WRAP - Earnings call 1 2022 | Wrap Technologies, Inc.

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Operator

Good afternoon, and welcome to the Wrap Technologies First Quarter 2022 Earnings Conference Call. My name is Paul Manley, and I'm Vice President of Investor Relations. Today, we will provide a report on our progress and performance during the first quarter and an update on our key priorities and strategy.

On today's call, I'm excited to introduce our newly appointed CEO, TJ Kennedy; and our new President, Kevin Mullins.

We are also joined by Jim Barnes, our Chief Financial Officer.

meaning a during to forward-looking Securities the to, within take certain you statements and to harbor pursuant made safe XXXX statements call the Litigation like Act moment the as remind now that made provisions of I'd of the amended. Private of today constitute

our release that such as statements of SEC. results in to not today actual are and known press statements. Such are cause risks and update earnings with to forward-looking These the do to in our of forward-looking uncertainties filings the statements and made unknown forward-looking undertake we this materially from are any could both subject obligation risks date These and and statements. the uncertainties differ described call,

over turn you, now call will the TJ. to I

T. Kennedy

Paul, I to and earnings my on I'm to give as everyone. be To some CEO. want afternoon, job. first to excited good I decided start perspective incredibly take why Thank the off, here call Wrap's as you, to

As by in the incredibly we XXXX. building. been Board Board, culture unique is I've you Since more impressed de-escalation of Directors in are white fill to addressable joined market throughout the for our increases solutions know, that a a efficient company's is growing the There demand mission-critical opportunity as joining and mission-driven and business may the the significantly space safer, restraint I world.

others. security. landscape in our back incredibly individuals built have can diverse significant the mission former What's that sales make among have XXX I in potential in are you Reality worked a our of officer is more changes the field, military have of the who by positive that modern talented technology, key BolaWrap marketing, set WRAP As a the and a and and law driven enforcement that development, team tell solutions, for policing, to we and

Jim want I in a results, talent look quarter said, priority. to the address our further Barnes, moment discuss to first major recruit detail That to in ahead, continuing our take top-tier will we financial CFO, remains a As call. which later

life growing mind permanent Our build term headwinds. XXX shared solutions, in accelerating as President, the have Wrap move enforcement services critical was team was despite that phase operating with keep It Kevin and cycle. to appointments significant for global and near into chain Wrap first law Reality important us for as we is the term. to of and long majority company's a Mullins, over the in of Wrap X the vision without suite diversifying year-over-year the momentum for as supply The leadership BolaWrap quarter. myself represent milestone other the of a of for WRAP next of of CEO the The able sales revenues including

days, and take of every XX what next is working assess what the Kevin can I will inventory and improved the upon. facet of be Over business to well

our will customers distributors engaging this employees, our process. We be throughout and

a BolaWrap for sales closely plan product our want and internationally. XXX both as WRAP how for and Specifically, We to at growth devise our domestically want down drive look can BolaWrap Reality. the to understand strategies we the we doubling on go-to-market and XXX key

to and to customer maximize channel and demand Reality. to to and expand and success existing ways technologies function. We brand well partnerships, as new as through generating assess an expand want want improved explore identify synergistic awareness relationships how want potential for We customer to ones WRAP we

value creation. to release expect and develop we days, XX and ultimately diversification innovation strategic and that these of roadmap a enhanced sales, end will support the At increased long-term

before opportunity the quarter. financial now Kevin? to to Jim briefly our himself like the introduce discusses results I'd Kevin give for

Kevin Mullins

Wrap, profitability. to incredibly technology safety I've and see career afternoon, to to Thank the companies we in Wrap Wrap good incredibly spent my together. into distributing public phase future growth of be taking accomplish products. am the working excited confident what next the early lead and the I'm already TJ, from I'm commercializing of And the given at team to with success of and to XXX, excited everyone. our can BolaWrap you, I concept

the and to we leadership value significant that company Now long the delivering running come. enhanced share the capture permanent the and has is a to to stakeholders over a in committed market the team to growing years while business quarters term, and all expect

