[Abrupt Start] ….today are pursuant to and within the meaning of 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. These risks are discussed in our SEC filings. And before we go to Rick, we will open with our earnings video. [Video Presentation]

Awesome. All right. Well, I will launch in. Andrea, and Angel, great job, as always, on the quarterly video, that's fantastic. Great way to share all the exciting stuff with our shareholders. Okay. We're executing on what is shaping up to be a really excellent year. And our confidence in our growth extends well beyond 2022. We emerged from the pandemic and civil unrest of 2020 in our strongest position ever. And now we're fortunate to be able to leverage that position and strength, while many parts of the economy are experiencing uncertainty. We're seeing broad-based strength across our product numbers, and we're really energized by the growing number of agencies that are buying nearly everything we offer and signing up for 10-year contracts, sometimes even 12 years. It's exciting to see an agency go all in with Axon. We set a vision several years ago that an agency wouldn't just say, well, we have a TASER device or maybe we have body cameras and Evidence.com, but would instead simply describe Axon as their technology partner. And that's starting to happen now. When agencies sign up for all of our software solutions, plus our body camera, dash camera, the TASER 7, the VR training, our drone solution and so on. Customers are increasingly demonstrating their confidence that we are the right technology partner for them for the next decade. We made it easy for our customers to bet on us, because our team delivers. Now on to some other hours. We expect profitability to improve in the back half of this year. We expect to drive increased leverage coming out of Q2, when we had some expenses that won't repeat, more on that coming from Jim in a moment. Also, we recently launched an internal campaign called, spend it like…

Thanks a lot, Rick. I appreciate that and it's good to see everybody. In my new role, I'm humbled by the trust our team, our customers and our shareholders have placed in me. We are working hard every day to deliver on our mission and drive exciting growth in tandem with margin expansion. Here's what that looks like in terms of where I'm investing my time and focus. First, I'm working on building a world-class team from top to bottom. as opposed to focusing on simply filling the needs of today, I'm working with our leadership team to build the team we need for the next 5 to 10 years. We will focus on a next play mindset, versatility, mental toughness and the capability to deliver outsized outcomes as the core characteristics of our team. That starts with the search for our new CFO. We have made a lot of progress in this area, and we are very excited about the candidates that we have attracted. We hope to have someone to announce shortly that I am personally thrilled about. As Rick said, I couldn't be happier about the partnership we've had with Jim. His steady leadership has allowed us to take our time with the search for a permanent CFO. He has been the consummate teammate and done whatever the team has asked. I sincerely appreciate Jim's leadership. Second, I'll be driving discipline and prioritization across the business. The one thing each of us truly controls is where we focus our attention. We have a lot of exciting opportunities to go after. And as you all know, we will unlock maximal value by focusing our efforts only in the areas where we can have the most impact and deliver the most value for our customers. That is the optimal…

Thanks, Rick and Josh. Hello, everyone. It's great to see you again. We had an excellent quarter, as you can see in our shareholder letter. Let me put some context around the results and how we are thinking about our outlook. Top line momentum continued with growth of over 30%, and gross margin improved sequentially. We delivered second quarter adjusted EBITDA of $50 million, a margin of about 17.5% largely reflecting some expenses that were unique to this quarter. Let me unpack that for you. During the second quarter, we spent about $1 million on Axon ACCELERATE, our annual user conference, which has become strategically important to our sales pipeline, technology leadership and ecosystem expansion. Additionally, we committed more than $3 million in incremental mid-year bonuses to employees at the senior director level and below. This was an intentional decision given the team over delivering on results in an environment where inflation was impacting their lives. We did so precisely because we had line of sight to stronger-than-expected revenue, both in the quarter and in the back half of the year, which is reflected in our updated outlook. We are especially pleased that we could issue this bonus without affecting our projected adjusted EBITDA margin percentage for the year. The fundamental strength of our business allowed us to demonstrate our commitment both to our shareholders and to the team members who work so hard for our customers. With that context on the quarter, we are already focusing on moderating expense growth going forward to help drive adjusted EBITDA margin expansion. Our working capital needs were $23 million in the quarter, and we have already started to see some of that reverse in July, which is driving us to maintain our full year adjusted free cash flow outlook. Finally, I'd really…

All right. Thanks. Here, we all are in gallery. We will take our first question from Will Power at Baird. Go ahead, Will, you're up.

