Hi, everyone, and thank you for joining Axon's executive team today. We hope you've had a chance to read our shareholder letter released after the market closed, which you can find at investor.axon.com. Our remarks today are meant to build upon that letter. 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'll also discuss certain non-GAAP financial measures. Reconciliations to non-GAAP are included in our shareholder letter and available on our Investor Relations website. With that, before I turn it over to Rick, we have a quick video to show you. It shows a little bit about our vision for Axon 911. Let's pull it up.

Thanks, Erik, and great job to our team who put that video together to help share some of the narrative of where we're going next as we extend the Axon ecosystem. So I'd like to welcome everybody to our Third Quarter 2025 Earnings Call. It's truly just an amazing time to be at Axon. Just a few weeks ago, we were at the major annual conferences across public safety, federal and military and enterprise, meeting with hundreds of customers to catch up on their top priorities and share our vision, which you just saw a glimpse of a piece of it in that video. Like me, our team walked away energized. We're incredibly excited about what we're building. The future we envision is coming together, and it's even more inspirational than I could have imagined a decade ago. At the heart of that future is the expansion of our ecosystem. Our latest update outlines our path toward delivering Axon 911, which will be built on the foundations of Prepared and Carbyne, a major leap toward unifying the technology needed to deliver measurably better outcomes for communities and our customers. Prepared and Carbyne are powerfully complementary. Prepared is a low-friction AI capability that can be rapidly installed in any communication center, immediately giving call takers superpowers to speed through data collection, analysis, and sharing. It can autonomously handle up to half of noncritical calls, freeing the human operators for true emergencies. On critical calls, Prepared serves as an intelligent assistant, taking on data collection so operators can focus on the human side of helping people in crisis. Just last week, we heard a story about a 911 call center for one of the largest U.S. cities who installed Prepared ahead of the 4th of July. They completed implementation in about a month, which is incredibly fast. It's lightning fast for public safety. And in the first few days, they saw a 33% reduction in calls requiring a human operator even as the overall inbound volume was up significantly due to the holiday weekend. That's real immediate impact. And Carbyne replaces on-prem call center infrastructure with highly resilient cloud infrastructure, eliminating the enormous costs of running legacy equipment and allowing agencies to move at the exponential pace of modern technology rather than at the glacial pace of procurement. We see Carbyne repeating in voice communications the success we had with evidence.com in moving agency data centers to the cloud. Now we'll do it with their call centers. Together, these capabilities let agencies make their existing systems smarter today and provide a smooth orderly path to full modernization over time. Both leverage AI natively to rethink what's possible. Let me bring this to life. Imagine you need help. You dial 911. Today, the operator listens, gathers information, and frenetically types it into a command line system. That information is then passed via a typed message over to a dispatcher who's a different person who reads that information and then relays it over the radio to police officers. It's an inherently inefficient system of the old telephone game, prone to risks of miscommunication. We can turn that process, and we are now turning it on its head. When you make that call, a network of connected devices and software across your city will activate instantly, analyzing information, prompting decisions, and allowing the human operator to coordinate a faster, more informed response. Call handlers will focus on helping you instead of typing feverishly, while real-time prompts will enable the dispatch of human or drone responders. And that suspicious reported person, we can handle that call autonomously. No need for a human operator. When there is an emergency, critical context will flow directly to those on scene through their body cameras, keeping them more informed, less distracted, and better supported by a network built to keep people safe. It's a powerful future that's coming into view. Now to clarify how this fits into our overall approach, as you will recall, we exited our computer-aided dispatch product line about a year ago. This new approach lets us innovate in critical response workflows without rebuilding legacy systems. It means we can innovate faster, driving real-world impact and value creation. And we will enable reciprocal data sharing and APIs to drive true interoperability, giving agencies the flexibility to modernize at their own pace. This isn't just a cloud migration. It's a connected platform that upgrades existing systems and makes them better, no replacement required. Customers get immediate capability upgrades while having the option to migrate older infrastructure to hyperscaler efficiency on their own timeline. It also unlocks new potential across our real-time operations, vehicle intelligence, and drone and robotics platforms, creating an integrated ecosystem that delivers on the future we've long envisioned with Fusus serving as the real-time sensor network backbone, while Prepared and Carbyne provide the voice layer connecting every persona from the caller to the responder moving toward creating an AI superpowered team. Voice communications, if we think back, this began with operators 100 years ago physically connecting phone lines, then it moved through rotary dials and keypads. The next era is intelligent AI-enabled communications that process information at superhuman speed and surface the right insights to each human decision-maker when they need it. Prepared and Carbyne aren't the end state. They are the foundation for the transformation in voice communications ahead. People often ask where Axon's limits are. I believe we're only scratching the surface. We're advancing our ecosystem while expanding our reach to more new customers. In addition to better serving emergency call centers, we recently introduced ABW Mini, our second enterprise body camera, opening enterprise opportunities similar to public safety, and we're finding new inroads globally. As I think about the next few decades and what we're building, I truly believe that the best is indeed yet to come. What an amazing time to be alive and what a privilege to be at Axon during this accelerating transformation. And with that, I'll turn it over to Josh.

