Earnings Call Transcript - AXON Q4 2020

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Hello, everyone. Welcome to Axon's Fourth Quarter 2020 Earnings Conference Webinar. I'm Andrea James, Senior Vice President of Corporate Strategy and Investor Relations. This is actually our fourth quarterly earnings over Zoom, so it's great to see faces again. Today, we have Axon CEO, Rick Smith; President, Luke Larson; CFO, Jawad Ahsan; Chief Revenue Officer, Josh Isner and Chief Product Officer, Jeff Kunins. First we're going to give prepared remarks and then we'll bring all of our analysts up into gallery view for Q&A. I hope you've all had a chance to read our shareholder letter, which was 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. If for some reason we lose Internet or Zoom connectivity, we'll make every effort 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 and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed further in our SEC filings. Finally, we really encourage you all to look at our updated ESG and corporate social responsibility report, which we published today in conjunction with our earnings. We are increasingly conscious of our social and corporate responsibility as our company and our shareholder base grows, and we're pleased to share this comprehensive report with you. Angel Ambrosio, whom you're familiar with on this call, is our Senior Manager of Investor Relations and ESG and we welcome you to reach out to us on this topic if that's interesting to you. Okay, go ahead Rick.

Rick Smith, CEO

Thanks, Andrea. Hi everybody. I want to start by talking about 2020. The conventional narrative is that 2020 was a terrible year. I'd like to offer a different perspective. Challenging times bring out the best in humanity. These are the times that inspire us to rise up to overcome to stretch ourselves. The hardest times become our finest hours. If we choose to focus on the negative there was plenty to see in 2020. But if we look harder we can see so many signs of hope and progress supercharged by a global play, nations sprung into the kind of arms race we should want to see competing ferociously to cure a pandemic and we all know the results. Multiple vaccines developed 10 times faster than ever before. We adapted to a world where travel was simply off the table. So we virtualized ourselves and we learned to zoom around the world for business. And we got to see our kids for dinner every night. My customer engagement has jumped more than tenfold as customers are now open to video conferencing. And we've enjoyed seeing you, our analysts, and our investor community face-to-face in our new quarterly conference Zoom calls. I don't mean to minimize the pain we all experienced in 2020. I understand and I share it. My mother passed away days before Christmas after contracting COVID. But even in that sorrow came progress as we came together and we healed some fractured relationships within our own family. I would not have chosen for 2020 to turn out as it did, but as we've said before we don't get to choose what the world throws at us, but we can choose how we respond. The urgency resulting from the intent social strike in 2020 is accelerating the world's readiness to move beyond bullets to a world where telling each other is no longer something we simply accept as some immutable facet of human society. It is supercharged our energy as we redouble our efforts to deliver TASER energy weapons that will outperform a traditional side arm before this decade is out. And our customers are embracing this goal. They have told us that the bar will be very high, but I'm confident our team will deliver. 2020 was also a year where Axon delivered incredible value to our customers and the communities they serve. As you can see, you can see it in our results. We knew that adversity would present opportunities for those individuals and those organizations that are nimble and adaptable just as ice ages create breakout opportunities for adaptable species to explosively grow in thereafter. In the weeks following the arrival of COVID in North America, we transformed our offices into adjunct manufacturing spaces allowing us to spread out, create social distance and continue to deliver exceptional results that far exceeded our most optimistic expectations. We didn't just deliver on our operational goals, we significantly outperformed them. I'm personally humbled by our team's ability to deliver exceptional results in a year filled with so much turmoil and adversity. We exceeded our goals and exited 2020 better positioned than we've ever been before from an operational, strategic and financial perspective. Here's a few highlights. We inked our first two programs of record with the federal government, including a $13 million US customs and border protection order for body cameras and digital evidence management. In the fourth quarter, we signed our largest TASER contract in company history, a $20 million order for TASER 7 from an international customer, eclipsing our record $15.5 million TASER order from the Department of Homeland Security in the prior quarter. In 2020, we passed $1 billion in total bookings with the majority of that coming from our core market of state and local public safety. In 2020, we also delivered the largest single contract deal in company history, a $46 million officer safety plan with one of our major city customers. On the product side, we launched Auto-Transcribe, deployed customers on both Respond and Records, debuted unique new capabilities like priority ranked video audit and countless software and device firmware improvements. At Axon, we are continuing to look forward. We had a recent executive planning session where we asked ourselves, where do we want to be at the end of this decade? And our answer was simple. Our vision is to be globally synonymous with our mission of protecting life by building the world's largest and most trusted network of safety devices and services. What an amazing opportunity to be part of such a talented team with such an aspirational mission. I'd like to conclude by telling you what I’m hearing from our customers today. Making us a key partner to transforming public safety, we hear stories daily about customers using our products to save lives and to protect communities. Our Net Promoter Scores are hitting new highs. And our customers are actively and enthusiastically supporting our mission to make the bullet obsolete so that officers will no longer have to make the most terrible choices. We know that we're welcoming a lot of new shareholders onto our growth journey. So thank you for joining us and for taking an interest. And with that, I'd like to turn over the call to our President, Luke Larson.

