Earnings Call Transcript - AXON Q2 2025

Operator, Operator

Investor.axon.com. Our prepared remarks today build upon the information in that letter. During this call, we will discuss our business outlook and make forward-looking statements. Any forward-looking statements made today are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These comments are based on our predictions and 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. We discuss these risks in our SEC filings. We will also discuss certain non-GAAP financial measures. A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our shareholder letter as well as on our Investor Relations website. Now before we turn to our quarterly update, we'll take a quick look at some recent highlights from one of the CEO summits that Rick has been hosting.

Patrick W. Smith, CEO

All right. Thanks, Erik, and welcome, everyone, to our second quarter 2025 earnings call. I love hosting those summits. It's all about connecting the dots with our customers so that we can build the tools they need to make their jobs just a little bit easier. We are, of course, proud to come back to you with another fantastic quarter. But what we're really proud of are the relationships and partnerships we've built with our customers. I spend most of my time with them. And the more I do, the more excited I am for what's ahead. In fact, there are several trends I'm seeing right now that are fueling that excitement. First, demand for new technology from our customers is accelerating, and it's outpacing even my most optimistic expectations. Artificial intelligence, drones and robotics, real-time operations, cameras and our newest TASER devices and virtual reality, each of those are resonating across our customer base. There's no one breakout product driving conversations. It's everything. In the past, it could take a few years for our newest products to start seeing meaningful adoption. Often at least the first year took time to fine-tune the application, work through the approval processes and get everything right. Today, we're watching customers adopt new solutions as a standard faster and in real time. Draft One remains our fastest adopted software solution. TASER 10, our fastest adopted TASER weapon. Axon Body 4, our fastest adopted camera. Dedrone, Fusus and the AI Era Plan are also being deployed faster than we've seen with prior new technologies while laying the groundwork for future innovations coming over the horizon. Another observation I want to share is that I believe one critical factor enabling this movement is the trust we've built with our customers. It is something I'm extremely grateful for. We have a history of being bold. It's only after decades of tireless work, thought leadership and responsible, careful balanced approach that we've earned the privilege to partner this deeply. They're able to move faster today because they trust we'll be there with them on the journey and there tomorrow, doing things the right way. The final observation I'll make is that collaboration and public safety isn't just critical anymore. It is absolutely essential. Roles, responsibilities and jurisdictions may have fine lines, but effective public safety happens through close collaboration across the landscape from sworn officers to public officials, federal governments, enterprises, and even consumers. To support this, we need to think broader than ever before, ensuring our products enable these different stakeholders to work together. Our work to expand into new customers, introduce new products that rethink how existing systems operate and build partnerships with industry leaders is about more than growth. It strengthens our ecosystem and makes every layer of connectivity incrementally more valuable for every user. This summer, we spent time with our product teams working through our future product investments, and we have the broadest, yet most cohesive and synchronized pipeline of products in development we've ever had. It's truly an inspiring time, and we remain committed now more than ever to investing behind our vision and the mission that drives it. With that, I'd like to turn it over to Josh.

Joshua M. Isner, CFO

Thanks, Rick, and good afternoon, everybody. Before we get into our results, I want to say we're thinking about the NYPD and the victims of last week's horrible tragedy. We are reminded of why we come to work every day, and we'll all continue to pursue Axon's mission of protecting life with vigor. As we reflect on our Q2 results, the theme continues to be customer obsession. We consider it the honor of a lifetime to work with the men and women of public safety and our continued emphasis on the customer experience is central to how we run the business. I tend to be the person on the team that reminds everyone that no matter how much success we have, we can always be better. I'm not sure that will ever change, but I'd like to take a reprieve from that for a few minutes as I'm truly awestruck at what our team is accomplishing. And the most exciting part is we continue to accelerate. This is not a team that slows down. Maybe the best example of this is our state and local team under the leadership of Jessica Duncan. This team took back the record for the largest deal in Axon company history by a wide margin. This contract with a major city police department also marked the largest contract we've seen in terms of new product bookings, encompassing everything from drones to our AI products. Similarly, our corrections team, led by Zach Austin, also closed their largest deal in team history and contributed 2 of the top 10 deals in the quarter. Corrections has been an important area for us to grow our presence because the value our products offer to keep correctional institutions safer is so clear. What's exciting here is that the deals we are seeing in the vertical now include products from across our ecosystem, TASER 10, body cameras, VR, evidence management and Fusus. Next, our wins in international and enterprise continue to validate our investments in these areas. Our international team added a new TASER customer in Africa, becoming the largest in the region. And in Enterprise, we signed a contract opening up a major opportunity in the gaming space. It was our first win in that vertical to include our AI products and a clear indicator to me that we're on the right path. Zooming out a bit, every quarter that goes by indicates more and more of a contribution from new products. We closed almost $150 million of bookings for our AI Era Plan in Q2 alone and over 30% of bookings this quarter came from new product categories. We've talked in the past about an opportunity to grow our presence with officers as our product portfolio expands. Just a few years ago, the maximum an agency could spend with us on a per officer basis was less than $300. Today, that sits over $600 due to new products, and we saw the per officer bookings in our largest deals push up against that level. These are just a few examples of the activity we saw in another strong quarter. As I said in Q1, the team came out of the gate with speed this year, and that momentum is accelerating. Coming off a strong first half with a growing pipeline, we now have line of sight to deliver year-over-year bookings growth in the high 30% range, which would once again put our second half in line with the prior year's entire campaign. At Axon, we're a next play shop. We don't fall in love with what we just did or what we did last year or the year before that. But as I said, I am so proud of our sales and product teams to see bookings accelerating at this stage in our business speaks to the level of execution and innovation going on at Axon. As I digested in these results, I was brimming with excitement about what the future holds and the impact that we can have. You are truly seeing what a world-class team is capable of doing when everybody is on the same mission. With that, let's kick it over to Brittany.

