Axon Enterprise, Inc.

Thank you for joining us. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, as discussed in our SEC filings. We will also discuss certain non-GAAP financial measures. Descriptions and reconciliations of GAAP to GAAP are included in our shareholder letter and available on our investor website. Now, as always, before we kick it over to Rick, we have a quick video to get us started. Let's pull it up.

This summer, as millions gathered for the World Cup, D-Drones secured the airspace above all 11 U.S. host cities, helping protect stadiums, fan zones, and celebrations everywhere. Pretty exciting. But to us, the bigger story wasn't what happened there. It's what didn't. The drones that never reached the stadium. The incidents that never escalated. The thousands of fans who never knew they were protected. That's the kind of impact public safety agencies are creating every day with the Axon ecosystem. And it's a story we're seeing play out in communities around the world.

The Axon ecosystem has already enabled us to save significant time in our workflows.

And back home, as Fourth of July celebrations brought a surge in calls, Skagit 911 in Washington deployed Axon Prepared to handle routine requests so operators could focus on emergencies, answering 98% in under 10 seconds.

Across every part of the Axon ecosystem, the story is the same. When first responders have better tools and training, better outcomes follow. That's the future we're building together. That's Axon.

Thank you, Erik, and great job to the team. I love those videos. They just get me pumped up. So lucky to get to work here. I'd like to thank all of our analysts and investors who are joining us today. As you can see, we had another record quarter. Again, I was just looking at the numbers, like 39%, like, wow. Thank you so much for joining us. Two days ago, OpenAI announced an unreleased model had solved 10 open problems in mathematics, problems that the best mathematicians alive have been stuck on for decades, one of them unsolved for at least 27 years. And the compute cost to do all this, to do 10 of these unsolved PhD career-level problems, was $2,000, or $200 per problem. So for many years, the critique was that AI, sure, it could remix human work, but it can't create anything new. Well, that critique is finished. A Fields medalist, which is math's highest prize, it's been called the Nobel of math, said he would have published a comparable result without hesitation. And there are many that said any of these problems might on their own have qualified a human had they solved it for the Fields medal. and yet within a day, a model from another lab had reproduced half of the list, meaning it could solve half those problems on its own. So this isn't about one company getting lucky. The whole field just crossed a line at once. The cost of an original breakthrough has just collapsed. So why does this belong on an Axon earnings call? Well, because an idea on a page Thank you for joining us. Thank you for joining us. They lower the risk for everyone. The officer, the bystander, and the person that the police were sent to stop. Every person is safer. See it, understand it, act on it. This is the chain of events. It's the same chain that drove me to work this morning. Software alone can't close it. Hardware alone can't. But in public safety, Axon holds every link in this chain. Now, when we changed our name from Taser to Axon, we were very specific about that. An axon is the nerve fiber that carries the signal from the senses to the brain and the decision from the brain back out to the body so that it can act. We didn't pick a name that just sounded good. We picked a description of what we were building, and we've been busy building it. At the edge, sensors can see what's happening, whether it's body cameras, drones, fixed and in-car cameras, license plate readers, 911 AI assistance. Behind them is the largest customer-controlled data repository in public safety. Then AI and real-time operations can turn these signals into understanding, and then the means to act. Taser devices, drones, communication, training. At the heart of it, of course, is our mission to protect life. This doesn't just add up, it compounds. Every sensor adds a signal. Every workflow adds context. Every outcome improves the next one. Brookhaven, Georgia shows you exactly what this looks like when you connect it end to end. Drones on the scene in 53 seconds. Coverage across 96% of their city. Burglaries down 45%. Look, no single product on the list produces these numbers. The system does. Data shouldn't sit trapped in a silo waiting for someone to find it. It should move securely through the workflows where it does something. A city's cameras to its 911 center, to its officers to real-time intelligence, its evidence to courtroom, a frontline worker in danger to help that arrives in seconds. And all of this depends on trust. We've earned that over years of stewarding our customers' data and never treating it as our own. will keep deploying this technology responsibly and thoughtfully alongside our customers and their communities with people at the center of every critical decision. In public safety, power without trust isn't an opportunity, it's a liability. I see this coming together everywhere I look. A few weeks ago, a customer bought body cameras for municipal employees, not for the police, for building inspectors. A few weeks before that, some of our largest Enterprise pilots began putting Axon Body Mini on frontline workers. And during the World Cup, our ecosystem supported agencies across North America through one of the most complex public safety missions in the world. So, where we sit today, the world is being flooded with intelligence. What's scarce is intelligence connected to the real world, trusted by institutions that depend on it and aimed at problems that matter. That's what we've spent 30 years building. There is no company better positioned to benefit from the intelligence explosion than Axon and through us, our customers. and their communities for whom we operationalize this intelligence with physical hardware and thoughtful design and controls to help maximize benefit with appropriate oversight. What an exciting time to be alive and an even better time to be at Axon. And with that, I'd like to turn it over to Josh Isner.

