Axon Enterprise Inc Stock

Great. Good morning, everybody. Welcome to the Axon fireside chat at the Goldman Sachs Communacopia and Technology Conference. I have the privilege of introducing Brittany Bagley, who's the Chief Financial Officer and Chief Operating Officer at Axon. My name is Mike Ng, and I cover Axon here at the firm. We have about 35 minutes for today's presentation. But first and foremost, thank you so much for being here, Brittany.

Thank you for having me. I always like coming here.

I'm thrilled about that. To kick things off, I wanted to ask about Axon's portfolio and key growth drivers. Axon is the market leader in U.S. public safety technology. Historically, Axon has done very well in TASER, body camera, evidence management software. Today, about 1/3 of the software comes from non-evidence software like 911, Fusus and the AI Era Plan. How are you thinking about the key growth drivers from here and what the strategic priority is for the management team?

Yes. No, it's a great question. And it's really nice to be able to share some of those stats with all of you because these are businesses that we have been talking about and investing behind in the last couple of years. So it's great to actually be able to share some of those growth numbers. I think the really important thing to remember about our products and as we've evolved the product portfolio is that it really is an ecosystem and everything works together and so everything gets better together. And so, as we look towards the future, we're not prioritizing any one product category over another. We continue to be incredibly pleased with how TASER and body cameras are anchoring the portfolio. But then we've added on counter drone through our Dedrone products. We've added on 911. We're adding on these other software pieces, and they all just reinforce each other.

So as we look at our priorities, it's really just to make these products continue to get better, continue to solve problems for our customers, fill in gaps in the ecosystem where we see them, continue to evolve our AI products because we're only at the very beginning of what AI can do. So that's a big area of investment for us. But what we do is we tell you about things well before they actually become meaningful to our P&L. And so the things that we talk about are things that are the drivers for the next couple of years. So then we start telling you when they become meaningful to our P&L like some of these software products. But that's the goal is just keep evolving that ecosystem.

Let's talk a little bit about business momentum, bookings, which is a new metric that you complemented in terms of a 5-year bookings metric starting last quarter. That number grew over 30% in the second quarter of '26. Gross bookings grew a little bit more slowly. But could you just talk a little bit about the differences between gross bookings, the new 5-year normalized metric? How do you think investors should evaluate this new normalized growth metric alongside your contracted backlog?

Yes. So we gave the new 5-year normalized because we were getting a lot of questions about what role duration of our contracts was playing in bookings. How much of our bookings growth was because we were getting really long-term contracts. And so we wanted to provide this metric as a way to help all of you look at our 5-year normalized bookings. What that really means is that when we look at 5-year deals, we take out any of the years that are 6 and beyond. So you're really just getting a number for 5 years. Now if we do a deal that is shorter than 5 years, we don't gross it up. So this is the total bookings that will happen in the next 5 years.

We thought that would be a helpful metric, both to get to the duration piece, but also as we go forward to help give some comparisons for as we grow our enterprise business, not all of those deals are going to be 5-year deals. Some of our international deals aren't 5 years. So give everyone a way to look at it. We did it in a quarter where -- or a year where it shouldn't make a particularly large difference. So we're not expecting there to be a dramatic difference as we look at the year between our normalized bookings and our gross bookings. You could see normalized being higher sometimes, you could see gross being higher sometimes. In Q2, normalized was higher. Gross was lower at 20%. Gross was also comping a 50% growth in bookings from the prior year. So you have to balance some of those things out.

As we look at the year, we really look at both gross and normalized bookings, but we do look a lot at normalized bookings and we look at our future contracted bookings. We had given the color that we expected our normalized bookings to grow 30% plus. We expect our future contracted bookings to grow well above that. You can back into what that means for gross bookings, but it shouldn't have a material difference for the year between gross and normalized.

Great. One common question that I also -- I often get from investors is just about Axon's TAM and how penetrated Axon is within its TAM. A couple of things that we could tease out here. But maybe to start out, how much does Axon make of a state and local police budget today? And is there opportunity to grow that percentage just in terms of.

Yes, absolutely. I think depending on the department, we're somewhere between 1% to 5% of the police budget today. So pick 3% in the middle, if you want. I think at some of our largest customers who are buying everything, you get up to that 5%. And those aren't necessarily our numbers. One of the great things about our customers is they publish a lot of this information, so you can go find customers who lay out their budgets and how much Axon is a part of that. So not a huge part of their budget today, lots of room to continue growing inside of the budget. Police budgets have continued to grow, but we have grown much faster than that, and that is really because we're increasing our share of wallet. We increase our share of wallet by coming up with products that solve real problems for our customers that they need, that they want to use.

Depending on the product, some of them are really mission-critical. Some of them are lifesaving. Some of them are about transparency. And as we look at AI, some of them are even more about ROI and actually generating efficiency for the department. So there's different reasons that we're able to do that across our products. But I think we estimate we're about 15% penetrated in our state and local TAM today. And then our overall TAM is about $159 billion, $160 billion from a TAM standpoint.

Lots of detail that we can get into all of you on how we get to that TAM. We try to be pretty conservative. We try to really have a look at only products that we sell today in countries or markets that we can actually apply it. So I know there's lots of ways to do TAM. We try and be pretty conservative and think that it just shows that there's a huge opportunity in front of us.

Great. I would have thought that Axon was relatively fully penetrated in TASER, yet last quarter, you had your largest individual TASER order in company history. Could you talk a little bit about what's driving this TASER momentum? Is it the TASER 10 refresh? Is it expanded number of seats, if you will?

Yes. And it differs depending on market. So the U.S. deal that we were excited to call out last quarter, like our largest ever TASER deal still happening 3-plus years into our refresh cycle. That was an upgrade to TASER 10. So great to see that we still continue to have customers moving to TASER 10, still a lot of opportunity to do that. But then we also called out international deals having TASER in them. International has had some real reception to TASER 10. TASER 10 is -- it has higher efficacy and more use cases. And so that's really appealing to some of our international customers. And so that's where you're seeing us get into markets that we were not in before.

Perfect. I wanted to ask about enterprise. Enterprise bookings tripled year-over-year last quarter, and you're currently conducting trial programs for newly launched Axon bodies of the Workforce Mini and retail and healthcare organizations. So first, could you talk a little bit about the feedback that you're getting from your enterprise customers? How do you map the time line from trials to full-scale deployments? And what are the main enterprise use cases that you guys are most excited about?

Yes. Great question. So there's a couple of ways in. It usually really is with the trial. Some of our customers trialed our older Axon Body workforce camera, which was a little bit larger than our new ABW Mini. ABW Mini really launched at the beginning of Q3 for us. So nothing in our Q2 numbers from an ABW Mini standpoint. And so we see customers either trialing the Axon Body Workforce and thinking about upgrading to ABW Mini or they were waiting to get their hands on ABW Mini and they will trial ABW Mini. What do they like about it? They like the transparency. They are seeing that it helps them understand situations, improve efficiency. There's training opportunities off of that. There's also deescalation capabilities coming off of it. Sometimes if you just see someone wearing a camera and you know you're getting recorded, you behave a little bit better. So that is also something that they're seeing.

So depending on the customer, they're seeing different use cases, but it's all sort of in that training efficiency, interaction with customers or patients. And so that's where we're seeing the benefit. I would imagine how long trials depends on the customer. I would say some large customers will even have phased rollout. So they won't do all of their locations at one time. And so that's typically what we see. It goes from trial to phased rollout. So can be fast in terms of what they see, but they usually want to collect data and then make that transition.

Perfect. You talked about some of the momentum in international with TASER 10. Overall, international bookings have been on a tear, 3x year-over-year last quarter. Maybe expand a little bit about the drivers behind the international momentum. How are you adapting your go-to-market in these regions? And anything else you would highlight in terms of whether it's T10 momentum or something else?

Yes. I think back to where we started, it's the whole portfolio and the whole ecosystem working together. T10 definitely has momentum internationally. Our counter drone products are very interesting internationally. And I would say our AI products are really interesting internationally. So we called out that some of our international customers were some of our largest AI deals in Q2. So we're seeing that adoption. Now with our AI products, we have to do things like localize for forms and language in those countries. So we have a little bit of work to do when a country decides to come on to those AI products. But again, I would say we have more things than ever that are resonating with our customers. And so that is what's allowing us to get into international, not just with TASER, with TASER and with our other products.

Great. On the topic of counter-drone, some of the U.S. federal agencies have intent to acquire counter-drone products and sensors. And Axon, I think, was named as a participant in one of the DHS programs. Could you maybe just talk a little bit about that and the opportunity there?

Yes. It's a pretty nascent market. So there's an enormous opportunity. I think as drones become more and more visible and more and more used, you can imagine that counter drone goes along with that. So I think for every major event, whether or not that's something like the World Cup and it's a sporting event or parades or really anything you can think of where there's a large gathering, you're going to start to see counter drone be a requirement to have there just because you don't know what could happen. So it's going to really start to be a necessary product for deployment. That's true for state and local. It's going to be true for Fed civil.

So we were really excited to see those contracts come out. We were excited to be named as part of them. Still too early to tell what that means in terms of how they're splitting up those dollars across products. but it's why we talk about there being such an opportunity inside of Counter Drone and why we get the question sometimes like, well, was it just a World Cup event? It wasn't just a World Cup event because there's going to continue to be events and sporting events and gatherings of people. And so it continues to be relevant.

Right. And for the World Cup in that quarter, you guys had over $100 million of quarterly revenue for counter Drone, which to put that into context was bigger than body camera, I believe, in the quarter. So maybe if you can just elaborate a little bit on that. I mean, obviously, the World Cup is such a large and seminal event. Like what else could be going on from an asset protection or asset monitoring perspective that could help that?

Yes. Yes. I mean I think -- I mean, you could imagine that there's like single events that maybe could pass that. I don't know if the Olympics is going to be a big deal. But I think it's less going to be like there's a single event that has to like be bigger than the World Cup and more that this is just becoming a standard required capability for everyone to have when they're doing events. And so as we continue to grow the business, it's really -- there's probably -- I mean, I'm sure there could be like an event we call out again in the future, but it's not going to be built on that. It's going to be built on the rest of our business proliferating out to all of our customers.

But I am really excited to say that we passed that $100 million because we acquired this business 2 years or so ago. It was nascent. We got lots of questions of like how big is this going to be? Is it only going to be for DFR? So it's really validating on the vision and the strategy that we set for counter-drone.

Great. If we could pivot to the AI Era Plan, certainly something that has emerged as a true standout. Revenue -- AI revenues, I think, grew 700% year-over-year last quarter. And 3 of the top 5 AI Era Plan deals last quarter came from international customers. So this is really something that's seeing global demand. Could you unpack what's driving this growth, talk about customer adoption and feedback? How important is Draft One in driving AI Era sales?

Yes. Draft One is important because it was really one of our first products that came out in the AI Era Plan. As a reminder, we sold the AI Era Plan as like everything that we do in AI, you can get. And so Draft One was really the first big product inside that probably along with transcription. And then we continue to innovate and add more products. So we went from Draft One to Form One. Translation has been incredibly popular inside of our AI Era Plan, and there's more to come. There's always more to come with our product road map. But you can imagine we're really just getting started with what we can do with AI inside of that product portfolio.

So I would say customers continue to believe that we will innovate and we will be leading, and we will come up with product ideas first. And so they both like the products that we have in, but they also like the fact that we are basically future-proofing AI for them. They don't have to be out deciding who the next great start-up is or what they're going to get. They know that we're going to do it, and we're going to do it in a way where we have thought through the ethics of it. We are willing to work with their DAs. We're willing to really make it a product that they can use in their ecosystem. I think that's some of the stuff that's really exciting about the AI Era Plan. Back to our earlier conversation, it also allows departments to get efficiency, which is a really nice conversation to have.

Draft One saves time. I think we put this out a couple of quarters ago, but we went through and said it can save officers up to 4 hours a week. That's real-time savings, especially relative to the price of the AI Era Plan. And that's before you get into things like translation and the other products that we have. So it drives real efficiency. And the point on the international customers is they're seeing it, too. This doesn't just resonate in the U.S., it resonates with our international customers. Now you have to do the work to make it apply. Everybody has different forms that they have to fill out, but just huge runway there.

Right. So AI Era Plan is a subscription. You get all of the latest software and products coming out of Axon that are AI related. Is there anything that you could share as it relates to product road map for AI Era Plan or how you think about pricing, right, especially as you add more features and capabilities to AI Era? Like where are we now? Where do you think it could be?

Yes. I would say that there's lots of development going into the AI Era plan. Nothing I can share right now. We did talk about Axon Gravity back at Axon Week, which is helping connect all of the systems together. And we do have IACP coming up in October, which is usually where Rick likes to talk about some of the cool new things that we're putting on the product road map. But I would say you can imagine like just like translation, you can imagine we're doing more and more things on the body camera or with the video that comes off of that. Those are areas that are really ripe for us.

And then what the next part was?

It is about anything you can share as it relates to the philosophy around pricing?

Yes. We redo our pricing annually. So I would say, coming up in the next couple of months, we'll look at our pricing for 2027. We, from a philosophy standpoint, always like to really look at the value we're providing our customers and make sure we're providing more value when we take prices up. So we don't just take prices up sort of apples-to-apples, but we really try and add things in and add value. So I think what we do on AI pricing will depend on what we're adding into the bundle, the use customers are getting out of it, making sure they really feel like we're getting value there. As we think about the long-term game, it's much more important that we become their AI provider and that they're using us and that they believe we can provide their solutions than it is to necessarily take price day 1.

Great. On TASER 10, I think the product is 3 years into launch and product refresh. Booked units are already outpacing lifetime units of TASER 7. Could you talk a little bit about whether or not T10 will have a 5-year life cycle, which I think was the life cycle for TASER 7 before T10 came out. How much more runway is there to upgrade the installed base to T10?

Yes. So we talked about TASER having, on average, a 5-year life cycle and our body cameras having on average a 2.5-year life cycle. That doesn't necessarily mean that we get our products out perfectly on that schedule, but that's roughly the right way to think about it. I think even with 5 years, that would give us a little bit of time before we came out with our next TASER. And so our conversation earlier, like between international, between customers, we still sell TASER 7. We were still selling TASER 7 last year. So there's plenty of room for customers to continue to upgrade.

Great. On Axon 911, you guys have made a couple of acquisitions in this space more broadly between Carbyne and Prepared. Maybe you could just talk a little bit about the 911 strategy. Last quarter, I think you signed your first-ever full-scope Axon 911 customer?

Yes. So we like to talk about 911 sort of giving us access to our customers all the way from when the call comes in, all the way to when they close a case. So we talked about it from call to closure and helping them at all of the steps along the way. That's really what the acquisitions gave us is they gave us that incoming call piece. We made 2 acquisitions, Prepared and Carbyne. That gives us both the AI overlay on top and it actually gives us the underlying call handling system. But rather than having it be an on-prem call handling system, it's a cloud call handling system. So we were really excited to announce the first customer that bought both Prepared and Carbyne, so bought our full suite of 911 products.

I think we hope we'll see a lot more of that because that provides their solutions and what they need. You can imagine that doing the AI overlay is a lot faster and easier for customers to implement. They can do that pretty quickly, going through an upgrade to their call handling system. They do that less often. It's a bigger deal for them. Carbyne has certainly done many of them. They've done a really good job with it. But you can imagine that takes longer for those RFPs to come out. But then when you win those, you are a relatively sticky call handling service until they decide to do their next RFP. We've gotten great feedback from the customers who are using these products. We had one, I think we talked about, they implemented it before July 4, it took them about a month to implement. And then even as they saw the spike in July 4 calls coming in, the actual calls that their agents had to handle went down by 33% by having Prepared, the AI agent on top. So we're getting really pleased customer feedback from these implementations.

Great. And just as a follow-up on that, could you talk a little bit about your desire to do more in computer-aided dispatch and whether that's kind of changed over the years and why? And then as you also try to win customers that are not your traditional constituent like fire departments and hospitals and things like that, like how does that change your go-to-market, if any?

Yes. So I think the nice thing about our 911 strategy is we can do that while integrating with existing CAD solution providers. So we don't have to do our own CAD play. You probably remember, we tried that for a little bit and decided that wasn't our sweet spot. And so this gets us at the same goal, which is getting into these calls early and being part of these early conversations and even thinking about how and who is getting dispatched. Are you dispatching an officer? Are you dispatching a drone? What kind of information do you have? It integrates into Fusus. It really makes it really seamless across it without having to get into CAD or without having to get into some of those legacy systems.

Great. And then on Fusus, you guys have a very powerful unified real-time single pane of glass interface. Saw really strong growth last quarter. What's driving all this growth in real-time operations? Is it traditionally in your state and local customer, is there much more in enterprise and retail and things like that?

Yes. I mean I think one of the things I will say that's nice about our enterprise strategy and why we think it is such a good adjacency for us is you can take a lot of the same capabilities that we have in state and local and with some tweaking, have them also be really relevant for enterprise. So again, I would say Fusus is relevant across all of our markets. It's relevant across state and local, international, enterprise. And the reason that is, is because everybody has cameras out there or sensors out there of some kind, including our fleet cameras, including our body cameras that they want to be able to see in a real-time way. And so Fusus becomes that single pane of glass where they can pull in all of their sensors, ours or other people's. We are an open ecosystem. We are happy to integrate, but pulls in all of those sensors and allows them to look at it. And so relevant for all police forces, but also relevant for enterprise customers thinking about how they do asset protection.

Right. And in that partnership model, could you talk a little bit about whether or not there are costs to Fusus for pulling in footage from other partners that are non-Axon cameras because you guys really are an open ecosystem play, right, like Citizens app and closed-circuit cameras and all that stuff.

Yes. Yes. I mean it sort of depends on the partner and what the relationship is. But I would say, in general, like it is best practice to have an open API for this type of integration. And so usually, that's what we're working off of.

Okay. Great. I wanted to talk a little bit about the competitive environment within body cameras. Last quarter, you talked a little bit about some competitive win-backs in the body camera space. What were some of the pain points that those customers had to deal with before coming back to Axon? And maybe you can just talk about what's happening in body cam competitively overall?

Yes. I mean I'll keep this pretty high level. But I would say one of the things that we really like to do for our customers is we like to innovate. We like to have features that we're first to market with, and then we like to really deliver on our promises to our customers. So if we say something will work a certain way, we absolutely make sure it works a certain way. If we say it will integrate with Evidence.com a certain way, we make sure it integrates with Evidence.com a certain way. And so what we have seen from our customers is that often, maybe not often, sometimes when they go trial with a competitor, when they deploy it in the field, that won't happen the way that the competitor said that it would happen. It won't integrate as well or it won't be as reliable. And so in those cases, that's where we see someone coming back to Axon because we really do what we say we're going to do.

Right. Just on financial guidance. Last quarter, you raised your full year revenue growth outlook to 32% to 34%. Maybe talk a little bit about the key demand drivers, operational tailwinds that gave you that confidence to raise the full year outlook.

Yes. So as we look at the full year, usually, we have pretty good visibility by the time we come into the second half of the year. Because we have future contracted bookings, we know a good chunk of our revenue that's coming in. And then by the time we get to the second half, we have pretty good visibility into the deals that we think will close for the year and what that will do for revenue for us for the year. So that's what allowed us to get to the 32% to 34%. I will say, and this is how when we called this out on the call, and this is how it looked last year, that tends to be more heavily weighted to Q4 than to Q3. So if you looked at the shape of our year last year, we did a little bit over 30% growth in Q3, and then we had our highest ever growth quarter or our highest growth quarter of the year in Q4.

And so we gave similar commentary for this year, which is we really expect Q4 to be the quarter where you see some really attractive growth, highest growth quarter for the year would be our expectation. And that's just because we get a lot done as we go into like close the year. That's a real impetus for our customers to get through City Council to get through -- get things signed to not have it drift into next year. So it's not that we don't get deals done earlier in the year. But obviously, that's all the deals that we have sitting out there that we know that we think we're going to get done this year, like that end of year line is a real push. So that's what you see when you shape the year.

Great. And then on gross margins, I guess one question on software, one question on Connected Devices. On software, what's the right way to think about steady-state software-only gross margins? And maybe you could talk a little bit about the services impact on that line as well. And then on Connected Devices, just given how strong Dedrone and platform solutions are growing, is that going to impact the steady-state margins of connected devices?

Yes, great question. I'll go in reverse order. So as I think about connected devices, there's sort of 3 big drivers of connected devices. TASERs, no real change to how we think about TASER margins. There's our cameras. Our cameras are the one area that really are getting hit by the increase in memory costs. Memory costs keep going up. Hopefully, with some new capacity coming online, that starts to change in 2028. So I don't think that there's anything -- I mean, we'll see where memory sort of falls out. But ultimately, we also can look at pricing. And so over time, I don't know that I would call out connected devices as being any different, but there's certainly some headwinds for us on the memory part for cameras.

And then there's Dedrone. I would say Dedrone is really in 2 pieces. So there's the hardware business, and then there is a software business that comes along with Dedrone. You're seeing a lot of the hardware business upfront. That business is new. It's nascent. We're scaling into it. We're figuring out how to do deployments and service and all of that. So that is a drag on our Connected Devices overall margin. But I don't think that you should assume that it is forever a drag on our connected devices margin. I think that's just a business where we have to figure out how we scale and get more leverage in those margins and how we operationalize that and how we deliver.

From a software and services standpoint, software continues to be above 80%. I don't see that changing, but obviously, it's something we keep a close eye on. And so then the fluctuation you see in the software and services line item is services. We have services around a lot of our products. A couple of years ago, we talked about it really being around fleet. Well, now it's around a lot more than just fleet. We have to do implementations on Dedrone. We do implementations on our hardware. We also do a lot of it on our software. So we have services to get Fusus up and running. We have services to get our records business up and running. So that's how we look at our services business and just depending on the deployment and the mix of our services, that's how you see the Software & Services fluctuate.

Great. In the last few minutes, we have -- maybe I can just ask you about what Axon is prioritizing over the next 1 to 2 years to just maintain all this growth momentum that you have.

Yes. Yes. I'll give you 2 different versions. One, our customers. We always prioritize our customers. Like that is our North Star, and we don't lose sight of that because if we don't delight our customers, they're not going to buy all of the new products that we come up with. So we really stay very, very focused on our customers and how happy they are with us. Two is our innovation pipeline. We continue to innovate. That's what we do. We are interested in new technologies. We do it organically. We've obviously acquired some great companies, but we're really interested in continuing to make sure that we're solving problems for our customers. And then there's how we scale that profitably, right? So how do we deliver for our customers and their product vision in a profitable and growing way.

How do we do that? A lot of it is about continuing to come up with new products for our existing customers and then taking those customers -- those products into new markets. So that's where you get us talking about things like enterprise and international. How can we take those products that have proven themselves out in our U.S. state and local business and sell them in more places?

Perfect. That's a great place to wrap up. Brittany, thank you so much for being part of the conference. It's been a privilege to have you on stage.

Thank you for having us.

Hello, everyone, and thank you for joining Axon's executive team today for our Second Quarter 2026 Earnings Conference Call. Before we get started, I'll note that our remarks today are intended to build upon our most recent shareholder letter and investor materials, which you can find on our investor website at investor.axon.com.

During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our expectations as of today and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially as discussed in our SEC filings. We will also discuss certain non-GAAP financial measures. Descriptions reconciliations of GAAP to GAAP are included in our shareholder letter and available on our investor website.

Now as always, before we kick it over to Rick, we have a quick video to get us started. Let's pull it up.

[Presentation]

All right. Thank you, Erik, and great job to the team. I love those videos just get me pumped up. So lucky to get to work here. I'd like to thank all of our analysts and investors who are joining us today. As you can see, we had another record quarter. Again, I was just looking at the numbers, like 39%, like wow. Okay.

So we had a record quarter, and I could not be more proud of this team. And none of this -- none of it happens without our customers. You guys are the foundation, and we can't do any of this without you. This morning, my cyber truck drove me to work. I sat behind the wheel and never touched it. A few years ago, that was a keynote fantasy. Today, it's my commute. And I've stopped noticing. That's how this goes, right? The impossible becomes remarkable and then it becomes Tuesday.

Two days ago, OpenAI announced an unreleased model had solved 10 open problems in mathematics. Problems that the best mathematicians alive have been stuck on for decades, one of them unsolved for at least 27 years. And the compute cost to do all this, to do 10 of these unsolved like PhD career-level problems was $2,000 or $200 per problem. So for many years, the critique was at AI, sure, it could remix human work, but it can't create anything new. Well, that critique is finished.

A field medalist, which is [ Math's ] highest price. It's been called the Nobel of [ Math ]. Said he would have published a comparable result without hesitation. And there are many that said any of these problems might on their own qualified a human had they solved it for the field metal. And yet within a day, a model from another lab had reproduced half of the list, meaning it could solve half those problems on its own. So this isn't about one company getting lucky, the whole field just cross the line at once. The cost of an original breakthrough has just collapsed.

So why does this belong on an Axon earnings call? Well, because an idea on a page is not an outcome of street. Every one of these models perceives the world largely through strokes on a keyboard. When Axon deploys AI, we perceive the world through the largest connected network of sensors in public safety. Millions of eyes and ears already in the field already running and built for this moment. The intelligence doesn't replace the person, the human making a decision or making the call, but we hand them a clearer picture of what's happening in the seconds that matter most. And then it does the one thing software alone can never do. it acts.

A TASER device can stop a violent incident without taking a life. Drones and robotics let us send a machine where a person would otherwise have to go, both do the same thing. They lower the risk for everyone, the officer, the bystander and the person that the police were sent to stop. Every person is safer. See it, understand it, act on it. This is the chain of events. It's the same chain that drove me to work this morning, right? Software alone can't close it. Hardware alone can't. But in public safety, Axon holds every link in this chain.

Now when we changed our name from TASER to Axon, we were very specific about that. Axon is the nerve fiber that carries the signal from the census to the brain and the decision from the brain back out to the body, so to connect. We didn't pick a name that just sounded good. We picked a description of what we were building, and we've been busy building it. At the edge, sensors can see what's happening, whether it's body cameras, drones, fixed and in-car cameras, license plate readers, 911 AI assistance. Behind them is the largest customer controlled data repository and public safety. Then AI and real-time operations can turn these signals into understanding and then the means to act, TASER devices, drones, communication, training at the heart of it, of course, is our mission to protect life.

This doesn't just add up, it compounds. Every sensor has a signal. Every workflow adds context. Every outcome improves the next one. Brookhaven, Georgia shows you exactly what this looks like when you connect it end-to-end. Drones on the scene in 53 seconds. Coverage across 96% of their city. Burglaries down 45%. Look, no single product on the list produces these numbers. The system does. Data shouldn't sit trapped in a silo waiting for someone to find it. It should move securely through the workflows where it does something. A cities cameras to its 911 center. It's to its officers to real-time intelligence. It's evidence to courtroom, a frontline worker in danger to help that arrives in seconds. And all of this depends on trust. We've earned that over years of stewarding our customers' data and never treating it as our own. We'll keep deploying this technology responsibly and thoughtfully alongside our customers and their communities with people at the center of every critical decision.

In public safety, power without trust isn't an opportunity, it's a liability. I see this coming together everywhere I look. A few weeks ago, the customer bought body cameras for municipal employees, not for the police, for building inspectors. A few weeks before that, some of our largest enterprise pilots began putting Axon Body Mini on frontline workers. And during the World Cup, our ecosystem supported agencies across North America through one of the most complex public safety missions in the world.

So where we sit today, the world is being flooded with intelligence. What's scarce is intelligence connected to the real world, trusted by institutions that depend on it and aimed at problems that matter. That's what we've spent 30 years building. There is no company better positioned to benefit from the intelligence explosion than Axon. And through us, our customers and their communities for whom we operationalize this intelligence with physical hardware and thoughtful design and controls to help maximize benefit with appropriate oversight. What an exciting time to be alive and an even better time to be at Axon.

And with that, I'd like to turn it over to Josh Isner.

Thanks a lot, Rick. And good afternoon, everybody. As Rick said, we can't do any of this without our customers. Every day, our focus is on delighting them. Because when we do that well, everything else follows. We also can't do any of this without our team. They have embraced our mission and are working hard every day to deliver outsized societal outcomes. And there have been many of those in the last few months, including on the biggest stage in sports.

I am so proud of the Dedrone team for their work to support the World Cup. This was one of the most complex and comprehensive installments we've ever worked on. The expectations were clear, simultaneous delivery and activation across 11 U.S. host cities, more than 50 additional sites and surrounding areas, international deployments, multiple agencies with very little margin for error. The team executed with incredible precision and I believe this deployment further established Axon as the technology leader in public safety.

Dedrone is delivering tremendous growth and the opportunity continues to expand across state and local public safety, international, federal, enterprise and corrections. It is also one of the areas where we're investing in most aggressively, and the team is earning that investment. This is a business that was still in its infancy just a year ago and is quickly becoming one of our largest product lines surpassing $100 million in quarterly revenue.

Next, I want to give a shout out to our international team. International bookings came in at roughly 3x the prior year in Q2, driven by several large deals. What's especially exciting is some of our international customers are adopting our newest offerings right alongside our core products. In fact, they may be even moving faster than some of our U.S. customers, 3 of our top 5 AI Aeroplan deals in the quarter came from international customers. We're also seeing international markets fuel expansion in TASER. In Q2, we won a TASER 10 deal in the Middle East comparable in scale to our largest current U.S. state and local deployment and another in Europe comparable to a top 5 U.S. agency deployment. These are massive opportunities showing up more and more, and we're just starting to scratch the surface.

State and local public safety and corrections continues to show strength as well. We signed not 1, but 2 9-figure agreements with major cities in the quarter. One of those was our largest ever individual TASER order. We also signed 2 8-figure agreements with major state corrections customers and another ground breaker, our first full scope Axon 911 customer. This customer will deploy a combined prepared and carbine solution to power the call to closure vision we laid out when we announced these acquisitions, committing to that future just months before both deals closed.

And lastly, in the U.S., we continue to see more and more customers who bet on other vendors coming to Axon for body camera pain relief. We expect body camera shipments to be up 20% to 30% sequentially in Q3 and 15% to 20% quarter-over-quarter. The success across markets led to our TASER volume being the highest in a quarter to date. We've now booked more TASER 10 units than we booked over the lifetime of TASER 7 with a ton of pipeline still in front of us. That may sound crazy for a product category that has been around for 3 decades. Well, it's real, and it speaks to how much opportunity remains.

Next, enterprise. We've been talking about this moment for a long time. The point when those early conversations and pilot programs begin converting into meaningful enterprise deployments. That moment is here. Enterprise bookings were also up about 3x from a year ago, and the volume of opportunities continues to grow. And last but not least, I'm excited to see our federal business showing a lot of promise. We are engaged in opportunities across the federal civilian space, and the team is executing with intensity as we approach the end of the fiscal year.

Federal was part of the story with Dedrone in the World Cup, and we also closed a major deployment of Axon Assistant with a federal agency on our body cameras because they are using them as body cameras. And just yesterday, we were named one of the participants in the $1.5 billion DHS program for counter-UAS. I am looking forward to talking more and more about our progress in the federal space.

As far as bookings go, every indicator I'm watching looks as good as it ever has. Q2 gross bookings were up 20%. That's on top of nearly 50% bookings growth in Q2 last year. On a 5-year normalized basis, which adjusts for contract duration, bookings were up even more, over 30%. That matters because some of our newer markets like international and enterprise signed deals in the 1- to 5-year range compared to some of the 10-year agreements we sometimes sign with state local customers. Normalizing for duration gives us a clearer view of the underlying demand across markets. And as I review the pipeline, I see a clear line of sight to finishing the year with 30 -- in the 30% range of normalized bookings.

And before I hand it over, I want to spend a minute on how we're operating internally because this kind of execution doesn't happen by accident. A little over a year ago, we began flattening the organization to empower people closest to the work, reducing layers of foot friction and moving faster. We paired that organizational change with disciplined investment in AI tools for our teams. We didn't rush to deploy every tool or ask people to use AI for the sake of using AI. We rolled it out deliberately, and we focused on where it can make our people more effective. That has evolved in the regular hackathons and recognition for teams finding new ways to move faster and spend more time on the work that matters. We're seeing that operation model, our operating model, pay off and execution. I believe that discipline is a big part of why we've continued to raise our own expectations while navigating supply chain disruptions, higher component costs and tariffs while scaling to meet demand and never missing a beat for our customers.

It is coming together nicely. The team is earning. The mission is fueling them. Our customers can see it, and we are investing in Axon and they are investing in Axon as their trusted technology partner. We are a next play organization and we are stacking next place like never before.

With that, I'll turn it over to you, Brittany.

Thanks, Josh. We continue to see the power of the Axon ecosystem. We're not just one product but a system that all works together, getting better all the time to solve real problems for our customers. From before our call comes in to during an incident to closing a case, the sensor software and data work together. This is what you're seeing in our results.

Revenue was $904 million, up 35% year-over-year marking our tenth consecutive quarter of growth above 30%, and the demand remains broad-based. Software and services revenue increased 36% year-over-year to $398 million. Axon Evidence remains the backbone of our software business and the secure data foundation powering the vision Rick described. Increasingly, our newer software offerings are also meaningful contributors. More than 1/3 of our software revenue now comes from offerings beyond our core evidence platform, consisting of real-time operations, which includes fuses, productivity applications, including records, the AI Aeroplan, counter drone software and Axon 911. Together, that part of our software business grew roughly 70% year-over-year with the AI Aeroplan a true standout, growing almost 700%. And these businesses are still in early innings.

That breadth is supporting strong expansion within our customer base. Net revenue retention reached 126% and annual recurring revenue increased 39% to $1.6 billion. Our software fed by sensors and enhanced by data is a core pillar for our customers' workflows. We're enhancing these with AI and the numbers continue to show that this is sticky and growing.

On the devices side, Connected Devices revenue grew 35% to $507 million, primarily driven by Dedrone counter drone, TASER 10 and Axon Body 4. Platform Solutions revenue grew 123% to $150 million with Dedrone driving much of that performance. Counter drone was a new category for Axon added at the end of 2024, and it has quickly become a consistent contributor to our results, validating our acquisition strategy alongside our organic product development. We continue to see strong demand across customer markets and expect the business to continue to scale. TASER 10 remained to stand out in the quarter, as Josh highlighted.

Turning to margins. Adjusted gross margin was 62.9%, up 130 basis points sequentially. This increase in gross margin was primarily driven by tariff refunds, partially offset by increased mix from newer product offerings, which are still scaling. Adjusted EBITDA was $242 million or a 26.8% margin. Operating cash flow improved to $20 million from an outflow of $92 million in the prior year. This resulted in a free cash flow outflow of $1 million and reflected continued efforts around free cash flow conversion while still making substantial inventory investments to support customer demand and reduce supply chain risk as we scale. We continue to have line of sight to strong free cash flow generation consistent with our Q1 guidance of $450 million for the full year, with strong seasonality expected in the fourth quarter. As we've noted before, we also expect long-term free cash flow conversion to improve from these levels, but need to get through this period of inventory investment, which we expect to moderate after this year.

Future contracted bookings grew more than 40% year-over-year to $15.1 billion, reflecting the broad-based momentum we're seeing across products and end markets. As Josh mentioned, we continue to feel very good about the momentum we're seeing in the second half of the year. We're raising our full year revenue guidance to a range of 32% to 34%, 200 basis points above our prior range of 30% to 32%. Based on the strong demand pipeline and results in the first half, we expect seasonality similar to last year, where Q4 is our strongest quarter both in terms of revenue and year-over-year growth. We continue to expect full year adjusted EBITDA margin of approximately 25.5%. We received a refund in Q2 for tariffs, but we are also facing increasing component costs for the year, especially on memory which leaves our full year guidance unchanged. We expect Q3 adjusted EBITDA margin to reflect the impact of those memory costs with no benefit from tariff refunds before we scale margins back in Q4 to these levels to hit our full year target.

We are also thrilled with the performance of our counter drone segment. But as we scale this and other new businesses rapidly, we are absorbing the mix impact. Over time, these are well worth the investment on the bottom line as well as the top. While there are a lot of moving pieces in our business, we continue to deliver for our customers, our shareholders and our employees and are very proud of our results this quarter. As you think about a Rule of 45, we delivered above 60 and are looking forward to continuing to drive a strong second half of the year.

With that, I'll turn it over for questions.

Thanks, team. I think we're all up in gallery view. We have our -- one note today. We're going to try to take one question and then if we have time, we'll come back to everyone around the circle. So we're going to start with Meta Marshall at Morgan Stanley.

Great. Congrats on the quarter. I guess, Rick, I wanted to ask, just as customers gain comfort with AI where are your customers asking you to innovate around? And are there any areas where you're still finding any resistance from customers?

Well, sure. Change is always hard. And we -- this is a very risk-averse customer base when it comes to tech. So I would say, actually, some of the new areas we're being asked a lot about are around privacy, data security, I'm sure you all have seen the deflock movement, which is had some broader anti surveillance sort of momentum.

Now for me, this feels a bit familiar, like when TASER first came out, there was a massive backlash. I view this as sort of the birthing process, almost of a new -- any new real technology in public safety is going to go through an adjustment period. And I would say the credits aren't all wrong. There have been some mistakes, things that could have been handled better in terms of data privacy and security and a couple of high-profile uses where police employees were abusing their access to license plate reader data to do things like Track and X. But those are exactly the sorts of things where I think our approach to data privacy, where we have a critic based system where we bring in critical thinkers that are going to challenge us early.

I think we're about to post a new episode of the [ Boligo ] podcast with a couple of folks off of our EAC, our Equity and Ethics Advisory Council. And I think that's become a real super power. Like our customers, we talk about trust, it's not just hand wavy. It's -- we've hit a point where our trust with our customers is an incredibly valuable and fragile asset. If we break that trust, it would be very damaging to the overall business. And if we protect and cherish and continue to earn that trust, it makes our business more durable. So I would say we're seeing a significant number of agencies want to come over to Axon and convert from existing license plate readers to us, specifically because of the controls and privacy work that we've done around this space.

And for example, one of the things we're doing is we'll be building AI tools to watch for anomalous search behavior so that we're watching out for potentially abusive patterns and people have access to the data. So I would say, in general, there are still -- there are places where there's concerns about AI, and we just have to be thoughtful and understand those concerns. And say, look, this is a tool to amplify human ability not to replace human judgment.

And then maybe to just add, I think you asked about where the demand is. I think there's sort of 3 broad themes that are always present. Number one, and this is and even it helps them get response faster, effective, correct response faster and many of the things you see us talking about anchor on that. Number two, is anything that helps save officer time to get them more time back to do their jobs in community. And number three, is anything that drives officer and community safety directly. And so again, across all of our lines of business, across all of our categories and all the investments you see us do in AI, almost all of them line directly on those 3 broad categories.

Thank you, Meta. Up next, we have Mike Ng at Goldman Sachs.

I just have two as well. First, just on the momentum that you're seeing in Dedrone, Counter Drone, maybe you could just talk a little bit about other use cases that you're seeing beyond World Cup, I think it's natural for some people to think that you guys saw some outsized demand because of the event. What are some of the other private infrastructure, use case demands that you're seeing on a go-forward basis to give you confidence around that greater than $100 million quarterly revenue run rate.

And then second, just as a housekeeping item. On professional services within software and services, historically, we've thought of that as something that is tied very closely to fleet. I would imagine there are much broader use cases for professional services now. So I was just wondering if you could talk about what drives that.

Let me take the first one, and then I'll let [indiscernible] take the second one. So look, counter drone, there's this war going on in the Middle East and the one in Russia, where like you look at what the Ukrainians have been able to do to these wildberries warehouses now, they're just decimating that. The Iranians are threatening to go after American infrastructure and data centers, but these aren't confined to just tools of war, you're going to have -- our customers get it. I think the World Cup is certainly an accelerant but every data center understands, especially with now some of the rising controversy around data centers that any disgruntled person with a 3D printer, access to a drone in the Internet, could build something that could cause real problems.

The -- I think people -- anyone who's prone a gun violence could be prone to drone violence and so I think -- and it's not just us saying that, right? I think our customers broadly -- even in enterprise, like we have deployments that CEOs houses as part of their security protocol, we're seeing it at data centers and for campuses, it's at the World Cup now, but I think it's going to be every Friday night football game in 5 or 10 years. So I think the World Cup was certainly a surge, but it's part of just a normalizing acceptance that there's a 3-dimensional aspect to safety that we need to be able to police.

So I'll add a little bit to that, Michael. Thanks for the question. So ultimately, one of the more exciting things about our Dedrone business is, yes, federal is a piece of it for sure, but we're seeing far more opportunity internationally. And so I would not necessarily tie any much of our Dedrone revenue to one specific event. Those trailers, for example, that we sent to the World Cup are already being repurposed by the customer for other use cases. And so we certainly expect the Dedrone demand to endure.

Now it's important to recognize that these are large revenue shipments of hardware. So quarter-to-quarter, they can swing a little. But when you add it all up, I don't think it will look like the World Cup was an outlier. And on top of that, as Rick said, right now, it's really enterprise, federal and international as drone mitigation becomes legalized for state and local, again, we view that as another potential surge in demand here. So we're feeling really, really good about Dedrone beyond the World Cup.

Now second, on the professional services. We view this as an enabler to customer happiness, but also customer use the usage of our products. So a couple of years ago, professional services meant show up and deploy body cams or TASERs or integrate to a record system and so forth. Now professional services are showing up and starting to build things on site for customers using our AI tools. And so very much like some other companies in some other markets, we really view the opportunity here to start to delight our customers with more and more on-site that could be rapidly built and custom deployed, just as Rick talked about, at Axon Week ground Axon Gravity. So professional services will certainly be a strategic enabler to more usage and more purchases of products.

Thanks, Mike. Next, we have Jonathan Ho at William Blair.

I really appreciate the additional disclosure on your 5-year annualized deals. One thing I would like to understand a little bit better is when we commented about the 9-figure deals that you signed with the municipal police, some of these are likely longer-term deals. Can you help us understand, first, like how much you've really expanded with these customers versus prior deals? And what this potentially looks like as you broaden your engagement with the entire customer base?

Sure thing. I think it's following a trend that we expect to see in a lot of places, right? It's what we've talked about with this idea that we sell products, we delight the customer, and then we earn the right to sell more. And ultimately, I think that's what's happened in those couple of large deals. And they are deployments or expanded deployments of our products. It's not simply a renewal. And so oftentimes, there's more hardware and a lot more software in those deals.

And I think it's something we can start to see internationally here and there as well, potentially this year. And ultimately, like our bookings, I feel equally good about them as I did at this time and on this call last year. We're very excited to see how we got out of the gate in the first half of the year. I was just at our sales summit all week in Scottsdale here and talking to our state and local team. And the attitude is we're expecting a really massive second half of the year, especially just like last year, a little more weighted towards Q4 but certainly plenty of room for growth. And when you add it up, we'll be in the 30% range again for bookings. And so we've got it all in front of us, and now it's time to go do the work.

Thanks, Jonathan. Up next, we have Trevor Walsh at Citizens.

Great. Thanks, Erik. Josh, great to hear about the full scope prepared carbine deal that you signed, that seems a little bit counter kind of how you guys set up the go-to-market there in terms of, I think, landing more with the prepared use case of getting bringing some AI capability and then shifting to carbine later, which is more of a larger lift and shift of larger systems and databases. Are we seeing maybe an early trend that that's now changing and people are going to go hold whole kit and caboodle from the outset.

And then kind of follow on to that, if and when they do that full scope deal, what's the uplift look like, generally speaking, if a customer already has some flavor of maybe an OSP type of bundle?

Sure thing. So the one thing that's becoming apparent to us is customers are actively looking for alternatives in 911. And we're excited that we're in exactly the right place here to help them by virtue of the prepared and carbine acquisitions.

One of the things we did early on to your question, Trevor, is when we acquired Carbine, we actually integrated them into Prepared not into Axon. So now this apparatus is Axon 911. And so now we are seeing a little more combination in certain places of the desire to do both of these at once. But that's kind of the beauty of it, right? Like some customers are going to be ready for that. But a lot of customers are going to buy one or the other upfront with a clear intention of moving away from their current vendors.

And so I am wildly bullish on the 911 space and our ability to win there. The APCO conference was this week our prepared team was telling us how much momentum they're picking up and how universally they're hearing that more alternatives and competition in that market is welcome. And so we're excited to compete.

Thanks, Trevor. Up next, we have Joe Cardoso at JPMorgan.

Thanks for the question. Maybe I wanted to touch on the body camera shipments commentary that you made in terms of sequential growth going into 3Q. I guess first question is more, so any way you can kind of contextualize the growth that you're seeing from there? And maybe bifurcating it between Axon Body Mini and maybe Axon Body 4.

And then as a second part to that question, just curious how you're thinking about the Axon Body Mini rollout now that it's GA. I think your expectations around adoption, at least in terms of some of the early conversations was maybe more measured and like thinking about it as more of a tranche deployment, but at least some of the early data points that you guys had in your prepared comments as well as in the presentation material, does seem like things could be moving a bit faster and more widespread. So just curious if that's a fair read on how we should be thinking about that and if there's any limitations we should keep in mind?

