SCOTTSDALE, Ariz., Aug. 6, 2020 /PRNewswire/ --
Dear Shareholders,
When we began investing in body cameras in 2008, we faced
numerous skeptics. But, we knew that body cameras — and the
accountability and transparency they bring — were the future. And
we were confident in our institutional knowledge about policing,
due to our close connection to our customers through the success of
our TASER devices.
Body cameras started to gain traction after a wave of
protests began in Ferguson, Mo.,
in 2014, which was also the birth of the Black Lives Matter
movement. Axon was delivering the right products at the right time
and our investments in cloud software made body camera programs
feasible and affordable for all agencies.
In 2020, we are humbled to be developing solutions that
once again find themselves relevant to a national conversation
about policing. The pandemic has amplified the deep inequities in
our society, with disproportionate burdens of unemployment, illness
and death among Black and Brown people and historically
marginalized populations. We understand and see the pain and nuance
behind the demands to defund the police, which is really about
reforming and reshaping the justice system. We also know that
public safety is a fundamental right of all communities, and our
pipeline continues to strengthen as communities see the power of
our platform to drive positive change. We believe we will look back
on 2020 as a time that set in motion the next wave of policing
reform.
Technology is not a panacea but it can have an outsized
impact on creating a world where everyone feels safer in their
neighborhoods, and gets home safely at the end of the day. We have
the privilege to imagine how the world can and should be different
and we have the capability to create and drive that
change.
After the killing of George
Floyd in Minneapolis in
May, Axon employees began to brainstorm ways to leverage our
expertise to do even more in service of our mission to protect
human life. We expanded our existing vision to also center on
racial equity, diversity and inclusion in the justice system, and
created a new position within our sales team to put a greater focus
on incorporating community input into our product development
process. Axon engineers are developing software that addresses the
need for better data collection, accountability, investigation and
compliance for force events, and helps agencies to better document,
analyze and report on force incidents. We are eager to build upon
our existing leadership in driving down injury rates and providing
use-of-force accountability. TASER devices have the lowest
likelihood of death or serious injury compared with other
use-of-force options and provide the best combination of stopping
power while also keeping both officers and the public safe. TASER
devices also document the duration of an energy discharge, the
quality of the connection and the type of deployment, and when
armed, are able to trigger body-worn cameras to begin
recording.
This is also a year where we have walked beside our
customers in one of the most challenging environments they have
ever faced — whether through our personal protective equipment
charitable campaign for first responders, or through helping
agencies respond to and comply with demands for more transparency
and source technology amid greater public budget scrutiny, we
aspire to be a true partner. We are emboldened by the opportunity
to continue to re-imagine public safety and support our customers
and communities.
Key business highlights:
- Adriane Brown joined Axon's
board:
-
- After an extensive search, we welcomed Adriane Brown to our board of directors in May.
Adriane brings a wealth of experience and global business
leadership to Axon. She sits on the board of directors for eBay and
the Washington Research Foundation, and is the Board Chair at
Seattle's Pacific Science Center.
She has served on boards for Raytheon, Allergan and Harman. In
2018, Adriane was appointed as a venture partner at Flying Fish
Partners, a firm that invests capital and expertise in startups
focused on machine learning and artificial intelligence. Prior to
that, Adriane served as president and COO at Intellectual Ventures,
as president and CEO of Honeywell Transportation Systems, and rose
from shift supervisor to vice president and general manager of the
Environmental Products Division during her 19-year tenure at
Corning. Adriane's appointment expands the total number of
independent directors on Axon's board to eight.
- New international markets unlocked:
-
- International revenue was 24% of the total in Q2 2020, and grew
80% year over year. Three new countries topped $1 million in revenue for the first time in the
quarter: Indonesia, Panama, and Thailand.
- The Gujarat State Police became the first major police agency
in India to deploy TASER devices
when it purchased the X2. Axon began investing in the sales channel
in India in late 2018 and we are
committed to expanding our presence in the world's most populous
democracy.
- Chile's National Police Force,
Carabineros de Chile, is equipping
more than 600 officers with Axon body-worn cameras and Axon
Evidence, positioning Chile as one
of the most significant adopters of advanced policing technology in
the world, alongside the US, UK, and Australia. Chile has the largest number of Axon body-worn
cameras in Latin America.
- Baltimore Police Department
to deploy Axon Records:
- We are thrilled to welcome Baltimore as a major city Axon Records
customer. Baltimore's Axon Records
capability is included in their subscription to Officer Safety Plan
7+, our highest value bundle. We first announced that Baltimore adopted OSP 7+ in August 2019, and their decision to adopt the Axon
Records benefit of the plan showcases the plan's value to
customers.
- Axon's cloud-based records management solution, which we first
brought to market September 2019,
integrates police reports with body-worn video footage, promotes
transparency and accountability and saves officers time. It
includes the Axon Standards use-of-force reporting module, which
helps agencies mitigate risk and understand performance at the
officer and agency-wide levels. This product is relevant to the
national discussion about use-of-force tracking and reporting and
is an easy way for agencies to begin using Axon Records, even
before they are ready to fully replace their legacy records
management system.
- Axon Records falls within our "Productivity" suite of products.
This suite also includes Axon Performance, which allows supervisors
to ensure that cameras are recording when they're supposed to be
and access key body-worn camera metrics in near real time.
- Real-time situational awareness use grows:
- We are advancing communications beyond the radio, providing
more and better real-time situational awareness to central command,
and supporting our go-to-market strategy for our cloud-based 911
Dispatch product.
- These tools in our "Communications" suite have proven useful
for major city agencies in managing resources during civil unrest.
We've seen increased adoption and engagement with Axon Aware
location, alerts, and live-streaming. Without this technology,
staff would have had to keep relying heavily on officers' ongoing
verbal description of their location and the situation on the
ground.
- We've also seen significant interest in this platform from
international agencies exploring ways to bring supplemental
resources, such as mental health and social services, to support
unfolding incidents.
- Finally, in the quarter we launched the Axon Aware mobile app,
with real-time alerts, officer location, and live-streamed video
built in. This new feature is included in OSP 7+. Here is a 20
second video on how it works:
https://player.vimeo.com/video/443194883
- Axon Body 3 is in Europe, solid feedback from customers:
-
- We began delivering Axon Body 3 to European customers in
Q2 2020 and we expect to expand Axon Body 3 to Australia, New
Zealand and the rest of the Asia-Pacific region in the back half. Axon
Body 3 first began shipping September
2019, and represents our first camera that supports
GPS-enabled location services and LTE-communications
capability.
