Q4 2025 VirTra Inc Earnings Call

March 26, 2026

Operator: Good afternoon, and welcome to VirTra's Q4 and full year 2025 Earnings Conference Call. My name is Diego, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, John Givens, and CFO, Alanna Boudreau. Following the remarks, we will open the call for questions. Before we begin the call, I would like to provide VirTra's 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, 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.

Speaker #2: Joining us for today's presentation are the company's CEO, John Givens, and CFO, Alanna Boudreau. Following the remarks, we will open the call for questions.

Speaker #2: Before we begin the call, I would like to provide VirTra's 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.

Speaker #2: 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.

Speaker #2: Finally, I'd like to remind everyone that this call will be made available for replay via a link in the investor relations section on the company's website at www.virtra.com.

Operator: Finally, I'd like to remind everyone that this call will be made available for replay via a link in the investor relations section on the company's website at www.VirTra.com. Now I'd like to turn the call over to VirTra CEO, Mr. John Givens. Thank you. You may proceed, sir.

Speaker #2: Now, I'd like to turn the call over to VirTra's CEO, Mr. John Givens. Thank you. You may proceed, sir. Thank you, Diego. And thank you, everyone, for joining us this afternoon.

John Givens: Thank you, Diego, 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 Q4 and the full year ending December 31, 2025, along with an update of our business and operating environment. 2025 was defined by an extended and highly atypical disruption in federal funding. These delays affected the timing of awards, procurement activities, and ultimately system deliveries across our core markets. As a result, our reported revenue does not fully reflect the level of underlying demand or activity across the business. What I want to do this afternoon is walk you through what drove the disconnect, what we are seeing change in the funding environment, and how we are positioned as these conditions begin to normalize.

Speaker #2: After the market closed today, we issued the press release that provided our financial results for the fourth quarter and the full year ending December 31, 2025, along with an update of our business and operating environment.

Speaker #2: 2025 was defined by an extended and highly atypical disruption in federal funding. These delays affected the timing of awards, procurement activities, and ultimately system deliveries across our core markets.

Speaker #2: As a result, our reported revenue does not fully reflect the level of underlying demand or activity across the business. What I want to do this afternoon is walk you through what drove the disconnect.

Speaker #2: What we are seeing change in the funding environment and how we are positioned as these conditions begin to normalize. Let me start with the funding environment.

John Givens: Let me start with the funding environment, because that has been the primary driver for our results. The federal funding freeze that began in 2024 was unlike anything that we've seen. Budget approvals that were expected to flow in fiscal year 2025 were held and agencies were limited to their ability to move forward with procurement. That dynamic persisted through Q4. What has changed more recently in the last several days is that we are now seeing those programs begin to reopen. Specifically, just in the past week, the Justice Assistance Grant, or JAG, and the COPS Fund have both reopened for applications. Importantly, this includes fiscal year 2025 funding that was approved in the federal budget back in October 2024 and has been frozen since.

Speaker #2: Because that has been the primary driver for our results, the federal funding freeze that began in 2024 was unlike anything that we've seen. Budget approvals that were expected to flow in fiscal year '25 were held, and agencies were limited to their ability to move forward with procurement.

Speaker #2: That dynamic persisted through the fourth quarter. What has changed more recently in the last several days is that we are now seeing those programs begin to reopen.

Speaker #2: Specifically, just in the past week, the Justice Assistance Grant, or JAG, and the COPS Fund have both reopened for applications, importantly. This includes fiscal year 2025 funding that was approved in the federal budget back in October of 2024 and has been frozen since.

Speaker #2: It is only now being made available, but that gives you an indication of the extent of the delays we've been operating through. Behind that, additional funding cycles are progressing as the fiscal year 2026 and expected fiscal year 2027 allocations are moving through the system at the exact same time.

John Givens: It is only now being made available, but that gives you an indication of the extent of the delays we've been operating through. Behind that, additional funding cycles are progressing as the fiscal year 2026 and expected fiscal year 2027 allocations are moving through the system at the exact same time. As a result, we are seeing a meaningful increase in customer engagement and applications across our base. We are actively working alongside those customers as they move through the grant application and approval process. As we've noted before, this remains a multi-step process. Customers must apply, awards must be determined, and purchase orders must be issued, and then the systems must be delivered and accepted. We are staying closely engaged throughout the process to help conversions wherever we can.

Speaker #2: As a result, we are seeing a meaningful increase in customer engagement and applications across our base. We are actively working alongside those customers as they move through the grant application and approval process.

Speaker #2: As we've noted before, this remains a multi-step process. Customers must apply, awards must be determined, purchase orders must be issued, and then the systems must be delivered and accepted.

Speaker #2: We are staying closely engaged throughout the process to help conversions wherever we can. Based on what we're seeing today, that process is likely to play out over the coming quarters rather than all at once.

John Givens: Based on what we're seeing today, that process is likely to play out over the coming quarters rather than all at once. While the environment is clearly improving, the timing of revenue conversions will continue to be driven by those external funding timelines. One point I wanted to be clear on is that demand has remained strong throughout the period. We closed 2025 with $25.6 million in backlog and generated $26.7 million in bookings during the year. In many cases, orders have been already placed, but customers are not yet in a position to take delivery, either due to funding timing or the readiness on their end with buildings and space. We are also seeing this dynamic internationally, where contracts are in place across markets in EMEA and Latin America, but deliveries are tied to customer side funding or operational readiness to accept.

Speaker #2: So while the environment is clearly improving, the timing of revenue conversions will continue to be driven by those external funding timelines. One point I want to be clear on is that demand has remained strong throughout the period.

Speaker #2: We closed 2025 with 25.6 million in backlog and generated 26.7 million in bookings during the year. In many cases, orders have been already placed, but customers are not yet in a position to take delivery.

Speaker #2: Either due to funding timing or the readiness on their end with buildings and space. We are also seeing this dynamic internationally, where contracts are in place across markets in EMEA and Latin America but deliveries are tied to customer-side funding or operational readiness to accept.

