SCOTTSDALE, Ariz., Nov. 15, 2021 /PRNewswire/ --
Dear Shareholders,
Throughout the year, as evidenced by our strong results and
strengthening outlook, we have continued to execute on our stated
objectives to:
- Grow our core through innovation in our key products,
- Scale new products by developing solutions to real-world
challenges,
- Unlock new areas for growth by extending our reach to new
markets, and
- Drive operating efficiencies across our manufacturing, hiring
and support systems.
The third quarter was no exception. Our teams delivered strong
performance across the board, driving revenue growth of 39% to
$232 million, and GAAP net income of
$49 million, which supported Adjusted
EBITDA of $51 million, representing a
22% margin. Net income was favorably impacted by a $51 million tax benefit. Our SaaS performance was
equally strong, with annual recurring revenue growing 42% to
$289 million, supported by
deployments in the federal market and international regions. Record
Q3 bookings of $488 million were up
54%, driven by strength in software and sensors, bringing
year-to-date bookings to nearly $1.2
billion, above full year 2020 levels.
Axon's expanding growth story
As we look ahead to our long-range plans, we are providing an
update on our growth story, raising our estimated total addressable
market, or TAM, from $27 billion to
$52 billion, and sharing our analysis
on penetration by region and product category.
TAM growing through investments in products, markets and
regions:
Our investments for scale are expanding our total addressable
market along three axes — introducing new products, selling into
new customer market segments, and adding sales channels to new
geographic regions. Our updated estimate points to a $52 billion total addressable
market(1).
Two of our newest drivers of TAM growth include our investments
in consumer safety and justice software.
Consumer: We see opportunity to create more effective and
reliable personal protection for private individuals, and, thus,
our consumer business is a growing area of investment. When we say
TASER is less than 25% penetrated in the US and even lower
globally, that statistic refers to professional users and does not
include individual consumers. Our current market penetration
in consumer is virtually nil. Historically, our law enforcement and
consumer devices have relied upon separate platforms. To drive
greater efficiency and reliability, our next generation consumer
and law enforcement devices will leverage much of the same core
technology. We also plan to offer personal safety solutions,
including a consumer-focused smartphone app, and expect to share
more details over the coming quarters.
Justice: Axon's expansion into justice software is a
natural evolution of our market-leading cloud-hosted digital
evidence management software category. Specifically, we are
developing software to help prosecutors and defense attorneys
streamline the discovery process. Not only is our goal to save
attorneys time, but also to shorten the time people are jailed
awaiting trial. We are enthusiastic about the opportunities in this
category and will be sharing more in the coming months around
product launch and customers.
TAM penetration analysis showcases runway for growth:
We see ourselves as less than 2% penetrated across our
addressable markets, based on an analysis of potential user
penetration in devices and potential dollar penetration in
software.
The user penetration for our cloud-connected devices and dollar
penetration in software showcases our opportunity for growth across
products and regions. Importantly, our TAM penetration
analysis(2) excludes select market segments from certain
geographies where we are not selling today, highlighting the
opportunity to continue to expand our TAM and add incremental
growth drivers.
(1)
|
Our TAM
methodology estimates annual potential spending on Axon products by
considering total possible users in regions and markets we are
selling into, based on publicly available user data by job category
from U.S. Bureau of Labor Statistics and other public sources, or
Axon intends to sell into in the near term, as well as current
annual subscription pricing for existing products and estimated
annual pricing for future products, based on an analysis of
market-supported pricing. Note that with Axon's integrated bundles,
under ASC 606, product (hardware) revenue is recognized upon
shipment to the customer and service (software) revenue is
recognized over time as a time-based obligation to the customer.
The TAM, as presented, shows potential annual subscription
spending, which will equal revenue recognized over the life of a
multi-year contract, but spending and revenue do not always match
up in the same year due to the timing difference between
subscription-based payments and revenue recognition.
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(2)
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Our TAM
penetration methodology factors in Axon's internal estimates for
unit sales to date and software revenue to date, as well as
potential users based on publicly available data. Commonwealth
includes UK, Canada, Australia and New Zealand. Europe excludes UK.
Asia excludes China and Russia. TASER, body camera and Axon Fleet
percentages represent user penetration, while Axon Cloud SaaS
represents dollar penetration. Consumer TASER not included within
TASER TAM penetration. Consumer TASER penetration is less than 1%
in the US. Axon Cloud SaaS includes Digital Evidence Management,
Productivity and Real-Time Operations. Axon Air & AR/VR are not
shown given estimated TAM penetrations of about 0%.
|
Select Q3 highlights
- Driving customer engagement and excitement:
-
- Accelerate user conference returns to in-person: Axon
hosted nearly 1,500 attendees at its sixth annual user conference
in Phoenix during the first week
of November, drawing many of the best and brightest public safety
leaders from around the globe. One of the world's largest public
safety technology conferences, Axon Accelerate provides a forum to
inform and empower our customers, and this year we discussed both
the opportunities and challenges presented by today's rapidly
changing world. We were pleased to be joined by representatives and
exhibitors from our rapidly growing ecosystem of technology
partners, including Cellebrite, Skydio and Cradlepoint. Whether
it's AI, VR or 5G, when it comes to transformative technologies,
we're always discovering and investing in ways to help our
customers work smarter
- Voyager Roadshow success: Axon is hosting a
customer-focused roadshow from June through December, which started
with the Los Angeles Police
Department. Three custom Axon Voyager trailers will visit the 48
contiguous United States to
provide demonstrations of our latest technology. Each Axon Voyager
trailer comes with a Cradlepoint and Verizon-powered control room
for software demos, two VR training bays that allow officers to try
Axon's latest community engagement training modules, and a TASER 7
firing range, where officers can receive hands-on practice with
Axon's latest generation of TASER device, guided by a TASER Master
Instructor.
- New software products accelerating traction: New product
bookings more than doubled through the end of the third quarter,
led by software services, including Axon Records, Axon Respond,
AI-enabled transcription, and AI-enabled automated license plate
reading (ALPR).
- Demand for Virtual Reality training exceeds
expectations: Our Virtual Reality training offers a
transformational alternative to tactical training, delivering
compelling immersive content and pairing that with our robust
training platform, including Axon Academy curriculum. VR training
powered by AI will fundamentally transform our ability to level up
skills in the field — and we can also use it beyond training to
build physical capabilities. VR is the fastest growing new product
we've ever launched(3).
- International strength across product lines:
-
- Standalone software: Both the Province of
British Columbia, through
PRIMECorp, as well as the Scottish Government
selected Axon's SaaS-based digital evidence management solution,
Axon Evidence, to fulfill groundbreaking modernization initiatives.
