Wrap Technologies (NASDAQ:WRAP) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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Summary

Wrap Technologies reported a 45% increase in total revenue for Q1 2026, reaching $1.1 million, with product sales climbing 186% due to increased demand for the BolaWrap 150 product line.

The company is targeting 100% revenue growth for 2026, with expanding operations in international markets such as India, Panama, Brazil, Malta, and the UK.

Operational highlights include the growth of recurring revenue from technology-enabled services and early traction in drone and counter-drone solutions, indicating potential new market opportunities.

Gross profit increased by 16% to $0.7 million, although gross margin declined to 62% from 78% due to higher sales of lower-margin hardware products.

Management expressed confidence in the company's strategic initiatives, focusing on agency-wide adoption of non-lethal solutions, and improving financial options as fundamentals strengthen.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Wrap Technologies, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. Webcast viewers can type questions in at any time via the webcast Q&A function. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lou Springer. Please go ahead.

Lou Springer (Vice President of Finance)

Thank you. Good afternoon and welcome to Wrap Technologies first quarter 2026 earnings conference call. I'm Lou Springer, Vice President of Finance. Joining me today is Scott Cohen, Chief Executive Officer and Jared Novick, President and Chief Operating Officer. We appreciate your time and continued interest in Wrap. Before we begin, I want to remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information that are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform act of 1995 and the Federal Securities Regulations. Please review the forward looking and Cautionary Statements section at the end of our first quarter 2026 earnings release for various factors that could cause actual results to differ materially from forward looking statements made during our call today. Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the Company's filings with the securities and Exchange Commission. The forward looking statements included in this conference call are only made as of the date of this call and the Company is not obligated to publicly update or revise statements made during this call do not constitute an offer to sell or a solicitation of any offer to buy any securities. Securities will be offered only by means of a registration statement and prospectus which can be found at www.sec.gov. also, during today's call we will discuss certain non GAAP financial measures which we believe can be useful in evaluating the Company's financial performance. Descriptions of those non GAAP financial measures that we use and reconciliations of those measures to our results as reported in accordance with GAAP are detailed in our earnings release. Unless otherwise stated, all reported results discussed in this call compare the first quarter ended March 31, 2026 with the first quarter ended March 31, 2025. The earnings release will be available on the Financial Info section of our [email protected] in addition, a replay of this earnings call will be posted on our website after the call. I will now hand it over to Scott

Scott Cohen (Chief Executive Officer)

thank you Lou. Good afternoon everybody and thanks for joining us today. When we spoke in March we told you that for the first time we had visibility into our pipeline and that we are targeting 100% revenue growth growth for 26 1/4 in I can tell you that based on the information we have today, our conviction in that target has strengthened the momentum we described coming out of the fourth quarter carried directly into the first quarter and has continued to build as we move into the second quarter. First quarter revenue grew 45% year over year. More importantly, product sales, the core measure of agency adoption with our technology grew 186%. That growth was driven by increased domestic and international demand for the bowler app 150 line, including continual reorders from and very active installed base. We believe these numbers indicate two things. First, the pipeline we talked about in March is beginning to convert and second, the agencies that have adopted Bull Ramp are using it and expanding internationally. We're expanding our footprint. We've expanded our footprint in India, Panama, Brazil, Malta and the uk. Across the BolaWrap, Wrap Reality, our drone and counter drone solutions, we are seeing the reoccurring side of this business start to take shape. Cassettes represented a growing number, a growing component of product revenue in the quarter consistent with the expanding base of BO wrap devices and in active field use subscription activity and Wrap Reality Wrap Tactics and rap vision is beginning to build. Behind that reoccurring revenue is a slower compounding story than our single large than a single large product order. But it's me. It's a meaningful contributor to the quality of our revenue base over time and it is growing steadily on the innovation front. The early commercial traction we are seeing from the drone encounter Drone reinforces our view that non lethal response integrated with autonomous platforms is a real and emerging market and one in which we believe we're well positioned for. Jared's going to cover that in detail shortly. I'm now going to turn it back over to Lou who's going to walk you through the financial results. And Jared will cover our operational progress and R and D growth initiatives. I'll come back to discuss our outlook and priorities for the balance of 26. Thank you.