Speaker #2: So the core dynamic we've been operating in is not a lack of demand, but the delay in conversion. We are ready for that conversion.

John Givens: The core dynamic we've been operating in is not a lack of demand, but the delay in conversion. We are ready for that conversion. We have used this period to align our operations, inventory, production capacity so that we can fulfill orders quickly as they come through. Our inventory levels were, are where they need to be. Our production processes are optimized and our team is positioned to execute. As funding is secured and purchase orders are issued, we expect to be able to move quickly from order to delivery. At the same time, we have made targeted investments in our sales organization in recent quarters. We are adding a second dedicated federal sales resource to increase coverage in that channel, which has a longer and more relationship-driven sales cycle.

Speaker #2: We have used this period to align our operations, inventory, production capacity, so that we can fulfill orders quickly as they come through. Our inventory levels were where they need to be.

Speaker #2: Our production processes are optimized, and our team is positioned to execute. As funding is secured and purchase orders are issued, we expect to be able to move quickly from order to delivery.

Speaker #2: At the same time, we have made targeted investments in our sales organization in recent quarters. We are adding a dedicated, a second dedicated federal sales resource to increase coverage in that channel.

Speaker #2: Which has a longer and more relationship-driven sales cycle. This allows the rest of our team to stay focused on law enforcement, where we already are seeing re-engagement as the grant programs open.

John Givens: This allows the rest of our team to stay focused on law enforcement, where we already are seeing re-engagement as the grant programs open. We have also recently added an experienced director of marketing with deep simulation and defense industry roots. Our marketing cadence has increased meaningfully at the start of 2026, building on the website redesign we completed last fall. We are seeing early signs of improved engagement, including higher volumes of inbound activity and demo requests, increased time spent on our website, and more qualified leads. We are also planning to expand our presence at key industry events to further strengthen visibility and pipeline development in 2026. Additionally, we continue to progress through the GSA re-entry process, which we believe should be completed by Q3 and will shorten the path for agencies to, from interest to order once completed.

Speaker #2: We have also recently added an experienced director of marketing with deep simulation and defense industry roots. Our marketing cadence has increased meaningfully at the start of 2026.

Speaker #2: Building on the website redesign we completed last fall, we are seeing early signs of improved engagement, including higher volumes of inbound activity and demo requests, increased time spent on our website, and more qualified leads.

Speaker #2: We are also planning to expand our presence at key industry events to further strengthen visibility and pipeline development in 2026. Additionally, we continue to progress through the GSA reentry process, which we believe should be completed by Q3 and will shorten the path for agencies from interest to order once completed.

Speaker #2: We are continuing to engage with federal training stakeholders, including agencies with DHS, where we believe our solutions align well with evolving use cases around immersive judgment de-escalation and scenario-based readiness training.

John Givens: We are continuing to engage with federal training stakeholders, including agencies with DHS, where we believe our solutions align well with evolving use cases around immersive judgment, de-escalation, and scenario-based readiness training. On the product side, our focus has been on increasing the value of our platform and delivering the best possible training outcomes in the industry. I want to highlight several developments that I believe are meaningful for our competitive position and long-term growth. First, our APEX analytics platform is now integrated across our system, enabling customers to capture and analyze performance data in real time and generate actionable insight around accuracy, reaction time, and decision making. APEX is a meaningful step forward from traditional training environments and has already been a strong differentiator in recent customer wins. APEX also created the opportunity for ongoing engagement through customization and servicing, which could support a meaningful additional revenue model over time.

Speaker #2: On the product side, our focus has been on increasing the value of our platform and delivering the best possible training outcomes in the industry.

Speaker #2: I want to highlight several developments that I believe are meaningful for our competitive position in long-term growth. First, our Apex Analytics platform is now integrated across our system, enabling customers to capture and analyze performance data in real-time and generate actionable insight around accuracy, reaction time, and decision-making.

Speaker #2: Apex is a meaningful step forward from traditional training environments and has already been a strong differentiator in recent customer wins. Apex also created the opportunity for ongoing engagement through customization and servicing, which could support a meaningful additional revenue model over time.

Speaker #2: We've also continued to advance our integration with VBS4, allowing for more flexibility and customized training environments tailored to specific customer requirements. We've demonstrated these capabilities with multiple US military groups in real-world training settings.

John Givens: We've also continued to advance our integration with VBS4, allowing for more flexibility and customized training environments tailored to specific customer requirements. We've demonstrated these capabilities with multiple US military groups in real-world training settings, where feedback has been encouraging and highlights the relevance of our platform in a more advanced training use case. Over time, this integration should further expand our role within the military training ecosystem and support additional services and development opportunities. In addition, we've introduced a drone defense training solution recently, which is designed for corrections professionals, helping agencies prepare for the growing threat of unauthorized drones in secure environments. This represents an expansion of our addressable market into a new and evolving use case where we are beginning to see early interest and engagement.

Speaker #2: We're feedback has been encouraging and the highlights the relevance of our platform in a more advanced training use case. Over time, this integration should further expand our role within the military training ecosystem and support additional services and development opportunities.

Speaker #2: In addition, we've introduced a drone defense training solution recently, which is designed for corrections professionals, helping agencies prepare for the growing threat of unauthorized drones in secure environments.

Speaker #2: This represents an expansion of our addressable market into a new and evolving use case, where we are beginning to see early interest and engagement.

Speaker #2: Adoption of the VXR platform continues to grow as well, with multiple systems sold in recent months and additional demand building in the pipeline. Across our product initiatives, the common theme is improving the value of our platform and deepening integration into agencies' training workflow.

John Givens: Adoption of the V-XR platform continues to grow as well, with multiple systems sold in recent months and additional demand building in the pipeline. Across our product initiatives, the common theme is improving the value of our platform and deepening integration into agencies' training workflow. Our military pipeline continues to develop with active programs and evaluations underway across the Army, Navy, and Marine Corps. We currently have multiple opportunities in process, including demonstrations of our capability in real-world training environments. These opportunities are supported by our enhanced reporting, analytics, and customizable training environments. In this period of lower revenue conversions, we have been focused on ensuring our solutions remain aligned with evolving military programs and requirements. To summarize, 2025 was a challenging year, driven by external funding disruptions that impacted timing. We are now seeing clear signs that funding is moving again with multiple cycles in progress.

