Wrap Technologies, Inc. (WRAP) Earnings Call Transcript & Summary

Good afternoon, and welcome to the second edition of Wrap's Investor Insights call. Today, we're going to dive into a recent body-worn video that we just released that examines how BolaWrap can be used in potentially hazardous situations. After that, we'll discuss our brand-new, use-of-force guarantee policy, and then we'll it open for the questions. With regard to questions, of course, we are going to keep everything we discussed today related to what we talk about today. We will not be providing any numbers for 2022 or guidance for 2023. Also, please refer to our 10-K for risk factors and any forward-looking statements associated with the press release. I'm honored to be joined today by TJ Kennedy, our CEO, as we take a closer look at a recent body-worn camera from Alton, Texas. For those of you may not be familiar, Alton is a suburb of McAllen, Texas, located right on the Texas-Mexico border. TJ, can you tell us what makes this video and this situation so unique and potentially very dangerous for these officers?

Yes. I mean this is a very interesting video, some of the most dangerous things that officers do each and every day. So first off, the officers are responding to a domestic dispute. And often, these end up with violence coming from one side or another, and they don't know what they're getting into and there can certainly be weapons involved. As they were arriving on the scene, the individuals fled the scene in a car and got into a high-speed chase. That chase then ended and turned into a foot chase, which is also a very dangerous situation, and we've seen these turn into poor outcomes many, many times. The officer comes out at gunpoint. There's obviously a felony that's being conducted at this point, and he's chasing the individual at gunpoint, as you begin to see the body-worn video go through this. The individual runs towards a home, gets behind a car and behind a home. And at that point, the officer chooses to transition from a handgun to the BolaWrap because he's realized as the individual does not have a weapon. It's a very interesting transition. It's one to really help the safety of the individual. And it's a very dangerous situation, but there's multiple officers I'm seeing. One of them still hasn't gone out, but he's able to transition to his BolaWrap to try to effectively deescalate the situation and what is a car and foot chase in a very dangerous event. So let's go ahead and watch this video, and we'll pause at midstream to talk a little more about it. [Presentation]

At this moment, you can see the subject has just asked the officer to shoot him 3 different times. Very dangerous situation, often would end in gunfire because of the high risk of this situation. Because the officer had switched over to his BolaWrap, he had an option to use that de-escalation tool and remote -- restrain before going to shooting this individual. Super dangerous, but very well done by this officer. Excellent communication with dispatch as well as the other officers on scene. I think you heard about him describing the foot chase, describing the need for backup, describing the communication of where he was and what was happening. And so let's go ahead and watch the rest of this. But one of the things you did see at this moment is he actually holstered his service weapon, switched over to the BolaWrap 150. So he's able to now go into initially trying to gain laser compliance. And then as a suspect flees, you'll see that he wraps him up. [Presentation]

Most importantly, in this case, you can see that neither any of the officers that were involved or the subject ended up being injured, and not even minor injured, more the less severely injured or potentially killed, which you could see happening earlier in the situation when the subject is asking to be shot at 3 different times from the subject to the officer. The other thing that's very interesting about this case is we often get asked, does BolaWrap work on a running subject or even when the officer and the subject are running. This video clearly shows you that it does work. He had multiple wraps around his leg, and he was tripped up and was sitting on the grass after that situation and not able to get away. He was actually pulling at the Kevlar cord, hoping to get it off of his leg, so he could try to run again, but he was unsuccessful in that, and officers were able to safely get him into handcuffs and completely end this very, very dangerous call. This is the kind of thing that happens across America and around the world to law enforcement each and every day. So they go on dangerous calls where they're not sure if they may have to take someone's life or even have their own life be put at risk or severe injury. In this case, both the officers and the subject had a very positive outcome because of the use of the BolaWrap. It was able to deescalate and end the situation very, very clearly. And at the end of the day, both the officer gets to go home without having to be involved in an officer-involved shooting on this particular day. And the subject goes without injuries off to jail and to be prosecuted for the crimes that he committed. As part of that, this is a very successful outcome. You heard the officer say it multiple times, and we believe exactly the same way. And we're very proud of the professionalism of the Alton Police Department in Texas and the great work that they do every day protecting the citizens in their community. And also, I'm using modern tools for de-escalation and forced avoidance like the BolaWrap 150.

Awesome. Thank you, TJ. [Operator Instructions] TJ, another thing. Last week, Wrap introduced some groundbreaking news out there that we now have a use-of-force reduction guarantee, which is really an industry first. Nobody's ever done it in the industry. Can you share the reasoning why do this? What's -- why behind launching what's going on today? And how will this benefit law enforcement down the road?

Absolutely. Well, as you could just see in that video, I believe that, that scene was de-escalated because of the great work of the Alton Police Department being supported by a tool like the BolaWrap 150 and well-trained officers knowing that they could go to that tool, which then greatly deescalates the need for force. I mean this situation -- a little bit earlier in the video, as you can see, was a situation at gunpoint and a car and foot chase getting into that particular situation. If you look at the outcome, no officers injured, no subject injured. We're obviously changing the use of force, and the use of force that was required to safely take that individual into custody. We see this at departments around the country. And we think that by having the right policies in place in the department, where we are on the very low end or not a categorical use of force and other tools are obviously in the same use-of-force continuum locations that they have been all the way up to firearms of different sorts, that those incidents that happen pretty rarely in the life of a police officer typically getting into lethal force-type situation and very high level use of force, that unlike that, if BolaWrap is on every officer's belt and they use it each and every day at work and they're trained to use it at the right time, which is very early in the encounter and to end that encounter from getting more dangerous, we truly believe that we can reduce the use of force of an agency over a 12-month period by at least 10%. We're so confident that we can do that, that we will offer to buy back those devices at the end of the 12 months if they follow the parameters of this program that we're going to guarantee that. And we think that, that is a major move. One of the things we're also seeing is more and more departments are going to full deployment of BolaWrap, which means every officer in the field, every patrol officer, for instance, is not only issued a BolaWrap, but they were either on their gun belt, on a drop-down holster, on their vest, whatever that may happen to be, but they wear it and use it. And we believe that the use of the BolaWrap and the increased use, which we expect to continue to happen because it does safely deescalate many, many situations, that it will reduce the overall use of force required for that agency to safely execute their mission each day.

