VirTra Inc (VTSI) 2023 Q3 法說會逐字稿

Good afternoon, and welcome to VirTra's third quarter 2023 earnings conference call. My name is Irene, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, John Givens; CFO, Alanna Boudreau; and Executive Chairman, Bob Ferris. Following the remarks, we will open the call for questions.

下午好，歡迎參加 VirTra 2023 年第三季財報電話會議。我叫艾琳，我是今天電話的接線生。加入我們今天的演講的是該公司的執行長約翰·吉文斯 (John Givens)；財務長阿蘭娜·布德羅；和執行主席鮑勃·費里斯。發言結束後，我們將開始提問。

But before we begin the call, I would like to provide VirTra's Safe Harbor statement that includes cautions regarding forward-looking statements made in during this call. During this presentation, management may discuss financial projections, information or expectations about the company's products and services or markets, or otherwise make statements about the future, which are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them unless required by law.

但在我們開始電話會議之前，我想提供 VirTra 的安全港聲明，其中包括有關本次電話會議期間做出的前瞻性陳述的警告。在本簡報中，管理層可能會討論有關公司產品和服務或市場的財務預測、資訊或預期，或以其他方式做出有關未來的陳述，這些陳述是前瞻性的，並受到許多風險和不確定性的影響，這些風險和不確定性可能導致實際結果發生變化。與所做的陳述有重大差異。除非法律要求，否則本公司不承擔任何更新義務。

Finally, I'd like to remind everyone that this call will be made available for replay via link in the Investor Relations section of the company's website at www.virtra.com.

最後，我想提醒大家，本次電話會議將透過公司網站 www.virtra.com 投資者關係部分的連結進行重播。

Now I'd like to turn the call over to VirTra's CEO, Mr. John Givens. Thank you, and you may proceed.

現在我想將電話轉給 VirTra 的執行長 John Gives 先生。謝謝你，你可以繼續了。

Thank you, operator, and thank you, everyone, for joining us this afternoon. After the market closed today, we issued a press release that provided our financial results for the third quarter ended September 30, 2023. Along with highlighted business accomplishments, we also filed our 10-Q with the SEC today, which is available for your review at your discretion.

謝謝接線生，也謝謝大家今天下午加入我們。今天收盤後，我們發布了一份新聞稿，提供了截至 2023 年 9 月 30 日的第三季財務業績。除了突出的業務成就外，我們今天還向 SEC 提交了 10-Q 報告，供您審核由您自行決定。

As a brief overview for today's call, I'll begin by providing highlights for the third quarter of 2023 and summarizing our operations and initiatives before passing the call to Alanna to discuss our financial results in more detail. Bob will then come on to discuss our recent V-XR product development. And after that, I'll provide some concluding remarks before moving to the Q&A. And with that, we'll begin.

作為今天電話會議的簡要概述，我將首先介紹 2023 年第三季的亮點，並總結我們的營運和舉措，然後將電話轉給 Alanna，更詳細地討論我們的財務業績。然後 Bob 將討論我們最近的 V-XR 產品開發。之後，我將在進行問答之前提供一些結論性意見。接下來，我們就開始吧。

In Q3, we build on our success from the first half of the year, advancing our operations and sales efforts further. These improvements continue to show up in our financial performances with net income climbing over $2.4 million from the previous year and revenue increasing by 54% year over year. Operationally, we are finalizing our machine shop consolidation into a single facility. While being mindful to minimize the impact of our delivery schedule, we're also planning a $1.4 million capital investment to significantly enhance our manufacturing capability and speed and most importantly, the quality of our product. As a result, we're improving the customer experience while also reducing our costs.

在第三季度，我們在上半年的成功基礎上，進一步推動我們的營運和銷售工作。這些改善持續體現在我們的財務表現中，淨利潤比上年攀升超過 240 萬美元，營收年增 54%。在營運方面，我們正在最終將機械車間整合為一個工廠。在註意盡量減少交付計劃的影響的同時，我們還計劃投資 140 萬美元，以顯著提高我們的製造能力和速度，最重要的是提高我們的產品品質。因此，我們在改善客戶體驗的同時也降低了成本。

We've established the right processes to scale our operation effectively without compromising the quality of our final product. Our operational efficiencies set the stage for increasing our sales opportunities. We maintain a robust pipeline of potential agreements with in the law enforcement and military markets. With the recent introduction of our V-XR training solution, we have further accelerated this momentum. Since its debut last month at IACP, V-XR, an innovative headset-based training platform that transcends the traditional shoot-don't-shoot scenario has sparked a wave of interest.

我們已經建立了正確的流程來有效地擴大我們的營運規模，同時又不影響最終產品的品質。我們的營運效率為增加銷售機會奠定了基礎。我們與執法和軍事市場保持強大的潛在協議管道。隨著我們最近推出 V-XR 培訓解決方案，我們進一步加速了這一勢頭。自上個月在 IACP 上首次亮相以來，V-XR 這一創新的耳機訓練平台超越了傳統的「不開槍」場景，引發了人們的興趣。

V-XR provides unprecedented value to our law enforcement and government customers, but also the security agencies, the hospital security teams, educational institutions, and criminal justice academies. And by focusing on the development of critical interpersonal skills, these professionals will be better equipped to navigate sensitive situations, diffused potential conflict, increase their cultural awareness, and build stronger relationships with the communities that they serve. V-XR's extensive range of use cases gives it that unique position in the market.

