During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our expectations as of today and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, as discussed in our SEC filings. We will also discuss certain non-GAAP financial measures. Descriptions and reconciliations to non-GAAP are included in our shareholder letter and available on our investor website. And as always, before we kick it over to Rick, we have a quick video to show to get us started. Let's pull it up.

All right, everybody, IACP 2026, biggest week of the year for us. This is our Super Bowl. This is where we get to see all of our customers, all the police chiefs around the country. We actually bring our city manager, our chief operating officer.

What's unique this year, customers are coming to us to help them navigate AI.

Everything's changing from day to day. The technology is incredible.

Y'all bringing it together is really awesome. This year we're highlighting a number of cool AI features. We're highlighting the new Covert Taser, but we have also announced Axon Body 5, the most AI-capable product. What Axon Body 5 and Body 5 Pro bring for our customers?

Better imaging, better connectivity, and even better battery life than Axon Body 4. It brings our body cameras into the age of AI.

And not only are we here in full force at Axon, we're right next to Skydio. Our partner and market leader in US public safety drones. These guys save lives every day.

We are in such an amazing position to ride the wave of AI empowered by the trust of our customers to be the ones that help them navigate this change. And so as we maintain that trust, we will be able to build value at an exponential scale. All right. Thank you, Erik, and good afternoon, everyone. I want to start with the biggest decision we made this quarter. In fact, it's also the largest investment in Axon's history. Flying robots are coming. They aren't a novelty. They aren't a someday idea. In the coming decade, we believe there will be millions, maybe tens of millions, of autonomous drones in American skies. They'll be inspecting infrastructure, delivering goods, supporting agriculture, and responding to emergencies. They'll touch nearly every part of American life. Public safety will be one of the first places that change becomes real. When a 911 call comes in, a drone can be overhead in seconds, well before any human could possibly get there. So today, we announced an expanded commercial partnership with Skydio along with an additional $1.2 billion investment that takes our fully diluted ownership to 37%. We're excited to build on the existing partnership with Skydio and the investment is the largest that we have ever made. Here's what these two transactions mean for us. First, we've secured our ability to integrate the best public safety drones in the world into the Axon ecosystem as Skydio's exclusive public safety distributor in the US and Canada. Second, we now own a meaningful piece of what we believe could become America's leading drone company in public safety and across many other sectors. Skydio stays focused on what it does best, moving incredibly fast and building world-class autonomous flight. We bring that technology to every agency we serve and we share in Skydio's success well beyond our own market. Pair that with D-Drone, which protects agencies from threats in the sky, and Axon now covers both sides of the airspace. Now picture how it all fits together. A call comes in to Axon 911. A Skydio drone gets there first. Phusis builds a picture in real time. An officer arrives wearing an Axon Body 5 and already knows what they're walking into. AI assists throughout the incident and everything flows into evidence reporting and the workflows that come after. Those aren't separate businesses. They're one connected super intelligence powered system, which brings me to Axon Body 5. The spec sheet is impressive. 25 times the processing power of our prior generation, better connectivity and longer battery life. But the real breakthrough is that one device now records the scene and it reads the paperwork. Just like our Fleet and Outpost products, Body 5 Pro now has two cameras. One is optimized for video and the other for high resolution still images. An officer can now scan a driver's license or other documents seamlessly right from the camera on their chest. Why does that matter? Well, I want a future where a police officer never has to tie up their hands with a pen and a pad of paper again. Their hands stay free, their head stays up, they can scan information, and their AI partner processes it automatically. and with six speakers, your AI assistant is sure to be heard during translations and interactions. With Body5 Pro, that AI partner now has a physical form with expanded capabilities. And that partner is already looking out for them. Guardian is now generally available. It can hear when a situation may be escalating and alert someone in the real-time operations center so another set of eyes is on that officer's livestream and help is on the way. Axon's got their back. And customers are responding. Our AI products have already passed $100 million in annual recurring revenue. It took us nearly two decades to build one of the largest software businesses in public safety. AI became a meaningful part of it in less than two years. We also launched Taser Ion, which brings Taser technology to people it's never touched before, undercover officers, protection teams, and international customers who felt we didn't have the right form factor for them. At IACP, you could see it in people's faces as the light bulb came on. Now, Axon 911 is already beating my expectations, and we're not even a year into bringing Prepared and Carbine together. Three major full-scope deployments are ramping in the field, and we're winning new customers at an accelerating pace. Then there's Gravity, where we're building the largest repository of AI-enhanced public safety data Just like in physics, gravity pulls things into place, and Axon Gravity will help our customers gather all of their data into one secure place where our mission engineers help them apply AI to see the patterns hiding in plain sight. No more jumping between siloed systems. Our customers focus on keeping their communities safe, and we will bring their data to life. I want to close with what matters most. You may have heard me say this before, but it bears repeating. We have many hundreds of patents, many petabytes of data, and millions of deployed sensors and a world-leading software stack. But none of those is our most valuable asset. Our most valuable asset is the trust of our customers. You've likely seen the license plate reader controversy in the press. At its core, it's about broken trust. Misused systems, mishandled data, and uncontrolled sharing. Nearly 500 agencies are in our pipeline or have already switched to Axon for ALPR. And the reason is simple. They trust us to help them protect their communities without losing their community's trust. The world is moving at unbelievable speed. Everyone feels it, and so do our customers. In this age of accelerating disruption, they need a technology partner they can count on to help them navigate a pace of change the world has never seen before. That is the role they trust Axon to play. And here's the thing about trust. It takes decades to build it, so you have to protect it with everything you've got. So I will guard One thing with every ounce of my energy that this company earns that trust and defends it every day with the actions we take and the promises we deliver on. That's how we'll build a safer world, one that protects privacy and strengthens democracy in a way all of us can be proud of. And that's how we build a company that doesn't just last for decades, but for generations. I couldn't be more excited about what we get to build next. And with that, over to you, Josh.

