SCOTTSDALE, Ariz., Feb. 24, 2022 /PRNewswire/ --
Dear Shareholders,
Our 2021 results reflect strong operational and financial
execution across the business.
We are executing upon our vision to build the world's largest
and most trusted network of safety devices, in service of
protecting life by:
- Obsoleting the bullet
- Protecting truth
- Accelerating justice
- Building for racial equity, diversity, and inclusion
In 2021, we achieved revenue growth of 27% to $863 million. Over the past three years, we have
delivered a 27% compound annual revenue growth rate. While our net
loss of $60 million includes the
impact of non-cash stock based compensation expenses, annual
Adjusted EBITDA of $178 million
exceeded our guidance, reflected a 20.6% margin and showcases our
ability to deliver profitability while investing heavily to scale.
Indeed, we have achieved a three year Adjusted EBITDA CAGR of
43%.
Our focus on building best-in-class subscription software, with
a positive user experience, has driven our annual recurring revenue
to $327 million, tripling over three
years.
And record annual bookings of $1.7
billion, up 54% over 2020, point to strong growth ahead.
This level of sustainable high growth and profitability
underscores the importance and relevance of our mission to protect
life. This is especially true at a time when pandemics and social
unrest have created far-reaching impacts personally, professionally
and societally, around the world.
The stories that we hear from customers and citizens about lives
saved and communities feeling supported embolden us to continue
innovating, to pursue new markets and expand Axon's footprint into
new geographies, executing against the $52
billion total addressable market opportunity we laid out in
November 2021.
Our long-term model and financial targets remain unchanged: We
aim to deliver a 20%+ top line CAGR, while building recurring
revenue streams that support underlying Adjusted EBITDA margins of
30%, allowing us to reinvest for growth, as a Rule of 40
grower(1).
Our priority in 2022 is to *further excel at what we do* and we
are focused on setting our teams up for success. We are scaling new
products and markets, and attracting and developing talent to
continue executing on our mission.
(1)
|
The way Axon invests
in future growth while also demonstrating leverage is to target the
Rule of 40 — where the sum of our top line growth percentage plus
our Adjusted EBITDA margin percentage equals or surpasses 40. This
metric is typically used to evaluate pure SaaS companies, and has
set a high bar for our entire business, which includes hardware.
It's a bar that we continuously beat.
|
Select updates
New products
Axon launched Attorney Premier in December, formally
entering the justice software market, which we estimate to be worth
$1 billion. Attorney Premier enables
prosecutors and defense attorneys to easily manage various forms of
digital evidence, including body-worn and in-car video, drone
footage, interview room video, CCTV video, photographs, audio,
documents and more.
Axon's R&D on the category began more than a year ago, and
included hundreds of interviews with prosecutors and defense
attorneys. The proliferation of digital evidence has forced
highly-trained attorneys to spend up to a third of their time on
clerical work. Often, public defenders have as little as six
minutes with a client before entering a plea deal, while
prosecutors have less than an hour to make a charging decision.
Both sides can have hours of video evidence to review for each
case.
"Our District Attorney's Office has been working with Axon to
meet the many challenges that face us with the volume of videos and
other digital discovery that now fills the files of each case. We
have found Axon's approach to be responsive and found Attorney
Premier to be refreshing and innovative."
— Dan Rubinstein, District Attorney at 21st
Judicial District Attorney's Office in Colorado
Axon introduced plans for the Bolt 2, a new consumer
device. The TASER Bolt 2 is Axon's upcoming self-defense
product. It will feature a 15-foot range, discreet design, enhanced
features for improved accuracy in low-light, and the ability to
alert emergency dispatch when discharged when paired with a
companion app.
The Bolt 2 is designed to immobilize attackers for up to 30
seconds.
We anticipate that consumer will be a growing area of investment
for us over the long term given our incredibly low penetration of
this sizeable market. Our investments in personal safety devices
fall alongside our other growth investments, including software.
All of these investments are subject to the same financial
discipline that allows us to deliver meaningful profitability while
also growing the top line at 20% or higher.
Global scaling
Our geographical footprint continues to expand. Axon's
investments in CapEx include building out facilities around the
world to better service our customers.
In late 2021, we opened a new fulfillment center in Georgia, which aims to reduce shipping times
to Europe by about 50% and allows
us to reach many domestic customers more quickly, which is critical
in peak season and in mitigation for poor weather. The Atlanta fulfillment center is one of five.
Others include the facilities in or near Phoenix, the UK, Germany and Australia.
In February 2022, we announced a
new European R&D office. The London R&D hub is Axon's
fourth after Scottsdale, Ariz.,
Seattle, and Vietnam's Ho Chi
Minh City.
Strategic initiatives
Two initiatives completed in Q4 2021 are highly strategic and
value added.
Axon acquired Occam Video Solutions, a well-established
provider of forensic video solutions software. Axon initially
partnered with Occam in 2020 to license its technology. The
purchase price was $26 million,
consisting of cash and stock.
The Axon Evidence integration with Occam's solution solves a key
pain point for our customers. Video security, closed-circuit TV
(CCTV) and publicly submitted video evidence can be burdensome for
law enforcement agencies to manage. Many video security systems use
unique video formats that can only be played back using third-party
hardware or software. When agencies attempt to playback that video
using other commercial software, the files often play incorrectly
with frames being skipped entirely. Occam's software solves this
issue and supports most video file types.
Strategic investment in Dedrone, leader in drone detection
and tracking: Axon invested $25
million in Dedrone, a leader in drone security solutions to
identify, track and mitigate Small Unmanned Aircraft Systems
(sUAS). Dedrone has been delivering strong growth, and has
surpassed 1,000 sensors sold, expanding to detect more than 200
drone types. Dedrone uses artificial intelligence and machine
learning (AI/ML) to analyze and synthesize data from sensors to
detect, identify and track drones. Its software also provides data
analytics and drone mitigation.
Axon's investment in Dedrone is strategically significant to
Axon's long-term plans to leverage drones for public safety.