V-XR 為我們的執法和政府客戶以及安全機構、醫院安全團隊、教育機構和刑事司法學院提供了前所未有的價值。透過專注於發展關鍵的人際交往能力，這些專業人員將能夠更好地應對敏感情況，化解潛在衝突，提高文化意識，並與他們所服務的社區建立更牢固的關係。 V-XR 廣泛的用例使其在市場上擁有獨特的地位。

Following its debut in October, we received a strong response from the market with hundreds of inquiries already coming in from agencies looking to advance their team's soft skills. We are currently accepting pre-orders with deliveries expected to begin in April of 2024. Bob will delve into the product and how it's transforming the sector, but we already see it as a considerable opportunity. As we roll out V-XR, we have a longer-term plan of offering annual subscriptions for access to our training content library.

自 10 月首次推出以來，我們收到了市場的強烈反響，來自希望提高團隊軟技能的機構已收到數百份詢問。我們目前正在接受預訂，預計將於 2024 年 4 月開始交付。鮑勃將深入研究該產品以及它如何改變該行業，但我們已經將其視為一個巨大的機會。隨著我們推出 V-XR，我們制定了一項長期計劃，即提供年度訂閱以存取我們的培訓內容庫。

Personally, we believe that our content library is the most comprehensive and effective in the industry as made possible by our V3 technology. We expect over time, this offering will enhance our predictable reoccurring revenue streams, bringing us closer to our goal of 30% of total revenue.

就我個人而言，我們相信我們的內容庫是業界最全面、最有效的，這要歸功於我們的 V3 技術。我們預計，隨著時間的推移，這項服務將增強我們可預測的經常性收入來源，使我們更接近佔總收入 30% 的目標。

Our commitment to innovation doesn't stop at V-XR. We are actively advancing internal research and development projects surrounding the implementation of artificial intelligence into VirTra's content creation and data analytics processes. As we continue to push the boundaries of immersive trainings solutions, AI will play a pivotal role in enhancing our capabilities and driving further success.

我們對創新的承諾不止於 V-XR。我們正在積極推動內部研發項目，圍繞將人工智慧實施到 VirTra 的內容創建和數據分析流程中。隨著我們不斷突破沉浸式培訓解決方案的界限，人工智慧將在增強我們的能力和推動進一步成功方面發揮關鍵作用。

First and foremost, AI will transform our content creation process. By leveraging advanced algorithms and machine learning techniques, we will generate highly realistic and dynamic content assets at an unprecedented pace. This means that our customers will have access to a broader range of training content and scenarios allowing for more comprehensive and realistic simulations.

首先，人工智慧將改變我們的內容創作流程。透過利用先進的演算法和機器學習技術，我們將以前所未有的速度產生高度真實和動態的內容資產。這意味著我們的客戶將能夠獲得更廣泛的訓練內容和場景，從而實現更全面、更真實的模擬。

Furthermore, AI will enable us to analyze vast amounts of data collected during training sessions. With the help of sophisticated algorithms, we can extract valuable insight and patterns from this data, providing our customers with actionable feedback and performance matrix. This data-driven approach will not only enhance the effectiveness of our training programs but will allow for targeted improvements and customization based on individual needs.

此外，人工智慧將使我們能夠分析培訓期間收集的大量數據。借助複雜的演算法，我們可以從這些數據中提取有價值的見解和模式，為客戶提供可操作的回饋和績效矩陣。這種數據驅動的方法不僅可以提高我們培訓計劃的有效性，而且可以根據個人需求進行有針對性的改進和客製化。

Additionally, AI will play a significant role in enhancing the adaptability and responsiveness of our simulations. By continuously analyzing user interactions and feedback, AI algorithms can dynamically adjust and fine-tune the training experience in real time. This adaptive learning capability ensures that our simulators remain relevant, engaging, and effective for each user, maximizing their training outcomes.

此外，人工智慧將在增強模擬的適應性和響應能力方面發揮重要作用。透過不斷分析使用者互動和回饋，人工智慧演算法可以即時動態調整和微調訓練體驗。這種自適應學習功能可確保我們的模擬器對每個使用者保持相關性、吸引力和有效性，從而最大限度地提高他們的訓練成果。

The utilization of AI in VirTra's content creation and data analytics processes marks an exciting chapter in our journey. By harnessing the power of advanced algorithms and machine learning, we are poised to deliver even more immersive and effective training experiences. Through AI driven data analytics, we will gain valuable insight that will guide our decision making and ensure we remain at the forefront of the industry.

在 VirTra 的內容創建和數據分析流程中使用人工智慧標誌著我們旅程中激動人心的一章。透過利用先進演算法和機器學習的力量，我們準備提供更身臨其境和有效的培訓體驗。透過人工智慧驅動的數據分析，我們將獲得寶貴的見解，指導我們的決策並確保我們保持在行業的前沿。

In addition to these product innovations, we are focused on revamping our sales and operation functions. On our last update call, I shared our plans to realign the sales force into designated territories. We expect this to increase direct engagement with existing and potential customers to cultivate important relationships and expand our footprint.

