Axon Delivers Record Q4 and Full Year 2018 Revenue and Bookings; Introduces 2019 Guidance
SCOTTSDALE, Ariz., Feb. 26, 2019 /PRNewswire/ -- Axon (Nasdaq: AAXN), the global leader in public safety technology, today released the following quarterly update letter to shareholders. Financial performance included the following record results:
-- Total company Q4 revenue of $115 million, up 21% YOY
-- Axon Cloud revenue of $26 million, up 50% YOY
-- International revenue of $24 million, up 52% YOY
-- Software & Sensors bookings of $110 million, up 54% YOY
-- Full year revenue of $420 million, up 22% YOY
-- Full year GAAP operating income of $25 million, up 91% YOY; Adjusted
EBITDA of $61 million, up 53% YOY
-- Introducing full-year 2019 guidance of $480 million to $490 million in
revenue and $80 million to $85 million in Adjusted EBITDA
Dear shareholders,
We delivered a record 2018, executing across multiple fronts. Our strong top-line performance reflects the health of our growing software network, Axon's increasing international presence and our ability to expand into new product categories such as Axon Fleet in-car video. Our bottom line grew twice as fast, reflecting the rigor and cost-discipline we have established over the last 18 months.
We strengthened our balance sheet through strong operating cash generation and the successful completion of a follow-on offering, supporting our goal to continue driving subscription contracts and recurring cash flow growth. Additionally, we acquired body camera provider Vievu in a $7 million upfront cash and stock transaction((1)), which added five major city customers and accelerated the largest police department in the US onto the Axon network.
We concluded the year by launching TASER 7, the most significant redesign of the TASER device since 2003, and unveiling our first LTE-connected body camera, Axon Body 3.
Heading into 2019, Axon continues to build a foundation to support our next decade of growth and profitability. Our product and engineering teams are heavily focused on four major or "Alpha" strategic growth areas, with dedicated product leadership. These growth drivers are 1) TASER, 2) Sensors (including the related software), 3) Records (our new records management software), and 4) Dispatch (computer-aided dispatch software).
We've also deployed small, nimble product teams tasked with going after select break-out market opportunities. These scrappy "Delta" teams include Axon Air, which leverages our drone reseller partnership with DJI, our TASER consumer team, which is focused on the self-defense market, and three additional, yet-to-be-announced initiatives.
Additionally, for the first time, we've assigned dedicated sales personnel to markets adjacent to law enforcement, including fire departments and emergency medical services, federal government and military, corrections, private security, and commercial enterprise. Early successes include the Charlotte Fire Department, which is the first major city fire department to deploy Axon body cameras backed by our software network, and Cypress Creek Emergency Medical Services, which is the first EMS provider in the U.S. to deploy our camera solution to paramedics. There, body camera footage from an ambulance has already assisted emergency room doctors in saving lives.
((1)) The purchase price of Vievu consisted of $4.6 million in cash and $2.4 million in common stock issued to Safariland at closing. Deal terms also included consideration of up to 141,226 shares of common stock, contingent upon achieving certain milestones over two years, as well as minimum holster purchase commitments.
These market adjacencies offer the potential to grow our total addressable market and drive incremental opportunity beyond our four strategic areas of investment.
In 2019, we expect revenue growth to be driven by new cloud-connected products, including TASER 7 and Axon Fleet 2, both of which are currently shipping, and Axon Body 3, which we expect to begin shipping in the second half. Customer reception to TASER 7 has been exceedingly positive. We've discussed these new products in detail in our previous quarterly letter. Importantly, we expect to continue driving leverage through administrative cost controls, as well as improvements in new customer contract pricing. At the same time, we will continue to invest in R&D to deliver innovation and fuel long-term growth.
Summary of Q4 2018 Results ((2))
-- Strong quarterly revenue growth of 21% was driven by strength in both
segments, particularly Software and Sensors, which saw revenue grow 64%
over last year. Several large body camera contracts were executed in Q4
2018, exceeding our expectations. Strength was also driven by new users
on Axon Evidence (Evidence.com) and a full quarter of shipping Axon
Fleet 2, which we expected. International revenue was also strong in the
quarter, up 52% year over year.
