AAXN - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2018 Axon Enterprise, Incorporated Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Luke Larson, President of Axon. Sir, you may begin.

Luke Larson

Thanks. everyone. to afternoon Good the Axon. Larson, President Luke of I'm Welcome first quarter conference call. XXXX earnings to Axon's

CEO Rick and Jawad are today Joining Founder, Ahsan. Smith; CFO, and

Relations, Before V.P. harbor Andrea started, will Investor statement. we safe read James, the get of our

Andrea James

afternoon. internet is the section the available broadcast website. Relations and Axon Investor This Enterprise call the Good being of on is on

which quarterly cause that annual reports are our made XX-Q actual subject discussed are information uncertainties speak our is Form detail risks the to could forward-looking Risk certain quarterly session. as that information safe with that our harbor based greater the are in regarding today, caption question-and-answer are on Reform This statements be We'll materials, future, can find Form the you call, results, Statements statements, the Axon All including reported statements Act expectations which supplemental and the investor.axon.com we'll of report call During beliefs, at XX-K and our such which a are start forward-looking uncertainties the performance subject projected reading not XXXX. available to risks, date differ on today's Factors. regarding assumptions be we'll made, include under they is including only our shareholder We spending. our which These Securities on forward-looking our both are the of in website. live made difficult and predict. around and call statements results Private on and making Litigation and to to of estimates move guarantees upon statements on of Enterprise. intend on materially. These prepared references intentions involve today's to are regarding provided SEC will expectations, or then the and by forward-looking future strategies risks letter to by current statements the remarks, and and today that

You sec.gov these filings, well as the as or SEC at searching our by filings AAXN. may under other investor.axon.com ticker, find for filings at Axon

the turning Okay, over call Rick. to

Rick Smith

everyone. Thanks, Andrea. Welcome,

commend First the performance. helping our employees want quarter us and foremost, outstanding achieve for first I organization to throughout

in to & and initiatives. reflect execute team hard and revenue strength to QX, across Sensors, been Weapons This the and a a of mission acquisition praise. a our our gross domestically is working us continuing tuck-in Software of we has in We're we share opportunity drove to to value. shareholder internationally. lot of announced last record the GAAP per saving adds In Our this. board, VIEVU while incredibly our that team solid of margins, and cost $X.XX. execute, delivered and The they shares The deserve quarter front control and business solid of about great results against first deal deliver strategic excited lives. earnings The continue position really growth increase of week example the

scale police. next so a it's based a that exciting for this listening. mean our is are very we integrating This very employees acquisition in Also, in well-regarded who We and remain is public acquisition of make lot our adds work highly to technology believe and hundreds Motorola, the need had. cities the Seattle they features VIEVU major would has customers with and who aren't access history we part does keep footprint plan important, team office. law otherwise continuing on Mexico's and deal really but credibility is into you especially great law acquisition This might existing but community. we solutions and because next Our and, for federal in deliver including Safariland, We holster City has have best not Seattle adds them we for Also, believe respected holster primary in to customers customers and and fans more. to get momentum our an law Safariland rest produces from enforcement, expect companies, engines. agencies believe is investment dozens we that to and digital holster the new remain competitive, highly U.S. to supplier sooner importantly, well-funded a We're so strong. give Internationally, crowded in expand vendors We to products outsized competitive customer growth space portfolio. new made of and can the the Those software, within high-quality will notice, of four our police with most on is Panasonic, these Axon compete enforcement serendipitously, gain which from. customers weapons. than to Axon's not Mexico the and by X and VIEVU innovating used solutions remains our us. and laurels. the enforcement management of has best LX of and the safety developing with we that TASER partner, solutions generation The video and large, our Bookings evidence have best, choose our

writes as enforcement largely law with robust letter our industry the we're speaking, has future with mantra are business in saw Our dynamic product forefront Broadly "be turn note and scrappy" the talk product, not-so-new Axon a reflect you to strong how pipeline forefront And over I'm few driven law the to about the our to conservative will proud teams addition I'm our you guidance but of start it minutes, up becoming innovation VIEVU. first, our today, going to you fully so Luke the the that by top can of change forward. is on feedback costs VIEVU. to everything at also that our enforcement. increasingly Jawad input of see to I'll year, partners. more do, line guidance execution to the and thrilled us integration of update taking embraced to organization at expect as is the the shareholder well be performing how as of ensure with remains our of in we and continue on and

Now over to Luke.

