Axon Reports 2017 Second Quarter Results
SCOTTSDALE, Ariz., Aug. 8, 2017 /PRNewswire/ -- Axon Enterprise, Inc. (Nasdaq: AAXN), today reported financial results for the second quarter ended June 30, 2017.
"We posted another strong quarter highlighted by record Axon bookings that were nearly $10 million above our previous high," commented Rick Smith, CEO and co-founder of Axon. "We're excited to achieve this record level of bookings based on a healthy mix of customers that speaks to growing order volumes and the established momentum in our business. Our platform approach to technology solutions for law enforcement continues to resonate with our customers, and we are extending our leadership position through innovation which includes a robust product pipeline. During the quarter, we began shipping our Axon Fleet in-car camera solution which is fully integrated into our digital evidence management platform and represents an expansion of our ecosystem."
Second Quarter 2017 Financial Highlights:
-- Net sales increased 36% to $79.6 million in the second quarter of 2017
compared to $58.8 million in the second quarter of 2016. International
sales were $13.4 million in the second quarter of 2017.
-- TASER Weapons segment revenues increased 16% to $53.0 million in the
second quarter of 2017 compared to $45.5 million in the second quarter
of 2016.
-- Software and Sensors segment revenues increased 101% to $26.6 million in
the second quarter of 2017 compared to $13.2 million in the second
quarter of 2016.
-- Consolidated gross margin was 57% in the second quarter of 2017 compared
to 63% in the second quarter of 2016.
-- TASER Weapons segment gross margin increased to 70% in the second
quarter 2017 compared to 68% in 2016.
-- Software and Sensors segment gross margin was 33% in the second quarter
of 2017 compared to 47% in the second quarter of 2016. Service margin
was 70% in the second quarter of 2017, including $0.6 million of
non-recurring data migration expense, compared to 71% in the second
quarter of 2016. Hardware product margin (excluding services) was
negative 2% in the second quarter 2017 compared to 33% in the second
quarter of 2016 attributable to discounting of upfront hardware on
multi-year contracts which results in a portion of the allocated value
of the hardware to be recognized ratably over the contractual term.
-- Income from operations was $0.8 million in the second quarter of 2017
compared to $6.2 million in the second quarter of 2016.
-- Net income for the second quarter of 2017 was $2.3 million, or $0.04 per
diluted share, compared to $3.7 million, or $0.07 per diluted share, in
the second quarter of 2016.
-- Adjusted EBITDA for the second quarter of 2017 was $8.3 million compared
to $9.4 million in the second quarter of 2016.
-- In the second quarter of 2017, the Company used $5.8 million in cash in
operating activities. Cash, cash equivalents and investments were $61.8
million at June 30, 2017, compared to $89.3 million at December 31,
2016.
Business Highlights:
-- As of the end of the second quarter of 2017, 38 of the 68 major city law
enforcement agencies have purchased Axon body-worn cameras and/or its
digital evidence management solution: Albuquerque, Atlanta, Austin,
Baltimore, Baltimore County, Charlotte-Mecklenburg, Chicago, Cincinnati,
Cleveland, Dallas, Denver, Fort Worth, Fresno, Las Vegas, Los Angeles,
Louisville, Memphis, Mesa, Miami, Milwaukee, Minneapolis, Montgomery
County, New Orleans, Omaha, Philadelphia, Pittsburgh, Sacramento, Salt
Lake City, San Antonio, San Diego, San Francisco, San Jose, Seattle,
Tampa, Toronto, Tucson, Washington DC, and Wichita.
-- Axon's Evidence.com platform user count continued to grow, extending the
Company's market leadership. During the three months ended June 30,
2017, the Company booked approximately 20,600 seats on its digital
evidence management platform, Evidence.com, net of renewals. Since
inception, the Company has booked cumulative Evidence.com licenses of
approximately 169,000.
Quarterly Conference Call:
The Company will host its second quarter 2017 earnings conference call on Tuesday, August 8, 2017 at 4:30 p.m. ET. To join the live audio presentation, please dial toll free 877-303-9126, or for international callers, please dial +1-253-237-1156.
