Axon Enterprise (AXON) 26 Feb 192018 Q4 Earnings call transcript

Company Profile

Participants

Luke Larson	President
Rick Smith	CEO & Founder
Jawad Ahsan	CFO
Andrea James	VP, IR
Mark Strause	J.P. Morgan
Will Power	Baird
Jonathan Ho	William Blair
Jeremy Hamblin	Dougherty & Company
Saliq Khan	Imperial Capital
Scott Berg	Needham
Steve Dyer	Craig-Hallum
George Godfrey	CLK
Keith Housum	Northcoast Research
Glenn Mattson	Ladenburgh

Call transcript

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Operator

Good afternoon. My name is Sheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Axon Reports Q4 and Full-Year 2018 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank you President, your conference. Luke may Larson, begin

Luke Larson

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

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

give we birthday mom shout-out. Before a my want started, I get to

Relations Now I'll Investor to our Safe our VP Andrea turn read James, Harbor it of over to statement.

Andrea James

call Relations and is website. the Investor section Thanks, the online Luke. available broadcast Good is being afternoon. Enterprise of This Axon on

subject and Today's our expectations, to is Safe by future including Litigation results shareholder include Act Private current provided revenue can Reform the letter and which reported Securities and You our the expectations. beliefs, find statements, me quarterly and for on available XXXX. is intend based growth information and strategies on be excuse our Axon's that future information forward-looking of forward-looking We or regarding statements the Harbor call projections statements investor.axon.com intentions, at SEC profitability. all website. forward-looking will

XX-K caption under subject our results in XX-Q Our and that These statements Form are risks call future All difficult statements Reports which predict. quarterly could greater Annual of on on Form not to made uncertainties, guarantees are of they're reports performance as estimates to the Factors. are the speak the certain detail cause and assumptions and that that to made, risks, forward-looking risks and the are and today's are on discussed uncertainties on actual involve differ date materially. Risk in our only

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

call over to turning the Okay, Rick.

Rick Smith

twice acquired and breaking drove our in XXXX raised accelerated fast completely fortress, the business offering, XX% we in-car welcome, features into as $XXX We balance sheet the United was as growth system dominance. & than million with VIEVU, $XXX bottom is line a everybody. result in of the and grew EBITDA a Andrea, that XX%. adjusted and including year. States Fleet in redesigned a segment software more We up record largest is and the released follow-on several Sensors top-line up market a Citizen Thanks, which We in year-over-year. XX% Axon department video booked on we groundbreaking released for million Police Software the We Axon Network. vying turned

Conference plan. time customer especially a revenue, half Fleet. last quarter We record also year all finished seeing of procurement once Safety records initial a & with our We're software expect record X TASER including for quarter Axon which for or XXXX certification years. ABX with product We in Chiefs record IACP is the at that stellar for shipping. features Officer the it camera, record for Sensors, bundles Police body TASER, announced and company for and last To had healthy five customer in a line. from of the next-generation total course to TASER in the new International QX network. about for International tax the October. And our quarter device; the with shipping every Software and X of TASER bookings X quarter X which We free quarter momentum Plan for record year, X great rates for back cycle premium X connects TASER of offerings the the response we and the Association excited began and starts we the Body response to Axon in We're months a OSP

than workforce life. opinion, demonstrating their it's new XX. want TASER to I upgrade significant take want in that voting are which quality TASER, upgrade a the thank particular old in is the of the XX% and first view to strong the statement Demonstrating end utility product value a as earlier of to customers of of major the time executive in than our a do between indicator weapon new team, have energy less want shareholders do to exponential five-years-old, to out history and every to work weapons who to still this Our In and employee. this a very customers some excited years to drive we're the don't it customers wait city brought stock wish trading than of performance five total advantage willingness customers agency U.S. to X in it who plan margin over we month. for to less its roll operate quarter. of and they for It upgrade some the hit five-years-old really my course features internationally. of to in program. accounted of the But to facilitate compression alignment order the weapons Credits has approved in earlier the for proposition. trading personally We shareholders, the a pro-rated

accountants that have now. that are working lawyers on and We

revenue all thinking Our encouraging just adjusted hitting Luke? have like and in first beyond. and laser-focused either can our EBITDA decisions CEO from $XXX first milestone goals employees operational That's and I is shareholders. tell as those me. you, making are It's on $XXX or million in long-term we million to

Luke Larson

Swedish is We European police Axon to force first on year and Network. to wins. a Axon the forward deploy the Thanks, welcoming the to look The strong on start cameras Axon with nationalized the That's Rick. Police Network. key to Authority body off go several

provide $X.X that cameras with a for few and a Axon approved to notice the X,XXX Department Phoenix received the evidence.com. also Enterprise contract body million City Council ago weeks We

sleeve few for both we announcing and up that days TASER weeks. We our forward have coming more and cameras the a in X body wins to look

focus was the us body company on business demonstrate with Some of a really for pivoted us more of to leverage new been heavy profitability. we that know after late on culture XXXX, our It camera you led while for to Jawad, in who years have driving investment. by CFO, our important

we year shave I'd my one the ago, head up declared XXXX in I that front goals. and if hit So EBITDA I our stood of company