-- Gross margin of 56.9% includes 360 basis points of impact related to
costs associated with Vievu and a related large domestic customer
contract.((3)) Q4 2018 gross margin was also affected by startup costs
associated with initial production of TASER 7. In Q1 2019, we expect
gross margins to be in the range of 61% to 63% and build higher over the
rest of the year.
-- Operating expenses of $63.4 million included $42.1 million in SG&A and
$21.3 million in R&D. SG&A included marketing expenses associated with
Axon's launch of the TASER 7 and Axon Body 3 at the annual International
Association of Chiefs of Police trade show, as well as a $0.7 million
incremental charge for Vievu excess purchase commitments.((3)) R&D costs
declined sequentially on lower professional and consulting expenses,
partially offset by increased headcount.
-- GAAP EPS was $0.03; Non-GAAP EPS, which excludes $6.6 million in stock
based compensation expenses and $2.3 million tax benefit realized from
the CEO exercise of stock options, was $0.08.
-- Adjusted EBITDA in the quarter was $10.9 million, which reflects both
non-recurring and ongoing Vievu-related costs, as well as margin
compression on weapons. Our estimated EBITDA losses related to Vievu in
Q4 2018 are $6 million( (4)), of which nearly half are non-recurring and
primarily related to the write down of Vievu inventory and an
incremental charge related to excess purchase commitments in connection
with a large domestic customer. ((3)) For the full year 2018, we
achieved adjusted EBITDA margin of 14.6%, within our guidance range,
despite an approximately 250 basis point impact related to the Vievu
acquisition.
((2)) Amounts for Q4 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 Q4 2018 would have been $114.2 million under ASC 605.
((3) )After Axon acquired Vievu in May 2018, we began migrating several Vievu customers over to the Axon network. One large domestic customer accelerated its move to the Axon network in Q4 2018, resulting in excess inventory write downs and charges for excess purchase commitments in the period.
((4) )Our estimate of EBITDA losses related to Vievu includes those direct costs incurred by the Vievu legal entity plus legacy Vievu employee costs. It does not include any other costs of supporting the acquired Vievu customers.
Financial commentary by segment
TASER:
Three Months Ended Change
December 31, September 30, December 31, QoQ YoY
2018 2018 2017 (1)
TASER
---
Net $
65,301 $
63,666 $
64,409 2.6 1.4
sales
% %
Gross
margin 65.0
% 69.8
% 70.9
% -480bp -590bp
(1) Amounts for the three months
ended December 31, 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 revenue of $65.3 million included $7.4 million in TASER 7 sales,
which began shipping in early December.
-- TASER gross margin of 65% included higher-than-usual production costs
associated with ramping the all-new TASER 7 and cartridges. We expect
TASER gross margin to build back gradually to historical levels as the
mix of revenue recognition shifts toward recurring cartridge and
software revenue, as TASER 7 matures and as the customer trade-in credit
phases down.
-- About 35% of all weapons sold in Q4 were on a recurring payment plan. In
the United States, recurring payment plans accounted for 48% of new
TASER contracts.
-- The following illustration depicts revenue recognition and cash flow on
Axon's TASER 7 Certification Plan, which carries an MSRP of $60 per user
per month. Note that 45% of the revenue is recognized at the time of
sale and the remainder is recognized over the five-year contract.
Software & Sensors:
Three Months Ended Change
December 31, September 30, December 31, QoQ YoY
2018 2018 2017 (1)
Software
and
Sensors
---
Axon Cloud $
25,774 $
23,913 $
17,143 7.8 50.3
net sales
% %
Axon Cloud
gross % % %
margin 74.5 73.9 68.2 60bp 630bp
Sensors $
23,716 $
17,257 $
13,099 37.4 81.1
and Other
net sales % %
Sensors
and Other % % %
gross
margin 15.7 20.6 43.0 -490bp -2,730bp
(1) Amounts for the three months
ended December 31, 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 revenue of $25.8 million grew 50% year over year as Axon
brought new Axon Evidence users online.
