STOCK TITAN

Axon Reports Record Revenue Up 31% to $286 million; Raises Full-Year Outlook

Rhea-AI Impact
(Moderate)
Rhea-AI Sentiment
(Positive)
Tags
Rhea-AI Summary

Axon reported a strong second quarter in 2022, achieving 286 million in revenue, a 31% year-over-year increase. The growth was driven by Axon Cloud SaaS solutions and TASER 7 device adoption. The company boasts an annual recurring revenue of 368 million, reflecting 41% growth, with future contracted revenue exceeding 3 billion. Net income for the quarter was 51 million, or 0.71 per diluted share. In strategic moves, Axon renewed its partnership with Microsoft Azure and appointed new executives, positioning itself for continued growth.

Positive
  • Revenue growth of 31% year-over-year, reaching $286 million.
  • Annual Recurring Revenue of $368 million, up 41%.
  • Net income of $51 million, or $0.71 per diluted share.
  • Future contracted revenue surpassing $3 billion.
  • Strong adoption of Axon Cloud solutions, with SaaS product revenue nearly tripling year-over-year.
  • Renewed technology partnership with Microsoft Azure, enhancing pricing predictability.
Negative
  • Operating expenses increased to $153 million, impacting profitability.
  • Total gross margin declined to 60.9%, despite management's expectation of improvement.
  • Stock-based compensation expenses of $21 million, still impacting net income.
  • SaaS Strength: Annual Recurring Revenue of $368 million, up 41%

  • Profit of $0.71 per diluted share, non-GAAP diluted EPS of $0.44, Adjusted EBITDA of $50 million

  • Future contracted revenue surpasses $3 billion

SCOTTSDALE, Ariz., Aug. 9, 2022 /PRNewswire/ --

Dear Shareholders,

Our second quarter financial results reflect continued momentum throughout the business, including notable across-the-board strength in new product adoption.

Revenue growth of 31% year over year was driven by strong demand for Axon Cloud SaaS solutions, Axon Body 3 and Axon Fleet 3 systems, and our TASER 7 platform. Revenue from new SaaS products — such as productivity solutions, real-time operations, Axon Air, ALPR and VR(1) — nearly tripled year over year, highlighting our ability to drive customer adoption of our new software solutions.

We also executed against several key priorities in the quarter that position us well for future growth — including deepening our relationships with key partners and strategically investing to build out the Axon Ecosystem.

In June, we renewed our strategic technology partnership with Microsoft Azure — signing a six-year agreement that provides long-term pricing certainty and cost visibility for our Axon Cloud business. The renewal will support our software gross margin target of 80%+, and enables us to offer pricing predictability to our own customers. We discuss other ecosystem developments in more detail, below.

Customers are increasingly demonstrating their confidence that we are the right technology partner for them, for the next decade. We make it easy for our customers to bet on us, because we deliver. In the second quarter, 108 customers signed contracts for longer than five years. The quality of the deal flow is also strong. About a third of our top 100 deals were for a decade or more. This drives our confidence in our ability to continue scaling a rapidly growing, highly recurring SaaS business, with virtually zero churn.

(1) ALPR is the industry acronym for automatic license plate recognition. Enabled by artificial intelligence, Axon's ALPR solution comes standard with the Axon Fleet 3 in-car camera system. Plate read data that is collected during patrol is then retained and can be queried through Axon Evidence for later investigations.

VR is Axon's virtual reality training solution, which is included stand-alone or included in our highest value bundled offerings.

Select Highlights:

Management updates

Josh Isner, COO

In June, we appointed Josh Isner to the role of Chief Operating Officer, a newly created position to expand the office of the CEO. Josh is an executive familiar to investors who have tuned into Axon's earnings calls, which we've hosted over Zoom since early 2020. He's had an outsized impact on Axon, including during his most recent tenure as chief revenue officer. As CRO, Josh was responsible for Axon's global growth, customer service, professional services, and sales operations. He has been instrumental in building Axon's revenue stream to support our 2022 guidance above $1 billion, and was a key member of the executive team responsible for driving historical annual revenue growth rates exceeding 25%. He now oversees Axon's operational functions including business operations and execution, policies and employees.

Isaiah Fields, CLO

In July, we appointed Isaiah Fields to the role of Chief Legal Officer, where he will spearhead Axon initiatives across legal operations, government affairs, risk management and compliance. In Isaiah's previous role as general counsel, he drove success across all elements of our global organization. We are confident that Isaiah's leadership, devotion to his team and passion for our mission will help Axon successfully navigate this phase of rapid growth as we scale in complexity and expand globally.

CFO search

Our search process for a permanent CFO is progressing well and includes a strong pipeline of quality candidates.  We hope to welcome shortly an outstanding executive who brings an appetite for strong financial rigor, along with the operational expertise to continue to drive scale and long-term growth at Axon.

Customers & Product

New VR simulator promotes de-escalation for public safety: The Phoenix Police Department and New Castle County Police in Delaware are the first agencies to deploy Axon's latest improvement in its VR offerings. The new simulator allows officers to train from anywhere. Trainees learn to operate TASER 7 devices and training firearms in VR. Scenarios include indoor range and an outdoor, nighttime setting. The fast-paced exercises help trainees learn safety features, recognize proper spread and probe placement on moving subjects, manage clothing disconnects, and practice for higher effectiveness when deploying TASER cartridges. More than 1,000 U.S. agencies now use Axon VR training.

TASER 7 Device adoption accelerates in Canada: Police services in Ontario, including Toronto, found that simply presenting a TASER device de-escalates a situation between 70% to 90% of the time, without having to deploy a cartridge. Recent TASER 7 device adoption in Canada has included the Calgary Police Service, York Regional Police, Peel Regional Police, Toronto Police Service and the Edmonton Police Service.

