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Hahahahaha poor timing
OT: $smsi
TMobile should have a PR in the next week or two announcing a new platform for their Family Mode family safety product which should leverage Smith’s product. This’ll hopefully be the start of a ramp In marketing and revenue growth for Smith.
Aaron Warwick has written about the story on Seeking Alpha. Check them out for everything you need to know.
My two largest positions are equally weighted between $SMSI and $VTSI
great find! I never saw anything about their rocket launcher simulation capabilities!
V100 sims are at least ~$20k each with huge upside ($50k) if they also buy V-Author. So probably something like $0.5M-$1M order if they buy all 26 (and i'm not sure if V-Author is per system or per customer).
It's not clear through this descirption that the rocket launchers and the simulators are being used together. AirTronic makes live weapons and not simulation weapons. What use would a real rocket launcher be for a simulator? completition date of 2025 could just mean they'll buy a 4 year warranty.
That said, if you wanted to play detective and try to connect dots, one could say that rocket launchers are part of the requirements for STE-LTS and VirTra was brought in to this deal to allow for research of how to integrate rocket launchers into the simulation environment. Additionally, estimated completion date of 2025 kind of aligns with STE-LTS timeline. But this is all pure speculation based on what is provided in this contract and I don't really factor this contract into anything; just a weird data point that needs more info to understand the bigger picture.
https://www.usaspending.gov/award/CONT_AWD_W15QKN20F0678_9700_W15QKN20D0045_9700 -- It doesn't look like there has been any deliveries on this contract. So no indication as to what is/has been done on this contract, if anything.
I've seen two pieces of info:
1. Statement of Objectives for IVAS called for
STP#2 -- 300 systems (i'm assuming HUDs) for Platoon level testing. A platoon roughly consists of 3 squads or 30 soldiers. Each squad of 10 soldiers required ~19 recoil kits.
STP#3 -- 600 systems for Company level testing. A Company is very roughly 100 soldiers or 10 squads. Each squad of 10 soldiers required 20 recoil kits.
STP#4 -- 1600 systems for Battalion level testing. A Battalion is very roughly 1000 soldiers or 100 squads. Each squad of 10 soldiers required 20 recoil kits.
If we use the same ratio of of recoil kit requirements to HUD requirements, it's something like 30-50% of the HUD quantities will have a recoil kit.
2. On May 28, the Army wrote that it will have procured ~26k HUDs in FY21 and will procure ~29k HUDs in FY22 (https://www.asafm.army.mil/Portals/72/Documents/BudgetMaterial/2022/pbr/FY22_PB_brief_28MAY21.pdf -- page 14). The 26k HUD procurement in 2021 doesn't at all line up with STP volume, so my take on this is that the Army will have spent money to procure a lot of additional systems beyond STP volume in Q3 when governements fiscal year ends.
Well how much is "a lot"? lets say the cut checks for roughly 15k units (26k - STP4's 1,600 - a big margin of error for things like "user jury" testing, etc). At 15k units and roughly 30-50% volume of recoil kits per IVAS headset, that's 4k - 8k recoil kits needed for FY21 and and 8k to 15k kits for FY22. At, say, $2,500 per kit (very generous discount of 20%+ and assuming they don't charge more for M240/M249 kits even though they likely will), that's $10M-20M revenue in FY21 and $20M-$40M revenue in FY22. So we're looking at $30-60M revenues as a rough guide in the next year+. From this, I take it that the big order will be Q3 and it'll ramp from there with Q4 being the first $5M+ order.
If they have the work, it's very unlikely that, assuming IVAS units do get shipped, recoil kits aren't part of the package. Any communication between the laser and HUD/puck has to have been figured out by now and therefore means they're a core component of the system's functionality. It's also worth pointing out that there haven't really been "stages" of this rollout, it seems more like they built everything in one go. This helps point to HUDs/recoil kits all being bundled together.
Happy to hear other opinions, though!
All these analysts have crazy estimates. Maxim is projecting ~5M rev & $0.01 EPS each of the next three quarters. Roth is amazingly projecting -$0.06 EPS on 2.8M revenues in Q2 (We already know that VirTra has ~$2M in revenue from publicly announced deliveries!). Both have roughly 20M 2021 revenues with $0.14 2021 EPS and $0.23 EPS, respectively.
