Axon Enterprise, Inc. (AXON) Earnings Call Transcript & Summary

Hey, everybody. Welcome to the 48th Annual JPMorgan Technology, Media and Communications Conference. Thank you very much for joining. My name is Mark Strouse. I cover applied and emerging tech here at JPMorgan. Very happy to have Rick Smith, CEO and Co-Founder of overweight-rated Axon joining us today. So I'll begin our fireside chat with some questions, and we'll bring in questions from the audience throughout the session. If you would like to ask a question, please click on the Q&A button, type in your question, and then I can ask it for you. Rick, welcome. Thank you very much for your time.

Yes. Good morning. It's good to be here. I'm guessing, is this the first time in the long history of this conference that it's been done virtually?

It's the 48th annual total, it's the first virtually. So we'll see if it sticks. So far, it's -- I think it's gone pretty well. So Rick, we covered your stock for a long time, witnessed a very impressive transformation from a product company into a solutions company, a high percentage of recurring revenue. For those of the investors that are new to the story, if you can just give a brief overview of what Axon is all about.

Sure. So I started the company in the early 1990s. And it was after our 2 friends were shot and killed, and I became very passionate about violence in general and gun violence in specific. And the insight that came to me is this, we can't sit back and wait for the government to solve our problems. The real way we solve problem is through innovation. And so created this company with an idea to make the bullet obsolete. This could bring the Star Trek phaser to life and the NASA scientist and inventor, I mean, this is right out of a comic book, who had invented this device called the TASER. It had been around since the 1970s, but had sort of just gone into the dustbin of history. And I convinced him to give it another run. And so with me at 23 and him at 73, we started in his garage in Tucson. It took us 7 years to get the formula right. Once we did, the taser weapon really took off and began to be used by police around the world. We then saw -- it did save a lot of lives, and it still does. And it's still one of the most exciting technologies in our portfolio, I've now called the [ Baldit ]. Within the next 10 years, nonlethal weapons and particularly ours are going to outperform lethal for us. We're no longer content to be the little junior sibling alternative. But we've really broadened the portfolio to a whole host of technologies, including wearable thing like body cameras, wearable sensors that go on a police holster and a whole host of software to manage the deluge of data that comes off those body cameras. So today, we're running a connected hardware ecosystem, where our tasers are talking to our cameras or talking to the cloud. We're approaching 100 petabytes of data, which makes us the largest cloud-hosted solution in the Microsoft Azure cloud. And we're basically converting all of that data into the back end for law enforcement. So while it may not sound quite as sexy as making the bullet obsolete, we're going to make the keyboard on your laptop obsolete. It turns out most police officers, they get in the business to wear a gun and a TASER and go protect the world, but they spend the majority of their day as data entry clerks. And we've realized once we record all this data, we have unstructured records that are phenomenal, the best evidence you could have of an incident is the recording of it. And now we just need to extract that unstructured data into structured data, and we can basically say, police were having to type all those stuff up. And so it's an exciting decade ahead of us to accomplish both those missions, and we'll have a huge impact on the world and continue to add very high-value recurring revenue that will create, we think, a lot of further value for our shareholders.

Okay. So we'll come back to the near-term picture in COVID-19 and everything in a bit. I wanted to start with the long-term growth trends, though. Starting with the software and sensor segment. So you've expanded your TAM into multiple segments. I wanted to start with the body cams and evidence management, though, which was kind of your first foray for this segment. How penetrated are we now for that market, both in the U.S., but then also in your international countries, which I kind of -- I think you break them up into Tier 1 and Tier 2 subsegments?