All right. Great. Thanks, Andrea. I propose the two that maybe the next Analyst Day would be at the racetrack and we can help you test ALPR. I'd like a couple of quick questions. The cloud growth continues to be strong. Obviously, Evidence.com is a key component of that. But I'd love to unpack any of the other kind of key drivers there. What are you seeing with record management, any of the other kind of key pieces of the software portfolio, what does the traction of trends look like?

Yeah. Thanks for the question, Will, and nice to see you again. I'd say for us, we've talked about this a lot in the video. I mentioned our flywheel for us. The biggest thing we can be doing quarter-to-quarter is driving the number of officer safety plan subscriptions up. That bundles essentially all our products outside of dispatch that we sell – sorry, dispatch and fleet. And it provides optionality for customers to opt into records, but it – it provides a nice base for ARR between the license, all the software add-ons, the TASER, the virtual reality. And so for us, that's really the major focus in our state and local business is to drive as many renewals and purchases of that plan as we can. In addition to that, I think we are seeing exciting growth in some of our newer segments, one of which is federal, another is international. And then even in newer ones like justice and corrections, we're seeing an uptick. And so I'd say, all of those are combining to just provide a lot of wind in our back, as we go on here and we certainly still feel like our best days are in front of us.

That's great. Josh, maybe just one more for you. As you look at the international opportunity in front of you, any perspective on how the macro climate is or isn't impacting sales cycles, demand trends, et cetera, that's kind of the broader question. And then number two, tied to international in your prepared remarks, it sounds like you're feeling better and better about the TASER opportunity. What -- maybe just any other color or perspective what's driving that optimism?

Yes, absolutely. So internationally, in general, to answer your first question, I don't think we're seeing any kind of macro impacts at this point in terms of adoption, interest, buying cycles and so forth. I think we've performed in the TASER segment. We are seeing national police forces by larger order quantities of TASERs than we've seen in the past, which is really exciting. Because when we're talking about a national police force, five, six, seven times the size of NYPD and they're starting their purchases and in the thousands, the high four digits into five-digit, thousands of units of orders, like it's very exciting, because we know that we're very good at kind of the land and expand type of playbook. And so, we look at these as really good indicators for the future of our TASER business, and we do -- we are working with more and more national police forces across the world. And I'd say on top of that, our execution in our Tier 1 markets, the UK, Canada and Australia has been really strong, where we continue to see more adoption of Evidence.com and body cams, but also kind of our newer features on Evidence.com like real-time streaming and transcription. And so, the next step for us internationally is going to repeat -- is going to be to repeat that same level of execution in Tier 2 and Tier 3 markets. And there, we've got to do a really good job of evangelizing the cloud and helping customers understand why the cloud is far, far better as a mechanism for storing and sharing digital evidence. And so, we're working through that process. We'll continue to build there. But we're really excited about all the work our International team is doing and they're really focused right now on driving the results upward.

That’s great. Thank you.

Thank you. [Operator Instructions] We'll take our next question from Erik Suppiger from JMP. Go ahead, Erik.

Yes. Thanks for taking the question. Good quarter here. One, I don't know if you said this, but can we assume that backlog grew from the end of Q1 to the end of Q2, or how should we think about some of the backlog that you carried in from Q4 into Q1? And did that roll into Q2? And then, secondly, any comments about supply constraints? Did that improve or where are we from a supply-constrained -- supply chain constraint perspective?

I can still --

I take the first half of that. I guess, yes, so we can disclose future contracted revenue, Erik, in the letter. So that grew to $3.3 billion. So it was up versus a little bit less than $3 billion as of the end of Q2. And then, yes, there's really no -- nothing -- in Q4, we had some unfulfilled demand that rolled into the first half of the year, but we're sort of back to more normalized levels, obviously, quarter-to-quarter order inflows. And I guess, Josh, do you want to take the supply chain, please?

Sure, thing. And I'd just add to that, just traditionally in the back half, revenue performed stronger than the first half. So we're -- we see plenty of demand still and certainly are going to execute against that demand. In terms of supply chain, in general, our supply chain team has been one of our top- performing teams at Axon. As you can see in other businesses, companies are getting hit hard by supply chain constraints. Our team has just done a masterful job navigating through some of those challenges. And frankly, this is one of the reasons we do keep some inventory on the shelves to get through periods like we've had over the last few quarters. And so we think at this point, things look better and better each quarter. Like we do feel that we're through the worst of it, and that will continue to be able to build the supply orders, but also start to build a little buffer there as well on our TASER and core body camera lines.

Would you care to guess as to timing when supply chain might be relatively normalized? Any thoughts where we'll be as we enter 2023?

