VirTra Inc (VTSI) 2024 Q2 法說會逐字稿

Good afternoon, and welcome to VirTra's second-quarter 2024 earnings conference call. My name is Paul, 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 their remarks, we will open the call for questions.

下午好，歡迎參加 VirTra 2024 年第二季財報電話會議。我叫保羅，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 (Alanna Boudreau)。在他們發言之後，我們將開始提問。

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.

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所做前瞻性陳述的警告。

During this presentation, management may discuss financial projections, information or expectations about the company's products and services or markets or otherwise make statements about the future, which are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them as required by law. Finally, I'd like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at www.virtra.com.

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，可能導致實際結果有所不同實質上來自所做的陳述。本公司不承擔任何依法要求更新的義務。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. You may proceed, sir.

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

Thank you, Paul, and thank you, everyone, for joining us this afternoon. After the markets closed today, we issued a press release that provided our financial results for the second quarter ended June 30, 2024, along with highlighted business accomplishments.

謝謝保羅，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 2024 年 6 月 30 日的第二季財務業績，以及重點業務成就。

Today, I'll begin by discussing our second quarter performance and strategic achievements, including the launch of our V-XR platform and our military market engagements before handing it over to Alanna for a detailed financial review. After that, I'll provide some concluding remarks before moving on to the Q&A portion.

今天，我將首先討論我們第二季度的業績和戰略成就，包括我們的 V-XR 平台的推出和我們的軍事市場業務，然後將其交給 Alanna 進行詳細的財務審查。之後，我將在進入問答部分之前提供一些結論性意見。

Our second quarter results reflect the continuation of a transitional period as we ramp up our new sales initiatives. While our performance was not strong as we had hoped, I take full responsibility for these results. And we have entered into the second half in a position to reboot progress. Our revenue came in at $6.1 million. The results are due to both controllable and uncontrollable factors. The controllables are being our go-to-market efforts, the uncontrollables being delayed decision-making from delayed budgeting resolutions during the first half of the year. We are making progress on the controllable areas and finding workarounds to the uncontrollable areas, which I'll detail shortly.

我們第二季的業績反映了隨著我們加強新的銷售計劃，過渡期的延續。雖然我們的表現並不如我們所希望的那麼強勁，但我對這些結果負起全部責任。我們已經進入下半場，準備重新啟動進展。我們的收入為 610 萬美元。造成這種結果的原因有可控因素和不可控因素。可控因素是我們的市場推廣工作，不可控因素是上半年預算決議延遲導致的決策延遲。我們正在可控領域取得進展，並為不可控領域尋找解決方法，我很快就會詳細介紹。

Despite our top line results, we maintained exceptionally strong gross margins of 91%, demonstrating that our operational efficiencies we put in place last year and the beginning of this year are yielding positive results. These efficiencies will support our growth as sales initiatives gain momentum. Notably, our bookings increased by $3 million quarter-over-quarter, doubling since Q1, highlighting improved market conditions and the strengthened sales approach. Despite recent challenges, the demand for our solution remains robust, and we are still positioned to capitalize on it moving forward.

儘管我們取得了頂線業績，但我們仍然保持了 91% 的異常強勁的毛利率，這表明我們去年和今年年初實施的營運效率正在產生積極的成果。隨著銷售計劃的勢頭增強，這些效率將支持我們的成長。值得注意的是，我們的預訂量較上季增加了 300 萬美元，自第一季以來翻了一番，凸顯了市場狀況的改善和銷售方式的加強。儘管最近面臨挑戰，但對我們解決方案的需求仍然強勁，我們仍然有能力利用它向前發展。

We have faced external headwinds in the first half of the year due to primarily delayed budget decisions at the federal and local levels. These are not excuses, but realities that we are tackling head on. While local law enforcement budgets are compressing, we have strengthened our ability to secure federal grants, which are increasing and will provide essential funding for our customers. This approach helps us maintain our pipeline and capitalize on growth opportunities. While using grant money extends the sales cycle slightly, it ultimately helps us grow our customer base, and these efforts are important as we prioritize long-term relationships.

