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Axon Enterprise (AXON)

Participants
Andrea James VP, IR
Luke Larson President
Rick Smith CEO and Founder
Jawad Ahsan CFO
Arvind Bobra Director, Finance
Mark Strouse JP Morgan
Steve Dyer Craig-Hallum
Jeremy Hamblin Dougherty & Company
George Godfrey CL King
Glen Madsen Ladenburg Diamond
Allen Klee Sidoti
Good day ladies and gentlemen - and welcome to the Third Quarter Axon Enterprise Earnings Conference Call. [Operator Instructions] As a reminder - this conference call may be recorded.
I would now like to turn the call over Luke Larson President at Axon Enterprise.
Call transcript
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Luke Larson

Thank you, and good afternoon to everyone. Welcome to Axon’s Third Quarter 2017 Earnings Conference Call.

Joining on today’s call from management are Rick Smith, CEO and Founder; and Jawad Ahsan, our CFO.

Before we get started, I’m going to turn the call over to Andrea James, our VP of Investor Relations, to read the safe harbor statement.

Andrea James

Thanks, Luke.

on website available Relations our are site. earnings the and SEC Investor Our being Internet Enterprise on on call broadcast This is the Relations of the section and the Axon website. Investor available is earnings shareholder key our is Please note metrics, that letter well materials, operating website. as our on as available including supplemental the call Today, the remarks. with we will prepared open And follow the live session. we prepared standard will question-and-answer remarks with our future, statements including on call around strategies will regarding including our today’s statements, or expectations, made Statements regarding spending. forward-looking the statements projected intentions beliefs, include We such harbor that Act Securities forward-looking intend to statements XXXX. the provided Litigation be safe of Private subject by the Reform is information forward-looking regarding Axon current Inc. based The information and expectations upon on Enterprise as assumptions These to and future on the performance date are that predict. certain guarantees estimates only which uncertainties risks, are of and involve statements difficult and of made, speak they are not on forward-looking actual cause call today’s are are subject to could results that differ All the that our and statements uncertainties made risks to materially. in our XX-Q greater Risk under These Form risks Factors. detail the on on are annual Form and reports in discussed caption, quarterly XX-K reports

well find hand other to may Smith, over the as and will website, as that, filings these our call SEC filings now CEO our Rick www.axon.com. With You Founder. on I

Rick Smith

end-to-end our the good technology everyone. and plan executed platform we Andrea, in policing you, Thank Axon. QX, creating thank Thanks for call public for afternoon, for joining and In interest long-term safety. your against of and our

in milestones and revenue achievements We product our quarter. are proud the

for long-term we additional While were of success incurred some business. our they the costs, necessary

expenses. performance look our margin operating improving a and rigor harder taking around also at are We operating

dominant to we where the profitability. camera transitioning our growth scaling body long-term placing now of building is emphasis are foundations domestic operating significant now from our where on early leverage the market Specifically is phase formation phase focus and the business

revenue doubt strong is quarterly leadership across is customer relationships. categories. our product leadership about our our indicative no all strong of market Our There and

product segments across including was quarter revenue growth. by strong in revenue record weapons driven Our international our strength the

grows growth term able budget place, growth. stream them to Without X the weapons department from upgrade every to Giving our long the be is police budget to mechanism in We historic a XX giving range. upgrade where consistently Our revenue we years. the on five that five agencies to clear estimate we believe can by these was revenue quality budget closer years item a line in item with years cycle items line line cycle to place. for shorten that customers

service way software believe also additional will training add We that starting opportunities for plans upgrades as the plans and and the for other customer XXXX. us to service in create pave weapon revenue value to

At in in detail. was cover quarter Jawad and in loss by shareholder more which though letter quick factors let me detail three level our operating offer a the we will key Our caused which addressed review. in high

when penetrate this First, disruptive camera international third we so field years and introduction to weapons do camera quarter. which Evidence.com domestic usually we starting scale the well five as green body-worn did TASER gross with we the with ago, We and with ASPs XX enter compresses which upfront margins. market initial a new fleet began as domestically the new as the our case with is years markets This product today in ago. body-worn of discounting

as new the discounted X,XXX implementation our units cost fleet we are shift out iron deployment pricing We processes with required new product offering we higher competitors QX displacing with and several and segment. higher in this fleet at

video car foothold system. We are gaining in with our an important

one weapons of did the to in of how impact know, the both on you As due element multi invoice. several generally the accounting and our already proportionally customer and because of more discount element platform on the our must converted in applied on across cover deals accepted the regardless many But principles, will of appearance to all work the cost of Under we've fleet elements this detail. sensor Jawad a coming. profitability software police was which be accounting segment discount

margin the margin caused because and quarter contingent sold only be the sensors the not compressed in with we fleet exaggerated weapons in accounting a weapon. also segment This compressed but software of where under bit contracts current bundle a hardware effect this guidelines. can So also those deferred

aspects body of quarter this there next much new camera challenging XXXX. expect XXX are many the we coming economics deals year, in of better the a starting economics match result accounting. to hardware to guidelines first the significant improvement And our new While in will guidelines sign with as the see

