SCOTTSDALE, Ariz. , Nov. 7, 2023
/PRNewswire/ --
- Annual Recurring Revenue grows 54% year over year to
$619 million
- International revenue grows 52%, supported by growing
pipeline
- Net income of $59 million
supports Adjusted EBITDA of $92
million
- Raises full year revenue outlook to approximately $1.55 billion, or 30% annual growth; expects full
year Adjusted EBITDA margin just above 20%
- TASER 10 demand exceeding expectations
- U.S. federal government momentum builds and U.S. Department of
Veterans Affairs is live on Axon Records
Fellow shareholders,
We are delighted to once again present strong quarterly results,
raise our full-year outlook and share highlights that speak to
stellar momentum across the board. Record revenue across categories
in the third quarter reflected broad-based demand for new products,
which we discuss below. Axon's seventh consecutive quarter of over
30% year-over-year revenue growth is a reflection of and testament
to our track record of solid execution; product market fit;
deployment of capital toward innovation that solves real-world pain
points for customers; and growing demand from state and local,
federal, international and enterprise customers. We have also
achieved GAAP profitability for each of the previous seven
quarters.
Axon Cloud & Services remained a key growth driver in Q3
2023, increasing 55% year over year, fueled by both expansion with
existing customers and new logo wins. Net Revenue Retention (NRR)
of 122% supported 54% growth in Annual Recurring Revenue (ARR),
which has reached $619 million.
Sensors product revenue growth of 45% was catalyzed by the first
full quarter of Axon Body 4 shipments and continued strength in
demand for Axon Fleet 3. TASER segment revenue grew 12% over last
year, driven by the ramp of TASER 10. We are pleased with our TASER
10 ramp — revenue grew more than 50% sequentially, demonstrating
solid execution on this new product launch, and demand is exceeding
our expectations.
Although we are proud of our results, we are also heavy hearted
that we present them in the midst of global wars and growing
violence. As CEO and Founder Rick
Smith wrote in his annual letter to shareholders, violence
leads to sadness and loss and more violence. Ultimately, we believe
the way the world wins over evil is to continue to make progress
for good. Axon's mission to protect life is dedicated to that
progress.
Our mission inspires the work we do and has resulted in a
growing global demand profile. This affords us the ability to
update our full year outlook to an expectation of approximately 30%
annual revenue growth and an Adjusted EBITDA margin above 20%. We
are humbled at the partnership and trust that our customers place
in us as we deliver some of their most critical technologies — and
we're especially pleased to present updates on our U.S. federal
government and international customer momentum in this letter,
below.
Select Highlights:
A Force For Good | ESG
Updates
Axon Celebrates Year One of Our Moonshot
One year ago
in October, Axon launched a moonshot goal to reduce gun-related
deaths between the police and the public by 50% over the next ten
years. When we launched this goal, we knew we needed better data
that captures both officer and civilian fatalities and is
comprehensive enough to get to the root causes of shootings.
One year later, we have introduced key new capabilities in each
of the three elements of our strategy to hit our moonshot:
Technology, Training and Trust (Data).
First, we introduced breakthrough new TASER 10 technology
that doubles the range while delivering 10 shots.
Second, we upgraded training capabilities with
dedicated virtual reality (VR) TASER hardware for both TASER 10 and
TASER 7. With VR sidearms in development, we believe Axon VR will
transform public safety training.
Third, we are optimizing public safety data with a new
national database that represents a critical step toward achieving
our moonshot goal. The Axon Public Safety Gun Fatality Database,
released in collaboration with the independent non-profit research
firm Institute for Intergovernmental Research (IIR), provides a
comprehensive view of gunfire fatalities between police and the
public in the United States,
including the deaths of both civilians and law enforcement
officers.
This new database allows us to ask and answer the right
questions and will help guide our future product roadmap. We are
incredibly proud to lead the charge for good with investments in
Technology, Training and data to build
Trust.
Force For Good Report | 2023
Axon's
moonshot goal is part of our broader company mission to protect
life. Our vision is a world where bullets are obsolete, where
social conflict is dramatically reduced, and where everyone has
access to a fair and effective justice system.
On November 28th, we will publish
our third responsibility report to share our ever-deepening
commitment to being a force for good. We approach corporate social
responsibility both qualitatively and quantitatively. Axon's Force
For Good report will serve as our updated Environmental, Social
& Governance (ESG) report, and account for Axon's progress from
2021 to 2023. Axon's previous report was published in 2021.
Axon Aid Responds to Hurricane Idalia
When disaster
strikes, Axon is proud to support first responders and communities
in need. Recently, Florida,
Georgia and the Carolinas grappled
with the destructive force of Hurricane Idalia. In its aftermath,
Axon Aid's Emergency Response Team joined forces with the
Lowndes County Sheriff's Office
(GA) to support their community and alleviate strain on public
resources.
Axon Aid's deployment to Lowndes
County lasted three days and included 138 drone missions
flown, covering more than 100 miles across the county and
identifying 68 damage sites. The Axon Aid pilots assisted in
providing real time situational awareness that helped to focus
first responder efforts, saving time and aiding efficiency, at no
cost to the public.
"First responders know that in a time of crisis, community
support is invaluable. Axon demonstrated their unwavering
commitment towards that support by providing essential resources
and personnel during our recent natural disaster. We are immensely
grateful to Axon Aid and their Emergency Response Team for their
swift and effective support in the aftermath of Hurricane Idalia.
Their amazing team arrived within hours of our request and provided
incredible training and insight to our newly formed drone team.
Axon's drone technology, flown by skilled pilots, provided critical
situational awareness and helped us identify damage areas promptly.
This invaluable assistance not only expedited our recovery efforts
but also played a pivotal role in our community's eligibility for
FEMA assistance. Axon's commitment to our community during our time
of need is a testament to their dedication to helping first
responders and communities in crisis." —Sheriff Ashley Paulk,
Lowndes County Sheriff's
Office
Partnering with Customers & Diversifying Markets
International Association of Chiefs of Police
(IACP)
In October, Axon returned to the International
Association of Chiefs of Police (IACP) annual conference, the
largest annual law enforcement event. We welcomed conference
attendees to participate in new VR training experiences, TASER 10
firing, and several product demonstrations highlighting our cloud
software offerings such as Axon Respond, Axon Records and Axon
Evidence. Customers were enlivened by experiences with TASER 10 and
our new VR simulator content and controllers, which made their IACP
debut.
Over 1,000 conference attendees, including chiefs of police,
sheriffs and other law enforcement leaders went through Axon VR and
TASER 10 experiences at the conference. It is one of the many
events we attend that helps build our pipeline and supports our
future growth, and we are pleased with the traction we have seen
coming out of our conversations and customer meetings.
"This is a particularly special year for Axon as we celebrate
our 30th anniversary and unwavering partnership with public safety
in helping to protect life." — Rick
Smith, Axon CEO and Founder
U.S. Federal Momentum Builds
Axon has grown our
presence with the U.S. federal government, emerging as an
innovative technology solution vendor for this customer segment,
which represents a $10 billion
opportunity. This year has been a breakout year for our U.S.
federal business, which is the result of focused investment that
Axon began several years ago when we began to establish a business
centered around meeting the mission needs of federal civilian and
military customers. We have built trusted relationships with
agencies that are finding increasing value in our products, our
mission, and our ability to meet their complex needs.
