Good day, ladies and gentlemen, and welcome to the Axon Enterprise conference call. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require operator assistance during the conference, please press star then zero on your touch-tone telephone. I would now like to introduce your host for today's conference, Mr. Rick Smith, CEO. You may begin.
Thank you, and good evening to everyone. Welcome to our first call as Axon Enterprise, following our rebranding announcement earlier today. Joining me from the Axon team are Luke Larson, President, and Jawad Ahsan, our new CFO. Before we get started, I'd like to ask Arvind Bobra, our Director of Finance, to read the Safe Harbor Statement.
This call is being broadcast on the Internet and is available on the Investor Relations section of the Axon website. Statements made on today's call will include forward-looking statements, including statements regarding our expectations, beliefs, intentions, or strategies regarding the future, including statements around projected spending. We intend that such forward-looking statements be subject to the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995. The forward-looking information is based on current information and expectations regarding Axon Enterprise, Incorporated. These estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties, and assumptions that are difficult to predict. All forward-looking statements that are made on today's call are subject to the risks and uncertainties that could cause our actual results to differ materially.
These risks are discussed in greater detail in our annual report on Form 10-K and quarterly reports on Form 10-Q under the captioned Risk Factors . You may find these filings, as well as other SEC filings, on our website, www.axon.com. Rick?
All right, thank you, Arvind. Today is a historic day for our company, and I'm really excited and energized. While it's atypical for us to hold an intra-quarter call, we did want to provide our analysts and investors a forum in which to better understand both announcements and for us to understand and answer any questions from you. With that in mind, we'll keep our comments to the point, and then we'll open it up to Q&A. So, after 23 years operating as TASER International, we announced that we've changed the name of our company to Axon Enterprise. Our stock will begin trading tomorrow on the NASDAQ under a new ticker symbol, AAXN. The Axon name better captures who we are today and the tremendous market opportunity before us.
It's a natural step in the expansion of our offerings from electrical weapons into a full network of connected devices and apps that protect life. When we founded the company in 1993, we focused exclusively on electrical weapons. Today, we still dominate the weapons category, but we have also developed multiple growth drivers under the Axon brand. Moving forward, Axon will serve as the torchbearer for all of our connected technologies, to include our TASER weapons, and it will set a path that will revolutionize public safety. Turning to the other news of the day, at noon today in Washington, D.C., we announced a program to equip every police officer in America with a body camera and software free for one year. The rationale behind offering a free body camera trial to every patrol officer in the country is very straightforward.
We believe this has the potential to dramatically accelerate the adoption of our full body camera solution. Uptake of our body camera program is often slowed down by a lengthy and bureaucratic sales cycle. Customers will be able to make a purchasing decision based on the outcome of the trial. In fact, I've already had a few calls today from large agencies who've informed me this is a game-changer and will help them to move forward more quickly. We have consistently messaged that an informed customer is our best asset. This rather bold offer backs this message and removes any perceived hurdles for head-to-head comparisons with our competitors. A very important benefit of accelerating adoption of cameras and our integrated cloud-based workflow solution is the availability of information to train and run our artificial intelligence learning algorithms. The more information available, the smarter our systems become.
These machine learning algorithms are an important part of automating all these very manual reporting processes in our customer base. This is all part of our goal to eliminate police paperwork, enabling officers to triple the amount of time they spend in their communities and to protect life in new ways. Axon really is the name for the entire ecosystem, the platform of devices, apps, and people. We believe the real value is when you can connect those three elements together in a way that, frankly, at this point, only we have. This is an opportunity for us to extend our advantage. We expect to report Q1 2017 earnings the second week of May. Please note, we're not going to be commenting today on our Q1 financial performance or the outlook on today's call. Obviously, we're still in the audit process.
We want to focus today on limiting the Q&A to today's announcements. Now, I'd like to introduce Jawad Ahsan, our new CFO. He started on Monday, and we're really excited, and I'm personally really enthusiastic to have Jawad on board. He joins us after serving as CFO of Market Track, a very successful SaaS company for 3 years and 13 years in various roles at General Electric. He brings an incredible breadth and depth of both experience and strategic insight, and we're very confident he will help us to grow our growth trajectory and drive long-term profitability. And with that, I'd like to hand over the call to Jawad to further discuss the financial aspects of the trial.
