Full Transcript: Virtuix Holdings Q1 2027 Earnings Call

Virtuix Holdings (NASDAQ:VTIX) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

Virtuix Holdings reported a 72% year-over-year increase in new orders for its Omni One systems, with new orders up 150% since the launch of Omni One for Quest in collaboration with Meta.

The company saw its gross margin expand to 30% from 17% in the prior-year period, despite a decline in net sales to $767,000 from $1 million due to backlog clearance in the previous year.

Strategic initiatives include a partnership with Meta, expanding defense contracts with the U.S. Marine Corps, and entering healthcare markets via a partnership with Sirica Therapeutics.

Virtuix Holdings plans to accelerate consumer revenue growth, advance defense programs, pursue M&A in defense, expand enterprise sales, and focus on healthcare as a potential major market.

Management highlighted a significant shift towards profitability with improved unit economics, particularly in consumer sales driven by the Meta collaboration.

Full Transcript

OPERATOR

Good morning and welcome to the Virtuix Holdings earnings conference call for the first quarter of fiscal year 2027 ended June 30, 2026. All lines have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. During today's call, we may make statements relating to our goals and objectives for future operations, financial and business trends, business prospects, and management's expectations for future performance that constitute forward-looking statements under federal securities laws.

Any such forward-looking statements reflect management's expectations based upon currently available information and are not guarantees of future performance, and they involve certain risks and uncertainties that are more fully described in our SEC filings. Our actual results, performance, or achievements may differ materially from those expressed in or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call.

Today's discussion also includes Adjusted EBITDA, a non-GAAP financial measure. A reconciliation of net loss to the most directly comparable GAAP measure to Adjusted EBITDA is included in the financial tables of the earnings press release issued yesterday after market closed last night. A press release detailing these results was issued last night and is available on the Company's investor relations website at invest.virtux.com. Hosting today's call are Virtuix Holdings founder, chief executive officer, and chairman Jan Gukuluk, and chief financial officer Thomas McGinnis.

They'll provide a corporate overview, review the quarter's key highlights, discuss the company's defense momentum and its expansion into enterprise and healthcare applications, cover financial results, and outline the company's priorities and outlook. With that, I'll turn the call over to Mr. Dukaluk. Please go ahead, sir.

Thomas McGinnis, CFO

Thank you, Jan, and good morning, everyone. Net sales for the fiscal quarter for the first quarter of fiscal 2027 were $767,000 compared to $1 million in the prior-year period, a decrease of 26%. As Jan noted, the prior-year quarter included the fulfillment of the final batch of the large legacy backlog of Omni One orders accumulated since the start of our pre-order period in August of 2020 through August of 2023, whereas revenue in the current quarter resulted from sales to newly acquired customers.

New orders for the Omni One actually increased 72% year over year, and new orders are up approximately 150% since the launch of our Omni One for Quest. In collaboration with Meta, we're seeing this momentum continue in this current quarter. The metric I would like to draw your attention to most is gross margin. Gross profit increased 29% to $227,000 from $176,000 in the prior-year period. Gross margin as a percentage of revenues increased approximately 13 percentage points from 17% in the prior-year period to 30% this quarter.

That improvement was driven by higher selling prices of the complete Omni One system compared to the prior-year period. Turning to operating expenses, total operating expenses increased by $1.9 million, or 86%, to $4.1 million compared to $2.2 million in the prior-year period. That increase was driven primarily by a $2.1 million increase in general and administrative expenses to $3.1 million from $1 million, reflecting the cost of operating as a public company that largely did not exist in the prior-year quarter, which predates our Nasdaq listing, and within that increase professional services accounted for $1.2 million, insurance for $0.2 million, and non-cash stock compensation for $0.7 million. Selling expenses moved the other way, decreasing approximately $0.3 million to $0.7 million. Research and development expenses increased approximately $0.1 million to $0.3 million as we added staff to advance Omni One for Quest. Loss from operations was $3.9 million compared to $2 million in the prior-year period. Net loss for the quarter was $7.2 million compared to $2.3 million in the prior-year period, and it is important to understand the composition of that loss.

Approximately $4 million of that are non-cash charges, including $2.5 million of largely non-cash interest expense, which includes amortization of debt discount on our convertible notes, a $0.6 million financing expense related to our warrant modifications, and $0.4 million loss on extinguishment of debt, partially offset by a $0.4 million gain on the change in fair value of financial instruments. These items relate to capital that we have raised, not the operating performance of the business.

Net loss per basic and diluted shares was 22.22 cents compared to 28 cents in the prior-year period, reflecting a substantially higher weighted average share count. Following our listing, we are also presenting adjusted EBITDA, which we define as net loss before interest, income taxes, and depreciation and amortization, further adjusted to exclude stock-based compensation and certain non-cash and non-recurring items. We believe it gives investors a clearer view of the performance of our ongoing operations by removing the financing-related and non-cash charges that I just described.

