Transcrición editada da conferencia de ganancias de AAXN ou presentación do 7 de maio do 20 ás 21:00 GMT

SCOTTSDALE 1 de xuño de 2020 (Thomson StreetEvents) – Transcrición editada de Axon Enterprise Inc, chamada de conferencias de ingresos ou presentación Xoves 7 de maio de 2020 ás 21:00 GMT.

Axon Enterprise, Inc. – VP de IR e estratexia corporativa

* Jawad A. Ahsan

Axon Enterprise, Inc. – CFO

* Jeffrey C. Kunins

Axon Enterprise, Inc. – Director de produtos e VP executiva de software

* Joshua M. Isner

Axon Enterprise, Inc. – Director de ingresos

* Luke S. Larson

Axon Enterprise, Inc. – Presidente

* Patrick W. Smith

Axon Enterprise, Inc. – Co-fundador, conselleiro delegado e director

Robert W. Baird & Co. Incorporated, División de Investigación – Analista senior de investigación

Andrea Susan James, Axon Enterprise, Inc. – VP de IR e Estratexia Corporativa [1]

Ola a todos. Benvido ao seminario de Axon sobre o primeiro trimestre 2020 de beneficios. Son Andrea James, vicepresidenta de Estratexia Corporativa e Relacións con Investidores. Grazas por acompañarnos hoxe. Hoxe, temos dispoñible o CEO de Axon, Rick Smith; O presidente, Luke Larson; CFO, Jawad Ahsan; Xefe de ingresos, Josh Isner; e o xefe de produto, Jeff Kunins.

Estamos moi satisfeitos de traerte a todo o equipo. Este equipo realizou decenas de chamadas de beneficios como unha empresa pública, pero este é o primeiro no que estamos todos nunha situación diferente. Igual que ti, todos nos estamos adaptando e agradecemos aos nosos analistas e aos nosos investidores que se unisen a nós hoxe en Zoom. Agradecemos que hoxe sexa un día de ganancias especialmente concurrido, e sei que nestes momentos hai moitas chamadas. A nosa empresa adoptou a tecnoloxía de videoconferencia para estar conectada. Empregamos fondos de zoom personalizados hoxe, e podes ver 7 deles cos nosos executivos. 5 dos fondos son oficinas reais de Axon en todo o mundo e, a continuación, 2 deles non son fondos reais. Entón, para os analistas, se nos acompañamos hoxe, se queres adiviñar en que antecedentes non son reais, enviaremos algún troco de Axon se o acertas.

Está ben. Así que hoxe, primeiro, a dirección dará observacións preparadas e logo levaremos aos nosos analistas a cámara para preguntas. (Instrucións do operador) Espero que todos tiveches a oportunidade de ler a nosa carta de accionistas, que foi lanzada despois do peche do mercado. Podes atopalo en investor.axon.com, e as nosas observacións de hoxe están destinadas a basear a información nesa carta robusta. Se por algún motivo hai unha interrupción en Internet fóra do noso control ou perdemos a conectividade do zoom, faremos todos os esforzos para enviar unha copia das observacións preparadas para investor.axon.com esta noite.

Durante esta chamada, falaremos das nosas perspectivas empresariais e faremos declaracións futuras. As declaracións futuras realizadas hoxe están de acordo con e no sentido da disposición do porto seguro da Lei de reforma do litixio de valores privados de 1995. Estes comentarios baséanse nas previsións e expectativas a día de hoxe. Non son garantías de rendemento futuro. Todas as declaracións futuras están suxeitas a riscos e incertezas que poden causar diferenzas materiais significativas. Estes riscos son discutidos nos nosos ficheiros de SEC.

Está ben, agora escoitemos falar de Rick.

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Patrick W. Smith, Axon Enterprise, Inc. – Co-fundador, conselleiro delegado e director [2]

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Impresionante. Grazas, Andrea e moitas grazas a todos por acompañarnos hoxe. Falamos por última vez con vostede na nosa chamada de actualización do Q4 o 27 de febreiro no que agora se sente como un mundo moi diferente, onde a xente comía nos restaurantes e voaba a reunións de negocios e vacacións. 3 días despois, evitamos todos os desprazamentos non esenciais para os nosos empregados, pero a nosa mensaxe para o noso equipo era moi clara: aínda que podemos frear viaxes ou traballar desde casa, iso non significa que reducimos o vigor co que perseguimos a nosa misión. Lonxe. Adaptámonos de xeito agresivo ás novas condicións do mundo mentres achegamos todos os nosos encontros e imos buscar oportunidades para usar este ambiente cambiante para aproveitar a nosa adaptabilidade superior para gañar terreo fronte a competidores menos áxiles.

Nas últimas semanas, Axon sacou adiante algunhas iniciativas importantes para facer fronte a esta crise, incluíndo dar acceso gratuíto global a Axon Citizen para o resto do 2020 e usar a nosa cadea de subministración como PPE de orixe para os primeiros respondentes nunha campaña nacional e en colaboración coa Nacional. Police Police, que ata chamou a atención do vicepresidente Pence, quen tuiteou ao respecto. Un gran número de empregados de Axon doaron cartos ou tempo persoal a esta causa. Os nosos primeiros respondentes aínda teñen riscos importantes e seguimos igualando as doazóns de EPI. Se vostede, os nosos investidores, son capaces de apoiar a causa, faino. Axúdanos a protexer aos que nos manteñen a salvo. Vai a axon.com/COVID e desprácese cara a abaixo e presiona o botón Donar agora. A pesar de que estiven traballando desde casa e conseguindo moito máis tempo cos meus fillos, incluídos algúns pedicuras da miña filla, leccións de Fortnite do meu fillo e axudando demostracións de produtos de cine co meu adolescente, personalmente tiven máis tempo de cara cos clientes máis. Zoom do que nunca tiven en persoa. Estou facendo ao redor de 5 reunións diferentes cos clientes do Zoom ao día e iso é moi superior ao posible cando tivemos que viaxar de xeito persoal en reunións presenciais. Entón, a miña velocidade de compromiso persoal con clientes aumentou. E Jawad e eu asistiremos a conferencias de investidores máis neste trimestre que en calquera momento dos últimos anos, xa que agora tamén podemos achegar a estas. Estamos orgullosos de ser líderes na adopción de tecnoloxía de condución. E estou encantado de ver o ben que os nosos clientes se adaptaron ao uso desta tecnoloxía para ser cada vez máis produtivos. Hoxe estiven en 3 reunións con clientes e a maioría nunca usara videoconferencia antes da crise do COVID, e agora volveuse estándar.