We are pleased that federal government customers are purchasing
products across the Axon ecosystem, including TASER devices, body
cameras, in-car cameras, digital evidence management software and
productivity software. In fact, five of our top 10 deals in the
third quarter came from U.S. federal government customers.
In October, we displayed our products and ecosystem at the
Association of the United States Army (AUSA) annual conference. Our
goal at the AUSA conference in 2023 was to demonstrate our ability
to meet the future 2030 needs of the U.S. Department of Defense and
specifically the U.S. Army with technologies we have ready and
widely deployed today. This included our "base security of the
future" experience, which showcased the Axon ecosystem of products
and partners, and how technology and innovation can help keep
military installations — and the families who live on them — safe
and protected. We were pleased to see the overwhelming enthusiasm
and support by our customers, which confirms our technology's fit
for the U.S. Department of Defense and Army mission.
In our product updates below, we share more details about our
success with the U.S. Department of Veterans Affairs, which is now
live on our Axon Records solution. Additional milestones in the
federal sector include:
- Securing an enterprise-wide IDIQ contract that enables all law
enforcement agencies within the Department of Homeland Security to
acquire Axon body-worn cameras and software licenses,
- The U.S. Army renewing its TASER modernization program,
and
- Signing our first TASER 10 contract with a U.S. federal
government agency.
These proof points highlight that the total addressable market
for our solutions has expanded beyond state and local law
enforcement into this critical adjacent customer segment.
International Drives Ahead
Axon is investing in
growing our global presence. International revenue grew 52% year
over year in Q3 2023, ahead of domestic revenue, and three of our
top 10 deals in the quarter came from international customers. Over
the last year, we have continued to invest in driving cloud and
software opportunities in Western
Europe and Asia. In
addition, over the longer term, we believe that our acquisition of
Brussels-based Sky-Hero, which
closed in June, will further deepen our European customer
intimacy.
Axon Public Safety Technology Roadshow attracts more than
1,000 European public safety professionals.
We embarked upon our first ever roadshow outside North America in September, meeting with
customers in France, Portugal, Spain, Germany, Belgium and Italy after a successful roadshow through the
United Kingdom. Our roadshow
continues into November and the team has had productive
conversations around technology modernization in policing across
several European countries.
Feedback from customers has been exciting, and we are proud to
have adapted our roadshow to new geographies, matching
language, visuals, and the needs of new international markets. As
of October, the Axon European Roadshow met with over 200 unique
police forces and over 1,100 attendees.
"This is what we've been looking for, for a very long time.
The cloud integration is something our current dashcam system can't
do." — Fleet Administrator, Police Agency in the U.K.
"The technology is just brilliant. We should have this with
every SWAT team." — Firearms instructor, referring to Sky-Hero
tactical ground robot
In November, Axon looks forward to participating in Milipol
Paris, which is a leading worldwide event for homeland security —
one of the largest international public safety events of its kind.
Axon intends to generate customer excitement and extend the success
we've enjoyed at U.S. tradeshows, and we have also coordinated a
week-long coinciding roadshow to meet with a number of Western
European customers.
Product Innovation Highlights
In conjunction with two major hardware product launches this
year, we continue to drive innovation across our ecosystem with
cohesive software offerings that create a comprehensive technology
solution approach for our customers. We conceptualize our software
product portfolio as belonging to three major categories:
digital evidence management, real-time operations and
productivity software.
- Digital evidence management remains our core SaaS
business and is the workhorse behind our software revenue growth.
We sell recurring software licenses that allow users to harness the
full power of their devices, including the leading digital evidence
management platform, which aggregates video, voice and text data
generated from devices and enables users to efficiently and
accurately manage an ever-growing base of digital evidence.
- Real-time operations is a fast growing product category
that further unlocks the potential of our network of devices,
including activating live-streaming, two-way voice communications
and location services. Our real-time operations portfolio is an
example of our product innovation approach driving category
creation, bringing new capabilities and products to customers.
- Productivity software builds on our digital evidence
management and real-time operations solutions. Offerings such as
Axon Records, Axon Standards and Axon Auto-Transcribe reduce time
spent on paperwork, so that our customers can spend more time in
the field. We also find ways to drive productivity through enhanced
training, an additional product category for us related to our VR
training portfolio. We double-click on VR as well as productivity
solutions below.
Axon VR Hardware Launch Harnesses the Power of Training and
TASER 10
We believe safer outcomes start with improved
training, and the customer pain points in this arena are clear.
Historically, public safety agencies have faced massive problems
providing officers with enough hours of effective training, when
constrained by traditional methods that are time-consuming,
unrealistic and expensive.
We've recently stepped up the pace of innovation with VR
training to improve usability and functionality, to help solve this
pain point for customers. The expansion of Axon VR Training
includes all-new ergonomically accurate TASER 10 and TASER 7 VR
controllers and represents the future of public safety training:
immersive de-escalation training that ultimately makes both
communities and officers safer. TASER 10 and VR training are now
tightly linked as a solution for helping public safety
professionals learn, practice and build competence in jobs that
require incredibly complex muscle memory and physical action
combined with split second decision making under stress — not so
different from the role that flight simulators have long played in
commercial and military aviation.
Currently, over 1,500 agencies across the globe use Axon VR to
train their officers. The Axon VR offerings continue to grow in
breadth and scope, helping agencies reduce costs and improve
outcomes.
Officer Productivity: Axon Records
Axon Records
continues to gain momentum. We now have over 90 agencies with
nearly 32,000 sworn officers live on our Axon Records solution,
including 20 agencies that have replaced their legacy records
management systems entirely with Axon Records.
Contributing to our momentum during the quarter, the U.S.
Department of Veterans Affairs became the first U.S. federal
government customer of Axon Records and our largest Records
deployment to date. We are also thrilled about deployments of Axon
Records in major cities, including a recent deployment in
Oklahoma City, in addition to
Baltimore, Tucson and Fresno.
"The successful implementation of Axon Records for Veterans
Affairs police officers is not just about upgrading technology;
it's about building an ecosystem around our troops. This holistic
approach improves job satisfaction, fosters transparency, enhances
professionalism, and reinforces accountability, ensuring that those
who protect our veterans are equipped and empowered to do so with
the utmost excellence." — Chief Troy
Brown, U.S. Department of Veterans Affairs
A key differentiator for customers adopting our Records product,
in addition to it being a world-class, modern cloud-based
standalone records management system, is the value derived in
leveraging the Axon ecosystem across products. In addition to
leveraging our ecosystem of innovative and solution-oriented
products, our ability to continually deliver fundamental innovation
and new capabilities ensures we are bringing emerging technology to
this crucial public safety software category and helping public
safety to benefit from broader technology trends.
Summary of Q3 2023 results
- Quarterly revenue of $414
million exceeded our expectations and grew 33% year over
year driven by strength across product categories. Axon Cloud
software was the primary growth driver, fueled by growing adoption
of our premium software bundles and a growing number of software
licenses associated with body and Fleet cameras, followed by
strength in demand for Axon Fleet systems and the early ramp of
TASER 10 and Axon Body 4.
