Axon Enterprise - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered record revenue of $0.669B (+33% y/y, +11% q/q) with broad-based strength and raised FY25 revenue and Adjusted EBITDA guidance; Non-GAAP EPS was $2.12 and Adjusted EBITDA was $0.172B with a 25.7% margin.
• Results beat Street: revenue by ~$27.6M (~4.3%) and Non-GAAP EPS by ~$0.66; Adjusted EBITDA beat consensus by ~$10.4M* (S&P Global).
• Software & Services grew 39% to $292M with net revenue retention rising to 124%; Connected Devices grew 29% to $376M; TASER +19%, Personal Sensors +24%, Platform Solutions +86%.
• Guidance raised: FY25 revenue to $2.65–$2.73B (from $2.60–$2.70B) and Adjusted EBITDA to $665–$685M (from $650–$675M), maintaining ~25% margin; tariffs shift to impact more in 2H.

What Went Well and What Went Wrong

• What Went Well

  • Strong top-line and quality of growth: revenue +33% y/y; Software & Services +39% y/y; ARR +39% to $1.183B; net revenue retention increased to 124%.
  • New product momentum and bookings: $150M AI Era Plan bookings in Q2; fastest adoption across Draft One, TASER 10, Axon Body 4; largest company deal booked, with strong corrections/international contributions.
  • Management confidence and raised outlook: FY25 revenue and Adjusted EBITDA guidance increased; margin discipline maintained at ~25%; tariffs timing now skewed to 2H.
  • Quote: “Draft One remains our fastest adopted software solution. TASER 10, our fastest adopted TASER weapon. Axon Body 4, our fastest adopted camera.” — Rick Smith.

• What Went Wrong

  • GAAP profitability constrained by non-cash items: operating loss of $1M and heavy stock-based compensation ($139M) drove GAAP net income margin down to 5.4% (vs 14.6% in Q1).
  • Cash flow pressure: operating cash outflow of $92M; free cash outflow of $115M; adjusted free cash outflow of $111M, with net cash position down $44M q/q to ~$66M.
  • Device margins compressed: Connected Devices gross margin declined to 48.6% (−270 bps y/y) and adjusted gross margin to 51.1% (−230 bps y/y) on mix (platform solutions).
  • Analyst concern: platform solutions growth may be “lumpy”; management flagged tariff cost timing to hit 2H.

Transcript

Speaker 2

Hello everyone and thank you for joining our Axon Enterprise executive team today. I hope you've all had a chance to read our shareholder letter released after the market closed, which you can find at investor.axon.com. Our prepared remarks today are meant to build upon the information in that letter. During this call we will discuss our business outlook and make forward-looking statements. Any forward-looking statements made today are pursuant to and within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These comments are based on our predictions and expectations as of today and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. We discuss these risks in our SEC filings. We will also discuss certain non-GAAP financial measures.

A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our shareholder letter as well as on our investor relations website. Now, before we turn to our quarterly update, we'll take a quick moment to show you some recent highlights from one of the CEO summits that Rick Smith has been hosting. The world is changing so fast because of AI.

Speaker 3

From June until ICP, we were able, we built eight features in that time frame, which is just mind blowing.

Speaker 2

Think about how we could use AI to build features for real-time.

Speaker 3

Crime Cinemas, we started this endeavor called.

Speaker 2

Uses back in 2019.

Speaker 3

I never thought I'd be standing in.

Speaker 2

Front of a group of professionals.

Speaker 0

Are actually utilizing and now enhancing the technology. This is as exciting for me.

Speaker 3

As hopefully you find it exciting for you today. The partnerships that we have with Axon and other great public safety technology companies allow us to reduce that footprint of officers in the field and allow us to do our job more efficiently, quicker. That way we don't have to worry.

Speaker 2

About getting other officers out in the field.

Speaker 0

This is only as good as the.

Speaker 1

Number of cameras and sensors that you.

Speaker 0

Can connect, and most of those you don't own.

Speaker 2

Right? They're out in the community, and you.

Speaker 1

are a lot of hurdles to get there. Each of you have one story that is a hundred stories that we can produce and put out into the world and have sort of all boats.

Speaker 0

Rise when it comes to trying to.

Speaker 1

Get communities involved here.

Speaker 3

Drone to drone, drone drone. You go down the list, this technology in the past three years has come out of nowhere to where this is the fundamental technology or this is how we generally deploy drones today. In the future, it's really moving towards, we think, autonomous drone deployments.

Speaker 0

After the flight, all the data that's generated is automatically uploaded to Axon Evidence and exists right alongside the body camera data from the officers on the ground. That is the reason that we're so excited about this partnership with Axon.

Speaker 3

All right, thanks, Eric. Welcome everyone to our second quarter 2025 earnings call. I love hosting those summits. It's all about connecting the dots with our customers so that we can build the tools they need to make their jobs just a little bit easier. We are, of course, proud to come back to you with another fantastic quarter. What we're really proud of are the relationships and partnerships we've built with our customers. I spend most of my time with them and the more I do, the more excited I am for what's ahead. In fact, there are several trends I'm seeing right now that are fueling that excitement. First, demand for new technology from our customers is accelerating and it's outpacing even my most optimistic expectations. Artificial intelligence, drones and robotics, real-time operations, cameras and our newest TASER devices and virtual reality.

Each of those are resonating across our customer base. There's no one breakout product driving conversations. It's everything. In the past, it could take a few years for our newest products to start seeing meaningful adoption. Often, at least the first year took it to fine-tune the application, work through the approval processes and get everything right. Today, we're watching customers adopt new solutions as a standard, faster and in real time. Draft one remains our fastest adopted software solution, TASER 10 our fastest adopted TASER weapon, Axon Body 4 our fastest adopted camera. Dedrone, Fusus and the AI Era Plan are also being deployed faster than we've seen with prior new technologies, while laying the groundwork for future innovations coming over the horizon. Another observation I want to share is that I believe one critical factor enabling this movement is the trust we've built with our customers.