Brittany Bagley, CFO

Thank you, Josh. As Josh and Rick mentioned, we're extremely proud of our second quarter results as we continue to deliver for our customers while investing for the long term. Second quarter revenue of $669 million increased 33% year-over-year, marking our 14th consecutive quarter of over 25% revenue growth. Josh shared some great color on our bookings and why we're so excited for the future. In terms of translating that into revenue today, the top line growth continues to be driven by software and services, which grew 39% year-over-year to $292 million. Our ability to win new users and to drive adoption of our newest products underpins this continued growth. Net revenue retention increased to 124% and has been near or above 120% for 20 consecutive quarters, demonstrating the results of our ongoing investment in our products and customers. Turning to Connected Devices. Revenue increased 29% year-over-year to $376 million. This growth was driven by strength across categories, including TASER, which grew 19%, driven by TASER 10. Personal sensors grew 24%, driven by Axon Body 4, and Platform Solutions grew 86%, driven by counter-drone and virtual reality. Adjusted gross margin was 63.3%, up 20 basis points year-over-year, driven by product mix to software and services, partially offset by lower devices margin due to the strong growth in our newer hardware products and newer markets. We expect this balance to continue in the second half as we mix across new investment areas and our software business growth. Adjusted EBITDA margin of 25.7% came in ahead of expectations due to higher revenue and operating leverage, as well as benefiting from the timing of tariffs, which will now impact us more in the second half of the year. Turning to our outlook. We are raising 2025 revenue guidance to a range of $2.65 billion to $2.73 billion, representing approximately 29% annual growth at the midpoint. This reflects our performance in Q2 and our confidence in the pipeline for the second half. We are raising our adjusted EBITDA guidance to a range of $665 million to $685 million, up from $650 million to $675 million. This maintains our 25% margin target for the year and incorporates our planned investments and tariff-related expenses in the second half. We continue to expect to increase hiring over the remainder of the year, particularly in R&D, as we prioritize investing behind the incredible product road map we've talked about as well as in our exciting new markets. These investments will continue to set us up well for 2026 and beyond. In summary, Q2 reflects another quarter of strong execution and healthy performance across the business. We remain focused on delivering sustainable growth while investing strategically to serve our customers and drive value creation over the long term. We're also incredibly excited to deliver on the second half of the year for everyone. With that, we'll turn it over for questions.

Operator, Operator

Thanks, Brittany. We'll move over to gallery view. All right. For today, I think we'll try to keep it to one question and a brief follow-up, if we can, just because we've got a full call and I want to make sure we can get to everyone. So first, we have Keith Housum at Northcoast.

Keith Michael Housum, Analyst

Great. Congratulations on a great quarter. Perhaps you guys can spend a little bit of time on the enterprise addressable market and perhaps some of the success that you guys have had with some of the pilots so far. Is there a certain product or two within the portfolio that is getting more traction than others as you guys are entering into the, I guess, expanded market than enterprise?

Joshua M. Isner, CFO

Sure. I'll take that one. Enterprise certainly is going very well. We're excited about the breadth of product interest there between not only our body cams and Evidence.com and Fusus and drones, counter-drone and frankly, across all these opportunities, we're seeing more and more interest in the full suite of products there. But Keith, I got to be honest. I'm shocked that after predicting bookings were flat, you weren't wondering why you're...

Keith Michael Housum, Analyst

Next question.

Joshua M. Isner, CFO

Yes, that's a good idea. Let's go to the next question.

Keith Michael Housum, Analyst

No, no, that was my expression though. In terms of bookings, can you perhaps parse out where that success was?

Joshua M. Isner, CFO

Yes, you mentioned that bookings would remain flat at $1 billion, which was actually an increase of 50%. You also indicated that we didn't secure any large deals in the quarter. However, we achieved our largest deal in the company's history, including our biggest correction deal. While you noted that the bookings growth rate was slowing down, it is actually on the rise, thanks to exceptional execution from both our product and sales teams.

Operator, Operator

Next, we have Andrew Sherman at TD Cowen.