今年上半年，我們面臨外部阻力，主要是因為聯邦和地方各級預算決策的延遲。這些不是藉口，而是我們正在面對的現實。雖然地方執法預算正在壓縮，但我們增強了獲得聯邦撥款的能力，這些撥款正在增加，將為我們的客戶提供必要的資金。這種方法有助於我們維持我們的管道並利用成長機會。雖然使用補助金稍微延長了銷售週期，但它最終有助於我們擴大客戶群，這些努力非常重要，因為我們優先考慮長期關係。

Additionally, with military budgets beginning to open, we are positioned to seize new growth opportunities there in the coming quarters.

此外，隨著軍事預算開始開放，我們準備在未來幾季抓住新的成長機會。

As you may have seen, last week, we announced the addition of Brandon Cox to our -- to VirTra as our Chief Technology Officer. Brandon brings a wealth of experience in data analytics and system integration, which will be instrumental in accelerating our innovation and leading new product development efforts. Having Brandon on the team will free me up to do what I've done in my whole career, build customer relationships and drive sales. With military budgets beginning to open up, there's a significant opportunity for VirTra to win large and long-term contracts, and I plan to lead that effort with our sales team.

正如您可能已經看到的，上週，我們宣布任命 Brandon Cox 為 VirTra 的技術長。布蘭登帶來了數據分析和系統整合的豐富經驗，這將有助於加速我們的創新和引領新產品開發工作。布蘭登加入團隊將使我能夠騰出時間去做我在整個職業生涯中所做的事情，建立客戶關係並推動銷售。隨著軍事預算開始開放，VirTra 有一個贏得大型長期合約的重大機會，我計劃與我們的銷售團隊一起領導這項工作。

In parallel with the changes we've made in our sales process, we are continuing to enhance our internal operations.

在我們對銷售流程進行變革的同時，我們正在繼續加強我們的內部營運。

Over the past year, we've completely rebuilt our ERP system. This change as well as several others to improve our operations are continuing to help us increase throughput, reduce production errors, and ultimately improve our book-to-ship times. As we grow our sales, we are well equipped to scale effectively.

在過去的一年裡，我們徹底重建了 ERP 系統。這項變更以及其他一些旨在改善我們營運的變更將繼續幫助我們提高吞吐量，減少生產錯誤，並最終縮短我們的預訂到出貨時間。隨著我們銷售額的成長，我們已經做好了有效擴大規模的準備。

In addition to having operations to scale, we continue to invest in the right content. We strengthened our competitive position. We have expanded our scenario library to include more real-world situations like crisis intervention and active shooter responses developed by our industry experts.

除了擴大營運規模外，我們還繼續投資於正確的內容。我們加強了我們的競爭地位。我們擴展了場景庫，以包含更多現實世界的情況，例如由我們的行業專家開發的危機幹預和主動射擊反應。

One of the newer areas that we've begun to create additional content for is the healthcare field. Since our initial V-180 deployment to Ascension's St. John's Hospital, we've seen an increase in demand for our training solutions for more than six additional institutions. The content we created allows hospital security staff to train on common scenarios that ensure the proper response for patient and staff safety when responding. The early reception of these scenario shows the significant untapped market potential.

我們開始創建額外內容的新領域之一是醫療保健領域。自從我們最初將 V-180 部署到阿森松島聖約翰醫院以來，我們發現另外六個以上機構對我們的培訓解決方案的需求增加。我們創建的內容允許醫院保全人員針對常見場景進行培訓，確保在回應時做出適當的回應，確保病患和工作人員的安全。這些場景的早期接受表明了巨大的未開發市場潛力。

We are continuing to create content for these applications and expect our V-XR to also grow sales in these markets. With the new content we are creating, we are excited about the upcoming launch of our V-XR. Our new extended reality solution is set to disrupt and improve professional training environments. It's designed to enhance soft skill training across applications in law enforcement, healthcare, education, and other related sectors. We are customizing the V-XR to accommodate diverse agency sizes, budget constraints, and specific training requirements.

我們正在繼續為這些應用程式創建內容，並期望我們的 V-XR 也能增加這些市場的銷售量。透過我們正在創建的新內容，我們對即將推出的 V-XR 感到非常興奮。我們新的擴展現實解決方案將顛覆並改善專業培訓環境。它旨在增強執法、醫療保健、教育和其他相關領域應用程式的軟技能培訓。我們正在客製化 V-XR，以適應不同的機構規模、預算限制和特定的培訓要求。

By extending beyond the traditional shoot, don't shoot scenario-based training, V-XR focuses on development of critical interpersonal skills, enabling professionals to better navigate sensitive situations, diffuse potential conflicts, and build strong community relationships. It's wide array of application positions V-XR as a key pillar in our long-term growth strategy.