-- Axon Cloud gross margin of 74.5% increased sequentially and year over
year.
-- Sensors and Other revenue of $23.7 million was boosted by international
strength and shipments of Axon Fleet 2, with Axon Fleet hardware units
increasing 78% year over year.
-- Sensors and Other gross margin of 15.7% reflects gross profit of $3.7
million, and was unfavorably impacted by $1.9 million of non-recurring
items related to Vievu. Excluding these items, Sensors and Other gross
margin would have been 23.7%.
December 31, September 30, June 30, March 31, December 31,
2018 2018 2018 2018 2017
Software and
Sensors
Bookings $
109,779 $
92,895 $
88,860 $
97,528 $
71,154
Software and
Sensors
Annual
Recurring
Revenue (1) $
108,496 $
101,618 $
92,711 $
83,310 $
69,960
Cumulative
Axon Cloud
seats booked 347,200 325,200 305,200 226,900 201,500
(1) Monthly recurring license,
integration, warranty, and
storage revenue annualized.
-- Software and Sensors bookings were a record $110 million, reflecting
strength across product offerings, including domestic body cameras and
Axon Fleet 2.
-- Note that annual recurring revenue of $108 million is driven by only
that portion of Axon's 347,200 booked seats that are online and
contributing to revenue.
-- Software and Sensors backlog of $758 million grew 41% year over year.
Outlook:
For full year 2019, we expect to achieve:
-- Revenue of $480 million to $490 million;
-- We expect to deliver significantly higher growth rates in the second
half of 2019, driven by an anticipated pick up in TASER 7 shipments
and initial Axon Body 3 shipments. Q1 2019 revenue is expected to
increase approximately 8% to 9% year over year
-- Adjusted EBITDA of $80 million to $85 million; and
-- 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.
-- Note: Axon is increasingly leveraging our strategic advantage with TASER
devices and body cameras by bundling our product offerings and
developing hardware devices that connect to our software. The level of
integration across our business means that much of our sales, marketing,
and administrative expenses support both segments. Thus, starting with
our Q1 2019 disclosures, we will no longer break out SG&A by segment,
but we will continue to provide revenue, gross margin and R&D by
segment.
We look forward to updating you throughout the year as we ship new products, gain a foothold and delight our early customers in Axon Records, and drive leverage on the bottom line.
Signed,
Rick Smith, CEO
Luke Larson, President
Jawad Ahsan, CFO
Quarterly conference call and Webcast
We will host our Q4 2018 earnings conference call on February 26 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 https://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 public safety personnel become smarter and safer. With a mission of protecting life, our technologies give customers the confidence, focus and time they need to keep their communities safe. Our products impact every aspect of a public safety 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 347,200 software seats booked on the Axon network around the world and more than 212,000 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.
DJI is a trademark of DJI, Facebook is a trademark of Facebook, Inc., and Twitter is a trademark of Twitter, Inc.
Axon, Axon Body 3, Axon Evidence, Axon Fleet, Axon Fleet 2, TASER 7, Vievu, Protect Life and the Delta Logo are trademarks of Axon Enterprise, Inc., some of which are registered in the US and other countries. For more information, visit www.axon.com/legal. All rights reserved.
