Wrap Technologies FY25 Earnings Analysis: Margin Expansion and the Shift to Fleet-Wide Deployments

Business Overview

Wrap Technologies, Inc. operates as a global provider of innovative public safety technologies and non-lethal response tools. The Company’s stated mission is to deliver scalable, safer, and cost-effective technological solutions targeted at public safety, defense, and critical infrastructure end-markets.

Throughout the 2025 fiscal year, management executed a strategic transformation, pivoting the enterprise from a traditional, isolated device manufacturer into an integrated solutions provider. Wrap has positioned itself as a category leader in the “Non-Lethal Response” (NLR) sector, offering a comprehensive operational framework that synthesizes hardware tools, tactical training, and proprietary software systems. This transition emphasizes proactive, lawful control of law enforcement encounters with a primary objective of facilitating safer outcomes, which the Company defines as incidents concluding with no injuries, no fatalities, and no resulting litigation when their solutions are appropriately utilized.

The Company’s integrated product and service portfolio encompasses:

• BolaWrap 150: A patented, non-lethal response device that utilizes multi-sensory, cognitive disruption (leveraging sight, sound, and sensation) to manage non-compliant subjects. It is explicitly designed not to shoot, strike, shock, or incapacitate, and operates independent of pain-based compliance.
• WrapReality: A fully immersive virtual reality simulator offering interactive scenarios designed to enhance the real-world decision-making capabilities of first responders.
• WrapVision: A recently launched, TAA-compliant body-worn camera and digital evidence management system, powered by IONODES, featuring cloud integration and a focus on operational security.
• WrapTactics: A subscription-based digital training program designed to scale the Company’s instructional reach.
• Counter-UAS Solutions: Next-generation drone interdiction technologies, including the PAN-DA system and the 1KC Kinetic Anti-Drone Cassette.

Key Financial Performance Highlights

The financial results for the fourth quarter and the full year ended December 31, 2025, reflect notable acceleration in top-line growth, margin expansion, and targeted cost-containment measures.

• Revenue Expansion: Gross revenue for the fourth quarter reached $1.4 million, representing a 62% increase compared to the $0.9 million reported in the prior-year period.
• Product Sales: The top-line acceleration was largely driven by hardware demand, with product sales more than doubling year-over-year to $1.2 million, up from $0.6 million in Q4 2024. Management attributed this surge to robust domestic and international demand for the BolaWrap platform.
• Profitability Metrics: Gross profit experienced a 79% increase, reaching $0.7 million compared to $0.4 million in the prior-year quarter. Consequently, the gross margin profile expanded by 500 basis points, rising from 47% to 52%.
• Operating Efficiency: Total operating expenses for the quarter contracted by 7% to $4.7 million, down from $5.0 million in Q4 2024, demonstrating management’s cost discipline amidst ongoing investments in market expansion.
• Loss Reductions: The loss from operations narrowed by 15% to $(3.9) million, improving from a $(4.6) million operating loss in the prior-year period. Furthermore, the fourth-quarter net loss improved by 48% to $(3.9) million, down from $(7.6) million.

Full Year 2025 Analysis

• Annual Revenue: Total gross revenue for the full fiscal year grew by 15% year-over-year, climbing to $5.2 million from $4.5 million in fiscal 2024.
• Margin Expansion: Annual gross profit grew by 9.5% (or $0.2 million) to reach $2.7 million, compared to $2.5 million in the prior year. The full-year gross margin improved to 58%, up from 55% in 2024.
• Expense Management: Total operating expenses for the year were reduced by 10%, falling to $16.2 million from $18.0 million in the previous year.
• Earnings Profile: The annual loss from operations improved by 13% to $(13.5) million, compared to $(15.6) million in 2024. However, the reported net loss for the year widened to $(10.3) million from $(5.9) million in 2024. Management noted that this year-over-year increase in net loss was directly driven by a $6.4 million reduction in non-cash income stemming from warrant fair value adjustments.

Segment-Wise & Business-Line Performance

Wrap Technologies bifurcates its performance across its core hardware product lines and its rapidly expanding technology-enabled services and subscriptions.

Technology-Enabled Services A standout performance metric for the fiscal year was the growth of the technology-enabled services segment, which includes training, managed services, and software subscriptions. This segment generated $1.7 million in revenue in 2025, representing an 85% year-over-year increase from $0.9 million in 2024. This growth trajectory was bolstered by the strategic acquisition of W1 early in 2025, as well as the successful launch of the WrapTactics digital training platform. During the year, management intentionally restructured the services portfolio, divesting from non-core activities such as advisory services to concentrate capital and resources on high-demand, recurring revenue engines like policy governance, digital evidence management, and VR training.