Luke Larson

that to the call at like showed we Axon Smith survey, about meeting War and picture Rick when Thanks, of a fast to quote exciting of was it's "The Rick Axon, the One is time at company ecosystem, has particular business, cycle, down General at and be I through a that since goes large business, thank exit stock did out a have were the of share because an instead on camera just moment and lot want call we out body long is doubled that on said, a of Patton under cameras World $X II XXXX, company I'd the ago that and to exit and home exiting, been and moving big Axon's Evidence.com. investment the vision. supported five per XX% part and we a of investors Berlin." software road a mission. a company such body come under executing with wanted importantly more from this and pressure Rick. the way when and pretty I to Axon's a years We're to trading important We've

working bring for the forces accelerate safety network. globe. every Axon the with at to which a and the the a around technology We on we public equip camera, leading to seat TASER officer want are body police growth. investments stage the We're the are speed all hard We benefits the of very those of today, at next and same realizing to investing time, we a

the You ways have and then the you pull shareholder does lifting, letter back are in many we I'll to executing. heavy the turnover call a the bit curtain about front of of the little that talking Jawad. more

items are community. there most relevant few three are next the investment to that execution Over quarters, the

Bryan Engineering, and while made is the to contributions first Vice dispatch appointed a record life The road Management and deep he's integration. directly now today, runs making how President essential which focus Wheeler, business of those also He of Seattle significant management Bryan me, be teams, and is will leading a out and map. a energy, technical far. reports doing Axon. Bryan understanding knowledge bringing of a successful of fantastic VP for Digital our integration so and to programs success. our brings product office. to lead up job the VIEVU and computer-aided our that integration Bryan a system our the newest in into built Evidence to a I've been Software ton integration

we is and every already has to goal will deliver the network, customer positive. convert subsidiary the customers as it contracts committed Axon. camera been We've to feedback initially, a their but VIEVU's operates is upon Axon body-worn that notified while to Our those within Axon programs, customer VIEVU eventually

Sensors a segment to & moving The scaling and cameras existing continuing expanding of importance on profitability, second software in-car is goal with the the momentum means in Software Fleet. body Axon area which We've video. leader set market and to and be our

Our using police of officers the automate We do to is third put our technology keeping of on and to their focus doing remains long-term streets, vision product, know they pre-revenue, them the best and report-writing. to what area safe. which of still Axon Records getting to development key is back and our boring tedious but communities want out

We’re XXXX. of a Records with on end quick track in update International. successful to launch want I for a Axon on

off. X markets Tier focus on Our paying is really

spent March and impressed and in, came three with from has directors Isner, items. from deals built company Essex Chief I EMEA, several end the managing the in Australia. a was Two week the of the history APAC, fantastic Our and team in in at QX: U.K. Europe Americas. for largest Josh the of is very organized Revenue of and Victoria with that Kent video Police booking our Officer, a

from only and shift is managers key suite. view about the also great. XX% was visited as from and TASER March, of TASERs the Chiefs' the Council, in I National both stated officer we country U.K. First, our leaders product Chesterman, very impressed the with for their officers Axon these Simon should where in Police our in massive agencies have in every the our a entire requests well and carry to relationship the historical of markets. the interest today. broaden carry as incoming interest U.K. U.K., thinking in TASER, in lead Italy deployments, now Germany end with At frontline a of frontline And

I'm international and two to legalized met subject we Germany approved our in to the to have large was large Interior TASER. security much trials. One police with Rick's carries highlight was trials. in March of Italy years will international, Pope's the but several that Axon parliament the forces I were of devices TASER, full scientific thought field over that private testing both pleased have the very the product pretty start in progress line. not about ago, summary, and the agencies announce CFO, our that the and pipeline proud XX, Italian Ministry further I'm TASER work been from successful previously to Pope and protected trip, on the Italian turn are awesome that, six the now to suite detail Italy that trialing the call We other it our trip In is by in TASER. Jawad. our Over

Jawad Ahsan

right execution. strong bottom about Luke. then guidance I'll going control revenue, first After $X.XX housekeeping I'll of for you. then Thanks, quarter acquisition, go the the the bring good upon and unpack line. We're touch to a items, cost and gross us talk we'll Q&A. few another strong enabled that, margins, pleased VIEVU to to to report I'm to Record

