Axon Enterprise, Inc. (AXON) Earnings Call Transcript & Summary

Good afternoon, everyone. We'll get the next session started. I'm Joe Cardoso, one of the hardware and networking analyst at JPMorgan. And for the next session today, I have the pleasure of hosting Axon's President, Josh Isner. Thank you, Josh, for joining us today. It's always a pleasure to have you here.

Nice to see you Joe. Thank you.

So maybe, yes, I just wanted to start off, you hosted your customer event in Arizona a couple of weeks ago for everyone in the room today. Could you maybe provide a quick rundown of the most notable product introductions that you had? And maybe more importantly, the customer conversations and discussions that you're having, where is the focus? Where is everyone kind of looking towards in terms of the Axon portfolio, where you're seeing the traction, at least in terms of those conversations that we as investors don't necessarily have the privilege to hear?

Sure. So we're really excited with the turnout 2 weeks ago at Axon Week. That's kind of our user conference, I think Dreamforce for cops, is kind of the construct there. We had 2,000 police decision makers from around the country and the world come join us in Scottsdale for a full week, go over all of our existing products and a lot of training sessions and so forth, but all of our new product rollouts as well. We're very excited to announce a number of key new products and partnerships everything from a new fixed camera, ALPR, which is automated license plate recognition, that product should be starting trials this summer. 5 or 6 new AI software products, new partnerships with Safariland, Ubicquia, Ring doorbell and a couple of others. And so a lot of excitement around the new product launches. We had a high bar for what we expected, and we're really excited to report that bar has exceeded pretty substantially with a lot of the early interest in some of these products. But it's also a time where we really double down on making sure that our existing products are really -- our existing customers are really happy with the products they already have. And it's a big part of our business model is happy customers buying more because public safety is a relatively small market. And so we've got to be really good at that, and we tend to be very focused on that.

That's a great overview. Maybe just taking a step back, Obviously, one of the bigger concerns coming into you this year has been the macro. I think as it relates to the public safety names, there's been this big concern around Dodge and how that would potentially impact your key customer vertical. So maybe can you just take a step back in those customer discussions that you're having? How are they feeling about the macro, how are they feeling about spending are you seeing any deterioration from demand intent from your end customers? Just give us a temperature read on that front?

Sure thing. So Dodge, we've been relatively unaffected by. We had one relatively small contract that the fifth year, which was the final year was not renewed. But as far as most of our federal dollars, vast, vast majority, high 90% still intact and feeling really good about customer sentiment and customer happiness with our products. I would say federal is a place where I don't know that over the next 2 or 3, 4 years, it's going to make or break the business. I think there's a lot more opportunity than there is risk for us. We're seeing the federal government rotate toward new defense tech names like Palantir and Andero and we've popped up with some new opportunities in the federal civilian space as a result of this new mindset of going away from the more common defense contractors. But at the end of the day, we do have a lot of work to do in federal still and other markets like enterprise and international tend to be growing faster right now. So it's one we look out and say, "Hey, this is one where there's a lot of long-term opportunity in doing the right things day to day is going to help with that, but certainly focused in some other places as well.

Got it. And quick clarification. There's obviously sometimes this rhetoric that there might be a trickle-down effect in kind of your core state and local. Are you seeing any of that?

Zero of that. And in fact, I think what we're hearing on Capitol Hill is there's probably going to be some more funding for state and local law enforcement post-dodge cuts that this administration certainly supports public safety in the police in a way that should lead to more opportunity for our customers to have a little more powder in the cake to buy more technology.

No, that's great to hear. You obviously mentioned international front, not necessarily seeing anything there. Obviously, a big TAM expansion opportunity if you just think about the installed base of everywhere else besides the United States, right? You recently hired Cameron books almost a year ago. You mentioned them on the earnings call in terms of driving some of the key initiatives there. Maybe just flesh that out for us today. What's Cameron doing there? What's different? What's changed over the past year, kind of what he's leading and what traction you're seeing because of his efforts there.