Aquí está o que estou aprendendo con eses clientes e o que me están dicindo. Están traballando con persoal reducido debido a que o persoal está enfermo. Os clientes están a ver esta crise. Está obrigándolles a adaptarse e cambiar máis rápido que nunca e a tecnoloxía xogará un papel aínda maior como pedra angular en todos os novos procesos de negocio necesarios no mundo post-COVID. Tanto se está a usar Axon Citizen como para reunir probas do público ou do noso portal do fiscal para compartir probas dixitais para os fiscais nos tribunais, o mundo está cambiando. E Axon prospera no cambio.

Incluso estamos axudando a que algún grupo clave de liderado da industria substitúa as súas conferencias canceladas e os mova en liña. Por sorte, temos un pouco de reputación por ser innovadores e bastante bos para lanzar grandes eventos. Así, estamos cargando a nosa experiencia aos socios da industria para axudalos a prosperar neste novo mundo connosco.

Agora falemos do futuro. As nosas mellores estimacións para o ano seguen sen cambios e o noso pipeline segue sendo forte. Non obstante, os clientes están relacionándonos con que teñen grandes carencias orzamentarias e incerteza no contorno macro, ao contrario de calquera que vimos nunca. Actualmente, o noso pipeline de vendas segue sendo sólido. Pero non podemos ver ao horizonte nada mellor que o resto de vostedes para saber como se revolverá a economía ou se o goberno federal intervirá para ofrecer axuda adicional aos gobernos estatais e locais. Dar orientacións implica un nivel de certeza que agora mesmo non é posíbel determinar. Para ser contundentes, nun ambiente onde vemos tantas empresas recoñecendo as incertezas por diante ao tirar de orientación formal, cremos que sería máis prudente volver a practicar as mellores estimacións para recoñecer a incerteza superior á normal. Por iso, estamos dicindo aos accionistas que a pesar de que a nosa empresa foi moi resistente ata o momento e as nosas mellores estimacións non cambiaron, o nivel de incerteza aumentou ata un nivel no que xa non estamos cómodos caracterizando esas estimacións como guía ata o o ambiente macro estabiliza. Non queremos implicar que sabemos algo do resto do mundo, é dicir, como se desenvolverá a economía nos próximos meses.

Nós temos o xefe de ingresos, Josh Isner, na liña. E durante o P&A, pode falar coa forza do noso pipeline, se estás interesado.

Todo o dito, non podía ser máis alcista en Axon. Somos axentes de cambio. Os nosos enfoques centrados na adaptabilidade e na innovación son vantaxes únicas para nós cando o mundo cambia rapidamente como sucede agora mesmo. Non é a primeira vez que Axon se enfronta á diversidade. Eu mesmo, o noso presidente, o noso xefe de ingresos, xestionamos todos xuntos a última recesión da que nos amosamos moito máis fortes. En 2008, a medida que a crise financeira agromaba o mundo, decidimos inclinarnos e transformar todo o noso negocio de ser un simple negocio de fabricación de dispositivos TASER nunha empresa de tecnoloxía integrada que fabricaba software de nube e wearables. Esa transición foi nada fácil. E tivemos moitas curvas de aprendizaxe difíciles de superar. Pero a medida que os competidores no espazo de seguridade pública retrocederon, foi exactamente cando avanzamos en novas oportunidades e establecémonos como o claro líder do mercado en sensores dixitais, software e cámaras de xestión dixital aloxados en nube.

No último ano, enviamos agora dous principais produtos de software: Axon Records, que agora está vivo ou asinado con despregamentos durante o voo en máis dunha ducia de axencias; e Axon Dispatch, que acaba de vivir en directo ao noso primeiro cliente. Hoxe, Axon é máis forte que nunca. Rematamos o primeiro trimestre con case 400 millóns de dólares en efectivo e equivalentes, 0 débeda e un negocio subxacente que xera un forte fluxo de efectivo e ingresos recorrentes de alta marxe.

Os nosos ingresos do primeiro trimestre creceron un 27% con respecto ao ano. E mentres o ingreso neto viuse afectado polos gastos de compensación baseados en accións, o noso EBITDA axustado superou o dobre interanual a 30 millóns de dólares, reflectindo un 20% de marxe. Temos varios lunos en marcha. Antes de que se cumpra esta década, lanzaremos unha arma TASER que superará unha pistola de 9 milímetros en potencia de parada. Seguiremos facendo a policía transparente e eficaz e imos estender o noso alcance a todo o sistema de xustiza penal, facéndoo máis xusto e máis eficiente. Seguiremos creando un gran valor social para a sociedade e un gran valor para vostede, os nosos accionistas.

E con iso, gustaríame facerlle unha chamada ao noso presidente, Luke Larson. Lucas?

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Luke S. Larson, Axon Enterprise, Inc. – Presidente [3]

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Grazas, Rick. Dende COVID, como equipo de liderado, estivemos centrados no láser en tres prioridades clave: a número un, a saúde e seguridade dos nosos empregados; número dous, facendo a nosa parte para axudar a aplanar a curva; e número tres, mantendo as iniciativas clave para apoiar aos nosos clientes. Quero dar un berro a todos os empregados de Axon. Realmente aumentaron os últimos 2 meses. Quero dar un grito específico a Josh Goldman, o noso vicepresidente de Ops; Elizabeth Hart, que dirixe o noso equipo de People; e todo o noso equipo de TI pola súa capacidade para cambiar a toda a nosa forza de traballo a traballar desde casa para todos os nosos traballadores do coñecemento, así como por manter as liñas críticas de misión abertas coas directrices recomendadas polo CDC. Estas accións permitíronnos manter o negocio en marcha para apoiar aos nosos clientes que están realmente na primeira liña. A principios da crise, comezamos a recibir mensaxes da aplicación da lei en todo o mundo preguntándolle a Axon se enviaremos TASER 7 e Axon Body 3. Dende os grandes departamentos de policía da cidade a pequenos departamentos, moitos dos nosos clientes estaban esperando ansiosamente para conseguir o seu dispositivos críticos para as misións, asegurarse de que os nosos primeiros respondedores teñan as ferramentas que precisan para manter as comunidades seguras foi un factor clave na nosa decisión de manter abertas as liñas de fabricación críticas para a misión. Para manter a seguridade e saúde dos nosos empregados e facer a nosa parte para aplanar a curva, engadimos moitas precaucións e continuamos pagando aos empregados en grupos de alto risco, aínda que non poidan traballar. Detallouno na nosa carta de accionistas e comprimiu as nosas marxes brúas TASER en 110 puntos básicos. Se non houbese COVID-19 máis aló dos nosos fenómenos resultados do primeiro trimestre que deron un comezo forte ao ano, o título secundario deste trimestre sería que Axon Dispatch pasou en directo. Isto supón un fito fundamental para a nosa empresa e amosa a capacidade de Axon para continuar coas iniciativas clave ata unha pandemia global.