除了這些產品創新之外，我們還專注於改善我們的銷售和營運職能。在我們上次的更新電話會議上，我分享了我們將銷售團隊重新調整到指定區域的計劃。我們希望這能夠增加與現有和潛在客戶的直接接觸，以培養重要的關係並擴大我們的足跡。

We've since made substantial progress in this approach, successfully establishing our presence in all our outlying territories, we've placed particular emphasis on the international market recognizing the need for dedicated international sales personnel to tap into the expanding global landscape, we expect this to bolster our total pipeline of opportunities. This quarter, we revised our sales initiative -- incentive program to not only attract the industry's top talent, but also reward performance to retain the best talent. We're fostering an environment that rewards performance and dedication.

此後，我們在這種方法上取得了實質進展，成功地在所有偏遠地區建立了我們的業務，我們特別重視國際市場，並認識到需要專門的國際銷售人員來開拓不斷擴大的全球格局，我們預計這一點加強我們的整體機會管道。本季度，我們修改了銷售舉措－激勵計劃，不僅吸引業界頂尖人才，也透過獎勵業績留住最優秀的人才。我們正在創造一個獎勵績效和奉獻的環境。

To further support this initiative, we've added sales support specialists to our team. Their role is to streamline our sales process and work in tandem with our sales representatives who are now more focused than ever on generating new business. These sales specialists are strategically located in Arizona and Florida, offering extended support to our customers and acting as a catalyst to move sales through the pipeline efficiently.

為了進一步支持這項計劃，我們在我們的團隊中增加了銷售支援專家。他們的職責是簡化我們的銷售流程，並與我們的銷售代表合作，現在銷售代表比以往任何時候都更專注於創造新業務。這些銷售專家策略性地分佈在亞利桑那州和佛羅裡達州，為我們的客戶提供廣泛的支持，並作為有效推動銷售的催化劑。

In addition, we've refined our internal sales procedures to enhance monitoring and advancement of potential deals. These improvements enable more frequent and meaningful touch points with law enforcement agencies and military departments. Our goal is to provide unparalleled customer service responding properly to their needs and ensuring the seamless journey from initial contact to close. The enhancements we've made to our sales infrastructure reflects a strategic shift design to propel us forward.

此外，我們也完善了內部銷售程序，以加強對潛在交易的監控和推進。這些改進使得與執法機構和軍事部門的接觸更加頻繁和有意義。我們的目標是提供無與倫比的客戶服務，正確回應他們的需求，並確保從最初接觸到結束的無縫過程。我們對銷售基礎設施所做的改進反映了推動我們前進的策略轉變設計。

It's with this context of transformation that we welcome Tony Cianflone to the VirTra's team as our new VP of Sales. With his rich history of sales leadership, Tony has already begun to infuse our sales strategies with new insights and proven tactics. As Tony joins the fold and gets acclimated to our operations, we look forward to his expertise to further hone VirTra's market opportunities.

正是在這種轉型背景下，我們歡迎 Tony Cianflone 加入 VirTra 團隊，擔任我們新的銷售副總裁。憑藉豐富的銷售領導經驗，托尼已經開始為我們的銷售策略注入新的見解和行之有效的策略。隨著 Tony 加入並適應我們的運營，我們期待他的專業知識進一步磨練 VirTra 的市場機會。

These significant changes with our sales functions are not just promising for the future, they're already having influence on our financial results. Our recent progress is beyond our initial projections, and we're optimistic that as these initiatives solidify, our booking rates will escalate in tandem. While these enhancements were only recently implemented and thus fully reflected in the third -- and not fully reflected in the third quarter results, we're seeing indications of future benefits. Just to be clear, all of these territories are now up and running, and there are sales individuals hired working these territories along with the leadership and this sales support specialists.

我們銷售職能的這些重大變化不僅對未來充滿希望，而且已經對我們的財務表現產生了影響。我們最近的進展超出了我們最初的預測，我們樂觀地認為，隨著這些措施的鞏固，我們的預訂率將同步上升。雖然這些增強功能最近才實施，因此在第三季度中得到了充分體現，並且沒有在第三季度業績中得到充分體現，但我們看到了未來效益的跡象。需要明確的是，所有這些區域現在都已啟動並運行，並且僱用了銷售人員以及領導層和銷售支援專家來工作這些區域。

Looking closer to how end markets performed in the quarter. In Q3, our government revenue increased by 71% to $7.3 million from $4.3 million in the prior year. This growth is attributable to a jump in design and prototyping revenue, complemented by stronger simulator and accessory sales. Internationally, our revenue was $180,000, a decrease from $380,000 in 2022. This can primarily be attributed to the longer lead times for the international pipeline. And while our international pipeline has grown, the current geopolitical tension and US government budgeting issues have affected the expected release dates of those opportunities. We do expect higher close rates in the next several quarters as that funding and those projects are released.

密切關注本季終端市場的表現。第三季度，我們的政府收入從前一年的 430 萬美元增加到 730 萬美元，成長了 71%。這一成長歸因於設計和原型製作收入的成長，以及模擬器和配件銷售的強勁補充。在國際方面，我們的收入為 18 萬美元，較 2022 年的 38 萬美元有所下降。這主要歸因於國際管道的交貨時間較長。儘管我們的國際管道有所增長，但當前的地緣政治緊張局勢和美國政府預算問題影響了這些機會的預期發布日期。我們確實預計，隨著資金和專案的釋放，未來幾季的成交率將會更高。

We have reported continued growth from our subscription training equipment partnership and STEP program, which provides reoccurring revenue for VirTra and offers an easy on-ramp for the smaller agencies interested in our solution but are perhaps budgeted constrain for an outright purchase. This also gives our staff another tool in closing the sale. Currently, our reoccurring revenue, including warranty revenue, represents 25% of the total quarterly revenue, but we expect this to increase in the future.

