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Josh Isner is the president of Axon Enterprise and has been with the company for over 15 years. In this podcast, he joins Motley Fool analyst Jason Moser to discuss:
- Why Axon is like the Apple of law enforcement.
- How immersive technology improves police training and retention.
- The role of drones and humanoids in public safety.
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This video was recorded on Dec. 15, 2024.
Josh Isner: We’re seeing virtual reality as a major disruptor in training. The reason is retention. We see that when you train in virtual reality, retention goes up about 40% versus conventional in person training, and it makes sense because you’re living those scenarios in a very real, convincing way. You’re not firing taser probes at a person running around in a Velcro suit or at a stationary target, instead you’re confronting real world scenarios that are modeled after real incidents that have happened in policing, and you’re training on those under tremendous stress. The best part of all is, you can do it as many times as you want in as many different locations as you want.
Mary Long: I’m Mary Long, and that’s Josh Isner. He’s a president at Axon Enterprise. Axon builds tasers and body cameras for law enforcement officers. They also have a cloud based evidence management system and immersive augmented reality technologies that help police departments better train and prepare officers for stressful, very high stakes situations. Fool analyst Jason Moser caught up with Josh to discuss why Jason thinks of Axon as the Apple of its industry, the ways Axon is using artificial intelligence, augmented reality and drones to save lives, and how humanoids could be the next big innovation in law enforcement.
Jason Moser: I like to view Axon as the Apple of public safety, and that’s a compliment in every way. You guys make market leading hardware. You’ve developed a tremendous ecosystem of software and services to support it all. Can you just give us a quick breakdown of the actual business? What are the major segments of the business and what are you guys excited about these days?
Josh Isner: For sure. We do a lot at Axon. I appreciate that compliment. That’s about as lofty of a compliment as we could have. That’s very nice of you. Thank you. We do look at Apple as a good analogy to how our products complement each other. We really have two core businesses. One is the iPhone, iTunes model for body cameras for police. You have your iPhone, which is your body camera, and then your version of iTunes as a police officer is called evidence.com, and that’s all of your digital evidence is managed. All of the video coming off your body camera, video coming from CCTV, in car video, drones, really any source of video, it’s all housed in evidence.com, and we house over 30 times the amount of video in the Netflix library currently on evidence.com.
This is a massive, massive data set. That’s core business number one, the core business number two is very different, it’s our less lethal technologies business, and tasers or conducted electrical weapons are the thing there. We’ve been in that business since 1993. We’re on our 10th version of the taser, aptly called Taser 10. Certainly, the intent there is to make this technology so good that a bullet will never have to be fired in policing. That’s a very lofty goal, but that is what we’re on a mission to do is to offer a police officer the same amount of stopping power, but make sure at the end of it that the suspect is alive. Those are the two core businesses.
Then we’ve got these interesting businesses that we’ve built off of them on the taser side, virtual reality training is one of our fastest growing businesses. On the video side, AI, analytics, different tools that you can use within your digital evidence management platform like automated redaction and sharing and being able to view multiple feeds that are time sync. Those are the types of follow on opportunities there are, as well as a records management product that’s very closely married to digital evidence. We operate those two businesses at the company in a way that allows them to be scrappy and entrepreneurial, and we’ve seen a lot of growth in both over the last five or seven years here.
Jason Moser: Something we all think about as investors is your competitive landscape. There’s no obvious Pepsi to your Coke or Coke to your Pepsi, if you prefer. But what I’m getting at is competition. Who do you consider your main competitors today?
Josh Isner: Sure. There are plenty of competitors in the body camera space. The one I think people will have heard of before is Motorola. They’re very active in this space, and that’s probably our major competitor in the body camera space. But what I say a lot about Axon is our main competition is the status quo. Ultimately, government is not built to be on the front end of adoption. Their procurement cycles are lengthy and protracted and their budget cycles are such that things take time. A lot of times it’s about convincing the end user that this technology they’re deploying is going to have a return on investment is going to make them more efficient. It’s going to allow them to keep communities safer. But a lot of times in government, it can be challenging to move the technological ball down the field. I’d say that’s really the competition that we’re most focused on.
Jason Moser: Got you. Getting back to that immersive technology angle because I made a recommendation of Axon in our augmented reality and beyond service because of the work that you all have been doing in immersive technology, particularly in training. It seems like it makes perfect sense. But we’ve also seen that adoption of immersive technology, it’s still slow going in many cases, particularly more with the mass consumer. But what does your future look like there? Do you feel like you all are reaping the returns on that investment? Is that something you plan to continue building out?