Thanks a lot, Rick, and good afternoon, everybody. As Rick said, we can't do any of this without our customers. Every day, our focus is on delighting them, because when we do that well, everything else follows. We also can't do any of this without our team. They have embraced our mission and are working hard every day to deliver outsized societal outcomes. And there have been many of those in the last few months, including on the biggest stage in sports. I am so proud of the D Drone team for their work to support the World Cup. This was one of the most complex and comprehensive installments we've ever worked on. The expectations were clear. Simultaneous delivery and activation across 11 U.S. host cities, more than 50 additional sites in surrounding areas, international deployments, multiple agencies with very little margin for error. The team executed with incredible precision, and I believe this deployment further established Axon as the technology leader in public safety. Dedrone is delivering tremendous growth, and the opportunity continues to expand across state and local public safety, international, federal, enterprise, and corrections. It is also one of the areas where we're investing in most aggressively, and the team is earning that investment. This is a business that was still in its infancy just a year ago and is quickly becoming one of our largest product lines, surpassing $100 million in quarterly revenue. Next, I want to give a shout out to our international team. International bookings came in at roughly three times the prior year in Q2, driven by several large deals. What's especially exciting is some of our international customers are adopting our newest offerings right alongside our core products. In fact, they may be even moving faster than some of our U.S. customers. Three of our top five AI era plan deals in the quarter came from international customers. We're also seeing international markets fuel expansion in Taser. In Q2, we want a Taser 10 deal in the Middle East comparable in scale to our largest current US state and local deployment, and another in Europe comparable to a top five US agency deployment. These are massive opportunities showing up more and more, and we're just starting to scratch the surface. State and local public safety and corrections continues to show strength as well. We signed not one, but two nine-figure agreements with major cities in the quarter. One of those was our largest ever individual taser order. We also signed two eight-figure agreements with major state corrections customers. And another groundbreaker, our first full-scope Axon 911 customer. This customer will deploy a combined prepared and carbine solution to power the call to closure vision we laid out when we announced these acquisitions, committing to that future just months before both deals closed. And lastly, in the U.S., we continue to see more and more customers who bet on other vendors coming to Axon for body camera pain relief. We expect body camera shipments to be up 20 to 30 percent sequentially in Q3 and 15 to 20 percent quarter over quarter. The success across markets led to our Taser volume being the highest in a quarter to date. We've now booked more Taser 10 units than we booked over the lifetime of Taser 7 with a ton of pipelines still in front of us. That may sound crazy for a product category that has been around for three decades. Well, it's real and it speaks to how much opportunity remains. Next, Enterprise. We've been talking about this moment for a long time, the point when those early conversations and pilot programs begin converting into meaningful enterprise deployments. That moment is here. Enterprise bookings were also up about 3x from a year ago, and the volume of opportunities continues to grow. and last but not least, I'm excited to see our federal business showing a lot of promise. We are engaged in opportunities across the federal civilian space and the team is executing with intensity as we approach the end of the fiscal year. Federal was part of the story with D-Drone in the World Cup and we also closed a major deployment of Axon Assistant with a federal agency on our body cameras because they are using them as body cameras. And just yesterday, we were named one of the participants in the $1.5 billion DHS program for Counter UAS. I am looking forward to talking more and more about our progress in the federal space. As far as bookings go, every indicator I'm watching looks as good as it ever has. Q2 gross bookings were up 20%. That's on top of nearly 50% bookings growth in Q2 last year. On a five-year normalized basis, which adjusts for contract duration, bookings were up even more, over 30%. That matters because some of our newer markets, like International and Enterprise, sign deals in the one-to-five-year range compared to some of the 10-year agreements we sometimes sign with state and local customers. Normalizing for duration gives us a clearer view of the underlying demand across markets. And as I review the pipeline, I see a clear line of sight to finishing the year in the 30% range of normalized bookings. And before I hand it over, Thank you so much for joining us. or ask people to use AI for the sake of using AI. We rolled it out deliberately and we focused on where it can make our people more effective. That has evolved into regular hackathons and recognition for teams finding new ways to move faster and spend more time on the work that matters. We're seeing that operating model pay off in execution. I believe that discipline is a big part of why we've continued to raise our own expectations while navigating supply chain disruptions, higher component costs and tariffs, all while scaling to meet demand and never missing a beat for our customers. Thanks, Josh.