It is something I am extremely grateful for. We have a history of being bold. It's only after decades of tireless work, thought leadership and responsible, careful, balanced approach that we've earned the privilege to partner this deeply. They're able to move faster today because they trust we'll be there with them on the journey and there tomorrow doing things the right way. The final observation I'll make is that collaboration in public safety isn't just critical anymore. It is absolutely essential. Roles, responsibilities and jurisdictions may have fine lines, but effective public safety happens through close collaboration across the landscape. From sworn officers to public officials, federal governments, enterprises, and even consumers, to support this, we need to think broader than ever before.

Ensuring our products enable these different stakeholders to work together, our work to expand into new customers, introduce new products that rethink how existing systems operate, and build partnerships with industry leaders is about more than growth. It strengthens our ecosystem and makes every layer of connectivity incrementally more valuable for every user. This summer we spent time with our product teams working through our future product investments, and we have the broadest, yet most cohesive and synchronized pipeline of products and development we've ever had. It's truly an inspiring time, and we remain committed now more than ever to investing behind our vision and the mission that drives it. With that, I'd like to turn it over to Josh.

Speaker 0

Thanks, Rick, and good afternoon, everybody. Before we get into our results, I want to say we're thinking about the NYPD and the victims of last week's horrible tragedy. We are reminded of why we come to work every day, and we'll all continue to pursue Axon's mission of protecting life with vigor. As we reflect on our Q2 results, the theme continues to be customer obsession. We consider it the honor of a lifetime to work with the men and women of public safety, and our continued emphasis on the customer experience is central to how we run the business. I tend to be the curmudgeon on the team that reminds everyone that no matter how much success we have, we can always be better.

I'm not sure that'll ever change, but I'd like to take a reprieve from that for a few minutes as I am truly awestruck at what our team is accomplishing. The most exciting part is we continue to accelerate. This is not a team that slows down. Maybe the best example of this is our state and local team under the leadership of Jessica Duncan. This team took back the record for the largest deal in Axon company history by a wide margin. This contract with a major city police department also marked the largest contract we've seen in terms of new product bookings, encompassing everything from drones to our AI products. Similarly, our corrections team, led by Zach Austin, also closed their largest deal in team history and contributed two of the top 10 deals in the quarter.

Corrections has been an important area for us to grow our presence because the value our products offer to keep correctional institutions safer is so clear. What's exciting here is that the deals we are seeing in the vertical now include products from across our ecosystem: TASER 10, body cameras, VR, evidence management, and Fusus. Next, our wins in international and Enterprise continue to validate our investments in these areas. Our international team added a new TASER customer in Africa, becoming the largest in the region. In Enterprise, we signed a contract opening up a major opportunity in the gaming space. It was our first win in that vertical to include our AI products and a clear indicator to me that we're on the right path. Zooming out a bit, every quarter that goes by indicates more and more of a contribution from new products.

We closed almost $150 million of bookings for our AI Era Plan in Q2 alone, and over 30% of bookings this quarter came from new product categories. We've talked in the past about an opportunity to grow our presence with officers as our product portfolio expands. Just a few years ago, the maximum an agency could spend with us on a per officer basis was less than $300. Today, that sits over $600 due to new products, and we saw the per officer bookings in our largest deals push up against that level. These are just a few examples of the activity we saw in another strong quarter. As I said in Q1, the team came out of the gate with speed this year, and that momentum is accelerating.

Coming off a strong 1H with a growing pipeline, we now have line of sight to deliver year-over-year bookings growth in the high 30% range, which would once again put our second half in line with the prior year's entire campaign. At Axon, we're an ex play shop. We don't fall in love with what we just did or what we did last year or the year before that. As I said, I am so proud of our sales and product teams. To see bookings accelerating at this stage in our business speaks to the level of execution and innovation going on at Axon. As I digested these results, I was brimming with excitement about what the future holds and the impact that we can have.

You are truly seeing a world-class team that is capable, or you are truly seeing what a world-class team is capable of doing when everybody is on the same mission. With that, let's kick it over to Brittany.

Speaker 1

Thank you, Josh. As Josh and Rick mentioned, we're extremely proud of our second quarter results as we continue to deliver for our customers while investing for the long term. Second quarter revenue of $669 million increased 33% year over year, marking our 14th consecutive quarter of over 25% revenue growth. Josh shared some great color on our bookings and why we're so excited for the future in terms of translating that into revenue. Today, the top line growth continues to be driven by software and services, which grew 39% year over year to $292 million. Our ability to win new users and to drive adoption of our newest products underpins this continued growth. Net revenue retention increased to 124% and has been near or above 120% for 20 consecutive quarters, demonstrating the result of our ongoing investment in our products and customers.

Turning to connected devices, revenue increased 29% year over year to $376 million. This growth was driven by strength across categories, including TASER, which grew 19% driven by TASER 10. Personal sensors grew 24% driven by Axon Body 4, and platform solutions grew 86% driven by counter-drone and virtual reality. Adjusted gross margin was 63.3%, up 20 basis points year over year, driven by product mix to software and services, partially offset by lower devices margin due to the strong growth in our newer hardware products in newer markets. We expect this balance to continue in the second half as we mix across new investment areas and our software business growth. Adjusted EBITDA margin of 25.7% came in ahead of expectations due to higher revenue and operating leverage, as well as benefiting from the timing of tariffs, which will now impact us more in the second half of the year.

Turning to our outlook, we are raising 2025 revenue guidance to a range of $2.65 to $2.73 billion, representing approximately 29% annual growth at the midpoint. This reflects our performance in Q2 and our confidence in the pipeline. For the second half, we are raising our adjusted EBITDA guidance to a range of $665 to $685 million, up from $650 to $675 million. This maintains our 25% margin target for the year and incorporates our planned investments and tariff-related expenses in the second half. We continue to expect increased hiring over the remainder of the year, particularly in R&D as we prioritize investing behind the incredible product roadmap Rick talked about, as well as in our exciting new markets. These investments will continue to set us up well for 2026 and beyond. In summary, Q2 reflects another quarter of strong execution and healthy performance across the business.

We remain focused on delivering sustainable growth while investing strategically to serve our customers and drive value creation over the long term. We're also incredibly excited to deliver on the second half of the year for everyone. With that, we'll turn it over for questions.