Luke Larson, President

Thanks, Rick. As 2020 showed us, a lot that happens in this world is outside of our control. Against that backdrop, Axon employees really showed up and engaged their best in the areas that matter the most. I want to give an emphatic thanks to all of our employees. Thank you. At Axon, we've built an amazing team, and that talent is a huge asset and competitive advantage that doesn't show up on the balance sheet. Our team is laser-focused on a clear mission inspired by our purpose and leaning in with an owner's mindset, with a maniacal focus on delivering value for our customers. In 2020, we focused on our commitment to the mission, to our customers and the caring for the health and safety of our employees. In 2020, Axon was able to outperform in a difficult year, because we built a phenomenal team. Looking to the future, our company has the talent, infrastructure and capabilities to manage challenging environments and thrive. The company earned this position over three decades by taking risks, making bold decisions, investing hundreds of millions of dollars in research and development, countless hours of engineering, tens of thousands of hours of customer meetings, and most importantly, maintaining an unfaltering commitment to our mission. As we look to 2021, we have four key objectives: one, grow the core; two, scale new products; three, unlock new markets; and four, drive efficiency to fuel growth. We're also taking care of the amazing team that we've built. Our employees' health and growth remains a top priority. We recently added Ginger, a mental health app providing 24/7 support to our employees, as well as rolled out LinkedIn Learning to the entire company. In 2021, we will continue to look for ways to support our working parents and caregivers. In 2021, we'll continue to invest in our people, products, and sales channels, helping individuals level up, aim higher, and push harder to make our mission a reality. I'll close out by talking about one of the areas of added investment, which allows us to go after a $2 billion total addressable market, and that is our investment in virtual reality training. As a former military officer, I saw how the Department of Defense's near-unlimited budget can create amazing training like markdowns filled with thousands of Arabic-speaking actors, huge multi-group training, as well as unmatched simulator training with pilots used for flight training. In law enforcement, though, they don't have the luxury of these enormous budgets or the benefit of having the majority of their time available to train. With virtual reality, we can leverage the best-in-class instructors and training to create scenarios that can be used across hundreds of thousands of officers, bringing the cost down to a very economical price that can democratize training, and Axon is poised to be a leader in creating this new category just like we've done with the TASER devices, our Axon Body cameras, and our digital – system Evidence.com. And we're going to do it again with the virtual reality training. In 2021, we intend to transform how agencies train our officers by addressing the inefficiencies around classroom, roleplaying and simulator training, and by leveraging VR, we can address their two biggest issues: budget and time. We'll accomplish this through three assets: First, we have an exciting product launch that we can't say more on but it is coming soon; second, we intend to regularly release new training modules; and third, we are doubling down on our community engagement training reforms. We're seeing encouraging signs on demand for this product, and we're excited about where it can go. Earlier I talked about the amazing team and culture we've built at Axon. Before I hand it over to our CFO, Jawad Ahsan, you want to learn more about that culture. I recommend you check out his book, What They Didn't Tell Me, you can get it on Amazon. So with that let me turn it over to our CFO, Jawad Ahsan.