their by Jawad own gross we a over forward. And have factor, product go as we Microsoft point cost second cloud to customers in out international wanted a made significant about bring with investments third migrating just can we relationships The QX but performed of decision Azure. in our our from I to migration globe control restructuring minutes the grow should ever ROI to leverage and are offerings. migration this data data financial largest around as we'll functions. will a $X.X scrutiny the margins going entities the that to the quarter in yield terabytes factor, compressed with in in were AWS the complete, data closer Microsoft million this XX in sales few data migration also partner is After the strong

see as in of percentage to point our rate a XX these expect effective over efforts. result reduction We

control in taking areas investing to intelligence growth. growth company been identify areas greater focused practices discounting improvement. until Up magnifying our glass plan a on continue fleet, other such future and records we R&D towards as cost we would to we've almost identified for we've artificial now management, are for in Although in areas entirely and that benefit

the Our and key that’s organization metrics were delivered. metrics has including growth what focused on all exactly primarily the compensation

XXXX and pivotal of beyond. for profitability plans we our segment, long-term adding part body performance metrics camera to As our in equity are and compensation profitability

make of areas the and control wanted decisions we that management in plans long-term investors also for spend we highlight strategic growth. QX made of to business, we believe slowing we in While these to many place the cost internal the regarding investments with have right to

committed growth are network. like rigorous we that building today next in I'd possible progress that tremendous reiterating on network today. create services conclude to because devices, to apps we've can our We has stage by with been of more focus people new that the focus made on profitability. that of are And only valuable executing highly so of and this

on and offices services. secured crown highly across utilizing sharing XXX over entire we've prosecutor's have the Axon are and X,XXX We information over agencies the prosecution United Evidence.com, the enable valuable network adding to added offices Kingdom

with we that creating will value like Luke. possible processes to to will that I'd services. world. premier of in In camera services and services call create these some we've data we've services will million industries unique unlock customers launching network These value ingested one XXX,XXX significant XXXX high or today field that in business begin and datasets have intelligence over and new margin sensors the largest And expect terabytes, and that built. customers that turn artificial create We leading XX made our research enabling the advance in the by and commerce long-term engineering will value for the XX services have of profitability. our accelerate the the added over AI team the the and high develop gigabytes And are of automation data to of the to

Luke Larson

year had booking. this Thanks similar reliant from not by meaningful Rick. this continue bookings to of million of we lead Bookings quarter's QX $XX large million more made strong grew were quarter over exceptional any We or had prior representing the the Fleet in $XX as XXXX bookings market. quarter, the one order. second bookings on to contribution a XX% XX% quarter's

announced to agency providers speaks our quality was body XX see in not value the that in any our camera providing. where evidenced from is proposition prosecutors It's everyone which solutions to value to are fleet the platforms appreciate fact we they This to displaced in for and defenders. customers the top the to do this the by Our wins in XX offering easy on body-worn competitors. end-to-end officers backs of our solution QX of or we migrate and of switch QX. chain workflow improved camera but and This win

Vegas the renew and to Axon on We also in where including Las Vegas safety QX the reliance chose agencies officer early our Las expansions in Department Police to to on their and one large Metropolitan customers' camera saw network. they plan. of four customers decided contract sign their and contract body-worn was their upsize earliest QX

I want this hitting We are development pleased Citizen. has discipline seen the Axon improvement touch our and milestones four operational our compared Intelligence, on software and a product is accomplishments in Sidearm and which evidence.com, milestones accelerating in product rise we've in quarter. in pace year. as segment or past of development with sensors XXXX seen Artificial product development to with Signal

First Artificial Intelligence.

We and clear a deploy are which for AI end We us differentiates from learning enhanced productivity see not will as multiplier in and path investing functionality. competitors AI us across and product our in itself product that machine an offers a for monetization.

results evaluated really project. evaluates the were research We major benchmark for for specifically We our still a as investments and be AI is video, grant big of work revenue, strategic choosing technology against enforcement. of are the speed pay analytics though and win the our to law categorizing test. accuracy Axon material our each points federal police several special it to up. rigorous such scientifically the department AI a supplier approach had over reviewers panel of with competitor's via the to project on advantage Angeles While quarter. to video Las for received flow the of LAPD validation win in work competitors the focusing improvement pre not solutions received we believe we the A

three the this letter. eliminate make body department for we of points development helping shareholder our it will that our but best updates in their also new office Not back use camera problems pain in software out only field agency to the mentioned officer in QX team Second solve the is sold in investment. Evidence.com as Evidence.com

to allows search now feature filter our update in For by to which camera quarter recorded example, agencies the it. video device the

One it meaningful of saves and me features I device for really work. search are customers. used the of our customer feature These hours day the available was said, first it

to users customers device evidence who that together details encouraging an place. access over received feedback all run a from brings update updates more report related summary allows single that control gives also a the to has regarding into device granular that We various feature

wrote, the is out Again, continuously mostly to seriously. customers making improving customer update take the connected and for thank very thank Evidence.com VOC feedback We of you really customers to you, decisions. roll we One agency we driven feature are our thank you, as device summary. customers.