So the acquisition. first, VIEVU

supplier upfront can features the the cash next deal customers duplicate rationalize to importantly in for Axon working two stock, to the and extent of This can closed still synergistic see for our the into our on you of by in both with deal there eliminating synergies Seattle. stock-based of are consideration $X.X years. shareholders the are sales great aspects We now million the teams, worked a for and letter, both expect certain a in shareholder people in. This As and that be done, of customers, competitor the significant partner we only pleased I’m to XX% earn-out at and who than with U.S. this lower Many sides deal a and we're and paid recently deal a most contingent major turns customer acquisition normally we're organically. city and in companies. efforts quantify these excited and combining particularly expenses which gives a software the opportunities deal us over investing access to is Axon network is we'd about get hard result. both but based on realize this very cost form five

and points, international Next, do VIEVU thinking guidance benefit by we're in percentage I'd revenue we expect guidance of QX acquisition. which our our like which the full-year. to and revenue, strength reflects QX, weapons X both raising the unpack had from strong how to about In We're very not QX. we the

expect weapons to grow QX about revenue year-over-year. We to XX% X%

the think to full-year, about flow through the you estimates revenue as QX. you for be of timing rebalance revenue So, from sequentially how P&L your QX we expect down the and will

pleased margin to investing guidance. to we costs in we're operating for leverage is as did great operating new a Rick deliver QX, year. stay. We growth to a make to this in XX% said, culture job on more We driving QX, our still Turning were and here investments margin have around but and

in really you think VIEVU's impact two buckets. As about operating margins, it's on

are level below Axon to those honor would've we customer larger of contracts. a and some what First, contracts bid, at priced going were VIEVU's

gross we'll Sensors as the on in segment As & Software pressure we some those a result, deliver margin contracts. see

integration for expansion. expect operating we is margin in thanks great contracts excluding transaction clear, should QX. margin X.X%, nonrecurring be and still to control, of cost we costs about majority To absorb rigorous What those the what for transaction XXXX of you some that, consistent integration about in with margin Second, feel implies operating this guidance to and points with hitting we onetime can we to our Onetime maintain basis XX our expenses. costs, X.X% transaction told full-year, the amount an February.

new expect balance in QX reflects look quarter, OpEx impact by focused pipeline, acquisition This operating build onetime be increase with the product equity-based be an as new we because So, the the VIEVU and associated compensation don't Rick there. the in of making point any from second compensation commentary margin Also, year, and excludes low to guidance at operating in our from we expected investments stock-based no-salary, to driven costs. XX-year, our Smith's expenses surprises, want we're we the plan. in there

recommend corresponding vote Our that will shareholders. and this get it's they great vote shareholders the and won't one past paycheck growth XX Rick plan, on gotten plan plan returns. XX, and Axon myself Rick shareholder only we months, revenue the and for a May and get in for on will hasn't another that for We EBITDA few he if think board a plan. deliver Under outsized for paid in years. and

We give plan, stock the reminder, be and hit noncash EPS stock-based our at compensation expenses margin costs, on absorbing the VIEVU's up as earnings stock sure vote. to will We'll and To be incur exclude earnings around by next track amount Rick's expect we're associated so some full-year. for to still determined the now expenses, with non-GAAP margin with won't to that on and price wrap the contracts even a affected. our guidance visibility adjusted operating our of the time call, make our operating commentary,

features address Weapons shortening the domestic offering about four of of We've years a internationally, still upgrade long cycles Those but expanding growth. TASER have having we make federal intend and are: demand more the down runway letter. we're from that getting historically from in five campus We and law security, in also and law not enforcement. a seeing outside segment, weapons. is disclosure weapon smarter TAM, eight of TASER We're growing going for Weapons TASER growth communicate talked forward. a to want selling increased enforcement, our U.S. law that did talks to to portion drivers. more sales We letter We about enforcement, shareholder I broke to to keep orders Next, agencies primary and helping segment. which to in the our don't we to drive strength want in plan private you security, that TASER Weapons breaking confidence our geography is for that but source This others. by customer out several shareholder

of We're you those items descriptors & of several our followed a segment. Software are housekeeping for Sensors There changes. some the three us Finally, for in updating minor who've while.

