SCOTTSDALE, Ariz., Nov. 5, 2020 /PRNewswire/ --
Dear Shareholders,
As 2020 enters the final stretch, Axon is on track to exit the
year strong. We are pleased to report a surge in momentum in our
business in the third quarter. We drove bookings[1]
growth of 62% sequentially and 56% year over year, aided by robust
North American demand for body cameras and cloud software, and a
rebound in TASER demand driven by the US federal and corrections
markets. High-margin annual recurring revenue topped $200 million, doubling in two years' time. And we
are on track to exceed our original 2020 financial targets — which
is a testament to the mental toughness and dedication of our teams
and the market's reception to our products that solve real
problems.
In February, we told investors that our strategic priorities in
2020 included continuing to execute in our core market, while
expanding to new customer segments and accelerating our
path-to-market in new product categories. We are pleased to be
executing to plan, even amid the economic and logistical challenges
presented by the pandemic.
The following two areas of strength are the direct result of
accelerated investments in the US federal law enforcement channel
and the development of real-time command-and-control software for
public safety.
[1] Bookings represents the total expected revenue
contribution of contracts signed in the quarter that have a
five-year length or shorter. We further define this metric under
"Statistical Definitions."
U.S. federal customers generate $38
million in quarterly bookings
We are thrilled to report rapid progress in the federal market.
As a result of targeted investments in building direct
relationships with federal customers, we achieved a record
$38 million in bookings from federal
customers in the third quarter, up 400% year over year. Our
successes include the following new programs and contracts, many of
which are firsts for Axon:
- We established our first two programs of record with the
federal government, including a $13
million U.S. Customs and Border Protection order for body
cameras and digital evidence management. A program of record is a
key milestone because it specifies an appropriated line item in the
US discretionary budget. Previously, Axon mainly leveraged
distributors for sales into the federal government.
- We signed our first indefinite delivery, indefinite quantity
(IDIQ) contract with a federal agency. This type of contract
establishes product pricing along with a contract ceiling.
- We signed our first Officer Safety Plan contract with a federal
agency. Officer Safety Plan is our integrated subscription bundle
that includes TASER 7, Axon Body 3, and a host of cloud software
features to empower an agency. This early achievement gives us
confidence that the integrated subscription bundle that has proven
popular with municipal law enforcement may also be valuable to the
federal adjacency.
- We sold body cameras and digital evidence management for the
first time to the Department of Defense. We have primarily
communicated our bullishness regarding Axon's ability to sell to
federal civilian law enforcement. Selling to the DoD further
expands Axon's federal total addressable market.
- We signed our largest TASER contract in company history, valued
at $15.5 million, within the
Department of Homeland Security.
We announced Axon Respond, our end-to-end platform to power
real-time operations
We introduced Axon Respond to the industry at our August user
conference. Although we have talked generally with the investment
community about our growing suite of dispatch and communications
products, the launch of Respond represented our first formal
communication to customers about the availability of
"real-time operations" — a broader vision for the category. We are
now building a book of business for the platform, which comprises a
modern cloud-based dispatch system, communications capabilities,
real-time situational awareness through GPS-and-LTE-enabled body
cameras, in-car cameras and drones, and integrated light bar and
weapon deployment signals, giving everyone a real-time map of what
is happening. It is accessible from any device, and is built to
evolve, unlike legacy on-premises systems.
The Respond platform is made up of several products that work
together and are integrated with Axon's software suite, which
includes digital evidence management and Axon Records. Our teams
built this platform after conducting more than 1,000 hours of
customer research, which uncovered several consistent problems with
legacy 911 dispatching operations: Basic usability falls short of
modern software design standards that most consumers take for
granted, on-premise legacy systems are inherently less reliable
than the modern cloud, and upgrades and performance improvements
are complex and infrequent rather than seamless and ongoing.
Delayed responses in 911 can be caused by delayed situational
awareness — a gap between an event occurring and the system of
responders being able to react to the development. Also, officers
often have to juggle a rat's nest of tools — cobbled together from
consumer applications, dispatching applications, texting and
radio.
We have a growing number of customers using components of
Respond. And many agencies are using it regularly as part of their
routine police work. In a recent survey of more than 200 users by
TechValidate, 90% said that Respond has had a "positive" or
"extremely" positive impact on officer safety. Respond is also
driving situational awareness, efficiency of daily command
operations, and improving relationships with communities.
In the past month, more than 200 agencies have used Respond for
Devices (previously referred to as Axon Aware), which is the
GPS-enabled service that pairs with the Axon Body 3 camera.
Customers include the Atlanta and
Cincinnati police departments and
Toronto Police Service. In
addition, over the past six months, we have seen a 6x increase in
usage of live-streaming with Respond for Devices.
In April, Arizona's
City of Maricopa Police Department
moved over from a competitor and went live on Axon's cloud-based
computer aided dispatch (CAD) solution to power their 911 incident
response — representing our first Dispatch customer. We are
encouraged by the pipeline of additional Dispatch customers, as we
aim to be first in the category in the coming years.
International expansion continues:
Recent milestones in our international expansion include the
Toronto Police Service's
deployment of Axon body cameras, the London Metropolitan Police's upgrade to Axon
Body 3 cameras, government approval to sell TASER 7 in the UK, and
the first major agency in Ukraine
purchasing TASER devices.
International revenue of $23
million in the quarter represented 15% year-over-year growth
and reflected typical third quarter seasonality. Year-to-date
international revenue is up 43%.
"Deciding to go with an Axon
body camera program was the best decision for Toronto Police Service because the cameras are
just part of the bigger picture. The real value is within the
digital evidence management solution, which will allow us to manage
and share evidence with ease, speed and less costs." --Toronto Police Service Superintendent
Michael Barsky
"The National Police of
Ukraine will start using TASER
(devices) for its operations, which is a completely new tool for
law enforcement agencies in our country. We have carefully studied
the usage of these devices globally and believe that equipping our
units with this innovative device will make them more effective in
protecting the rule of law and civil order. We look forward to a
long-term partnership with Axon and to truly harnessing the power
of their network." --Deputy Minister of Internal Affairs of
Ukraine, Mr. Anton Gerashchenko
Environmental, Social & Governance (ESG) update
Axon is a mission-driven company whose overarching goal is to
protect life. Our vision is a world where bullets are obsolete,
where social conflict is dramatically reduced, and where everyone
has access to a fair and effective justice system. We continue to
strengthen our focus on ESG.