Thanks, Rick. I'm really excited to be here and join Axon in such an important week for the company. I'm also looking forward to building relationships with our analysts and investors.
I'd like to discuss the high-level financial impact of the trial. The trial offer is on our Unlimited license tier and includes an Axon Body camera, 1 dock for every 6 officers, storage, and training. Depending on the length of the trial and speed of uptake, we may be able to use cameras and docks for more than one trial. Offering agencies a free trial is not new. We've always offered agencies a free trial before purchase. This is just a bigger scale version of an existing promotion with the intent to remove any perceived barriers to adoption. There are a maximum of 500,000 patrol officers in the United States who are not already on a body camera program with either us or a competitor.
It's too early to know the uptake of the offer, but our estimate is that this will result in up to an incremental $5 million of expense in the back half of the year. The approximate break-even point of the trial is a 10% conversion rate from trial to our average five-year contract. Said another way, if we have a 50% conversion rate, the break-even will be one year or less. Further, based on our current trial-to-purchase conversion rate of nearly 100% with large agencies, as well as the general acceptance of body cameras across the country, we expect that a very large percentage of trials will lead to long-term purchases. Looking at the trial from an LTV-to-CAC ratio perspective, for each customer converted, the lifetime value of the customer is approximately 15x the cost of the trial.
We believe this calculation to be conservative as it assumes no increase in the revenue per user. The trial hardware expense will be an SG&A expense and will be amortized over the useful life of the device. Training and support will also be part of SG&A expenses. The magnitude of expense will be directly correlated to the number of trials. Overall, we're confident that this offer comes at the right time due to both the need and demand for body cameras. While the success of the offer is based on the acceptance and conversion of users, we believe this will lead to a very high return for law enforcement, our customers, and our shareholders. We're now going to move into the question-and-answer portion of the call.
Ladies and gentlemen, if you have a question or comment at this time, please press the star then the number 1 key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from the line of Jeremy Hamblin with Dougherty & Company. Your line is now open.
Good evening. Thanks for taking the question. I think the first question is, in terms of thinking about the expense, it sounds like you're planning or anticipating using the cameras for multiple officers, multiple forces over time. Is there an end date to this offer, or is it we can use it over the next year, and then if an agency comes to us, let's say next March, that they still have a year to trial it? Can you add some detail around that?
Yeah. Great question. We are giving agencies a year to be able to start the trial. So they have until a year from today to be able to sign up and start the trial, and then they would have a year from when we get them started. Just knowing our customer base, and especially the larger customers, the large, frankly, they need a little time to get the logistics in place to do this.
Okay. Then a second question is, for the existing users, is there any concern that they're going to be frustrated, let's say if they just signed up a contract in a place like Seattle or something, are they going to be looking to get their camera free and that first year free? Is there any contingency plan in here for potentially offsetting those costs that maybe some customers come back to you looking to kind of benefit from this program that's new?
A great question. We've looked at all of our large contracts and ensured that if you actually look at the discounts that these agencies have gotten during the negotiation process, they all add up to a greater net discount than the value of one free year on their contract. So we don't anticipate we do expect there'll be a lot of conversations with customers about this. That's something we're fully prepared for. We think we're fully in compliance with all of the most favored nation sort of clauses that we have in some of our contracts. And ultimately, this will drive great discussions about some of the future things that we're working on as well.
There may be some cases where when we run the numbers, particularly with some of the smaller medium agencies, where it may make sense for us to give some additional accommodation, perhaps in some additional premium features or things. But we've run the numbers certainly across the large agencies that make up the bulk of our customers, and we think we're in pretty good shape.
Okay. And one follow-up. You noted on the presentation today that the Pew study, which clearly seems to indicate a reduction in use of force incidents, increase in guilty pleas, et cetera. In terms of the personal liability insurance that a lot of these agencies have, are they starting to see some benefits for those that have been on your program? Is that one of the selling points at this point of having a body camera program?
We certainly saw that with TASERs in the early days where it took a few years for that to really develop to where the insurance agencies started underwriting the cost of the TASER weapons. I believe we do have at least one insurance pool that is incentivizing agencies to deploy cameras for exactly that reason. But that's a really great question. Maybe let me do a little research offline so I can get you a more specific answer. I think we're probably getting to the point now where there's enough data to start supporting that.