Thanks. I mean, back on to that a little bit, why launch this program right now? What's the benefit of doing this today and getting it out there, considering the 150s been in the market almost a year now, but what's the logic behind launching it today?

Well, we're hearing -- you hear this in the news regularly now. There are a lot of discussions going on in city councils, county commissions, even at the state and federal level, as well as with community groups of all sorts and law enforcement. Recently came off some very large law enforcement conferences here in the last week or 2 in Washington, D.C., and lots of discussions on how we can improve when use-of-force tools are leveraged and improve the interactions to have safer outcomes. And we are so much a believer that BolaWrap can dramatically improve outcomes and especially make them safer and less injurious to both the officer and the subjects that they interact with, that we felt it was the right time to put this guarantee out there for departments who fully deploy BolaWrap across their departments and to encourage them to have that confidence that they will have very positive outcomes over the next 12 months by leveraging BolaWrap and the tools and training that we provide to be able to seek safer outcomes for every community and to be able to do that in a way that can make their job more effective and safer overall.

All right. Thank you, TJ. We're going to now open it up to questions. And we've got a few that have been submitted.

TJ, in the U.K., the U.K. had interest in BolaWrap a few years ago. Major concerns there was noise and making it less noisy and the ability to deploy it in a situation of greater than 25 feet. Being that the 150 is deployed by gas instead of gunpowder, how does the 150 perform compared to the 100? And can that make a difference in the U.K. market?

That's a very detailed U.K. market question. Interesting, but happy to cover it. First of all, the BolaWrap 150 is effective from 10 to 25 feet, which is an extremely competitive range for a safe deployment of remote restraint. We have a loud bang that comes from a non-black powder accelerant that's very similar to a very tiny airbag propulsion that creates that kind of gas generation to drive out the tether and the hooks. Because of that, it does have some noise to it as part of the startling effect that, I think, is extremely effective to disorient an individual without causing any injury or harm. But we are looking at ways that we can deal with different noise levels for different situations. I don't have anything to announce today. So I'll say some of that will come in the future. But right now, I think we have a terrific tool that can be used in all environments, including in very dense urban environments. We have this tool being used in some of the biggest cities in the United States today. It's also being used in crowded areas such as malls or other areas. We have not had any issues to date with sympathetic fire or other things of that nature. We continue to train on that. One of the things you see officers hollering as they use it as a wrap, wrap, wrap, or in some cases, our older training of bola, bola, bola. That's also done to make it very clear what's being deployed. As you could see on the video here today, many officers who had weapons out but very good communications from the officer, a very safe outcome. So I think the video from Alton is probably as perfect an explanation for that, sound being something that is part of the device today, but also not causing problems to other officers at that scene.

Awesome. Thank you. Based on the past events over the past few months, are you starting to see the conversation shift from the incidents themselves to potential police reform or de-escalation [indiscernible] and how does Wrap potentially play into that in 2023?

Well, I think de-escalation is right at the heart of many of the encounters that we see and discussions going on between police chiefs and sheriffs and law enforcement leaders worldwide, really trying to find ways to drive safe outcomes for the officers and the individuals they interact with. Many individuals that law enforcement deals with each day are either under the influence of drugs or alcohol. They could be dealing with mental health crisis or other situations where also being able to leverage a nonlethal and noninjurious tool as a way to deescalate that situation and get them safely into handcuffs is really a great outcome. We see this being utilized by many ICT teams and dealing with crisis and incident management across the law enforcement community. We see this being discussed at very high levels across law enforcement leadership. It's not us having to raise the conversation. The conversation is already occurring. We're also seeing very positive feedback from both small, medium and large agencies in the U.S. and abroad who are very interested in making BolaWrap part of every officer's body-worn tools, typically on their gun belt or on their person because it needs to be in those front-line officers across the entire department to drive successful outcomes.

Awesome. And TJ, I know you've gotten this a million times. It's a question that always comes up. Any update on the status of potentially getting this into security or individual's hands in the future?

Yes. We believe that private security, hospital security, other entities across the U.S., absolutely could and should use BolaWrap. We get requests for it almost every day of the week. We are working to make some changes that will help make that more positive and likely in the future. I don't want to go too far in depth on that today, but we believe, like it is in some countries, it should be available to private security, hospital security and others who can greatly benefit from this nonlethal tool that really helps deescalate situations and get people safely secured during all sorts of incidents. So definitely making progress. No immediate news for right now, but we continue to work on that, and I think that is a very high priority for us.

Awesome. TJ, thank you for the time today. Thanks for carving out a bit of your time to talk with us. For everybody else, we look forward to talking to you soon. We are going to have our earnings on March 1. That will be after the market closes. Look forward to talking to everybody then, and then we'll pick back up our Investor Insight shortly after that. As always, if you have any questions, please reach out to our IR website, which we recently launched a new one, or our e-mail address, and we will be in touch. Talk with you soon, and that's a wrap. Bye.