U.S. federal funding momentum: Axon's Federal business outlook continues to strengthen with recent developments signaling broad support for body camera adoption. In May, the White House issued an executive order that mandated body cameras for federal law enforcement. In addition, the White House's proposed FY2023 budget includes body camera funding for the Justice Department. We are also seeing support in Congress for body camera programs among the following federal law enforcement customers: Justice Department agencies, including the FBI, the U.S. Marshals, the U.S. Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives; Department of Homeland Security agencies, including U.S. Customs & Border Patrol, and U.S. Immigration & Customs Enforcement; and Department of Interior agencies. The House is also proposing funding for state and local agency matching grants to drive body camera adoption.

Strategic initiatives:

In May, we hosted our seventh annual Axon Accelerate — our user conference that has become the largest technology conference in public safety. On display was the strength of the Axon Ecosystem, featuring a growing network of partnerships and integrated products. Our go-to-market strategy for the Axon Ecosystem has graduated from an idea to now delivering tangible customer value.

In addition to extending our technology partnership with Microsoft, highlighted at the beginning of this letter, we also executed several new key strategic initiatives during the second quarter:

  • Foundry 45: In April, we announced the acquisition of Foundry 45, a VR studio focused on delivering immersive training modules to large organizations. The acquisition bolsters Axon's VR team in transforming public safety by making training more accessible, relevant and affordable — with the goal of better preparing officers for real-life situations.

  • Fūsus: In May, we announced a strategic partnership with Fūsus along with a $21 million non-controlling minority investment. Fusus is the U.S. market leader in real-time crime center solutions for public safety. The partnership makes it easier and more cost-effective for communities to aggregate live feeds from public and private cameras in addition to live video feeds from Axon Body 3, Axon Fleet 3 and Axon Air connected drones, creating a unified operational picture for first responders.

  • Skydio: In May, we also announced live-streaming from Skydio drones into our Axon Respond platform. The integration with Respond will enable command staff and 911 dispatchers to combine the live-streaming capabilities of Axon body-worn and in-car cameras with the Skydio drone's aerial perspective to provide a more comprehensive operational picture.

  • Dedrone: In June, we closed a $25 million non-controlling minority follow-on investment in Dedrone, a market leader in counter unmanned aircraft systems. Axon led the company's oversubscribed $30 million Series C-1 financing round, which follows our initial $25 million investment in Dedrone in December 2021. Dedrone is accelerating on a path towards making the world safer from unauthorized and malicious drones. After conducting extensive due diligence to evaluate opportunities to participate in the rapidly growing air security market, we were impressed by Dedrone's technology, team and commercial traction.

  • DroneSense: In June, we also closed a $15 million non-controlling minority investment in DroneSense in support of our previously announced partnership to implement its piloting, program management and operations solution via Axon's unmanned aircraft program, Axon Air. DroneSense has also integrated its software platform with Axon's digital evidence management platform, Axon Evidence, and real-time operations hub, Axon Respond, to provide agencies with a comprehensive solution to start and operate a drone program. This integration streamlines first responder and drone pilot communications — allowing live streaming from the UAS into Axon's real-time operations platform and digital footage to be stored in Axon's evidence management platform.

In addition to these recent new initiatives, we are also seeing positive momentum across our broader ecosystem. In late 2021, we acquired Occam Video Solutions, a leader in digital video investigations software. The business has been integrated with Axon, and, in addition to powering our Third-Party Video Playback solution, Occam's flagship investigative software, iNPUT-ACE, has been relaunched as Axon Investigate, and is seeing growing interest from our customers.

Our partnerships with Flock Safety and RapidSOS are also expanding in value for the Axon Ecosystem. We are seeing strong adoption of Flock Safety's ALPR cameras nationwide. Plate reads captured by Flock Safety's cameras can be shared to cases with a single-click and managed within Axon Evidence workflows. RapidSOS's technology powers Axon's recently launched consumer focused smart phone app for personal safety, Axon Protect (available in the Apple App Store and on Google Play), which enables users to connect with a live Axon agent. We also recently launched an Axon Respond integration with RapidSOS, which enables 911 operators that use the company's Jurisdiction View software platform to see live locations of first responders equipped with Axon Body 3 cameras and also live-stream videos from those cameras.

Summary of Q2 2022 results

  • Quarterly revenue of $286 million grew 31% year over year, exceeding our expectations, and led by software and sensors segment growth of 41%.

  • Total company gross margin of 60.9% improved 20 basis points sequentially.
    • We are prudently managing through an inflationary environment. We expect gross margins to improve as we continue to increase manufacturing output, with some variability based on product mix.

    • We expect further TASER 7 automation to come online in the back half of this year and contribute to gross margin improvement in 2023. Our cloud hosting contract with Microsoft Azure also provides us long-term visibility into the gross margin on the software portion of our contracts, which has consistently trended above 80%.
  • Operating profit was $21 million. Operating expenses for the quarter of $153 million included $20 million in stock based compensation expenses.
    • SG&A of $95 million included $9 million in stock-based compensation expenses.
    • R&D of $58 million included $11 million in stock-based compensation expenses.
    • The sequential growth in operating expenses includes:
      • $5 million tied to hiring that supports our long-term growth profile
      • $3 million tied to higher bonuses paid to employees at the senior director level and below,
      • $2 million tied to annual company bonus accruals resulting from our improved outlook, and
      • $1 million tied to our annual user conference.
      • We expect expense growth, excluding stock-based compensation, to moderate in the back half of the year.
  • Our quarterly net income of $51 million, or $0.71 per diluted share, included $21 million in stock based compensation expenses, a $12 million non-cash, unrealized, mark-to-market loss related to our strategic investment in Cellebrite, and $60 million in net unrealized gains related to strategic investments.
    • Our stock based compensation expenses have declined significantly compared to 2021. Of the $21 million in total stock-based compensation expense in Q2 2022, $3 million was related to our specialized stock based compensation plans.(1) A year ago, we recognized $138 million of stock based compensation in the second quarter. The decline is due to the fact that we have expensed 94% of the total projected expenses for the plans since the CEO Performance Award was adopted in 2018 and the XSPP was adopted in 2019, including for XSPP grants issued to date.
  • Non-GAAP net income was $32 million, or $0.44 per share.