Speaker #2: Our military pipeline continues to develop with active programs and evaluations underway across the Army, Navy, and Marine Corps. We currently have multiple opportunities in process, including demonstrations of our capability in real-world training environments.

Speaker #2: These opportunities are supported by our enhanced reporting, analytics, and customizable training environments, and in this period of lower revenue conversions, we have been focused on ensuring our solutions remain aligned with evolving military programs and requirements.

Speaker #2: To summarize 2025 with challenging year driven by external funding disruptions that impacted timing. We are now seeing clear signs that funding is moving again with multiple cycles of progress.

Speaker #2: We've maintained a strong customer engagement, built backlog, strengthened our commercial organization, and prepared our operations to execute. As those fund cycles translate into awards and purchase orders, our focus is on converting that activity into revenue in a disciplined but efficient way.

John Givens: We've maintained a strong customer engagement, built backlog, strengthened our commercial organization, and prepared our operations to execute. As those fund cycles translate into awards and purchase orders, our focus is on converting that activity into revenue in a disciplined but efficient way. With that, I'll turn the call over to Alanna for detailed financial review. Alanna?

Speaker #2: With that, I'll turn the call over to Alanna for a detailed financial review. Alanna.

Speaker #1: Thank you, John, and good afternoon, everyone. Now let's review our audited financial results for the fourth quarter and full year ended December 31, 2025.

Alanna Boudreau: Thank you, John, and good afternoon, everyone. Now let's review our audited financial results for Q4 and full year ended 31 December 2025. Our total revenue for Q4 was $2.9 million, compared to $4.7 million in the prior year period. The decrease was driven by those continued delays in government funding, the timing of customer procurement cycles, and deferred deliveries across both domestic and international customers. For the full year, our total revenue was $22.4 million, compared to $26.4 million in 2024. The decline was primarily due to extending funding delays throughout the year. Breaking our full revenue down by market. Our government revenue for the year was $17.8 million, compared to $22.9 million in 2024.

Speaker #1: Our total revenue for the fourth quarter was $2.9 million, compared to $4.7 million in the prior year period. The decrease was driven by those continued delays in government funding, the timing of customer procurement cycles, and deferred deliveries across both domestic and international customers.

Speaker #1: For the full year, our total revenue was $22.4 million, compared to $26.4 million in 2024. The decline was primarily due to extended funding delays throughout the year.

Speaker #1: Breaking our full revenue down by market, our government revenue for the year was $17.8 million, compared to $22.9 million in 2024. International revenue for the year was $4.2 million, compared to $3.1 million in 2024.

Alanna Boudreau: International revenue for the year was $4.2 million, compared to $3.1 million in 2024. Commercial revenue was approximately $400,000, consistent year-over-year. Our gross profit for Q4 was $1.7 million or 58% of total revenue, compared to $2.9 million or 62% in the prior year period. The decline was primarily due to that lower revenue volume. For the full year, gross profit totaled $15.2 million or 68% of revenue, compared to $19.4 million or 74% in 2024. Our net operating expense for Q4 was $3.3 million, a 23% decrease from $4.2 million in the prior year period.

Speaker #1: And commercial revenue was approximately $400,000, consistent year over year. Our gross profit for the fourth quarter was $1.7 million, or 58% of total revenue, compared to $2.9 million, or 62% in the prior year period.

Speaker #1: The decline was primarily due to that lower revenue volume. For the full year, gross profit totaled $15.2 million, or 68% of revenue, compared to $19.4 million, or 74%, in 2024.

Speaker #1: Our net operating expense for the fourth quarter was $3.3 million, a 23% decrease from $4.2 million in the prior year period. For the full year, net operating expense was $14.8 million, compared to $17.4 million in 2024.

Alanna Boudreau: For the full year, net operating expense was $14.8 million compared to $17.4 million in 2024, representing a 15% reduction as we actively managed costs while continuing to invest in key areas of the business to help re-accelerate our growth. Operating loss for the Q4 was 1.6 million compared to 1.3 million in the prior year period. Operating income for the full year was 0.4 million compared to 2 million in 2024. Net loss for the Q4 was 1 million or $0.09 per diluted share, consistent with the prior year period. Net income for the full year was 3 million or $0.02 per diluted share, compared to 1.4 million or $0.12 per diluted share in 2024.

Speaker #1: Representing a 15% reduction, as we actively managed costs while continuing to invest in key areas of the business to help re-accelerate our growth. Operating loss for the fourth quarter was $1.6 million, compared to $1.3 million in the prior year period.

Speaker #1: And for the full year, operating income was $0.4 million, compared to $2.0 million in 2024. Net loss for the fourth quarter was $1.0 million, or $0.09 per diluted share, consistent with the prior year period.

Speaker #1: And for the full year, net income was $3 million, or 2 cents per diluted share, compared to $1.4 million, or 12 cents per diluted share in 2024.

Speaker #1: Our adjusted EBITDA for the full year was $1.6 million, compared to $2.9 million in the prior year period. As we turn to the balance sheet, we ended the year with $18.6 million in cash and $30.8 million in working capital.

Alanna Boudreau: Our adjusted EBITDA for the full year was $1.6 million compared to $2.9 million in the prior year period. As we turn to the balance sheet, we ended the year with $18.6 million in cash and $30.8 million in working capital. This provides flexibility to navigate the current timing dynamics in the business. VirTra defines our bookings as the total of newly signed contracts, awarded RFPs, and purchase orders received in a given period, and our bookings for Q4 totaled $7.3 million, contributing to the full-year bookings of $26.7 million.

Speaker #1: This provides flexibility to navigate the current timing dynamics in the business. VirTra defines our bookings as the total of newly signed contracts, awarded RFPs, and purchase orders received in a given period, and our bookings for the fourth quarter totaled $7.3 million, contributing to the full year bookings of $26.7 million.

