Axon Q3 Results: Record Revenue of $105 million; Software Annual Recurring Revenue Exceeds $100 million
SCOTTSDALE, Ariz., Nov. 6, 2018 /PRNewswire/ -- Axon (Nasdaq: AAXN), the global leader in public safety technology, today released the following quarterly update letter to shareholders. Results included:
-- Total quarterly revenue of $104.8 million, up 16% year-over-year
-- Axon Cloud revenue of $23.9 million, up 47% year-over-year
-- Software & Sensors annual recurring revenue of $101.6 million, up 60%
year-over-year
-- All-new TASER 7 conducted energy weapon in active field trials, shipping
soon
-- Introduced Axon Body 3, with LTE live-streaming capability
Dear shareholders,
Axon's third quarter was highlighted by both innovation and execution. For the 25th anniversary of the company's founding, we were delighted to introduce the TASER 7 at the International Association of Chiefs of Police Conference in early October.
TASER 7 is the first ground-up redesign of the TASER handheld weapon since the founding of the company in 1993. TASER 7 improves performance across all key metrics, increasing effectiveness, reducing size and improving ease of use. TASER 7 delivers a more compact multi-shot weapon, faster reloads, more stable darts with greater kinetic energy, and increased effectiveness yielding faster, more reliable threat stoppage. New adaptive cross connect technology actively measures and optimizes the flow of charge across up to four probes deployed on the target.
TASER 7 is the most effective TASER weapon ever developed and represents a new premium tier in our weapons category that creates a compelling upgrade opportunity for our entire installed base. It also represents an important step toward our mission of making the bullet obsolete.
Also, for the first time, the TASER 7 integrates seamlessly with our cloud-based software solution for Axon on-officer cameras without requiring a manual connection through a PC. Each TASER 7 is sold with a dock and subscription on Axon Evidence (Evidence.com). Law enforcement customers across the board tell us that TASER 7 is a game changer. It has already been ordered for full deployment by the Fort Worth Police Department and the Nevada State Highway Patrol and is in field trials with several other major agencies. We expect to begin meaningful shipments in December and will continue to sell prior models.
In early October, we also introduced the Axon Body 3 camera, Axon's first LTE-connected device. Axon will procure embedded LTE services directly from FirstNet, built with AT&T, and Verizon's dedicated Public Safety Private Core, eliminating the need for agencies to handle the logistics of a separate LTE bill.
Axon Body 3 retains all the features that made Axon Body 2 the market leader, including full-shift battery life, ruggedness, simplicity, and ease of use. Improvements include better low-light capture, higher image clarity, GPS functionality, and audio that allows for ambient noise reduction. Axon Body 3 also offers live-streaming video and the ability to react to active intelligence, with a processor that can handle edge-AI capabilities such as gunshot detection.
Live streaming offers command staff real-time insight into what is happening during a major incident. In incidents such as mass shootings, bomb scares or SWAT team entries, command staff can see what the officers on the ground are seeing and can more expeditiously allocate the appropriate resources and inform the public. Also, we believe that arriving officers can perform better if they have enhanced situational awareness in advance.
The timing of Axon Body 3's introduction was optimized for 2019 procurement cycles and to leverage the inflection point in adoption of FirstNet's and Verizon's mission-critical LTE services. Some agencies will receive test units in early 2019 and we expect shipments to begin ramping in mid-2019.
In conjunction with revealing two new compelling hardware products -- TASER 7 and Axon Body 3 -- we also unveiled our go-to-market strategy for Axon Records, our new law enforcement records management system currently under development. In short, Axon is disrupting how agency records management systems are packaged and sold. Agencies that procure the TASER 7 and Axon Body 3 via our Officer Safety Plan package will receive Axon Records' core functionality at no incremental cost for five years. Because records management systems represent one of the largest technology costs for agencies, we believe this offering provides us with a significant competitive advantage.
