Axon Enterprise, Inc.
AXON ENTERPRISE, INC. (Form: 8-K, Received: 08/08/2017 16:05:39)


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 8, 2017
Date of Report (Date of earliest event reported)
 
Axon Enterprise, Inc.
( Exact name of registrant as specified in its charter)
Delaware
 (State or other jurisdiction of
 incorporation)
 
001-16391
 (Commission File Number)
 
86-0741227
 (IRS Employer
 Identification No.)

17800 N. 85 th St.
Scottsdale, Arizona 85255
(Address of principal executive offices, including zip code)

(480) 991-0797
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).  Emerging growth company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

 





TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURE


Item 2.02 Results of Operations and Financial Condition

On August 8, 2017 Axon Enterprise, Inc. (the "Company" or "Axon"), formerly, TASER International, Inc., issued a press release regarding the Company’s financial results for its second quarter of 2017 . The full text of the press release, together with the unaudited condensed consolidated statements of operations, segment reporting, balance sheets, selected cash flow information, statistical measures and reconciliations of GAAP to non-GAAP financial measures are attached hereto as Exhibit 99.1. The Company has also provided additional unaudited statistical data for its second quarter of 2017 as attached hereto as Exhibit 99.2.

The information pursuant to Item 2.02 in this report on Form 8-K is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.

Item 9.01 Financial Statements and Exhibits

(d)        Exhibits
Exhibit
Number
 
Exhibit Description
99.1
 
Press release dated August 8, 2017
99.2
 
Unaudited operating metrics dated August 8, 2017





 






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
Dated: August 8, 2017
Axon Enterprise, Inc.
 
 
By:  
 /s/ JAWAD A. AHSAN
 
 
 
Jawad A. Ahsan
 
 
 
Chief Financial Officer 
 















FOR RELEASE ON: August 8, 2017 at 1601 ET

Exhibit 99.1

CONTACT: Arvind Bobra
Investor Relations
Axon Enterprise, Inc.
IR@axon.com

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., August 8, 2017 − Axon Enterprise, Inc. (Nasdaq: AAXN), today reported financial results for the second quarter ended June 30, 2017 .

"We posted another strong quarter highlighted by record Axon bookings that were nearly $10 million above our previous high," commented Rick Smith, CEO and co-founder of Axon. "We’re excited to achieve this record level of bookings based on a healthy mix of customers that speaks to growing order volumes and the established momentum in our business. Our platform approach to technology solutions for law enforcement continues to resonate with our customers, and we are extending our leadership position through innovation which includes a robust product pipeline. During the quarter, we began shipping our Axon Fleet in-car camera solution which is fully integrated into our digital evidence management platform and represents an expansion of our ecosystem."

Second Quarter 2017 Financial Highlights:

Net sales increased 36% to $79.6 million in the second quarter of 2017 compared to $58.8 million in the second quarter of 2016 . International sales were $13.4 million in the second quarter of 2017 .

TASER Weapons segment revenues increased 16% to $53.0 million in the second quarter of 2017 compared to $45.5 million in the second quarter of 2016 .

Software and Sensors segment revenues increased 101% to $26.6 million in the second quarter of 2017 compared to $13.2 million in the second quarter of 2016 .

Consolidated gross margin was 57% in the second quarter of 2017 compared to 63% in the second quarter of 2016 .

TASER Weapons segment gross margin increased to 70% in the second quarter 2017 compared to 68% in 2016 .






Software and Sensors segment gross margin was 33% in the second quarter of 2017 compared to 47% in the second quarter of 2016 . Service margin was 70% in the second quarter of 2017 , including $0.6 million of non-recurring data migration expense, compared to 71% in the second quarter of 2016 . Hardware product margin (excluding services) was negative 2% in the second quarter 2017 compared to 33% in the second quarter of 2016 attributable to discounting of upfront hardware on multi-year contracts which results in a portion of the allocated value of the hardware to be recognized ratably over the contractual term.

Income from operations was $0.8 million in the second quarter of 2017 compared to $6.2 million in the second quarter of 2016 .

