01—Abstract
Summary
Summary of the 10-K filed February 27, 2019. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Revenue increased by 22.2% year-over-year to $420.1 million in 2018.
- The Software and Sensors segment saw significant growth, with net sales increasing by 52.8% to $167.0 million in 2018.
- Bookings for the Software and Sensors segment grew by 33.6% to $389.1 million in 2018, indicating a strong future revenue pipeline.
- Gross margin improved to 61.6% in 2018 from 60.2% in 2017, driven by the Software and Sensors segment's improved margins.
- The company continues to invest heavily in R&D, particularly in new product development and expanding its software and cloud offerings.
- Axon's backlog increased significantly to $812.7 million as of December 31, 2018, primarily due to growth in the Software and Sensors segment.
- Despite revenue growth, the company has not declared or paid cash dividends and does not intend to in the foreseeable future.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Axon Enterprise, Inc. kept $0.07.
- Revenue$420.1M100.0%
- Cost of revenue−$161.5M38.4%
- Gross profit$258.6M61.6%
- Operating costs−$233.7M55.6%
- Operating income$24.8M5.9%
- Interest, other & tax$4.4M1.0%
- Net income$29.2M7.0%
Where FY2018 revenue went
$420.1M- Cost of revenue: $161.5M, 38% of revenue
- SG&A: $156.9M, 37% of revenue
- R&D: $76.9M, 18% of revenue
- Operating income: $24.8M, 5.9% of revenue
Kept 5.9% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 27, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $420.07M$343.80M | +22.2% |
| Cost of Revenue | $161.49M$136.71M | +18.1% |
| Gross Profit | $258.58M$207.09M | +24.9% |
| R&D Expenses | $76.86M$55.37M | +38.8% |
| SG&A Expenses | $156.89M$138.69M | +13.1% |
| Operating Expenses | $233.74M$194.06M | +20.4% |
| Operating Income | $24.84M$13.02M | +90.7% |
| Net Income | $29.20M$5.21M | +460.9% |
| EPS (Basic) | $0.52$0.10 | +420.0% |
| EPS (Diluted) | $0.50$0.10 | +400.0% |
| Shares Outstanding (Basic) | 56.39M52.73M | +7.0% |
| Shares Outstanding (Diluted) | 57.92M53.90M | +7.5% |
05—Questions
Frequently Asked Questions
What is Axon Enterprise's primary business and how is it segmented?
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.
What are the key growth drivers for Axon Enterprise?
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.
What are the main risks and challenges facing Axon Enterprise?
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.
How has the shift to a subscription model impacted Axon's financials?
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.
06—Continue