Well, at this point, I don't think we're guessing. We're just executing against our plan. And I think by the end of this year, we'll certainly see some buffer in the TASER 7 and AB 3 or Axon Body 3 product lines. And from there, I think it will just be about optimizing the level of inventory we keep on the shelves. And so from an investor results perspective, I wouldn't plan on seeing any kind of abnormal activity in either product shipped or inventory backlogs.

Great. Thank you.

Great. Thank you. Next question is Sami Badri from Credit Suisse. Go ahead, Sami.

Hi. Thank you. You made a reference earlier, maybe it was Rick, regarding profitability being better in the second half of 2022. And I think you just made a reference that second half revenue growth is -- or at least second half revenue production is usually better than the first half. So is there a specific segment or a product that's seeing very good profitable dynamics in the second half that's kind of giving you guys that operating leverage? That's the first question. The second question is the free cash flow guidance was reiterated and unchanged for the fiscal year 2022, but it looks like there were some changes in CapEx. Could you kind of give us the puts and takes on that?

Sure thing. I'll talk briefly about the free cash flow element there. Remind me of your first question, Sami.

Products that are enabling better profitability in the second half of 2022.

Yes, I'll take those two, and then I'll kick it over to Rick on the campus piece as well. So in general, I think we see stronger bookings in the back half of each year, and that's really across all products. This is the end of -- sorry, Q3 is the end of the fiscal year for several major markets in the US. It's also the federal government's end of their fiscal year. So, a combination of budgets ending and having some money to spend. And then the new budget starting, if there's a line item for our products, it tends to be a pretty active part of the year. And so I'd say, the big driver of profitability is the TASER business, and we expect exciting results there. But really across the board, we do see a lot of upside in the back half of the year. And in terms of free cash flow, I'd just say, we've reiterated our guidance, because we feel like, frankly, coming from sales, this to me is not all that different than inside sales. We've got to get in touch with customers, have a process we follow, have well-trained people on the phone, get commitments, follow-up on those commitments and then just get to the point of real predictability there. And I think Jim and I are partnering together there, and we've just brought in a new AR leader, I'm personally investing time with our accounts receivable team to build a playbook here where we can really measure efficiency and productivity. But this -- again, this one is really within our control. And when we couple that like you mentioned, Sami, with a better EBITDA, both dollars and margins in the back half of the year, there's a lot of opportunity to improve free cash flow in the back half, and we're really focused on it, and that's what we're going to do. And so I'll kick it over to Rick to talk about the new campus.

Yeah. Thanks, Josh. So earlier this year, we projected an accelerating spend on the new campus. We've -- now we're basically telling you we're going to slow that down. We're pacing it out a bit. There have been a number of things. I'd say one of them is just the inflationary environment. What we've seen as we were getting ready to really move forward with more of the significant build-out on the campus, construction costs are just up pretty dramatically. And when we couple that with, we've also seen COVID resurging, I think, even more than people had expected. And we looked at the whole return to work dynamic, we've come to accept that the future is going to be hybrid work. And so we also see opportunity to really look at what is the best use of the overall land, really optimizing for collaborative events, customer centric events, of course, the land that we need and the space we need for manufacturing and warehousing and all that. But maybe shifting the balance away from the idea of people coming into the office so much and really more the hybrid work environment. And then in this environment as well, like there's a lot going on, and we just wanted to preserve some optionality of our cash. So we basically -- let's slow down a little bit, let's really recalibrate and see what the post-COVID world looks like and let took the building cost cool off a little bit, and now give us a little time to just keep tuning and refining. The world is in a pretty constant state of flux and we'd rather take our time to make sure we get it right.

Got it. Thank you.

All right. Next up, Keith Housum with Northcoast. Go ahead, Keith.

Hey, Keith, it looks like you're on mute.

Sorry. Thanks, guys. Appreciate it. Looking at the TASER gross margins and your commentary regarding improvement in the second half of the year, I mean, previously, I think the manufacturing automation was going to happen when you're going to build the campus, but it sounds like things are changing. Perhaps touch on what your plans are for the second half of the year of improving the automation in the manufacturing process?

Yeah. I would say that's not fully dependent on the campus headquarters. We're already starting to build out that automation. I think part of what we're seeing in the first half was really pressure in terms of growing into our expanded manufacturing footprint. So we've been investing to build out the footprint and capacity to build. And I think as we grow into those build plans, I think we'll see better overhead absorption in there. And I think that's not contingent upon the new building.