Dedrone is selling into 33 countries, and customers include four
G-7 nations, nine U.S. federal agencies, including the Department
of Defense, and more than 65 critical infrastructure sites, 20
airports, 50 correctional facilities and 10 Fortune 500 companies.
Dedrone's product suite will integrate with Axon's end-to-end drone
solution, Axon Air, which we launched in 2018.
Summary of Q4 2021 results:
- Quarterly revenue of $218 million
declined 4% year over year, and exceeded our expectations. The
negative growth rate reflects:
-
- A high year over year comparison was caused by a $20 million TASER order received from a national
government in Q4 2020.
- About $35 million of revenue tied
to demand for our TASER 7 platform shifted from Q4 2021 into 2022.
This was due to industry-wide chip shortages, as we communicated in
our Q3 2021 shareholder letter.
- About $15.5 million of revenue
tied to demand for Axon Body 3 cameras shifted from Q4 2021 into
2022 due to supply chain constraints.
- Total company gross margin of 62.1% was in line with our
expectations.
- Operating expenses for the quarter of $162 million included $40
million in stock based compensation expenses.
-
- SG&A of $111 million included
$28 million in stock-based
compensation expenses.
- R&D of $51 million included
$12 million in stock-based
compensation expenses.
- Our quarterly net loss of $14
million, or ($0.19) per share,
included $41 million in stock based
compensation expenses, an $11 million
non-cash, unrealized, mark-to-market adjustment related to our
strategic investment in Cellebrite and $9
million in payroll taxes tied to the vesting or exercising
of our eXponential Stock Performance Plan (XSPP) and CEO
Performance Award(2).
- Non-GAAP net income was $34
million, or $0.46 per
share.
- Adjusted EBITDA was $31 million,
adding up to full year Adjusted EBITDA of $178 million, which exceeded our guidance.
-
- Of the $41 million in total
stock-based compensation expense in Q4 2021, $27 million was related to our XSPP and CEO
Performance Award.
-
- In Q4 2021, $14 million was tied
to acceleration of attainment dates, which means the time over
which we record expense is shortened.
- Since the CEO Performance Award was adopted in 2018, we have
expensed $230 million of total
potential expense of $246 million
under the plan. Since the XSPP plan was adopted in 2019, we have
expensed $177 million of total
potential expense of $199 million
currently projected under the plan for XSPP grants issued to
date.
- In 2021, our operating cash flow of $124
million supported free cash flow generation of $74 million.
-
- Excluding our campus investments, adjusted free cash flow more
than quadrupled from $20 million in
2020 to $85 million in 2021.
Principal uses of cash in 2021 included $40
million of capital expenditures, primarily deployed toward
manufacturing automation and global facilities expansion, and
$43 million of investment in working
capital. We expect adjusted free cash flow generation to strengthen
even further in 2022.
- Outside of adjusted free cash flow in 2021, other uses of cash
included $68 million from inorganic
transactions, including the acquisitions of Occam and My90, and
strategic investments in RapidSOS and Dedrone, a $90 million strategic investment in Cellebrite,
and $331 million in tax payments
related to vesting and exercises of net settled stock awards. We
also invested $10 million toward our
new Scottsdale, Ariz. campus,
which is described further in the Outlook section.
- Principal contributors to cash outside of adjusted free cash
flow included $106 million in net
proceeds from our at-the-market offering, adopted in part to offset
net settled stock award tax payments, $52
million in proceeds from the exercise of stock options, and
$14.5 million in proceeds from our
strategic investment in Flock Safety.
- As of 2021 year end, Axon had $402
million in cash, equivalents and investments.
- Axon has zero debt.
(2)
|
These innovative
stock-based compensation plans were approved by shareholders in
2018 and 2019 and align the interests of management and employees
with shareholders.
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Financial commentary by segment:
TASER
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THREE MONTHS ENDED
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CHANGE
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31 DEC
2021
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30 SEP
2021
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31 DEC
2020
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QoQ
|
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YoY
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(in thousands)
|
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Net sales
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$
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103,909
|
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$
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121,491
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$
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135,761
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(14.5)
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%
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(23.5)
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%
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Gross
margin
|
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63.9
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%
|
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65.8
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%
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64.5
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%
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(190)
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bp
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(60)
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bp
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- Q4 2021 TASER segment revenue of $104
million declined year over year. In Q4 2020, we benefitted
from a $20 million TASER 7 order from
an international customer - the largest TASER order in company
history. Also, in Q4 2021, about $35
million in revenue did not ship due to inventory
constraints. On a full year basis, TASER segment revenue grew 19%
to $437 million.
- Q4 2021 TASER segment gross margin of 63.9% declined slightly,
primarily driven by lower fixed-cost leverage, product mix and
higher industry-wide freight costs. On a full year basis, TASER
segment gross margin expanded 310 basis points to 65.7%, aided by
engineered lower build costs in our TASER segment, including
investments in automation, and fixed-cost leverage.
Software & Sensors
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THREE MONTHS ENDED
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CHANGE
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31 DEC
2021
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30 SEP
2021
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31 DEC
2020
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QoQ
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YoY
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(in thousands)
|
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|
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Axon Cloud net
sales
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$
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68,668
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$
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63,264
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$
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50,343
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8.5
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%
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36.4
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%
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Axon Cloud gross
margin
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74.3
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%
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74.6
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%
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77.7
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%
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(30)
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bp
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(340)
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bp
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Sensors and Other net
sales
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$
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45,001
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$
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47,234
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$
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40,036
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(4.7)
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%
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12.4
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%
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Sensors and Other
gross margin
|
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39.3
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%
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36.9
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%
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36.3
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%
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240
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bp
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300
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bp
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- Axon Cloud revenue grew 36% year over year to $69 million, reflecting strong domestic demand
and growing adoption of our real-time operations and transcription
services.
