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

Good morning, and welcome to the Axon Enterprise, Inc. Annual Meeting of Shareholders. I would now like to introduce the first presenter, Rick Smith. Please go ahead.

Good morning, everyone. My name is Rick Smith, and I'm the Founder, CEO and a Director of Axon Enterprise. Welcome to the 2021 Annual Meeting of Stockholders. If you're only listening over the phone, please go to investor.axon.com, scroll down to Events and access the link, so that you can see us on Zoom. Turning to the formal portion of the meeting, I would like to first introduce our directors and executive officers who are attending the meeting today. Michael Garnreiter is our Chairman of the Board of Directors who -- I have you to just say a quick hi and maybe the screen will pop to you, so the shareholders can see who you are. So Mike?

Good morning, everyone. Thank you for being here.

Next up, Adriane Brown. Say hi, Adriane.

Hello. Pleasure to be with you this morning.

Next up, Dr. Richard Carmona. You may be on mute there, Rich.

Good morning, everybody. Pleasure to be with you.

Perfect. Thank you, Rich. Julie, you're up next. Unmute and say hi, please.

Good morning, everyone.

And Caitlin Kalinowski.

Good morning. Happy to be here.

Dr. Mark Kroll.

Morning. Thanks for joining us.

Dr. Matthew McBrady.

Good morning. Great to be here. Thanks for taking the time as well.

Hadi Partovi.

Good morning, everybody.

Okay. Moving on to our executive officers. Let me first introduce President, Luke Larson.

Good morning, everyone.

The guy who keeps an eye on the money, our Chief Financial Officer, Jawad Ahsan.

Hi, everyone. Thanks for joining us today.

Our Chief Product Officer, Jeff Kunins.

Good morning, everyone. Thank you so much for being here.

Okay. I'd like to make a few more introductions. We will not have them say hello just out of logistics. So that would be Tim Zingraf and Scott Davidson, auditors from Grant Thornton, our independent registered public accounting firm. [Operator Instructions] Today's meeting will be in 2 phases. First, we will conduct the formal part of the meeting to consider each of the proposals listed in the notice of Annual Meeting of Stockholders dated April 12, 2021, and conduct such other business as may properly come before the meeting. The second part of the meeting will be a management presentation, followed by a question-and-answer session. The second part of the meeting will be conducted via Zoom only. Isaiah Fields, our Corporate Secretary, will be recording the minutes of this meeting, and Bobby Driscoll has been appointed to serve as the inspector of election. He has signed the oath of office, which will be filed with the minutes of the meeting. I will now call on Isaiah Fields to establish that we have met the necessary corporate requirements to begin. Isaiah?

Thank you, Rick. We have proof that notice of this meeting and related proxy materials was mailed or made available around April 12, 2021, to all shareholders of record as of the record date of March 31. Based on that, this meeting is duly called with timely and proper notice. As of March 31, 2021, the record date for the meeting, there were 64,673,091 shares outstanding. We have 56,921,217 shares present by person or proxy at this meeting, which is over 88% of the outstanding shares and constitutes a quorum permitting the transaction of business. Each share entitles the holder to 1 vote on each matter, which may come before the meeting. A list of registered stockholders entitled to vote is available for examination by stockholders. The polls for matters to be voted upon today are now open and will close immediately after I present the matters to be voted upon at the meeting. If you have not previously voted or you wish to change your vote, you should do so now online at www.virtualshareholdermeeting.com/axon 2021. That's www.virtualshareholdermeeting.com/axon2021. The first item of business is the election of directors as nominated by the Board. The 3 nominees for election as Class C directors are Dr. Richard Carmona, Julie Cullivan and Caitlin Kalinowski, who will each serve a regular 3-year term until our 2024 Annual Meeting or until their respective successors are elected and qualified. The Board recommends a vote for each of the nominees. The second item of business is the approval of an advisory resolution on our executive compensation. The Board recommends a vote for this proposal. The third item is -- of business is the ratification of the appointment of Grant Thornton LLP as Axon's independent registered public accounting firm for 2021. The Board recommends a vote for this proposal. The fourth item of business is the approval of amendments to the company's certificate of incorporation to increase the maximum size of the Board of Directors from 9 to 11 directors. The Board recommends a vote for this proposal. The fifth item of business is the shareholder proposal submitted by Mr. James McRitchie to move from a plurality voting standard to a majority voting standard. It is my understanding that Mr. McRitchie has submitted a recording of his proposal and is on the line to answer any questions. The Board recommends against the shareholder proposal. I will now play Mr. McRitchie's recorded proposal, and then we will take questions that have been submitted via the virtual shareholder meeting platform.

