VirTra (VTSI) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - John Givens
• Chief Financial Officer - Alanna Boudreau

TAKEAWAYS

• Revenue -- $7.6 million, representing 42% growth driven by increased government and international deliveries.
• Net Income -- $2.2 million, or $0.19 per diluted share, reflecting improved revenue conversion and disciplined cost management.
• Bookings -- $10.3 million, increasing 87% sequentially from the second quarter due to contributions from STEP agreements and capital system orders.
• Total Backlog -- $27.6 million, providing visibility into future revenue across capital, service, and STEP categories.
• Capital Backlog -- $14.1 million, comprising simulators, accessories, and custom design work.
• Subscription Training Equipment Partnership (STEP) Backlog -- $9.6 million, representing long-term subscription-based program contracts.
• Service Backlog -- $3.9 million, consisting primarily of extended warranty and support contracts.
• Gross Margin -- 70%, increasing from 66% in the prior year period due to a higher mix of international revenue and operational efficiencies.
• Government Revenue -- $5 million, compared to $4.1 million in the prior year period, driven by domestic sales activity.
• International Revenue -- $2.4 million, compared to $1.2 million last year, reflecting the fulfillment of existing commitments including a deployment in Colombia.
• Operating Income -- Approximately $2 million, improving from an operating loss of $0.5 million in the prior year period due to higher top-line volume.
• Net Operating Expenses -- $3.3 million, decreasing from $4 million last year as the company focused on disciplined expense management.
• Adjusted EBITDA -- $2.6 million, up from $0.09 million in the prior year period, reflecting the impact of improved operating leverage.
• Cash and Cash Equivalents -- $18.4 million, compared to $18.6 million at the end of 2025, following investments in inventory and the acquisition of an Orlando facility.
• Nine-Month Revenue -- $16.9 million, a 13% decrease from $19.5 million last year, primarily due to delayed customer funding and procurement timelines.
• CBP Contract Value -- $14 million maximum potential, established through a five-year sole-source agreement to modernize and maintain training networks.
• Tajikistan Award -- $1.5 million, representing a sole-source award from the U.S. Army for a V-300 training system.
• Task Force Santa Applications -- 154 departments, highlighting demand for advanced training solutions in the law enforcement community.
• Inventory -- $14.1 million, net, increasing from $13.1 million at the end of 2025 to support anticipated customer deliveries.
• Accounts Payable -- $1 million, compared to $784,000 at the end of 2025.
• Long-term Notes Payable -- $11 million, compared to $7.3 million at the end of 2025, partly reflecting a mortgage for a building purchase.

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RISKS

• Boudreau stated, "the timing of customer funding and procurement decisions can create variability from quarter to quarter," regarding the potential volatility of financial results.
• Givens noted that simple components are facing shortages, stating, "they're talking now about just simple things like fiberglass, the raw fiberglass it takes to build the green electronics boards to put the components on."
• Givens warned that inclusion in the U.S. Army Marketplace provides no assurance of future procurement awards, despite increasing visibility with decision-makers.

SUMMARY

VirTra, Inc. (NASDAQ:VTSI) reported $7.6 million in revenue for the third quarter, representing sequential growth for the third consecutive quarter. Management reported that bookings reached $10.3 million, supported by domestic capital sales and international system deliveries. The company stated that it is currently undergoing evaluation in the U.S. Army Marketplace across three capability areas: weapons skills development, joint fires training, and counter-unmanned aircraft systems. Additionally, the company indicated that grant activity in the law enforcement sector is reopening after approximately two years of limited availability.

• Givens reported that the company is preparing for a shoot-off among the top three vendors in the U.S. Army Marketplace expected around April.
• Management stated that international deliveries contributed significantly to the 70% gross margin during the quarter.
• Givens noted that the company is exploring second and third shifts in manufacturing to mitigate potential production bottlenecks for larger orders.
• The company announced plans to formally launch its Version 7 software platform at the Interservice/Industry Training, Simulation and Education Conference from Nov. 30 to Dec. 3.
• Management indicated that while the company has established dominance in law enforcement, it is actively working to increase brand awareness in the federal and military sectors.
• Boudreau noted that the decrease in revenue for the first nine months of the year was primarily caused by customers being unable to accept delivery rather than a lack of demand.