Got you. And then the professional services part that hurt the software and sensor gross margins. Was that in advance of the CAD and the systems you're putting in, or where was that spending being done?

I think it covers CAD, RMS are the software pieces, but there's a heavy fleet portion as well. So fleet -- there was a big uptick in terms of fleet install. So all those things together lead to that PSO revenue becoming a slightly bigger portion of the cloud revenue, but that's enabling that high-margin software cloud revenue growth as well. So it's set the groundwork for future growth. But I think PSO is an important part of us controlling that customer experience and really getting sticky customers.

Okay. Thanks Jim. Appreciate it.

All right. Awesome. Thank you so much. Next question from Jonathan Ho at William Blair. Go ahead, Jonathan.

Hi, good afternoon. I just wanted to understand, first of all, with your headcount increases, can you talk a little bit about where you're making sort of those incremental hires? And what sort of changed for you to want to make those hires now? I think you referenced a better hiring environment, but just curious in terms of your thinking.

Yes, absolutely. I think, look, the last couple of years, we've hired very, very aggressively across all segments of the business. And now -- we're starting in a lot of places to grow into that size and not need to hire as aggressively. But the one major exception to that is in product. I think from our perspective, we have a lot of great ideas, and we limit those -- what we do based on where we think we have the most upside and also the size of our team and what our team can take on. And so for us, as long as there's talented engineers, product managers on the market that can help us deliver product faster and build products that we feel can really change our outcomes in public safety, we're going to keep investing there. And so I think going into next year, the mindset is going to be -- get a little leaner in terms of our hiring plans in SG&A and continue to be aggressive where we can in R&D.

Got it. And then just as a follow-up, when we think about some of the cost savings initiatives that you referenced, either on the T&E side or other areas. Can you talk a little bit about maybe philosophically, where you're seeing that opportunity, the spend as if it's your own, I know I'm not saying that right, but that campaign -- yes, I just want to understand, like do you feel like there was maybe lack of oversight there in the past, or is this a situation where you're just trying to tighten the belt a little bit. Thank you.

I think it's -- I'm not sure it's a lack of oversight. I think certainly, we've got very good controls and process in place to measure expenses. But I think at times, we've gotten just a little bit bloated in how we think about things from the number of people that attend meetings with customers like Rick mentioned, or Swag is another obvious one, where we have -- and maybe the absence of being in the office, we've used Swag as a way to kind of connect with our employees. And so I think there's just opportunities to – to get a little more efficient in those places. It's not necessarily an indictment of anyone or anything we've done in the past. It's just more like the landscape has changed a little bit. We see all this exciting revenue growth well into the future. And it's just a matter of getting leverage out of that growth where we can without impacting our employee sentiment at Axon. And I think we can read that needle very effectively.

Yes. Let me jump in and add it as well. Like a business like any community can't sort of have all messages all resonate all at the same time. And so you go through cycles, several years ago, we had a scrappy year where -- that was an opportunity for us to lead and say, okay, this is the year we want people to really like it's very similar what we did we spend it like pictures, like old be scrappy was, hey, we want to focus in on finding ways to more efficiently get things done and where more people are being scrappy and not throwing a body at every problem. We've had a fair number of new employees come in. And certainly, we have our standard expense controls and training, but we felt with what's happening, look, the overall market is down, inflation is up other companies are, I'd say, more aggressively cutting back their investment plans. We saw this as an opportunity to communicate with our employees say, 'Hey, spend it like it's ours, right? Like this is a moment, let's take what's going outside, everyone has things in your control where you cut back spending. And by doing that, we'll all be rewarded. The market is rewarding companies that have more financial rigor, and we can also reward you by investing and not having to pull back on our investment plans and the exciting things we want to go build. But we can't just be toned up and continue as if the macro environment hasn't shifted. So, I think this was a balanced way for us to connect with -- maybe even some of the angst our employees are feeling about the macro environment, like, hey, here's something you can do really buckle down on expenses so we can continue to invest over here because we know these are the times those investments really pay off. Our hiring has accelerated, and I think a big part of that is it's the macro environment. We don't have as many competitors. We're having more success recruiting because we're just not competing with as many other tech companies that are as aggressive right now. And so these are the times we want to lean in and accelerate our growth. So, I hope that gives a little bit of context as to how we felt we could position us with the company employees to really get them all rolling in the same direction.

The fact one thing I'd probably add to that too is just like overall travel costs, as like everybody is seeing, also went up sort of at the same time as we sort of dealt with that sort of pent up post pandemic demand. And I think as Rick said, we adjust to sort of how the best way to operate in the most efficient ways from a travel and hybrid perspective going forward. I think we'll thread the needle a little bit better in terms of meeting that. And I think everybody's plays are focused on that.

