Okay, we're gonna go ahead and get started. Thanks, everybody, for being here. Good afternoon. For those I don't know, I'm Will Power, Cover Cloud Software for Baird. Really pleased to have Josh Isner with us. He's the Chief Operating Officer of Axon. We also have Andrea James, Erik Lapinski from the company over here as well. I'm sure they'd be happy to chime in for any questions that make sense. I think as most of you probably know, Axon, of course, is a leader in public safety, products like TASERs, increasingly software, body cameras, you know, et cetera. We're just gonna jump straight in, and if there are questions from the audience here, you have instructions in front of you. You can submit them to the email address there, and I will try to get those incorporated as well. Josh, thanks for being here. Really appreciate it. Thanks, Will. Let's maybe just start, you know, for anybody that might be less familiar, maybe just talk about the Axon mission and a bit on just the evolution of the company and the platform you have today. Yeah, absolutely. We're really proud of our mission. Our mission is to protect life. Certainly, we think there's a lot of opportunity to be able to do that in policing and public safety around the United States and around the world. You know, through technology... You know, we're taking a step back. We're not super confident that large reforms in public safety are gonna be driven in Congress or by politicians. We think technology is the way faster way to drive change in this market, and so we've really built a company around that, and we've had a lot of success in the TASER business, started developing TASERs in 1993. In about 2003, 2004, once TASERs were becoming more well adopted, there were questions about how they were being used in the field, so we put a camera on the TASER device itself, and we had really good success with that product line. We said, 'Hey, why don't we take the TASER off, or sorry, the camera off the TASER and put it on the officer's uniform?' Thus, the Body Camera business was born in 2009, 2010. That actually invited a even larger problem to solve, which was once you're creating all of this digital content, how do you manage it and share it and do everything you need to do with it, administration-wise, in an efficient manner, thus, Evidence.com, kind of our cloud digital evidence management system, was formed. It's a nice story of one thing leading to another, and now we're the market leader really across wearables, less lethal devices, and digital evidence management in public safety. Yeah, that's great. Okay, well, I mean, I guess kind of along those lines, if you think about the mission, you've got a 10-year goal to reduce police-related firearm deaths by, you know, 50%. Maybe just talk about the keys to achieving that, what you're, you know, what the opportunities are within Axon to do that. Yeah. Yeah, there's really two things. We've, number one, need to continue advancing the capabilities of the TASER device itself, and the keys there are more shots, more range, more effectiveness, more accuracy. You know, this new device we've just launched called the TASER 10, allows a police officer to deploy from 45 feet as opposed to closer to 20 or 25 feet. It also gives the officers 10 shots as opposed to 2 shots. Much better ability to use the device from longer ranges or with more shots. Why that matters, especially on the more shots, is you've got to pierce clothing of generally a suspect moving away from you, or moving in general, and you've got to do it with 2 probes flying downrange, and oftentimes, it's really hard to do that. Even, you know, the most trained users in public safety, that's difficult. By offering more shots, that increases the margin of error significantly to where you don't have to hit with every shot. You have multiple opportunities to do that, and of course, from more range, keeps both the officer and the suspect safer. That's really the technological kind of driver there. Pairing that with ways of increasing the training capacity at a police department, I think, is the other half of that solution. There, it's really about virtual reality training. We think there's a tremendous opportunity to train police officers under stress in a far more efficient way. Right now, going to the range once or twice a year and firing some TASER, you know, cartridges downrange is not necessarily preparing officers for what they're going to see in the field. By leveraging virtual reality technology, creating a lot of different use-of-force scenarios that police officers can train on day in and day out, we think that's gonna be a major part of this equation in terms of limiting bad outcomes in the field. I want to come back to TASER 10 and probably, you know, VR. Before I do that, just high level then, you're rolling out TASER 10, you've got AB4, Axon Body 4 coming, I don't know, end of year or thereabouts, you know, kind of launching into, you know, next year. I assume those are probably at the top of your priorities, but where are your kind of key strategic priorities kind of through this year and the next couple of years? Yeah, for sure. we have launched TASER 10 and shipping this year. We're gonna start shipping Axon Body 4, our new body camera, in July, and so we're really excited about that as well. I think strategically, of course, we want to continue to perform