90% of the S&P 500 companies have a majority vote standard for directors. The Board opposes because that asks the Board to replace failing incumbents on an expedited basis instead of the customary 90 days. Unfortunately, the company failed to accept my offer to negotiate. My language was meant to give the Board more flexibility. Had they discussed their concerns with me, I would have been happy to allow 90 days or more, if needed. The Board also disagrees with my charge that it is an outdated governance structure that reduces accountability to shareholders. Well, in 2018, 67% of shares voted for my proposal to declassify the Board. In 2020, 85% voted for my declassified proposal. More than half the Board has served for 10 years or longer. Axon has no requirement to separate CEO and Chair positions, and we don't have proxy access. Axon claims an engaged and independent Board of Directors that actively maintains strong relationships with shareholders. I filed 3 shareholder proposals in 3 years, winning between 67% and 97% of the vote. They certainly have never engaged with me. Have they engaged with you? Vote for proposal #5. If directors can't get elected by majority when no one is running against them, something's obviously wrong. I want to give you a warning. Vote now, while I'm talking. Companies often close the polls immediately to keep you from voting. Of course, that doesn't make any sense. The whole purpose of presenting proposals at the meeting is to allow shareholders to consider the arguments and then vote. Closing the polls immediately makes mockery of the process. Unfortunately, many companies care more about imposing their will than reflecting the wishes of shareholders. I'm stalling a bit to give you a little more time to vote. However, I don't want to be accused of wasting your time or filibustering, so I'll close now. Once again, vote for proposal #5 to declassify our Board. Thanks for your consideration.

I'd like to thank Mr. McRitchie for his comments, and we'll now take a moment to see if any questions are submitted for Mr. McRitchie through the forum. Okay. There being no questions at this time, we will now take questions that have been submitted via the virtual shareholder meeting platform. These questions are to address the formal matters being voted upon today. Attendees will have the opportunity to ask general business questions during the informal portion of the meeting using Slido at www.sli.do. That's www.sli.do. While we wait to see if any questions come in, I want to remind anyone who is listening in over the phone that you can go to investor.axon.com, scroll down to Events and access the link to see us live on Zoom. That will also allow you to watch the company presentation following the formal portion of today's meeting. We'll now take a few moments to see if any questions come in through the shareholder meeting platform. Okay. There being no questions having been submitted, we'll move on to the results of the election. This concludes the matters to be voted on as outlined in the notice of the annual meeting. In accordance with our bylaws, I hereby declare the polls for voting at our 2021 Annual Meeting closed. I've received a preliminary tabulation from our inspector of election. And based on that tabulation, I'm pleased to report that each of the 3 Class C director nominees were elected. Each of the management proposals was approved. And the shareholder proposal to move from a plurality voting standard to a majority voting standard was approved. The final voting results of today's meeting will be reported on a Form 8-K filed within 4 business days. That concludes the formal business, and I now declare the formal portion of this meeting adjourned. If you wish to continue on to our investor update, please join us via Zoom. You can find the link at investor.axon.com. That's investor.axon.com. I will now turn the meeting over to Andrea James who runs Axon's Investor Relations.

