Good day, ladies and gentlemen, and welcome to the TASER International Q3 twenty fourteen Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will have a question and answer session and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Mr.
Rick Smith, Chief Executive Officer. Sir, the floor is yours.
Thank you, and good morning, everyone. Welcome to TASER International's third quarter twenty fourteen earnings conference call. And before we get started, we're going to start with everyone's favorite part with Dan Barrett reading our Safe Harbor statement.
Thank you, Eric. So the Safe Harbor statement. Statements made on today's call will include forward looking statements, including statements regarding our expectations, beliefs, intentions and 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 H.
R. National Inc. These estimates and statements only speak as to the date in 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 3133 under the caption Risk Factors.
You may find both these filings as well as our other SEC filings on our website at at www.tasr.com. And with that, I'll turn it back over to Rick.
Thanks, Dan. As a reminder, we're going to be accepting some questions via Twitter during the Q and A portion of the call, which can be submitted using the hashtag updates on Twitter during the call, which you will want to do, we'll be posting various graphics. Follow the account at TaserIR that's TaserIR. So we'll be posting graphics and commentary and links to some videos during the call. And for those of you without Twitter, all updates and graphics stream directly to our Investor Relations website investor.taser.com.
The third quarter of twenty fourteen was a busy one here at TASER and I'm personally excited to share some of the progress and milestones reached during the quarter. First off, consolidated revenue grew 26% year over year to 44,300,000 yet another new record for the company. This marks the eleventh consecutive quarter of year over year top line double digit growth. We continue to work hard to aggressively grow the top line and we're eager to continue to share our progress and success through the remainder of the year and into 2015. The Evidence.com and Video business realized another quarter of increasing momentum and exciting announcements which culminated in a strong bookings figure of $15,300,000 and we hit the milestone of selling over 100,000 cameras into the field to date, including Axon and our TASER Cams.
In the macro environment, it's ever more clear that we are at a tipping point for this technology in law enforcement. The unfortunate events at Ferguson put a bright spotlight on the issue of on officer cameras both within communities and in law enforcement. I believe there has never been a more singular point in time for on officer cameras that has caused such a fundamental shift in customer attitude. Inquiries increased tenfold. Our video pipeline is the largest it's ever been and RFPs have more than doubled compared to last year for video specific bids.
We feel that Ferguson switched the light on for some officers eliminating some of the resistance remaining to the adoption of this technology. And perhaps the most striking example of this shift in adoption comes from the Seattle Police Union. A few years ago, the Seattle Union had taken a strong stance against wearable video. After Ferguson, the President of the Union said that they now support wearable cameras to protect their officers. It's interesting to compare the adoption trends of this technology with the beginnings of our TASER weapons business so many years ago.
TASER weapon implementation was initially pushed by frontline officers and was typically met with initial top down resistance to change and the potential for controversy. With on officer video, we now also have officers asking for the technology in order to protect themselves while on duty. In fact, some of them are buying these units personally. And we also have broad external support from the community, including groups like the ACLU for more accountability by police. Further, there's a very high return on investment for the agency as a result of fewer citizen complaints and reductions in the use of force.
In one example, the now famous Rialto PD study estimated that they saved $400,000 in hard costs just from the reduction in complaints once they deployed the cameras. Their first year cost for the program were $90,000 yielding over a 300 return on investment in the first year. In other words, the agency saved $4 for every dollar they spent. Further, I just sat on a panel with the Chief of Rialto at the IACP, which is the International Association of Chiefs of Police at the conference that I sat with the Chief. And he said that they realized another big savings before cameras they had three people dedicated full time to internal affairs.
Now they have so few complaints, he only needs one officer. So he's been able to redeploy the other two officers to do police work. This equates to another approximately $380,000 in savings per year. They've also seen their overtime for officers going to court to testify dropped by 41%. We can't yet quantify what that is in dollar terms, but hopefully by our next call we'll have some estimates.
If we add up the numbers, the first year ROI starts to reach incredible levels. We now have three forces pushing for the adoption of video: police officers, the community and the return on investment. The largest agencies are continuing to choose our solution Axon and Evidence dot com to address this seismic shift in law enforcement. As of the third quarter, we had 11 major cities actively deployed and another 35 in some form of pilot program. That is nearly triple the number of major cities in pilot from what we discussed last quarter.
We are very confident that these trials are going well. Large cities who deployed cameras in previous quarters for expanding their programs. For example, Salt Lake City and Birmingham have decided to manage all their digital evidence not just from Axon cameras, but everything on evidence.com. And Miami Beach held such a strong conviction about the benefits of these cameras that they purchased Axon cameras from multiple departments within the city, including their fire department, building inspectors and parking attendants. These expansions prove the concept of evidence.com as a digital evidence management platform and we look forward to integrating more agencies in the future.
We're often asked about the benefits of our solution versus our competitors in this space. To our knowledge, we are the only proven scalable end to end solution in the marketplace today, which is why we are winning these large agencies. Birmingham is a great example like Albuquerque of a turnaround story. They initially went with a competitor of ours, but found it was not scalable or robust. They came back to TASER and have clearly become our advocate with the expansion to all digital evidence.
The 3,700 agencies who are choosing Evidence.com as of the third quarter are doing so because of the end to end solution, an extraordinary customer support experience they get from TASER. By the way, just to be clear, those 3,700 agencies include agencies that are using the full Evidence.com with Axon cameras as well as Evidence Lite for managing their TASER CEW weapons. Evidence.com receives a new file upload every six seconds during the third quarter, culminating in a total of 1,300,000 files uploaded this far into evidence.com. If you take a look at the graph we're tweeting out right now, the mathematicians among you will notice it is still resembling a smooth exponential curve. In 2014, approximately 75% I'm sorry, approximately 75% of cameras sold included an Evidence.com contract initially.