enforcement only to for specific plan. investigation. to in submit recording Third that from Signal to has is finished And range interest generated capture of from the attaches This when Axon Signal and Citizen, customers continue all buffered crimes interest. pubic strong law alert agencies beta product evidence recently firearm for and see and wireless begin Axon customers. us we've that cameras our members tracking is Axon a to Sidearm testing our we holster, available its is portal to product most by from video released a allows a internal a firearm was firearm fourth that under holsters, sensor lot and a now smart shift for the is user We sent withdrawn. customers Sidearm, removed safety all to requested development is October within before community enforcement to a is law directly

to access we on to as access XXXX early shipping number represents you partners. is a partners. RMS RMS agency future revenue pre of that still agencies track smaller and QX, and early signed on Finally, which update our select opportunity. up major I'd one agencies In to like large a

at our results. RMS it I'll encouraged of discuss to in We of for are turn Chiefs of our interest October. the by really The International shown And Jawad financial now over customer Police Association Conference level Axon will developed who

Jawad Ahsan

Luke. Thanks Great.

received and stating they questions to begin address SEC filing. review completed We've briefly that want comment today of my remarks, I letter we SEC's to letter. the XX-K from a address working the prepared their been our earlier Form the SEC's we Before

QX in Turning quarter. annual $XX.X represents growth. back to We record XX% million the had revenue of which

software upgrading continue the who growth was XX% service network domestic pretty in also sensors, side the QX. deeper to hardware Axon XX,XXX we pace. as customers. users are the Axon weapon to In we continue revenue grew cameras a weapons hardware that XX% software and shift and healthy and in On segment we of drove a to lot as we quarter. That shift Within agencies add exciting in and new execute XX% in grew switchover penetrating in International sensors, growth nearly weapons of there. at to to

was who domestic customers market camera record X.X quarter's their upgrades international driven This contractual have shipments unit by the and in year hit contract. five to year strength volume market, continued in on customers

revenue revenue The also million of held markets. by or XX% was terms previously revenue $X an revenue in revenue. orders up service of international $XX.X to weapon International by sales X both was and Tier weapon quarter our catch driven strong year-over-year domestic and in large third UK contractual the included million in pending in increase segment increase driven some milestones. XX primarily growth outside fulfillment The smart

to payment plan million. the in an the the UK and quarter the quarter, first was and UK. XX driven prior sensors revenue the in drive This growth quarter, weapon XX% primarily approval captures received Total in international from quarter. revenue. For to consolidated the plan as growth $XX.X first the subscription in representing of weapons seats. third than million margins domestic continued second XXXX revenue TASER on from our segment doubling total time quarter XXXX growth in to XX,XXX on software margin increase business, QX end the increased our this the more XX.X% by base which doubling in of we Weapons were the gross sales of or book The converted revenue UK payment help Gross and basis. year seats $X.X recurring Annual $XX.X second we quarter our or we the the paid cartridge our XX.X% bundling order of and fleet service customers. XX%. and $X weapon we benefit In of offer initial by million slight impacted at down the approximately by the was XX.X% sequentially XX% X.X% is was a greater second number items quarter quarter. several was and the with XX mix the unfavorably in of and weapons pricing margin sensors impacted In leading of Axon impact software in were the gross which segment, million this

sensors' to items. margin and three due lower was hardware Software

by early than as fleet which offered flows. leader for some First, aggressive were a booked more we of concession data year accessories we were the such both impacted pricing deals, our needed on where and ago routers

month in in charge the accelerating of now signed of fleet cost discounting package which do bookings Axon same for pricing plus is industry. deals have unlimited fleet recently Our upfront hardware. the level we even full not fleet highly and fact the $XX a disruptive are at our

did the Second, revenue to conditions all at would allocated upfront which of and across contracts benefit we expected time terms camera allowed we receive the our recognize the us the not full from shipment. have the standardizing to

of you uplift see on in in language. are standardized We QX expect a ship able if larger to a percentage margins to with contracts

under guidelines. the contract expected XXXX QX, we improvement accelerate in change gross XXX this new partially As a reminder, is margin the expected hardware to accounting

accounts in unfavorably levels do the certain not pricing XXXX. we were by beachhead that we large international on expect at impacted Lastly,

