01—Abstract
Summary
Summary of the 10-Q filed August 7, 2020. Cited figures are marked; the original filing is the authoritative source.
Axon Enterprise, Inc. reported its second-quarter 2020 financial results, showcasing robust revenue growth driven by strong performance in both its TASER and Software and Sensors segments.
Net sales increased by 25.7% year-over-year to $141.3 milliona. However, the company reported a net loss of $30.8 million for the quarter, a significant shift from the $0.7 million net income in the prior year's quarter. This loss was largely influenced by a substantial increase in stock-based compensation expense, primarily related to performance awards, and increased legal expenses associated with the FTC litigation.
Despite the net loss, the company highlighted a healthy increase in gross margin to 62.4% and a strong liquidity position with $319.3 millionb in cash and cash equivalents. The company's strategic shift towards a subscription-based model continues, with significant future contracted revenues totaling approximately $1.34 billion.
Management expressed confidence in their ability to navigate the COVID-19 pandemic due to supply chain diversification and proactive measures. Key growth drivers include the new TASER 7 devices and cartridges, alongside continued expansion in cloud-based evidence management and body camera solutions.
02—Key points
Key Highlights
- Net sales grew 25.7% year-over-year to $141.3 million, driven by both product and service revenue increases.
- Gross margin improved significantly to 62.4% from 58.4% in the prior year's quarter, indicating better cost management and product mix.
- The company reported a net loss of $30.8 million, a stark contrast to a net income of $0.7 million in Q2 2019, largely due to increased stock-based compensation and legal expenses.
- Stock-based compensation expense surged by $21.8 million year-over-year, primarily due to the probable achievement of performance goals for CEO and XSPP awards.
- Remaining performance obligations (future contracted revenue) stood at a substantial $1.34 billion as of June 30, 2020.
- Cash and cash equivalents increased to $319.3 million, demonstrating a strong liquidity position.
- The Software and Sensors segment continued its strong growth trajectory, with net sales up 36.6% year-over-year.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2020, Axon Enterprise, Inc. lost $0.22.
- Revenue$141.3M100.0%
- Cost of revenue−$53.1M37.6%
- Gross profit$88.2M62.4%
- Operating costs−$101.9M72.1%
- Operating income−$13.7M9.7%
- Interest, other & tax−$17.1M12.1%
- Net income−$30.8M21.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed August 7, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $141.26M$112.36M | +25.7% |
| Cost of Revenue | $53.08M$46.80M | +13.4% |
| Gross Profit | $88.18M$65.56M | +34.5% |
| R&D Expenses | $29.56M$23.49M | +25.8% |
| SG&A Expenses | $72.29M$43.36M | +66.7% |
| Operating Expenses | $101.85M$66.86M | +52.3% |
| Operating Income | -$13.68M-$1.29M | −956.1% |
| Net Income | -$30.76M$738K | −4267.9% |
| EPS (Basic) | $-0.51$0.01 | −5200.0% |
| EPS (Diluted) | $-0.51$0.01 | −5200.0% |
| Shares Outstanding (Basic) | 60.35M59.19M | +2.0% |
| Shares Outstanding (Diluted) | 60.35M60.00M | +0.6% |
05—Questions
Frequently Asked Questions
What is the primary reason for the net loss in Q2 2020 despite strong revenue growth?
The net loss of $30.8 million in Q2 2020, compared to a profit in the prior year, was primarily driven by a significant increase in stock-based compensation expense ($21.8 million higher year-over-year) due to the probable achievement of performance goals for executive awards. Additionally, increased legal expenses related to the FTC litigation also contributed to the loss.
How is the company's revenue growth distributed between its segments?
Revenue growth was strong across both segments. The TASER segment saw a 16.4% increase in net sales, while the Software and Sensors segment experienced an even more substantial growth of 36.6% year-over-year, highlighting the accelerating adoption of their cloud-based solutions and body cameras.
What is the significance of the large remaining performance obligations?
The approximately $1.34 billion in remaining performance obligations represents future contracted revenue that Axon expects to recognize over the next several years. This provides good visibility into future revenue streams and demonstrates the continued demand for the company's products and services, particularly its cloud-based solutions.
How is Axon managing the impact of COVID-19 on its operations and supply chain?
Axon has implemented several measures to manage COVID-19 impacts, including providing free cloud software to customers, ensuring employee safety through remote work and facility protocols, and diversifying its supply chain to mitigate disruptions. The company reported that thus far, it has been able to produce and ship critical products with minimal interruption.
06—Continue