Andrew Michael Sherman, Analyst

Great job, Josh, on achieving $150 million in bookings from AI Era in Q2. Can you discuss the demand mix for Draft One? Is the demand for Draft One itself increasing, along with the newer products? The data you've shared in the press release about the time savings from the newer segments is intriguing. Please elaborate on the demand for the entire bundle and whether it's accelerating, as it seems to be.

Joshua M. Isner, CFO

Yes, Andrew, thanks for the question. Good to see you again. Absolutely, it's accelerating. Yes, we're excited about the result. We had talked about this a lot in the Q1 call that the first half, we'd see some incremental growth, and we certainly did. But the pipeline in the back half of this year for the AI Era Plan is loaded, and we certainly expect to continue to go fast in terms of the AI Era Plan. It's something that's very well received from our customers. I think it's a good indication of not only the time savings that customers are seeing with these products, but it's also the fact that there's more and more products that are making a difference day-to-day this plan that customers are getting along the way. So they're super pleased with Draft One. We continue to see more and more momentum there. But now with the AI assistant and the real-time translator as part of that and products like Form One and Brief One getting going. There is a lot of customer excitement around this plan. And a huge shout out to Rick a year ago, a year plus ago now for calling out the need to invest heavily in the AI world in product line. And then, of course, Jeff and his team for implementing these products in a way that makes a real, real difference for our customers. It's just very, very cool to see right now.

Operator, Operator

Thanks, Andrew. Up next to Will Power at Baird.

William Verity Power, Analyst

Okay. Great. And congratulations on the results. I want to start on Platform Solutions. Obviously, a really nice acceleration. I recognize smaller numbers, but I think strategically, very important longer term. I wonder if you could help us just understand kind of what really underpinned the counter-drone success. Maybe you can kind of breakdown or color you can share across law enforcement versus enterprise. If I take that a step further, if I stick with drones, it would be great to get any perspective as to what you're seeing in terms of pipeline build bookings within DFR and whether the executive orders have started to spur further activity there.

Patrick W. Smith, CEO

Let me start by discussing counter-drone technology. I'm sure everyone is aware of Operation Spiderweb and the increasing prevalence of drones in conflicts like Ukraine and the Middle East. Ukraine's ability to eliminate a significant portion of Russia's strategic bomber fleet using $1,000 FPV drones is noteworthy, as is Israel's capability to operate deep within Iran. This has caught everyone's attention, whether you're managing a stadium, a nuclear plant, a power station, or responsible for safeguarding an executive's residence. The world has become acutely aware that small drones pose a major threat, accessible to anyone, and traditional defense systems are not designed to counter it. Our acquisition of Dedrone and our team's foresight have been invaluable, putting us in a strong position. We are undoubtedly a market leader, experiencing immense demand from those who recognize the need for solutions. I dedicate a considerable amount of my time to exploring how we can maintain that leadership as well as grow and address new threats, such as the fiber optic drones we are now seeing widely deployed in Russia and Ukraine, which are resistant to jamming due to their physical connections. We are deeply focused on how to expand our solutions to meet these challenges. The pace of change is astonishing.

Joshua M. Isner, CFO

Maybe just the fact that one of the reasons, and we had mentioned this when the acquisition closed is we really believe we can lead with Dedrone in some international markets. And I think in certain places, that's not only very relevant to today but a nice difference where some of the new products that we're acquiring we can get in the door, so to speak, with those and with a lot of interest from a customer. And then when a customer is ready to move to body cameras or less lethal or video aggregation or AI, we're better positioned to participate in some of those opportunities.

Brittany Bagley, CFO

I'll just jump in and mention that in that segment, there's a lot of enthusiasm around counter-drone, which also includes a fleet and VR. Every category in this segment is seeing significant growth, and we're excited to include counter-drone. However, due to the scale of this, you should anticipate some fluctuations in that segment going forward because counter-drone can secure large deals at once. Overall, we're pleased with all the products in this segment, and they're all performing well.

William Verity Power, Analyst

Okay. And anything you can add just with respect to the DFR side of the equation in terms of how that pipeline is building and kind of level of activity? Because that seems like another really nice longer-term opportunity as well.

Joshua M. Isner, CFO

Sure thing, Will. I would definitely say we're excited about DFR. One of the developments in DFR or drones for first responders is that, while we don't produce the hardware for outdoor DFR, there are emerging opportunities related to the hardware that bring considerable value to customers. These include live streaming, storing evidence on Evidence.com, and enhancing the speed at which we can deploy drones using software, even before 911 calls come in. There's a lot of exciting work happening around DFR, and currently, the most relevant aspect of Axon’s product portfolio is Dedrone, which ensures safety for drones in the air. Many people think of Dedrone primarily for counter-drone purposes, tracking various drones, and neutralizing threats. However, another significant advantage is that police departments using Dedrone can access a comprehensive map of where all their drones are operating within the city. We believe we will remain relevant in the DFR space for a long time. Our partnership with Skydio is progressing very well, and we're enthusiastic about the future potential there.