Yes. So if we start with the U.S., I would say this is an interesting pattern where we are more penetrated in the larger agencies with body cameras. So TASER weapons were interesting. They started in the smaller agencies first, really caught fire there and then moved up, the larger agencies moved more slowly. With body cameras, the scene reversed where the camera started as a large agency phenomenon and have gone down to the smaller agencies. So most of the bigger, major cities do have body cameras today. The state police are a little further behind. They tend to use more in-car cameras, which is obviously another market that we're in. And then as you get down to the smaller cities, et cetera, there, we're seeing lower penetration rates, probably under 50%. And then internationally, we are seeing high adoption in the U.K. and Australia. Canada, less so. Canada has been less focused on body cameras, but a lot more interest on digital evidence software for managing the digital evidence. There's different use cases as well. They're quite interesting in the U.S. The primary impetus for body cameras started really with the Ferguson, Missouri shooting of Michael Brown; in this question of distrust between certain communities and police and body cameras were really a way to basically ensure police were doing things in an accountable way and that agencies could defend their officers' actions by having a video of what led to certain use of force. In other parts of the world, that's less critical, particularly in Canada, they're much more focused on the use of the software. And now there's growing interest in cameras, but more for chain of evidence and record creation. So I think we're seeing a lot more interest. I was on a call with a bunch of Canadian police teams just yesterday. And we are in beta with a transcription product where we're transcribing the audio/video record and one of the chiefs on there, who's one of our beta customers said it was unbelievable the impact that was having. They just had 2 homicides. This is a smaller agency that normally gets 1 homicide every few years and they've had 2 in the span of a month. And homicide investigations are super intense, and they've got to transcribe everything that goes in courts. And we're now automating that process. Now while the transcription is imperfect, as we all know, these are not yet to the level of human transcriptionists, what they're finding is it's helping them organize all of the evidence. And because we integrate the transcript in the audio/video into one seamless experience, there's less need to get the transcript perfect because you can find the critical moments in all the different interviews, have a human transcriptionist to fix those and then at any point, if there's any -- you can click and watch and listen to the evidence. So we really see this morphing from police records being sort of digital representations of the same thing they did on paper 50 years ago into a much more multimedia interaction. And we think that's where a lot of the growth in the business will come from. If we can free up half of an officer's time, we're basically -- half of the cost of running a police agency, the value proposition is enormous. So we're really focused on now expanding the premium services around the body cameras.

Yes. Okay. So I mean, that kind of segues into records management. Can you talk about Axon Records and how -- I mean there's other digital RMS systems that are out there. So I mean, what's your secret sauce? What separates you from the competition?