- Axon Cloud gross margin of 74.3% reflects a combination of our
high margin software revenue and no-to-low margin professional
services costs related to installing new 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 12% year over year to
$45 million. About $15.5 million of revenue tied to demand for Axon
Body 3 cameras shifted from Q4 2021 into 2022 due to supply chain
constraints. Body camera demand continues to be strong. Absent the
impact of supply-chain related shipping delays, Sensors & Other
revenue would have grown 50% year over year.
- Sensors & Other gross margin was 39.3%. As a reminder, we
manage toward a 25% gross margin for camera and sensors hardware,
and the gross margin will fluctuate quarter to quarter depending on
the customer mix.
Forward-looking performance indicators:
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31 DEC
2021
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30 SEP
2021
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30 JUN
2021
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31 MAR
2021
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31 DEC 2020
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($
in thousands)
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Annual recurring
revenue (1)
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$
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327,488
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$
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288,691
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$
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260,178
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$
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242,357
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$
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221,263
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Net revenue retention
(2)
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119
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%
|
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119
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%
|
|
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119
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%
|
|
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119
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%
|
|
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119
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%
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Total company
future
contracted revenue (2)
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$
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2,800,000
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$
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2,390,000
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$
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2,040,000
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$
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1,790,000
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$
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1,730,000
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Percentage of
TASER
devices sold on a recurring
payment plan
|
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65
|
%
|
|
|
58
|
%
|
|
|
55
|
%
|
|
|
64
|
%
|
|
|
53
|
%
|
|
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(1)
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Monthly recurring
license, integration, warranty, and storage revenue
annualized.
|
(2)
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Refer to "Statistical
Definitions" below.
|
- Annual Recurring Revenue (ARR) grew 48% year over year to
$327.5 million. On a sequential
basis, ARR increased by $39 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. 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 $2.8 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 65%
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 full
year 2022 expectations as of February 24,
2022, and are subject to risks and uncertainties.
- We expect to achieve 2022 revenue of about $1.04 billion, representing 20% growth year over
year. This reflects a strengthened outlook compared with our
previously communicated guidance of at least $1.0 billion and highlights our long-term
strategy of scaling a business that supports a 20%-plus revenue
CAGR.
- We are establishing our expectations for Adjusted EBITDA in the
range of $185 million to $195 million.
-
- This guidance represents our ability to accelerate revenue
growth by reinvesting back into the business with both rigor and
discipline, pushing us forward on our path to achieving our
long-term target Adjusted EBITDA margin of 30%.
- 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
$104 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.
- We expect adjusted free cash flow to strengthen to a range of
about $125 million to $145 million in 2022, compared with about
$85 million in 2021. This range
reflects our expectations for operating cash flow, minus our
expected purchases of property and equipment (CapEx), excluding any
investments made in our campus facility, outlined below.
- Our expected capital expenditures of approximately $135 million to $160
million in 2022 include the following initiatives:
-
- Approximately $85 million is
expected to be deployed toward Axon's new campus in Scottsdale, Ariz. This project, which includes
a next-generation manufacturing facility, aims to consolidate
multiple facilities and bring increased automation to future
generations of product hardware. Axon leverages physical facilities
for not only manufacturing and warehousing, but hardware R&D,
testing labs, wireless calibration, customer training & events
and a variety of other functions that require physical
collaboration. We expect this investment to provide long-term
flexibility and stability for our physical plant operations.
- Investments of about $40 million
to support TASER capacity expansion and automation for current and
future products.
- Investments of about $15 million
in global facility build-outs and upgrades to support manufacturing
expansion, including expansions into Germany, the
Netherlands, India and
Spain.
- Up to $5 million in automating
packaging and assembly lines.
We entered 2022 with strong momentum and tremendous confidence
in our ability to continue accelerating growth and
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 Q4 2021 earnings conference call webinar on
Thursday, February 24, 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/91034907333.
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 December 31, 2021. We expect to
recognize between 15% - 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, Free Cash Flow and Adjusted Free Cash Flow. The
Company's management uses these non-GAAP financial measures in
evaluating the Company's performance in comparison to prior
periods. We believe that both management and investors benefit from
referring to these non-GAAP financial measures in assessing its
performance, and when planning and forecasting our future periods.
A reconciliation of GAAP to the non-GAAP financial measures is
presented herein.
- EBITDA (Most comparable GAAP Measure: Net income) - Earnings
before interest expense, investment interest income, income taxes,
depreciation and amortization.
- Adjusted EBITDA (Most comparable GAAP Measure: Net income) -
Earnings before interest expense, investment interest income,
income taxes, depreciation, amortization, non-cash stock-based
compensation expense and pre-tax certain other items (identified
and listed below in the reconciliation).
- Non-GAAP Net Income (Most comparable GAAP Measure: Net income)
- Net income excluding the costs of non-cash stock-based
compensation and excluding any net
gain/loss/write-down/disposal/abandonment of property, equipment
and intangible assets; loss on impairment; costs related to
strategic investments and business acquisitions; costs related to
the FTC litigation and pre-tax certain other items (listed below).
The Company tax-effects non-GAAP adjustments using the blended
statutory federal and state tax rates for each period
presented.
- Non-GAAP Diluted Earnings Per Share (Most comparable GAAP
Measure: Earnings Per share) - Measure of Company's Non-GAAP Net
Income divided by the weighted average number of diluted common
shares outstanding during the period presented.
- Free Cash Flow (Most comparable GAAP Measure: Cash flow from
operating activities) - cash flows provided by operating activities
minus purchases of property and equipment and intangible
assets.
- Adjusted Free Cash Flow (Most comparable GAAP Measure: Cash
flow from operating activities) - cash flows provided by operating
activities minus purchases of property and equipment and intangible
assets, excluding the net impact of investments in our new
Scottsdale, Ariz. campus.