The Company has posted supplemental materials including its key operating metrics on its website to provide additional information about our second quarter financial results.
The Company plans to update and post its investor relations presentation with the second quarter results to http://investor.axon.com within the next two weeks. Archived presentations from previous quarters can also be found on the website.
Statistical Definitions:
-- Axon cameras and Evidence.com bookings represent a statistical measure
defined as the sales price of orders placed in the relevant time period.
Bookings are an indication of the activity the Company is seeing
relative to Axon cameras and Evidence.com. We consider bookings to be a
statistical measure defined as the sales price of orders (not invoiced
sales) placed in the relevant fiscal period, net of cancellations,
regardless of when the products or services ultimately will be provided.
Some bookings might be invoiced in subsequent years. Due to municipal
government funding rules, certain of the future year amounts included in
bookings are subject to budget appropriation or other contract
cancellation clauses. Although the Company has entered into contracts
for the delivery of products and services in the future and anticipates
the contracts will be completed, if agencies invoke a cancellation
clause or do not appropriate funds in future year budgets, revenue
associated with these bookings will ultimately not be recognized,
resulting in a future reduction to bookings. In the second quarter of
2017, the Company did not record any reversals related to prior period
bookings due to non-appropriation or other cancellation reasons.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 and Free Cash Flow. Our 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 our performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented at the end of the release.
EBITDA is defined as consolidated net income before interest expense, income taxes and depreciation and amortization. Adjusted EBITDA, as presented herein, is defined as EBITDA before certain other items, including: stock-based compensation; net gain/loss on write-down/disposal of property, equipment and intangible assets; and loss on impairment.
Free Cash Flow is defined as cash flows provided by operating activities minus purchases of property, plant and equipment, and intangible assets.
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 and investors should not assume that the non-GAAP financial
measures presented in this earnings release were prepared 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
The Axon network is a network of devices, apps and people that helps law enforcement become smarter and safer. Our mission is to protect life. Our technologies give law enforcement the confidence, focus, and time they need to keep their communities safe. Our products impact every aspect of an officer's day-to-day experience:
-- In the field - Our Smart Weapons offer a less-lethal intermediate use of
force response and our body-worn and in-car cameras collect video
evidence to capture the truth of an incident; and our mobile
applications enable simple evidence collection.
-- At the station - Our secure, cloud-based digital evidence management
solution allows officers and command staff to manage, review, share and
process digital evidence using forensic, redaction, transcription and
other tools.
-- In the courtroom - Our solutions for prosecutors make collaborating
across jurisdictions and agencies easy so that cases can be resolved
quickly.
We work hard for those who put themselves in harm's way for all of us. To date, there are more than 100,000 licensed users from around the world and more than 187,000 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, the "Axon Delta" logo, Axon network, Evidence.com, "Protect Life," TASER, Smart Weapons, X2, and X26P are trademarks of Axon Enterprise, Inc., some of which are registered in the U.S. and other countries. For more information, visit www.axon.com/legal. All rights reserved.
Note to Investors
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements regarding our expectations, beliefs, intentions or strategies regarding the future. We intend that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. The forward-looking information is based upon current information and expectations regarding Axon Enterprise, Inc. These estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict. Axon Enterprise, Inc. assumes no obligation to update the information contained in this press release, except as required by law.