- Buying trends indicate that customers buying Axon Body 3 are
doing so because of the value-added features such as LTE and GPS,
which we believe indicates solid product-market fit with our latest
generation camera. We expect location-based services, enabled by
the body camera, to become standard across a number of major cities
over the next 18 to 24 months, seeding the market for greater use
of our real-time operations platform and communications suite of
tools.
- Axon Fleet 3 with ALPR trending toward successful
launch:
- We remain confident that our next-generation in-car video
system will be a disruptive game-changer. In recent weeks, we have
installed Axon Fleet 3 engineering validation test systems to begin
field testing and we expect Fleet 3 sales to start contributing to
growth next year.
- We intend to make it easier and more cost effective for police
departments to deploy a network of fixed and mobile automated
license plate reader (ALPR) sensors by integrating and bundling
Flock Safety's solution alongside our upcoming Axon Fleet 3 in-car
solution. Axon is re-inventing the traditional ALPR model by
leveraging AI to reduce cost, making it affordable for police
departments to deploy ALPR in every vehicle. And unlike traditional
systems, Axon is ethically designing its ALPR solution from the
ground up to improve data security, transparency and privacy
relative to historical legacy solutions.
- Successful follow-on offering completed:
-
- We want to thank our new and existing shareholders who
participated in our recent follow-on offering. In mid-June, Axon
raised just over $300 million at
$92 per share, which enabled us to
fortify our balance sheet, strengthen our relationships with
existing shareholders and provide an opportunity for new investors
to join us on the next leg of our growth journey. We finished Q2
2020 with more than $675 million in
cash and investments, and zero debt.
Summary of Q2 2020 results:
- Revenue of $141 million grew 26%
year over year, with strength being driven by our body camera and
cloud software solutions (Software and Sensors segment revenue grew
37%) and increased momentum outside of the US (international
revenue grew 80% year over year to a quarterly record of
$34 million)
- Gross margin of 62.4% was the highest it has been since Q3
2018, driven by improved yields on TASER 7 and our highest-ever mix
of high-margin cloud software revenue, which was 30% of the total
in the quarter. We expect gross margin in Q3 2020 to be
approximately 700 basis points lower on a sequential basis, as we
fulfill several large shipments of lower-margin body camera
hardware to large major city customers.
- Operating expenses of $102
million included $34 million
in stock-based compensation expense and $4
million in costs related to FTC litigation. (An update on
the FTC litigation is below, under "Update on Legal Matters.")
-
- SG&A included $27 million in
stock-based compensation expense, including nearly $11 million in "catch up" expense. R&D
included $6 million in stock-based
compensation expense, including $1
million in "catch up" expense. Excluding stock-based
compensation expense, operating expenses declined 1%
sequentially.
- The "catch up" expense is tied to Axon's CEO Performance Award
and eXponential Stock Performance Plan ("XSPP"), for which two
additional operational goals became probable of attainment during
Q2 2020 due to our strengthened outlook, bringing the total number
of operational goals that are statistically probable to
eleven.
- For more details about Axon's innovative stock-based
compensation plans, which were approved by shareholders and align
the interests of management and employees with shareholders, please
see our online FAQ at investor.axon.com.
- GAAP EPS was ($0.51); and
Non-GAAP EPS was ($0.01).
-
- GAAP EPS includes the "catch-up" stock-based compensation
expense referred to above.
- Both GAAP EPS of ($0.51) and
Non-GAAP EPS of ($0.01) include
$19 million, or $0.31 per share, of income tax expense.
- Our income or loss before taxes has diverged widely from our
taxable income, largely due to differences between GAAP accounting
and tax treatment for stock-based compensation expense, the most
significant of which is driven by the large stock-based
compensation expense associated with the CEO Performance Award.
When those options vest and are subsequently exercised in future
periods, IRS limitations will prevent us from deducting large
portions of today's stock-based compensation expense on those
future tax returns. This difference between GAAP and IRS treatment
of stock-based compensation expense is the primary factor driving
our large effective tax rate for year-to-date 2020.
- Quarterly Adjusted EBITDA grew 142% year over year. Adjusted
EBITDA of $28 million represented a
20% margin on revenue, and delivered a 57% incremental contribution
margin on revenue when compared with Q2 2019.
- Cash and cash equivalents and investments totaled $687 million at June 30,
2020, or $676 million after
adjusting for an investment payable of $20
million, which net of receivables was $10 million.
-
- Uses of cash in the second quarter included $35 million tied to building up hardware
inventory, which helped us respond to strong product demand while
preparing us to stagger factory work schedules due to COVID-19, and
$7 million tied to selling long-term
hardware subscriptions, which results in recognizing revenue when
we deliver hardware to our customers ahead of invoicing for the
full value of that hardware.
-
- As we indicated in May, our elevated inventory build over the
course of 2020 is a proactive approach to building safety stock in
an effort to minimize shipping disruptions. We are committed to
working through COVID-19 supply chain challenges as they arise to
support our customers and deliver mission critical equipment.
- Finished goods inventory totaled $45
million at second quarter end, including $9 million of Axon Body 3 cameras and associated
hardware due for customer shipments in the back half.
- Accounts payable of $40 million
included the above mentioned $20
million payable, which settled in early July.
- Axon has zero debt.
Financial commentary by segment:
TASER:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
70,490
|
|
|
$
|
75,895
|
|
|
$
|
60,572
|
|
|
(7.1)
|
%
|
|
16.4
|
%
|
Gross
margin
|
|
|
61.4
|
%
|
|
|
60.1
|
%
|
|
|
59.9
|
%
|
|
130
|
bp
|
|
150
|
bp
|
- TASER segment revenue of $70
million grew 16% year-over-year due to strength in TASER 7
units and international demand for our legacy, two-shot
weapon.
- Gross margin increased to 61.4% due to improvements to the
production process and our ability to drive better yields. Gross
margin improvement was offset by about $760,000, or about 100 basis points, of COVID-19
related manufacturing overhead and other precautionary measures to
keep our workers safe. These measures included staggered shifts, an
on-site nurse, hazard pay, extra cleaning and paying manufacturing
employees who did not work, either due to belonging to a high risk
group or to reduce the number of people in our production facility
to ensure adequate spacing and physical distancing.