我們報告了我們的訂閱培訓設備合作夥伴關係和STEP 計劃的持續增長，該計劃為VirTra 提供了經常性收入，並為對我們的解決方案感興趣但可能受到直接購買預算限制的小型機構提供了輕鬆的入口。這也為我們的員工提供了另一種完成銷售的工具。目前，我們的經常性收入（包括保固收入）佔季度總收入的 25%，但我們預計這一比例未來會增加。

Regarding our military operations, as of Q3 we continue to work ahead of initial expectations. Our nurturing of a strong pipeline of leads has resulted in military related contracts reaching $4 million year to date, an achievement that notably surpassed our goal set at the onset of the Department of Defense's fiscal year 2024 in October.

關於我們的軍事行動，截至第三季度，我們的工作繼續超出最初的預期。我們培育了強大的潛在客戶管道，今年迄今為止，軍事相關合約已達到 400 萬美元，這一成就明顯超過了我們在國防部 2024 財年 10 月開始時設定的目標。

While the competition and sensitive nature of these contracts warrants discretion in public disclosures, our confidence in VirTra's potential for further expansion in the military section remains high. Overall, the outlook for the military small arms training acquisition is likely to focus on modernization, technology driven training, realism, safety, and interoperability. Military small arms training is shifting towards more realistic and mission specific scenarios. VirTra's products and training programs are designed specifically to replicate real-world conditions, including urban warfare, counterterrorism, and asymmetric warfare.

雖然這些合約的競爭性和敏感性需要公開披露，但我們對 VirTra 在軍事領域進一步擴張的潛力仍然充滿信心。總體而言，軍事小型武器訓練採購的前景可能集中在現代化、技術驅動的訓練、現實性、安全性和互通性。軍事小型武器訓練正在轉向更現實和針對特定任務的場景。 VirTra 的產品和培訓計劃專門為複製現實世界條件而設計，包括城市戰、反恐和不對稱戰爭。

As defense strategies evolve, the acquisition of small arms training systems and equipment that remain as important aspect of military readiness and effectiveness. As we tailor our products for this market, VirTra is positioned as a Tier 1 provider of our revolutionary recoil kit capabilities for military weapons, such as the M4 and the M249.

隨著國防戰略的發展，小型武器訓練系統和設備的採購仍然是軍事戰備和有效性的重要方面。當我們為這個市場量身打造產品時，VirTra 被定位為我們革命性反沖套件功能的一級供應商，適用於 M4 和 M249 等軍事武器。

I'll now turn the call over to Alanna to further discuss the financial results and their details. Alanna?

我現在將把電話轉給阿蘭娜，進一步討論財務表現及其細節。阿蘭娜？

Thank you, John, and good afternoon, everyone. It's a pleasure to be speaking to you today to review our unaudited financial results for the third quarter and first nine months ended September 30, 2023. Our total revenue for the first nine months of 2023 increased 42% to $27.9 million from $19.7 million in the prior year period. For the third quarter of 2023, revenue increased 54% to $7.6 million from $4.9 million in the third quarter of 2022. The increase in revenue was driven by our continued improvement in sales strategy and continued demand for our training solutions.

謝謝約翰，大家下午好。很高興今天與您交談，回顧我們截至2023 年9 月30 日的第三季度和前九個月的未經審計的財務業績。我們2023 年前九個月的總收入增長了42%，從2023年1970 萬美元增至2790 萬美元。上一年期間。 2023 年第三季度，營收從 2022 年第三季的 490 萬美元成長 54% 至 760 萬美元。營收的成長得益於我們銷售策略的持續改善以及對培訓解決方案的持續需求。

Our gross profit for the first nine months of 2023 increased 67% to $18.3 million or 65% of revenue compared to $10.9 million or 56% of revenue in the prior year period. For the third quarter, gross profit increased 114% to $5.4 million or 71% of revenue from $2.5 million or 51% of revenue in the third quarter of 2022. The increase in gross profit margin for both the three- and nine-month periods was due to increased sales while maintaining cost of sales in line with 2022 levels.

2023 年前 9 個月的毛利成長了 67%，達到 1,830 萬美元，佔營收的 65%，而去年同期為 1,090 萬美元，佔營收的 56%。第三季的毛利成長了114%，達到540 萬美元，佔營收的71%，而2022 年第三季的毛利為250 萬美元，佔營收的51%。三個月和九個月期間的毛利率增幅均為由於銷售額增加，同時銷售成本維持在 2022 年水準。

Our net operating expense for the first nine months increased to $11.2 million from $10.3 million in the prior year period. Net operating expense for the third quarter of 2023 was $3.7 million compared to $3.6 million in the third quarter of last year. The increase in net operating expense is primarily due to an increase in salaries and benefits resulting from addition of new staff, expenses for the new Orlando office, increased R&D spend, and implementation expenses related to the launch of the new ERP system.

