SCOTTSDALE, Ariz., Feb. 28,
2023 /PRNewswire/ --
- Axon Cloud revenue of $368
million up 50% year over year
- Annual Net Income of $147 million
supports Adjusted EBITDA of $232
million
- Operating cash flow of $235
million; Adjusted free cash flow of $195 million
- Company projects over $2 billion
in 2025 revenue, confidence in sustained CAGR of 20%+
Fellow shareholders,
Axon brought 2022 to a phenomenal close — with demand for our
mission-driven public safety solutions fueling Q4 revenue growth
above 50%, and financial discipline supporting our fourth
consecutive quarter of GAAP profitability. The year was headlined
by the launch of our moonshot goal, the continued advancement of
our mission to protect life, and disciplined execution across the
board.
Underpinning Axon's success is a culture of continuous
innovation and improvement, an inspiring mission that attracts top
technology talent from around the globe, and an expanding suite of
modern public safety solutions that meets the real needs of the
public.
We are pleased to deliver this letter with a look back on 2022,
an update on the market opportunity in front of us and view of our
roadmap ahead, including the introduction of our goals for
2025.
Key 2022 Takeaways
Our teams brought Axon to new heights in 2022 with the following
major accomplishments:
- Strong financial results: In 2022, Axon delivered record
revenue growth of 38% to $1.19
billion and net income of $147
million (12.4% net income margin), supporting Adjusted
EBITDA of $232 million, or 19.5%
margin.
- Stand-out SaaS performance: The Axon Cloud software
suite continues to be our top growth-driver, with revenue up
approximately 50% in 2022 on top of 38% growth the year before, and
making up an increasing share of our business. Axon Cloud revenue
of $368 million represented 31% of
total revenue, and drove 45% Annual Recurring Revenue growth to
$473 million.
- Compelling Adjusted Free Cash Flow of $195 million: Full year operating cash flow
of $235 million supported adjusted
free cash flow generation of $195
million, exceeding the upper end of our guidance of
$145 million.
- Strengthened balance sheet with convertible notes
offering: In Q4 2022, we successfully completed our first-ever
debt raise, with total net proceeds of approximately $603 million. A powerful combination of timing,
market demand and the underlying health of our business, allowed us
to be opportunistic and strengthen our capital structure at a low
cost of capital. Year-end cash, cash equivalents and investments of
more than $1 billion provide us with
meaningful capital allocation optionality looking forward.
- Deepened management bench: In 2022, we made a number of
strategic changes to our bench, including the appointment of Axon
veterans Josh Isner to COO and
Jeff Kunins to CPO & CTO, as
well as the addition of Brittany
Bagley as our new CFO & CBO. We are confident that we
have assembled a visionary team to lead the company's next chapter
of growth.
- Launched moonshot goal: 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 over the
next 10 years. In announcing this 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
communities.
On the heels of an exceptional 2022, we started the new year by
unveiling our first major technology advancement since announcing
our moonshot goal. To that end, the historic launch of the TASER 10
device, discussed in detail below, is ushering in a new era in
less-lethal technology, and deepening Axon's relationships with
customers globally.
2025 target model
With our strong foundation of operational excellence to date,
estimates regarding the durable nature of our business and our
estimates with respect to the runway in front of us, we are
positioned to drive solid top and bottom-line growth, generate
significant cash flow and create meaningful value for our
shareholders over our planning horizon, and are introducing the
following financial goals.
- In 2025, we aspire to achieve:
-
- Revenue of at least $2 billion,
reflecting a 20%+ top-line annual growth rate;
- Adjusted EBITDA margins of approximately 25%, representing
about 500 basis points of improvement over three years;
- Strong cash generation, with adjusted free cash flow conversion
on Adjusted EBITDA of at least 60%, as we continue to invest to
support global scale;
- Reduced dilution related to stock-based compensation. We
continue to work through already granted equity vesting and
exercises which can result in uneven annual levels of dilution, and
we are targeting a CAGR for annual dilution of approximately 3% for
2025 and beyond as we work through already granted equity vesting
and exercises.
We provide Adjusted EBITDA margin guidance, rather than net
income margin guidance, and adjusted free cash flow conversion on
Adjusted EBITDA, rather than cash flow from operations conversion
on net income, due to the inherent difficulty of forecasting
certain types of expenses and gains such as stock-based
compensation, income tax expenses and gains or losses on strategic
investments, which affect net income but not Adjusted EBITDA and
adjusted free cash flow but not cash flow from operations. We are
unable to reasonably estimate the impact of such expenses, if any,
on net income and adjusted free cash flow. Accordingly, we do not
provide a reconciliation of projected net income to projected
Adjusted EBITDA or projected cash flow from operations to free cash
flow.
Large and underpenetrated total addressable market
Axon is executing against a $50
billion total addressable market. Our four key customer
categories of US state and local governments, the US federal
government, international governments and commercial enterprises
comprise $45 billion, of that TAM,
and grew ~33% over our 2021 published estimate.
The largest growth drivers in our updated analysis reflect TAM
expansion in Axon's key customer categories of state and local law
enforcement and the US federal government, as well as key product
categories, encompassing camera devices, TASER devices and robotic
security, including Axon Air. We have reframed our expectations on
the market size of the consumer personal protection market — from
$18 billion down to less than
$5 billion — to better reflect our
near-term focus on the significant opportunity we have in our
core.
Against the backdrop of this large and growing TAM and our
ability to deliver solutions that solve real world challenges,
which are more in demand than ever before, we are embarking upon
our next chapter of growth with commitment, passion and an
unwavering sense of purpose.
We encourage you to check out our latest investor relations
presentation at investor.axon.com.
Select product advancements
Introducing TASER 10
Axon CEO and Founder Rick Smith
first introduced TASER devices to the world 30 years ago — and we
are proud to have had advanced less-lethal technology ever
since.
In 2018, Axon introduced TASER 7 — the most innovative
less-lethal weapon to date. And in 2020, we made the strategic
decision to accelerate our investment in further advancing
this technology to better serve public safety and communities.
Over the course of 2021 and 2022, we invested about $100 million in TASER segment research and
development. We are incredibly proud of the results.