Jawad Ahsan, CFO

Thanks, Luke. I want to start by talking about the number 28. I'm now referring to the number of days in this month, but rather three important milestones we hit as a company this quarter. We delivered 28% growth on revenue over 2019, 28% compound annual growth in revenue over the last five years, and we finished the year with 28% in adjusted EBITDA margins. Now before I dive deeper into these, I want to talk about something else, the perception of our two business segments. We've discussed with you at great length the investments we've been making in our pivot to a tech-enabled solutions company. The perception of our software and sensors segment is best described by letting the numbers speak for themselves. Year-over-year, total revenues in this segment grew 26%, and our ARR grew 37%. When I joined Axon in 2017 and our stock price was at $22, many investors told me that they viewed our stock as appropriately valuing our TASER device business with a free option on a high-growth software business. I think it's safe to say that we're now seeing some value in our stock price for our software business. But what about that TASER devices segment, the one that's been around since 1993? Was there maybe a perception that its best days are behind it? If so, we shattered that perception with our 2020 results. Our TASER Weapons segment grew revenue 30% year-over-year, outpacing even our fast-growing software and sensors segment. We're very proud of the TASER energy devices that we've built and believe that there's still a large base of untapped customers who have yet to adopt. So the 28% revenue growth over 2019 was really fueled by strength across the board in body-worn cameras and software, and especially in TASER devices. We feel that this validates our strategy to invest aggressively in both R&D and channel expansion. R&D to stay ahead of the innovation curve in all of our product segments and channel investments that will unlock new markets and new geographies. We're going to run this play again in 2021. When we look back over the past five years and the 28% CAGR on revenue, that's also the result of investments we've been making along similar lines. As we look ahead to the next five years, we're very excited by the next wave of new products and technologies that are going to become an important part of our growth story in their own right. Technologies like VR, which Luke just talked about earlier, and we feel can have a transformative impact on the critical area of training for law enforcement. Technologies like Axon Respond and our live streaming platform. What's particularly exciting with this one is the interest we're seeing outside of our core law enforcement market. For example, coronavirus in the vaccine rollout is top of mind for communities all over the world. A municipal security unit in Chile has been trialing Axon Respond live streaming to ensure the quality and security of the supply chain and transportation process for COVID-19 vaccine distribution in their community. Another technology we're excited about is our new ERP and CRM. Many people across Axon are working incredibly hard on upgrading these critical support systems and their associated processes, and they're already driving huge efficiencies as the early modules come online. Luke also talked about the importance of driving efficiencies to fuel growth. And we're laying the foundation today for a company that will be able to scale to $1 billion in revenue and well beyond. Now you might be wondering why I'm choosing to highlight our new ERP along with sexier technologies like VR and live streaming. And I'm doing it to highlight something I can sum up in one word: discipline. We have our sights set on some lofty goals by 2030, as Rick mentioned, but our feet are firmly planted in the here and now. I'm so proud of the discipline we exhibit as a company on a day-to-day basis. In our capital allocation decisions, our budgeting, our execution. This is a team that is absolutely dialed in and ready to build on our momentum. And with that, we're going to turn it over to questions.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Thank you, Jawad and team. Let's take our first question from Jonathan Ho at William Blair. Go ahead, Jonathan.

Jonathan Ho, Analyst at William Blair

Hi there. I just want to start out with sort of a tremendous quarter and the year that federal and international had. Can you maybe talk about what is driving sort of that increased demand? And is there sort of a broader mindset shift that you're seeing with either how agencies or national police forces are starting to look at the TASER?

Josh Isner, Chief Revenue Officer

Thanks, Jonathan for the question. Ultimately, I think it's just a lot of hard work that our team is putting in. A few years ago we said we were going to continue to focus on Tier 1 markets until we felt really good about earning the right to go into Tier 2 and Tier 3 markets. And now we're starting to see that kind of mechanism pay off. And this was a foundational year in 2020 in some of our Tier 2 markets. We're seeing new markets buy TASERs at high volumes and we're extremely excited for that trend to continue this year. And so we're really focused on growing the TASER business. And then earning the right to expand into other product lines in these markets and we're going to continue to execute day-to-day toward that end.

Jonathan Ho, Analyst at William Blair

Got it. And just as a follow-up, have state local government pressures created any sort of headwinds in terms of your pipeline of opportunities? Or is it actually the reverse where maybe this is opening up some opportunities just given your strong value proposition? Thank you.

Josh Isner, Chief Revenue Officer

I can't really offer an opinion on that, to be honest. I think it's more just we're focused on covering the market as best we can, not only in state and local but in federal and international as well. And by doing that, certainly, we feel like we have the best products in law enforcement and public safety, and we're going to continue to tell that story and make customers very happy. And turn them into evangelists for our company. And regardless of what pressures may or may not exist in any given year, we think that's the long-term winning formula.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Thank you, Jonathan. Analysts, we have you all in the queue and added you one by one as you joined the call this afternoon. There's no need to raise your hands, but we appreciate the questions. Our next speaker is Will Power from Baird. Please go ahead, Will.

Will Power, Analyst at Baird

Right, great. Yeah, this is a bit of a follow-up I guess to the previous question in the international comments. But just looking at TASER, obviously just a huge quarter. Any other color you can provide on the key underpinnings there? As you look at the upside in the quarter, what was the upside surprise if there was? Obviously, you had one big customer that looks broad-based more than that. Is it tied to certain geographies, certain types of local agencies versus federal? Anything else you'd call out with respect to that TASER strength?