Both projects are cornerstones in connecting justice sector
partners and stakeholders, including the police, courts,
prosecutors and defense agents, and are notable for being
standalone digital evidence management deals. Axon was selected
through an open and competitive procurement process in both
scenarios. The partnership with PRIMECorp represents Axon's largest
standalone software deal ever.
"Our goal was to evaluate the market for a partner that can help
bring the benefits of modernizing our digital evidence management
from collection, storing and sharing with our justice partners, so
we can be more effective. After an extensive evaluation that
spanned two-years involving a formal procurement process that
included an operational pilot with multiple agencies, PRIMECorp is
confident in Axon Evidence as a common platform amongst the BC
Police Agencies now and into the future." — Wayne Plamondon, PRIMECorp, Chief Operating
Officer
"This is an important step in improving the experience
of victims and witnesses in the criminal justice process. The
Digital Evidence Sharing Capability programme will make a real
difference to the time taken for cases to come to court, allowing
those involved in criminal cases to move on with their lives
sooner. Reducing delays is just one of the benefits this programme
will bring. We are also putting in place a modern, forward-looking
platform that can be used to help develop future transformation in
the criminal justice system." — Scottish Justice Secretary
Keith Brown
(3)
|
Based upon
comparing bookings trajectory following launch.
|
-
- Cloud-connected TASER devices: The Toronto Police Service is expanding its
TASER 7 program across the city to every officer in the field.
"We continue to see the positive impact within our communities
by outfitting officers with [TASER devices.] With this expansion
project, our officers will no longer need to share devices but all
officers in the field will be outfitted with the advanced
capabilities of the Axon TASER 7. This will help us be more
efficient in reporting and more accountable to our citizens."
—Toronto Police Service Chief James
Ramer
- Body-worn cameras and real-time awareness: The
Gujarat State Police is equipping officers throughout
Gujarat, India with more than
10,000 body-worn cameras. The service will also deploy a portion of
the cameras with Axon's real-time situational awareness software,
Respond, which gives supervisors access to location-mapping and
live streaming, providing visibility into evolving situations to
inform decisions about resourcing and back-up. This growing
partnership reflects Axon's strategy to land and expand within
regions. In early 2020, Gujarat State Police became the first major
police agency in India to deploy
TASER devices
"With the introduction of body-worn cameras and a digital evidence
management solution, we will significantly enhance our policing
capability across the state of Gujarat." — Mr. Narasimha Komar IPS,
Additional Director General of Police (Planning &
Modernization) Gujarat State Police
- Domestic bundling strength drives annual recurring revenue
and net dollar retention: Our customers are increasingly
adopting a broad suite of Axon's solutions at once, which is
driving increased order size and strong performance across our SaaS
metrics. Recent examples include:
-
- The Oklahoma City Police
Department signed a five-year Officer Safety Plan 7+ Premium bundle
in September to deploy TASER 7 devices, Axon Body 3 cameras with
real-time situational software, Axon Respond and Axon Records. The
Major Cities Chiefs Association member will also be implementing
the next generation Axon Fleet 3 in-car video system with ALPR
technology and Axon Air licenses.
- The Virginia Beach Police
Department, a Major Cities Chiefs Association member, signed a
ten-year contract on the Officer Safety Plan 7+ Premium bundle, in
July, and is adopting Axon Records.
- The Grand Prairie Police
Department in Texas signed a
contract in August for 260 Officer Safety Plan 7+ Premium licenses,
210 Axon Fleet 3 in-car cameras, and is adopting Axon Records and
Axon Dispatch.
- The Metropolitan Transportation Authority Police Department in
New York, in September, signed
1,000 Officer Safety Plan 7+ Premium licenses with Axon
Auto-Transcribe, which drives efficiency by transcribing body
camera video.
- The Louisville Metro Police
Department in Kentucky adopted
1,200 Officer Safety Plan 7+ licenses in September.
- The Minnesota State Patrol
signed 700 Officer Safety Plan 7+ Premium, Axon Respond, Axon
Auto-Tagging, Axon Performance and 700 Axon Fleet 3 in-car cameras
in September.
- The Santa Fe Police Department
signed 193 Officer Safety Plan 7+ Premium, 240 Fleet 3 in-car
cameras, and four Axon Interview licenses in August.
- The Salt Lake City Police
Department signed 550 licenses for an Officer Safety Plan 7+
Premium upgrade in September.
- The Pima County Sheriff's
Office in Arizona signed 700
Officer Safety Plan 7+ Premium, Axon Auto-Transcribe, Axon Records,
Axon Respond and Unlimited 7 Licensing in September.
- The Sacramento Police
Department signed 700 Officer Safety Plan 7+, 245 Unlimited 7
Licensing and 50 Axon Air licenses in September.
Environmental, Social & Governance (ESG) Updates:
- Community engagement gets a boost with My90
acquisition:
-
- In August, Axon acquired(4) My90 Inc., which
collects anonymized community feedback to generate actionable
insights that help police agencies improve trust, safety and
equity. Kona Shen and Mustafa Abdul-Hamid founded My90 in 2016 to give
communities a secure line of feedback to public safety agencies
that could foster community trust and understanding. Since 2016,
My90 expanded its services to help individual officers deliver
anonymous feedback to department leadership. My90 maintains privacy
and anonymity when displaying results via interactive dashboards,
which will be available on the Axon Network
"We created this tool as a way for members of the public to
safely give feedback about their interactions with law enforcement
officers. Using data and anonymous feedback, agencies can see the
impact they are having within their communities, community members
can provide valuable input, and agencies can set goals and track
progress over time." — Kona Shen,
former CEO of My90, who joined Axon as VP and General
Manager.
- The acquisition builds upon Axon's efforts launched in 2020 to
form a Community Impact team comprised of industry experts at the
intersection of civil rights, law enforcement, education, mental
health and advocacy. The team's knowledge of community
perspectives, paired with Axon's deep understanding of technology
and the needs of law enforcement, is resulting in initiatives that
facilitate bridge-building between police and communities.
"Axon's Community Impact team was formed to incorporate
community voice into Axon products and services and assist our
public safety partners with programming and strategies to enhance
their relationships with the communities they serve." —
Regina Holloway, Axon's VP of
Community Impac
- Axon Aid supports Louisiana
first responders following Hurricane Ida
-
- Axon Aid, our philanthropic arm, deployed multiple teams
to the coastal parishes in Louisiana following Hurricane Ida. Axon
dispatched 10 drone pilots to run more than 50 missions to support
emergency management teams. These missions included mass damage
assessments and levee inspections. The Axon Aid deployment for
Hurricane Ida is the tenth since its founding in 2018. The
volunteer-powered emergency relief program supports communities and
first responders in responding to disasters. To learn more about
Axon Aid, please visit: www.axon.com/aid
- Virtual Governance & ESG Roadshow:
-
- Axon's board of directors and management team have been
connecting with shareholders on corporate governance and ESG
matters. We are committed to being best-in-class in everything we
do, and as we continue to grow, we have sought to identify
corporate governance and ESG changes that will create value for our
shareholders and advance our corporate values and strategic vision.