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

This is what you're seeing in our results.

Revenue was $904 million, up 35% year over year, and the demand remains broad-based. Software and services revenue increased 36% year-over-year to $398 million. Axon Evidence remains the backbone of our software business and the secure data foundation powering the vision Rick described. Increasingly, our newer software offerings are also meaningful contributors. More than one-third of our software revenue now comes from offerings beyond our core evidence platform, consisting of real-time operations, which includes FUSIS, productivity applications, including records, the AI era plan, counter-drone software, and Axon 911. Together, that part of our software business grew roughly 70% year over year, with the AI era plan a true standout, growing almost 700%. And these businesses are still in early innings. That breadth is supporting strong expansion within our customer base. Net revenue retention reached 126%, and annual recurring revenue increased 39% to $1.6 billion. Thank you for watching. Platform Solutions revenue grew 123% to $150 million, with DDrone driving much of that performance. CounterDrone was a new category for Axon added at the end of 2024, and it has quickly become a consistent contributor to our results, validating our acquisition strategy alongside our organic product development. We continue to see strong demand across customer markets and expect the business to continue to scale. Taser 10 remained to stand out in the quarter, as Josh highlighted. Turning to margins, adjusted gross margin was 62.9%, up 130 basis points sequentially. This increase in gross margin was primarily driven by tariff refunds, partially offset by increased mix from newer product offerings, which are still scaling. Adjusted EBITDA was $242 million or a 26.8% margin. Operating cash flow improved to $20 million from an outflow of $92 million in the prior year. This resulted in a free cash flow outflow of $1 million and reflected continued efforts around free cash flow conversion while still making substantial inventory investments to support customer demand and reduce supply chain risk as we scale. Thank you so much for joining us. Future contracted bookings grew more than 40% year-over-year to $15.1 billion, reflecting the broad-based momentum we're seeing across products and end markets. As Josh mentioned, we continue to feel very good about the momentum we're seeing in the second half of the year. We're raising our full-year revenue guidance to a range of 32-34%, 200 basis points above our prior range of 30-32%. Thank you for joining us. We expect Q3 adjusted EBITDA margin to reflect the impact of those memory costs with no benefit from tariff refunds before we scale margins back in Q4 to these levels to hit our full year target. We are also thrilled with the performance of our counter drone segment, but as we scale this and other new businesses rapidly, we are absorbing the mix impact. Over time, these are well worth the investment on the bottom line as well as the top. While there are a lot of moving pieces in our business, we continue to deliver for our customers, our shareholders, and our employees and are very proud of our results this quarter. As you think about a rule of 45, we delivered above 60 and are looking forward to continuing to drive a strong second half of the year. With that, I'll turn it over for questions.

