Axon Enterprise, Inc. · NASDAQ:AXON
Axon Enterprise — Q3 2023 Earnings Presentation
31 slides from Axon Enterprise's earnings presentation, Nov 7, 2023
Slide 1: Investor Presentation
INVESTOR PRESENTATION AXON ENTERPRISE | November 2023
Slide 2: Safe-harbor statement
Safe-harbor statement Forward-looking statements in this letter include, without limitation, statements regarding: proposed products and services and related development efforts and activities; expectations about the market for our current and future products and services, including statements relat
Slide 3: Founder-led management team with track record of scaling new product categories
Founder-led management team with track record of scaling new product categories Rick Smith Josh Isner Brittany Bagley Jeff Kunins Chief Executive Officer President Chief Operating Officer Chief Product Officer & Founder & Chief Financial Officer & Chief Technology Officer 3
Slide 4: Technology, Training, Trust: Axon's role
Cut gun-related deaths between police and public by 50% in 10 years W h a t i s A xo n ' s ro l e ? We a re i n v e s t i n g i n : Te c h n o l o g y Tra i n i n g Tr u st Today Advancing Axon’s De-escalating with Never miss a moment, R&D pipeline confidence body cameras Driving technology Virtual
Slide 5: Differentiated value proposition
Differentiated value proposition Technology platform revolutionizing public safety Mission driven to protect life, capture truth, and accelerate justice Market leader in cloud-powered integrated hardware and software for public safety Strong market tailwinds — public safety spending is resilient and
Slide 6: Table of Contents
Table of Contents BUSINESS MARKET FINANCIAL OVERVIEW OPPORTUNITY OVERVIEW 01 02 03 6
Slide 7: Protect Life, Capture Truth, Accelerate Justice
01 PROTECT LIFE CAPTURE TRUTH ACCELERATE JUSTICE 7
Slide 8: Axon at a glance
01 Axon at a glance TASER AXON CLOUD SENSORS + OTHER TASER devices are the leading less- Best-in-class, cloud-powered software Market leadership in body cameras, lethal option, at the forefront of de- suite for digital evidence in-car cameras, and sensors, that are escalation, and on the cusp of glo
Slide 9: #1 cloud software suite for public safety
01 #1 cloud software suite for public safety DIGITAL EVIDENCE REAL-TIME PRODUCTIVITY MANAGEMENT OPERATIONS Software hub for digital evidence Real-time situational awareness Streamlining administration and workflows – review, analyze, share, leads to faster responses and report-writing to save time a
Slide 10: Mission critical solutions from capture to courtroom
01 Mission critical solutions from capture to courtroom Time Write and Community- 911, Signal Officer on scene Officer leaves file Justice system captured alerts and More efficient incident Shorten time evidence Dispatch report Axon enables Axon Dispatch and In an event where use of Axon Body camera
Slide 11: Powerful flywheel effects
01 Powerful flywheel effects + PRODUCTS Build products and integrated & INTEGRATED bundles that improve our customers’ BUNDLES effectiveness to ensure everyone gets home safely. This creates more users (aka people) + CUSTOMER and nodes (aka devices) on the Axon + DATA & AI EFFECTIVENESS network that
Slide 12: Strong customer franchise with compelling net revenue retention
01 Strong customer franchise with compelling net revenue retention U.S. STATE & LOCAL U.S. FEDERAL INTERNATIONAL COMMERCIAL ENTERPRISE = Growth 17k+ public safety 122% net 5+ year Markets agencies globally revenue retention customer contracts Net revenue retention is as of most recent update and is
Slide 13: Table of Contents
Table of Contents BUSINESS MARKET FINANCIAL OVERVIEW OPPORTUNITY OVERVIEW 01 02 03 13
Slide 14: Massive market opportunity
02 Massive market opportunity $12.0 $22 Billion SaaS TAM $11.0 $10.5 $50 $9.7 $10.0 $8.0 $7.1 $6.7 $6.0 $4.6 BILLION TAM $4.0 $2.0 $– (Billions) Digital evidence Real-time Camera Axon Air + TASER Personal management Operations, hardware AR/VR Training (professional) protection Productivity & added s
Slide 15: Axon enjoys early TAM penetration & global expansion opportunity
02 Axon enjoys early TAM penetration & global expansion opportunity U S C O M M O N W E A L T H E U R O P E L A T I N A M E R I C A A S I A User adoption of TASER devices is still early outside of US state and T A S E R 35% 22% 3% 1% 0% local law enforcement. US federal penetration remains early. Bo
Slide 16: Diversified growth opportunities along several vectors
