SCOTTSDALE, Ariz., Aug. 8, 2023
/PRNewswire/ --
- Axon Cloud & Services revenue of $133 million up 62% year over year
- Annual recurring revenue grows 52% to $559 million
- Net income of $12 million
supports Adjusted EBITDA of $82
million
- Full year revenue outlook raises to $1.51 billion to $1.53
billion, or approximately 27% to 29% annual growth;
maintains 20% full year Adjusted EBITDA margin guidance
Fellow shareholders,
Axon delivered a strong first half of 2023 supported by robust
demand across our product portfolio, with notable strength in Axon
Cloud & Services. We achieved second quarter annual revenue
growth of 31% alongside our sixth consecutive quarter of GAAP
profitability.
Axon Cloud & Services grew 62% year over year, highlighting
the powerful market appetite for our cloud platform and premium
bundles. We drove this growth through both signing on new customers
as well as expanding services to existing customers. Net revenue
retention increased to 122% from 121% last quarter. As a reminder,
net revenue retention ("NRR") measures our ability to grow with our
existing Software-as-a-Service ("SaaS") customers. NRR compares the
revenue contribution of our year-ago SaaS cohort with their revenue
contribution today. We want to highlight that even with this
continued strong growth, the penetration rate of our Officer Safety
Plan ("OSP") bundles is less than 20% relative to our potential
state and local law enforcement install base in the
U.S.(1)
We are pleased to update our full year outlook to about 28%
revenue growth at the midpoint and maintain our Adjusted EBITDA
margin guidance of 20%. Our updated outlook reflects increased
visibility after the successful launch of two new products, TASER
10 and Axon Body 4, as well as continued momentum in Fleet cameras
and software. We commit to long term subscription contracts with
our customers that allow us to execute on our goals to drive growth
and improve profitability.
Looking further ahead
Innovation has always been core to our DNA. What sets us apart
is our relentless drive to power adoption of disruptive technology.
Six years ago, we published a vision video with the idea that
artificial intelligence could one day extract key information from
body camera videos, which together with a brief oral description
from the officer, could be used to write the police report for that
officer. That vision seemed like science fiction to some at the
time. And yet it was part of our thesis and our focus as we built
Axon's cloud infrastructure over the past decade.
Today, Axon Evidence is the world's leading repository of law
enforcement data, and our customers already count on us to deliver
a growing suite of productivity tools. Because of the foundational
network we have built, we believe we are best positioned to adapt
generative AI for law enforcement use — building products right
into the cloud-enabled software that customers already know well
and enjoy. We will share more about our plans over the next
year.
We began building AI-enabled technology into our products in
2017 and AI now powers our transcription, video redaction, and
automated license plate recognition ("ALPR") products, to name a
few. We believe that our investments in generative AI-enabled tools
will expand our lead. We see opportunity to make our public tax
dollars more efficient, as well as improve law enforcement
recruiting and retention, by automating mundane, time-consuming
tasks. We are developing new data applications that will save our
customers time while helping to ensure accuracy and justice.
(1) Based on a potential domestic state and local
government install base of 706,555 sworn officers, according to
data from the U.S. Census Bureau's State and Local Employment and
Payroll Data as of June 2023.
Select Highlights:
Products & Customers
TASER 10 is off to a strong start and is gaining market
momentum. We began shipping in Q1 2023 and have seen a steady
increase in orders. TASER 10 drove year over year growth in our
TASER business while TASER 7 revenue remained stable quarter over
quarter and year over year. Customer feedback has been
fantastic with more trials underway and successful
de-escalations happening in the field.
TASER 10 is a generational advancement in TASER technology. It
sets up a multi-year growth opportunity in our TASER segment and
supports our moonshot goal to reduce gun deaths between police and
the public.
Axon Body 4 began shipping at the end of June and we are
pleased to see our customers in the renewal stage opting for this
new generation of body cameras. The new camera allows for more use
cases with Axon Respond, which is a growing product line in our
Axon Cloud & Services business. Axon Respond enables live
streaming and two-way voice communications through our body
cameras. We have seen an uptick in customers buying our premium
bundle offerings that include software features to fully unlock the
power of Axon Body 4, which we believe is an example of our
hardware product innovation driving adoption of our premium
software.
We expect Axon Body 4 to drive the majority of our body camera
shipment volumes in the second half of 2023.
Axon Cloud & Services
Digital evidence management remains our core SaaS
business and drives our growth. Our cameras and sensors, including
each generation body camera, Axon Fleet in-car camera, and latest
generation of TASER products, are sold alongside subscriptions to
our digital evidence management platform. This platform includes a
wide range of key add-ons that customers can buy both à la
carte and as part of our bundles. Over 50% of the growth in our
Axon Cloud software business year over year was driven by digital
evidence management licenses associated with our domestic body
camera base.
Real-time operations software is a growing product
category that unlocks the full potential of our integrated hardware
and software product bundles for our customers. Our real-time
operations software includes features such as Axon Respond, which
enables live streaming and two-way voice communications in our body
cameras, as well as officer geolocation for central command. It
also includes our emerging Dispatch product suite. Revenue
associated with our real-time operations product portfolio grew
more than 50% year over year in the quarter.
Productivity software is an emerging product category
that builds upon hours of video data to save officer time spent on
documentation. Productivity software features such as Axon Records
and Transcription are included in our premium Officer Safety
Plan bundles. Within this category, we also sell Axon Standards, an
enhanced component of our Records solution that drives efficiency
in reporting for high-risk officer events, such as use of force,
and affords better data management. We now have 66 agencies with
over 21,000 sworn officers live on our Records solution, including
19 agencies that are already using our product to replace their
legacy records management systems. Revenue associated with
these products more than tripled year over year.
Axon Public Safety Technology Roadshow migrates to
Europe
Over the past two years, Axon has hosted one of public safety's
largest roadshows in the United
States and Canada. Our
customer-focused roadshow began in 2021 with Axon trailers visiting
the 48 contiguous United States,
as well as stops in Canada, to
provide demonstrations of the latest public safety technology.
In 2023, the roadshow is expanding to England, Wales, France, Spain, Portugal, Italy, Germany, and Belgium, showcasing the global adoption
potential of our technology. The tour kicks off this month and
will run through late November. Each stop is designed to recognize
and celebrate Axon's global customers with localized content,
hands-on product demonstrations, networking and public safety
appreciation.
Sky-Hero Acquisition
During the second quarter, we made the strategic acquisition
of Sky-Hero, a Brussels-based
innovator in drones and ground-based vehicles, primarily focused on
indoor tactical use cases. Robotic security is an increasingly
important category for law enforcement and we believe this
acquisition puts us squarely on the leading edge of this growing
space. We do not expect Sky-Hero to have a meaningful impact to
revenue or profit this year.
Sky-Hero robots are currently used by elite tactical teams at
leading law enforcement and military agencies around the world.
Sky-Hero complements Axon's category investments to date, allowing
us to continue to develop a foundational platform for this
increasingly important de-escalation category. At the core of our
efforts lies our conviction that technology enables de-escalation
to avoid lethal force. The addition of Sky-Hero underscores
Axon's mission to protect life — bringing expanded capabilities
that advance our moonshot goal to reduce gun-related deaths between
police and the public by 50% in the next decade.
How we think about growth in any macro environment
We are often asked about Axon's growth opportunities in the
context of customer budgets. Throughout Axon's history, our teams
have focused on delivering value that generates a clear return on
investment and justifies the cost for our customers. We bring new
products to market, create new budget categories, and displace
legacy areas of inefficient spend.
