Axon Enterprise Conference Call Summary Company Overview - **Company**: Axon Enterprise (NasdaqGS:AXON) - **Date**: March 03, 2026 - **Key Personnel**: Brittany Bagley, COO and CFO Key Industry Insights Financial Performance - **2025 Revenue Growth**: 33% increase in revenue and 46% growth in bookings [4][5] - **International Bookings**: Over $1 billion in international bookings for 2025 [4] - **New AI Products**: $750 million in bookings from new AI products [5] Future Projections - **Revenue Target**: Aiming for $6 billion in revenue by 2028, driven by ongoing trends and new product bookings [6] - **Bookings Conversion**: 20%-25% of $14.4 billion in bookings expected to convert in the next year [8] Market Dynamics - **AI Era Plan**: Introduced to future-proof AI usage for customers, reflecting the rapid pace of innovation [19][30] - **Data Privacy**: Ongoing discussions about data privacy and responsible innovation frameworks [18] Product and Market Developments New Product Innovations - **ALPR Product**: Successfully launched in 2025, contributing to AI integration [31] - **Fusus**: Expected to be adopted across all markets, enhancing operational efficiency [84] 911 Market Innovations - **Prepared and Carbyne Acquisitions**: Focus on modernizing the 911 call handling system with AI capabilities [34][38] Federal and Corrections Market - **Federal Business**: Experienced uncertainty in 2025 but optimistic about future opportunities, including events like the World Cup [55] - **Corrections Market**: Similar to state and local markets, with a focus on improving safety through technology [53] Strategic Initiatives International Expansion - **Cloud Deals in Europe**: Successful cloud deals signed, indicating growth potential in international markets [60] - **Investment in Data Residency**: Continued investment in data residency and localization to support international growth [70] Enterprise Market Opportunities - **Body Cameras and Drones**: New products like the ABW Mini and counter-drone technologies are being developed for enterprise customers [74][90] Financial Metrics and Projections EBITDA and Cash Flow - **EBITDA Margin Expansion**: Targeting a 250 basis point increase over the next three years [110] - **Free Cash Flow Conversion**: Expected to return to 60% in the coming years after a year of inventory investments [118] Stock-Based Compensation - **XSP Plan**: Performance-based stock compensation plan remains consistent, with no major changes anticipated [122] Conclusion - **Overall Outlook**: Axon Enterprise is positioned for continued growth through innovation in AI, strategic acquisitions, and expansion into new markets, while maintaining a focus on customer needs and data privacy.

Financial Data and Key Metrics Changes - In 2025, total bookings surpassed $7 billion, representing a more than 40% increase year-over-year, with fourth-quarter bookings up over 50% [10][11] - Revenue for the fourth quarter grew 39% year-over-year to $797 million, marking the eighth consecutive quarter of over 30% growth [27] - Adjusted EBITDA grew 46% year-over-year to $206 million, with an adjusted EBITDA margin of 25.9% [32] Business Line Data and Key Metrics Changes - Software and services revenue grew 40% year-over-year to $343 million, driven by expansion within existing customers and new customer growth [28] - Connected devices revenue increased 38% year-over-year to $454 million, with TASER revenue growing 32% to $264 million [30] - New product bookings, including Air, AI, and Fusus, totaled over $1 billion for the year, nearly tripling the previous year's result [13] Market Data and Key Metrics Changes - Bookings in new and emerging markets surpassed $2 billion, with international corrections and justice showing record results [17][18] - The international team achieved over $1 billion in annual bookings for the first time, indicating strong growth in global markets [18] Company Strategy and Development Direction - The company aims to become the leading global sensor network, integrating AI capabilities into its product offerings [101][102] - There is a focus on expanding into enterprise markets, with significant opportunities identified in federal law enforcement and corrections [22][24] - The strategy includes continued investment in R&D and new product development to maintain a competitive edge [54][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment for 2026, anticipating strong performance across all core markets [112] - The company is positioned to leverage AI advancements to enhance its product offerings and customer trust [101][103] - Management emphasized the importance of execution and maintaining momentum in a rapidly evolving market [105][106] Other Important Information - The company completed acquisitions of Prepared and Carbyne, enhancing its capabilities in the 911 and emergency response sectors [35] - Adjusted gross margin was reported at 61.1%, with expectations for continued volatility due to product mix [31] Q&A Session Summary Question: What are the expectations around bookings growth and the demand environment in 2026? - Management refrained from providing specific bookings guidance but expressed confidence in strong demand across all core markets [112][113] Question: Can you discuss the differentiation of Axon 911 and the go-to-market strategy? - The integration of Prepared and Carbyne is seen as a significant enhancement to the 911 ecosystem, providing real-time data and efficiency [117][118]