We see 100% of our revenues as generated by products and
solutions that support the UN Sustainable Development Goals,
particularly goals 5, 9, 11 and 16. These goals seek to achieve
gender equality, build resilient infrastructure and foster
innovation, promote safe living conditions in urban areas, reduce
violence and death rates, promote the rule of law to ensure
everyone equal access to justice, and develop effective,
accountable and transparent institutions.
Following the death of George
Floyd and this summer's social unrest, Axon became one of
the first companies to announce an action plan, including a
commitment to help public safety agencies in their work to address
systemic inequity, racism, and injustice. As part of this
commitment, Axon added a new strategic goal to our mission — to
center racial equity, diversity, and inclusion.
On October 28, we unveiled our
first eight product features developed in direct support of this
goal, which we built through a company-wide initiative called
Sprint for Justice. The features focus on transparency, truth and
officer development, and aim to reduce violence and social
conflict. Importantly, they increase officer accountability with
features such as automatically prioritizing body camera videos
selected for random audits based on events such as unholstering a
TASER device or spoken keywords from the AI-powered transcription
of the audio, a use of force dashboard, virtual reality training to
assist in handling high-stakes situations like peer intervention,
and replay coaching to revisit body camera footage and promote
ongoing learning and development.
Summary of Q3 2020 results:
- Revenue of $166 million grew 27%
year over year, with broad-based strength driven by demand for
almost all product lines.
- Gross margin of 59.0% reflected a favorable product mix
relative to our expectations. Shipments of low-to-no margin body
camera hardware, which we previously communicated, had about 400
basis points of negative gross margin impact in the quarter.
- Operating expenses of $104
million included $26 million
in stock-based compensation expense and $8.6
million in costs related to FTC litigation. (An update on
the FTC litigation is below, under "Update on Legal Matters.")
-
- SG&A of $74 million included
$19 million in stock-based
compensation expense.
- R&D included $6 million in
stock-based compensation expense.
- Although Axon recognized $17
million in expenses that were particularly related to our
innovative stock-based compensation plans in the third quarter, no
employees or executives have received shares, because no
operational milestones have been achieved. Costs are recognized
under these plans when future milestones are considered probable of
achievement. For more details about these innovative stock-based
compensation plans, which were approved by shareholders and align
the interests of management and employees with shareholders, please
see our online FAQ at investor.axon.com.
- GAAP EPS was ($0.01) based on a
net loss of $1 million; and Non-GAAP
EPS was $0.40.
- Quarterly Adjusted EBITDA grew 40% year over year. Adjusted
EBITDA of $34 million represented a
20% margin on revenue.
- Cash and cash equivalents and investments totaled $628 million at September
30, 2020.
-
- Uses of cash in the third quarter included:
-
- $54 million to purchase a parcel
of land in Scottsdale from the
Arizona State Land Department at auction, on which we intend to
construct our new manufacturing and office facility. We aim to
consolidate five locations and bring more automation to future
generations of product hardware. We require physical facilities for
not only manufacturing, but also hardware R&D, testing
laboratories, wireless calibration, quality testing, and a variety
of other functions that require physical collaboration. This land
investment provides long-term flexibility, optionality and
stability for our physical plant operations, and supports Axon's
growth and expansion plans for the next several decades. The
acquired land is walking distance from Axon's current headquarters
and manufacturing operations, giving us flexibility to migrate key
manufacturing infrastructure over time, with the benefits of
minimal business disruption and operational redundancy.
- $16 million tied to building up
inventory, which helped us respond to strong product demand while
preparing us to stagger factory work schedules due to COVID-19, and
prepares us for large shipments in the coming weeks.
-
- As we first indicated in May, our elevated inventory build over
the course of 2020 is a proactive approach to building safety stock
in an effort to minimize shipping disruptions. We are committed to
working through COVID-19 supply chain challenges as they arise to
support our customers and deliver mission critical equipment.
- Finished goods inventory totaled $55
million at third quarter end, including TASER devices due
for customer shipments in Q4 2020.
- $15 million increase in contract
assets tied to selling long-term hardware subscriptions, which
results in recognizing revenue when we deliver hardware to our
customers ahead of invoicing for the full value of that
hardware.
- Axon has zero debt.
Financial commentary by segment:
TASER
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
84,406
|
|
|
$
|
70,490
|
|
|
$
|
71,743
|
|
|
19.7
|
%
|
|
17.7
|
%
|
Gross
margin
|
|
|
62.9
|
%
|
|
|
61.4
|
%
|
|
|
63.1
|
%
|
|
150
|
bp
|
|
(20)
|
bp
|
- TASER segment revenue of $84
million reflected robust demand for devices, cartridges, and
officer training.
- Gross margin increased to 62.9% due to lower discounting and
higher-margin training revenue. As higher percentages of our TASER
units are sold in integrated bundles, we realize a lower gross
margin on the TASER units upon shipment than selling stand-alone,
but higher gross profit over the life of the subscription. As we
note in the next section, the percentage of TASER units sold on a
subscription bundle surged to 75% in the quarter, reflecting the
value that customers see in our subscription bundles, and our
efforts to evolve TASER from a book-and-ship hardware product to a
subscription-based de-escalation platform that includes cloud
software and training.
Software & Sensors
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Axon Cloud net
sales
|
|
$
|
45,462
|
|
|
$
|
41,891
|
|
|
$
|
34,021
|
|
|
8.5
|
%
|
|
33.6
|
%
|
Axon Cloud gross
margin
|
|
|
77.1
|
%
|
|
|
77.9
|
%
|
|
|
75.8
|
%
|
|
(80)
|
bp
|
|
130
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensors and Other net
sales
|
|
$
|
36,574
|
|
|
$
|
28,878
|
|
|
$
|
25,073
|
|
|
26.7
|
%
|
|
45.9
|
%
|
Sensors and Other
gross margin
|
|
|
27.5
|
%
|
|
|
42.6
|
%
|
|
|
36.4
|
%
|
|
(1,510)
|
bp
|
|
(890)
|
bp
|
- Axon Cloud revenue grew 34% year over year and reflected strong
domestic demand for our growing software suite.