Today, Axon accounts for less than 1% of overall spending on
policing within the United States
state and local public safety markets(1). And our
contracts often comprise less than 1% of our customers' total
budgets. We have seen examples where our contracts account for
closer to 2% to 3% of a customer's total budget. We believe this
highlights we have the ability to gain wallet share as customers
see increasing value from what we can deliver as part of our
premium Officer Safety Plan bundles, Axon Fleet in-car camera
systems, our VR training platform and more. Opportunities for
customer upgrades are found through recognizing areas where our
services increase efficiency.
We believe this points to our opportunity to expand within the
bounds of customer budgets on a sustainable basis. We have not
positioned ourselves purely to take advantage of healthy budget
cycles, but rather to build a compounding business model that we
believe positions us to consistently grow in any budgetary
environment, with technology playing an increasingly important
role. When we drive efficiencies and deliver better products, our
customers win.
Finally, not only are our products mission critical, but we are
more diversified than ever in terms of end user base and market. We
are diversifying into new markets by adding new types of customer
profiles, or users, and by adding to our core customer base. We
think of those core customers as falling into roughly four
categories of funding sources: U.S. state and local governments,
the U.S. federal government, international government customers,
and commercial enterprises. Simultaneously, the types of customers
who find value in our product offerings are expanding beyond law
enforcement to include attorneys, fire and EMS personnel,
corrections and the U.S. military.
(1) Axon trailing 12-month United States revenue compared with U.S.
Census Bureau estimates of state and local police protection
spending of $135 billion.
Management Promotions
We continue to enhance our leadership structure to support our
long-term success. In June, we made two significant promotions
within our executive team that we believe position Axon for
multiple years of dynamic and profitable growth.
Josh Isner, President
Josh Isner became President of
Axon, effective June 28. He will
maintain responsibility for driving execution and growth —
including top line performance as well as global expansion into new
markets and new product categories — and managing other day-to-day
functions. Josh is a keen operational leader who drives discipline
and prioritization across the business, and ensures that Axon is
aggressively pursuing our total addressable market opportunity,
supported by a world class team.
Brittany Bagley, COO &
CFO
Brittany Bagley now serves as
Axon's Chief Operating Officer and Chief Financial Officer. In her
expanded role, Brittany is responsible for further integrating
Axon's financial functions with its operations, including
manufacturing and supply chain, and driving operational
improvements to contribute to the strength of Axon's income
statement, balance sheet and cash flows, including more streamlined
management of cost of goods sold, inventory and working
capital.
Summary of Q2 2023
results
- Quarterly revenue of $375
million grew 31% year over year, exceeding our expectations,
driven by strength in Axon Cloud software, Axon Fleet and the
initial ramp of our TASER 10 platform.
- Total company gross margin increased sequentially to
62.0%, primarily reflecting business mix from software. As we noted
in May, we would expect full year gross margin to remain
approximately flat or improve only modestly from Q1 2023 levels, as
the remainder of the year reflects continued professional services
related to Fleet 3, as well as continuing to ramp Axon Body 4 and
TASER 10.
- Operating profit was $40
million. Operating expenses of $192
million in the quarter included $30
million in stock-based compensation expenses.
-
- SG&A expense of $120 million,
32.0% of revenue, included $14.9
million in stock-based compensation expenses.
- R&D expense of $72 million,
19.2% of revenue, included $15.3
million in stock-based compensation expenses.
- Net income of $12 million
(3.3% net income margin), or $0.16
per diluted share, supported non-GAAP net income of $84 million, or $1.11 per diluted share.
-
- Non-GAAP net income excludes gains and losses related to our
strategic investments and includes favorable discrete income tax
benefits from the vesting of the final two tranches of our
eXponential Stock Performance Plan ("XSPP") program during the
second quarter.
- Adjusted EBITDA of $82
million reflected a margin of 22.0%.
-
- Adjusted EBITDA margin expanded 460 basis points year over year
driven by strong gross margins and operating leverage.
- Both Non-GAAP net income and Adjusted EBITDA exclude
stock-based compensation expenses and net gains or losses related
to our strategic investment portfolio.
- Operating cash flow of $43
million in Q2 2023 supported free cash flow of $29 million and adjusted free cash flow of
$34 million.
- As of June 30, 2023, Axon had
$1.08 billion in cash, equivalents
and investments, and outstanding convertible notes in principal
amount of $690 million, for a net
cash position of $395 million, up
$15 million sequentially.
Financial commentary by
segment:
Software & Sensors
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THREE MONTHS ENDED
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CHANGE
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30 JUN 2023
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31 MAR 2023
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30 JUN 2022
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QoQ
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YoY
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(in thousands)
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Axon Cloud and Services
revenue (1)
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$
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132,637
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$
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116,453
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$
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81,697
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13.9
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%
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62.4
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%
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Axon Cloud and Services
gross margin
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69.7
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%
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73.2
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%
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70.4
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%
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(350)
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bp
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(70)
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bp
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Sensors and Other
revenue
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$
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87,558
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$
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92,308
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$
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68,330
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(5.1)
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%
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28.1
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%
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Sensors and Other gross
margin
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|
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52.9
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%
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|
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38.2
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%
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42.9
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%
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1,470
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bp
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1,000
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bp
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(1) The TASER segment
includes Cloud and Services revenue, which is not broken out
here.
|
- Axon Cloud & Services revenue growth of 62% reflects
growing demand for our premium Officer Safety Plan integrated
bundles. Our core domestic digital evidence management business
remains the primary driver of Axon Cloud growth, supplemented by
growth in Axon Fleet associated digital evidence management
licenses, real-time operations solutions, and productivity
software.
- Axon Cloud & Services gross margin of 69.7% decreased year
over year due to increased mix from professional services tied to
installations of Fleet 3. Software-only gross margin in this
segment, most of which is annually recurring and includes cloud
storage and compute costs, increased year over year and exceeded
our software gross margin target of 80%. We have revised the name
for this revenue category to reflect the fact that it primarily
includes recurring SaaS software, and professional services revenue
for both hardware installations and enterprise software
integrations and deployments.
- Sensors & Other revenue growth of 28% year over year was
driven by strength in shipments of Axon Fleet 3 in-car cameras.
Axon Fleet Systems revenue more than doubled year over year.
- The increase in Sensors & Other gross margin resulted from
a decrease in manufacturing overhead allocation, an improvement in
Fleet 3 gross margins due to higher volume driving better
fixed-cost absorption, and a favorable non-recurring cost
adjustment. As a reminder, our Sensors & Other segment is a
leading driver of our growing installed base of devices that
correspond with high margin Axon Cloud software revenue
licenses.
TASER
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THREE MONTHS ENDED
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CHANGE
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30 JUN 2023
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31 MAR 2023
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30 JUN 2022
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QoQ
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YoY
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(in thousands)
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Revenue
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$
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154,410
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$
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134,282
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$
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135,586
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15.0
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%
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13.9
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%
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Gross margin
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60.5
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%
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62.2
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%
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64.3
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%
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(170)
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bp
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(380)
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bp
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- TASER segment revenue growth of 14% was driven by the initial
ramp of our TASER 10 platform. TASER 10 platform revenue
contribution was incremental to TASER segment revenue year over
year, partially offset by a decline in legacy TASER X-series
products. TASER 7 revenue remained stable quarter over quarter and
year over year, and remains the largest contributor to our TASER
segment.
- TASER segment gross margin of 60.5% decreased 170 bps
sequentially as a result of initial shipments of TASER 10 as well
as an increase in manufacturing overhead allocated to TASER as a
result of ramping TASER 10. We expect TASER segment gross margins
to improve gradually as we ramp our TASER 10 shipment volumes and
increase automation.