- Total company gross margin of 61.7% declined 30 basis
points year over year driven by lower margin in our TASER segment
resulting from the launch of TASER 10, which is still ramping
toward full scale in manufacturing, increased mix from lower margin
Sensors hardware, and higher professional services costs associated
with growth in Axon Fleet 3, partially offset by increased software
mix. Gross margin was down slightly sequentially on mix and we
expect these dynamics to remain in our fourth quarter, with an
additional mix shift toward Software & Sensors hardware related
to the ramp of Axon Body 4 to result in a modestly lower gross
margin relative to the third quarter.
- Operating profit of $55
million increased 71.7% year over year driven by increased
revenue and operating leverage. Operating expenses of $200 million in the quarter included $28 million in stock-based compensation expenses.
Operating expenses as a percent of revenue improved 330 basis
points year over year to 48.4%.
- SG&A expense of $123 million,
29.8% of revenue, included $13
million in stock-based compensation expenses.
- R&D expense of $77 million,
18.6% of revenue, included $15
million in stock-based compensation expenses.
- Net income of $59 million
(14.4% net income margin), or $0.78
per diluted share, supported non-GAAP net income of $78 million (18.7% margin), or $1.02 per diluted share.
- Adjusted EBITDA of $92
million reflected an Adjusted EBITDA margin of 22.2%.
- Adjusted EBITDA margin expanded 41 basis points year over year
largely driven by operating leverage.
- Both Non-GAAP net income and Adjusted EBITDA exclude
stock-based compensation expenses and net gains or losses related
to our strategic investment portfolio. We have also excluded a
$2.6 million insurance recovery
benefit from Non-GAAP net income and from Adjusted EBITDA.
- Operating cash flow of $63
million supported free cash flow of $49 million and adjusted free cash flow of
$53 million.
- As of September 30, 2023, Axon
had $1.12 billion in cash,
equivalents and investments, and outstanding convertible notes in
principal amount of $690 million, for
a net cash position of $432 million,
up $37 million sequentially.
Financial commentary by segment:
Software &
Sensors
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THREE MONTHS ENDED
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CHANGE
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30 SEP 2023
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30 JUN 2023
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30 SEP 2022
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QoQ
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YoY
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(in thousands)
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Axon Cloud and Services
revenue (1)
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$
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147,963
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$
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132,637
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$
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95,740
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11.6
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%
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54.5
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%
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Axon Cloud and Services
gross margin
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72.4
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%
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69.7
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%
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74.1
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%
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270
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bp
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(170)
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bp
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Sensors and Other
revenue
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$
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103,068
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$
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87,558
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$
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71,131
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17.7
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%
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44.9
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%
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Sensors and Other gross
margin
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45.2
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%
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52.9
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%
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43.3
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%
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(770)
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bp
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190
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bp
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(1)
The TASER segment includes
Cloud and Services revenue, which is not broken out
here.
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- Axon Cloud & Services revenue growth of
55% year over year reflects growing demand for our domestic digital
evidence management platform, fueled by growing adoption of our
premium Officer Safety Plan integrated bundles and associated
deployments of premium software offerings.
Axon Cloud & Services gross margin of 72.4% decreased year over
year driven by increased mix toward professional services
associated with growth in our Fleet systems business. Software-only
gross margins in this segment continue to exceed our software gross
margin target of 80%.
- Sensors & Other revenue growth of 45%
year over year was driven by strength in demand for Axon Fleet
systems and the initial ramp of Axon Body 4. Axon Fleet systems
revenue grew 164% year over year and decreased modestly quarter
over quarter due to timing of shipments related to customer-driven
deployment schedules.
Sensors & Other gross margin of 45.2% grew year over year due
to scale efficiencies from higher volume Fleet shipments and growth
in Axon Body 4. The sequential decline in Sensors & Other gross
margin was related to the absence of non-repeated favorable
manufacturing overhead reallocation that benefited the second
quarter.
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TASER
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THREE MONTHS ENDED
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CHANGE
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30 SEP 2023
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30 JUN 2023
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30 SEP 2022
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QoQ
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YoY
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(in thousands)
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Revenue
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$
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162,570
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$
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154,410
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$
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144,883
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5.3
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%
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12.2
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%
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Gross margin
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62.5
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%
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60.5
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%
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63.1
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%
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200
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bp
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(60)
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bp
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- TASER segment revenue growth of 12% year over year was driven
by the continued ramp of the TASER 10 platform and increased
cartridge revenue, partially offset by a decrease in TASER 7. TASER
10 revenue contribution increased by roughly 50% sequentially and
we expect TASER 10 to account for the majority of TASER handle
revenue in the fourth quarter.
- TASER segment gross margin of 62.5% decreased 60 basis points
year over year resulting from the launch of TASER 10, which is
still ramping toward full scale in manufacturing. The sequential
increase in TASER segment gross margins resulted from favorable
product mix and the absence of non-repeated manufacturing overhead
reallocation charges incurred in the second quarter.
Forward-looking
performance indicators
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30 SEP 2023
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30 JUN 2023
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31 MAR 2023
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31 DEC 2022
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30 SEP 2022
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($ in millions)
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Annual recurring
revenue (1)
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$
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619
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$
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559
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$
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520
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$
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473
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$
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403
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Net revenue retention
(1)
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122
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%
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122
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%
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121
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%
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121
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%
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120
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%
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Total company future
contracted revenue (1)
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$
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5,819
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$
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5,227
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$
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4,778
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$
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4,647
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$
|
3,730
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(1)
Refer to "Statistical
Definitions" below.
|
- Annual Recurring Revenue (ARR) grew 54% year
over year to $619 million, bolstered by sales of our premium
bundles, which have increased as a percentage of our overall
bookings over the past two years, a growing base of software
licenses tied to Axon Fleet 3 and growth in new and emerging
customer segments including U.S. federal, justice, and
international.
Net Revenue Retention (NRR) was 122% 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, which include a
variety of premium software options. This SaaS metric excludes the
hardware portion of customer subscriptions.
- Total company future contracted revenue grew
to $5.8 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."
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2023 Outlook
The following forward-looking statements
reflect Axon expectations as of November 7,
2023, and are subject to risks and uncertainties.
Q4 2023
- For the fourth quarter, we expect to report revenue within the
range of $417 million to $420 million.
- We expect Adjusted EBITDA margin of approximately 20% in the
fourth quarter.
Full Year
- Axon's full year 2023 revenue expectation has improved to
approximately $1.55 billion, or 30%
annual growth. Previously, Axon had guided to a full year 2023
revenue range of $1.51 billion to
$1.53 billion, reflecting
approximately 27% to 29% growth year over year.
- Axon's Q4 2023 Adjusted EBITDA margin expectation of
approximately 20% implies full year Adjusted EBITDA margin of
20.8%, exceeding our previously communicated expectation of
Adjusted EBITDA margin of approximately 20% in 2023. This reflects
an increase in Adjusted EBITDA dollars to approximately
$322 million, compared with the prior
implied guidance range of $302
million to $306 million.