  • Adjusted EBITDA was $50 million.
    • Both Non-GAAP net income and Adjusted EBITDA exclude stock-based compensation expenses and net gains and losses related to our strategic investment portfolio.
  • Operating cash flow of $19 million supported free cash flow generation of $7 million and adjusted free cash flow generation of $10 million. We define free cash flow as operating cash flow less capital expenditures and purchases of intangible assets. Adjusted free cash flow excludes campus investments.

  • As of June 30, 2022 Axon had $356 million in cash, equivalents and investments.
    • Uses of cash in the quarter included $61 million for strategic investments, $23 million in working capital, $13 million in capital expenditures, and $7 million for the exercise of warrants in an existing strategic investment.
  • Axon has zero debt.

(2) These innovative stock-based compensation plans were approved by shareholders in 2018 and 2019 and align the interests of management and employees with shareholders.

Financial commentary by segment:




















TASER



THREE MONTHS ENDED



CHANGE




30 JUN 2022


31 MARCH 2022


30 JUNE 2021


QoQ


YoY



(in thousands)








Net sales


$

135,586



$

114,360



$

112,528



18.6

%


20.5

%

Gross margin



64.3

%



64.5

%



66.4

%


(20)

bp


(210)

bp

  • TASER segment revenue growth was driven by demand for our TASER 7 platform, with units up 85% year over year.

  • Q2 2022 TASER segment gross margin slightly declined sequentially. We expect further TASER 7 automation to come online in the back half of this year and contribute to segment gross margin improvement in 2023. We also expect to generate leverage on our fixed cost base as we grow into our expanding manufacturing footprint.

 




















Software & Sensors



THREE MONTHS ENDED



CHANGE




30 JUN 2022


31 MARCH 2022


30 JUNE 2021


QoQ


YoY



(in thousands)








Axon Cloud net sales


$

81,697



$

77,016



$

60,477



6.1

%


35.1

%

Axon Cloud gross margin



70.4

%



72.3

%



74.5

%


(190)

bp


(410)

bp




















Sensors and Other net sales


$

68,330



$

65,050



$

45,790



5.0

%


49.2

%

Sensors and Other gross margin



42.9

%



40.5

%



39.7

%


240

bp


320

bp

  • Axon Cloud revenue grew 35%year over year to $82 million, reflecting strong user growth for our Axon Evidence (Evidence.com) platform, and software features including transcription and body-camera enabled real-time operations capabilities across location-based services, live streaming and incident event alerts.

  • Axon Cloud gross margin of 70.4% included expected costs to scale our cloud business. This includes the low-to-no margin professional services costs of teams who help our customers deploy Axon's solutions. The software-only revenue in this segment, which is annually recurring and includes cloud storage and compute costs, has consistently carried a gross margin above 80%.

  • Sensors & Other revenue grew 49% year over year to $68 million, reflecting growth in Axon Fleet 3 shipments followed by body camera unit growth.

  • Sensors & Other gross margin was 42.9%, reflecting a favorable product mix. As a reminder, we manage toward a 25% gross margin for camera and sensors hardware, and the gross margin will fluctuate quarter to quarter depending on the customer mix.

 






















Forward-looking performance indicators:



30 JUN 2022


31 MARCH 2022


31 DEC 2021


30 SEP 2021


30 JUNE 2021



($ in thousands)


Annual recurring revenue (1)


$

367,952



$

347,613



$

327,488



$

288,691



$

260,178


Net revenue retention (2)



119

%



119

%



119

%



119

%



119

%

Total company future contracted revenue (2)


$

3,330,000



$

2,970,000



$

2,800,000



$

2,390,000



$

2,040,000


Percentage of TASER devices sold on a recurring payment plan



76

%



45

%



65

%



58

%



55

%

(1)

Monthly recurring license, integration, warranty, and storage revenue annualized.

(2)

Refer to "Statistical Definitions" below.

  • Annual Recurring Revenue (ARR) grew 41% year over year to $368 million.

  • Net revenue retention was 119% in the quarter, reflecting our ability to deliver additional value to our customers over time and de minimis attrition. We drive adoption of our cloud software solutions through integrated bundling. Our law enforcement agency customers often sign up for five to ten-year subscriptions. This SaaS metric purposely excludes the hardware portion of customer subscriptions. We further define this metric under "Statistical Definitions."

  • Total company future contracted revenue grew to $3.33 billion, reflecting strong bookings in the quarter. This metric is also known as "remaining performance obligations." Most of our bookings are for multi-year contracts. See definition of this metric under "Statistical Definitions."

  • The percentage of TASER devices sold on a subscription was 76% in the quarter, reflecting a stronger mix of our TASER 7 devices, which are mostly sold on a subscription. As a reminder, Axon has been successfully transitioning its TASER hardware business into a subscription service in more mature markets and expanding into new markets where some initial sales are not on a subscription, with the intention of building subscription businesses in those markets over time.

Outlook

The following forward-looking statements reflect Axon's full year 2022 expectations as of August 9, 2022, and are subject to risks and uncertainties.

  • Axon's upwardly revised full year 2022 revenue expectation has improved to a range of $1.07 billion to $1.12 billion, reflecting approximately 27% annual growth at the midpoint. Previously, Axon had guided to a range of $1.05 billion to $1.1 billion, reflecting 25% growth at the midpoint.

  • We now expect to deliver 2022 Adjusted EBITDA at the higher end of the previously communicated range of $190 million to $200 million.
    • As discussed last quarter, we are facing higher labor, freight and materials costs, which we are working to offset with automation, additional distribution facilities and engineering R&D on products to lower component costs.

    • We provide Adjusted EBITDA guidance, rather than net income guidance, due to the inherent difficulty of forecasting certain types of expenses such as stock-based compensation and income tax expenses, which affect net income but not Adjusted EBITDA. We are unable to reasonably estimate the impact of such expenses, if any, on net income. Accordingly, we do not provide a reconciliation of projected net income to projected Adjusted EBITDA.
  • We expect stock-based compensation expense to be more than $104 million for the full year. Because our stock-based compensation expense may vary based on changes in the probability of attaining certain operational or market capitalization metrics or attainment of such metrics and with changes in the expected or actual timing of such attainment, it is inherently difficult to forecast future stock-based compensation expense.