Forward-looking performance indicators
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30 JUN 2023
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31 MAR 2023
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31 DEC 2022
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30 SEP 2022
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30 JUN 2022
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($ in millions)
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Annual recurring
revenue (1)
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$
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559
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$
|
520
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$
|
473
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$
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403
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$
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368
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Net revenue retention
(1)
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122
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%
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121
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%
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121
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%
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|
120
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%
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|
|
119
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%
|
Total company future
contracted revenue (1)
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$
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5,227
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$
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4,778
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$
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4,647
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$
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3,730
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|
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$
|
3,330
|
|
|
|
(2)
|
Refer to "Statistical
Definitions" below.
|
- Annual Recurring Revenue ("ARR") grew 52% year over year to
$559 million, bolstered by sales of
our premium bundles, which have increased as a percentage of our
overall bookings over the past two years.
- Net revenue retention was 122% in the quarter, reflecting our
ability to deliver additional value to our customers over time and
de minimis attrition. We drive adoption of our cloud
software solutions through integrated bundling, which include a
variety of premium software options. This SaaS metric excludes the
hardware portion of customer subscriptions.
- Total company future contracted revenue grew to $5.2 billion. We expect to recognize between 15%
to 25% of this balance over the next twelve months, and generally
expect the remainder to be recognized over the following ten years.
This metric is also known as "remaining performance
obligations."
2023 Outlook
The following forward-looking statements reflect Axon
expectations as of August 8, 2023,
and are subject to risks and uncertainties.
- Axon's full year 2023 revenue expectation has improved to a
range of $1.51 billion to
$1.53 billion, reflecting
approximately 27% to 29% growth year over year. Previously, Axon
had guided to a full year 2023 revenue range of $1.44 billion to $1.46
billion, reflecting approximately 21% to 23% growth year
over year.
-
- Our updated outlook reflects increased visibility and
confidence upon the successful market introduction of two new
products, TASER 10 and Axon Body 4, as well as continued momentum
in Fleet cameras and software.
- We are maintaining our expectation for Adjusted EBITDA margin
of 20% in 2023. This reflects an increase in implied Adjusted
EBITDA dollars to a range of $302
million to $306 million,
compared with the prior implied guidance range of $288 million to $292
million.
-
- We provide Adjusted EBITDA guidance, rather than net income
guidance, due to the inherent difficulty of forecasting certain
types of expenses and gains such as stock-based compensation,
income tax expenses and gains or losses on marketable securities
and strategic investments, which affect net income but not Adjusted
EBITDA. We are unable to reasonably estimate the impact of such
expenses, which could be material, on net income. Accordingly, we
do not provide a reconciliation of projected net income to
projected Adjusted EBITDA.
- We expect stock-based compensation expenses to be approximately
$140 million for the full year.
Because our stock-based compensation expenses may vary based on
changes in the share price or the actual timing of attainment of
certain metrics, it is inherently difficult to forecast future
stock-based compensation expense, which may also be materially
affected by any future stock-based compensation plans, subject to
shareholder approval.
- We expect 2023 CapEx to be in the range of $50 million to $65
million, in line with our prior guidance. Our 2023 CapEx
plans include investments in TASER 10 automation and capacity
expansion, including cartridge capacity and lab enhancements and
global facility build-out and upgrades, including warehousing
support for global shipping facilities.
Thank you for investing in our mission.
-The Axon team
Quarterly conference call and webcast
We will host our Q2 2023 earnings conference call webinar on
Tuesday, August 8, at 2 p.m. PT / 5 p.m.
ET.
The webcast will be available via a link on Axon's investor
relations website at https://investor.axon.com, or can be accessed
directly via axon.zoom.us/j/94352515522
Statistical Definitions
Annual recurring revenue: Annual recurring revenue is a
performance indicator that management believes provides more
visibility into the growth of our revenue generated by our highest
margin, recurring services. Annual recurring revenue should be
viewed independently of revenue and deferred revenue because it is
an operating measure and is not intended to be combined with or to
replace GAAP revenue or deferred revenue, as they can be impacted
by contract start and end dates and renewal rates. Annual recurring
revenue is not intended to be a replacement or forecast of revenue
or deferred revenue. We calculate annual recurring revenue as
monthly recurring license, integration, warranty, and storage
revenue, annualized.
Net revenue retention: Dollar-based net revenue retention is an
important metric to measure our ability to retain and expand our
relationships with existing customers. We calculate it as the
software and camera warranty subscription and support revenue from
a base set of agency customers from which we generated Axon Cloud
subscription revenue in the last month of a quarter divided by the
software and camera warranty subscription and support revenue from
the year-ago month of that same customer base. This calculation
includes high-margin warranty revenue but purposely excludes
the lower-margin hardware subscription component of the
customer contracts, as it is meant to be a SaaS metric that we use
to monitor the health of the recurring revenue business we are
building. This calculation also excludes the implied monthly
revenue contribution of customers that were added since the
year-ago quarter, and therefore excludes the benefit of new
customer acquisition. The metric includes customers, if any, that
terminated during the annual period, and therefore, this metric is
inclusive of customer churn. This metric is downwardly adjusted to
account for the effect of phased deployments -- meaning that for
the year-ago period, we consider the total contractually obligated
implied monthly revenue amount, rather than monthly revenue amounts
that might have been in actuality smaller on a GAAP basis due to
the customer not having yet fully deployed their Axon solution. For
more information relative to our revenue recognition policies,
please reference our filings with the Securities and Exchange
Commission ("SEC").
Total company future contracted revenue: Total company future
contracted revenue includes both recognized contract liabilities as
well as amounts that will be invoiced and recognized in future
periods. The remaining performance obligations are limited
only to arrangements that meet the definition of a contract under
Topic 606 as of June 30, 2023. We
expect to recognize between 15% to 25% of this balance over the
next twelve months, and generally expect the remainder to be
recognized over the following ten years, subject to risks related
to delayed deployments, budget appropriation or other contract
cancellation clauses.
Non-GAAP Measures
To supplement the Company's financial results presented in
accordance with GAAP, we present the non-GAAP financial measures of
EBITDA, Adjusted EBITDA, Non-GAAP Net Income, Non-GAAP Diluted
Earnings Per Share, Free Cash Flow, and Adjusted Free Cash Flow.
The Company's management uses these non-GAAP financial measures in
evaluating the Company's performance in comparison to prior
periods. We believe that both management and investors benefit from
referring to these non-GAAP financial measures in assessing its
performance, and when planning and forecasting our future periods.
A reconciliation of GAAP to the non-GAAP financial measures is
presented herein.
- EBITDA (Most comparable GAAP Measure: Net income) - Earnings
before interest expense, investment interest income, income taxes,
depreciation and amortization.
- Adjusted EBITDA (Most comparable GAAP Measure: Net income) -
Earnings before interest expense, investment interest income,
income taxes, depreciation, amortization, non-cash stock-based
compensation expense, realized and unrealized gains/losses on
strategic investments and marketable securities and certain other
pre-tax items (identified and listed below in the
reconciliation).
- Non-GAAP Net Income (Most comparable GAAP Measure: Net income)
- Net income excluding the costs of non-cash stock-based
compensation and excluding any net
gain/loss/write-down/disposal/abandonment of property, equipment
and intangible assets; realized and unrealized gain/losses on
strategic investments and marketable securities; loss on
impairment; costs related to strategic investments and business
acquisitions; costs related to the FTC litigation and pre-tax
certain other items (listed below). The Company tax-effects
non-GAAP adjustments using the blended statutory federal and state
tax rates for each period presented.
