TASR

TASER International, Inc. (TASR)

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TASER International, Inc. (TASR)

Q4 2010 Earnings Call

February 23, 2011 10:00 AM ET

Executives

Rick Smith – CEO and Co-Founder

Dan Behrendt – CFO

Analysts

Eric Wold – Merriman Curhan Ford & Co

Greg McKinley – Dougherty and Company

Presentation

Operator

Good day ladies and gentlemen and welcome to the Fourth Quarter 2010 TASER International Incorporated Earnings Conference Call. My name is Regina and I will be your operator today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) Today’s conference is being recorded for replay purposes.

I would now like to turn the conference over to our host for today’s event, Mr. Rick Smith, Chief Executive Officer. You may proceed sir.

Rick Smith

Thank you. And thanks everybody for joining us this morning. As is the norm, I will turn over to our CFO Dan Behrendt to first read the Safe Harbor statement, and then we’ll get started.

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. 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 law enforcement market; expansion of product sales to the private security, military and consumer self-defense markets; growth expectations for new and existing accounts; expansions 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 endorsements of key opinion leaders in law enforcement community; the level of product technology and price competition for our products; the degree and rate of growth of our markets in which we compete and accompanying demand for our products; potential delays 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; media publicity concerning product uses and allegations of injure and deaths; and the negative impact this could have on sales; product quality risks; potential fluctuations in quarterly operating results; competition; negative reports concerning TASER device uses; financial and budgetary constraints of prospects and customers; dependent on sole and limited source of suppliers; fluctuations in component pricing; risk of government investigation 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.

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

Rick Smith

Thanks Dan. Okay, again thanks for joining us to everybody to look back at 2010, but more importantly looking forward in 2011. As is no secret, 2010 was a challenging year in general and particularly for our customers in municipal law enforcement. Going back to 2009, the stimulus program was in full swing in ‘09 and we had a record year that year. What it became clear in 2010 that the stimulus spend was not going to continue, really what happened was some necessary restructuring in the cost structure of many governments and particularly municipal agencies that was forestalled from ‘09, there were prop up operations with stimulus spending, 2010 was the year to that the music stopped and everybody had to find its share.

Then we did a particularly tough year to be selling capital equipment into frankly paramilitary agencies that have a very tight bond of brotherhood in one of the agencies looking going through staffing cuts, they will go to extra lengths to try to preserve the jobs of their men and women at arms. And in those environments trying to sell new equipment and new capabilities is exceedingly difficult. And frankly we don’t dispute to be priorities of our customers were very close with that community.

I would say that 2011 is a bright new day in our opinion. Our distribution network is giving its very positive signs. Our discussions of law enforcements, it seems that many agencies have been through the restructuring or at least they are in the midst of it now. And by the midpoint of the year, we believe that we’re seeing a fundamental shift where agencies will be coming out of this staff cutting mode. And as they do, they will be facing up to equipment shortfall, shortage in cartridges, outdated equipment that constitutes for life, there will be pent-up demand. And we believe that as we come up to the backend of this, our customers as well knowing how painful it is to go through staffing cuts, are going to be more likely to focus on investing in efficiency systems, improving the efficiency in our workforce rather than just staffing right back up immediately.

And our core systems both TASER devices and the new AXON and EVIDENCE.COM makes dramatic improvements in agency performance on a cost savings and return on investment basis. So we believe that positions us very well for the coming market conditions. In 2010, some specific highlights. One thing to point out, at the end of the year we saw our first major order for the TASER X3 for over a 1,000 units by the Arizona State Department of – I’m sorry the Arizona Highway Patrol, Department of Public Safety.

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