Good day, ladies and gentlemen, and welcome to the Q2 2018 Axon Enterprise, Inc. Earnings Conference Call. Currently, at this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Should anyone require assistance at any time during the conference, please press star and zero on your touch-tone telephone. Also, as a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to your host, to Luke Larson, President of Axon. Please go ahead, sir.
Thank you. Good afternoon to everyone. I'm Luke Larson, the President of Axon. Welcome to Axon's second quarter 2018 earnings conference call. Joining me today are CEO and Founder, Rick Smith, and CFO, Jawad Ahsan. Before we get started, Andrea James, our VP of Investor Relations, will read the safe harbor statement.
Good afternoon. This call is being broadcast on the internet and is available on the investor relations section of the Axon Enterprise website. During our call, we'll be making references to our reported results, which you can find by reading our quarterly shareholder letter, which is available at investor.axon.com and on the SEC website. We'll start with short prepared remarks. Then we'll take questions. Statements made on today's call will include forward-looking statements, including statements regarding our expectations, beliefs, intentions, or strategies regarding the future, including statements around projected spending. We intend that such forward-looking statements be subject to the safe harbor provided by the Private Securities Litigation Reform Act of 1995. This forward-looking information is based upon current information and expectations regarding Axon Enterprise.
These estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties, and assumptions that are difficult to predict. All forward-looking statements that are made on today's call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in greater detail on our annual reports on the Form 10-K and the quarterly Form 10-Q under the caption Risk Factors. You may find these filings, as well as our other SEC filings, at investor.axon.com or at sec.gov and searching for our filings under the AAXN ticker. Okay, now turning the call over to Axon CEO, Rick Smith.
Thanks, Andrea, and welcome everyone. We're pleased with our second quarter results and feel great about the way our teams are blocking and tackling as we execute against the goals we've outlined. One of the big accomplishments in the quarter was our follow-on offering, which we consider a re-IPO. The offering was highly beneficial on a couple of key fronts. First, it provided us with significant resources to be able to accelerate our shift across the entire business towards subscription, and we've begun executing on the internal functions now to support that, so we can move the TASER business even more aggressively to subscription. We'll note that subscription as a percentage of orders did drop in Q2, which was partly a result of mix.
We had some international and distributor orders that skewed the percentage, also it was a result of the fact that we were not yet pulling every lever to drive subscription sales, partly because of resourcing. We now have the flexibility to accelerate our plans. Please stay tuned for some exciting times as we transition the business model more aggressively. As I mentioned earlier, we view Axon as having re-IPOed as a software and technology company, rather than as a weapons hardware manufacturer. It made sense for us to reintroduce ourselves to the capital markets in a way that more accurately reflects what Axon is rather than what TASER was. The TASER weapon obviously remains a huge and important part of our business. Even the weapon itself, we believe, has the ability to benefit from the strong network effects that we've built into our software platform.
There are so many opportunities for us to make the TASER systems more connected and more integrated into the larger Axon network. It's not easy to transition from a hardware company to a SaaS software plus hardware solutions company, we're incredibly excited to be making this happen. As CEO, I just want to thank our shareholders for responding well, and thanks to all of you who've been so supportive of this transition over the years and have allocated the capital that will allow us to continue to execute and return value back to you. Moving now to some of our newer initiatives. We're now entering the testing and refinement phase of Axon Records, which is a pretty exciting place to be. An early version of the product is in field testing with customers. I also want to highlight the new partnerships with DJI and Milestone.
This is interesting to note because it shows that we're really extending the network beyond the hardware that we manufacture and having world-class partners and third parties that can beginning to come to life on the Axon network. We now have 30 petabytes of data. The sheer amount of data that we are hosting in our secure cloud is continuing to grow, customers are continuing to find great value in the goods and the services that we're selling. We also held our annual user conference, Axon Accelerate, in June, we were overwhelmed by the positive response from the industry. We've had over 1,300 police, security, legal, and technology professionals in attendance, which included both members of the Axon network and non-customers, putting Axon and our Accelerate conference at the center of thought leadership in public safety.
With that, I'll now hand off to Luke to go deeper into our operations.
