AXON ENTERPRISE, INC.

Note 8 –Debt

Notes payable, net, consisted of the following at September 30, 2026 and December 31, 2025 (in thousands):

(1)During the nine months ended September 30, 2026, we redeemed and settled conversions in respect of all of our remaining outstanding 2027 Notes.

2031 Notes

In September 2026, we issued $1.15 billion aggregate principal amount of our 0% Convertible Senior Notes due 2031 (the “2031 Notes”) in a public offering registered under the Securities Act, of which the aggregate principal amount included the exercise in full of the underwriters’ option to purchase up to an additional $150.0 million principal amount.

The 2031 Notes mature on September 15, 2031, unless earlier converted, redeemed, or repurchased. The 2031 Notes will not bear regular cash interest and the principal amount of the notes will not accrete. The effective interest rate for the 2031 Notes is approximately 0.26%, which reflects amortization of debt issuance costs. The total combined gross proceeds from the issuance of the 2031 Notes were $1.15 billion. After deducting initial net underwriters’ discounts and commissions and other debt issuance costs of $14.7 million, the total combined net proceeds were approximately $1.14 billion, of which we used $114.9 million to pay the cost of the capped call transactions described below. The fair value of the 2031 Notes is determined based on the closing trading price of the respective notes payable as of the last day of trading for each period. We consider the fair value to be a Level 2 measurement, as the fair value is primarily affected by the trading price of our common stock and market interest rates.

Upon conversion, the terms of the 2031 Notes generally permit us to pay or deliver, as the case may be, cash, shares of our common stock, or a combination thereof, at our election. Any shares issued upon conversion shall be recorded in stockholders’ equity. The 2031 Notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding June 15, 2031 only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on December 31, 2026 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five business day period immediately after anyten consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of 2031 Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

•upon the occurrence of certain corporate events (e.g., change in control or delisting of our common stock) or distributions on our common stock, as provided in the indenture governing the 2031 Notes; and

•if we call the 2031 Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding the applicable redemption date, but only with respect to the 2031 Notes called (or deemed called) for redemption.

On or after June 15, 2031 until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2031 Notes, holders of the 2031 Notes may convert all or any portion of their 2031 Notes at any time, regardless of the foregoing conditions. Upon conversion, the 2031 Notes will be settled in cash, shares of our common stock or a combination thereof, at our option, as described in the indenture governing the 2031 Notes.

If we undergo a fundamental change (as defined in the indenture governing the 2031 Notes), other than an exempted fundamental change, holders may require us to repurchase for cash all or any portion of their 2031 Notes at a price equal to 100% of the principal amount of the 2031 Notes to be repurchased, plus accrued and unpaid special interest, if any, up to but excluding the fundamental change repurchase date.

In addition, subject to certain conditions, holders may require us to repurchase their 2031 Notes on or around March 20, 2031 (the “Holder Repurchase Option”) at a repurchase price equal to the principal amount of the 2031 Notes to be repurchased, plus accrued and unpaid special interest, if any. We may elect to satisfy all or a portion of our obligation with respect to the principal amount of the repurchase price for the Holder Repurchase Option by issuing or delivering shares of our common stock, up to a specified maximum number of 2,875,000 shares (subject to customary anti-dilution and pro-rata adjustments) with the remainder, if any, of the repurchase price payable in cash, subject to and in accordance with the terms of the indenture governing the 2031 Notes.

Following certain corporate events or if we issue a notice of redemption, the conversion rate may be increased for holders who elect to convert their 2031 Notes in connection with such corporate event or during the relevant redemption period. Except in the case of a cleanup redemption, on or after September 20, 2029 and before the 31st scheduled trading day immediately before the maturity date, we may redeem for cash all or any portion of the 2031 Notes, at our option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the 2031 Notes to be redeemed, plus accrued and unpaid special interest, if any. We may also redeem for cash all, but not less than all, of the 2031 Notes at any time if the principal amount of 2031 Notes outstanding is less than 10% of the aggregate principal amount of 2031 Notes initially issued under the indenture (a “cleanup redemption”).

