Axon Enterprise, Inc. is a leading provider of law enforcement technology solutions, focusing on enhancing public safety through integrated hardware and cloud-based software solutions. The company operates primarily in two segments: TASER and Software and Sensors, offering products such as conducted energy devices and digital evidence management solutions . Axon's revenue is derived from both product sales and services, with a significant portion coming from recurring revenue streams like subscriptions to their software . In 2023, the company reported strong growth across its segments, driven by increased demand for its cloud and services offerings .
- Software and Sensors - Encompasses body-worn cameras, in-car cameras, and cloud-hosted digital evidence management solutions like Axon Evidence. Includes productivity and real-time operations software designed to enhance law enforcement efficiency and transparency.
- Axon Cloud and Services - Provides cloud-based solutions and services, contributing significantly to the company's growth.
- TASER - Develops, manufactures, and sells conducted energy devices (CEDs) such as TASER devices, used by law enforcement to de-escalate situations and minimize the use of force. Includes related accessories and extended warranties.
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What went well
- Axon expects Q4 bookings to exceed last quarter, aiming for a record bookings quarter, driven by strong execution across all four segments: state and local, enterprise, federal, and international.
- Significant interest in new AI products, such as Draft One, with the pipeline growth after IACP and customers considering it "the most we've seen out of any year 1 product," indicating robust future revenue potential.
- Strong international and federal growth opportunities, with international bookings up 40% sequentially from Q2, and Axon leveraging their FedRAMP High status to win federal deals, leading to double-digit growth in the federal segment.
What went wrong
- Margins are expected to decline sequentially in Q4 due to increased expenses, including Dedrone acquisition and integration costs, and catch-up on expenses that were delayed, which may indicate that recent margin expansion is not sustainable.
- There is an observed deceleration in software Annual Recurring Revenue (ARR) growth from the prior trend line, potentially indicating slowing momentum in the high-margin software segment.
- Potential tariffs imposed by a new administration could increase component costs, affecting the supply chain and impacting margins, posing a risk to future profitability.
Q&A Summary
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Q4 Bookings Outlook
Q: Is Q4 2024 expected to be a record bookings quarter? What gives you confidence in achieving this?
A: Yes, we are very confident that Q4 bookings will exceed last quarter and be comparable to what we did in the full year last year. This confidence is based on tremendous execution across all four segments—state and local, enterprise, federal, and international—with meaningful deals in each. We're seeing the results of pipeline building throughout the year, and we're excited to discuss our Q4 bookings in more detail in February. -
Sustainability of TASER Growth
Q: Can TASER sustain its current level of growth? What gives you confidence in continued strong performance?
A: Absolutely, the TASER business can sustain its growth. We're in year two of a five-year upgrade cycle and continue to see exceptionally strong demand—literally double what it was with T7. There's significant runway ahead, and we believe we're still scratching the surface of what the TASER business is capable of, especially with opportunities in international markets. -
Draft One Revenue Impact
Q: Was there any revenue recognition tied to Draft One in the September quarter? Any significant contributions to ARR?
A: Yes, we did receive some orders in Q3 from early customers, so there was some impact on revenue from Draft One. However, we're still in the "top of the first inning" on what that's going to look like moving forward. We're very bullish on Draft One and all our AI products' contributions to both revenue and profitability over time, but we're not yet seeing a major impact on quarter-to-quarter results due to SaaS accounting. -
Update on Draft One Pipeline
Q: Is there an update on the $100 million pipeline for Draft One mentioned last quarter?
A: The pipeline continues to grow, especially after IACP. We're converting some of that pipeline into the new AI era bundle launching next year, with Draft One being the central driver of interest along with other AI features we're developing. The interest is the most we've seen for any year-one product. -
Draft One and AI Aero Bundle Pricing
Q: What is the pricing plan for Draft One and the AI Aero bundle?
A: Currently, Draft One alone is priced at $65 per month, and it requires transcription on top of that for another $20, totaling $85 per month. We're looking at the AI Aero bundle price of $199, with the sum of the parts expected to be around $250 to $350. This offers good economics for buying features as a bundle instead of individually, and that's the price going into next year. -
Drone Monetization and Adoption
Q: How should we think about monetizing drones as first responders and achieving broader adoption?
A: We see drones as a huge opportunity. The Dedrone acquisition is key because, before you can start flying drones without expert humans monitoring them, you need to be able to see your airspace. Dedrone helps with that. Legislation changes may allow state and local law enforcement to interdict drones, expanding the market. Partnerships with companies like Skydio enhance our capabilities. We're excited about integrating drones into real-time crime centers and dispatching drones automatically to assist officers. -
Impact of FedRAMP Status on Federal Opportunities
Q: How is your FedRAMP status helping you win U.S. federal opportunities?