Yes. So there's a couple. The first and most crystalline difference is that we integrate the audio/video record and the written record into one experience. So you're not logging into 2 different systems, you go right into Evidence.com. Our cameras, in fact, communicate with each other. I remember, I was having a conversation with the former Chief of Chicago PD who saw me just that fact alone that if you find one Axon camera, it will tell you the other ones that were on the scene. And then you can watch them all in one seamless window experience. That's a huge issue, if a PD does not turn over all the video, a case is thrown out because it's assumed that there was a malicious intent. And he was saying, "Look, just -- when you're running a 15,000-person department, just finding all the stuff is hard, but then also integrating the record into that." And so when you are reading the witness statements or reading the synopsis, to be able to put markers that go right into key moments of the video is a huge time-saver for everybody, in particular who has to review it. Like when this goes to a prosecutor, for them not to have to sort through a bunch of DVDs and CDs and then try and fast forward and go back to find time markers that might be referenced in the written report, those are live markers in our experience. So it couldn't be more of a night and day experience when you bring these 2 together. Now of course, over time, we'll be -- and we are building tools that will extract more and more of the report from the video. So we haven't even gotten there yet. I think just the integrated consumption model is a huge differentiator. But what will really set us apart is the integrated report creation ecosystem where we're beginning to really extract the report from the audio/video record. So that's our biggest differentiator. I would say a couple of those, we are all in the cloud. Now I think most of the incumbent competitors are also moving to the cloud. We have the sort of wonderful opportunity that we're starting with a clean sheet. We did not -- we had an opportunity. There were lots of companies for sale in this space. We did not make an acquisition to get started. We wanted to start without the baggage of having to support an existing product set. We wanted to come out with a completely clean sheet approach. And that's allowed us to do some interesting things like we really focused in on the idea of a dynamic report. So historic RMS systems, you rely on the human officer, there's maybe hundreds of fields that they may have to fill off for a report, and they're organized in these tabs. And if you watch a police officer write a report, fill out report, tab, tab, tab, click across several different tabs in the form, fill out a few more. We're building it into a heuristic-rules engine that basically says, Okay, things like name, address, that's going to be in every report. Let's start with those. And then when you get to the incident code, you then select, well, this was a DUI. Our system, you program the rules into the system, to then present to the officer, okay, for DUI. Now there's more stuff you have to fill out, and these are the required fields and these are the optional fields, but we're organizing all that for the officer, whereas historically, you might be training thousands of officers to remember what fields they have to do for which report, and it can really be a pretty clunky user experience. And then the last thing I would say is, I have intentionally worked with our team to take a very different strategy, and that is we are not allowing the procurement process to drive our product development process. Because if you do, that is a recipe for building a really poor user experience. Because if you're focused on the 600 check boxes that go out in a typical RFP package, you're going to build software that's really wide. It just checks a bunch of boxes. And every time you go for a new bid, you're building 10 more check boxes, and there's not a lot of focus because there's not a lot of financial reward on how well the system actually works in the hands of the user. So we've taken the approach, I told the team, "We're going to win in the hands of the user." And that means look, we're going to lose with a lot of agencies that just go to a blind RFP. But we're going to focus on getting our products into the hands of users and doing the 20% of things that take up 80% of their day extraordinarily well. And then we'll win based on the user experience. And I think that incentive sets us up to build software. I hate to sound like religious about this, but the right way. We want to build great software that wins because it's great at doing what the cops need to do, not great at presenting in a 600-page document that's responsive to a highly complex and bureaucratic procurement process. So while it sounds a little abstract, it's making an enormous difference because just that focus means the software is doing what we're designing it to do. It's being highly responsive to the use cases much more so than the procurement guidelines.

Yes. Got it, okay. So it kind of partially answers the question that we just got from an investor. They ask, RMS adoption accelerated from 2 customers to over 12 in a matter of months. What drove that pickup in adoption? And were you competing with other cloud solutions on those deals?

Yes. So we were competing with our cloud solutions in those deals. I would say what's picking it up is, number one, there's a lot of interest in our Officer Safety Plan. So the Officer Safety Plan is our integrated bundled offering where it basically includes -- I can't say everything because we do have different offerings, but includes everything we can that makes sense. So everything a patrol officer would reasonably need is in Officer Safety Plan. It includes a TASER, the new TASER 7, VR training. It includes body camera, live streaming, our redaction studio of AI tools, and it includes our Axon Records product experience as well. And so most of the deals are coming in because agencies are seeing value in the overall bundle. And that's one way for us to give them the opportunity to try records, where it's like, hey, this doesn't have to go through this completely separate procurement process. And we've been very straightforward with them. I've been out leading a charge of what we call agile procurement, which is basically inspired by the agile software development methodology that, hey, buy software, the way the best tech companies in the world are developing now, very user driven, very much iterative in the hands of the users and get the software in the hands of users, and then test how well the vendors are also responding to that. Does that feedback loop work? And we've seen some of the nonprofit sort of tech think tanks in the law enforcement space sort of get behind this movement. And sort of the Officer Safety Plan is one way that we implement this, or we're able to say, "Look, we're effectively going to give you records for free as part of this overall bundle." And the bundle has enough value in it even without records that agencies will buy it, even if they're thinking, well, I haven't made my mind up yet, but it doesn't cost me anything to give records a shot. Of course, we bundled it in such a way where it also makes economic sense for us. And once we're in those cases, when they start trying the software, we have a really high win rate.

