Good morning, and welcome to the Axon Enterprise Inc. Annual Meeting of Shareholders. I would now like to introduce the first presenter, Rick Smith. Please go ahead.
Good morning, everyone. My name is Rick Smith, and I'm the founder, CEO, and the director of Axon Enterprise. Welcome to the twenty twenty one Annual Meeting of Stockholders. If you're only listening over the phone, please go to investor.axon.com, scroll down to events, and access the link so that you can see us on Zoom. Turning to the formal portion of the meeting, I would like to first introduce our directors and executive officers who are attending the meeting today.
Michael Garnrider is our Chairman of the Board of Directors. I'll have each of you just say a quick hi and maybe the screen will pop to you so the shareholders can see who you are. So Mike.
Good morning, everyone. Thank you for being here.
Next up, Adrian Brown. Say hi, Adrian.
Hello. Pleasure to be with you this morning.
Next up, doctor Richard Carmona. We may have you on mute there, Rich. Good morning, everybody. Pleasure to be with you. Perfect.
Thank you, Rich. Julie, you're up next. Unmute and say hi, please.
Good morning, everyone.
And Caitlin Kalanowski.
Good morning. Happy to be here.
Doctor. Mark Kroll.
Morning. Thanks for joining us.
Doctor. Matthew McBrady.
Good morning. It's great to be here. Thanks for taking the time as well.
Hadi Partovi.
Good morning, everybody.
Okay. Moving on to our Executive Officers. Let me first introduce President Luke Larson. Good morning, everyone. The guy who keeps an eye on the money, our Chief Financial Officer, Jawad Hassan.
Hi, everyone. Thanks for joining us today.
Our Chief Product Officer, Jeff Cummins. Good morning, everyone. Thank you
so much for being here.
Okay. I'd like to make a few more introductions. We will not have them say hello, just out of logistics. So that would be Tim Zindroff and Scott Davison, partners of Graham Thornton, our independent registered public accounting firm. If you have any questions for our management team, you may submit them using the Q and A feature in the online virtual meeting at www.virtualshareholdermeeting.com/axon2020one.
I'll repeat that again. It's www.virtualshareholdermeeting.com/axon2021. Today's meeting will be in two phases. First, we will conduct the formal part of the meeting to consider each of the proposals listed in the notice of annual meeting of stockholders dated 04/12/2021, and to conduct such other business days may properly come before the meeting. The second part of the meeting will be a management presentation followed by a question and answer session.
The second part of the meeting will be conducted via Zoom only. Isaiah Fields, our Corporate Secretary will be recording the minutes of this meeting and Bobby Driscoll has been appointed to serve as the Inspector of Election. He has signed the oath of office, which will be filed with the minutes of the meeting. I will now call on Isaiah Fields to establish that we have met the necessary corporate requirements to begin. Isaiah?
Thank you, Rick. We have proof that notice of this meeting and related proxy materials was mailed or made available around 04/12/2021 to all shareholders of record as of the record date of March 31. Based on that, this meeting is duly called with timely and proper notice. As of 03/31/2021, the record date for the meeting, there were 64,673,091 shares outstanding. We have 56,921,217 shares present by person or proxy at this meeting, which is over 88% of the outstanding shares and constitutes a quorum permitting the transaction of business.
Each share entitles the holder to one vote on each matter, which may come before the meeting. A list of registered stockholders entitled to vote is available for examination by stockholders. The polls for matters to be voted upon today are now open and will close immediately after I present the matters to be voted upon at the meeting. If you have not previously voted or you wish to change your vote, you should do so now online at www.virtualshareholdermeeting.com/axon2020one. That's www.virtualshareholdermeeting.com/axon2020one.
The first item of business is the election of directors as nominated by the board. The three nominees for election as Class C directors are Doctor. Richard Carmona, Julie Kolevin, and Caitlin Kalanowski, who will each serve a regular three year term until our February or until their respective successors are elected and qualified. The board recommends a vote for each of the nominees. The second item of business is the approval of an advisory resolution on our executive compensation.
The board recommends a vote for this proposal. The third item is of business is the ratification of the appointment of Grant Thornton LLP as Axon's independent registered public accounting firm for 2021. The board recommends a vote for this proposal. The fourth item of business is the approval of amendments to the company's certificate of incorporation to increase the maximum size of the board of directors from nine to 11 directors. The board recommends a vote for this proposal.
The fifth item of business is the shareholder proposal submitted by mister James McRitchie to move from a plurality voting standard to a majority voting standard. It is my understanding that Mr. McRitchie has submitted a recording of his proposal and is on the line to answer any questions. The board recommends against the shareholder proposal. I will now play Mr.