Thanks, Rick, and good afternoon, everyone. Before we dive into our results, I want to echo Rick's welcome to the Prepared team and soon the Carbyne team at Axon. Our greatest asset is our team, and I am thrilled about the exceptional people joining us to help advance our mission and future. Our growth relies on elite talent, and we are now stronger than ever with the addition of Michael, Dylan, Neil, and the rest of the Prepared team, along with Amir, Alex, and the Carbyne team. Reflecting on our Q3 results and looking ahead to Q4, I feel both excitement and gratitude. We are building an exceptional business with a team that is fully committed to our mission. Many people here work tirelessly every day, and I appreciate their dedication and the standards they uphold. What we're witnessing right now is not just outstanding performance; it's a clear signal. The central theme is obsession. Our focus on our customers is relentless, and we emphasize this every day at Axon because their success drives ours. Let me share some data points that demonstrate our effectiveness. Our state and local customers continue to depend on us for an increasing number of products. Rick mentioned the expansion of our ecosystem, and the most telling indicator of our success is that we’re helping customers where they need it most. We hear this in daily conversations, but we see it in the data as well. A clear example is that a growing number of our deals now encompass our entire portfolio. I often say we have the best sales team globally. When you can offer everything to a customer, it’s more than just good sales; it reflects the trust we’ve built, the fit of our products in the market, and indicates we're making a difference. I mentioned last quarter that some of our deals were nearing the $600 per user per month mark, which is significantly above our current average. In Q3, we surpassed that threshold with two of our top 10 deals in the state and local sector, each symbolizing substantial upgrades with Axon. These long-term partnerships across various product lines highlight our customers' confidence in their future with us. The narrative remains consistent across our products. The AI Era Plan continues to be the fastest booked software product at Axon. We are on track for AI bookings to account for over 10% of U.S. state and local bookings this year. Furthermore, if we consider our newer offerings, like Axon Air, Dedrone, and Fusus, bookings are up more than three times year-to-date. This momentum emphasizes a vital aspect of our growth strategy: we accelerate our advancement when we acquire excellent businesses. All our acquisitions this past year have exceeded initial booking forecasts, evident in the uptake of these new products. Now, let’s discuss our expansion beyond the primary state and local markets into corrections, justice, international, and enterprise. Corrections stands out this year, contributing two of our top 10 deals in Q3, with year-to-date bookings more than double those from last year. Internationally, we also secured two of our top 10 deals overall, including a significant nine-figure cloud deal in Europe that closed in October. We're witnessing a transition in several countries, spurred by the value cloud products provide, and we anticipate larger deals in our International segment moving forward. The growing adoption of TASER 10 in international markets adds to this narrative, with seven of our top 10 international deals in Q3 driven by TASER 10. Looking ahead, we are progressing against a growing pipeline, and we are not slowing down. Year-to-date bookings are up over 30% and are accelerating compared to last year, with a clear sight towards closing out an even stronger year. We have the healthiest indicators across our business that we have ever seen, and I am confident we are on the right path as we increase investments in our products and sales team to pursue all opportunities ahead. I believe we are on track for another record year in 2026, a thought many of you may be contemplating. Our potential for growth could accelerate significantly further. As we approach next year, anticipate us continuing to drive record growth, enhancing execution through AI tools and efficient decentralized ownership to tackle new markets and opportunities. Our elite, resourceful team will continue to excel in multiple areas simultaneously, which will be our competitive edge for years ahead. That's what our next strategic move looks like. Now, I’ll hand it over to Brittany.

Thank you, Josh. As Rick and Josh highlighted, we're excited to welcome Prepared and announce Carbyne, which we expect to close in early 2026. We're proud of our third quarter results, which again reflect strong execution across our products and markets. Third quarter revenue of $711 million increased 31% year-over-year, marking our seventh consecutive quarter of 30% or greater growth, underscoring the robust demand we are seeing. Software and services was again the leader, increasing 41% year-over-year to $305 million of revenue. This growth reflects both new customers and existing customers expanding their use of our platform and capabilities. We continue to have strong net revenue retention at 124% again this quarter, and ARR grew 41% to $1.3 billion. Connected Devices revenue grew 24% year-over-year to $405 million, reflecting broad-based demand. TASER grew 17%, led by TASER 10. Personal Sensors grew 20%, driven by Axon Body 4 and Platform Solutions grew 71%, driven by counter drone, virtual reality and fleet. Adjusted gross margin of 62.7% decreased 50 basis points year-over-year, primarily due to tariffs impacting us for the first full quarter. We also continued scaling Platform Solutions, which overall has lower margins than TASER and personal sensors, but offsets by continued strong growth in our higher-margin software business. Adjusted EBITDA margin of 24.9% reflected the impact from tariffs and the planned increased R&D investments. These investments are into categories that will support future growth, including our vehicle intelligence ALPR products, Axon Body Workforce Mini and new AI Era Plan features such as live translation and policy chat. We couldn't be more excited about these products and the traction they are already seeing from our customers, and we will deliver a strong ROI on these organic investments over the long term. We've also accelerated strategic investments with recent acquisitions. Newer product lines such as Fusus and Dedrone are scaling quickly, and we continue to invest in their growth, along now with Prepared and Carbyne as another exciting new category. While these acquisitions are immaterial from a financial perspective at close, we see tremendous value in how these investments advance our long-term vision and solve challenges for our customers. They have strong teams in emerging categories and complement the capabilities we are already investing in. Turning to our outlook. We're again raising revenue guidance for the remainder of the year. We expect Q4 revenue between $750 million and $755 million, implying full year revenue of about $2.74 billion, up from $2.65 billion to $2.73 billion and representing approximately 31% growth at the midpoint. For adjusted EBITDA, we expect Q4 between $178 million and $182 million, which maintains our full year 25% margin target. We are pleased to deliver on our commitment for a 25% adjusted EBITDA margin for the year, even with the impact from tariffs and our increased R&D investments. We think the combination of top line growth and bottom line profitability is the right balance for the business, delivering at 55-plus versus the Rule of 40. We're incredibly excited by the opportunities in front of us. The investments we highlighted are key components of continuing to deliver great performance in the years ahead. In summary, we are proud of our results and our team and thankful for our terrific customers. We're well-positioned for the future and look forward to continued strong performance. With that, we'll open the line for questions.