Operator, Operator

We have Mike Ng at Goldman Sachs.

Michael Ng, Analyst

I just have one on the high 30% bookings growth guidance. I think it implies about $7 billion, which would be about $2 billion of bookings growth year-over-year. Could you just talk a little bit about what's driving that doubling of annual bookings growth that you've had historically, I think, relatively consistently? Is it just the AI Era Plan and some of the momentum there? Are the lengths of the deals changing at all? Anything you could just talk a little about in terms of pipeline giving you that confidence or deals closed to date would be helpful.

Joshua M. Isner, CFO

Sure thing, Mike. Good to hear from me again. And on your question, I'd say we've said for a long time, and Jeff brought this framework to Axon when he first joined, which was, hey, we want to be really, really good at selling new products to existing customers. So that's our U.S. customer base. And there, we're talking about drones, AI, virtual reality, Fusus, Dedrone, all of our software add-ons that we continue to build and as well as iterating on the TASER and body camera. And then you combine that with selling existing products to new markets. And there, we're talking about international enterprise and federal, where we can take the things that are very successful in state and local and all of a sudden customers in those other segments are starting to see really, really good product market fit there. So it's not one thing, and that's one of the things we're most excited about is we feel like we're very diversified. We have a lot of ways to win the game, so to speak, and we're going to keep investing in all of them because we see a ton of opportunity ahead.

Michael Ng, Analyst

Great. And can I just maybe get a quick follow-up on international? I mean, I think, accelerating growth, I think the best year-over-year and quarter-on-quarter growth there. Maybe some of the key markets where you're getting the most traction, I heard the mention about TASER in Africa, but I would love some detail there.

Joshua M. Isner, CFO

Yes. I appreciate the question. We tend to be a little less specific about where we're going internationally only because as a competitive group, we don't want to tip anything off here, but we do see opportunity across LATAM, certainly the U.K. and Europe and then certain segments within Asia as well. So very much feeling like, hey, over the next few years, international should continue to be really, really exciting. Cameron, our CRO had come in, and he just as of Q2 celebrated his 1-year anniversary and we're certainly seeing the investments of having a CRO in Europe with the team over there starting to pay off as well. So yes, much more to come on that.

Brittany Bagley, CFO

One of the things about some of our international deals is that they tend to be quite significant. You can notice the impact in quarters when a large international deal comes in. In Q2, we secured a couple of substantial international deals, which is incredibly exciting and shows a great deal of momentum. However, there is also significant momentum in our state and local segments and other areas of our business. Therefore, I'm unsure if we'll be able to maintain the same 20% growth rate we achieved this quarter, but there is a lot of momentum behind our international bookings and the overall business.

Operator, Operator

Thanks, Mike. Up next, we have Meta Marshall at Morgan Stanley.

Meta A. Marshall, Analyst

Congrats on the quarter. Just as the AI bookings have picked up, just what kind of lessons have you guys learned about getting through some of the hurdles from state and local? Is it having reference customers? Just getting kind of oil has been put in the gears to kind of move those along? And then maybe just as a second follow-up question, just obviously, a lot of immigration dollars enforcement dollars and OBB just where you guys kind of see opportunity there?

Joshua M. Isner, CFO

Sure. Regarding the AI bookings question, we believe in putting products into users' hands, allowing them to provide feedback and experience the value for themselves. There's no sales or marketing effort that can compare to that. When customers use a product like Draft One for 60 days and realize they’re spending significantly more time on the road combating crime instead of being behind a desk, those stories really resonate. Similarly, with our AI assistant and real-time translator, users at border crossings or in regions like Quebec find the tools extremely relevant and practical for their job. Our standard for these AI products is grounded in real-world impact; they help keep communities safe and enable police to engage more directly with the public rather than being stuck at a computer. The exciting part is that we are just getting started with our journey and have many innovative ideas for advancing cutting-edge AI products in public safety. Could you please remind me of your second question?

Meta A. Marshall, Analyst

Immigration enforcement dollars that opportunity.

Joshua M. Isner, CFO

Yes, we believe that starting in the first quarter of the federal government's calendar year, which corresponds to the fourth quarter of our own calendar year, we will see an increase in solicitations, whether they are RFIs or RFPs, for products funded by this new bill. Our focus will be primarily on counter-drone technologies, video products like Fusus, drone technology, and potentially some TASER products as well. Our team has already begun to identify customers and assess the potential opportunities with each of them, aiming to determine how we can support their needs. Additionally, since some of these federal agencies are among our largest customers in the U.S., we feel that we are well-positioned to showcase how we can assist them effectively.

Operator, Operator

Thanks, Meta. Up next, we have Joe Cardoso at JPMorgan.

