Good day ladies and gentlemen and welcome to TASER International Second Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions following at that time. [Operator Instructions]. As a reminder, this conference is being recorded. And now I’ll turn the conference over to your host, Luke Larson, President of TASER International. Please begin.

Thank you and good morning to everyone. Welcome to TASER International’s second quarter year 2015 earnings conference call. Before we get started I’m going to turn the call over to Dan Behrendt, our CFO to read the Safe Harbor Statement.

Thanks Luke. Safe Harbor Statements: Statements made on today’s call will include forward-looking statements including statements regarding our expectations, beliefs, intentions or strategies regarding the future, including statements around projected spending. 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 to the date 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 risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in our press release we issued today and in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2014 under the caption Risk Factors. You may find both of these filings as well as our other SEC filings on our website at www.taser.com. And with that, I will turn it back over to Luke Larson, President.

Thank you, Dan. As a reminder, we’re going to be accepting some questions via Twitter during the Q&A portion of the call. To follow our updates on twitter during the call follow the account @taser_ir. For those of you without Twitter, all updates and graphics streams directly to our Investor Relations website investor.taser.com. The team here TASER have continued to achieve extraordinary results in the second quarter or following up a strong start to the year in Q1. We continue to exceed expectations in both the top-line and bottom-line bookings in the AXON and evidence.com business posted a new record of $30.6 million, a growth of 170% compared to the second quarter of 2014. Revenues in the second quarter of 2015 were $46.7 million, growth of $9.5 million or 25.7% compared to the prior year. We now have 26 major cities on our AXON platform including both evidence.com and MediaSolv. During the quarter, we announced the Dallas, Louisville, Montgomery County AXON deployments, but we also added DC and Milwaukee to that list as well. We remain hyper focused on consolidating the top two of the market on AXON platform through incremental sales personnel, a sales development team and a professional implementations team and we are seeing the fruits of our investments with continued bookings growth and new major city wins. We pride ourselves in being a trusted partner in law enforcement which results in continued multiple year contract being assigned accommodating in future contracted revenue in Q2 of $94.9 million. The company had several exciting announcements in the last couple of months including new product offerings, acquisitions and big new order wins. The second quarter was the first in which we had the opportunity to see early traction of the standard issue grant program, which is a resounding early success.…

Thank you, Luke and good afternoon everyone. Or maybe I should say good morning. I'm currently in France where it's a beautiful afternoon and I've been spending a lot of time with our international team and we're just beginning my year-long international tour to focus on getting our tier 1 markets up and running. Continental Europe and the UK has been my focus for the summer and as many of you know the Europeans take their summer holidays quite seriously, so while I've had several meetings with national level police forces, we primarily used the past few months to focus on setting up our foundation for the long term success and we'll begin more intensive customer engagements at summer's end. When I talk about setting up our foundation, I'm specifically talking about recruiting the right people. Setting up our facilities and our business processes in the key infrastructure to drive sustainable growth. One key structural change I'd like to talk about is that we've consolidated all of our global sales under Josh Isner, our Executive Vice President of Global Sales. You may recall that we restructured our sales organization in December when I promoted Josh to run all of North America and another person to run international sales. This was largely to give me more visibility into the people and processes across our sales organization and based upon what I learned, I felt that our international team can truly benefit from Josh's talent around hiring, implementing world class sales process. Accordingly, in May, we made another move and I promoted Josh to oversee all sales globally. He's been quite busy helping build out our international team. Josh directly led the hiring efforts for our new UK country manager along with three new enterprise sales people there, sales engineering and account…