Interest expense related to the 2031 Notes was as follows (in thousands):

2031 Capped Calls

To reduce the impact of potential economic dilution upon conversion of the 2031 Notes, in September 2026, we entered into privately negotiated capped call transactions (the “2031 Capped Calls”) with certain financial institutions (the “2031 Option Counterparties”) at a cost of $114.9 million, excluding approximately $0.1 million in related advisory expenses.

The 2031 Capped Calls cover 1,763,640 shares of our common stock, which corresponds to the number of shares initially underlying the 2031 Notes. The 2031 Capped Calls have an initial strike price of $652.06 per share, corresponding to the initial conversion price of the 2031 Notes, and an initial cap price of $1,049.94 per share, in each case subject to certain adjustments. The 2031 Capped Calls may also offset potential cash payments in excess of the principal amount of converted 2031 Notes, subject to the cap.

The 2031 Capped Calls may be settled in cash, shares of our common stock, or a combination thereof, generally consistent with our elected settlement method for the related 2031 Notes. The aggregate purchase price was recorded as a reduction to additional paid-in capital. The 2031 Capped Calls are separate from the 2031 Notes, expire upon the maturity of the 2031 Notes, and do not provide any rights to holders of the 2031 Notes. The 2031 Capped Calls are intended to reduce potential economic dilution associated with the 2031 Notes but do not offset their dilutive effect for purposes of calculating diluted income per common share. As of September 30, 2026, all 1,763,640 shares remained subject to the 2031 Capped Calls.

2030 and 2033 Notes

In March 2025, we issued $1.0 billion aggregate principal amount of 6.125% Senior Notes due 2030 (the “2030 Notes”) and $750.0 million aggregate principal amount of 6.250% Senior Notes due 2033 (the “2033 Notes”and, together with the 2030 Notes, the “Senior Notes”) in a private offering. Interest expense related to the Senior Notes was as follows (in thousands):

2027 Notes

In December 2022, we issued $690.0 million aggregate principal amount of our 0.50% Convertible Senior Notes due 2027 (the “2027 Notes”) in a private offering. During the year ended December 31, 2025, we entered into and closed separate, privately negotiated exchange agreements with certain holders of the 2027 Notes to exchange $604.3 million aggregate principal amount of the 2027 Notes for consideration consisting of cash and shares of our common stock. We had $81.1 million aggregate principal amount of 2027 Notes outstanding as of December 31, 2025.

In December 2025, we delivered a notice of redemption to redeem all of our outstanding 2027 Notes in February 2026 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, together with accrued and unpaid interest. Holders of the 2027 Notes were able to convert their notes prior to the redemption date for cash up to the principal amount of any notes being converted and shares of our common stock for any conversion obligation in excess of the principal amount. We redeemed $0.8 million aggregate principal amount of the 2027 Notes on February 10, 2026, and we settled conversions in respect of $80.3 million aggregate principal amount of the 2027 Notes on February 11, 2026, with $80.3 million in cash and 211,870 shares of our common stock. We also received 41,139 shares from option counterparties in connection with partial termination of the Note Hedge and Warrants in February 2026, as discussed further below. As a result, we haveno 2027 Notes outstanding following settlement of the aforementioned redemption as of September 30, 2026. Interest expense related to the 2027 Notes was as follows (in thousands):

Fair Value of Debt

The estimated fair value of our outstanding debt at September 30, 2026 and December 31, 2025 is as follows (in thousands):

2027 Convertible Note Hedge

To reduce the impact of potential economic dilution upon conversion of the 2027 Notes, in December 2022, we entered into a convertible note hedge transaction (the “Note Hedge” or “2027 Note Hedge”) with certain investment banks (the “2027 Option Counterparties”), with respect to our common stock, concurrently with the issuance of the 2027 Notes.

The Note Hedge covers shares of our common stock at a strike price per share that corresponds to the initial conversion price of the respective 2027 Notes, subject to adjustment. As of September 30, 2026,2,642,030 shares remain covered by the Note Hedge, which is subject to automatic exercise at expiration on December 15, 2027, unless earlier terminated.

2027 Convertible Note Warrants

In December 2022, we entered into warrant transactions with certain investment banks, whereby we sold Warrants to acquire, subject to adjustment, the number of shares of our common stock shown in the table above. If the average market value per share of our common stock exceeds the strike price of the Warrants, such Warrants can have a dilutive effect on our earnings per share to the extent we report net income. According to the terms of the Warrants, the Warrants will be automatically exercised over a 60-trading day period beginning on the first expiration date as set forth above, unless earlier terminated. As of September 30, 2026,2,662,063 shares remain subject to the Warrants.

