Hello, everyone, and thank you for joining Axon's executive team today. I hope you all had a chance to read our shareholder lender release after the market closed, which you can find at investor.axon.com. Our prepared remarks today are going to build upon the information in that letter. During this call, we will discuss our business outlook and make forward-looking statements. Any forward-looking statements made today are pursuant to 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. We discuss these risks in our SEC filings. We will also discuss certain non-GAAP financial measures. A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our shareholder letter as well as on our Investor Relations website. Now turning to our quarterly update. First, we'll start off with a quick video showing an awesome example of one of our customers using products across our ecosystem. It will be about 5 minutes. So you get a chance to take a minute. [Presentation]

All right. Thanks, Erik, and I want to thank all of you. I thank all of our shareholders for joining us here today. So welcome to Axon's Third Quarter 2024 Earnings Call. It is truly humbling to come back to you with another fantastic update. And to show you these videos that capture what we've been working on and the relationships we strive to build with our customers. These calls are a great opportunity for us to reflect on our recent momentum while thinking about what's next. As I've shared with you in the past, I spend the majority of my time with our customers and with our product teams, ensuring that we are inventing and focused on the right things and aligning our efforts where our customers need us and where they need us to be for their future. I've been able to lean in with hundreds of our customers over the past few months between the AUSA, which is the big Army show, IACP, the Chief of Police Conference and several events at our offices and internationally. Our customers are as excited as we are about what's ahead, and it's energizing to see them ready to move forward with us on this journey together. There's no place where this is more clear to me than the area of artificial intelligence. The interest is immense here and we are already building a suite of products for our new AI Era plan, providing access to an expanding set of solutions. Our strategy here is twofold. First, we understand and believe that AI innovation is moving at a breakneck pace. It would be almost impossible for us to continually update our go-to-market offerings at the speed that AI is moving. With this plan, we had to deliver an ever-changing and expanding…

Thanks a lot, Rick, and good afternoon, everybody. This week, we are participating in a core element of our culture at Axon, putting our customers first together. It is the week of the customer internally where we invite customers into work to share their stories, recognize our internal support teams and double down on employee training to ensure that the customer remains at the center of our universe. I'd like to share a quick anecdote to that end. In response to the devastating hurricanes that impacted the Southeastern U.S. in September and October, we deployed our Axon Aid emergency response team to work alongside first responders around the clock for 16 days. Our team had to witness the magnitude of customers' efforts firsthand. At Axon, we know our customers are heroes and being a small service to them in this mission was an honor and nothing short of inspirational. We work every day to help our customers achieve better outcomes. And when we put their needs first, we get to share in their successes. Understanding this is something I have spent a lot of time on and a percolates into how we built our team. When I look at what our team is working on with our customers and the results we are delivering because of our strong partnership with them, I continue to be excited and impressed. First, our record results. We just delivered our 11th consecutive quarter growing above 25% in our third quarter this year growing above 30%. That growth puts us at a level where we are accomplishing in quarters what took us years to do only a few years ago. Second, while we've been growing fast, we still have line of sight to a multiyear growth opportunity that continues to build. We closed Q3 with…

This quarter marks 2 years for me in Axon and the business has certainly been incredible. I couldn't be more pleased to share the results of another great Q3. We grew revenue 32% year-over-year and delivered strong adjusted EBITDA with a 26.7% margin. We achieved this margin expansion while driving over 30% top line growth, and we continue to successfully prioritize balancing the bottom line with achieving that strong top line growth that we promised. As Rick and Josh both talked about, the focus on product innovation and delivering for our customers remains our North Star and is what enables us to keep delivering these types of results. Thank you to everyone on our team who drives that focus. As we get into the details, I am particularly excited that the revenue growth is broad-based in terms of products and customer verticals. Josh spoke to the strength we're seeing across different customers. The strength is across our products as well. For example, our acquisition of Fusus has been very positive across a number of our verticals and TASER 10 also continues to exceed our expectations on its adoption. TASER revenue was a standout in the quarter, growing 36% year-over-year, the strongest growth in our TASER segment in more than 2 years on the back of increased capacity and broad-based demand. Cloud and services was up 36% year-over-year with software revenue as the primary driver. ARR of $885 million is up 36% year-over-year, and our net revenue retention, an indicator of growth with our existing and new customers increased to 123%. Sensors and other revenue was up 18% year-over-year with strong demand for Axon Body 4 partially offset by Fleet. Fleet continues to be a very strong product, but given RFP timing and customer deployment schedules, we expect it to have…

Thanks, Brittany. We can all get up into gallery view. We'll take our first question from George Notter of Jefferies.