  • We are maintaining our expected adjusted free cash flow range of $125 million to $145 million in 2022, compared with $85 million in 2021. This range reflects our expectations for operating cash flow, minus our expected purchases of property and equipment (CapEx) of $80 million to $90 million, excluding any investments made in our campus facility, which we expect to be less than $25 million.

  • We are revising our expected 2022 capital expenditures to a range of $80 million to $90 million, compared with our previous expectation of $135 million to $160 million.
    • We expect our net campus investments in 2022 to be less than $25 million, down from $85 million communicated previously. This reflects adjusted pacing as we continue to monitor remote-hybrid work trends and optimize our facility plans. We also are monitoring the economic environment and are course adjusting to maintain flexibility in how we invest our capital for growth.

We are energized by the momentum in our business, superior execution by our teams and the underlying strength of our model, all of which sets us up to continue accelerating growth and profitability.  

Thank you for investing in our mission to protect life.

-The Axon team

Quarterly conference call and webcast

We will host our Q2 2022 earnings conference call webinar on Tuesday, August 9, at 2 p.m. PT / 5 p.m. ET.

The webcast will be available via a link on Axon's investor relations website at https://investor.axon.com (https://investor.axon.com/), or can be accessed directly via https://axon.zoom.us/j/98326867283.

Statistical Definitions

Bookings: We consider bookings to be a statistical measure defined as the sales price of orders (not invoiced sales), including contractual optional periods we expect to be exercised, net of cancellations, inclusive of renewals, placed in the relevant fiscal period, regardless of when the products or services ultimately will be provided, so long as they are expected to occur within five years. Most bookings will be invoiced in subsequent periods. Due to municipal government funding rules, in some cases certain of the future period amounts included in bookings are subject to budget appropriation or other contract cancellation clauses. Although we have entered into contracts for the delivery of products and services in the future and anticipate the contracts will be fulfilled, if agencies do not exercise contractual options, do not appropriate funds in future year budgets, or enact a cancellation clause, revenue associated with these bookings may not ultimately be recognized, resulting in a future reduction to bookings. Bookings, as presented here, represent total company bookings inclusive of all product. Certain customers sign contracts for time periods longer than five-years, which generates a larger-sized booking — but the expected exercise amounts after the five-year period is not included in bookings, as described here, in order to facilitate comparisons between periods.

Net revenue retention: Dollar-based net revenue retention is an important metric to measure our ability to retain and expand our relationships with existing customers. We calculate it as the software and camera warranty subscription and support revenue from a base set of agency customers from which we generated Axon Cloud subscription revenue in the last month of a quarter divided by the software and camera warranty subscription and support revenue from the year-ago month of that same customer base. This calculation includes high-margin warranty but purposely excludes the lower-margin hardware subscription contingent of the customer contracts, as it is meant to be a SaaS metric that we use to monitor the health of the recurring revenue business we are building. This calculation also excludes the implied monthly revenue contribution of customers that were added since the year-ago quarter, and therefore excludes the benefit of new customer acquisition. The metric includes customers, if any, that terminated during the annual period, and therefore, this metric is inclusive of customer churn. This metric is downwardly adjusted to account for the effect of phased deployments -- meaning that for the year-ago period, we consider the total contractually obligated implied monthly revenue amount, rather than monthly revenue amounts that might have been in actuality smaller on a GAAP basis due to the customer not having yet fully deployed their Axon solution. For more information relative to our revenue recognition policies, please reference our SEC filings.

Total company future contracted revenue: Total company future contracted revenue includes both recognized contract liabilities as well as amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under Topic 606 as of June 30, 2022. We expect to recognize between 15% - 20% of this balance over the next twelve months, and generally expect the remainder to be recognized over the following ten years, subject to risks related to delayed deployments, budget appropriation or other contract cancellation clauses.

Non-GAAP Measures

To supplement the Company's financial results presented in accordance with GAAP, we present the non-GAAP financial measures of EBITDA, Adjusted EBITDA, Non-GAAP Net Income, Non-GAAP Diluted Earnings Per Share, Free Cash Flow and Adjusted Free Cash Flow. The Company's management uses these non-GAAP financial measures in evaluating the Company's performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented herein.

  • EBITDA (Most comparable GAAP Measure: Net income) - Earnings before interest expense, investment interest income, income taxes, depreciation and amortization.

  • Adjusted EBITDA (Most comparable GAAP Measure: Net income) - Earnings before interest expense, investment interest income, income taxes, depreciation, amortization, non-cash stock-based compensation expense, realized and unrealized gains/losses on strategic investments and marketable securities and pre-tax certain other items (identified and listed below in the reconciliation).

  • Non-GAAP Net Income (Most comparable GAAP Measure: Net income) - Net income excluding the costs of non-cash stock-based compensation and excluding any net gain/loss/write-down/disposal/abandonment of property, equipment and intangible assets; realized and unrealized gains/losses on strategic investments and marketable securities; loss on impairment; costs related to strategic investments and business acquisitions; costs related to the FTC litigation and pre-tax certain other items (listed below). The Company tax-effects non-GAAP adjustments using the blended statutory federal and state tax rates for each period presented.

  • Non-GAAP Diluted Earnings Per Share (Most comparable GAAP Measure: Earnings Per share) - Measure of Company's Non-GAAP Net Income divided by the weighted average number of diluted common shares outstanding during the period presented.

  • Free Cash Flow (Most comparable GAAP Measure: Cash flow from operating activities) - cash flows provided by operating activities minus purchases of property and equipment and intangible assets.

  • Adjusted Free Cash Flow (Most comparable GAAP Measure: Cash flow from operating activities) - cash flows provided by operating activities minus purchases of property and equipment and intangible assets, excluding the net impact of investments in our new Scottsdale, Ariz. campus.

