Will Power: Yes. That all makes sense. If I could just ask a quick second question on TASER, maybe any just update on how the automation process is going, where you are with respect to having enough supply to meet demand? And maybe any other color on the gross margin commentary there because as you automate over-time that should help gross margins, it sounds like it was probably that initial investment maybe that’s impacting it. Just love to get some color on that front.
Brittany Bagley: Yes, I think you sort of summarized that really well, which is we’re in this balance between focusing on ramping capacity and really working on cost down initiatives and we continue to see better demand than we’ve even expected for TASER 10 and so we continue to be in that area where we’re really ramping capacity. You saw that come through and 33% growth in Q1. I mean that was because we had more supply available. So I think the teams doing a really nice job getting that capacity online and supporting that customer demand. It might take us a little bit longer to hit some of those cost-down initiatives as we hit that balance. But ultimately that’s just a matter of timing one quarter to the next as we figure out how to slot that in.
I would say overall, it’s going nicely and is on track. And then as you look at our gross margins for the rest of the year, you also have a general mix-shift balance that we do our best to look into our crystal ball and try and figure out software versus our devices versus our TASER business. And I would say devices were a little bit lighter and software was pretty strong in this Q1. And so as we go through the year, I’d expect some health and devices to balance that down a bit. So that’s all that’s embedded in us trying to say that that gross margin guidance is probably not going to get better for the year than it was in Q1.
Will Power: Got you. Thank you.
Erik Lapinski: Thanks, Will. We’ll go to Keith Housum at Northcoast.
Keith Housum: Good morning, guys, and thanks. Each question for you, Josh, here. In terms of maybe a seasonality type of business, you guys have grown so much over the years. If we look at last year, fourth quarter was a tremendous bookings quarter for you, obviously, not so much this quarter. For instance, probably the first time I remember a sequential decline. Maybe you can talk about how you’re thinking about the seasonality of your bookings as we look for the next year, this year and next several years?
Josh Isner: Yes, Keith, great question. I appreciate it. I think ultimately, very similar story as Q1 last year where bookings were kind of the low-point of the year in Q1. It’s a hard quarter to really rack up bookings for a couple of reasons. Number one, like you said, we’re coming off a really strong one where we kind of cash the chips in Q4 where we can. But then we go through a cycle where we add salespeople. That means the regions change and that means just getting up to speed on the book of business. There’s not a lot of urgency on the customer side because like I said in my remarks, Q1 is the only quarter of the year where no major fiscal budgets and really only the UK ends in Q1. And so it’s — Q1 is about kind of building the foundation, rebuilding the pipeline, but I can tell you, I see no red flags in bookings for the remainder of the year.
I think the teams going to respond really strongly. I think it’s always nice. We’ve got a really, really good sales team. And when we can kind of light a fire under them after kind of a so-so quarter that usually tends to lead to some good out quarter results and that’s certainly what I expect here in quarters two, three and four. So yeah, I’d say for the future, I’d consider Q1 kind of the seasonal low point to be expected for bookings, but really not an indicator of what’s to come here in the future.
Keith Housum: Okay. And a follow up question in terms of federal. Federal last year had another great year for bookings. Are we seeing those start to deploy here or are those going to be kind of a little bit longer, I guess, deployment schedule? How do we think about that contributing to your overall revenue growth?
Josh Isner: It — a lot of these large federal bookings, they are phased into multiple years. And so we tend to recognize revenue when the products deployed or when it’s shipped on the TASER side. And so of those phased deployments that are previous bookings, there’s just some noisiness in and when the shipments are sent and when the deployments are done. But federal is in that bucket of — when I said we had a really, really healthy pipeline for the rest of the year, we’re feeling great about where the federal business is headed. We’ve got some large opportunities here in the next few quarters and certainly expect federal to register another awesome year.
Keith Housum: Great. Thank you. Appreciate it.
Erik Lapinski: Thanks, Keith. Next we have Josh Reilly at Needham.
Josh Reilly: Yes, thanks for taking my questions here. So following this body cam issue with the NY — New York Department of Corrections from a competitor solution. You know the NYPD as we know is a customer for you guys in other areas of their police force with body cameras. Can you just speak to how quickly you could move in if asked with the replacement product there? And maybe just from a higher-level, like what have you done from an engineering perspective to ensure that your cameras don’t catch on fire from battery malfunctions?
