Q3 2023 Wrap Technologies Inc Earnings Call

Good afternoon, and welcome to the wrap Technologies' third quarter 2023 earnings conference call.

My name is JD mirth vessel and I'm, the director of strategy and communications for wrap technologies. Joining me today is wrap Technologies', Chief Executive Officer, Kevin Mullins, and our Chief Financial Officer, Christy Almeida.

Following the 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 site at IR Dot wrap dot com.

Additionally, the company asked that all interested parties register on the Investor Relations website at IR Dot wrap dot 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 Kevin.

Good afternoon, and thank you for joining us it is an honor to shed light on wraps commendable strides and achievements throughout the third quarter of 2023.

The past quarter stance.

Estimate of our relentless dedication to excellence in our pursuit of innovation, our third quarter performance brands 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.

With a robust deployment order from the northeast sector in the United States sentiments.

Our dominant market stature.

And our ongoing endeavor to consistently elevate the standards rap 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 and rolling out new scenarios monthly.

Reinforcing the unparalleled caliber of our product on sample.

Furthermore, we are enthusiastically embarking on an officer mental health and wellness initiatives, which we will continue to develop over the coming months.

We're also seeing good progress with sales for the recently acquired intrinsic 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 or improved products.

The changing needs of todays market and transformer app 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 rats products.

This quarter shows how hard we work to grow our presence in the market with strong demand. Our Q3 sales are testament to our reach both locally and internationally.

We've had another record sales period with rap reality and.

And we're starting to see good success from our new intrinsic platform as well.

We're heading into the last full.

Full quarter with hope and excitement.

We made some updates to our sales process to better meet our customers' growing needs.

Looking ahead rapid 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.

Our past success is just the beginning in 2020 forward in the years that followed we plan to explain expand our global reach and 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 for ready to achieve even more.

Our goal is clear.

Is to make real improvements in public safety. Thanks.

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 and public safety.

I'll now turn the call over to Chris for an in depth exploration of our financial performance for this quarter Chris.

Good afternoon, everyone and thank you, Kevin our third quarter performance solidified the strength and relevance of our offerings in the market both domestic and international sales have responded positively positioning wrap for consistent growth during.

During the third quarter, we had record quarterly revenue as a result of continued strong demand for our solutions as we gain 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 to $2 one $8 million.

Our efforts to increase production efficiency and manage costs for our Boulder up 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 onetime items related to certain legal expenses.

A thing that we completed and the onetime costs associated with the intrinsic 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 of 2023 improved significantly from the second quarter and on a year over year basis, excluding the onetime 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 focused on revenue growth.

Looking at our balance sheet remains healthy and robust as of September 32023, with 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 is growing by 14% and certified officer and structures have increased by 14% from the prior year period.

These are contained 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.

Notable milestones with record revenues.

And an all time high in gross profit these accomplishments accomplishments reflect our company's resilience and adaptability commence industry dynamics. Furthermore, our strategic efforts have been successful in improving the net loss position a trend and.

We anticipate well preserved.

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 a focus on innovation and market expansion Rapids poised for a robust performance underpinning our commitment to shareholder value creation with that I'll turn the call back over to Kevin to discuss our outlook in more detail.

Thank you Chris.

As we conclude another another pivotal quarter on.

I am proud to share that the dedication resilience and strategic efforts of the entire wrap technologies' team had been the driving force behind our continued success, we've navigated the challenges and harnessed the opportunity reinforcing our position in the market.

As we continue to earn the trust of our clientele.

The outlook for our future has never been brighter with a deep understanding of the industry. We are experiencing strong demand for our solutions. This demand isn't just a testament of the quality of our products, but also reflection of the evolving needs of a world where technology plays an increasingly pivotal role.

Our vision for the future is clear.

To continue to grow.

At a high trajectory.

Remain at the forefront of innovation and further solidify our market leadership.

With the continued support of our stakeholders and the relentless efforts of our team we are poised to achieve these goals and exceed expectations.

I'll now turn the call back to J D to facilitate the Q&A and pre selected questions. We have received from investors.

Thank you Kevin.

The following questions were submitted from shareholders and interested parties.

Okay.

Kevin.

With the record breaking revenue this quarter, largely driven by international orders, particularly from the North African region can you elaborate on what factors contributed to this success and whether it is sustainable in the long term.

There are multiple factors contributing to our growing success speaking for Boulder App in both the domestic and the international markets. There is a commonality.

Agency law enforcement political leaders and all of society are looking for solutions to bridge communities.

With those charged to protect them.

Looking back at the pandemic looking back at high profile negative situations. We've had civil unrest, we had geopolitical events that have change policy and perception.

Everyone's looking for a solution to lower uses of force be able to de escalate situations, how do we increase subject safety mitigate liability injury to officers.

Liability to the agency to the municipality and Bowl wrap is really the answer that everyone is seeking C outcome that everyone is seeking and we see this in the U S and we see this in every country around the world. So demand is growing and it's our job at raft technologies and meet that demand.

From the standpoint of our new body camera platform.

We live in a video world now.

The consensus of most of the public safety that.

Every agency will be required to wear body camera in the next five years at least that's the.

<unk>.