- Non-GAAP Diluted Earnings Per Share (Most comparable GAAP
Measure: Earnings Per share) - Measure of Company's Non-GAAP Net
Income divided by the weighted average number of diluted common
shares outstanding during the period presented.
- Free Cash Flow (Most comparable GAAP Measure: Cash flow from
operating activities) - Cash flows provided by operating activities
minus purchases of property and equipment and intangible
assets.
- Adjusted Free Cash Flow (Most comparable GAAP Measure: Cash
flow from operating activities) - Cash flows provided by operating
activities minus purchases of property and equipment and intangible
assets, excluding the net impact of investments in our new
Scottsdale, Ariz. campus and bond
premium amortization.
Caution on Use of Non-GAAP Measures
Although these non-GAAP financial measures are not consistent
with GAAP, management believes investors will benefit by referring
to these non-GAAP financial measures when assessing the Company's
operating results, as well as when forecasting and analyzing future
periods. However, management recognizes that:
- these non-GAAP financial measures are limited in their
usefulness and should be considered only as a supplement to the
Company's GAAP financial measures;
- these non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, the Company's GAAP
financial measures;
- these non-GAAP financial measures should not be considered to
be superior to the Company's GAAP financial measures; and
- these non-GAAP financial measures were not prepared in
accordance with GAAP or under a comprehensive set of rules or
principles.
- Further, these non-GAAP financial measures may be unique to the
Company, as they may be different from similarly titled non-GAAP
financial measures used by other companies. As such, this
presentation of non-GAAP financial measures may not enhance the
comparability of the Company's results to the results of other
companies.
About Axon
Axon is a technology leader in global public safety. Our
moonshot goal is to cut gun-related deaths between police and
the public by 50% before 2033. Axon is building the public
safety operating system of the future by integrating a suite of
hardware devices and cloud software solutions that lead modern
policing. Axon's suite includes TASER energy devices, body cameras,
in-car cameras, cloud-hosted digital evidence management solutions,
productivity software and real-time operations capabilities. Axon's
growing global customer base includes first responders across
international, federal, state and local law enforcement, fire,
corrections and emergency medical services, as well as the justice
sector, commercial enterprises and consumers.
Non-Axon trademarks are property of their respective owners.
Axon, Axon Body, Axon Fleet, Axon Records, Axon Respond, TASER,
TASER 7, TASER 10, Protect Life and the Delta Logo are trademarks
of Axon Enterprise, Inc., some of which are registered in the US
and other countries. For more information,
visit www.axon.com/legal. All rights reserved.
Forward-looking statements
Forward-looking statements in this letter include, without
limitation, statements regarding: proposed products and
services and related development efforts and activities;
expectations about the market for our current and future products
and services; including statements related to our user base and
customer profiles; the impact of pending litigation; strategies and
trends relating to subscription plan programs and revenues;
statements related to recently completed acquisitions; our
anticipation that contracts with governmental customers will be
fulfilled; the timing and realization of future contracted revenue;
the fulfillment of bookings; strategies and trends, including the
amounts and benefits of, research and development investments; the
sufficiency of our liquidity and financial resources; expectations
about customer behavior; the impact on our investment portfolio of
changes in interest rates; our potential use of foreign currency
forward and option contracts; statements concerning projections,
predictions, expectations, estimates or forecasts as to our
business, financial and operational results and future economic
performance, including our outlook for 2023 full year revenue,
stock-based compensation expense, adjusted EBITDA, adjusted EBITDA
margin, and capital expenditures; statements of management's
strategies, goals and objectives and other similar expressions; as
well as the ultimate resolution of financial statement items
requiring critical accounting estimates, including those set
forth in our Annual Report on Form 10‑K for the year ended
December 31, 2022. Such statements
give our current expectations or forecasts of future events; they
do not relate strictly to historical or current facts. Words such
as "may," "will," "should," "could," "would," "predict,"
"potential," "continue," "expect," "anticipate," "future,"
"intend," "plan," "believe," "estimate," and similar expressions,
as well as statements in future tense, identify forward-looking
statements. However, not all forward-looking statements contain
these identifying words.
We cannot guarantee that any forward-looking statement will be
realized, although we believe we have been prudent in our plans and
assumptions. Achievement of future results is subject to risks,
uncertainties and potentially inaccurate assumptions. The following
important factors could cause actual results to differ materially
from those in the forward-looking statements: our exposure to
cancellations of government contracts due to appropriation clauses,
exercise of a cancellation clause, or non-exercise of contractually
optional periods; the ability of law enforcement agencies to obtain
funding, including based on tax revenues; our ability to design,
introduce and sell new products or features; our ability to defend
against litigation and protect our intellectual property, and the
resulting costs of this activity; our ability to win bids through
the open bidding process for governmental agencies; our ability to
manage our supply chain and avoid production delays, shortages, and
impacts to expected gross margins; the impacts of inflation,
macroeconomic conditions and global events; the impact of
stock-based compensation expense, impairment expense, and income
tax expense on our financial results; customer purchase behavior,
including adoption of our software as a service delivery model;
negative media publicity or sentiment regarding our products; the
impact of product mix on projected gross margins; defects in, or
misuse of, our products; changes in the costs of product components
and labor; loss of customer data, a breach of security, or an
extended outage, including by our third party cloud-based storage
providers; exposure to international operational risks; delayed
cash collections and possible credit losses due to our subscription
model; changes in government regulations in the U.S. and in foreign
markets, especially related to the classification of our products
by the United States Bureau of Alcohol, Tobacco, Firearms and
Explosives; our ability to integrate acquired businesses; the
impact of declines in the fair value or impairment of our
investments, including our strategic investments; our ability to
attract and retain key personnel; litigation or inquiries and
related time and costs; and counter-party risks relating to cash
balances held in excess of FDIC insurance limits. Many events
beyond our control may determine whether results we anticipate will
be achieved. Should known or unknown risks or uncertainties
materialize, or should underlying assumptions prove inaccurate,
actual results could differ materially from past results and those
anticipated, estimated or projected. You should bear this in mind
as you consider forward-looking statements. The Quarterly Report on
Form 10‑Q for the quarter ended March 31,
2023 and the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2023, which we expect
to be available on August 8, 2023,
list various important factors that could cause actual results to
differ materially from expected and historical results. These
factors are intended as cautionary statements for investors within
the meaning of Section 21E of the Exchange Act and Section 27A of
the Securities Act. Readers can find them in Part II, Item 1A under
the heading "Risk Factors" in our Quarterly Reports on Form 10‑Q,
and investors should refer to them. You should understand that it
is not possible to predict or identify all such factors.
Consequently, you should not consider any such list to be a
complete set of all potential risks or uncertainties.
Except as required by law, we undertake no obligation to
publicly update forward-looking statements, whether as a result of
new information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on related
subjects in our Form 10‑Q, 8‑K and 10‑K reports to the SEC.
Our filings with the SEC may be accessed at the SEC's web site at
www.sec.gov.
Update on Legal Matters:
Axon v. FTC
The case has been remanded to the District of Arizona (Case No.
2:20-cv-00014-DWL) following Axon's April 14, 2023
unanimous U.S. Supreme Court victory allowing Axon's constitutional
challenges to the Federal Trade Commission's structure to proceed
in Federal court (No. 21-86). Axon anticipates briefing on the
merits of its constitutional claims to proceed throughout the
remainder of 2023.
The FTC's administrative action (No. D9389) regarding Axon's
2018 purchase of insolvent body-worn camera competitor Vievu LLC
remains stayed. However, on June 20,
2023, the FTC withdrew the administrative case from
adjudication to facilitate discussion regarding the proper
resolution of the case. As always, we are open to evaluating
strategic alternatives to litigation if achievable on terms
agreeable to the FTC and Axon, and determined to be in the best
interests of shareholders and customers.