Software & Sensors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
CHANGE
|
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
QoQ
|
|
YoY
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Axon Cloud net
sales
|
|
$
|
41,891
|
|
|
$
|
39,154
|
|
|
$
|
31,822
|
|
|
7.0
|
%
|
|
31.6
|
%
|
Axon Cloud gross
margin
|
|
|
77.9
|
%
|
|
|
75.3
|
%
|
|
|
73.0
|
%
|
|
260
|
bp
|
|
490
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensors and Other net
sales
|
|
$
|
28,878
|
|
|
$
|
32,113
|
|
|
$
|
19,968
|
|
|
(10.1)
|
%
|
|
44.6
|
%
|
Sensors and Other
gross margin
|
|
|
42.6
|
%
|
|
|
42.0
|
%
|
|
|
30.1
|
%
|
|
60
|
bp
|
|
1,250
|
bp
|
- Axon Cloud revenue grew 32% year over year, and for the first
time, represented 30% of total company revenue.
- Axon Cloud gross margin of 77.9% includes some low-to-no margin
professional services that support new installations for SaaS
customers. The software-only revenue in this segment, which
includes cloud storage and compute costs, has consistently carried
a gross margin above 80%. We expect a slightly higher mix of
lower margin professional services in Q3 2020.
- Sensors & Other revenue grew 45% in the quarter on strong
demand for Axon Body 3 cameras. Revenue declined sequentially,
which we anticipated following stronger-than-expected performance
in Q1 2020.
- Sensors & Other gross margin was 42.6%. 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. In Q3 2020, we expect gross margin on devices to
be about 15%, due to Axon Body 3 shipments to our largest
customers.
Forward-looking performance indicators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
31 DEC 2019
|
|
30 SEP 2019
|
|
30 JUN 2019
|
|
|
($ in thousands)
|
|
Annual recurring
revenue (1)
|
|
$
|
183,498
|
|
|
$
|
173,919
|
|
|
$
|
161,277
|
|
|
$
|
141,540
|
|
|
$
|
129,452
|
|
Net revenue retention
(2)
|
|
|
119
|
%
|
|
|
119
|
%
|
|
|
121
|
%
|
|
|
*
|
|
|
|
*
|
|
Total company future
contracted revenue
|
|
$
|
1,340,000
|
|
|
$
|
1,274,000
|
|
|
$
|
1,230,000
|
|
|
$
|
1,130,000
|
|
|
$
|
1,050,000
|
|
Percentage of TASER
devices sold on a recurring payment plan
|
|
|
46
|
%
|
|
|
43
|
%
|
|
|
58
|
%
|
|
|
55
|
%
|
|
|
60
|
%
|
|
|
|
|
|
(1)
|
Monthly recurring
license, integration, warranty, and storage revenue
annualized.
|
(2)
|
Refer to "statistical
definitions" below.
|
*
|
Not
disclosed.
|
- Annual Recurring Revenue grew 42% year over year to
$183 million.
- Net revenue retention was 119% in the quarter. We drive
adoption of our cloud software solutions through integrated
bundling. We are seeing major cities upgrading their subscriptions
at individual net dollar retention rates of 150% to 300% to take
advantage of our growing suite of productivity and digital evidence
management tools. Because our agency customers often sign up for
five to ten-year subscriptions, we experience low annual churn.
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 $1.34 billion. This amount is limited to revenue
from arrangements that meet the definition of a contract under
Topic 606 as of June 30, 2020. We
expect to recognize between 20% to 25% of this balance over the
next 12 months and generally expect the remainder to be recognized
over the following five to seven years, subject to risks related to
delayed deployments, budget appropriation or other contract
cancellation clauses.
- The percentage of TASER devices sold on a subscription rose to
46% in the quarter, with a domestic attach rate to subscriptions of
59%.
Current market trends and outlook:
The following forward-looking statements reflect Axon's
expectations as of August 6, 2020,
and are subject to substantial uncertainty due to the COVID-19
pandemic.
What we're seeing in the market:
We executed well through a challenging second quarter —
while demand for our products remained robust, US domestic
customers often lacked bandwidth to make purchasing decisions as
they focused on personnel outages due to COVID-19, employee safety
and caution about uncertain budgets. Even with these challenges, Q2
2020 revenue was generally in line with our pre-pandemic
expectation.
Total company quarterly bookings in Q2 2020 on contracts
of five years or fewer were flat year-over year, with domestic
bookings down 6% and international bookings up 36%. Domestic body
camera bookings grew 13% in the quarter, with domestic
COVID-19-related purchasing delays largely affecting only the TASER
segment.
Bookings in Q2 were strongest, on a year-over-year
percentage growth basis, in international TASER and domestic Fleet,
demonstrating our ability to diversify our exposure to new
geographies and product segments. We are seeing the benefits of
investing in geographic and customer diversity this year,
especially as we realize increasing orders from corrections
departments and international markets, including UK, Australia, Canada and new markets including Indonesia, Brazil, Panama, Thailand, India and Chile, to name a few.
In the first weeks of Q3 2020, TASER and body camera
bookings are trending ahead of April. We have a loaded
pipeline for our back half and we are expecting a strong Q3 2020
and even stronger Q4 2020 — tracking toward the range we gave at
the start of the year.
We also have a strong pipeline of Officer Safety Plan 7+
opportunities that we expect to close in the next six months. As a
reminder, OSP 7+ is our highest value bundle at $229 per officer per month for five years, and
includes TASER 7, Axon Body 3 camera and a host of cloud software
productivity and digital evidence management services, including
Axon Records.
Update on formal guidance:
For the third quarter 2020, we are managing toward revenue
growth of approximately 15% year over year, supporting an Adjusted
EBITDA margin of approximately 12%. (Q3 2020 EBITDA margin will be
affected by expected shipments of lower-margin body cameras to our
largest customers.)
We expect our diluted share count in Q3 2020 to be approximately
64.5 million shares.
In light of macro uncertainties, we are maintaining the decision
we made last quarter to refrain from providing formal full year
guidance. The impact of COVID-19 remains fluid, and we are
monitoring state and local mandates as we approach the fall.
Shut-down activity could bring renewed caution from police
departments on budgeting. Thus, while our bookings are trending in
a positive direction, COVID-19 risk remains. We are not seeing
changes in buying activity due to police defunding concerns. We
have seen some anecdotal acceleration of body camera buying
decisions due to agencies wishing to provide transparency to their
communities.