- Axon Cloud gross margin of 77% includes some low-to-no margin
professional services that support new installations for SaaS
customers. The software-only revenue in this segment, which
includes cloud storage and compute costs, has consistently carried
a gross margin above 80%.
- Sensors & Other revenue grew 46% year over year on strong
demand for Axon Body 3 cameras.
- Sensors & Other gross margin was 27.5%. As a reminder, we
manage toward a 25% gross margin for camera and sensors hardware,
and the gross margin will fluctuate quarter to quarter depending on
the customer mix. In the third quarter, we shipped Axon Body 3
cameras at low-to-no margin to our largest customers. We expect
Sensors & Other gross margin in Q4 2020 to be about flat with
Q3 as we complete shipments to our largest customers.
Forward-looking performance indicators:
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
31 MAR
2020
|
|
31 DEC 2019
|
|
30 SEP 2019
|
|
|
($
in thousands)
|
|
Annual recurring
revenue (1)
|
|
$
|
203,815
|
|
|
$
|
183,498
|
|
|
$
|
173,919
|
|
|
$
|
161,277
|
|
|
$
|
141,540
|
|
Net revenue retention
(2)
|
|
|
120
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
121
|
%
|
|
|
*
|
|
Total company
future
contracted revenue (2)
|
|
$
|
1,510,000
|
|
|
$
|
1,340,000
|
|
|
$
|
1,274,000
|
|
|
$
|
1,230,000
|
|
|
$
|
1,130,000
|
|
Percentage of
TASER
devices sold on a recurring
payment plan
|
|
|
75
|
%
|
|
|
46
|
%
|
|
|
43
|
%
|
|
|
58
|
%
|
|
|
55
|
%
|
_____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Monthly recurring license, integration, warranty, and storage
revenue annualized.
|
(2)
Refer to "Statistical Definitions" below.
|
* Not
disclosed.
|
- Annual Recurring Revenue ("ARR") grew 44% year over year to
$204 million — and we've doubled our
ARR in two years from $102 million in
Q3 2018. The record sequential ARR increase of $20 million reflects customer demand for our
growing suite of software tools.
- Net revenue retention was 120% in the quarter, reflecting our
ability to walk customers up the value chain over time and our de
minimis annual churn rates. We drive adoption of our cloud software
solutions through integrated bundling. We are seeing major cities
upgrading their subscriptions at individual net dollar retention
rates of 150% to 300% to take advantage of our growing suite of
productivity and digital evidence management tools. Our agency
customers often sign up for five to ten-year subscriptions. This
SaaS metric purposely excludes the hardware portion of customer
subscriptions. We further define this metric under "Statistical
Definitions."
- Total company future contracted revenue grew to $1.51 billion. See definition of this metric
under "Statistical Definitions."
- The percentage of TASER devices sold on a subscription rose to
a record 75% in the quarter, reflecting the value that customers
see in our integrated subscription bundles and our efforts to
evolve TASER from a book-and-ship hardware product to a
subscription-based de-escalation platform that includes cloud
software and training.
Outlook:
The following forward-looking statements reflect Axon's
expectations as of November 5, 2020,
and are subject to uncertainty due to the COVID-19 pandemic.
- We are tracking to Q4 2020 revenue of $175 million to $185
million, which implies full-year revenue of $630 million to $640
million. The outperformance versus our original 2020 revenue
expectation of $615 million to
$625 million reflects strength across
the business, as well as growing customer diversification,
particularly in the US federal and international markets.
- We expect to see fourth quarter gross margins in line with the
third quarter.
- We expect to achieve Adjusted EBITDA in Q4 2020 of $30 million to $35
million, which implies full year Adjusted EBITDA of about
$122 million to $127 million. This outlook exceeds our original
expectation of $100 million to
$105 million and reflects revenue
outperformance and related expense leverage, and travel and event
cost savings of approximately $12
million.
-
- We provide Adjusted EBITDA guidance, rather than net income
guidance, due to the inherent difficulty of forecasting certain
types of expenses such as stock-based compensation and income tax
expenses, which affect net income but do not affect Adjusted
EBITDA. We are unable to reasonably estimate the impact of such
expenses, if any, on net income. Accordingly, we do not provide a
reconciliation of projected net income to projected Adjusted
EBITDA.
- We expect stock-based compensation expense to be at least
$107 million for the full year.
However, as our stock-based compensation expense may increase
significantly based on increases in the probability of attaining
certain operational metrics and with acceleration in the expected
timing of such attainment, it is inherently difficult to forecast
future stock-based compensation expense.
- Earlier this year we shared our plans to invest in our channel,
product and support infrastructure as we look to scale the business
to $1 billion in revenue and beyond.
These investments yielded results ahead of our expectations, as
evidenced by our strengthened outlook for 2020. We intend to
continue these types of investments in 2021. Our initial view of
the business in 2021 includes $720
million to $750 million in
revenue with $120 million to
$130 million in Adjusted EBITDA. We
are extremely proud of the high level of execution from our teams
that has set us up for continued strength on the top-line and
margin performance consistent with a COVID-normalized expense
profile.
The impact of COVID-19 remains fluid, although we believe we
sell products that meet a critical need. Reductions in economic
activity could bring renewed caution from police departments on
budgeting. Similar to our communication in our August update, we
are not seeing changes in buying activity due to police defunding
concerns. We have seen some anecdotal acceleration of body camera
buying decisions due to agencies wishing to provide transparency to
their communities.
Thank you for your engagement and investment in Axon.
Signed,
Rick Smith, CEO
Luke Larson, President
Jawad Ahsan, CFO
Quarterly conference call and webcast
We will host our Q3 2020 earnings conference call on
Thursday, November 5 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
(https://investor.axon.com/), or can be accessed directly via
https://axon.zoom.us/j/93010191090.
