01—Abstract
Summary
Summary of the 10-Q filed November 5, 2013. Cited figures are marked; the original filing is the authoritative source.
TASER International, Inc. (now Axon Enterprise, Inc.) reported a strong increase in net sales for the third quarter and the first nine months of 2013, driven by the successful adoption of its newer TASER X26P and X2 conducted electrical weapons (CEWs) and growth in its EVIDENCE.com & Video segment.
The company saw a significant rise in gross margin due to increased sales volume and improved pricing, while managing cost of goods sold effectively. Despite increased sales, general, and administrative expenses, largely attributed to investments in sales and marketing and higher litigation defense costs, the company achieved substantial net income growth.
Operating cash flow remained robust, though slightly decreased year-over-year due to increased investment in short-term investments and a significant stock repurchase program. The company ended the period with a healthy cash balance and no outstanding borrowings on its line of credit, indicating a solid liquidity position.
02—Key points
Key Highlights
- Net sales increased by 22.3% to $35.2 million for the three months ended September 30, 2013, compared to the prior year, and by 18.4% to $97.8 million for the nine months ended September 30, 2013.
- Gross margin improved significantly, rising to 62.8% of net sales for the third quarter of 2013 from 58.4% in the same period last year, driven by higher sales volumes and improved pricing.
- The EVIDENCE.com & Video segment experienced substantial growth, with net sales increasing by 111.5% to $3.6 million for the third quarter and by 104.7% to $7.9 million for the nine months, indicating strong market traction.
- Net income increased by 39.1% to $5.1 million for the third quarter and by 17.8% to $12.9 million for the nine months, demonstrating improved profitability.
- Despite increased investments and a stock repurchase program, the company maintained strong operating cash flow of $23.1 million for the nine months ended September 30, 2013.
- The company's cash position remained strong at $35.0 million as of September 30, 2013, with no borrowings outstanding on its $10 million line of credit, indicating good liquidity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2013, Axon Enterprise, Inc. kept $0.15.
- Revenue$35.2M100.0%
- Cost of revenue−$13.1M37.2%
- Gross profit$22.1M62.8%
- Operating costs−$15.2M43.2%
- Operating income$6.9M19.5%
- Interest, other & tax−$1.8M5.0%
- Net income$5.1M14.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2013filed November 5, 2013Financial Statements
Q3 FY2013 against Q3 FY2012
| Line item | Q3 FY2013Q3 FY2012 | Change |
|---|---|---|
| Revenue | $35.20M$28.77M | +22.3% |
| Cost of Revenue | $13.10M$11.97M | +9.4% |
| Gross Profit | $22.10M$16.80M | +31.5% |
| R&D Expenses | $2.44M$1.99M | +22.8% |
| SG&A Expenses | $12.78M$9.54M | +33.9% |
| Operating Income | $6.88M$5.28M | +30.4% |
| Net Income | $5.11M$3.68M | +39.1% |
| EPS (Basic) | $0.10$0.07 | +42.9% |
| EPS (Diluted) | $0.10$0.07 | +42.9% |
| Shares Outstanding (Basic) | 51.34M52.51M | −2.2% |
| Shares Outstanding (Diluted) | 53.32M53.11M | +0.4% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the revenue growth in the third quarter of 2013?
Revenue growth was primarily driven by the strong adoption of new TASER CEW models like the X26P and X2, and significant expansion in the EVIDENCE.com & Video segment. Improved average selling prices and lower trade-in credit values also contributed to higher revenue.
How did the company manage its costs in light of increased sales?
The company saw an improvement in its gross margin percentage. While the cost of goods sold increased in absolute terms with higher sales, it decreased as a percentage of net sales. For the EVIDENCE.com & Video segment, cost savings were achieved through efficiencies in cloud storage and depreciation of software development costs.
What is the outlook for litigation expenses?
The company noted an increase in sales, general, and administrative expenses due to litigation defense costs. However, it expects these expenses related to product and commercial litigation defense to trend downward in the second half of 2014.
What is the company's current liquidity and capital position?
The company maintained a strong liquidity position with $35.0 million in cash and cash equivalents as of September 30, 2013. It had no outstanding borrowings under its $10 million revolving line of credit, which had $9.4 million available for borrowing. The company believes its operating cash flow and existing cash reserves are sufficient to fund its operations and strategic initiatives.
06—Continue