Axon Enterprise Inc

NASDAQ:AXON

Earnings Call Transcript 2021-Q4

[Operator]

[Started Abruptly] …in the meeting as an attendee and will be muted throughout the meeting.

[Andrea James, Investor Relations]

Hello, everyone. Welcome to Axon’s Fourth Quarter 2021 Earnings Call. We appreciate you are tuning in today in the midst of considerable market volatility and global -- geopolitical risk. Today we have available Axon CEO, Rick Smith; President, Luke Larson; CFO, Jawad Ahsan; Chief Revenue Officer, Josh Isner; and Chief Product Officer, Jeff Kunins. I hope you’ve all had a chance to read our Shareholder Letter, which was released after the market closed. You can find it at investor.axon.com. Our remarks today are meant to build upon the information in that robust letter. During this call, we 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 they are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties cause actual results to differ materially. These risks are discussed in our SEC filings. Okay, so before we go to Rick, we are going to play our quarterly update video. This video was pre-recorded before current global events escalated. But we’re making the decision to share it today because there’s important information about our quarterly update in the video. Okay. Thank you. [Video Presentation] Thank you, Operator. Go ahead.

[Rick Smith, Chief Executive Officer]

All right. Thank you, Andrea. I was just waiting for the queue here. I love waiting -- watching those videos. We’ve got the most creative finance team in the business. And as you can see from that video, we’ve been looking forward to sharing results from the best year in Axon’s history. But we’re heavy hearted to do this on a day when democracy is under attack and wars breaking out in Europe. But we don’t get to choose whether the times we live in will include geopolitical instability or global pandemics. What we can choose are our principles and how we respond. We stand for transparency, truth and protecting life. Our products are designed to strengthen trust in the rule of law and they support the United Nations 16th Sustainable Development Goal to foster peace, justice and strong institutions. My thought are especially with the U.K., Ukraine national police who are our customer, as well as our excellent teammates in Ukraine. As we kick off 2022, I’m confident Axon’s best days are ahead of us. We are prioritizing our people and giving them a platform to further excel at what they do. Last month, Dr. Richard Carmona announced he will be retiring from Axon’s Board after 15 years of service. Dr. Carmona has been a tremendous contributor to Axon, helping us shape strategy and positioning Axon as we evolved from a single product company known as TASER to where we are today. He is simply a wonderful human being. We’re incredibly grateful to him not only for his 15 years of service, but also for the way forward he helped us to define. As I reflect on what is driving our strength, it is a powerful combination of solving real challenges for our customers, creating a better user experience and attracting passionate talent. It’s really our emphasis on building software at the core that creates a great user experience. Historically, our competitors built software to fit RFPs, which check a lot of boxes, but ultimately, does not function well in the hands of user. We’ve been religious about understanding our customer’s needs and building software and products that delight them when they use them. When customers test Axon solutions, we stand apart. As we consider the competitive landscape. One of the most important factors that sets us apart is that we truly have a highly integrated suite, a high performance ecosystem that seamlessly connects hardware, software and our community of users to achieve our mission of delivering a safer world. When competitors talk about winning market share, it’s mostly focused on lower margin hardware buyers who don’t get value great software and usually aren’t ready to advance to the cloud. We look forward to welcoming those customers down the road, just like the many agencies here in the U.S. that are upgrading from continuing platforms to the Axon ecosystem. Perhaps even more important than the technology we’ve built is the mission mindset of our employees that sets us apart. I regularly hear from chiefs raving about their positive experience with our employees, because they are so passionate about helping our customers succeed. I recently got a call from a State Police Colonel asking me to come to their headquarters for a surprise award ceremony where they recognized Axon rockstar Project Manager, Jenny Schupp for seamlessly upgrading them from a competing platform on to Axon. Great work, Jenny. So proud to have you on our team. Great tech and passionate people is just a magical combination and it works. Our momentum Fleet 3 has allowed us to continue to capture share with major cities, county sheriff’s and state controls here in the domestic market. We’ve converted several major agencies in the last year from competing platforms onto our network, joining our community. The whole ecosystem ties together our body cameras, fleet cameras, TASER weapons, drones and third-party centers with a growing suite of software capabilities and I’m glad to see it’s delighting our customers. We’re laser focused on pursuing our mission and driving growth. And it’s clear that our people are our best asset. As you’ve heard from Luke over these years, we have been fortunate to attract people who are among the best in the world what they do. I’m incredibly grateful and thankful to have these people on our team contributing to our success. Now, over to Luke to take you through some of our 2021 highlights in more detail.

