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Look at twitter. There were tons of traders in this one after Friday's AH action
https://www.thelion.com/bin/aio_msg.cgi?cmd=search&symbol=vtsi&x=22&y=32
My expectations:
Q4
Topline Revenue: $7.75m
International: $0.45m
Commercial: $0 (no idea)
STEP: $0.85m
Government (less STEP): $5.3m
Warranty: $0.5m
Installation: $0.3m
Software: $0.35m (no idea)
Gross Margins: 57%
Gross Profit: $4.26m
SG&A: $2.7m (no idea)
R&D: $0.7m (no idea)
OPEX: $3.4m
EBITDA: $1.24m
EBIT: $1.02m
Net Income: $0.76m
EPS: $0.07
FY'22
Topline Revenue: $27.45m
International: $3.85m
Commercial: --- no idea because their two recent 10Q's are misleading
STEP = $2.9m
Government simulators: --- no idea because their 10Q's are misleading
Warranty: $2.7m
Installation: $1.1m
Software: $1.5m
Gross Margins: 56%
Gross Profit: $15.4m
SG&A: $11.0m
R&D: $2.7m
OPEX: $13.7m
EBITDA: $2.7m
EBIT: $1.78m
Net Income: $1.4m
EPS: $0.12
Q4 Bookings - $5m (total guess, but likely will be on the lower end because no big orders announced)
Backlog - $25.6m
----
I don't have any upside baked into these numbers, but there is some upside based on the large bookings number that came through in Q3; They could easily surprise with a $10m quarter. But i don't think it matters in the long run because that revenue will flow through over the next few quarters anyway. Besides that, I don't expect much to come from this cc except more of the same "we have a great backlog, business is strong, but we're still waiting for military programs to start before we seriously grow" rhetoric. I'd love to hear the company expand into new verticals or hear more about how federal programs could be beneficial for VirTra, but I don't have any expectations.
This is all a fruitless exercise while we twiddle our thumbs waiting for some US Army program to roll out.
Thanks for sharing!
Here's the important doc IMO https://docdro.id/qLELukb
> For reasons that are also somewhat in dispute InVeris never delivered any Blue Rail
weapon, and in fact the uncontroverted testimony was that InVeris has never delivered or sold a
single Blue Rail weapon to any customer (as of the date of the very Hearing in this case).
> Mr. Shavers’ testimony was critically damaging to InVeris’ $1.4 million claim – and was
supportive of certain of Oak Grove’s claims – in multiple other respects. Specifically, Mr.
Shavers conceded that no Blue Rail weapons had ever been sold at the time the subcontract was
entered and, in fact, that Blue Rail technology at that point was at most a “prototype,” that is, it
was not yet a “product.” Mr. Shavers also conceded that the same BlueFire products sold to Oak
Grove had been sold under a separate contract to the U.S. Army; that these weapons had a
“myriad of issues” which led to frequent return for repairs; that the weapons failed the Army’s
initial acceptance test; and that an as yet unconducted “root cause analysis” was necessary to
determine why the weapons were failing and breaking over and over again (DX 16). And
finally, Mr. Shavers conceded that the Army’s Contractor Performance Report (“CPAR”) rated
InVeris’ performance – again, involving the same BlueFire weapons as those sold to Oak Grove – initially as “marginal,” noting “considerable schedule delays” (DX 19), and later as
“unsatisfactory” (DX 705);
Blue Rail product description: https://www.officer.com/training-careers/product/21068469/meggitt-training-systems-virtual-and-live-fire-weapons-training-systems-bluerail-technology-converts-your-firearm-for-virtual-training
Welcome back!
After the first line, i thought this was a poem by Twister. Sad that it wasn't.
RTES award goes to Bagira
Notice: https://www.find-tender.service.gov.uk/Notice/004471-2023
An area of growth for VirTra is getting their recoil kits used in live training systems. These types of systems are used by many militaries around the world and would be a great expansion of TAM beyond the screened simulator market and US Army/Marines. I don't have any visibility into current TES opportunities on the horizon.