So that it's or everyone the with share indeed we goals. and did with I feelings those team rallied the team that share mixed hit with

a still to accounting my of right heck late company our a let over our Phoenix you them. we for where metric meeting structure. our leverage, fact, acquire exceeded tone related $XX throughout successful And and earning several as feel In even this to about and organization evidenced period offices for know Open for loss long-term, to profitability great while cleared stage we make major world. in million employees XXXX except of the and We and on May, the customers Axon Even with controls everyone VIEVU great course, us almost performance also my I for invest in annual echoed our sharing kickoff full-year in so privately XXXX to under our expense I moment how this about targets. decisions that shareholders a in shaving I recognize we and we with just our growth weekly the all all was the opportunities. sunburn reviews remains the VIEVU begin way It while during took the the of association turn acquiring a after which as we was of for broadcast of Axon got annual by committed pretty demonstrate cost of wife. a driving implementing I'm head

on XXXX, primary I'm laser-focused items. Turning three execution to

the X TASER the that received is in rollout ensuring is being first it's The successful most ever. market. And very well TASER

The Axon with both second next-generation the is X responders' the software launch is The first team camera And rollout Records we're networks dedicated body this our LTE which what Axon of talk timing. to Axon product launch AT&T, extremely first Axon our delivering partners. focused which have camera. of This successful looks clicking the coincides of cellular and by nail a place is let's Body X to in third rollout FirstNet, launching We that. midyear Axon on like. do Verizon, our Body about connected are and Records right first need product on we double to the the great one; partners, third,

really to a foothold key delight launch is and our customers. gain early the deployments. XXXX to our need goal in also We early succeed

the We sell call Axon to X setup are also and with CFO, through customers Body I'll our great to whose over want feeling experience. TASER the XXXX. Axon turn Records X full bundled Jawad. We're about our Axon Safety And now, Plan really the X Officer for

Jawad Ahsan

large domestic substantial Thanks, Luke. I've In said despite felt a We've growth. we how in proven we headwind positioned what we is VIEVU for the did do we're pretty better their to execute. of about from one could going XXXX, company customers. never

about backlog to around the terrific and right picking driven Software the Dispatch feel recurring in corner also Records Fleet in for fact online teams annual more and about million products International and in coming crossed up feel $XXX have than contributing I our and having investments are XXXX. and has leadership. our on We vying $XXX top-line revenue and records business momentum that the company great XXXX. Axon with total we bookings million for good in market by

of forward. team recent embracing this goals On company's expect for of I'm discipline. proud that hit level year and a the our we the is we first financial the that profitability going line, continue our bottom new in history to very

to Equally XXXX, $XXX balance operating the strategic million generated strong gives strong to to and us to continue market areas a selling muscle position providing innovation position ago. of in subscriptions. the gives in we $XX us the from the the both top in investing bottom and which Turning on with line. combined puts ongoing $XX our cash leadership. switch In we million sheet, cash The us important, we're amount an up That our guidance four in financial today about strength follow-on flip million resilience. on incredible offering have cash, year reflects drive a growth TASER

the back a sales more momentum rate we to look XXXX, reflecting half. the we relative As modest growth at year. QX build throughout expect to

reduce as investing increases to that the R&D from as in continue SG&A year. that reducing further We percentage sales of We will percentage expect XXXX. XX% with by to and XX% in of plan sales XXXX as of for XXXX a throughout percentage to dropped offset in a in sales. partially we growth SG&A a

with about to Our teams turn success top-line line highly XXXX And drive needed motivated and the results. to to keep bottom operating in let's our discipline growing and the maintain excited operator incredibly questions. that, they're are

Operator

[Operator Instructions].

first of Please J.P. comes go from ahead. Morgan. question Mark of Strause the The line

Your line is open.

Mark Strause

everybody. questions. Yes, for Thanks taking my thanks

items half that of about long-term kind And talked kind targets those? laying or XXXX? can in should margin follow-up fourth margins or a one-time guidance, I on of of just your were any you should associated how expansion VIEVU it think good think a that over that and the below more you've year call for a we are that large kind So then I weighing -- expenses guidance pretty away is out And bit kind of Jawad, year. with job about you think EBITDA the the have. points first the guess they term, the reiterate of done to we your how items of that But to in here there that should those the so? one-time longer quick Are I guess targets stepping you've last contracts we about question expect from

Jawad Ahsan

the VIEVU start great one. Yes, I'll with question, Mark.

that customer rationalize working knew domestically, And look one counted being business that we still we So very costs headwind saw of was XXXX get we see costs longer XXXX. and make to more of duplicative to last we earned integrated VIEVU and a up on. dilutive going level the we're with acquired and and we sure dilutive we're not ended large that it's headwind hard the going in issue year of business into when that had certainly than the some no to a to that

QX than be from still to continue magnitude we results headwind also guidance better not TASER up QX. I than expecting then you question. the see saw we're we to question a the there. in is we're rationalize just order the costs it's our less base -- from facing drive would being higher what that's are say some good we're still And we're are a We do some as bit second leverage to XXXX. our this in away in expecting part much and looking stepping costs What expecting to see of again ramp and an But and of that little but ended just was X of very VIEVU than to on -- was it's it your in on cost going QX, also

Mark Strause

XXXX you I kind baked markets and And the of anything for you're that's into about in of be to Thank OpEx kind press helpful. helpful? more that incremental the there's associated investors level of adjacent help then you kind share guess mentioning the you. markets that, that's high with Thank then Okay, talk Can would your addressable release. you. those if you're that can frame expense

Luke Larson

part Yes, I'll Mark. of the handle question. first that

these open plan our so few had senior they're on In individuals terms and that market markets. of figure into are we OpEx of motivations how up markets, of the to to members teams a our we actually facing several to additional overtime expansion one the quite have customer growing and for actually team new great working working them, support on new key XSU opt out

see we great add So OpEx don't any there.

is continue these up in and to able to to SG&A markets. leverage of this drive some still think going we're be -- new I open

teams of law in enforcement those adjacent quite terms big EMS we we Fire market. markets really see like call the have those, and talking and of In would not opportunity they're what focus we as very markets, as the in an

well. We because lipped don't tight to I'm interest also had now as pretty from for have any some just keep of going kind we markets competitive to additional that intel. release actually want

Operator

the Baird. ahead. Your Power next go question Please line Will from comes of of

Your line is open.