Links to all court filings and opinions can be found on Axon's
FTC Investor Briefing page at https://www.axon.com/ftc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands,
except per share data)
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
30 JUN 2023
|
|
31 MAR 2023
|
|
30 JUN 2022
|
|
30 JUN 2023
|
|
30 JUN 2022
|
Net sales from
products
|
|
$
|
233,474
|
|
$
|
219,389
|
|
$
|
200,051
|
|
$
|
452,863
|
|
$
|
376,255
|
Net sales from
services
|
|
|
141,131
|
|
|
123,654
|
|
|
85,562
|
|
|
264,785
|
|
|
165,784
|
Net sales
|
|
|
374,605
|
|
|
343,043
|
|
|
285,613
|
|
|
717,648
|
|
|
542,039
|
Cost of product
sales
|
|
|
101,192
|
|
|
107,584
|
|
|
87,502
|
|
|
208,776
|
|
|
166,854
|
Cost of service
sales
|
|
|
41,292
|
|
|
31,357
|
|
|
24,148
|
|
|
72,649
|
|
|
45,483
|
Cost of
sales
|
|
|
142,484
|
|
|
138,941
|
|
|
111,650
|
|
|
281,425
|
|
|
212,337
|
Gross margin
|
|
|
232,121
|
|
|
204,102
|
|
|
173,963
|
|
|
436,223
|
|
|
329,702
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
119,922
|
|
|
116,567
|
|
|
95,005
|
|
|
236,489
|
|
|
185,134
|
Research and
development
|
|
|
71,940
|
|
|
70,927
|
|
|
57,547
|
|
|
142,867
|
|
|
105,963
|
Total operating
expenses
|
|
|
191,862
|
|
|
187,494
|
|
|
152,552
|
|
|
379,356
|
|
|
291,097
|
Income from
operations
|
|
|
40,259
|
|
|
16,608
|
|
|
21,411
|
|
|
56,867
|
|
|
38,605
|
Interest and other
income (loss), net
|
|
|
(52,368)
|
|
|
25,276
|
|
|
47,026
|
|
|
(27,092)
|
|
|
102,325
|
Income (loss) before
provision for income taxes
|
|
|
(12,109)
|
|
|
41,884
|
|
|
68,437
|
|
|
29,775
|
|
|
140,930
|
Provision for (benefit
from) income taxes
|
|
|
(24,529)
|
|
|
(3,255)
|
|
|
17,475
|
|
|
(27,784)
|
|
|
35,097
|
Net income
|
|
$
|
12,420
|
|
$
|
45,139
|
|
$
|
50,962
|
|
$
|
57,559
|
|
$
|
105,833
|
Net income per common
and common equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.17
|
|
$
|
0.62
|
|
$
|
0.72
|
|
$
|
0.78
|
|
$
|
1.49
|
Diluted
|
|
$
|
0.16
|
|
$
|
0.61
|
|
$
|
0.71
|
|
$
|
0.77
|
|
$
|
1.46
|
Weighted average number
of common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
74,224
|
|
|
72,638
|
|
|
71,040
|
|
|
73,435
|
|
|
70,995
|
Diluted
|
|
|
75,780
|
|
|
73,880
|
|
|
72,283
|
|
|
74,834
|
|
|
72,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
SEGMENT
REPORTING
(Unaudited)
(dollars in
thousands)
|
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
30 JUN 2023
|
|
|
31 MAR 2023
|
|
|
30 JUN 2022
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
145,916
|
|
|
$
|
87,558
|
|
|
$
|
233,474
|
|
|
$
|
127,081
|
|
|
$
|
92,308
|
|
|
$
|
219,389
|
|
|
$
|
131,721
|
|
|
$
|
68,330
|
|
|
$
|
200,051
|
|
Net sales from services
(2)
|
|
|
8,494
|
|
|
|
132,637
|
|
|
|
141,131
|
|
|
|
7,201
|
|
|
|
116,453
|
|
|
|
123,654
|
|
|
|
3,865
|
|
|
|
81,697
|
|
|
|
85,562
|
|
Net sales
|
|
|
154,410
|
|
|
|
220,195
|
|
|
|
374,605
|
|
|
|
134,282
|
|
|
|
208,761
|
|
|
|
343,043
|
|
|
|
135,586
|
|
|
|
150,027
|
|
|
|
285,613
|
|
Cost of product
sales
|
|
|
59,968
|
|
|
|
41,224
|
|
|
|
101,192
|
|
|
|
50,583
|
|
|
|
57,001
|
|
|
|
107,584
|
|
|
|
48,463
|
|
|
|
39,039
|
|
|
|
87,502
|
|
Cost of service
sales
|
|
|
1,085
|
|
|
|
40,207
|
|
|
|
41,292
|
|
|
|
180
|
|
|
|
31,177
|
|
|
|
31,357
|
|
|
|
—
|
|
|
|
24,148
|
|
|
|
24,148
|
|
Cost of
sales
|
|
|
61,053
|
|
|
|
81,431
|
|
|
|
142,484
|
|
|
|
50,763
|
|
|
|
88,178
|
|
|
|
138,941
|
|
|
|
48,463
|
|
|
|
63,187
|
|
|
|
111,650
|
|
Gross margin
|
|
|
93,357
|
|
|
|
138,764
|
|
|
|
232,121
|
|
|
|
83,519
|
|
|
|
120,583
|
|
|
|
204,102
|
|
|
|
87,123
|
|
|
|
86,840
|
|
|
|
173,963
|
|
Gross margin
%
|
|
|
60.5
|
%
|
|
|
63.0
|
%
|
|
|
62.0
|
%
|
|
|
62.2
|
%
|
|
|
57.8
|
%
|
|
|
59.5
|
%
|
|
|
64.3
|
%
|
|
|
57.9
|
%
|
|
|
60.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
14,376
|
|
|
|
57,564
|
|
|
|
71,940
|
|
|
|
16,080
|
|
|
|
54,847
|
|
|
|
70,927
|
|
|
|
13,316
|
|
|
|
44,231
|
|
|
|
57,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
|
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2023
|
|
|
30 JUN 2022
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
272,997
|
|
|
$
|
179,866
|
|
|
$
|
452,863
|
|
|
$
|
242,875
|
|
|
$
|
133,380
|
|
|
$
|
376,255
|
|
Net sales from services
(2)
|
|
|
15,695
|
|
|
|
249,090
|
|
|
|
264,785
|
|
|
|
7,071
|
|
|
|
158,713
|
|
|
|
165,784
|
|
Net sales
|
|
|
288,692
|
|
|
|
428,956
|
|
|
|
717,648
|
|
|
|
249,946
|
|
|
|
292,093
|
|
|
|
542,039
|
|
Cost of product
sales
|
|
|
110,551
|
|
|
|
98,225
|
|
|
|
208,776
|
|
|
|
89,088
|
|
|
|
77,766
|
|
|
|
166,854
|
|
Cost of service
sales
|
|
|
1,265
|
|
|
|
71,384
|
|
|
|
72,649
|
|
|
|
—
|
|
|
|
45,483
|
|
|
|
45,483
|
|
Cost of
sales
|
|
|
111,816
|
|
|
|
169,609
|
|
|
|
281,425
|
|
|
|
89,088
|
|
|
|
123,249
|
|
|
|
212,337
|
|
Gross margin
|
|
|
176,876
|
|
|
|
259,347
|
|
|
|
436,223
|
|
|
|
160,858
|
|
|
|
168,844
|
|
|
|
329,702
|
|
Gross margin
%
|
|
|
61.3
|
%
|
|
|
60.5
|
%
|
|
|
60.8
|
%
|
|
|
64.4
|
%
|
|
|
57.8
|
%
|
|
|
60.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
30,456
|
|
|
|
112,411
|
|
|
|
142,867
|
|
|
|
23,212
|
|
|
|
82,751
|
|
|
|
105,963
|
|
|
|
(1)
|
Software and Sensors
"products" revenue consists of sensors, including on-officer body
cameras, Axon Fleet cameras, other hardware sensors, warranties on
sensors, and other products, and is sometimes referred to as
Sensors and Other revenue.