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 and the soon-to-be-filed Form 10-K for the year ended December 31, 2018. 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. Our Annual Report on Form 10-K lists various important factors that could cause actual results to differ materially from expected and historical results. These factors are intended as cautionary statements for investors within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act. Readers can find them under the heading "Risk Factors" in the Report on Form 10-K and 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 https://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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended Twelve Months Ended December 31,
December 31, September 30, December 31, 2018 2017 (1)
2018 2018 2017 (1)
---
Net sales from products $
89,017 $
80,923 $
77,508 $
327,635 $
285,859
Net sales from services 25,774 23,913 17,143 92,433 57,939
Net sales 114,791 104,836 94,651 420,068 343,798
Cost of product sales 42,863 32,953 26,180 139,337 117,997
Cost of service sales 6,582 6,250 5,455 22,148 18,713
Cost of sales 49,445 39,203 31,635 161,485 136,710
Gross margin 65,346 65,633 63,016 258,583 207,088
Operating expenses:
Sales, general and
administrative 42,099 39,685 39,613 156,886 138,692
Research and development 21,254 21,982 15,755 76,856 55,373
Total operating expenses 63,353 61,667 55,368 233,742 194,065
Income from operations 1,993 3,966 7,648 24,841 13,023
Interest and other income
(expense), net 1,021 1,274 (582) 3,263 2,738
Income before provision for
income taxes 3,014 5,240 7,066 28,104 15,761
Provision for (benefit from)
income taxes 931 (471) 9,137 (1,101) 10,554
Net income (loss) $
2,083 $
5,711 $
(2,071) $
29,205 $
5,207
Net income (loss) per common and common
equivalent shares:
Basic $
0.04 $
0.10 $
(0.04) $
0.52 $
0.10
Diluted $
0.03 $
0.10 $
(0.04) $
0.50 $
0.10
Weighted average number of common and common
equivalent shares outstanding:
Basic 58,502 58,340 52,913 56,392 52,726
Diluted 59,665 59,805 52,913 57,922 53,898
(1) Amounts for the three and
twelve months ended December
31, 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 December 31, 2018 Three Months Ended September 30, 2018 Three Months Ended December 31, 2017 (1)
TASER Software Total TASER Software Total TASER Software Total
and Sensors and Sensors and Sensors
---
Net sales from
products (2) $
65,301 $
23,716 $
89,017 $
63,666 $
17,257 $
80,923 $
64,409 $
13,099 $
77,508
Net sales from
services (3) - 25,774 25,774 23,913 23,913 17,143 17,143
Net sales 65,301 49,490 114,791 63,666 41,170 104,836 64,409 30,242 94,651
Cost of product
sales 22,874 19,989 42,863 19,256 13,697 32,953 18,713 7,467 26,180
Cost of service
sales - 6,582 6,582 6,250 6,250 5,455 5,455
Cost of sales 22,874 26,571 49,445 19,256 19,947 39,203 18,713 12,922 31,635
Gross margin 42,427 22,919 65,346 44,410 21,223 65,633 45,696 17,320 63,016
Sales, general and
administrative 25,151 16,948 42,099 22,574 17,111 39,685 22,919 16,694 39,613
Research and
development 5,196 16,058 21,254 4,837 17,145 21,982 2,446 13,309 15,755
Income (loss) from
operations $
12,080 $
(10,087) $
1,993 $
16,999 $
(13,033) $
3,966 $
20,331 $
(12,683) $
7,648
Gross margin % 65.0 46.3 56.9 69.8 51.5 62.6 70.9 57.3 66.6
% % % % % % % % %
Operating margin % 18.5 (20.4) 1.7
% 26.7 (31.7) 3.8
% 31.6 (41.9)
% % % % % % 8.1
%
Twelve Months Ended December 31, 2018 Twelve Months Ended December 31, 2017 (1)
TASER Software and Total TASER Software and Total
Sensors Sensors
Net sales from
products (2) $
253,115 $
74,520 $
327,635 $
234,512 $
51,347 $
285,859
Net sales from
services (3) 92,433 92,433 57,939 57,939
Net sales 253,115 166,953 420,068 234,512 109,286 343,798
Cost of product
sales 80,354 58,983 139,337 72,054 45,943 117,997