Consensus within the U S market internationally, we are seeing many countries that have felt they cannot afford a body worn camera solution or the process is too complex for the upload ability might not work within that geographic territory.

We solve those issues.

Our solution is infinitely scalable, it's openly integrated and its affordable for agencies, allowing them to be able to move forward.

With our VR training solution study show that the our learners are four times faster, they're more comfortable they retain at higher levels with rap reality, we've created new content at extraordinary levels were putting new scenarios out roughly every month.

Recent scenarios additions deal with the <unk> homes with opioid identification with command control showing that we listened to our partner agencies and we provide enable content at the fastest possible levels. So we're reaching out we're meeting the demand of where our customers are so the original question absolutely we are.

R R.

Sustainably positioned to meet whatever the growth cycle is and thats the excitement within within wrap technologies right now.

Thank you Kevin.

Additionally, how has the integration of rap intrinsic impacted the companys operational efficiency and what tangible benefits can shareholders expect from this acquisition.

It's provided a major impact the acquisition of intrinsic really solidifies wrap technologies as a solutions provider.

Now we have the ability to provide a suite of products.

Packaged together, so that we become a budgetary item for each agency, we have a non lethal solution with.

With <unk>, we have a world class VR training solution with rap reality and now we have a body camera platform and.

Intrinsic.

With our evidence on cloud solution. It's a cloud based platform that allows us to be able to infinitely scale, if digital evidence as case management and incident management.

So provided that for all of law enforcement, what's different about intrinsic as that we can do a mobile upload we do video optimization, we're very open source and then to the agencies using.

One platform with a with their computer aided dispatch of their RMS, we integrating those platforms. So we're not that proprietary where it.

It allows an agency to be able to shift and to move. It also opens up many additional sales verticals.

When you think about intrinsic with schools universities with hospitals with utility workers. Those are just a few no currently we sell body more cameras into the cannabis industry for security and delivery, we have our camera platform operating in the mining industry.

Yes body cameras are becoming mandated in public safety, but there are so many other verticals and possibilities that allow us to be able to operate with that.

And yes I'll.

These revenue.

Solutions are reoccurring so it's a reoccurring revenue model that we all want to see and we.

We sell solutions.

We have the ability to expand wrap technologies as a solutions provider not just bowler at boll Rep is our core technology at this point, but we're continuing to seek other revenue opportunities and thats the advantage and certainly things that become opened up with the acquisition of in transit.

Thank you Kevin.

For Kevin as well the company is forecasted positive growth for the fourth quarter and into 2024, what specific indicators should shareholders look forward that will signify that the company is on track to meet these projections.

Yes, I mentioned earlier.

Factors that are driving revenue growth.

Feel very positive.

Toward our domestic and the international demand now for our suite of products without expanding specifically, we are experiencing substantial pipeline growth for each of our product sets in particular on the international front as well as some high value targets domestically. So we built a sales team.

And we continue to modify our sales operation to be able to expand and grow our model is a bit different now that we're operating with high value partners out there and aligning those with our insight team with their outside team with our customer success team and so beginning to click on all cylinders and you see that.

And you see that building within our pipeline that combined with.

This demand for our product when you think about markets worldwide were all looking for that solution right that that outcome and that's what we sell we're selling that outcome with bowler RAF.

All looking for way to Deescalate situations.

Again to two lower uses of force to bridge a community back to law enforcement and we do that by providing our technology. It's something that's very unique in the market. We truly don't have competition in that remote restraint business. It just building the understanding of the market of what our technology is.

And then driving those opportunities and Thats exactly what were doing and Thats what were seeing that substantial pipeline growth. So very bullish about what our opportunities are and.

There's a lot of excitement everyone consensus and we're very much I believe at a tipping point with with wrap technologies.

Thank you Kevin.

This question is for Chris Chris.

During the increase in SG&A expenses due to onetime items, what measures are being taken to ensure that operational costs remain in check without compromising strategic growth.

Yeah, absolutely. So when we look at our cost structure overall, we've done quite a bit over the last.

A few months early since April even before that to reduce our overall cost footprint reduce our opex going forward.

Both on the R&D side getting tighter from that perspective, but mainly on the SG&A side. So we will continue to do that we will continue to hold costs down. We think there is ample opportunity for revenue growth with the cost structure. We're at.

In the third quarter and second quarter. Unfortunately, we had.

Changes in management, which made some severance impact in the third quarter of course, we did the intrinsic acquisition, which is a wonderful acquisition. We did the preferred financing transaction and some of those costs. Unfortunately, just get expense per GAAP and one period versus over over the life of the contracts.

So with that Thats why we had some some increased costs, we expect that to not continue that to go down.

Dramatically and really will keep tight controls and really monitor the growth and what revenue run a little bit before any cough haven't not saying down the road and in years, we won't see some increases.

As we add staff and really try to fulfill for our market perspective, but the main focus here is revenue and then just keeping costs costs under control.

Thank you Chris.

That concludes our Q&A portion of the call.

Thank you for joining us today for wrap Technologies' third quarter 2023 earnings conference call. If you have any additional questions. Please reach out to us via our website at IR dot wrap dot com.

May now disconnect.

Goodbye.