透過超越傳統拍攝、不進行基於場景的訓練，V-XR 專注於培養關鍵的人際交往能力，使專業人士能夠更好地應對敏感情況、化解潛在衝突並建立牢固的社區關係。V-XR 的廣泛應用使其成為我們長期成長策略的關鍵支柱。

Since our last call, we've also added two additional scenarios that was shipped when the product is launched. We are currently finalizing terms and conditions with Meta. And once this is complete, we'll be ready to take orders and then begin shipping. With this launch, we are prepared to moderate our strong profit margins temporarily to secure more substantial market share and ensure sustained growth.

自上次通話以來，我們還添加了產品發佈時附帶的兩個附加場景。我們目前正在與 Meta 敲定條款和條件。一旦完成，我們將準備好接受訂單，然後開始出貨。透過此次推出，我們準備暫時調整我們強勁的利潤率，以確保更大的市場份額並確保持續成長。

Before turning the call over to Alanna, I'll give you a rundown of how our end markets performed in Q2. In the second quarter, our government revenue decreased to $5.3 million from $9.5 million in the prior year. This difference is attributed to the delay in federal budget decisions with -- which impacted our ability to close contracts within the expected time frame. As I mentioned earlier in the call, law enforcement budgets are facing continuous cuts and now rely heavily on grant funding from the federal government. Our grant watch program will help bridge this gap between the customer and federal funding.

在將電話轉給 Alanna 之前，我將向您簡要介紹我們的終端市場在第二季的表現。第二季度，我們的政府收入從前一年的 950 萬美元減少到 530 萬美元。這種差異歸因於聯邦預算決策的延遲，這影響了我們在預期時間範圍內完成合約的能力。正如我之前在電話會議中提到的，執法預算面臨持續削減，現在嚴重依賴聯邦政府的撥款。我們的撥款觀察計畫將有助於彌合客戶與聯邦資金之間的差距。

Internationally, our revenue was $0.6 million, a decrease from $0.7 million in 2023. The slight decrease in international revenue is primarily due to the long lead times in our international pipeline, which have slowed the execution of opportunities.

在國際範圍內，我們的收入為 60 萬美元，比 2023 年的 70 萬美元有所下降。國際收入的小幅下降主要是由於我們的國際通路的交貨時間較長，減慢了機會的執行速度。

With our international pipeline continuing to grow, we expect higher close rates in the next several quarters as the budgets are approved. As part of our sales team restructuring, we now have a dedicated international sales. And these changes are enhancing our ability to forecast and stabilize future revenue streams within this segment as we continue to build out a more predictable international pipeline.

隨著我們的國際通路持續成長，隨著預算獲得批准，我們預計未來幾季的成交率將會更高。作為我們銷售團隊重組的一部分，我們現在擁有專門的國際銷售人員。隨著我們繼續建立更可預測的國際管道，這些變化正在增強我們預測和穩定該細分市場未來收入流的能力。

Turning to our progress in the military. We are continuing to make progress with US Army's Integrated Visual Augmentation System, or IVAS program. As a reminder, this is a $5.9 million prototype contract secured through our collaboration with Microsoft as a prime contractor. Included in this order are our industry-leading recoil hardware kits, high-pressure air fill stations and magazines, all engineered to meet the US Army's stringent requirements. This partnership reaffirms the reliability and performance of our technology and also highlights our capability to innovate and adapt in response to the demanding needs of military training.

轉向我們在軍事方面的進展。我們正在繼續推進美國陸軍的綜合視覺增強系統（IVAS）計劃。提醒一下，這是一份價值 590 萬美元的原型合同，是我們作為主承包商與 Microsoft 合作獲得的。該訂單包括我們領先業界的反沖硬體套件、高壓充氣站和彈匣，所有這些都是為了滿足美國陸軍的嚴格要求而設計的。這種合作關係重申了我們技術的可靠性和性能，也凸顯了我們的創新和適應能力，以滿足軍事訓練的嚴苛需求。

We are also focused on expanding our reach further into US federal and Department of Defense channels by pursuing these opportunities through targeted marketing campaigns and strategic initiatives. We have deployed a dedicated sales team tasked with securing larger contracts in US Federal and Department defense channels. The specialized unit is strategically equipped to navigate complex opportunities and drive significant growth in these key areas.