well in the categories that we own today, which are really around, you know, wearable camera technology and less lethal tools in the field. At the same time, we're moving on the cloud side to becoming more of the operating system of public safety, and that's across police reporting, evidence management, dispatching police officers, to calls, in-car video, that feeds into some of these situational awareness products, drone video that feeds into these situational awareness products. It's about really building out that operating system so that police officers and police agencies really have one place to go for all of their technology needs, from the time a dispatcher is called, you know, on a 911 line, all the way through the culmination of that court case, and really controlling that flow of information and evidence as part of that workflow. ... Yeah. Okay, no, that's helpful. Maybe just to dig into TASER a little bit. Yeah. TASER, as you already noted, major, you know, upgrade for you. What are you seeing in terms of early demand indicators? And I guess, you know, as importantly or close to as importantly, how's the supply chain? Yeah manufacturing process, you know, going with the new products? Yeah, really well. Demand, this is really the first TASER we've ever launched, where legacy customers are interested in upgrading early to this device. We, we view that as a great sign of product market fit and customer interest. Now it's about fulfilling that demand. As you mentioned, you know, the supply chain environment is getting better, so we don't see any real headwinds as of now to being able to not only ship this year's kind of allocation that we plan for, TASER 10, but moving into next year, when a lot of our automation equipment comes online, we should be able to pick up speed at that point. We're very excited about what the future holds for the TASER business, both in terms of impact, as well as adoption. I guess, you know, one of the issues you ran into with TASER 7, and at least out of the gate, I think more, maybe more for cartridges, you had lower gross margins, and I think part of that was just the way the lines ran, some of just there were just miscellaneous challenges there. I mean, what are you, what are you seeing from a, from a gross margin perspective thus far on, you know, TASER 10 and potential impacts there? Yeah, absolutely. For this year, we're building TASER 10s essentially by hand because we want to have the design locked completely before we turn it over to automation, because you're inviting a lot of headaches when you invest in a bunch of automation equipment, and then the design changes, and you need to retool, and it's just a painful cycle. As we finalize all of the final designs, including some of the cost-out initiatives that we're working on, we're gonna be building TASER 10s by hand this year. The good news is there isn't. It's the lowest part of our total TASER mix that you'll ever see with T10, because we've got large installed bases of our other models, so there'll be a little bit out of the gate of gross margin headwinds associated with that core product line. As a whole, gross margin won't look very different, from, you know, past levels. Hopefully next year, as that automation equipment comes online, we'll actually pick up some tailwinds on TASER 10, and that'll reflect through in the gross margins in the years to come. Well, was that, was the plan all along to kind of build by hand, just knowing that it was gonna be a newer product? Absolutely. You have to do that? All right. Yep. No, haven't been surprises. Yep on that front. Yep. It sounds like the demand indicators have been positive thus far. How does that extend, you know, outside the U.S., or is that too early to call? We're seeing really nice interest from our key international markets as of today with the U.K., Canada, and Australia. We're seeing some opportunities to upgrade large installed bases in those markets, and it's starting to allow for increased interest and trials in some of our other key European markets. We're excited. We also see some opportunities in Brazil, which is another large market for us, and early interest there is very good on the TASER 10. We think this will be something where, you know, it might shorten the cycle of adoption in some of these first-time or early international users. if you get that early upgrade interest, how do you balance that against whatever the previous agreements were they had in place? Yeah -You know, versus upgrading early? I mean, how do you make sure the economics, you know, work out? Generally speaking, I think, you know, each case a little different based on where the customer is in their life cycle and their contracts and if they financed their last TASER model and so forth. You know, the, you know, this isn't. It's called TASER 10. It's actually the eighth generation of TASER we've launched, but because of the 10 shots, we moved straight to TASER 10. We've done this a few times before, and we're comfortable with some of those motions, and we've had some practice, leading up to this point, so we feel really good about being able to execute on that. Okay. Let me maybe switch over, you know, to software, because I feel like longer term, this is one of the biggest opportunities you still have in front of you. Yeah. Maybe before you get to the newer products, I mean, Evidence.com