Thank you, Rick. Revenue in the second quarter was $46.7 million, a growth of 25.7% compared to the second quarter of 2014. We’re very happy with our second quarter sales results as it exceeds our expectations, because we were able to close some deals in Q2, which we had forecast to happen in Q3. As a result, we expect Q3 results to come and close Q2 actual. This is more align with our traditional seasonality with Q3 normally being seasonally weaker than Q2. And 2013 and 2014 that seasonality was match by strong orders in the federal space due to year-end sweep up orders. With this sequestration, we see the same amount of federal [indiscernible] money and Q3 this year will probably not come to provision because the tighter budget climate. And general, we continue to become 12 on a consolidated basis with an annual figure of 15% for the foreseeable future. Gross margins continue to be very strong with this quarter’s gross margin coming in 65.8%. This is in line with our guidance last quarter, the normalize margins on a go forward basis. We feel that they should fall somewhere in the 63% to 66% range. And TASER Weapon segment, gross margins were 70.2% in the second quarter of 2015, compared to 64.7% in the second quarter of 2014. We expect margins remain strong, programs like standard issue grant program have ability to decrease average selling prices and resulting gross margins on those sales. In the AXON segment, gross margins improved 47% in the second quarter of 2015, compared to 26.7% in the prior year. As service revenue scale, we’ll continue to get leverage other fixed costs needed run our evidence.com platform resulting improved margins overtime. In the second quarter, our service margins were 66.3% improvement over the prior…

As the operator to making the announcement to put people in the queue, we have actually received a question from Twitter address to look.

What other adjacent markets are there for cameras commercially?

Well, there are several other potential uses for on-body cameras. We believe our strength in the long person arena as we already have the relationships with 17,000 out of 18,000 of the domestic agencies through our weapons business. This has really been the catalyst for either the growth in our AXON and Evidence.com business as well to these preprior relationships. This market is still in the early majority adoption phase of the technology cycle. So we are laser focused on consolidating not only the top tier of the market with major cities, but also counties at insuringly up coverage in the middle and lower tiers of the markets. So our regional sales representatives and - sales function will really really laser focus on our core market which is the domestic law enforcement market for AXON and Evidence.com growth.

Thanks, -. That's helpful. So with that we will turn that over to the operator to announce the -- to go to the Q&A portion of the call.

[Operator Instructions]. Our first question is from Steven Dyer of Craig Hallum. Your line is open.

As it relates to weapons business, the upgrade cycle, I mean you have had a number of very good weapons quarters in the row now. Do you have any sense as to maybe where you are in the upgrade cycle and you how many of the deals you are getting are replacement versus new, et cetera? Any color there around the weapons business would be great.

That's a good question. Luke do you want to take that?

Yeah. We are still seeing a lot of opportunity in the weapons business. What we are focused on today is selling our Smart Weapons. We still got 500,000 officers to go into top 1,200 and we’ve seen a lot of traction from major agencies moving to our Smart Weapons platform that’s are real focuses.

Okay. So really no sense has to use a baseball analogy kind of maybe what any more in this upgrade cycle et cetera or how many one point time you feel like you had a pretty good read and harmony in the field or over five years old et cetera?

Yes, our focus, we want to try to get a Smart Weapon on every Police Officer in the country and so with our sales teams we’re looking at that as kind of opportunity and driver.

Steve, this is Dan. I would say in the baseball analogy I would say we’re still in relative early innings here. There is a large amount of X26Es, so the legacy X26 still in the market as well as a number of the largest agencies in the U.S. like NYPD still have a pretty low TASER penetration versus the officer count. So we still think there is a lot of opportunity for continued upgrade. The other thing as we look at it become sort of a positive cycle for the business. There are earlier adopters for the Smart Weapons will be up for upgrades here in the next couple of years. So we think that cycle just continues overtime.

Yes, I think what you’re saying maybe it’s just one peer cyclical perhaps it’s been in the past?

Yes, I think that’s fair. Rick, do you have a comment?