[Luke Larson, President]

Thanks, Rick. In 2021, Axon focus on our commitment to our mission, our customers and our employees. We continue to be in a period of rapid scale. Last year we hired more than 900 new Axon teammates and we set new company records by filing more than 100 patent applications. We also supported our customers through a period of turbulence. One of our initiatives included the creation and launch a Family First, a free and confidential mental health resource and training package for the families of law enforcement. Another fantastic initiative we launched last year was the Axon Roadshow. We hosted 200 events over the course of six months, where we visited customer agencies and gave demos of our products. We also grew our international markets with São Paulo Military Police adopting a large body camera deployment and the Dutch National Police undergoing a large TASER deployment. On the product front last year we launched Fleet 3 and ALPR, and demand has exceeded our expectations. As a result, Fleet bookings for 2021 far surpassed our projections and customers have raved and served as incredible references and our first launch of the Attorney Premiere in December opens up an entire new software category for us in the justice sector. While we’re quick to highlight key wins in new market segments, our entire business has been able to achieve record results due to the stellar work that continues to be done by our state and local teams. Operationally, last quarter, we told you about industry-wide chips shortages that impacted our TASER 7 platform. We told you we had line of sight to clearing the backlog in the first half of 2022 and that remains the case. We continue to manage through challenges including delivery delays and our supply chain team is navigating extremely well. We also called out in today’s Shareholder Letter, that approximately $15 million of AB3 is also shifting into 2022, as a result of an elongated supply chain. I want to note that we have been intentional over our preparedness, investing in manufacturing capacity and flexibility, thereby improving our ability to meet customer demand. We feel great about our pipeline and bookings and in what continues to be a very dynamic environment. As Rick noted, you often hear me post about our teams and the incomparable talent we have at Axon, recruiting is a major focus for us as we grow. We recently announced that we are opening an R&D hub in London, which will be our fifth after Scottsdale, Seattle; Tampere, Finland; Ho Chi Minh City, Vietnam. And finally, if you know someone fantastic who wants to make an impact, we want the best people in the world to come to Axon, so please refer them to us. Now, with that, I’ll turn the call over to our Chief Financial Officer, Jawad Ahsan.

[Jawad Ahsan, Chief Financial Officer]

Excellent. I’d like to start by recapping some of our financial highlights over the past few years. This is our third year in a row of 25% plus revenue growth. Our annual recurring revenue has tripled over those same past three years to $327 million and looking back over five years, our revenue has grown at a CAGR of 26% from 2016 to 2021. And over the same period, our adjusted EBITDA has grown at a CAGR of 32%. We’ve delivered both exciting topline growth and strong operating leverage, all while making investments that will not only continue these trends for years to come, but more importantly, help us achieve our mission to protect life. As we look ahead to 2022 and beyond, we intend to use this momentum to our advantage and stay on offense. What does that going to look like? We’re introducing today a third pillar of our financial strategy, in addition to topline growth and bottomline leverage, and that third pillar is cash generation. We’re laser focused on building an enterprise that will deliver 20% plus revenue growth for years to come, return increasing amounts of profitability to our shareholders as we grow and build a free cash flow generating machine that will make our businesses sustainable for the long-term and keep us nimble and flexible. This flexibility will be built on the stable foundation of a subscription-based business model that generates highly recurring cash flows. We recently talked about investing for growth in terms of R&D. We’re still making those investments. But we also know that our continued growth at this pace will depend on more than just R&D. We’ll need new sites and new offices around the world, as our global footprint expands. We’ll need new facilities with new capabilities, both in terms of automation and streamline manufacturing, as well as showcase spaces for our technology, where we can collaborate with and gather feedback from our increasingly diverse customer and partner base. And finally, we’ll also need the ability to move quickly when the right inorganic opportunity presents itself. It’s for these reasons that we gave you more color than usual in our Shareholder Letter about our cash flow and CapEx expectations, including formal guidance for 2022. Transparency is of paramount importance to us and you can expect to hear more from us on this topic. We’re incredibly proud of how we’ve positioned the business to be cash generative for years to come. To recap, the three pillars in terms of what you can expect from us going forward. It’s, number one, continued strong performance on the topline. Number two continued discipline in our operations, which will be evidenced by outperforming the rule of 40. And number three, a strong ramp in operating cash flow that will after the investments that we’ve laid out, lead to a strong ramp in free cash flow. Looking ahead, we’re also very excited by the next wave of new products and technologies that are going to become an important part of our growth story in their own right. Before we move to questions, I want to echo Rick’s comments about the geopolitical crisis we are all facing as global citizens. Our thoughts are very much with the citizens of Ukraine today and we had Axon have never been more proud of our mission to protect life. And with that, Andrea, let’s move to questions.

