Wrap Technologies, Inc.

Public safety in the 21st century faces many challenges. Current policing methods are under tight scrutiny. Advocacy groups are calling for drastic reform. And communities across the country are demanding solutions. For police officers to meet both the expectations of their job and their community, we need to reimagine the tools and training available to them. RAP Technologies offers creative solutions to these complex issues, from novel equipment to help first responders quickly and safely de-escalate situations at a distance, to cutting edge virtual reality training. We empower public safety officials to effectively protect and serve their communities. Our purpose is clear. We're helping good police officers be better. Because with better solutions come better outcomes and a safer, more unified community.

Good afternoon and welcome to the Rapp Technologies second quarter 2021 earnings webcast. My name is Paul Manley and I'm vice president of investor relations here at Rapp. We will provide an update on the progress we made in the second quarter of 2021, our growth strategy for the future, and how we view our mission to lead the world's police and technology training and de-escalation of situations requiring restraint of non-compliant suspects. Right now, I'm in our 11,000-square-foot manufacturing facility and headquarters in Tempe, Arizona. This is where we manufacture our products. Here, each device and cartridge is assembled, shipped, and packaged. The facilities are managed by an amazing group of talented and hardworking and dedicated people who put in the hours of production to ensure that each product functions flawlessly for law enforcement officers in the field. We are extremely... Grateful for their dedication. Joining me on the call today are Tom Smith, our president and CEO, Jim Barnes, our chief financial officer, and in addition, I'd like to introduce the newest member of our executive team, Glenn Hickman, our chief operating officer who started on July 1st. Following our prepared remarks, we will conduct a question and answer session with Tom and Jim. You may ask a question at any time during the webcast, and to do so, use the Q&A tab at the bottom of your screen and not the chat button. I'd like to take a moment now to remind you that certain statements made during the call today constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities and Litigation Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our earnings press release and in our filings with the SEC. The forward-looking statements made today are as the date of this call and we do not undertake any obligation to update the forward-looking statements. With that, I'd like to turn the call over to you, Tom.

