorded operating income of $1 9 million compared to a loss of <unk> 2 million in fourth quarter of 2021.
For 2022, our income from operations was $2 6 million an improvement from the one 5.002 million 21.
Net income for the fourth quarter of 2022 totaled $1 4 million or 13 cents per diluted share. This was an increase of the net income of 13000 or less than one cent per diluted share in the fourth quarter of 2021.
For 2022, net income totaled 2 million or 18 cents per basic and diluted share, which compares to net income of $2 5 million or 25 cents per basic and diluted share for 2021.
Our adjusted EBITDA, a non-GAAP metric for the fourth quarter of 2022 was $1 7 million compared to half a million in the fourth quarter of 2021.
For 2022, adjusted EBITDAR totaled $3 6 million, an increase of $1 2 million in 2021, the increase in adjusted EBITDA was significantly impacted by the one time event of the official forgiveness of the PPP loan.
Turning to our bookings and backlog.
We define bookings as the total of newly signed contracts and purchase orders received in a defined period.
Our fourth quarter and full year 2022, we received bookings totaled $6 4 million and $33 million respectively.
Furthermore, we define backlog as the accumulation of bookings from signed contracts and purchase orders that are not started or uncompleted and cannot be recognized as revenue until delivered in a future period.
<unk> also includes our extended warranty agreements and step agreements that are deferred revenue recognized on a straight line basis over the life of each respective agreement.
As of December 31, 2022, our backlog totaled $27 7 million, which was up 20% from December 31st 2021.
And finally to our balance sheet.
As of December 31, 2022, we had unrestricted cash and cash equivalents of $13 5 million compared to $15 7 million at the end of third quarter from a working capital standpoint at the end of fourth quarter, we had $24 3 million and working capital a decrease from the $25 seven at the end of.
Q3.
Virtuous cash balance decreased as we continued the construction of the new building, which has increased our property plant and equipment balance and we saw an increase in our accounts receivable and unbilled revenue item shipped to our customers at the end of the quarter.
We expect to see the cash increase as we exit Q1.
For additional details of our financial results. Please reference our 10-K, which was filed earlier today and that concludes my prepared remarks, and I'll turn it back to Bob.
Thanks, a lot of it is great to have you on the virtual team had been doing a great job.
In closing 2022 was a successful year for Onboarding tremendous new talent and implementing the right processes for virtu to win and service larger volumes of business we.
We did so while also achieving improved profitability and continuing our streak of annual revenue growth.
With new operational systems in place, we expect to build out our business pipeline in both our law enforcement markets International markets and military markets in 2023.
There are immense opportunities in front of virtually to serve industries that need the gold standard of training solutions and this year's focus will be on increasing momentum in our target markets. In fact, we are off to a strong start already in 2023, our sales pipeline remains robust and we are determined to do better.
As we see many areas, where we can improve and must improve as as as John indicated.
And with that I'm going to wrap up my prepared remarks, and we'll open the call up for your questions. Operator, please provide the appropriate instructions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.
Information tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Jason Smith with Lake Street. Please proceed with your question.
Hey, guys. Thanks for taking my questions I, just wanted to start Bob with sort of your last comment on the sales pipeline, obviously backlog remains pretty robust here, but just curious if you could comment on what youre seeing from an order pattern perspective year to date, just given all the macro challenges out there.
Yeah, well thanks for the question.
We're still seeing a robust sales pipeline.
We are working a lot of deals international military and that there are issues with timing on that but.
And then we have our standard domestic in federal and international law enforcement pipeline, so, but overall, we're still seeing people willing to spend money on effective training solutions and so with that it seems like there's a continued emphasis on how do.
We properly trained people for lethal force.
And thats, an ever increasing reality and on the military side is international threats increase and it's an ever present pressure.
Pressure on our state local federal government are in America with policing.
Obviously policing reform has been has been in the headlines with Washington, working on it and I think that underscores the presence and ubiquitous of trying to get the very best training into those that are entrusted with lethal force.
Okay.
And then are you seeing any continued impact from the supply chain or what are you seeing in sort of the supply chain backdrop.
We have so far we've had good inventories.
Of parts that we're the ones that we're most concerned about once in a while we get surprised by by an item that we didn't know we needed to just to have extra stock such as if they do it's a design change and don't notify us.