我們前 9 個月的淨營運費用從去年同期的 1,030 萬美元增加到 1,120 萬美元。 2023 年第三季的淨營運費用為 370 萬美元，而去年第三季為 360 萬美元。淨營運費用的增加主要是由於增加新員工、新奧蘭多辦公室費用、研發支出增加以及與推出新 ERP 系統相關的實施費用而導致的工資和福利增加。

Our operating income jumped to $7.1 million from the first nine months of 2023, a $6.4 million increase from $0.6 million in the prior year period. For the third quarter of 2023, operating income increased by $2.8 million to $1.7 million from negative $1.1 million in the third quarter of 2022.

我們的營業收入從 2023 年前 9 個月躍升至 710 萬美元，比去年同期的 60 萬美元增加了 640 萬美元。 2023 年第三季度，營業收入從 2022 年第三季的負 110 萬美元增加到 170 萬美元，增加了 280 萬美元。

Net income for the first nine months of 2023 was $5.6 million or $0.51 per diluted share, an improvement compared to the net income of $0.6 million or $0.05 per diluted share in the year prior. And net income for the third quarter of 2023 totaled $1.6 million or $0.15 per diluted share, which represents an increase compared to the net income of negative $0.8 million or negative $0.7 (sic - see slide "$0.07") per diluted share in the third quarter of 2022.

2023 年頭 9 個月的淨利潤為 560 萬美元，即稀釋後每股收益 0.51 美元，較前一年的淨利潤 60 萬美元，即稀釋後每股收益 0.05 美元有所改善。 2023 年第三季的淨利潤總計為160 萬美元，即稀釋後每股收益0.15 美元，較第三季度每股稀釋收益負80 萬美元，即負0.7 美元（原文如此- 參見幻燈片“0.07 美元」）有所增加2022 年。

For the first nine months of 2023, adjusted EBITDA, a non-GAAP metric increased to $9.4 million from negative $1.7 million in the prior year period. Adjusted EBITDA for the third quarter of 2023 increased to $2.9 million from negative $0.5 million in the third quarter of 2020.

2023 年前 9 個月，調整後 EBITDA（非 GAAP 指標）從去年同期的負 170 萬美元增至 940 萬美元。 2023 年第三季調整後 EBITDA 從 2020 年第三季的負 50 萬美元增至 290 萬美元。

Now turning to our bookings and backlog. We define bookings as the total of newly signed contracts and purchase orders received in a defined period. For the first nine months, we have received bookings totaling $20.1 million. For the third quarter of 2023, we received bookings totaling $7.3 million. As John mentioned, we anticipate that these will gain momentum as our sales success initiatives begin to take effect.

現在轉向我們的預訂和積壓。我們將預訂量定義為在規定時間內新簽訂的合約和收到的採購訂單的總數。前 9 個月，我們收到的預訂總額為 2,010 萬美元。 2023 年第三季度，我們收到的預訂總額為 730 萬美元。正如約翰所提到的，我們預計隨著我們的銷售成功計劃開始生效，這些將獲得動力。

Now looking at our backlog, which we define as the accumulation of bookings from signed contracts and purchase orders that are not yet started or incomplete and cannot be recognized as revenue until delivered in a future periods. As of September 30, 2023, our backlog totaled $16 million. The breakout of this backlog includes $7.3 million in capital, $5.9 million in service and warranties, and $2.8 million in STEP contracts. And based on current contract delivery dates, we expect the majority of new capital bookings received in the first nine months of the year to be converted into revenue in 2023.

現在看看我們的積壓訂單，我們將其定義為尚未開始或不完整的已簽署合約和採購訂單的預訂累積，只有在未來期間交付才能確認為收入。截至 2023 年 9 月 30 日，我們的積壓訂單總額為 1,600 萬美元。此次積壓訂單的突破包括 730 萬美元的資本、590 萬美元的服務和保固以及 280 萬美元的 STEP 合約。根據目前合約交付日期，我們預計今年前 9 個月收到的大部分新資本預訂將在 2023 年轉化為收入。

As a reminder, our service warranties and STEP backlog is revenue that will be recognized on a straight-line basis over the coming years. In addition to the backlog, there is about $6 million in renewable STEP contracts that would represent an additional revenue for the next five years. Historically, we have greater than 95% renewal rate on our STEP contracts.

提醒一下，我們的服務保固和 STEP 積壓是未來幾年將按直線法確認的收入。除了積壓訂單外，還有約 600 萬美元的可續約 STEP 合同，這將代表未來五年的額外收入。從歷史上看，我們的 STEP 合約續約率超過 95%。

And finally, to our balance sheet. As of September 30, 2023, we had unrestricted cash and cash equivalents of $17.2 million, an increase from $13.3 million at June 30, 2023. And from a working capital standpoint, at the end of third quarter, we had $29.2 million in working capital, an increase from $26.6 million at the end of Q2. We did have an increase in our inventory, largely due to the development projects we've been working on.

最後，我們的資產負債表。截至2023 年9 月30 日，我們的無限制現金和現金等價物為1,720 萬美元，較2023 年6 月30 日的1,330 萬美元有所增加。從營運資金的角度來看，截至第三季末，我們的營運資金為2,920 萬美元，較第二季末的 2,660 萬美元有所增加。我們的庫存確實有所增加，這主要是由於我們一直在進行的開發項目。

For additional details about our financial results, please reference to 10-Q, which was filed earlier today. And that concludes my prepared remarks, and I will turn it over to Bob to discuss some of the improvements we've made with our technology.