Rick Smith, CEO

Yeah, sure. So, I think we had some visibility into some large deals in Q4, but not to get too specific. Some of the challenges in this environment are making sure we can deliver and get accepted in short periods of time. And we did get the order in time in Q4 and we're able to deliver it. We view that as kind of a 50-50 proposition in early November. The team did a fantastic job executing. But behind that one large order there were a series of mid-sized orders in international across all three geographies: the Americas, EMEA, and APAC. I think it just speaks to the work the team is doing to really focus in on markets that are now ready to move to more less-lethal solutions. And again, we believe we can parlay that into body camera adoption and records management adoption and virtual reality adoption and so forth over the long-term.

Will Power, Analyst at Baird

If I could stick a question for Luke, I know, as you talked about the key 2021 objectives you had four key ones. One of them was scaling new products. Wonder if maybe you could just update us with respect to Records and Respond, what are you putting in place to accelerate growth there? What does that cadence of opportunities look like as you kind of move through 2021 here?

Luke Larson, President

Yes. Well, we're seeing a lot of interest from our customers specifically around the entire Axon portfolio, where we see the biggest adoption of these capabilities is in our officer safety plans that we offer. I'm going to turn it over to Jeff Kunins to add a little more color on the specific product details.

Jeff Kunins, Chief Product Officer

Thank you for the question. We are very pleased with our progress in Records. A recent highlight is that 40 agencies have either signed on, are in deployment, or are actively using one or more modules of Records, including over a dozen that are transitioning from their legacy RMS. Additionally, we are seeing strong momentum with major cities. For instance, Atlanta recently went live with the standard use of force module in Q4, and Baltimore, previously announced as an upcoming full Records customer, is on track for deployment this year. We are excited about this ongoing momentum. As noted in our shareholder letter, we've seen a sevenfold increase in live streaming and engagement with the Respond for devices product over the past six months, demonstrating robust adoption across the board. Furthermore, we are particularly excited about the new additions to our product line, such as Auto Transcribe. Our unlimited Auto Transcribe package supports various scenarios, enhancing evidence management and introducing capabilities like priority ranked video audit, which assists agencies in utilizing their body camera data to ensure compliance and improve the effectiveness of their programs.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Thank you. Will, really appreciate it. Next question from Jeremy Hamblin at Craig-Hallum. Go ahead, Jeremy.

Jeremy Hamblin, Analyst at Craig-Hallum

Thanks, Andrea. Congratulations to the team on an incredible year. I wanted to revisit the international aspect for a moment, where you clearly have significant momentum, and I believe this question is directed towards Josh. In terms of the international sales cycle, which has historically been longer, it seems that the current momentum indicates a greater sense of urgency among the customers you're engaging with. I would like to know if the international sales cycle is starting to shorten and if you are closing these contracts sooner, or if this is simply the result of years of groundwork. It does seem like the sales cycle is getting a bit quicker.

Josh Isner, Chief Revenue Officer

Yes. Certainly. Thanks, Jeremy. I think it is compressing a little bit. And I think the other element we have is we've added to our international team pretty substantially over the last three or four years. I think it's probably started around 10 people in 2016 that were direct sellers and we've multiplied that by two or three at least. The result of that is we just have more activity in the pipeline quarter-over-quarter. So that pipeline is starting to come into fruition and there's certainly an element of the sales cycle seems to be speeding up a little bit, but we just have way more opportunities now every quarter and certainly it relieves a little bit of pressure of fewer opportunities, and we have more ways to get there now which feels great, and we're going to continue to focus on building that out and we're making some investments again this year in certain markets to create even more momentum. And hopefully, we'll continue to see that trend in the years to come.

Jeremy Hamblin, Analyst at Craig-Hallum

I wanted to ask about the new product launch, even though I know you can't share many details. Historically, significant product launches have meant a slight decrease in margins due to investments in sales and research and development. Given that your revenue base is considerably larger than before, I'm curious if there's expected to be margin pressure this year. Can you provide some insight into the extent of this impact considering the new product launch and other developments?

Jawad Ahsan, CFO

Yes, I'll take this one. Jeremy, it's a good question. We are not expecting any margin drag from the new products that we're launching. We're actually expecting some margin expansion. In 2020, we were looking at some of the headwinds that we had on TASER. We also had some customer mix as far as international shipments, and that's behind us. And so in this year even with the new products we're launching, for some of the newer ones specifically like VR, there's a little bit of a drag from a hardware perspective, but it's so small as to be negligible. Overall, we're not expecting any drag.

Jeremy Hamblin, Analyst at Craig-Hallum

Last one for me, real quick on supply chain. So, as you've gotten more federal contracts and so forth, and obviously we know how you're producing TASERs and the cameras. Has there been any pressure to alter your supply chain? Is that something that you're considering down the road and where you're sourcing cameras and how the cameras are coming?