Statistical Definitions
Bookings: We consider bookings to be a statistical measure
defined as the sales price of orders (not invoiced sales),
including contractual optional periods we expect to be exercised,
net of cancellations, inclusive of renewals, placed in the relevant
fiscal period, regardless of when the products or services
ultimately will be provided, so long as they are expected to occur
within five years. Most bookings will be invoiced in subsequent
periods. Due to municipal government funding rules, in some cases
certain of the future period amounts included in bookings are
subject to budget appropriation or other contract cancellation
clauses. Although we have entered into contracts for the delivery
of products and services in the future and anticipate the contracts
will be fulfilled, if agencies do not exercise contractual options,
do not appropriate funds in future year budgets, or do enact a
cancellation clause, revenue associated with these bookings may not
ultimately be recognized, resulting in a future reduction to
bookings. Bookings, as presented here, represent total company
bookings inclusive of all products, and should not be confused with
our historical reported measure of Software & Sensors bookings,
which excluded TASER-related bookings. Certain customers sign
contracts for time periods longer than five-years, which generates
a larger-sized booking — but the expected exercise amounts after
the five-year period is not included in bookings, as described
here, in order to facilitate comparisons between periods.
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 but purposely excludes the
lower-margin hardware subscription contingent 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 SEC filings.
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 September 30, 2020. We expect
to recognize between 20% - 25% of this balance over the next twelve
months, and generally expect the remainder to be recognized over
the following five to seven 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 and 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 and pre-tax certain other items (described
below).
- Non-GAAP Net Income (Most comparable GAAP Measure: Net income)
- Net income excluding the costs of non-cash stock-based
compensation and excluding pre-tax certain other items, including,
but not limited to, net gain/loss/write-down/disposal/abandonment
of property, equipment and intangible assets; loss on impairment;
costs related to business acquisitions and investments in
unconsolidated affiliates; and costs related to the FTC litigation.
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, intangible assets and
cash flows related to business acquisitions and other equity
investments.
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 the global leader in connected public safety
technologies. We are a mission-driven company whose
overarching goal is to protect life. Our vision is a world where
bullets are obsolete, where social conflict is dramatically
reduced, where everyone has access to a fair and effective justice
system and where racial equity, diversity and inclusion is centered
in all of our work. Axon is also a leading provider of body cameras
for US law enforcement, providing more transparency and
accountability to communities than ever before.
You may learn about our Environmental, Social, and Governance
(ESG) and Corporate Social Responsibility (CSR) efforts by reading
our ESG disclosure at investor.axon.com.
We work hard for those who put themselves in harm's way for all
of us. More than 236,000 lives and countless dollars have been
saved with the Axon network of devices, apps and people. Learn more
at www.axon.com or by calling (800) 978-2737. Axon is a global
company with headquarters in Scottsdale,
Ariz., and a global software engineering hub in Seattle, Wash., as well as additional offices
in the US, Australia, Canada, Finland, Vietnam, the UK and the Netherlands.
Facebook is a trademark of Facebook, Inc.; LTE is a trademark of
the European Telecommunications Standards Institute; TechValidate
is a trademark of Surveymonkey, Inc.; Twitter is a trademark of
Twitter, Inc. and Zoom is a trademark of Zoom Video Communications,
Inc. Axon, TASER, TASER 7, 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. © 2020 Axon Enterprise, Inc. All rights
reserved.
Follow Axon here:
- Axon on Twitter: https://twitter.com/axon_us
- Axon on Facebook:
https://www.facebook.com/Axon.ProtectLife/
Forward-looking statements
Forward-looking statements in this letter include, without
limitation, statements regarding: the impact of the COVID-19
pandemic; proposed products and services and related development
efforts and activities; expectations about the market for our
current and future products and services; strategies and trends
relating to subscription plan programs and revenues; strategies and
trends, including the benefits of, research and development
investments; the timing and realization of future contracted
revenue; expectations about customer behavior; statements
concerning projections, predictions, expectations, estimates or
forecasts as to our business, financial and operational results and
future economic performance, including our outlook for fourth
quarter 2020 revenue, gross margin, adjusted EBITDA, and
stock-based compensation expense, and full year 2021 revenue;
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 Form 10–K for the
year ended December 31, 2019. 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: the potential global
impacts of the COVID-19 pandemic; our exposure to cancellations of
government contracts due to appropriation clauses, exercise of a
cancellation clause, or non-exercise of contractually optional
periods; 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 manage our supply chain and avoid production delays,
shortages, and impacts to expected gross margins; the impact of
stock 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 regarding our products; the impact of
product mix on projected gross margins; defects in our products;
changes in the costs of product components and labor; loss of
customer data, a breach of security, or an extended outage,
including our reliance on 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 and to evolving regulations surrounding privacy and data
protection; our ability to integrate acquired businesses; our
ability to attract and retain key personnel; 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. Our Annual Report on Form 10-K and our
Quarterly Reports on Form 10-Q 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 under the heading "Risk Factors" in the Annual Report on
Form 10-K and in the 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.
Update on Legal Matters:
Axon v. FTC
Axon continues to both vigorously prosecute its Federal court
case against the FTC and defend the FTC's separate administrative
action against the company.
The FTC's administrative hearing that was scheduled to begin on
October 13, 2020 has been put on
temporary hold by the Federal court of appeals.
As background, Axon's Federal court constitutional challenge
against the FTC was dismissed in April, without prejudice, for lack
of jurisdiction, holding that Axon must first bring its claims
through the FTC's administrative process. Axon appealed that ruling
to the Ninth Circuit Court of Appeals (No. 20-15662), which granted
expedited consideration and held oral argument on July 17, 2020. On October
2, 2020, the Ninth Circuit stayed the FTC administrative
hearing to preserve the status quo pending its ruling on Axon's
appeal on the merits.
Copies of Axon's Federal court filings, including its most
recent appellate brief, can be found on Axon's FTC Investor
Briefing page at https://www.axon.com/ftc.
As a reminder, in parallel to these matters Axon is evaluating
strategic alternatives to litigation, which Axon might pursue if
determined to be in the best interests of shareholders and
customers. This could include a divestiture of the Vievu entity
and/or related assets. While Axon continues to believe the
acquisition of Vievu in 2018 was lawful and a benefit to Vievu's
customers, the cost, risk and distraction of protracted litigation
merit consideration of settlement if achievable on terms agreeable
to the FTC and Axon.
For investor relations information please contact Andrea James via email at IR@axon.com.
