10-QPeriod: Q1 FY2009

AXON ENTERPRISE, INC. Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 11, 2009For Securities:AXON

Summary

Axon Enterprise, Inc. (formerly TASER International, Inc.) reported its first quarter 2009 financial results, indicating a shift towards international markets and increased investment in research and development. While net sales saw a 9% increase year-over-year to $24.6 million, driven by strong international demand particularly in the UK and Brazil, domestic sales declined due to economic constraints on municipal spending. This international growth helped offset a decrease in consumer product sales (TASER C2) and TASER Cam. The company experienced a net loss of $0.47 million for the quarter, a reversal from the $1.2 million net income in the prior year's quarter, largely due to a significant increase in R&D expenses and SG&A costs. Despite the quarterly loss, the company maintains a strong liquidity position with $58.3 million in cash and cash equivalents. The company is actively investing in future growth, particularly in R&D for new products like AXON and EVIDENCE.com, and plans further capital expenditures in manufacturing automation. Management expresses confidence that current liquidity, operating cash flow, and its credit facility will be sufficient for at least the next 12 months, though market uncertainties are acknowledged.

Key Highlights

  • 1Net sales increased 9% to $24.6 million, primarily driven by strong international demand offsetting domestic sales decline.
  • 2International sales represented 37% of total net sales, a significant increase from 13% in the prior year's quarter.
  • 3The company reported a net loss of $0.47 million for the quarter, compared to a net income of $1.2 million in Q1 2008.
  • 4Research and Development expenses nearly doubled year-over-year to $4.2 million, reflecting increased investment in new product development.
  • 5Sales, General, and Administrative (SG&A) expenses increased by 25% to $11.5 million, partly due to higher stock-based compensation and legal fees.
  • 6Cash and cash equivalents stood strong at $58.3 million, providing robust liquidity.
  • 7The company has no outstanding debt and a substantial portion of its cash is insured by the federal government's Temporary Guarantee Program for Money Market Funds.

Frequently Asked Questions

Net sales increased by 9% to $24.6 million, primarily due to strong international shipments, particularly to the UK and Brazil, for single cartridges and TASER X26 ECDs. This growth helped offset a decline in domestic sales, attributed to economic pressures on municipal budgets, and a decrease in consumer product sales like the TASER C2.

The company reported a net loss of $0.47 million compared to a profit of $1.2 million in the prior year's quarter. This reversal was mainly due to a significant increase in Research and Development expenses, which nearly doubled to $4.2 million, and a 25% rise in Sales, General, and Administrative expenses, including higher stock-based compensation and legal costs. These investments are intended to support new product development and market expansion.

The company maintains a strong liquidity position with $58.3 million in cash and cash equivalents as of March 31, 2009. This is supported by operating cash flows and an available credit line. A significant portion of these cash equivalents are insured by the federal government's Temporary Guarantee Program for Money Market Funds, providing an additional layer of security.

The company is significantly increasing its investment in Research and Development, with expenses nearly doubling year-over-year, focusing on new product development such as the AXON and EVIDENCE.com platforms. They also plan to invest between $10.0 to $15.0 million in capital expenditures for 2009, including manufacturing automation equipment.