Software XX% from disclosed impacted of by and was $X.X and government Amazon Microsoft Azure's sensors services the cost million to gross related margin was unfavorably cloud. previously web to migration service

end on by of a this October completed are of migration largest a reminder, in the Azure QX. and phase entirely cloud the As first be is on We to in data track history. the migration

migration However, in up to million related of the we $X cost still expect quarter. to fourth

to the quarter. a call, million margins, $XX.X forecast when $X.X In classified expense we quarter. had contractor general is $XX.X of we in in I good make our weren't and at pace tax amortization events. were related internal from help XXX or now bring it but hit. to have office solved administrative Additionally, in us to issues as producing. Total accounting felt it the Asian it to yet a our as previously at which the new quarter to that the three was material will material the from of definitively. point were bring to cost We relative but of in Misfit to we lingering important $XX.X different remediating about ASC to and and consultants includes through recorded of to resources we goals had million, call We outside expenses satisfied which but with services against happened was capabilities. with as expenses making needed last earning's we progress We quarter, behind back sold restructuring getting ready revenue million. in operating these wouldn't addressing support our fees weaknesses, and it the pace issues up guideline these outside Selling, decided this we international QX development to. prior subsequent research cost million for which that ensure we these help could it items related acquisition prioritize the independent After were These issues are put deadline in low professional $XXX,XXX critical expense us be have with best weakness are

and drive important operating includes worked by team & with. forward previously profitability. in of to our and Ernst that partners critical steadily very will class with bring the expense going XXXX been call and our new strong improved the working led on which are year roles, can I and key other and with level about can organization in Accounting vigor we foundation exit deal at A areas. up confidence this Jim made team Overall, continue our by finance Zito, so This these to to VP items thought key with momentum. finance Young we've excited great new our be bringing of in we a focus hires We execute to now world leadership to Stein a Todd

$X.X we million increase The as lines sequential $X.X commission our increased were spend offset RMS. we was million of from SG&A, selling professional includes the by to line, of and beat shift and of interest new million in $XX.X in XX good for spends income related type allocate a of that rules in interest had increase on and QX. internal expenses, Research increase forecast. development increase the XX by of to related headcount and operating on business revenues payment $X.X Below the in fleet to million through Misfit accelerated portion a gain $XX which driven consulting TASER GAAP expense flowing adjustment headcount investment are income we hardware TASER our in customers. customer partially consisted foreign from $X.X which currency essentially a lower the in expenses Additionally, transaction in amortization financing program that both up of require a was as cost other million and interest of The we of expenses including sold. our QX, income small million

by us meet year target management end. our track or Total to by executing exceed are to $XX on We on of $XX.X million the plan. million in inventory our million inventory $X.X putting quarter decreased

for rest of to year. our the the Turning outlook

in As full XX% you have which in growth of exceed guidance XX% original our our expect shareholder to letter XX% growth we now XXXX. to in of you, revenue year surpasses front

and improvement of operating sequential We X% sequential margin expect increased X% modest in expenses in QX. to gross a

an at this our of We long-term drive forward We to move week overview the of working And York. next to Analyst vision in of to can our of our with now operating questions-and-answer call. stated to expense the rate and portion Rick we the are New at the Investor as call. Day actively leverage growth beginning that adjust provide trajectory look

Operator

Mark comes [Operator JP Instructions] of question from Our Morgan. Strouse first

Your is line open

Mark Strouse

taking for our questions. Hi, guys. Thanks

something down one I gross just time The items margin could. quarter. if that this I way clarify on want So to

like by of still XQ some that impact we much will Sound XXXX in are is it the but be margin XQ time number, they to get cleaner accurate?

Jawad Ahsan

right. exactly that's Yes,

the of that's going migration the had beachhead the QX us. as We we leader have expecting account by pricing -- to international on mentioned data and are some we behind we

Mark Strouse

for have comp then for into okay. market. a phase In pretty you XXXX, the year-over-year are are Okay, you now you going easy operating as to And mentioned profitability transitioning margin.

of kind guess margins just I can thunder for your specific there I can next target operating maybe So, you but you am year. any is of next stealing more from kind week give

Jawad Ahsan

I we are going and that you mentioned profitability to So making discuss that's absolutely all going are that be this Rick can our shift I as profitability. employees incentivizing something towards we of driving -- also and Rick we to team next our week. are mentioned though to to what be frankly executive tell

Mark Strouse

can. I then getting and people just coming just in if in share high space. where your exceeding market out one it. on body competitive sneak cam And see Axon's the latest if aggressive more Got competitors thoughts and Rick level I of landscape, the more the thoughts domestic can IACP Thanks. on you your

Rick Smith

I mean about we coming good of feel really out this. Yes.

backs. We are win to continuing see lots of

We senior platform. some platforms feedback different struggling initially took Axon things discussions that are our at the team little get we longer product they gone expected. particularly that a really was hearing are with the us are and on and fleet to people on at market run having who customers we delighted from I that really have positive

away positive networks be the patrol just was at when immigrating think overall by as all the be installs Axon out well to launched the feedback compelling, handling build hardware customer in fleet easy that of function who first got professional to we services new turned of car the sort makes staff light the was got and nature connected was the they in as previous talked we approach product. taken of I of that. cloud to tried big customer to the me weight delighted had I hardware with it of to feedback, call, our the on sort sort great service related giving telling really really cars on experience experience, little maintain, into the lift and we people every But complexity that it of we to their chief just wireless blown I were had the that a

the into ultimately really in of I And going records meeting are to A management we record announced great a and a we AI system from that of I felt Then year that we that's ago should sort are in they lot with space. think So around continuing meta colonels; AI idea really a the a see feel well made with excited build record. our our position data record lot in I should records in that product. of police customer team. interested car video capabilities had state good, text strategy. the our up very the the text and of our with think video we one be in end extracted out of progress towards lot

think they is a to selected collecting whole So resonating us believe vision they so is camera new us back way a and I camera, tell is coming new body that's for the analyze at and that customers about right this much that number of frankly because than vendor bigger information. their really one

for solid and better really we I about positioning. overall than are the was So think it mean competitive show us ever I feeling

