Q1 2026 Axon Enterprise Inc Earnings Call

Speaker #1: Give it a minute for everyone to move over.

Speaker #2: 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.

Speaker #2: 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.

Speaker #1: Customers and sometimes, you know, 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, you know, the customer more general terms.

Speaker #1: 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.

Speaker #2: 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-cap financial measures.

Speaker #2: Yep. If I can add in, if you go search the mayor of Denver did a great, you know, video tweet where he's talking about, you know, they moved from a competing system to AXON, largely because of the data privacy, data ownership, you know, we really structured this in a way where we've it's not just talk, right?

Speaker #2: Hi guys, thanks for taking my question. wanted to ask a quick one on AI, like, coming out of AXON, there was like a ton of innovation, ton of new products.

Speaker #1: product, this product is The product is good. it's doing. It's cheaper, that's certainly cheaper. That's certainly helping, helping. In the you know, in, in the context context of competing against of fighting against incumbents.

Speaker #1: 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.

Speaker #2: Descriptions and reconciliations to gap 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.

Speaker #1: And so this is, you know, when you think of, telecom providers, this is one of the first three or four that's gonna enter your brain.

Speaker #2: 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?

Speaker #1: 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-cap financial measures.

Speaker #1: I w I would say that. And then, the use case is across retail locations, other, company physical assets, certainly any video stream essentially. I'm actually Brennan Rogers at Wolf.

Speaker #2: Let's pull it up.

Speaker #2: I think traditionally, like, a pricing cycle would happen and you guys would revise the pricing and, like, you know, Q, Q4, Q1, but just given, like, even in the shareholder letter you guys are talking about, AXON Vision being GA in Q4, like, we just heard about that in AXON Week.

Speaker #2: We when we think about building products rigorously, in a way we're going to be proud of, we do we do that both so our insides match our outsides, you know, employees want to be authentic and know that we're doing things in a way that they're going to be proud of.

Speaker #3: Welcome to Axon Week and welcome to Nashville, Tennessee.

Speaker #1: 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.

Speaker #4: Welcome to the Singularity, where AI changes the equation entirely. We're standing on the most extraordinary frontier. Our species, as ever, stood out. The explosion of AI capabilities we've introduced this past year has been mind-blowing.

Speaker #2: But it stands up to scrutiny. And ultimately, you know, that pays off when customers are like, "Oh, wow, we didn't realize our license plate reads were being shared with a federal agency that's, frankly, not popular with our constituents in this area." And we don't want that happening, certainly without our knowledge.

Speaker #2: You guys probably won't have a chance to

Speaker #1: Let's pull it up.

Speaker #4: For example, Axon Assistant grew from a few scales to a chatbot with real-time detection on the way. Prepared and Carbine doing AI for 911 and voice.

Speaker #2: Welcome to AXON Week, and welcome to Nashville, Tennessee.

Speaker #3: Welcome to the Singularity, where AI changes the equation entirely. We're standing on the most extraordinary frontier. Our species has ever stood at. The explosion of AI capabilities we've introduced this past year has been mind-blowing.

Speaker #2: And when we come in, we say, "Look, here's how this system works. It's your data. We don't have any right, title, or interest to it."

Speaker #4: Vehicle Intelligence outpost and Light Post with computer vision. Drop One Form One Brief One are streamlining records. Smart Detection, Auto Intel, Attribute Search help you make sense of your evidence.

Speaker #2: We certainly enable you to share, with anybody you want to share it to, but in ways that are very explicit and well understood, and it's you making the decision, so you're never getting surprised. You know, those sorts of things.

Speaker #4: Case Compass and People Search go through your records management. Meta Coach and VR are transforming how you train with interactive AI. And next, we're bringing Axon Gravity, one program to pull all of your agencies' data into one place.

Speaker #3: For example, AXON Assistant grew from a few scales to a chatbot with real-time detection on the way. Prepared and Carbine doing AI for 911 and voice.

Speaker #2: Pay off pretty big when controversy's hit. And one of the things you'll hear from the customers or that 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.

Speaker #3: Vehicle Intelligence outposts and light posts with computer vision. Draft 141, brief 1, are streamlining records. Smart Detection Auto Intel attribute search helps you make sense of your evidence.

Speaker #4: So we have a super intelligent analyst you can ask at any question powered by AI. Twenty years ago, we were a company with one product, the Taser.

Speaker #3: I'm just going to add that one of the fun things about talking

Speaker #3: Case Compass and People Search go through your records management. Meta Coach and VR are transforming how you train with interactive AI. And next, we're bringing AXON Gravity, one program to pull all of your agencies' data into one place.

Speaker #4: Today, we operate the largest network of public safety sensors and technology on Earth. And everything we built sets us up for this moment now.

Speaker #4: We can layer AI on top of all of this, but we must do this ethically.

Speaker #3: So we have a super intelligent analyst you can ask at any question powered by AI. 20 years ago, we were a company with one product, the Taser.

Speaker #5: This isn't automation replacing judgment. Humans make 100% of decisions.

Speaker #3: Today, we operate the largest network of public safety sensors and technology on Earth. And everything we built sets us up for this moment now.

Speaker #6: It's helping humans do things they couldn't do on their own. Speak 30 languages. Surface the right information at the right moment.

Speaker #4: 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, you know, maybe what your ambitions are at scale?

Speaker #4: Our mission is about connection, but the most important connection we've ever made aren't just in the technology. They're here in this room.

Speaker #3: We can layer AI on top of all of this, but we must do this ethically.

Speaker #4: This isn't automation, replacing judgment. Humans make 100% of decisions.

Speaker #4: And what level of scale would you need to achieve that? Thank you.

Speaker #7: In the relationships that we have with Axon, the one thing that really sold me is this is much more than a company.

Speaker #5: It's helping humans do things they couldn't do on their own. Speak 30 languages. Surface the right information at the right moment.

Speaker #3: Yeah, 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 three hardware businesses inside of Connected Devices.

Speaker #4: The relationships with the people who trust us, with the hardest moments of their lives, that's the network that matters most.

Speaker #3: Our mission is about connection, but the most important connections we've ever made aren't just in the technology. They're here in this room.

Speaker #3: And certainly the D-Drone hardware is a portion of that. I do think there's room for us to continue to improve that margin as we scale.

Speaker #6: In the relationships that we have with AXON, the one thing that really sold me is this is much more than a company.

Speaker #2: 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.

Speaker #3: 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, we can go leverage, we would, of course, expect it to improve over time.

Speaker #3: The relationships with the people who trust us, with the hardest moments of their lives, that's the network that matters most.

Speaker #2: 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.

Speaker #3: I would also make a reminder that there's also a nice software component to our D-Drone business. And so that spreads out more years. We get more of the hardware up front.

Speaker #1: 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.

Speaker #2: It's no longer just about our new products. After decades of partnership, it's about how we've earned our customers' trust at a moment when it matters most.

Speaker #3: But there is a great software component to D-Drone 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%.

Speaker #2: 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've passed the inflection point.

Speaker #1: 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.

Speaker #1: It's no longer just about our new products. After decades of partnership, it's about how we've earned our customers' trust at a moment when it matters most.

Speaker #3: So we're still really happy with the contribution of D-Drone. But certainly, with the type of growth we're seeing, we will take a little bit of movement, you know, quarter to quarter, in our connected devices growth margin and return for that.

Speaker #2: 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.

Speaker #1: 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've passed the inflection point.

Speaker #4: Yeah, fair. Thank you. Appreciate the response.

Speaker #2: There are two things I'm looking at that drive my conviction. First, technology is no longer evolving linearly or even exponentially. It's evolving across multiple dimensions at once.

Speaker #2: Thanks, Joe. Up next, we have Trevor Walsh at Citizens.

Speaker #5: Great. Thanks, Eric. Josh and/or Jeff, maybe for you guys, I also wanted to ask about D-Drone, but maybe in a different way. So the commentary you had around the strength and the momentum there seems very event-driven, protecting of infrastructure.

Speaker #1: 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.

Speaker #2: 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.

Speaker #5: Counter-Drone. But we've thought of D-Drone as well, as more of the airspace management and how it can relate to DFR opportunities. So is it really being driven by that Counter-Drone piece, or is that DFR element still present?

Speaker #1: There are two things I'm looking at that drive my conviction. First, technology is no longer evolving linearly or even exponentially. It's evolving across multiple dimensions at once.

Speaker #2: 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 as technology is moving.

Speaker #5: And how is that going? As I'm trying to just, like, can you think of it as two separate buckets, or do they really need to be together, I guess, is maybe the question?

Speaker #1: 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.

Speaker #2: No, I think it's two advantages to deploying D-Drone. I actually think right now it's far more predicated on the Counter-Drone than it is on DFR.

Speaker #2: 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.

Speaker #1: 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 as technology is moving.

Speaker #2: And that's more of a, I guess, a reflection on who's buying it now. US, state, and local is buying it. But international enterprise and federal, I'd say, are buying it as much or more.

Speaker #2: 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.

Speaker #2: And in those three 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 D-Drone.

Speaker #1: 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.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: And there's opportunity to make it much more tightly ingrained with FUSIS. So you see everything on one map. And it's just a very clean user experience in that way.

Speaker #2: Across AI, real-time operations, drones, and connected devices, we're moving beyond product adoption and towards system adoption. A system that operates faster, safer, and with more awareness.

Speaker #1: technology. And so, you know, ultimately, there's, there's a lot that goes into it, but I, I really am pleased with, the early progress here.

Speaker #1: 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.

Speaker #2: But the counter-drone functionality is what is driving the D-Drone interest up front.

Speaker #2: 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.

Speaker #5: Just to connect those dots, the technology piece is shared. So that thesis is still 100% right. But what you're just seeing is, as DFR is also explosively growing super-duper fast, there's just a mixture of where they're relying on the onboard autonomy versus where they're relying on the D-Drone tech to do it.

Speaker #1: as, as a reminder, we really think Prepared is out there. you know, 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.

Speaker #1: Across AI, real-time operations, drones, and connected devices, we're moving beyond product adoption and towards system adoption. A system that operates faster, safer, and with more awareness.

Speaker #1: And, and one of the things I think we're seeing that we're, we're particularly excited about is Carbine has, has got a large international, you know, brand and, and a lot of momentum there as well.

Speaker #2: Axon Guardian, monitors alongside officers and can call for help before they can. Axon Assistant has already surpassed 1 million uses and will soon be available wherever officers work.

Speaker #1: 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.

Speaker #5: And it's just a mix and situational. So you have all of these things growing super fast. And so, right now, at this moment, I totally agree with Josh, right?

Speaker #1: So, certainly not limited to the US and, and Carbine's case. and so, yeah, we're, we're, we're feeling good about it. It's still early innings and, and we've got a lot of work to do to keep building.

Speaker #2: And over time, our Axon Gravity initiative will bring in more data that can be harnessed to make even more possible. Our position as the leading repository of data for our customers will continue to broaden.

Speaker #5: The majority of the D-Drone growth is on the counter side. But the tech thesis is the same. And it goes fits hand in glove with the overall DFR hypergrowth as well.

Speaker #1: AXON Guardian, monitors alongside officers and can call for help before they can. AXON Assistant has already surpassed 1 million uses and will soon be available wherever officers work.

Speaker #1: But, you know, we've already signed some of the largest, jurisdictions in the country on Prepared in the last, you know, three or six months here.

Speaker #5: Makes sense. Maybe just based on your answers, 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 D-Drone versus counter, I don't know.

Speaker #2: To be the leading unleasher. 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.

Speaker #1: And, we expect that to continue. So, feeling really good about what 911's gonna look like for the year to come.

Speaker #1: And over time, our AXON Gravity initiative will bring in more data that can 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 unleasher importantly, every capability we add now makes every other capability more valuable.

Speaker #3: Yeah. I, 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 Chim and his team at, at Prepared, we were like, wow, these are great teams.

Speaker #5: Do you have that level to kind of give us some just breadcrumbs as to how that's all flowing and in which direction, if you will, for that line of the business?

Speaker #3: It would take us, you know, it takes time to go build great teams. And they've built great products. customer feedback has been just phenomenal.

Speaker #3: I mean, I think you might expect us to give breadcrumbs 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.