All right, thanks a lot, Rick, and good afternoon, everybody. As Rick said, it was another strong quarter, and we're well positioned for another great year at Axon. I'm particularly proud of the Axon Body 5 team for such an awesome launch at IACP. AB4 set a high bar in this category, and we believe AB5 further differentiates Axon as the technology leader in public safety. We continue to focus on the magical formula of pairing world-class innovation with the strongest channel in the industry. And that combination is once again proving to unlock tremendous value. The team had another strong bookings quarter in Q3 and is working hard to deliver on a very promising pipeline in Q4. Total bookings and five-year normalized bookings are up more than 20% year-to-date, and even better, bookings across some of the newer parts of the portfolio have more than doubled from last year and have already exceeded $1 billion in bookings year-to-date. And we could see that number double in Q4 alone, as the pipeline supports it. The opportunity for these products is not a theoretical TAM. We are winning in them. And that's true across our growing set of customers, too. First, state and local. This remains the foundation of Axon, and the business is performing at a very high level. The team is built around mission-driven, customer-focused individuals at the top of their profession, and I am in awe of their consistency and work ethic. Another team firing on all cylinders is Corrections. It is amazing to see how far Axon has come in this market. Our three largest deals this quarter were all major ecosystem deployments with three different state DOCs, one eight-figure and two nine-figure multi-year agreements across nearly everything we sell. Think about that. A customer vertical that was almost entirely new to us not too long ago is now going all in on Axon. International is right there too. Bookings are up more than 30% year to date on top of a record year last year. And we have several massive deals in Q4 that should accelerate that growth. Then there's Enterprise. We're still really early here, but about two years ago, we signed our first major Enterprise customer agreement for Fusis across roughly 300,000 video streams. Today, we are working on an even larger agreement with that same customer to add body cameras and AI solutions like Metacoach. That's the playbook. Land, deliver, delight, and earn the right to do more. and finally Federal. Coming off last year, we said we expected this business to start picking up and that's exactly what happened with Bookings. Year to date, we're up more than 5x last year's results. We also have several very large federal opportunities in the pipeline across D-Drone, Taser, and body cameras. We have a good line of sight into these projects, but we are seeing federal procurement move a bit slower around funding and election cycles, and some programs are simply taking longer to work through approvals and deployment steps than we originally anticipated. Three large federal DDROM deployments are really the clearest example of what we're talking about. Together, they represent about $130 million of revenue and $200 million of bookings that we expected in the second half of this year. One $30 million deployment was expected in Q3, and then two more, totaling another $100 million, were marked in our Q4 forecasts. Unfortunately, we're seeing some delays and we can't be sure those come through this year. The reality is these projects are different from what Axon has historically dealt with at this scale. A major counter drone deployment can involve sites to prepare, equipment to install, federal procurement requirements, ITAR and export permitting, acceptance testing and operational requirements. Sometimes things outside of our control or even outside of the customer's control take a little longer. And because these are hardware-heavy deployments, one individual project can represent tens of millions of dollars of revenue at once. Historically, even very large acts on customer agreements tended to recognize revenue over the longer period. Now a single D-drone deployment can move our reported growth rate by hundreds of basis points between quarters. That's a new dynamic for us. We're calling this out very specifically because I don't want it to obscure what we're seeing in the rest of the business because the demand picture is still very, very strong. As CounterDrone gets bigger, particularly with federal and international customers, we are going to have to work through that dynamic quarter to quarter and be thoughtful about how much timing-sensitive hardware we assume in our guidance. For this year, we're taking a very conservative approach. If some of these deployments get done before December 31st, we will treat those as upside. But we are not going to force a deployment or bank on timing we don't fully control just because our fiscal year is ending, especially when so much federal momentum is mounting. While a newer dynamic to manage, we're thrilled to be working on opportunities this large in such a relevant and fast-moving space and in a business we have so much confidence in. On a similar note, I want to talk about inventory. Our inventory investment is affecting free cash flow this year, and we're actually accelerating some of that investment because we see the opportunity to get ahead of demand, especially in the Ddrone platform. That's what drove over $100 million of increased inventory in Q3 alone. But I want to be very clear about this and about how I think about the puts and takes of these decisions. Number one, we sell mission-critical tools that save lives. First responders depend on our ability to ship products in a timely manner. Number two, our core hardware does not go obsolete. We sell tens of thousands of X2s and Axon Body 3s beyond their useful life despite these product lines being 15 and 6 years old respectively. This makes us different from almost every other connected device company given the lack of obsolescence risk. Our planning work in this number three suggests the risk of geopolitical conflict like China and Taiwan disrupting access to certain critical components like batteries and chips. And that risk could be roughly in the range of 10 to 25% depending on the component in the scenario. In that event, Axon would have limited access to these components given our volumes relative to the major consumer hardware brands that rely on the same components. Now again, this hardware does not go obsolete. This is the foundational element, and it's very unique to Axon, that makes this strategy viable. To be clear, we're not predicting a major supply chain disruption next year, and we'll be thrilled if one never comes into fruition. But for Axon, we have the balance sheet to easily mitigate this risk. So we're doing something about it. What do we get for that investment? We get better product availability, we get more flexibility in purchasing, we have more confidence in what we can deliver, and we have greater insulation if something disruptive happens in the supply chain. I don't see many better ways we can directly invest in our own business than this. We have spent years earning our customers' trust, as Rick mentioned, and I don't want to put that trust at risk because we're trying to optimize for one year of free cash flow. Once we hit the desired inventory state in Q1 or in early Q2 of 2027, the inventory spend will be reduced to backfilling the supply. And as the risk hopefully dissipates, we will take the inventory levels back down at the appropriate time. I generally do not talk much about inventory on these calls, as everybody knows, but given the investment, as well as my absolute conviction that this is the right strategy for Axon, I wanted to spend a few minutes on it today. In the midst of our best year in company history, we remain maniacally focused on delivering over the long term for both our customers and our shareholders. And we will do just that. Over to you, Brittany.

