INVESTOR PRESENTATION | A X O N E N T E R P R I S E | J u n e - - PowerPoint PPT Presentation

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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 statement This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities


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INVESTOR PRESENTATION

| A X O N E N T E R P R I S E |

J u n e 2 0 2 0

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Safe-harbor statement

This 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

  • bjectives 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

  • n 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.

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PROTECT LIFE CAPTURE TRUTH ACCELERATE JUSTICE

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to stun.

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Axon is building the future envisioned by Gene Roddenberry

  • f Star Trek fame, where technology helps elevate humanity.

The TASER was directly inspired by Captain Kirk’s Phaser.

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  • 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)

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Our mission

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Axon’s Independent AI and Policing Technology Ethics Board

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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 Appleseed Social Justice Non-Profit EFF Google Seattle Chief of Police Chief Inspector of Irish National Police Boston Police Commissioner AI Ethicist: Oxford’s Future of Humanity Institute & OpenAI NYU The Policing Project National Police Foundation (Retired) Police Chief (Retired) Privacy Expert Stanford / Microsoft

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Axon leadership has resulted in an attractive financial profile

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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

$174mm

Annual 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

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25+ years of transforming public safety with technology

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Evolving public safety ecosystem

AXON 1.0

Pre-2010

AXON 2.0 2010-2019

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

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PROTECT LIFE PROTECT LIFE CAPTURE TRUTH

AXON 3.0 2020 & beyond EVIDENCE.COM

Smart Devices + Workflow + Intelligence Smart Devices + Workflow Devices

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Large TAM through value-added new products and markets

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TAM by product TAM by market

Law Enforcement 54% Corrections, Fire, and Other 24% Enterprise 8% Consumer 7% Federal 6% BWC / DEMS $11B TASER $5B Fleet $3B Dispatch $2B Consumer Self-defense $2B AR / VR $2B Records $2B Axon Air $1B

$27B TAM

AR / VR – augmented reality / virtual reality BWC – body worn cameras DEMS – digital evidence management system

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Cloud-driven strategic growth drivers

Communications Cameras De-escalation Productivity

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Time

Officer leaves Officer on scene Justice system Citizen- captured evidence Write and file incident report

Shorten More 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

  • fficers to arrive on

knowing the most relevant and critical information A TASER device may

  • r 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

  • fficers’ time

Incident data and post- arrest interview video are used and viewed by prosecutors, defense attorneys, media, the community and the public 911 Call and Dispatch

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Cloud-driven strategic growth drivers

Communications Cameras De-escalation Productivity

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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

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Axon trains for unbiased and empathetic public safety

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Cameras = transparency and trust

FLEX SIGNAL SIDEARM BODY FLEET 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 3

with LTE-live streaming began shipping Sep. 2019

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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

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Transforming communications beyond the radio

Synchronized video recording for all

  • fficers on-site

GPS enabled heatmaps Integrated public safety suite for

  • ptimal visibility and control

Real-time view of

  • fficer presence and

devices LTE live streaming for real-time situational awareness

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FINANCIAL OVERVIEW

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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

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$40 $61 $88 $104 2017 2018 2019 LTM

Adjusted EBITDA ($ millions)

12% 15% 17% 18%

Strong growth with scaling profitability

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$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 reconciliations

1 Rule of 40 defined as revenue growth plus adjusted EBITDA margin

40% 37% 43% 46%

Rule of 401

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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

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Strategic R&D driving to 70%+ target gross margins and robust

  • perating leverage

Commitment to drive leverage TASER Software & Sensors

70% 70%

Long-term target model Long-term target model

62%

2019 Gross margin

53%

2019 Gross margin

Axon consolidated

2019 Adj EBITDA margin

17%

Long-term target model

30%

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TASER Fleet BWC + DEMS Dispatch Records AR / VR Air

Growth R&D Existing products Sustaining R&D

Federal Corrections Enterprise

Sales investment New products Existing customers New customers

x

Note: Long-term targets exclude share-based compensation Refer to appendix for Non-GAAP reconciliations AR / VR – augmented reality / virtual reality BWC – body worn cameras DEMS – digital evidence management system
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+ Products & Bundles + Super Powers + Users & Nodes + Data & AI

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Axon’s Path to 2030

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TASER will

  • bsolete the

pistol AI will eliminate paperwork Cloud & IoT will transform communications Axon will reimagine public safety

BY 2030, WE BELIEVE

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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

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APPENDIX

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Strong, engaged independent board of directors

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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

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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.

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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 X2 Unlimited ($36/mo) TASER 7 Basic ($40/mo) TASER 7 Certification ($60/mo) Body-Worn Camera Unlimited Storage ($89/mo) Axon Fleet Unlimited ($129/mo) Legacy Officer Safety Plan ($109/mo) OSP 7 ($149/mo) OSP 7+ ($229/mo) Revenue $ Gross Profit $ Gross Margin % Total Company Target Gross Margin 70%

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$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 fee Illustrative 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

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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