- SaaS Strength: Annual Recurring Revenue of $368 million, up 41%
- Profit of $0.71 per diluted
share, non-GAAP diluted EPS of $0.44,
Adjusted EBITDA of $50 million
- Future contracted revenue surpasses $3
billion
SCOTTSDALE, Ariz., Aug. 9, 2022
/PRNewswire/ --
Dear Shareholders,
Our second quarter financial results reflect continued momentum
throughout the business, including notable across-the-board
strength in new product adoption.
Revenue growth of 31% year over year was driven by strong demand
for Axon Cloud SaaS solutions, Axon Body 3 and Axon Fleet 3
systems, and our TASER 7 platform. Revenue from new SaaS products —
such as productivity solutions, real-time operations, Axon Air,
ALPR and VR(1) — nearly tripled year over year,
highlighting our ability to drive customer adoption of our new
software solutions.
We also executed against several key priorities in the quarter
that position us well for future growth — including deepening our
relationships with key partners and strategically investing to
build out the Axon Ecosystem.
In June, we renewed our strategic technology partnership with
Microsoft Azure — signing a six-year agreement that provides
long-term pricing certainty and cost visibility for our Axon Cloud
business. The renewal will support our software gross margin target
of 80%+, and enables us to offer pricing predictability to our own
customers. We discuss other ecosystem developments in more detail,
below.
Customers are increasingly demonstrating their confidence that
we are the right technology partner for them, for the next decade.
We make it easy for our customers to bet on us, because we
deliver. In the second quarter, 108 customers signed contracts
for longer than five years. The quality of the deal flow is also
strong. About a third of our top 100 deals were for a decade or
more. This drives our confidence in our ability to continue scaling
a rapidly growing, highly recurring SaaS business, with virtually
zero churn.
(1) ALPR is the industry
acronym for automatic license plate recognition. Enabled by
artificial intelligence, Axon's ALPR solution comes standard with
the Axon Fleet 3 in-car camera system. Plate read data that is
collected during patrol is then retained and can be queried through
Axon Evidence for later investigations.
VR is Axon's virtual reality training
solution, which is included stand-alone or included in our highest
value bundled offerings.
Select Highlights:
Management updates
Josh Isner, COO
In June, we appointed Josh Isner
to the role of Chief Operating Officer, a newly created position to
expand the office of the CEO. Josh is an executive familiar to
investors who have tuned into Axon's earnings calls, which we've
hosted over Zoom since early 2020. He's had an outsized impact on
Axon, including during his most recent tenure as chief revenue
officer. As CRO, Josh was responsible for Axon's global growth,
customer service, professional services, and sales operations. He
has been instrumental in building Axon's revenue stream to support
our 2022 guidance above $1 billion,
and was a key member of the executive team responsible for driving
historical annual revenue growth rates exceeding 25%. He now
oversees Axon's operational functions including business operations
and execution, policies and employees.
Isaiah Fields, CLO
In July, we appointed Isaiah
Fields to the role of Chief Legal Officer, where he will
spearhead Axon initiatives across legal operations, government
affairs, risk management and compliance. In Isaiah's previous role
as general counsel, he drove success across all elements of our
global organization. We are confident that Isaiah's leadership,
devotion to his team and passion for our mission will help Axon
successfully navigate this phase of rapid growth as we scale in
complexity and expand globally.
CFO search
Our search process for a permanent CFO is progressing well and
includes a strong pipeline of quality candidates. We hope to
welcome shortly an outstanding executive who brings an appetite for
strong financial rigor, along with the operational expertise to
continue to drive scale and long-term growth at Axon.
Customers & Product
New VR simulator promotes de-escalation for public
safety: The Phoenix Police
Department and New Castle County
Police in Delaware are the first
agencies to deploy Axon's latest improvement in its VR offerings.
The new simulator allows officers to train from anywhere. Trainees
learn to operate TASER 7 devices and training firearms in VR.
Scenarios include indoor range and an outdoor, nighttime setting.
The fast-paced exercises help trainees learn safety features,
recognize proper spread and probe placement on moving subjects,
manage clothing disconnects, and practice for higher effectiveness
when deploying TASER cartridges. More than 1,000 U.S. agencies now
use Axon VR training.
TASER 7 Device adoption accelerates in Canada: Police services in Ontario, including Toronto, found that simply presenting a TASER
device de-escalates a situation between 70% to 90% of the time,
without having to deploy a cartridge. Recent TASER 7 device
adoption in Canada has included
the Calgary Police Service, York
Regional Police, Peel Regional Police, Toronto Police Service and the Edmonton Police Service.
U.S. federal funding momentum: Axon's Federal business
outlook continues to strengthen with recent developments signaling
broad support for body camera adoption. In May, the White House
issued an executive order that mandated body cameras for federal
law enforcement. In addition, the White House's proposed FY2023
budget includes body camera funding for the Justice Department. We
are also seeing support in Congress for body camera programs
among the following federal law enforcement customers: Justice
Department agencies, including the FBI, the U.S. Marshals, the U.S.
Drug Enforcement Administration, the Bureau of Alcohol, Tobacco,
Firearms and Explosives; Department of Homeland Security agencies,
including U.S. Customs & Border Patrol, and U.S. Immigration
& Customs Enforcement; and Department of Interior agencies. The
House is also proposing funding for state and local agency matching
grants to drive body camera adoption.
Strategic initiatives:
In May, we hosted our seventh annual Axon Accelerate — our user
conference that has become the largest technology conference in
public safety. On display was the strength of the Axon Ecosystem,
featuring a growing network of partnerships and integrated
products. Our go-to-market strategy for the Axon Ecosystem has
graduated from an idea to now delivering tangible customer
value.
In addition to extending our technology partnership with
Microsoft, highlighted at the beginning of this letter, we also
executed several new key strategic initiatives during the second
quarter:
- Foundry 45: In April, we announced the acquisition of
Foundry 45, a VR studio focused on delivering immersive training
modules to large organizations. The acquisition bolsters Axon's VR
team in transforming public safety by making training more
accessible, relevant and affordable — with the goal of better
preparing officers for real-life situations.
