WRAP TECHNOLOGIES, INC. (WRAP)·Q2 2025 Earnings Summary

Executive Summary

• Q2 revenue was $1.01M, up sequentially vs Q1 ($0.77M) but down year over year vs Q2 2024 ($1.57M); operating expenses fell 26% QoQ to $3.3M as restructuring completed, but net loss widened YoY due to warrant fair value swings that will cease after reclassification at quarter-end .
• Management highlighted a mix shift toward multi‑year subscription bundles (Wrap Ready/Wrap Plus); CEO said the first six weeks of Q3 generated more purchase orders than the entire first half, positioning 2H for acceleration (qualitative positive momentum rather than formal guidance) .
• Balance sheet quality improved: net cash used in operations declined by $2.2M YTD, cash rose 16% to $4.2M, and warrant liabilities were reclassified to additional paid-in capital, which should reduce future earnings volatility from mark‑to‑market adjustments .
• Strategic expansion continued: launch of North American–made WrapVision body‑worn cameras and progress on counter‑UAS repurposing of BolaWrap broaden the TAM (law enforcement, healthcare, corrections, defense), while manufacturing fully relocated to Virginia to support “Made in USA” positioning .

What Went Well and What Went Wrong

• What Went Well

  • Operating expense discipline: OpEx fell 26% QoQ to $3.3M (from $4.5M), and YTD OpEx decreased 14% vs prior year as cost rationalization completed .
  • Liquidity and cash burn: Net cash used in operations improved by $2.2M YTD; cash increased to $4.2M at 6/30/25, aided by a $5.7M financing and warrant liability reclassification that removes future P&L volatility from mark‑to‑market changes .
  • Strategic repositioning gaining traction: Management launched subscription bundles and stated early Q3 purchase orders exceeded all of 1H, with customers validating the “pre‑escalation” strategy; “no reported serious injuries and zero lawsuits related to BolaWrap deployments” underpins adoption narrative .

• What Went Wrong

  • Revenue declined YoY: Q2 revenue of $1.01M fell vs $1.57M in Q2 2024; product sales decreased to $0.20M (from $1.25M) as mix shifted and the model pivoted, partly offset by managed services .
  • Earnings volatility in the quarter: Q2 net loss widened YoY to $(3.73)M (from $(0.39)M), impacted by a negative change in warrant fair value; the company amended warrants at quarter‑end to mitigate future non‑cash swings .
  • Scale still early: Management emphasizes pipeline and pilots, but hard, externally verifiable deployment KPIs remain limited publicly; management notes data collection is sensitive and under confidentiality with agencies .

Financial Results

Revenue and EPS (sequential trend; oldest → newest)

Year-over-Year (YoY) – Q2 comparison

Revenue Mix – Q2

KPIs and Balance Sheet Highlights

Estimates vs Actuals (S&P Global)

• Consensus for EPS and revenue was not available for WRAP this quarter; therefore, a beat/miss vs Wall Street cannot be determined. Actual revenue was $1.01M .
• Consensus EPS (Q2 2025): N/A*; Consensus Revenue (Q2 2025): N/A*
• Values retrieved from S&P Global.*

Guidance Changes

Note: Management reiterated strategy and operational milestones but provided no quantitative revenue/EPS guidance .

Earnings Call Themes & Trends

Management Commentary

• “In the first six weeks of Q3, we received more purchase orders for Wrap devices than we did in the entire six months of the year.” — Scot Cohen, CEO .
• “Operating expenses were reduced by 26% from Q1 to Q2 2025… On a year-to-date basis, operating expenses are down 14%.” — Gerald Ratigan, CFO .
• “On 06/30/2025, we amended… outstanding warrants, enabling us to reclassify… warrant liabilities to additional paid‑in capital… reducing earnings volatility going forward.” — CFO .
• “We are fully moved into Virginia… products will be made in America in Wise County… production can be scaled.” — Jared Novick, President & COO .
• “To date, there have been no reported serious injuries and zero lawsuits related to BolaWrap deployments.” — President & COO .

Q&A Highlights

• Adoption acceleration: Management is engaging directly with chiefs, command staff, and trainers while deploying a learning management system to scale training; regulatory shifts are pulling demand rather than requiring push .
• Non‑law enforcement verticals: Active interest and pilots in corrections, hospitals, schools, private security; potential legislative changes (HR 2189) could expand addressable markets .
• Adjacent product lines: Counter‑UAS capabilities leveraging existing BolaWrap inventory (both air‑to‑air and surface‑to‑air) targeting DoD and international defense markets .
• Subscription mix: Transition from one‑off sales to recurring bundles to reduce consumables cost uncertainty and access larger “training dollar” budgets .
• Operations: Fully relocated to Virginia with documented processes and readiness to scale production; inventory supports near‑term demand .

Estimates Context

• S&P Global shows no published consensus for EPS or revenue for Q2 2025; a beat/miss vs Wall Street is therefore indeterminable. Actual revenue reported was $1.01M .
• Consensus EPS (Q2 2025): N/A*; Consensus Revenue (Q2 2025): N/A*
• Values retrieved from S&P Global.*

Where estimates may adjust: If management’s commentary on Q3 momentum and subscription adoption converts to recognized revenue, Street models (when initiated) may need to reflect higher recurring contribution and lower quarter-to-quarter volatility tied to warrant accounting (now removed) .

Key Takeaways for Investors

• Cost structure reset is real: OpEx down 26% QoQ and 14% YTD, with warrant reclassification improving earnings quality; cash burn trending better even as revenue transitions to subscriptions .
• Revenue base is rebuilding: Q2 revenue grew sequentially to $1.01M but remains below prior year; mix is shifting from product to managed services and subscriptions, which should smooth demand and consumables usage .
• Early 2H inflection watch: Management reports a sharp order pickup early in Q3 and broader subscription adoption—an execution catalyst to monitor in reported results and backlog disclosures .
• Portfolio expansion widens TAM: WrapVision (North American–made BWC) and counter‑UAS initiatives diversify beyond BolaWrap, align with U.S. sourcing/data‑sovereignty priorities, and open defense channels .
• Regulatory tailwinds: Barnes v. Felix and restrictive use‑of‑force policies are driving agencies toward pre‑escalation tools and training—WRAP’s core narrative .
• Manufacturing/”Made in USA”: Full move to Virginia supports procurement preferences and scale readiness; inventory on hand provides near‑term supply certainty .
• Evidence path to scale: Management is formalizing deployment data capture with agencies; more transparent KPIs would bolster investor confidence as subscription cohorts mature .