McRitchie's recorded proposal, and then we will take questions that have been submitted via the virtual shareholder meeting platform.
90% of S and P 500 companies have a majority vote standard for directors. The board opposes because it asks the board to replace failing incumbents on an expedited basis instead of the customary ninety days. Unfortunately, the company failed to accept my offer to negotiate. My language was meant to give the board more flexibility. Had they discussed their concerns with me, I would have been happy to allow ninety days or more if needed.
The Board also disagrees with my charge that it is an outdated governance structure that reduces accountability to shareholders. Well, in 2018, 67% of shares voted for my proposal to declassify the board. In 2020, 85% voted for my declassified proposal. More than half the board has served for ten years or longer. Axon has no requirement to separate CEO and chair positions, and we don't have proxy access.
Axon claims an engaged and independent board of directors that actively maintains strong relationships with shareholders. I filed three shareholder proposals in three years, winning between sixty seven and ninety seven percent of the vote. They certainly have never engaged with me. Have they engaged with you? Vote for proposal number five.
If directors can't get elected by majority when no one is running against them, something's obviously wrong. I wanna give you a warning. Vote now while I'm talking. Companies often close the polls immediately to keep you from voting. Of course, that doesn't make any sense.
The whole purpose of presenting proposals at the meeting is to allow shareholders to consider the arguments and then vote. Closing the polls immediately makes mockery of the process. Unfortunately, many companies care more about imposing their will than reflecting the wishes of shareholders. I'm stalling a bit to give you a little more time to vote. However, don't want to be accused of wasting your time or filibustering.
So I'll close now. Once again, vote for proposal number five to declassify our board. Thanks for your consideration.
I'd like to thank Mr. McRitchie, for his comments, and we'll now take a moment to see if any questions, are submitted for Mr. McRitchie through the portal. Okay. There being no questions at this time, we will now take questions that have been submitted via the virtual shareholder meeting platform.
These questions are to address the formal matters being voted upon today. Attendees will have the opportunity to ask general business questions during the informal portion of the meeting using Slido at www.sli.do. That's www.sli.do. While we wait to see if any questions come in, I wanna remind anyone who is listening in over the phone that you can go to investor.axon.com, scroll down to events, and access the link to see us live on Zoom. That will also allow you to watch the company presentation following the formal portion of today's meeting.
We'll now take a few moments to see if any questions come in through the shareholder meeting platform. Okay. There being no questions having been submitted, we'll move on to the results of the election. This concludes the matters to be voted on as outlined in the notice of the annual meeting. In accordance with our bylaws, I hereby declare the polls for voting at our two thousand twenty one annual meeting closed.
I've received a preliminary tabulation from our inspector of election. And based on that tabulation, I am pleased to report that each of the three class c director nominees were elected. Each of the management proposals was approved, and the shareholder proposal to move from a plurality voting standard to a majority voting standard was approved. The final voting results of today's meeting will be reported on a Form eight k filed within four business days. That concludes the formal business, and I now declare the formal portion of this meeting adjourned.
If you wish to continue on to our investor update, please join us via Zoom. You can find the link at investor.axon.com. That's investor.axon.com. I will now turn the meeting over to Andrea James, who runs Axon's Investor Relations.
Your line is now muted.
Hello? Can you all hear me? Okay. Welcome. We're so excited to have you here today at our Annual Shareholder Meeting.
We're excited to take you through our business. Our CEO, our President and our CFO will be giving you an overview of our strategy and our products. And then we're going take questions at the end. So head on over to slido.com, use the Axon to submit questions. It's right here up on the screen.
And next, we'll go through our safe harbor statement. Okay. During this presentation, we will discuss our business outlook Any forward looking statements made today are pursuant to and within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These comments are based on our predictions and expectations as of today and are not guarantees of future performance. All forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
These risks are discussed in our SEC filings. Okay? Settle in. We hope you enjoy learning about what we've been up to. Go ahead, Rick.
Thanks, Andrea, and hello, everyone. Let me begin by offering perspective on the conventional narrative that 2020 was a terrible year. Challenging times bring out the best in humanity, and these are the times that inspire us to rise up, to overcome, to stretch, to create our finest hours. If we choose to focus on the negative, there was plenty to see in 2020. But if we look harder, we see so many signs of hope and progress.
We see that 2020 showed us all what we're made of. Supercharged by a global plague, nations sprung into the kind of arms race we should want to see competing ferociously to cure a pandemic. The result was an amazing feat for humanity. In early twenty twenty, our worlds began to lock down due to COVID. But by December, the first COVID vaccinations were being placed in arms.