Thanks, Rick. At Axon, we want every police officer in the world to carry a TASER, wear an Axon camera, and every public safety official to have a seat on the Axon network. Every day, we are executing against that vision. Everything we do comes back to our mission of making the bullet obsolete and enabling truth and fairness in our justice system. I want to start off by talking about our Vievu integration, which is an important area of execution for us. As you know, we acquired Vievu in May, which was a key body camera competitor.
We are building customer synergies across the Axon network, the addition of several new law enforcement agency customers both enhances the value for our existing customers as well as the ones who are joining because they can more easily share data with each other across the public safety and justice system information chain.
Those customers can take advantage of our scale, and they are pleased to be working with Axon. We also continue to be very impressed with the Vievu team that joined us in Seattle. We inherited a group of solid people, and it expanded our capabilities. We feel like we acquired more than just customers and products. We added a team that makes us better and stronger. I want to mention one more item related to Vievu. In June, we received a letter from the Federal Trade Commission notifying us that they are looking into the acquisition to ensure that the marketplace remains competitive. We view this as a routine matter, and you'll see some language around it in our upcoming 10-Q filing later this week.
We'll keep you posted on any developments. We are cooperating fully with the FTC and are confident that the acquisition was a benefit to customers and that the FTC will recognize this. We are highly focused on customer satisfaction, and our customers continue to validate our approach. You see that in our financial performance and also in new customer sign-ups. In July, Honolulu became the 45th major city customer to join the Axon network. As at the end of June, we now have over 300,000 booked seats on the Axon network. That represents a more than tenfold increase in user count since the first half of 2015. We have 10x our evidence.com subscriptions in about three years. With a total addressable market of more than 2 million users, there is still great runway ahead of us.
I'll turn the call over to our CFO, Jawad.
Great. Thanks, Luke. Our Q2 results reflect another quarter of solid execution and strong operating performance. There are a few things I want to touch upon, and then we'll leave plenty of time for questions. As Rick said, the follow-on offering was a success and puts us in a strong financial position for our next stage of growth. We want to transition the majority of our cash flows to subscription pricing models. The cash flow from selling TASER weapons funds a two-pronged growth and investment strategy. First, it allows us to invest in products that address our existing market, such as body and in-car cameras and evidence management. Second, it allows us to invest in products that will expand our market reach, such as Records, Dispatch, and drones. These investments will come in the form of people, programs, systems, and potentially acquisitions.
We now have a balance sheet that gives us the financial strength and flexibility to execute aggressively on this strategy. Second, you heard from Luke about our progress with the Vievu integration. From a cost perspective, as we expected, the majority of integration costs hit in the second quarter, and we expect about 100 basis points of Adjusted EBITDA margin impact to the full year. As we said last quarter, our strict expense controls are allowing us to absorb the gross margin pressure on some of the Vievu contracts while maintaining our earnings guidance for 2018. As you can see, the leverage in our business model continued to be evident in Q2. Revenue grew 25%, and adjusted net income more than doubled. We feel great about the leverage we've been demonstrating in the first half.
Looking at the back half of the year, you can expect to see us invest more heavily in some of our key growth areas, including adding engineers to Axon Records and Dispatch, while continuing to generate strong earnings growth. That's reflected in the guidance we're providing today. You'll notice that we're guiding to a full-year Adjusted EBITDA margins of 14%-16%. To be clear, this represents the same level of expense control that we talked about in prior quarters. Given the unpredictable stock compensation adjustments related to Rick's new compensation plan and the one-time acquisition costs related to Vievu, we're moving over to an existing metric that is cleaner and works better for period-over-period comparisons. Thank you all for dialing in today. With that, I'll turn it back to Andrea.
Thanks, Jawad. Before we go to questions, I have one housekeeping item for you guys. In the spirit of being scrappy, next quarter, we're going to ask the majority of listeners to please listen via webcast, and we'll save the conference call line for those of you who wish to ask questions. Okay, Dylan, let's go to questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press star and one. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Steve Dyer from Craig-Hallum. Your question, please.
Thanks. Good afternoon. Just a couple of quick ones for me. On the software and services side of the business, you'd indicated ARPU down quarter-over-quarter. You attributed some of that to Vievu. A couple questions. One, was it up year-over-year? Secondly, would it have been up quarter-over-quarter organically?
