Rick Smith - CEO and Director Dan Behrendt - CFO Luke Larson - CMO.

Steven Dyer - Craig Hallum Mark Strouse - JP Morgan Andrew Grone - Dougherty & Company Glenn Mattson - Ladenburg Thalmann George Godfrey - C. L. King.

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..

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. As of the second quarter, we have already issued three quarters of a million dollars in grants for approximately 4300 officers.

Perhaps most interesting is that we believe the program has accelerated adoption of the officer safety plan licensed tier, our highest tier of service.

As a reminder, standard issue grant is another program in place to help incentivize agencies to ensure their officers are fully equipped on the job, they are only with an officer cameras but also with smart weapons which historically have not been standard issue equipment.

In these times, we believe in this day in age every officer should have a TASER, a camera and an evidence.com license and we are moving aggressively to bring our technology to the men and women out there doing one of the hardest jobs in managing law.

Over the last 20 years, TASER International has been in business, we’ve evolved our products, we paid some to needs that we have seen we are closer relationship with our customers from the intent scenarios in which smart weapon is used, we learned that the TASER cam could capture the use of the weapon to protect officers and citizens alike in a potential excessive use forced scenario.

The TASER cam provided our first insights into video evidence market, where it ultimately informed the AXON platform. We could now capture the context of the scenario leading up to the use of the smart weapon by filming an entire citizen interaction rather than just to exposure itself.

Upon the launch of the first generation of the AXON camera in 2009, it became abundantly clear that the management of digital evidence was the next challenge facing law enforcement entering the digital age, hence the development of evidence.com.

Next week is the one year anniversary of Ferguson Missouri and the death of Michael Brown, while absolutely and unfortunate from the perspective of our country’s history in the present state of communities, it highlighted the need for more transparency between law enforcement and their communities.

At TASER, we look to solve tough societal problems with technology. By leveraging technology, we believe we can help solve these massive societal issues in the unique way that creates the most value. This is an always readily apparent at the early stages of the technology investment.

When we started investing in a cloud platform for a law enforcement there was a lot of doubt it would be successful. We have been investing in AXON and Evidence.com, our cloud and wearable platform for upwards of five years prior to the Ferguson event happening.

This positioned us to be the top leader in helping agencies deal with these extremely complex and difficult problems.

Since this event the demands from both law enforcement and the general public has surged far quicker for a solution to this transparency in AXON and Evidence.com than we ever expected and this year has been huge success from the increase in bookings ARPU, major city adoption, active and paid users, just to name a few of the proven statistics.

As management, it is hugely rewarding to start to see those five years improving work begin to pay off, but we believe that we are still in the early maturity phase of this adoption curve and as technology refresh within the public safety sector.

As we look forward it is imperative that we continue to move at start up speed and capture the market-share under our end-to-end solution, something that we believe we are the market leader in today.

In 2015 as more and more agencies are joining this movement and subsequently recording, managing and storing digital evidence, all eyes have been open to the implications of this technology to the entire criminal justicism.

We experienced some push back to body camera deployments from participants downstream in the prosecution cycle of cases as there were fewer of in surging influx of evidence on disks. The historical way agencies shared their digital evidence.

We sent some of our sales team and product managers to the district in Florida to learn about their processes and we showed them Evidence.com, the result of which is an addition to of a prosecutor licensed tier.

At the same districts in Florida chose to standardize on Evidence.com and now all agencies in the area will be required to utilize our system. A text book example of how important the network effects are in this ecosystem, we viewed district attorneys and prosecutors as key influencers in the decision making process to deploy AXON and Evidence.com.

By giving the standard version of the product to them for free, we believe we can gain additional key proponents of our platform in this increasingly competitive market.

Overall we feel strong that our product iteration process is successful because of our intense voice to the customer research and we will continue to evaluate opportunities accordingly. It is our long-term goal to manage an officer's entire digital life be on cameras hence our continued investment in the cloud solutions variables and mobile.

In order to maintain a leadership position, we will make full technology investments in these emerging technologies, some of these investments will succeed, some will fail.