Thanks to vaccines developed 10 times faster than ever before. Humanity was also supercharged into space in 2020. SpaceX, whose ultimate mission is to make life multi planetary, helped NASA return human spaceflight capabilities to The United States for the first time since the space shuttle program ended in 2011. Back on Earth, many of us adapted to new realities. We virtualized ourselves, and we learned to Zoom around the world for business, and thus parents got to see our kids every night for dinner.
My customer engagement jumped more than tenfold as our customers, police chiefs and sheriffs opened up to this idea of video conferencing, and our leadership team enjoyed seeing our analyst community face to face in our new Zoom quarterly conference calls. I don't mean to minimize the pain we've all experienced. In many cases, we're still experiencing. I understand it, and I share it. My mother passed away days before Christmas after contracting COVID, and my father, our founding chairman, Phil Smith, passed away holding my hand on April 14.
Dad was instrumental in helping to get Taser off the ground in its early days, and our company would not exist without it. For our annual meeting, many of you might remember him sitting on the front row cheering us all on. His final twenty four hours were an amazing capstone to an incredible life. All of his children and grandchildren came together around his bed, excuse me, the night before. And in a breathtaking and beautiful ceremony, we all got a chance to tie a Philly sentence and say goodbye.
His final hours were peaceful and quiet. His passing was as beautiful as such a thing can be. I would not have chosen for the past year to turn out as it did, but we don't get to choose what the world throws at us. We can only choose how we respond. We take a moment to recompose myself, and let's get back to how we're responding in the future.
At a recent executive planning session, we asked ourselves where we want to be at the end of the decade. And here's the answer. Our vision is to be globally synonymous with our mission of protecting life by building the world's largest and most trusted network of safety devices and services. Recently, current events including last year's death of George Floyd and the events that followed, they forced our nation to reflect upon the values we hold true for all Americans. Axon is and will remain committed to creating technologies that save lives, increase transparency, and help communities and public safety agencies who serve them achieve a higher quality of life to ensure everyone makes it home safe.
Our products work. In fact, I would tell you they are transformative. Customers and increasingly communities see us as a key thought leader and a partner in the global drive to transform community and public safety. We hear stories daily about customers using our products to save lives and to protect their communities, and we believe our problem solving approach to these major challenges will continue to drive change and to drive growth. Two years ago when I published my book, The End of Killing, it was a radical idea that we can actually make the bullet obsolete and create less lethal weapons that become the primary use of force and eventually displace lethal weapons and put them into the dustbin of history.
Customers were far more receptive to this idea than I could ever have anticipated. In the light of events in the past twelve months, we are hearing pleas from our public safety customers and the broader community that they cannot wait until the deadline I set at the end of this decade for us to achieve the goal of surpassing the sidearm in effectiveness. Our teams are working hard to bring in the dates for the next generation of TASER weapons, which I believe will be the largest single leap in capability in the history of less lethal weapons. Customers have even begun signing ten year programs with us to enable seamless upgrades, and we worked with them to create programs that will even allow them to upgrade early when the next generation arrives. Now to set expectations, the next generation of TASER device is a couple years out due to the intense testing that a ground up new redesign requires, as well as full production automation and scaling.
But I wanted to talk about the issue head on, given the growing and intense public interest and help our investors understand why you might be seeing this dynamic behind ten year programs and frankly why you hear us talking about how we focus in years, not quarters. Axon is delivering incredible value to our customers and the communities they serve. In 2020, we secured our first Dispatch customer, established a solid foothold in the federal market, launched our records platform and grew our international revenue by more than 70%. We are proud to have delivered a record $681,000,000 in revenue in 2020, representing 28% growth, 1,100,000,000.0 in contract bookings, and $221,000,000 in annual recurring revenue. We wrapped up the year with an exceptional fourth quarter highlighted by revenue growth of 32%, strong profitability and robust global demand for our TASER devices.
We didn't just deliver on our operational goals, we significantly outperformed them. I am humbled and so grateful to our team for their ability to deliver exceptional results amid turmoil and adversity. We exited 2020 better positioned than we've ever been from an operational and strategic and financial perspective. And for those of you who followed our first quarter twenty twenty one report earlier this month, you know that 2021 is off to an equally strong start. Now I'll hand off to our President, Luke Larson, to take you more deeply into a journey of what we're building.
Luke?
Thanks, Rick. Hello. I'm president Luke Larson. Thanks for joining us. Now let's dive in.
If we break our business down into three main phases, we'd say the first fifteen years of the company were getting Taser off the ground. This era took the company to about a billion dollar market cap. Then we entered the body camera era. We began investing in body cameras in 02/2008. And when Ferguson happened in 02/2014, we were ready.