Yes. We're very intentional with the growth we've had in the business, especially in state and local that we felt like amongst our team, we had a pretty good handle on how to keep growing there and so forth. The place we really wanted to supplement the team with some more expertise with international growth. So hiring our new Chief Revenue Officer based in Europe was a pretty big priority for us. We hired Cameron Brooks coming out of AWS. He ran Europe, Middle East and Africa for AWS, and he's been a great fit for us. He's -- we've talked a lot on the earnings calls about how it's hard to unlock new European markets with cloud. Historically, they're not on the front end of the adoption curve with cloud and things like online banking are relatively new to some countries in Europe as crazy as that sounds. And so for us to have somebody who's really run this playbook of deploying cloud to European governments and public safety specifically. It's a great opportunity for us to keep growing. Cameron has been fantastic. We've made some major upgrades talent-wise to the team, strategy-wise, using some more partners and resellers along the way to help kind of broaden our footprint in the sales process, but it's all amounting to a really exciting progress. We're seeing the best Q1 we've ever had international bookings-wise on track for our best year relative to a few years ago, it could be 3 to 4x the size of our bookings just a few years ago. So really excited about where the international business is headed. And as you said, there's plenty of opportunity there relative to the U.S, winning the 2 major police forces in a country like Italy is -- it represents about 1/3 of the total number of police officers in the United States and so. There are some big opportunities out there, and it's up to us to execute on them.

Yes. No, totally. I guess when you think about the go-to-market approach there, has there been any change in terms of where you're leading into the customer with as it relates to the portfolio. I think typically or maybe the sentiment would be more, hey, your cores and TASERs, body cameras and so that's the lead in there. But I guess, Cameron has the background in cloud like you just mentioned. So are you seeing the go-to-market approach in international markets like Europe? Is that changing at all in terms of where you're trying to lead in with the portfolio?

To some extent, I think we are focusing more on the video products in certain markets, and it is opening some doors for us. TASER adoption remains strong in Europe, and that is always a great kind of land and expand opportunity for us. I'd say the one new wrinkle in our sales process internationally is Dedrone, which is a company we acquired at the end of last year. They do all the drone defense technology. For example, the Ukranians are now using Dedrone that take Russian drones out of the sky. And they have made inroads with a lot of large international governments that historically haven't been major customers of ours, and we identified that as a pretty big opportunity as part of acquisition is how do we leverage some of these relationships to further our progress there with the rest of our product lines. And so I'd say that's the one thing that's kind of accelerated some of the business and some of the discussions we're having. But some of these deals are long sales cycle. It takes a lot of brick-and-mortar and half the battle is just getting the right people to represent our brand in country and the right teams there to build out some of these deployments.

Yes, sure. So maybe switching gears slightly. The other part of the TAM expansion opportunities, obviously, in the enterprise space. Last quarter, you announced the largest deal of your history, I think the large logistics customer. Maybe just first flesh out what is this deal involved? I get that question a lot in terms of what areas of the portfolio you guys are leveraging in terms of relationship and maybe even taking a step back, how did that deal evolve in terms of where were you initially kind of having the conversations with that customer and how that kind of transformed over the course of getting the deal finally across the line?

For sure. So I'm really bullish on our enterprise business. This is where we sell body cameras and other video technologies, and drone defense outside of the public safety ecosystem. And the deal you're speaking about in Q4, it was the largest deal in our company's history, and we've been in public safety for 30 years. We've been in the enterprise for 3 years, and our biggest deal in company history is now an enterprise deals. So I think that speaks to a lot of the opportunity there. How it came about was we were looking at just supplying this potential partner with body cameras. And so we had a pretty good relationship there, and we're working through some of the body camera deployment stuff. And then Fusus, which is a company we acquired last February, has really accelerated some of the interest we've seen from the international -- sorry, from the enterprise customer base. Fusus is essentially the way to consolidate all of your disparate video feeds into 1 pane of glass at a public safety agencies real-time crime center at an enterprise's kind of security operation center. And so in this particular case, there was about 300,000 video streams from stores, warehouses, trucks, et cetera, that we're able to consolidate into one system for the customer, which was very highly valued.

