10-KPeriod: FY2018

AXON ENTERPRISE, INC. Annual Report, Year Ended Dec 31, 2018

Filed February 27, 2019For Securities:AXON

Summary

Axon Enterprise, Inc. (AXON) presented a strong financial performance in its 2018 Form 10-K filing, showcasing significant revenue growth driven by its expanding Software and Sensors segment, which includes body cameras and cloud-based evidence management solutions. The company demonstrated robust top-line expansion, with a notable year-over-year increase in net sales, reflecting growing adoption of its integrated technology solutions by law enforcement agencies. Key financial highlights include substantial growth in bookings for the Software and Sensors segment, indicating a strong future revenue pipeline. While the TASER segment remains a core business, the company's strategic investments in software and cloud services are increasingly contributing to its overall growth and profitability. Axon's focus on recurring revenue models through subscriptions positions it well for sustained expansion, despite acknowledging various risks related to product development, market adoption, competition, and regulatory changes that could impact future performance.

Financial Highlights

51 data points
Beta

Revenue

$420.07M

61.6% Gross Margin

Net Income

$29.20M

7.0% Net Margin

EPS (Diluted)

$0.50

Total Assets

$719.54M

Cash & Equivalents

$351.03M

Free Cash Flow

$52.74M

Financial Statements
Beta
Revenue$420.07M
Cost of Revenue$161.49M
Gross Profit$258.58M
R&D Expenses$76.86M
SG&A Expenses$156.89M
Operating Expenses$233.74M
Operating Income$24.84M
Net Income$29.20M
EPS (Basic)$0.52
EPS (Diluted)$0.50
Shares Outstanding (Basic)56.39M
Shares Outstanding (Diluted)57.92M

Key Highlights

  • 1Revenue increased by 22.2% year-over-year to $420.1 million in 2018.
  • 2The Software and Sensors segment saw significant growth, with net sales increasing by 52.8% to $167.0 million in 2018.
  • 3Bookings for the Software and Sensors segment grew by 33.6% to $389.1 million in 2018, indicating a strong future revenue pipeline.
  • 4Gross margin improved to 61.6% in 2018 from 60.2% in 2017, driven by the Software and Sensors segment's improved margins.
  • 5The company continues to invest heavily in R&D, particularly in new product development and expanding its software and cloud offerings.
  • 6Axon's backlog increased significantly to $812.7 million as of December 31, 2018, primarily due to growth in the Software and Sensors segment.
  • 7Despite revenue growth, the company has not declared or paid cash dividends and does not intend to in the foreseeable future.

Frequently Asked Questions

Axon Enterprise operates as a leading provider of technology solutions for law enforcement. Its business is segmented into two primary areas: the TASER segment, which includes conducted energy weapons (CEWs) and related accessories, and the Software and Sensors segment, which encompasses on-officer body and in-car cameras, as well as cloud-based digital evidence management software (Axon Evidence) and other software solutions.

The key growth drivers for Axon are the increasing adoption of its integrated technology solutions by law enforcement agencies. Specifically, the Software and Sensors segment, including body-worn cameras and cloud-based evidence management software like Axon Evidence, is a significant growth engine. The company is also investing in new products such as Axon Records and computer-aided dispatch software, aiming to expand its ecosystem of public safety technology.

Axon faces several risks, including dependence on law enforcement agency adoption of its products, competition from other technology providers, potential product defects, cybersecurity risks related to data storage, lengthy sales cycles due to government budget cycles, and evolving regulations in privacy and data protection. The company also notes risks associated with new product introductions and the potential for litigation.

The company is strategically shifting towards subscription-based revenue models, particularly for its Software and Sensors segment. This shift is intended to generate recurring revenue and cash flow, aligning with municipal budgeting cycles. While this transition may lead to delayed cash collections initially compared to upfront hardware sales, it is expected to provide more predictable revenue streams and leverage as the customer base scales. This is reflected in the increasing deferred revenue and backlog for subscription-based services.