In 02/2015, body cameras began to take off. And within two years, we were the clear market leader. We entered the dashboard camera market in 2017 to augment our product offering. This brought the company to about a
$3,000,000,000
to $5,000,000,000 market cap. This track record of solid execution provides a foundation for the next phase of rapid growth, which will be the result of leveraging our platform. We estimate our total global addressable market to be about $27,000,000,000, and it continues to expand along two primary axes. We've more than tripled the TAM over the past two years. First, we continue to push into new market categories.
And in any category we enter, it's our goal to become the market leader. Second, we are moving beyond law enforcement and public safety to several adjacent markets. You can think of our product growth drivers in three main categories. We believe we have excellent product market fit and very good product moment fit. The first category is TASER.
This includes our popular taser devices. But we're what we're doing now, we're doing more to help officers deescalate, and this includes offering new and exciting virtual reality and training tools. The second category is sensors. These include our body cameras, our in car cameras, our drone partnerships, and more. And the final category is software.
We divide software itself up into three categories. They are digital evidence management, productivity solutions, and real time operations. Our products all work together to form a virtuous cycle. We build products and bundles that give our customers superpowers to ensure everyone gets home safe. This creates more users, aka people, and nodes, aka devices, on the Axon network that then creates more data that we can unlock more value from machine learning and AI.
We use this to create even more great products and more bundles. Let's do a quick video to show you how our vision for our products all work together.
All units vehicle reported stolen with a 16 year old male asleep in the back seat. Be on the lookout for a green Chevy Malibu. License plate 3.
Dispatch +1 023, locate the suspect vehicle.
Dispatch to +1 023. Is the victim in the
vehicle? Negative. Dispatch +1 023, hear some yelling. I'll be out on foot.
Copy that. +1 023, sending backup. All units, Bola Green Malibu, Mount Baker. Request backup and UAV assist.
Dispatch, this is officer Brady. I'm approximately five minutes out.
Copy dispatch. UAV en route.
Dispatch. There's an echo. I can't seem to pinpoint the location of that altercation.
Officer Gomez, I've got a UAV pilot on scene, and backup is on the way. Can you give your current location?
Negative. You booked livestream.
Stream is live. We've got your position. Officer Brady head Northeast to officer Gomez location. Use your phone to find him.
Copy that dispatch. I've got him on my map.
We have eyes on a suspicious building due west of your current location. Adult male appears to be pounding on the door.
Police, don't move. Let me see your hands. Let me see your hands.
The man wearing the baseball cap is our victim.
His name is Mark. Copy that dispatch. Mark.
Be advised the victim is autistic. Come here, buddy.
Please don't move. Please Please don't move.
Officer Gomez, we have eyes on the suspect, and the unit is set to intercept.
I didn't take the kid. Put your hands up where I can see you. I'm not going back to jail. I'm gonna be safe. I didn't take the kid.
He was in the car. He was in the car. Car.
Nicely done, team. We'll have your camera footage downloaded remotely. It'll be waiting for you.
Awesome. What an what a great video. Shout out to our marketing team for really making something phenomenal that showcases all of our products. We aren't just in the business of selling taser devices. We're mission driven.
We are in the business of protecting life and equipping officers to deescalate in key moments. Supporting public safety and minimizing use of force is a key component to Axon's mission of protecting life. These tools include the cloud connected taser conducted energy devices as well as a suite of augmented reality and virtual reality training services and empathy training for law enforcement officers. We're transforming how agencies train their officers by addressing the inefficiencies around the classroom, role playing, and simulator training. By leveraging VR, we are addressing their two biggest issues, budget and time.
We just launched an exciting new VR simulator to help officers develop critical thinking, deescalation, and tactical skills. Now let's take a look.
Take anyone who is the best at what they do and ask them how they became the best. The story they'll tell you is what they did before, before they made the winning catch, before the home stretch, before the rescue, the commendation, before the cheers, the way to goes, and the fist bumps. The best will tell you, they became the best because of the time they spent here. The early morning reps, the hours of studying, getting it right, getting it perfect. It's the long hours that won't get the likes or the front page.
Training allows those who are merely good to fail safely and often so they can come out the other end as the best. Because honoring the badge means giving their best so everyone can get home safe. They won't tell you it's easy. They'll just tell it's necessary because that's what the best are called to do.
Body cameras and the transparency and accountability they bring are becoming synonymous with best practices in modern policing as evidenced with bipartisan demand and support for the technology, and we are continuing to drive that change. I'm really proud of our body worn cameras and the position that we've achieved. It was not inevitable, and we worked really hard to get it. We still see a wide opportunity for that business. Our industry leading digital evidence management software, Axon Evidence, supports our network of cloud connected cameras and sensors.
Axon Evidence is the world's largest cloud hosted repository of law enforcement video data and other types of electronic evidence. This next video will show you the major digital evidence challenges that Axon solves for agencies.
