Rapid-fire Gateway Conference Summary

My process, takeaways and a company review

The Process

This was the first investment conference I’ve attended. I had a lot of fun, but it was also draining! For those who haven’t had the chance to attend one, it’s like investment speed dating. Investors and investment managers rapidly switch between tables, meeting management teams for 30 minutes each.

Before the conference started, I whittled down a list of around 70 companies to the 16 I was most interested in. This itself was a daunting task. I spent around 3 minutes per company. I read the company description and quickly looked over their financials. I would look for companies that were either profitable or that were close. I mostly avoided heavily leveraged companies and prioritised companies with good insider ownership. I occasionally picked companies because I was interested in the industry/sector they operated in and wanted to learn more. The average quality of the companies I met with was very high. It would be fun to review this selection in a year and see how they all got on.

During the meetings, I aim to understand what’s happening behind the flashy presentation. The big topics I tend to delve into are:

• Industry trends.

• Long-term goals.

• Understanding the business economics (e.g. looking at unit economics or margins and how they might change).

• The competitive landscape.

• What I perceive to be the risks and how they are being mitigated.

There’s too much to cover in 30 minutes, particularly since I didn’t know many of the businesses well. That said, you leave with a handful of cards and a personal connection to practically every CEO, so picking up the conversation with the most exciting opportunities should be simple.

In addition to getting the information I need and getting a feeling for the company, I also try to help the management have a good time. To that end, I try to ask intelligent questions they might not have heard from others. That requires a high level of concentration and investment in the conversation. After going deep into each company for 30 minutes, I found the process of switching to a new company straight away and repeatedly rather tiring. I skipped some of the filler presentations to regroup and collect my thoughts.

On a final note, I acknowledge that management is effectively selling me a rosy picture. The next step would be to begin a much more rigorous research process. I won’t get a chance to do that for every company, so I wanted to summarise what stuck out to me for each company.

Investment opportunities

So that investors can quickly search for particular companies they’re interested in, I’ve listed the companies alphabetically (by ticker). I’ve bolded the companies I’m most curious to dig further into. I italic the ones I own already:

1. Amprius Technologies, Inc. (AMPX)

2. Arqit Quantum Inc. (ARQQ)

3. Bit Digital, Inc. (BTBT)

4. DMG Blockchain Solutions, Inc. (DMGI.V)

5. Heartcore Enterprises, Inc. (HTCR)

6. Locafy Limited (LCFY)

7. Interlink Electronics, Inc. (LINK)

8. Nature’s Sunshine Products, Inc. (NATR)

9. Ooma, Inc. (OOMA)

10. Sky Harbour Group Corporation (SKYH)

11. Sow Good Inc. (SOWG)

12. SoundThinking, Inc. (SSTI)

13. Urgent.ly Inc. (ULY)

14. Universal Technical Institute, Inc. (UTI)

15. Vislink, Inc. (VISL)

16. VirTra, Inc. (VTSI)

17. WidePoint Corporation (WYY)

Amprius Technologies (AMPX)

This one is more speculative than most of the other companies. I took the interview primarily to better understand the battery market as a reference point for one of my investments, Ultralife (ULBI). That said, the CEO Kang and CFO Sandra told a compelling story that piqued my curiosity. They produce a battery that is silicon-based rather than graphite-based. This distinction gives their batteries significantly higher battery density, which results in batteries being either more compact or having greater capacity. Energy density is desirable in many applications, such as electric vehicles. However, it seems crucial for electric-powered aircraft. Markets they are dipping their toes into so far include drones and satellites.

That said, they’ve been in development until now, and though they have a product, they’re essentially pre-significant-revenue. It will be interesting to see how things ramp up for them. I do note that believers in the company seem sure that the company will secure a large contract with a big manufacturer or OEM, which would certainly make this more attractive. However, the current fundamentals and contracts do not justify the current price. Hence, I consider this stock high risk, though it may be worth checking in on this one again in six months or as a big contract is secured.

As seen from the chart above, the stock is in freefall. Even if I wanted to take a position, I would probably wait for a base to form rather than get in when the downward momentum seems so strong.