So when you think about the pipeline in enterprise, obviously, now we have this big logistics use case to kind of look forward to potentially as maybe new customers you're able to onboard. Can you maybe provide examples of other large enterprise use cases that's outside the realm of logistics?

Yes, retail is a big one right now. We're seeing shrinkage up from 1% to 3% in retail, which represents billions of dollars of lost inventory, and that's creating a lot of urgency for some of these businesses to figure out how they can limit theft and body cameras on retail workers is certainly a piece of that equation. The other thing we're seeing is retail workers, abuse of them by customers in the workplace is rising. Target closed 9 stores in the Midwest last year over this issue. And so I do think we're going to be solving some major problems there. And I think our pipeline and the conversations we're having across major retailers is indicative of the fact that there's a lot of opportunity and a lot to be excited about there.

No, very interesting. Okay. So maybe shifting gears and surprisingly going back to your core public safety and so your state and local law enforcement. I wanted to take a step back here. I have a lot of conversations with investors. And obviously, the sentiment is like, hey, today, every police department has some form of evidence or records. But maybe what's not totally appreciated is, at what stage do they have these? What technology are they leveraging to perform or serve this application, right? So maybe can you just help flesh that out a little bit? Like whats the current state of technology across your customers, what are they utilizing and maybe how does that compare to Axon's offerings, particularly when you think about some of the next-generation products that you guys are providing?

Sure, like I said at the beginning, a big part of our business model is this concept of landing and expanding. And so every police department in the U.S. has one or more of our products at this point, whether it's TASERs, body cameras, evidence management software, Fusus, which I just mentioned, et cetera. Now the work -- where the work comes in for us is you have customers that are maybe paying you $50 or $100 a month and at this point, our -- the sum of our offerings is between 50,000 and 60,000 -- $500 and $600 a month per officer. And so there's a lot of upward mobility still to take place in terms of average bookings per user or monthly bookings per user, however you want to look at it. And the name of the game for us is getting some of those customers from more basic deployments to more advanced technology deployments, adopting things like virtual reality or some of our AI tool set, Fusus, Dedrone some of the new products that we've come out with outside of just the TASER and the body camera and that's going very, very well. It's something we pay a lot of attention to internally, how many of our customers are adopting kind of the more premium product that we offer. But like I said, there's still a lot of room for growth in state and local, and I think we're executing according to that.

And you've mentioned an interesting point there, like some of the areas that you're addressing is net new use cases and they're around workflow efficiency and some of those other applications there that didn't exist. So maybe flesh that out a little bit. What are officers doing today versus what you guys are trying to provide and help drive a more efficient process for them. And then maybe the second part of this is get this question a lot as the police departments or the various customers that you're looking to service with this. Obviously, this is all new budget for them to allocate towards these workflow processes. Are you seeing any cannibalization as they try to adopt essentially these new digital products?

So generally, our mindset is we've got to find a way to disrupt a current spend in order to get paid for something new. And so how that manifests itself will take one instance as Draft One, which is our new AI add-on into our ecosystem. Essentially, what happens is if you're an officer we're in a body cam, you go out there and you have a conversation so maybe it's a traffic stop. The AI is analyzing the audio transcript of that video, and then it's writing the first draft of the police report for the officer. And then the officer goes in and edit it and probably does the last mile, like the last 20% of the police report. But when you add up the time savings there, you're talking about an officer going from spending 50% of their time on police reporting to 10% to 20% of their time on police reporting. And so just in terms of efficiency and maximizing the capabilities that you workforce as a police department. That's a big piece of it. But then the other element to your second question is, in this use case that we just mentioned, all police departments at this point have more head count approved, then they do have officers working. They've got a high vacancy rate right now that they could go hire and more cops. That's creating some budget surplus. And so part of our position for Draft One is like, hey, if you get x percentage more efficient just due to this product and your comps are out there fighting crime more and writing reports less, then you should be able to reallocate some of that head count overage to something like this. Because you're not going to need that much head count anymore, and that's really resonating. So I think there'll be a lot more to come, obviously, across all industries in AI, but especially in public safety with the amount of kind of legacy outdated workflows that cops still have to participate in every day. There's just a tremendous amount of opportunity to automate a lot of that.