Caution on Use of Non-GAAP Measures

Although these non-GAAP financial measures are not consistent with GAAP, management believes investors will benefit by referring to these non-GAAP financial measures when assessing the Company's operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

  • these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to the Company's GAAP financial measures;

  • these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the Company's GAAP financial measures;

  • these non-GAAP financial measures should not be considered to be superior to the Company's GAAP financial measures; and

  • these non-GAAP financial measures were not prepared in accordance with GAAP or under a comprehensive set of rules or principles.

Further, these non-GAAP financial measures may be unique to the Company, as they may be different from similarly titled non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company's results to the results of other companies.

About Axon

Axon is the global leader in connected public safety technologies. We are a mission-driven company whose overarching goal is to protect life. Our vision is a world where bullets are obsolete, where social conflict is dramatically reduced, where everyone has access to a fair and effective justice system and where racial equity, diversity and inclusion is centered in all of our work. Axon is also a leading provider of body cameras for US public safety, providing more transparency and accountability to communities than ever before.

You may learn about our Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) efforts by reading our ESG report at investor.axon.com.

We work hard for those who put themselves in harm's way for all of us. More than 270,000 lives and countless dollars have been saved with the Axon Network of devices, apps and people. Learn more at www.axon.com or by calling (800) 978-2737. Axon is a global company with headquarters in Scottsdale, Arizona, and a global software engineering hub in Seattle, Washington, as well as additional offices in the US, Australia, Canada, Finland, Vietnam, the UK and the Netherlands.

Apple and App Store are trademarks of Apple, Inc., Cellebrite is a trademark of Celebrite Mobile Synchronization Ltd.; Dedrone is a trademarks of Dedrone Holdings, Inc.; DroneSense is a trademark of DroneSense, Inc., Facebook is a trademark of Facebook, Inc.; Flock Safety is a trademark of Flock Group, Inc., dba Flock Safety; Google Play is a trademark of Google, Inc.; Microsoft and Azure are trademarks of Microsoft Corporation; RapidSOS is a trademark of Rapid SOS, Inc.; Skydio is a trademark of Skydio, Inc.; Twitter is a trademark of Twitter, Inc.; and Zoom is a trademark of Zoom Video Communications, Inc.

Axon, the Delta Logo, Axon Accelerate, Axon Air, Axon Body, Axon Evidence, Axon Fleet, Axon Network, Axon Respond, TASER, TASER 7 and Protect Life are trademarks of Axon Enterprise, Inc., some of which are registered in the US and other countries. For more information, visit  www.axon.com/legal. All rights reserved.

Follow Axon here:

Forward-looking statements

Forward-looking statements in this letter include, without limitation, statements regarding: proposed products and services and related development efforts and activities; expectations about the market for our current and future products and services; strategies and trends relating to subscription plan programs and revenues; strategies and trends, including the benefits of, research and development investments; the timing and realization of future contracted revenue; the fulfillment of bookings; expectations about customer behavior; statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance, including our outlook for 2022 full year revenue, stock-based compensation expense, adjusted EBITDA, adjusted free cash flow, and capital expenditures; statements of management's strategies, goals and objectives and other similar expressions; as well as the ultimate resolution of financial statement items requiring critical accounting estimates, including those set forth in our Form 10‑K for the year ended December 31, 2021. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. Words such as "may," "will," "should," "could," "would," "predict," "potential," "continue," "expect," "anticipate," "future," "intend," "plan," "believe," "estimate," and similar expressions, as well as statements in future tense, identify forward-looking statements. However, not all forward-looking statements contain these identifying words.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. The following important factors could cause actual results to differ materially from those in the forward-looking statements: the potential global impacts of the COVID-19 pandemic; our exposure to cancellations of government contracts due to appropriation clauses, exercise of a cancellation clause, or non-exercise of contractually optional periods; our ability to design, introduce and sell new products or features; our ability to defend against litigation and protect our intellectual property, and the resulting costs of this activity; our ability to manage our supply chain and avoid production delays, shortages, and impacts to expected gross margins; the impact of stock compensation expense, impairment expense, and income tax expense on our financial results; customer purchase behavior, including adoption of our software as a service delivery model; negative media publicity regarding our products; the impact of product mix on projected gross margins; defects in our products; changes in the costs of product components and labor; loss of customer data, a breach of security, or an extended outage, including by our third party cloud-based storage providers; exposure to international operational risks; delayed cash collections and possible credit losses due to our subscription model; changes in government regulations in the U.S. and in foreign markets, especially related to the classification of our products by the United States Bureau of Alcohol, Tobacco, Firearms and Explosives; our ability to integrate acquired businesses; our ability to attract and retain key personnel; and counter-party risks relating to cash balances held in excess of FDIC insurance limits. Many events beyond our control may determine whether results we anticipate will be achieved. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. The Annual Report on Form 10‑K that we filed with the Securities and Exchange Commission ("SEC") on February 25, 2022 lists various important factors that could cause actual results to differ materially from expected and historical results. These factors are intended as cautionary statements for investors within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act. Readers can find them under the heading "Risk Factors" in the Report on Form 10‑K, and investors should refer to them. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8-K and 10-K reports to the SEC. Our filings with the SEC may be accessed at the SEC's web site at www.sec.gov.

Update on Legal Matters:

Axon v. FTC

Axon continues to vigorously prosecute its federal court constitutional case against the Federal Trade Commission (FTC) while the FTC's separate antitrust administrative action against the company regarding its 2018 acquisition of Vievu LLC remains stayed.

On January 24, 2022, the U.S. Supreme Court accepted review of an important jurisdictional issue raised by Axon's constitutional challenges to the FTC's internal administrative structure and procedures. The high Court's action is a critical first step for all businesses seeking to vindicate their constitutional rights and hold government regulators accountable. Oral argument is now set at the Supreme Court for November 7. A decision is unlikely before March 2023.  Links to all court filings and opinions can be found on Axon's FTC Investor Briefing page at https://www.axon.com/ftc.

Parallel to these matters Axon is evaluating strategic alternatives to litigation, which Axon might pursue if determined to be in the best interests of shareholders and customers. This could include a divestiture of the Vievu entity and/or related assets. While Axon continues to believe the acquisition was lawful and a benefit to Vievu's customers, the cost, risk and distraction of protracted litigation merit consideration of settlement if achievable on terms agreeable to the FTC and Axon.

