Good afternoon, and welcome to the Bertra 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, Now I'd like to turn the call over to Virtra's CEO, Mr. John Givens. Thank you, and you may proceed, sir.

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 19 cents 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 and ended September with $27.6 million in backlog. Those metrics provide important visibility into future revenue opportunities and reflect continued demand for virtuous training solutions for 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 two 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 advanced 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 B100 simulator system. To date, we've received applications for 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 five-year sole source contract with U.S. Customs and Border Protection highlights the long-term value of our customer relationship and the relevance of Virtua's training solution across larger organizations. With the maximum potential Value at $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 longstanding 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 positions Vertra for additional opportunities. In the military market, our solutions are now available for evaluations to the U.S. Army's marketplace across three mission-critical capability areas, weapon skills development, joint fires training, and counter-unmanned aircraft systems. This participation expands awareness of virtuous 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 B-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 virtual 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 virtual 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 30th through December 3rd 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 solution. Our training solutions provide to the customers and focused on translating that value in sustained business performance for our shareholders. With that, I'll turn the call over to Alanna to review the financial results.

Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the third quarter and nine months ending September 30th, 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 nine months was 16.9 million compared to 19.5 million in the prior year period. This decrease primarily reflect 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 nine 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 expense for the third quarter was $3.3 million compared to $4 million in the prior year period. And our net operating expense for the first nine months was $10.4 million compared to $11.7 million in the prior year period. This reflects our disciplined expense management while continuing to grow to invest in our key growth initiatives. Income from operations for the third quarter was approximately 2 million compared to a loss of half a million in the prior year period. Income from operations for the first nine months was approximately half a million compared to 1.8 million in the prior year period. Net income for the third quarter was 2.2 million or 19 cents per diluted share compared to the net loss of 0.4 million or negative 3 cents per diluted share in the prior year period. Our net income for the first nine 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 nine months of 2026, our adjusted EBITDA was approximately $2.2 million compared to $2.5 million in the prior year period. As of September 30th, our cash and cash equivalent totaled $18.4 million compared to $18.6 million at December 31st, 2025. During the first nine 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, VRTRA 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. Vertra defines our backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started or are incomplete and their performance obligations, and therefore cannot be recognized as revenue until delivered in a future period. We segment that backlog into three 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. are backlogged at September 30, 2026, so to $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 the 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?

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 investment 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 this progress we've made during the quarter. As the demand for effective training and readiness solutions continue to evolve, we believe VRTRA is well positioned to support the customer's mission-critical needs while creating long-term value for shareholders. We look forward to updating you on the continued progress in the quarters ahead. That concludes our prepared remarks. Operator, please open the call for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Now, our first question comes from Richard Baldry with Roth Capital. Please proceed.

Thanks, and congrats on a great quarter. Can you talk about the sustainability of this or extensibility of this level of revenue, maybe thinking about the top of the funnel? Given the booking strength, it seems good, but do you think you'll be able to replenish this level of revenue on an ongoing basis? How do we think about this step-up you've had?

Well, great question, Rich. The environment has been a bit tumultuous over the last four or five 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 one thing you can look at is if you look at the previous quarter, while the revenue may have not 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 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 and 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 number one 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. So we have the theme of 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 need. 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 fill the backlog. And to Alanna's point, Our challenge is that we're able to get the products out quickly, but the customers aren't ready for them, whether it's a 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.

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

I think it's exactly what you said. It's the mix, right? Are we going to have thousands of have $50,000 deals, or are we going to have $25,000, $4,000, $5,000 deals? Or are we going to sell more step for the reoccurring revenue? Are we going to maintain capital? That's where the lumpiness comes in. As we stated, what made this quarter is we had an 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 three variables that we can't control. But we are doing things like we're publishing a paper. How do you take a virtual system and how do you incorporate it into your training program? Or how do you build a training program around the virtual 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, 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.

No, that's a good answer. It lasts for me in sort of two, but The GNA was down year over year and sequentially. Can you talk about, you know, is there is this a good run rate level we're sitting at here? Were there some sort of one things that made it as good as it was? And then, you know, 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 your chance to. Thanks.

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

Yeah, I mean, I think we're being really cautious with GNA, 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 where we have, like, our overhead staff and our fixed costs and all of those things. So, yeah, 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.

Yeah, and 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, you know, 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 matrix 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 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 B1 and our B100G and then some of the other accessories and items that we've put in place that try to reach and help out those individuals.

Great, thanks and congrats again.

Thank you, Rich.

Again, if you have a question, please press star then one. Our next question will come from Jason Schmidt with Lake Street. Please proceed.

Hi, guys. Thanks for taking my questions. John, just want to start with the military opportunity and seeing 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.

Yeah, 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, but the delivery mechanism is still in the process. So what they want to do is get newer technology in the hands of the warfighter in a much quicker manner, okay, 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 two 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 need. This is part of the mission-critical training that we need. Then what they'll do is then 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 three, and then they will, three 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. Expectation is those are probably dollars that expire in I'd say the 30th. 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 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 two 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 I'm 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 right. 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 in the marketplace and buy the equipment, I'm kind of unsure how that works since the funding comes from one area, but yeah, 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 in exceeding expectations and the requirements on a daily basis.

Okay, that's good to hear and I appreciate that caller. 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?

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 for the last two years, believe it or not. The one 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 one opinion. The other, because all those folks are already in place and the money is already in those areas, 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 Virtra's system is we've worked with the national autism and we've created scenarios to deal with autism. We've created scenarios, many scenarios about de-escalation and 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 number one they didn't want the responsibility of spending the money or the backlash from it so everything just set as a modus operandi and just just sat there until they in place and most of them are in place and 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 other 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 virtual system, depending on what your motive is on law enforcement or military. It's staying active. and monitoring what's being said out there in the narrative and responding accordingly.

Okay, perfect. And then just the last one for me and I'll jump back into 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 concerns about being able to convert any potential chunkier orders that come in as you go forward?

Yeah. I'll mention to you what we're doing to the things we can control to mitigate that without excessive growth or spend to keeping the cost 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, so 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 highly tolerances or incredibly tight. And we always, 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, a 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 sound vendors that can build some of our NGs, some of our 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 we get in the past that really have affected our ability to deliver. Now the bad, probably 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 the 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 two 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 the micro level. And again, staying in tune with what's going on in our 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 unable to be able to fulfill them. So it's a great question and we're dealing with that now. So thank you for that, Jason.

Gotcha. No, that's really helpful. Thanks a lot, guys.

Thank you.

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.