Jeff Kunins: Sure. No, thanks so much for the question. Again, I mean, you’re right on both fronts, right. One is, it is the case that having aggregated access to large amounts of data are a really powerful differentiator and one of the things — one of the reasons why we put so much into everything we’ve built over the last years and it’s one of the things that we think enables us to keep building and building in differentiated ways. At the same time, one of the key incentives that helps us not — or not worry as much about the particular concern you noted is that for the most part, all of this data is in fact our customers’ data ultimately and they’re the ones where they choose to work with multiple vendors and partners, us and sensors and providers of other kinds as well as businesses in their community, they themselves get to vote with their feet about how they want the various tools they choose to work with, including us to work together.
And so they’re a really powerful voice there that incentivizes all of us to play nicely in the sandbox while working to keep making our individual products as differentiated as possible.
Trevor Walsh: That’s terrific. Really appreciate the color there. Maybe one quick follow up, maybe piggybacking a little bit off some of the Dedrone comments. How much do you intend to kind of lean into the more counter — UAS counter drone type use cases whether that’s for DoD or some of the non-public safety customers that might be there?
Rick Smith: Yes, I would say we intend to lean in pretty hard. So our goal is to protect life. And to the degree that drones are being used to threaten lives, we see that as 100% in our mission set to try to create new ways to protect from those risks. So we see this could end up being a real opportunity where Dedrone not only is useful to our existing customers, but Dedrone is interesting to a new set of customers, for example, major sporting stadiums, critical infrastructure and indeed militaries, both US and internationally, they have a customer set that is new for us and can bring our ecosystem into those customers as well.
Trevor Walsh: Great. Appreciate the questions. Congrats on the quarter.
Rick Smith: Thank you.
Erik Lapinski: Thanks, Trevor. Up next, we have Joe Cardoso at JP Morgan.
Joe Cardoso: Hey, everyone, and good afternoon. Thanks for the question. First one here, just wanted to follow up on the Dedrone questions. Obviously, we — you’ve been working with them for a while and this isn’t the first time you pulled the trigger on acquiring a partner of yours that you guys think there’s value in owning. Just curious why right now is the right time for you guys to acquire them? Has there been any change in terms of like — I know you talked the timeline, but maybe is there some type of change that maybe we don’t appreciate? And then maybe just — can you just talk about has there been any change relative to your thoughts around participating or — sorry, which parts of the technology stack you want to participate as it relates to the drone opportunity and whether that differs than what you’re doing currently around like taser and body cams? And then I have a follow up. Thank you.
Rick Smith: So, Jeff, you want to take first crack at that one?
Brittany Bagley: Maybe I’ll do timing of why now and then Jeff can talk about the technology pieces. So I think there’s a couple of things. One, we knew we were going to get a bit more active from an M&A standpoint. It’s why we opportunistically strengthened our balance sheet and did our capital raise back in the fall of 2022. And so that was really so that we could go out and be methodical and pick up some of these pieces of the puzzle where we really wanted to strengthen the roadmap and the pillars. And Rick has consistently been talking about the importance of robotic security. And so both Sky-Hero and Dedrone fit squarely into his vision for what robotic security looks like for us in the future, everything from the indoor tactical drones of Sky-Hero to having Dedrone help support DFR and help support counter drone in all of those markets.
That just goes back to timing of like when does it feel right for them given everything else they have on their plate and what they’re thinking about as an independent company versus when it makes sense to come together with us. And so I think nothing big out there that we’re not talking about other than the fact that it felt right timing-wise for them and for us. They were a partner of ours. We had invested in them before. We very much knew when we made that investment that we might make an acquisition and this is the timing that sort of worked out for both sides from an acquisition standpoint.
Jeff Kunins: Yes. And then just building from there, again, great question about the ecosystem. I’ve personally spent my sort of three decades across lots of the businesses I’ve worked in on these kinds of ecosystems that are always this delicate balance between thinking about where do you build by partner, et cetera. And those things evolve over time and you always trying to decide at each layer of the stack where do the best opportunities to really, really partner well with other fantastic teams and other fantastic providers and where over time can you get the most leverage by self-building or by growing organically. And as you see with us, that’s an evolving target, but what it combines all of those decisions over time is looking to see based on where we are now, where we see ourselves going, what’s the best combination of where we can join forces with others while self-building ourselves at both all across the hardware and software side of things.
And so you can see, for example, with drones, we made a very surgical and key decision with Sky-Hero in bringing in this very focused tactical drone hardware provider. You see the work we’ve done with Fusus and then all of the organic build you see us do everywhere and we’ll continue to evaluate that stuff carefully and be as smart as we can as we go.