I results. it will our to over to turn that, financial Jim discuss With

James Barnes

Thanks, Kevin. for Good into the everyone. afternoon, I'll first highlights move discussing quarter. financial the straight

quarter of revenues the and net QX over XXX. generation in discounts million first promotional is incentives, primarily to in This That million represented converting to in generated $X.X XXXX. new spite the BolaWrap we First, of customers related $X.X XXXX. X% growth of

Gross had revenues discounts gross the so discounts revenues before $X.XX was such for QX XXXX year million. $X,XXX only of quarter were million. nominal $X.X prior

this in after to product QX. industry We customer expect decline discounts customary conversion

revenues positive seen documented BolaWrap's QX period revenues net the to XX% compared bodycam footage. quarters, prior represented in momentum driven Domestic XX% continuing revenues XXXX same year, recent success by on for XXXX. the International of stories over in in grew XX% by part

solution continue in While training virtual difference our believe an significant small is policing. to market safer growth making penetration modern, and in make a reality important we total with related BolaWrap and large still addressable are for room very market, our

in interactions XXXX, restrictions face-to-face pandemic-related build but momentum. lessening and it are may take time schedule our International to

time international and at our geopolitical sanctions predict have also will cannot impact We on recent conflicts operations. the this

restrictions face flagged growth could our to pandemic related now We revenue conflict. have international consistently especially as revenues lumpy, be uncertainties international travel balance that we and

and be may to events. user, enforcement business agencies geopolitical end law large to international be national they the sensitive especially as tends Our

for continued especially focused BolaWrap growth, new on launch the our business are the managing We of with XXX.

first gross $X.X the margin for XX% impacted was quarter, noted for Our recent previously of discounts. XXXX. QX million gross significantly In was by to the compared most XX% margin quarter the of

and operations. risks supply that can challenges impact and margins face chain to We affect global continue

global While suppliers. we on assemble we rely product in many Tempe,

and key shortages delays of faced We unexpected and of are have risk components. at

We experienced components. have price of also increases certain

and changes shortages cost and delay Price can increase production.

and certain design that product for related these decline delay time quarter promotional can incurred the time, around of delivered agencies. prior We from first product cost to in and need awareness year a costs brand also, training to factors All further demonstration the primarily may the is results. development components expanded We from costs. products demonstration the $XXX,XXX of impact require and future law time reduces as enforcement to our can to This products. need production and

associated development as outside increased compared increase and XXX. R&D of related testing consulting expense was to well new The XXXX. to finalizing prior a the headcount year with QX costs product as primarily million costs $X.X was in the BolaWrap result for development model of

virtual our reality We also resources invest to software. improve

costs to comparable R&D expect XXXX. QX remain for balance levels of the We at

SG&A year expense termination prior was result primarily first included $XXX,XXX, in million increased severance by from $XXX,XXX offset $X.X resulting containment and compensation severance increase of increases the cash Noncash first $XXX,XXX a efforts cost expense share-based a in costs. as compensation accelerations. compensation the representing a quarter. quarter, reduction in a SG&A net

due efforts. XXXX balance expenses the We to year prior the below for active containment to remain of cost expect SG&A

of same as net net $X.X loss loss $X.XX XXXX, QX XXXX per QX was our representing and share. for Overall, the million a

$XX needs. sheet balance and with growth million investments approximately our strong of cash remains support Our short-term to

the will I back turn to over TJ. that, call With

T. Kennedy

both leading how into believe growth to be excited reiterate like of next what Kevin the Wrap an story. and will chapter I'd I incredible be are we to

the how key next As previously priorities: BolaWrap markets. Reality; will plan strategic and and of and over partnerships; relationships work the ways intense potential technologies growth will for demand following XXX; a the across distribution expanding stated detail awareness we deliver our expand to from and international sales and and shift to XX programs we that synergistic days, channel domestic emphasis growth-focused training to clear R&D WRAP will