- Fūsus: In May, we announced a strategic partnership
with Fūsus along with a $21
million non-controlling minority investment. Fusus is
the U.S. market leader in real-time crime center solutions for
public safety. The partnership makes it easier and more
cost-effective for communities to aggregate live feeds from public
and private cameras in addition to live video feeds from Axon Body
3, Axon Fleet 3 and Axon Air connected drones, creating a unified
operational picture for first responders.
- Skydio: In May, we also announced live-streaming from
Skydio drones into our Axon Respond platform. The integration with
Respond will enable command staff and 911 dispatchers to combine
the live-streaming capabilities of Axon body-worn and in-car
cameras with the Skydio drone's aerial perspective to provide a
more comprehensive operational picture.
- Dedrone: In June, we closed a $25 million non-controlling minority
follow-on investment in Dedrone, a market leader in counter
unmanned aircraft systems. Axon led the
company's oversubscribed $30
million Series C-1 financing round, which follows our
initial $25 million investment in
Dedrone in December 2021. Dedrone is accelerating on a path
towards making the world safer from unauthorized and malicious
drones. After conducting extensive due diligence to evaluate
opportunities to participate in the rapidly growing air security
market, we were impressed by Dedrone's technology, team and
commercial traction.
- DroneSense: In June, we also closed a $15 million non-controlling minority investment
in DroneSense in support of our previously announced partnership to
implement its piloting, program management and operations solution
via Axon's unmanned aircraft program, Axon Air. DroneSense has also
integrated its software platform with Axon's digital evidence
management platform, Axon Evidence, and real-time operations hub,
Axon Respond, to provide agencies with a comprehensive solution to
start and operate a drone program. This integration streamlines
first responder and drone pilot communications — allowing live
streaming from the UAS into Axon's real-time operations platform
and digital footage to be stored in Axon's evidence management
platform.
In addition to these recent new initiatives, we are also seeing
positive momentum across our broader ecosystem. In late 2021, we
acquired Occam Video Solutions, a leader in digital video
investigations software. The business has been integrated with
Axon, and, in addition to powering our Third-Party Video Playback
solution, Occam's flagship investigative software, iNPUT-ACE, has
been relaunched as Axon Investigate, and is seeing growing
interest from our customers.
Our partnerships with Flock Safety and
RapidSOS are also expanding in value for the Axon Ecosystem.
We are seeing strong adoption of Flock Safety's ALPR cameras
nationwide. Plate reads captured by Flock Safety's cameras can be
shared to cases with a single-click and managed within Axon
Evidence workflows. RapidSOS's technology powers Axon's recently
launched consumer focused smart phone app for personal safety, Axon
Protect (available in the Apple App Store and on Google Play),
which enables users to connect with a live Axon agent. We also
recently launched an Axon Respond integration with RapidSOS, which
enables 911 operators that use the company's Jurisdiction View
software platform to see live locations of first responders
equipped with Axon Body 3 cameras and also live-stream videos from
those cameras.
Summary of Q2 2022 results
- Quarterly revenue of $286 million
grew 31% year over year, exceeding our expectations, and led by
software and sensors segment growth of 41%.
- Total company gross margin of 60.9% improved 20 basis points
sequentially.
-
- We are prudently managing through an inflationary environment.
We expect gross margins to improve as we continue to increase
manufacturing output, with some variability based on product
mix.
- We expect further TASER 7 automation to come online in the back
half of this year and contribute to gross margin improvement in
2023. Our cloud hosting contract with Microsoft Azure also provides
us long-term visibility into the gross margin on the software
portion of our contracts, which has consistently trended above
80%.
- Operating profit was $21 million.
Operating expenses for the quarter of $153
million included $20 million
in stock based compensation expenses.
-
- SG&A of $95 million included
$9 million in stock-based
compensation expenses.
- R&D of $58 million included
$11 million in stock-based
compensation expenses.
- The sequential growth in operating expenses includes:
-
- $5 million tied to hiring that
supports our long-term growth profile
- $3 million tied to higher bonuses
paid to employees at the senior director level and below,
- $2 million tied to annual company
bonus accruals resulting from our improved outlook, and
- $1 million tied to our annual
user conference.
- We expect expense growth, excluding stock-based compensation,
to moderate in the back half of the year.
- Our quarterly net income of $51
million, or $0.71 per diluted
share, included $21 million in stock
based compensation expenses, a $12
million non-cash, unrealized, mark-to-market loss related to
our strategic investment in Cellebrite, and $60 million in net unrealized gains related to
strategic investments.
-
- Our stock based compensation expenses have declined
significantly compared to 2021. Of the $21
million in total stock-based compensation expense in Q2
2022, $3 million was related to our
specialized stock based compensation plans.(1) A year ago, we
recognized $138 million of stock
based compensation in the second quarter. The decline is due to the
fact that we have expensed 94% of the total projected expenses for
the plans since the CEO Performance Award was adopted in 2018 and
the XSPP was adopted in 2019, including for XSPP grants issued to
date.
- Non-GAAP net income was $32
million, or $0.44 per
share.
- Adjusted EBITDA was $50
million.
-
- Both Non-GAAP net income and Adjusted EBITDA exclude
stock-based compensation expenses and net gains and losses related
to our strategic investment portfolio.
- Operating cash flow of $19
million supported free cash flow generation of $7 million and adjusted free cash flow generation
of $10 million. We define free cash
flow as operating cash flow less capital expenditures and purchases
of intangible assets. Adjusted free cash flow excludes campus
investments.
- As of June 30, 2022 Axon had
$356 million in cash, equivalents and
investments.
-
- Uses of cash in the quarter included $61
million for strategic investments, $23 million in working capital, $13 million in capital expenditures, and
$7 million for the exercise of
warrants in an existing strategic investment.
(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.