Yes. Thanks, Joe, and thanks for hosting us at your conference a couple of months ago here. Ultimately, on the body cameras, I wouldn't consider AI -- or I'm sorry, AB Mini a big driver of that guidance that I mentioned for next quarter. I think there's some in there, but the real story there is we are winning in public safety commonly across all of our markets. I think there's a few different flavors of those deals. There's renewals in there. There's expansions in there. Like I said in the prepared remarks, there's also win backs in there where more and more customers that made a different decision upfront are migrating to Axon. And so I think it's every bit as much of a commentary around U.S. state and local as it is enterprise. And then, of course, international is also showing some real signs of life.

And then as it's been reported publicly, we've got some exciting federal opportunities in the body camera space as well. So I think hitting on all cylinders and certainly very pleased that this late in the product life cycle that we continue to see so much demand from so many different places, but I don't want that to be mistaken for a lack of demand in U.S. state and local. It's certainly there.

And the last thing I'll say is on the quarter-to-quarter shipments. Just remember the body camera shipments are a function of our bookings, right? In Q1, we tend to have seasonally the lightest quarter in bookings of the year. And thus, when we ship those since a lot of the deals come in late in the quarter, we shipped them in Q2. That's a reflection of Q1 bookings. And so as we go through the year, you should certainly expect those body camera shipments to pick up. And I think if I were betting, I'd say it'd be closer to 30% sequentially next quarter versus this quarter, but we are giving the range of 20% to 30%.

Got it. And then maybe just the second part on Axon Mini there?

Sure. On Axon Mini, it's driving a lot of interest. We've kicked off. I was just talking about our Head of Enterprise yesterday. We've kicked off a number of trials with the AB Mini that are starting to gain momentum and we're kind of brands you've heard of in the market and brands you might see if you visit their stores, so there'll be that growing trend. But it does take time, right? And ultimately, we got to do one thing, one foot in front of the other for a while, succeed very well in the trials then capture our first orders. And then just like in public safety early on, that second cycle of expansion is where we see the highest volume.

So right now, it's about seeding the market in a number of different large enterprises with maybe even hundreds of body cameras per deployment even though some will certainly be in the thousands and then building from there just as more interest is coming online with Fusus and Outpost and Evidence.com in general, with a number of these enterprise customers.

Thanks, Joe. Up next we have Keith Housum who's at Northcoast.

Good afternoon, guys. Appreciate it. I try to give here. In terms of the Outpost and Lifepost now being out there for several months now. Perhaps you guys can touch base on a little bit of what you're seeing in terms of adoption. Obviously, we saw some takeaways that you had in the quarter. Perhaps just talk about success there and the lineup that you guys have.

Yes. So we -- so Keith, in the first half of 2025, I believe our outpost post bookings were somewhere around single-digit millions. From 2H last year through 1H of this year, so a full rolling 12 months we're right around $100 million of bookings already in Outpost and Lightpost. So that business is certainly growing. We're very proud of how we've built these products, as Rick said, keeping privacy and information security and auditing and all the accountability features around how this data is usual, we're very proud of what we've built there, and we think that is a major tailwind to adoption of these products is customers are looking for an alternative to what they've been using historically, and they're seeing a very responsibly build product that protect everybody without outpost and lightpost.

Next, we have Andrew Sherman at TD Cowen.

Great. Good to see you. Josh, great to hear the international commentary, especially the 3 big AI deals. Were you surprised by the early action there? What is really turning the light bulb on for them with some of the newer products, including AI and there are more of these in the second half pipeline?

Yes. The second half pipeline is full with a lot of exciting international opportunities, no question about that. in terms of what they're seeing internationally in the AI Aeroplan, I'd probably point to a couple of things. Number one, we've enabled Draft One in more markets now, and so that is picking up a lot of steam and that does take some work because reporting is different in every country. So there's some work to do to bring countries online, but that work is has happened and continues to happen.

The second one is the translator. Whenever people are speaking 2 different languages. The real-time translator via the Axon system is the thing that driving a lot of the interest there as well. So was I surprised? I mean, our international team, it's just incredible to see the amount of progress we're making there, the quality of the team the work ethic, the delivery, just everything that it takes to build an exciting business internationally. And so not a lot of surprises me about our sales teams these days. They're pretty effective.

Thanks, Andrew. Up next, we have Brenden Rogers at Wolfe.

In the past, you've talked about longer sales cycles for AI and the OSP bundles, with the bigger price tags on those. Are those cycles shortening now that the products have been in the market for longer periods of time customers might be more familiar, more used to AI? Or are you kind of noticing these conversations are still taking a long time and maybe that's driving some of the more budget flush conversations?

In terms of timing, I don't know that there's a material difference because ultimately, even like when we were selling TASER stand-alone 15 years ago, if you still have to go through a government process to buy something. And so I would say, if anything, yes, certainly, there is more acceptance of the products upfront, but it's maybe a little offset by just the sheer size of some of these deals. And when you're up at these levels of contract value, you do have to go through several approvals and a lot of contract negotiation and so forth.

So I think one way to look at it is clearly, the team had a fantastic Q4 last year, and they got out of the gate fast. And while delivering the results you've seen in the first half, they've rebuilt the pipeline for the second half and so a lot of the work we've done in the first half, you'll see come through clearly in Q4 this year with another massive bookings quarter and even some buildup to that in Q3. So I'd say everything generally within a year, but still got to go through the process and do all the right things and our teams become very, very good at that.

Thanks, Brenden. Next, we have Jim Fish at Piper Sandler.

Maybe just on Dedrone. Nice to see that greater than $100 million. Clearly, a lot of momentum around counter drone just generally. First, is there a way to think about how much of the DHS contract you guys are looking at? And secondly, more for Rick, probably, how are you thinking about the strategy here between moving beyond Dedrone and into other mitigation and prevention strategies with that counter drone business?

So on the $1.5 billion DHS contract, it's still a little unclear how much of that will be captured. But I think the important thing there is out of 55 or 60 applicants for that contract, a handful were select, including us. And I think that very much legitimizes the offering. And so this endeavor, that's not the only way money is going to be spent on counter drones. So I would look at it like certainly, we'll capture a portion of it, but it also enables more and more sales across federal, but equally so across state and local and international as well.

Got it. Okay. And then for me, in terms of -- this is a very fluid space. It is moving quickly. Today, we today, we live in a world where state and local are just getting the ability to begin to do mitigation, so things like jamming or hacking in and taking control of the drone obviously, with more advanced drones that are either AI driven or being flown with a fiber optic cable. Jamming and cyber takeover is not going to work, and so you're going to need various types of physical ways to stop the drone. And so we've got ongoing partnerships and discussions with teams in Ukraine and in other countries on what types of interceptor drones you may use or other interception methods, everything from nets to lasers in different ways to mitigate those drones.

And we view our footprint with Dedrone is to be the best connector meaning that we partner with the best-in-class across a variety of different vendors that we create the best overall user experience and that we're able to move at the speed at which the drone and counter drone base is moving. We don't think any one hardware vendor is going to be able to keep up and win. So having a great partner strategy and our own world-class first-party on some of the centers and key elements of the ecosystem is the is the winning play.

And frankly, it's why I've been to Ukraine a couple of times in the past year. I was planning to go to the Defense Tech Valley Conference next month. That's been canceled. Since they ran out of interceptors, the threat of Russian ballistic missiles is much greater. In fact, they just hit one of my friends, the senior executive and one of the companies we invested in Ukraine was at a conference in Kiev, where they got hit luckily none of his people were killed, but it's pretty scary. So I'm maybe sharing that if we have any listening here is in the power to help us get more interceptors to Ukraine, that'd be super helpful. But I've personally been very engaged there so I think it's important that we help them win. And b, that's where the next technologies are likely to come out of. And especially when you're talking about a commercial price points both traditional like U.S. military price points.

And so I think I was joking at one of my recent customer summit, I bet for a police chief that was not on their bingo card. They're going to have to run a small Air Force. But they're going to. They're going to have to have ways to intercept these small drones. And now it's going to be different. You typically don't want big things going boom over American cities and detonating but deploying nets or things with parachutes, and we're doing some interesting work with our friends at [indiscernible] on how we could use the DFR capabilities that they've built and start marrying in other sorts of things. So just I'd say expect experimentation and innovation and continued evolution.

Yes. And I think just to wrap that back to your strategy question, it's really like 3 simple things that goes with every thing else that we do. Number one is our software experience and our sensor fusion engine that ties for any given combination of hardware you want from any combination of vendors, we're going to deliver the best possible detection and defeat results given any combination of hardware with our software and sensor fusion.

Number two, as Rick said, we're going to be the best in the world, meaning the fastest, the most flexible on the highest quality at integrating the sort of dizzying array of new vendors on both the sensor and the effector side that are going to keep coming out. And number three, just like with everything else, you'll see us choose which pieces of the hardware side we think are the most important for us to be first party leaders on while partnering very liberally across all of the others.

Thanks, Jim. Up next, we have Will Power at Baird.

Okay. Great. Thanks. Yes. Congratulations on the broad-based product traction. I got a number of investor questions on this. So this is where I want to focus my question. The 5-year normalized bookings metric, why now? It sounds like perhaps is tied to expectation for ramping international growth, enterprise, and you're just trying to get the right duration there. But anything else you're signaling that we should take away from that? Then I guess just for context, are there any historical kind of comparisons you can provide just to help us kind of frame it up?

Sure thing, Will. Great questions. Number one, on the historicals, I think in our first earnings call of the year, we had cited the fact that 5-year bookings were also in a 30% range last year. So a similar range to the 10-year bookings of the total bookings of last year.

In terms of this year, as I mentioned, 30% -- over 30% year-over-year and 5-year bookings. The reason you hit on it a little bit, there's really 2 elements of it. One is, for example, in Enterprise, we're seeing it's much more common to do 3-year deals. And so ultimately, figuring out how all these contract durations normalize, I think as important as the business looks different and different as we win in different markets.

The second one, which is equally important, is that some of these international deals that we're seeing and working on are so big in size that they represent such a big swing in years 6 through 10 that it doesn't give a clear picture of what the bookings look like anymore year-to-year. And so if some of these deals approach $0.5 billion or more than we're looking at a 10-year value, you can imagine that quarter-to-quarter, some of these swings will be pretty interesting. And so normalizing them down to the same common denominator just gives us a way better look at what the future looks like.

And as I've said many times on the calls, part of what gives us so much confidence in revenue growth in the out years is the idea that we look at bookings to inform those. And Again, looking at 5-year bookings as a common denominator gives us, I think, a lot more context when we talk about out years of revenue growth.

Well, I think just to add the other piece is, we've gotten a lot of questions about how is duration impacting our bookings. And so this is a way for us to try and help normalize that for people so that, that duration question comes out. I do think we can still say that our future contracted bookings for the whole year will grow faster than that 30% that we gave for the 5-year normalized bookings. So there's really strong numbers on both metrics. We just wanted to start providing us to be really hopeful.

Thanks, Will. Up next, we have David Paige at RBC.

A lot of good color on the call already. I just want to add one on the body cameras. I think you had mentioned some of the growth was due to winning back customers. So I was curious to know what exactly is driving that? Is that -- they just like the Axon camera better? Or is it the connected ecosystem? Or is it the trust credibility that you had built up? Any extra color would be helpful.

Sure thing. I think it's quite simple in some ways where customers were told one thing or expected one thing and through their usage of the products, they weren't getting what they expected or what they were sold. And we're seeing customers cancel contracts early with other providers to come over to Axon. It's happened very publicly in a couple of cases this year. And we're very proud of the fact that even the first time, if we're not successful, that we remain in open lines of communication with these customers, we're trying to support them however we can and often some of our best and most loyal customers had chosen a different vendor upfront initially. And so we continue to invest heavily in these products. And the experience is really showing when you -- even basic things like does the battery last the full shift, for example. That's a really important thing to our customers. And as they see that play out, they have questions about that.

And again, we do the basic things, the fundamentals very, very well. But when you pair that with a lot of value-added functionality on top, whether it's AI Aeroplan Draft One of the real-time translator or just the Evidence.com workflows that share from the police department to the prosecutor through the court system. A lot of that really for a first-time body camera buyer, a lot of that doesn't come out until you start using it and understanding how it works and what's going well and what's not. And our customers are very, very pleased with how we do those things, and they're telling their peers, everybody is on the same team in public safety, which works really well for us because the network effects matter a lot. And we're seeing those play out. So really proud of our teams for continuing to keep their heads down and working hard and not take anything for granted and continuing to win a lot in public safety.

Thank you, David. Next, we have Jeremy Hamblin at Craig-Hallum.

Thanks. Appreciate it. And congratulations on the results. So I wanted to ask a question that kind of builds on something that Michael asked earlier, which is the evolution of your business and as we look at platform solutions, which is really exploded as a reportable segment, I mean, it's kind of blown by personal sensors here like [ Affley ] quickly. And obviously, there could be some things in the near term that are maybe perceived as shorter-term opportunities. It sounds like you have a lot of confidence that it's going to continue to build, particularly in the international market.

But as we look at how this business evolves and you have your 2028 targets, can you give us a sense for like do you expect platform solutions to really be bigger than your TASER segment by the time we get to 2028, and you're hitting $6 billion in revenues. Is that the type of growth that you're kind of expecting? Or how can you help us kind of think about how your business model is going to evolve over the next couple of years?

So what's like -- Brittany can weigh in, but maybe I'll start. Jeremy, I think ultimately, that's not really the way I look at our business in terms of operating day to day. It's more about the idea that we're seeing growth across U.S. state and local and all products. We're seeing growth in international in all products. We're seeing the same thing in federal and enterprise. And when you add up just using bookings as an example, last year, I think we're clear we booked over $7 billion, and you normalize that and you kind of understand the trend line you're on. And then this year, we have our understanding of what that will look like.

And so that's informing the revenue growth far more than any strong feeling about is it going to be mainly platform? Is it going to be mainly TASER? These things are sold in concert with each other. And so we look at it much more as, hey, what's the sum of the parts in terms of bookings, understanding that hardware and software in different quarters will look a little different. And when you add it all up, we feel very confident in that guidance.

Yes. I would like to jump in here too, like this question, what we have built and what we are building, the thing is the interconnectedness of it all and that these individual capabilities may be more valuable or less valuable to another customer. But like how is it that we make all these things leverage each other in a way that just creates outsized value. And what I think is a little different. I think if you think of this as a business, you might be like, well, what's our objective in terms of where we want to grow and like do we want to have more platform or more TASER.

And I think the way we approach this, it is a bit more mission-oriented and that might sound a little cheesy, but it's like what are the problems that matter to our customers and which of these things solve those problems, and that's -- like we want to double down on the most valuable customers -- customer problems to solve because that's what they're going to pay us for. We've put a lot more focus there versus like trying to engineer like where do we want to grow to make more or less margin or more or less hardware or software. And so it again, this might sound a little like 2 self-congratulatory that we're very customer driven, but we really -- we have found when we solve things that matter to our customers, we can figure out how to get paid for that in ways that build a sustainable business.

And so I personally don't spend much time at all trying to engineer financial returns around our ecosystem. I spent my time talking to customers and when they're working with Jeff, on how we translate where the emerging needs are. And sometimes we learn things that are like a lot more valuable than we thought they might have been, and we doubled down on those. And it's really just being responsive to the customer environment to grow revenue overall.

Go ahead, Brittany.

Well, you can jump in on the product. I'll just round out on the numbers when you're ready.

I was just going to say, again, in the sort of old -- maybe old jargon at this point, but it literally is a network effect on both inside each individual agency and then across agencies inside one of these market segments like state and local and then across market segments like the public private partnerships. And so when you think about what it means to have network affected product categories, that is quite literally what the Axon ecosystem is.

I mean I think as you look at our 2028 guide, we have a lot of ways to get there. And obviously, Platform Solutions is performing incredibly well, and we have a lot of enthusiasm behind that. I certainly would not discount what our TASER business can continue to do as we look ahead to 2028. And then -- and to Rick's point that it's all connected I would also think about the software pieces that get connected to all of these hardware businesses, what you're seeing a lot in platform solutions right now as you're seeing a lot of big upfront hardware sales and we're going to be building the software business on the back of that, and that will be a long tailwind behind that.

The body camera business, obviously already has everything attached to it and has a huge DEMS business that really goes along hand-in-hand with it. So I wouldn't separate those. But certainly, as you think about tailwind building out that counter drone software business and some of those other software product lines are also big tailwinds. And so as we get to 2028, I think you can think about everything growing into the future.

Also, just one clarification for everyone on the 5-year normalized bookings. In case it wasn't clear, we don't take shorter bookings and gross them up to 5 years. So these are really all of our shorter bookings plus anything longer than 5 years normalized down to 5 years. So just to prevent any conspiracy theories there.

Great. And just a quick follow-up there on the last point. And you've seen your ARR growth kind of reaccelerate here in '26. And just want to understand, in terms of kind of key driver there, is that really just more AI era adoption plans and just gravitating a higher portion of your kind of embedded customers into that? And is that going to likely continue to see this higher growth rate continue into 2027, 2028 and beyond?

I mean it's certainly part of that, right? We highlighted that about 1/3 of our software business this quarter was coming from outside of DEMS. And that 1/3 of the business is growing at 70%. So that is not just AI. AI, we called out at almost 700%. So yes, I think you can expect that, that will continue to have outsized growth but it's not just AI. It's our records business, it's our 911 business, it's the software tied to counter drone and drones. So what you're really fundamentally seeing is all of these software businesses that we've been investing behind and incubating, they're really starting to contribute to that software growth number.

And they're going to continue to do that because even though they're starting to contribute nicely, they're still relatively small and have a lot of room to grow, and a lot of room to continue getting attached to our customers. It's also why you're seeing our NRR number sort of nicely continue to ticked up over time. We're up at 126% this quarter. It's because we're attaching more of those products in.

Yes. And that's super cool Brittany, by the way, we used to be stuck in like 119% NRR for a very long time. See it [indiscernible] [ 126 ] [indiscernible].

Keep coming up with cool things.

All right. Well, that was our last question. So Rick, you can close this out.

Awesome. Okay. Look, I pinch myself every day. I get to do this job with these people and these customers working on these problems. It is a privilege and I'm deeply thankful to you, our shareholders, who make that possible. And of course, the analysts who help our shareholders understand our business, which has grown immensely in its complexity from the simple book-and-ship business we were 20 years ago to this amazing ecosystem, hardware, software, cloud and now AI services business. And we're in the midst of another major transformation. It's going to be exciting. I can't even tell you what kind of business we're going to be in the next 10 years because the world is changing so fast. But the people I work with, give me hope that we will solve the problems faster than any of our competitors and we'll continue to make this moment just an epic moment for our company to leverage this change.

And with that, we'll see you all in November. If you get a chance to come to the [ ICP ], Erik, we're doing something [ ACP ] in October?

Yes.

Yes, we have some cool new stuff in particular, some new ways to tell the story that differentiates us uniquely that I think you'll find very interesting. So come see us in Orlando, and I look forward to telling you about the next phase of the Axon story.

And some new products Rick and [ ICP ].

Shoot me an e-mail if you want to join our booth. All right. Thank you, everyone. Thanks a lot.

All right. Thanks, everyone, for joining. Today, we are going to host a webinar with a few of Axon's very important customers that have been with us for a while that we're going to hear from, and we'll open up the opportunity to also ask some questions via Slido link. Hosting the webinar for us and asking some of those questions will be Mike Wagers, Axon's Chief Customer Officer. I'll kick it over to you to maybe introduce yourself.

Sure. Thanks, Erik. As Erik said, I'm Mike Wagers, I'm the Chief Customer Officer here at Axon. I'm approaching 10 years. And before I've been in -- I added it up the other day, I'm feeling really old. I've been in this business for 30 years now, either public sector, private sector or nonprofit sector, all focused on public safety. I got my PhD from Rutgers School of Criminal Justice. I've been a professor at university. I've worked at IACP, I worked at Amazon Web Services, building out their Justice and Public Safety business. And I've been the Chief Operating Officer at Seattle PD. But I've been here at Axon for 10 years.

I'm excited to have a conversation, not just I consider obviously, they are very valuable customers of ours, but certainly recognized leaders across the entire profession. That's why we chose them for this panel and for this webinar. And so Erik, without anything else, I will go and introduce the panel. We'll just jump right in, unless you have any introductory comments, I'll introduce the panel.

Sounds great.

All right. We have with us, and we try to -- as we're thinking about how to put this panel together is we have Chief Darrell Lowe, who's the Chief at Redmond in Washington, in the Pacific Northwest. And they all have -- they come at this from different angles, like Chief Lowe originally started down in California, but he's known as an innovator when it comes to DFR. So I'm sure we'll talk a little bit about drones and drone as a first responder.

Chief Doreen Jokerst. She's now -- she's at Overland Park, Kansas, so we got the middle of the country covered. She formerly at University of Colorado. And if you ask her question about Deion Sanders, you'll get a very funny answer. Just spoiler alert. She had no idea who he was when he became coach there. And she -- Overland Park is the second largest city in Kansas and part of the Kansas City metropolitan area. So she right now is in the thick of World Cup.

So we really appreciate her time because she's got a lot going on to try to keep all the fans and the teams and everyone else safe in and around the Kansas City area. And then we have Sheriff Michael Adkinson, who is a sixth-generation Walton County native, I didn't know that. And he's been the sheriff since 2008, has been reelected 4 times, which is pretty amazing.

But he's also -- different from Chief Lowe and Chief Jokerst, he also in Florida for his county, he's in charge of not just the law enforcement, but fire rescue and emergency management. So he has it all under one roof. So he brings a slightly different perspective than perhaps Chief Jokerst and Chief Lowe. And he's also, like they all are, involved in national organizations. So they -- not just what they see and hear and understand and deal within their jurisdiction, but they deal with their counterparts across the country.

And in particular, Sheriff Adkinson is the Chair of The FirstNet Authority Board, which is a pretty important position that is established by Congress, pushed by all the law enforcement associations to bring interoperability to law enforcement after 9/11. It just took a long time to get the Board established. And then the Board is in charge of, the Sheriff Adkinson chairs, to make sure FirstNet does what it's supposed to do in terms of providing that priority network to law enforcement.

And we may talk about communications during this conversation. So with that introduction, maybe I'll just get started and maybe I'll start with you, Chief Jokerst.

I think everyone probably what they read and see on social media thinks crime is still out of control and going up in the country coming out of COVID and all the aftermath of George Floyd. Just curious like what are the -- where do you think crime today in Overland Park as you talk to your colleagues? And is it still going up? Or is it come down? And where are things when it comes to the state of crime in Overland Park, but also the United States?

Well, thank you so much for having us. I greatly appreciate it. Like Mike said, my background in policing is from Colorado. I served in a city for 20 years before I became the Chief of Police at the University of Colorado Boulder for another 6.5. So 26.5 years in the state of Colorado and about 18 months in the state of Kansas. And so...

She started when she was 12...

That's all right. That's very nice. So crime is definitely different from state to state, and I don't doubt Chief Lowe and Sheriff Adkinson have different perspectives in regards to this from their communities that they serve as well. In Kansas for us and being just 30 minutes south of the Kansas Metro area, we're a very affluent community, 207,000 population. I have about 280 officers, about 100 professional staff.

Our crime rate in our city primarily goes around property-related crimes for us. And so that's the things for us that are kind of on the rise and a little steady, but a little on the rise, too. Definitely, as you mentioned, with the World Cup in our backyard that has changed some of the things within the past month in regards to what that looks like.

But crime for us has definitely been maintaining more of a steady factor for us. But policing and the expectations of police have changed over those years as well. And kind of how we look at crime and what it looks like from an evidence-based methodology and how we respond to crime has definitely changed as well being a more proactive preventative model versus a reactive model and how do you balance those 2 things out. And so I know, Mike, that was kind of a broad-based answer in regards to it. But property crime for us in Kansas and in our area is definitely what we see more than a high violent crime city per se.

And is crime up -- I mean overall, I would assume crime is down in Overland Park. And Chief Lowe, same thing. How are you viewing crime in Redmond in the surrounding area? Up? Down? And what are sort of the major challenges right now?

Yes. Like Chief Jokerst said, Redmond too is an affluent suburb of Seattle. So we see a lot of property crime. Crime has been down consistently year-over-year. What we see here in Redmond and across the country is the organized retail theft aspect of things. And the other part, we have unique challenges in the Pacific Northwest around the political landscape and overall lack of accountability in other parts of the criminal justice system, which create -- or contributes to some challenges for us on the front lines actually trying to keep our community safe.

That was a very diplomatic way of putting things, Chief Lowe. And down in Florida, I mean, do you see things a bit differently than probably Washington State, Sheriff?

Well, I joke sometimes that we wake up sometimes and go, what is California and New York doing and we're going to do the exact opposite, sometimes. But no, not in the policing world, certainly. I think in my area of the world, which is a tourism community where that's what drives us, it's extremely prosperous. I mean crime is down significantly since the COVID endeavor.

I will say something I'll bifurcate because one thing I have noticed that unfortunately, when things go kinetic, the level of violence is significantly higher. The level of force is significantly higher when it does go kinetic. And that is -- I think that's a change because you have this long period, and I suspect it's the same for both chiefs would say the same that when we're seeing it here, once we have that transition into that action, it becomes much, much more serious.

And you mean when you're engaging a suspect and when the suspect doesn't obey commands.

Much more armed -- much quickly to deadly force situations than we had dealt with in the past. And I think there's numerous reasons for that. A couple -- obviously, the plethora of issues involving mental health and things of that nature. There are also some pretty serious firearm considerations and things of that nature. But yes, when it does go kinetic, we lost a deputy this last year. And from the time of the encounter until the actual incident ended was 45 seconds over nothing. And that has been indicative of the kind of things we've seen here but by and large, extremely safe. Those things kind of stand in contrast.

Now I don't know where staffing -- I know where it sort of stands nationally. Just curious, anybody's take, is recruiting up, down? Staffing up, down? And how are you seeing that going forward? That's always a question we get, like our departments have they recovered? Or is this just a new world of the staffing levels that you're at today? And I'll throw it out to any of you.

Well, from -- go ahead, Mike.

Doreen, I'm sorry..

No -- I was just going to say from our department, I've been here about 18 months, Mike. When I stepped into the organization, we had 41 open commission positions. So I'm authorized 280. So having 41 open is quite substantial in regards to the organization. Now we have about 8 commission positions open, which still means people have to go to the police academy. And as the Chief and Sheriff knows, by the time you hire someone on to the time that, that person is out on the street, you're looking at almost a year in time frame.

So the numbers are increasing, and I say we're trending in the right direction, but it still takes a minute to see that out on patrol serving our community in more of a solo status by themselves and forefront. When I came to Overland Park, Kansas, I did some listening sessions, meeting with different professional staff and commission throughout the organization and recruitment came up, but it was really great.

One of our police officers said, "Well, Chief, are you looking at recruitment and that's your issue? Is retention your issue?" And that was a really value point because to me, retention does start at onboarding. And so we did look at our retention, and I'm pleased to say that we're below the national average when it comes to turnover within an organization.

With that being said, I still think I have probably 25-or-so eligible for retirement. So I have 25-, 30-year plus employees that we should be celebrating and highlighting because they made it successfully to having an amazing career and leaving a lasting legacy. So retention cannot -- you can't talk about recruitment, I guess, without talking about retention as well, which means then you can't talk about those things without talking about wellness and the great things we are doing better within our respective organizations when it comes to really supporting our people that support our communities.

And so we are doing much better when it comes to recruitment. I feel applications definitely are going up. But I would say I've seen a change in those that are coming into the profession. And so I interview all new recruits coming in and saying, why did you pick Overland Park Police Department and what resonated with you? And I definitely see a higher likelihood that people say, it's your tech, it's your drones. I want to get into this. It's your co-responder units, it's social services, those type of things than back in the day when I saw more of the SWAT, it's your canines. And we still get those responses.

But large in part, I get more technology-based interest and really working in more of a co-responder police officer type role as well and community engagement type role. And so I'd say we're seeing a change, too, in those that are applying to our respective organizations.

Interesting, Chief Lowe or Sheriff Adkinson, are you seeing similar things?

Yes, similar thing. So unfortunately, Washington is 51st in the nation when it comes to a number of police officers. So it's a challenge holistically within my particular agency. We are as close -- I've been here almost 7 years. I have 4 vacancies right now. When I pass my recruitment unit, I keep saying, I need 4, I need 4. But like Chief Jokerst said, it takes about a year from application to deployment, which is a challenge and that feeds into a bigger conversation around budgets and FTE allocations.

And getting people to understand that unlike other positions within a municipality, we can't just run a recruitment, have a person and onboard them in 30, 45 days-ish. It's a year-long process. So we have to get ahead of the curve because if we get to a point where we are fully staffed and we stop accepting applications, it's going to take minimum of a quarter for us to get back in for the cycle because we use a centralized testing service.

So that contributes to some of the challenges. In fairness to our current governor, he did allocate $100 million for recruitment and retention of police officers throughout the state. But as I say, there is no such thing as a free lunch, there is no such thing as free money. That was tied to a public safety sales tax, which feeds into yet again, some of the political challenges and dynamics within the region around progressive taxing, et cetera. So while there is hope on the horizon, there is, I won't call it, a pot of gold, there is a pot of money available, it has some challenges that go along with it.

Sheriff, I know in Florida recruitment retention budgets are, again, slightly different than the rest of the country.

Yes. It's interesting. I would say that we're fundamentally in the best shape that we've been in many, many years. And -- but there are a couple of things about the change, and I think it's very extremely pertinent, which is Florida does not have a state income tax. So that matters quite a bit in our recruitment. And we do things like the out-of-state -- a $10,000 hiring bonus if you come to us from out of state. I mean that's supported by the governor and by most of the sheriffs.

We don't have a state police in Florida, so we look a little bit different from that in that regard. But I will tell you, there's a thing on the horizon where we are going to vote as to whether or not essentially eliminate property tax in the state of Florida. And the effects of that could be quite frankly, catastrophic. We're trying to figure out what that's going to look like. To Chief Lowe's point, there's no such things as a free lunch. And it's specifically written in that they're not going to cut sheriffs or the public safety budget, but I just -- I don't know how that math works.

So that will be on the ballot in November. But if you have a state with no property tax, essentially no property, it's extremely low already and no state income tax and you can't pass a sales tax. It's prohibited to pass a sales tax to fund that. I'm not exactly sure what we're going to do. So we're -- and they're extremely, extremely -- excuse me, extremely supportive of public safety here. I'm just not exactly sure what this is going to look like if it passes.

And when it comes to budget pressures, so let me just -- so what I hear talking to you guys and across the country, like the world has changed coming out of COVID and the aftermath of George Floyd and everything that happened. Nationally, crime is down overall. There's -- obviously, there's some variation. But we do see property crimes in various jurisdictions on the rise or probably bucking the trend when it comes to violent crime.

We do see recruitment and retention recovering, but recovering in different ways. And I think as Chief Jokerst said, like that's sort of like a new recruit see it differently than probably the 3 of you did when you joined this profession. And also you had to respond differently in what you offer. And as Chief Jokerst said about technology, we hear that quite a bit across the country. They expect the same technology that we -- you and I have in our personal lives, like everything is just on our phone or everything just works.

So before I get into the technology piece, just curious like how do you balance like everyone is under budget pressure, like they always have -- we always get the question like, how -- like departments where do they stand with their budget? Florida has got the thing going on. I've never been to a sheriff's office or a state police agency or a municipal agency where they didn't say, hey, we're always under budget pressure. Like how do you balance that sort of your personnel needs and everything that goes with that, which is probably, I don't know, on average, 90% of your budget versus the increasing demands to deploy the latest technology to making it more efficient and effective, which has taken up a larger percent of, I would assume, the budget in your agency.

I'll jump in with it. So for me, I look at it kind of a two-pronged test. Does it solve a problem that exists and does it create inefficiency? The ideal answer is yes to both of those, but that drives a lot of the technology discussion and decision. And the technology won't replace people. It just enhances their ability to do the job. And it creates that efficiency.

So when we look at it, I know it kind of tees the whole DFR aspect of it. So when we went down that path, I had familiarity with it from the agency I was at in California. So once it was brought forward here, it was easy for me as the agency head to move forward with something that I knew the effectiveness of it, but then getting the buy-in both internally and externally then became the challenge and then the cost aspect of it.

But then when you see that actual return on investment, that efficiency, the ability to cancel a ground response unit to free them up for other high-priority calls that is what gained, I'll say, the political buy-in and that buy-in is attached to the purse strings and the authorization for contracts, et cetera. So it's that balance, right? You'll never get rid of the people or replace the people, you just have to ensure that technology has a good return on investment.

And I'd assume and you're seeing what we're seeing across the country, one, and I don't know what -- I mean you probably know, but across the country, we're seeing the numbers somewhere between 20% and 40%. If you have a DFR program, drones are responding and officers don't have to respond is somewhere between 20% and 40% of calls. But now we're seeing negative response times, which is just something I never thought -- I didn't know what the word meant until we started hearing it where the drone is getting overhead before the dispatcher is even able to get the call out over the air to send a unit.

Can I make a point about something Chief Lowe said too that I think is pertinent.

Yes, sir.

One of the things that I think agencies really struggle with is typically before they buy technology, they think about it for a year, and they go through the procurement process for a year and then implementation for a year. And so at year 3, when they finally get it, if you think about Moore's Law being 18 months, give or take, probably faster now, so they're hitting this rate of obsolescence about the time they take on a lot of this technology, right?

And they tend to be seduced by it. And what happens is when they buy single solution optimization, they have a systemic problem somewhere else, right? You're going to have a downstream effect. So any technology that is multimodal that touches these different modalities, I think, is where you're going to see the future across the board. We talked about AI. We've talked about some of these other things, but where it touches multiple either entities, sections in your agency, that's where you can get your best return on investments for efficiency as the Chief was saying before.

And I think that's the real bright future for me. When I'm looking at things, I say, where does this impact multiple entities inside the organization? And is it resilient to obsolescence in a shorter period of time? And I think the answer to those 2 things are yes, to go back to Chief Lowe's point, I'm sure Doreen would agree with this, that's where the real sweet spot is at.

And Chief, on the procurement process that just hit me when you're just talking about it. I mean you want to make sure when the sheriff was saying about -- first of all, should have had a drinking game, like who would have thought that a law enforcement leader on this panel is going to bring up Moore's Law. I mean that's pretty impressive. But I mean -- but technology is moving so fast, procurement can only move so fast as well. I mean how do you sort of balance that when you're trying to get the latest technology that your officers want and your communities deserve in terms of reducing crime and everything else that goes along with that?

Yes. So part of it is understanding the process and then also having good communication with your vendors, to Sheriff's point, understanding not just what your tech stack is, but understanding where all of your data is and how do all of those things interact. And when you look at it and you have to start with that, right? So if you can start out mapping out your architecture and you'll have a clearer picture, it will make it much easier when you interact with your preferred vendor, so they understand what it is you're trying to accomplish, but they also understand the challenges that may exist or equally as important, they will identify the APIs and the connections that need to be made to create those efficiencies.

I'm sorry, Chief Jokerst, I interrupted you.

No, no, no. I was just -- I fully support everything my colleague said. I think for me, I've been here 18 months, but in less than a year, we signed the largest tech contract with Axon under a year. And so that really is building trust with my city manager and our city council and our elected officials and talking about the benefits for me how to be community-centric.

And so my department in the past had had some challenges when trying to move things forward. And I just always say words matter in regards to what that looks like. So instead of saying this benefits to police, everywhere you want to say police or then either say public safety and community insert these words. And so you can say, the community benefit with having this technology is this.

And instead of saying real-time crime center, and this might not work in Chief Lowe's or Sheriff Adkinson's or they might not need this knowing their communities, I say, put information and make our real-time information center community focused. In Kansas, we do get these windstorms, and we've had some alerts to tornadoes. I can say we haven't had one since I've been here just yet. But the real-time information center has been activated on these storms out there and really been beneficial to our emergency management teams as well.

And so I think for me, it's really talking about we are here to serve our community, how can this technology benefit our community as a whole, which police is a benefit from that as well and showing what that looks like. And I agree, making sure it's more efficient, that it's not going to be obsolete over time. And I just always tell our city council, we're building this plan as we're flying it, which means we're going to have to turn and we're going to have to pivot and we're probably going to have to change some pieces and parts out, but the plan is airborne.

And so I think really having that innovative mindset too and those people that trust you and bringing them along with you as part of this journey. We have such new things out here in Kansas. And so I bring our community members in. We had a tour of the real-time information center, and I'm thinking ask any questions you want on governance, on accountability, on thoughtful oversight, on policy development, ask any questions you want. And I think the more offense you play, I'd just say the best offense is offense, then it helps with those understanding and educational pieces as you keep developing these things out.

Now Chief Jokerst, Sheriff Adkinson and Chief Lowe have all been to Scottsdale here at our worldwide headquarters or something we call our CEO Summits. Sheriff Adkinson, we got bonus points if you'd actually talked about Ray Kurzweil and law of accelerating returns, that would have made Rick really happy, but you did get it down with Moore's Law.

And Chief Jokerst who is out here in terms of words matter and thinking about how to -- I mean technology, especially just what's happening today and how people are thinking about AI, and it could be scary and you're seeing the protests against data centers and everything else. But I mean, I've seen some really thoughtful police leaders about how they implement new -- including 3 on the panel today about how to implement new technologies in their communities, which again can be scary and being implemented by agencies who have the constitutional right domestically to take away your life or liberty, like it does take -- it's a lot more than just what AI can do.

And one quick story on Chief Jokerst, like, we have made it clear that back in 2018, we put a pause on facial recognition because the technology just wasn't there. We said we continue doing the research, and we have. And the top algorithms, by the way, that we evaluated in 2017, 2018, not even in the top 500 today. So it's getting really good, better than humans.

But what Chief Jokerst pointed out, like we're not really doing facial recognition. We're not trying to use the camera to scan everybody and trying to identify there's Darrell Lowe, there's Michael Adkinson, there's -- you're looking -- you're matching that against the list and Chief Jokerst like that's face matching. And that means something very different. And when I talk to my community that is -- that would be more acceptable than facial recognition.

And without that feedback, we would have still been calling it facial recognition. So Chief Jokerst gave us, just like all these law enforcement leaders do when they -- we interact with them, like we listen to what they say, and that's been super important because we can build the technology, but if they can't procure it and they can't implement it in the right ways in their communities, it doesn't matter.

Mike, can I just add something real quick there because I think Doreen already touched on that, and that is nomenclature matters, right? And so when we're doing these kind of things, a lot of times, as you're talking about [indiscernible] I think we said off air, the policies and the procedures need to be in place prior to the application of these new technologies, and that's where the buy-in comes in. Rachel Botsman, she's an economist, talks a lot about currency of trust. And I think we've got this thing backwards. We should be building the currency of trust with the technology and introducing the technology with the policy already in place, not the other way around. And I think that's a real opportunity to be better in the way we do it.

Yes. And how do -- like I mean, by the way, a couple of things. We will get to your questions. Erik reminded me that there's a Slido link in there. But just curious, like, I mean, we are just like any company, like moving fast on AI, rolling out new things all the time. I mean it is mind-blowing to me working in a company to see how fast we can move. I'm just curious how you take it all in as a police leader, as a law enforcement leader and then think about how to use those technologies when AI is just moving and technology is just moving so fast today versus 18 months ago.

Well, I think part of it is actually leaning into it and understanding it. And I think that, that is a real void or deficiency with law enforcement executives. AI is -- that train is already moving. And if you don't understand it and if you don't embrace it, you're going to get left behind. And oftentimes, that can be scary kind of to the sheriff's point. Sometimes we wait. Nobody wants to necessarily be the first, right?

Because if it goes bad, it's very public and could not be good for a community and agency, et cetera. But I think leaders need to understand it, to participate with the vendors to help make it better to talk about our pain points to talk about our concerns. And then once you understand it, perhaps you don't do a department-wide rollout. You start with a pilot to test it to ensure that it meets your expectations from a deployment perspective because Kansas is different than Washington and different than Florida.

And while we can all use the same technology, we may all use it slightly different. In Florida, this year we may be able to crank it up to 100, I may have to start at 65. And in Kansas, it may be somewhere in the middle. And so that's the sweet spot. But we, as leaders, have an obligation to ensure that we have the knowledge because at the end of the day, we have to stand in front of it to sell it to our community, to our legislative bodies. But equally as important, we have to stand behind it and the decision that we make to deploy these types of technologies. And the best way to do that is to understand it, to really lean in and engage in the process.

I don't -- I mean I would generally directionally I think you're right, Florida, they can crank it up to 100. Washington State, I was going to probably say 30% or 40%. That will give you credit, Chief Lowe. You're out there. Like you -- I mean being an innovator in DFR that we'll get to in a second, I see some questions coming in about that. Like I'm like that's a big undertaking to make sure you're doing the DFR program in the right way where it doesn't get shut down in a place like Washington State.

So as I mentioned, slido.com, the code is axon. I'll just jump into some of the questions early, now I should just say. And I'll mention when I talked to the Sheriff and Chief Jokerst and Chief Lowe, like this is not a commercial for Axon. I don't want them to promote Axon, like they obviously aren't trying to sell Axon. So I want their honest answers. So I ask the questions and you can give us the honest feedback as you see fit.

And I mean, actually, I like to hear where we maybe haven't done so well, where we can improve. We're always looking for feedback. But I do want to make clear like they are not out here, they did not join this webinar to promote Axon. So I'm sure they're going to give you their honest feedback and answers to these questions.

So first one, and maybe Chief Jokerst because I think you have our AI Era plan, but we'll see for the rest. What AI products do you use the most for Axon as 1a. 1b, how do you tackle rollout, which we talked about a little bit adoption, how do you -- let's just stick with one because I think we did as far as -- like what products are you -- AI products do you use most from Axon?

So currently, I would say a couple. I would say Draft One is something that we use quite a bit that just rolled out into our organization. And I can tell you, I sat through every Axon training for Draft One, for TASER, like I sat through everything to number one, see how I say your trainers were coming out and training the department, what language they are using, what that looked like because I wanted to hear it.

And so that way, when our officers had feedback, I could say, "Oh, I know what you're talking about, I attended that training as well." And so Draft One is one that we use that I can tell you, I was more restrictive when it came out as far as like governance as far as not opening up so many percentages of like does that make sense of what they can type and what they can't type.

And it's something we have slowly cascaded over time to open it up or become less restrictive, I guess, is how I should explain that for the police reports. The second one, Mike, you'll have to tell me the name of it, but it's going to be when language triggers on a body-worn camera, it's a prompted review in regards to what that looks like, and we have profanities and we have hate speech. What -- is that Axon Standards?

Correct. That's right.

Yes. So Axon Standards, we use as well because you have all of these hundreds and hundreds of hours, thousands of hours of interactions with our community, and there's no way that you can go through all that. So having a system be able to kind of critique those things. But something we also want to do, too, is not just highlight, hey, Mike got triggered this many times and here's what we're doing, and we need to help them.

But where is Darrell doing an amazing job on this, too, these performance metrics should not always just be looked at through the lens of negativity or punitive in nature, but also highlighting and expressing and congratulating, appreciating those when they do well. And so when we look at it, I always say, I get it triggers for this, but how do we trigger it over here to say, Mike is doing an amazing job. And how do we put something in his file as well to counteract that because I don't want the officers to think, I bought all this technology and look, she's out to get me or it's this type system.

No, these systems can actually be used to really benefit our teams and departments. So how do we level set that within the organization? Prepared is probably the next one. And when you say a [ zero set ] for DFR, our DFR responds 26% faster, I say, than an officer. And that's just on the metrics we're currently using. But Prepared comes in at the same time to our real-time information center so they can deploy those drones. And so that's something that we're using, I would say, quite frequently as well. So all different, one is a dispatch one, one is a police report writing one, one is a governance and accountability one, if that makes sense.

Yes. I love to hear -- love that about Prepared. And I do think like as they're listening as the call is coming in and the AI can listen and translate. If it's a foreign language or just listen for keywords faster than what a human could type, understand and type and dispatch. So love that. So you'll be happy to know we're going to supercharge Standards coming soon with some additional AI features to make it better, one in terms of coaching officers to your point, like it's not should be punitive, like where did they do well, where can they do better?

And then also to help speed up supervisor review because obviously, that's a major pain point as well. So Chief, just curious and Sheriff in terms of AI, like -- and by the way, it could be questions about Axon features, but there's other AI features you're using, I'm happy to hear about that as well.

Yes. For us, similar. We have World Cup in our backyard. So we're using the translation feature on the body-worn cameras. I just did our video for it. I have an officer who speaks 7 different languages. So we did a video with that. Also with Prepared and looking at it. And so for each of it, we're kind of evaluating, we saw forms to Chief's point, Standards. I just went through a demo with your AI Era team for each of the platforms that are available.

And again, it kind of goes back to my previous comments of taking that deep dive, spending the time, truly understanding what each platform can do, which ones make the most sense for us because, again, you have to be a good steward of the people's money. While I would love to say, yes, give me everything. Well, we don't need everything. We have a prosecutor's office that will not allow generated reports. So that makes Draft One not usable for us.

So that has to factor into the consideration and the negotiation with the AI Era team, how does that look for pricing, packaging, contracting, that type of thing. And there are other platforms out there that we use. We use a platform called ForceMetrics and it's kind of overlay for our CAD and RMS system. We have found that to be very beneficial for us, very affordable.