有關我們財務業績的更多詳細信息，請參閱今天早些時候提交的 10-Q。我準備好的發言就到此結束，我將把它交給鮑伯討論我們在技術上所做的一些改進。

Thank you, Alanna, and good afternoon, everyone. I'd like to take a step back and provide a broader perspective on our trajectory and how our recent technological strides are aligning with overarching industry trends. As we navigate our leading position in the training landscape, innovation remains at the forefront of our strategy. It's clear that a key strength of ours lies in recognizing the unique challenges faced by each of our customers.

謝謝你，阿蘭娜，大家下午好。我想退後一步，對我們的發展軌跡以及我們最近的技術進步如何與整體行業趨勢保持一致提供更廣泛的視角。當我們在培訓領域佔據領先地位時，創新仍然是我們策略的前沿。顯然，我們的關鍵優勢在於認識到每個客戶所面臨的獨特挑戰。

The V-XR training solution is more than a new headset product. It embodies our response to an increasingly complex world that demands a sophisticated approach to training beyond the conventional. Its design is more than a shoot-don't-shoot trainer, as John mentioned, extending its scope beyond mere marksmanship improvement. Rather, it cultivates critical soft skills in high pressure situations. The V-XR is a low-profile lightweight system that immersive users in a span situations containing lifelike characters.

V-XR 培訓解決方案不僅僅是一款新的耳機產品。它體現了我們對日益複雜的世界的反應，這個世界需要超越傳統的複雜培訓方法。正如約翰所提到的，它的設計不僅僅是一個「射擊不射擊」訓練器，它的範圍超出了單純的射擊技巧改進。相反，它培養高壓情況下的關鍵軟技能。 V-XR 是一款低調的輕量系統，可讓使用者沉浸在包含栩栩如生的角色的跨距場景中。

Our 3D human characters captured by our V3 capture studio are displayed in front of students. These characters are highly realistic and include eye and mouth movements that look natural and eliminate the uncanny valley. This plagues all of our competitors and the difference between what they offer and what we offer is just undeniable.

我們的 V3 捕捉工作室捕捉到的 3D 人物角色展示在學生面前。這些角色高度逼真，眼睛和嘴巴的動作看起來很自然，消除了恐怖谷的感覺。這困擾著我們所有的競爭對手，他們提供的產品和我們提供的產品之間的差異是不可否認的。

The system can be instructor-led or entirely self-driven making it a flexible training solution for agencies. It offers a variety of lessons across three learning modules, which we call the three Es, educate, experience, and engage. Users can learn skills like interviewing, de-escalation, weapon transitions, decision making, and more. Our engage module, for example, provides unmatched training with realistic simulated individuals experiencing mental health crises.

該系統可以由講師指導或完全自我驅動，使其成為機構靈活的培訓解決方案。它提供了跨三個學習模組的各種課程，我們稱之為三個 E：教育、體驗和參與。使用者可以學習訪談、降級、武器轉換、決策等技能。例如，我們的參與模組為經歷心理健康危機的真實模擬個人提供了無與倫比的培訓。

With V-XR, we are not just evolving training methods, but also responding to societal need for empathy and understanding in law enforcement and security practices.

借助 V-XR，我們不僅改進了培訓方法，還滿足了社會對執法和安全實踐的同理心和理解的需求。

Regrettably, the lack of mental health resources is unlikely to change in the near term. However, this challenge presents an opportunity for VirTra to make a significant impact. We are determined to supply an affordable, super convenient, and superior solution through V-XR. Our recent technological advancements encompass both hardware and software guided by valuable customer and expert input. We have significantly refined our 180 and 300 series simulators, optimizing them for standard room heights and streamlining across access to critical components.

遺憾的是，精神衛生資源的缺乏在短期內不太可能改變。然而，這項挑戰為 VirTra 提供了產生重大影響的機會。我們決心透過 V-XR 提供價格實惠、超級方便且卓越的解決方案。我們最近的技術進步包括在有價值的客戶和專家意見指導下的硬體和軟體。我們顯著改進了 180 和 300 系列模擬器，針對標準房間高度進行了最佳化，並簡化了對關鍵組件的存取。

These enhancements not only accelerate setup now achievable by a single individual, but also integrate standardized cables and materials, which reduces manufacturing costs and augments profit margins. This balance of operational excellence with financial stewardship is a testament to our commitment to delivering customer satisfaction, hand-in-hand with cost effectiveness and is a lot of what John Givens has been driving here at VirTra.

這些增強功能不僅加快了現在可由單一人實現的設定速度，而且還整合了標準化電纜和材料，從而降低了製造成本並增加了利潤率。卓越營運與財務管理之間的這種平衡證明了我們致力於提供客戶滿意度和成本效益，這也是 John Gives 在 VirTra 一直致力於推動的目標。

Our progress and investment in the military products have resulted in capabilities that are levels beyond anything else in the market. Keep in mind that VirTra not only leads in simulator capabilities, but we also supply market leading recoil kit capabilities, allowing realistic training without the need for expensive and dangerous blank grounds. It's these significant developments that will help to fuel some of our future growth and advance our reputation as industry leaders.