Speaker #1: VirTra defines our backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started, or are incomplete in their performance obligations, and therefore cannot be recognized as revenue until delivery in a future period.

Alanna Boudreau: VirTra defines our backlog as the accumulations of bookings from signed contracts and purchase orders that are not yet started or are incomplete in their performance obligations and therefore cannot be recognized as revenue until delivery in a future period. We segment that backlog into three primary categories. Capital, which includes our simulators, our accessories, installation, training, custom content, and our design work. Service, which is primarily extended warranty and support contracts. STEP, which is our long-term subscription-based program. Our backlog at December 31, 2025 stood at $25.6 million. That included $13.8 million in capital, $5.1 million in service, and $6.7 million in STEP contracts. That concludes my prepared remarks, and I'll turn the call back over to John for his closing comments. John?

Speaker #1: So we segment that backlog into three primary categories. Capital, which includes our simulators, our accessories, installation, training, custom content, and our design work. Service, which is primarily extended warranty and support contracts.

Speaker #1: Step, which is our long-term subscription-based program. Our backlog at December 31, 2025, stood at $25.6 million. That included $13.8 million in capital, $5.1 million in service, and $6.7 million in Step contracts.

Speaker #1: So that concludes my prepared remarks, and I'll turn the call back over to John for his closing comments. John?

Speaker #2: Thank you, Alana. At the start of 2026, we are beginning to see the macro conditions shift with funding moving back into the system and customers actively increase activity increasing.

John Givens: Thank you, Alanna. At the start of 2026, we are beginning to see the macro conditions shift with funding moving back into the system and customers actively increasing activity. We have used this period to strengthen our sales and marketing execution and enhance our product capabilities. With a robust backlog, continued support engagement, and the operational infrastructure and processes in place to scale, our focus is on converting that activity into revenue in a disciplined and efficient manner. That concludes my prepared remarks. Operator?

Speaker #2: We have used this period to strengthen our sales and marketing execution and enhance our product capabilities. With a robust backlog, continued support engagement, and the operational infrastructure and processes in place to scale, our focus is on converting that activity into revenue in a disciplined and efficient manner.

Speaker #2: That concludes my prepared remarks. Operator?

Speaker #3: Thank you. And at this time, we will conduct the question-and-answer session. If you would like to ask a question at this time, please press star one on your telephone keypad.

Operator: Thank you. At this time, we will conduct the question and answer session. If you would like to ask a question at this time, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We'll pause for a moment while we pull for questions. Your first question comes from Jaeson Schmidt with Lake Street Capital Markets. Please state your question.

Speaker #3: A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #3: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We'll pause for a moment while we pull for questions.

Speaker #3: And your first question comes from Jason Schmidt with Lakestreet Capital Markets. Please state your question.

Speaker #4: Hey, guys. Thanks for taking my questions. John, just hoping you can expand a little bit about your commentary on the expansion of engagements with the military market.

Jaeson Schmidt: Hey, guys. Thanks for taking my questions. John, just hoping you can expand a little bit about your commentary on the expansion of engagements with the military market. Just curious if that is expanding into different programs. Is it kind of additional systems being trialed, or how should we think about that?

Speaker #4: Just curious if that is expanding into different programs? Is it kind of additional systems being trialed? Or how should we think about that?

Speaker #2: Yeah, all of those are accurate. So we have multiple engagements across Army several and Navy and in the Marine Corps. We've engaged with them to find out exactly what they're looking for on the systems.

John Givens: Yeah, all of those are accurate. We have multiple engagements across Army, several, and Navy and in the Marine Corps. We've engaged with them to find out exactly what they're looking for on the systems. My commentary previous about how we were focusing on the systems and making them military ready, it hardened them for LE as well. There is a different dynamic in which the military requires a very dynamic, adaptive as they think and learn on a system. That's where VBS came into play. We've had the programs that are out there. There's no secret they're out there. There's the SVT, the Soldier Virtual Trainer. There's several others that are out there as well, and extending some of the ones that we currently have with ADMIRE and with special operations.

Speaker #2: My commentary previously about how we were focusing on the systems and making them military-ready hardened them for LE as well. But there is a different dynamic in which the military requires a very dynamic, adaptive—as they think and learn—on a system.

Speaker #2: So that's where BPS came into play. We've had very—the programs that are out there, there's no secret. They're out there as the SVT, the Soldier Virtual Trainer.

Speaker #2: There are several others that are out there as well, and we're extending some of the ones that we currently have with ADMIRE and with Special Operations.

Speaker #2: We also have Navy contracts coming up, and our engagement at I/ITSEC, the large show in Orlando, was quite a hit. We have one box, called our V100 Next Generation, which puts everything in one box.

John Givens: Navy has contracts coming up in our engagements at I/ITSEC, the large show in Orlando, was quite a hit. We have one box called our V-100 Next Generation, which puts everything in one box. It's portable, and it's a hit. They're looking to replace some aging systems and ones that have lack of technology and aren't nearly as mobile out there in the field. We've really honed our training and also our system to meet those needs, and they're all benefiting. There are programs out there that you can look up that I've mentioned on these calls before. That's there. We also have several other military groups that are

Speaker #2: It's portable, and it's a hit. They're looking to replace some aging systems, as well as ones that lack technology and aren't nearly as mobile out there in the field.

Speaker #2: And so we've really honed our training and also our system to meet those needs. And they're all benefiting. So, there are programs out there that you can look up that I've mentioned on these calls before.

Speaker #2: That's there. We also have several other military groups that are they're taking our systems and they're doing evaluations with their staff like Gunnery Sergeants and those sorts of things.

John Givens: They're taking our systems, and they're doing evaluations with their staff, like gunnery sergeants and those sorts of things, and looking at it as a replacement. The activity is quite robust right now. Much larger, longer sales cycles, but we've been at it for a bit, so we're looking forward to those coming to fruition.

Speaker #2: And looking at it as a replacement, so the activity is quite robust right now. Much larger sale—longer sale cycles—but we've been at it for a bit.