Josh Isner: When we talk about our mission Jason, a lot of people think about the taser as the main apparatus to protect life. Certainly, you can make that argument very easily. But I would say there’s a second component of that, which is revolutionizing the way police officers train. Historically, the idea of sending everyone in your department to one location in a city having them fire consumables once or twice a year and then certifying them to go out and perform at the highest level in the most stressful situations they could ever possibly imagine.
Personally, I think that’s a disservice to police officers, and I think they deserve better than that. We’re seeing virtual reality as a major disruptor in training. The reason is retention. We see that when you’re trained in virtual reality, retention goes up about 40% versus conventional in person training, and it makes sense because you’re living those scenarios in a very real convincing way. You’re not firing fake taser probes at a person running around in a Velcro suit or at a stationary target, instead you’re confronting real world scenarios that are modeled after real incidents that have happened in policing, and you’re training on those under tremendous stress. The best part of all is, you can do it as many times as you want and in as many different locations as you want.
In terms of actually preparing police officers for what they’re about to face in the field, we truly believe virtual reality is a major, major component of that and fast follow would be augmented reality. It’s turned into a nice business. Our partner is HTC on the headsets, and then we build all the custom content for police officers. It’s one of our fastest growing businesses. We’ve had at Axon, and I think it’s only two or three-years-old. It’s really still got a lot of white space looking ahead.
Jason Moser: That’s great. You actually answered a question I was going to ask in regard to the hardware and the software. It sounds like like you mentioned, you’re working with HTC on the hardware side and then building out the software, those experiences on your end, is that right?
Josh Isner: Absolutely. We’re we’ve been in the police training business since 1993. All of our users go through taser certification training and so forth. For us, we feel like we’re really close to the experience already, and that informs better content, better scenarios, and ultimately better outcomes in the field.
Jason Moser: I’m curious, given the success that you all have witnessed in the immersive technology space, as it applies to your business, beyond Axon, are there any use cases for immersive technology that have caught your attention or the attention of leadership there at the company?
Josh Isner: Sure. I think the big opportunities for us outside of just training police officers in immersive technologies is we serve other markets as well, whether it’s military, whether it’s enterprises that are doing private security details, international government. For us, it’s about diversifying the content within VR to really hit home the major use cases for each one of our customer segments. We also actually offer VR training to civilians, and it’s called community engagement training. What it allows you to is it allows you to put yourself as a civilian in the police officers shoes and then see the same event unfold from the civilians perspective.
I think it builds a little bit of mutual understanding of what each side in some of these incidents is going through, and it’s particularly valuable in terms training police officers on how to deal with subjects that are going through a mental health crisis or that are hard of hearing and that have Alzheimer’s. Some of these edge cases that do happen commonly in America today. Then, it gives a person on the other side of the body camera that same benefit of being able to see how those scenarios unfold.
Jason Moser: That’s great. Then leaping from immersive technology on into AI because you knew this was coming. It’s all about AI these days. In your recent shareholder letter, I was reading through, and you all noted the AI era plan, which I think is really compelling. For our listeners, can we dig into exactly what the AI era plan is all about, and how are you as a company investing in AI to make your business better?
Josh Isner: Sure thing. We’ll start with the AI era plan. We’re really excited about what the future holds for this offering. We announced it in mid October, and actually this week, we’ve seen the plan already pass several city council meetings, and that is particularly encouraging because in government, generally, when you go to market with something, you’re not seeing deals transpire two months later. But I think that the value of the plan and the types of efficiencies it lends to police officers. The AI era plan is essentially a collection of all of our AI tools today, but it also future proofs you. Meaning, if you sign up for today on a five year contract, every AI feature Axon makes over the next five years is included in that plan. It’s a very economical way to lock in the future of AI as a governmental agency and have cost control around it.
Some of the things in that plan our products like Draft one, which analyzes body camera video and audio transcripts and writes the first draft of the police report for the officer. Today, we hear police officers spend about 50% of their time writing reports, and we drive that number down to about 10-20% of their time. Essentially, we’re giving police officers back more than a day a week of time to be out in the community, doing what they do best, which is fighting crime. The officer still has to edit the transcript, make sure everything looks right put in some key identifiers and so forth.
That’s a really big part of the process to make sure that revision occurs from the human. But you’re starting with the ball on the 10 yard line and looking to go into the end zone here. It’s a really compelling value proposition for the customer. We think over the next year, we’re positioned to launch seven or eight more of those types of products. This AI bundle is really gaining a lot of interest, and we’re very excited about what the future holds for it.