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 262,000 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.; Dedrone is a trademark of Dedrone Holdings, Inc., Facebook is
a trademark of Facebook, Inc.; RapidSOS is a trademark of RapidSOS
Inc.; Twitter is a trademark of Twitter, Inc.; Vievu is a trademark
of Vievu, LLC and Zoom is a trademark of Zoom Video Communications,
Inc. Axon, Axon Network, Bolt 2, TASER, TASER 7, Protect Life, the
Delta Logo and the Lightning Bolt in Circle 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: 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 2022 full year revenue, adjusted EBITDA, stock-based
compensation expense, adjusted free cash flow, and capital
expenditures; statements of management's strategies, goals and
objectives and other similar expressions; as well as the ultimate
resolution of financial statement items requiring critical
accounting estimates, including those set forth in our Form 10–K
for the year ended December 31, 2021.
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 or other catastrophic events; our
ability to manage our supply chain and avoid production delays,
shortages and impacts to expected gross margins; changes in the
costs of product components and labor; our ability to attract and
retain key personnel; the impact of product mix on projected gross
margins; our ability to defend against litigation and protect our
intellectual property, and the resulting costs of this activity;
the impact of stock compensation expense, impairment expense, and
income tax expense on our financial results; 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
design, introduce, sell and deploy new products or features;
customer purchase behavior, including adoption of our software as a
service delivery model; delayed cash collections and possible
credit losses due to our subscription model; exposure to
international operational risks; our exposure to cancellations of
government contracts due to appropriation clauses, exercise of a
cancellation clause, or non-exercise of contractually optional
periods; defects in our products; loss of customer data, a breach
of security, or an extended outage, including by our third party
cloud-based storage providers; our ability to integrate acquired
businesses; negative media publicity regarding our products; 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 Federal Trade Commission (FTC)
while the FTC's separate antitrust administrative action against
the company remains stayed.
On January 24, 2022, the U.S.
Supreme Court accepted review of an important jurisdictional issue
raised by Axon's constitutional challenges to the FTC's internal
administrative structure and procedures. The high Court's action is
a critical first step for all businesses seeking to vindicate their
constitutional rights and hold government regulators
accountable.
As background, Axon's federal district 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, the appellate panel in a 2-1 split decision affirmed
the district court ruling against Axon on the jurisdictional
question, but granted Axon's motion to stay the case pending
resolution of the company's certiorari petition with the U.S.
Supreme Court (No. 21-86).
The Supreme Court will now decide the question of "whether
Congress impliedly stripped federal district courts of jurisdiction
over constitutional challenges to the FTC'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." Without such jurisdiction, parties
must endure the very processes they contend are unconstitutional
before reaching a court with actual authority to decide their
claims.
Argument is expected at the beginning of the Supreme Court's
next term in October. A decision is unlikely before February 2023 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.
AXON
ENTERPRISE, INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(in thousands,
except per share data)
|
|
|
|
THREE MONTHS ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
31 DEC
2021
|
|
30 SEP
2021
|
|
31 DEC
2020
|
|
31 DEC
2021
|
|
31 DEC
2020
|
Net sales from
products
|
|
$
|
145,409
|
|
$
|
165,803
|
|
$
|
174,116
|
|
$
|
608,525
|
|
$
|
500,250
|
Net sales from
services
|
|
|
72,169
|
|
|
66,186
|
|
|
52,024
|
|
|
254,856
|
|
|
180,753
|
Net sales
|
|
|
217,578
|
|
|
231,989
|
|
|
226,140
|
|
|
863,381
|
|
|
681,003
|
Cost of product
sales
|
|
|
64,845
|
|
|
71,336
|
|
|
73,624
|
|
|
260,098
|
|
|
224,131
|
Cost of service
sales
|
|
|
17,672
|
|
|
16,086
|
|
|
11,210
|
|
|
62,373
|
|
|
40,541
|
Cost of
sales
|
|
|
82,517
|
|
|
87,422
|
|
|
84,834
|
|
|
322,471
|
|
|
264,672
|
Gross
margin
|
|
|
135,061
|
|
|
144,567
|
|
|
141,306
|
|
|
540,910
|
|
|
416,331
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
111,453
|
|
|
99,295
|
|
|
97,523
|
|
|
515,007
|
|
|
307,286
|
Research and
development
|
|
|
50,674
|
|
|
42,382
|
|
|
38,008
|
|
|
194,026
|
|
|
123,195
|
Total operating
expenses
|
|
|
162,127
|
|
|
141,677
|
|
|
135,531
|
|
|
709,033
|
|
|
430,481
|
Income (loss) from
operations
|
|
|
(27,066)
|
|
|
2,890
|
|
|
5,775
|
|
|
(168,123)
|
|
|
(14,150)
|
Interest and other
incom (expense), net
|
|
|
(10,148)
|
|
|
(5,530)
|
|
|
3,265
|
|
|
26,748
|
|
|
7,859
|
Income (loss) before
provision for income taxes
|
|
|
(37,214)
|
|
|
(2,640)
|
|
|
9,040
|
|
|
(141,375)
|
|
|
(6,291)
|
Benefit from income
taxes
|
|
|
(23,706)
|
|
|
(51,164)
|
|
|
(16,794)
|
|
|
(81,357)
|
|
|
(4,567)
|
Net income
(loss)
|
|
$
|
(13,508)
|
|
$
|
48,524
|
|
$
|
25,834
|
|
$
|
(60,018)
|
|
$
|
(1,724)
|
Net income (loss) per
common and common equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.19)
|
|
$
|
0.73
|
|
$
|
0.41
|
|
$
|
(0.91)
|
|
$
|
(0.03)
|
Diluted
|
|
$
|
(0.19)
|
|
$
|
0.67
|
|
$
|
0.40
|
|
$
|
(0.91)
|
|
$
|
(0.03)
|
Weighted average
number of common and common
equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
69,310
|
|
|
66,192
|
|
|
63,639
|
|
|
66,191
|
|
|
61,782
|
Diluted
|
|
|
69,310
|
|
|
72,441
|
|
|
65,362
|
|
|
66,191
|
|
|
61,782
|
AXON
ENTERPRISE, INC.