Got it. And is there -- because Draft One came out roughly a year ago, I believe for the early adopters, you starting to see that value materialize for those customers?

Absolutely. Absolutely. And we're big on -- when we get in competitive situations or just rolling out new products, we're big on having our customers field trial our products show up really well in the field day to day for police officers and getting our products in their hands, only helps in the sales process. So even in a 30-day trial, cops are starting to see those time savings really manifest themselves. And certainly, that's leading to far faster adoption than we've seen in a lot of our legacy products. Draft One is our most, the most highly adopted product we've ever had within the first year. It scaled over $100 million in bookings in 1 year. And so we think that's going to be a big one and the AI tool set as a whole, playing a big part of that into the future.

No, makes sense. The other area that I wanted to touch on, and maybe this is taking a step back and going back to like records and evidence and some of the other products where maybe the competitive space is a little more mature, when you're going into deals and potentially displacing either a legacy offering or maybe just starting there like a legacy offering, how often are you finding yourselves going against maybe a legacy provider who hasn't necessarily kept up with the technology innovation versus perhaps going against maybe somebody a peer of yours that's more innovative and more savvy on the technology side. I guess how would you kind of think about that competitive landscape in terms of the displacement and who you're going in and actually displacing?

Yes. I think there's a spectrum there. But typically, when we're trying to displace an incumbent, we have a major technology advantage, I would say. The adoption cycles in public safety can be 10 to 20 years long for one product. So oftentimes, you're dealing with replacing something that's quite old and outdated. That's a double-edged sword because it takes a while at times to have those opportunities to get to that spot. But once you're there, we feel really good about our offerings. And it really, there are legacy companies that are new companies in this space. We're outspending them on R&D. We're out recruiting them in terms of the talent we're bringing into Axon. We're a very, very competitive group of people. We'd like to compete, we like to win. And so we're very comfortable in those settings.

So -- and that brings up an interesting question, right? Like when you think about this land and expand motion. Where do you see the more growth coming from for Axon? Is it really -- because you talked about it, hey, sometimes you're displacing something that's been there for a decade, right? Do you find that, that go-to-market motion is faster in terms of translating to revenue growth? Or is it really when you finally land, they get some type of Axon product in their hands, then it's really doing those value-add and having additional share capture from a wallet perspective. And that's really the growth driver for you guys?

Yes, it's a great question. I think taking a step back, we've grown by 30-plus percent for 3 straight years, 25-plus percent for 7 years. And all of that growth at all points has been driven by 2 simple content. We need to be very effective at selling new products to our existing customer base, and we need to be very effective at selling existing products to new customers bases and so state and local U.S., that's our existing customer base. There, it's about things like Draft One and Fusus and Dedrone, virtual reality, TAZER 10 all new products that we've come out with in the last few years are required that we sell into that customer base. And at the same time, we've got to be really good at selling TASERs and body cams into new markets, whether it's enterprise, international, federal and over time, of course, those new markets become existing ones, and we layer on new products to those existing customers as we find new markets to go into at the same time. But it's really those two concepts that are going to sustain our growth into the future.

No, makes sense. And maybe just touching on one of those products or just switching the conversation to one of those projects, TASER 10, T10, entering its third year. Maybe just walk us through the upgrade cycle today, how does it compare to T7? And then maybe second part of this question is like what is your visibility into customer upgrades? I get this question a lot, like how structural is a TASER replacement cycle compared to something like a consumer smartphone upgrade cycle, right? Where maybe there's less visibility whether consumer will upgrade.