Thanks, Brittany. Up first, we have George Notter at Wolfe.

Josh, you mentioned that AI should contribute about 10% to total bookings this year, but bookings looked a little bit softer this quarter. Was there any delayed contract decisions in Q3 that maybe drove that? Or what's the perspective there?

Yes. Thanks for the question, George. Look, we had said last quarter, we expect bookings growth to be in the high 30s year-over-year, and we still believe that to be true. And so you can guess what that means for Q4.

Got it. Okay. And then also, you guys have now acquired, I guess, if I look at it, Prepared, Carbyne, both in the 911 space. You talked about them as kind of a foundation. But it would be great if you could talk a little bit more about sort of the industrial logic, why it makes sense for you guys to be in that space, given the existing competitive landscape and the types of things that you expect to add to those businesses going forward. So what's the perspective on those 2 deals?

Yes. I'll address that. When considering our ecosystem, we focus on elements that add value to the greater Axon ecosystem. Currently, we maintain strong connections with field officers, their vehicles, body cameras, in-car cameras, drones, and robotics. Information mainly flows through 911 call centers. We previously explored dispatch but found there was limited opportunity for innovation due to the outdated, training-intensive CAD software that integrates with numerous legacy systems. Consequently, we shifted our focus to areas where we could innovate using AI, particularly at the outset of incidents, which typically begin with a 911 call. We recognized the need for alternative smartphone connections beyond outdated voice interfaces from the 1970s. Our findings indicated no interest in anything outside the 911 call. However, once we engage the 911 call, we can establish parallel communication channels. For instance, with Prepared, we can share a link to activate cameras and sensors on smartphones, allowing real-time AI processing to bypass limitations in human typing speed and complete initial reports efficiently. This enables quicker drone deployment and optimizes officer positioning before their official assignment, creating a seamless link between the caller and the Axon ecosystem. Prepared focuses on AI-driven voice communication automation starting with 911, while Carbyne offers a reliable, mission-critical voice communication platform that also originates from 911 but is not confined to that usage. We see potential in the voice communication systems, which are currently based on outdated infrastructure within 911 centers and LMR radios from the 1970s. Carbyne presents an opportunity to enhance that voice communication infrastructure beyond 911, incorporating AI to centralize operations. Our company name, Axon, represents the nerve connections that integrate everything into a complex system, and we aim to create a modern policing nervous system. These two acquisitions position us as significant players in voice communications and enhance our connection with consumers right from the initial 911 call.

Up next, we have Jeremy Hamblin at Craig-Hallum.

And I wanted to get into just some of the interplay that you're seeing between software and services, connected devices. So your ARR growth was the best growth rate you've seen in 2025, software and services, also the best growth in a quarter in 2025 and a little bit slower growth with connected devices than you've seen in the first half of the year. And I wanted to just get a sense for whether or not that is a reflection that you are having maybe not as many new licenses, but the value of those licenses is growing substantially. And then as we start to look ahead at how the business is going to change and evolve here over the next few years, is that how you expect growth to go forward here over the next, let's say, 3 to 5 years?

I'm happy to start or you can, Josh.

Yes. Go ahead, Brittany.

As we look towards the future, we anticipate that software and services will continue to experience higher-than-average growth rates, as we have seen over the past few years. This growth is driven by our customers purchasing more and enhancing their features and capabilities, along with an increase in user count. We are consistently adding new customers to the platform and successfully upselling them over time, indicating robust growth across the board. Additionally, we are very pleased with the progress in our other segments, particularly in TASERs and our body camera division, which saw significant growth this quarter and is expected to continue expanding. Both TASER and our body cameras, along with our connected sensors, are experiencing strong growth this year and into the next. New products, like the ABW Mini launching next year, are contributing to this momentum. There is noticeable growth in Platform Solutions, with developments in counter-drone technology and ongoing strong performance in fleet and VR. Overall, we expect this trend to persist.

Yes, I agree with everything Brittany said. I also echo Jeremy; over the next 3 to 5 years, I believe we will see the same type of growth we are experiencing now. A significant part of this is due to the increasing per user values, but we should also recognize the user growth that we anticipate, particularly in international and enterprise markets. We have strong confidence that these areas are moving in the right direction. We are very excited about the results we've achieved year-to-date in international markets and the early Q4 results we are witnessing. I believe user growth will be a crucial aspect of our future.