Line of Credit

Our credit agreement provides for a senior unsecured multi-currency revolving credit facility (the “Credit Agreement”) which previously included a total aggregate principal amount of $300.0 million (with an accordion feature which allowed for an increase in the total line of credit up to $400.0 million), as well as availability for the issuance of letters of credit of $50.0 million.

In September 2026, in connection with the issuance of the 2031 Notes, we entered into a second amendment to the Credit Agreement. The amendment increases the existing revolving credit facility by $200.0 million to a total aggregate principal amount of $500.0 million and permits us to request an increase in the facility by an additional $150.0 million. The amendment extends the maturity date of the Credit Agreement from March 11, 2030 to the earliest of: (i) the fifth anniversary of the amendment’s closing (September 18, 2031), (ii) 91 days prior to the stated maturity of the 2031 Notes (unless fully redeemed, repurchased, converted, or defeased, with qualifying refinancing), (iii) 91 days prior to March 20, 2031 (the 2031 Notes’ optional repurchase date) if certain share-settlement notice and stock-price conditions are met, or (iv) 91 days prior to the maturity of any other permitted convertible indebtedness (subject to similar conditions).

As of September 30, 2026, no amounts were drawn under the Credit Agreement. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of September 30, 2026, we had letters of credit outstanding of approximately $9.1 million under the facility and available borrowing of $490.9 million, excluding amounts available under the accordion feature. As of September 30, 2026, we are in compliance with the associated covenants under the Credit Agreement.

Note 9 –Income Taxes

Effective Tax Rate

The overall effective tax rate for the three months ended September 30, 2026 was 27.8%. This rate differs from the federal statutory rate due to state income taxes and increases in tax reserves, partially offset by a net tax benefit from stock-based compensation and R&D tax credits. The effective tax rate was favorably impacted by a $3.3 million net tax benefit from stock-based compensation for stock awards that vested during the three months ended September 30, 2026.

By comparison, our overall effective tax rate for the three months ended September 30, 2025 was 113.9%. This rate differed from the federal statutory rate due to lower pre-tax book income in that period, which magnified the relative impact of permanent and discrete items, including the impact of changes in tax law on our R&D tax credit. The effective tax rate was favorably impacted by a $15.4 million net tax benefit from stock-based compensation for stock awards that vested during the three months ended September 30, 2025.

The overall effective tax rate for the nine months ended September 30, 2026 was 18.0%. This rate differs from the federal statutory rate due to the favorable impact of R&D tax credits, a net tax benefit from stock-based compensation, and a gain on an investment transaction not recognized for tax, partially offset by increases in tax reserves and state income taxes. The effective tax rate was favorably impacted by a $26.4 million net tax benefit from stock-based compensation for stock awards that vested during the nine months ended September 30, 2026.

By comparison, our overall effective tax rate for the nine months ended September 30, 2025 was (43.1)%. This rate differed from the federal statutory rate due to the net favorable impacts of stock-based compensation and R&D tax credits, partially offset by an increase in uncertain tax positions. The effective tax rate was favorably impacted by an $84.2 million net tax benefit from stock-based compensation for stock awards that vested during the nine months ended September 30, 2025.

Note 10 –Stockholders’ Equity

Our stock-based compensation program includes grants of service-based restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), and performance-based stock options (“stock options”) under the Axon Enterprise, Inc. Amended and Restated 2022 Stock Incentive Plan (the “Amended 2022 Plan”) and grants of eXponential stock units (“XSUs”) under the Axon Enterprise, Inc. Employee eXponential Stock Plan (the “Employee XSP”) and the CEO Performance Award. With the exception of the Employee XSP as discussed further below, there were no significant changes to our RSUs, PSUs and stock options during thenine months ended September 30, 2026.