Jason Moser: That’s very exciting to hear the launches, the roll outs that you all are planning. That was my assumption was that this was something that would just continue to iterate and evolve. Something I love seeing in your shareholder letters are the testimonials from your customers regarding the products and the services. I wonder in regard to AI era, your investments in AI, are there any stories in particular? Is there feedback in particular that stands out to you? Something that makes you all say, “Yes, we are absolutely on the right path here.”
Josh Isner: I actually think it’s feedback coming from the prosecutors themselves. We knew the police officers would be really excited about this in that it’s less administrative work at the end of every shift. But we didn’t know how prosecutors would feel about it, because they’re saying, “hey, how should we think about this evidence? It’s written by an AI model at least the first draft of it is.” We’ve seen a lot of promising support and acceptance of these reports in the courtroom already. I think early on the critics were like, “hey, will this actually make it through the legal process?” We’re seeing that it is. To see prosecutors say, “Hey, the quality of these reports is much better, and they’re getting generated faster.”
It’s a win, win, and that feedback is really encouraging because the workflows don’t really stop with just the police department. They have to go to the DA’s office. They have to go to the public defender or the defense firm’s office, and eventually they have to go to the courtroom. Making sure that whatever we build really withstands the captured courtroom workflow, as we call it, is a really big part of the process.
Jason Moser: That’s terrific. When I wrote up a recommendation for Axon in August of 2023, and I noted in that piece that today Axon is a very US centric business with international operations representing really only around one fifth of total revenue right now, not even really, just around one fifth. But down the road, I saw where founder and CEO Rick Smith he anticipates those tables turning to where the international business represents closer to 80% of the overall total, which I mean, that’s exciting from an investor’s perspective because it gives us a very clear view of ultimately the market opportunity and what y’all are trying to do. I’m just curious, how is that international expansion going?
Josh Isner: For sure, it’s going great. We’re excited about the results that we’re seeing from our international team this year. They’re on track, and we’re feeling really good about the progress we’ve made. One of the highlights of the year was we hired a new chief revenue officer who’s based in Europe named Cameron Brooks, and historically, he was the head of AMIA for Amazon Web Services, and our big push in Europe is to unlock the Cloud. There’s some data sovereignty issues there. There’s different objections to the Cloud market by market.
To have someone who’s been so successful driving cloud adoption in that exact customer base, that was a great fit for us. Cameron came in in April and we’ve rebuilt some of the team, we’ve rebuilt a lot of our go to market strategy and process, and we’re already seeing that lend itself to better results. I certainly think International will continue to grow call it a 20-30% clip over the next couple of years as we build more of that foundation. But for the long term, we’ll hit a much steeper part of that curve as some of these sales cycles to start to conclude. These are major customers. I think Rick’s right. I think we will have failed if our international business is not bigger than our domestic business as just a function of a TAM. There’s far more police officers internationally than there are in the United States. some of these countries, take Italy, for example, they have almost 200,000 officers spread across their two main police forces in the country that’s five times the size of NYPD.
The centralization of these police forces makes it a little harder to break in on the front end, and it’s a slow process. But once you’re in the sheer scale that you’re looking at versus going city by city in the United States, it’s a totally different ballgame. We’re very optimistic that we’re going to start to see some of these national police forces adopt our products in larger quantities over time and really propel our international business forward.
Jason Moser: That’s really encouraging to hear. Now, you mentioned earlier in the interview drones, and that’s been another topic of discussion, obviously, as the drone space starts to mature and become a little bit more of a thing. Your company Axon, you recently acquired a little drone company called Dedrone, which I feel like that was really fascinating acquisition from a number of angles, has expanded your market opportunity considerably. That total addressable market. It’s expanded that considerably, and it feels like that business could go a lot of different ways. We see in the shareholder letters, this idea is drone as a first responder opportunity. But what’s the initial strategy with your drone aspirations today?
Josh Isner: Sure, thing. Drone as a first responder, DFR is at the center of it. We really believe that the first police technology to include humans that arrive to a scene is going to be a drone. the reason that’s so important is because it can give the police officer and the dispatcher more situational awareness as they arrive to a scene. One of the things we see a lot today, unfortunately, is very sad is police officers tend to be ambushed. There’s a call for domestic violence or something like that, police officer walks up to the front door and they’re ambushed and killed, and something like a drone as a first responder could mitigate that.