A: Our FedRAMP High status is a differentiator, but even if everyone had FedRAMP, we'd still win the majority of deals due to the quality of our products and the federal team's phenomenal execution in sales and support. The team has done a nice job this year with exciting double-digit growth from federal, and we're confident we're on the right path. -
TASER Cartridge Revenue Growth
Q: Why was TASER cartridge revenue growth slower this quarter?
A: Cartridge revenue can be particularly lumpy quarter-to-quarter. Last quarter, we had some big international customers place cartridge orders that didn't repeat this quarter. Looking at a longer trend line, cartridge growth remains strong. -
Services Revenue Growth
Q: Why was services revenue growth lower this quarter compared to previous quarters?
A: The services revenue reflects timing and a quarterly lag—what we booked in Q3 shows up in Q4. Additionally, there's a reduction in professional services associated with fleet deployments, which was atypical. Normally, PSO and software both grow, but since fleet came down this quarter, you're seeing that dynamic. -
International Growth Drivers
Q: What's driving improved traction in international markets?
A: It's really broad-based. We've upped our game internationally with new leadership and team improvements. We're building relationships with the right customers and better demonstrating the value our products bring. The tremendous execution across all regions is contributing to international growth.
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Q4 implies lower adjusted EBITDA margins than achieved in Q3 due to timing of expenses and Dedrone integration costs ; how confident are you in achieving your 25% margin target for 2025 , and what measures are you implementing to mitigate further integration costs or unexpected expenses?
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With TASER hitting revenue records for six consecutive quarters , but concerns about the sustainability of this growth emerging , what specific strategies do you have to ensure TASER remains a major growth driver, and how do you plan to address potential market saturation or increased competition?
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Regarding the Dedrone acquisition and its role in your Drone as a First Responder (DFR) program , how do you plan to expand this opportunity internationally, given the differing use cases and regulations, and what challenges do you anticipate in scaling this business outside the U.S.?
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Considering you're on track to deliver your initial $2 billion revenue target for 2025 a full year early , are there risks of overextending resources or facing capacity constraints, and how are you ensuring operational scalability to maintain service quality and customer satisfaction?
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With the importance of FedRAMP high status in winning U.S. federal contracts , how are you leveraging this advantage to significantly grow your federal business, and are there challenges or limitations in this sector compared to state and local markets that might impact your growth expectations?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2024
- Guidance:
- Q4 Revenue Guidance: $560 million to $570 million, representing more than 30% growth at the midpoint .
- Full Year Revenue Guidance: Approximately $2.07 billion, or greater than 32% annual growth, up from prior guidance of $2 billion to $2.05 billion or 29.5% growth .
- Q4 Adjusted EBITDA Guidance: $130 million to $135 million, or approximately 23.5% adjusted EBITDA margin .
- Full Year Adjusted EBITDA Guidance: Approximately $510 million or 24.6% margin .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Full Year 2024 Revenue Guidance: $2 billion to $2.05 billion, representing 29.5% annual growth at the midpoint, up from prior guidance of $1.94 billion to $1.99 billion, which represented approximately 26% annual growth .
- Full Year 2024 Adjusted EBITDA: $460 million to $475 million, implying an adjusted EBITDA margin of 23.1% at the midpoint, up from prior guidance of $430 million to $445 million, expanding the expected margin by 80 basis points .
- Impact from Planned Acquisition of Dedrone: Incorporates an immaterial amount of revenue and adjusted EBITDA margin impact from the planned acquisition of Dedrone, expected to close in the current year .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Revenue: $1.94 billion to $1.99 billion, representing approximately 26% annual growth at the midpoint, above the prior high end of their guidance range of 20% to 24% .
- Adjusted EBITDA: $430 million to $445 million, implying an adjusted EBITDA margin of approximately 22%, up year-over-year and approximately in line with prior guidance on margin .
- Capital Expenditures (CapEx): $80 million to $95 million for the year, as they continue to ramp capacity investments to meet strong demand for TASER 10 .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Revenue Growth: 20% to 24% total revenue growth, translating to a revenue range of $1.88 billion to $1.94 billion for 2024 .
- Adjusted EBITDA: $410 million to $430 million, implying an adjusted EBITDA margin of approximately 22%, an increase of 100 basis points from the previous year .
- Long-term Targets: Targeting a 20% annual revenue CAGR and a 25% adjusted EBITDA margin for 2025 and beyond .
- Free Cash Flow Conversion: Targeting 60% free cash flow conversion on adjusted EBITDA for 2025 and beyond .
- Stock Compensation Expense: Expects approximately 3% annual dilution from stock compensation expense for 2025 and beyond .
Competitors mentioned in the company's latest 10K filing.
- Axis Communications AB - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Digital Ally Inc. - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Getac Technology Corporation - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Halo Body Cameras - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- i-PRO - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- LensLock Inc. - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Motorola Solutions - Competitor in the body-worn camera and in-car video/automatic license plate readers industry and in software solutions for public safety agency workflows .