AXON
ENTERPRISE, INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(in thousands,
except per share data)
|
|
|
|
THREE MONTHS ENDED
|
|
NINE MONTHS ENDED
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
30 SEP
2020
|
|
30 SEP
2019
|
Net sales from
products
|
|
$
|
120,091
|
|
$
|
98,755
|
|
$
|
96,497
|
|
$
|
326,134
|
|
$
|
264,977
|
Net sales from
services
|
|
|
46,351
|
|
|
42,504
|
|
|
34,340
|
|
|
128,729
|
|
|
94,032
|
Net sales
|
|
|
166,442
|
|
|
141,259
|
|
|
130,837
|
|
|
454,863
|
|
|
359,009
|
Cost of product
sales
|
|
|
57,798
|
|
|
43,825
|
|
|
42,445
|
|
|
150,507
|
|
|
120,265
|
Cost of service
sales
|
|
|
10,404
|
|
|
9,257
|
|
|
8,223
|
|
|
29,331
|
|
|
24,098
|
Cost of
sales
|
|
|
68,202
|
|
|
53,082
|
|
|
50,668
|
|
|
179,838
|
|
|
144,363
|
Gross
margin
|
|
|
98,240
|
|
|
88,177
|
|
|
80,169
|
|
|
275,025
|
|
|
214,646
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
74,443
|
|
|
72,293
|
|
|
48,424
|
|
|
209,763
|
|
|
134,678
|
Research and
development
|
|
|
29,246
|
|
|
29,560
|
|
|
25,129
|
|
|
85,187
|
|
|
71,976
|
Total operating
expenses
|
|
|
103,689
|
|
|
101,853
|
|
|
73,553
|
|
|
294,950
|
|
|
206,654
|
Income (loss) from
operations
|
|
|
(5,449)
|
|
|
(13,676)
|
|
|
6,616
|
|
|
(19,925)
|
|
|
7,992
|
Interest and other
income, net
|
|
|
2,040
|
|
|
1,613
|
|
|
1,820
|
|
|
4,594
|
|
|
5,978
|
Income (loss) before
provision for income taxes
|
|
|
(3,409)
|
|
|
(12,063)
|
|
|
8,436
|
|
|
(15,331)
|
|
|
13,970
|
Provision for
(benefit from) income taxes
|
|
|
(2,536)
|
|
|
18,696
|
|
|
2,332
|
|
|
12,227
|
|
|
709
|
Net income
(loss)
|
|
$
|
(873)
|
|
$
|
(30,759)
|
|
$
|
6,104
|
|
$
|
(27,558)
|
|
$
|
13,261
|
Net income (loss) per
common and common
equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01)
|
|
$
|
(0.51)
|
|
$
|
0.10
|
|
$
|
(0.45)
|
|
$
|
0.22
|
Diluted
|
|
$
|
(0.01)
|
|
$
|
(0.51)
|
|
$
|
0.10
|
|
$
|
(0.45)
|
|
$
|
0.22
|
Weighted average
number of common and
common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
63,496
|
|
|
60,346
|
|
|
59,278
|
|
|
61,159
|
|
|
59,128
|
Diluted
|
|
|
63,496
|
|
|
60,346
|
|
|
60,059
|
|
|
61,159
|
|
|
59,938
|
AXON
ENTERPRISE, INC.
|
SEGMENT
REPORTING
|
(Unaudited)
|
(dollars in
thousands)
|
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
30 SEP
2020
|
|
|
30 JUN
2020
|
|
|
30 SEP
2019
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from
products (1)
|
|
$
|
83,517
|
|
|
$
|
36,574
|
|
|
$
|
120,091
|
|
|
$
|
69,877
|
|
|
$
|
28,878
|
|
|
$
|
98,755
|
|
|
$
|
71,424
|
|
|
$
|
25,073
|
|
|
$
|
96,497
|
|
Net sales from
services (2)
|
|
|
889
|
|
|
|
45,462
|
|
|
|
46,351
|
|
|
|
613
|
|
|
|
41,891
|
|
|
|
42,504
|
|
|
|
319
|
|
|
|
34,021
|
|
|
|
34,340
|
|
Net sales
|
|
|
84,406
|
|
|
|
82,036
|
|
|
|
166,442
|
|
|
|
70,490
|
|
|
|
70,769
|
|
|
|
141,259
|
|
|
|
71,743
|
|
|
|
59,094
|
|
|
|
130,837
|
|
Cost of product
sales
|
|
|
31,297
|
|
|
|
26,501
|
|
|
|
57,798
|
|
|
|
27,242
|
|
|
|
16,583
|
|
|
|
43,825
|
|
|
|
26,504
|
|
|
|
15,941
|
|
|
|
42,445
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
10,404
|
|
|
|
10,404
|
|
|
|
—
|
|
|
|
9,257
|
|
|
|
9,257
|
|
|
|
—
|
|
|
|
8,223
|
|
|
|
8,223
|
|
Cost of
sales
|
|
|
31,297
|
|
|
|
36,905
|
|
|
|
68,202
|
|
|
|
27,242
|
|
|
|
25,840
|
|
|
|
53,082
|
|
|
|
26,504
|
|
|
|
24,164
|
|
|
|
50,668
|
|
Gross
margin
|
|
|
53,109
|
|
|
|
45,131
|
|
|
|
98,240
|
|
|
|
43,248
|
|
|
|
44,929
|
|
|
|
88,177
|
|
|
|
45,239
|
|
|
|
34,930
|
|
|
|
80,169
|
|
Gross margin
%
|
|
|
62.9
|
%
|
|
|
55.0
|
%
|
|
|
59.0
|
%
|
|
|
61.4
|
%
|
|
|
63.5
|
%
|
|
|
62.4
|
%
|
|
|
63.1
|
%
|
|
|
59.1
|
%
|
|
|
61.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
3,355
|
|
|
|
25,891
|
|
|
|
29,246
|
|
|
|
3,762
|
|
|
|
25,798
|
|
|
|
29,560
|
|
|
|
3,485
|
|
|
|
21,644
|
|
|
|
25,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
|
|
|
NINE MONTHS ENDED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 SEP
2020
|
|
|
30 SEP
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from
products (1)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
228,569
|
|
|
$
|
97,565
|
|
|
$
|
326,134
|
|
|
$
|
197,148
|
|
|
$
|
67,829
|
|
|
$
|
264,977
|
|
Net sales from
services (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
2,222
|
|
|
|
126,507
|
|
|
|
128,729
|
|
|
|
558
|
|
|
|
93,474
|
|
|
|
94,032
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
230,791
|
|
|
|
224,072
|
|
|
|
454,863
|
|
|
|
197,706
|
|
|
|
161,303
|
|
|
|
359,009
|
|
Cost of product
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
88,787
|
|
|
|
61,720
|
|
|
|
150,507
|
|
|
|
74,044
|
|
|
|
46,221
|
|
|
|
120,265
|
|
Cost of service
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
29,331
|
|
|
|
29,331
|
|
|
|
—
|
|
|
|
24,098
|
|
|
|
24,098
|
|
Cost of
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
88,787
|
|
|
|
91,051
|
|
|
|
179,838
|
|
|
|
74,044
|
|
|
|
70,319
|
|
|
|
144,363
|
|
Gross
margin
|
|
|
|
|
|
|
|
|
|
|
|
|
142,004
|
|
|
|
133,021
|
|
|
|
275,025
|
|
|
|
123,662
|
|
|
|
90,984
|
|
|
|
214,646
|
|
Gross margin
%
|
|
|
|
|
|
|
|
|
|
|
|
|
61.5
|
%
|
|
|
59.4
|
%
|
|
|
60.5
|
%
|
|
|
62.5
|
%
|
|
|
56.4
|
%
|
|
|
59.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
|
|
|
|
|
|
|
|
|
|
10,149
|
|
|
|
75,038
|
|
|
|
85,187
|
|
|
|
10,284
|
|
|
|
61,692
|
|
|
|
71,976
|
|
______________________
|
(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, 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 revenue.