Speaker #2: So we're looking forward to those coming to fruition.

Speaker #3: Okay, great. That's good to hear. And then, understanding that the funding environment remains challenging, I'm just curious what you're seeing from a quoting activity standpoint so far this year, and overall, kind of sales touch points, even against this more challenging backdrop?

Jaeson Schmidt: Okay, great. That's good to hear. Understanding that the funding environment remains challenging, just curious what you're seeing from sort of a quoting activity standpoint so far this year and just overall kind of sales touch points even against this kind of more challenging backdrop.

Speaker #2: Yeah, as I stated, the demand has been remained high. And I would say it's even higher and what our focus has been is a lot of these agencies have relied on multiple different grants that came from multiple places.

John Givens: Yeah. As I stated, the demand has remained high, and I would say is even higher. What our focus has been is a lot of these agencies had relied on, you know, multiple different grants that came from multiple places. As I stated, it's been unfortunate because none of the money that was allocated in these grants for fiscal year 2025, which was awarded in October 2024, and then subsequently 2026 in October 2025, has been released. We already expect that. I've been on Capitol Hill, and we've been going through why it's important, and we've been in front of legislators and said they need to release the money. What we do expect is we expect a pretty regimented release of funding.

Speaker #2: And as I stated, it's been unfortunate because none of the money that was allocated in these grants for fiscal year '25, which was awarded in October of '24, and then subsequently '26s in October of '25, those have just been released and we already expect that I've been on Capitol Hill and we've been going through why it's important and we've been in front of legislators and said they need to release the money.

Speaker #2: So what we do expect is we expect a pretty regimented release of funding. The only caveat to that that I would say is so the quoting has increased.

John Givens: The only caveat to that I would say is the quoting has increased. We've got the quotes out there, and they're just sitting. Unfortunately, it's up to them because we can't legally submit these grants. We help them in any way that we can, and stay side by side with them. We have people in-house that we're giving them the information that they need about the system, and helping what we can. They still have to submit it, and then they still have to be down selected. There still is a bit of a process, but we haven't even had that process moving for the last two years. That's a great sign.

Speaker #2: So we've got the quotes out there and they're just sitting. Then unfortunately, it's up to because we can't legally submit these grants. So we help them in any way that we can and stay side by side with them.

Speaker #2: We have people in-house that we're giving the information they need about the system, and helping where we can. They still have to submit it, and then they still have to be down-selected.

Speaker #2: So there still is a bit of a process. But we haven't even had that process moving for the last two years. So that's a great sign.

Speaker #2: As far as other activity, we're also starting to see, on the same time frame, our international market—we're starting to see those monies flow as well.

John Givens: As far as other activity, we're also starting to see on the same time frame, our international market, we're starting to see those monies flow as well. The only monies that are not flowing is DHS. As you know, we have DHS with U.S. Customs and Border Protection as our customer, and we have U.S. Secret Service our customer, and we have U.S. Coast Guard. As we talk about them as their upcoming upgrades and purchasing new systems, all that's come to a grinding halt. That's the only one that we've you know, we're down that path, and it just came to a halt. There's other agencies as well, as you know about, that are also engaged with us wanting systems. The orders, the interest, the demand, it's all there. Just got to free up the funding.

Speaker #2: And the only monies that are not flowing is DHS. As you know, we have DHS with Customs and Border Patrol as our customer, and we have Secret Service as our customer.

Speaker #2: And we have Coast Guard. And so as we talk about them as their upcoming upgrades and purchasing new systems, all that's come to a grinding halt.

Speaker #2: That's the only one that we've—we're down that path and it just came to a halt, so. And there are other agencies as well, as you know, that are also engaged with us.

Speaker #2: Wanting systems—so the orders, the interest, the demand, it's all there. Just got to free up the funding. And we're doing everything we can to help move that forward.

John Givens: We're doing everything we can to help move that forward.

Speaker #3: Gotcha. That's really helpful. I'll jump back into Q. Thank you.

Jaeson Schmidt: Gotcha. That's really helpful. I'll jump back into queue. Thank you.

Speaker #2: Thank you, Jason, for your questions.

John Givens: Thank you, Jaeson, for your questions.

Speaker #3: Thank you. And a reminder to the audience: to ask a question, press star one on your phone. To withdraw your question, press star two on your phone.

Operator: Thank you. A reminder to the audience, to ask a question, press star one on your phone. To withdraw your question, press star two on your phone. Your next question comes from Richard Baldry with ROTH Capital Partners. Please state your question.

Speaker #3: Your next question comes from Richard Baldry with Roth Capital Partners. Please state your question.

Speaker #4: Thanks. Sort of following on that, and building on what you've talked about during the call, could you look in even more detail at the process it'll take to get the money to move?

Richard Baldry: Thanks. Sort of following on that, and building on what you talked about during that call. Could you go into even more detail at sort of like the process it'll take to get the money to move? So while it's been, you know, held, have people been building sort of grant documentation so that could kind of move across the table very quickly? Did they, for some reason, not start that, so that process still has to fully take place? Sort of any timelines around, you know, from submission to approval, things that you've seen in the past under normal circumstances to give us a feel for how, you know, slow or quickly it could take to start to see some of these things move.

Speaker #4: So while it's been held, have people been building sort of grant documentation so that could kind of move across the table very quickly? Do they, for some reason, not start that so that process still has to fully take place?

Speaker #4: Are there any timelines around from submission to approvals—things that you've seen in the past under normal circumstances—to give us a feel for how slow it will be or how quickly it could take to start to see some of these things move?

Speaker #2: Yeah, I mean, that's—yeah, that's the crystal ball, right? The problem is, there really hasn't been any consistency on—well, you get a consistency of end of April, mid and end of April, several of these grants are due.

John Givens: Yeah, I mean, that's the crystal ball, right? The problem is there really hasn't been any consistency on end of April, mid and end of April, several of these grants are due. Two and a half months, almost three months ago, we have what we call a grant stage in our CRM and Salesforce. What we've done is all the sales folks have been working with them on a regular basis and constant. They've already have quotes. They already like the system. They want the system. They have the training need. They just don't have the funds. As soon as we knew that there was something coming out, all the sales folks started that process. That process is just that.