Luke Larson, President

We've got decades of experience producing our TASER devices where ICAR is restricted, which means we have to manufacture in the US. And so we feel really, really good about that process. On the camera side, it's something that we definitely keep an eye on. As it sits today, we still feel really, really good with the way that we manufacture and then kind of load the final firmware on the product. And so, I don't see anything from kind of the supply chain side; I would defer to Josh if he's hearing anything from the customers.

Josh Isner, Chief Revenue Officer

Yes. I think we're in a fantastic position inventory and supply chain wise. Our customers have been delighted that we've really at times accelerated the speed at which we're able to deliver large deals, and that's a huge credit to Josh Goldman and our entire operations team. They're just doing a fantastic job supporting our customers. And this is actually over the years the best I've ever felt about our ability on the supply chain and logistics side to please customers. So, I'm really, really bullish going into this year in that regard.

Jeremy Hamblin, Analyst at Craig-Hallum

Great. Congrats and best wishes this year. Thanks.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Thank you, Jeremy. Next question is from Erik Lapinski at Morgan Stanley. Go ahead, Erik.

Erik Lapinski, Analyst at Morgan Stanley

Hi. Thanks, and congrats on the quarter. Last month, you announced a deal with a private security company. And I guess I'm just wondering what kind of opportunity do you think that market can represent? Are you seeing interest from other private customers? Or is that maybe a one-off type deal that wouldn't be something we could see again? And are there investments you could make to attack that?

Josh Isner, Chief Revenue Officer

Certainly, we believe there are other opportunities out there. We see the demand come from a variety of different customers, and we continue to engage with private security firms to understand their needs and how we can best serve them. We're optimistic about the potential growth in this sector as we showcase the value of our products.

Erik Lapinski, Analyst at Morgan Stanley

Got it. That's helpful. I'd like to ask about the dispatch side. You've mentioned in recent quarters that you're enhancing capabilities, which might lead some customers to delay their adoption. Can you provide an update on that? Do you think the product is ready? Is there a sufficient roadmap for larger police departments to consider your solution and possibly postpone a replacement? It's still early, but any insights you can share would be appreciated.

Jeff Kunins, Chief Product Officer

Sure. Thanks Erik. It’s a great question. I think first, like we said before, dispatch or really more broadly this idea of a real-time operations platform is a multiyear journey. And so we're very confident that over the next three to five years, we're going to wind up being number one in what's traditionally called the legacy computer-aided dispatch market, but our sights are even broader and more ambitious than that. But as Jawad said earlier, our feet are also very firmly planted in the present. And so like right now today as you know we have one city live on our dispatch platform and we have multiple more that are signed and sold in the queue for deployment over the course of this year and going forward. So we feel very good about that pipeline. Just like we talked about records and really in any software category where you have an insurgent trying to unseat legacy competitors, which in this case we're the insurgent; there's this journey of building up in the right way the capabilities needed to be the right fit for each successive chunk of the market, while adding on top of that your unique differentiation that makes you a compelling reason to switch. And that has nothing to do with Axon or CAD or records; that's just the physics of any disruptive insurgent category like this. And we feel really good about where we're positioned and where we're going even though it's early. And in the case of dispatch, the sequence or ladder there is first being great for law enforcement only PSAPs as opposed to ones that also do fire and medical, but sort of the mid-sized cities, and then actually after that gearing up to also cover fire and medical, which we're actively working on this year. And then ultimately to be not only the largest cities but the multi-jurisdiction PSAPs. So we feel fantastic about our trajectory, but it is early in that journey, but we need to keep you apprised as we win and deploy customers along that way.

Rick Smith, CEO

Let me share an experience. I spoke with a police chief from the first agency in the world, or at least the United States, that is live streaming every dispatch call. It was incredibly rewarding to have that conversation and see our ideas coming to fruition. The month he shared with me was a complete game changer. Dispatchers are now assisting new officers in real time. He recounted a situation where the dispatcher heard a thud that the officer on the scene did not notice, as the officer was focused on safety. The dispatcher, acting as a neutral support, alerted the officer to check the sound, which turned out to be a dropped gun that the suspect tried to hide. This was critical information in the unfolding situation. Furthermore, having dispatchers watch the calls gives them a much deeper understanding compared to just listening to radio transmissions. They are able to oversee every incident in real time. Reflecting on last year's events, there is now discussions around how agencies select the right videos for review. In this agency, every video is reviewed not by a supervisor but by a neutral dispatcher. So if someone mentions concerns like not being able to breathe, the dispatcher can immediately call for a supervisor to check the situation rather than waiting weeks to learn of the issue. This represents a transformative new capability that we can uniquely offer. There is a dynamic balance between my responsibilities and Jeff’s focus, which ensures we deliver core functions while integrating new capabilities effectively. Having Jeff on the team has been invaluable as we navigate how to combine legacy features with innovative ones to disrupt existing competitors.