There's other products out there. But again, you have to evaluate, and obviously get the most bang for your buck when it comes to technology, again ensuring for Axon, works with Axon, right, I mentioned the APIs before to ensure that when you do have the multiple vendors and to the Sheriff's earlier point about having the multimodality or the single ecosystem, it's really important that while it's business, the companies play nice together and this is the plug for Axon. The works with Axon thing is really important because having such a big position and a big stake in many police departments it's very important that others are able to plug in so that we can have some continuity of operations across our tech stack.

Yes. I just said, Chief, you're not going to -- you're not here to plug Axon. And now you're -- like I forgot about works with Axon. So thank you for the reminder. I mean that is -- we...

It's important.

We are committed to interoperability. And like it is, and we say this over and over again, and I think this is why we really picked up a lot of steam in fixed ALPRs against some of the challenges that are happening out there with some of the competitor -- one of the competitors is because we believe there's your data. It's not our data. So we -- you should be able to share it the way you want to share it and use it the way you want to use it.

So -- and also that goes with any other vendor. That's why we have open APIs. We love for vendors to plug in and for us to be able to plug in as well because you should be able to use the technology the way you want to use and you should be able to use the data the way you want to use it. So Sheriff, comments?

Yes. So it's interesting to me. I actually changed my mind when I came back from Phoenix in the way that we were going to inculcate this into the system, which was simply this. My kind of thought is that too much data coming at you at one time is not communication, it's noise. And so what we started to do is say, okay, let's write the policies and procedure for a system-wide implementation of multiple different systems. And so that's what we're in the process of doing around our policy.

And I think what this ends with us is using the example that you rolled out, if you remember, was the -- where the DA had given the basic fact check on, say, for instance, domestic violence crime. What we wanted to double that with -- we see it as a virtual assistant riding with the deputy, right, a virtual deputy going at the same time. So we are kind of committed to this concept of the same person that may say that these are the elements of a crime that you need to make sure that you committed in this call that I can pull away from it.

And by having our HR closed loop in that system, say, reminder, you need to get your oil change in 30 days. And by the way, what is the -- what's the agency policy on bereavement? I'm a Gen X kid. I would have said -- my dad would have said, look that up on Encyclopedia Britannica and look at -- but it's the first time to that totality of knowledge that you have the ability to ask the question and receive it.

So for us, it's about writing a policy to determine what amount of the report should the deputy sheriff write prior to doing X, right? Or my firefighters in my case or my medical teams, what amount of things should be self-generated, how do we check against review. So we're writing the policy first so that we don't have multiple iterations as we add sections to it.

Yes. To what Sheriff Adkinson mentioned that we do, do these things called our CEO Summits and all 3 have been out here. And that truly is how we think about our road map and building what we're going to build. Like it's amazing if you just ask customers what they want, they'll tell you what's most valuable to them and what will solve their problems versus what we think will solve their problems.

The one that I always like to give the example on policy chat, it was a Chief of Police at one of those sessions said to us like, "Hey, can't you just upload all of our policies" and then officer could just ask on their body camera using AI, like what is the policy on bereavement leave or I forgot my black shoes today, what are my -- what should I do? Like we would have never thought of that.

It's just -- I mean we would have never thought of that. That came from the field, that came from chiefs and sheriffs and others who tell us like that would be super valuable to us. So we built it. And a lot of the AI Era plan came from translation, real-time translation that -- and by the way, we turned it on for every World Cup city and surrounding jurisdictions. Most of them -- almost all of them have Axon body cameras. We turned it on for the World Cup just so everyone could have it.

That also came from a chief who just sat in here at headquarters and said, well, I can translate on my phone, why can't the officers translate on their body camera. So we're building things because of the feedback we're getting from leaders like they're on the call. DFR, we had several questions about DFR. Let me just -- let me put them together and you guys can answer them how you see fit. One surrounds, is it here to stay? Is it becoming -- and second, is it becoming more prevalent? And then third, any challenges that you had? And we sort of touched upon it, but any challenges you have with community acceptance. So I'll throw that out to all 3 of you.

I'll jump. Yes, it's here to stay. It's taken the profession by gangbusters. Now departments are scrambling to catch up for it. Challenges around transparency. One of the things that largely made our program successful and it kind of became a national model was we have the camera pointed at the horizon while going to and coming back from the call, and that was the tipping point for my community because they were hypersensitive about surveillance, et cetera.

But when we explained that to them and then also had the forward-facing dashboard, my running joke was for those in the Pacific Northwest, the mountains out, when you can see Mount Rainier, I go, we have great pictures of Mount Rainier. We should use that to offset the cost, make post cards. And people got it, right? And so like I said, that was a huge selling point.

And then the efficiency for the officers internally because for me, I use commission officers as my pilot because I need to be able to establish probable cause or lack thereof in that call response. So taking a body from patrol at a time when we talked about recruitment when you're trying to hire additional people created some internal churn.

But once the officers realize that, hey, this actually saves me from going to a call, the running joke was the loudest voices in the building that were anti-DFR were the first ones on the radio asking if [ Air One ] was available because they realized that drone is going to get there in 90 seconds and likely cancel them from having to respond to the call. So it became a win-win both internally and externally.

Sheriff, our Chief Jokerst, any comments on DFR and where you see it going and community acceptance?

I think it's definitely here to stay. So just to give some perspective, our city is about 75 square miles. We have 2 hives, 4 cameras total, one in the north, one in the center. So I don't have the south side of the city covered just yet. We did team up with some academics that are doing research on DFR because I wanted to show how is it working. And I'd just say there wasn't a true road map.

I'm sure Darrell is using it a little bit differently to fit for his community. Michael is using it differently for his. And so although I was researching, I say best practices, really just practices that were currently out there and adopting what I thought made sense for Kansas, everyone is kind of using it slightly different. And so I want to show that it's successful, too. That's probably my bias in it. And so far, it is.

But what data metrics should we be archiving now? What does that look like? And then just teaming up with some academics to look at that research and development piece because when my contract is over, I want to replace and expand. And so that is something that we team up with a lot kind of looking at the research out there and looking at it through a different lens outside of policing. In regards to it, I would love to see it expand to, I am not a fan of pursuits, I would like to end all pursuits.

And so looking at ways that drones can definitely take over some type of pursuit where the vehicle comes to its resting point, you can set up a better tactical operation that helps for the safety of all involved or police officers and the ones in the car. And so I would love to see this expand even further, and I'm very thankful that our community and department are a part of it.

As far as supportiveness, I would say there's always going to be community members that maybe fear something due to lack of understanding what that looks like. We adopted exactly what Darrell did on looking at the horizon to and from the locations. I don't have beautiful mountains out here in Kansas, maybe some flowers and stuff.

But we did a lot of those same things, and we worked with community members to develop thoughtful policies and also look at a transparent data dashboard in regards to where our flights are going and everything else. And so we are definitely very much when it comes to transparency pieces. Where allowable, I would say, we definitely push those things out there, too.

Well, I hope it's here to stay because I sold our helicopters, everything but the medical one. So it better be here to stay. No, I think...

Wow!

Yes. Well, listen, they have practical applications how they're actually used as opposed to people [indiscernible] use is significant from everything from search and rescue where you don't have to deal with rotor wash down in a low vegetation area. I mean there's a lot of practical applications. I will say that additionally, I think there's a pretty serious insurance application and opportunity to be used there.

One thing we noticed in Florida, particularly with hurricanes and things of that nature, is one of the major issues that you have is roof damage, damage to structures on the way. And so now we're in a situation where you can plug in a resident address and have that drone check the status of, a, the roof; b, the structure itself without the individual having to go into a closed area.

So if you're in the Keys or in my county, we're about 1,200 square miles, right, with 26 miles of coast. And so if I close off 200 square miles of coast because -- but people want to know, hey, what's going on in my home. So in the way that you could ask for a residential check or patrol deputy, they just want to see their structure is still standing. But there's some pretty serious insurance opportunities to partner, I think, with insurance companies to use that to make sure the integrity of structures and roofs and things of that nature as well. So yes, I think it's got a real big future there.

Sheriff, you do have a fan listening because they just wrote a comment. Thank you Sheriff Adkinson for keeping Seaside safe. We greatly appreciate your work. So I'm not sure who that is, but you got a fan listening on the webinar here. Similar with DFR because we talked about prepared, which is we acquired them back at the end of last year, and there are several questions about this, so I'll just sort of put it all together.

Like where do you see AI-assisted call taking and dispatching going? I mean it sounds like everyone is sort of sold on Prepared today, the features that where you use AI for call assistance where you could triage calls, you could use AI for translation, which is huge. Probably, it's one story, like we hear multiple stories, but like maybe happening in your community, we had someone calling in outside of Baltimore speaking Mandarin. The call taker, the old way of doing business, you got to hit the line to get a translator on the call. Prepared, their AI picked up. The man said, my daughter has been shot in Mandarin, comes out in English, the car gets dispatched, rescue as well.

They're on the scene before the translator actually got on the call before they could translate it. So you're seeing like just amazing stories like that. But I guess the question is like where do you see AI playing a role with call taking and dispatch into the future? Like is it like DFR, like that's here to stay, and that will transform how we think about call taking and dispatching.

So we passed the Turing test, what, maybe 5 years ago, give or take. And you want to talk about Kurzweil, right? So AGI, artificial generative intelligence, I think there's a decent argument that we've achieved that now and some people argue differently. But either way, you want to do it I think from a purely practical matter. There's zero question that we're going to be able to parse and manage these calls significantly faster with much less error using AI. It is absolutely the realm of the future.

And I always thought the Turing test was a fairly low threshold because now it is so much better that it really is becoming difficult to tell. And I think with the Prepared questions and the road map for it to move down, I think this is -- we're all going to be moving to that very, very, very quickly.

yes, I agree.

I agree with that -- I was just going to say I definitely think it's here to stay. I spoke with our dispatchers yesterday. They really, I'd say, support and enjoy the new technology that's coming out. I also met with the real-time information center, sent some police over there, how is this going? They think it's a great feature. I get weekly updates on stats for both the real-time information center and just our new tech because I want to know how is it working? Is it working to the way we thought and those type of things. And I definitely think it's here to stay.

And I think once it is really more ingrained within our dispatch centers, more ideas will come out to say, how about this? Can we do this? But people are calling 911 because time is of the essence. So any second step we can take off to perform life safety measures, I applaud that. And so it seems to be really working well within our center.

I got a couple of questions about, and we did touch upon a little earlier, just about AI in general, like we're seeing what's happening just in the world around us. Sort of maybe apprehension around AI, perhaps job losses coming, especially white-collar jobs in terms of what AI can do. Like are you seeing -- and the protest we're seeing with data centers because of -- and pulling -- some states and cities pulling back building data centers. Are you seeing that apprehensiveness within your agency in terms of adopting AI or your officers like -- and is there a split older officers, younger officers? Are you seeing any of that within the agency? Or they're saying, no, give us more.

For us, more. They want more. They're used to it because we have been so tech forward that they're looking for the next thing. Like I said, we have to balance ours against what our prosecutor will accept. So we're looking at other areas, definitely in the Prepared side. I think that is the next iteration of what dispatch looks like. And as far as the job displacement concerned, it's just going to change how we work, right?

There will always be a need for people, but part of our jobs as leaders is that workforce development is to train folks how to better utilize it. Right now, we're going through, I'll call it, exercise where I'm identifying a couple of groups of teams within my department to identify some of our repetitive workflows because I'm looking at a way to automate those using agents, using various AI platforms.

We have the either AWS or Azure GovCloud, so we can work in that closed environment within our infrastructure. But to create automations, to use agents to create these efficiencies and while it's not going to replace the need for people, I definitely think it will perhaps change the workforce or the number of people because we can make the people that we have more efficient, but we also have to train them up in how to utilize AI and utilize these tools on these repetitive workflows and tasks that we currently do.

I agree with the Chief. I think if you're not evolving, you're becoming obsolete. And this technology for me is complementary. So it's in addition to, but not in lieu of. And so I would say, in my organization, I definitely had a couple of tenured positions that were more, okay, let me understand this new technology, and I get it. Every time a new iPhone comes out, I'm like, I just learned the old iPhone. So I understand what that looks like.

But more often than not, everyone embraces the technology. And so knowing that, we really put thoughtfulness into training and making sure people felt comfortable with what that looks like and did kind of more of a slow, as my colleagues talked about, rollout to make sure everyone is on board. And I definitely have some people that are like, Chief, let's keep this going, like we're excited. We want to keep moving forward.

And so I did an internal survey when I got here and one just a few weeks ago because we're working on a strategic plan. And I said, what's one of our biggest strengths? And they put community engagement for a department and everything else, but they put technology. And I can tell you, 18 months ago, my department would not have listed technology as one of the biggest strengths we have going for our department.

And so I definitely think it's embraced within our organization, but it takes leadership to also say we're going to roll this out. And if I -- if we need to pivot, we will. And if I made a decision I thought was great, and we later determined we should have gone left, then we're going to turn and it's going to be okay. And so I think, too, just getting up in front of people and saying, yes, I thought this was going to be right. But now that -- I always say the best policy, you write it with the best intentions.

But then you're using it and you're saying, "Oh, now that the practicality piece is here, we should have wrote it more like this." And so being able to say, hey, we're going to change as we go and having that evolution, so to speak, I think, is really important from a leadership position as well. And so I say it's embraced from my department standpoint.

I am certainly not a Luddite. I mean...

No, you're not because you're quoting Kurzweil and Moore's Law and everything else, you are not a Luddite.

It's my mother's [ policy ], she believed in the classical education. If you look at the average age of our deputies and our firefighters and our dispatchers now, these are folks that are absolutely used to the next iteration of change. So it's really in the command level being able to stay apprised of what is the next iteration. And one of the things I find with our folks is we have to be careful at the command level not to be seduced by technology.

And remember, technology is a tool, right? It doesn't reason, and we have to be thoughtful about the way we do it. But I think as far as my experience has been with particularly line staff and the sergeant level is they are immersed in this from cradle and the grave. These are all Internet -- none of these folks are born prior to -- nobody ever gave them Encyclopedia Britannica and said, look it up. And so this is really what they expect. And in fact, they are resistant to things staying the same too long. So it's an interesting change from that standpoint.

Erik, Encyclopedia Britannica is where you used to have to go. These are big books, you pull off the shelf, you have an alphabetical order, you flip through it to look up information. Erik is of that generation, too. So...

I probably learned something for sure.

And as we start wrapping up here, we got 5 minutes. Just -- and I don't know what Chief Lowe, Chief Jokerst and Sheriff Adkinson will say. But like technology is changing quickly, you're trying to keep up, the procurement process, everything going on, like how -- like what are the key factors or the key things you look for in a vendor and whether that's Axon or not, but like what do you look for in a vendor as you make these purchasing decisions?

Partnership. Being able to understand what -- I'll say my pain points are. One of the big things that I share fairly freely with vendors is to understand the budget cycles of municipalities because that's not the same as the -- I'll say, the sales cycle for a sales team, and you could waste your time because if you come to me mid-budget cycle to the sheriff's earlier point, the reality of it is that deal is not going to close probably for another year because I'm mid-budget cycle.

So if you understand that, you can establish the relationship, understand what that potential customers' needs are and develop the contract, the package, the everything. And then when they are in their budget process, that's the time. And then also just flexibility, flexibility around the financing. Yes, it is a business, there's a bottom line. But if there is no flexibility in wiggle room, you're going to lose more deals than you're going to make.

And while you may make a deal that is not optimum for the numbers, you've now got a customer, I'll say, for life, you have a customer with multiple contracts. So don't be shortsighted on the sales piece of it, look at it from the relationship perspective and the partnership perspective.

Sheriff and chief Jokerst?

I agree with what Chief Lowe said completely. I believe strongly in quality customer service. And I'm definitely believe in servant leadership, and I expect the same things from our vendors. I want a real focus on community safety. I want it on public safety. And so I'd like to look at mission statements and visions of vendors to include Axon's that go far beyond the products and what they sell to show what the ultimate thing that is trying to be achieved.

And so quality customer service, and I sent you an e-mail last week in regards to that, I appreciate all the stuff you have done for host cities, Axon has done, in setting out additional technology and equipment. So if something goes down in an organization, it's readily right there to be able to help. And although we haven't had to open the trailer or do anything, it doesn't matter. It's the fact that all the stuff is here. And I just really appreciate that. I appreciate the quality customer service and really looking at it through a community and a public safety lens.

Your e-mail made my day. I certainly like all feedback and all concerns and challenges and everyone has my e-mail address and Rick's e-mail address and cell phone numbers. But when I get a good one coming in like that, Chief Jokerst that made my day. Sheriff Adkinson.

For me, it's probably a little bit of a Pareto distribution in that I -- if you can achieve 80% of the things across the multiple things I'm trying to -- I like to be pragmatic about it. And so I think one of the things that happens is that a lot of agencies, if you're not careful, if you don't have reasonable voice -- unvoiced expectations leads to future frustrations, right?

So if I try to buy individual pieces of technology because this one is the best for this and this one is the best for this and this one is the best for that, they don't mesh together. They don't work together. I would rather have that 80% that works across the board in a system than individual superstars, right, in that particular modality. And so to me, that really is what I look at how I understand that I'm going to add multiple pieces of technology that need to work together. And so I look at systems and how they're going to function.

Well, as we wrap up, one, shameless plug. I do a weekly newsletter called The Weekly Briefing. I think all 3 are subscribers, it goes out to over 1,000 police leaders. It's not about Axon. And along with that, I do a podcast and both Chief Lowe and Chief Jokerst have been on it, not Axon related, just about trends in the industry.

I need to get Sheriff Adkinson on there. I can see that now. So if you're interested in that and go to policebriefing.com, you can sign up for the Substack and you could check all the podcasts that are there.

Chief Lowe, Chief Jokerst and Sheriff Adkinson, I really appreciate you joining us. I know you guys are super busy. We really appreciate you also being -- I was going to say valuable customers, but we actually see you as a valuable partner. So we appreciate your partnership. And with that, I'll turn it back over to you, Erik.

I'd just echo those comments. Thanks so much for giving us the time. I think we and everyone on the line really learned a lot, and we appreciate everything you're doing for your communities and the community at large.

Thank you. Everybody, have a good day. Stay safe.

Conference and today's session with Axon. My name is Jonathan Ho, and I'm the research analyst for William Blair & Company. Our speaker today is Josh Isner, who is the President of Axon. Before we begin, I'm required to inform you that a complete list of research disclosures or conflicts of interest is available at our website at www.williamblair.com.

With that, I'll hand it over to Josh to give a high-level overview of Axon before we head into a fireside chat. Josh? Thank you.

Thanks, Jonathan. Good morning, everybody. I'll try to be quick here with the slides, and we'll open it up for the Q&A shortly thereafter. Of course, our safe harbor statement, which I'm sure you're all familiar with.

A little about our company. Axon was founded in 1993, first as a TASER company. We built the TASERs that you see public safety using today, all the police officers with those yellow TASERs on their belts. It's a story of one thing leading to another. Essentially, people were questioning how TASERs are being used in the field. We started to put a camera on the TASER. That was well received. We took a camera off the TASER, put it on the officer's body. That was well received as well.

And it actually created a bigger problem to solve, which was all the data coming off of those body cameras and how you manage them and administer all of the evidence from that point forward. That created Evidence.com, which is now the largest police evidence repository in the world. We manage about 50x as much content as on the Netflix library and we're Microsoft Azure's biggest customer. And ultimately, this business has created a lot of offshoots of opportunity.

Of course, this massive data set is very useful in the age with AI. There's also all of these downstream workflows to prosecutors and other stakeholders that create additional opportunity. We've then built out an additional sensor network around that, drones, body -- sorry, drones, in-car video cameras, fixed cameras, et cetera, all of these sensors feeding data into Evidence.com and then that data powering a lot of the workflows that police rely on today.

Now when we think about who we serve as customers, our core market is U.S. state and local, think all the cities and towns and state police agencies. We also have a large federal government business. There, we talk more about DHS, Department of Homeland Security as well as our federal civilian customers. Not so much in the DOW, the Department of War. Those are more built-for-spec type products that we're more of an off-the-shelf vendor.

So I think federal law enforcement is a lot better of a market for us. International, this business has grown substantially. Last year was our first year booking over $1 billion in this segment, continues to grow nicely. And then enterprise, these are all essentially use cases outside of sworn law enforcement, private security, retail, security operations centers for Fortune 500 companies, et cetera.

And then, of course, we have this large ecosystem of hardware, software and AI that I mentioned. You see all of these sensors, whether they're TASERs, fixed cameras, license plate recognition, virtual reality devices, drones, robots, all of those things we sell to public safety in addition to our new Dedrone counter-drone platform that has been one of our largest product lines garnering a ton of interest over the last few quarters, pair that with a lot of software and then additional AI capabilities on top of that.

Last year was our first year selling dedicated AI tools. We booked over $750 million in AI bookings. That number is up in Q1, 140% year-over-year. We expect another exciting year of AI growth in our business. And I think we're really proud of the fact that we've built AI-first products that police are using in the field today. This isn't like hypothetical, we could do this. AI is a little part of this product. These are AI-first products that police are paying large dollar amounts for because they drive so much efficiency at their agencies.

And then this is our kind of very simple framework for how we think about growth. In the U.S. public safety, that would be that top left box. It's an existing customer. That's our core customer market. And there, the motion is building out new products for those customers. We sell new products to an existing customer.

And then we essentially do the inverse of that, which is the bottom right, in our new markets. We take our new customers and we sell existing products to them. The one thing we don't do a lot of is build brand-new products for brand-new markets. That's a risky proposition that can go a couple of different directions. But given how much trust we've built up in our U.S. state and local business, it makes far more sense to just keep innovating there, driving ARPU up and solving more problems in that market.

And then we have so many products that we already feel have great product market fit in international and federal and enterprise that applying those products to those markets as opposed to trying to invent off the bat in those markets, we feel like is a much more sustainable growth strategy.

And that's manifested itself in the numbers. You see our -- that top left chart is our bookings growth since 2022, that number has essentially 4.5x. Net revenue retention continues to go up. That's driven by that motion of selling new products to existing customers.

Our annual revenue, we're very proud of the fact that we've been a 30% grower for several years now and a 25% grower before that for 7 years. You don't see a lot of 30-year-old companies doing that, and we're really proud of the fact that we continue to provide that type of growth. And then lastly, you see margin expansion. We have expanded EBITDA margins from about 19% 4 or 5 years ago to 25.5% is what we're guiding to this year and our long-term guidance 3 years out of the year -- the full year 2028, guiding to 28%. So you'll see continued margin expansion, coupled with very exciting revenue growth, which we think is a very durable combination and one that we're very focused on.

So that's a little about our company. Our mission is to protect life. We're a mission-driven company. That's what we care about is making sure that we're building tools that keep police officers and community members safe. That resonates a lot with our employees. It leads to great employee retention. We feel like we've got a very solid core team that's been together for a long time, and it builds a lot of customer trust. And when we're trying to solve literally the biggest problem police have, how do you limit people dying in communities, we feel like we're central to that and very relevant in that equation. So that's a little about Axon. We'll open it up to questions from Jonathan.

Gosh, thank you for that overview. Just to maybe level set the audience a little bit, Axon has seen tremendous growth over the past few years, the company has expressed confidence that it can continue to exist for many more years. Can you help us understand what gives you the confidence that there is a long road ahead to sustain this growth? And maybe what some of those primary growth drivers are?

Sure thing. So -- it's a lot of that motion I mentioned, but it's really that top left chart that you see on the slide now. Those are 5-year bookings. So our back of the napkin is, look, if 5-year bookings continue to grow by 30-plus-percent, you can kind of expect revenue to follow that same trend. And so every year, we look at bookings as the leading indicator of revenue. Then you couple that with a strong in-year pipeline and you couple it with just more and more core product expansion, body cams, TASERs, software AI across all our markets, we really feel good about just the core business continuing to drive growth like we've seen historically.

And then we see some upside to that with some of the new M&A. I mentioned Dedrone, that was up 300% quarter-over-quarter, I'm sorry, year-over-year in Q1, and we expect that to continue. Our counter-drone technology is becoming more and more relevant. I think that's become very visible in what's going on in Ukraine and Iran right now where drone warfare is a big part of how these conflicts are manifesting themselves. And so we see a lot of opportunity there into the future and hopefully, a great opportunity to keep Americans safer.

Absolutely. I mean one of the things that's been most impressive about the company is the sheer number of products and product categories that you've been able to expand into over time. Can you help us maybe understand how that broader vision fits together? How do your customers use the products together as a platform? And how does that make Axon stronger as a whole?

Yes, sure. I think a platform is the exact right word for it. We look at all of our products as this combination of point solutions that together form this operating system that police rely on. And so when you think about evidence management, it's Evidence.com. That's at the center of that ecosystem where you plug in all of these sensors, some of which we own, some of which we partner on and all of them feed into this one engine that is the well of information that the police department manages.

And then likewise, on real-time activity, whether it's real-time video or counter-drone, we look at that as a platform as well, where the user interface there is a map, and it's showing all of your sensors across your city, whether they're fixed cameras, in-car video, body cameras, et cetera, but now you get a new view of that map, which is also in the air space above your city. And that's where you're seeing all the counter-drone technology take place both in terms of tracking drones, seeing where the pilots are located, which is a feature of Dedrone and then eventually being able to mitigate those drones by jamming them, by cyber takeover, et cetera.

And so really, we've built essentially 2 integrated platforms, one associated with all the police evidence and then the other one associated with all the real-time activity taking place in the city. And we think those are very durable and they allow us to continue to plug, whether it's M&A or partnership, can plug in new modules into those platforms and remain relevant for a very long period of time.

Excellent. Excellent. I know the origins of the company were with U.S. law enforcement and specifically state and local. But Axon itself has been able to expand dramatically into new types of customers as well, whether that's international or whether that's into the enterprise market. What inning are we in, in terms of those opportunities? And how do you sort of unlock more of these markets over time?

Yes. I think in our new markets, the game hasn't even started yet. We're still like in the national anthem of getting ready to run out on the field here. So in U.S. law enforcement, we see, like I said, the new products really driving that growth. But I'd say if international isn't eventually bigger than our U.S. business, we did something wrong. And if enterprise isn't bigger than both of those businesses, we didn't execute as well as we could have.

So I think we've got a lot of opportunity from our new markets. You just think about internationally, I use a stat in Italy, there's 2 police forces that make up 1/3 of the total number of officers in the United States. That's one relatively midsized country. And then you think about Walmart as a company, they have 2.4 million retail workers. and there's 1 million cops in the U.S. And so you just think about the pure dynamics of the TAM there, we've got a lot of execution in front of us. We got to do all the things, but it's right there for the taking.

Absolutely, absolutely. With AI, there seems to be a common misperception in the market that AI is going to eat software. Can you talk a little bit about the moats that Axon has that maybe make your products AI proof?

Yes. I think that's relevant to some pure software businesses. I think when you have the fact that our hardware is creating all the content that's driving the software experience that's driving the utility of AI tools, and then you're in this environment where it's highly regulated with a lot of security clearances.

So generally a small market where you got to win the most of it to be relevant. We just think there's a lot in there that is not easily replicable, integrations with all the prosecutors, integrations with all the courts, integrations with all the jails. There's just a lot of infrastructure there where we think we are actually positioned to be one of the big winners in this shift to AI, where it's like, "hey, we are serving a customer base that is in need of dramatically different workflows and speed," certainly something that AI is very good at. We're serving customers that have these massive wells of data that we manage for them. That's training the AI, that's optimizing it. Again, we see that as a big tailwind.

And then we've just built up so much equity with our customer base where they trust us to be the delivery mechanism of disruptive technologies into public safety that happened with TASER. That happened with wearable technologies like body camera. It happened with cloud. It happened with drones. It happened with counter-drones. We think that's going to happen with AI as well, where we will be the company delivering this technology into public safety.

Absolutely. I mean just to elaborate on that point, like how do you sort of partner with the Frontier models today? And have they ever expressed any interest in going into the space directly? Or will you be the distribution channel for this?

I think we look at ourselves as a distribution channel for like I said, law enforcement, it's hard to get -- for a lot of companies to get excited about in a million officer TAM, right? You've really got to be confident you can win the most of it at high dollar amounts with differentiated products. And that's our DNA. That's what we do as a company.

It's really hard to build that whole motion from the outside. And so I think we -- as we look at models, I think our name of the game is diversification. We don't ever want to be in a situation where something in a model changes that there's a lot of inherent bias in and all of a sudden, all of our recognition models in the field are affected by that, and that puts our brand or trust at risk.

We vet pretty much every publicly available model to have backup plans in every case. And we work with these vendors on version control where we get a little more latitude switching from version to version to version, so we can actually test everything around the way the new models work and so forth. And so that's something -- and we diversify our contracts, so we're not locked into one vendor as well, which we think is really important.

And I guess the last thing is all these AI models do different things well. And so for us, there might be a vendor that does our Draft One product, that's the perfect fit at a relatively low cost. And then some of our more complex reasoning models, we might pick a different vendor. So diversification is the name of the game there.

Excellent. Excellent. I mean one of the things that you've been doing is bringing AI to your customers through the AI Era's plan and the ability to cross-sell that into the customer base. What are some of the new AI functions that have people most excited? What have you been able to add? And any sneak peek on what you're going to add in the future?

Sure thing. So our most -- our first flagship AI product was called Draft One. And what the product does is it listens to the body camera video essentially. It's listening to the audio portion of it. And it's writing a draft to release -- sorry, draft police report in real time. So when you get back to the station and you click into a case that you or the officer assigned to on a given day, you're going to see the first draft of that police report.

You go in and edit it. You have to make it your own. You can't just click submit and make no changes. There's like a blinking red screen where that happens and won't let you do that, you still have to edit it. But essentially, what we're seeing in the field is before Draft One came out, officers spent 50% of their time writing police reports. So 2.5 days a week, just simply writing police reports. That number is now down to 20%.

So we've given every police officer back 1.5 days of time to be in the field fighting crime. And that's a really attractive proposition for our customers because every police department on earth right now has headcount vacancy. And so when you think about, oh, I might -- I don't have to hire as many police officers now because I've just picked up 1.5 days a week in my current police force. They can fund all these products through those headcount savings.

And so we sell these types of products in a plan called the AI Era plan. Draft One was the anchor, as I mentioned. We have the real-time translator out now for the World Cup and being used on the border being used internationally where a police officer walks up to a person, they're speaking a different language. They have an emergency, you hit one button on your body camera. It identifies the language they're speaking, and it translates it for you. All you do is speak back in your native language, translate it back to the person that's speaking in their native language.

And so in terms of just the utility of that core product alone, massive in policing environments. And now we're building more and more tools around that. We have Axon Vision, which turns your CCTV cameras into detection mechanisms. You can detect a person lying motionless on the ground. You can detect the tussle. You can detect a car break in. You can kind of get real-time alerts of these things that are happening in your city.

We launched a product called Axon Gravity, where Evidence.com connects to all the other policing -- all the other systems in a police force, and then it can give you real-time insights across data sets. And so when we think about the next frontier of AI and policing, the first one is delivering point solutions like I just mentioned, the translator, the Draft One, et cetera.

Eventually, it becomes, hey, we're going to be on site building custom AI workflows and experiences with Axon Gravity being the foundation of that. And so over time, we think ultimately, this just becomes more and more relevant for our customers.

Absolutely. When you mentioned the World Cup and just given everything that's changed geopolitically, how do we think about the opportunity in the drone market and the counter-drone market? This is something that Axon invested in early, had a vision for, but it seems like it's still relatively early in terms of the stages of adoption.

It's definitely early. We acquired a company called Dedrone what was it, late 2024, less than 2 years ago. We've already booked more dollars on that product than we paid for the acquisition. And so we're very excited about the trajectory that it's on. We think right now, we're seeing international, federal and enterprise as the 3 biggest potential markets for that product. And the only thing that has to happen for state and local to join that is cities are given the opportunity to not only identify drones in the sky, but mitigate them and take them out of the sky. Right now, that power sits with the FAA.

The World Cup cities are the first cities that have been granted a waiver to be able to mitigate drones. So we view that as like the next step of that will be major cities in the U.S. having that same capability. And so that will be an exciting moment for our public safety business. And the good news for us right now is all these World Cup cities are essentially getting a trial of the product. They've paid for it, but it's limited installments because you're just protecting a stadium's air space generally.

But then all those cities will take those products that are mounted on trailers right now, and then they'll mount them on fixed sites in their city, and they work in a 2- to 5-mile radius, call it, or kilometer radius, I'm sorry. And so you need a bunch of them to cover your whole city, and this is kind of the wedge into each city is having these early installments that are repurposed from the World Cup.

So we think we're really well positioned to see this business grow nicely in all of our markets, but -- it's really the first one, interestingly, that state and local has been our slowest to adopt. Usually, that's the engine and then we feed it out to other markets. In Dedrone's case, it's opened a lot of doors in international. It's opened a lot of doors in enterprise with protecting these data centers and warehouses and valuable inventory, logistics hubs, et cetera. And then in the federal government at the border and otherwise, certainly a lot of relevance there as well.

Excellent. Excellent. I mean just speaking of fixed mount sort of enclosures, you've also sort of invested in the fixed mount camera space. And so sticking to the theme of products, how do you think about the opportunity to expand in this market? There's been some privacy challenges with some of your competitors. And so can you speak to what that looks like?

Yes. We're very proud of the fact that we're viewed by our customers as the responsible innovation company in public safety. About 6 years ago, we created an AI Ethics Board, which has evolved a little bit. There used to be a lot of academic researchers on that board, and now it's much more comprised of community activists and folks who are generally a little skeptical of the police.

And we invite them in and we walk them through everything we do product-wise every quarter. They meet with our Board once a year. And they essentially are the balancing act to everything we want to do on the policing side. Ultimately, our products have to work not only for our police customers, but for communities as well. And when we start with that foundation, when products are delivered to the market, they're just so much more thoughtfully delivered and thinking about privacy and security and making sure that we've been responsible in how we build the models when we're talking about AI.

And when we sit in front of the city council and walk them through all the work we've done or better yet have some of the members of this Board sit in front of the city council, it really resonates. And so we've seen some of our competitors trip up in this area pretty substantially, and that's ultimately been a tailwind for us because it's refreshing for city councils to hear from a company that's thought this stuff through at the level we have.

Excellent. Excellent. One thing I want to understand a little bit better as well is that as you sort of expanded the product set, as you target these larger market opportunities, how does your distribution strategy need to evolve in order to match this growth opportunity? Where do you see the opportunity to invest? Where are your light? Where is -- that can you beef it up?

In U.S. state and local, we're very -- we have a high conviction that a direct selling motion is the way to go. We're going to do our products more justice than any distributor would in those markets. And we have the relationships and the incumbency in these customers that we don't necessarily need somebody to connect the dots. We have the relationships.

And so we've built a very focused direct sales model in our U.S. state and local customer base. When we go into federal, generally, the same thing. We use some government affairs and so forth, but we're more of a direct selling motion. But then in international and enterprise, I think system integrators are a lot more valuable to us because there, we don't have the years of incumbency. We don't have all the relationships.

We might be 20% of a national policing deal that's relevant to our products, and that might be a massive deal for Axon, but that also might just be a medium-sized piece to the entire ecosystem that the system integrator is selling. And so there's some value in selling through those partners. And that's, frankly, one of the motions that's unlocked our international business.

And so -- and similar with enterprise, a lot of large companies buy from specified security vendors or distribution partners of some kind on technology. And so making sure we're building relationships there and creating multiple pathways into some of these large companies is, again, it's something that's paid off.

Excellent. Excellent. I have to ask at least one financial question.

Sure.

How do we think about the balance between profitability and sustaining that growth longer term? Like how do you mitigate those?

Yes. I think we can do both. But if guns to our end, we had to choose, we'll take the growth. I think we can always solve for profitability if we're growing substantially. And it's way harder to figure out how to grow 30-plus-percent than to figure out how to cut costs or be responsible with your budget. Those things I think we're pretty good at these days. And so for us, it's the focus on 30-plus-percent revenue growth and making sure that we're capturing the opportunity in front of us.

Excellent. We'll now open it up to the audience to take a couple of questions before we go to the breakout. So go ahead.

[indiscernible]

Sure thing.

So please repeat the question.

Absolutely. So the question was about how is the newest model TASER device doing and what's our plans for future TASER devices. We launched a new TASER every 5 years. So we are essentially in our fourth year of that cycle right now. So we still got about 18 months left in that cycle.

TASER 10, which is our newer device, it shoots 10 darts out of the TASER instead of 2 cartridges in our previous model. So it gives the officer more opportunities to connect through heavy clothing and to deescalate the situation safely. TASER 10 through present day has sold at 2x the volume of TASER 7 over the same time duration. So it is certainly growing very quickly.

It's not only growing quickly in our U.S. state and local base, international and federal, both growing quickly as well. It's really been a breakthrough product for us on the TASER side. I'm sure you guys can guess what our next TASER is going to be called if this one is called TASER 10. And so when that product comes out in about 18 months, we'll be excited to -- directionally, it might be a couple of years, but that will be the next upgrade cycle, and we'll continue to solve for the biggest challenge and the biggest kind of breakthrough we still need to make is how do you go from 85% to 90% effective to 100% effective. Because if not 100% effective, you're not going to displace firearms eventually.

And so when we think about that, it's really about breaking through clothing resistance. That's still the biggest challenge in that last 10% people wearing heavy clothing in the winter and so forth. We're solving that in 2 different ways. We're creating a new dart design that we're experimenting with internally that can pierce a little deeper, but still safely. And then the second one is using machine vision to guide the darts in the low-resistance areas.

So the compute will be eventually, you'll see a computer on the front of a -- I mean, a camera on the front of a TASER that is essentially sensing where the resistance is, persons wearing pants that are like jeans or tapies or something and they're wearing a heavy winter jacket. The darts will be guided at the pants and be able to pierce through more reliably there, and we'll be using computer vision to guide those darts. We're actually working on that technology in drones right now. So it will first launch in a drone for SWAT instances and so forth and then eventually make it through to the TASER. And at that point, we think we can displace the fire.

[indiscernible]

What does the backlog consist of? Sure. So we sign multiyear contracts. And so the backlog is essentially anything in the out years that we haven't recognized yet as part of our in-quarter revenue or in new revenue. So if we sign a new 5-year contract this quarter, all 5 years will go into the backlog because it hasn't been delivered yet.

And then once it starts delivering, we -- the revenue offsets the backlog. And so the way to look at this chart, in my opinion, is ultimately, you need to see that number growing by 20%, 25%, 30% every year in backlog, that indicates that bookings are still growing substantially, and you can feel good about the growth rate continuing.

[indiscernible]

Yes. So there's essentially some non-appropriations clauses in there that's really that cities have. It's like, "hey, if the city Council decides they can't fund the contract anymore," that's city government, you have to have that flexibility. We've never seen a customer non-appropriate. So it's a very low risk.

[indiscernible]

Well, they're the market leader in voice. So we're in pretty much every major -- really major or minor policing environment together. In terms of products, I certainly think we're viewed as the market leader by a substantial margin on a lot of the body camera evidence management side of the house. They're obviously the market leader in voice.

And there are some categories that we're more actively competing against each other and 911 being the newest one of those. And so we're -- you have competitors in pretty much anything and you just got to focus on what you can do and build your competitive advantage and go on offense as much as you can, and we feel like we're doing that, and we're excited to compete. We like competing against Motorola. We'll continue to do it and see what the scoreboard says.

Yes. But one last one for me. Just as you mentioned 911, I'd be remiss not to at least ask about the CAD space and the opportunities that you have there. Can you talk a little bit about the strategy, why you made the acquisitions and the success that you're seeing in that space?

Yes. When you imagine like a call center from like the movies in like the 1960s and '70s, the scary part is your imagination is still accurate to the present day. Like these call centers are relying on antiquated on-premise technology. It's not a feat of engineering or innovation. It's just very much like a switchboard type stuff that you've seen for years and years.

There's a new age of 911 companies out there that are using AI tools to layer on top of this infrastructure to add much more sophisticated capability, anything from transcribing the calls to localizing the language to sending a drone based on the metadata coming off the cell phone when they call 911. We think all of these things, that's where the opportunity lies because ultimately, switching out infrastructure is a once in 5 or 10 years thing. You want to do that as little as possible.

So the question is in the age of AI, how do you take advantage of all the new tools without having to go through these big infrastructure cycles. That's exactly what Prepared 911 does, and that's why we acquired them. We can sell over the top of any 911 infrastructure out there, and this company is growing very, very fast. So this product line is growing very, very fast.

And so as we create this additional kind of customer base in 911. And as they want to optimize their new call center infrastructure and modernize it, we probably acquired the second company called Carbyne, which is cloud-native call center infrastructure. So prepared is kind of the front end of that. We go out and try to win everywhere we can on prepared, delight the customer with an amazing experience using AI and then we'll have earned the trust to update their call center infrastructure over time with Carbyne. And so that's kind of the playbook there.

Excellent. Unfortunately, we've reached the end of our time. So please join us in the [ Mar ] room for the breakout session. Thank you.

Everybody, Andrew Sherman, software analyst at TD Cowen, covering Axon. I'm here with Josh, President of Axon. I'm sure many of you know and know the story. So I'm going to jump right into it since we only have half an hour.

Q1, you had a great quarter. I'll kick it off there, really strong start to the year. Dedra was 1 thing that really stood out revenue growth. I think bookings was even higher than that. Talk about what kind of inflected in there? It sounds like -- I know there's some World Cup, but other than that, what else drove that.

Ultimately, I think between Ukraine and Russia and what's going on in Iran right now, I think it just opened a lot of eyes to what's -- what the future looks like in in some context around drones and security and public safety. And I think for the first time, a lot of governments are really recognizing how serious threat is and exploring opportunities to try to mitigate that threat and dedrones a business that's been around for 10-plus years at this point. We acquired them about 18 months ago. We're very excited about not only their footprint internationally already, but the applicability of the products to pretty much all of our markets, whether it's federal market, enterprise, U.S. state and local or international, and so it's worked out very, very well.

We've already booked on that product line, essentially more than the acquisition price, which was a very exciting moment in time given that the acquisition only happened 18 months ago. And certainly see a lot of upside in that business durably. World Cup is great. It's securing 11 sets and so forth is -- it feels very relevant. It's a good opportunity for us, but these events, in general, they're happening all over the world every week, and it's not really a moment in time. It just feels that way because it's so close to the U.S. right now. But we see a lot of durable opportunity there for the long term. right?

And it's relevant to a lot of different things, campuses, data centers, you can talk about -- touch on that, Executive residences is like a large number of use cases.

Totally warehouses, anywhere you're housing valuable inventory, stadiums, et cetera, yes. .

Data centers itself, it sounds like it could be interesting.

Apparently, there's a lot of building going on anticipated we're excited to participate in that. .

Okay. But for the state and local departments, they can't yet take drones out of the sky, maybe explain where we are in the .

It's actually the first product we've ever acquired and sold in the market where the U.S. public safety business is the smallest of all the businesses, and that's because in the U.S., you're not allowed to mitigate the drones, unless you're the federal government. And so what ends up happening is cities can deploy this for tracking what they would actually have to call in the FAA to take a drone out of the sky. And for the World Cup, it's the first time that cities have been given a waiver to be able to mitigate drones. So this will be -- hopefully, it doesn't come to that in any way. But the capability is now there and cause our mainstream.

And from there, we believe the the government will continue to let major cities and so forth mitigate drones. But that -- because that is still in motion in the U.S. Other markets have just moved ahead of it. International has been very exciting for drone and not only in and of itself, but the network effect to have the right connectivity in a national police force and leverage that to sell body cameras or TASER devices or whatever the case may be after that enterprise, we talked about certainly opportunity there. And then in the federal civilian market, where our product, we're not necessarily super focused on Department of War. We're more focused on federal civil and public safety use cases Department of War is much more focused on blowing things up in the sky and receptor drones and so forth. That's not going to be our core competency. And so for federal civilian and state and local, it's a really good fit as well as ministries of interior internationally.

And so for federal civilian and state and local, it's a really good fit as well as ministries of interior internationally.

Okay. But someday, state and local might be able to.

Yes, someday as soon as this year or into next year.

You guys are working on.

Yes. And there's a lot of -- there's -- I think as always, the government has got to make sure that we're not getting out over our skis and allowing capabilities that have negative effects, but this one feels pretty down the middle of the fairway for things they're looking at and saying, Hey, there's much more good than harm that can be done in this case.

Yes. And in the same vein as drones, DFR seems to be accelerating and they're pretty early innings, I think. Can we envision a world where that is ubiquitous as TASERs and body cameras? What would that take to?

Yes, absolutely. DFR, for those that are unaware, drones is a first responder. This is essentially the idea you call 911 and a drone is immediately dispatched to the scene of an incident to give the police more situational awareness as to what's going on. And in terms of officer safety, read about officers being ambushed when they show up on site or called to a domestic abuse and someone's waiting there for them or something. This technology kind of gives you the lay of the land and makes the police officer far more informed. And so it's been a very valuable tool, and it aids in car chases. You don't have to chase cars anymore with a car.

You can just follow them overhead with a drone, a lot of different monitoring critical infrastructure, power and things like that. So there's -- we see a lot of utilities. Skydio is the market leader here. They've been our partner in the space for a long time. Our products integrate very nicely together. Our go-to-market motion is very well coordinated. And so we're feeling a lot of tailwinds right now from that construct.

