- SaaS strength drives Axon Cloud revenue growth of 51%;
Annual Recurring Revenue of $403
million, up 40% YOY
- EPS of $0.17, Non-GAAP EPS
of $0.60, Adjusted EBITDA of
$68 million at 21.7% margin
SCOTTSDALE, Ariz., Nov. 8, 2022
/PRNewswire/ --
Fellow Shareholders,
Customer enthusiasm across our product suite, including notable
strength in our Software & Sensors business, drove record
quarterly revenue of $312 million, up
34% year over year. Continued momentum on the top line, sequential
gross margin improvement and the inherent leverage in our business
model supported net income of $12
million and allowed us to generate Adjusted EBITDA of
$68 million, at 21.7% margin.
Our demand backdrop remains robust and we have tremendous
confidence in our sustainability of pipeline, which is supported by
our mission-critical product offerings and long-term contracts.
Importantly, our highly recurring, stable business model benefits
our company as well as our customers, who see us as their trusted
technology partner. We are especially pleased that our highest tier
integrated bundle is demonstrating the highest adoption rates this
year. Year to date, more than half of customers who chose
Officer Safety Plan selected Officer Safety Plan 7+ Premium, which
is listed at $249 per officer per
month and includes the TASER 7, Axon Body 3 camera, and more
software features than any other bundle. Even with this healthy
demand, the penetration rate of our highest tier bundles
is less than 15% relative to our potential state and local law
enforcement install base (1), signifying that our
domestic business enjoys wide runway for continued growth.
Our shareholders can expect Axon to continue to build upon this
solid foundation of customer trust, signing long-term contracts
with future deliverables, and introducing more and broader
enterprise bundles as we build the premier operating system for
public safety. We are emboldened by our market leadership position,
and feel confident in the sustainability of our long-term growth
profile.
(1) Based on a potential domestic
state and local government install base of 712,112 sworn officers,
according to data from the U.S. Census Bureau's State and Local
Employment and Payroll Data as of March
2021.
Select highlights:
Management update
Brittany Bagley, CFO &
CBO
In September, Brittany joined Axon as Chief Financial Officer
and stepped into the newly created role of Chief Business Officer.
Brittany is a seasoned business and finance leader with experience
both as an operator and as a board member. She has hit the
ground running over the past 40 days, conducting deep dives into
key metrics, taking a strategic and holistic lens to operations and
meeting customers and partners at the IACP conference. By way of
background, Brittany is a current member of the board of directors
of self-driving technology company Aurora Innovation (NASDAQ: AUR),
where she also serves as Audit Committee Chair and serves on the
compensation committee. Prior to joining Axon, she served for 3.5
years as Chief Financial Officer at Sonos (Nasdaq: SONO),
overseeing traditional finance functions, including investor
relations and M&A, as well as real estate and information
technology. From 2017 to 2019, Brittany served on the Sonos board
of directors, where she chaired the compensation committee. Over
the course of 12 years on KKR's Americas Private Equity team, she
held various investing roles including as a Managing Director of
the technology team. At KKR, she also served on numerous
boards.
"Axon is uniquely positioned to deliver
strong growth and drive long-term profitability with its model of
high-margin software growth that drives annual recurring revenue. I
look forward to partnering with this great team and building upon
their outstanding track record of execution and delivering
shareholder value." — Brittany
Bagley, CFO & CBO
Mission & vision update
Moonshot goal:
In October, Axon returned to the International Association of
Chiefs of Police (IACP) annual conference, the largest law
enforcement event of the year and a key customer-facing event for
us. This year, we announced that Axon is joining forces with law
enforcement and community leaders in a moonshot goal to cut
gun-related deaths between police and the public in half by
2033.
In announcing this moonshot goal, Axon pointed to the relevance
of our R&D product roadmap of hardware devices and SaaS
software solutions. We are committed to investing in the
technology, training and data that will help achieve better
outcomes and deepen trust between law enforcement and the
communities they protect and serve. Our product roadmap includes
accelerated advancements in non-lethal and de-escalation tools and
training, next-generation cameras and evidence capture devices,
real-time response and communications tools, community impact,
engagement and feedback solutions, and more comprehensive and
actionable use of force and response to resistance reporting.
Executing on our strategic vision
Relentless product innovation
We continue to invest in new product development in support of
our ultimate mission to protect life, as well as in support of our
long-term revenue target CAGR of 20%+.
Five key product developments since our last update include:
Never Miss a Moment is a framework that Axon has
introduced to help agencies and communities ensure that critical
moments are always captured and stored. The four components to
never missing a moment are:
- Reliable cameras — It's important to capture points of view
from multiple sources. We do this from officers via Axon Body 3
cameras; from vehicles via Axon Fleet 3 in-car cameras; from drones
via Axon Air; and from fixed cameras.
- Axon Performance software — Agencies set their own policies on
camera usage, and Axon develops software to help agencies manage
policy compliance. Axon Performance allows agencies to see baseline
camera activation rates down to the officer level and incentivizes
compliance while also enabling performance coaching, supervisor
alerts, and more. In the first year of using Axon Performance,
agencies tend to see dramatic improvement in camera usage —
ensuring cameras are recording when they are supposed to. We
believe that Axon Performance has helped at least 160 agencies
increase their body camera activation rates this year alone.
- Compliance safeguards — Axon designs software and hardware
tools to auto-activate cameras, which is useful in myriad
situations, especially when officers are too occupied to start
recording. We built the Axon Signal product line to drive camera
activation rates when certain incidents occur — such as the removal
of a firearm from its holster, or the activation of a TASER device.
We also offer programmatic integrations with computer aided
dispatch systems, which allows remote camera activation and
programmable geofencing, so cameras can automatically activate when
officers arrive on scene. These safeguards always come with strict
controls to preserve officer privacy and autonomy.
- Final failsafe —In the rare, rapidly unfolding and
high-pressure scenarios where all efforts to follow camera
activation policies may fail, Axon offers a failsafe called Video
Recall. This function allows the agency to enable a small and
specialized set of authorized users to forensically retrieve
"missed" video from an Axon Body 3 camera when the setting is
turned on. This feature works while providing careful controls and
strict privacy protection.
Axon Investigate adds a valuable tool to our suite of
digital evidence management solutions. Our investments in this
software support our ultimate goal of providing an end-to-end
solution for every piece of an agency's digital evidence, not just
body camera video, from capture to courtroom.