I have one more question. The company is approaching $3 billion in annualized revenue. In considering some of the newer components of the platform, such as Axon 911 compared to Dedrone, which do you anticipate will grow faster? Both are still in the early stages and from a materiality perspective.

I'll start off with that. The reason we acquired both of these businesses in the 911 sector is due to their promising growth potential. It's important to remember that these are software businesses, and like all software, there is a period needed for revenue to build up. Dedrone operates as both a software and hardware business, so its impact will be seen earlier in our results due to significant hardware shipments, including some substantial opportunities we're currently pursuing. I believe Dedrone will generate revenue first in a significant way. However, when considering Prepared and Carbyne for the long term, we see substantial potential for disruption in the 911 space. The synergy between these opportunities and the subsequent processes involving digital evidence and prosecution will create long-term value in public safety.

I agree with all of that. I would just add, like I wouldn't discount Fusus and I wouldn't discount some of the new organic investments we're making into things like vehicle intelligence and automated license plate reading. As we think about our acquisitions, I think what you're seeing is we are investing in companies that tend to be a little bit earlier stage. So we're not really buying revenue. We're not buying an existing business. We're buying an opportunity, and then we're pulling it into our ecosystem and integrating it and really using that to accelerate the opportunity. I think what you're seeing on Fusus and Dedrone is now we've had them under our belt for a year plus. So you're seeing the power of doing that. Hopefully, a year from now, when we've had Prepared and Carbyne under our belt for a year, you'll start to see some of that traction as well.

All right. Up next, we have Andrew Sherman at TD.

Good to see you. The international deals, good to see the 2 big deals there, including a 9-figure one. Any more color on where those were, what products they bought? And how is the pipeline shaping up across countries? And can this momentum you're seeing in Europe or internationally continue over the next year or so?

Yes. Andrew, nice to see, and thanks for the question. We've been talking for years about opening up the cloud in Europe, and we're starting to see that happen. And I think it's a credit to the team over there, led by Cameron and Nathan Satel opened up one large cloud opportunity already this year in Europe, and that might not be it. And so we're encouraged to see some of that taking place just as TASER 10 is starting to accelerate internationally. We see very consistent bookings out of Canada and Australia, and South America is coming on strong as well. So the international business is all the things we've been talking about and all the investments we've been making there over the years, it's really starting to come into fruition. And look, that's part of the investment we have to make moving forward is making sure that we capture that opportunity around the world, and we're prepared to do that and feel really, really good about the results that it's going to yield.

Yes. I would add in this 9-figure deal is not in one of the bigger or more populous countries. It just gives you an idea of the scale of the opportunity in Europe. And then what I think is even more important is this is the alpha patient. When you're introducing a new technology, the hardest part is getting the first customer to adopt it. In the U.K., that was the London Met going to the cloud. But the U.K. post-Brexit is not in the EU. And they're really considered really more part of the Commonwealth as we look at, and we've had a lot of adoption there. So to me, the thing that's more exciting than the value of this order is that we've got really, I'd say, the first customer going all in on the cloud in the EU. We've had some other customers dipping their toe, but this is a big one. We get a couple more of these add in TASER 10 getting some momentum, and Europe could get pretty exciting.

That's great to hear. And since you're all wearing the new Body Workforce Mini, which is nice to see that live. I know these retail trials have been in the pipeline for a while that you've talked about. I would love to hear an update on the status of that and what Body Workforce Mini can do to help that and how this actually deters organized crime in retailers and how you're thinking about that opportunity next year?

Yes, sure. Look, I think I've been excited about enterprise for a while and the closer we get to the launch date of ABW Mini, the more excited we get. We already have pent-up demand for this product. And in the meantime, customers are deploying our Axon Body 4 right now. And so they see the need for body cameras. They're already paying for them and deploying them, and they really plan to expand in a major way as ABW Mini gets to market. And so I think I've said a couple of times on these calls, at the end of the day, enterprise might be the biggest part of our business. And so we are investing there and feeling great about what our future looks like there. Obviously, a massive TAM with some very, very large customers and enterprises that we're working with and that are showing a lot of interest in expansion. And so very, very bullish on enterprise heading into the years to come. And that ABW Mini launch is certainly a moment in time where we think we'll step up in terms of getting into the next tier of that opportunity.

If I may add, there was a time when our first body camera for policing, the Axon Pro, did not achieve product market fit. We released it and secured a few key customers to validate the concept. Then, the Axon Flex became much smaller, but it was the launch of the Axon Body 1 that really resonated with law enforcement and allowed us to scale. Currently, existing body cameras are primarily viewed as police body cameras. We do have the Axon Body Workforce, which is essentially a minor redesign of AB3 compared to our latest developments. We believe we have reached product market fit, as we collaborated closely with our key customers during development. This is the moment where we expect significant growth. Moreover, we are observing encouraging early indicators, including statistically meaningful decreases in assaults on staff, alongside compelling individual stories of dangerous individuals abandoning their intentions upon realizing they are being recorded.