So 75 of cameras are sold online. Further, other cameras have come online that were initially purchased as offline units. Birmingham is a great example of this. That's the beauty of our system. It's as easy as flipping a switch for a customer should they change their mind and decide to utilize evidence.com.
Additionally, in the third quarter, bookings over 87% of contracts were for multiple years. To us, this is a fabulous time. Not only do agencies understand the value proposition of Evidence.com, but they see this as a technology and a solution that is here to stay. And that TASER is the right partner for long term success in new technology implementation. Frankly, one of our standout benefits and competitive differentiators, TASER will not allow a customer to fail.
We provide the best support in the industry and we have consistently from our customers. Our programs scale because of the solution and because of the people behind it. We're also innovating to develop the most requested features from our customers. Last week, we announced Axon Signal, a Bluetooth add in that will turn all cameras within a certain radius on with the activation of a police light bar on their car or when a TASER weapon is armed, a unique feature that only TASER could offer. This feature will be available on Axon Flex cameras starting in the first quarter of twenty fifteen and it's a feature that can be added to previously purchased cameras for a small additional cost.
I just returned from Association of Chiefs of Police. It was by far the most successful show of my career. There was so much traffic to our booth, we overheard other exhibitors complain, what, is this show just all about TASER? Our theme this year was don't be a dinosaur. We wanted to drive a conversation about the need to adapt to change, particularly the need to adapt to new technologies like the Internet, cloud and wearables.
There was a line around our booth for two solid days and we estimate around 3,000 attendees, primarily police chief went through the TASER experience. Many who came to our show were absolutely energized to help drive change at their agencies and they see TASER and evidence.com as the key partner to drive that change. To ensure we kept the don't be a dinosaur topic on top of every conversation, we had two life-sized velociraptors walking the show floor all day. And we took them to some key events such as the major city Chiefs of Police reception. And I can tell you everyone was talking about why we had dinosaurs roaming the reception.
And it placed the seed for the exact conversation that we wanted to occur, especially among our current customers educating new prospects on the great experience that they are having with ovens.com. Our dinosaurs even made a guest appearance at the TASER party with another 3,000 plus attendees talking about dinosaurs. And they have talked about the dinosaurs within their own agencies, exactly the conversation we need to have. Now to help entice people to come through our presentation, we gave away large oversized stuffed dinosaurs. 2,000 people received the evidence.comdinosaur and every one of which was a mobile billboard force that saturated the show floor.
These dinosaurs were too big to stick in a bag, so when you carried it, you were advertising for us. You'll get a chance to see later when we tweet out some videos from the show, just how impactful this program was. And these dinosaurs were going to kids and grandkids keeping the Don't Be a Dinosaur campaign alive long after the show was over. I cannot put into words how proud I am of our marketing team for the work they did this week. I think it was the most impactful marketing campaign in the history of law enforcement and certainly the most creative campaign I've ever been involved with.
Last year, we set the objection objective to establish dominant market share and to do what it takes to avoid market fragmentation. We increased our investments and our team has executed rigorously. We've won every major agency that has made a purchase decision in the past year. If we continue this momentum with the 35 major cities that are in some form of trial with us today, it is conceivable that we could have 46 of the 66 major cities or 70% of them on evidence.com by the end of twenty fifteen. This would establish evidence.com as a nearly unassailable market leader.
The smaller agencies will typically follow the larger ones which drive standards regionally. We will continue to aggressively invest in expanding our sales team, our marketing programs and our product development to maximize our chances to succeed in this mission. We believe these investments will be as fruitful as the investments we made in 2013 that are yielding the winning results we now enjoy. Following the Ferguson incident buying cameras work everywhere at IACP, One of our people joked that even Hotdog Vendor had a camera to sell. But what we've heard over and over from our customers was that no one there had a proven scalable end to end system that we have spent six years developing with axon and evis.com.
Others will try to follow, but those starting to make investments now will have an enormous amount of decline to catch us because we've invested the time, capital and the best talent in the industry years ago to establish a wide first mover advantage upon which we are now building aggressively. In addition to the fantastic momentum we're seeing in our Video and Cloud business, the TASO weapons business continues to execute and show strong results, delivering revenues that were up 26.5% to forty point zero million dollars Gross margins for the weapons were epic at 68.9% for the third quarter. Domestic weapons sales increased 20% year over year. The upgrade to smart weapons within the weapons segment is progressing. As of the third quarter, we have 40 major cities with significant numbers of smart weapons deployed.
We were able to add Dallas and Houston to that list this quarter. In the third quarter, we were there were several large orders that were actually expected to close in the fourth quarter. We brought them forward. So as we previously mentioned, we have 10 to 12 deals a quarter which are over $250,000 but we have approximately 4,500 orders total in each quarter. If these large deals shift in one quarter, it can cause lumpiness in the domestic business.
So while the lumpiness was favorable for the third quarter, it could potentially have the opposite effect in future quarters. Our sales team executed flawlessly this quarter, brought in several deals from the fourth quarter into the third, which of course could cause a bit of lumpiness next quarter in both revenues and potentially in bookings. Now on the other hand, we are working some very large international deals, which could come in during the fourth quarter. Internationally, there were some great wins as well. In total, revenues were $6,700,000 internationally in the third quarter, an increase of 81.6 compared to the prior year.
In fact, year to date, 2014 international 14 international revenue has surpassed all of 2013. Notable events in the quarter internationally included the sale of smart weapons into Poland for the first time, thereby opening a new market for TAVERS. A smart weapon expansion in France and Australia and we saw the London Met double their infield pilot camera program bringing the total up to 1,000 units with what is arguably the most influential agency in the world and certainly outside of The U. S. Our international headquarters in Amsterdam is in the process of setting up.
Ron Brand and his team are busy hiring incremental sales and administrative staff to help run and expand that business, which we are confident will continue to grow stronger over time. We continue to be excited about the direction of TASER and Evidence.com and look forward to showing more success in the coming quarters. Now, let me hand over to Dan to go over the financial results in more detail.