Evidence. And evidence can't do what it's meant to do when it's disorganized, hard to find, view, and share. Each piece of evidence begins with a single source. Shouldn't it end up in a single place? The answer is Axon Evidence, a secure, centralized digital evidence management system that accepts all types of evidence and organizes it in one place.
Axon Evidence can instantly find that one piece of evidence you need to build a strong case. And it's designed with easy to use functionality like dynamic review and playback. It's also versatile with built in tools like automated redaction, performance, and sharing. Plus, transcription, evidence suggestions, and more make the whole process lightning quick. And we're just getting started.
Future features will include virtual and augmented reality scene scans. We're also working on evidence timeline and mapping views and a host of AI connections and mobile experiences for working in the field. Axon Evidence, the DEMs for the demands of modern policing.
Our productivity suite of tools reduce time spent on paperwork. Axon Records takes a disruptive modern approach to displace legacy on prem records management systems by putting body camera video at the heart of incident records. Axon Records includes Axon Standards, a radically simpler approach to use of force reporting. Now let's take a look at another video.
In today's world of policing, use of force incidents face more scrutiny than ever. Without proper documentation and transparency, the relationship between your agency and the community you serve can become strained. But properly reporting use of force incidents can be a headache due to outdated processes and clunky technology. The solution is Axon Standards. The dynamic reporting engine within Axon Standards will empower your agency to efficiently document uses of force, citizen complaints, and other critical officer related incidents.
With a smart user interface that helps command staff associate key digital evidence and built in support for Axon AutoTranscribe, you can complete and review a report in a fraction of the time. Axon Standards gives internal affairs investigators a holistic incident view using digital evidence and saves critical administrative time. It also helps agencies understand use of force trends to make better strategic decisions on training and development, building greater trust with communities. And Axon Standards is fully Axon Network. It features analytics dashboards and associates evidence from Axon cameras, sensors, and taser energy weapons to give you a more complete picture of your agency.
More efficient reports, stronger community relationships, part of the Axon network. Check out Axon standards today.
We are developing communication tools that support real time situational awareness through the sharing of information across various omnichannels, including voice, messaging, location mapping, and intelligence and evidence sharing. In September 2019, we began shipping Axon Body three, an LTE mobile data capable camera with a GPS chip, which supports real time awareness. This is enabling a whole host of new capabilities and seeding our entry into the dispatching market. Products include Respond4 devices, which allows agencies to know the GPS location of their officers and what those officers are experiencing through live video streaming and more. And Axon Dispatch, the emergency dispatch solution we brought to market with our first customer last year.
This is a capability that only exists in the market through Axon.
This is new. This is true real time operational control in public safety. This is AxonRespond. AxonRespond harnesses the power of the entire Axon network. It connects live streaming body cams, in car cameras, and drones, light bar and weapon deployment signals, live maps with the locations of officers on foot.
With all this real time information coming in, AxonRespond gives everyone a common operating picture, providing situational awareness for dispatchers, patrol officers, and supervisors alike. AxonRespond also provides a modern communications platform that streamlines how teams collaborate. It starts with a smart user interface designed from the ground up to be faster, more intuitive, accessible on any device, anywhere, and it's built to evolve and expand as new technologies come online. Legacy systems are a thing of the past. With AxonRespond, you'll always have the latest capabilities.
Put the power of the Axon network to work for your agency. Get the complete picture and act in real time so everyone gets home safe. That's the promise of Axon Respond.
Awesome. Last thing from me, I just wanna send good luck and positive energy to the Phoenix Suns as they head into their third playoff game against the Lakers. Go, Suns. And now let me turn it over to our chief financial officer, another Suns fan, Juwad Asan.
Thanks, Luke, and hi, everyone. Thanks again for joining us today. First, let me start by saying that our shareholders are very important to us, and I wanted to thank you for your time today. We feel a strong sense of accountability to all of our stakeholders, which includes our customers and the communities they serve, our employees and our shareholders. We have an ambitious vision for the future of public safety.
We're delivering compelling products, and our financial profile reflects our strength. Axon's financial strategy is very straightforward: one, grow the top line while driving leverage on the bottom two, sell subscriptions and create a powerful recurring cash flow engine and three, invest heavily in R and D to maintain our status as the innovator in public safety, delivering the most value and helping drive strong margins and finally, maintain strong liquidity, abundant operating flexibility and put ourselves in a position to advance even when our competitors are in retreat. Before I run through our financial strategy, I wanted to touch on ESG, or Environmental, Social and Governance, which we're hearing about from a growing number of our investors. Axon is a mission driven company whose overarching goal is to protect life, and that social mission is what drew many of us to the company. We see fully 100% of our revenues as tied to devices, software or services designed for public safety in promoting social good.