Jeff Kunins, Chief Product Officer

So one last tiny bit just to put all that together is exactly that combination of why we declare respond and have a real-time operations platform that's the real category. Historical CAD is cute. Real-time operations platform is skating to where the puck is going. And from a business and this insurgent standpoint, the key is just like how with records an agency can adopt standards are use of first module of reps side-by-side with their legacy RMS even before they might be ready to make a full migration, Respond for devices what we used to call at what there what Rick was just referring to our live streaming any PSAP. In conjunction with their law enforcement agency can easily deploy Respond for device right in their PSAP alongside their legacy CAD even if they aren't ready to switch over for their full CAD, but that not only gets them into these scenarios earlier, but it also gets them acculturated to our experience, and we think that's ultimately an accelerator to when they're ready to consider a full migration.

Erik Lapinski, Analyst at Morgan Stanley

Yes. That's awesome. Thanks for sharing that example. I mean that's definitely the vision coming to life. So congrats.

Rick Smith, CEO

Thanks, Erik.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Thank you, Erik. Next question from Derek Soderberg at Colliers. Go ahead, Derek.

Derek Soderberg, Analyst at Colliers

Thanks, Andrea. So I wanted to start with consumer TASER. It looks like that was pretty strong again this quarter. I was wondering if you can, sort of, elaborate on what drove that strength again? I know there have been some tailwinds due to the pandemic and some other things that happened in 2020. Just curious as to your thoughts on that business as we, sort of, move past that a little bit. How sustainable is consumer TASER strength? And, I guess, maybe longer term if you can update us on the strategy there to penetrate the non-lethal weapons market?

Luke Larson, President

Yes. Thanks for the question. Our consumer business doubled in revenues year-over-year 2020 over 2019. And some of that early in the year was the pandemic and some of the just overall lift in firearm sales and we were certainly a beneficiary of that. We did put a new general manager of the consumer business in place around the second quarter last year and he's really up leveled our game. He is a marketing background, Matt Goren. He's got a very strong background in marketing and he's tried to move things for us. It actually had a very immediate effect and we've seen that momentum continue into 2021, which is how we know it's not a fluke. We've got some pretty lofty goals for the consumer business. We've got two new products that we're bringing to market by the end of this year. And longer term our ambition as a company is still to make the bullet obsolete, and that doesn't just happen with building a better TASER device for law enforcement. We're planning on building a consumer device that also does the same thing. And then I want to turn it over to Rick and let him talk a little bit about his vision as well.

Rick Smith, CEO

We began this business in 1993, selling the original TASER to police departments. Initially, we decided to pivot towards the consumer market for two key reasons. First, we have the potential to save more lives, as police officers are involved in numerous lethal force incidents each year, while private citizens account for 35,000 to 40,000 homicides annually. This allows us to have a greater impact on saving lives. Second, from a market scale perspective, the consumer market is significantly larger. While law enforcement is important, the consumer market has a much higher dollar value and unit volume. Therefore, we are dedicated to growing in the consumer space for both business and mission-driven reasons. I believe we will reach a tipping point when we can demonstrate that our product outperforms a standard nine-millimeter firearm. This would be transformative, not just for U.S. law enforcement but for police agencies worldwide, which generally have a different relationship with firearms than the U.S. Take Iceland, for example; if we can outperform their service weapons, we could potentially become the standard weapon there. If we can assert that our device can replace firearms, every police force that currently uses firearms would become a customer, driven by significant political and moral pressures to adopt the safer alternative that saves lives. This, in turn, would also enhance the consumer market. We are still in the early stages. We entered law enforcement in 1999 to validate our technology so that we could reenter the consumer market, and that goal is still unfolding. Additionally, we appointed Jawad to lead the consumer segment a couple of years ago, and he deserves recognition for revitalizing that area and integrating new ideas, which is one of his passion projects that is beneficial for our consumer initiatives.

Derek Soderberg, Analyst at Colliers

Great. Thank you for the detailed math. And as my follow-up, Rick, last quarter you had sort of mentioned the conversation you had had with U.S. congressperson. I guess, now with the new administration, new representatives, I guess I'm curious as to how those conversations have evolved over the last quarter. Are you sort of feeling that same sense of optimism around maybe sort of a sweeping police reform bill that includes body cams, or how is your sort of sense of optimism changed?