Axon Records remains on track to be commercially available in Q3 2019, with deployments beginning to scale at that time. We are building a foundational product, upon which we will incorporate additional modules and apps over time, including transcription and automatic report writing. Axon Records will support the key functions that agencies require, including incident report writing, case management, routing and task management, and Axon Evidence integration.
Making Axon Records available for free as part of our popular Officer Safety Plan is a strategy designed to rapidly drive mass adoption. Combining agencies' text records with on-officer camera data puts video at the heart of the record and creates the ecosystem for us to develop breakthrough premium services, leveraging our industry-leading AI team. Axon Records creates the training data set to enable us to develop AI models that extract the records meta data from the audio-video data. The value created by automating the incident report creation process will be far greater than the value of any records system currently in existence.
Summary of Q3 2018 Results ((1))
-- Revenue of $104.8 million grew 16% year-over-year, with strength driven
by domestic weapons demand and Axon Fleet.
-- Gross margin of 62.6% was up 750 basis points from gross margin of 55.1%
in Q3 2017.
-- Much of the improvement in gross margin was driven by an improved
mix of body-camera shipments, better margins associated with Axon
Fleet, which were negative one year ago as Axon deployed leader
pricing to early adopters, and the elimination of duplicate data
storage costs, which were incurred one year ago as we transitioned
from Amazon Web Services to Microsoft Azure.
-- Operating expenses of $61.7 million grew 7% sequentially.
-- The increase in operating expenses was driven by a 19% increase in
research and development spending as we added engineering talent to
support Axon Records and incurred incremental costs in our final
push to bring the TASER 7 to market.
-- SG&A spending grew 0.9% sequentially, reflecting additional payroll
to support our growth, offset by ongoing cost control measures and
lower professional and consulting fees. Q3 2018 SG&A expenses
include a non-cash intangible asset abandonment charge of $2.0
million.
-- GAAP EPS was $0.10. Non-GAAP EPS of $0.20, which excludes $0.10 related
to stock-based compensation expense, was up substantially versus
non-GAAP EPS of $0.05 a year ago.
-- Adjusted EBITDA of $15.5 million grew 129% year over year and represents
an Adjusted EBITDA margin of 14.8%.
(1) Amounts for Q3 2017 have not
been adjusted under the
modified retrospective method
of adoption of Topic 606, and
are presented consistent with
the prior period amounts
reported under ASC 605. Revenue
for Q3 2018 would have been
$102.6 million under ASC 605.
Financial commentary by segment
TASER Weapons
Three Months Ended Change
September 30, June 30, 9/30/2017 QoQ YoY
2018
2018
---
TASER Weapons
---
Net sales $
63,666 $
60,624 $
59,416 5.0 7.2
% %
Gross margin 69.8 70.8 67.6
% % % -100bp 220bp
(1) Amounts for the three months
ended September 30, 2017 have
not been adjusted under the
modified retrospective method
of adoption of Topic 606, and
are presented consistent with
the prior period amounts
reported under ASC 605.
-- TASER weapons sales grew 7% year over year and 5% sequentially as Q3
2018 benefited from higher handle volumes tied to shipments to domestic
customers and an increase in cartridge revenue.
-- Weapons gross margin was up 220 basis points year over year and was
higher than the average of the prior six quarters on customer mix.
-- About 33% of TASER weapons sales in Q3 2018 were sold on a recurring
payment plan such as TASER 60 or Officer Safety Plan. We expect
recurring payment plan subscriptions to increase substantially in 2019
as we drive sales of TASER 7, which includes a software subscription
with Axon Evidence.
Software & Sensors
Three Months Ended Change
September 30,
2018 June 30, September 30, QoQ YoY
2017 (1)
2018
Software
and
Sensors
---
Axon Cloud $
23,913 $
22,505 $
16,277 6.3 46.9
net sales
% %
Axon Cloud
gross % % %
margin 73.9 77.8 63.6 -390bp 1030bp
Sensors $
17,257 $
16,097 $
14,569 7.2 18.5
and Other
net sales % %
Sensors
and Other % % %
gross
margin 20.6 16.7 (5.3) 390bp 2,590bp
(1) Amounts for the three months
ended September 30, 2017 have
not been adjusted under the
modified retrospective method
of adoption of Topic 606, and
are presented consistent with
the prior period amounts
reported under ASC 605.