Thank you, Josh. Rick and Josh covered a lot of ground, and there is a lot to be excited about. Since the financials are in our shareholder letter, I'll just add some additional color. Revenue was $909 million, up 28% year-over-year. We expected the third quarter to reflect normal seasonality, which it did. In addition, though, we had the large federal D-drone deal Josh discussed. If that had landed in the quarter, we would have been up over 30%. Connected devices revenue increased 16% to $472 million. Platform Solutions was a standout, growing 106% year-over-year to $125 million, driven primarily by Ddrone even without the large federal deal. Ddrone delivered its second-largest quarter ever, even coming off of several large World Cup-related shipments in Q2. Demand remains very strong, and the pipeline of large projects keeps building. However, as these deals get larger, particularly with federal and international customers, the timing of individual projects can move results from quarter to quarter, as Josh mentioned. So we're resetting how we guide. We'll include these deals once we're confident they'll ship in the quarter, which keeps them as upside and limits timing risk going forward. Taser revenue of $233 million declined modestly on lower Taser 7 sales. We continue to see strong Taser 10 demand, as evidenced by our largest ever T10 deal last quarter, and we expect the category to grow again next quarter. We also just launched Taser Ion, where the early customer response indicate a compelling future growth opportunity by expanding the pool of potential Taser customers. Within personal sensors, Body 4 grew 25% sequentially, in line with our expectations. Body 4 demand remains strong, and with Body 5 launching next spring, we will begin another major body camera upgrade cycle for customers. Software and services was the true highlight of our quarter. Revenue growth accelerated almost 700 basis points sequentially to 43% year over year. At 437 million, software and services delivered its highest quarterly contribution ever and is approaching half of total company revenue. Growth continued to be driven by our digital evidence management business and increasingly by newer software offerings. Real-time operations, records, AI, D-drone software, and 911 collectively reached an annual revenue run rate of nearly 500 million, more than doubling from last year. That strength is also showing up in our recurring metrics. ARR increased 40% year over year to $1.8 billion, and net revenue retention remained strong at 126%. Turning to profitability, adjusted gross margin was 59.2%. Gross margin continues to reflect product mix and increased component costs, particularly memory. We believe winning early and significant new markets like CounterDrone is more than worth the near-term mix impact, and over time we'll work to continue improving these margins through operating scale and an increased mix of software. Memory costs are driving approximately 50 basis points of headwind to margins this year, with the highest impact expected in Q4, since we benefited from lower-priced inventory purchased earlier in the year. Our current planning assumption is that elevated memory costs remain a headwind through 27 and 28, but that pricing doesn't continue to increase materially from what we're seeing today. Given those gross margin headwinds, operating leverage remains an important driver of our margin expansion. Adjusted EBITDA increased more than 33% year-over-year to $236 million, representing a margin of 25.9%. On cash flow, Josh covered the primary driver this year, our intentional investment in inventory. We expect to reach our target inventory levels in the first half of 27, and from there, the cash impact should begin to normalize. Excluding the inventory investments this year, free cash flow conversion on adjusted EBITDA would exceed our 60% target. And once we are through these investments, we expect to get back to that target. For the full year, we expect to generate $350 to $400 million of free cash flow. That compares to our prior target of $450 million as we continue to invest more in inventory. At the midpoint, conversion is about 40%, and Q4 free cash flow alone would be approximately $450 million. I'd also like to touch on our capital structure. Our goal is to build a capital structure that minimizes our cost of capital while preserving operating flexibility and allowing us to invest back into the business both organically and inorganically when we see compelling opportunities. We continue to focus on cash generation. In this quarter, we felt the convertible market offered historically attractive terms. As a result, we raised $1.15 billion and are using those proceeds to add cash to the balance sheet as well as fund part of our Skydio investment. The $1.2 billion investment in Skydio will be a mix of cash and stock, approximately 60-40. In the P&L, you'll see revenue from the Skydio partnership in software and services at our channel margin. And since we don't have control or significant influence over their operations, there is no consolidation or equity method accounting. We're very excited to make what we think is a compelling investment and to deepen our relationship through an exclusive channel partnership with the best U.S.-made drone company and a world-class team. Now turning to guidance. We expect fourth quarter revenue of $990 to $1.01 billion. Our Q4 outlook no longer assumes two large federal drone deployments totaling approximately $100 million. combined with the 30 million federal D Drone deployment that moved out of Q3, these three programs represent approximately 130 million or nearly 500 basis points of growth this year. That was included in our prior second half expectations. Even without these materializing, the midpoint of our growth for the year is still above 30% for the fifth straight year. We now expect fourth quarter adjusted EBITDA of approximately $245 to $250 million, implying full year adjusted EBITDA of $924 to $929 million, or approximately 25.6% margin. Overall, we're proud of the 28% growth we delivered in Q3 and excited for what we are going to deliver in Q4. The underlying demand picture remains strong, supported by our $15.8 billion of future contracted bookings. Our product innovation is paving the way for the future. We're balancing investment in the business with delivering profitability and cash flow. We look forward to sharing more on 2027 and our longer-term outlook when we report Q4 earnings in February. Erik, back to you.