我們也致力於透過有針對性的行銷活動和策略性舉措來抓住這些機會，進一步擴大我們在美國聯邦和國防部通路的影響力。我們部署了一支專門的銷售團隊，負責在美國聯邦和國防部的國防管道中獲得更大的合約。該專業部門具有戰略能力，可以駕馭複雜的機會並推動這些關鍵領域的顯著成長。

This quarter, we're also approved for Department of Defense funding for research projects. This approval confirms what we've known virtuous simulators can record shooting performance accurately and track individual progress over time reliably, thereby qualifying them as a verified and consistent research tool. This was done by an independent research study conducted by Ohio State University and further emphasizes our potential.

本季度，我們也獲得了國防部研究計畫資助的批准。此次批准證實了我們所知道的良性模擬器可以準確記錄射擊表現並可靠地追蹤個人隨時間的進展，從而使它們成為經過驗證和一致的研究工具。這是由俄亥俄州立大學進行的一項獨立研究完成的，進一步強調了我們的潛力。

I'll now turn the call over to Alanna to discuss our financial results in further detail. Alanna?

我現在將把電話轉給阿蘭娜，進一步詳細討論我們的財務表現。阿蘭娜？

Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the second quarter ended June 30, 2024.

謝謝約翰，大家下午好。現在讓我們回顧一下截至 2024 年 6 月 30 日的第二季未經審計的財務表現。

Total revenue was $6.1 million compared to $10.3 million in the prior year period. The decrease was primarily due to delays in federal funding attributed to the US government's continuing resolution, which caused numerous contracts to be placed on hold. This temporary challenge impacted bookings in the first half of the year.

總收入為 610 萬美元，而去年同期為 1,030 萬美元。減少的主要原因是美國政府的持續解決方案導致聯邦資金延遲，導致大量合約被擱置。這項暫時的挑戰影響了上半年的預訂。

Our gross profit totaled $5.5 million, 91% of total revenue compared to $5.9 million, 57% of total revenue in the prior year. The 7% decrease in gross profit was primarily due to the change in sales. Gross margin increased mainly due to the lower cost of sales driven by operational enhancement, offsetting labor costs related to development projects and 40% of the total revenue driving from our service and STEP contracts, which have limited cost of sales associated with that revenue.

我們的毛利總計 550 萬美元，佔總收入的 91%，而前一年為 590 萬美元，佔總收入的 57%。毛利下降7%主要是因為銷售額變化所致。毛利率的成長主要是由於營運增強推動的銷售成本降低，抵消了與開發項目相關的勞動力成本以及我們的服務和STEP合約帶來的總收入的40%，這些合約與該收入相關的銷售成本有限。

Net operating expense was $4.4 million, marking a 10% increase from the $4 million in the prior year period. This increase was driven by investments in sales and marketing as well as strategic hiring to support growth initiatives. Also adding to the increased operating expenses related to our improved IT structure and compliance requirements for our future -- for our current and future contracts.

淨營運費用為 440 萬美元，比上年同期的 400 萬美元成長 10%。這一增長是由銷售和行銷投資以及支援成長計劃的策略招聘所推動的。此外，與我們改進的 IT 結構和未來合規要求（當前和未來的合約）相關的營運費用也有所增加。

Operating income was $1.1 million compared to $1.9 million in the second quarter of 2023. Net income was $1.2 million or $0.11 per diluted share based on the 11.1 million weighted average diluted shares outstanding, a 17% increase from net income of $1 million or $0.09 per diluted share based on 10.9 million weighted average diluted shares outstanding in the prior year period. Adjusted EBITDA, a non-GAAP metric, was $1.6 million compared to $2.6 million in the prior year period.

營業收入為 110 萬美元，而 2023 年第二季為 190 萬美元。根據1,110 萬股加權平均稀釋流通股計算，淨利為120 萬美元，即稀釋每股0.11 美元，比上年同期淨利100 萬美元，即稀釋每股收益0.09 美元，根據去年同期的1,090 萬股加權平均稀釋股份計算，成長17% 。調整後 EBITDA（非 GAAP 指標）為 160 萬美元，而去年同期為 260 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 second quarter of 2024, we received bookings totaling $5.9 million.