Joe Cardoso: I appreciate the color there. And then maybe for my second question, just on the CapEx raise today, maybe you can just talk us through what’s driving the confidence to accelerate your investment plans this early into the year? Like obviously, you talk about it as being like a slower bookings quarter, but the pipeline is growing. So maybe you can just dive into that why pull the investments today versus 90 days in the future, right? And then just maybe a second part of that is just as we think about these investments coming online, should we think about it as being more gradual over time adding more automation and then capacity coming on slowly or is this more of a we should expect some kind of inflection and bigger magnitude in a later quarter. Any color around the timing associated with the capacity acceleration or capacity investment acceleration would be appreciated. Thanks.
Brittany Bagley: Yes, sure. So I would focus you on the part of Josh’s commentary when he said it’s the best pipeline we’ve ever had coming out of Q1 and really drive you there. I think what you’re hearing from us is like, yes, we had slightly softer future contracted revenue in Q1, but that is not at all indicative of how we see the year going, which I think you can see from our guidance and our commentary. And so as we look out at pipeline, as we look at the demand for TASER 10, as we look at the 33% growth in Q1, we basically said that in order to keep meeting that demand and we don’t want our customers to have to wait too long for our products that we needed to invest in more capacity. And then the way we invest in capacity is we’re buying pretty specialized equipment to run our lines and do our manufacturing and so there’s lead times associated with that.
So right now, we have to start making investments to support capacity increases in 2025 basically at this point. So there’s no inflection point. You just see us nicely and slowly ramping our capacity increases, maybe not slowly, but steadily ramping our capacity increases to meet that demand and trying to get out in front of it so that we don’t get caught in 2025, saying we don’t have the ability to meet demand and we’re going to have to backlog our customers for a significant amount of time. So that’s really just what we’re seeing is making sure we’re getting ahead and being prepared for 2025. If we waited 90 days, that would just mean we were bringing it on 90 days later in 2025 when we got ramped up and I think we have enough confidence.
I’m telling you we have enough confidence in the pipeline and the demand that it’s prudent for us to bring that online.
Joe Cardoso: No, understood, Brittany. Thanks for all that color. Appreciate it. Congrats on the results, guys.
Brittany Bagley: Thank you.
Erik Lapinski: Thanks, Joe. We’ll take our last question from Mike Ng at Goldman Sachs.
Mike Ng: Great. Good afternoon. Thanks for the question. I have two as well. First, just on Axon and Cloud Services, it was up $12 million quarter-on-quarter. Could you talk a little bit about how we should think about the sequential growth in this line? Is this low double-digit dollar growth, sequentially still a good way to think about it? Qualitatively, is this more user base driven with the growth in the installed-base cross body and fleet or are we beginning to see more software and I’ll call it ARPU uplift from records and standards and dispatch? Thanks. And then I have a quick follow up.
Brittany Bagley: Yes. So our step up quarter over quarter was almost $13 million. I would say part of that was in Q4 last year. We had a really big step up. Part of that was from revenue recognition. We’ve talked particularly about how with records coming online, some of that revenue recognition is going to be a little bit lumpy. So we had a particularly large quarter in Q4 and then that leads to a slightly smaller step Q4 to Q1. But I also think $13 million continues to be a pretty healthy step and sort of in line with what we’ve indicated is like if you averaged out our quarters, that feels like a pretty normal step up each quarter.
Mike Ng: Great. Thanks. And then I was wondering if you could comment on some of the Axon wins that have been reported in the media. How is RCMP field testing going? Are there any themes across the wins in Cornelius, North Carolina or Puerto Rico? I know some of them were from a large competitor. So any themes in terms of product or costs that are driving those wins? Thank you.
Josh Isner: Yes. Thanks, Mike. Great question. I’m going to give you a little bit more of a general answer on them. I think we’ve said this a lot about our international business that we aren’t going to be or — and we’re not aspiring to be the kind of low-cost vendor in the space. We believe what we’ve built is really, really valuable and we believe that we can perform and our products can perform in the field just as we say they will in the written solicitations. And that’s not always the case for other vendors in this space. And so at times, a customer upfront might focus on cost — and say, hey, this is the lowest price point. And then when they start to use the products and test them out and see what they do well and where the shortcomings are, they might feel like, hey, the ROI is such that we should look at a product that’s priced differently even if it’s higher and oftentimes that’s where we’ve come in internationally.
And while it takes a little bit of discipline on the front-end, we think it’s the right long-term winning strategy because we do really have a lot of conviction that what we’ve built, a police officer is lesser served with something else in their hands or on their chest or on their belt. And so we’ve got a lot of conviction that’s the right strategy and we’re starting to see that play-out in international markets.
Mike Ng: Excellent. Thank you for the thoughts.
Rick Smith: Thank you.
Erik Lapinski: Thanks, Mike. I think that’s it for questions today. We’ll turn it over to Rick to close us out.
Rick Smith: Awesome, right. Well, thanks, Erik, and thanks again to all of you for joining. I’m really proud of our entire team and the incredible execution they continue to show. We’ll be really excited to come to you with more updates later this year and we look forward to seeing you all again in August.
