Axon Enterprise, Inc.

All right. Thanks, Eric. I always enjoy watching those highlight reels and welcome everyone to our first quarter 2025 earnings call. We kicked off another exciting year at Axon just a couple of weeks ago as we hosted our annual user conference, which is one of my favorite events of the year, as we dedicate a full week to spending time with our customers. And as you can see from that video, we got to show them the many exciting things we've been working on. I believe our work is about far more than technology or results. It's about our mission to protect life. It's about giving those who stand on the front lines of our communities the tools, the tech they need to be safer, faster, smarter, and better connected. We envision a society where violence and crime rarely occur because it is simply so unappealing and so well-deterred. I'm so proud of the products we've developed and brought to market over the past few years because I think We are creating the power of that deterrence to create a safer society. Each quarter, we're putting Taser 10 in the hands of more people, helping them safely deescalate conflict without escalating to lethal force. We're giving them better training tools alongside while investing to improve efficacy in more and more situations. At the same time, our camera and sensor systems are becoming increasingly connected and exponentially more intelligent with the power of AI. DraftOne is helping officers cut back on administrative workloads so they can focus their attention in the field where it matters. In the field, Axon Assistant ensures they're no longer alone. They have an always available voice-driven AI assistant delivering critical information exactly when and where it's needed through hardware that they already have. With FuSys, they also have the support of hundreds of thousands of public and private cameras to provide them another layer of real-time visibility. And now, with Axon Vehicle Intelligence and LightPost and Outpost, our tools are delivering actionable insights through license plate recognition and real-time alerts, available through innovative, flexible form factors. Through our newly launched integrations with Ring and Citizen, we're also helping public safety and the community work together to help keep their neighborhoods safe, building a critical bridge, all while protecting privacy and the right to choose whether or not you want to participate. As you know, I spend my time thinking about where Axon is going, and part of that is thinking about how we grow. Our new headquarters project is a focus of mine, and I'm excited to share that we recently cleared another hurdle with the passing of Arizona Senate Bill 1543, recently signed by the governor. This gets us one step closer to moving forward and one step closer to keeping acts on in Arizona. Our efforts around this new legislation are another example of what our unstoppable team can do. I cannot be more proud. Challenging, divisive political opposition and obstacles have stood in front of our project for nearly five years. But our team found a way. And the leadership of Arizona found a way to step up and help us stay here. We don't have everything finalized yet. There are still a few other hurdles to clear, but I wanted to thank our team for everything they've done for this effort, including hundreds of employees who showed up at the Arizona State Capitol building and personally met with and wrote letters to our elected officials to help them see just why we want to lay the foundation for decades of future growth at Exxon right here where we started. We will come back to you with more details when we have them and look forward to updating you on our continued progress. And with that, I'd like to hand over to our president, Josh, to share more about what the team accomplished in the first quarter. Over to you, Josh.

Thanks a lot, Rick. And good afternoon, everybody. As I'm sure you can gather from Rick's comments, we're really proud of everything going on here at Axon. We're ramping our investments to deliver on our vision and our team's ability to execute quarter after quarter has allowed us to do so at an incredible rate for our customers. The start of the year is a great opportunity for our sales and product teams to do just that, to plan and work through customer priorities and see where we can help. I'm proud to say our partnership has never been stronger. This was especially evident coming out of Axon Week, our user conference in April, and continues to be evident as we look ahead. Q1 bookings are a great indicator of our momentum. Although seasonally, the most modest bookings quarter of the year, we're off to a fantastic start. A year ago at the end of Q1, I felt like we could have come out of the gate faster, and we talked a lot about that throughout 2024. I'm thrilled to say our sales team responded to that message, emulating the sense of urgency and mission orientation that our customers deserve. As a result, we emerged from Q1 with a far stronger outcome and an even more exciting pipeline for the remainder of 2025. We expect another record for annual bookings with a growth rate in the range of what we saw last year. I'm proud of our mentally tough sales team who embraces the fact that pressure is a privilege. More specifically, our pipeline is strong across customer segments, especially with U.S. state and local who are upgrading to our OSP 10 premium plans and beginning to deploy draft one. In fact, five of our top 10 Q1 domestic deals included OSP 10 premium and two included draft one. Along the same lines, through the first two years, Taser 10 orders continue to pace at 2x the rate of adoption of Taser 7. This is our fastest new Taser adoption by a wide margin. And through one year, Draft 1 remains our fastest adopted software product, with nearly 30,000 active users across Draft 1 in our AI era plan to date. More than 2x any other product we've launched one year in. Turning to our other customer verticals, international bookings are off to a strong start. We're seeing demand in Australia, Latin America, Canada, Asia, the UK, and Europe, all of which contributed to our top 10 international deals in the quarter. The team delivered a record Q1 booking results. And we have more and more conviction in the growing global pipeline. Additionally, we're seeing strong demand across our emerging verticals, including triple digit growth in corrections and injustice. And in enterprise, we're coming off a record deal in Q4 and building a strong pipeline in several key industries. U.S. federal, as we mentioned in Q4, represents a strong long-term opportunity. While there's a lot of uncertainty within the federal agencies, our solutions are mission critical and the value we deliver is clear. While Congress discusses reconciliation and a final budget for next year, we'll continue to focus on converting the existing large deals in our federal pipeline. Finally, I'll conclude with a quick note about the current tariff situation, which Brittany can expand upon in more detail. A couple of years ago, our team flagged tariffs and the uncertainty in the South China Sea as reasons to diversify our supply chain and make large but low-risk investments in inventory. I'm proud of Brittany, Josh Goldman, and Eric Hertz and our entire operations team for seeing around corners and ensuring we are ready for a climate like this. This, of course, puts us in a better position to serve our amazing customers. That's always the priority, and we're confident in our ability to do that given the quality of our team. With that, we're on to the next play. We'll kick it over to Brittany.

