Rick Smith - CEO and Director Dan Behrendt - CFO Luke Larson - CMO

Mark Strouse - JPMorgan Glenn Mattson - Ladenburg Thalmann Steve Dyer - Craig Hallum Greg McKinley - Dougherty & Company [Abrupt Start] …it is the tool that is used in violent and dangerous confrontations in which emotions can be extreme, while they had been involved in some tragic situations including Arrest-Related Death. We have also saved more than 140,000 lives from death or serious injury in more than 2.7 million field uses. That is the nature of exactly what TASER International is focused on, defying conventional wisdom with revolutionary and proven methods to protect life and truth. You have to be willing to endure the critics from afar as we try to resolve some of the world’s most complicated and dangerous issues of stopping violent people, while improving transparency at the same time. What matters is that we can make a difference that matters in the world and we are determined to tackle these problems. With that I’d like to turn it over to our CFO, Dan Behrendt to provide some more color on our financial results and the outlook for 2015.

Thanks, Luke. As Rick mentioned earlier revenue in the first quarter was 44.8 million a growth of 24% compared to the first quarter of 2014 which is stronger than expected. There are a couple of deals on either end that bolstered results for the first quarter. We had some deals which were pushed from Q4 into Q1 and we were also able to pull a couple of Q2 deals earlier, but we’re certainly very happy with the results. Research and development expenses of 4.6 million are slightly lower than anticipated again due to the slower hiring of plan. We did make several critical hires in both management and G&A roles but have plans to continue to aggressively grow both hardware and software engineering staff bulks throughout the remainder of the year. We anticipate that with the hiring plans as well as incremental consulting spend in the Hardware segment we will grow R&D approximately 1 million quarterly from the first quarter levels in the second quarter. In order to maintain a leadership position in the market we will make all technology investments in emerging technologies such as wearables, mobile and cloud. The gross margins in the quarter were epic. In the TASER Weapons segment gross margins were 71.1% in the first quarter of 2015 compared to 66.4% in the prior year. In the AXON segment gross margins increased to 40.6% compared to 17.5% in the prior year. As you can see from the supplemental package online there were a few one-time reversals that contributed to gross margin strength. However, as our service revenues continue to increase and a critical mass of licenses is reached, corporate service and levered margins will continue to improve as the fixed cost associated with provision of software as a service. Due to one-time and if you think the gross margins on a go forward basis will be at a 64% to 66% range on a consolidated basis. The investments we’re making are still paying-off and proven to be prudent. In the first quarter our customer acquisition cost to lifetime value a standard ratio used to value of the level investments spend in SaaS companies was 3.5. As a reminder the general thought is investments are well placed with a ratio greater than 3, with an active user base of approximately 22, 000 users this quarter versus approximately 15,000 last year we’re seeing continued growth. While the fourth quarter ratio is greater than four, our incremental investments in sales personnel during 2015 creates a longer return run rate as reps get trained up and deployed into the field but we’re certainly very comfortable with the 3.5 ratio for this quarter. We are realistic in knowing that some of these investments will succeed and some would fail. We believe that the investments we make in both our successes and failures will be critical to maintaining a learning organization that can evolve and adapt to future technologies and market challenges. We are diligent about integrating our customers’ feedback into our technologies so that we ideally innovate to their direct needs. Today we are investing heavily in mobile around communication and fibration features for public safety. We see the trend from desktop to mobile as something that will certainly come to the public safety market as it has to so many other markets that are intent on being a leader and we are intent on being a leader in the space. I’d like to reiterate our commitment to the long-term and set the expectation this is a consistent message you’d be hearing from me and our leadership team we've assembled a world-class development team and which we see as competitive advantage and which we will continue to supplement with strong hires. We are playing to win a much larger market over the long run and look forward to generating long-term shareholder value as a result. You may have also noticed the tax rate for the quarter is 32.5% which is lower than the historic rate. This is due to two things the first is we're benefitting from the domestic production activities deduction which we get for producing our goods in the United States. The second and even more significant is the impact we’re having from having our international business structure run out of Amsterdam. While we set up the Amsterdam office to be closer to our customers we do get some tax benefits under this arrangement. It is worth noting that because we will have an income in the United States as well as various foreign jurisdictions outside the United States. Our effective tax rate could fluctuate due to changes in the mix of earnings and potential losses in countries with different statutory tax rates. We look at this each quarter and update our effective tax rate as appropriate. As a reminder the Annual Shareholder Meeting will be held in a couple of weeks on May 18th in Seattle. It will be held at 1800 Yale Avenue at the SpringHill Suites Seattle Downtown at 09:00 AM Pacific Standard Time. After the formal voting procedures, presentations will be made by Luke Larson, Rick Smith and Marcus Womack. There will also been an informal round table discussion with Company's product managers on both the video and weapon of the business where you could ask questions about product offerings and the development process. We also have some videos and momentums from the ISTP Conference so investors will be able to experience a bit of what our customers went through at that foreign conference in the fourth quarter. While not required we would appreciate RSVPs to be send to ir@taser.com so we can plan it for the appropriate number of attendees. You may have also noticed we changed up earnings release, earnings process this quarter. We heard feedback in the last quarter that were perhaps a little bit too for both during the call and did not leave enough time for questions. This call is meant to update you our investors on our quarterly progress so we tweak the process to hopefully we make this more useful for you. We not only added AXON second statistics into the release as well as two more business highlights from the quarter but for the first time we have uploaded supplemental package to the investor Web site which goes through each of the line item drivers and provide investors a little bit more color to about what happened in the financial statements. As a result we will be skipping most of the financial highlights of the call and going right to Q&A at the end of the call we will be tweeting our survey line. Please let us know what you think about this new format and ways that we can continue to improve this process going forward. And with that we will go to the Q&A portion and take questions from the audience.

