Behind The Numbers – Axon Enterprise (AXON)
On Tuesday, after the close, Axon Enterprise (AXON) reported stellar headline numbers:
-EPS of $0.88 vs $0.54 estimate – Beat
-Revenue of $343M vs $319.7M estimate – Beat
-FY Revenue Guidance of $1.45B (midpoint) vs $1.44B estimate – Beat
-Annual Recurring Revenue (ARR) of $520M, up 49.4% Y/Y
-Future Contracted Revenue of $4.78B, up 60.9% Y/Y
The company grew the top line 34% Y/Y, achieving what the company called a “record quarterly revenue.” Its cloud business grew 51% Y/Y while international bookings grew double digits, driven by nearly 100% Y/Y bookings growth in Europe. And they also saw triple-digit bookings growth in their Justice segment, an emerging market for them.
It would appear the only blemish was on the gross margin front, in which management admitted that they had some sequential headwinds in Q1, reflecting an impact of one-time items related to inventory and cost adjustments. Yet, shares were punished on Wednesday, falling 15%. One day later, JPMorgan analyst Paul Chung was out saying they are taking advantage of the 15% decline in the stock price and upgrading the stock to Overweight from Neutral. “The pullback we were waiting for came sooner than expected, driven by what we see as temporary headwinds ahead of a strong upgrade cycle across body cams (Axon 4) and Taser 10.”
Reading over the conference call transcript, it was very clear that the product ramp the company is currently going through can only be construed as “bullish.”
TASER – The company’s TASER weapons business grew 17% Y/Y, and most of that was tied to continuing strong demand of the TASER 7 platform. For those that have followed our Conversations discussions, you know that the company is in the midst of delivering their new TASER 10 product. On the call, CEO Patrick Smith said, “New TASER devices take a few quarters to ramp in terms of sales as our customers need to trial and get trained before they can go into full deployment. Customer reception to TASER 10 has been great. We began shipping in March and many customers have called the product a true game changer.”
Axon Body – The company’s Axon Body 4 product was announced in April, is currently being trialed, and will begin shipping in the second half of this year. The product enables video livestreaming with new bi-directional audio, a “Watch Me” button, more perspectives with ability to attach to different areas, and an upgraded camera with a larger field of view.
VR – Finally, the company is pioneering police officer training with virtual reality, and management stated that its VR technology is the fastest-growing new product line in Axon’s history, suggesting the product is well positioned for a material ramp in the second half as well.
JMP Securities analyst Erik Suppiger highlighted as well that Axon has a rich array of new product cycles that they believe will drive growth in 2H23 and could fuel upside to management’s outlook for 22% growth in FY23. “Our channel checks suggest law enforcement agencies like buying integrated bundles when buying technology because it saves them from integrating technologies, and Axon is effectively leveraging its broad portfolio to offer integrated suites.”