[Andrea James, Investor Relations]

Thanks so much, guys. Matt, can you bring everyone up into gallery view? Let me know when that, when we’re all in gallery. Are we in gallery view? Okay. Awesome. Okay. Great. We’ll take our first question from Jonathan Ho at William Blair. Go ahead, Jonathan.

[Jonathan Ho, William Blair]

Hi. Good afternoon. I wanted to start out with sort of, maybe what was different between your supply chain expectations around backlog and what ended up materializing around the quarter? And what’s sort of giving you the confidence that you’ll be able to sort of maintain, clearing the backlog by second quarter?

[Rick Smith, Chief Executive Officer]

Jonathan, thanks for that question. Yeah. We had just some material delays that impacted some of our original thinking. We still feel really strong about the total year outlook. And our supply chain teams just done a phenomenal job ensuring that we have line of sight to key revenue drivers. If I had to summarize it, I would say, we may see some quarter-to-quarter mix based on some of those material delays. But we still feel very strong for the year guidance that we published.

[Jonathan Ho, William Blair]

Okay. And then just as a follow-up, you referenced 25% of bookings coming from new types of customers. I just wanted to get a sense for, how much those customers can continue to contribute going forward, as we look at sort of that, that increasing ratio? What can that get to over time? Thank you.

[Jawad Ahsan, Chief Financial Officer]

Thanks, Jonathan. Nice to see you again. I’d say, for international specifically, our goal is to have international outperformed the United States in bookings long-term. So I think we’re just scratching the surface right now in that segment and the federal government will acknowledge our entire federal team. Just two years ago, we’re -- was a kind of a $15 million to $20 million bookings business every year and last year we’re just short of $100 million in that segment. And again, we think we’re closer to the beginning then the end of that growth. And so we have a lot of confidence, especially in those two segments. And then, the Justice segment, the correction segment and enterprise, where we’re starting to see some encouraging momentum as well. I -- one of the things that makes it challenging at times as our domestic segments still grows pretty substantially. But certainly, we hope and expect those new segments to outpace domestic and become a bigger and bigger part of that mix over time.

[Jonathan Ho, William Blair]

Thank you.

[Andrea James, Investor Relations]

Okay. Thanks, Jonathan. Next question from Josh Reilly at Needham. Go ahead, Josh.

[Josh Reilly, Needham]

Hey, there. Thanks for taking my questions and nice job on the quarter and year. So, I think, given the news in Ukraine here over the last week, curious how this maybe impacts your European opportunity, given the pipeline there in that region? And I know it’s early, but do you anticipate any potential business disruption as a result of what’s going on?

[Rick Smith, Chief Executive Officer]

We’ve spent years and years building up a really strong team and pipeline in Europe. And last year the team really performed well against our goals. In terms of normalized five-year bookings we are up about 35%. In terms of 10-year bookings, we’re up close to 60% in international. So these are deals that take a lot of time and energy to move through the sales cycle. And so the ones that we expect to close this year, largely we’ve been working on already for quite some time. So I think we’re in a place now where we feel like they’re insulated from some of the uncertainty. But having said that, no one can predict the future in terms of how this will play out longer term. So, of course, there’s a little bit more risk there today than there was last week, but we still feel really confident in our international and EMEA business throughout 2022.