Employee XSP and CEO Performance Award

The Employee XSP includes an approved pool of approximately 4.5 million shares of common stock reserved for grants of XSUs to employees. Approximately 0.8 million XSUs remain available to grant to employees under this program as of September 30, 2026. A total of approximately 0.7 million XSUs were granted during the nine months ended September 30, 2026. Shareholders previously approved a grant of 679,102 XSUs for the CEO Performance Award on May 10, 2024.

On January 23, 2026, the Compensation Committee of the Board of Directors approved the addition oftwo incremental tranches to the Employee XSP. Consistent with prior tranches, Tranches 8 and 9 are performance-based and contingent upon achievement of stock price goals, operational goals, and minimum service requirements. These three independent vesting conditions are described in the following table:

(1)Operational goals are measured, as of any date, for the previous four consecutive fiscal quarters, beginning with the Company’s first full fiscal quarter ending after the fiscal quarter in which the grant date occurred. In connection with certain acquisitions which were completed in the first quarter of 2026, the operational goals were adjusted as required by the terms of the Employee XSP and CEO Performance Award grant agreements for the respective tranches.

(2)Tranches 1, 2, and 3 vested in June 2025, December 2025, and June 2026, respectively. As of September 30, 2026, for certain grantees, the shares acquired upon vesting of Tranche 3 remain subject to a holding period requirement under the plan, which will expire on the earlier of (i) December 31, 2030 and (ii) the date on which the subsequent tranche vests.

Stock-based Compensation Expense

The following table summarizes the composition of stock-based compensation expense for the three and nine months ended September 30, 2026 and 2025 (in thousands):

(1)For the nine months ended September 30, 2026, stock-based compensation expense included $5.7 million in non-recurring costs, the majority of which derived from ongoing acquisition integration activities.

At-the-Market Equity Offering

We participate in an “at-the-market” equity offering program (the “ATM”), pursuant to which we are authorized to sell up to a total of approximately 2.0 million shares of our common stock.

During the nine months ended September 30, 2026, we sold approximately 0.2 million shares of our common stock under the ATM. We generated approximately $101.2 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $100.3 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $0.9 million.

As of September 30, 2026, there were approximately 1.0 million shares remaining. We utilize the net proceeds from this offering program for general corporate purposes, which may include providing capital to satisfy a portion of the tax obligations related to the vesting and settlement of stock compensation awards granted to our employees under our stock plans and funding ongoing strategic investments and acquisitions as we continue to expand our product ecosystem.

Stock Incentive Plan

In May 2024, our shareholders approved the Amended 2022 Plan authorizing an additional 2.2 million shares, plus remaining available shares under prior plans, for issuance under the Amended 2022 Plan. Combined with the shares of our common stock available under our legacy stock incentive plans, there are 2.4 million shares of our common stock available for grant under the Amended 2022 Plan as of September 30, 2026.

Note 11 –Commitments and Contingencies

Product Litigation

As a manufacturer of weapons and other law enforcement tools used in high-risk field environments, we have historically been the subject of product liability litigation concerning the use of our products. Currently, we are named as a defendant in onlyone such lawsuit regarding the use of a TASER CED by law enforcement in connection with an arrest.

We continue to aggressively defend all product litigation, which we do not believe will have a material effect on our financial position, results of operations or cash flows. We are self-insured for the first $5.0 million of any product claim. No judgment or settlement has ever exceeded this amount in any product liability case to which we have been a party.

Other Matters

Pending in the District of New Jersey (Case No. 3:23-cv-7182) is a putative antitrust class action brought bythree municipalities based largely on the Federal Trade Commission’s dismissed administrative complaint concerning Axon’s 2018 acquisition of insolvent body camera competitor, Vievu LLC. We deny all allegations of anticompetitive or other misconduct and are vigorously defending the case.

Pending in the Eastern District of Virginia (Case No. 1:24-CV-01625) is a patent infringement suit filed by Airspace Systems, Inc. (“Airspace”) against Dedrone and Axon involving certain drone technology. The case has been stayed pending Axon’s invalidity challenges to allthree asserted patents in the United States Patent and Trademark Office, which instituted review last fall. On October 7, 2026, the Patent Trial and Appeal Board cancelledtwo of the patents in their entirety and invalidated all buttwo claims in the third patent. The litigation is expected to remain stayed during the appellate process. Separately, pending in the Western District of Texas (Case No. 1:24-cv-1497) is a patent infringement suit filed by CentralSquare Technologies LLC (“CST”) against Carbyne, Inc. and Carbyne Ltd. (jointly “Carbyne”) relating to 911 technology. CST seeks injunctive relief and damages in an unspecified amount. Carbyne, which we acquired on February 18, 2026, denies infringement and has countersued CST for infringement of its own patent. No trial date has been set.

