This post will briefly explore Axon Enterprises: the global leader in public safety technologies. I became interested in Axon Enterprises in the last year due to their evolving business model (subscription based) and the significant lack of competitors within the industry.
Axon rose to prominence following the development of the Taser electroshock weapons. The core aims of Axon are defined as reducing social conflict through the establishment of a fair & effective justice system. Axon has claimed that they believe they are ‘creating a sustainable and profitable business model while solving society’s most challenging problems’.[1] The financial strategy entails selling the technologies through subscription plans that ‘generate recurring revenue and cash flow and demonstrate leverage as we scale’.[2] Axon is currently split into two main segments: the Taser aspect of the business comprises of the development, manufacturing and sale of conducted energy devices (CEDs). Taser devices were first introduced in 1993 and have since been adopted by the majority of US police departments. The appeal of Taser devices has been mainly attributed to the fact that bullets become less necessary.
The second component of the company is the software and sensors aspect entailing on-officer body and in car cameras (Axon Body and Flex) in combination with ground-breaking cloud-based digital evidence management software. Body cameras have successfully addressed the problem of time consuming report writing by largely eliminating their necessity. The cloud software has had an extreme impact on the industry due to its role in allowing law enforcement to ‘capture, securely store, manage, share and analyze video and other digital evidence’.[3] Furthermore, out of the 69 major metropolitan area police departments in the US, 46 use the Axon network.
Evidently, Axon has seen ongoing success due to their ability to address problems in society otherwise ignored by the public safety industry. The competition environment has also played a key role as Axon have emerged as police departments are extremely attracted to the concept of paying a single fee for tasers, body cameras, and footage analysis to the point that finding several separate providers would be a financial and logistical pain. Competition in the industry is defined by ‘product performance, product features, battery life, product quality and warranty, total cost of ownership, data security, data and information work flows, company reputation and financial strength, and relationships with customers’, all of which Axon is currently thriving in.[4]
One of the main contributors to Axon’s success in recent years has been their effective means of promotion. New products are initially implemented for free to police forces in order to drive growth: ‘when Axon pivoted toward body cameras, it decided to give them away for free, along with one year of access to Evidence.com. Now, such subscriptions come with free upgrades and a free year of Axon Records’.[5] This method of promotion has been very effective for Axon, however, this can lead to profits taking longer to hit the income statement. Nonetheless, this has not prevented Axon from being extremely popular with investors due to the monthly subscription model resulting in a readily available cash flow.
Ultimately, the subscription based business model implemented by Axon is providing them with consistent competitive advantage as it locks clients down into their ecosystem.
[1] 2019- 10K Annual Filing SEC
[2] 2019- 10K Annual Filing SEC
[3] 2019- 10K Annual Filing SEC
[4] ‘The Top Defence Companies to Watch in 2020’, Baystreet (January, 2020). http://www.baystreet.ca/stockstowatch/7205/The-Top-Defense-Companiesto-Watch-in-2020
[5] Brian Stoffel, ‘Why You Shouldn’t Pay Too Much Attention to Axon’s 2020 Forecast’, (March, 2020). https://www.fool.com/investing/2020/03/03/whyyou-shouldnt-pay-attention-axons-2020-forecast.aspx
Financial Institutions 1850-2020 