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WRAP TECHNOLOGIES, INC. (WRAP)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 did not have a traditional results press release; instead, management furnished an Item 2.02 update: unaudited first‑quarter revenue grew +54.7% year over year, with the potential for additional growth as Q4 2023 orders are recognized; no financial restatements are anticipated .
  • Operational priorities include enhanced financial controls, expense reduction, and scaling sales capacity; Fairfax County Police and Detroit PD CIT fully implemented BolaWrap, reinforcing adoption momentum .
  • For context, WRAP delivered record quarterly revenue in Q3 2023 ($3.63M, +114% YoY) and gross margin of 60%; Q2 2023 revenue was $1.20M with gross margin of 56% .
  • Near‑term catalysts revolve around audit timing and NASDAQ compliance, price increases across product lines expected in Q2 2024, and efforts to secure state/federal mandates for BolaWrap .

What Went Well and What Went Wrong

What Went Well

  • Unaudited Q1 2024: revenue grew +54.7% YoY, with potential upside from Q4 2023 orders recognition; management also indicated no restatements expected .
  • Adoption momentum: full deployments at Fairfax County Police and Detroit PD’s Mental Health Crisis Intervention Team; management emphasized high success rates and low injury rates for BolaWrap as a no‑harm compliance tool .
  • Prior trend strength: record Q3 2023 revenue ($3.63M, +114% YoY) and 60% gross margin, driven by international orders and domestic deployment; Wrap Reality delivered consecutive record sales .

Quotes:

  • “BolaWrap...has transitioned...to being recognized as a premier, high‑quality law enforcement technology… the ONLY non‑lethal tool we are aware of that does NOT rely on pain to gain compliance.” — Scot Cohen, CEO .
  • “Second consecutive record quarter for Wrap Reality sales.” .

What Went Wrong

  • Filing delays: the company delayed its FY2023 10‑K beyond the April 16, 2024 extended due date; Q1 2024 results follow after FY2023 release timing .
  • Q1 2023 baseline softness underscores cyclicality: preliminary Q1 2023 revenue was $0.60–$0.70M amid delayed orders and typical early‑year budget timing; net loss estimated $3.7–$4.3M .
  • Ongoing cost discipline necessary: while gross margins improved in 2023, SG&A saw one‑time costs (restructuring, financing, acquisition), requiring continued controls into 2024 .

Financial Results

Revenue and Growth

MetricQ2 2023Q3 2023Q1 2024
Revenue ($USD Millions)$1.20 $3.63 Not disclosed; company indicated YoY growth
Revenue YoY Growth (%)+3% +114% +54.7%

EPS and Margins

MetricQ2 2023Q3 2023Q1 2024
Net Loss per Share ($)$(0.12) $(0.07) Not disclosed
Gross Margin (%)56% 60% Not disclosed

Regional Revenue Breakdown

RegionQ2 2023Q3 2023Q1 2024
Americas ($USD Millions)$1.20 $1.34 Not disclosed
International ($USD Millions)$0.03 $2.29 Not disclosed

Operating Expenses Trend

MetricQ1 2023 (Prelim)Q2 2023Q3 2023
Total Operating Expenses ($USD Millions)$4.0–$4.5 $5.75 $4.93

