Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data


Index to Consolidated Financial Statements						Page
Consolidated Balance Sheets as of December 31, 2024 and 2023						58
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2024, 2023, and 2022						59
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023, and 2022						60
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 202 2						61
Notes to Consolidated Financial Statements						62
Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 238)						111
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 248)						115

AXON ENTERPRISE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	December 31, 2024		December 31, 2023
	As Restated

ASSETS
Current assets:
Cash and cash equivalents	$	454,844	$	598,545
Marketable securities	198,270		77,940
Short-term investments	333,235		644,054
Accounts and notes receivable, net of allowance of $3,322 and $2,392 as of December 31, 2024 and December 31, 2023, respectively	547,572		412,961
Contract assets, net	367,929		287,232
Inventory	265,316		269,855
Prepaid expenses and other current assets	130,315		103,055
Total current assets	2,297,481		2,393,642
Property and equipment, net	247,324		200,533
Deferred tax assets, net	304,282		227,784
Intangible assets, net	175,157		19,539
Goodwill	756,838		57,945
Long-term notes receivable, net	3,460		2,588
Long-term contract assets, net	119,876		84,382
Strategic investments	332,550		231,730
Other long-term assets	237,620		191,031
Total assets	$	4,474,588	$	3,409,174
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	71,955	$	65,852
Accrued liabilities	279,193		193,550
Current portion of deferred revenue	612,955		470,415
Current portion of convertible notes, net	680,289		—
Customer deposits	20,626		21,935
Other current liabilities	12,857		9,787
Total current liabilities	1,677,875		761,539
Deferred revenue, net of current portion	360,685		270,901
Liability for unrecognized tax benefits	25,007		18,049
Long-term deferred compensation	15,877		11,342
Long-term lease liabilities	41,383		33,550
Long-term convertible notes, net	—		677,113
Other long-term liabilities	26,096		20,915
Total liabilities	2,146,923		1,793,409
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively	—		—
Common stock, $0.00001 par value; 200,000,000 shares authorized, 96,839,558 shares issued and 76,619,331 shares outstanding as of December 31, 2024, and 200,000,000 shares authorized, 95,521,651 shares issued and 75,301,424 shares outstanding as of December 31, 2023	1		1
Additional paid-in capital	1,689,781		1,347,410
Treasury stock at cost, 20,220,227 shares as of December 31, 2024 and December 31, 2023	(155,947)		(155,947)
Retained earnings	812,014		434,980
Accumulated other comprehensive loss	(18,184)		(10,679)
Total stockholders’ equity	2,327,665		1,615,765
Total liabilities and stockholders’ equity	$	4,474,588	$	3,409,174

The accompanying notes are an integral part of these consolidated financial statements.

AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)


	For the Years Ended December 31,
	2024		2023		2022
Net sales from products	$	1,221,292	$	964,002	$	797,177
Net sales from services	861,234		596,697		389,966
Net sales	2,082,526		1,560,699		1,187,143
Cost of product sales	618,136		447,708		360,909
Cost of service sales	223,010		157,538		100,121
Cost of sales	841,146		605,246		461,030
Gross margin	1,241,380		955,453		726,113
Operating expenses:
Selling, general and administrative	741,247		494,884		399,330
Research and development	441,593		303,719		233,810
Total operating expenses	1,182,840		798,603		633,140
Income from operations	58,540		156,850		92,973
Interest income, net	36,595		42,112		4,294
Other income (loss), net	286,369		(41,901)		98,971
Income before provision for income taxes	381,504		157,061		196,238
Provision for (benefit from) income taxes	4,470		(18,722)		49,308
Net income	$	377,034	$	175,783	$	146,930
Net income per common and common equivalent shares:
Basic	$	4.98	$	2.37	$	2.07
Diluted	$	4.80	$	2.33	$	2.03
Weighted average number of common and common equivalent shares outstanding:
Basic	75,748		74,195		71,093
Diluted	78,558		75,456		72,534
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$	377,034	$	175,783	$	146,930
Foreign currency translation adjustments	(7,874)		(4,352)		(4,818)
Unrealized gain (loss) on available-for-sale investments	369		852		(1,044)
Comprehensive income	$	369,529	$	172,283	$	141,068

The accompanying notes are an integral part of these consolidated financial statements.

AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)


	Common Stock			Additional Paid-in Capital			Treasury Stock				Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount				Shares		Amount
Balance, December 31, 2021	70,896,856	$	1	$	1,095,229		20,220,227		$	(155,947)	$	112,267	$	(1,317)	$	1,050,233
Issuance of common stock	—	—		(74)			—		—		—		—		(74)
Issuance of common stock under employee plans, net	566,780	—		(4,870)			—		—		—		—		(4,870)
Stock-based compensation	—	—		106,176			—		—		—		—		106,176
Issuance of common stock for business combination contingent consideration	10,945	—		—			—		—		—		—		—
Tax benefit related to convertible note hedge	—	—		48,858			—		—		—		—		48,858
Purchase of convertible note hedge	—	—		(194,994)			—		—		—		—		(194,994)
Issuance of warrants	—	—		124,269			—		—		—		—		124,269
Net income	—	—		—			—		—		146,930		—		146,930
Other comprehensive loss, net	—	—		—			—		—		—		(5,862)		(5,862)
Balance, December 31, 2022	71,474,581	$	1	$	1,174,594		20,220,227		$	(155,947)	$	259,197	$	(7,179)	$	1,270,666
Issuance of common stock	467,594	—		94,705			—		—		—		—		94,705
Issuance of common stock under employee plans, net	1,441,279	—		(107,894)			—		—		—		—		(107,894)
Stock options exercised	1,907,026	—		54,503			—		—		—		—		54,503
Stock-based compensation	—	—		131,358			—		—		—		—		131,358
Issuance of common stock for business combination contingent consideration and related tax effects	10,944	—		144			—		—		—		—		144
Net income	—	—		—			—		—		175,783		—		175,783
Other comprehensive loss, net	—	—		—			—		—		—		(3,500)		(3,500)
Balance, December 31, 2023	75,301,424	$	1	$	1,347,410		20,220,227		$	(155,947)	$	434,980	$	(10,679)	$	1,615,765
Issuance of common stock under employee plans, net	804,780	—		(58,178)			—		—		—		—		(58,178)
Stock options exercised	510,000	—		14,576			—		—		—		—		14,576
Stock-based compensation	—	—		382,604			—		—		—		—		382,604
Issuance of common stock for business combination contingent consideration and related tax effects	3,127	—		498			—		—		—		—		498
Issuance of replacement awards in connection with business combinations	—	—		2,871			—		—		—		—		2,871
Net income	—	—		—			—		—		377,034		—		377,034
Other comprehensive loss, net	—	—		—			—		—		—		(7,505)		(7,505)
Balance, December 31, 2024	76,619,331	$	1	$	1,689,781		20,220,227		$	(155,947)	$	812,014	$	(18,184)	$	2,327,665

The accompanying notes are an integral part of these consolidated financial statements.

AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	For the Years Ended December 31,
	2024		2023		2022
Cash flows from operating activities:
Net income	$	377,034	$	175,783	$	146,930
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation	382,604		131,358		106,176
(Gain) loss on strategic investments and marketable securities, net	(283,217)		41,785		(98,943)
Depreciation and amortization	48,425		19,315		23,116
Provision for bad debts and inventory	20,073		5,484		701
Deferred income taxes	(85,096)		(72,497)		22,019
Other noncash items	21,177		12,853		16,031
Change in assets and liabilities:
Receivables and contract assets	(245,842)		(178,989)		(78,226)
Inventory	607		(77,626)		(95,011)
Deferred revenue	155,641		146,819		155,566
Accounts payable, accrued and other liabilities	54,519		65,329		80,978
Prepaid expenses and other assets	(37,613)		(80,351)		(43,976)
Net cash provided by operating activities	408,312		189,263		235,361
Cash flows from investing activities:
Purchases of investments	(793,419)		(563,680)		(845,179)
Business combinations, net of cash acquired	(621,817)		(21,090)		(2,104)
Proceeds from call, maturity, and sale of investments	1,003,394		657,418		72,138
Purchases of property and equipment	(78,785)		(59,635)		(55,802)
Other, net	54		(537)		(20)
Net cash (used in) provided by investing activities	(490,573)		12,476		(830,967)
Cash flows from financing activities:
Net proceeds from equity offering	—		94,705		(74)
Proceeds from options exercised	14,576		54,503		—
Income and payroll tax payments for net-settled stock awards	(58,178)		(107,894)		(4,870)
Net proceeds from issuance of convertible senior notes	—		—		673,769
Proceeds from issuance of warrants	—		—		124,269
Purchase of convertible note hedge	—		—		(194,994)
Other, net	(1,835)		—		—
Net cash (used in) provided by financing activities	(45,437)		41,314		598,100
Effect of exchange rate changes on cash and cash equivalents	(6,209)		2,065		(3,380)
Net increase (decrease) in cash and cash equivalents	(133,907)		245,118		(886)
Cash and cash equivalents and restricted cash, beginning of period	600,670		355,552		356,438
Cash and cash equivalents and restricted cash, end of period	$	466,763	$	600,670	$	355,552

Supplemental disclosures:
Cash and cash equivalents	$	454,844	$	598,545	$	353,684
Restricted cash (Note 1)	11,919		2,125		1,868
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	466,763	$	600,670	$	355,552

Cash paid for interest	$	3,450	$	3,508	$	—
Cash paid for income taxes, net of refunds	67,845		64,492		10,508

Non-cash transactions
Property and equipment purchases in accounts payable and accrued liabilities	$	5,157	$	238	$	1,056
Non-cash equity issuances related to business combinations	2,871		—		—

The accompanying notes are an integral part of these consolidated financial statements.

Note 1 - Organization and Summary of Significant Accounting Policies

Axon Enterprise, Inc. (“Axon”, the “Company”, “we” or “us”) is a market-leading provider of public safety technology solutions. Our mission is to protect life in service of promoting peace, justice and strong institutions.

The accompanying consolidated financial statements include the accounts of Axon Enterprise, Inc. and our subsidiaries. All intercompany accounts, transactions and profits have been eliminated.

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions in these consolidated financial statements include:

revenue recognition,
stock-based compensation,
business combinations,
inventory valuation and related reserves,
valuation of goodwill, intangible and long-lived assets,
valuation of strategic investments,
recognition, measurement and valuation of current and deferred income taxes, and
recognition and measurement of contingencies and accrued litigation expense.

We believe that estimates used in the preparation of these consolidated financial statements are reasonable; however, actual results could differ materially from those estimates.

Revision of Previously Issued Financial Statements

As previously disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 and in the Original 2024 Annual Report, in preparing the condensed consolidated financial statements as of September 30, 2024, we identified errors in our previously issued financial statements related to our historical conclusions of principal vs. agent accounting of certain reseller arrangements under ASC 606. The identified errors impacted our previously issued 2021 and 2022 annual financial statements, 2023 quarterly and annual financial statements, and 2024 quarterly financial statements through June 30, 2024. We have made adjustments to correct the prior period amounts presented in these financial statements accordingly. Furthermore, we have made adjustments to correct for other previously identified immaterial errors.

We assessed the materiality of the errors on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, "Materiality," codified in ASC 250, Accounting Changes and Error Corrections. Based on this assessment, we concluded that the error correction is not material to any previously issued interim or annual financial statements on either a quantitative or qualitative basis. A summary of the revisions to the previously reported financial information is included in Note 23 and Note 24. As further discussed within Note 25, as the financial statements as of March 31, 2024 effectuating the revision have not yet been reissued as of the date of filing this Amended 2024 Annual Report, the revision errors impacting the March 31, 2024 interim period have been subsumed into the restatement of those financial statements described below.

Restatement of Previously Issued Financial Statements

Subsequent to the issuance of the Company's consolidated financial statements for the fiscal year ended December 31, 2024, the Company identified an error in the presentation of the $690.0 million aggregate principal amount of 0.50% convertible senior notes due 2027 (the “2027 Notes” or “Notes”) issued pursuant to an indenture dated December 9, 2022 (the “Indenture”) between current liabilities and long-term liabilities.