|
SEGMENT
REPORTING
|
(Unaudited)
|
(dollars in
thousands)
|
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
31 DEC
2021
|
|
|
30 SEP
2021
|
|
|
31 DEC
2020
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from
products (1)
|
|
$
|
100,408
|
|
|
$
|
45,001
|
|
|
$
|
145,409
|
|
|
$
|
118,569
|
|
|
$
|
47,234
|
|
|
$
|
165,803
|
|
|
$
|
134,080
|
|
|
$
|
40,036
|
|
|
$
|
174,116
|
|
Net sales from
services (2)
|
|
|
3,501
|
|
|
|
68,668
|
|
|
|
72,169
|
|
|
|
2,922
|
|
|
|
63,264
|
|
|
|
66,186
|
|
|
|
1,681
|
|
|
|
50,343
|
|
|
|
52,024
|
|
Net sales
|
|
|
103,909
|
|
|
|
113,669
|
|
|
|
217,578
|
|
|
|
121,491
|
|
|
|
110,498
|
|
|
|
231,989
|
|
|
|
135,761
|
|
|
|
90,379
|
|
|
|
226,140
|
|
Cost of product
sales
|
|
|
37,539
|
|
|
|
27,306
|
|
|
|
64,845
|
|
|
|
41,554
|
|
|
|
29,782
|
|
|
|
71,336
|
|
|
|
48,138
|
|
|
|
25,486
|
|
|
|
73,624
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
17,672
|
|
|
|
17,672
|
|
|
|
—
|
|
|
|
16,086
|
|
|
|
16,086
|
|
|
|
—
|
|
|
|
11,210
|
|
|
|
11,210
|
|
Cost of
sales
|
|
|
37,539
|
|
|
|
44,978
|
|
|
|
82,517
|
|
|
|
41,554
|
|
|
|
45,868
|
|
|
|
87,422
|
|
|
|
48,138
|
|
|
|
36,696
|
|
|
|
84,834
|
|
Gross
margin
|
|
|
66,370
|
|
|
|
68,691
|
|
|
|
135,061
|
|
|
|
79,937
|
|
|
|
64,630
|
|
|
|
144,567
|
|
|
|
87,623
|
|
|
|
53,683
|
|
|
|
141,306
|
|
Gross margin
%
|
|
|
63.9
|
%
|
|
|
60.4
|
%
|
|
|
62.1
|
%
|
|
|
65.8
|
%
|
|
|
58.5
|
%
|
|
|
62.3
|
%
|
|
|
64.5
|
%
|
|
|
59.4
|
%
|
|
|
62.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
14,104
|
|
|
|
36,570
|
|
|
|
50,674
|
|
|
|
10,476
|
|
|
|
31,906
|
|
|
|
42,382
|
|
|
|
5,231
|
|
|
|
32,777
|
|
|
|
38,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWELVE MONTHS ENDED
|
|
|
TWELVE MONTHS ENDED
|
|
|
|
31 DEC
2021
|
|
|
31 DEC
2020
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from
products (1)
|
|
$
|
426,916
|
|
|
$
|
181,609
|
|
|
$
|
608,525
|
|
|
$
|
362,649
|
|
|
$
|
137,601
|
|
|
$
|
500,250
|
|
Net sales from
services (2)
|
|
|
10,011
|
|
|
|
244,845
|
|
|
|
254,856
|
|
|
|
3,903
|
|
|
|
176,850
|
|
|
|
180,753
|
|
Net sales
|
|
|
436,927
|
|
|
|
426,454
|
|
|
|
863,381
|
|
|
|
366,552
|
|
|
|
314,451
|
|
|
|
681,003
|
|
Cost of product
sales
|
|
|
149,739
|
|
|
|
110,359
|
|
|
|
260,098
|
|
|
|
136,925
|
|
|
|
87,206
|
|
|
|
224,131
|
|
Cost of service
sales
|
|
|
145
|
|
|
|
62,228
|
|
|
|
62,373
|
|
|
|
—
|
|
|
|
40,541
|
|
|
|
40,541
|
|
Cost of
sales
|
|
|
149,884
|
|
|
|
172,587
|
|
|
|
322,471
|
|
|
|
136,925
|
|
|
|
127,747
|
|
|
|
264,672
|
|
Gross
margin
|
|
|
287,043
|
|
|
|
253,867
|
|
|
|
540,910
|
|
|
|
229,627
|
|
|
|
186,704
|
|
|
|
416,331
|
|
Gross margin
%
|
|
|
65.7
|
%
|
|
|
59.5
|
%
|
|
|
62.7
|
%
|
|
|
62.6
|
%
|
|
|
59.4
|
%
|
|
|
61.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
46,136
|
|
|
|
147,890
|
|
|
|
194,026
|
|
|
|
15,380
|
|
|
|
107,815
|
|
|
|
123,195
|
|
|
|
(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
|
|
|
TWELVE MONTHS ENDED
|
|
|
|
31
DEC
|
|
31
DEC
|
|
Unit
|
|
Percent
|
|
|
31
DEC
|
|
31
DEC
|
|
Unit
|
|
Percent
|
|
|
|
2021
|
|
2020
|
|
Change
|
|
Change
|
|
|
2021
|
|
2020
|
|
Change
|
|
Change
|
|
TASER 7
|
|
12,927
|
|
41,099
|
|
(28,172)
|
|
(68.5)
|
%
|
|
90,348
|
|
77,451
|
|
12,897
|
|
16.7
|
%
|
TASER X26P
|
|
8,246
|
|
10,611
|
|
(2,365)
|
|
(22.3)
|
|
|