Speaker 2

Thanks, Brittany. We'll move up into gallery view. All right, for today I think we'll try to keep it to one question and a brief follow-up if we can, just as we've got a full call and I want to make sure we can get to everyone. Up first we have Keith Housum at Northcoast.

Speaker 3

Great.

Speaker 2

Hey, thank you guys. Thanks, and congratulations on a great quarter. Perhaps you guys can spend a little bit of time on the enterprise addressable market and perhaps some of the success that you guys have had with some of the pilots so far. Is there a certain product or two within the portfolio that is gaining more traction than others as you guys are entering into the, I guess, expanded market than enterprise?

Speaker 0

Sure, I'll take that one. Enterprise certainly is going very well. We're excited about the breadth of product interest there between not only our body cams and Axon Evidence and Fusus and drones, counter-drone, and frankly across all these opportunities we're seeing more and more interest in the full suite of products there. Keith, I gotta be honest, I'm shocked that after predicting bookings were flat, you weren't wondering why you're off 50%.

Speaker 2

Next question.

Speaker 0

Yeah, that's a good idea. Let's go to the next question.

Speaker 2

That was my next question though. In terms of bookings, can you perhaps parse out, you know, where that success was?

Speaker 0

Yeah, you had said bookings would be flat at $1 billion. I was up by 50%. You had said new. You know, we didn't have any large deals in the quarter. We booked our largest deal in the company's history, including our largest deal in corrections. You had said the bookings growth rate was slowing down, and in fact it's picking up, and it's all a result of really, really good execution from our product team and our sales team.

Speaker 2

Great, thanks. Up next we have Andrew Sherman at TD Cowen.

Speaker 3

Oh great, thanks. Good to see everyone.

Speaker 2

Congrats, Josh. Impressive $150 million of bookings from AI.

Speaker 3

Era in Q2 alone.

Speaker 2

Can you just talk about the mix?

Speaker 3

Is the demand for draft one itself accelerating?

Speaker 2

Also the newer products that some.

Speaker 3

The data you have in the press release is interesting with the time.

Speaker 2

Savings that the other newer segments are driving. Just talk about the demand for the.

Speaker 3

Whole bundle, and if that's kind of accelerating here, which it sounds like it is, yeah.

Speaker 0

Andrew, thanks for the question. Good to see you again. Absolutely. It's accelerating. Yeah, we're excited about the result. We had talked about this a lot in the Q1 call that the first half, you know, we'd see some incremental growth and we certainly did. The pipeline in the back half of this year for the AI Era Plan is loaded and we certainly expect to continue to go fast in terms of the AI Era Plan. It's something that's very well received from our customers. I think it's a good indication of not only the time savings that customers are seeing with these products, but it's also the fact that there's more and more products that are making a difference day to day in this plan that customers are getting along the way. They're super pleased with Draft one. We continue to see more and more momentum there.

Now with the AI assistant and the Real-Time translator as part of that, and products like Form one and Brief one getting going, there is a lot of customer excitement around this plan and a huge shout out to Rick a year ago, a year plus ago now for calling out the need to invest heavily in the AI world in product line. Of course, Jeff and his team for implementing these products in a way that makes a real, real difference for our customers. It's just very, very cool to see right now.

Speaker 3

Great to hear. I'll pass it on. Rick, I love your new podcast. Thanks. Remember to Ball doing it.

Speaker 2

Thanks, Andrew. Up next, we have Will Power at Baird.

Speaker 3

Okay, great, thanks. Yeah, congratulations on the results. I wanted to start on platform solutions. You obviously have really nice acceleration. I recognize smaller numbers, but I think strategically very important longer term. I'd love if you could help us just understand kind of what really underpinned the counter-drone success. Maybe any kind of breakdown or color you can share across law enforcement versus enterprise. If I take that a step further, if I stick with drones, it'd be great to get any perspective as to what you're seeing in terms of pipeline build bookings within DFR and whether the executive orders have started to spur any further activity there. Let me maybe jump on initially, Josh, and talk about counter-drone. I'm sure you all saw Operation Spiderweb. We've seen drones becoming more and more prominent in the war in Ukraine and in the Middle East.

Just the ability for Ukraine to take out a sizable percentage of Russia's strategic bomber fleet with thousand dollar FPV drones and then similar things to be done by Israel deep in the heart of Iran, I think has got everybody's attention. Whether you run a stadium or a nuclear reactor or a power station, or are responsible for protecting an executive's home, the world is suddenly keenly aware that these small drones are the biggest threat vector at scale, because anyone can do it. None of the traditional defense mechanisms, none of our air defense systems are designed, excuse me, around that threat. Our acquisition of Dedrone and AD and his team have been just phenomenal to have identified this early. I think we're in a really strong position.

I'd say we are certainly a market leader and we're seeing just a ton of demand across the spectrum for people realizing they need solutions here. I was spending a lot of my time going deep on how do we maintain that leadership and grow it and deal with these new threats, like these fiber optic drones that we're now seeing deployed widely in Russia and Ukraine, where those are unjammable because they're flying with a physical connection. We're digging deep on how do we extend our solution set to cover this. This thing is iterating at incredible speed. Josh, I don't know if you want to add anything on any other.

Speaker 0

Maybe just the fact that one of the reasons we had mentioned this when the acquisition closed is we really believe we can lead with the drone in some international markets. I think, in certain places, that's not only very relevant to today, but a nice difference where some of the new products that we're acquiring, we can get in the door, so to speak, with those and with a lot of interest from a customer. When a customer is ready to move to body cameras or less lethal or video aggregation or AI, we're better positioned to participate in some of those opportunities.

Speaker 1

I'll just jump in. Just so you know, on that segment, you can hear the enthusiasm around counter-drone. That also has Fleet in it, it has VR in it, and I think part of what you're seeing is every category in that segment is growing really nicely. We're obviously thrilled to add in the counter-drone, but I would also just say, because of the size of that, you should expect some lumpiness in that segment going forward, as counter-drone can win a big deal at one time. I would just say we're happy with all the products in that segment. Keep in mind they're all doing well.