[Josh Reilly, Needham]

Okay. And then if you look at the increasing guidance and adjust for the $15 million of AB3 revenue that’s pushed to 2022. How much of that $40 million increase is related to increase assumptions around TASER versus other products?

[Rick Smith, Chief Executive Officer]

I think it’s a healthy mix. I think we believe the TASER business is going to grow this year across both domestic and our newer segments, and then video shipments and some other products, both on the software and hardware side will contribute there. We -- the team did a really nice job of not only closing out a strong Q4, but continuing to develop a pipeline for this year. And in Q1, we expect really significant book -- bookings growth over Q1 of last year and we’re pushing really hard to make that trend continue throughout the year. So we think it’ll be a mix of factors that drive that revenue and bookings result there.

[Josh Reilly, Needham]

Got it. Thanks, guys.

[Andrea James, Investor Relations]

All right. Thank you. Will Power at Baird. Go ahead, Will.

[Will Power, Baird]

All right. Great. Thanks. Rick, maybe starting with you, you all rolled out a bunch of new exciting products, whether it’s VR, Bolt 2, Fleet 3, on and on Digital Evidence Management for justice. You look over the next five years, what should these new product categories get you most excited and what can be the biggest opportunity, I guess, growth for the company?

[Rick Smith, Chief Executive Officer]

Sorry, I had myself muted there, it’s my patented move. That’s kind of like asking me again, like which of my children I love the most. It’s actually -- it’s hard to pick. Like, over on the TASER side of the business, we’ve got some crazy awesome new technology coming over the next 10 years. We are going to outperform a 9-millimeter pistol by 2030. I am highly confident. Over on the other side of the business, like solving problems for attorneys in the criminal justice system, that’s high margin software. It’s scaling rapidly, quickly. And we’re passionate, our team over there talks about the opportunity to really impact fairness and efficiency in the justice system by having tools that enable public defenders, who may only have literally minutes with their clients have to work out plea deals to make them able to efficiently be able to process the video evidence and find what they need. So across our whole business, pretty much everything we do, impacts people’s lives in an important way, because public safety is, it’s really important and foundational work to a modern society. So I’m excited across the board. I mean, consumer, I started this business to focus on the consumer space after a private citizen killed two of my friends, ruining their lives and now spending his life in jail. We need to give people something better than a bullet. It’s 2022 and across the board, whether it’s improving the efficiency of the justice system or saving lives or just putting medieval technology on the shelf, because we’ve given the world something better. We’re just excited across the board. So forgive my enthusiasm, but I actually love my job. I just got back from a two and a half day roadshow, saw 12 major agencies and I always come back super pumped. I literally got home about five minutes before the call. It’s just such an awesome business to be in. And I’ll just tell you this, I also, I’m watching what’s happening in Europe. And I can’t help but think, like the world is looking at this quite differently. Like, what is this capricious use of war? It doesn’t feel like it fits the modern world and I think we all were hoping it was gone. But the global revolves, you can feel it and I’m hoping that we’re turning a corner here. And I think we’re seeing even in military circles, the acceptance of killing people is not what it was 100 years ago. And hopefully, we’re going to get rid of it being accepted at all in the next century.

[Will Power, Baird]

Yeah. Okay. Thank you. That all makes sense. Maybe if I can just ask the second one, either for you or Luke or whoever wants to take it. It has been a challenging hiring environment, especially for R&D talent and technology. I know you’re opening a new hub in London, which presumably helps. Maybe just talk about what you’re seeing in terms of employee retention, difficulty hiring, how does that factor into plants and outlook there?

[Rick Smith, Chief Executive Officer]

Yeah. I’m going to take that first, and Luke, I’ll have you take the ball. Part of what we’re doing in London as well, it’s really important, we’re beginning to continue to expand our global footprint that, we’ve got a lot of customers in the U.K. and Scotland and across Europe. And we really feel it’s incumbent on us to really have a global footprint, where we’re sourcing talent around the world and putting that talent closer to our customers. So this both helps with a sourcing talent, but also we think from a customer intimacy perspective, it’s getting help there as well. With that, Luke, can you take the rest on retention.