[Operator Instructions] Our first question or comment comes from the line of Paul Coster from JPMorgan. Your line is open.

This is Mark Strouse on for Paul. Thanks for taking our questions. So Rick thanks a lot for going through your travel plans I guess for the next six to nine months. I guess are some of those countries and cities that you are going to be visiting are they cities that have already expressed an interest in on officer video or is the goal more to set up the salesforce and build more sustainable long-term business I think another way of saying it is, should we think about those international opportunities as kind of pilots maybe in 2015 and then more hold deployment orders in 2016 or could there be some meaningful orders in 2015?

Well, certainly I think the UK is getting to a point of maturity where we could start to see meaningful orders this year. France we’ve got to just frankly get little more engaged there with the customer they have 8,000 weapons that are I think they were eight or nine years old.

Easily eight or nine years old?

So we see a real need for them to upgrade those I’d like to hope we can make some progress on that in a relatively short-term. Italy is a brand new market for us but there we got the largest lease force in Europe side okay that one is more of a long-term. So the general idea here is really more to start momentum I don’t think I’m going to be closing orders per se but what we are finding is these international agencies are really large compared to the U.S. like the City of London is considered a small agency in UK It has got a 1,000 officers here in the U.S. we call that a pretty good sized agency. For example the result of some of the work goes down in UK I was invited into the London Met to do a session on leadership during transformation of an organization. So this had nothing to do with sales per se but the London Met is going through their own transformational project right now and I think that’s not something that typically they would invite sales rep in to do something like that. And that gave me access to something like a top-150 leaders now of course I’m very careful in those things not to try and head into a sale pitch but really to try to be a helpful thought partner but I think that really resonates with these agencies more so than the product per se because most lease agencies around the world I think are struggling with the same problems. They are very far behind technologically I mean actually this past quarter the NYPD had put in I guess $1 million line item to replace their typewriters and that resulted in a City Counsel New York actually banning typewriters from the NYPD or putting in a motion to do so. And that’s not a uniquely American problem. So I know it is a little bit of a long winded answer I’m not going over there to sign contract and celebrate big orders that are already baked. This is setting the foundation for the long-term. And also we are using this as sort of a forcing function like we did in the UK this kind of helps focus the team on getting new hires in place. So we have the team in place to continue to follow-up as we start each market.