Thank you. All right. It looks like we're all up in gallery mode, so we'll start taking questions. Just an ask so that we could try to get to everyone today to keep it to one question, if possible, and we could circle back around. We'll start with Joe Cordoso at J.P. Morgan.

Thanks for the question. Yeah, so maybe one question that I'd ask here is just starting off with the Skydio announcement, you know, maybe just can you take us a little bit deeper in terms of the strategic rationale, both in terms of the investment and the increased ownership, as well as the distribution exclusivity, you know, and is this a path to 100% ownership situation longer term?

Yeah, I think I'll take that one. So we spent a lot of time thinking about this, and we love Skydio. And we looked at what is the right structure. And right now, what we think is best for both of us is to be the most successful partners under this structure. with their exclusive distribution in public safety that protects our core market. And we're providing them with more dollars to invest to go further expanding their lead in autonomous drone technology. What's great about this is I believe this is a foundational technology that will drive the next decade. Flying robots will be everywhere. It's going to be much bigger than DFR in public safety. It will impact everything we touch. So under this structure, Skydio can do what they do best and we can do what we do best. We have real ownership in them and the future they're building without holding them back. When I look a few years out from now, I think what we'll see is we'll both be in a much stronger position than we would have been if they were part of Axon at this moment in time. It means we have an incredible partner, we're fully aligned, and we can run the bill down the field together. Now, we'll see what the future holds, but at this moment in time, after a lot of consideration, we thought this was the right disciplined approach that created a true win-win.

I might just jump in and add a couple more considerations just in terms of the practicality of everything. To be the number one drone company in America, which we have a lot of confidence Skydio is and will be well into the future, this is going to be a particularly Thank you for joining us. Doing that unencumbered on their own as a separate company, I think, is the thing that allows that to happen to the fullest. And frankly, we've made four or five acquisitions in the last few years, and we're seeing all of the benefits of those acquisitions. We're seeing the growth. We're seeing the adoption. And for us right now, We need to make sure we continue to see that through. When you look at Fusis, the opportunity in both public safety and enterprise is significant. When you look at Ddrone, despite some of the timing, this business is moving fast and showing a lot of promise. 911, we continue to win new 911 centers around the country. And so, you know, when you look at all these things, we have plenty of work to do in the next couple of years. And Skydio has to continue to execute and heavily invest to make sure that they widen their lead in U.S. public safety. And so, you know, thinking through all of that, this structure was, you know, the best possible way to land the plane, so to speak, on that. Or land the drone.

Thanks, Joe.

Up next, we have Ryan Abbott at Paper Sandler.

Thanks for taking my question. Could you give a bit more color on the reasons for the delays of the federal drone deals? Was that related more to delays in closing the deals, or was that related to any issues with getting the hardware for those deals?