02 Diversified growth opportunities along several vectors CROSS-SELL & UP-SELL NEW PRODUCTS NEW MARKETS & USER PROFILES GLOBAL EXPANSION Enterprise Federal TASER Software Axon Air Axon Respond Justice Devices + Sensors VR Training Fire & EMS Corrections M&A PARTNERSHIPS/INVESTMENTS 16
Slide 17: U.S. public safety spending is resilient & growing
02 U.S. public safety spending is resilient & growing 400% Cumulative Increase in Direct Expenditure and GDP Compared to Baseline Year 1977 (1978-2020,%) State & Local Corrections 300% ’08-’09: Even when GDP dips, public safety spending remains stable or increases State & Local Public Safety Aggrega
Slide 18: Table of Contents
Table of Contents BUSINESS MARKET FINANCIAL OVERVIEW OPPORTUNITY OVERVIEW 01 02 03 18
Slide 19: Q4 and FY 2023 Guidance
Q4 and FY 2023 Guidance New As reported Nov. 7, 2023 $417 million to $420 million Revenue (Q4 2023) (24% to 25% annual growth) Adjusted EBITDA (Q4 2023) Margin of approx. 20% New Previous As reported Nov. 7, 2023 As reported Aug. 8, 2023 Approx. $1.55 billion $1.51 billion to $1.53 billion Full year
Slide 20: High financial visibility driven by recurring subscription bundles
03 High financial visibility driven by recurring subscription bundles SAAS ANNUAL RECURRING REVENUE % TOTAL REVENUE TIED TO ($ MILLIONS) SUBSCRIPTION BUNDLES (Non-subscription revenue tied to consumer, new & emerging markets) $619 GR CA % 44 $403 $289 90% 80% $204 71% 73% $142 55% Q3 19 Q3 20 Q3 21
Slide 21: Strong, consistent growth with attractive gross margin profile
3 Strong, consistent growth with attractive gross margin profile ‘20–’22 ‘22 Revenue ($ millions) Revenue Gross CAGR Margin Axon Cloud & Services $1,467 32% 61% Sensors & Other $1,190 TASER $510 44% 73% $863 $368 $681 $245 $369 45% 42% $290 $177 $181 $137 $532 $588 20% 63% $367 $437 2020 2021 2022 T
Slide 22: Healthy margins and increasing free cash flow
03 Healthy margins and increasing free cash flow $350 ADJ. EBITDA ($ IN MILLIONS) $304 $300 $250 $232 $200 $178 $156 $150 $100 $88 $61 $50 $0 2018 2019 2020 2021 2022 TTM Adj. EBITDA Margin % 15% 17% 23% 21% 20% ‘Rule of 40’1 37 43 51 48 58 Adj. FCF2 $52 $48 $16 $79 $197 1. Rule of 40 is defined as
Slide 23: Appendix
APPENDIX B AXON
Slide 24: Axon's Board of Directors
Axon’s Board of Directors Michael Julie Anne Graham Caitlin Dr. Matthew R. Adriane Garnreiter Cullivan Smith Kalinowski McBrady Brown Chairman of the Board Director Director Director Director* Director Hadi Chief Jeri Mark W. Erika Rick Partovi Williams Kroll, PH.D Ayers Badan Smith Director Directo
Slide 25: Axon's Ethics & Equity Advisory Council
Axon’s Ethics & Equity Advisory Council When we build for the future, we engage with our valued EEAC, who routinely provides feedback throughout the product design process, helping us ensure that we are investing to build a future that we all want to live in ... ... we also work with governments, ci
Slide 26: How the Axon ecosystem appears to the customer
How the Axon ecosystem appears to the customer: 01 26
Slide 27: Right-sized & custom bundles for any agency
Right-sized & custom bundles for any agency Based on 5-year pricing. Price increase over 5 years includes a 4% annual inflation adjustment. TASER hardware revenue recurs every 5 years. Camera and VR hardware revenue occurs approximately every 2.5 years. >90% of cash flows are reoccurring.
Slide 28: Officer Safety Plan 10+ Premium Integrated Bundle
Officer Safety Plan 10+ Premium Integrated Bundle Illustrative revenue recognition and cash flow schedule on a public safety contract for 100 officers $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Axo n Clo ud
Slide 29: Non-GAAP Reconciliation: Adj. EBITDA
Non-GAAP Reconciliation: Adj. EBITDA NINE MONTHS ENDED TWELVE MONTHS ENDED 30-SEP- 30-SEP- 31-DEC- 31-DEC- 31-DEC- 31-DEC- 31-DEC- $ IN THOUSANDS 2023 2022 2022 2021 2020 2019 2018 EBITDA and Adjusted EBITDA Net income $ 116,956 $ 117,964 $ 147,139 $ (60,018) $ (1,724) $ 882 $29,205 Depreciation and
Slide 30: Non-GAAP Reconciliation: Revenue & ARR CAGR
Non-GAAP Reconciliation: Revenue & ARR CAGR Q3’19 – Q3’23 $ IN THOUSANDS Q3 2019 Q3 2020 Q3 2021 Q3 2022 Q3 2023 REVENUE CAGR Revenue $130,837 $166,442 $231,989 $311,754 $413,601 33% Axon Cloud & Services 34,021 45,462 63,264 95,740 147,963 44% Sensors & Other 25,073 36,574 47,234 71,131 103,068 42%
Slide 31: Non-GAAP Reconciliation: Adj. Free Cash Flow
Non-GAAP Reconciliation: Adj. Free Cash Flow THREE MONTHS ENDED $ IN THOUSANDS 30-SEP-2020 30-SEP-2021 30-SEP-2022 30-SEP-2023 Free cash flow Net cash provided by (used in) operating activities $11,140 $16,449 $40,901 $62,892 Purchases of property and equipment (58,472) (12,470) (14,371) (13,974) Pu