"It's the hope that kills you" - Ted Lasso
I have the next 3 quarters at $26m revenue with Q1 being the peak. Maybe $8m/$10m/$8m. Margins and OPEX i can't predict, so i'll say 52.5% and $3.4m, respectively. That gives us roughly 6c EPS and 1.2m EBITDA.
That Q4 run-rate at a 12x EV/EBITDA multiple roughly gets you to a $6.80 stock price. 15x multiple gets you $8.30. Someone check my math....
Of the 44 awards worth $6.3m which specifically identified the intent to purchase a VR simulator, i found details for 36 worth $4.6m. Of the 36 awards,
- 18 awards (50%) worth $2.7m (58%) clearly stated the desire to purchase from VirTra
- 11 awards (30%) worth $1.0m (21%) clearly stated the desire to purchase from Apex
- 3 awards (8%) worth $ $0.4m (9%) clearly stated the desire to purchase from Ti Training
- 2 awards went to InVeris / SURVIVR ($0.3m)
- 1 award each went to Axon and Streetsmarts VR ($0.2m)
- 5 don't have details in the documents ($1.0m)
- 2 had yet to decide and will go through a competitive bidding process ($0.4m)
"Congress passes bill to fund police de-escalation training"
https://apnews.com/article/biden-rhode-island-mental-health-police-brutality-john-cornyn-3b66eef9c2378a44faec4b18bc2959d2
Senate bill - https://www.congress.gov/bill/117th-congress/senate-bill/4003/text
Note that the article states $70m/yr but i do not see that in the current bill's text. Not sure which to believe.
Maybe I'm off base here, but if they're involved in military programs and bound by NDA's and unable to publicly disclose their involvement, how can they buy stock in the open market?
"SEC Rule 10b-5 prohibits corporate officers and directors or other insider employees from using confidential corporate information to reap a profit (or avoid a loss) by trading in the Company's stock."
They could, however, grant themselves shares in the company under the guise of hitting profitability targets which, coincidentally, would be achieved by being involved in classified military programs.
SiVT in FY23 NDAA
https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-117HR7776EAS-RCP117-70.pdf
This isn’t necessarily news as we’ve seen articles talk about SiVT being a 2024 priority and also Co-CEO say Military revenue is 12+ months away.
Hope you're right!
I'm happy to be pleasantly surprised by your numbers, but I'm penciling in a modest $6-7m revenue and $3m OPEX. Who knows what margins will be, but maybe we'll see 4-5c EPS. There's been news for at least $12m of bookings, so my reasonable, no upside expectation is $15-16m in bookings.
Interested to see updates on
- Commercial revenue
- STEP revenue
- Inventory
2 military updates worth sharing:
1. https://www.janes.com/defence-news/defence/latest/course-correction-us-army-renegotiating-usd22-billion-ivas-contract-eyeing-path-for-different-form-factor
TL;DR - IVAS v1.0 and v1.1 still to be released in 2023/2024 at max total of 10k units. These initial versions, however, will not be fielded to operational units and will instead be delivered to schoolhouses for training and to US Army Recruiting Command to demo for prospective soldiers. IVAS 1.2 (redesigned version by MSFT or someone else) is a 2025 thing.
2. https://www.nationaldefensemagazine.org/articles/2022/11/9/army-training-factoring-in-new-realities
TL;DR - SiVT is now a 2024 priority. Since IVAS won't be field ready until 2025 per #1 link, I could see this getting pushed out as well.
Requests 2022 COPS CPD grant info. First update:
For context, I only receive 3 things for each award. A short paragraph (called an abstract) per awardee, the awardee name, and the award amount.
- 60 awards were made worth $8.8m. I think it was $11m of available funds.
- 43 awards (71%) clearly stated in their abstract the desire to purchase a VR simulator. These awards accounted for $6.1m in awards (69% of award amount). Note that the entire award amounts may not go directly to a simulation vendor and money can be spent on multiple purchases for a single award.