Lou Springer (Vice President of Finance)

Thank you Scott. The financial results in Q1 suggest that our strategy is beginning to translate into commercial traction. Total revenue for the first quarter was 1.1 million, an increase of 45% compared to the 0.8 million in the prior year period. We saw our bookings grow to 3.2 million over the same period. Product sales increased 186% to 0.9 million compared to 0.3 million in the prior year quarter driven by increased domestic and international Demand for the Bolerap 150 product line. Cassettes and consumables represented a growing component of product revenue consistent with the expanding base of Bolarap devices in active field use. Technology enabled services revenue was 0.2 million compared to 0.5 million in the prior year period. The year over year change reflects the growth in RAP Vision and related software revenue offset by the wind down of certain advisory and investigative services. We are focusing technology enabled services revenue line on higher margin subscription and software based offerings including RAP Tactics, RAP Reality and RAP Vision Evidence Management. Subscriptions Gross profit increased 16% to 0.7 million compared to 0.6 million in the prior year period. Gross margin was 62% compared to 78% in the prior year period. The decline in gross margin percentage reflects the growth in hardware product sales in Q1 which carry lower margin than software subscriptions and managed services. We currently expect gross margins to improve as technology enabled services revenue grows as a proportion of total revenue throughout 2026, although there can be no assurances that this mix or shift will occur at the pace or magnitude we anticipate. Within selling General and administrative Expense Share based compensation was 2.4 million for the first quarter compared to 1.7 million in the prior year period. Cash based SGA was 3 million compared to 2.5 million in the prior year period reflecting investment in sales and go to market expansion. Total operating expenses were $5.5 million compared to $4.5 million in the prior year period. Please note, as always, a reconciliation of GAAP to non GAAP measures can be found in our earnings release which is posted on our website. Cash used in operating activities improved 59% to $1.2 million compared to $3.1 million in the prior year period reflecting higher revenue discipline, disciplined cost management and reduced cash burn. Even as we continue to invest in sales and go to market activities. We believe the first quarter results reflect a leaner, more focused business that is beginning to grow with the non lethal response framework we laid out last quarter. I'll now hand it over to Jared to cover our operational highlights and strategic initiatives. Thank you Lou.

Jared Novick (President and Chief Operating Officer)

As we look beyond the headline financial results, the first quarter also provided early evidence that our go to market strategy is beginning to gain traction in areas we have prioritized for growth. Let me describe this in the following key areas. Non Lethal Response at Scale we see agencies are increasingly interested in moving away from single device purchase to agency wide adoption. In the first quarter we saw this validated as agencies began to make that transition. The integrated program approach of hardware technology training and policy is what is resonating when it comes to federal defense market entry. Our strategy is supported by federal consultants and advisors that continue to position our portfolio for DoD, DHS and other federal customers. We continue to focus on TAA compliant products, made in America manufacturing efforts, procurement infrastructure through carahsoft as our master government aggregator give us foundation to compete for that work. When it comes to counter UAS and our advancements there, our R and D investments into drone to drone and drone to person capabilities are showing traction. We have pre orders for both drone and counter drone systems with recent orders across the UK and Europe and follow on dfrx. Orders from our partner in Panama and our R and D expansion into net based drone interdiction reflect that a market is moving from concept to procurement. International reorders and engagements across the uk, Europe, India, Panama and Malta during and after quarter support review that demand for integrated non lethal response solutions is broad based and global. I'll now hand it back to Scott to discuss our outlook for the balance of 2026.

Scott Cohen (Chief Executive Officer)