Hello. Can you all hear me? Okay. Welcome. We're so excited to have you here today at our Annual Shareholder Meeting. We're excited to take you through our business. Our CEO, our President and our CFO will be giving you an overview of our strategy and our products, and then we're going to take questions at the end. So head on over to slido.com, use the #Axon to submit questions. It's right here up on the screen. And next, we'll go through our safe harbor statement. Okay. During this presentation, we will discuss our business outlook and make forward-looking statements. Any forward-looking statements made today are pursuant to and within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These comments are based on our predictions and expectations as of today and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks are discussed in our SEC filings. Okay. Settle in. We hope you enjoy learning about what we've been up to. Go ahead, Rick.

Thanks, Andrea, and hello, everyone. Let me begin by offering perspective on the conventional narrative that 2020 was a terrible year. Challenging times bring up the best in humanity, and these are the times that inspire us to rise up, to overcome, to stretch, to create our finest hours. If we choose to focus on the negative, there was plenty to see in 2020. But if we look harder, we see so many signs of hopeful progress. We see that 2020 showed us all what we're made of. Supercharged by a global plague, nations sprung into the kind of arms race we should want to see, competing ferociously to cure a pandemic. The result was an amazing feat for humanity. In early 2020, our worlds began to lock down due to COVID. But by December, the first COVID vaccinations were being placed in arms. Thanks to vaccines developed 10x faster than ever before. Humanity was also supercharged into space in 2020. SpaceX, whose ultimate vision is to make life multi-planetary, helped NASA return human space life capabilities to the United States for the first time since the Space Shuttle program ended in 2011. Back on earth, many of us adapted to new realities. We virtualized ourselves, and we've learned to Zoom around the world for business; and as parents, got to see our kids every night for dinner. My customer engagement jumped more than tenfold as our customers, police chiefs and sheriffs, opened up to this idea of video conferencing. And our leadership team enjoyed seeing our analyst community face-to-face in our new Zoom quarterly conference calls. I don't mean to minimize the pain we've all experienced; in many cases, we're still experiencing. I understand it, not share it. My mother passed away days before Christmas after contracting COVID; and my father, our Founding Chairman, Phil Smith, passed away holding my hand on April 14. Dad was instrumental in helping get TASER off the ground in its early days, and our company would not exist without him. For our annual meeting, many of you might remember him sitting on the front row cheering us all on. His final 24 hours were an amazing capstone to an incredible life. All his children and grandchildren came together around his bed. The night before, [indiscernible] taking a beautiful ceremony. We all got a chance to tie up all loose ends and say goodbye. His final hours were peaceful quite this past hours is beautiful as such a thing can be. I would not have chosen for the past year to turn out as it did, but we don't get to choose what the world throws at us. We can only choose how we respond. Let me take a moment to recompose myself, and let's get back to how we're responding in the future. At a recent executive planning session, we asked ourselves where we want to be at the end of the decade. And here's the answer: our vision is to be globally synonymous with our mission of protecting life by building the world's largest and most trusted network of safety devices and services. Recently, current events, including last year's death of George Floyd and the events that followed, they forced our nation to reflect upon the values we hold true for all Americans. Axon is and will remain committed to creating technologies and save lives, increase transparency and help communities and public safety agencies who serve them achieve a higher quality of life to ensure everyone makes it home safe. Our products work. In fact, I would tell you they are transformative. Customers and increasingly, communities see us as a key thought leader and a partner in the global drive to transform community and public safety. We hear stories daily about customers using our products to save lives and to protect their communities. And we believe our problem-solving approach to these major challenges will continue to drive change and to drive growth. Two years ago, when I published my book, The End of Killing, it was a radical idea that we can actually make the bullet obsolete and create less-lethal weapons to become the primary use of force and eventually displace lethal weapons and put them into the dust bin of history. Customers were far more receptive to this idea than I could ever have anticipated. In the light of events in the past 12 months, we are hearing pleas from our public safety customers and the broader community that they cannot wait until the deadline I had set at the end of this decade for us to achieve the goal of surpassing the side arm ineffectiveness. Our teams are working hard to bring in the dates for the next generation of TASER weapons, which I believe will be the largest single leap in capability in the history of less-lethal weapons. Customers have even begun signing 10-year programs with us to enable seamless upgrades. And we work with them to create programs that will even allow them to upgrade early when the next generation arrives. Now to set expectations, the next generation of TASER device is a couple of years out due to the intense testing that a ground-up new redesign requires as well as full production automation and scaling. But I wanted to talk about the issue head-on, given the growing and intense public interest and to help our investors understand why you might be seeing this dynamic behind 10-year programs,and, frankly, why you hear us talking about how we focus in years, not quarters. Axon is delivering incredible value to our customers and the communities they serve. In 2020, we secured our first dispatch customer, established a solid foothold in the federal market, launched our records platform and grew our international revenue by more than 70%. We are proud to have delivered a record $681 million in revenue in 2020, representing 28% growth, $1.1 billion in contract bookings and $221 million in annual recurring revenue. We wrapped up the year with an exceptional fourth quarter, highlighted by revenue growth of 32%, strong profitability and robust global demand for our TASER devices. We didn't just deliver on our operational goals; we significantly outperformed it. I am humbled and so grateful to our team for their ability to deliver exceptional results amid turmoil and adversity. We exited 2020 better positioned than we've ever been from an operational and strategic and financial perspective. And for those of you who followed our first quarter 2021 report earlier this month, you know that 2021 is off to an equally strong start. Now I'll hand off to our President, Luke Larson, to take you more deeply into a journey of what we're building. Luke?

