Axon Reports 2017 Second Quarter Results

Revenues of $79.6 million, up 36% Year-over-Year
Record Bookings of $81.9 million, up 14% Year-over-Year

SCOTTSDALE, Ariz., Aug. 8, 2017 /PRNewswire/ -- Axon Enterprise, Inc. (Nasdaq: AAXN), today reported financial results for the second quarter ended June 30, 2017.

TASER's Axon brand includes a growing suite of connected products and services from body cameras and digital evidence management tools to mobiles apps.

"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
Weapons


Software and Sensors


Total


TASER
Weapons


Software and Sensors


Total













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
Weapons


Software and Sensors


Total


TASER
Weapons


Software and Sensors


Total













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, 2016


September 30, 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 Change


2017


2016


Unit Change


Percent 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

 

Axon (Nasdaq: AAXN) headquarters in Scottsdale, AZ, USA.

View original content with multimedia:http://www.prnewswire.com/news-releases/axon-reports-2017-second-quarter-results-300501513.html

SOURCE Axon

News Provided by Acquire Media