Operator

Craig Steve Our Dyer question comes next Hallum. of

is line open Your

Steve Dyer

question. Thanks for my taking

Any if On for bigger severance the to in sort now. that other base which why was kind color revenue, the the you year-over-year us the time of can given gross down add intuitive margin software still I and services installed of seems exclude quarter side be? even would hits one

Rick Smith

Yes.

to last really hardware things particularly as internationally hardware had pricing on margins of were those on we some is to sure as so in initial customers just of this need more cases market way margin space we your routers some cost big and customers thing our I off they to do right-- case the et supporting a is some those was that call at cost with in shipment our and at the handled were hardware is made there pointed from and there on high experience not think you most that about of for way the when they our a we sort right accounted that's early that greater that there entering of out one contract in-car so negative was such the we the we and items. the are cetera The and thing actually important one combinations which provided was two make then significant year and contingent And great might of older aggressive customer a new is think confusions fleet fleet. the have first some get is advantage. Jawad determine ease some

improvement fleet that impact we but think I should we call deals was good it the Though quarter on pretty fleet see got adversely. that did to the right continued in although than body cameras is there in favorable are be going are in to -- sort camera. they and phase introduction market still of will less margin fleet that we body the so relative

the fleet its body we But quarter. future. overall relative will net they performance are the detail last in think then And will in camera to more significant I it to segment. improvements especially started that in on expect particularly see so we provide QX, improve

Steve Dyer

into of our sort Great. And question. ducktails that next -- my

that XXXX mean camera -- that more as that about to the should sort that deliberate software the be or the there take focused and business? Is being talked you profitability of transition overall Just on market. body of thing profitability as segment on services in much distinction I where is same might a year not

Jawad Ahsan

software is very cameras of services. sort raise the because have comes only should with we cameras. be The do gross to as going software segments, it to term to long each them be sensors out overall possibly sensors we've are will going now on that are at show It's We relative are profitability. now are and what premium think had we remains that it the that that segment is being Yes, to margin will did us. fleet software fleet; body to services camera S But that to are a segment, out a base. hit in how of but run margin help that be think launching counteract we And own and successful fleet the that -- had are seen. different where not the profitable body we are and just we specific least toward very effect their the when be out now mean be these traditionally very shift a deliberately for on question only is of we that that we see due specifically going of we improving point we I using about it body on and will lifecycle calling You is and the profitability also hardware entering curve bit, good. your product network. model we some those Ultimately they build call margin ARPU lower high on high

Rick Smith

I to clarify level enterprise making at talking investment that we are the camera we and areas want in a also body in are is Steve, we leverage. absolutely segment profitability to looking this are drive other but

Steve Dyer

relative maybe least Mark's is guess year question, to margins at earlier I to improved Right. next mean I operating expect directionally? it fair

Rick Smith

Yes.

Steve Dyer

back be? even of I a and housekeeping terms effective new is so that mean what Okay. how that I is about rate When plus. tax jumps that around know will Jawad and obviously Your then you in are I'll one in The thinking queue. A don't jump rate quick modeling? is effective much

Jawad Ahsan

Yes.

it we in with simplified would was jumped that October expect should see us to start we so that this and but in down. and headline year around effect has that come you accounting the took noise a point to it equity tax of bit our had change that structure relative QX we So a for bit little

are but is to new So tax will equity anticipating be going to estimate at it we impact what any XX%. of changes hard point-- this so south it's from be the of

Steve Dyer

Thank hope got Okay, it. in queue. back you. I'll

Rick Smith

in only One well. have execute. strategy, a the is adds And then in Jawad legal jump our to figure and identified months aggressively the a that thing here was been moved not lot strategy took bringing significant. pretty there think Right few on rectify of big and gate accounting I I'd in .over mean has to that like optimal a for completed accomplishment. he few international it. to as organization aggressively moved frankly to into Zito booking work Jim was pretty and accounting, Jawad of I just months a and tax been of the job impact And implement

our we the at So aggressively known forecasting let in, forward. and I brought rigor great to been behind not that awesome worked need in move he And think systems people in Jawad into E&Y, to we going in that pretty as make been get you been I leasing really the have our are dialed with all -- we financial -- here are us has also pleased we are to they that acceptable well not see as very so at sure move team have has XXXX. we more something weaknesses know expenses material he

Operator

Hamblin Jeremy comes Our Dougherty next question & of from Company.