Financial commentary by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TASER
|
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
30 JUNE 2021
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
135,586
|
|
|
$
|
114,360
|
|
|
$
|
112,528
|
|
|
18.6
|
%
|
|
20.5
|
%
|
Gross margin
|
|
|
64.3
|
%
|
|
|
64.5
|
%
|
|
|
66.4
|
%
|
|
(20)
|
bp
|
|
(210)
|
bp
|
- TASER segment revenue growth was driven by demand for our TASER
7 platform, with units up 85% year over year.
- Q2 2022 TASER segment gross margin slightly declined
sequentially. We expect further TASER 7 automation to come online
in the back half of this year and contribute to segment gross
margin improvement in 2023. We also expect to generate leverage on
our fixed cost base as we grow into our expanding manufacturing
footprint.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software &
Sensors
|
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
30 JUNE 2021
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Axon Cloud net
sales
|
|
$
|
81,697
|
|
|
$
|
77,016
|
|
|
$
|
60,477
|
|
|
6.1
|
%
|
|
35.1
|
%
|
Axon Cloud gross
margin
|
|
|
70.4
|
%
|
|
|
72.3
|
%
|
|
|
74.5
|
%
|
|
(190)
|
bp
|
|
(410)
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensors and Other net
sales
|
|
$
|
68,330
|
|
|
$
|
65,050
|
|
|
$
|
45,790
|
|
|
5.0
|
%
|
|
49.2
|
%
|
Sensors and Other gross
margin
|
|
|
42.9
|
%
|
|
|
40.5
|
%
|
|
|
39.7
|
%
|
|
240
|
bp
|
|
320
|
bp
|
- Axon Cloud revenue grew 35%year over year to $82 million, reflecting strong user growth for
our Axon Evidence (Evidence.com) platform, and software features
including transcription and body-camera enabled real-time
operations capabilities across location-based services, live
streaming and incident event alerts.
- Axon Cloud gross margin of 70.4% included 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. The software-only revenue in this segment, which
is annually recurring and includes cloud storage and compute costs,
has consistently carried a gross margin above 80%.
- Sensors & Other revenue grew 49% year over year to
$68 million, reflecting growth in
Axon Fleet 3 shipments followed by body camera unit growth.
- Sensors & Other gross margin was 42.9%, reflecting a
favorable product mix. As a reminder, we manage toward a 25% gross
margin for camera and sensors hardware, and the gross margin will
fluctuate quarter to quarter depending on the customer mix.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-looking
performance indicators:
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
31 DEC 2021
|
|
30 SEP 2021
|
|
30 JUNE 2021
|
|
|
($ in thousands)
|
|
Annual recurring
revenue (1)
|
|
$
|
367,952
|
|
|
$
|
347,613
|
|
|
$
|
327,488
|
|
|
$
|
288,691
|
|
|
$
|
260,178
|
|
Net revenue retention
(2)
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
Total company future
contracted revenue (2)
|
|
$
|
3,330,000
|
|
|
$
|
2,970,000
|
|
|
$
|
2,800,000
|
|
|
$
|
2,390,000
|
|
|
$
|
2,040,000
|
|
Percentage of TASER
devices sold on a recurring payment plan
|
|
|
76
|
%
|
|
|
45
|
%
|
|
|
65
|
%
|
|
|
58
|
%
|
|
|
55
|
%
|
(1)
|
Monthly recurring
license, integration, warranty, and storage revenue
annualized.
|
(2)
|
Refer to "Statistical
Definitions" below.
|
- Annual Recurring Revenue (ARR) grew 41% year over year to
$368 million.
- 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 $3.33 billion, reflecting strong bookings in the
quarter. This metric is also known as "remaining performance
obligations." 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 76%
in the quarter, reflecting a stronger mix of our TASER 7 devices,
which are mostly sold on a subscription. 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 August 9,
2022, and are subject to risks and uncertainties.
- Axon's upwardly revised full year 2022 revenue expectation has
improved to a range of $1.07 billion
to $1.12 billion, reflecting
approximately 27% annual growth at the midpoint. Previously, Axon
had guided to a range of $1.05
billion to $1.1 billion,
reflecting 25% growth at the midpoint.
- We now expect to deliver 2022 Adjusted EBITDA at the higher end
of the previously communicated range of $190
million to $200 million.
-
- As discussed last quarter, we are facing higher labor, freight
and materials costs, which we are working to offset with
automation, additional distribution facilities and engineering
R&D on products to lower component costs.
- 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 vary 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 are maintaining our expected adjusted free cash flow range
of $125 million to $145 million in 2022, compared with $85 million in 2021. This range reflects our
expectations for operating cash flow, minus our expected purchases
of property and equipment (CapEx) of $80
million to $90 million,
excluding any investments made in our campus facility, which we
expect to be less than $25
million.
- We are revising our expected 2022 capital expenditures to a
range of $80 million to $90 million, compared with our previous
expectation of $135 million to
$160 million.
-
- We expect our net campus investments in 2022 to be less than
$25 million, down from $85 million communicated previously. This
reflects adjusted pacing as we continue to monitor remote-hybrid
work trends and optimize our facility plans. We also are monitoring
the economic environment and are course adjusting to maintain
flexibility in how we invest our capital for growth.
We are energized by the momentum in our business, superior
execution by our teams and the underlying strength of our model,
all of which sets us up to continue accelerating growth and
profitability.
Thank you for investing in our mission to protect life.
-The Axon team
Quarterly conference call and webcast
We will host our Q2 2022 earnings conference call webinar on
Tuesday, August 9, 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/98326867283.
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 product. 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 June 30, 2022. 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 ten years, subject to risks related to delayed
deployments, budget appropriation or other contract cancellation
clauses.
Non-GAAP Measures
To supplement the Company's financial results presented in
accordance with GAAP, we present the non-GAAP financial measures of
EBITDA, Adjusted EBITDA, Non-GAAP Net Income, Non-GAAP Diluted
Earnings Per Share, Free Cash Flow and Adjusted Free Cash Flow. The
Company's management uses these non-GAAP financial measures in
evaluating the Company's performance in comparison to prior
periods. We believe that both management and investors benefit from
referring to these non-GAAP financial measures in assessing its
performance, and when planning and forecasting our future periods.