Arqit Quantum (ARQQ)

A product before its time? Perhaps. But it may be too late to start building a great wall if the Huns are approaching. Arqit is another pre-substantial-revenue company I met with because I was curious about their product. Though Tracy (their Chief Financial Strategy Officer) did a great job explaining it to me, I still feel I don’t understand it well. At a high level, their encryption tool is unlike others out there because it cannot be broken by computers “doing maths” as they can for asymmetric encryption. Instead, both sides of data transfer need a code to unlock the encryption (i.e. symmetric encryption), which their product enables.

Though I’m still somewhat clueless about the tech and would need to seriously brush up to feel more comfortable investing in a company like this, I would guess that the market for such a product (to protect from quantum computing hacks) will be considerable in time. It is unknown when quantum computing will present a more significant problem for network security. Still, once companies feel this is getting closer, such a product could become in high demand.

They have $24m in cash, which is a modest runway. They have a shelf and some warrants to raise further cash if needed. They hope to make $5-10m in revenue in 2025.

For me, this is a company to keep a loose eye on, perhaps one to check in around a year.

Bit Digital (BTBT)

I know very little about Bitcoin mining and am very sceptical of the industry. Getting any kind of edge in the space seems difficult—it’s a commodity business. However, the financials looked okay, and I saw they had also been diversifying out of Bitcoin, so I thought it was worth a look. Bit Digital utilises high-performance computing (HPC) for various applications beyond Bitcoin mining, including research using complex models, simulation modelling for autonomous vehicles, AR/VR, AI/ML and more. It’s also worth noting that it’s a very capital-intensive business to buy all the equipment needed.

While I still maintain that this industry does not have much differentiation between players, it does seem that BTBT is doing something right. They’re about to break even and have grown well over the past year. They have a deal with Boosteroid that could ramp to an additional $140m/y. The stock has come down a lot, largely because one of their key customers delayed a big project as they wanted to wait for the new NVidia chips. Assuming this project happens next year, it could be a good time to buy into the stock.

The BTBT chart looks highly volatile and seems to have no clear momentum for now. Below, I also included the chart for Bitcoin to see how well the two correlated. I think it’s fair to say they don’t appear to be correlated at all, likely due to the diversification.

I enjoyed chatting with Cam (Head of IR) and Luna (MD). While their prospects appear good on first impression, it doesn’t seem like the fat pitch I am looking for.

DMG Blockchain Solutions (DMGI.V)

If you read my comments on BTBT, most apply here. This meeting confirmed that the industry is tough—hard to differentiate and capital intensive. I liked that to expand, the company hasn’t diluted shareholders but instead took on debt. That said, debt has its own challenges and risks. Steven (COO) was kind and spent plenty of time walking me through the economics of Bitcoin mining. Several factors affect profitability, including the price of Bitcoin, the cost of energy, and the hash rate, all of which are hard to predict. I can’t help but feel that the company's (and the industry’s) future is out of the company’s hands. It may do brilliantly; it may struggle.

A final note. Curiously, the charts of DMGI and Bitcoin appear far more correlated. This makes sense, given DMGI’s lack of diversification.

Heartcore Enterprises (HTCR)

HeartCore Enterprises, Inc., a software development company, provides Software-as-a-Service solutions to enterprise customers in Japan and internationally. It offers a Content Management System (CMS) with around a 25% market share in Japan, competing against big players like Adobe. Additionally, it offers a Digital Transformation (DT) toolset that I do not fully understand and need to dig deeper into. They currently have a 40% market share and play against 30 smaller companies.

The final element of the business is to consult Japanese companies wanting to uplist in the US. The CEO’s company was one of the first to ever do so, and he has written a popular book on the topic. They are paid $500k per service, which covers their costs (almost zero margins). However, they also get compensated in warrants, which they always sell once the company goes public. They have had some delays in IPOs lately, which I believe have contributed to poor stock performance. I believe there’s also some debate between the company and the SEC in how this sort of revenue should be accounted for which I need to understand better.

The company’s long-term goal is to reach $100m in revenue in the next three years and hit an EBITDA margin of around 25-30%. The company currently has a $20m market cap, so its long-term goal caught my attention. I’ll also mention that they predict only $10m of that goal would come from IPO consulting, so most of the growth is expected to come from SaaS. They are preparing to step up sales for SaaS in the US.

