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Good afternoon, and welcome to VirTra's Second Quarter 2025 Earnings Conference Call. My name is Ryan, and I will be your operator for today's call. Joining us for today's presentation are 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 company's website at www.virtra.com. Now I would like to turn the call over to VirTra's CEO, Mr. John Givens. Thank you, and over to you, sir.

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 second quarter and six months ended June 30, 2025, along with highlighted business accomplishments. In Q2, VirTra delivered year-over-year growth in both revenue and bookings, maintained profitability and strengthened our cash position. While bookings were lighter sequentially due to the timing of orders and the ongoing funding delays, our operational discipline and customer engagement strategies continue to position us well for the back half of the year and into 2026. We remain confident in the strength of our solutions, our reoccurring revenue programs and our ability to execute as funding flows improve. The operating environment remains shaped by the federal and international funding delays. Agency procurement cycles are still slower than normal. And in some cases, funding is being held back entirely until the fiscal year budgets reset. We believe these challenges are temporary, but they continue to influence our quarterly order patterns. That said, we are starting to see some movement. The Department of Justice COPS grant program reopened on June 1 and closed for submissions on June 30, a positive step that should help unlock some funding for agencies later in the year. We've been actively engaged in Washington, D.C. to help policymakers understand the value of immersive training and to support funding initiatives that benefit our customers. While the real impact of these programs will take time to flow through, we expect improved order activity in the quarters ahead. To this end, we continue to execute on our sales and marketing initiatives in the second quarter. Our marketing efforts remain a central focus with our redesigned website expected to launch in the coming weeks. We expect the new site to enhance lead capture, funnel visibility and our conversion tracking. Our regional sales model continues to improve accountability and responsiveness across all territories. We have made targeted personnel changes to ensure we have the right people in the right roles, strengthening our customer engagement and follow-through. We also remain positioned to benefit from our reentry into the GSA procurement channel, which will streamline contracting for eligible agencies and shorten delivery time lines once live. Although this is expected to impact Q4 and beyond more meaningfully, it strengthens our long-term go-to-market approach. STEP continues to be a strong selling point, especially in smaller markets. Six customers renewed early in Q2, primarily for the V-180 and the V-300 systems, signaling both the STEP's value and the customer satisfaction with our systems' performance. These renewals, combined with the transition to 3-year agreements, improved visibility into future reoccurring revenue. Interest in our V-XR extended reality platform continues to grow with strong pipeline active quotes across public safety, academic and health care markets. Customers are recognizing the flexibility and immersive fidelity of the system, and we expect to announce new developments with strategic partners in the coming quarters. Content conversion from our scenario library to the XR platform is progressing well, too. Our robust library of certified content will further expand the appeal and applicability of the platform. Following on the V-XR discussion, our commitment to product quality continues to be a key driver for VirTra's market position. In recent quarters, we have made deliberate investments to enhance our manufacturing processes, expand our reliability testing and implement tighter quality control protocols. These actions, combined with incorporating customer feedback directly into the product enhancements have meaningfully improved hardware durability, reliability and overall performance. These improvements are being noticed in the field. Customers consistently report that our systems not only deliver the superior training capabilities, but also withstand years of rigorous real-world use. This validation reinforces our reputation as a trusted long- term training partner and helps drive repeat business and renewals. We are sustaining these quality advancements while operating with efficiency, and this dynamic is allowing us to price our systems competitively without sacrificing performance or reliability. We continue to strengthen our value proposition, ensuring that VirTra remains well positioned to win and retain customers across multiple market segments. Our work on the IVAS program continues to advance. We've completed additional recall kit validations and reliability testing and remain in position for potential production opportunities. The recent novation of the contract from Microsoft to Android was a positive step in clarifying the program's future. We are also tracking broader DoD initiatives that emphasize modular, scalable systems, an area where VirTra solution is well aligned. Overall, Q2 built on the progress made earlier in the year. We continue to strengthen our operations and maintain positive momentum despite funding delays remaining a near-term challenge. Our strong cash position, stable reoccurring revenue base and disciplined execution provide a solid foundation for the remainder of 2025. As funding flows improve, we are well positioned to convert opportunities into growth. With that, I'll turn it over to Alanna for a detailed financial review. Alanna?

Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the second quarter and six months ending June 30, 2025. Our total revenue for the second quarter was $7 million compared to $6.1 million in the prior year period. The 15% increase was primarily driven by the higher capital deliveries and stable reoccurring revenue from STEP and Service contracts. Breaking this down by market, Government revenue for the second quarter was $5.4 million compared to $5.3 million in the prior year period. International revenue for the second quarter was $1.4 million compared to $0.6 million in the prior year period. Our total revenue for the six months was $14.1 million compared to $13.4 million in the prior year period. This 5% increase was driven as well by the higher capital deliveries stable recurring revenue from STEP and Service contracts. Our gross profit for the second quarter was $4.8 million or 69% of total revenue compared to $5.5 million or 91% of total revenue in the prior year period. Last year's unusually high gross margin reflected capitalized labor on the development of V-XR and the IVAS program and a greater mix of high-margin service and STEP revenue. Our gross profit for the first six months was $10 million or 71% of total revenue compared to $10.2 million or 76% of total revenue in the prior year period. The change in gross margin reflects a higher mix of capital sales in 2025 relative to Service and STEP revenue as well as the absence of the unusually low cost of sales recorded in 2024 due to the capitalized labor on those development projects. Our net operating expense for the second quarter was $3.9 million, an 11% decrease from $4.4 million in the prior year period. Our net operating expense for the first 6 months was $7.7 million, a 9% decrease from the $8.5 million in the prior year period. These decreases reflect the disciplined cost management while maintaining investment in core growth initiatives. Our operating income for the second quarter was $0.9 million compared to $1.1 million for the prior year period, and our operating income for the first 6 months was $2.3 million compared to $1.8 million in the prior year period. Our net income for the second quarter was $0.2 million or $0.01 per diluted share compared to $1.2 million or $0.10 per diluted share in the prior year period. Our net income for the first 6 months was $1.4 million or $0.12 per diluted share compared to $1.7 million or $0.15 per diluted share in the prior year period. Our adjusted EBITDA, a non-GAAP metric, was $0.7 million for the second quarter and $2.4 million for the first 6 months of 2025. As of June 30, cash and cash equivalents totaled $20.7 million compared to $17.6 million at March 31. Our working capital was $33.5 million, and we maintained a debt-light balance sheet. VirTra defines bookings as the total of newly signed contracts, awarded RFPs and purchase orders received in a given period. Bookings for the second quarter totaled $4.6 million, up from $3.6 million in Q2 of 2024, but down from the $6.4 million in Q1 2025. The sequential decline was driven by the timing of awards and customer-related deferrals rather than lost opportunities. VirTra defines our backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started or have incomplete performance obligations and therefore, cannot be recognized as revenue until delivered in a future period. We segment this backlog into three primary categories: capital, which includes our simulators, our accessories, installation, training, custom content and any design work, our Service is primarily our extended warranties and support contracts, and STEP is our long-term subscription- based program. Our backlog at June 30, 2025, stood at $18.8 million. This includes $7.1 million in capital, $5.7 million in service and $6 million in STEP contracts. Additionally, we continue to track renewable STEP contract options, which are not included in the backlog total. Most new capital bookings from the first half are expected to convert to revenue within the current calendar year, though some orders, particularly from international customers have requested a deferred delivery into early 2026. As always, our ability to convert backlog into revenue remains dependent on customer-driven installation time lines, which can shift based on factors outside of our control. So in review, our backlog remains solid and the stability of our recurring revenue base, combined with a strong balance sheet provides us flexibility as we move into the second half of the year. Looking forward, we believe the combination of our disciplined cost management, enhanced contract structures and ongoing demand recovery will support continued progress. Our updated STEP program with its 3-year commitments and strong 95% renewal trends transform what was once optional renewal potential into high confidence recurring revenue. This not only strengthens our revenue visibility, but also reinforces long-term customer relationships and positions VirTra for substantial growth. That concludes my prepared remarks. I'll now turn the call back over to John for his closing comments. John?

Thank you, Alanna. As we move through 2025, our focus remains on both agile and disciplined. While many of our customers are still working through funding complexities, their commitment to training and preparedness remains strong. We stand ready to deliver as budgets open up, and we are dedicated to earning trust through reliable execution. The strides we've made in sales, product innovation, operational efficiency strengthen our foundation each quarter, and we're confident in our ability to translate these efforts into growth as the year progresses and into 2026. That concludes my prepared remarks. Operator?

[Operator Instructions] The first question comes from the line of Jaeson Schmidt from Lake Street Capital Markets.

John, I just want to drill down a bit further on your comments on IVAS. And obviously, with the move from Microsoft to Android and sort of the headset getting reconfigured. I just want to make sure I'm clear that you guys still expect to be involved? Or has your position in this program changed at all with the changes going on?

Yes, that's a great question. There is a bit of confusion out there. So we completed our R&D effort with the government canceling the last of the testing because it performed "flawless". So our product stands ready to meet and be able to be produced in a production quantity and production level. What's going on right now with IVAS, when they novated the contract from Microsoft to Android, they still aren't happy with the headset. So they did release a new contract. It's under an OTA for one year, and they've opened it up and it's just for the headset. So they have to produce and demo, I believe it's -- I don't have it in front of me. I believe it's either March or April. They'll demo another headset. And we expect that to be closed like stated on previous calls by September, and then they would most likely issue a production contract, which would include the entire system or kit. So that's -- we're still there. They're just trying to work through the augmented reality and the headset goggles. And just FYI, Android and Meta have teamed together, and they're going to fund most of it as a customer funded. So we'll see where that competition goes. I would encourage everyone to watch that. And then as soon as that competition is over, it's for one year, and it's very aggressive. They're going to announce the winners of that quite soon, I believe, in August. So stay tuned for that. But VirTra is much still in -- have still been approved, and there isn't any competition for any further recoil kits.

Okay. That's really helpful. And then just have a question here on recent news on the U.S. Army selecting sort of Bohemia in that virtual battle space. Just curious how that impacts you or what you guys think of that news?

