Hello everyone, and welcome to our First Quarter 2021 Earnings Conference Webinar. I’m Andrea James, Senior Vice President of Corporate Strategy and Investor Relations. Today, we have with us CEO, Rick Smith; President, Luke Larson; CFO, Jawad Ahsan; Chief Revenue Officer, Josh Isner; and Chief Product Officer, Jeff Kunins. I hope you’ve all had a chance to read our very robust shareholder letter, which we released after the market closed. You can find it at investor.axon.com. Our remarks today are meant to build upon the information in that robust letter. At the end of this call, we’ll play our quarterly earnings video. That’s our first time doing it on the earnings call, and you’re welcome to stay for that. If for some reason, we lose connectivity, we’ll endeavor to post a copy of our prepared remarks to investor.axon.com. During this call, we will discuss our business outlook and make forward-looking statements. Any forward-looking statements made today are pursuant to and within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These comments are based on our predictions and expectations as of today; they are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks are discussed in our SEC filings. Okay. Now, turning it over to Rick.

Thanks, Andrea, and hello, everyone. As you can see from the shareholder letter, we’ve had an exceptional start to the year. Our teams have remained focused on executing our mission and driving growth across all of our products and markets. I couldn’t be more proud of what we’ve built and Axon’s position as a true change agent, ultimately—and most exciting—where we’re heading. We’ve always been passionate about innovation, and that drive continues to propel our business forward. Today, I’d like to address current events, public and personal, that are relevant to our business. First, recent events, including last year’s death of George Floyd and the events that followed, forced our nation to reflect upon the values we hold true for all Americans. Axon is and will remain committed to creating technologies that save lives, increase transparency and help communities and public safety agencies serve them achieve a higher quality of life, ensuring everyone makes it home safe. Customers, and increasingly communities, see us as a key thought leader and partner in the global drive to transform public safety. We hear stories daily about customers using our products to save lives and protect their communities. We believe our problem-solving approach to these major challenges will continue to drive our growth. Two years ago when I published my book, The End of Killing, it was a radical idea that we could actually make the bullet obsolete and create less lethal weapons that could become the primary use of force and eventually displace lethal weapons. Customers were far more receptive to this idea than I could have anticipated. In light of the events of the past 12 months, we are pleased to hear from our public safety customers and the broader community that they are eager to reach the deadline I had set at the end of this decade for us to achieve the goal of surpassing the sidearm in effectiveness. Our teams are working extremely hard to bring in the date for the next generation of TASER weapons, which I believe will be the largest leap in capability in the history of less lethal weapons. Customers have even begun signing 10-year programs with us to enable seamless upgrades, and we worked with them to create programs that will even allow them early upgrades when the next generation launches. Now, to set expectations, the next generation of TASER is a couple of years out due to the intense testing a ground-up design requires, as well as full production automation and scaling. But, I wanted to discuss the issue head-on, given the growing public interest and to help our investors understand the dynamics behind this 10-year program. Second, on a personal note, the passing of my father, Phil Smith, our founding Chairman, last month was a monumental loss. He was instrumental in helping to get TASER off the ground in its early days, and our Company would not exist without him. His final 24 hours were an amazing capstone to an incredible life. His mission lives on among all of us at Axon, and I will miss calling him after the call today to discuss the results. As we look to the future, Axon can be a huge force for progress through our vision of obsoleting the bullet, reducing social conflict, enabling a fair and effective justice system, and building for racial equity, diversity and inclusion. Luke and Jawad will now take you through some more highlights of our business.