A reconciliation of GAAP to the non-GAAP financial measures is
presented herein.
- EBITDA (Most comparable GAAP Measure: Net income) - Earnings
before interest expense, investment interest income, income taxes,
depreciation and amortization.
- Adjusted EBITDA (Most comparable GAAP Measure: Net income) -
Earnings before interest expense, investment interest income,
income taxes, depreciation, amortization, non-cash stock-based
compensation expense, realized and unrealized gains/losses on
strategic investments and marketable securities and 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; realized and unrealized gains/losses on
strategic investments and marketable securities; loss on
impairment; costs related to strategic investments and business
acquisitions; costs related to the FTC litigation and pre-tax
certain other items (listed below). The Company tax-effects
non-GAAP adjustments using the blended statutory federal and state
tax rates for each period presented.
- Non-GAAP Diluted Earnings Per Share (Most comparable GAAP
Measure: Earnings Per share) - Measure of Company's Non-GAAP Net
Income divided by the weighted average number of diluted common
shares outstanding during the period presented.
- Free Cash Flow (Most comparable GAAP Measure: Cash flow from
operating activities) - cash flows provided by operating activities
minus purchases of property and equipment and intangible
assets.
- Adjusted Free Cash Flow (Most comparable GAAP Measure: Cash
flow from operating activities) - cash flows provided by operating
activities minus purchases of property and equipment and intangible
assets, excluding the net impact of investments in our new
Scottsdale, Ariz. campus.
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 270,000 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.
Apple and App Store are
trademarks of Apple, Inc., Cellebrite is a trademark of Celebrite
Mobile Synchronization Ltd.; Dedrone is a trademarks of Dedrone
Holdings, Inc.; DroneSense is a trademark of DroneSense, Inc.,
Facebook is a trademark of Facebook, Inc.; Flock Safety is a
trademark of Flock Group, Inc., dba Flock Safety; Google Play is a
trademark of Google, Inc.; Microsoft and Azure are trademarks of
Microsoft Corporation; RapidSOS is a trademark of Rapid SOS, Inc.;
Skydio is a trademark of Skydio, Inc.; Twitter is a trademark of
Twitter, Inc.; and Zoom is a trademark of Zoom Video
Communications, Inc.
Axon, the Delta Logo, Axon Accelerate, Axon Air, Axon Body, Axon
Evidence, Axon Fleet, Axon Network, Axon Respond, TASER, TASER 7
and Protect Life 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; the fulfillment of bookings;
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, stock-based compensation expense, adjusted EBITDA,
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; 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. The Annual Report on Form 10‑K that we
filed with the Securities and Exchange Commission ("SEC") on
February 25, 2022 lists 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 Report on Form 10‑K, and investors should refer to
them. You should understand that it is not possible to predict or
identify all such factors. Consequently, you should not consider
any such list to be a complete set of all potential risks or
uncertainties.
Except as required by law, we undertake no obligation to
publicly update forward-looking statements, whether as a result of
new information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on related
subjects in our Form 10-Q, 8-K and 10-K reports to the SEC. Our
filings with the SEC may be accessed at the SEC's web site at
www.sec.gov.
Update on Legal Matters:
Axon v. FTC
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 regarding its 2018 acquisition of Vievu LLC 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.
Oral argument is now set at the Supreme Court for November 7. A decision is unlikely before March
2023. Links to all court filings and opinions can be found on
Axon's FTC Investor Briefing page at https://www.axon.com/ftc.
Parallel to these matters Axon is evaluating strategic
alternatives to litigation, which Axon might pursue if determined
to be in the best interests of shareholders and customers. This
could include a divestiture of the Vievu entity and/or related
assets. While Axon continues to believe the acquisition 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
|
|
SIX MONTHS ENDED