On January 24, 2023, Axon unveiled
TASER 10 — a game-changing, life-saving weapon that is a feat of
human ingenuity and engineering. TASER 10 represents a giant leap
in innovation, with several step-function improvements compared to
previous versions.
TASER 10 is the most sophisticated, accurate and effective TASER
energy weapon to date. Future generations may simply take for
granted the existence of this less-lethal technology — as if it had
always existed — and like with all technological advancements that
drive society forward, that is our aim. We are proud to be
innovative category creators.
Major new advancements that TASER 10 delivers, include:
- Individually targeted probes. A key improvement for
TASER 10 is the individually targeted probes. Each probe comes in a
single cartridge with its own dedicated propellant. This allows
each probe to be precisely targeted and individually deployed, with
officers controlling their own probe spread.
- The ability to deploy up to 10 probes compared
with four probes previously. With 10 opportunities to deploy a
cartridge probe, the calculated probability of an officer obtaining
a sufficient electrical connection is approximately 98%, based on
data from TASER X2 deployments in the UK. We are still evaluating
field data, however we believe we will see dramatically higher
effectiveness rates.
- A longer range of up to 45 feet (13.7 m), compared with only 25 feet (7.6 m) previously. This provides more time and
distance for the officer, which allows greater opportunity for
de-escalation and may avoid the need for lethal force.
"As public servants, our goal is never to bring harm to
anyone in a difficult situation. The TASER 10 adds a new level of
confidence for our deputies when intervention is required to ensure
that they can de-escalate with accuracy and enhanced safety. I
believe that the TASER 10 will play a key role in reducing
situations where our deputies may otherwise have to resort to
lethal options, and we believe that the TASER 10 will serve as a
key tool to continue to keep our communities safe." —Dennis Lemma,
Sheriff at the Seminole County
Sheriff's Office in Sanford, Fla.,
and a key agency in Axon's TASER 10 evaluation program
We expect the TASER 10 platform to be gross margin neutral once
we are at scale, beginning in the second half of 2023. And we
expect TASER 10 to support expanding TASER segment gross margins
over time. Bundled pricing on TASER 10 starts at $50 per user per month, on a five-year contract,
and extends to our $299 per user per
month highest tier Officer Safety Plan bundle, which also includes
body cameras and a suite of SaaS cloud-software features. The TASER
10 magazine holds 10 cartridges each containing a single probe,
wire bundle and propellant. Following a deployment, unspent
cartridges are still usable and the user can easily replace spent
cartridges, which are typically included as part of customers'
subscription bundles.
Axon Cloud achieves FedRAMP High
In November, the US General Services Administration upgraded
Axon Cloud to FedRAMP High — its highest level security
certification. This change allows Axon's government customers to
store the most sensitive, unclassified data handled by federal
civilian agencies.
Previously, Axon's FedRAMP status was Moderate. US Axon FedCloud
offerings include Axon Evidence, Axon Respond, and Axon Records,
and also act as the core control center over Axon devices and
client applications. Axon FedCloud is currently used by multiple
agencies across the federal sector, including the United States
Department of Homeland Security, the Department of Justice and the
Department of Interior.
In 2023, we have increased our Federal total addressable market
estimate from $8.9 billion to
$10.3 billion, due to our ability to
deliver against the complex requirements our solutions need to meet
to serve this market at scale.
"We are proud to be leaders in data security, which is an
ongoing challenge across the federal sector. There is a constant
need to ensure sensitive information is protected across agencies
and administrations as the government securely conducts business.
Axon is proud to serve the US government in this capacity and we
continue to deepen our trusted relationships with federal agencies
who see the value in our products, mission, and commitment to law
enforcement and communities." —Richard Coleman, President of Axon
Federal
Summary of Q4 2022 results
- Q4 2022 revenue of $336 million
grew 54% year over year, led by 66% growth in our domestic
business, driven by demand for our premium products and bundles. Q4
2022 revenue included $8.5 million in
previously underreported Axon Cloud revenue related to software and
professional services in prior periods, and accounted for
approximately 4% of the year-over-year growth.
- Total company gross margin of 61.2% in Q4 2022 was in line with
our expectations, and reflects the positive impact of previously
underreported software revenue and our renewed agreement with
Microsoft Azure, offset by a higher mix of Axon Fleet hardware
shipments, which more than doubled year over year.
- Operating expenses for the quarter of $183 million included $30
million in stock-based compensation expenses.
-
- SG&A of $114 million included
$15 million in stock-based
compensation expenses.
- R&D of $69 million included
$15 million in stock-based
compensation expenses.
- Our quarterly net income of $29
million, or $0.40 per diluted
share, supported non-GAAP net income of $51
million, or $0.70 per diluted
share. Our full year net income of $147
million reflects a net income margin of 12.4%.
- Adjusted EBITDA was $232 million
for the full year and $66 million in
Q4 2022. Expense controls, offset by mix and inflation-driven gross
margin pressure throughout the year, drove full year Adjusted
EBITDA margin of 19.5%.
-
- Both Non-GAAP net income and Adjusted EBITDA exclude
stock-based compensation expenses and net gains or losses related
to our strategic investment portfolio.
- In the fourth quarter, cash flow from operations of
$131 million supported free cash flow
generation of $119 million and
adjusted free cash flow generation of $122
million. We define adjusted free cash flow as operating cash
flow less capital expenditures and purchases of intangible assets.
Adjusted free cash flow excludes campus investments.
- For the full year, we generated $235
million in cash flow from operations, and $195 million in adjusted free cash flow,
representing an 84% adjusted free cash flow conversion on Adjusted
EBITDA of $232 million, compared with
2021 adjusted free cash flow of $85
million, at a 47% conversion.
- As of December 31, 2022, Axon had
$1.09 billion in cash, equivalents
and investments, and outstanding convertible notes in principal
amount of $690 million, for a net
cash position of $402 million. Axon's
net cash position grew $31 million
sequentially and was roughly flat year over year, even after
investing $83 million in acquisitions
and strategic investments.
-
- In connection with the completion of our Q4 2022 convertible
notes offering, we were pleased with our successful efforts to both
minimize equity dilution and achieve a cash coupon of only 0.50%.