-- Axon Cloud sales grew 47% year over year to $23.9 million.
-- Axon Cloud gross margin gained year over year largely due to the
elimination of data migration costs that we incurred a year ago, and was
down sequentially because of professional services fees, which vary by
quarter.
-- Sensors and Other sales, which primarily consist of hardware sensors,
totaled $17.3 million and were boosted by installations of the new Axon
Fleet 2, which began shipping in September. We believe our progress and
success with Axon Fleet, which began shipping in Q2 2017, demonstrates
our ability to identify a market adjacency and expand into a compelling
new product category.
-- Sensors and Other gross margin was adversely affected by delivering upon
VIEVU contracts we acquired in May.
September 30, June 30, March 31, December 31,
2018 2017 September 30,
2017
2018 2018
Software and
Sensors
Bookings $
92,895 $
88,860 $
97,528 $
71,154 $
77,976
Software and
Sensors
Annual
Recurring
Revenue (1) $
101,618 $
92,711 $
83,310 $
69,960 $
63,694
Cumulative
Axon Cloud
seats booked 325,200 305,200 226,900 201,500 187,400
(1) Monthly recurring license,
integration, warranty, and
storage revenue annualized.
-- Software & Sensors bookings of $92.9 million grew 5% sequentially and
19% year over year, and represented strength across categories,
including domestic bookings of Axon Fleet and new international markets
adopting Axon solutions.
-- Software & Sensors annual recurring revenue (software & warranty) was
$101.6 million, surpassing $100 million for the first time, and
reflecting growth of 60% year over year.
-- As of September 30, 2018, we had 325,200 booked seats on the Axon
network, representing an increase of 20,000 seats from June 30, 2018.
-- As of September 30, 2018, Software & Sensors backlog increased to
approximately $700 million, which is a subset of Axon's total remaining
performance obligations of approximately $820 million.
Outlook
We are providing the following updated guidance for the full year ending December 31, 2018:
-- Maintaining revenue growth guidance of 18% to 20%.
-- Based on current Q4 business trends, we are tracking to achieve the
midpoint of our full year guidance range.
-- We expect TASER 7 to contribute modestly to Q4 2018 and to be a
significant growth driver beginning in 2019.
-- Reiterating Adjusted EBITDA margin guidance of 14% to 16%, which
compares to Adjusted EBITDA margin of 11.6% in 2017.
-- The Adjusted EBITDA margin guidance range includes the impact of
cost absorption related to a large domestic customer transitioning
from VIEVU cameras to Axon Body 2 cameras, beginning in Q4 2018.
-- A normalized tax rate of 20% to 25%, which can fluctuate depending on
geography of income and the effects of discrete items, including changes
in our stock price; and
-- Capital expenditures in the range of $10 million to $12 million.
Looking ahead, you can expect to see us continue to deliver product innovation and a superior customer experience, stay scrappy and remain focused on driving strong top-line growth and profitability. We look forward to updating you again in 2019.
Signed,
Rick Smith, CEO
Luke Larson, President
Jawad Ahsan, CFO
Quarterly conference call and Webcast
We will host our Q3 2018 earnings conference call on Tuesday, November 6, 2018 at 2 p.m. PT / 3 p.m. AZT / 5 p.m. ET.
The call will be available via live audio webcast and archived replay on Axon's investor relations website at http://investor.axon.com.