-
- 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 marketable securities
and strategic investments, which affect net income but not Adjusted
EBITDA. We are unable to reasonably estimate the impact of such
expenses, which could be material, on net income. Accordingly, we
do not provide a reconciliation of projected net income to
projected Adjusted EBITDA.
- We expect stock-based compensation expenses to be approximately
$130 million to $140 million for the full year. Because our
stock-based compensation expenses may vary based on changes in the
share price or the actual timing of attainment of certain
metrics, it is inherently difficult to forecast future stock-based
compensation expense, which may also be materially affected by any
future stock-based compensation plans, subject to shareholder
approval.
- We expect 2023 CapEx to be in the range of $50 million to $65
million, in line with our prior guidance. Our 2023 CapEx
plans include investments in TASER 10 automation and capacity
expansion, including cartridge capacity and lab enhancements and
global facility build-out and upgrades, including warehousing
support for global shipping facilities.
- Looking into 2024, we are resuming consideration on our
headquarters plans as we look at ways to continue to motivate,
inspire and bring together our employees and customers, and to
accommodate our future growth needs. As a reminder, we paused
this work in summer 2022 and think now is a good time to reassess
our plans.
For 2024 and beyond, we remain confident in our ability to scale
globally, to penetrate new customer segments, and to introduce new
products that drive highly profitable revenue growth.
Thank you for investing in our mission.
-The Axon team
Quarterly conference call and webcast
We will host our
Q3 2023 earnings conference call webinar on Tuesday, November 7, 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/94863536596
Statistical Definitions
Annual recurring revenue: Annual recurring revenue is a
performance indicator that management believes provides more
visibility into the growth of our revenue generated by our highest
margin, recurring services. Annual recurring revenue should be
viewed independently of revenue and deferred revenue because it is
an operating measure and is not intended to be combined with or to
replace GAAP revenue or deferred revenue, as they can be impacted
by contract start and end dates and renewal rates. Annual recurring
revenue is not intended to be a replacement or forecast of revenue
or deferred revenue. We calculate annual recurring revenue as
monthly recurring license, integration, warranty, and storage
revenue, annualized.
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 filings with the Securities and Exchange
Commission ("SEC").
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, 2023. 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 certain other
pre-tax 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 and bond
premium amortization.
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 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 Aid, Axon Body, Axon Evidence, Axon Fleet, Axon
Records, Axon Respond, Axon VR, TASER, TASER 7, TASER 10, Protect
Life and the Delta Logo are trademarks of Axon Enterprise, Inc.,
some of which are registered in the US and other countries. For
more information, visit www.axon.com/legal. All rights
reserved.
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,
including statements related to our user base and customer
profiles; the impact of pending litigation; strategies and trends
relating to subscription plan programs and revenues; statements
related to recently completed acquisitions; our anticipation that
contracts with governmental customers will be fulfilled; the timing
and realization of future contracted revenue; the fulfillment of
bookings; strategies and trends, including the amounts and benefits
of, research and development investments; the sufficiency of our
liquidity and financial resources; 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, stock-based compensation
expense, adjusted EBITDA, adjusted EBITDA margin, 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 Annual
Report on 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, services or features; our ability
to defend against litigation and protect our intellectual property,
and the resulting costs of this activity; our ability to win bids
through the open bidding process for governmental agencies; 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; the
impact of declines in the fair value or impairment of our
investments, including our strategic investments; 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 Quarterly Report on
Form 10-Q for the quarter ended September, 30, 2023, which we
expect to be available on November 7,
2023, 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 in Part
II, Item 1A under the heading "Risk Factors" in our Quarterly
Reports on Form 10‑Q, and investors should refer to them. You
should understand that it is not possible to predict or identify
all such factors. Consequently, you should not consider any such
list to be a complete set of all potential risks or
uncertainties.
Except as required by law, we undertake no obligation to
publicly update forward-looking statements, whether as a result of
new information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on related
subjects in our Form 10‑Q, 8‑K and 10‑K reports to the SEC.
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
On October 6,
2023, the Federal Trade Commission (FTC) dismissed its
administrative complaint against Axon without consent decree or
other condition. This action followed Axon's unanimous U.S. Supreme
Court victory in April 2023, which
confirmed federal court jurisdiction over its constitutional
challenges to the FTC's structure. Axon's case was remanded to the
District of Arizona where Axon
filed an amended complaint in August
2023, signaling its intention to take the merits of its
constitutional claims right back to the Supreme Court.
Simultaneously, Axon engaged with the FTC seeking a global
resolution of both cases based on the robust competition in the
body-worn camera market today. Rather than answering Axon's
complaint or acknowledging current market conditions, the FTC
simply dismissed its case. Axon then dismissed its constitutional
claims as moot, ending this five-year battle to protect our
intellectual property and investors. We are confident others will
continue to pursue these important constitutional challenges
through the jurisdictional door Axon opened.
Links to all court filings and opinions can be found on Axon's
FTC Investor Briefing page at https://www.axon.com/ftc.
New Jersey Class Actions
The plaintiffs' bar is now
attempting to capitalize on the unproven and dismissed allegations
in the FTC complaint by filing a series of purported class action
lawsuits in the District of New
Jersey (Case No. 3:23-cv-7182). These cases will be
consolidated with an amended complaint expected by the end of the
year. As with the FTC case, Axon will vigorously defend these
untimely, misguided claims regarding its five-year-old consummated
acquisition of Vievu, a significantly financially distressed
company destined to exit the market. Rather than restrict
competition, Axon's action prevented major body-camera program
disruptions for Vievu customers.
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
AXON
ENTERPRISE, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
NINE MONTHS ENDED
|
|
|
30 SEP 2023
|
|
30 JUN 2023
|
|
30 SEP 2022
|
|
30 SEP 2023
|
|
30 SEP 2022
|
Net sales from
products
|
|
$
|
256,443
|
|
$
|
233,474
|
|
$
|
210,398
|
|
$
|
709,306
|
|
$
|
586,653
|
Net sales from
services
|
|
|
157,158
|
|
|
141,131
|
|
|
101,356
|
|
|
421,943
|
|
|
267,140
|
Net sales
|
|
|
413,601
|
|
|
374,605
|
|
|
311,754
|
|
|
1,131,249
|
|
|
853,793
|
Cost of product
sales
|
|
|
116,278
|
|
|
101,192
|
|
|
93,724
|
|
|
325,054
|
|
|
260,578
|
Cost of service
sales
|
|
|
42,051
|
|
|
41,292
|
|
|
24,773
|
|
|
114,700
|
|
|
70,256
|
Cost of
sales
|
|
|
158,329
|
|
|
142,484
|
|
|
118,497
|
|
|
439,754
|
|
|
330,834
|
Gross margin
|
|
|
255,272
|
|
|
232,121
|
|
|
193,257
|
|
|
691,495
|
|
|
522,959
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
123,279
|
|
|
119,922
|
|
|
102,023
|
|
|
359,768
|
|
|
287,157
|
Research and
development
|
|
|
76,880
|
|
|
71,940
|
|
|
59,127
|
|
|
219,747
|
|
|
165,090
|
Total operating
expenses
|
|
|
200,159
|
|
|
191,862
|
|
|
161,150
|
|
|
579,515
|
|
|
452,247
|
Income from
operations
|
|
|
55,113
|
|
|
40,259
|
|
|
32,107
|
|
|
111,980
|
|
|
70,712
|
Interest and other
income (loss), net
|
|
|
14,310
|
|
|
(52,368)
|
|
|
(11,249)
|
|
|
(12,782)
|
|
|
91,076
|
Income (loss) before
provision for income taxes
|
|
|
69,423
|
|
|
(12,109)
|
|
|
20,858
|
|
|
99,198
|
|
|
161,788
|
Provision for (benefit
from) income taxes
|
|
|
10,026
|
|
|
(24,529)
|
|
|
8,727
|
|
|
(17,758)
|
|
|
43,824
|
Net income
|
|
$
|
59,397
|
|
$
|
12,420
|
|
$
|
12,131
|
|
$
|
116,956
|
|
$
|
117,964
|
Net income per common
and common equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.79
|
|
$
|
0.17
|
|
$
|
0.17
|
|
$
|
1.58
|
|
$
|
1.66
|
Diluted
|
|
$
|
0.78
|
|
$
|
0.16
|
|
$
|
0.17
|
|
$
|
1.56
|
|
$
|
1.63
|
Weighted average number
of common and common
equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
74,826
|
|
|
74,224
|
|
|
71,107
|
|
|
73,904
|
|
|
71,033
|
Diluted
|
|
|
75,952
|
|
|
75,780
|
|
|
72,525
|
|
|
75,212
|
|
|
72,386
|
AXON
ENTERPRISE, INC.