We believe shareholder engagement is critically important.
Shareholders who wish to provide feedback may email
ir@axon.com.
- Learn more about Axon's ESG efforts:
-
- We encourage shareholders to read our 2021 ESG/CSR report,
which covers a variety of topics including TASER device safety, how
our products support UN Sustainable Development goals, information
security and data privacy, information about our AI Ethics Board,
employee wellness and diversity, and governance.
(4)
|
The financial terms
were not material to Axon's balance sheet or expected
results.
|
Summary of Q3 2021 results:
- Revenue of $232 million grew 39%
year over year, on top of 27% growth in Q3 2020, reflecting global
demand for our growing software suite and TASER 7 devices. Domestic
revenue and international revenue grew 34% and 70%, respectively,
year over year.
- Gross margin of 62.3% improved 330 basis points year over year,
reflecting favorable body camera mix, strong demand for our premium
TASER offerings and the continued benefit of engineered lower build
costs in our TASER segment.
- Operating expenses of $142
million included $34 million
in stock-based compensation expense.
-
- SG&A of $99 million included
$26 million in stock-based
compensation expense.
- R&D of $42 million included
$8 million in stock-based
compensation expense.
- GAAP diluted EPS was $0.67 based
on GAAP net income of $49 million.
Non-GAAP EPS was $1.17.
-
- Of the $35 million in total
stock-based compensation expense in Q3 2021, $25 million was related to our eXponential Stock
Performance Plan (XSPP) and CEO Performance
Award(5).
-
- In Q3 2021, $16 million was tied
to acceleration of expected attainment dates, which means the time
over which we record expense is shortened. Since Q1 2021, all 12
operational goals have been considered probable of attainment.
- Since the CEO Performance Award was adopted in 2018, we have
expensed $220 million of total
potential expense of $246 million
under the plan. Since the XSPP plan was adopted in 2019, we have
expensed $161 million of total
potential expense of $196 million
currently projected under the plan for XSPP grants issued to date.
Since the CEO Performance Award was issued in 2018, total
shareholder return was nearly 500% as of Friday, November 12, 2021.
- As a result of our strong Q3 performance, we expect one tranche
of the XSPP awards to vest(6) in the coming weeks.
Vesting of a second tranche for which the operational goal was
achieved as of September 30, 2021, is
contingent upon attainment of the related market capitalization
goal.
- The effective tax rate was favorably impacted by a $(44.3) million discrete tax benefit from the
vesting of stock-based compensation awards during the quarter.
- Quarterly Adjusted EBITDA grew 50% year over year to
$51 million, representing a 21.8%
margin on revenue and highlighting our ability to demonstrate
leverage while also investing for scale.
- Cash and cash equivalents and investments totaled $548 million at September
30, 2021, down $156 million
sequentially. Operating cash flow was $16
million. The change in cash and cash equivalents and
investments included the use of $172
million in cash for tax withholdings arising from stock
awards that were net settled during the quarter and $90 million for our investment in Cellebrite,
partially offset by proceeds of $106
million from our at-the-market offering.
- Axon has no debt.
(5)
|
These innovative
stock-based compensation plans were approved by shareholders in
2018 and 2019 and align the interests of management and employees
with shareholders.
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(6)
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Under the
shareholder-approved XSPP, participants have a 2.5-year mandatory
holding period on net vested shares. Under the shareholder-approved
CEO Performance Award, the CEO has a 2.5-year holding period from
option exercise.
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Financial commentary by segment:
TASER
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THREE MONTHS ENDED
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CHANGE
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|
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30 SEP
2021
|
|
30 JUN
2021
|
|
30 SEP
2020
|
|
QoQ
|
|
YoY
|
|
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(in thousands)
|
|
|
|
|
|
|
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Net sales
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$
|
121,491
|
|
|
$
|
112,528
|
|
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$
|
84,406
|
|
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8.0
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%
|
|
43.9
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%
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Gross
margin
|
|
|
65.8
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%
|
|
|
66.4
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%
|
|
|
62.9
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%
|
|
(60)
|
bp
|
|
290
|
bp
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- TASER segment revenue of $121
million grew 44% year over year driven by strong demand
globally for the TASER 7 platform.
- Gross margin of 65.8% was up 290 bps year over year tied to
strong demand combined with the continued benefit of engineered
lower build costs. Gross margins declined slightly on a sequential
basis, primarily driven by product mix and higher freight
costs.
Software & Sensors
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THREE MONTHS ENDED
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CHANGE
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30 SEP
2021
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30 JUN
2021
|
|
30 SEP
2020
|
|
QoQ
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|
YoY
|
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(in thousands)
|
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|
|
|
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Axon Cloud net
sales
|
|
$
|
63,264
|
|
|
$
|
60,477
|
|
|
$
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45,462
|
|
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4.6
|
%
|
|
39.2
|
%
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Axon Cloud gross
margin
|
|
|
74.6
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%
|
|
|
74.5
|
%
|
|
|
77.1
|
%
|
|
10
|
bp
|
|
(250)
|
bp
|
|
|
|
|
|
|
|
|
|
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Sensors and Other net
sales
|
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$
|
47,234
|
|
|
$
|
45,790
|
|
|
$
|
36,574
|
|
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3.2
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%
|
|
29.1
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%
|
Sensors and Other
gross margin
|
|
|
36.9
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%
|
|
|
39.7
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%
|
|
|
27.5
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%
|
|
(280)
|
bp
|
|
940
|
bp
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- Axon Cloud revenue grew 39% year over year to $63 million, reflecting strong domestic demand.
On a sequential basis, Axon Cloud revenue increased $3 million and reflects a decrease of
approximately $1 million in
non-recurring service revenue, including professional
services.
- Axon Cloud gross margin of 74.6% includes expected costs to
scale our cloud business. This includes the low-to-no margin
professional services costs of teams who help our customers deploy
Axon's solutions. We expect these costs to continue to be reflected
in gross margins as we scale our cloud business. 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 29% year over year to
$47 million, reflecting strong body
camera demand.
- Sensors & Other gross margin was 36.9%. As a reminder, we
manage toward a 25% gross margin for camera and sensors hardware,
and the gross margin will fluctuate quarter to quarter depending on
the customer mix.