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

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

Well, sure, change is always hard. And this is a very risk-averse customer base when it comes to tech. So I would say, actually, some of the new areas we're being asked a lot about are around privacy, data security. I'm sure you all have seen the deflock movement, which has some broader anti-surveillance sort of momentum. Now, for me, this feels a bit familiar. Like when tasers first came out, there was a massive backlash. You know, I view this as sort of the birthing process almost of a new any new real technology in public safety is going to go through an adjustment period. And I would say the critics aren't all wrong. There have been some mistakes, things that could have been handled better in terms of data privacy and security and a couple of high profile uses where, you know, police employees were abusing their access to license plate reader data to do things like your track and X. But those are exactly the sorts of things where I think our approach to data privacy, where we have a critic-based system where we bring in critical thinkers that are going to challenge us early. I think we're about to post a new episode of the Boldly Go podcast with a couple of folks off of our EEAC, our Equity and Ethics Advisory Council. And I think that's become a real superpower. Like our customers, we talk about trust. It's not just hand wavy. It's, you know, we've hit a point where our trust with our customers is an incredibly valuable and fragile asset. If we break that trust, it would be very damaging to the overall business. And if we protect and cherish and continue to earn that trust, it makes our business more durable. So I would say we're seeing a significant number of agencies want to come over to Axon and convert from existing license plate readers to us specifically because of the controls and privacy work that we've done around the space. And for example, one of the things we're doing is we'll be building AI tools to watch for anomalous search behavior so that we're watching out for potentially abusive patterns and people have access to the data. So I would say in general, there are still places where there's concerns about AI and we just have to be thoughtful and understand those concerns and say, look, this is a tool to amplify human ability, not to replace human judgment.

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

Great. Thanks so much. Thank you, Mita. Up next, we have Mike Ng at Goldman Sachs.

Hey, good afternoon. Thanks for the question. I just have two as well. First, just on the momentum that you're seeing in DDrone, CounterDrone, maybe you could just talk a little bit about other use cases that you're seeing beyond World Cup. I think it's natural for some people to think that you guys saw some outsized demand because of the event. What are some of the other private infrastructure, other use case demands that you're seeing on a go-forward basis to give you confidence around that greater than $100 million quarterly revenue run rate. And then second, just as a housekeeping item, on professional services within software and services, historically, we've thought of that as something that is tied very closely to fleet. I would imagine there are much broader use cases for professional services now. So just wondering if you could talk about what drives that.

Let me take the first one and then I'll let somebody else take the second one. So look, counter drone, there's this war going on in the Middle East and the one in Russia where like you look at what the Ukrainians have been able to do to these Wildberries warehouses now, they're just decimating that. The Iranians are threatening to go after American infrastructure and data centers. Thank you for having me. I think anyone who's prone to gun violence could be prone to drone violence. And it's not just us saying that. I think our customers broadly, even in enterprise, we have deployments at CEOs' houses as part of their security protocol. We're seeing it at data centers and corporate campuses. It's at the World Cup now, but I think it's going to be at every Friday night football game in five or ten years. So I think the World Cup was certainly a surge, but it's part of just a normalizing acceptance that there's a three-dimensional aspect to safety that we need to be able to police.

So I'll add a little bit to that. Michael, thanks for the question. So ultimately, one of the more exciting things about our Ddrone business is, yeah, federal is a piece of it for sure, but we're seeing far more opportunity internationally. And so I would not necessarily tie much of our Ddrone revenue to one specific event. Those trailers, for example, that we sent to the World Cup are already being repurposed by the customer for other use cases. And so we certainly expect the D drone demand to endure. Now, it's important to recognize that these are large revenue shipments of hardware. So quarter to quarter, they can swing a little. But when you add it all up. I don't think it'll look like the World Cup was an outlier. And on top of that, as Rick said, right now it's really enterprise, federal, and international. As drone mitigation becomes legalized for state and local, again, we view that as another potential surge in demand here. So we're feeling really, really good about and Deidrone beyond the World Cup. Now, second on the professional services, we view this as an enabler to customer happiness, but also customer usage of our products. So a couple of years ago, professional services meant show up and deploy body cams or tasers or integrate to a record system and so forth. Now professional services are showing up and starting to build things on site for customers using our AI tools. And so very much like some other companies and some other markets, we really view the opportunity here to start to delight our customers with more and more on site that could be rapidly built and custom deployed, just as Rick talked about at Axon Week around Axon Gravity. So Thank you, Rick. Thanks, Josh. You got it. Thanks, Mike. Up next, we have Jonathan Howitt, William Blair.