Speaker #2: Draft One improves with every report and every sensor. The value of each will continue to get stronger. My second observation is just as important.

Speaker #3: I was just with, just with them recently at some customer events. And, I can tell you it's, we're getting glowing customer feedback. and i-it's also kind of fun for me as an entrepreneur who's, you know, getting a little further in my career, the energy, these, these younger entrepreneurs are bringing into the organization is great.

Speaker #1: 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.

Speaker #3: 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.

Speaker #2: 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.

Speaker #5: Cool. Great. Thanks, all. Appreciate it.

Speaker #2: Thanks, Trevor.

Speaker #6: Trevor.

Speaker #1: 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.

Speaker #2: Up next, we have Jeremy Hamblin at Carcallum.

Speaker #7: Thanks, and congrats on the strong results. I want to start with your annual recurring revenue. There's an uptick in the year-over-year growth rate on that, both sequentially and in total dollar amount—the fastest growth that you've ever had.

Speaker #3: It's like just a fresh wave of energy into a, you know, in, into the whole company. It's been great.

Speaker #2: Just yesterday, I hosted a collection of chiefs in San Francisco two years ago when I queried the room who had used AI, it was almost zero.

Speaker #1: And it's just one more oh, so go ahead.

Speaker #1: 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.

Speaker #3: Go ahead, Jeff. I was just gonna answer the federal question after.

Speaker #1: Yeah. I was just gonna say really, really quick, it's yet another example of how the hole is greater than the sum of the parts, right?

Speaker #2: Today, it's 100% are using AI tools in their personalized 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 that they have a seamless, secure, accredited AI they can use at work.

Speaker #1: The enthusiasm that we're seeing customers have for how quickly we brought the data from Prepared. And 911 alerts directly into Fusis. And then also bringing that directly into Skydio.

Speaker #7: 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?

Speaker #1: Just yesterday, I hosted a collection of chiefs in San Francisco two years ago, when I queried the room who had used AI, it was almost zero.

Speaker #7: Or is that being driven by more adoption of AI Era Plan and really getting higher kind of monthly user pricing as a result of adoption of more premium plans?

Speaker #1: As part of DFR, those things together make shorter response times happen. And the that is a perfect example of the flywheel that Rick was referring to before.

Speaker #2: As just one of many features we're bringing to them. This isn't limited to law enforcement. FUSIS, D-Drone, Axon 911, license plate readers, vehicle intelligence are being deployed across entire cities and countries.

Speaker #1: Today, it's 100% are using AI tools in their personalized daily, but they know those tools can't be used on government data. And that's why we added the AXON Chatbot into Assistant so that they have a seamless, secure, accredited AI they can use at work.

Speaker #3: And then Mita, on, on federal, renewed momentum there. Last year, we, we rebuilt a large portion of the team, including our leadership. Claudia Davidson has, has come in from Palantir and is a, is a fantastic fit at the company and is someone that I think is gonna be, a long ball hitter here for a long time.

Speaker #2: And now enterprises are seeing similar needs. The environment's may differ, but the requirements and the needs are the same. Safety efficiency and trust in a fast-moving world.

Speaker #3: 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.

Speaker #1: It's just one of many features we're bringing to them. This isn't limited to law enforcement. FUSIS, D-Drone, AXON 911, license plate readers, vehicle intelligence are being deployed across entire cities and countries.

Speaker #3: So, there's really no sort of one driver. I would say you're seeing the business hit on all cylinders, and you're seeing the AI plan really kick in on top.

Speaker #2: 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 up front, not after the fact.

Speaker #3: and, she's done a nice job kind of rebuilding the momentum. We're seeing renewed interest in body cameras and tasers in federal law enforcement. We're seeing a lot of interest in Drone.

Speaker #3: 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%.

Speaker #1: And now enterprises are seeing similar needs. The environment's may differ, but the requirements and the needs are the same. Safety, efficiency, and trust in a fast-moving world.

Speaker #2: That's what makes our technology more durable, more trusted, more widely adopted. And that trust is what earns us the privilege to keep pushing forward.

Speaker #3: and then, of course, on, on the DOW side, we're also seeing some Drone, applicability there. So, really, the federal business is, is, is trending very much in the right direction and with a few things going our way, it could be, a banner year in Fed.

Speaker #3: 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, it's sort of strength across the board.

Speaker #1: 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 up front, not after the fact.

Speaker #2: Three decades of building, millions of sensors, millions of users, trillions of data points flowing through one connected network. Every camera, every device, every line of code, it's all been leading here to this moment.

Speaker #3: But you're seeing it in ARR first.

Speaker #7: 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.

Speaker #3: But again, that's, we gotta, we gotta do the work still.

Speaker #1: That's what makes our technology more durable, more trusted, more widely adopted. And that trust is what earns us the privilege to keep pushing forward.

Speaker #5: Great. Thanks so much.

Speaker #1: Thanks, Mita. Up next, we have Joe Cardoso at JPMorgan.

Speaker #2: 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.

Speaker #6: Hey, good evening, guys. Thanks for the questions here. so m-maybe you can just touch on I w I wanted to circle back with on the Fusis conversation and maybe more specifically the level of attached that you guys are seeing with some of the opportunities here.

Speaker #1: Three decades of building, millions of sensors, millions of users, trillions of data points flowing through one connected network. Every camera, every device, every line of code, it's all been leading here to this moment.

Speaker #7: And 20% of your total business here—so what portion of that is being driven by D-Drone? And is that something—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?

Speaker #2: 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.

Speaker #6: particularly as it relates to Outpost. You know, you mentioned it with the telecom win, but curious how much more pervasive that dynamic is playing out.

Speaker #1: 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.

Speaker #6: And what's exactly driving customers to adopt the hardware side of things? You know, I guess, like, the crux 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?

Speaker #2: And with that, I'll turn it over to Josh.

Speaker #1: 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.

Speaker #2: Yeah, 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 US is going to keep growing.

Speaker #1: 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.

Speaker #6: And then I have a follow-up. Thank you.

Speaker #2: And every time international grows fast, we also have a great quarter from US. And so the mix doesn't change all that much. But I would say, you know, if we isolated international, it's a little bit of both.

Speaker #1: Sure thing. We, we absolutely are. And there's two or three driving forces behind it. Number one is the product is performing exceptionally well in the field.

Speaker #1: 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.

Speaker #1: And with that, I'll turn it over to Josh.

Speaker #1: And relative to incumbents in the space, our product is outperforming them in terms of la in terms of lane coverage, plate The performance reads, performance in bad in bad weather, things weather, things that our customers that cost from an AXON will max on product.

Speaker #7: 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 welcome 3,000 people to AXON Week in April.

Speaker #2: 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.

Speaker #1: 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.

Speaker #7: 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.

Speaker #2: And then there's the inverse of that, where we've had some large D-Drone deals. And now we've built some equity with those customers, and we're talking about how else we can help.

Speaker #1: And incumbents, and then they, you know, the third then the third one is the idea one is the idea infrastructure, and it's going to lead to more and more utility-safer outcomes, more AI.

Speaker #1: 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.

Speaker #2: And so, on a revenue basis, you know, D-Drone 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.

Speaker #7: 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.

Speaker #1: We enter 2026 with tremendous momentum coming off a massive Q4. And the team came out of the gates even faster than we did last year.

Speaker #2: So you might see international revenue still be lumpy from quarter to quarter. But as we zoom out on the year, I'm sure D-Drone will be a driver of increased international revenue.

Speaker #7: 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.

Speaker #1: Q1 was our strongest ever first quarter across revenue, bookings, and new products. And it was a record in markets, US public safety, international, and enterprise, each setting first quarter bookings records.

Speaker #2: I'd say that's a pretty safe bet.

Speaker #1: is so infrastructure that's gonna lead to more and more utilities, big outcomes, more AI. Transformative hardware program here.

Speaker #3: Yeah, and I think 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.

Speaker #7: We enter 2026 with tremendous momentum coming off a massive Q4. And the team came out of the gates even faster than we did last year.

Speaker #1: 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 one product, one geography, or one customer segment.

Speaker #3: And so, I would expect you'll continue to see it be a big topic for us, and some of the momentum. We've had sort of two quarters in a row now up at that 20% level.

Speaker #7: Q1 was our strongest-ever first quarter across revenue, bookings, and new products. And it was a record in markets. US public safety international and enterprise each setting first quarter bookings records.

Speaker #3: So it is really contributing nicely to the business.

Speaker #1: 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.

Speaker #7: Thanks so much, best wishes.

Speaker #2: Thanks, Jeremy.

Speaker #6: Thanks, Jeremy.

Speaker #2: 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.

Speaker #7: 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 one product, one geography, or one customer segment.

Speaker #2: We'll start with Mike Ng at Goldman Sachs.

Speaker #1: A major driver of that momentum is the continued adoption of the AI era plan. 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.

Speaker #1: Great. Good afternoon, 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 or seasonally the smallest booking quarter of the year.

Speaker #7: 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.

Speaker #1: But I was just wondering, you know, 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?

Speaker #1: 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, y, accelerating workflows, and giving officers time back.

Speaker #7: 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.

Speaker #1: Thank you.

Speaker #2: I would say so, yeah. Yeah, Michael. You know, directionally, I think that's how we look at it as well. You know, the back of the napkin is: if bookings grow at the same rate as revenue, then we can assume the revenue growth rate continues way out into the future.

Speaker #1: 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.

Speaker #7: 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.

Speaker #2: And so, you know, there's a lot of opportunity out there. We see, you know, a relatively similar pipeline ratio to what we saw last year versus the goals, which gives us confidence that bookings are continuing to grow.

Speaker #1: We are determined to become the AI company in public safety. And we are well on our way. But the AI era plan is not the only thing driving explosive growth.

Speaker #7: 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.

Speaker #2: As you know, quarter to quarter, they can change a little. You know, back half is very weighted, especially Q4 with the growing size of these deals.

Speaker #1: D-Drone, 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.

Speaker #2: But yeah, we're bullish on bookings like we always are, and feeling really good about where we started the year.

Speaker #7: 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.

Speaker #1: D-Drone is now on a similar trajectory as the AI era plan. 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.

Speaker #6: Thanks, Mike.

Speaker #1: Thank you.

Speaker #6: Up next, we'll go to Andrew Spinola at UBS. You're still with us? Maybe we lost Andrew. Okay, David Page at RBC.

Speaker #7: D-Drone, 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.

Speaker #1: For example, D-Drone 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.

Speaker #8: Hi, thank you for taking my question. Maybe just a quick one again on the drone. It looks like you have a quote here in the deck that says over 400 unauthorized drone detections by D-Drone.

Speaker #7: D-Drone 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.

Speaker #8: So, I'm curious—when you actually go to market and sell the drone offering, what are people looking to protect against? Or what's their main use case?

Speaker #1: D-Drone 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.

Speaker #7: For example, D-Drone 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.

Speaker #8: Thank you.

Speaker #2: Sure thing. I think it starts with just situational awareness. I'd say my guess is a lot of those 400 were, you know, people who just didn't know what they were doing and, you know, irresponsibly flying a drone, but not necessarily like nefarious, predatory drones.

Speaker #1: We have laid the infrastructure to sell globally over the last several years. And now D-Drone has established itself as a further accelerant to our growth.

Speaker #1: 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.

Speaker #7: D-Drone 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.

Speaker #2: So I think the first step is just having a basic understanding of what's going on in your airspace day to day. And as some of these U.S. state and local laws start to change, that allows for mitigation.

Speaker #7: We have laid the infrastructure to sell globally over the last several years. And now D-Drone has established itself as a further accelerant to our growth.

Speaker #2: I think you'll see customers follow with jamming capabilities nets. Interceptor is probably a little bit of a toss-up. Just, you know, that feels like making things explode in the sky will be a lot more highly regulated.

Speaker #7: 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.

Speaker #1: 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.

Speaker #2: 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.

Speaker #1: The deployment centers around Fusis, 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.

Speaker #2: And you know, 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.

Speaker #7: 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.

Speaker #2: And where the pilot is—you know, out in the wild—so they can go send the drone home and meet the pilot there. So yeah, we're, you know, again, this is a new and growing segment, and technology is changing fast.

Speaker #1: By recognizing abnormalities as they occur, this product will add immediate value to any security operation. At the same time, Assistant and Draft One are becoming enterprise ready.