Pending in the Northern District of California (Case No. 3:26-cv-11183) and in Riverside County (CA) Superior Court (Case No. CVRI26O6719) are putative class actions seeking statutory damages and injunctive relief for alleged violations of California’s Automated License Plate Reader (“ALPR”) disclosure statute. We deny all allegations, including the statute’s applicability to Axon, and will vigorously defend these cases. We are also aware of a third ALPR complaint recently filed in the Northern District, but we have not yet been served. These cases will likely be consolidated.

General

From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time.

Based on our assessment of outstanding litigation and claims as of September 30, 2026, we have determined that it is not reasonably possible that these losses, if any, from lawsuits will individually, or in the aggregate, materially affect our results of operations, financial condition or cash flows. However, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.

Off-Balance Sheet Arrangements

Under certain circumstances, we use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the installation and integration of Axon cameras and related technologies. Certain of our letters of credit and surety bonds have stated expiration dates with others being released as the contractual performance terms are completed. At September 30, 2026, we had outstanding letters of credit issued under our credit facility of $9.1 million that are expected to expire through 2029. We also had outstanding letters of credit of $0.6 million that do not draw against our credit facility. Additionally, we had $7.3 million of outstanding surety bonds as of September 30, 2026, with expiration dates ranging through 2029.

Note 12 –Accumulated Other Comprehensive Income (Loss)

The following tables reflect the changes in accumulated other comprehensive income (loss), net of tax (in thousands):

(1)Amounts are net of immaterial tax impacts.

(1)Amounts are net of immaterial tax impacts.

Note 13 –Segment Data

Information relative to our reportable segments was as follows (inthousands):

(1)Other segment items includes adjustments for noncash stock-based compensation expense and amortization of acquired intangible assets to arrive at the profit measure used by the CODM.

(1)Other segment items includes the adjustment for noncash stock-based compensation expense, amortization of acquired intangible assets, compensation taxes related to Employee XSP vesting, non-recurring severance costs, and inventory step-up amortization related to acquisitions to arrive at the profit measure used by the CODM.

The following table presents supplemental information included within the measure of profit or loss, adjusted gross margin, reviewed by our CODM (in thousands). There are no other material items presented to our CODM by segment or included within adjusted gross margin for supplemental disclosure.

(1)For the nine months ended September 30, 2026, stock-based compensation expense excludes immaterial severance costs recorded to cost of product and service sales.

Note 14 –Business Combinations

The consolidated financial statements include the operating results from each acquisition from the date of acquisition noted below. Supplemental pro forma information has not been presented as the effects of the business combinations during the three and nine months ended September 30, 2026 were not material to our consolidated financial statements.

2026 Business Combinations

Carbyne

On February 18, 2026, we acquired the remaining 89.3% interest in Carbyne Ltd. (“Carbyne”), a leading cloud-native emergency communications and response platform. Net of cash acquired and equity consideration attributable to pre-combination service, total cash paid in the business combination was approximately $551.7 million. Incremental consideration transferred was approximately $563.2 million. The acquisition aligns with our mission and positions us to accelerate next-generation public safety communications and emergency response solutions. We recorded acquisition-related transaction and integration costs of $8.0 million and $17.0 million during the three and nine months ended September 30, 2026, respectively. Our existing interest of approximately 10.7% had a fair value at the acquisition date of $67.5 million, which resulted in a non-taxable gain of $38.0 million.

The purchase price allocation is subject to revision during the measurement period for purchase accounting adjustments to balances such as intangible assets, pre-acquisition legal contingencies, working capital, and income tax assets and liabilities, and is expected to be completed by the first quarter of 2027. During the three and nine months ended September 30, 2026, we recorded immaterial measurement period adjustments. Based on the current purchase price allocation, including measurement period adjustments, we have recorded $523.3 million of goodwill, $108.2 million of identifiable intangible assets, $10.1 million of acquired cash, $2.2 million of net deferred tax liabilities, and assumed $8.7 million of other net liabilities.