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

Sure thing. I think it's following a trend that we expect to see in a lot of places, right? It's what we've talked about with this idea that we sell products, we delight the customer, and then we earn the right to sell more. And ultimately, I think that's what's happened in those couple large deals. and they are meaningful deployments or expanded deployments of our products. It's not simply a renewal. And so oftentimes there's more hardware and a lot more software in those deals. And I think it's something we can start to see internationally here and there as well, potentially this year. And ultimately, like our bookings, I feel equally good about them as I did at this time and on this call last year. We're very excited to see how we got out of the gate in the first half of the year. I was just at our sales summit all week in Scottsdale here and talking to our state and local team. And the attitude is we're expecting a really massive second half of the year, especially just like last year, a little more weighted toward Q4 2020. But certainly plenty of room for growth. And when you add it up, we'll be in the 30% range again for bookings. And so we've got it all in front of us. And now it's time to go do the work.

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

Great. Thanks, Eric. Thanks for taking the questions, team. Josh, great to hear about the full scope prepared carbine. deal that you signed. That seems a little bit counter to how you guys set up the go-to market there in terms of landing more with the prepared use case of bringing some AI capability and then shifting to Carbine later, which is more of a larger lift and shift of larger systems and databases. Are we seeing maybe an early trend that that's now changing and people are going to go whole Thank you for joining us.

and we're excited that we're in exactly the right place here to help them by virtue of the prepared and Carbine acquisitions. One of the things we did early on in your question, Trevor, is when we acquired Carbine, we actually integrated them into prepared, not into Axon. So now this apparatus is Axon 911 and so now we are seeing a little more combination in certain places of the desire to do both of these at once. But that's kind of the beauty of it, right? Like some customers are going to be ready for that, but a lot of customers are going to buy one or the other upfront Thanks, Trevor.

Next, we have Joe Cardoso at JPMorgan.

Hey, good afternoon. Thanks for the question. Maybe you wanted to touch on the body camera shipments commentary that you made in terms of sequential growth going into 3Q. You know, I guess first question is more so, any way you can kind of contextualize the growth that you're seeing from there and maybe bifurcating it between Axon Body Mini and maybe Axon Body 4? And then as a second part, too, of that question, you know, Thank you so much for having me. Prepared comments as well as in the presentation material does seem like things could be moving a bit faster and more widespread. So just curious if that's a fair read and how we should be thinking about that and if there's any limitations we should keep in mind.

Thanks, Joe, and thanks for hosting us at your conference a couple months ago here. Ultimately, on the body cameras, I wouldn't consider AB Mini as a big driver of that guidance that I mentioned for next quarter. I think there's some in there, but the real story there is we are winning in public safety commonly across all of our markets. I think there's a few different flavors of those deals. There's renewals in there. There's expansions in there. Like I said in the prepared remarks, there's also win-backs in there where more and more customers that made a different decision up front are migrating to Axon. And so I think it's every bit as much of a commentary around U.S. state and local as it is enterprise. And then, of course, international is also showing some real signs of life. And then as it's been reported publicly, we've got some exciting federal opportunities in the body camera space as well. So I think hitting on all cylinders and certainly, you know, very pleased that this late in the product's lifecycle that we continue to see so much demand from so many different places. But I don't want that to be mistaken for a lack of demand in U.S. state and local. It's certainly there. And then the last thing I'll say is on the, you know, on the quarter to quarter shipments, just remember the body camera shipments are a function of our bookings, right? So in Q1, we, you know, we tend to have seasonally the lightest quarter and bookings of the year. And thus, when we ship those, since a lot of the deals come in late in the quarter, we ship them in Q2. That's a reflection of Q1 bookings. As we go through the year, you should certainly expect those body camera shipments to pick up. I think if I were betting, I'd say it'd be closer to 30% sequentially next quarter versus this quarter, but we are giving the range of 20% to 30%.