Yes, organically, it is up.
Quarter-over-quarter as well as year-over-year?
Quarter-over-quarter, it's also up, yes.
Okay. Obviously appreciate the guidance for the second half of the year. Any more you can add just in terms of how we should think about the cadence? Typically, Q4 has been materially better than Q3. Would you anticipate sort of a similar pattern this year?
Yeah, I think that's typically how we see things go from a seasonality perspective, Steve, so I'd expect roughly the same.
Got it. Lastly, can you just remind me what you said at the Analyst Day, just in terms of margin or leverage margin expansion beyond this year? It sounds like you're kind of reiterating this year, but can you just remind us how you had us think about the next several years?
Yeah, the guidance that we gave, Steve, at the Analyst Day was that we were going to drive 300 to 400 basis points of operating margin improvement every year for the next three years. We're now changing that to Adjusted EBITDA because of the stock-based compensation expense and some of the volatility there with Rick's new plan. The point is that we're still committing to driving operating leverage within the business over the next few years. We're not backing off that.
It's still three to 400 basis points, just a slightly different metric.
That's correct.
Okay. That's it for me. Thanks.
Thank you. Our next question comes from Yuuji Anderson from Morgan Stanley. Please go ahead.
Great. Thanks for taking my question. I had a couple on the TASER side of the business there. First, can you help us unpack the growth between domestic and international, just relative to the corporate average? Somewhat related, can you describe what % of the current TASER install base is on some kind of subscription or payment plan? Thanks so much.
Yeah, this is Rick. I'll take that one. I think the split was relatively typical this past quarter between international and domestic. In terms of the total base that's on a subscription plan, I don't think we published the numbers on what the % of the total base is, some of which is because we've historically sold more through distributors than direct, and we've been transitioning to more direct over time. It's a little hard to come up with what we use as the entire denominator of how many of those previous weapons sold many years ago are still in the field. Obviously, in the published letter to shareholders, we gave the rates for the last four or five quarters.
Okay, got it. Just to follow up on the TASER growth, I guess I was just trying to get a sense of just how much international is growing relative to domestic rather than the actual split.
Historically, we've seen international be about 20% of our overall business. There's a little fluctuation quarter to quarter. That trend has held over the last 18 months or so.
I think we do expect, and I think we've started to see that international's been accelerating a little faster than the U.S. We think that that trend over the next couple of years, there's a lot of opportunity for international to actually take up a greater percentage of revenue.
Yeah, just to add on that, as we look to the future, our goal would be to see international grow as a relative percentage of our overall revenue, we feel pretty confident about that over the next two to three years.
Got it. Thanks so much.
Thank you. Our next question comes from Scott Berg from Needham. Your question please.
Hi, everyone. Thanks for taking my questions. Congratulations on a great quarter. I guess I have two here. First one, I don't know who wants to take this, but I wanted to see how we should think about organic versus inorganic growth in the quarter with the acquisition of Vievu. Specifically looking at the Axon Cloud, I know there were some revenues that came over, but just trying to understand how much of that revenue growth came from one versus the other. Then maybe looking at that seat count addition. Obviously, that was a pretty large increase in the quarter. Trying to maybe help us understand how much that is organic versus inorganic.
Yeah. I'll take the seat count and then, Jawad, do you want to take revenue?
Sure.
Yeah. On the seat counts, we had a mix of both organic user growth and then the seats added from Vievu, as well as reclassifying some camera seats, which were originally booked as on-premise, but were then migrated into the cloud. New book seats were up sequentially, organically. We're not going to break it out to any greater level of detail.
Yeah. On the first part of your question, Scott, on the organic versus inorganic. On revenue, Vievu only contributed about less than 3% to our revenue growth. From a margin standpoint, it's at a loss, so it contributed to our loss organically. Organically, we have most of the growth coming from the core business, and Vievu didn't really contribute much to that.
Got it. That's helpful. Then kind of a bigger level picture, probably for Rick, since he made the comments on the call is the transition to the subscription-based plan on the TASER product, does that become more of a push or a pull, do you think, over the next, I don't know, two, three, four years, whatever that time horizon looks like? I ask the question because obviously the percentage of sales coming from a subscription have been a little bit choppy. They're down this quarter. Not a surprise. I expect that to vary, at least in the short term. Just trying to understand maybe what those levers, pushes, or pulls look like over the short term. Thank you.