More so the former, but also making sure that we have availability of the hardware to ship. And ultimately, these systems, they consist of a lot of hardware from a lot of different sources, including stuff that we make. And so matching all that up takes a little time. More so the timing, I think, going into the election cycle that certainly had an effect on the timing. And then, you know, just the general procurement. I think like one thing that's a little different about federal is they close their fiscal year September 30th. And so, you know, they had a lot of priorities to get through. There was, you know, like we said, some dynamics around the election. And now, you know, in October 1st, They're just starting their fiscal year. So while we're moving fast on some of these procurements, they don't necessarily have the just starting out their fiscal year. They're going to have flexibility in the next couple of quarters as to how they want to time these deployments and orders. And so I thought it was prudent to make sure we're being very conservative in how we talk about those opportunities.

Yeah, I would just add, I think you can see in our inventory investment, and one of the reasons it was higher in Q3 is because we have been investing in the inventory that we will need to support these big deals. So I think the good news is that we're not seeing an underlying risk to demand or need for this product. It truly is just a timing piece, and a lot of that timing comes down to how big some of these deals are.

Thank you. Thanks, Ryan. Up next, we have Mike Ng at Goldman Sachs.

Good afternoon. Thank you for the question. Mine is just on Skydio. In the letter, you talked about Skydio expecting a billion dollars of bookings this year. I was just wondering if you could just add a little bit more texture in terms of the opportunity set. Sell like DFR in the markets that you currently operate in. Are there additional legal or other types of regulations and approvals that you need to make those markets actionable? And then anything you could share around expected growth rates off of that billion dollars of bookings and thoughts around how we should think about the channel take rate, right? If typical IT channel distribution is kind of in that Low to high single digits. Are you something better than that, just given your kind of unique go-to-market? Thank you.

Sure thing. Yeah, ultimately, you know, one of the most valuable elements of this partnership for Axon is the channel exclusivity in U.S. public safety. And frankly, you know, we've talked a lot over the years about what we view as our strengths as a company. And at the top of that list is our channel. And so we certainly believe we can help as we have, you know, historically continue to, you know, proliferate Skydio. It certainly fits very nicely into the Axon ecosystem and and network and adds a very, very important capability. I would say whenever Skydio is in a deal, they generally don't lose it. The deals that they're not winning are the deals that are, you know, that for one reason or another were outside of their radar. And, you know, I think again with our channel that that will minimize some of that risk into the future. And then outside of public safety, Mike, we certainly see a ton of opportunity for Skydio and Enterprise as well. And we're partnering on several large deals with, you know, Skydio being a piece of the overall network that we sell into these enterprises. And there the DFR use case is still very, very viable. Some of the largest companies in the United States are in our pipeline jointly with Skydio now and are certainly another opportunity for both of us to add value together. So absolutely very bullish. We've talked a lot about this idea of the land and expand motion in public safety, and now we're seeing it in enterprise. And Skydio is just another landing point here now that allows us to kind of expand our capabilities in the value we deliver to these customers.

Thank you. Up next, we have Josh Riley at Needham.

Great, thanks for taking my question. What are you seeing from customers following the fallout from one of your competitors' PR challenges in terms of deals pushing, if at all? It seems the LAPD deal renewal still requires city council approval to close and has been a high-profile news event there locally. They're yet to vote on it when the existing deal you had there expired a few months ago. Thanks, guys.

Yeah, thanks, Josh. Look, I think it's always a great thing when democracy rules the day on all of this. So I would not characterize it ever as bad when city councils approve new technologies. And so we embrace that part of the process. And frankly, we're going through it. in a lot of different places right now. I would say the big takeaways are there are some jurisdictions that are very excited about ALPR and there are some that are less excited about it or don't want it at all. And our job is to support the customer and their communities on the projects they desire. So I would say in general, if ALPR is not something that's desired and it was part of the deal historically, this isn't one of those things that's like, oh, the whole deal is... and so forth. is something that's widely supported regardless of how someone looks at the world. And so, you know, it's kind of business as usual on the bookings front and the deal conversion front for us. And, you know, there are some that are including ALPR where folks are excited about it and some where it's not included. Most of all, it's important that public safety and the communities they serve are on the same page as to what they want and what they support and how these products can add value to their communities without compromising privacy and trust.

The one thing I would add, we're seeing a lot of activity around ALPR legislation, and most of it is really pretty constructive. So I think some of the, what we're hearing from a lot of our customers too is like, hey, we're going to take a pause until we get the right safeguards in place. So I'm hopeful, you know, again, the political landscape changed a lot in the last 36 hours. And I only say that in that, like, it's less predictable, right? We're going to have a new party in power in Congress. So It's hard to know exactly what's going to happen there, but personally, I have faith that I think the pressure to do something is going to remain. There's a lot of focus on AI in general, and I think a lot of the work we've done around ethics and responsibility positions us well to be a thought partner with our political leaders as they figure this out, and a technology partner. And again, we've had several hundred agencies already come over to us from competitors, and the number one reason is The trust that they feel that we're going to do it the right way with them. And there's many hundreds more that are in the pipeline.