We believe that the investments we make with both our successes and our failures will be critical to maintaining a learning organization that can evolve and adapt to future technologies and market challenges. Today we are investing heavily in mobile around communication and collaboration features for public safety.

We see the trend from desktop to mobile as something that will certainly come to the public safety market as it has to so many other markets and we are intent on being a leader in the space.

Much like our early investments in cloud technology seven years ago, division we have for mobile it will be significant differentiator for our products from those of competitors. Our increased mobile capabilities add to our holistic end-to-end technology solution that creates great benefits for our customers and value for our shareholders.

It is incremental services such as implementation and prosecutor support that differentiate us from the competition which as everyone knows is heating up as other seek to emulate the success we are demonstrating.

Others have realized that this is a very interesting market that is happening now, there are new entrance more pressure in the hardware stack and others claiming to have a comparable cloud solution.

We are extremely confident that we have a substantial lead on the end-to-end solution of video capture storage and management through the entire criminal justice system. When we are in front of the customer we win time and time again as our offerings excel on total value created, total parts of ownership, the ecosystem and the customer experience.

To simplify, we are investing in the channel to win share now that we are investing in engineering to continue to deliver a world class technology platform where the value increases with each additional user. As I mentioned on the last call, hiring is a huge priority for me, especially this year.

The first quarter started out a little slower than planned even with adding over 50 people by the first quarter call, our people and culture team has really been running at top speed and we have added an incremental 50 people in the second quarter, hiring nearly all areas to the business, but remaining focus on customer facing position, software engineers and international infrastructure.

In the third quarter, we have our new class from college hire starting a truly impressive group of nine talented recruits.

We also went through a hiring deep dive in July to prioritize our hiring for the rest of the year to ensure we are being diligent in our investments to make sure we are hitting the most long-term ROI from each hire as their integrated into the organization.

But we are confident that our investments in high quality hires across the business will continue to provide corresponding incremental returns, there is a lag between the initial date of hire and the positive impact on results.

As we look forward to the third quarter results, incremental hiring is going to increased expenses in addition to some increased travel expenses due to our annual sales meeting, public relations expense for a new AXON brand campaign acquisition-related to legal personnel and integration expenses and new system implementations.

In the third quarter, we anticipate R&D expenses to increase sequentially by $500,000 and SG&A expenses increased sequentially by $1.6 million. Further, in the fourth quarter of this year, we expect another incremental increase in SG&A and R&D of $1.4 million and $500,000 sequentially.

I'd like to reiterate our commitment to the long term and set the expectation this is a consistent message you'll be hearing from me and the rest of our leadership team.

We believe that by investing to obtain, extend and solidify our market leadership position will create a public safety platform that we can leverage to create a powerful economic model. We're planning to win a much larger market over the long run and look forward to generating long term shareholder value as a result.

Rick is now going to update you on the progress in the international market..

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 management and various other support resources.

Following in July, we announced the acquisition of Tactical Safety Responses Limited or TSR. We're moving quickly and aggressively in the UK which is the most advanced market in terms of the evaluation of our product suite today. The UK market represents approximately 120,000 officers and currently has an installed base of around 16,000 TASER weapons.

We're currently waiting on a pending approval of our new Smart Weapon, but we believe that we'll be seeing that come sometime in the next six months. This represents not only an opportunity to upgrade of 16,000 aging weapons in the install base, but there is also clearly a lot of wide space in that market to expand.

There's recently been support expressed by some public officials by the national police union and by the general public to arm frontline officers with TASER Weapons, particularly in light of the current -- against police in the west.

While encouraging main addition of TASER Weapons in this market is a long way off due to the established - culture and we have a lot of work to do. The acquisition of TSR will help us in this market in a multitude of ways. Their experts is in the public procurement with - logistics, compliance, import and export laws of the UK which are very complex.

Further, they are deeply in bringing in existing client base, so not only been we buy their experience in expertise on logistical weapons side, but we are continuing to model and ensuring that we own directly the customer relationship in key markets.

