New products were always going to play a big role in Axon Enterprise Inc.'s (NASDAQ:AXON) year, and investors finally got a look at those items late last week. The maker of technology and products for law enforcement released the next-generation taser, known as Taser 7, and announced the Body 3 body camera for a 2019 release. 

Along with new products, Axon continued to transform its pricing with new subscription options. If law enforcement agencies see the value in Axon's suite of products, year end could be big for the company.

Police officer wearing Axon Body 3 and Taser 7.

Image source: Axon Enterprise Inc.

New products set the standard

Three new products were announced over the weekend: Taser 7, Body 3, and Axon Records. Taser 7 is the new taser product Axon introduced. It improves taser functionality, but the big change is that it is "integrated into Axon Evidence," so it will tie to cloud data and work better with the full suite of Axon products. 

Body 3 is the latest body camera, and it includes a number of new features. A wireless connection will use AT&T and Verizon LTE connections to live stream from the field in real time. The body camera also has gunshot detection, which automatically alerts superiors and begins a live stream when a gunshot is heard. 

The Body 3 camera will also include Axon Records features like transcription and license scanning. Axon's management indicated that these software upgrades will be released over time, with Axon Records continually improving as it's used more in the field. 

Axon Records is the software system Axon is building to be a productivity tool and data repository for law enforcement agencies. It will include the transcription and license scanning I mentioned but will also allow agencies to collaborate with data in a team-centric manner. Associated evidence will be explorable on the platform, allowing for more insights into each case. Ultimately for Axon, the goal is to tie all of the company's products together, improve productivity in the field, and lock law enforcement agencies into the Axon platform. 

This new body camera won't begin testing until early 2019, but Axon expects to ship it to customers by summer 2019 for $699. That's a high price tag, and that's why the new pricing model could make Axon a huge winner in the long term

Recurring revenue is the name of the game

For a few years now, Axon has been trying to shift customers to a subscription revenue model rather than the bulk sales that previously dominated the business. The bundles announced along with Taser 7 and Body 3 show how management is trying to push customers into subscriptions. Here are the three officer safety plan (OSP) options.

  • OSP Standard ($109 per user per month): Taser X2 or X26P, Body 2 and Flex 2 or Body 3, and unlimited license
  • OSP 7 ($149 per user per month): Taser 7, Body 3 (with real-time features), unlimited license, and five years of Axon Records
  • OSP 7 Plus ($199 per user per month): Taser 7, Body 3 (with real-time features), unlimited license, auto-tagging services, Axon Performance, Axon Citizen, Redaction Assistant, Signal Sidearm, and five years of Axon Records

If all goes well, these options will add to the $750 million backlog and $92.7 million in annualized revenue as of the end of the second quarter.

Axon's transformation continues

With each new product release, Axon differentiates itself from a shrinking list of remaining competitors and takes a tighter grip on the law enforcement body camera industry. What I think investors should be most pleased with is how tasers and gun holsters (Signal Sidearm) are being tied in to body cameras and cloud storage services, creating a full product ecosystem. 

If Axon can drive customers to subscriptions that often last for five years, investors will have a good idea what long-term cash flow will look like, and we'll see margins and profitability begin to improve as well. As Axon's transformation continues, it's becoming easier to see why this company is well positioned for the long term. 

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