|
AXON
ENTERPRISE, INC.
|
UNIT SALES
STATISTICS
|
(Unaudited)
|
Units in whole
numbers
|
|
|
|
THREE MONTHS ENDED
|
|
|
NINE MONTHS ENDED
|
|
|
|
30
SEP
|
|
30
SEP
|
|
Unit
|
|
Percent
|
|
|
30
SEP
|
|
30
SEP
|
|
Unit
|
|
Percent
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
|
TASER 7
|
|
15,908
|
|
17,674
|
|
(1,766)
|
|
(10.0)
|
%
|
|
36,352
|
|
34,644
|
|
1,708
|
|
4.9
|
%
|
TASER X26P
|
|
8,119
|
|
10,766
|
|
(2,647)
|
|
(24.6)
|
|
|
26,780
|
|
35,244
|
|
(8,464)
|
|
(24.0)
|
|
TASER X2
|
|
10,078
|
|
9,819
|
|
259
|
|
2.6
|
|
|
33,656
|
|
29,439
|
|
4,217
|
|
14.3
|
|
TASER
Pulse
|
|
12,811
|
|
3,923
|
|
8,888
|
|
226.6
|
|
|
21,501
|
|
8,807
|
|
12,694
|
|
144.1
|
|
Cartridges
|
|
852,980
|
|
566,347
|
|
286,633
|
|
50.6
|
|
|
2,441,612
|
|
1,789,084
|
|
652,528
|
|
36.5
|
|
Axon Body
|
|
62,873
|
|
22,037
|
|
40,836
|
|
185.3
|
|
|
137,803
|
|
68,231
|
|
69,572
|
|
102.0
|
|
Axon Flex
|
|
3,175
|
|
5,409
|
|
(2,234)
|
|
(41.3)
|
|
|
8,213
|
|
12,508
|
|
(4,295)
|
|
(34.3)
|
|
Axon Fleet
|
|
2,396
|
|
2,967
|
|
(571)
|
|
(19.2)
|
|
|
7,399
|
|
7,143
|
|
256
|
|
3.6
|
|
Axon Dock
|
|
9,165
|
|
3,724
|
|
5,441
|
|
146.1
|
|
|
19,096
|
|
12,126
|
|
6,970
|
|
57.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
|
(Unaudited)
|
Dollars in
thousands
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
30 SEP
2020
|
|
30 SEP
2019
|
|
EBITDA and
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(873)
|
|
$
|
(30,759)
|
|
$
|
6,104
|
|
$
|
(27,558)
|
|
$
|
13,261
|
|
Depreciation and
amortization
|
|
|
3,133
|
|
|
2,930
|
|
|
2,709
|
|
|
8,944
|
|
|
8,196
|
|
Interest
expense
|
|
|
32
|
|
|
5
|
|
|
4
|
|
|
44
|
|
|
27
|
|
Investment interest
income
|
|
|
(965)
|
|
|
(1,499)
|
|
|
(1,647)
|
|
|
(3,157)
|
|
|
(5,280)
|
|
Provision for (benefit
from) income taxes
|
|
|
(2,536)
|
|
|
18,696
|
|
|
2,332
|
|
|
12,227
|
|
|
709
|
|
EBITDA
|
|
$
|
(1,209)
|
|
$
|
(10,627)
|
|
$
|
9,502
|
|
$
|
(9,500)
|
|
$
|
16,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
26,094
|
|
$
|
33,835
|
|
$
|
13,663
|
|
$
|
80,124
|
|
$
|
30,195
|
|
Transaction costs
related to investment in
unconsolidated affiliate
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
923
|
|
|
—
|
|
Loss on disposal and
abandonment of
intangible assets
|
|
|
139
|
|
|
100
|
|
|
33
|
|
|
252
|
|
|
51
|
|
Loss on disposal and
impairment of
property and equipment, net
|
|
|
124
|
|
|
788
|
|
|
845
|
|
|
1,429
|
|
|
2,408
|
|
Costs related to FTC
litigation
|
|
|
8,573
|
|
|
3,834
|
|
|
—
|
|
|
18,542
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
33,721
|
|
$
|
28,020
|
|
$
|
24,043
|
|
$
|
91,770
|
|
$
|
49,567
|
|
Net income (loss) as
a percentage of net
sales
|
|
|
(0.5)
|
%
|
|
(21.8)
|
%
|
|
4.7
|
%
|
|
(6.1)
|
%
|
|
3.7
|
%
|
Adjusted EBITDA as
a percentage of net
sales
|
|
|
20.3
|
%
|
|
19.8
|
%
|
|
18.4
|
%
|
|
20.2
|
%
|
|
13.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
744
|
|
$
|
836
|
|
$
|
312
|
|
$
|
2,170
|
|
$
|
775
|
|
Sales, general and
administrative
|
|
|
19,117
|
|
|
26,766
|
|
|
9,508
|
|
|
60,853
|
|
|
19,130
|
|
Research and
development
|
|
|
6,233
|
|
|
6,233
|
|
|
3,843
|
|
|
17,101
|
|
|
10,290
|
|
Total
|
|
$
|
26,094
|
|
$
|
33,835
|
|
$
|
13,663
|
|
$
|
80,124
|
|
$
|
30,195
|
|
AXON
ENTERPRISE, INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES - continued
|
(Unaudited)
|
Dollars in
thousands
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
30 SEP
2020
|
|
30 SEP
2019
|
|
Non-GAAP net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
|
$
|
(873)
|
|
$
|
(30,759)
|
|
$
|
6,104
|
|
$
|
(27,558)
|
|
$
|
13,261
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
26,094
|
|
|
33,835
|
|
|
13,663
|
|
|
80,124
|
|
|
30,195
|
|
Loss on disposal and
abandonment of intangible
assets
|
|
|
139
|
|
|
100
|
|
|
33
|
|
|
252
|
|
|
51
|
|
Loss on disposal and
impairment of property and
equipment, net
|
|
|
124
|
|
|
788
|
|
|
845
|
|
|
1,429
|
|
|
2,408
|
|
Transaction costs
related to investment in
unconsolidated affiliate
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
923
|
|
|
—
|
|
Costs related to FTC
litigation
|
|
|
8,573
|
|
|
3,834
|
|
|
—
|
|
|