Adjusted EBITDA loss for the first quarter fiscal 2027 was negative $3.1 million compared to negative $1.9 million in the prior-year period. The year-over-year change is driven by the step-up in public company operating expenses rather than by unit economics, which improved. The full reconciliation of net loss, the most directly comparable GAAP measure to adjusted EBITDA, is included in the financial tables of yesterday's press release. Turning to the balance sheet, cash and cash equivalents were $7.4 million as of June 30, 2026, compared to $9.5 million at March 31, 2026, a decline of approximately $2 million.

Inventory increased approximately $0.2 million to $1.4 million as we build for order growth that Jan has previously described. Net cash used in operating activities was $3.3 million for the quarter compared to $1.5 million in the prior-year period, with the increase reflecting the public company costs that step up and working capital invested in inventory. Total assets were $12.6 million compared to $14.8 million at fiscal year-end. Total liabilities were $15.7 million compared to $13.7 million, including $10.7 million of notes payable, net of discount, compared to $7.8 million at March 31.

And total stockholders' equity was a deficit of $3.1 million compared to a positive equity of $1.1 million at fiscal year-end. That $4.2 million change reflects the quarter's net loss of $7.2 million, partially offset by a $3 million increase in additional paid-in capital from financing and equity activities during the year. We are managing the balance sheet to support the growth opportunity in front of us, and we will continue to evaluate our capital structure with that objective in mind.

And with that, I'll turn the call back over to Jan.

OPERATOR

Please stand by. We'll reconnect. Jan, please go ahead.

Jan, CEO

Thank you. Sorry about that. My call dropped for some reason. Are we at slide 16, priorities and outlook?

Thomas McGinnis, CFO

That's correct, Jan. Yes, that's correct.

Jan, CEO

Thank you. Super. Thank you, Thomas. All right, well, looking ahead, we have six clear priorities. First, accelerate consumer revenue growth. The order momentum from the launch of Omni One for Quest with Meta is the most important trend in our consumer business today, and our focus is on sustaining that momentum and accelerating revenue growth together with Meta, and we believe we've only scratched the surface of the marketing opportunities we have with Meta.

Second is to advance our defense programs towards larger awards. That means bringing the Marine Corps infantry fireteam trainer to Quantico in the fourth calendar quarter this year, completing our Air Force Phase I SBIR and aiming to move that to a Phase II, advancing our counter-drone trainer toward potential awards, and also exploring additional partnerships and programs that we can be part of. Third is advance our defense M&A. Our objective is to complete one or more acquisitions with $10 million to $50 million of annual revenue.

That would add government contract vehicles, past performance, sales channels, and recurring defense revenue. Fourth is to expand enterprise sales. We intend to build on the Tesla sale, the NASA collaboration, and all our other recent enterprise traction to grow high-margin Omni One enterprise sales. Fifth, build out our healthcare and therapeutics vertical, which we believe can become a third large end market for our technology. That means developing the channel with Circa Therapeutics and other ABA partners and obtaining clinical validation from our university research collaborations.

And sixth, ultimately drive toward profitability. We intend to build on this quarter's 30% gross margin, continue to grow revenue, and add high-value defense and enterprise contracts as we drive toward profitability. We believe Virtuix Holdings is well positioned to convert our current momentum into long-term growth and value for our shareholders. All right, with that, we'll now open up the call for questions. Operator.

OPERATOR

Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed into the question queue, please press star-1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-2 if you'd like to remove your question from the queue. One moment, please, while we poll for questions. Our first question today is coming from Jack van der Aarde from Maxim Group. Your line is now live.

Jack van der Aarde, Analyst at Maxim Group

Okay, great. Good morning, Jan and team. This is great to see the momentum continuing. Maybe I'll start with a question, Jan, for some of the key growth drivers you're expecting this year. You touched on the Made for Meta partnership. Obviously that's a big catalyst that I believe just began in June. As we're looking at the, I guess the back half of this year heading into the holiday season, can you just touch on how this Made for Meta partnership, I guess, is incrementally adding, I guess, to the game portfolio and the demand strength versus, say, where Virtuix Holdings was last year entering the holiday season?

Jan, CEO

Thanks. Yeah. Hey Jack, good morning. Thanks for joining. Yeah, we're seeing that strong momentum that we reported with the launch of our Meta product. We're seeing that continuing this quarter, and so we believe that that momentum can continue. It's not just a one-time flash in the pan. As it's looking like right now, it's going to continue. And the reason is that, if you think about it, you know, Meta sold over 20 million headsets by recent estimates, 6 million active users who can now, for the first time, buy our products directly and use it with their existing headset and games.

