Taser maker Axon CEO acquires air defense startup Dedrone

Well, it’s so great to speak with you today. Joining me now, CEO of Axon, Rick Smith and CEO of D Drone, which is a CNBC disruptor 50 company, ADT Endeavor on Conda. It’s so great to have you here. Rick, I’m going to start with you. The fact that you are making an acquisition of D Drone, we’re now talking about counter drone technology for a company probably best known for Tasers and body cams. What does this bring to the portfolio? Why do it? Why do it now? Yeah, well, we are a mission driven company and when we focus on solving problems that people really care about, it’s it generally turns out well. And I would say D drone and what they have done in the space of really trying to help the public protect the airspace and you know, you can see what’s happening around the world. Drones carry great promise but also great peril. And so by combining forces, we’re able to bring our scale together with D Drone’s ingenuity and innovation so that we can protect more lives and more places. In terms of the details, Rick, about this deal, when do you expect it to close? Are you disclosing the price tag? We will be disclosing the price tag later this week in our ten Q. We expect it to go through a normal closing process sometime later this year in the second-half. OK. And ADI, guess just to take a step back and talk to me about D drone, which has been growing, been growing quickly. You’ve racked up a number of milestones, including just recently one that that enables even more work and contracting with the federal government. I guess just talk to me about the capabilities. Yeah, thanks. Thank you. We are the global leader in airspace security. It’s a it’s a huge thing for a small company like us to claim, but we are deployed in 800 different locations. Like Rick said, on the one side we keep the bad drones out and on the other side it’s a product we’re launching by end of this year, which will end enable the good drones to fly further and actually do the job they want to do. So we, I mean we we’re bringing robotics and AIML to the forefront in both defence as well as public safety. I couldn’t be more excited about Axon being our future home. Yeah, we’ve known Axon for two years and it’s been a phenomenal journey with them as an investor, as a board member. And I know that as companies we intersect on the mission, we protect lives, we want to protect more lives and more places. I love Rick and his entrepreneurial team. It’s just a phenomenal, it’s like a large start up. It’s one of the key reasons why I think it’s a great match because honestly it’s a large start up and they’re going to provide the resources that will you know take us to the next level from a rocket ship from a rocket fuel perspective. So super excited about the transaction, super excited about where the company is. We’ve been growing leaps and bounds and I know this is a bigger and bolder platform for us to take off in the future. So ADI mean you just talked about protecting lives. What are the types of places that your technology is already deployed and how, how real, how acute has that risk or that threat then that it has been put to the test? No, absolutely. I I mean just look at just open any newspaper, any, you know, switch on any TV channel, Look at what’s happening in Ukraine, look at what’s happening in the Middle East. Drones have changed Modern Warfare, public safety and Homeland Security forever. So we work at the intersection of Modern Warfare. You know, we solve problems in war on drugs, we solve the border security problem and we solve the, you know, public safety issues. So we have true dual use technology that the DoD wants to bring from a commercial and you know, law enforcement world into DoD. So super excited about that. We are deployed at 800 different locations. Look, every airport needs it. Every, you know, prison needs it. Every MOD in the world needs it. At this point, DoD or MOD in the world needs it. So talk about any contested environment, Modern Warfare if you will, it’s completely changed the face of how you know battles are fought and then we are at the forefront of some of these most important things. Right now I’m in this public thing, there’s stuff about us in the public domain that you can pick up. But yeah, we are very proud of what we’re doing. Our engineering and Genuity like like Rick mentioned is, is our crown jewel is what we’re absolutely prepare a software AIML based company both in camera AILMSRFAI, radio frequency AI and we want to bring that technology to solve what is the most important and asymmetric threat in public safety and national security today which is drones. And I do want to get into the AI PS of this in in more detail. But first just one more question tied to the steel Rick counter drone technology. I mean given the fact that you have these different businesses, these different verticals, this represents a new one. How, how big do you expect this to be versus the rest of the portfolio? How much do you expect this to grow? How quickly can you, I guess continue to beef up these capabilities once it once it this deal closes? Yeah. So we estimate this will increase our total available market by over 20%. And what AD has done is truly impressive for a start up. I mean they’re protecting stadiums around the world, they’re protecting borders. And we believe with what’s happening now, you know, drones are not only changing warfare, but we’re talking about the same drones fundamentally. You can buy at a Best Buy that with minor repurposing and plans you can buy online can suddenly take these consumer toys into things that mean quite dangerous. And so we think D drone is really on the cutting edge of helping society figure out how to manage these drones and not only how to manage the dangerous ones, but we see a huge area of growth is for public safety to have their own drones, what’s called drone as a first responder, meaning you can get a drone on scene well before a police car can get there through traffic. But in order to do that today, you have to have a police officer standing on a rooftop. You’re looking into the distance trying to see a drone. We know that a superhuman array of sensors can track drones and keep the airspace much safer than a person standing on a rooftop. So it’s a very natural