INDUSTRY GLOSSARY

• V-300: A 300-degree wrap-around training simulator for extensive immersive training scenarios.
• V-100: A single-screen firearms training simulator designed for law enforcement and military skills.
• STEP: Subscription Training Equipment Partnership, a program allowing agencies to subscribe to simulators and coursework.
• C-UAS: Counter-Unmanned Aircraft Systems, a mission-critical military training capability area.
• FAT: Factory Acceptance Test, a quality control process performed by customers at the manufacturing facility.
• I/ITSEC: Interservice/Industry Training, Simulation and Education Conference, a major industry trade show.
• VICTA: Virtual Interactive Coursework Training Academy, a software suite for teaching and maintaining departmental standards.

Full Conference Call Transcript

Operator: Good afternoon and welcome to the VirTra Third Quarter 2026 Earnings Conference Call. My name is Megan 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. 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 on the 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, sir.

John Givens: Thank you, Megan, and good afternoon, everyone. Thanks for joining us today to discuss our third quarter 2026 financial results. We delivered a strong quarter with revenue at $7.6 million, bookings of $10.3 million, and net income of $2.2 million, or $0.19 per diluted share. Our revenue increased 42% from the prior year quarter, bookings rose 87% sequentially from the second quarter, and we generated our third consecutive quarter of sequential revenue growth. These results demonstrate continued progress in translating customer demand into revenue, earnings, and shareholder value. The improvement was also evident in our operating performance.

Gross margins increased to 70% while disciplined cost management contributed to $2 million of operating income compared to the operating loss in the prior year quarter. We believe these results demonstrate the operating leverage inherent in our business model as revenue conversion improves and we continue to execute efficiently. We also generated $10.3 million in bookings during the quarter ended September with $27.6 million in backlog. Those metrics provide important visibility into future revenue opportunities and reflect continued demand for VirTra's training solutions in law enforcement, federal, military, and international markets. Our focus remains converting those commitments into deployments while continuing to expand customer relationships and win new business.

Turning to our markets, we see encouraging signs in the law enforcement funding environment. After nearly 2 years of limited grant activity, programs are reopening and agencies are actively pursuing funding opportunities. This gives departments additional avenues to invest in training and advance purchasing decisions. While the timing of grant awards, funding distributions, and customer deployments remain a bit difficult to predict, activity levels have improved meaningfully. Our team remains focused on helping customers navigate the funding process and convert that activity into future orders and deployments. We view the continued reopening of these programs as a constructive development for the market.

Looking specifically at demand, one example that it remains strong is the response to our Task Force Santa initiative, which provides agencies with an opportunity to compete for a V-100 simulator system. To date, we've received applications from 154 departments, demonstrating the ongoing need for high-quality training solutions across law enforcement communities. More importantly, the response highlights the strong demand for advanced training solutions and the extent to which agencies are actively pursuing funding opportunities to support these investments. We look forward to working with these agencies to identify grant opportunities that can help them accelerate system deployments and improve training readiness. In the federal market, our recently announced 5-year sole-source contract with U.S.

Customs and Border Protection highlights the long-term value of our customer relationship and the relevance of VirTra's training solution across larger organizations. With a maximum potential value of $14 million, the contract provides CBP with a framework to modernize, maintain, and support its nationwide simulator training network. Importantly, the opportunity extends beyond the initial simulator installations. It reflects a long-standing customer continuing to invest in its training infrastructure and creates opportunities for modernization, upgrades, and support over time. As with all indefinite delivery contracts, the $14 million represents a contract ceiling. The revenue depends on customer ordering activity and our performance under the agreement.