For investor relations information please contact Investor Relations via email at IR@axon.com.

















AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)



THREE MONTHS ENDED


SIX MONTHS ENDED



30 JUN 2022


31 MARCH 2022


30 JUNE 2021


30 JUN 2022


30 JUNE 2021

Net sales from products


$

200,051


$

176,204


$

156,427


$

376,255


$

297,313

Net sales from services



85,562



80,222



62,368



165,784



116,501

Net sales



285,613



256,426



218,795



542,039



413,814

Cost of product sales



87,502



79,352



65,301



166,854



123,917

Cost of service sales



24,148



21,335



15,565



45,483



28,615

Cost of sales



111,650



100,687



80,866



212,337



152,532

Gross margin



173,963



155,739



137,929



329,702



261,282

Operating expenses:
















Sales, general and administrative



95,005



90,129



177,662



185,134



304,259

Research and development



57,547



48,416



53,952



105,963



100,970

Total operating expenses



152,552



138,545



231,614



291,097



405,229

Income (loss) from operations



21,411



17,194



(93,685)



38,605



(143,947)

Interest and other income, net



47,026



55,299



41,841



102,325



42,426

Income (loss) before provision for income taxes



68,437



72,493



(51,844)



140,930



(101,521)

Provision for (benefit from) income taxes



17,475



17,622



(4,727)



35,097



(6,487)

Net income (loss)


$

50,962


$

54,871


$

(47,117)


$

105,833


$

(95,034)

Net income (loss) per common and common
equivalent shares:
















Basic


$

0.72


$

0.77


$

(0.72)


$

1.49


$

(1.47)

Diluted


$

0.71


$

0.76


$

(0.72)


$

1.46


$

(1.47)

Weighted average number of common and
common equivalent shares outstanding:
















Basic



71,040



70,950



65,166



70,995



64,604

Diluted



72,283



72,349



65,166



72,316



64,604

 






































AXON ENTERPRISE, INC.
SEGMENT REPORTING
(Unaudited)
(dollars in thousands)



THREE MONTHS ENDED



THREE MONTHS ENDED



THREE MONTHS ENDED




30 JUN 2022



31 MARCH 2022



30 JUNE 2021








Software











Software











Software












and











and











and








TASER



Sensors



Total



TASER



Sensors



Total



TASER



Sensors



Total


Net sales from products (1)


$

131,721



$

68,330



$

200,051



$

111,154



$

65,050



$

176,204



$

110,637



$

45,790



$

156,427


Net sales from services (2)



3,865




81,697




85,562




3,206




77,016




80,222




1,891




60,477




62,368


Net sales



135,586




150,027




285,613




114,360




142,066




256,426




112,528




106,267




218,795


Cost of product sales



48,463




39,039




87,502




40,625




38,727




79,352




37,701




27,600




65,301


Cost of service sales






24,148




24,148







21,335




21,335




145




15,420




15,565


Cost of sales



48,463




63,187




111,650




40,625




60,062




100,687




37,846




43,020




80,866


Gross margin



87,123




86,840




173,963




73,735




82,004




155,739




74,682




63,247




137,929


Gross margin %



64.3

%



57.9

%



60.9

%



64.5

%



57.7

%



60.7

%



66.4

%



59.5

%



63.0

%






































Research and development



13,316




44,231




57,547




9,896




38,520




48,416




12,313




41,639




53,952


 




























SIX MONTHS ENDED



SIX MONTHS ENDED




30 JUN 2022



30 JUNE 2021








Software











Software












and











and








TASER



Sensors



Total



TASER



Sensors



Total


Net sales from products (1)


$

242,875



$

133,380



$

376,255



$

207,939



$

89,374



$

297,313


Net sales from services (2)



7,071




158,713




165,784




3,588




112,913




116,501


Net sales



249,946




292,093




542,039




211,527




202,287




413,814


Cost of product sales



89,088




77,766




166,854




70,646




53,271




123,917


Cost of service sales






45,483




45,483




145




28,470




28,615


Cost of sales



89,088




123,249




212,337




70,791




81,741




152,532


Gross margin



160,858




168,844




329,702




140,736




120,546




261,282


Gross margin %



64.4

%



57.8

%



60.8

%



66.5

%



59.6

%



63.1

%


























Research and development



23,212




82,751




105,963




21,556




79,414




100,970


 

(1)

Software and Sensors "products" revenue consists of sensors, including on-officer body cameras, Axon Fleet cameras, other hardware sensors, warranties on sensors, and other products, and is sometimes referred to as Sensors and Other revenue.

(2)

Software and Sensors "services" revenue comprises sales related to the Axon Cloud, which includes Axon Evidence, cloud-based evidence management software revenue, other recurring cloud-hosted software revenue and related professional services, and is sometimes referred to as Axon Cloud revenue.

 




















AXON ENTERPRISE, INC.
UNIT SALES STATISTICS
(Unaudited)
Units in whole numbers



THREE MONTHS ENDED







SIX MONTHS ENDED 




30 JUN


30 JUN


Unit


Percent



30 JUN


30 JUN


Unit


Percent




2022


2021


Change


Change



2022


2021


Change


Change


TASER 7


32,790


17,711


15,079


85.1

%


64,185


41,071


23,114


56.3

%

TASER X26P


8,831


7,012


1,819


25.9



15,169


15,241


(72)


(0.5)


TASER X2


2,745


9,788


(7,043)


(72.0)



4,751


18,626


(13,875)


(74.5)


TASER Consumer devices


5,157


6,307


(1,150)


(18.2)



11,358


14,993


(3,635)


(24.2)


Cartridges


1,536,332


1,413,329


123,003


8.7



2,626,271


2,423,089


203,182


8.4


Axon Body


59,851


45,572


14,279


31.3



122,413


91,666


30,747


33.5


Axon Flex


1,136


1,846


(710)


(38.5)



4,263


3,411


852


25.0


Axon Fleet


6,146


2,462


3,684


149.6



11,893


3,902


7,991


204.8


Axon Dock


5,314


5,283


31


0.6



13,378


12,069


1,309


10.8





















 