Is that -- the records that's included in that package, is that kind of a more basic solution? So I remember, gosh, I don't know, 4 or 5 years ago, you kind of did a similar thing with Evidence.com, where it was a basic solution, then you got people comfortable with it and they realized the value, and then they would come back. And even before their free trial was up, they would say, "Hey, we want to start paying for something better."

Yes. So initially, our approach was we were going to do sort of a subset of records and then have an upsell capability. We've since then really shifted our strategy. This is a full-blown records management system, where we think the incremental monetization will make sense. Well, there's 2 aspects. One, we've priced it into an overall bundle where it's still a fair economic deal for us. So in light of everything else that's in there, if that's all they have revised the Officer Safety Plan, we still have -- the overall plan has over a 70% margin, and we're happy and the customer is happy. But we think the real monetization play from the records piece, in particular, will be some of the AI tools that help them create the record, the workflow. So just bluntly, we came to conclude that no matter how good your form filling software is, it's -- that's strange warfare. If you're going to be out with a bunch of incumbents, all of whom are going to have some flavor of cloud software, where even though your workflow in filling out these forms may be marginally better, it's not clear that, that is such a clear differentiator that you're going to create a really valuable and sustainable business. Our belief is our secret sauce is the connection between the cameras, the data they produce and the records. So effectively, it give records away within this bundle. And then let's really create high-value services that are going to unlock that 50% of an officer's time that's going into report creation today. And those AI tools like our transcription engine, some of the image recognition things we'll be able to do around extracting things like drivers' licenses and things, those will be clear ways that we can -- we believe create much bigger revenue opportunities by creating much bigger value for our customers.

Okay. So moving on to dispatch, which you recently announced your first paying customer a little bit earlier than you were originally just talking about anyway. Can you just talk to us about how dispatch is different from competing solutions? And is this included in the bundles? Or I mean, how should we think about that revenue?

So that is a great question. Dispatch is not included in the bundles. We looked at dispatch and concluded the buying patterns are different enough and the use cases are different enough that it actually did not make sense to include in the bundle. A lot of times, CAD was bought at a regional level by the PSAPs, these public safety access points, specifically the 911 data centers are the real sort of driving authorities there, which is just a different buyer persona than we see on the TASER, the body cameras. And the records, RMS is -- can be really quite similar to the buying personas that are buying digital evidence. So there, it makes sense to bundle them. With CAD, it did not. So for example, our first customer is paying for CAD. And in terms of the model, I'd say, estimate around $50 per user per month with CAD is about where we think it will be over the next couple of years. We do see an opportunity for that to increase over time, maybe up to the $100 per user per month sort of range or maybe even a bit more as the solution matures, and we're adding more workflow automation and more value into the product, but it is being sold separately. And I think one of the big differentiators, look, we went all in on cloud. And it's déjà vu all over again. When we first went in with cloud in body cameras, we heard all the FUD about cloud was insecure and agencies couldn't put their data in this cloud. That turned out to be wrong. We're hearing it now with CAD as well, where "Oh, my gosh, you need reliability and how could you possibly put a mission-critical system in the cloud?" Well, folks, the Internet was created by DARPA to create redundant communications for our nuclear missile control systems after a phone switch in Colorado went down. We lost contact with part of the red sensor array. So the whole idea of the Internet is a redundant multi-pathway communication network. Now I think people sometimes perceive the Internet is unreliable because their individual connection goes down, but that's not the Internet. That's your Internet provider, your service provider. And that is a highly solvable problem, creating some redundant connections to the Internet, we can do that with much higher reliability than your average agents can run in terms of uptime reliability of their own data systems. So we think we're seeing the same sort of resistance points that there were about the underlying sort of technical arguments or strongly favor the cloud. And then the last piece I would say is we have built a lot of redundancy into our system. So even though it's browser based, our team loves to do demos where they'll come in, and they'll just literally yank the cords out of the computers, and they keep running just fine. Now you're not getting necessarily real-time updates, but we've got a lot of cached data that runs locally. So we think we've got that pretty well solved. But that has given us the speed and agility of a cloud-only offering. Any time you sort of get half pregnant, we say, well, we're going to do cloud, and we're also going to do on-prem. That just introduces a whole host of incremental problems you have to solve, and it probably makes you less good than if you had a really focused strategy.