Statistical Definitions
Software & Sensors bookings are an indication of the activity the Company is seeing relative to Software & Sensors hardware, software and Axon Evidence. 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, placed in the relevant fiscal period, regardless of when the products or services ultimately will be provided. 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 Axon has entered into contracts for the delivery of products and services in the future and anticipates the contracts will be fulfilled, if agencies do not exercise contractual options, do not appropriate money in future year budgets or do enact a cancellation clause, revenue associated with these bookings may not ultimately be recognized, resulting in a future reduction to bookings.
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.
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
Axon 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 and public safety personnel 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.
We work hard for those who put themselves in harm's way for all of us. To date, there are more than 325,200 software seats booked on the Axon network around the world and more than 207,000 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.
Amazon is a trademark of Amazon, AT&T is a trademark of AT&T Intellectual Property II, L.P. AT&T Intellectual Property, Inc., Azure is a trademark of the Microsoft Corporation, Facebook is a trademark of Facebook, Inc., FirstNet is a trademark of the US Department of Commerce, LTE is a trademark of the European Telecommunications Standards Institute, Twitter is a trademark of Twitter, Inc., and Verizon is a trademark of Verizon Trademark Services, LLC.
Axon, Axon Body 3, Axon Fleet, Axon Fleet 2, Axon Network, Axon Evidence (Evidence.com), the Delta Logo, Protect Life, Smart Weapons, TASER, and TASER 7 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:
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: proposed products and services and related development efforts and activities; expectations about the market for our current and future products and services; expectations about customer behavior; statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; and 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, 2017. 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: customer purchase behavior, including adoption of our software as a service delivery model; 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 manage our supply chain and avoid production delays or shortages; changes in the costs of product components and labor; defects in our products; the impact of product mix on projected gross margins; loss of customer data, a breach of security or an extended outage, including our reliance on third party cloud-based storage providers; negative media publicity regarding our products; our ability to defend against litigation and protect our intellectual property, and the resulting costs of this activity; 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; counter-party risks relating to cash balances held in excess of FDIC insurance limits; our ability to integrate acquired businesses; and our ability to attract and retain key personnel. 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 SEC on March 1, 2018 listed 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 in the 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.
Please visit http://investor.axon.com, https://www.axon.com/press, www.twitter.com/axon_us and https://www.facebook.com/Axon.ProtectLife/ where Axon discloses information about the company, its financial information, and its business.
For investor relations information please contact Andrea James via email at IR@axon.com.
AXON ENTERPRISE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended September 30,
September 30,
2018 June 30, September 30, 2018 2017 (1)
2017 (1)
2018
---
Net sales from products $
80,923 $
76,721 $
73,985 $
238,618 $
208,351
Net sales from services 23,913 22,505 16,277 66,659 40,796
Net sales 104,836 99,226 90,262 305,277 249,147
Cost of product sales 32,953 31,087 34,573 96,474 91,817
Cost of service sales 6,250 4,996 5,924 15,566 13,258
Cost of sales 39,203 36,083 40,497 112,040 105,075
Gross margin 65,633 63,143 49,765 193,237 144,072
Operating expenses:
Sales, general and
administrative 39,685 39,343 36,398 114,787 99,079
Research and development 21,982 18,501 14,166 55,602 39,618
Total operating expenses 61,667 57,844 50,564 170,389 138,697
Income (loss) from
operations 3,966 5,299 (799) 22,848 5,375
Interest and other income,
net 1,274 (295) 1,430 2,242 3,320
Income before provision for
income taxes 5,240 5,004 631 25,090 8,695
Provision for (benefit from)
income taxes (471) (3,481) 209 (2,032) 1,417
Net income $
5,711 $
8,485 $
422 $
27,122 $
7,278
Net income per common and common equivalent
shares:
Basic $
0.10 $
0.15 $
0.01 $
0.49 $
0.14
Diluted $
0.10 $
0.15 $
0.01 $
0.47 $
0.14
Weighted average number of common and common
equivalent shares outstanding:
Basic 58,340 55,527 52,831 55,681 52,663
Diluted 59,805 57,054 53,843 57,254 53,762
(1) Amounts for the three and
nine months ended September 30,
2017 have not been adjusted
under the modified
retrospective method of
adoption of Topic 606, and are
presented consistent with the
prior period amounts reported
under ASC 605.