Speaker #7: The deployment centers around Fusis, 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.

Speaker #1: 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.

Speaker #2: 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 drones.

Speaker #7: By recognizing abnormalities as they occur, this product will add immediate value to any security operation. At the same time, Assistant and Draft One are becoming enterprise-ready.

Speaker #2: So, that'll be a continued place of focus and momentum for us.

Speaker #1: 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 Fusis two years ago and D-Drone approximately 18 months ago as of Q1.

Speaker #8: Thank you.

Speaker #6: Thanks, David. Up next, Jordan Linus at Bank of America.

Speaker #7: 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.

Speaker #7: Hey, thanks for taking the question. On D-Drone, how you guys are going to market for it—how is it different than your other products?

Speaker #1: We have now booked over $1.5 times the combined purchase price of those two companies. We see a similarly disruptive opportunity in Axon 911 as we integrate Carbine and Prepared.

Speaker #7: Is it customers coming to you, selling through distributors? And then, for the defense end, international side, how much more do you think we could see this accelerate if FUSUS gets FedRAMP status?

Speaker #7: 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 Fusis two years ago and D-Drone approximately 18 months ago as of Q1.

Speaker #1: We are proving our momentum is sustained. And because we expect a lot more growth, I have sponsored significant investment in core product inventory. We are fortunate that our taser CW lifecycles are 10 to 15 years and our body cameras continue to sell for five-plus years.

Speaker #7: We have now booked over $1.5 times the combined purchase price of those two companies. We see a similarly disruptive opportunity in AXON 911 as we integrate Carbine and Prepared.

Speaker #7: Thanks, Jeff. Yeah.

Speaker #2: Thanks, Jordan. On the counter-drone go-to-market, I think it varies a little by market. US state and local, we very much sell direct. And so it's in our packaging there.

Speaker #1: Thus, we have minimal obsolescence risk as compared to most hardware. 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.

Speaker #2: And you could buy it as a standalone as well. But I think the real takeaway on D-Drone, outside of its 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 four of our customer segments.

Speaker #7: 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.

Speaker #7: We are fortunate that our taser CEW lifecycles are 10 to 15 years. And our body cameras continue to sell for five-plus years. Thus, we have minimal obsolescence risk as compared to most hardware.

Speaker #1: 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.

Speaker #2: And even more so than Taser, more so than body cameras, this product solves a need in all four 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.

Speaker #7: 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.

Speaker #1: And they rely on more and more of Axon products. We will not let them down. Thanks, everyone. Over to you, Brittany.

Speaker #2: Thanks, Josh. Well said 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.

Speaker #7: 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.

Speaker #2: Like, we've got to do that well in D-Drone across all four markets. And you'll see the tailwinds of that in our other product sales.

Speaker #7: And they rely on more and more of AXON products. We will not let them down. Thanks, everyone. Over to you, Brittany.

Speaker #2: So, you know, really, really excited about not only the growth, but the doors that are opening as a result of the interest in that one product.

Speaker #2: 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.

Speaker #2: And then FUSIS 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, you know, there's interest across the board.

Speaker #1: Thanks, Josh. Well said 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.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: And certainly in our core business and core products, as well as D-Drone, DFR, and others. But FUSUS is in that bucket. And it'll certainly help, especially across some of these ecosystem deployments where, you know, you're adding to an Evidence.com environment with these FUSUS streams.

Speaker #2: 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.

Speaker #1: 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.

Speaker #7: Thank you.

Speaker #6: Thanks, Jordan. And we'll take our final question today from Alex Lattimore at Northland.

Speaker #2: 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.

Speaker #9: Hey, guys. Thanks for taking my question here. I was curious what your acquisition interest looked like for the year. I saw that you had a $10 million investment in Buntar Aerospace.

Speaker #1: And we'll 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.

Speaker #9: Maybe it's the acquisition as a drone manufacturer. Anything there would be great.

Speaker #2: Connected devices revenue grew 33% to $453 million. This was a particularly strong Q1 for connected devices. Taser 10 and Body 4 remained durable drivers of growth.

Speaker #1: 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.

Speaker #2: 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.

Speaker #2: And platform solutions, which includes our counter-drone hardware, grew 95% year over year. In total, across hardware and software, D-Drone revenue was up over $300% year over year.

Speaker #2: 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.

Speaker #1: Connected devices revenue grew 33% to $453 million. This was a particularly strong Q1 for connected devices. TASER 10 and Body 4 remained durable drivers of growth.

Speaker #2: 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 D-Drone, FUSUS, and our 911 business right now.

Speaker #2: 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.

Speaker #1: And platform solutions, which include our counter-drone hardware, grew 95% year over year. In total, across hardware and software, D-Drone revenue was up over $300% year over year.

Speaker #10: Alex, I would just note that was an investment, though. And I would expect, like we have been historically, that we will continue to make investments in places that we think are interesting in the ecosystem.

Speaker #2: 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.

Speaker #1: 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.

Speaker #10: 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.

Speaker #2: 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.

Speaker #10: So we'll continue to make investments, sort of consistently, as we go.

Speaker #1: 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.

Speaker #9: Yep. That one in particular, Buntar—you know, 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.

Speaker #2: 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.

Speaker #1: And it represented 20% of our revenue for the quarter. Future contracted bookings were up 44% year over year to 14.3 billion, reflecting this broad-based momentum.

Speaker #9: Because, you know, that's where the fastest level of innovation is happening. And, you know, our D-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.

Speaker #2: 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.

Speaker #1: 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 our raising our revenue guidance for the year to a range of 30 to 32% growth.

Speaker #9: Lord knows what could happen way down the road. But I would say, in Ukraine right now, you know, their hands are pretty busy. They're not looking to get acquired.

Speaker #9: 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.

Speaker #2: Incorporated in this guidance is continued tariffs, inflationary component costs, inclusive of memory, and product makeshift from continued platform solutions growth as well as software and services.

Speaker #1: 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.

Speaker #9: And then, long term, we could also be a great sales channel for some of the technology coming out of Ukraine. When the war's 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.

Speaker #2: 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.

Speaker #1: Incorporated in this guidance is continued tariffs, inflationary component costs, inclusive of memory, and product makeshift from continued platform solutions growth, as well as software and services.

Speaker #7: Thank you.

Speaker #6: Thanks, Alex. And Rick, we'll let you close us out.

Speaker #2: 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 for the full year in 2026.

Speaker #2: Awesome. Well, it's been a wild year. Geopolitically, you know, the optimist in me hopes that the universe is clearing its throat and we're going to get back after, you know, the pandemic and the wars that have happened, to maybe a little bit more stability in the world.

Speaker #1: 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.

Speaker #2: On stock-based compensation, we expect full year of expense of approximately $590 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.

Speaker #1: 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 for the full year in 2026.

Speaker #2: And, you know, I'm proud of the role that we're playing in helping to mitigate, you know, some of those threats, to help to reduce some of the effects of violence in society that at times is feeling more polarized and unstable than ever—at least, maybe it feels that way.

Speaker #2: And, you know, 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.

Speaker #1: On stock-based compensation, we expect full year of expense of approximately $590 to $620 million. As a reminder, a portion of our stock-based compensation expense is tied to our performance plans.

Speaker #2: 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.

Speaker #2: And it's just a continued 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—you know, we never look to be second or third in a category.

Speaker #2: 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%.

Speaker #1: And we'll only be realized if we hit the share price and operational milestones laid out as part of our excess P 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.

Speaker #2: 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, you know, the great stuff we've been doing, we have whole new categories coming.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: And that's what keeps us really invigorated and excited. So great seeing you all. We'll see you on next quarter's call.

Speaker #1: Inclusive of both of these programs, we are committed to average annual dilution of less than 2.5%. As the impact from our performance plans normalizes, 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: And with that, I will turn it over for questions.

Speaker #3: Thanks, everyone. All right. Today at first, we have Will Power at Baird.

Speaker #1: 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.

Speaker #4: OK, great. Thanks, everybody. Yeah, congratulations on another really strong start to the year. Probably for Rick, Josh, Jeff, or whoever wants to take it, just coming out of Axon Week, a lot of focus on some of the new AI capabilities.

Speaker #1: And with that, I will turn it over for questions.

Speaker #2: Thanks, everyone.

Speaker #4: Axon Vision, Guardian, Form 1, et cetera. It'd be great just to get a sense for where you saw the highest levels of customer engagement and interest.

Speaker #3: All right. Today, at first, we have Will Power, at Baird.

Speaker #4: OK, great. Thanks, everybody. Yeah, congratulations on another really strong start to the year. Probably for Rick, Josh, Jeff, or whoever wants to take it, just coming out of AXON Week, a lot of focus on some of the new AI capabilities.

Speaker #4: And how that might kind of fold into the pipeline built for the year, as you think about the broader AI portfolio. Then I have a question for Bitney too.

Speaker #3: Yeah. 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.

Speaker #4: AXON Vision, Guardian, Form 1, et cetera. It'd be great just to get a sense for where you saw the highest levels of customer engagement and interest.

Speaker #3: 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.

Speaker #4: And how that might kind of fold into the pipeline built for the year as you think about the broader AI portfolio. Then I have a question for Brittany, too.

Speaker #2: Yeah. 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.

Speaker #3: And part of what I really wanted to do was to just share the breadth of everything becoming possible in every role with AI that can impact anybody who's touching this information.

Speaker #2: 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.

Speaker #3: 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 era plan.

Speaker #3: 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.

Speaker #2: And part of what I really wanted to do was to just share the breadth of everything becoming possible in every role with AI that can impact anybody who's touching this information.

Speaker #3: 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.

Speaker #2: 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 era plan.

Speaker #3: You brought us body cameras when we nobody wanted to wear them. And 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #3: And so really, it's just each of those features are targeting different personas. Brief one 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 evidence to fill out any form, not just ours, but any web-based form.

Speaker #2: You brought us body cameras when we nobody wanted to wear them. And 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.

Speaker #3: 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.

Speaker #2: And so really, it's just each of those features are targeting different personas. Brief one 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 evidence to fill out any form, not just ours, but any web-based form.

Speaker #3: Everybody was like, wow, it's like it's everywhere. And help us figure this out. So I don't know if Josh or Jeff, if you want to add anything.

Speaker #2: 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.

Speaker #1: Yeah, I'll just add one 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.

Speaker #2: Everybody was like, wow, it's like it's everywhere. And help us figure this out. So I don't know if Josh or Jeff, if you want to add anything.

Speaker #1: It's 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 era plan.

Speaker #3: Yeah, I'll just add one 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.

Speaker #1: I think that's incumbent upon us to continue to delight customers and look, we're like Kentucky Derby was last week. The Belmont's in a few weeks.

Speaker #3: It's 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 Era plan.

Speaker #1: 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 this shock tank idea where they come up with new ideas.

Speaker #3: I think that's incumbent upon us to continue to delight customers and look, we're like we're Kentucky Derby was last week. The Belmont's in a few weeks.

Speaker #1: 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.

Speaker #3: 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 this shock tank idea where they come up with new ideas.

Speaker #1: And we think that's going to be a massive tailwind for our customers, our investors, and our company.

Speaker #4: OK. And then if I can I appreciate that. Great perspective. Brittany, I guess some of the questions I've got, and I guess earlier a bit on the free cash flow side, I know you addressed it on the inventory piece and inventory commentary.

Speaker #3: 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.

Speaker #4: 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?

Speaker #3: And we think that's going to be a massive tailwind for our customers, our investors, and our company.

Speaker #4: OK. And then if I can I appreciate that. Great perspective. Brittany, I guess some of the questions I've got and I guess earlier a bit on the free cash flow side.

Speaker #4: And then anything you could share on the cap exchange, which I think came down a little bit. And just putting all that together, how you get comfortable with kind of the free cash flow conversion targets given the moving pieces here.

Speaker #4: 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 the inventory investment, how much does that relate to higher memory cost and inflationary pressure versus just trying to meet customer demand?

Speaker #5: Yeah. 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.

Speaker #4: And then anything you could share on the cap exchange, which I think came down a little bit. And just putting all that together, how you get comfortable with kind of the free cash flow conversion targets given the moving pieces here.

Speaker #5: 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.