Well, I think it's great for Bohemia and BAE. I think it's also great for us. As I've reported since I got here, there is -- the virtual battle space, the product of Bohemia is spread throughout probably 132 countries around the world. So it's a great distribution network that we should be part of. All that does is that furthers our opportunities going in the future. That doesn't mean they just automatically buy VirTra system. Somebody has to have a need for a marksmanship trainer, and it would give us -- we wouldn't be out of the competition because there's other competitors that also are using VBS as well. But it puts us right in the forefront with the solid products that we have and now running VBS, we've announced it, and it's now running on our systems, and we've had inquiries from other military units for just such a system with VBS. So they can leverage their current investment in the gaming engine. And now that it runs on ours, they all can connect, which is a big benefit for DoD.

Got you. And then the last one from me, and I'll jump back in the queue. Just curious what you're seeing with the V-XR and kind of customer traction there and customer conversations.

Yes. So I've been for a very long time being a platform instructor in the military, the V-XR is great for many, many things. The one thing that it's not good at just yet is putting weapons in there because it creates a negative training effect. However, because VirTra leads in the certified training courses for law enforcement, it's an absolute need and a must. We have strong interest in multiple different sectors to include health care for just such a system. It's very portable. They can get immersed and they can get the certified training that they need and then log and calculate -- log and get credit for those training sessions. So the traction is there. People are now understanding what it does. They had -- the industry had this perspective that they could just put on the headset and be just like being there and using the weapon. And later, they found out that I talked about that negative training. It just didn't stand up to the rigors of actual platform training and meeting a mission need. So they've backed away and now are seeing the capability and where it really has its biggest benefit, and we're right there.

We take the next question from the line of Richard Baldry from ROTH Capital Partners.

Can you talk about any changes you've seen on STEP renewal rates and maybe changes in the customer preferences between STEP versus sort of your traditional acquisition model?

Yes. I'm going to -- there'll be two parts to that. I'll let Alanna answer it after I do. So we -- VirTra as a company changed its model from the 5-year to the 3-year. Initially, there was a bit of a pushback because they had already -- some of the STEP programs that were coming due had already set their budgets up for those systems coming out five years versus three. So it was an initial hurdle. We've managed to navigate through that. The STEP and the capital, it just depends on how -- where they're getting their dollars and how they're getting their dollars. We wanted to take advantage of operational budgets as well as capital. We haven't seen any changes. And as we reported for the last several years, towards the end of '24, most of '25 and into '26, we have a lot of the 5-year renewals coming up, and we're still seeing above a 95% renewal rate. We have seen some conversions. I think we have more than six that renewed early on the STEP. And we have some that have converted to capital, and we've had some capital that's converted to the STEP program. It just depends on their funding and what appetite, their financial groups in those areas, how they're getting that money. So we've seen -- it's been a real mix, Richard. But yes, great question. Alanna, did you have anything else?

No. I mean you pretty much nailed what I was going to say, which is I know we've been reporting about a 95% renewal rate, and that really hasn't changed. We had a couple of customers towards the beginning of when we started reporting that, that didn't renew mostly because of their own budgets because there are a lot of smaller agencies that need this program. And everything in the last six months, we're just seeing renewals and into those 3-year programs. And when John talks about the six that are renewed early, they renewed early because they want some of our new tech, right? So they don't want to wait a whole year. They want to get renewed for that new 3-year contract, so they can get the new stuff.

Got it. Does the new accelerated depreciation accounting have any impact, do you think? Or could it have any impact? I'm not sure how applicable that is across government sector versus private sector, but sort of curious your thoughts there.

I don't think it's going to have -- at this point, I don't think it's going to have a major effect on us, but I will let everyone know if we do see that.

And then last for me, where you were closing bookings in the quarter, is there any geographic end market, any other sort of trends inside of that, that are sort of different or emerging?

I'm not sure. Can you clarify that last question?

Whether that was federal agencies, municipalities, any sort of variability within the closings, where you saw successes or not?

Yes, I can -- I understand that. Yes, we haven't seen much of anything across any of those that required the federal funding. We are seeing the grants are opening now, as I mentioned. So we have quite a few customers that were in that queue waiting that we assisted -- we produced a grant pamphlet and basically did everything we could to help them so that they could self-file because that's a requirement, there are applications. So we did follow that quite a bit. As far as there are some other industries now that have changed some laws that we're starting to see a lot of inquiries, Washington State, just all of the folks that do the concealed carry and security and all that need x number of training hours. So we're starting to see different areas open up. But as far as all of the federal were frozen, grants are the ones on top. We are seeing some private investment with foundations that are trying to get some of the police departments in their areas in need systems. So I would say grants are probably the biggest one that are starting to open up and show us the positive signs. And international, I know you didn't mention that, Rich, but international is another one that is -- we've seen a lot of activity most recently. I hope that answers your question.

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

Yes. Thank you for joining us today and for your continued support of VirTra. We've made meaningful progress so far this year. We'll stay focused on execution, our customer success and advance our growth initiatives. We appreciate your trust and look forward to updating you on our continued progress in the quarters to come. God bless all of you, and let's continue to make great strides together.