Thank you. As we stated earlier in the third quarter consolidated sales of $44,300,000 were represent a 26% increase from the third quarter of twenty thirteen. The increase in sales was primarily driven by the total law enforcement weapon handle sales, which increased $6,900,000 in the third quarter compared to the prior year. Axon camera revenues increased 1,200,000 compared to the prior year and service revenues, revenues like common video segment increased $700,000 to $1,200,000 in the third quarter compared to the prior year. The legacy X26 CDW declined $4,300,000 in the third quarter as a result of agencies embracing the new smart weapon platform.
As we messaged at the last quarter's call, at the end of the fourth quarter, the X26E, which is the legacy product, will be going out of production. While we will still support warrantied handles, we will start focusing solely on the smart weapon platform going into 2015. The Neuschyn single shot smart weapon, the X26P saw sales increase $8,100,000 over the third quarter of twenty thirteen, which is the main reason total law enforcement handle sales grew by $6,700,000 when compared to the prior year. Gross margin for the third quarter was $28,700,000 dollars or 64.7% of revenue, which is up from $22,100,000 or 62.8% in the prior year. As sales have increased, we continue to benefit from higher operating leverage.
Due to the price increase instituted at the beginning of twenty fourteen and more sales being sold directly to the end users rather than through distribution channels, we've also realized higher ASPs on our product improving gross margin. Cost of services delivered increased $200,000 in the third quarter compared to the prior year, primarily due to the increased personnel and travel costs associated with our professional services team. Cloud storage and hosting fees also increased compared to the prior year as more data and files are uploaded into evidence.com. Gross margins in the TASER weapons business were especially strong with gross margins as a percentage of revenue in the third quarter of twenty fourteen being 68.9% compared to gross margins of 65.5% in the third quarter of twenty thirteen. In the Evans.com and Video segment, revenues increased $800,000 to $4,300,000 for the third quarter of twenty fourteen.
Loss from operations in the Evans.com and Video segment worsened to $4,000,000 from a loss of $1,500,000 in the third quarter of twenty thirteen, largely due to the increased investment in research and development activities and in additional sales representatives and marketing expenses for Axon and evidence.com. The investment in sales and marketing are continuing to yield results as evidenced by our current acquisition costs to lifetime value of the customer ratio. This statistic looks at sales and marketing costs in the quarter divided by the number of new seats acquired in the quarter and then we compare this to the net present value of future gross margins for that customer. In the third quarter, the video business had results where the customer acquisition cost lifetime value ratio was greater than three. As a general rule of thumb, when you have investments when that ratio is above three, it indicates that we're getting a lot of leverage out of our sales and marketing and it's a good indication that increased investments warranted in the future.
SG and A expenses of $12,400,000 and $12,800,000 for the three months ended June 3034 and 2013 respectively represented a decrease of $400,000 for this year or 2.6%. As a percentage of net sales, SG and A expenses decreased to 28.1% for the third quarter compared to 36.3% for the third quarter of twenty thirteen. Compared to the prior year, professional accounting legal fees and litigation expenses decreased $2,800,000 driving primarily by lower cost of defense related product and commercial litigation. That's the main driver for the reduction year over year. Liability insurance also decreased approximately $300,000 compared to the prior year due to favorable rate changes in the impairment of that insurance.
These decreases were partially offset by increased personnel costs of $1,200,000 as the company has increased customer facing positions as well as some other administrative functions. We expect to see elevated SG and A expense continue into the fourth quarter due to the timing of the International Association of Chiefs of Police show that Rick mentioned earlier. That show typically has an investment of roughly $600,000 for us. Last year that expense was divided between Q3 and Q4 this year. All that expense will be in Q4.
So we do expect to see elevated spending in Q4 due to the show as well as additional incremental investments we're making in SG and A. We expect the higher SG and A cost to continue into 2015 as we continue to hire people and spend money on sales and marketing activities in order to drive the business. Research and development expenses of $3,800,000 for the third quarter of twenty fourteen. This represents an increase of $1,300,000 compared to the third quarter of twenty thirteen. The increase continues to be primarily due to additional personnel costs relating to our Evans.com and video segment development initiatives.
As the team begins development initiatives, expenses will be capitalized until the product launches. However, given the newness of this initiative, the company cannot be certain of the timing of the capitalization or the completion of the development projects and we do not capitalize any expenses in Q3. With current planned hires and other research investments in Evans Icon in the video segment, we continue to expect R and D expenses to increase from these levels. We're finding that larger customers such as the London Met require additional functionality in our Evidence.com solution, which has delayed the development and launch of some of the new product lines. We believe in ensuring that major cities utilizing our solution have the best experience possible will continue to solidify our position in the market.
Adjusted EBITDA, which includes items such as detailed in the press release was $15,100,000 in the third quarter of twenty fourteen. This compares to $9,000,000 in the third quarter of twenty thirteen with the increase being driven by the higher sales and gross margins in 2014. Income from operations was $12,500,000 in the third quarter of twenty fourteen compared to $6,900,000 in third quarter of twenty thirteen. As a percentage of sales, operating income was 28.2 percent in 2014 compared to 19.5% in the third quarter of twenty thirteen with the increase mostly due to higher gross margins on the higher sales in the Q3 of twenty fourteen. Net income for the third quarter of twenty fourteen was $7,600,000 or $0.14 on both a basic and diluted share basis compared to net income of $5,100,000 or $0.1 per diluted share last year.