Speaker #5: Yeah. 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.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: We have bonus payments. We have commission payments. We have one of our two semi-annual 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.

Speaker #5: 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.

Speaker #5: So as we look at the next three 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.

Speaker #5: We have bonus payments. We have commission payments. We have one of our two semi-annual 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.

Speaker #5: 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.

Speaker #5: So as we look at the next three 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.

Speaker #5: 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 and tightening up that capex forecast for the year.

Speaker #5: 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.

Speaker #4: OK. Thank you.

Speaker #1: Thanks, Will.

Speaker #4: Thanks, Will. Up next, we have Andrew Sherman at TD Cowan.

Speaker #5: 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.

Speaker #6: Oh, great. Thanks. Good to see everybody. Congrats on the quarter. Josh, the AI era plan bookings up 140%. Revenue up, I think, 700%. That was a lot higher than I thought.

Speaker #5: As we're just refining and tightening up that capex forecast for the year.

Speaker #4: OK. Thank you.

Speaker #3: Thanks, Will.

Speaker #6: 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's been out for a while?

Speaker #4: Thanks, Will. Up next, we have Andrew Sherman at TD Cowen.

Speaker #6: Oh, great. Thanks. Good to see everybody. Congrats on the quarter. Josh, the AI Era plan bookings are up 140%. Revenue is up, I think, 700%.

Speaker #6: So you're seeing more viral type of adoption? Are you seeing that in the pipeline?

Speaker #3: 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 the year.

Speaker #6: 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's been out for a while?

Speaker #3: And I think these deals take a long time to come into fruition, right? We're talking 50 to 200 million dollar deals with some of these large major cities.

Speaker #6: So you're seeing more viral type of adoption? Are you seeing that in the pipeline?

Speaker #3: And as a result, sometimes it takes 8 to 12 months to get these things across the goal line. So we announce the AI era plan at the very, very end of 2024.

Speaker #2: 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 the year.

Speaker #2: And I think these deals take a long time to come into fruition, right? We're talking 50 to 200 million dollar deals with some of these large major cities.

Speaker #3: 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.

Speaker #3: 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.

Speaker #2: And as a result, sometimes it takes 8 to 12 months to get these things across the goal line. So we announced the AI era plan at the very, very end of 2024.

Speaker #2: 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.

Speaker #3: And so just today, a major city in the Mid-Atlantic region went in front of their city council and had an $150 million deal approved that included the AI era plan.

Speaker #2: 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.

Speaker #3: 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.

Speaker #2: And so just today, a major city in the Mid-Atlantic region went in front of their city council and had an $150 million deal approved that included the AI era plan.

Speaker #3: But I certainly have a lot of confidence in our team to be able to do that.

Speaker #4: 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 Fusion.

Speaker #2: 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.

Speaker #4: So talk about the use case in this example. What problems does Fusion solve for them? Are there more of these in the pipeline? Thanks.

Speaker #2: But I certainly have a lot of confidence in our team to be able to do that.

Speaker #4: 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 Fusion.

Speaker #3: Sure thing. So I think about our enterprise business in really three buckets. Fusion, D-Drone, and then the ABW or the Axon body mini. And so with Fusion, all of these businesses have dozens, dozens of thousands, hundreds of thousands, and in some cases, millions of video streams around the world.

Speaker #4: So, what—talk about the use case in this example. What problems does Fusion solve for them? Are there more of these in the pipeline?

Speaker #4: Thanks.

Speaker #2: Sure thing. So I think about our enterprise business and really three buckets. Fusion, D-Drone, and then the ABW or the AXON body mini. And so with Fusion, all of these businesses have dozens, dozens of thousands, hundreds of thousands, and in some cases, millions of video streams around the world.

Speaker #3: And as they brought those online, a lot of times they've siloed across different systems. And they don't have a real unified user experience. So we're able to come in with Fusion 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.

Speaker #3: And so that's been very valuable. It's certainly as camera infrastructure has grown across all cities and businesses, that's been a certain tailwind for Fusion's adoption.

Speaker #2: And as they brought those online, a lot of times they've siloed across different systems. And they don't have a real unified user experience. So we're able to come in with Fusion 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.

Speaker #3: 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.

Speaker #2: And so that's been very valuable. It's certainly as camera infrastructure has grown across all cities and businesses, that's been a certain tailwind for Fusion's adoption.

Speaker #3: And 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.

Speaker #2: 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.

Speaker #3: I keep ABW as Axon body workforce, which is the first version of that product. And so we're seeing it really start to happen in enterprise.

Speaker #3: 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.

Speaker #2: And 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.

Speaker #2: I keep ABW as Axon Body Workforce, which is the first version of that product. And so we're seeing it really start to happen in enterprise.

Speaker #4: Awesome. Thanks, Josh.

Speaker #6: Sure thing, Andrew. Thank you.

Speaker #4: Thanks, Andrew. Up next, we have Jim Fisher, Piper Sandler.

Speaker #7: Hey, guys. Next quarter. Look, multiple large events are coming up here. You can just highlighted a few that this past weekend. Hopefully, your horse pawn.

Speaker #2: 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.

Speaker #7: But just how is this impacting bookings and pipeline? And really, how much of the D-Drone kind of uptick and outsized performance is being tied to these events?

Speaker #4: Awesome. Thanks, Josh.

Speaker #3: Sure thing, Andrew. Thank you.

Speaker #4: Thanks, Andrew. Up next, we have Jim Fisher, Piper Sandler.

Speaker #7: Hey, guys. Next quarter. Look, multiple large events are coming up here you can just highlighted a few that this past weekend. Hopefully, your horse Juan but just how is this impacting bookings and pipeline?

Speaker #7: And really, the crux of it all, guys, is just trying to understand is this event-driven, or is it sustainable kind of demand?

Speaker #3: I would think in this is infrastructure. Certainly, events are nice moments in time, where we can show off the product. They're not super large deployments.

Speaker #7: And really, how much of the D-Drone kind of uptick and outsized performance is being tied to these events? And really, the crux of it all, guys, is just trying to understand, is this event-driven or is it sustainable kind of demand?

Speaker #3: And they're kind of like ephemeral in nature. But what it does do is it gives the host city and federal law enforcement a view into what's happening.

Speaker #3: Federal law enforcement was very complementary to us about our D-Drone installation at the Super Bowl. And that drove interest in that segment. And so think of these are great opportunities to show what we can do.

Speaker #2: I would think this is infrastructure. Certainly, events are nice moments in time where we can show off the product. They're not super large deployments.

Speaker #2: And they're kind of like ephemeral in nature. But what it does do is it gives the host city and federal law enforcement a view into what's happening.

Speaker #3: But it's really about translating that into permanent infrastructure in these cities and businesses. And that's where the real long-term value lies. And that's happening.

Speaker #2: Federal law enforcement was very complimentary to us about our D-Drone installation at the Super Bowl, and that drove interest in that segment. And so, think of these as great opportunities to show what we can do.

Speaker #3: D-Drone 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.

Speaker #2: But it's really about translating that into permanent infrastructure in these cities and businesses. And that's where the real long-term value lies. And that's happening.

Speaker #3: 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.

Speaker #2: D-Drone 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.

Speaker #3: So very, very exciting in a lot of work to do to continue to build out the ecosystem there. But certainly, a lot of to get us very optimistic about being a leading counter-drone provider.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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 to get us very optimistic about being a leading counter-drone provider.

Speaker #2: And that is a multi-year program. So to Josh's point, the events are great. But I would not view D-Drone as being successful only because those events.

Speaker #1: 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.

Speaker #2: 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 scale and get the product out the door than we are by opportunities out there.

Speaker #1: And that is a multi-year program. So to Josh's point, the events are great. But I would not view D-Drone as being successful only because those events.

Speaker #3: Yeah. 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.

Speaker #1: 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 scale and get the product out the door than we are by opportunities out there.

Speaker #3: And it triggers the notion of them viewing it as a sacrosanct thing they have to add to their portfolio.

Speaker #2: Yeah. 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.

Speaker #4: I appreciate all the details there, guys. And Brittany, just to belabor the point, but what's your purchase commitments at this point? If I look at your inventory today and understand the investment you're making, it's about half of your product cost for the year.

Speaker #2: And it triggers the notion of them viewing it as a sacrosanct thing they have to add to their portfolio.

Speaker #4: So what's giving you enough confidence here that we have the inventory availability to meet the demand for the year?

Speaker #4: All right. Appreciate all the details there, guys. And Brittany, just to labor the point, but what's your purchase commitments at this point? If I look at your inventory today and I understand the investment you're making, it's about half of your product cost for the year.

Speaker #2: Yeah. 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.

Speaker #4: So what's giving you enough confidence here that we have the inventory availability to meet the demand for the year?

Speaker #2: 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 not a nice-to-have.

Speaker #1: Yeah. 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.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: 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.

Speaker #2: So I would just say it's really, really close collaboration with our partners and our supply chain.

Speaker #1: 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.

Speaker #4: 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.

Speaker #1: 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.

Speaker #1: So I would just say it's really, really close collaboration with our partners and our supply chain.

Speaker #4: 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 wave out on the memory costs.

Speaker #4: 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.

Speaker #4: 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, large, large international orders are not taking away from our ability to ship to US customers and not putting a ceiling on our revenue growth.

Speaker #4: 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 wave out on the memory costs.

Speaker #4: And really, we're looking toward next year at this point, and how we can position ourselves well across our core products so 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: But like Brittany said in her remarks, it's that has already contemplated in our free cash flow guidance for the year. Makes sense. Thanks, guys.

Speaker #4: Thanks, Jim. Up next, we have Jonathan Ho at William Blair.

Speaker #4: 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.

Speaker #5: Hi. 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 the existing long-term contracts?

Speaker #4: But like Brittany said in her remarks, it's that is already contemplated in our free cash flow guidance for the year. Makes sense. Thanks, guys.

Speaker #5: Are 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.

Speaker #2: Thank you.

Speaker #4: Thanks, Jim. Up next, we have Jonathan Ho at William Blair.

Speaker #5: Hi. Congratulations on the excellent quarter. Thanks for your—our talk—a little bit about your AI cross-sell cadence. Particularly for customers that are maybe in the middle of existing long-term contracts, are most waiting until their contracts expire?

Speaker #5: Any color would be helpful there.

Speaker #3: Sure thing, Jonathan. A lot of that is that happens very naturally, even before the AI era plan that was happening relatively naturally. Because we do release new products every single year.

Speaker #3: We release some at Axon Week. We'll have more exciting things to talk about at IACP. And those are often catalysts to rewrite contracts. Customers see something they like and says, "Okay.

Speaker #5: 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.

Speaker #2: Sure thing, Jonathan. A lot of that is that happens very naturally, even before the AI era plan that was happening relatively naturally. Because we do release new products every single year.

Speaker #3: 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.

Speaker #2: We released some at AXON Week. We'll have more exciting things to talk about at IECP. And those are often catalysts to rewrite contracts. Customers see something they like and say, "OK, if I'm going to buy this, we might as well put everything together and create a new contract that contemplates all of this." In between camera upgrades, new products, urgency around AI—these are all catalysts for those conversations.

Speaker #3: 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.

Speaker #5: 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.

Speaker #2: 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.

Speaker #5: 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?

Speaker #5: Any color would definitely be helpful.

Speaker #5: 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.

Speaker #3: 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.

Speaker #5: 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?

Speaker #3: 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.

Speaker #5: Any color would definitely be helpful.

Speaker #2: 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.

Speaker #3: 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.

Speaker #2: 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.

Speaker #3: There's certainly a lot of demand for drone. And that's driving a lot of conversations into other product categories. And so that's certainly a big part of it as well.

Speaker #3: And ultimately, I just think we're showing up as more of a global company at this point. It's not kind of one person in a very large country showing up trying to sell tasers for the first time.

Speaker #2: 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.

Speaker #2: There's certainly a lot of demand for drone. And that's driving a lot of conversations into other product categories. And so that's certainly a big part of it as well.

Speaker #3: 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 US and in the consistency of our results now is showing that.

Speaker #2: And ultimately, I just think we're showing up as more of a global company at this point. It's not kind of one person in a very large country showing up trying to sell tasers for the first time.

Speaker #3: Where last year was our first year over a billion dollars in bookings. This year, we have a very, very strong pipeline and certainly hope to grow well beyond that.

