VirTra (NASDAQ:VTSI) reported a sharp year-over-year decline in first-quarter revenue as timing issues tied to government funding, customer procurement processes and delivery acceptance continued to weigh on results. Management said customer activity has improved since quarter-end, but emphasized that converting that activity into revenue remains a multi-step process that could play out over coming quarters.
Chief Executive Officer John Givens said the company is seeing “important movement across the business” as funding programs reopen and customers resume work on grants and procurement steps. However, he said the first quarter was still affected by timing, particularly around government funding and the ability of some customers to accept delivery.
Revenue Falls as Backlog Conversion Slows
Chief Financial Officer Alanna Boudreau said first-quarter revenue totaled $3.5 million, down from $7.2 million in the prior-year period. The decrease was attributed to delays in converting backlog to revenue, as several customers were unable to accept delivery of orders received in the third and fourth quarters.
Government revenue was $2.7 million, compared with $5.2 million in the first quarter of 2025. International revenue was $0.7 million, down from $1.9 million a year earlier. Commercial revenue was approximately $84,000, which Boudreau said was consistent year over year.
Revenue from VirTra’s Subscription Training Equipment Partnership, or STEP, was approximately $1 million, up slightly from approximately $0.9 million in the prior-year period. STEP represented 28% of total revenue in the quarter, compared with 13% a year earlier, primarily because capital system sales were lower. Boudreau said STEP provides recurring revenue visibility and remains “an attractive access model for agencies,” with revenue recognized over the length of the contract.
Gross profit was $2.1 million, or 61% of revenue, compared with $5.2 million, or 73% of revenue, in the prior-year quarter. Boudreau said the decline reflected lower revenue volumes, as well as continued work on integrations and new content intended to support future revenue.
Net operating expense was $3.5 million, compared with $3.8 million a year earlier. VirTra reported an operating loss of $1.3 million, compared with operating income of $1.4 million in the prior-year period. Net loss was $1.3 million, or $0.12 per diluted share, compared with net income of $1.3 million, or $0.11 per diluted share, a year earlier. Adjusted EBITDA was negative $0.8 million, compared with positive $1.7 million in the prior-year quarter.
Backlog Remains Above $25 Million
VirTra ended the quarter with $17.9 million in cash and cash equivalents, down from $18.6 million at Dec. 31, 2025. Boudreau said the balance provides flexibility as the company navigates timing dynamics while continuing to invest in growth areas.
Bookings for the quarter totaled $3.8 million. The company defines bookings as newly signed contracts, awarded requests for proposals and purchase orders received in a given period. Backlog at March 31 was $25.2 million, consisting of $13.2 million in capital, $4.4 million in service and $7.6 million in STEP contracts.
During the question-and-answer session, Roth Capital Partners analyst Richard Baldry asked why bookings were slightly above revenue while backlog declined. Boudreau said some bookings converted to revenue in the same quarter, meaning not all bookings flowed into ending backlog.
Management Points to Improving Funding Environment
Givens said VirTra’s customers are moving through several stages before revenue can be recognized, including funding applications, award determinations, purchase orders, delivery and acceptance. He said some agencies are waiting on recently opened grant awards, others are in procurement, and some customers have funding but still need to complete facility or internal readiness steps before accepting delivery.
In response to a question from Lake Street Capital Markets analyst Jaeson Schmidt, Givens said qualified leads have approximately doubled over the past three months, driven by increased event activity, a new website, better lead capture and improved qualification processes. He said conversion from a qualified lead to a quote or purchase order typically ranges from six to 12 months, depending on the agency and funding status.
Givens said the company could see some compression in that cycle this year because customers are “so far behind” after delayed government funding. He referenced delays tied to fiscal 2025 funding, fiscal 2026 funding and fiscal 2027 timing, as well as broader government appropriations issues.
Givens also described the 2025 budget climate as challenging, citing continuing resolutions affecting defense and law enforcement funding and a 43-day government shutdown. He said there are signs of improvement in 2026, including recent funding releases for several grants and appropriations bills moving through legislation, but added that the process still requires applications, funding awards, RFPs and contract awards before revenue can be generated.
Product Initiatives Include Data Analytics and Drone Defense
Management highlighted VirTra’s APEX data analytics platform as an increasingly important part of customer training. Givens said early feedback indicates the platform can help customers analyze performance around accuracy, reaction times and decision-making.
Asked about an international analytics win, Givens identified it as the INL Colombia deal tied to the State Department’s International Narcotics and Law Enforcement agency. He said the government wants to monitor how systems placed in foreign countries are being used and assess training effectiveness, rather than only capturing near-term simulator performance data.
Givens also discussed VirTra’s next-generation drone defense training system, which was demonstrated during the quarter at the American Correctional Association Winter Conference. He said unauthorized drones pose challenges for correctional facilities, including contraband delivery and perimeter security, and that the demonstration generated ongoing conversations.
The company also continues to pursue military and federal opportunities. Givens said VirTra has held demonstrations and evaluations across multiple branches, including Army and Marine Corps groups, and that some prospects have moved from early discussions toward requirements development and potential RFP pathways. He cautioned that military opportunities have long cycles and should not be treated as near-term revenue certainty.
“Customers are re-engaging, funding and procurement processes are advancing, and our commercial execution is improving,” Givens said. “We believe this activity positions us for improved financial performance as funding and procurement activities continue to convert over the course of 2026.”
About VirTra (NASDAQ:VTSI)
VirTra, Inc (NASDAQ: VTSI) develops and markets simulation-based training systems designed to enhance decision-making, marksmanship, and judgmental use-of-force skills for law enforcement, military, corrections, and commercial security organizations. The company’s virtual reality–based solutions integrate immersive video, scenario-based engagement, and live firearms training to create realistic, customizable exercises. By combining hardware, software, and content, VirTra aims to deliver comprehensive training environments that replicate real-world challenges faced by frontline professionals.
Key products in VirTra’s portfolio include the V-300 and V-150 immersive training simulators, which offer wraparound projection with touch-screen compatibility for weapon-mounted or handheld controls.