Thanks, Rick. Hello, I'm President Luke Larson. Thanks for joining us. Now let's dive in. If we bring our business down into 3 main phases, we'd say the first 15 years of the company were getting TASER off the ground. This era took the company to about $1 billion market cap. Then we entered the body camera area. We began investing in body cameras in 2008. And when Ferguson happened in 2014, we were ready. In 2015, body cameras began to take off. And within 2 years, we were the clear market leader. We entered the dashboard camera market in 2017 to augment our product offering. This brought the company to about a $3 billion to $5 billion market cap. This track record of solid execution provides a foundation for the next phase of rapid growth, which will be the result of leveraging our platform. We estimate our total global addressable market to be about $27 billion, and it continues to expand along 2 primary axes. We've more than tripled the TAM over the past 2 years. First, we continue to push into new market categories. And in any category we enter, it's our goal to become the market leader. Second, we are moving beyond law enforcement and public safety to several adjacent markets. You can think of our product growth drivers in 3 main categories. We believe we have excellent product market fit and very good product moment fit. The first category is TASER. This includes our popular TASER devices. But what we're doing now, we're doing more to help officers deescalate, and this includes offering new and exciting virtual reality and training tools. The second category is sensors. These include our body cameras, our in-car cameras, our drone partnerships and more. And the final category is software. We divide software itself up into 3 categories: they are digital evidence management, productivity solutions and real-time operations. Our products all work together to form a virtuous cycle. We build products and bundles that give our customers superpowers to ensure everyone gets home safe. This creates more users, aka people; and nodes, aka devices, on the Axon network that then creates more data that we can unlock more value from machine learning and AI. We use this to create even more great products and more bundles. Let's view a quick video to show you how our vision for our products all work together. [Presentation]

Awesome. What a great video, and shout-out to our marketing team for really making something phenomenal that showcases all of our products. We aren't just in the business of selling TASER devices. We're mission-driven. We are in the business of protecting life and equipping officers to deescalate in key moments. Supporting public safety and minimizing the use of force is a key component to Axon's mission of protecting life. These tools include the cloud-connected TASER-conducted energy devices as well as a suite of augmented reality and virtual reality training services and empathy training for law enforcement officers. We're transforming how agencies train their officers by addressing the inefficiencies around their classroom, role playing and simulator training. By leveraging VR, we are addressing their 2 biggest issues: budget and time. We just launched an exciting new VR simulator to help officers develop critical thinking, deescalation and tactical skills. Now let's take a look. [Presentation]