All in all, I’m curious enough to delve deeper into this company. It appears cheap. I liked the management team; I met with Sumitaka, the CEO, and David, the senior director of Business Development. They seem to have a high-quality product. The balance sheet looks decent. This one is high on my to-research list.

Locafy (LCFY)

This was, without a doubt, my favourite meeting of the day. I’ll explain why, but first, I’ll mention the technicals and background to set the scene. I also haven’t done a proper write-up on Locafy, so I am using this as an opportunity to do a short one.

Locafy has an interesting chart. The stock has declined for some time (not unwarranted based on some tough times for the business). Then, in mid-July, a trading group took this stock for a ride. After a long period of low volume, 46.2m shares were suddenly traded in a single day (compared to 1.3m shares outstanding), with the stock up over 4x in a day. I would have thought that after the traders had their fun, the stock would return to its original price. Rather than fill the gap as I would expect, given the spike was unwarranted, we saw a 50% retracement, and now the stock seems like it wants to climb.

Regarding what they do, Locafy helps businesses rank at the top of search engines, predominantly Google. This practice is known as Search Engine Optimization (SEO) and helps companies drive traffic to their websites organically (i.e. without needing to pay for ads). Visitors to websites ultimately drive sales, so you can imagine why that would be important. LCFY does this in a different way than most. Most consultants do SEO on a case-by-case basis, a process that can take a year to show results and is expensive. LCFY’s solution can automate this process, meaning their solution is repeatable and scalable and could generate huge margins once revenues ramp up.

Locafy has effectively shifted its client base. They describe this shift as a lightbulb switching on. They have historically been focused on direct sales aimed at smaller businesses. This is a difficult business for LCFY since small businesses require a lot of handholding, and LCFY doesn’t have the manpower to support them. This has led to some bad reviews for their product in the past.

However, Locafy has shifted to focus on bigger fish. This has enabled LCFY to streamline its salesforce workforce and become highly lean. It’s easier to keep one customer happy than two hundred.

On this note, Locafy has hinted several times in the past to some significant deals on the horizon. These haven’t materialised to date, which has caused investors to give up hope as things dragged out. However, if one of these deals worked out, it would be truly explosive. Management didn’t know the scale of such deals (e.g., how quickly they might ramp), but we have in the past discussed some of the unit economics and the total potential and realistic size for what the contracts might be (conjecture). I am intentionally not sharing those numbers here for competitive reasons. I will say that these deals are likely to generate millions (at a minimum) in revenues that will largely drop directly to the bottom line.

Now, here’s the fun part. Here are some quotes that might lead one to suspect something:

1. Gavin said at the start of the call, “This is a transformational year for our company. I think you’re going to see some pretty good innovations coming out in the next 3-6 months that will essentially transform the company.”

2. Later he said again, “The market opportunity is huge. This is a transformational year for us. Keep your eye out for SOME announcements in the not-too-distant future. You’ll see that we are actually transitioning our business from having a degree of upfront services to being highly automated and having mass-produced products that work at scale.”

3. When answering a question about why the stock jumped so much in July, Gavin said that he hopes to see something similar soon, but this time, on the back of fundamental success.

4. When answering a question about the current revenue split (by geography), Gavin said the split was currently 50/50 between Australia and the US. However, he said he expects this to shift dramatically to the US in the not-too-distant future.

5. Gavin and Jimmy looked very happy throughout the presentation and our one-on-one. They both seemed unable to hide their excitement.

6. In private, we discussed capital allocation should such deals materialise, and it was clear that management had given this some very serious thought.

You can watch the full presentation here. Unfortunately, the audio quality is not brilliant.

The number of not-so-subtle hints in this presentation got me very excited. Upon hearing the clues placed together like this, anyone familiar with the company would likely conclude that Gavin is sitting on at least two “transformational” announcements. These could well be regarding deals for which annual earnings may exceed the current market cap.

The final puzzle piece is why now? Gavin also gave us a clue in his presentation. Google changed their algorithm earlier this year, wreaking havoc on publishers. We’re talking millions, or likely tens of millions of dollars in revenue for these companies gone as site traffic dried up overnight. I would imagine these companies would be highly incentivised to find a solution to this problem as soon as possible. As far as I know, Locafy is the only company that offers a fast and effective solution to restore their revenue streams. That is likely the primary reason why things are now accelerating quickly for Locafy.

