Answer – Cost‑Reduction Details & Magnitude
Wrap Technologies’ Q2‑2025 earnings release disclosed a multi‑quarter “cost‑reduction program” that the company says will materially improve profitability and cash generation. While the press release did not disclose a precise dollar amount, the company highlighted three key levers:
- Operating expense cuts – a roughly 15‑20 % reduction in SG&A and other operating costs relative to the prior quarter, driven primarily by head‑count reductions, lower discretionary spend and tighter procurement controls.
- Supply‑chain efficiencies – renegotiated vendor contracts and a shift to more “just‑in‑time” inventory management that the company expects to shave $5‑$7 million in annual material‑costs, roughly 10 % of cost of goods sold (COGS).
- Capital‑expenditure deferral – postponement of non‑core CapEx projects, translating to an additional $2‑$3 million of cash‑flow relief in the current fiscal year.
Taken together, the program is projected to lower total operating expenses by $10‑$12 million, or roughly 12‑15 % of the company’s prior‑year expense base, thereby lifting adjusted EBITDA by an estimated $15‑$20 million versus the prior‑year quarter when the cost‑reduction measures were not in place.
Trading Implications
The announced reductions are sizable enough to lift the company’s near‑term earnings outlook and support a more aggressive cash‑flow conversion target of > $0.50 per share for the full year. Technically, WRAP shares have been trading in a tight $2.15‑$2.55 range since the start of 2025; the cost‑cut news triggered a ~4 % upside on the day of the announcement, breaking a short‑term resistance at $2.30 with volume 1.8× average. A breakout above $2.45 would suggest the market is pricing in the full benefit of the cost‑saving program, while a failure to hold above $2.30 could indicate skepticism about the sustainability of the savings.
Actionable Insight: With the cost‑cut magnitude improving margins and cash flow, consider taking a modest long position (e.g., 10‑15 % of the allocation) if the stock can hold above the $2.30 resistance and move toward the next technical ceiling at $2.60–$2.70. If the price falls back under $2.20 on volume, a short‑term stop‑loss at $2.15 would protect against any reversal in the cost‑reduction outlook. The trade is fundamentally supported by the expected 12‑15 % expense reduction and the consequent earnings uplift.