Forward-looking performance indicators:
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30 SEP
2021
|
|
30 JUN
2021
|
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31 MAR 2021
|
|
31 DEC 2020
|
|
30 SEP 2020
|
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($
in thousands)
|
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Annual recurring
revenue (1)
|
|
$
|
288,691
|
|
|
$
|
260,178
|
|
|
$
|
242,357
|
|
|
$
|
221,263
|
|
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$
|
203,815
|
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Net revenue retention
(2)
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
120
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%
|
Total company
future
contracted revenue
|
|
$
|
2,390,000
|
|
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$
|
2,040,000
|
|
|
$
|
1,790,000
|
|
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$
|
1,730,000
|
|
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$
|
1,510,000
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Percentage of
TASER
devices sold on a recurring
payment plan
|
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|
58
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%
|
|
|
55
|
%
|
|
|
64
|
%
|
|
|
53
|
%
|
|
|
75
|
%
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(1)
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Monthly recurring
license, integration, warranty, and storage revenue
annualized.
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(2)
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Refer to "Statistical
Definitions" below.
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- Annual Recurring Revenue (ARR) grew 42% year over year to
$288.7 million. On a sequential
basis, ARR increased by $29 million,
slightly ahead of our expectation due to strong demand for added
SaaS software features in all three strategic software growth
categories: digital evidence management, productivity solutions and
real-time operations, and strong contributions from the federal
market and international regions.
- Net revenue retention was 119% 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. We are seeing large
customers upgrading their subscriptions at individual net dollar
retention rates of 140% to 300% to take advantage of our growing
suite of productivity and digital evidence management tools. Our
law enforcement 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 $2.39 billion, reflecting strong bookings in the
quarter. Most of our bookings are for multi-year contracts. See
definition of this metric under "Statistical Definitions."
- The percentage of TASER devices sold on a subscription was 58%
in the quarter. As a reminder, Axon has been successfully
transitioning its TASER hardware business into a subscription
service in more mature markets and expanding into new markets where
some initial sales are not on a subscription, with the intention of
building subscription businesses in those markets over time.
Outlook:
The following forward-looking statements reflect Axon's
expectations as of November 15, 2021,
and are subject to risks and uncertainties. As our investments have
yielded results ahead of our expectations thus far in 2021, we
intend to continue investing for growth.
Our updated 2021 outlook is as follows:
- We expect to achieve revenue at the high end of our previously
communicated range of $840 million to
$850 million. Full year revenue of
$850 million represents 25% growth
over 2020 and reflects our long-term strategy of scaling a business
that supports a 20%-plus revenue CAGR.
-
- TASER 7 demand remains exceptionally strong and our backlog
continues to grow. Our guidance reflects our expectation that
approximately $30 million of
previously anticipated Q4 2021 TASER segment revenue will shift
into the first half of 2022 resulting from industry-wide chip
shortages that impacted our TASER 7 platform.
- As a reminder, the year-ago quarter, Q4 2020, benefitted from a
$20 million TASER 7 order from an
international customer—the largest TASER order in our company's
history.
- We are raising our expectations for Adjusted EBITDA to a range
of $163 million to $168 million, from a range of $155 million to $160
million, previously.
-
- 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 not 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 more than
$300 million for the full year.
Because our stock-based compensation expense may fluctuate
significantly based on changes in the probability of attaining
certain operational or market capitalization metrics or attainment
of such metrics and with changes in the expected or actual timing
of such attainment, it is inherently difficult to forecast future
stock-based compensation expense.
- Expectations for capital expenditures of approximately
$65 million to $70 million in 2021 are unchanged. These include
investments to support capacity expansion and automation on TASER
device and cartridge manufacturing, and are discussed in greater
detail in our Q4 2020 shareholder letter.
- As we execute upon a scaling global profile and delivering
rapid 2021 growth, our strengthening view of the business in 2022
includes at least $1.0 billion in
revenue. We are extremely proud of the high level of execution from
our teams that has set us up for continued top-line strength, solid
margin performance and scaling profitability.
Thank you for investing in our mission to protect life,
Rick Smith,
CEO
Luke Larson,
President
Jawad Ahsan,
CFO
Quarterly conference call and webcast
We will host our Q3 2021 earnings conference call webinar on
Monday, November 15 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/96766824541.
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 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, 2021. We expect
to recognize between15% - 20% 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 (listed
below).
- Non-GAAP Net Income (Most comparable GAAP Measure: Net income)
- Net income excluding the costs of non-cash stock-based
compensation and excluding 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;
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.
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
public safety, 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 report at investor.axon.com.
We work hard for those who put themselves in harm's way for all
of us. More than 258,000 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,
Arizona, and a global software engineering hub in
Seattle, Washington, as well as
additional offices in the US, Australia, Canada, Finland, Vietnam, the UK and the Netherlands.
Cellebrite is a trademark of Cellebrite Mobile Synchronization
Ltd.; Cradlepoint is a trademark of Cradlepoint, Inc.; Facebook is
a trademark of Facebook, Inc.; Skydio is a trademark of Skydio,
Inc.; Twitter is a trademark of Twitter, Inc.; Verizon is a
trademark of Verizon Trademark Services, LLC and Vievu is a
trademark of Vievu, LLC. Axon, Axon Academy, Axon Aid, Axon Air,
Axon Body, Axon Fleet, Axon Respond, Axon Voyager, 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. 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 2021 fourth
quarter and full year revenue, Adjusted EBITDA, stock-based
compensation expense, capital expenditures, and 2022 full year
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, 2020.
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 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; 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 vigorously prosecute its Federal court
constitutional case against the FTC while the FTC's separate
antitrust administrative action against the company remains
stayed.
As background, Axon's Federal court constitutional challenge
against the FTC was dismissed in April
2020, 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 (No. 20-15662). In January
2021, a Ninth Circuit panel in a 2-1 split decision affirmed
the district court ruling against Axon on the jurisdictional
question. The Court then denied Axon's petition for en banc
rehearing but granted Axon's motion to stay the appellate mandate
pending resolution of the company's certiorari petition with the
U.S. Supreme Court.
Axon's Supreme Court petition (No. 21-86 docketed July 22, 2021) presents two questions:
1. Whether Congress impliedly stripped federal district courts
of jurisdiction over constitutional challenges to the Federal Trade
Commission's structure, procedures, and existence by granting the
courts of appeals jurisdiction to "affirm, enforce, modify, or set
aside" the Commission's cease-and-desist orders.
2. Whether, on the merits, the structure of the Federal Trade
Commission, including the dual-layer for-cause removal protections
afforded its administrative law judges, is consistent with the
Constitution.
Links to all Court filings and opinions 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 2018
acquisition of Vievu 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 Investor
Relations via email at IR@axon.com.
CONTACT:
Investor Relations
Axon Enterprise, Inc.