has continued to be, you know, the major driver, right? Yeah. It continues to demonstrate strong growth. What should we expect from here? I I mean, how do you kind of continue that cadence of growth or something even, you know, close to that, given where body camera penetration is and whatnot? I think for us, it's, you know, when you walk into a police department, and you ask about software, generally, you don't get a lot of excited responses because a lot of the software public safety uses is antiquated, on-premise, highly customized, not the recipe for great software success. You know, when customers answer, like, what's their favorite piece of software, it's almost unanimously Evidence.com, because we really brought the cloud to public safety and all the good things that come with the cloud in terms of scalability, security, information sharing. You know, we're really proud of the business we built with Evidence.com. While, traditionally it's been viewed as something that is more of the repository for body camera footage, now it's really changing to be the platform for all of digital evidence and reporting and policing. As customers pile more digital evidence from more sources into Evidence.com, as they think about what the next generation of police reporting is gonna look like, it's really around the incident, right? It's. You're writing a report on something that you have on video already. Those two concepts are very tightly linked together now, and it really lends itself to Evidence.com becoming kind of, like we said, that operating system type concept for public safety, cross-reporting and evidence management. This might be kind of a 2-part question, but I'll try to pull in, you know, the AI kind of component, too. Yeah. You know, as you move into Records, then that opens up a whole new growth opportunity. Yeah. I know you've had early success with at least a number of, I don't know, what you might call kind of mid-size, you know, agencies. Yeah. you know, what's the opportunity? I mean, we're here in New York, right? I mean, what does it take to get some of the big law enforcement agencies, you know, on board, and, you know, any sense for interest there? B, maybe talk about what you're doing from an AI perspective there, using body camera footage, you know, et cetera where that stands today. For sure. I think for us, one of the things that is an opportunity is the fact that this is a highly fragmented business right now in police reporting. There's dozens of vendors, and none of them actually have even close to a majority of the market. One of the tailwinds we have is because we've entered into these large software and hardware contracts, we have a vehicle where we can introduce our next products existing in these agencies. We're very bullish on our ability to become the market leader in records management. A lot of it is driven by the cloud user experience and the integration with digital evidence. You know, our playbook has kind of been, "Hey, look, introduce Evidence.com, get customers comfortable using the product, and then layer in the next thing on top of that over and over again," whether they're things like real-time streaming features or whether it's something like reporting. In the case of reporting, I do think, you know, in the past year, we've racked up a number of major cities that are now deployed on Axon Records, and that momentum has really started to accelerate, such that I think, you know, in the last 5 or 6 months, we've added 4 or 5 major cities to the platform. We have a large backlog over the next couple of years of future deployments, and we're really excited about what that might mean in terms of our market leadership over that time. In terms of AI, a lot of opportunity there. We already built in transcription into Evidence.com, so whenever you have a video, it's automatically transcribed, then it's searchable and very easy to view or view the transcript of it. There's other opportunities, though. You can think of a world where if you have everything that happened on video already, eventually, AI can just write the police report for you, and you can kind of proofread it, you know, based on its analysis of what actually happened in the video. Being able to do that at scale across thousands of police contacts every day at every large department, we think that carries a lot of value, a lot more to come, certainly on the AI side. We're also really focused on how we can pick up leverage internally by adopting some of these new AI tools as well, and hopefully, that leads to less reliance on kind of expanding our OpEx over time, and we can pick up a lot of efficiency that way. How does the go-to-market differ for software versus somebody that's talking to an agency about TASER or body camera? Can that same individual go in and pitch software, or how has that evolved? Ultimately, we've had a lot of kind of additional folks come in on the sales side as we've gotten deeper into technology. The weapon sales motion is very different than the kind of connected devices and software motion. We have recruited with a lot of intensity over the last five or six years to build what we view as the best sales team in the industry. We're one of the few companies that sells directly to end users. We don't use distributors. We think that's a big differentiator for us, and, you know, strategically, as a company, I