Axon(US:AXON)2025-02-28 21:22Financial Performance - Net sales increased to $2,082,526 thousand in 2024, up 33.3% from $1,560,699 thousand in 2023[369]. - Net income for 2024 reached $377,034 thousand, representing a 114.1% increase compared to $175,783 thousand in 2023[369]. - Gross margin improved to $1,241,380 thousand in 2024, up from $955,453 thousand in 2023, indicating a significant increase in profitability[369]. - Research and development expenses rose to $441,593 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 $4,474,588 thousand in 2024, compared to $3,409,174 thousand in 2023, marking a 31.2% increase[366]. - Total liabilities increased to $2,146,923 thousand in 2024, up from $1,793,409 thousand in 2023, indicating a rise of 19.7%[366]. - Retained earnings surged to $812,014 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 $4.98 in 2024, up from $2.37 in 2023, reflecting a 110.5% increase[369]. - Cash and cash equivalents decreased to $454,844 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) in 2024, compared to a net cash provided of $12,476 in 2023[374]. - Stock-based compensation increased significantly to $382,604 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) in 2024, compared to a gain of $41,785 in 2023[374]. - Net cash provided by operating activities increased to $408,312 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 $116.2 million, or 31.3%, to $487.8 million in 2024, driven by increased sales under subscription plans[461]. - Contract liabilities (deferred revenue) rose by $232.3 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 $7.9 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 $200.0 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 $690.0 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 $6.627 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 $873.3 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 $600,670 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 $598,545 in 2023[392]. - Total inventory decreased to $265.3 million as of December 31, 2024, from $269.9 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 $5.6 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 $17.8 million in 2024, compared to $5.4 million in 2023[481]. - The company recognized a warranty expense of $5.591 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 $332,550 thousand in 2024, compared to $231,730 thousand in 2023, representing a growth of 43.5%[366]. - The company recognized an unrealized gain of $75.6 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].