 


















AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Dollars in thousands



THREE MONTHS ENDED


SIX MONTHS ENDED




30 JUN 2022


31 MARCH 2022


30 JUNE 2021


30 JUN 2022


30 JUNE 2021


EBITDA and Adjusted EBITDA:

















Net income (loss)


$

50,962


$

54,871


$

(47,117)


$

105,833


$

(95,034)


Depreciation and amortization



6,210



5,755



4,291



11,965



8,582


Interest expense



3



8



17



11



22


Investment interest (income) loss



584



346



(502)



930



(1,035)


Provision for (benefit from) income taxes



17,475



17,622



(4,727)



35,097



(6,487)


EBITDA


$

75,234


$

78,602


$

(48,038)


$

153,836


$

(93,952)



















Adjustments:

















Stock-based compensation expense


$

21,162


$

25,088


$

137,549


$

46,250


$

227,159


Net realized and unrealized gains on
strategic investments and marketable
securities (1)



(47,985)



(55,851)



(40,855)



(103,836)



(40,855)


Transaction costs related to strategic
investments and acquisitions



964



871



110



1,835



495


Loss on disposal and abandonment of
intangible assets



8



40



119



48



130


Loss (gain) on disposal and
impairment of property and
equipment, net



83



106



(2)



189



43


Costs related to FTC litigation



291



4



147



295



380


Payroll taxes related to XSPP vesting
and CEO Award option exercises







2,217





3,669


Adjusted EBITDA


$

49,757


$

48,860


$

51,247


$

98,617


$

97,069


Net income (loss) as a percentage of net sales



17.8

%


21.4

%


(21.5)

%


19.5

%


(23.0)

%

Adjusted EBITDA as a percentage of net sales



17.4

%


19.1

%


23.4

%


18.2

%


23.5

%


















Stock-based compensation expense:

















Cost of product and service sales


$

1,066


$

1,108


$

1,838


$

2,174


$

3,327


Sales, general and administrative



8,610



12,982



114,089



21,592



185,104


Research and development



11,486



10,998



21,622



22,484



38,728


Total


$

21,162


$

25,088


$

137,549


$

46,250


$

227,159


(1)

Includes unrealized gains of $28.6 million and realized gain of $12.3 million for the three and six months ended June 30, 2021.

 


















AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - continued
(Unaudited)
Dollars in thousands, except per share amounts



THREE MONTHS ENDED


SIX MONTHS ENDED




30 JUN 2022


31 MARCH 2022


30 JUNE 2021


30 JUN 2022


30 JUNE 2021


Non-GAAP net income:

















GAAP net income (loss)


$

50,962


$

54,871


$

(47,117)


$

105,833


$

(95,034)


Non-GAAP adjustments:

















Stock-based compensation expense



21,162



25,088



137,549



46,250



227,159


Net realized and unrealized gains on
strategic investments and marketable
securities (1)



(47,985)



(55,851)



(40,855)



(103,836)



(40,855)


Transaction costs related to strategic
investments and acquisitions



964



871



110



1,835



495


Loss on disposal and abandonment of
intangible assets



8



40



119



48



130


Loss (gain) on disposal and impairment of
property and equipment, net



83



106



(2)



189



43


Costs related to FTC litigation



291



4



147



295



380


Payroll taxes related to XSPP vesting and
CEO Award option exercises







2,217





3,669


Income tax effects



6,344



7,405



(24,826)



13,749



(47,606)


Non-GAAP net income


$

31,829


$

32,534


$

27,342


$

64,363


$

48,381



















Diluted income (loss) per common share

















GAAP


$

0.71


$

0.76


$

(0.72)


$

1.46


$

(1.47)


Non-GAAP


$

0.44


$

0.45


$

0.38


$

0.89


$

0.70



















Diluted weighted average shares
outstanding

















GAAP



72,283



72,349



65,166



72,316



64,604


Non-GAAP (2)



72,283



72,349



71,689



72,316



69,544


 

(1)

Includes unrealized gains of $28.6 million and realized gain of $12.3 million for the three and six months ended June 30, 2021.

(2)

Non-GAAP diluted income per common share factors in higher diluted weighted average shares outstanding in periods where there is both a GAAP net loss and non-GAAP net income.

 








AXON ENTERPRISE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)



30 JUN 2022


31 DEC 2021



(Unaudited)




ASSETS







Current Assets:







Cash and cash equivalents


$

212,815


$

356,332

Marketable securities



45,900



72,180

Short-term investments



118,514



14,510

Accounts and notes receivable, net



379,672



320,819

Contract assets, net



196,754



180,421

Inventory



154,297



108,688

Prepaid expenses and other current assets



61,839



56,540

Total current assets



1,169,791



1,109,490








Property and equipment, net



157,916



138,457

Deferred tax assets, net



100,548



127,193

Intangible assets, net



13,934



15,470

Goodwill



45,004



43,592

Long-term investments



24,925



31,232

Long-term notes receivable, net



8,992



11,256

Long-term contract assets, net



28,240



29,753

Strategic investments



281,691



83,520

Other long-term assets



100,982



98,247

Total assets


$

1,932,023


$

1,688,210








LIABILITIES AND STOCKHOLDERS' EQUITY







Current Liabilities:







Accounts payable



60,689



32,220

Accrued liabilities



100,980



103,707

Current portion of deferred revenue



253,185



265,591

Customer deposits



11,330



10,463

Other current liabilities



6,787



6,540

Total current liabilities



432,971



418,521








Deferred revenue, net of current portion



269,477



185,721

Liability for unrecognized tax benefits



7,692



3,797

Long-term deferred compensation



5,517



5,679

Deferred tax liability, net



1



811

Long-term lease liabilities



18,210



20,440

Other long-term liabilities



4,504



5,392

Total liabilities



738,372



640,361








Stockholders' Equity:







Preferred stock





Common stock



1



1

Additional paid-in capital



1,139,086



1,095,229

Treasury stock



(155,947)



(155,947)

Retained earnings



215,716



109,883

Accumulated other comprehensive income (loss)



