Marvelous Microcaps
VirTra, Inc. (VTSI)
INTRO:
At Perritt Capital Management, we take focused positions in companies where we have a high conviction in their success; companies that are out of the mainstream of small cap investing. To highlight our process, we are pleased to present the newest installment in our ongoing series “Marvelous Microcaps – Big Ideas on Small Companies.” This series profiles companies that we believe have a niche in their existing markets or are launching a product that could disrupt their marketplace.
THE COMPANY:
VirTra, Inc. (VTSI) is a global provider of firearms and use of force simulators for the law enforcement, military, educational, and commercial markets. In this capacity, the company assembles, provides software, and manufactures some components of simulators, ranging from single screen devices to full, room sized multi-screen 300-degree systems. Supporting these systems is a broad offering of software offerings for training programs and support tools for use with their systems. The training software consists of programs in firearms both their use and accuracy as well as scenario training, including use of force simulations that allow interaction with both firearms and less-than-lethal devices such as TASER©s. They offer a library of off-the-shelf training solutions as well as customizable programs unique to their client’s needs. Their support tools include simulated recoil kits and a patented return fire device that can be used to apply real-world stress on trainees during use. This eco-system is protected by several existing and pending patents.
The company has recently experienced a management transition with a new CEO, John Givens, taking over the role earlier in 2023 after having shared the role for a year with the previous CEO Bob Ferriss, who took the position of Executive Chairman of the Board as part of the transition. The presence of both John and Bob at the company is important to note as Bob’s industry experience is concentrated in the law-enforcement markets while John has experience in the military markets, allowing them each to focus on business development within their respective verticals. Prior to joining VirTra, John Givens founded, led, and eventually sold a firm called Bohemia Interactive Simulations, Inc. to BAE Systems plc.
WHY WE OWN: THE PERRITT ADVANTAGE
WHY WE OWN: THE PERRITT ADVANTAGE
We first purchased VirTra in early 2021, believing that their product offerings around use of force training software served a critical need in the marketplace, which coupled with the valuations of the company at the time, made for an interesting investment opportunity. Our primary thesis is that the continued focus on the use of force by police should lead to an increased and continued focus on training and funding by federal, state, and local programs centered around law enforcement. VirTra is well positioned to benefit from this funding. They offer a depth in training offerings that is second to none in the industry and several standardized system set-ups that make VR training accessible to law enforcement departments that may not be able to afford a large-scale customized system.
The law enforcement markets have been the historical focus for the company, and this is where they have the existing base to grow revenues the quickest. They continue to invest in product Research and Development (R&D) and training program development, including a new generation of programs using a type of video capture technology that produces superior graphics relative to a computer simulation. We believe this continued investment in their product, superior depth and quality in training offerings, and an existing market presence that gives them credibility with new customers leave them well positioned to increase their market share.
The secondary thesis behind the investment is that VirTra can penetrate and grow their business in the military markets. The company has historically had limited sales into the defense markets, primarily to those segments responsible for law enforcement duties within military establishments. With the appointment of John Givens as CEO as his background in selling into the defense space, the board has made a clear statement to the markets that this is the next growth vertical for the company. He brings an established network through which the company can cultivate connections and sales opportunities within the vertical. While this is still an early-stage opportunity for the company, we are encouraged that they have appointed the right team to execute.
We are excited for what is to come with VirTra. It is our belief that they can continue to grow their base of business in the law enforcement space and use that success to support their sales initiatives in the defense space. These efforts will be supported by their continued investment in R&D centered around better training programs and methods for use of force programs, as well as emerging VR platforms that may provide better experiences for end users. We look forward to future developments with the company and are happy to introduce them to our shareholders!