Speaker 3

Okay. Is there anything you can add just with respect to the DFR side of the equation in terms of how that pipeline's building and kind of level of activity? That seems like another really nice longer term opportunity as well.

Speaker 0

Sure thing, Will. I would definitely say we're excited about DFR, and one of the things kind of taking shape in DFR, or drones as a first responder, is that while we don't manufacture the hardware for outdoor DFR, there are opportunities popping up around the hardware that create a lot of value for the customer. Things like live streaming, having the evidence in Axon Evidence, and so forth. Then even figuring out how we get drones in the sky faster through software, even before 911 calls in. I think there's a lot of exciting work around DFR, and frankly, the biggest relevance at Axon Enterprise on our product portfolio right now is Dedrone, which makes sure the skies are safe for drones to fly. A lot of people associate Dedrone with counter-drone and tracking nefarious drones and taking them out of the sky.

Another big benefit there is a police department using Dedrone can see the entire map throughout their city of where their own drones are. We think we'll be relevant in the DFR space for a long time. Skydio and us, we have a great partnership. We would say it's going very, very well, and we're excited about what the future holds there.

Speaker 3

Great, thank you all.

Speaker 0

Thanks, Will.

Speaker 2

Thanks, Will. Up next we have Mike Ng at Goldman Sachs.

Speaker 0

Great.

Speaker 3

Good afternoon.

Speaker 2

Thanks for the question.

Speaker 0

I just have one on the high 30% bookings growth guidance. I think it implies about.

Speaker 2

$7 billion, which would be about $2 billion of bookings growth year over year.

Speaker 0

Could you just talk a little bit?

Speaker 2

About what's driving that doubling of annual bookings growth.

Speaker 3

That you have had historically.

Speaker 0

I think relatively consistently. Is it just the AI Era Plan?

Speaker 2

Are the length of the deals changing at all?

Speaker 0

Anything you could just talk a little.

Speaker 3

In terms of kind of pipeline giving you that confidence or deals closed.

Speaker 0

To date would be helpful.

Speaker 2

Thank you.

Speaker 0

Sure thing, Mike. Good to hear from you again. On your question, I'd say we've said for a long time and Jeff brought this framework to Axon when he first joined, which was, hey, we want to be really, really good at selling new products to existing customers. That's our U.S. customer base. There we're talking about, you know, drones, AI, virtual reality, Fusus, Dedrone, all of our, you know, software add-ons that we continue to build, and as well as iterating on the TASER and body camera. Then you combine that with selling existing products to new markets and there we're talking about international enterprise and where we can take the things that are very successful and stay local. All of a sudden customers in those other segments are starting to see really, really good product market fit there.

It's not one thing and that's one of the things we're most excited about because we feel like we're very diversified, we have a lot of ways to win the game, so to speak. We're going to keep investing in all of them because we see a ton of opportunity ahead.

Speaker 2

Great.

Speaker 3

Can I just maybe get a quick follow-up on international? I mean, I think, you know, accelerating growth.

Speaker 2

I think that the best year over.

Speaker 3

Year and quarter-on-quarter growth there.

Speaker 2

You know, maybe some of the key.

Speaker 0

Markets where you're getting the most traction.

Speaker 2

I heard the mention about.

Speaker 3

You know, TASER in Africa would.

Speaker 0

Love some detail there.

Speaker 2

Thank you.

Speaker 0

Yeah, I appreciate the question. We tend to be a little less specific about where we're, where we're going internationally only because, you know, as a competitive group we don't want to tip anything off here, but we do see opportunity across LATAM, certainly the UK and Europe, and then certain segments within Asia as well. Very much feeling like, hey, over the next few years international should continue to be really, really exciting. I mentioned Cameron, our CRO, had come in and he just as of Q2 celebrated his one year anniversary, and we're certainly seeing the investments of having a CRO in Europe with the team over there starting to pay off as well. Much more to come on that. Great.

Speaker 3

Thank you, Josh.

Speaker 1

One of the things about some of our international deals is they tend to be pretty big deals. You can see a little bit in quarters where you have a big international deal come in. I think in Q2 you saw us do a couple of really big international deals. Incredibly exciting. I think huge amount of momentum there. I don't know because there's also so much momentum in state and local and other parts of our business. I don't know that you'll see it maintain at that sort of 20% level that we hit this quarter, but tons of momentum behind some of those international bookings and the rest of the business.

Speaker 2

Great, thank you, Brittany. Thanks, Mike. Up next, we have Mina Marshall at Morgan Stanley. Great, thanks, and congrats on the quarter. You know, just as the AI bookings have picked up, just what kind of lessons have you guys learned about kind of getting through some of the hurdles from state and local? Is it, you know, having reference customers, you know, just getting what kind of oil has been put in the gears to kind of move those along? Maybe just as a second follow-up question, obviously a lot of immigration dollars, enforcement dollars, and, you know, just where you guys kind of see opportunity there. Thanks.

Speaker 3

Sure.

Speaker 0

On the AI bookings question, I think really it's the same thing that we kind of, you know, really believe in across, which is when you put products in the hands of users and let the users give you feedback and experience them and see the value themselves, there is no amount of sales or marketing or packaging or anything else that compares to that.

When customers start to use a product like draft one for 60 days and they say, man, I'm spending a full day more every week on the road fighting crime as opposed to sitting behind a computer, those are the kinds of stories that just build, or with our AI assist in the real-time translator, you have customers at the border or in Canada and Quebec or whatever the case may be saying like, man, this is really relevant and practical for what I need to do my job. That's kind of our bar for these AI products. This isn't like hand wavy stuff. This is the stuff that keeps police safe, communities safe, and allows police to be in the communities fighting crime as opposed to behind a computer. The best part is we're still on like our own five yard line of the football field.

We got a long way to go and a lot of great ideas about how to deliver more and more cutting edge AI products to public safety. Your second question, do you mind reminding me what that was?

Speaker 2

Oh, immigration enforcement dollars. Yeah, that opportunity.

