10-QPeriod: Q1 FY2013

AXON ENTERPRISE, INC. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 7, 2013For Securities:AXON

Summary

Axon Enterprise, Inc. (formerly TASER International, Inc.) reported solid revenue growth in the first quarter of 2013, with net sales increasing by 18.7% year-over-year to $30.4 million. This growth was primarily driven by strong adoption of the new TASER X2 and X26P conducted electrical weapons (CEWs), alongside continued momentum in the emerging Video segment which includes AXON cameras and EVIDENCE.com. While gross margins improved to 60.6% due to sales leverage and efficiencies in the Video segment, operating income saw a decline of 18.6% to $5.3 million. This was largely due to a significant increase in Sales, General, and Administrative (SG&A) expenses, up 26.6%, driven by strategic hires and increased investment in sales and marketing. Despite the increase in operating expenses, the company maintained a healthy cash position, ending the quarter with $38.6 million in cash and cash equivalents, and initiated a $25 million share repurchase program.

Financial Highlights

46 data points
Beta

Revenue

$30.43M

60.6% Gross Margin

Net Income

$3.30M

10.8% Net Margin

EPS (Diluted)

$0.06

Total Assets

$117.07M

Cash & Equivalents

$38.58M

Free Cash Flow

$4.14M

Financial Statements
Beta
Revenue$30.43M
Cost of Revenue$11.98M
Gross Profit$18.45M
R&D Expenses$2.01M
SG&A Expenses$11.18M
Operating Income$5.26M
Net Income$3.30M
EPS (Basic)$0.06
EPS (Diluted)$0.06
Shares Outstanding (Basic)52.75M
Shares Outstanding (Diluted)54.60M

Key Highlights

  • 1Net sales increased 18.7% to $30.4 million, driven by strong adoption of new TASER models (X2 and X26P) and growth in the Video segment.
  • 2Gross margin improved to 60.6% from 59.4% in the prior year, reflecting sales leverage and operational efficiencies.
  • 3Sales, General, and Administrative (SG&A) expenses increased by 26.6% to $11.2 million, primarily due to strategic hires and increased sales/marketing investments.
  • 4Operating income decreased by 18.6% to $5.3 million due to the rise in SG&A expenses.
  • 5The Video segment showed significant growth, with net sales increasing 175.3% to $2.4 million.
  • 6The company ended the quarter with $38.6 million in cash and cash equivalents, an increase from the prior year-end.
  • 7A new $25 million share repurchase program was authorized, with approximately $5.4 million repurchased in the first quarter.

Frequently Asked Questions

Revenue growth was primarily driven by the strong adoption of new TASER models, specifically the TASER X2 and the recently introduced TASER X26P. Additionally, the Video segment, which includes AXON cameras and EVIDENCE.com, experienced substantial growth, more than doubling its sales.

Operating income decreased by 18.6% primarily due to a significant increase in Sales, General, and Administrative (SG&A) expenses. These expenses rose by 26.6% year-over-year, reflecting strategic investments in customer-facing roles, sales, marketing, and increased D&O/liability insurance costs.

The company maintained a healthy liquidity position, ending the quarter with $38.6 million in cash and cash equivalents. Operating activities generated $4.5 million in cash. The company also has a $10 million revolving line of credit available, though no amounts were borrowed as of March 31, 2013. Furthermore, the company initiated a $25 million share repurchase program, demonstrating confidence in its financial position.

The Video segment showed very strong growth, with net sales increasing by 175.3% to $2.4 million. This growth is attributed to the continued adoption of the AXON Flex camera and EVIDENCE.com software-as-a-service, with bookings for the segment also showing significant improvement. The company recognizes revenue for EVIDENCE.com over a service period, indicating potential for future recurring revenue.