Right. Regarding your question on how it affects crime reduction, the cameras themselves play a direct role, as Rick mentioned. However, the effectiveness comes from how these cameras interact with Fusus and their deployment in the GSOC of large retailers and enterprises. They complement each other alongside partners like Auror and their workflows. For instance, if Auror helps identify repeat offenders or individuals linked to organized crime, the GSOC can receive alerts. Additionally, if situations escalate in stores, the merging of our solutions, including Fusus and body cameras, along with our partnerships like Auror, is what excites enterprises and creates a pivotal moment for them to adopt the entire system.

Okay. I got to come back and add one more thing. Here's how this ecosystem ties together. So you've got body cameras that can reduce assault in the store. And I think we've seen society-wide, the experiment with decriminalizing theft was a disaster. It led to the hollowing out of some of our best cities as retailers' business models no longer made sense. They left town with catastrophic consequences. The politicians we talk to know that. I've met in the past 2 weeks with 2 prosecutors, one in one of the largest districts in America and one in one of the largest districts in a Commonwealth country. And they both shared with us how important it is for them to be able to drive down criminal behavior and retail crime that we've got to help reduce the friction because there's both the political will to do it, but then how do you actually manage all of this data and get it to the prosecutor in a way that they can handle and where they can make sense of the hours and hours of video they may get with every case. And just one example, rolling out our digital evidence in Scotland and the test pilot in Dundee, they saw an 80% reduction in court backlog. So we are the only ones who can take this from the retailer through the police to the prosecutor and the courts and tie the whole system together in a way that will fundamentally make society better and safer.

Next, we have Jim Fish at Piper Sandler, and welcome to the Axon call.

Maybe just staying on body camera. What are you guys seeing competitively there, especially post Motorola's introduction of their new SVX? And how much of the Carbyne acquisition and broader 911 is a way to push back on Motorola given that LMR angle, Rick, that you alluded to?

Yes, I'll take that one, and it's nice to meet you. Thank you for joining the call. We're focused on what we're doing at Axon with our body camera business. There’s a lot of discussion in the market, and people like to talk about us. We're concentrated on our customers, and we see no concerns from them regarding our body cameras. We produce the best products available. Other companies may point out minor details where they think they’ve made a breakthrough, but our customers don’t perceive it that way. We will continue to execute our plans, stay focused on our customers, keep innovating, and deliver world-class technology. The 911 initiative presents another chance to improve how things are currently handled in the field, and we are truly excited about competing in that area.

Got it. And then Brittany, I'm not going to let you off the hook here. I guess Q4 guide is implying a revenue acceleration exiting the year. What's giving the confidence in that? How are you guys thinking about backlog exiting the year? It looks like you guys continue to build it up relative to revenue that provides that level of confidence?

Yes. I mean we have a lot of confidence. I think as Josh said, we are just seeing more momentum than ever in our bookings. We talked about it a little bit. We're expecting a really big bookings quarter in Q4. Plus we have our recurring software business that is just hitting on all cylinders. So I would say at this point in the year, we have really strong visibility. A little bit of the variability is just mix and exactly what books and gets recognized when, but really strong visibility and just incredible momentum from our customers and from the deals that we have looking at in Q4.

Can I just add one more thing there? I think ultimately, we feel really, really good about our organic growth for the next few years. And like we're excited about what that looks like. If we want that to continue for years like 5 through 10 out into the future, we've got to make some investments to do that in sales and in product and in new markets and in new products. And so part of this is like, hey, how do we continue to deliver great results to our investors? We understand the importance of money coming through the bottom line and growing the top line in exciting ways. If we sit on our laurels, we could do that pretty easily for the next few years. We're playing the long game here, and we want to deliver decades of growth like this. And to do that, there are times where we have to make investments to make that happen for the long term. And so that's where we are right now.

Thanks, Jim. Up next, we have Yanni Samoilis at Baird.

Yanni Samoilis on from Will Power tonight. Rick, Josh, maybe if I just start with a question on Dedrone and DFR. I was hoping you could provide some color on how conversations are progressing at the state and local level. I know you've been meeting with a lot of customers lately, especially at IACP. So it would be great to hear how that was received coming out of that event. And then also the extent to which there might be growing traction across your broader drones portfolio for military or defense applications going forward.

Yes, I'll begin with that. Every customer is acutely aware of the threat posed by drones. Drone-based violence presents a significant new threat that could be even more dangerous than gun violence due to the potential for causing extensive damage quickly. Currently, in the U.S., state and local police do not have the legal authority to address drone issues effectively. However, with upcoming events like the World Cup, they need to invest in the infrastructure required to track drones. At this point, they can only address the issue by identifying the pilot. There is growing momentum in Congress to provide state and local police with the means to manage drone threats. Unfortunately, we are just one serious incident away from change, and while I don't wish for that to occur, it seems likely. If that happens, we will see a swift push towards equipping local forces, as there aren't enough federal resources to handle counter-drone operations across every city, stadium, or public event. We believe Dedrone is extremely well positioned for this scenario. Whenever we enter a new area, we conduct a thorough assessment of whether to make, build, buy, or partner. In regard to DFR, it became evident that one company stood out, and that was Skydio. This is why we have become a significant investor in Skydio and selected them as our DFR partner. Their technology is scaling impressively. The automated robotic docks that allow for autonomous drone deployment and recharging without human intervention have just started to become available in the last couple of quarters, and demand is growing rapidly with several substantial deals in the DFR space on the horizon.