Dixémoslle o último trimestre que estariamos en directo ao medio ano co noso primeiro cliente Dispatch de pago, e estamos encantados de que lanzásemos un pouco antes. O envío é a entrada nun mercado de software de control e control en tempo real de 2.000 millóns de dólares. Estamos moi encantados de poder dirixir as 911 operacións de envío para a cidade de Maricopa, que é o noso primeiro compañeiro de lanzamento. Este software tamén é fundamental para a nosa misión de protexer a vida, e capacita a todos os implicados nunha resposta ao incidente: despachadores, tomadores de chamadas, mando, patrullas, bombeiros e persoal médico. O obxectivo aquí é acurtar o tempo de Ola a Ola. É o que chama a industria o momento en que alguén chama por primeira vez o 911 ata o momento en que chega un oficial.

Outra iniciativa clave para nós é a contratación. E non puiden estar máis afeccionado á velocidade de contratación que vimos e seguimos a acelerar, particularmente neste último trimestre, coma sempre, inclinándonos máis que en agarrar. En concreto, o xefe de produtos, Jeff Kunins, que nos acompaña hoxe, cumpriu rapidamente os principais roles de liderazgo en tecnoloxía, incluíndo o noso novo SVP de AI, VP de Xestión de Evidencias Dixitais e o noso GM de Axon Air, e moito máis mentres se duplican. crecer rapidamente o noso banco de enxeñaría con talento para aumentar a barra no noso centro de software global en Seattle, así como en Vietnam e Scottsdale. Comecei cun berro aos empregados de Axon e quero rematar a miña sección con outro. Este é un gran equipo que realmente se inclinou durante a crise para apoiarse mutuamente e aos nosos clientes. Grazas a todos os nosos empregados dedicados.

E con iso, envieiino ao noso CFO, Jawad Ahsan.

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [4]

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Grazas, Luke. O mundo cambiou desde a nosa última chamada de ingresos e os retos aos que nos enfrontamos hoxe non teñen precedentes. Ao reflexionar sobre os nosos resultados do primeiro trimestre e facer un balance de onde estamos hoxe, veñen á cabeza 3 palabras: orgullo, resiliencia e confianza. Non fixemos ningún segredo do noso amor polos nosos clientes e estou orgulloso do xeito no que fomentamos os PPE para os primeiros respondentes nunha campaña nacional en colaboración coa Fundación Policía Nacional. Estou orgulloso do xeito no que os nosos empregados contribuíron a esa campaña. Estou aínda máis orgulloso do xeito en que os nosos empregados se adaptaron á nosa nova realidade, continuando traballando de xeito cohesivo e produtivo, incluso coa forza de traballo distribuída. É un testamento das ferramentas, sistemas e infraestruturas de soporte interno, traballamos duro para poñer en marcha.

Nesta fase do noso crecemento como SaaS e unha empresa de dispositivos conectados, decidimos ser agresivos cos nosos investimentos e conservadores co noso balance. Esta estratexia trouxéronnos a resiliencia que nos permitirá arrasar esta tempestade e saír máis forte que nunca. Os nosos investimentos en produto e canle obtén rendementos emocionantes e a nosa posición de liquidez é excepcionalmente forte. Tamén estamos vendo 3 tendencias que se suman á nosa resiliencia. En primeiro lugar, a crise actual está fomentando discusións sobre o uso de software na nube con axencias que non o terían considerado anteriormente, e estamos a demostrar o valor e a utilidade de Axon Citizen para as axencias de todo o mundo. En segundo lugar, estamos a ver que máis axencias se desprazan aos dispositivos Axon como un problema estándar en lugar de agrupar ou compartir dispositivos. E en terceiro lugar, estamos a ver que o goberno federal intenta reforzar os orzamentos para facer cumprir a lei e comprometer estímulo á lei e ordenar o gasto, o que pode ter beneficios que superen a crise.

O noso modelo de ir ao mercado é cada vez máis resistente, xa que vendemos máis produtos que as axencias pagan dos seus orzamentos operativos en vez de ser tratados como un gasto de capital imprevisible. E a maioría dos nosos ingresos está ligada a contratos recorrentes agrupados, o 71% en 2019. No noso negocio SaaS, a retención de ingresos neta nos últimos 6 meses tendeuse en aproximadamente o 120%. Isto converteuse nunha medida importante para nós en canto a como miramos o negocio e por iso estamos a compartilo hoxe.

A métrica captura 2 factores clave. En primeiro lugar, o noso desembolso anual é case 0, xa que os nosos clientes normalmente asinan contratos de 5 a 10 anos, dándonos máis resiliencia na contratación que a maioría das outras empresas SaaS. E en segundo lugar, a taxa de retención de Axon capta que nalgún ano dado, algunha parte dos clientes da nosa axencia está a actualizar os seus contratos para aproveitar todas as novas ferramentas de software que temos para ofrecer. Algunhas cidades importantes comprometéronse a actualizar SaaS con Axon ao 300% dos seus contratos anteriores, e iso é un novo testamento da nosa resiliencia e da proposta de valor que ofrecemos aos nosos clientes.

Finalmente, mentres miramos o resto do ano, estamos seguros. Estamos retirando a nosa guía hoxe por unha razón: nestes momentos non se pode coñecer toda a extensión e o impacto da crise actual nos mercados aos que atendemos e nos nosos negocios. O que sabemos é que estamos a avaliar unha ampla gama de escenarios con respecto ao potencial impacto continuo da pandemia e sentimos confianza na nosa capacidade de xestionar esta crise. De feito, os nosos obxectivos internos para 2020 que conseguimos seguir sendo os mesmos. Nas últimas semanas, reforzáronse as nosas canalizacións federais e internacionais. Seguimos contratando talento tecnolóxico para aumentar a barra a un ritmo acelerado, e seguimos executando con un sólido gasoduto, pechando grandes contratos de varios millóns de dólares e contratos do Plan de seguridade dos oficiais plurianuais.

Son tempos incertos e os nosos clientes e empregados están a ser afectados de xeito importante. Agradecemos a todos os nosos empregados de todo o mundo que seguen mostrando un compromiso incrible coa nosa misión, inxenuidade e resolución na súa execución. Aínda que hoxe estamos ante unha adversidade sen precedentes, unha cousa é segura. Os nosos mellores días aínda nos quedan por diante.

Con iso, volverei a Andrea para que nos faga preguntas.

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Preguntas e respostas

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Andrea Susan James, Axon Enterprise, Inc. – VP de IR e Estratexia Corporativa [1]

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Grazas, Jawad. Moderadores, pode levar todo o mundo á vista da cámara. Analistas, queremos ver as túas caras bonitas. Podes acender as túas cámaras?

Está ben. A nosa primeira pregunta é de Scott Berg en Needham.