Rick Smith, CEO

I feel quite optimistic. At times, I need to remind myself to stay grounded. The movement towards body cameras, less lethal weapons, and our initiatives are truly grassroots. There has been some discussion about potential federal legislative action, but I don't want to speculate on that. If it occurs, it could be beneficial, but it’s not part of our plans. We believe we are effectively gaining the support of agencies and communities by providing solutions that protect careers and lives, while alleviating the stress of having to use lethal force and maintaining integrity in controversial situations with the support of body cameras. I wouldn’t say there has been any notable change, positive or negative, at the political level. We continue to witness strong support at the state and local levels, where these important decisions are actually made.

Derek Soderberg, Analyst at Colliers

Great. Thanks so much.

Rick Smith, CEO

Awesome. Great questions.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Okay. Thank you, Derek. Our next question is from Keith Housum at Northcoast. Go ahead, Keith.

Keith Housum, Analyst at Northcoast

I want to reiterate my congratulations to the team on a successful quarter and a fantastic year. If I could delve a bit deeper into the TASERs performance for the year, there has been significant growth. Can you share how much of that growth is attributed to nontraditional state and local agencies? You mentioned various initiatives related to federal, jail, corrections, and security. It would be helpful to have some detail breaking down the revenue sources between the traditional and new ones.

Josh Isner, Chief Revenue Officer

Yes, I appreciate the question, Keith. International growth has significantly contributed to the increase in CW weapons. We've discussed this at length already. The federal sector also had a strong performance last year with several new agencies adopting our newer CWs. This year, we expect to see continued growth in our federal business and are excited about several CW opportunities. In the state and local markets, we have been gaining momentum with TASER 7. There are ongoing questions each year about whether growth is slowing down, but last year state and local bookings rose nearly 30%. This growth was fairly balanced between body cameras and TASERs. Overall, our team is doing an excellent job of ensuring continued growth in the TASER line. We firmly believe that every law enforcement officer is better off carrying a TASER, and we have much work ahead to make that a reality. Our focus remains on growth in the federal, international, and state and local markets, where there is still significant potential.

Keith Housum, Analyst at Northcoast

Okay. Appreciate it. And I would be remiss if I didn't ask the question about the guidance. It looks like the guidance for the full year next year is about 12% growth year-over-year. You obviously got some great tailwinds at your back, but you're obviously going in some huge numbers at your content. If I look at cartridges I look at the consumer devices, obviously, some good tailwinds for you. And you guys have never grown only 12%, I think, at least in the recent history ever. What gives you the indication that revenue growth is going to actually slow down so much year-over-year?

Josh Isner, Chief Revenue Officer

Yes, we are definitely not finished. Over the past couple of years, we've experienced growth in the mid- to high 20s. Additionally, those years have typically had a stronger performance in the latter half, with Q3 and Q4 collectively being significantly higher than Q1 and Q2. As we approach early February, our aim is to sell far more than 760, and each year, we strive to surpass our growth from the previous year. However, we haven't yet seen the pipeline develop for the second half to the extent that would allow us to be more optimistic in our guidance. In the first quarter, we need to be responsible and disciplined in how we set our expectations. This will be something we review each quarter, and as the pipeline for the second half develops, we will share more updates accordingly. For now, we are starting with the target of 760. Despite this, we have many positive factors working in our favor, and we are focused on achieving another outstanding year in revenue.

Keith Housum, Analyst at Northcoast

Okay. Appreciate. Thank you.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Okay. Anybody have anything to add? We're not seeing any slowdown just want to make that clear. Thank you.

Jawad Ahsan, CFO

Andrea, I actually might piggyback on that from an EBITDA standpoint for guidance, just how you should think about that provide some more context. So ever since I joined Axon, it's been really important to me that we're demonstrating both growth on our top line as well as driving leverage on our bottom line. And we've not only done exactly that over the last few years, but it's also been a central tenet of our long-term guidance as you know. So it's super important to us that we're continuing to invest to stay ahead of the innovation curve. That's another sort of thing that we're trying to solve for. So every year we put together an operating plan or a budget that's trying to solve for those three things; top line growth driving leverage and investing for growth. And it's actually super hard to do, but we've got a very talented management team and that's what we've been doing. However, one of the dynamics, as Josh pointed out, of our business is that our revenue profile throughout the year is back-half weighted. And even then it's really more concentrated in Q4 than in Q3. So what happens is if we hit our revenue targets, our EBITDA comes in on plan on our internal plan. And we drive that a little bit of incremental margin expansion while still having invested in things like R&D or the channel, but if we beat our revenue targets especially in the fourth quarter, it's too late in the year to reinvest that upside. So we return it to shareholders, which is exactly what you saw this past quarter. So that's how you should be thinking about it from an EBITDA standpoint, Keith. Our base plan is solving for top line growth, incremental leverage, and investing for growth. And to the extent that we exceed on the top line that will allow us to drive even more leverage.