Speaker #2: 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 US, and the consistency of our results now is showing that.

Speaker #3: And 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.

Speaker #2: 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.

Speaker #3: So.

Speaker #4: Yeah. I would add in, I just got back from a two-week, two-and-a-half-week overseas trip. We are seeing some of the smaller countries looking at going all in on a national basis.

Speaker #2: And we're certainly as confident as we've ever been in the international business. And I think that's a tribute 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.

Speaker #4: Which is kind of a new dynamic. And I think that's really quite helpful. Especially within some of these different blocs where maybe there's historically not been as much comfort with the cloud.

Speaker #4: Yeah. I would add in, I just got back from a two-week, two-and-a-half-week overseas trip. We are seeing some of the smaller countries looking at going all in on a national basis.

Speaker #4: Seeing some of these smaller countries go all in gives us proof points. I had one of my first 90-minute sessions with a prime minister.

Speaker #4: Where this is rising up to that level. Where they're looking at this going, "Wow. We could sort of leapfrog and become one of the most advanced police agencies on Earth." Because we could just deploy everything with Axon.

Speaker #4: 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.

Speaker #4: Seeing some of these smaller countries go all in gives us proof points. I had one of my first 90-minute sessions with a prime minister.

Speaker #4: Which is it's been a pretty solid dynamic to feel that shift happening. And I think as these smaller countries do it, it'll give us the ability to earn our way up into the larger as with everything.

Speaker #4: Where this is rising up to that level. Where they're looking at this going, "Wow, we could sort of leapfrog and become one of the most advanced police agencies on Earth." Because we could just deploy everything with AXON.

Speaker #4: The really mega forces move much more slowly. And that's true of these big national forces compared to maybe some of the smaller ones. We're finding a bit more nimble.

Speaker #4: Which is it's been a pretty solid dynamic to feel that shift happening. And I think as these smaller countries do it, it'll give us the ability to earn our way up into the larger as with everything.

Speaker #4: And again, it's plowing the ground by having for example, in the EU, having some people leading the way really going all in on cloud.

Speaker #4: The last thing I'll say there 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.

Speaker #4: The really mega forces move much more slowly. And that's true of these big national forces compared to maybe some of the smaller ones. We're finding a bit more nimble.

Speaker #4: And again, it's plowing the ground by having for example, in the EU, having some people leading the way really going all in on cloud.

Speaker #4: And so that's another place where fuses is a catalyzing part of the equation, right? It's not just our body cameras and just stems. Fuses is a socket to let them get more value out of the investment they've already made in these other cameras.

Speaker #4: The last thing I'll say there, 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.

Speaker #4: And that just makes the overall ecosystem story from Axon kind of easier to reach the tipping point of their interest. And so it's a great catalyst.

Speaker #4: And so that's another place where Fusus is a catalyzing part of the equation. It's not just our body cameras and just STIMS. Fusus is a socket to let them get more value out of the investment they've already made in these other cameras.

Speaker #3: Thank you. Up next, we have Keith Husam at Northcoast.

Speaker #6: Great. Thanks, guys. Good morning. Obviously, a very solid quarter for you guys. Brittany, if there's anything to pick on from investor standpoint, it might be in the software and services standpoint.

Speaker #4: And that just makes the overall ecosystem story from AXON kind of easier to reach the tipping point of their interest. And so it's a great catalyst.

Speaker #6: In the software and services tends to be very lumpy. I think what we saw here is sequentially probably a little bit lower for us.

Speaker #6: Some people were expecting perhaps walk us through some of the puts and takes about the software and services for the quarter and how we should be thinking about that.

Speaker #2: Thank you. Up next, we have Keith Husam at North Coast.

Speaker #5: Great. Thanks, guys. Good morning. Obviously, a very solid quarter for you guys. Brittany, if there's anything to pick on from investor standpoint, it might be in the software and services standpoint.

Speaker #7: 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.

Speaker #5: In the software and services, it tends to be very lumpy. I think what we saw here is, sequentially, probably a little bit lower for us than we were expecting.

Speaker #7: 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.

Speaker #5: Perhaps walk us through some of the puts and takes about the software and services for the quarter and how we should be thinking about that.

Speaker #7: 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.

Speaker #6: 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.

Speaker #7: 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.

Speaker #6: 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.

Speaker #6: 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.

Speaker #7: And you just see that picking up in ARR first.

Speaker #6: Okay. Appreciate it. And then, Josh, if I could ask you a follow-up to the enterprise question before. Maybe I missed this. Was this a telecom retailer?

Speaker #6: 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.

Speaker #6: Because I understand fuses, Axon Body Mini, and then not only the retailer, but also is this an auction process? Was this you guys going to them?

Speaker #6: And you just see that picking up in ARR first.

Speaker #6: Perhaps from the background behind the adoption by this customer.

Speaker #5: OK. Appreciate it. And then, Josh, if I could ask you a follow-up to the enterprise question before. Maybe I missed.

Speaker #3: 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.

Speaker #3: 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 more general terms.

Speaker #3: And so this is when you think of telecom providers, this is one of the first three or four that's going to enter your brain.

Speaker #3: 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.

Speaker #3: 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.

Speaker #6: Great. Thank you.

Speaker #3: Thank you, Keith.

Speaker #4: Thanks, Keith. Up next, we have Brennan Rogers at Wolf.

Speaker #8: Hi, guys. Thanks for taking my question. I wanted to ask a quick one on AI. Coming out of Axon, there was a ton of innovation, a ton of new products.

Speaker #8: How do you guys think about pricing to value as you kind of furiously add these new products into the bundle over the course of the year?

Speaker #8: I think traditionally, a pricing cycle would happen and you guys would revise the pricing in Q4, Q1. But just given even in the shareholder letter, you guys are talking about Axon Vision being GA in Q4.

Speaker #8: We just heard about that in Axon Week. You guys probably won't have a chance to update pricing. How do you guys think about that?

Speaker #3: 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 could certainly compare the sum of the parts of all the individual features versus the bundle price.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: But no matter what, we're going to make sure that the customer feels like there is a hit your forehead simple ROI on what we're providing relative to the cost.

Speaker #4: And this is where the era plan is just really loved by customers. This idea that, hey, this is moving so fast. We can't even predict with certainty what we're going to be building next year.

Sure, great question. Um, look, I I think as always, you know, we want our price to be commensurate with the, with the value we're creating, and in our bundles, you know, you could certainly compare the sum of the parts of all the individual features versus the bundle price. And generally, we want those things to tie out. So the more features we add, uh, you know, you should you should expect that to be reflected in the price as we revised it each year. Um, and there is an annual kind of, um, you know, um, uh, escalator in the contracts, you know, to account for the fact that each year will represent, uh, more value and functionality in the plan. Um, and so generally speaking, you know, it's it serves customers well to get in early and

Speaker #4: And to avoid having to constantly be going back to procurement cycles, it would just be exhausting. So they really love this idea that, you know what, Axon Vision's new.

Speaker #4: 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 you're on that plan.

You know, the longer you wait, the more the sum of the parts adds up, but, um, 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, you know, relative to the cost.

And this is where the error plan is just really.

Speaker #7: 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.

Speaker #7: That's a pretty strongly held belief of ours is that it's tied to value. And so I think what you're seeing is we are putting more value into the AI era plan, which is great because then it means our customers will see that value.

Speaker #7: And when we do get to our annual pricing discussions, we will look at the value we're delivering relative to the price.

Loved by customers. You know, 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, uh, and to avoid having to constantly going back to procurement Cycles. It would just be exhausting. So they really love this idea that, you know what axon vision is knew. You didn't know about it when you signed your contract, frankly, maybe we didn't either, but they're going to get it if you're on that plan.

Speaker #8: Got it. Thank you. And then just one more. Sort of on that memory side, any chance you guys can quantify the impact in terms of margins?

Speaker #8: I'm assuming it's probably not big enough to reprice or maybe that's the wrong assumption. Any assumption?

Speaker #3: That's a right assumption.

Speaker #7: Yeah. 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.

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 is that it's tied to value. And so, I think what you're seeing is, we are putting more value into the AI Aero plan, 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.

Speaker #7: 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.

Got it, thank you. And then just one more, um, sort of on that memory side. Um, any chance you guys can quantify the impacts?

Speaker #7: 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.

Um, in terms of margins, um, I'm assuming it's probably not big enough to reprice, or maybe that's the wrong assumption. Um,

Speaker #7: But I wouldn't over-index on it.

Speaker #8: Got it. Thank you.

Speaker #4: Thanks, Brennan. Up next, we have Mita Marshall at Morgan Stanley.

Speaker #9: Great. Thanks so much, guys. 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.

Speaker #9: And then maybe just second on federal, obviously, some kind of shutdowns at various points this year. No, it's not a major business for you, but just how you're seeing kind of the deal environment on the federal side.

Yeah, 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.

Got it. Thank you.

Thanks, Brandon. Up next, we have Meet and Marshall at Morgan Stanley.

Speaker #9: Thanks.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: I think the value proposition is very, very strong there. It reminds me when we first got into cloud 15 years ago when the options were all on-premise.

Speaker #3: 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.

Great. Thanks so much guys. Um, maybe uh, a couple of questions for me, you know, noted still very early days of of carbine and prepared. Uh, but just what you're seeing in terms of kind of how you're looking at that market opportunity. Um, and then maybe just second on federal. Obviously, some kind of, you know, shutdowns at various points this year? No, it's not a major business for you but just how you're seeing kind of the deal environment on the federal side. Thanks sure. On on 911, I think um I would say I I have a lot of confidence that we will.

Speaker #3: 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.

Speaker #3: 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, uh,

Speaker #3: So certainly not limited to the US and Carbine's case. And so, yeah, we're feeling good about it. It's still early innings. And we've got a lot of work to do to keep building.

Speaker #3: But we've already signed some of the largest jurisdictions in the country on Prepared in the last three or six months here. And we expect that to continue.

Speaker #3: So feeling really good about what 911 is going to look like for the year to come.

Speaker #4: Yeah. 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, Chaim and his team at Prepared, we were like, wow, these are great teams.

Speaker #4: 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.

Speaker #4: 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's getting a little further in my career.

Speaker #4: The energy,

Speaker #4: 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.

Speaker #3: just one more oh, so go And it's ahead.

Speaker #4: Go ahead, Jeff. I was just going to answer the federal question after.

Speaker #3: Yeah. I was just going to say really, really quick, it's yet another example of how the hole is greater than the sum of the parts, right?

Speaker #3: The enthusiasm that we're seeing customers have for how quickly we brought the data from Prepared. And 911 alerts directly into Fusis. And then also bringing that directly into Skydio.

Speaker #3: 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.

Speaker #4: And then, Mita, on federal, renewed momentum there. Last year, we 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.

Speaker #4: And she's done a nice job kind of rebuilding the momentum. We're seeing renewed interest in body cameras and tasers in federal law enforcement. We're seeing a lot of interest in Drone.

Speaker #4: And then of course, on the DOW side, we're also seeing some Drone applicability there. So really, the federal business is trending very much in the right direction.

Speaker #4: And with a few things going our way, it could be a banner year in Fed. But again, that's we got to do the work still.

Speaker #9: Great. Thanks so much.

Speaker #4: Thanks, Mita. Up next, we have Joe Cardoso at JPMorgan.

Speaker #10: Hey, good evening, guys. Thanks for the questions here. So maybe you can just touch on I wanted to circle back on the Fusis conversation.

Speaker #10: And maybe more specifically, the level of attached that you guys are seeing with some of the opportunities here. Particularly as it relates to Outpost.

Speaker #10: 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?

Speaker #10: I guess the crux 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?

Speaker #10: And then I have a follow-up. Thank you.

Speaker #3: Sure thing. We absolutely are. And there's two or three driving forces behind it. Number one is the product is performing exceptionally well in the field.

Speaker #3: 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.

Speaker #3: It's cheaper. That 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.

Speaker #3: You can run AI 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.

Speaker #3: Reminder on Outpost is it's got two 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.

Reads that our customers will max on product. Product is, uh, it's cheaper—that probably helping, uh, you know, in the context of marketing against incumbents. And then say, you know, the third one is the idea that, again, it's a new sensor in this broader 'e,' you can run AI.