We're proud to both develop and sell products and services that are good for the public and generate strong financial returns. We're a strong top line grower, which speaks to market demand for our products. Here, you can see our track record for top line growth and leverage. There's always a balance between investing for future growth while also driving leverage, and the way we think about that is generally through the Rule of 40, where we aim for a target model where the top line growth percentage plus the adjusted EBITDA margin is 40% or more. We put a lot of discipline into our capital allocation and hold our teams to high standards in terms of generating top line returns that are also margin accretive.
The key number I want you to remember from 2020 is 28. I'm referring to three important milestones we hit as a company as we closed our recent year. We delivered 28% growth on revenue over 2019, 28% compound annual growth in revenue over the last five years, and we finished the year with 28% in adjusted EBITDA margins. Our software business is very healthy. It has a 120% net dollar retention, and our annual recurring software revenue is $242,000,000 and has grown at a compound rate of 51% over the past four years.
Our software contracts generally carry an underlying gross margin of 80% or higher. On the right side of this slide, you can see our success in moving our customer base over from book and ship TASER device customers who purchased out of their capital expense budgets to customers who subscribed to our more comprehensive solution out of their operating budgets. We told investors at an Analyst Day in 2017 that our intention was to drive a majority of our revenue over to bundled subscriptions, and you can see our progress here. We finished 2020 with 73% of our revenue tied to subscriptions. As you can see on the left, our growth trajectory is twofold: selling our existing products into new markets and selling new products into our existing markets.
Our new product categories include dispatch, records, drones and VR training. New markets where we are investing in building a new sales channel include federal, corrections and commercial enterprise. And on the right, we have our target model. We're driving towards 70% gross margins. And as I'd said earlier, our underlying software and storage contracts support 80% plus gross margin.
Our goal is to not only be the market leader in any new category, but also to stand up businesses that support 30 adjusted EBITDA margins or higher as we increasingly leverage the investment in our platform. Axon began investing in body cameras in 02/2008, and that business really started to gain traction after Ferguson in 2014. We had the right products at the right time. I think we'll look back years from now and see 2020 as kicking off the next wave of policing reform. We believe that by the end of the decade, the investments Axon is making today will prove to once again be the right products at the right time.
We have excellent product moment fit. By 02/1930, we believe TASER devices will outperform and eliminate pistols. AI will eliminate manual report writing. Communications will have evolved well beyond the radio. And just like we did with TASER and body cameras, we will once again have transformed public safety.
And now I'm going to turn it back to Rick to take us through Q and A.
Rick, it looks like we only have one question, and it's what products are you most excited about?
That's like asking me which of my children I love the most. You know, you you just can't answer it. I mean, across the board, in every category, we're doing stuff that's just mind blowing. This morning, I was Jeff was doing a demo for our board of directors of fleet three, and, you know, that's the next one to go out, you know, at shift out of the building, and it was pretty mind blowing how just what a huge step up in capability that ALPR is really outperforming both our and customer expectations. I'm knee deep personally in some of the next gen taser generation stuff that's also gonna I think it's gonna blow people's minds when it gets here.
The next generation body camera is is fantastic. The transcription product that's now in the field and evolving to real time transcription, is amazing. Our AI group is doing fantastic work. Our dispatch software, and, you know, some of the relationships we've got there with RapidSOS, really transforming that space, and records, like freeing police from the yoke of data entry. Right?
They sign up to go be a police officer, and they have this, you know, other job. It's a data entry clerk, and, we're we're lifting that off their shoulders. So I I probably left out a lot of other things too. It's it's literally everything
we do.
You did leave that one and a half to go in there. The thing that I'm most excited about unequivocally is our virtual reality training. I think this can be transformational and create better outcomes, and it's a really cool example where this technology is hitting an inflection point. It can solve just really big problems for agencies and help ensure we have better outcomes and everyone makes it home safe. So gotta make sure everyone knows how excited we are about VR as well.
Yeah. You know, one thing about being a mission driven company, we don't do products we're not excited about. Like, life's too short. You know? And the reason I think that we we we have the level of success we do is we do things we're passionate about.
And so you get good at the things you're passionate about, and, ultimately, you make money at the things you're good at. So, I think that that that mission loop really does tie back, and you won't see us working on stuff if it's just for money because, you know, life's too short to just do things that you're not passionate about.
