TASR

TASER International, Inc. (TASR)

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TASER International Inc. (TASR)

Analyst Day Conference Transcript

March 12, 2013 10:00 AM ET

Executives

Erin Curtis - Investor Relations

Rick Smith - Founder and CEO

Dan Behrendt - Chief Financial Officer

Doug Klint - President

Jeff Kukowski - Executive Vice President, Sales and CMO

Jason Droege - General Manager, EVIDENCE.COM

Mike Garnreiter - Chairman

Analysts

Presentation

Erin Curtis

Good morning, everybody. Welcome to TASER International’s first ever Analyst Day Event. We appreciate you taking the time to come today to listen to our team talk about the TASER strategy and long-term vision for the future.

My name is Erin Curtis, and I’m the Investor Relations present for TASER. And with me today I have Rick Smith, our CEO and the founder of TASER; Dan Behrendt, our Chief Financial Officer; Doug Klint, our President; Jeff Kukowski, our Chief Marketing Officer and Executive Vice President of Sales; and Jason Droege, the General Manager of EVIDENCE.COM.

Each of them will be presenting to you today based on their piece of business and also be participating in the question-and-answer session at the end. After the Q&A session wrapped up we will be doing some informal lunch for those of you who are able to stay, as well as product demonstration of our video products, cloud products and weapon products.

Since this is our very first Analyst Day, I will encourage you to provide us any feedback you have on how we could improve for future events, you can do that by talking to myself one as a team or emailing ir@taser.com.

With that, I’m going to move on to forward-looking statements disclosure. This presentation contains forward-looking statements within the meaning of Section 27A of Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, including statements without limitation regarding our expectations, beliefs, intentions or strategies regarding the future. We intend that such forward-looking statements be subject to the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995.

This forward-looking information is based upon current information and expectations regarding TASER International Incorporated. These estimates and statements speak only as of the date on which they are made and are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.

Such forward-looking relates to expected revenue and earnings growth, estimations regarding the size of our target market, successful penetration of law enforcement market, expansion of product sales to the private security, military and consumer self defense market, growth expectations for new and exiting products and accounts, expansion of product capability, new product introduction, municipal budget environment -- municipal budget environment.

We caution that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein.

Throughout the presentation ask or forecasted is use to indicate projected amounts, please see our Form 10-K and 10-Q fillings with the SEC for risks and uncertainties which could cause actual results to differ material from current expectations.

Thank you. With that, I would like to pass it on to Rick Smith to kick off the presentation. Thank you.

Rick Smith

Okay. Thank you, Erin, and thanks everybody for giving us a few hours of your day. We’re pretty excited about things going on at TASER and we’ll share with you our vision for where we see the company going over the next five years.

Each of us will be come up. We are going to give a little bit of background. My background before TASER is purely academic. So I mainly graduated at Harvard then two graduate degrees, and when I was leaving at the University of Leuven doing an MBA two of my high school friends were shot and killed in the road rage incident, and I became very interested in the whole topic of self-defense, gun control, violence, maybe the same issues that are still at the forefront of American society today.

And I found a gentlemen who is former NASA scientist who live in Tucson, Arizona. I was 23 at the time, he was 73. He had been working on a device call the TASER since the 1960s and we decided to give him one more shot and we started doing in his garage in Tucson. And it’s been a 20 years ever since, including our IPO in May of 2001.

And we’ve got the opportunity to really transform the global law enforcement community frankly even more than original target the consumer space. We are currently used by almost 95% of law enforcement agencies in United States.

So let me talk little bit about what is that we do. Virtually, everybody knows us for our TASER weapons. In fact, the TASER brand name similar to Kleenex or Xerox. It’s synonymous in many times in many people’s minds with what the devices actually are.

We’ll introduce you today to some additional concepts where we see the company going and expanding in our future. So we think of this first sort of a problem and solution approach. Obviously, we got our start in high-risk incidents. We make weapons. They were not risk free. They do cause people to fall down. It’s actually the primary risk but today we can estimate what appear to be a statistical certainty, we’ve saved over a 100,000 people in dangerous situations where law enforcement would justify the using labor force.

So we can say with the high degree of confidence, we saved over 100,000 people from potential death or serious injury. And this is a significant issue in United States with 1.3 million die in the crimes every year. About 35,000 people dying in firearm related incidents and 600,000 officers being assaulted every year.

But in agencies, by deploying these TASER devices, we see pretty dramatic decreases in the injury to doctors, injuries to people in the community and in the number of police-involved shootings. But as we look at our future from where we’re at today, we’re going to talk about our three opportunities for growth. But first, we’ll talk about how we see the progression of the technologies that we’re investing in and bringing to the field.

So as we got involved in this TASER business and really got to know our customers, what we’ve learned is for law enforcement agency, the problem isn’t over when the incident is over. When they hit somebody with a TASER, they get them into custody, that’s really just beginning of the situation. Because any one of these incidents will frequently transition from a personal altercation to a legal altercation, whether that means that the agency is prosecuting some one in a criminal way or maybe that person is suing the agency.