think we're gonna perform really well if we continue to do two things: build the best products and combine that with the best sales channel. It's, it's hard to beat that equation, and that's really where we're focused and have a lot of confidence. You know, this team has driven, you know, like last year, I think 34%-35% revenue growth. It's like you don't commonly see that with companies that are 30 years old, so we're really excited about the momentum we have and what that looks like into the future. Is there any particular event that helps drive these customers into the software beyond Evidence.com, so into Axon Records? Is there a pain threshold you reach with your on-premise platform, you just can't support it anymore? I mean, just like you see in kind of software broadly. Yeah. You know, the shift from on-premise to cloud. Yeah. Give a sense for kind of where agencies are in that? I think, you know, on the digital evidence side, it was more about, hey, solving the initial problem with the camera and then realizing, hey, you know, there's five or six additional things we need to do to make this a really strong program from capture to courtroom, as we say. In terms of reporting, I think it's really what happens in a lot of police agencies, is they build their own records management solution, and then it gets to a point where it just doesn't scale anymore. It's so customized that it doesn't integrate with any of the other tools that the PD uses, and then they take a step back, and they say, "Hey, how did we get to this place?" A lot of it is this concept of customization as opposed to configuration. You know, for us, we wanna build a highly configurable solution, but not one that is customized, and that's really the key for these big agencies to scale these programs over time, and I think that message is resonating, and that lends itself to just way better integration with everything else the police department actually uses. Yeah. Okay. All right, maybe if I switch gears a little bit to cover sensors, obviously another big- Sure. you know, growth area for you. AB4 launching July. Yeah. What does the manufacturing there look like? What do the really demanding indicators on that front look like? Yeah. I mean, customers that are already on subscription, they'd have an opportunity to upgrade to that. Absolutely. Yeah, what are you seeing in terms of indicators there? Yeah, Axon Body 4 is our. You know, if you walk outside here in New York, you'll see all of the officers here wearing Axon Body 3s, and there was a big breakthrough with Axon Body 3, where it was all about live streaming. It was, you know, an incrementally better camera, incrementally better battery, but it offered real-time streaming for the first time. With AB4, we're building on that, and now we're offering two-way real-time streaming. Not only can you push out your feed, you can actually get incoming traffic on your camera, mainly by voice. If you picture a scenario where somebody's in need of medical assistance, you could have an EMT watching the video, coaching the officer, the camera wearer, on what to do. You could also use that for translation support, you could also use that for communicating on the whereabouts based on, you know, if you're, if you're looking for a suspect, and you have maybe drone footage that could inform that, using two-way voice to inform that based on the officer's location and stream. We're really excited about this voice use case in the body camera. It's the first time that that's ever been available, and then, of course, we've made a lot better in the camera, the video quality, the stabilization, the battery life, all the things that our customers come to expect. This is something that's gonna be available to our customers, by virtue of our upgrade cycle that's already built into their contracts, and then there's an element of, certainly new camera adoption that we think, this product will open up as well. Are you feeling good on production? I mean. Feel great on production. Okay. On the body camera side, we leverage contract manufacturers. We've realized we're not gonna be the best company in the world at building camera technology, but we have a lot of pride in the design and in the fact that we've really built this for public safety. In terms of the manufacturing, that's done by a CM, and that allows us to scale really quickly, so we certainly anticipate, you know, 6-figure shipments of Axon Body 4 in the back half of the year. Okay. I've got a bunch more questions, but if there are any, please feel free to submit them, and I'll again, I'll try to get to those as well. One of the big opportunities on, outside of the various, you know, product categories, right, that many of which you're still early in, are, you know, expanding, you know, the TAM, in terms of different verticals you're going after. Whether it's federal, corrections, maybe just update us, maybe start there? Yeah. What are you seeing in terms of federal demand? Where's corrections? We had, like, the state of Ohio and maybe Florida and a few. What's the pipeline look like across some of these newer areas outside of local? We're really thrilled with how our new markets are performing in general. We look at growth through two different lenses. We've got to be really good at selling existing products to new customers, and we've got to be really good at selling new