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。2024 年第二季度，我們收到的預訂總額為 590 萬美元。

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 period. As of June 30, 2024, our backlog totaled $13.8 million. The breakout of this backlog includes $5.6 million in capital, $6 million in service and warranties, and $2.2 million in STEP contracts.

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，只有在未來一段時間內交付才能確認為收入。截至 2024 年 6 月 30 日，我們的積壓訂單總額為 1,380 萬美元。此次積壓訂單的突破包括 560 萬美元的資本、600 萬美元的服務和保固以及 220 萬美元的 STEP 合約。

As a reminder, 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 are $7 million in renewable STEP contracts that would represent additional revenue for the next five years.

提醒一下，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，還有價值 700 萬美元的可續約 STEP 合同，這將代表未來五年的額外收入。

This year, as our first STEP customers are ending their original agreements, we are seeing a 93% rate of either renewing their STEP contracts or moving to a capital purchase. This retention highlights our success in building a loyal customer base as we focus on new pipeline development.

今年，隨著我們的第一批 STEP 客戶終止其原始協議，我們發現 93% 的客戶要么續簽 STEP 合同，要么轉向資本購買。這種保留凸顯了我們在專注於新管道開發時在建立忠實客戶群方面的成功。

Finally, to our balance sheet. As of June 30, 2024, we had unrestricted cash and cash equivalents of $18.4 million compared to $22.4 million at the March 30, 2024. This decrease primarily reflects in our corporate tax payment.

最後，我們的資產負債表。截至 2024 年 6 月 30 日，我們擁有不受限制的現金和現金等價物為 1,840 萬美元，而 2024 年 3 月 30 日為 2,240 萬美元。這項減少主要反映在我們的企業稅繳納。

From a working capital standpoint, at the end of second quarter, we had $34.8 million in working capital, up slightly from the $33.2 million at the end of Q1 in 2023. For additional details of our financial results, please reference our 10-Q, which was filed earlier today. That concludes my prepared remarks.

從營運資金的角度來看，截至第二季末，我們的營運資金為 3,480 萬美元，略高於 2023 年第一季末的 3,320 萬美元。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 報告。我準備好的發言就到此結束。

And now I'll turn it back over to John for his closing remarks.

現在我將把它轉回給約翰作結束語。

Thank you, Alanna. As we review the past quarter and the first half, it's clear that while we are navigating through some temporary challenges, our strategic initiatives and our operational improvements are setting the stage for incredible future growth. Our upcoming launch of the V-XR platform and growth into our strategic military engagements are important components to this response, and they will be key to our success for the rest of 2024.

謝謝你，阿蘭娜。當我們回顧過去的季度和上半年時，很明顯，雖然我們正在克服一些暫時的挑戰，但我們的策略舉措和營運改進正在為未來令人難以置信的成長奠定基礎。我們即將推出的 V-XR 平台以及我們戰略軍事行動的發展是這項應對措施的重要組成部分，它們將是我們在 2024 年剩餘時間裡取得成功的關鍵。

Looking ahead, we have the right procedures in place and are optimistic for the second half of the year as grant funding becomes clear and military contracts begin to open. We are positioned to capitalize on our healthy pipeline of opportunities in the months ahead while continuing to enhance our customer relationships, which are the single most important in this business, particularly as we extend our global reach and rollout of new products.

展望未來，我們已經制定了正確的程序，並且隨著贈款資金變得明確和軍事合約開始開放，我們對下半年持樂觀態度。我們準備在未來幾個月利用我們健康的機會管道，同時繼續加強我們的客戶關係，這是該業務中最重要的一個，特別是當我們擴大全球影響力和推出新產品時。

In conclusion, despite the temporary hurdles, VirTra does remain at the helm of training industry, driven by innovation and a commitment to excellent training outcomes. We are optimistic about what the back end of 2024 holds, and we look forward to sharing our progress, and we appreciate your continued support and interest.

總之，儘管存在暫時的障礙，在創新和對卓越培訓成果的承諾的推動下，VirTra 確實仍然是培訓行業的掌舵者。我們對 2024 年底的情況感到樂觀，並期待分享我們的進展，並感謝您的持續支持和關注。

Now before we open the call for questions, I want to let everyone know that our Annual Shareholder Meeting will be held in Chandler, Arizona in October. We'll follow this with an Investor Day where we'll offer a presentation and a tour of the facility. More details will be made available in a forthcoming press release, and we look forward to engaging with our shareholders and investor during these events.

