Q2 2024 Axon Enterprise Inc Earnings Call
It's very eloquently done there were a few things that we had to edit but I would say it probably about 90% of that first report that's probably at 25 to 30 in the annual report and you hit the Nariman button hearing something out in a few seconds. It does force you to go through the report to make sure that you agree with everything that's written we make sure we're checking our work when they do AI.
Speaker Change: <unk> report, writing, but ultimately it is a clean process and some of the reports that we've seen are maybe better than an obstacle right.
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Speaker Change: <unk> D monetizing the foundation model layer of the AI ecosystem.
Speaker Change: We believe.
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Speaker Change: Sir Gov cloud environment.
Speaker Change: Our AI products not only to offer tremendous growth opportunities for us, but also immense value to our customers.
Speaker Change: Solutions like dropped one automated license plate reading transcription video redaction. These services quickly pay for themselves I'm, particularly excited about upcoming album announcements that we have planned for the annual police Chiefs conference. The I a C. P in October.
Speaker Change: So stay tuned.
Speaker Change: Our next focus is real time operations, which we see as a major opportunity.
Speaker Change: From what we've learned and our work in legacy dispatch systems combined with that.
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Speaker Change: Up from 35% last year and 29% the year before.
Speaker Change: Taser 10, and axon body for also contributed an impressive 28% year over year growth in both our taser and sensors product categories.
Speaker Change: These products are performing incredibly well and we're still in the early innings.
Speaker Change: Overall, our future contracted revenue sits at approximately $7 4 billion, which is up 41% year over year and a R. R of $850 million.
Speaker Change: 44% year over year.
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Speaker Change: Thank you.
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Speaker Change: A lot of the gross margin line, we continue to focus on scaling the business both to drive profitability and to successfully deliver on our topline growth.
Speaker Change: This has included adding a new manufacturing facility to increase production capacity for Taser devices and cartridges as well as integrating our acquisitions and investing in R&D.
Speaker Change: We've been able to invest in and grow the business, while driving operating efficiency increase.
Speaker Change: Increased revenue gross margin and operating efficiency drove adjusted EBITDA to $123 million, which was 24, 5% margin in the quarter up 270 basis points year over year.
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Speaker Change: The increase in our adjusted EBITDA guidance includes better than expected performance in Q2, and our increased expectations for the remainder of the year.
Speaker Change: Consistent with last quarter, our guidance incorporates an immaterial amount of revenue and adjusted EBITDA margin impact from our planned acquisition of dethrone, which we still expect to close in the current year.
Speaker Change: Overall, we saw strength across the board on the P&L shipped a record number of teasers and body cameras generated strong cash flow made additional investments into our drone partnerships and remain on track to close the drone.
Speaker Change: Right.
Speaker Change: For the year.
Speaker Change: Okay.
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Speaker Change: Yes.
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Speaker Change: And then in telecom and the Gallery view Alright, we are going to start off with Jonathan Ho at William Blair.
Speaker Change: Yeah.
Speaker Change: Hi, there good afternoon, and congratulations on another quarter of strong results can you give us a little bit more color on the adoption of your software applications and maybe what are some of the biggest contributors now and what are sort of the incremental add ons and where you see the biggest inflection point definitely appreciate the AI commentary, but just wanted to get it.
Speaker Change: Maybe what's driving the performance this quarter and what you're most excited about going forward.
Speaker Change: I don't know if I can start and then turn it over.
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Speaker Change: Right now we're incredibly excited about the pipeline with you know over $100 million in pipeline, it's not actually yet contributing to the revenue in the quarter. So continues to be a big area of excitement going forward, but the tremendous increase you're seeing this quarter is really coming from the existing products that we've talked about.
Speaker Change: Yep.
Speaker Change: Let me speak briefly Jonathan I might have you speak a little more detail as well as the sort of the breakout of our current software.
Jonathan: I tend to focus on the sort of the leading edge and then as things kind.
Speaker Change: Stabilize.
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Speaker Change: By the time, they're bigger I'm spending a lot of my time personally on them and jobs.
Speaker Change: Yes.
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Speaker Change: Thank you.
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Speaker Change: How do you go in any user experience the first time I turn it on.
Speaker Change: I think February I got access to it and data I was at the Texas Department of public safety doing it.