Thank you, Paul, and good afternoon, everyone. For those of you that are new to our story, thank you for joining us today. As a global leader in pioneering public safety technologies and services, it continues to be a privilege for RAP Technologies to be on the forefront of driving innovative solutions and training for global law enforcement officers and other agencies. For those of you who have been following us all along, thank you for your support. I'm pleased to report some exciting foundational and financial growth developments that continue the growth trajectory of the company. We're moving fast and consistently making strong progress on executing our strategy for educating and training and securing sales for our devices and accessories. Everyone at Wrapp Technologies remains deeply driven by our unyielding dedication to our mission of providing our technology platform to officers and agencies worldwide. We live the mission every day. We believe policing is safer and more effective with early intervention and de-escalation solutions. We work hard to ensure we're in the right place at the right time with an unrivaled product suite that is seeing growth and demand as the agencies on the front lines confirm what we have known all along, that our solutions are valuable and can help save lives. For the quarter, we continue to gain traction with US-based police agencies, primarily those with 100 officers or less. These agencies typically have a shorter buying cycle, which translates to faster sales since overall orders are generally smaller and have fewer levels of approval. This has served as a significant source of revenue for us as these orders add up in a meaningful way. This is important as we scale our business and enter longer sales cycles with the larger agencies. Our success with agencies of all sizes continues to be bolstered by our steady stream of body cam videos showing actual body wrap field deployments, which enable officers to see how effective the BOLA wrap actually is during real life crisis situations. Our international business continues to grow despite COVID headwinds. There are still many important countries with ever-changing COVID-related travel restrictions, which are limiting our ability to demonstrate the bolo wrap and wrap reality in person, which is the most effective sales way to demonstrate the effectiveness of our products. However, we have adapted to this headwind nicely. We are generating increasingly strong interest in the bolo wrap and wrap reality with our unrelenting pursuit of educating and marketing to the industry. As a result, our international team continues to make steady progress. As a reminder, in these early stages, we do not expect our consolidated revenue ramp to remain linear. We have a number of mid-sized and large agencies in various stages of pilot and trial programs. These can take weeks, months, and longer to close. Depending on the timing of the orders for larger agencies, we could see lumpy growth rates from quarter to quarter. But year over year, I believe our growth will accelerate. We believe RAP is in the early stages of our revenue ramp with a long runway ahead. In the US alone, we only have devices in less than 4% of total agencies, representing a tremendous growth opportunity in a massive addressable market. Another notable area of progression this quarter is our RAP Reality training platform. Our RAP Reality library is already robust, and our vision is to become a global industry leader for law enforcement virtual reality training. We are still in the process of building out an extensive and immersive catalog of scenarios for police officers. Importantly, we expect our simulations to go far beyond our products. We expect our library will not only consist of situations involving Ebola wrap, but all the tools available to the officers, including verbal commands in any other situation an officer may face, making wrap reality more versatile and valuable across the training spectrum. We believe our approach directly addresses the public demand for police training reform that is at the center of the media community and government calls to action. We believe better training solutions are essential tools for better policing. We know training that is accessible and in real time can help officers prepare for hundreds of potential scenarios without ever leaving their home or precinct. Allied market research has cited the market opportunity for virtual reality training and simulation is projected to exceed $600 billion by 2027, growing at a compounded annual growth rate of 13.7% from 2020 to 2027, driven in large part by law enforcement and military, which are at the heart of our target market. As virtual reality evolves to become the preferred training solution for any situation, I'm confident our RAP Reality platform is a perfect fit for police officers and the evolving training environment. I will now move to our operations highlights. We'd like to share some of our notable progress from this quarter. We grew US agencies trained to over 800. That's up 29% from the first quarter and nearly four times our number a year ago. This is an important metric because we believe it serves as a leading indicator for sales orders. For the first time, we surpassed $1 million in quarterly sales in the US. Although we expect our top line to grow years into the future, as I mentioned earlier, we do not expect this growth to stay linear. Nevertheless, we are pleased with this newest milestone. Our growth strategy is driven by two product lines on a single synergistic technology platform. One is the BOLA RAP device, the other is our RAP Virtual Reality Training System. While they are designed to integrate seamlessly, both offer exceptional value as a standalone product or service, providing an easy point of entry for new customers with the potential of generating a meaningful recurring revenue stream. We expect that as officers have success with one of our products, this will lead to goodwill and be a generator for the other product. With EbolaWrap, our approach to growth is through market penetration. We believe the visual appeal of seeing a real life EbolaWrap deployment in the field triggers word of mouth and social media attention. Both are proven drivers of spontaneous or referral inquiries and sales. We strategically targeted a diverse range of agencies from large to small. across police, military and private security, which include college and university campuses, as well as spread out geographically, both domestically and internationally. We are in the very early stages of our growth curve, and we think our new agency customers metaphorically as planting seeds that eventually will generate new business referrals from other or similar nearby agencies. Additionally, we attend or exhibit at major law enforcement conferences and equipment trade shows in the U.S. and several internationally. These provide an excellent opportunity to meet with and demonstrate to hundreds of prospective customers in a short period of time. These conferences and trade shows are now returning to the old normal in person rather than virtual attendance over the past 17 months. Our RAP reality service is a highly immersive virtual reality training system. We currently have 48 different modules in our RAP Reality Library, most of which are centered around encountering and restraining a wide range of non-compliant subjects. One of our biggest differentiators is the 360 degree immersive experience we offer. When combined with our BOLA RAP, it provides an attractive value proposition for agencies. And we're just getting started. Agencies throughout the U.S. are enhancing training for officers as their collective first step towards police reform. At RAP, we continue to improve our modules to ensure the best and most realistic library for law enforcement training from cadet to retirement. It's also worth noting that we are structuring RAP Reality as a subscription service, which lowers the cost of entry for agencies while providing a growing stream of revenue recurring for RAP. While BolaWrap and Wrap Reality are state of the art, we intend to have continuous innovation and development of our current and potentially new devices and services. We are committed to be recognized as the leader in escalation avoidance technology and training and are aggressively working to develop, upgrade, or acquire technologies that provide a synergistic fit to our products, marketing, and distribution strategy. On the subject of new product development, I'm pleased to introduce the newest member of our executive team, our Chief Operating Officer, Glenn Hickman. I met Glenn a little over 10 years ago when we were both at Taser. Glenn then had a nine-year career there, most recently as the Vice President of Research and Development, where he led the product launch of six hardware products, doubled the size of the engineering team, and established a manufacturing presence in China. Over the past two years, he earned his MBA at Northwestern University, and his immediate responsibilities at RAP will be research and development, operations, engineering, and supply chain management, as well as spearheading our new product developments. We could not be more excited to welcome him aboard. Glenn.