Because we committed to repaying the principal in cash (rather than
shares) and purchased a call spread to limit potential dilution, we
expect zero effective dilutive impact until our share price is
greater than $338.86, and notably,
any dilution would not be realized until the bonds mature in five
years from issuance (unless we call them sooner). At a share price
of $340, the dilutive impact would be
about 10,000 shares, and at a share price of $500, the dilutive impact would remain below 1
million shares. For a worksheet, please visit the following
link:
-
-
https://filecache.investorroom.com/mr5ir_axon/364/Convertible_Senior_Notes_Dilutive_Impact_February_2023.pdf
Financial commentary by
segment:
Software & Sensors
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
31 DEC
2021
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Axon Cloud net
sales
|
|
$
|
113,538
|
|
|
$
|
95,740
|
|
|
$
|
68,668
|
|
|
18.6
|
%
|
|
65.3
|
%
|
Axon Cloud gross
margin
|
|
|
75.5
|
%
|
|
|
74.1
|
%
|
|
|
74.3
|
%
|
|
140
|
bp
|
|
120
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensors and Other net
sales
|
|
$
|
85,867
|
|
|
$
|
71,131
|
|
|
$
|
45,001
|
|
|
20.7
|
%
|
|
90.8
|
%
|
Sensors and Other gross
margin
|
|
|
41.5
|
%
|
|
|
43.3
|
%
|
|
|
39.3
|
%
|
|
(180)
|
bp
|
|
220
|
bp
|
- Axon Cloud revenue growth of 65% 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 revenue of
$114 million includes $8.5 million in previously underreported software
and professional services revenue from prior periods, accounting
for 12% of the annual growth.
- Axon Cloud gross margin of 75.5% included 120 basis points of
benefit from previously underreported revenue. 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 of 91% year over year
reflected strength in shipments of Axon Fleet in-car cameras,
followed by larger body-camera shipment volumes. Strong Axon Fleet
shipments reflect both high demand for the hardware platform as
well as our execution against inventory constraints to better
fulfill growing demand backlog.
- Sensors & Other gross margin was 41.5%, reflecting hardware
shipment mix.
TASER
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
31 DEC
2021
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
136,737
|
|
|
$
|
144,883
|
|
|
$
|
103,909
|
|
|
(5.6)
|
%
|
|
31.6
|
%
|
Gross margin
|
|
|
61.6
|
%
|
|
|
63.1
|
%
|
|
|
63.9
|
%
|
|
(150)
|
bp
|
|
(230)
|
bp
|
- TASER segment revenue growth of 32% in Q4 2022 was driven by
strong demand for our TASER 7 platform, as well as expanding sales
related to training and VR.
- TASER segment gross margin declined 150 basis points from Q3
2022. The quarter on quarter decline can primarily be traced to
year-end inventory adjustments and component cost inflation.
Forward-looking performance indicators
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
30 JUN
2022
|
|
31 MAR
2022
|
|
31
DEC 2021
|
|
|
($
in millions)
|
|
Annual recurring
revenue (1)
|
|
$
|
473
|
|
|
$
|
403
|
|
|
$
|
368
|
|
|
$
|
348
|
|
|
$
|
327
|
|
Net revenue retention
(2)
|
|
|
121
|
%
|
|
|
120
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
119
|
%
|
Total company future
contracted revenue (2)
|
|
$
|
4,647
|
|
|
$
|
3,730
|
|
|
$
|
3,330
|
|
|
$
|
2,970
|
|
|
$
|
2,802
|
|
Percentage of TASER
devices sold on a recurring payment plan
|
|
|
79
|
%
|
|
|
63
|
%
|
|
|
76
|
%
|
|
|
45
|
%
|
|
|
65
|
%
|
|
(1) Monthly
recurring license, integration, warranty, and storage revenue
annualized.
|
(2) Refer to
"Statistical Definitions" below.
|
- Annual Recurring Revenue (ARR) grew 45% year over year to
$473 million, bolstered by sales of
our premium bundles and strong reception of our new products,
including Axon Fleet with automatic license plate reading software
and virtual reality.
- Net revenue retention was 121% 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 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 $4.6 billion. We expect to recognize between 15%
to 25% 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 79%
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.
2023 Outlook
The following forward-looking statements reflect Axon
expectations as of February 28, 2023,
and are subject to risks and uncertainties.
- Axon expects to deliver revenue growth of approximately 20% in
2023, or revenue of at least $1.43
billion.
- We are targeting 2023 Adjusted EBITDA margin of 20%, which
implies $286 million in Adjusted
EBITDA.
-
- We are increasing our focus on both gross margins and Adjusted
EBITDA margins, in addition to total Adjusted EBITDA dollars, to
ensure we deliver leverage on our sales growth, while still
investing for the future.
- We provide Adjusted EBITDA guidance, rather than net income
guidance, due to the inherent difficulty of forecasting certain
types of expenses and gains such as stock-based compensation,
income tax expenses and gains or losses on strategic investments,
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
$140 million for the full year.
Because our stock-based compensation expense may vary based on
changes in the actual timing of attainment of certain operational
or market capitalization metrics, it is inherently difficult to
forecast future stock-based compensation expense.
- We expect 2023 CapEx to be in the range of $50 million to $65
million, including investments in:
-
- TASER 10 automation and capacity expansion, including cartridge
capacity and lab enhancements.
- Global facility build-out and upgrades, including warehousing
support for global shipping, and facilities in Germany, the UK, Vietnam, India and Australia.
Thank you for investing in our mission.
-The Axon team
Quarterly conference call and webcast
We will host our Q4 2022 earnings conference call webinar on
Tuesday, February 28, 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/98164681437
Statistical Definitions
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 revenue but purposely excludes the
lower-margin hardware subscription component of the customer
contracts, as it is meant to be a SaaS metric that we use to
monitor the health of the recurring revenue business we are
building. This calculation also excludes the implied monthly
revenue contribution of customers that were added since the
year-ago quarter, and therefore excludes the benefit of new
customer acquisition. The metric includes customers, if any, that
terminated during the annual period, and therefore, this metric is
inclusive of customer churn. This metric is downwardly adjusted to
account for the effect of phased deployments – meaning that for the
year-ago period, we consider the total contractually obligated
implied monthly revenue amount, rather than monthly revenue amounts
that might have been in actuality smaller on a GAAP basis due to
the customer not having yet fully deployed their Axon solution. For
more information relative to our revenue recognition policies,
please reference our SEC filings.