SEGMENT
REPORTING
(Unaudited)
(dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
30 SEP 2023
|
|
|
30 JUN 2023
|
|
|
30 SEP 2022
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
153,375
|
|
|
$
|
103,068
|
|
|
$
|
256,443
|
|
|
$
|
145,916
|
|
|
$
|
87,558
|
|
|
$
|
233,474
|
|
|
$
|
139,267
|
|
|
$
|
71,131
|
|
|
$
|
210,398
|
|
Net sales from services
(2)
|
|
|
9,195
|
|
|
|
147,963
|
|
|
|
157,158
|
|
|
|
8,494
|
|
|
|
132,637
|
|
|
|
141,131
|
|
|
|
5,616
|
|
|
|
95,740
|
|
|
|
101,356
|
|
Net sales
|
|
|
162,570
|
|
|
|
251,031
|
|
|
|
413,601
|
|
|
|
154,410
|
|
|
|
220,195
|
|
|
|
374,605
|
|
|
|
144,883
|
|
|
|
166,871
|
|
|
|
311,754
|
|
Cost of product
sales
|
|
|
59,746
|
|
|
|
56,532
|
|
|
|
116,278
|
|
|
|
59,968
|
|
|
|
41,224
|
|
|
|
101,192
|
|
|
|
53,422
|
|
|
|
40,302
|
|
|
|
93,724
|
|
Cost of service
sales
|
|
|
1,252
|
|
|
|
40,799
|
|
|
|
42,051
|
|
|
|
1,085
|
|
|
|
40,207
|
|
|
|
41,292
|
|
|
|
—
|
|
|
|
24,773
|
|
|
|
24,773
|
|
Cost of
sales
|
|
|
60,998
|
|
|
|
97,331
|
|
|
|
158,329
|
|
|
|
61,053
|
|
|
|
81,431
|
|
|
|
142,484
|
|
|
|
53,422
|
|
|
|
65,075
|
|
|
|
118,497
|
|
Gross margin
|
|
|
101,572
|
|
|
|
153,700
|
|
|
|
255,272
|
|
|
|
93,357
|
|
|
|
138,764
|
|
|
|
232,121
|
|
|
|
91,461
|
|
|
|
101,796
|
|
|
|
193,257
|
|
Gross margin
%
|
|
|
62.5
|
%
|
|
|
61.2
|
%
|
|
|
61.7
|
%
|
|
|
60.5
|
%
|
|
|
63.0
|
%
|
|
|
62.0
|
%
|
|
|
63.1
|
%
|
|
|
61.0
|
%
|
|
|
62.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
15,672
|
|
|
|
61,208
|
|
|
|
76,880
|
|
|
|
14,376
|
|
|
|
57,564
|
|
|
|
71,940
|
|
|
|
13,864
|
|
|
|
45,263
|
|
|
|
59,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
|
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP 2023
|
|
|
30 SEP 2022
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from products
(1)
|
|
$
|
426,372
|
|
|
$
|
282,934
|
|
|
$
|
709,306
|
|
|
$
|
382,142
|
|
|
$
|
204,511
|
|
|
$
|
586,653
|
|
Net sales from services
(2)
|
|
|
24,890
|
|
|
|
397,053
|
|
|
|
421,943
|
|
|
|
12,687
|
|
|
|
254,453
|
|
|
|
267,140
|
|
Net sales
|
|
|
451,262
|
|
|
|
679,987
|
|
|
|
1,131,249
|
|
|
|
394,829
|
|
|
|
458,964
|
|
|
|
853,793
|
|
Cost of product
sales
|
|
|
170,297
|
|
|
|
154,757
|
|
|
|
325,054
|
|
|
|
142,510
|
|
|
|
118,068
|
|
|
|
260,578
|
|
Cost of service
sales
|
|
|
2,517
|
|
|
|
112,183
|
|
|
|
114,700
|
|
|
|
—
|
|
|
|
70,256
|
|
|
|
70,256
|
|
Cost of
sales
|
|
|
172,814
|
|
|
|
266,940
|
|
|
|
439,754
|
|
|
|
142,510
|
|
|
|
188,324
|
|
|
|
330,834
|
|
Gross margin
|
|
|
278,448
|
|
|
|
413,047
|
|
|
|
691,495
|
|
|
|
252,319
|
|
|
|
270,640
|
|
|
|
522,959
|
|
Gross margin
%
|
|
|
61.7
|
%
|
|
|
60.7
|
%
|
|
|
61.1
|
%
|
|
|
63.9
|
%
|
|
|
59.0
|
%
|
|
|
61.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
46,128
|
|
|
|
173,619
|
|
|
|
219,747
|
|
|
|
37,076
|
|
|
|
128,014
|
|
|
|
165,090
|
|
|
|
(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 and
Services, 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 and Services revenue.
|
AXON
ENTERPRISE, INC.
