01—Abstract
Summary
Summary of the 10-K filed February 28, 2023. Cited figures are marked; the original filing is the authoritative source.
Axon Enterprise, Inc. (Axon) reported a strong financial year ended December 31, 2022, with net sales increasing by 37.8% to $1.19 billiona.
The company successfully transitioned to profitability, reporting a net income of $147.1 millionb, a significant improvement from a net loss of $60.0 million in the prior year. This turnaround was driven by robust growth across both its TASER and Software and Sensors segments, with notable increases in TASER 7 device sales and Axon Evidence cloud services revenue. The company's strategic focus on recurring revenue models and integrated hardware/software solutions continues to yield positive results, evidenced by a substantial increase in its overall backlog to $4.6 billion.
Despite the strong top-line growth and improved profitability, investors should be aware of the identified material weakness in internal controls over financial reporting related to the quote-to-cash cycle, which management is actively working to remediate. Furthermore, the company carries a significant amount of convertible debt, which could lead to dilution if converted. Axon's forward-looking statements highlight a commitment to innovation and market expansion, but also acknowledge risks associated with supply chain, competition, and evolving regulations, particularly concerning its TASER 10 product, which is now regulated as a firearm.
02—Key points
Key Highlights
- Net sales surged by 37.8% to $1.19 billion for the year ended December 31, 2022, driven by strong performance in both the TASER and Software and Sensors segments.
- The company achieved profitability with a net income of $147.1 million, a significant turnaround from a net loss of $60.0 million in the prior year.
- The TASER segment saw a 21.7% increase in net sales, largely due to the strong performance of the TASER 7 device and cartridges, with a shift from legacy devices.
- The Software and Sensors segment experienced a substantial 54.4% increase in net sales, primarily fueled by growth in Axon Evidence and cloud services, as well as increased demand for Axon Body and Axon Fleet cameras.
- The company's total backlog grew significantly to $4.6 billion, indicating strong future revenue potential.
- A material weakness in internal controls over financial reporting was identified related to the quote-to-cash cycle for software and services revenue, which management is actively remediating.
- The company successfully issued $690.0 million in 0.50% Convertible Senior Notes due 2027, strengthening its liquidity position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Axon Enterprise, Inc. kept $0.12.
- Revenue$1.19B100.0%
- Cost of revenue−$461.0M38.8%
- Gross profit$726.1M61.2%
- Operating costs−$633.1M53.3%
- Operating income$93.0M7.8%
- Interest, other & tax$54.0M4.5%
- Net income$146.9M12.4%
Where FY2022 revenue went
$1.19B- Cost of revenue: $461.0M, 39% of revenue
- SG&A: $399.3M, 34% of revenue
- R&D: $233.8M, 20% of revenue
- Operating income: $93.0M, 7.8% of revenue
Kept 7.8% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 28, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $1.19B$865.64M | +37.1% |
| Cost of Revenue | $461.03M$319.92M | +44.1% |
| Gross Profit | $726.11M$545.72M | +33.1% |
| R&D Expenses | $233.81M$194.03M | +20.5% |
| SG&A Expenses | $399.33M$514.85M | −22.4% |
| Operating Expenses | $633.14M$708.87M | −10.7% |
| Operating Income | $92.97M-$163.15M | +157.0% |
| Net Income | $146.93M-$60.02M | +344.8% |
| EPS (Basic) | $2.07$-0.85 | +343.5% |
| EPS (Diluted) | $2.03$-0.91 | +323.1% |
| Shares Outstanding (Basic) | 71.09M66.19M | +7.4% |
| Shares Outstanding (Diluted) | 72.53M66.19M | +9.6% |
05—Questions
Frequently Asked Questions
What is Axon's overall financial performance for the fiscal year 2022?
Axon reported strong top-line growth with net sales reaching $1.19 billion, a 37.8% increase year-over-year. The company also achieved profitability, posting a net income of $147.1 million, a substantial improvement from a net loss in the previous year. This growth was driven by increased sales in both its TASER and Software and Sensors segments.
What are the key growth drivers for Axon's business segments?
The TASER segment's growth was primarily driven by the TASER 7 device and related cartridges, with increasing adoption and a shift away from legacy models. The Software and Sensors segment saw significant growth from its Axon Evidence cloud platform and services, as well as strong demand for its body-worn cameras (Axon Body) and in-car systems (Axon Fleet).
What is the significance of the material weakness in internal controls reported by Axon?
Axon identified a material weakness in its internal controls related to the quote-to-cash cycle, stemming from issues during the implementation of new systems. This led to immaterial understatements of revenue and overstatements of deferred revenue. While management is actively implementing remediation steps with a target completion by the end of fiscal year 2023, this indicates a need for investors to monitor the company's control environment and financial reporting accuracy.
How does the company's debt situation impact investors?
Axon issued $690 million in convertible senior notes in December 2022. While this provides liquidity, the convertibility feature carries the risk of dilution to existing shareholders if the stock price triggers conversion. Investors should consider this potential dilution in their assessment of the company's equity.
06—Continue