Specifically, the terms of the Notes require conversion into cash up to the principal amount, with conversion into common stock, cash, or a combination of cash and common stock, at the Company's option, for any amount in excess of the principal. As previously disclosed, the Notes are convertible at the option of the holders under certain circumstances, including when the Company's sale price per common stock exceeds 130% of the initial conversion price of the Notes for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Beginning with the quarter ended March 31, 2024, and as of the balance sheet date for each of the previously reported fiscal year ended December 31, 2024 and fiscal quarters ended March 31, 2024 and September 30, 2024 (the “Affected Periods”), the Company's sale price per common stock exceeded 130% of the initial conversion price for the contractually specified period of time. As such, although no holders of the Notes exercised this put option, the Notes should have been presented as current liabilities rather than long-term liabilities for the Affected Periods. The effect of this error did not impact Total Assets, Total Liabilities, or Stockholders' Equity in the consolidated balance sheets or the consolidated statements of operations, stockholder's equity or cash flows for the Affected Periods.

The impact of the correction of the error on the consolidated financial statements as of and for the year ended December 31, 2024 is summarized below. Refer to Note 12 and Note 25 for further information, including a summary of the impact to the previously reported interim financial information for the Affected Periods. There is no impact as of and for the year ended December 31, 2023.


As of December 31, 2024	As Reported		Restatement		As Restated

Current portion of convertible notes, net	$	—	$	680,289	$	680,289
Total current liabilities	997,586		680,289		1,677,875
Long-term convertible notes, net	680,289		(680,289)		—

Other than the captions noted above, there was no impact to the consolidated balance sheet.

Out of Period Adjustment

During the 2024 year-end close process, we identified immaterial errors in our previously issued financial statements related to accounting for certain contract terms and conditions in accordance with ASC 606. We assessed the materiality of the errors in combination with the errors described above on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” codified in ASC Topic 250, Accounting Changes and Error Corrections and concluded that the errors are not material, individually and in the aggregate, to any previously issued financial statements and that the correction of this misstatement in 2024 was also not material to the current fiscal year on either a quantitative or qualitative basis. We corrected these errors as an out of period adjustment during the year ended December 31, 2024 with a decrease to revenue of $3.3 million and a decrease to net income of $2.3 million. These errors originated in prior years and were immaterial to each respective prior period.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist of accounts and notes receivable, contract assets and cash. Historically, we have experienced an immaterial level of write-offs related to uncollectible accounts.

We hold the majority of our cash and cash equivalents accounts at two depository institutions. As of December 31, 2024, the aggregate balances in such accounts were $376.8 million. Our balances with these two institutions regularly exceed Federal Deposit Insurance Corporation insured limits for domestic deposits and various deposit insurance programs in countries such as Australia, Belgium, Canada, Finland, France, Germany, Greece, India, Italy, the Netherlands, Spain, the United Kingdom and Vietnam. To manage the related credit exposure, management continually monitors the creditworthiness of the financial institutions where we have deposits.

Major Customers and Suppliers

No customer represented more than 10% of total net sales for the years ended December 31, 2024, 2023 or 2022. At December 31, 2024 and 2023, no customer represented more than 10% of the aggregate balance of accounts and notes receivable and contract assets. For additional details, refer to Note 2.

We currently purchase both off-the-shelf and custom components, including finished circuit boards, injection-molded plastic components, small machined parts, custom cartridge components, electronic components and sub-assemblies from suppliers located in the United States, Taiwan, Mexico, China, Vietnam, Thailand and the Republic of Korea. We may source from other countries as well. Although we currently obtain components from single source suppliers, we own substantially all injection-molded component tooling, designs and test fixtures used in production for all custom components. As a result, we believe we could obtain alternative suppliers in most cases. We acquire most of our components on a purchase order basis and do not currently have significant long-term purchase contracts with most component suppliers.