- 7 awards (11%) worth $1.1m (12%) do not seem like they will purchase VR equipment. 10 awards (17%) worth $1.5m (17%) are unclear what their intention is
Of the 43 awards worth $6.4m which specifically identified the intent to purchase a VR simulator:
- 14 awards (32%) worth $2.0m (31%) clearly stated the desire to purchase from VirTra
- 10 awards (23%) worth $0.9m (14%) clearly stated the desire to purchase from Apex
- 1 award worth $0.2m clearly stated the desire to purchase from Axon
- This leaves 18 awards worth $3.3m where it's possible that could purchase from VirTra
Compared to last year where VirTra was purchased by < 30% of the VR related awards, this growth to being purchased by (as of now) > 50% of VR awards is quite significant growth YoY.
It'll take some time, but I'll follow up when I learn more.
This is something I don't think is talked about enough.
> Another factor is the STEP program. How many full priced sales have they missed in order to lease equipment at a fraction of the annual cost to make them more affordable and obtain reoccurring revenue which is much more valuable longterm?
In Q3'20, they did $0.23m STEP revenue. By Q4'21, they had TTM of $2m STEP revenue. Because they only made $0.5m in Q3, they were probably closer to a $2.5m runrate at the end of the year. This implies that they did something like 50 STEP orders sales over the 5 quarters. Assume an average order price of $125k and that means ~$6m in revenue has been pushed through STEP and (6m - 2m = ) ~$4m has been "deferred" through STEP's recurring revenue model. Imagine what 2021 would have looked like if $4m was added to revenue at almost gross 100% margin?
This probably won't ever be a huge factor in the current stock price as it's marginal revenue and growth, but when VirTra eventually gets bought out, this will surely be factored in to the purchase price.
I do always appreciate Bob dropping hints in conference calls
Appreciate the insight DG!
> cost savings and time savings which ultimately leads to higher margins and more flexibility
Is this comparing to the "self-inflicted," so to speak, lower margins due to investment we saw in h1 2022 or are you comparing to 2020-2021 margins? Additionally, they've never really mentioned how much time/effort/marge gets put into scenario generation, so we can't really say for sure how big of an impact "quickly create training content with the lowest potential for any manual editing" has.
But re: future potential and the comment "VirTra is also evaluating rental opportunities for the volumetric studio to select customers..." I'm not sure it's related to the paid R&D because i can't imagine this applies to SiVT since it seems to call for a video game tech more than branching-like setup, but i do think this has applicability to SVT which seems reasonably likely that they use headsets.
I obviously think this is good for the company, but I’m trying to determine if this is a step change in the business like they said it is in technology. And unless they win a military contract with this new software, which they might, I’m not sure it is. This tech does seem way better then Axon’s marksmanship tool.
It seems like they will still be limited to pre-recorded, branching-like scenarios, right? I can't fathom that this visual acuity will translate to AI/ML rendering of the same characters responding to interactions on the fly like a video game can do. If it did, why wouldn't the same work for CGI?
So what does this mean as far as the business goes? Does the software get sold separately into existing simulators as an upsell? Do they start selling headsets and not care about the fact that weapons still can't integrate (or can they, they just haven't announced it?)? The PR didn't talk about how the business grows beyond "Exceptional training content is a key differentiator and compelling reason for so many customers to buy simulators from VirTra." They already had the best software on the market, so curious how much this increases their market penetration.
Maybe i'm overthinking all of this though... On the plus side, maybe we'll see OPEX drop back down to the $2.5m / q range and we'll get back to making a non-negligible profit once earnings ramp in Q4
Good call out. It's not crazy to expect to see a $15m quarter in bookings this quarter. I'm not seeing any special top/bottom line numbers in Q3 report, but it'll start showing up come Q4 and Q1. We may even get that mythical $10m revenue quarter in 2023!
Here's the new proposed Invest To Protect bill text
https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-117HR6448RH-RCP117-65.pdf ($60m '23-'27)
compared to the senate's version https://www.congress.gov/bill/117th-congress/senate-bill/3860/text ($50m '23-'27)
compared to the original house bill https://www.congress.gov/117/bills/hr6448/BILLS-117hr6448ih.pdf ($50m '22-'26)
It says "Democrates reached an agreement Wednesday to vote on a series of bills that provide millions of dollars to local law enforcement and also include accountability measures." and not that it's been passed.