Speaker 0

Sure thing. The government, you know, the federal government, we believe between Q1 of their calendar year, which is, or their fiscal year, which is Q4 of our calendar year, we'll start to see more and more solicitations, whether they're RFIs or RFPs for products that they're looking into with this money coming out of this bill. For us that's really around counter-drone, certainly the video products like Fusus's drone technology and beyond, maybe some TASER as well. Right now as a team, even earlier today, starting to sit down and say, you know, map out the customers and figure out what we expect the opportunity to be in each of those customers and see how we can help.

Frankly, with some of these federal agencies being among our largest customers in the U.S., we believe we're well positioned to be able to demonstrate how much we can help right now.

Speaker 2

Great, thanks. Thanks, Mita. Up next, we have Joseph Cardoso at JPMorgan. Hey guys, congrats on the results and thanks for the question. Maybe a follow up to the last question, but in a different context. You know, you guys talked about the big beautiful bill and the opportunity there. I think fairly well in terms of the different avenues you guys can participate in it. Maybe can you just touch on the programs that are ongoing in Europe and in a similar manner in terms of their opportunities there. You know, where is Axon well positioned? Is there anything different in terms of the different programs in the U.S. and then as we think about both the U.S. programs and the European programs, can you just help us think about the timing of these opportunities and then maybe just hitting it on the nose.

Speaker 0

Is any of this baked into the?

Speaker 2

Back half outlook in terms of bookings is like, are you guys already seeing any of this? Goodness. Thanks for the question.

Speaker 0

Rick, why don't you start since you've been over in Europe for the better part of the summer, meeting with customers here?

Speaker 3

Yeah. I would tell you the visibility is certainly rising. I had my first ever meeting with a Prime Minister, a NATO nation last week. I met with several Ministers of the Interior level folks. There is a ton of, you know, just a ton of need. I mean the social displacement that has been happening in Europe, the amount of, they're dealing with their own immigration problems as well that, you know, with the best of intentions, Europe sort of took in a lot of folks and is now realizing that they're, they weren't set up to integrate all those people and they're, they're seeing surging social problems. I was getting questions related to border security where they're seeing frankly hybrid warfare from the Russians, like pushing sort of and encouraging mass migration across the borders as a destabilizing function.

One example, I had border guards asking if we could tune the TASER 10. Right now the TASER 10 can handle up to three people that you would hit with it. We generally discourage thinking about using a TASER 10 on multiple people because in the U.S. we're very focused on civil rights. If you hit the first person, the second person, and then the first person complies but the second doesn't, you might have a problem legally if you activate and hit both of them. When I bring that up as a concern to these European border agencies, they're like, that is not our concern. We're getting overwhelmed and we're literally going to be shooting and killing people en masse here at the rate things are going. There is an opportunity for TASER to become really a primary defensive weapon.

I think the need for that is rising in Europe. On the other side of things, our real-time translation, we actually had to shift our priorities so that we could get it translating into a non-English language as its primary language in order to meet an Eastern European country's immediate need. That went extremely well. I think the real-time translator as well is being seen as just like a have to have capability and that is opening up. I'm personally involved in two countries that in full disclosure, I probably couldn't have picked out exactly. I could point at generally where they were on the map. I couldn't have told you which ones they were. That are now talking to us about very large deals, like larger than deals we'd ever signed as of a few years ago and up with some of the larger ones we're signing now.

I don't want to get too far ahead of my skis that you know that this is all going to happen quickly. The overall level of interest across the board is really very high.

Speaker 0

Joe, your question also included kind of bookings. Is some of that baked in? You know, already you're in the back half. We do expect Q3 and Q4 to be very exciting quarters for our international business. Now, look, we got to go improve it, but certainly pipeline wise, we're pleased with what we're seeing there.

Speaker 2

No, I appreciate the color, guys. I'll drop out. Thanks. Thanks, Joe. Up next we have Jonathan Ho, William Blair. Apologize for any on the way.

Speaker 3

Is there a way for you to?

Speaker 2

Maybe understand how your second half bookings are potentially shaping up just given your commentary that it could be as large as last year. What underpins that confidence here is your visibility, perhaps even better than what we saw last year.

Speaker 0

Yeah, Jonathan, I mean, I think our sales leaders would tell you this isn't a hobby at this point. This is what they're good at and this is what our pipeline indicates, and we've given a lot of bookings commentary over the last three or four years. I think as you've seen, we've been able to deliver on what we've said and we feel no differently right now. We have a ton of confidence and fidelity in our pipeline and we're even, frankly, halfway through Q3. We're already, you know, we had a very productive July. The things are that we've got very, very, very strong sales professionals that believe in our mission and that believe in our customers. It just shows quarter after quarter and really, really proud of the team and have a feeling I'll continue to be saying that or I'll continue to say that for time.

We're very confident we're going to have a big second half, bookings, flies.

Speaker 2

A quick follow-up. Within your premium software offering, is there a way to maybe unpack for us?

Speaker 3

What is the most common upgrade path?

Speaker 2

What is maybe contributing the most to growth, and how much runway do you see to sustain that growth from here? Thank you.

Speaker 0

Sure. Across the ecosystem in terms of upgrades, Jonathan.

Speaker 2

Yes, just in terms of the.

Speaker 0

Yeah, the.

Speaker 2

Yeah, across the ecosystem, what's driving the premium software offering to see the type of growth that is.

Speaker 3

Sure.

Speaker 0

I think generally speaking, customers tend to buy their most price focused in their first contract, whenever that may be. You definitely don't see OSP as commonly as you do with existing customers or Officer Safety Plan. You tend to see a customer buying maybe some TASERs and some body cameras and kind of the core feature set of Axon Evidence, but then a lot of our products have been built as a result of customers expressing where they want to go next in their program. Inevitably, customers that are newer are going to hit those same points along the way and say, hey, it would be nice if I could add this, this, and then that becomes an Officer Safety Plan conversation.

With AI now on top of the Officer Safety Program or Officer Safety Plan, that's just for those customers that have been on OSP for a while, they start to see the value of these AI features on top of what they're already doing. I think it's a really nice path that our customers take to adopting more and more. Frankly, we're very disciplined about measuring how customers use new products and making sure that they're very pleased with what they're seeing in new products. Years later, that kind of manifests itself in terms of adoption. That's a little bit about how we get from A to B there.