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Scott Randolph Berg, Needham & Company, LLC, División de Investigación – Analista Senior [2]

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Isto é un pouco diferente para a Q & A. Espero que todo o mundo vaia ben. Desculpa, estiven un par de minutos para a chamada. Entón, se fago unha pregunta redundante, creo, xa o verás na miña cara, polo menos. Entón, creo que un par de preguntas. Na medida de retención de ingresos netos que Jawad acaba de dar ao 120%, unha boa métrica. Podes axudarnos a entender o que se compara tal vez na última parella de 3 anos en termos de tendencia? Foi ao redor dese 120%? ¿Pasou? ¿Está abaixo? Isto sería útil.

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [3]

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Si. Scott, foi por aí. Unha das razóns polas que empezamos a divulgar, é que nos últimos trimestres foi bastante estable nos que decidimos comezar a divulgala. Pero é algo do que estamos moi orgullosos.

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Scott Randolph Berg, Needham & Company, LLC, División de Investigación – Analista Senior [4]

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Conseguín. E logo desde a perspectiva de preguntas de seguimento, o aumento de inventario foi algo nas observacións preescritas que o tipo de atención chamoume, polo menos, é tan elevado que cre que os niveis de inventario superan a próxima parella, 3 trimestres? Creo que é unha medida prudente que estás facendo, obviamente, dada a incerteza sobre algúns dos compoñentes comerciais mundiais que hai. Pero iso chega a un nivel realmente grande? E o estás facendo porque viches problemas? Ou só estás a protexerte desa oportunidade?

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Luke S. Larson, Axon Enterprise, Inc. – Presidente [5]

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Scott, unha gran pregunta. Temos un gran ciclo de actualización por diante con TASER 7, así como AB3, ademais de ampliar en mercados adxacentes, correccións e expansión internacional. E así pasamos por un exercicio exhaustivo para dicir cal é o nivel adecuado de inventario para nós para asegurarse de que podemos satisfacer a demanda dos clientes, eliminar a nosa cadea de subministración e ter bastante para estas expansións. De feito, isto acabou sendo unha gran estratexia e axudounos nos últimos meses. Agora pasamos por outra análise para ver cales son os niveis adecuados ao longo de todo o ano. Queremos asegurar que xestionemos o noso fluxo de efectivo gratuíto, pero tamén temos os niveis de inventario adecuados para apoiar o cumprimento dos clientes.

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [6]

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Si. E quero engadir, Scott, a iso só para que penses pensalo desde unha perspectiva financeira. Vai ser algo que vaia a ser un uso bastante efectivo de diñeiro este ano. Pensamos que é o correcto por as razóns que mencionou Lucas. Pero esa é unha das vantaxes que temos co balance que temos para poder estar en condicións de financiar ese inventario.

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Andrea Susan James, Axon Enterprise, Inc. – VP de IR e Estratexia Corporativa [7]

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Moitas grazas, rapaces. E imos tomar a nosa seguinte pregunta de Charlie Anderson en Dougherty.

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Charles Lowell Anderson, Dougherty & Company LLC, división de investigación – VP e analista senior de investigación [8]

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Xenial. Podes escoitarme todo ben?

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [9]

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Si.

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Charles Lowell Anderson, Dougherty & Company LLC, división de investigación – VP e analista senior de investigación [10]

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Excelente. Ben, parabéns por un gran comezo de ano. Quería: soa como para caracterizar as cousas, parece que non estás a ver os efectos de COVID-19 aínda no pipeline, o perfil de demanda. Quero estar seguro de que é correcto que non viste ningún push-outs nin cancelacións neste momento. Só queres clasificar como caracterizar o que estás a ver en tempo real na medida en que as conversas como cidades están a avaliar os seus ingresos?

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Joshua M. Isner, Axon Enterprise, Inc. – Director de ingresos [11]

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Charlie, esa é unha gran pregunta. Antes de respondelo e volvo regresalo, só quero recoñecer a Breann Leath, que é un oficial do departamento de policía de Metro de Indianápolis, e fomos moi activos na axuda do departamento e dela. Faleceu en abril debido a un tiroteo implicado por un oficial. E un momento moi triste para un dos nosos clientes máis antigos e só queremos recoñecelo a ela e á súa familia. Queremos tamén recoñecer a todos os primeiros respondentes en todo o mundo que non tiñan o luxo de refuxiarse no lugar ou en corentena, e que están na primeira liña, poñéndose en risco a si mesmos e ás súas familias todos os días. E estamos aquí para apoiar aos nosos clientes e os nosos pensamentos e oracións están con eles durante este tempo.

Agora, polo que se refire ao oleoduto, é preciso dicir que se realizaron pequenos axustes no oleoduto. Estamos escoitando de xeito cualitativo que algunhas axencias esperan que teñan impacto nos seus orzamentos. E hai ingresos fiscais en cuestión e así por diante, así como o apoio federal para os estados e os locais. Pola súa banda, tamén estamos escoitando algúns clientes que COVID é a razón pola que están pensando en ir a emisión estándar dos nosos produtos. Xa sexa por cámaras de carrocería ou TASER, un xeito de limitar a contaminación non é compartir equipos, e tamén escoitamos ese sentimento.

E entón creo que aquí hai un pouco por ambos os dous lados. Polo tanto, non hai nada de material neste punto que consideramos unha importante interrupción do oleoduto. Pero temos respeto polo risco sen precedentes que existe agora mesmo con COVID. Por iso estamos certamente centrados en executar, cumprir todos os nosos obxectivos este ano e seguir construíndo o noso pipeline a longo prazo non só en termos estatais e locais, senón tamén federais, internacionais e algunhas das nosas canles máis recentes. Moitas grazas.

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Andrea Susan James, Axon Enterprise, Inc. – VP de IR e Estratexia Corporativa [12]

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Charlie, tes un seguimento? Podemos silenciar a súa liña.

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Charles Lowell Anderson, Dougherty & Company LLC, división de investigación – VP e analista senior de investigación [13]

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Si. Estupendo, si. Si. Entón, creo que tamén me resultou curioso, no que se refire ao software, así aos rexistros e ao envío. Pregúntome se isto presenta unha oportunidade potencialmente para vostede, xa que se relaciona coa súa estratexia de prezos en relación aos participantes. Así que, por considerar que son as presións nas que poden estar, estou curioso se iso crea calquera oportunidade que estea a ver.

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Joshua M. Isner, Axon Enterprise, Inc. – Director de ingresos [14]

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Si. Ata certo punto, certamente, vemos isto como unha oportunidade. Seguimos investindo. Estamos investindo na canle e no produto. E estamos empregando xeitos creativos para seguir conectando cos nosos clientes máis practicamente que nunca. Creo que con COVID ou sen, seguimos sentindo como seguramente unha forza que hai que ter en conta, tanto do lado do produto como da canle en calquera produto novo no que investamos e poñamos ao mercado. Por iso, seguramente confiamos a longo prazo de que imos ser moi, moi competitivos en todos estes mercados, xa sexan DEMS, CAD, RMS, etcétera.