(5,205)



(1,317)

Total stockholders' equity



1,193,651



1,047,849

Total liabilities and stockholders' equity


$

1,932,023


$

1,688,210

 


















AXON ENTERPRISE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)



THREE MONTHS ENDED


SIX MONTHS ENDED




30 JUN 2022


31 MARCH 2022


30 JUNE 2021


30 JUN 2022


30 JUNE 2021


Cash flows from operating activities:

















Net income (loss)


$

50,962


$

54,871


$

(47,117)


$

105,833


$

(95,034)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:

















Depreciation and amortization



6,210



5,755



4,291



11,965



8,582


Purchase accounting adjustments to goodwill



58







58




Loss on disposal and abandonment of intangible assets



8



40



119



48



130


Loss (gain) on disposal and impairment of property and equipment, net



83



106



(2)



189



43


Realized and unrealized gains on strategic investments and marketable securities, net



(47,985)



(55,851)



(40,855)



(103,836)



(40,855)


Stock-based compensation



21,162



25,088



137,549



46,250



227,159


Deferred income taxes



8,021



18,029



(6,291)



26,050



(6,889)


Unrecognized tax benefits



2,530



1,365



(147)



3,895



47


Bond amortization



142



159



1,606



301



3,110


Noncash lease expense



1,723



1,556



1,539



3,279



2,650


Provision for expected credit losses



(45)



228



397



183



62


Change in assets and liabilities:

















Accounts and notes receivable and contract assets



(87,742)



7,495



(35,286)



(80,247)



(3,988)


Inventory



(32,849)



(14,260)



(2,368)



(47,109)



(1,848)


Prepaid expenses and other assets



4,386



(7,074)



(6,368)



(2,688)



(13,320)


Accounts payable, accrued and other liabilities



34,149



(9,580)



7,681



24,569



(10,381)


Deferred revenue



58,563



16,037



19,428



74,600



25,647


Net cash provided by operating activities



19,376



43,964



34,176



63,340



95,115


Cash flows from investing activities:

















Purchases of investments



(108,240)





(82,463)



(108,240)



(238,288)


Proceeds from call / maturity of investments



2,273



7,200



162,560



9,473



294,814


Exercise of warrants from strategic investments



(6,555)







(6,555)




Proceeds from sale of strategic investments







14,546





14,546


Purchases of property and equipment



(12,749)



(17,098)



(13,510)



(29,847)



(24,031)


Purchases of intangible assets



(67)



(37)



(102)



(104)



(143)


Proceeds from disposal of property and equipment



4



87



38



91



48


Strategic investments



(61,000)



(500)



(500)



(61,500)



(20,500)


Business acquisition, net of cash acquired



(2,104)







(2,104)




Net cash provided (used) in investing activities



(188,438)



(10,348)



80,569



(198,786)



26,446


Cash flows from financing activities:

















Net proceeds from equity offering



(3)



(71)





(74)




Income and payroll tax payments for net-settled stock awards



(931)



(1,388)



(3,267)



(2,319)



(10,312)


Net cash used in financing activities



(934)



(1,459)



(3,267)



(2,393)



(10,312)


Effect of exchange rate changes on cash and cash equivalents



(3,753)



(157)



73



(3,910)



(319)


Net increase (decrease) in cash and cash equivalents and restricted cash



(173,749)



32,000



111,551



(141,749)



110,930


Cash and cash equivalents and restricted cash, beginning of period



388,438



356,438



154,930



356,438



155,551


Cash and cash equivalents and restricted cash, end of period


$

214,689


$

388,438


$

266,481


$

214,689


$

266,481


 

















AXON ENTERPRISE, INC.
SELECTED CASH FLOW INFORMATION
(Unaudited)
(in thousands)



THREE MONTHS ENDED


SIX MONTHS ENDED



30 JUN 2022


31 MARCH 2022


30 JUNE 2021


30 JUN 2022


30 JUNE 2021

Net cash provided by operating activities


$

19,376


$

43,964


$

34,176


$

63,340


$

95,115

Purchases of property and equipment



(12,749)



(17,098)



(13,510)



(29,847)



(24,031)

Purchases of intangible assets



(67)



(37)



(102)



(104)



(143)

Free cash flow, a non-GAAP measure


$

6,560


$

26,829


$

20,564


$

33,389


$

70,941

Net campus investment



3,543



5,217



2,873



8,760



3,781

Adjusted free cash flow, a non-GAAP measure


$

10,103


$

32,046


$

23,437


$

42,149


$

74,722

 








AXON ENTERPRISE, INC.
SUPPLEMENTAL TABLES
(in thousands)



30 JUN 2022


31 DEC 2021



(Unaudited)




Cash and cash equivalents


$

212,815


$

356,332

Short-term investments



118,514



14,510

Long-term investments



24,925



31,232

Total cash and cash equivalents and investments, net


$

356,254


$

402,074

 

CONTACT:

Investor Relations
Axon Enterprise, Inc.
IR@axon.com

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/axon-reports-record-revenue-up-31-to-286-million-raises-full-year-outlook-301602906.html

SOURCE Axon

FAQ

What were Axon's Q2 2022 revenue figures?

Axon reported revenue of $286 million for Q2 2022, marking a 31% increase year-over-year.

What is Axon's annual recurring revenue in 2022?

Axon's annual recurring revenue reached $368 million, reflecting a growth of 41%.

How much net income did Axon report for Q2 2022?

Axon reported a net income of $51 million, or $0.71 per diluted share for Q2 2022.

What future revenue projections does Axon have?

Axon has future contracted revenue surpassing $3 billion.

What changes were made to Axon's executive team?

Axon appointed Josh Isner as COO and Isaiah Fields as CLO to support its growth initiatives.

Axon Enterprise, Inc.

NASDAQ:AXON

AXON Rankings

AXON Latest News

AXON Stock Data

46.71B
72.86M
4.72%
81.01%
3.38%
Aerospace & Defense
Ordnance & Accessories, (no Vehicles/guided Missiles)
Link
United States of America
SCOTTSDALE