18,542
|
|
|
—
|
|
Income tax
effects
|
|
|
(8,618)
|
|
|
(8,530)
|
|
|
(3,654)
|
|
|
(24,984)
|
|
|
(8,205)
|
|
Non-GAAP net income
(loss)
|
|
$
|
25,439
|
|
$
|
(642)
|
|
$
|
16,991
|
|
$
|
48,728
|
|
$
|
37,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
30 SEP
2020
|
|
30 SEP
2019
|
|
Non-GAAP diluted
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted earnings
(loss) per share
|
|
$
|
(0.01)
|
|
$
|
(0.51)
|
|
$
|
0.10
|
|
$
|
(0.45)
|
|
$
|
0.22
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
0.41
|
|
|
0.56
|
|
|
0.23
|
|
|
1.30
|
|
|
0.50
|
|
Loss on disposal and
abandonment of intangible
assets
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
Loss on disposal and
impairment of property and
equipment, net
|
|
|
0.00
|
|
|
0.01
|
|
|
0.01
|
|
|
0.02
|
|
|
0.04
|
|
Transaction costs
related to investment in
unconsolidated affiliate
|
|
|
-
|
|
|
0.00
|
|
|
-
|
|
|
0.01
|
|
|
-
|
|
Costs related to FTC
litigation
|
|
|
0.13
|
|
|
0.06
|
|
|
-
|
|
|
0.30
|
|
|
-
|
|
Income tax
effects
|
|
|
(0.13)
|
|
|
(0.14)
|
|
|
(0.06)
|
|
|
(0.40)
|
|
|
(0.14)
|
|
Non-GAAP diluted
earnings (loss) per share (1)
|
|
$
|
0.40
|
|
$
|
(0.01)
|
|
$
|
0.28
|
|
$
|
0.79
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of diluted common and
common equivalent shares outstanding (in
thousands)
|
|
|
64,087
|
|
|
60,346
|
|
|
60,059
|
|
|
61,818
|
|
|
59,938
|
|
________________
|
(1)
|
The per share
calculations for GAAP net income, Non-GAAP adjustments and Non-GAAP
diluted earnings per
share are each computed independently. Per share amounts may not
sum due to rounding.
|
AXON
ENTERPRISE, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
thousands)
|
|
|
|
30 SEP
2020
|
|
31 DEC 2019
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
176,000
|
|
$
|
172,250
|
Short-term
investments
|
|
|
330,914
|
|
|
178,534
|
Accounts and notes
receivable, net
|
|
|
172,803
|
|
|
146,878
|
Contract assets,
net
|
|
|
63,105
|
|
|
38,102
|
Inventory,
net
|
|
|
97,610
|
|
|
38,845
|
Prepaid expenses and
other current assets
|
|
|
35,421
|
|
|
34,866
|
Total current
assets
|
|
|
875,853
|
|
|
609,475
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
102,718
|
|
|
43,770
|
Deferred tax assets,
net
|
|
|
39,773
|
|
|
27,688
|
Intangible assets,
net
|
|
|
10,260
|
|
|
12,771
|
Goodwill
|
|
|
25,012
|
|
|
25,013
|
Long-term
investments
|
|
|
120,615
|
|
|
45,499
|
Long-term notes
receivable, net of current portion
|
|
|
22,611
|
|
|
31,598
|
Long-term contract
assets, net
|
|
|
15,019
|
|
|
9,644
|
Other
assets
|
|
|
67,288
|
|
|
40,181
|
Total
assets
|
|
$
|
1,279,149
|
|
$
|
845,639
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
22,441
|
|
|
25,874
|
Accrued
liabilities
|
|
|
74,114
|
|
|
45,001
|
Current portion of
deferred revenue
|
|
|
154,731
|
|
|
117,864
|
Customer
deposits
|
|
|
2,132
|
|
|
2,974
|
Other current
liabilities
|
|
|
5,137
|
|
|
3,853
|
Total current
liabilities
|
|
|
258,555
|
|
|
195,566
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
87,733
|
|
|
87,936
|
Liability for
unrecognized tax benefits
|
|
|
4,406
|
|
|
3,832
|
Long-term deferred
compensation
|
|
|
4,150
|
|
|
3,936
|
Deferred tax
liability
|
|
|
560
|
|
|
354
|
Other long-term
liabilities
|
|
|
28,592
|
|
|
10,520
|
Total
liabilities
|
|
|
383,996
|
|
|
302,144
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
908,584
|
|
|
528,272
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
144,067
|
|
|
172,265
|
Accumulated other
comprehensive loss
|
|
|
(1,552)
|
|
|
(1,096)
|
Total stockholders'
equity
|
|
|
895,153
|
|
|
543,495
|
Total liabilities
and stockholders' equity
|
|
$
|
1,279,149
|
|
$
|
845,639
|
AXON
ENTERPRISE, INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
30 SEP
2020
|
|
30 SEP
2019
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(873)
|
|
$
|
(30,759)
|
|
$
|
6,104
|
|
$
|
(27,558)
|
|
$
|
13,261
|
|
Adjustments to
reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
3,133
|
|
|
2,930
|
|
|
2,709
|
|
|
8,944
|
|
|
8,196
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
139
|
|
|
100
|
|
|
33
|
|
|
252
|
|
|
51
|
|
Loss on disposal and
impairment of property and equipment,