Net income for the second quarter of 2017 was $2.3 million , or $0.04 per diluted share, compared to $3.7 million , or $0.07 per diluted share, in the second quarter of 2016 .

Adjusted EBITDA for the second quarter of 2017 was $8.3 million compared to $9.4 million in the second quarter of 2016 .

In the second quarter of 2017 , the Company used $5.8 million in cash in operating activities. Cash, cash equivalents and investments were $61.8 million at June 30, 2017 , compared to $89.3 million at December 31, 2016 .
Business Highlights:

As of the end of the second quarter of 2017 , 38 of the 68 major city law enforcement agencies have purchased Axon body-worn cameras and/or its digital evidence management solution: Albuquerque, Atlanta, Austin, Baltimore, Baltimore County, Charlotte-Mecklenburg, Chicago, Cincinnati, Cleveland, Dallas, Denver, Fort Worth, Fresno, Las Vegas, Los Angeles, Louisville, Memphis, Mesa, Miami, Milwaukee, Minneapolis, Montgomery County, New Orleans, Omaha, Philadelphia, Pittsburgh, Sacramento, Salt Lake City, San Antonio, San Diego, San Francisco, San Jose, Seattle, Tampa, Toronto, Tucson, Washington DC, and Wichita.

Axon's Evidence.com platform user count continued to grow, extending the Company's market leadership. During the three months ended June 30, 2017 , the Company booked approximately 20,600 seats on its digital evidence management platform, Evidence.com, net of renewals. Since inception, the Company has booked cumulative Evidence.com licenses of approximately 169,000.
Quarterly Conference Call:

The Company will host its second quarter 2017 earnings conference call on Tuesday , August 8, 2017 at 4:30 p.m. ET. To join the live audio presentation, please dial toll free 877-303-9126, or for international callers, please dial +1-253-237-1156.






The Company has posted supplemental materials including its key operating metrics on its website to provide additional information about our second quarter financial results.

The Company plans to update and post its investor relations presentation with the second quarter results to http://investor.axon.com within the next two weeks. Archived presentations from previous quarters can also be found on the website.

Statistical Definitions:

Axon cameras and Evidence.com bookings represent a statistical measure defined as the sales price of orders placed in the relevant time period. Bookings are an indication of the activity the Company is seeing relative to Axon cameras and Evidence.com. We consider bookings to be a statistical measure defined as the sales price of orders (not invoiced sales) placed in the relevant fiscal period, net of cancellations, regardless of when the products or services ultimately will be provided. Some bookings might be invoiced in subsequent years.

Due to municipal government funding rules, certain of the future year amounts included in bookings are subject to budget appropriation or other contract cancellation clauses. Although the Company has entered into contracts for the delivery of products and services in the future and anticipates the contracts will be completed, if agencies invoke a cancellation clause or do not appropriate funds in future year budgets, revenue associated with these bookings will ultimately not be recognized, resulting in a future reduction to bookings. In the second quarter of 2017 , the Company did not record any reversals related to prior period bookings due to non-appropriation or other cancellation reasons.

For more information relative to our revenue recognition policies, please reference our SEC filings.

Non-GAAP Measures:

To supplement the Company’s financial results presented in accordance with GAAP, we present the non-GAAP financial measures of EBITDA, Adjusted EBITDA and Free Cash Flow. Our management uses these non-GAAP financial measures in evaluating the Company’s performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented at the end of the release.

EBITDA is defined as consolidated net income before interest expense, income taxes and depreciation and amortization. Adjusted EBITDA, as presented herein, is defined as EBITDA before certain other items, including: stock-based compensation; net gain/loss on write-down/disposal of property, equipment and intangible assets; and loss on impairment.

Free Cash Flow is defined as cash flows provided by operating activities minus purchases of property, plant and equipment, and intangible assets.





Caution on Use of Non-GAAP Measures

Although these non-GAAP financial measures are not consistent with GAAP, management believes investors will benefit by referring to these non-GAAP financial measures when assessing the Company’s operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to the Company’s GAAP financial measures;
these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the Company’s GAAP financial measures;
these non-GAAP financial measures should not be considered to be superior to the Company’s GAAP financial measures; and
these non-GAAP financial measures were not prepared in accordance with GAAP and investors should not assume that the non-GAAP financial measures presented in this earnings release were prepared under a comprehensive set of rules or principles.