Thanks, Rick. As stated in our shareholder letter, which we received a lot of positive feedback on—shout out to our IR team—our teams are executing on our 2021 strategic priorities to grow our core, scale new products, unlock new markets, and drive efficiency to fuel growth. We believe Axon has been at the forefront of change. In the past year, we’ve been put in the center of truly unprecedented events that inspired our teams to show up in new ways. Our body cameras are capturing the most critical events in the world. We’re proud of that, and it’s a responsibility we take very seriously. During the civil unrest in the Capitol on January 6, for instance, the DC Metropolitan Police and the Montgomery County Police—who are Axon Body customers—were called in for backup, and the Justice Department has released Axon Body camera videos related to that incident. Axon Body cameras are also providing critical evidence in many of the current events that we’re all familiar with. Just last week, NPR published a story about a team of public safety experts and economists stating that body-worn cameras are both beneficial and cost-effective. The University of Chicago Crime Lab and the Council on Criminal Justice Task Force on Policing released a report stating the key benefit of body-worn cameras is the reduced use of police force. For example, one police department saw complaints against police drop by 17%, and the use of force by police during fatal and nonfatal encounters fell by nearly 10%. Professor Jens Ludwig, Head of the Crime Lab, says if you’re a local government looking at adopting the cost from your narrow green eyeshade bottom line, the technology probably pays for itself, and the benefits to the public are a huge win that easily outweighs the cost. Our focus as a management team is to invest in growth so that we can continue delivering technologies to protect life and truth. In February, we outlined the capital investments we’re making this year, including TASER manufacturing. We have a great update to share on that front—as you see in our shareholder letter. These investments are growing the TASER manufacturing capacity and driving gross margin expansion. This positions us to meet growing TASER demand globally and in our federal sector. So far this year, TASER device manufacturing and supply chain improvements are on track to deliver more than $4 million in gross cost savings in 2021. We are also excited about the momentum that we are seeing in our Software and Sensors segment. Later this year, we expect to launch our third-generation fleet solution, which is our dashboard cam solution, featuring AI-powered automatic license plate recognition (known in the industry as ALPR). Demand for this premium fleet bundle, which includes the ALPR software add-on and live streaming from our cameras, is exceeding our expectations by a healthy margin, and you can read more about this in detail in our shareholder letter. We are also seeing growing adoption and usage of LTE-enabled live streaming off body cameras and remote evidence uploads. In the coming weeks, we expect to transition the Baltimore Police Department to our records solution, and the training and feedback has been going very well. Finally, we’re transforming how agencies train their officers by addressing the inefficiencies around classroom, role-playing, and simulator training. By leveraging VR, we are addressing their two biggest issues: budget and time. In the coming days, we have an exciting product launch that we can’t wait to tell you more about. We just did a sneak peek of our big VR announcement yesterday with TASER’s training advisory board, and it was very well received. We have a lot to be excited about in 2021 and beyond. Now, I’ll turn the call over to our Chief Financial Officer, Jawad.