|
(2)
|
Software and Sensors
"services" revenue comprises sales related to the Axon Cloud and
Services, which includes Axon Evidence, cloud-based evidence
management software revenue, other recurring cloud-hosted software
revenue and related professional services, and is sometimes
referred to as Axon Cloud and Services revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
SALES BY PRODUCT AND
SERVICE
(Unaudited)
Dollars in
thousands
|
|
|
THREE MONTHS ENDED
|
|
30 JUN 2023
|
|
|
31 MAR 2023
|
|
|
30 JUN 2022
|
|
TASER
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TASER Devices
(Professional)
|
$
|
84,975
|
|
22.7
|
%
|
|
$
|
67,472
|
|
19.7
|
%
|
|
$
|
70,313
|
|
24.6
|
%
|
Cartridges
|
|
48,425
|
|
12.9
|
|
|
|
46,800
|
|
13.6
|
|
|
|
49,845
|
|
17.5
|
|
Axon Evidence and
Cloud Services
|
|
8,494
|
|
2.3
|
|
|
|
7,201
|
|
2.1
|
|
|
|
3,720
|
|
1.3
|
|
Extended
Warranties
|
|
7,715
|
|
2.0
|
|
|
|
7,670
|
|
2.2
|
|
|
|
7,459
|
|
2.6
|
|
Other
(1)
|
|
4,801
|
|
1.3
|
|
|
|
5,139
|
|
1.5
|
|
|
|
4,249
|
|
1.5
|
|
Total TASER
segment
|
|
154,410
|
|
41.2
|
|
|
|
134,282
|
|
39.1
|
|
|
|
135,586
|
|
47.5
|
|
Software and Sensors
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Axon Body Cameras and
Accessories
|
|
32,781
|
|
8.8
|
|
|
|
38,797
|
|
11.3
|
|
|
|
33,938
|
|
11.9
|
|
Axon Fleet
Systems
|
|
35,960
|
|
9.6
|
|
|
|
32,972
|
|
9.6
|
|
|
|
15,881
|
|
5.5
|
|
Axon Evidence and
Cloud Services
|
|
132,102
|
|
35.3
|
|
|
|
118,314
|
|
34.5
|
|
|
|
81,911
|
|
28.7
|
|
Extended
Warranties
|
|
15,166
|
|
4.0
|
|
|
|
14,085
|
|
4.1
|
|
|
|
12,498
|
|
4.4
|
|
Other
(2)
|
|
4,186
|
|
1.1
|
|
|
|
4,593
|
|
1.4
|
|
|
|
5,799
|
|
2.0
|
|
Total Software and
Sensors segment
|
|
220,195
|
|
58.8
|
|
|
|
208,761
|
|
60.9
|
|
|
|
150,027
|
|
52.5
|
|
Total net
sales
|
$
|
374,605
|
|
100.0
|
%
|
|
$
|
343,043
|
|
100.0
|
%
|
|
$
|
285,613
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
|
|
|
30 JUN 2023
|
|
|
30 JUN 2022
|
TASER
segment:
|
|
|
|
|
|
|
|
|
|
|
|
TASER Devices
(Professional)
|
$
|
152,447
|
|
21.2
|
%
|
|
$
|
133,477
|
|
24.6
|
%
|
Cartridges
|
|
95,225
|
|
13.3
|
|
|
|
87,670
|
|
16.2
|
|
Axon Evidence and
Cloud Services
|
|
15,695
|
|
2.2
|
|
|
|
6,737
|
|
1.2
|
|
Extended
Warranties
|
|
15,385
|
|
2.1
|
|
|
|
14,138
|
|
2.6
|
|
Other
(1)
|
|
9,940
|
|
1.4
|
|
|
|
7,924
|
|
1.5
|
|
Total TASER
segment
|
|
288,692
|
|
40.2
|
|
|
|
249,946
|
|
46.1
|
|
Software and Sensors
segment:
|
|
|
|
|
|
|
|
|
|
|
|
Axon Body Cameras and
Accessories
|
|
71,578
|
|
10.0
|
|
|
|
72,455
|
|
13.3
|
|
Axon Fleet
Systems
|
|
68,932
|
|
9.6
|
|
|
|
29,701
|
|
5.5
|
|
Axon Evidence and
Cloud Services
|
|
250,416
|
|
34.9
|
|
|
|
161,850
|
|
29.9
|
|
Extended
Warranties
|
|
29,251
|
|
4.1
|
|
|
|
21,559
|
|
4.0
|
|
Other
(2)
|
|
8,779
|
|
1.2
|
|
|
|
6,528
|
|
1.2
|
|
Total Software and
Sensors segment
|
|
428,956
|
|
59.8
|
|
|
|
292,093
|
|
53.9
|
|
Total net
sales
|
$
|
717,648
|
|
100.0
|
%
|
|
$
|
542,039
|
|
100.0
|
%
|
|
|
(1)
|
TASER segment "Other"
includes smaller categories, such as VR hardware, weapons training
revenue such as revenue associated with our Master Instructor
School, and TASER consumer device sales.
