INVESTOR PRESENTATION| A X O N E N T E R P R I S E |
J u n e 2 0 2 0
Safe-harbor statementThis presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to risks and uncertainties. In some cases, you can identify these statements by forward-looking
words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other
comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial
performance, our anticipated growth strategies and anticipated trends in our business. Examples of forward-looking statements include, without limitation, statements regarding: the
impact of the COVID-19 pandemic; proposed products and services and related development efforts and activities; expectations about the market for our current and future products
and services; our outlook for 2020 with respect to revenue; trends relating to subscription plan programs and revenues; expected trends, including the benefits of, research and
development investments; the sufficiency of our liquidity and financial resources; expectations about customer behavior; statements concerning projections, predictions,
expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; and statements of management’s strategies, goals and
objectives and other similar expressions.
Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Such forward-looking statements included in this presentation are based
on information available to us as of the date hereof and our current expectations about future events, which are inherently subject to change and involve risks and uncertainties.
There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or
achievements expressed or implied by the forward-looking statements, including those factors discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as well as under the heading “Risk Factors” in the prospectus
supplement related to the proposed common stock offering.
We do not undertake any obligation to update any forward-looking statements included in this presentation, whether as a result of new information, future events or otherwise,
except as required by law. All such forward-looking statements should be read as of the time the statements were made and with the recognition that these forward-looking
statements may not be complete or accurate at a later date.
2
PROTECT LIFE
CAPTURE TRUTH
ACCELERATE JUSTICE
3
to stun.
4
Axon is building the future envisioned by Gene Roddenberry of Star Trek fame, where technology helps elevate humanity. The TASER was directly inspired by Captain Kirk’s Phaser.
2. REDUCE SOCIAL CONFLICT
COMPLAINTS DOWN 88%2
USE OF FORCE DOWN 42%2
3. ENABLE A FAIR & EFFECTIVE JUSTICE SYSTEM
GUILTY PLEAS UP 20%3
OFFICER COURT TIME REDUCED BY 70%4
~200,000 LIVES SAVED FROM DEATH OR SERIOUS INJURY1
1. OBSOLETE THE BULLET
1 M.W. Kroll Study (2009) 2 Mesa On-Officer Body Camera Field Study (2014) 3 Newport News Case Study (2015) 4 Queensland Police Domestic Violence Case Study (2017) 5
Our mission
Axon’s Independent AI and Policing Technology Ethics Board
6
Cyber Civil Rights Initiative Professor at Boston University
Police Reform Racial Equity Community Leader
DOJ Civil Rights Division
USC, Researches debasing, deep fakes and digital forensics
Texas AppleseedSocial Justice Non-Profit
EFF Google
Seattle Chief of PoliceChief Inspector of Irish National Police
Boston Police Commissioner
AI Ethicist: Oxford’s Future of Humanity Institute
& OpenAI
NYUThe Policing Project
National PoliceFoundation (Retired)Police Chief (Retired)
Privacy ExpertStanford / Microsoft
Axon leadership has resulted in an attractive financial profile
7
700K+TASER devices in place
today globally
120%Net dollar retention
17%2019 Adjusted EBITDA margin
Note: TASER devices in place today globally represents total number of units sold in the last 5 years. Annual recurring revenue is as of Axon’s latest quarterly report. Refer to appendix for Non-GAAP reconciliations
$174mmAnnual recurring software
revenue
$203 $235 $253 $282
$36$51
$75
$119
$29
$58
$92
$130
2016 2017 2018 2019
Axon Cloud Sensors & Other TASER
$268
$420
$344
63%
49%
12%
26%$531
Revenue ($ million)2016–19
CAGR
75%2019 cloud gross margin
71%Revenue from recurring
bundles