Further, these non-GAAP financial measures may be unique to the Company, as they may be different from similarly titled non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company’s results to the results of other companies.

About Axon

The Axon network is a network of devices, apps and people that helps law enforcement become smarter and safer. Our mission is to protect life. Our technologies give law enforcement the confidence, focus, and time they need to keep their communities safe. Our products impact every aspect of an officer's day-to-day experience:

In the field  - Our Smart Weapons offer a less-lethal intermediate use of force response and our body-worn and in-car cameras collect video evidence to capture the truth of an incident; and our mobile applications enable simple evidence collection.

At the station  - Our secure, cloud-based digital evidence management solution allows officers and command staff to manage, review, share and process digital evidence using forensic, redaction, transcription and other tools.

In the courtroom  - Our solutions for prosecutors make collaborating across jurisdictions and agencies easy so that cases can be resolved quickly.

We work hard for those who put themselves in harm's way for all of us. To date, there are more than 100,000 licensed users from around the world and more than 187,000 lives and countless dollars have been saved with the Axon network of devices, apps and people. Learn more at www.axon.com or by calling (800) 978-2737.






Axon, the "Axon Delta" logo, Axon network, Evidence.com, 'Protect Life,' TASER, Smart Weapons, X2, and X26P are trademarks of Axon Enterprise, Inc., some of which are registered in the U.S. and other countries. For more information, visit www.axon.com/legal. All rights reserved.

Note to Investors

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements regarding our expectations, beliefs, intentions or strategies regarding the future. We intend that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. The forward-looking information is based upon current information and expectations regarding Axon Enterprise, Inc. These estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict. Axon Enterprise, Inc. assumes no obligation to update the information contained in this press release, except as required by law.

We caution that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward looking statements herein. Such factors include, but are not limited to: market acceptance of our products; our dependence on sales of our TASER X26P and X2 CEWs; acceptance of our Evidence.com software as a service delivery model by our law enforcement customers; our a bility 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.

- More -






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



# # #





AXONHORIZONTALA01.JPG

Operating Metrics (Unaudited)
 
 
2017
 
2016
 
2015
 
 
Q2
Q1
 
Q4
Q3
Q2
Q1
 
Q4
Q3
Q2
 
 
 
 
 
 
 
 
 
 
 
 
 
Axon & Evidence.com Bookings (millions)
 
$
81.9

$
60.1

 
$
72.5

$
57.5

$
72.0

$
52.1

 
$
44.7

$
36.9

$
30.6

Sequential % Change
 
36
%
-17
 %
 
26
%
-20
 %
38
%
17
%
 
21
%
21
%
34
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual Service Revenue (millions)  (1)
 
$
54.7

$
46.2

 
$
40.2

$
32.0

$
21.1

$
18.1

 
$
16.7

$
12.0

$
9.8

 
 
 
 
 
 
 
 
 
 
 
 
 
Future Contracted Revenue (millions) (2)
 
$
446.4

$
390.0

 
$
350.8

$
302.0

$
262.8

$
202.3

 
$
159.0

$
122.4

$
94.9

Sequential % Change
 
14
%
11
 %
 
16
%
15
 %
30
%
27
%
 
30
%
29
%
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Multiple Year Contract % (3)
 
97
%
94
 %
 
88
%
89
 %
95
%
95
%
 
92
%
91
%
88
%
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV/CAC
 
5.5x

4.3x

 
6.0x

4.9x

6.2x

5.1x

 
4.3x

4.6x

4.5x

 
 
 
 
 
 
 
 
 
 
 
 
 
Weapons Op Inc %
 
33
%
35
 %
 
36
%
38
 %
33
%
34
%
 
37
%
35
%
39
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Evidence.com new seats booked
 
20,600

16,400

 
21,400

15,600

20,200

15,800

 
13,200

9,300

9,500

 
 
 
 
 
 
 
 
 
 
 
 
 
Evidence.com cumulative seats booked
 
169,000

148,400

 
132,000

110,600

95,000

74,800

 
59,000

45,800

36,400

 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Monthly recurring license, integration, warranty and storage revenue annualized.
 
