01—Abstract
Summary
Summary of the 10-Q filed November 15, 2021. Cited figures are marked; the original filing is the authoritative source.
Axon Enterprise, Inc. reported strong top-line growth for the third quarter and first nine months of 2021, with net sales increasing by 39.4%a and 42.0%, respectively, compared to the prior year periods.
This growth was driven by robust demand across both the TASER and Software and Sensors segments, with particular strength in the new TASER 7 devices and cloud-based Axon Evidence services. The company's strategic shift towards a subscription model is progressing, indicated by a significant increase in future contracted revenues to $2.39 billionb. Financially, the company reported a significant swing to net income of $48.5 million for the third quarter of 2021, a substantial improvement from a net loss of $0.9 million in the prior year period.
This turnaround was partly due to a substantial income tax benefit of $51.2 millionc. However, the nine-month period still resulted in a net loss of $46.5 million, influenced by a significant increase in operating expenses, particularly stock-based compensation related to performance awards. The company maintained a strong liquidity position with $281.7 million in cash and cash equivalents.
02—Key points
Key Highlights
- Net sales increased by 39.4% to $232.0 million in Q3 2021 and by 42.0% to $645.8 million in the first nine months of 2021, demonstrating strong revenue growth.
- The company swung to a net income of $48.5 million in Q3 2021 from a net loss of $0.9 million in Q3 2020, driven by revenue growth and a significant income tax benefit.
- Future contracted revenues reached $2.39 billion as of September 30, 2021, indicating strong future revenue visibility, with 15-20% expected to be recognized in the next 12 months.
- Gross margin improved year-over-year for both segments, reaching 62.4% in Q3 2021 (up from 59.0%) and 62.9% for the nine-month period (up from 60.5%), reflecting operational efficiencies and favorable product mix.
- Operating expenses significantly increased, particularly stock-based compensation ($170.1M in nine months vs. $80.1M prior year) related to performance awards, contributing to a net loss for the nine-month period.
- Cash and cash equivalents stood at a healthy $281.7 million as of September 30, 2021, providing ample liquidity.
- The company raised its total addressable market (TAM) projections to $51.6 billion, driven by new product introductions and expansion into justice software and consumer safety markets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2021, Axon Enterprise, Inc. kept $0.21.
- Revenue$232.0M100.0%
- Cost of revenue−$87.4M37.7%
- Gross profit$144.6M62.3%
- Operating costs−$141.7M61.1%
- Operating income$2.9M1.2%
- Interest, other & tax$45.6M19.7%
- Net income$48.5M20.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed November 15, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $231.99M$166.44M | +39.4% |
| Cost of Revenue | $87.42M$68.20M | +28.2% |
| Gross Profit | $144.57M$98.24M | +47.2% |
| R&D Expenses | $42.38M$29.25M | +44.9% |
| SG&A Expenses | $99.30M$74.44M | +33.4% |
| Operating Expenses | $141.68M$103.69M | +36.6% |
| Operating Income | $2.89M-$5.45M | +153.0% |
| Net Income | $48.52M-$873K | +5658.3% |
| EPS (Basic) | $0.73$-0.01 | +7400.0% |
| EPS (Diluted) | $0.67$-0.01 | +6800.0% |
| Shares Outstanding (Basic) | 66.19M63.50M | +4.2% |
| Shares Outstanding (Diluted) | 72.44M63.50M | +14.1% |
05—Questions
Frequently Asked Questions
What is the primary driver of Axon's revenue growth?
Axon's revenue growth is primarily driven by strong demand for its products and services across both the TASER and Software and Sensors segments. Key contributors include increasing sales of newer generation TASER devices like the TASER 7, higher cartridge sales, and the expansion of cloud-based services such as Axon Evidence, supported by a growing user and device network.
How did Axon's profitability change in the reported period?
For the third quarter of 2021, Axon returned to profitability with a net income of $48.5 million, a significant improvement from a net loss in the prior year period. This was aided by revenue growth and a substantial income tax benefit. However, for the first nine months of 2021, the company reported a net loss of $46.5 million, largely due to a significant increase in operating expenses, particularly stock-based compensation.
What is the outlook for future revenue based on contracted work?
Axon has substantial future revenue visibility, with approximately $2.39 billion in total company future contracted revenues as of September 30, 2021. The company expects to recognize between 15% and 20% of this amount over the next twelve months, with the remainder anticipated to be recognized over the following five to seven years, subject to risks like delayed deployments or contract cancellations.
What are the main risks or challenges facing Axon?
Key risks and challenges include potential supply chain disruptions for key manufacturing components (as seen with TASER 7), the impact of economic slowdowns on municipal budgets affecting customer purchasing power, ongoing litigation (such as the FTC action), and the increasing operational costs, especially stock-based compensation expenses. The company also faces risks related to catastrophic events and the ongoing impact of the COVID-19 pandemic on operations and supply chains.
06—Continue