& rather is closely we future now backlog numbers change backlog XX-Q. report are are the our revenue, that contracted Software aligned so than that more first our with giving Sensors metrics we in The

periods. we approximately be backlog, recognized is future a invoiced slightly in contracted both which XX, revenue, The well of million & liabilities, former though that than As calculation XXXX, Sensors of March the pretty includes similar. $XXX numbers will amounts had Software future figure the different recognized contract were and as backlog as

second will as The as we and Sensors referring same data storage above. is service recurring annual revenue, and recurring cloud-based now Software that warranty, to includes be change that software, & annual revenue

with The revenue roughly and & third Services Same how with aligns aligns our with do change revenue. Software as to product revenue. always, cloud-based we report service has software hardware

& for can better Sensors this Axon revenue And does service Sidearm, our Evidence.com, storage to And like operator, other on-officer our is product Fleet because revenues. the this bucket Software encapsulates to that revenue referring our track Cams, and What talk related about so, cloud-based descriptor professional that begun the Mirroring with items increasingly body calling the which quarter, we isolate revenue category. Axon be the Axon questions. so and that we'd hardware and to open revenue, Other, plus services hardware, data revenue that and this call support when software Cloud Signal Cloud starting that, software warranty bucket, TASER it as platform, investment growing cameras, we'll community to important we've tied a Sensors that, is cloud-based and includes the our all because offering.

Operator

[Operator Mark question from the comes first our from Instructions] of JPMorgan. Strouse And line

open. now is line Your

Mark Strouse

congrats and questions on our taking for quarter. Thanks another evening. good Yeah, solid

prepared guidance of the missed into trying I'm is So, sorry what organic I'm for Did is to Or just change? for the is just everything if back my remarks, VIEVU? this but question the because year. I Jawad. that in first of kind

Jawad Ahsan

for XXX points organic we're of the The points No. basis improvement. year, guidance to basis XXX sticking to

Mark Strouse

it these – sounded lower-margin though VIEVU that had like maybe the – a got you contracts But Okay. you year start to that good sounded it right. my coming impression though It was on. and

So, margin it bit the this hadn't if is operating it a fair that stronger, been been assume for might have acquisition? organic to

Jawad Ahsan

That's correct.

Mark Strouse

is of can a then, be customers? could that know initial kind there in with early, And or gotten of contracts VIEVU, anything any share from you've technically kind potential feedback any okay. risk? but VIEVU's Rick, Okay, clause it's still speaking, I you those that a change-of-control And

Rick Smith

Yes.

no reviewed to a provision. And we've price. So, the customers positive, the I contracts. There's feedback from from been their risk going legal largely for VIEVU that procurement of up ended say, change-of-control would some has them, generally, in

some heard we're commentary so, contracts. that to Axon And of to they're I've excited going rather that and platform the getting is the now actually that honor on back they're those

those So, very for positive we customers. intend make of every to a this one experience

Mark Strouse

it. Got

Okay. I’ll in That’s queue. from it me. back Congrats hop again.

Rick Smith

Thank you.

Operator

line our Steve comes question the from And Craig-Hallum. from of Dyer next

Your line is now open.

Steve Dyer

and Thanks. congratulations well. Good as afternoon

Just up growth the in tweaked the around is organic on following guidance. how Mark's organic, question

sort ballpark, VIEVU flowed numbers. imply was of I the of On sort new year from wondered out, and through, that willing versus added would for balance VIEVU. was what or just you're was QX in you're side, already break the of the sort guidance a the sort anticipating over expected what the if of revenue of revenue to maybe lot not

Jawad Ahsan

to our and & business exceed guidance, so out, guidance. dilutive pointed Yes, VIEVU, were, out, to on as initial business. that track revenue the we you is operating Software And expenses our Sensors up Mark as our took Steve, pointed in we

we're and absorb to to original operating around margins. gave feel so, that comfortable going we that be the we And to stick able guidance is what

Steve Dyer

about the line very the of I rough revenue Yes. in you'd this numbers, an and imply sort revenue If, the talking, be of million by raise would that I'm quarter, about uptick. on guess, $XX line kind revenue.

if just just organically quarter, the wondering the of the softer lot assuming. there's last if given a VIEVU first year So, little quarters not maybe big three revenue you're a or of were

Jawad Ahsan

that to in all expect have international some be year. Well, onetime don't the expect we the as items QX recur. mentioned, we VIEVU generally from did, material to that you We don't segment Weapons for

Steve Dyer

it. Got

Okay.

guess, Or the I XX% quarter. the Weapons gone out and some to is a at just said trying potentially, I second XX% long guess, Are you X% so, XX little point, in organic seeing a, see along anomaly? that enough you downtick And sort has if quarter, I by figure an slowdown to grew guess, I of, those sort you sequential for of growth? TASER on a I'm a where, lines, in first broader think had to bit.