Thanks Jarrett. Putting all this together, we continue to target 100% growth for this year. What has changed in our visibility, our pipeline and our conviction? The contracts that we're currently pursuing for 26 and 27, if awarded, have the potential for a meaningful increase in the scale of this business. However, these opportunities do remain subject to competitive processes and government funding decisions and other factors outside of our control. But in summary for Q1 showed early evidence that our go to market strategy is beginning to convert into measurable commercial traction. With revenue growth, stronger product sales and expanding bookings and lower operating cash use, we are seeing customers move towards broader non lethal response adoption. While early drone and counter drone pre orders suggest that our recent R and D investments may open additional markets beyond the core handheld BoarApp platform, our focus for the balance of 26 is straightforward. Continue converting pipeline, deepen agency wide adoption, advance federal and international opportunities and execute against our 100% revenue target for this year. To all you shareholders, thank you, thank you for your continued support and confidence. All right, Lou, I'm going to turn it over to you. I think we've got how many questions do we get today? We had four questions come in. All right, let's hear them. All right, I'm going to take that one. Since I've been leading and driving a lot of the capital, a lot of the financing. So look, it's really straightforward. The more liquidity in our stock, the more options you have. And to get institutional quality investors, they're looking for fundamentals in this business. We finally have them. We finally have pipeline that we can show. We finally have a sales rep. We finally have fiscal discipline, discipline that's showing up in our numbers. And if we can continue to drive the top line like what's unfolding here, there's going to be a lot of different financial options for us. It has been a tough road. You guys know how much money I put into this company. I participated in all these rounds. It wasn't something I was anticipating doing, but I am standing up for this company. I'm standing up for what we're building and I'm not stopping because we've got really important work in front of us. It's not easy taking in money for a company that hasn't been forming because we haven't. It's been really tough. But if things continue, and I've never, the company's never given out guidance, but if we can execute on this, we will have finally, for the first time, some real financing options. I hope that answered your first question. The first thing you need to do is put the fundamentals in place and put up numbers, which thankfully we're doing now with visibility, which we'll be talking about. This will be unfolding throughout the year. So as you're on that path, we get to engage with different types of funds, different types of brokers that actually have fundamental investors that are interested in a financial story with some big upside associated with it. So that's activity that we are getting ready for because finally the company could stand. I used to be on the buy side, I was on the sell side. So I know this arena extremely well and I know how much time can get wasted on the road and I know what funds are looking to invest in and we're definitely investable. But when you put the numbers together with the story that's unfolding here, I think we're going to have a lot of financial, a lot better financial options going forward. So you could end the first sign is when we actually do it, when we actually put up a deal that with some credit, with some Institutions that everybody can see and those are bigger transactions. And you can see those funds will hopefully be active filers in small cap companies with long term positions. But I will say this being real about our cap table, I'm very proud of that cap table. There are still we have some extremely sticky shareholders. We pulled the shareholder base three and a half years ago, maybe four years ago and found that over a third of our cap table were people associated with law enforcement. That is, that made me very proud and that's a really good indicator the industry has is buying in on what this technology is about. So and if you look at our top holders, you can look at some of the small but our top holders have been in place for from the beginning. It's had very little change in that holy ship. So I am thankful and grateful that people have been supporting us for years and haven't stopped those financings that have taken place, those smaller financings, let's call them 3 to 5. We could have taken in bigger money possibly but hard to get real fundamental people involved. And you can't go out to the street and talking about this because it puts pressure on the stock. Have to be very, very careful. So again the thing that makes me proud not only do we have a big large amount of our cap table is coming from people that are associated with law enforcement but our top holders and most of our holders haven't moved their positions. Some of them increase but they haven't moved. So and particularly the people that have invested in those, the pipes, the three or four last deals that we've done, they're still in there side barely any of them have sold their positions. So that is not easy to do. You need to have trust with that investor and I think we've established that. But it is time. I think we all want a different class investors and we can access them if we keep doing exactly what we are on a path to start to access that kind of capital. If we can get through the second quarter and execute through this year, we will have plenty more financing options available to us.

Lynn

Next question Next question is investors have seen extended periods where the CEO simultaneously held multiple executive and financial reporting functions. Is there a plan to search for a cfo?

Scott Cohen (Chief Executive Officer)

Oh yeah, there certainly is. Look, we've had plenty of C suite turnover I could tell you with and you can see evidenced by today's call. We were ahead of time. For the first time in a long time our systems are in place and our controls are the best they've ever been. So big thanks out To Yulu and Brian and the rest of the team. They've done a great job to get us here and get us finally in a good place financially. But we are good. I am going to be looking for a CFO that can help talk to capital markets, help help tell our story and get in front of investors. But in order to do that, you better have the numbers to because you won't even get the meeting. It'll be wasting time. So I think we're coming up to that point. We are on the lockout lookout. We've done interviews and we will find the right candidate. But the good news is our financial infrastructure is the best it's ever been. Jared, do you have anything to add to that?

Jared Novick (President and Chief Operating Officer)

It's a priority of the company. People matter. It's a leadership. So it is. It is one of the key initiatives of the company to find top talent in these positions.

Scott Cohen (Chief Executive Officer)

Right. Okay, Lou, what else we got?

Lou Springer (Vice President of Finance)

Final question. How should Shareholders interpret the April 10, 2026 trading session where trading volume dramatically exceeded historical norms without any repricing of the equity?

Scott Cohen (Chief Executive Officer)

Great question. I still scratch in my head how that happened. I'm going to leave it to algorithms. I think an algo must have gotten a hold of us and traded back and forth because as soon as I saw no big changes in the cap table subsequent to that event. So if I saw a large movement in any of the large shareholders, I could tell you that I was from. But it wasn't. I saw no movement in the cap table. So unfortunately it was a bit of a head fake. It was exciting day. I didn't know where it was coming from, but my best guess is the net worth.

Lou Springer (Vice President of Finance)

All right, that concludes our question and answer portion. On behalf of Scott, Jared and the entire Rapp team, thank you for your engagement and support. We look forward to updating you on our progress. And this concludes Rapp Technologies first quarter 2026 earnings conference call. Thank you.

OPERATOR

This concludes today's conference call. Thank you for participating.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.