01—Abstract
Summary
Summary of the 10-Q filed August 9, 2018. Cited figures are marked; the original filing is the authoritative source.
Axon Enterprise, Inc. reported strong growth in its second quarter of 2018, with total net sales increasing by 24.6% to $99.2 milliona compared to the prior year quarter.
This growth was driven by robust performance in both its TASER Weapons segment, up 14.4%, and its Software and Sensors segment, which saw an impressive 45.0% increase. The company's strategic shift towards subscription-based revenue models is gaining traction, with a significant portion of sales now coming from contracts with multiple performance obligations. Net income more than tripled year-over-year to $8.5 millionb, reflecting improved gross margins and operational efficiencies, although operating expenses, particularly R&D, also increased as the company continues to invest in innovation and expansion.
The balance sheet shows a significant increase in cash and cash equivalents to $307.5 millionc, largely due to proceeds from a follow-on equity offering in May 2018. The company also reported an increase in goodwill and intangible assets, indicating strategic acquisitions or business development activities.
While the company faces ongoing litigation, management believes it will not materially impact financial condition. The company is also addressing a previously identified material weakness in internal controls related to its UK subsidiary through remediation efforts.
02—Key points
Key Highlights
- Net sales increased by 24.6% to $99.2 million in Q2 2018 compared to Q2 2017.
- The Software and Sensors segment experienced substantial growth of 45.0% year-over-year, reaching $38.6 million in net sales.
- Net income grew significantly to $8.5 million, up from $2.3 million in the prior year quarter, with diluted EPS at $0.15.
- Cash and cash equivalents surged to $307.5 million as of June 30, 2018, up from $75.1 million at the end of 2017, bolstered by a recent equity offering.
- Gross margin improved to 63.6% from 57.3% in the prior year quarter, indicating better cost management and operational leverage.
- R&D expenses increased by 42.4% to $18.5 million, reflecting continued investment in product development, particularly in the Software and Sensors segment.
- The company is actively managing a material weakness in internal controls related to its UK subsidiary, implementing remediation steps.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2018, Axon Enterprise, Inc. kept $0.09.
- Revenue$99.2M100.0%
- Cost of revenue−$36.1M36.4%
- Gross profit$63.1M63.6%
- Operating costs−$57.8M58.3%
- Operating income$5.3M5.3%
- Interest, other & tax$3.2M3.2%
- Net income$8.5M8.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed August 9, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $99.23M$79.64M | +24.6% |
| Cost of Revenue | $36.08M$34.01M | +6.1% |
| Gross Profit | $63.14M$45.64M | +38.4% |
| R&D Expenses | $18.50M$12.99M | +42.4% |
| SG&A Expenses | $39.34M$31.82M | +23.6% |
| Operating Expenses | $57.84M$44.81M | +29.1% |
| Operating Income | $5.30M$824K | +543.1% |
| Net Income | $8.48M$2.28M | +272.8% |
| EPS (Basic) | $0.15$0.04 | +275.0% |
| EPS (Diluted) | $0.15$0.04 | +275.0% |
| Shares Outstanding (Basic) | 55.53M52.74M | +5.3% |
| Shares Outstanding (Diluted) | 57.05M53.77M | +6.1% |
05—Questions
Frequently Asked Questions
What is the company's revenue growth for the quarter and what segments are driving it?
Axon Enterprise, Inc. reported a 24.6% increase in net sales to $99.2 million for the three months ended June 30, 2018, compared to the same period in 2017. Growth was strong in both segments: the TASER Weapons segment increased by 14.4%, and the Software and Sensors segment saw a significant increase of 45.0%.
How has the company's cash position changed and what is the source of the increase?
The company's cash and cash equivalents significantly increased to $307.5 million as of June 30, 2018, up from $75.1 million at December 31, 2017. This substantial increase was primarily due to the net proceeds of $234.0 million from a follow-on equity offering completed in May 2018.
What is the company's profitability trend and what is impacting net income?
Net income more than tripled year-over-year, reaching $8.5 million for the three months ended June 30, 2018, compared to $2.3 million in the prior year quarter. This improvement is attributed to a higher gross margin (63.6% vs. 57.3%) and increased sales, although operating expenses, including R&D, also rose.
Are there any significant legal or internal control issues that investors should be aware of?
The company is involved in ongoing product litigation, but management states that it is not reasonably possible that these lawsuits will materially affect its results. Additionally, the company identified a material weakness in its internal control over financial reporting related to its UK subsidiary and is actively implementing remediation steps.
06—Continue