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    AXON
    Earnings call· Dec 2024(Q4 FY24)

    AXON ENTERPRISE, INC. AXON

    Feb 25, 2025 Source

    Executive summary

    Axon Enterprise, Inc. Q4 FY24 — Strong Growth Across Segments and Record Bookings

    Axon delivered a strong Q4 and full-year 2024, driven by robust demand across its TASER, sensors, and software segments, with software contributing 40% of total revenue. The company achieved its 2025 adjusted EBITDA margin target a year early and reported record bookings, indicating a healthy pipeline for future growth. Strategic investments in AI, drones, and enterprise markets are expanding the total addressable market, though a local political challenge in Arizona poses a potential risk to headquarters expansion plans.

    Highlights

    5

    • Q4 revenue of $575 million increased 34% year-over-year, marking the 12th consecutive quarter of over 25% revenue growth.

    • Full-year revenue exceeded $2 billion, nearly doubling in two years and achieving over 30% growth for the third consecutive year.

    • Total future contracted bookings ended the year over $10 billion, with $5 billion booked in the last year, supporting several years of growth.

    • Adjusted EBITDA margin reached 25% for the full year, a milestone achieved a full year ahead of the 2025 target.

    • International bookings grew nearly 50% sequentially in Q4, building on 40% sequential growth in Q3, and enterprise bookings roughly tripled year-over-year.

    Concerns

    2

    • The company's headquarters campus expansion in Arizona faced a setback due to political petitions, delaying the project by two years and potentially leading to relocation if not resolved.

    • TASER 10 demand continues to outpace supply, requiring significant capital investment to increase manufacturing capacity.

    Guidance & targets

    3
    CategoryTargetConfidence
    Full-year 2025 Revenue
    $2.55 billion to $2.65 billion
    high materiality
    High
    Full-year 2025 Adjusted EBITDA
    $640 million to $670 million
    high materiality
    High
    Full-year 2025 Capital Expenditures
    $140 million to $180 million
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    TASER
    Experienced strong year-over-year growth in Q4.
    		—37%——
    Sensors
    Achieved double-digit year-over-year growth in Q4.
    		—18%——
    Software and Services
    Was a key driver of overall growth, contributing 40% of total revenue in Q4.
    		—41%——

    Operational metrics

    22
    Revenue growth
    30%3 consecutive years
    FY22-FY24

    Company achieved over 30% revenue growth for three consecutive years.

    Adjusted Gross Margin
    63.2%stable across the year
    Q4 FY24

    Adjusted gross margin remained very stable at an overall company level throughout the year.

    Adjusted EBITDA Margin
    24.6%
    Q4 FY24

    Company continues to invest in the business while delivering strong profitability.

    Adjusted EBITDA Margin
    25%up almost 400 bps
    FY24

    Achieved a 25% adjusted EBITDA margin for the full year, a milestone initially set for 2025, expanding almost 400 basis points this year.

    Rule of 40
    50%well above
    4 years

    Company has hit 50% for four years, well above the Rule of 40.

    TASER 10 orders vs TASER 7
    2x
    Q4 FY24

    TASER 10 orders continue to outpace TASER 7 by 2x, 8 quarters in.

    Officer Safety Plan bookings
    highest evernearly booking more seats in the quarter than the prior 3 quarters combined
    Q4 FY24

    Achieved highest ever Officer Safety Plan bookings in Q4, nearly booking more seats in the quarter than the prior three quarters combined.

    AI Era Plan deals
    10
    Q4 FY24

    Closed the first 10 AI Era Plan deals in Q4, launched in late October, indicating accelerated adoption.

    International bookings growth
    50%sequential
    Q4 FY24

    International bookings grew nearly 50% sequentially in Q4, on top of 40% sequential growth in Q3.

    Enterprise bookings growth
    tripledyear-over-year
    Q4 FY24

    Enterprise bookings roughly tripled year-over-year in Q4, including the largest deal in company history.

    Software solutions users
    1 million+
    Q4 FY24

    Now have more than 1 million users of software solutions, spanning evidence management, real-time operations, productivity, and AI.

    Total Addressable Market (TAM) expansion
    doubles
    future

    Investments around AI, real-time operations, drones, and robotics roughly double the overall opportunity set.

    Federal, International, Enterprise opportunity
    $100 billion+
    future

    These three customer groups account for over $100 billion of opportunity.

    Software and Services revenue contribution
    40%
    Q4 FY24

    Software and services remained a driver of overall growth and contributed 40% of total revenue in Q4.

    Annual Recurring Revenue (ARR)
    $1 billionup 37% year-over-year
    Q4 FY24

    ARR increased to $1 billion, up 37% year-over-year, reinforcing visibility and predictability.

    Net Revenue Retention (NRR)
    123%remained strong
    Q4 FY24

    Net revenue retention remained strong at 123%.

    Cloud services revenue sequential increase
    $35 millionQ-on-Q
    Q4 FY24

    Cloud services revenue within software and sensors saw a solid step up Q-on-Q, the largest on record, driven by seasonality and user adoption.

    Drone cost (consumer)
    $500
    current

    Ukraine conflict showed that anyone could use a drone costing less than $500.

    Police officer annual cost
    $200,000
    annual

    Flying a drone manually by a police officer is estimated to cost $200,000 per year in labor.

    Autonomous drone operation cost
    $50,000
    annual

    An autonomously flown drone, not consuming an officer, costs $50,000, making it about 1/4 the price of manual operation when considering human labor.

    Petition signatures for HQ project
    93%
    Q4 FY24

    Paid petitioners collected 93% of signatures on a pay per signature basis, with 2/3 coming from outside Arizona, causing a setback for the headquarters project.