- Video is the most prolific source of evidence available to
investigators, but only when played correctly. While many commonly
available playback and conversion tools— including sometimes even
those created by CCTV companies for their own files—
unintentionally alter or otherwise incorrectly play evidence files,
Axon Investigate secures the forensic integrity of each video clip
regardless of its source, enabling investigators to protect
truth.
- Axon Investigate is built by a team of certified forensic video
analysts and ensures that investigators view and share accurate
digital evidence that is ready for court. In fact, users can bring
Axon Investigate into the courtroom and play full screen, zoomed or
looped video evidence for the judge or jury.
- Axon Investigate is the result of our late 2021 acquisition of
Occam Video Solutions and its flagship investigative software,
iNPUT-ACE.
"Axon Investigate solved the issue we were
facing with ease, this easily saved us many hours and added a layer
of integrity we would not have had if we were forced to process the
video another way." — Captain James
Evans of the Racine County
Sheriff's Office (Wisconsin)
My90 gains momentum, fostering community engagement. Axon
acquired this community engagement tool last year, and it is
quickly becoming a key addition to our solution suite. It allows
customer agencies to automatically send short surveys about officer
interactions, such as after a 911 response. It also collects candid
feedback from officers to reduce burnout and support officer
wellness. Resulting reports and analytics can be reviewed to bridge
gaps and bank trust, winning positive reviews from several
agencies.
"My90 is a great way to engage with our
community to better understand how the public feels about
interactions with our agency. Since deploying a trial of My90, we
have collected over 3,000 responses in just over 2 months. We have
the opportunity to review these results to gain valuable feedback
on an ongoing basis from people we have just served." —
Chief Kevin Davis, Fairfax County
Police Department
Axon Records continues to forge a steady and accelerating
path toward market leadership, one deployment at a time. We have
nearly 40 agencies with nearly 14,000 sworn officers live on Axon
Records, including 12 agencies that are already using our product
to fully replace their legacy records management system. The amount
of custom work for each marginal customer continues to decline,
while the number of simultaneous deployments increases. Indeed, we
are seeing clear proof points that bundling Records with our
higher-tier Officer Safety Plans is a go-to-market
differentiator.
Axon Respond, the centerpiece of our real-time operations
platform, also continues to demonstrate strong momentum. Respond
paid licenses have expanded to more than 1,500 agencies,
representing hundreds of thousands of connected Axon body cameras.
Active usage across all Respond features continues to rapidly grow
as well, helping supervisors be more aware of officer locations and
be notified of critical events. Our customers tell us that Axon
Respond video streaming dramatically enhances supervisors' ability
to support officers in the field, and some agencies are now using
Axon Respond to enable dispatchers to view live video for every
call for service, providing an extra set of eyes and additional
safety for officers in the field. Growing usage of the tool
demonstrates its utility to customers and supports future contract
renewals, validates our selling motion of offering software bundles
with integrated features, and seeds a pathway for our long-term
ambitions to be a leader in real-time solutions for public
safety.
Diversifying our customers and markets
We are diversifying into new markets by adding new types of
customer profiles, or users, and by adding to our core customer
base. We think of those core customers as falling into
roughly four categories of funding sources: U.S. state and local
governments, the U.S. federal government, international government
customers, and commercial enterprises. Simultaneously, the types of
customers who find value in our product offerings are expanding
beyond law enforcement to include attorneys, fire and EMS
personnel, corrections and the U.S. military.
U.S. federal government progress update
This year, we are seeing continued growth acceleration with U.S.
federal customers. In the first three quarters of 2022, the
federal government has booked contracts exceeding $200 million, with deliverables that extend over
the next several years. This progress is the result of a
growth initiative that Axon began in 2019, when we began
establishing trusted relationships with agencies that are now
finding value in our products, mission, and commitment to law
enforcement and communities.
Over the past four years, Axon has established itself as a key
partner to many of the federal offices that collectively employ
about 137,000 federal civilian law enforcement
agents(1), each with an agency that serves a unique
mission. Axon's compelling value proposition to the federal
government includes our mission focus, our stability and
reliability as a company that has been innovating since 1993, and
our technology leadership building unique products to solve unique
problems. In addition, to date, Axon remains the only
FedRAMP-authorized digital evidence management system cloud service
provider.
U.S. government adoption of body cameras and digital evidence
management
Axon is working to support customers, helping them tackle
difficult challenges and lead successful body camera programs, such
as the Department of Homeland Security's first-ever deployment of
body cameras along the U.S. southern border. The evidence captured
on those body cameras is managed in our FedRAMP-cloud
environment.
Additionally, the U.S. Marshals Service, Drug Enforcement
Administration (DEA) and the U.S. Park
Police are expanding their body camera programs, including
awarding Axon additional contracts this year.
In May 2022, the White House
issued its Executive Order on Advancing Effective,
Accountable Policing and Criminal Justice Practices to Enhance
Public Trust and Public Safety. The order contained a key
provision outlining a requirement for federal agencies to adopt
body-worn camera policies.
Since then, the U.S. Department of Veterans Affairs (VA) became
the first agency to award a contract and begin the process of
instituting a new body camera program. The department signed a
$60 million contract(2)
with the potential to expand over time, showcasing both VA's
commitment to veterans and officers, as well as Axon's ability to
respond to the requirements of the federal market.
"Our mission is to deliver professional law
enforcement and security services, and the protection of persons
and property on VA campuses; as well as the buildings under the
jurisdiction of the Department of Veterans Affairs. That includes
ensuring the safety of our Veterans, their care givers and VA
employees at all medical centers and clinics. By providing our
police officers, detectives and special agents with real-time
visibility and situational awareness, we ensure a safe environment
for our Veterans across the healthcare system." — Troy Brown, Director, VA Law Enforcement
Services
U.S. government adoption of TASER devices
We are also seeing healthy interest in our less-lethal
technology from myriad government customers. The U.S. Secret
Service Uniformed Division, for example, recently awarded Axon a
contract to deploy TASER 7. This represents the first
Homeland Security agency — and the largest federal customer — to
deploy TASER 7 less-lethal technology.
We expect more agencies to adopt Axon-provided capabilities and
are pleased with our progress in supporting the U.S. federal
government.
(1) Source: U.S. Department of Justice's Bureau of
Justice Statistics, Federal Law Enforcement Officers, 2020 –
Statistical Tables published on September
2022
(2) Axon's $60
million indefinite delivery, indefinite quantity (IDIQ)
contract with the VA includes a price schedule that allows for
performance over a five-year period.