Our focus remains on delivering the capabilities and services that strengthen these relationships and position VirTra for additional opportunities. In the military market, our solutions are now available for evaluation through the U.S. Army's marketplace across 3 mission-critical capability areas: weapons skills development, joint fires training, and counter-unmanned aircraft systems. This participation expands awareness of VirTra's technology and provides an opportunity to demonstrate how our training solution can address a broader range of military readiness requirements. While inclusion does not guarantee a procurement award, it increases visibility with potential users and procurement decision-makers across the Army. We also received a $1.5 million sole-source award from the U.S.

Army for a V-300 training system and related equipment supporting firearm training and force readiness efforts in Tajikistan. This award serves as another example of our ability to support military training requirements both domestically and internationally. Together, these developments continue to expand our opportunities within the military market and reinforce the broad applicability of our training platform. International deliveries were an important contributor to the third quarter revenue performance and demonstrate how awarded business translates into financial results as customer requirements are fulfilled and systems are deployed. We continue to pursue opportunities across international markets while remaining focused on executing against existing commitments and supporting customers throughout the deployment process.

As governments and security organizations seek advanced training solutions, we believe VirTra remains well-positioned to address those needs. Innovation also remains a core component of our long-term strategy. Our Version #7 software platform is designed to make VirTra systems more intuitive, efficient, and effective for customers. The release incorporates customer feedback, usability enhancements, and workflow improvements intended to improve the overall training experience. We plan to formally introduce this platform at the upcoming Interservice/Industry Training, Simulation and Education Conference, November 30 through December 3 in Orlando, Florida, where customers and industry participants will have an opportunity to see these enhancements firsthand. The third quarter demonstrated our ability to turn customer demand into revenue and earnings.

We delivered strong bookings, expanded gross margins, generated profitability, and continued developing opportunities across our core markets. Our priorities are clear: convert backlog into deployments, deepen our customer relationships, and pursue growth through disciplined investment and cost management. Supported by a strong balance sheet and a growing pipeline of opportunities, we believe we are well positioned to build on the progress achieved during the quarter. We remain confident in the value of our training solutions provided to customers and focused on translating that value into sustained business performance for our shareholders. With that, I'll turn the call over to Alanna to review the financial results.

Alanna Boudreau: Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the third quarter and 9 months ending September 30, 2026. Our total revenue for the third quarter was $7.6 million compared to $5.3 million in the prior year period. Our revenue increased significantly from $5.8 million in the second quarter and $3.5 million in the first quarter, reflecting improved revenue conversions and contributions from international deliveries during the quarter. If we break this down by market, government revenue for the third quarter was $5 million compared to $4.1 million in the prior year period. International revenue for the third quarter was $2.4 million compared to $1.2 million in the prior year period.

Our total revenue for the first 9 months was $16.9 million compared to $19.5 million in the prior year period. This decrease primarily reflects delayed customer funding, procurement timelines, and customer acceptance activities that impacted the timing of revenue recognition mostly in the beginning of the year. Our gross profit for the third quarter was $5.3 million, or 70% of total revenue, compared to $3.5 million, or 66% of total revenue, in the prior year period. Gross margin continues to reflect the impact of our operational efficiencies we've put in place that we benefit from as we're able to recognize revenue.

Our gross profit for the first 9 months was $10.9 million, or 65% of total revenue, compared to $13.5 million, or 69% of total revenue, in the prior year period. The decrease was driven by lower revenue, volumes and the continued investment in our strategic content and development initiatives that support our future growth opportunities. Our net operating expenses for the third quarter were $3.3 million compared to $4 million in the prior year period. And our net operating expenses for the first 9 months was $10.4 million compared to $11.7 million in the prior year period. This reflects our disciplined expense management while continuing to invest in our growth initiatives.