Dan, just on the evidence.com the 26.80 monthly revenue proceed figure that you guys have, is there any way to -- and I know that’s an average number but is there any way to kind of frame what the ranges of those ARPUs are maybe not by customer obviously but maybe by customers that are doing their minimum with you versus those that are doing the total package, what kind of range is there in that monthly ARPU number?

Yes it’s a fairly wide range. And some of the new offerings that are actually pushing out the lease to top-end of that, so our basic service starts at $15 plus stores. So sort of assume and sort of the low end of the marquee may be at $20 or $22 probably closer to $20 before discounting and then our highest tier for the highest tier service with unlimited storage and integrations would be $65 per month before any discounting. So there is fairly wide range there but obviously hopefully we can drive people into programs like the unlimited storage program with AXON Ultimate with unlimited storage or officer safety program are both some of the higher tier programs. And as we get traction of those higher tier programs hopefully that can start moving the need. The other thing I would sort of that we are very cognoscente of is that that install base gets bigger and bigger it’s going to be harder to sort of move it dramatically in one quarter it’s going to be more of a trend overtime just because you have got that large install base.

One thing I would add is well Dan is that that number is just the software and storage services. So, additionally the people that go on these new hiring license tiers are also signing for some pretty significant sort of monthly deferred revenue related to hardware and warranty services.

That’s correct.

Thank you. Our next question or comment comes from the line of Glenn Mattson from Ladenburg Thalmann. Your line is open.

Questions about the gross margin especially in the video hardware segment, maybe Dan can you walk us through why that was so strong and it has fluctuated widely as four or five quarters maybe a little more on that?

Yes, sure. So I think -- so on the software side we’re really encouraged to see that sort of 65% margin for the quarter and that’s mostly driven by the fact that we sort of we finally got to sort of that critical mass where we’re starting to see the benefit of our variable cost of one more sort of user in the system versus variable cost of delivering that and that’s why that improved so much this quarter as we sort of craft on [indiscernible] we are really seeing that benefit. On the hardware side we did benefit a little bit this quarter. We had as you know we took a large reserve last quarter and for some excess and obsolete inventory. We were able to reverse a little bit of that this quarter about $200,000 which improved the margins. So that’s -- those margin on a normalized basis would have been closer to 25% this quarter.

And then could you say what you think going forward the video the service the software margins would -- if you look out two or three years like kind of what the potential is on that side?

Well I think it’s partly based on that ARPU as we move that ARPU up I think that’s got the ability to expand margins. A lot of these advanced features will drive people to those higher tiers there is not a lot of variable cost to delivering it there is a lot of R&D cost but our cost to service a customer on the ultimate plan is not that different from customers in some of the lower tiers. So if we move that ARPU up I think that that 65% can improve overtime. Certainly, if you looked at other sort of SaaS companies we certainly have the ability to move that up now I would say that probably unique or somewhat unique to TASER is the fact that we also have storage which is going to be a little bit of a lower margin product overtime just because of the efficiencies of what customers would expect to pay for storage. But overall we’re very happy with the 65% and hopefully we can improve that overtime as we see that ARPU go up.

And then last from me, the weapons number was quite strong this quarter. You mentioned that you may have pulled an order or two forward from Q2 can you talk about the magnitude of that and do you expect Q2 to be last quarter Q1 to Q2 was basically flat do you see it maybe sequentially down or still growing here, what do you think?

No. That’s a good question. As you know it we are sort of a book and ship business so it’s a little bit harder I can tell you that we did have a couple million dollars worth of orders that we expected in Q4 that just basically just missed and we were able to close those deals early in Q1 so there is a couple of million of stuff that’s we have trickled in from the fourth quarter that was pushed to the first. We pulled in probably another million plus of Q2 orders as well. So, we certainly benefit from that. As far as sort of the seasonally it’s almost hard you get some of those positive sort of lumpiness in a quarter it sort of mutes some of that normal seasonal trends just because the Q1 is typically one of our weaker quarters from a seasonality perspective and we exceeded even our own expectations for the quarter with these results.