Will Power

year the wouldn't XXXX off off of key and back to for guess QX. the revenue off visibility first or I be Camera drivers. of in the to the interested X continue any continue the of build I -- as guess into guess the I the X why that Thanks to Maybe kind half. just first expected of Body taking through QX just Good. in second the and half build guidance question. the part build TASER then through reason second half coming

visibility in the understand to of that improvement trying second half just So revenue?

Jawad Ahsan

upgrades is to Yes. about midpoint We're so the production see multiplier year happen X the pickup revenue by in second sort a of what's a And expecting is and of half be will there of those are the and fully with the lot ramped be TASER in the coming half. to ABX effect we'll of going year. back in also force then up what

lead the be, back in well upgrades to [ph] are as the the half year in profiles TX fully being as So ramped the ABX back tested the half of of to going revenue year.

Will Power

drivers on then And or you presentation in key four release. Okay. the kind of talked the growth that strategic your about

for Records talked there curious much your already and key and hear on guess more from I I I'm here? customers You could thinking year. what's just about pushing bookings later Dispatch, this timing

Luke Larson

Rick take we don't why that question? Yes,

Rick Smith

on call excited on but we're Thanks, keeping it lot fairly Luke. person in later an Yes, on details we we that will in a year not that. to just now more provide reasons it's releasing competitive we're the for that area pretty are closer some Stay point, and tuned about. for

Operator

of comes question Ho ahead. next go the of line Blair. William from Your Please Jonathan

line is Your open.

Jonathan Ho

Hi, hear you good Can me? Okay. afternoon.

Luke Larson

Yes.

Jonathan Ho

Perfect.

types your of wanted in just out about second So can magnitude I give half but color start the And being the terms targeting of customers us expectations RMS. about. in the we of of bookings thinking be opportunity you should some know be to you initially? bookings you'd timeframe terms around talked what

Rick Smith

is one. that I Yes, can This take Rick.

the bookings So to most bundles. as expect of actually part the early be we OSP of

using the the of for we body our with cameras We that think real the are plan agencies already TASER our are and us that software. target Cloud ecosystem bundles majority we because in have weapon, some and Records that market included safety that people

player there. the the we see real So opportunity

we revenue being is Now this handled allocation there allocated how actually the terms we're from Jawad, Jawad, I'm -- and is a some at towards details I any giving country allocation is that not revenue area of more of said time. Records. in in that different look

Jawad Ahsan

No, this time. not

Rick Smith

Okay.

long view in see the sale is in really we is the include enterprise a haul in it and that add-on overall real of reason to Records the value itself. data we part sales, software the the So free not as

their our software we that So rationale And the as be software is fill officers that the we a commodity, more in strategy and half period. a horizon forms is spends sort such over we law to of dramatically a of time good officers the payroll is, bundle. seven-year But on largely it's tasks. customer to with it a no date a from billion what be a that a Records commodity. recently it give enforcement printed U.S. stream are a because is spent talked for record And contract fundamentally an It's when make over they are And structured can the believe general a about matter And free year interaction machine fundamentally, structured multi-year like their that things a to time the filling We time the something that automation. in they're into by we possible on very to ultimately doing see record birth? have team you the this go-to-market is hugely time really points plan. cut of audio/video the conversation live? so target AI management audio, $X.X Where what's how name? and be we we that you software about record your that had form able extract just the do your and that in great agency camera in that same the I spend your case, officers aggressive pre-populate forms. my software, decided begin to think Records What's will be conversations. transcription filling can filling is idea, one will and reports Hello from is information value-add video form pre-populating amount system major out administrative valuable. connecting And spending and to to management something really of real sort will out the and million sir, $XX

that us value payroll opportunity going tasks. cost for bureaucratic added value $XXX automate creation the that's on to So is million

bundle of see when a and the is in add so and see, so you automation will will largely the And next kicked against we're allocation where the we over that's begin then with function records high-value connects records. to the associated you'll really five It the early years. to revenue be that years AI in body to cameras three analytics

Jonathan Ho

now impacts seeing follow-up OSP. you're and Thank been TASER a other look I the to for mean want how seeing are historically potentially that of change maybe mix? base. that you the maybe that color. customers sort refresh talk customer about the of only you broader just TASER sort bundle how at or the have that strengths hardware X and look at like around that you does Can as excitement when Excellent. And we X the in

Luke Larson

see all agencies Absolutely, the used great opportunity Axon Rick. so the when the additional time Solution our see total of Yes, a those about to products portfolio go every are is ahead, benefits. strength together, our we talk of in customers we get front and

benefit And the kind Over of to we're total of about with you, we're the every products, one in, so solution. of Rick. a time, any highlighting our talking customer

