Breaking Down Wrap Technologies, Inc. (WRAP) Financial Health: Key Insights for Investors

If you're looking at Wrap Technologies, Inc. (WRAP), you're seeing a classic growth story in transition, and the Q3 2025 numbers show the pivot is working, but the cash burn is defintely still real. The good news is the top-line momentum is undeniable: the company reported Q3 2025 gross revenue of $2.0 million, a massive 241% surge year-over-year, which is exactly what you want to see from a disruptive technology firm. Plus, the shift to a sticky business model is gaining traction, with recurring subscription sales hitting $236,000, or about 12% of gross revenue. Here's the quick math: they've expanded gross margin to a healthy 59%, up from 40% a year ago, showing better unit economics (cost of goods sold relative to revenue). But still, the bottom line tells a different story: the net loss for the quarter was $2.77 million, translating to an EPS of -$0.06, and while the operating loss narrowed to $2.8 million, they are not yet cash-flow positive. The balance sheet is a lifeline, though, with cash on hand improving to $6.0 million as of Q3 2025, up from $3.6 million at the end of 2024. So, the question for every investor is whether the improving margins and recurring revenue growth can outrun the current rate of loss before that $6.0 million runway runs out.

Revenue Analysis

The headline takeaway from Wrap Technologies, Inc. (WRAP)'s Q3 2025 results is a massive revenue surge, but it's a nuanced story driven by a strategic pivot. Gross revenue for the quarter ended September 30, 2025, hit a high of $2.0 million, representing a 241% year-over-year (YoY) increase, which is the strongest performance in two years. This growth defintely shows the company is gaining traction, but we need to look closer at the revenue mix to understand the quality of that growth.

The primary revenue streams are shifting away from a pure hardware model. The core product, the BolaWrap ${}^{\textregistered}$ remote restraint device, still drives the bulk of sales, contributing $1.74 million in product revenue for Q3 2025. However, the real strategic change is the push toward a recurring revenue model (sales that are predictable and repeat, like a subscription). This shift is critical for stabilizing cash flow and improving valuation multiples.

• Product Sales (BolaWrap): $1.74 million in Q3 2025.
• Managed Services/Subscription: $236,000 in recurring sales.
• Subscription Contribution: Represented approximately 12% of total gross revenue.

Here's the quick math on the recent acceleration. The Q3 2025 net revenue of $1.49 million was a 151% jump from the prior-year period, but it's important to remember that gross revenue for the nine months ended September 30, 2025, was only slightly up at $3.8 million compared to $3.6 million in the same period in 2024. This suggests the revenue is lumpy and heavily weighted toward the third quarter, which is a near-term risk to monitor.

What this estimate hides is the impact of Sales Returns and Allowances, which reduced total revenue by $531,000 in Q3 2025. That's a significant number that tempers the excitement over the gross revenue figure and points to potential issues in channel execution or product acceptance that need to be addressed. The company is actively transitioning to higher-margin system sales and subscription services like WrapReady ${}^{\texttrademark}$ and WrapPlus ${}^{\texttrademark}$, which should eventually smooth out these revenue dips. If you want to dive deeper into who is betting on this transition, you should check out Exploring Wrap Technologies, Inc. (WRAP) Investor Profile: Who's Buying and Why?

The big picture is that the growth is real, but the profitability challenge remains, as evidenced by the Q3 net loss. The company is trading a one-time hardware sale for a multi-year subscription contract, but that transition takes time and capital. The shift is the story.

Finance: Model the Q4 2025 revenue sensitivity to a 10% increase in subscription sales versus a 10% increase in product returns by next Wednesday.

Profitability Metrics

You need to know if Wrap Technologies, Inc. (WRAP) is on a clear path to sustainable profitability, and the 2025 numbers show a company still burning cash but with dramatically improved gross margins and a strategic pivot that is starting to pay off.

For the first nine months of 2025, the company's financial health is a tale of two very different margins. The gross profit margin is strong, but the operating and net margins are still deep in the red. Here's the quick math based on approximately $3.3 million in net revenue for the nine months ended September 30, 2025.

• Gross Profit Margin: Approximately 60.2%.
• Operating Profit Margin: Approximately -289.7%.
• Net Profit Margin: Approximately -198.5%.