Disclaimer: Locafy is my largest position.

Interlink Electronics (LINK)

Interlink Electronics (LINK) specialises in developing and manufacturing innovative human-machine interface technologies, especially touch sensors and force-sensing resistors, for various applications in the automotive, medical, and consumer electronics industries. They recently expanded into gas sensors, particularly for environmental monitoring and safety applications (e.g. monitoring change in air quality due to forest fires), complementing their portfolio of human-machine interface technologies.

I liked that much of their revenue is generally fixed, as two-thirds is designed into products and is unlikely to be replaced at that point. I also liked that the CEO, Steven, is a big shareholder and gave the impression of being transparent and a careful capital allocator.

The business had been growing nicely, but this year, one of their main clients got bought out by Siemens. Siemens wanted to reduce the inventory for this product from 12 to 3 months, so around $2m in revenue dropped off for the company, causing revenues to decline. The CEO believes the run rate will normalise next summer or around then. This will be an interesting company to review in 6-9 months.

Nature’s sunshine (NATR)

Founded in 1972, Nature's Sunshine began by selling herbal products through a direct sales model and has since evolved into a leading provider of dietary supplements with a global presence. They have an omnichannel strategy and believe digital sales will become an increasingly large part of the pie.

I spoke with Terrence (CEO) and Shane (CFO). They were both very passionate about the product and seemed like straight shooters.

While I typically dislike the consumer space, I like that this is a stickier-than-usual segment for consumers. Once consumers find a product that helps with a health condition (e.g. IBS), I imagine they’d be reluctant to change.

The business’s revenue growth has apparently stalled due to foreign exchange rates. Seventy-five percent of its revenue is international (45% in APAC / 20% in Europe / 5% in LATAM). Due to the strength of the dollar, local revenues count for less. This would be worth confirming in the financial statements. If it holds, one could assume that FX will become a tailwind again.

Their long-term goal is to hit 15% EBITDA margins in around 4-5 years, with revenue likely growing in the single digits.

I probably wouldn’t dig deeper as the current valuation doesn’t scream out as hugely asymmetric, but this seems to be a steady business that will do well over time. The stock price has decreased significantly, and I believe market-beating returns are feasible over time.

Ooma (OOMA)

Ooma, Inc. offers voice-over Internet Protocol (VoIP) communication services and smart home technology, primarily focusing on providing affordable home phone solutions and business communication services.

Most readers will know I am invested in CXDO, Ooma’s competitor. I took the meeting primarily to understand the market better but left myself open to understanding the company as if I weren’t invested in Crexendo. After all, it’s a great industry, and there could be many winners.

I had the chance to speak with Eric (CEO), Shig (CFO) and Matt (Head of IR). I was upfront about being a CXDO investor, and despite that, they were friendly and engaged. It was a great conversation.

Ooma reminds me of CXDO. They also develop their own technology, which they tout as being the most flexible or customisable in the industry. This makes it perfect for customers who want to do their own thing and use APIs. Apparently, they were named the best product for small businesses in PC magazine, though I would say the G2 reviews aren’t as rosy as CXDO’s.

Margins are set to expand; they are paying down their debt (which will be paid off shortly). They are buying back about as many shares as are vesting, so the share count remains approximately even. I don’t have any big incentive to invest in Ooma over CXDO; that said, my gut tells me Ooma will also do very well over time.

One interesting product was the AirDial. This product made a lot of sense to me, and I imagine the demand would be high. However, it would require a deeper look.

I think their chart looks very interesting here. A golden cross supports the fundamentals and marks the shift in technical momentum.

Sky Harbour Group (SKYH)

Sky Harbour Group Corporation specialises in developing and managing private aviation hangars and facilities, providing tailored solutions for private and corporate aircraft owners. They rent land from airports, develop hangars, and then lease them out for private jets. Otherwise, these private jet holders have to share spaces and are often located far from their owners. There seems to be significant demand for the offering, as they have full occupancy for the four operational locations. I think they have around 15 locations in the works at various stages.