Yes. So in the TASER business, it's interesting, the useful life of the TASER is 5 years. And so I'm like a smartphone where you might get a couple of years out of it, you're really -- you're prolonging that upgrade process for about 5 years for TASER. There are a lot of inventory tailwinds that come with that. We had some commentary about the tariffs and ability to stock up on inventory and so forth. So there are some advantages there. One of the disadvantages is sometimes an agency might wait 6 or 7 years to upgrade. I think what TASER 10 is doing is it's really condensing the upgrade cycle to 5 years or fewer for the first time on an average and relatively consistent basis. And there, it's the first time we went from 2 shots to 10 shots in the new TASER went from 20 feet to 45 feet, there's a lot of real-life advantages to TASER 10 that cops are seeing in the field that are helping them deescalate situations that otherwise they might have to deploy a firearm, and we're seeing a lot of lives saved as a result. And so TASER 10, to answer your question directly, is being adopted at double the rate of our previous TASER and that's sustained for the first 2 years. We expect it to sustain further and maybe through its 5-year useful life. And so we're very bullish on the future, TASER 10. And frankly, everyone we build already has a home, and it will be that way for a while. There's a ton of demand out there, and we're still ramping up automation and so forth to catch up with that demand. So all good things there.

Got it. Now T10 tracking 2x the rate of T7. Like if I did the math on T7 when you guys used to disclosures around units. I think it was at 150. So assume 300,000 units on T10, I know the math is imperfect, but that would imply like 30% penetration of your historical or your legacy customer installed base. I think the problem with doing that math is obviously you're penetrating new verticals with the T10. So is there any way if we can bifurcate the adoption. Obviously, if you throw out that 30% penetration watermark, it sounds like you guys made good progress. But at the same time, it sounds like the installed base is actually expanding as well in terms of what's addressable. So maybe help us think about the adoption rate if we're just thinking about your legacy customer base and maybe how growth opportunity or the TAM expansion opportunity is now that you're kind of expanding down their lying installed base as well?

Yes. So that assumption takes -- no, you called out one of the things which hey, there's new customers coming to the table in other markets. The other thing is not every agency is upgraded to every generation of the TASER. So we still have X26 customers out there, X2 customers out there that see enough urgency now in TASER 10 to upgrade I'd have to -- I don't know that I could quantify it off the top of my head. I would still say qualitatively in our state and local customer base. There's plenty of room to expand. And the expansion generally comes from going from mixed -- like shared deployments of the TASER, like, hey, we have 100 offices, we need 30 TASERs and we can share them to, hey, we buy everything from Axon now on a per officer basis in one license fee. And so now you get 100 TASERs instead of 30 for that same police department. And so I think qualitatively, that's where the expansion will continue to happen in TASER 10. And then, of course, markets like international and federal, there's certainly more opportunity there as well.

No, makes sense. And I think you mentioned 2 important parts. It's part of the T10 adoption in terms of maybe contracting that refresh cycle or bringing it back to kind of that average that you were talking about is kind of the upgrades, right? -- pretty dramatic in terms of the improvements that you're seeing there. But you also announced kind of the AR, VR training as well. Can you maybe talk to how that's also kind of influencing the deployment of this and maybe that's also expanding instead of officer sharing maybe now everyone can have a TASER as well?

Yes. So our mission is to protect life. One of the ways we're trying to do that is to get the TASER to the point where it outperforms a firearm. I think the other way is to really revolutionizing police training. I think everyone's probably heard the old kind of axiom that it takes longer to get qualified as a hairdresser than a police officer terms of what you're required to do in terms of weapons training and policing. It's very quick. Historically, you train once a year with your service weapon at the range. You get everyone together. You got to pay people over time to cover their shifts. You've got to pay a lot of consumables costs just to fire bullets and TASER cartridges at the range. And by the way, you're not really getting any better on anything you're doing because you're just shooting at a stationary target or somebody in a Velcro suit where it's just not the same stress that's being simulated that you would see in the field. Virtual reality flips all of that on its head. We are seeing 40% to 50% more retention of the teaching concepts, 1 in VR. You're seeing a much better simulation of stress that you would see in real life. And by the way, you can do this on an unlimited basis. You can put this headset on every day at roll call and go through 1 scenario in 5 or 7 minutes and just do that continually and continually get better at what you're doing. And so we think VR is a major, major part of police training moving into the future. Of course, augmented reality will factor into that as well. And then in terms of the financial model, it's one of the first products that we've been able to sell as like an upsell to the TASER business and to see that being adopted so commonly and with so much excitement from our customer base is really exciting for us.