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
30 JUNE 2021
|
|
30 JUN 2022
|
|
30 JUNE 2021
|
Net sales from
products
|
|
$
|
200,051
|
|
$
|
176,204
|
|
$
|
156,427
|
|
$
|
376,255
|
|
$
|
297,313
|
Net sales from
services
|
|
|
85,562
|
|
|
80,222
|
|
|
62,368
|
|
|
165,784
|
|
|
116,501
|
Net sales
|
|
|
285,613
|
|
|
256,426
|
|
|
218,795
|
|
|
542,039
|
|
|
413,814
|
Cost of product
sales
|
|
|
87,502
|
|
|
79,352
|
|
|
65,301
|
|
|
166,854
|
|
|
123,917
|
Cost of service
sales
|
|
|
24,148
|
|
|
21,335
|
|
|
15,565
|
|
|
45,483
|
|
|
28,615
|
Cost of
sales
|
|
|
111,650
|
|
|
100,687
|
|
|
80,866
|
|
|
212,337
|
|
|
152,532
|
Gross margin
|
|
|
173,963
|
|
|
155,739
|
|
|
137,929
|
|
|
329,702
|
|
|
261,282
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
95,005
|
|
|
90,129
|
|
|
177,662
|
|
|
185,134
|
|
|
304,259
|
Research and
development
|
|
|
57,547
|
|
|
48,416
|
|
|
53,952
|
|
|
105,963
|
|
|
100,970
|
Total operating
expenses
|
|
|
152,552
|
|
|
138,545
|
|
|
231,614
|
|
|
291,097
|
|
|
405,229
|
Income (loss) from
operations
|
|
|
21,411
|
|
|
17,194
|
|
|
(93,685)
|
|
|
38,605
|
|
|
(143,947)
|
Interest and other
income, net
|
|
|
47,026
|
|
|
55,299
|
|
|
41,841
|
|
|
102,325
|
|
|
42,426
|
Income (loss) before
provision for income taxes
|
|
|
68,437
|
|
|
72,493
|
|
|
(51,844)
|
|
|
140,930
|
|
|
(101,521)
|
Provision for (benefit
from) income taxes
|
|
|
17,475
|
|
|
17,622
|
|
|
(4,727)
|
|
|
35,097
|
|
|
(6,487)
|
Net income
(loss)
|
|
$
|
50,962
|
|
$
|
54,871
|
|
$
|
(47,117)
|
|
$
|
105,833
|
|
$
|
(95,034)
|
Net income (loss) per
common and common
equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.72
|
|
$
|
0.77
|
|
$
|
(0.72)
|
|
$
|
1.49
|
|
$
|
(1.47)
|
Diluted
|
|
$
|
0.71
|
|
$
|
0.76
|
|
$
|
(0.72)
|
|
$
|
1.46
|
|
$
|
(1.47)
|
Weighted average number
of common and
common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,040
|
|
|
70,950
|
|
|
65,166
|
|
|
70,995
|
|
|
64,604
|
Diluted
|
|
|
72,283
|
|
|
72,349
|
|
|
65,166
|
|
|
72,316
|
|
|
64,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC. SEGMENT
REPORTING (Unaudited)
(dollars in thousands)
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
30 JUN 2022
|
|
|
31 MARCH 2022
|
|
|
30 JUNE 2021
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
131,721
|
|
|
$
|
68,330
|
|
|
$
|
200,051
|
|
|
$
|
111,154
|
|
|
$
|
65,050
|
|
|
$
|
176,204
|
|
|
$
|
110,637
|
|
|
$
|
45,790
|
|
|
$
|
156,427
|
|
Net sales from services
(2)
|
|
|
3,865
|
|
|
|
81,697
|
|
|
|
85,562
|
|
|
|
3,206
|
|
|
|
77,016
|
|
|
|
80,222
|
|
|
|
1,891
|
|
|
|
60,477
|
|
|
|
62,368
|
|
Net sales
|
|
|
135,586
|
|
|
|
150,027
|
|
|
|
285,613
|
|
|
|
114,360
|
|
|
|
142,066
|
|
|
|
256,426
|
|
|
|
112,528
|
|
|
|
106,267
|
|
|
|
218,795
|
|
Cost of product
sales
|
|
|
48,463
|
|
|
|
39,039
|
|
|
|
87,502
|
|
|
|
40,625
|
|
|
|
38,727
|
|
|
|
79,352
|
|
|
|
37,701
|
|
|
|
27,600
|
|
|
|
65,301
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
24,148
|
|
|
|
24,148
|
|
|
|
—
|
|
|
|
21,335
|
|
|
|
21,335
|
|
|
|
145
|
|
|
|
15,420
|
|
|
|
15,565
|
|
Cost of
sales
|
|
|
48,463
|
|
|
|
63,187
|
|
|
|
111,650
|
|
|
|
40,625
|
|
|
|
60,062
|
|
|
|
100,687
|
|
|
|
37,846
|
|
|
|
43,020
|
|
|
|
80,866
|
|
Gross margin
|
|
|
87,123
|
|
|
|
86,840
|
|
|
|
173,963
|
|
|
|
73,735
|
|
|
|
82,004
|
|
|
|
155,739
|
|
|
|
74,682
|
|
|
|
63,247
|
|
|
|
137,929
|
|
Gross margin
%
|
|
|
64.3
|
%
|
|
|
57.9
|
%
|
|
|
60.9
|
%
|
|
|
64.5
|
%
|
|
|
57.7
|
%
|
|
|
60.7
|
%
|
|
|
66.4
|
%
|
|
|
59.5
|
%
|
|
|
63.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
13,316
|
|
|
|
44,231
|
|
|
|
57,547
|
|
|
|
9,896
|
|
|
|
38,520
|
|
|
|
48,416
|
|
|
|
12,313
|
|
|
|
41,639
|
|
|
|
53,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
|
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2022
|
|
|
30 JUNE 2021
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
242,875
|
|
|
$
|
133,380
|
|
|
$
|
376,255
|
|
|
$
|
207,939
|
|
|
$
|
89,374
|
|
|
$
|
297,313
|
|
Net sales from services
(2)
|
|
|
7,071
|
|
|
|
158,713
|
|
|
|
165,784
|
|
|
|
3,588
|
|
|
|
112,913
|
|
|
|
116,501
|
|
Net sales
|
|
|
249,946
|
|
|
|
292,093
|
|
|
|
542,039
|
|
|
|
211,527
|
|
|
|
202,287
|
|
|
|
413,814
|
|
Cost of product
sales
|
|
|
89,088
|
|
|
|
77,766
|
|
|
|
166,854
|
|
|
|
70,646
|
|
|
|
53,271
|
|
|
|
123,917
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
45,483
|
|
|
|
45,483
|
|
|
|
145
|
|
|
|
28,470
|
|
|
|
28,615
|
|
Cost of
sales
|
|
|
