Patrick Smith
AXON ENTERPRISEAbout Patrick Smith
Patrick Smith is Axon’s CEO and a director since 1993 (age 54) with deep technology credentials, holding 53 U.S. patents and degrees from Harvard (BA), University of Leuven (Master’s in International Finance), and University of Chicago (MBA with honors, top 5%) . Under his tenure, Axon delivered record 2024 revenue of $2.1 billion, net income of $377 million, and Adjusted EBITDA of $521 million, and ranks above the 95th percentile among S&P 500 companies for 1-, 3-, 5-, and 10-year TSR through year-end 2024 . Board leadership is separated, with an independent Chair (Michael Garnreiter), and Smith is not independent given his CEO role; the board reported nine meetings in 2024 with no director below 75% attendance .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Axon Enterprise, Inc. | CEO & Director | 1993–present | Co-founder and visionary leader; technology innovation evidenced by 53 U.S. patents |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| None disclosed | — | — | No other public company boards or committee roles disclosed |
Fixed Compensation
| Component | 2024 Value | Notes |
|---|---|---|
| Base Salary | $31,201 | Minimum wage per CEO Employment Agreement, fixed through 2030 |
| Target Annual Bonus | $0 | CEO is not entitled to annual bonus or short-term incentives |
| Actual Annual Bonus Paid | $0 | No cash bonus for CEO |
Performance Compensation
| Plan | Grant Date | Instrument | Size | Grant Date Fair Value | Key Metrics | Status/Notes |
|---|---|---|---|---|---|---|
| 2024 CEO Performance Award | May 10, 2024 | XSUs | 679,102 | $164,463,091 | Three independent conditions per tranche: stock price, TTM revenue or TTM Adj. EBITDA, and minimum service | Tranches 1–2 certified achieved March 24, 2025; vesting deferred until CEO minimum service dates (Dec 2028/Dec 2030) |
Detailed tranche goals (CEO minimum service is longer than Employee XSP):
| Tranche | Stock Price Goal ($) | Revenue (TTM, $mm) | Adj. EBITDA (TTM, $mm) | Minimum Service (CEO) | Goal Expiration |
|---|---|---|---|---|---|
| 1 | 247.40 | 1,834 | 382 | Dec 2028 | Dec 31, 2026 |
| 2 | 309.25 | 2,293 | 497 | Dec 2028 | Dec 31, 2027 |
| 3 | 386.56 | 2,866 | 644 | Dec 2029 | Dec 31, 2028 |
| 4 | 483.20 | 3,583 | 834 | Dec 2029 | Dec 31, 2029 |
| 5 | 604.00 | 4,479 | 1,077 | Dec 2030 | Dec 31, 2030 |
| 6 | 755.00 | 5,599 | 1,389 | Dec 2030 | Dec 31, 2031 |
| 7 | 943.75 | 6,999 | 1,739 | Dec 2030 | Dec 31, 2032 |
Award design and value:
- Notional value approximately $150 million for the seven-year term, derived from $7 million annual target x 7 years x risk multiplier of 3; share count set using 90-day VWAP .
- Vesting requires Compensation Committee certification of stock price and operational goals plus minimum service; any unvested tranches at term end are forfeited .
Prior performance awards and realization:
- 2018 CEO Performance Award: Smith exercised 510,000 options in 2024; net shares subject to a 2.5-year post-exercise holding period, reducing near-term selling pressure .