30,083
|
|
37,391
|
|
(7,308)
|
|
(19.5)
|
|
TASER X2
|
|
14,432
|
|
9,751
|
|
4,681
|
|
48.0
|
|
|
38,620
|
|
43,407
|
|
(4,787)
|
|
(11.0)
|
|
TASER Consumer
devices
|
|
8,733
|
|
11,657
|
|
(2,924)
|
|
(25.1)
|
|
|
26,958
|
|
33,158
|
|
(6,200)
|
|
(18.7)
|
|
Cartridges
|
|
1,194,867
|
|
1,272,679
|
|
(77,812)
|
|
(6.1)
|
|
|
4,945,927
|
|
3,714,291
|
|
1,231,636
|
|
33.2
|
|
Axon Body
|
|
31,749
|
|
44,735
|
|
(12,986)
|
|
(29.0)
|
|
|
181,663
|
|
182,538
|
|
(875)
|
|
(0.5)
|
|
Axon Flex
|
|
1,027
|
|
749
|
|
278
|
|
37.1
|
|
|
7,828
|
|
8,962
|
|
(1,134)
|
|
(12.7)
|
|
Axon Fleet
|
|
4,609
|
|
3,905
|
|
704
|
|
18.0
|
|
|
11,264
|
|
11,304
|
|
(40)
|
|
(0.4)
|
|
Axon Dock
|
|
4,959
|
|
6,326
|
|
(1,367)
|
|
(21.6)
|
|
|
25,584
|
|
25,422
|
|
162
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
|
(Unaudited)
|
Dollars in
thousands
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
|
31 DEC
2021
|
|
30 SEP
2021
|
|
31 DEC
2020
|
|
31 DEC
2021
|
|
31 DEC
2020
|
|
EBITDA and
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(13,508)
|
|
$
|
48,524
|
|
$
|
25,834
|
|
$
|
(60,018)
|
|
$
|
(1,724)
|
|
Depreciation and
amortization
|
|
|
5,274
|
|
|
4,838
|
|
|
3,531
|
|
|
18,694
|
|
|
12,475
|
|
Interest
expense
|
|
|
1
|
|
|
5
|
|
|
11
|
|
|
28
|
|
|
55
|
|
Investment interest
income
|
|
|
(353)
|
|
|
(123)
|
|
|
(929)
|
|
|
(1,511)
|
|
|
(4,086)
|
|
Provision for (benefit
from) income taxes
|
|
|
(23,706)
|
|
|
(51,164)
|
|
|
(16,794)
|
|
|
(81,357)
|
|
|
(4,567)
|
|
EBITDA
|
|
$
|
(32,292)
|
|
$
|
2,080
|
|
$
|
11,653
|
|
$
|
(124,164)
|
|
$
|
2,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
41,110
|
|
$
|
35,062
|
|
$
|
53,448
|
|
$
|
303,331
|
|
$
|
133,572
|
|
Realized and
unrealized (gains) losses
on strategic investments and
marketable securities (1)
|
|
|
11,160
|
|
|
6,660
|
|
|
(2,055)
|
|
|
(23,035)
|
|
|
(2,055)
|
|
Transaction costs
related to strategic
investments and acquisitions
|
|
|
1,180
|
|
|
393
|
|
|
109
|
|
|
2,068
|
|
|
1,032
|
|
Loss on disposal and
abandonment of
intangible assets
|
|
|
16
|
|
|
—
|
|
|
68
|
|
|
146
|
|
|
320
|
|
Loss on disposal and
impairment of
property and equipment, net
|
|
|
18
|
|
|
31
|
|
|
293
|
|
|
92
|
|
|
1,722
|
|
Costs related to FTC
litigation
|
|
|
119
|
|
|
242
|
|
|
522
|
|
|
741
|
|
|
19,064
|
|
Payroll taxes related
to XSPP vesting
and CEO Award option exercises
|
|
|
9,195
|
|
|
6,069
|
|
|
—
|
|
|
18,933
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
30,506
|
|
$
|
50,537
|
|
$
|
64,038
|
|
$
|
178,112
|
|
$
|
155,808
|
|
Net income (loss) as
a percentage of net sales
|
|
|
(6.2)
|
%
|
|
20.9
|
%
|
|
11.4
|
%
|
|
(7.0)
|
%
|
|
(0.3)
|
%
|
Adjusted EBITDA as
a percentage of net sales
|
|
|
14.0
|
%
|
|
21.8
|
%
|
|
28.3
|
%
|
|
20.6
|
%
|
|
22.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
1,405
|
|
$
|
1,112
|
|
$
|
1,294
|
|
$
|
5,844
|
|
$
|
3,464
|
|
Sales, general and
administrative
|
|
|
27,740
|
|
|
25,969
|
|
|
43,007
|
|
|
238,813
|
|
|
103,860
|
|
Research and
development
|
|
|
11,965
|
|
|
7,981
|
|
|
9,147
|
|
|
58,674
|
|
|
26,248
|
|
Total
|
|
$
|
41,110
|
|
$
|
35,062
|
|
$
|
53,448
|
|
$
|
303,331
|
|
$
|
133,572
|
|
|
|
(1)
|
Includes net
unrealized gains of $10.7 million and realized gain of $12.3
million for the twelve months ended December 31, 2021.
