“We concluded a very strong year for TASER International with record fourth quarter Weapons segment revenues and record quarterly bookings in our Axon segment,” said Rick Smith, TASER chief executive officer. “Throughout the year, we made significant progress in extending our leadership position as the go-to provider of innovative technology solutions to law enforcement. We also demonstrated returns on the ongoing build-out of our international operations, which remains an important area of focus for us as we expand our addressable market.”
“In 2016, we see tremendous opportunity to further enhance our integrated hardware-software platform and pursue our strategic initiatives with a focus on long-term profitable growth,” concluded Smith.
Fourth Quarter 2015 Financial Highlights:
- Net sales were $56.0 million in the quarter, an increase of $9.2 million, or 19.7% over the prior year fourth quarter. International net sales were $12.1 million in the quarter.
- TASER Weapons segment revenues increased $6.2 million year-over-year, or 15.4%, to $46.7 million in the fourth quarter of 2015 setting a new quarterly record.
- Axon segment revenues increased $3.0 million year-over-year, or 47.0%, to $9.4 million in the fourth quarter of 2015. The increase was driven by a $3.2 million increase, or 216.9%, in service revenue which also included an approximately $0.9 million catch-up revenue related to completed professional service implementations that occurred during the fourth quarter. This increase was partially offset by a decrease in Axon body-worn camera hardware sales of $1.1 million as we delayed shipments of the new Axon Body 2 camera until the first quarter of 2016.
- Consolidated gross margin percentage in the fourth quarter of 2015 was 66.0%, compared to 58.6% in the same period last year. The increase was mostly due to the mix of higher margin TASER Weapon product sales within the quarter compared to the prior year. The prior year also was lower due to reserves taken for obsolete inventory related to the end of production of the legacy TASER X26 conducted electrical weapon and excess inventory for components of the Axon camera line.
- TASER Weapons segment gross margin percentage improved to 70.0% in fourth quarter 2015 compared to 66.2% in fourth quarter 2014.
- Axon segment gross margin percentage improved to 46.1% in the fourth quarter 2015 compared to 9.7% in the fourth quarter of 2014. The prior year gross margin was impacted by reserves taken of $1.2 million for excess inventory related to Axon camera components. Axon gross margin was also favorably impacted by the growth of our user count which allowed us to leverage the fixed costs to operate and host the Evidence.com service.
- Sales, general and administrative (SG&A) expenses of $21.9 million in the fourth quarter of 2015 increased $7.4 million, from $14.4 million in the fourth quarter of 2014. Compared to the prior year, personnel expenses increased $2.6 million as the Company is investing in customer-facing positions as well as administrative functions. Marketing expenses increased approximately $1.5 million, due to the additional investment in the IACP and Millipol tradeshows compared to the prior year. Consulting, lobbying and accounting fees increased $1.7 million compared to the prior year as well.
- Research and development (R&D) expenses of $6.6 million for the fourth quarter of 2015 increased $2.6 million when compared to the fourth quarter of 2014 which was driven by additional personnel and consulting expenses related to Axon segment product development initiatives.
- Income from operations decreased $0.4 million to $8.5 million in the fourth quarter of 2015 compared to $8.9 million in the fourth quarter of 2014 due to the above mentioned increases in SG&A and R&D. The operating expense increase of $10.0 million was almost entirely offset by the $9.6 million increase in gross margin.
- Provision for income taxes in the fourth quarter of 2015 was $3.4 million. The Company’s annual effective tax rate for 2015 was 43.6% due to startup losses generated by the Company’s Netherlands subsidiary, which are not deductible for U.S. tax purposes.
- Net income for the fourth quarter of 2015 was $5.1 million, or $0.09 per diluted share, which is equivalent to the prior year net income and diluted earnings per share.
- In the fourth quarter of 2015, the Company generated $16.1 million in cash from operating activities. Cash, cash equivalents and investments were $118.3 million at December 31, 2015, up from $90.4 million at December 31, 2014.