Financial Data and Key Metrics Changes - In 2025, the company achieved full-year bookings of over $7 billion, representing a more than 40% increase from the previous year [30] - Q4 bookings increased by over 50%, marking a significant acceleration compared to the previous two years of high 20% growth [31] - Revenue for Q4 grew 39% year-over-year to $797 million, marking the eighth consecutive quarter of over 30% growth [40] - Adjusted EBITDA grew 46% year-over-year to $206 million, with an adjusted EBITDA margin of 25.9% [42] Business Line Data and Key Metrics Changes - Software and services revenue grew 40% year-over-year to $343 million, driven by expansion within existing customers and new customer growth [40] - New product bookings, including Air, AI, and Fusus, totaled over $1 billion for the year, nearly tripling the 2024 result [32] - Connected devices revenue increased by 38% year-over-year to $454 million, while TASER revenue grew 32% to $264 million [41] Market Data and Key Metrics Changes - Bookings in new and emerging markets surpassed $2 billion, with record results in international corrections and justice [34] - The international team achieved over $1 billion in annual bookings for the first time, with significant deals in Q4 [34] - The corrections team delivered the largest single customer booking in company history, showcasing product market fit across the platform [35] Company Strategy and Development Direction - The company aims to leverage its integrated hardware and software solutions to address complex regulatory and liability requirements, positioning itself well for AI adoption [38] - The focus is on expanding into new markets, including enterprise and federal law enforcement, with promising signs of growth [37] - The company is committed to maintaining a strong balance sheet and pursuing tuck-in acquisitions to enhance its ecosystem [54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, anticipating strong performance across all core markets in 2026 [94] - The company is focused on executing its strategy to become the leading global sensor network, emphasizing the integration of AI into its offerings [96] - Management highlighted the importance of maintaining customer trust and delivering innovative solutions to drive future growth [87] Other Important Information - The company completed the acquisition of Prepared in Q4 and Carbyne in the current month, enhancing its product offerings [45] - Adjusted gross margin was reported at 61.1%, with expectations of volatility due to product mix but long-term benefits from software growth [42] - The company targets a revenue growth range of 27%-30% year-over-year for 2026, with an adjusted EBITDA margin of 25.5% [45] Q&A Session Summary Question: What are the expectations for bookings growth and the demand environment in 2026? - Management refrained from providing specific bookings guidance but expressed confidence in strong demand across all core markets [94] Question: Can you discuss the differentiation of Axon 911 and the go-to-market strategy? - The integration of Prepared and Carbyne is expected to enhance the 911 ecosystem, providing efficient and effective solutions that outperform legacy systems [99]

Core Insights - Axon Enterprise is experiencing significant growth driven by its innovative technology in law enforcement, including TASERs, body cameras, and cloud-based software services [1][3] - The company is focusing on enhancing its 911 services through recent acquisitions and the introduction of AI technology to improve response times and efficiency [5][6] Financial Performance - Axon reported strong performance in its most recent quarter, with a notable increase in AI bookings expected to contribute over 10% of US state and local bookings for the year [6][8] - The company has achieved a growth rate of over 30% in recent years, maintaining a consistent upward trajectory [18] Strategic Initiatives - Recent acquisitions of Prepared and Carbyne are aimed at improving the 911 response process, leveraging AI to reduce the time taken to dispatch help from over two minutes to mere seconds [5][6] - The introduction of the AI Era Plan is expected to streamline administrative tasks in public safety, allowing officers to focus more on their core duties [8][10] Product Development - Axon is expanding its product offerings beyond public safety into the enterprise market, addressing issues like workplace theft and abuse with new technologies [13][20] - The company is developing products like the ABW mini body camera and Fusus, which integrates various video feeds for enhanced security monitoring [13][20] Market Opportunities - Axon sees significant potential in the enterprise sector, with a focus on providing solutions that can reduce theft and improve safety in retail environments [13][20] - The company is also exploring opportunities in surveillance and live security monitoring, ensuring that privacy and ethical considerations are prioritized [11][12] Competitive Landscape - The less-than-lethal space is gaining traction, with Axon viewing it as an opportunity for growth rather than competition, emphasizing the importance of safer incapacitation methods [16] - Axon aims to maintain its leadership in public safety technology while adapting to emerging trends and customer needs [16][18]