現在，在我們開始提問之前，我想讓大家知道我們的年度股東大會將於十月在亞利桑那州錢德勒舉行。隨後我們將舉行投資者日活動，屆時我們將提供演示和設施參觀。更多詳細資訊將在即將發布的新聞稿中提供，我們期待在這些活動期間與我們的股東和投資者接觸。

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

接下來，我們將開始電話詢問您的問題。操作員，請提供適當的說明。

(Operator Instructions) Jaeson Schmidt, Lake Street Capital Markets.

（操作員指令）Jaeson Schmidt，湖街資本市場。

Hey guys, thanks for taking my questions. Just want to dig in a little bit more on sort of the bookings activity. Obviously, a nice rebound in Q2. Understanding the budget constraints impacting Q2. Just curious if you've seen bookings continue to accelerate here in Q3?

嘿夥計們，謝謝你回答我的問題。只是想深入了解預訂活動。顯然，第二季出現了不錯的反彈。了解影響第二季的預算限制。只是好奇您是否看到第三季的預訂量繼續加速？

We are seeing -- see not to make it forward-looking. We're pleased with what's happening in the first month of the quarter.

我們正在看到——不要使其具有前瞻性。我們對本季第一個月發生的情況感到滿意。

Okay. No, that's helpful. And then looking at -- sorry, you noted some continued traction in the healthcare market, adding kind of six additional institutions. When do you think those could maybe pivot from more kind of pilot programs to firm POs?

好的。不，這很有幫助。然後看看——抱歉，您注意到醫療保健市場持續受到關注，增加了六個額外的機構。您認為什麼時候這些可能會從更多類型的試點計畫轉向堅定的採購訂單？

Well, we're seeing several of those come in, and those are the numbers that were reported in bookings. It's an underserved market that has -- there's specific rules in California and Connecticut now that require healthcare workers to have some type of training, not certified, but I think it's going to move towards that and VirTra is right there at the start and the middle of it right now. So we should see that -- that's the growth that we're seeing, the word's getting out and VirTra is taking care of their customers and they're seeing that it's meeting the needs they have now and is driving some of their policies going forward.

嗯，我們看到其中有幾個進來，這些是預訂中報告的數字。這是一個服務不足的市場，加州和康乃狄克州現在有具體規則，要求醫護人員接受某種類型的培訓，但未經認證，但我認為它會朝著這個方向發展，而VirTra 就在開始和中期現在。所以我們應該看到——這就是我們所看到的成長，消息傳開，VirTra 正在照顧他們的客戶，他們看到它正在滿足他們現在的需求，並正在推動他們的一些政策向前發展。

So that's a bit unpredictable of -- it's going to be a very large market, but we're going to have to see how that plays out because the healthcare industry has never had to deal with this -- with training, they just usually had a security force is just dealing with stuff.

所以這有點不可預測——這將是一個非常大的市場，但我們必須看看它會如何發揮作用，因為醫療保健行業從來沒有處理過這個問題——通過培訓，他們通常只接受培訓安全部隊只是在處理事情。

And as these laws come out to protect patients and healthcare workers, it becomes -- it's becoming more apparent that they need some type of training aid. And the training that we do, it doesn't require much to adapt to what they need in that industry. It's more about how they handle it within their environments because it is slightly different.

隨著這些法律的出台是為了保護病人和醫護人員，他們需要某種類型的訓練協助變得越來越明顯。我們所做的培訓不需要太多就能適應他們在這個行業的需求。更重要的是他們如何在自己的環境中處理它，因為它略有不同。

Okay. That's really helpful. And then just last one for me, and I'll jump back in the queue. Obviously, gross margin was extremely strong in the quarter. You noted mix and some other efficiency improvements. But how should we think about gross margin here in the second half? I assume it's going to at least come down a bit from Q2 level.

好的。這真的很有幫助。然後我就跳回隊列中的最後一個。顯然，本季的毛利率非常強勁。您注意到混合和其他一些效率改進。但我們該如何看待下半年的毛利率呢？我認為它至少會比第二季度的水平下降。

Yes, we expect --

是的，我們期望--

We don't -- yeah, go ahead Alanna.