products to existing customers. If we do both of those things in parallel, you know, we will continue to grow at similar rates. We're very excited about that, especially on the existing products to new customer side. That's corrections. That business has tripled over the course of the last three years. In terms of federal bookings, that business has 10x'd over the last three years. Our International business has 10x'd over the last five or six years. All of these newer markets, we're seeing a lot of momentum in, and it's driven by the fact that we've built products that have a proven ROI for the use cases that our customers experience day in and day out. In the Federal business, we're seeing a lot of adoption around the Federal Civilian business, DHS, DOJ, both on the camera and the TASER side. We have a new leader that came in from General Dynamics 3 years ago, and he really, for the first time, showed us how to succeed and sell into the federal government. We're really excited about the momentum we have there. Corrections is similar, where, you know, historically, cameras and TASERs have not been highly adopted. We have a focused team on that now. We just have this year have signed a couple major deals in the corrections space that you'll be hearing more about in the next few months, and we're really excited about the tailwinds we're seeing there. Campus security is another one of those. Fire and EMS is another one of those. Of course, our International business is moving along nicely. Lastly, we founded an Enterprise business, which is body cameras and digital evidence management software geared at non-police use cases. Think about retail workers at large stores that are commonly getting assaulted now, unfortunately, and commonly seeing thefts right now. We see a lot of product market fit there, and we've got some early signals that that'll be a growing business for us as well, we're very excited about that. Yeah, I wanted to come to that because it seems like there's a potentially big opportunity, maybe, like, think about hospitals, you know, sporting venues, which you all talked about in the past. The number of incidents that happened at professional sports things were crazy. I mean, you know, it's. You're just improving, you know, safety and security generally. For sure. Is there, is there more you have to do on the go-to-market side, or how do you open up? How do you crack that, I guess, to become, you know, make commercial enterprise- Yeah more a bigger part of the business? Yeah, absolutely. I think, you know, in public safety, we enjoy this referral-based kind of growth, where customers are very happy. They inform their neighboring cities about their success with these products, and it kind of goes from there. You don't necessarily have that same benefit in enterprise because a lot of the people we're selling to are competitors with each other. It really is, you know, brick-and-mortar sales. You've got to go in there, do the work. We've done a lot on the product design side to come out with a smaller, lighter-weight camera that is really tailored for the retail worker experience of having to wear it for long periods of time and not, you know, having it be too heavy and not over-designing it. We've come out with a really exciting design for that use case, and it's paired with, you know, the real-time streaming, that, you know, we view as something that could be very useful if there's an event happening and police want to tap into the camera and see what's going on in the store. You know, we've built in a lot of the kind of workflows and user interface that would be different in retail, and so we've done the work on the product side, and now it's about just going out there and doing the work on the sales side, and we've got a really capable leader, one of the people who was instrumental in building our Public Safety business five or six years ago. He's moved over to run our Enterprise business, and, we're excited about the potential there. It's certainly a large TAM and a lot of opportunity. Is that slimmed-down camera available today? I mean. Um- What's the status of that? Yeah, absolutely. It's a variant of the AB3, and it'll be shipping in the back half of the year or two for trials and then available next year. Okay. All right. No, that's great. Okay, That makes sense from a form factor- Yeah. -standpoint, I would think. Yep. I'm, you know, we're going to get to some of the numbers here in a minute, too, but Fleet, that's been a huge growth driver for you. I mean, that's still pretty early. Maybe just talk about the success you're seeing there, and what's. Yeah. Maybe just the differentiation in the market. Yeah. I don't know that everybody appreciates, you know, kind of the price point and the capabilities... Yeah of those competitors. Ultimately, it's a great story of how having this installed base driven by Evidence.com allows for future purchases of kind of adjacent products. Fleet is an example of that. We had a lot of very happy customers using body cameras and evidence management. Now it's about, okay, how many other sources of videos can you plug into this network? Drones are one of them, Fleet is another one. At this point, we have the market-leading in-car video product. We've been very disruptive to the incumbents in that market. Shipments have grown nicely since we launched Fleet 3 in mid-2021. We