Summary of Q3 2022 results
- Quarterly revenue of $312 million
grew 34% year over year, led by our domestic business, which grew
37%, driven by demand for the premium versions of our products and
bundles.
- Total company gross margin of 62% improved more than 100 basis
points sequentially. Gross margin benefitted from our renewed
agreement with Microsoft Azure, which was discussed in our last
quarterly update, as well as demand for our premium software-heavy
bundles.
- GAAP operating profit was $32
million. Operating expenses for the quarter of $161 million included $27
million in stock-based compensation expenses.
-
- SG&A of $102 million included
$14 million in stock-based
compensation expenses.
- R&D of $59 million included
$13 million in stock-based
compensation expenses.
- Our quarterly net income of $12
million, or $0.17 per diluted
share, included $28 million in
stock-based compensation expenses and $11
million in net unrealized losses related to strategic
investments and marketable securities.
- Non-GAAP net income was $44
million, or $0.60 per diluted
share.
- Adjusted EBITDA was $68 million,
supporting Adjusted EBITDA margins of 21.7%.
-
- Both Non-GAAP net income and Adjusted EBITDA exclude
stock-based compensation expenses and net gains or losses related
to our strategic investment portfolio.
- Operating cash flow of $41
million supported free cash flow generation of $26 million and adjusted free cash flow
generation of $31 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 September 30, 2022 Axon had
$371 million in cash, equivalents and
investments.
- Axon has zero funded debt.
Financial commentary by segment:
TASER
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|
|
|
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|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
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CHANGE
|
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
30 SEP
2021
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
144,883
|
|
|
$
|
135,586
|
|
|
$
|
121,491
|
|
|
6.9
|
%
|
|
19.3
|
%
|
Gross margin
|
|
|
63.1
|
%
|
|
|
64.3
|
%
|
|
|
65.8
|
%
|
|
(120)
|
bp
|
|
(270)
|
bp
|
- TASER segment revenue growth was driven by a significant
customer shift from our legacy TASER products to the premium TASER
7, which has a higher average selling price and delivers a higher
number of cartridges associated with the bundles.
- Sequential TASER segment gross margin drivers in the quarter
included unfavorable purchase price variance on raw materials
components, unfavorable product mix, including low-margin
VR-hardware, slightly offset by sequential favorability in outbound
freight costs. We see opportunities to improve TASER segment gross
margin by continuing to drive manufacturing efficiency and improve
fixed cost absorption as we grow.
Software &
Sensors
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THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
30 SEP
2021
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Axon Cloud net
sales
|
|
$
|
95,740
|
|
|
$
|
81,697
|
|
|
$
|
63,264
|
|
|
17.2
|
%
|
|
51.3
|
%
|
Axon Cloud gross
margin
|
|
|
74.1
|
%
|
|
|
70.4
|
%
|
|
|
74.6
|
%
|
|
370
|
bp
|
|
(50)
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensors and Other net
sales
|
|
$
|
71,131
|
|
|
$
|
68,330
|
|
|
$
|
47,234
|
|
|
4.1
|
%
|
|
50.6
|
%
|
Sensors and Other gross
margin
|
|
|
43.3
|
%
|
|
|
42.9
|
%
|
|
|
36.9
|
%
|
|
40
|
bp
|
|
640
|
bp
|
- Axon Cloud revenue growth of 51% reflects strong domestic
demand for our software-heavy premium integrated bundles and
healthy momentum in our digital evidence management, productivity
and real-time operations platforms.
- Axon Cloud gross margin of 74.1% included the benefit of our
renewed agreement with Microsoft Azure, which was discussed in
detail in our last quarterly update. Axon Cloud gross margin also
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 exceeded our
gross margin target of 80%.
- Sensors & Other revenue growth reflected domestic strength
in our body camera business, including a favorable pricing mix,
followed by strength in shipments of Axon Fleet in-car
cameras.
- Sensors & Other gross margin was 43.3%.
Forward-looking
performance indicators:
|
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|
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|
|
|
|
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
31 MAR
2022
|
|
31
DEC 2021
|
|
30 SEP
2021
|
|
|
($
in millions)
|
|
Annual recurring
revenue (1)
|
|
$
|
403
|
|
|
$
|
368
|
|
|
$
|
348
|
|
|
$
|
327
|
|
|
$
|
289
|
|
Net revenue retention
(2)
|
|
|
120
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
Total company future
contracted revenue (2)
|
|
$
|
3,730
|
|
|
$
|
3,330
|
|
|
$
|
2,970
|
|
|
$
|
2,800
|
|
|
$
|
2,390
|
|
Percentage of TASER
devices sold on a recurring payment plan
|
|
|
63
|
%
|
|
|
76
|
%
|
|
|
45
|
%
|
|
|
65
|
%
|
|
|
58
|
%
|
|
|
(1)
|
Monthly recurring
license, integration, warranty, and storage revenue
annualized.
|
(2)
|
Refer to "Statistical
Definitions" below.
|
- Annual Recurring Revenue (ARR) grew 40% year over year to
$403 million.
- Net revenue retention was 120% 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.
- Total company future contracted revenue grew to $3.73 billion. We expect to recognize between 15%
to 20% of this balance over the next twelve months, and generally
expect the remainder to be recognized over the following ten years.
This metric is also known as "remaining performance
obligations."
- The percentage of TASER devices sold on a subscription was 63%
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 November 8,
2022, and are subject to risks and uncertainties.
- Axon's full year 2022 revenue expectation has improved to a
range of $1.15 billion to
$1.16 billion, reflecting
approximately 34% year-over-year growth at the midpoint.
Previously, Axon had guided to a range of $1.07 billion to $1.12
billion, reflecting 27% year-over-year growth at the
midpoint.
-
- Our guidance implies Q4 2022 revenue of $300 million to $310
million, representing 40% year-over-year growth at the
midpoint.
- We now expect to deliver 2022 Adjusted EBITDA between
$215 million and $220 million, compared with our previous
expectation that we would deliver Adjusted EBITDA of about
$200 million.
-
- Our guidance implies Q4 2022 Adjusted EBITDA of $49 million to $54
million.
- We provide Adjusted EBITDA guidance, rather than net income
guidance, due to the inherent difficulty of forecasting certain
types of expenses such as stock-based compensation and income tax
expenses, which affect net income but 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 approximately
$105 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 now expect adjusted free cash flow to come in above the
midpoint of our previously communicated range of $125 million to $145
million. This range reflects our expectations for operating
cash flow, minus our expected purchases of property and equipment
(CapEx), excluding (adding back) investments made in our campus
facility.