Body cameras and the transparency and accountability they bring are becoming synonymous with best practices in modern policing as evidenced with bipartisan demand and support for the technology. And we are continuing to drive that change. I'm really proud of our body-worn cameras and the position that we've achieved. It was not inevitable, and we worked really hard to get it. We still see a wide opportunity for that business. Our industry-leading digital evidence management software, Axon Evidence, supports our network of cloud-connected cameras and sensors. Axon Evidence is the world's largest cloud-hosted repository of law enforcement video data and other types of electronic evidence. This next video will show you the major digital evidence challenges that Axon solves for agencies. [Presentation]

Our productivity suite of tools reduced time spent on paperwork. Axon Records takes a disruptive modern approach to displace legacy on-prem records management systems by putting body camera video at the heart of incident records. Axon Records includes Axon Standards, a radically simpler approach to use of force reporting. Now let's take a look at another video. [Presentation]

We are developing communication tools that support real-time situational awareness through the sharing of information across various omnichannels, including voice messaging, location mapping and intelligence and evidence sharing. In September of 2019, we began shipping Axon Body 3, an LTE mobile data-capable camera with a GPS chip, which supports real-time awareness. This is enabling a whole host of new capabilities and seeding our entry into the dispatching market. Products include Respond for Devices, which allows agencies to know the GPS location of their officers and what those officers are experiencing through live video streaming and more. And Axon Dispatch, the emergency dispatch solution we brought to market with our first customer last year. This is a capability that only exists in the market through Axon. [Presentation]

Awesome. Last thing for me, I just want to send good luck and positive energy to the Phoenix Suns as they head into their third playoff game against the Lakers. Go, Suns. And now let me turn it over to our Chief Financial Officer, another Suns fan, Jawad Ahsan.

Thanks, Luke. And hi, everyone. Thanks again for joining us today. First, let me start by saying that our shareholders are very important to us, and I wanted to thank you for your time today. We feel a strong sense of accountability to all of our stakeholders, which includes our customers and the communities they serve, our employees and our shareholders. We have an ambitious vision for the future of public safety. We're delivering compelling products, and our financial profile reflects our strength. Axon's financial strategy is very straightforward: one, grow the top line while driving leverage on the bottom; two, sell subscriptions and create a powerful recurring cash flow engine; and three, invest heavily in R&D to maintain our status as the innovator in public safety, delivering the most value and helping drive strong margins; and finally, maintain strong liquidity, abundant operating flexibility and put ourselves in a position to advance even when our competitors are in retreat. Before I run through our financial strategy, I wanted to touch on ESG, or environmental, social and governance, which we're hearing about from a growing number of our investors. Axon is a mission-driven company whose overarching goal is to protect life, and that social mission is what drew many of us to the company. We see fully 100% of our revenues as tied to devices, software or services designed for public safety in promoting social good. We're proud to both develop and sell products and services that are good for the public and generate strong financial returns. We're a strong top line grower, which speaks to market demand for our products. Here, you can see our track record for top line growth and leverage. There's always a balance between investing for future growth while also driving leverage. And the way we think about that is generally through the rule of 40, where we aim for a target model where the top line growth percentage plus the adjusted EBITDA margin is 40% or more. We put a lot of discipline into our capital allocation and hold our teams to high standards in terms of generating top line returns that are also margin-accretive. The key number I want you to remember from 2020 is 28. I'm referring to 3 important milestones we hit as a company as we closed our recent year. We delivered 28% growth on revenue over 2019, 28% compound annual growth in revenue over the last 5 years, and we finished the year with 28% in adjusted EBITDA margins. Our software business is very healthy. It has a 120% net dollar retention, and our annual recurring software revenue is $242 million and has grown at a compound rate of 51% over the past 4 years. Our software contracts generally carry an underlying gross margin of 80% or higher. On the right side of this slide, you can see our success in moving our customer base over from book-and-ship TASER device customers who purchased out of their capital expense budgets to customers who subscribe to our more comprehensive solution out of their operating budgets. We told investors at an Analyst Day in 2017 that our intention was to drive a majority of our revenue over to bundled subscriptions, and you can see our progress here. We finished 2020 with 73% of our revenue tied to subscriptions. As you can see on the left, our growth trajectory is twofold: selling our existing products into new markets and selling new products into our existing markets. Our new product categories include dispatch, records, drones and VR training. New markets where we are investing in building a new sales channel include federal, corrections and commercial enterprise. And on the right, we have our target model. We're driving towards 70% gross margins. And as I've said earlier, our underlying software and storage contracts support 80%-plus gross margin. Our goal is to not only be the market leader in any new category but also to stand-up businesses that support 30% adjusted EBITDA margins or higher as we increasingly leverage the investment in our platform. Axon began investing in body cameras in 2008, and that business really started to gain traction after Ferguson in 2014. We had the right products at the right time. I think we'll look back years from now and see 2020 as kicking off the next wave of policing reform. We believe that by the end of the decade, the investment Axon is making today will prove to once again be the right products at the right time. We have excellent product moment fit. By 2030, we believe TASER devices will outperform and eliminate pistols. AI will eliminate manual report writing. Communications will have evolved well beyond the radio. And just like we did with TASER and body cameras, we will once again have transformed public safety. And now I'm going to turn it back to Rick to take us through Q&A.