Jawad Ahsan

digits still What the We're sequential question. you're seeing anomaly. grow seeing Weapons great lower business our organically. is double really Yes,

Steve Dyer

Got it.

used Okay. below mid- me, staying margin And then, margin XX% I The sort operating of guess, operating ticked quarter. Historically, lastly that there Weapons. a for this be to products with if has to wondering or suddenly have time, just missing, I'm bit R&D there's for you. little I'm what a maybe more if expensed shifted what or business. mix over new there high-XX%

Rick Smith

TASER Yes, think would you're more in deals the the of this OSP. as say, more is going Rick. so the majority Safety of of seeing we're are seeing I part Officer Plan, what is there and I

business, revenue that with the ends And up you like from time than of discounting perhaps some cameras on business but on the would Weapons Software just hardware, – the so together software, TASER some obviously more and impact little to just so, the deals, revenue Sensors the allocation, see the & TASER end the those discount by you TASER margins. the it of of when revenue bundle allocating bundled some away which allocation, up tends bit is a with

Steve Dyer

Got it.

Thanks very much. Okay.

Rick Smith

you. Thank

Operator

question And Capital. from line from Khan of Imperial our next comes Saliq the

Your open. now line is

Saliq Khan

Hi, you. Luke and Great. Jawad. Thank Rick,

Rick Smith

Good afternoon.

Saliq Khan

take look are the becoming the on what you Guys, quick trial first customers? thoughts being outlook, are is, my full-paying a at your that percentage of of a on couple the real end, the one questions if users

Rick Smith

you. Got

moved we're of the very very some the to that users the And from hands with procuring trial. trials. I'm a many to It's job we might let this, we've of I numbers, because hard midst have closed, project, a And they weapons, tell to moves We're procurements they percentage way. in majority into deals you customers some which a of any not been away have are does the us me – happy those just have going can't us. do in But them well. that people major the have we one. Put for in Jawad, ball a still evaluate they of and it won about ongoing. I if what that direction, strategically that vast the mean, was contracts you towards universally, that have well those of went think exact successful of the the and let trials, into still purchasing trial, have moving there's can that agree I I when field at it we wanted make think stuff that look the in where really a them. and little see, saw very that Luke guys of deal. hands completed in the already is in gone of trial, bit high direction, trials sure may right? the committee, we So, – take give what the cases, this, materially users, contacted bureaucratic pretty and our the gone we moved And

Luke Larson

deal trial. Yes. over Any we we've ever time lost rate. very have have of of trial XXX see a a a I units, XXX-unit think we where high we a can't success

Rick Smith

is on-premise one our believe here, belief of or those of an this customers connected a that we kind IT, an the where we've if went believe that's in and frankly, within that to shot win Well, our And and future. side good world, it "Hey, towards history because a, tides got particularly the cloud on world are sort of institutional on-premise." we assessment going internet-enabled, on the said, is run that to they two, so very we're had we of moving

Saliq Khan

how kind was years, you had he about and Kanders real what [Indiscernible] good there. of for was opportunity surprised talking me a had VIEVU, market that, really great is

do to what motivated to Kanders So, Safariland's think sell guys? over VIEVU you you

Rick Smith

many internally, I very talking smart a I honest, the was this cost how years build build far mean, ago, expecting at expensive to turned We more first to launched than software platform build about remember, To it's basically be well-run were surprised actually support when were Because a expected. the team, it he's we into the infrastructure. be company. space we call. we yes, the I So the to to out guy. and phone

case, pressed because, Now mover and saw space, very we were in creating that that our that create we valuable could opportunity felt ultimately, the were we and a we first the the we we through business. when put I If cost myself work already the the importance a of and make Safariland strong there's the it's leader. of to the software in the economics position, realizing it, really basically doing hard market

just Axon out to couldn't already and continue work likely the to given on that ultimately, strong. run reached to our focus So, a business. them leverage if them would growing good the at simply investment strong respect marketplace. frankly, where be more help delighted continuing everybody's I'm them with solutions And to their level strengths that to really such competencies because to build a allows valuable holstering we make and around really things can really to and going strong conclusion, that they're and are to lead that and support position, way now Safariland had a of I come I same the And I in their were found us, we have in justified, is gear core

Saliq Khan

just I over agree. into I've the Rick. marketplace. switch Well, nice a one pretty there question, had And last just

about do portfolio the what product you the that other, like over you could look opportunities that how tighten really once your versus and – look when And a at If you up? if map product integration happens? margin take start portfolio the the one potential it you have I thinking

Rick Smith

Yes.