-
- Our adjusted free cash flow projections reflect the fact that
we've been investing in inventory to support growth amidst a
challenging supply chain environment.
- We now expect 2022 capital expenditures of $70 million to $80
million, compared with our previous range of $80 million to $90
million, as some investments have pushed into next year.
This includes our unchanged expectations for net campus investments
of less than $25 million.
We remain confident in our long-term financial objective of
profitably delivering a 20%+ topline CAGR, and delivering products
that solve real-world problems, and benefit all of our
stakeholders, including shareholders, customers and the public.
Thank you for investing in our mission.
-The Axon team
Quarterly conference call and webcast
We will host our Q3 2022 earnings conference call webinar on
Tuesday, November 8, at 2 p.m. PT / 5 p.m.
ET.
The webcast will be available via a link on Axon's investor
relations website at https://investor.axon.com, or can be accessed
directly via https://axon.zoom.us/j/99038315799.
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 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 September 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 gain/losses on
strategic investments and marketable securities; loss on
impairment; costs related to strategic investments and business
acquisitions; costs related to the FTC litigation and pre-tax
certain other items (listed below). The Company tax-effects
non-GAAP adjustments using the blended statutory federal and state
tax rates for each period presented.
- Non-GAAP Diluted Earnings Per Share (Most comparable GAAP
Measure: Earnings Per share) - Measure of Company's Non-GAAP Net
Income divided by the weighted average number of diluted common
shares outstanding during the period presented.
- Free Cash Flow (Most comparable GAAP Measure: Cash flow from
operating activities) - cash flows provided by operating activities
minus purchases of property and equipment and intangible
assets.
- Adjusted Free Cash Flow (Most comparable GAAP Measure: Cash
flow from operating activities) - cash flows provided by operating
activities minus purchases of property and equipment and intangible
assets, excluding the net impact of investments in our new
Scottsdale, Ariz. campus.
Caution on Use of Non-GAAP Measures
Although these non-GAAP financial measures are not consistent
with GAAP, management believes investors will benefit by referring
to these non-GAAP financial measures when assessing the Company's
operating results, as well as when forecasting and analyzing future
periods. However, management recognizes that:
- these non-GAAP financial measures are limited in their
usefulness and should be considered only as a supplement to the
Company's GAAP financial measures;
- these non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, the Company's GAAP
financial measures;
- these non-GAAP financial measures should not be considered to
be superior to the Company's GAAP financial measures; and
- these non-GAAP financial measures were not prepared in
accordance with GAAP or under a comprehensive set of rules or
principles.
Further, these non-GAAP financial measures may be unique to the
Company, as they may be different from similarly titled non-GAAP
financial measures used by other companies. As such, this
presentation of non-GAAP financial measures may not enhance the
comparability of the Company's results to the results of other
companies.
About Axon
Axon is a technology leader in global public safety. Our
moonshot goal is to cut gun-related deaths between police and the
public by 50% before 2033. Axon is building the public safety
operating system of the future by integrating a suite of hardware
devices and cloud software solutions that lead modern policing.
Axon's suite includes TASER energy devices, body-worn cameras,
in-car cameras, cloud-hosted digital evidence management solutions,
productivity software and real-time operations capabilities. Axon's
growing global customer base includes first responders across
international, federal, state and local law enforcement, fire,
corrections and emergency medical services, as well as the justice
sector, commercial enterprises and consumers.
Non-Axon trademarks are property of their respective owners.
Axon, Axon Air, Axon Body, Axon Evidence, Axon Fleet, Axon
Investigate, Axon Performance, Axon Respond, My90, TASER, TASER 7
and the Delta Logo are trademarks of Axon Enterprise, Inc., some of
which are registered in the U.S. and other countries. For more
information, visit www.axon.com/legal. © 2022 Axon
Enterprise, Inc. All rights reserved.
Forward-looking statements
Forward-looking statements in this letter include, without
limitation, statements regarding: proposed products and services
and related development efforts and activities; expectations about
the market for our current and future products and services;
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 fourth quarter
and 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-based compensation expense, impairment expense, and income
tax expense on our financial results; customer purchase behavior,
including adoption of our software as a service delivery model;
negative media publicity 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
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 occurred at the Supreme Court on
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
|
|
NINE MONTHS ENDED
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
30 SEP
2021
|
|
30 SEP
2022
|
|
30 SEP
2021
|
Net sales from
products
|
|
$
|
210,398
|
|
$
|
200,051
|
|
$
|
165,803
|
|
$
|
586,653
|
|
$
|
463,116
|
Net sales from
services
|
|
|
101,356
|
|
|
85,562
|
|
|
66,186
|
|
|
267,140
|
|
|
182,687
|
Net sales
|
|
|
311,754
|
|
|
285,613
|
|
|
231,989
|
|
|
853,793
|
|
|
645,803
|
Cost of product
sales
|
|
|
93,724
|
|
|
87,502
|
|
|
71,336
|
|
|
260,578
|
|
|
195,253
|
Cost of service
sales
|
|
|
24,773
|
|
|
24,148
|
|
|
16,086
|
|
|
70,256
|
|
|
44,701
|
Cost of
sales
|
|
|
118,497
|
|
|
111,650
|
|
|
87,422
|
|
|
330,834
|
|
|
239,954
|
Gross margin
|
|
|
193,257
|
|
|
173,963
|
|
|
144,567
|
|
|
522,959
|
|
|
405,849
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
102,023
|
|
|
95,005
|
|
|
99,295
|
|
|
287,157
|
|
|
403,554
|
Research and
development
|
|
|
59,127
|
|
|
57,547
|
|
|
42,382
|
|
|
165,090
|
|
|
143,352
|
Total operating
expenses
|
|
|
161,150
|
|
|
152,552
|
|
|
141,677
|
|
|
452,247
|
|
|
546,906
|
Income (loss) from
operations
|
|
|
32,107
|
|
|
21,411
|
|
|
2,890
|
|
|
70,712
|
|
|
(141,057)
|
Interest and other
income (expense), net
|
|
|
(11,249)
|
|
|
47,026
|
|
|
(5,530)
|
|
|
91,076
|
|
|
36,896
|
Income (loss) before
provision for income taxes
|
|
|
20,858
|
|
|
68,437
|
|
|
(2,640)
|
|
|
161,788
|
|
|
(104,161)
|
Provision for (benefit
from) income taxes
|
|
|
8,727
|
|
|
17,475
|
|
|
(51,164)
|
|
|
43,824
|
|
|
(57,651)
|
Net income
(loss)
|
|
$
|
12,131
|
|
$
|
50,962
|
|
$
|
48,524
|
|
$
|
117,964
|
|
$
|
(46,510)
|
Net income (loss) per
common and common equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.17
|
|
$
|
0.72
|
|
$
|
0.73
|
|
$
|
1.66
|
|
$
|
(0.71)
|
Diluted
|
|
$
|
0.17
|
|
$
|
0.71
|
|
$
|
0.67
|
|
$
|
1.63
|
|
$
|
(0.71)
|
Weighted average number
of common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,107
|
|
|
71,040
|
|
|
66,192
|
|
|
71,033
|
|
|
65,139
|
Diluted
|
|
|
72,525
|
|
|
72,283
|
|
|
72,441
|
|
|
72,386
|
|
|
65,139
|
AXON
ENTERPRISE, INC.
