Q2 2024 Summary
Updated Jan 10, 2025, 5:10 PM UTC- International bookings up 100% year-to-date, driven by strong demand for TASER 10 and cloud adoption, indicating significant global expansion opportunity.
- Strong growth in Axon Cloud & Services segment, with a $19 million sequential increase, boosted by software growth and contributions from acquisitions like Fusus.
- Rapid adoption of new AI products like Draft One, generating over $100 million in pipeline within three months of launch, suggesting significant future growth potential.
- Axon experienced a slowdown in sequential growth of Annual Recurring Revenue (ARR) in Q2 compared to the previous year's Q2, adding less ARR than expected, which could indicate a potential deceleration in growth momentum.
- The company faced challenges with its own dispatch console software, finding it difficult to scale due to fragmented customer requirements, leading them to pivot their strategy towards Fusus. This shift suggests potential difficulties in their product development and execution.
- Adoption of Axon's cloud services in international markets, especially in Europe, has been slower than anticipated due to resistance to cloud solutions. While AI offerings like Draft One might improve adoption, this outcome is still uncertain.
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Software Adoption and AI Impact
Q: How is software adoption, and what excites you going forward?
A: Software growth continues strong, with terrific growth from Evidence.com and increasing contributions from other software products like productivity and AI tools. The AI-powered product Draft One is generating excitement, with over $100 million in pipeline. While Draft One isn't yet contributing to revenue, it's expected to be a significant driver going forward. AI advancements are accelerating product development priorities, leading to nimble responses to customer needs. -
International Growth Opportunities
Q: Why is international growth gaining speed, and what could accelerate it?
A: International bookings are up 100% this quarter , driven by a stronger team, the launch of TASER 10, and increasing cloud adoption. The international team is the strongest it's been, with new leadership and country managers. AI services like Draft One are generating strong interest internationally, especially in Europe, potentially accelerating cloud adoption where resistance was previously higher. -
TASER 10 Adoption Outside Local LE
Q: What's driving TASER 10 adoption beyond local law enforcement?
A: The largest TASER 10 deals are now outside state and local law enforcement, particularly in corrections, federal agencies, and international markets. These customers are often 2, 3, or 4 times the size of major local agencies like NYPD. This expansion results from efforts over the past five years to grow beyond state and local markets, opening opportunities to sell additional products like body cameras and software solutions. -
Fusus Integration and Growth
Q: Can you provide an update on Fusus integration and growth?
A: Fusus shows strong demand, and we're pivoting our dispatch strategy to be Fusus-centric. Fusus excels at bringing together data into a unified map interface, integrating third-party cameras, and enhancing real-time operations. This shift allows us to focus on areas where we can drive innovation and scale. Fusus is contributing to over 100% growth in the real-time operations group. -
Drone as First Responder and TAM
Q: What's the outlook for drones as first responders and total addressable market?
A: Interest in Drone as First Responder (DFR) is growing rapidly, with a 10x increase in agencies adopting DFR in a 12-month period. Our partnership with Skydio and Dedrone positions us well in this space. While it will take time to become a material revenue contributor, we believe that in the next 10 years, there will be a one-to-one relationship between drones and police cars. -
Axon Cloud Growth and Revenue per Seat Potential
Q: Is Axon Cloud's strong growth sustainable, and how much can revenue per seat grow?
A: Axon Cloud & Services saw a sequential revenue increase of $19 million, the highest on record. While quarterly growth may vary, the overall growth remains healthy. With just over 20% of customers on our OSP plans, there's significant room for revenue per seat to grow by moving customers to higher-tier plans and adding additional features. -
Opportunity Pipeline Strength
Q: What's driving your confidence in the strong opportunity pipeline?
A: The pipeline is the strongest it's been, with conviction in its accuracy. Our sales team is the best in the industry, and we expect a massive second half in terms of bookings. The pipeline includes strong names across the business, fueling our optimism for future results. -
TASER Gross Margin Outlook
Q: How should we think about TASER gross margin trajectory?
A: TASER gross margins are starting to stabilize around current levels. Benefits from automation coming online are contributing positively. While product mix can cause variations, we expect margins to remain steady, with ongoing improvements from operational efficiencies. -
ARR Growth Timing
Q: Is the slower ARR growth this quarter a matter of timing?
A: Yes, it's a timing issue. Sequential ARR growth was down compared to last year's Q2 due to when new revenue started in the quarter and lighter bookings in Q1. However, we're pleased with the 40%+ year-over-year ARR growth. -
Macro Impact Resilience
Q: How might a potential recession impact your business?
A: Historically, economic swings haven't significantly impacted us. Our products are essential services that save lives and money. Customers recognize the value, and moving away from our products would cost them more. While no one is immune to macroeconomic factors, we typically see resilience due to the critical nature of our offerings.