Yeah. Great question. I would say it's going to be a little probably what you expected. It's a mix. We think that there are things that we can do that will make the subscription offerings more compelling in terms of features and services that will help create more pull. We think that we can really influence that in a positive way. I guess you could say that's a push. Ultimately, if we can create these interconnections that are even more valuable, it's going to just really stimulate demand.
Thank you.
I wish I could give you some more details, but like I said, stay tuned. We think there's some pretty exciting new programs that we'll be in a position to launch now.
Thank you. Our next question comes from Mark Strouse from JPMorgan. Your question, please.
Hi, everybody. Thanks for taking our questions. I apologize if I missed this, my line cut out for a bit, but just wanted to get some more color on Axon Dispatch. Can you just talk about, I know it's early, but kind of what the view is and how that is different versus the competitors that are out there, and then how we should think about timing of commercial availability, and then also, I guess, is that investment for that new segment, is that contemplated in the long-term targets that were given at the Analyst Day as far as margins?
Let me take this one. You could think of Axon Dispatch as sort of the more real-time communications, whereas Axon Records tends to be more of the post-incident historical data that's collected in reports that are then put through the business processes all the way to the prosecution chain. Whereas Axon Dispatch is the process of handling inbound calls, managing your resources, communicating to officers, giving them information about the calls that they're going on. We see a real opportunity that these systems really want to be integrated tightly. The most pure record that you have is the video of the incident itself, just videos tend to have a lot of unstructured data in them.
The Axon Records of a structured data. Of course, we're working on tools to extract the structured data from the unstructured data. Of course, bring that into a more real-time environment, make that information more actionable with the individual officers so they're making decisions and they're getting smarter as they're going into these situations. The fact that it's even called Computer-Aided Dispatch, we note with a little bit of humor what other type of dispatch would we expect in the world today? These are pretty dated systems. We tend to see some really pretty old software that's just been sort of so heavily integrated into a bunch of other things. It's sort of ossified into a really challenging user experience. We see the opportunity to leverage the network we've built for moving digital evidence into Axon Records and bringing it all real time with Axon Dispatch.
We see all these pieces coming together in a very cohesive way. Yes, I'll let Jawad Ahsan confirm, it doesn't change any of our guidance that we've given.
That's correct.
Okay. That's helpful. Thank you, Rick. Then, again, I apologize if I missed this, but any update on the weapons testing in some of those larger European countries that you talked about in the last quarter or two?
Yeah. Those are both progressing. We're not quite at the deal stage yet, but we're seeing positive momentum in the U.K. as well as Italy, are two key markets that we're focused on. In the U.K., the chief firearms instructor, Simon Chesterman, made the comment when I was over there in March saying he thought every constable should carry a TASER. Then in Italy, the trials that they started are in progress. I'm actually meeting with the rep from Italy next week, so looking forward to that update. Very confident in expansion in continental Europe with TASER.
We've also seen some pickup of activity and interest in Latin America.
Interesting. Okay. That's very helpful. Thank you very much.
Thank you. Our next question comes from William Power from Baird. Please go ahead.
Great. Yeah. Thanks for taking the question. I guess a couple of questions. I recognize it's early, but it'd be great to get any early qualitative feedback with respect to the Records deployment. I know it's just one trial today, but any early learnings there? Just any color kind of qualitatively around the pipeline of opportunities, increasing inbound interest, just any further color on that initiative would be great.
Yeah, I'll take that one. I think it's just too early for us to be providing any real feedback. I think at this point, the first users are interfacing with the software, we've got engineers riding along with them and learning a ton. I think we're really learning, we're hitting the mark generally, of course, there's things that we're tweaking and adjusting, trying to be very agile sort of development loop there so that we're feeding those learnings back in quickly. Pipeline, we are getting a lot of interest.