Segment Information

Our operations comprise two reportable segments: the development, manufacture and sale of fully integrated hardware and cloud-based software solutions that enable law enforcement to capture, securely store, manage, share and analyze video and other digital evidence (collectively, the “Software and Sensors” segment); and the manufacture and sale of CEDs, batteries, accessories, extended warranties and other products and services (collectively, the “TASER” segment). In both segments, we report sales of products and services. Service revenue in both segments includes sales related to Axon Evidence. In the Software and Sensors segment, service revenue also includes other recurring cloud-hosted software revenue and related professional services. Collectively, this revenue is sometimes referred to as “Axon Cloud revenue.”

Reportable segments are determined based on discrete financial information provided to our Chief Executive Officer who is our chief operating decision maker (“CODM”). In deciding how to allocate resources and assess performance, the CODM reviews adjusted gross margin by operating segment, consolidated financials and revenue by major geography, and product and service lines. Specifically, the CODM reviews adjusted gross margin by segment to evaluate segment profitability, identify cost trends and make operational decisions to support our segments. Consolidated financials provide a holistic view of our overall financial health to guide capital allocation and entity wide decisions. Disaggregated views of revenue by major geography and product line support the evaluation of specific market and product performance to understand customer trends. There are no operating segments that are aggregated. Furthermore, there are no inter-segment sales. Assets and other expense items, such as research and development and selling, general, and administrative expenses, are not provided to the CODM by segment, as our CODM does not evaluate our operating segments using this discrete information. As such, these items are not relevant to adjusted gross margin leveraged by the CODM to assess segment performance. As a result, they are not disclosed by segment. We perform an analysis of our reportable segments at least annually. The vast majority of our long-lived assets, including property, plant and equipment and right-of-use lease assets are located within the United States. International long-lived assets are immaterial. Additionally, the majority of our revenues are generated within the United States.

During the year ended December 31, 2024, the segment measure of profit and loss used by the CODM was changed from gross margin to adjusted gross margin, defined as gross margin before stock-based compensation expense, amortization of acquired intangible assets and inventory step-up amortization related to acquisitions. Each of the aforementioned components of our segment measure of profit and loss, adjusted gross margin, are included within other segment items. This change in segment measure allows the CODM to better assess operating results over time and is consistent with how the CODM evaluates our businesses. Accordingly, we have updated our segment disclosure for the years ended December 31, 2023 and 2022 to conform to the new presentation. For additional details, refer to Note 20.

Geographic Information

The majority of our sales to international customers are transacted in foreign currencies and are attributed to each country based on the shipping address of the distributor or customer. For the years ended December 31, 2024, 2023 and 2022, no individual country outside the United States represented more than 10% of net sales. Substantially all of our assets are located in the United States. For additional details, refer to Note 2.

Cash, Cash Equivalents and Investments

We have cash, cash equivalents and investments, which at December 31, 2024 comprised cash, money market funds, commercial paper, corporate bonds, term deposits, U.S. government bonds, U.S. Treasury bills, and agency bonds. Cash

equivalents and investments at December 31, 2023 also included U.S. Treasury inflation-protected securities. We place our cash and cash equivalents with high quality financial institutions. Although we deposit our cash with multiple financial institutions, our deposits regularly exceed federally insured limits. Cash and cash equivalents include funds on-hand and highly liquid investments purchased with initial maturity of three months or less. Short-term investments include securities with an expected maturity date within one year of the balance sheet date that do not meet the definition of a cash equivalent, and long-term investments are securities with an expected maturity date greater than one year and less than three years in accordance with our investment policy.

We report available-for-sale investments at fair value as of each balance sheet date and record any unrealized gains or losses within accumulated other comprehensive loss as a component of stockholders’ equity. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (loss), net within the consolidated statements of operations. Income tax effects are released from accumulated other comprehensive loss for unrealized gains or losses when the gains or losses are realized and are taxed at the statutory rate based on jurisdiction of the underlying transaction. When the fair value is below the amortized cost of an available-for-sale investment, an estimate of expected credit losses is made. Credit losses are recognized through the use of an allowance for credit losses account in the consolidated balance sheets and subsequent improvements in expected credit losses are recognized as a reversal of an amount in the allowance account. If we have the intent to sell the security or it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis, then the allowance for the credit loss is written-off and the excess of the amortized cost basis of the asset over its fair value is recorded in the consolidated statements of operations. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases. There were no credit losses recorded on our investment portfolio during the years ended December 31, 2024, 2023, and 2022.