I think one last thing just to triple down on the VR point. Another thing that I think is a hallmark of Axon and it relates to the financial, you know, responsibility and discipline combined with the innovation culture of the company, which is we build personally what we think we are best at and we're best able to add value on, and then we partner and source smartly where we can do that for leverage. And one of the things I'm super excited about with VR, it's a perfect example of that. You know, we are bringing absolutely revolutionary content, training expertise, connection of this training to TASER and the rest of our portfolio, but we're partnering with best in class hardware leaders specifically in VR like BioHTC to bring the whole solution together. So we're not reinventing the wheel.
We're spending our R and D and our time on the places where we can add the most value and partnering smartly across the ecosystem to bring best in class solutions together for our customers.
Okay. We've got a couple other questions. This first one, as you roll out license plate recognition, are you worried about being embroiled in controversy, around police surveillance? No. Controversy is what we do.
Tasers were controversial. Body cameras are controversial. Cloud software is controversial. We don't shy away from controversy. We run at it, and we run at it with a mindset of how do we do things the right way.
At ALPR, one of our biggest differentiators is we've built an ethics first design from the ground up and not just as a, you know, as a positioning, thing or as PR. But, you know, yesterday, I was meeting with our community advisory coalition, including even people who've been formerly incarcerated and getting those voices about how they view, you know, police and the risks of getting the technology wrong and enabling, you know, practices that are counterproductive. And that goes to the core. Maybe I'll hand over to Jeff a little bit too just to talk, Jeff, about how you have really embedded an ethics first approach in every aspect of our product design.
Sure, Rick. Well, you know, first and foremost, you know, starting with our mission you know, and starting with really the innovation of the creation of our ethics board, this independent body, you know, that's that's, you know, peopled with amazingly diverse coalition of folk from everything from former law enforcement leaders to civil rights and, you know, and civil liberties, you know, leaders and everything in between that really serve as counselors and as a mirror for us as we go through our design process. You know, fundamentally, every product we build as part of from spec all the way through delivery has not just, again, a halo of, yep, we like it to be ethical, but has specific questions and a specific framework that the product managers and engineers need to directly speak to as part of our evaluation and ultimately bringing those things to fruition. And hope is not a strategy for building in these technologies and new techniques. It really has to be fundamentally architected into the way you build.
And I'll I'll wrap by saying the other thing we've learned, excuse me, about this is doing things the right way pays huge business dividends. Right? Our customers work for elected officials. And when there's controversy or, you know, protest against police or the media is raking them over their coals, no that's not good for anybody. When we come in and we present our our solutions, we have community groups saying, hey.
You should go with Axon solution because it answers a lot of our concerns. So that that gives us an advantage with the elected officials, with the communities, and ultimately with our customers. If we can turn down the heat, and get people collaborating more, rather than, you know, confronting each other more, that's a winner across the board. I believe ethics in design, will be for us what privacy has turned out to be for Apple and their product strategy, something that's not just something you believe in, but something that becomes a competitive advantage. And with that, now let me turn over this next question.
You mentioned our focus on ESG. What are you most excited to focus on in this space over the next year? For me, I mean, everything we do, is is making the world safer. But to get specific on, maybe the areas that are, in particular focused with shareholders, let me hand over to Jawad.
Yeah. This is a lot like the product one. I mean, our entire company, our mission is geared towards, ESG initiatives and tenets. And so pretty much everything we do from our mission to how we live that and embody that in our products, how we improve ourselves operationally, we are just constantly every day striving towards embodying more of those principles and making sure that we're really bringing more transparency and more visibility to what we're doing as a company. So there's not anything one in particular.
Even internally, the things that we don't talk about necessarily all the time on earnings calls or shareholder meetings, what we're doing internally with providing forums for our employees for new affinity groups that we've stood up for various support groups and funding and initiatives that we've run to basically help make for a more inclusive environment. We've got a very inclusive and diverse Board as well. And really just from the Board all the way all throughout the company, it's a major focus for us. And so I would really encourage you to check out our ESG disclosure. It's on investor.axon.com just to get a sense for all the great things that we're doing.
And just in case anyone is still listening via Broadridge or via the audio only line, please go to slido.com, put in the hashtag Axon to ask your question for the informal portion of the meeting. So we're taking all informal portion of the meeting questions through Slido. Thank you.
Alright. Next up. This seems the first year Axon made investments in other companies, Block Safety, RapidSOS, Celebrate. Do you make do do we expect to make more investments at this time? And how do you decide when to make an investment or measure whether the strategy is working?
I'm gonna have both Jawad and Jeff answer this. I'll first say, for me, it starts with, does this impact our vision? That's that's number one. If it if it's not gonna have an impact on us accelerating towards our vision, we're not even gonna take a look at it. And then from there, as you can all guess, you know, we've got, I have a lot of excitement and optimism, and, you know, we need a team that brings a lot of rigor to how we neck down all the things we could do to which ones really make the most sense.