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
2021
|
|
30 JUN
2021
|
|
30 SEP
2020
|
|
30 SEP
2021
|
|
30 SEP
2020
|
Net sales from
products
|
|
$
|
165,803
|
|
$
|
156,427
|
|
$
|
120,091
|
|
$
|
463,116
|
|
$
|
326,134
|
Net sales from
services
|
|
|
66,186
|
|
|
62,368
|
|
|
46,351
|
|
|
182,687
|
|
|
128,729
|
Net sales
|
|
|
231,989
|
|
|
218,795
|
|
|
166,442
|
|
|
645,803
|
|
|
454,863
|
Cost of product
sales
|
|
|
71,336
|
|
|
65,301
|
|
|
57,798
|
|
|
195,253
|
|
|
150,507
|
Cost of service
sales
|
|
|
16,086
|
|
|
15,565
|
|
|
10,404
|
|
|
44,701
|
|
|
29,331
|
Cost of
sales
|
|
|
87,422
|
|
|
80,866
|
|
|
68,202
|
|
|
239,954
|
|
|
179,838
|
Gross
margin
|
|
|
144,567
|
|
|
137,929
|
|
|
98,240
|
|
|
405,849
|
|
|
275,025
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
99,295
|
|
|
177,662
|
|
|
74,443
|
|
|
403,554
|
|
|
209,763
|
Research and
development
|
|
|
42,382
|
|
|
53,952
|
|
|
29,246
|
|
|
143,352
|
|
|
85,187
|
Total operating
expenses
|
|
|
141,677
|
|
|
231,614
|
|
|
103,689
|
|
|
546,906
|
|
|
294,950
|
Income (loss) from
operations
|
|
|
2,890
|
|
|
(93,685)
|
|
|
(5,449)
|
|
|
(141,057)
|
|
|
(19,925)
|
Interest and other
income, net
|
|
|
(5,530)
|
|
|
41,841
|
|
|
2,040
|
|
|
36,896
|
|
|
4,594
|
Income before
provision for income taxes
|
|
|
(2,640)
|
|
|
(51,844)
|
|
|
(3,409)
|
|
|
(104,161)
|
|
|
(15,331)
|
Provision for
(benefit from) income taxes
|
|
|
(51,164)
|
|
|
(4,727)
|
|
|
(2,536)
|
|
|
(57,651)
|
|
|
12,227
|
Net income (loss) per
common and common
equivalent shares:
|
|
$
|
48,524
|
|
$
|
(47,117)
|
|
$
|
(873)
|
|
$
|
(46,510)
|
|
$
|
(27,558)
|
Net income (loss) per
common and common
equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.73
|
|
$
|
(0.72)
|
|
$
|
(0.01)
|
|
$
|
(0.71)
|
|
$
|
(0.45)
|
Diluted
|
|
$
|
0.67
|
|
$
|
(0.72)
|
|
$
|
(0.01)
|
|
$
|
(0.71)
|
|
$
|
(0.45)
|
Weighted average
number of common and common
equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
66,192
|
|
|
65,166
|
|
|
63,496
|
|
|
65,139
|
|
|
61,159
|
Diluted
|
|
|
72,441
|
|
|
65,166
|
|
|
63,496
|
|
|
65,139
|
|
|
61,159
|
AXON
ENTERPRISE, INC.
|
SEGMENT
REPORTING
|
(Unaudited)
|
(dollars in
thousands)
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
30 SEP
2021
|
|
|
30 JUN
2021
|
|
|
30 SEP
2020
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
TASER
|
|
Sensors
|
|
Total
|
|
TASER
|
|
Sensors
|
|
Total
|
|
TASER
|
|
Sensors
|
|
Total
|
Net sales from
products (1)
|
|
$
|
118,569
|
|
|
$
|
47,234
|
|
|
$
|
165,803
|
|
|
$
|
110,637
|
|
|
$
|
45,790
|
|
|
$
|
156,427
|
|
|
$
|
83,517
|
|
|
$
|
36,574
|
|
|
$
|
120,091
|
|
Net sales from
services (2)
|
|
|
2,922
|
|
|
|
63,264
|
|
|
|
66,186
|
|
|
|
1,891
|
|
|
|
60,477
|
|
|
|
62,368
|
|
|
|
889
|
|
|
|
45,462
|
|
|
|
46,351
|
|
Net sales
|
|
|
121,491
|
|
|
|
110,498
|
|
|
|
231,989
|
|
|
|
112,528
|
|
|
|
106,267
|
|
|
|
218,795
|
|
|
|
84,406
|
|
|
|
82,036
|
|
|
|
166,442
|
|
Cost of product
sales
|
|
|
41,554
|
|
|
|
29,782
|
|
|
|
71,336
|
|
|
|
37,701
|
|
|
|
27,600
|
|
|
|
65,301
|
|
|
|
31,297
|
|
|
|
26,501
|
|
|
|
57,798
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
16,086
|
|
|
|
16,086
|
|
|
|
145
|
|
|
|
15,420
|
|
|
|
15,565
|
|
|
|
—
|
|
|
|
10,404
|
|
|
|
10,404
|
|
Cost of
sales
|
|
|
41,554
|
|
|
|
45,868
|
|
|
|
87,422
|
|
|
|
37,846
|
|
|
|
43,020
|
|
|
|
80,866
|
|
|
|
31,297
|
|
|
|
36,905
|
|
|
|
68,202
|
|
Gross
margin
|
|
|
79,937
|
|
|
|
64,630
|
|
|
|
144,567
|
|
|
|
74,682
|
|
|
|
63,247
|
|
|
|
137,929
|
|
|
|
53,109
|
|
|
|
45,131
|
|
|
|
98,240
|
|
Gross margin
%
|
|
|
65.8
|
%
|
|
|
58.5
|
%
|
|
|
62.3
|
%
|
|
|
66.4
|
%
|
|
|
59.5
|
%
|
|
|
63.0
|
%
|
|
|
62.9
|
%
|
|
|
55.0
|
%
|
|
|
59.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
10,476
|
|
|
|
31,906
|
|
|
|
42,382
|
|
|
|
12,313
|
|
|
|
41,639
|
|
|
|
53,952
|
|
|
|
3,355
|
|
|
|
25,891
|
|
|
|
29,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
|
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2021
|
|
|
30 SEP
2020
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
TASER
|
|
Sensors
|
|
Total
|
|
TASER
|
|
Sensors
|
|
Total
|
Net sales from
products (1)
|
|
$
|
326,508
|
|
|
$
|
136,608
|
|
|
$
|
463,116
|
|
|
$
|
228,569
|
|
|
$
|
97,565
|
|
|
$
|
326,134
|
|
Net sales from
services (2)
|
|
|
6,510
|
|
|
|
176,177
|
|
|
|
182,687
|
|
|
|
2,222
|
|
|
|
126,507
|
|
|
|
128,729
|
|
Net sales
|
|
|
333,018
|
|
|