Great. Thanks, guys. Good luck.
Thank you.
Our next question comes from the line of Mark Strouse with J.P. Morgan. Your line is now open.
Yeah. Thank you very much. Thanks for taking our questions, Jawad. Welcome to the fray and an exciting week. So just want to confirm the $5 million increase, well, I guess the $5 million in expenses during the back half of the year, that's only in OPEX. How should we think about gross margin in the back half of the year, or I guess even longer during this trial period?
No change to gross margin.
Okay. Simple enough. And then I think on the last conference call, you had mentioned that the bookings during the year for Evidence.com would be similar to the 4Q levels. Now, obviously, you're going to have some of those come in that will become paying customers during the year, but how should we think about that metric throughout 2017? Obviously, we'll have some or a lot that won't be paying customers. So anything you can share there as far as new bookings this year?
Yeah. So this is Rick. Let me take that. We actually had begun offering this to some of our larger customers a few months ago in anticipation as we move forward on a larger scale. And one interesting dynamic we've seen is that as long as agencies feel they need to know they're getting a good deal and that they're getting a discount on their program that at least accounts for this so that they would not be worse off if they took this. But we've recently signed some pretty large contracts with agencies that were aware that we were working on this program and had already made the offers to them. So I think one of the interesting working on this program and had already made the offers to them.
I think one thing that we've seen is once an agency is at a certain point in their procurement process, it's actually counterproductive for them to stop and start over. So as long as they're feeling assured that the program they're getting is a good one and that they're getting something at least as good as they would get if they participate in the free trial, they'll continue to move through procurement. So there might be some cases where some bookings might slip out that we otherwise would have closed into bookings, but we think that those will ultimately be significantly offset by the number of new people we get into the funnel. And I mentioned before, we've already been talking with a few large agencies today. We announced on CNBC, you'll see here shortly, that Mecklenburg County became the first county to sign up to do this program.
But there's also 2 other aspects I think you might find interesting. 1 of them is we debated long and hard, like, do we limit this at 100 cameras or 200 cameras? And as we went through and we modeled this, what we realized is by offering it free for every officer in an agency, it creates a really powerful incentive for that. The agency's going to want to get the maximum benefit out of this. And so there's a real incentive to say, "Look, let's not just take this free year for 10 of our officers. Let's do it for everybody." And we think that can really help accelerate the market forward. We have lots of agencies who historically would say, "We're going to roll this out over 5 years, right?
We'll do 500 cameras this year and so forth, and next year for the next five years." By creating this incentive for them to move more quickly, we think we have the potential to really accelerate forward revenues beyond what they would have been without this. Then the other aspect of this is from a competitive standpoint. We've had some pretty significant discussions with agencies that have already purchased competing systems, and this gives them the ability to trial us in a way where, "Hey, TASERs offer this to everybody." It sort of takes the risk off the table for them to go ahead and take a look at this. We think we'll win back a good number of the agencies that may have gone with a different solution out of the gate.
Okay. Thank you very much. Good luck.
Thanks.
Our next question comes from the line of Steve Dyer with Craig-Hallum. Your line is now open.
Thanks. Good afternoon, and I'd like to welcome Jawad.
Thank you.
So just to be clear on the P&L impact, is it really the only, am I hearing this correctly, that the only P&L impact this year is basically going to be $5 million of OPEX? There's no additional cost of goods sold. You don't have to expense the trials or anything like that?
We're going to expense the trial through SG&A, and that estimate, we looked at what we think the projected uptake is going to be. Based on that basically being expensed over the remaining useful life of our body camera too, we're going to expect to see some expense in this year and then some trailing into 2018. The expense in 2017, we expect to be about $5 million. Again, that's going to be all SG&A.
Okay. So I saw one article today that quoted you, Rick, as saying this could cost anywhere from $5 million-$100 million. Now, that was an article in the press. So I'm just curious, A, is that accurate? And B, the initial sort of $5 million this year would seem to be on the very low end of that.
