TASER 10 Margins Outlook
Q: How will TASER 10 margins trend in 2024?
A: TASER gross margins are expected to improve in 2024 as the one-time impact from a manufacturing issue affecting Q4 margins by 420 basis points comes out. They are investing in automation and cost-down initiatives that will benefit margins, with improvements starting to roll in throughout the year and becoming more cumulative in the back half as these initiatives are executed. - -

Future Revenue Visibility
Q: Has the duration of contracts extended, impacting revenue recognition?
A: While they've seen a trend toward more 10-year contracts, the 15%-25% of future contracted revenue expected to convert in the next 12 months hasn't changed significantly. Longer contracts are a factor, but they haven't massively altered how future contracted revenue converts for the next year, providing strong visibility into 2024 revenue guidance. -

Software Growth Drivers
Q: How will software components contribute to growth in 2024?
A: Productivity software stands out as a huge opportunity, having found product-market fit with customers very satisfied. They're aiming to deploy faster across more customers. Digital Evidence Management is on track, and the Respond product (live streaming) will also contribute to growth. -

TASER 10 Demand and VR Training
Q: Is TASER 10 demand from upgrades or new markets?
A: Both. Existing customers are upgrading, some expressing interest in early upgrades, and TASER 10 is expected to open new markets internationally, including private security and federal use cases. VR training is progressing and is seen as integral to TASER 10 adoption, enhancing safety outcomes, and is being rolled out internationally and to federal markets. - -

Acquisitions of Fusus and Sky-Hero
Q: What synergies do you see with Fusus and Sky-Hero acquisitions?
A: The acquisitions are focused on long-term market opportunities rather than immediate synergies. Fusus enhances situational awareness by integrating with various sensors and CCTV cameras, serving as the "Switzerland of cameras." Sky-Hero provides tactical drones used by special forces and SWAT teams, with long-term potential in using drones and robotics to improve safety and reduce reliance on sending personnel into dangerous situations. -

International Growth Trends
Q: How did international bookings and revenue trend?
A: International had a record quarter in bookings, with teams driving significant momentum. Revenue recognition may fluctuate due to factors like country-by-country approvals and longer implementation lead times for national deployments, leading to quarterly lumpiness. However, strong bookings are expected to drive future revenue growth. -

Corrections Market Strategy
Q: What's your strategy for growth in the corrections market?
A: They are building on foundational products like TASERs and body cameras and investing in solutions like Fusus, drones, and VR training tailored for corrections. There's significant opportunity in domestic, federal, and international corrections markets, with positive feedback from early engagements on new products. -

Drone Business and Sky-Hero Integration
Q: What are hurdles to greater drone adoption and Sky-Hero integration?
A: Regulatory challenges, such as FAA permissions for beyond visual line-of-sight flights, are hurdles for drone adoption. For Sky-Hero, they've temporarily paused sales to secure FCC approval for certain RF transmission bands. Despite short-term challenges, they anticipate long-term opportunities in both outdoor and indoor drones, with innovations expected over the next few years. -

Future Contracted Revenue Conversion Rate
Q: What variables move future revenue conversion between 15%-25%?
A: The conversion rate depends on the average contract length and the number of TASER Assurance Plan (TAP) upgrades scheduled in the year. An increased number of upgrades can boost current-year revenue recognition, affecting where the conversion rate falls within the 15%-25% range. -

TASER Automation Impact on Margins
Q: What is the impact of TASER automation on margins?
A: Automation and cost-improvement initiatives are expected to enhance TASER 10 margins, aiming for stable gross margins over time rather than previous fluctuations. While these efforts contribute to confidence in moderate gross margin improvement for 2024, specific long-term margin targets for TASER are not provided. - -

European Market Penetration
Q: How is European adoption compared to Commonwealth countries?
A: For TASER products, Continental Europe is beginning to outpace Commonwealth countries, evidenced by large orders last quarter. While cloud adoption has been slower in Europe, they are focusing on key markets where they're starting to gain traction with trials and pilots, which could accelerate adoption in other regions over the next few years. -

Fusus Product Readiness
Q: Will Fusus need investment to drive adoption?
A: Fusus is ready to deploy immediately, offering a turnkey solution for state and local agencies in the U.S. and starting internationally. It provides significant advancements in situational awareness by integrating with various cameras and sensors, and it's experiencing rapid growth without requiring additional investment for adoption. -

Cloud Product Growth
Q: Will cloud products' growth contributions differ in 2024?
A: Productivity software is expected to see significant growth due to strong product-market fit and high customer satisfaction. They plan to accelerate deployment across more customers. Digital Evidence Management continues to expand into new markets, and real-time operations products like Respond (live streaming) will also drive growth. -

TASER 10 Improvement Timing
Q: Will TASER 10 margin improvements be linear or back-end loaded?
A: Margin improvements will begin rolling in throughout the year as automation and cost-down initiatives are implemented. While not entirely back-end weighted, the cumulative impact will be more pronounced in the second half of the year as all initiatives are fully executed. -