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Body Camera Demand Drives TASER International Into New Growth Phase

By Travis Hoium - Feb 29, 2016 at 1:19PM

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The growth engine is finally in high gear at TASER International.

Smart weapons like the Pulse personal protection Taser are TASER International's bread and butter. Image: TASER International.

The body camera market is starting to take hold for TASER International (AXON -1.66%), and after a few quarters of anticipation it finally led to a great fourth quarter. Not only are customers buying into the Axon body camera line of products, they're increasingly choosing the Evidence.com database as their video repository.

Momentum in 2015 could lead to a record year in 2016. Here's what investors need to know. 

TASER International results: The raw numbers

Metrics 

Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Sales

$56.0 million

$46.8 million

19.7%

Net income

$5.1 million

$5.1 million

0%

Adjusted EPS

$0.09

$0.09

0%

Image source: Company earnings release.

What happened with TASER International this quarter?
TASER has two main product lines: Taser weapons and Axon body cameras. Both are gaining traction as law enforcement agencies look for nonlethal options and try to gain credibility with citizens.

  • TASER Weapons sales jumped 15.4% to $46.7 million in the fourth quarter, a new record. Gross margins within the segment were 70%.
  • Axon segment revenues were up 47% from a year ago to $9.4 million and gross margin was 46.1%.
  • SG&A expenses rose 52% to $21.9 million as management expanded its sales force. International growth was a big focus in 2015 and I would expect that to continue as the company gains traction in 2016.
  • There was a 65% increase in research and development expenses to $6.6 million. This is consistent with the strategy to develop and launch new and improved products on a regular basis. The launch of a new Axon camera and Evidence.com, in particular, took a lot of investment in 2015.
  • Future contracted revenue from Axon and Evidence.com jumped 30% in just the last three months to $159 million. This is from the long-term contracts customers sign to keep video on Evidence.com, which is recognized over the length of the contract.

Axon body cameras are the real growth engine for TASER. Image source: TASER International.

What management had to say
Momentum in the Axon segment continues to be a big focus and probably presents TASER's biggest potential opportunity. Since Evidence.com was launched, the company has booked 59,000 licenses, and 13,100 still haven't started generating revenue because they haven't been implemented yet. This pace of sales and getting customers up and running is what's driving the increase in SG&A expenses above, but in the long term it will pay off handsomely.

After international sales fell slightly a year ago to $9.9 million in the fourth quarter, sales jumped to $12.1 million in the most recent quarter. That outpaced domestic sales, and management thinks growth in international markets will be a key to long-term growth for the company.

Looking forward
Investors have been able to visualize what the future might look like for TASER International for years now. Body cameras, a cloud database, and smart weapons are well positioned in today's law enforcement market. But it's taken a while for technology to become cheap enough for the company to offer compelling products and for customers to demand the products as well.

What we're seeing from the fourth quarter of 2015 is the traction TASER International's products are starting to get. And with Evidence.com being a subscription model, there's even solid contracted revenue for years into the future. After a solid quarter, the company seems well positioned for long-term growth.

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