Rick Smith

numbers weapons. stronger has to a with a particularly that software what did compare assignments starts it TASER on returns Yes, to sexy down an versus of allow we're it that all device now like going but doing and just I doesn't agency or data ABX experience over integration we deploying like where it it. things ecosystem and to sound they our into the It things you even process do element with just later type We're device and and integrated mobile which How say, X write of on much yesterday, TASER them serial with time team a these. is your assign of an it thousands the X Actually app the design I officer. the improves dramatically spreadsheet tap would was you alerting. real TASER that's it to thousands part definitely

a exciting you of field. when camera that to I an program they get open calling able has it up that the that year the camera. be platform, officer Once field. host such -- information will of planning now or iPhone, the the Axon comes in we'll think Body We really and some U.S. I chest for Pro interesting Nuance X discover connectivity iPod a -- by Go is became services, out saying, sort customer that type in this that for great the top we their we are hardware the of part with I'm and if which kinds because happening of online subscription we're alert iPhone kicks really we'll like an well a in later. player will we're routed went us both it's and on become time clockwork record. opposed really of sit better on plan pretty of our real them future big dropped actually in for effectively we which aware be as as use into the today; because carry Axon part think the can be be fires out that agency rarely or so arms agency upgrade make the we way, great officers hardware services that features. the most of back roadmap. the which it we And the just We administrators and by like a sort So field, your use to support all what's and some to hardware three cameras. top us indefinitely wear a make of so once to any We generations customers majority in, our see they will in move and it. it, a other already that installed thing And of move gives people in moment the with a even upgrade on things help fundamentally plan an the of and anymore And something innovate of don't as to more officers can significant at competitors of you service the think to last aware to look which poised the will download could the of than X and within they, TASER coming a a of offer music camera can benefits their LTE whole we're base in opportunities the software the X the meaning our of flexibility And phone on wear device. along of We as space. Body cameras the the that now, And have faster similar initial perceptions Alexa what to like my me connected phone transformatively that sort their and

Operator

from go next ahead. of & of Company. the Your Jeremy question comes Please line Dougherty Hamblin

is line open. Your

Jeremy Hamblin

I to ask Thanks about wanted for taking that. the questions.

the timeframe gross margin? gross that a give the sense to better back mentioned range business TASER us on you Can get specific think more You you'll margin. into the which that XX%, time maybe rebuild a XX% in you

Jawad Ahsan

there's credits the in mix Jeremy incentive dealing the to in the have on, very factors we're the fully successively we trading until that first we're early got At that's lot changed the throughout in trading to still something structure we're going have and ramped. QX going some although the obviously there minimize we're are pricing build, XXXX. of discounting. where much this see some sales still half we're There's at there's of discounting a we credits. then It'll going leader also point And we've in ramp point, that year the team with the with it to see costs

more expect normalized year to going built will we're to exiting the throughout see basis. will and what margins XXXX, a be so And is there hopefully those in

Jeremy Hamblin

that's Got R&D helpful. as in particular very XXXX QX as thinking product line in outlook investments. our in this investment it. your about new you reflect, you've terms item? guess we that talked And year, coming we be bit think How then going here launches lower think Axon How and R&D just That's little had should the about a to numbers about of along. about we Records I

Jawad Ahsan

good Yes, question, Jeremy.

you've seen, and investment some excited and what under new R&D. increase markets opportunities do excited very there we are those we're our opportunities So certainly to don't markets us that we've the addressing continued the to about in are opportunities. of But today. We're ahead that very miss in on is adjacent we're Records as about Dispatch well and want and invest in out

XX% from XX% XX% and as it It's look a will revenue above from about you help And in that's up be so XXXX if what and for we're down our about to in up percentage of XXXX, XXXX, you further a and XX%. the that, end revenue, closer that as offset at to going our expect so to percentage the SG&A of slightly R&D about to of can expect doing drive XXXX XXXX. even that end XXXX, of was down, that's at XX% at XX% we're in coming

those And leverage in very we're and our into reinvesting support dollars function consciously R&D. doing is so costs what driving

Jeremy Hamblin

year? revenue then product. Okay, generation of the to to the in a in great. specifically you is question in thinking which more early revenue in that XXXX; that's going be give of which or generating terms the is of timeframe just us XXXX Can in half terms And a sense that related about second a Records follow-up something in

Jawad Ahsan

Yes.

selling that the XXXX. with but our part Rick as contributor TASER So we was today see Records earlier, saying a being in OSP would actually of Axon bundled X, we're offering in first

Jeremy Hamblin

guys. Thanks Okay.

Rick Smith

happens, that add on. which strong can piece Axon where that's expect our we I Axon solution integrated is the selling already many so just there, in of deals where we're standalone be going don't to be the it a are particularly Yes, color major agencies Ecosystem would little just the with Records because

So as our is that it's Rec sales bundled these guidelines year. to conserve late soon that growing recognizing in start customers those gaining we'll the revenue happen Rev availability with meet that we product you'll expect as and up this features the general see utility from features, in

Jeremy Hamblin

was is when Thank think But be going of got that I That the recognized revenue. Right. we question answer. product as really you. the to

Operator

Your next the Markets. go Northland of comes Mike line question Latimore ahead. of Please from Capital

open. line Your is

Unidentified Analyst

one what Mike like Latimore. is guys. has This upgrades? recurring Hi my sales I Thanks question. a percentage Pavan on on for [ph] have and of plan sold your My is were taking questions. first TASER for two

Rick Smith

got to We going that letter. just We're that shareholder track down.