And for that, I lean heavily on Jeff and Jawad. So, I'll let you guys go. I'll let you pick who goes first. Go for it, Jo Anne. I guess, yes, first, I'd
like to start by giving you just a frame of mind for how we think about M and A. Rick is a University of Chicago guy, and I have done quite a bit of M and A in my career, and we know how hard it is. It's really difficult to integrate a company, especially when you've got one with such a strong culture like we do. And so like by default, we've got a very, very high bar to cross. The other thing is we've built a fortress balance sheet.
We have a bunch of cash and absolutely no debt. It's a very strong position to be in, and we can afford to be choosy. We also have organically a ton of runway ahead of us. When you look at all the products that we're in today, you've heard Jeff and Luke talk about them. We have so much runway ahead of us that something really has to be pretty spectacular for us to consider it to be either it's going to accelerate our time to market or it's going to get us into a new product category, but those are both pretty high bars to cross.
What we've done recently with investments is start to dip our toe into the water with these companies that
we really
admire. And certainly, we've looked at them from an M and A standpoint as well. But what we like about the investments is that it gets us a chance to build relationships with those companies, get to know them a little better, get a chance for them to know us. It could turn into something further down the road. Even if it doesn't, we're pretty happy with the relationship we have.
In some cases, it's more than just the investment. There's a commercial partnership as well. I think you should expect to see us continue to be very picky, very choosy, but we do have a lot of flexibility on our balance sheet to be a little bit more aggressive in the coming years. Jeff, I'd love to turn it over to you to hear your thoughts.
Yes, sure. That's an excellent answer. So just to, you know, echo, you know, I also you know, in my own career, you know, I've lived through more than half a dozen acquisitions from both sides of the table as both acquirer and acquiree. So I also know how hard it is and why we have to, you know, make smart choices and be disciplined. And exactly as both Rick and Jawad said, look, we're not a PE firm.
We're here to, you know, do things that make strategic sense for the business regardless of what form they take, whether it's a straight up commercial partnership or one of these investments or ultimately potentially M and A. It's all about trying to
move the
ball forward for our mission and our strategy. And so you'll see that every one of these companies we've spent time with and invested in so far are ones where there's a natural fit on the partnership and product integration side. And then also being an investor highlights our enthusiasm and seeing where it goes both with those and with other ones that we look at over time. So it's all part of a disciplined portfolio approach.
I do want to wrap this one up. Something that I'm I'm pretty proud of, that we we've innovated on, and that is how we bring these opportunities to our board of directors. You know, I'm self aware that I am an enthusiastic optimist, and I have a tendency to assume things will be easier to do than they will be and that we can do more than we can. And so in that vein, as we've looked at these, and and, actually, I think there were some great articles recently criticizing how most management teams, you know, the CEO falls in love with an acquisition, tells everybody to get in line, and they polish it up to bring it to the board for the approval. In our case, when we've gone to our M A committee, we have such a talented Board and they're such great thought partners.
I'm not interested in getting to my answer. I'm interested in getting to the right answer. And to help us with that on several of these larger programs, When we went to the Board and our M and A Committee, we actually set up a bull case and a bear case. And we had the prosecution and the defense on why we should do the case and what could go wrong. And we invited the Board into a very transparent discussion around these cases.
And I think that's something we plan to continue to make sure that we've got a lot of rigor. Again, Jawad mentioned the University of Chicago approach that markets are efficient, assets are fairly valued, and we have to really be confident that something is going to be more valuable because we're partnering with them and it's a good place to put our money that our investors couldn't do on their own or if we're going to buy something even a higher level, it has to be undeniably more valuable as part of us. And we've got to be willing to take the pain, the cultural integration, all those other things that distract us from the great things we're doing. So it's a we're keeping a pretty high bar, a very high bar. And with that, I'm not seeing any other additional questions.
Andrea, anything you wanna, take this through before we we wrap?
That was the program we prepared for everyone. Thanks, guys.
Alright. So with that, stay tuned. There's lots of great stuff, coming from Axon. The international markets are continuing to heat up. Fleet three, we're about to launch the best hardware in the in car video industry to go with our industry leading software.
There's lots of great stuff in the pipeline, new partnerships, whether it's with Skydio and DJI and PhotoKind and drones or the things we've announced more recently. Thanks for being a thanks for being a shareholder and coming along for the ride. And hopefully, you're as proud as we are that we get the privilege of waking up every morning and working on really important problems that the world cares about and supporting the men and women of public safety who have had a pretty rough year, they just need better tools. And we're gonna keep giving them to them. So with that, thanks for your support, and we'll see you at our next quarterly conference call.
And, at our next shareholder meeting next year, let's do it in person.