Total company future contracted revenue: Total company future
contracted revenue includes both recognized contract liabilities as
well as amounts that will be invoiced and recognized in future
periods. The remaining performance obligations are limited only to
arrangements that meet the definition of a contract under Topic 606
as of December 31, 2022. We expect to
recognize between 15% to 25% 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
Respond, TASER, TASER 7, TASER 10, X2, Protect Life and the Delta
Logo are trademarks of Axon Enterprise, Inc., some of which are
registered in the US and other countries. For more information,
visit www.axon.com/legal. © 2023 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 2023 full year
revenue, gross margin, stock-based compensation expense, adjusted
EBITDA, adjusted EBITDA margin, and capital expenditures; our 2025
target revenue, adjusted EBITDA margin, and adjusted free cash flow
conversion; future average annual dilution; statements regarding
our TAM; 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
and the soon-to-be-filed Form 10-K for the year ended December 31, 2022. 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: our exposure to
cancellations of government contracts due to appropriation clauses,
exercise of a cancellation clause, or non-exercise of contractually
optional periods; the ability of law enforcement agencies to obtain
funding, including based on tax revenues; 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 impacts of inflation, macroeconomic
conditions and global events; 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 or sentiment regarding our products; the impact of
product mix on projected gross margins; defects in, or misuse of,
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; litigation or
inquiries and related time and costs; 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.
In January 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, 2022. A decision is expected before
June 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
|
|
TWELVE MONTHS ENDED
|
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
31 DEC
2021
|
|
31 DEC
2022
|
|
31 DEC
2021
|
Net sales from
products
|
|
$
|
214,735
|
|
$
|
210,398
|
|
$
|
145,409
|
|
$
|
801,388
|
|
$
|
608,525
|
Net sales from
services
|
|
|
121,407
|
|
|
101,356
|
|
|
72,169
|
|
|
388,547
|
|
|
254,856
|
Net sales
|
|
|
336,142
|
|
|
311,754
|
|
|
217,578
|
|
|
1,189,935
|
|
|
863,381
|
Cost of product
sales
|
|
|
102,641
|
|
|
93,724
|
|
|
64,845
|
|
|
363,219
|
|
|
260,098
|
Cost of service
sales
|
|
|
27,822
|
|
|
24,773
|
|
|
17,672
|
|
|
98,078
|
|
|
62,373
|
Cost of
sales
|
|
|
130,463
|
|
|
118,497
|
|
|
82,517
|
|
|
461,297
|
|
|
322,471
|
Gross margin
|
|
|
205,679
|
|
|
193,257
|
|
|
135,061
|
|
|
728,638
|
|
|
540,910
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
114,418
|
|
|
102,023
|
|
|
111,453
|
|
|
401,575
|
|
|
515,007
|
Research and
development
|
|
|
68,720
|
|
|
59,127
|
|
|
50,674
|
|
|
233,810
|
|
|
194,026
|
Total operating
expenses
|
|
|
183,138
|
|
|
161,150
|
|
|
162,127
|
|
|
635,385
|
|
|
709,033
|
Income (loss) from
operations
|
|
|
22,541
|
|
|
32,107
|
|
|
(27,066)
|
|
|
93,253
|
|
|
(168,123)
|
Interest and other
income (expense), net
|
|
|
12,189
|
|
|
(11,249)
|
|
|
(10,148)
|
|
|
103,265
|
|
|
26,748
|
Income (loss) before
provision for income taxes
|
|
|
34,730
|
|
|
20,858
|
|
|
(37,214)
|
|
|
196,518
|
|
|
(141,375)
|
Provision for (benefit
from) income taxes
|
|
|
5,555
|
|
|
8,727
|
|
|
(23,706)
|
|
|
49,379
|
|
|
(81,357)
|
Net income
(loss)
|
|
$
|
29,175
|
|
$
|
12,131
|
|
$
|
(13,508)
|
|
$
|
147,139
|
|
$
|
(60,018)
|
Net income (loss) per
common and common equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
$
|
0.17
|
|
$
|
(0.19)
|
|
$
|
2.07
|
|
$
|
(0.91)
|
Diluted
|
|
$
|
0.40
|
|
$
|
0.17
|
|
$
|
(0.19)
|
|
$
|
2.03
|
|
$
|
(0.91)
|
Weighted average number
of common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
71,270
|
|
|
71,107
|
|
|
69,310
|
|
|
71,093
|
|
|
66,191
|
Diluted
|
|
|
72,976
|
|
|
72,525
|
|
|
69,310
|
|
|
72,534
|
|
|
66,191
|
AXON
ENTERPRISE, INC. SEGMENT
REPORTING (Unaudited)
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
31 DEC
2022
|
|
|
30 SEP
2022
|
|
|
31 DEC
2021
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
128,868
|
|
|
$
|
85,867
|
|
|
$
|
214,735
|
|
|
$
|
139,267
|
|
|
$
|
71,131
|
|
|
$
|
210,398
|
|
|
$
|
100,408
|
|
|
$
|
45,001
|
|
|
$
|
145,409
|
|
Net sales from services
(2)
|
|
|
7,869
|
|
|
|
113,538
|
|
|
|
121,407
|
|
|
|
5,616
|
|
|
|
95,740
|
|
|
|
101,356
|
|
|
|
3,501
|
|
|
|
68,668
|
|
|
|