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

Sure. On Axon Mini, it's Driving a lot of interest, we've kicked off, I was just talking to our head of enterprise yesterday, we've kicked off a number of trials with the AB Mini that are starting to gain momentum and we're kind of brands you've heard of in the market and brands you might see if you visit their stores. So there'll be, you know, that growing trend. But it does take time, right? And ultimately, we got to do one thing, put one foot in front of the other for a while, succeed very well in the trials, then capture our first orders. And then just like in public safety early on, that second cycle of expansion is where we see the highest volume. So right now, it's about seeding the market in a number of different large enterprises with Maybe even hundreds of body cameras per deployment, even though some will certainly be in the thousands. And then building from there, just as more interest is coming online with Fusis and Outposts and Evidence.com in general with a number of these enterprise customers.

Makes sense. Thanks, Josh. Appreciate all the cover.

Thanks, Joe. Up next, we have Keith Husam at North Coast.

Yep. Yep.

Yep. Good afternoon, guys. Appreciate it. Trying to get my video here. In terms of the Outpost and LivePost now being out there for several months now, perhaps you guys can touch base on a little bit of what you're seeing in terms of adoption. Obviously, we saw some takeaways that you had in the quarter. Perhaps just talk about success there and the lineups that you guys have.

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

Great. Thanks. I'll keep it simple there. Thanks, guys.

Thanks, Keith. Thanks, Keith. Up next, we have Andrew Sherman at TD Cowens.

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

Yeah, the second half pipeline is full with a lot of exciting international opportunities. No question about that. In terms of what they're seeing internationally in the AI era plan, I'd probably point to a couple of things. Number one, we've enabled draft one in more markets now. And so that is picking up a lot of steam. And that does take some work because reporting is different in every country. So there's some work to do to bring countries online, but that work has happened and continues to happen. The second one is the translator. Whenever people are speaking two different languages, the real-time translator via the Axon assistant is the thing that's driving a lot of the interest there as well. So was I surprised? I mean, our international team, it's just incredible to see the amount of progress we're making there, the quality of the team, the work ethic, the delivery, just everything that it takes to build Thank you, Andrew.

Up next, we have Brennan Rogers at Wolf. Hey, guys. Thanks for taking my question.

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

In terms of timing, I don't know that there's a material difference because ultimately, even like when we're selling tasers just standalone 15 years ago, you still have to go through a government process to buy something. And so I would say if anything, yeah, certainly there's more acceptance of the products up front, but it's maybe a little offset by just the sheer size of some of these deals. And when you're up at these levels of, you You do have to go through several approvals and a lot of contract negotiation and so forth. I think one way to look at it is clearly the team had a fantastic Q4 last year, and they got out of the gate fast. While delivering the results you've seen in the first half, they've rebuilt the pipeline for the second half. A lot of the work we've done in the first half you'll see come through quickly. Thanks, Brendan. Up next, we have Jim Fisher, Piper Sandler.

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

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

Got it. OK. And then for me, in terms of this is a very fluid space. It is moving quickly. Thank you for joining us. Thank you for joining us. other interception methods, everything from, you know, nets to lasers and different ways to mitigate those drones. And we view our footprint with Ddrone is to be the best connector, meaning that we partner with the best in class across a variety of different vendors, that we create the best overall user experience, and many more. Thank you for joining us. That's where the next technologies are likely to come out of. And especially when you're talking about commercial price points as opposed to traditional U.S. military price points. And so I think, you know, I was joking at one of my recent customer summits. I bet for a police chief, it was not on their bingo card. They're going to have to run a small air force. But. They're going to. They're going to have to have ways to intercept these small drones. And now it's going to be different. You typically don't want big things going boom over American cities and detonating, but deploying nets or things with parachutes. And we're doing some interesting work with our friends at Skydio on how we could use the DFR capabilities that they've built and start marrying in other sorts of things. So just I'd say expect experimentation and innovation and continued evolution.