我們在軍事產品方面的進步和投資帶來了超越市場上任何其他產品的能力。請記住，VirTra 不僅在模擬器功能方面處於領先地位，而且我們還提供市場領先的反沖套件功能，允許進行真實的訓練，而無需昂貴且危險的空白地面。這些重大發展將有助於推動我們未來的成長並提高我們作為行業領導者的聲譽。

I look forward to sharing more about our achievements when the time is right and when we can provide further details. While our year-to-date figures are promising, the true value lies in our potential for tomorrow. Our technology doesn't just represent a product, rather, it's a pathway to a safer, more prepared society.

我期待在適當的時候以及我們能夠提供更多細節的時候分享更多關於我們的成就。雖然我們今年迄今為止的數據充滿希望，但真正的價值在於我們明天的潛力。我們的技術不僅代表一種產品，更是通往更安全、更有準備的社會的途徑。

And as we continue to innovate, we keep our vision clear, to equip those who serve with the very best training tools available, helping them to become the best trained version of themselves to make critical decisions that save lives and protect communities.

隨著我們不斷創新，我們保持清晰的願景，為服務人員提供最好的培訓工具，幫助他們成為訓練有素的自己，做出拯救生命和保護社區的關鍵決策。

I will now pass the conversation back to John, who will offer closing thoughts on our exciting journey ahead. Thank you.

現在我將把談話轉回給約翰，他將對我們激動人心的未來旅程提出結束語。謝謝。

Thanks, Bob. As highlighted, our products form the core of VirTra's mission. This year, we've witnessed growing demand for our solutions, and I'm proud to say that our operations have scaled to meet this challenge. In the first half, we effectively addressed our backlog and concentrated on elevating the customer experience. The complete overhaul of our ERP system has not only increased our installation efficiencies, but also significantly boosted our customer service capabilities and provided visibility on how well our processes changes are affecting the bottom line.

謝謝，鮑伯。如所強調的，我們的產品構成了 VirTra 使命的核心。今年，我們見證了對我們解決方案的需求不斷增長，我很自豪地說我們的業務已經擴大規模以應對這一挑戰。上半年，我們有效解決積壓問題，專注於提升客戶體驗。我們的 ERP 系統的全面檢修不僅提高了我們的安裝效率，而且還顯著提高了我們的客戶服務能力，並提供了我們的流程變化對利潤的影響程度的可見性。

We also made strong advances in supply chain management, reducing the risk of delays and disruptions while enhancing our operational performance. These improvements, along with our scalable infrastructure, have refined inventory management, enhanced timely order fulfillment, and improved financial oversight. The restructured territories and additional regional sales managers, along with the revised incentive plans and the addition of sales support specialists are already reflecting positively in our outcomes.

我們在供應鏈管理方面也取得了巨大進步，降低了延誤和中斷的風險，同時提高了我們的營運績效。這些改進加上我們可擴展的基礎設施，完善了庫存管理，提高了訂單履行的及時性，並改善了財務監督。重組的地區和增加的區域銷售經理，以及修訂的激勵計劃和增加的銷售支援專家已經對我們的成果產生了積極的影響。

Collectively, the modifications we've implemented in our operational and sales strategies are set to propel growth further. Our ongoing focus is to fortify our business pipeline across key markets, uphold a standard of world-class operations, and consistently deliver superior quality to our customers. As we move forward towards the end of the year and into 2024, we are confident in the opportunities that lie ahead and expect a strong, continued pace of growth.

總的來說，我們在營運和銷售策略中實施的修改將進一步推動成長。我們持續的重點是加強我們在主要市場的業務管道，維護世界一流的營運標準，並始終如一地為我們的客戶提供卓越的品質。隨著年底和 2024 年的到來，我們對未來的機會充滿信心，並期待強勁、持續的成長速度。

And with that, I'll open up the call for questions. Operator, please provide the appropriate instructions.

接下來，我將開始提問。操作員，請提供適當的說明。

(Operator Instructions)

（操作員說明）

Jaeson Schmidt, Lake Street.

傑森‧施密特，湖街。

Hey, guys. Thanks for taking my questions and congrats on a nice quarter. Wanted to start with that big jumping bookings. Was this driven by a few customers or was it just broad-based strength across the business?

大家好。感謝您回答我的問題，並祝賀您度過了一個愉快的季度。想要從大幅預訂開始。這是由少數客戶推動的還是整個企業的廣泛實力？

It was broad-based strength and maybe in our perspective, one or two decent sized deals. But yeah, it was pretty much strength across the board.

這是基礎廣泛的實力，也許在我們看來，是一兩筆規模不錯的交易。但是，是的，它幾乎是全面的力量。

I concur.

我同意。

Okay.

好的。

And then looking at gross margin also took a nice jump sequentially. How should we think about gross margin going forward? Is this the new level or will it revert to more of that normalized Q1, Q2 range?

然後看毛利率也連續大幅躍升。我們該如何看待未來的毛利率？這是新水準還是會恢復到標準化 Q1、Q2 範圍的更多水準？

I would say that Q1 is probably more normal. Q2, we know we took a hit because of the inventory write-off that we had. So I think a combination of Q1 is where we need to be. Q3 was an anomaly as we moved a fair amount of labor into our R&D category as we were doing some development items. And that offset some of our cost of goods.