The high gross margin is a huge positive, but the negative operating and net margins show the massive cost of running the business (operating expenses) relative to its current revenue scale. The company is defintely still in a growth-investment phase.

Gross Profit and Operational Efficiency Trends

The trend in gross profit is the most compelling story for Wrap Technologies, Inc. It signals success in their strategic focus on cost management and product mix. In Q1 2025, the gross margin soared to 77.8% on $765,000 in revenue, a massive jump from 56.6% in the prior year's quarter. This was driven by a significant 73.4% reduction in the cost of revenue.

However, the margin is volatile, which is typical for a company in transition. By Q3 2025, the gross margin settled to a still-strong 59% on net revenue of $1.5 million, with a gross profit of $0.9 million. This fluctuation points to a shifting product mix, including the expansion of lower-margin managed services following the W1 Global, LLC acquisition, which you can read more about here: Mission Statement, Vision, & Core Values of Wrap Technologies, Inc. (WRAP).

On the operational efficiency front, management is showing discipline. The operating loss narrowed to $2.8 million in Q3 2025, an improvement of 24% year-over-year. This improvement comes from continued cost containment initiatives, with operating expenses reduced to $3.6 million for the quarter. The model is shifting from one-time hardware sales to a recurring revenue stream, with subscription sales accounting for about 12% of Q3 gross revenue, totaling $236,000. That recurring revenue is what builds long-term, predictable profitability.

Comparison with Industry Averages

When you compare Wrap Technologies, Inc.'s profitability to the broader public safety and defense technology sector, the picture is complex. The company's gross margin is competitive, but its operating margin is a clear outlier.

The gross margin of 60.2% is respectable for a hardware and services company, sitting below the high-end software players like Allot Ltd. (71.4% gross margin in Q3 2025) but reflecting the inherent cost of goods sold for its BolaWrap product. What this comparison highlights is the scale issue: major defense contractors like General Dynamics or Moog operate with positive operating margins between 10% and 15% because their revenue base is massive enough to absorb their high fixed costs like R&D and SG&A. Wrap Technologies, Inc.'s negative operating margin shows that its current revenue of $3.3 million (YTD) is nowhere near the scale needed to cover its operating expenses, which totaled approximately $9.56 million for the same period. The key action here is watching for a sustained, material increase in revenue to close that gap.

Debt vs. Equity Structure

You're looking at Wrap Technologies, Inc. (WRAP) and trying to figure out how they fund their growth-is it through borrowing or by issuing more stock? Honestly, for a company in the public safety technology space, Wrap Technologies' balance sheet is remarkably conservative, prioritizing equity over traditional debt. This is a good sign for a growth-stage company, even if it means relying on capital raises.

As of the third quarter of 2025, Wrap Technologies' capital structure shows minimal reliance on interest-bearing debt. Their total liabilities, which include operational items like accounts payable and lease obligations, stood at $4.111 million as of September 30, 2025. The bulk of this is not a bank loan, but rather an operating lease liability-a low-risk form of obligation for a technology firm.

• Total Current Liabilities (Q3 2025): $1.907 million
• Total Long-Term Liabilities (Q3 2025): $2.204 million
• Traditional Long-Term Debt: $0 (negligible)

Here's the quick math on their leverage: The Debt-to-Equity (D/E) ratio is your key measure of financial leverage, comparing total liabilities to shareholder equity. Using the Q3 2025 figures, Wrap Technologies' total liabilities of $4.111 million against a total stockholders' equity of $14.126 million gives you a D/E ratio of approximately 0.29.

To be fair, a D/E ratio of 0.29 is very low. When you compare this to the industry standard for the broader Aerospace & Defense sector-a close proxy for public safety technology hardware-which averages around 0.38 as of November 2025, Wrap Technologies is significantly less leveraged. They aren't heavily dependent on debt to finance their operations, which is defintely a lower risk profile.

The company's financing strategy in 2025 has been squarely focused on equity funding and balance sheet cleanup, not debt issuance. In February 2025, the company closed a $5.8 million private placement of securities, which is capital raised from investors, not a loan. Plus, a major action demonstrating prudent financial stewardship occurred in June 2025: they amended the terms of certain outstanding warrants, enabling the reclassification of a $10.131 million warrant liability to additional paid-in capital.