89,088
|
|
|
|
123,249
|
|
|
|
212,337
|
|
|
|
70,791
|
|
|
|
81,741
|
|
|
|
152,532
|
|
Gross margin
|
|
|
160,858
|
|
|
|
168,844
|
|
|
|
329,702
|
|
|
|
140,736
|
|
|
|
120,546
|
|
|
|
261,282
|
|
Gross margin
%
|
|
|
64.4
|
%
|
|
|
57.8
|
%
|
|
|
60.8
|
%
|
|
|
66.5
|
%
|
|
|
59.6
|
%
|
|
|
63.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
23,212
|
|
|
|
82,751
|
|
|
|
105,963
|
|
|
|
21,556
|
|
|
|
79,414
|
|
|
|
100,970
|
|
(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
|
|
|
|
|
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN
|
|
30 JUN
|
|
Unit
|
|
Percent
|
|
|
30 JUN
|
|
30 JUN
|
|
Unit
|
|
Percent
|
|
|
|
2022
|
|
2021
|
|
Change
|
|
Change
|
|
|
2022
|
|
2021
|
|
Change
|
|
Change
|
|
TASER 7
|
|
32,790
|
|
17,711
|
|
15,079
|
|
85.1
|
%
|
|
64,185
|
|
41,071
|
|
23,114
|
|
56.3
|
%
|
TASER X26P
|
|
8,831
|
|
7,012
|
|
1,819
|
|
25.9
|
|
|
15,169
|
|
15,241
|
|
(72)
|
|
(0.5)
|
|
TASER X2
|
|
2,745
|
|
9,788
|
|
(7,043)
|
|
(72.0)
|
|
|
4,751
|
|
18,626
|
|
(13,875)
|
|
(74.5)
|
|
TASER Consumer
devices
|
|
5,157
|
|
6,307
|
|
(1,150)
|
|
(18.2)
|
|
|
11,358
|
|
14,993
|
|
(3,635)
|
|
(24.2)
|
|
Cartridges
|
|
1,536,332
|
|
1,413,329
|
|
123,003
|
|
8.7
|
|
|
2,626,271
|
|
2,423,089
|
|
203,182
|
|
8.4
|
|
Axon Body
|
|
59,851
|
|
45,572
|
|
14,279
|
|
31.3
|
|
|
122,413
|
|
91,666
|
|
30,747
|
|
33.5
|
|
Axon Flex
|
|
1,136
|
|
1,846
|
|
(710)
|
|
(38.5)
|
|
|
4,263
|
|
3,411
|
|
852
|
|
25.0
|
|
Axon Fleet
|
|
6,146
|
|
2,462
|
|
3,684
|
|
149.6
|
|
|
11,893
|
|
3,902
|
|
7,991
|
|
204.8
|
|
Axon Dock
|
|
5,314
|
|
5,283
|
|
31
|
|
0.6
|
|
|
13,378
|
|
12,069
|
|
1,309
|
|
10.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (Unaudited)
Dollars in thousands
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
30 JUNE 2021
|
|
30 JUN 2022
|
|
30 JUNE 2021
|
|
EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
50,962
|
|
$
|
54,871
|
|
$
|
(47,117)
|
|
$
|
105,833
|
|
$
|
(95,034)
|
|
Depreciation and
amortization
|
|
|
6,210
|
|
|
5,755
|
|
|
4,291
|
|
|
11,965
|
|
|
8,582
|
|
Interest
expense
|
|
|
3
|
|
|
8
|
|
|
17
|
|
|
11
|
|
|
22
|
|
Investment interest
(income) loss
|
|
|
584
|
|
|
346
|
|
|
(502)
|
|
|
930
|
|
|
(1,035)
|
|
Provision for (benefit
from) income taxes
|
|
|
17,475
|
|
|
17,622
|
|
|
(4,727)
|
|
|
35,097
|
|
|
(6,487)
|
|
EBITDA
|
|
$
|
75,234
|
|
$
|
78,602
|
|
$
|
(48,038)
|
|
$
|
153,836
|
|
$
|
(93,952)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
21,162
|
|
$
|
25,088
|
|
$
|
137,549
|
|
$
|
46,250
|
|
$
|
227,159
|
|
Net realized and
unrealized gains on
strategic investments and marketable
securities (1)
|
|
|
(47,985)
|
|
|
(55,851)
|
|
|
(40,855)
|
|
|
(103,836)
|
|
|
(40,855)
|
|
Transaction costs
related to strategic
investments and acquisitions
|
|
|
964
|
|
|
871
|
|
|
110
|
|
|
1,835
|
|
|
495
|
|
Loss on disposal and
abandonment of
intangible assets
|
|
|
8
|
|
|
40
|
|
|
119
|
|
|
48
|
|
|
130
|
|
Loss (gain) on
disposal and
impairment of property and
equipment, net
|
|
|
83
|
|
|
106
|
|
|
(2)
|
|
|
189
|
|
|
43
|
|
Costs related to FTC
litigation
|
|
|
291
|
|
|
4
|
|
|
147
|
|
|
295
|
|
|
380
|
|
Payroll taxes related
to XSPP vesting
and CEO Award option exercises
|
|
|
—
|
|
|
—
|
|
|
2,217
|
|
|
—
|
|
|
3,669
|
|
Adjusted
EBITDA
|
|
$
|
49,757
|
|
$
|
48,860
|
|
$
|
51,247
|
|
$
|
98,617
|
|
$
|
97,069
|
|
Net income (loss) as a percentage of net
sales
|
|
|
17.8
|
%
|
|
21.4
|
%
|
|
(21.5)
|
%
|
|
19.5
|
%
|
|
(23.0)
|
%
|
Adjusted EBITDA as a percentage of net
sales
|
|
|
17.4
|
%
|
|
19.1
|
%
|
|
23.4
|
%
|
|
18.2
|
%
|
|
23.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
1,066
|
|
$
|
1,108
|
|
$
|
1,838
|
|
$
|
2,174
|
|
$
|
3,327
|
|
Sales, general and
administrative
|
|
|
8,610
|
|
|
12,982
|
|
|
114,089
|
|
|
21,592
|
|
|
185,104
|
|
Research and
development
|
|
|
11,486
|
|
|
10,998
|
|
|
21,622
|
|
|
22,484
|
|
|
38,728
|
|
Total
|
|
$
|
21,162
|
|
$
|
25,088
|
|
$
|
137,549
|
|
$
|
46,250
|
|
$
|
227,159
|
|
(1)
|
Includes unrealized
gains of $28.6 million and realized gain of $12.3 million for the
three and six months ended June 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
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
30 JUNE 2021
|
|
30 JUN 2022
|
|
30 JUNE 2021
|
|
Non-GAAP net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss)
|
|
$
|
50,962
|
|
$
|
54,871
|
|
$
|
(47,117)
|
|
$
|
105,833
|
|
$
|
(95,034)
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