None of the analysts have a clue about what the military opportunity consists of let alone seem to know what is happening in the LE space. Their only job here is to allow for beat and raises it seems. Woudln't pay anything they say any mind.
Looks like the job posting is still active on linkedin https://www.linkedin.com/jobs/view/2631283780/ although not on Virtra.com/careers. A couple of us are keeping a list of jobs @ https://docs.google.com/spreadsheets/d/1AbQ5LFvHxAZE1uqDjE_xZad9yHPzTFYe3_xk77RfAUs/edit#gid=723033868 if anybody ever wants to add things along the way. Additionally there is a list of news articles announcing deliveries or orders for VirTra. Your docs for STEP agreements would be a great addition!
I don't know how to read into the temp job beyond that it seems like VirTra wants to take extra steps to ensure their product is well built. It would make sense that a company does this at the beginning of a new manufacturing process, or the beginning of a larger order such that they are ramping production, or maybe to oversee quality after the addition of new hires. It would also make sense to hire this role if they've faltered in building products. The "Work towards our goals of 100% On-Time Delivery and 100% Quality" could, from a negative perspective, indicate they aren't/weren't hitting their goals. But taken with all of their other hiring, you'd probably want to take this is a positive and that VirTra is going the extra mile to ensure customer happiness. And in this case, it makes sense that the customer is the Army with their new training solutions with IVAS.
and all this is just solo research. I had some time away from work that allowed me to do lots of reading and while I initially thought IVAS was all software when I first saw OWT. Once i read more into what IVAS actually entailed, it was pretty obvious to me that new training hardware would be required. Then it was just a matter of spending the days/weeks to wrap my head around the IVAS program while tying company commentary to Army updates. I never found a single comment from the company that didn't align with Army/IVAS commentary which helped build confidence in the story from the beginning. I have some friends who already had conviction that the law enforcement business was more than enough to justify their current valuation which made the optionality and ultimate timing of the military opportunity even more worth fully understanding as basically any profits from it would be immediately additive to the share price while simultaneously likely to increase the company's multiple as well. And feeling confident in the timing of it all meant derivatives became a viable investment strategy. Kind of the perfect storm of the research being worth the time investment.
They must have changed their policies since you wrote a few years ago. They are now the worst and if there was another website with equal distribution, I would never even consider posting there. I only did so because the VirTra story is so unknown and it's beneficial for the story to get out to a wider network IMO.
This was my exchange with the editorial staff if you feel like some entertaining reading from this awful website.
Good find, but I've seen this (and commented on the blue recoil kit pic!) and to me there's no great indication that this is VirTra's nor that this is any more than a demo.
1) many companies use co2 magazines. Cubic, InVeris, VirTra, Laser Shot, and any others could bring in Dvorak recoil kits.
2) The blue magazine in subsequent pic also doesn't appear to be VirTra's standard mag. Check out the difference in both color and design as compared to page 15 of https://cdn.hubilo.com/brochure/747945/BROCHURE-609be182d9f03b0517563567-1622054896228.pdf. I've also watched a bunch of VirTra youtube videos and don't see anything comparable.
3) VirTra's recoil kits already have their own laser; they don't need to integrate with a MILES laser.
4) This was posted around the time of the STE-LTS demos taking place, so I think this probably was part of a variety of demos and not "here's the new product we're using."
That said, I do actually think the bolt replacement _is_ VirTra's. I'm not 100% confident in what all the other companies' bolts look like but from the ones I could find, it looks closest to VirTra's. Additionally, color/design could of the mag could have been changed to fit military requirements. And lastly, it probably would be a requirement to initially integrate with MILES, especially if this was for STE-LTS (i'm not sure if SiVT is using MILES). Again, lots of "this could be something," but it's nothing definitive in my mind.