Yeah. So obviously, the media likes to focus in on some of the more spectacular bounds, and that would be sort of at the upper bound of if 500,000 officers—if every officer in America took us up on this—it could be at the upper end of that range. I think sort of the good news here is that'd be a fantastic problem to have in that the cost of this program scales 100% correlated with the number of people entering our sales pipeline. And the more cameras they put on the street, the deeper we feel that we're integrated into the business process at the agency. So if an agency deploys a few thousand cameras, we think this is hard to unring that bell. You don't take them off the officers once they're out in the street.
We think there's a very high probability that the more officers using it, the faster we get to a full deployment where every camera has a seat on our platform.
Got it. Okay. And then you raised OPEX guidance quite a bit on the most recent conference call, and I'm assuming you guys kind of knew this was going to be potentially in the works at that point in time. Does the OPEX guidance you gave on the last call sort of take into consideration this $5 million, or will this be incremental?
I think certainly some of the expenses around operating this program were built in. I mean, that's, for example, why inventory was climbing at the end of the year. We were building inventory and the people and support infrastructure to be able to support this. Now, certainly in terms of a lot of this is just going to depend on the uptake rate. It'll scale ratably with the uptake rate. But certainly, we've been planning this for a while, and you've seen some of those expenses, particularly the support infrastructure and inventory, already come in.
Okay. Great. One more, and then I will hop back in the queue. So if after a year an agency decides to go ahead and continue and keep it, would you expect a lower level of discounting going forward, just given that this is sort of the de facto trial and discount, or do you still expect some flexibility around that price going forward?
Yeah. No, great question. Our expectation is there is going to be a lower level of discounting, that this is in effect a discount akin to what we do today on existing trial programs.
All right. Great. I'll hop back in the queue. Thanks, guys.
Our next question comes from the line of George Godfrey with C.L. King. Your line is now open.
Thank you. I had the phone on mute. Thank you for taking my questions. Just two questions. Rick, you said 500,000 officers would go to the higher end of that expense ratio, $100 million. So if I go to the $5 million, you're thinking the uptake is somewhere around $25,000 in the second half of this year?
It's in that ballpark. A lot of this also depends on how fast the uptake happens, what quarter it comes in, et cetera. But you're in the ballpark there. We don't want to get too far ahead of ourselves, naming, because it's going to be very difficult to predict what the uptake on this is going to be, but you're certainly within shooting distance.
Understood. And then second question. I imagine part of this is to have a fertile ground for the Records Management System, which is a great new product that's on the come. Have you had any customers trialing that product, or are you still in the lab design at this phase for RMS?
So RMS, we're still in the design phase. We will showcase the prototypes of RMS in June. I would say, as I think we talked about earlier, it's really not going to be a revenue product, at least until next year. But this is one of those cases where if you could have talked to some of the customers in the room when we showed them that demonstration video, I sat across the table within the last few weeks from one of the chiefs of one of the five largest agencies in the U.S. And when we showed him our vision for how cameras and AI and RMS all fit together with the cameras recording, the AI technologies helping to organize that information so it's searchable and creating a multimedia RMS, his reaction is he said, "If the table wasn't between us, I'd kiss you." And I said, "Okay.
That's kind of awkward to hear from a grown man in a police uniform." But we're really getting positive feedback. So we announced the RMS early, number one, for our customers because we think it helps sell them on why they don't want to just go out to bid and buy the cheapest camera they can find, that they really need to think about this as a fundamental change to the way information is gathered and processed in law enforcement. And that's working. I think agencies are seeing that vision. So it actually helps us differentiate our cameras even today. And it's getting customers into our pipeline for RMS because those are very long sales cycles to replace a core system in an agency. And frankly, we're getting agencies that are now starting to sign up as development partners, which is something we generally won't be publicly commenting on.
But strategically, the idea of having agencies as development partners is you're building advocacy within those agencies. People there are feeling ownership of it and is guiding our product development by tightly integrating customer feedback through the whole development process.
Got it. And then I'm sorry, just one last follow-up. You mentioned that you think the value of a conversion could be 15 times the cost of what it took for that person to trial it. If I think about the lifetime value of a police officer, the career of 20 years, and under the current product offering, the TASER weapon, the Unlimited service, $100 a month, and then discount some value of that, is that kind of the way you're thinking about what the lifetime value to a TASER for a police officer is over the life of their career?