Awesome. Thank you, guys. Thank you, Josh. Up next, we have Tim Long at Barclays.

Thank you. I wanted to touch on the AB5 launch. Could you just talk a little bit about kind of how meaningful you think this can be? Obviously you have, you know, two products there, one leaning heavy into on-device and AI features. So just hoping you could talk about kind of the rollout and how you see, you know, number one, an upgrade cycle and in the context of having a lot of the customer base already on, you know, subscriptions where maybe they might already have an upgrade cycle. Thank you.

Yeah, maybe I'll take this first. So look, the memory costs in particular hit pretty hard on AB5. And as we were looking at it, we've identified we have two customer segments. We have those that tend to be more leaning into AI and really looking at the full solution set. And then we have other customers that are more price focused. And we felt just given the cost structure of what was happening with memory and the higher end microprocessors that it made sense for us to bifurcate at this point to be able to serve the more cost sensitive customers. And at the same point, we always want to make sure we're the technology leader in this space. So we think this just gives us the ability to serve those different segments.

Maybe I'll just add a little bit on the on regular refresh and upgrade cycles. You might see a little bit of a pause on that in Q1 just because we'll be so close to the launch of AB5 and it really does have some fantastic additional features and then I think you can see that we'll get a lot of traction and a lot of excitement as we go through next year on that AB5 launch. In terms of other, you know, unlocking other AI features, we continue to have such a huge opportunity in front of us in terms of our AI software. We're growing nicely. We're really happy to share the 100 million of ARR, but that 100 million of ARR still has a ton of opportunity ahead of it. And so I think this only helps drive that.

Thank you. Thanks, Tim. Up next, we have Keith Houseman at North Coast.

Great. Thanks, Erik. Hey, guys, it's been about a year since you guys have got prepared in Carbine and combined them together for Axon 911. And I think, Rick, you said that it's probably performing better than you expected. But maybe you can unpack a little bit about its performance. And I guess the question I have is, you know, is that are you guys able to expand what the customers would traditionally pay for those services because of what you guys bring to the table? in terms of just growing over the overall pie. And perhaps any numbers you can give us in terms of how many customers are currently engaged with you guys in Axon 911?

Sure. Keith, I'd say that the headline is ARR's doubled across the 911 business this year from, you know, the end of last year. So very encouraging from that perspective. The number of 911 centers we have won throughout this year is in the dozens, you know, up from Exxon wasn't really participating in 911 last year. And most importantly, I think, you know, Thank you for watching. and many, many more. Deploying them in tandem will just create more value for the customer and frankly, more efficiency when you think about some of the tools and products in the middle of just taking a 911 call and getting an officer to the scene. And so we certainly see a lot of economic value in this as well. But yeah, very, very talented teams executing very well, excited about all the progress and yet another area where we can expand and compete to win more and more customers on the Axon ecosystem.

Thanks. Thank you, Keith. Up next, we have Mita Marshall and Morgan Stanley.

Great. Thanks. You know, in the past, you guys have talked about kind of the learning curve or approval process that went into kind of the demand on some of the report writing products. Can you just speak to that, you know, how you see that adoption process going on Guardian or just what early signals are about kind of what are the barriers to getting that deployed with officers? Thanks.

So I would say the because Guardian is a real time product, really, that's more of an internal thing within the agency. And one of the things we did, Mike Wagers, who is our chief customer officer, did a fantastic job of engaging with police unions early on to make sure that we were We're covering all the concerns from not only police management, but frontline and their representation. And we've gotten really strong feedback from both. The one thing that is different that I think maybe slowed down draft one a bit is because draft one creates documents that then have to go over to prosecutors and the courts. And we also serve those customers. they tend to be pretty conservative, shall we say, from a technology perspective and having some initial concerns about, my goodness, if AI has written the report, how does that stand up in court? And those are concerns that we've heard all along and we've built many, many controls in place to make sure that it is the officers, that is their report. It's derived from their speech, like they're basically interactions and they're dictating what's happening as they go. So I think the thing that's made draft one, again, taking a little effort, is we have to get the prosecutors to sign off. And part of it is the fact that we're also giving them AI tools that help them sort through these briefs as well has been helpful. I think Guardian, we're going to see less of that where we have to have secondary agencies sign off. We think the agency internally together with its union can make the call. And we've just not seen resistance from the unions. They really love this idea. of wow, like anything that can help their officers stay safer and call for assistance when things are escalating is a good thing.

I'd just add one additional thought, which is, you know, Guardian is the latest of these exciting features that, you know, that Jeff's team has done a great job developing. But this really demonstrates kind of, you know, what we believe will happen over the next couple of years with AB5. Now, there's no inhibitor on how much AI we can run at the edge on these body cameras with this and many more. and so we're very excited to continue to add more and more value associated with these tools and frankly as others start to think about a real-time translator for the first time or draft one, we are so far beyond that at this point in terms of the capabilities we're going to be able to deploy on these body cameras and we consider the second lens in there as well. Just very excited about what the future holds and the value we'll be able to deliver across products like Guardian to our customers.