Speaker #3: And ultimately, it's one of those where, again, 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.

Edge, you have immediate utility from, um, and if it's just broader play vision. And so, um, reminder on Outpost is two cameras, and everyone is working the other one.

CCTV screen.

Speaker #3: All these things combined into what looks like another transformative hardware program here.

this is,

2 cameras in it. 1 is for plate reads and the other 1 is for CCTV streaming. And so we think this is again, physical infrastructure.

Performance in bad weather. Things that customer development acts on product. This product is doing, uh, it's cheaper. That's certainly helping, uh, you know, in the context of competing against incumbents and then say you know, the third 1 is the idea that again it's it's a new sensor in this broader ecosystem, you can run AI on it. The edge you uh you have immediate utility from the plate reads um and it fits in this broader play with access vision and so forth. Um you know reminder on outpost is it's got 2 uh uh 2 cameras in it. 1 is for plate reads and the other 1 is for CCTV streaming. And so we think this is again, physical infrastructure.

Speaker #4: Yeah. 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.

Speaker #4: 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 so our insights match our outsides.

Jeff Kunins: Transformative hardware program here.

Josh Isner: Transformative hardware program here.

Rick Smith: Yeah, if I could add in, if you go search the mayor of Denver did a great, you know, video tweet, where he was talking about, you know, they moved from a competing system to Axon largely because of the data privacy, data ownership. You know, we really structured this in a way, where it's not just talk, right? When we think about building products rigorously in a way we're gonna be proud of, we do that both so our insides match our outsides. You know, employees wanna be authentic and know that we're doing things, you know, in a way that they're gonna be proud of. It stands up to scrutiny.

Rick Smith: Yeah, if I could add in, if you go search the mayor of Denver did a great, you know, video tweet, where he was talking about, you know, they moved from a competing system to Axon largely because of the data privacy, data ownership. You know, we really structured this in a way, where it's not just talk, right? When we think about building products rigorously in a way we're gonna be proud of, we do that both so our insides match our outsides. You know, employees wanna be authentic and know that we're doing things, you know, in a way that they're gonna be proud of. It stands up to scrutiny.

Speaker #4: 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.

Speaker #4: And ultimately, that pays off when customers are like, "Oh, wow, we didn't realize our legislate reads were being shared with a federal agency that's frankly not popular with our constituents in this area." And we don't want that happening, certainly without our knowledge.

Speaker #4: And when we come in, we say, "Look, here's how this system works. It's your data. We don't have any right title or or interest to it.

Speaker #4: We certainly enable you to share, with anybody you want to share it to, but in ways that are very explicit and well understood. And it's you making the decision, so you're never getting surprised." Those sort of things, pay off pretty big when controversy is hit.

Rick Smith: Ultimately, you know, that pays off when customers are like, Oh, wow, we didn't realize our license plate reads were being shared with a federal agency that's frankly not popular with our constituents in this area, and we, you know, don't want that happening certainly without our knowledge. When we come in, we say, Look, here's how this system works. It's your data. We don't have any right, title, or interest to it. We certainly enable you to share with anybody you wanna share it to, but in ways that are very explicit and well understood, and it's you making the decision so you're never getting surprised. You know, those sort of things pay off pretty big when controversy is hit.

Rick Smith: Ultimately, you know, that pays off when customers are like, Oh, wow, we didn't realize our license plate reads were being shared with a federal agency that's frankly not popular with our constituents in this area, and we, you know, don't want that happening certainly without our knowledge. When we come in, we say, Look, here's how this system works. It's your data. We don't have any right, title, or interest to it. We certainly enable you to share with anybody you wanna share it to, but in ways that are very explicit and well understood, and it's you making the decision so you're never getting surprised. You know, those sort of things pay off pretty big when controversy is hit.

Speaker #4: And one of the things we're hearing from customers or that 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.

Speaker #2: I'm just going to add that one of the fun things about talking about Prepared and Carbide and 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.

Speaker #2: So we did 34% growth without any of these. And these are amazing drivers to support our long-term growth in our future.

Rick Smith: One of the things you'll hear from the customers or that 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.

Rick Smith: One of the things you'll hear from the customers or that 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.

Speaker #10: No, appreciate the color, guys. And then maybe just as my follow-up here, and on the Joan opportunity, maybe this one's more geared towards you, Brittany.

Brittany Bagley: I'm just gonna add that one of the fun things about talking about Prepared and Carve-In and, you know, 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. We did 34% growth without any of these, and these are amazing drivers to support our long-term growth and our future.

Brittany Bagley: I'm just gonna add that one of the fun things about talking about Prepared and Carve-In and, you know, 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. We did 34% growth without any of these, and these are amazing drivers to support our long-term growth and our future.

Speaker #10: 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.

Speaker #10: 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?

I'm just gonna add that one of the fun things about talking about Prepared, and Carbine, and, you know, 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.

Joseph Cardoso: No, appreciate the color, guys. Then maybe just as my follow-up here on the drone opportunity, maybe this one's more geared towards you, Brittany. Obviously, nice growth this quarter. Appears to be a building pipeline here, a strong pipeline building. You know, just given its infancy, I'm sure it's weighing on the device margins here. Maybe can you help us frame where this business sits today within the margin structure versus, you know, what's your ambitions at scale and what level of scale would you need to achieve that? Thank you.

Joe Cardoso: No, appreciate the color, guys. Then maybe just as my follow-up here on the drone opportunity, maybe this one's more geared towards you, Brittany. Obviously, nice growth this quarter. Appears to be a building pipeline here, a strong pipeline building. You know, just given its infancy, I'm sure it's weighing on the device margins here. Maybe can you help us frame where this business sits today within the margin structure versus, you know, what's your ambitions at scale and what level of scale would you need to achieve that? Thank you.

Speaker #10: Thank you.

Speaker #2: Yeah. 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 three hardware businesses inside of connected devices.

Speaker #2: And certainly, the Drone hardware is a portion of that. I do think there's room for us to continue to improve that margin as we scale.

Speaker #2: 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.

Brittany Bagley: Yeah, no, it's a great question. You're absolutely right. We've called out before that our Platform Solutions business is the lowest of our three hardware businesses inside of Connected Devices. 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. As we scale and as we get repeatability, and as we get, you know, larger numbers that we can go leverage, we would of course expect it to improve over time. I would also, you know, make a reminder that there's also a nice software component to our Dedrone business, that spreads out more years.

Brittany Bagley: Yeah, no, it's a great question. You're absolutely right. We've called out before that our Platform Solutions business is the lowest of our three hardware businesses inside of Connected Devices. 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. As we scale and as we get repeatability, and as we get, you know, larger numbers that we can go leverage, we would of course expect it to improve over time. I would also, you know, make a reminder that there's also a nice software component to our Dedrone business, that spreads out more years.

Speaker #2: I would also make a reminder that there's also a nice software component to our Drone business. And so that spreads out more years. We get more of the hardware up front.

Speaker #2: But there is a great software component to Drone that shows up inside of our software business. And And our software-only growth margins, if you include the services piece, continue to be above 80%.

Speaker #2: So we're still really happy with the contribution of Drone. 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 and return for that.

Brittany Bagley: We get more of the hardware up front, there is a great software component to Dedrone that shows up inside of our software business. Our software only grows margins if you include the services piece, continue to be above 80%. We're still really happy with the contribution of Dedrone. Certainly with the type of growth we're seeing, we will take a little bit of movement, you know, quarter-to-quarter in our Connected Devices gross margin in return for that.

Brittany Bagley: We get more of the hardware up front, there is a great software component to Dedrone that shows up inside of our software business. Our software only grows margins if you include the services piece, continue to be above 80%. We're still really happy with the contribution of Dedrone. Certainly with the type of growth we're seeing, we will take a little bit of movement, you know, quarter-to-quarter in our Connected Devices gross margin in return for that.

Speaker #10: No, fair. Thank you. Appreciate the response.

Speaker #4: Thanks, Joe. Up next, we have Trevor Walsh at Citizens.

Speaker #11: Great. Thanks, Eric. Josh and/or Jeff, maybe for you guys, I also wanted to ask about Drone, but maybe in a different way. So the commentary you had around the strength and the momentum there seems very event-driven, protecting of infrastructure.

Speaker #11: Counter-Drone. But we've thought of Drone as well as more of the airspace management and how it can relate to DFR opportunities. So is it really being driven by that Counter-Drone piece, or is that DFR element still present?

Joseph Cardoso: No, fair. Thank you. Appreciate the response.

Joe Cardoso: No, fair. Thank you. Appreciate the response.

Jeff Kunins: Thanks, Joe. Up next, we have Trevor Walsh at Citizens.

Erik Lapinski: Thanks, Joe. Up next, we have Trevor Walsh at Citizens.

Trevor Walsh: Great. Thanks, Eric. Josh and/or Jeff, maybe for you guys, also wanted to ask about Dedrone, but maybe in a different way. The, the commentary you had around the strength and the momentum there seems very event-driven, protecting of infrastructure, counter-drone. We thought of Dedrone as well as more the airspace management and how it can relate to DFR opportunities. Is it really being driven by that counter-drone piece, or is that DFR element still present, and how is that going? I'm trying to can you think of it as two separate buckets or are they really need to be together, I guess is maybe the question.

Trevor Walsh: Great. Thanks, Eric. Josh and/or Jeff, maybe for you guys, also wanted to ask about Dedrone, but maybe in a different way. The, the commentary you had around the strength and the momentum there seems very event-driven, protecting of infrastructure, counter-drone. We thought of Dedrone as well as more the airspace management and how it can relate to DFR opportunities. Is it really being driven by that counter-drone piece, or is that DFR element still present, and how is that going? I'm trying to can you think of it as two separate buckets or are they really need to be together, I guess is maybe the question.

Speaker #11: And how is that going? As I'm trying to just can you think of it as two separate buckets, or are they really need to be together, I guess, is maybe the question?

Speaker #4: No, I think it's two advantages to deploying Drone. I actually think right now it's far more predicated on the Counter-Drone than it is on DFR.

Speaker #4: And that's more of a, I guess, a reflection on who's buying it now. US, state, and local, is buying it. But international enterprise and federal, I'd say, are buying it as much or more.

Rick Smith: No, I think it's two, you know, two 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 reflection on who's buying it now. US state and local is buying it, but international enterprise and federal, I'd say, are buying it as much or more. In those three markets, it's far more for counter-drone. As DFR becomes more, you know, as it 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 Fusus so you see everything on one map, and then it's just a very clean user experience in that way.

Josh Isner: No, I think it's two, you know, two 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 reflection on who's buying it now. US state and local is buying it, but international enterprise and federal, I'd say, are buying it as much or more. In those three markets, it's far more for counter-drone. As DFR becomes more, you know, as it 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 Fusus so you see everything on one map, and then it's just a very clean user experience in that way.

Speaker #4: And in those three 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 Drone.

Speaker #4: And there's opportunity to make it much more tightly ingrained with Fusis. So you see everything on one map. And it's just a very clean user experience in that way.

Speaker #4: But the Counter-Drone functionality is what is driving the Drone interest up front.

Speaker #12: Just to connect those dots, 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 duper fast, there's just a mixture of where they're relying on the onboard autonomy versus where they're relying on the Drone tech to do it.

Rick Smith: The counter-drone functionality is what is driving the Dedrone interest up front.

Josh Isner: The counter-drone functionality is what is driving the Dedrone interest up front.

Jeff Kunins: Just to connect those dots, the technology piece is shared, so that thesis is still 100% right. What you're just seeing is as DFR is also explosively growing super-duper fast, there's just a mixture of, like, where they're relying on the onboard autonomy versus where they're relying on the Dedrone tech to do it. It's just a mix and situational. You have all of these things growing super fast and right now at this moment, I totally agree with Josh, right? The majority of the Dedrone growth is on the counter side, the tech thesis is the same, it fits hand in glove with the overall DFR hypergrowth as well.

Jeff Kunins: Just to connect those dots, the technology piece is shared, so that thesis is still 100% right. What you're just seeing is as DFR is also explosively growing super-duper fast, there's just a mixture of, like, where they're relying on the onboard autonomy versus where they're relying on the Dedrone tech to do it. It's just a mix and situational. You have all of these things growing super fast and right now at this moment, I totally agree with Josh, right? The majority of the Dedrone growth is on the counter side, the tech thesis is the same, it fits hand in glove with the overall DFR hypergrowth as well.

