10-QPeriod: Q2 FY2021

AXON ENTERPRISE, INC. Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 6, 2021For Securities:AXON

Summary

Axon Enterprise, Inc. reported strong top-line growth for the second quarter of 2021, with net sales increasing by 54.9% year-over-year to $218.8 million. This growth was driven by robust performance in both the TASER and Software & Sensors segments, with significant contributions from cartridge sales, the TASER 7 device, and expanded Axon Evidence and cloud services adoption. Despite the substantial revenue increase, the company reported a net loss of $47.1 million for the quarter, a wider loss compared to the prior year's $30.8 million. This was largely due to a significant increase in operating expenses, particularly stock-based compensation, which rose substantially due to updated estimates for performance-based awards. However, the company's financial position remains solid with $266.4 million in cash and cash equivalents and a strong overall contracted revenue backlog of $2.04 billion, indicating positive future revenue potential.

Financial Highlights

49 data points
Beta

Revenue

$218.79M

63.0% Gross Margin

Net Income

-$47.12M

-21.5% Net Margin

EPS (Diluted)

$-0.72

Total Assets

$1.53B

Cash & Equivalents

$266.48M

Free Cash Flow

$20.67M

Financial Statements
Beta
Revenue$218.79M
Cost of Revenue$80.87M
Gross Profit$137.93M
R&D Expenses$53.95M
SG&A Expenses$177.66M
Operating Expenses$231.61M
Operating Income-$93.69M
Net Income-$47.12M
EPS (Basic)$-0.72
EPS (Diluted)$-0.72
Shares Outstanding (Basic)65.17M
Shares Outstanding (Diluted)65.17M

Key Highlights

  • 1Net sales surged by 54.9% year-over-year to $218.8 million, driven by strong demand across both TASER ($112.5M) and Software & Sensors ($106.3M) segments.
  • 2TASER segment sales grew 59.6%, with significant increases in cartridge revenue (up 96.4%) and TASER 7 device sales (up 142.7%), indicating strong product adoption and replacement cycles.
  • 3Software & Sensors segment sales increased 50.2%, fueled by the continued expansion of Axon Evidence and cloud services (up 44.1%) and robust sales of Axon Body cameras.
  • 4Gross margin improved to 63.0% from 62.4% year-over-year, with notable margin expansion in the TASER segment (66.4% vs. 61.4%), reflecting manufacturing efficiencies and product mix.
  • 5Operating expenses more than doubled, increasing to $231.6 million from $101.9 million, primarily due to a significant increase in stock-based compensation expenses related to performance awards.
  • 6The company reported a net loss of $47.1 million for the quarter, compared to a net loss of $30.8 million in the prior year, despite strong revenue growth.
  • 7Future contracted revenue stands at approximately $2.04 billion, providing strong visibility for future revenue recognition over the next five to seven years.

Frequently Asked Questions

Net sales increased by 54.9% to $218.8 million, driven by strong demand for both product lines. Key contributors included a substantial rise in cartridge sales and TASER 7 device sales within the TASER segment, and continued growth in Axon Evidence and cloud services, alongside increased Axon Body camera sales in the Software & Sensors segment.

The net loss widened to $47.1 million from $30.8 million primarily due to a significant increase in operating expenses. Specifically, stock-based compensation expense saw a substantial rise, impacting profitability despite the strong revenue performance. This increase was attributed to updated estimates related to performance-based stock awards.

The company reported approximately $2.04 billion in future contracted revenue as of June 30, 2021. Management expects to recognize between 20% to 25% of this balance over the next twelve months, with the remainder recognized over the following five to seven years. This indicates a strong revenue pipeline and visibility, though subject to risks like delayed deployments and contract cancellations.

The company is actively monitoring its supply chain and managing raw material costs through supplier negotiations and strategic purchasing of non-expiring materials. They are also bolstering strategic supplier relationships, identifying secondary sources, and building inventory buffers to mitigate potential impacts and maintain predictable gross margins.