Interesting. Part of Axon and offering T10 and even AR/VR offerings as well as there's a lot of bundling that happens on a subscription basis, which in hardware land is typically hard to do, but you guys are obviously seeing some...

Accounts would tell you, it's hard to do wherever you are, for sure.

So maybe just talk about how much of your current installed base is on a subscription plan today versus procuring offerings outright or on a stand-alone basis. And maybe just can you give us a sense of how the shift to subscription has trended over the past couple of years? And what's been the drivers, at least from your end customer standpoint to kind of get them over the ledge to adopt subscriptions?

Yes, for sure. So essentially, I think like 96% or 97% of all of our sales are subscription sales. It doesn't matter if it's hardware or software, if it's hardware, it's like you're financing it over a 5-year period. If its software, you're just paying as you go, but the contract late tends to be 5 or 10 years. So ultimately, shift to subscription for us has gone very, very well. The only time we don't see products bought on subscription as you might see some onetime international customers just buy a ton of TASERs and cartridges not on a plan and that might be because, hey, we don't have that mechanism set up in that country or it's through a third-party distributor or we're not comfortable extending them the credit to do the deal for 5 years. And so you see some of that and then you see some onetime services well in there. But the rest of the business is very much on subscription. This is a strategic decision we made in 2018 to start to move towards this model. Among other things, just make sure that our business is not susceptible to like, hey, if it's onetime grants dry up or onetime capital expenditures and policing dry up. Historically, that would have had a pretty big impact on our business. Now we feel relatively insulated from that because all of our products are bought in an operational budget from the police department and those are just far more resilient through the ups and downs of grant funding and the economy in general.

Got it. I wanted to switch gears, particularly to the AI offerings that you guys are providing now. You obviously -- you mentioned not too long ago or earlier around the strong adoption around Draft One, I think during your earnings call, you kind of provided like an all-up AI view that you kind of reached 30,000 active users. Any way though you can bifurcate the adoption the AI era plan versus Draft One and how AI era has been tracking relative to the AI -- or sorry, the Draft One performance, just given the Era plan came out I think it was October time period, right?

Yes, sure. So conceptually, we launched our first true AI product in April of last year called Draft One. We talked about that. That's the thing that writes the police reports. And then we had like 4 or 5 more in the hopper. And we said, look, this is only going to accelerate. This is the fewest number of AI products offer. And to go back to governments and try to pitch them on a new product every 3 months in their sales and buying cycles is like impossible. And so instead, we tried to go or we did go to this bundle concept for all of our AI offering. So you can buy any one of the -- some of the parts as a one-off or you could just buy this portal that includes all of our AI products over the next 5 years. And we think that's really valuable to our customers. Because it gives them price certainty, but it also motivates us to keep performing against that to make sure that they're renewing and so forth. And so the AI era bundle is the -- it's the AI era in policing. That's the name of that package. And we started with Draft One, now we have a real-time translator so your body camera can translate over 100 languages, picture your cop at the border, speaking in Spanish to somebody or you're in Montreal speaking in French, when you speak English, whatever the case may be, this real-time translator has been a big hit for many different police departments around the world. Then on top of that, we've got new tools around being able to consolidate all case evidence into one simple report for a prosecutor that we call that a brief one. We have a product called Form One that essentially fills out all like local custom police at a city or a state might require on top of just the police report. So we're really doubling down on all of these AI capabilities and in terms of adoption of the AI era plan. It's going quite well. We announced it in October. We had some early customers buy by the end of the year, which almost never happens following a launch to see government orders coming in 8 weeks later, its usually about 6 to 12 months later. And now we're seeing those continue to come in, but also this pipeline toward the back half of the year really build some of the big markets, like about half the country's budgets turn over on July 1. So leading up to that is a big moment trying to get all these plans and deals in the new budget. And then we expect those orders to come in, in Q3 and then Florida and Texas both renew their budgets on October 1 as well as the federal government. And so the back half of the year tends to be where a lot of the rubber hits the road in the sales process.