Speaker #12: 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?

Speaker #12: The majority of the Drone growth is on the counter side. But the tech thesis is the same. And it goes fits hand in glove with the overall DFR hypergrowth as well.

Speaker #11: Makes sense. Maybe just based on your answers, 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 Drone versus Counter?

Speaker #11: I don't know if you have that level of visibility. Could we maybe expect something to kind of give us some just breadcrumbs as to how that's all flowing in which direction, if you will, for that line of the business?

Trevor Walsh: Makes sense. Maybe just based on your answers, a quick follow-up for Brittany. Just given what your colleagues just said, are you currently or in the future gonna be able to maybe differentiate between what revenue is more DFR related for Dedrone versus counter? I don't know if you have that level of visibility. Could we maybe expect something to kind of give us some.

Trevor Walsh: Makes sense. Maybe just based on your answers, a quick follow-up for Brittany. Just given what your colleagues just said, are you currently or in the future gonna be able to maybe differentiate between what revenue is more DFR related for Dedrone versus counter? I don't know if you have that level of visibility. Could we maybe expect something to kind of give us some.

Speaker #2: I mean, I think you might expect us to give breadcrumbs and continue to give color on the call. I think we're a pretty long way from further breaking out platform solutions as a segment.

Speaker #2: 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.

Josh Isner: Breadcrumbs as to how that's all flowing in which direction, if you will, for that line of the business.

Trevor Walsh: Breadcrumbs as to how that's all flowing in which direction, if you will, for that line of the business.

Speaker #11: Cool. Great. Thanks, all. Appreciate it.

Speaker #4: Thanks, Trevor.

Speaker #12: Trevor. Up next, we have Jeremy Hamblen at Cargallum.

Brittany Bagley: I mean, I think you might expect us to give, you know, breadcrumbs 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. As we always do on some of these segments, we will of course try and give you color as we see developments going places.

Brittany Bagley: I mean, I think you might expect us to give, you know, breadcrumbs 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. As we always do on some of these segments, we will of course try and give you color as we see developments going places.

Speaker #13: 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.

Josh Isner: Cool. Great. Thanks all. Appreciate it.

Trevor Walsh: Cool. Great. Thanks all. Appreciate it.

Erik Lapinski: Thanks, Trevor.

Josh Isner: Thanks, Trevor.

Rick Smith: Trevor.

Rick Smith: Trevor.

Speaker #13: Just in terms of kind of quantifying how or what's driving that, the portion of growth, is that more being driven by user growth? Or is that being driven by more adoption of AI era plan and really getting higher kind of monthly user pricing as a result of adoption of more premium plans?

Erik Lapinski: Up next, we have Jeremy Hamblin at Cowen.

Erik Lapinski: Up next, we have Jeremy Hamblin at Cowen.

Jeremy Hamblin: Thanks, and congrats on the strong results. I wanna start with your annual recurring revenue. An uptick in the year-over-year growth rate on that from a sequential and total dollar amount, you know, 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 or a plan and really getting, you know, higher kind of monthly user pricing as a result of adoption of more premium plans?

Jeremy Hamblin: Thanks, and congrats on the strong results. I wanna start with your annual recurring revenue. An uptick in the year-over-year growth rate on that from a sequential and total dollar amount, you know, 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 or a plan and really getting, you know, higher kind of monthly user pricing as a result of adoption of more premium plans?

Speaker #2: 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.

Speaker #2: So there's really no sort of one driver. I would say you're seeing the business hit on all cylinders and you're seeing the AI plan really kick in on top.

Speaker #2: 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%.

Brittany Bagley: 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. There's really no sort of one driver. I would say you're seeing the business hit on all cylinders, and you're seeing the AI plan really kick in on top. You know, you're seeing the benefit in ARR of our big bookings quarter in Q4. You're starting to see that show up. We're continuing to have NRR of 125%. That's been very consistent, but you're seeing those existing customers come back in and trade up and buy more. I mean, as I said earlier, sort of strength across the board, but you're seeing it in ARR first.

Brittany Bagley: 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. There's really no sort of one driver. I would say you're seeing the business hit on all cylinders, and you're seeing the AI plan really kick in on top. You know, you're seeing the benefit in ARR of our big bookings quarter in Q4. You're starting to see that show up. We're continuing to have NRR of 125%. That's been very consistent, but you're seeing those existing customers come back in and trade up and buy more. I mean, as I said earlier, sort of strength across the board, but you're seeing it in ARR first.

Speaker #2: 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.

Speaker #2: But you're seeing it in ARR first.

Speaker #13: 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.

Speaker #13: And 20% of your total business here so what portion of that is being driven by Drone? 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?

Jeremy Hamblin: Then just a follow-up here on the commentary around drone and your international business. You saw, you know, huge growth internationally, the best in quite some time, and 20% of your total business here. What portion of that is being driven by Dedrone? Is that something that, you know, the international portion because of that and because of what's going on geopolitically, is that something where we should be expecting international is gonna be just a bigger portion of the total here for the foreseeable future?

Jeremy Hamblin: Then just a follow-up here on the commentary around drone and your international business. You saw, you know, huge growth internationally, the best in quite some time, and 20% of your total business here. What portion of that is being driven by Dedrone? Is that something that, you know, the international portion because of that and because of what's going on geopolitically, is that something where we should be expecting international is gonna be just a bigger portion of the total here for the foreseeable future?

Speaker #4: Yeah, it's a great question, Jeremy. I think the challenge we always have in predicting that one is just it's a question of how fast US is going to keep growing.

Speaker #4: And every time international grows fast, we also have a great quarter from US. 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.

Josh Isner: It's a great question, Jeremy. I think the challenge we always have in predicting that one is just, it's a question of how fast US is gonna keep growing. Every time international grows fast, we also have a great quarter from US, the mix doesn't change all that much. I would say, you know, if we, if we isolated international, it's a little bit of both. We have some markets last year where we opened up on cloud, the conversations have really quickly advanced to following fast with Dedrone in large ways. There's the inverse of that, where we've had some large Dedrone deals, now we've built some equity with those customers, we're talking about how else we can help.

Josh Isner: It's a great question, Jeremy. I think the challenge we always have in predicting that one is just, it's a question of how fast US is gonna keep growing. Every time international grows fast, we also have a great quarter from US, the mix doesn't change all that much. I would say, you know, if we, if we isolated international, it's a little bit of both. We have some markets last year where we opened up on cloud, the conversations have really quickly advanced to following fast with Dedrone in large ways. There's the inverse of that, where we've had some large Dedrone deals, now we've built some equity with those customers, we're talking about how else we can help.

Speaker #4: We have some markets last year where we opened up on cloud. And then the conversations have really quickly advanced to following fast with Drone in large ways.

Speaker #4: And then there's the inverse of that where we've had some large Drone deals. And now we've built some equity with those customers. And we're talking about how else we can help.

Speaker #4: And so on a revenue basis, Drone 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.

Speaker #4: So you might see international revenue still be lumpy from quarter to quarter. But as we zoom out on the year, I'm sure Drone will be a driver of increased international revenue.

Josh Isner: On a revenue basis, you know, Dedrone does factor in a little more because there's a lot of hardware versus, you know, some of our services that are more bookings-oriented that hit revenue over time. You might see, you know, international revenue, you know, 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.

Speaker #4: I'd say that's pretty safe bet.

Josh Isner: On a revenue basis, you know, Dedrone does factor in a little more because there's a lot of hardware versus, you know, some of our services that are more bookings-oriented that hit revenue over time. You might see, you know, international revenue, you know, 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.

Speaker #2: And I think 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.

Speaker #2: 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 two quarters in a row now up at that 20% level.

Speaker #2: So it is really contributing nicely to the business.

Erik Lapinski: And, you know-

Brittany Bagley: And, you know-

Erik Lapinski: Thanks, Trevor.

Erik Lapinski: Thanks, Trevor.

Brittany Bagley: It's gonna move around. As Josh said, it's lumpy. It's, it's quarter to quarter. We are seeing fundamentally more strength in international. 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 two quarters in a row now up at that 20% level. It is really contributing nicely to the business.

Brittany Bagley: It's gonna move around. As Josh said, it's lumpy. It's, it's quarter to quarter. We are seeing fundamentally more strength in international. 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 two quarters in a row now up at that 20% level. It is really contributing nicely to the business.

Speaker #13: Thanks so much, best wishes.

Speaker #4: Thanks, Jeremy.

Speaker #12: Thanks, Jeremy. 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.

Speaker #12: We'll start with Mike and Goldman Sachs.

Speaker #14: Great. Good afternoon. 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 or seasonally the smallest booking quarter of the year.

Jeremy Hamblin: Thanks so much. Best wishes.

Jeremy Hamblin: Thanks so much. Best wishes.

Josh Isner: Thanks, Jeremy.

Josh Isner: Thanks, Jeremy.

Erik Lapinski: Thanks, Jeremy. 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 Michael Ng at Goldman Sachs.

Erik Lapinski: Thanks, Jeremy. 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 Michael Ng at Goldman Sachs.

Speaker #14: 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?

Michael Ng: Great. Good afternoon. Thank you for the question. I think implied bookings in the quarter were up roughly 75% year over year. You know, I certainly appreciate it's seasonally the smallest booking quarter of the year. I was just wondering, you know, what that tells you about the momentum for full year bookings growth. Could we expect, you know, full year bookings growth kind of growing in line with revenue growth? Thank you.

Michael Ng: Great. Good afternoon. Thank you for the question. I think implied bookings in the quarter were up roughly 75% year over year. You know, I certainly appreciate it's seasonally the smallest booking quarter of the year. I was just wondering, you know, what that tells you about the momentum for full year bookings growth. Could we expect, you know, full year bookings growth kind of growing in line with revenue growth? Thank you.

Speaker #14: Thank you.

Speaker #4: I would say so, yeah. Yeah, 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.

Speaker #4: 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.

Josh Isner: I would say so, yeah. Yeah, Michael. It, you know, in that directionally, I think that's how we look at it as well. You know, 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. You know, there's a lot of opportunity out there. We see, you know, 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. You know, H2 is very weighted, especially Q4, with the growing size of these deals.

Josh Isner: I would say so, yeah. Yeah, Michael. It, you know, in that directionally, I think that's how we look at it as well. You know, 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. You know, there's a lot of opportunity out there. We see, you know, 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. You know, H2 is very weighted, especially Q4, with the growing size of these deals.

Speaker #4: 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.

Speaker #4: But yeah, we're bullish on bookings like we always are. And feeling really good about where we started the year.

Speaker #12: Thanks, Mike.

Speaker #14: Thank you.

Speaker #12: Up next, we'll go to Andrew Spinola at UBS. You're still with us. Maybe you lost Andrew. Okay. David Page at RBC.

Josh Isner: Yeah, we're bullish on bookings like we always are and feeling really good about where we started the year.

Josh Isner: Yeah, we're bullish on bookings like we always are and feeling really good about where we started the year.

Speaker #15: Hi. Thank you for taking my question. Maybe just a quick one again on the Drone. It looks like you have a quote here. And the deck that says over 400 unauthorized drone detections by Drone.

Erik Lapinski: Thanks, Mike.

Erik Lapinski: Thanks, Mike.

Michael Ng: Thank you.

Michael Ng: Thank you.

Erik Lapinski: Up next, we'll go to Andrew Spinola at UBS. If you're still with us. Maybe we lost Andrew. Okay, David Paige at RBC.

Erik Lapinski: Up next, we'll go to Andrew Spinola at UBS. If you're still with us. Maybe we lost Andrew. Okay, David Paige at RBC.

Speaker #15: So I'm curious, when you actually go to market and sell the Drone offering, what are people looking to protect against? Or what's their main use case?

Speaker #15: Thank you.

David Paige: Hi, thank you for taking my question. Maybe just a quick one again on the drone. It looks like you have a quote here in the deck that says over 400 unauthorized drone detections by Dedrone. So I'm curious, when you actually go to market and sell the drone offering, like what are people looking to protect against? Or like what's their main use case? Thank you.