AXON ENTERPRISE, INC.
SEGMENT REPORTING
(Unaudited)
(dollars in thousands)
Three Months Ended September 30, 2018
Three Months Ended June 30, 2018 Three Months Ended September 30, 2017 (1)
TASER Software Total TASER Software Total TASER Software Total
and Sensors and Sensors and Sensors
Weapons Weapons Weapons
---
Net sales from
products (2) $
63,666 $
17,257 $
80,923 $
60,624 $
16,097 $
76,721 $
59,416 $
14,569 $
73,985
Net sales from
services (3) - 23,913 23,913 22,505 22,505 16,277 16,277
Net sales 63,666 41,170 104,836 60,624 38,602 99,226 59,416 30,846 90,262
Cost of product
sales 19,256 13,697 32,953 17,681 13,406 31,087 19,237 15,336 34,573
Cost of service
sales - 6,250 6,250 4,996 4,996 5,924 5,924
Cost of sales 19,256 19,947 39,203 17,681 18,402 36,083 19,237 21,260 40,497
Gross margin 44,410 21,223 65,633 42,943 20,200 63,143 40,179 9,586 49,765
Sales, general and
administrative 22,574 17,111 39,685 21,920 17,423 39,343 20,575 15,823 36,398
Research and
development 4,837 17,145 21,982 4,019 14,482 18,501 1,856 12,310 14,166
Income (loss) from
operations $
16,999 $
(13,033) $
3,966 $
17,004 $
(11,705) $
5,299 $
17,748 $
(18,547) $
(799)
Gross margin % 69.8 51.5 62.6 70.8 52.3 63.6 67.6 31.1 55.1
% % % % % % % % %
Operating margin % 26.7 (31.7) 3.8
% 28.0 (30.3) 5.3
% 29.9 (60.1) (0.9)
% % % % % % %
Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017 (1)
TASER Software Total TASER Software Total
and Sensors and Sensors
Weapons Weapons
Net sales from
products (2) $
187,814 $
50,804 $
238,618 $
170,103 $
38,248 $
208,351
Net sales from
services (3) 66,659 66,659 40,796 40,796
Net sales 187,814 117,463 305,277 170,103 79,044 249,147
Cost of product
sales 57,480 38,994 96,474 53,341 38,476 91,817
Cost of service
sales 15,566 15,566 13,258 13,258
Cost of sales 57,480 54,560 112,040 53,341 51,734 105,075
Gross margin 130,334 62,903 193,237 116,762 27,310 144,072
Sales, general and
administrative 65,759 49,028 114,787 55,283 43,796 99,079
Research and
development 11,816 43,786 55,602 5,931 33,687 39,618
Income (loss) from
operations $
52,759 $
(29,911) $
22,848 $
55,548 $
(50,173) $
5,375
Gross margin % 69.4
% 53.6 63.3
% 68.6
% 34.6
% % 57.8
%
Operating margin % 28.1
% (25.5) 7.5
% 32.7
% (63.5)
% % 2.2
%
(1) Amounts for the three and
nine months ended September 30,
2017 have not been adjusted
under the modified retrospective
method of adoption of Topic 606,
and are presented consistent
with the prior period amounts
reported under ASC 605.
(2) 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.