21,162
|
|
|
25,088
|
|
|
137,549
|
|
|
46,250
|
|
|
227,159
|
|
Net realized and
unrealized gains on
strategic investments and marketable
securities (1)
|
|
|
(47,985)
|
|
|
(55,851)
|
|
|
(40,855)
|
|
|
(103,836)
|
|
|
(40,855)
|
|
Transaction costs
related to strategic
investments and acquisitions
|
|
|
964
|
|
|
871
|
|
|
110
|
|
|
1,835
|
|
|
495
|
|
Loss on disposal and
abandonment of
intangible assets
|
|
|
8
|
|
|
40
|
|
|
119
|
|
|
48
|
|
|
130
|
|
Loss (gain) on
disposal and impairment of
property and equipment, net
|
|
|
83
|
|
|
106
|
|
|
(2)
|
|
|
189
|
|
|
43
|
|
Costs related to FTC
litigation
|
|
|
291
|
|
|
4
|
|
|
147
|
|
|
295
|
|
|
380
|
|
Payroll taxes related
to XSPP vesting and
CEO Award option exercises
|
|
|
—
|
|
|
—
|
|
|
2,217
|
|
|
—
|
|
|
3,669
|
|
Income tax
effects
|
|
|
6,344
|
|
|
7,405
|
|
|
(24,826)
|
|
|
13,749
|
|
|
(47,606)
|
|
Non-GAAP net
income
|
|
$
|
31,829
|
|
$
|
32,534
|
|
$
|
27,342
|
|
$
|
64,363
|
|
$
|
48,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
|
0.71
|
|
$
|
0.76
|
|
$
|
(0.72)
|
|
$
|
1.46
|
|
$
|
(1.47)
|
|
Non-GAAP
|
|
$
|
0.44
|
|
$
|
0.45
|
|
$
|
0.38
|
|
$
|
0.89
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
|
72,283
|
|
|
72,349
|
|
|
65,166
|
|
|
72,316
|
|
|
64,604
|
|
Non-GAAP
(2)
|
|
|
72,283
|
|
|
72,349
|
|
|
71,689
|
|
|
72,316
|
|
|
69,544
|
|
(1)
|
Includes unrealized
gains of $28.6 million and realized gain of $12.3 million for the
three and six months ended June 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 JUN 2022
|
|
31 DEC 2021
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
212,815
|
|
$
|
356,332
|
Marketable
securities
|
|
|
45,900
|
|
|
72,180
|
Short-term
investments
|
|
|
118,514
|
|
|
14,510
|
Accounts and notes
receivable, net
|
|
|
379,672
|
|
|
320,819
|
Contract assets,
net
|
|
|
196,754
|
|
|
180,421
|
Inventory
|
|
|
154,297
|
|
|
108,688
|
Prepaid expenses and
other current assets
|
|
|
61,839
|
|
|
56,540
|
Total current
assets
|
|
|
1,169,791
|
|
|
1,109,490
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
157,916
|
|
|
138,457
|
Deferred tax assets,
net
|
|
|
100,548
|
|
|
127,193
|
Intangible assets,
net
|
|
|
13,934
|
|
|
15,470
|
Goodwill
|
|
|
45,004
|
|
|
43,592
|
Long-term
investments
|
|
|
24,925
|
|
|
31,232
|
Long-term notes
receivable, net
|
|
|
8,992
|
|
|
11,256
|
Long-term contract
assets, net
|
|
|
28,240
|
|
|
29,753
|
Strategic
investments
|
|
|
281,691
|
|
|
83,520
|
Other long-term
assets
|
|
|
100,982
|
|
|
98,247
|
Total assets
|
|
$
|
1,932,023
|
|
$
|
1,688,210
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
60,689
|
|
|
32,220
|
Accrued
liabilities
|
|
|
100,980
|
|
|
103,707
|
Current portion of
deferred revenue
|
|
|
253,185
|
|
|
265,591
|
Customer
deposits
|
|
|
11,330
|
|
|
10,463
|
Other current
liabilities
|
|
|
6,787
|
|
|
6,540
|
Total current
liabilities
|
|
|
432,971
|
|
|
418,521
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
269,477
|
|
|
185,721
|
Liability for
unrecognized tax benefits
|
|
|
7,692
|
|
|
3,797
|
Long-term deferred
compensation
|
|
|
5,517
|
|
|
5,679
|
Deferred tax liability,
net
|
|
|
1
|
|
|
811
|
Long-term lease
liabilities
|
|
|
18,210
|
|
|
20,440
|
Other long-term
liabilities
|
|
|
4,504
|
|
|
5,392
|
Total liabilities
|
|
|
738,372
|
|
|
640,361
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,139,086
|
|
|
1,095,229
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
215,716
|
|
|
109,883
|
Accumulated other
comprehensive income (loss)
|
|
|
(5,205)
|
|
|
(1,317)
|
Total stockholders' equity
|
|
|
1,193,651
|
|
|
1,047,849
|
Total liabilities and stockholders'
equity
|
|
$
|
1,932,023
|
|
$
|
1,688,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
30 JUNE 2021
|
|
30 JUN 2022
|
|
30 JUNE 2021
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
50,962
|
|
$
|
54,871
|
|
$
|
(47,117)
|
|
$
|
105,833
|
|
$
|
(95,034)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
6,210
|
|
|
5,755
|
|
|
4,291
|
|
|
11,965
|
|
|
8,582
|
|
Purchase accounting
adjustments to goodwill
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
8
|
|
|
40
|
|
|
119
|
|
|
48
|
|
|
130
|
|
Loss (gain) on disposal
and impairment of property and equipment, net
|
|
|
83
|
|
|
106
|
|
|
(2)
|
|
|
189
|
|
|
43
|
|
Realized and unrealized
gains on strategic investments and marketable securities,
net
|
|
|
(47,985)
|
|
|
(55,851)
|
|
|
(40,855)
|
|
|
(103,836)
|
|
|
(40,855)
|
|
Stock-based
compensation