Speaker 1

I think the only thing I would add to that, Jonathan, is remember that because of the pace of our product innovation, many of the products that are available now might not have been available when the customer was originally signing up. As they come back and we naturally have more software features, functionality, capability, it's just a different conversation that we can have with them in terms of what's even in some of these more premium bundles. I think that's a lot of what continues to drive that. AI only helps that conversation.

Speaker 2

Thank you. Thanks, Jonathan. Up next, we have George Nodder at Wolfe Research. Welcome back, George.

Speaker 0

Hey, I think Erik's got a pre-established list here in terms of how we go through the questions. Sorry, we're not intentionally ignoring your hand up. We're just going through the list ahead of time.

Speaker 2

Thanks a lot. All right, I appreciate that. I guess kind of tacking onto the last question, you guys threw out a $600 price point, I think for some deals this quarter in terms of per officer metric. I'm just curious, and what you said, Josh, a few moments ago, I think makes sense just in terms of customers kind of layering in more pieces of the Axon solution into the bundle. Are there comparisons you can give us for a year ago, two years ago, three years ago to help us understand sort of the path to $600 per officer? What metrics can you share?

Speaker 0

Yeah, certainly, directionally for sure. Two or three years ago, maybe call it three years ago, the top offering in OSP, our Officer Safety Plan, might have been in the mid-$200s. Then we started adding drones and Dedrone and Fusus as additional value. We never just simply inflate the price of Officer Safety Plan. If the price changes, it means there's more adds to the bundle, and that's kind of what's happened from year to year. Now we're in the mid-$300s just on Officer Safety Plan alone. You combine the AI Era Plan, which list price $199 a month, and then you add in car video, for example, you add Dedrone across your enterprise, you add Fusus, all things that you build out more and more. That's where we're seeing some of these numbers right around the $600s in terms of monthly value per user.

Certainly, look, it's great to see some customers doing that, but our job is to communicate the value to every customer so that they appreciate still the incredible ROI they get even at those numbers. That's really what we're focused on right now.

Speaker 2

Was that a typical number for deals that you closed this quarter, or is that sort of the high end?

Speaker 0

No, that's the high end. That's definitely, you know, that drove our largest deal in U.S. history and company history now. You know, we do think that's a promising side of things to come, but certainly wouldn't set the expectation that, you know, even the majority of the customers are there for sure.

Speaker 2

At one point, you guys gave us a mix of business coming from Officer Safety Plan. Is there an updated number there? I seem to remember a 20% number. Is that still the right ballpark or is that higher now?

Speaker 1

No, we don't have an updated number on that. What we said a quarter or two ago was that about 70% of our customers, I think we said it last quarter, about 70% of our customers were still on one of our basic plans. There is lots and lots of room to upgrade. To Josh's point, we don't give an actual ARPU number. It could be as high as $600, but we still have so many customers that are not coming in and buying our whole suite of products. When we talk every quarter about our amazing software growth, some of it is the natural rotation that you see as our customers come back in and as they do upgrade and as they move up their price point.

Speaker 2

Super. Thank you. Thanks, George. Up next, we have Melissa at Park Place. Hey guys, just a quick follow up.

Speaker 1

On that, you know, the 70% still on basic plans. With that upsell motion going, are you?

Speaker 2

Kind of seeing that number decelerate.

Speaker 1

Terms of basic plans pretty quickly, or is this kind of a slow expansion? I just had a quick follow-up on the U.S. International. Given the outperformance this quarter, should we kind of continue seeing, even with the.

Speaker 2

Strength of U.S. International now becoming a.

Speaker 1

Larger piece in the mix? Thanks.

Speaker 0

Sure thing. Thanks for the question, Alyssa. Maybe the second one first. I do think international is going to keep growing in a very exciting fashion. The hard part about talking about the mix is the U.S. is growing very fast as well. It's hard to really take over a bigger and bigger part of the mix. That would mean the U.S. is slowing down, and it's the opposite right now. We think both that the total bookings rate will grow excitingly, but also that the international one will as a standalone. I just can't guarantee the mix is going to change all that much so long as the U.S. keeps going on the path that it is right now, if that makes sense. I did forget your first question in answering the second one first.

Speaker 1

You mind, Josh, Alyssa, I think you can go back. We've sort of given that metric at points in time. I think we gave it when it was like 80% and then 75% and then 70%. We are working our customers up. It's not like it turns all on in one quarter. Right. We are over time moving the customers up to those, you know, more premium plans. The other point I would make is that what's in the premium plan, to Josh's comment, like we keep adding new things in it and how premium the plan is or how much they could pay as we get new products. Over time that also keeps moving up. We have those two drivers, right. We have the driver of moving customers further up the plan and then actually just having more product offerings that they.

Speaker 3

Could come by and then the AI.

Speaker 2

Era Plan being yet another new plan on top of that plan that they can do.

Speaker 3

Thank you.

Speaker 2

Thanks, Alyssa. Up next, we have Jeremy Hamblin at Craig-Hallum. Thanks, and congrats on the momentum in the business. I wanted to come back and see if I could clarify something here in the platform solutions. Performance, exceptional growth. A lot of talk about Dedrone, and I just wanted to see if I could kind of pointedly ask it. Is Dedrone the biggest driver of that growth in terms of kind of percentage or contribution to that year over year growth rate?

Speaker 0

No, it's actually toward right now one of the smaller ones and frankly growing every quarter. Certainly not the biggest driver of new product, but bookings growth.

Speaker 1

If you're looking just inside of our platform sensors business, it was a big driver of the growth this quarter inside of platform sensors. If you look at the overall business, it's just not a material driver of our overall growth. Again, it'll be a little lumpy inside of that platform segment. I hope all of that.

Speaker 0

Therein lies the opportunity. Ultimately, we think there's a very relevant product. We got a lot of white space in front of us, and we're gearing up to execute well there.