I met with Francisco, the CFO, who was a lot of fun. I didn’t initially plan to meet with them; they poached me in between meetings. It was a very interesting discussion, and I was pleased they did. Francisco ran through the business model, and the unit economics seemed very appealing to me. I liked that they practically have a monopoly in the space (at least, so I’m told). It is a capital-intensive business, though, and there is notable debt which requires closer analysis.

Overall, this opportunity looks exciting, but I’m a little out of my depth. I don’t have real estate expertise, so I’m getting a friend who does to look into the company with me. I’ll keep you updated on my findings.

Sow Good (SOWG)

Sow Good specialises in producing and selling freeze-dried candy, offering a unique and innovative twist on traditional sweets. They currently have a significant market share, driven, in their words, by a superior product. The superior product quality results from their unique freeze-drying capabilities and expertise. I had a good chat with Claudia, the CEO. I also tasted a pack of their candy, which was tasty (although a little too tangy for my taste) and a unique experience. That said, I haven’t tasted any other products in the category, so I still have a challenging homework assignment ahead of me there…

The stock has come down substantially due to a heatwave over the summer. It was too hot in the trucks transporting the goods, which would have led to melted products and disappointed customers. They opted to keep the inventory and not ship the products. This led to the last quarter, as well as the upcoming Q3, to be weak. Q4 should be back to normal. They will ensure temperature-controlled trucks are ready for next summer. This problem sounds like a temporary hiccup in their growth journey and not one that overly concerns me.

Another potential issue worrying investors is that Mars is launching a product in the space. Mars has advertising money Sow Good doesn’t, so it may initially take some market share. According to the CEO, this isn’t as bad as some make out. Mars’ product will be notably more expensive than their own. So customers may be drawn into the product category by the advertising spend and then try the cheaper version. Additionally, Sow Good should have better product quality because of their expertise in the freezer-drier space. Finally, Mars also has one candy type for now, and Sow Good has many, so Mars should only pull away revenue generated by a single kind of candy (if it all). Despite knowing CEOs can be overly optimistic, I found these arguments persuasive.

The balance sheet is okay. There are no warrants. Good insider ownership. They have been investing to increase capacity but won’t need to expand further for a while. There is a lot to like about this business. If one believes that these temporary issues will not affect long-term growth, I think this presents a decent opportunity at these prices.

Since the conference, an investing friend has mentioned risks as his main concerns on the company: management credibility and capability, competition and lack of any competitive advantage, uncertain demand outlook, hefty dilution, management turnover, etc. I think further work would be required before knowing whether these risks are overstated.

The business still doesn’t scream cheap to me, even after the stock price is practically 50% off the highs.

SoundThinking (SSTI)

SoundThinking is a company that specialises in providing advanced audio analysis and processing solutions, leveraging artificial intelligence to enhance sound-related applications. It targets law enforcement and offers a range of products, including gunshot detection, plate recognition, case investigative tools, a law-enforcement platform, and a weapons detection platform.

They’re guiding towards $105m revenue in 2024, with an 18-20% AEBITDA margin. In 4-5 years, they’re hoping to hit $150m in revenue with a 40% AEBITDA margin. That’s only around 10% growth, which seems very doable. However, thanks to the margin expansion, the company could be generating $60m AEBITDA in 2029, worth something like $5-600m in market cap. Its current market cap is $160m. That’s a market cap CAGR of around 30%.

The stock price has come down substantially. This is likely largely due to the possibility that the Mayor of Chicago no longer wants to use their services. Apparently, they have good connections within the department, so their losing the contract is not set in stone yet. Additionally, should they lose the contract, they are confident they could rewin it later once the mayor leaves office.

They offer a much more discrete product for weapons detection than competitors. Thus, they apparently have an edge in winning contracts in places where businesses don’t want customers to notice they are being checked.

Overall, I like the business a lot. It’s diversified in products. The business is cash-flow profitable, and the balance sheet is reasonable. It has profitable cash-cow business streams funding the young, fast-growing but still unprofitable. The management was frank about the challenges with the Chicago situation and seemed trustworthy and conservative overall. This is one I’d like to dig deeper into.

Urgent.ly (ULY)

Urgent.ly is a digital roadside assistance platform that connects drivers with service providers in real time. The company offers a mobile app and web-based services that allow users to request help for various roadside emergencies, such as flat tyres, battery jumps, fuel delivery, and towing.