open. is line Your

Jeremy Hamblin

excluding that guys. fleet to I of Hi, I want portion to expect larger hardware level that that quarter in to mentioned about that to even the and you it's margins you back know hardware XX% forward moving the but you be fleet. enter XX% as we am but probably about you return margins was guessing come XXXX think -- and going bookings this also to know

that XX% next gross could So level like? have the going gross margins how fleet assuming of with of that on look gross what margins had -- much going on that is this mean Axon to we or kind the difficulties you Should perspective be given underperformance year's are from margin this we what at to type margin gross impact of that. -- negative the should X%, overall. and year selling the I negative be of an

Rick Smith

going and the I both bit answered our more the a between long detail we through would Day better go question are XXXX probably term where little at Investor think

Jawad Ahsan

Jeremy I pass Also fleet that said to excluding we through clarify wanted in entirety. its excluding fleet not hardware

the pass they So component are we party are which and where deal that's through excluding. are third of

Rick Smith

having our significant to margins how we and made and we've discussions gone color sort debate more it the are easy buy important at more margin than do like in a for trying to rather we frankly they go putting through optimize low portion look very of the through got independently our statement. customers and the there need that than customers pass we we make that's Just items our routers where your on elements is of have servers there commodity ultimately income those that decision

right call. So that's think we

it great lot have were where quarter through We a also think the I we understand this but a deals that. of better didn't deals early handle on

And so a accommodations are lot more there future. that to we expect in make

Jeremy Hamblin

that's Yes, now helpful.

-- gross they you this this difficult really, from significantly sequentially yet from they them I am had that up and including time year question the of forecasting QX there last really to expected my think margin heart down when quarter -- QX. I what be were is is

get but to I am that year improvement. it like be trying thinking what maybe forecast some to really next much improvement sounds next there in not an So of is at year and will ahead

Luke Larson

Yes. We here. is cost it's owned the I to Luke these what products new exactly is with that. This to mean know going be. difficult core

in get fleet are trying products such in the more way that to the are term. more in We maturity. where confident communicate very can confidence have With we long we that

accurate storage was the migration of data history not And have of it the us. forecast be. visibility components the about all involved really the And what on With we growth just for largest to for three confident did that. next that's we At behind parties all feel and would we we it. that are hard we the are in line and over therefore understand it. Investor sign That to the transfer couldn't Day going up something now years bottom had

annual to hit are both key place putting for as as targets. We those long leaders act well performance term in

Jeremy Hamblin

add the to fair called that summary release. I that Luke. understand even your just out three And were I back be in No, times

margins gross just have have XX%. that been still You under would

a wrap just am is kind just the set than of company expectations XXs range. be low XX% head around trying want better So appropriately. I been thinking has XX%, XX%, And maybe be to my rather baseline in I to about historically the thinking to

Jawad Ahsan

compression to talked something we is there stages. be it pricing is what as about as it's hardware know the like to with going going early some we shift that rules, tough the that And to So given fleet be accounting going in is to do again we in over not -- over are to margins accretive are are our going be to margin time that's but we accretive. that deals that and you be confident that see upfront to confident going but time do the we may effect these immediately

Rick Smith

this if be just be not percentage business rate so adding even to silver it margin will gross the And on largely dollars fleet may the existing a will incremental be lining fleet so the the gross as not margin is in average adding percentage. same the we will as margin dollars are we the the segment high more which more business have maybe

Jeremy Hamblin

forecast. came Let which also higher to in me move than expenses on operating

Australian that terms your the $XX.X of quarter to is In I expense I fourth just I just clarify wanted distributor. for mean is to amortization million do it's the I back pin down million out of we recurring to for since need to inclusive the am the million, guidance $XX -- or range. assuming the guidance. $XX But million. that's want $XX.X recurring

Jawad Ahsan

correct, includes That's -- it

Jeremy Hamblin

to any camera related the trial? include free that does And cost

Jawad Ahsan

Yes.

Jeremy Hamblin

okay, It great. does,

they $XX your that about something was looks about to transition positive. revenues me let up to So Evidence.com it million. were million like $X.X sequentially strong On very a

how that much of what increase - QX. drove active licenses terms your in paying did In growth

Rick Smith

sure not question. understand am I the I

Jeremy Hamblin

they the licenses, My paying right is question quarter. how was occurred booking. revenues active licenses what $XX paying Paying in the many service licenses increase roughly in quarter. to the Evidence.com not Your the active million in

Jawad Ahsan

XXXXX domestic

Jeremy Hamblin

into in there how to similar be be about type QX, should turned we on of that. terms Okay, licenses a or the great. growth thinking And is of going then number of thinking

Jawad Ahsan

in rate. expect Yes. would line same to growth be roughly of We that

Jeremy Hamblin

taking Okay, guys for -- great, thanks

Rick Smith

to to One be would adding thing tend those additional of we us sales I the to that back some and to up will of uplifting year I punctuate fees go the add first start is going just additional see to are there XXXX am some think services the this services that existing you launching.

primary So been growing network. the historically has focus size on our the of

to for We is to cetera customers. are are the doing go to going with be revenue but of do an existing and we continuing opportunity that there some increase certainly back AI things et

Jeremy Hamblin

Yes.

nicely While already pretty revenue are on you service growing a the side.