SALES BY PRODUCT AND
SERVICE
(Unaudited)
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
30 SEP 2023
|
|
|
30 JUN 2023
|
|
|
30 SEP 2022
|
|
TASER
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TASER Devices
(Professional)
|
$
|
86,718
|
|
21.0
|
%
|
|
$
|
84,975
|
|
22.7
|
%
|
|
$
|
80,146
|
|
25.7
|
%
|
Cartridges
|
|
54,279
|
|
13.1
|
|
|
|
48,425
|
|
12.9
|
|
|
|
46,475
|
|
14.9
|
|
Axon Evidence and
Cloud Services
|
|
8,975
|
|
2.2
|
|
|
|
8,494
|
|
2.3
|
|
|
|
5,125
|
|
1.7
|
|
Extended
Warranties
|
|
8,078
|
|
1.9
|
|
|
|
7,715
|
|
2.1
|
|
|
|
7,290
|
|
2.3
|
|
Other
(1)
|
|
4,520
|
|
1.1
|
|
|
|
4,801
|
|
1.3
|
|
|
|
5,847
|
|
1.9
|
|
Total TASER
segment
|
|
162,570
|
|
39.3
|
|
|
|
154,410
|
|
41.2
|
|
|
|
144,883
|
|
46.5
|
|
Software and Sensors
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Axon Body Cameras and
Accessories
|
|
52,488
|
|
12.7
|
|
|
|
32,781
|
|
8.8
|
|
|
|
40,944
|
|
13.1
|
|
Axon Fleet
Systems
|
|
26,716
|
|
6.4
|
|
|
|
35,960
|
|
9.6
|
|
|
|
10,139
|
|
3.2
|
|
Axon Evidence and
Cloud Services
|
|
150,563
|
|
36.4
|
|
|
|
132,102
|
|
35.3
|
|
|
|
96,814
|
|
31.1
|
|
Extended
Warranties
|
|
16,054
|
|
3.9
|
|
|
|
15,166
|
|
4.0
|
|
|
|
14,511
|
|
4.7
|
|
Other
(2)
|
|
5,210
|
|
1.3
|
|
|
|
4,186
|
|
1.1
|
|
|
|
4,463
|
|
1.4
|
|
Total Software and
Sensors segment
|
|
251,031
|
|
60.7
|
|
|
|
220,195
|
|
58.8
|
|
|
|
166,871
|
|
53.5
|
|
Total net
sales
|
$
|
413,601
|
|
100.0
|
%
|
|
$
|
374,605
|
|
100.0
|
%
|
|
$
|
311,754
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
|
|
|
30 SEP 2023
|
|
|
30 SEP 2022
|
TASER
segment:
|
|
|
|
|
|
|
|
|
|
|
|
TASER Devices
(Professional)
|
$
|
239,165
|
|
21.1
|
%
|
|
$
|
213,623
|
|
25.0
|
%
|
Cartridges
|
|
149,504
|
|
13.2
|
|
|
|
134,145
|
|
15.7
|
|
Axon Evidence and
Cloud Services
|
|
24,670
|
|
2.2
|
|
|
|
11,862
|
|
1.4
|
|
Extended
Warranties
|
|
23,463
|
|
2.1
|
|
|
|
21,428
|
|
2.5
|
|
Other
(1)
|
|
14,460
|
|
1.3
|
|
|
|
13,771
|
|
1.6
|
|
Total TASER
segment
|
|
451,262
|
|
39.9
|
|
|
|
394,829
|
|
46.2
|
|
Software and Sensors
segment:
|
|
|
|
|
|
|
|
|
|
|
|
Axon Body Cameras and
Accessories
|
|
124,066
|
|
11.0
|
|
|
|
113,399
|
|
13.3
|
|
Axon Fleet
Systems
|
|
95,648
|
|
8.5
|
|
|
|
39,840
|
|
4.7
|
|
Axon Evidence and
Cloud Services
|
|
400,979
|
|
35.4
|
|
|
|
258,664
|
|
30.3
|
|
Extended
Warranties
|
|
45,305
|
|
4.0
|
|
|
|
36,070
|
|
4.2
|
|
Other
(2)
|
|
13,989
|
|
1.2
|
|
|
|
10,991
|
|
1.3
|
|
Total Software and
Sensors segment
|
|
679,987
|
|
60.1
|
|
|
|
458,964
|
|
53.8
|
|
Total net
sales
|
$
|
1,131,249
|
|
100.0
|
%
|
|
$
|
853,793
|
|
100.0
|
%
|
|
|
(1)
|
TASER segment "Other"
includes smaller categories, such as VR hardware, weapons training
revenue such as revenue associated with our Master Instructor
School, and TASER consumer device sales.
|
(2)
|
Software and Sensors
segment "Other" includes revenue from items including Signal
Sidearm, Interview Room and Axon Air.
|
AXON
ENTERPRISE, INC.
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP 2023
|
|
30 JUN 2023
|
|
30 SEP 2022
|
|
30 SEP 2023
|
|
30 SEP 2022
|
|
EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,397
|
|
$
|
12,420
|
|
$
|
12,131
|
|
$
|
116,956
|
|
$
|
117,964
|
|
Depreciation and
amortization
|
|
|
8,418
|
|
|
7,480
|
|
|
6,206
|
|
|
22,587
|
|
|
18,171
|
|
Interest
expense
|
|
|
1,762
|
|
|
1,737
|
|
|
3
|
|
|
5,223
|
|
|
14
|
|
Investment interest
income
|
|
|
(12,220)
|
|
|
(11,400)
|
|
|
(1,098)
|
|
|
(35,010)
|
|
|
(168)
|
|
Provision for (benefit
from) income taxes
|
|
|
10,026
|
|
|
(24,529)
|
|
|
8,727
|
|
|
(17,758)
|
|
|
43,824
|
|
EBITDA
|
|
$
|
67,383
|
|
$
|
(14,292)
|
|
$
|
25,969
|
|
$
|
91,998
|
|
$
|
179,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
29,987
|
|
$
|
31,891
|
|
$
|
28,204
|
|
$
|
96,228
|
|
$
|
74,454
|
|
Unrealized loss (gain)
on strategic
investments and marketable securities, net
|
|
|
(4,036)
|
|
|
61,912
|
|
|
11,338
|
|
|
42,306
|
|
|
(92,498)
|
|
Transaction costs
related to strategic
investments and acquisitions
|
|
|
495
|
|
|
455
|
|
|
469
|
|
|
1,793
|
|
|
2,304
|
|
Loss on disposal,
abandonment, and
impairment of property, equipment and
intangible assets, net
|
|
|
137
|
|
|
24
|
|
|
1,795
|
|
|
317
|
|
|
2,032
|
|
Insurance recoveries
(1)
|
|
|
(2,615)
|
|
|
(789)
|
|
|
—
|
|
|
(3,404)
|
|
|
—
|
|
Costs related to FTC
litigation
|
|
|
71
|
|
|
1
|
|
|
—
|
|
|
72
|
|
|
295
|
|
Payroll taxes related
to XSPP vesting and
CEO Award option exercises
|
|
|
201
|
|
|
2,368
|
|
|
—
|
|
|
8,961
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
91,623
|
|
$
|
81,570
|
|
$
|
67,775
|
|
$
|
238,271
|
|
$
|
166,392
|
|
Net income as a percentage of net
sales
|
|
|
14.4
|
%
|
|
3.3
|
%
|
|
3.9
|
%
|
|
10.3
|
%
|
|
13.8
|
%
|
Adjusted EBITDA as a percentage of net
sales
|
|
|
22.2
|
%
|
|
21.8
|
%
|
|
21.7
|
%
|
|
21.1
|
%
|
|
19.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
1,687
|
|
$
|
1,678
|
|
$
|
1,157
|
|
$
|
4,685
|
|
$
|
3,331
|
|
Sales, general and
administrative
|
|
|
12,886
|
|
|
14,901
|
|
|
14,268
|
|
|
43,232
|
|
|
35,860
|
|
Research and
development
|
|
|
15,414
|
|
|
15,312
|
|
|
12,779
|
|
|
48,311
|
|
|
35,263
|
|
Total
|
|
$
|
29,987
|
|
$
|
31,891
|
|
$
|
28,204
|
|
$
|
96,228
|
|
$
|
74,454
|
|
|
|
(1)
|
Presentation of
Adjusted EBITDA for the three months ended June 30, 2023 has been
recast to conform to the current presentation, and reflects
insurance recoveries that were immaterial to that period. Adjusted
EBITDA for the nine months ended September 30, 2023 reflects total
year-to-date insurance recoveries.