Internal estimates & visibility:
At this time, our best estimate for our 2020 performance remains
in line with our previously issued guidance, but there is enough
uncertainty in how the current crisis will affect our customers
that we don't feel that our internal estimates should be considered
formal guidance.
Axon remains confident in its long-term, multi-year outlook, and
we firmly believe we will emerge from 2020 even stronger. Our
confidence is supported by our strong first half 2020 performance
and the state of our current pipeline, which remains robust and is
more geographically diverse than ever.
While our contracts are subject to appropriations risk, at
this point in time, the revenue realized in 1H 2020 plus the
recurring revenue under contract for the remaining two quarters
gives Axon visibility into approximately 65% of the midpoint of the
previously issued full-year revenue guidance range of $615 million to $625
million.
Axon's mission to protect life and drive transparency and
accountability in policing has motivated us for more than a decade.
Whether these issues are in the foreground of national attention as
they are today, or in the background, they've always been
important to society, and to us. We're privileged to be working on
solutions to some of society's most entrenched
challenges.
Signed,
Rick
Smith, CEO
Luke
Larson, President
Jawad Ahsan, CFO
Quarterly conference call and webcast
We will host our Q2 2020 earnings conference call on
Thursday, August 6 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/92337281166.
Statistical Definitions
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.
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 and 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 and pre-tax certain other items (described
below).
- Non-GAAP Net Income (Most comparable GAAP Measure: Net income)
- Net income excluding the costs of non-cash stock-based
compensation and excluding pre-tax certain other items, including,
but not limited to, net gain/loss/write-down/disposal/abandonment
of property, equipment and intangible assets; loss on impairment;
and costs related to business acquisitions. 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, intangible assets and
cash flows related to business acquisitions and other equity
investments.
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 law enforcement, 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 disclosure at investor.axon.com.
We work hard for those who put themselves in harm's way
for all of us. More than 236,000 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, Ariz.
and global software engineering hub in Seattle, Wash., as well as additional offices
in Australia, Canada, Finland, Vietnam, the UK and the Netherlands.
Allergan is a trademark of Allergan, Inc.; eBay is a
trademark of eBay, Inc.; Facebook is a trademark of Facebook, Inc.;
Harman is a trademark of Harman International Industries, Inc.;
Honeywell is a trademark of Honeywell International, Inc.;
Intellectual Ventures is a service mark of Penky LLC, LTE is a
trademark of the European Telecommunications Standards Institute;
Raytheon is a trademark of Raytheon Company; Twitter is a trademark
of Twitter, Inc. and Zoom is a trademark of Zoom Video
Communications, Inc. Axon, Axon Aware, Axon Evidence, Axon Records,
Axon Standards, Axon Fleet, TASER, TASER 7, X2, Protect Life and
the Delta Logo are trademarks of Axon Enterprise, Inc., some of
which are registered in the US and other countries. For more
information, visit
www.axon.com/legal. ©
2020 Axon Enterprise, Inc. All rights
reserved.
Follow Axon here:
- Axon on Twitter: https://twitter.com/axon_us
- Axon on Facebook:
https://www.facebook.com/Axon.ProtectLife/
Forward-looking statements
These forward-looking statements include, without limitation,
statements regarding: the impact of the COVID-19 pandemic; proposed
products and services and related development efforts and
activities; expectations about the market for our current and
future products and services; the impact of pending litigation;
our outlook for 2020 with respect to revenue, legal expenses
relating to the FTC litigation, stock compensation expense, and
income tax rate; trends relating to subscription plan
programs and revenues; our anticipation that contracts with
governmental customers will be fulfilled; expected trends,
including the benefits of, research and development investments;
the sufficiency of our liquidity and financial resources; that we
may repurchase our common stock; expectations about customer
behavior; the impact on our investment portfolio of changes in
interest rates; trends in the percentage of our revenues
denominated in foreign currencies; our potential use of foreign
currency forward and option contracts; statements concerning
projections, predictions, expectations, estimates or forecasts as
to our business, financial and operational results and future
economic performance; 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, 2019.
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 our reliance on 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 product by
the United States Bureau of Alcohol, Tobacco, Firearms and
Explosives and to evolving regulations surrounding privacy and data
protection; 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. 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. Our Annual Report on
Form 10-K and our Quarterly Report on Form 10-Q list 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 Annual Report on Form 10-K and in the Quarterly
Report 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.
Update on Legal Matters:
Axon v. FTC
Axon continues to both vigorously prosecute its Federal court
case against the FTC and defend the FTC's separate administrative
action against the company. The FTC's administrative action had
been stayed until July 7, 2020, due
to the COVID-19 pandemic, but discovery has resumed and the
administrative hearing is scheduled to begin on October 13, 2020. Separately, Axon's case against
the FTC was dismissed on April 8,
2020, without prejudice, for lack of jurisdiction, holding
that Axon must first bring its constitutional claims through the
FTC's administrative process. Axon appealed that ruling to the
Ninth Circuit Court of Appeals (No. 20-15662), which granted
expedited consideration and held oral argument on July 17, 2020. Copies of Axon's Federal Court
filings, including its most recent appellate brief, can be found on
Axon's FTC Investor Briefing page at
https://www.axon.com/ftc. In 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 of Vievu in 2018 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. As of Q2 2020, Vievu software
licenses represented approximately 4% of Axon's annual recurring
revenue of $183 million.