Financial Data and Key Metrics Changes - The company reported Q3 revenue of $711 million, a 31% year-over-year increase, marking the seventh consecutive quarter of 30% or greater growth [34] - Adjusted gross margin was 62.7%, a decrease of 50 basis points year-over-year, primarily due to tariffs [36] - Annual recurring revenue (ARR) grew 41% to $1.3 billion [35] - Adjusted EBITDA margin was 24.9%, reflecting the impact from tariffs and planned increased R&D investments [37] Business Line Data and Key Metrics Changes - Software and services revenue increased 41% year-over-year to $305 million, driven by new and existing customers expanding their use of the platform [34] - Connected devices revenue grew 24% year-over-year to $405 million [35] - TASER product line grew 17%, led by TASER 10, while personal sensors grew 20% driven by Axon Body 4 [35] Market Data and Key Metrics Changes - Year-to-date bookings were up in excess of 30% and accelerating from last year [32] - Corrections contributed two of the top 10 deals in Q3, with year-to-date bookings up more than 2x from last year [29] - International bookings also delivered two of the top 10 deals, including a nine-figure cloud deal in Europe [29][30] Company Strategy and Development Direction - The company is focused on expanding its ecosystem, particularly through the integration of Prepared and Carbyne, which are expected to enhance the 911 response system [20][34] - The strategy includes leveraging AI to improve communication and response times in emergency situations [19][49] - The company aims to innovate faster by moving away from legacy systems and focusing on cloud-based solutions [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering another record year in 2026, with expectations for continued strong performance driven by AI tools and efficient decentralized ownership [33] - The management highlighted the importance of investing in sales and product development to sustain long-term growth [95] - There is optimism regarding the international market, with consistent bookings from Canada, Australia, and South America [71] Other Important Information - The company is raising its Q4 revenue guidance to between $750-$755 million, implying full-year revenue of about $2.74 billion [40] - The company is also focused on addressing the challenges posed by tariffs, which have impacted gross margins [110] Q&A Session Summary Question: AI's contribution to total bookings and any delayed contract decisions - Management confirmed that bookings growth is expected to remain strong, with a belief in high 30s% year-over-year growth for Q4 [44] Question: Rationale behind acquiring Prepared and Carbyne - Management explained that these acquisitions enhance the company's ability to innovate in the 911 space and integrate with existing systems [46][48] Question: Interplay between software and services, and connected devices - Management indicated that software and services are expected to continue growing at a higher-than-average rate, driven by increased user count and upselling [58][60] Question: International deals and pipeline - Management provided insights into the successful cloud opportunities in Europe and consistent bookings from other international markets [70][71] Question: Competitive landscape regarding body cameras - Management emphasized their focus on customer needs and confidence in their product offerings despite competition [90] Question: Gross margin outlook and tariff impacts - Management discussed the one-time adjustment from tariffs and the expectation of improved gross margins as the software business continues to grow [110][112]

Company Overview - Axon's mission is to protect life by building the technology ecosystem for public safety[7] - The company estimates a total addressable market of $159 billion[9, 68] - Axon has over 1 million software users and has sold over 1 million TASER devices[9] Financial Performance - Axon's 2024 annual revenue was $2.1 billion[32] - The company's annual recurring revenue was $1.3 billion[34] - Future contracted bookings reached $11.4 billion[34, 122] - The adjusted EBITDA margin for 2024 was 25%[34] - Net revenue retention was 124%[34, 82, 123] Market Opportunity - The U S State & Local Law Enforcement TAM is under 15% penetrated[63] - Law enforcement use cases account for approximately 50% of the total addressable market[62] - U S State & Local law enforcement accounted for approximately 75% of company revenue in 2024[66] Forward-Looking Statements - Axon projects Q4 2025 revenue between $750 million and $755 million, representing approximately 31% annual growth[127] - The company anticipates an adjusted EBITDA of $178 million to $182 million for Q4 2025, with an approximate 24% margin[127] - Axon expects approximately $2.74 billion in revenue for the full year 2025, a growth of approximately 31%[127]