Equity Ownership & Alignment
| Metric | Amount | Notes |
|---|---|---|
| Shares Beneficially Owned | 2,900,883 | Includes 6,193 shares held jointly with spouse |
| Shares Acquirable Within 60 Days | 20,931 | From options exercisable within 60 days |
| Total Beneficial Ownership | 2,921,814 | 3.8% of outstanding shares (77,848,148 shares) |
| Options (exercisable) | 20,931 | Exercise price $28.58; expires 2/26/2028 |
| Unvested XSUs (2024 Award) | 679,102 | Performance-based; subject to stock price, operational, and service conditions |
| Pledging/Hedging | None disclosed for CEO | Company policy limits pledging to 25% and prohibits hedging; a pledge exemption applies to a director, not the CEO |
| NEO Stock Ownership Guideline | ≥50,000 shares | CEO beneficially owns well above guideline threshold |
| Holding Requirements | 2.5-year post-exercise hold on 2018 CEO Award net shares | Reduces short-term sale risk |
Insider selling pressure indicators:
- 2024 option exercise was subject to a 2.5-year hold; 2024 XSUs had no tranches vested in 2024, and tranches 1–2 were certified in March 2025 but CEO’s longer minimum service dates defer vesting until Dec 2028 and later, mitigating near-term selling .
Employment Terms
| Term | Detail |
|---|---|
| Agreement Date | December 8, 2023 (CEO Employment Agreement); CEO Letter Agreement also dated December 8, 2023 |
| Role & Term | CEO and director through December 31, 2030; at-will thereafter |
| Cash Compensation | Base salary at minimum wage ($31,201 annually); no annual bonus or short-term incentives before 2031 |
| Equity Eligibility | No additional equity before 2031 except the 2024 CEO Performance Award |
| Early Termination Covenant | If CEO terminates for any reason on or before December 31, 2030, he must pay Axon $30 million promptly |
| Restrictive Covenants | Non-compete, non-solicit, and non-disparagement covenants apply |
| Charitable Donation Letter | Company waived holding period to allow ~$25 million share donation; if CEO resigns before December 31, 2025, he must pay Axon $25 million |
Severance and change-of-control economics (CEO-specific acceleration rules):
- Termination without cause: operational goals disregarded; tranches with stock price goals attained vest; next unattained tranche partially vests pro rata vs 90-day VWAP; CEO minimum service dates apply .
- Change in control (without termination): compare goals to closing price or deal price; CIC Units with minimum service met vest; others remain outstanding until service met; operational goals disregarded .
- CIC with qualifying termination: all CIC Units unvested at termination vest immediately .
- Death/Disability: service dates disregarded; tranches with both stock price and operational goals achieved vest immediately .
Potential payments as of 12/31/2024 (illustrative calculations by Axon):
| Scenario | Estimated Value |
|---|---|
| Termination without Cause | $275,006,128 |
| Death or Disability | $115,315,910 |
| Change in Control (with qualifying termination) | See plan-specific CIC Unit rules; Axon’s illustrative values provided for other NEOs; CEO acceleration mechanics summarized above |
Board Governance (dual-role implications)
- Board service: Director since 1993; no standing committee memberships; not independent due to CEO role .
- Leadership structure: Independent Chair (Michael Garnreiter) separates the Chair and CEO roles to ensure independent oversight; Lead Independent Director would be appointed if Chair became non-independent .
- Independence: Majority independent board; Matthew McBrady also designated not independent out of caution due to long-standing social relationship with CEO .
- Meetings/attendance: Board held nine meetings in 2024; no director below 75% attendance; all directors attended the 2024 annual meeting .
- Director compensation: Employees are not separately compensated for board service (non-employee director fee program applies only to outside directors) .
Director Compensation (for the CEO as director)
| Item | Policy |
|---|---|
| Cash retainer/RSUs | Not applicable to employees; non-employee director program features cash and RSU retainers; the CEO as an employee receives no separate director pay |
Compensation Committee and Peer Benchmarking
- Compensation Committee members: Hadi Partovi (Chair), Adriane Brown, Michael Garnreiter, Graham Smith; all independent .
- External consultant: Semler Brossy engaged; director RSU grant increased to $260,000 in 2025 per review .
- Peer comparator group (2024 review): Alarm.com, ANSYS, Aspen Technology, CrowdStrike, Datadog, Dynatrace, Elastic, Fair Isaac, HEICO, HubSpot, MongoDB, Palantir, Paycom, Paylocity, Procore, PTC, Samsara, Tyler Technologies, Zscaler .