I'm not a political process expert, but reading these articles and listening to today's hearing @ https://live.house.gov/, I think there still needs to be a house vote on these bills. Then I'd think, since there's a difference between the house version and the senate versions of Invest To Protect, they'll need to come to an agreement on what the final bill actually says.
"Law Enforcement Funding Package Splits Democrats Ahead of Midterm Elections"
Looks like a V300 to Morocco - $150k
https://www.ungm.org/Public/Notice/181492
I looked back at prior awards on FPDS and when VirTra PR'd them...
- $800k DHS IDIQ took 7 days to PR.
- $1.5m FLETC took 7 days
- $863k CBP took 15 days
- $1.6m from DHS took 7 days
With all the commotion today, nobody saw https://www.bloomberg.com/news/articles/2022-09-01/microsoft-combat-goggles-win-first-us-army-approval-for-delivery ?
I have them now maintaining a consistent $29-30m runrate for the next 12 months.
It's interesting to note that these two orders are both part of the $24.5m IDIQ through CBP from last year. If you recall, that IDIQ allowed for any federal agency to place orders against it. I wasn't sure we would actually see anything like that, but the IRS order shows that it's being used that way.
Next 10 2021 grant documents came through:
2 - no VR systems
1 - unclear what system, sounds like Screened Sim
2 - unclear what system, Headset
1 - SURVIVR (InVeris)
2 - Apex
1 - Ti Training
1 - MILO
Still seems like there's no rhyme or reason as to why agencies choose each provider. 5 of the 8 in this batch who bought a VR system did choose a headset, though.
That makes:
7 - VirTra
14 - Competitors
5 - unknown
17 - no VR simulator
14 - to be determined
====
57
Shaping up to more likely be:
60% grants purchase VR simulator
of those who purchase VR, 25% purchase from VirTra
Net -- 15% of all grants buy from VirTra.
Again, we're looking at < 15% of all funding since grants are used for more than just a simulator. As we come into 2022 CPD program, 15% of the $15m would be $2.25m. That seems like an upper bound. Probably more likely we see closer to $1m which would be ~6% of the total funds spent.
if we apply this to some of the other funding initiatives going through congress (they've been tossing around $50,000,000 per year), similar percentages would equate to, rough ballpark, $3m additional revenue.
How did they sell $5m to commercial market but nobody ordered >$1.5m? How many different military/commercial customers do they have?
"For the six months ended June 30, 2022, no single customer comprised more than 10% of total net sales"
Good catch!
I don’t think $1m, but instead $300k?
“ On April 11, 2022, John F. Givens II was appointed as the Co-Chief Executive Officer of the Company. VirTra has agreed to pay Mr. Givens an initial annual base salary of $298,990, subject to annual review. VirTra issued Mr. Givens a signing bonus of 64,815 shares of common stock which are restricted from transfer until the earlier of: i) 12 months of employment having lapsed or ii) the Company terminating employment with Mr. Givens without cause.
Mr. Givens was also granted 288,889 performance-based restricted stock units pursuant to the Company’s 2017 Equity Incentive Plan. Beginning on the last business day of August 2022, a tranche of restricted stock units, having an approximate value of $40,000, based on current prices, may vest if the Company has achieved net profit for the twelve months ending June 30, 2022 of at least $2,500,000. For every $500,000 earned in excess of $2,500,000 another tranche will vest. If the maximum net profit of $7,000,000 is achieved, ten tranches would vest”
The 65k shares at time of hire @ $5.08 should be OPEX from my understanding of https://www.wallstreetprep.com/knowledge/stock-based-compensation-accounting-journal-entries/. And then next quarter, when performance based comp is given, we should see another hit of something like $150k (ceos + coo).