Income from operations for the third quarter was approximately $2 million compared to a loss of $0.5 million in the prior year period. Income from operations for the first 9 months was approximately $0.5 million compared to $1.8 million in the prior year period. Net income for the third quarter was $2.2 million, or $0.19 per diluted share, compared to a net loss of $0.4 million, or negative $0.03 per diluted share, in the prior year period. Our net income for the first 9 months was approximately $0.6 million, or $0.05 per diluted share, compared to net income of $1.1 million, or $0.09 per diluted share, in the prior year period.

Adjusted EBITDA, a non-GAAP metric, was $2.6 million compared to $0.09 million in the prior year period. For the first 9 months of 2026, our adjusted EBITDA was approximately $2.2 million compared to $2.5 million in the prior year period. As of September 30, our cash and cash equivalents totaled $18.4 million compared to $18.6 million at December 31, 2025. During the first 9 months of the year, cash usage reflected investments in inventory supporting customer deliveries, including international shipments, as well as the acquisition of our Orlando facility. As we turn to our bookings, VirTra defines bookings as the total of newly signed contracts, awarded RFPs, and purchase orders received in a given period.

Bookings for the third quarter totaled $10.3 million compared to $5.5 million in the second quarter and $3.8 million in the first quarter. This increase reflected contributions from STEP agreements, capital system orders, renewed activity from federal customers, and a number of capital systems purchased across our domestic sales territories. VirTra defines our backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started or are incomplete in their performance obligations, and therefore cannot be recognized as revenue until delivered in a future period.

We segment that backlog into 3 primary categories: capital, which includes our simulators, our accessories, installations, training, custom content, and design work; service, which is primarily extended warranty and support contracts; and then STEP, which is our long-term subscription-based program. Our backlog at September 30, 2026, stood at $27.6 million, and this included $14.1 million in capital, $3.9 million in service, and $9.6 million in STEP contracts. During the quarter, we converted a portion of our backlog into revenue, including the second phase of our previously awarded international deployment in Colombia. We expect additional backlog conversion during the fourth quarter, although the timing will continue to depend on the procurement process, installation schedules, and acceptance timelines.

In summary, we're encouraged by the momentum we saw across the business during the third quarter. Improved revenue conversion, strong booking performance, and adjusted EBITDA growth reflect continued progress against our strategic priorities. While the timing of customer funding and procurement decisions can create variability from quarter to quarter, we believe our backlog, recurring revenue streams, and strong financial position provide a solid foundation for continued execution and growth. That concludes my prepared remarks. I'll turn the call back over to John for his closing comments. John?

John Givens: Thank you, Alanna. As we reflect on the third quarter, we're pleased with the progress we've made across the business. We delivered our third consecutive quarter of sequential revenue growth, generated bookings of more than $10 million, expanded gross margins to 70%, and grew our backlog, all while continuing to strengthen customer engagement across our law enforcement, federal, military, and international markets. These results provide further evidence that the investments we've made in our products, our customer relationships, and go-to-market initiatives are gaining traction. Looking ahead, we remain encouraged by the underlying demand environment and the level of activity we're seeing across our pipeline.

We believe the increasing pace of grant activity, growing federal engagement, healthy backlog, and strong booking performance position us well for continued progress. In closing, we're pleased with the progress we've made during the quarter. As the demand for effective training and readiness solutions continues to evolve, we believe VirTra is well positioned to support customers' mission-critical needs while creating long-term value for shareholders. We look forward to updating you on continued progress in the quarters ahead. That concludes our prepared remarks. Operator, please open the call for questions.

Operator: [Operator Instructions] Our first question comes from Richard Baldry with Roth Capital.

Richard Baldry: Congrats on a great quarter. Can you talk about the sustainability or extensibility of this level of revenue, maybe thinking about the top of the funnel, given the booking strength, it seems good. But are you -- do you think you'll be able to replenish sort of this level of revenue on an ongoing basis? Sort of how do we think about the step-up you've had?