For investor relations information please contact Andrea James 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 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
30 JUN 2020
|
|
30 JUN 2019
|
Net sales from
products
|
|
$
|
98,755
|
|
$
|
107,288
|
|
$
|
80,391
|
|
$
|
206,043
|
|
$
|
168,480
|
Net sales from
services
|
|
|
42,504
|
|
|
39,874
|
|
|
31,971
|
|
|
82,378
|
|
|
59,692
|
Net sales
|
|
|
141,259
|
|
|
147,162
|
|
|
112,362
|
|
|
288,421
|
|
|
228,172
|
Cost of product
sales
|
|
|
43,825
|
|
|
48,884
|
|
|
38,220
|
|
|
92,709
|
|
|
77,820
|
Cost of service
sales
|
|
|
9,257
|
|
|
9,670
|
|
|
8,582
|
|
|
18,927
|
|
|
15,875
|
Cost of
sales
|
|
|
53,082
|
|
|
58,554
|
|
|
46,802
|
|
|
111,636
|
|
|
93,695
|
Gross
margin
|
|
|
88,177
|
|
|
88,608
|
|
|
65,560
|
|
|
176,785
|
|
|
134,477
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and
administrative
|
|
|
72,293
|
|
|
63,027
|
|
|
43,362
|
|
|
135,320
|
|
|
86,254
|
Research and
development
|
|
|
29,560
|
|
|
26,381
|
|
|
23,493
|
|
|
55,941
|
|
|
46,847
|
Total operating
expenses
|
|
|
101,853
|
|
|
89,408
|
|
|
66,855
|
|
|
191,261
|
|
|
133,101
|
Income (loss) from
operations
|
|
|
(13,676)
|
|
|
(800)
|
|
|
(1,295)
|
|
|
(14,476)
|
|
|
1,376
|
Interest and other
income, net
|
|
|
1,613
|
|
|
941
|
|
|
1,845
|
|
|
2,554
|
|
|
4,158
|
Income (loss) before
provision for income taxes
|
|
|
(12,063)
|
|
|
141
|
|
|
550
|
|
|
(11,922)
|
|
|
5,534
|
Provision for
(benefit from) income taxes
|
|
|
18,696
|
|
|
(3,933)
|
|
|
(188)
|
|
|
14,763
|
|
|
(1,623)
|
Net income
(loss)
|
|
$
|
(30,759)
|
|
$
|
4,074
|
|
$
|
738
|
|
$
|
(26,685)
|
|
$
|
7,157
|
Net income (loss) per
common and common equivalent shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.51)
|
|
$
|
0.07
|
|
$
|
0.01
|
|
$
|
(0.44)
|
|
$
|
0.12
|
Diluted
|
|
$
|
(0.51)
|
|
$
|
0.07
|
|
$
|
0.01
|
|
$
|
(0.44)
|
|
$
|
0.12
|
Weighted average
number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
60,346
|
|
|
59,609
|
|
|
59,187
|
|
|
59,977
|
|
|
59,051
|
Diluted
|
|
|
60,346
|
|
|
60,394
|
|
|
60,000
|
|
|
59,977
|
|
|
59,876
|
AXON
ENTERPRISE, INC.
SEGMENT REPORTING (Unaudited)
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
THREE MONTHS ENDED
|
|
|
|
30 JUN 2020
|
|
|
31 MAR 2020
|
|
|
30 JUN 2019
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from
products (1)
|
|
$
|
69,877
|
|
|
$
|
28,878
|
|
|
$
|
98,755
|
|
|
$
|
75,175
|
|
|
$
|
32,113
|
|
|
$
|
107,288
|
|
|
$
|
60,423
|
|
|
$
|
19,968
|
|
|
$
|
80,391
|
|
Net sales from
services (2)
|
|
|
613
|
|
|
|
41,891
|
|
|
|
42,504
|
|
|
|
720
|
|
|
|
39,154
|
|
|
|
39,874
|
|
|
|
149
|
|
|
|
31,822
|
|
|
|
31,971
|
|
Net sales
|
|
|
70,490
|
|
|
|
70,769
|
|
|
|
141,259
|
|
|
|
75,895
|
|
|
|
71,267
|
|
|
|
147,162
|
|
|
|
60,572
|
|
|
|
51,790
|
|
|
|
112,362
|
|
Cost of product
sales
|
|
|
27,242
|
|
|
|
16,583
|
|
|
|
43,825
|
|
|
|
30,248
|
|
|
|
18,636
|
|
|
|
48,884
|
|
|
|
24,262
|
|
|
|
13,958
|
|
|
|
38,220
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
9,257
|
|
|
|
9,257
|
|
|
|
—
|
|
|
|
9,670
|
|
|
|
9,670
|
|
|
|
—
|
|
|
|
8,582
|
|
|
|
8,582
|
|
Cost of
sales
|
|
|
27,242
|
|
|
|
25,840
|
|
|
|
53,082
|
|
|
|
30,248
|
|
|
|
28,306
|
|
|
|
58,554
|
|
|
|
24,262
|
|
|
|
22,540
|
|
|
|
46,802
|
|
Gross
margin
|
|
|
43,248
|
|
|
|
44,929
|
|
|
|
88,177
|
|
|
|
45,647
|
|
|
|
42,961
|
|
|
|
88,608
|
|
|
|
36,310
|
|
|
|
29,250
|
|
|
|
65,560
|
|
Gross margin
%
|
|
|
61.4
|
%
|
|
|
63.5
|
%
|
|
|
62.4
|
%
|
|
|
60.1
|
%
|
|
|
60.3
|
%
|
|
|
60.2
|
%
|
|
|
59.9
|
%
|
|
|
56.5
|
%
|
|
|
58.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
3,762
|
|
|
|
25,798
|
|
|
|
29,560
|
|
|
|
3,032
|
|
|
|
23,349
|
|
|
|
26,381
|
|
|
|
3,087
|
|
|
|
20,406
|
|
|
|
23,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
|
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2020
|
|
|
30 JUN 2019
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
|
TASER
|
|
|
Sensors
|
|
|
Total
|
|
Net sales from
products (1)
|
|
$
|
145,052
|
|
|
$
|
60,991
|
|
|
$
|
206,043
|
|
|
$
|
125,724
|
|
|
$
|
42,756
|
|
|
$
|
168,480
|
|
Net sales from
services (2)
|
|
|
1,333
|
|
|
|
81,045
|
|
|
|
82,378
|
|
|
|
239
|
|
|
|
59,453
|
|
|
|
59,692
|
|
Net sales
|
|
|
146,385
|
|
|
|
142,036
|
|
|
|
288,421
|
|
|
|
125,963
|
|
|
|
102,209
|
|
|
|
228,172
|
|
Cost of product
sales
|
|
|
57,490
|
|
|
|
35,219
|
|
|
|
92,709