[Luke Larson, President]

Yeah. Great question. As we, look, like in the last two years we’ve seen this acceleration of remote work and that’s given every employee in the world a lot of opportunities. I think a lot of companies are kind of scratching their heads going, how are we possibly going to retain people in this environment? I’m super excited about that Axon, because I think we’re going to be the beneficiary of that, because we built an amazing company. So when we go out and talk to candidates, we talk about the purpose and the mission that we have. We talked about the great team that we’ve built and the talent that we’ve attracted. I think one really exciting part of the business is the future growth that we see ahead of us. And so, that’s not only for prospective employees, it’s for existing employees as well. And so, I feel really confident about the team that we built and it’s definitely a challenging hiring environment, but we think it’s going to be one where we’re going to thrive, because we built such a great business.

[Rick Smith, Chief Executive Officer]

Stay tuned at the end of the call. We’ve got one more video for you, that the team put together, that really is showcases a bit of who we are and we’re getting rave reviews from people seeing it online, who don’t even know what we do, who want to come work for us. We aspire to have a place that not only works on big problems, but really has a good time doing it. It recognizes and celebrates the humanity of our people. We’re all in this together working on problems we care about and that is resonating with our current employees and with folks we’re trying to recruit in.

[Will Power, Baird]

Yeah. Look forward to that.

[Andrea James, Investor Relations]

Yeah. Thanks. We’re really excited to share that video with you at the end. So do stick around. Okay. Mita Marshall at Morgan Stanley. You are next.

[Mita Marshall, Morgan Stanley]

Great. Thanks. You listed a number of kind of international agencies that you guys were having success with in the quarter. Just wanted to get a sense of whether -- where you’re seeing the most traction, either TASER s or body camera and just whether they’re more likely to kind of bundle up front or if there’s different needs with the software for those customers that maybe digging in on the international side and what traction you’re seeing there? And then, maybe second, it sounded like you guys were able to kind of work around and find alternatives for a lot of the products, but just getting a sense of, if you think there’s any price increases that will need to be passed on to customers? Thanks.

[Rick Smith, Chief Executive Officer]

Yeah. Thanks very much for the question. So, on international, I think, our focus is customer acquisition regardless of product. So I think some customers are better suited at the moment for TASER, are more interested in TASER s and others are pursuing body cameras or in-car video or even interview room. And for us our strategy has always been to make sure we can delight our customers with one of those products and then over time expand the ecosystem within each agency. And we really believe that’s become a competitive differentiator for us in the United States over time and it will internationally as well. I’d say it’s a little less common to see bundling of TASER s and body cams in most markets, the Commonwealth countries might be a little more common there. But it’s still, in a lot of these markets, how can we get in there with any of our products and delight customers and build really strong productive trusting relationships. So that’s really the focus internationally. And in terms of pricing, I think, we feel really good about where we stand right now. We’ve -- we address pricing every year and meet as a team and decide kind of how best to go out to market and be fair in terms of the value that we’re providing. And we don’t at this point, anticipate passing any of the or passing any pricing increases along to our customers. We announced our new pricing in January. We feel great about it. We have many of our supplier contracts locked in. Our 10-year deals do contain escalator starting in year six to account for inflation and new products and new capabilities and so forth, and we continue to feel good about that.

[Mita Marshall, Morgan Stanley]

Great.

[Luke Larson, President]

I want to add on hear that one thing we are working on, that’s why we laid it out for you in our cash estimates is our investment in automation, streamlining, manufacturing, labor reduction, right, that’s a big investment we’re making from a CapEx standpoint to help attack this from the cost side.

[Mita Marshall, Morgan Stanley]

Perfect. Thanks for the context.

[Andrea James, Investor Relations]

Good. Thanks, Mita. Keith Housum at Northcoast. You’re up next.

[Keith Housum, Northcoast]

Thanks, guys. Appreciate it. Can you guys speak a little bit, perhaps, a crystal ball here, and perhaps, give us a little bit of a highlight in terms of what to expect for this year in terms of new product rollouts or updating existing ones, now AB3 is three years old, TASER, it’s being in process. Perhaps, can you give us an update where you guys are out in the new products or in the improvements or changing or updating the old ones?