|
|
|
21,162
|
|
|
25,088
|
|
|
137,549
|
|
|
46,250
|
|
|
227,159
|
|
Deferred income
taxes
|
|
|
8,021
|
|
|
18,029
|
|
|
(6,291)
|
|
|
26,050
|
|
|
(6,889)
|
|
Unrecognized tax
benefits
|
|
|
2,530
|
|
|
1,365
|
|
|
(147)
|
|
|
3,895
|
|
|
47
|
|
Bond
amortization
|
|
|
142
|
|
|
159
|
|
|
1,606
|
|
|
301
|
|
|
3,110
|
|
Noncash lease
expense
|
|
|
1,723
|
|
|
1,556
|
|
|
1,539
|
|
|
3,279
|
|
|
2,650
|
|
Provision for expected
credit losses
|
|
|
(45)
|
|
|
228
|
|
|
397
|
|
|
183
|
|
|
62
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
(87,742)
|
|
|
7,495
|
|
|
(35,286)
|
|
|
(80,247)
|
|
|
(3,988)
|
|
Inventory
|
|
|
(32,849)
|
|
|
(14,260)
|
|
|
(2,368)
|
|
|
(47,109)
|
|
|
(1,848)
|
|
Prepaid expenses and
other assets
|
|
|
4,386
|
|
|
(7,074)
|
|
|
(6,368)
|
|
|
(2,688)
|
|
|
(13,320)
|
|
Accounts payable,
accrued and other liabilities
|
|
|
34,149
|
|
|
(9,580)
|
|
|
7,681
|
|
|
24,569
|
|
|
(10,381)
|
|
Deferred
revenue
|
|
|
58,563
|
|
|
16,037
|
|
|
19,428
|
|
|
74,600
|
|
|
25,647
|
|
Net cash provided by
operating activities
|
|
|
19,376
|
|
|
43,964
|
|
|
34,176
|
|
|
63,340
|
|
|
95,115
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(108,240)
|
|
|
—
|
|
|
(82,463)
|
|
|
(108,240)
|
|
|
(238,288)
|
|
Proceeds from call /
maturity of investments
|
|
|
2,273
|
|
|
7,200
|
|
|
162,560
|
|
|
9,473
|
|
|
294,814
|
|
Exercise of warrants
from strategic investments
|
|
|
(6,555)
|
|
|
—
|
|
|
—
|
|
|
(6,555)
|
|
|
—
|
|
Proceeds from sale of
strategic investments
|
|
|
—
|
|
|
—
|
|
|
14,546
|
|
|
—
|
|
|
14,546
|
|
Purchases of property
and equipment
|
|
|
(12,749)
|
|
|
(17,098)
|
|
|
(13,510)
|
|
|
(29,847)
|
|
|
(24,031)
|
|
Purchases of intangible
assets
|
|
|
(67)
|
|
|
(37)
|
|
|
(102)
|
|
|
(104)
|
|
|
(143)
|
|
Proceeds from disposal
of property and equipment
|
|
|
4
|
|
|
87
|
|
|
38
|
|
|
91
|
|
|
48
|
|
Strategic
investments
|
|
|
(61,000)
|
|
|
(500)
|
|
|
(500)
|
|
|
(61,500)
|
|
|
(20,500)
|
|
Business acquisition,
net of cash acquired
|
|
|
(2,104)
|
|
|
—
|
|
|
—
|
|
|
(2,104)
|
|
|
—
|
|
Net cash provided
(used) in investing activities
|
|
|
(188,438)
|
|
|
(10,348)
|
|
|
80,569
|
|
|
(198,786)
|
|
|
26,446
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
(3)
|
|
|
(71)
|
|
|
—
|
|
|
(74)
|
|
|
—
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(931)
|
|
|
(1,388)
|
|
|
(3,267)
|
|
|
(2,319)
|
|
|
(10,312)
|
|
Net cash used in
financing activities
|
|
|
(934)
|
|
|
(1,459)
|
|
|
(3,267)
|
|
|
(2,393)
|
|
|
(10,312)
|
|
Effect of exchange rate changes on cash and cash
equivalents
|
|
|
(3,753)
|
|
|
(157)
|
|
|
73
|
|
|
(3,910)
|
|
|
(319)
|
|
Net increase (decrease)
in cash and cash equivalents and restricted cash
|
|
|
(173,749)
|
|
|
32,000
|
|
|
111,551
|
|
|
(141,749)
|
|
|
110,930
|
|
Cash and cash
equivalents and restricted cash, beginning of period
|
|
|
388,438
|
|
|
356,438
|
|
|
154,930
|
|
|
356,438
|
|
|
155,551
|
|
Cash and cash
equivalents and restricted cash, end of period
|
|
$
|
214,689
|
|
$
|
388,438
|
|
$
|
266,481
|
|
$
|
214,689
|
|
$
|
266,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC. SELECTED CASH FLOW
INFORMATION (Unaudited)
(in thousands)
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
30 JUN 2022
|
|
31 MARCH 2022
|
|
30 JUNE 2021
|
|
30 JUN 2022
|
|
30 JUNE 2021
|
Net cash provided by
operating activities
|
|
$
|
19,376
|
|
$
|
43,964
|
|
$
|
34,176
|
|
$
|
63,340
|
|
$
|
95,115
|
Purchases of property
and equipment
|
|
|
(12,749)
|
|
|
(17,098)
|
|
|
(13,510)
|
|
|
(29,847)
|
|
|
(24,031)
|
Purchases of intangible
assets
|
|
|
(67)
|
|
|
(37)
|
|
|
(102)
|
|
|
(104)
|
|
|
(143)
|
Free cash flow, a
non-GAAP measure
|
|
$
|
6,560
|
|
$
|
26,829
|
|
$
|
20,564
|
|
$
|
33,389
|
|
$
|
70,941
|
Net campus
investment
|
|
|
3,543
|
|
|
5,217
|
|
|
2,873
|
|
|
8,760
|
|
|
3,781
|
Adjusted free cash
flow, a non-GAAP measure
|
|
$
|
10,103
|
|
$
|
32,046
|
|
$
|
23,437
|
|
$
|
42,149
|
|
$
|
74,722
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC. SUPPLEMENTAL TABLES (in
thousands)
|
|
|
30 JUN 2022
|
|
31 DEC 2021
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
212,815
|
|
$
|
356,332
|
Short-term
investments
|
|
|
118,514
|
|
|
14,510
|
Long-term
investments
|
|
|
24,925
|
|
|
31,232
|
Total cash and cash
equivalents and investments, net
|
|
$
|
356,254
|
|
$
|
402,074
|
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
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SOURCE Axon