SEGMENT
REPORTING
(Unaudited)
(dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
30 SEP
2022
|
|
|
30 JUN
2022
|
|
|
30 SEP
2021
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
139,267
|
|
|
$
|
71,131
|
|
|
$
|
210,398
|
|
|
$
|
131,721
|
|
|
$
|
68,330
|
|
|
$
|
200,051
|
|
|
$
|
118,569
|
|
|
$
|
47,234
|
|
|
$
|
165,803
|
|
Net sales from services
(2)
|
|
|
5,616
|
|
|
|
95,740
|
|
|
|
101,356
|
|
|
|
3,865
|
|
|
|
81,697
|
|
|
|
85,562
|
|
|
|
2,922
|
|
|
|
63,264
|
|
|
|
66,186
|
|
Net sales
|
|
|
144,883
|
|
|
|
166,871
|
|
|
|
311,754
|
|
|
|
135,586
|
|
|
|
150,027
|
|
|
|
285,613
|
|
|
|
121,491
|
|
|
|
110,498
|
|
|
|
231,989
|
|
Cost of product
sales
|
|
|
53,422
|
|
|
|
40,302
|
|
|
|
93,724
|
|
|
|
48,463
|
|
|
|
39,039
|
|
|
|
87,502
|
|
|
|
41,554
|
|
|
|
29,782
|
|
|
|
71,336
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
24,773
|
|
|
|
24,773
|
|
|
|
—
|
|
|
|
24,148
|
|
|
|
24,148
|
|
|
|
—
|
|
|
|
16,086
|
|
|
|
16,086
|
|
Cost of
sales
|
|
|
53,422
|
|
|
|
65,075
|
|
|
|
118,497
|
|
|
|
48,463
|
|
|
|
63,187
|
|
|
|
111,650
|
|
|
|
41,554
|
|
|
|
45,868
|
|
|
|
87,422
|
|
Gross margin
|
|
|
91,461
|
|
|
|
101,796
|
|
|
|
193,257
|
|
|
|
87,123
|
|
|
|
86,840
|
|
|
|
173,963
|
|
|
|
79,937
|
|
|
|
64,630
|
|
|
|
144,567
|
|
Gross margin
%
|
|
|
63.1
|
%
|
|
|
61.0
|
%
|
|
|
62.0
|
%
|
|
|
64.3
|
%
|
|
|
57.9
|
%
|
|
|
60.9
|
%
|
|
|
65.8
|
%
|
|
|
58.5
|
%
|
|
|
62.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
13,864
|
|
|
|
45,263
|
|
|
|
59,127
|
|
|
|
13,316
|
|
|
|
44,231
|
|
|
|
57,547
|
|
|
|
10,476
|
|
|
|
31,906
|
|
|
|
42,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
|
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2022
|
|
|
30 SEP
2021
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
382,142
|
|
|
$
|
204,511
|
|
|
$
|
586,653
|
|
|
$
|
326,508
|
|
|
$
|
136,608
|
|
|
$
|
463,116
|
|
Net sales from services
(2)
|
|
|
12,687
|
|
|
|
254,453
|
|
|
|
267,140
|
|
|
|
6,510
|
|
|
|
176,177
|
|
|
|
182,687
|
|
Net sales
|
|
|
394,829
|
|
|
|
458,964
|
|
|
|
853,793
|
|
|
|
333,018
|
|
|
|
312,785
|
|
|
|
645,803
|
|
Cost of product
sales
|
|
|
142,510
|
|
|
|
118,068
|
|
|
|
260,578
|
|
|
|
112,200
|
|
|
|
83,053
|
|
|
|
195,253
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
70,256
|
|
|
|
70,256
|
|
|
|
145
|
|
|
|
44,556
|
|
|
|
44,701
|
|
Cost of
sales
|
|
|
142,510
|
|
|
|
188,324
|
|
|
|
330,834
|
|
|
|
112,345
|
|
|
|
127,609
|
|
|
|
239,954
|
|
Gross margin
|
|
|
252,319
|
|
|
|
270,640
|
|
|
|
522,959
|
|
|
|
220,673
|
|
|
|
185,176
|
|
|
|
405,849
|
|
Gross margin
%
|
|
|
63.9
|
%
|
|
|
59.0
|
%
|
|
|
61.3
|
%
|
|
|
66.3
|
%
|
|
|
59.2
|
%
|
|
|
62.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
37,076
|
|
|
|
128,014
|
|
|
|
165,090
|
|
|
|
32,032
|
|
|
|
111,320
|
|
|
|
143,352
|
|
|
|
(1)
|
Software and Sensors
"products" revenue consists of sensors, including on-officer body
cameras, Axon Fleet cameras, other hardware sensors, warranties on
sensors, and other products, and is sometimes referred to as
Sensors and Other revenue.
|
(2)
|
Software and Sensors
"services" revenue comprises sales related to the Axon Cloud, which
includes Axon Evidence, cloud-based evidence management software
revenue, other recurring cloud-hosted software revenue and related
professional services, and is sometimes referred to as Axon Cloud
revenue.
|
AXON
ENTERPRISE, INC.