I think customers really see the vision that the more they interact with their Alexa or their Siri or their Google Home device, they're seeing that voice-to-text is not science fiction, but that really we will have the ability to bring this to life in a way that's going to meaningfully impact the way that records are created. I can't give any real quantitative feedback in terms of pipeline. We're not at a stage where we're ready to share that publicly. We do have the International Association of Chiefs of Police conference coming up in early October. That's typically a place where, if you're interested in seeing customer reactions, et cetera, it's a great place to go walk the show, get a feel for the competitive landscape. I believe, Andrea, that we'll be hosting an event for investors in Orlando at IACP this year as well?
Yes.
Yes. Yeah.
I think that's a place we can give you definitely more color there.
Okay. Yeah, no.
Yeah.
It may be a similar answer to the second question here, but coming out of Axon Accelerate, looking at some of the new products announced there, Axon Fleet 2, Axon Air. Any update for timing for revenue? I assume those are both more 2019, and I guess I'd also be interested in any early feedback on those products.
Yeah. Fleet 2 will have revenue, we expect to impact certainly by the end of this year. Axon Air is a relatively new product for our customers. We don't think it's going to be material this year, but we view that as really creating the framework for another very interesting business over the next three to five years. Fleet 2 was really a lot of iterative feedback from Fleet 1, and as we mentioned in the letter, we believe that Fleet 1 had become the top-selling in-car video system within its first year of shipment, which is pretty remarkable. Fleet 2 really enhances the major points of feedback that we've gotten on Fleet 1. We do expect that Fleet 2 should have an accelerating impact on our ability to continue making an impact in the in-car space.
Great. Thank you.
Yeah. Thank you.
Thank you. Our next question comes from Jeremy Hamblin from Dougherty & Company. Please go ahead.
Congratulations on the strong results. I also wanted to ask a follow-up question on Axon Air. Just in terms of the partnership you have with DJI there, can you talk a little about how managing that business, it sounds like it's going to be a little bit more of an outsourced model with you really leveraging your selling network. Can you talk to, one, the kind of the TAM that you expect for that particular product? Two, in terms of thinking about margins and kind of the cost ramp, because you're partnering with them, do you expect that to be profitable more quickly than maybe some of your other products?
Yeah. I'll take this one as well. Yeah, we do have a great partnership with DJI. We will be reselling their hardware, and that will obviously be much lower margin than when we're reselling or when we're selling our own hardware. We do see significant opportunities in value-added premium software services. We are building out the team to really sort of build out a long-term drone roadmap in the software space. This isn't like a one or two-quarter sort of pop thing. This is we're laying the foundation. Drones create new types of metadata related to managing a fleet of drones, relating to flight data. There might be incremental audit controls we put in place given some of the privacy concerns people have about how drones are used, et cetera.
I think it's certainly much deeper than us just buying drones, stocking them in the warehouse, and having our salespeople write orders. We see that there are subscription software services that will go with those drones, leveraging our training network to provide training to drone pilots in the field. I don't want to speak on behalf of DJI, but in our discussions, I would characterize it that was quite an area of interest given our training infrastructure for training cops how to use TASER weapons. To be able to use those similar resources and infrastructure to train pilots on drones was pretty important in making this an attractive partnership for them. I think it's a little premature for us to start setting a path to when we think it's going to be profitable.
The good news is we're not going to be incurring a lot of hardware development costs. There will be some software development costs, but I do think overall that this is not going to be one of those heavy lift, huge investments over years before we're seeing a return, that this one it's a much more sort of lightweight path to profitability.
Okay, great. I just wanted to ask a question on the weapons segment. You had some really nice, I think, 110 basis points of gross margin improvement year-over-year, but the operating margins were down about 520 basis points. Can you just give me a little color in terms of that change in profitability? Was this just allocation of costs as you're selling more kind of package deals, or can you just give me some color on that?
Jawad?
Yeah. Broadly speaking, Jeremy, we had an increase in OpEx. These are investments we're continuing to make in the business. We had some OpEx that hit the TASER segment. We also had some sales to distributors that are typically at lower pricing. We talked about before, the way that we allocate our costs, we tend to have more of an allocation to the TASER segment. When we have an increase in OpEx across the business, it tends to hit TASER more broadly.
Got it. Thanks. Good luck, guys.
Yep, thank you.
Thank you. Our next question comes from John Weidemoyer from William Blair & Company. Please go ahead.