Yes, I’m going to say the upgraded cycle from European perspective. We have 16,000 each weapons, I think I got the number right. In the United Kingdom, all of which or the vast majority of which are pas there five year life and UK there is a lot of focus on making sure they are very careful about maintaining their weapons, keeping them within warranty. While we just waiting on home office approval and when we get home office approval we think there has been a lot of pent-up demand to upgrade those we’ve got another, I think it’s each thousand in France, they’re also going to pretty old. So there is some significant upgrade opportunities internationally, but I think as Luke was pointing out we really start to do shift our focus away from the concept of upgrade to the concept of standard issue that there shouldn’t be a specialty piece of equipment they could share and upgraded periodically but just becomes a part of every officers kept and we think that is really sort of the key to, we are a number one for our customers is much better. I mean to have comp go on the street with the gun and no TASER in this day and age to strikes me as arcane. And our customers that message is resonating with them as well. So we’re also really put a lot of focus on helping our customers to create a budget line item for their TASER devices, so that they are on one of our service plan like offer some safety or we’ve got the TASER assurance plan as we managed programs we’ve done that includes, so there are already budgeted for their upgrade every five years. And if we look at that the opportunity is we move people on to those payments programs where they now have budget line items, we think we can effectively double the rate at which agencies are upgrading their weapons. Mainly that using some back the envelope map that we look at all the weapons and probably they have not been upgraded and the ones that have been upgraded its probably around a 10 year replacement cycle we’re on right now. Because those do upgrade, typically do it at year seven may be year eight, so we’ve a lot of people who never upgrade it. So if we simply met sort of 10 year-ish average down to five years, obviously that would substantially grow the business and that will give our customers the best equipment all the time. So between those two areas of focus getting every officer have a TASER and getting them on our plan with getting the TASER refresh in regularly every five years. There is a lot of growth left in the business as we push towards those two goals.

Okay. Great hopping over to the video segment, TASER cams really jumped up in the quarter is that driven by one particular order or a couple of big orders is that just sort of a residual from sort of the move to body cams and this is sort of middle ground?

Yes, we had one big order from Australia that kind of drove that number up.

Okay. And then last one then I’ll hop back in the queue. So curious your focus has historically been cloud based storage of video but you did by MediaSolv because there is obviously some that are seeking to do it on premise, any color there as to what you are hearing from people maybe the split as to how many roughly are looking at each way and any characteristics of what kinds of departments are up for which?

So we still think that it’s inevitable that these agencies are going to move the cloud model I think Louis there was a great example of an agency that had been a MediaSolv customer and like their solution and then we went in front of them with AXON and Evidence.com and MediaSolv and they ended up going with kind of an integrated approach. So we see the main value of MediaSolv as giving the agency the opportunity have additional ingest points for more data kind of on [indiscernible] that were eventually upload into our cloud model, so we feel extremely confident that Evidence.com and cloud model is the best buy for the customer and we have been fairly successful in seeing traction with the customers to move to that.

Thank you. And next question is from Paul Coster of JP Morgan.

Good morning, guys. This is Mark Strouse on for Paul. Thanks for taking our questions. So I think we are encouraged to see the ARPU number, especially the incremental ARPU number tick up this quarter. But just thinking about the subscriber additions going forward specially with some at least press releases of new companies coming into the space, are you seeing any lengthening of the sales cycle, any RFPs that are out there that you would have expected in a particular month that are now a couple of months later as those agencies are potentially evaluating more technologies?

That's a good question Mark this is Dan. I would say that we definitely, I think that agencies as always I think some political pressure to make sure - to bid on any significant purchase and I think we see that. I think we continue to win almost every RFP situation. So I think although it may have lengthened the sales cycle, I think it's actually, I think that agencies continue to get to the right answer and take us, because really we are really the only proven end to end solution that really has shown the ability to scale, a lot of our competitors very small install bases, I think we are really the only one that have shown that they could do this as scale. So although it may have a near-term impact like in a sales cycle I think as long as we continue to win, I think we are satisfied with the process.

I would add as well this is Rick that we have heard from frankly some of the smaller agencies that have gone with continuing systems. Some of the feedback even in relatively small scale they are having a bunch of challenges and we are now back in discussions with agencies that purchase within the past year, again were maybe too small or they were in the top agencies that we have talked about mostly in our conferences size. But though what we do well is hard. Putting together the brochures and the PowerPoint slide it’s pretty easy, we have a lot of folks in or sort of marketing stuff at playing to be pretty similar to ours, but there is a lot of moving parts, there is a lot of technology from hardware stack through firmware through all of the intermediating pieces whether it's software that runs on a laptop or the doc or on a server that ingest in the new bed in the cloud. So I don’t think -- we haven’t seen anybody else I think that to able to do it, that sale is fast and efficiently and reliably as we're doing it and a lot of these other folks. I think it got some a lot of room to -- we've got a lot of distance to cover to catch up to us and frankly that's part of the reason we're continuing to double down on our investments in engineering to make sure that we're continuing to move further and further ahead.