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Patrick W. Smith, Axon Enterprise, Inc. – Co-fundador, conselleiro delegado e director [15]

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Si. En realidade, se está ben, Andrea, quero engadir unha cousa alí. Non sei que COVID teña tanto impacto, pero diría que a miña confianza na nosa estratexia e como nos achegamos ao desenvolvemento de produtos de software é cada vez máis forte. E un dos elementos clave desa estratexia é que decidimos non tentar ir xeneralmente para gañar a batalla dos RFP con 800 caixas de verificación, senón construír un fantástico software centrado no usuario que faga as cousas que fan estes oficiais todos os días, moi ben E iso permite que os nosos empregados do Plan de seguridade oficial proben elementos do sistema e gañen basicamente cunha fantástica experiencia de usuario. E creo que a longo prazo, iso permítenos ter unha posición realmente forte no mercado ao centrarse nas cousas que ao final fan que sexa unha gran experiencia para os policías no campo, e esa estratexia parece estar xogando como cada vez que están tocando o noso software, estamos escoitando, oh, wow, como esta é unha experiencia estupenda, e temos plans de contratación para permitirlles comezar pequenos e expandirse connosco.

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Andrea Susan James, Axon Enterprise, Inc. – VP de IR e Estratexia Corporativa [16]

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Está ben. Entón, a nosa seguinte pregunta virá de Jonathan Ho en William Blair.

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Jonathan Frank Ho, William Blair & Company L.L.C., División de Investigación – Analista de tecnoloxía [17]

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Podes escoitarme ben?

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Andrea Susan James, Axon Enterprise, Inc. – VP de IR e Estratexia Corporativa [18]

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Si.

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Jonathan Frank Ho, William Blair & Company L.L.C., Research Division – Technology Analyst [19]

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Perfect. One of the things I wanted to understand a little bit better is with the new CAD system that you’re rolling out, can you talk a little bit about maybe the feature set and what segment of the market that you’re potentially targeting since there’s pretty much a high end, mid-range and low end of the market. Just want to get a sense of what you guys are looking at with that system.

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Jeffrey C. Kunins, Axon Enterprise, Inc. – Chief Product Officer & Executive VP of Software [20]

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Yes, absolutely. Great question. So first, the first thing I say is we’re incredibly excited to be live in the market with our first happy customer in Maricopa and Chief Stahl. And at the end of 2020, just to put it in context, for this first year, our goal is to be GA with a product that’s a fantastic bit for a significant percentage of U.S. agencies, be live or — and/or active deployments with the next handful of customers beyond Maricopa and be en route to steadily growing SAM coverage with strong sales pipeline to match. And so specifically, what that means to your question is, in the same way that for records in RMS, kind of the unit of currency for building up coverage of which customers for which you are a great fit for what they may need, which we’re now well on our new journey and continuing to accelerate on. For CAD, the main dimensions are: one, whether a given jurisdiction, the key staff that serves the jurisdiction only serves law enforcement dispatch or also serves fire and EMS. And then the second primary dimension is whether it’s serving a single jurisdiction at a time or if it’s an aggregated key staff that serves multiple jurisdictions at once. And so what you’ll see on there in the same kind of playbook we’ve been doing with records is starting with a whole great product for a subset of agencies that fit in one of those, so specifically like single jurisdiction law enforcement only, and then we’ll progressively from there becoming an awesome excessive tranche of potential customers. So that’s our overall approach.

Of course, it’s early days. I’m very confident to Rick’s point that over time, Axon will probably become the #1 share leader in both records and dispatch. And then along the way, we’re going to wind up-leveling the buying criteria for these categories to be much more about end-to-end agency productivity in the case of records and real-time operations in the case of CAD. So the multiyear journey, no one shouldn’t have any illusions it’s going to be overnight. But just as Rick said, customers are loving what we’re building. They’re loving the OSP 7 Plus bundling approach and the way that makes things easier to buy and adopt. And those 2 together are helping us skate to where the puck is going.

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Jonathan Frank Ho, William Blair & Company L.L.C., Research Division – Technology Analyst [21]

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Fantastic. And just as a follow-up, with some of the potentially challenging macro environments that are coming up, how do you think about balancing between operating leverage and maybe investing when your competition cannot? Any color there would be helpful.

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [22]

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Yes. Jonathan, that’s a great question. And that’s something we actually very purposefully went into 2020 with — our budget for the year as we had disclosed in our previous guidance is that this is a year in which we’re getting very aggressive about making investments in the R&D team and our product team in our sales channel. A lot of the open positions that we have are geared towards those groups as we’re seeking to very aggressively put the pedal to the metal and try to continue to grow, bring new products to market, continue to expand our footprint. And it’s because of the proof points that we’ve seen in products like Records in some of the international markets that we’ve started to enter is that we’re going to double down on those debts.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [23]

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Our next question will come from Keith Housum at Northcoast Research.

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Keith Michael Housum, Northcoast Research Partners, LLC – MD & Equity Research Analyst [24]

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Probably, this question is for Josh. Josh, the international sales was very good this quarter. I was hoping you could provide some perspective, is that more widespread across the board? Or was it targeted with just a few different agencies? And then second, what’s our strength in software and sensors or the weapons business? But some more color there.

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [25]

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Yes, sure. And thank you for the question, Keith. So I would characterize it as, look, we — 2 or 3 years ago, we made large investments in our international channel. We were seeing success at that point in Tier 1 markets, but outside of Tier 1, we’re having very little success. And as we look at not only the Q1 results, but also the pipeline for the rest of the year, I’m feeling really good that, that investment of a couple of years ago is really starting to pay off. And so while Q1 — Tier 1 countries were strong in terms of revenue on the CEW side, we also saw some meaningful contributions from Tier 2 and rest of the world, and I expect those to continue throughout 2020. I think especially on the CEW side, we’re starting to see a lot of that work that the team has been putting in coming to fruition.

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Keith Michael Housum, Northcoast Research Partners, LLC – MD & Equity Research Analyst [26]

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Great. And then just as a follow-up. Jawad, maybe if I could go back to a commentary I thought you guys said before. Was there a pressure of 110 basis points on gross margins for, I guess, if I heard it correctly, paying for employees during the COVID time? And then, is that going to continue out into the second quarter?

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [27]

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Yes. We’re not going to disclose to what degree it’s going to weigh on margins, but it is going to weigh on margins in Q2. This is one of the trickiest things about not issuing guidance. We still are, as I mentioned earlier, managing to our internal estimates, which have formed the basis for our previous guidance. On the flip side, we’re also seeing savings, right? People aren’t traveling as much. There are some programs that we had committed to that we’re not going to be able to do in person now, and there’s some cost savings that are associated with that. So while we are going to be impacted to a slightly larger degree in Q2 than what we saw in Q1, we also are going to see savings that are going to offset it.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [28]

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Thanks, Keith. We did come — question came in from the public anonymously, actually. And we weren’t anticipating that, but it’s a good one, so I thought I would answer it.

