Axon Enterprise Q4 2023 Earnings Review
$AXON Q4'23 Results:
Financial Results:
⬆️$432M rev (+28.6% YoY, +32.7% LQ) beat est by 2.7%
↘️GM* (61.1%, -0.1%pp YoY)
⬆️Adj EBITDA Margin (21.1%, +1.5%pp YoY)
↘️FCF Margin 26.8%, -8.7%pp YoY)
⬆️Net Income Margin* 19.8%, +4.6%pp YoY)
⬆️EPS* $1.12 beat est by 31.8%
*non-GAAP
Revenue By Segments
➡️$161.3M TASER rev (18.0% YoY)
⬆️ $107.2M Sensors and other rev (+24.8% YoY)
⬆️ $163.6M Axon Cloud rev (+44.1% YoY)
Key Metrics
➡️NRR 122% (122% LQ)
⬆️Total company future contracted revenue $7.14B (+54.0% YoY)
⬆️ARR $697M (+47.0% YoY)🟢
Operating expenses
⬆️S&M*/Revenue 28.2% (26.7% LQ)
⬆️R&D*/Revenue 15.3% (14.9% LQ)
⬆️G&A*/Revenue 15.6% (14.3% LQ)
⬆️Net New ARR $78M ($60 LQ, +11% YoY)
Dilution
⬆️SBC/rev 8%, +1.0%pp QoQ
↘️Dilution at 4.4% YoY, -0.3%pp QoQ🟡
Guidance
➡️$1,940M FY guide (+24.1% YoY)
Key points from Axon Enterprise Fourth Quarter 2023 Earnings Call:
Earnings Highlights:
Axon reported its fifth consecutive year of over 25% revenue growth, with a 31% increase year-over-year, and a strong Q4 revenue growth of 29%. Adjusted EBITDA margin expanded by 160 basis points versus 2022, demonstrating both top-line growth and profitability improvements.
TASER
Innovations and Enhancements:
TASER 10 has been introduced with features like a warning sound to deter potential threats and individually targeted probes for more effective range and accuracy.
Customer Feedback and Adoption:
TASER 10 is seeing strong adoption, with order rates significantly higher than TASER 7, indicating positive customer reception and demand.
Manufacturing and Margins: There's an emphasis on improving TASER 10 margins through automation and cost initiatives, aiming for stable gross margins over time.
Sensors
Integration and Expansion:
The acquisition of Fusus is highlighted as a strategic move to integrate and expand sensor capabilities, particularly for real-time operations, enhancing situational awareness with a broad compatibility with various sensors and cameras.
Indoor and Outdoor Drone Usage:
Axon is investing in drone technologies (including the acquisition of Sky-Hero) for tactical and first responder applications, both indoor and outdoor, with a focus on safety and efficiency in dangerous situations.
Axon Cloud
Productivity Software Focus:
A significant growth opportunity is identified in productivity software within the Axon Cloud ecosystem, aimed at improving efficiency and reducing paperwork for law enforcement agencies.
Digital Evidence Management (DEMS):
Stable growth and adoption, with future innovations leveraging AI for enhanced functionality.
Strategic Acquisitions:
Axon announced the acquisitions of Fusus and Sky-Hero, aiming to enhance its product ecosystem and address a broader market. Fusus is praised for its real-time operations capabilities and integration with various sensors and cameras, while Sky-Hero brings expertise in tactical drone technology.
Market Expansion and Guidance:
Expansion into New Markets: Axon is targeting new customer verticals (e.g., federal, international, corrections, and enterprise) with its suite of products, including body cameras, TASERs, and cloud-based solutions. Axon provided a revenue growth guidance of 20% to 24% for 2024, targeting $1.88 billion to $1.94 billion in total revenue.
Management comments on the earnings call.
TASER and Product Innovations:
"First, with seemingly small things like adding a warning sound to TASER 10 to help communicate to someone on the other end that something unpleasant is impending... And adding a watch me button to our body camera so that an officer can proactively request a second set of eyes for them during their most high-risk situations." - Rick Smith
"Next, we thought a bit more outside the box, introducing individually targeted probes, enabling far more effective range on TASER 10 and making our innovative TASER technology more effective in more situations." - Rick Smith
Sensors and Axon Cloud:
"We're innovating in diverse areas from robotic security to Generative AI to virtual reality. And there's really so much more that's still left for us to do." - Rick Smit
Drone, Fusus, and Sky-Hero:
"Our partnership with Fusus began a few years ago and we've really been impressed with their people and the product they've built." - Rick Smit
"Together, we're taking our real-time operations to the next level and opening our ecosystem to an even larger network of sensors and devices which will unlock entirely new solutions for our customers over time." - Rick Smit
"On the Sky-Hero side, long-term, this is probably not going to be big revenue in the short-term, but they are one of the, if not the leading tactical drone maker in the world used by special forces, by SWAT teams." - Rick Smit
Market Expansion:
"Looking ahead to 2024 and beyond, the opportunity is right there in front of us. We're steeply ramping TASER 10 and Axon Body 4, we are building transformative new products and we've added Fusus and Sky-Hero, which together grow our estimated TAM by over $13 billion to a total of $63 billion." - Josh Isner
Guidance:
"As we look to 2025 and beyond, we expect to continue targeting a 20% annual revenue CAGR and a 25% adjusted EBITDA margin." - Brittany Bagley
Thoughts on Axon Enterprise ER $AXON:
🟢 Pros:
+ FY 2024 guidance is +24.1% better than the guidance for last year (2023) at +20.2%.
+ Axon Cloud revenue increased by +44% YoY.
+ Dollar-Based Net Retention (DBNR) is 122%, an improvement of +1 percentage point YoY.
+ Annual Recurring Revenue (ARR) and Total company future contracted revenue are growing faster than revenue.
+ Recorded a record number of net new ARR.
+ The company is increasing margins and profitability.
+ Beat Q3 revenue guidance by 2.7%.
🟡 Neutral:
+- Revenue rose by +28.6% YoY, indicating revenue growth is slowing down from +32.7% in the previous quarter.