I want to highlight that the investments we are making in DFR and 911 are closely interconnected. Reducing the response time for 911 services to launch a drone leads to better results for both customers and the community. Although they may seem distinct on the surface, they are fundamentally related, and we believe that our investments in 911 will enhance DFR adoption and ultimately improve outcomes on the ground.

Yes. Let me tell you one more thing actually together on ecosystem. Today, if you call 911 in a retailer like a Walmart, the people in the store have no idea you've called 911. They're completely unaware that there might be some incident happening. When we tie together Prepared, Carbyne, Fusus, and our enterprise customers, we can begin to have them collaborate in real-time so that they're getting alerts as well and being aware, hey, if there's a 911 call in our parking lot, we're going to need to engage with that or in the store as well. So again, this is where each of these pieces all sort of build on each other into one highly integrated nervous system.

Yes. Good to hear. Sounds pretty compelling. And then Brittany, I was just wondering, just switching gears, if you could talk about the gross margin outlook from here. And maybe if you could just review the tariff impact that you might be seeing on the gross margins on the connected devices side.

Yes, happy to. So all of the impact from tariffs is obviously hitting the Connected Devices business overall. This was the first quarter that we had a full quarter of impact from tariffs. So as we look at the year-over-year step down, that really is attributable to tariffs. As long as tariffs stay in place, I view that as sort of a one-time adjustment. So now that's baked into the gross margins. Obviously, as our software business continues to outpace from a growth standpoint, like we talked about, that becomes even at bigger dollars, that becomes a smaller and smaller percentage of our overall gross margin. And so as you go forward from this quarter, you'll go back to just seeing the mix shift interplay between software and connected devices quarter-to-quarter. So I would imagine that over a longer period of time, you'll go back to seeing tailwinds in the gross margin from the software business. You'll also, over time, see tailwinds as we take in some new businesses and we scale them, something like our platform sensors, which we're calling out as a headwind to gross margins right now. As we get that to scale over time, that will end up being neutral. So you get into that product mix. This is the one sort of quarter step down that you're seeing from tariffs. Now that will continue to be baked in for as long as we have tariffs. Like no question, if there weren't tariffs, we would have had higher gross margins and then higher adjusted EBITDA for this quarter and Q4. But once it's in, it's in, if that makes sense.

Up next, we have Trevor Walsh at Citizens.

Rick, I want to revisit some of your comments regarding Prepared and Carbyne. I completely understand the advantages for users in enhancing the process and system. However, it appears that existing systems, like CAD or legacy ones, are still part of the equation. Does this pose a risk from a technology standpoint as customers integrate these new solutions? Could there be issues where existing systems fail, fail to scale, or introduce other technical challenges that might limit options? Are you hoping customers will move away from those older systems more quickly? It would be helpful if you could elaborate on how the successful components won't negatively impact your objectives in this area.

Yes, 911 serves as the main access point for police and public safety services. Historically, this has been through landlines, but it's increasingly shifting to mobile devices. The next-generation 911 initiative started back in 1987, but it doesn't fully reflect the advancements we've made today. Our strategy focuses on developing parallel systems that honor the existing infrastructure while also promoting innovative progress. We plan to integrate with Computer-Aided Dispatch (CAD) systems, though I anticipate that CAD will gradually become less significant as AI-driven systems handle information processing. We foresee more backend integrations occurring in the cloud, although we will likely still need to relay information to local CAD systems. Similar to how people transitioned from landlines to mobile phones without completely discarding the old technology, we envision a gradual migration. Mobile technology has significantly advanced, whereas landlines have stagnated since the removal of rotary dials in the 1970s. Many individuals may find they can’t even recall their landline number anymore, highlighting its declining relevance. We believe our strategy is robust, allowing us to develop all essential components with cloud infrastructure, decreasing our reliance on outdated on-premises systems. However, we remain committed to supporting the systems our customers currently use. This approach will enable us to create a parallel infrastructure with no dependencies on older, less efficient setups, facilitating seamless communication from callers to emergency response teams, including police officers equipped with body cameras.

Yes. And just to build on that really specifically, it's another reason why the combination of Prepared and Carbyne is so helpful. As Josh said at the top and Rick said at the top, what Prepared is it's this extraordinarily easy to deploy AI overlay that interplays with what they already have with their existing infrastructure, in particular with their existing call-taking systems. Like literally, all they have to do is tap an audio feed port off of the existing infrastructure and then the rest just works. It's just SaaS software. And so it's very easy to deploy, very fast to deploy, very, very minimal integrations. And it instantly gives both the PSAP, the ECC, a ton of this acceleration and efficiency value and forwards that data instantly to Fusus to voice assistant from Axon on all of those things to DRF. And then alongside that, you have Carbyne, which is a totally modern, totally cloud-based call handling infrastructure system that's already battle-hardened and proven. And as an agency is ready to get rid of that old-school big iron clunky on-prem call handling system, they can plop that in and have a massive cloud-based upgrade similar to, as Rick said before, the original journey to evidence.com. And so we have both flavors of that and agencies can move at their pace, and they can work with us every step of the way as they move through that, get instant value from Prepared and when and as they're ready, get a complete transformation to the cloud with Carbyne.