25+ years of transforming public safety with technology
8
Evolving public safety ecosystem
AXON 1.0Pre-2010
AXON 2.02010-2019
EVIDENCE.COM
BODY-WORN CAMERAS
AXON RECORDS
AXON DISPATCH
AXON FLEET
AXON CLOUD
TASER
TASER
BODY-WORN CAMERAS
AXON FLEET
TASER
PROTECT LIFE
CAPTURE TRUTH
ACCELERATE JUSTICE
9
PROTECT LIFE PROTECT LIFE
CAPTURE TRUTH
AXON 3.02020 & beyond
EVIDENCE.COM
Smart Devices + Workflow + IntelligenceSmart Devices + WorkflowDevices
Large TAM through value-added new products and markets
10
TAM by product TAM by market
Law Enforcement
54%
Corrections, Fire, and Other
24%
Enterprise8%
Consumer7%
Federal6%
BWC / DEMS$11B
TASER$5B
Fleet$3B
Dispatch$2B
Consumer Self-defense
$2B
AR / VR$2B
Records$2B
Axon Air$1B
$27BTAM
AR / VR – augmented reality / virtual realityBWC – body worn camerasDEMS – digital evidence management system
11
Cloud-driven strategic growth drivers
Communications
Cameras
De-escalation
Productivity
Time
Officer leavesOfficer on scene Justice systemCitizen-
captured evidence
Write and file incident
report
ShortenMore efficient
The role of Axon’s four strategic growth areas during a public safety incident
Axon software makes it easy to capture digital evidence, including CCTV video and citizen mobile evidence
Axon’s dispatch solution enables officers to arrive on knowing the most relevant and critical information
A TASER device may or may not be deployed when responding to an incident. If deployed, all use of force data is logged in Evidence.com
Axon body cameras and Fleet cameras capture video evidence, which is safely stored in Evidence.com. Live-streaming provides real-time situational awareness
Axon Records incorporates video into the incident log and uses AI to save officers’ time
Incident data and post-arrest interview video are used and viewed by prosecutors, defense attorneys, media, the community and the public
911 Call andDispatch
12
13
Cloud-driven strategic growth drivers
Communications
Cameras
De-escalation
Productivity
De-escalation has become eminent in our society
TASER product leadership
Numerous agencies adopted cloud-
connected TASER 7
Expansion beyond public safety
Recent wins include US Forestry, DoJ and
Corrections
Expansion into new geographies
UK, Canada, Australia, etc.
AR / VR
AR / VR empathy training delivered via
Axon Cloud
14
Axon trains for unbiased and empathetic public safety
15
Cameras = transparency and trust
FLEXSIGNALSIDEARM
BODYFLEET
APPS
Body camera programs address a transparency and accountability problem. They create a giant data management and storage problem
Axon’s camera + software solution solves all
Axon Body 3with LTE-live streaming
began shipping Sep. 2019
16
17
Productivity solutions to unlock efficiencies in public safety
Fragmented point solutions
Bloated and expensive
Complex and stale UI
Slow, manual and reactive
Cloud-based integrated software platform
Efficient and cost effective
Simple and consumer-grade UI
AI-driven proactive public safety
Legacy
Citizen reporting stolen vehicle
Note: Image on right is illustrative and represents Axon’s vision
18
Transforming communications beyond the radio
Synchronized video recording for all officers on-site
GPS enabled heatmaps
Integrated public safety suite for optimal visibility and control
Real-time view of officer presence and
devices
LTE live streaming for real-time situational
awareness
FINANCIAL OVERVIEW
19
Powerful long-term growth engine
Strong growth with scaling profitability
High visibility with significant revenue from recurring bundles
Strategic R&D driving to 70%+ target gross margins and robust operating leverage Strong
liquidity, no debt, and abundant operating flexibility
1
2
3
20
4
$40
$61
$88
$104
2017 2018 2019 LTM
Adjusted EBITDA($ millions)
12%15%
17%18%
Strong growth with scaling profitability
21
$344
$420
$531 $562
2017 2018 2019 LTM
Revenue($ millions)
28% 22%
26% 28%
% growth y/y
% margin
Note: Refer to appendix for non-GAAP reconciliations1 Rule of 40 defined as revenue growth plus adjusted EBITDA margin
40% 37% 43% 46%Rule of 401
High visibility with significant revenue from recurring bundles
Note: Annual recurring revenue includes recurring license, integration, warranty and storage revenue.