Hi. Thanks for taking my question. This is for Jonathan Ho. We are having some technology challenges tonight, so thanks for letting me ask a question. Again, on the drones. First of all, can you hear me okay?
Yeah.
Okay, sorry. Relative to the drones, how big is the drone opportunity relative to the fleet of body camera market?
Yeah, it is a little hard to say right now. Just the future is hard to predict. You could imagine a world where every police car has a drone associated with it, or if we go further downfield, you could imagine maybe even drones that are pre-in-place that might be greater than the number of patrol cars. I think it is sort of anyone's guess as to how significant the drone market will be long term. We do see that there are some real advantages to being able to have oversight over the top of a scene, both visually and to be able to use them as communication hubs, to be able to jump wireless communications. There is lots of interesting things that could be done with drones. It is just going to be really hard to predict how that market is going to evolve.
That's going to be based a lot on your customer feedback.
Yeah, I would add one point on Axon Air. This is one where we definitely see the market is pulling this technology, and they're coming to us saying, "Hey, help us understand how do we package this in such a way that we can have a simple, easy-to-use workflow." That's where we see the real benefit of the Axon Cloud and the network that we've developed.
Okay, that's very helpful. Thank you very much. Another question. Now that you've had the Officer Safety Plan and subscriptions for your weapons, have you seen any sort of a change in buying behavior by police departments where they might be upgrading, stepping up their upgrades to take advantage of it? Or do you think it's more gated by budgeting and the RFP process?
Compared to a few years ago before OSP, I'd say we're definitely seeing an increase in the percentage of weapons that are being bought on subscription. We started first doing variants of municipal leases, maybe six or seven years ago, with very low attach rates. I think over time, as agencies have begun to get used to subscription on the SaaS side of the business, it was LAPD who actually, I think, first came to us with the idea of bundling together TASER weapons with cameras and software into one easy-to-budget-for subscription price. We've seen it generally uptrending. Again, there's some noise quarter to quarter. I'd say we have seen that that has increased the velocity of sales.
Namely, agencies that previously may have wanted to buy 100 weapons a year over 5 years so they could fit it in their budget, will buy 500 weapons now, and pay for them over 5 years. The great news there is it doesn't just bring that one set of orders forward, but now when we get to year six, all their weapons are 5 years old, and they've already got the budget line item in place, it's far higher likelihood that they then replace all those weapons at the beginning of year six, and now we get two or three sale cycles within a 10-year period. Whereas historically, if they'd done this phased rollout, the problem you get into is in year six, a good portion of their weapons are still pretty new, and most agencies don't want to have mixed fleets.
They don't want to have half X26s and half X2s. What we saw in that historical buying pattern is once they finish the multi-year rollout, then you've got to sort of wait until the last batch of weapons is sort of coming out of its useful life. You wouldn't see that first upgrade probably for nine or 10 years, as opposed to right at the end of year five.
Got it. Okay. Thank you very much. Appreciate it.
Yep, thank you.
Thank you. Our next question comes from Mike Latimore from Northland. Please go ahead.
Hey, guys. This is Bailey on for Michael Latimore. Congrats on a great question. I know you guys said that your international segment is growing faster than the U.S. Do you see that this might change your EBITDA margins and your basis points that you guide for the next few years?
Just to clarify that, we've historically seen international come in at about 20% of revenue. We see our international pipeline is growing faster relative to a percentage, and so we're optimistic about future international expansion. We're also growing our overall revenue and domestic business very well. This is work that's ahead of us to realize those sales.
Got you. I guess as a follow-up, do you see that changing the margins at all? I guess, can you just give a little bit more color about how we should think about that?
Weapons margins are relatively the same across international and domestic. In some of the earlier international markets, we're seeing more of a pull for just a body-worn camera. Morocco is one of our big deals where they don't have the infrastructure for Axon Cloud today, they started with a body-worn camera deployment only. There's some deal mix on margins in that segment.
We do see international across the board tends to start a little lower on margins, but we are seeing international margins overall are increasing steadily.
Got you. That's great. Just as a follow-up question, do you expect body and fleet camera sales to be the main SaaS revenue driver? I assume that records will be the main one thereafter, but how should we think about that?