All right. Awesome. Josh Riley at Needham, you're up next.

All right. Thanks Andrea for the questions. So, TASER revenues, obviously, were very strong in the quarter, quite a bit above what we were modeling. You touched on this a bit, but how much of the back orders you expected at the end of last year to be complete? I think you had mentioned previously by the first half or now through, I think you mentioned it was like $30 million. And then can you remind us if there's any seasonality to TASER shipments and if that could affect Q3 or Q4 TASER revenue just so we have an idea sequentially.

Yes, absolutely, Josh. Thanks for the question. So, I'd say it's fair to say we're caught up on the TASER shipments from Q4 last year and we've shipped those over Q1 and Q2. And because sequentially, TASER shipments go up in the back half of the year that we still feel like Q3 and Q4 will be the highlights of the year revenue-wise. And so I think that's kind of the story Q4 tends to be a little a little higher than Q3, but over the years, we've seen the inverse of that as well. But as a back half, we certainly have a lot of confidence that will outpace the first half of this year in revenue.

Got it. That's super helpful. And then on the Axon Fleet units, those increased nicely as well quarter-over-quarter. Should we assume that all of those are Fleet 3 at this point, or are you still shipping any Fleet 2? And then how should we think about the level of supply constraint versus demand from that product?

Yes. In terms of the mix of fleet, there's still a little bit of Fleet 2, but mainly Fleet 3 and of course, a lot of body camera shipments going out. Supply chain constraints, I'd say, we have plenty of supply to deliver on our guidance in the back half of the year. Product-by-product, when we get outside of the core TASER and body camera products, there's a little bit of flux month-to-month there. But in a macro sense, we are feeling great about where we stand from an inventory perspective.

Awesome. Thanks guys.

All right. Jeremy Hamblin from Craig-Hallum. Go ahead Jeremy

Thanks for taking the questions. Congrats on the strong momentum in the business. So federal contract's clearly a pretty key segment right now, really a big driver of the business, a ton of momentum there. I wanted to get a sense for whereas we've seen executive order mandating federal agencies to use body cams. I wanted to get a sense for what you're seeing internationally in terms of that type of mandate, that type of adoption. Typically, there's been a decent lag period between instituting that type of policy. But there have been significant incidents, both in English-speaking world as well as other places with surprises incidents. Japan comes to mind, where we wanted to get a sense for what the pulse is of other government agencies around the globe.

Yeah. I think it's a good question, Jeremy. And as you'd expect, it varies a little bit. I can say, just like the United States, Canada, Australia and the UK were relatively early adopters of body cams. So even if a mandate were to come down at this point, I think, I don't know that, it would change the buying behavior all that much in those three markets. I think the market has decidedly already shifted to body cameras there. In other markets, we're starting to see – I position it like international governments are starting to dip their toe a little bit into the body camera world and start to understand kind of what's going to work for them and what's not. And so I think we do have a lot of opportunity there. First, with kind of small and mid-sized orders and then growth over time and so that's the – that's really where we see kind of international going in terms of body cameras. But like I mentioned, we are seeing international governments start to deploy TASERs with a lot more conviction around the globe, and we should expect to see that continue for the years to come.

As a follow-up question, domestically, federal contracts, in terms of the value that you're getting in those deals, right? You're talking about a huge buyer, a buyer that's been mindful to look at getting best pricing, et cetera. So I wanted to understand, in terms of length of contracts there and kind of the value you're getting the ASPs. How that compares, obviously, without getting into exact specifics, but just understanding that a little bit in terms of that buyer.

And is that for international, specifically?

No, domestically.

Oh, domestically. Okay. What was that, Rick?

I think the question was about our federal buyers.

Oh, federal. Okay. Federally mirrors – our federal government is generally mirroring what our state and local customers are doing pricing-wise. Certainly, we do have some commitments to make sure that we are recognizing the federal government and the most favored nations clauses in some of those contracts. But ultimately, we do feel pretty good that those license types and sizing is similar to what we see. And far, far ahead of where our – when our state and local customers started to buy in large volumes, like the federal government has kind of skipped that phase of basic licenses and TAP and they're buying a lot more frequently at higher license types, which is exciting.

Yeah. And I would add, Josh, as well that we're starting to now invest in dedicated federal R&D. So in many cases, we're seeing the Fed customers interested in premium sort of features that might require a little more investment in certain types of hardening of different devices or software to meet certain federal requirements that in some cases, can even lead to premium pricing.

