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    AXON
    Earnings call· Mar 2025(Q1 FY25)

    AXON ENTERPRISE Q1 FY25 earnings call AXON

    May 7, 2025 Source

    Executive summary

    Axon Q1 FY25 — Strong Bookings and Raised Full-Year Guidance

    Axon delivered a strong Q1 FY25, driven by robust bookings and continued adoption of its premium software plans and new hardware like TASER 10. The company raised its full-year revenue guidance, reflecting confidence in its pipeline and product diversification, despite anticipating a 50 basis point headwind to adjusted EBITDA margin from tariffs. Strategic investments in R&D and new product launches, including fixed ALPR solutions, are expected to drive future growth.

    Highlights

    5

    • Q1 revenue of $604 million increased 31% year-over-year, marking the 13th consecutive quarter over 25% growth.

    • Adjusted EBITDA margin reached 25.7%, coming in ahead of expectations.

    • Software and Services revenue grew 39% year-over-year to $263 million.

    • Annual Recurring Revenue (ARR) hit $1.1 billion, up 34% year-over-year, supported by a Net Retention Rate (NRR) of 123%.

    • Full-year 2025 revenue guidance was raised to $2.6 billion-$2.7 billion (27% growth at midpoint) from $2.55 billion-$2.65 billion (25% growth).

    Concerns

    2

    • Tariffs are expected to result in a net impact of approximately 50 basis points reduction to the full-year adjusted EBITDA margin guidance.

    • The U.S. Federal segment is experiencing uncertainty and a standstill in deal volume due to ongoing budget discussions in Congress.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year 2025 Revenue
    $2.6 billion to $2.7 billion
    high materiality
    High
    Full-year 2025 Adjusted EBITDA Margin
    approximately 25%
    high materiality
    High
    Full-year 2025 Adjusted EBITDA
    $650 million to $675 million
    high materiality
    High
    Annual Bookings Growth Rate
    in the range of what we saw last year
    medium materiality
    Medium
    Apollo Cartridge Scaled Automated Production
    about a year out
    medium materiality
    High
    Fixed ALPR Revenue Impact
    no major revenue impact this year
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Software and Services
    Driven by continued strength across digital evidence management and premium add-ons, each contributing about half of overall software growth.
    Digital evidence management: strong growthPremium add-ons: strong growth
    		$263 million39%——
    Connected Devices
    Driven by growth across TASER 10 devices and cartridges, AB4s (now included in personal sensors), and fleet, counter drone, and VR (now included in platform solutions).
    TASER 10 devices and cartridges: growthAB4s (personal sensors): growthFleet, counter drone and VR (platform solutions): growth
    		$341 million26%——

    Operational metrics

    12
    Adjusted Gross Margin
    63.6%up 40 basis points year-over-year
    Q1 FY25

    Largely based on mix shift to software.

    Adjusted Operating Expenses
    $236 millionup 3% sequentially and down 140 basis points year-over-year
    Q1 FY25

    Part of this leverage was driven by timing of hiring ramp, with investment expected to ramp through the year.

    Adjusted EBITDA Margin
    25.7%ahead of expectations
    Q1 FY25

    Came in ahead of expectations.

    Net Retention Rate
    123%remained at 123%
    Q1 FY25

    Supported annual recurring revenue growth.

    Domestic User Base on Basic Plans
    approximately 70%
    Q1 FY25

    Indicates significant opportunity for premium plan upgrades.

    TASER 10 Adoption Rate
    2xrate of adoption of TASER 7
    First 2 years

    Fastest new TASER adoption by a wide margin.

    Draft One Active Users
    nearly 30,000
    To date

    Fastest adopted software product, 2x any other product launched in 1 year.

    Tariff Impact on Adjusted EBITDA Margin
    approximately 50 basis points
    Full-year FY25

    Net impact after offsetting through other cost measures.

    Software Growth Contribution
    about half
    Q1 FY25

    Each contributed about half of overall software growth.

    International Bookings Growth
    strong start
    Q1 FY25

    Delivered record Q1 booking results.

    Corrections and Justice Growth
    triple-digit growth
    Q1 FY25

    Strong demand in emerging verticals.

    AI Era Plan Adoption Rate
    —
    Q1 FY25

    Draft One had a faster head start, but AI Era Plan conversations are increasing, with larger bookings expected in H2 FY25.

    Industry KPIs

    2
    MetricValueDetails
    Total company backlog$9.9 billionUSD
    Unit deliveries by program2xrate

    Orderbook & backlog

    1
    Future Contracted Bookings$9.9 billionQ1 FY25

    Used as a basis for raising full-year guidance.

    Product announcements

    4
    ProductTypeDetails
    Draft Oneupdate
    Axon Assistantupdate
    Axon Vehicle Intelligence (Light Posts & Outpost)launch
    Apollo Cartridgeroadmap

    Deals & partnerships

    5
    RingIntegration to help public safety and the community work together

    Building a critical bridge while protecting privacy and choice.

    CitizenIntegration to help public safety and the community work together

    Building a critical bridge while protecting privacy and choice.

    AurorPartnership to address retail crime

    Addresses organized retail crime, which is often linked to violent crimes.