That's right. I think that just builds on, you know, you've heard us talk a lot about this unique combination of the physical socket on an officer's body or in a car or wherever it is, combined with practically applied, you know, AI right in the moments where it matters, right? Anyone can put a translation app on an app on a phone that's in your pocket that you have to pull out and blah, blah, blah, blah. But connecting that immediately to the body camera that's already on their chest with the right speakers, the right microphone, the right connectivity, hands free, eyes free, tailored for the officer, that unique intersection of the AI with the physical objects is a huge part of our sustained differentiation.

Thanks.

Thank you, Mita. Up next, we have Will Power at Baird.

All right, great. Yeah, thanks, team. I'm taking the question. I guess I want to shift back to the original product, Taser, and try to better understand the outlook there and what that means to the total company growth going forward. I get a lot of investors' questions around what inning are we in? Is it the third inning? Is it the fifth inning? Is this a low double-digit grower from here? And if it is, What's the confidence level you can get to your 30% five-year kind of revenue CAGR growth guidance? I mean, ultimately, I think that's the key question here, especially with a revenue shortfall in Q4. What kind of underpins that continuing confidence and kind of where does Taser maybe as a piece fit in that?

Yeah, I'd say the Taser business is performing very, very well, roughly 2x the adoption of Taser 7. And you can do the math on the five-year intervals of Tasers, and certainly we're excited to, upon that anniversary, be moving forward with more exciting projects. and many more. but certainly we're very optimistic about what Taser can contribute well out into the future. And I think the big takeaway here is even with relatively conservative expectations, 30% plus growth, You know, across this business with a lot of large D drone deals slipping out, I think is a pretty good data point to show the strength and momentum that our core business has and continues to drive across our major markets. And so certainly we're feeling very Very confident and very bullish on Taser continuing to be a big part of that equation. Rick, I'll kick it over to you in case you want to add anything.

Yeah, I would just say, you know, Taser Ion is also a good one. It's, you know, we're launching another variant that opens up some new avenues as we're, you know, a little past mid-cycle, shall we say, on Taser 10. So I'm very bullish on Taser. I still see the... You know, we have not yet launched the Apollo Dart, the one that will penetrate through heavy clothing. We'd announced that like 18 months ago. We thought we'd have it out this winter. That has been a difficult problem. We're doing a lot of tuning. I'm very personally involved in it and will continue to be. I think that will be a step change function because once we take heavy clothing off the table, then I think we are on the right to become the primary defensive weapon in many countries around the world. and that, I think, will really drive international adoption. Ten years from now, the international market for tasers should be larger than the domestic market. The only thing that's prevented that from happening is the domestic market just has kept growing faster, frankly, than we thought.

Oh, sorry, go ahead.

Well, I was going to give you a little modeling help, but if you want to jump in before you can.

Maybe the modeling help. Yeah, I just was underpinning the five-year 30% CAGR guidance, right?

Yeah, yeah. So, you know, I would say, one, remember that Q3 is a seasonally softer quarter for us. And so I wouldn't read more into Taser than that. We had an incredibly big deal in Taser last quarter, which made that number look absolutely fantastic. But you are going to see just a little bit more lumpiness quarter to quarter. And so I wouldn't have necessarily expected it to be big in Q3. We will see growth in Taser as we look at Q4. And then I think to Rick's point, you will also so there continues to be good growth in Taser 10. I think you are certainly seeing a double digit grower. I don't know where in the double digits, but you're seeing a double digit grower going forward. Ion helps with that. Some of the other things Rick talked about helps with that. And then I think, you know, we're we're not. Thank you so much for joining us. and many more.

One thing I want to avoid is that this company ever gets so focused on being predictable that we stop doing things that are innovative and disruptive. Like the things that are happening with DDrone, like CounterDrone is a business, like it is growing exponentially and the worldwide need is incredible. We want to play in those markets, and that's, to me, far more important. I will fight the forces of mediocrity that would say, no, we should just build a business that's very predictable. No, if everything we're doing is predictable, we are not stretching far enough. Now, we want to do a good job helping you model the more mature parts of the business, but we are going to take those risks because we think that's how we continue to deliver growth in the 30% range. and by the way, we solve problems that are super valuable for society and for our shareholders and our customers.

Thanks, Will. Up next, we have Andrew Spinola at UBS.

Thanks, Erik. Brittany, the comment about the gross margin pressure from memory for fiscal 26, I think you said it was 50 bps. Was that to connected devices or was that to consolidated? And can you give us a little bit of color if pricing stays here? What sort of pressure do you expect in fiscal 27 from memory? And how does that affect your thoughts on margin expansion? Thanks.