(3) 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 September 30,
Nine Months Ended September 30,
2018 2017 Unit Change Percent 2018 2017 Unit Change Percent
Change Change
---
TASER X26P 18,842 13,472 5,370 39.9 53,226 47,031 6,195 13.2
% %
TASER X2 16,729 21,896 (5,167) (23.6) 52,767 54,423 (1,656) (3.0)
TASER Pulse
and Bolt 3,750 2,944 806 27.4 10,908 8,863 2,045 23.1
Cartridges 598,119 643,077 (44,958) (7.0) 1,742,207 1,818,345 (76,138) (4.2)
Axon Body 17,622 28,669 (11,047) (38.5) 59,798 75,864 (16,066) (21.2)
Axon Flex 3,487 8,298 (4,811) (58.0) 10,461 20,772 (10,311) (49.6)
Axon Fleet 1,601 1,598 3 0.2 5,537 1,598 3,939 246.5
Axon Dock 3,525 6,440 (2,915) (45.3) 13,903 19,584 (5,681) (29.0)
TASER Cam 1,339 1,512 (173) (11.4) 6,358 4,187 2,171 51.9
AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Dollars in thousands
Three Months Ended Nine Months Ended September 30,
September 30,
2018 June 30, 2018 September 30, 2018 2017 (1)
2017 (1)
---
EBITDA and Adjusted EBITDA:
---
Net income $
5,711 $
8,485 $
422 $
27,122 $
7,278
Depreciation and
amortization 3,065 2,750 2,277 8,226 5,677
Interest expense 16 17 49 53 132
Investment interest income (1,256) (595) (189) (1,926) (677)
Provision for (benefit from)
income taxes (471) (3,481) 209 (2,032) 1,417
EBITDA $
7,065 $
7,176 $
2,768 $
31,443 $
13,827
Adjustments:
Stock-based compensation
expense $
6,255 $
4,954 $
4,000 $
15,302 $
11,423
Transaction costs and
adjustments related to
business acquisition - 1,382 1,382
Loss on disposal and
abandonment of intangible
assets 2,049 54 2,103
Loss on disposal and
impairment of property and
equipment, net 137 119 290
Adjusted EBITDA $
15,506 $
13,685 $
6,768 $
50,520 $
25,250
Net income as a percentage of 5.4 8.6
% 0.5 8.9
% 2.9
net sales % % %
Adjusted EBITDA as a 14.8 13.8 7.5 16.5 10.1
percentage of net sales % % % % %
(1) Amounts for the three and
nine months ended September 30,
2017 have not been adjusted
under the modified
retrospective method of
adoption of Topic 606, and are
presented consistent with the
prior period amounts reported
under ASC 605.
AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - continued
(Unaudited)
Dollars in thousands
Three Months Ended Nine Months Ended September 30,
September 30,
2018 June 30, September 30, 2018 2017 (1)
2018 2017 (1)
---
Non-GAAP net income:
---
GAAP net income $
5,711 $
8,485 $
422 $
27,122 $
7,278
Non-GAAP adjustments:
Stock-based compensation
expense 6,255 4,954 4,000 15,302 11,423
Loss on disposal and
abandonment of intangible
assets 2,049 54 2,103
Loss on disposal and
impairment of property and
equipment, net 137 119 290
Transaction costs and
adjustments related to
business acquisition - 1,382 1,382
Income tax effects (2,048) (1,580) (1,515) (4,629) (4,298)
Income tax benefit of CEO
stock option exercise - (3,362) (3,362)
Non-GAAP net income $
12,104 $
10,052 $
2,907 $
38,208 $
14,403
Three Months Ended Nine Months Ended September 30,
September 30,
2018 June 30, September 30, 2018 2017 (1)
2018 2017 (1)
---
Non-GAAP diluted earnings per share:
---
GAAP diluted earnings per
share $
0.10 $
0.15 $
0.01 $
0.47 $
0.14
Non-GAAP adjustments:
Stock-based compensation
expense 0.10 0.09 0.07 0.27 0.21
Loss on disposal and
abandonment of intangible
assets 0.03 0.04
Loss on disposal and
impairment of property and
equipment, net 0.00 0.00 0.01
Transaction costs and
adjustments related to
business acquisition - 0.02 0.02
Income tax effects (0.03) (0.03) (0.03) (0.08) (0.08)
Income tax benefit of CEO
stock option exercise - (0.06) (0.06)
Non-GAAP diluted earnings
per share (2) $
0.20 $
0.18 $
0.05 $
0.67 $
0.27
Weighted average number of
diluted common and common
equivalent shares
outstanding (in thousands) 59,805 57,054 53,843 57,254 53,762
(1) Amounts for the three and nine
months ended September 30, 2017
have not been adjusted under the
modified retrospective method of
adoption of Topic 606, and are
presented consistent with the prior
period amounts reported under ASC
605.