Joseph Lima Cardoso, Analyst

Congrats on the results. Maybe a follow-up to the last question but in a different context. You guys talked about the big beautiful bill and the opportunity there, I think, fairly well in terms of the different avenues you guys can participate in it. Maybe can you just touch on the programs that are ongoing in Europe in a similar manner in terms of layer opportunities there? And where is Axon well positioned? Is there anything different in terms of the different programs in the U.S. And then as we think about both the U.S. programs and the European programs, can you just help us think about the timing of these opportunities? And then maybe just hitting it on the nose, is any of this baked into the back half outlook in terms of bookings? Is like, are you guys already seeing any of this goodness?

Joshua M. Isner, CFO

So Rick, why don't you start since you've been over in Europe for the better part of the summer meeting with customers here?

Patrick W. Smith, CEO

Yes, the visibility is definitely increasing. I had my first meeting with a Prime Minister last week and spoke with several interior ministers. There is a significant need due to the social displacement occurring in Europe. They are managing their own immigration challenges, and while Europe has welcomed many, they are now realizing they were not prepared to integrate all these individuals, leading to rising social issues. I encountered questions about border security, especially regarding hybrid warfare from Russia that promotes mass migration as a destabilizing tactic. One border guard inquired about the TASER 10, which currently affects up to three people. In the U.S., we focus heavily on civil rights, and hitting multiple individuals could lead to legal issues. However, when I raised this concern with European Border Agencies, they expressed that they are overwhelmed and fear for mass casualties. This presents an opportunity for TASER to become a key defensive weapon in Europe, where demand is increasing. Additionally, we shifted our priorities to provide real-time translation services in non-English languages for an Eastern European country, and this has gone very well. The demand for real-time translators is also growing, and I’m personally involved in discussions with two countries regarding significant deals, larger than what we have signed in the past. While I don't want to rush to conclusions about how quickly this will unfold, the overall interest is notably high.

Joshua M. Isner, CFO

And Joe, your question also included whether some of that is already included in our bookings for the second half. We do expect Q3 and Q4 to be very promising quarters for our international business. Now, we need to execute and demonstrate that, but we are certainly pleased with the current pipeline.

Operator, Operator

Thanks, Joe. Next, we have Jonathan Ho, William Blair.

Jonathan Frank Ho, Analyst

Still a way for you to maybe help us understand how your second half bookings are potentially shaping up just given your commentary that it could be as large as last year? And what underpins that confidence is your visibility perhaps even better than what we saw last year?

Joshua M. Isner, CFO

Yes, Jonathan. I believe our sales leaders would agree that this has moved beyond being just a hobby; it's an area where they excel, supported by our pipeline. Over the last few years, we've provided plenty of insights into our bookings, and as you've observed, we've consistently met our commitments. Our confidence in our pipeline remains strong. We're already seeing positive results halfway through Q3, particularly from a productive July. Our sales professionals are exceptional, committed to our mission and our customers, which consistently reflects in our performance. I'm extremely proud of the team and anticipate continuing to express that sentiment. We're highly confident that we will achieve significant bookings in the second half.

Jonathan Frank Ho, Analyst

Just a quick follow-up. Within your premium software offering, is there a way to maybe unpack for us? What is the most common upgrade path? What contributes the most to growth? And how much runway do you see to sort of sustain that growth from here?

Joshua M. Isner, CFO

Sure. And just across the ecosystem in terms of upgrades, Jonathan?

Jonathan Frank Ho, Analyst

Yes. In terms of the ecosystem, what is driving the premium software offering to experience this level of growth?

Joshua M. Isner, CFO

Sure. I think generally speaking, customers tend to buy they're most price focused in their first contract whenever that may be. And so you see maybe you definitely don't see the Officer Safety Plan as commonly as you do with existing customers. Our Officer Safety Plan, you tend to see a customer buying maybe some TASERs and some body cameras and kind of the core feature set of Evidence.com. But then a lot of our products have been built as a result of customers expressing where they want to go next in their program. So inevitably, customers that are newer are going to hit those same points along the way and say, 'Hey, it would be nice if I could add this, this and this.' And then that becomes an Officer Safety Plan conversation. And with AI now on top of the Officer Safety Program, again, that's just for those customers that have been on OSP for a while, they start to see the value of these AI features on top of what they're already doing. So I think it's a really nice path that our customers take to adopting more and more. And frankly, we're very disciplined about measuring how customers use new products and making sure that they're very pleased with what they're seeing in new products. And then years later, that kind of manifests itself in terms of adoption. So yes, that's a little bit about how we get from A to B there.

Brittany Bagley, CFO

I would like to emphasize that due to the rapid pace of our product innovation, many of the products currently available may not have been accessible when the customer initially signed up. As they return, we naturally offer more software features and capabilities, allowing for a different conversation regarding what's included in some of the more premium bundles. This ongoing growth is significantly enhanced by AI, which further enriches the discussion.

Operator, Operator

Thanks, Jonathan. Up next, we have George Notter at Wolfe Research. Got a pre-established list there in terms of how we go through the question, so sorry, we're not intentionally ignoring your hand up. We're just going through the list ahead of time.

