Andrea James: Meta Marshall at Morgan Stanley. Go ahead, Meta.
Meta Marshall: Great, thanks. And congrats on the quarter. Maybe just as a first question, just in terms of kind of the increase, ways that you guys plan to use AI and automation, just where are kind of customer conversations on just ways in which they want to see you incorporate some of these features, ways in which, you know, they just kind of want to get their heads around some of that. And then just maybe as a second question for you, Brittany, you know, gross margins obviously took a small step down quarter-on-quarter, but were better than expected. Is that — some of that just from kind of the scale, or is some of that just the ramp of Fleet 10 just kind of having smaller headwinds than expected? Thanks.
Rick Smith: Let me start with the AI question, and we’re going to be a little cagey here. I will tell you, at IACP, I was showcasing a prototype, a functioning prototype of an AI-powered service, and it got, if not the strongest, one of the most positive, strongest reactions I’ve ever seen in a product. Obviously, we have a ton of data that we could be running AI on. The art of this is to figure out where can we create maximum customer value while mitigating the risks that are associated, you know, with what can go wrong in AI. And we think we found at least one very powerful use case. But I’m not going to give any more details for competitive reasons, but stay tuned. Exciting times ahead.
Brittany Bagley: Okay. Which leaves us with gross margins? So I would say gross margins were better than expected, really, on the incredibly strong software performance in the quarter. So our software business is gross margin accretive for us. And so the more we build up there, the better overall impact for our gross margin. So I would drive most of the outperformance there. As I think about, you know, why was it down, you know, still a bit year-over-year or quarter-over-quarter? That’s really just on mix of our sensors business and the fact that our sensors business also performed incredibly well and the fact that our TASER 10 is also performing quite well. Our TASER margins overall improved quarter-over-quarter, but the mix in there of TASER 10 was quite high.
Andrea James: Yes. Thank you, Meta. Josh Reilly at Needham. You’re up.
Josh Reilly: All right. Thanks for taking my questions. In terms of the Department of Veterans Affairs Records win, can you just discuss what some of the factors were in that win? That’s obviously a very large deployment. Curious if your openness to third-party or best-of-breed modules was a factor in that one.
Rick Smith: Josh, thanks for the question. And to answer directly, no, that wasn’t a big driver. Instead, it was just this connected story around digital evidence in reporting. And that we think is consistent across pretty much every customer interested in Axon Records, which is they just see this link where, hey, if you have the video and you see what happened in the video, like what effect does that have on the ability to write a police report, you know, easily in a scalable and simple way. And so, you know, going back, you know, Brian Wheeler, we’ve talked about from time to time in terms of his leadership of our records product and his team just continues to perform very well in that regard. And our customers are seeing the value. And then, you know, like we mentioned before, having a FedRAMP-authorized cloud RMS product just aids in the momentum there. So it’s really a combination of those things all coming together.
Josh Isner: There are two other things, I would add. One is just the customer relationship, namely, as they deployed our evidence.com and our other products, they just had a great experience that they shared with us was just different than they had with previous technology. So that set us up for the win. Then the other piece I would say is, we made a decision years ago when we are building records that we were not going to go try to win in RFPs for Record systems because we believe that’s a recipe for building bad software. If you go build, you know, 800 checkboxes that all the great on the paper report you submit for the RFP, you’re going to build a lot of breadth and there’s almost no reward for good user experience. And we structured a lot of our go-to-market around how do we win in the hands of the user and set this up where we can build great software that does the most important things really, really, really well and then integrate other systems to handle sort of the fringes and the breadth of it.
And I think that was a, you know, pretty important here where what we were able to show them was a functional system that they could test out and go, wow, this just works great in the hands of the user because we spent the time to build it that way, you know, bringing in people with consumer backgrounds that are used to building UI. That’s got to be super intuitive, not built to a large government spec document. No offense to government, you know, procurement specifications, but there’s a reason government spec software is typically not great, and that’s because, you know, you’re building it to very large specs. And in there, there’s typically not a real easy way to quantify the user experience. And we focus on user experience first and then identifying which of those specs are the really important ones to the people actually using it.
And I think that philosophy, we did not expect to win a federal agency this early in Records lifecycle. So it was a really pleasant surprise.
Josh Reilly: Got it. And then just to follow-up on the profitability piece. You’ve done a really nice job of managing profitability and higher margins over the last year. As we see this, you know, the growth opportunity in terms of revenue appears sustainable even in this kind of challenging macro. Should we expect additional hiring over the coming quarters, or can you manage the growth in business with kind of the current headcount, which would imply more operating leverages coming? Thank you.