(2) 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2018 December 31, 2017
---
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $
324,371 $
75,105
Short-term investments 500 6,862
Accounts and notes receivable,
net 116,518 56,064
Contract assets, net 13,263
Inventory 39,221 45,465
Prepaid expenses and other
current assets 30,514 21,696
Total current assets 524,387 205,192
Property and equipment, net 35,613 31,172
Deferred income tax assets, net 18,080 15,755
Intangible assets, net 16,956 18,823
Goodwill 25,043 14,927
Long-term notes receivable, net
of current portion 38,220 36,877
Other assets 23,396 15,366
Total assets $
681,695 $
338,112
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $
8,998 $
8,592
Accrued liabilities 36,908 23,502
Current portion of deferred
revenue 89,637 70,401
Customer deposits 4,111 3,673
Current portion of business
acquisition contingent
consideration 1,736 1,693
Other current liabilities 115 89
Total current liabilities 141,505 107,950
Deferred revenue, net of current
portion 69,382 54,881
Liability for unrecognized tax
benefits 1,805 1,706
Long-term deferred compensation 3,590 3,859
Business acquisition contingent
consideration, net of current
portion - 1,048
Other long-term liabilities 5,751 1,224
Total liabilities 222,033 170,668
Stockholders' Equity:
Preferred stock -
Common stock 1 1
Additional paid-in capital 447,933 201,672
Treasury stock (155,947) (155,947)
Retained earnings 169,301 123,185
Accumulated other comprehensive
income (1,626) (1,467)
Total stockholders' equity 459,662 167,444
Total liabilities and
stockholders' equity $
681,695 $
338,112
AXON ENTERPRISE, INC.
SELECTED CASH FLOW INFORMATION
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended September 30,
September 30,
2018 June 30, September 30, 2018 2017 (1)
2017 (1)
2018
---
Net income $
5,711 $
8,485 $
422 $
27,122 $
7,278
Depreciation and
amortization 3,065 2,750 2,277 8,226 5,677
Stock-based
compensation 6,255 4,954 4,000 15,302 11,423
Net cash provided by
(used in) operating
activities 16,530 (1,947) 6,607 32,636 (5,851)
Net cash provided by
(used in) investing
activities 1,223 (8,494) 7,514 (6,003) 9,551
Net cash provided by
(used in) financing
activities (1,039) 226,667 (244) 222,158 (1,575)
Cash and cash
equivalents 324,371 307,507 43,471 324,371 43,471
Restricted cash 2,477 2,470 3,326 2,477 3,326
Cash, cash
equivalents and
restricted cash,
end of period 326,848 309,977 46,797 326,848 46,797
Three Months Ended Nine Months Ended September 30,
September 30, June 30, September 30,
2018 2017 (1) 2018 2017 (1)
2018
---
Net cash provided by
(used in) operating
activities $
16,530 $
(1,947) $
6,607 $
32,636 $
(5,851)
Purchases of
property and
equipment (2,215) (3,602) (3,331) (6,880) (9,072)
Purchases of
intangible assets (206) (220) (261) (460) (431)
Cash flows related
to business
acquisitions 24 (5,014) (4,150) (4,990) (10,629)
Free cash flow
(deficit), a non-
GAAP measure $
14,133 $
(10,783) $
(1,135) $
20,306 $
(25,983)
(1) Amounts for the three and
nine months ended September 30,
2017 have not been adjusted
under the modified
retrospective method of
adoption of Topic 606, and are
presented consistent with the
prior period amounts reported
under ASC 605.
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
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