 
(2)  Cumulative bookings for the Software and Sensors segment minus cumulative recognized revenue related solely to Software and Sensors segment
(3)  For orders booked with Evidence.com seats, the % that signed multiple year contracts
 
 





AXONHORIZONTALA01.JPG

SG&A Expenses by Segment (Unaudited)
 
Three Months Ended June 30,
 
Dollar Change
 
Percent Change
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TASER Weapons segment:
 
 
 
 
 
 
 
 
 
 
 
Salaries, benefits and bonus
$
6,993

 
22.0
%
 
$
5,150

 
21.1
%
 
$
1,843

 
35.8
 %
Stock-based compensation
1,432

 
4.5

 
863

 
3.5

 
569

 
65.9

Professional, consulting and lobbying
2,408

 
7.6

 
2,932

 
12.0

 
(524
)
 
(17.9
)
Sales and marketing
2,254

 
7.1

 
2,102

 
8.6

 
152

 
7.2

Travel and meals
1,245

 
3.9

 
964

 
4.0

 
281

 
29.1

Other
3,160

 
9.9

 
2,673

 
11.0

 
487

 
18.2

Total TASER Weapons segment
17,492

 
55.0

 
14,684

 
60.2

 
2,808

 
19.1

Software and Sensors segment:
 
 
 
 
 
 
 
 
 
 
 
Salaries, benefits and bonus
6,790

 
21.3

 
4,177

 
17.1

 
2,613

 
62.6

Stock-based compensation
723

 
2.3

 
596

 
2.4

 
127

 
21.3

Professional, consulting and lobbying
2,511

 
7.9

 
1,929

 
7.9

 
582

 
30.2

Sales and marketing
2,196

 
6.9

 
1,418

 
5.8

 
778

 
54.9

Travel and meals
1,443

 
4.5

 
1,104

 
4.5

 
339

 
30.7

Other
669

 
2.1

 
471

 
1.9

 
198

 
42.0

Total Software and Sensors segment
14,332

 
45.0

 
9,695

 
39.8

 
4,637

 
47.8

Total sales, general and administrative expenses
$
31,824

 
100.0
%
 
$
24,379

 
100.0
%
 
$
7,445

 
30.5











AXONHORIZONTALA01.JPG

R&D Expenses by Segment (Unaudited)
 
Three Months Ended June 30,
 
Dollar Change
 
Percent Change
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TASER Weapons segment:
 
 
 
 
 
 
 
 
 
 
 
Salaries, benefits and bonus
$
742

 
5.7
%
 
$
419

 
6.2
%
 
$
323

 
77.1
 %
Stock-based compensation
129

 
1.0

 
142

 
2.1

 
(13
)
 
(9.2
)
Professional and consulting
324

 
2.5

 
156

 
2.3

 
168

 
107.7

Travel and meals
152

 
1.2

 
155

 
2.3

 
(3
)
 
(1.9
)
Other
516

 
4.0

 
373

 
5.6

 
143

 
38.3

Total TASER Weapons segment
1,863

 
14.3

 
1,245

 
18.6

 
618

 
49.6

Software and Sensors segment:
 
 
 
 
 
 
 
 
 
 
 
Salaries, benefits and bonus
6,286

 
48.4

 
3,432

 
51.1

 
2,854

 
83.2

Stock-based compensation
1,537

 
11.8

 
635

 
9.5

 
902

 
142.0

Professional and consulting
1,105

 
8.5

 
625

 
9.3

 
480

 
76.8

Travel and meals
271

 
2.1

 
146

 
2.2

 
125

 
85.6

Other
1,927

 
14.8

 
627

 
9.3

 
1,300

 
207.3

Total Software and Sensors segment:
11,126

 
85.7

 
5,465

 
81.4

 
5,661

 
103.6

Total research and development expenses
$
12,989

 
100.0
%
 
$
6,710

 
100.0
%
 
$
6,279

 
93.6