Business Highlights:
- As of the end of the fourth quarter, 30 major city law enforcement agencies have purchased TASER’s Axon body-worn cameras and/or its digital evidence management solution: Albuquerque, Baltimore County, Charlotte-Mecklenburg, Chicago*, Cleveland, Dallas, Denver, Fort Worth, Fresno, Kansas City*, Los Angeles, Las Vegas, Louisville, Memphis, Mesa, Miami, Milwaukee, Montgomery County, New Orleans, Omaha, Philadelphia*, Pittsburgh, Salt Lake City, San Antonio, San Diego, San Francisco, Tampa, Toronto*, Tucson, and Washington, D.C. (Please note that some of these customers have purchased only the MediaSolv solution at this point in time as noted by an *.)
- Evidence.com’s user count continued to grow, extending the Company’s market leadership. Total active, paid users at December 31, 2015 were approximately 45,900. Since inception, the Company has booked cumulative Evidence.com licenses of approximately 59,000. The 13,100 seats booked but not yet recognized in monthly service revenue will come online as the Company completes customer implementations and integrations.
- In February 2016, the Company announced an exclusive partnership agreement with Amped Software, one of the premier providers of forensic video enhancement tools. This new partnership will further enable law enforcement to use a variety of tools to analyze evidence through the Axon Forensic Suite.
- On February 26, 2016, TASER’s Board of Directors authorized a stock repurchase program to acquire up to $50.0 million of the Company’s outstanding stock subject to market conditions and corporate considerations.
Statistical Definitions:
- Future billings are defined as cumulative bookings to date net of cumulative recognized Axon camera and Evidence.com revenue and Axon camera and Evidence.com deferred revenue balances.
- Future contracted revenue is defined as cumulative Axon and Evidence.com bookings, net of cancellations, minus cumulative recognized revenue related solely to Axon and Evidence.com.
- LTV/CAC is defined as the lifetime value of a customer as a ratio of the costs to acquire that customer.
- TASER Weapons Operating Income % is considered a key metric to show continued diligence in running our legacy business profitably while investing in new markets internationally.
Non-GAAP Measures:
- To supplement the Company’s financial results presented in accordance with GAAP, we are presenting the non-GAAP financial measures of EBITDA, Adjusted EBITDA and Free Cash Flow. Our management uses these non-GAAP financial measures in evaluating the Company’s performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented at the end of the release.
- EBITDA is defined as consolidated net income before interest expense, income taxes and depreciation and amortization. Adjusted EBITDA, as presented herein, is defined as EBITDA before certain other items, including: stock-based compensation; net gain/loss on write-down/disposal of property, equipment and intangibles; and loss on impairment.
- Free Cash Flow is defined as operating cash flow minus purchases of property, plant & equipment and intangible assets.
Caution on Use of Non-GAAP Measures
Although these non-GAAP financial measures are not consistent with GAAP, management believes investors will benefit by referring to these non-GAAP financial measures when assessing the Company’s operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:
- these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to the Company’s GAAP financial measures;
- these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the Company’s GAAP financial measures;
- these non-GAAP financial measures should not be considered to be superior to the Company’s GAAP financial measures; and
- these non-GAAP financial measures were not prepared in accordance with GAAP and investors should not assume that the non-GAAP financial measures presented in this earnings release were prepared under a comprehensive set of rules or principles.
Further, these non-GAAP financial measures may be unique to the Company, as they may be different from similarly titled non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company’s results to the results of other companies.
A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure or measures appears within this press release.
About TASER International, Inc.
TASER International makes communities safer with innovative public safety technologies. Founded in 1993, TASER first transformed law enforcement with its electrical weapons. TASER continues to define smarter policing with its growing suite of technology solutions, including Axon body-worn video cameras and Evidence.com, a secure digital evidence management platform. More than 162,000 lives and countless dollars have been saved with TASER’s products and services.
Learn more at www.taser.com and www.axon.io or by calling (800) 978-2737.
TASER® and Axon® are registered trademark of TASER International, Inc., registered in the U.S. All rights reserved. TASER logo, Axon, Axon Body, Axon Body 2, Axon Flex, Axon Interview, Axon Signal, TASER X26, TASER X26P, and TASER X2 are trademarks of TASER International, Inc. All rights are reserved for trademarks of TASER International, Inc.