10-QPeriod: Q1 FY2023

AXON ENTERPRISE, INC. Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 9, 2023For Securities:AXON

Summary

Axon Enterprise, Inc. reported strong revenue growth in the first quarter of 2023, with total net sales increasing by 33.8% year-over-year to $343.0 million. This growth was driven by robust performance in both the Software and Sensors segment (+46.9%) and the TASER segment (+17.4%). The Software and Sensors segment, in particular, saw significant boosts from Axon Evidence and Cloud Services, as well as Axon Fleet Systems. Despite the impressive revenue increase, net income decreased to $45.1 million from $54.9 million in the prior year, primarily due to a notable increase in operating expenses, particularly in sales, general, and administrative (SG&A) and research and development (R&D), which rose by 29.3% and 46.5% respectively. This increase in expenses was largely attributed to higher headcount, increased stock-based compensation, and higher salaries and benefits. The company ended the quarter with a healthy cash and cash equivalents balance of $263.4 million, though this was a decrease from the prior quarter. Axon also highlighted its substantial remaining performance obligations of approximately $4.8 billion, providing visibility into future contracted revenues. While the company faces ongoing risks related to supply chain, litigation, and macroeconomic conditions, its strategic investments in cloud-based solutions and continued expansion in the public safety technology market position it for sustained growth.

Financial Highlights

51 data points
Beta

Revenue

$344.34M

59.4% Gross Margin

Net Income

$45.90M

13.3% Net Margin

EPS (Diluted)

$0.62

Total Assets

$3.01B

Cash & Equivalents

$265.32M

Free Cash Flow

-$64.84M

Financial Statements
Beta
Revenue$344.34M
Cost of Revenue$139.88M
Gross Profit$204.46M
R&D Expenses$70.93M
SG&A Expenses$115.95M
Operating Expenses$186.87M
Operating Income$17.59M
Net Income$45.90M
EPS (Basic)$0.63
EPS (Diluted)$0.62
Shares Outstanding (Basic)72.64M
Shares Outstanding (Diluted)73.88M

Key Highlights

  • 1Total net sales increased by 33.8% to $343.0 million in Q1 2023 compared to Q1 2022.
  • 2The Software and Sensors segment revenue grew by 46.9%, driven by Axon Evidence and Cloud Services and Axon Fleet Systems.
  • 3TASER segment revenue increased by 17.4%, with significant contributions from cartridges and TASER devices.
  • 4Operating expenses increased substantially, with SG&A up 29.3% and R&D up 46.5%, impacting profitability.
  • 5Net income decreased to $45.1 million from $54.9 million year-over-year, impacted by higher operating expenses and a lower unrealized gain on investments compared to the prior year.
  • 6Remaining performance obligations stand at approximately $4.8 billion, indicating strong future contracted revenue.
  • 7The company maintained a strong liquidity position with $263.4 million in cash and cash equivalents at the end of the quarter.

Frequently Asked Questions

Axon's revenue growth was primarily driven by strong performance across both its segments. The Software and Sensors segment saw significant increases in Axon Evidence and Cloud Services, as well as Axon Fleet Systems. The TASER segment also contributed positively, with higher sales of cartridges and TASER devices, including the new TASER 10.

Net income decreased primarily due to a substantial increase in operating expenses. Sales, General, and Administrative (SG&A) expenses rose by 29.3% and Research and Development (R&D) expenses increased by 46.5%. These increases were driven by higher headcount, increased stock-based compensation, and rising salaries and benefits.

The $4.8 billion in remaining performance obligations represents future contracted revenue that Axon expects to recognize over the next several years. This provides investors with visibility into the company's future revenue streams and demonstrates the strength of its long-term contracts, though it is subject to risks like delayed deployments and contract cancellations.

As of March 31, 2023, Axon had $263.4 million in cash and cash equivalents, which represents a decrease of $90.3 million from December 31, 2022. This decrease is attributed to cash used in operating and investing activities, partially offset by financing activities. The company maintains a revolving credit facility of $200 million, providing additional liquidity if needed.