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Axon(AXON) - 2024 Q4 - Annual Report
AXONAxon(AXON)2025-02-28 21:22
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Financial Performance - Net sales increased to 2,082,526thousandin2024,up33.32,082,526 thousand in 2024, up 33.3% from 1,560,699 thousand in 2023[369]. - Net income for 2024 reached 377,034thousand,representinga114.1377,034 thousand, representing a 114.1% increase compared to 175,783 thousand in 2023[369]. - Gross margin improved to 1,241,380thousandin2024,upfrom1,241,380 thousand in 2024, up from 955,453 thousand in 2023, indicating a significant increase in profitability[369]. - Research and development expenses rose to 441,593thousandin2024,a45.5441,593 thousand in 2024, a 45.5% increase from 303,719 thousand in 2023, reflecting the company's commitment to innovation[369]. - Total assets grew to 4,474,588thousandin2024,comparedto4,474,588 thousand in 2024, compared to 3,409,174 thousand in 2023, marking a 31.2% increase[366]. - Total liabilities increased to 2,146,923thousandin2024,upfrom2,146,923 thousand in 2024, up from 1,793,409 thousand in 2023, indicating a rise of 19.7%[366]. - Retained earnings surged to 812,014thousandin2024,comparedto812,014 thousand in 2024, compared to 434,980 thousand in 2023, showing a growth of 86.5%[366]. - The company reported a basic net income per share of 4.98in2024,upfrom4.98 in 2024, up from 2.37 in 2023, reflecting a 110.5% increase[369]. - Cash and cash equivalents decreased to 454,844thousandin2024from454,844 thousand in 2024 from 598,545 thousand in 2023, a decline of 24.1%[366]. - The company reported a net cash used in investing activities of (490,573)in2024,comparedtoanetcashprovidedof(490,573) in 2024, compared to a net cash provided of 12,476 in 2023[374]. - Stock-based compensation increased significantly to 382,604in2024from382,604 in 2024 from 131,358 in 2023, marking a 191% increase[374]. - The company reported a loss on strategic investments and marketable securities of (283,217)in2024,comparedtoagainof(283,217) in 2024, compared to a gain of 41,785 in 2023[374]. - Net cash provided by operating activities increased to 408,312in2024from408,312 in 2024 from 189,263 in 2023, a growth of 116%[374]. Revenue Recognition and Contracts - The company recognizes revenue from two primary sources: product sales and subscriptions to the Axon Evidence SaaS offering[410]. - The company applies the five-step revenue recognition model outlined in ASC 606 for contracts with multiple performance obligations[411]. - Contract assets increased by 116.2million,or31.3116.2 million, or 31.3%, to 487.8 million in 2024, driven by increased sales under subscription plans[461]. - Contract liabilities (deferred revenue) rose by 232.3million,or31.3232.3 million, or 31.3%, to 973.6 million in 2024, attributed to acquisitions and increased subscription invoicing[461]. - Remaining performance obligations as of December 31, 2024, were approximately 7.9billion,withanexpectationtorecognize207.9 billion, with an expectation to recognize 20%-25% over the next 12 months[464]. Investments and Financial Instruments - The company invests in a portfolio of marketable and non-marketable securities, with potential unrealized losses affecting earnings performance[221]. - A hypothetical 100 basis point increase in interest rates would result in a 0.7 million decline in the fair market value of the investment portfolio[357]. - The company has access to a 200.0millionlineofcredit,withavailableborrowingsreducedbyoutstandinglettersofcredittotaling200.0 million line of credit, with available borrowings reduced by outstanding letters of credit totaling 7.8 million[358]. - The company has not engaged in any currency hedging activities, exposing it to foreign exchange rate risks[361]. - The company faces counterparty risk with respect to the 2027 Note Hedge transactions, which could adversely affect its financial results[260]. - The company issued 690.0millionaggregateprincipalamountof2027Notes,withnetproceedsofapproximately690.0 million aggregate principal amount of 2027 Notes, with net proceeds of approximately 673.8 million after deducting costs[500]. - The effective interest rate for the 2027 Notes is 0.99%, with total interest expense of 6.627millionfortheyearendedDecember31,2024[505].−Theestimatedfairvalueofthe2027Notesincreasedto6.627 million for the year ended December 31, 2024[505]. - The estimated fair value of the 2027 Notes increased to 1,798.5 million as of December 31, 2024, compared to 873.3millionasofDecember31,2023[505].LegalandRegulatoryRisks−Legalclaimsrelatedtoproductliabilityandintellectualpropertycouldresultinsignificantcostsandadverselyaffectbusinessprospects[222][229].