Excellent. The AI era plan has obviously been a huge success in just a short amount of time. A lot of healthy contribution to bookings last year in its first year, about 10% of the total. It sounds like all agencies are now thinking about this, maybe buying it or planning to buy it. What -- is it like a product maturity thing where we're finally -- they're realizing the benefits of Draft one and the other products? And what -- ultimately, how broad can this go across your state and local?

Yes. It's our fastest-selling product ever, as I was saying in our group meetings, so ironic, we're caught in the middle of like the SaaS pocalypsephere. It's like we are the company going on offense and AI, like our first year of selling AI products to police. We sold almost $1 billion of it for a company whose revenue was was around $3 billion last year, whatever it was. It's like this is a meaningful contributor and something that's growing -- grew 140% in Q1 year-over-year. We're going on offense in a big way in AI. I think our customers recognize us as the company that they can trust deploying AI.

I think we've earned that trust through bringing several disruptive categories to law enforcement, whether it was conducted electrical weapons, whether it's body cams, whether it was a cloud, virtual reality. We've just built up a lot of equity with customers that they trust us to deploy this well. And so for us, that's where the opportunity is and speaks to the product market fit to see bookings growing this fast in such a short time, and we expect that to continue throughout the year and feel really good about the opportunities that the AI Aeroplan positions us for in the future.

Yes. Draft 1 pays for itself pretty quickly. And I've seen some small agencies buy that, too. Absolutely. It's not like you need a massive budget.

Yes. The equation there is really, really simple. Like today, police spend 50% of their time writing reports. So that's 2.5 days per week that they're sitting behind a computer writing police reports instead of being out in the community fighting crime, doing what they're passionate about. And with Draft 1, that goes down to about 20%. So you're giving every police officer 1.5 days back per week -- and you can understand like what that means for vacancies in policing. All of a sudden, you don't need to hire all these unhired roles that have been sitting there the last couple of years, you can redeploy that headcount money to buy tools like this that make you more efficient and put your folks back on the street to do what they do best. And so it's really been a massive winner and one that our customers have highly valued.

That's great. There's also the overtime budget component. I was actually looking at my towns budget book that they send everybody.

Hotly read publication.

Yes. Well, I didn't crack it until I realized that this data was in there about the police budget, which 89% of the budget goes to people. They are a TASER customer, which is great. 13% to 15% of that people salary is overtime. So if you can cut that out by making them more efficient, you seeing customers? -- absolute customers.

Absolutely. Yes, people are the biggest cost in every public safety budget. And whenever you can really convince and show that your products can save money out of the people budget, that's like a -- that's a well that's not tapped very often because there are so few products that meet that bar, but we're very lucky that Draft 1 is one of them.

Yes. Speaking of budgets, I get a lot of questions on that. It was more so a year ago given the federal stuff. But you guys have had a remarkable ability to drive up budget capture by adding more products in, you're less than 1% of the average customer, but that could be 3. How do you just keep growing that over time?

I think like the name of the game is you have 2 options. You can create new categories, you better make sure that new category, you're creating solves a massive problem because that's where there's not a lot of net new money trickling into police budgets every year. So if you're going to launch something new in a new category, you got to have a plan of -- you're going to solve a problem so important that the customer has no choice, but to invest in that. The other option is you disrupt incumbent spend categories. And I think that's what we've gotten really, really good at the last few years as things like Draft One. It's like we're disrupting the head count spend that exists, especially the vacant head count spend.

Everything we do, VR, you're taking this training budget that's heavily weighted on in-person training where you're you're firing all this ammo, you're spending all this fuel to get everybody to a centralized location, you're paying over time for the people that have to cover the ships. And all of a sudden, you can administer better quality training every single day by wearing a VR headset in your precinct for 10 minutes versus 1 day a year of in-service training where you're firing devices weapons at an actual range. And so that's the kind of positioning and approach that leads to some of this new funding that shows up is coming from other spend categories in a police department budget.

Yes. That's awesome. But on the bookings growth side, you had a great Q1. You had a huge year last year, over 40%. How should we think about -- I know it's seasonal and we're not talking about quarterly, but how should we think about this year's bookings growth.

Yes. We see a similar opportunity for growth this year. Every year, you get the law of large numbers, so you're coming off a bigger base. And in our business, we're doing bigger and bigger deals. And so what I would say is quarter-to-quarter, like last year was a -- usually every quarter, it goes up into the right incrementally in bookings, like that's what we saw for 20 years. Last year was the first quarter where we went up in Q1, then Q2 and Q3 were kind of flat with each other, and then Q4 was a very, very steep ramp. And -- that will happen, I think, throughout years in different quarters just based on when we're able to close these massive 9-figure deals.

There's just a little more of that, that's going to factor into the growth rate. And so it's not going to look perfect every quarter. But I think when you add it all up at the end of the year, there's similar opportunity to put up the kind of numbers we have in the last few years.

Great. And the visibility you have into the pipeline because all these are they're slated with city councils essentially. They know that their deal is up or that they want to expand it. So there's a meeting and there's a whole process to that. So that gives you good visibility.

In U.S. state and local, for sure. In federal, it's a little more unpredictable. There's different procurement policies and rules and procedures. International is probably the hardest 1 to exactly predict because you're working in markets that kind of new for you. And so -- but a lot of that can be resolved just with good salespeople going through a good sales process and connecting with the right stakeholders and we feel like that's a a core strength of ours.

And so yes, it's -- there's certainly opportunity in a lot of places right now.

Yes. Great. Yes. Speaking of international, that they really felt like it took off last year. There are years in the making. I know you've done some things on the go-to-market side. But is the market itself embracing more cloud ready days potentially because of AI? Talk about that .

Sure. Yes. Last year was our first year over $1 billion in international bookings. That was a big moment in time, I remember I took over international sales as a sales leader in 2016, and we were pump when we did -- we broke like the $30 million threshold for the first time. So it's super exciting to see the growth over the last 10 years. But I think the next 10 years are even going to be more exciting because, like you said, we've established more of a presence internationally. And the idea, like AI is maybe ironically, just based on the state of software right now, but like AI is actually driving more cloud spend internationally because a lot of these governments that wanted to do as much as they could on-prem historically are now realizing it's just not scalable to run all of the AI tools you want on-premise.

And so that's opening up more adoption in the cloud. That's opening up more potential body cameras and having the dot com customers for us as well as some AI opportunities -- that's a piece of it, no doubt. The go-to-market investment over the last 5 years has been a piece of it as well. There's probably 2 other motions. One is around system integrators. We've just gotten better at working with the right systems integrators in some of these markets. where we can go and work at the national police level instead of working our way up through users and try to get to as high as you can in hierarchy, essentially, the system integrators have a seat at the table and some of these large international forces. And we've been able to close some large deals through integrators in the last Q4, that happened a few times in large volume.

We're seeing that again this year. And then the last 1 is these acquisitions between especially ddrone and Carbine our call handling 911 solution, both of them have large international -- large international presence already. And so going in and not having to start from scratch and have a product in market that's working well that customers like that's just such a more advantageous position to start from as we look to diversify the number of products we can sell into that customer.

And international, it's not like it's just Europe, your products can work in any country essentially. So there's really no -- there's no reason why all sorts of different total increase and these agencies are huge.

We have -- historically, our other Commonwealth countries have been our most consistent international markets, U.K., Canada, Australia. But now we're seeing major business in South America. We're a major business in Europe, major business in the Middle East, some in Asia and then Africa coming online with more and more TASER purchases as well. So really starting to see it happen. It's like we knew it was there. Certainly, we know the products add value, just had to kind of crack the code between the go-to-market and some of the right partners and acquisitions to position us well. .

Yes. Well, that's great. The other new market I want to touch on is enterprise, which has gotten a lot of attention for obvious reasons. So talk about the 3 buckets, fuses, body mini and ddrone and kind of your approach to each of those.

Yes. I think we have 3 very clear opportunities in enterprise. And for us, when we talk about enterprise, we're really talking about not public safety. So businesses, retailers, logistics companies, like those types of businesses would be in our enterprise bucket. And there, we see really, as Andrew said, 3 different types of opportunities emerging. Number one, body cameras on retail workers, and we have a product called Axon Body Mini. It's launching in July. We're already in field trial with some of the biggest retailers in the world on it. They've already preordered some of these cameras.

We're very bullish on what the opportunity is in those -- in that market. I'd say it really comes down to limiting shrink and limiting workplace islands and abuse, and both of those are unfortunately on the rise right now. And so we're helping there. I think customers are seeing that and they're investing in the body camera product. The biggest overall bucket, though, is Fuses, which is our video stream aggregation to -- so picture a lot of these Fortune 500 companies, they built out their geographical footprints over 20, 30, 40 years such that they have buildings in different states or countries. All of those buildings were built at different times. So they have different core camera infrastructure like CCTV, different vendors, different products, different models. And now they're establishing their security operations center, which is becoming more and more common to see businesses have their own security forces, some of them are the size of NYPD, some of these private companies their security forces, and they want everything centralized in their global operations center.

And so what does that mean? You've got to find a way to take all of these disparate cameras and connect them into 1 place in a way that's kind of low drag, which means you don't want to go out and replace all of the camera infrastructure. You want to find a way to just leverage what's in place and aggregate it into your command center, and that's exactly what Fuss does. -- our biggest deal in the enterprise space at the time, it was our biggest deal in company history involved 300,000 video streams from 1 company. And so you can think about the amount of work to deploy that and so forth, that's -- it's a lot of work, but certainly a lot of upside in doing so.

And we're seeing that continue to just drive a lot of enterprise interest right now. And the third one, like we talked about before, just counter drone like valuable assets, whether they're data centers, whether they're warehouses, logistics facilities, whatever they are, there's a lot of interest coming out of the thread of flying drones in the data centers in the Middle East that kind of materialized in the last few months, that's driven a lot of interest in this. And especially in these massive CapEx like data center build-outs, we think this is a really good opportunity for us to kind of integrate this technology as this space gets hotter and hotter.

Yes. That's awesome. On the retail -- on the retail trials, what have they seen? So I know it's early, but what have they seen? And does it report you guys put out, there's some metrics around the level of deterrents, it's not like the associates are going to stop what's happening, but it's capturing the footage.

So we were in 1 we went out to see 1 customer who's piloting the body mini. It's a brand everybody in the room has heard of a very large company. And we walk into their storefront. And within 10 minutes, we see a woman approach a cashier just screaming at the person around the return policy, getting very, very aggressive. You see the cashier say, "Excuse me, I'm going to turn my body camera on and then all of a sudden, it's like, well, like let's settle everything down a person just totally change in behavior. It's like when we launched body cameras into police, you saw the exact same thing in the person from corporate turned to us and said, "Did you stage that? Like that's ultimately what we're seeing.

It's just the temperature is coming down in all of these places due to body cameras. And the other effect of that is a lot of times in certain states, prosecutors are saying they're not going to prosecute theft. Well, when you have a body camera video that's clear a day of the person stealing with their face and just leaving no room for interpretation, all of a sudden prosecutors are willing to prosecute those cases. And the reason that's so important is so much of retail theft is organized crime. It's not 1 person going in and taking stuff to their house to use in there like that happens. But the lion's share, like 80% of the actual shrink is getting exported out of the United States in an organized fashion. And so when you can really provide a deterrent for the shoplifters, you're you're not limiting the one-offs, you're attacking kind of the apparatus that's driving most of the shrink.

Well, yes, that's a great example. And that's how the thinking about the ROI. It's just that and maybe also like greater employee satisfaction, less turnover, and this is a high turnover job.

Totally. 90% of retail associates say they're safer with a body camera on, which is, again, very close parallel to what police officers when they first started with body camera. .

You have a lot of hospitals already.

Hospital security and nursing. I guess a similar thing in emergency rooms, nurses are often abused or don't feel safe as folks are coming into the ERs oftentimes late at night, body cameras on nurses has been, again, another deterrent in the ER hospital security forces using TASERs, body cameras, fuses et cetera Yes. .

Well, my wife's a nurse, not in the ER, but [indiscernible] Yes. I mean there's like 5 million nurses in the U.S., what would it take to to get like that kind of broad adoption .

I think a lot of them are -- and I'm not sure if this is the case with your wife, but they're organized into these networks almost -- so it's not about going to each hospital and trying to sell to the hospital. It's more about trying to sell to the health care system or the nursing organization where you can capture high volumes without going like place to place. So that's really the motion there a lot of [indiscernible].

Any big hardware R&D areas of the future you guys are thinking about or talking about it?

Absolutely. We're excited. TASER technology, we think, is applicable in a lot of places right now. We still are looking at the idea of putting TASER technology on a drone for SWAT instances and then eventually into -- we think this can limit mass shootings. And it was a little controversial when Rick talked about the idea of this in schools, and that's probably not the place we would start. But when you think about the idea of like a mass shooter on the loose, and police taking time, even if it's a matter of minutes to respond to that, if you've got a drone mounted in the ceiling with TASER technology that's flown by someone that's a law enforcement officer in a command center, that's a drone pilot that can choose to deploy this technology, and it's not done autonomously. We think that's like a Nobel prize capable product of really limiting mass shootings.

And we're very excited about the prospect of it. There's still a lot of work to do before anything comes to market. But I think our conviction is growing that in today's world, it might sound a little crazy. It might sound a little controversial, show me a better path to stopping mass shootings. And so that's 1 that we're excited about into the future. Certainly, we've got some opportunities to refresh our core business devices, whether it's the next-generation TASER, next-generation body camera. Those are all coming up in couple of years here. And then more and more, that can interact on police cars, things that can potentially limit car chases more and more in the VR space in terms of sensors, more and more in the counter drone space. So yes, hardware will continue to be a massive part of our business.

That's amazing. Back to some of the newer products, 911, given the acquisitions has been a focus, and you touched on those earlier internationally. Maybe just walk through like the land and expand you're trying to do there with prepared and Carbine what is the existing calling infrastructure is very huge. It's taken a long time to kind of disrupt this -- what is the can we see that accelerate a bit given where you are familiar.

Prepared, I think, is -- and you're right. This is a market that it takes the actual turnover of the call center technology and the call handling technology, those are big enterprise like changeover. So they take time and a lot of work. But what prepared does is it's a layer on top of all that. So it's agnostic. You can use whatever call handling you want and prepared has multiple kind of AI features that are very useful and anything from transcribing to localizing the language to sending a drone directly based on the GPS coordinates of the color that are taken from the metadata of the phone to nonemergency call handling, which is a new one, large LAPD was 1 of the early adopters of this product.

Essentially, when you call 911 and you don't have an emergency, you wait on the call for like an hour someone talks to you. And now this is set up where an agent just answers the call gets all the key data and routes it to somebody who can help so that the emergency line stays open for emergency callers. And so this is like the early like over-the-top type of functionality, but we're delighting customers with it. And then the bet we're making is those delighted customers when they want to switch out their call handling technology, which a lot of them do, they will go to Carbine, which is the other acquisition we made the cloud native, modernized call handling platform, starting to win a lot in major cities, starting to be very disruptive in the market.

So we're really excited about the combination of those 2 companies. And when you're involved in the front end of 911, it enables you to just these workflows, whether they're dispatch related, whether they're communication related, whether they're drone-related all of those, you can get ahead of if you're on the front end of the 911 call. And so that's the goal there.

Well, that's great. On the ALPR side, you've had that product for a bit here. Talk about that traction pipeline, market dynamics.

Yes. we were not the first to market in ALPR. Motorola originally was with the company called vigilant. That since kind of slowed down in favorable company called Flock. And Flock had some success in the public safety market. I think they've had some challenges as well around data privacy and security and so forth, and that's really opened up an opportunity for us as really the trusted brand around how we manage data and sensitive data and so forth. We're already a camera provider, so like making a stationary camera that detected license plates was something that was like 1 degree away from what we already do.

So it made a lot of sense to enter that space. We've had a lot of tailwinds in the last year were pipeline is up over $100 million for this year on that product line. It's going to grow from there. We see enterprise applicability to it as well. So very excited about how that's going.

That's great. Good. There's been a lot of surveillance privacy concerns that have come up because of that. But the police really needs it because I think there's like 80% of crimes involve a vehicle. And so...

That's exactly right. And I think ultimately, 1 of the things that we've done a little differently than most of the vendors in our space is, we have what we call the EEAC it's ethics and equity advisory coalition. And these are the folks that are generally skeptical of the police. They're generally from activist communities, and we invite them in to put our products through the ring or everything from any inherent bias in the algorithms to how users will deploy weapons and everything in between. And we've built a lot of trust that way because we listen. We want our products to not only work for police, but to work for communities as well. And when we have representation from both populations, we get to the best products.

And so when we show up at a City Council meeting and we walk through all of the checkpoints around privacy and security and the responsible design of the product, it carries a lot of weight. And I encourage everyone, there's this [great video the Mero Denver] put out, I think, in February or March explaining the cutover from, I think it was flock to Axon in that case, and all of the thinking that went into that and why that's the best solution for their community. And it really does a good job outlining kind of the competitive differentiators there. And so we're proud of that. We think -- we're proud of the fact that we're trusted in the space and we take that trust very seriously. So it's been a big part of why we've been successful.

That's great. One last question. You've been running the company for a long time. You've worked there for a long time in many different roles. You're a lot bigger than you used to be. What is currently though something you think the investor community either underappreciates or misunderstand?

Yes. I think a lot of it right now, as you know, covering software, it's like kind of lumped into the software basket at times. And we do have a big software business, but I think we started disrupting our own software business 2 years ago, and that's why we built the biggest AI business in public safety. And when you couple that with hardware, with this -- like the regulation of all these information security clearances and a high barrier to entry in a very effective sales channel I think like we envision ourselves as 1 of the big winners in kind of this AI revolution.

And I think more and more as people dig in, I think they're starting to realize that and appreciate it. At the time, it kind of just get lumped in with with other companies that may or may not be similar in those ways. And so part of that's on us. [We've got to message] it better at times, but we're really bullish on what the future holds.

Awesome. Thanks for your time, Josh.

Thanks a lot. Appreciate it.

Good afternoon, everyone. Thank you for joining our next section, which is with Axon's President, Josh Isner. Josh, thank you for joining us today. We really appreciate you spending the time.

So maybe, Josh, just to get things kind of kicked off here. You've been at Axon for over a decade and have seen the company evolve from primarily a TASER business to something well beyond that, right? So maybe let's start there. Can you talk about the evolution of the company and how it's changed your focus and day-to-day over the past couple of years?

Sure. So I arrived at Axon 2009. We were a TASER manufacturer then starting to think about getting to the body camera space getting into the body camera space as a result of questions of how TASERs are being used in the field led to a market leadership position in that product line, which led to a bigger problem to solve, which was how do you manage all of this massive amount of data coming off of all these devices and how do you do it at a time where the cloud wasn't the obvious bet. And so we were one of the first companies or the first company to bring cloud to public safety. We now manage about 40x as much data as the Netflix library on Evidence.com, which is our video management platform, Microsoft Azure's biggest customer.

From there, it's like a story just one thing kind of leading to the next. It's like, hey, we want to understand how to deliver real-time capabilities based on all the video coming in. We got into real-time certainly, in-car video was a very obvious extension. And then in recent years, it's like now that we kind of own a lot of these police reporting and evidence related workflows, and we manage all of the data that they rely on. It's like very down the middle of the fairway opening for us to become the market leader in AI and public safety, and we have. We went from 0 to $750 million in sales last year in our AI product line. Bookings grew almost 40% last year. Revenue has grown 30% for a few straight years now, 25% for 7 straight years. And just keep kind of investing in new categories and ones that we think are logical extensions.

Drones and cameras have become married in some ways over the last 5 years in public safety. You've got all your camera infrastructure on the ground. Now you have the camera infrastructure in the air. That led us to become interested in counter drone, which we thought was very aligned with our mission of protecting life and a platform play in public safety across U.S. state and local, and that business has really turned out to be a big winner over the last 6 or 8 months, specifically, but really over the last 18 months since we've owned Dedrone. And that's -- we continue to invest in -- the biggest investment center now is 911 within Axon. We made 2 acquisitions there in the last year.

We think that's very exciting position to be in to have the most modern 911 tools because they relate so closely to all the downstream things that happen after the call comes in, whether it's getting a drone on site, whether it's allocating police officers and staff to the incident, whether it's a reporting that takes place at the incident that can be prepopulated based on what comes off the 911 call, whether it's owning more of the communication traffic between dispatchers and RTCC personnel with the police officer through the body cam itself, a lot of opportunity there.

So business is very diversified at this point across hardware and software, very diversified across markets. Our core market is U.S. state and local. It's kind of all the cities, town states that you see in day-to-day life, all those police officers. We also have a federal business that's grown very nicely. We have an international business that in recent years has really started to explode. And then our enterprise business, camera products and safety products outside of public safety to actual businesses whether they're retailers, logistics, hospitals, et cetera, that's -- that market has recently showed some really exciting growth and opportunity to become maybe our biggest market of all long-term. So that's the summary.

No. Great overview. And at least I'm planning on touching a couple of those things that you just mentioned there. But maybe before diving into that, another kind of overarching question and coming from the customer perception, right? I think Rick described customer reception at Axon Week in April as unlike anything he's ever seen before. So maybe just dive in like what was your own perception of the event this year? And probably more importantly, what was the most surprising area of focus and feedback from your customers as you kind of met them at the conference itself?

Sure. I'd say Axon Week this year, the biggest -- we booked these things 2 years out. We plan for capacity of like 1,800 people. We had over 3,000 registrants, humbling that government customers, whether they're police chiefs, sheriffs, body camera program managers, trainers, whatever the case may be, they spend a week of their dedicated time with us. And that's very, very valuable. We learn a lot. We get a lot of feedback. We have the opportunity to showcase some of the new things we're doing. I think the biggest takeaway where is customers really are starting to see the synergy across all of these organic products and acquisitions, like it's all coming together in a really unified way to the customer.

We now manage all of their video workflows. We have the opportunity to be the vendor driving DFR, which enhances those video workflows, that's drone as a first responder, fly drones to any scene. We talked about the 911 and the connectivity to those items. There's opportunity across our platform where the Fusus map, which shows you everything going on land across your city merges with the Dedrone map, which shows you everything going on in the air across your city.

So we think this ecosystem is really coming into plain sight here where customers look at our products as this very tight organic collection of sensors, software and AI that solve a lot of problems for them and a lot of growing problems for them, whether it's drones and they're seeing all the threats overseas with Ukraine and what's going on in Iran, those are shining a light on the importance of counter drone. And so we are really uniquely positioned to be the true operating system of public safety. We're excited about that opportunity, and we take a lot of pride in the fact we don't let customers fail with our solutions. And all of that investment and focus and customer obsession is really paying off.

No, got it. And maybe just focusing on one of those folks a part of the ecosystem is, obviously, you mentioned AI. So I think you recently suggested that nearly all large domestic law enforcement agencies are now including AI in their purchases. I guess, first part of that is, can you just clarify where maybe the mid- and smaller-sized agencies are in their journey of AI. And then the second part is, can you flesh out a bit particularly relative to where the focus is from your customers in their AI journey? Like what parts of the portfolio are they looking for? Is it the whole suite? Maybe walk us through that?

Yes, yes, of course. So I guess to start with the small and midsized customers, I think AI is one of those things like the larger the scale, the more of a payoff there is in terms of efficiency. So I think with a lot of police products, you see the large agencies leading the way on adoption and then kind of midsize and smaller agencies coming along behind it. And I think that's what's happening right now in AI adoption and public safety. And frankly, there are more workflow efficiency, scale type problems to solve, but these ultra-large police departments than a 10-person police department that doesn't have a high crime rate. And so we're very, very focused on making sure that across the largest geographies, our products are working the best.

We also -- within AI, I think we're now in the middle of this transition, the year 1 and 2 of AI sales at Axon was about these point solutions that we developed internally that drove a lot of value for the customer. Product called Draft One is an example of that. It essentially listens to the body camera recording and writes the first draft of the police report. So it saves officers about 20%, 30% of their time and gets them out in the field, fighting crime instead of being an administrator writing reports.

Now what's happening is, of course, there's more and more of that, but there's also this opportunity emerging with a product called the Axon Gravity, which we announced at Axon week and that allows you to connect all of the police department systems together to give you maximum data visualization, maximum insights as to what's happening in your city real time, maximum reporting. And so for us, it's like selling these AI point solutions, and that's what's driving a lot of the early interest, but then showing up and help customers actually deploy AI in ways that allows you to kind of start to disrupt or cancel other peripheral products or contracts.

And so we think with the amount of reporting that we can do just based on the data set we have, combined with the AI functionality we brought to market, that over time, you just see some of these like one-off point solutions for whether it's giving you predictive analytics on crime or whether it's telling you where to station your police officers or how to allocate your resources like all of these things are now very straightforward use cases that AI can do very quickly for you. And so we want to not only sell the point solutions, but we want to help the customer obtain the most possible value from these AI tools that we possibly can.

Got it. And maybe this dovetails off of your earlier comment around kind of customers seeing the full spectrum of offerings in the ecosystem and understanding it more holistically. As you think about AI penetration and what you're seeing across these large agencies, are you starting to see any attach associated with the other parts of the portfolio or even moving them across from maybe a lower-tier bundle to the higher-tier bundles? Well, how are you seeing that go-to-market motion kind of synergize with one another?

Yes, of course. I think we're solving a lot of problems for our customers. And I think as we make these acquisitions or bring more organic products to market, certainly, there is more willingness from their perspective to try more of what we're building and to adopt it. And we've seen that -- I used the stat on our earnings call that we acquired a company named Fusus and a company named Dedrone, one was 18 months ago, one was 2 years ago, and we've already booked 50% more money on those products than we paid for the combined acquisitions. And so part of our value proposition is we can take these very, very exciting early technologies and build them into our channel, build them into our product ecosystem and just accelerate the time to value for the customer. And so that's been a big part of thinking about how to continue to add additional value there.

Got it. And since we're on the topic of AI, we've obviously seen the market very concerned about potential disruption, particularly for software companies. What's your view on this? And more importantly, how do you see Axon positioned to kind of weather any potential risk around this?

Sure. Look, I think the thesis has merit. I just think it's nuanced like if you're a software-only company, that's the only thing you build, the software is easy to deploy and use and adopt. you're at a lot of risk right now because now you're going to have more competition, faster and probably a lot more options for customization. When you're a business where most of your software functionality is driven by adoption of your hardware and all the data you're leveraging for all your workflows is coming off of that hardware. And everything you do from a process perspective, whether it's hardware or software, is governed by very strict information security compliance practices, government clearances and so forth.

And by the way, you're selling the most AI of any company in your segment in public safety, we view this as like the perfect environment for us to be able to go on offense. And I think there's some commentary about software being disrupted, but I think everyone I'm sure is hearing ServiceNow's commentary over the last week or 2, it's like very similar. It's like, hey, if you're ingrained, if you're adding value in these workflows and it's resilient to the point where between all the things you're already integrated into and all the clearances and workflow management you have to provide, it's a lot harder to disrupt. And I look at Axon in that way and even more so in that way because of the amount of hardware that we supply on the front end of that process.

Got it. So maybe switching gears to drones. Obviously, Axon, you mentioned Dedrone. You also have DFR, some other components of it as well on the video side, too. Obviously, nice exposure to this market. But interestingly enough, I think if I was talking to you 2 years ago on drone opportunity, you'd probably be telling me it's 2030, right? It seems like that has definitely been pulled forward. So maybe first, can we just talk about like why are we seeing this market move much faster than what we were envisioning 2 years ago?

Ultimately, I think the utility is there. I think situational awareness and real-time capabilities continue to be the name of the game for crime fighting right now and drones play a big part in that. You can get a drone to a scene a lot faster than you can get a human to a scene. You can get eyes on that scene faster as a result. When your humans arrive, they're far more prepared. And now things like being able to use drones for certain SWAT operations or even potentially attaching less lethal eventually to a drone, like all of these things are in play as a result of the proliferation of drones. But it is also still early. Like these are -- there's still a very cash-intensive business to build drones. You've got to be able to differentiate in some way, whether it's autonomy, whether it's a piloting experience, whether it's a flight time or the speed. And all these things are still in the early innings, like there's still a lot of work to do in that space, and that's why we've taken the partnership approach here on drone hardware.

We want to see that play out. I think we've bet on the right horse in Skydio, but there's a lot more of the game to play. And the thing we're sure of, though, is we can win in counter drone based on our investment in Dedrone 5 or 6 years ago and our acquisition of them 2 years ago, like this platform is what public safety needs, is what the federal civilian market needs to be able to be far more aware of what's going on in airspace and using basic mitigation techniques, whether it's jamming or net. I don't think we'll ever be the company that makes things explode in the sky. I think we'll partner with companies that do that if that's part of the requirement set for the customer.

But in a lot of times in state and local, it's much more about all the other things than interceptors. And I think we're well positioned to be that platform for the long-term. And everything else can be modular, what sensors you use will evolve over time. We don't have to make all of those. We just integrate them in our solution, what drones you're looking to identify in the sky, like of course, everybody -- all the nefarious actors are aware of all the counter drone technology out there. So they're trying to figure out ways to surpass it with their drone products, and we've got to keep up with that. And so I think that's -- the thing that's very durable is the platform itself and then all the hardware you use around that platform. Certainly, I think we're in a position to integrate, partner, build some of it ourselves and make our customers very successful in that space.

Got it. And maybe if we can just take a step back. I know you obviously just described kind of the Dedrone offering. Maybe you can touch on the other areas of the portfolio and then also take it one step further in terms of the timing of all these opportunities, right? It does seem like Dedrone is seeing a lot more momentum maybe than some of the other opportunities in the drone space that you guys are participating in. So maybe just kind of talk about how you guys are participating and the timelines associated.

We've made a bet on indoor drones. That's going well. It's a small TAM and a small space. So like that's -- it wasn't a big bet, and it solves a problem for tactical customers and so forth. But those are really the only drones we build ourselves. We do partner with Skydio, as I mentioned, for all the outdoor drone as a first responder operation, but counter drone is our major bet in the drone space. And so does that go...

Maybe tie in some of the video aspects of it as well, like how else are you participating in the DFR solution. So when you partner with Skydio, what are you actually providing in partnership?

Sure. So ultimately, as I mentioned, we have the platform for police video management, like that's what we do. That's what Evidence.com is. And so whenever you have these sensors gathering video data. Part of it is how do you make the drone fly? Like how do you pilot it? What's that experience? But then part of it is like how do you stream the video to the police, how do you store the video long-term? How do you run other analytics on that video? How do you put it as part of a case with all the on-the-ground video? And that half of the equation is where we add value in the drone space.

And so we don't build the hardware for outdoor flight, but we do all the essentially evidence management in real-time awareness that results from having drones in the air. And I think, again, this market is still forming. It's moving fast. There's new entrants. There's new capabilities. There's new considerations from the customer. So I think from our perspective, taking the path we're taking is the right one until we see more evidence of the market kind of forming across 1 or 2 vendors.

Got it. And then just maybe 2 questions here on drones still. But as we think about some of the global conflicts that have happened over the past couple of years, obviously, drone usage has been a major headline around those conflicts. So maybe one, can you just talk to the influence of those conflicts in terms of how has that changed your strategic direction as you guys approach the market?

And then the second one would be around just given the general pull forward, at least I'm kind of characterizing it as has that led to any constraints on your supply chain as you're starting to see maybe a little bit more demand than what you had perceived?

Yes. In the drone space, I mean, I think for the last -- however long it's been, between Russia and Ukraine, like that, we're seeing like drone technology playing out in real time and counter drone technology playing out in real time. So we do have several investments of -- in Ukrainian companies that are on the front end of a lot of this drone and counter drone technology. We're learning a lot from them. And so it's influencing our product road map and to some extent, some of our partners' road maps based on what they're learning there. I'd say that in more recent times, the idea that Iran threatened to attack all these Middle Eastern data centers with drones that certainly opened the eyes of the U.S. data center providers, and it's presented a pretty immediate opportunity with Dedrone for -- to deploy those products as these data center build-outs continue to become more and more of a reality.

And so yes, it's -- you never want to see bad things happening that like shine a light on why you need products like this. But at the same time, like I think it was very obvious that something like this was coming. And I still think sadly, it's pretty obvious that at some point, someone is going to use a drone to attack somebody or something in the United States, and it's a scary reality, but also one that we've been investing ahead of to be able to help there for a long time. And so yes, certainly, these events are shining a light on the need for more capability in that space.

And then just on the supply side.

Yes. Supply side, we've been very nearly paranoid for the last 5 years in terms of just all the supply issues around government sales. The last couple of years, the current administration has taken a far more binary route around what it means to be a drone company or counter drone company and how that relates to the Chinese supply chain. We're seeing all this geopolitical risk pop up going into next year between China and Taiwan. And that's really informed our inventory strategy, and we talked a little about this on our call, like -- we invest a lot in inventory. Our products don't go obsolete as crazy as that is to hear.

Our TASERs that we launched in 2010 still sell in 2026. Our body camera, our AB2, which is 2 body cameras ago, still sells to some customers. And so we use that as a strength. Like if we know our hardware isn't going to go obsolete, we can get far more aggressive in buffering inventory, and that really accomplishes 2 things. It like hedges all the geopolitical supply chain risk and all the regulatory kind of risk around supply chain. And it also allows us to maximize our growth. There have been quarters where beating consensus, beating guidance, but we could have shipped more if we had it and seen even higher revenue growth. And as our business is exploding across a few markets right now, we don't want to be constrained by inventory.

And so we're taking a very aggressive approach to that. It's showing up in free cash flow, but this is a bet I'm positive on. like it's not -- I think if you ask folks like, would you rather us optimize for free cash flow and have less inventory given everything you just heard, I think it's like more risky to do that than to just invest and build the inventory. And hopefully, we'll look smart later as the constraints continue to show up, and we've got plenty to ship to our customers. And by the way, these customers, like these are life-saving products for customers. So we cannot ship them. We have to be in a position where we can supply these products to first responders. And so all that's weighing into the calculus right now.

No. Got it. And so maybe shifting gears towards the enterprise opportunity. I think here, you've announced at least over the last 2 years, I think, 2 large beachhead customer wins, one logistics, one telecom, if I'm remembering correctly. Just given how different this is maybe from your traditional customer vertical, what's been the biggest go-to-market lesson that you've learned from these first few large deployments? And how are you applying that going forward?

Yes. It's -- when you're -- it took us 30 years to do a $100 million deal in government, and it took us 2.5 years to do that in enterprise. And so the TAM is there, the product market fit is there, the interest is there, but you're learning something new at the same time. When you're trying to aggregate 300,000 video streams across a global logistics providers footprint, that's a little different than showing up at a city and doing it within a few square miles of each other, right? And so all of the learnings around like how do we deploy quickly, how do we make sure we have all the infosec stuff done on the front end. So when it comes time to like get things in the ground or get the product deployed, those aren't things that slow us down.

And so there's some new learnings in enterprise for sure. You're even -- we're even learning things like, hey, look, some companies compete with Microsoft that are in our pipeline. So they want to host all the data on AWS. And then you have that same dynamic where other companies compete with AWS or Amazon, and they're not willing to host their data on that infrastructure. So you really need to have 2 or 3 options across different infrastructure providers for our services and building those out, getting to parity across each of those environments, that's not a small undertaking given the amount of different products we've launched in software and AI. And so all that takes time. All it takes investment. You learn a lot as you go through it. But I'd say it's a hell of a lot more fun to learn a lot across 9-figure types of deals than it is to do this at no margins or negative margins at small deployments, like I think we're learning in the right types of opportunities.

Yes, fair point. So maybe just walk us through, as we think about some of these large enterprise deals that you have won, first, which part of the portfolio was the landing product that essentially got you kind of this initial engagement? And then more importantly, like how should we think about the opportunity to expand from here? Like what does year 2 and year 3 upsell potential look like across these customers?

Yes. I think in enterprise, there's really 4 different opportunities we have. We have this opportunity around Fusus, which is aggregating all of these CCTV streams across all these large companies, getting them on one user interface and then being able to connect that directly to the police. Like that's what Fusus is, and that is driving a lot of interest. One of the big value propositions there is you don't need all new CCTV infrastructure. You can use cameras that you already have. Even if they're older, we can still run AI on those cameras. We can still aggregate them and connect them to the police. So that one is the one that's moving the fastest, driving the largest volume of deals. And that's a little more services heavy because we have to really go location by location to connect everything.

Now there's plenty of upsell opportunity from there. I think that positions us to potentially be the complete software and AI platform for a security operations center in an enterprise, which is kind of like taking it 1 degree further than just doing video there. So I think we'll continue to invest in that.

Bucket 2 is more body camera oriented. And here, we have some of the biggest retailers in the world using our body cameras now. And from there, it starts with like a body camera sale and some software and storage, but then the upsell opportunity is very much along the same playbook that we had in government, like -- can we build a bunch of AI capabilities on the edge where they can take advantage of them in a storefront instead of in a police setting, things like whether it's inventory related, things more focused on aggregating the results of a bunch of conversations with customers every day to give insights to store managers or leadership at these businesses. You could do a lot of interesting things connecting panic buttons to indoor drones and how that works as a security apparatus.

So a lot to do there, but a lot of early interest there and again, working with some of the biggest retailers in the world on that product line.

The third one is counter drone for infrastructure. We talked about already, data centers, warehouses, logistics facilities, a lot of high-value inventory there, making sure those are protected from any kind of nefarious drone activity.

And then the last one is health care. And there, it's -- right now, it's nurses wearing body cameras. Nurses are assaulted every day in ERs by aggressive incoming patients and otherwise, and it's become a workplace safety thing. And now we're seeing more and more nursing networks deploying body camera as like a condition of working in an ER or at a hospital. I'm not sure how far that one goes beyond that. I think there's some questions about how do you use some of these products in caregiving settings like in an operating room or otherwise. But certainly, we'll explore and the hospital security business without all that is a nice business to be in and opens up some different opportunities there.

So that's kind of how I think about enterprise. And I think more and more as we go, the first 2 categories will converge, the idea of users wearing body cameras and all the CCTV being aggregated into the same system. I think that makes a lot of sense. I think the long pole in the tent there is just getting these more and more companies feeling good about deploying body cameras outside of retail environments. But yes, a lot of really encouraging signs.

Interesting. Let me just pause there and take any questions from the room. If you have a question, please raise your hand. I see one. Wait for the mic, please. She's right there.

How do the cameras that are worn by the retailers to avoid prevent shoplifting and the health care providers to prevent assaults, how are they different than the ones that the police officers wear?

Yes. It's a great question. I think it comes down to wearability and form factor. It's more like these body cameras police wear, they're bigger, they're ruggedized. They're supposed to survive a 12-hour police shift under any conditions. They generally mount to a tactical vest or a police uniform. And so a lot of the guts of the camera are the same, but it's a much smaller form factor. You don't need a 12-hour battery life in a retail setting. You could take a lot of weight out of the camera. One of the things we did was we put a panic button on the side of the camera. So if someone's under duress, that functionality exists in a retail setting.

These are connected by Wi-Fi. So you don't have to have all the cellular bomb within the camera anymore. You can use Wi-Fi instead. So there's some like differences around the edges, but most of it comes down to wearability and being able to wear on a T-shirt or a collar shirt as opposed to police uniform, just factors like that, that just make it less intrusive to a retail worker.

Yes. Any other questions? One in the back?

Just thinking about M&A and organic expansion, anywhere else in the product or product set that you'd really like to go into? Any areas you think would be really exciting to add that you don't have today?

Sure thing. Great question. We've made 4 major acquisitions in the last 2 years. We bought Fusus, we bought Dedrone, -- we bought Carbyne and Prepared, which the last 2 are both 911 products. And so I think this year is much more around like let's fortify everything. Let's make sure all of these businesses continue on the right trajectory that they're on, that we're investing enough to keep the growth going, that we're delighting customers with services and deployments.

And it's just a good year to kind of reset and build that muscle after all the buying activity of past years. Now into the future, certainly, I think we're going to be very opportunistic around things that make sense from video analytics to other opportunities to expand our footprint in enterprise to maybe some opportunities in public safety as they present themselves as well. And so -- but for now, it's been -- we've bought enough for the short-term. We see plenty of avenues for explosive growth, and we got to make sure we don't sell any of it short in the short-term here.

Any other questions? Okay. I'll continue with one. So maybe switching gears, international opportunities. Another area that you guys have been kind of hitting the hot streak on. So maybe can you help investors understand what's been driving the acceleration here? And probably more importantly, what's the durability of these? Like are the wins that you guys are doing in the international markets more lumpy large deal or large-sized deals? Or are you guys actually building a repeatable pipeline that's similar to what you've done in the domestic market as well?

Yes, it's a good question. It's somewhere in between. I think whenever you have a market this big in international, the deals can be very, very large. And so there is the potential to have a lumpy business quarter-to-quarter. I don't think it's lumpy year-to-year. Like I think there's plenty of volume of opportunity to capture in any given year to demonstrate a lot of growth around it. But -- but from quarter-to-quarter, sure, there'll be one deal we signed -- or 1 quarter, we'll sign a 9-figure deal in. The next quarter will be kind of a combination of a bunch of more foundational deals from some of our core international markets, and that just kind of water finds its level throughout the course of the year.

But what's driving a lot of the growth is the -- I'd say, the diversification of the product portfolio where you just have more entry points. Like we are -- I should have like land and expand tattooed across my forehead. Like that's how we think about our business. We win with one product, and then we go in there and try to win with the next one and the one after that once we built the relationship, we built some trust and equity. So now that we have more products to sell internationally, that's really starting to present itself where you could win on Dedrone to start. And then a year later, you're looking at TASERs, body cameras, AI. You could win on Carbyne. Carbyne has a large international footprint. And some of those deals are our fastest-moving international deals this year across our entire product portfolio.

And so the acquisitions, the diversification of product, that's been a big one. And then we've also really up-leveled our team over the last 3 or 5 years internationally. Our CRO now lives in Europe. He's in the fight with our international sales teams every day. He's doing a lot more hiring in region. We're seeing a lot more like with our own eyes, how things are going week-to-week in these regions by virtue of having some more leadership and built out teams over there.

And it's really all combining to kind of what we envisioned 5 or 10 years ago where international, I think, in 2015 was booking like I think it booked like $27 million that year and so forth. And last year was our first quarter -- first year over $1 billion. And so things have really scaled over the last 10 years in this business. And I think $1 billion would be disappointing into the future here in international. We really feel like the wind is at our back, and we've got a formula that's working. And while there's certainly going to be some ups and downs and lumpiness as we go, when you sum it all up at the end of the year, I think it will be pretty exciting.

Got it. And maybe in the last couple -- last 35 seconds here, I think you started off this year suggesting you've never been more excited. So now that we're almost halfway through '26, like how would you characterize the way the year is tracking relative to your original expectations and across key offerings or end markets? And where have you been the most surprised by?

Yes. My only regret up to this point is not repurposing our entire business into building GPUs. That feels like that would have been a better bet so far this year, but...

It's never too late.

But no, look, like the last 2 quarters we've had our best 2 quarters in company history back to back. The company is rolling. It stinks that the external validation hasn't been necessarily aligned with that relative to where we were trading at last year. But look, this is a very interesting cycle we're in now. And our belief, as always, is we're going to keep doing the things that build long-term value. We're going to durably grow revenue over 30%.

We're going to deliver EBITDA margins that are expanded year-over-year. We're going to deliver incredible bookings growth. Like those are the things that we think if we focus on those quarter in and quarter out, all this other noise tends to take care of itself. And when we've done that in our core business for so long and now we have even more upside given some of these acquisitions that are really moving fast, we're feeling good about a lot right now. And ultimately, we're a very competitive bunch. We want to win in as many places as we possibly can, and that's what drives a lot of us. And so that's what we're going to keep trying to do. And I think over the long-term, our investors have a lot to be excited about.

Thank you, Josh. Thank you, everyone.

Thanks a lot.

Hello, everyone, and thank you for joining Axon's executive team today. Before we get started, I'll note that our remarks today are meant to build upon our most recent shareholder letter and investor materials, which you can find at investor.axon.com. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our expectations as of today and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially as discussed in our SEC filings.

We will also discuss certain non-GAAP financial measures. Descriptions and reconciliations to GAAP are included in our shareholder letter and available on our investor website. Now as always, before we kick it over to Rick, we have a quick video to get us started. Let's pull it up.

[Presentation]

All right. Thank you, everyone, for joining us for our first quarter 2026 earnings call. I'm really pleased with how the year has started, and I'm even more excited about where we're going. I always say Axon Week is one of my favorite events of the year, and every year, it somehow gets better. What we shared with customers this April felt fundamentally different. It's no longer just about our new products.

Through decades of partnership. It's about how we've earned our customers' trust at a moment when it matters most. I'm more convinced than ever that we're building something the world genuinely needs. I spend my time thinking about how we can make an impact, how we can do more, faster.

Today, I think we passed the inflection point. We are entering what I believe will be a generational leap in both the pace of innovation we can achieve and the speed of customer adoption we will see.