|
|
|
|
47,540
|
|
|
|
30,280
|
|
|
|
77,820
|
|
Cost of service
sales
|
|
|
—
|
|
|
|
18,927
|
|
|
|
18,927
|
|
|
|
—
|
|
|
|
15,875
|
|
|
|
15,875
|
|
Cost of
sales
|
|
|
57,490
|
|
|
|
54,146
|
|
|
|
111,636
|
|
|
|
47,540
|
|
|
|
46,155
|
|
|
|
93,695
|
|
Gross
margin
|
|
|
88,895
|
|
|
|
87,890
|
|
|
|
176,785
|
|
|
|
78,423
|
|
|
|
56,054
|
|
|
|
134,477
|
|
Gross margin
%
|
|
|
60.7
|
%
|
|
|
61.9
|
%
|
|
|
61.3
|
%
|
|
|
62.3
|
%
|
|
|
54.8
|
%
|
|
|
58.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
6,794
|
|
|
|
49,147
|
|
|
|
55,941
|
|
|
|
6,799
|
|
|
|
40,048
|
|
|
|
46,847
|
|
|
|
|
|
|
|
|
(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
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
|
TASER 7
|
|
9,014
|
|
8,135
|
|
879
|
|
10.8
|
%
|
|
20,444
|
|
16,970
|
|
3,474
|
|
20.5
|
%
|
TASER X26P
|
|
7,658
|
|
9,493
|
|
(1,835)
|
|
(19.3)
|
|
|
18,661
|
|
24,478
|
|
(5,817)
|
|
(23.8)
|
|
TASER X2
|
|
13,100
|
|
9,759
|
|
3,341
|
|
34.2
|
|
|
23,578
|
|
19,620
|
|
3,958
|
|
20.2
|
|
TASER
Pulse
|
|
5,429
|
|
3,631
|
|
1,798
|
|
49.5
|
|
|
8,690
|
|
4,884
|
|
3,806
|
|
77.9
|
|
Cartridges
|
|
715,268
|
|
606,220
|
|
109,048
|
|
18.0
|
|
|
1,588,632
|
|
1,222,737
|
|
365,895
|
|
29.9
|
|
Axon Body
|
|
35,066
|
|
20,346
|
|
14,720
|
|
72.3
|
|
|
74,930
|
|
46,194
|
|
28,736
|
|
62.2
|
|
Axon Flex
|
|
1,964
|
|
3,508
|
|
(1,544)
|
|
(44.0)
|
|
|
5,038
|
|
7,099
|
|
(2,061)
|
|
(29.0)
|
|
Axon Fleet
|
|
2,327
|
|
2,441
|
|
(114)
|
|
(4.7)
|
|
|
5,003
|
|
4,176
|
|
827
|
|
19.8
|
|
Axon Dock
|
|
4,634
|
|
3,408
|
|
1,226
|
|
36.0
|
|
|
9,931
|
|
8,402
|
|
1,529
|
|
18.2
|
|
TASER Cam
|
|
794
|
|
1,716
|
|
(922)
|
|
(53.7)
|
|
|
2,308
|
|
3,457
|
|
(1,149)
|
|
(33.2)
|
|
AXON
ENTERPRISE, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (Unaudited)
Dollars in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
30 JUN 2020
|
|
30 JUN 2019
|
|
EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(30,759)
|
|
$
|
4,074
|
|
$
|
738
|
|
$
|
(26,685)
|
|
$
|
7,157
|
|
Depreciation and
amortization
|
|
|
2,930
|
|
|
2,881
|
|
|
2,687
|
|
|
5,811
|
|
|
5,487
|
|
Interest
expense
|
|
|
5
|
|
|
7
|
|
|
17
|
|
|
12
|
|
|
23
|
|
Investment interest
income
|
|
|
(1,499)
|
|
|
(693)
|
|
|
(1,630)
|
|
|
(2,192)
|
|
|
(3,633)
|
|
Provision for (benefit
from) income taxes
|
|
|
18,696
|
|
|
(3,933)
|
|
|
(188)
|
|
|
14,763
|
|
|
(1,623)
|
|
EBITDA
|
|
$
|
(10,627)
|
|
$
|
2,336
|
|
$
|
1,624
|
|
$
|
(8,291)
|
|
$
|
7,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
$
|
33,835
|
|
$
|
20,195
|
|
$
|
8,627
|
|
$
|
54,030
|
|
$
|
16,532
|
|
Transaction costs
related to investment in unconsolidated affiliate
|
|
|
90
|
|
|
833
|
|
|
—
|
|
|
923
|
|
|
—
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
100
|
|
|
13
|
|
|
—
|
|
|
113
|
|
|
18
|
|
Loss on disposal and
impairment of property and equipment, net
|
|
|
788
|
|
|
517
|
|
|
1,321
|
|
|
1,305
|
|
|
1,563
|
|
Costs related to FTC
litigation
|
|
|
3,834
|
|
|
6,135
|
|
|
—
|
|
|
9,969
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
28,020
|
|
$
|
30,029
|
|
$
|
11,572
|
|
$
|
58,049
|
|
$
|
25,524
|
|
Net income (loss) as a percentage of net
sales
|
|
|
(21.8)
|
%
|
|
2.8
|
%
|
|
0.7
|
%
|
|
(9.3)
|
%
|
|
8.9
|
%
|
Adjusted EBITDA as a percentage of net
sales
|
|
|
19.8
|
%
|
|
20.4
|
%
|
|
10.3
|
%
|
|
20.1
|
%
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and
service sales
|
|
$
|
836
|
|
$
|
590
|
|
$
|
237
|
|
$
|
1,426
|
|
$
|
463
|
|
Sales, general and
administrative
|
|
|
26,766
|
|
|
14,970
|
|
|
4,941
|
|
|
41,736
|
|
|
9,622
|
|
Research and
development
|
|
|
6,233
|
|
|
4,635
|
|
|
3,449
|
|
|
10,868
|
|
|
6,447
|
|
Total
|
|
$
|
33,835
|
|
$
|
20,195
|
|
$
|
8,627
|
|
$
|
54,030
|
|
$
|
16,532
|
|
AXON
ENTERPRISE, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES - continued (Unaudited)
Dollars in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
30 JUN 2020
|
|
30 JUN 2019
|
|
Non-GAAP net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss)
|
|
$
|
(30,759)
|
|
$
|
4,074
|
|
$
|
738
|
|
$
|
(26,685)
|
|
$
|
7,157
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
33,835
|
|
|
20,195
|
|
|
8,627
|
|
|
54,030
|
|
|
16,532
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
100
|
|
|
13
|
|
|
—
|
|
|
113
|
|
|
18
|
|
Loss on disposal and
impairment of property and equipment, net
|
|
|
788
|
|
|
517
|
|
|
1,321
|