72,169
|
|
Net sales
|
|
|
136,737
|
|
|
|
199,405
|
|
|
|
336,142
|
|
|
|
144,883
|
|
|
|
166,871
|
|
|
|
311,754
|
|
|
|
103,909
|
|
|
|
113,669
|
|
|
|
217,578
|
|
Cost of product
sales
|
|
|
52,447
|
|
|
|
50,194
|
|
|
|
102,641
|
|
|
|
53,422
|
|
|
|
40,302
|
|
|
|
93,724
|
|
|
|
37,539
|
|
|
|
27,306
|
|
|
|
64,845
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
27,822
|
|
|
|
27,822
|
|
|
|
—
|
|
|
|
24,773
|
|
|
|
24,773
|
|
|
|
—
|
|
|
|
17,672
|
|
|
|
17,672
|
|
Cost of
sales
|
|
|
52,447
|
|
|
|
78,016
|
|
|
|
130,463
|
|
|
|
53,422
|
|
|
|
65,075
|
|
|
|
118,497
|
|
|
|
37,539
|
|
|
|
44,978
|
|
|
|
82,517
|
|
Gross margin
|
|
|
84,290
|
|
|
|
121,389
|
|
|
|
205,679
|
|
|
|
91,461
|
|
|
|
101,796
|
|
|
|
193,257
|
|
|
|
66,370
|
|
|
|
68,691
|
|
|
|
135,061
|
|
Gross margin
%
|
|
|
61.6
|
%
|
|
|
60.9
|
%
|
|
|
61.2
|
%
|
|
|
63.1
|
%
|
|
|
61.0
|
%
|
|
|
62.0
|
%
|
|
|
63.9
|
%
|
|
|
60.4
|
%
|
|
|
62.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
14,531
|
|
|
|
54,189
|
|
|
|
68,720
|
|
|
|
13,864
|
|
|
|
45,263
|
|
|
|
59,127
|
|
|
|
14,104
|
|
|
|
36,570
|
|
|
|
50,674
|
|
|
|
TWELVE MONTHS ENDED
|
|
|
TWELVE MONTHS ENDED
|
|
|
|
31 DEC
2022
|
|
|
31 DEC
2021
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
511,010
|
|
|
$
|
290,378
|
|
|
$
|
801,388
|
|
|
$
|
426,916
|
|
|
$
|
181,609
|
|
|
$
|
608,525
|
|
Net sales from services
(2)
|
|
|
20,556
|
|
|
|
367,991
|
|
|
|
388,547
|
|
|
|
10,011
|
|
|
|
244,845
|
|
|
|
254,856
|
|
Net sales
|
|
|
531,566
|
|
|
|
658,369
|
|
|
|
1,189,935
|
|
|
|
436,927
|
|
|
|
426,454
|
|
|
|
863,381
|
|
Cost of product
sales
|
|
|
194,957
|
|
|
|
168,262
|
|
|
|
363,219
|
|
|
|
149,739
|
|
|
|
110,359
|
|
|
|
260,098
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
98,078
|
|
|
|
98,078
|
|
|
|
145
|
|
|
|
62,228
|
|
|
|
62,373
|
|
Cost of
sales
|
|
|
194,957
|
|
|
|
266,340
|
|
|
|
461,297
|
|
|
|
149,884
|
|
|
|
172,587
|
|
|
|
322,471
|
|
Gross margin
|
|
|
336,609
|
|
|
|
392,029
|
|
|
|
728,638
|
|
|
|
287,043
|
|
|
|
253,867
|
|
|
|
540,910
|
|
Gross margin
%
|
|
|
63.3
|
%
|
|
|
59.5
|
%
|
|
|
61.2
|
%
|
|
|
65.7
|
%
|
|
|
59.5
|
%
|
|
|
62.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
51,607
|
|
|
|
182,203
|
|
|
|
233,810
|
|
|
|
46,136
|
|
|
|
147,890
|
|
|
|
194,026
|
|
|
|
(1)
|
Software and Sensors
"products" revenue consists of sensors, including on-officer body
cameras, Axon Fleet cameras, other hardware sensors, warranties on
sensors, and other products, and is sometimes referred to as
Sensors and Other revenue.
|
(2)
|
Software and Sensors
"services" revenue comprises sales related to the Axon Cloud, which
includes Axon Evidence, cloud-based evidence management software
revenue, other recurring cloud-hosted software revenue and related
professional services, and is sometimes referred to as Axon Cloud
revenue.
|
AXON
ENTERPRISE, INC. UNIT SALES
STATISTICS (Unaudited)
Units in whole numbers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
TWELVE MONTHS ENDED
|
|
|
|
31
DEC
|
|
31
DEC
|
|
Unit
|
|
Percent
|
|
|
31
DEC
|
|
31
DEC
|
|
Unit
|
|
Percent
|
|
|
|
2022
|
|
2021
|
|
Change
|
|
Change
|
|
|
2022
|
|
2021
|
|
Change
|
|
Change
|
|
TASER 7
|
|
34,530
|
|
12,927
|
|
21,603
|
|
167.1
|
%
|
|
139,217
|
|
90,348
|
|
48,869
|
|
54.1
|
%
|
TASER X26P
|
|
3,737
|
|
8,246
|
|
(4,509)
|
|
(54.7)
|
|
|
22,651
|
|
30,083
|
|
(7,432)
|
|
(24.7)
|
|
TASER X2
|
|
4,056
|
|
14,432
|
|
(10,376)
|
|
(71.9)
|
|
|
13,927
|
|
38,620
|
|
(24,693)
|
|
(63.9)
|
|
TASER Consumer
devices
|
|
4,685
|
|
8,733
|
|
(4,048)
|
|
(46.4)
|
|
|
23,223
|
|
26,958
|
|
(3,735)
|
|
(13.9)
|
|
Cartridges
|
|
1,527,929
|
|
1,194,867
|
|
333,062
|
|
27.9
|
|
|
5,635,369
|
|
4,945,927
|
|
689,442
|
|
13.9
|
|
Axon Body
|
|
60,018
|
|
31,749
|
|
28,269
|
|
89.0
|
|
|
253,501
|
|
181,663
|
|
71,838
|
|
39.5
|
|
Axon Flex
|
|
567
|
|
1,027
|
|
(460)
|
|
(44.8)
|
|
|
6,018
|
|
7,828
|
|
(1,810)
|
|
(23.1)
|
|
Axon Fleet
|
|
10,109
|
|
4,609
|
|
5,500
|
|
119.3
|
|
|
24,344
|
|
11,264
|
|
13,080
|
|
116.1
|
|
Axon Dock
|
|
11,644
|
|
4,959
|
|
6,685
|
|
134.8
|
|
|
28,844
|
|
25,584
|
|
3,260
|
|
12.7
|
|
Effective in Q1 2023, we will be retiring unit disclosures on a
product-specific level, which is a reporting practice that began
when Axon's annual revenue was less than $200 million. These unit disclosures no longer
reflect how we manage the business. We will continue to provide
detailed, transparent and relevant disclosures regarding the health
of our business and will introduce updated disclosures in Q1 that
we believe will be helpful to investors in evaluating our business
and measuring our success going forward.