Thanks, Luke. As our teams continue to execute at an extremely high level, we’re able to confidently invest in our future. Our strong balance sheet also gives us the flexibility to drive growth broadly across products, markets, and geographies. We’ve recently made three strategic investments in Flock Safety, RapidSOS, and Cellebrite, as well as expanded our strategic partnerships. These were carefully crafted moves that allow us to extend our platform as we aim to build the public safety ecosystem of the future. In Q1, we invested $20 million in RapidSOS and more recently completed a strategic partnership. When people dial 911, lives are literally in the balance if the call center doesn’t know where they are. RapidSOS is a leader in solving this problem. For example, if you call 911 today using your iPhone, in the vast majority of U.S. jurisdictions, Apple will send your location to public safety via RapidSOS. Now, the location and live streams of Axon Body cameras and Axon Fleet cameras can be integrated into the RapidSOS platform, and RapidSOS data can be integrated into our new Axon Respond dispatching platform. Another recent investment in strategic partnership includes a $90 million participation in a PIPE transaction in connection with Cellebrite going public via a SPAC IPO. Cellebrite is the market leader in digital intelligence. Their software complements our lead in digital evidence management, and they share our strong emphasis on safeguards to protect privacy. We are consistently hearing great feedback from our customers in common with Cellebrite, and the company has been delivering compelling results. This partnership will make Evidence.com even more valuable for our customers. From an M&A perspective, as you can see, we’re taking a deliberate approach to how we partner and deploy our capital. You can expect to see us continue to be opportunistic and make strategic moves that strengthen and extend our platform. To be clear, we will be highly selective. Our continued strong execution allows us to make these types of investments and maintain our strategic focus on investing for growth. However, it’s really the fact that we always lead with our mission to protect life and truth in the communities we serve that has us taking a long-term view on our business. As we work towards goals such as obsoleting the bullet, we are measuring our progress over a longer-term horizon. In fact, we’d like to invite you to think about our business the way that we do, in terms of years and not quarters. This is why today, we are introducing two-year revenue guidance for both 2021 and 2022. For 2021, we are raising our revenue guidance by $40 million at the midpoint to $800 million. In 2022, our early view of the year anticipates that we will deliver approximately $920 million in revenue. The combination of positive underlying demand trends and our strategic growth and expansion initiatives gives us tremendous confidence in our longer-term outlook. We’ve been making investments in several new geographies outside the U.S., and many of these investments are starting to yield results. The nature of the international market is such that the deals are often for larger regions or entire nations. The larger and more complex nature of these deals makes their timing difficult to forecast, and thus, growth is not as linear as we might expect in the U.S. We, therefore, expect the phasing of revenue from international deals to contribute to variability in our quarterly revenue—a trend we expect to continue for the foreseeable future. This is why we’re anchoring on annual revenue guidance. We don’t want the timing of large international deals to signal anything about the underlying growth rate of our business. We are laser-focused on building a business that will sustainably grow at a 20%-plus CAGR. I want to reiterate that we are committed to continuing to execute and invest with rigor and discipline. As such, and given our strength and outlook for the year, we’re raising our adjusted EBITDA guidance for 2021 by $12.5 million at the midpoint. We’re also maintaining our long-term target adjusted EBITDA margin of 30%, while continuing to invest for growth. I’d like to close by highlighting another aspect of Axon that I’m particularly proud of: how diversified we’ve become. We sell hardware and software, solutions and services, products and training. We’ve diversified geographically as well as to the types of customers we sell to. Revenues from our market-leading tailored devices and body cameras remain on a strong growth trajectory, while our ARR has now surpassed $240 million and is expected to grow approximately $15 million per quarter. I’ve never felt better about how Axon is positioned for growth, and I’m looking forward to seeing how our team continues to deliver. And with that, Andrea, let’s move to questions.

Thanks, Jawad and team. I just want to check with our moderators that we can bring everybody up into the gallery view. And give me a nod when we are up in gallery view. Okay. We are up in gallery view. Analysts, we’ve got you all in our queue, so no need to use the hand raise feature. Just let us know if you have a follow-up. We’ll take our first question from Keith Housum at Northcoast.

All right. How are we doing now? All right. Thanks, guys. Congratulations on a great quarter, and I appreciate the guidance going forward. Rick, it looks like now two quarters in a row, fantastic TASER sales with growth. Perhaps you can provide a little more color on what you think some of the drivers are. How are you guys achieving this TASER growth the past few quarters? And I guess, in the previous quarter we saw similar growth?

Yes. I’ll touch on it. And then, Josh, I’ll hand it off to you. I would say, there’s really a shifting focus. 10 years ago, there was a lot of focus on the medical safety of the TASER devices. I think we’ve come out of that, where now there’s really an intense focus on effectiveness. In my book, where I talked about, I’ve been very transparent. We are not yet reliable enough to be a substitute for lethal force, but we’re heading that direction. We made a significant step with TASER 7, and we’ll make an even bigger step on our next launch. I think our customers are excited, and we’re seeing a lot of TASER 7 adoption that has really picked up. We’re also seeing broader international adoption. There are orders coming in our daily reports, and I have to look at the map to see where some of these countries are that a few years ago weren’t even on our radar, and now we’re getting much broader coverage. And with that, Josh, I’ll hand it over to you.

