The expanded use of body cameras is helping drive record results for TASER International, Inc. (NASDAQ:AXON), and the future continues to get brighter. Third-quarter results released after the market closed on Wednesday showed continued growth in both TASER weapons and Axon body cameras. Here are the highlights investors should be looking at right now.  

Image source: TASER International. 

TASER International results: The raw numbers


Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)


$71.9 million

$50.4 million


Net Income

$3.8 million

$1.5 million


Adjusted EPS




Data source: TASER International Q3 2016 earnings release. YOY = year over year.

What happened with TASER International this quarter?

The financial results for TASER International as a whole are strong, but it's the underlying revenue and earnings drivers that continue to improve each quarter.  

  • Weapon sales jumped 34% to $52.9 million, and gross margin improved 40.2% to $38.0 million. As the biggest revenue driver today, weapons are really the reason for the company's results.
  • The present in TASER International's results is driven by weapons, but the future belongs to the Axon body camera segment. Axon revenue was up 74.5% to $18.9 million, and gross margin improved from 36.8% a year ago to 45.4% in the quarter.
  • Within Axon, service revenue driven by subscriptions jumped 179% to $8.7 million. And the gross margin in this booming business is 81% right now. Before long, this will be the driver of bottom-line growth at TASER International because most subscriptions come with a multiyear contract from law enforcement agencies.
  • Bookings for body cameras and services were up 55.8% year over year to $57.5 million, but they fell from $72.0 million a quarter ago. Total future contracted revenue stood at $302.0 million. The number of bookings will likely be volatile, but investors should watch for general momentum moving higher.
  • The other good news is that 89% of Axon bookings came with a multiyear contract. That'll keep service revenue growing, and that's a very high-margin business long term.

What management had to say

Momentum for body cameras continues to be strong, particularly in the U.S., where half of the country's major cities are using the Axon product. With more cities looking toward transparency and fewer lethal weapons, the business should continue to grow.  

Management also said subscription sales for weapons continue to improve, which will lead to less lumpy results going forward. And as customers get comfortable with the subscription model, it could make sense to move to subscriptions for body cameras and weapons as well.

Looking forward

The core weapon and body camera business will likely continue its strong momentum for the foreseeable future. What investors should watch is international growth and new product launches.

Just $11.3 million of sales in the third quarter came from international markets, but management has been adding sales staff in those regions all year. Watch to see if international sales begin to grow faster than sales in the U.S. over the next year.

R&D spending was also up to $7.4 million in the quarter as TASER International develops new products. Watch for new body camera models and potentially streaming technology to come into the product line in the next year or two. And if management can create compelling products that leverage existing body camera customers, it would be a boon long term.

What's great for investors is that momentum is moving in the right direction for TASER International, and bottom-line growth should continue into 2017.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.