Restricted Cash

Restricted cash balances were $11.9 million and $2.1 million as of December 31, 2024 and 2023, respectively. This increase is primarily attributable to a payment held in escrow related to the potential construction of our headquarters building in Scottsdale, Arizona. Restricted cash also includes funds held in international bank accounts for various operating and financing activities. As of December 31, 2024, approximately $11.8 million was included in prepaid expenses and other current assets on our consolidated balance sheet, with the remainder in other long-term assets.

Inventory

Inventories are stated at the lower of cost or net realizable value, using a standard cost method which approximates the first-in, first-out method. Additional provisions are made to reduce excess, obsolete or slow-moving inventories to their net realizable value. These provisions are based on our best estimate after considering historical demand, projected future demand, inventory purchase commitments, industry and market trends and conditions among other factors. We evaluate inventory costs for abnormal costs due to excess production capacity and treat such costs as period costs. Raw materials include an immaterial amount of work-in-process inventory.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Additions and improvements are capitalized, while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is calculated using the straight-line method over the estimated economic life.

Software Development Costs

We expense software development costs, including costs to develop software products or the software component of products and services to be marketed to external users, before technological feasibility of such products is reached.

Software development costs also include costs to develop software programs to be used solely to meet our internal needs and applications. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the intended function. Additionally, we capitalize qualifying costs incurred for upgrades and enhancements to existing software that result in additional functionality. Costs related to preliminary project planning activities, post-implementation activities, maintenance and minor modifications are expensed as incurred. Internal-use software development costs are amortized on a straight-line basis over the estimated useful life of the software.

We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Leases

We determine if a contract contains a lease at inception. At commencement, lease contracts are evaluated for classification as an operating or finance lease. Operating lease right-of-use (“ROU”) assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Additionally, we use the portfolio approach in determining the discount rate used to present value lease payments. We give consideration to our 2027 Notes, line of credit, macroeconomic factors, as well as publicly available data for instruments with similar characteristics when estimating our incremental borrowing rates. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives.

We have operating leases for office space, manufacturing and logistical functions. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We do not have any material variable lease costs associated with our operating leases. For leases beginning on or after January 1, 2019, we account for lease components separately from non-lease components for all asset classes.

Our operating leases have remaining terms of less than one to approximately 12 years, some of which include one or more options to renew for up to five years, and some of which include options to terminate the leases within one year. The exercise of lease renewal options is at our sole discretion and such options are included in ROU assets and liabilities for renewal periods that are reasonably certain of exercise. Certain of these lease agreements include stated rental payment escalations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We may enter into sales-type finance leases as an alternative means to realize value for our body cameras and related accessories. For sales-type finance leases where we are the lessor, we recognize our selling profit on a gross basis at lease commencement within net sales from products and cost of product sales, respectively. Interest income is recognized over the lease term within interest income, net. The current and long-term portions of our investment in sales-type leases are included in prepaid expenses and other current assets and other long-term assets, respectively. Given the immateriality of our finance lease activity as of December 31, 2024, no further disclosure considerations related to finance leases are necessary.

Valuation of Goodwill, Intangible and Long-lived Assets

We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets and identifiable intangible assets, excluding goodwill and intangible assets with indefinite useful lives, may warrant revision or that the remaining balance of these assets may not be recoverable. Such events and circumstances could include a change in the product mix, a change in the way products are created, produced or delivered, or a significant change in the way products are branded and marketed. In performing the review for recoverability, we estimate the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. The amount of impairment loss, if impairment exists, is calculated based on the excess of the carrying amounts of the assets over their estimated fair values computed using discounted cash flows.

Finite-lived intangible assets and other long-lived assets are amortized using the straight-line method over the estimated useful life. We do not amortize goodwill and intangible assets with indefinite useful lives; rather such assets are tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. We test goodwill and intangible assets for impairment on an annual basis on December 31, 2024 and on an interim basis when certain events and circumstances exist.