Andrea James

of were it the was weapons was believe and in almost in and TX recurring. I payment all plan on new all on a contracts XX% was XX% it specifically TASER sold a of recurring QX U.S.

Unidentified Analyst

could my your like seats backlog of not yet And evidence.com you give second Yes. question activated? is a us sense of

Andrea James

do we that. about Yes, have XX%. generally It's

Jawad Ahsan

to Yes, our XX% seats. it's of booked XX% about

Unidentified Analyst

Yes, thanks. questions. Bye. Thanks for answering my

Operator

Your ahead. of next question Capital. line go Please Imperial comes Saliq of from the Khan

Your line is open.

Saliq Khan

first margin your seeing more you question give you more are of any revenue A competitive or either the likes me on granularity and importantly actual is expected the guys. X bit contribution on from WatchGuard? pressures my quick one could the is for regarding end even Perfect a Fleet you

Luke Larson

I start don't half why so Yes, back of question. the with your

of market's demand the we a on really sell have really we just recognize for period. Fleet we seen a where like or We X the proud and then them our bookings Fleet. sell do cameras of the over and response are majority and that our buy products five-year contract on kind for demand just We they'll of five-year Fleet

Rick Smith

was say WatchGuard market But competitive. high I hold if company been we've as years video. leader the I are would way clear couple in they And could quite a the by we of contribute ago in Saliq, say in-car I well, regard. a

Our to competitor Intel have bookings is momentum we've tells we dollar market the direction. us quarters a been heading our and basis leader feel on the where that there been continue

spot. a we've about time. feel to So we we strong for number able within only or launch with one year contender good a get really stronger been be the And think we of two

Saliq Khan

ahead, please. Perfect. Go

Jawad Ahsan

that X,XXX be in quarterly rate about and units extra at the some level. provide to we're run to quarter in want above or shipped we expecting I XXXX color, a

Saliq Khan

that. Guys, Thank That's end very my on as helpful. you two more questions for well.

Is to be you're touched first of your but the inflection some noticed that sales; missing. something by sales offerings? other may cannibalized that the I else on You Or year-over-year. that have be declined I X% roughly going seeing they one there Axon the upon had because may is

Luke Larson

we announced Camera. IACP, In Body Axon our X

lot them we And would going been how a on to our the shipping so that's this transition working technology we've new be to customers year. over of with

Rick Smith

officer suboptimal would there. in really experience, is add we've just head. in camera to giving the you wear do narrow tend of field the view on not camera head enjoy it they of a up tracking it not their their et want perspective and to I that the of we've XB general, a found I Rick. Integrated the is wearing seen so mounted in it was the and shifting In that ultimately of Body using up practice concept original this what be it's the think and the officers favor cetera officer's market ends the tracks shoulders Yes, Flex the really XB, versus head, on camera,

agencies now where camera to just officers towards more simplified design and continuing a that see a I'm both ABX moving trend So ABX. body are and

Saliq Khan

would well. have I Yes, as mentioned that

on so factor lot with product in now. I to with this guys, ton ABX, Rick this. the you of my and use lot a ease the than better a a more great the altogether form believe question think this it's past. of for seems do you of nonetheless saw the continue Axon I what done a work end Last I have FLEX,

to the International big to a take out tends are the to be a predictability that of that business or due the four agencies there. at look over be If you business? year improve difference, the International to past two have able you What your done

Rick Smith

of done what the thing to takes into we've got open in is hiring get think it here. don't sales we dedicated Yes, a a I good model people and main I market. have really pretty detail market

we to International we've we how in TASER And and go really are just got were did think down now some that the Sweden. sales I Europe as a national and to we're But starting on. about are markets world been start we off we've both some others I there really on I see in blossom areas we record International able year got was way. to but in have eye pretty We of across a police trials think see field the into in in two, efficient in to where to continue it has and period the saw our we've come could do weapons competitors resource Mainland, cameras. new we We call it forces got markets. that replicate ahead, expect XXXX, XXXX, so like we three years

Operator

Please question Berg comes the go Scott from next ahead. Needham. of of Your line

line Your open. is

Scott Berg

everyone if question conversations of the of want TASER us were new thanks a saw on answer the from one of follow-up, sales Rick my a the in the terms what in taking quarter heard first but you the but or that questions. you can that for the to comment Luke maybe X subscription. all you don't vast give I had? to I the give know metric how and the quarter the subscription of were Hi guess have a I sense X broader Andrea their evaluating willingness TASER majority purchase in about on customers I

Luke Larson

Yes, why sorry. Rick, take you don't that?

out for and chunks kind lot So TASER they approaching usually purchases when -- spend a of cash the on discretionary of whatever of they were we MXX wanted. could early of their we were they funds when were historically, SXX out of that customers

mission as critical TASER the gear. positioned effectively we've Now

agencies States operating actually of our to especially the to So have a into their really the budget come put majority which us in subscription with pull aligns with plan. that the

three expect a would service the recurring the to five would I to over on we So years, customers of plan. see next U.S. our majority buy vast

these do VIEVU. going But subscription like mind We're never to in still discretionary want to some have on buy they customers turn of plans. to and they away majority to way we that funds keep the purchase. that's the looking the the of Now I see would