So moving on to the balance sheet, we finished the quarter with the company generated $16,700,000 of operating cash flow, which led to finishing the quarter with $74,000,000 in cash, cash equivalents and investments. Accounts receivable for the end of the quarter $27,100,000 This is up $4,600,000 from the year end balances due to the timing of collections as well as the higher sales in the quarter. And inventory balances of $16,100,000 is actually up $5,000,000 from the prior year due to increased stocks of both raw materials and finished goods in anticipation of future sales. Total assets as of September 3034 were $164,100,000 Total deferred revenue for the quarter was $30,000,000 This is an increase of $9,800,000 from the year end balances, primarily due to the upgrade program of the X26 and X2, which includes extended warranty. We also had sales of the Evans.com solution, which contributed $2,800,000 to an increase in deferred revenue from prior year balances.
As you know, we are deferring revenue related to Evans dot com service at the time of the purchase. So the service revenue ends up being recognized over the service period, which is between one and five years depending on the sales agreement. Also contributing to the increase in deferred revenue is the TASER Assurance plant, which has increased the balance by year end by $2,600,000 as customers continue to brace the program for both weapons and axon cameras. Total liabilities of $46,100,000 and the quarter company finished the quarter with $118,000,000 in stockholders' equity. Company continues to have no long term debt other than some small capital lease on the balance sheet, continuing to have plenty of liquidity and a strong cash flow engine in our core business to fund our sales, R and D efforts and operations into the future.
Moving on to the selected information from cash flows. The company had cash provided from operations of $22,600,000 for the first nine months of 2014. This compares the company paid approximately $4,500,000 year to date on several litigations cases including the AA and Safa Consultants Inc. Versus TASER which was a negative cash flow. The operating cash flow would have been higher without those expenses.
Net cash used in investing activities for the nine months ended September 3034 was $17,100,000 compared to cash used of $13,200,000 in the same period of the prior year. The net use of cash was driven by the net purchases of investments during the time period of $23,800,000 Cash used in finance activities was $9,300,000 for the first nine months of 2014 compared to the cash used and financing activities of $11,000,000 in the same period of the prior year. The net use of cash was really driven by the repurchase of company stock of $22,400,000 for approximately $1,700,000 I'm sorry 1,700,000.0 shares, partially offset by the proceeds from employee stock option exercises of $8,600,000 and excess tax benefit from stock based compensation of $5,800,000 To wrap up, we're continuing to invest in the business because we're serious about executing on our strategy of providing top line double digit growth consistently. We feel that these investments are necessary to continue to solidify our market position in the video business, investigate and develop adjacent revenue producing opportunities and continue to grow internationally so we can provide long term value for all our shareholders.
Okay. With that, there's still other things I want to mention that I fell to in my segment. But first, some of you might have noticed that during the IACP, we launched the Evidence.com Partner Platform program with three launch partners, a drone company AeroVironment, IRobot and Net Transcripts. We've stood up a business development function this year and I can tell you we were frankly overwhelmed with inquiries from companies that want to come and partner with us. I think it is being seen in the industry that we have the strongest brand and that our platform is the core platform by a fairly large margin.
So we see partnering as a way to further solidify the power, the stickiness and the momentum of Evidence.com. And finally, I'd point out as well, our party at IACP was themed as a retirement party for the X26. So again, our creative team did just a great job. We had a small roast and a send off for the X26 banking it for its dozen years of service in the field, which is a fun tongue in cheek way to sort of remind the market that the X26 goes out of production at the end of this year and help customers transition to our newer smart weapons platforms. And so with that, we'll transition and we'll take a few questions.
Our first question comes from the line of Paul Coster, JPMorgan. Your line is now open. Please proceed with your question.
Yeah. Good morning. This is Mark Strauss on for Paul. Thanks for taking our questions. Just looking at the Evidence.com bookings, was there anything any particularly large orders that are worth calling out?
I'm just thinking about next quarter and if there's anything from this quarter that would be a tough comp for 4G?
Yes. Thanks, Mark. This is Dan. As Rick indicated earlier, I mean, we certainly our sales team executed flawlessly this quarter. And really, there's a number of deals we're able to pull forward.
Individually, they weren't saying on the sort of orders of magnitude like the San Diego deal last quarter. But collectively, they were as big or bigger than the San Diego deal. We had a number of million dollar deals that we closed this quarter. So there's some lumpiness. Obviously, we're continuing to execute hard.
As Rick said, the pipeline for video, it continues to be very strong. In fact, it increased from the last time we talked and continues to be larger than the CW pipeline. But it's tough to predict exactly when those orders will happen, but certainly very happy with the results this quarter.
Okay. And switching to weapons, I know you guys don't give guidance, so this may not be a fair question. But is there any way to quantify for us the amount of orders that were pulled forward into 3Q? Kind of what the hold is in 4Q?
Yes. I mean, that's a tough one. Again, we closed the quarter very strong with sales team executing both in the federal space with some year end monies that we're able to pull forward and get into Q3, which was useful as well as a couple of the transactions. The Dallas deal was a deal that could have easily been in the fourth quarter. It was kind of a lease deal that we did.
It was kind of nip and tuck there at the end. That was a deal for about $2,500,000 to $3,000,000 So there's certainly, I think that they executed well and I was very pleased we're very pleased with this company with the way they executed the quarter. So certainly we had both between the large federal deal and Dallas is one of the call in particular, easily deals that could have been fourth quarter deals.
Okay. And then one last one if I can. Just any thoughts on potentially updating the long term targets or maybe hosting another Analyst Day?
Yes. No, it's a good question. That's certainly something that we're looking at. It's as you can see, things are very much in flux right now in a positive way. And we want to make sure that we've got plenty of flexibility to continue to make the investments, which we think will pay off long term for our investors, but it makes it a little bit tougher to predict certainly down to the net income level with investments we're making.
But we'll continue to look at that. We'd like certainly like to do that have another Analyst Day maybe sometime in 2015, but we'll certainly update you once we're ready to do that.
Okay. Thank you very much. Congrats on the quarter.
Thank you.
Our next question comes from the line of Greg McKinley with Dougherty and Company. Your line is now open. Please proceed with the question.