It says, great earnings call experience, best one yet. Do you plan to continue providing earnings calls on Zoom instead of a traditional webcast?

I think our answer to that is design thinking, iterate, test and learn. So we’ll come back to you on that one. We’ll see if you guys like it.

All right. So our next question will be from Will Power at Baird.

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William Verity Power, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [29]

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Great. Yes, a couple of questions. Let me maybe start with the broader question for Rick or Luke, whoever wants to take it. One of the big themes in software, particularly with respect to COVID-19 and the impacts is that is an accelerant to digital transformation more broadly. And I wonder what you’re seeing with respect to the conversations you’re having with law enforcement along those lines as you kind of talk about records, dispatch and trying to move to the cloud. It would seem to feed into that. Or is it just they’re so focused on other things that that’s not really entering the dialogue yet.

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Patrick W. Smith, Axon Enterprise, Inc. – Co-Founder, CEO & Director [30]

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Yes. Let me take this one. I mean there are some really bright silver linings to this — the cloud that is this pandemic. I talked about my customer engagement velocity. Literally, I have never had this many customer meetings, and I think their eyes have been opened to new ways of interacting. I think that our travel expenses should be more controllable in the future that we should be able to engage with more customers over Zoom. They’re seeing that this is an effective way to engage.

I’m also hearing and sensing 2 other things. One, another bright silver lining here is law enforcement is telling me that this has started to shift perceptions of police again, where a few years ago, they were facing a lot of negativity. Now this is almost like a 9/11 sort of thing where people are realizing, hey, those cops are out there. More cops have been killed this year by the pandemic so far than guns and vehicle accidents combined. And that’s a good thing that it’s rebuilding public support for policing, and we’re hopeful that, that will flow in to the federal government actually stepping in and helping fund first responders.

And then the other side of it is, the impetus to do business differently is just strong. The — I was talking with some customers this past week that want to start pushing the courts to start accepting digital evidence instead of forcing them to burn things to disk, right? We’ve been successful in getting prosecutors to start using Evidence.com. The courts have been more resistant to it, where now people are downloading stuff that the prosecutor or the agency to put on disks to deliver to the court. And I’ve been out evangelizing this with our customers, hey, bring — let’s find the alpha patient. Let’s find some judges that are going to break down the barrier and say, hey, look, let’s move it online. And one of the things we hear is, well, courts don’t have great, like, technology systems. That’s music to our ears. They don’t need it. They need a browser. Like, they don’t need to install servers and stuff. It’s a fantastic opportunity for us to upgrade their experience. And everywhere I look, I see that the negatives of COVID are driving change that previously wasn’t possible.

And I’ll give you one — one other example is we — with the push for Axon Citizen in Europe, there’s been just a ton of resistance in Mainland Europe to using the cloud for a whole bunch of reasons we’ve talked about on previous conference calls. And we’ve been really pushing the team hard to engage with customers, look, what could be a stronger reason to move to a cloud-hosted digital evidence-sharing platform than social distancing in a world where you want to minimize the risk of your officers out going to pick up CDs and hard drives or thumb drives from the public. I don’t know that we have anything material to report back other than what we’re hearing is quite different. Customers that have been traditionally quite resistant to change, they’re changing across the board. And we’re looking at how we can help use this to drive positive and long-term change, which can include a lot of digital transformation.

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William Verity Power, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [31]

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Okay. I guess my second — go ahead.

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Jeffrey C. Kunins, Axon Enterprise, Inc. – Chief Product Officer & Executive VP of Software [32]

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Go ahead, please.

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William Verity Power, Robert W. Baird & Co. Incorporated, Research Division – Senior Research Analyst [33]

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Well, as I was going to say, my second question was just a follow-up on some of the corrections commentary. I know you all have been talking about that several calls in a row. I think you’ve referenced, right in front of me, maybe 5 states that you have relationships with now. Where does that stand in terms of shipments? Any other numbers, quantification? How long that takes to really kind of ramp into a bigger opportunity?

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [34]

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Sure thing. So about 1/3 into last year, we ramped up our efforts specifically focusing on corrections. And this year, we have an independent sales team focused on that market. And I’m really excited about the work that they’re doing so far. It wasn’t a place where we were necessarily focused in the past. But now the use cases are coming much more — becoming much more clear. And obviously, on the body camera side, there are benefits there and on the TASER side in terms of riot control and so forth. And one of the interesting things is, given COVID, officers are actually really risking their safety by going hands on in jails because COVID obviously could spread really quickly through a contained environment like that. So we’re seeing more investment on a faster cadence than in the past, particularly in the CEW segment, to keep officers from having to go hands on and protect them from potential risk of infection. So long term, we definitely see corrections becoming a more meaningful part of our domestic business, both on the federal and on the state and local level.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [35]

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Thank you, Will. Our next question is from Joe Osha at JMP Securities.

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Joseph Amil Osha, JMP Securities LLC, Research Division – MD & Senior Research Analyst [36]

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For starters, my compliments to everybody for doing such a good job with this Zoom conference. This has been great. Thank you to the IR team. Two questions. First, I see that the portion of TASERs that was sold in a recurrent payment plan went down as a result of the shift to international. I’m just wondering whether there might be some potential to think about shifting the way those non-U.S. customers behave over time. And then the second question is a more general one. We’ve had chain of evidence, we’ve had CAD, we’ve had records management. I’m just wondering whether this crisis might perhaps cause Axon to sort of resequence how it’s coming at those priorities a little bit. Those are my questions.

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [37]

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Okay, Joe, thanks for your question, and I’d be happy to take the first one and then hand it over for the second one, likely to Jeff. So on international subscriptions, we actually are seeing that already in our Tier 1 market. So in Australia, the U.K. and Canada, it is relatively common for agencies to sign up for a TASER 60 contract where they pay, just like in the U.S., over 60 months. Especially in the U.K., every agency in the U.K. that is a CEW customer is actually already on a TASER 60 plan. So the team has done a really nice job there transitioning to subscription. Australia is moving in that direction as well. And then Canada is lagging behind a little bit just due to the fact that we’ve commonly sold through distribution in Canada and the TASER 7 has not been authorized there yet.

And so I would say that ball is moving in the right direction. There is some complication in Tier 2 and 3 markets, especially some of the more volatile ones where there might be a little more risk of collectibility on multiyear engagements and so forth. So we’re monitoring that very closely to make sure that we’re very confident in the deals we’re signing. But I would say it’s fair to expect international to continue to pivot more to a subscription-type of setup on TASER business.