AXON
ENTERPRISE, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (Unaudited)
Dollars in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
31 DEC
2021
|
|
31 DEC
2022
|
|
31 DEC
2021
|
|
EBITDA and Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
29,175
|
|
$
|
12,131
|
|
$
|
(13,508)
|
|
$
|
147,139
|
|
$
|
(60,018)
|
|
Depreciation and
amortization
|
|
|
6,210
|
|
|
6,206
|
|
|
5,274
|
|
|
24,381
|
|
|
18,694
|
|
Interest
expense
|
|
|
474
|
|
|
3
|
|
|
1
|
|
|
488
|
|
|
28
|
|
Investment interest
income
|
|
|
(4,614)
|
|
|
(1,098)
|
|
|
(353)
|
|
|
(4,782)
|
|
|
(1,511)
|
|
Provision for (benefit
from) income taxes
|
|
|
5,555
|
|
|
8,727
|
|
|
(23,706)
|
|
|
49,379
|
|
|
(81,357)
|
|
EBITDA
|
|
$
|
36,800
|
|
$
|
25,969
|
|
$
|
(32,292)
|
|
$
|
216,605
|
|
$
|
(124,164)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
31,722
|
|
$
|
28,204
|
|
$
|
41,110
|
|
$
|
106,176
|
|
$
|
303,331
|
|
Realized and
unrealized (gains) losses on strategic investments and marketable
securities, net (1)
|
|
|
(6,445)
|
|
|
11,338
|
|
|
11,160
|
|
|
(98,943)
|
|
|
(23,035)
|
|
Transaction costs
related to strategic investments and acquisitions
|
|
|
64
|
|
|
469
|
|
|
1,180
|
|
|
2,368
|
|
|
2,068
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
42
|
|
|
20
|
|
|
16
|
|
|
110
|
|
|
146
|
|
Loss on disposal and
impairment of property, equipment and other assets, net
|
|
|
3,488
|
|
|
1,775
|
|
|
18
|
|
|
5,452
|
|
|
92
|
|
Costs related to FTC
litigation
|
|
|
250
|
|
|
—
|
|
|
119
|
|
|
545
|
|
|
741
|
|
Payroll taxes related
to XSPP vesting and CEO Award option exercises
|
|
|
—
|
|
|
—
|
|
|
9,195
|
|
|
—
|
|
|
18,933
|
|
Adjusted
EBITDA
|
|
$
|
65,921
|
|
$
|
67,775
|
|
$
|
30,506
|
|
$
|
232,313
|
|
$
|
178,112
|
|
Net income (loss) as
a percentage of net sales
|
|
|
8.7
|
%
|
|
3.9
|
%
|
|
(6.2)
|
%
|
|
12.4
|
%
|
|
(7.0)
|
%
|
Adjusted EBITDA as
a percentage of net sales
|
|
|
19.6
|
%
|
|
21.7
|
%
|
|
14.0
|
%
|
|
19.5
|
%
|
|
20.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
1,276
|
|
$
|
1,157
|
|
$
|
1,405
|
|
$
|
4,607
|
|
$
|
5,844
|
|
Sales, general and
administrative
|
|
|
15,441
|
|
|
14,268
|
|
|
27,740
|
|
|
51,301
|
|
|
238,813
|
|
Research and
development
|
|
|
15,005
|
|
|
12,779
|
|
|
11,965
|
|
|
50,268
|
|
|
58,674
|
|
Total
|
|
$
|
31,722
|
|
$
|
28,204
|
|
$
|
41,110
|
|
$
|
106,176
|
|
$
|
303,331
|
|
|
|
(1)
|
Includes unrealized
gains of $136.9 million and unrealized losses of $38.0 million for
the twelve months ended December 31, 2022. Includes unrealized
gains of $28.5 million, unrealized losses of $17.8 million and
realized gain of $12.3 million for the twelve months ended December
31, 2021.
|
AXON
ENTERPRISE, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES - continued (Unaudited)
Dollars in thousands, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
31 DEC
2021
|
|
31 DEC
2022
|
|
31 DEC
2021
|
|
Non-GAAP net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
|
$
|
29,175
|
|
$
|
12,131
|
|
$
|
(13,508)
|
|
$
|
147,139
|
|
$
|
(60,018)
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
31,722
|
|
|
28,204
|
|
|
41,110
|
|
|
106,176
|
|
|
303,331
|
|
Realized and
unrealized (gains) losses on strategic investments and marketable
securities, net (1)
|
|
|
(6,445)
|
|
|
11,338
|
|
|
11,160
|
|
|
(98,943)
|
|
|
(23,035)
|
|
Transaction costs
related to strategic investments and acquisitions
|
|
|
64
|
|
|
469
|
|
|
1,180
|
|
|
2,368
|
|
|
2,068
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
42
|
|
|
20
|
|
|
16
|
|
|
110
|
|
|
146
|
|
Loss on disposal and
impairment of property, equipment and other assets, net
|
|
|
3,488
|
|
|
1,775
|
|
|
18
|
|
|
5,452
|
|
|
92
|
|
Costs related to FTC
litigation
|
|
|
250
|
|
|
—
|
|
|
119
|
|
|
545
|
|
|
741
|
|
Payroll taxes related
to XSPP vesting and CEO Award option exercises
|
|
|
—
|
|
|
—
|
|
|
9,195
|
|
|
—
|
|
|
18,933
|
|
Income tax
effects
|
|
|
(7,276)
|
|
|
(10,409)
|
|
|
(15,605)
|
|
|
(3,936)
|
|
|
(75,276)
|
|
Non-GAAP net
income
|
|
$
|
51,020
|
|
$
|
43,528
|
|
$
|
33,685
|
|
$
|
158,911
|
|
$
|
166,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income
(loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
|
0.40
|
|
$
|
0.17
|
|
$
|
(0.19)
|
|
$
|
2.03
|
|
$
|
(0.91)
|
|
Non-GAAP
|
|
$
|
0.70
|
|
$
|
0.60
|
|
$
|
0.46
|
|
$
|
2.19
|
|
$
|
2.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
|
72,976
|
|
|
72,525
|
|
|
69,310
|
|
|
72,534
|
|
|
66,191
|
|
Non-GAAP
(2)
|
|
|
72,976
|
|
|
72,525
|
|
|
72,682
|
|
|
72,534
|
|
|
71,066
|
|
|
|
(1)
|
Includes unrealized
gains of $136.9 million and unrealized losses of $38.0 million for
the twelve months ended December 31, 2022. Includes unrealized
gains of $28.5 million, unrealized losses of $17.8 million and
realized gain of $12.3 million for the twelve months ended December
31, 2021.