Awesome. Maybe one quick follow-up for Brittany or Josh, feel free to weigh in as well. Just given international momentum sounds great. Corrections deals, also great. I know those are 2 kind of big priority areas, but federal deals have been as well and kind of progress there. Just curious if the guidance is influenced at all by the shutdown or even kind of how you're thinking about '26, kind of where that's looking on that particular area of the business.

Yes. I'll provide some guidance and then Josh can discuss the federal aspect more broadly. At the beginning of the year, we mentioned that we weren't counting on federal for this year and it wasn't a significant part of our guidance. I believe that remains accurate. So, I'll pass it to Josh, but there seems to be more potential for growth in federal at this point than any associated risks.

Yes. I would just say weirdly, given everything going on, it's strange to say, but we expect Q4 to be our best federal quarter of the year. And so a lot of that's driven by interest in Dedrone going into major events next year like the World Cup and otherwise. But certainly, even as the shutdown has been going on, significant numbers of personnel are still working through some of these opportunities with us, and we see some upside there for Q4 that's frankly exciting.

Up next, we have Andrew Spinola at UBS.

Thanks Erik. Strong quarter in international, but the U.S. business decelerated again this quarter despite a really strong software and services growth reaccelerating to 41%. Just wondering if you could provide a little color on the dynamic in the U.S. business.

The U.S. business is accelerating.

On the bookings side, what about the revenue side?

The revenue reflects our software recognition methods. Bookings serve as a clear indication of the future potential of our domestic business. Not only is it on the rise, but it has also exceeded our expectations for this year. We are very proud of the progress being made domestically and believe it will be significantly evident in Q4. When I consider the business, I have no concerns about our execution in state and local sectors. I anticipate it will be an exceptional year for that team, with continued momentum into the next year.

So it's more timing you're saying, just on revenue rec?

Yes. I mean, look, Q4 has always been our biggest quarter for domestic. The deals are getting bigger and bigger. And so sometimes it takes a little extra time to close opportunities like that. We had an awesome October. I'm feeling great about bookings and revenue in the domestic segment. Again, no concerns there.

I was just going to echo like nothing fundamental. There's a lot of timing that goes into that quarter-to-quarter. And so you can have lumpy deals in international, you can have lumpy deals in different segments. Like I would look at it less quarter-to-quarter and more over the course of the year. And to Josh's point, over the course of the year, and that really comes through in bookings, we continue to see really incredible strength in the domestic business.

The second question I wanted to ask is just on the bookings piece. Anecdotally, I've seen a shift towards more and more 10-year contracts with your clients, which I think unquestionably a good thing. But I'm thinking about, is there any color you can give us around that, maybe take rates, how big the shift has been from 5 to 10 years? Because I'm just trying to think as we exit the year and looking at how '25 performed against the year-end contracted backlog in '24. I'm trying to think about how to think about '26. So I'm just wondering how big of a transition are you seeing towards those 10-year contracts?

Yes, Andrew, that's a great question. We evaluate our business through both normalized bookings, which we adjust to a 5-year view, and total bookings. We won't provide much detail regarding the weighting of the 10-year deals. However, in our 5-year agreements, we observe that the growth rate in normalized bookings is outpacing last year's growth rate. The 5-year bookings figure is indeed accelerating. We are certainly closing more 10-year deals, which we consider positive. Nonetheless, we want to clarify that even when normalized, the growth in bookings is accelerating.

If I could share one key takeaway, it’s that about 5 or 6 years ago, we had discussions with customers expressing concerns about being overly reliant on Axon due to the increasing share of our tech budget. Those concerns have largely faded. Customers now say that when they implement solutions with Axon, whether it's body cameras or records, everything just functions seamlessly. Our team is excellent, and we empower them to support our customers effectively. We ensure that none of our customers fail. We're increasingly hearing that they would prefer Axon to manage all their technology needs because we are a trusted partner and they are confident in our solutions. This sentiment contributes to the long-term contracts we are seeing, as customers express their belief in our partnership and a desire for long-term commitments. It’s essential for us to maintain that trust, which places increasing pressure on us to deliver consistently. Trust is fragile and can take decades to build, and we are committed to defending it with all our efforts.

We'll try to squeeze 2 more people in here. Jordan at Bank of America, you're next.

Just 2 quick ones. You guys have a lot of irons in the fire, new product development investments for growth in the companies you've acquired. How should we think about margin mix going forward? And then two, Rick, for the time that you spent in Europe, what are the timing items that you're seeing on Dedrone sales to NATO countries?

I can start with the margin aspect and then pass it to Rick. From a gross margin perspective, we have touched on this before. The product mix plays a significant role, with positive influences from software and the blend between software and hardware. Regarding adjusted EBITDA margins, we have worked diligently to balance the effects of tariffs and the new segments we aimed to invest in while maintaining our commitment to a 25% adjusted EBITDA margin for the year. We take pride in fulfilling our commitment and managing all the new initiatives we want to undertake long-term alongside the impact of tariffs. Moving forward, we will continue to adopt a long-term perspective, focusing on creating a robust business that can grow consistently. We will make informed, ROI-focused decisions each quarter about where to invest and how to position ourselves for sustainable success. Comparing ourselves to the rule of 40, achieving over 55% in that regard indicates we are effectively balancing our margin and growth strategy, and we will maintain this approach in the future.