Yeah, I think the-
Yeah.
Go ahead, Jawad.
Sorry. Yeah.
Sorry.
In the near term, we've got a lot of momentum in our Evidence.com-enabled services like body camera fleet. Over the near term, that's going to be the main driver, but as Records and Dispatch come online, we think that ultimately that's going to be the majority of the growth in the business from a cloud perspective.
Thank you. Ladies and gentlemen, if you have a question at this time, please press star and one. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our next question comes from George Guthrie from C.L. King. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. Just a couple here. The seat count added this quarter, roughly 80,000. If we look at the organic adds and the reclassification of Axon at, say, 35,000, is 45,000 a reasonable seat count for Vievu?
Yeah. Sorry, for strategic reasons, we don't want to go into explaining those numbers up in any finer detail.
Okay. Shifting over to the TASER weapon base. What is the installed base of the TASER weapon right now here in the U.S.?
Jawad, I'll kick that over to you for what we're using for the estimate on the installed base on TASER weapons.
Yes. We believe that to be about 450,000.
450,000. About a 10% increase, I want to say, from roughly two and a half years ago.
That's a fair assumption.
Okay. The camera count of 300,000 we ended this quarter with, what milestone or metric are you waiting for before you start segmenting that domestic versus international?
Sorry. I don't know that we've set a firm metric for when we start segmenting those out.
Well, that's my question. What are we waiting for?
Go ahead, Juan.
Sorry, Rick. At this point, as Rick and Luke both mentioned earlier, we're still establishing our presence in the international markets, and there are some early beachhead accounts that we're trying to win, or that we've won, and there's some pricing that's not really indicative of what this business is going to look like long term. At some point it'll make sense when that business is more mature to split it out, at this point, it doesn't really add a lot of value.
Okay. My last question, as it relates to the artificial intelligence and machine learning that you call out in your press release, and thinking about the facial recognition software, two questions. One is, if you embed facial recognition technology into the existing camera base, do you think that's a feature you charge extra for, or is that an ongoing upgrade to the existing subscription? I have one follow-on to that.
At the point when we do launch something like facial recognition biometrics, we think likely that would be a premium service.
Okay.
That wouldn't be something that just happens within the existing contracts. I would also give the caveat that we've been pretty careful that we don't have a timeline to launching facial recognition. We do not have a team actively developing it. This is a technology we don't believe that sitting here today, the accuracy thresholds are right where they need to be to be making operational decisions off of facial recognition. Once we see sort of daylight to where it'll meet the accuracy thresholds, and once we've really got a tight understanding of the privacy and accountability controls that we need to ensure that it'll be acceptable by the public at large, at that point, we would then move into commercialization of that capability.
This is one where we think you don't want to be premature and end up either where you have technical failures with disastrous outcomes or something where there's some unintended use case where it ends up then being unacceptable publicly and impairs the long term of the technology.
Got it. My last question, you mentioned the 30 petabytes of data. Are there legal restrictions where police departments, even if they want to share data between Seattle and Chicago, they can't, or under your agreements, they're obligated to do so? Thank you very much.
No, under our agreements, the data belongs to the customer. They have to opt in specifically to any use of their data. Certainly there are local guidelines or restrictions that may impair whether they can share that data across to other jurisdictions, et cetera. We do find in many cases that we now have the CJIS accredited AI training center where we have a staff that has been cleared to the same standards as other law enforcement agencies, that are able to help create, train, and inference data off of the underlying data and help to train our models. We are having agency customers that are opting in to participate in those programs. They do have to opt in.
Understood. Thank you, Rick. Thank you. My questions.
Yep, thanks.
Thank you. Our last question comes from Saliq Khan from Imperial Capital. Please go ahead.
Great, thank you. Good evening, guys.
Hey.
Hey.
A few questions on my end. The first one being is, you've done a pretty great job of introducing several new offerings over a very short period of time. Are you concerned about being spread too thin? What are you doing to be able to ensure the success of all the programs that you have recently introduced?
Yeah. Great question. Two of our key metrics that we focus across our entire business is Net Promoter Score and usage. We really want to make sure o n a quarterly basis and even on kind of a daily and feature set that we're measuring are our customers using the products that we're creating and would they give us a positive recommendation? We've got a very tight feedback loop. We're monitoring these systems daily to see are they using and would they recommend, and we've got really good customer feedback.