What this estimate hides is that a low D/E ratio for a growth company often means a higher reliance on dilutive equity raises, but in Wrap Technologies' case, it also shows a strong preference for financial flexibility. They are using their equity base to fund the transition to a recurring revenue model, which is a smart trade-off for a company focused on long-term system sales. If you want to dig deeper into who is funding this equity, you should read Exploring Wrap Technologies, Inc. (WRAP) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You need to know if Wrap Technologies, Inc. (WRAP) has the cash to cover its near-term bills, and the 2025 figures show a much stronger liquidity position than in prior years, but still a clear reliance on financing to fund operations. The company's focus on cost reduction and a shift to subscription revenue is paying off in better cash flow management, but they are still burning cash from core business activities.

Here's the quick math on their short-term financial health:

• Current Ratio: As of the second quarter of 2025, the Current Ratio sits at approximately 5.65.
• Quick Ratio: The Quick Ratio for the quarter ended June 2025 was a strong 2.71.

A Current Ratio of 5.65 means Wrap Technologies, Inc. has $5.65 in current assets to cover every dollar of current liabilities. That's defintely a high number and signals excellent short-term health. The Quick Ratio of 2.71, which strips out less-liquid inventory, is also very healthy, indicating they can cover their immediate obligations easily with just cash and receivables. This is a significant improvement in their ability to meet short-term debt.

Working Capital and Cash Position

The strength in their ratios is reflected directly in their working capital, which is the capital available to them for day-to-day operations. For the quarter ended June 30, 2025, their current assets were approximately $11.321 million, against current liabilities of about $2.002 million. This leaves them with a solid working capital of roughly $9.319 million. This trend shows a proactive balance sheet discipline, including a successful reclassification of a warrant liability that reduces future earnings volatility.

Their cash position has fluctuated, but the trend shows improvement from the end of the last fiscal year. Cash and cash equivalents increased to $6.2 million in Q1 2025, a 72% rise from Q1 2024, before settling at $4.2 million by June 30, 2025. This cash base, plus the successful raising of $5.8 million in a private placement in February 2025, provides a strong buffer for their continued growth strategy.

Cash Flow Statement Overview

The cash flow statement tells the real story of how they fund their business. While the balance sheet is strong, the company is still in a growth phase that requires capital investment. You need to look at the three main cash flow activities:

• Operating Cash Flow (OCF): This is the crucial area. Net cash used in operations for the six months ended June 30, 2025, was $5.0 million. The good news is this is a $2.2 million reduction from the $7.2 million used in the same period in 2024, showing cost containment is working. However, they are still burning cash from core business activities.
• Investing Cash Flow (ICF): The acquisition of W1 Global, LLC in Q1 2025 is a key investing activity, strengthening their capabilities in managed services and consulting. This is a strategic use of cash to expand their competitive edge.
• Financing Cash Flow (FCF): The $5.8 million private placement in February 2025 was a significant financing event, providing the capital needed to fund the operating loss and strategic investments.

The net cash outflow from operations is the primary liquidity concern, but the company is actively reducing it and offsetting it with financing activities. The path to sustained profitability relies on converting that improving operating cash flow trend into a positive number. For a deeper dive into who is funding this growth, you should read Exploring Wrap Technologies, Inc. (WRAP) Investor Profile: Who's Buying and Why?

The action here is clear: watch the operating cash flow in Q4 2025. If that number continues to narrow, the company is on a solid trajectory toward self-funding its operations, which is the ultimate sign of financial health.

Valuation Analysis

You're looking at Wrap Technologies, Inc. (WRAP) and trying to figure out if the stock price of approximately $2.11 is a bargain or a trap. Honestly, based on the 2025 fiscal year data, traditional valuation metrics suggest the company is significantly overvalued, reflecting a high-risk, high-potential growth story that is still burning cash.

The core issue is profitability. Since Wrap Technologies is not profitable, standard valuation tools like the Price-to-Earnings (P/E) ratio are essentially useless-it's reported as 0.00 or 'n/a' because the company has negative earnings per share (EPS). For the third quarter of 2025, the company posted an EPS of -$0.06, and the trailing 12-month EPS is -$0.30.