As of the acquisition date, the identifiable intangible assets included $79.0 million of developed technology, $27.1 million of customer relationships, and $2.1 million of trademarks. The fair values of the intangible assets were calculated using the multi-period excess earnings method for the developed technology, the distributor method for customer relationships, and the relief-from-royalty method for the trademarks. The significant assumptions used to estimate the fair value of the developed technology included projected revenues, estimated economic life of 8 years, and an appropriate discount rate. The significant assumptions used to estimate the fair value of the customer relationships included projected revenues, customer attrition rates, distributor margins, and appropriate discount rates. The weighted average amortization period of the acquired intangible assets as of the acquisition date was 7.9 years.

The goodwill associated with this business combination is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the consolidated results of Carbyne are included in our Software and Services reportable segment following the business combination.

2025 Business Combinations

Prepared

On October 1, 2025, we acquired the remaining 99.2% interest in Invictus Apps, Inc. (“Prepared”), a leading provider of AI-powered emergency communications software. Net of cash acquired and equity consideration attributable to pre-combination service, total cash paid in the business combination was $623.9 million. Incremental consideration transferred was $728.1 million. The acquisition aligns with our mission and positions us to accelerate next-generation public safety communications and emergency response solutions. Acquisition-related transaction and integration costs were immaterial for the three and nine months ended September 30, 2026. Our existing interest of approximately 0.8% had a fair value at the acquisition date of $6.2 million, which resulted in a non-taxable gain of $2.2 million.

The purchase price allocation was subject to revision during the measurement period through September 30, 2026. During the nine months ended September 30, 2026, we recorded various measurement period adjustments, primarily consisting of adjustments to deferred tax assets, resulting in an $11.8 million decrease to goodwill. Based on the final purchase price allocation, including measurement period adjustments, we have recorded $585.0 million of goodwill, $98.9 million of acquired cash, $47.5 million of identifiable intangible assets, a $3.8 million net deferred tax asset, and assumed $1.0 million of other net liabilities.

As of the acquisition date, the identifiable intangible assets included $37.0 million of developed technology, $7.3 million of customer relationships, and $3.2 million of trademarks. The fair values of the intangible assets were calculated using the relief-from-royalty method for the developed technology, the multi-period excess earnings method for customer relationships, and the relief-from-royalty method for the trademarks. The significant assumptions used to estimate the fair value of the developed technology included projected revenues, the selected royalty rate, estimated economic life of 5 years, and an appropriate discount rate. The weighted average amortization period of the acquired intangible assets as of the acquisition date was 5 years.

The goodwill associated with this business combination is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the consolidated results of Prepared are included in our Software and Services reportable segment following the business combination.

Note 15 –Subsequent Event

On November 5, 2026, the Company entered into agreements for incremental non-voting minority investments of up to $1.2 billion in Skydio, Inc. (“Skydio”), a privately-owned autonomous drone manufacturer, which are expected to increase the Company’s ownership from 15% to approximately 37% on a fully diluted basis. The Company expects the investments to be settled with up to approximately $720.0 million in cash and the remainder in shares of the Company’s common stock, with the final mix subject to the results of a tender offer and secondary purchases that are expected to close in the fourth quarter of 2026 and first quarter of 2027. The number of shares of the Company’s common stock issued shall be determined utilizing the volume-weighted average price per share of the Company’s common stock, as reported on the NASDAQ Global Select Market, for the 10-trading day period up to and including the trading day immediately preceding two business days prior to settlement.

The Company’s primary investment in Skydio, with an aggregate purchase price of approximately $254.9 million, payable 50% in cash and 50% in shares of the Company’s common stock, closed on November 5, 2026, resulting in a cash payment of approximately $127.5 million and a commitment to deliver approximately $127.5 million of the Company’s common stock. The remaining investments, consisting of a tender offer and secondary purchases, are valued at up to approximately $968.6 million in aggregate and are expected to close through a series of transactions during the fourth quarter of 2026 and first quarter of 2027. The incremental investments will be included in non-marketable equity investments and accounted for under the measurement alternative method, as we do not have significant influence over Skydio’s operations.