We caution that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward looking statements herein. Such factors include, but are not limited to: market acceptance of our products; our dependence on sales of our TASER X26P and X2 CEWs; acceptance of our Evidence.com software as a service delivery model by our law enforcement customers; our ability to design, introduce and sell new products; delays in development schedules; rapid technological change and competition; product defects; breach of our security measures resulting in unauthorized access to customer data; outages and disruptions relating to our Evidence.com service; budgetary and political constraints of prospects and customers; the length of our sales cycle and our ability to realize benefits from our marketing and selling efforts; our exposure to cancellations of government contracts due to appropriation clauses; changes in civil forfeiture laws; the long-term revenue recognition cycle for our SaaS Evidence.com product; our reliance on third party cloud-based storage providers; litigation risks resulting from alleged product-related injuries and media publicity concerning allegations of deaths occurring after use of the TASER device and the negative impact this publicity could have on sales; the outcome of pending or future litigation; our ability to protect our intellectual property as well as intellectual property infringement claims and relating litigation costs; challenges obtaining and enforcing our patent rights in foreign countries; risks of governmental regulations, including regulations of our products by the United States Consumer Product Safety Commission, regulation of our products as a "crime control" product by the Federal government, state and local government regulation and foreign regulation and the adverse effects that could result from our products being classified as firearms by the United States Bureau of Alcohol, Tobacco, Firearms and Explosives; regulatory and political challenges presented by international markets; the possibility that the United States may withdraw from or materially modify the North American Free Trade Agreement; the adverse effect of the United Kingdom's exit from the European Union; our compliance with regulations governing the environment, including but not limited to, regulations within the European Union; regulations relating to voice, data and communications services; regulations relating to conflict minerals; our dependence on third party suppliers for key components of our products; component shortages; rising costs of raw materials and transportation relating to petroleum prices; that we may experience declines in gross margins due to a shift in product sales from CEWs to Axon devices; our ability to manage our growth and increase manufacturing production to meet demand; establishment and expansion of our direct and indirect distribution channels; our ability to pursue sales directly with customers; risks relating to acquisitions and joint ventures; goodwill impairment; catastrophic events; the adverse effects on our operations and financial results from foreign currency fluctuations; fluctuations in our effective tax rate; counter-party risks relating to cash balances held in excess of FDIC insurance limits; employee retention risks; volatility in our stock price; quarterly fluctuations in our operating results; and other factors identified in documents filed by us with the Securities and Exchange Commission, including those set forth in our Form 10-K for the year ended December 31, 2016.
Please visit http://investor.axon.com, www.twitter.com/axon_us, and www.facebook.com/Axon.ProtectLife/ where Axon discloses information from time to time about the company, its financial information, and its business.
For investor relations information please contact Arvind Bobra via email at IR@axon.com.
AXON ENTERPRISE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Net sales $79,643 $58,756 $158,885 $114,286
Cost of products sold and
services delivered 34,006 21,457 64,578 40,085
Gross margin 45,637 37,299 94,307 74,201
------ ------ ------ ------
Operating expenses:
Sales, general and
administrative 31,824 24,379 62,681 49,212
Research and development 12,989 6,710 25,452 13,637
Total operating expenses 44,813 31,089 88,133 62,849
------ ------ ------ ------
Income from operations 824 6,210 6,174 11,352
Interest and other income
(expense), net 1,684 (123) 1,890 (5)
----- ---- ----- ---
Income before provision for
income taxes 2,508 6,087 8,064 11,347
Provision for income taxes 232 2,437 1,208 4,234
--- ----- ----- -----
Net income $2,276 $3,650 $6,856 $7,113
====== ====== ====== ======
Net income per common and common equivalent
shares:
Basic $0.04 $0.07 $0.13 $0.13
Diluted $0.04 $0.07 $0.13 $0.13
Weighted average number of common and common
equivalent shares outstanding:
Basic 52,736 52,480 52,578 53,087
Diluted 53,770 53,289 53,723 53,890
AXON ENTERPRISE, INC.