Here's the quick math on the key multiples, which are very high:

• Price-to-Book (P/B) Ratio: The ratio sits at a high 7.69. This means investors are paying over seven times the company's net asset value, which is a big premium for an early-stage growth company with a market capitalization of roughly $108.77 million.
• Price-to-Sales (P/S) Ratio: This multiple is also elevated at 25.18. Compare that to an industry average, and you see investors are betting heavily on a massive ramp-up in future revenue, especially since total revenue for the first six months of 2025 was only $1.8 million.
• Enterprise Value-to-EBITDA (EV/EBITDA): This is also 'n/a' because the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is negative, specifically around -$11,907,000. The Enterprise Value is approximately $105.29 million. A negative EBITDA means the company is losing money from its core operations, so this ratio doesn't help you much, but it confirms the cash burn.

What this estimate hides is the potential for the BolaWrap 150 Remote Restraint device to gain wider adoption, which is the whole investment thesis. Still, you have to be a realist about the current financial picture.

The stock price has been volatile but showed a strong near-term gain, rising by +41.61% over the last 52 weeks, with a 52-week range between a low of $1.20 and a high of $3.00. The stock's price on November 21, 2025, was $2.11, which is a 6.57% increase for the year. The average price over the last 52 weeks was $1.84. This recent upward trend suggests some positive sentiment, maybe due to the Q2 2025 report showing a reduction in net cash used in operations to $5.0 million for the six months ended June 30, 2025, down from $7.2 million in the prior year.

On the income side, Wrap Technologies, Inc. is a growth company, so it does not pay a dividend, which means the dividend yield and payout ratios are 0.00%. Don't expect any income from this stock; it's purely a capital appreciation play.

The analyst consensus is a clear warning sign. Based on ratings from Wall Street analysts over the last 12 months, the consensus is a Sell rating. One analyst even projects a -100.00% downside with a price target of $0.00, which is a highly bearish view that you cannot ignore. This suggests the professional investment community is largely skeptical that the company can grow into its current valuation. The high P/B and P/S ratios, combined with a negative EBITDA and a 'Sell' consensus, point to a stock that is currently overvalued relative to its fundamentals, relying entirely on future execution and growth. If you want to dive deeper into the full picture, check out the full post here: Breaking Down Wrap Technologies, Inc. (WRAP) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at Wrap Technologies, Inc. (WRAP), a company with a compelling product in the public safety space, but you need to understand the real risks before making a move. The direct takeaway is this: while management is aggressively pivoting to a recurring revenue model and cutting costs, the company is still deep in a cash-burn phase, and its path to sustainable profitability is not yet clear. This is a high-volatility stock with a lot of execution risk.

Here's the quick math on the financial risk: for the nine months ended September 30, 2025, Wrap Technologies, Inc. posted a net loss of approximately $6.39 million. In the third quarter alone, the net loss was $2.77 million, resulting in a loss per share of $0.06. They are burning cash, but they are also working to fix it.

Operational and Financial Headwinds

The biggest near-term risk is simply the lack of profitability. Despite gross revenue reaching $2 million in Q3 2025, the company's operating margin remains deeply negative, which is typical for a growth-stage company in a specialized hardware-plus-subscription market. This financial profile means they may need to raise additional capital, and that often comes with the risk of diluting the value of existing shares.

The sales cycle for their core product, BolaWrap, and their new WrapVision body-worn camera system, is notoriously long because they sell to law enforcement and government entities. This lengthy evaluation and procurement process creates revenue uncertainty. Plus, as a technology company in the hardware industry, Wrap Technologies, Inc. stock has a high Beta of 2.33, which means it is significantly more volatile than the overall market. That's a wild ride for any investor.

• Maintain compliance with Nasdaq listing standards.
• Face litigation risks from alleged product-related injuries.
• Manage the impact of potential product defects.

External and Strategic Challenges

The external risks center on competition and regulation. Wrap Technologies, Inc. operates in a competitive landscape for less-lethal alternatives, and they must constantly innovate to stay ahead. Their business success is also highly dependent on government regulations and the acceptance of non-lethal tools by law enforcement agencies, which can shift based on political and social dynamics.

International expansion, a key growth driver, is complicated by the need to obtain export licenses for countries outside the United States, a bureaucratic hurdle that slows down market penetration. Furthermore, the successful adoption of their technology requires policy alignment within law enforcement, which takes significant time and effort. You can't just sell the device; you have to sell the entire doctrine change.