Thanks Rick. Dan just one real quick follow up. I think you mentioned something before in your prepared remarks about the 15% CAGR. Are you talking about the total revenue or are you talking about weapons revenue, what was that?

Yes, the total revenue for the company both segments of the business. We still feel comfortable that that long term CAGR can continue at that 15% rate.

Thank you. And next question is from Greg McKinley of Dougherty & Company. Your line is open.

First question was just regarding MediaSolv, was any portion of the 30.6 million in bookings related to contracts signed through MediaSolv?

Yes, I don’t think any substantial part of the bookings was from anything from MediaSolv. I think we did have a 350k section from them. Revenue, just to clarify, that was revenue.

I would add to that, so there's a couple of million dollars over $2 million I'm aware of in Evidence.com bookings that we would attribute those bookings to the MediaSolv acquisition, so in certain accounts where we went in as MediaSolv became a part of TASER and Evidence.com we saw those accounts move our direction and in fact expand the level of deployment by sort of deciding rather than trying to put some stuff local in some of the cloud they expanded their purchase through the Evidence.com as with several million dollars but to be clear in Evidence.com business we would attribute to that growth to the MediaSolv integration.

Would you I guess on that note, are there any cities that were previous MediaSolv relationships? Are any of them utilizing competitor cameras right now or have any converted over yet to AXON pilots at least?

Yes this is Dan I think there's installed base of MediaSolv customers and some of those do have body worn video, it's just sort of a small portion of their installed base and clearly I think one of the strategies around the MediaSolv acquisition is for the customers that have on pram solutions or like on pram solutions to get them sort of a clear migration path to the cloud in the future to Evidence.com

Okay. Great, shifting over the margins here, so specifically so AXON product margins are pretty strong at 37, just over 37%, can you provide any color on just which hardware components are contributing to that of its I guess a little bit of a surprise of how they were and in the last quarter they were just over 30%, but part of that was from a that reduction of an obsolete and inventory charge or reversal of that charge?

Yes, this is Dan I think overall it's a little bit because of the sort of revenue recognition, sort of allocating to all the pieces, but I think in general I think it just a -- I think it just indicative as we continue to sort of get our operations in line and make sure that we’re not having sort of any kind of negative variances, we add some the warranty expenses continue to be low for that product it's a high quality product with relatively low return rates. So that certainly helps the margins. So it's a lot of little things and it's little bit of mix but for the most part, we’re satisfied where we are. As you know our strategy is not to maximize the profits on the sale on the cameras but to get people in ecosystem and on our service and we’re encouraged to be able to see that we can make money on the hardware as we continue to win business. But I think it’s really sort of one product is driving that I think it just as, I think it discontinues improvement and then I would say the general talent would just disapproved warranty cost because the product, turn rate continue to drop.

So are these $15 months have the upgrade features or is that allocating into this product margin, right now?

No its not, so the $15 a month for future cameras get the first that's part of the deferred revenue balance on the balance sheet. And that's not included the ARPU, the ARPU only includes the service and storage and that service include things like integration and things like that but that ARPU is sort of monthly service and storage, the payments from the customers for future cameras get deferred until we deliver the second camera.

Okay. And are you seeing any less of a need to discounted order to win some of these contracts? Maybe the new or six months ago discount on the hardware specifically?

I think in general I think we’re seeing a market from up a little bit, we could change to structural sales people to make sure they are going to be competitive on price on the hardware, but in most of the cameras in the market continue to be priced higher than our camera, so I think we should start even to start -- starting prices typically better than most and major competition we see out there. So its I think that certainly helped us well.

