Good day ladies and gentlemen, and welcome to the TASER International, Incorporated Quarter One 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions to follow at that time. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host for today, Mr. Rick Smith, CEO. Sir you may begin.

Thank you. Before we get started this morning, I am going to have Dan go ahead and read the Safe Harbor statement and then we’ll get started.

Good morning. Safe Harbor statement. Today’s call includes forward-looking statements including statements regarding our expectations, beliefs, intentions or strategies regarding future. We intend that such forward-looking statements be subject to the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995. The forward-looking information is based upon current information and expectations regarding TASER International, Incorporated. These estimates and statements speak only as of the day on which they are made, are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. All forward-looking statements that are made on today’s call are subject to risk and uncertainties that could cause our actual results to differ materially. These risks are discussed in the press release we issued today and in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2012 under the caption Risk Factors. You may find both of these filings as well as our other SEC filings on the website at www.taser.com. With that, I’ll turn the call back over to Rick Smith.

Great. Thanks Dan. Alright, so surely you’ve all seen the press release this morning. The team here has been working hard and again I think bringing some great results. First quarter revenues were up 19% from $25.6 million last year to $30.4 million this year; most of that driven by law enforcement agencies purchasing and upgrading to our new Smart TASER Weapon platforms, the X2 and X26P. You all are familiar with the X2 which we’ve been selling for several years, the X26P is a new product where we integrated many of the new smarter features and upgraded to an all digital platform, any device that does not require changes in user training or behavior, so it's a very seamless upgrade for agencies that have already deployed the X26. We received extremely positive feedback from the market. For those agencies that are looking to be increasing their capabilities, the X2 has been wildly adopted and is widely selected, but for a lot of agencies that are dealing with a tougher budgetary environment and reduced training staff, there was just really one of key things simple, yet still upgrade to new technology. The X26P has been frankly a home-run. Those agencies see it as being responsive to the voice of the customer that it really meets their needs in particular with simplifying their deployment process. And one example of that is that less than 90 days after it's launch by March, the X26P in the month of March outsold the X26 and it was certainly too early to call that a trend or to depend on that going forward, but that's pretty remarkable for a new weapon to have that happen that quickly. So we are seeing the intended features of the X26P making it easy to adopt, do seem to…

Thanks Rick. As Rick mentioned, revenues for the first quarter was $30.4 million, which is up approximately $4.8 million or 18.7% form the prior year. The increase in sales versus the prior is mostly driven by the continued adoption of the X2 Conducted Electrical Weapons as well as the adoption of the new X26P CEW that was announced in January 2013. The North American law enforcement business continues to be strong mostly driven by the upgrade cycle of the X2 and X26P CEW; we actually sold $8.1 million of the X26P and X2 CEW handles in Q1 and North American law enforcement sales were actually up 31% over the first quarter of 2012. The upgrade opportunity in North America remains one of our growth drivers and ones that were started continue into 2013. Gross margin was $18.5 million or 60.6% of revenues which is up slightly from 59.4% from the prior year. We continue to see the benefit of higher operating leverage in the business as the fixed and semi-fixed accessories in manufacturing overhead are levered up as we see increased sales. We also had a higher percentage of drop shipments in other direct sales to customers in the quarter, which increases our average selling price, and our average selling price in that business has a partial offset and that for some of the drop shipments we actually have higher variable selling expenses because we pay distributors their commission in SG&A when we drop ship on their behalf. Cost of service delivered decreased $417,000 as we continue to realize the lower cost structure that we benefit from moving to a public cloud web services from our own data center and we made that move, completed that in about mid-way through last year and started seeing the full benefit in the…

Hey, thanks Dan. One thing I like to notice were a couple of things. First significant number of X26P orders including some of the larger agencies New Orleans with 400, New York State Police with 334, Sunnyvale with 210, and that of course the X2 continues strong as well with Atlanta buying 200 more, Louisville Police Department, Buncombe County, Garfield and a bunch of others. What you don't see this quarter is there were no particularly large orders of the magnitude like the Phoenix PD. In fact San Diego Sheriffs was on our pipeline we expect in the first quarter and it slipped in to the second quarter and yet we were still able to meet impressive sales result this quarter largely due to the continued success in growth of the telesales team that brought in $3.3 million in business from the smaller agencies within the market. That's again I'll attribute that largely to the rare Jeff Kukowski has brought to our sales team and operations, our program life style and the other things we are doing. We also had a bit of our soft spot internationally in the quarter. International sales came in at about 10%, down from our historical levels. We attribute that largely to just the -- international tends to be lumpy, they tend to be some larger orders. As you know we've been investing in international sales offices that really started in earnest about nine months ago. We are expecting to see those results take some time to kind of find the pump, but we are certainly of the belief that same regulators working in the US is going to help us internationally. Let me shift now to talking about AXON Flex and Evidence.com. Again we continued to see momentum and new adoptions on the marketplace.…

(Operator Instructions) Our first question comes from the line of Steve Dyer of Craig-Hallum. Your line is open, please go ahead.