Yes. Thank you, Rick. Ultimately, I think it’s just a continued story of a lot of investments in the channel that we’ve made over the years are starting to pay off. As Jawad said, we’re diversifying. State and local law enforcement is absolutely a big part of that growth story, but so is international, so is federal, so is corrections. We’ve got a lot of talented people doing great work right now, and we’ll continue to invest in white space in the channel to make sure those results continue to grow in the future.

Okay, great. And then, just if I could, my follow-up, I’ve got a guy ask a question about the supply chain issues that are happening really across all technologies these days. I guess, where in your portfolio of products, do you have any pinch points with supply chain? And are the issues getting worse here as we’re going into the second quarter?

Yes. Great question, Keith. I’ll fill that. So, our supply chain and ops team is led by a phenomenal guy, named Josh Goldman. Over the last year, we’ve really put buffers in place to ensure that we can meet quarterly demand, as well as forecast out critical components. I’ve just got to give the team credit for navigating the last 12 months, and we’re keeping that same strategy looking forward. As of today, we feel really good about it.

Thanks, Keith. We’ll take our next question from Will Power at Baird.

Great, okay. Thanks for taking the question. Rick, first, I’m sorry for your loss.

Thanks, Will. On the positive side, I hope to die the way he did. It was actually as positive and uplifting as such a thing could be.

Okay. That’s good. Well, congratulations on the results. Obviously, really strong across the board. I guess, maybe broadly looking at the opportunities in the U.S. in spending habits. What are you seeing in terms of municipal budgets? Are there any headwinds on that front? And to what degree are some of the federal aid plans helping?

Absolutely. So, I think about this time last year, there were a lot of questions about how that would materialize, and we’re still very happy to say that it really hasn’t in a meaningful way. In fact, a lot of the federal conveyed packages have provided additional funding to state and local governments. At first, it was mainly for large cities, but in the latest grant package, it was for small and midsized cities as well. So, we don’t see any systematic challenges across municipal funding that make us any more or less worried than in the past. We think it’s ahead of us, and we provide the right products that our customers value. We really believe they will be able to find funding to buy them.

Okay. That’s great. And if I could sneak in just one more: really nice to see some of the early Fleet 3 indicators. I’m wondering if you could provide any more color as to what’s helping set you apart in the market? Any potential issues on the supply side in terms of meeting that demand? Any more background would be great.

I’m sorry, what was it? I couldn’t hear what product you were referring to, Will?

Fleet.

Fleet. Why don’t I take the first stab and then pass it to Jeff. One thing that I’m really excited about is just the attach rate to the ALPR. Customers are saying, "Hey, I can go with one solution with Axon and get these two critical benefits." It’s also a great story about how we’re able to provide not only the hardware but also the software and advanced technology that the customers are willing to pay for.

Yes. Just continuing on that. First and foremost, on the camera system itself, we’re really proud and looking forward to shipping it to customers. This is overwhelmingly our best camera system ever for the car. On those merits alone, that drives a lot of the demand that we’re seeing. And as we’ve alluded to, one of Axon’s greatest strengths is how we can combine these devices with the power of intelligent cloud services. So, both with our Respond live streaming connected, and as well as our Vievu approach to ALPR, we create the ability for an agency to afford ALPR capability in every single vehicle. So, you put all that together at an attractive overall price. We still look forward to shipping it later this year and seeing how customers love it.

I’ve got to add one more thing. Maybe we’re too transparent sometimes. But with Fleet 1 and 2, we were scrapping—we had to get to market fast. The hardware was not our strength in those products. We still got to the top end of the suppliers in the market. Fleet 3 is where we’re bringing our A-game. This is the first camera where the hardware has been designed from the ground up for this use case. Previously, we did take our body cameras and then refactor them for the car. We learned a lot by doing that. I’m really excited to see how it performs in the market.