Rick, it looks like we only have 1 question, and it's, what products are you most excited about?

That's like asking me which of my children I love the most. You just can't answer it. I mean across the board, in every category, we're doing stuff that's just mind-blowing. This morning, I was -- Jeff was doing a demo for our Board of Directors of Fleet 3, and that's the next one to go out. That's chip out of the building, and it was pretty mind-blowing how just with a huge step-up in capability, the ALPR is really outperforming, both ours and customer expectations. [ I mean it ] personally in some of the next-gen TASER generation stuff that's also going to -- I think it's going to blow people's minds when it gets here. The next-generation body camera is fantastic. The transcription product that's now in the field and evolving to real-time transcription is amazing. Our AI group is doing fantastic work. Our dispatch software, some of the relationships we've got there with RapidSOS really transforming that space in records like freeing the police from the yoke of data entry, right? They sign up to go be a police officer, and they have this other job that's a data entry clerk. And we're lifting that off their shoulders. So I'd probably left out a lot of other things, too. It's literally everything we're doing...

You did leave about one. I have to go in there. The thing that I'm most excited about unequivocally is our virtual reality training. I think this can be transformational in creating better outcomes. And it's a really cool example where this technology is hitting an inflection point that can solve just really big problems for agencies and help ensure we have better outcomes and everyone makes it home safe. So got to make sure everyone knows how excited we are about VR as well.

Yes. One thing about being a mission-driven company, we don't do products we're not excited about. Like life's too short. And the reason I think that we have the level of success we do is we do things we're passionate about. And so you get good at the things you're passionate about, and ultimately, you make money at the things you're good at. So I said that mission loop really does tie back and you won't see us working on stuff if it's just for money because life's too short to just do things that you're not passionate about.

I think one last thing just to triple down on the VR point. Another thing that I think is a hallmark of Axon and it relates to the financial responsibility and discipline combined with the innovation culture of the company, which is we build personally what we think we are best at and we're best able to add value on, and then we partner and source smartly where we can do that for leverage. And one of the things I'm super excited about with VR, it's a perfect example of that. We are bringing absolutely revolutionary content, training expertise, connection of this training to TASER and the rest of our portfolio, but we're partnering with best-in-class hardware leaders, specifically in VR like VIVE HTC to bring the whole solution together. So we're not reinventing the wheel. We're spending our R&D and our time on the places where we can add the most value and partnering smartly across the ecosystem to bring best-in-class solutions together for our customers.

Okay. We've got a couple of other questions. This first one, as you roll out license plate recognition, are you worried about being embroiled in controversy around police surveillance? No. Controversy is what we do. TASERs were controversial. Body cameras are controversial. Cloud software is controversial. We don't shy away from controversy. We run at it, and we run at it with a mindset of how do we do things the right way. At ALPR, one of our biggest differentiators is we've built an ethics-first design from the ground up and not just as a positioning thing or is VR. But yesterday, I was meeting with our community advisory coalition, including even people who've been formally incarcerated and getting those voices about how they view police and the risks of getting the technology wrong and enabling practices that are counterproductive. And that goes to the core. Maybe I'll hand over it to Jeff over, too, just to talk, Jeff, about how you really embedded an ethics-first approach in every aspect of our product design.