    SkydioPartnership for DFR (drone as first responder) solutions

    Scaling manufacturing of docks for DFR, particularly for flights below 200 feet.

    UbicquiaPartnership for fixed ALPR installations via streetlights

    Provides preset access to streetlights for easy installation of fixed ALPR equipment, bypassing permitting issues.

    Capital programs

    1
    New Headquarters Projectunderway
    Start: nearly 5 years ago

    Benefit: lay the foundation for decades of future growth

    Recently cleared a hurdle with Arizona Senate Bill 1543 signed by the governor. Still a few other hurdles to clear.

    Risks & headwinds

    3
    Tariff impact on supply chainFull-year FY25

    approximately 50 basis points reduction to full-year adjusted EBITDA margin guidance

    Mitigation: Offset through other cost measures; proactive supply chain diversification; no immediate price increases planned.

    Uncertainty in federal agency budgets and reconciliationUntil new budget is passed

    deal volume at a standstill

    Mitigation: Focus on converting existing large deals in the federal pipeline; minimal impact on overall bookings.

    Regulatory/Ethical Concerns with AI/ALPR technologiesOngoing

    some jurisdictions will be slower to adopt

    Mitigation: Leading with productivity enhancements; emphasizing ethical framework and responsible design; offering a broad product suite for choice.

    What to watch in Q2 FY25

    5

    Draft One and AI Era Plan Bookings Conversion

    H2 FY25
    Currentnearly 30,000 active users for Draft One; AI Era Plan conversations increasing
    Targetmuch bigger way of bookings in the back half of this year

    Why it matters

    Indicates the success of Axon's new AI-powered software products and their contribution to future contracted bookings.

    I think the first half of this year is still about making sure that we have identified all the key opportunities in Draft One in the AI Era Plan. And we think in the back half of the year, we'll start to see a lot more of those convert.

    Q&A highlights

    6

    What drove the strong Q1 bookings and ARR, and what's the outlook for Draft One conversion in guidance?

    Q1 bookings strength resulted from proactive work in the previous year, leading to a more predictable Q1 and strong pipeline for Q2 and beyond. Draft One and AI Era Plan conversions are expected to ramp significantly in H2 FY25, showing up in future contracted bookings. ARR growth was driven by strong Q4 bookings and a 50/50 split between new users and premium add-ons.

    “I think the first half of this year is still about making sure that we have identified all the key opportunities in Draft One in the AI Era Plan. And we think in the back half of the year, we'll start to see a lot more of those convert.”

    asked by Andrew Sherman · answered by Joshua Isner, Brittany Bagley

    2 min read6 chapters

    Detailed Narrative

    01

    New Headquarters Project Progress

    Axon is advancing its new headquarters project in Arizona, with Senate Bill 1543 recently signed by the governor. This legislation is a significant step towards laying the foundation for decades of future growth in Arizona, overcoming nearly five years of political opposition. The company expects to provide more details as further hurdles are cleared, highlighting the team's persistence in this effort.

    02

    Product Innovation and AI Integration

    Axon continues to rapidly innovate, integrating AI across its product suite to enhance public safety tools. Draft One, an AI-powered administrative assistant, has seen rapid adoption with nearly 30,000 active users, pacing 2x faster than any other software product launched in its first year. The company is also leveraging AI in Axon Assistant for real-time information delivery and in new vehicle intelligence solutions, aiming to make officers safer, faster, and smarter.

    03

    Supply Chain Diversification and Tariff Management

    Proactive supply chain diversification, initiated years ago due to tariff concerns, has positioned Axon well to manage current shifting environments. While Q1 saw minimal impact, the company expects a net 50 basis point impact to its full-year adjusted EBITDA margin guidance from tariffs. This impact has been offset through other cost measures, and no immediate price increases are planned for customers.

    04

    International Market Expansion and Focus

    International bookings achieved a record Q1, demonstrating strong demand across Australia, Latin America, Canada, Asia, the U.K., and Europe. This growth is attributed to increased focus from Axon's teams and product adoption ranging from TASERs to body cameras and cloud solutions. The strategy involves winning with one product and then expanding by earning the right to sell more through a great customer experience.

    05

    Fixed ALPR and Ecosystem Expansion

    Axon introduced new fixed ALPR (Automatic License Plate Recognition) hardware products, Light Posts and Outpost, expanding its ecosystem beyond mobile solutions. This move leverages existing imaging expertise and integrates with Fusus, Ring, and Citizen, aiming to enhance real-time visibility and deter crime. The company emphasizes responsible AI and privacy, focusing on identifying dangerous individuals or wanted vehicles to get help or deter criminal activity.

    06

    TASER 10 Adoption and Future Impact

    TASER 10 continues its rapid adoption, pacing 2x faster than TASER 7 in its first two years. The upcoming Apollo cartridge, expected in scaled production in about a year, is anticipated to be a "moonshot" for the mission. It aims to transform TASER into a self-defense weapon, potentially displacing lethal force in 40% of situations and opening significant new international and enterprise markets for TASER.

    AI-generated summary of the company’s earnings call. Not investment advice.