John Givens: Well, great question, Rich. So the environment has been a bit tumultuous over the last 4 or 5 quarters, given the grants and the government funding that we rely on. We've expanded into other areas, so we've actually increased our pipeline. But 1 thing you can look at is, if you look at the previous quarter, while the revenue may not have been there, we were replenishing that backlog, and we continue to do that. So as you look forward, there's quite a few opportunities that are out there. We have the military growing with the marketplace.

We have a lot of other areas within the country, within research, within adjacent markets that are coming online too, that have the requirement of looking at either de-escalation or dealing with different levels of issues with people in the public as you look at law enforcement, security forces, and the like. So I believe that it just keeps expanding. And one of the things that we've seen is word about VirTra is getting out there. While we may have been #1 in the law enforcement environment, we were relatively unknown in the federal and the military space. We have some federal customers, but we didn't expand on that in the early days of VirTra.

So I think that and what we've done, we've hired a new director of marketing and she's putting the systems together and doing some amazing outreach, which we're seeing a result of in our leads. And our shows are more directed at the need of the time that we have the theme when we go to the shows and what we're doing and how we react to the industry is much more direct and much more focused on the needs. So, we're seeing some effects on the programs and the processes that we're putting in place. So yes, I do believe we're able to backfill the backlog.

And to Alanna's point, our large challenge is that we're able to get the products out quickly, but the customers aren't ready for them, whether it's the construction of a building or where they will put it or who's going to be in charge of it or how they're going to integrate it into their training program. Those are the things that really stand in our way. And those are the things we're trying to help by publishing things and helping them in that process. But yes, to your question, yes, we'll be able to fill that pipeline, that backlog.

Richard Baldry: Maybe another way to think about it, if you look at the successes you've had in the shipping lately, is it a large number of sort of mid to bite-sized deals, or is there some sort of lumpiness in larger deals that would cause a little bit more concern about the sustainability?

John Givens: I think it's exactly what you said. It's the mix, right? Are we going to have thousands of $50,000 deals, or are we going to have 25 $400,000 or $500,000 deals? Or are we going to sell more STEP for the recurring revenue? Or are we going to maintain capital? That's where the lumpiness comes in. As we stated, what made this quarter is we had in international, we were able to book more of the international revenue, which has a higher margin, which affected our gross margin. So it really -- what we're trying to do is we're trying to level off those peaks and valleys by trying to make sure that we're focusing on the mix.

But like I said, there's usually 3 variables that we can't control. But we are doing things like we're publishing a paper: How do you take a VirTra system and how do you incorporate it into your training program? Or how do you build a training program around the VirTra system? And also guiding them through the grant process. So we're helping in every way that we can. We've identified the problems that our customer base are having and we're being looked at as the thought leadership in those areas, and that's why you're seeing this big shift as we're moving through. But unfortunately, the lumpiness, as much as we want to control it, we're trying.

I just don't know that -- I really don't have a good answer for that, Rich. I apologize.

Richard Baldry: No. That's a good answer. And last for me is sorty of two, but G&A was down year-over-year and sequentially. Can you talk about, is this a good run rate level we're sitting at here? Were there some sort of one-time things that made it as good as it was? And then, I think it wouldn't be a sell-side call if someone didn't ask you to expound on the ways you can use AI to make the company stronger, better going forward. So we'll give you a chance too.

John Givens: I'll let Alanna address the first part of that, and I'll address the AI part. Alanna?

Alanna Boudreau: Yes, I mean, I think we're being really cautious with G&A. And I think we've kind of established a level at this point where we could still experience revenue growth without having to increase those numbers significantly for a while. I'm pretty comfortable with where we have like our overhead staff and our fixed costs and all of those things. So yes, I mean, I think that this is probably -- I don't know how much more we can cut from this. I think this is probably a good run rate based on the work we've done.

John Givens: Again, I would agree with that. And as far as the AI, I'll say this: we are cautiously optimistic in looking at options. Right now it's the Wild West when you put your stuff out there, so we're being very cautious in that regard. But we're looking at -- we have implemented in a lot of different areas, from content development to we're doing some sales. We're looking at sales. We're looking at our pipeline. We're comparing close rates, win rates, and proposals, and comparing those to the metrics on what they're asking for in a proposal.