I’ll have to update my model to account for this
you can see all of my assumptions re: revenue drivers in here:
https://docs.google.com/spreadsheets/d/1DhYie5lDmtbBhuKqy_9Vty_KRdfwuNLa70QTMduo_qY/edit#gid=842727511
Would love for folks to weigh in and poke some holes in it
800k income, 2.8m OPEX, 55% GM = $6.6m revenue
800k income, 3m OPEX, 50% GM = $7.6m revenue
800k income, 2.5m OPEX, 60% GM = 5.5m revenue
So pick your favorite scenario, it's another good not great quarter.
https://www.foxnews.com/politics/vulnerable-democrat-promises-push-police-funding-pelosi-delays-vote-manchin-bill
Pushed back further, but at least it's being talked about publicly
Agree lots of upside opportunities. Agree that it's cheap-ish on future potential. I don't see how the company gets $40m revenue next year without some serious news nor am I confident we get $30m revenue this year.
I'm mixed about this quarter. From a business perspective, good job but boring. From a stock perspective, I'm less excited.
Positives
* Revenue of $6.75 is the 3rd straight quarter of $6m+. They had one quarter in 2018 at this rate, one in 2019, two in 2020, and two in 2021. Seasonality is a thing and historical q1's were $3.2m in 2018, then 3.1m, 3.3m, and 4.4m in 2021. I'm hoping we see $2m+ international revenue in Q2...
* Profit margin back to 55%.
* Inventory continues to rise from $4.2m in 2021q1 to $7m in 2022q1. Some of this is surely supply chain safety stock, but also....
* machinery and equipment line item up to $2.5m from $1.1m 2021q1. $1.5m --> 1.74 --> 1.97 --> $2.45m. I will follow up with Bob next time, but this line item I believe is typically is for machinery to make recoil kits. Are we stocking up for inventory & machinery for IVAS still?
* $1.6m revenue from military segment. Not sure where it came from, but good to see.
* $6.4m bookings marks 6 of 7 quarters > $6m bookings and eight in a row > $5.5m. puts TTM bookings at $31.9m Historically TTM bookings in Q1's are $16m in 2019 --> $21.1 in '20 --> $25.3 in '21.
Negatives
* Net Margins are back down to 8% from 16% in Q1'21-Q3'21. FY22 revenue of $30m, which is 25% revenue growth, at these margins is only $2.5m EBITDA or 23c EPS which equates to a 17x forward EV/EBITDA multiple. hardly "cheap". If you project a 15% net margin you're looking at 10x forward multiple.
* Bob said after Q3 that R&D would go from $600k back down toward historic rates of $300-400k but it's gone up 3 quarters in a row to now $680k. (See quote below)
* Bob said in Q4 cc that SG&A due to accounting changes was mostly a Q4 thing but then Q1 was the same as Q4... Can we really trust Bob at this point?
* Bookings of $6.4m was good, but we've received roughly $100k in Q1 from federal. A lumpy federal order stream like this severely hinders growth. We may see big Q3/Q4 numbers as end of fiscal year ramp up, but it's also possible we see muted spending until federal standards are set next year. Again, delaying opportunity.
* $1.8m removed from backlog "due to budgetary cuts and government de-funding." This is the first time I've seen this happen but ties back to my prior point of federal spending being pushed out until standardization takes shape. I don't think this is likely, but if they're cutting spending now, will they cut spending on VirTra in the future? I'm guessing this is CBP orders as no other gov agency has placed >$1.5m orders recently from what i can see.
* Cash continues to go down. Less so than on the surface due to AR and Unbilled Revenue increases. I think it's ~$1.7m accounting for changes in AR/AP/Unbilled Rev/Deferred Rev.
Quote re: R&D
> I still think Givens was promoted for something he did, not something he will do
I thought the same and I straight up asked Bob this question recently and then as a follow up after Bob's initial answer I added "well after the form-4 announcing his equity grant before announcement of co-CEO, it made it seem like he did something" and Bob said no and implied that he didn't get hired as CEO earlier because of what sounded like some conflict of interest (i thought it was a non-compete, but from the recent 10-k, Givens was still employed at BiSim through part of 2022).
From the 10k