|
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 2023
|
|
30 JUN 2023
|
|
30 SEP 2022
|
|
30 SEP 2023
|
|
30 SEP 2022
|
|
Non-GAAP net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
59,397
|
|
$
|
12,420
|
|
$
|
12,131
|
|
$
|
116,956
|
|
$
|
117,964
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
29,987
|
|
|
31,891
|
|
|
28,204
|
|
|
96,228
|
|
|
74,454
|
|
Unrealized loss (gain)
on strategic investments and
marketable securities, net
|
|
|
(4,036)
|
|
|
61,912
|
|
|
11,338
|
|
|
42,306
|
|
|
(92,498)
|
|
Transaction costs
related to strategic investments
and acquisitions
|
|
|
495
|
|
|
455
|
|
|
469
|
|
|
1,793
|
|
|
2,304
|
|
Loss on disposal,
abandonment, and impairment of
property, equipment and intangible assets, net
|
|
|
137
|
|
|
24
|
|
|
1,795
|
|
|
317
|
|
|
2,032
|
|
Insurance recoveries
(1)
|
|
|
(2,615)
|
|
|
(789)
|
|
|
—
|
|
|
(3,404)
|
|
|
—
|
|
Costs related to FTC
litigation
|
|
|
71
|
|
|
1
|
|
|
—
|
|
|
72
|
|
|
295
|
|
Payroll taxes related
to XSPP vesting and CEO
Award option exercises
|
|
|
201
|
|
|
2,368
|
|
|
—
|
|
|
8,961
|
|
|
—
|
|
Income tax
effects
|
|
|
(6,168)
|
|
|
(24,595)
|
|
|
(10,409)
|
|
|
(37,222)
|
|
|
3,340
|
|
Non-GAAP net
income
|
|
$
|
77,469
|
|
$
|
83,687
|
|
$
|
43,528
|
|
$
|
226,007
|
|
$
|
107,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
$
|
0.78
|
|
$
|
0.16
|
|
$
|
0.17
|
|
$
|
1.56
|
|
$
|
1.63
|
|
Non-GAAP
|
|
$
|
1.02
|
|
$
|
1.10
|
|
$
|
0.60
|
|
$
|
3.00
|
|
$
|
1.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of diluted common and common equivalent shares outstanding (in
thousands)
|
|
|
75,952
|
|
|
75,780
|
|
|
72,525
|
|
|
75,212
|
|
|
72,386
|
|
|
|
(1)
|
Presentation of
Non-GAAP net income for the three months ended June 30, 2023 has
been recast to conform to the current presentation, and reflects
insurance recoveries that were immaterial to that period. Non-GAAP
net income for the nine months ended September 30, 2023 reflects
total year-to-date insurance recoveries.
|
AXON
ENTERPRISE, INC.
CONSOLIDATED BALANCE
SHEETS
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
30 SEP 2023
|
|
31 DEC 2022
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
406,042
|
|
$
|
353,684
|
Marketable
securities
|
|
|
68,850
|
|
|
39,240
|
Short-term
investments
|
|
|
715,688
|
|
|
581,769
|
Accounts and notes
receivable, net
|
|
|
442,830
|
|
|
358,190
|
Contract assets,
net
|
|
|
260,523
|
|
|
196,902
|
Inventory
|
|
|
260,119
|
|
|
202,471
|
Prepaid expenses and
other current assets
|
|
|
103,789
|
|
|
73,022
|
Total current
assets
|
|
|
2,257,841
|
|
|
1,805,278
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
186,957
|
|
|
169,843
|
Deferred tax assets,
net
|
|
|
213,831
|
|
|
156,866
|
Intangible assets,
net
|
|
|
20,324
|
|
|
12,158
|
Goodwill
|
|
|
57,344
|
|
|
44,983
|
Long-term
investments
|
|
|
—
|
|
|
156,207
|
Long-term notes
receivable, net
|
|
|
4,381
|
|
|
5,210
|
Long-term contract
assets, net
|
|
|
78,663
|
|
|
45,170
|
Strategic
investments
|
|
|
240,299
|
|
|
296,563
|
Other long-term
assets
|
|
|
194,543
|
|
|
159,616
|
Total assets
|
|
$
|
3,254,183
|
|
$
|
2,851,894
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
90,035
|
|
|
59,918
|
Accrued
liabilities
|
|
|
146,940
|
|
|
155,934
|
Current portion of
deferred revenue
|
|
|
454,891
|
|
|
360,037
|
Customer
deposits
|
|
|
16,469
|
|
|
20,399
|
Other current
liabilities
|
|
|
9,492
|
|
|
6,358
|
Total current
liabilities
|
|
|
717,827
|
|
|
602,646
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
270,082
|
|
|
248,003
|
Liability for
unrecognized tax benefits
|
|
|
18,938
|
|
|
10,745
|
Long-term deferred
compensation
|
|
|
9,148
|
|
|
6,285
|
Deferred tax liability,
net
|
|
|
2,467
|
|
|
1
|
Long-term lease
liabilities
|
|
|
35,329
|
|
|
37,143
|
Convertible notes,
net
|
|
|
676,315
|
|
|
673,967
|
Other long-term
liabilities
|
|
|
2,960
|
|
|
4,613
|
Total liabilities
|
|
|
1,733,066
|
|
|
1,583,403
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
1,315,954
|
|
|
1,174,594
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
373,978
|
|
|
257,022
|
Accumulated other
comprehensive loss
|
|
|
(12,869)
|
|
|
(7,179)
|
Total stockholders' equity
|
|
|
1,521,117
|
|
|
1,268,491
|
Total liabilities and stockholders'
equity
|
|
$
|
3,254,183
|
|
$
|
2,851,894
|
AXON
ENTERPRISE, INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
NINE MONTHS ENDED
|
|
|
|
30 SEP 2023
|
|
30 JUN 2023
|
|
30 SEP 2022
|
|
30 SEP 2023
|
|
30 SEP 2022
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,397
|
|
$
|
12,420
|
|
$
|
12,131
|
|
$
|
116,956
|
|
$
|
117,964
|
|
Adjustments to
reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
29,987
|
|
|
31,891
|
|
|
28,204
|
|
|
96,228
|
|
|
74,454
|
|
Deferred income
taxes
|
|
|
(15,706)
|
|
|
(27,945)
|
|
|
4,299
|
|
|
(53,311)
|
|
|
30,349
|
|
Unrealized loss (gain)
on strategic investments and