Hardware & C-UAS Innovations The core BolaWrap 150 hardware continues to be the foundational entry point for public safety agencies. Additionally, the Company officially entered the counter-Unmanned Aerial Systems (C-UAS) market in 2025. Management highlighted that this entry marked the first known air-to-air drone interdiction utilizing mechanical entanglement, utilizing systems such as the MERLIN drone interdiction system and the 1KC anti-drone cassette.

Operational Metrics and Key Drivers

Operational success in 2025 was underpinned by several key performance indicators reflecting heightened platform adoption and expanded market penetration:

• Installed Base & Utilization: Wrap currently boasts an active installed base of over 10,000 BolaWrap units deployed domestically, with more than 76% of these systems operating on the current-generation BolaWrap 150 platform. The product has achieved global reach, being utilized by over 1,000 agencies across 60 countries. Furthermore, management observed consistent consumable reorder activity throughout the year, indicating active field deployment in operational settings.
• Deal Size Expansion: Validating the Company’s strategic shift toward fleet-wide deployments, the average deal size experienced a nearly sixfold increase from the first half of 2025 to the fourth quarter. This aligns with the transition from individual device placements to comprehensive Non-Lethal Response bundle deployments.
• Customer Retention & Engagement: The Company reported robust retention metrics, noting that nearly half of all departments trained in 2025 were returning existing customers seeking instructor recertification. Training outcomes also proved highly favorable, with agencies utilizing the full NLR framework demonstrating a significantly higher field use success rate during the year.
• International Footprint: The Company successfully expanded its international presence, securing new distribution partnerships and purchase orders globally. A notable operational milestone includes a recent strategic agreement to enter the Indian market, covering the deployment of BolaWrap, Wrap Reality, and DFR-X drone interdiction systems.

Management Commentary and Strategic Updates

Management explicitly stated that the public safety market is approaching an inflection point where agencies require integrated, holistic solutions rather than isolated devices. The Company noted that disciplined growth and strategic investment were achieved simultaneously, as evidenced by a 10% reduction in operating expenses occurring concurrently with new product launches and market entries.

Key strategic updates implemented to support this growth include:

• Wrap Federal & Defense Channels: The formation of Wrap Federal establishes a dedicated channel to pursue procurement opportunities with the Department of Defense (DOD), Department of Homeland Security (DHS), and other federal entities.
• Strategic Partnerships & Manufacturing: To comply with complex government procurement infrastructures, the Company established a procurement channel through Carahsoft. Additionally, Wrap partnered with K-Form to expand domestic research and development and advance its “Made in America” manufacturing initiatives. Consequently, manufacturing operations were strategically relocated to Norton, Virginia.
• WrapVision Assembly: The newly launched WrapVision body-worn cameras boast final North American assembly, with a roadmap firmly targeting critical made-in-America status by early 2026, aimed at eliminating foreign surveillance risks and ensuring data integrity.

2026 Priorities Entering 2026, Wrap Technologies has provided guidance targeting approximately 100% top-line revenue growth. The execution plan to achieve this aggressive growth is centralized around five core pillars:

1. Scaling agency-wide, programmatic deployments of the integrated NLR ecosystem.
2. Penetrating the Federal and Defense markets through Wrap Federal and Carahsoft.
3. Advancing non-lethal solutions for the autonomous systems and drone (UAS) markets.
4. Driving recurring revenue growth by scaling software subscriptions (WrapTactics, Wrap Reality, WrapVision).
5. Capitalizing on centralized procurement dynamics to execute large-scale international expansions.

Notable Risks and Challenges

While the Company’s strategic realignment has yielded positive momentum, management’s disclosures outline an array of material risks, uncertainties, and operational challenges that could impact future execution:

• Growth Targets & Execution: A primary risk involves the Company’s ability to successfully achieve its stated target of approximately 100% revenue growth in 2026.
• Capital and Financing: The availability of adequate funding to continue financing operations remains a critical operational risk factor.
• Sales Cycles & Market Acceptance: Management acknowledges the inherent complexity, significant expense, and lengthy evaluation timeframes associated with finalizing sales to government and law enforcement entities. Furthermore, establishing widespread market acceptance for both existing and future product iterations remains a challenge.
• Manufacturing and Operations: The Company faces risks related to successfully manufacturing and producing products to meet customer demand, alongside the ongoing challenge of implementing effective training programs.
• Regulatory & Geopolitical Risks: Wrap’s operational environment is highly sensitive to government regulations, including the ability to obtain necessary export licenses for international jurisdictions. Additionally, macroeconomic risks stemming from geopolitical conflicts and any resulting sanctions pose potential threats to global operations.
• Legal & Compliance: Notable legal challenges include the defense of intellectual property against competitors, potential litigation risks arising from alleged product-related injuries, and the threat posed by competitive products and solutions in the marketplace. Finally, maintaining compliance with the Nasdaq Capital Market’s stringent listing standards remains a continuous corporate requirement.