George Charles Notter, Analyst

All right. I appreciate that. I guess kind of tacking on to the last question, you guys threw out a $600 price point, I think, for some deals this quarter in terms of per officer metric. I guess I'm just curious what you said, Josh, a few moments ago, I think makes sense just in terms of customers kind of layering in more pieces of the Axon solution into the bundle. But are there comparisons you can give us for a year ago, 2 years ago, 3 years ago to help us understand sort of the path to $600 per officer? What metrics can you share?

Joshua M. Isner, CFO

Yes, a few years ago, the top offering in our Officer Safety Plan was around the mid-20s. Since then, we've added drones, Dedrone, and Fusus to enhance its value. We don't simply raise the price of the Officer Safety Plan; if the price changes, it reflects additional features included in the bundle. Currently, the price is in the mid-300s for the Officer Safety Plan alone. When we consider the AI Era Plan priced at $199 a month, along with in-car video, Dedrone across the Enterprise, and Fusus, we’re seeing monthly value per user reaching around $600. It's encouraging to see some customers subscribing at this level, but our focus is on ensuring every customer understands the value they receive and the substantial return on investment, even at those price points.

George Charles Notter, Analyst

And was that typical? Was that a typical number for deals that you closed this quarter? Or is that sort of the high end?

Joshua M. Isner, CFO

No, that's the high end. That definitely drove our largest deal in U.S. history and company history now. We think that's a promising sign of things to come, but we wouldn't set the expectation that even the majority of the customers are there right now.

George Charles Notter, Analyst

And then at one point, you guys gave us a mix of business coming from Officer Safety Plan. Is there an updated number there? I seem to remember a 20% number. Is that still the right ballpark? Or is it higher now?

Brittany Bagley, CFO

No, we don't have an updated number on that. What we mentioned a quarter or two ago was that approximately 70% of our customers are still on one of our basic plans. There's significant potential for upgrades. To Josh's point, we don't provide an exact ARPU number, but it could be as high as $600. However, we still have many customers who are not purchasing our entire range of products. When we discuss our impressive software growth each quarter, some of it is due to the natural shift we see as our customers return, upgrade, and increase their spending.

Operator, Operator

Thanks, Alyssa. Next, we have Jeremy Hamblin at Craig-Hallum.

Jeremy Scott Hamblin, Analyst

Congrats on the momentum in the business. So I wanted to come back and see if I could clarify something here in the Platform Solutions performance, exceptional growth, a lot of talk about Dedrone. And I just wanted to see if I could kind of pointedly ask it. Is Dedrone the biggest driver of that growth in terms of kind of percentage or contribution to that year-over-year growth rate?

Joshua M. Isner, CFO

No, it's actually one of the smaller contributors right now and, frankly, it has been growing every quarter, but it is certainly not the biggest driver of new product bookings growth.

Brittany Bagley, CFO

Yes. First, sure. So if you're looking just inside of our platform sensors business, it was a big driver of the growth this quarter inside of platform sensors. But if you look at the overall business, it's just not a material driver of our overall growth. And again, it will be a little lumpy inside of that platform segment.

Joshua M. Isner, CFO

The opportunity. Ultimately, we think there's a very relevant product. So we've got a lot of white space in front of us, and we're gearing up to execute well there.

Patrick W. Smith, CEO

Yes. A lot of you hear me waxing during the call, it's rarely about the stuff that's selling well this quarter. It's stuff that I'm looking a year out.

Jeremy Scott Hamblin, Analyst

I understand. I was seeking clarification, particularly within that small segment of the business. I wanted to get a sense of the many moving parts in the business and the various verticals you are addressing. From an investment perspective in the team, as you consider product and potentially your sales and marketing teams, where do you see the need for investment? It seems there has been a shift in your focus compared to where you were a year ago. While a significant portion of the core business, like TASER, grew by 19% this quarter and continues to perform well, I’d like to know where you believe the most investment is needed from an infrastructure standpoint to position the business for success in the next 2, 3, or 5 years.

Joshua M. Isner, CFO

Maybe I'll start there and hand it over to Rick and Jeff. Jeremy, I believe we follow the same strategy every year. While the numbers may vary, our commitment to investing in research and development remains constant. This is an innovative company led by an innovative founder, and we will continue to capitalize on every opportunity to pursue our mission, especially given the strong buying signals from our customers. At times, this investment comes at the expense of other areas, and we aim to fund it by optimizing our selling, general, and administrative (SG&A) expenses. Specifically regarding G&A, we assess the opportunities available, particularly in sales, as hiring a salesperson can yield a clear return on investment based on their quotas. We maintain a disciplined approach in the rest of the G&A sector, focusing on leveraging AI internally, just as our customers are using AI externally, ensuring that our team doesn't need to grow significantly as our business expands. In summary, we practice discipline in G&A, invest heavily in sales, and consistently invest wherever we see product opportunities.