All right. Thanks. Well, we love the families here at Axon. We’ll take our next question from Jonathan Ho at William Blair. Go ahead, Jonathan.

I wanted to just start out with the two-year guidance. Just given the lumpiness that you’re seeing in some of these international deals and the longer sales cycles, can you talk a little about how you’re building that long-term forecast? What gives you the confidence to offer a two-year view this early?

Yes. I’d like to start with that, and I would love to hear Josh’s input as well. There are a couple of factors, Jonathan. First, quite frankly, the business is rocking and rolling. You’ve heard us allude to it, we have collected a fantastic collection of talent in all of our functions, and they are executing crisply and reliably. I have tremendous confidence in them. The pipeline that we’ve built gives me high assurance that we will execute on that to such a degree that I feel confident going out two years on our guidance. The second factor is these international deals—it makes it difficult for us to give quarter-to-quarter guidance. It’s better for us to think in terms of years because they are larger, more complex, and involve many factors: financial, operational, regulatory, and political. We really think about the business in terms of years. What we’re working toward is building a business that will sustainably grow at a 20%-plus CAGR year-over-year.

Lastly, I would add that one of the benefits of focusing on bookings as a forward-looking indicator of our results is our bookings have continued to grow year after year. We saw that last year, and we’re seeing it this year as well. We’re very excited about what that means for the future. Between bringing on more and more enterprise sales talent that gets better and better at forecasting combined with growing bookings year-over-year gives us confidence that we’re going to keep growing.

Got it. Can you also provide a little more color on the traction you’re seeing relative to the RMS and CAD solutions, specifically your software suite? How are those contributing to net retention and some of the expansionary metrics there as well? Thank you.

Certainly. We’re really excited. We’re seeing customers that have confidence in us historically willing to partner with us more on our newer offerings. When we go into police departments, one of the questions we always ask is, what’s the best operating software you have today? Oftentimes we hear it’s Evidence.com. That inspires confidence from our customers that the next piece of enterprise software we deliver will be equally good or better. We have to be very careful in terms of setting the right expectations. We bring on the right customers for us early on, and we make those customers really successful. That’s what we’re focused on, and we believe just like we have in every category we’ve entered, we will turn those early evangelists into a growing market over the years.

Thanks, Jonathan. We’ll take our next question from Jeremy Hamblin at Craig-Hallum. Go ahead, Jeremy.

Thanks. And congratulations on the strong results, and also my thoughts are with your family. I wanted to ask about Cellebrite. Thinking about the investments you’ve made in that business, what is the likelihood of making additional investments down the road with the rapid growth they are seeing? How integrated do you see these businesses becoming?

Yes. I’ll start. Cellebrite is a company that we’ve admired from afar for some time now. We had a chance to build a relationship with them before the SPAC deal came onto our radar. They are a market leader in digital intelligence, which we see as a very natural extension of our lead in digital evidence management. This partnership will make Evidence.com even more valuable for our customers. We will evaluate the opportunity to invest more or something beyond that going forward. But at this point, we feel really good about where we’re at.

I would just add that you can see a pattern in all of these very judicious investments we’ve made so far. So, between Flock Safety, RapidSOS, and now Cellebrite, all of them are financial investments, but they were very purposefully chosen to be a match for places where customers win as we do interesting things together commercially. The investment acts as an accelerant to what we otherwise want to naturally do as great partners.

Great. Additionally, I wanted to ask about your annual recurring revenue. You’ve had a very steady pace, roughly adding about $20 million a quarter. As the company gets bigger, what would drive a deviation to the upside from that $20 million a quarter? Is it gaining significant traction in RMS? Is that going to be the big driver? How do we potentially step up from that level?