net
|
|
|
124
|
|
|
788
|
|
|
845
|
|
|
1,429
|
|
|
2,408
|
|
Stock-based
compensation
|
|
|
26,094
|
|
|
33,835
|
|
|
13,663
|
|
|
80,124
|
|
|
30,195
|
|
Deferred income
taxes
|
|
|
(5,518)
|
|
|
(4,604)
|
|
|
(2,635)
|
|
|
(11,670)
|
|
|
(3,946)
|
|
Unrecognized tax
benefits
|
|
|
(39)
|
|
|
271
|
|
|
(19)
|
|
|
573
|
|
|
594
|
|
Other noncash,
net
|
|
|
1,977
|
|
|
1,440
|
|
|
1,101
|
|
|
4,573
|
|
|
2,923
|
|
Provision for expected
credit losses
|
|
|
118
|
|
|
(244)
|
|
|
—
|
|
|
776
|
|
|
—
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
(39,176)
|
|
|
325
|
|
|
(19,491)
|
|
|
(48,551)
|
|
|
(30,497)
|
|
Inventory
|
|
|
(16,100)
|
|
|
(34,641)
|
|
|
1,213
|
|
|
(59,371)
|
|
|
(6,302)
|
|
Prepaid expenses and
other assets
|
|
|
3,729
|
|
|
(10,828)
|
|
|
(6,206)
|
|
|
(4,822)
|
|
|
(11,967)
|
|
Accounts payable,
accrued liabilities and other liabilities
|
|
|
8,657
|
|
|
20,270
|
|
|
3,224
|
|
|
25,365
|
|
|
(13,528)
|
|
Deferred
revenue
|
|
|
28,875
|
|
|
725
|
|
|
21,899
|
|
|
34,099
|
|
|
28,476
|
|
Net cash provided by
(used in) operating activities
|
|
|
11,140
|
|
|
(20,392)
|
|
|
22,440
|
|
|
4,163
|
|
|
19,864
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(224,090)
|
|
|
(193,085)
|
|
|
(100,701)
|
|
|
(516,687)
|
|
|
(242,693)
|
|
Proceeds from call /
maturity of investments
|
|
|
128,529
|
|
|
74,355
|
|
|
66,888
|
|
|
287,199
|
|
|
92,207
|
|
Purchases of property
and equipment
|
|
|
(58,472)
|
|
|
(5,342)
|
|
|
(4,250)
|
|
|
(66,023)
|
|
|
(12,111)
|
|
Purchases of intangible
assets
|
|
|
(66)
|
|
|
(66)
|
|
|
16
|
|
|
(177)
|
|
|
(328)
|
|
Proceeds of disposal
from property and equipment
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
94
|
|
|
—
|
|
Investment in
unconsolidated affiliate
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,700)
|
|
|
—
|
|
Net cash used in
investing activities
|
|
|
(154,083)
|
|
|
(124,138)
|
|
|
(38,047)
|
|
|
(300,294)
|
|
|
(162,925)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
—
|
|
|
306,779
|
|
|
—
|
|
|
306,779
|
|
|
—
|
|
Proceeds from options
exercised
|
|
|
—
|
|
|
267
|
|
|
2
|
|
|
295
|
|
|
106
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(1,119)
|
|
|
(577)
|
|
|
(1,136)
|
|
|
(6,886)
|
|
|
(3,268)
|
|
Net cash provided by
(used in) financing activities
|
|
|
(1,119)
|
|
|
306,469
|
|
|
(1,134)
|
|
|
300,188
|
|
|
(3,162)
|
|
Effect of exchange
rate changes on cash and cash
equivalents
|
|
|
812
|
|
|
775
|
|
|
(426)
|
|
|
(303)
|
|
|
(678)
|
|
Net increase
(decrease) in cash and cash equivalents and
restricted cash
|
|
|
(143,250)
|
|
|
162,714
|
|
|
(17,167)
|
|
|
3,754
|
|
|
(146,901)
|
|
Cash and cash
equivalents, beginning of period
|
|
|
319,359
|
|
|
156,645
|
|
|
221,293
|
|
|
172,355
|
|
|
351,027
|
|
Cash and cash
equivalents, end of period
|
|
$
|
176,109
|
|
$
|
319,359
|
|
$
|
204,126
|
|
$
|
176,109
|
|
$
|
204,126
|
|
AXON
ENTERPRISE, INC.
|
SELECTED CASH FLOW
INFORMATION
|
(Unaudited)
|
(in
thousands)
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
30 SEP
2020
|
|
30 JUN
2020
|
|
30 SEP
2019
|
|
30 SEP
2020
|
|
30 SEP
2019
|
Net cash provided by
(used in) operating activities
|
|
$
|
11,140
|
|
$
|
(20,392)
|
|
$
|
22,440
|
|
$
|
4,163
|
|
$
|
19,864
|
Purchases of property
and equipment
|
|
|
(58,472)
|
|
|
(5,342)
|
|
|
(4,250)
|
|
|
(66,023)
|
|
|
(12,111)
|
Purchases of
intangible assets
|
|
|
(66)
|
|
|
(66)
|
|
|
16
|
|
|
(177)
|
|
|
(328)
|
Investment in
unconsolidated affiliate
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,700)
|
|
|
—
|
Free cash flow, a
non-GAAP measure
|
|
$
|
(47,398)
|
|
$
|
(25,800)
|
|
$
|
18,206
|
|
$
|
(66,737)
|
|
$
|
7,425
|
AXON
ENTERPRISE, INC.
|
SUPPLEMENTAL
TABLES
|
(in
thousands)
|
|
|
|
30 SEP
2020
|
|
31 DEC 2019
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
176,000
|
|
$
|
172,250
|
Short-term
investments
|
|
|
330,914
|
|
|
178,534
|
Long-term
investments
|
|
|
120,615
|
|
|
45,499
|
Total cash and cash
equivalents and investments, net
|
|
$
|
627,529
|
|
$
|
396,283
|
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
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SOURCE Axon