The operator welcomes everyone to the Third Quarter Earnings Call and reminds them to read the shareholder letter. They will discuss their business outlook and make forward-looking statements, while acknowledging the risks and uncertainties involved. They then play a video showcasing their federal business expansion at the AUSA Conference, and CEO Rick Smith expresses his excitement for their team's performance at the event. He also mentions the company's 30th anniversary.

The company's success can be attributed to their close relationship with customers and their focus on developing products based on direct feedback. They also prioritize staying ahead of the innovation curve and are constantly looking for ways to improve and solve problems. This has led to their success in introducing cloud software to public safety and their plans to introduce generative AI tools in the future. The company's engineers are dedicated to finding solutions and are highly skilled in technology.

The company has achieved strong product market fit and has built strong relationships with customers and employees. The growth is a result of decisions made in the past and the company is now focusing on future growth. The formula for success is customer closeness, long-term vision, and day-to-day execution. The company acknowledges global events and remains focused on its mission to protect life. The CEO then hands over to the CFO who is confident about the company's long-term growth and shares his vision for the next five years.

Axon sells to four main customer categories and is building an operating system for public safety and security. They have expanded their vision to cover the entire workflow from an officer's first interaction with a civilian to case adjudication. They are investing and delivering solutions to help their customers, including new devices, software features, and VR training. They are also seeing success with their records product, TASER 10, and Axon Body 4. The CEO is particularly excited about the potential of VR training and the strong demand for TASER 10.

The company has quickly achieved product market fit thanks to the efforts of their TASER pillar team and orders for TASER 10 have already surpassed those for TASER 7 after only three quarters. The company's success in the federal market and international market is also a promising sign for their long-term strategy. The company is focused on continuing to grow and is optimistic about their future performance.

In Q3 2022, Axon's adjusted EBITDA margins significantly improved, with a 33% year-over-year increase in revenue and a 22.2% adjusted EBITDA margin. The software business remains the main driver of growth, with a 55% increase in cloud and services revenue. This growth is due to new customers, customer expansion, and a focus on solving customer problems and driving innovation. The launch of new hardware products also contributed to growth, with the TASER 10 and Axon Body 4 driving strong demand. The gross margin for the quarter exceeded expectations due to a higher mix of software revenue.

The company saw a slight decrease in margins compared to last year due to increased revenue from TASER 10 and sensors. They expect this trend to continue in the fourth quarter. Operating expenses were well-managed, allowing for an increase in adjusted EBITDA margin. The company has raised its revenue and adjusted EBITDA outlook for the fourth quarter and full year, citing strong demand and successful product launches. They are confident in their ability to continue scaling and introducing new products for future growth.

At a recent event, Axon CEO Rick Smith and President Josh Isner heard from customers who were excited about the company's full ecosystem of products and services. Customers expressed trust in the company and a desire to use more of their technology, including newer products such as VR, TASER 10, and Axon Records. Overall, the feedback was positive and customers were impressed with the company's capabilities and customer service.

The company has received positive feedback for their early showcase products and is confident that their upcoming products will also be successful. They mention their focus on execution and customer demand. Additionally, they discuss their decision to wait for all-in-one VR headsets and their development of specialized hardware for virtual reality, which has received great customer feedback.

The company has seen success in the military and federal space, with their existing product suite being well received. At a recent event, the company showcased their live streaming cameras, counter drone technology, TASER 10, and vehicle-based fleet solutions, which received positive feedback and interest. The company's partnership with Fusus to integrate multiple cameras also resonated with potential clients. Overall, the company's offerings have gained traction in the military and federal market, with their products being used for base security.

The speaker is excited about the future of combat operations, believing that successful military operations will involve killing the least amount of people. They use the example of Israel and the potential for more precise drones and robotics to minimize collateral damage. The speaker also mentions their previous belief in the end of war and the current situation in Ukraine. They suggest the use of counter-material drones to destroy equipment and deescalate violence while accomplishing national priorities.

At the AUSA conference, the speaker had conversations with senior military officials who showed a positive reaction to the message that killing should always be a last resort and more creativity should be used to minimize loss of life. The company has identified a $10 billion total addressable market for federal customers and has already seen success with top deals and contracts. The company's approach to market expansion involves tailoring existing products to new customer segments and building out sales channels.

The company is working on expanding its customer base by developing new products tailored for specific market segments, such as the federal market. They have made various investments and adjustments to their existing products to make them suitable for federal customers. The recent example of the VA going live with Axon Records shows their success in this area. The company also clarifies that their goal is not to pass judgment on the use of force by police or military, but rather to provide a solution that minimizes loss of life in these situations. They envision a future where modern technology can safely and effectively target military objectives without causing harm to innocent civilians.