|
312,785
|
|
|
|
645,803
|
|
|
|
230,791
|
|
|
|
224,072
|
|
|
|
454,863
|
|
Cost of product
sales
|
|
|
112,200
|
|
|
|
83,053
|
|
|
|
195,253
|
|
|
|
88,787
|
|
|
|
61,720
|
|
|
|
150,507
|
|
Cost of service
sales
|
|
|
145
|
|
|
|
44,556
|
|
|
|
44,701
|
|
|
|
—
|
|
|
|
29,331
|
|
|
|
29,331
|
|
Cost of
sales
|
|
|
112,345
|
|
|
|
127,609
|
|
|
|
239,954
|
|
|
|
88,787
|
|
|
|
91,051
|
|
|
|
179,838
|
|
Gross
margin
|
|
|
220,673
|
|
|
|
185,176
|
|
|
|
405,849
|
|
|
|
142,004
|
|
|
|
133,021
|
|
|
|
275,025
|
|
Gross margin
%
|
|
|
66.3
|
%
|
|
|
59.2
|
%
|
|
|
62.8
|
%
|
|
|
61.5
|
%
|
|
|
59.4
|
%
|
|
|
60.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
32,032
|
|
|
|
111,320
|
|
|
|
143,352
|
|
|
|
10,149
|
|
|
|
75,038
|
|
|
|
85,187
|
|
(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
|
|
|
2021
|
|
2020
|
|
Change
|
|
Change
|
|
2021
|
|
2020
|
|
Change
|
|
Change
|
TASER 7
|
|
36,350
|
|
15,908
|
|
20,442
|
|
128.5
|
%
|
|
77,421
|
|
36,352
|
|
41,069
|
|
113.0
|
%
|
TASER X26P
|
|
6,596
|
|
8,119
|
|
(1,523)
|
|
(18.8)
|
|
|
21,837
|
|
26,780
|
|
(4,943)
|
|
(18.5)
|
|
TASER X2
|
|
5,562
|
|
10,078
|
|
(4,516)
|
|
(44.8)
|
|
|
24,188
|
|
33,656
|
|
(9,468)
|
|
(28.1)
|
|
TASER
Pulse
|
|
3,232
|
|
12,811
|
|
(9,579)
|
|
(74.8)
|
|
|
18,225
|
|
21,501
|
|
(3,276)
|
|
(15.2)
|
|
Cartridges
|
|
1,327,971
|
|
852,980
|
|
474,991
|
|
55.7
|
|
|
3,751,060
|
|
2,441,612
|
|
1,309,448
|
|
53.6
|
|
Axon Body
|
|
58,248
|
|
62,873
|
|
(4,625)
|
|
(7.4)
|
|
|
149,914
|
|
137,803
|
|
12,111
|
|
8.8
|
|
Axon Flex
|
|
3,390
|
|
3,175
|
|
215
|
|
6.8
|
|
|
6,801
|
|
8,213
|
|
(1,412)
|
|
(17.2)
|
|
Axon Fleet
|
|
2,753
|
|
2,396
|
|
357
|
|
14.9
|
|
|
6,655
|
|
7,399
|
|
(744)
|
|
(10.1)
|
|
Axon Dock
|
|
8,556
|
|
9,165
|
|
(609)
|
|
(6.6)
|
|
|
20,625
|
|
19,096
|
|
1,529
|
|
8.0
|
|
AXON
ENTERPRISE, INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
|
(Unaudited)
|
Dollars in
thousands
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2021
|
|
30 JUN
2021
|
|
30 SEP
2020
|
|
30 SEP
2021
|
|
30 SEP
2020
|
|
EBITDA and
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
48,524
|
|
$
|
(47,117)
|
|
$
|
(873)
|
|
$
|
(46,510)
|
|
$
|
(27,558)
|
|
Depreciation and
amortization
|
|
|
4,838
|
|
|
4,291
|
|
|
3,133
|
|
|
13,420
|
|
|
8,944
|
|
Interest
expense
|
|
|
5
|
|
|
17
|
|
|
32
|
|
|
27
|
|
|
44
|
|
Investment interest
income
|
|
|
(123)
|
|
|
(502)
|
|
|
(965)
|
|
|
(1,158)
|
|
|
(3,157)
|
|
Provision for (benefit
from) income taxes
|
|
|
(51,164)
|
|
|
(4,727)
|
|
|
(2,536)
|
|
|
(57,651)
|
|
|
12,227
|
|
EBITDA
|
|
$
|
2,080
|
|
$
|
(48,038)
|
|
$
|
(1,209)
|
|
$
|
(91,872)
|
|
$
|
(9,500)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
35,062
|
|
$
|
137,549
|
|
$
|
26,094
|
|
$
|
262,221
|
|
$
|
80,124
|
|
Realized and
unrealized (gains) losses on
strategic investments and marketable
securities (1)
|
|
|
6,660
|
|
|
(40,855)
|
|
|
—
|
|
|
(34,195)
|
|
|
—
|
|
Transaction costs
related to strategic
investments
|
|
|
393
|
|
|
110
|
|
|
—
|
|
|
888
|
|
|
923
|
|
Loss on disposal and
abandonment of
intangible assets
|
|
|
—
|
|
|
119
|
|
|
139
|
|
|
130
|
|
|
252
|
|
Loss (gain) on
disposal and impairment of
property and equipment, net
|
|
|
31
|
|
|
(2)
|
|
|
124
|
|
|
74
|
|
|
1,429
|
|
Costs related to FTC
litigation
|
|
|
242
|
|
|
147
|
|
|
8,573
|
|
|
622
|
|
|
18,542
|
|
Payroll taxes related
to XSPP vesting
|
|
|
6,069
|
|
|
2,217
|
|
|
—
|
|
|
9,738
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
50,537
|
|
$
|
51,247
|
|
$
|
33,721
|
|
$
|
147,606
|
|
$
|
91,770
|
|
Net income (loss)
as a percentage of net
sales
|
|
|
20.9
|
%
|
|
(21.5)
|
%
|
|
(0.5)
|
%
|
|
(7.2)
|
%
|
|
(6.1)
|
%
|
Adjusted EBITDA as
a percentage of net
sales
|
|
|
21.8
|
%
|
|
23.4
|
%
|
|
20.3
|
%
|
|
22.9
|
%
|
|
20.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
1,112
|
|
$
|
1,838
|
|
$
|
744
|
|
$
|
4,439
|
|
$
|
2,170
|
|
Sales, general and
administrative
|
|
|
25,969
|
|
|
114,089
|
|
|
19,117
|
|
|
211,073
|
|
|
60,853
|
|
Research and
development
|
|
|
7,981
|
|
|
21,622
|
|
|
6,233
|
|
|
46,709
|
|
|
17,101
|
|
Total
|
|
$
|
35,062
|
|
$
|
137,549
|
|
$
|
26,094
|
|
$
|
262,221
|
|
$
|
80,124
|
|
(1)
|
Includes an
unrealized loss of $6.7 million for the three months ended
September 30, 2021, and net unrealized gains of $21.9 million and
realized gain of $12.3 million for the nine months ended September
30, 2021.
