AXON Core Business and Opportunities

Hey guys, I’m doing a dive into the business of Axon Enterprise. For those of you that have spoken to me over the years, you know that I have been following and investing in Axon. I’ll try to break down the business of Axon so you can decide if it’s right for you.

Axon Enterprise is positioned as a leader in public safety technology, with strong core businesses in TASERs, body cameras, and cloud services, and promising growth opportunities in the drone market. The company dominates the TASER market, benefiting from strong branding and limited competition. The new TASER 10 system has had good uptake by public safety departments across the country. Its body cameras are integrated with cloud-based evidence management software, creating high switching costs for customers and solidifying its competitive advantage. What does this mean? They provide the total end-to-end solution for anything related to public safety. Let me explain…

When officers present to a scene, the body cams are recording to Axon cloud services. In order to access these recordings for internal use, judicial or public reasons, the customers must subscribe to the cloud services. In addition, Axon uses the video footage to learn about de-escalation techniques and uses that to provide VR training (again, another subscription). The Axon’s cloud services generate recurring revenue and boast high gross margins, making this a key area for future growth.

The company is also targeting a $19 billion total addressable market in drones and integration, bolstered by strategic acquisitions like Sky Hero, which added tactical drones and robots, and Dedrone, enhancing drone security capabilities with FAA-approved technology. Acquiring Fusus also provides them further opportunity to integrate non-Axon camera systems into their public safety portfolio. These investments aim to position Axon as a significant player in the emerging drone space and further entrench them in public safety.

Financially, Axon has delivered impressive results, with Q3 2024 revenue growing 31.7% year-over-year to $544.27 million. Cloud services now account for 37% of total revenue, and the company reported strong profitability, with adjusted EBITDA increasing 54% year-over-year and a solid cash position of $1.16 billion. The YOY growth rate is impressive with more room for expansion into other verticals (federal, healthcare, private security) and markets (international).

For aggressive growth investors, Axon represents a compelling long-term opportunity with its strong foundation and innovative expansion efforts. As Axon continues to execute on its initiatives and expand into new markets, it could become a cornerstone of your portfolios. It has been one of my core holdings that I am regularly contributing.

I hope this helps you guys understand Axon and its business. If you want a deeper dive into the Q3 2024 earnings, check out my article.

Until next time,

Henry Dalsania, Founder, Profit Pulse