marketable securities, net
|
|
|
(4,036)
|
|
|
61,912
|
|
|
11,338
|
|
|
42,306
|
|
|
(92,498)
|
|
Depreciation and
amortization
|
|
|
8,418
|
|
|
7,480
|
|
|
6,206
|
|
|
22,587
|
|
|
18,171
|
|
Bond
amortization
|
|
|
(4,035)
|
|
|
(4,146)
|
|
|
(362)
|
|
|
(12,071)
|
|
|
(61)
|
|
Noncash lease
expense
|
|
|
1,912
|
|
|
1,583
|
|
|
1,718
|
|
|
4,890
|
|
|
4,997
|
|
Unrecognized tax
benefits
|
|
|
1,435
|
|
|
2,012
|
|
|
(376)
|
|
|
4,302
|
|
|
3,519
|
|
Amortization of
debt issuance cost
|
|
|
797
|
|
|
775
|
|
|
—
|
|
|
2,328
|
|
|
—
|
|
Coupon interest
expense
|
|
|
(652)
|
|
|
862
|
|
|
—
|
|
|
1,073
|
|
|
—
|
|
Other noncash
items
|
|
|
(872)
|
|
|
(452)
|
|
|
2,181
|
|
|
(1,140)
|
|
|
2,659
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
(80,263)
|
|
|
(51,774)
|
|
|
(34,799)
|
|
|
(182,468)
|
|
|
(115,046)
|
|
Inventory
|
|
|
(15,979)
|
|
|
(27,774)
|
|
|
(19,158)
|
|
|
(59,564)
|
|
|
(66,267)
|
|
Prepaid expenses and
other assets
|
|
|
(15,318)
|
|
|
15,058
|
|
|
(15,183)
|
|
|
(64,608)
|
|
|
(17,871)
|
|
Accounts payable,
accrued and other liabilities
|
|
|
49,399
|
|
|
1,067
|
|
|
4,115
|
|
|
13,423
|
|
|
28,684
|
|
Deferred
revenue
|
|
|
48,408
|
|
|
19,687
|
|
|
40,587
|
|
|
118,294
|
|
|
115,187
|
|
Net cash provided by
operating activities
|
|
|
62,892
|
|
|
42,656
|
|
|
40,901
|
|
|
49,225
|
|
|
104,241
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(180,944)
|
|
|
(100,925)
|
|
|
(85,902)
|
|
|
(426,993)
|
|
|
(194,142)
|
|
Proceeds from call /
maturity of investments
|
|
|
80,132
|
|
|
299,994
|
|
|
6,012
|
|
|
461,214
|
|
|
15,485
|
|
Exercise of warrants
from strategic investments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,555)
|
|
Purchases of property
and equipment
|
|
|
(13,974)
|
|
|
(13,137)
|
|
|
(14,371)
|
|
|
(35,624)
|
|
|
(44,218)
|
|
Purchases of intangible
assets
|
|
|
(392)
|
|
|
(62)
|
|
|
(89)
|
|
|
(579)
|
|
|
(193)
|
|
Proceeds from disposal
of property and equipment
|
|
|
64
|
|
|
3
|
|
|
135
|
|
|
67
|
|
|
226
|
|
Strategic
investments
|
|
|
(6,775)
|
|
|
(10,917)
|
|
|
(9,000)
|
|
|
(17,692)
|
|
|
(70,500)
|
|
Business acquisition,
net of cash acquired
|
|
|
(64)
|
|
|
(21,026)
|
|
|
—
|
|
|
(21,090)
|
|
|
(2,104)
|
|
Net cash provided by
(used in) investing activities
|
|
|
(121,953)
|
|
|
153,930
|
|
|
(103,215)
|
|
|
(40,697)
|
|
|
(302,001)
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
(101)
|
|
|
61,156
|
|
|
—
|
|
|
94,705
|
|
|
(74)
|
|
Proceeds from options
exercised
|
|
|
—
|
|
|
15,322
|
|
|
—
|
|
|
54,503
|
|
|
—
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(7,021)
|
|
|
(62,214)
|
|
|
(72)
|
|
|
(104,076)
|
|
|
(2,391)
|
|
Net cash provided by
(used in) financing activities
|
|
|
(7,122)
|
|
|
14,264
|
|
|
(72)
|
|
|
45,132
|
|
|
(2,465)
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
|
(2,007)
|
|
|
27
|
|
|
(2,873)
|
|
|
(1,201)
|
|
|
(6,783)
|
|
Net increase (decrease)
in cash and cash equivalents
and restricted cash
|
|
|
(68,190)
|
|
|
210,877
|
|
|
(65,259)
|
|
|
52,459
|
|
|
(207,008)
|
|
Cash and cash
equivalents and restricted cash,
beginning of period
|
|
|
476,201
|
|
|
265,324
|
|
|
214,689
|
|
|
355,552
|
|
|
356,438
|
|
Cash and cash
equivalents and restricted cash,
end of period
|
|
$
|
408,011
|
|
$
|
476,201
|
|
$
|
149,430
|
|
$
|
408,011
|
|
$
|
149,430
|
|
AXON
ENTERPRISE, INC.
SELECTED CASH FLOW
INFORMATION
(Unaudited)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
NINE MONTHS ENDED
|
|
|
30 SEP 2023
|
|
30 JUN 2023
|
|
30 SEP 2022
|
|
30 SEP 2023
|
|
30 SEP 2022
|
Net cash provided by
operating activities
|
|
$
|
62,892
|
|
$
|
42,656
|
|
$
|
40,901
|
|
$
|
49,225
|
|
$
|
104,241
|
Purchases of property
and equipment
|
|
|
(13,974)
|
|
|
(13,137)
|
|
|
(14,371)
|
|
|
(35,624)
|
|
|
(44,218)
|
Purchases of intangible
assets
|
|
|
(392)
|
|
|
(62)
|
|
|
(89)
|
|
|
(579)
|
|
|
(193)
|
Free cash flow, a
non-GAAP measure
|
|
$
|
48,526
|
|
$
|
29,457
|
|
$
|
26,441
|
|
$
|
13,022
|
|
$
|
59,830
|
Bond premium
amortization
|
|
|
4,035
|
|
|
4,146
|
|
|
362
|
|
|
12,071
|
|
|
61
|
Net campus
investment
|
|
|
761
|
|
|
290
|
|
|
4,415
|
|
|
2,063
|
|
|
13,175
|
Adjusted free cash
flow, a non-GAAP measure
|
|
$
|
53,322
|
|
$
|
33,893
|
|
$
|
31,218
|
|
$
|
27,156
|
|
$
|
73,066
|
AXON
ENTERPRISE, INC.
SUPPLEMENTAL
TABLES
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 SEP 2023
|
|
31 DEC 2022
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
406,042
|
|
$
|
353,684
|
Short-term
investments
|
|
|
715,688
|
|
|
581,769
|
Long-term
investments
|
|
|
—
|
|
|
156,207
|
Cash and cash
equivalents and investments, net
|
|
|
1,121,730
|
|
|
1,091,660
|
Convertible notes,
principal amount
|
|
|
(690,000)
|
|
|
(690,000)
|
Total cash and cash
equivalents and investments, net of convertible notes
|
|
$
|
431,730
|
|
$
|
401,660
|
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SOURCE Axon