|
(2)
|
Non-GAAP diluted income
per common share factors in higher diluted weighted average shares
outstanding in periods where there is both a GAAP net loss and
non-GAAP net income.
|
AXON
ENTERPRISE, INC. CONSOLIDATED BALANCE
SHEETS (in thousands)
|
|
|
|
|
|
|
|
|
|
31 DEC
2022
|
|
31 DEC 2021
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
353,684
|
|
$
|
356,332
|
Marketable
securities
|
|
|
39,240
|
|
|
72,180
|
Short-term
investments
|
|
|
581,769
|
|
|
14,510
|
Accounts and notes
receivable, net
|
|
|
358,190
|
|
|
320,819
|
Contract assets,
net
|
|
|
196,902
|
|
|
180,421
|
Inventory
|
|
|
202,471
|
|
|
108,688
|
Prepaid expenses and
other current assets
|
|
|
73,022
|
|
|
56,540
|
Total current
assets
|
|
|
1,805,278
|
|
|
1,109,490
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
169,843
|
|
|
138,457
|
Deferred tax assets,
net
|
|
|
156,866
|
|
|
127,193
|
Intangible assets,
net
|
|
|
12,158
|
|
|
15,470
|
Goodwill
|
|
|
44,983
|
|
|
43,592
|
Long-term
investments
|
|
|
156,207
|
|
|
31,232
|
Long-term notes
receivable, net
|
|
|
5,210
|
|
|
11,256
|
Long-term contract
assets, net
|
|
|
45,170
|
|
|
29,753
|
Strategic
investments
|
|
|
296,563
|
|
|
83,520
|
Other long-term
assets
|
|
|
159,616
|
|
|
98,247
|
Total
assets
|
|
$
|
2,851,894
|
|
$
|
1,688,210
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
59,918
|
|
|
32,220
|
Accrued
liabilities
|
|
|
155,934
|
|
|
103,707
|
Current portion of
deferred revenue
|
|
|
360,037
|
|
|
265,591
|
Customer
deposits
|
|
|
20,399
|
|
|
10,463
|
Other current
liabilities
|
|
|
6,358
|
|
|
6,540
|
Total current
liabilities
|
|
|
602,646
|
|
|
418,521
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
248,003
|
|
|
185,721
|
Liability for
unrecognized tax benefits
|
|
|
10,745
|
|
|
3,797
|
Long-term deferred
compensation
|
|
|
6,285
|
|
|
5,679
|
Deferred tax liability,
net
|
|
|
1
|
|
|
811
|
Long-term lease
liabilities
|
|
|
37,143
|
|
|
20,440
|
Convertible notes,
net
|
|
|
673,967
|
|
|
—
|
Other long-term
liabilities
|
|
|
4,613
|
|
|
5,392
|
Total
liabilities
|
|
|
1,583,403
|
|
|
640,361
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,174,594
|
|
|
1,095,229
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
257,022
|
|
|
109,883
|
Accumulated other
comprehensive loss
|
|
|
(7,179)
|
|
|
(1,317)
|
Total
stockholders' equity
|
|
|
1,268,491
|
|
|
1,047,849
|
Total
liabilities and stockholders' equity
|
|
$
|
2,851,894
|
|
$
|
1,688,210
|
AXON
ENTERPRISE, INC. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
31 DEC
2021
|
|
31 DEC
2022
|
|
31 DEC
2021
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
29,175
|
|
$
|
12,131
|
|
$
|
(13,508)
|
|
$
|
147,139
|
|
$
|
(60,018)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
6,210
|
|
|
6,206
|
|
|
5,274
|
|
|
24,381
|
|
|
18,694
|
Amortization
of debt issuance cost
|
|
|
198
|
|
|
—
|
|
|
—
|
|
|
198
|
|
|
—
|
Coupon interest
expense
|
|
|
211
|
|
|
—
|
|
|
—
|
|
|
211
|
|
|
—
|
Purchase accounting
adjustments to goodwill
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
Loss on disposal and
abandonment of intangible assets
|
|
|
42
|
|
|
20
|
|
|
16
|
|
|
110
|
|
|
146
|
Loss on disposal and
impairment of property, equipment and other assets, net
|
|
|
3,488
|
|
|
1,775
|
|
|
18
|
|
|
5,452
|
|
|
92
|
Realized and unrealized
(gains) loss on strategic investments and marketable securities,
net
|
|
|
(6,445)
|
|
|
11,338
|
|
|
11,160
|
|
|
(98,943)
|
|
|
(23,035)
|
Stock-based
compensation
|
|
|
31,722
|
|
|
28,204
|
|
|
41,110
|
|
|
106,176
|
|
|
303,331
|
Deferred income
taxes
|
|
|
(8,259)
|
|
|
4,299
|
|
|
(22,410)
|
|
|
22,090
|
|
|
(81,303)
|
Unrecognized tax
benefits
|
|
|
(44)
|
|
|
(376)
|
|
|
(783)
|
|
|
3,475
|
|
|
(706)
|
Bond
amortization
|
|
|
(1,402)
|
|
|
(362)
|
|
|
611
|
|
|
(1,463)
|
|
|
5,217
|
Noncash lease
expense
|
|
|
1,728
|
|
|
1,718
|
|
|
1,486
|
|
|
6,725
|
|
|
5,573
|
Provision for expected
credit losses
|
|
|
130
|
|
|
386
|
|
|
(829)
|
|
|
699
|
|
|
(214)
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
41,818
|
|
|
(34,799)
|
|
|
(87,675)
|
|
|
(73,228)
|
|
|
(205,769)
|
Inventory
|
|
|
(29,720)
|
|
|
(19,158)
|
|
|
(15,118)
|
|
|
(95,987)
|
|
|
(18,272)
|
Prepaid expenses and
other assets