Speaker #2: Two and a half months, almost three months ago, we have what we call a grant stage in our CRM and Salesforce. And what we've done is all the sales folks have been working with them on a regular basis and constantly.

Speaker #2: They've already have quotes. They already like the system. They want the system. They have the training need. They just don't have the funds. So as soon as we knew that there was something coming out, all the sales folks started that process.

Speaker #2: And that process is just that, whether it's demographics or geographics or certain types of training, there are specifications. And so we've grouped each of those and helped them identify which grant that they would most likely be a good candidate for.

John Givens: Whether it's demographics or geographics or certain types of training, there are specifications. We've grouped each of those and helped them identify which grant that they would most likely be a good candidate for, so with a higher success rate. We've done that. That grant stage consists of the number of police departments across the country. Then there's things like, what does the system do? We have a lot of that information that's just block information that we can give them. They have to fill out an application, and then they have other items and things that they have to that we have no visibility on. Once that's complete, they submit it by the timeline. Once it goes there. Unfortunately, Rich, I can't tell you what the timeline is.

Speaker #2: So with a higher success rate. So we've done that. So that grant stage consists of the number of police departments across the country. And then once then there's things like what does the system do?

Speaker #2: So we have a lot of that information that's just block information that we can give them. And then they have to fill out an application.

Speaker #2: And then they have other items and things that they have to do that we have no visibility on. Once that's complete, then they submit it by the timeline.

Speaker #2: Once it goes there, unfortunately, Rich, I can't tell you what the timeline is. We've seen it three months, and then we've seen it a year.

John Givens: We've seen it 3 months, and then we've seen it 1 year, and then we've seen it 18 months. It does vary, and it also varies based on the number of submissions they get and the level of staffing that they have of the administrators of those particular grants. Not all grants are created equal because you're coming out of different departments, but sometimes for the same thing. That's and then there's a level of priority for what they're looking for. If it's immigration and those sorts of things, if they have scenarios and things that they need to in their certain geographic area, they may have a priority or precedence. It's uncertain who the source selection committee is and how they determine that.

Speaker #2: And then we've seen it at 18 months. So it does vary. And it also varies based on the number of submissions they get, and the level of staffing that they have of the administrators of those particular grants.

Speaker #2: And not one grant—not all grants—are created equal, because they're coming out of different departments, but sometimes for the same thing. So that's—and then there's a level of priority.

Speaker #2: For what they're looking for—if it's immigration and those sorts of things, if they have scenarios and things that they need to, and there's a certain geographic area—they may have a priority or a precedence.

Speaker #2: And it's uncertain who the source selection committee is and how they determine that. So the best thing I can tell you is, at least we have a deadline right now for submission.

John Givens: The best thing I can tell you is at least we have a deadline right now of submission. We have our team that's working directly with all those customers that have had active quotes for a while, and we're working them through and helping them, telling them what they have to do and reading all the documentations and kind of walking them through as much as we can. Then it would be up to them. After that, when it's all collected, they have a source selection committee that review all of them. I don't know always how they choose the different groups, but what we do is we collect all that data, and then we start normalizing it.

Speaker #2: And we have our team that's working directly with all those customers that have had active quotes for a while. And we're working them through and helping them, telling them what they have to do, and reading all the documentation, and kind of walking them through as much as we can.

Speaker #2: And then it would be up to them. After that, when it's all collected, they have a source selection committee that reviews all of them.

Speaker #2: And I don't know always how they choose the different groups. But then what we do is we collect all that data and then we start normalizing it.

Speaker #2: So, if anybody else is in the queue and someone with a certain geographic or demographic or size agency or training-specific need, we then look for folks in the grant stage, and then we'll start pushing them towards those grants.

John Givens: If anybody else in the queue and someone with a certain geographic, or demographic, or size agency, or training-specific need, we then look for folks in our grant stage, and then we'll start pushing them towards those grants. We do have a methodology that we're doing with as much as we can, but there are a lot of variables. That's a great question. I wish I knew all the answers, Rich.

Speaker #2: So, we do have a methodology that we're doing with as much as we can. But there are a lot of variables. But that's a great question.

Speaker #2: I wish I knew all the answers, Rich.

Speaker #4: So, if I looked at your backlog, if I put the services a step together, is it fair to view that as those two combined and then divide by four or whatever?

Richard Baldry: If I looked at your backlog, if I put the services step together, is it fair to view that as those two combined and then, you know, divide by four or whatever? Is that an annual sort of baseline or even the service and step can be multi-year, so we can't really think of it that way?

Speaker #4: Is that an annual sort of baseline, or are even the service and step—can they be multi-year, so we can't really think of it that way?

Speaker #2: Yeah, your ladder. You can't really think about—I’m on a lot of—do some commentary. So backlog, as you said, is three components. And you could have services and warranty.

John Givens: Yeah, the latter. You can't really think about. I'm gonna let Alanna do some commentary. Backlog, as she said, is 3 components. You could have services and warranty. On a capital system, you also have the maintenance, the warranty, so it could be multiple years as well. We may have a you know larger concentration in year 2 and 3 or 1 and 2. 1 might be coming off, another one going on. It's very hard to break that down to just say, "Look, you got $25 million in backlog." Clearly, not all of it, even if we were incredibly efficient, everything cleared up, you're not gonna get $25 million. I think the cap was, what'd she say? Was it $12 million? $13 million? It, it's hard to say that. Alanna, did you wanna make commentary on that?

Speaker #2: So, on a capital system, you also have the maintenance, the warranty. So it could be multiple years as well. So we may have a larger concentration in year two and three, or one and two.

Speaker #2: One might be coming off, another one going on, so it's very hard to break that down to just say, 'Look, you got $25 million in backlog.' Clearly, not all of it—even if we were incredibly efficient, everything cleared up.