The speaker, Rick, discusses the steps they are taking to reduce collateral damage and lethality in the use of technology in war and law enforcement. He also mentions their excitement for providing better tools to these groups without causing unnecessary death. The next speaker, Will, asks about the growth in international markets and the adoption of new products such as body cameras and TASER 10. Rick responds by mentioning the wider adoption of the Axon network in Tier 1 markets and the expansion of their products beyond just TASERs and body cameras.

The company is seeing growth in international markets, especially in Europe, as more countries adopt cloud technology and value body cameras and other wearable camera technology. The goal is for the international business to rival the US business in bookings within the next five to seven years. The company's software has developed into a best-in-class digital evidence management system, with different areas of the business competing and excelling on their own.

The speaker discusses multiple ways to enter new markets and mentions seeing broader traction across a range of products internationally. They also mention their Head of International Sales managing the team towards building a larger pipeline for future growth. They acknowledge some lumpiness in revenue due to the nature of their products, but expect it to balance out in the long term. The speaker then takes a question about the growth of Axon cloud and services and attributes it to strong drivers.

The speaker is discussing the success of Axon's cloud suite of products, which has seen increased adoption by customers and is driving revenue growth. They credit this growth to years of investment in new features and products, as well as the sales team's efforts. The speaker is proud of the product team's ability to understand customer needs and build successful products. They are optimistic about the future growth potential of the cloud business.

Brittany Bagley and Josh Isner discuss the impact of customers moving to premium bundles on revenue growth and the size of the step up in software revenue each quarter. Bagley also mentions the positive impact of Fleet 3 installations. There is no offsetting factor for the large step up in software revenue this quarter, and the company is guiding for healthy growth in Q4. Jonathan Ho asks about the main drivers of the 122% net retention growth, to which Rick Smith responds.

The company's success in selling new products and building value into evidence.com has resulted in high customer satisfaction and trust in their customer success, product, and sales teams. This has led to increased ARPU and NRR. The company's recent contracts with the DHS and U.S. federal government may have a halo effect, making it easier to sell to other federal and international agencies within the government.

The company has a lot of data that can be used for AI, but they are focused on finding the best use case to create value for customers while minimizing risks. They had better-than-expected gross margins due to strong software performance and the success of their TASER 10. The recent win with the Department of Veterans Affairs was not influenced by their openness to third-party modules, but rather their strong track record in providing digital evidence and reporting solutions.

The success of Axon Records can be attributed to its ability to easily and efficiently link video evidence with police reports, as well as the strong leadership and customer relationships of the team. Additionally, the decision to focus on user experience rather than winning RFPs has led to the development of high-quality software.

The speaker believes that showing a functional system to the government agency was important and that they were able to impress them with their user experience-focused approach. They did not expect to win a federal agency this early in the Records lifecycle, but it was a pleasant surprise. The company has been managing profitability well and will continue to hire for R&D, but will not get ahead of their revenue growth.

The company expects to gain leverage in SG&A but will need to continue investing in sales and G&A to support top-line growth. This includes improving IT systems and addressing material weaknesses. The company also aims to maintain its 25% adjusted EBITDA margin target. World-class tech recruiting is also a key part of this strategy. The analyst asks about the Fleet product and its potential integration with AI technology in the future.

The speaker admits to being wrong about the potential obsolescence of in-car cameras due to the rise of body cameras. They have learned that customers still value in-car cameras, especially for state highway patrols, and there are opportunities for growth in other markets such as ambulances and military vehicles. The company plans to integrate their network, workflow, and sensor development to provide AI capabilities in the future.

The speaker discusses the potential growth of the vehicle Fleet business and its different needs and requirements. They also mention the impact of the cloud portion of the business on gross margins and the company's goal of reaching 25% EBITDA margins. They state that they are closely monitoring both gross margins and OpEx leverage, and that the TASER business is also a focus for improving overall gross margins.

The speaker thanks Andrea James for her work at Axon and announces that she will be leaving the company. He praises her for her contributions and quotes Ray Kurzweil on the importance of how we spend our time.

The CEO of Axon talks about his colleague AJ leaving the company to focus on her family and future opportunities. He expresses gratitude for her contributions and announces that she will continue to support the company in an advisory role. He also thanks the team for their hard work and wishes everyone a happy holiday season.

This summary was generated with AI and may contain some inaccuracies.