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Jeffrey C. Kunins, Axon Enterprise, Inc. – Chief Product Officer & Executive VP of Software [38]

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Yes. And continuing from there on the second part of the question. Obviously, we like to think of Axon as a learning and an adapting machine. So we always continue to reexamine the data in front of us and reserve the right to wake up smarter as we learn more. But I think from what we’ve seen so far, transformation has been validating of our focus and prioritization that we have in front of us. Our R&D investment, which, as you know, we’ve continued to double down on and be aggressive about investment, looking forward to leverage as we go forward. Really on our core pillars of de-escalation including TASER and sensors and signals and the like across our categories for cam and for digital evidence management and the new investments in the categories of productivity with records and communications and real-time operations with CAD. And those have taking up the vast bulk decision to some of these incubation areas like Axon Air with drones and the like. And we evaluate those pretty regularly, and we feel great about the validation we’re seeing like what we’ve been describing with records and CAD and the rest, that we’ve got the right positive attitude and investment in each of those and the right sequencing. But we’ll continue to evaluate as we go and make those small and bigger adjustments if and when that makes sense. But we’re feeling pretty good about that prioritization.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [39]

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Thanks, Joe. Our next question is from Erik Lapinski at Morgan Stanley.

Erik, your video is off. I’ll give you another second here…

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Erik Taylor Lapinski, Morgan Stanley, Research Division – Research Associate [40]

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Can you hear me and see me? Hello?

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [41]

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We can hear you. Go ahead and ask the question. We can’t see you, but go ahead and ask.

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Erik Taylor Lapinski, Morgan Stanley, Research Division – Research Associate [42]

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Sorry. It shows me on mine. But maybe I’ll just kind of ask on dispatch and that first kind of paid customer rollout. From that — from initial trials and interest and rollover of systems and final implementation, like what were some of the learnings you maybe had on what the typical sales cycle would look like with a dispatch customer and kind of anything you could share there.

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [43]

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Sorry, Erik. You were breaking up a little. Do you mind just repeating that question? My apologies.

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Erik Taylor Lapinski, Morgan Stanley, Research Division – Research Associate [44]

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Yes. No problem. Can you hear me now?

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [45]

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Yes.

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Erik Taylor Lapinski, Morgan Stanley, Research Division – Research Associate [46]

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Just quickly on maybe what were some of the learnings you had from just the pace of rollout in the sales cycle with your first paid dispatch customer and kind of, I guess, what you could share there.

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [47]

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Sure thing. Thanks very much for the question. I think just like with all kind of early customers, we’re really focused right now on learning. And so we have a pipeline of customers that we look forward to working with on CAD deployments. But the highest priority for us is gaining some early use cases, references and success stories. And so for the next, at least, 3 to 5 customers, that’s really where our focus lies, is making sure we’re ready to scale, and we continue to build that interest pipeline. So when that pipeline starts to convert, there are plenty of happy customers that can speak to their success with the product. We anticipate a lot of interest in the product from all segments in the market, and we’re seeing it already. And so we’re very, very excited about the potential of our CAD business.

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Erik Taylor Lapinski, Morgan Stanley, Research Division – Research Associate [48]

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That’s helpful. And then if I could just maybe one follow-up. As you look at everything going on and the potential impacts that your customers could see, like are there any actions or promotions you’ve thought through where you could kind of help customers, I guess, from a pricing or a pooled license perspective or kind of accommodations you’d consider this year?

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [49]

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Sure. Nothing really across the market. Certainly, the customers that have voiced challenges, whether they’re budget or timing of some of those budgets, we’re working through them on a one — kind of a one-off basis. But at this point, we don’t plan on having like an overarching program across the market. Frankly, we just haven’t seen that type of concern yet from the customer base. But certainly, we’re going to continue to monitor it and where necessary, we’ll make adjustments. But right now, we’re still certainly executing as per our normal kind of approach to these deals.

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Luke S. Larson, Axon Enterprise, Inc. – President [50]

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Yes. And I would just add on that. We — today, we have several different ways that a customer can acquire our products from just buying an individual device to multiple plans, our premium plan, the OSP 7 Plus, and the leadership team is very aligned around the benefits of this, as are the customers. They can choose to start using on day 1. And so that’s been very positively received.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [51]

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Thank you, guys. Erik, and I can see you now. You popped up.

So our next question will be from Ryan Sigdahl at Craig-Hallum.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [52]

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Great. Thanks, Andrea. And to start, I’m going to guess your background is fake.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [53]

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Got it. And the others?

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [54]

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I’m going to guess, Jeff.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [55]

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So Jeff’s background is actually the 14th floor at our Seattle software hub.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [56]

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Okay. Well, I’ll take 1 out of 2 for some swag anyways.

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Jeffrey C. Kunins, Axon Enterprise, Inc. – Chief Product Officer & Executive VP of Software [57]

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Come visit any time when we’re open.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [58]

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Awesome. Two for me here. First off, just a follow-up on corrections. What percent approximately of the 450,000 correctional officers do you think carry a TASER today, and then separately, on the body cams?

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [59]

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Yes. Qualitatively, both of those numbers are low relative to the overall population. But state by state, we’re really making progress quarter in and quarter out to show some really rapid growth in that department. So at this point, I’m not prepared to give firm numbers on that. But qualitatively, there’s a lot of white space in that market. And we think for the first time, we’re really seeing meaningful momentum there to start to capture some of that white space.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [60]

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Care to put in a ballpark of 25%, 50%, 75% just — or innings, if you want to talk baseball?

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [61]

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Appreciate the sports analogy, but we’re going to stick with the first answer on that one. Natively very well. Thanks.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [62]

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Second question, just on TASER 7, it declined for the second consecutive quarter. It seems a bit surprising given the recent launch. So how do you guys think about that product mix within weapons segment over the remainder of the year?

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [63]

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So Ryan, thanks again for the question. I think that’s just seasonality. Q3 and Q4 are our strongest quarters of the year. So coming off our 2 strongest quarters with what historically have been kind of slower starts of the year in Q1 and Q2, it’s not a huge surprise to us that TASER 7 sales are not going to be as strong here. And we expect that to definitely change in the back half of the year as we continue to build pipeline and work with large agencies on meaningful T7 deployments.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [64]

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Mike Latimore from Northland, you’re up next.

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Michael James Latimore, Northland Capital Markets, Research Division – MD & Senior Research Analyst [65]

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Yes. Can you hear me okay?

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [66]

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Yes.

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Michael James Latimore, Northland Capital Markets, Research Division – MD & Senior Research Analyst [67]

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Sounds good. Yes, I think you said that you have about 50% visibility into the kind of original guidance for the year. I guess at this point last year, what was that visibility?

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [68]

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Yes. In any given year, Mike, we typically enter the year with about that. I think last year is a little less. It’s probably, I think, around the mid-40s, I believe. And this year, we have — every year, as we continue to progress in our SaaS business, it’s been increasing.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [69]

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And Mike, you want what percentage our Q1 sales make of the full year? It’s a much higher percentage than would be typical this Q1.