|
|
|
(34,336)
|
|
|
(15,183)
|
|
|
(11,252)
|
|
|
(52,207)
|
|
|
(40,158)
|
Accounts payable,
accrued and other liabilities
|
|
|
52,073
|
|
|
4,115
|
|
|
16,773
|
|
|
80,757
|
|
|
45,301
|
Deferred
revenue
|
|
|
44,531
|
|
|
40,587
|
|
|
88,057
|
|
|
159,718
|
|
|
175,615
|
Net cash provided by
operating activities
|
|
|
131,120
|
|
|
40,901
|
|
|
12,930
|
|
|
235,361
|
|
|
124,494
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(570,232)
|
|
|
(85,902)
|
|
|
—
|
|
|
(764,374)
|
|
|
(362,479)
|
Proceeds from call /
maturity of investments
|
|
|
56,653
|
|
|
6,012
|
|
|
219,445
|
|
|
72,138
|
|
|
718,617
|
Exercise of warrants
from strategic investments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,555)
|
|
|
—
|
Proceeds from sale of
strategic investments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,546
|
Purchases of property
and equipment
|
|
|
(11,584)
|
|
|
(14,371)
|
|
|
(13,385)
|
|
|
(55,802)
|
|
|
(49,886)
|
Purchases of intangible
assets
|
|
|
(114)
|
|
|
(89)
|
|
|
(235)
|
|
|
(307)
|
|
|
(392)
|
Proceeds from disposal
of property and equipment
|
|
|
61
|
|
|
135
|
|
|
12
|
|
|
287
|
|
|
43
|
Strategic
investments
|
|
|
(3,750)
|
|
|
(9,000)
|
|
|
(25,000)
|
|
|
(74,250)
|
|
|
(45,500)
|
Business acquisition,
net of cash acquired
|
|
|
—
|
|
|
—
|
|
|
(21,693)
|
|
|
(2,104)
|
|
|
(22,393)
|
Net cash provided by
(used in) investing activities
|
|
|
(528,966)
|
|
|
(103,215)
|
|
|
159,144
|
|
|
(830,967)
|
|
|
252,556
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
—
|
|
|
—
|
|
|
(101)
|
|
|
(74)
|
|
|
105,514
|
Proceeds from options
exercised
|
|
|
—
|
|
|
—
|
|
|
51,614
|
|
|
—
|
|
|
51,614
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(2,479)
|
|
|
(72)
|
|
|
(148,792)
|
|
|
(4,870)
|
|
|
(331,309)
|
Net proceeds from
issuance of convertible senior notes
|
|
|
673,769
|
|
|
—
|
|
|
—
|
|
|
673,769
|
|
|
—
|
Proceeds from issuance
of warrants
|
|
|
124,269
|
|
|
—
|
|
|
—
|
|
|
124,269
|
|
|
—
|
Purchase of convertible
note hedge
|
|
|
(194,994)
|
|
|
—
|
|
|
—
|
|
|
(194,994)
|
|
|
—
|
Net cash provided by
(used in) financing activities
|
|
|
600,565
|
|
|
(72)
|
|
|
(97,279)
|
|
|
598,100
|
|
|
(174,181)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
3,403
|
|
|
(2,873)
|
|
|
(155)
|
|
|
(3,380)
|
|
|
(1,982)
|
Net increase (decrease)
in cash and cash equivalents and restricted cash
|
|
|
206,122
|
|
|
(65,259)
|
|
|
74,640
|
|
|
(886)
|
|
|
200,887
|
Cash and cash
equivalents and restricted cash, beginning of period
|
|
|
149,430
|
|
|
214,689
|
|
|
281,798
|
|
|
356,438
|
|
|
155,551
|
Cash and cash
equivalents and restricted cash, end of period
|
|
$
|
355,552
|
|
$
|
149,430
|
|
$
|
356,438
|
|
$
|
355,552
|
|
$
|
356,438
|
AXON
ENTERPRISE, INC. SELECTED CASH FLOW
INFORMATION (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
TWELVE MONTHS ENDED
|
|
|
31 DEC
2022
|
|
30 SEP
2022
|
|
31 DEC
2021
|
|
31 DEC
2022
|
|
31 DEC
2021
|
Net cash provided by
operating activities
|
|
$
|
131,120
|
|
$
|
40,901
|
|
$
|
12,930
|
|
$
|
235,361
|
|
$
|
124,494
|
Purchases of property
and equipment
|
|
|
(11,584)
|
|
|
(14,371)
|
|
|
(13,385)
|
|
|
(55,802)
|
|
|
(49,886)
|
Purchases of intangible
assets
|
|
|
(114)
|
|
|
(89)
|
|
|
(235)
|
|
|
(307)
|
|
|
(392)
|
Free cash flow, a
non-GAAP measure
|
|
$
|
119,422
|
|
$
|
26,441
|
|
$
|
(690)
|
|
$
|
179,252
|
|
$
|
74,216
|
Net campus
investment
|
|
|
2,724
|
|
|
4,415
|
|
|
3,391
|
|
|
15,899
|
|
|
10,297
|
Adjusted free cash
flow, a non-GAAP measure
|
|
$
|
122,146
|
|
$
|
30,856
|
|
$
|
2,701
|
|
$
|
195,151
|
|
$
|
84,513
|
AXON
ENTERPRISE, INC. SUPPLEMENTAL TABLES (in
thousands)
|
|
|
|
|
|
|
|
|
|
31 DEC
2022
|
|
31 DEC 2021
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
353,684
|
|
$
|
356,332
|
Short-term
investments
|
|
|
581,769
|
|
|
14,510
|
Long-term
investments
|
|
|
156,207
|
|
|
31,232
|
Cash and cash
equivalents and investments, net
|
|
|
1,091,660
|
|
|
402,074
|
Convertible notes,
principal amount
|
|
|
(690,000)
|
|
|
—
|
Total cash and cash
equivalents and investments, net of convertible notes
|
|
$
|
401,660
|
|
$
|
402,074
|
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
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SOURCE Axon