My overall thought is that the faster IVAS rolls out, the more there will be a need for VirTra's recoil kits. My guess is that VirTra's recoil kits would not being purchased solely because they allow jamming and reloading mechanically whereas other recoil kits can only do so electronically. I think there is more integration being done with regards to their ballistics calculator and lasers integrated into the weapon itself and not attached. Otherwise, why wouldn't the Army have started to procure these great recoil kits in 2019 once VirTra had the jamming/reload patents?
SAM-T simulators (InVeris product) are still in existence, so I don't see recoil kits being used for simulators. This basically only leaves IVAS related simulations changing right now. So any recoil kit sales should be directly related to IVAS units deployed. If there are only 100 IVAS units, there's no need for 10,000 recoil kits. If there are 100,000 IVAS units, there is a much higher need for 100,000 recoil kits. While the ratio may not be 1:1, there will be a directly correlated relationship.
I guess what i'm trying to understand is what quantities will we see each year.
120k units is a number i've seen, but i've never heard it called "the minimum units supplied." We do know that the contract is a minimum of 5 years. so is the 120k units expected to be delivered over 5 years, so roughly 25k units per year? Then why are they already requesting 29k the first year?
Ultimately we know that revenues in '22 won't be $100M no matter what contract comes through, but opportunity over 5 years might be
https://www.asafm.army.mil/Portals/72/Documents/BudgetMaterial/2022/pbr/FY22_PB_brief_28MAY21.pdf
Slide 14 --- FY'21 == 26,304, FY'22=29,237 IVAS units delivered
From Intevac conference call, they suggesed 120k units would be delieverd over 5 years. I haven't seen that number clarified/confirmed anywhere else, but since Intevec has been working with Microsoft since 2018, i imagine this is correct
I need to reread prior cc's, but i don't think CEO tends to give firm timelines on too much and therefore the following line of commentary makes me think he has a firm end date in mind. This means waiting to build your position is a bet that one can purchase everything they want at the price they're waiting for before an announcement comes. I'm not interested in that game and already have a more than full position.
From Q2 2020 call:
"in last July, we engaged JL O’Connell & Associates to help advise us and broker relationships with military leaders and decision makers. Those investments, among others, have been gaining traction and they are beginning to bear fruit. There is tangible progress here, but given the sensitivity of some of these developments, we are not yet in a position to discuss anything in detail. However, we did want to share that there has been progress with the military market, particularly over the last quarter, and the pipeline has never been stronger than it is today. We will hopefully have some updates to share in the coming quarters, so please stay tuned."
... 2 quarters later ...
Q4 2020 call:
"On our last call, we discussed how the ADMIRE contract demonstrates the military's appetite for our solutions, as well as our ability to customize our products' functionality to seamlessly integrate with the military's training programs. Companies partner with us because we have a key piece to the puzzle that they lack: we can leverage our industry expertise and IP portfolio to partner with a larger player who has already built a relationship with key decision makers. That sales strategy by supplying a critical missing piece to help a large player better perform on a contract is one that we believe will continue to be an effective way for VirTra to expand further into the military market.
And indeed, we've already seen evidence of it in 2021. Due to the sensitive nature of some of our current work, we're constrained in what we can disclose at this time, but we hope to provide more details on the strategy and our progress later in the year. So, please stay tuned. "
and the recent call in May:
"We also understand that government agencies and prime contractors seek out well-capitalized firms for the larger size contracts. So while our track record of coming through for customer spans nearly three decades, the market need for our simulators, our training curriculum, our recoil kits, and our solutions have also grown much larger in size. With our bolstered balance sheet, we can increase our production capabilities, which should eliminate those potential concerns and provide prospects with the peace of mind that we will meet their needs. We believe this capital may help secure larger sales into the future as well. With the amount of demand we've seen from both the law enforcement community and the military, we intend to expand our production capabilities to fulfill larger orders faster.
In fact, as I speak to you today, our company is adding the second shift in our production department to help keep up with market demand for our products. In my opening remarks, I also discussed how VirTra has expanded. The proceeds from this raise will be used in our expansion efforts as we invest in the products, in the staff and an infrastructure to take VirTra to the next level. Please stay tuned for further updates on this front.