Operator, Operator

I think we might need to move quickly, Jeremy, since you had two questions and we have ten minutes left to address five more. Let's aim for one question each. Josh Reilly, you're up next.

Joshua Christopher Reilly, Analyst

Any update on the light post and outpost camera opportunities in terms of the manufacturing ramp and the pipeline build? And then I just had a quick follow-up on drones after that.

Joshua M. Isner, CFO

Sure. Very exciting to be live with a few customers already in trials. That's for a product that we announced in May and have really invested a lot in the first half of the year to see pulls on the ground and camera is working at certain large customers right now. That's obviously a great first signal. I also don't want to get out over our skis there. There are certainly things that we're learning and things that we need to do better as part of that. But that's just the cycle all of our hardware goes through, and we really believe we're on the right track. We think we're going to be very, very competitive in this market, and we're excited about the opportunity.

Joshua Christopher Reilly, Analyst

Got it. And then just a quick question on the monetization of drones. When you're looking at the revenue that you're actually getting from drones, is it really just software revenue on the DFR programs? Or as part of the hardware from the DFR programs recognized in your income statement then passed along to Skydio? Maybe just help us understand how that dynamic is going to work.

Joshua M. Isner, CFO

Brittany, why don't you take that one, if that's all right.

Brittany Bagley, CFO

Sure. So when we're talking about drones and things like platform sensors and all of that, we're really hearing us talk about is the hardware piece of Dedrone and then the software piece of Dedrone would be showing up in our software business. That's by far the bulk of it. We do partner with Skydio, and our partnership with Skydio is basically a referral fee that comes through. I would not think about them today as being a big part of that business other than what else we can enable when we do partner with Skydio, from a software standpoint, from an experience standpoint for our customers. So don't think about that as a big chunk of our revenue. Think about it as everything Dedrone can enable through DFR, but that's what you're seeing in the numbers.

Operator, Operator

Thanks, Josh. Next, we have Jordan at Bank of America.

Jordan J Lyonnais, Analyst

Could you guys just give an update on USIS' FedRAMP status? And then for Dedrone, what is your strategy to start playing a more meaningful role in DoD counter-drone programs that are getting funded like Replicate or 2?

Joshua M. Isner, CFO

So Jordan, on the strategy one, again, like we don't necessarily want to tip off our hand on how we're thinking about the opportunity. But we'll be in the game when the lights come on, and we're ready to prove what we can do for sure. Jeff, why don't you take that first question, if that's okay.

Jeffrey C. Kunins, Executive VP

Yes, sure. Just like with everything we do, we submit things in as we have new things in our envelope and we sort of go through the official certification testing. And then ultimately, the second part is the FedRAMP body itself going through their final little check boxes. And so exactly on plan, we submitted and completed all the work to make Fusus FedRAMP compliant, submitted as part of our last package. So you can think of it as we are FedRAMP compliant at the moment. And the only thing waiting is the natural course of the committee sort of officially giving that last check mark. We're operating in the market with customers knowing that we've met all those requirements.

Operator, Operator

Thanks, Jordan. Up next, we have Trevor Walsh at Citizens.

Trevor James Walsh, Analyst

Great. You had an interesting stat in the shareholder around the survey that you ran towards the beginning of last year. About 14% of departments are essentially not at full staffing levels. Not necessarily surprise headcount and the hiring of the officers has been a struggle for a while now. And it's pretty clear that AI is going to help in that a little bit to make officers just more productive. But do you guys see any trends around just more broadly than that of departments knowing that they might not be able to get the head count that they want just shifting that spend to other kind of areas within the department's needs, whether that's technology, and that generally helping you guys? Or do you see that as a possibility kind of down the road, if not right now? And then a quick follow-up for Brittany, can you just elaborate on the tariff piece for the kind of second half of the year? And if that's related to kind of the newer things that we're hearing around tariffs? Or is that just more baked in from the April kind of announcements that we've heard?

Patrick W. Smith, CEO

Let me take the first part. We are absolutely having those conversations. Draft One is the baseline of, hey, if I can spend less time doing administrative work and more time doing police work. We're hearing across the board, things that we can do with technology, even DFR is one of those, right? Hey, if there are calls that we can clear without having to send officers, that means we can focus our manpower on the calls that make more sense. The same thing is true of inbound call handling, like your customers are interested on, hey, are there things we can use with technology to be able to handle noncritical calls, maybe we don't send an officer at all, maybe report them to an AI agent. Translation, historically, there's like multiminute waits to be able to get a translator. We're in either middle of a critical incident or an inbound call, and those are the sorts of things that across our stack or through our partners, we begin to turn those things into real-time right now. It doesn't need a person at all. It's technology aiding the person or in some cases, we can handle a whole thing over to tech, and we think it's a combination of AI and robotics over the coming years that's going to enable us to take on a greater and greater portion of that workload, allowing human beings to focus on the sort of top end of those incidents that really require human engagement. And I'd say there's probably at least 50% of the workload of a police department that's automatable. And we are seeing that they're open to thinking their budgets that way. I can think of a few conversations we've had where agencies have said, 'Hey, I'm understaffed by this many folks. I'm just going to take part of that budget and push it over here and maybe not hire a couple of those.

