UPDATE 3-Taser Q4 results beat Wall Street view, shares up

Fri Feb 19, 2010 1:08pm EST

* Q4 EPS $0.07 vs est $0.02

* Net sales rise 31 pct

* Expects R&D costs to remain flat

* Shares rise as much as 12 percent (Recasts; adds conference call details, updates share movement)

Feb 19 (Reuters) - Stun-gun maker Taser International Inc (TASR.O) reported better-than-expected quarterly results, helped by lower expenses, and said it expects research and development (R&D) costs to remain flat, sending its shares to a 17-month high.

Taser shares, which have more than doubled since touching a low of $3.11 in March last year, were trading up 9 percent at $7.15 in high volumes Friday afternoon on Nasdaq.

Rising R&D spending has been a drag on the earnings of the company, whose Taser guns incapacitate people through a 50,000-volt jolt of electricity.

"We do expect R&D expenses to relax in 2010, as the launch costs for Axon, X3, Shockwave and XREP are behind us," Chief Financial Officer Dan Behrendt said on a conference call.

The company expects to see more stimulus-driven orders in the first half of 2010, the CFO said.

"Over the next 18 months, we could see revenues trend significantly higher based on pent-up demand for Taser products unleashed by a continued economic recovery," Merriman Curhan Ford analyst Eric Wold said in a note dated Feb. 18.

Taser -- whose guns are bought not only by the police, military and correction facilities, but also by individuals and casinos -- has seen an improvement in domestic law enforcement business.

The Scottsdale, Arizona-based company's shares touched a high of $7.34 earlier in the day. Nearly 4 million shares changed hands by afternoon, more than five times the stock's 10-day moving average volume.

LOWER SG&A DRIVES Q4

In the fourth quarter, the company's net income rose about 23 percent to $4.6 million, or 7 cents a share. Net sales rose 31 percent to $34.5 million.

Sales, general and administrative expenses fell 10 percent to $9.8 million, while R&D costs rose nearly 7 percent to $4.8 million.

Analysts on average were expecting earnings of 2 cents a share, on revenue of $31.1 million, according to Thomson Reuters I/B/E/S.

The company recognized $3.5 million of deferred revenue in the fourth quarter, all related to the trade-in program allowing agencies to upgrade to the Taser X3. The X3 is a multi-shot electronic gun that can engage multiple targets.

Taser expects a slow ramp up of X3 over the course of the year.

"With the 2010 introductions of the Axon and the Protector... Taser should start to see increased revenue visibility as well as a higher gross margin profile from the additional revenue streams," analyst Wold said.

Axon is an audio-video device that can be connected to stun guns to grab footage of incidents.

The Protector is an application that gives parents the ability to supervise their children's mobile phone usage and monitor driving behavior.

Federal and military sales rose significantly during the quarter, partly due to the first order of 2,500 X26 electronic control devices and related accessories.

International sales represented 17 percent of net sales. Britain, France, New Zealand, Canada and Australia are some of the key international markets for the company. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Aradhana Aravindan, Anne Pallivathuckal)

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