Sure, Rick. Well, first and foremost, starting with our mission and starting with really the innovation of the creation of our Ethics Board is independent body that's people with an amazingly diverse coalition of folks from everything from former law enforcement leaders to civil rights and [ sub-liberty ] leaders and everything in between, they really service counselors and as a mirror for us as we go through our design process. Fundamentally, every product we build as part of -- from spec all the way through delivery has not just, again, a halo of yes, we like it to be ethical, but as specific questions and a specific framework that the product managers and engineers need to directly speak to as part of our evaluation and ultimately bringing those things to fruition. And hope is not a strategy for building in these technology with many techniques. It really has to be fundamentally architected into the way you build.

And I'll wrap by saying the other thing we've learned about this is doing things the right way pays huge business dividends, right? Our customers work for elected efficiency. And when there's controversy or protest against police or the media is raking them over the coals, that's not good for anybody. When we come in and we present our solutions, we have community groups say, "Hey, you should go with Axon solution because it answers a lot of our concerns." So that gives us an advantage with the elected officials, with the communities and ultimately, with our customers. If we can turn down the heat and get people collaborating more rather than confronting each other more, that's a winner across the board. And I believe ethics in design will be for us what privacy has turned out to be for Apple and their product strategy, something that's not just something you believe in but something that becomes a competitive advantage. And with that, now let me turn over this next question. You mentioned our focus on ESG. What are you most excited to focus on in this space over the next year? For me, I think everything we do is making the world safer. But to get specific on maybe the areas that are in particular focus with shareholders, let me hand over to Jawad.

Yes. This is a lot like the product one. I mean our entire company, our mission is geared towards ESG initiatives and tenets. And so pretty much everything we do from our mission to how we live that and embody that in our products, how we improve ourselves operationally, we are just constantly every day striving towards embodying more of those principles and making sure that we're really bringing more transparency and more visibility to what we're doing as a company. So there's not anything one in particular. Even internally, the things that we don't talk about necessarily all the time on earnings calls or shareholder meetings, what we're doing internally with providing forums for our employees, for new affinity groups that we've stood up, for various support groups and funding and initiatives that we've run to basically help make for a more inclusive environment, we've got a very inclusive and diverse Board as well. And really just from the Board all the way -- all throughout the company, it's a major focus for us. And so I would really encourage you to check out our ESG disclosure, it's on investor.axon.com, just to get a sense for all the great things that we're doing.

And just in case anyone is still listening via Broadridge or via the audio-only line, please go to slido.com, put in the #Axon to ask your question for the informal portion of the meeting. So we're taking all informal portion of the meeting questions through Slido. Thank you.

All right. Next up, this seems the first year Axon made investments in other companies, Flock Safety, RapidSOS, Cellebrite. Do you make -- do we expect to make more investments at this time? And how do you decide when to make an investment or measure whether the strategy is working? I'm going to have both Jawad and Jeff answer this. I'll first say, for me, it starts with, does this impact our vision? That's number one. If it's not going to have an impact on us, accelerating towards our vision, we're not even going to take a look at it. And there, as you can all guess, we've got -- I have a lot of excitement and optimism, and we need a team that brings a lot of rigor to how we knock down all the things we could do to which ones really make the most sense. And for that, I lean heavily on Jeff and Jawad. So I'll let you guys go on. Let's pick who goes first.

Go for it, Jawad.