Thanks for the color. Best wishes.

Thanks.

[Operator Instructions] So we'll take our last question from Erik Lapinski at Morgan Stanley. Go ahead Erik.

Thank you. I just maybe wanted to follow up on the federal market and some of the comments you guys just made there. I'm curious in terms of just the bundling that you're seeing in the federal market. Are you seeing similar uptake of OSP 7 Plus? I know that a number of agencies already have TASERs. So are they looking at body camera contracts kind of separately or bundling when you see those deals, I'd be curious on kind of what it looks like?

Yes, a great question, Erik. I'd say we're seeing kind of department by department, a little bit of everything. I think the agencies, you mentioned that agencies already have tasers, a lot of those are up for upgrades. So it's a great time to buy our body cameras and software and bundle those – that upgraded version of the Taser in -- with that contract. Other customers are buying software-only, our investigator package for certain customers in the federal government. And then some standalone activity as well. The 1 really in -- there's a lot of really encouraging things here, but one of them that stands out is customers are also buying across our suite of products. They're seeing use cases for live streaming. They're seeing use cases for records, they're seeing fleet 3 interest. And so really across the board, we're seeing a lot of interest and a lot of different products from the federal government. And it's really a credit to the work Richard Coleman, our Head of Federal and his team have done, it's really kind of transformed over the last few years from kind of a steady state market into an exponentially growing one.

Thank you. That's helpful. And if I could sneak in another one. I know the corrections market is kind of another expansion area for you guys that we didn't talk that much about this quarter. I'd be curious if just any – whether it's from funding initiatives you're tracking or kind of just what the states are looking at in terms of the corrections market. If you're seeing more of an uptake there, if it's kind of -- I know there have been a couple of early presence there, over the past couple of quarters, but just in terms of kind of building on top of that?

Yes. The team is definitely growing. And for us, I think it's more of a -- it's less about the federal government giving grants or fundings or any kind of overall market effects there. I think it's more just – historically, we haven't really had a team focused on corrections as its own market. We really did a lot of correction sales through the Sheriffs office while they were buying products for the rest of their deputies and now just having a really focused team, we're starting to unlock a lot of that market on a much more predictable basis. And so, I think the growth there is just attributable to our team's focus as opposed to any external factors.

Thank you.

Looks like we have a follow-up from Jonathan Ho at William Blair. Thanks Jonathan.

Yes. Just a couple for me. I wanted to maybe dig a little bit into your Microsoft opportunity. Can you talk a little bit about the level of benefit or cost savings that you could maybe see from that deal? Just as a starting point.

Yes, I'd start by saying the exact terms of the deal are not something we can go public with. I don't know, Jim, what would you?

Yes. I'd say, at a high level, it enables us -- it supports our target long term of having 80-plus percent software gross margins. And I think the duration of that contract is really helpful for us for having that confidence and visibility to our pricing when we set our contracts with customers. So I think it helps us over time, sort of maintain/expand our Axon Cloud gross margins. But I think the best thing of that, guys, this gives us predictability.

Got it, got it. And then, just in terms of the commercial market, can you talk a little bit about your progress there? And maybe some of the go-to-market opportunities that you see specific to commercial? Thanks.

Yes. We're thrilled with the opportunity there. Mike Shor and his team have just done a great job building something from -- we don't get those the same advantages we sometimes have in the public sector where the referral network and stuff. We have to build those from scratch. And Mike and his team have done a great job of that. The team continues to be on a cadence of kind of doubling every year. And that’s happened in terms of the results the last three years now. And we're still probably about 90% of the way there on product market fit, where we've got some really evangelical early adopters that are excited about how things are going. And now it's just kind of closing that last 10% of some of the product market fit items and really expanding each year. And I think, we're really, really well positioned to do that, and we'll start to see some names that you're very familiar with adopting our products for more commercial purposes.

That’s it for me. Thank you.

Great. Do we have any other follow-ups? I’ll give you a second. I can see you guys thinking. Okay. All right. Let's have Rick close this out.

All right. Well, obviously, another great quarter. I'm really proud of what the team was able to deliver. It's -- there's a lot going on in the world, and our team just really digs in and Josh just does a great job of keeping people focused right, lock out the noise. There's a lot happening in the world that we can affect, but there's things within our control and the more we focus, the better the results always end up being. So appreciate everybody joining us today, and we look forward to updating you on the back half. Have a great day.