|
(2)
|
Software and Sensors
segment "Other" includes revenue from items including Signal
Sidearm, Interview Room and Axon Air.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Dollars in
thousands
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2023
|
|
31 MAR 2023
|
|
30 JUN 2022
|
|
30 JUN 2023
|
|
30 JUN 2022
|
|
EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,420
|
|
$
|
45,139
|
|
$
|
50,962
|
|
$
|
57,559
|
|
$
|
105,833
|
|
Depreciation and
amortization
|
|
|
7,480
|
|
|
6,689
|
|
|
6,210
|
|
|
14,169
|
|
|
11,965
|
|
Interest
expense
|
|
|
1,737
|
|
|
1,724
|
|
|
3
|
|
|
3,461
|
|
|
11
|
|
Investment interest
(income) loss
|
|
|
(11,400)
|
|
|
(11,390)
|
|
|
584
|
|
|
(22,790)
|
|
|
930
|
|
Provision for (benefit
from) income taxes
|
|
|
(24,529)
|
|
|
(3,255)
|
|
|
17,475
|
|
|
(27,784)
|
|
|
35,097
|
|
EBITDA
|
|
$
|
(14,292)
|
|
$
|
38,907
|
|
$
|
75,234
|
|
$
|
24,615
|
|
$
|
153,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
31,891
|
|
$
|
34,350
|
|
$
|
21,162
|
|
$
|
66,241
|
|
$
|
46,250
|
|
Unrealized loss
(gains) on strategic investments and marketable securities,
net
|
|
|
61,912
|
|
|
(15,570)
|
|
|
(47,985)
|
|
|
46,342
|
|
|
(103,836)
|
|
Transaction costs
related to strategic investments and acquisitions
|
|
|
455
|
|
|
843
|
|
|
964
|
|
|
1,298
|
|
|
1,835
|
|
Loss on disposal,
abandonment, and impairment of property, equipment and intangible
assets, net
|
|
|
24
|
|
|
156
|
|
|
91
|
|
|
180
|
|
|
237
|
|
Costs related to FTC
litigation
|
|
|
1
|
|
|
—
|
|
|
291
|
|
|
1
|
|
|
295
|
|
Payroll taxes related
to XSPP vesting and CEO Award option exercises
|
|
|
2,368
|
|
|
6,392
|
|
|
—
|
|
|
8,760
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
82,359
|
|
$
|
65,078
|
|
$
|
49,757
|
|
$
|
147,437
|
|
$
|
98,617
|
|
Net income as a percentage of net
sales
|
|
|
3.3
|
%
|
|
13.2
|
%
|
|
17.8
|
%
|
|
8.0
|
%
|
|
19.5
|
%
|
Adjusted EBITDA as a percentage of net
sales
|
|
|
22.0
|
%
|
|
19.0
|
%
|
|
17.4
|
%
|
|
20.5
|
%
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
1,678
|
|
$
|
1,320
|
|
$
|
1,066
|
|
$
|
2,998
|
|
$
|
2,174
|
|
Sales, general and
administrative
|
|
|
14,901
|
|
|
15,445
|
|
|
8,610
|
|
|
30,346
|
|
|
21,592
|
|
Research and
development
|
|
|
15,312
|
|
|
17,585
|
|
|
11,486
|
|
|
32,897
|
|
|
22,484
|
|
Total
|
|
$
|
31,891
|
|
$
|
34,350
|
|
$
|
21,162
|
|
$
|
66,241
|
|
$
|
46,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES - continued
(Unaudited)
Dollars in
thousands, except per share amounts
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2023
|
|
31 MAR 2023
|
|
30 JUN 2022
|
|
30 JUN 2023
|
|
30 JUN 2022
|
|
Non-GAAP net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
12,420
|
|
$
|
45,139
|
|
$
|
50,962
|
|
$
|
57,559
|
|
$
|
105,833
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
31,891
|
|
|
34,350
|
|
|
21,162
|
|
|
66,241
|
|
|
46,250
|
|
Unrealized loss (gain)
on strategic investments and marketable securities, net
|
|
|
61,912
|
|
|
(15,570)
|
|
|
(47,985)
|
|
|
46,342
|
|
|
(103,836)
|
|
Transaction costs
related to strategic investments and acquisitions
|
|
|
455
|
|
|
843
|
|
|
964
|
|
|
1,298
|
|
|
1,835
|
|
Loss on disposal,
abandonment, and impairment of property, equipment and intangible
assets, net
|
|
|
24
|
|
|
156
|
|
|
91
|
|
|
180
|
|
|
237
|
|
Costs related to FTC
litigation
|
|
|
1
|
|
|
—
|
|
|
291
|
|
|
1
|
|
|
295
|
|
Payroll taxes related
to XSPP vesting and CEO Award option exercises
|
|
|
2,368
|
|
|
6,392
|
|
|
—
|
|
|
8,760
|
|
|
—
|
|
Income tax
effects
|
|
|
(24,595)
|
|
|
(6,660)
|
|
|
6,344
|
|
|
(31,255)
|
|
|
13,749
|
|
Non-GAAP net
income
|
|
$
|
84,476
|
|
$
|
64,650
|
|
$
|
31,829
|
|
$
|
149,126
|
|
$
|
64,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
|
0.16
|
|
$
|
0.61
|
|
$
|
0.71
|
|
$
|
0.77
|
|
$
|
1.46
|
|
Non-GAAP
|
|
$
|
1.11
|
|
$
|
0.88
|
|
$
|
0.44
|
|
$
|
1.99
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of diluted common and common equivalent shares outstanding (in
thousands)
|
|
|
75,780
|
|
|
73,880
|
|
|
72,283
|
|
|
74,834
|
|
|
72,316
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
CONSOLIDATED BALANCE
SHEETS
(in
thousands)
|
|
|
|
30 JUN 2023
|
|
31 DEC 2022
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
474,203
|
|
$
|
353,684
|
Marketable
securities
|
|
|
64,800
|
|
|
39,240
|
Short-term
investments
|
|
|
594,942
|
|
|
581,769
|
Accounts and notes
receivable, net
|
|
|
372,060
|
|
|
358,190
|
Contract assets,
net
|
|
|
255,306
|
|
|
196,902
|
Inventory
|
|
|
249,767
|
|
|
202,471
|
Prepaid expenses and
other current assets
|
|
|
101,572
|
|
|
73,022
|
Total current
assets
|
|
|
2,112,650
|
|
|
1,805,278
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
179,096
|
|
|
169,843
|
Deferred tax assets,
net
|
|
|
198,581
|
|
|
156,866
|
Intangible assets,
net
|
|
|
21,837
|
|
|
12,158
|
Goodwill
|
|
|
57,741
|
|
|
44,983
|
Long-term
investments
|
|
|
15,481
|
|
|
156,207
|
Long-term notes
receivable, net
|
|
|
5,278
|
|
|
5,210
|
Long-term contract
assets, net
|
|
|
75,200
|
|
|
45,170
|
Strategic
investments
|
|
|
233,637
|
|
|
296,563
|
Other long-term
assets
|
|
|
177,903
|
|
|
159,616
|
Total assets
|
|
$
|
3,077,404
|
|
$
|
2,851,894
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
72,989
|
|
|
59,918
|
Accrued
liabilities
|
|
|
118,162
|
|
|
155,934
|
Current portion of
deferred revenue
|
|
|
412,212
|
|
|
360,037
|
Customer
deposits
|
|
|
14,517
|
|
|
20,399
|
Other current
liabilities
|
|
|
7,359
|
|
|
6,358
|
Total current
liabilities
|
|
|
625,239
|
|
|
602,646
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
265,458
|
|
|
248,003
|
Liability for
unrecognized tax benefits
|
|
|
17,812
|
|
|
10,745
|
Long-term deferred
compensation
|
|
|
8,767
|
|
|
6,285
|
Deferred tax liability,
net
|
|
|
2,782
|
|
|
1
|
Long-term lease
liabilities
|
|
|
33,987
|
|
|
37,143
|
Convertible notes,
net
|
|
|
675,518
|
|
|
673,967
|
Other long-term
liabilities
|
|
|
2,843
|
|
|
4,613
|
Total liabilities
|
|
|
1,632,406
|
|
|
1,583,403
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,293,089
|
|
|
1,174,594
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