Rick Smith

Yes, is a batteries to even has we element run they is the and a element I bought subscription weapon, TASER even rechargeable effectively they it that the the X that globally in if to the as docs subscription really if there software need would for every well. that services sales virtually program add buy interested outright. weapons

quarter personal the would come back say the to it no, larger customers want the buy pay for and and and my whereas officers started the way buy subscription going and whereas are plans of no, well having this payment subscription or I of it of safety offering no parts. one-time own of they There say for the the [indiscernible] the market So in can't think one came majority some you and in model. would that weapons, order plans three I've they're may always of the now no, when I I to and tone to type majority the subscription significant is four aware I'm had customers bought customer these I'm the give be smaller that. one exposure where offhand where a we every of certification But go only it's different of that weapons are I all almost, said, would where the or some quite just years ago element we

Scott Berg

helpful. I be medical, or additional law of Fire et those incremental enforcement incremental was like big other stories it law and in Department XXXX here was there? enforcement how that the about you. Charlotte emergency think -- the Fire like outside Thank outside your investments then of success follow-up maybe your look Got any in endeavors in on wondering outside a it, cetera. then of or And those Can you press release would investments services some quantify my investments emergency you mentioned what Departments,

Jawad Ahsan

can make those with will you given the within that start investments we'll that investments, for guidance R&D. level expect I the of So we've

So XX% the guided minimal. markets bucket, and percentage this we're north of investments to part R&D the as relatively of we've it's and of revenue as adjacent still point at inclusive overall of making a that's for

Rick Smith

would products is a just enterprise I users way. because enterprises the want that well capabilities. customers enforcement other oriented add clear created leader leadership and by looking focused pretty scrappy elite where for on how at data that fairly we're where that how parlay set mostly law this pretty seen we pretty, very where features there as into having other revenue we're Yes, secure enforcement in as would the now can And and doing one that reference we're market same a it's markets that's in we're powerful is law fact similar find take and we've we

will said, investment initiatives the of see broken going made making body investment connected you just it's those nowhere This these major not like with near It's into -- we've markets. the cameras we're in So something Dispatch. new taking and not major now level out. is really Jawad Records, are building taking that these into

to should themselves We're be So not new huge some from relatively and our launch that way. I marketing a SG&A quickly. going these expectation markets There's is moving pay expense. upfront markets effective perspective, to pretty for think cost in

Jawad Ahsan

them where one from categories very, add shift these to getting kudos about And we want three early made seeing heavy returns, and to markets, we're be teams done small proving the it's talk what Luke this lot Rick pretty to we about and thought Previously want we're and done we're from new really I mindset your I have product Luke new and that actually doing of excited is Delta new we'll our about heard into and we're business. here. these recently people their take into some new to and of into teams very you've very we've other to that growth that, to Yes, to scrap basically products. drones with give smaller Rick getting when bootstrap way pioneer investments. we've us this There's products, these

products there's we're a certainly law of existing product is markets scrappy markets for categories we're and there like in looking then cameras outside that but approaching also for body enforcement new So small mindset. that TASERs

Operator

Your line next question go Dyer Craig-Hallum. comes of ahead. Steve Please of the from

line Your is open.

Steve Dyer

the TASER on Sensors. Great, business, thanks. and question one A Software question on

margin gross margin to good in of add degradation, do think add you feel a sort a touched FX would bit on other quarter TASER business, On a if the margin back what little operating a you of you what one-time normalized you was? like in I back words operating those of XX.X%, but the

Jawad Ahsan

TASER, of for yes, and longer So out basis, SG&A is the actually segment. here. look no pro issue a On SG&A at of we're of are allocated that wasn't mean that breaking segment our it we your, TASER we have by -- lot one costs most to this very because we've were got a is by SG&A to cost, our part I meaningful at forma we so were looking really second, Steve

we our And basis. so margins gross look by R&D look at look by a segment at really segment, SG&A we but we consolidated our at on

to So that's year. I margins you the and XX% where would normalize like the to really point something of to in gross had short-term that to XX% TASER and we expect by the we said the focus end

Steve Dyer

structurally years ago ago TASER not years things as playing Got than that quarter long mid an I curtailment? that think that more this ago, I I mean over guess of on be gradually people to more last plan but different out. I if I pricing a but operating basis I that high-XXs would business questions profitable declining if one-time trying couple of the anything as and make the couple of there the business TASER on And of XX.X% figure any couple was could can realized calculated and or it is of what subscription I'm business way different, with is anything that in years going sort a out, a or my margin on is it. was a going of guess it's recently operating couple one to

Jawad Ahsan

overall the perceptive in look a been that SG&A it was an margins servicing gross from and consolidated we that company given entire sure, the the on at to is the for and of costs margins couple you're but guidance margins looking for business all company that's segment standpoint TASERs. you period the added is much not of look it by going going and we've been infrastructure degraded basis. those have operating a costs really what's it's TASER. the When those the than Sensors over at that gross that's SG&A, burdened what but in Again have TASER is at TASER Yes, allocating on which so very ago years different Steve, seeing because Software and I've really why to already you of a is reflective haven't we on we're lot again

that taking even. So headwinds. it's about business we're ramping body one-time for the also we close up really those costs it's going a expect TASER XXXX step X back good a bit normalize but VIEVU camera of actually if you we as very to were and take feel We throughout break those to out

Steve Dyer

That's like TASER stage at forward. be you sort buyers will it. do who of product any already this helpful, Got growth that to is one you your had is thanks. I do I guess What TASER expect the expectation X devices, that sales from? of get that on on new this [indiscernible] going conquest people typically more people for have of question weapons, well sort