我們不——是的，繼續吧，阿蘭娜。

Pardon. Yeah. No, we do expect it to come down. There was sort of the best of all the things that could have happened in this quarter to get such a high number, as we pull in the development projects that we were talking about and those start -- those expenses start to hit that all sort of level set us out. So I still expect us to be in the low 60s where we anticipated this quarter was just unique in an outlier.

赦免。是的。不，我們確實預計它會下降。在本季度可能發生的所有事情中，有可能發生的最好的事情是獲得如此高的數字，當我們引入我們正在討論的開發項目並開始這些項目時，這些費用開始達到各種水平水平讓我們出發。因此，我仍然預計我們的業績將處於 60 多歲左右，我們預計本季只是一個異常值。

And I'll add, Jaeson. I'm willing to sacrifice a little bit of the gross margin to gain when we start releasing the V-XR to gain as much market share as I can. So high 50s is probably -- mid- to high 50s is the lowest target that I'll go to, but I'm willing to sacrifice a little bit for that.

我要補充一點，傑森。當我們開始發布 V-XR 時，我願意犧牲一點毛利率來獲得盡可能多的市場份額。所以 50 多歲可能是——中到 50 多歲是我要達到的最低目標，但我願意為此做出一點犧牲。

Okay, no, that's really helpful. Thanks a lot, guys.

好吧，不，這真的很有幫助。非常感謝，夥計們。

Thanks.

謝謝。

Richard Baldry, ROTH Capital Partners.

理查德·鮑德里，羅仕資本合夥人。

Thanks. You've been very focused on efficiencies in the business ever since you took the CEO seat. I want to -- I'm curious that the inventory level sort of set a new high in the quarter as revenues have been a bit soft. Does that indicate something you're seeing in sort of near-term opportunities? Or are there more defensive stance to be taken on maybe harder to procure items or something we need to be aware of? Thanks.

謝謝。自從您擔任執行長以來，您一直非常注重業務效率。我想——我很好奇，由於收入有點疲軟，庫存水準在本季創下了新高。這是否表明您在近期機會中看到了一些東西？或者是否需要採取更多的防禦立場，可能更難獲得物品或我們需要注意的事情？謝謝。

One of the -- I can take that. So one of the things that you're seeing in the $1 million increase in inventory is those labor costs that we're talking about that got moved to a work-in-progress account until those projects come to fruition to match the revenue accordingly. So that is a big chunk of it, work-in-progress.

其中之一——我可以接受。因此，您在庫存增加 100 萬美元中看到的一件事是，我們正在談論的勞動力成本已轉移到進行中項目，直到這些項目取得成果以相應地匹配收入。這是其中很大一部分，正在進行中的工作。

Got it. And --

知道了。和--

And Richard, the other part is the purchases for IVAS and our prototyping as well. So we're putting product out in each of those phases. So we are buying for that while we're still in production for our customer base that we have been for years.

Richard，另一部分是 IVAS 的採購以及我們的原型設計。因此，我們在每個階段都推出了產品。因此，我們在為我們多年來一直在為客戶群生產的同時就購買了這種產品。

Got it. I don't want to be too bogged in technical accounting, but you were EBITDA positive. The cash went down about $4 million. That same amount basically is missing from accrued expenses and other. It's sort of a random line. Can you walk through what's in that line? Why it fell to such a kind of dramatically low level is otherwise the cash would have been essentially sideways and wouldn't look like it was falling is why I ask. Thanks.

知道了。我不想太陷入技術會計的泥沼，但你的 EBITDA 為正值。現金減少了約 400 萬美元。應計費用和其他費用基本上缺少相同的金額。這是一條隨機線。能講一下這一行的內容嗎？為什麼它會跌到如此低的水平，否則現金基本上會橫盤整理，看起來不會下跌，這就是我問的原因。謝謝。

Yeah, it's all in our tax calculations and our tax provisions. We are sitting on a prepaid tax in both federal and state taxes, which is where the cash movement went. And then we were attempting to not hold as much accounts payable on the balance sheet for quarter end as well.

是的，這一切都在我們的稅務計算和稅務規定中。我們坐擁聯邦和州稅的預繳稅款，這就是現金流動的去向。然後我們也試著在季度末的資產負債表上保留盡可能多的應付帳款。

Got it. So then maybe from a higher-level perspective, if you step back and think about the continuing resolution hampering budgets, can you talk about like activity levels outside of that or whether that's product pipelines or sales pipelines, the degree to which the salespeople are engaged with either existing clients or new clients. And I'm asking is this a way to gauge once a budget situation improved, there's sort of a soft off the books backlog of activity that gives you some hope for sort of a reenergized growth rate going forward? Thanks.