Just a housekeeping question to begin with, is the X26P a sub-category or sub-group of the X26 numbers that you gave or are those in addition?

Those are in addition; so we sold 9,024 X26s and in addition to that we sold another 4,345 X26Ps.

And then with respect to the new bookings I realize it’s very early and this isn't going to be a linear progression, etcetera. But in general, what are you kind of seeing there that number was off slightly quarter-over-quarter, how do you sort of think that plays out from a cadence standpoint?

Well, one of the things that’s interesting from a market dynamic perspective is we are seeing the larger agencies move faster than we have historically. The TASER growth early on was driven really a lot more by the smaller agencies moving more quickly. We've been surprised frankly at the level of interest in the big agencies, so there is a plus and the minus to that. We've actually put a lot of focus in the opportunity there. We see to really win this market long term the more the big agencies we can get the more influential they will be. So we are putting a lot of our focus with you know when Salt Lake City or Fort Worth puts their hands up or Pittsburgh, we really put a lot of focus on those. If we can win over a sizeable percentage or even a majority of the major cities and begin to work with those customers to identify what sorts of information they will want to share those network effect you can really kick-in like we saw in Salt Lake City with the local agencies, the smaller agencies tending to follow the large. So there is some real advantages to that dynamic. One disadvantage is relying on big agencies meaning that's going to be more lumpy; you know in the quarter we certainly we had some pipeline that had it come into the quarter we would have seen significant growth over the fourth quarter given some of those pushed out, it happens with larger agencies. So I would say you know probably for the balance of this year, we can continue to see some lumpier large orders that will sort of determine some of that quarter-to-quarter sequential noise whether its up or down, but I can tell you qualitatively we've seen a major shift in the response to the market; people no longer saying, I actually presented at [Chief’s Course] in Louisiana about two weeks ago where we get about 110 chiefs and senior administrators and at the beginning of my presentation, I asked how many of them saw their agencies moving major systems to the cloud and I would say 80% of the hands went up. Two years ago, I think we might have seen 10% of the hands go up. So we're seeing a lot of those good qualitative responses; obviously, we like to see sequential growth every quarter, but the large agencies are going to make a bit lumpy.

And we expect this trend line will continue to be updated with that lumpiness. That’s kind of what we're focused on sort of the overall trend. Although, as Rick said, we like to sort of see sequential growth, but I think as long as you’re sort of seeing that trend line continue to be up until the right, we feel like we're on the right track.

Sure, understood. And then just I guess sequentially from a revenue perspective, I know you don’t give a lot of guidance. I had expected maybe a little bit about, you talked about little pause as people, agencies evaluate the X26P versus the X2. Certainly, it didn’t seem like you saw a much of want if any; sequentially, does it feel like kind of things get better from this level throughout the year?

I think, obviously we felt very good about first quarter. You know, we expected see agencies sort of evaluating that to sort of weight. We still saw some of that in the quarter and it got still probably something we could see in Q2, but you know, we feel very good, to be able to put up these kinds of numbers with that backdrop of new product being launched. So I think we're setting in a good position. I think as Rick said, we've had a couple of deals get pushed from Q1 into Q2. So I think that’s at the level of about Q2, but as you know, this is a difficult business to forecast, but we feels very good about sort of we’re sitting overall with a large amount of the North American business has not having upgraded yet, but we're certainly seeing new traction there.

Thank you. Our next question comes from the line of Paul Cost of JP Morgan. Your line is open please go ahead.

Rick can you talk a little bit about the penetration of large accounts in North America with your video solutions. Where do we stand not just in terms of the percentage of large accounts that have even adopt it, but within those large accounts what's the sort of penetration level and where do you expect to ultimately to go?