I would also say our Axon Accelerate conference is just a great kind of testament to the customer's satisfaction with the Axon Network. We actually sold Axon T-shirts and swag, and our customers bought $24,000 worth of Axon swag, which was just, I think, an incredible testament to the affinity that they have for the Axon kind of brand and network.
Yeah. The other thing I would point out is there is an incredible value to having systems that are integrated and just work well together. One example I can give you is if you stack up FleetOne, our in-car fleet system, against most of the in-car systems out there today on a feature-by-feature basis, there's a lot more features in the incumbent systems that are out there. Where our system really shined was it played really well with body cameras. There was a lot of tight integration between them, on the back end being able to do multi-camera sync, to have all the information stored in one system that can be shared with the prosecutor, et cetera. That seamless integrated user experience was far more important than a list of 90 advanced user features, et cetera.
Now, some of those features were things that were causing customer pains, which is why we had a very fast cycle time from FleetOne to FleetTwo. We believe in each of these segments we're going into, the key advantage we have is if we just make it integrated well and easy to deploy with great customer service and training, that we're going to provide a much better user experience and be able to rapidly gain market share and learn from the customer on which of those incremental features we need to bake back into the product. We do think the network effects here are particularly compelling for the end user.
Great. Thank you. As you continue to build out the end-to-end public safety platform, are you finding you're having more success or more successful conversations either in the field, the station, or in the courtroom? Where are some of these lower hanging fruits for you?
That's a great question. I would say the conversations are getting easier and easier over time. When we first launched cameras, oh, geez, how long ago was it now? Eight years ago, I think there was a ton of skepticism that, "Wait a minute, you're a weapon company, you're going to do cameras and cloud software? Well, A, what is that? And B, how do we know that you're the people to develop it?" I think having delivered on a number of successive transformational product experiences, we've gained a ton of credibility with our customers. Many of them tell us that evidence.com is the most reliable and enjoyable software that they use on a day-to-day basis. I think as we extend into things like records and dispatch, we're finding a very hungry user base for better user experiences.
Now we're continuing to see the most fertile ground is still with law enforcement agencies themselves. Obviously we've extended now into prosecution. It's extending from there into defense attorneys and the courts. There's certainly a ton of opportunity for us to continue to expand the network. We just want to make sure that we stay focused on the most important thing is that we have a really solid core in law enforcement as we then begin to expand out further into the broader public safety agencies.
Great, guys. Just one last question on my end, and that is, how are you being impacted by any other budgetary or political constraints?
We've not seen any slow back when we sit across from customers, certainly in the U.S., really around the globe. They're saying, "We've got a need for your products," we've not seen budget be an issue.
Perfect. Thank you, guys.
All right. Thank you.
Thank you. Last question comes from Brian May from Morgan Stanley. Please go ahead. Mr. May, if you have your phone on mute, please unmute your line. I show no further questions in the queue at this time. I'd like to turn the call back to CEO of Axon, Mr. Rick Smith. Please go ahead with closing remarks.
Great. Thank you. As you can see this last quarter, and frankly these last several years, we've really been focused on driving ARR, annual recurring revenue, and bookings growth, and you can see we continue to make solid progress there. Thanks for those of you who are relatively new, who've joined us since the secondary in May. We really do believe that sets up a foundation where we've now frankly helped to align our investor base with the mission of the company. It's been a lot of work to transition from a manufacturing company into the leading cloud provider of software and connected devices in the public safety market. Transitioning to bringing in investors who are excited about, and supportive of that vision, is really great. We believe we've got alignment across all of our stakeholders now, investors, employees, and customers. Stay tuned.
We're going to use those resources creatively to continue to solve big problems, to continue to accelerate our reach into our customers. This next quarter we're going to have some really exciting events. I'd encourage you, if you get a chance to come and visit us at one of those, we'd love to get to know you all a little bit more personally. Stay tuned as we continue to protect life and change the world together. Thanks for joining us today.
Thank you, ladies and gentlemen, for attending today's conference. This concludes the program. You may all disconnect. Good day.