And just to put some scope about how big this challenge is for our customers, according to a study from the APL little over a year ago, U.S. law enforcement agencies spend about $2.5 billion a year on settlements. This were just the checks that they write to claims go away. This does not include legal costs. This does not include investigator cost. This doesn’t include internal affairs cost or any of the logistics cost.

They are spending about 2.5 billion. Again these were just the payments against claims against these agencies. Well, TASER has been no stranger to some of the controversy that our customers face but as today in law enforcement agencies, they use TASER devices. It is the most used force option that they have by a significant margin.

According to one NIJ study, they showed TASERs were used more than all other force options combined because of its uniquely high effectiveness and it’s uniquely low injury rate. I have been hit with it seven times and everybody standing up here has been hit with TASER device.

So now as we come to understand that for our customers, while there is great benefit was helping them to build these critical incidents. We also would have an opportunity to help themselves in major fiscal challenge if we could help eliminate some of these claims against these agencies.

And now just from a fiscal perspective, what could we do to further improve the relationship between law enforcement and the communities they protect. We believe the answer there, it really comes down to transparency and on-officer video. Frequently, the controversy rises because the story that police tell is dramatically different than the stories that the families or the people that they arrest tell. And how do you reconcile these. In many times, it ends up with a protest you given out starts in some other civic leader coming out.

In the worst cases, we have cities like Cincinnati where these things deteriorated into riots due to racial tensions between the police and the community. While in Cincinnati, we were able to play a big part of the solution, when they brought TASER into Cincinnati, we saw them go years without a single police-involved shooting and a dramatic shift in relationship between law enforcement and the community.

We can take that to a new level with on-officer video where now we have an indisputable record of what happened. From the officer’s perspective, showing what they saw and what they’re reacting too. Now, we started putting cameras on TASERs back in 2006 with a TASER Cam. And today, we have over 60,000 TASER Cams in the field.

So we’re the market leader in on-officer video system, just with our TASER Cam alone. But we learnt that the TASER cam has a much more limited utility than it could otherwise have if we can move that video off the weapon and under the officer because the TASER gets used about once every two years.

So it’s helpful to have a video of that TASER incident, how much more helpful would it be, if that officer could record the incidents they’re dealing with every day either to defend that officer or in many cases, people have them faster things like DIY or other cases, we know that videos actually involve prosecutors are significantly more likely to prosecute those cases and people much more likely to plea bargain so the game changer in the law enforcement space video.

But as we go deeper with our customers, we uncovered yet another problem, that’s even larger in scale and in scope. And that is how our customers deal with technology and how they would deal with the logistics around the video. As about few years ago, the majority of U.S. law enforcement video that had video were using VHS tapes. And there’re still many agencies that actually have warehouses full of VHS tapes. So that’s how they record their entire video.

So if we actually look at our customers and their ability to move to digital video, we’re generating two hours per video per officer per day. And this is coming off of a device that’s meant really for digital data handling, that’s a significant technical challenge. And if we look at the scope of the opportunity here, our customers are spending $10 billion to $20 billion a year on technology.

It goes from a number of different sources. The prominent one are reported by IJIS, Integrated Justice Information Systems Institute, which is formed by the DOJ to help U.S. law enforcement with technology. So we’re spending a lot of money on software and hardware to go out and do their jobs.

Now, at the bottom there, I put an opportunity -- we've also uncovered an opportunity for $5 billion to $10 billion improvement in efficiency for these departments. And that’s by deploying on-officer video and helping them solve the backend with a cloud-base service called EVIDENCE.COM that Jason is going to talk more about shortly.

We see the same cloud phenomenon that is swapped through the consumer space but it’s clearly sweeping through enterprise business space. And it’s certainly calming the government but if you look at things like the federal government cloud first policy or again groups like IJIS, they are now accepting that this technology is calming the law enforcement, better place to come with the scalability of hosted file solution than in a new space like on-officer video that is going to require massive scalability beyond their existing infrastructure and systems.

So then we’ll take a moment here to play a quick video that’s going to give you a little idea of how all these systems fit together.

Unidentified Participant

(Inaudible)

Rick Smith

So let me go back. We had a question on the efficiency gains. Actually, the way we bring that, we get to that number. In United Kingdom, they started testing on-officer video in 2007. I think U.K. pioneered this concept. And what they found in the six month field trial was that officers were able to spend almost 10% more time on petrol, 9.2% with the number.

And the reason was they were out on petrol more because they didn’t have to fill out these long written reports. In the future, we see video becoming the center of police report. The whole reason of police report exists is because 100 years ago, it was the only way to create a record of what happened so that it could be reviewed in the judicial system.

But if you got a reporting, you can dramatically decrease, getting rid of the large long written multi page narratives, the officer just spills their names and insert in information more like metadata for search. And so we’re able to improve U.S. law enforcement by putting 10% more time out on the streets and also paper work that represents despite the $10 billion number there.

We will come to the competitive space in few moments. So I’m going to play out quick video here. Again, it gives you a little bit of idea of some of the new medical benefits that we’ve seen with TASER devices and how it fits in with what we’re doing with on-officer video & cloud. I’m not sure how -- what we need do is click, okay. Here we go.

Read the rest of this transcript for free on seekingalpha.com