So the ROI we quoted, the 15x, is on the body camera only, and that doesn't include any of the additional revenue uptake we'd see from any upsell. Yeah. And when we say body camera only, we're talking about the body camera supporting software, like the current body camera management software. But there's a lot of upside potential with AI, RMS, the fleet in-car video system, and any of the other adjacencies that we can sell from a unique position once we're their body camera vendor.
Understood. Thank you for taking my questions.
Our next question comes from the line of Allen Klee with Sidoti. Your line is now open.
Yes. Hi. Just first question. I'm a little confused on saying that there's no gross margin impact because if you would have had bookings and you would have been selling cameras, you would have gotten revenue for that during 2017. So those revenues are going to go away, but we'll still have the cost of goods sold. So wouldn't gross margins go down, or am I missing something?
Well, because we're looking at this as a trial and we're accounting for it as our existing trials, the expense will be amortized through SG&A and won't have any impact on gross margins. And we're really looking at it as if it were a regular body camera sale where there'd be a discount involved versus this is effectively moving the discount upfront in the first year of the five-year period. Yeah. And I would add, I think from your perspective, what you're saying is if sales delay, then we would certainly see a delay in revenue for that sale and also the delay in COGS for that sale. So the percentage of margin should still end up about the same. Our general feeling, though, is we don't think this is going to end up pushing out revenue substantially.
Again, there may be a few cases where it does, but there may also be a lot of cases where once we're in talks, there's a certain momentum for agencies if they're moving it through the process to drive it to completion. So again, we'll have to see. There's a little bit of uncertainty there as to the net impact that it will have. But we think it's going to bring more customers into the funnel by a significant margin than those that might delay.
Okay. Could you give me an example or just kind of frame how I think about maybe the average revenue per user this represents and the potential number of users?
At this point, I would say we probably don't want to get out. I mean, there's up to 500,000 users we could bring on this platform. And ultimately, we're giving them access to the Unlimited license because we want them to taste and feel the full power of the full program with the idea that most of them are going to want to use the advanced features we've got. So we're certainly hopeful that we'll see them booking closer to the $80 a month range than down at the basic level when they get to the end of the trial.
Okay. And finally, do you think that this puts any pressure just on longer-term pricing competitively or when you go back to the customers a year from now or to other customers that this can have an impact?
I think the exact opposite is the case. Where we see pricing pressure is on the front end of a contract where, and in particular, if agencies don't do field trials. If an agency just goes and does a standard bureaucratic purchasing process, "Hey, let's form a committee, get some proposals, and score them, and add up the price, and see what we get," that's where we're at greatest risk because it's really hard. All of our competitors are watching us pretty closely because we're winning the vast majority of deals. So if you watched everybody's PowerPoints, they look a lot like ours. And copying our PowerPoints is pretty easy. Building everything from the cameras, the docs, the firmware, the mobile software, the backend infrastructure, we've got a pretty large software development team doing this stuff. And as soon as it hits the field, that's where we just pull away.
The pricing sensitivity drops dramatically once agencies get an idea of the real difference between the systems. And once they're on it and they're using it a lot, we think that pricing sensitivity is going to be, frankly, far less than it would be if we did not do this.
Okay. Thank you.
Our next question comes from the line of Glenn Mattson with Ladenburg Thalmann. Your line is now open.
Hi. Thanks for taking the question. Maybe we've hit on this a few years back, but it's been a while now. What level of investment is required by the agency when they bring Axon on board, or is it kind of plug and play, or is there significant investment there from the municipality?
So it's pretty darn plug and play. All they really need is high-speed internet access. Now, some agencies, especially the larger ones, will look at this, and they may, in some cases, say, "Look, we need to hire more people to be able to process this information or people to do redactions." So that's one of the reasons we acquired the Misfit team to help with the machine vision around redaction, where we're automating more and more of those processes. So I think there's still an argument that some of the large agencies would say, "Well, we're still going to need to make some internal investments to support this," but they're pretty minimal. And what we would point out back to them is if you look at the Rialto case study, even including the cost of the cameras, they were saving $7 for every $1 they spent.
So the savings, we think, across office or overtime going to court, complaints, internal affairs, litigation costs, complaint resolution costs. This thing should be a huge positive ROI from day one, even if the agency does feel that they need to invest in some more personnel to support the program as they go live.
