Please ensure Javascript is enabled for purposes of website accessibility

My Most Highly Anticipated Tech Earnings for February

By Brian Stoffel – Feb 16, 2020 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Almost no one is focused on the third point. Therein lies an opportunity.

Lots of technology companies are reporting earnings this month. But even though my own portfolio is almost exclusively tech-focused, there's one earnings date I have circled: Thursday, Feb. 27, after the market close.

That's when Axon Enterprises (AXON 1.47%) reports. Here's why the date is so important to me -- and probably should be to you, too.

Calendar with the 27th circled

Image source: Getty Images.

What excites me about Axon is the fact that it's a software-as-a-service (SaaS)company with two virtual monopolies.

The first is its line of TASER stun guns for use by police forces -- the legacy business. But the real coup comes from the company's domination over body cameras and -- more importantly -- the Evidence.com cloud platform that stores and analyzes all that footage.

The stock is very important to my family: Shares make up over 7% of my family's real-life holdings. Here are three things I'll be focused on come the 27th.

How many seats were booked?

When a police department signs on to use Axon body cameras, it also agrees to pay a subscription to Evidence.com. The platform stores, analyzes, and can even search for footage.

As you might imagine, once a department starts storing footage on the platform, it is locked in for the long haul. Not only is there no other player to rival Axon's scope, but switching would be costly, a logistical nightmare of retraining entire police forces, and dangerous in terms of the potential to lose vital legal evidence.

That's why each additional seat booked (read: officer with permission to use Evidence.com) is so important. Here are the trends over the past few years.

Chart of Evidence.com seats booked

Data source: Axon Enterprises SEC filings. Chart by author. 

As the company has been growing seats booked at about 7% sequentially over the past year, I would expect -- at the very least -- to see a 5% bump to over 450,000.

Comments on records management system

Axon has figured out a way to make life easier for police officers once they're in the Evidence.com ecosystem. Axon Records Management Systems (RMS) was only rolled out very recently. The idea is intriguing: By using AI and applying it to the police footage, much of the paperwork that keeps officers stuck at their desk can be auto-filled by Evidence.com.

The Fresno police department has been a test case. Success there convinced management it was time to offer the service up across the board. 

But don't expect to see revenue from the project anytime soon. Police departments that sign on get to test it for free. Over the long run, that makes a lot of sense, as RMS is also protected by high switching costs. 

That's why I'll be paying more attention to management comments about adoption of RMS than any specific numbers. This could be the next major growth driver for the company.

Uses outside of police forces

As if all this weren't enough, organizations outside of law enforcement have also begun to kick the tires on Axon's products.

In 2018, the Charlotte fire department became the first major city fire department to adopt Axon's platform. And early last year, Cypress Creek Emergency Medical Services in Texas became the first EMS provider to adopt Axon. 

While I won't be disappointed or surprised if there aren't further updates on this front, it remains a free lottery ticket for investors: There's very little downside to no progress, but enormous upside if adoption picks up in these adjacent groups.

Takeaway for investors

There's one final sticky issue to deal with: the battle between Axon and the FTC. It turns out the FTC saw these monopolies and decided to act. The regulatory action the FTC is seeking to impose appears steep, though the market is clearly not too upset, as shares have continued riding higher. 

Keep an open ear: There's a lot of potential (and with the FTC, peril) that could come to light during the company's conference call. I'm certain I'll be listening. You should, too.

Brian Stoffel owns shares of Axon Enterprise. The Motley Fool owns shares of and recommends Axon Enterprise. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Axon Enterprise Stock Quote
Axon Enterprise
AXON
$112.28 (1.47%) $1.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.