Jawad Ahsan

like with turn I'd I before to start over. this

a X, of I'm the towards one a of strategy to key so our very that the shift has TASER with pricing excited part So about recurring with weapons. been TASER things model

CapEx to from for really should useful for talked of to then useful of been be and TASER that life. always the a is seeing the And demand what have shifting X time, but XX, about we and weapon five-year budget. weapon because piece what people historically It's being driver we first and is First for it's the seeing we're want good TASER the shift actually very so new the for now SXX the OpEx good. on merits five-year life line talked a the we're sales. And the being in item new about OpEx

Luke Larson

one and that TASER called our -- carry times officers. have wake a high Frontline profile PD Frontline in TASER. where Yes, they that of incident, a push a them really for we all made ago It on officer wasn't they a that incident they X the long should didn't had think Chicago every to get

every should And working in be seen officers big TASERs. just we're have of should white making hey major on Frontline we're seeing believe where and positioning internationally, deploy officer. space, historically also by every now city, smaller strides filling we've this percentage carried forces percentage we're then So every a every, opportunity out we a

Steve Dyer

Last Where relates some would for starting to one cams people to body as come it for for first of point seeing been Thanks. to They've a just speak opportunities be or thing the good and few for of just adopters up renewal, me, their to some see now great. color cams. there body you as years out up there renewal. any early are certainly the

Luke Larson

metrics or churn retention. Yes, actually one year and on last of our margin of our one was for

renewal, we're they on on ABX. products So laurels, that Axon capabilities laser-focused when even the not like investing we're up every We've rested making for our these better and Network. on stay in they ensuring more deal the offer come

X talking about X sticky both the entire and the So a OSP our along out very, cities. Rick with offering. an we active confident Officer, Chief meeting the body going Revenue be and got major This cameras, not week in Axon very I to are both different cities taking we've feel at offering about but but only role entire we're with with records that solution talking with TASER major

Steve Dyer

just are you percentages any time to that first any cetera? steps et any around there is follow-up, able A carry renewal

Luke Larson

I'm repeat sorry, you that. could

make that couldn't I staticky. really out. is line Your

Steve Dyer

some this guess that like product. suggest to sticky the a or on adopters kind body still quantitative back renewal cam, anything around or that early I for of shifting long-term the first am looking the Yes, for that is of anecdotal up it's numbers I renewal come

Jawad Ahsan

Yes.

were the last bonus metrics. time for focused first first for commercially and they the our So last time metrics, we introduced profitability we changed all some year year, previously

of adding five scope, accounts and and some scope renewal adding of I up We renewing a say is early customers so and was their than it's for Actually been product. seeing go the mutations churn and to want about third up zero. users we a work to as lot had had of the even less we And full metrics practically also XX we're a of was a it and contracts. one It very introduced percent. don't the end sticky years what different that

Luke Larson

their workflow when learn Yes. learn Cameras, I into Axon go not would -- the them the -- going cameras, they adopt they Body we're also offer where officer offering operating gets a product. to only then we're petabytes They on actually install over talking That's infrastructure uploads site in have all they're XX of on evidence day life also we of we now a which is that when dock. that in and evidence.com. on not evidence.com data

really So we ourselves as place cemented of SAP with put the we they're the as the in well system. that new want also workflow to data infrastructure to the agencies that continually in provide we've to uploading have that just amount but value

Rick Smith

Yes, this is Rick.

mainly T&E, TACT screen small customer year, small it of Just was enough basically a get units a on was large last were not that the that on a of had customer a not not finer a all renew radar one actively point did agencies that my that number using. there to only that and they was

any renewed, last renewed So for cameras of customer didn't with them got decent deploy that's on have number customer they sort a the and but wouldn't expect reason you'd the if significant small of network number year. every whatever

they're the lot said. of upgrade with did I or to they add a that. and So But customers have business. procurement, the it if say something once they and anticipated utility last it. team and on universal. into new we pretty make could so we've finding whether sure in features, go that adding another another of better they very another want procurement looking year there far contract, is for most I should that saw five And have seeing it's to not happy got a one-time is you prop done to time to it's very keep value I'm because a are going to once customers and we wanted through TASER working process have other come through through increase phenomenon let's at because extend their when I [indiscernible] they onto we're going than that would of my this early adding a them say co-terminate what X, go don't any to whether we're we -- to At created Fleet, to common agencies do it's years,

Operator

from comes question ahead. George CLK. of Please Your Godfrey next line of the go

open. line Your is

George Godfrey

expect midpoint. one million, you thinking Thank you. million, conversion so the at adjusted my came a adjusted in for Question is flow conversion XXXX rate Thank EBITDA in Would $XX EBITDA in just million on your you for Jawad, free XX% I'm questions. taking adjusted XXXX? was you And $XX similar $XX.X cash at rate. EBITDA that

Jawad Ahsan

Directionally, yes.

it'll I think probably.

these customers less there making that air for So then But for what slightly building, to going cash but recurring upfront time on we impact most were had it's we a to part previous maybe with maybe the these, booking bit impact generally see bit shift an also impact. X about same. with because an slightly have lower, the a the an on haven't directionally versus like or deals obviously of of and much because lower a it's with period base we of some of so as on now of seen be of subscription about sales TASER those expecting same model -- weapons the