Speaker #2: You're not going to get $25 million. I think the cap was—didn't you say it was $12 million, $15 million? Yeah, so it's hard to say that.

Speaker #2: Alanna, did you want to make commentary on that?

Alanna Boudreau: Yeah, I was just gonna say the problem is the bookings and backlog, especially for the STEP. We have STEP contracts that we've signed this year that are three years long. Then we have STEPS that we've signed the year before or whatever that were five years long, and some of those weren't guaranteed. Those are in our future STEP revenue as opposed to what we just talked about on the call. If you look in the K, we think that on top of that backlog, we have additional $2.5 million that hasn't been re-signed or committed to. That can also be part of that, but that is another year or two. STEP is a...

Speaker #3: Yeah, I was just going to say the problem is the bookings and backlog, especially for the STEP—we have STEP contracts that we've signed this year that are three years long.

Speaker #3: And then we have steps that we've signed the year before, or whatever, that were five years long. So that, and some of those, weren't the guarantee.

Speaker #3: So those are in our future step revenue as opposed to what we just talked about on the call. If you look in the K, we think that on top of that backlog, we have additional 2.5 million that hasn't been resigned or committed to that can also be part of that.

Speaker #3: But that is another year or two. So, a step is a step—it can be anywhere from one year from now all the way up to four years from now.

Alanna Boudreau: STEP can be anywhere from 1 year from now to all the way up to 4 years from now for revenue conversion. The same goes for the warranty service plans. Some people sign 1-year agreements, some people sign 3-year agreements. Occasionally, somebody will allow somebody to sign a 5-year agreement. It's not quite as easy as just divide by 4 because there's a mix in those numbers. The capital extends out a little as well because some of that capital are for what we talked about, our international customers or development work that isn't gonna convert until later in 2026 through early 2027, depending on when they can accept that, those items.

Speaker #3: For revenue conversion. And the same goes for the same goes for the warranty service plans. Some people sign one-year agreement. Some people sign three-year agreements.

Speaker #3: Occasionally, somebody will allow somebody to sign a five-year agreement. So it's not quite as easy as just dividing by four because there's a mix.

Speaker #3: In those numbers. And the capital extends out a little as well, because some of that capital is for what we talked about—our international customers or development work that isn't going to convert until later in '26 through early '27, depending on when they can accept those items.

Speaker #2: I think, Rich and Alanna, you can correct me, but if you did want to do a quick number and you wanted to be on the conservative side, taking the step and dividing it by four would give you a very conservative number.

John Givens: I think, Rich, and Alanna, you can correct me, but if you did wanna do a quick number and you want to be on the conservative side, taking the STEP and dividing it by 4 would give you a very conservative number.

Speaker #4: Got it. And we're sort of backing into fourth quarter numbers using your full year. I don't know if I heard this or not.

Richard Baldry: Got it. We're sort of backing in the Q4 numbers using your full year. Can you remind me? I don't know if I heard this or not. Can you tell me what the Q4 adjusted EBITDA number was as a standalone?

Speaker #4: Can you tell me what the fourth quarter adjusted EBITDA number was as a standalone?

Alanna Boudreau: Yeah. I don't have that up. I don't have that reported in the K or the thing, so it'll give me a minute to get that for you. Feel free to move on, if you want, to another question for John.

Speaker #3: Yeah, I don't have that up. I don't have that reported in the K or the thing. So it'll give me a minute to get that for you.

Speaker #3: I'm afraid to move on if you want to. Another question for John.

Speaker #4: Yeah.

Richard Baldry: Yeah. The last one just for me would be, are there any upcoming important milestones on the military side that we would see on our side of the table? Or is it sort of in a status where we're gonna have to wait until, you know, something larger is announced by one of the other contractors maybe?

Speaker #2: Yeah, the last one for me would be: are there any upcoming important milestones on the military side that we would see on our side of the table, or is it sort of in a status where we're going to have to wait until something larger is announced by one of the other contractors, maybe?

John Givens: Yeah, that's a good question. It's a mix of both. There are larger contracts where we are a smaller component of that we're partnering with others to go after. Then there are larger contracts that are coming out that are more specific to us that we'll be the prime contractor on that we're bidding. You can see there's quite a few of them in all different branches of the service that have several that are out there.

Speaker #4: Yeah, that's a good question. It's a mix of both. So there are larger contracts where we are a smaller component of that we're partnering with others to go after.

Speaker #4: But then there's larger contracts that are coming out that are more specific to us that will be the prime contractor on that we're bidding.

Speaker #4: And those you can see there's quite a few of them in all different branches of the service have several that are out there. The one thing that we do see I will mention this is because of what happened with DOGE and then some of the military has done at least the army has done in their acquisition corps has just done a massive restructuring and taken one entity down and created a new one.

John Givens: The one thing that we do see, I will mention this, is because of what happened with DOJ and then some of the military has done, at least the army has done in their acquisition corps, has just done a massive restructuring and taken one entity down and created a new one and moved them around on who's responsible. There is something of a speculation that some of these marksmanship training simulators, some of these programs may be combined to end up being a much larger one, and we're well positioned for those. The larger ones may require that we actually take on a sub that may have staffing and those sorts of things that can because it's across the world, not just the US.

Speaker #4: And moved them around on whose responsible. And so there is something of a speculation that some of these marksmanship training simulators some of these programs may be combined.

Speaker #4: So it may end up being a much larger one. And we're well positioned for those. But the larger ones may require that we actually take on a sub that may have staffing and those sorts of things that can because it's across the world, not just the US.

Speaker #5: Maybe one more last one for me. A big topic across any of my software-driven companies is really AI these days. So maybe can you talk about to what extent you think AI is a threat?

Richard Baldry: Maybe one more last one for me. A big topic across any of my software-driven companies is really AI these days. Maybe can you talk about to what extent you think AI is a threat, what extent you think it's perhaps able to be monetized in maybe incremental offerings, and, you know, third, what extent you could use it internally to, you know, streamline processes, make things more efficient? Thanks.

