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Body cameras are the future, but they're not where Axon makes most its money today.
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When Axon Enterprise (AAXN +0.02%) changed its name from TASER International earlier this year it was an indication of where the company sees its future. Body cameras are growing quickly and are built to be highly profitable long-term, which is a great business to bet on.
But the core of Axon Enterprise is still manufacturing and selling tasers. Which more than shows in the company's finances.
Image source: Axon Enterprise.
You can see in the table below, the weapons business is still Axon Enterprise's biggest division by a long shot. Not only does it dominate sales, it offsets losses incurred in the body camera business as well.
| Segment | 2016 Revenue | 2016 Income from Operations |
| Weapons | $202.6 million | $71.2 million |
| Axon | $65.6 million | ($39.4 million) |
| Total | $268.2 million | $31.9 million |
On a unit basis, Axon sold 139,122 tasers in 2016 and 1.98 million cartridges, compared to 47,979 cameras. The body camera business is growing more quickly with Axon Body sales jumping 278% last year, but right now tasers are still the name of the game.
Despite the fact that tasers are a big and profitable business, Axon sees a brighter future in body cameras. As I mentioned, the flagship Axon Body camera saw sales nearly quadruple in 2016 and in the first quarter of 2017 the volume was up another 228% from a year ago.
But the real driver of the body camera transition is that it ingrains the company further into law enforcement. When a city buys a taser it needs to refill cartridges periodically, but there's not a long-term relationship between Axon and the customer unless they use a financing package. Body cameras change that.
With body cameras, Evidence.com, and services like analytics and records management the company can be a subscription provider with an ongoing relationship with customers. Right now, customers who buy the unlimited cloud package and Axon camera bundle with upgrades every 2.5 years pay $79 per month per user. That's an offer that's a win for Axon because customers effectively become locked into their platform, but it's also a win for law enforcement because they get equipment upgrades regularly.
Despite the fact that weapons are Axon's bread and butter today, they won't be forever. The company and its finances are moving toward the body camera business because it's highly profitable and locks in customers into long-term relationships. Weapons may come along for the ride, but body cameras are the real future for Axon Enterprise. And that's great news for long-term investors.