The TSR team brought some pace foundation for our weapon business and we are now adding on top of that a new general manager, enterprise sales and support staff to build up a full team we believe we need to win the market across our entire technology platform including Evidence.com and AXON in our enterprise software sales.

The existing staff will cost us approximately $375,000 in SG&A expense per quarter. We plan to hire out some additional talent internationally in the marketing and sales engineering roles as well in the second half of 2015.

We are deeply committed making the AXON platform, leading cloud mobile and wearable technology ecosystem across the United Kingdom and frankly across the work.

We are actively recruiting country managers in at least three additional countries with respect to fill in the third quarter in addition to two other international regional sales managers we added in the first half. This is all about meeting closer to our customers.

We are decreasing the communication distance from our customers to our product developers and support team. Some of which will be deploying people in country. Beyond operating item support, we will now be positioned to better develop UK customer-driven solutions from nationwide in the management system to UK specific supports reported.

This investment underscores to TASER International's commitment to the UK market and our focus on the international market by delivering the best value and innovations in public safety technology to our customers.

In order to the United Kingdom we have been building out our team at our new international headquarters in Amsterdam from sales to finance IT bringing new systems online to support our supply chain, manufacturing and accounting logistic this has been a significant undertaking and our team has been working really hard and I am really proud of them.

On spirits in building out our U.S. business we know that we need at the right team and right systems to win across the globe and we have been delivering out and setting the foundation.

The UK is great example of the model -- international tour while my focus is on getting the right team in place in our tier 1 countries, getting some of the higher level of introductions made with key decision makers in these markets so that our team can run fast.

After the UK and northern Europe this summer I headed the France, I will be based in Paris which provides a great central location from which I can support efforts across all of Europe. In the Spring I relocate to Rome and again have the ability to move across Europe as we scale up our customer engagement.

I have planned during summer of next year in Australia and Asia helping our teams there. The addressable markets in Europe and Asia in aggregate represent a well over million police officers which is collectively greater than the science of our North American markets.

[indiscernible] on our challenges and our success in these markets in the course of the coming year. But before I hand up I’d like to take you on one other metric that I personally find very helpful in engaging how our business is doing, this is what I call our steady state earnings.

So one of the challenges with the SaaS business, as we evidence.com is it GAAP revenues are spread out we’re very long time horizon, making GAAP revenues and earnings are very much lagging indicator, you really can’t drive the business using GAAP revenues and earnings to assess relative levels of investment, it's a wayward looking metric, especially the business is growing at faster than 100% year-over-year.

So to help collaborate just remind you we talk about this previously but I play a hypothetical game, which is what at the business within a steady state, just like this quarter, and we just repeated this quarter’s performance into the indefinite future.

Under this scenario GAAP revenues would eventually equalize at the second level bookings sure there might be some quarter-to-quarter timing differences but those can cancel out over time, so in this hypothetical future steady state, we would have add revenues equal to bookings or 30.6 million in the AXON business segment instead of the 8.9 million of recognized GAAP revenue.

If we assume a 65% gross margin on this revenue at scale, the additional 21.7 million of revenue would generate an additional 14.1 million of operating margin. This would make the P&L look very different, this will take the operating margin from an actual loss of 5.3 million today to an operating income of 8.8 million.

Though it feels like a pretty reasonable business earning 8.8 million on 36 million of revenue, a theoretical operating margin of over 28%, now of course I want to emphasize this is a purely theoretical exercise that I use to help mentally collaborative our level which expenditure in reasonable for the size of the business when we have today normally assumptions are going to whole true.

I am going to continue ramp up our investments as Luke talked about because we believe that we’re still in a very steep part of the growth curve. So we also expect the booking number to climb over time.

But the steady state earnings is a part of exercise that I find very helpful in looking at a snapshot of the business as it is today and evaluating our level of investment spend. Dan is now going to take us through some of the financial highlights for the quarter..

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 year service margins of 40.7%.

At scale, we think the AXON segment margins could mimic the margins of the weapons business, but the time scale is clearly very independent on future trajectory of the license count and ARPU for the necessitating investments we’re making in today and sales marketing and Research & Development.