fit with our existing customer base and then D drone does bring us new customer bases and critical infrastructure and major entertainment venues etcetera where we can bring some of our other solutions into these new spaces. It’s really, I mean it is pretty wild when you think about the fact that you still have to have an officer on site, the whole line of sights, regulatory framework that everybody’s been talking about changing or updating for so many years now, but that you still have, you still have this playing out. I am curious Rick, how you are thinking about AI more broadly because I know this has been a big part of the Axon story. It’s certainly been big with your customers and increasing productivity and some of the services you’re able to offer. But it’s been big with investors too with the stock up what almost 50% over the past 12 months. So how, how are you implementing it and where does it go more broadly? Well, just last week we announced our biggest AI product to date, it’s called Draft One. And basically seven years ago we started creating a record management system for law enforcement. Now normally a mission driven company, you would think, well why do you guys want to build basically form filling software. And the reason is because bureaucratic tasks take up about 50% of our nation’s law enforcement capacity. Cops are spending about half their time sitting in writing reports. So we believed 7 years ago that one day AI would come along that would enable you to extract most of the police report right from the body camera transcript. And effectively that day has arrived and we’ve now launched Draft One. It’s live in several agencies today and it’s probably getting the the most welcoming response of any product we’ve ever launched because police just hate the drudgery of doing paperwork. And we’re not only making it faster for them, but also the quality of reports is better on every metric we’ve measured. And of course with D drone bringing AI into helping make sense of huge amounts of sensor data, you know, you can imagine tracking small drones in an airspace is not easy and they’ve been able to fuse, you know, visual sensors, RF detectors and radar into one seamless network and then using AI to process all that at a scale and speed no human being could. So AD let’s talk a little bit about that and where it goes from here. Yeah, look, look I mean as Rick said, our capability is in our AI pipeline on the on the you know camera side. So if you put a bunch of cameras out there and look up in the sky and not many cameras are doing that today, we should be able to classify everything that’s flying in that airspace. So at that point you understand what are the, what are the friendly ones that we need to kind of go from point A to point B and what are the non friendly ones that are not supposed to be there. And we have to then adjudicate that in the middle of what is already a busy airspace with like you know manned and you know crude aviation be it helicopters or commercial jets or or you know small Cessna planes. So it’s I I think that the skies are getting are going to get more crowded for a good reason because you know there’s all kinds of air taxis as well as drone is the first episode responded drones that’s going to that’s going to come in to kind of put robots in to do tasks that you know robots do better than humans. And I think it’s our job to have that infrastructure and security and situational awareness layer that will enable these platforms to take off. Yeah, it’s it’s pretty interesting to think that we could potentially see something like autonomous flying in a bigger meaningful way before we see autonomous driving. I I want to go back to something you said Rick and that was just in terms of the AI product you you just launched. We’ve seen in recent years we’ve seen police and security budgets under pressure when you do offer these type of technological solutions. I wonder what that means in an environment where that has been the case and I guess your outlook in general for those types of budgets and and and the appetite for the products and the services that you’re now offering into the marketplace. Yeah, so specifically what we’re seeing is on average agencies are spending about 40% of their man hours on bureaucratic tasks. And so at a very high level that means about almost half the budget or 40% of their budget is going into non productive bureaucratic tasks. We believe we can cut that at least in half. And so you know a a quick back of the envelope is that could be the equivalent of increasing the nation’s law enforcement capacity by about 20%. So and we also obviously spend a lot of time thinking about the risks of AI. It can be very powerful. You also have to be quite careful with it and report drafting. We’re very careful with the name draft. One, it is not the finished police report. We’ve put many safeguards in place to make sure there’s no bias introduced and that officers are going through and methodically answering questions that we’re placing in there to make sure we’ve clarified exactly what happened and what their perceptions were during an incident. So we think this is a very relatively safe place to use AI for huge benefits for our customers. OK, final question for you, since I know we’re getting this DealNews, but also earnings for Exxon, which is publicly traded and part of the S&P 500. Just a little bit of color on the quarter and what you expect for the full year. Yeah, it’s a, it’s a really exciting time. We just turned in 34% year over year growth. It’s our 9th consecutive quarter growing at over 25% and our Adjusted EBITDA profitability is just a hair below 24%. So in the pipeline is as strong as we’ve ever seen even before this acquisition and we believe you know I just couldn’t be more excited to have AD and his team come and join us. We think this is going to set up the next leg of our sensor and software business which is now larger than the Taser business most people knew us for. And of course, Dedro now really gives us, you know, the opportunity to expand that whole sensor array into the skies. All right. I’ll look forward to covering all of this as it comes together and this next chapter unfolds. I appreciate the time today. Rick Smith of Axon and Aditya Devaron Konda of D Drone. Thank you. Thank you.