Thank you. Our next question or comment comes from the line of Steve Dyer from Craig Hallum. Your line is open.

Dan I just want to clarify something you said on gross margins, did you said excluding kind of one-time items you expect 64% to 66% gross margins going forward?

I did, on a consolidated basis, that’s right.

And then real quickly another quick question Luke I think you had indicated you anticipate OpEx going up by 1 million is that kind of per quarter or is that the next quarter will be 1 million higher than the last quarter?

That’s for next quarter we see the business as happening now I am sure you saw on the news we had a presidential candidate Hillary Clinton called for body cams events that are occurring in Baltimore we feel now is the time to build out the sales teams and capitalize on that momentum.

As it relates to the video business ARPU obviously didn’t go up kind of at the same sequential trajectory than it did last quarter. Is that a function of just kind of been since real recently that you guys have started signing the kind of the all you can need is a bigger data plans or is it a function of you still have some early guys on the network that maybe got the first year free or something like that or any color there would be great?

Yes Steve, this is Dan I think it’s a little bit of both. Certainly these newer pricing tiers are new and there is a kind of a long sales cycle for our really both products but certainly the video product has a new capability there is a long sales cycle that goes with it. So, I could tell you that the new pricing tiers have been well received by customers that we presented them to, and over the next several quarters hopefully we’ll see more deals close at those pricing tiers as those sales cycles come to a close and we start getting orders for those higher tiers.

And then as it relates to the bookings I know it’s variable and a lot of it is swung by big deals. Generally directionally how do you see the trajectory progressing throughout the year given we keep getting these public incidents? And looking at your sales book I mean would you expect Q1 to be a low watermark or too tough to call?

Yes it is tough to make a exact prediction we certainly feel very comfortable that we’re going to see strong year-over-year growth on total year to total year as you know it’s very deal dependent so each quarter is we don’t want to put too much weight on an individual quarter for that reason but we feel that the macro trends are great for us. As Luke said earlier we see this market forming this year so we think that certainly as we look at the market and our pipeline we’re very happy with where we sit right now.

Last question for me then I'll hop back in the queue. And I know there is not a perfect answer to this just given that you don't know but if had to guess, at kind of what percentage of your weapons orders this quarter or sort of in general right now are replacements or upgrade versus new, how would you make that split?

Well actually it is a tough question I would say that the international is probably still the bulk of those are still net new deployments just because you've got so much wide space internationally the OPP iskind of a good example where they have legalized the carriers TASER weapons for patrol officers now so yes some of those are replacements for supervisor weapons but the fact that you can now sort of open up the market certainly makes that a net new capability for a lot officers out there I'd say in the U.S. I think our tele sales has done a really nice job I think there is probably some wide space that those guys are capturing as well just you know being in front of customers and provide a great service we think that's enabled some of these agencies that are say some of the 100 go from maybe same kind of thing where you are going from sort of supervisors to wire deployment is because they I think we're just more top of mind so it's definitely a mix in the U.S. as you know there is still a fair amount of wide space we still have some large cities that are under representative of TASER hopefully some of the indications from like LA last year as they started fielding more of the TASER weapons and their desire to put a TASER in a camera and officer will see that trend continue in some of the other big cities for a lot of wide spaces.

Yes I would add in as well we are really trying to shift the focus on the conversation with our customers sort of away from the idea of upgrading what you have to expanding TASER's for everybody that come on guys in 2015 every cop that goes out there with a gun should have a TASER and probably I camera now so that's why we shifted towards the standard issue grant program where we’re giving basically from an investor perspective think about as sort of a replacement for our old training programs well now the incentives are if you want to get the $100 to $400 per officer you basically you have to step up and make TASER standard issue so that every officer coming out of the academy gets one and they can show to us some sort of plan that they are giving every officer on patrol a TASER a camera or both. So as we have shifted that focus and then also frankly the logistics costs of having people send stuff in just so we can destroy it here so I’d say our visibility on what's operating and what are not is kind of dropping and so we’re not really just really focusing on that a whole lot as we shift to this focus of every officer getting a TASER.

Thank you. Our next question or comment comes from the line of Greg McKinley from Dougherty & Company. Your line is open.

We have a $71 million backlog. Can you help us break that between hardware and software?

We don’t have that we haven’t really disclosed exactly where it is coming out of certainly as you see more of these ultimate deals that some of that backlog is going to be hardware for future cameras and anybody in the ultimate plan is going to get a camera it is a 2.5 and 5 year mark so that is definitely included in the number, so we will see fairly it will certainly be a mix on a go forward basis the deals that are not on those ultimate plans is going to be all software on those deals so it's going to be a mix I would say if that's something that is interesting we can take a look at that but it's not something that we’re ready to talk specifically to today.

Yes I mean I think as you are bookings continue to build that will be something that I think investors increasingly have an interest in understanding how that revenue in March makes us strong and within that backlog may be given I'm sure you have higher ARPU in that backlog than what you reported this quarter can you talk at all about how you expect that to behave as backlog you amortized through the income statement over the next 12 months or so?

Yes I mean I would say it is probably the way that we maybe encourage investors to look at that as look at the sort of user count and sort of we've got the 80% or so attachment rate and sort of look at how that approximately 22,000 user count at the end of Q1 and how that grows overtime and just the fact that we're seeing about a 65% margin on the service side today I think that makes for a pretty good case just as that user count grows throughout this year and into next year so we see that will be that the AXON business gross margin should continue to improve so you will see improvement in mix you see a greater percentage of their total sales coming from the licenses versus the hardware which should improve the overall profitability at least on a gross margin line for that business.

Going back to weapons can you -- you have really strong weapons units during the quarter although international didn't necessarily stand out as being the source to that so should be interpret that your focus through the tele sales group on medium to small sized agencies was the big driver there? And if you can tell us your thoughts on that and then as you look at the next nine months of the year is it, with Rick spending a lot of time traveling internationally is that where some big opportunities lie from a weapon standpoint or is it more domestically?

Yes. So on the first question, our tele team has just done a phenomenal job servicing what I would call the long tail of the market. As you know we’ve got 10,000 agencies in the U.S. that are very small and so our tele team has been servicing these agencies that are 1 to 25 officers that have historically not been actively service from the sales perspective. And so we certainly benefited from pulling some of that revenue in.

On the international front yes certainly there are some really big opportunities internationally. Historically we’ve not seen them -- I’m not been happy that we’ve been to pull those opportunities into the boat and certainly that’s part of the reason for the renewed focus there. I’d say the other thing is, in the U.S. I’ve been doing thought leadership type stuff speaking at key conferences et cetera, it’s being less and less that really involved in individual sales call frankly I’d say the caliber of our sales team is dramatically higher than it was just a few years ago and the team here is really hitting on all cylinders across the board. So certainly as we’ve got our teles doing great we’ve also added what we sort of call, junior reps in each region to focus on the middle tier and then our senior regional reps are focusing on the largest agencies and as we increase that level of focus I think we’re seeing improvements across the board.

And then maybe if I can just ask you to repeat I think you commented on the degree to which the accrual reversal impacted margins in the quarter, could you remind of that please?

Yes, sure. So, on the video segment we have about $200,000 pick up on the hardware revenues, or hardware gross margins. So on a normalized basis the hardware margin for video would have been closer to 25%.

Thank you. I’m showing no further questions in the queue at this time. I’d like to turn the conference back over to management for any closing remarks.

Great. Well, obviously we won’t have any calls like today. I’d like to congratulate the whole TASER team and our new AXON group out in Seattle to the great quarter. We look forward to seeing you all at our shareholder meeting in Seattle. You’ll get a sneak peak of our new facility up there. We’ll be quite ready for move in until June but those of you who have been to our headquarters in Scottsdale know that we take great pride in putting together a unique and compelling work environment. We are doing some similar work in Seattle. Come on up check it out and meet some of all these new people we’ve been hiring. Everybody have a great day and we’ll see you in a few weeks in Seattle.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.