知道了。那麼，也許從更高層次的角度來看，如果您退後一步，考慮阻礙預算的持續解決方案，您能否談論除此之外的活動水平，或者是產品渠道還是銷售渠道，以及銷售人員的參與程度與現有客戶或新客戶。我想問的是，這是否是一種衡量預算狀況改善後，帳面積壓的活動是否會出現軟性的方法，這是否會給您帶來一些希望，讓您對未來的增長率重新煥發活力？謝謝。

And I wish I had a crystal ball for that one, Richard, because there's so many indicators. One is just that they start putting us back in the process or they start opening up the competition. But I've stated the differences before. The military and police law enforcement sales are very, very similar. I understand both of them very well. The big difference that people do not understand is while it's a big chunk and very large contracts for the military, you're only dealing with a handful of people for 25 or 30 sites as they buy in volume. So you deal with one contracting officer and one person. Those are easy to determine when those come around. The harder part is there's different agencies that are putting out federal grants. And in each one of the law enforcement, you'd have state, local, federal, city municipalities, that all have different ways of releasing funds and purchasing processes and all of that.

我希望我有一個水晶球，理查德，因為有很多指標。一是他們開始讓我們回到這個過程中，或者他們開始開放競爭。但我之前已經指出過這些差異。軍隊和警察執法銷售非常非常相似。我非常理解他們兩個。人們不理解的最大區別是，雖然這是一筆很大的軍事合同，但你只與少數人打交道，因為他們大量購買 25 或 30 個站點。因此，您要與一名合約官員和一個人打交道。當這些出現時，很容易確定。更困難的部分是有不同的機構正在提供聯邦撥款。在每一個執法部門中，都有州、地方、聯邦、市政府，它們都有不同的方式來發放資金和購買流程等等。

So I can give you a very good indication of when the military markets open, but it's -- state and local level, some have to go through accounting commissioners. We understand how all that works is just -- it's not very clear when that opens up because you're talking to different people in different cities, in different states.

因此，我可以很好地告訴您軍事市場何時開放，但這是州和地方層級的，有些市場必須經過會計專員的審查。我們知道這一切是如何運作的——目前還不清楚，因為你正在與不同城市、不同州的不同人交談。

So what we -- the biggest indicator for us is the federal contracts because a lot of them are funding some of the small municipalities and police departments. And with that, there are sometimes they'll be matching funds. So when those start to move, we know that they're -- that the funds are starting to release, and we'll start getting the POs. And we're starting to see some of that now.

所以，對我們來說，最大的指標是聯邦合同，因為其中很多都為一些小城市和警察部門提供資金。因此，有時他們會提供配套資金。因此，當這些開始發生變化時，我們知道資金正在開始釋放，我們將開始獲得採購訂單。我們現在開始看到其中的一些。

Great. Thanks --

偉大的。謝謝--

I can answer your question specifically, but really is -- I wish it was that easy to tell you what the answer is.

我可以具體回答你的問題，但實際上——我希望能這麼容易地告訴你答案是什麼。

Got it. Thanks for your help.

知道了。感謝您的協助。

Thanks, Richard.

謝謝，理查。

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

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

Thank you, Paul. VirTra is dedicated to our customers and their crucial missions is as strong as it ever has been. Our passion, hard work, and dedication of our team are the cornerstone of our success, and I'm confident in our ability to provide that leadership to our customers and continue innovating at the top of the industry and making a meaningful difference. That's our priority.

謝謝你，保羅。VirTra 致力於為我們的客戶服務，他們的重要使命一如既往地堅定。我們團隊的熱情、辛勤工作和奉獻精神是我們成功的基石，我相信我們有能力為客戶提供這種領導力，並繼續在行業頂尖領域進行創新並做出有意義的改變。這是我們的首要任務。

To our shareholders, I want to thank you for your continued support and hope to see you in October in Chandler. Paul, over to you.

對於我們的股東，我要感謝你們一直以來的支持，並希望 10 月在錢德勒見到你們。保羅，交給你了。

Thank you for joining us today for VirTra's second-quarter 2024 conference call. You may now disconnect.

感謝您今天參加 VirTra 2024 年第二季電話會議。您現在可以斷開連線。