|
|
1,305
|
|
|
1,563
|
|
Transaction costs
related to investment in unconsolidated affiliate
|
|
|
90
|
|
|
833
|
|
|
—
|
|
|
923
|
|
|
—
|
|
Costs related to FTC
litigation
|
|
|
3,834
|
|
|
6,135
|
|
|
—
|
|
|
9,969
|
|
|
—
|
|
Income tax
effects
|
|
|
(8,530)
|
|
|
(7,837)
|
|
|
(2,517)
|
|
|
(16,367)
|
|
|
(4,583)
|
|
Non-GAAP net
income
|
|
$
|
(642)
|
|
$
|
23,930
|
|
$
|
8,169
|
|
$
|
23,288
|
|
$
|
20,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
30 JUN 2020
|
|
30 JUN 2019
|
|
Non-GAAP diluted earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted earnings
per share
|
|
$
|
(0.51)
|
|
$
|
0.07
|
|
$
|
0.01
|
|
$
|
(0.44)
|
|
$
|
0.12
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
0.56
|
|
|
0.33
|
|
|
0.14
|
|
|
0.89
|
|
|
0.28
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
0.00
|
|
|
0.00
|
|
|
-
|
|
|
0.00
|
|
|
0.00
|
|
Loss on disposal and
impairment of property and equipment, net
|
|
|
0.01
|
|
|
0.01
|
|
|
0.02
|
|
|
0.02
|
|
|
0.03
|
|
Transaction costs
related to investment in unconsolidated affiliate
|
|
|
0.00
|
|
|
0.01
|
|
|
-
|
|
|
0.02
|
|
|
-
|
|
Costs related to FTC
litigation
|
|
|
0.06
|
|
|
0.10
|
|
|
-
|
|
|
0.16
|
|
|
-
|
|
Income tax
effects
|
|
|
(0.14)
|
|
|
(0.13)
|
|
|
(0.04)
|
|
|
(0.27)
|
|
|
(0.08)
|
|
Non-GAAP diluted
earnings per share (1)
|
|
$
|
(0.01)
|
|
$
|
0.40
|
|
$
|
0.14
|
|
$
|
0.38
|
|
$
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of diluted common and common equivalent shares outstanding
(in thousands)
|
|
|
60,346
|
|
|
60,394
|
|
|
60,000
|
|
|
60,671
|
|
|
59,876
|
|
|
|
|
|
|
|
|
(1)
|
The per share
calculations for GAAP net income, Non-GAAP adjustments and Non-GAAP
diluted earnings per share are each computed independently. Per
share amounts may not sum due to rounding.
|
AXON
ENTERPRISE, INC. CONSOLIDATED BALANCE
SHEETS (in thousands)
|
|
|
|
|
|
|
|
|
|
30 JUN 2020
|
|
31 DEC 2019
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
319,253
|
|
$
|
172,250
|
Short-term
investments
|
|
|
237,980
|
|
|
178,534
|
Accounts and notes
receivable, net
|
|
|
154,253
|
|
|
146,878
|
Contract assets,
net
|
|
|
50,799
|
|
|
38,102
|
Inventory,
net
|
|
|
81,010
|
|
|
38,845
|
Prepaid expenses and
other current assets
|
|
|
42,429
|
|
|
34,866
|
Total current
assets
|
|
|
885,724
|
|
|
609,475
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
45,386
|
|
|
43,770
|
Deferred tax assets,
net
|
|
|
34,142
|
|
|
27,688
|
Intangible assets,
net
|
|
|
11,146
|
|
|
12,771
|
Goodwill
|
|
|
24,905
|
|
|
25,013
|
Long-term
investments
|
|
|
129,580
|
|
|
45,499
|
Long-term notes
receivable, net of current portion
|
|
|
26,115
|
|
|
31,598
|
Long-term contract
assets, net
|
|
|
12,108
|
|
|
9,644
|
Other
assets
|
|
|
63,806
|
|
|
40,181
|
Total assets
|
|
$
|
1,232,912
|
|
$
|
845,639
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
40,105
|
|
|
25,874
|
Accrued
liabilities
|
|
|
64,467
|
|
|
45,001
|
Current portion of
deferred revenue
|
|
|
129,518
|
|
|
117,864
|
Customer
deposits
|
|
|
3,858
|
|
|
2,974
|
Other current
liabilities
|
|
|
4,882
|
|
|
3,853
|
Total current
liabilities
|
|
|
242,830
|
|
|
195,566
|
|
|
|
|
|
|
|
Deferred revenue, net
of current portion
|
|
|
83,150
|
|
|
87,936
|
Liability for
unrecognized tax benefits
|
|
|
4,445
|
|
|
3,832
|
Long-term deferred
compensation
|
|
|
3,990
|
|
|
3,936
|
Deferred tax
liability
|
|
|
447
|
|
|
354
|
Other long-term
liabilities
|
|
|
28,237
|
|
|
10,520
|
Total liabilities
|
|
|
363,099
|
|
|
302,144
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
1
|
|
|
1
|
Additional paid-in
capital
|
|
|
883,609
|
|
|
528,272
|
Treasury
stock
|
|
|
(155,947)
|
|
|
(155,947)
|
Retained
earnings
|
|
|
144,940
|
|
|
172,265
|
Accumulated other
comprehensive loss
|
|
|
(2,790)
|
|
|
(1,096)
|
Total stockholders' equity
|
|
|
869,813
|
|
|
543,495
|
Total liabilities and stockholders'
equity
|
|
$
|
1,232,912
|
|
$
|
845,639
|
AXON
ENTERPRISE, INC. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
30 JUN 2020
|
|
30 JUN 2019
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(30,759)
|
|
$
|
4,074
|
|
$
|
738
|
|
$
|
(26,685)
|
|
$
|
7,157
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
2,930
|
|
|
2,881
|
|
|
2,687
|
|
|
5,811
|
|
|
5,487
|
|
Loss on disposal and
abandonment of intangible assets
|
|
|
100
|
|
|
13
|
|
|
—
|
|
|
113
|
|
|
18
|
|
Loss on disposal and