Some of our customers using DFR already, we also saying some of these calls for service get resolved by the drone versus ever having to send a human there in the first place. Maybe it was an erroneous call or maybe it was something broke out, but then people scattered. Whatever the case is to not have to send a police officer when they’re not needed is also very valuable. When you take that workflow of drones as a first responder, there’s really a couple components. There’s the actual drone hardware, and that’s a space as far as outdoor drones we’re not in right now. We partner with the premier US made drone company called Skydio. But we do all the infrastructure to allow those drones to fly. Part of DFR is actually what’s called BV loss beyond visual line of sight.
Today, if you can believe it, a police officer to run a DFR mission needs to be standing on a rooftop and watching the drone the whole time. If the drone flies out of sight, there better be someone down range on a different rooftop pending it off and watching this drone fly. Essentially what Dedrone does is it allows you to watch the drones and have complete situational awareness through a user interface, as opposed to humans conducting these missions. You can get a waiver from the FAA to be able to administer DFR this way. Think of Dedrone as the blueprint for how and where the drones are actually going to fly and the awareness around them. That’s a big part of the process. Then the third part is all of the streaming and video and situational awareness capabilities coming from the drone camera to your dispatch a real time crime center. That’s our power alley. We have a product called Axon Respond that allows the live streaming of those drones back to RTCC. It’s really those three components. It’s the drone, it’s the infrastructure, and it’s the streaming and situational awareness.
Jason Moser: The drone opportunity is obviously just getting really started today. It’s exciting. As I mentioned, it’s really expanded your total addressable market, rather significantly. I’m going to ask you to try to predict the future here a little bit. What I’m going to try to do? Let’s see it around the corner, if we can. Beyond drones, what would you say could? Not necessarily will be, but what would you say could be Axon’s next big market opportunity?
Josh Isner: Sure. It’s funny you say see around corners because that’s one of our core expressions for that. That’s one of the things we ask our employees to do every day. I think when we do that well, it’s a major competitive advantage for us. In this case if we’re looking far out into the future, I bet humanoid robots will be major parts of public safety.
Jason Moser: That’s fascinating.
Josh Isner: When you think about what’s the best way to ensure a safe outcome? In an intense policing scenario, it’s to get the human out of there. It’s to have the human in a place remotely where they can control the robot. But the amount of stress they’re feeling in that moment, versus if they were there and there was a threat to their own safety, it’s just two different environments. When you can remove the human and make them remote and then still be dictating the use of force decisions because necessarily foresee a future where humanoid robots will be making their own use of forced decisions. If we can put the human in a far better environment to make those decisions, I think we see much safer outcomes for everyone. Certainly it’ll be a few years before the technology is there, and it’s available at a price that can be deployed in mass, but I certainly think that day is coming.
Jason Moser: That makes a lot of sense, and certainly something exciting that we shareholders can keep an eye out for. I want to wrap our interview up here on a little bit of a lighter note. I understand you love golf. I feel like this interview was meant to be I was a PGA club professional in a former life, so I’ve been playing golf all my life as well. [laughs] For me I’ve always drawn parallels between golf, life and investing. I wonder if you ever think of it that way and if so, how do you feel like golf makes you better at your job or better in life?
Josh Isner: Sure thing. I love that question. I owe a lot to the game of golf. I’m not sure I would have gotten into the college that I got into if I wasn’t a golfer, and I played golf there for a little while, and it’s still a major part of my life to this day. In general, whether it’s golf or other sports, one of the things we say a lot at Axon is next play. I don’t know that there’s a game where that’s more relevant than golf. Your last shot, whether it was good or bad, no longer matters. The only thing that matters is what you’re going to do when you’re standing over the ball this time at that moment especially given how much success we’ve had at Axon over the last two or three years, it’s like, “Hey, we’re next play.”
Nobody is patting themselves on the back right now. one of the things we say loud is you don’t get a pat on the back for doing your job. That’s what’s expected here. That next play mindset is particularly important. When you’re having a lot of success. It’s really easy look past what just happened and focus on the future when something didn’t go well, when something’s going great, you tend to wallow in the success, and that’s not the behavior we’re looking for here at Axon. Learn that from golf, learn that from other sports. But certainly if you don’t have that mindset in golf, as it’s going to be a really long day out there.
Jason Moser: Josh, this has been a real pleasure. Thank you so much for your time today.
Josh Isner: Thank you very much, Jason, and congrats on all of your success, and thanks for letting me be a part of it today. I appreciate it.
Jason Moser: Absolutely.
Mary Long: As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. Buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I’m Mary Long. Thanks for listening. We’ll see you tomorrow, Fools.