314,581
|
|
|
257,022
|
Accumulated other
comprehensive loss
|
|
|
(6,726)
|
|
|
(7,179)
|
Total stockholders'
equity
|
|
|
1,444,998
|
|
|
1,268,491
|
Total liabilities and stockholders'
equity
|
|
$
|
3,077,404
|
|
$
|
2,851,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2023
|
|
31 MAR 2023
|
|
30 JUN 2022
|
|
30 JUN 2023
|
|
30 JUN 2022
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,420
|
|
$
|
45,139
|
|
$
|
50,962
|
|
$
|
57,559
|
|
$
|
105,833
|
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
7,480
|
|
|
6,689
|
|
|
6,210
|
|
|
14,169
|
|
|
11,965
|
|
Amortization
of debt issuance cost
|
|
|
775
|
|
|
756
|
|
|
—
|
|
|
1,531
|
|
|
—
|
|
Coupon interest
expense
|
|
|
862
|
|
|
863
|
|
|
—
|
|
|
1,725
|
|
|
—
|
|
Purchase accounting
adjustments to goodwill
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
58
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
8
|
|
|
10
|
|
|
8
|
|
|
18
|
|
|
48
|
|
Loss on disposal and
impairment of property, equipment and other assets, net
|
|
|
16
|
|
|
146
|
|
|
83
|
|
|
162
|
|
|
189
|
|
Unrealized gains on
strategic investments and marketable securities, net
|
|
|
61,912
|
|
|
(15,570)
|
|
|
(47,985)
|
|
|
46,342
|
|
|
(103,836)
|
|
Gain on insurance
recovery
|
|
|
(789)
|
|
|
—
|
|
|
—
|
|
|
(789)
|
|
|
—
|
|
Stock-based
compensation
|
|
|
31,891
|
|
|
34,350
|
|
|
21,162
|
|
|
66,241
|
|
|
46,250
|
|
Deferred income
taxes
|
|
|
(27,945)
|
|
|
(9,660)
|
|
|
8,021
|
|
|
(37,605)
|
|
|
26,050
|
|
Unrecognized tax
benefits
|
|
|
2,012
|
|
|
855
|
|
|
2,530
|
|
|
2,867
|
|
|
3,895
|
|
Bond
amortization
|
|
|
(4,146)
|
|
|
(3,890)
|
|
|
142
|
|
|
(8,036)
|
|
|
301
|
|
Noncash lease
expense
|
|
|
1,583
|
|
|
1,395
|
|
|
1,723
|
|
|
2,978
|
|
|
3,279
|
|
Provision for expected
credit losses
|
|
|
313
|
|
|
28
|
|
|
(45)
|
|
|
341
|
|
|
183
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
(51,774)
|
|
|
(50,431)
|
|
|
(87,742)
|
|
|
(102,205)
|
|
|
(80,247)
|
|
Inventory
|
|
|
(27,774)
|
|
|
(15,811)
|
|
|
(32,849)
|
|
|
(43,585)
|
|
|
(47,109)
|
|
Prepaid expenses and
other assets
|
|
|
15,058
|
|
|
(64,348)
|
|
|
4,386
|
|
|
(49,290)
|
|
|
(2,688)
|
|
Accounts payable,
accrued and other liabilities
|
|
|
1,067
|
|
|
(37,043)
|
|
|
34,149
|
|
|
(35,976)
|
|
|
24,569
|
|
Deferred
revenue
|
|
|
19,687
|
|
|
50,199
|
|
|
58,563
|
|
|
69,886
|
|
|
74,600
|
|
Net cash provided by
(used in) operating activities
|
|
|
42,656
|
|
|
(56,323)
|
|
|
19,376
|
|
|
(13,667)
|
|
|
63,340
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(100,925)
|
|
|
(145,124)
|
|
|
(108,240)
|
|
|
(246,049)
|
|
|
(108,240)
|
|
Proceeds from call /
maturity of investments
|
|
|
299,994
|
|
|
81,088
|
|
|
2,273
|
|
|
381,082
|
|
|
9,473
|
|
Exercise of warrants
from strategic investments
|
|
|
—
|
|
|
—
|
|
|
(6,555)
|
|
|
—
|
|
|
(6,555)
|
|
Purchases of property
and equipment
|
|
|
(13,137)
|
|
|
(8,513)
|
|
|
(12,749)
|
|
|
(21,650)
|
|
|
(29,847)
|
|
Purchases of intangible
assets
|
|
|
(62)
|
|
|
(125)
|
|
|
(67)
|
|
|
(187)
|
|
|
(104)
|
|
Proceeds from disposal
of property and equipment
|
|
|
3
|
|
|
—
|
|
|
4
|
|
|
3
|
|
|
91
|
|
Strategic
investments
|
|
|
(10,917)
|
|
|
—
|
|
|
(61,000)
|
|
|
(10,917)
|
|
|
(61,500)
|
|
Business acquisition,
net of cash acquired
|
|
|
(21,026)
|
|
|
—
|
|
|
(2,104)
|
|
|
(21,026)
|
|
|
(2,104)
|
|
Net cash provided by
(used in) investing activities
|
|
|
153,930
|
|
|
(72,674)
|
|
|
(188,438)
|
|
|
81,256
|
|
|
(198,786)
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
61,156
|
|
|
33,650
|
|
|
(3)
|
|
|
94,806
|
|
|
(74)
|
|
Proceeds from options
exercised
|
|
|
15,322
|
|
|
39,181
|
|
|
—
|
|
|
54,503
|
|
|
—
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(62,214)
|
|
|
(34,841)
|
|
|
(931)
|
|
|
(97,055)
|
|
|
(2,319)
|
|
Net cash provided by
(used in) financing activities
|
|
|
14,264
|
|
|
37,990
|
|
|
(934)
|
|
|
52,254
|
|
|
(2,393)
|
|
Effect of exchange rate changes on cash and cash
equivalents
|
|
|
27
|
|
|
779
|
|
|
(3,753)
|
|
|
806
|
|
|
(3,910)
|
|
Net increase (decrease)
in cash and cash equivalents and restricted cash
|
|
|
210,877
|
|
|
(90,228)
|
|
|
(173,749)
|
|
|
120,649
|
|
|
(141,749)
|
|
Cash and cash
equivalents and restricted cash, beginning of period
|
|
|
265,324
|
|
|
355,552
|
|
|
388,438
|
|
|
355,552
|
|
|
356,438
|
|
Cash and cash
equivalents and restricted cash, end of period
|
|
$
|
476,201
|
|
$
|
265,324
|
|
$
|
214,689
|
|
$
|
476,201
|
|
$
|
214,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
SELECTED CASH FLOW
INFORMATION
(Unaudited)
(in
thousands)
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
30 JUN 2023
|
|
31 MAR 2023
|
|
30 JUN 2022
|
|
30 JUN 2023
|
|
30 JUN 2022
|
Net cash provided by
(used in) operating activities
|
|
$
|
42,656
|
|
$
|
(56,323)
|
|
$
|
19,376
|
|
$
|
(13,667)
|
|
$
|
63,340
|
Purchases of property
and equipment
|
|
|
(13,137)
|
|
|
(8,513)
|
|
|
(12,749)
|
|
|
(21,650)
|
|
|
(29,847)
|
Purchases of intangible
assets
|
|
|
(62)
|
|
|
(125)
|
|
|
(67)
|
|
|
(187)
|
|
|
(104)
|
Free cash flow, a
non-GAAP measure
|
|
$
|
29,457
|
|
$
|
(64,961)
|
|
$
|
6,560
|
|
$
|
(35,504)
|
|
$
|
33,389
|
Bond premium
amortization
|
|
|
4,146
|
|
|
3,890
|
|
|
(142)
|
|
|
8,036
|
|
|
(301)
|
Net campus
investment
|
|
|
290
|
|
|
1,012
|
|
|
3,543
|
|
|
1,302
|
|
|
8,760
|
Adjusted free cash
flow, a non-GAAP measure
|
|
$
|
33,893
|
|
$
|
(60,059)
|
|
$
|
9,961
|
|
$
|
(26,166)
|
|
$
|
41,848
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
SUPPLEMENTAL
TABLES
(in
thousands)
|
|
|
|
30 JUN 2023
|
|
31 DEC 2022
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
474,203
|
|
$
|
353,684
|
Short-term
investments
|
|
|
594,942
|
|
|
581,769
|
Long-term
investments
|
|
|
15,481
|
|
|
156,207
|
Cash and cash
equivalents and investments, net
|
|
|
1,084,626
|
|
|
1,091,660
|
Convertible notes,
principal amount
|
|
|
(690,000)
|
|
|
(690,000)
|
Total cash and cash
equivalents and investments, net of convertible notes
|
|
$
|
394,626
|
|
$
|
401,660
|
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
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SOURCE Axon