During the years ended December 31, 2024 and December 31, 2023, long-lived asset impairment charges were immaterial. During the year ended December 31, 2022, we recorded $5.3 million of impairment charges, the majority of which were related to the cease-use of a portion of our Seattle office.

No impairment charges were recognized related to goodwill or intangible assets during the years ended December 31, 2024, 2023, and 2022.

Customer Deposits

We require deposits in advance of shipment for certain customer sales orders. Additionally, customers may elect to make deposits with us related to contracts for our products and services that were not executed as of the end of a reporting period. Customer deposits are included in other current liabilities in the consolidated balance sheets.

Revenue Recognition, Receivables, Contract Assets, and Deferred Revenue

We derive revenue from two primary sources: (1) the sale of physical products, including CEDs, Axon cameras, Axon Signal-enabled devices, corresponding hardware extended warranties, and related accessories such as Axon docks, cartridges and batteries, among others, and (2) subscriptions to our Axon Evidence digital evidence management SaaS offering (including data storage fees and other ancillary services), which includes varying levels of support. To a lesser extent, we also recognize revenue from training, professional services and other software and SaaS services. We apply the five-step model outlined in ASC 606. For additional discussion, refer to Note 2.

We enter into contracts that can include various combinations of products and services, each of which is generally distinct and accounted for as a separate performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our estimate of the standalone selling price (“SSP”) of each distinct good or service in the contract. Revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Performance obligations to deliver products, including CEDs, Axon cameras and related accessories, such as docks, cartridges and batteries, are generally satisfied at the point in time we ship the product, as this is when the customer obtains control of the asset under our standard terms and conditions. In certain contracts with non-standard terms and conditions, these performance obligations may not be satisfied until delivery or formal customer acceptance occurs. Performance obligations to fulfill service-type extended warranties and provide our SaaS offerings, including Axon Evidence and other cloud services, are generally satisfied over time as the customer receives and consumes the benefits of these services over the stated service period.

We determine the term of our arrangements based on identifying the contract with the customer. In certain of our arrangements, the customer may have termination rights. In these instances, we determine if there is a substantive penalty. For contracts with a substantive penalty, the accounting term will be the legal contract term, inclusive of the periods for which the customer termination rights exist. In these contracts with no substantive penalty, we also consider if the option for our customer to purchase additional goods or services represents an additional performance obligation in the form of a material right.

While our products and services may be sold on a standalone basis, we generally combine our hardware products and services together and sell them to our customers in single transactions where the customer can make payments over a multi-year period. These sales may include payments for upfront hardware and services, as well as payments for hardware and services to be provided at a future date. Additionally, we offer customers the ability to purchase CED cartridges and certain services on an unlimited basis over the contractual term. Due to the nature of these arrangements whereby we are obligated to deliver products at the customer’s request, we account for these arrangements as stand-ready obligations, and recognize revenue ratably over the contract period. Cost of product sales is recognized when control of hardware products or accessories has transferred to the customer.

We recognize shipping costs as an expense in cost of product sales when the control of hardware products or accessories has transferred to the customer. Sales tax collected on sales is netted against government remittances and, thus, recorded on a net basis. Payment terms and conditions vary by contract type and geography, but our standard terms are that payments are due within 30 days from the date of invoice.

The timing of revenue recognition may differ from the timing of invoicing to customers. We generally have an unconditional right to consideration when we invoice our customers and record a receivable. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing. Contract asset amounts that will be invoiced during the subsequent 12-month period from the balance sheet date are classified as current assets and the remaining portion is recorded within other long-term assets on our consolidated balance sheets. Deferred revenue that is expected to be recognized during the subsequent 12-month period from the balance sheet date is recorded as current deferred revenue and the remaining portion is recorded as long-term deferred revenue. Generally, customers are billed in annual installments.