Yes. Thank you. I wanted to, I guess, touch on a couple of different topics. First of all, Rick, you talked a little bit about international operations. Can you maybe just summarize for us what your infrastructure is in international markets, where you see that going?
And then maybe what are some of the most attractive market opportunities you think that will help you capitalize on?
Okay. Well, let me start. So the Epicenter is now moving to Amsterdam. That's where Ron Brandt and his team are based. In Amsterdam, I'd say we probably have around eight employees today.
That will probably be growing to 12 to 15 next year as we add international controller etcetera. There are some tax advantages to operating out of Holland. So obviously, we see that as a we did a pretty exhaustive review on where it made the most sense for us to be looking at tax implications as well as operational implications. Wanted to be right close to the heart of Europe there. That's our largest team internationally.
In Brazil, we've got a team I think of about five people in Brazil. We're still working to try to get approval from the Army to be able to start manufacturing phases with our contract manufacturer and reenter the Brazil on the weapons side. In the meantime, we've had some of the largest agencies in Brazil are now in paid pilots with Axonanimatus.com. We're able to deploy from Amazon's data center in Sao Paulo. So those are going well.
So even while the weapons approval has taken much longer than we would have hoped, we are seeing that the camera business down there can be very interesting. We have a couple of individuals in other parts of the globe. Frankly, as we look at 2015, we're just going into our budgeting process now. We intend to significantly ramp up our investments in international sales and marketing. And frankly, as we look at history, we've done well in the English speaking countries in The UK and Australia and New Zealand and not as strong elsewhere.
So I think we've realized late last year that if we're going to be truly international, we've got to behave more internationally and provide the sorts of investments in infrastructure and personnel to our international customers that we do here. We began internationalizing all of our websites in terms of language. We hired a European, a German guy, not just an American we transplanted overseas. I'd say three years ago, our international sales plan was largely send Americans around the world on senior executives to go make presentations, but I don't think we're strong in having teams on the ground to follow-up and drive the ball down the field. That is changing now and we see lots of opportunity to drive more growth next year.
So you will see some more investments in international as we build out both the team in Europe and I think you'll see investments in putting in more structure and larger team in Asia.
Okay. Okay. Thank you. That's helpful. And then, wonder if on the bookings side within your video business, maybe can you and Dan, you also talked about deferred revenue.
Can you remind us how much deferred revenue is on the balance sheet today as it relates to Evidence.com? And can you talk about a backlog number? How much has been already recognized for software and service revenues versus how much is in backlog? Just to give us a sense for how that's aggregating?
Yes. It's certainly we've seen a significant growth. This quarter it was almost $3,000,000 of deferred revenue growth just for the video business on top of what was already on the balance sheet. We'll have that in the Q. So The
$3,000,000 sequential increase?
Yes, sequential increase. I'll get you that total hopefully by the end of the call here. We'll get somebody looking at pulling out of the queue. We certainly see it's about almost about $7,000,000 on the balance sheet right now for the deferred revenue for the video business. Again that balance will be partly driven by how much cash that we receive.
So our future billings are actually significantly higher than that. This year, we've had $32,500,000 of bookings. The amount of cash the amount of billings is a fraction of that. It's probably about maybe $10,000,000 of billings. So even this future $22,500,000 of future billings that will be done in subsequent years.
Most of the customers with multi year deals will still prefer to pay for the product annually. So it doesn't create a large deferred revenue, but it does create sort of a large future billing amount.
Okay. Okay. Thank you. That's helpful. And then regarding the Evidence.com product itself and the Axon hardware, how I know you've already recently announced new features on the Axon camera to link it back to a squad car or turn the camera on remotely.
How frequently do you anticipate new features being introduced? And is there a long life cycle to be able to get new features into the camera if needed?
Yes. I think that I'd say one of the things that is unique for TASER and really a competitive advantage is our ability to do a lot of voice of the customer research. Customers we have a really good relationship with customers. They are very open with us as far as features that they desire. Our marketing team and our R and D team does a really good job of helping customers prioritize the features.
So we work on the things that are most important to them and we work on those things first and the things that have the most universal need. So I think the a lot of what the team is working on today has been sort of additional features in Evans.com that especially for the larger customers that make it more efficient for them to roll out the product, make their use of the product more efficient. And again, this creates a competitive advantage because these are advanced features that are hard for competition to replicate. And I think it's a big reason why we're winning the large deals Rick talked about being the only scalable and then solution. Part of that scalability is having advanced features that make large customers make their experience in our system excellent and makes them reference customers going forward for other big customers that allows them pulling into the system as well.
One other thing I would point out is I believe every major deal we've signed this past quarter was on our ultimate plan or at least the vast majority of them were. Our ultimate plan is where we bundle in an included upgrade every two point five to three years. So for our customers, they love that. We take the risk out of it for them and say, look, as you get on this plan, you don't have to worry about are you going to be obsolete when the next camera comes out. We can have you on a regular upgrade cycle.
And frankly, I think that's something that uniquely TASER could do with some of our smaller competitors that obviously, there's a lot of noise out there. There's a lot of paperware. A lot of the competitors have memorized our product specifications to like comical detail. But the fact is a customer is not going to get on effectively a prepaid plan with some company they don't know if it's going to be here in a year or two. Yes.
The stability, the customer relationship we have at TASER allows us to enter into these relationships and take that risk off the table for our customers. And that's something that is not replicable.
Yes. Okay. Thank you. Nice quarter.
Thank you.
Our next question comes from the line of Steve Dyer with Craig Hallum Capital Group. Your line is now open. Please proceed with your question.
Hey, guys. It's actually Greg Palm on for Steve. Congrats on the fantastic results.
Thanks. Thank you.
I was wondering if you could go into some detail on the bookings number. Obviously, a big jump sequentially and I'm sure Ferguson had something to do with that. But can you talk about the cadence of those orders received? Obviously, results will be lumpy on a quarterly basis going forward. But given the active deployments and pilots you guys have talked about kind of what's the right level to think about going forward?
