TASER International, Inc. (TASR)
Q4 2011 Earnings Call
February 23, 2012 10:00 am ET
Rick Smith – Chief Executive Officer, Director and Cofounder
Dan Behrendt – Chief Financial Officer
Steven Dyer – Craig-Hallum Capital
Paul Coster – JPMorgan
Previous Statements by TASR
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As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today to Mr. Rick Smith, CEO of TASER International, please proceed.
Thank you, and welcome everyone to our 2011 earnings call. Before we get started let me – I just got Dan read the Safer Harbor statement and we’re good to go.
Hey, great thanks Rick. Certain statements contain in this presentation may be deemed to be forward looking statements as defined by the Private Security Litigation Reform Act of 1995. And TASER International intends such forward looking statements to be subject to the safe harbor created thereby such forward looking statements relate to expected revenue and earnings growth at the nation regarded as size of our target markets. Successful penetrations of all force in the market expansion of product sales through private security, military and sell (inaudible) consumer stop the test markets. Growth expectation for doing existing accounts, expansion of production capabilities, new product introductions, product safety and our business model.
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. Such factors include, but are not limited to, market acceptance of our products, establishment and expansion of our direct and indirect distribution channel, 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 accompanying demand for our products, potential delays in international and domestic orders, implementation risk for manufacturing automation, risks associated with rapid technological change, execution and implementation risk of new technology, new product introduction risk, ramping manufacturing production to meet demand, litigation resulting from alleged product related injuries and deaths, media publicity concerning product uses and allegations of injury and death 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, 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.
With that, I’ll turn it back over to Rick Smith.
Thanks Dan. All right. So let’s talk about the results. Fourth quarter revenues came in at $21.3 million plus we had $1.6 million in backlog that will shift in the first quarter of 2012 recognize.
Revenues for the quarter was down sequentially and year-over-year. The decrease was primarily driven by lower international sales, which were down 65% from $6.6 million last year being 2010 to $2.3 million in the fourth quarter of 2011.
We see two primary factors that led to the softness in international sales. First was the general weakness in Europe and maybe economic confusion, austerity measures et cetera. And second, many international customers due require the use of a TASER CAM with their ECDs, electronic control devices, of course. TASER CAM HD that we developed for the X2 was not ready to ship until the first quarter 2012, we believe this did delay international adoption and even evaluation be it two platform as customers waited for the TASER CAM HD.
Two important bright spots in fourth quarter revenues we should highlight. U.S. law enforcement sales were up approximately 25% over the same quarter last year, primarily driven by the X2. Also AXON and Evidence.com gained some significant traction in the marketplace, fourth quarter bookings increased by over 140% sequentially from a small base of $220,000 in the third quarter to $537,000 in the fourth quarter. We attribute the increased traction to the fact that we began selectively showing the AXON Flex unit, which we announced earlier this week and integrating upgrades into our fourth quarter AXON deals.
I’ll be back to talk more about video and the cloud business after Dan covers the numbers in detail. but before we do that, I do want to talk a little bit about the large balance sheet adjustments. So following the successful launch and strong demand for the new X2 and the AXON Flex we announced earlier this week, we are writing down the inventory and tooling where the previous generation TASER X3 and the first generation TASER AXON, both the X2 and AXON Flex have shown strong demand right from their launch. And the adoption of these products from both new and existing customers has been impressive. Therefore the demand for legacy products has diminished as our newer products are showing much higher volume potential.
With the TASER X2, it became very clear that the X2 will be the primary volume driver for agencies looking to upgrade from the older X26. It’s still early days it became clear that the AXON Flex is making our first generation AXON (inaudible).