UNIT SALES
STATISTICS
(Unaudited)
Units in whole
numbers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
|
|
|
|
NINE MONTHS ENDED
|
|
|
|
30
SEP
|
|
30
SEP
|
|
Unit
|
|
Percent
|
|
|
30
SEP
|
|
30
SEP
|
|
Unit
|
|
Percent
|
|
|
|
2022
|
|
2021
|
|
Change
|
|
Change
|
|
|
2022
|
|
2021
|
|
Change
|
|
Change
|
|
TASER 7
|
|
40,502
|
|
36,350
|
|
4,152
|
|
11.4
|
%
|
|
104,687
|
|
77,421
|
|
27,266
|
|
35.2
|
%
|
TASER X26P
|
|
3,745
|
|
6,596
|
|
(2,851)
|
|
(43.2)
|
|
|
18,914
|
|
21,837
|
|
(2,923)
|
|
(13.4)
|
|
TASER X2
|
|
5,120
|
|
5,562
|
|
(442)
|
|
(7.9)
|
|
|
9,871
|
|
24,188
|
|
(14,317)
|
|
(59.2)
|
|
TASER Consumer
devices
|
|
7,180
|
|
3,232
|
|
3,948
|
|
122.2
|
|
|
18,538
|
|
18,225
|
|
313
|
|
1.7
|
|
Cartridges
|
|
1,481,169
|
|
1,327,971
|
|
153,198
|
|
11.5
|
|
|
4,107,440
|
|
3,751,060
|
|
356,380
|
|
9.5
|
|
Axon Body
|
|
71,070
|
|
58,248
|
|
12,822
|
|
22.0
|
|
|
193,483
|
|
149,914
|
|
43,569
|
|
29.1
|
|
Axon Flex
|
|
1,188
|
|
3,390
|
|
(2,202)
|
|
(65.0)
|
|
|
5,451
|
|
6,801
|
|
(1,350)
|
|
(19.9)
|
|
Axon Fleet
|
|
2,342
|
|
2,753
|
|
(411)
|
|
(14.9)
|
|
|
14,235
|
|
6,655
|
|
7,580
|
|
113.9
|
|
Axon Dock
|
|
3,822
|
|
8,556
|
|
(4,734)
|
|
(55.3)
|
|
|
17,200
|
|
20,625
|
|
(3,425)
|
|
(16.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXON
ENTERPRISE, INC.
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
30 SEP
2021
|
|
30 SEP
2022
|
|
30 SEP
2021
|
|
EBITDA and Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
12,131
|
|
$
|
50,962
|
|
$
|
48,524
|
|
$
|
117,964
|
|
$
|
(46,510)
|
|
Depreciation and
amortization
|
|
|
6,206
|
|
|
6,210
|
|
|
4,838
|
|
|
18,171
|
|
|
13,420
|
|
Interest
expense
|
|
|
3
|
|
|
3
|
|
|
5
|
|
|
14
|
|
|
27
|
|
Investment interest
(income) loss
|
|
|
(1,098)
|
|
|
584
|
|
|
(123)
|
|
|
(168)
|
|
|
(1,158)
|
|
Provision for (benefit
from) income taxes
|
|
|
8,727
|
|
|
17,475
|
|
|
(51,164)
|
|
|
43,824
|
|
|
(57,651)
|
|
EBITDA
|
|
$
|
25,969
|
|
$
|
75,234
|
|
$
|
2,080
|
|
$
|
179,805
|
|
$
|
(91,872)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
28,204
|
|
$
|
21,162
|
|
$
|
35,062
|
|
$
|
74,454
|
|
$
|
262,221
|
|
Realized and
unrealized (gains) loss on strategic
investments and marketable securities, net
(1)
|
|
|
11,338
|
|
|
(47,985)
|
|
|
6,660
|
|
|
(92,498)
|
|
|
(34,195)
|
|
Transaction costs
related to strategic investments
and acquisitions
|
|
|
469
|
|
|
964
|
|
|
393
|
|
|
2,304
|
|
|
888
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
20
|
|
|
8
|
|
|
—
|
|
|
68
|
|
|
130
|
|
Loss on disposal and
impairment of property, equipment
and other assets, net
|
|
|
1,775
|
|
|
83
|
|
|
31
|
|
|
1,964
|
|
|
74
|
|
Costs related to FTC
litigation
|
|
|
—
|
|
|
291
|
|
|
242
|
|
|
295
|
|
|
622
|
|
Payroll taxes related
to XSPP vesting and CEO Award
option exercises
|
|
|
—
|
|
|
—
|
|
|
6,069
|
|
|
—
|
|
|
9,738
|
|
Adjusted
EBITDA
|
|
$
|
67,775
|
|
$
|
49,757
|
|
$
|
50,537
|
|
$
|
166,392
|
|
$
|
147,606
|
|
Net income (loss) as
a percentage of net sales
|
|
|
3.9
|
%
|
|
17.8
|
%
|
|
20.9
|
%
|
|
13.8
|
%
|
|
(7.2)
|
%
|
Adjusted EBITDA as
a percentage of net sales
|
|
|
21.7
|
%
|
|
17.4
|
%
|
|
21.8
|
%
|
|
19.5
|
%
|
|
22.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
1,157
|
|
$
|
1,066
|
|
$
|
1,112
|
|
$
|
3,331
|
|
$
|
4,439
|
|
Sales, general and
administrative
|
|
|
14,268
|
|
|
8,610
|
|
|
25,969
|
|
|
35,860
|
|
|
211,073
|
|
Research and
development
|
|
|
12,779
|
|
|
11,486
|
|
|
7,981
|
|
|
35,263
|
|
|
46,709
|
|
Total
|
|
$
|
28,204
|
|
$
|
21,162
|
|
$
|
35,062
|
|
$
|
74,454
|
|
$
|
262,221
|
|
|
|
(1)
|
Includes unrealized
losses of $38.0 million and unrealized gains of $130.5 million for
the nine months ended September 30, 2022. Includes an unrealized
loss of $6.7 million, unrealized gains of $28.6 million and
realized gain of $12.3 million for the nine months ended September
30, 2021.
|
AXON
ENTERPRISE, INC.