我想說 Q1 可能比較正常。第二季度，我們知道由於庫存沖銷，我們受到了打擊。所以我認為第一季的組合是我們需要達到的目標。第三季是一個反常現象，因為我們正在做一些開發項目，因此將大量勞動力轉移到研發類別。這抵消了我們的部分商品成本。

Okay. That's helpful. And then just last one for me and I'll jump back in the queue. Looking at that V-XR product, I know it's early, but just based on customer feedback, how should we think about order patterns for this? Do you think police departments are ordering multiple of V-XR devices? Or is this one for the whole department?

好的。這很有幫助。然後我就跳回隊列中，只看最後一個。看看 V-XR 產品，我知道現在還為時過早，但僅根據客戶回饋，我們應該如何考慮該產品的訂單模式？您認為警察部門會訂購多台 V-XR 設備嗎？還是這個是針對整個部門的？

And I guess relatedly, it does seem very complementary, but are you at all concerned that this will cannibalize your core simulator market?

我想相關地，它看起來確實非常互補，但是您是否擔心這會蠶食您的核心模擬器市場？

Yeah, I'll talk about the cannibalization because I thought about that very long. So one of the problems that we've had is there's such a long cycle because when you're doing sales, whether it's military or with counties or state governments, they have to put the budget in. So there's 12 to 18 months. One of the problems that we had is we're standing alone waiting on that, but they have discretionary dollars at a level. We needed a product not only that serve to solve a problem of soft skills, but we also needed something at a price point. So we could stay in there, show our capabilities.

是的，我會談論蠶食，因為我想了很久。所以我們遇到的問題之一是周期太長，因為當你進行銷售時，無論是軍事銷售還是縣政府或州政府銷售，他們都必須投入預算。所以有 12 到 18 個月。我們遇到的問題之一是我們獨自等待，但他們有一定程度的可自由支配資金。我們不僅需要一款能夠解決軟技能問題的產品，而且還需要一個價格合理的產品。這樣我們就可以留在那裡，展現我們的能力。

As far as, cannibalize, no, because the training component with our V-300, other than the shoot-don't-shoot and those scenarios, we're not chasing that in the V-XR headset because we find that that is negative training because you can't put your regular weapon, you can't see the sites. There's a whole bunch of complement.

至於，蠶食，不，因為我們的 V-300 的訓練組件，除了射擊-不射擊和那些場景之外，我們不會在 V-XR 耳機中追求這一點，因為我們發現那是消極的訓練，因為你不能放置你的常規武器，你看不到這些地點。有一大堆補充。

We did a lot of searching and a lot of investigating, a lot of research to put together what path we were going to chase. And so I think we're in a very sweet spot that really complements what our V-300 or V-180 does. We don't use our recoil kits with the V-XR. The price point is quite low.

我們進行了大量的搜尋、大量的調查、大量的研究，以整理出我們要追尋的道路。因此，我認為我們正處於一個非常有利的位置，它真正補充了我們的 V-300 或 V-180 的功能。我們的反沖套件不與 V-XR 一起使用。價格點相當低。

And your other part of that question is I think you're going to buy multiple kits because of our price points and what's the value? I always say content is king and the V-XR is based on our content. We made a significant investment prior to me coming on board in the V3 studio and all these captures and I want them to continue to capture.

這個問題的另一部分是，我認為您會因為我們的價格點而購買多個套件，其價值是多少？我總是說內容為王，V-XR 是基於我們的內容。在我加入 V3 工作室和所有這些捕捉之前，我們進行了重大投資，我希望他們繼續捕捉。

And I tell them every three months I want them to come to me and tell me they need to paint the floor because they burnt the paint off the floor with using it so much. So building that library is paramount and going forward. So I think we'll see some nice revenue from that capability as a complementary product. But no, nothing in the cannibalizing at all.

我每三個月告訴他們，我希望他們來找我，告訴我他們需要粉刷地板，因為他們用太多，把地板上的油漆燒掉了。因此，建立這個圖書館是最重要的，也是未來的事。因此，我認為我們會從該功能作為補充產品中看到一些可觀的收入。但不，根本沒有蠶食任何東西。

Okay. That makes sense. Really appreciate the color. Thanks, guys.

好的。這就說得通了。真的很欣賞這個顏色。多謝你們。

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. John Givens for his closing remarks. Please go ahead.

至此，我們的問答環節就結束了。現在我想將電話轉回給約翰·吉文斯先生，讓他作結束語。請繼續。

Thank you, operator. We stand firm and our service to our customers and their life-saving missions. The passion and dedication of our team is a driving force behind our success. And I have every confidence that we will continue to push the boundaries of what is possible and change world for the better. As we look forward to the rest of the year and into 2024, I'm excited to see the results following the strong foundation we've worked diligently to lay out. Thank you, be safe, take care, and God bless.

謝謝你，接線生。我們堅定不移地為客戶提供服務並履行他們拯救生命的使命。我們團隊的熱情和奉獻精神是我們成功的動力。我堅信，我們將繼續突破可能的界限，讓世界變得更美好。當我們展望今年剩餘時間和 2024 年時，我很高興看到在我們辛勤工作奠定的堅實基礎上取得的成果。謝謝你，注意安全，保重，上帝保佑。

Thank you for joining us today for VirTra's third quarter 2023 conference call. You may now disconnect.

感謝您今天參加 VirTra 的 2023 年第三季電話會議。您現在可以斷開連線。