Got it. Okay. So I'm going to put in a shameless plug for your book, which I read, very big ideas over the next several decades. Now that records and dispatch are up and running, what's next? And when should we expect that?

Yes. So like most companies, we don't give Kentucky windage on new product launches till they're ready to go. I would say this. Last year, we went live with both records and dispatch. That's sort of like having twins. And okay, when are you going to get pregnant again, have another baby? We're feeding the newborns right now. So there is a lot of work that's going into scaling those. So I would say the next couple of years are going to be a little more about just really executing the hell out of. These are our first pure software products. Back in the day, we were a hardware company. There were a lot of questions about whether we could do hardware and software, and it was harder than I ever thought it would be. A lot of missteps along the way. I think we've gotten that pretty dialed in. And now we're launching software-only products. We're facing similar and reasonable questions about our ability to execute there. So we're really focused on making sure we can continue to execute there. I mean the TASER weapon, don't take your eye off the ball there. That continues to be a real profit engine and cash flow machine that drives the business. We've said -- I said in the book, we're going to outperform the pistol by 2029, and we're working hard at it. There'll be good things coming out in TASER, not in the next couple of years, but we're on about a 5-year refresh cycle on TASER weapons, and we're 1.5 years into TASER 7. So it might give you an idea, 3, 4 years-ish maybe from a big upgrade in TASER weapons. But one then question I have gotten is, well, is Axon going to just go to pure software? And the answer is no. I think software companies are interesting and valuable. Hardware companies are also interesting and can be valuable, but companies that can do both. It really gives you a breadth to be able to create solutions, where you can go from -- you can create the whole widget as was famously said. And so we believe our hardware enables much of our software and our ability to reach out into the physical world and impact what's happening with our hardware, with our software. Makes the whole ecosystem more valuable. So you should expect to see continued innovation across the board. And I would say you will see some innovation around additional markets. I would say, over the past decade, we've been very focused on law enforcement and getting our feet under us there. And I'd say we're there. We've got really strong market presence. Our cams and software business is really doing well. We are now looking and expanding into some of the adjacent markets, okay, how do we take what we've built and monetize in some additional markets, so fire, paramedics, corrections. Richard Coleman, our Head of Federal and Military programs, is fantastic from General Dynamics. I think we're making a lot of progress on federal and military. And then we just brought back the guy who used to run our sales -- our whole software and sensor sales business. Mike Shore had left to go to a startup. He'd gotten a startup edge, went up to Silicon Valley, just had a second baby here and wanted to come back, and we welcomed with open arms. He's now leading our commercial sales. He's really kind of a pioneering sales guy. And so that's going out and looking for industrial applications for wearable cameras where you need to manage. We're not going to go to consumer, we're not going to go to people with the likes of GoPro. Our cameras are not great for consumer use. They're really built for enterprise use, where you have lots of users, lots of data integrity concerns, you want to make sure your data is secure and being managed through a business process. But we're now looking at places where we can do that in the enterprise. And there's a number of really interesting use cases we're seeing emerge. So I think you'll start to see expanding our TAM into these adjacent markets will be a real focus for the next 5 years.

Yes. Okay. So you kind of touched on this already, but some of the new markets for the TASER weapon, if we can switch over to that side of the house. How big are those markets, corrections, federal, fire, EMS? If we add that all up, it sounds like you're almost doubling your TAM or close to anyway.