−Thecompanyfacesrisksfromclassactionlawsuitsthatcouldleadtosubstantialmonetaryjudgmentsandreputationalharm[224].−Theabilitytoenforcepatentrightsinternationallymaybelimited,impactingthecompany′scompetitivepositioninforeignmarkets[237].−Open−sourcesoftwareusemayexposethecompanytorisksthatcouldharmitsintellectualpropertyandbusinessoperations[238].−Newandexistinglawsandregulationscouldmateriallyandadverselyaffectthecompany′sbusinessoperationsandcompliancerequirements[240].−Theevolvingnatureoflawsandregulationsmayleadtouncertaintiesthatcouldimpactthecompany′spoliciesandpractices[241].−Thecompanyissubjecttoevolvingcorporategovernanceandpublicdisclosureregulations,whichmayincreasegeneralandadministrativeexpenses[243].AssetsandLiabilities−Totalcashandcashequivalentsattheendof2024were873.3 million as of December 31, 2023[505]. Legal and Regulatory Risks - Legal claims related to product liability and intellectual property could result in significant costs and adversely affect business prospects[222][229]. - The company faces risks from class action lawsuits that could lead to substantial monetary judgments and reputational harm[224]. - The ability to enforce patent rights internationally may be limited, impacting the company's competitive position in foreign markets[237]. - Open-source software use may expose the company to risks that could harm its intellectual property and business operations[238]. - New and existing laws and regulations could materially and adversely affect the company's business operations and compliance requirements[240]. - The evolving nature of laws and regulations may lead to uncertainties that could impact the company's policies and practices[241]. - The company is subject to evolving corporate governance and public disclosure regulations, which may increase general and administrative expenses[243]. Assets and Liabilities - Total cash and cash equivalents at the end of 2024 were 466,763, down from 600,670attheendof2023,adecreaseof22600,670 at the end of 2023, a decrease of 22%[374]. - The company holds cash and cash equivalents totaling 454,844 as of December 31, 2024, down from 598,545in2023[392].−Totalinventorydecreasedto598,545 in 2023[392]. - Total inventory decreased to 265.3 million as of December 31, 2024, from 269.9millionin2023,withprovisionstoreduceinventoriesamountingtoapproximately269.9 million in 2023, with provisions to reduce inventories amounting to approximately 17.8 million[481]. - The total allowance for expected credit losses on customer receivables was 5.6millionasofDecember31,2024,upfrom5.6 million as of December 31, 2024, up from 4.0 million in 2023[480]. - The company recorded provisions to reduce inventories to their lower of cost or net realizable value of approximately 17.8millionin2024,comparedto17.8 million in 2024, compared to 5.4 million in 2023[481]. - The company recognized a warranty expense of 5.591millionin2024,adecreasefrom5.591 million in 2024, a decrease from 8.062 million in 2023, indicating improved product reliability or cost management[428]. Strategic Growth and Innovation - The company’s strategic investments increased to 332,550thousandin2024,comparedto332,550 thousand in 2024, compared to 231,730 thousand in 2023, representing a growth of 43.5%[366]. - The company recognized an unrealized gain of 75.6millionforastrategicinvestmentduringtheyearendedDecember31,2024[491].−Thecompanyexercisedcalloptionsandacquiredtheremainingoutstandingstockoftwostrategicinvestments,resultinginnetnon−taxablegainsof75.6 million for a strategic investment during the year ended December 31, 2024[491]. - The company exercised call options and acquired the remaining outstanding stock of two strategic investments, resulting in net non-taxable gains of 42.3 million and $51.6 million for Fusus and Dedrone, respectively[490]. - The company is currently evaluating the impact of new accounting standards on its consolidated financial statements, including ASU 2023-09 and ASU 2024-03[454][457]. Shareholder and Governance Matters - The company’s amended and restated bylaws include exclusive forum provisions that may limit shareholders' ability to bring claims in favorable judicial forums[248]. - The conditional conversion feature of the Notes may adversely affect the company's liquidity if triggered[251]. - The total potentially dilutive securities increased to 8.790 million in 2024 from 7.048 million in 2023, reflecting changes in stock-based awards and convertible notes[452]. - The weighted average shares outstanding increased to 75.748 million in 2024 from 74.195 million in 2023, contributing to the earnings per share growth[452].