$18
$46
$83
$122
$174
Q1 16 Q1 17 Q1 18 Q1 19 Q1 20
SaaS Annual Recurring Revenue($ millions)
% Total Revenue Tied to Subscription Bundles
34%46%
55%
71%
2016 2017 2018 2019
22
Strategic R&D driving to 70%+ target gross margins and robust operating leverage
Commitment to drive leverage
TASER
Software & Sensors
70%
70%
Long-term target model
Long-term target model
62%
2019 Grossmargin
53%
2019 Grossmargin
Axon consolidated
2019 Adj EBITDAmargin
17%
Long-termtarget model
30%
23
TASER Fleet BWC + DEMS
Dispatch Records AR / VRAir
Growth R&D
Existingproducts
Sustaining R&D
Federal Corrections Enterprise
Sales investment
Newproducts
Existingcustomers
New customers
x
Note: Long-term targets exclude share-based compensation Refer to appendix for Non-GAAP reconciliationsAR / VR – augmented reality / virtual realityBWC – body worn camerasDEMS – digital evidence management system
+ Products & Bundles
+ Super Powers
+ Users & Nodes
+ Data & AI
24
Axon’s Path to 2030
25
TASER will obsolete the
pistol
AI will eliminate
paperwork
Cloud & IoT will transform
communications
Axon will reimagine public
safety
BY 2030, WE BELIEVE
Key Considerations
• Creating societal value—protecting life, capturing truth, and accelerating justice
• Technology platform revolutionizing public safety
• High-growth subscription revenue model with track record of significant operating leverage
• Addressing a $27 billion market opportunity and millions of users globally
• Holistic software / AI-based solution for public safety, from incident to judicial process
26
APPENDIX
27
Strong, engaged independent board of directors
28
ADRIANE BROWN
Director
MICHAEL GARNREITER
Chairman of the Board
JULIE ANNE CULLIVAN
Director
HADI PARTOVI
Director
CAITLIN KALINOWSKI
Director
DR. RICHARD CARMONA
Director
DR. MATTHEW R. MCBRADY
Director
MARK W. KROLL, PH.D
Director
Note: Independent directors
Axon bundle monthly pricing assumes five years, or 60 months, per contract. Revenue shown includes any initial hardware purchase required, which may not be included in the monthly fee. Bundle gross margins exclude unallocated manufacturing overhead. Future hardware upgrades assume a 15% increase in bill of materials cost over current generation hardware. Actual total company gross margins may be lower than target due to sales discounts, trade-in credits, lower margin professional services revenue, third-party hardware sold as a pass-through, unallocated manufacturing overhead, customer purchases of lower-tier offerings that are not pictured, and costs related to hardware returns. 29
Projected revenue & gross margin by bundle
$1,560 $2,160 $2,400
$3,600
$6,226
$7,740 $7,288
$9,826
$14,626
60%
70%
80%
90%
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
TASER X2 Basic($26/mo)
TASER X2Unlimited($36/mo)
TASER 7 Basic($40/mo)
TASER 7Certification
($60/mo)
Body-WornCamera
UnlimitedStorage
($89/mo)
Axon FleetUnlimited($129/mo)
Legacy OfficerSafety Plan($109/mo)
OSP 7($149/mo)
OSP 7+($229/mo)
Revenue $ Gross Profit $ Gross Margin % Total Company Target Gross Margin 70%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Axon Cloud software (Annual recurring revenue) Hardware warranty revenue
TASER cartridges & training revenue TASER hardware revenue
Camera hardware revenue Customer payment / Cash flow
Customer payment & cash flow =$229 / officer / month over 5 years + program startup feeIllustrative GAAP revenue allocation per officer
TASER hardware revenue recurs every 5 years. Camera hardware revenue occurs every 2.5 years. >90% of cash flows are reoccurring. Chart assumes no upsell upon contract renewal for illustrative purposes.
Officer Safety Plan 7+ Integrated Bundle
30
31
Non-GAAP reconciliation
31-Mar-2020 31-Mar-2019 31-Dec-2019 31-Dec-2018 31-Dec-2017
EBITDA and Adjusted EBITDA
Net income $4,074 $6,419 $882 $29,205 $5,207
Depreciation and amortization 2,881 2,800 11,361 10,615 8,041
Interest expense 7 6 46 86 186
Investment interest income (693) (2,003) (7,040) (3,002) –
Provision for (benefit from) income taxes (3,933) (1,435) 1,188 (1,101) 10,554
EBITDA $2,336 $5,787 $6,437 $35,803 $23,988
Adjustments
Stock-based compensation expense $20,195 $7,905 $78,495 $21,879 $15,610
Transaction costs and adjustments related to business acquisition and investment in unconsolidated affiliate
833 – – 1,382 –
Loss on disposal and abandonment of intangible assets 13 18 67 2,117 1,146
Loss (gain) on disposal and impairment of property and equipment, net
517 242 2,542 303 (28)
Costs related to FTC litigation 6,135 – 240 – –
Adjusted EBITDA $30,029 $13,952 $87,781 $61,484 $40,716
Adjusted EBITDA margin 20.4% 12.0% 16.5% 14.6% 11.8%
Twelve months ended Three months ended