Summary
Axon Enterprise, Inc. (AXON) reported solid revenue growth in the third quarter and the first nine months of 2017, driven by strong performance in both its TASER Weapons and Software and Sensors segments. Net sales increased by 25.6% year-over-year for the third quarter and 33.8% for the first nine months. The Software and Sensors segment showed particularly robust growth, with net sales up 62.8% in Q3 and 88.8% year-to-date, largely due to the increasing adoption of on-officer cameras and the Evidence.com platform. Despite revenue growth, the company experienced a significant increase in operating expenses, especially in Research and Development (R&D), which nearly doubled year-over-year for the quarter as Axon continues to invest in product innovation and expansion of its cloud-connected device platform. This increased investment, coupled with higher cost of sales and strategic discounting in the Software and Sensors segment, led to a decrease in gross margin percentage and a significant drop in operating income for the quarter. For the nine-month period, net income declined by 33.6% year-over-year. The company is actively managing its liquidity, with substantial cash, cash equivalents, and investments. However, operating activities used cash for the first nine months of 2017, primarily due to increased accounts receivable and inventory buildup, partially offset by significant increases in deferred revenue. Axon is also addressing material weaknesses in its internal controls over financial reporting, with remediation efforts underway.
Financial Highlights
51 data points| Revenue | $90.26M |
| Cost of Revenue | $40.50M |
| Gross Profit | $49.77M |
| R&D Expenses | $14.17M |
| SG&A Expenses | $36.40M |
| Operating Expenses | $50.56M |
| Operating Income | -$799K |
| Net Income | $422K |
| EPS (Basic) | $0.01 |
| EPS (Diluted) | $0.01 |
| Shares Outstanding (Basic) | 52.83M |
| Shares Outstanding (Diluted) | 53.84M |
Key Highlights
- 1Strong revenue growth across both TASER Weapons (12.2% Q3, 17.9% YTD) and Software and Sensors (62.8% Q3, 88.8% YTD) segments.
- 2Evidence.com revenue surged by 89.6% in Q3 and 125.8% YTD, highlighting strong adoption of the cloud-based evidence management platform.
- 3Research and Development (R&D) expenses more than doubled for the quarter (92.5% increase) and increased by 88.7% YTD, reflecting significant investment in new product development, particularly in the Software and Sensors segment.
- 4Gross margin percentage decreased significantly in Q3 (55.1% vs. 64.8% in prior year), impacted by higher discounting and increased costs within the Software and Sensors segment, especially for hardware.
- 5Net income for the quarter declined to $0.4 million from $3.8 million in the prior year, and YTD net income decreased by 33.6% to $7.3 million, impacted by increased operating expenses and lower gross margins.
- 6Operating activities used $5.8 million cash for the first nine months of 2017, a significant reversal from $22.0 million generated in the prior year, driven by increases in accounts receivable and inventory.
- 7The company is actively working to remediate material weaknesses identified in its internal controls over financial reporting related to revenue recognition, deferred revenue, and cost of goods sold.