questions. the for we thanks and So forward continue growth taking look to

Operator

Godfrey Our of next from question George King. comes CL

line Your open is

George Godfrey

Thank taking you and thank my you for question.

the on OpEx on given getting. growth I be clear be a million should is about operating revenue $X.X to QX XX% more. so loss year just Maybe a so of am income what and So bit the the full little

Jawad Ahsan

that acknowledge quarter. that What of out operating our doing we we at opportunity are going tell specific with -- better think are That's so we guidance So of forecasting owned to that got you and ensuring capabilities. I the building next not our we give can and to an I part we I are the and what guidance right. on all first margins for team

QX expenses. to And so we far we -- felt we give operating we are trying that for guidance as could want to hit as

bringing not to are expense can. which as we the is we get give that. call be to it other is increase intention intention as to going we've QX as close given of are absolutely shouldn't The thing it is our But we And as lost rigor our to that QX guidance we any specific comments much can. and back to the relative additional as in you

Rick Smith

This I I we a ready and we the the investments get expense to CFO could prepared shown believe would so here. as and come change I new these to we company. Jawad of a as think a well a come with handle XXX enter I the that have right say to a international is And remediate is this let's in to we think structure this highlight weakness a cost of XXX in those I choose into not weaknesses., consultants, our strong entity supporting material to push am and strongly say just call to leadership for is and in tough the really bring for made that for and E&Y and as make to investment Yes. And in add material the XXXX as and on feel addition this to get lot there really done. that want but right for supportive so Jawad well having restructuring

George Godfrey

to will financial but a and timeframe next target linear of start getting points of of X trying that's in work go just margin understand What QX am the realized back go basis what a are if going margin I to a years. margin the operating at they minus Investor the that XX% three Day adding basis year of per three was probably XXX quarter. on we all appreciate I won't I and is implications they I at we are to and impact where take quarters and these XX is of over

base or and state -- XXX,XXX So seats looking a do are we you resetting margin year steady relative these reset? a ago, expectations the we year those about where my question and or gets they number XXX% Axon to that just to is, ago just were or half need are to be we figures that talked

Rick Smith

Yes.

be resetting forward So models just a we the to days. going in few obviously are looking

fourth for are So the would really -we EPS not rather than tell - of in details here getting I into some the optimizing we just general you quarter. in are

we to be days for expenses is know street anybody be optimizing this forecast we shock us in high surprised actually And to three not a behind are nor a our that in as going the years. roll the year. of profitable -- spot solid very not We trajectory us. XXXX call into is and bright will And Jawad it next has that ability towards committed over next our business those predictable be

and team So we really got he a are performance focus that's it our on improve is to there. going

Operator

question Madsen is open comes Ladenburg line from [Glen next Diamond] of Our your

Glen Madsen

just XX; was talk just deal that the offset large There I and Yes, look expected. drove question. It there XXX the gain units. any one one decline other. between in at unit doesn't I am and the you I growth weapons the what that missed like in have the looking Can thanks for out, taking little was the on better you might called that? And than about

it growth no your are is drove why fast? us there in cartridges maybe you revenue and as a lot what cartridges growing to Can So give idea growth of attributed weapons.

Rick Smith

Yes.

they big of typically in The UK, use the in it's orders. cartridges of do TASER, in things. Jawad, were Kingdom, significantly couple the than many federal some TASER So United higher There approval how US. training for

Jawad Ahsan

XX to XX per officer per year

Rick Smith

they of customer. is TASER UK they training UK the helping significantly consume expansion been growth right in service the more in sort XX have are So launching and also than cartridges bundle helpful there LASER Then of into US also typical them that's our plan. drive in cartridges in to the

Glen Madsen

Sorry cartridges? Rick what was the the number on

Rick Smith

Jawad?

Jawad Ahsan

year per -- cartridges XX to per between training XX and officer

Glen Madsen

Versus like I it? in US remember the from what or it wasn't was something X to X

Rick Smith

accurate. that's Yes,

Glen

after sustainable. -- while seems a mean train it I that that's like they And is them mean everyone I rate that stop if they will at using or

Rick Smith

which of so specifically. that's tell are UK. completely in It's so -- It's UK premium are proud XX every TASER to sustainable committing year builds much most something cartridges customers you that and of that of turn in here particularly now going the so in they our way number I'll UK it's that to

UK UK weapon issues to in weapon have we the get they've talk you misuse of the they they countries it's would don't going that do. reason is the handling believe training than see extensive that in making If more lesser and and investment that way and they they and training believe proper may got part policing other that they are

Glen Madsen

or heard you beachhead new about that could that what countries said haven't on just accounts in was question Rick? little us Next on a the international and there more you video large are color you margins give color also, we talking about before

Rick Smith

opens like very a we It much to that and market was one lot customer large for shift details order. of on important but that signed we give is us this international again that cameras too customer specific don't last flagship we No, year.

Glen Madsen

catch then last up asked was $X.X someone video up but sales about right. point sequentially the And time one there catch couple catch that million service great. questions growing $X.X Okay, There a in up. one something. of was ago million or

Jawad Ahsan

That's right. million $X catch up.