John Gibbons light and effort recently to overcome that.
And it was an all hands on deck.
Stay till it's done type of effort that that was what was successful but it was unplanned. So supply chain still is a is a danger. So far virtuous had a great track record of navigating it well we plan to continue that but it's it's a it's a constant.
Effort much more than we had to do three or four years ago, arguing that but as of right now we're in good we're in good shape.
I'd like to add to that too is that.
What we're finding is.
We're setting our minimum Max's and our inventory and with the ERP re implementation, we're able to manage our vendor pipeline much better the only thing that we see remnants of the supply chain issues is that when the vendor makes a mistake on a larger order it does take a little bit longer because they don't have stock.
And supply.
And that's what Bob was alluding to we just recently had a small problem with a vendor and we had to modify to try to use what they gave us even though it was a mistake.
We modified our software to be able to utilize it so those things will deal with one offs, but I don't think those are any different than it was prior to the COVID-19.
But yeah, a little bit it's getting a lot lot better and I would add to that one one thing that differentiates <unk> in our market is we have teams of engineers on staff many of whom have worked a virtue for years and other companies. We compete with many times they hire a 10 99.
Staffer or they they hire a firm to do a project and then it goes dormant and then years later to modify it or.
Change it it's a big problem so bye.
By virtue of having teams of engineers and having enough scale in our industry to afford to do that.
Things like that happen. We are we have a much easier time in accommodating it because we have we have that kind of trained staff on site.
Versus trying to track down what company did it or or what 10 99 employee did it for us and so it's just a.
It's one advantage of the investments that over so many years, our shareholders have made and virtue to to have that kind of robust infrastructure. So.
That comes in very handy.
Okay. That's helpful color and then just last one for me and I'll jump back into queue. Just curious if you guys could expand on sort of John's comments on some of the challenges in the past I mean, I can understand how the ERP system can cause some friction but was this a case of.
Our sales strategy, not being well thought out or not going after the right customers any additional color would be helpful.
Uh huh.
Well, there's so many ways that can go with that no. The ERP implementation was just no one knew what they were doing and classic mistake. If he took every every business case from Harvard that talks about implementation of large systems I think someone who uses a roadmap to make all the mistakes every single one that people have made and so unraveling that the.
Problem with that is so stomach because if that's the heartbeat of the organization. It messes up all your processes everybody was trying to manage things separately.
Spreadsheets and all of that is part of the reasons why financials Werent complete but now that that's all been corrected and we are continuing to take advantage of the ERP. I mean, there were things that were taking advantage of that makes the business much more streamlined and the.
The effort of the folks that are here now really jumped in and we're seeing where we're building reports, where we're catching things way ahead of time, and we're not sending things out incorrectly.
Myriad of things so it had nothing to do with the sales or anything it was just an operational mishap.
Okay.
Okay.
Thanks, a lot guys.
Thank you appreciate it.
Our next question comes from the line of Richard Baldry with Roth Capital. Please proceed with your question.
Thanks, maybe just sort of building off of that.
That last part can you talk about the prospects you think to be able to cut the backlog down over the year ahead, now that sort of running more smoothly, but maybe another way to think about it like what what's the you've got almost a year of revenue and backlog depending on.
Someone's outlook.
What would a normal or a healthy level of backlog on quarters months here tend to be long term do you think.
Yeah.
That's a really good question.
Having a backlog that largest is in my opinion not bad I mean not good.
In the operation piece, we've changed how we are now building systems.
In separate job job groups and if you look at the numbers, we grew the backlog by 20%.
So you know my goal would be is that the backlog is less than half.
And if you look at the components that make up the backlog I don't know that we could get down any further than that the only way I would build the backlog to what it is higher today than it would be good is in our step program with reoccurring revenue and our goal is to raise that reoccurring revenue through our step programs. Those contracts will go three years and then they come up for renewal and a key.
Keeping those customers and keep dripping them, so that they will spend additional revenue with us.
That's kind of the model so you'll see it start to go down, but then the idea would be build back up and it doesn't have anything to do with.
Getting the systems out the door, our internal goal and our stretch goal is that once we get a P. O. We want the systems going out the door door in 30 days, but the staff themselves have challenged himself to once we get an order it'll be out the door in seven days.