David Paige: Hi, thank you for taking my question. Maybe just a quick one again on the drone. It looks like you have a quote here in the deck that says over 400 unauthorized drone detections by Dedrone. So I'm curious, when you actually go to market and sell the drone offering, like what are people looking to protect against? Or like what's their main use case? Thank you.

Speaker #12: Sure thing. I think it's 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 irresponsibly flying a drone but not necessarily nefarious predatory drones.

Speaker #12: So I think the first step is just having a basic understanding of what's going on in your airspace day to day. And as some of these US state and local laws start to change, that allows for mitigation.

Josh Isner: Sure thing. I think it starts with just situational awareness. I'd say my guess is a lot of those 400 were, you know, people who just didn't know what they were doing and, you know, irresponsibly 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 airspace day-to-day. As some of these US state and local laws start to change that allow for mitigation, I think you'll see customers follow with jamming capabilities, nets. Interceptor is probably a little bit of a toss-up, just, you know, that feels like making things explode in the sky will be a lot more highly regulated.

Josh Isner: Sure thing. I think it starts with just situational awareness. I'd say my guess is a lot of those 400 were, you know, people who just didn't know what they were doing and, you know, irresponsibly 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 airspace day-to-day. As some of these US state and local laws start to change that allow for mitigation, I think you'll see customers follow with jamming capabilities, nets. Interceptor is probably a little bit of a toss-up, just, you know, that feels like making things explode in the sky will be a lot more highly regulated.

Speaker #12: I think you'll see customers follow with jamming capabilities, nets, interceptors, 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.

Speaker #12: 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.

Speaker #12: 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.

Speaker #12: And where the pilot is out in the wild so they can go send the drone home and meet the pilot there. So yeah, we're again, this is a new and growing segment in technology is changing fast.

Josh Isner: At least those first couple, I think, are more likely to start to happen faster. It's a case of one thing building to the next, and, you know, 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, you know, out in the wild, so they can go send the drone home and meet the pilot there. You know, again, it's 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.

Josh Isner: At least those first couple, I think, are more likely to start to happen faster. It's a case of one thing building to the next, and, you know, 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, you know, out in the wild, so they can go send the drone home and meet the pilot there. You know, again, it's 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.

Speaker #12: 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 drones.

Speaker #12: So that'll be a continued place of focus and momentum for us.

Speaker #15: Thank you.

Speaker #12: Thanks, David. Up next, Jordan Linus at Bank of America.

Speaker #16: Hey, thanks for taking the question. On Drone, the how you guys are going to market for it, how is it different than your other products?

Josh Isner: Plenty of problems to still go out and solve and counter drones. That'll be a continued place of focus and momentum for us.

Josh Isner: Plenty of problems to still go out and solve and counter drones. That'll be a continued place of focus and momentum for us.

Speaker #16: Is it customers coming to you selling through distributors? And then for the defense end, international side, how much more do you think we could see this accelerate if Fusys gets FedRAMP status?

David Paige: Thank you.

David Paige: Thank you.

Erik Lapinski: Thanks, David. Up next, Jordan Lyonnais at Bank of America.

Erik Lapinski: Thanks, David. Up next, Jordan Lyonnais at Bank of America.

Jordan Lyonnais: Hey, thanks for taking the question. 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? Then for the defense and international side, how much more do you think we could see this accelerate if Fusus gets FedRAMP status?

Jordan Lyonnais: Hey, thanks for taking the question. 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? Then for the defense and international side, how much more do you think we could see this accelerate if Fusus gets FedRAMP status?

Speaker #12: Thanks, Jordan. Yeah.

Speaker #4: Thanks, Jordan. On the counter drone go-to-market, I think it varies a little by market. US state and local, we very much sell direct. And so it's in our packaging there.

Speaker #4: And you could buy it as a standalone as well. But I think the real takeaway on Drone outside of its 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 four of our customer segments.

Josh Isner: Thanks, Jordan.

Josh Isner: Thanks, Jordan.

Jordan Lyonnais: Then I have one for Jeff. Yeah.

Jordan Lyonnais: Then I have one for Jeff. Yeah.

Josh Isner: Thanks, Jordan. On the counter-drone go-to-market, I think it varies a little by market. US state and local, we very much sell direct, and so it's in our packaging there, and you could buy it as a standalone 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 four of our customer segments. Even more so than Taser, more so than body cameras, like this product solves a need in all four customer segments that's urgent.

Josh Isner: Thanks, Jordan. On the counter-drone go-to-market, I think it varies a little by market. US state and local, we very much sell direct, and so it's in our packaging there, and you could buy it as a standalone 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 four of our customer segments. Even more so than Taser, more so than body cameras, like this product solves a need in all four customer segments that's urgent.

Speaker #4: And even more so than Taser, more so than body cameras, this product solves a need in all four 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.

Speaker #4: We've got to do that well in Drone across all four 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 one product.

Josh Isner: Our job is to not only win those deals and delight customers out of the gate, but that land and expand play with 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 four markets, and you'll see the tailwinds of that in our other product sales. You know, really excited about not only the growth, but the doors that are opening as a result of the interest in that one product. Fusus FedRAMP certainly opens up opportunity, you know, in the federal government.

Josh Isner: Our job is to not only win those deals and delight customers out of the gate, but that land and expand play with 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 four markets, and you'll see the tailwinds of that in our other product sales. You know, really excited about not only the growth, but the doors that are opening as a result of the interest in that one product. Fusus FedRAMP certainly opens up opportunity, you know, in the federal government.

Speaker #4: And then Fusys 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.

Speaker #4: And certainly in our core business and core products as well as Drone and DFR and others. But Fusys is in that bucket. And it'll certainly help, especially across some of these ecosystem deployments where you're adding to an evidence.com environment with this Fusys streams.

Josh Isner: I'm not sure that if I were stack ranking the products, I'd still say, you know, there's interest, you know, across the board and certainly in our core business and core products as well as, you know, Dedrone, DFR, and others. Fusus is in that bucket and it'll certainly help, especially across some of these ecosystem deployments where, you know, you're adding to an Evidence.com environment with this Fusus, you know, these Fusus streams.

Josh Isner: I'm not sure that if I were stack ranking the products, I'd still say, you know, there's interest, you know, across the board and certainly in our core business and core products as well as, you know, Dedrone, DFR, and others. Fusus is in that bucket and it'll certainly help, especially across some of these ecosystem deployments where, you know, you're adding to an Evidence.com environment with this Fusus, you know, these Fusus streams.

Speaker #16: Thank you.

Speaker #12: Thanks, Jordan. And we'll take our final question today from Alex Lattimore at Northland.

Speaker #17: Hey, guys. Thanks for taking my question here. I was curious what your acquisition interest looked like for the year. I saw that you had a $10 million investment in Buntar Aerospace.

Speaker #17: Maybe it's the acquisition is a drone manufacturer. Anything there would be great.

Jordan Lyonnais: Thank you.

Jordan Lyonnais: Thank you.

Speaker #18: 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.

Erik Lapinski: Thanks, Jordan. We'll take our final question today from Michael Latimore at Northland.

Erik Lapinski: Thanks, Jordan. We'll take our final question today from Michael Latimore at Northland.

Michael Latimore: Hey, guys. Thanks for taking my question here. I was curious what your acquisition interest looked like for the year. I saw that you had a $10 million investment in Buntar Aerospace. Maybe it's the acquisition of the drone manufacturer. Anything there would be great.

Alex Latimore: Hey, guys. Thanks for taking my question here. I was curious what your acquisition interest looked like for the year. I saw that you had a $10 million investment in Buntar Aerospace. Maybe it's the acquisition of the drone manufacturer. Anything there would be great.

Speaker #18: 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.

Speaker #18: 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 Drone, Fusys, and our 911 business right now.

Josh Isner: We're heads down working on integrating and maximizing the potential of all the acquisitions we've made over the last couple years, and there's been a bunch of them. 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. Really for this year, it's about going into execution mode, integrating the acquisitions we've made very well, and putting up more results like we're seeing out of Dedrone, Fusus, and our 911 business right now.

Josh Isner: We're heads down working on integrating and maximizing the potential of all the acquisitions we've made over the last couple years, and there's been a bunch of them. 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. Really for this year, it's about going into execution mode, integrating the acquisitions we've made very well, and putting up more results like we're seeing out of Dedrone, Fusus, and our 911 business right now.

Speaker #19: Alex, I would just note that was an investment, though. And I would expect we have been historically, and we will continue to make investments in places that we think are interesting in the ecosystem.

Speaker #19: 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.

Speaker #19: So we'll continue to make investments sort of consistently as we go.

Brittany Bagley: 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, you know, bring the companies and the teams on and integrate them and all of that. We'll continue to make investments sort of consistently as we go.

Brittany Bagley: 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, you know, bring the companies and the teams on and integrate them and all of that. We'll continue to make investments sort of consistently as we go.

Speaker #12: Yeah. That one in particular, Buntar, 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.

Speaker #12: And our Drone is one of the key systems there. So I would look at that one more as a key market partnership than any sort of a near-term acquisition.

Josh Isner: Yeah. That one in particular, Buntar, you know, 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, you know, that's where the fastest level of innovation is happening. You know, our Dedrone is one of the key systems there. 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, you know, their hands are pretty busy.

Rick Smith: Yeah. That one in particular, Buntar, you know, 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, you know, that's where the fastest level of innovation is happening. You know, our Dedrone is one of the key systems there. 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, you know, their hands are pretty busy.

Speaker #12: 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.

Speaker #12: 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.

Speaker #12: 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.

Josh Isner: 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.

Rick Smith: 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.

Speaker #17: Thank you.

Speaker #12: Thanks, Alex. And Rick, we'll let you close us 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.

Rick Smith: For us to be able to learn together with them and have people that can help us grow our footprint in Ukraine. 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 gonna be a lot of go-to-market opportunities where we might be able to bring that tech, you know, into other markets.

Rick Smith: For us to be able to learn together with them and have people that can help us grow our footprint in Ukraine. 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 gonna be a lot of go-to-market opportunities where we might be able to bring that tech, you know, into other markets.

Speaker #12: And I'm proud of the role that we're playing in helping to mitigate some of those threats to help to reduce some of the effects of violence in society that at times is feeling more polarized and unstable than ever, at least maybe it feels that way.

Michael Latimore: Thank you.

Alex Latimore: Thank you.

Erik Lapinski: Thanks, Alex. Rick, we'll let you close us out.

Erik Lapinski: Thanks, Alex. Rick, we'll let you close us out.

Rick Smith: Awesome. Well, it's been a wild year, geopolitically. You know, the optimist in me hopes that the universe is clearing its throat, and we're gonna get back after, you know, the pandemic and the wars that have happened to maybe a little more stability in the world. You know, I'm proud of the role that we're playing in helping to mitigate, you know, some of those threats to help to reduce some of the effects of violence in society that at times is feeling more polarized and unstable than ever. At least maybe it feels that way. You know, 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.

Rick Smith: Awesome. Well, it's been a wild year, geopolitically. You know, the optimist in me hopes that the universe is clearing its throat, and we're gonna get back after, you know, the pandemic and the wars that have happened to maybe a little more stability in the world. You know, I'm proud of the role that we're playing in helping to mitigate, you know, some of those threats to help to reduce some of the effects of violence in society that at times is feeling more polarized and unstable than ever. At least maybe it feels that way. You know, 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.

Speaker #12: 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.

Speaker #12: And it's just a 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.

Speaker #12: We never look to be second or third in a category. We like to create new categories. New capabilities have never existed. And stay tuned over the next year.

Speaker #12: 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.

Rick Smith: It's just 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. You know, we never like to be second or third in a category. We like to create new categories, new capabilities that have never existed. Stay tuned over the next year. You're gonna see, in addition to, you know, the great stuff we've been doing, we have whole new categories coming, and that's what keeps us really invigorating and excited. Great seeing you all, and we'll see you on next quarter's call.

Rick Smith: It's just 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. You know, we never like to be second or third in a category. We like to create new categories, new capabilities that have never existed. Stay tuned over the next year. You're gonna see, in addition to, you know, the great stuff we've been doing, we have whole new categories coming, and that's what keeps us really invigorating and excited. Great seeing you all, and we'll see you on next quarter's call.

Erik Lapinski: Thank you.

Erik Lapinski: Thank you.

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