INVESTOR 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
| 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 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
Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Such forward-looking statements included in this presentation are based
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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Axon is building the future envisioned by Gene Roddenberry
The TASER was directly inspired by Captain Kirk’s Phaser.
CONFLICT
COMPLAINTS DOWN 88%2 USE OF FORCE DOWN 42%2
EFFECTIVE JUSTICE SYSTEM
GUILTY PLEAS UP 20%3 OFFICER COURT TIME REDUCED BY 70%4 ~200,000 LIVES SAVED FROM DEATH OR SERIOUS INJURY1
BULLET
1 M.W. Kroll Study (2009) 2 Mesa On-Officer Body Camera Field Study (2014) 3 Newport News Case Study (2015) 4 Queensland Police Domestic Violence Case Study (2017)5
Our mission
Axon’s Independent AI and Policing Technology Ethics Board
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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
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
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
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
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
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
knowing the most relevant and critical information A TASER device may
deployed when responding to an
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
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
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 vehicleNote: Image on right is illustrative and represents Axon’s vision
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Transforming communications beyond the radio
Synchronized video recording for all
GPS enabled heatmaps Integrated public safety suite for
Real-time view of
devices LTE live streaming for real-time situational awareness
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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
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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 margin40% 37% 43% 46%
Rule of 401
High visibility with significant revenue from recurring bundles
Note: Annual recurring revenue includes recurring license, integration, warranty and storage revenue.
$18 $46 $83 $122 $174 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20
SaaS Annual Recurring Revenue ($ millions) % Total Revenue Tied to Subscription Bundles
34% 46% 55% 71% 2016 2017 2018 2019
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Strategic R&D driving to 70%+ target gross margins and robust
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
+ Products & Bundles + Super Powers + Users & Nodes + Data & AI
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Axon’s Path to 2030
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TASER will
pistol AI will eliminate paperwork Cloud & IoT will transform communications Axon will reimagine public safety
BY 2030, WE BELIEVE
Key Considerations
leverage
process
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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
Director
Director
MARK W. KROLL, PH.D
Director Note: Independent directors
Axon bundle monthly pricing assumes five years, or 60 months, per contract. Revenue shown includes any initial hardware purchase required, which may not be included in the monthly fee. Bundle gross margins exclude unallocated manufacturing overhead. Future hardware upgrades assume a 15% increase in bill of materials cost over current generation hardware. Actual total company gross margins may be lower than target due to sales discounts, trade-in credits, lower margin professional services revenue, third- party hardware sold as a pass-through, unallocated manufacturing overhead, customer purchases of lower-tier offerings that are not pictured, and costs related to hardware returns.
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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%
$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