And I just want to reiterate that. I think Brittany and I are very fiercely aligned that, look, when we spend money as a company, we're going to get an ROI on it. And so I don't want anyone to be under the illusion like this is going to be a runaway train of investment. Like we're going to make smart investments and those investments are going to pay off. And we understand the need to balance revenue growth and profitability, and we're prepared to be responsible there. So we're excited about the ability to be able to thoughtfully invest in some of our new opportunities across markets and thoughtfully staff all these new R&D opportunities we have. But make no mistake, profitability is still important to this company.

Yes. I want to emphasize that the investments and acquisitions we're making are not focused on mature, cash-generating businesses, as those often come with significant technical debt. We position ourselves as disruptors, and after our strategy meeting earlier this year, it became clear that with the current surge in AI, particularly in the 911 call space, it’s the right time for us to take action. We carefully considered whether to develop solutions in-house or to partner with others. We discovered two talented teams that are relatively early in their growth stages but offer distinct product solutions; one has a broad approach while the other builds a solid long-term foundation. Since this aligns with our roadmap, we decided to move forward with these teams, which are built on modern technology. This integration into our ecosystem isn't about acquiring established entities and restructuring sales teams to improve profitability. Instead, we believe these partnerships will enhance the stickiness and overall value of our ecosystem in the long run.

And Jordan, you asked about Dedrone. I'll just quickly answer that so we can get to one more question. Look, I think Dedrone is actually the most consistent product we have across federal, state and local and international. We're not going to go into market by market and NATO on the call. But I would say across those 3 markets, we are seeing real demand for Dedrone. And actually, the one that's maybe taking the longest to materialize is U.S. state and local just based on some of the regulatory issues there right now in terms of mitigating drones, but there's a lot of pent-up demand there. And while we're waiting for some of those things to take shape, it's a great contributor to both our federal and international businesses, and there is a lot of demand across those segments for it. So I think the growth trajectory of Dedrone in and of itself across markets is something that we're excited to see play out.

We'll take the last question from Josh Reilly at Needham.

Yes, I'll just ask one quick question here. I think Fusus has about 200 customers, correct me if I'm wrong, on that front, and there's roughly 12,000 agencies in the U.S. Do you think that DFR programs or some other catalyst is out there, which could drive much higher penetration for Fusus over the next few years? Or is it more of a natural kind of pipeline building process that you've kind of just executed excellently over the last few years? And then one question I get to with that is, is a real-time Crime Center relevant for all 12,000 agencies in the U.S.? Or is it really just some portion of that mix ultimately that is relevant for the TAM?

Do you want to take it? Josh?

Go ahead, Jeff.

I believe that every agency, regardless of size, should and likely will adopt the concept of a real-time Crime Center over time. This doesn't necessarily mean a large room filled with big screens; SaaS cloud software allows it to be accessible via an app on a phone, an MDT in a vehicle, and so on. It's essential for agencies to have a unified view that consolidates various signals such as 911 calls, CCTV footage, body cameras, and drones, since this is crucial for situational awareness. The demand for this capability in both domestic law enforcement and enterprises is significant. As mentioned earlier, we are very enthusiastic about the growth potential in this area. Furthermore, this year, we successfully transitioned nearly all customers who were previously using our body cameras for live streaming to Fusus. These customers are now using Fusus for their body camera live streaming, even if they haven't yet started connecting CCTV cameras and other devices. Overall, this progress is comprehensive and indicative of high growth.

Yes. Think of Fusus as like the more hardware inputs we have in the market, the more Fusus adoption will grow across body cameras, ALPR, DFR, CCTV, et cetera.

I think that 200 is outdated. I don't think we've updated it. So maybe we'll consider updating it, but I would imagine that it is bigger than that now.

Thanks, Josh. All right. We'll kick it to Rick to close this out.

As we reflect on the past three quarters, I am extremely proud of our team's financial performance. We have exceeded our internal expectations, and I commend the organic efforts our teams have been undertaking with products like ABW Mini, Outpost, and Lightpost. We haven't spent much time discussing these, but they represent significant market potential for us, especially following our acquisitions of Fusus, Dedrone, Prepared, and Carbyne. These developments complement our internal growth and our AI Era Plan offerings. I am thrilled that we're executing excellently on our organic programs, and Henrik Kuhl and his team have effectively enhanced our corporate development efforts, establishing partnerships and acquisitions to expand our ecosystem. Ultimately, our goal is to provide our customers with exceptional capabilities. Jeff and I discussed the transformation in taxi dispatching brought about by Uber, and while I don't suggest that a similar change will happen in our field, there are significant technological advancements on the horizon. We believe we are well-positioned to serve as the technology platform that our partners need, extending beyond agencies to enterprise users and their security teams. Additionally, we are uncovering new productivity applications for our audio, video, cloud, and AI platforms that may not be directly related to security. It's an incredibly exciting period for us, as our team excels in turning AI innovations into valuable products and creating scalable, profitable revenue for our investors. As we approach the holidays, we are energized and eager for what lies ahead. I wish everyone a wonderful holiday season, and I look forward to updating you on our continued growth in the new year.