[Rick Smith, Chief Executive Officer]

Well, I’ve got to contain my excitement here, you know that, Keith. The products are, we surprised that are getting to the end of their expected lifecycle, where do we start to expect to see some new ones coming along. So I can’t give you any specifics. But we do get on a cadence of approximately two and a half to three years on body cameras and every five years on TASERs. And we just launched Fleet 3. There’s a lot going on. But, unfortunately, I can’t give you more than that, other than to share my smile with you and let you know, we got good stuff coming on the way.

[Keith Housum, Northcoast]

Okay. I buy 3s in May 2018, correct, 2019, and mass, so just like probably I am missing for that one. My -- no comment for you guys necessary, my assumption is on that one. It’s the next question more for Jawad. You guys did noted that you guys increased freight costs in the fourth quarter. I’m assumed you got other costs and supply chain issues, can you perhaps give us some context what the impact was in the fourth quarter, how we should think about that in 2022?

[Jawad Ahsan, Chief Financial Officer]

Yeah. The impact is fairly muted on our margins when you saw gross margin compression, it was largely actually due to when we talked about the supply chain shortages that we had, unable to fulfill demand and so we had some fixed costs that were unable to be allocated over inventory and that caused a little bit of margin compression. But, overall, not a big disruption. This is again pointing back to the investments we’re making in our manufacturing, processes, in automation to really get out ahead of that. We’re seeing results. We’ve been making those investments for a couple of years. They’ve been on a bit of a smaller scale and now we’re ramping those up because we’re seeing such great benefits from those. And that’s something that we expect to continue to pay dividends in the short-term and over the next few years, and as we, again, try to drive towards that long-term margin target of 30%.

[Keith Housum, Northcoast]

Okay. So to recap, Jawad [ph], you don’t expect any significant compression in 2022 because either of those issues.

[Jawad Ahsan, Chief Financial Officer]

That’s correct.

[Keith Housum, Northcoast]

…on cost side. Okay. All right. Thanks, guys. Appreciate it.

[Andrea James, Investor Relations]

Thank you, Keith. Next up it looks like Eric has dropped off, so we’ll go to Paul Chung at JPMorgan. Go ahead, Paul.

[Paul Chung, JPMorgan]

Hey. Thanks for taking my questions. So just -- I just want to talk about the kind of push out in 4Q revenues and kind of impact on the shape of your TASER contribution in 2022. And then how is your visibility on the weapons side and then given that higher subscription bundles, do we expect a little less volatility between the quarters? Then I’ve a follow-up.

[Rick Smith, Chief Executive Officer]

Yeah. I think it’s a good question. The teams worked really, really hard to get as much line of sight into the TASER supply chain as we can and they deserve a lot of credit for that. I think we feel very much that the outlook on supply chain does support our new revenue guidance. And so, as you remember in Q4, we did guide to around $204 million I think and surpassed that, and that just speaks to the fact that the team really did a good job pulling in every component that they could to be able to beat that guidance and we think we’ve got a promising path forward in that regard. In terms of quarter-to-quarter flux, last year it became fairly consistent between Q2 and Q4. There was less kind of swing in the revenue results overall. I do think that is because the team is getting better and better at building a more substantial pipeline across segments and that allows us to have a little less execution risk quarter-to-quarter. So certainly every quarter we start with, how can we maximize the percentage of the pipeline that we close and that’s going to continue to be a focus, and I really believe the team is primed for another really strong year in that regard.

[Luke Larson, President]

And then Paul on your visibility question, we have got visibility to little over half, about half -- over half is booked, and it’s one of the reasons we like to highlight our bookings number, because it’s a really strong indicator of our future revenue growth.

[Paul Chung, JPMorgan]

And then on cash flow, very strong, so despite some of the component shortages here, talk about the working cap dynamics you expect over the year and then kind of benefits of a larger subscription base and then the shape of cash flows as we move through the year, that would be helpful. Thanks.

[Rick Smith, Chief Executive Officer]

Yeah. This is one we’re really excited about. I’m personally extremely…

[Paul Chung, JPMorgan]

Yeah.