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

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

Okay, great, thanks. Yeah, congratulations on the broad-based product traction. I have a number of investor questions on this. This is where I wanted to focus my question. The five-year normalized bookings metric, why now? It sounds like perhaps it's tied to expectation for ramping international growth, enterprise, and you're just trying to get the right duration there. But anything else you're signaling that we should take away from that And I guess just for context, are there any historical kind of comparisons you could provide just to help us kind of frame it up?

Sure thing, Will. Great questions. Number one on the historicals, I think in our first earnings call of the year, we had cited the fact that five-year bookings were also in the 30% range last year. So, you know, similar range to the 10-year bookings or the total bookings of last year. in terms of this year, as I mentioned, over 30% year-over-year and five-year bookings. The reason you hit on it a little bit, there's really two elements of it. One is, for example, in enterprise, we're seeing it's much more common to do three-year deals. And so ultimately figuring out how all these contract durations normalize, I think is important as the business looks different and different as we win in different markets. The second one, which is equally important, is that some of these international deals that we're seeing and working on are so big in size that they represent such a big swing in years six through 10 that it doesn't give a clear picture of what the bookings look like anymore year to year. And so, you know, if if. Some of these deals approach a half a billion dollars or more than we're looking at in 10-year value. You can imagine that quarter to quarter, some of these swings will be pretty interesting. And so normalizing them down to the same common denominator just gives us a way better look at what the future looks like. And as I've said many times on the calls, part of what gives us so much confidence In revenue growth in the out years is the idea that five-year bookings as a common denominator gives us, I think, a lot more context when we talk about out years of revenue growth.

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

That makes sense. Thank you. Thanks a lot, Will.

Thanks, Will. Up next, David Page at RBC.

Thank you for taking my question. A lot of good color on the call already. I just want to add one on the body cameras. I think you had mentioned some of the growth was due to winning back customers. So I was curious to know what exactly is driving that. Is that they just like the Axon camera better or is it the connected ecosystem or is The Trust Credibility that you had built up. Any extra color would be helpful. Thank you. Sure thing.

I think it's quite simple in some ways where customers were told one thing or expected one thing and through their usage of the products, they weren't getting what they expected or what they were sold. and we're seeing customers cancel contracts early with other providers to come over to Axon. It's happened very publicly in a couple cases this year and we're very proud of the fact that either Romain and and many more. and many more. and many more. Very, very pleased with how we do those things, and they're telling their peers everybody's on the same team in public safety, which works really well for us because the network effects matter a lot, and we're seeing those play out. So really proud of our teams for continuing to keep their heads down and working hard and not take anything for granted and continuing to win a lot in public safety. Thank you.

Thank you, David. Up next, we have Jeremy Hamblin and Craig Helm.

Thanks. I appreciate it and congratulations on the results. So, I wanted to ask a question that kind of builds on something that Michael asked earlier, which is the evolution of your business. And as we look Thank you for joining us. but you know as we look at how this business evolves and you have your 2028 targets you know can you give us a sense for like do you expect platform solutions to really be bigger than your taser segment by the time you get to 2028 and you're hitting six billion dollars in revenues is that the type of growth that you're kind of expecting or how can you help us kind of think about how your business model is going to evolve over the next couple of years?