Other companies that offer such services have already assigned geographies to service providers. Since Urgent.ly hasn’t, it has greater flexibility in serving customers and managing pricing.

They are playing with a flexible demand-based pricing model, which seems interesting. Counterintuitively, this model determines the price they pay to service providers rather than the price they charge, so it would help them manage expenses.

The company has a sizeable amount of debt ($50m) that comes due in Q1 of 2025. Management seemed confident in its ability to refinance that debt or negotiate new time frames for the required payments.

The company does appear cheap, and a part of that is due to financing risk. Assuming the company can renegotiate payment timeframes for this debt, it would likely experience a re-rating. Its current P/S is a mere 0.05, and EV/S is 0.23. If the company turns cash flow positive in Q1 2025 as management expects, this just feels way too cheap for me.

This company doesn’t meet my criteria. I’m not convinced it is best-in-class, and I don’t want to touch companies with high debt. That said, for investors comfortable with taking on risk and who like buying very cheap stocks, this seems like an interesting company to investigate.

Universal Technical Institute (UTI)

UTI provides education and training for students pursuing careers in automotive, diesel, motorcycle, and other technical fields. I imagine this need will only grow over time. Whereas white-collar jobs will likely be under pressure due to AI, blue-collar jobs will likely suffer less. I think learning trades presents an ever-increasingly attractive alternative to university. UTI is more expensive than community college, but it teaches courses in half the time (only one year) and is effective at landing its students in lucrative jobs thereafter.

I enjoyed chatting with Jerome (CEO) and Matt Kempton (VP of Corporate Finance). They came across as very capable and seemed to be executing well. The stock price has responded, doubling over the last year. I should note that just yesterday, the CFO left. I’m not sure how that leadership change will affect the company.

It seems like a quality business, and I believe the stock will produce above-market rates over a couple of years. However, the stock doesn’t seem like a steal at these levels. If it became much cheaper, I’d be more tempted to research further.

Vislink (VISL)

Vislink Technologies, Inc. provides advanced video transmission solutions, specialising in wireless communication systems for live broadcasting, government, and security applications. This is another company already in my investment portfolio, so I know it very well. I really like Mickey, the CEO, and we spent the whole thirty minutes chatting about the opportunities on the drone front.

While I cannot share what they are working on for competitive reasons, I will simply say they will soon make a step-change in technology, putting them ahead of their competition. Not only are Vislink ahead of where competitors’ current technology is, but Vislink’s customers and partners have also commented that none of the competitors have shared a roadmap for making the developments that Vislink has.

We already heard on the conference call that cash flow profitability would be pushed by around a quarter. This is predominantly the reason for that, and I wholeheartedly support it. If they can successfully implement the changes they intend to, Vislink’s technology will have a significant edge over the competition and could rapidly gain market share. This is currently a $1m revenue business for them, but I believe it could be much more with the right investment. This seems worth the relatively small delay in cashflow profitability, especially given Vislink’s huge cash reserves.

Other parts of the company seem to be moving along well. We’ve had a nice pullback from the highs, and I think this presents a good opportunity to top up for those who want to increase their position size.

VirTra (VTSI)

Virtra is a company I have looked into before|. I was actually considering adding it to my portfolio. I think the long-term potential looks good. It operates in an attractive market and has best-in-class training products. I like the new management team and think they are executing well. That said, the business experienced some temporary headwinds with government orders being pushed back. The current price momentum is clearly down, so I’d rather wait until the price action begins bottoming out. I wonder if the stock will fall again to $5.

Virtra develops hardware, software and content to create training scenarios for law enforcement, first response, and military. Before the meeting, I had a chance to try one of their scenarios on the v-XR. I’ve used virtual reality headsets before, so this wasn’t new. However, this felt very different from playing virtual golf with my siblings back in the UK. Instead, I was talking someone off a ledge. Depending on what I said and did, the scenario played out differently. Despite knowing the scenario wasn’t real, it felt real, and I felt a great deal of pressure and responsibility on me. I’m certain these would make effective tools when it comes to training.