KPIs

KPIQ2 2023Q3 2023
Trained Law Enforcement Agencies>1,450 (+18% YoY) >1,480 (+14% YoY)
Certified Officer Instructors>4,827 (+16% YoY) >5,200 (+14% YoY)
Backlog ($USD)~$0.025M ~$0.365M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (FY)FY 2023NoneApproximately $6.1M (unaudited preliminary) New preliminary disclosure
Revenue (YoY Growth)Q1 2024None+54.7% YoY (unaudited) New preliminary disclosure
Product PricingQ2 2024NoneAnticipate significant price increases across all product lines Raised (planned increases)
Restatements2024NoneNo restatements anticipated Maintained (reaffirmed)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q1 2024)Trend
Product performance (BolaWrap)Robust growth; advanced talks for large international orders Large domestic Mid‑Atlantic deployment; strong North Africa demand Full deployments at Fairfax County Police and Detroit PD CIT; higher success and low injuries Strengthening adoption
VR/Training (Wrap Reality)Record sales; monthly scenario expansion Second consecutive record quarter Continued emphasis on de‑escalation and training outcomes Sustained momentum
Body‑worn cameras/Evidence (Intrensic)Acquisition announced; scalable cloud solution Integration enhancing portfolio; projected sales surge Positioned as comprehensive solution; adoption across agencies Integration progressing
Regional trendsAmericas steady; intl flat Intl +940% YoY; Americas steady Not detailed; unaudited growth cited Intl expansion was key driver in H2’23
Cost structure & controlsOne‑time costs in Q2; excluding those, OpEx -17% YoY One‑time costs; excluding those, OpEx ~flat YoY and net loss improved Commitment to reduce expenses and strengthen financial controls Ongoing discipline
Regulatory/complianceN/AN/AAudit timing update; NASDAQ compliance plan (June 17, 2024) Addressing listing/audit timing

Management Commentary

  • Strategic positioning: “We are actively leveraging our direct, indirect, and partnership channels… to support crucial federal and local mandating efforts.” — Scot Cohen .
  • No‑harm principle: “BolaWrap… does NOT rely on pain to gain compliance.” — Scot Cohen .
  • Operational focus: “Management… is committed to enhancing operational efficiencies, reducing expenses, and strengthening financial controls.” .
  • Shareholder letter highlights: New auditor engaged (HTL), NASDAQ compliance plan submitted June 17, 2024; anticipated OpEx reduction to ~$700k/month by end of 2024 (from ~$2.5M/month in 2022) .

Q&A Highlights

  • Revenue drivers and pipeline: Management cited substantial pipeline growth across product sets, particularly internationally, and alignment with high‑value partners to scale sales operations .
  • Intrensic integration and recurring revenue: Body‑worn camera and evidence management broaden verticals (schools, hospitals, utilities, cannabis, mining) with recurring revenue; open integrations to agency systems .
  • Cost discipline: Non‑recurring items impacted Q2/Q3 2023, but management expects tight controls and OpEx stability going forward, prioritizing revenue growth .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 revenue and EPS was unavailable via API at the time of this analysis; therefore, estimate comparisons could not be performed.
  • Investors should note that Q1 2024 company‑furnished information was limited to YoY revenue growth and qualitative operational updates, without detailed GAAP or non‑GAAP line items .

Key Takeaways for Investors

  • Q1 2024 inflection: Unaudited revenue growth of +54.7% YoY suggests demand recovery against a soft Q1 2023 baseline, with potential incremental revenue as Q4 2023 orders are recognized .
  • Adoption flywheel: Full‑department deployments (Fairfax, Detroit CIT) and field data highlight efficacy and safety, reinforcing WRAP’s no‑harm differentiation; watch for mandate progress to accelerate penetration .
  • Margin trajectory: Q3 2023 gross margin reached 60% and Q2 2023 56% on improved BolaWrap 150 cost efficiency; sustaining margin gains depends on mix, pricing, and scaling services .
  • Pricing and policy catalysts: Anticipated price increases in Q2 2024 and pursuit of state/federal mandates are tangible catalysts; monitor legislative/regulatory developments .
  • Execution and filings: Audit completion, 10‑K/10‑Q timing, and NASDAQ compliance remain stock‑moving events; the company does not anticipate restatements .
  • International leverage: Q3 2023 growth was led by international orders (+940% YoY); a sustained international pipeline supports medium‑term growth but may involve longer sales cycles .
  • Integrated platform: Intrensic (body‑cams/evidence) and Wrap Reality (VR training) broaden recurring revenue opportunities and strengthen WRAP’s positioning as a full solutions provider .

All cited information comes from company filings and press materials as referenced above.