|
AXON
ENTERPRISE, INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES - continued
|
(Unaudited)
|
Dollars in
thousands, except per share amounts
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
|
31 DEC
2021
|
|
30 SEP
2021
|
|
31 DEC
2020
|
|
31 DEC
2021
|
|
31 DEC
2020
|
|
Non-GAAP net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
|
$
|
(13,508)
|
|
$
|
48,524
|
|
$
|
25,834
|
|
$
|
(60,018)
|
|
$
|
(1,724)
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
41,110
|
|
|
35,062
|
|
|
53,448
|
|
|
303,331
|
|
|
133,572
|
|
Realized and
unrealized (gains) losses on
strategic investments and marketable securities
(1)
|
|
|
11,160
|
|
|
6,660
|
|
|
(2,055)
|
|
|
(23,035)
|
|
|
(2,055)
|
|
Loss on disposal and
abandonment of intangible
assets
|
|
|
16
|
|
|
—
|
|
|
68
|
|
|
146
|
|
|
320
|
|
Loss on disposal and
impairment of property and
equipment, net
|
|
|
18
|
|
|
31
|
|
|
293
|
|
|
92
|
|
|
1,722
|
|
Transaction costs
related to strategic investments
and acquisitions
|
|
|
1,180
|
|
|
393
|
|
|
109
|
|
|
2,068
|
|
|
1,032
|
|
Costs related to FTC
litigation
|
|
|
119
|
|
|
242
|
|
|
522
|
|
|
741
|
|
|
19,064
|
|
Payroll taxes related
to XSPP vesting and CEO
Award option exercises
|
|
|
9,195
|
|
|
6,069
|
|
|
—
|
|
|
18,933
|
|
|
—
|
|
Income tax
effects
|
|
|
(15,605)
|
|
|
(12,064)
|
|
|
(13,172)
|
|
|
(75,276)
|
|
|
(38,156)
|
|
Non-GAAP net
income
|
|
$
|
33,685
|
|
$
|
84,917
|
|
$
|
65,047
|
|
$
|
166,982
|
|
$
|
113,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income
(loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
|
(0.19)
|
|
$
|
0.67
|
|
$
|
0.40
|
|
$
|
(0.91)
|
|
$
|
(0.03)
|
|
Non-GAAP
|
|
$
|
0.46
|
|
$
|
1.17
|
|
$
|
1.00
|
|
$
|
2.35
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
|
69,310
|
|
|
72,441
|
|
|
65,362
|
|
|
66,191
|
|
|
61,782
|
|
Non-GAAP
(2)
|
|
|
72,683
|
|
|
72,441
|
|
|
65,362
|
|
|
71,066
|
|
|
62,707
|
|
|
|
(1)
|
Includes net
unrealized gains of $10.7 million and realized gain of $12.3
million for the twelve months ended December 31, 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)
|
|
|
|
31 DEC
2021
|
|
31 DEC 2020
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
356,332
|
|
$
|
155,440
|
Marketable
securities
|
|
|
72,180
|
|
|
|
Short-term
investments
|
|
|
14,510
|
|
|
406,525
|
Accounts and notes
receivable, net
|
|
|
320,819
|
|
|
229,201
|
Contract assets,
net
|
|
|
180,421
|
|
|
63,945
|
Inventory,
net
|
|
|
108,688
|
|
|
89,958
|
Prepaid expenses and
other current assets
|
|
|
56,540
|
|
|
36,883
|
Total current
assets
|
|
|
1,109,490
|
|
|
981,952
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
138,457
|
|
|
105,494
|
Deferred tax assets,
net
|
|
|
127,193
|
|
|
45,770
|
Intangible assets,
net
|
|
|
15,470
|
|
|
9,448
|
Goodwill
|
|
|
43,592
|
|
|
25,205
|
Long-term
investments
|
|
|
31,232
|
|
|
90,681
|
Long-term notes
receivable, net
|
|
|
11,256
|
|
|
22,457
|
Long-term contract
assets, net
|
|
|
29,753
|
|
|
20,099
|
Strategic
Investments
|
|
|
83,520
|
|
|
11,711
|
Other long-term
assets
|
|
|
98,247
|
|
|
68,206
|
Total
assets
|
|
$
|
1,688,210
|
|
$
|
1,381,023
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
32,220
|
|
|
24,142
|
Accrued
liabilities
|
|
|
103,707
|
|
|
59,843
|
Current portion of
deferred revenue
|
|
|
265,591
|
|
|
163,959
|
Customer
deposits
|
|
|
10,463
|
|
|
2,956
|
Other current
liabilities
|
|
|
6,540
|
|
|
5,431
|
Total current
liabilities
|
|
|
418,521
|
|
|
256,331
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
185,721
|
|
|
111,222
|
Liability for
unrecognized tax benefits
|
|
|
3,797
|
|
|
4,503
|
Long-term deferred
compensation
|
|
|
5,679
|
|
|
4,732
|
Deferred tax
liabilities, net
|
|
|
811
|
|
|
649
|
Other long-term
liabilities
|
|
|
25,832
|
|
|
27,331
|
Total
liabilities
|
|
|
640,361
|
|
|
404,768
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common
stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,095,229
|
|
|
962,159
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
109,883
|
|
|
169,901
|
Accumulated other
comprehensive income (loss)
|
|
|
(1,317)
|
|
|
141
|
Total stockholders'
equity
|
|
|
1,047,849
|
|
|
976,255
|
Total liabilities
and stockholders' equity
|
|
$
|
1,688,210
|
|
$
|
1,381,023
|
AXON
ENTERPRISE, INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
|
31 DEC
2021
|
|
30 SEP
2021
|
|
31 DEC
2020
|
|
31 DEC
2021
|
|
31 DEC
2020
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(13,508)
|
|
$
|
48,524
|
|
$
|
25,834
|
|
$
|
(60,018)
|
|
$
|
(1,724)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
5,274
|
|
|
4,838
|
|
|
3,531
|
|
|
18,694
|
|
|
12,475
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
16
|
|
|
—
|
|
|
68
|
|
|
146
|
|
|
320
|
|
Loss on disposal and