Rick Smith: Yes, Josh, thanks a lot. And the first thing I want to say about this is there was a captain that was injured as part of this. And so our thoughts are with him. It’s really a bad scenario when this type of stuff happens. And you indicated there might be a business opportunity here. We’ll see what happens with that. We’re certainly — we feel good about our ability to deploy products. We’ve invested a lot into them. We’ve invested a lot into the deployment. And we have the opportunity, of course, we’ll be ready to go. But in the meantime, we’re just — we’re focused on what’s in front of us and that’s continuing to build great products. Like you alluded to we’ve invested a lot into our hardware and into our devices pillar and we have great people and thinking through all of these kind of fringe and edge case scenarios that could pop-up with the hardware.
And so, while we’re not going to kind of disclose any trade secrets here, any in-depth engineering, I will say, we thought through a lot of these potential edge cases and we feel good about how our products will perform in them. And so in the meantime, we’ll keep just doing what’s in front of us and what we’re in control of. And if an opportunity presents itself, we’ll be ready.
Josh Reilly: Got it. Thank you. And then just a quick follow-up on the TASER revenue strength in the quarter here. Is there anything to call out in terms of TASER 10 domestic strength versus international being stronger? I know you had some big opportunities there for the seven in Australia. And then just balancing that versus the automation coming on, was the automation a benefit in Q1? Because I was thinking that was a little bit more tilted for the automation equipment taking hold in the second half. Thank you.
Josh Isner: Yes, maybe I’ll cover the demand and then we talk about the automation after. I mean, TASER 10 is a monster, Josh, like it’s the most popular TASER device we have ever brought to market. It’s out cycling the TASER 10 demand or TASER 7 demand by double. We continue to see strong indicators from all over the world that this product is the one that is a meaningful step in outperforming a firearm and it puts us on that moonshot journey that we’ve talked a lot about. And it’s a credit to Rick and our entire TASER pillar for all the great work they’re doing to ramp this product and do so with high quality. And so I think with demand, there is a need to ramp faster. We want to get this device out to our customers as fast as we can because we really believe it will save lives.
And so we’re working through that. Of course, we have to invest more in automation to maximize our build capacity every quarter and we’re in the process of doing so, but future is very, very bright on the TASER 10 side.
Josh Reilly: Thank you.
Erik Lapinski: Thanks, Josh. We’ll go to Jeremy Hamblin at Craig-Hallum. Jeremy, I think make sure you come off mute before [Multiple Speakers]
Jeremy Hamblin: Thanks for taking the question. I wanted to talk a little bit more in depth about some of the acquisition as well as just the new product opportunities. You’ve had a — this is a pretty substantial increase in your TAM and you’ve had that on a couple of occasions here over the last six or seven years. But this is among the most significant. And just getting a sense for Dedrone, which I gather there’s quite a bit of sensitivity out there in how this is going to be used potential for pushback in the community. Give us a sense for how you expect that to be deployed through your customer segments as they stand today. Is this the type of product where — while it’s immaterial now, do you see it potentially as a material contributor, let’s say, in two to three years?
Rick Smith: Yes, let me take that one to get started. A few years ago when we were standing up Axon Air, our business leader there had an important insight that as important as drones are, probably even more important is going to be how public safety can deal with the new threats that drones pose. And that was before what we’ve seen recently in world events where in modern warfare, turns out these small consumer level drones are a real game-changer, but they’re also presenting new threats to everyone from stadiums to critical infrastructure to major events. And so actually with Dedrone, we don’t see a lot of push back because Dedrone is really about monitoring drones in the airspace. And again, especially given the new threat vector that that represents, we’re seeing pretty widespread support that people expect their local government, their public safety to be able to protect them and aerial threats are just an entirely new vector.
Now the drone is a first responder, which can be enabled by Dedrone. So Dedrone both helps control aerial threats. And then if you want to deploy your own drones, having really great visibility of the airspace is a key part of that. Now DFR does present some concerns people may have about the government flying drones. What we find gets most people comfortable is if those drones are really being used to respond to 911 calls and people can understand that that gets police eyes on the scene much more quickly and can help them make better resourcing decisions that these are not being flown just hovering over the population. They’re really being used to respond to calls for help. That combined with good transparency about drone missions that are being flown and how they’re being used in publicizing their policy helps most agencies I think really gain a lot of public support.
