01—Abstract
Summary
Summary of the 10-Q filed November 7, 2018. Cited figures are marked; the original filing is the authoritative source.
Axon Enterprise, Inc. (AXON) demonstrated significant financial strength in the third quarter of 2018, with total net sales reaching $104.8 milliona, a 16.1% increase year-over-year.
This growth was largely driven by a substantial 33.5%b surge in the Software and Sensors segment, particularly in Axon Evidence and cloud services, alongside a more modest 7.2% increase in the TASER Weapons segment. The company's strategic shift towards recurring revenue models is evident, with 53% of consolidated revenues coming from multi-element, multi-year contracts. This indicates a successful transition towards a more predictable revenue stream.
Financially, Axon reported a net income of $5.7 millionc for the quarter, a significant improvement from $0.4 million in the prior year, leading to diluted EPS of $0.10. The balance sheet shows a robust increase in cash and cash equivalents to $324.4 million, largely due to a successful follow-on equity offering that raised $234.0 million in net proceeds. This strong liquidity position, coupled with strategic investments in R&D and a growing recurring revenue base, positions Axon for continued growth and market leadership in public safety technology.
02—Key points
Key Highlights
- Total net sales increased by 16.1% year-over-year to $104.8 million in Q3 2018.
- Software and Sensors segment sales grew by a strong 33.5%, driven by Axon Evidence and cloud services.
- Net income rose significantly to $5.7 million from $0.4 million in the prior year's comparable quarter.
- Cash and cash equivalents increased substantially to $324.4 million, bolstered by a $234.0 million equity offering.
- Research and development expenses increased by 55.2% to $22.0 million, indicating continued investment in future products and services.
- The company continues to focus on shifting revenue to multi-year, recurring payment plans, with 53% of Q3 revenue from such contracts.
- Gross margin improved significantly to 62.6% from 55.1% in the prior year, largely due to improved service margins and accounting standard changes.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Axon Enterprise, Inc. kept $0.05.
- Revenue$104.8M100.0%
- Cost of revenue−$39.2M37.4%
- Gross profit$65.6M62.6%
- Operating costs−$61.7M58.8%
- Operating income$4.0M3.8%
- Interest, other & tax$1.7M1.7%
- Net income$5.7M5.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed November 7, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $104.84M$90.26M | +16.1% |
| Cost of Revenue | $39.20M$40.50M | −3.2% |
| Gross Profit | $65.63M$49.77M | +31.9% |
| R&D Expenses | $21.98M$14.17M | +55.2% |
| SG&A Expenses | $39.69M$36.40M | +9.0% |
| Operating Expenses | $61.67M$50.56M | +22.0% |
| Operating Income | $3.97M-$799K | +596.4% |
| Net Income | $5.71M$422K | +1253.3% |
| EPS (Basic) | $0.10$0.01 | +900.0% |
| EPS (Diluted) | $0.10$0.01 | +900.0% |
| Shares Outstanding (Basic) | 58.34M52.83M | +10.4% |
| Shares Outstanding (Diluted) | 59.80M53.84M | +11.1% |
05—Questions
Frequently Asked Questions
What is the primary driver of Axon's recent revenue growth?
Axon's recent revenue growth is primarily driven by its Software and Sensors segment, which saw a 33.5% increase in net sales year-over-year. This growth is largely attributed to strong performance in Axon Evidence and other cloud-based services, reflecting the company's successful transition towards recurring revenue models.
How has the company's cash position changed, and what is the impact of the equity offering?
Axon's cash and cash equivalents significantly increased to $324.4 million as of September 30, 2018, up from $75.1 million at the end of 2017. This increase is largely due to the net proceeds of $234.0 million from a follow-on equity offering completed in May 2018, providing substantial liquidity.
What is the company's strategy regarding revenue recognition and future revenue streams?
Axon is strategically shifting its business model from traditional hardware sales to multi-year, subscription-based contracts, emphasizing recurring revenue. This is reflected in 53% of consolidated revenues in Q3 2018 coming from contracts with multiple performance obligations, indicating a move towards more predictable and sustainable revenue streams.
What are the key investments the company is making for future growth?
The company is significantly increasing its investment in Research and Development (R&D), with R&D expenses up 55.2% year-over-year to $22.0 million. This investment is focused on developing new TASER technologies and expanding its Software and Sensors segment, aiming to drive future subscription revenue growth.
06—Continue