SEGMENT REPORTING
(Unaudited)
(dollars in thousands)
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
TASER Software and Total TASER Software and
Sensors Sensors Total
Weapons Weapons
------- -------
Product sales $53,016 $13,859 $66,875 $45,536 $8,331 $53,867
Service revenue - 12,768 12,768 - 4,889 4,889
--- ------ ------ --- ----- -----
Net sales 53,016 26,627 79,643 45,536 13,220 58,756
------ ------ ------ ------ ------ ------
Cost of products
sold 16,078 14,094 30,172 14,489 5,565 20,054
Cost of services
delivered - 3,834 3,834 - 1,403 1,403
Gross margin 36,938 8,699 45,637 31,047 6,252 37,299
------ ----- ------ ------ ----- ------
Sales, general and
administrative 17,492 14,332 31,824 14,684 9,695 24,379
Research and
development 1,863 11,126 12,989 1,245 5,465 6,710
Income (loss) from
operations $17,583 $(16,759) $824 $15,118 $(8,908) $6,210
======= ======== ==== ======= ======= ======
Gross margin % 69.7% 32.7% 57.3% 68.2% 47.3% 63.5%
Operating margin % 33.2% (62.9)% 1.0% 33.2% (67.4)% 10.6%
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
TASER Software and Total TASER Software and
Sensors Sensors Total
Weapons Weapons
------- -------
Product sales $110,687 $23,679 $134,366 $91,370 $13,172 $104,542
Service revenue - 24,519 24,519 - 9,744 9,744
--- ------ ------ --- ----- -----
Net sales 110,687 48,198 158,885 91,370 22,916 114,286
------- ------ ------- ------ ------ -------
Cost of products
sold 34,104 23,140 57,244 28,566 8,943 37,509
Cost of services
delivered - 7,334 7,334 - 2,576 2,576
Gross margin 76,583 17,724 94,307 62,804 11,397 74,201
------ ------ ------ ------ ------ ------
Sales, general and
administrative 34,708 27,973 62,681 29,956 19,256 49,212
Research and
development 4,075 21,377 25,452 2,365 11,272 13,637
Income (loss) from
operations $37,800 $(31,626) $6,174 $30,483 $(19,131) $11,352
======= ======== ====== ======= ======== =======
Gross margin % 69.2% 36.8% 59.4% 68.7% 49.7% 64.9%
Operating margin % 34.2% (65.6)% 3.9% 33.4% (83.5)% 9.9%
AXON ENTERPRISE, INC.
Software and Sensors Bookings by Quarter
(Unaudited)
(in thousands)
June 30, 2017 March 31, 2017 December 31, September 30,
2016 2016 June 30, 2016
------------- -------------- ------------- -------------- -------------
Bookings $81,942 $60,080 $72,509 $57,491 $72,034
Software and Sensors Future Contracted Revenue
(Unaudited)
(in thousands)
June 30, 2017 March 31, 2017
------------- --------------
Cumulative
bookings,
net
of
cancellations $606,601 $524,659
Cumulative
recognized
revenue (160,500) (134,639)
Future
contracted
revenue $446,101 $390,020
======== ========
Future contracted revenue for the Software and Sensors segment represents a statistical measure defined as cumulative bookings minus cumulative recognized revenue related solely to that segment. Future contracted revenues are an indication of momentum of longer-term contracts being signed and the expectations of future revenues in the Software and Sensors segment. These financial metrics are exclusive of TASER Cam recorder revenues.
AXON ENTERPRISE, INC.
UNIT SALES STATISTICS
(Unaudited)
Units in whole numbers
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 Unit Change Percent 2017 2016 Unit Change Percent
Change Change
---- ---- ----------- -------- ---- ---- ----------- --------
TASER X26P 18,198 16,559 1,639 9.9% 33,559 35,126 (1,567) (4.5)%
TASER X2 15,390 13,479 1,911 14.2 32,527 22,216 10,311 46.4
TASER Pulse
and Bolt 2,347 3,020 (673) (22.3) 5,919 4,586 1,333 29.1
Cartridges 579,282 414,828 164,454 39.6 1,175,268 879,985 295,283 33.6
Axon Flex 9,373 3,668 5,705 155.5 12,474 6,065 6,409 105.7
Axon Body 26,882 9,686 17,196 177.5 47,195 15,884 31,311 197.1
Axon Dock 8,269 3,402 4,867 143.1 13,144 4,804 8,340 173.6
TASER Cam 1,336 3,132 (1,796) (57.3) 2,675 5,137 (2,462) (47.9)
AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Dollars in thousands
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Net income $2,276 $3,650 $6,856 $7,113