Okay. Thanks. So I guess I'm wondering if it's reasonably plug and play, then I wonder why you think you're going to still get you're not going to have to offer discounts in a year's time when the companies, when the agencies come back to sign up for a longer-term deal because they're still going to have to go back to their city councils and compare the pricing that they're going to pay versus what the pricing you've offered to other agencies. And they're going to say, "Look, the free year was your plan, and now we have to sign a deal that complies with industry standards or whatever." And being that it's something that could be replaced or ripped out without too much sunk cost by the agency, I'm just wondering about pricing on the back end of this.
So those are certainly discussions that we're having as we go into these that we're making an investment on the front end. Ultimately, we expect to be treated fairly when it comes time to considering the full cost of the system down the road. I would say just logistically, when we say it's easy to plug in and get started, very true. The agencies, if they do unplug, we can give them all their data back, no problem, in industry-standard format. But if you actually think about the logistics effort that it will take for an agency, it is not insubstantial.
Once all their officers are trained and using the equipment, it's been issued, they all have their user logins, they may have if you have 1,000 officers, by the end of a year, you might have, oh, millions of videos, all of which are in various states of processing through the evidence management process being shared over at the DA or internally, etc. So what you're now talking about, the cost to switch that out involves retraining every officer and then downloading all of that data back out of the system while tracking the chain of custody of all those files and things. I think operationally, agencies are going to see a tremendous value to all the workflow we provide. And ripping that out and replicating it, there's no other system that's got anywhere near the comprehensive backend workflow process that we've got.
That's the whole idea is we want to demonstrate that to our customers so that when they look at making the final purchasing decision, the cost of not having our capabilities will be significantly above the cost that they might save by going to the low-cost bidder on just cameras.
Okay. That's helpful. Thanks. Good luck with the promotion.
Thank you.
We do have a follow-up question from Jeremy Hamblin with Dougherty & Company. Your line is now open.
Hey, guys. Thanks for taking a follow-up. Just one other thought in terms of looking at this opportunity and what it might do for you. On the customer acquisition cost side, my assumption is doing this actually is going to lower your CAC moving forward. And then kind of related to this, as you've progressed significantly through the large agencies throughout the country and probably there's less progress thus far in the third and fourth-tier cities, is doing this demo in some ways helping you to keep your sales costs lower in the future because you're able to trial it and you're not having to have kind of as much one-to-one sales contact down the road with some of the smaller-tier cities? So kind of two-part question there.
Yeah. I think ultimately, exactly. This should reduce all of the friction around the sale process. The other thing is, look, we've had just a lot of success in building out the network to where we're at. We've got over 80% of the major cities who have made a selection on our platform. A big part of this is how do we make sure that we risk mitigate, that we control risks around market fragmentation. We're well on our way to building a network that has the vast majority of law enforcement on that network processing what we believe is the most important information they'll have, which is all this multimedia, audio, video evidence.
If we can consolidate 80%-90% of the whole market, we think we have a highly defensible business where the network effect, we've made this free for prosecutors to use, and we've had the entire state of Delaware, the state prosecutor's office is now using Evidence.com. The more of those workflows that go into our network, the more valuable and defensible that network becomes. So this is a way for us. I view this as it does two things. First, on the strategic side, we think this increases the opportunity for us to continue to really win the lion's share of the market onto our platform and to accelerate it faster. So there's a lot of strategic benefits there.
But when we actually sat and ran the numbers, it's just a straight financial ROI on the investment of putting the cameras and the software in the hands of officers. Even regardless of the strategic benefits, it's a very high return on investment as purely just a straight financial analysis on accelerating these sales.
Okay. Great. Understood. Thanks a lot, guys. It sounds like a great plan. Good luck.
Thank you.
Our next follow-up comes from the line of Steve Dyer with Craig-Hallum. Your line is now open.
Thank you. Kind of a wordy question, so bear with me. But I'm looking at last year's video hardware revenue at about $25 million. And I'm trying to figure out what this promotion does for that number this year. I'm guessing you're still generating hardware revenue from any upgrades that may occur just as normal course of business. I'm guessing there's still revenue there from existing sort of rollouts that are in year two, three, four of rollout. And it sounds like these trials have kind of been more or less going on anyway. And so I'm trying to think what revenue this year from a revenue recognition perspective that apples to apples you would have gotten last year, but you don't get this year. Does that make sense?
