01—Abstract
Summary
Summary of the 10-K filed March 6, 2017. Cited figures are marked; the original filing is the authoritative source.
Axon Enterprise, Inc. (formerly TASER International, Inc.) reported significant growth in its 2016 fiscal year, with net sales increasing by 35.6% to $268.2 milliona.
This growth was driven by strong performance in both its TASER Weapons segment (up 24.8%) and its rapidly expanding Axon segment (up 84.7%). The company highlighted the increasing adoption of its Axon on-officer cameras and Evidence.com platform as key drivers for the Axon segment's success. Despite robust revenue growth, net income saw a slight decrease to $17.3 millionb from $19.9 million in the prior year, partly due to increased operating expenses, particularly in Sales, General & Administrative (SG&A) and Research & Development (R&D) to support future growth and new product development.
The company also reported a significant increase in its backlog to $384.2 millionc, indicating strong future revenue potential. Financially, Axon ended the year with $40.7 million in cash and cash equivalents. The company's strategic focus remains on expanding its connected platform, aiming for every officer to carry a TASER device, deploy an Axon camera, and be connected to the Axon network.
Investments in AI capabilities through acquisitions signal a commitment to innovation and future growth. Investors should note the company's stated intention not to pay dividends and its ongoing investment in growth initiatives, which will likely continue to drive SG&A and R&D expenses.
02—Key points
Key Highlights
- Net sales increased by 35.6% to $268.2 million in 2016, driven by strong performance in both TASER Weapons and the rapidly growing Axon segment.
- The Axon segment experienced significant growth of 84.7%, fueled by the adoption of on-officer cameras and the Evidence.com platform.
- Backlog increased substantially to $384.2 million, signaling strong future revenue potential.
- Operating expenses, particularly SG&A and R&D, increased significantly to support growth initiatives and new product development, impacting net income.
- The company is investing in Artificial Intelligence (AI) capabilities through acquisitions to enhance its Axon platform.
- Axon Enterprise does not currently pay dividends and has no intention to do so in the foreseeable future.
- Despite revenue growth, net income decreased slightly to $17.3 million from $19.9 million in the prior year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Axon Enterprise, Inc. kept $0.06.
- Revenue$268.2M100.0%
- Cost of revenue−$97.7M36.4%
- Gross profit$170.5M63.6%
- Operating costs−$138.7M51.7%
- Operating income$31.9M11.9%
- Interest, other & tax−$14.6M5.4%
- Net income$17.3M6.4%
Where FY2016 revenue went
$268.2M- SG&A: $108.1M, 40% of revenue
- Cost of revenue: $97.7M, 36% of revenue
- Net income: $17.3M, 6.4% of revenue
- R&D: $30.6M, 11% of revenue
- Interest, other & tax: $14.6M, 5.4% of revenue
Kept 6.4% as net incomeNet income $17.3M · 6.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed March 6, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $268.25M$197.89M | +35.6% |
| Cost of Revenue | $97.71M$69.25M | +41.1% |
| Gross Profit | $170.54M$128.65M | +32.6% |
| R&D Expenses | $30.61M$23.61M | +29.6% |
| SG&A Expenses | $108.08M$69.70M | +55.1% |
| Operating Expenses | $138.69M$93.31M | +48.6% |
| Operating Income | $31.85M$35.34M | −9.9% |
| Net Income | $17.30M$19.93M | −13.2% |
| EPS (Basic) | $0.33$0.37 | −10.8% |
| EPS (Diluted) | $0.32$0.36 | −11.1% |
| Shares Outstanding (Basic) | 52.67M53.55M | −1.6% |
| Shares Outstanding (Diluted) | 53.54M54.64M | −2.0% |
05—Questions
Frequently Asked Questions
What is Axon Enterprise's (formerly TASER International) primary business and growth strategy?
Axon Enterprise's core business is the development, manufacture, and sale of conducted electrical weapons (CEWs) under the TASER brand and connected wearable on-officer cameras and digital evidence management solutions under the Axon brand. The company's growth strategy is focused on expanding its connected ecosystem, aiming for every law enforcement officer to use its TASER devices, Axon cameras, and be connected to the Axon network. Key initiatives include launching innovative new products, scaling existing offerings, and driving network adoption globally.
How did the company perform financially in the fiscal year 2016?
In fiscal year 2016, Axon Enterprise reported a significant increase in net sales, reaching $268.2 million, a 35.6% rise from the previous year. This growth was robust across both segments, with the TASER Weapons segment up 24.8% and the Axon segment showing exceptional growth of 84.7%. However, net income slightly decreased to $17.3 million from $19.9 million in 2015, largely due to increased operating expenses in sales, general, and administrative (SG&A) functions, as well as research and development (R&D) investments to support future growth and product innovation.
What are the key risks facing Axon Enterprise, as highlighted in the filing?
Key risks identified include significant dependence on law enforcement market acceptance of its products, the potential for delays or slow adoption of its Evidence.com SaaS model, risks associated with rapid technological change and competition, and the potential for product defects. The company also faces risks related to data security breaches, interruptions in cloud storage services, government budgetary constraints, lengthy sales cycles, and potential liability from product use. Management also noted material weaknesses in internal controls over financial reporting, primarily related to revenue recognition and deferred revenue reporting, which they are actively working to remediate.
What is the company's approach to research and development and future innovation?
Axon Enterprise emphasizes R&D as a foundation for long-term growth, with a significant portion of its operating expenses dedicated to this area. In 2016, R&D expenses increased by 29.6% to $30.6 million. The company is actively investing in next-generation technology, including the formation of an 'Axon AI' group through acquisitions of proprietary technology and teams focused on computer vision and deep learning. This strategic focus on AI aims to improve the analysis of video and audio data, making it more searchable and insightful for public safety customers.
06—Continue