So we're doing all the things that you would read about the industry, but we're also doing some things that are really going to drive our productivity that I really don't want to talk about on the call from a competitive perspective. But we're seeing an immense amount of productivity in a few areas that will help drive the bottom line, increase our profitability, and our gross margins. At that point, like I've stated in the past, there are some areas that we will sacrifice some of our gross margin in order to gain more market share.

So with these new advancements in AI and how we're applying them, that's how we're going to maintain the levels that we have now and still be able to reach and get the prices to a point where we can serve those 13,500 police agencies that are incredibly underserved. And we've seen that through the products that we've produced in our V-One and our V-100G and then some of the other accessories and items that we put in place that try to reach and help out those individuals.

Operator: [Operator Instructions] Our next question will come from Jaeson Schmidt with Lake Street.

Jaeson Schmidt: I just want to start with the military opportunity and see if you can explain the process and activities of the U.S. Army marketplace and, I guess relatedly, how we should think about this contributing to the P&L longer term.

John Givens: Yes, interesting. We just got a bunch of information. I think even the military really -- they knew it was something they wanted more like an Amazon marketplace is kind of what they're doing in a bunch of different areas. The intent and the purpose, I think, is well thought out, but the delivery mechanism is still in the process. So what they want to do is get newer technology in the hands of the war fighter in a much quicker manner without all the paperwork and without going through programs and all of that.

I think it also provides them a way to be competitive in the marketplace so they can eliminate protests and all the other things that happen during a regular funding cycle. The marketplace is quite unique because the marketplace has added all of our competitors and all that to the marketplace. They purchased 2 systems from each of them, and they put them out there in the field for the users to assess them and use them and see what they like and which one they like. And what it is, it's a precursor to a program of record.

So once they determine the users say, "Hey, this is a great one, this fits our needs, this is part of the mission-critical training that we need," then what they'll do is they'll create a program of record. From a timing perspective, I can tell you this, is that in April, they will be having what they call a shoot-off between the top 3 and then they will -- 3 or at least that's usually what happens, it may be more, a place to designate, they'll look at all of our equipment, and then they'll do a first initial purchase. The expectation is those are probably dollars that expire in, I'd say, September 30.

So you could see something by that period again. No guarantees, but we're part of that. And then the other thing is they went to all the sites and last week they visited our Chandler manufacturing facility and they did what they call a FAT, a factory acceptance test. We received absolutely glowing reviews and letters from the colonel and the others that were doing it. And they said in their years of looking and doing all of this, our facility was the cleanest, the most productive, and processes in place. And they were quite impressed with what they saw. The whole day event, and they accepted the 2 systems that they had purchased. So we're very proud of that.

So that all of that work that we've been doing, I know people get tired of me saying, "Well, it's coming, it's coming, it's coming." The problem is this is a brand-new process that even I am, and I've been doing this for a long time, very aware of how this process works. So we're learning as we go. And I quite frankly believe that the government and some of the folks that are doing implementation are learning as well, and we feel they're being very considerate to industry, and we're one of the top vendors, we've been told on multiple occasions. So that's the process.

You're on the marketplace, they've done all their due diligence, they've done all the contracting, they've done everything they need to. Now anybody can go in the marketplace and buy the equipment. I'm kind of unsure how that works since the funding comes from 1 area, but yes, we're right in the thick of it. I hope that explains that and also lets you know that I'm totally unsure of where it goes from here, but we're complying and exceeding expectations and requirements on a daily basis.

Jaeson Schmidt: Okay. That's good to hear, and I appreciate that color. And then just given the changes in Washington post the midterms and the CR expiring in December, how are you thinking about just the general demand environment? And have you seen any sort of change, or are you concerned about any of the funding?