Speaker #5: What extent you think it's perhaps able to monetize and maybe incremental offerings? And third, what extent you could use it internally to streamline processes, make things more efficient?

Speaker #5: Thanks.

Speaker #2: That's a fantastic question, Rich. And I don't see it as a threat. I see it as an igniter and what I mean by that is we're able to do a lot more with less.

John Givens: That's a fantastic question, Rich. I don't see it as a threat. I see it as an igniter. What I mean by that is, we'll be able to do a lot more with less. What's happening in the AI world right now is they're coming out with AI skill sets, and they're coming out with AI models. We're taking advantage of the models and the skill set. A skill set might be that it's programming facial recognition in a gaming environment with textured characters. That could be one, and we're taking advantage of those. One example is we do video shoots. They're like Hollywood movies, basically, to be able to get our scenarios. That's why they're so good.

Speaker #2: What's happening in AI in the AI world right now is they're coming out with AI skill sets, and they're coming out with AI models.

Speaker #2: And we're taking advantage of the models and the skill set. So a skill set might be is that if it's programming, facial recognition on in a gaming environment with textured characters.

Speaker #2: So that could be one. And we're taking advantage of those. One, we'll give you an example is we did a we do video shoots.

Speaker #2: They're like Hollywood movies basically, to be able to get our scenarios. That's why they're so good. The team took one of these AI models, and they took all of the scenes and scenarios that they had recorded, and then they had this AI model, and they actually made an opening trailer for this scene with assets that they couldn't record on.

John Givens: The team took one of these AI models, and they took all of the scenes and scenarios that they had recorded, and then they had this AI model, and they actually made an opening trailer for this scene with assets that they couldn't record on. It was quite amazing. I mean, even the team was amazing. They've been at this for, some of them, for 30 years in this industry. We're also using it as far as comparative, as you start writing software and code, what it was kinda made for, as you find bugs and you find things inside your software, doing a comparative analysis sometimes took a long time to thread through all these, you know, millions of lines of code. The AI model, this skill set for programming, would be able to identify a potential area that of this code.

Speaker #2: And it was quite amazing. I mean, even the team was amazing. They've been at this for some of them for 30 years in this industry.

Speaker #2: We're also using it, as far as comparative, as you start writing software and code—where it was kind of made for—as you find bugs and you find things inside your software. Doing a comparative analysis sometimes took a long time to thread through all these millions of lines of code.

Speaker #2: And the AI model, this skill set for programming would be able to identify a potential area that of this code. You still need that skill set, the very strong skill set to identify, but it narrowed it down and we were able to fix a few things and identify performance-related issues in a matter of days rather than a matter of months or maybe even through two or three different releases of software.

John Givens: You still need that skill set, a very strong skill set to identify, but it narrowed it down that we were able to fix a few things and identify performance-related issues in a matter of days rather than a matter of months or maybe even through two or three different releases of software. That is pretty significant. The other one that's really coming around is the AI tutor. What do I mean by that? If you go to a weapons range and you shoot at a target and you shoot a grouping of five shots in one area, but you have one or two that are out on the side, unless an instructor is there watching you, they would normally say, "Oh, well, you didn't breathe right. You pulled the trigger, you blinked your eyes," whatever that is.

Speaker #2: So that is pretty significant. The other one that's really coming around is the AI tutor. What do I mean by that? If you go to a weapons range and you shoot at a target and you shoot a grouping of five shots in one area, but you have one or two that are out on the side, unless an instructor is there watching you, they would normally say, "Oh, well, you didn't breathe right.

Speaker #2: You pulled the trigger. You blinked your eyes." Whatever that is. Now what we're able to do is take standard operating procedures instructors' notes, cognitive performance studies, whatever it is, throw it into that AI model and then once the shot is taken, we then can look at that.

John Givens: Now, what we're able to do is take standard operating procedures, instructors notes, cognitive performance studies, whatever it is, throw it into that AI model, and then once the shot is taken, we then can look at that. We can have AI look at all the information that we put into that model and then analyze the results and give suggestions of what may happen. There's that AI tutor as well. It's not a replacement, but at least get you, because what our systems have always done is it presents a target just like you're on the range. It shows you your results of what you've done, but then there's no one there to give an analysis. This section of AI that we're using now, it's able to do the analysis as well.

Speaker #2: We can have AI look at all the information that we've put into that model, and then analyze the results and give suggestions of what may happen.

Speaker #2: So there's that AI tutor as well. So it's not a replacement, but at least gets you because what our systems have always done is it presents a target just like you're on the range.

Speaker #2: It shows you your results of what you've done, but then there's no one there to give an analysis. So this section of AI that we're using now is there's it's able to do the analysis as well.

Speaker #2: And then there's a multitude of other areas that we're taking AI and looking at. It's a performance enhancement, monetizing is a different story in ours.

John Givens: There's a multitude of other areas that we're taking AI and looking at. It's in performance enhancement. Monetizing is a different story in ours. We're looking at ways to monetize AI in that regard. That's a little tough, a little tougher question, a little bit harder look. What we are doing is we're seeing our bottom line. We're seeing cost savings across the board because of our implementation of these AI models and these AI skill sets.

Speaker #2: We're looking at ways to monetize AI in that regard. That's a little tough—a little tougher question, a little bit harder look. But what we are doing is we're seeing our bottom line, we're seeing cost savings across the board because of our implementation of these AI models and these AI skill sets.

Speaker #5: Got it. Thanks.

Richard Baldry: Got it. Thanks.

Speaker #2: No worries. Alanna, did you get that?

John Givens: No worries. Alanna, did you get that?

Speaker #3: All right. Rich, it's a yes. It's a negative 0.9.

Alanna Boudreau: Rich, yep, it's a negative 0.9.

Speaker #5: Thank you. And, ladies and gentlemen, at this time, this concludes our question and answer session. Thank you for joining us today for VirTra's fourth quarter.

Operator: Thank you. Ladies and gentlemen, at this time, this concludes our question and answer session. Thank you for joining us today for VirTra's Q4 and full year 2025 conference call. You may now disconnect.

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