There are 2 things I'm looking at to drive my conviction. First, technology is no longer evolving linearly or even exponentially. It's evolving across multiple dimensions at once, a hyper exponential. The result is a compounding effect where more data, more tools and more connections multiply what's possible. Our ecosystem is built for exactly this moment. We've created secure end-to-end operational workflows across products, customers and verticals. We made the decision over a decade ago to invest in tightly integrated solutions across hardware and software, creating an ecosystem that allows customers to scale and grow as fast this technology is moving.

Our software is better because of our hardware. And our hardware enables software features that wouldn't be possible without capable connected sensors at the edge. No single tool or even a collection of individual tools can deliver the same value as this kind of unified system. And as technology advances, the difference isn't incremental. It's transformative.

The simplest way to think about it is this: outcomes now depend on the fusion of sensors available and connected in real time, with an increasingly intelligent AI backbone. Across AI, real-time operations, drones and connected devices were moving beyond product adoption and towards system adoption, a system that operates faster, safer and with more awareness. Axon Vision, Guardian and Assistant are early examples of what this phase looks like, always on, always available and more and more intelligent.

Axon Vision enables teams to understand what's happening in time so they can respond with the best and most informed resources. Axon Guardian monitors alongside officers and can call for help before they can. Axon Assisted has already surpassed 1 million uses and will soon be available wherever officers work. And over time, our Axon Gravity initiative will bring in more data that could be harnessed to make even more possible. Our position as the leading repository of data for our customers will continue to broaden to be the leading unleisure. Importantly, every capability we add now makes every other capability more valuable.

Data flowing through Axon 911 becomes more powerful when connected to first responder drones or body cameras. Insights from vision become more impactful when integrated into real-time operation centers. Draft 1 improves with every report and every sensor. The value of each will continue to get stronger.

My second observation is just as important. Adoption is now accelerating akin to innovation and expanding in scope. In the past, new technologies were adopted gradually Today, demand is immediate. Customers want these tools now and they want more of them. They are ready. Just yesterday, I hosted a collection of chiefs in San Francisco. Two years ago, when I acquired the room who used AI, it was almost 0. Today, it's 100% are using AI tools in their personal lives daily, but they know those tools can't be used on government data. And that's why we added the Axon chatbot into a system. So they have see jest, secure accredited AI, they can use at work. It's just one of many features we're bringing to them.

This isn't limited to law enforcement. Fuses, drone, Axon 911, license -- readers, vehicle intelligence are being deployed across the entire cities and countries. And now enterprises are seeing similar needs. The environments may differ but the requirements and the needs are the same: safety, efficiency and trust in a fast-moving world. Everything we do is built on trust. Our customers move faster than anyone else to adopt AI because they trust how we build it. carefully, deliberately with the hard conversations happening upfront, not after the fact.

That's what makes our technology more durable, more trusting, more widely adopted. And that trust is what burns us the privilege to keep pushing forward. 3 decades of building, millions of sensors, millions of users, trillions of data points flowing through 1 connected network. Every camera, every device, every line of code, it's all been leading here to this moment, the AI breakout. And no one in public safety is positioned like we are. positioned to change the world, positioned to create extraordinary value for our shareholders, our customers and society itself. I'm incredibly proud of what this team has built. And as I look at all this coming together, I'm just even more excited about what comes next.

And with that, I'll turn it over to Josh.

Thanks a lot, Rick, and good afternoon, everybody. I'm proud to report that we're off to another incredible start here at Axon. As Rick mentioned, we welcomed 3,000 people to Axon week in April. We quickly learned what customers are excited about, what's gaining traction and ultimately, where our pipeline goes from here. The reception from agencies, enterprises and international partners was unlike anything I've seen before. Frankly, it's reflective of the growth we are seeing every day.

Our flywheel is spinning we are delighting customers with market-leading products, pairing that with customer obsession. We are earning the right to do more, and we wear that as a badge of honor and a badge of responsibility and that expanding opportunity set is already showing up in our results.

We entered 2026 with tremendous momentum coming off a massive Q4 and the team came out of the gates even faster than we did last year. Q1 was our strongest ever first quarter across revenue, bookings and new products, and it was a record in markets U.S. public safety, international and enterprise each setting first quarter bookings records. The core is off to a great start with sustained TASER growth rates and the breadth of overall demand is compelling. It tells us that the growth we are seeing is not isolated to 1 product, 1 geography or 1 customer segment.

Across the business, we are tracking indicators like customer engagement, pipeline quality, adoption of new products and continued strength in the core. And those indicators support another year of 30-plus percent revenue growth. A major driver of that momentum is the continued adoption of the AI Aeroplan. AI bookings were up 140% versus Q1 last year and we are seeing AI move from early interest to a standard part of how large agencies think about their future technology stack.

In fact, nearly all large domestic law enforcement agencies are now including AI in their purchases. This is a powerful signal that customers are treating AI as a core capability for improving productivity, accelerating workflows and giving officers time back. We expect the rapid adoption to continue as we deliver more AI-enabled capabilities into the platform, including Axon 911, Axon Vision, Axon Gravity and an expanded Axon assistant functionality. We are determined to become the AI company in public safety, and we are well on our way.

But the AI Aeroplan is not the only thing driving explosive growth. Dedrone, our counter drone business is scaling beyond our most aggressive assumptions. Bookings are up 500% year-over-year, and we are continuing to see rising demand. Dedrone is now on a similar trajectory as the AI Aeroplan, and it's relevant to every market we sell into. Rick saw this opportunity years ago. And as it is coming into fruition, we are well positioned to serve our growing and diversified customer base with this product line.

For example, Dedrone protected the 2026 Super Bowl as well as last week's Kentucky Derby. We are proud to support the American World Cup sites as well as several other large scale events throughout the year. Dedrone is also featured in some of our largest international opportunities of the year. This allows for expansion into other product categories, and we are seeing that play out in real time.

We have laid the infrastructure to sell globally over the last several years, and now Dedrone has established itself as a further accelerant to our growth. And finally, it is no secret that physical AI infrastructure is going to be a source of record spending in the years to come. our enterprise team is in conversations with many of the largest infrastructure providers to protect their ever-growing portfolio of sites and data centers. And speaking of enterprise, we have exciting news to announce on this front as well.

After a 50% year-over-year Q1 in April, our team closed a $40 million opportunity with one of the largest telecom providers in the world. the deployment centers around uses, which continues to garner interest and drive growth in this segment, along with Axon Body Mini and Axon Outpost. We will also be launching Axon Vision directly into enterprise. By recognizing abnormalities as they occur, this product will add immediate value to any security operation.

At the same time, assistant in draft Warner becoming enterprise-ready. We're showing up as a true technology leader in this space. with the advantage of already knowing how to deploy at a large scale securely. Something very special is happening at Axon right now. Our core investment in both products and markets are paying off just as our acquisitions are hitting the steepest part of their respective curves.

We acquired Fusus 2 years ago in Dedrone approximately 18 months ago as of Q1. We have now booked over 1.5x the combined purchase price of those 2 companies. We see a similarly disruptive opportunity in Axon 911 as we integrate carbine and prepared. We are proving our momentum is sustained. And because we expect a lot more growth I have sponsored a significant investment in core product inventory.

We are fortunate that our TASER CEW life cycles are 10 to 15 years and our body cameras continue to sell for 5-plus years. Thus, we have minimal obsolescence risk as compared to most -- were. Given the expanding geopolitical risks, the competition for key components and the growing demand of our products worldwide, we are investing in inventory with durability in mind. We never want inventory to be the reason we cannot maximize our growth and impact. After all, our customers do the most important jobs in the world. and they rely on more and more of Axon products. We will not let them down.

Thanks, everyone, and over to you, Brittany.

Thanks, Josh. Well set on what an exciting opportunity we continue to see in front of us. Rick has consistently provided a compelling vision, and we are seeing the results of that come through in our numbers. Revenue of $807 million was up 34% year-over-year and marks our ninth consecutive quarter of growth above 30%.

Software and services increased 35% year-over-year to $355 million. While all of our software products continue to grow, AI was a standout with AI product revenue growing more than 700% year-over-year. This is on a small revenue base, but is delivering on the strong bookings from last year and will continue to scale. Our AI products are also continuously improving including with the launch of new features at Axon Week, which we highlighted in the shareholder letter.

The value proposition is clearly resonating and adds another leg to our consistent software growth. This growth supports strong net revenue retention, which was 125% in the quarter and strong in ARR, which grew 35% year-over-year to $1.5 billion. Connected Devices revenue grew 33% to $453 million. This was a particularly strong [ Q1 ] for connected devices. TASER 10 and Body 4 remain durable drivers of growth and Platform Solutions, which includes our counter drone hardware, grew 95% year-over-year.

In total, across hardware and software, Dedrone revenue was up over 300% year-over-year. The need for counter drone capabilities is becoming increasingly obvious and critical, and we're proud to have a leading solution in the space. As Josh mentioned, we expect this strength to continue and counter drone is another major leg supporting our growth. In addition to strength across our products, we are seeing strength across end markets. International revenue was up over 100% year-over-year as we delivered on the bookings momentum we highlighted last year and it represented 20% of our revenue for the quarter.

Future contracted bookings was up 44% year-over-year to $14.3 billion, reflecting this broad-based momentum. Given these trends, our strong Q1 results and the momentum we are seeing in our pipeline, we're well positioned to deliver on our top line expectations and are raising our revenue guidance for the year to a range of 30% to 32% growth. We still expect to deliver 25.5% adjusted EBITDA margins for the year, consistent with our prior guidance. This improves upon the 25% adjusted EBITDA margin we delivered in Q1 with operating leverage expected in the second half of the year, allowing us to hit that annual target.

Incorporated in this guidance is continued tariffs inflationary component costs inclusive of memory and product mix shift from continued platform solutions growth as well as software and services. As we scale the business, we are also focusing on our free cash flow conversion from adjusted EBITDA. Josh talked about the continued investments we're making in inventory this year, which you can see in Q1. These investments will position us well to deliver on demand through the rest of this year. Even with these investments, we expect free cash flow conversion to improve meaningfully and expect to deliver approximately $450 million of free cash flow full year in 2026.

On stock-based compensation, we expect full year expense of approximately $590 million to $620 million. As a reminder, a portion of our stock-based compensation expense is tied to our performance plans and will only be realized if we hit the share price and operational milestones laid out as part of our XSP program. This program is long term in nature and doesn't scale linearly with growth because of how we account for the probability of the tranches. The expected expense from this plan is down from last year.

The other portion of stock-based compensation is run rate RSU grants, which are important to hire and retain the best talent. Inclusive of both of these programs, we are committed to average annual dilution less than 2.5%. As the impact from our performance plans normalize, stock-based compensation dollars should remain roughly flat over the next few years, meaning it will decline as a percentage of revenue with our continued growth.

We talk about hitting 55 on the rule of 40. And yet again, we delivered in excess of that goal this quarter. We're very happy with the results, especially in what is typically a seasonally softer quarter. pointing to the underlying momentum we continue to see in the business. We're focused on growing and scaling for many years to come, supported by our great customers, diversifying end markets and broad product portfolio. We're excited to deliver another great quarter. And with that, I will turn it over for questions.

Thanks, everyone. All right. Today, at first, we have Will Power at Baird.

Okay. Great. Thanks, everybody. Yes, congratulations on another really strong start to the year. Probably for Rick, Josh, Jeff -- whoever wants to take it, just coming out of Axon Week, a lot of focus on some of the new AI capabilities, Axon Vision, Guardian, [ Form 1 ], et cetera, it would be great just to get a sense for where you saw the highest levels of customer engagement and interest. And how that might kind of fold into the pipeline build for the year as you think about the broader AI portfolio, then I have a question for Brittany too.

Yes. So let me start with that one. I would say, look, the keynote ran a bit long because we had so many things to talk about. And then frankly, across so many different personas in the audience, we had leaders from health care, we had leaders from enterprise, we had prosecutors, police chiefs, TASER instructors, and part of what I really wanted to do was to just share the breadth of everything becoming possible in every role with that can impact anybody who's touching this information and then wrap it up at the end, like, hey, this is like more than you can really wrap your head around and we simplify it all with this AI Aeroplan.

And the feedback I got pretty overwhelmingly from customers was that, that really hit home. There's a sense of like, my God, the world is moving fast. It's like almost disorienting, but we know we have to keep up. And the general sense was, look, you guys have always -- you brought us TASERS when we didn't think we needed it. You brought us body cameras and nobody wanted to wear them. And like thanks for making this something where we have a partner that we feel like you guys can help us make sense of all this because it's head spinning.

And so really just each of those features are targeting different personas like Brief 1 is really focused much more on an investigator or a command staff or a prosecutor compared to Form 1, the new feature that enables them to use their digital -- to fill out any form, not just ours, but any web-based warm. And so for me, it was pretty evenly distributed. I've been -- this was the first year I felt that the entire vibe, nobody was saying like, I don't know if this AI thing is for real. Like everybody is like, wow, it's like it's everywhere and help us figure this out. So I don't know if John, Josh or Jeff, if you want to add anything.

Yes, I'll just add 1 quick thought, which is, I think in times of uncertainty, this is where the 17, 18, 20 years in the cloud and software space and wearable space really pays off is like customers trust us to bring market-leading products to market in responsible ways. And I'm really proud of Jeff and our team as to how fast we've been able to release new features into our AI Aeroplan. I think that's incumbent upon us to continue to delight customers. And look, we're like Kentucky Derby was last week, the Belmont is in a few weeks, we look at ourselves like Secretariat at the Belmont we want to be accelerating ahead of everybody in AI. And the sheer volume of new useful tools we are sending out to our customers, like our customers had, we do the shock tank idea where they come up with new ideas. And we're building one and our goal is to release that to every customer who came to Axon Week in the next couple of months just to show we can go from idea to execution to output in a very condensed period of time now, and we think that's going to be a massive tailwind for our customers, our investors and our company.

Okay. And if I can -- I appreciate that. Great perspective. Brittany, I guess some of the questions I've got and I guess, early here a bit on the free cash flow side. I know you addressed it on the inventory piece and inventory commentary. Is there any way to kind of share as you think about the higher or the inventory investment, how much of that relates to higher memory cost and inflationary pressure versus just trying to meet customer demand? And then anything you can share the CapEx change, which I think came down a little bit. And just putting all that together, you get comfortable with kind of the free cash flow conversion targets given the moving pieces here.

Yes. No, thank you for asking. So as we look at inventory, of course, memory is included in that overall number. But this is really about inventory investments to make sure we have supply across all of our products and have the ability to scale to meet demand as we look forward into the next year. So I would view it as including memory and making sure that we're in a good place on memory, but not at all solely driven by memory. We would be doing this with or without memory, just to make sure that we are in a good supply chain position.

If you look at Q1, Q1 is our -- generally our seasonally softest quarter from a free cash flow standpoint. We have bonus payments, we have commission payments. We have 1 of our 2 semiannual interest payments in Q1 and even with all of that, without the inventory investments, we would have been positive from a free cash flow standpoint in Q1.

So as we look at the next 3 quarters of the year, we're very comfortable that with the inventory investments we have in mind with everything we can do around working capital and the fact that we won't have some of those Q1 events reoccurring that we can get to that target for the year.

From a CapEx standpoint, as we go into the year, we tend to have a lot of projects, a lot of things on our plate. And then as we get into the year and we see what we're actually executing on, we can refine that CapEx forecast. And so that's really all you're seeing there, as we're just refining tightening up that CapEx forecast for the year.

Next, we have Andrew Sherman at TD Cowen.

Congrats on the quarter. Josh, the AI Aeroplan bookings up 140% revenue, up I think 700%. And that was a lot higher than I thought. And interesting comment on all large agencies, including that now. Maybe just expand on that. Are we hitting a tipping point now where the bundle has been out for a while. So you're seeing more viral type of adoption? Are you seeing that in the pipeline?

Thanks, Andrew. Glad we could beat your expectations on how many of these things we're going to sell in Q1 here, and it's been a great start to year. And I think like these deals take a long time to come into fruition, right? Like we're talking $50 million to $200 million deals with some of these large major cities. And as a result, sometimes like it takes 8 to 12 months to get these things across the goal line. So we announced the AI Aeroplan at the very, very end of 2024. So last year was a great start. We had said we had booked $750 million on it. But we certainly expect that number to keep rising, like there's more and more belief in what we're doing. There's more and more engagement. There's more and more engagement across the features and the bundle itself which are driving a better view of the ROI that we're offering and so just today, a major city in the Mid-Atlantic region, went in front of their city council and had a $150 million deal approved that included the AI Aeroplan. And so we're seeing this all over. We're very excited about it. We know that responsibility comes with it.

Like I said, we have to keep iterating and making sure that we're delighting our customers with this feature set. But I certainly have a lot of confidence in our team to be able to do that.

Excellent. Thanks. One more for you, Josh. The enterprise telco deal in April, very impressive. That's your second big deal in enterprise focused on fuses. So talk about the use case in this example, what problems he Fusus solve for them? Are there more of these in the pipeline?

Sure thing. So I think about our enterprise business in really 3 buckets: Fusus, Dedrone and then the ABW or the Axon Body Mini. And so with Fusus, all of these businesses have ensured -- dozens of thousands, hundreds of thousands, and in some cases, millions of video streams around the world. And as they brought those online, a lot of times, they've siloed across different systems, and they don't have a really unified user experience. So we're able to come in with Fusus and bring everything in together in one place and be able to connect it with public safety at the customer's option in terms of the protocols there.

And so that's been very valuable. It certainly has as camera infrastructure has grown across all cities and businesses, that's been a certain tailwind for Fusus adoption. But we're seeing similar interest in D drone right now, as I said, protecting data centers, high-value warehouses, headquarters, other physical infrastructure. And then, of course, the Axon Body Mini start shipping production units start shipping in July. So as we get through beta there, we're seeing a lot of momentum, a couple of major, major customers growing their deployments already of ABW -- ABW's Axon Body workforce, which is the first version of that product. And so we're seeing it really start to happen in enterprise. It's exciting. But it's also really exciting to see it continue to happen in public safety and to see international grow explosively as well. So a lot to be looking forward to this year.

Next, we have Jim Fish at Piper Sandler.

Nice quarter. Look, multiple large events are coming up here. You just highlighted a few at this past weekend, hopefully, your horse pond. But just how is this impacting bookings and pipeline? And really, how much of the drone kind of uptick and outsized performance as being tied to these events and really the crux of it all guys. I was just trying to understand like is this event-driven or is it sustainable kind of demand?

I would think of this as infrastructure. Like certainly, events are nice moments in time where we can show off the product they're not super large deployments and they're kind of like a femoral in nature. But what it does do is it gives the host city and federal law enforcement, a view into what's happening, like federal law enforcement was very complementary to us about our Dedrone installation at the Super Bowl, and that drove interest in that segment.

And so think of these are great like opportunities to show what we can do, but it's really about translating that into permanent infrastructure in these cities and businesses is -- and that's where the real long-term value lies, and that's happening. Like Dedrone is we're very bullish about the acquisition and what it would mean for our business and what it would mean for our ability to protect lives and all of those expectations have been shattered.

I mean the demand for this product is in terms of hardware, about as fast as I've ever seen adoption of a hardware product that we've made. So very, very exciting in a lot of A lot of work to do to continue to build out the ecosystem there. But certainly, a lot of -- a lot to get us very optimistic about being a leading counter drone provider.

I would just add, even if you look at some of the legislation like the Safer Skies initiative that's coming through, it is really enabling counter drone technology to be sustainable, and that is a multiyear program. So to Josh's point, the events are great, but I would not view Dedrone as being successful only because of those events. This is a real trend and a real change in the trajectory and the need for adoption of counter drone. And we are seeing that. I would say right now, we're more limited by our actual ability to and get the product out the door than we are by opportunity.

Yes. It's really -- these things are all a catalyst for a shift in mindset to viewing counter drone as an essential infrastructure capability for cities, for enterprises for all of these things. And it triggers the notion of them viewing it as a sacrosanct thing they have to add to their portfolio.

I appreciate all the details there, guys. And Brittany, at just to labor the point, but what's your purchase commitments at this point is if I look at your inventory today, and I understand the investment you're making, it's about half of your product costs for the year. what's giving you enough confidence here that we have the inventory availability to meet the demand for the year?

Yes. Look, I think part of the thesis behind this investment, as you can see how quickly we're growing and how quickly we're ramping all of our hardware. And so we want to make sure that we have the ability to hit that demand, and that is part of the investment behind it. We work really closely with all of our suppliers. We have mission-critical hardware. This hardware is -- it is not a nice to have, it is a must-have for our customers.

And so as we look at our investments and we look at the year, we're really making sure that we work with our suppliers to get in what we need to get in to give them those long-term forecasts because we have products that last for a long time, we have a lot of stability in our demand and our need. So I would just say it's really, really close collaboration with our partners and our supply chain.

And can I just add to that, just so there's no confusion. We have been investing in inventory for quite a while, and we entered the year, one of the reasons that we haven't had much impact from the memory costs in terms of our guidance is because of our inventory philosophy, we had a lot of inventory for this year coming into the year.

And thus, we were able to be a little more patient and are still able to be a little more patient to ride this weight out on the memory costs. And really, we're looking toward next year at this point and how we can position ourselves well across our core products so that international, like large, large international orders are not taking away from our ability to ship to U.S. customers and not putting a ceiling on our revenue growth.

Certainly, geopolitical risk going into next year. We've got our eye on that, and we certainly don't want anything that happens in the world to have an impact on our ability to support our customers. And so we're looking at this as a sustained inventory investment to get up to certain levels where we think we can support the growth and hedge some of the risk. But like Brittany said in her remarks, it's -- that is already contemplated in our free cash flow guidance for the year.

Next, we have Jonathan Ho at William Blair.

Congratulations on the excellent quarter. Can you maybe talk a little bit about your AI cross-sell cadence, particularly for customers that are maybe in the middle of like the existing long-term contracts most waiting until their contracts expire? Is there a way for you to sort of restructure these mid flow, particularly for those contracts that are in place? Any color would be helpful there.

Sure. thing, Jonathan, a lot of that is -- that happens very naturally even before the AI Aeroplan that was happening relatively naturally because we do release new products every single year. We released some an Axon Week. We'll have more exciting things to talk about at ICP. And those are often catalysts to rewrite contracts. Customers see something they like and says, okay, if I'm going to buy this, we might as well put everything together and create a new contract that contemplates all of this. And between camera upgrades, new products, urgency around AI, these are all catalysts for those conversations. And so we do rewrite these contracts as we go according to new product availability, and it has been a great driver of bookings growth.

Got it. And then just as a follow-up. You've referenced multiple times the strength in international growth. And I just wanted to better understand sort of the drivers here. It seems like you've initially landed with many of the national police forces. Are you seeing this strength come from filter down? Or is this new national police forces? Any color would definitely be helpful.

Sure thing. It's a good question. I guess it's not one individual thing, but I think it's a combination of having a far better team and go-to-market operation. And that's not only our own internal team, but that's partners, technology partners and system integrators and distributors, we've really figured out the right way to go to market in some of these different nations around the world, and that's been certainly some wind at our back.

And then we parlay that into better product market fit. There's demand for fuses, there's demand for records. There's certainly a lot of demand for Dedrone, and that's driving a lot of conversations into other product categories. And so that's certainly a big part of it as well. And ultimately, I just think we're showing up as more of a global company at this point. It's not kind of 1 person in a very large country showing up, trying to sell TASERs for the first time. We're showing up like a technology vendor that can help across a number of different product lines and that land and expand strategy is starting to really work like it did in the U.S. and the consistency of our results now is showing now where last year was our first year over $1 billion in bookings. This year, we have a very, very strong pipeline and certainly hope to grow well beyond that. We're certainly confident as we've ever been in the international business. And I think that's attributed to Cameron, our Chief Revenue Officer. He's done a really nice job rebuilding a lot of that function as well as a lot of folks on the ground doing really good work every single day.

Yes. I would add and I just got back to 2-week, 2.5-week overseas trip. We are seeing some of the smaller countries looking at going all in on a national basis, which is kind of a new dynamic, and I think that's really quite helpful. especially within some of these different blocks where maybe there's historically not been as much comfort with the cloud. Seeing some of these smaller countries go all in, gives us proof points. I had one of my first like 90-minute sessions with a Prime Minister where this is rising up to like that level where they're looking at this going, wow, we could sort of leapfrog and become one of the most advanced place agencies on earth because we could just deploy everything with Axon, which is a -- it's been a pretty solid dynamic to feel that shift happening. And I think as these smaller countries do it will give us the ability to earn our way up into the larger -- as with everything, the really mega forces move much more slowly, and that's true like these big national forces compared to maybe some of the smaller ones we're finding a bit more nimble. And it's again, it's pointing the ground by having like, for example, in the EU, having some people leading the way really going all in on cloud.

The last thing I'll say they're really fast. Similar to the enterprise discussion that Josh said before, in a lot of these other countries, they've spent a tremendous amount on massive networks of CCTV cameras. And so that's another place where FSIs is a catalyzing part of the equation, right? It's not just our body cameras and just -- like Fusus, is a socket to let them get more value out of the investments they've already made in these other cameras. And that just makes the overall ecosystem story from Axon kind of easier to reach the tipping point of their interest. So it's a great catalyst.

Next, we have Keith Housum at Northcoast.

Great. Obviously, a very solid quarter for you guys. Brittany, if there's anything to pick out from an investor standpoint, it might be in the software and services standpoint, software and services tends to be very lumpy. I think what we saw here sequentially, probably a little bit lower for us, so we were expecting. Perhaps walk us through some of the puts and takes about software and services for the quarter and how we should be thinking about that.

Sure, happy to. I would say this is pretty typical for our seasonality in Q1. And so you saw a similar dynamic in Q1 of 2025. So we just tend to have a slightly smaller software step in Q1. If you want to look at our ARR though, that's usually where it shows up first, and we had absolutely phenomenal ARR growth this quarter. And so really, I'd look at '25 and say it comes through first in the ARR growth, and then you could expect you'll start to see that in the software step for next quarter. So I would dive a little deeper on the picking and look at it as pretty typical seasonality with very nice strength continuing in our software business. I just see that picking up in ARR first.

Okay. Appreciate it. And Josh, if I could ask you a follow-up to the enterprise question before. Maybe I missed this. Was this a telecom retailer? Because I understand Fusus, Axon Body Mini, not only the retailer but also, is this an auction process? Or was this you guys going to them? Perhaps a background behind the adoption by those customers.

Sure thing. Keith, I've said on the call a couple of times historically, I'm generally a little more uncomfortable about sharing names of enterprise partners because sometimes they're competitive with our other customers and sometimes. There are other dynamics where it doesn't necessarily serve us to be front and center with other brands versus just supporting them behind the scenes and talking about the customer in more general terms. And so this is -- when you think of telecom providers. This is 1 of the first 3 or 4 that's going to enter your brain. I would say that.

And then the use case is across retail locations, other company physical assets, certainly, any video stream essentially that's in their ecosystem of one of their cameras, that's now being managed and integrated into fuses. And so this is really about having complete situational awareness across all of their physical assets.

Up next, we have Brennan Rogers at Wolfe.

I wanted to ask a quick one on AI, like coming out of Axon, there was like a ton of innovation, a ton of new products -- how do you guys think about like pricing to value as you kind of furiously add these new products into the bundle like over the course of the year? I think traditionally like a pricing cycle would happen and you guys would revise the pricing in like Q4, Q1. But just given like even in the shareholder letter, you guys are talking about Axon Vision being GA in Q4, we just heard about that in Axon Week. You guys probably won't have a chance to update pricing. Like how does -- how do you guys think about that?

Sure. Great question. Look, I think, as always, we want our price to be commensurate with the value we're creating and in our bundles. You can certainly compare the sum of the parts of all the individual features versus the bundled price. And generally, we want those things to tie out. So the more features we add, you should expect that to be reflected in the price as we revise it each year.

And there is an annual kind of escalator in the contracts to account for the fact that each year will represent more value and functionality in the plan. And so generally speaking, it serves customers well to get in early. And the longer you wait, the more the sum of the parts adds up. But no matter what, we're going to make sure that the customer feels like there is a like hit your forehead simple ROI on what we're providing relative to the cost.

And this is where the Aeroplan is just really loved by customers. this idea that, hey, this is moving so fast like we can't even predict with certainty what we're going to be building next year, and they'll avoid having to constantly going back to procurement cycles that would just be exhausting. So they really love this idea that you know what, Axon Vision is new, you didn't know about it when you signed your contract, frankly, maybe we didn't either, but you're going to get it if we're on that plan.

I would say we're really careful on pricing to make sure that we are delivering more value to our customers before we take prices up, that's a pretty strongly held belief of ours that it's tied to value. And so I think what you're seeing is we are putting more value in the AI Aeroplan, which is great because then it means our customers will see that value. And when we do get to our annual pricing discussions, we will look at the value we're delivering relative to the price.

Got it. And then just 1 more sort of on that memory side. Any chance you guys can quantify the impacts in terms of margins, I'm assuming it's probably not big enough to reprice or maybe that's the wrong assumption. Any...

It's not big enough for us to break it out for all of you guys. If you think about it, the products that we have memory going into the most are our camera products, so they're clearly important for us but they are only a part of our overall portfolio. So you can imagine that the basis point impact to gross margin is not meaningful enough to break it out. Now it's certainly something we're looking at. It's certainly one of the many puts and takes going into our gross margin for the year, and it is all contemplated as we think about our guidance. But I wouldn't over-index on it.

Up next, Meta Marshall at Morgan Stanley.

Maybe a couple of questions for me. noted still very early days of carbine and prepared, but just what you're seeing in terms of kind of how you're looking at that market opportunity? And then maybe just second on Federal, obviously, some kind of shutdowns at various points this year. I know it's not a major business for you, but just how you're seeing kind of the deal environment on the federal side.

Sure. On 911, I think I would say I have a lot of confidence that we will be contending for market leadership in this space in the next few years. I believe we have the most talented team in the market. I believe we have the most talented leadership all the way down to the folks building the products and selling the products. I think the value proposition is very, very strong there. It reminds me when we first got into cloud 15 years ago and the options were all on-premise, and it's like, hey, this is kind of the next generation, and there's a lot of benefit to doing it this way. And our customers are now seeing that after being entrenched in very, very outdated technology. And so ultimately, there's a lot that goes into it, but I really am pleased with the early progress here. As a reminder, we really think prepared is out there capturing logos with their over-the-top feature sets and then carbine is the capable fast follow for call handling when the time is right for the customer.

And one of the things I think we're seeing that we're particularly excited about is Carbine has got a large international brand and a lot of momentum there as well. So certainly not limited to the U.S. and carbons case. And so yes, we're feeling good about it. Still early innings, and we've got a lot of work to do to keep building. But we've already signed some of the largest jurisdictions in the country on prepared in the last 3 or 6 months here, and we expect that to continue. So feeling really good about what 911 is going to look like for the year to come.

Yes. I would tell you, my natural inclination, I'm highly biased towards building things ourselves. But when we met both Amir and his team at Carbine and Michael Chime and his team at prepared. We're like, wow, these are great teams. It would take us -- it takes time to go build great teams, and they've built great products. Customer feedback has been just phenomenal. I was just with them recently at some customer events. And I can tell you, it's -- we're getting glowing customer feedback and it's also kind of fun for me as an entrepreneur who is getting a little further in my career, the energy these younger entrepreneurs are bringing into the organization is great. It's like just a fresh wave of energy into the whole company. It's been great.

Go ahead, Jeff. I was just going to answer the federal question after.

Yes. I was going to say really, really quick. It's yet another example of how the whole is greater than the sum of the parts, right? The enthusiasm that we're seeing customers have for how quickly we brought the data from prepared and 911 alerts directly into Fusus and then also bringing that directly into Skydio as part of DFR. Those things together make shorter response times happen, and that is a perfect example of the flywheel that Rick was referring to before.

And then, Meta, on federal, renewed momentum there. Last year, we've rebuilt a large portion of the team, including our leadership. Claudia Davidson has come in from Palantir and is a fantastic fit at the company and is someone that I think is going to be a long ball hitter here for a long time. And she's done a nice job kind of rebuilding the momentum. We're seeing renewed interest in body cameras and tasers and federal law enforcement. We're seeing a lot of interest in Dedrone.

And then, of course, on the DOW side, we're also seeing some Dedrone applicability there. So really, the federal business is trending very much in the right direction. And with a few things going our way, it could be a banner year in Fed. But again, that's -- we've got to do the work still.

Up next, we have Joe Cardoso at JPMorgan.

So maybe you can just touch on -- I wanted to circle back with -- on the Fusus Conversation and maybe more specifically, the level of attach that you guys are seeing with some of the opportunities here. particularly as it relates to Outpost, you mentioned it with the telecom win, but curious how much more pervasive that dynamic is playing out? And what's exactly driving customers to adopt the hardware side of things? I guess like the core of the question really comes down to, are you actually seeing folks rip and replace hardware to essentially install outpost and what's kind of the driving force behind that? And then I have a follow-up.

Sure thing. We absolutely are. And there's 2 or 3 driving forces behind it. Number one is the product is performing exceptionally well in the field. And relative to incumbents in the space, our product is outperforming them in terms of lane coverage, plate reads performance in bad weather, all the things that our customers would expect from an Axon product. This product is doing. It's cheaper. That's certainly helping in the context of competing against incumbents.

And then I'd say the third one is the idea that, again, it's a new sensor in this broader ecosystem. You can run an eye on it at the edge. You have immediate utility from the plate reads and it fits in this broader play with Axon Vision and so forth. A reminder on Outpost is it's got to cameras in it. One is for plate reads and the other one is just for CCTV streaming. And so we think this is, again, physical infrastructure that's going to lead to more and more utility, safer outcomes, more AI adoption -- and ultimately, it's one of those where, again, like the trust in Axon, the belief from our customers that we do things the right way, from data privacy, from making sure the community had a voice and product development all these things combined into what looks like another transformative hardware program here.

Yes. If I can add in, if you go search the Mayor of Denver did a great video tweet where he's talking about they moved from a competing system to Axon, largely because of the data privacy, data ownership, we really structured this in a way where we've it's not just talk, right? When we think about building products rigorously in a way we're going to be proud of, we do that both to our insights, match our outside, employees want to be authentic and know that we're doing things in a way that they're going to be proud of, but it stands up to scrutiny. And ultimately, that pays off when customers are like, oh, wow, we didn't realize our license plate REITs were being shared with a federal agency that frankly, not popular with our constituents in this area, and we don't want that happening certainly without our knowledge.

And when we come in, we say, look, here's how the system works. It's your data, we don't have any right TASER interest to it. We certainly enable you to share with anybody you want to share to but in ways that are very explicit and well understood, and it you making the decision, so you're never getting surprised. Those sort of things pay off pretty big when controversy one of the things you'll hear from the customers or we're actually positioned with them is like we can help you get your job done and stay out of the headlines, and that's important to them.

I'm just going to add that one of the fun things about talking about prepared and carbon outpost is that these are all things that are not called out in our revenue commentary because they're still immaterial to our revenue in this quarter. So we did 34% growth without any of these, and these are amazing drivers to support our long-term growth in our future.

I appreciate the color, guys. And then maybe just as my follow-up here and on the drone opportunity, and maybe this one is more geared towards you, Birte. Obviously, nice growth this quarter appears to be a building pipeline here, a strong pipeline building. But just given its infancy, I'm sure it's weighing on the device margins here. So maybe can you help us frame where this business sits today within the margin structure versus maybe what's your ambitions at scale. And what level of scale would you need to achieve that?

Yes. No, it's a great question. And you're absolutely right. We've called out before that our Platform Solutions business is the lowest of our 3 hardware businesses inside of connected devices. And certainly, the Dedrone hardware is a portion of that. I do think there's room for us to continue to improve that margin as we scale. I don't have an exact level for you. But that is something where it is small today and as we scale and as we get repeatability and as we get larger numbers that we can go leverage, we would, of course, expect it to improve over time. I would also make a reminder that there's also a nice software component to our de drone business. And so that spreads out more years. We get more of the hardware upfront, but there is a great software component to Dedrone that shows up inside of our software business and our software-only gross margins, if you include the services piece, continue to be above 80%. So we're still really happy with the contribution of Dedrone. But certainly, with the type of growth we're seeing, we will take a little bit of movement quarter-to-quarter in our Connected Devices gross margin in return for that.

Next, we have Trevor Walsh at Citizens.

Josh and/or Jeff, maybe for you guys. I also wanted to ask about Dedrone maybe in a different way. So the commentary you had around the strength and the momentum there sees very event driven, protecting infrastructure counter drone. But we've thought of Dedrone as well as more of the aerospace management and how it can relate to DFR opportunities. So is it really being driven by that counter drone piece? Or is that Element still present? And how is that going? I'm trying to just -- like, can you think of it as 2 separate buckets? Or they really need to be together, I guess, is maybe the question.

No, I think it's too 2 advantages to deploying Dedrone. I actually think right now, it's far more predicated on the counter drone than it is on DFR. And that's more of a, I guess, a reflection on who's buying it now. U.S. state and local is buying it, but international, enterprise and federal, I'd say, are buying it as much or more. And in those 3 markets, it's far more for counter drone. And so as DFR becomes more continues to proliferate, Certainly, there'll be a lot of utility with Dedrone, and there's opportunity to make it much more tightly ingrained with Fuses, so you see everything on 1 map and it's just a very clean user experience in that way. But the counter drone functionality is what is driving the Dedrone interest upfront.

Just to -- the technology piece is shared. So that thesis is still 100% right. And as -- but what you're just seeing is as DFR is also explosively growing super, super fast, there's just a mixture of like where they're relying on the onboard autonomy versus where they're relying on the drone tech to do it, and it's just a mix and situational. So -- you have all of these things growing super fast. And the -- so right now at this moment, I totally agree with Josh, right, the majority of the Dedrone growth is on the counter side, but the tech thesis is the same, and it goes fits hand in glove with the overall DFR hyper growth as well.

Makes sense. And maybe just based on your answer as a quick follow-up for Brittany, just given what your colleagues just said, are you currently or in the future going to be able to maybe differentiate between what revenue is more DFR related for Dedrone versus counter -- do you have that level of visibility? And could we maybe expect something to kind of give us some -- just as to how that's all flowing in which direction, if you will, for that line of business?

So I mean, I think you might expect us to give bread crumbs and continue to give color on the call. I think we're a pretty long way from like further breaking out platform solutions as a segment. But as we always do on some of these segments, we will, of course, try and give you color as we see developments going places.

Next, we have Jeremy Hamblin at Craig-Hallum.

Thanks and congrats on the strong results. I want to start with your annual recurring revenue. So an uptick in the year-over-year growth rate on that. from a sequential and total dollar amount, the fastest growth that you've ever had. Just in terms of kind of quantifying how or what's driving that? Is the portion of growth, is that more being driven by user growth? Or is that being driven by more adoption of AI Aeroplan and really getting higher kind of monthly user pricing as a result of adoption of more premium plans.

I mean it's really both, honestly. We continue to see nice growth in our user counts and our user adoption and you're seeing AI come in. So there's really no sort of 1 driver. I would say you're seeing a business hit on all cylinders, and you're seeing the AI plan really kick in on top. So you're seeing the benefit in ARR of our big bookings quarter in Q4. You're starting to see that show up. And then we're continuing to have NRR of 125%. So that's been very consistent, but you're seeing those existing customers come back in and trade up and buy more. So I mean as I said earlier, sort of strength across the board, but you're seeing it in ARR first.

And then just a follow-up here on the commentary around drone and your international business. So you saw huge growth internationally, the best in quite some time and 20% of your total business here. So how -- what portion of that is being driven by Dedrone? And is that something that the international portion because of that and because of what's going on geopolitically, is that something where we should be expecting international is going to be just a bigger portion of the total here for the foreseeable future?

Yes, it's a great question, Jeremy. I think the challenge we always have in predicting that one is just a question of how fast the U.S. is going to keep growing. And every time international grows fast, we also have a great quarter from U.S. and so the mix doesn't change all that much. But I would say if we isolated international, it's a little bit of both. We have some markets last year where we opened up on cloud, and then the conversations have really quickly advanced to following fast with d drone in large ways, and then there's the inverse of that where we've had some large Dedrone deals, and now we're -- we've built some equity with those customers, and we're talking about how else we can help.

And so on a revenue basis, Dedrone does factor in a little more because there's a lot of hardware versus some of our services that are more bookings-oriented that hit revenue over time. So you might see international revenue still be lumpy from quarter-to-quarter. But as we zoom out on the year, I'm sure Dedrone will be a driver of increased international revenue. I'd say that's a pretty safe bet.

It's going to move around. As Josh said, it's lumpy, it's quarter-to-quarter, but we are seeing fundamentally more strength in international and so I would expect you'll continue to see it be a big topic for us and some of the momentum. And we've had sort of 2 quarters in a row now up at that 20% level. So is really contributing nicely to business.

And we would love to try to get everyone in here knowing that we're coming up above the hour here, maybe if everyone could pick their favorite question for the next few -- we'll start with Mike Ng at Goldman Sachs.

Great. Thank you for the question. I think implied bookings in the quarter were up roughly 75% year-over-year. I certainly appreciate it's the smallest seasonally bookings -- seasonally the smallest booking quarter of the year. But I was just wondering what that tells you about the momentum for full year bookings growth. Could we expect full year bookings growth kind of growing in line with revenue growth? I would say so, yes.

Yes, Michael. In that -- directionally, I think that's how we look at it as well. the back of the napkin is if bookings grow at the same rate of revenue, then we can assume the revenue growth rate continues way out into the future. And so there's a lot of opportunity out there. We see a relatively similar pipeline ratio to what we saw last year versus the goals, which gives us confidence that bookings are continuing to grow.

As you know, quarter-to-quarter, they can change a little. Back half is very weighted, especially Q4 with the growing size of these deals. But yes, we're bullish on bookings like we always are and feeling really good about where we started the year.

Next, we'll go to Andrew Spinola, UBS.

Maybe we lost Andrew. Okay, David Paige.

Maybe just a quick 1 again on the drone. It looks like you have a quote here in the deck that says over 400 unauthorized drone detection by drone. So I'm curious when you actually go to market and sell the drone offering. What are people looking to protect against -- like what's their main use case.

Sure thing. I think it starts with just situational awareness. I'd say my guess is a lot of those 400 were people who just didn't know what they were doing and your responsibly flying a drone but not necessarily like nefarious predatory drones. I think the first step is just having a basic understanding of what's going on in your aerospace day-to-day. And as some of these U.S. state and local laws start to change that allow for mitigation, I think you'll see customers follow with jamming capabilities, net Interceptor is probably a little bit of a toss-up just that feels like making things explode in the sky will be a lot more highly regulated, but at least those first couple, I think, are more likely to start to happen faster.

And so it's a case of one thing building to the next and customers are seeing a lot of value in that, and they're able to locate the pilots as a result of understanding what drone it is and where the pilot is out in the wild, so they can go send the drone home and meet the pilot there.

So yes, again, this is a new and growing segment and technology is changing fast, and our job is to stay ahead of that curve. And Jeff is doing a fantastic job with this team doing that. and plenty of problems to still go out and sell and counter drone. So that will be a continued place of focus and momentum for us.

Up next, Jordan Lyonnais at Bank of America.

On Dedrone, how you guys are going to market for it. how is it different than your other products? Is it customers coming to you, selling through distributors? And then for the defense and international side? How much more do you think we could see this accelerate us gets FedRAMP status?

Thanks, Jordan. On the counter drone go-to-market, I think it varies a little by market. U.S. state and local, we very much sell direct. And so it's in our packaging there and you could buy it as a stand-alone as well. But I think the real like takeaway on Dedrone outside of it's just pure momentum and revenue growth and bookings growth and all that is the idea that this product is truly opening up opportunity across all 4 of our customer segments. And even more so than TASER, more so than body cameras, like this product solves a need in all 4 customer segments that's urgent. And so our job is to not only win those deals and delight customers out of the gate.

But that land and expand play that is the hallmark of our execution as a go-to-market apparatus. Like -- we've got to do that well in Dedrone across all 4 markets, and you'll see the tailwinds of that in our other product sales. So really, really excited about not only the growth but the doors that are opening as a result of the interest in that 1 product. And then Fusus FedRAMP certainly opens up opportunity in the federal government. And I'm not sure that if I were stack ranking the products, I'd still say there's interest across the board and certainly in our core business and core products as well as Dedrone and DFR and others, but Fusus is in that bucket, and it will certainly help especially across some of these ecosystem deployments where you're adding to an evidence.com environment with is these Fusus streams.

And we'll take our final question today from Alex Latimore at Northland.

I was curious what your acquisition interest look like for the year? I saw that you had a $10 million investment in -- Aerospace. Maybe it's -- the acquisition is a drug manufacturer. Anything there would be great.

We're heads down working on integrating and maximizing the potential of all the acquisitions we've made over the last couple of years, and there's been a bunch of them. So I think, Alex, this is a year where, of course, we'll be opportunistic. Of course, we'll continue to invest in other companies that we think could be great partners or future acquisition targets. But really for this year, it's about going into execution mode, integrating the acquisitions we've made very, very well and putting up more results like we're seeing out of Dedrone, Fusus, in our 911 business right now.

Alex, I would just note that was an investment, though, and I would expect like we have been historically, and we will continue to make investments in places that we think are interesting in the ecosystem. I differentiate that pretty dramatically from us making acquisitions where we have to bring the companies and the teams on and integrate them and all of that. So we'll continue to make investments sort of consistently as we go.