With our enhanced balance sheet, VirTra has never been in a better position than it is today to grow. While we always evaluate the business through a long-term lens with $4.4 million in revenue in the first quarter and $16.1 million in backlog, it appears that we're on track for another strong year. In fact, based on our current cash, market position and the prospects in front of us, we believe we are poised to substantially grow the business in the next few years. Of course, that is not guaranteed, but we are cautiously optimistic that it is achievable based on what we know today."
I did find that VirTra has supplied a couple simulators to the Army over the last few years, but these hardly seem appropriate to put the Army logo on a brochure.
List: https://www.fpds.gov/ezsearch/search.do?q=virtra+CONTRACTING_AGENCY_NAME%3A%22DEPT+OF+THE+ARMY%22&s=FPDS.GOV&templateName=1.5.1&indexName=awardfull&sortBy=SIGNED_DATE&desc=Y
* Sept '20 order to be delievered by Sep '21: "The purpose of this Firm-Fixed Price (FFP) deliver order is to procure the VirTra V300 System with associated parts, equipment and accessories on behalf of the US Army Criminal Investigation Command (USACIDC)."
* Mar '19 order deliverd in May '19: Firearms Trainer System Upgrade
and then a couple more tiny orders. None of these seem to point to "put the Army logo on our brochure" type of deal, though.
For context, VirTra has been partnering (i presume) with ACME to integrate the GAR into their simulations (https://www.virtra.com/tool/military-accessories/) going at least back to september 2020 (https://web.archive.org/web/20200926174151/https://www.virtra.com/tool/military-accessories/).
What's interesting about the GAR is that "GAR® is a patented, all-electric, plug-it-into-the-wall system. A replica weapon mounts on a GAR® recoil cradle that provides the motion. It’s driven by offboard electronics and managed by simple, powerful software." I can't imagine the Army wants to use plugged-in weapons during real training exercises, but who knows.
I don't know what to make of this, but GSA Advantage already lists M249 from VirTra and has since at least May.
M240
M249
You're grasping at straws here. An IDIQ worth "up to $X" is not guaranteed money and it won't be nor ever has been included in the backlog nor bookings.
For example, The $5M IDIQ signed in 2019 that CBP just placed their $800k order under is not all considered backlog. Neither is the $23M IDIQ signed with CBP in 2016 that has only placed $6m worth of orders.
do you care to share the company?
is this MVIS? I haven't been able to identify other company's subcontracting for IVAS. But i haven't really checked all that much
Only placed orders go into the backlog. I think you are assuming a signed contract is the same thing as a placed order. A signed contract could be an IDIQ with no orders or only a single small order.
I'm not expecting the Army would place a $10M order off the bat causing a giant spike in bookings and/or backlog. I think we'll slowly see a change in gross margins, inventory, and bookings over the coming 2-3 quarters as the ramp up happens.
----
Another reason why i think the raise happened when it did is because that is when Microsoft announced their $22B IVAS contract. If VirTra is a sub to MSFT, then a production order for MSFT = follow on production orders for VirTra.
> I do not believe it is legal to have a signed contract not disclosed in the backlog
We asked CEO this question. He gave off the impression (my interpretation) that he had given this thought before. His response was that there was no legal requirement to disclose a contract unless it was material to the sustainment of the company. Meaning if VirTra can survive on LE alone, any military contract would not _need_ to be disclosed. I could have misheard or CEO could be making up excuses. Ask the CEO/IR this yourself and let me know!
But you're right, any military work would show up in the backlog assuming an order was placed and was not fulfilled. With that in mind, here's how CEO ended his prepared commentary on the previous call,
https://www.sec.gov/Archives/edgar/data/0001085243/000149315221015439/xslF345X03/ownership.xml
&
https://www.sec.gov/Archives/edgar/data/0001085243/000149315221015437/xslF345X03/ownership.xml
The options expired next week. Plus, this is trivial nominal value. Nothing to read in to here
From that link:
This mention is about the ADMIRE deal VirTra is a part of; nothing new. That work isn’t supposed to finish until next summer, either. With that and the fact that IST has been doing this for 10 years, it’s nothing but speculation if VirTra will take any part in subsequent work IMO
I'm fairly certain a company with 20M cash and no debt >>> a company with 20M cash and 20M debt. and the military probably sees things similarly when selecting vendors to help build a core functionality of their future.