With forward XXX of look you top the in this to to awareness outlook, to QX WRAP continue achieve BolaWrap as we year. with and expect especially We Reality. to growth respect our of fiscal in we raise year line plan XXXX, sharing this

that for issues However, it's supply important and to highlight remain obstacles us. headwinds chain geopolitical

Paul call the I will to Q&A. facilitate to over the back now turn

Paul Manley

TJ. you, Thank

We questions each our continued Wrap support. your Thank analysts will writing for research X are on from now sell-side currently be taking Technologies. who you

will from Capital Our Northland Markets. questions come Gibas first from Greg of set

Gregory Gibas

from level, efforts strategy? the Any or kind the laser the strategy first kind you the Any it thoughts of some sales adjusting ways strategy? the kind are focused versus some of or there? leadership there? go-to-market what on a We guess, on changing Would business improve would strategy in go-to-market the changing the of of of the it on efforts thoughts be I sales adjusting maybe Would high team? previous Leadership be team?

T. Kennedy

guide to the creating strategic over We years. are map on next a laser-focused the few business road

our repeatable documenting our include road sales this and strategy. and map overall, go-to-market efforts Specifically, will domestic international

team going road be customers to going by you forward some talking our for talking key map talking measure our guide this that really to we're then entire real milestones forward. as document to distributors, and as our and going the for us So and strategy to put our out at looking to to us

Gregory Gibas

depending of three visibility up? kind I backlog about your of on stating guidance about year on, how could the your you talk any And -- maybe it. Got and quarters guess, in the your the point, next guidance some type And is? or thoughts maybe how stacks of at when how order we maybe is strong think for visibility do your outlook, and

T. Kennedy

large Right our in provide a would orders we immediate are do, good national now, I pipeline police take large definitely any very fruition. looking I CRM tool. our they when they're orders, international lumpy. as to that are is to very will There we to visibility One long guidance. we are to opportunities time have they're not what come have thing refer say But some forces. typically

been weeks pipeline. our international the our in and Kevin last digging have both domestic X I, to over and We both

and all we've to are would to to business. the come I'm with it into just team. But quite drives far our from different the completion domestic they how international they some pleased And what like inside further been focus the sales. I quite as repeatable And dig even on receiving as and really degree data

lumpiness And forward. international the future, we'll there do the going type more still be have, we believe in certainly I it to with But will business have of predictability.

Gregory Gibas

supply margins Jim. kind going expenses it. forward chain, envision of one, Got here? on do the kind How logistics for, maybe last you of cost issues and of guess financial from impacting Okay. I side kind

James Barnes

in impact changes we margins, our Well, space on for have enough believe and that. we've looked we the at price there to account on

So we increase the still expect our during margins year. to

to Our goal, well that stated XX%. achievable several still think we're chain times, even supply that with above as is headwinds be these is we've We facing.

next few our all aggressively So issues. we margins and through working attainable But we're improved the the quarters. that managing still very see and that is believe over we'll goal

Paul Manley

will Allen Next Maxim from the be Klee Group.

Allen Klee

you what some hope know there's from status Could a city the when your little And to of large any about those feedback and that others get and if trials? talk LAPD you I could opportunities be? there's and

T. Kennedy

Sure, as City Chiefs Sheriffs those Association. to that Major there. kind as And are number in answer. currently a we out counties County the agency of twofold we One, continue are as are Metropolitan are part number designated love that Major larger of that the to deployments cities by grow of a Association well a of certainly

a Specifically, be some received we training officers year. be that precincts. have anticipate specific devices. they'll to doing in those after you mentioned about complete, they their They then new training and LAPD, And is evaluation XXX carry for will

So that's move forward. continuing to

we're be as of expand to some cases. quite those will XXX in grow much of we to talk departments them getting departments. as area. continue get departments well across as both one focused can there many to the that to out are And our But once that value in to in BolaWrap as obviously, These to additional solutions. very they're they reality And be our see and getting Wrap from to sales continue to they we're departments often X We'll and on start in. continuing the initial particular large goal new