Got you. Well, first of all, let me just say Ferguson had very little to do with the bookings number this quarter. Our customers don't buy in thirty day cycles. Ferguson drove a big shift in inquiries and new trials, but we won't see the effects of Ferguson in the booking number for another quarter or two. Dan?
Yes. No, I agree with that. I think as I indicated before a little bit earlier on the call, I mean, we had a number of $1,000,000 deals this quarter, which I think is really encouraging that the quarter is not dependent on a single deal. Last quarter, we had a pretty good percentage of the total quarter bookings were one transaction. So having a number of sort of million dollar size deals I think is useful.
Certainly, as on a go forward basis as Rick indicated in his comments earlier, I think that there's certainly some lumpiness. It makes it tough to predict, but we feel very good about the macro environment. We think we're continuing to win the vast, vast majority of any competitive situation we're in. So the faster the market moves, the faster the bookings will grow. But we are dependent on a number of outside influencers as well.
And one other anecdote I would share about the Ferguson incident, we did have a number of agencies in that area obviously, call us up and say, hey, we want to get cameras out fast. We were able to deploy I think 70 or 80 cameras at one agency that wanted them in a matter of days. And what I heard back from our team that was out there is that while they were there in one of these agencies, one of the competitors also had some product there and the agency couldn't get it to work. So that's again one of our advantages. This thing scales.
We've got in the tens of thousands of cameras, 100,000 total in the field. We have thousands and thousands of cameras online and our business processes continue to get more and more streamlined, so we can bring cameras online faster and easier for the customer. And we believe that those competitive advantages we have an opportunity to widen The Gulf from the position we're at now. And it's like the one we heard about there with that agency struggling. As new competitors throw lots and lots of features and try to compete, this stuff's hard to do well.
It takes really great engineers and a lot of work and a lot of rigor. And a lot of folks trying to do this, we don't see have the resources and talent and time frankly to be able to do something competitive while the market is forming here.
That's helpful.
Moving on to weapons business and sorry if I missed this, but you guys are obviously end of life in the X26 this year. Can you talk about the impact of that? What that had on Q3 results, if any? And kind of what kind of impact it has going forward on the upgrade cycle for the next couple of quarters?
Yes. We certainly this is Dan. Certainly, historically when we ended like the M26, it certainly helped customers that are sort of waiting or on the fence for an upgrade. It helped to sort of drive adoption. They gave them sort of one more data point to use with their city councils as they try to get capital money to buy new weapons.
They'd say, look, our weapons are sold, old they're not supported by the manufacturer anymore. We think that will be a useful fact for them to have in their argument of why they need to upgrade. And certainly, we think by end of life in the X26 that could help to continue to drive the upgrade cycle. It's tough to quantify exactly how much is how big an impact it's having in any given quarter. But certainly we know from sort of historically that it is useful.
It gives forces customers to look at our new products. We think candidly the new smart weapon platform is has some significant advantages over legacy products. And by no longer supporting legacy product, it forces customers to take a look at the new products, which hopefully will help drive the cycle as well to upgrade.
And then last one. Maybe as you take a step back and kind of compare what's going on with the Video segment now and think back to maybe what your expectations were like a year ago. What has changed? What's different from your initial thoughts, whether it be accelerated adoption, take rates, usage rates? I know the Ferguson events have probably had a pretty significant effect, but just trying to get a sense on how things are ramping compared to your initial thoughts?
I think we're very pleased to where we are right now. I would say that a couple of things that we find really encouraging. One is that 87% of the deals this quarter were multiyear deals. That to me is just an amazing statistic. It shows confidence in our customers to continue to execute.
It shows confidence that the solution is something that they're going to need long term. This isn't a one year and we'll figure out a year if we really need it. They get it. I think our sales team has done a great job of helping our customers understand the complexities of trying to manage digital evidence on their own without a robust solution behind them. So I think the fact that we're seeing 75% of the cameras sold this quarter were online, meaning they bought subscriptions to MSI com and then 87% of those bought multi year deals.
I think we're very encouraged by both of those statistics. And we feel compared to our expectations, I would say we're very pleased and meeting it or even exceeding our expectations at this point.
Yes. I'd add it as well. Look, we are feeling phenomenal right now, right? I mean, five years ago when we started down this path, a lot of people thought we were crazy. Cops a lot of people said cops aren't ever going to wear our cameras, big brother.
I mean we had police chiefs the overwhelming feedback was we'll never put our data outside of the four walls of the agency in the cloud. I mean frankly, a lot of people thought we were kind of crazy. And we went through some dark years there. I mean, this was hard to transform the business. This has not been an easy transformation.
What we've built was intense from a capital perspective, from an effort and engineering perspective. And we went through some dark days. I'd say about two years ago, we had folks in the company asking us, hey, is it time to shut this thing down? Is this thing ever going to scale? Well, I think we have that answer now.
And the great news is when you can see what's coming when the rest of the world doesn't see it yet, that can set up for a great advantage. And so everybody what everybody thought was crazy five years ago is now accepted as inevitable and we are well positioned. I'd like to thank our shareholders. Some of you guys have stuck with us through those dark days and through the years where we bounced around breakeven to get this done. And I got to tell you, it feels great right now to have the validation of the market and the validation of the customers.
And we are running hard and we're going to own this thing. And we feel like we much like the TASER business, we created it from nothing and we're going to run hard. And I think we could win this. We could run the table. We're winning every major city right now.
And I think we may have a couple of blips along the way. Things aren't always sunny and challenge free. But as people pointed out a few years ago, this could be a very competitive place. There's lots of cameras. People can do software.