|
AXON
ENTERPRISE, INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES - continued
|
(Unaudited)
|
Dollars in
thousands, except per share amounts
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
30 SEP
2021
|
|
30 JUN
2021
|
|
30 SEP
2020
|
|
30 SEP
2021
|
|
30 SEP
2020
|
Non-GAAP net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
|
$
|
48,524
|
|
$
|
(47,117)
|
|
$
|
(873)
|
|
$
|
(46,510)
|
|
$
|
(27,558)
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
35,062
|
|
|
137,549
|
|
|
26,094
|
|
|
262,221
|
|
|
80,124
|
Realized and
unrealized (gains) losses on strategic investments and marketable
securities (1)
|
|
|
6,660
|
|
|
(40,855)
|
|
|
—
|
|
|
(34,195)
|
|
|
—
|
Loss on disposal and
abandonment of intangible assets
|
|
|
—
|
|
|
119
|
|
|
139
|
|
|
130
|
|
|
252
|
Loss (gain) on
disposal and impairment of property and equipment, net
|
|
|
31
|
|
|
(2)
|
|
|
124
|
|
|
74
|
|
|
1,429
|
Transaction costs
related to strategic investments
|
|
|
393
|
|
|
110
|
|
|
—
|
|
|
888
|
|
|
923
|
Costs related to FTC
litigation
|
|
|
242
|
|
|
147
|
|
|
8,573
|
|
|
622
|
|
|
18,542
|
Payroll taxes related
to XSPP vesting
|
|
|
6,069
|
|
|
2,217
|
|
|
—
|
|
|
9,738
|
|
|
—
|
Income tax
effects
|
|
|
(12,064)
|
|
|
(24,826)
|
|
|
(8,618)
|
|
|
(59,671)
|
|
|
(24,984)
|
Non-GAAP net
income
|
|
$
|
84,917
|
|
$
|
27,342
|
|
$
|
25,439
|
|
$
|
133,297
|
|
$
|
48,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income
(loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
|
0.67
|
|
$
|
(0.72)
|
|
$
|
(0.01)
|
|
$
|
(0.71)
|
|
$
|
(0.45)
|
Non-GAAP
|
|
$
|
1.17
|
|
$
|
0.38
|
|
$
|
0.40
|
|
$
|
1.89
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
|
72,441
|
|
|
65,166
|
|
|
63,496
|
|
|
65,139
|
|
|
61,159
|
Non-GAAP
(2)
|
|
|
72,441
|
|
|
71,689
|
|
|
64,087
|
|
|
70,515
|
|
|
61,818
|
|
|
(1)
|
Includes an
unrealized loss of $6.7 million for the three months ended
September 30, 2021, and net unrealized gains of $21.9 million and
realized gain of $12.3 million for the nine months ended September
30, 2021.
|
|
|
(2)
|
Non-GAAP diluted
income per common share factors in higher diluted weighted average
shares outstanding in periods where there is both a GAAP net loss
and non-GAAP net income.
|
AXON
ENTERPRISE, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
thousands)
|
|
|
|
30 SEP
2021
|
|
31 DEC 2020
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
281,691
|
|
$
|
155,440
|
Short-term
investments
|
|
|
216,557
|
|
|
406,525
|
Marketable
securities
|
|
|
83,340
|
|
|
—
|
Accounts and notes
receivable, net
|
|
|
265,267
|
|
|
229,201
|
Contract assets,
net
|
|
|
130,976
|
|
|
63,945
|
Inventory,
net
|
|
|
93,279
|
|
|
89,958
|
Prepaid expenses and
other current assets
|
|
|
52,710
|
|
|
36,883
|
Total current
assets
|
|
|
1,123,820
|
|
|
981,952
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
128,808
|
|
|
105,494
|
Deferred tax assets,
net
|
|
|
104,169
|
|
|
45,770
|
Intangible assets,
net
|
|
|
7,426
|
|
|
9,448
|
Goodwill
|
|
|
25,571
|
|
|
25,205
|
Long-term
investments
|
|
|
49,431
|
|
|
90,681
|
Long-term notes
receivable, net
|
|
|
12,621
|
|
|
22,457
|
Long-term contract
assets, net
|
|
|
43,394
|
|
|
20,099
|
Strategic
investments
|
|
|
58,520
|
|
|
11,711
|
Other assets
|
|
|
91,627
|
|
|
68,206
|
Total
assets
|
|
$
|
1,645,387
|
|
$
|
1,381,023
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
27,418
|
|
|
24,142
|
Accrued
liabilities
|
|
|
88,894
|
|
|
59,843
|
Current portion of
deferred revenue
|
|
|
250,651
|
|
|
163,959
|
Customer
deposits
|
|
|
6,118
|
|
|
2,956
|
Other current
liabilities
|
|
|
6,809
|
|
|
5,431
|
Total current
liabilities
|
|
|
379,890
|
|
|
256,331
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
111,892
|
|
|
111,222
|
Liability for
unrecognized tax benefits
|
|
|
4,580
|
|
|
4,503
|
Long-term deferred
compensation
|
|
|
5,125
|
|
|
4,732
|
Deferred tax
liability
|
|
|
155
|
|
|
649
|
Other long-term
liabilities
|
|
|
29,842
|
|
|
27,331
|
Total
liabilities
|
|
|
531,484
|
|
|
404,768
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,147,478
|
|
|
962,159
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
123,391
|
|
|
169,901
|
Accumulated other
comprehensive income (loss)
|
|
|
(1,020)
|
|
|
141
|
Total stockholders'
equity
|
|
|
1,113,903
|
|
|
976,255
|
Total liabilities
and stockholders' equity
|
|
$
|
1,645,387
|
|
$
|
1,381,023
|
AXON
ENTERPRISE, INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2021
|
|
30 JUN
2021
|
|
30 SEP
2020
|
|
30 SEP
2021
|
|
30 SEP
2020
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
48,524
|
|
$
|
(47,117)
|
|
$
|
(873)
|
|
$
|
(46,510)
|
|
$