Brittany Bagley, CFO

Yes. So on tariffs, we factor in everything we know as of like 24 hours before this call. So we're as up to speed as we can be on how we think about guidance for the second half of the year. And then we just bake into the guidance we give you for the second half. I would say it continues to move around, obviously. But I think more is certainly known now even than it was a quarter ago. And so I think that allows us to do things like come up with good plans to mitigate as much as we can and manage through as much as we can, which we're obviously trying to do. But our current view is just baked into the guidance.

Operator, Operator

Thanks, Trevor. Next, we have Mike Latimore at Northland.

Michael James Latimore, Analyst

Great. Yes. Excellent results. In terms of the Enterprise segment, I guess, prior to this quarter, the biggest deal was in enterprise, how is that deployment going? How is the pipeline for enterprise, which products seem to be the most interest? And then on TASER 10 is maybe just elaborate a little bit on manufacturing capacity there. Are you ramping that through year-end?

Brittany Bagley, CFO

Yes. So I'll maybe go in reverse order, and then Josh can jump in on enterprise too. But we are continuing to ramp TASER 10 capacity. I would say we are sort of continuing to ramp TASER 10 capacity as much as we can because we continue to see just great demand for that. So we're ramping it this year. You saw us take our CapEx guidance up a bit. That's us continuing to ramp it into next year so that we continue to meet that demand. From an enterprise standpoint, and I know Josh will jump in, but we continue to be really excited about the pipeline that we're seeing. I think a lot of our products are really relevant to the enterprise segment. But I will say Fusus has been particularly exciting as we've brought them in. That's just really resonating well with our enterprise customers and opening a lot of doors and a lot of really great conversations. Again, I think, obviously, our cameras, as we talk about retail and frontline workers, you could see counter-drone, you could see a whole lot of our portfolio being relevant, but it's a huge market. And so we'll continue to update over time. But there's a lot as we start to fight that off.

Joshua M. Isner, CFO

Yes. The only other thing I'd add is the enterprise deployments are hard by nature. We're talking about aggregating hundreds of thousands of video screens to one pane of glass. That's hard work, and I'd say we're learning the deployment is going well. And what we learned here will absolutely make us better in the next 3, 4, 5 of these that we do. And so the team is doing great work and some new variables when you have enterprise customers relative to government, and we're working through those and feeling good about where we're going to land.

Operator, Operator

Thanks, Mike. And up next, we have a new face to our call, Andrew Spinola at UBS.

Andrew Carl Spinola, Analyst

Just following up or continuing on the enterprise space. Would you be able to willing to elaborate on the gaming contract that you guys announced? What are you doing there? Is it Fusus centric? Or are there a few of your other product lines in the mix?

Joshua M. Isner, CFO

Let's focus on video for now. There may be opportunities in gaming as well as with Fusus in terms of security, but video, including body cameras and Fusus, has significant relevance given the financial stakes at each of those sites. Thank you for your patience, Andrew.

Operator, Operator

Thanks, Andrew. We'll kick it to Rick to close this out.

Patrick W. Smith, CEO

Oh, man, we're done already. I was ready for a couple more. I just have to say I'm so proud of the team, and we're really hitting on all cylinders. It's also great that I'm answering fewer questions during the call about the operations of the business. That's because I have such a fantastic team. I've been traveling a lot with customers and have identified a couple more exciting opportunities that will expand our product portfolio in the next couple of years. It's really great to have a team you can rely on; we're all focusing on our areas, and the business runs like a very reliable machine, maybe not the most reliable, but like a reliable Ferrari. This thing is just running. And of course, having you all help the investment community understand our business is crucial. This is a complex business to grasp. We’re involved in everything from media creation in VR for content and managing training to pure software plays like our records business. We also handle electrical weapons, drones, and counter-drone systems. It's a lot of fun for us to run the business, and we know it keeps you busy trying to see how it all connects. One thing that keeps me excited from a business perspective is that we have so many opportunities that we aren’t relying on any one part of the business. We have a genuinely diversified portfolio that all works together seamlessly. We're expanding to anyone who interacts with law enforcement. If you're a business, your security team is engaging with law enforcement. Similarly, if you’re military, you need to interact with enforcement too, especially with the hybrid threats we are currently facing in society. We can start from the foundation we’ve built around public safety and begin to move into the next layers. It's an exciting strategic time to lead. With that, I want to thank you, Josh. Do you have anything to add before we wrap up today?

Joshua M. Isner, CFO

No. You said it well, Rick, thank you.

Patrick W. Smith, CEO

Thank you, everyone. We look forward to another strong quarter and will connect again in a few months.

Joshua M. Isner, CFO

Thanks.