Yeah, so the 50 basis points was to consolidated, you know, really to consolidated adjusted EBITDA, but it works both ways for the year. The way that it works for us, because we do invest in inventory and then we capitalize that inventory in, is we didn't see much of an impact from memory in the first half of the year because we were doing that at old memory prices. You started to see a little bit in Q3. It ramped in Q4. And then it will hit us harder for next year than it hit us in Q4 of this year. So you guys can go back into it. But that's like more than a 4x impact on that 50 basis points roughly. That's obviously a challenge for us on gross margins, and I think you're seeing some of the gross margins come down because of that. I do think it's a challenge that'll be with us through 27 and 28, and then hopefully we are not in as difficult a position with memory as we are today. I also don't have a perfect crystal ball on that, so I can just tell you what I'm assuming, and what I'm assuming is that we have relatively stable memory prices. And what you're seeing is that catch up into RP&L. We will obviously work to offset that. Rick talked about us thinking about how we had to price AB5 and how we had to manage memory in AB5. So we are thinking about that impact as we come out with new products. We'll think about that impact as we think about pricing. We have some tailwinds because of the strength in our software and services business. And then finally, as we think about our EBITDA targets, it means we really need to do a good job on our OpEx leverage.

Thank you. Thank you, Andrew. Up next, we have Jonathan Ho at William Blair.

Hi, good afternoon. Can you maybe help us understand what the impact was on the federal deals from an adjusted EBITDA perspective, particularly on the incremental side? Was it similar to the 45% that you've talked about? Just wanted to understand maybe the profitability impact to guide that happened from the deferral.

Yeah, so we have talked about for Ddrone the fact that it is slightly dilutive to our connected devices gross margin. But remember, it is still revenue and especially on those federal deals, it's relatively large revenue. And so there is a flow through impact from that on EBITDA because it just gives us less leverage on our overall OPEX portfolio. So Ddrone, it's very helpful to EBITDA, but it's just slightly lower on that gross margin perspective in connected devices.

Thanks, Jonathan. Up next, we have Andrew Sherman at TBD Cowen.

Great, thanks. Hey, everybody. Josh, on the bookings front, how should we think about Q4 growth? You've done 25% year-to-date in the five-year. How do you feel about hitting that in the big seasonal Q4? Did you see any deals pushed to Q4? You mentioned the newer products have done a billion in bookings year-to-date, which could double in Q4. So just help us with the The cadence of bookings and your visibility into Q4.

Thanks. Yeah, thanks, Andrew, and good to see you. Yeah, bookings I feel good about. Like, we have the pipeline right in front of us, just like kind of going into every Q4, and now it's about, you know, making sure we execute on it. But the pipeline is very promising. You know, losing the couple hundred million of DDrone, you know, that would translate into $130 million of revenue. You know, that makes it – Thanks, Josh. Thanks, Andrew. Up next, we have Trevor Walsh at Citizens. Well, thanks, Eric. Hey, all. Thanks for taking the question.

Josh, maybe since you spent a lot of time talking about it or a good amount of time on the inventory investments, it sounds like early 27 is when you expect some of those to start to moderate or you think you've gotten, I guess, through that phase. If it stretches longer, I guess, two-part question, how should we think about what you've given for 27 kind of free cash flow kind of outlook if those investments go longer? If they do, I'm assuming that's probably a good thing from the standpoint of, again, you're probably seeing additional demand and you want to get ahead of that from just, you know, having things available. And so I guess how, maybe another way, how confident are you in that kind of early or 27 of those?

Yeah, Trevor, very, very confident early 2027, like mostly Q1, maybe a little bit into Q2, but we have a very clear target on where we want our inventory to be by product line. and you know for the core stuff it's about a year and so you can imagine once we get to a year of inventory and we sell a quarter's worth we'll backfill a quarter's worth but we're not going to take it beyond a year and like I said as the risk you know hopefully dies down over the next 12 to 18 months we'll right size that back down accordingly but ultimately we just feel like this is such an obvious decision given the puts and takes of our business I understand that it's relatively and many more. the biggest risks we see into the future and especially the ones we have no control over you know we think this is this is a obvious decision to do this and we understand it's come at a cost of free cash flow this year but ultimately if these risks materialize that'll be a very very small price to pay for having the ability to ship uh customer orders and to be able to continue to grow revenue which you know obviously is tied to hardware shipments and so We think this is the right decision for us, and we realize there's been, like with all hard decisions, there's been a little pain associated with it this year, but that pain will subside very quickly going into next year.

Trevor, we're expecting with the updated guide, we're expecting about 40% conversion this year. Next year, we'll call it conservatively half a year of having an inventory investment. And then we expect we can be back to that 60% by 2028. So, you know, it's not a firm guide, but you can imagine we'll be better than this year, but not back to our long-term target yet.

Thanks, both. Thank you, Trevor, and thanks, team. I think we just hit the hour here, so maybe we'll pass it to Rick to close us out.

All right. Hey, thanks, everybody, for tuning in. I hope you all have a very happy holiday season. We're excited to see what Q4 carries, excited to get these new products into the market, and we'll see you all. Go hug your kids, your loved ones this holiday season, and we'll see you in 2027.