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES - continued
(Unaudited)
Dollars in
thousands, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
30 SEP
2021
|
|
30 SEP
2022
|
|
30 SEP
2021
|
|
Non-GAAP net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
|
$
|
12,131
|
|
$
|
50,962
|
|
$
|
48,524
|
|
$
|
117,964
|
|
$
|
(46,510)
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
28,204
|
|
|
21,162
|
|
|
35,062
|
|
|
74,454
|
|
|
262,221
|
|
Realized and
unrealized (gains) loss on strategic investments
and marketable securities, net (1)
|
|
|
11,338
|
|
|
(47,985)
|
|
|
6,660
|
|
|
(92,498)
|
|
|
(34,195)
|
|
Transaction costs
related to strategic investments and acquisitions
|
|
|
469
|
|
|
964
|
|
|
393
|
|
|
2,304
|
|
|
888
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
20
|
|
|
8
|
|
|
—
|
|
|
68
|
|
|
130
|
|
Loss on disposal and
impairment of property, equipment and other
assets, net
|
|
|
1,775
|
|
|
83
|
|
|
31
|
|
|
1,964
|
|
|
74
|
|
Costs related to FTC
litigation
|
|
|
—
|
|
|
291
|
|
|
242
|
|
|
295
|
|
|
622
|
|
Payroll taxes related
to XSPP vesting and CEO Award option exercises
|
|
|
—
|
|
|
—
|
|
|
6,069
|
|
|
—
|
|
|
9,738
|
|
Income tax
effects
|
|
|
(10,409)
|
|
|
6,344
|
|
|
(12,064)
|
|
|
3,340
|
|
|
(59,671)
|
|
Non-GAAP net
income
|
|
$
|
43,528
|
|
$
|
31,829
|
|
$
|
84,917
|
|
$
|
107,891
|
|
$
|
133,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income
(loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
|
0.17
|
|
$
|
0.71
|
|
$
|
0.67
|
|
$
|
1.63
|
|
$
|
(0.71)
|
|
Non-GAAP
|
|
$
|
0.60
|
|
$
|
0.44
|
|
$
|
1.17
|
|
$
|
1.49
|
|
$
|
1.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
|
72,525
|
|
|
72,283
|
|
|
72,441
|
|
|
72,386
|
|
|
65,139
|
|
Non-GAAP
(2)
|
|
|
72,525
|
|
|
72,283
|
|
|
72,441
|
|
|
72,386
|
|
|
70,515
|
|
|
|
|
|
(1)
|
Includes unrealized
losses of $38.0 million and unrealized gains of $130.5 million for
the nine months ended September 30, 2022. Includes an unrealized
loss of $6.7 million, unrealized gains of $28.6 million and
realized gain of $12.3 million for the nine months ended September
30, 2021.
|
(2)
|
Non-GAAP diluted income
per common share factors in higher diluted weighted average shares
outstanding in periods where there is both a GAAP net loss and
non-GAAP net income.
|
AXON
ENTERPRISE, INC.
CONSOLIDATED BALANCE
SHEETS
(in
thousands)
|
|
|
|
|
|
|
|
|
|
30 SEP
2022
|
|
31 DEC 2021
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
147,711
|
|
$
|
356,332
|
Marketable
securities
|
|
|
35,280
|
|
|
72,180
|
Short-term
investments
|
|
|
194,627
|
|
|
14,510
|
Accounts and notes
receivable, net
|
|
|
418,308
|
|
|
320,819
|
Contract assets,
net
|
|
|
168,673
|
|
|
180,421
|
Inventory
|
|
|
173,046
|
|
|
108,688
|
Prepaid expenses and
other current assets
|
|
|
68,054
|
|
|
56,540
|
Total current
assets
|
|
|
1,205,699
|
|
|
1,109,490
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
164,160
|
|
|
138,457
|
Deferred tax assets,
net
|
|
|
96,355
|
|
|
127,193
|
Intangible assets,
net
|
|
|
13,039
|
|
|
15,470
|
Goodwill
|
|
|
44,819
|
|
|
43,592
|
Long-term
investments
|
|
|
28,536
|
|
|
31,232
|
Long-term notes
receivable, net
|
|
|
8,462
|
|
|
11,256
|
Long-term contract
assets, net
|
|
|
48,388
|
|
|
29,753
|
Strategic
investments
|
|
|
290,329
|
|
|
83,520
|
Other long-term
assets
|
|
|
110,643
|
|
|
98,247
|
Total
assets
|
|
$
|
2,010,430
|
|
$
|
1,688,210
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
50,193
|
|
|
32,220
|
Accrued
liabilities
|
|
|
112,766
|
|
|
103,707
|
Current portion of
deferred revenue
|
|
|
246,446
|
|
|
265,591
|
Customer
deposits
|
|
|
15,317
|
|
|
10,463
|
Other current
liabilities
|
|
|
6,801
|
|
|
6,540
|
Total current
liabilities
|
|
|
431,523
|
|
|
418,521
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
313,823
|
|
|
185,721
|
Liability for
unrecognized tax benefits
|
|
|
7,317
|
|
|
3,797
|
Long-term deferred
compensation
|
|
|
5,369
|
|
|
5,679
|
Deferred tax liability,
net
|
|
|
1
|
|
|
811
|
Long-term lease
liabilities
|
|
|
16,311
|
|
|
20,440
|
Other long-term
liabilities
|
|
|
4,773
|
|
|
5,392
|
Total
liabilities
|
|
|
779,117
|
|
|
640,361
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,167,218
|
|
|
1,095,229
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
227,847
|
|
|
109,883
|
Accumulated other
comprehensive loss
|
|
|
(7,806)
|
|
|
(1,317)
|
Total stockholders'
equity
|
|
|
1,231,313
|
|
|
1,047,849
|
Total liabilities
and stockholders' equity
|
|
$
|
2,010,430
|
|
$
|
1,688,210
|
AXON
ENTERPRISE, INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
30 SEP
2021
|
|
30 SEP
2022
|
|
30 SEP
2021
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
12,131
|
|
$
|
50,962
|
|
$
|
48,524
|
|
$
|
117,964
|
|
$
|
(46,510)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
6,206
|
|
|
6,210
|
|
|
4,838
|
|
|
18,171
|
|
|
13,420
|
|
Purchase accounting
adjustments to goodwill