Congratulations on the strong results. I wanted to ask some questions about Draft One. I'm curious if you can give us an update on your progress in the September quarter there in terms of pipeline. Was there any revenue recognition tied to Draft One? Any significant contributions to your ARR?

So thanks a lot for the question. I really appreciate it. In terms of Draft One, yes, we did receive some orders in Q3 from kind of early customers. So there was some impact on revenue from Draft One, but I would still say we're in like the top of the first inning on what that's going to look like moving forward, especially as we go into next year with draft rule one being the anchor product of our AI Era bundle, and so certainly, we're very, very bullish on Draft One and all of our AI products contributions to both revenue and profitability over time, but we're still not yet seeing a major impact on the quarter-to-quarter results, which is expected due to the SaaS accounting.

Last quarter, I think you guys mentioned $100 million pipeline, I think in 6 or 7 weeks of selling on Draft One. Is there an update to that number?

It continues to grow, especially after IACP. So we're again, we're converting some of that pipeline into the new kind of AI Era bundle that we're coming out with next year as well. And again, Draft One is really the kind of central driver of interest in that bundle along with a number of other AI features we're developing right now. So certainly safe to say that the interest is the most we've seen out of any year one product.

Got it. One last follow-up and I'll pass it on. Where are we going to land in terms of the pricing on that? I realize it's going to go into the bundle. I know you guys have been selling it a la carte to some degree to early customers. We heard price points of $30 and $40 a month. But is that kind of the right zip code in terms of where this is price or where maybe the incremental bundle would step up to in terms of pricing? Any sense there?

Sure. So right now, Draft One alone is $65 a month and it requires transcription on top of that for another $20. So $85 a month for just Draft One. We're looking at the AI Era bundle price of $199. And the sum of the parts of that bundle is expected to be somewhere around $250 to $350 in terms of everything included in it. So good economics for buying as a group of features instead of individual stand-alone features. But that will be the price going into next year.

And those are just the launch features. Of course, the features in the AI Era plan are going to grow rapidly.

I'd probably just note that we'll probably -- you'll hear us talking more and more about the AI bundle plan and less and less about Draft One is sort of an individual product or an individual data point. It's really going as Josh said, be the anchor product in the new AI bundle. We'll continue to add features there, but that's what you'll hear us talking about quarter-to-quarter.

That's right. And of course, pretty much everything in that plan are pure SaaS software additions on top of our overall software ARR, of course, they build upon people who have our hardware like cameras and TASERs and the like, but the Era plan itself is all good old as SaaS.

Up next, we've got Jonathan Ho at William Blair.

Just wanted to get a sense from you as you start to think about sort of the broader opportunity around drones, as a first responder, how should we think about maybe the ability to monetize this, the ability to see broader adoption? And what sort of has to happen for that to take place?

Rick, do you want to start? And I'll follow.

Sorry, I had myself on mute. So yes, we see drones as a huge opportunity. The Dedrone acquisition, we think, is a real key part of that because before you can start flying drones without expert human standing around watching them, you've got to be able to see your airspace. And an array of sensors can see the airspace far better than a human on a rooftop. And so part of our assessment in making the Dedrone acquisition was a dual bet. Number one, that it would be a key enabler for DFR, to be able to fly your own drones, you got to be able to see the airspace well. And then the second is that we're going to see increased interest in counter drone capabilities. I just learned this past week that apparently somebody in Pennsylvania, put a pipe bomb on a drone and it's going to fly it into critical infrastructure or something. We'd be glad to see there has not been that much of that kind of activity here in the U.S., but it's certainly growing all over the world. And what we certainly hope it doesn't come here. I think it is something that's likely to get more nefarious use. And right now, counter drone is really limited to Federal agencies, meaning state and local cannot interdict the drones themselves. So Dedrone is helpful in that case because they will tell me where the pilot is and you can go deal with the pilot directly. However, there was a bill in Congress, I believe this year, I don't think it's going to make it through, but there have been some efforts to give state and local law enforcement, the ability to interdict drones, not to get into politics, but my assessment of the shift of…

And then, John, just to add two things on Rick's great summary. One thing that we're super pumped about is how the market is evolving to think about the real-time crime center space and the DFR space together, which we think is both right and good for agencies and communities and plays right into our strengths and our differentiation as a solution. So the combination of Fusus in the real-time crime center, deeply connected with all of our other devices and then into the DFR partnership stuff that Rick was talking about. Agencies are thinking about buying those together, and that's both great for them as they think about how they use this technology to keep community safe, and it plays right into all of Axon's strengths. And the second, which is another example of that same thing. We just had a major agency who is in the middle of rolling out their DFR stuff the other day, talk unprompted about the notion that they would love to have an officer be able to press that watch me button that, you know, we have on our AB4 cameras and have that under the right conditions automatically trigger the dispatch of a DFR drone to bring health and extra overwatch to that situation even faster than what any other human-in-the-loop could be. And that's exactly the kind of solution that's powered by the combination of all the things we bring to bear for agencies.

Excellent. And then just as a follow-up. I mean, TASER again, had a very strong quarter. We regularly received a question whether the TASER business can sustain this level of growth. And I just want to get a sense from what gives you the confidence that we can continue to see TASER be one of the major drivers of the business? Or maybe do you see a shift in leadership where things like rate will start to take over that growth over time.

But they do compete for the top slot and it does make me proud that the old warhorse that's TASER can still run. So we I think we've got so many things that have the opportunity to continue to be disruptive and to grow. The big one for TASER just to come back on that to me, is really international. I think we are on the cusp, but actually I'm getting text updates from my engineers that are in the lab today actually working on some pretty cool stuff related to TASER that we think we have the opportunity in the next couple of years to become the primary weapon internationally. Now in the U.S., the gun is going to remain primary for quite a while, culturally because police are dealing with so many guns out in the public. But in much of the world, a gun is just if you had a viable, high-reliability alternative within that 45-foot range, and I'll just tell you the last thing we're working on is clothing penetration. Once we get that dialed in, we've got a shot at displacing lethal force. And our estimates are about 40% of situations where people are shot and killed in the U.S. today. So here, I'd say it's probably more about the moonshot internationally. But the reason I say that is most agencies in the U.S. are already buying TASERs. So yes, there's going to be a little bit of upgrade opportunity there. But in the U.S., it's going to drive the mission more than a pure revenue driver. Internationally, though, I think that's where TASERs are not standard issue in most countries. They're shared among specialty teams. But when we get to the point where it's like, hey, we're going to use this as our primary defensive weapon. Now you go from 3% to 10% of the agency using it to potentially 100% of patrol. And then that should begin to pull through with it, much like the rest of our ecosystem. So I think from a pure financial business sense I think T10 is going to be much more impactful in global markets. And then frankly, in enterprise and other places where whether you're somebody like Loomis, who's in the business of moving cash around or casino guards or anywhere you see armed private guards, we think T10 plus the Apollo is going to begin to be much more widely deployed there because -- and maybe they'll still carry their gun, they might start to look more like a comp where they have 2 weapons. But we think all the business operators pay a ton of attention to the liability issue. And if they can avoid a shooting, it's -- there's a lot of financial incentive in addition to the moral imperative. So I'd say this is going to its biggest impact will be opening new markets for TASER.

And I'm going to just add one or two more thoughts there about the question of is it sustainable for the TASER business to keep growing. In my opinion, the answer is absolutely yes. Like where you're two of five in an upgrade cycle right now. We continue to see exceptionally strong demand, literally double what it was as we've said on previous calls, with T7. And so certainly a lot of runway ahead to continue to grow the TASER business and look like, as Rick said, the TASER business is going to solve one of the most critical issues in policing over the long term, which is that these encounters can end in death either from a civilian or police officer. And if we can solve that problem, I still think we're scratching the surface of what the TASER business is capable of.

Yes. Just from a detailed sort of modeling perspective, I don't know that I would expect every quarter to be as strong as this quarter was. This was a particularly strong quarter for there. And that is partly because we got more capacity online for the TASER business, which helps us go fulfill all of that demand. So just from a growth standpoint, I would say this quarter really stood out, and it continues to be across both T10 and our T7 and legacy handle. So that was a little bit unique. But everything Rick and Josh said about the long-term trajectory, the power of T10, the ability to sell it into different markets holds over the long term.

Thank you. Again, congrats on the strong quarter.

Up next, we have Mike Ng at Goldman Sachs.

Good afternoon. Thank you very much for the question. I wanted to follow up on a comment made about 4Q '24. I think you said it would be likely a record bookings quarter. Is that right? And was the year ago 4Q bookings in that like $1.7 billion, $1.8 billion range just to make sure we're thinking about that the right way. And if you could talk about some of the visibility and the confidence that you have in those things that you mentioned, federal bookings increasing sequentially international bookings. Is it AI Era. Is it the pipeline growth that you've seen coming out of IACP? Would just love some color around the bookings outlook that you gave for 4Q.

Sure. Yes, certainly reiterating that I'm very confident and encouraged here in terms of what we're going to do in Q4 bookings. I probably won't give you a specific number other than we expected to exceed last quarter. And I think on the last call, I said the sum of Q3 and Q4 this year will be comparable to what we did in the full year last year in terms of bookings. So we're very bullish on bookings. Part of what's informing that confidence is just tremendous execution across all four segments of the business. state and local, enterprise, federal and international. We have meaningfully -- meaningful deals in all 4 of those segments in Q4 and a lot of them, such that there's no it sounds like a huge percentage of the bookings would be concentrated on one deal. We feel really, really good about the foundation. And we're excited to talk in more detail about our Q4 bookings in February.

There's been a couple of questions now about like what's going to do better or what's going to drive the growth going forward. I think one of the things that I like so much that this quarter demonstrates is the growth is across the board. So you might get a little more from one segment, one quarter and a little more from another segment than another quarter. But really across the business, the devices on the strength of AB4, TASER on the strength of TASER 10. And then our software on the strength of both our existing software business is continuing to perform well and then the very right future that we think the AI plan has will continue to drive software. And so you'll see a slightly different mix every quarter. But as you look long term, you really should expect all three of those pieces to continue driving our growth.

Excellent. And if I could follow up on the earlier TASER question. The revenue I counted, this was the sixth consecutive quarter where TASER has hit a revenue record. You talked a little bit about faster-than-expected adoption. I mean if we look back to TASER 7, it probably took you, I think, 5 years to get to 80% to 85% adoption. How much shorter can that be? And could you just remind us like what's the typical price mix or ASP uplift versus TASER 7?

So Michael question was how fast can we get to 85% adoption on T10 versus T7?

Yes, that's right.

Okay. Look, I think that would be setting our sights short, I would say. Our goal is to transition every T7 and legacy model TASER into a T10. And we think we have an opportunity to do that. I think this TASER 10, while each TASER is an incremental improvement over the last one, TASER 10 is just a fundamental massive leap forward in the technology, in the de-escalation capabilities, in the officer safety features, we really believe that every comp will be best served with the TASER 10. And certainly, as we go into the next few years here of the TASER 10 life cycle, the primary goal is upgrade and replacement of the current Fleet. And again, we're very confident in our ability to do that.

Up next we have Joe Cardoso at JPMorgan.

I guess maybe just a quick clarification on the bookings. And Josh, can you just like quickly clarify if your comments today, are you guys on track to meet the bogey that you laid out last quarter and achieving bookings in line with full year '23 in the back half of this year? Or is it more like unknown. I'm just curious if you could just flesh that out a little bit more because it does seem like perhaps you're a little bit off pace. And I just want to make sure that I'm not thinking about that incorrectly.

I'd say you're thinking about that incorrectly.

Okay. And then so when you're going into the back half of this year, like where are you actually seeing the growth in driving these bookings across the portfolio really all broad-based in terms of the entire portfolio? Are you guys embedding any of the new AI suite in that in terms of the releases there? Just curious in terms of like how you're thinking about the drivers in the rank ordering? And then I have a quick follow-up.

Yes, sure. Look, I certainly appreciate the question, Joe. And these deals that are going to be closed in Q4 are deals that generally a 6- to 12-month sales cycle at a minimum, right? These things take the full year to come together. We talked in Q1 when bookings are seasonally light traditionally part of that is the team is getting their arms around the new products and the new pricing, getting our arms around their new book of business as the territories can change and so forth. And so that's really where the groundwork goes into like building the pipeline for the rest of the year. And naturally, most of that closes in Q3 and Q4, especially when you see some of the biggest budgets in the country -- the federal government in Florida, Texas, all ending on September 30, you get a lot of September action and then you've got a lot of new budget dollars being spent in Q4. And so I don't know that the AI bundle is going to have a major impact on Q4 since we launched it in the same quarter. And we're still building the pipe for the long term for some of our newer features and products. So the big driver of a lot of these deals is officer safety plan execution in the same local market and some large deals in international federal and enterprise that have been coming together over the course of several quarters. So certainly expect Q4 to really trump Q3 in terms of just the absolute dollars and the normalized bookings, but it's also the result of a lot of pipeline building that happened throughout the year.

Got it. Very clear. I appreciate the explanation there. And then maybe a question for Brittany. Just margins subtract nicely through the year and expanded each quarter and even outperforming kind of your expectations, if I'm remembering the guides correctly. So as we look here into the fourth quarter and the guide here for a sequential decline. Can you maybe just walk us through what has been the driver of outperformance in margins over the past couple of quarters? And then relative to your expectations going into this quarter, like what's different that's driving your expectation for the sequential decline to occur in the fourth quarter itself?

Yes. So we've actually done a pretty good job hitting our expense targets and our OpEx targets. And then our revenue has outperformed. And so what you're really seeing is some nice flow-through on that higher top line revenue coming through the bottom line. And it's been really nice to see how the team has been able to scale and get some leverage out of the OpEx and especially on the SG&A side. When we look at Q4, though, we also expect that some of the benefit has been timing, right? Like we've been talking about timing on everything hits exactly in the quarter. So we've been a little bit behind on some of our expense spend as we've gone through the first 3 quarters. We expect to catch up on some of that in Q4. And then the other thing is we expect to have a full quarter of Dedrone and some of the integration costs associated with Dedrone in Q4 now that we have closed that deal.

And I might just add one more thought on adjusted EBITDA, just high level, which is the thing I'm most excited about is the fact that we are not sacrificing R&D to achieve these results, right? Like that's a -- it would be very easy to drive up adjusted EBITDA by mortgaging the future. And I don't think anyone feels that way right now. We're still in the place of just loading up on new opportunities and investing relentlessly in them. We're just seeing, like Brittany said, over delivery and a lot more discipline in SG&A as well.

Up next we have Jamie Reynolds at Morgan Stanley.

Congrats again on the quarter. Rick, I know you just mentioned there's probably some stuff to keep an eye on for the international market going forward. But just given the strength in bookings that you've kind of seen through the year, I guess, could you give us a sense as to what's driving maybe the improved traction kind of near term and kind of as we go into next year?

It really is broad-based. I think the -- about, Jeff was it 6, 7 months ago, I just come back to my tech conference and told Jeff, we need to pull the emergency break and take a look at all of our product development plans and look at where AI would enable new features that weren't even on our on our visibility list a year ago.

Not the emergency break, turn the wheel.

Well, no, this is the one where you're in reverse and you pull the brake. It's like The Dukes of Hazzard and you, anyways drifting. It was a pretty big shift. And for example, one that came out of that, we also do these AI roundtables. Well, they're customer round tables, but we did one really focused on AI. And one thing that became very clear was being able to do real-time translation on a body camera would be just insanely valuable. It rated at the top of the charts. And so we pivoted, Jeff, basically, as you can imagine like how disruptive this is to his days, managing like 1,015 engineers, and it's like, hey, I know we've got everything planned that everybody is working, but let's like disrupt everything. And I think that enabled us to talk about 6 or 7 major new AI features by IACP already. And I'm really proud. Companies in our scale. It's hard to move like that. But I think that -- so our customers are seeing, again, things that just feel almost magical that are possible with AI. And our investment in things like our EEAC, our Ethics Advisory Council (sic) [ Ethics and Equity Advisory Council ] to help us do safety testing on things like Draft One or simply running tests to see if you change the race of the subject, does that pick up any historical bias from the global data sets that these models are trading on. And we did pick up some things like word choice. If it says the man fled the scene versus the man left the scene can really change the emotional perception of that statement. And so we did things like tuning down the word choice severity so that our AI writes the…

So one just thought, I think again, so many of the things that are goldilocks and magical, I think, about Axon's flywheel for lack of better phrase, connecting like the questions about what's happening with bookings or demand, like right now and everything Rick is talking about the future is it's all of our new innovations are really leading indicators of this time next year's growth, not about this quarter's growth because of the sales cycle stuff, because of building stuff, but they feed into customers' excitement about their bet on Axon for the long term. But the bookings that are this quarter, next quarter are about the pipe, as Josh talked about, that got laid 9 months ago, and it all connects in that ongoing sequence, beating upon itself in a really virtuostic way that we're super excited about.

And Jamie, was your question specific to international at all? Or was that...

Yes. Yes. It was just kind of what's driving that improved it internationally?

Yes, for sure. So on international, look, as you know, we -- in searching for a new CRO, our big priority was upping our game internationally. And Cameron Brooks has come in really early on this year, hit the ground running and has really just helped up our game in terms of the quality of the team, the quality of the execution, how we're executing now, but also building for the future. And I think just across the board, we've got some new players on the team that are a really good kind of free agent signings. We've got a lot of customer momentum from the work that's been done in the last couple of years. And we're starting to, frankly, just see things come together at a more polished level. Still a long way to go. There's still a huge TAM out there. Everything is going to take time internationally, just due to the fact you're dealing with Federal governments in all of these countries, not saying local police forces that are able to operate semiautonomously. So it's still going to be a grind, but we really, really believe we're on the right track, and it's a tribute to kind of the team we're building here led by Cameron.

Next we have Jordan Lyonnais at Bank of America.

On the administration change, how are you guys looking at the opportunities versus the risks involved just with what plans have been said if they come true or not, the increased emphasis on border security versus tariffs?

Yes. I appreciate the question, Jordan. I'd say the first thing that I want to make really clear is like we have a very apolitical culture at Axon. We know we've got to be successful in a Democratic administration as well as the Republic administration. And we've seen that over the last 10 years with both parties being in power and the business continuing to grow. Of course, there are going to be some interesting opportunities for us in the new administration that's focused primarily on border security. We're excited about how we can help there and new capabilities that we can bring to the table to offer support on that. But at the high level, certainly, we believe, look like saving lives, driving transparency and delivering disruptive technologies to governments and public safety agencies around the world. Those are things that are really not specific to which party is in power, and we're really focused on just delivering the best products we can.

Thanks. And then on just -- if tariffs are imposed, how are you looking at what levers you can pull to offset any supply chain component changes?

Yes. So we certainly lived in an environment of tariffs before. And so I think our philosophy is generally to be pretty flexible. We've got multiple sources from a supplier standpoint, we do -- we manufacture our TASERs like in the U.S. so that it will really be on component parts as those come in. So look, we'll just work through it and we'll be flexible and be nimble as those come through and as we see what they are.

Up next we have Josh Reilly at Needham.

Maybe just starting off, can you discuss how the FedRAMP status in your position as the, I believe, the only cloud, body cam vendor with the highest level FedRAMP status has been helping me win some of these U.S. federal opportunities? And how -- just along with that, how is the growth in U.S. Federal been, I guess, relative to the broader business this year? Is it significantly above the consolidated growth rate? I know you don't break it out, but any color there would be helpful.

Yes. Thanks a lot, Josh. On the first question regarding FedRAMP, look, like we've invested a lot and we put a lot of effort into being a FedRAMP high product in the federal government. No question about that. And that's certainly a differentiator for us. But I would be simple as to say even if everybody was on FedRAMP, we're still winning the majority of deals in state and local, we're competing against the same companies without FedRAMP. And so I think it's more of a tribute to the team's quality product delivery and the Federal team's phenomenal execution on the sales and more importantly, the support front for our federal law enforcement customers. And so the team has done a nice job this year. There's -- as I said in my remarks, there's a lot to still close in we could have a better Q4 than Q3 in the federal space, which is generally uncommon because at the end of the budget year at the end of Q3. And so we'll have to see where the dust settles, but certainly exciting double-digit growth from federal and a lot of conviction that we're on the right path there.

Got it. That's helpful. And then just going back to the TASER revenues. I think we all generally know that the capacity has been increasing sequentially. But maybe just over the next 3 or 4 quarters, should we assume that, I know you said that maybe the sequential increases in revenue may not be the same, but is it safe to assume there's still more capacity increases that will be coming in the next kind of 3 to 5 quarters as well?

Yes, for sure. I mean, we -- as we talk about capacity, we have both cart capacity and handle capacity. And as you can imagine, we're working to bring both of those up to meet the demand lease. There are lead times. We do have automation equipment. So it's not -- we can't always turn on as much supply immediately as we would like to. So you can see the results of us getting more supply in this quarter. And then again, the growth is particularly impressive this quarter. I want to temper everyone's expectations on that looking the same every quarter. But yes, we'll keep bringing capacity on as we continue to see demand increase.

Up next, we'll go to Trevor Walsh at JMP.

Maybe Rick or Josh kind of high level one for you, circling back to the Dedrone, sort of just general DFR opportunity. Can you -- does that seem to be in your minds, kind of a state and local U.S. domestic kind of initial push? Or is there international opportunities along the lines there? And I guess I ask from the standpoint of seems like landing with TASER or any kind, whether it's TASER 10 or previous models is sort of the kind of the tip of the spear for the U.S. business. and it seems to be following a similar type of path in kind of the international front. But just curious if there's ways for DFR type of use cases to be more again in that tip-of-the-sphere kind of on the international front with respect to Dedrone and the other things you guys are doing.

Sure. If I could start, first just Dedrone by itself without DFR, a ton of interest internationally. I mean every country in the world is now thinking about how they're going to deal with growing threats in the past 24 months. And in many cases, AD brought just a great capability as the CEO Dedrone and he's brought us new customers, too, whether it was the World Cup in Qatar, the NFL stadiums, critical infrastructure. And then we've seen the same thing with Fusus. I mean both of these acquisitions, these were two big bites for us to take this closely together. And it's been really just impressive how much customer interest there has been in those with Fusus that's really supercharged our enterprise customers. Enterprises want to be able to work collaboratively with public safety and Fusus becomes the backbone of doing that in real time. Dedrone, we think there's more -- it's a new angle into military customers for us. Militaries around the world are very interested in how you deal with these small first-person or Mavic style drones critical infrastructure and then enterprise there as well. So I'd say Dedrone even on its own is, I think, not only interesting to our existing customers, frankly, probably even more interesting to the new customer sets they're bringing to us. The DFR is what's making counter drone especially relevant our customers in state and local, the responses are. Yes, we're kind of interested in counter drone, but it's not really our mission set today to be dealing with hostile drones coming in. Now that for us more of a future bet that that's going to come on your plate as those threats grow, but the DFR thing is here and now, that's where our customers really with up, oh,…

Up next we have Keith Housum at Northcoast.

I know we're going to long here, so I'll try to make my questions quick. So just really quick, Brittany. You talked about, probably like a bit of a pull forward catching up with a T10 with your capacity. How much of growth in the quarter would you say was more of a catching up on capacity as opposed to normal is demand?

I wouldn't break it out necessarily, Keith. What I would say is we've had incredible demand, like our demand has been outpacing our capacity. And so as that demand grows every quarter, we need to bring more capacity on. And so what you saw this quarter was the combination of the two. But I wouldn't say, it's not like we chewed through backlog or something like that to deliver. You're just seeing the ability for us to ship more into that demand.

Got you. Appreciate it. and then the services. I know services can be lumpy. But if we look at sequential growth in services of about $6 million, probably the lowest is growth sequentially for several years, if I look at it correctly. [ Amy ] happened in the quarter? Or how should we think about services going forward?

Yes, great question. I think there's two pieces of that. One, there's a little bit of a lag in that step as you go through each quarter. So what we really booked in Q3 will show up in Q4. So a little bit of what you're seeing in the step in the quarter is sort of what was going on in Q2 from a booking standpoint. And that's because many of the bookings come in pretty late in the quarter. So they hope the revenue from that doesn't necessarily get captured in our actual number. Then the other piece that's going on in there is that both our software stack and our services business. And so with some of the deployments of our Fleet hardware being down in the quarter, which you can see in the Fleet number, we actually had less professional services associated with Fleet. And so that's actually offsetting some of the software piece. So if you were just looking at software, you would see a larger step than what's coming through in the numbers you're actually seeing because we actually have a step down in PSO, which is atypical. Normally, PSO is growing and software is growing, but because Fleet came down this quarter, you're seeing that dynamic.

We'll try to get everyone in here. We have Will Power at Baird.

Awesome. All right. Yes. Congratulations on a very strong quarter of execution. Question probably for Brittany. The software and ARR growth continues to be very good. There was some deceleration from the trend line you've been on there. So I guess I wonder if there's any other color or impacts got to be aware of there and how to think about modeling that going forward? Is mid-30s already so of the right growth rate? And what are the puts and takes there?

Yes. I mean, we really look at that sort of on an average basis, like I think because of the dynamics I just talked about, the timing of when bookings come in, in a quarter, looking at any one quarter, it's not as good as sort of averaging out over the year, and you do have things like seasonality playing into that. So I would say nothing underlying it that would change our sort of 4 to 6 quarter average on anything, the step on ARR growth on any of that, you're just seeing a little bit of timing and a quarterly lag is what's showing up in Q3 is really Q2. What will show up in Q4 is really what we're talking about with strength in Q3 and then what will show up in Q1 will be whatever we deliver in Q4.

We have one last with Jeremy Hamblin at Craig-Hallum.

Congrats on another fantastic quarter. I might come back to TASER just for a second, right? So I think 50% year-over-year growth, really impressive. And it sounds like getting great traction on the international front. I wanted to see if we could unpack the driver there. And it sounds like it's really picking up on the international piece of the business. We know that there's a lot of opportunity domestically still. But internationally, is this more about the capability? And I think just seeing what the device does versus the prior version. It is a huge step forward from a technology perspective. But does this make you think that the longer-term potential is quite a bit bigger internationally than maybe what you've seen before. That's part one of my question. The second part actually has to do with the cartridge. Cartridge revenue relative to the growth in TASER was really not -- that was -- it was up, I think, maybe about 10% year-over-year. And I'm just curious if there was something in particular there, why that didn't grow a little bit stronger?

Yes. I can maybe start a cartridge because that's easy and then Josh wants to talk more about TASER, he can. So most of our TASER customers are on sort of a cartridge deployment plan, which smooths out how you cartridge revenue coming in. But we do have international customers who are not on a plan. And so what you'll see is every now and then, our cartridge revenue is particularly lumpy quarter-to-quarter. And so last quarter, we had some big international customers come in and place cartridge orders and then those didn't repeat this quarter. So again, I look at a longer trend line of cartridge growth versus last quarter to this quarter. I think the only other thing I would add, maybe to give a little more color on TASER before I let it go over to Josh, last quarter in his script, Josh talked a bit about how much demand we're seeing for TASER 10 relative to TASER 7. I think he said demand is sort of 2x, the pace. But we are still seeing really good performance from TASER 7. And sort of combining to give a particularly nice result.

Yes. And I'll just add, Jeremy, I'd say it's in part due to international. Certainly, it's a big TAM. We're getting better there. We're building relationships kind of with the right customers. We're doing a better job explaining and demonstrating the value that TASERs bring to police both in terms of lifes saved, but also in terms of officer safety increasing and workers' comp decreasing and just some of the issues that come along with absence of TASER deployments. But I think the bigger thing is just very simple. We have phenomenal product market fit with this product, and that's really credit to Rick. Like our customers are, for the first time, really seeing that man, this thing is on track to outperforming a firearm in the field. And we have been talking about it for a long time, but for 30 years with only up to two shots, that was still kind of a pipe dream and now we're seeing it with 10 shots and customers are saying, "Man, increased distance of 45 feet combined with the number of shots combined with the better penetration, those are all things that I think are inspiring more confidence in the device from our customers, whether they be in state and local or federal or international. And so I think that's really it. It's like good sales execution with product that has phenomenal product market fit.

Great. Thanks for all the color, best wishes.

Thanks Jeremy. It was nice to see many of you at IACP. Thanks for making the trip out there and always great to see you at the booth.

Thanks, everyone. That's it will give to Rick to close this out.

All right. So I have two things I want to conclude on. One, I want to be careful in my previous statement, when I talked about the election results, I'm not talking about which party won where, I'm talking about the overall political environment. For example, in California, the voters approved Proposition 36 that basically raised the penalties for shoplifting in certain drug trends. We're seeing a general shift that manifested in this election, swinging the pendulum more support of public safety in general. And I would say in our company, we are violently nonpartisan. We have passionate gun control advocates and passionate Second Amendment gun owners who come to meetings together and are productive. And you could say that across all the divisive issues in politics. And I think Josh in particular is going to great job from setting the tone from a leadership perspective, that we want to be an intellectually diverse space that where everyone is welcome, and we keep the divisive stuff like out of the office because we've got a job to do. And we do best when the best, brightest smartest, most passionate people no matter their political views, feel like this is a place where they can come and do their best work. And then the other thing I wanted to say was, Brittany, man, 2 years. It's flown by. The -- what you're seeing right now, I mean, we see a lot of Brittany's fingerprints on the P&L. She really does a great job just driving both operating and financial rigor. I come back from customers with all sorts of ideas. Some people might say they're crazy and some of them are between Brittany and Jeff, they've got to figure out, okay, how do we sort through what we're actually going to…