One of the things that Josh alluded to is for us, the leading indicator is really bookings. Right now, just as we’ve made investments in new international markets, we’re also making investments in these new product categories, like records and dispatch. We are in the very early innings. We’re building a product that we’re proud of and believe it will be a market leader. So, the leading indicator for us is going to be bookings. As those bookings come in, we think that will translate into ARR.

Jeremy, I just wanted to piggyback, make sure your numbers are clear. We’re very proud of the rate we’re adding ARR, but it’s been closer to $15 million a quarter as the average over the last year. Jawad referenced that number in his script as well. We’ll take our next question from John Godin at Needham. Go ahead, John.

Hey guys. I appreciate you taking my questions. Congrats on the nice quarter. I have a question around the VR products. Obviously, given a lot of the social unrest, how have you seen demand trends early on? And looking out two or three years, how do you see that product growing and coming to market? Where do you fit in competitively?

Yes. I would say the demand we’ve seen for VR is nearly unprecedented, where customers come to us. We explain what our existing offering is with community agent scenarios and some of the future ideas we’re developing. We’ve seen a really healthy pipeline from all sizes of agencies across a lot of geographical distributions. So, we feel there is a lot of demand.

I think that’s right. I just want to be clear, though—I’m very cautious to attribute that to anything except we’re addressing a need that has existed for the last 20 years and will continue to exist in the next 20 years. We can’t control year-to-year what narrative is in the public or what’s going on externally. For us, it’s about building products that we think are better and make our customers more effective and safer at their jobs while making communities safer. We believe VR is part of that category. We see a lot of market demand, strong alignment with our long-term mission, and we’re proud to participate in this new category. We’ve got a team that’s very focused and excited about scaling it over the next several years.

We’ll take our next question from Erik Lapinski at Morgan Stanley. Go ahead, Erik.

Maybe going back to the Baltimore rollout of records. As you’re working through that, what’s the level of customization that a larger police department would be pushing forward with? Is the product modular enough that you can kind of work around what they might want, wondering how that process goes, and if it has altered the development path in any way from making it more customizable?

Sure. No, great question. Inherently, not only for us but for everyone playing in large, complex enterprise software, there is that advance. It’s clear as we continue to go forward that we’re really excited and building the right pieces in the right order, as we keep building up the product and winning, trying to delight our early customers. As Josh said today, this is a multiyear journey for us, and we are determined in our path to ultimately become number one in these categories, though we have an evolution that takes time. It’s one piece of the overall path of our sensors and software contributing more to the full portfolio of scenarios customers need to be successful daily. We feel fantastic about that rollout and about what Baltimore needs, and each of our early customers' needs as we move forward.

And we just got some feedback from the outside indicating that Erik’s question and John’s maybe not that well heard. So, John Godin had asked about virtual reality training, and Erik had asked about the level of customization required for Baltimore PD.

If I can ask one more: just on international traction in bookings there. Is that primarily TASER right now, or are you also seeing it pick up with the body cam side? I think the last time we asked, TASER was really leading some of the international expansion, but I’m wondering if body cam has followed?

The question is about what products are driving our international bookings. Thanks, Josh. Go ahead.

Yes. That’s a great question. The good news is we’re seeing both; it depends on the market. Some markets, we lead with TASER, and then we grow those into body cam customers, while in others, customers are leading with body cameras. We’re even seeing some large customers in the international market buy software-only packages from us in high volumes without body cameras. We’re particularly excited about that trend, and we feel well positioned just like in the United States, where we started with one product and have diversified and grown customers into adopting several of our products. We’re seeing that same thing happen in international locations.

Thanks, Erik. Do any of our analysts have any follow-up questions? No? Okay. Well, thanks, guys, for joining us. We’re going to have Rick close us out.

Thanks, Andrea. Hey, before you leave, if you have time to stick around, we’re going to play our quarterly earnings video. Thanks for joining. We look forward to updating you throughout the year. We’ll drop off after this video. The webcast will be posted to investor.axon.com. Roll video.