[Rick Smith, Chief Executive Officer]

…excited about it. We’ve built a business that is going to be hugely cash generative for years to come. This is something that we’ve been building the foundation for many years and it’s really starting to manifest itself in our cash flow statements. Last year we had a bit of a use of working capital and we expect that that’s going to work itself out in the first half of the year. And going -- we obviously laid out the investment in the new campus, the automation, manufacturing initiatives. We have new sites and facilities opening around the world. And so that’s one of the reasons that we’ve given more visibility into our capital expenditure. We’ve broken that out versus sort of like recurring business ongoing, excluding the one-time items. We are going to give you visibility to those one-time items over the next couple of years and we expect that once we’re through the next couple of years with those investments that we’re really going to be throwing off pretty significant amounts of cash.

[Andrea James, Investor Relations]

Thanks, Paul. And it looks like we have Astrid joined -- has joined us from Raymond James. Don’t mean to put you on the spot, because your video is off, but do you have a question, Astrid? Okay. I’m going to assume not. I’ll give you another second. Is there anybody else who has a follow up? You can kind of come off mute. Don’t all jump up at once. Oh, Will Power has his hand up. Go ahead.

[Will Power, Baird]

There was a follow up, I was intrigued with -- on the corrections market look like a nice one in Ohio, I believe. So, I’d love to get further color as to what the pipeline of opportunities looks like. It seems like that’s been a kind of a budding opportunity for a while. Are we finally at the cusp of more significant win, so how do we think about that opportunity moving forward?

[Rick Smith, Chief Executive Officer]

Yeah. Absolutely. Deploying body camera at every correctional facility in Ohio was a huge win for the corrections team and one that took multiple years to deliver. There’s a big market here. We often talk about internally like, for example, the California Department of Corrections is about the size of NYPD and office account. So there’s a big market out there to go get. We’ve reworked some of the offerings and packaging and bundling to better suit our corrections customers and we’ve continued to build out that team over the last year and a half here. So we’re really excited about the progress. There are still a lot of work to do and to do a different sale for sure than a lot of our more conventional law enforcement customers. But we expect that to be not only a part of our state and local growth moving forward, but also a part of our federal growth moving forward.

[Andrea James, Investor Relations]

Thanks, Will. Jonathan has a follow up. Go ahead, Jonathan.

[Jonathan Ho, William Blair]

Hi, there. So just given when we started the call in VR, I thought it’d be appropriate to just ask, just given the success that you’re seeing there. Are there any stimulus funding or programs that can maybe drive even faster adoption in that VR space? And can you maybe remind us of how much of a step up in ASPs and you can see from sort of VR adoption? Thank you.

[Rick Smith, Chief Executive Officer]

Yeah. Absolutely. So, right now, if you buy a VR, our VR offering with TASER 7, it’s about a $17 month uplift from the TASER 7 and we have some a la carte packages as well. I’d say, like all of our products, early on we’re far more focused on adoption than ASP right now. We believe that this is an extremely emerging and disruptive technology that is going to further our mission, obviously, the bullet, of course, we can do that through building a better and better TASER and we will. But the other side of that is making sure that we’re able to simulate the type of stress that officers experience in the field. And so we really believe this is kind of our next big product category and we’re really focused on becoming the market leader in this space. And like, we said this product outperformed both our body cameras and X26 in year one of sales, which is a great indicator. And the team’s really focused on driving this business segment up past $100 million in bookings as fast as we can here.

[Jonathan Ho, William Blair]

Thank you.

[Andrea James, Investor Relations]

Rick, you’re off mute, so you’re going to close this out. Go ahead.

[Rick Smith, Chief Executive Officer]

Now, you made me want to double check and just make sure that I’m off mute here. Well, hey, we’re obviously just thrilled with the performance the team’s been able to pull together over these past two years despite the pandemic and social unrest and now these new geopolitical challenges. But I have the great fortune to work with just some really awesome people who get out of bed, regardless of what’s happening in the world and just get after our mission. So we want to conclude by sharing with you a really special project. Our team shot some drone footage of our current headquarters this week and we’d love to take you through our Scottsdale office R&D and manufacturing facility. It’s pretty cool. Check it out. [Video Presentation]