Mitigation Strategies and Clear Actions

Management is defintely aware of these risks and has taken concrete steps to mitigate them. They are strategically pivoting from a pure hardware model to a higher-margin, recurring revenue model. In Q3 2025, subscription-based sales accounted for 12% of total gross revenue, a positive signal of this shift.

They also executed a cost-reduction initiative, decreasing operating expenses by 26% in Q2 2025, from $4.5 million to $3.3 million, which helps conserve their cash reserves of $4.2 million as of June 30, 2025. This focus on financial discipline is crucial for extending their runway. The shift to a connected ecosystem-BolaWrap, Wrap Reality (virtual reality training), and WrapVision-is a smart strategic move to increase customer lock-in and address the market's need for integrated solutions.

For a deeper dive into the company's financial standing and valuation, consider reviewing the full analysis in Breaking Down Wrap Technologies, Inc. (WRAP) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking at Wrap Technologies, Inc. (WRAP) right now and seeing a company in the middle of a major strategic pivot. The direct takeaway is this: their future growth isn't just about selling more BolaWrap devices; it's about monetizing a complete, integrated public safety ecosystem on a subscription model, plus a huge expansion into federal and defense markets. This shift is the key to understanding the aggressive financial projections for 2025.

Here's the quick math on their trajectory: actual revenue for the first three quarters of 2025 was a total of only $5.285 million ($765,000 in Q1, $1.01 million in Q2, and $3.51 million in Q3), but the consensus analyst forecast for the full 2025 fiscal year is an annual revenue of $34 million. That's a massive, defintely ambitious jump, implying a Q4 revenue of over $28 million. This gap shows the market is banking on the successful execution of large, late-stage international or federal deals.

• Future revenue hinges on big contract wins.

Key Growth Drivers and Strategic Initiatives

Wrap Technologies, Inc. is moving from a single-product company to a Managed Safety and Response (MSR) provider, a much stickier, higher-margin business model. This means a shift toward recurring revenue streams, which is what institutional investors love to see. The acquisition of W1 Global, LLC in February 2025 was a crucial step, bringing in former FBI, DEA, and DoD leadership to help them navigate the complex federal procurement landscape.

The core growth drivers are now a suite of integrated products and services, not just the BolaWrap 150 non-lethal restraint device. This ecosystem approach dramatically increases the total addressable market (TAM) beyond just municipal law enforcement to include private security, corrections, healthcare, transportation, and defense.

The strategic initiatives driving this forecasted revenue spike include:

• Ecosystem Scaling: Expanding the product line to include Exploring Wrap Technologies, Inc. (WRAP) Investor Profile: Who's Buying and Why? WrapVision (body-worn camera and evidence management) and Wrap Reality (VR training simulator).
• Federal and Defense Focus: Establishing Wrap Federal, a DCAA-compliant division, and opening a new advanced manufacturing facility in Wise, Virginia, to qualify for 'Made-in-America' federal procurement preferences.
• Subscription Model: Transitioning to a technology-as-a-service model, which represented 12% of gross revenue in Q3 2025, providing a predictable, recurring income base.

Competitive Advantages and Earnings Outlook

The company's primary competitive advantage is the BolaWrap 150 itself, a patented, non-pain-based compliance tool that has demonstrated a 92% field success rate with zero reported deaths, serious injuries, or lawsuits. This safety profile is a huge differentiator in a public safety environment demanding de-escalation. Also, the new Wrap Merlin One counter-Unmanned Aerial System (C-UAS) capability, which repurposes BolaWrap technology to physically entangle hostile drones, opens up a massive defense market projected to exceed $15 billion globally by 2030.

On the earnings front, the company is not yet profitable. The analyst consensus for 2025 is an annual Earnings Per Share (EPS) of -$0.46. While this is a loss, the focus is on improving operational efficiency and gross margins to reach a break-even point. For example, Q1 2025 saw a gross margin of 77.8%, up over 21 points from the prior year, a direct result of cost reductions in their revenue structure. Still, the Q2 2025 operating expenses were $3.3 million, so they have a ways to go before net income turns positive.

The table below summarizes the financial picture that underpins the aggressive growth forecast: