Patrick W. Smith – Chief Executive Officer and Director Daniel Marc Behrendt – Chief Financial Officer and Investor Relations Contact

Good day, ladies and gentlemen, and welcome to Q1 2012 TASER International, Inc., earnings conference call. My name is Sandra and I will be your operator for today. At the time all participants will be on a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes. I would now like to hand the call over to Mr. Rick Smith, CEO. Please go ahead, sir.

Great. Thank you. Welcome, everyone. Thank you for spending part of your morning with us. Before we get started I’m going to have Dan Behrendt, our CFO, read the Safe Harbor.

Thank you, Rick. Our Safe Harbor statement. 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 such forward-looking statements to 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 markets, expansion of product sales through 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 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 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 in the markets for which we compete and accompanying demand for our products, potential delays in international and domestic orders, implementation risk of 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 concerns, potential fluctuations in quarterly operating results, competition, negative reports concerning TASER device uses, financial and budgetary constraints in 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. I think we’re all proud to be having a call like one we’re having today. I think the results reflect a lot of hard work by a lot of great people. As you all are probably aware, first quarter revenues came in at $25.6 million, an increase of $2.5 million or 10.9% over the first quarter a year ago. Sequentially revenues grew by about 20%. This increase was driven primarily by our third consecutive quarter of growth in North American law enforcement, which grew by over 25% as well as by a large order from the United States Army. These increases were partially offset by a 51% decrease in international sales from a year ago period, although we did see a slight sequential increase over the fourth quarter. : Operating income of $6.4 million, $6.456 million, I guess round up to $6.5 million, came in over 25% of revenues, driven by a combination of strong operating results and a partial reversal of the Turner verdict, which caused us to reduce our litigation reserve by $2.2 million. And with that, I will hand over to Dan to go into more detail through the results.

Thanks, Rick. So as Rick said, revenue for Q1 was $25.6 million, which is up approximately $2.5 million or 10.9% from the prior year first quarter amount. The increase in sales versus prior year were driven by the continued adoption of the X2 electronic control device as well as a significant order from the United States Army for 3500 X26 ECDs, following the DOD's Type Classification of the X26. Gross margin for the first quarter was $15.2 million or 59.4% of revenue which is 6.6% as a percent of sales better than the 52.8% in the prior year. The improvements in margins were mostly driven by the increased leverage of indirect manufacturing cost due to the higher sales and a favorable product mix. When we look at the ECD segment gross margin, it was 65.2% in Q1 of 2012 versus 59.3% in Q1 of 2011. We’re encouraged by the gross margin performance. We’ll likely see a slight degradation in gross margin as we increase the sale of video products, as these carry lower gross margin than the ECD products. But that should be partially offset over time with profitable recurring revenue from EVIDENCE.com as the video business scales up. The SG&A expenses for the quarter were $8.9 million versus $9.3 million in the prior year. SG&A was 34.5% of net sales in Q1 of 2012 compared to 40.4% of net sales in 2011. The improvement was mostly driven by lower consulting and lobbying fees, about $240,000 and we continue to encourage by the lower SG&A levels, although some of the improvements in the quarter were really driven by some timing difference, so we expect the ongoing SG&A rate to be closer to the sort of the 2011 SG&A levels on a go forward basis. Research and development expenses were $2.1…

Thanks, Dan. First I’d like to highlight the U.S. Army order. Certainly I am sure folks are asking whether we should think about it as a one-time event or is this something that can impact the future of the business. The important part there is this purchase comes at the end of the Type Classification process, which, the military has a fairly involved approval process for products to be Type Classified, which means that all the acquisition, methodologies, procedures, safeguards, et cetera are in place. And the product is officially approved for use by the department of defense. So this milestone does set the way to streamline future procurement by the Army. So of course we still have selling to do for those orders to come in. But that now drastically simplifies their ability to purchase and deploy as it’s now an officially approved platform. So a significant milestone. Great work to our federal and military team in completing that long process. As we initiated last quarter, we have begun to break out our P&L by business unit, so that our investors will be able to see how we’re doing in the electronic control device business, our historical core business, as well as the new video and cloud business unit. What you continue to see is that we have a solidly profitable, very cash, very positive cash generating machine and our core business. And the profits and cash flow from this core business have been funding the major development efforts in AXON and Evidence.com, where we believe we are well positioned as the first major mover in cloud computing for law enforcement. We believe we are close to the inflection point for the rapid adoption of officer-based video, and we believe that our solution is best-in-class with the Flex that…

(Operator Instructions) [E.C.], your line is live. Please go ahead.

Hello. Guys can you hear me?

Yes, we can.

Oh! I’m sorry. Just as a couple of follow-up question. Can you mention that or actually I might have been Rick, you mentioned the North American law enforcement sales were up in the first quarter, I didn’t catch that percentage. I was wondering if you could give that to us again.

Yeah, let me take a look at my notes. I believe it was 25%.

25% and does that include the U.S. Army order?

No

No. Okay, got it. And really that’s pretty significant improvement and certainly exceeded my expectations. What is really driving that? Have you guys seen kind of inflection point in municipal budgets or has something as the landscape changed that gives these agencies much more confidence in purchasing the product, and the funding to make the purchase.

You know I would actually tell you the users using about the first quarter sales is that X2 the new product was not the primary driver of the growth relative into the prior quarters. In the first quarter, the primary driver was, I believe, just a more rigorous execution of our sales team. We’ve been very focused on developing new rigorous pipeline system using salesforce.com and really bringing best practices in to drive results. So I would actually tell you first quarter more than market dynamic was driven more by just operational excellence of our sales and marketing teams.

Got it. So you'd characterize it as really just hammering the product home with these agencies and helping them across the finish line in purchasing them.

Yeah, we have actually launched a telesales initiative we’re looking to augment our field sales group having a dedicated outbound team in addition we’ve had a great customer service team. And then I think we’ve got a great people over the years I think we are giving them better systems now to be able to track leads, and follow up on them, and make sure that we are reaching out to the market and closing every opportunity that comes our way. So it's mostly rigorous execution although I would say we are also feedback from the law enforcement market is the major layoffs they were going three years ago but mostly behind them. And I say the market is somewhat stabilizing we do expect that in the next couple of years and we should see a drive to replace capital equipment law enforcement just across the board over the last few years they were really delaying their refresh of capital equipment in the budget environment to try to avoid the layoffs so they come out of that now, TASERs, cars, computers, pretty much across the board, I think the market is seeing that they’ve not been keeping up with their capital equipment needs. And we think that is obviously a good trend for us.

Got it. Great, and then internationally you mentioned that sales declined 51% year-over-year, are there any – can you maybe revisit some of the bigger fish that you are going after right now or you see as really reasonable opportunities. I know we’ve talked about some Australian opportunities and France opportunities and things like that. Could you maybe rehash a couple of those bigger fish that you are going after?

Yeah. We typically don’t get into a lot of detail on their international sales from a sort of competitive space analysis. And frankly as we mentioned historically, this can be politically sensitive for some of those agencies that may not want to, it’s a security issue in terms of us, necessarily talking about what agencies are looking at expanding. But once we talk about historically that remain significant opportunities, there is certainly Australia, France, Brazil. Those are areas where we are putting some teams in-market, in Brazil and in France. We’ve got a very strong distributor in the United Kingdom, it continues to do well. I think its I would say some of what we’ve seen is with the introduction of the X2 the international markets do tend to take a little longer cycle to evaluate new technology. So we are expecting to see some more significant X2 orders begin to develop, we are hearing from our sales pipeline that some of those evaluations are now complete, and perhaps some of the agencies that were looking at buying X26 once the X2 came available may have taken a step back to evaluate the new technology so we remain confident that we are going to see the pipeline at least sort of returns up towards the more historic levels. And we believe the things that we are doing now to actually put teams in market and begin to invest in more scalable systems internationally, will set the basis for long-term growth.

Great, and last one for me. Looking at ECD segment margins 65.2% was just a really nice performance follow-through. Was there anything because I mean I would even looking back historically that’s probably on the higher end of what you guys have done. Was there anything in the quarter that really stood out from a margin perspective? And Dan, I think you mentioned that we should probably expected to move back towards more historical levels would you think more in that 60% range. Is that probably a fair way to think about it?

Yeah Peter, yes it is certainly a fair way to think about, we benefited from the number of things as Rick said we did see some fair goal sort of news on the warranty side of things with – when we launch new product we typically just record a higher warranty percentage, because we don't have an actual return rate to go against and then we adjusted once that product has been in the market for a year. And with really the rock-solid quality of X2 we had a pretty significant reduction in warranty reserve which certainly help things. The mix helped as well. We had a lot of handle sales in the quarter those are higher margin business for us, which certainly help. So I think yeah we feel good about the margins. I think as the video business scales will certainly contribute. But, the margins on the video businesses are quite healthy as the ECD handle profitability. So you will just see a little bit of a negative mix impact but, we feel good certainly the leverage on the indirect cost were solid for the quarter, when we see those higher sales it certainly helps to bring down that indirect manufacturing cost as a percentage of sales, which improves the margin as well.

Perfect, great, thanks a lot guys.

Well, thank you.

Thank you. We have no more questions. I’ve now like to turn the call back over to Rick Smith. Please go ahead.

Great. All right, well, again thanks everyone for tuning in. We do have our shareholder meeting coming up here at this headquarters May 31st. So we certainly invited to come down, come see the new flex unit for yourself. You had an opportunity to test-fire on X2 and see our latest ECDs. So we will be talking to you either in the shareholder meeting or I guess our next call. Our conference call will be in July looking at Q2 results. And by then we should hopefully have some interesting early indicators on Flex market attraction. Thanks for joining us today. We will see you all soon.

Thank you ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining. And enjoy the rest of your day.