So let's, Brittany can weigh in, but maybe I'll start. Jeremy, I think ultimately it's not really the way I look at our business in terms of operating day to day. It's more about the idea that We're seeing growth across U.S. state, local, and all products. We're seeing growth in international and all products. We're seeing the same thing in federal and enterprise. And when you add up, just using bookings as an example, last year, I think we were clear, we booked over $7 billion. And you normalize that, and you kind of understand the trend line you're on. And this year, we have our understanding of what that will look like. And so that's informing the revenue growth far more than Any, you know, any strong feeling about is it going to be mainly platform? Is it going to be mainly tasers? These things are sold in concert with each other. And so we look at it much more as, hey, what's the sum of the parts? We'll look a little different. And when you add it all up, you know, we feel very confident in that guidance.

I would like to jump in here, too, like this question. Thank you. Thank you. leveraging each other in a way that just creates outsized value. And what's our objective in terms of where we want to grow and do we want to have more platform or more taser? And I think the way we approach this, it is a bit more mission-oriented, and that might sound a little cheesy, but it's like, what are the problems that matter to our customers? And which of these things solve those problems? And that's We wanted to double down on the most valuable customer problems to solve because that's like trying to engineer where do we want to grow to make more or less margin or more or less hardware or software. And so, again, this might sound a little like too self-congratulatory that we're very customer driven, but we have found when we solve for that, in ways that build a sustainable business. And so I personally don't spend much time at all trying to engineer financial returns around our ecosystem. I spend my time talking to customers and then working with Jeff on how we translate where the emerging needs are. And sometimes we learn things that are, like, a lot more valuable than we thought they might have been. We double down on those. And it's really just being responsive to the customer environment. Yeah. It's great.

You can jump in on the product. I'll just round it out on the numbers.

I was just going to say, again, maybe old jargon at this point, but it literally is a network effect. on both inside each individual agency and then across agencies inside one of these market segments like state and local, and then across market segments like what it means to have network-affected product categories. That is quite literally what the Axon ecosystem is.

I mean, I think as you look at our 2028 guide, we have a lot of ways to get there, and obviously, is performing incredibly well, and we have a lot of enthusiasm behind that. I certainly would not discount what our Taser business can continue to do as we look ahead to 2028. And to Rick's point that it's all connected, I would also think about the software pieces that get connected to all of these hardware businesses. What you're seeing a lot in platform solutions right now is you're seeing a lot of big upfront hardware sales, and we're going to be building the software business on the backup and many more. and some of those other software product lines are also big tailwinds. And so as we get to 2028, I think you can think about everything growing into the future. Thanks, Brittany.

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

I mean, it's certainly part of that. Thank you for having me. It's our records business. It's our 911 business. It's the software strategic counter drone and drones. So what you're really fundamentally seeing is all of these software businesses that we've been investing behind and incubating that are really starting to contribute to that software growth number. and they're going to continue to do that because even though they're starting to contribute nicely, they're still relatively small and have a lot of room to grow and a lot of room to continue getting attached into our customers. It's for you to kick up over time. We're up at 126% this quarter. It's because we're attaching more of those products in.

Thanks so much for the call.

Yeah, that's super cool, Brittany. By the way, we used to be stuck at like 119% NR for a very long time. See it up to size 126.

Keep coming up with cool things.

All right. Well, those are lots of questions. So, Rick, you can close us out.

Awesome. Okay. Look, I pinch myself every day. I get to do this job with these people, these customers working on these problems. It is a privilege. And I'm deeply thankful to you, our shareholders, who make that possible. Of course, the analysts who help our shareholders understand our business, which has grown as we were 20 years ago to this level. Amazing ecosystem, hardware, software, cloud, and now AI services business. And we're in the midst of another major transformation. I can't even tell you what kind of business we're going to be in the next 10 years because the world is changing so fast. But the people I work with give me hope that we will continue to make this moment just an epic moment for our company to leverage this change. And with that, we'll see you all in November. If you get a chance to come to ISTP. Erik, are we doing something at ISTP in October? Yes. We have some cool new stuff. In particular, some new ways to tell the story that differentiates us uniquely that I think you'll find very interesting. So come see us in Orlando. And some new products.

Shoot me an email if you want to join our booth. All right.

Thank you, everyone.

Thanks a lot.