Dialogue. Axon & Coupang Update, Outperforming Expectations, Drones, New Markets, Taiwan & Cloud

**SPEAKER_2** (0:06)
Welcome to The Synopsis, a Speedwell Research podcast. We are back, and I am personally saving you from another week of Drew's solo podcasting. I know, listen Drew, I don't mean to, you know, it was good, I listened to it, but I mean, come on, nothing beats the return of the host. I mean, we're an absolute necessity here, staple of Speedwell. And I'm glad summer break is over, fall is here, and we are back into it.

**Drew** (0:28)
You know, I think you just lied twice in the opening intro already. You definitely didn't listen to the solo podcast. And on top of that, I don't think people miss you, so...

**SPEAKER_2** (0:38)
Well, one of those statements are true. I don't know what's going to be more harmful.

**Drew** (0:43)
No one knows who you are anymore. You've been out of the game for so long. Who are you?

**SPEAKER_2** (0:48)
I'm a little rusty. You know, I'm known as the host who is a little under prepared, but just prepared enough to get Drew through the discussions here. And, you know, it's been an exciting month at Speedwell. You just released LVMH, which, you know, a lot on LVMH, but I think you always do a really great job of adding unique perspective to it. I think this is the second longest report you've written. Meta is still king at 160 pages. I think you got to just over 120 on this one. So I'm sure you left no details out.

**Drew** (1:16)
You know what? On this one, there still are a lot of details left out, even at 121 pages.

**SPEAKER_2** (1:22)
Yeah, that's okay. I'm sure you need a little self-editing there, which is good. You know, get the reader what they need. But yeah, no, it's exciting to be back. We've got an API group, a company episode coming out soon. But for today, we're doing our kind of making through Q2 updates on some of the companies we haven't covered in a little bit. I know we're a little late on some of them, but I think it's great to, you know, still kind of get some updates on Axon and Coupang. It's been a while we did our company update on Axon and Rick Smith, the very unique story of the Taser and the evolution of Axon as a company. And then, of course, Coupang, the South Korean Amazon, which Drew doesn't like that analogy, but we're going to keep, we always roll with it. So why don't we touch base on Axon a little bit and figure out what's been happening? I mean, Axon has been a company that from an investor standpoint is priced, you know, we'll say, you know, you're a Speedwell member plus, you can look at the reverse DCF. You need a lot of growth for a very long time and a very high level of execution. Axon seems to be delivering on all of those things. I mean, growing 30% year over year this quarter and continuing to be further entrenched into police departments, not only domestically, but internationally. And it seems as though the dystopian drone future, whether it's dystopian or not, maybe it's safer, but it does seem drones seem to be penetrating a lot faster than even we thought when we did the company update just a couple of months ago. So with that, I'll kind of preface Drew, maybe you want to give us some high level numbers from the quarter and then we can kind of dive in from there.

**Drew** (2:48)
Yeah. So after they reported 2Q25 earnings, the stock was up 17% the next day. This was a couple of weeks ago now though. So it has since retreated a little bit.
That marked the 14th consecutive quarter of over 25% growth and the 6th consecutive quarter of over 30% growth. And so those that remember or remembers and saw our reverse DCF at the very high end of our growth assumptions at the time, we assumed only 25% growth for five years. And so, okay, it's only been one year. So, you know, keeping up 25% growth and the compounding of that still is going to be a lot of growth that you have to assume in order to even be comfortable with just that high end. But they have been growing faster than, you know, kind of even optimist expectations at the time. And so this is kind of one of those instances where you do see a company growing and exceeding growth expectations. And so that's kind of why the stock has been so strong over the past year. Really, I guess the past couple of years now really has had a kind of a very strong run. And so if that continues and if you're looking at the assumptions, though, and we could talk a little bit about valuation later on, you'll see, though, that you still kind of have to assume that to happen for a very long time, just to kind of get an adequate return at that. And so moving on to kind of just the actual fundamentals, though, of the quarter and what's going on with the business, they have these two segments. They rename one of their segments to connected devices. And so that segment is now going to be everything, include the tasers, the cartridges, the body cams, the sensors, the drones, the VR, all that. And then their other segment is going to be software and services. So that's going to be the evidence.com platform, DraftOne, which is kind of their AI tool that helps police write reports and so that's been really important to kind of cut down on the amount of hours that police spend filling out reports. Paperwork is actually a very big part of policing and so the more they can eliminate sort of the paperwork aspect of policing, the more time officers can actually be out on the field, which of course is just a better utilization of their time and also means safer communities. And so that's a positive. And then they're doing a lot more with AI workflow tools as well. And so that's kind of those two segments there. And so if you're looking at the connected device segment, we see that it's now growing 29% year-over-year, so pretty strong growth. Software is growing even faster at 39% year-over-year. And so that's what kind of gets them together to their 33% year-over-year growth. And that's been kind of an acceleration of what we've seen even just a couple of years ago when they were growing in kind of the lower 20% rate. And so that has been really the adoption of a mix of things. AI has actually really been an accelerant for them. The more they've been able to include that in their software, the more they've been able to upsell people. And at the same time, it's kind of been hard to fill officers for jobs. A big part of that was kind of the defund the police movement, made it so a lot of people didn't want to become police officers anymore. On top of that, there were some budget cuts and budget movements that kind of hurt their ability to hire more officers. And so they've kind of been solving for that by leaning more into technology, more into AI, which is helping make each officer's job much more efficient. So like I was mentioning before, they're able to spend less time kind of in the office and more time out on the field. And so that's been part of the reason why their growth has been so strong. Of course, there's been some other things too, such as the new Taser 10 This is, you know, a Taser device that now has 10 prongs that it can shoot out. You do need two shots to land on someone in order to complete the circuit for the electricity to flow through. So you still have five opportunities basically to subdue and assailant. And so that is a big step forward from when the Taser started, when there was only two shots. And if you missed them, then you're kind of out of luck. And on top of that, the range wasn't that great and it didn't penetrate clothing very well. And so the more they're able to make the Taser device work as efficiently or better than a gun, at least in terms of stopping someone. Of course, the object is not to kill them, but to subdue them so they can't move and capacitate them. And so if they don't use a Taser very often, they are using a gun. And so a Taser is a more preferable.