That one, in particular, Bondar, they are in Ukraine. They're one of the leading reconnaissance drone makers. They're one of several companies we invested in to help build our sort of footprint and our relationship across the Ukrainian drone and counter drone space because that's where the fastest level of innovation is happening, and our drone is one of the key systems there. So I would look at that one more as a key market partnership than like any sort of a near-term acquisition.

Lord knows what could happen way down the road, but I would say in Ukraine right now, their hands are pretty busy. They're not looking to get acquired, but we do think it's important for us to put some investments in the market to build those relationships and for us to be able to learn together with them and have people that can help us grow our footprint in Ukraine. And then long term, we could also be a great sales channel for some of the technology coming out of Ukraine. When the war is over, we think there's going to be a lot of go-to-market opportunities where we might be able to bring that tech into other markets.

Thank you.

Thanks, Alex. And Rick, we'll let you close this out.

Awesome. Well, it's been a wild year geopolitically. The optimist in me hopes that the universe is clearing its throat and we're going to get back after the pandemic and the wars that have happened to maybe a little bit more stability in the world. And I'm proud of the role that we're playing in helping to mitigate some of those threats to help to reduce. So the effect of violence in society that the times is feeling more polarized and unstable than ever, at least maybe it feels that way. And I'm really proud of our team's ability to continue to execute and to continue to build out the team with great people and great technology, and it's just -- it continues to be a real privilege for me to get to work with awesome people on problems that really matter doing things that are fundamentally moving the ball down the field. We never look to be second or third in the category. We like to create new categories. new capabilities have never existed. And stay tuned over the next year. You're going to see in addition to the great stuff we've been doing, we have whole new categories coming, and that's what keeps us really invigorating and exciting. So great to see you all. We'll see you on next quarter's call.

Thank you.

Hey, everybody, for the 100th time you get to listen to the disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

I'm Meta Marshall. I cover the networking names here at Morgan Stanley. We're delighted to have Axon here with us today, Brittany Bagley, COO and CFO.

Thank you for having me.

All right. So welcome back. Congrats on earnings last week, pretty phenomenal. 2025 was another exceptional year for Axon with 33% revenue growth, 46% growth in bookings. Can you just walk us through some of the key drivers of the strong performance in 2025, particularly given like some of these, maybe manufactured concerns post Q3?

Yes. So I would say there was really strength across the board. It's hard to point to one particular product or one particular region that drove it. It was really everything working together well. So our core domestic state and local business continued to perform really well. You'll see part of that is driven by some of the new products and offerings that we have because our new product bookings did particularly well.

Corrections, which is a somewhat new market for us, was absolutely on fire, booking some of our largest deals. International was really strong. We did over $1 billion in bookings in International for 2025. And then we also did over $1 billion in bookings in some of our new products. So that would be Fusus, products like that. And then we also disclosed that we had $750 million of bookings in our new AI products to our AI Era Plan. So it was all pretty much working.

I think to your question coming out of Q3, it's really hard on a quarterly basis. We look at it as the full year. Coming out of Q2, we gave some guidance on what we thought our bookings would be for the full year. We not only hit that, we exceeded that, but it didn't all happen in Q3. So then we got some questions coming out of Q3. But we really look at it on an annual basis. Q4 is always a big quarter for us.

Okay. So as part of earnings last week, you laid out some multiyear targets. You talked about kind of accomplishing $6 billion of revenue in 2028. Just what are the drivers? And are they any different than kind of what we saw over the last year?

Yes. It's really rolling what we've been talking about forward. So for us, we tend to talk about big trends we're seeing, then that starts to show up in bookings. But even something like the AI Era Plan with $750 million in bookings is still really new. We've had that product out for a year, right? Then it shows up in bookings and then it starts to show up in revenue. So as you think about $6 billion of revenue in 2028, that's everything we're talking about now and everything that's just starting to show up in bookings.

Okay. We just talked about kind of $14.4 billion you already have in bookings as of the end of the year. Just how should we think about that giving you visibility into not just 2026, but kind of just a question more about like what is the duration kind of we should be thinking of that bookings?

Yes. So on that $14.4 billion, we say that we have 20% to 25% converting in the next year. It has been that range for at least the last 4 years. That's sort of as long as I've been here, we've had that 20% to 25% converting in the next year. So when we look forward, that's really what we use. We have gotten a lot of questions around is our duration lengthening. And the answer is I think that's already happened to some extent. When I looked at '24 versus '25, the average duration of our contracts is about the same.

So we have talked about moving more to 10-year contracts. I think we might even have had a 20-year contract get signed, but that trend has already really happened. And so at this point, we're in that 10-year contract time frame. We still get 5-year contracts. We still get some longer contracts, but that's pretty stable. So we take that 14.4%. We look at the 20% to 25% rolling forward into the next year and then the delta between that and our guidance is our go get.

Okay. Perfect. There's been a lot of scrutiny of software companies of late, just kind of questions about AI removing barriers to entry. Rick commented a lot on this meaningfully on earnings. But just how do you see kind of that moat of Axon maybe different than a lot of software companies?

Yes. And for anyone who hasn't, I encourage you to go back and listen to Rick because he is incredibly eloquent on this and passionate about it. But I think it's really all of the pieces that Axon has build -- been building over multiple years. So yes, we have a great software business. We have fragmented end customers. So it's not like there's one customer who's going to go build a solution and replace us. Those products have a lot of data already sitting in them and stored in them. We have a lot of data from our customers that we can use to tune and make those products better. We tend to be very careful with our data.

Our customers own the data. We're very privacy-centric. But even within that, there's a lot we can go do with that data to make our AI products better. And part of that is because we also have the sensors out there in the world. The other thing we talked about was being the #1 public safety sensor network. So we have the body cameras. We have the fleet cameras. We have ALPR cameras, all pulling in data. That's what's getting stored in our software, and that's what's getting analyzed, and that's what's informing our ability to go out and make AI tools for people.

Okay. Perfect. You mentioned kind of the data privacy concerns there. But just are you -- is that actively a conversation that you're having on a daily basis? Just how are kind of organizations thinking about that like right balance of kind of data privacy?

It's a conversation we have as a team on a very active basis. We think about it. It is not new to AI for us. So we have thought about data and data privacy and what that means to our customers for a long time now. We've developed a responsible innovation framework that we've put out there on how we deal with data and privacy. We deal with a lot of sensitive data, and our customer has always been sensitive to this. So doing it for AI is a bit of a roll forward of things that we've always been focused on. You see it in our approach to ALPR, you see it in our approach to AI.

Okay. Got it. Your AI Era Plan looks to give kind of customers easy access to ongoing innovation and clearly seeing traction with the $750 million of bookings, you kind of talked about in the first full year release. Why did you kind of choose to introduce the plan with kind of these future innovations built in?

Yes. It's a great question. What we wanted to do is we wanted to future-proof AI usage for our customers. So one of the things about our customer base is it can take a long time to get a contract signed. It takes a lot of effort and a lot of work. And what we found, especially when we launched Draft One is some of our customers came to us and said, "Gosh, I wish you'd had this 3 months ago or 6 months ago when I signed my contract. I don't want to go do a rewrite or try and get additional money, but I really wish I had this product in there.

And it was a little bit of a light bulb going off for us on AI, which is the pace of innovation is going to be so fast. And Rick has really been at the forefront of it. I mean he's been talking to all of us about AI for far longer than the AI trend has been popular. And so our thought was, let's do that for our customers. Let's take all of that vision that Rick has around AI. Let's be at the lead of it, and let's make sure they have access to it, and let's do it in a way that is frictionless and seamless for them in terms of having to go back out and contract.

Yes. Okay. Rick talked a lot last week about work being done on a new hardware form factor, not asking you for your product roadmap, but just where are you seeing kind of some of those most incremental opportunities to bring AI further into law enforcement?

Yes. So we always have new hardware products in development. So Rick will probably say that to you every year because he's always thinking of something. I think a great example is really in 2025, we really got our ALPR product launched. So that's a tangible example of a piece of hardware we brought up.

I think from an AI standpoint, more on the software side for us and then connecting into the sensors, but it will be a continuation most likely of a lot of these productivity tools. So we started with Draft One, which does the police report. We have added Axon Assistant.

We've added BriefOne and PolicyOne so that they can pull in all of their policy rules and just get a quick query. Axon Assistant does translation. So it's really going at all of these things that take time or have friction in their day and speed it up and make it more seamless. I think the other thing that's nice for our customers, other than like who doesn't want to be more efficient or who wants to spend less time writing report is that they can make that a real ROI-based pitch.

Yes. Okay. The 911 market and the Carbyne prepared acquisitions looking to bring more AI into the 911 market, which has kind of been running probably the same way for about 40 years. Just how do you see, like what are some of those prepared success stories? And just what kind of sparked that this was a market that was ready for innovation?

Yes. I would say we had been poking around the edges of 911 for a while. We had thought about doing our own CAD platform. We decided that, that didn't work for us. But we knew it was a space that was really interesting. And the reason it's interesting is because you're getting closer to the origination of the call or the origination of the information. And so the more you know at the front end, the more information you can provide to an officer who's getting dispatched to the scene or in the coming world, maybe it's a drone getting dispatched to a scene, not an officer, and you want that underlying data so that you can help do that.

The second thing is we listen to our customers and our customers were raving about Prepared. They were talking about what a great solution Prepared has. Prepared is also AI first and AI forward. So it's not a legacy product that we had to come in and try and jam in or significantly upgrade, like they have already thought about that. It's an overlay on top of other existing products. So it's a really easy add-on.

So you take all of those things together, and it felt like a really natural place for us to play. We like finding companies that are disruptors. We like finding companies that are innovative. We like finding places where you can add value to your customers and Prepared was all of those things for us.

As we were looking into Prepared, we also were spending time with the Carbyne team, and I think we talked about this a little bit, but we didn't necessarily know we wanted to do both of them until we really got into diligence and understood the underlying platform and the benefit. Carbyne is doing the same thing for the underlying call platform and that they're significantly modernizing it and they're making it cloud-based. So all of our software as well. There's like tiny asterisk exceptions, but the vast majority of our software is cloud-based. And so Carbyne is now doing that for the call handling systems.

So if you put them together and the customers don't have to put them together, but if you put them together, you have this modern call handling platform in the cloud that you can do a ton of AI overlay work on.

And then you can drive efficiencies for the customers. I think some of the early success and use cases on emergency calls, if you can get this information and do the right routing and triage, you can make sure that the calls that are emergencies are getting put through quickly and the nonemergency calls are getting handled.

Yes. I mean at IACP this year, there were some pretty interesting kind of demos of Prepared and kind of that triage and kind of front being front-footed that can happen with the tools that are pretty interesting.

Yes. I mean if you get into it, right, like the longer your 911 call takes, the less likely you are to have a good outcome at the end of it. And so for the people who are spending a lot of time in the 911 space, it's all about shortening that call time and getting the right people dispatched with the right information. And so the fact we can do that all the way end-to-end is exciting and valuable.

Yes. The federal and corrections market has been an area of growth for you guys over the past couple of years. Just how is this market different than how you guys look at the maybe traditional state and local market? And just what are the opportunity time lines do you see with some of the OBBA funds?

Yes. I would sort of separate corrections and federal for us. I think our corrections market looks a lot like our state and local market. Interest in a lot of the similar products, real value to having all of the products in there. It's a great place to improve safety, body cameras make a lot of sense, all of that. And I would say because it's at the state level or the local level, it functions a lot more like our traditional state and local business.

The federal business, if there was one area that was maybe not firing on all cylinders for us in 2025, it was probably the federal business. There was just a lot of uncertainty, a lot of question around funding. Government got shut down at least twice. So I do think as we look out into the future, we continue to be really optimistic about the federal business, things like World Cup, potentially the Olympics, there's a lot of opportunity there. I think it's just working through some of the funding mechanisms.

Okay. International market has maybe been something almost like federal, where people have been kind of skeptical until it was successful. Just given some of the different dynamics with that market, can you just rehash some of the success you're seeing there? And does it feel like this kind of dam has now broken on International?

Yes. So it's interesting because we had a very successful International business, in countries that we would call the Commonwealth countries. So Australia, New Zealand, the U.K., we had a really nice business there and international was doing well. A lot of times when people hear up, I'm excited about at the end of 2025 is those 2 cloud deals that we got signed in Europe. I don't know if I would say the dam has broken, but I would say there's definitely water trickling through, which is a great -- it's a great sign and exciting to see.

And I think AI will start to be a big part of that. It's really hard to deploy AI if you're not on the cloud. And as these customers see real value in AI or in Fusus or something like that, it's just more appealing to them to think about being on the cloud. And we're not the only ones trying to solve that, right? Like all the cloud providers are trying to figure out data sovereignty and how they can do hosting and how they can get.

Yes. I mean, I guess just on that, are there increased investments that you need to make kind of on that data residency side to kind of compete with some of the needs in that market?

Yes. I think probably. Nothing that's not factored into our guidance. But yes, I think you'll see us continue to invest in some of that as we go after international data residency, localization, the supporting sales teams and customer success that go into that. As we look out as we get to 2028, that investment is sort of baked into our model. Investment in International, including data residency, investment in the enterprise business. So we're expecting we continue to invest in these new markets.

The enterprise opportunity has been yielding success as well even before I think what some people have considered we're going to need, which was the mini body camera. Fusus seems like a great kind of early use case here. But just what are the breadth of your portfolio that you're seeing being looked at by the enterprise customer?

Yes. We're getting to a nice point where there's really a lot they can look at. I would say it's less on the TASER side. At some point, private security may carry TASERs. But when we talk about enterprise, we're focusing less on that and more on people on the front line. So I would say that's less of a big market for our TASER business, the body cameras. We're really excited about the ABW Mini coming out in the second half of this year. Fusus, absolutely really valuable.

I think counter drones and drones, as you think about something like campus security for large enterprises, both of those can be particularly interesting. That's on the counter drone protection side. On the drone side, the ability to do inspections with a drone. So I think really across the portfolio, there's a lot of opportunities. And I imagine as we get more into the enterprise, having machine learning or AI embedded on top of those products will be an opportunity for us.

How is that go-to-market different in --for enterprise and maybe some of the other businesses?

Yes. It's definitely different. We're selling to a totally different customer. Most of them have heard of Axon, but there's definitely a little bit of education to do. I think in some of the places that we got in, we're actually really getting in with the security part of the enterprise. So take retail, retail theft has been a real challenge or organized retail crime or just incidents in the store, that's running to their security team. Their security teams obviously know Axon really well, and then that goes up a level and becomes sort of a C-level type sale when they see what we can do.

Okay. What other markets are you seeing Fusus adoption in? Because certainly, it's kind of a pretty exciting new piece of the portfolio.

Yes. I think it's getting adopted across all our markets. I would say it differently. There's no market where I don't think they're interested in.

All right. We wrote a large note last year just kind of about the drone market, Ukraine, what we're seeing over the weekend, bringing kind of more news about drones to the forefront. Just where are you looking at where is the most attractive piece of that market to compete in? And what do you see as some of the catalysts for that business?

Yes. So we partner with a domestic-made drone company, Skydio. They're down in San Mateo. They're great. I would say that is really how we're partnering there for a play on DFR. So that's sort of the domestic state and local piece of it. I think that's incredibly interesting. We will also partner for them in the enterprise. So they're really our drone partner. Then I would say on the counter drone side, we made an acquisition of a company called Dedrone, and they do counter drone. They've played in Ukraine. So they've really been at the forefront. And everywhere you start to see drones, you will start to see counter drone.

So that's federal, that's state and local, that's enterprise. You might be like why enterprise? Well, like think about if you're watching a game on TV, like you don't want a drone coming in and interrupting your game, right? They're doing a lot behind the scenes to make sure you don't have that happen.

Those pesky ones at the Olympics following all the skier.

Those, they want. That was a pretty cool shot.

Exactly. All right. So the NRR expanded 200 basis points year-over-year to 125% in Q4. You've noted kind of a lot of innovation coming on to the platform. But just how do you think about what part of the growth algorithm like the NRR is?

Yes. I think that the NRR is incredibly important for a couple of reasons. One, we know we have really de minimis churn. So our customers like our product. And not only are they renewing our product, but they're coming back and buying more. And I think a lot of the buying more is really because we have added more products into the mix. So we talked about the prices on OSP, how OSP has gone up. That's not just because we're doing like-for-like price increases, it's because we're adding new products and new innovations into our Officer Safety Plan bundle.

If you think about it, we now have -- our top price point is $570 if you took our top OSP bundle plus our AI Era Plan, you could get higher than that if you add it on other products like fleet, but that's getting you to almost $600.

So that's significantly higher than our top plan was even a couple of years ago. So I think part of it is you just have customers coming through. We talked about how 30% of our customers are on a premium plan. That's not this year's premium plan. That's they signed up for the plan that was premium at any point in time. So that gets to -- as you come back and renew, you can just get so many more things. And we're bundling in things like ALPR. We're bundling in things like counter drones, obviously, not one-for-one with officers, but it's giving them a flavor and an ability to try.

Okay. Got it. With all these innovations, expansions and end markets, you've stayed committed to expanding the EBITDA margins by 250 basis points over the next 3 years. Just how do we think about where this leverage comes from?

Yes. Rick gave me a nice shout out on earnings. We had a little bit of an arm wrestle over EBITDA margin expansion. So we landed in a really good place. We are going to continue investing in the business. So I would expect to see us continuing to invest in R&D. We have for the last couple of years. We will. We have so many more places to go. I know it feels like we're doing a lot, but they're all sort of logical next step additions to our product portfolio and what our customer needs. So expect to see continued R&D investment. I promised Rick, we would not get our leverage at the cost of R&D. But then everything else is sort of fair game.

So I would expect you'll see some gross margin expansion because we have some tailwinds from our software business growing faster than our core business. And then I would expect to see leverage in SG&A, which we've been leveraging in the last couple of years. And it's not that we're not investing there. I just talked about how we're investing in our new markets. We are. We're just not investing at the same rate as growth.

Can you still get that gross margin expansion even this year when we're kind of talking about margin or memory headwinds?

I think by the end of the year, I mean, we'll see how that lands for the full year picture, but I think as we roll in a full year of tariffs, and remember, for last year, we didn't have a full year of tariffs, partly because of when they got announced and partly, we just had inventory on our shelves that wasn't tariffs that we were selling through. So we'll have a full year of tariffs this year. We'll have memory costs.

You saw in Q4 that we had some mix shift, so our lowest margin platform solution business, and by the way, I say lowest margin, it's still a really nice margin. It's just lower than some of our other hardware products. That grew 81% in Q4. So that will provide some quarter-to-quarter lumpiness on mix, but I think as you get through to the end of the year, as you've digested the memory costs, as you've annualized on tariffs, then you'll start to see some of that software product mix come through.

Perfect. You talked about 60% free cash flow conversion in the coming years. Just how are you thinking about kind of capital allocation?

Yes. So we've done 60% in prior years. We obviously didn't in 2025. In 2025, we were really making a lot of inventory investments. I think every couple of years, we have to sort of relook at the supply chain and do some strategic things to make sure we're well positioned, and so that was an investment year for us in inventory in 2025. We also had some stuff around our collections timing, which we will hopefully get back in, in Q1. But I say that in Q1, and then I don't want you to think like Q1 is going to be amazing because Q1 is our seasonally low cash flow quarter, but cleaning up some of the collections timing piece, and that pretty naturally gets us back to a 60% free cash flow conversion.

The things that -- the reasons we don't get higher than that, we've got interest expense. We've got timing of commissions. We won't have a huge inventory investment year, but we will continue to invest in inventory. We're most focused on certainty of supply for our customers.

Got it. Stock-based compensation has come under a little bit more scrutiny of late. Pullbacks and software valuations have had companies thinking about what is that right blend of cash compensation. Just how are you guys thinking about your stock-based compensation philosophy?

Yes. We've been really consistent on our stock-based comp since we put in place our XSP plan. So our XSP plan is a performance-based stock comp plan, and we only earn those tranches if we perform. So a bit of what you saw in 2025 is: thank you, we had very nice share price performance. We also had really nice operating performance. So you saw a lot of those performance shares get recognized in our stock-based comp.

We gave guidance for this year that our stock-based comp is flat. And what it -- about half of our stock-based comp is that XSP plan. So if you want to look at our normal run rate, like divided in half, and I think we'll be pretty consistent on that XSP. We've already put that plan in place. There's no big new XSP plan coming. I don't think we're giving any AI engineers $100 million stock plans or anything like that.

It might be a couple of rooms over.

So pretty steady Eddie from here.

Okay.

And I would -- like I know, I would just give a plug for our XSP plan. It is phenomenal in recruiting. So when I say we didn't give any $100 million like AI engineer plans, people get really excited about the mission and that ability to have a plan that's really linked to our performance is exciting. And so we certainly punch above our weight in the talent we're able to recruit.

Got it. There's a lot of start-ups in the defense space kind of have reinvigoration. Just you guys have been active in that market. What makes a good kind of Axon acquisition?

Yes. Talent and technology. I went on a long discussion of Prepared and Carbyne, and I didn't mention their amazing founders. They have great founders and great teams of really smart, scrappy people. So really smart, scrappy, talented people who are building innovative, disruptive things that weren't naturally on our roadmap or that we didn't do ourselves.

And then I would say really well liked by customers when we talk to them. That's really important to us. We're never going to put something in a bundle and try and jam it down someone's throat. We really care that our customers find value in and like the products. And so that's where something like Prepared was great. Our customers were telling us how much they love Prepared and how much value it added. And so it fits strategically in our portfolio. It had great talent. It's a nice business, and our customers like it.

Got it. I mean maybe just last question. Rick spent a lot of time on the earnings call talking about AI and disruption, also saying it's kind of challenging a lot of you guys internally to adopt AI as well. Just as we all look for how people are using these in their real lives. What are you guys using internally? Or how are you using AI internally to kind of gain some efficiencies?

Yes. I think we, and probably many people you talk to, are seeing unbelievable productivity gains on the coding side. So our R&D engineers are all using and loving the coding tools. We'll see how anthropics fight with the federal government lands. We would like to be able to continue using those. But there's a number of good ones out there. So I would say that is probably the fastest place we're seeing real efficiency gains and disruption, but we are pushing it through the whole organization.

Everything from things that are really annoying point solutions or that take a lot of time for people internally, how we do our expense management review. We're using it in our accounting close. Our customer service reps are using it to make sure they have all the best information on their customers. I mean it's kind of everywhere now.

Yes. Okay. Any questions from the audience before we wrap up? All right.

Let's double click on the federal opportunity [indiscernible].

Those are big budget buckets, yes. And I think they're all really ripe and interesting opportunities for us. We have some umbrella contracts with some of those agencies already, but there's more to come. Certainly, World Cup money is relatively new money that's flowing through. I think that there's plenty of opportunity for TASER in the federal government. I also think there's plenty of body camera opportunity. And I would say don't forget about Dedrone. I think Dedrone has some really big opportunities on the federal side.

Similar question to that on the retail vertical. Remember last year, there was some enthusiasm that every Walmart employee will be wearing some sort of body camera, et cetera. Is that something we should think about as like a 2026 opportunity or further out?

Yes. I would say our ABW Mini, which comes out in the second half of the year, we trialed an Axon Body workforce camera. That's what gave us the confidence to say that there's real utility and use cases for the customer, but nobody liked wearing them. They were sort of big and heavy. If you think about it, officers have like a duty vest that they wear and so they can put a bigger body camera on it.

A lot of retail associates or nurses are wearing much softer clothing. And so that lighter, smaller form factor body camera, we think will make a really big difference for them and the deployments and the rollout.

Perfect. Brittany, thanks so much for being here.

Thank you for having me.

All right. Hi, everyone, and thank you for joining Axon's executive team today. We may notice we have a longer call schedule this afternoon. We're going to report our fourth quarter and full year results as we normally do, and then we'll transition into a short presentation where we'll introduce you to our new 2028 financial targets and share more about our vision.

Our remarks today are meant to build upon our most recent shareholder letter and investor materials, which you can find on our investor website at investor.axon.com. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our expectations as of today and are not guarantees for future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially as discussed in our SEC filings.

We will also discuss certain non-GAAP financial measures. Descriptions and reconciliations to GAAP are included in our shareholder letter and available on our investor website. Now as always, before we begin, we have a quick video to get us started. Let's pull it up.

[Presentation]

All right. Thank you, Erik, and thank you, everyone, for joining us today. We completed another incredible year at Axon. I'm humbled by what our team has accomplished. It goes beyond products and financial performance, it's about our mission and the work we're doing to accomplish even more in the years to come.

As Erik mentioned, we're going to do things a little different today. After you hear from Josh and Brittany, I'll come back to tie it together with how we see Axon evolving and why I believe there is no better position to be in than the one we are in right now. Josh you're up.

Thanks a lot, Rick, and good afternoon, everybody. I'm very proud of our team. They earned this result and they deserve the credit. They are this good. It's a privilege to work with such talented people who are passionate about serving our customers and pursuing our mission. And in 2025, their hard work yielded a number of exciting outcomes worth highlighting.

First, when it comes to our key indicators on our scoreboard, there is no metric more important than bookings. You may recall that over the past few quarters, we laid out an ambitious plan to drive record bookings, I'm proud to say the team left no doubt. 2025 full year bookings surpassed $7 billion and were up more than 40% from last year. That's on the back of Q4 bookings up more than 50%, representing a major acceleration relative to 2 straight years of bookings growth in the high 20% range.

To me, this is the beginning of a trend. We just booked almost as much business in the quarter as we did in the full year just 2 years ago, and we see no sign of that slowing down. Generally, we are big on singling out specific teams because, frankly, so many of them at Axon are operating at a world-class level right now. But given the Q4 results, I want to call out a few standout performances.

First, our U.S. state and local team led by Jessica Duncan. This is our best team at the company and possibly the best team in the entire industry. In 2025, they delivered not 1, but three 9-figure deals. A few years ago, that didn't even seem possible. This demonstrates the tremendous reception that our new products are receiving.

Speaking of new products. A second highlight was that new product bookings, which include AI and Fusus totaled over $1 billion for the year and were nearly triple 2024 as a result. For 2 years, we have recognized that for software companies to win in the age of AI, they must convert their existing customer base to AI users before someone else does. And I believe Axon is doing that better than any company in public safety.

To that end, in our first full year of selling the AI Era plan, it accounted for approximately $750 million worth of bookings or about 10% of the overall bookings total. We are positioned to be a winner in this AI-driven environment, and we intend to lap the field. Along those lines, we see a lot of runway across our new product portfolio. ALPR and Vehicle Intelligence is another one that has barely scratched the surface.

Our pipeline is sitting in the 9 figures for that new product set and we expect that to continue to grow. These are exactly the signs we need to see to know we are on the right track, and it's why we keep building more. The industry-wide scrutiny on data privacy and license plate readers is real, and we believe it's a tailwind for Axon.

Our early and sustained investment in privacy by design and ethical governance has positioned us well. We're hearing directly from customers, some of whom came to us from other vendors that our track record on privacy and ethics was a deciding factor in their decision. Customers aren't just buying hardware and software, they're buying confidence that will help them deploy technology responsibly. That's a durable competitive advantage.

Next up, we have new and emerging markets. Bookings in this category, which include everything outside U.S. state and local law enforcement, surpassed $2 billion on the back of record results in international corrections and justice. A huge shout out to our international team specifically, who crossed $1 billion in annual bookings for the first time and delivered 2 of our largest deals in Q4 both of which were large European cloud deployments, coupled with Connected Devices. We're seeing this type of progress across multiple regions as our land and expand strategy continues to gain momentum.

Additionally, it's impossible to talk about explosive growth at Axon without mentioning our corrections team. A few years ago, it would have sounded crazy for me to predict this, but the largest single customer booking in Axon company history was delivered by our corrections team. And what's really important about that is what's included, TASER 10, Body 4, real-time capabilities, AI and more, showing we have product market fit across the platform.

Corrections has become one of our many verticals to prove it could punch well above its weight. While 2025 was a great year, and we're thrilled with such a strong result, we stopped celebrating this at about 12:10 Pacific Time on January 6. That was 10 minutes into our 2026 company kickoff event. This is a team that is on to the next play. We are 15% of the way through 2026 already. And as we assess what's ahead, I have never been more excited to kick off a new campaign.

We have opportunity in front of us everywhere. Of course, 2026 starts with selling new products to our existing U.S. state local customer base. At this point, hopefully, if there is no more confusion we are accelerating in this market and delighting customers along the way. As we sell new products to existing customers, we also sell existing products to new customers and several of those new customer markets represent exciting days ahead.

Enterprise is a big one. The market is enormous and what we're good at translates perfectly. While 2025 is about putting the right team in place to start scaling fast, we also solidified our second high-volume U.S. enterprise customer. What's particularly exciting is that they will be fielding the recently announced Axon Body Mini, which is getting rave reviews in beta and will launch later this spring.

On top of the Mini, expanded capabilities in Fusus, new AI offerings, counter drone technology and Axon Lightpost and Outpost will contribute to stronger and stronger product market fit in the enterprise space.

U.S. Federal is also showing promising signs. There is a major opportunity across federal law enforcement for a number of our core products as well as counter UAS technology. As I look ahead, our patience and persistence in this customer set is paying off. Some of our largest opportunities in front of us for 2026 could come from federal customers, and we're excited to help.

Our confidence is also bolstered by the arrival of our new federal leader, Claudia Davidson, who is well respected in the federal space and is off to a great start. Rick will talk more about this but as we enter the new year, we believe Axon is positioned very well. At our core, we sell integrated hardware and software solutions that help collect and leverage the power of data for our customers that have highly complex regulatory and liability requirements where technology has lagged for decades.

That's a unique combination that lends itself to swift adoption of AI capabilities as our $750 million of bookings in this category demonstrates. So the takeaway is simple. We're seeing broad-based demand and we're seeing it at increasing scale in a lot of places. This is a defensible, rapidly expanding business built on a foundation of customer trust and we can't wait to put up another record year. Over to you, Brittany.

Thank you, Josh. I echo Rick and Josh's comments when I say that I am truly thankful for our team and impressed with everything they were able to accomplish over the past year.

First, I'll walk through our fourth quarter performance, and then we'll move to guidance, our new 2028 targets and how we think about the future. Q4 was another very strong quarter across the Board. Revenue grew 39% year-over-year to $797 million, our eighth quarter and fourth year in a row growing above 30%.

Our growth is supported across our product lines. Software and Services grew 40% year-over-year to $343 million. Expansion within existing customers and growth with new customers both drive this segment. We see strong demand with new products, including Fusus, AI, VR and counter drone, each contributing to our software growth alongside our digital evidence management platform.

Net revenue retention expanded to 125% in the quarter and demonstrates the adoption of our new products by our existing customers. ARR grew 35% year-over-year to over $1.3 billion. We're also gaining new customers in diversified end markets, as Josh called out, including strong wins in corrections and International this quarter.

Connected Devices was up 38% year-over-year with revenue of $454 million. TASER revenue of $264 million grew 32%. Personal Sensors revenue of $109 million grew 28% and Platform Solutions revenue of $81 million grew 81% in the quarter. TASER 10, Body 4, counter drone equipment and VR training solutions were all drivers. Adjusted gross margin came in at 61.1%, down sequentially due to the impact of tariffs and increased mix from Platform Solutions, partially offset by continued strong growth in high-margin Software and Services.

We expect to see quarter-to-quarter volatility from product mix. But over time, we will see the benefits of our software mix flow through to gross margins. Adjusted operating expenses of $1.1 billion increased $245 million sequentially and decreased as a percentage of revenue from 39.2% to 38.2% year-over-year. Increased operating expenses were driven by continued investment in R&D and our go-to-market functions as we scale the business to support future growth. This was partially offset by leverage on our G&A functions as we work to scale efficiently.

Adjusted EBITDA grew 46% year-over-year to $206 million and adjusted EBITDA margin of 25.9% outperformed our expectations on higher revenue than forecasted and operating leverage. Operating cash flow of $217 million and free cash flow conversion on an adjusted EBITDA decreased year-over-year due to investments in inventory and the timing of collections, which we expect to catch up on in the coming quarters. We continue to target free cash flow conversion on adjusted EBITDA of 60% and expect 2025 to represent a low point as we get back closer to that 60% level in 2026.

On our balance sheet, we leveraged our financing during the year to update our capital structure and completed the redemption of our outstanding convertible notes, limiting dilution while ensuring we have capital available to support our growth strategy. We closed the acquisition of Prepared in Q4 and closed our acquisition of Carbyne this month.

Now turning to guidance. Our strong 2025 bookings, scaled manufacturing capacity, continued investment in new products and a growing bookings backlog supports our expectations for another year of robust growth. Our forecast for 2026 is revenue growth in the range of 27% to 30% year-over-year, which is the strongest outlook we have had heading into the year. We see robust growth and are maintaining our adjusted EBITDA margin of 25.5% for the year. This expectation includes the impact from our increased investment in several product and market areas as well as impacts from global tariffs, inflationary componentry costs, including memory and acquisitions, which are still scaling.

Obviously, there was big news on tariffs last week. Right now, for us, very little has changed going forward given the implementation of the new 15% global tariff, and that is what we have baked in. We're not assuming anything on refunds until the process is clearer.

In addition to our full year guidance, I'd like to provide some commentary on seasonality. Q4 is usually our strongest quarter for bookings, which we absolutely saw. Q1 is a period where we build pipeline for the year, resulting in our slowest quarter for new bookings. We also paid bonuses and commissions in Q1, resulting in a quarter that typically has lower free cash flow conversion than our average. We expect both dynamics again as we head into Q1. We do expect year-over-year revenue growth to be consistent with our overall guide for the year in Q1, and we expect to ramp into our average adjusted EBITDA margins as we scale revenue through the year, which may result in lower adjusted EBITDA margins than our annual target in Q1.

Now that's the recap of our quarter and results for the year. As Rick mentioned, we are doing things a little differently today, and we've prepared a brief presentation to walk through our new 2028 target model and the long-term strategy behind it.

Let's pull up the presentation. Thank you. Our agenda is a brief overview of our financials and targets from me, and then I'll pass it over to Rick to cover our longer-term product vision.

As I look back on the last 5 years, I am impressed by the transformation the company has gone through, more than tripling revenue over 5 years with a 33% CAGR over the past 3 years. Scaling new hardware products and managing through ongoing supply chain disruptions and tariffs with stable gross margins, generating strong operating leverage as we expanded adjusted EBITDA over 500 basis points over 3 years to 25.5% and delivering over $700 million of EBITDA in 2025.

Our products have expanded significantly, including TASER 10, Axon Body 4, our VR training portfolio, Fleet 3, Air and AI with software at 43% of our business. We've seen traction in markets like enterprise and corrections, each producing some of our largest bookings, and we've had our best year ever in international.

As I look forward, we are going to keep that momentum, more than doubling revenue, expanding gross margins over time and delivering adjusted EBITDA expansion of almost 250 basis points as we continue to innovate, add problems, solve problems for our customers, add products, solve problems and gain traction in new markets.

We've also continued to mature as a company with a strong balance sheet, clean capital structure and a track record of strong M&A with disruptive companies that complement our organic R&D efforts.

Let's look a little closer at 2025 and some of the metrics underlying our business that highlight the quality of what we're delivering and underpin the future.

First, we did $7.4 billion in annual bookings. That acceleration, growing bookings at 46%, along with our 125% net revenue retention is a great sign that our products are resonating with our customers. Today, only about 30% of our customers are on premium versions of our subscription plans, and that includes prior premium plans from several years ago, which actually look more like our entry-level plans today. We think that means we have meaningful room to drive adoption of the new products we continue to deliver.

Our current officer-based subscription plans can deliver ARPU of nearly $600. And when we add in other products such as Fleet, Fusus, Dedrone and ALPR, that ARPU can get much larger. That's relative to our subscription plan 5 years ago where our most premium offering was under $250. Those new product offerings, which did over $2 billion in bookings are a major driver of future growth. International did over $1 billion of bookings. There is no one product alone that drives our success, but the portfolio delivers value across our customer base.

Our success is driven by being customer-obsessed, innovative, embracing new technologies like AI and having the data and experience to make it work. We've always been careful with our customers' data, but we're seeing increasing value in how we can use it to deliver powerful AI solutions, all while respecting privacy. Within our software business, more than 40% of our software growth was driven by products outside our core DEMS business in 2025.

In our hardware business, Platform Solutions drove more than 30% of our growth, also largely driven by newer products. For our 2028 targets, our 2028 revenue target is approximately $6 billion. This more than doubles our revenue today. Along with this growth, we are targeting a 28% adjusted EBITDA margin in 2028. This implies approximately 250 basis points of margin expansion over the next few years, balancing profitability with continuing to invest as a disruptive innovator and reaccelerating margin expansion after this year.

As I mentioned before on free cash flow, we expect average annual conversion of approximately 60% over the longer term and expect to get back close to that level next year. We believe 2025 conversion will be a low point as we look ahead and maintain our conversion target of approximately 60%. We have a compensation plan that is highly performance-based, attracts and retains the best talent and met our goal of less than 3% annual dilution from stock-based compensation. We are now dropping that to less than 2.5% on a go-forward basis.

No material M&A is contemplated in the forecast, but we expect to continue our strategy of tuck-in deals to expand our ecosystem and bring the best talent to Axon going forward. We will also continue to mature our business, our operations and our best practices while staying true to our culture and what makes Axon special. Another way we benchmark this model is through the lens of the Rule of 40. Over the last several years, we've consistently operated around 50% or higher with the most recent years among our strongest and well above 55%. Our target model implies we can continue to operate at these levels as we grow and expand margins, maintaining 55% or better.

Let's go through what we need to do to get there, deliver for our customers, solve real problems and innovate. A core element of our strategy will continue to be reinvestment in the business. We are funding new product development organically that has been and will remain a primary driver of our growth and our investment. New organic products have included our TASER devices, body cameras, in-car cameras, VR training solutions, vehicle intelligence, evidence management and our suite of AI products.

Our ability to fund organic investment positions us as an innovator, disruptor and category leader. We are not simply entering existing markets. We are creating them or taking a new approach. It is a testament to Rick's visionary leadership and ensures we are not the disrupted but the disruptor. That's why investing is critical. We won't get complacent. These investments are in both hardware and software as the deep integration is a strong advantage for us. The dynamics of our software business today with the nascent adoption of AI and strong trends in our other core software products means we expect software growth to be faster than hardware, but both are critical and valuable.

You are seeing us drive upsell and adoption in our existing markets. We continue to have a lot of opportunity in state and local, and it delivered amazing results again this year. We also have tremendous opportunities outside domestic state and local in federal, corrections, retail, health care and other enterprise customers. This isn't hypothetical. We've demonstrated this with strong customer wins in each of these markets. We're investing behind them thoughtfully, and we will execute on and grow those opportunities as we drive longer-term results.

We're incredibly excited about what we're going to deliver over the next 3 years in the business, but we always take a long-term mindset. So let me turn it over to Rick to talk through our product vision.

Awesome. Thank you, Brittany. It excites me that our team is thinking longer term, and I believe that will be a competitive advantage for many years to come. 5 years ahead -- 3 years ahead is no time at all and even in the history of TASER and Axon, but with the technology advancing faster than ever, I have no doubt the world will look unrecognizable in just a few more short years in a good way.

Now before I talk about where we're going, I want to ground us in where we are today and what anchors us to do so much of what we do.

Let me start with our Moonshot. A few years ago, we introduced a Moonshot to cut gun-related deaths between police and the public in the United States in half by 2033. We do a lot of things at Axon. But when you step back and you think about impact, I believe it all harmonizes under this goal and our mission to protect life.

I'm also excited to share and look, this is still preliminary as data is still coming in from last year, but 2025 appears to be the first year where the number of gun-related deaths between police and the public actually went down substantially in the U.S. It's too early to claim Axon had a direct causal impact, but I'm encouraged to see the trend is turning the right direction for the first time.

We do have numerous anecdotes of specific instances where the capabilities of TASER 10 saved the life in situations where previously people would have been shot and killed. See this video I'm going to show you now from our hometown here in Scottsdale, Arizona, where a woman called 911, she wanted to be shot and killed, she wanted to commit what's called suicide by cop.

[Presentation]

Alright. As you can see there, there was another officer with a lethal weapon. I talked to some of the [indiscernible] day and they said she very likely [indiscernible]. Go and advance to the next slide, please.

I also want to share that we've had customers now coming back and telling us they are seeing a result. We are in major county sheriff's office. That means they're one of the largest in the U.S. tell us that they had a 42% reduction in deputy involved shootings, and they believe that TASER 10 was a major contributing factor, along with de-escalation training, much of which happened in our VR system.

So in addition to that quote, I just want to talk about like where this translates into our mission. Our mission translates into the products we build and the scale that we're now operating at. TASER is becoming synonymous with de-escalation and saving lives more than ever before and in more places.

Today, we estimate a TASER cartridge is fired in the field approximately every 30 seconds in the U.S. In just the time I was speaking, another TASER cartridge has been fired. Every time a TASER device is used successfully, it has the potential to save life, and that's what grounds us in how we think about this product line.

Training is also a critical element. We can build the greatest device ever created, but if people aren't trained to use it effectively, it doesn't deliver its true value. That's why we invested in building a suite of virtual reality training solutions over the last 5 years. We took a risk. VR training was not common or widely adopted when we started. And as Brittany mentioned, we leaned in to be the innovators and disruptors here. And today, we see that was definitely the right direction.

Last year, customers completed nearly 0.5 million VR training sessions, and that number continues to grow. VR training is nearly sold 1:1 with TASER 10 deployments, and it can do much more than trained users on our devices. This year, we are infusing our VI platform with AI-powered features that will transform how police are trained in the decade ahead. Because we lean in and make bold bets before it's safe to do so, we garner significant first-mover advantages.

And now we have what we believe is the most widely deployed VR training platform in the U.S. public safety sector and are well positioned to layer in AI capabilities just as we are across our massive sensor and software network.

Another part of our strategy has been transparency and better decision-making in the moment. That led us to body cameras nearly 15 years ago. And today, our cameras are the standard in public safety. We have stored and enabled recordings of more than 60 million hours of body-worn camera footage on our latest two generation of cameras, Body 3 and Body 4 in just the last year, and we're helping customers use that body camera footage to drive more efficient workflows, provide transparency and support faster and more effective justice.

Beyond body cameras, our real-time efforts expanded into fixed cameras, vehicle intelligence and real-time operations. Through Fusus, we now power more than 1 million monthly live streams with more than 300,000 community cameras connected. That's powerful connectivity and insights unavailable anywhere else.

And finally, we're leading and supporting and driving toward the future in the AI era. We already have more than 500 public safety -- I'm sorry, public safety agencies live with Axon Assistant, generating more than 200,000 monthly messages. We were the first to introduce a suite of industry-leading AI tools for our customers, and we're not just enabling the ability to query. We're pioneering the ideas and the ways they will use AI and its features to do their jobs more safely and more effectively. We're just getting started with what that assistant can do. And you'll continue to see us push the envelope well ahead of the pack.

I know that sounds like a lot already. But in my view, you haven't seen anything yet. It's about to get a lot more exciting, and it's going to happen faster than ever before.

Let me summarize it in a succinct vision. This is how I think about Axon developing. Axon can be the provider of the world's largest global sensor network, fully connected and supercharged by AI. We will power the most intelligent connected safety devices globally. We will connect those sensor devices across the full life cycle of how they're used, and we'll build AI into every workflow safely, securely and reliably.

Let's go to the next slide. And now let's dive into what that means in more detail. Building the leading global sensor network means more than just our body cameras used by law enforcement. We believe our devices can be the primary connected AI-powered assistant across many different use cases and industries. We're a leader in AI-powered wearables. Workers for the government, retailers, utility companies, health care providers and in many more places today taking massive amounts of data into their brains. And they process that data manually and they carry out the task they've been asked to do and then they spend hours typing it into systems.

Our sensors will become their partners. Their virtual eyes, ears, mouths bring that real-world data into a digital backbone where it can be analyzed, utilized and relayed. Because we have the proven track record of ingesting and managing some of the most sensitive data on earth, enterprise customers of many varieties now see us as the safest choice to help them use sensors and AI to securely capture multimedia information and transform it into useful knowledge and work product.

Today, we connect body cameras, in-car cameras, TASER devices, fixed cameras, drones and robotics. We've been the industry leader in introducing customers to these sensor product solutions, and we've built them in close partnership to understand or to ensure that we understand how they can be used to help. So I want to take a moment to step back and speak to something I believe is fundamental to Axon's long-term value creation. We build for durability, not for the metric of the moment. A decade ago, when our SaaS business was gaining momentum, there was real pressure to shed hardware and chase software margins. I disagreed. My conviction was and remains that the most important customer problems require integrated solutions, not point products. That decision looks prescient today.

As AI increasingly commoditizes software development, the companies with defensible positions are those that own the full stack, including hardware, and we do. What we've built is an interconnected ecosystem of hardware, software and cloud services embedded in a heavily regulated industry through long-term government contracts. That's not just a business model. It's an ecosystem that grows even more valuable, the deeper our customers go into it. And rather than being a target for disruption, we are the disruptor.

The current environment is accelerating our growth as customers consolidate around platforms that they trust to scale with them. The ability to capture data at the point of action and integrate it seamlessly across complex, regulated ecosystems is a rare capability and one that we believe will define the next generation of public safety technology. What you see in our sensor and product portfolio today is compelling. What it becomes over the next few years is what truly excites me.