It's a very nice offering at a good price point, and it expands our addressable market. So that was the plan all along, but it seems to be paying off where it translates to meaningful sales growth and order growth, 2.5x from what it was before. So that is looking promising for the second half of the year, especially going into our holiday period.

Jack van der Aarde, Analyst at Maxim Group

Okay, great. And, you know, as part of this, I guess this equation here is going to be the production side of the business. Can you just touch on your capacity today? I think you've been able to produce actually quite a bit of these Omni Ones per month. Has high-volume production started since the Meta relationship was announced? And just touch on your overall, I guess, capacity expansion and current run rates.

Jan, CEO

Yep, yep. Our capacity is set up. Our production facility and capacity is well established. We are certainly now firing on all cylinders, producing units, meeting the demands. But on the production side we are set up and can meet the demand we're seeing. I think we reported before that our production capacity right now is up to 3,000 units a month or so, which would translate to about $100 million in annual revenues.

Jack van der Aarde, Analyst at Maxim Group

Excellent. And then, you know, if we just shift really quick to the defense side then, obviously you're talking about your M&A strategy here with targeting $10 to $50 million kind of revenue opportunities. It sounds like there's a few targets in your pipeline. Before we get into acquisitions, though, can you just touch on kind of what you're seeing recently with your organic expansion in the defense sector? You're in every arm of the U.S. government now, I believe.

Can you maybe give an update on what you're hearing the feedback is from the actual troops that are using this in training modes today? Is there room for expansion in follow-on orders?

Jan, CEO

Yeah, definitely. If you think about it, the military has always had simulators for aircraft. They have simulators for vehicles, tanks. They've never before had a simulator for ground troops, for infantry until today, thanks to our technology. Beyond me now, infantry warfighters can walk around in virtual environments for training, mission planning, mission rehearsal. And we believe that's a revolutionary capability for the U.S. military that they didn't have before.

And that's why we're seeing all this traction and excitement by the Marine Corps, by the Air Force, and the other branches as well in a very short, I'd say a very quick time frame. I really only started this effort about a year ago and now we're already working with all four major branches of the U.S. military involved in various programs and projects and awards that we're moving forward. And there's more on the horizon as well. There's many more various applications where technology can be really useful in the context of military training.

And so the objective here is to move those projects forward to the next phase: Phase I SBIR to Phase II SBIR. Move these pilot programs to potentially bigger awards and bigger rollouts to military facilities and customers and whatnot. So we see it as a major part of our business that can really drive growth and meaningful revenues, but also margin going forward.

Jack van der Aarde, Analyst at Maxim Group

Jan, if I could ask you just maybe one more follow-up here—there's clearly a lot of different growth angles here. A lot of irons in the fire with big, very big, well-established companies. Obviously Made for Meta is obviously the 800-pound gorilla in the space. But then you also have a lot of real momentum in the defense sector with potential acquisitions on the way. How do you see, I guess, the revenue profile of Virtuix Holdings kind of evolving over the next two to five years across these segments?

Are they all going to be accelerating, kind of hockey-stick-like growth? Is one going to come first or faster than the other and then one's a faster, longer-term leg? Just like to get your thoughts there and also how that impacts the gross margin longer term.

Jan, CEO

Yeah, thank you for that. And by the way, one thing I keep stressing to the team here and also as our strategy is to stay focused—certainly consumer and defense today are our biggest focus areas—and enterprise and healthcare is emerging in the background and growing in the background. I think if you look at timing, I mean consumer is what's driving most growth and revenues today and certainly with the big catalyst there being our Meta collaboration, and we believe we're only seeing the start there and scratching the surface of what's possible there.

So that is happening today. The defense, military business, a lot of traction there, working towards bigger awards, bigger contracts that will, I think we announced, that that's probably—to get to bigger awards—is probably next calendar year, kind of fiscal year 2028 as we work towards that. But that could be, that could come in a step change where you win a big award certainly makes an immediate big impact on revenues. And so consumer and defense are core focus areas.

But enterprise is emerging with these various pockets of demand and applications that are very interesting, like the humanoid robots application that could become a meaningful revenue stream in the future. And then healthcare specifically, I believe, could become a third big vertical. In addition to consumer and defense, the healthcare market could become a big vertical. It's not a core focus just yet of our company as we're moving the development forward with Serica, with Rutgers.

But there's a lot of potential there, specifically with, you know, 12,000 or so ABA centers nationwide that could use our technology plus a private market besides that. It's potentially a big vertical, but that will come a bit later. It's a bit more of a staggered approach so that we don't want to get pulled into a thousand directions all at once. We stay focused on consumer, defense, enterprise as it develops, and then healthcare as a potential big market in the future.

Jack van der Aarde, Analyst at Maxim Group

Okay, I really appreciate the color there. That's it for me. Look forward to tracking the story.

OPERATOR

Thanks. Thank you. Our next question today is coming from Gaussi Sriv from Singular Research. Your line is now live.