But this business also has some aspects where if a true market leader emerges, there would be a lot of momentum for people to consolidate around that market leader. And we got a shot at it. It's not in the bag, but in another year or two, we could have this really dialed in and locked up. And this business is materially more valuable if we are the dominant industry standard than if we are just one of several in the market fragments. So we've said that message before and we'll repeat it again.
And that is a battle cry for our employees and frankly for our investors. We know that you guys aren't always delighted when we say, hey, we're going to invest more to get this done. But when we see this sort of growth possibilities and when Dan talked about that customer acquisition to long term value number, to me that's a super conservative approach because we're just modeling in the customer value with our current products today. Every customer that we're in, we have opportunities to expand with future products with additional premium add ons. If we started modeling that in, the number increases even further.
But of course, with investors, we want to be conservative. But in case you can't tell, I'm feeling great and the wins at our back and this is not the time for us to relax and let up. It's time to go for the kill.
Thanks again for the insight and congrats again.
Thank you.
Our next question comes from the line of Glenn Mattson with Ladenburg Thalmann. Your line is now open. Please proceed with your question.
Yeah. Hi. Good morning, everybody. So I guess keeping on that same thing same theme, it's nice to see the uptake in new services by some of these other agencies like Salt Lake City and Birmingham, the fire and buildings departments in Miami. Curious if those extended use cases are being brought up in other cities.
But then also I think we've spoken in the past about next year 2015 you guys starting to potentially release some new products down that Evidence.com sales channel. And was curious how that process is coming along, but also is it customer feedback? Is it things that they're asking for and requesting that's driving the new product development there? Or is it things that you guys think that the market needs that they don't know they need yet? So any thoughts on that?
So, yes, absolutely. This is Rick. Let me comment on that. The introduction of sort of completely new products is slightly delayed. I would say as we've made resourcing decisions.
For example, the plumbing deploying in England with the London Met that required some significant work to get that done because we couldn't use Amazon Web Services long term. We had to deploy on a local provider that met certain requirements within The U. K. So as we looked at it, we have had to make some prioritization decisions where we've said, you know what, we've got to win every big deal that's coming across the table right now. And so we've invested a little more heavily and we've redeployed some of our engineering resources on making sure so our number one priority is win every big deal.
And right behind that is we want to make every one of those customers ecstatic. We want them to have a successful program that they're bragging about that it's going so well. And that requires a lot of support. And the reason we do that is twofold. These guys all talk to each other that's going to impact the next deal.
And then frankly that's setting the stage for when we want to come in with our next products and services, some of which are going to displace some incumbent systems they've got. Customer sat is typically very low at law enforcement agencies with their existing systems. We think our customer sat is like the secret weapon that will enable us to come in with the next generation products and as we expand out from our beachhead. So I think we're doing obviously we feel it's the right thing from a discipline perspective to make sure that we have the current business opportunity under control, stable scaling and working and not overextend ourselves and introduce something else too soon if that means taking resources off of the opportunity at hand. Dan anything you want to add on that?
Yes. No, I think that you hit that perfectly. That's great. I think the only thing I would add is you had a question about the sort of digital evidence management and examples like Salt Lake. I would say that's definitely something our sales team reinforces with all the customers.
We've engineered the system to be a digital evidence management solution for all digital evidence not just our videos. So having customers like Salt Lake store other digital evidence in there I think makes them referenceable for other customers consider using our product for everything and having all their evidence in one place from a digital perspective. So I think that's one more value proposition we offer. We've got good workflow for ingest of other products. So and some of the partnership stuff we're working on will certainly allow for other things to be loaded in the system and have all the digital evidence in one place.
One other thing I'd like to I missed answering the second part of your question which is, are we developing things customers are asking for? Or are we going to sneak up on them with some new things they don't know they need? We sort of learned our lesson those who were here many years ago about trying to sneak up on our customers with left field that is just totally out of the blue that we hope law enforcement would like. The engineering team when we acquired Familiar last year, they spent four months in the field on ride alongs with cops and go on swap call outs and sit in the dispatch centers. So we it's not just even product management.
Engineers are in the field with cops taking their feedback into what they need and that's those are the things we're building. So it's a very customer driven approach. It is not an internal engineering driven approach on all of our new products and services.
Yes, that's right. I think the X26P was a good example of how you guys have moved towards listening to the customers and what a success that product's been.
Yes. The X3 is still my favorite TASER we ever made. I went by my bedside. Unfortunately, I'm sort of alone in that perspective and we don't want to have another one of those. So we want to make sure it's right for the customer and not right for us.
Yeah, right. Quick from Dan, you mentioned the inventory rise due to some potential I guess new sales or kind of how you see the sales kind of playing out. I guess the inventory rise if it's mostly related to weapons would equate to a revenue number just looking at the year over year comparison to something sort of flat to slightly up in Q4 sequentially. Is it I'm curious about how the policy is. I know there's a lot of book and ship business within the quarter.
So what kind of look do you get ahead of time that gives you the confidence to build that inventory?
Yes. I mean I think one of the things for that that makes it a little bit easier is we don't have a proliferation of a proliferation of SKUs at TASER. So it makes it a little bit easier to go heavier on inventory and not worry about obsolescence risk. So certainly as we look at the business, especially as Rick indicated, we're making large investments to grow international business. We expect that to grow faster than The U.
S. Business over the next few years and become a more meaningful part of the business. And certainly, the international business as you know tends to be a little bit lumpier, tends to be punctuated by larger individual deals. So you need to keep a little bit more inventory in order to react and be able to satisfy that customer demand when it happens. I think on the video side, candidly the video business has been so strong.
It's been hard to build inventory because the demand has been so strong. So we're continuing to ramp up the supply chain to make sure that we continue to meet demand both now and in the future.
Great. And then last real quick one. The comment at the end of top line double digit growth, is that something is that a consistent language that you've always used? Or is that a new part you've added to the script?