Our sensor network is most valuable, not as a system of record, but as a system of action. The ability to surface and connect data in real time across active incident and task workflows is what separates a truly integrated platform from a collection of devices. Post-incident analysis has its place, but real-time intelligence is where outcomes change. That is the capability we're building toward and one where we believe very few organizations in the world are positioned to deliver.

What makes this even more powerful is, of course, AI, not bolted on after the fact, but embedded natively within the workflow and accessible directly through each device. This is the difference between technology that assists and technology that transforms. We are giving our customers genuine superpowers, the ability to do things that simply were not possible before. And we believe that potential has only begun to be realized.

For most of my career, people thought we were crazy. But now the breadth of what Axon has built and the vision that connects it, it was not obvious to the outside world for a long time. And there were moments it was easier to just keep our heads down and build. But things have changed. The vision that has driven every product decision, every acquisition and every bet is now coming into focus for the broader market. People are starting to see what we have always envisioned.

Let me give you a few examples of why I believe that. So here's one to make the vision tangible. A 911 call comes in and it's answered instantly. If it's not a true emergency, it's handled automatically by AI, freeing human capacity for the moments that matter most. If it is an emergency, the full weight of the Axon ecosystem activates in seconds. The call is transcribed and translated from just about any language in real time, breaking down language barriers that have historically cost critical minutes.

Location confirmed, context captured, crime center notified, live video from city cameras, public sources, from the 911 caller's phone and vehicle intelligence all flowing in real time. A drone already airborne and gathering awareness before the first responder has left the station. By the time the boots hit the ground, the situation is already understood. And in a growing number of cases, the drone does not just inform the response, it is the response where it holds the situation safely, creating the time and visibility needed for a better outcome. This is the power of sensors connected and supercharged with AI.

Next, emergency response is just one dimension of what this ecosystem makes possible. Consider the challenge of connecting physical infrastructure and protecting it against a new class of threat. Drones are the physical equivalent of a cyberattack. They're low cost, widely available and capable of causing outsized disruption and harm in the wrong hands. A single consumer drone can shut down an airport, compromise a stadium or create chaos at a public event.

The question is no longer whether this threat is real. It is whether you are ready for it. At a major venue, an unauthorized drone enters restricted airspace. Our integrated sensor network flags it immediately, location of the aircraft, flight path and origin point of the operator are identified in seconds. Security engages on the ground. Law enforcement has the same real-time picture. The operator standing in a nearby parking lot realizes the response is already underway, and this disruption ends before it escalates and the event continues.

But detection is only half the equation. Knowing a threat exists means nothing if you cannot neutralize it. Our DeDrone Defender uses the same sensor network that identified the threat to aim a sophisticated jamming system directly at the drone, delivering precise electromagnetic interference on the exact frequency it is using to communicate, not a broad blanket, a surgical one, a surgical response.

Today, active drone mitigation is reserved for federal agencies, but the threat has democratized faster than the law has adapted. And many times, we will build ahead of the law and be involved in helping to change the law. So we're active at all levels of government. And what once only mattered at a presidential inauguration now matters at your county fair or your Friday night football game, drones are a threat everywhere. And we're not building for today's threats in today's regulatory environment alone. We're building for tomorrow's.

When the law catches up, and we believe it will, Axon will already be there. This is the same connected AI-powered ecosystem applied to a different threat, and it works exactly the same way. Now let's take this ecosystem in a completely different direction. A retail associate faces difficult situations regularly. Before they ever encounter one, they've already been trained for it through our immersive AI-driven MetaCoach, scenarios designed to build the confidence and judgment to stay safe, deescalate and prevent situations from spiraling. It's AI-centric, and it can be delivered on any screen conveniently and effectively.

When an incident does occur, they're ready, camera activated, panic feature engaged. Their security team is live within seconds, communicating directly through the device and pulling additional camera angles to guide the response in real time. The incident is automatically summarized and transmitted as an emergency to the local appropriate police department. The closest officer with retail crime training is dispatched. They arrive, deescalate and documentation begins immediately. That is where most systems stop. Ours does not.

The post-incident reporting system cross-references the individual against prior incidents, aggregates the supporting evidence and delivers a complete prosecution-ready summary directly to the prosecutor's office. Justice is served, and that associate comes back to work the next day, not rattled but confident, knowing they have the training, the tools and an entire ecosystem behind them. This is end-to-end community safety, not a product, not a platform. It's really a promise.

Sensors deployed citywide by governments, businesses and private citizens, unified in a privacy-preserving way into a system that detects threats, accelerates response and drives outcomes that matter. Every stakeholder is connected, every incident better handled than the one before. The goal was never just faster response times or better documentation. It was a community that works together, feels safer together, is more connected and trusts one another more because of it. That's what we're building.

And again, we're just getting started. So what excites me most is this. We're not building for just one use case. We're building for many of them. Corrections, retail, health care, federal, the courtroom, the back office, every environment where safety, documentation and accountability matter is an environment where Axon belongs. A correctional officer with the tools to deescalate before conflict starts, a retail manager with real-time visibility into store operations; an ER nurse whose documentation burden drops so she can focus on the patient in front of her, a federal agent with the same integrated platform as the local officer on the be; a prosecutor who walks into court with a clear evidence-based picture of exactly what happened. The platform is the same. The impact scales to every corner of public safety and now beyond. That is the opportunity in front of us.

So let me be direct with you. We are at a moment unlike anything I've seen in 30 years of building this company. AI is not an incremental shift. It is not a bubble. It is not overblown. It is a fundamental disruption. It is a force, and it will break companies that are not ready for it. I've watched tech cycles come and go. This one is different. The speed is different, the stakes are different, and it's what we've been building for, for the past decade or more. And I've never been more confident in Axon's position.

We're not a simple all software company waiting to be undercut by a cheaper model or a faster startup. We're an integrated ecosystem of hardware, software and real-world data embedded in regulated environments, trusted by the customers who depend on us most. And that trust is not a marketing line. It is the result of 30 years of showing up, delivering and earning the right to be a partner rather than a vendor.

Here's how I see the opportunity. If we deploy AI more aggressively and more thoughtfully than anyone else in this space, while honoring the responsibility that comes with operating in the environments we operate in, we will create value that our customers simply cannot replicate, cannot replace and most importantly, they will not want to because they trust us. They will reward that with deeper partnerships, larger opportunities and bigger problems for us to go solve together. None of this gives us permission to relax. Complacency is fatal.

In a world moving as fast, yesterday's success is not a foundation. It is a liability if you let it make you comfortable. As Josh says, we got to focus on the next play. We had a great year, but Axon is not about getting comfortable. We're leaning in harder than we ever have. We will take bold risks. We will invest aggressively. We will reimagine everything AI can touch in what we do, and we will do it without losing sight of the mission that has always driven us.

Axon has never been built on smooth sailing. We've been built on reinvention, on finding a way through when others said there was none. That is not just our history, it's our competitive advantage. And right now, it has never been more relevant.

So let me leave you with this. What I've described today is not a vision deck. It's not a road map for the next few years. It's happening now, and it's arriving faster than any of us anticipated. The pace of what our teams are building, the creativity I see accelerating across this company, the acceleration they are delivering against their original road maps, this is the Axon I've always believed in. And right now, we are hitting -- we are firing on every cylinder. We're living through a pivotal chapter, not just for Axon, not just for public safety, but for humanity, the moment where human and machine intelligence begin working together to solve problems that once felt permanent. It's not hyperbole. It's what I see when I walk halls to this company every day.

I've been doing this for over 30 years. I've never been more energized than I am right now. We're pushing the arc of history away from violence toward a world where killing is no longer necessary or acceptable. That mission hasn't changed. Our ability to deliver on it has grown and it has never been greater. Now what matters is execution. And by that measure, we've never been stronger. Let's roll.

Thanks, Rick, everyone. So we'll spend the next half of the call today taking everyone's questions. Up first, we have Mike Ng at Goldman Sachs.

Historically, you've given us a sense of what bookings growth could look like on an absolute basis or relative to revenue growth. I was just wondering if you could talk about what you're expecting around bookings growth and discuss the demand environment in 2026?

And then relatedly, are you expecting to see any meaningful product or customer vertical inflections over the next 3 years embedded in the guidance?

Yes. Thanks a lot, Michael. I'd say at this point in time, we probably want to stay away from any bookings guidance. But I would say qualitatively, as we get toward the later part of the year and I start to have more visibility just like in the past years, I can certainly give more information then.

But from a demand perspective, never been more confident across the Board. Like we knew our core was rolling, and we're excited about that. But seeing these new products layer on and just the stand-alone demand for them in some cases and the kind of bundled demand in conjunction with some of our other products, it's just -- it's coming together really nicely. And I think it's very, very possible that all 4 of our core markets are in a place to have banner years this year. And it's going to take a lot of execution and a lot of focus, a lot of discipline, but I'll bet on our team.

Great. And just as my follow-up, just on the strategy to become the #1 global sensor network, it seems like Axon 911, building on prepared and Carbyne should be really foundational to that. Could you talk a little bit about the differentiation that you guys have relative to the incumbents? What does the go-to-market look like to address this wider group of constituents that you may have done a little bit less with in the past, like Fire and EMS?

Sure. Jeff, why don't you cover the product and then -- or Rick cover the product, I'd be happy to cover the go-to-market motion.

I'm going to give Jeff a little chance to speak here, and then maybe I'll top up after.

Yes, sure. Thanks for the question. Michael, I think like we talked about before, the combination of sort of two steps. One is within 911 and then 911, how it connects to the rest of the ecosystem and everything Rick just talked about.

So within 911, the combination of Prepared and Carbyne and why we were so excited to bring both of them into the Axon fold is because it's breadth and depth. And so what Prepared does is it is this AI-powered modern overlay that instantly adds value with almost 0 deployment complexity that can be done in extremely short order to any PSAP anywhere instantly turbocharging their ability to have a faster and more efficient workforce and to feed real-time data about incidents into a real-time crime center like Fusus and the like, and I'll come back to that in a moment.

So it is not competitive with the legacy systems. It is an add-on and an instant overlay that's extremely efficient and effective. And then Carbyne comes right around behind that and says as an agency is ready whenever they're ready and many and many and more of them are getting ready sooner to say, we want to modernize our overall call handling infrastructure and have top to bottom the absolute best full stack for powering 911, Carbyne has already proven and continues to prove that pound for pound, they can outperform on every metric that matters those incumbent systems.

And so the combination of those 2, we think, sets us up very, very well, both right now and in the years to come. And then both of those connect to the ecosystem in a very advantaged way in the vignettes that Rick already shared. So the ability to as seamlessly as possible, take that signal from 911, flow it right into the RTCC with Fusus, flow it right into DFR with Skydio and more, and then all the way connected from there to all of our other sensors and signals, including the ones that are being worn by officers.

And so again, agencies will pick individually which pieces they want the most, but the complete combination is really unmatched and unbeatable.

Thanks a lot, Jeff. And from a go-to-market perspective, Michael, you're right to identify the fact that while there's overlap in the real-time crime center, the PSAPs are an extension of our customer base. I think Prepared's brand -- and look, the Carbyne acquisition closed just very recently. So most of my comments will be more geared toward Prepared as we've made a little more headway given that the acquisition was last year. These folks are very well ingrained in this customer set, and they're very well liked and respected.

And I'd say any acquisition we do ever starts with the quality of the team, like it doesn't really matter to us who's ahead and who's behind. In this case, we believe Prepared is ahead and Carbyne is ahead in next-gen call handling, but these teams are very, very talented. So not only are we placing a bet on this technology, we're placing a bet on the leaders here.

And specifically, Michael Chime, CEO of Prepared, this guy is going to win in 911. We're betting on him. We're arming him with what he needs, coupled with the mirror at Carbyne, we think we're going to be a very, very, very competitive group into the future, and we're excited about that.

One thing I want to just pile on with one other thing. If you look at -- there's sort of 2 general acquisition strategies, I'd say, in our industry. There's buy the mature cash cow industry leader and you sort of do that sort of a roll-up, which is not what we do, or you look at who are the disruptors that bring a fresh tech stack, Fusus, Dedrone, Prepared, Carbyne. These are all category upstarts that have a fresh technology stack that we can bring and integrate with what we're doing. The alternative is you buy a ton of tech debt. And so just because you've got a bunch of sort of legacy businesses under one brand doesn't mean that the systems play well together. And especially if we don't get the cultural elements right, driving change in large organizations is ever harder.

So I want to thank Jeff, in particular, and Josh, I mean, I drive these guys nuts. They're trying to run a large business. And I'm always coming in like, hey, we got to push over here. We got to be changing. And I'm really proud. I mean, Jeff has shown me just great examples. I think our team is adopting AI internally at a speed that I'm just really proud of. And it's not easy. There's also -- frankly, at times, there's pressure to, hey, should we be more focused, stay in one market, stay in one product segment. But you look at the breadth of all the different things we're doing across that portfolio and now in so many different markets, -- and the benefit of that is when the ground is shifting beneath our feet, we're not just relying -- I would not want to be a software-only company right now. I think this whole SaaS box looks has got some real risk to it.

But when you combine like doing integrated hardware and software and all the data handling and network effects of sharing across all these different users and now in each new market we go into, I just met with a huge company in the medical response space. The ability we can give them to directly communicate and share data with other first responders without going -- having to rely on a radio right out of the 1970s, we think sets us up to continue to really build this ecosystem for the future and disrupt many of the category incumbents.

Up next, we have Will Power at Baird.

Okay. Great. Well, really strong results. Congratulations to the whole team. And Rick, probably most importantly, great to hear some of the early green shoots. It seems like you're seeing out of the moonshot land. So best of luck on that, obviously moving forward. Look, as I look at the future contract bookings, that provides really strong visibility seemingly for 2026. So I guess I want to focus on '27 and '28 and maybe better understand the confidence and visibility to sustain similar growth rates. Anything you can share on contribution from existing products versus new products? Any particular standouts there? And then I have a quick follow-up.

Sure. I mean I think, Will, in general, I think we're still growing into these new offerings, the AI Era Plan, the new version of OSP that launched this year. There's just more and more products. We have essentially more arrows in our quiver to keep selling and all of the buying signals are there. And frankly, we see a multitude of ways to get to that CAGR. I mean, we have, like I said, 4 markets that are all really showing signs of growth and a bunch of new products that we're really excited to see the adoption of.

Maybe I'll call out one, which is Dedrone. That one, I think, has the potential to be really exciting, both because in state and local, we have the opportunity to really make an impact there with it, but it's really opening doors into both federal and international and often like the land and expand might not always be TASER into something else anymore. It might be Dedrone into something else. And we're just seeing that play out so beautifully across both federal and international. It gives us a lot of confidence in the out years. And so certainly, everything we're looking at in terms of indicators suggest that the next 3 years is going to be really exciting here.

Yes. The only thing I would add for everyone is I don't think you need to assume anything differently than what we have just delivered in this last year, right? There's no major change that you have to forecast or underwrite for 2028. All of the product lines are growing. We're seeing traction in all the markets. You can just continue to roll that forward.

Okay. I just -- that's all very helpful. Just maybe to follow up on some of the AI commentary. Great to see the bookings strength there. It'd be great to get any kind of perspective on kind of what any year. I mean, I think last year was kind of the first big year for bookings, right, given when it was rolled out. Is that something that could double this year? I mean what's kind of the -- what does the pipeline look like? And what is the product road map there? Anything you can share on that front?

Well, I take a lot of craft at Axon for sports analogies. So you're not helping me out here. But I would say we're in the very early innings, like bottom of the first, top of the second, we're talking about here. We've got a lot of pipeline ahead of us in AI, and we've got the opportunity to continue deploying more and more AI products every year into this plan. And as such, the value will continue to increase in it and certainly attract more and more customers along the way. So this is one where this is like we're -- game just started, National Anthem is over and teams are running out on the field here.

Up next we have Jonathan Ho at William Blair.

Let me echo the congratulations as well on the strong quarter. Can you -- I also appreciate sort of the additional detail on your AI moats. And so I wanted to start there and maybe dig in a little bit more. Can you help us understand some of the domain knowledge and data moats that you have in the AI world? And maybe how does that relationship -- the vision for working with some of the frontier models, how does that look like now and in the future?

I was going to see if Jeff wanted to take that one.

Maybe I'll start and then, Rick, you can chime on. So I think, first, I think that the grounding, and you've heard us talk about this before and goes with what Josh was saying, too, is that I think differentiation and success here in AI at its core in a world where everybody has access to the same commodity but very powerful frontier models is really, one, having the right physical sockets, and that's why hardware plays such a big role, right? So if you think about something like even translation that we came out with last year that is having such a big hit, the raw technology of translation comes with the core models. That's not where our -- either our innovation or our differentiation or our moat is.

The key is that we are marrying that up with a clear and present, very real specific need for our customers all day, every day in their real job, and we are embedding it ergonomically and physically into the device that a very, very, very large number of the people in this category are already wearing every day. And that's why -- and like if you think about an officer carrying a phone and trying to pull out the phone and launch an app and this and that and the other or add some other piece of equipment that they're not used to or have -- all of those things are radically simplified when we simply can build in that functionality into an experience and a physical artifact that we already have that socket for.

The second, as you said, is ultimately about the data. And as you know, we simultaneously have, I think, the highest bar of anyone out there in our own or even other segments about thinking ethically and responsibly about how we use any kind of data and certainly customer data in the right ways. But ultimately, even with the highest possible bar of dedication to responsible innovation, our responsibility and our ability, given that massive -- you talked about the millions of hours of video and everything else is for us to use the state-of-the-art as it keeps evolving with what the models can do to get differentiated results out of the same models that everybody else can use by leveraging in a responsible way, the unique customer data that we are the custodians of.

Maybe I'll just add one really, really simple add-on to that, which is like our CEO is in the top 0.0001% of AI users globally. So you can imagine what that means for everyone else at the company when that's Rick, right? And so I think I'm particularly proud of the push we've gotten from Rick, but also Jeff equally leading the charge on this and really establishing our identity as an AI company in public safety.

The only thing I would add on to the tail end of that is also the fact that we are managing these business process flows of this critical information because of the whole Evidence.com ecosystem, right? The evidence comes in, we store it, we move it around workflows that have traditionally been manual. The opportunity for us to automate more and more of that with AI is just like we're in this incredible position to automate away just a ton of work for our customers. And then it goes to the prosecutor, it goes to the defense attorney. And now we're now selling premium products there years ago. And we -- I think we still do have a free version of Evidence.com for prosecutors to be able to just receive evidence, but they're now buying premium versions because, boy, they sure love that evidence to come in and get processed for all the things they've got to do with it, make sure we're helping track discovery requests and helping them find where the needles in the haystack, the things they need to look at, most importantly, when they get 100 hours of video in a case.

So I think the -- it really is that we've got sort of the manual version of these workflows with this highly secure data, and it's shame on us if we can't be the ones who really delight our customers by bringing AI in to solve more and more problems for them on their existing workflows and then doing new things that they never thought possible.

Sockets, workflows and real jobs to be done. So many companies out there that are trying to work their way through this situation, they are trying to sort of, as Rick said before, kind of do AI for AI's sake or paint it on as an afterthought. Foundationally, we are always grounded in actually solving the real everyday workflows for our customers, and we have the benefit of having these incredibly sticky all day, everyday workflows and physical sockets that they are already depending on us for, and they are the perfect conduits to insert AI done right to help accelerate what they're trying to get done.

Excellent. It looks like you're a clear beneficiary of this AI trend. One thing I wanted to also better understand is with the enterprise opportunity, you've now called out sort of multiple large contracts. It seems like we're just at the beginning here as well. What maybe has to happen from a go-to-market perspective to achieve that vision? What do you have to do to build out a channel and to sell this even more into newer enterprises?

Sure thing. I think, look, while it's a different market, I think we've seen this play out before. Some of us were here in 2009, 2010, 2011 when we were building the Video business in public safety, and we understand what it takes to like get momentum out of the gate to make your first customer successful to parlay that into customers 2, 3 and -- and the reality is it's like -- it's an exponential curve. It's not linear. Like we go from 1 to 4 to 12 customers and each of those kind of is the next like stone across the creep that we have to cross, and it's going to take a little time. But for me, the most important thing out of the gate is not how many enterprise customers we sign up in short order. It's how many enterprise customers we make successful and delighted with the products early on. And then the rest has a way of figuring itself out.

And so for us, it's much more about getting the right team, focusing on the right early customers, focusing on the right channel partners in certain markets like private security. And so that's just a process that's playing out. But every year, we see a few more indicators that this is something that's truly turning into a valuable business. And while we've got some work to do, for sure, like my opinion is, as long as we keep things simple and put one in front of -- put one foot in front of the other, we're going to end up in a very exciting place in the enterprise business.

Thanks, Jonathan. Up next, we have Andrew Sherman at TD Cowen.

Congrats on the quarter. Josh, TASER saw a huge acceleration to 32% growth. Congrats on hitting $1 billion run rate there and also the decline in the officer-related debts. Talk about any specific drivers in the quarter that helped that? Where do you stand from a capacity standpoint? And is the Apollo cartridge still slated for this year?

So I'll let Rick weigh in on the Apollo DART project. In terms of TASER demand, I think it's a matter of just execution. I think one thing people have got to realize a little bit about bookings, and I think Q3 and Q4 were a good example of this is the bigger the deals get like sometimes Q3 like last year will be a decent quarter, but not a double over the last year, but then we come back in Q4 with a couple of these large, large deals that we thought had a chance to close in Q3 and they closed in Q4. So with 9-figure deals and these bigger and bigger deals, there's just a little more variability quarter-to-quarter.

And I think that's more of what happened. I think it was -- the demand was there, and we are very confident in it. It's just some of those large deals pushed from Q3 to Q4, and the team did a good job getting them soon up before the end of the year. But we certainly feel like TASER demand is very strong. And it's exciting to see, obviously, the progress on the moonshot and to hear the testimonials from customers saying in or coming in. We're only talking about a low thousands number. So when you hear an agency say, "Hey, there were 5 or 7 of these that would have resulted in a shooting, that's like a statistically significant amount that we're starting to see in terms of saves instead of shootings in public safety. And so we're really encouraged to see the trend line. And again, a lot of work to do, but feeling like we're on the right track.

Rick, did you want to cover the Apollo DART?

Yes. Apollo is testing extremely well, better than we even expected in laboratory testing, meaning the percentage of time we can get through heavy clothing being very high and the percentage of time we get an over penetration is very low. So that's great. It's going to be going shortly up to the Arctic circle for some field testing. We've made heavy investments in the automation. It is not an easy product to make. If you look at the videos, it kind of looks like this pretty cool object.

The thing is a flying hypodermic needle that we have like cut with incredible precision to create these cascading crumple zones so we can use the physics and fluid dynamics of skin function to create a chain reaction that makes this thing stop cutting through materials and penetrating. So I think it's a really big technological breakthrough. And I would say it's probably not going to be a meaningful contributor to revenue this year, but it will start to be in real customers' hands for the next cold season is the goal.

That's great. One more quick one for you, Josh. Europe, obviously had a huge year. Great to hear the 2 big deals in Q4. How is the pipeline for this year tracking? How do you keep up that momentum? What's driving that?

Sure thing. It's a story of -- we had 2 huge deals at the end of the year that certainly helped the result, coupled with a lot of medium-sized deals. And I think that's kind of the thing. Like as it's growing, we saw this in state and local, we feel good about the foundational level, but for things to really grow fast, we've got to have more and more big deals. And so we've got a bunch of big deal hunters over there in Europe now, and they're bringing back more and more opportunity every quarter. And while the timing is going to vary a little quarter-to-quarter, we feel like we've got a few really, really exciting opportunities in international this year, and the team is going to focus on closing them.

Thanks, Andrew. Up next, we have Mike Latimore at Northland.

So I think you've mentioned that within the longer-term guidance, maybe software grows a little faster than hardware. I guess is there any thought that maybe the software growth rate actually improves or accelerates a little bit given some of the AI applications that are going in there?

I mean I think we're obviously really excited with the performance we saw, but our hardware business is also doing great. So I mean, I think they're both performing so well. It's hard to really call which will be a bigger contributor. I think you've seen in the last couple of years, though, that software has been slightly outpacing hardware growth, and that's a tailwind for us from a gross margin standpoint.

We do have monetary dynamics there with like how much software historically we've booked, when you just layer on the AI Era Plan on top of that, now there's just so many more dollars available in software and AI relative to hardware. So certainly, we're excited about that and seeing more and more software start to pile up here.

We do have some more hardware magic up our sleeve over the next couple of years here. So I do want to give a shout out to Brittany as well. She had her work cut out working with me on the long-term plan because one of the things I worry about is that if we underinvest in continuing to build out the hardware elements of the ecosystem, which are going to -- they're not going to be as high margin, at least initially, especially as the software, but I think it's important to the health of the business. And Brittany and her team really did a nice job really rigorously modeling this out to show me we have plenty of room to be able to hit all the investments we want to invest in and continue to deliver growing profitability to our shareholders.

Great. And then just a second question for me. It seems like you've won some good international cloud deals lately. Do you see sort of an acceleration there? Is that kind of loosening up where the dam sort of broken and now international cloud is going to -- they're more comfortable with that model?

Yes, for sure, for sure. And we think AI is the thing that takes that opportunity to the next level as well. Now it's like if you want to deploy things on-premise, you're essentially signing up for 0 AI tools into the future, which I think is becoming pretty clearly not a winning formula. And so I think that is a nice push to the cloud for some governments that have been slow to adopt it. And we're here certainly waiting for that moment with a lot to offer, not only in cloud, but also in AI.

Up next, we have David Paige at RBC, and welcome to the calls with us.

Erik. Nice to be here. Congrats on the great results, team. I had a question -- maybe jumping back to what Jonathan Ho had asked, in terms of driving growth in the enterprise market and the go-to-market, I guess if I think about like U.S. public safety, police station, like the Chief of Police would then call like the neighboring chief of police and say, "Oh, hey, I have this great Axon product. Why don't you look at it, look how beneficial it is." But like a big box retailer wouldn't exactly call their biggest competitor and say, "Hey, I have this great camera that's reducing theft and all the benefits that it has." So I was just curious, maybe you could flesh out just how you're going after new business there.

Yes. Let me take on that one to start because I would actually tell you, they do colleagues, the security departments are mostly former law enforcement. And they're under a lot of pressure, and they don't view that as a competitive advantage in any way. It that's an area like we partner with Auror, which is one of our investment companies out of New Zealand that basically runs a case management software similar to Evidence.com for retailers. And they share wildly with each other because they want to track -- they're all being hit with these organized retail crime organizations. And so there is actually much more collaboration than I was expecting. I expected a more competitive dynamic, and there certainly is on the retail side, but I'm not seeing anybody viewing this as an area of competitive advantage. They're quite collaborative.

And then similarly, on the medical side, I was just with a major medical provider. And it was interesting there, there's a fair amount of mission-driven stuff, too. This company, in particular, operates a ton of ambulances and vehicles and EMS services. But there day-to-day, they're pretty geographically segmented, and they're constantly deploying ambulances that calls that may come into a competitor or they'll have a call that comes in that they'll end up shunting over to a competitor. And I think in those cases, I've not seen in those industries that a negative competitive dynamic. In fact, there's a lot of the same collaboration.

Yes. I'd just add, it's incumbent upon us to build the business case also for every customer. Ultimately, I think you're right, in general, like there's an element of competition, at least a little more so than in public safety. But ultimately, all of these decision-makers understand what an ROI looks like and that our products drive that ROI and solve real problems for them. So our lead gen efforts and our -- how we show up for new prospects matters probably a little more here than in public safety. But at the same time, I think the market is so much bigger as well that I don't think the opportunity slows down as a result of that nuance.

Up next, we have Jordan Lyonnais at Bank of America.

Rick, you touched on it a little bit in the Go Boldly podcast where things had gone where you expected. So when we look out to 2028, having this joint sensor just under the Axon tool belt, what do you worry about could go wrong?

I think for us, a misstep around sort of privacy and data handling. We are seeing that those are concerns right now out in the public. I think that would be one where we could make a mistake that would have outsized negative consequences. I think also if we -- our customers are going to expect that we continue to deliver more and more value. I mean they're all hearing the same things we all are that you can do more with less cost in terms of developing technology. And so I think it's incumbent on us to make sure we're still earning our way up the value chain the way we always have.

It something I'm particularly proud of, like when Josh talks about where we were 5 years ago with a much lower peak price point, it was, I think, like in the $200 range. We haven't just like raised prices to get there. We've launched a ton of new products that didn't exist. And I think that we've got to just continue to deliver there. And Jeff and his team are pretty busy making sure that I think expectations for what we deliver in the AI Era Plan are going to continue to grow, and we've got to hit it.

Thanks, Jordan. Up next, we have Keith Housum at Northcoast.

Just unpacking the enterprise opportunity a little bit more. Perhaps you guys can provide a little bit of color about, one, I guess, which verticals are you having the initial success in? And perhaps any color you can give on the second large customer that you guys have in terms of which vertical they buy in? And then finally, I guess, as you guys are going after the enterprise market, are you leading with Fusus? Are you leading with the Mini or what's kind of like the lead product there? And are people signing up for a multipack or are they going with one product and the goal is to land and expand?

Yes. Thanks, Keith, and good to see you. I would say, look, like our salespeople, we're like as allergic as to the like show up and throw up mindset as you possibly could be. Like we want our salespeople showing up and asking a million questions to identify the opportunity and then figure out what product is going to solve the problem. And so I think there's moments where ABW Mini leads or Axon Body Mini leads to more conversations around software and AI. I think there's moments where Fusus is really the exciting part. I think there's moments where Outpost and Lightpost or DFR or counter drone are the exciting first opportunities.

And I think that's -- it's similar to international. It's like the beauty of it is -- you just got to get in with one product and then everything works so synergistically, we'll bet on ourselves and our ability to sell more over time. And so I think now more than ever, it varies. Like for a little while, it was a Body cam and then you go to the next step. Now it can be a number of different first products.

Great. Great. Any color on the large customer that you guys announced in your second one in enterprise?

Yes. So I appreciate you asking, Keith. Personally, I'm not sure that we're going to be announcing logos from us on enterprise deals. I'm not sure that it serves us. And I think we'll see. I think some of these will just come out in the press or hopefully, some of you guys are walking into these major businesses over time and you see our products just being used in the wild. But I think we're trying to do the calculus of like is it worth starting to identify these by name for competitive reasons or not. And so that -- hence our trepidation on that.

Thanks, Keith. Up next, we have Meta Marshall at Morgan Stanley.

Congrats. I guess just maybe first question on the 911 market. Just is that a different buyer kind of within the organization? Or just how much can you use kind of cross-selling and leveraging the relationships you already have within kind of some of the state and local environments?

And then maybe just a second quick question for Brittany. You mentioned the 30% on the premium OSP plan. Understanding that continues to kind of get enhanced over time. But do you see any major changes to that percentage kind of driving some of your expectations for 2028?

Brittany, do you want to start with the second one first?

Yes, sure. I mean, look, the interesting thing about that is the premium plan goes up every year. So each year, we start with a new premium plan. I do think that over time, we will continue to roll more of our customers on to our most premium plans. That's a little bit of what you're seeing underlining the 125% NRR number. So I think you can continue to see it moving up over time. I also think, though, that we continue to add amazing new products, and that takes that premium plan price point up. So it's not like I see us getting saturated on how many people are on the premium plan in the next few years.

And Meta, great question on the buyer persona and 911. I don't think it's cut and dry with like one buyer. Sometimes the RTCC really has a lot of say over that, the real-time crime center. Sometimes the police department or county operates their own 911 center and there, again, it's a very tight decision loop. Sometimes a PSAP supports 5, 10, 20-plus different accounts. And there, that's probably the case where we get the lease network effects from our existing customer base, but there's still some. And I think Prepared and Carbyne over the past several years have really built up their own brands and relationships in those spaces. So I think we view this as an opportunity to bring more potential buyers into our universe, not necessarily like an uphill battle to go meet a bunch of new buyers for the first time.

Thank you, Meta. Up next, we have George Notter at Wolfe.

All right. I think I heard you say earlier in the call that you have 500 agencies deploying Axon Assistant. I think Axon Assistant is an element of the AI Eras Plan. I guess I'm inferring that you have 500 AI Eras customers at this point, and that translates into $750 million in bookings. Is that the right math exercise? Am I looking at that correctly?

Not quite, George, because you could buy some of these as a stand-alone as well. And so it's not one for one, any customer who adopts a Draft One or an Axon Assistant is automatically an AI Era customer. But directionally, that's kind of the right line of thinking that a number of those deals will be on the AI Era Plan and translate into a certain number of bookings. And we're -- you know what the pricing is, we publish it. It's not a secret. It's just a matter of covering the market.

I think also, George, what we were calling out is that's one of our very newest features inside the AI Era Plan. And so not every customer turns on a new feature immediately. So we're sharing that because it's a really nice indicator that customers are excited for it and they're starting to adopt it, but it does not tie exactly back to how many customers are on our AI Era Plan.

Got it. Okay. I guess where I was going with this is I'm trying to understand sort of the penetration rate you've got at this point on AI Eras. And I guess if I think about 15,000 law enforcement agencies in the U.S., roughly just the U.S., and I kind of use that 500 number as a proxy for your penetration. Like am I in the right ballpark in terms of where you are in penetration rate?

I would go back and I would look at what we charge on a per officer per month basis for that, consider that inside of the $750 million of bookings that we shared, and then you can tie that sort of back to the officer count.

Up next, we have Jim Fish at Piper Sandler.

Look, going back on TASER, TASER noticeably reaccelerated, and we've been hearing customers that had been on TASER 7 were sort of being told end of support on that as they come up for renewal, not a forced refresh by any means across the base, but encouraging them to move to TASER 10. So I guess how much refresh of TASER 7 to 10 could we see this year? Or what percentage of the base is still actually on some of the legacy offerings that we can actually have a bit of an upgrade cycle on top of the fact that if I look back 5 years ago, your incremental bookings really improved versus this time last year. So should we be expecting a larger portion of your growth this year actually coming just from contract renewals?

So Jim, great question. I don't think it's the case. We view it as failure when a customer buys TASER 10 and then their upgrade is a TASER 10 5 years from now. So we're really focused on trying to get the new version of the TASER out to market as fast as we can. I would say TASER 7, there's -- we would never not support the product. Part of our -- actually, part of our inventory strategy is like, hey, we launch a TASER. We know it ships for 15 or 20 years before it's discontinued. And that kind of is the hedge on being more aggressive with holding more inventory upfront.

So we'll continue to support TASER 7. There's plenty of customers on it and using it. Of course, we view those as the population. We've got to go earn the right to upgrade, and we believe we will. But high level, I think you should think of the TASER business this year as plenty of demand and orders to support the revenue guidance. So certainly, we don't see anything different than that.

Yes. I would maybe just add, I mean, that's all spot on. I mean, including the fact that like we still have customers we're selling X2, too. So yes, TASER 10 is doing incredibly well, but that's driven a lot more by the efficacy of the product than it is us not supporting it. But I think the thing I wouldn't miss is as we have big corrections deals and we have big international deals, you're seeing new customers come in, right? So there's always this conversation around TASER of like what is the upgrade cycle. That still exists. Customers do 5- to 10-year contracts. We upgrade TASER every 5 years. But don't forget the piece in the TASER business as new customers are coming in and actually adopting TASER.

We'll go to Tim Long at Barclays next.

Just 2 quick ones, if I could. First, obviously, a lot of success in these other markets outside of state and local. So just curious, anything jump out that's different there relative to deals that are in more of the core, things like win rate, deal sizes, bundles, anything like that, that you can point to directionally on those?

And then second, I did want to follow up on the hardware comments on T10 and AB4 both seem to have a ton of incremental utility compared to prior products. So Rick, I think you talked about some magic in hardware, but -- just curious, as you've taken such big leaps on this last set of some of the core products, does it get more and more difficult over time to innovate further and take bigger steps compared to what was just accomplished with the really successful ones?

No, I actually can see, I think our next generations of hardware are all going to be pretty compelling. We've got at least one new category in the pipeline as well. But I'm knee-deep in the next-generation TASER, knee-deep with Rubén Caballero, who Jeff hired on his team, who's leading our sensors space. His last gig -- well, I don't know if it's his last gig, but he worked for Steve Jobs directly as a hardware lead on the iPhone. So bringing him in, a lot of new creative energy looking at our personal sensor space. So I think we still have a lot of room to innovate.

Jeff, how would you answer it?

No, I think that's spot on. I was just -- I was half jokingly saying we have at least 2 whole new categories in the pipeline. But I thought that was good. And I think to the -- everything we said on the call, it all just keep coming back to, I think, where we continue to differentiate on being the world's best combination in this area of hardware and software working together and on having a full spectrum portfolio of products that we grow both organically and through bringing on early-stage disruptive winning teams and product lines and bringing them into the fold in a way that is just as natural as if they were organically built, which is a completely different approach to just sort of GE style stacking together a bunch of independent separate nonintegrated companies.

I don't think we're anywhere close to running out of ideas and things to be innovative on, not on the product team, but neither Rick nor Jeff nor their teams are slowing down in any way.

And Tim, on your first question on the different market dynamics depending on which buyer we're talking about. Ultimately, state and local is a market that values premium products even if they carry premium prices. The only buyers that are buying anything else are doing that on price. They're willing to take a more primitive product at a lower price that is not full featured. And that's happening very, very rarely in state and local, and I believe that will continue to happen very, very rarely.

Internationally, we've said for years, hey, if you're a customer that wants on-prem with primitive tools and you want to pay a very inexpensive price for that, we're probably not the vendor for you. And there is some of that internationally. But the good news is more and more, we're seeing customers that value the premium workflows and products and tools between hardware and software, and those are becoming Axon customers. And so I think it just comes down to the intersection of price and quality and the buyers that really value price above all, they'll generally buy something else. But the good news for us is there are fewer and fewer of those buyers in public safety.

Thanks, Tim. Up next, we have Joe Cardoso at JPMorgan.

Maybe just one for me, just to be respectful of time here. When we think about the AI Era Plan traction today, just curious if you could touch on now that it's been in the market for a while or at least a year plus, if you could touch on customer behavior around adoption of the plan and whether you're seeing any interesting trends. And like maybe specifically, curious if adoption is being more done in isolation, meaning like you're just seeing folks go out and basically purchase the AI Era Plan or if you're seeing customers expand spend in other areas of the portfolio at the same time? Just trying to get a sense if you're seeing any pull-in as you're kind of going out to customers and pitching kind of the new plan there.

Yes. Thanks a lot, Joe. And I think, look, oftentimes, OSP and the AI Era Plan at this point are bought in tandem with each other, and that often includes a newer version of OSP with more new products in it. So I think it's fair to say that it's not in isolation that customers are buying the AI Era Plan, they're buying it along with other capabilities. And I think, look, we've got our customer success team, their sole measure of success day-to-day is adoption of new products. And so that's really what they're focused on. When we sell AI Era Plan, getting customers comfortable with using it is -- it takes a little bit of work, and that's what our customer success team does day in and day out, and they're very, very good at it.

I'm particularly excited. I think as we ideate and talk about new AI products that are going to go into that plan, I think this is going to be an exciting year for that, and we're going to start unlocking some new capabilities in that plan for customers over the coming months. And going into next year, I think there'll be a lot to talk about in terms of new capabilities in that plan. So certainly very bullish on what the future of AI adoption looks like amongst our customers.

Thanks, Joe. We'll squeeze one more in here. I know we're running up a little over on time. But -- so Trevor Walsh at Citizens.

Erik, let's get through them all. I mean all these -- everybody waited 1.5 hours here might as well let them ask the questions.

All right. Cool. I like it, Josh. Rick, maybe for you just on the commentary you made around drone legislation. You sounded like you were -- there was a little bit left to be desired about what's kind of currently out there. But as we kind of read through the most recently passed National Defense Act, there was a pretty robust language in there about letting -- moving from federal agency overview to giving state and local powers around both kind of drone tracking, taking down or mitigation of threat type drones. So I guess what do you think is lacking there still? Or what still needs to be done for you in that regard?

Well, I just think it's a continued evolution. Like I know there's some special accommodations being made for the World Cup for those cities. And then there's some more broad-based stuff. But I've been walking all the Congress. We got a bill to create a new less lethal category that would exempt the T10 from the Firearms Act. And then I understand why people say it will take an act of Congress with something that's going to be pretty hard to do. But we're just -- we're continuing to engage there.

So to be honest, I haven't checked in on the latest status of the -- where each type of regulation is on this. But I think just directionally, today, state and local really can't mitigate drones directly. I think in a few years, they'll all get that capability. And we may see it go to a fair number of private security type folks, too, like sporting stadiums and people are running critical infrastructure. So the main point is it's narrowly allowed capability today, but we're building the center network to be able to expand and be able to do mitigation work as well. And we just think that that's going to grow as the regulations loosen up.

And I'd also say, like to the administration's credit, they've been very open to modernizing policy around drones and counter drones, which we view as very helpful, like the engagement and conversations have generally given us a lot of confidence that the government is going to adapt with the technology.

We've got Josh Reilly at Needham.

All right. Just 2 quick items for me. On the international business outside the Commonwealth countries, would you kind of characterize that 2025 was that an inflection point in terms of that becoming a much bigger contributor to international? And then secondarily, on Carbyne and Prepared impact to the guidance, I got a number of e-mails into the quarter asking about the impact there on revenue and EBITDA. I know it's relatively immaterial, but any comment there?

I can take one...

I'll let Brittany with the second one, yes.

I'll start with the second one. On Carbyne, there's literally 0 impact because Carbyne wasn't even closed until this month. And to your point on Prepared, it was only partway through the quarter. It was really an immaterial impact. So we're very excited for both businesses, but you can expect to see those really start to impact going forward.

And Josh, what was the first question again? I think it was international related, but sorry.

Yes. Is there an inflection point in the international business that could be a good bode well for this year?

Look, it's only an inflection point if we follow it up with an even better year, right? And so we'll see at the end of the year if it was or it wasn't, it certainly feels that way, but it's not going to feel that way if we don't show up and do our jobs well and continue to bring on more and more international customers. So that will be the focal point. We feel like we have some wind at our back, and now we got to capitalize on it.

All right. And our final question will come from Jeremy Hamblin at Craig-Hallum.

And I'll add my congratulations. I'm going to ask a high-level question. So I think what's interesting, if we go back 3 years ago when you unveiled the FY '25 plan, at that point in time, you were assuming a 20% sales CAGR. And with each successive year, you've actually raised your expectations on your sales growth, your revenue growth for the year on your initial guidance here in February, including this year where it's 27% to 30%.

I want to just understand in terms of the visibility, like clearly, which must be significantly higher and how you feel about that today than you did about the business 3 years ago. What's providing that type of confidence? Is it that you just have a lot more shots on goal and a lot more ways that you can win? And obviously, the business has tacked on a lot of different areas, whether it's Axon 911, whether it's Dedrone, et cetera. But just can you provide a little more insight? You guys are typically pretty conservative. I don't know how many quarters in a row of beat and raises in the 20s, I think. But I just wanted to get some insight.

Yes. Jeremy, it's a great question, and I appreciate it. I think some of what you said certainly factors into it, but the biggest thing is the bookings growth rate, right? Like when we issued that guidance a few years ago, we were seeing bookings in that range as well in terms of year-over-year growth. Now all of a sudden, they're accelerating each year into a high point last year, and hopefully, we'll be able to trump that this year.

But when you look at that type of growth and you factor in what like all those guaranteed dollars already mean for us as they come in, certainly, it gives us more confidence that revenue will continue to be exciting in its growth rate. And at the end of the day, even 5-year normalized bookings were accelerating nicely year-over-year. And so again, even when you zero in, it gives us more and more confidence that these bookings are going to continue to translate into growing revenue. And so that's probably the #1 consideration.

Certainly, we see the pipeline and some of these larger deals take longer to close. And so we're talking about deals now that are going to hit next year in some of these markets. And so I think it's a combination of a few things. But ultimately, one of the things we think we do very, very well early every year is establish what the floor looks like. And then as things start to become more and more true throughout the year, we can update that guidance as we go. So that's a little bit of commentary about how we look at the growth rate.

I would echo that. I would -- Jeremy, just mechanically, if you look at it, we've got our future contracted bookings, and we talk about how 20% to 25% of that will convert in the following year. So if you think about how we did guidance, last year based on our future contracted bookings number. We're actually taking a very, very similar approach to our future contracted bookings number this year and how much we think bakes into it. We just have a bigger future contracted bookings number. So you have more that is naturally carrying over into the next year.

And then the delta between that future contracted bookings number and our guidance is based on the pipeline and what we think we can go get. And there, to your point, we just continue to see these underlying metrics like our NRR and the potential ARPU and what customers can do because we have so many more products and so many more markets, you can imagine that, that gives us comfort in hitting that relatively larger number with our pipeline each year. And you can actually roll that all the way forward to 2028 and sort of keep a consistent math philosophy.

Thank you. We'll kick it to Rick to close this out.