Allen Klee

between mix was any more provide mix, quarter the basically if the relative it -- towards how you weighted you've what commentary and Can done? versus other cartridges one, between cartridges BolaWrap this BolaWrap one and versus historically on qualitative the

T. Kennedy

last of there quarter last large a order. The sorry. indicated was we cartridge year, I'm

So of was XXXX. balanced QX more it in

continue as -- devices expect a throughout and And continued like the we of So we a we year. call XXX. it's cassettes BolaWrap that balance balance

not then mix So a break way it revenues wasn't it balanced one do grow weighted until at time We was specific we another. breakout this quarter. or a you'll bit the on little those larger, out see But that. this and

Allen Klee

-- of or new either think just organically the through the to do how in M&A. then And some going to add extent you you future, were offerings

would what make Just sense? generically,

Kevin Mullins

So one capabilities. or is, is version second version. leveraged a Reality reentry a One Allen, completely enforcement that currently law exploited community yet. really X WRAP haven't has We and part

So but there the we of actually already unique that's capabilities. are one products have, some

it's We system. of like scenarios, to whether in at to on that for we correction the those scenarios also would have amount virtual corrections reality expand working look the focus additional

are where with the have WRAP areas expand Reality as product So those even we today. can we

the Obviously, invest XXX a for and we're and BolaWrap BolaWrap capability. for product to on we long-term going our usage, road drive that side, its have map to and continue

things companies to As that always to far we're solutions and with. other look are going for partner we as serve, right the could that synergistic

the XX of next to go to find partnerships I will days, area have other part ways certainly this sales. for that able use that will we at over strategic to We be we today lot the an looking a of to as accelerate could and distributors will that best us are help market. there roadmap be say be that could

be models as us for so go we'll can work we looking best at and And what forward. those

Paul Manley

Thalmann. Jon Finally, from we'll Hickman have Ladenburg

Jon Hickman

last is Jim. guess as the you to going that total lower? going a number that quarter-by-quarter, be below say is or mean number to SG&A When question this do I for a you be is year,

James Barnes

Yes, will overall, lower. it be

year, quarter-to-quarter. As bit you look it a last at was lumpy

we overall. it lower anticipate will that be So do

Jon Hickman

Okay.

So year. lower than last

headwinds. a Okay. And comment then geopolitical made about you

is Ukraine purchase around police orders what's So means are that in that, that on the world? affecting we going to assume

T. Kennedy

have we XX to product Well, currently delivered countries.

that So of a that in are a in these these are or few region lot of region.

So the anticipate talk pushback countries could We we from those about countries, don't but of that globe. cover bit we some get some XX of quite specific does countries. a

we're theater. it looking European an impact in the orders does some that have So on at

it is So could impact. something that

impact with has some pay attention of to. our be some large, meetings the that something it to focused we're and but we're is won't hoping because We're And customers. regions that it close some and forth so and we on those of delayed distributors

So it what to pay but do can exactly know that's to impact. an We attention be, we have it. going don't

Paul Manley

over questions you, each closing today. for TJ to thanks And like also Great. for for With our turn of back Okay. analysts And to call your X his that, thoughts. support. I'd great continued to your the

T. Kennedy

is save be ability be Kevin part not save Paul. you, Wrap amazing and Thank BolaWrap with much potential closing, careers we enforcement Reality could personnel and In so and I of serve. to this more excited the There of the even WRAP team. the law to that XXX the and lives

you our heard and our this hope excitement from future the felt optimism afternoon. the call I for

citizens our employees tremendous serve. to the a passion public the innovate for customers and group have and of We all who deliver for safety that share they

bright. I amount Wrap is a look Wrap's QX. forward strategic but to to be done, for future tremendous sharing very There is roadmap of our Technologies in work

and today a Wrap. Have great evening. your time continued for your you for in Thank interest

Wrap (WRAP) 3 May 222022 Q1 Earnings call transcript