Well 2015 got after a slow start with anticipated hiring, we started running fast in the second quarter. We added 50 people in the second quarter and continue to aggressively accrue very high performers from some of the top companies in the world for remaining critical roles within the organization.

We’re looking forward to our new class and leadership development program participant strongly in September and we’re continue to build out the international organization with country managers in the UK, France, Australia and Canada.

Domestically, we’re hiring more tele sales and sales development roles more video original sales managers as we increased our territories and key software engineers to help continue to move both down the quarter in our mobile, wearables and cloud strategy.

We’re still very focus and return on these investments measuring statistics such as customer acquisition costs versus lifetime value, ARPU, license counts et cetera. And the second quarter 2015, our customer acquisition costs lifetime value ratio was actually the highest we’ve ever had at 4.9.

We do expect this ratio to come down a bit in the near term as we add new sales people and consider the time it takes for new sales professionals to ramp up and become productive. We're including all the presales cost enumerator to capture all the incremental sales people, marketing, personnel, sales commissions and sales development initiatives.

We believe our investments have been well placed thus far and are confident enough in the future growth of video business to increase the spend for customer facing sales and support roles shortly in the second half of 2015 in order to ensure to continue to capture a significant share of the growing market for on officer video and digital evidence management.

With active user base of approximately 29,000 users at the end of the second quarter compared to 22,000 last quarter, we're seeing continued growth.

As we introduce higher revenue tiers of our service which include additional features such as unlimited storage and integration into other core systems at agencies, we're seeing the average revenue per user or ARPU go up. In Q2, we had an ARPU of $29.04, this is an increase of $2.24 over Q1 of 2015.

We've priced our monthly service as low as $15 a month per user for our basic service tier and as high as $65 per user per month for the monthly service and storage part of our officer safety plan. Both of those price points are undiscounted. So sales mix will continue to have an impact on ARPU.

We're encouraged by the trend we've seen in ARPU, seeing the ARPU move from $21.70 in September of 2014 to $29.04 that we enjoyed in June of 2015. This is a 33% increase in nine months. As we mentioned in our conference calls over the past year, we are ramping up our investments in both R&D and SG&A.

We continue to see large whitespace opportunities in both on officer video space as well as international markets. As Luke mentioned, going in the third quarter we took a close look at our strategic hiring plan and the timing of our critical hires base and the market dynamics we're seeing.

Result of that exercise is the expectation of our incremental spend in the third quarter compared to second quarter R&D is expected to go up by $500,000 incrementally. In SG&A we expect an incremental $1.6 million in expense in the third quarter compared to the second quarter.

On top of those increases, as we feather in additional hires over the next five months, we expect that R&D will go up an additional $500,000 or $1 million from today's run-rate in the fourth quarter and then SG&A will go up incrementally another $1.4 million or $3 million more than today's run-rate.

In the fourth quarter, the increase in SG&A is partially driven by the International Association of Chiefs of Police Conference which is happening in Q4 this year. It's our biggest trade show of the year in terms of expense as well as the pipeline we generate from it. So in this quarter you might know is we had kind of unusual income tax expense.

We did have a benefit this quarter as we kind of announced on the calls and in our 10-Q, our 2012 tax return was under audit by IRS. That audit actually completed in the second quarter.

The company takes a reserve for the audit risk around on certain tax positions such as potential reduction of our R&D tax credit allowed -- amount we claimed in the return.

As the 2012 audit concluded without any adjustment the R&D tax credits claimed in the 2012 return we did take a benefit in the second quarter of $388,000, which reduce our Q2 2015 income tax expense. On normalized basis, our effective tax rate is approximately 36%. So we see great feedback from the shorten cost structures in the last quarter.

So I will wrap it up here and take some questions from the queue. We have added the supplemental results package on our investor website, investor.taser.com to review the drivers in the second quarter results. And as a result we will only take three questions per person in the first round to make sure that more people have a chance to talk..

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..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day..