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Michael James Latimore, Northland Capital Markets, Research Division – MD & Senior Research Analyst [70]

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Sure. Okay. Makes sense. And then I believe in maybe third quarter, fourth quarter, you’re going to start recognizing more of the records revenue as different features get launched. What — I think there’s a little bit of a catch-up, even among customers that have already purchased the bundle. So like what kind of ARR bump may you get from that?

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [71]

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Yes. Well, the first thing is, we’re actually not going to get a catch-up. The way the accounting works is that we’re going to take the same amount of revenue just over a compressed period of time. So it’s going to step up pretty materially over the remainder of those contracts, but there’s not going to be a cumulative catch-up as like in other long-term contracts. And right now, we had — what we had said previously in our guidance was that our ARR was going to grow $10 million per quarter. We felt that, that was conservative this quarter, it grew about $12 million, $12 million to $13 million. And we think it’s going to be in that $10 million to $15 million range. And as we get towards the end of the year, it’s likely going to be at the top end of that range as more of our software products, specifically records and dispatch come online.

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Michael James Latimore, Northland Capital Markets, Research Division – MD & Senior Research Analyst [72]

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And then you touched on this a little bit earlier, but in terms of just international cloud adoption, as you’ve won some of these additional deals internationally, how many are sort of willing to go with Evidence.com in the cloud? I mean is that trending in the right direction?

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [73]

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Yes. I’d say it is trending in the right direction. I’d say everything in international — and a huge credit to the team here and the team’s leadership in each region. Things are generally trending in the right direction internationally across video and CEW. Again, these are — we’re dealing with governments here, not state and local governments, like federal governments. So these deals do take longer to materialize, but we are seeing more interest in the cloud than we have in the past and more interest in CEWs than we have in the past.

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Patrick W. Smith, Axon Enterprise, Inc. – Co-Founder, CEO & Director [74]

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Andrea, I’d like to reach out and thank Ryan for throwing his hat in the ring to guess on the special backgrounds. And so for any analyst today who would want to throw their hat in the ring, in addition to the T-shirt swag, if you want to get yourself one of these fancy Axon tattoos, I’ll pay for it personally because we want to encourage you all to get your best Axon swag on.

So Andrea, back to you for some more questions.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [75]

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Thanks, Rick. Well, actually, to our buy-side investors on the call who’ve been e-mailing me, thanks for guessing. And it sounds like even some of our investors’ kids are getting in on it. So I just — I love that, like it’s super cool. So thanks for e-mailing me, too, your guesses. I’ll respond after the call.

Okay. Next question is from Scott Kessler (sic) [Jeff Kessler] at Imperial. Scott, go ahead and turn your video on for us.

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Jeffrey Ted Kessler, Imperial Capital, LLC, Research Division – MD [76]

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I am hanging out outside. I unfortunately came unprepared and don’t have any questions. So feel free to jump to the next person there.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [77]

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Okay. That’s great. We have a 908 number dialed in, and I’m not sure who it is, and I’m wondering if you’d like to ask a question.

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Patrick W. Smith, Axon Enterprise, Inc. – Co-Founder, CEO & Director [78]

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While we’re waiting there, Andrea, I can — I want to take on the elephant in the room that maybe Scott was uncomfortable addressing. And that is, Josh Isner, can you share with the folks what’s going on with that epic beard you’ve got going on? I’m sure folks seeing you for the first time with that beard, may want to know.

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Joshua M. Isner, Axon Enterprise, Inc. – Chief Revenue Officer [79]

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Thanks, Rick, for pointing that out. I really appreciate it. So yes, I made a commitment in early March that I would not shave or cut my hair until the office in Scottsdale reopened. At that time, it looked like a late April, early May start. Here we are on May 7, and it’s been extended to June 1. And I am in a world of hurt right now. And my wife is even in a bigger world of hurt looking at me every day. So thanks, Rick. I appreciate it. And hopefully, the next time I see everybody, it will be a slightly different look.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [80]

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All right. So if any of our analysts have follow-ups, go ahead and let us know via the chat window. We have a few more minutes here. We did get some questions from the public. We hadn’t planned on taking them, but I’ll just read off a couple, and we’ll answer them if we have time.

One is, is there a next-generation of TASER 7 in development? And if yes, what will be some of its enhanced features?

Rick, I think you should take that one.

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Patrick W. Smith, Axon Enterprise, Inc. – Co-Founder, CEO & Director [81]

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Yes. We typically don’t talk about new features until they’re launched. I would say we’re continually evaluating some of the programmatic aspects of TASER 7 to make sure that we’ve got ways that it can fit all of our different buyer personas. And kind of stay tuned as always for new product developments with Axon.

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Jawad A. Ahsan, Axon Enterprise, Inc. – CFO [82]

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Yes. I actually — I want to piggyback on this because I know Rick is trying to do his best to not disclose too much, but one of the reasons I joined the company was to help Rick make the bullet obsolete. And the technology that we’re working on now with the next-generation TASER is going to be a big step in that direction. We laid out our goals towards the end of the decade what we want to have accomplished. And one of those is to have the TASER to be the primary means for an officer to stop a threat. And I think that with what Rick and the TASER team have in mind and what they’re working on, it’s going to be a long way towards that.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [83]

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Okay, there’s the next one. It’s just an interesting question. Axon sells TASER self-defense devices into the consumer market. Are there any plans to enter the consumer dash cam or body camera market?

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Patrick W. Smith, Axon Enterprise, Inc. – Co-Founder, CEO & Director [84]

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Yes. Let me take that one. The answer is no. The consumer dash cam market is much more of a commodity market. And the elements that make our system valuable for professional law enforcement users would not be particularly applicable in that market, so no.

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Andrea Susan James, Axon Enterprise, Inc. – VP of IR & Corporate Strategy [85]

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Okay. That’s all we have time for from the public. Thanks for submitting your questions.

I’m going to turn the call back over to Rick to close this out.

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Patrick W. Smith, Axon Enterprise, Inc. – Co-Founder, CEO & Director [86]

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Awesome. Well, thanks. I’m really enjoying the positive feedback on the new format. It’s been enjoyable for me to feel a little more connected seeing your faces and interacting online. Sorry for harassing you a little bit there, Josh. It just feels like this is a more human experience. And I’m sure we’re going to evaluate and see if we keep doing it in Zoom. But I certainly found this to be much more engaging. I hope you did, too.

I’d like to thank you all for joining us. As you know, Axon does not shy away from challenges. We view them as opportunities. And we’re trying new approaches in evangelizing our cloud software to public safety and increasing our productivity. And we’re going to continue to lean into everything that 2020 has got to throw at us.

So we hope you all stay safe, healthy and sane during this period of disruption. And we look forward to updating you all again in August. So thanks, and we’ll talk to you soon.

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