impairment of property and equipment, net
|
|
|
18
|
|
|
31
|
|
|
293
|
|
|
92
|
|
|
1,722
|
|
Net loss (gain) on
strategic investments and marketable securities
|
|
|
11,160
|
|
|
6,660
|
|
|
—
|
|
|
(23,035)
|
|
|
—
|
|
Stock-based
compensation
|
|
|
41,110
|
|
|
35,062
|
|
|
53,448
|
|
|
303,331
|
|
|
133,572
|
|
Deferred income
taxes
|
|
|
(22,410)
|
|
|
(52,004)
|
|
|
(4,858)
|
|
|
(81,303)
|
|
|
(16,528)
|
|
Unrecognized tax
benefits
|
|
|
(783)
|
|
|
30
|
|
|
98
|
|
|
(706)
|
|
|
671
|
|
Bond premium
amortization
|
|
|
611
|
|
|
1,496
|
|
|
—
|
|
|
5,217
|
|
|
3,345
|
|
Noncash lease
expense
|
|
|
1,486
|
|
|
1,437
|
|
|
2,876
|
|
|
5,573
|
|
|
4,104
|
|
Provision for expected
credit losses
|
|
|
(829)
|
|
|
553
|
|
|
526
|
|
|
(214)
|
|
|
1,302
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
(87,675)
|
|
|
(114,106)
|
|
|
(59,211)
|
|
|
(205,769)
|
|
|
(107,762)
|
|
Inventory
|
|
|
(15,118)
|
|
|
(1,306)
|
|
|
7,215
|
|
|
(18,272)
|
|
|
(52,156)
|
|
Prepaid expenses and
other assets
|
|
|
(11,252)
|
|
|
(15,586)
|
|
|
(10,063)
|
|
|
(40,158)
|
|
|
(14,885)
|
|
Accounts payable,
accrued and other liabilities
|
|
|
16,773
|
|
|
38,909
|
|
|
(16,479)
|
|
|
45,301
|
|
|
8,886
|
|
Deferred
revenue
|
|
|
88,057
|
|
|
61,911
|
|
|
31,040
|
|
|
175,615
|
|
|
65,139
|
|
Net cash provided by
operating activities
|
|
|
12,930
|
|
|
16,449
|
|
|
34,318
|
|
|
124,494
|
|
|
38,481
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
—
|
|
|
(124,191)
|
|
|
(139,835)
|
|
|
(362,479)
|
|
|
(656,522)
|
|
Proceeds from call,
maturity, or sale of investments
|
|
|
219,445
|
|
|
204,358
|
|
|
92,640
|
|
|
718,617
|
|
|
379,839
|
|
Proceeds from sale of
strategic investments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,546
|
|
|
—
|
|
Purchases of property
and equipment
|
|
|
(13,385)
|
|
|
(12,470)
|
|
|
(6,606)
|
|
|
(49,886)
|
|
|
(72,629)
|
|
Purchases of intangible
assets
|
|
|
(235)
|
|
|
(14)
|
|
|
(64)
|
|
|
(392)
|
|
|
(241)
|
|
Proceeds from disposal
from property and equipment
|
|
|
12
|
|
|
(17)
|
|
|
1
|
|
|
43
|
|
|
95
|
|
Purchases of strategic
investments
|
|
|
(25,000)
|
|
|
—
|
|
|
(2,368)
|
|
|
(45,500)
|
|
|
(7,068)
|
|
Business acquisition,
net of cash acquired
|
|
|
(21,693)
|
|
|
(700)
|
|
|
—
|
|
|
(22,393)
|
|
|
—
|
|
Net cash provided by
(used in) investing activities
|
|
|
159,144
|
|
|
66,966
|
|
|
(56,232)
|
|
|
252,556
|
|
|
(356,526)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
(101)
|
|
|
105,615
|
|
|
—
|
|
|
105,514
|
|
|
306,779
|
|
Proceeds from options
exercised
|
|
|
51,614
|
|
|
—
|
|
|
—
|
|
|
51,614
|
|
|
295
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(148,792)
|
|
|
(172,205)
|
|
|
(923)
|
|
|
(331,309)
|
|
|
(7,809)
|
|
Net cash provided by
(used in) financing activities
|
|
|
(97,279)
|
|
|
(66,590)
|
|
|
(923)
|
|
|
(174,181)
|
|
|
299,265
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(155)
|
|
|
(1,508)
|
|
|
2,279
|
|
|
(1,982)
|
|
|
1,976
|
|
Net increase
(decrease) in cash and cash equivalents and restricted
cash
|
|
|
74,640
|
|
|
15,317
|
|
|
(20,558)
|
|
|
200,887
|
|
|
(16,804)
|
|
Cash and cash
equivalents and restricted cash, beginning of period
|
|
|
281,798
|
|
|
266,481
|
|
|
176,109
|
|
|
155,551
|
|
|
172,355
|
|
Cash and cash
equivalents and restricted cash, end of period
|
|
$
|
356,438
|
|
$
|
281,798
|
|
$
|
155,551
|
|
$
|
356,438
|
|
$
|
155,551
|
|
AXON
ENTERPRISE, INC.
|
SELECTED CASH FLOW
INFORMATION
|
(Unaudited)
|
(in
thousands)
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
31 DEC
2021
|
|
30 SEP
2021
|
|
31 DEC
2020
|
|
31 DEC
2021
|
|
31 DEC
2020
|
Net cash provided by
operating activities
|
|
$
|
12,930
|
|
$
|
16,449
|
|
$
|
34,318
|
|
$
|
124,494
|
|
$
|
38,481
|
Purchases of property
and equipment
|
|
|
(13,385)
|
|
|
(12,470)
|
|
|
(6,606)
|
|
|
(49,886)
|
|
|
(72,629)
|
Purchases of
intangible assets
|
|
|
(235)
|
|
|
(14)
|
|
|
(64)
|
|
|
(392)
|
|
|
(241)
|
Free cash flow, a
non-GAAP measure
|
|
$
|
(690)
|
|
$
|
3,965
|
|
$
|
27,648
|
|
$
|
74,216
|
|
$
|
(34,389)
|
Net campus
investment
|
|
|
3,391
|
|
|
3,128
|
|
|
—
|
|
|
10,297
|
|
|
54,152
|
Adjusted free cash
flow, a non-GAAP measure
|
|
$
|
2,701
|
|
$
|
7,093
|
|
$
|
27,648
|
|
$
|
84,513
|
|
$
|
19,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
|
SUPPLEMENTAL
TABLES
|
(in
thousands)
|
|
|
|
31 DEC
2021
|
|
31 DEC 2020
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
356,332
|
|
$
|
155,440
|
Short-term
investments
|
|
|
14,510
|
|
|
406,525
|
Long-term
investments
|
|
|
31,232
|
|
|
90,681
|
Total cash and cash
equivalents and investments, net
|
|
$
|
402,074
|
|
$
|
652,646
|
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
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SOURCE Axon