have, you know, as we take orders right now, those installations are scheduled well out into 2024. We've got a very healthy backlog of customers ready to deploy. We're very excited about that. Yeah, very bullish on the Fleet business. One of the things that differentiates the product is the fact that it can read license plates. Right now, if coming into Manhattan, you'll notice in the tunnels and bridges, there are fixed ALPR systems, meaning you plant this truck with this capability on it, and it measures the license plates of every car coming in and out. Now we've really turned that into a remote capability where it can be in every car. As opposed to a city having 7, 8, 9, 10 of these fixed ALPR checkpoints, every police car you have turns into an ALPR checkpoint, and so, certainly very valuable in solving crimes, and something that, you know, has been highly anticipated and enjoyed by the market at this point. Yeah. Okay. you've talked about a lot of the broader drivers. Maybe you kind of help pull that together for us in terms of growth expectations as we kind of move through this year, next few years. You laid out a couple of quarters ago, I guess, you know, the medium-term guidance of growing 20% plus per year. Yeah. I think the guidance for this year is a 22% growth- Yeah. up from 20% last quarter. Yep. Maybe just talk about the confidence, I guess, and the key drivers that took as you move into the second half of the year and what are pricing tougher comps year-over-year? For sure. For sure. You know, for those who have been familiar with Axon for some time now, we've had some great growth in the past few years, and we tend to be a little conservative on guidance coming out of the year because we want to see things come closer to materializing before we get more aggressive. In the back half of the year, we tend to get a little more aggressive with our guidance, and I'd expect that same kind of trend line this year. We're excited about what this year entails. Certainly looking forward to our call in August, and, you know. Same with the 2025 guidance. We have a lot of conviction in that guidance. We think, you'll start to see, you know, some nice operating profit expansion, and, got a lot of confidence moving in the future here. Are there any particular product categories that are driving the bulk of that confidence, or is it more broad-based? Anything in particular you'd call out as you move into the second half, the next couple of years? Yeah. I think it's really a nice confluence of a number of product lines with a lot of interest. It's, you know, the TASER business continues to grow. Like, 5, 6 years ago, we were getting questions about, "Hey, is this saturated? Is this going to keep growing?" Since then, it's probably doubled, and we still see plenty of white space in the TASER market. You combine that with growing adoption of our wearables and growing ARPUs on the software side, where we continue to innovate and come out with new feature sets that lead to upsells. You know, we mentioned the Fleet business. Our Virtual Reality business has grown nicely. Our ALPR business has grown nicely. You know, there's... You know, one of the things we really enjoy in our business is both on the top line and the bottom line, there's multiple ways to get there. On the top line, we have a number of product categories and markets that are all scaling very nicely. On the bottom line, you know, we have, you know, some opportunity both on the OpEx and on the gross margin side. You know, the diversified path really gives us a lot of confidence, and we'll continue to execute against the plan. Well, I want to touch on that maybe last question, because this has been a, you know, a subject of debate, I guess, among investors, just to understand what the EBITDA margin expansion is, right? There have been some ups and downs over time. Yeah. You're launching several new products, right? Presumably, that makes it more difficult to expand margins this year. Yeah. I think the guidance has been to expect more margin expansion next year. What really underpins that? What should give investors confidence that you can grow, you know, several hundred basis points in margins? Yeah. Margins. Not to get too technical, first with the OpEx side, going into this year, for the first time, we only greenlighted about 70 net new roles on the SG&A side, and that's compared to 500- 600 SG&A roles in the last 3 years annually. This year, we don't really enjoy a lot of the benefit of that, because if our average start date was August first last year, essentially, you're ending up with full year salaries for all of the people you hired last year, so that's hitting this year's P&L. Going into next year with only 70 net new roles from this year, we do get a lot of leverage on the SG&A side. When we combine that with the opportunity to expand gross margins, as you mentioned, you know, coming out with, two new products this year, investing in automation, the next couple of years will really see a lot of relief on the gross margin side. There's a lot of opportunity across OpEx and gross margin to get there. Okay, that's great. Yeah, we're gonna have to wrap it up there for time purposes. We are having a breakout session if anybody has additional questions they want to run by the company. Please join me in thanking Josh for all his comments. Appreciate it. Thank you.