– what had would built. what Safariland to a as of to competitive time, and this, effort of they the part building think team be at I looked already system So, had have energy with a we lot spend

much is built. efficient acquire this VIEVU from economics leverage for we've what So, to perspective, just more be and able a us to global

And I X moving figure say, they've is really down be platform, the one public the VIEVU for in months, customers. shift expansion further major field, and the then this, So, are solving point, having opens the XX everybody capabilities running team helping platform leverage and time our exciting opportunities. new of integrate us can next features opportunities into over world, safety in of it's focus an the the be how really to at problems exciting got additional to what for we just to that the and virtually best new additional out their up the ball at unlimited Axon our building at to this would datasets to that going because largest into cloud

one the customers, investments the investments Jawad making challenges for company sequencing right my also is So, those that us, some the partner keeps while making way us sure focused for to here maximum the rigor. financial add on of value so we're with managing

Saliq Khan

Thank Fantastic. you.

Rick Smith

you. Thank

Operator

Company. next from Dougherty the of And & Hamblin comes Jeremy from our question line

line is now Your open.

Jeremy Hamblin

Software on intermediate-term to thinking deal for results. breakeven. this taking questions business and strong plan the about congratulations have the jump kind thanks into the you of and on your Hi, & that Sensors on I wanted

still the material, break contracts Software is You three that next Axon but you've be – more the business on that kind in see to given Are not may Sensors, years? inherited, track you even, revenues overall imagine, to as pertains material. it mentioned that that to I of the it business &

Luke Larson

place execute Sensors I changes profitable we long-term on any plans good up got model. a business, making not turn we've business Jawad and to in and really we're Every how our think Software get about that the to plan. & and Yes, do into day,

Jeremy Hamblin

U.K, Have we're at you then sales cycle had And any Europe. to today, great length in cycle Italy. we frontiers is color of also to where great. here now, the some months gone played how these has that, U.K., play thinking XX-month of updates the and some wanted the in the the Can months? saw in out of kind it how progress of Germany that cycle in Okay, Rick? on on XX sales ask, you XX And newer the expect in sales provide to to or U.K. out I in out we from you maybe a that just in might about evolution Australia, the play

Rick Smith

cycle. Yes, this we're few it just we're into cycle, seeing in so Italy, We're sales countries. in changed that field the the trials I a where approvals years has now don't continental know sales seeing European other happening

some the police where differences, U.K. still are there tend to units. regional think and Australia have I

forces. and Australia, France, So, we're there's in for constabularies in and national more police the example, major around in XX U.K. with dealing Italy whereas XX

to So, decision larger cycle longer have times. institutions tend

Luke, know you years I'm see So, progress. to seen some but few we're anything do into I changing, to don't it we're it I've that starting to have that a glad add? see now, and

Luke Larson

didn't years just record international they Yes. of that stakeholders I local those really we've a deescalate last we've in is This there hard customers, the access this culmination look building isn't direct hired across are Europe we mean, the our were protests, This last was types quarter effective just channel table Every work. nationals. I done quarter few the preparing think, we a for in to a international out months. over use-of-force and to city now, before. at when key really to I of Again, And million. a at I options two of we have good looking job And end situations. of gaining March, Mayday where they're events. major sales think, at for when three $XX has was

And in expansions so, Germany like to right addition U.K. in Italy markets signs in we're seeing all the the and

good feel we about our progress. international So, really

Jeremy Hamblin

Yes.

in shortened? expand Just player, now maybe the an That's where has really established base the you of U.K., the cycle or the on have question. that question, the that you're clarify, sales to

Rick Smith

in I Yes, the and think now the in in it'll a camera in the are customers. that whereas the business, bit. likely versus we new concept U.K. shortened were a there's the growing body we when cloud think started, I largest agencies when brand-new first was U.K. confidence business,

between I using advantages. seeing this them starting platform. customers the is cloud convert internet-enabled think some buzz docks we're over validating And that, business of and is onto whole model sort more and the to more our real of

that cycles the the in So, I'd decision U.K. accelerating say it's

Jeremy Hamblin

revenue disruptive selling going and business that Is be market structure. how player Or really here software under of that clearly the in gaining service, reported? last way and wanted Axon quick on very And terms business, is to Fleet. current is the thinking then made that on that about you're the And to that moving to there. the reported just you've understand, reporting to be I share Okay, great. progress of going one services that revenues market forward?