After that, I spoke with John, CEO, and Alanna, CFO. We mostly spoke about what they had been doing to right the ship. Though the business and stock have done well over the years, behind the scenes, it was far from a well-oiled machine. They had outstanding orders that were two years overdue. A large backlog had built up, and customers were not pleased.

John focused on first cleaning up behind the scenes, connecting departments, setting up a Q&A team, and clearing out their enormous backlog. Orders can now be fulfilled off the shelf in short timelines. John and Alana felt that the decreasing backlog may have weighed down the stock despite faster turnaround being a good thing. In addition, the revenue spiked while clearing the backlog, but it returned to normal levels after that. I believe this is making investors cautious of further declines (unlikely) and/or tough comparables (inevitable).

Investors may have preferred John start by fixing the sales team, but I don’t mind so much, as sales growth slowly temporarily gives me a better entry point. The whole sales team has been replaced. We spoke about the systems they have in place to better direct the team, including new geographies, how they decide on quotas and so on. About half the sales team is currently hitting their quotas, which I think is a great base to build from. I imagine the sales numbers will improve from here.

The next paragraphs are based on conversations Kevin Crawford (a member of Breakout Investors) had with management. As an introduction, Kevin is probably the authority on VirTra and knows the company inside and out.

With the company focusing on federal grants, Kevin spoke to the company trying to ascertain the opportunity that VirTra has in front of them. While we know $90m funding is coming in specifically for de-escalation over the next two years, John pointed out that there is upwards of $300m across other opportunities for this year, in which training is a subset of the use cases. John discussed how the company has significantly invested in improving their sales processes to identify potential customers who could qualify for these grants and guide the customer towards successfully submitting grant applications. While the company can’t predict how much of that $300m they can secure, Kevin estimates it could be in the tens of millions.

The company also discussed short-term margin compression due to increased v-XR adoption. While the company couldn’t provide specifics, at roughly $40,000 per headset, there would need to be a rather significant amount of V-XR sales for it to considerably move margins from its current low-60 % guidance down towards its stated short-term mid-50 % rate. Kevin is bullish on the product market fit, its pricing, and the company’s desire to take market share out of the gate. An additional part of the same program that will open up $90m in grant funding for de-escalation is for the federal government to identify a certified curriculum that grant money must be used on. IADLEST is one of the few programs that certify coursework across most US states, and VirTra has 20+ courses that are already certified; their direct competition has less than 5. John mentioned that it can take upwards of 6 months to certify courses through IADLEST, and with VirTra’s continued investment in new content (“content is king” per John), the company continues to build its moat.

In summary, I (Sam) have a hard time believing the business will not continue to do even better in the long term if the behind-the-scenes is working more efficiently. Additionally, it sounds as though they are streamlining their sales and improving. That said, I’m cautious around optically declining revenues (despite it being unfair), and downward momentum in stock price. This is a company I continue to watch closely.

WidePoint Corporation (WYY)

WidePoint Corporation provides managed mobility services and cybersecurity solutions that enable organisations to manage mobile devices and sensitive data securely. I’ve met the team twice already, and I like them. Today, it was just Jin (CEO), and I was frank with him about my thoughts. We had a good discussion.

I like the quality of service, evidenced by the various certifications they have received (before anyone else), the projects they have managed and the contracts they are winning. They have a unique product that encrypts data arguably better than anyone else (it requires a physical counterpart - a card or a phone).

We discussed the year’s guidance, which is $120-133m. Given that they’ve already hit $70m in H1, this guidance felt low to me. We discussed the pros and cons of increasing the guidance vs. just beating it. It seems likely that they will beat the upper range of the guidance, which makes the investment more attractive.

That said, because the revenue is split into zero-margin carrier services and some margin for the rest, it’s hard to forecast for the business. We also discussed potentially guiding both total and “real” revenue.

I don’t like that their gross margins appear to be declining as they continue to grow, even when excluding carrier services. Management believes this is set to change as they target growth in the managed services segment. I’m in wait-and-see mode until I see the results or some evidence.

I’m also unsure of whether the identification/encryption card will ever find wider market success. I understand why they are popular for highly sensitive government data, but I struggle to see mass consumers using them.

Revenue momentum and the stock price action look good. I’m mostly hesitant about how the margins will look a few years later.