Yeah. I think the question makes sense. I think in general, it really comes down to if agencies, I think you've got it. For agencies that are already on board, if they're on upgrades, this really shouldn't impact that at all. So that'll be new revenue because those start to really become a little more material this year as people that are coming up on their upgrades. The next question is, for new customers, do they just say, "Hey, I'm going to pause my purchase and just take the year free," or do I go ahead and move forward with the purchase and we negotiate a discount into that, which is not totally dissimilar to the discounts we've already been offering?
If the second case happens, and we think that's going to be the preponderance of cases, that things will still move forward, then we shouldn't see a substantial negative impact on hardware revenue.
Got it. That's helpful. And then last question for me. You guys have started to get traction both outside of the U.S. on the BWC side as well as in some sort of ancillary end markets outside of law enforcement. So things like jails, prisons, things like that. Any plans or thoughts as to extending this offer either internationally or to individuals outside of law enforcement?
Let me start on the individuals outside law enforcement. Probably not. That's not an area where we have sufficient data to know with high confidence that it's going to be a high ROI investment, and it would distract us from we believe priority number one is consolidate the law enforcement market and create a highly defensible, sticky business that is dominant in that market segment. So we don't want to do anything that distracts us from accomplishing that goal because we think that's what builds the moat that is a long-term, very profitable and defensible business. In the international markets, now that's something we'll look at more carefully on a case-by-case basis.
For example, if the Gendarmerie or the National Police of France came and said, "Hey, we want to do this with a lot of cameras," we would take a hard look at that because I think the same dynamics are at play. It really comes down to, are these agencies, if they're going to use the cameras substantially, then the chance of a renewal is very high. But at this point, we're really focused on the U.S. because we think the market has matured to the point where this offer can really move the needle. And we have the infrastructure. We have the people in place. We have the training materials. So we're ready to support it scaling here in the U.S. But we'll monitor this as well, and we'll see in the international markets. It certainly is a strategy that could make some sense in the future.
All right. Got it. Thanks for the time, guys.
Our next follow-up comes from the line of George Godfrey with C.L. King. Your line is now open.
Thank you. Just one quick follow-up. I'm doing this from memory. At the Investor Day last year, Rick, I think you targeted a 20% margin on the body camera business at 350,000 seats in the steady state on the weapons at 40% margin. Anything today change that thinking or make it more fluid, or is that still those all still good targets?
Well, Jawad's on day 3 of the job here. So we are one of our first priorities is to get Jawad comfortable with all the financial models in some depth and to come back to investors with a refresh. I would tell you my personal opinion is I think we can do better than 20% in that segment long-term. And the better we build this, the faster we get through this phase right now. When the market's forming, it's expensive to win deals. It's hard, and it's sometimes unpredictable, especially if agencies don't really test the things we've invested to build. So we think this gets us to that profitable state faster. And I would be pretty disappointed if we were only at 20% at scale, at maturity, if we successfully have built the moat we think we'll build here.
That sounds great. Thank you very much.
I'm showing no further questions at this time. I would now like to turn the call back over to CEO Rick Smith for closing remarks.
Great. Well, everybody, we appreciate you coming on board today to spend some time with us. Certainly, it's been an exciting day for us in terms of the name change. We've gotten how many original articles do we have at this point? We've got like 62 original articles on both the name change and the body camera offer. I think that's probably the highest in the company's history, certainly of any proactive event like this. We're getting a lot of interesting calls from customers. Ultimately, I think it's important you all understand this is very intentionally designed to help build a business that for you, our shareholders, will be very profitable.
And in case you guys didn't hear it on the call, when I said I'd be disappointed at 20%, Jawad was giving me a big smile and saying he agrees that for the investments we're making, it should be better than that level. Yeah. Absolutely. Look, I joined because I'm excited about the company that Axon will be, not the company that Taser was. And when you look at the transformative bets that we're making, you look at the platform that we're building, there's really a significant opportunity for long-term value creation. And I see it as one of my top priorities, if not my top priority, to make sure that we're not just creating that value, but capturing it. Great. All right, everybody. We'll talk to you in May when we report Q1 results.
Thanks for being a TASER shareholder, and thanks for everybody waking up tomorrow and being an Axon shareholder.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.