Okay. And then last from me just look clerical question that over the past couple of quarters, you were sharing a metric regarding the percent of contract signed that were for five years in length and I know this quarter you share that 88% for multiple year. Is just an apples-to-apples comparison or is language in [indiscernible] ?

Yes, that’s a fair question. The 88% is multiple year, so that could include some two and three year deals as well. Accountably we also had a six-year deal that was a small deal this quarter, but some really multiple years or anything sort of over one. This quarter is a little bit unusual, because we had more this two and three-year deals and we typically see. But we still expect to have relatively low turn overtime. So ultimately we don’t think it makes that big difference, but the 88% would be any all the customers are assigned multiple year deals.

Thank you. Our question is from Glenn Mattson of Ladenburg Thalmann. Your line is open.

Can you talk about what percent of the increase in the sales expense that you’ve laid out today is related to international, is that more international? And then I’m just wondering about sales capacity, do you feel like by Q4 you’ll be in a pretty good spot or is this continue to ramp at this pace or something similar in ’16?

It’s a good question. I probably can get on specific, I can tell you that we are seeing sort of significant investments both in the international space as well as a video space. As I mentioned, we’re going to continue to increase a number of territory. So each sales person has a lower number of accounts they’re working. Our sales people are, the marketing is doing a great job generating sales pipeline as well as leads and we want to make sure we have enough sales people exactly work those leads. So I think really disappointing if some of the competitors are able to get a hold in the market or increase our market share because we didn’t have the right count of sales coverage. So we’re going to continue to add. On the video side, we’re also adding a little bit on the CW side as well especially as we take more and more business direct, it’s causing us to need more direct sales people on the weapon side of the business. And then international as Rick indicated we’ve got a number Tier 1 countries that we’re hiring people into and some cases like the UK were that’s now direct country we’re making those investments. In other cases, we’re working a lot of science distributors in order to drive market adoption or products.

Okay. And it’s just like, this expense that you expect to continue to ramp as you exit the year or is it, or you feel like you build that infrastructure and you can leverage in future periods?

Yes, we see 2016 is being a year that we continue to ramp. Although in certain parts of the business, we think the 2016 we make it’s a sort of steady stake going into ’17. But certainly on the international side a lot of it’s going to be dependent on if these investments were making the tier 1 markets start bearing fruit then we’ll look at making similar investments in other tier 1 markets or going into the tier 2. So international may just continue to grow even going into ‘17 and beyond, for the video business I think we eventually get to a point where we have the right number of territories and that would be a leverage we’ll expense but we do expect that we still see some ramp up in both SG&A and R&D in 2016 as well.

Thank you. And next question comes from George Godfrey of C. L. King. Your line is open.

Of the 38 hires, that you hired this year and customer facing, how many of those people carry a code and we disclose that cause as we’ve bouncing around different calls?

Yes, so for those customer facing roles they all carry a code and previous question was around capacity, we don't feel we’ve got capacity on the channel side and when we were talking with the market, we see series indicators that the market is happening now and we feel strongly now as we time for us to make the investments to be in front of the customers, when we are in front of the customer, we win the majority of deals and especially with our model, we’re going to capture each individual officer on our platform and really get that long -- multi-year contract and lock it out, so we think this is our window opportunity, we’ve said 2015 is our super bowl, and we really feel strong, we’ve got to be in front of the customers. So we can win those deals,

Understood. Last question, so existing 2015 in the number of people carrying quota for Taser?

I wouldn’t get into specifics other than saying we’re going to keep investing in the channel so we hit capacity, because we think this is our window of opportunity to win that share.

Thank you. There are no further questions at this time. I’d like to turn the conference over to Luke Larson for any closing remarks.

Yes, we had a couple of other questions come in via twitter that I’ll address real quick, one is can evidence.com also be used for interview rooms and holding cells? And absolutely Evidence.com can be used to store all of the agencies through evidence. We see that active pain to the area of the biggest kind of growth in digital evidence is this push toward body camera, we’ve got the best solution for that. But evidence.com can also be used to really store any piece of digital evidence. So thank you for listening in to our Q2 2015 earnings call. And with that we will end the call here. So thank you.