Okay great question. Most of the large agencies I would say are in early deployment, so if we are looking at the major - the MMC or the major cities we’ve got Pittsburgh, well I think around 50 units, Mesa around 50, Fort Worth is around 50 to 100. We have got a number of others that are testing or they have made smaller purchases that we have not yet announced as we work through. Some of these have paid in trials; I guess there’s probably another 5 to 10 agencies that are actively testing of the major cities which again is top 65 or around 70 agencies in the country. We have seen some of the mid-size agencies like (inaudible) and now [Chesapeake] that have gone to whole deployment. I think we were excited and working hard to help get some of these major cities to really stay on their programs. We do expect that to happen in several of those cities to have significant expansion by the end of this year. We are also learning that one of the things that we are working hard at to help that happen is doing some integrations with some of their existing IT systems to be able to have some information back and forth logistically. So, for example, one of these agencies they want the officers to be able to just record on and off all day and not have to tag any videos and we could then match on the back end based on the time and date of who made the recording. We could pull tables from the record management system and have the (inaudible) automatically do that tagging. That would remove any incremental work up to those officers which is seen as a huge benefit. So we are working very closely with these customers, warning what are the next enhancement, and again being in the cloud model it’s great that we can rollout enhancements about every 90 days, and those types of things we think will help keep these agencies from the 100ish range up to much larger deployment. I would also point out that perhaps new this quarter, we knew how major agency is beginning field trails in Brazil, the UK, Australia Asia and elsewhere in Europe. So don’t want to give to many details until we are further in to these, but we’ve been able to turn on instances through our cloud partner, so we do have the ability to store data internationally. That increases the comfort level on our international customers, and so we are working into the sales process now globally.

Where are you seeing completion in this space and from whom?

There’s a lot of guys making cameras out there. In Albuquerque we saw those little cameras you can buy in Sky Mall for $150 bucks. Now they found that we are replacing some of those. I don't know the exact one from Sky Mall but similar category. We are replacing those one or two times a year on the field. So for us to be able to upgrade them from a $150 price point obviously to $800 or $900 price point I think shows that the industrialization we’ve done really pays off and really the work flow as we worked with Albuquerque they were burning, and officers had to download their own devices and burn them to CDs or DVDs and I think they had hundreds of thousands of disks they were dealing with. So untangling that has another big advantage for us. Internationally there are some local players in different countries. I know in Australia Asia there's at least one on body camera maker; in France we believe there's one. There's a couple of in the UK. Some of them are doing software backend. Typically we are still seeing most of the business models are facing or at least all of them that I am aware of currently are primarily the hardware vendors where the software is like a free app sort of approach. I don't know that we've seen somebody at really make the heavy investment in building out the Enterprise class software that comes with the core and over time that's where again we see the real value out of the business. There are some in the media you probably saw in one area really asked us about Google glass and how we see that coming. We've been selected as one of the early glass explorers. We look at that as when that technology is commercialized, we are building our system the same way that we frankly partnered with (inaudible) to make AXON Flex taken right commercial technology and dab into our marketplace. We see our strategies building that ecosystem that partners with world class devices like iPhones and Android devices. So we are less focused on the hardware overtime certainly will become commodity. We see the opportunity to solve the big data problem as the big one, and we have not yet seen I would say a major competitor go there, although I would expect within the next year we will probably see some of the car vendors that have done on-premise you know digital (inaudible) management solutions probably also start to make moves into the cloud. So we've got to continue to press our first mover advantage hard.

You could actually capture them later I imagine. But my last question is what percentage of revenue today is recurring, and then looking out over your forecasting horizons how do you see that evolving for the company.

Is your question about the percentage of revenue that's recurring in the video business or across the whole business?

Well, its really both but obviously the video is very much recurring but I'm really keen to understand how your business is working for the whole company over this or five year period that you talked about.

This is Dan yeah we do expect the recurring piece of video will grow over time and as I mentioned we've got $2 million of deferred revenue on the balance sheet right now, just for the video business. In this quarter the service piece of revenue was about 10% of the total and we expect that that percentage will increase over time. You know the overall business we still sort of benefit from sort of the razor blade model on that roughly 30% of our sales are cartridges and other accessory and that's been pretty predictable to make that part of the business and we expect the video as the service business. Some of these early customers come back and now move to trial the deeper adoptions and buying the service; we expect that service revenue will grow over time.

Okay, got it. But do you also anticipate hardware leasing to grow.

Yes, I mean we didn't have a lot of the [CPP] deals this quarter but it continues to generate a lot of interest from our customers. I think the good news is we continue to see cases where customers evaluate our [CPP] program and do a cash deal that's perfect for us. I mean part of it is just another tool for our sales people to use and continue the conversation and make sure that the conversation doesn't stop with hey we are not sure we have enough budget to deploy this and in some cases they have been able to actually find budget dollars and just make cash purchases which is buried.

Thank you. Our next question comes from the line of Glen Mattson of Sidoti & Company. Your line is open. Please go ahead. Glen Mattson - Sidoti & Company: A real quick. Housekeeping first. SG&A jumped this quarter. Is that -- first off, do you still have same expectations for SG&A this year and also you know more conception on the video business, you know, between the Rialto study and the attack in Boston and what a key role video played there, almost feels like have we turned this corner. Are you starting to see a lot more interest and it seems like you have a lot more deal flow in the video business even in this second quarter? So basically those two points.