Speaker 3

Yeah, a lot of times you hear me waxing, and during the call, it's rarely about the stuff that's selling well this quarter. It's stuff that I'm looking a year out.

Speaker 2

No, I understood. I was clarifying just within that small segment of the business. I just wanted to understand.

Speaker 3

Okay.

Speaker 2

There are a lot of moving parts in the business. There's a lot of different verticals that you're attacking. I wanted to get a sense for, from an investment in the team perspective, as you're looking at product, as you're looking at maybe your sales and marketing teams, where do you need. My sense is there's just a shift in what you're looking at from where you were a year ago. Not that there's a lot of the regular business. Taser grew 19% in the quarter, so there's a lot of the core business that's still doing incredibly well. Jeff or Rick, Josh, where do you think you need to invest the most from an infrastructure perspective to really get the business where it needs to be over the next two, three, five years?

Speaker 0

Maybe I'll start there and I'll kick it over to Rick and Jeff. Jeremy, I think it's the same formula every year that the numbers might change, but it's really, we start with, we are going to relentlessly invest in R&D every year. That's core to who we are as a company. You know, this is an innovative company with an innovative founder. We are going to continue to invest in every opportunity we can to pursue our mission, especially when we're seeing such incredible buying signals from our customers. We do that at times at the expense of getting, you know, we try to fund that by getting leverage out of SG&A, so really G&A salespeople.

We look at where the opportunities are, and those are generally the easiest ones to say yes to because when you're hiring a salesperson for X dollars and their quota might be $5 million to $10 million a year, you get a very clear return on that. We are very disciplined in the rest of the G&A segment around, hey, how do we use AI internally, just like our customers are using AI externally? How do we use AI to make sure that we don't need our team to balloon as our business grows? A lot of discipline in G&A, of course, a lot of investment in sales, and then relentless investment where we see opportunity and product.

Speaker 3

Got it.

Speaker 2

If I could sneak. Go ahead. I think we're going to. We might move, Jeremy, because you had two and I just. We have 10 minutes left to get to five more, so we might try to do one question each. All good. Thanks. Yeah. Thank you. Josh Reilly at Needham, you're up next.

Speaker 3

Yeah.

Speaker 0

Any update on the light post?

Speaker 2

Outpost camera opportunities in terms of the.

Speaker 0

Manufacturing ramp and the pipeline build?

Speaker 2

I just had a quick follow up on drones after that.

Speaker 3

Sure.

Speaker 0

Very exciting to be live with a few customers already in trials. That's for a product that we announced in May and have really invested in a lot in the first half of the year. To see poles on the ground and cameras working at certain large customers right now, that's obviously a great first signal. I also don't want to get out over our skis there. There are certainly things that we're learning and things that we need to do better as part of that, but that's just the cycle all of our hardware goes through, and we really believe we're on the right track. We think we're going to be very, very competitive in this market, and we're excited about the opportunity.

Speaker 3

Got it.

Speaker 0

Just a quick question on.

Speaker 2

The monetization of drones, when you're looking at the revenue that you're actually getting from drones, is it.

Speaker 0

Really just software revenue on the DFR.

Speaker 2

Programs, or is part of the hardware from the DFR programs recognizing your income.

Speaker 0

Statement, then passed along to Skydio? You could just help us understand how that dynamic is going to work. Brittany, why don't you take that one, if that's all right?

Speaker 1

Sure. When we're talking about drones and things like platform sensors and all of that, what you're really hearing us talk about is the hardware piece of Dedrone, and then the software piece of Dedrone would be showing up in our software business. That's by far the bulk of it. We do partner with Skydio, and our partnership with Skydio is basically a referral fee that comes through. I would not think about them today as being a big part of that business, other than what else we can enable when we do partner with Skydio from a software standpoint, from an experience standpoint for our customers. Don't think about that as a big chunk of our revenue. Think about it as Dedrone, everything Dedrone can enable through DFR. That's what you're seeing in the numbers.

Speaker 2

Very helpful, thank you. Thanks, Josh. Up next, we have Jordan at Bank of America. Hey, thank you for taking the question. Could you guys just give an update on Fusus FedRAMP status, and then for Dedrone, what is your strategy to start playing a more meaningful role.

Speaker 0

In DoD counter-drone programs, that are.

Speaker 2

Getting funded like Replicator 2?

Speaker 0

Yeah. Jordan, on the strategy one, we don't necessarily want to tip off our hand on how we're thinking about the opportunity, but we'll be in the game when the lights come on and we're ready to prove what we can do for sure. Jeff, why don't you take that first question, if that's okay?

Speaker 2

Yeah, sure. Just like with everything we do, you know, we get, we submit things in as we have new, new things in our envelope and we sort of go through the official certification testing. Ultimately, the second part is the FedRAMP body itself going through their final little checkboxes. Exactly on plan. We submitted and completed all the work to make Fusus FedRAMP compliant. Submitted it as part of our last package. You can think of it as we are FedRAMP compliant at the moment. The only thing waiting is the natural course of the committee sort of officially giving that last check mark. We're operating in the market with customers knowing that we've met all those requirements. Thank you. Thanks, Jordan. Up next, we have Trevor Walsh at Citizens. Great. Hey team, thanks for taking the questions.

Speaker 0

You had an interesting stat in the shareholder around the survey that you ran towards the beginning of last year. About 14% of departments are essentially not at full staffing levels. Headcount and hiring of officers is, you know, been a struggle for a while now, and it's pretty clear that AI is going to help in that a little bit to make officers just more productive. Do you guys see any trends around just more broadly than that of departments knowing that they might not be able to get the headcount that they want, just shifting that spend to other kind of areas within the department's needs, whether that's technology, and is that generally helping you guys, or do you see that as a possibility kind of down the road, if not right now?

A quick follow up for Brittany, can you just elaborate on the tariff piece for the kind of second half of the year and if that's related to kind of the newer things that we're hearing around tariffs, or is that just more baked in from the April kind of announcements that we've heard?