Thank you, Josh. As Josh and Rick mentioned, we're extremely proud of our results and performance as we deliver for our customers and invest in the future. First quarter revenue of $604 million increased 31% year over year, our 13th consecutive quarter over 25%, and we delivered a 25.7% adjusted EBITDA margin with $1.1 billion in ARR. Before I go into the details, you'll notice we updated our segments from TASER and software and sensors to connected devices and software and services. As we mentioned last quarter, we made this change to better align our segment reporting given our increasing product diversification. Some previously disclosed margin information will no longer be included in the shareholder letter as a result, but we'll continue to give periodic updates on our earnings calls. Software and services increased 39% year-over-year to $263 million, driven by continued strength across digital evidence management and premium add-ons, each contributing about half of our overall software growth. We continue to see growing adoption of our premium plans. Approximately 70% of our domestic user base is still on our basic plans, and our offerings continue to get better over time, convincing more customers to upgrade. Our NRR, also a measure of our existing customers coming back and buying more, remained at 123% and supported annual recurring revenue of $1.1 billion, an increase of 34% year over year. Connected devices revenue of $341 million grew 26% year-over-year. This was driven by growth across Taser 10 devices and cartridges, AB4s, which are now included in personal sensors, and fleet, counter drone, and VR, which are now included in platform solutions. Adjusted gross margin of 63.6% was up 40 basis points year-over-year, largely based on mixed shift to software. Adjusted operating expenses of $236 million were up 3% sequentially and down 140 basis points year over year. As a result, adjusted EBITDA margin came in ahead of expectations at 25.7%. Part of this leverage was driven by timing of our hiring ramp, and we do expect to continue to ramp investment through the year, especially in our R&D organization. We also expect some impact to the rest of the year from tariffs. As many of you know, we already manufacture our TASER devices in Arizona, but we do have an impact on the supply chain. The team has done a great job ensuring we can be flexible and nimble, and we think we are well positioned to manage through the shifting environment. Based on timing, Q1 had a minimal impact. For the full year, we have offset some of the tariff impact through other cost measures. And overall, we expect a net impact to our adjusted EBITDA margin guidance of approximately 50 basis points for the full year. This is based on where tariffs stand today. We are not planning any price increases to our customers at this point. We review pricing annually and will assess the need heading into next year. Turning to guidance for 2025, we expect revenue in a range of $2.6 to $2.7 billion, or 27% annual growth at the midpoint. This is up from $2.55 to $2.65 billion, or 25% growth. Our comfort in raising guidance is based on the strong Q1 bookings performance, as well as the pipeline we see for the year and the future contracted bookings of $9.9 billion. On adjusted EBITDA, we continue to target margin of approximately 25% for the year, which raises our guidance to $650 to $675 million from our previous outlook of $640 to $670 million. Tariffs and exciting R&D investments are factored into this guidance, and we're very pleased to be able to maintain the 25% margin target. Overall, we're delivering another strong quarter in Q1, as well as a healthy outlook for the rest of 2025. This is based on our momentum across a wide range of product categories and end markets. We continue to be long-term focused on our investing in the business to deliver for our shareholders and for our customers well into the future. With that, we'll turn it over for questions.