Wrap Technologies, Inc. (NASDAQ:WRAP) Q3 2023 Earnings Call Transcript

Wrap Technologies, Inc. (NASDAQ:WRAP) Q3 2023 Earnings Call Transcript November 9, 2023

Unidentified Company Representative : Good afternoon and welcome to the Wrap Technologies Third Quarter 2023 Earnings Conference Call. My name is [JD Mafasso] and I’m the Director and Strategy and Communications for Wrap Technologies. Joining me today is our Wrap Technologies, Chief Executive Officer, Kevin Mullins; and our Chief Financial Officer, Chris DeAlmeida. Following their prepared remarks, we will have a few questions submitted from shareholders. I would like to remind everyone that this call will be recorded and made available for replay via a link in the Investor Relations section of the company’s website at ir.wrap.com. Additionally, the company asks that, all interested parties register on the investor relations website at ir.wrap.com to continue to receive alerts and stock information.

As a reminder to listeners, certain statements made during the call today constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our earnings release and more fully in our filings with the SEC. The forward-looking statements today are made as of the date of this call, and we do not undertake any obligation to update the forward-looking statements. Now, I would like to turn the call over to our CEO, Kevin Mullins.

A technician in a deep-water treatment facility, ensuring clean water for public safety.

Kevin Mullins: Good afternoon, and thank you for joining us. It is an honor to shed light on Wrap’s commendable strides and achievements throughout the third quarter of 2023. The past quarter stands as a testament of our relentless dedication to excellence and our pursuit of innovation. Our third quarter performance brims with milestones, not merely in financial terms, but as a clear indication of our expanding go global influence, significant demand from international avenues, particularly the African continent, coupled with a robust deployment order from the Northeast sector of the United States, sentiments are dominant market stature. In our ongoing endeavor to consistently elevate the standards, Wrap Reality continues to see significant demand, leading to the second consecutive quarter of record sales.

This success stems from our content focus of our training platform, enrolling out new scenarios monthly, reinforcing the unparalleled caliber of our product ensemble. Furthermore, we are enthusiastically embarking on an officer, mental health and wellness initiative, which we will continue to develop over the coming months. We are also seeing good progress with sales for the recently acquired Intrensic platform in the third quarter. Early feedback shows the solution integrates well into our market and product set, which promises steady growth for us. With today’s focus on clear transparency and strong responsibility, our improved products, meet the changing needs of today’s market and transform Wrap as a complete solutions provider. Our achievements in Q3 highlight the strong plans we have, our dedication to being the best and the bright future we see ahead.

As we move throughout this year, we are optimistic about our earnings in the coming months, thanks to great results from Wrap’s products. This quarter shows how hard we work to grow our presence in the market. With strong demand, our Q3 sales are a testament to our reach, both locally and internationally. We have had another record sales period with Wrap Reality, and we are starting to see good success from our new Intrensic platform as well. We are heading into the last full quarter with hope and excitement. We have made some updates to our sales process to better meet our customer growing needs. Looking ahead, Wrap is set for strong growth. Our commitment to constant innovation and understanding the needs of international law enforcement positions us as a top choice for public safety tech worldwide.

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Q&A Session

Our past success is just the beginning. In 2024 and the years that follow, we plan to expand our global reach, offer more products and strengthen our relationships with law enforcement groups. Everyone is sensing the positive direction of wrap. With our team’s energy and strong financial position, we are ready to achieve even more. Our goal is clear, is to make real improvements in public safety. Thanks to our shareholders’ trust and our team’s hard work, we are preparing for great things ahead. Lastly, a massive thank you to everyone who has been with us on this journey: our partners, our stakeholders, and our dedicated team. Together, we’re working towards a safer and more transparent future in public safety. I will now turn the call over to Chris for an in-depth expiration of our financial performance for this quarter.

Chris?

Chris DeAlmeida: Good afternoon, everyone. Thank you, Kevin. Our third quarter performance solidifies the strength and relevance of our offerings in the market. Both domestic and international sales have responded positively, positioning Wrap for consistent growth. During the third quarter, we had record quarterly revenue as a result of continued strong demand for our solutions, as we gained traction worldwide. In the Americas, our revenues were relatively in line with the prior year period. However, our international revenues showed strong improvement year-on-year, driven by a large order, which we announced. This is a reflection of the strong foundation we have built in these markets. For the third quarter, we had record gross profit both in terms of dollars and as a percent of revenue.

Our gross profit for the third quarter increased by 139% from the prior year period, going from $910,000 to $2.18 million. Our efforts to increase production efficiency and manage costs for our BolaWrap 150 product have paid off. And this is clearly reflected in our gross margin of 60%. Operating expenses for the third quarter increased by 2% from the same period last year, mainly due to one-time items related to certain legal expenses, the financing that we completed, and the one-time costs associated with the Intrensic acquisition. If we exclude these one-time items, our operational expense for Q3 2023 decreased by 15%, reflecting our ongoing commitment to maintaining operational efficiency and financial discipline. Our net loss for the third quarter 2023 improved significantly from the second quarter and on a year-over-year basis.

Excluding the one-time items I mentioned earlier, our net loss was just under $2 million which is a significant 50% improvement over the prior year period. Going forward, we will continue to maintain tight controls on cost, while we are focused on revenue growth. Looking at our balance sheet, it remains healthy and robust. As of September 30th 2023, we have cash and cash equivalents and short-term investments, totaling approximately $15 million compared to $19 million at the end of 2022. On the note of key performance indicators, I am pleased to share that the total number of trained law enforcement agencies has grown by 14% and certified officer and structures have increased by 14% from the prior year period. These are continuing promising indicators of our ability to expand our footprint and influence in the public safety market.

In summary, our solid financials, ongoing operational enhancements, our recent acquisition and market growth sets us up for a promising end of 2023. With these strategies and our strong financial position, we are well-placed for future success and increasing shareholder value. For Q3 2023, Wrap set notable milestones with record revenues and an all-time high in gross profit. These accomplishment accomplishments reflect our company’s resilience and adaptability amidst industry dynamics. Furthermore, our strategic efforts have been successful in improving the net loss position, a trend we would anticipate will persist. Looking ahead to Q4 and 2024, our recent achievements set a solid foundation. We are confident in sustaining this growth trajectory, capitalizing on our record financials, and further improving our overall financial performance.

With the focus on innovation and market expansion, Wrap is poised for a robust performance underpinning our commitment to shareholder value creation. With that, I will turn the call back over to Kevin to discuss our outlook in more detail.