So to finish out, we see this as being very material to the future. We think drones are already proving to be transformative and will only become more so.
Brittany Bagley: I would just say from a timing standpoint, I’d echo Rick fully. I think there’s a question of is it — from a financial standpoint, is it two to three years from now? Is it longer? I mean, it will certainly be a really big pillar of our business and you can see us investing heavily behind robotic security. I think we are really seeding a long-term growth trajectory though, a business that’s going to be material in for many years in the future, more than targeting a year or two years from now.
Jeremy Hamblin: Got it. Helpful color. And then just following up here on Draft One, which the demand for this sounds incredible. In terms of thinking about the competitive set, there are lots of other solutions out there, although maybe not quite in rolled-out in the way that law enforcement is looking for just yet. I wanted to get a sense of how challenging you see that market in terms of entering it or is it that your ecosystem is such where there is a natural fit and it’s giving you a competitive advantage simply because of the other product lines that you already have out there.
Rick Smith: Well, this is the entire reason that we invested in a records management system six, seven years ago was entirely because we saw this coming, but the ability to not only have your video evidence and your written records in one system, but to be able to extract one from the other would be critical. And I think we’re really seeing that come to bear. So we always want to stay a little paranoid about competition. It’s a very competitive market, but we think between the combination of the ecosystem just really providing a great user experience. And what we invest in earning customer trust and support and the rigor with which we’ve evaluated the risks and really dealt with all the critical players, whether it’s from community concerns to district attorneys and legal concerns across the board.
I think we’ve done this in a way that our customers can know that this is a pretty well vetted approach. And obviously, AI can be a bit controversial. We intentionally chose an area that is very-high payback for our customers with very minimal risk compared to some other areas where using AI today may introduce more risk here. We think given especially because it’s derived from the body camera video, it’s derived directly from the evidentiary record, which we think leads to actually even better, more detailed, more accurate police reports.
Josh Isner: And Jeremy just building on what Rick said, as always, we obsess about our customers while being healthily self-aware about the competitive landscape. And that’s one of the reasons we talk about the ecosystem so much as you were talking about. We’ve had transcription of the audio from body camera video at scale with a very large number of customers building up and up for several years now. We’ve got the footprint of both our body cameras themselves and DEMS and the growing momentum and records. And all that together is sort of the perfect tee up that makes Draft One possible. And then the second thing, as Rick was saying, a lot of people talk about the concepts of responsible AI and using these techniques in ways that combine effective results for customers with doing it in a principled and appropriate way and Draft One really is that actually put into action and it’s why we’re so proud of it and why we believe customers are showing the early excitement for it.
Jeremy Hamblin: Great. Congratulations and thanks for all the color.
Erik Lapinski: Thanks, Jeremy. Up next, we have Trevor Walsh at JMP.
Trevor Walsh: Great. Thanks for taking my questions. Rick, maybe one for you. It was great to hear all the commentary around kind of opportunities around AI coming out of Axon Week. I wonder if you could just ponder or kind of pontificate a little bit for us around the kind of nature of data in that — in AI versus the sensors that sort of drive that? Is there any worries for a product for such excuses, for example, where it’s relying on not just Axon proprietary data, but things coming from other places where vendors don’t necessarily start to play as nice in the sandbox when we kind of realize or having realized that AI is kind of the new — or the data for AI is kind of the new gold, does that become an issue in terms of people kind of sharing that data kind of on a more longer-term basis?
Rick Smith: Well, we certainly haven’t seen it yet. And most of the partners that are sharing in through Fusus, I mean, those are really members of the community, businesses, other enterprises, churches, schools, partner government agencies that are sharing that data primarily because they want to be safer and they will only be able to have that data put to use to be able to help police do their jobs better and identify whether it’s criminal activity or solved crimes. So we haven’t seen people sort of pushing back against using that data responsibly to protect them better. Jeff, I don’t know if you have any color you might want to add on that?
