Conference calls with investors can be one of the best ways to learn about how management is thinking about a company long term. In the case of Axon Enterprise (NASDAQ: AAXN), the first-quarter 2019 call laid out exactly what the company is doing, why it's doing it, and where it's going to go in the future.
Below are four quotes I think investors can learn a lot from when looking at Axon Enterprise. They don't talk about the company's numbers but rather about the motivation and strategy behind what the company does every day.
The problem Axon is trying to solve
One thing investors need to understand about a company is its motivation. A core driving force can lead to some of the most impactful businesses on the market, and CEO Rick Smith laid out why Tasers are the core of what Axon does, saying:
Killing is a technology problem. We're making a dent in it, and Axon is well positioned ultimately to help solve it. We're getting a lot closer to competing with the handgun with Taser 7 and I think we'll get even closer with Taser 8. I've challenged our internal team to develop the Taser weapon that outperforms the handgun as measured by time to incapacitation of a threat within the next decade, and I believe less lethal energy weapons will surpass the performance of kinetic projectiles within the same timeframe.
Axon is trying to make the world safer for law enforcement and citizens, and its product performance is key to making that possible. Imagine a Taser that's more effective than a gun for law enforcement. That could change interactions with law enforcement around the world.
Records are a key to helping law enforcement
If Axon can help law enforcement reduce gun shootings, the next step would be making it easier to record what happened during an incident or investigation. That's where Axon Records, an upcoming product from Axon, will play a big role, identifying pertinent video from body cameras, recording witness statements, and compiling information into reports. Axon has invested in artificial intelligence solutions to help improve that process. Smith said:
[I]f you think about autonomous driving we're calling this autonomous report writing and actually it's not as difficult a problem as autonomous driving is but it will evolve in several stages. So we're sort of stage zero to one right now, which is all about getting all the basic data structure right so that we can begin to optimize some of the AI data extraction using our smart sensors when those go live this summer as well. So launch of Axon Body 3 and Records really complement each other in that Axon Body 3 is essentially optimized to begin moving into this AI driven future.
If Axon can reduce injury with Tasers and improve the accuracy of reporting with Axon body cameras and Axon Records, it'll be an incredibly impactful company.
Building a brand with law enforcement
Creating a great product is important, but without a demand pull from law enforcement agencies, there won't be a great business behind it. Axon has done an incredible job building a "cool" brand that law enforcement can get behind. Axon President Luke Larson highlighted this when discussing swag sales at a recent conference:
One of our key goals for the year is to create a rabid fan base and I'm here to tell you at the event we sold out our swag. T-shirts, hats, stuffed animals of canines. We sold over $30,000 worth of T-shirts and Axon branded swag.
Swag may not be a great metric to follow long term, but the fact that people want to wear Axon T-shirts shows that it's building a brand people can get behind. And being "cool" in law enforcement is easier said than done.
Becoming more than a law enforcement company
One thing Axon's management hasn't talked about much in the past is product extensions beyond law enforcement. But CFO Jawad Ahsan said the company sees a lot of services that can be ported over to enterprise users:
Our successful transition to both a technology products and SaaS business leaves us incredibly well positioned to develop new revenue streams. We have a unique opportunity to take the same products and features that we've developed for law enforcement and find applications for enterprise users who want similar capabilities.
Security applications are a natural extension for cameras and even Tasers, but I think the AI being used in Axon Records could have applications inside enterprises that need to filter video effectively. This could rapidly increase Axon's total addressable market beyond the $8.4 billion that management sees as its opportunity today.
Axon's business can be boiled down to a mission to replace the bullet, reduce social conflict, and improve fairness in the justice system. All of its products can be viewed through a lens of reaching that goal, and when you see that, it's easy to see how new products like Taser 8, Axon Body 3, and Axon Records will achieve those goals. As the strategy plays out, there should be strong financial growth for investors who are along for the ride.
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