TASR

TASER International, Inc. (TASR)

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TASER International, Inc. (TASR)

Q4 2012 Earnings Conference Call

February 21, 2013 10:00 AM ET

Executives

Patrick W. Smith – Chief Executive Officer

Daniel M. Behrendt – Chief Financial Officer

Analysts

Steve Dyer - Craig Hallum

Greg McKinley - Dougherty and Company

Glenn Mattson - Sidoti & Company

Presentation

Operator

Good day ladies and gentlemen, and welcome to the TASER International, Inc. Fourth Quarter 2012 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I’d now like to turn the conference over to your host Rick Smith, Chief executive Officer, Sir you may begin.

Patrick Smith

Hello and thank you all for joining us for our 2012 TASER International Annual results conference call. Before we get started, I’m going to hand over to Dan Behrendt, our CFO for the Safe Harbor statement.

Daniel Behrendt

Sure, the Safe Harbor statement. This press release contains forward-looking statements within the meeting of Section 27A of the Securities Act of 1933 as amended and Section 21E of Securities Exchange Act of 1934 as amended, exchange act including statements regarding our expectations, beliefs, intentions or strategies regarding the future that will continue to make investments through increased SG&A in 2013, that we anticipate agencies will take advantage of our operate program and that we are well positioned to execute our strategy. We intended such forward looking statements be subject to the Safe harbor provided by the Private Securities Litigation Reform Act of 1995.

The forward-looking information is based upon our current information and expectations regarding TASER International incorporated. These estimates and savings speak only as of day on which they are made, they are not guarantees of future performance and of certain risks, uncertainties and assumptions that are difficult to project. Be cautioned, these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward looking statements yearend. TASER International assumes to obligation to update this information contained in this conference call. Other factors are identified as documents filed by us with the Securities and Exchange Commission including those set forth in our for 10-K for the year ended December 31, 2011 under the caption of risk factors.

And with that, I’d like to turn back over to Rick Smith.

Patrick Smith

Thanks Dan. We appreciate with the opportunity to report some great results for 2012 and a strong fourth quarter in particular. As you, no doubt have seen in the press release by now, Q4 revenues were up 51% to $32.1 million and annual revenues rose 27.5% from $90 million in 2011 to a $114.8 million in 2012. If we look at this by segment, you may conduct it like a weapon segment, revenues grew $9.6 million or 46.6% over the same quarter last year.

In the videos, cloud and software segment, revenues grew a 122% or $1.1 million over the last year. Now although video revenues grew from a small base, we’re seeing consistent growth and evidence of continued traction in the market place. In fact, we are including some new information in our earnings release. We are now releasing the AXON and Evidence.com bookings by quarter. Given that Evidence.com as a service with revenue that will be recognized over the service delivery, we feel it’s an important metric to share the total sales booking each quarter to enable investors to see the overall traction of the business, which can be harder to discern on a GAAP basis, as revenues again are recognized over extended time periods.

We define booking as a sales price associated with orders placed in relevant time period including hardware, software licenses, maintenance warranties and other items, which maybe paid for and/or recognized as revenue in future time periods. Bookings for AXON and Evidence.com have grown from 352,000 in the first quarter of 2012 to $1.67 million in the fourth quarter. Across the business gross margins were strong in the quarter as well, coming in at 59.7% compared to 32.7% last year. Of course the number last year includes some significant onetime items

In the weapons segment, margins were very healthy, 62.7%. Now SG&A also increased significantly over the last year by 23% or $2.4 million. There are two primary reasons for this. First, we’ve increased our investment in customer facing rules to help grow sales. For example, we created a new telesales group function which did not exist in 2011. In a little over a half year, starting in May, the telesales group brought in well over $5 million in incremental revenue. This group accounts for roughly 8 additional headcount and we anticipate growing it to around 12 people in 2013. We believe the return on investment on these positions is significant in driving additional revenue.

Another gamble is our account management function, which also did not exist a year ago. In order to ensure that customers who purchase the AXON Flex cameras have a great experience and become long term customers for Evidence.com. We have created a team of account managers which currently includes around 14 members. This team does proactive post sales support to ensure the customers who purchase our systems are able to effectively deploy and begin using our Evidence.com service, which we believe is critical in growing that service over time.

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