Does it immediately hurt shareholders? Yes, obviously. But the hope is that the CEO chose this route because the opportunity has a high enough ROI to make the dilution worthwhile over the long term.
Have you listened to the CEO recently? The money is not going to be used to advertise for simulator sales to law enforcement. The money is going to be used for the 30% headcount growth that has mostly already happened, inventory to fulfill upcoming orders, and to maintain a strong balance sheet such that the military can have trust that VirTra will avoid being a bottleneck in their plans.
Army budget for FY22 and beyond. Read the 50 pages pertaining to PE 0604121A to understand timing, budget, and some detailed descriptions of different programs within IVAS.
https://www.asafm.army.mil/Portals/72/Documents/BudgetMaterial/2022/Base%20Budget/rdte/RDTE_BA_4_FY_2022_PB.pdf
I see three options for how VirTra or recoil kits fit into the Army contracts and I’ve listed them below by likelihood. I will call out that I think it makes the most sense that recoil kits are consistent across the entire Army training program (IVAS) and therefore likely have already been awarded rather than waiting on new contracts.
1) SiVT via Microsoft. SiVT consists of TSS and TMT (and OWT but not relevant) which we know help simulate training operations. This work is already been awarded to Cole Engineering on June 14 but the prototype work was awarded to Microsoft (maybe they subcontracted? Idk) While it doesn't make a lot of sense to integrate hardware into a software contract, TSS/TMT requires weapon integration to run. The raise timing happening once the Microsoft deal was announced is another coincidence that aligns with this.
2) STE-LTS: https://nstxl.org/opportunity/synthetic-training-environment-live-training-system-ste-lts/ this deal is set to be awarded (according to TSIS conference, was supposed to be yesterday) in the next few days and, again, according to TSIS commentary, there will be multiple awards given. I don’t believe this is the deal because it’s been in RFP since only January and prior to that it was set to be a later program (like 2024 and beyond) and only decently pushed to be done earlier by Congress. Bobs commentary makes it seem like hiring and the raise has already happened In May and this contract, while In negotiations in April, has not been awarded. This is a ton of hiring and dilution without a guarantee of a deal. That said, this contract is so fitting to VirTra’s capability that it is hard to overlook. They could solve the entire direct fire problem space by figuring a way for the recoil kit to efficiently interface with the IVAS puck. This isn’t necessarily an easy technical challenge IMO, but it seems the most obvious solution that scales to years of technological advancement. If a weapon can interact with a computer in high fidelity (which CEO Ferris and the Army have both used to describe VirTras recoil kits and the army’s needs), they have created the e-bullet. VirTra’s recoil kit solves this problem currently with a laser, so it might be adequate for now while the ebullet tech is developed.
3) TADSS- I think this is a support service so I don’t know if it’d be Responsible for procuring new hardware, but the contract is held by Lockheed Martin and VirTra has a prior relationship with them. I need to go back to my notes and rewatch TSIS, but the TADSS presentation mentioned something about added capabilities than previously had. Maybe that’s augmenting current weaponry systems?
4) SVT — RFP I think will be sent out in q1 IIRC and won’t be Developed for a few years. The broad idea of the project matches VirTras capabilities, but none of the requirements have been finalized and then obviously not V published so it’s hard to speculate. But timing that far down the line doesn’t jive with commentary from the CEO
> Microsoft is supplying the system
Exactly! Microsoft is supplying the HUD and some part of the SiVT (I still don't understand what this is no matter how much i read. Is it a training tool? An idea? A platform of platforms?). The SiVT comprises of OWT, TSS, and TMT. All three of OWT, TSS, and TMT have been awarded by TReX.
> Are they going to find some other unrelated vendor to supply these components and try to figure out how to integrate them later?