Cost of service
sales 22,148 22,148 18,713 18,713
Cost of sales 80,354 81,131 161,485 72,054 64,656 136,710
Gross margin 172,761 85,822 258,583 162,458 44,630 207,088
Sales, general and
administrative 90,910 65,976 156,886 78,202 60,490 138,692
Research and
development 17,012 59,844 76,856 8,377 46,996 55,373
Income (loss) from
operations $
64,839 $
(39,998) $
24,841 $
75,879 $
(62,856) $
13,023
Gross margin % 68.3
% 51.4 61.5
% 69.3
% 40.8
% % 60.2
%
Operating margin % 25.6
% (24.0) 5.9
% 32.4
% (57.5)
% % 3.8
%
(1) Amounts for the three and
twelve months ended December 31,
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 December 31,
Twelve Months Ended December 31,
2018 2017 Unit Percent 2018 2017 Unit Percent
Change Change Change Change
---
TASER 7 5,759 5,759
* 5,759 5,759
*
TASER X26P 18,597 23,350 (4,753) (20.4) 71,823 70,381 1,442 2.0
TASER X2 13,088 21,683 (8,595) (39.6) 65,855 76,106 (10,251) (13.5)
TASER Pulse
and Bolt 7,490 3,641 3,849 105.7 18,398 12,504 5,894 47.1
Cartridges 600,690 590,126 10,564 1.8 2,342,897 2,408,471 (65,574) (2.7)
Axon Body 26,167 13,944 12,223 87.7 85,965 89,808 (3,843) (4.3)
Axon Flex 5,080 5,253 (173) (3.3) 15,541 26,025 (10,484) (40.3)
Axon Fleet 3,908 2,197 1,711 77.9 9,445 3,795 5,650 148.9
Axon Dock 3,859 3,908 (49) (1.3) 17,762 23,492 (5,730) (24.4)
TASER Cam 1,952 2,245 (293) (13.1) 8,310 6,432 1,878 29.2
AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
Dollars in thousands
For the Three Months Ended For the Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 (1) 2018 2017 (1)
---
EBITDA and Adjusted EBITDA:
---
Net income (loss) $
2,083 $
5,711 $
(2,071) $
29,205 $
5,207
Depreciation and
amortization 2,389 3,065 2,364 10,615 8,041
Interest expense 33 16 54 86 186
Investment interest income (1,076) (1,256) (227) (3,002) (904)
Provision for (benefit from)
income taxes 931 (471) 9,137 (1,101) 10,554
EBITDA $
4,360 $
7,065 $
9,257 $
35,803 $
23,084
Adjustments:
Stock-based compensation
expense $
6,577 $
6,255 $
4,187 $
21,879 $
15,610
Transaction costs and
adjustments related to
business acquisition - 1,382 290
Loss on disposal and
abandonment of intangible
assets 14 2,049 1,146 2,117 1,146
Loss (gain) on disposal and
impairment of property and
equipment, net 13 137 (28) 303 (28)
Adjusted EBITDA $
10,964 $
15,506 $
14,562 $
61,484 $
40,102
Net income (loss) as a 1.8 5.4
% (2.2)
percentage of net sales % % 7.0
% 1.5
%
Adjusted EBITDA as a 9.6 14.8 15.4 14.6 11.7
percentage of net sales % % % % %
(1) Amounts for the three and
twelve months ended December
31, 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
For the Three Months Ended For the Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 (1) 2018 2017 (1)
---
Non-GAAP net income:
---
GAAP net income (loss) $
2,083 $
5,711 $
(2,071) $
29,205 $
5,207
Non-GAAP adjustments:
Stock-based compensation
expense 6,577 6,255 4,187 21,879 15,610
Loss on disposal and
abandonment of intangible
assets 14 2,049 1,146 2,117 1,146
Loss (gain) on disposal and
impairment of property and
equipment, net 13 137 (28) 303 (28)
Transaction costs and
adjustments related to
business acquisition - 1,382 290
One-time charge related to
Tax Cuts and Jobs Act - 8,012 8,012
Income tax effects (1,737) (2,048) (1,997) (6,366) (6,406)
Income tax benefit of CEO
stock option exercise (2,321) (5,683)
Non-GAAP net income $
4,629 $
12,104 $
9,249 $
42,837 $
23,831
For the Three Months Ended For the Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 (1) 2018 2017 (1)
---
Non-GAAP diluted earnings per share:
---
GAAP diluted earnings per
share $
0.03 $
0.10 $
(0.04) $
0.50 $
0.10
Non-GAAP adjustments:
Stock-based compensation
expense 0.11 0.10 0.08 0.38 0.29
Loss on disposal and
abandonment of intangible
assets 0.00 0.03 0.02 0.04 0.02
Loss (gain) on disposal and