Operator

Allen from comes Our of Sidoti. question next Klee

open line Your is

Allen Klee

stuff Yes, hi. clarifying questions just you mentioned. some Two

us type new then fleet that. -- you start that I well be? can First forward And going give margin probably for with what of range gross would of margins gross for for sense just a sales, will

Rick Smith

prepared I Yes. are we think release today. here to number that don't

Allen Klee

metric going compensation. us management you - that for then be? are just to profitability And add would metric you profitability to that Could Okay. that tell what you said

Luke Larson

Yes.

the at we are plan So executives we growth on calculate aiming the have pay one is the showing annual and be be entire will our top targets way bonus to EBITDA company we to the next years have key and plan year are bottom are and that Day performance some long this going that line the we we Investor [RQ] for plan lay three also be will that kind for out we going line Analyst term the the we metrics metric tied to of three and tied will of do we EBITDA to is align. at set key believe down then we incentive for conference that and

Jawad Ahsan

don't actually exactly I we what that's profitability have what all system same the here you can something on focused the fully this on designed pivot It's historically we to that in thing with towards what delivered. organization that shift want of that compensation this line to takeaway highlight and to the the so was we are working those going have exactly just is from gain do. They execute do And and profitability. any is top profitability are we metrics expecting our it to now really well growth today.

line were our but trending more concerns by also we on line some as point few execution end, And point on will so term inventory gave are near the cash growth we've past about top have year we flow. years I think a our much -- the over executed to that proof of that very I and and towards guidance recently we a there

has a think metrics manifest see in to track fully compensation got I into when the record profitability introduce you the I P&L. executing going and are our expecting am team that start and So of we itself

Operator

Steve Our of a Capital. up Craig-Hallum next follow Dyer question is from

is Your open line

Steve Dyer

Thanks.

what's as about. and the puts we Just directionally should of complex I fairly opportunities a your gotten any puts to business here? Jawad takes swing mean couple guess are follow P&L. and up. in that of I takes XXX thinking I be there mean look But US some be What's a it. sort at familiarity and your with have of you I obvious

Jawad Ahsan

Yes, good question.

So huge expecting as or complexity standardizing when in have our XXX impact our no revenue contract us overall allow we will there a far of But on revenue level of to on are effect is on components lot recognition language we and would not delivered in that a talked accelerate other as about the business. meaningful the are hardware modifying mimic an really is other that impact XXX effect upfront. are there And to expecting. the than which we

Steve Dyer

So expect see just fleet other margins going product other to hardware pressure, be and from the be clear direction there significantly XXX hardware is -- at based although lower to to on improves being really some margin we

Jawad Ahsan

exactly That right.

Steve Dyer

picture Okay, as relates then I got it bigger And just operating to it. guess expenses.

-- keeps of is think it sort about interesting really giving opportunity from of guys I new the the keeps from is really always new something model. kind things or invest of one which you hard to leverage operating optimizing in there

it's on mean Because I from producing the at what of going what's week. of but see spending layout willing spend or I into think that help investors of and sort three likes obviously some in to managing important products you a basis growth you next great what's and or I et just stab are been business think non sort are about think lot But terms it would pipeline know to services? bullies will years there take annual revenue anyway has to guys or you in the a will a sound is OpEx are going the those you on cetera revenue. quarterly you

Luke Larson

have great got management four evidence key our stream, body-worn Axon a digital ancillary question, we camera Signal, That's and we have and TASER, about our Currently business think Axon value in business RMS. fleet Yes. Steve. like include we then product

discussing We our about body how camera business the we we bottom percentage will to products. is One new Day about invested dents of on Investor talk signaling, thinking having the contribute we line. are metric R&D net our are showing that are at how in

question, great the we how more we will Day talk at about have thinking and are about So that. to Investor

Operator

from Godfrey CL a is follow question up George next of Our King.

open line Your is

George Godfrey

Thank you.

Just end ones quarter? two quick of at hope. the I the Headcount

Jawad Ahsan

it get will on have I We hand. don't that.

George Godfrey

directionally drain program, And lapping be and of to cash Okay. XX that be a is then will we in working just now generator or TASER likely capital XXXX?

Rick Smith

I in we've as selling are to model. more our normalize. an going so say are are would shift would that historically working line and Where to see actually to going -- right this transition I top that expect impact we now been capital grow we subscription but to you on to continues the booking

Operator

no over are I'd further turn back any Mr. questions. like call remarks. There for closing to the Smith to

Rick Smith

Very good.

us issues. function. joining for everybody thanks got growth today. we term Obviously finance we our got up in got we So we know to expense that the We've expenditures work chop line with delighted are really some on making short we experienced the that are quarter. shore we top And some to

to that We Hope XXXX the into are more both a we great you New dramatically look we all can see place day. and bottom we out so on details York. on rigor to as top confident line that the and that guys are in roll you forward We giving in plan. beyond. Have more in improve right Thanks.

Operator

participating and all have conference. thank may a gentlemen, the program. does you disconnect. This Everyone for great day. in you And Ladies conclude today's