The entire IVAS system is meant to be modular so in fact they can train on the HUD without new recoil kits and integrate them later. It's why you see so many images of the MILES system and other weapon attachments still being used during STP exercise photos. Two reasons why something would be delayed until a later time, like SVT and STE Live, is because the technology for that product isn't ready or alternatively the product being integrated into isn't ready. Dummying this down an example of building a car, a tire could be built many ways. A tire's design is also dependent on the axle's design. So tying this back to IVAS, the HUD and computer and TSS/TMT are all ahead of the weapon system in when they get productionalized and awarded. Now keep in mind that the weapon systems will very likely be tested in conjunction with anything along the way, but nothing would be finalized and contracts wouldn't be awarded. And IMO from reading conference calls and Army docs, nothing re: recoil kits or training simulation tools were finalized prior to 2021 and that is my point re: contracts; My point was not that whichever company will eventually be supplying recoil kits was never part of previous conversations or demos.
> Microsoft is the prime integrator on the contract which means (from what I can tell) they deliver the whole shebang
I don't think Microsoft is responsible for delivering everything. That seems awfully risky because Microsoft's specialty is in computer hardware and software and not weapon systems or training simulators. The Army wouldn't put the responsibility on Microsoft to source recoil kits or simulation training systems. This is demonstrated by TReX posting and giving awards for the past 3 years for many aspects of the IVAS program.
> why you think the recoil kits, training software and training management system would come later
The contract for TSS and TMT was just awarded on Monday. That's evidence that they came later. I don't really know what point you're trying to get across.
Want to message me on twitter under this name or at this email @gmail? I'm interested in talking more details on VirTra
My comment was only that the contracts you referenced were for the HUD and that contracts for weapons and the STE as a whole were always going to come after the HUD. So it was no wonder that nobody had won long term deals for weapon components. Prototypes for the STE virtual training have been built prior to long term contracts, but it's wasn't being done at scale so you wouldn't hear large prototype contracts being announced in this space.
Otherwise I agree with everything you said and military docs explain it the same way. IVAS is a system of systems and the HUD is only a component.
IMO nobody has put VirTra related components out there because early iterations of IVAS prototypes were for the HUD which is pretty much finished at this point. That system was the groundwork for which everything will interact.
STE TSS/TMT contracts only just got awarded this week which means there is finally some clarity on who will be building a couple of the key software components.
Virtual training system contracts will be some of the next dominoes to fall. It's still not clear to me through what program any weapon systems integrating into the initial SiVT will come through. It probably would be Microsoft as they own that scope.
thank you!
As far as current contracts go, it might be worth researching SiVT implementation details. I haven't found anything either, but thats the only program with significant budget for 2022
do you think we'll have backlog/revenue from the "big contract" by EOY? Otherwise what do you think will cause Q2/Q3 to be huge huge?
A buyout when there's a pending multi-million dollar contract opportunity with great law enforcement tailwinds seems like a terrible thing for shareholders. I'll wait two years for a chance at 100%+ growth rather than an immediate buyout.
Great find!
Really appreciate your perspective!
From the link you provided,
Great find. I saw this a few days ago and noticed The recoil component as well. Using pricing From a virtra catalog, I came up with VirTra revs for STP2 (3q19) = 185k. Revs for STP3 (3q20) = $700k. Revs for STP4 (2q21) = $2M.
I guess my confusion is with the HUD itself and STE. I haven’t followed this story beyond a few weeks ago, but I assumed STE was around before the HUD and was something separate. Doing research, there’s a STE Army team but I don’t see any team to build the HUD, which helped solidify this idea. But rereading this doc, you’re right, it could be that STE is part of the entire IVAS program which also includes the HUD.
(Keeping everything in a single reply) regarding ATMP, thank you for that comment! To be honest, I haven’t found anything from that deal that made me think it was anything More than support/servicing, but I haven’t found any other contracts (TReX or otherwise) that seem like VirTra could be a sub for. On a call with Bob yesterday, he mentioned that they want to try to sell through primes and he specifically mentioned both Microsoft and Lockheed, so I don’t know how to read into this any more. If they’re going through Microsoft, what contract will they be a sub for? I should look at the MSFT one as I skipped over that assuming they were only responsible for the HUD and none of the underlying software related to training itself.
I definitely believe whatever VirTra is part of something that aligns with the IVAS rollout and I have a significant stake in the company assuming such. I just can’t figure out where the connection is.