10-QPeriod: Q3 FY2022

AXON ENTERPRISE, INC. Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 9, 2022For Securities:AXON

Summary

Axon Enterprise, Inc. reported strong revenue growth in the third quarter of 2022, with net sales increasing by 34.4% year-over-year to $311.8 million. This growth was primarily driven by the Software and Sensors segment, which saw a 51.0% increase in net sales, and continued strength in the TASER segment, particularly with the TASER 7 device. The company also achieved significant year-over-year improvement in profitability, with income from operations rising substantially to $32.1 million from $2.9 million in the prior year quarter. This profitability surge was aided by a significant decrease in stock-based compensation expense. For the nine-month period ended September 30, 2022, net sales grew by 32.2% to $853.8 million, and the company transitioned from a net loss of $46.5 million in the prior year to a net income of $118.0 million. A substantial portion of this improvement is attributable to a significant decrease in stock-based compensation expense. The company ended the quarter with a healthy liquidity position, characterized by $147.7 million in cash and cash equivalents and a strong backlog of future contracted revenue amounting to $3.73 billion, providing good visibility into future revenue streams.

Financial Highlights

49 data points
Beta

Revenue

$311.75M

62.0% Gross Margin

Net Income

$12.13M

3.9% Net Margin

EPS (Diluted)

$0.17

Total Assets

$2.01B

Cash & Equivalents

$147.71M

Free Cash Flow

$26.53M

Financial Statements
Beta
Revenue$311.75M
Cost of Revenue$118.50M
Gross Profit$193.26M
R&D Expenses$59.13M
SG&A Expenses$102.02M
Operating Expenses$161.15M
Operating Income$32.11M
Net Income$12.13M
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)71.11M
Shares Outstanding (Diluted)72.53M

Key Highlights

  • 1Net sales for Q3 2022 increased by 34.4% to $311.8 million, driven by both TASER and Software & Sensors segments.
  • 2Software and Sensors segment sales surged 51.0% year-over-year, highlighting continued growth in cloud services and integrated solutions.
  • 3Income from operations dramatically improved, reaching $32.1 million in Q3 2022, compared to $2.9 million in Q3 2021.
  • 4The nine-month period ended September 30, 2022, saw a significant swing to profitability, with net income of $118.0 million, compared to a net loss of $46.5 million in the prior year.
  • 5Gross margins remained strong, with the overall company gross margin at 62.0% for Q3 2022.
  • 6Future contracted revenue stands at a substantial $3.73 billion as of September 30, 2022, indicating strong revenue visibility.
  • 7Cash and cash equivalents were $147.7 million at the end of the quarter, with no outstanding borrowings on the company's credit facility.

Frequently Asked Questions

The primary driver of Axon's revenue growth in Q3 2022 was the strong performance of its Software and Sensors segment, which saw a 51.0% increase in net sales year-over-year. The TASER segment also contributed positively, with growth led by the TASER 7 device and increased cartridge sales.

Axon experienced a significant improvement in profitability. For the third quarter of 2022, income from operations increased to $32.1 million from $2.9 million in the prior year. The nine-month period also showed a substantial turnaround, moving from a net loss of $46.5 million to a net income of $118.0 million, largely influenced by a decrease in stock-based compensation expenses.

Axon reported approximately $3.73 billion in future contracted revenue as of September 30, 2022. The company expects to recognize between 15% - 20% of this balance over the next twelve months, with the remainder recognized over the following ten years, subject to certain contractual risks.

As of September 30, 2022, Axon Enterprise, Inc. had no outstanding borrowings under its $50.0 million revolving credit facility, though it had $6.5 million in outstanding letters of credit. The company reported no long-term debt on its balance sheet.