impairment of property and
equipment, net 0.00 0.00 (0.00) 0.01 (0.00)
Transaction costs and
adjustments related to
business acquisition - 0.02 0.01
One-time charge related to
Tax Cuts and Jobs Act - 0.15 0.15
Income tax effects (0.03) (0.03) (0.04) (0.11) (0.12)
Income tax benefit of CEO
stock option exercise (0.04) (0.10)
Non-GAAP diluted earnings
per share (2) $
0.08 $
0.20 $
0.17 $
0.74 $
0.44
Weighted average number of
diluted common and common
equivalent shares
outstanding (in thousands) 59,665 59,805 54,069 57,922 53,898
(1) Amounts for the three and twelve
months ended December 31, 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.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 2018 December 31, 2017
---
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $
349,462 $
75,105
Short-term investments - 6,862
Accounts and notes receivable,
net 130,579 56,064
Contract assets, net 13,960
Inventory, net 33,763 45,465
Prepaid expenses and other
current assets 30,391 21,696
Total current assets 558,155 205,192
Property and equipment, net 37,893 31,172
Deferred income tax assets, net 19,347 15,755
Intangible assets, net 15,935 18,823
Goodwill 24,981 14,927
Long-term notes receivable, net
of current portion 40,230 36,877
Other assets 22,999 15,366
Total assets $
719,540 $
338,112
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 15,164 8,592
Accrued liabilities 41,092 23,502
Current portion of deferred
revenue 107,016 70,401
Customer deposits 2,702 3,673
Current portion of business
acquisition contingent
consideration - 1,693
Other current liabilities 37 89
Total current liabilities 166,011 107,950
Deferred revenue, net of current
portion 74,417 54,881
Liability for unrecognized tax
benefits 2,849 1,706
Long-term deferred compensation 3,235 3,859
Business acquisition contingent
consideration, net of current
portion - 1,048
Other long-term liabilities 5,704 1,224
Total liabilities 252,216 170,668
Stockholders' Equity:
Preferred stock -
Common stock 1 1
Additional paid-in capital 453,400 201,672
Treasury stock (155,947) (155,947)
Retained earnings 171,383 123,185
Accumulated other comprehensive
loss (1,513) (1,467)
Total stockholders' equity 467,324 167,444
Total liabilities and
stockholders' equity $
719,540 $
338,112
AXON ENTERPRISE, INC.
SELECTED CASH FLOW INFORMATION
(Unaudited)
(in thousands)
Three Months Ended Twelve Months Ended December 31,
December 31, September 30, December 31, 2018 2017 (1)
2018 2018 2017 (1)
---
Net income (loss) $
2,083 $
5,711 $
(2,071) $
29,205 $
5,207
Depreciation and
amortization 2,389 3,065 2,364 10,615 8,041
Stock-based
compensation 6,577 6,255 4,187 21,879 15,610
Net cash provided by
operating
activities 31,239 16,530 24,322 63,875 18,471
Net cash provided by
(used in) investing
activities (3,857) 1,223 9,531 (9,860) 19,082
Net cash provided by
(used in) financing
activities (2,810) (1,039) (2,245) 219,348 (3,820)
Cash and cash
equivalents 349,462 324,371 75,105 349,462 75,105
Restricted cash 1,565 2,477 3,333 1,565 3,333
Cash, cash
equivalents and
restricted cash,
end of period 351,027 326,848 78,438 351,027 78,438
Three Months Ended Twelve Months Ended December 31,
December 31, September 30, December 31, 2018 2017 (1)
2018 2018 2017 (1)
---
Net cash provided by
operating
activities $
31,239 $
16,530 $
24,322 $
63,875 $
18,471
Purchases of
property and
equipment (4,259) (2,215) (1,347) (11,139) (10,419)
Purchases of
intangible assets (98) (206) (593) (558) (1,024)
Cash flows related
to business
acquisitions - 24 (4,990) (10,629)
Free cash flow
(deficit), a non-
GAAP measure $
26,882 $
14,133 $
22,382 $
47,188 $
(3,601)
(1) Amounts for the three and
twelve months ended December
31, 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.
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SOURCE Axon