Speaker Change: Probably shouldn't have given me exactly how was there any large agency in Texas doing a demo and then we're saying Oh, there's no way it isn't work with east, Texas accident, and they started teasing each other and I said, well I don't know lets try it and we had this officer come up and literally this guy he could've been on Saturday Night Live you did the best.
Speaker Change: Hillbilly voice sked was completely non linear and answering questions was all over the place I was sure it can be a disaster.
Speaker Change: And I was just shocked at how well the AI turned all of the nonsense into a professional looking report in like literally 15 seconds and.
Speaker Change: And we're seeing that reaction from customers across the board we had some customers say that at the time savings alone from dropped one justifies paying for the entire officer safety plan.
Speaker Change: So while it's not because of the nature of these things.
Speaker Change: We write contracts upfront it takes time for the revenue to kick in.
Speaker Change: Dropped one is a real accelerator. It brings transcription you need to have respond you have to have the wireless connectivity for us to be able to push up to the cloud to have it ready in time, so it pulls other products with it.
Jeff: And then there is a whole suite of other stuff that we are now working on across the board and I would just tell you you know, Jeff and I sat down and we said, we kind of pulled the emergency brake and setting across the entire business. Every team is now researching what are the AI possibilities that justify changing our priorities so that.
Speaker Change: We're nimble and there we're moving things that our customers couldn't even imagine are now moving to the top you know a year ago are now at the top of our product development priorities. So that Oh, Jeff I don't know if you have anything else you want to add.
Jeff: Sure I think both you have written about that.
Jeff: Thanks, John.
Speaker Change: Okay.
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Speaker Change: Thank you.
Speaker Change: Yes.
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Speaker Change: And reduction all of those things to strengthen productivity like the pipeline for drop blood, but records and standards and core transcription and of course at our T O the existing strength and respond. The addition of thesis.
Speaker Change: We are accelerating.
Speaker Change: Across the board. So I think that the thing that is the most interesting is how universal the growth is across the diversity of our product lines.
Speaker Change: Excellent I'll keep it to one question. Thank you.
Speaker Change: Thanks, Jonathan we're going to trigger Walsh at JMP next.
Trigger Walsh: Great. Thank you.
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Speaker Change: You mentioned it can be successful and we're investing in those areas and the team is doing a great job in executing in those geographies and so I think all of those factors are really contributing to the great results. We're seeing internationally I would say we're still.
Speaker Change: Very much in our home territory here looking down the whole field, we've got a ton of opportunity here and.
Josh: This is going to be essentially the low point of our international results this year and a ton of opportunity to build on into the future here, especially with with the right team in place now so very excited about what the future holds for international Hey, Josh if I can jump in as well.
Speaker Change: Yes.
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Josh: Thank you.
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Speaker Change: Thank you.
Speaker Change: Thank you Scott.
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Speaker Change: Good morning.
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Speaker Change: Our gross margin this quarter as you know, we've talked about automation coming online and youre starting to see the benefits of that.
Speaker Change: I think you'll see that benefit going forward and then just as we go through the year.
Speaker Change: Does always tend to move things up or down a little bit both inside the segments and for the overall gross margin.
Speaker Change: Got it thank you very helpful.
Speaker Change: Thanks, Josh we got Joe Cardoso at J P. Morgan up next.
Joe Cardoso: Hey, Thanks for the question and congrats on the results as well.
Joe Cardoso: I guess just one for me and just wanted to follow up I think Josh last quarter, you talked about.
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Speaker Change: Hardware bands have been instituted in some states already like Florida.
Speaker Change: <unk> always been clear U S market leader there also the clear leader globally in autonomy in terms of the drones being able to fly themselves without operator intervention.
Speaker Change: So.
Speaker Change: Jeff really spearheaded the efforts around negotiating these new partnership combining the best of drones.
Speaker Change: Sky D O and Diedre.
Speaker Change: <unk>. So we think we're well positioned either way.
Speaker Change: This this pans out there was a movement towards a federal ban it looks like that has at least for now.
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Speaker Change: Thank you our valuation and we find that opens their their minds to doing more with us.
Speaker Change: And then I think also the they are aware of the speed at which this is happening.
Speaker Change: Just the level of tech shift thats happening across society and so we're I think we're seeing them. These OSP packages are a way to sort of derisk. These acquisitions for our customers, where they don't necessarily been know how much of the stack youre going to use.