George Godfrey

taking or I'm similar Sweden over them through across you're still pushed work goal did to more very Got contract? again announcements versus through onto and action get just the what Authority on high-level. just countries to what that your curious just then sign body line curious having it. countries. them to I've second is the And question the latch read what for Swedish sales But I'm probably other now Police cam. a picture a

Luke Larson

much Yes, faster working some sales gaps so earned They a so have countries dynamic the going of a data also cycle. infrastructure cloud. to connectivity markets. not constant we Europe, States, There's got cloud-based on all have in with In we're municipal like have in Continental might in solution. access mid-tier with international, in the like on some these kind in we've of around agencies in Europe now sales they issues sovereignty particular they're comfort still actually different slightly lot for

UK. And great so a Police big reference we and Greater to close Sweden, other They're in London of in the kind Metropolitan customer. agencies have

them I Axon onto so it of And made the very those Network. think factors compelling all to for go

George Godfrey

Germany? more versus comfortable say connectivity in with Sweden Italy So data is infrastructure their or

Luke Larson

In German still of the developing in of process facing We're Germany, working in particular, the and kind ground adoption there or in hired providers German slow rep. is partners customer right technology a of those infrastructure for we've the that are Germany on lot technology and around and down sensitivity the is with -- cycle. implementation

George Godfrey

Thank you Got for taking questions. it. my

Andrea James

before minutes we to little can go Operator, the question, go already. few we next a bit

gross quick last and clear the of couple of it's not XX% margin guidance the the So year the a I just that wanted the minutes company to clarification said and in that's for shareholder rest QX pretty been something point of whole of the TASER is segment. in letter XX% for

was want to sure clear. just that make So

Okay.

please. Next question

Operator

ahead. line from Research. the comes of Please go question Northcoast of next Keith Housum Your

open. is line Your

Keith Housum

a of FY exit I color the up provide throughout TASER you as about going bit saying Guys acceptance, ramp know little X afternoon. to year. fast guess expect quarter. the in sales are rate the ramp I acceptance question. XXXX with the we and you guys it's Good on TASER at going up forward? Can to how to And perhaps for you XX% you noticed it expect are Thanks the XXX% I X looking

Jawad Ahsan

of the think In slower and a X we place. we year things being we TASER seller. see is We with to the be going number from International our TASER in majority for XX% our as that to sales, XX% of a market will need on wouldn't X clear come XXX% have would X of the business their roughly all expect TASER to regulatory that's we deals the one end U.S., going

We will which be in have got we've offering some laggards XXX so. piece in case agencies have that sensitivity price great may the or a

Keith Housum

guys subscription at the being sale. or Jawad, of would TX Got the the time? of time And the plan, the at the in of under you same the in It be revenue as talked recognized it. profitability then at XX% look release noticed that What I no? the profitability if the I would sale about percentage be point

Jawad Ahsan

the allocated one that's revenue models $XX for XX% the is software that gets has TASER, two we XX% because $XX are revenue $XX there monthly -- the The plan. $XX actually they're month and about So $XX and revenue plan the the upfront actually components. of upfront, sell of more one plan is is a monthly more it has to and

that And expect plans. the side. will depend tick so the profitability -- on will then overall, companies start entire margins we is to what we the the the software on see that of mix that two will the But margin up

Keith Housum

month ask XX at point if let's month, So differently, the time? I little of that XX% mean revenues point that the Does so a question of a recognized cost bit XX% XX at that say plan, maybe in in recognized the bucks time. if the also is

Jawad Ahsan

costs weapon a it see for the less the revenue $XX upfront. the no -- And month would will then be recognized the the under well plan. No,

mix less, the be we actually in have would margins monthly. the So $XX higher a if

Keith Housum

take appreciate will well. that I offline as it. Thanks,

Operator

ahead. go question comes Ladenburgh. the from next of of Mattson Your Please Glenn line

Your line open. is

Glenn Mattson

that recent just you but in anything a if Supreme I'm are Hi, hearing ruling see, field the guys out it's Court I know the curious there prohibits excessive to event but really recent that light going fact would budgets especially of and kind it's in asset and confiscation increase. mean a what in for forfeitures major of forward terms a price the that Police of the

Your you're next, be current then plan, the would if so share shrinking budget from guess a program success to I potentially. you see with going to officer safety that continue taking

that think on So if might a just ruling? what road kind you're hearing down yet anything you of the generally thoughts from hear you your or

Rick Smith

Rick. this so is Yes,

advantage that's get one-off. agencies, can annual forfeiture just assets. be their buy that purchases confiscated that no seen getting it that we've some event they things to asset budget real have some buy overall would to This to-date. they where a leads with. again one-time leads impact from budgets. I small of an one would into That's and of say portion by the more money those relatively So this things hardest the is they The hit things the overall

not is what into whims more the they of or less business faith line recently. Our complications in have ever budget susceptible become those become integrated to terms on items. sort of of based may line We've may

much haven't we an effect I to of there much of and given seen heavier especially be subscription. the an So to anticipate shift effect don't

Operator

are There like at to Smith Rick this turn to I would call remarks. time. for further over questions no closing the

Rick Smith

thanks to you everybody stuff and of will have User the of and the Great. and see for April accelerate can and targeted end it’s Conference, be of thousands we our coming of Hey Xst half we the back up so into new us investors year. customers our of come out Annual for hundreds coming today, May come the on call will segments showcasing move out some the the as see and

So thanks everybody a and have great day.

Operator

This call. concludes today's conference

You now disconnect. may

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