We continue to support that.
I would just add that.
<unk> was able to achieve 630 days that would probably break all records at our industry. If we hit seven days. There is there is there is not a company that's been able to sustain that speed of delivery, so that would be a remarkable accomplishment.
I believe we can be successful with either of those but seven day turnaround on product would be.
Would be an incredibly efficient.
Very streamlined process and operational.
System, which would be.
A bit of a miracle in our in our industry, but I do believe it is it is possible.
And the gross margins in the quarter very strong.
Again, it's building out the same theme, we're all talking about <unk>.
Given the efficiencies and things that you had can you talk about how you think those gross margins should trend is that the efficiencies are helping you turn things faster.
Matchup product better.
So those should be sustainable or you know how do you view that long term trend.
I have here with their first functions at my happy with my personal no I'm never happy with those margins.
I think the trend will go.
The trend will continue to go up.
And Theres a couple of ways of that one we haven't raised the price as much and so a lot of the price increases on some of the products.
We just had a modest price increase but now getting to the point, where we have all of our costs accounted for both labor. Our Cogs are fully laid out we're able to stay competitive why raising those margins. So that's always a tricky item they'll go up a little bit they'll go up some more because we have some more efficiencies in areas.
That we're cleaning up and.
Finalizing those processes and making it much more robust some of that might be some SG&A improvements, yeah, DNA improvement right, yes, still but I.
I would say that they.
Hi.
Yeah, I would say.
Maybe 10% higher it was kind of where I would it would be a fair target over the next 18 months, because we might we might improve some quality.
Might have a little increase in costs to improve some quality.
And the technologies changes too I think we'd also be able to take advantage and make the margins higher by <unk> technologies.
<unk> some of the equipment.
Yes.
What we're looking at.
Alright, and then also I'd also like to note that that in the history of military simulation training.
Companies have been able to win larger military contracts they get a lot more economies of scale on those whereas police contracts are often smaller and more diverse equipment, which makes it a bit tougher to have larger margins on so it's a great point there.
Okay and last for me would be you started to touch on I actually answered. My last question. So you know what the efficiencies you're done and are able to achieve with the systems now more streamline.
Your your G&A has actually gone down two quarters in a row. So how do we think about absolute spending they're trending there.
How efficient do you feel you're at now from a capacity.
When would you need to be adding to that just as a natural course of growing the overall business. Thanks.
I think a lot of that has to do with the kind of growth that we have a right right now the way we are building the scalability of the company it would be too would be to handle growth without having.
A lot of expense.
John and I are both very conservative.
And.
Hum.
Even at the point, where John doesn't rent a car he borrowed a car that I have and then he paid for tires to go on the car. So to avoid just to avoid a rent a car fee for the company when John was here. So so.
We're very careful with the cash of the company and how expect.
And we feel like we've spent a lot of company money to build the scalability, we invested in the ERP system and are reinvesting in it to get it to get it improved in and much more effective than the first implementation, where we had a lot of problems as John mentioned.
So we would like to see it slow down but only when we don't see a good return if we see a good return on investment than you know John and I, we want to be the most competitive company in the industry and sometimes that takes some investment, but I think generally where we're thinking some of that spend is going to.
Its going to slowdown.
Our plan is just it would be to see it slow down unless there is an obvious need for it.
We would like we would prefer to move into the mode of higher efficiencies on SG&A reduction of capital spend.
Now that <unk> has set up a lot of a lot of our construction is done I think that's that's the.
Yeah, the bulk of what we thought was needed to perhaps virtually to be the tier one supplier for both military and law enforcement.
I think it's going to even as we increased business.
I don't think it will reach equilibrium in it.
It's going to go down and stay there for several quarters anyways.
Great. Thanks.
Okay.
It was all the time, we have for questions I'd like to hand, the call back to Bob Ferris for closing remarks.
Thank you.
And thank you everyone. We appreciate your continued interest in our company and to our investors. Thank you for your continued support.
Please know that we are dedicated more than ever before to building shareholder value and building the world's most effective simulation training products. So that the war fighter and the law officer conserve their country accomplish their mission and make it home safely.
With 2023 off to a strong start I firmly believe the best days for virtual are ahead of us as always be safe take care and God bless.
Ladies and gentlemen.
And that does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yes.
Yeah.