Jawad Ahsan

any that it Software & And separately. don't this we future, include break some point, Sensors, Jeremy. point At is to for Sensors. future, but we revisit the Software that in under Yes, at we're plans the that, to have out in may foreseeable going &

Jeremy Hamblin

Okay.

that right products services? in going but net from now, is sales included, or be sales net from to So,

Jawad Ahsan

Yes, both. actually it's

hardware So, will Axon the revenues, software for said the then software nomenclature will Cloud, and new around under portion Other. the under be as and Fleet be I the our Sensors

Jeremy Hamblin

guys. for Thanks Best questions taking of great. Okay the luck.

Rick Smith

evolve year, acquired I Thank had going Finland. team Fleet particularly you. And to his fantastic I'm a bringing, vision in by add there, the doing job. the just last the around mentioned over really would a are product future. at and team in we line's there of way, Juha we, the where excited in

areas we're the I me. So, of think – one the business exciting that's for of

Operator

Mattson next question of our And of the line comes Glenn from Ladenburg.

line Your open. now is

Glenn Mattson

taking Hi, questions. the thanks for

Just a couple.

it on at time contracts, sense acquisition, NYPD. of give deal are years And the take they a many the or reason left can I'm those you a VIEVU? the three-year the instance? with five-year how Was On for Like, that signed confidence know to the standard of in lot getting standard up upon contracts renewal? – pricing of which you I how more more you've significantly curious But just, situations, a underbidding feel they like were structure you your about mentioned. those do is us

Luke Larson

with be Yes, so hardware where years, their kind this discussions X and go I feel we're the is any move over of their them we the customers, at willingness customers. And and and of would with good those But the about early of to talk this not the work to customers, natural really the average to to those out life about Axon say, several is, Axon network. time, cycle the a upgrade going specific way there'll thinking we're to customers we're earn show trust key going about benefits in network. and X.X anywhere from really

Rick Smith

and the Yes, building that I value part would is of the to it add services are that, that future network products Axon us of and gives extremely we're offer valuable. ability – the

discussions these they're going already these really valuable. are some of future some where we're had products with that that So, and services validating to be customers I've building

So, that I delight things how and – these new don't very to prices want not we do the We're those them thinking this; really renewal of going to increase to be time. for new that they'll the future. capabilities some we'll the are be in earn like purchase some that valuable over customers additional services have we And building? business how able confident we're I'm of the customers think with with new of like thinking do we're we in at terms those about

Jawad Ahsan

and such in the years because contracts though about proof on running Yes. these we to expect their solutions many products of situations. at even just average X.X future. And don't length, on term new get full in up build of our would new rapid of end And to introducing same they're upsell Rick continue some we're actually, the rewritten pace, that X a just the spoke is point in to that, what contracts,

Glenn Mattson

I Great, guess? up, margins? year-over-year. points going maybe getting that's XX Is there anything scale, helpful. better percentage were beyond They sequentially about on just service and Jawad, X I there think, how

Rick Smith

we've costs to from So, it migration was completed AWS part of Azure. our

there in there there. were So, costs costs, migration some duplicate were

do add? complete that, us. to just anything of behind we and some Jawad, that have So, you benefited from else having

Jawad Ahsan

That's that users we're there. add it, we network, to also the fact and scale the continue and to exactly getting

Glenn Mattson

last was in few – just international little last was of Cam so maybe was TASER Was the the the thing, weaker Dock catch-up, orders and orders? the Cam maybe some and just – seems ebbs kind the like oddly dock a curious And was Great. a guess. – TASER but on flows, mean, I quarter, – Dock this I that random maybe strong TASER quarter. there

Luke Larson

It Yes, strong record was actually we had still a internationally. and we're some international Cams a selling really, TASER really quarter, quarter.

Rick Smith

Cams least significant. was our I that of U.S. like us don't was them pretty can typically at specificity, with order who one about went customers think Probably know talking that I TASER well. U.S. as one major there – but with

Glenn Mattson

guys. Okay. Congrats. Great thanks

Rick Smith

Thank you.