- Reveal Media - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Safe Fleet - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Utility Associates - Competitor in the body-worn camera and in-car video/automatic license plate readers industry and in software solutions for public safety agency workflows .
- Versaterm Inc. - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Wolfcom Enterprises - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Wrap Technologies Inc. - Competitor in the body-worn camera and in-car video/automatic license plate readers industry and in VR de-escalation training .
- Zepcam B.V. - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Applied Concepts Inc. - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- Genetec Inc. - Competitor in the body-worn camera and in-car video/automatic license plate readers industry and in software solutions for public safety agency workflows .
- Insight LPR - Competitor in the body-worn camera and in-car video/automatic license plate readers industry .
- FileOnQ - Competitor in software solutions for public safety agency workflows .
- FotoWare - Competitor in software solutions for public safety agency workflows .
- IBM - Competitor in software solutions for public safety agency workflows .
- NICE - Competitor in software solutions for public safety agency workflows .
- OpenText Corporation - Competitor in software solutions for public safety agency workflows .
- Oracle - Competitor in software solutions for public safety agency workflows .
- QueTel Corporation - Competitor in software solutions for public safety agency workflows .
- Revir Technologies - Competitor in software solutions for public safety agency workflows .
- Vidizmo, LLC - Competitor in software solutions for public safety agency workflows .
- 365Labs - Competitor in RMS and CAD software .
- Beacon Software Solutions Inc. - Competitor in RMS and CAD software .
- Caliber Public Safety - Competitor in RMS and CAD software .
- Central Square Technologies - Competitor in RMS and CAD software .
- CivicEye - Competitor in RMS and CAD software .
- Core Technology Corporation - Competitor in RMS and CAD software .
- CSI Technology Group - Competitor in RMS and CAD software .
- EForce Software - Competitor in RMS and CAD software .
- Executive Information Services Inc. - Competitor in RMS and CAD software .
- Hexagon AB - Competitor in RMS and CAD software .
- Kologik - Competitor in RMS and CAD software .
- LawSoft Inc. - Competitor in RMS and CAD software .
- Mark43 Inc - Competitor in RMS and CAD software .
- Niche Technology Inc. - Competitor in RMS and CAD software .
- Saab - Competitor in RMS and CAD software .
- SmartCop - Competitor in RMS and CAD software .
- SOMA Global - Competitor in RMS and CAD software .
- Sopra Steria - Competitor in RMS and CAD software .
- Southern Software - Competitor in RMS and CAD software .
- Sun Ridge Systems Inc. - Competitor in RMS and CAD software .
- Tyler Technologies - Competitor in RMS and CAD software .
- Combined Systems, Inc. - Competitor in less-lethal alternatives to firearms .
- Byrna Technologies Inc. - Competitor in less-lethal alternatives to firearms and personal safety .
- SABRE Corporation - Competitor in less-lethal alternatives to firearms and personal safety .
- Mace Security International, Inc. - Competitor in less-lethal alternatives to firearms and personal safety .
- UZI - Competitor in less-lethal alternatives to firearms .
- Jolt - Competitor in less-lethal alternatives to firearms .
- B.E. Meyers & Co., Inc. - Competitor in less-lethal alternatives to firearms .
- Genasys Inc. - Competitor in less-lethal alternatives to firearms .
- Monadnock - Competitor in less-lethal alternatives to firearms .
- Armament Systems and Procedures, Inc. - Competitor in less-lethal alternatives to firearms .
- Adaptive VR Ltd. - Competitor in VR de-escalation training .
- Apex Officer - Competitor in VR de-escalation training .
- Hologate GmbH - Competitor in VR de-escalation training .
- InVeris Training Solutions Inc. - Competitor in VR de-escalation training .
- Laser Shot Inc. - Competitor in VR de-escalation training .
- MILO - Competitor in VR de-escalation training .
- Street Smarts VR - Competitor in VR de-escalation training .
- Ti Training Corp - Competitor in VR de-escalation training .
- V-Armed - Competitor in VR de-escalation training .
- VirTra Inc. - Competitor in VR de-escalation training .
- Salt Supply Co. - Competitor in personal safety .
- Vipertek - Competitor in personal safety .
Recent developments and announcements about AXON.
Financial Reporting
Auditor Changes
Axon Changes Auditor
On February 26, 2024, Axon Enterprise, Inc. announced a change in its certifying accountant. The Audit Committee of the Board of Directors approved the appointment of PricewaterhouseCoopers LLP as the new independent registered public accounting firm. This change will take effect after the filing of Axon's Annual Report for the year ended December 31, 2023. Concurrently, Grant Thornton LLP, which has served as Axon's auditor since 2005, was dismissed following the completion of their engagement for the 2023 fiscal year. There were no disagreements or reportable events with Grant Thornton during their tenure .