No. I think we certainly I think we felt that way. And I think that that's something we talked about at our Analyst Day eighteen months ago. And we continue to make the investments to drive that double digit top line growth. And we feel with the international business, the video business and the continued upgrade cycle, we have a good growth engine to continue to deliver on that.
Great. Good luck.
Thank you.
And our next question is a follow-up from the line of Greg McKinley. Your line is now open. Please proceed.
Yes. Thank you. Just a couple follow-up items. Can you give us any color on your telesales group's progress and how that's impacting U. S.
Performance? Yes. They're doing they're just absolutely continue to do exceptionally
well. Contributor for us both in the top line as well as in gross margins because that's all direct business. So that's part of the shift and we've seen higher ASPs as well. And again the purpose of telesales wasn't necessarily that's more of a byproduct of taking more business direct. It's making sure we're serving that smaller customer that's typically been underserved by both us and our distributors and those customers are getting having a great experience with our telesales.
Okay. Thank you. And then Rick at the IACP show, you mentioned that you partnered with AeroVironment and iRobot. I thought there was a third company you mentioned. But can you tell me what those partnerships do?
Or how you're collaborating with them?
Yes. So AeroVironment and iRobot both have devices that are autonomous vehicles either aerial or ground based. They're used for a variety of things whether it's observation, trying to find missing people, outdoors sometimes, bomb disposal units etcetera. And all those have video feeds on them that are typically used for real time situational awareness. We're partnering with them so that those video feeds can be fed into evidence.com and preserved for evidentiary use later.
So obviously these incidents where these robots and drones are being used are pretty high risk incidents. They're likely to end up in some sort of legal case after the fact. And so we're just making it seamless for our customers and this solves it's a great add on value for our customers there that they can take that video and rather than bringing it to a desk they can put it into evidence.com and enjoy all the chain of custody and sharing and collaboration features that we've got. And then the other one is with Net Transcripts. They are a transcription a company specializes in transcription for law enforcement.
So this makes it easy for our customers to click a button and that's a job to have it transcribed and delivered back to the agencies so that they have transcript. You'll see a number of additional partnerships that we're evaluating over the coming quarters and years to continue to build out additional functionality for our customers. But it would really want all their digital events in one place, ninesevenis.com.
Okay. Thank you. And then
I don't know the degree
to which you can comment on this for competitive purposes, but you talk about extending Evidence.com features and responding to other needs that agencies have that aren't being addressed yet. Can you give us some more granularity on helping us understand what are those needs and where you see the bigger opportunities?
Not really.
Okay.
For competitive reasons. Until we're ready to announce stuff, we don't want to put it out there and give our competitors a heads up which ways we're going.
Okay. And then last question. Dan, you had shared on this last quarter 75% of your cameras sold also included in Evidence.com subscription. You've quantified camera sales in the past. Can you give us a sense for how many licenses are out there either through what's deployed so far or perhaps included in the bookings numbers just so we understand how many of those we can look forward to starting to generate revenue when they're deployed?
Yes. We're not quite ready to disclose that. I would say that we've you can see from sort of the service revenue line that it is growing. We can certainly say it's above over 10,000 licenses at this point.
Okay. That's helpful. Thank you. Sure.
Thank you. And with that, I'm not showing any more phone questions at this time. I would like to turn the call back over to Mr. Rick
Smith. Great. All right. Let's take a couple of questions from Twitter. I'll take the first one here.
Will TASER ever be a dividend stock? Answer to that is we don't know what the future holds. Certainly, it's something that we do consider and we talk at the board level every quarter about our strategy for our capital structure. As you've seen, we've been pretty aggressive over the years with buybacks and we are not shy about returning capital to shareholders. We are in a phase right now where we're letting some capital accumulate just given the opportunities ahead of us and frankly the uncertainty.
Things are moving fast and it's hard to predict the future. So we're letting the cash balances build up for a bit here, so that we make sure that we have the assets available to support our plans. And if we need to if we see opportunities to jump on, we've got the capital available. We've also shown to investors that we're disciplined about this. We're going to be very careful just because cash is in the account.
Certainly, we don't feel like we need to go spend it. But that's something we'll continue to evaluate. And we'll let you know if we ever come to the conclusion we think a dividend makes sense. I think at this point, we think that that might be a little too constraining because when you start setting a dividend policy, right? That's forever.
It creates a long term expectation. And right now, we just there was so much opportunity in front of us. I don't think we're prepared to constrain our sort of capital usage. Dan?
Yes. I've got a second Twitter question asking if we're capacity constrained at all in the next six months. It's a great question. Currently, we run one shift four days a week. So we've always had the ability to add shifts on Friday and over the weekend.
And we have the ability to add a second shift which in effect double our capacity. So we certainly have plenty of capacity. We're not constrained at this point. The supply chain continues to ramp up to make sure we've got the raw materials to produce and the manufacturing team is working overtime at this point and certainly has the ability to add a second shift as we move forward. We just have to find the personnel to work the off hours, but something we've done successfully in the past and certainly available to us as we go forward.
So I guess I'd wrap up with that. If we do get one of these really outsized international orders, short term, there could always be an issue with trying to get stuff done in the quarter by the time you've got to move supply chain along. But we wouldn't certainly over a multi quarter basis. I don't think we're seeing anything from a capacity constraint at least on the hardware side. And we're hiring software developers right now.
So anybody who knows some great software developers keep sending those in. That might be one area where you might say we're constrained just in building out the team to continue to extend our lead. So that we'll go ahead and we'll wrap up. We've been on for over an hour. I guess calls like this you want to just let them keep going because we're having a ball and really enjoying the results we had this quarter.
Thank you again to our shareholders who stuck with us over the years. We're committed to doing great things here and serving our three stakeholders, our customers, our shareholders and our employees. And with that, we're looking forward to wrapping up the year and we'll talk to you all in February on our next conference call and we'll see you at our shareholder meeting next May. Have a great
day. Thank
you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a good day everyone.