    AI Era Plan pricing increase
    $200from $350 to $550
    per person

    The AI Era Plan represents a significant lift in OSP pricing, from $350 at the high end to $550, an increase of $200 per person.

    Industry KPIs

    4
    MetricValueDetails
    Book to bill ratio>2.5xratio
    Total company backlogover $10 billionUSD
    Unit deliveries by program2xmultiple
    Production capacity expansion—

    Orderbook & backlog

    3
    Total future contracted bookingsover $10 billionFY24 end

    Provides support for years to come; more indicative of business than GAAP RPO.

    Bookings for last yearover $5 billionFY24

    About half of total bookings closed in Q4; strength across the board.

    Pipeline healthhealthiest it has ever beenQ4 FY24

    healthier than this time last year

    Expected to lead to another record bookings year in 2025 with line of sight into several years of exciting growth.

    Product announcements

    4
    ProductTypeDetails
    TASER 10update
    Draft Onelaunch
    AI Era Planlaunch
    Real-time translatorlaunch

    Deals & partnerships

    3
    FususAcquisition to connect more sensors and cameras, enhancing real-time operations.

    The acquisition of Fusus helps Axon connect more sensors and cameras, contributing to the expansion of connected technology applications.

    SkydioPartnership with a leader in autonomous AI-driven drones to integrate hardware and enhance situational awareness.

    Axon partnered with Skydio, the leading U.S. maker of long-range autonomous AI-driven drones, to augment its ecosystem and provide customers with more situational awareness and integrated DFR (Drone as First Responder) experiences. Skydio is considered the world leader in autonomy.

    Flock SafetyPartnership for ALPR technology, currently exited but with potential for resumption under new terms.

    Axon exited a partnership with Flock Safety regarding ALPR technology, but both sides have an interest in resuming it. Axon proposed new terms for a more fair flow of information into Fusus.

    Risks & headwinds

    3
    Arizona Headquarters Campus Expansion Delaynear-term

    Project delayed by 2 years

    Mitigation: Working with elected officials to fix the situation; vetting options in other states if unresolved in coming weeks.

    TASER 10 Supply-Demand ImbalanceFY25

    Demand still outpacing supply

    Mitigation: Investing in increased manufacturing capacity for TASER 10, aiming to balance supply and demand by next year.

    Federal Funding Cutscurrent

    Some grants and programs dried up

    Mitigation: Management believes Axon's products drive true outcomes and are supported across political divides, leading to more opportunity than risk in the federal space.

    What to watch in Q1 FY25

    5

    Arizona HQ decision

    in the coming weeks
    CurrentProject delayed by political petitions
    TargetFinal decision on Arizona HQ location or relocation to another state

    Why it matters

    The decision on the headquarters campus will impact future investment and operational stability, potentially leading to relocation if Arizona's political environment remains challenging.

    I intend to make that decision together with my Board in the coming weeks.

    Q&A highlights

    6

    Inquired about the impact of federal hiring freezes and funding cuts on Axon's federal contract revenues and deployment timelines, particularly in light of Department of Justice (DOJ) changes.

    Management believes there is more opportunity than risk in the federal space, as agencies seek cost-effective technology solutions like Axon's. They anticipate continued support for federal law enforcement and DoD, with no material impact expected from funding cuts.

    “I certainly don't think in terms of Axon's case, in our future, there's any real cause for concern about what's happening with the funding cuts and DOGE and so forth. Actually, I think there's a world where we could come out of this with more opportunity.”

    asked by Jeremy Hamblin (Analysts) · answered by Joshua Isner (Executives)

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Expansion into New Markets and Technologies

    Axon is actively expanding its total addressable market (TAM) by investing in artificial intelligence, real-time operations, drones, and robotics, which are expected to double its overall opportunity set. Early product bookings support this outlook, with these areas accounting for nearly half of the current pipeline. The company sees significant opportunities in federal, international, and enterprise customer groups, which collectively represent over $100 billion in potential.

    02

    AI Adoption and Impact on Customer Workflows

    AI-powered products, such as Draft One and the AI Era Plan, are experiencing rapid adoption, with the AI Era Plan closing deals within 8-9 weeks of launch. These tools are resonating with customers by driving measurable ROI through time savings for officers, effectively increasing capacity by an estimated 20%. This allows police departments to mitigate staffing shortages and improve morale by automating low-value administrative tasks, enabling officers to focus on more engaging duties.

    03

    International and Enterprise Segment Growth

    International bookings demonstrated strong sequential growth of nearly 50% in Q4, following 40% growth in Q3, driven by enhanced execution and product market fit. The enterprise segment also saw bookings roughly triple year-over-year, including the largest deal in company history with a global logistics provider. These segments are becoming major growth drivers, with multiple entry points for Axon's product ecosystem, including body cameras, Fusus, and Dedrone.

    04

    Arizona Headquarters Campus Setback

    Axon's plan to invest in its headquarters campus in Arizona has faced a setback due to political petitions challenging zoning decisions. This issue, which involved paid petitioners and out-of-state signatures, could delay the project by two years. Management is actively working with elected officials to resolve the situation and ensure a predictable business environment, but is also vetting options in other states if a resolution is not found in the coming weeks.

    05

    Skydio Partnership and Autonomous Drone Strategy

    Axon views its partnership with Skydio as a strategic fit, leveraging Skydio's leadership in autonomous drone technology. This collaboration aims to enhance situational awareness and enable integrated Drone as a First Responder (DFR) experiences. The combination of Skydio's autonomous flight capabilities with Axon's Fusus and Dedrone systems is expected to provide a seamless, cost-effective solution for customers, significantly reducing human labor compared to traditional drone operations.

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