All right. Hell of a year, as Josh would say, next play. Again, just really pumped to be part of this team, getting to work on these problems and have supportive shareholders, especially as we enter this does feel like this year is different. Just the world is changing really fast. And for years, I keep putting up pictures of Charles Darwin quote that it's the adaptable that survive. And I think that's really the incumbent. Can we be as adaptable as the company we are today as we were when we were smaller. And only time will answer that, but we're sure focused on it.

So thanks, everybody. Stay safe, and we'll see you maybe at Axon Week, where we may have a few announcements.

Thanks, everyone.

Thank you.

Hi, everyone, and thank you for joining Axon's executive team today. We hope you've had a chance to read our shareholder letter released after the market closed, which you can find at investor.axon.com. Our remarks today are meant to build upon that letter. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our expectations as of today and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially as discussed in our SEC filings. We'll also discuss certain non-GAAP financial measures. Reconciliations to non-GAAP are included in our shareholder letter and available on our Investor Relations website. With that, before I turn it over to Rick, we have a quick video to show you. It shows a little bit about our vision for Axon 911. Let's pull it up.

[Presentation]

Thanks, Erik, and great job to our team who put that video together to help share some of the narrative of where we're going next as we extend the Axon ecosystem. So I'd like to welcome everybody to our Third Quarter 2025 Earnings Call. It's truly just an amazing time to be at Axon. Just a few weeks ago, we were at the major annual conferences across public safety, federal and military and enterprise, meeting with hundreds of customers to catch up on their top priorities and share our vision, which you just saw a glimpse of a piece of it in that video. Like me, our team walked away energized. We're incredibly excited about what we're building. The future we envision is coming together, and it's even more inspirational than I could have imagined a decade ago. At the heart of that future is the expansion of our ecosystem.

Our latest update outlines our path toward delivering Axon 911, which will be built on the foundations of Prepared and Carbyne, a major leap toward unifying the technology needed to deliver measurably better outcomes for communities and our customers. Prepared and Carbyne are powerfully complementary. Prepared is a low-friction AI capability that can be rapidly installed in any communication center, immediately giving call takers superpowers to speed through data collection, analysis and sharing. It can autonomously handle up to half of noncritical calls, freeing the human operators for true emergencies. On critical calls, Prepared serves as an intelligent assistant, taking on data collection so operators can focus on the human side of helping people in crisis. Just last week, we heard a story about a 911 call center for one of the largest U.S. cities who installed Prepared ahead of the 4th of July.

They completed implementation in about a month, which is incredibly fast. It's lightning fast for public safety. And in the first few days, they saw a 33% reduction in calls requiring a human operator even as the overall inbound volume was up significantly due to the holiday weekend. That's real immediate impact. And Carbyne replaces on-prem call center infrastructure with highly resilient cloud infrastructure, eliminating the enormous costs of running legacy equipment and allowing agencies to move at the exponential pace of modern technology rather than at the glacial pace of procurement. We see Carbyne repeating in voice communications, the success we had with evidence.com in moving agency data centers to the cloud. Now we'll do it with their call centers. Together, these capabilities let agencies make their existing systems smarter today and provide a smooth orderly path to full modernization over time.

Both leverage AI natively to rethink what's possible. Let me bring this to life. Imagine you need help. You dial 911. Today, the operator listens, gathers information and frenetically types it into a command line system. That information is then passed via a typed message over to a dispatcher who's a different person who reads that information and then relays it over the radio to police officers. It's an inherently inefficient system of the old telephone game, prone to risks of miscommunication. We can turn that process, and we are now turning it on its head. When you make that call, a network of connected devices and software across your city will activate instantly, analyzing information, prompting decisions and allowing the human operator to coordinate a faster, more informed response. Call handlers will focus on helping you instead of typing feverishly, while real-time prompts will enable the dispatch of human or drone responders.

And that suspicious reported person, we can handle that call autonomously. No need for a human operator. When there is an emergency, critical context will flow directly to those on scene through their body cameras, keeping them more informed, less distractive and better supported by a network built to keep people safe. It's a powerful future that's coming into view. Now to clarify how this fits into our overall approach, as you will recall, we exited our computer-aided dispatch product line about a year ago. This new approach lets us innovate in critical response workflows without rebuilding legacy systems. It means we can innovate faster, driving real-world impact and value creation.

And we will enable reciprocal data sharing and APIs to drive true interoperability, giving agencies the flexibility to modernize at their own pace. This isn't just a cloud migration. It's a connected platform that upgrades existing systems and makes them better, no replacement required. Customers get immediate capability upgrades while having the option to migrate older infrastructure to hyperscaler efficiency on their own time line. It also unlocks new potential across our real-time operations, vehicle intelligence and drone and robotics platforms, creating an integrated ecosystem that delivers on the future we've long envisioned with Fusus serving as the real-time sensor network backbone, while Prepared and Carbyne provide the voice layer connecting every persona from the caller to the responder moving toward creating an AI superpowered team. Voice communications, if we think back, this began with operators 100 years ago physically connecting phone lines, then it moved through rotary dials and keypads.

The next era is intelligent AI-enabled communications that process information at super human speed and surface the right insights to each human decision-maker when they need it. Prepared and Carbyne aren't the end state. They are the foundation for the transformation in voice communications ahead. People often ask where Axon's limits are. I believe we're only scratching the surface. We're advancing our ecosystem while expanding our reach to more new customers. In addition to better serving emergency call centers, we recently introduced ABW Mini, our second enterprise body camera, opening enterprise opportunities similar to public safety, and we're finding new inroads globally. As I think about the next few decades and what we're building, I truly believe that the best is indeed yet to come. What an amazing time to be alive and what a privilege to be at Axon during this accelerating transformation. And with that, I'll turn it over to Josh.

Thanks a lot, Rick, and good afternoon, everyone. Before we get into our results, I want to echo Rick's comments as we welcome the Prepared team and soon the Carbyne team to Axon. I believe our greatest asset is our team. Nothing excites me more than bringing on exceptional people who will help accelerate our mission and ignite our future. Our growth can only accelerate via elite talent, and our team is now stronger than ever with the additions of Michael, Dylan, Neil and the rest of the Prepared team and Amir, Alex and the rest of the Carbyne team. As I reflect on our Q3 results and look ahead to Q4, I'm excited and grateful.

We are building an elite business that is still nowhere near its ultimate potential, and we are doing it with a team that is rapidly bought into the mission. A lot of people around here bust their tails every day, and I am thankful for the intensity they bring to work and the bar they set. What we're seeing right now isn't just incredible execution. It's a signal. The theme that comes to mind is be obsessed. Our value focusing on relentless focus on our customers, an attitude we drive home every day at Axon because we know their success is what fuels ours. Let me share a few data points that show how we're hitting the mark. First, our state and local customers continue to rely on us for more and more products. Rick talked about expanding our ecosystem. And for me, the most important indicator that we're doing it right is simple. It's evidence that we're helping customers where they need it most. We hear that in conversations every day, but we are seeing that in the data.

One clear example is that more and more of our deals now include the full breadth of our portfolio. I say it often, we have the best sales team in the world. But when you can sell everything to a customer, that's more than just sales execution. It's the trust you've built, it's the product market fit and it's a sign you're making an impact. I mentioned that last quarter that a few of our deals were approaching the $600 per user per month level, several multiples above our current average. In Q3, we broke that threshold with 2 of our top 10 deals in our state and local base, each representing major upgrades with Axon. These long-term partnerships across so many different product lines speak to our customers' confidence in a future with us.

Across products, the story is the same. The AI Era Plan continues to be the fastest booked Axon software product to date. We're on pace for AI bookings to contribute over 10% of U.S. state and local bookings for next year -- or sorry, for this year. When you expand that to our newer offerings, Axon Air, Dedrone and Fusus, bookings are up more than 3x year-to-date. The momentum highlights another key part of our growth strategy, how we pour fuel on the fire when we acquire great businesses. Across the board, our acquisitions over the past year have outperformed initial bookings expectations, which are showing up in adoption of these new products. Next, let's talk about expansion beyond our core state and local base into corrections, justice, international and enterprise. A standout this year continues to be corrections, which contributed 2 of our top 10 deals in Q3 with year-to-date bookings up more than 2x from last year.

International also delivered 2 of our top 10 deals overall with an additional 9-figure cloud deal in Europe that closed in October. We're finally seeing a shift in some countries driven by the value that cloud products bring, and we think this will be the start of larger and larger deals in our International segment to come. Growing adoption of TASER 10 in international markets is another part of the story, and 7 of our top 10 Q3 international deals were driven by TASER 10. Looking ahead, we're executing against a growing pipeline, and we're not slowing down. Year-to-date bookings are up in excess of 30% and accelerating from last year, and we have line of sight to close out the year even stronger, but we are still in the early innings.

We see the healthiest and best indicators across our business we have ever had, and I'm confident we are on the right track as we scale up the investment in our products and sales team to go after the entirety of what's in front of us. I have no doubt we will deliver another record year in 2026, something that I'm sure many of you are wondering about. And I think our opportunity has the potential to accelerate much further. Going into next year, look for us to continue to drive record growth, ensuring better execution through the use of AI tools and efficient decentralized ownership to tackle new markets and opportunities. Elite scrappy team doing more and more in parallel will be our competitive advantage for years to come. That's what our next play looks like. With that, over to you, Brittany.

Thank you, Josh. As Rick and Josh highlighted, we're excited to welcome Prepared and announce Carbyne, which we expect to close in early 2026. We're proud of our third quarter results, which again reflect strong execution across our products and markets. Third quarter revenue of $711 million increased 31% year-over-year, marking our seventh consecutive quarter of 30% or greater growth, underscoring the robust demand we are seeing. Software and services was again the leader, increasing 41% year-over-year to $305 million of revenue. This growth reflects both new customers and existing customers expanding their use of our platform and capabilities.

We continue to have strong net revenue retention at 124% again this quarter, and ARR grew 41% to $1.3 billion. Connected Devices revenue grew 24% year-over-year to $405 million, reflecting broad-based demand. TASER grew 17%, led by TASER 10. Personal Sensors grew 20%, driven by Axon Body 4 and Platform Solutions grew 71%, driven by counter drone, virtual reality and fleet. Adjusted gross margin of 62.7% decreased 50 basis points year-over-year, primarily due to tariffs impacting us for the first full quarter. We also continued scaling Platform Solutions, which overall has lower margins than TASER and personal sensors, but offset by continued strong growth in our higher-margin software business.

Adjusted EBITDA margin of 24.9% reflected the impact from tariffs and the planned increased R&D investments. These investments are into categories that will support future growth, including our vehicle intelligence ALPR products, Axon Body Workforce Mini and new AI Era Plan features such as live translation and policy chat. We couldn't be more excited about these products and the traction they are already seeing from our customers, and we will deliver a strong ROI on these organic investments over the long term. We've also accelerated strategic investments with recent acquisitions.

Newer product lines such as Fusus and Dedrone are scaling quickly, and we continue to invest in their growth, along now with Prepared and Carbyne as another exciting new category. While these acquisitions are immaterial from a financial perspective at close, we see tremendous value in how these investments advance our long-term vision and solve challenges for our customers. They have strong teams in emerging categories and complement the capabilities we are already investing in. Turning to our outlook. We're again raising revenue guidance for the remainder of the year. We expect Q4 revenue between $750 million and $755 million, implying full year revenue of about $2.74 billion, up from $2.65 billion to $2.73 billion and representing approximately 31% growth at the midpoint.

For adjusted EBITDA, we expect Q4 between $178 million and $182 million, which maintains our full year 25% margin target. We are pleased to deliver on our commitment for a 25% adjusted EBITDA margin for the year, even with the impact from tariffs and our increased R&D investments. We think the combination of top line growth and bottom line profitability is the right balance for the business, delivering at 55-plus versus the Rule of 40. We're incredibly excited by the opportunities in front of us. The investments we highlighted are key components of continuing to deliver great performance in the years ahead.

In summary, we are proud of our results and our team and thankful for our terrific customers. We're well positioned for the future and look forward to continued strong performance. With that, we'll open the line for questions.

Thanks, Brittany. Up first, we have George Notter at Wolfe.

Josh, you mentioned that AI should contribute about 10% to total bookings this year, but bookings looked a little bit softer this quarter. Was there any delayed contract decisions in Q3 that maybe drove that? Or what's the perspective there?

Yes. Thanks for the question, George. Look, we had said last quarter, we expect bookings growth to be in the high 30s year-over-year, and we still believe that to be true. And so you can guess what that means for Q4.

Got it. Okay. And then also, you guys have now acquired, I guess, if I look at it, Prepared, Carbyne, both in the 911 space. You talked about them as kind of a foundation. But it would be great if you could talk a little bit more about sort of the industrial logic, why it makes sense for you guys to be in that space, given the existing competitive landscape and the types of things that you expect to add to those businesses going forward. So what's the perspective on those 2 deals?

Yes. Let me go ahead and take that one. If you think about what we've built in our ecosystem so far, we look at what are things that are most valuable when they plug into the broader Axon ecosystem. So today, we've got a strong connection to the officers in the field, their vehicles through their body cameras, their in-car cameras, drones and robotics. But if you look at where information comes in, that comes in really through your 911 call centers. Now previously, we had looked at making a play in dispatch. And what we learned was that CAD software, frankly, was just -- there was not a lot of room to innovate.

It was something where it's very training intensive, typically very old code bases that have to integrate with a lot of legacy, federal and other systems. And so we pulled back from there seeing was the place we could innovate. And we were looking at where can we use AI and where could we begin to innovate really across the very beginning of an incident, right? It starts with a 911 call, the majority of the time, but you can't skip 911, right? We looked at different strategies, how else could we connect these smartphones rather than through like a 1970s voice interface. And what we learned and looking at all that is like there is 0 appetite to do anything that is not in the 911 call. But once you start with the 911 call, you can then open up parallel channels of communication. So with Prepared, for example, we can send a link, open up cameras and sensors on the phone.

We can begin to do like AI processing so that the human -- we're not limited by the typing speed of the human nor their ability to finish the initial report before sending it on elsewhere. We can begin processing information in real time. We see this as the ability to deploy drones much faster to begin moving officers into position before they're even officially deployed and to become much smarter by now basically creating the link between the caller and the whole Axon ecosystem. And I think this is a lot bigger than 911. Prepared is really about AI voice communication automation, really starting in 911. And then where Carbyne gets really interesting, they have built a very high reliability, mission-critical voice communication platform that also starts in 911, but by no means is it limited that that's where you would need to sit.

So we think voice communications that today sits in pretty ancient infrastructure across the whole spectrum, whether it's in the 911 call center or LMR radios right out of the 1970s, like you've got all these different voice communication systems, none of which really leverage the latest technology and are not really built to move at the exponential speed of modern tech. We see Carbyne is the play to go deeper into that voice layer infrastructure and to be able to deploy it across not just 911, but all the human beings that are involved in a call and to bring the move AI to the center. We named the company Axon, right, because it's all about the Axon's of the nerve fibers that connect everything together into the sophisticated nervous system that is a human being. We're building the nervous system of the modern police agency. And these 2 acquisitions move us into really being a major player in voice communications and really an ability to link in the consumer right from that first 911 call.

Up next, we have Jeremy Hamblin at Craig-Hallum.

And I wanted to get into just some of the interplay that you're seeing between software and services, connected devices. So your ARR growth was the best growth rate you've seen in 2025, software and -- software and services, also the best growth in a quarter in 2025 and a little bit slower growth with connected devices than you've seen in the first half of the year. And I wanted to just get a sense for whether or not that is a reflection that you are having maybe not as many new licenses, but the value of those licenses is growing substantially. And then as we start to look ahead at how the business is going to change and evolve here over the next few years, is that how you expect growth to go forward here over the next, let's say, 3 to 5 years?

I'm happy to start or you can, Josh.

Yes. Go ahead, Brittany.

Okay. I would say -- I'll sort of take it in reverse order. I would say as we look into the future, I think we continue to expect software and services as a category to be a higher-than-average growth rate. It's been doing that for the last couple of years. We expect it to continue doing that to what you called out that is on our customers buying more and increasing their features and capabilities, but it's also on increasing user count. So that is not an issue at all. We're continuing to see new customers come in and join the platform, and then we're upselling them over time. So higher growth there across the board.

That said, we continue to be really pleased by the growth that we're seeing in our other segments, both TASERs, our body camera segments, we had some really strong growth this quarter in those segments, and we expect those to continue to drive growth well into the future. So both TASER and our body cameras, our connected sensors are seeing nice growth this year, next year, like there's no real slowing down of that. So you should expect that to continue. Some of that's on new products. We talked about ABW Mini. We're excited for ABW Mini that launches next year. So as usual, we talk about things before they're really hitting our numbers. So ABW Mini will be something that will come next year. There's just a lot of momentum across the board. You can see in Platform Solutions, that's where you're starting to see both counter drone show up, but we're also still getting really nice growth from fleet, and we're seeing VR grow. So it's kind of across the board, and I would expect it to continue to be like that.

Yes. I just -- I agree with everything Brittany said. I also echo Jeremy, like over the next 3 to 5 years, I think you're going to see the same type of growth as you're seeing now. And it's certainly a part of it is what I talked about earlier with the per user values going up, but do not discount the user growth that we're going to see either, like international and enterprise, we have a lot of confidence that those are headed in the right direction. International, we're super excited about the results we've seen year-to-date and the early Q4 results that we're seeing. I think user growth is absolutely going to be a major part of our future.

And then just one other question. In terms of the company is closing in on kind of $3 billion in annualized revenue. As we look at some of these newer pieces of the platform, Axon 911 versus, let's say, a Dedrone, which of those do you expect to be -- they're still in early stages and from a materiality standpoint. Do you expect faster growth from Axon 911 versus Dedrone?

Maybe I'll take a shot at that to start. I think, look, part of the reason we acquired both of these businesses on the 911 side, Jeremy, is because their growth is very, very exciting into the future. But note that those are software businesses. And so in terms of hitting our revenue, just like with all software, there's -- it takes time for the software to accumulate. And Dedrone, while a software business is also a hardware business. And so you'll see that first in our results by virtue of the fact that these are high-dollar hardware shipments, some of which are like 9-figure opportunities we're working on right now. And so we -- I think Dedrone will be the first to hit revenue in a big way. But when you look at Prepared and Carbyne over the long term, we think there's a lot to disrupt in the 911 space. And the synergy between those opportunities and all the downstream stuff with digital evidence and prosecution, I think that workflow from end-to-end is going to be the long-term value that we add to public safety.

I agree with all of that. I would just add, like I wouldn't discount Fusus and I wouldn't discount some of the new organic investments we're making into things like vehicle intelligence and automated license plate reading. As we think about our acquisitions, I think what you're seeing is we are investing in companies that tend to be a little bit earlier stage. So we're not really buying revenue. We're not buying an existing business. We're buying an opportunity, and then we're pulling it into our ecosystem and integrating it and really using that to accelerate the opportunity. I think what you're seeing on Fusus and Dedrone is now we've had them under our belt for a year plus. So you're seeing the power of doing that. Hopefully, a year from now, when we've had Prepared and Carbyne under our belt for a year, you'll start to see some of that traction as well.

All right. Up next, we have Andrew Sherman at TD.

Good to see you. The international deals, good to see the 2 big deals there, including a 9-figure one. Any more color on where those were, what products they bought? And how is the pipeline shaping up across countries? And can this momentum you're seeing in Europe or internationally continue over the next year or so?

Yes. Andrew, nice to see, and thanks for the question. We've been talking for years about opening up the cloud in Europe, and we're starting to see that happen. And I think it's a credit to the team over there, led by Cameron and Nathan Satel opened up one large cloud opportunity already this year in Europe, and that might not be it. And so we're encouraged to see some of that taking place just as TASER 10 is starting to accelerate internationally. We see very consistent bookings out of Canada and Australia and South America is coming on strong as well. So the international business is all the things we've been talking about and all the investments we've been making there over the years, it's really starting to come into fruition. And look, that's part of the investment we have to make moving forward is making sure that we capture that opportunity around the world, and we're prepared to do that and feel really, really good about the results that it's going to yield.

Yes. I would add in this 9-figure deal is not in one of the bigger or more populous countries. It just gives you an idea of the scale of the opportunity in Europe. And then what I think is even more important is this is the alpha patient. When you're introducing a new technology, the hardest part is getting the first customer to adopt it. In the U.K., that was the London Met going to the cloud. But the U.K. post-Brexit is not in the EU. And they're really considered really more part of the Commonwealth as we look at, and we've had a lot of adoption there. So to me, the thing that's more exciting than the value of this order is that we've got really, I'd say, the first customer going all in on the cloud in the EU. We've had some other customers dipping their toe, but this is a big one. We get a couple more of these add in TASER 10 getting some momentum, and Europe could get pretty exciting.

That's great to hear. And since you're all wearing the new Body Workforce Mini, which nice to see that live. I know these retail trials have been in the pipeline for a while that you've talked about. I would love to hear an update on the status of that and what Body Workforce Mini can do to help that and how this actually deters organized crime in retailers and how you're thinking about that opportunity next year?

Yes, sure. Look, I think I've been excited about enterprise for a while and the closer we get to the launch date of ABW Mini, the more excited we get. We already have pent-up demand for this product. And in the meantime, customers are deploying our Axon Body 4 right now. And so they see the need for body cameras. They're already paying for them and deploying them, and they really plan to expand in a major way as ABW Mini gets to market. And so I think I've said a couple of times on these calls, at the end of the day, enterprise might be the biggest part of our business. And so we are investing there and feeling great about what our future looks like there. Obviously, a massive TAM with some very, very large customers and enterprises that we're working with and that are showing a lot of interest in expansion. And so very, very bullish on enterprise heading into the years to come. And that ABW Mini launch is certainly a moment in time where we think we'll step up in terms of getting into the next tier of that opportunity.

If I could add in as well, there was a moment in time our first body camera in policing didn't hit the product market fit, Axon Pro. We got it out, got a couple of key customers to prove the concept. Then Axon Flex made it much smaller, but really it was the introduction of Axon Body 1 that hit law enforcement and began to scale. I would say enterprise, the existing body cameras are seen more as police body cameras. Yes, we have the Axon Body Workforce, which is really sort of a minor reskin of AB3 compared to what we've now done. I would say this is the moment where we think -- well, we know we've got product market fit because we jointly developed this with our key customers. So I think this is -- we're really positioned now to have the moment that it takes off. And we're seeing, by the way, the early proof points, both statistically very significant reductions in assaults on staff in addition to powerful anecdotes, individual stories of very dangerous people seeing they're being recorded, throwing down whatever they were going to steal and just storming out rather than causing trouble.

Right. And to that -- to the part of your question about how it directly impacts reducing crime, there's the direct impact of the cameras themselves that Rick was just referring to. But again, it's about the combination of how the cameras work together with Fusus and how the cameras, which can get deployed right into the GSOC of these large retailers and other enterprises and how it works with other partners like Auror together with all of their workflows, right? So if Auror is helping them identify and be aware of key individuals that have been repeat offenders or a part of organized crime groups, if their GSOC can be alerted through those alerts as well as people being -- as people escalate situations in stores through the body floor, it's that combination of our pieces of the puzzle, Fusus, the body cameras and the rest and then the connection with our partners like Auror that have enterprises incredibly excited and make that the breakthrough moment for why they want to adopt the whole stack.

Okay. I got to come back and add one more thing. Here's how this ecosystem ties together. So you've got body cameras that can reduce assault in the store. And I think we've seen society-wide, the experiment with decriminalizing theft was a disaster. It led to the hallowing out of some of our best cities as retailers' business models no longer made sense. They left town with catastrophic consequences. The politicians we talk to know that. I've met in the past 2 weeks with 2 prosecutors, one in one of the largest districts in America and one in one of the largest districts in a Commonwealth country.

And they both shared with us like how important it is for them to be able to drive down criminal behavior and retail crime that we've got to help reduce the friction because there's both the political will to do it, but then how do you actually manage all of this data and get it to the prosecutor in a way that they can handle and where they can make sense of the hours and hours of video they may get with every case. And just one example, rolling out our digital evidence in Scotland and the test pilot in Dundee, they saw an 80% reduction in court backlog. So we are the only ones who can take this from the retailer through the police to the prosecutor and the courts and tie the whole system together in a way that will fundamentally make society better and safer.

Next, we have Jim Fish at Piper Sandler, and welcome to the Axon call.

Maybe just staying on body camera. What are you guys seeing competitively there, especially post Motorola's introduction of their new SVX? And how much of the Carbyne acquisition and broader 911 is a way to push back on Motorola given that LMR angle, Rick, that you alluded to?

Yes, I'll take that one, and nice to meet you. Thanks for joining the call. we're not -- we're focused on what we're doing at Axon with our body camera business. There's a lot of chatter out there in the market. People like to talk about us. We're focused on our customers. And we see absolutely no headwinds in that way with any concerns from our customers about our body cameras. We make the best products in the market. Other companies can pick out little things on the edges where they think there's some aha moment. Our customers don't see that. And so we're going to keep executing. We're going to keep focusing on our customer. We're going to keep out innovating ourselves, and we're going to keep delivering world-class technology to our customers. The 911 stuff is yet another opportunity to do something better than it's being done in the field right now, and we're really, really looking forward to competing in that space.

Got it. And then Brittany, I'm not going to let you off the hook here. I guess Q4 guide is implying a revenue acceleration exiting the year. What's giving the confidence in that? How are you guys thinking about backlog exiting the year? It looks like you guys continue to build it up relative to revenue that provides that level of confidence?

Yes. I mean we have a lot of confidence. I think as Josh said, we are just seeing more momentum than ever in our bookings. We talked about it a little bit. We're expecting a really big bookings quarter in Q4. Plus we have our recurring software business that is just hitting on all cylinders. So I would say at this point in the year, we have really strong visibility. A little bit of the variability is just mix and exactly what books and gets recognized when, but really strong visibility and just incredible momentum from our customers and from the deals that we have looking at in Q4.

Can I just add one more thing there. I think ultimately, we feel really, really good about our organic growth for the next few years. And like we're excited about what that looks like. If we want that to continue for years like 5 through 10 out into the future, we've got to make some investments to do that in sales and in product and in new markets and in new products. And so part of this is like, hey, how do we continue to deliver great results to our investors. We understand the importance of money coming through the bottom line and growing the top line in exciting ways. If we sit on our laurels, we could do that pretty easily for the next few years. We're playing the long game here, and we want to deliver decades of growth like this. And to do that, there are times where we have to make investments to make that happen for the long term. And so that's where we are right now.

Thanks, Jim. Up next, we have Yanni Samoilis at Baird.

Yanni Samoilis on from Will Power tonight. Rick, Josh, maybe if I just start with a question on Dedrone and DFR. I was hoping you could provide some color on how conversations are progressing at the state and local level. I know you've been meeting with a lot of customers lately, especially at IACP. So it would be great to hear how that was received coming out of that event. And then also the extent to which there might be growing traction across your broader drones portfolio for military or defense applications going forward.

Yes. So I'll start with that. I will tell you, every customer is acutely aware of the threat that drones present going forward. Drone-based violence is the big new threat vector. It's probably more dangerous even than gun violence in terms of the propensity for somebody to do a lot of damage quickly. One of the challenges is that right now in the U.S., state and local police are not legally authorized to mitigate drones. But they are seeing, especially with things like the World Cup coming up, they've got to start investing now in the infrastructure to be able to track drones. Right now, they can mitigate by going to the pilot. But there's a lot of, I would say, momentum building in Congress to give state and local police the ability to mitigate drones.

And look, we're one bad incident away from that just -- and I hate to be -- I don't wish for that to happen. I hope it never does. But I think realistically, that will happen, and then there's going to be a rapid movement where you just -- there's not enough feds to go around to operate the counter drone equipment we'll need to secure every city, every stadium, every school fair, every public gathering. And we think with Dedrone, we're just incredibly well positioned for that. And then, look, every time we move into a new space, we do a thoughtful make, build, buy partner analysis. And for DFR, it was just exceedingly clear. There was one company that stood head and shoulders out from the crowd, and that was Skydio.

And that's why we've become a significant investor in Skydio, and we've really chosen them as our DFR partner. And that is really scaling. I mean the docs, the automated robotic docs to be able to deploy and land a drone and have it recharge on its own with 0 human interaction. Those robotic docs really just started becoming available in the last 2 quarters, and it's scaling rapidly. We're seeing a ton of interest in some pretty big deals coming in, in the DFR space.

And the only thing I'll add is I think it's really important to call out that DFR and the 911 investments we're making really go hand-in-hand because the more you can shrink the time of the 911 response to get a drone up in the air, the better outcome the customer and the community receives. And so these -- while at face value, they seem like on different ends of the workflow here, they are very, very closely related. And ultimately, we think our investments in 911 will accelerate DFR adoption and lead to far better outcomes in the field.

Yes. Let me tell you one more thing actually together on ecosystem. Today, if you call 911 in a retailer like a Walmart, the people in the store have no idea you've called 911. They're completely unaware that there might be some incident happening. When we tie together Prepared, Carbyne, Fusus and our enterprise customers, we can begin to have them collaborate in real time so that they're getting alerts as well and being aware, hey, if there's a 911 call in our parking lot, we're going to need to engage with that or in the store as well. So again, this is where each of these pieces all sort of build on each other into one highly integrated nervous system.

That's right. Every single conversation is about that triangle of 911, DFR and real-time crime centers with Fusus and vehicle intelligence. And the intersection and interplay of those 3 things are what lead to solving crimes faster and more effectively and delivering the platforms that agencies and communities need.

Yes. Good to hear. Sounds pretty compelling. And then Brittany, I was just wondering, just switching gears, if you could talk about the gross margin outlook from here. And maybe if you could just review the tariff impact that you might be seeing on the gross margins on the connected devices side.

Yes, happy to. So all of the impact from tariffs is obviously hitting the Connected Devices business overall. This was the first quarter that we had a full quarter of impact from tariffs. So as we look at the year-over-year step down, that really is attributable to tariffs. As long as tariffs stay in place, I view that as sort of a onetime adjustment. So now that's baked into the gross margins. Obviously, as our software business continues to outpace from a growth standpoint, like we talked about, that becomes even at bigger dollars, that becomes a smaller and smaller percentage of our overall gross margin.

And so as you go forward from this quarter, you'll go back to just seeing the mix shift interplay between software and connected devices quarter-to-quarter. So I would imagine that over a longer period of time, you'll go back to seeing tailwinds in the gross margin from the software business. You'll also, over time, see tailwinds as we take in some new businesses and we scale them, something like our platform sensors, which we're calling out as a headwind to gross margins right now. As we get that to scale over time, that will end up being neutral. So you get into that product mix. This is the one sort of quarter step down that you're seeing from tariffs. Now that will continue to be baked in for as long as we have tariffs. Like no question, if there weren't tariffs, we would have had higher gross margins and then higher adjusted EBITDA for this quarter and Q4. But once it's in, it's in, if that makes sense.

Up next, we have Trevor Walsh at Citizens.

Rick, if I could just circle back to some of the commentary that you made around Prepared and Carbyne. I understand completely kind of the user persona benefits of just making this process and system better. But it seems like between CAD or legacy systems that are in place, it's still -- those are still kind of in the mix. So is there a risk from just a technology perspective as customers are adding these things into the stack that those things break or just become -- don't scale or whatever kind of technical kind of element there might be where that just limits the possibility or like customers need to get rid of those things faster, maybe that's what you're hoping for. If you just double-click a little bit on how kind of the -- sort of the -- I guess, the parts that are doing so well don't negatively affect what you guys want to do there, that would be helpful.

Yes. So 911 is the entry portal into the police, your public safety. The fact that, that historically has come through a landline, it's definitely now moving the majority or mobile, but it's still sort of next-gen 911 was this government initiative. I think it was next-gen in like 1987. It's certainly not very next-gen compared to where we're at today. And that's where we see a strategy that allows us to build parallel systems that respect the existing infrastructure, but allow us to begin to move in parallel alongside it.

So yes, we'll integrate with CAD. Over time, I think CAD is going to become less relevant as AI-based systems are processing that information, and we'll see more of those interconnections, I think, move back end to back end in the cloud. Now we'll still likely have to pass them into local CAD systems. But much like your home telephone, you didn't have to throw it out the window when you got your mobile phone. But over time, people migrated more and more and look at how much your mobile phone has evolved, where is your landline -- the last big upgrade your landline got was when the rotary dial went away in the '70s when I was growing up, but mobile moved really fast. And then a lot of people just don't even have -- you wake up one day and you're like, man, I don't -- I actually couldn't tell you my home telephone number right now for my landline. I probably shouldn't admit that on air, but it's become that irrelevant.

So yes, I think we've got a strategy that is resilient, that we can build all the critical elements with infrastructure connections in the cloud that make us less dependent, but we'll respect those systems that our customers have on-prem. But this is allowing us to build a parallel infrastructure that's -- there's no dependencies we really have on some creaky old on-prem thing in order for us to go from caller to RTCC to drone on site to the officer through their body cam.

Yes. And just to build on that really specifically, it's another reason why the combination of Prepared and Carbyne is so helpful. As Josh said at the top and Rick said at the top, what Prepared is it's this extraordinarily easy to deploy AI overlay that interplays with what they already have with their existing infrastructure, in particular, with their existing call taking systems. Like literally, all they have to do is tap an audio feed port off of the existing infrastructure and then the rest just works. It's just SaaS software. And so it's very easy to deploy, very fast to deploy, very, very minimal integrations. And it instantly gives both the PSAP, the ECC, a ton of this acceleration and efficiency value and forwards that data instantly to Fusus to voice assistant from Axon on all of those things to DFR. And then alongside that, you have Carbyne, which is a totally modern, totally cloud-based call handling infrastructure system that's already battle-hardened and proven. And as an agency is ready to get rid of that old school big iron clunky on-prem call handling system, they can plop that in and have a massive cloud-based upgrade similar to, as Rick said before, the original journey to evidence.com. And so we have both flavors of that and agencies can move at their pace, and they can work with us every step of the way as they move through that, get instant value from Prepared and when and as they're ready, get a complete transformation to the cloud with Carbyne.

Awesome. Maybe one quick follow-up for Brittany or Josh, feel free to weigh in as well. Just given international momentum sounds great. Corrections deals, also great. I know those are 2 kind of big priority areas, but federal deals have been as well and kind of progress there. Just curious if the guidance is influenced at all by the shutdown or even kind of how you're thinking about '26, kind of where that's looking on that particular area of the business.

Yes. Maybe I'll take guidance and then Josh can talk to federal more broadly. We talked at the beginning of the year about how we really weren't betting on federal for this year and that it wasn't a big part of our guidance or anything we were counting on. I think that continues to be true. So there's actually probably -- this I'll hand over to Josh, but there's probably more upside from federal at this point than there is any risk from it.

Yes. I would just say weirdly, given everything going on, it's strange to say, but we expect Q4 to be our best federal quarter of the year. And so a lot of that's driven by interest in Dedrone going into major events next year like the World Cup and otherwise. But certainly, even as the shutdown has been going on, significant numbers of personnel are still working through some of these opportunities with us, and we see some upside there for Q4 that's frankly exciting.

Up next, we have Andrew Spinola at UBS.

Thanks, Erik. Strong quarter in international, but the U.S. business deceled again this quarter despite a really strong software and services growth reaccelerating to 41%. Just wondering if you could provide a little color on the dynamic in the U.S. business.

The U.S. business is accelerating.

On the bookings side, what about the revenue side?

Well, look, the revenue is just a function of how we recognize software. Bookings is the indicator of what the future of the domestic business looks like. And not only is it accelerating, it's actually -- it's beyond what we planned for this year, frankly. And so we're really proud of the work that's being done in domestic right now. We think it will shine through in a major way in Q4. And when I sit thinking about the business, one thing that I do not worry about at all is our execution in state and local. I think it's just going to be a monster year for that team, and it's going to continue into next year.

So it's more timing you're saying, just on revenue rec?

Yes. I mean, look, Q4 has always been our biggest quarter for domestic. The deals are getting bigger and bigger. And so sometimes it takes a little extra time to close opportunities like that. We had an awesome October. I'm feeling great about bookings and revenue in the domestic segment. Again, no concerns there.

I want to ask one more.

I was just going to echo like nothing fundamental. There's a lot of timing that goes into that quarter-to-quarter. And so you can have lumpy deals in international, you can have lumpy deals in different segments. Like I would look at it less quarter-to-quarter and more over the course of the year. And to Josh's point, over the course of the year, and that really comes through in bookings, we continue to see really incredible strength in the domestic business.

The second question I wanted to ask is just on the bookings piece. Anecdotally, I've seen a shift towards more and more 10-year contracts with your clients, which I think unquestionably a good thing. But I'm thinking about, is there any color you can give us around that, maybe take rates, how big the shift has been from 5 to 10 years? Because I'm just trying to think as we exit the year and looking at how '25 performed against the year-end contracted backlog in '24. I'm trying to think about how to think about '26. So I'm just wondering how big of a transition are you seeing towards those 10-year contracts?

Yes, Andrew, it's a great question. We look at our business both as normalized bookings, which are -- we normalize everything to 5 years and then total bookings. And we're not going to comment much on the 10-year deals in terms of the weighting there. But in the 5-year deals, we see the growth rate in normalized bookings surpassing last year's growth rate. And so even the 5-year bookings number is accelerating. Certainly, we're closing more 10-year deals. And like you said, we view that as a good thing, but we certainly don't want there to be any misunderstanding. Even when you normalize it, the growth is accelerating in bookings.

If I could actually give you one qualitative takeaway I've got. Maybe 5, 6 years ago, we were having some conversations with customers about them having some concern about share of wallet like, hey, are we too dependent like on Axon just because you're picking up a growing portion of our tech budget. Those conversations have largely disappeared. What I'm hearing from customers now is, you know what, when we deploy something with Axon, whether it's body cameras or records, it just works.

Like you guys hire great people, you empower them to get the customer supported. We do not let customers fail. And we're hearing more and more, hey, we would love to just have Axon take over all the tech for our agency because you're a trusted partner. We know it's going to work. And I think those 10-year deals are just -- it's a function of that where customers are like, you know what, we believe in this relationship, and we want to do this for the long term. And we're all in together, and we're willing to do it over long time horizons. -- by the way, it's super incumbent on us to never let them down. The pressure on us to continue to execute only continues to grow as that trust grows. It's so easy to lose trust. It takes decades to build it. And so you'll see us defend it with every fiber of our effort.

We'll try to squeeze 2 more people in here. Jordan at Bank of America, you're next.

Just 2 quick ones. You guys have a lot of irons in the fire, new product development investments for growth in the companies you've acquired. How should we think about margin mix going forward? And then two, Rick, for the time that you spent in Europe, what are the timing items that you're seeing on Dedrone sales to NATO countries?

I can start with the margin piece and then hand it over to Rick. Look, I think from a -- like from a gross margin standpoint, I think we talked about it a bit. So that will really just be product mix. There's tailwinds from software, and then you'll have mix between software and hardware. If you're thinking about adjusted EBITDA margins, look, we worked really hard to balance the impact of tariffs and all of those additional new segments we wanted to invest in with our commitment on the 25% adjusted EBITDA margin for the year. So we're really happy and proud that we're delivering on our commitment for the year and managed to balance all of the new things that we want to go do for the long term and tariffs coming through.

And that will just be what we continue to do. We're always going to take the long-term view, the multiyear view. We want to continue making this an incredible business that compounds. And so we're going to make the right ROI-based decisions in any given quarter about where we need to be investing and what we need to be doing for the long term and set us up and you all up really well for that. I think if you compare to the rule of 40, any time we're delivering like 55% plus against that rule, like we're doing pretty happy with how we're balancing the margin versus growth profile, and we're going to continue to look at that in the future.

And I'll just add before we hand it over to Rick. Brittany and I are very fiercely aligned that, look, when we spend money as a company, we're going to get an ROI on it. And so I don't want anyone to be under the illusion like this is going to be a runaway train of investment. Like we're going to make smart investments and those investments are going to pay off. And we understand the need to balance revenue growth and profitability and we're prepared to be responsible there. So we're excited about the ability to be able to thoughtfully invest in some of our new opportunities across markets and thoughtfully staff all these new R&D opportunities we have. But make no mistake, profitability is still important to this company.

Yes. And by the way, I would also add, if you look at the types of investments or acquisitions we're making, we're not buying mature cash cow businesses. Those tend to come with a lot of tech debt. We are a disruptor. And when we identify -- like we looked at the -- coming out of our strategy meeting earlier this year, one of the takeaways, I sat with the team and said, like with the AI sort of explosion that's happening, now is the time for us to make our move into AI voice in particular on the 911 call space. And we did a hard look at should we build this ourselves or not. And as we looked around, we actually found 2 very talented teams that were relatively early with very different sort of product offerings, one that prepared that goes wide, quickly and easily and another one that goes deep and really sets the foundation for the long term.

And so we said, look, this was on our road map. The decision was we found 2 awesome teams. They're both pretty early in their growth cycle, but we think they're at the perfect time of the maturity of their platforms. They're great teams built on modern tech. What a great way to integrate that into our ecosystem. It's not like we're, again, buying something that's mature where we're going to rationalize sales teams and try to cut our way to profitability. We think this is what makes our ecosystem so sticky and so valuable over the long term.

And Jordan, you asked about Dedrone. I'll just quickly answer that so we can get to one more question. Look, I think Dedrone is actually the most consistent product we have across federal, state and local and international. We're not going to go into market by market and NATO on the call. But I would say across those 3 markets, we are seeing real demand for Dedrone. And actually, the one that's maybe taking the longest to materialize is U.S. state and local just based on some of the regulatory issues there right now in terms of mitigating drones, but there's a lot of pent-up demand there. And while we're waiting for some of those things to take shape, it's a great contributor to both our federal and international businesses, and there is a lot of demand across those segments for it. So I think the growth trajectory of Dedrone in and of itself across markets is something that we're excited to see play out.

We'll take the last question from Josh Reilly at Needham.

Yes, I'll just ask one quick question here. I think Fusus has about 200 customers, correct me if I'm wrong, on that front, and there's roughly 12,000 agencies in the U.S. Do you think that DFR programs or some other catalyst is out there, which could drive much higher penetration for Fusus over the next few years? Or is it more of a natural kind of pipeline building process that you've kind of just executed excellently over the last few years? And then one question I get too with that is, is a real-time Crime Center relevant for all 12,000 agencies in the U.S.? Or is it really just some portion of that mix ultimately that is relevant for the TAM?

Do you want to take it? Josh?

Go ahead, Jeff.

I mean I think the simple answer is absolutely, every single agency of all size should and I think over time, will have broadly the notion of real-time Crime Center. That doesn't always mean a big room with giant monitors in it. That's the beauty of SaaS software in the cloud is it can be the app on your phone, it can be the MDT in your car, et cetera. But the notion of having a single pane of glass to aggregate all of the signals, whether it's 911 calls, whether it's CCV cameras, whether it's body cameras, drones, Dedrone, et cetera, every agency needs that for situational awareness and the demand, both in domestic law enforcement and in enterprise is just staggering.

And I think we're -- as Brittany said earlier, we are extraordinarily excited about the growth. And then also as an interim step towards that, we also already this year migrated and smoothly transitioned almost every single customer that had previously been doing live streaming on our body cameras and what we used to call Respond onto Fusus. So every single one of those customers is already now using Fusus for their body camera live streaming even if they haven't yet expanded to also connecting CCTV cameras and the rest. And so all of that motion is comprehensive and high growth.

Yes. Think of Fusus as like the more hardware inputs we have in the market, the more Fusus adoption will grow across body cameras, ALPR, DFR, CCTV, et cetera.

I think that 200 is outdated. I don't think we've updated it. So maybe we'll consider updating it, but I would imagine that it is bigger than that now.

Thanks, Josh. All right. We'll kick it to Rick to close this out.

Awesome. So as we look back, we're 3 quarters into the year. I couldn't be more proud of the team in terms of the financial results. We have really beat our internal expectations. I'm proud of the organic work our teams have been doing, products like, let me find here again, but ABW Mini, Outpost and Lightpost, we didn't really spend much time talking about that. That's a huge potential market for us, building on our acquisitions of Fusus and Dedrone and now the new acquisitions of Prepared and Carbyne. And then that all leverages our internal and organic growth of all of our AI Era Plan offerings.

So I'm just delighted that we're executing both, I think, world-class on our organic programs and Henrik Kuhl and his team has done just a masterful job from corporate development to really turn on partnerships and acquisitions to really build out this ecosystem in a way that what really matters is do we give our customers world-class superpowers. -- Jeff and I were talking about this, remember what taxi dispatch used to be like, right? You'd call and then some person will be looking at a map to figure out where there's a taxi that all changed with Uber. Now I'm not saying that it's going to be the same kind of change. I think they're -- given when you're in a crisis, you're going to need human beings to help you through that.

But there's huge tech improvements that are going to happen, and we think we are so well positioned to continue to be that tech platform that our partners can work across all of the things that they need to do and not just within an agency, but now reaching out to enterprise users who then have their security teams that have to interact with customers. But then we're now finding new productivity use cases that are maybe not even security related for our audio, video and cloud and AI platforms. So it's just incredibly exciting time to be where we are, I think our team is probably doing as good a job as I've seen of any company turning the AI hype into real valuable products for customers and real repeatable, scalable, profitable revenue for our investors. So, it's -- we're going into the holidays on fire and excited, and I can't wait. I hope you all have a wonderful holiday season, and we will see you in the new year and be ready to update you on the next leg of our growth.