impairment of property and equipment, net
|
|
|
788
|
|
|
517
|
|
|
1,321
|
|
|
1,305
|
|
|
1,563
|
|
Stock-based
compensation
|
|
|
33,835
|
|
|
20,195
|
|
|
8,627
|
|
|
54,030
|
|
|
16,532
|
|
Deferred income
taxes
|
|
|
(4,604)
|
|
|
(1,548)
|
|
|
(1,888)
|
|
|
(6,152)
|
|
|
(1,311)
|
|
Unrecognized tax
benefits
|
|
|
271
|
|
|
341
|
|
|
306
|
|
|
612
|
|
|
613
|
|
Other noncash,
net
|
|
|
1,440
|
|
|
1,156
|
|
|
926
|
|
|
2,596
|
|
|
1,822
|
|
Provision for expected
credit losses
|
|
|
(244)
|
|
|
902
|
|
|
—
|
|
|
658
|
|
|
—
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable and contract assets
|
|
|
325
|
|
|
(9,700)
|
|
|
10,988
|
|
|
(9,375)
|
|
|
(11,006)
|
|
Inventory
|
|
|
(34,641)
|
|
|
(8,630)
|
|
|
(3,579)
|
|
|
(43,271)
|
|
|
(7,515)
|
|
Prepaid expenses and
other assets
|
|
|
(10,828)
|
|
|
2,277
|
|
|
(2,609)
|
|
|
(8,551)
|
|
|
(5,761)
|
|
Accounts payable,
accrued liabilities and other liabilities
|
|
|
20,270
|
|
|
(3,562)
|
|
|
(9,468)
|
|
|
16,708
|
|
|
(16,752)
|
|
Deferred
revenue
|
|
|
725
|
|
|
4,499
|
|
|
3,345
|
|
|
5,224
|
|
|
6,577
|
|
Net cash provided by
(used in) operating activities
|
|
|
(20,392)
|
|
|
13,415
|
|
|
11,394
|
|
|
(6,977)
|
|
|
(2,576)
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(193,085)
|
|
|
(99,512)
|
|
|
(36,670)
|
|
|
(292,597)
|
|
|
(141,992)
|
|
Proceeds from call /
maturity of investments
|
|
|
74,355
|
|
|
84,315
|
|
|
25,319
|
|
|
158,670
|
|
|
25,319
|
|
Purchases of property
and equipment
|
|
|
(5,342)
|
|
|
(2,209)
|
|
|
(2,590)
|
|
|
(7,551)
|
|
|
(7,861)
|
|
Purchases of intangible
assets
|
|
|
(66)
|
|
|
(45)
|
|
|
(182)
|
|
|
(111)
|
|
|
(344)
|
|
Proceeds of disposal
from property and equipment
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
|
—
|
|
Investment in
unconsolidated affiliate
|
|
|
—
|
|
|
(4,700)
|
|
|
—
|
|
|
(4,700)
|
|
|
—
|
|
Net cash used in
investing activities
|
|
|
(124,138)
|
|
|
(22,073)
|
|
|
(14,123)
|
|
|
(146,211)
|
|
|
(124,878)
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
equity offering
|
|
|
306,779
|
|
|
—
|
|
|
—
|
|
|
306,779
|
|
|
—
|
|
Proceeds from options
exercised
|
|
|
267
|
|
|
28
|
|
|
4
|
|
|
295
|
|
|
104
|
|
Income and payroll tax
payments for net-settled stock awards
|
|
|
(577)
|
|
|
(5,190)
|
|
|
(873)
|
|
|
(5,767)
|
|
|
(2,132)
|
|
Net cash provided by
(used in) financing activities
|
|
|
306,469
|
|
|
(5,162)
|
|
|
(869)
|
|
|
301,307
|
|
|
(2,028)
|
|
Effect of exchange rate changes on cash and cash
equivalents
|
|
|
775
|
|
|
(1,890)
|
|
|
(319)
|
|
|
(1,115)
|
|
|
(252)
|
|
Net increase
(decrease) in cash and cash equivalents and restricted
cash
|
|
|
162,714
|
|
|
(15,710)
|
|
|
(3,917)
|
|
|
147,004
|
|
|
(129,734)
|
|
Cash and cash
equivalents, beginning of period
|
|
|
156,645
|
|
|
172,355
|
|
|
225,210
|
|
|
172,355
|
|
|
351,027
|
|
Cash and cash
equivalents, end of period
|
|
$
|
319,359
|
|
$
|
156,645
|
|
$
|
221,293
|
|
$
|
319,359
|
|
$
|
221,293
|
|
AXON
ENTERPRISE, INC. SELECTED CASH FLOW
INFORMATION (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
30 JUN 2020
|
|
31 MAR 2020
|
|
30 JUN 2019
|
|
30 JUN 2020
|
|
30 JUN 2019
|
Net cash provided by
(used in) operating activities
|
|
$
|
(20,392)
|
|
$
|
13,415
|
|
$
|
11,394
|
|
$
|
(6,977)
|
|
$
|
(2,576)
|
Purchases of property
and equipment
|
|
|
(5,342)
|
|
|
(2,209)
|
|
|
(2,590)
|
|
|
(7,551)
|
|
|
(7,861)
|
Purchases of
intangible assets
|
|
|
(66)
|
|
|
(45)
|
|
|
(182)
|
|
|
(111)
|
|
|
(344)
|
Investment in
unconsolidated affiliate
|
|
|
—
|
|
|
(4,700)
|
|
|
—
|
|
|
(4,700)
|
|
|
—
|
Free cash flow, a
non-GAAP measure
|
|
$
|
(25,800)
|
|
$
|
6,461
|
|
$
|
8,622
|
|
$
|
(19,339)
|
|
$
|
(10,781)
|
AXON
ENTERPRISE, INC. SUPPLEMENTAL TABLES (in
thousands)
|
|
|
|
|
|
|
|
|
|
30 JUN 2020
|
|
31 DEC 2019
|
|
|
(Unaudited)
|
|
|
|
Cash and cash
equivalents
|
|
$
|
319,253
|
|
$
|
172,250
|
Short-term
investments
|
|
|
237,980
|
|
|
178,534
|
Long-term
investments
|
|
|
129,580
|
|
|
45,499
|
Investment payable, net
of receivable
|
|
|
(10,400)
|
|
|
—
|
Total cash and cash
equivalents and investments, net
|
|
$
|
676,413
|
|
$
|
396,283
|
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
View original content to download
multimedia:http://www.prnewswire.com/news-releases/axon-reports-strong-second-quarter-revenue-up-26-international-revenue-up-80-annual-recurring-revenue-up-42-301108028.html
SOURCE Axon