John Givens: You know, that's a great question, and this will be John's opinion based on what I've seen before and the activities that we've been prepping for the last 2 years, believe it or not. The 1 thing I think that might happen is I think the current administration will accelerate the awards and the grants to make sure that they all go out there. That's 1 opinion. The other -- because all those folks are already in place and the money's already in those area, so hopefully that will accelerate the grant awards.

The second part of that is I've been spending a lot of time in Washington, D.C., both on the Republican and the Democratic side, showing both sides the beauty of the VirTra system is we've worked with the National Autism Association and we've created areas to deal with autism. We've created scenarios, many scenarios about de-escalation for both sides, the use of force, non-lethal training, community officers, and individuals that deal with the public. So we appeal to both sides of the aisle and we appeal to the law enforcement environment.

From a military perspective, they have -- the budgets that they have now, they'll be able to spend it, they already have it, so we're seeing activity in those areas. So I think it will accelerate the marketplace and potentially the program of record that they'll be looking at. Again, the problems that we've dealt with at the last shift is none of the directors were in their office. So we had interim directors that, #1, they didn't want the responsibility of spending the money or the backlash from it. So everything just sat as a modus operandi and just sat there until directors were in place. And most of them are in place directors in those areas.

So, we're going to continue to do that. We're also involved with studies. We're working with the University of Chicago, we're working with the University of Ohio, we're working with individuals that are doing studies within the government. So we're making sure that we're part of those so that we can drive the narrative on the value of the VirTra system depending on what your motive is on law enforcement or military. It's just staying active and monitoring what's being said out there in the narrative and responding accordingly.

Jaeson Schmidt: Okay. Perfect. And then just the last one for me, and I'll jump back in the queue. You're obviously seeing some strong demand here, and I know you mentioned you have a good mix in that funnel, but is there any concern about being able to convert any potential chunkier orders that come in as you go forward?

John Givens: Yes, and I'll mention to you what we're doing to the things we can control to mitigate that without excessive growth or spend to keep costs down, but I'll also talk about a concern that some of our vendors and supply chain are telling us now, which I'll talk about that in a minute. So one of the things that we're doing is we are right-sizing our team, moving on to a second shift and a third shift in manufacturing and assembly. What we're also doing is some of our parts are very high -- tolerances are incredibly tight.

And our biggest problem is we have very small batches of material that we might do a run of 50 or 100, but a lot of these manufacturers want 10,000, 1 million a month, or something crazy in order for them to take it on. So we always move to the back of the list. But we have found vendors that can build some of our NGs, some of our refill stations, and we're getting multiple vendors to do those things. And we have it very well documented and it's a very strong, simple-to-follow process and so we can focus on building the parts that in the past really affected our ability to deliver.

Now, the bad news and I think this isn't just for VirTra, it's for the entire industry, we went and visited one of our vendors that produces something for us today and they were saying in the 35 years that they've been doing electronic manufacturing, they're having problems getting green PCB boards because everybody's heard about the lack of memory and the cost of memory, how it's gone up. But they're talking now about just simple things like fiberglass, the raw fiberglass it takes to build the green electronics boards to put the components on. So you can't build a fiberglass factory fast enough. So we're watching that very, very carefully.

And one of the reasons why I have kept my powder dry, kept a large amount of cash in the bank, is for just such an occasion. So when we find that we can buy -- I might buy 2 years' worth of material so I don't run into that. And as they address the supply chain, I can make sure that we're still able to fulfill orders. So we're looking at that macro and a micro level. And again, staying in tune with what's going on in our supply chain space, not just in law enforcement and military, but also on our manufacturing side.

And I have a lot of talented, brilliant people that are looking at that as well, and we're just making sure that we make those purchases. So you'll see our inventory grow, and you'll know why: it's because I don't want to get stuck with all these great orders and all this demand and be unable to fulfill them. So it's a great question, and we're dealing with that now. So thank you for that, Jaeson.

Operator: At this time, this concludes our question-and-answer session. Thank you for joining us today for VirTra's third quarter 2026 conference call. You may now disconnect.

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