Dan, why don’t you start with SG&A?

Yeah, on the SG&A side, we do saw expectations that will see SG&A expenses go up about 10% year-over-year. So not any, really not any change in strategy there. This quarter we saw about half a million of incremental legal expenses in the quarter but overall we still feel comfortable that we will be in the 10% growth with a lot of that growth being in customer base and we also grow both the video segment as well as the international part of the business.

On the other front, it's too early to say about the role of video in Boston. I don't know we have a good feel on whether that has an impact. Certainly, we also, you know, we've been sharing that study literally. It actually, the first place we had an opportunity to gauge customer reactions was we held to call it [text summit] here in Scottsdale about 60 days ago where the Chief of Rialto came and presented these results before they were public. At that event, we had roughly a 100 law enforcement officials from various agencies around the country and many of them we have actually helped cover the travel cost because of budgets aren't allowing them to travel. So just to be able to make sure we had good attendance we provided some grants to cover the travel cost. What we found was all the folks that came in including some major agencies that I would say were sceptical the night before the conference at our welcome reception by the evening after the conference we saw marked changes and their receptiveness, although (inaudible) conference was of the tone that they were going to go back their agencies and begin the process to deploy this technology. We are now looking how we can scale that by moving those summit events around the country by scheduling them around other events where senior law enforcement officials will be other major conferences, so that it doesn’t have the incremental travel cost or significant incremental travel cost that probably one of the biggest thing that we can do from a leadership perspective is getting the chief to these events, where they hear, chiefs like the Christopher Bank, the Chief of Salt Lake, was a speaker talking about other deploying multi-agency models in Salt Lake, Chief from Rialto, Chief Halstead from Fort Worth talking about the benefits of that they are seeing. So yeah, it feels to me like we crossed a tipping point intellectually. Again we need to be conservative about. We just don't know as they point out in the study the innovators of the [Limo] one of the challenges in modeling or analyzing or forecasting disruptive technologies is it really hard if not impossible to do, we don't know where we see that economic tipping point but I think we are starting to see upbeats in the numbers that we are certainly on an upward slope quite significant.

Thank you. Our next question is from Peter Mahon from Dougherty & Company. Your line is open. Please go ahead. Peter Mahon - Dougherty & Company: Good morning, guys. I just had a one question. Looking at the CEW segment and then actually gross margins declined almost 200 basis point year-over-year, I was hoping that you can might can elaborate on that especially as you guys talked about having more direct sales and things like that that increase ASP?

Yeah, I think that’s a good question. I think it’s really dragged a little bit by the mix also as we saw more of the X26P units, we are offering trading to encourage our customers to do that, so a lot we see like maybe higher ASP for part or and things like that for those parts of the business. We are offering trading credits so that does have a impact on gross margin, although we think trading credits, we see those have been very successful way to drive the business, but I think that small decrease in gross margin is really driven by the trading credits we run through the income statement.

And most of the trading credits are against packages that include extended warranties, so you part is probably related to higher percentage of deferred revenue associated with higher percentage of units purchase and warranties.

And we are seeing as a match we are seeing that deferred revenue line of balance sheet continue to grow very sharply so which is I think to Paul’s questions earlier I think again that because of more and more predictable part of the business is going to run in every quarter because we know and see that deferred revenues for warranties royalties as well as conservative and not come through forward. Peter Mahon - Dougherty & Company: And just to clarify you guys have a training program on both the X2 and X26P, is that correct.

That is correct. Peter Mahon - Dougherty & Company: Okay. And would you mind letting us know what those credits are at this point in time.

Yeah, I believe its $135 per handle for the second quarter. Peter Mahon - Dougherty & Company: Okay, great. Thanks a lot, guys.

Thank you. And ladies and gentlemen, that does conclude our Q&A session. I would like to turn the conference back over to Mr. Smith for any closing remarks.

Great, thank you very much. We appreciate those of you who stuck with us through the whole call here and stuck with us the shareholders over the years. I think we are seeing the return on investments that we make as we start to scale new parts of the business. I would also invite all of you to join us for our annual shareholder meeting which will be May 23 at our headquarters here in Scottsdale in Arizona. So come around and join us then we will have more updates on the business and we look forward if you can't make it then to talking to you on our next quarterly results call which should be in July. So thanks and have a great day.

Ladies and gentlemen, thank you for your participation in today's call. This does conclude the program and you may all disconnect. Have a great rest of the day.