Speaker 3

Thanks. Let me take the first part. We are absolutely having those conversations. You know, draft one is the baseline of, hey, if I can spend less time doing administrative work and more time doing police work. We're hearing across the board, you know, things that we can do with technology, even, you know, DFR is one of those. Right. Hey, if there's calls that we can clear without having to send officers, that means we can focus our manpower on the calls that make more sense. The same thing is true of inbound call handling, like your customers are interested on, hey, are there things we could use with technology to be able to, you know, handle non-critical calls? Maybe we don't send an officer at all. Maybe we port them to an AI agent.

Translation, you know, historically there's like multi-minute waits to be able to get a translator when you're in either the middle of a critical incident or an inbound call. You know, those are the sorts of things that across our stack or through our partners, we can begin to turn those things into real time. Right now it doesn't need a person at all. It's technology aiding the person, or in some cases we can hand the whole thing over to tech. We think it's a combination of AI and robotics over the coming years that is going to enable us to take on a greater and greater portion of that workload, allowing the human beings to focus on the sort of top end of those incidents that really require a human engagement.

I'd say there's probably at least 50% of the workload of a police department that's automatable, and we are seeing that they're open to thinking their budgets that way. I can think of a few conversations we've had where agencies have said, hey, I'm understaffed by this many folks. I'm just going to take part of that budget and push it over here and maybe not hire a couple of those.

Speaker 1

Yeah, on tariffs we factor in everything we know as of 24 hours before this call. We're as up to speed as we can be on how we think about guidance for the second half of the year, and we just bake it into the guidance we give you for the second half. I would say it continues to move around, obviously, but I think more is certainly known now even than it was a quarter ago. I think that allows us to do things like come up with good plans to mitigate as much as we can and manage through as much as we can, which we're obviously trying to do. Our current view is just baked into the guidance. Thank you.

Speaker 2

Thanks, Trevor. Up next, we have Mike Latimore at Northland. Great, thanks. Yeah, excellent results in terms of the Enterprise segment. I guess prior to this quarter, the biggest deal was in enterprise. How's that deployment going? How's the pipeline for enterprise? You know, which products seem to be of most interest? On TASER 10, maybe just elaborate a little bit on manufacturing capacity there. Are you ramping that through year end?

Speaker 1

Yeah. I'll maybe go in reverse order, and then Josh can jump in on Enterprise too. We are continuing to ramp TASER 10 capacity. I would say we are sort of continuing to ramp TASER 10 capacity as much as we can because we continue to see just there's great demand for that. We are ramping it this year. You saw us take our CapEx guidance up a bit. That's us continuing to ramp it into next year so that we continue to meet that demand from an Enterprise standpoint. I know Josh will jump in, but we continue to be really excited about the pipeline that we're seeing. I think a lot of our products are really relevant to the Enterprise segment, but I will say Fusus has been particularly exciting as we've brought them in.

That's just really resonating with our Enterprise customers and opening a lot of doors and a lot of really great conversations. Again, I think, you know, obviously our cameras, you know, as we talk about retail and frontline workers, you could see counter-drone, you could see a whole lot of our portfolio being relevant. It's a huge market, and we will continue to update over time, but there's a lot as we start to bite that off.

Speaker 0

Yeah, the only other thing I'd add is, you know, the Enterprise deployments are hard by nature. We're talking about, you know, aggregating hundreds of thousands of video screens to one pane of glass. That's hard work. I'd say we're learning the deployment is going well. What we learn here will absolutely make us better in the next three, four, five of these that we do. It's the team's doing great work and some new variables when you have enterprise customers relative to government, and we're working through those and feeling good about where we're going to land.

Speaker 3

Awesome, thanks.

Speaker 2

Thanks, Mike. Up next, we have a new face to our call, Andrew Spinola at UBS. Welcome. Thank you, Eric. Hey, just following up or continuing on.

Speaker 0

the enterprise space, would you be willing to elaborate on the gaming contract that you guys announced?

Speaker 2

What are you doing there?

Speaker 0

Is it Fusus centric or is there a few of your other product lines in the mix? Let's leave it at video for now. There probably are opportunities in gaming for less lethal as well in terms of security, but video between body cameras and Fusus and certainly a lot of applicability given the amount of money on the line at each one of those sites. Andrew, thanks for the patience.

Speaker 3

Appreciate it, appreciate it.

Speaker 2

Thanks for having me. All right, we'll kick it to Rick to close this out.

Speaker 3

Oh man, we're done already. I was ready for a couple more. I just gotta say I'm so proud of the team and we're just heading on all cylinders. It's also really great, you know, you'll see I'm answering less and less of the questions during the call about the operations of the business, and candidly that's because I've got just such a great team. I've been traveling like a banshee out with customers, having a ball, have identified a couple more fantastic things that are going to be expanding our product portfolio probably a couple years out. It's really great to have a team that you know you can just rely on. We're all running our lanes and the business just runs like a machine, like a very, like a Ferrari. Maybe not its most reliable machine, but a very reliable Ferrari.

I mean this thing's just running and of course, having you guys as sort of helping the investment community understand our business, this is a complex business to understand. We're everything from a media creation house in virtual reality for creating content and managing training content. We do pure software plays like our records business. We do electrical weapons and drones and now counter-drone systems. It's a lot of fun for us to run the business and we know we keep you pretty busy trying to understand how it all fits together. I can tell you one thing, it just keeps me excited. Now from a business perspective, we have so many horses that can run here that we're not dependent on any one part of the business. We just got this truly diversified portfolio, but it all works together so seamlessly.

Now we're expanding to anybody who needs to interact with law enforcement. If you're a business, your security team is interacting with law enforcement. Frankly, if you're military, you need to interact with your law enforcement as well. Now, these sorts of hybrid threats that we're now seeing in society and we're able to start from this kernel of a business we've built around public safety and begin to move out into these next layers. It's just a really exciting strategic time to be at the helm. With that, I want to thank you. Josh, you were leaning forward. Did you have anything to add there before we wrap today?

Speaker 0

Nope, you said it well, Rick. Thank you.

Speaker 3

All right. Thanks, everybody. We'll see you for, I'm not going to jinx it by predicting, we hope to be back with another good quarter. We'll see you guys in a few months.

Speaker 2

Thanks.