- Pay philosophy: Generally target ~50th percentile vs peers; executive/director reviews roughly every three years .
Say-on-Pay & Shareholder Feedback
- 2023 Say-on-Pay approval: ~84% favorable of 56.9 million votes cast .
- 2024 Say-on-Pay approval: just over 50% favorable of 60.3 million votes cast; Compensation Committee viewed outcome as supportive of program .
Compensation Structure Analysis
- Heavy shift to long-duration, performance-based equity (XSUs) with explicit stock price and operational hurdles plus minimum service; CEO 2024 award notional value ~$150 million over seven years, replacing traditional options/RSUs and aligning realizable value with shareholder outcomes .
- CEO cash comp held to minimum wage and no bonus, emphasizing at-risk pay; any early departure triggers significant repayment obligations ($30 million through 2030; $25 million if resigns before 12/31/2025 per donation letter), reinforcing retention .
Risk Indicators & Red Flags
- Clawback policy adopted December 1, 2023 per SEC/Nasdaq requirements; Axon identified accounting errors related to principal vs agent for reseller arrangements and revised prior periods; analysis concluded no recovery required because 2023 cash incentives remained at maximum and no payments under 2024 programs prior to revision .
- Pledging/hedging: Company limits pledging and prohibits hedging; no CEO pledges disclosed (a director has legacy pledged shares exempted) .
- Governance structure mitigates dual-role risk via independent Chair and committee oversight (Audit, Compensation, NCG, ER&C, M&A & Capital Structure) -.
Performance & Track Record
- Business results: 2024 revenue $2.1B, net income $377M, Adjusted EBITDA $521M; Adjusted EBITDA margin 25%; revenue CAGR 34% from 2021–2024 .
- Shareholder returns: Above 95th percentile TSR across multiple durations vs S&P 500 through 12/31/2024 .
- Strategic initiatives: AI Era Plan; acquisitions of Fusus and Dedrone; VR training integration; drone-as-first-responder capabilities; sensor ecosystem growth .
Equity Award Status and Vesting Pressure
| Item | 2024 | 2025 YTD |
|---|---|---|
| CEO option exercises | 510,000 shares exercised; 2.5-year hold applies | — |
| 2024 CEO XSUs | No tranches vested in 2024 | Tranches 1–2 goals certified Mar 24, 2025; CEO minimum service dates defer vesting to 2028/2029/2030 |
Employment & Contracts (Severance/Change-in-Control Detail)
| Provision | CEO |
|---|---|
| Severance table illustration (12/31/2024) | Termination without cause: $275,006,128; death/disability: $115,315,910 |
| CIC mechanics | CIC Units vest based on stock price comparison to closing/deal price and minimum service; operational goals disregarded; qualifying CIC termination accelerates CIC Units |
Investment Implications
- Strong alignment: CEO compensation is almost entirely performance-based with rigorous multi-factor hurdles and long minimum service, pushing realization into 2028–2030 and beyond; near-term insider selling risk is muted by the 2.5-year hold on 2018 award exercises and deferred vesting under 2024 XSUs .
- Retention secured: Early termination repayment obligations ($30M through 2030; $25M through 12/31/2025 under donation letter) materially reduce departure risk during the award horizon .
- Pay-for-performance credibility: Above-95th percentile TSR and accelerated operational delivery (record revenue, margin targets reached a year early) underpin the performance framework used by the Compensation Committee (Adjusted EBITDA, revenue, stock price) .
- Governance balance: Independent Chair and robust committee structure mitigate CEO dual-role concerns; CEO not independent, but oversight mechanisms and majority-independent board address independence and risk management -.
- Shareholder sentiment: 2024 say-on-pay passed but with slim majority (>50%); continued engagement and transparency around long-term equity design remain important for sustained support .