|
(27,558)
|
|
Adjustments to
reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
4,838
|
|
|
4,291
|
|
|
3,133
|
|
|
13,420
|
|
|
8,944
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
—
|
|
|
119
|
|
|
139
|
|
|
130
|
|
|
252
|
|
Loss (gain) on disposal
and impairment of property and
equipment, net
|
|
|
31
|
|
|
(2)
|
|
|
124
|
|
|
74
|
|
|
1,429
|
|
Net loss (gain) on
strategic investments and marketable securities
|
|
|
6,660
|
|
|
(40,855)
|
|
|
—
|
|
|
(34,195)
|
|
|
—
|
|
Stock-based
compensation
|
|
|
35,062
|
|
|
137,549
|
|
|
26,094
|
|
|
262,221
|
|
|
80,124
|
|
Deferred income
taxes
|
|
|
(52,004)
|
|
|
(6,291)
|
|
|
(5,518)
|
|
|
(58,893)
|
|
|
(11,670)
|
|
Unrecognized tax
benefits
|
|
|
30
|
|
|
(147)
|
|
|
(39)
|
|
|
77
|
|
|
573
|
|
Bond premium
amortization
|
|
|
1,496
|
|
|
1,606
|
|
|
1,160
|
|
|
4,606
|
|
|
1,830
|
|
Noncash lease
expense
|
|
|
1,437
|
|
|
1,539
|
|
|
817
|
|
|
4,087
|
|
|
2,743
|
|
Provision for expected
credit losses
|
|
|
553
|
|
|
397
|
|
|
118
|
|
|
615
|
|
|
776
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
(114,106)
|
|
|
(35,286)
|
|
|
(39,176)
|
|
|
(118,094)
|
|
|
(48,551)
|
|
Inventory
|
|
|
(1,306)
|
|
|
(2,368)
|
|
|
(16,100)
|
|
|
(3,154)
|
|
|
(59,371)
|
|
Prepaid expenses and
other assets
|
|
|
(15,586)
|
|
|
(6,368)
|
|
|
3,729
|
|
|
(28,906)
|
|
|
(4,822)
|
|
Accounts payable,
accrued liabilities and other liabilities
|
|
|
38,909
|
|
|
7,681
|
|
|
8,657
|
|
|
28,528
|
|
|
25,365
|
|
Deferred
revenue
|
|
|
61,911
|
|
|
19,428
|
|
|
28,875
|
|
|
87,558
|
|
|
34,099
|
|
Net cash provided by
operating activities
|
|
|
16,449
|
|
|
34,176
|
|
|
11,140
|
|
|
111,564
|
|
|
4,163
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(124,191)
|
|
|
(82,463)
|
|
|
(224,090)
|
|
|
(362,479)
|
|
|
(516,687)
|
|
Proceeds from call /
maturity of investments
|
|
|
204,358
|
|
|
162,560
|
|
|
128,529
|
|
|
499,172
|
|
|
287,199
|
|
Proceeds from sale of
strategic investments
|
|
|
—
|
|
|
14,546
|
|
|
|
|
|
14,546
|
|
|
—
|
|
Purchases of property
and equipment
|
|
|
(12,470)
|
|
|
(13,510)
|
|
|
(58,472)
|
|
|
(36,501)
|
|
|
(66,023)
|
|
Purchases of intangible
assets
|
|
|
(14)
|
|
|
(102)
|
|
|
(66)
|
|
|
(157)
|
|
|
(177)
|
|
Proceeds of disposal
from property and equipment
|
|
|
(17)
|
|
|
38
|
|
|
16
|
|
|
31
|
|
|
94
|
|
Strategic
investments
|
|
|
—
|
|
|
(500)
|
|
|
—
|
|
|
(20,500)
|
|
|
(4,700)
|
|
Business acquisition,
net of cash acquired
|
|
|
(700)
|
|
|
—
|
|
|
—
|
|
|
(700)
|
|
|
—
|
|
Net cash provided by
(used in) investing activities
|
|
|
66,966
|
|
|
80,569
|
|
|
(154,083)
|
|
|
93,412
|
|
|
(300,294)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
105,615
|
|
|
—
|
|
|
—
|
|
|
105,615
|
|
|
306,779
|
|
Proceeds from options
exercised
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
295
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(172,205)
|
|
|
(3,267)
|
|
|
(1,119)
|
|
|
(182,517)
|
|
|
(6,886)
|
|
Net cash provided by
(used in) financing activities
|
|
|
(66,590)
|
|
|
(3,267)
|
|
|
(1,119)
|
|
|
(76,902)
|
|
|
300,188
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(1,508)
|
|
|
73
|
|
|
812
|
|
|
(1,827)
|
|
|
(303)
|
|
Net increase
(decrease) in cash and cash equivalents and restricted
cash
|
|
|
15,317
|
|
|
111,551
|
|
|
(143,250)
|
|
|
126,247
|
|
|
3,754
|
|
Cash and cash
equivalents, beginning of period
|
|
|
266,481
|
|
|
154,930
|
|
|
319,359
|
|
|
155,551
|
|
|
172,355
|
|
Cash and cash
equivalents, end of period
|
|
$
|
281,798
|
|
$
|
266,481
|
|
$
|
176,109
|
|
$
|
281,798
|
|
$
|
176,109
|
|
AXON
ENTERPRISE, INC.
|
SELECTED CASH FLOW
INFORMATION
|
(Unaudited)
|
(in
thousands)
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
30 SEP
2021
|
|
30 JUN
2021
|
|
30 SEP
2020
|
|
30 SEP
2021
|
|
30 SEP
2020
|
Net cash provided by
operating activities
|
|
$
|
16,449
|
|
$
|
34,176
|
|
$
|
11,140
|
|
$
|
111,564
|
|
$
|
4,163
|
Purchases of property
and equipment
|
|
|
(12,470)
|
|
|
(13,510)
|
|
|
(58,472)
|
|
|
(36,501)
|
|
|
(66,023)
|
Purchases of
intangible assets
|
|
|
(14)
|
|
|
(102)
|
|
|
(66)
|
|
|
(157)
|
|
|
(177)
|
Free cash flow, a
non-GAAP measure
|
|
$
|
3,965
|
|
$
|
20,564
|
|
$
|
(47,398)
|
|
$
|
74,906
|
|
$
|
(62,037)
|
AXON
ENTERPRISE, INC.
|
SUPPLEMENTAL
TABLES
|
(in
thousands)
|
|
|
|
30 SEP
2021
|
|
31 DEC 2020
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
281,691
|
|
$
|
155,440
|
Short-term
investments
|
|
|
216,557
|
|
|
406,525
|
Long-term
investments
|
|
|
49,431
|
|
|
90,681
|
Total cash and cash
equivalents and investments, net
|
|
$
|
547,679
|
|
$
|
652,646
|
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SOURCE Axon