I guess, yes, first, I'd like to start by giving you just a frame of mind for how we think about M&A. Rick is a University of Chicago guy, and I have done quite a bit of M&A in my career, and we know how hard it is. It's really difficult to integrate a company, especially when you've got one with such a strong culture like we do. And so like by default, we've got a very, very high bar to cross. The other thing is we've built a fortress balance sheet. We have a bunch of cash and absolutely no debt. It's a very strong position to be in, and we can afford to be choosy. We also have organically a ton of runway ahead of us. When you look at all the products that we're in today, you've heard Jeff and Luke talk about them. We have so much runway ahead of us that something really has to be pretty spectacular for us to consider it to be -- either it's going to accelerate our time to market or it's going to get us into a new product category. But those are both pretty high bars to cross. What we've done recently with investment is to start to dip our toe into the water with these companies that we really admire. And certainly, we've looked at them from an M&A standpoint as well. But what we like about the investments is that it gives us a chance to build relationships with those companies, get to know them a little better, get a chance for them to know us. It could turn into something further down the road. Even if it doesn't, we're pretty happy with the relationship we have. In some cases, it's more than just the investment. There's a commercial partnership as well. I think you should expect to see us continue to be very picky, very choosy, but we do have a lot of flexibility on our balance sheet to be a little bit more aggressive in the coming years. And Jeff, I'd love to turn it over to you to hear your thoughts.

Yes. Sure. But it's an excellent answer. So just to echo, I also -- in my own career, I've lived through more than half a dozen acquisitions from both sides of the table as both acquirer and acquiree, so I also know how hard it is and why we have to make smart choices and be disciplined. And exactly as both Rick and Jawad said, well, look, we're not a PE firm. We're here to do things that make strategic sense for the business regardless of what form they take, whether it's a straight-up commercial partnership or one of these investments or ultimately, potentially, M&A. It's all about trying to move the ball forward for our mission and our strategy. And so you'll see that every one of these companies we've spent time with and investment in so far are ones where there's a natural fit on the partnership and product integration side. And then also being an investor highlights our enthusiasm and seeing where it goes both with those and with other ones that we look at over time. So it's all part of a disciplined portfolio approach.

I do want to wrap this one up, something that I'm pretty proud of that we've innovated on. And that is how we bring these opportunities to our Board of Directors. I'm self-aware that I am an enthusiastic optimist, and I had a tendency to assume things will be easier to do than they will be and that we can do more than we can. And so in that vein, as we looked at these -- and actually, I think there were some great articles recently criticizing how most management teams, the CEO falls in love with an acquisition, tells everybody to get in line and they polish it up to bring it to the Board for the approval. In our case, when we've gone to our M&A Committee, we have such a talented Board and they are such great thought partners. I'm not interested in getting them my answer. I'm interested in getting to the right answer. And to help us with that on several of these larger programs, when we went to the Board and our M&A Committee, we actually set up a bull case and a bear case. And we had the prosecution and the defense on why we should do the case and what could go wrong. And we invited the Board into a very transparent discussion around these cases. And I think that's something we plan to continue to make sure that we've got a lot of rigor. Because again, Jawad made the University of Chicago approach that markets are efficient, assets are fairly valued, and we have to really be confident that something is going to be more valuable because we're partnering with them, and it's a good place to put our money, that our investors couldn't do on their own, or if we're going to buy something, even a higher level, it has to be undeniably more valuable as part of us. And we've got to be willing to take the pain, cultural integration, all those other things that distract us from the great things we're doing. So it's a -- we're keeping a pretty high bar, a very high bar. And with that, I'm not seeing any other additional questions. Andrea, Anything you want to take us through before we wrap?

That was the program we prepared for everyone. Thanks, guys.

All right. So with that, stay tuned. There's lots of great stuff coming from Axon. The international markets are continuing to heat up. Fleet 3, we're about to launch the best hardware in the in-car video industry to go with our industry-leading software. There's lots of great stuff in the pipeline, new partnerships, whether it's with [indiscernible] and DJI and prototyping drones or the things we've announced more recently. Thanks for being a shareholder and coming along for the ride. And hopefully, you're as proud as we are that we get the privilege of waking up every morning and working on really important problems that the world cares about and supporting the men and women of public safety who have had a pretty rough year, and they just need better tools, and we're going to keep giving them to them. So with that, thanks for your support, and we'll see you in our next quarterly conference call. And at our next shareholder meeting next year, let's do it in person.