Stickiness

I’ve been following this board for about a month now, and have bought many of the SaaS stocks that most of you people have- TWLO, ZS, TDD, etc. I know and understand very little about these companies and have bought them based on your convictions.

With SaaS, I do not truly understand how and why some are “sticky” while others are not. What I think I understand, however, is my top conviction stock - AAXN. The waiting is about over and it will be on the move.

  1. AAXN was being sued by DGLY for patent infringement and had lost every court challenge and was out of challenges. This held the stock down for a long time. About two weeks ago, DGLY settled with another company that they sued for a measly $6 million. Because of that, the market thinks that even if AAXN loses, the damage will be minimal. DGLY should have gotten way more, but had to settle because they basically make nothing and was running out of money.
  2. TA is OT here, but over the past month AAXN hasn’t lost ground over the past month while the market has struggled. This tells me something has happened, especially when combined with 1)
  3. They make Tasers, sensors, body cameras,etc. Why is this important? STICKINESS. They are selling hardware to get police departments to use their software- evidence.com.
    From the Axon website: “That footage easily uploads to Evidence.com where you can quickly view and organize it as well as use additional tools for transcription, redaction, and more. And that’s just the beginning of how we’re helping law enforcement agencies simplify workflows, save time and money, and give you a better understanding of events.” This is their SaaS!
  4. They are trying to be like Apple- sell the hardware, sell the ecosystem.
  5. TAM- they are basically the only player in the law enforcement space.
  6. In the first quarter, seats booked increased to 371,100 from 226,900 a year ago, and annual recurring revenue rose from $83.3 million to $122.3 million with $930 million of total contracted revenue. (https://finance.yahoo.com/news/axon-enterprise-apos-growth-c…)
  7. They market cap is only $4 billion- a very tiny base.

DoesMIWork

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They make Tasers, sensors, body cameras,etc. Why is this important? STICKINESS.

Well, yes, but you do understand that they have an extremely generous program of lending the equipment to police departments for quite extended periods. The theory, of course, is that having used it for a couple of years they will come to depend on it and buy when the free period expires … which sounds good, but could not work out in the end for a number of reasons. To be sure, I think it is a good strategy, but I don’t know that we know very much about the actual conversion rate.

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I own AAXN as I have a longer view. But I do find myself at times wondering if I couldn’t jump out - and then jump in - to the stock when traction starts.

As pointed out, they are giving away many subscriptions to Evidence.com as part of refresh.

I believe they are creating a long term monster but it requires patience.

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DoesMIWork…

AAXN has been an interesting story… Obviously, their cloud / video storage business is great but for Taser, I did come across a short thesis that was about new form of restraining technology that make Taser obsolete. It was more in line of shooting a harness on the person of interest (supposedly criminal)…
I didnt quite research that because in general, I am not interested in business that largely depends cities and counties as customer.

I am curious though if you have accounted for such an alternative in your thesis.

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I’ve been waiting for signs they master AI in the Evidence.com space.

When (if) they do, the utility of enhanced, real-time, accurate documentation of interactions will sell itself. Think of making all police, all doctors, all nurses more time efficient. Who would pay to be able to spend much less time sitting in front of a screen? Everyone. My God, it will sell itself.

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Totally agree that evidence.com is a trove of potential. There is a public user guide available here: http://public.evidence.com/help/pdfs/latest/EVIDENCE.com+Adm… which gives a pretty good sense of what functionality is available today. Right now, it seems to be mostly focused on document management and workflow, as one would expect; reporting features are fairly basic, and there is no evidence [pun intended!] of any AI/machine learning based features coming into play yet. I think once they start doing something in that space the floodgates of value with really start to open up.

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From:https://www.bizjournals.com/phoenix/news/2019/06/01/takeaway…

"Axon is making it easier and faster to fill out daily reports. Axon Records, which launches in the second half of the year, provides artificial intelligent responses that autofill parts of the report to make it easier for officers to get names spelled correctly and for common phrases and addresses. Axon Records only show officers the part of the report they need to fill out and updates other forms automatically to reduce redundancies.

“There’s a hidden crisis for police officers because one third of their day is spent writing reports,” said Bryan Wheeler, vice president and head of Axon Records. “RMS (records management systems) are fossils frozen in time. We want to make police agencies more efficient so more officers are back on the streets.”

Increasing productivity for your customers always makes them happy.

and “Live streaming is a big part of Axon’s new products. The new Axon Body 3 body camera launching this year will enable live streaming so other police officers and dispatchers can see what’s happening in real time. The Axon Air drone also debuting this year will include live streaming.”

All the video they capture can be linked to all those reports they have to fill out- using their software. So the hardware/software have to work together as a team. They want to be like the Apple for law enforcement. I’m not in the software, IT industry, so this kind of stickiness is a lot easier for me to understand!

DoesMIWork

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Axon Records, which launches in the second half of the year, provides artificial intelligent responses that autofill parts of the report to make it easier for officers to get names spelled correctly and for common phrases and addresses. Axon Records only show officers the part of the report they need to fill out and updates other forms automatically to reduce redundancies.

The use of “artificial intelligence” in the sentence above is a very big stretch. Form fill assistance is certainly nice, but this isn’t really AI, nor where the real potential for AXON is in my view. The real potential is in things like automatically poring through all that form and video and picture data and coming up with some kind of predictive trends, or previously undetected correlations between cases, for example. In other words, using that data to come up with new intelligence that cannot be reproduced with existing procedure or manual analysis.

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