Definitely, I have a follow-up there, but let me just pause here to see if there's any questions in the room. Anyone have a question, just please raise your hand. Doesn't look like it. Okay. So then I can just go ask my follow-up. Obviously, you disaggregated the bundles in terms of you have your OSP bundle. Now you're having an AI era bundle. You mentioned that it kind of guarantees for a customer 5 years that there won't necessarily be some change and they can get all the new AI products, including the ones upcoming. As you think about probably beyond that 5-year horizon, are you thinking about the long-term plan is something similar to what we see now around OSP where -- yes, OSP in the sense that there's going to be different tier stacks there? Or like how are you guys thinking about the evolution of offering those bundles going forward?

Yes. I think that's fair to assume and for those listening OSP is our Officer Safety Plan, and that's what includes your TASER, your body camera, your software licensing, kind of all the stuff you use day-to-day as a police officer. The only thing it doesn't include is all of our AI products. And so in the Officer Safety Plan, as Joe mentioned, is tiered. There's kind of an entry level, mid-level and a premium level. I could see that happening in AI. Of course, things are moving so fast that to think about what 5 years will look like from now. That's a long run ahead of us. But I think conceptually, thinking about some of these AI offerings and tiers maybe relative to their compute cost is a reasonable way to think about it?

No, makes sense. And that actually leads perfectly into my next question. Obviously, you have these tiers. You mentioned earlier, I think I forgot the exact comments misquote you. But officers today or the average content per your officer is something below $100, something in that range you mentioned. When you do the math on kind of all the bundles that you can put together, it's like close to $700 in terms of the content opportunity there. As we think about longer term, what's -- and I know it's a difficult question, but what's the theoretical limit to that? Like -- are you getting pushback at least in terms of the that you have to date where maybe an officer is that $400, $500, where then you start to see the department like, hey, this is too expensive? Or is the appetite really strong in that you actually do see there's more headroom to kind of push the envelope in terms of pushing that higher end value or higher-end content opportunity?

Yes. I think it's more of the latter. Ultimately, for us, we're not really big on just unilaterally raising pricing other than hardware year-to-year our manufacturing costs go up because we get people raise every year and some of the component costs go up, inflation, like that's where we just kind of incrementally raise hardware by 4%, 5% a year pretty standard -- as a standard practice. But then our bundle pricing is all driven by what we're putting in the bundles. And for us, it's important every year to add more things that customers will value into those bundles and make sure the inherent discounts stays the same. So there -- the sum of the parts is still going to be equally larger than the bundled price, but that's where a lot of the customer value is derived. In terms of wallet share, we're not seeing a lot of that right now, a lot of concerns around, hey, Axon's taking up x amount of dollars, 98% of police budget is still staffing in overtime. And so that's generally where they're focused. And frankly, as we deliver products that make officers more efficient, like I said, that's a huge opportunity for us because that 98% bucket, you can start to spend some money out of that to buy more and more technology. So we're -- that's something we're monitoring and making sure that we don't get over our skis on that, and it's important to have a partner strategy there where the other products that customers are buying work really well with what we're selling. But no really inherent issues at all with the wallet share right now.

No, that's great. I think we're up at time. So Josh, thanks for the time. Thank you, everyone in the room.

Sure. Thanks, everyone. Appreciate it.