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 their remarks, we will open the call for questions. Before we begin the call, I would like to provide VirTra's Safe Harbor Statement that includes cautions regarding forward-looking statements made during this call. During this presentation, management may discuss financial projections, information or expectations about the company's products 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. Now, I'd like to turn the call over to VirTra's CEO, Mr. John Givens. Thank you, and you may proceed.

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. As a brief overview for today's call, I'll begin by providing highlights for the third quarter 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. In Q3, we built 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 cost. 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 within 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. V-XR provides unprecedented value to our law enforcement and government customers, but also the security agencies, 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, diffuse 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. 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 preorders with deliveries expected to begin in April 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. 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 recurring revenue streams, bringing us closer to our goal of 30% of total revenue. 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 training solutions, AI will play a pivotal role in enhancing our capabilities and driving further success. 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. 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 insights and patterns from this data providing our customers with actionable feedback and performance metrics. 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. 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. 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 insights that will guide our decision-making and ensure we remain at the forefront of the industry. 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. Since then, we made substantial progress in this approach, successfully establishing our presence in all our outlined 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. 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. In addition, we've refined our internal sales procedures to enhance monitoring and advancement of potential deals. These improvements enable more frequent and meaningful touchpoints with law enforcement agencies and military departments. Our goal is to provide unparalleled customer service, responding promptly to their needs and ensuring the seamless journey from initial contact to close. The enhancements we've made to our sales infrastructure reflect a strategic shift designed to propel us forward. It's with this context of transformation that we welcome Tony Cianflone to 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. These significant changes with our sales functions are not just promising for the future, they're already having an 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 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 the sales support specialists. Looking closer to how end markets performed in the quarter. In the third quarter, 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 longer lead times for the international pipeline. And while our international pipeline has grown, the current geopolitical tension and U.S. 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. We have reported continued growth from our Subscription Training Equipment Partnership and STEP program, which provides recurring revenue for VirTra and offers an easy on-ramp for the smaller agencies interested in our solution but are perhaps budget-constrained for an outright purchase. This also gives our staff another tool in closing the sale. Currently, our recurring revenue, including warranty revenue represents 25% of the total quarterly revenue, but we expect this to increase in the future. 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. While the competition and sensitive nature of these contracts warrant discretion in public disclosures, our confidence in VirTra's potential for further expansion in the military sector remains high. Overall, the outlook for 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, and VirTra's products and training programs are designed specifically to replicate real-world conditions, including urban warfare, counter-terrorism, and asymmetric warfare. As defense strategies evolve, the acquisition of small arms training systems and equipment remains an 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 capabilities for military weapons such as the M4 and the M249. I'll now turn the call over to Alanna to further discuss the financial results and their details.

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 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 demands for our training solutions. 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. 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 the 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. Our operating income jumped to $7.1 million for 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. 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 $0.07 per diluted share in the third quarter of 2022. 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 2022. 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 initiative begins to take effect. 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 period. 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. 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 which represent additional revenue for the next five years. Historically, we have had greater than a 95% renewal rate on our STEP contracts. 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. From a working capital standpoint, at the end of the 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. For additional details about our financial results, please reference our 10-Q, which was filed earlier today. And that concludes my prepared remarks. And now I'll turn it over to Bob to discuss some of the improvements we've made with our technology.

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 unique challenges faced by each of our customers. 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 just 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 immerses users in a span of situations containing lifelike characters. 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 that plagues all of our competitors. The difference between what they offer and what we offer is just undeniable. 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 3 Es: educate, experience, and engage. Users can learn skills like interviewing, de-escalation, weapon transitions, decision-making, and more. Our Engage module provides unmatched training with realistic simulated individuals experiencing mental health crises. With V-XR, we are not just evolving training methods, but also responding to a societal need for empathy and understanding in law enforcement and security practices. 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've significantly refined our 180 and 300 series simulators, optimizing them for standard room heights and streamlining access to critical components. 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 part of what John Givens has been driving here at VirTra. Our progress and investment in 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 rounds. It's these significant developments that will help to fuel some of our future growth and advance our reputation as industry leaders. I look forward to sharing more about our achievements when the time is right 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. 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. I will now pass the conversation back to John, who will offer closing thoughts on our exciting journey ahead. Thank you.

Thanks, Bob. As highlighted, our products form the core of VirTra's mission. This year, we've witnessed growing demands 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 process changes are affecting the bottom line. 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. 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. And with that, I'll open up the call for questions. Operator, please provide the appropriate instructions.

The first question we have is from Jaeson Schmidt of Lake Street.

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

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

I concur.

And then looking at gross margin, it 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?

I would say that Q1 is probably more normal. Q2, we know we took a hit because of the inventory write-offs 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 that offset some of our cost of goods.

And then just the 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 V-XR devices, or is this one for the whole department? And I guess, relatedly, it does seem very complimentary, but are you at all concerned that this will cannibalize your core simulator market?

Yes. I'll talk about the cannibalization; 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 were standing alone waiting on that, but they have discretionary dollars at a level. We needed a product not only that serves to solve a problem of soft skills, but we also needed something at a price point so we could stay in there and show our capability. As far as cannibalization, no, because the training component with our V300s, 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, can't see the sights. There's a whole bunch of complimentary. We did a lot of searching and a lot of investigating, and 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 V300 or V180 does. We don't use our recoil kits with the V-XR. The price point is quite low. And your other part of that question is, I think they're going to buy multiple kits because of our price point 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. 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've burned paint off the floor with using it so much. So building that library is paramount and going forward. So I think you will see some nice revenue from that capability as a complementary product. But no, nothing in the cannibalizing at all.

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.

Thank you, operator. We stand firm in our service to our customers and their life-saving missions. The passion and dedication of our team are 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 the 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.

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