Yes. Well, when I talked to Richard Coleman about it, he's a competitive guy, our Head of Federal, and he says, "Yes, I think I can make federal and military bigger than state and local." So great, love to hear that, Richard. Now don't take that as guidance, and sort of all these appropriate forward-looking statements stuff here. Now but if you look at how the military spends money and the federal agencies, that's not a crazy goal. Now a lot of that, we'd have to start to see a real military use case emerge. Right now, we're with -- basically the military buys TASER weapons for military police. But as you saw, a big area of focus in my book was really challenging some of the conventional thinking in the military, like we cannot kill our way to success anymore. It just doesn't work that way. In fact, the use of lethal force by our military forces can be strategically disastrous. You kill a wedding party, you kill a pregnant woman while walking up on, it could be soldiers who right now, have no way to stop her but besides an M16, that's kind of nuts. And so I'm putting a lot of personal focus now engaging in the military as a new market. I tend to -- as we got to know each her, I tend to love focusing on the new opportunities. That's really -- I'm an entrepreneur at heart. I love our existing customers, but when the business is running smoothly, we have a team of people that are really -- I'm not a like process optimization guy. I like discovering the new opportunities. So I'm putting a lot of focus into the military markets right now and then some of the commercial stuff as well. So yes, it's -- those markets together could be bigger than law enforcement.

Okay. So we've got about 7 or 8 minutes left. I just want to kind of switch over to the near term, if we can, posted positive 1Q results. Talked about not really seeing any impact yet from COVID-19, which you did withdraw your full year guidance. Can you just talk to us about what COVID-19 means for you and for your customers? What are you seeing with budgets and whatnot, your discussions you're having there?

Yes. It's -- this is very different than 2008. I guess one advantage is you get into the back half of your career, you get the wisdom of having seen some patterns before, but this was different. In 2008, we saw a fairly immediate budgetary reaction agencies like, hey, we're cutting -- we're going through layoffs, like we're going to have to delay our orders. We saw a fairly immediate impact. Now the good news was it's fairly short-lived. If law enforcement is going to go through a contraction, there's no way they get out of it without making budgetary cuts -- I'm sorry, staff cuts. Staff is the vast majority. It's like 90% of their budget, 85% to 90%. So what happens when you go through a contraction is there's a bit of a, "Hey, we're not going to go spend new money right now. We've got to get through this other thing." Once they cut, they then came back and, "Okay, we need to focus on productivity tools. We have less people now." But we're not seeing that this go around. What we're seeing this go around is just, I would say, just a little more confusion where we've not seen our pipeline decrease. Our pipeline has been pretty steady. But what we're hearing is, we just don't know -- from our customers, we don't know what the hell is going to happen in the back half of the year. We've never seen a situation like this. It looks like our budgets are going to be smaller, but we're not seeing that sort of definitive action we saw in 2008. That is the reason that we ended up pulling guidance, was just we wanted to be really clear with our shareholders. None of it were seen this before, and we don't -- it's a head-scratcher. We just don't know what's going to happen. There's puts and there's takes on one side, on the positive side, we're hearing agencies are less likely to share equipment, right? Like stuff you do with your hands and physically you're passing that from officer to officer. In the world of COVID, there's arguments that you don't want to do that. We're seeing the police -- the attitude to our police are much more positive, and nobody wants to be seen as cutting police budgets first responders after the risks they're taking right now. So those are the positive elements. Obviously, the big negative potential is that just if state local budgets do get hit materially, that we could see some delays in orders. We just -- we haven't seen that yet. And then there's a question what the federal government is going to do. This latest $3 trillion package has a lot of money for state and local. That would probably force all these budget issues or kind of make them go away. Now nobody knows what's going to happen there, right? The Republicans and the Democrats are negotiating over this. Our best intel as we think it's going to end up with some real estate and local funding coming into the stimulus package, which should defang a lot of the budget risk. But until it's over, nobody knows for sure.