Core Viewpoint - SoundThinking has integrated PlateRanger into its SafetySmart platform, enhancing public safety capabilities and enabling law enforcement agencies to improve investigative workflows and outcomes [2][4]. Integration and Technology - The integration of PlateRanger, an advanced license plate recognition solution, with ShotSpotter and CrimeTracer allows law enforcement to combine real-time gunshot detection data with vehicle identification and cross-jurisdictional insights [3][5]. - The Rekor Public Safety Network (RPSN) facilitates secure data sharing across jurisdictions, enhancing investigative speed and interoperability while respecting data ownership [6][7]. Benefits to Law Enforcement - The integration provides enhanced investigations by linking gunfire events with suspect vehicle data, allowing for more comprehensive follow-up [5]. - Multi-agency collaboration is improved through integrated systems that enable data sharing, helping to uncover connections between incidents [7]. - The commitment to open standards allows for seamless integration with existing systems, differentiating SoundThinking in the market [7]. Market Impact - SoundThinking serves over 175 ShotSpotter customers and approximately 2,100 CrimeTracer agencies, providing access to more than 1 billion records, thus expanding its market footprint [8].

Financial Data and Key Metrics Changes - The company reported Q4 revenue of $575 million, representing a 34% year-over-year increase, marking the 12th consecutive quarter of over 25% revenue growth [38][39] - Total revenue for the year exceeded $2 billion, nearly doubling from two years ago, with a consistent growth rate of over 30% for three consecutive years [28][39] - Adjusted gross margin was 63.2%, and adjusted EBITDA margin was 24.6%, with a full-year adjusted EBITDA margin of 25%, achieved a year ahead of schedule [40][41] Business Line Data and Key Metrics Changes - TASER revenue increased by 37%, Sensors by 18%, and Software & Services by 41% year-over-year [39] - The company booked over $5 billion in business last year, with about half closing in Q4, and TASER 10 orders outpacing TASER 7 by 2x [29][30] - The officer safety plan bookings in Q4 were the highest ever, with strong adoption of premium plans and emerging products [30] Market Data and Key Metrics Changes - International bookings grew nearly 50% sequentially in Q4, building on a 40% sequential growth in Q3 [32][33] - Enterprise bookings tripled year-over-year, with the largest deal in company history booked with a global logistics provider [33] - The total future contracted bookings exceeded $10 billion, indicating a healthy pipeline for future growth [35][41] Company Strategy and Development Direction - The company aims to leverage advancements in AI, real-time operations, and drones to double its overall opportunity set [31][39] - Investments in R&D and technology are prioritized to support growth and innovation, with a focus on enhancing customer safety and operational efficiency [40][46] - The company is exploring options for its headquarters due to challenges in Arizona's political and legal environment, with potential relocation if issues are not resolved [22][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the federal market, viewing potential funding cuts as an opportunity for increased business [52][54] - The company anticipates another record bookings year in 2025, with a strong pipeline and execution focus [36][44] - Management highlighted the transformative impact of AI tools on operational efficiency and customer satisfaction [68][136] Other Important Information - The company achieved a net revenue retention rate of 123%, reinforcing business visibility and predictability [39][122] - The company is entering 2025 with a clean inventory position and strong free cash flow generation above 60% [43][44] - CapEx is expected to be in the range of $140 million to $180 million, driven by increased TASER 10 capacity and investments in R&D [48][49] Q&A Session Summary Question: What portion of total revenues are from federal contracts? - Management indicated that there is no real concern regarding funding cuts, and they see more opportunities in the federal space moving forward [52][54] Question: What is the impact of the Ukraine war on drone-related business? - Management noted that the global focus on drone detection and defense has increased, positioning the company favorably in this market [58][61] Question: What is the adoption rate of AI tools? - Management reported that AI products are experiencing rapid adoption, with significant interest and deals being closed shortly after launch [68][69] Question: What is the status of the Flock Safety partnership? - Management stated that while they exited the partnership, both sides are interested in resuming it under new terms [76][78] Question: How is the federal business expected to expand? - Management expressed confidence in the continued expansion of body camera programs within federal law enforcement [80][81] Question: What is the outlook for TASER 10 supply and demand? - Management confirmed that demand for TASER 10 continues to outpace supply, and they are investing to increase capacity [124][125]