Operator

from line Baker our from [Operator the Bill Instructions] of And GARP Research. next comes question

Your open. is line now

Bill Baker

here business hear that you having your Or a see intelligence. Hi. folks companies, just a are several seeing there's about time? of appreciated My is applications in question your this and Day in about to I strategic thoughts beyond Street straight two fearful deal, year And signal morphing think the from police ago, artificial you're not little Motorola greatly Analyst be some really this back. going the wanted them divergence you kind part were I of to thinking here and developing internally, among you you passed Avigilon, two do you've over lot in market? The on emphasis do and the in you're as adjacent a going of thinking a this or on that. strategically lot placed of how that, out about a that and Because be you're of internally that to my to see colleagues months a

Rick Smith

We're bit for is focused on Hopefully, our a sure. I would difference. asset. very there [indiscernible] as building say core a of a

to doing things user really where you're with that things to weren't Some lot growing the buy acquiring play different is together. hard of up Apple-esque technical through end designed you and end bunch And that heavy of risk of buying And well of of of experience like talking that necessarily debt an our bunch well things and up integration, some really competitors it's together. a work our then a acquisition are a a was with technical interestingly approach. because I leaders,

building our on highly So, integrated much focused is more a things approach way. in

foundational an AI the AI a on we're like perspective, doing from So, or not scale Google research Facebook. of

of have the algorithms, wonderful, Our you this in and the one leveraging petabytes datasets the at team and know best-in-class the tools on building data on we growing XX models focused world is largest exponentially. based really we're AI and

many AI ours. our to used in Now, able very customers' not They and this clear. be with boring customers But that It value train algorithms. can and can and, data We'll automate has opt to inside of now have ultimately, the data. tasks that to that's mundane data. do unlock our that's law data the that then enforcement to to tedious our be is

focused gets team continues. allows So, we and feed build we team and to so customers, data, features forth, the build win AI data more which having a believe better which flywheel our us and more better more can features to so we to

people competing confident about in good we're the strategy just So, approach, enjoying haul that know the with some pockets – against excited are very confident do our approach. I'm that We to we're the how we're one see over just us, long is that our say We that, and with let's really we're deep up we're our future feeling and competition. unfolds. feel saying,

Bill Baker

a with again I of and you, engineers. chance speak have to Well, some to thank having appreciate your

area. So, it is a fascinating really

Rick Smith

Great. Thank you.

Bill Baker

You’re welcome.

Operator

our And George Godfrey King. from line the CL from question next of comes

now is line open. Your

George Godfrey

wanted congratulations great to How me what I Evidence.com or – From clear just start it time migrate Rick, Axon do them the to whether on – is existing full comments, wasn't for moving over from hardware the moving on VIEVU. with quarter. the you and you. does frame to to the customers Thanks taking and customers to for Thank leaving immediately. plan were the questions them you the VIEVU solution your then to and the solution?

Rick Smith

our customers. issues now in Yes, we're working are through with consultation that those right

So, we that. time don't on firm don't we – line a have

make determined, we that to on be that have the with path again, going that's close sure input customers to consultation choose they in our forward. So,

George Godfrey

solution. Northeast City adopt and New slow York Got have then, are really camera cities secondly, Boston, that think, two I it. And the to body been

signed ascertain their has VIEVU, changed? been with cameras contract for York New X,XXX able to around that that Given Have that? you thinking a

Rick Smith

biggest careful statements, we the we'll about year be have the what our or send the to earlier team statements made this York to do some know us [ph] accelerating of So, references hypothecate New plans I IR you are, of cameras our to about mayor full deployment. asked of if customers. those not have but their behalf not will has on agencies in speak although – particular that you And comment public really to

George Godfrey

Understood.

Nice quarter. Okay, you. thank

Rick Smith

Thank you.

are pretty it. We about excited

Operator

Thank like you. to any remarks. further at Rick no And this showing closing the I'd call back turn questions. I'm to for time, over

Rick Smith

people It's like on when Okay. work the labor this not that Well, smile hey, just and pitch quarters the one. hard past the have a to everybody. hard you our quarter see all of few in over fruits of done the to

come in thanks the to So, for the in our with excited for all meeting rest tune you sticking to us, and shareholder out really and have our calls we're year. of

Operator

great disconnect. Ladies may and the gentlemen, thank a and This you have conclude program, conference. does for your Everyone, today's you all in participation day.

Axon Enterprise (AXON) 9 May 182018 Q1 Earnings call transcript