Speaker Change: If you sign up for Amazon Prime, but you may or may not use the free videos or you may or may not use the different things in there but across.
Speaker Change: Tried to make it easy for them was like Hey, you don't have to figure it all out there's a lot to understand here.
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Speaker Change: And then I'll hand, it off.
Speaker Change: Yeah, I mean, I think that our domestic law enforcement business continues to just put up really incredible numbers and just.
Speaker Change: Just deliver and you'll see that from all of the things that the team has been talking about in terms of the ability to you know.
Speaker Change: Upgrade to move on to OSP to continue making those migrations, but we are seeing great traction outside right. Josh mentioned, we had some big corrections wins.
Josh: We're seeing big international wins, especially with Taser.
Speaker Change: Thank you.
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Speaker Change: Thank you Sir.
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Speaker Change: Thanks Scott.
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Speaker Change: Alright, thanks, guys.
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Speaker Change: Alright, Thank my firm axon in motion when Youre talking about before that.
Speaker Change: Opening the door to damage the body cams.
Speaker Change: Additional solutions down the road a few sits very much is proving to be that and we're super excited about the kind of past that.
Speaker Change: Creating for us in the enterprise space as well.
Speaker Change: We actually doubled down on that one sorry to keep going keep that.
Speaker Change: E Mail.
Speaker Change: Fuses.
Speaker Change: I initially thought of it as all of this helps.
Speaker Change: A police department connect to third party cameras like a school or a business, yes. It does that well we've been really interested to learn.
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Brian: Friday.
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Speaker Change: To your business.
Speaker Change: And whether or not any of the events are creating.
Speaker Change: More opportunities or more inbound interest in this particular category so.
Speaker Change: So let me start strategically then maybe like some other folks get a little more detail.
Speaker Change: So when you think about D drone for our core business of law enforcement their interest has been I would say.
Speaker Change: Sort of mediocre on the pure drone detection, it's like yeah. That's interesting it's not part of our day to day jobs today, but the D F. Our component being able to fly joins a first responder.
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Speaker Change: It's pretty easy.
Speaker Change: Thank you Chris.
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Speaker Change: Yes.
Speaker Change: Great.
Speaker Change: It's really growing in terms of adoption there is going to take some time to be.
Speaker Change: Adopted in such a way that it has a material impact on our revenue.
Speaker Change: And so I think for now just like early days of the body camera business.
Speaker Change: <unk> business and so forth, it's about establishing relationships with the agencies, it's about getting the first kind of one or two drones in there and then landing and expanding over time.
Speaker Change: So I would position this as strategically very important too.
Speaker Change: Win some market share early on but more of a long term effort.
Speaker Change: Before it really starts to have a major impact on the P&L.
Speaker Change: And where do you guys assess the Tam in four or five years.
Speaker Change: Hum.
Speaker Change: Thank Rick said this before and I certainly agree with it I don't know if its in the next five years, but in the next 10.
Speaker Change: We believe there'll be a one to one relationship between drones in police cars.
Speaker Change: Got it.
Speaker Change: Thanks, Yes. Thanks.
Speaker Change: Thanks, a lot Jeremy I appreciate it.
Speaker Change: Two.
Speaker Change: We're gonna go to making at Goldman Sachs.
Speaker Change: Hey, good afternoon. Thanks for the question you just have to.
Speaker Change: First on axon cloud services.
Speaker Change: Up really strong in the quarter $19 million and.
Speaker Change: Okay great.
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Speaker Change: Thanks, Mike and last but not least is will power of Baird.
Speaker Change: Alright, great. Thank you I guess I'll echo the congratulations.
Speaker Change: Broad based great to see I guess I have two questions. Maybe first one for Josh I was intrigued on Taser 10.
Speaker Change: Four largest deals outside of local law enforcement, if I heard it right just it would be great to kind of understand.
Speaker Change: Yes, what's happening there, what's kind of driving that.
Speaker Change: Within that I'm also interested.
Speaker Change: And kind of understand how much this change or 10 opening up new taser customers altogether.
Speaker Change: Starting to see people that just didn't have taser seven earlier versions of <unk>.
Speaker Change: <unk> 10, because of the new capabilities.
Speaker Change: Yeah, absolutely, thanks will and good to see.
Speaker Change: It is exciting to see so much adoption and growth.
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Speaker Change: Thank you Matt.
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