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
58
|
|
|
—
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
20
|
|
|
8
|
|
|
—
|
|
|
68
|
|
|
130
|
|
Loss on disposal and
impairment of property, equipment and other
assets, net
|
|
|
1,775
|
|
|
83
|
|
|
31
|
|
|
1,964
|
|
|
74
|
|
Realized and unrealized
(gains) loss on strategic investments and
marketable securities, net
|
|
|
11,338
|
|
|
(47,985)
|
|
|
6,660
|
|
|
(92,498)
|
|
|
(34,195)
|
|
Stock-based
compensation
|
|
|
28,204
|
|
|
21,162
|
|
|
35,062
|
|
|
74,454
|
|
|
262,221
|
|
Deferred income
taxes
|
|
|
4,299
|
|
|
8,021
|
|
|
(52,004)
|
|
|
30,349
|
|
|
(58,893)
|
|
Unrecognized tax
benefits
|
|
|
(376)
|
|
|
2,530
|
|
|
30
|
|
|
3,519
|
|
|
77
|
|
Bond
amortization
|
|
|
(362)
|
|
|
142
|
|
|
1,496
|
|
|
(61)
|
|
|
4,606
|
|
Noncash lease
expense
|
|
|
1,718
|
|
|
1,723
|
|
|
1,437
|
|
|
4,997
|
|
|
4,087
|
|
Provision for expected
credit losses
|
|
|
386
|
|
|
(45)
|
|
|
553
|
|
|
569
|
|
|
615
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
(34,799)
|
|
|
(87,742)
|
|
|
(114,106)
|
|
|
(115,046)
|
|
|
(118,094)
|
|
Inventory
|
|
|
(19,158)
|
|
|
(32,849)
|
|
|
(1,306)
|
|
|
(66,267)
|
|
|
(3,154)
|
|
Prepaid expenses and
other assets
|
|
|
(15,183)
|
|
|
4,386
|
|
|
(15,586)
|
|
|
(17,871)
|
|
|
(28,906)
|
|
Accounts payable,
accrued and other liabilities
|
|
|
4,115
|
|
|
34,149
|
|
|
38,909
|
|
|
28,684
|
|
|
28,528
|
|
Deferred
revenue
|
|
|
40,587
|
|
|
58,563
|
|
|
61,911
|
|
|
115,187
|
|
|
87,558
|
|
Net cash provided by
operating activities
|
|
|
40,901
|
|
|
19,376
|
|
|
16,449
|
|
|
104,241
|
|
|
111,564
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(85,902)
|
|
|
(108,240)
|
|
|
(124,191)
|
|
|
(194,142)
|
|
|
(362,479)
|
|
Proceeds from call /
maturity of investments
|
|
|
6,012
|
|
|
2,273
|
|
|
204,358
|
|
|
15,485
|
|
|
499,172
|
|
Exercise of warrants
from strategic investments
|
|
|
—
|
|
|
(6,555)
|
|
|
—
|
|
|
(6,555)
|
|
|
—
|
|
Proceeds from sale of
strategic investments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,546
|
|
Purchases of property
and equipment
|
|
|
(14,371)
|
|
|
(12,749)
|
|
|
(12,470)
|
|
|
(44,218)
|
|
|
(36,501)
|
|
Purchases of intangible
assets
|
|
|
(89)
|
|
|
(67)
|
|
|
(14)
|
|
|
(193)
|
|
|
(157)
|
|
Proceeds from disposal
of property and equipment
|
|
|
135
|
|
|
4
|
|
|
(17)
|
|
|
226
|
|
|
31
|
|
Strategic
investments
|
|
|
(9,000)
|
|
|
(61,000)
|
|
|
—
|
|
|
(70,500)
|
|
|
(20,500)
|
|
Business acquisition,
net of cash acquired
|
|
|
—
|
|
|
(2,104)
|
|
|
(700)
|
|
|
(2,104)
|
|
|
(700)
|
|
Net cash provided by
(used in) investing activities
|
|
|
(103,215)
|
|
|
(188,438)
|
|
|
66,966
|
|
|
(302,001)
|
|
|
93,412
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
—
|
|
|
(3)
|
|
|
105,615
|
|
|
(74)
|
|
|
105,615
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(72)
|
|
|
(931)
|
|
|
(172,205)
|
|
|
(2,391)
|
|
|
(182,517)
|
|
Net cash used in
financing activities
|
|
|
(72)
|
|
|
(934)
|
|
|
(66,590)
|
|
|
(2,465)
|
|
|
(76,902)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(2,873)
|
|
|
(3,753)
|
|
|
(1,508)
|
|
|
(6,783)
|
|
|
(1,827)
|
|
Net increase (decrease)
in cash and cash equivalents and restricted cash
|
|
|
(65,259)
|
|
|
(173,749)
|
|
|
15,317
|
|
|
(207,008)
|
|
|
126,247
|
|
Cash and cash
equivalents and restricted cash, beginning of period
|
|
|
214,689
|
|
|
388,438
|
|
|
266,481
|
|
|
356,438
|
|
|
155,551
|
|
Cash and cash
equivalents and restricted cash, end of period
|
|
$
|
149,430
|
|
$
|
214,689
|
|
$
|
281,798
|
|
$
|
149,430
|
|
$
|
281,798
|
|
AXON
ENTERPRISE, INC.
SELECTED CASH FLOW
INFORMATION
(Unaudited)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
NINE MONTHS ENDED
|
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
30 SEP
2021
|
|
30 SEP
2022
|
|
30 SEP
2021
|
Net cash provided by
operating activities
|
|
$
|
40,901
|
|
$
|
19,376
|
|
$
|
16,449
|
|
$
|
104,241
|
|
$
|
111,564
|
Purchases of property
and equipment
|
|
|
(14,371)
|
|
|
(12,749)
|
|
|
(12,470)
|
|
|
(44,218)
|
|
|
(36,501)
|
Purchases of intangible
assets
|
|
|
(89)
|
|
|
(67)
|
|
|
(14)
|
|
|
(193)
|
|
|
(157)
|
Free cash flow, a
non-GAAP measure
|
|
$
|
26,441
|
|
$
|
6,560
|
|
$
|
3,965
|
|
$
|
59,830
|
|
$
|
74,906
|
Net campus
investment
|
|
|
4,415
|
|
|
3,543
|
|
|
3,128
|
|
|
13,175
|
|
|
6,909
|
Adjusted free cash
flow, a non-GAAP measure
|
|
$
|
30,856
|
|
$
|
10,103
|
|
$
|
7,093
|
|
$
|
73,005
|
|
$
|
81,815
|
AXON
ENTERPRISE, INC.
SUPPLEMENTAL
TABLES
(in
thousands)
|
|
|
|
|
|
|
|
|
|
30 SEP
2022
|
|
31 DEC 2021
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
147,711
|
|
$
|
356,332
|
Short-term
investments
|
|
|
194,627
|
|
|
14,510
|
Long-term
investments
|
|
|
28,536
|
|
|
31,232
|
Total cash and cash
equivalents and investments, net
|
|
$
|
370,874
|
|
$
|
402,074
|
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
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SOURCE Axon