Keith Housum, Analyst at Northcoast

Got it. Thank you.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Thanks, Jawad. Okay. Last question I believe unless anybody has follow-up is from Scott Berg at Needham. Go ahead, Scott.

Scott Berg, Analyst at Needham

Great, thanks. Congratulations on the impressive quarter. I have a couple of questions. First, Jawad, could you clarify whether the large TASER sales in the quarter included the entire $20 million order for TASER 7s, considering it's international and there has been a historical tendency to purchase different models? I just wanted to confirm that.

Jawad Ahsan, CFO

Yeah, Josh why don't you weigh in. That was all TASER 7.

Josh Isner, Chief Revenue Officer

It was TASER 7 and accessories associated with cartridges, batteries, holsters and so forth.

Scott Berg, Analyst at Needham

No. Got it. And then just as a part of that is were they all purchased on a subscription plan? Or were they kind of an upfront product purchase? And I saw the mix in the quarter certainly downshifted for the mix of TASERs on subscription?

Josh Isner, Chief Revenue Officer

Yeah. It's a great question Scott. So for us in Tier 1 markets as well as in the United States, we do sell TASER 7 on subscription. But in Tier 2 markets and Tier 3 markets, we actually sell TASER 7 in a similar bundle, but it's available for an upfront purchase. The reason we do that is twofold. Number one, oftentimes there's distributors in the middle of the deal and that complicates how the subscription would work. In this case, there was no distributor. But part 2 is we don't have a very strong well-documented payment history with some of these first-time buyers for large TASER orders. And thus to protect the company and shareholders we do ask to be paid upfront so that we're not recognizing revenue ahead of getting paid more or less.

Scott Berg, Analyst at Needham

That's impressive. My final question is whether the increase in live stream usage by seven times from April to December is showing any impact on the sales cycle. I understand this comes from a small base since you only started getting those devices into customers' hands at the end of last year. Are you able to leverage those customer experiences to convert new customers who are undecided about purchasing the AB3?

Rick Smith, CEO

Josh I'll let you take that one.

Josh Isner, Chief Revenue Officer

Yeah. We're really excited about where live streaming is going. Certainly, I think over this last year, we've seen a ton of very interesting use cases for the product, and we continue to see more and more. This is something that as new body camera customers that are purchasing AB3. We are seeing a reasonable number of them buy live streaming on day one and then customers who have been upgraded to AB3 are trying live streaming early and often, building it into their budget in the out quarters. And so under both kind of use cases we are seeing an uptick in live streaming and we think this is going to be central to the value proposition across all of our products long-term. So certainly, it's an encouraging sign.

Jeff Kunins, Chief Product Officer

Yeah. I think the one thing to add to that is that, when people buy access to respond for devices even in addition to or instead of if they're not ready to use live streaming per se simply activating their use of that LTE chip and the camera unlocks a bunch of other scenarios as part of our software, including simply having accurate location for 100% of their evidence, which makes it easier to tag and find things later for compliance, as well as the transcription scenario I was talking about earlier where they can now configure us that all of the audio from their video automatically goes up to evidence.com immediately upon finishing the recording, so they can move even faster on some of the evidence management pieces. So response for devices, we love the live streaming scenario, but there's so much more that they unlock by buying that add on.

Scott Berg, Analyst at Needham

Great. Congrats on the wonderful quarter. Thanks everyone.

Andrea James, Senior Vice President of Corporate Strategy and Investor Relations

Thanks, Scott. I wanted to build upon Josh's answer on the pager subscription question just real quick. So those Tier 2 markets are the markets that we're a little bit newer to or we don't have always the established payment histories that we would have in Tier 1. Tier 1 tends to be the United States, the UK, Australia, Canada those English-speaking markets, and Tier 2 are ones where we're new. And so we feel confident that over time we're going to be able to drive pager subscriptions in those markets, just like we did in the US and in the UK, but it's still early and we also don't have the payment history to extend the credit to do that today. Okay. Are there any other questions? Did anyone put their hand up? No. Okay. I think Rick we'll have you close us out.

Rick Smith, CEO

Awesome. Thanks Andrea, and thanks everybody for joining us today. Obviously, we're delighted to be able to turn in results like that, and I couldn't be more proud of the team. I was just sitting back noticing and listening to my team field the questions, it's just been amazing to see us come together, and it's been a challenging environment. But what a year to have turned in, I couldn't be more proud of everybody who helped make that happen. Many of our employees and team members that are tuned in listening thank you for just phenomenal effort in a crazy year. So, enough celebration on the great results in 2020. It's time to get to work on 2021, and we look forward to talking to you all on our next quarterly update. Thanks, and stay safe.