TASER International, Inc. (TASR)

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TASER International, Inc. (TASR)

Q1 2013 Earnings Call

April 25, 2013, 11:00 am ET


Rick Smith - CEO

Dan Behrendt - CFO


Steve Dyer - Craig-Hallum

Paul Coster - JP Morgan

Glen Mattson - Sidoti & Company

Peter Mahon - Dougherty & Company



Good day ladies and gentlemen, and welcome to the TASER International, Incorporated Quarter One 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions to follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host for today, Mr. Rick Smith, CEO. Sir you may begin.

Rick Smith

Thank you. Before we get started this morning, I am going to have Dan go ahead and read the Safe Harbor statement and then we’ll get started.

Dan Behrendt

Good morning. Safe Harbor statement. Today’s call includes forward-looking statements including statements regarding our expectations, beliefs, intentions or strategies regarding future. We intend that 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 current information and expectations regarding TASER International, Incorporated. These estimates and statements speak only as of the day on which they are made, are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.

All forward-looking statements that are made on today’s call are subject to risk and uncertainties that could cause our actual results to differ materially. These risks are discussed in the press release we issued today and in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2012 under the caption Risk Factors. You may find both of these filings as well as our other SEC filings on the website at www.taser.com.

With that, I’ll turn the call back over to Rick Smith.

Rick Smith

Great. Thanks Dan. Alright, so surely you’ve all seen the press release this morning. The team here has been working hard and again I think bringing some great results. First quarter revenues were up 19% from $25.6 million last year to $30.4 million this year; most of that driven by law enforcement agencies purchasing and upgrading to our new Smart TASER Weapon platforms, the X2 and X26P. You all are familiar with the X2 which we’ve been selling for several years, the X26P is a new product where we integrated many of the new smarter features and upgraded to an all digital platform, any device that does not require changes in user training or behavior, so it's a very seamless upgrade for agencies that have already deployed the X26.

We received extremely positive feedback from the market. For those agencies that are looking to be increasing their capabilities, the X2 has been wildly adopted and is widely selected, but for a lot of agencies that are dealing with a tougher budgetary environment and reduced training staff, there was just really one of key things simple, yet still upgrade to new technology. The X26P has been frankly a home-run. Those agencies see it as being responsive to the voice of the customer that it really meets their needs in particular with simplifying their deployment process.

And one example of that is that less than 90 days after it's launch by March, the X26P in the month of March outsold the X26 and it was certainly too early to call that a trend or to depend on that going forward, but that's pretty remarkable for a new weapon to have that happen that quickly. So we are seeing the intended features of the X26P making it easy to adopt, do seem to be resonating well in the market.

The CEW, the weapon segment revenues were up 13% over the prior year to $28 million. In the Video segment, we saw an increase of $1.5 million or 175% up to $2.4 million in the first quarter of 2013, up from a small base the year prior. Sequentially, Video segment revenues grew $0.6 million or 32% in the fourth quarter.

Also, we saw net operating losses; we’ve had those by 50% over last year, down from $3 million to $1.5 million in the first quarter. Obviously, part of that is due to the increasing revenues, a part of that is due to continued optimization in that business unit.

Gross margins overall were up by 61% from 59% in a year ago period. Our SG&A expenses were down sequentially 10% in the fourth quarter, although up 27% from the prior year, as we have talked about increasing our investments in customer facing roles as we transition from a company that traditionally just sold weapons or products in the box to a more solution sales company, we’ve created a whole new customer facing functions in order to do that and believe those investments are paying off. We also did see some increase in litigation activities about $0.5 million compared to last year.

And before I hand it to Dan, let me comment briefly on litigation. We are seeing a very promising trend in our litigation; many of you know that we have take a number of steps including revision of our warnings in 2009 and 2010 and since that time, given that most of our cases are related to warnings not actually to any product feedbacks, we have seen rate of litigation drop significantly over the past year. And one example of that is, two years ago we had 60 active cases and today we have only 25; so we’ve cut the number of that cases by more than half, and the rate of dismissals is significantly greater than the rate of new litigation.

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