For Axon Enterprise (NASDAQ: AAXN), 2018 is all about new products. The company is introducing a holster that will automatically turn on a police officer's body camera whenever they draw their gun; a new vehicle-mounted camera system; and a new records management system. The car camera product, known as Axon Fleet, has hit the market and it's quickly gaining traction with law enforcement users, which is a great sign for investors.
Axon Fleet isn't just any new product -- it could be a big growth driver for the company. Its revenue will be incremental to the tasers and body cameras that are Axon's core products because it's an additional tool for the same customers who already patronize the company, which should improve profitability as well as providing growth.
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What is Axon Fleet?
Axon Fleet is a dual-camera system for law enforcement vehicles -- one faces forward from the dash, and the other faces into the back seat. It also takes a lot of the work out of the system for officers. Body cameras can be a bit cumbersome functionally because officers have to put them on, make sure they are turned on when an incident might happen, and place them in a dock to upload the data at the end of the shift.
Axon Fleet automatically uploads data to Axon's Evidence.com cloud service. For $129 per month, the department gets the two cameras, an Evidence.com vehicle license with unlimited storage, one hardware upgrade over a 5-year term, and an Axon Signal unit. Axon Signal is a sensor that can be attached to a squad car to automatically turn on all Axon cameras in range whenever its siren is turned on, taking another friction point out of officers' hands.
Axon Fleet can make recording and offloading data a simple process for police officers, and there's already evidence law enforcement agencies see the value in the system.
The money in Axon Fleet
According to the company, 2,601 Axon Fleet in-car video systems have been ordered since the beginning of the fourth quarter of 2017 -- meaning 5,202 cameras. That may seem like a small number compared to the 89,808 Axon Body cameras sold in 2017, but it's incremental new revenue, and every Fleet system will generate more revenue after it's deployed in the field.
On top of the camera purchase, Axon offers a router for offloading data for $1,700, and other services that can generate thousands of dollars of additional revenue from each location. But for context, I think it's important to compare the fleet product to Axon Body.
Not all law enforcement contracts are the same and customers choose different buying options, but the list prices for service agreements for Axon Body and Axon Fleet look like this:
|Product||Axon Body||Axon Fleet|
|Subscription price per user/vehicle||$79 per month||$129 per month|
You can see that Axon Fleet generates 63% more revenue per unit in the field than Axon Body. Given the early sales numbers, I think it's reasonable to expect the company to sell at least 20,000 Axon Fleet systems per year (less than a quarter of the number of Axon Body cameras sold last year), which would generate $31 million in subscription revenue at list prices. Since these are long-term contracts, that would be recurring revenue, and the service contracts would be additive to revenue each year.
The $31 million projection doesn't include any sales of routers ($1,700 per car) or offloading Wi-Fi station (up to $32,980 apiece). If Axon Fleet does well, it could add 1% to 2% revenue growth onto last year's $343.8 million base, so this isn't a factor investors should overlook.
Axon's growth plans are playing out
Axon Enterprise continues to leverage its product lineup to promote new offerings and gain a deeper foothold in the law enforcement market. This strategy gives it the opportunity to grow, both by reaching more customers and increasing the revenue generated by each customer. The company had $343.8 million in revenue last year, but that's just the beginning. The sales we already know about in the last two months will add at least $4 million in annual revenue from sources that didn't exist last year, and we still have most of 2018 to see Axon Fleet grow.
Management predicted 16% to 18% revenue growth at Axon Enterprise for 2018, but if new products gain traction like Axon Fleet has, that forecast could be a hurdle it clears with ease. We still haven't seen the Signal Sidearm, the new holster, nor the new records management system, which could become a critical tool for law enforcement. By the looks of it, Axon Enterprise has a lot of growth coming.
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