TASR

TASER International, Inc. (TASR)

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TASER International Inc. (TASR)

Q1 2010 Earnings Call

April 23, 2010 11:00 a.m. ET

Executives

Rick Smith - CEO

Dan Behrendt - CFO

Analysts

Eric Wold - Merriman Curhan Ford & Company

Greg McKinley - Dougherty Markets

Sean Brenckman - Craig-Hallum

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the first quarter 2010 TASER International earnings conference call. (Operator Instructions)

I would now like to turn your presentation over to Mr. Rick Smith, CEO. Please proceed.

Rick Smith

Thank you. Good morning, everyone, and thanks for joining us. We will first start out with Dan Behrendt reading the Safe Harbor statement.

Dan Behrendt

Thanks, Rick. Certain statements contained in this presentation may be deemed to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The TASER International intends that such forward-looking statements be subject to the safe-harbor created thereby.

Such forward-looking statements relate to expected revenue and earnings growth; estimations regarding the size of our target markets; successful penetration of the law enforcement market; expansion of product sales to the private security, military and consumer self-defense markets; growth expectations for new and existing accounts; expansion of production capabilities; new product introductions; product safety and our business model. We caution these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein.

Such factors include, but are not limited to market acceptance of our products; establishment and expansion of our direct and indirect distribution channels; attracting and retaining the endorsement of key opinion leaders in the law enforcement community; the level of product technology and price competition for our products; the degree and rate of growth of the markets in which we compete and the accompanying demand for our products; potential delays in international and domestic orders; implementation risks of manufacturing automation; risks associated with rapid technological change; execution and implementation risks of new technology; new product introduction risks; ramping manufacturing production to meet demand; litigation resulting from alleged product-related injuries and deaths; negative publicity concerning product uses and quality risks; potential fluctuations in quarterly operating results; competition; negative reports concerning TASER device uses; financial and budgetary constraints of prospects and customers; dependence upon sole and limited source suppliers; fluctuations in component pricing; risks of governmental investigations and regulations; TASER product tests and reports; dependence upon key employees; employee retention risks; and other factors detailed in the company's filings with the Securities and Exchange Commission.

Now I'd like to turn it back over to Rick Smith, our CEO.

Rick Smith

Thanks, Dan. Okay. As everybody has probably seen, in the press release this morning, net sales for the quarter were $23.8 million, which is a decrease of $0.8 million or 3% compared to last year. The decrease is primarily driven by fewer big significant orders from international customers.

As we've already talked about, this is a bit of a lumpy business and in the fourth quarter we benefited from some of these significant orders coming in. In the first quarter, as we were hoping to see, we didn't see in the quarter. And as a result, things came in, I think, a little below of where we were expecting to see them.

Adjusted operating income, which excludes the impact of stock-based compensation, charges, depreciation and amortization, was $1.6 million for the first quarter, a 49% increase from the $1.1 million in the first quarter of 2009. So GAAP loss from operations was $0.9 million compared to $1.0 million from the first quarter of 2009. And the net loss for the first quarter of 2010 was $0.5 million, while the net loss per share on a basic and diluted basis was $0.01.

So we'll be talking about the first quarter, some of the significant events. You know, the domestic law enforcement business actually continued to show up pretty strong. Domestic U.S. law enforcement was up 30% over prior year, and it was even up 7% sequentially.

We did see federal and military sales were really not strong this quarter, which is expected on a seasonal basis. We don’t tend to see many federal orders in our first year calendar quarter, but federal and military was certainly stronger in the fourth quarter. They tend to be stronger in the fourth and second quarters.

International sales, which did represent 25 of net sales, so we didn’t have a lot of the big lumpier orders, but the good news is that we saw some strength in just continuing business. And we're now starting to see a base of business internationally like we've developed here in the U.S., which of course adds some predictability to our long term business with those customers coming back for replenishment, slowly expanding their programs, buying cartridges, etcetera.

We also had our first domestic order from the Aberdeen Police Department for AXON. We talked a bit about AXON at Evidence.Com. If you actually go to cnn.com and type in a search on AXON, you'll see a great story out of Cincinnati. We've continued to see very strong interest in the capability that AXON at EVIDENCE.COM represent for our customers.

We do expect to see revenue in the third quarter. Do even though Aberdeen, they got pretty excited frankly from the results in the pilot, as with any software-as-a-service, there's a lot of complexity upfront so that we can make this product simple and easy for our customers' long term. And so, we've been doing a bunch of work in the pilots who've gotten great voice through the customer feedback.

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