Depreciation and
amortization 1,796 942 3,400 1,843
Interest expense, net 45 13 83 13
Provision for income taxes 232 2,437 1,208 4,234
EBITDA $4,349 $7,042 $11,547 $13,203
====== ====== ======= =======
Adjustments:
Stock-based compensation
expense $3,976 $2,306 $7,423 $4,526
Net loss (gain) on disposal
of property, equipment and
intangible assets, - 20 - (3)
Adjusted EBITDA $8,325 $9,368 $18,970 $17,726
====== ====== ======= =======
Adjusted EBITDA as a
percentage of net sales 10.5% 15.9% 11.9% 15.5%
Composition of stock-based compensation:
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Cost of products sold and
services delivered $155 $70 $234 $170
Sales, general and
administrative 2,155 1,459 4,183 2,849
Research and development 1,666 777 3,006 1,507
----- --- -----
$3,976 $2,306 $7,423 $4,526
====== ====== ====== ======
AXON ENTERPRISE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2017 December 31, 2016
------------- -----------------
(Unaudited)
ASSETS
Current Assets:
Cash
and
cash
equivalents $28,038 $40,651
Short-
term
investments 33,796 48,415
Accounts
and
notes
receivable,
net 45,428 39,466
Inventory,
net 60,743 34,841
Prepaid
expenses
and
other
current
assets 22,949 13,858
------ ------
Total
current
assets 190,954 177,231
Property
and
equipment,
net 29,603 24,004
Deferred
income
tax
assets,
net 20,264 19,515
Intangible
assets,
net 19,334 15,218
Goodwill 13,183 10,442
Long-
term
investments - 234
Long-
term
accounts
and
notes
receivable,
net
of
current
portion 27,791 17,602
Other
assets 15,182 13,917
------ ------
Total
assets $316,311 $278,163
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts
payable $17,993 $10,736
Accrued
liabilities 19,879 18,248
Current
portion
of
deferred
revenue 52,562 45,137
Customer
deposits 2,221 2,148
Current
portion
of
business
acquisition
contingent
consideration 1,720 1,690
Other
current
liabilities 469 80
--- ---
Total
current
liabilities 94,844 78,039
Deferred
revenue,
net
of
current
portion 47,608 40,054
Liability
for
unrecognized
tax
benefits 2,179 1,896
Long-
term
deferred
compensation 3,655 3,362
Business
acquisition
contingent
consideration,
net
of
current
portion 2,689 1,635
Other
long-
term
liabilities 1,875 2,289
----- -----
Total
liabilities 152,850 127,275
------- -------
Stockholders' Equity:
Preferred
stock - -
Common
stock 1 1
Additional
paid-
in
capital 194,221 187,656
Treasury
stock (155,947) (155,947)
Retained
earnings 124,834 118,275
Accumulated
other
comprehensive
income 352 903
--- ---
Total
stockholders'
equity 163,461 150,888
------- -------
Total
liabilities
and
stockholders'
equity $316,311 $278,163
======== ========
AXON ENTERPRISE, INC.
SELECTED CASH FLOW INFORMATION
(Unaudited)
(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Net income $2,276 $3,650 $6,856 $7,113
Depreciation and
amortization 1,796 942 3,400 1,843
Stock-based
compensation 3,976 2,306 7,423 4,526
Net cash provided
by (used in)
operating
activities (5,837) 3,243 (12,446) 10,336
Net cash provided
by (used in)
investing
activities (7,847) 5,283 2,037 1,646
Net cash provided
by (used in)
financing
activities 530 (24,798) (1,347) (34,520)
Cash and cash
equivalents, end
of period 28,038 37,306 28,038 37,306
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Net cash provided
by (used in)
operating
activities $(5,837) $3,243 $(12,446) $10,336
Purchases of
property and
equipment (3,398) (684) (5,741) (1,964)
Purchases of
intangible assets (75) (87) (170) (185)
Purchase of
property and
equipment and
intangible assets
in connection with
business
acquisition - - (8,526) -
--- --- ------ ---
Free cash flow
(deficit), a non-
GAAP measure $(9,310) $2,472 $(26,883) $8,187
======= ====== ======== ======
CONTACT: Arvind Bobra
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
View original content with multimedia:http://www.prnewswire.com/news-releases/axon-reports-2017-second-quarter-results-300501513.html
SOURCE Axon
