WRAP TECHNOLOGIES, INC. Q3 FY2023 earnings call

• Wrap Reality saw significant demand, achieving record sales for the second consecutive quarter, fueled by a content focus with new scenarios monthly.
• Embarking on an officer mental health and wellness initiative.
• Good progress with sales of the recently acquired Intrensic platform, with early feedback showing it integrates well into the market and product set.
• Strong demand domestically and internationally, with significant growth in international revenues, particularly from the African continent and Northeast US.
• Commitment to innovation and global expansion, aiming to strengthen relationships with law enforcement groups and expand product offerings.

In the third quarter, Wrap Technologies achieved record quarterly revenue due to strong demand worldwide. Domestic revenues were in line with prior year, but international revenues showed strong improvement year-on-year, driven by a large order. Gross profit for the third quarter increased by 139% from the prior year period, going from $910,000 to $2.18 million, with a gross margin of 60%. Operating expenses increased by 2% from the same period last year mainly due to one-time items, but excluding those, operational expenses decreased by 15%. Net loss for the third quarter improved significantly. The balance sheet remained healthy with cash and cash equivalents and short-term investments totaling approximately $15 million as of September 30, 2023. The total number of trained law enforcement agencies and certified officers grew by 14% from the prior year period.

• The company is optimistic about earnings in the coming months, with a solid foundation from recent achievements.
• Foresees positive growth for the fourth quarter and 2024, capitalizing on record financials and focusing on innovation and market expansion.
• Notable pipeline growth for product sets, both domestically and internationally, with bullish outlook on opportunities.

• Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in the earnings release and more fully in filings with the SEC.

Q: 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?

A: Multiple factors contribute, including demand for solutions to lower uses of force, deescalate situations, increase subject safety, mitigate liability. BolaWrap meets this need globally. The body camera platform solves issues of affordability and integration for agencies. VR training solution's effectiveness and regular content updates also drive demand. Positioned sustainably to meet growth cycles.

Q: How has the integration of Wrap Intrensic impacted the company's operational efficiency and what tangible benefits can shareholders expect from this acquisition?

A: Acquisition solidifies Wrap as a solutions provider, allowing a suite of products. Provides reoccurring revenue model, opens new sales verticals (schools, universities, etc.). Allows integration with various platforms, not being proprietary, enabling agency flexibility. Expands revenue opportunities beyond BolaWrap.

Q: The company has forecasted positive growth for the fourth quarter and into 2024. What specific indicators should shareholders look for that will signify that the company is on track to meet these projections?

A: Substantial pipeline growth for product sets, both domestic and international. Building sales team and modifying sales operation to align with high value partners. Continued demand for solutions to deescalate situations and meet evolving needs of various sectors.

Q: Considering the increase in SG&A expenses due to one-time items, what measures are being taken to ensure that operational costs remain in check without compromising strategic growth?

A: Have been reducing cost footprint since April, tightening controls on R&D and SG&A. Expect one-time costs from acquisition, financing, and management changes to not continue. Will keep tight controls, monitor growth, and let revenue run before significant cost increases, with some planned increases as staff is added to fulfill market needs.