Yes. Okay. I mean how do you think about your visibility, though? So your software sensors, that business is highly recurring on the weapon side, and you're -- depending on the quarter, about 50% or so of your new orders are on these bundles. What kind of visibility do you have into the rest of the year from that recurring revenue?

We're definitely in much better shape than we were in '08 from the revenue predictability standpoint because more and more of our revenue is recurring. Now that being said, the vast majority of our contracts do have cancellation clauses for lack of appropriation. That's just -- it's required by statute in most jurisdictions. Now it's extremely rare we see that happen. And if they did cancel, right, like cutting off your digital evidence management services would be something we're hearing is pretty unlikely from customers. But in the interest of being transparent, it is a possibility. If agencies got into a world of hurt, we could actually see some of that recurring revenue get cut. I think it's pretty unlikely, I think there's -- I don't think it's a big enough lever that they would go at that lever. If there's a big customer, they're going to have to go deal with staffing issues. And I'm not sure that they would hit the lever of canceling our existing contracts, but it is within the realm of possibility.

Okay. Well, I mean, so your bundled contracts, the customers pay for them over time, right? So is it wishful thinking to assume that any kind of an economic downturn could actually drive more customers towards those bundles, kind of avoiding the large upfront CapEx?

Well, I'm a big proponent of wishful thinking. I think that is what attracts entrepreneurship. Yes. I mean there's -- I don't want to overstate it. You can't exactly take it to the bank, but we -- all of our selling propositions are grounded in a positive ROI, but there's a strong return on investment. Moving to the cloud means you can redeploy staffing or otherwise dealing with running local infrastructure. We think we're very cost-competitive when you look at total cost of ownership and the fact that we spread this out over time. Does mean that, yes, you're not taking the big hits upfront of a big capital acquisition. So somebody might be looking at a big software purchase that may not have been looking at going to the cloud. We're going to look a lot more attractive now to spread that out over time.

We've got about a minute left. I just want to ask you about your balance sheet. I mean you've got an envious position with a pretty large net cash position. You've been free cash flow positive for many years. I mean how should we think about uses of cash near term? Are you -- are there any private companies or any other companies out there where the valuation for an acquisition might look pretty attractive sometime soon or buybacks?

We've got a pretty good-sized war chest. We've been really standing up a strong corporate development function. We've not been highly acquisitive in the past. And I would tell you, we are not going to be highly acquisitive in the future. We're not a roll-up player. I'm a Chicago school guy who thinks capital markets are pretty efficient and that acquisitions tend to be more about ego usually than financial results, and they typically don't work out so well for the acquirer. So that is the mental framework from which I start, and I think that's true across the executive team. That being said, we've now created an ecosystem with our software, where there's tons of opportunities where things could meet that borrower. They might be more valuable as part of our ecosystem than as a standalone. And so we are looking. We have lots of inbound conversations. We just made a small minority investment in Flock Safety, super interesting company doing these fixed license plate reader cameras. Garrett, the CEO, he's a great multi entrepreneur. This is not his first rodeo. There, we decided to take a strategic partnership and a minority investment approach. I would say we're watching with interest, what's going to happen with the overall economy. It's a good position to be in, to have a big cash balance if the wheels come off the bus in the economy, and I hope that does not happen. However, we have to plan for the world that comes to us. We do want to be in a position where there might come some assets that would be more valuable as part of us. And if the prices to acquire those go down, you would probably see us more likely to be acquisitive in a down environment, but we would look for us to make strategic bets. We are not interested in buying things where there's like a cost saving synergy approach. We're going to buy and get the sales force. That's not interesting to us. What's interesting to us is increase some 1 plus 1 equals 3 sort of synergy, where suddenly, the integration into our ecosystem makes it way more valuable than it was alone.

Okay. Well, I could keep going for a few more hours, but we're out of time. Rick Smith, CEO of Axon, thank you so much for your time, and thank you to those that listened in. Have a good day.

Thanks, Mark.