Contract assets generally result from our subscription programs where we satisfy a hardware performance obligation upon shipment to the customer, and the right to the portion of the transaction price allocated to that hardware performance obligation is conditional on our future performance of a SaaS service obligation under the contract. We recognize a portion of the amount allocated to hardware products shipped to the customer as accounts receivable when invoiced to the customer, and record the remaining allocated value as a contract asset as we have generally fulfilled our hardware performance obligation upon shipment. Unbilled accounts receivable expected to be invoiced and collected within 12 months were $5.6 million as of December 31, 2024, and were included in accounts and notes receivable, net on our consolidated balance sheet.

Contract liabilities generally consist of deferred revenue on our subscription programs where we generally invoice customers at the beginning of each annual contract period and record a receivable at the time of invoicing when there is an unconditional right to consideration. Deferred revenue is composed mainly of unearned revenue related to our Axon Evidence SaaS platform, secure cloud-based storage, service-type extended warranties, stand-ready obligations in our cartridge programs, and rights to future CED, Axon camera and related accessories hardware in our subscription programs. For additional discussion, refer to Note 2.

Reserve for Expected Credit Losses

Sales are typically made on credit, and we generally do not require collateral. We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for accounts receivable, contract assets, notes receivable and off-balance-sheet exposures is developed using historical collection experience, published or estimated credit default rates for entities that represent our customer base, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivables. We review receivables for U.S. and international customers separately to better reflect different published credit default rates and economic and market conditions. Additionally, specific reserve amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include account reconciliation, dispute resolution, payment confirmation, consideration of customers’ financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. Accounts and notes receivable, contract assets and off-balance-sheet exposures are presented net of a reserve for expected credit losses, which totaled $5.6 million and $4.0 million as of December 31, 2024 and 2023, respectively. This reserve represents our best estimate and application of judgment considering a number of factors, including those listed above. In the event that actual uncollectible amounts differ from our estimates, additional expense could be necessary. For additional discussion, refer to Note 4.

Deferred Commissions

We recognize an asset for the incremental costs of obtaining a contract with a customer, which consist primarily of sales commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract and amortized consistent with the expected recognition timing of the revenue for the underlying performance obligations.

For contract costs related to performance obligations with an amortization period of one year or less, we apply the practical expedient to expense these sales commissions when incurred. These costs are recognized as incurred within SG&A expenses in the consolidated statements of operations and comprehensive income. For additional discussion, refer to Note 2.

Cost of Product and Service Sales

Cost of product sales represents manufacturing costs consisting of materials, labor and overhead related to finished goods and components. Shipping costs incurred related to product delivery are also included in cost of products sold. Cost of service sales includes third-party cloud services, software maintenance and support costs – including personnel costs, associated with supporting Evidence.com and other software related services.

Advertising Costs

We expense advertising costs in the period in which they are incurred. We incurred advertising costs of $4.4 million, $1.9 million and $2.3 million in the years ended December 31, 2024, 2023 and 2022, respectively. Advertising costs are included within SG&A expenses in the consolidated statements of operations.

Warranty Reserves

We warranty our CEDs, Axon cameras and certain related accessories from manufacturing defects on a limited basis for a period of one year after purchase and, thereafter, will replace any defective unit for a fee. We estimate and record a liability for standard warranty at the time products are sold. The estimates are based on historical experience and reflect our best estimates of costs to be incurred over the warranty period. Adjustments may be required when actual or projected costs differ. Variations in component failure rates, repair costs and the point of failure within the product life cycle are key drivers that impact our periodic re-assessment of the warranty liability.

Revenue related to separately priced extended warranties is initially recorded as deferred revenue at its allocated amount and subsequently recognized as net sales on a straight-line basis over the warranty service period. Costs related to extended warranties are charged to cost of product sales when the costs become probable and can be reasonably estimated.

Changes in our estimated warranty reserve were as follows (in thousands):


	Year Ended December 31,
	2024		2023		2022
Balance, beginning of period	$	7,374	$	811	$	2,822
Utilization of reserve	(5,992)		(1,499)		(2,209)
Adjustment to reserve due to business combinations	1,311		—		—
Warranty expense	5,591		8,062		198
Balance, end of period	$	8,284	$	7,374	$	811

Research and Development Expenses

We expense as incurred R&D costs that do not meet the qualifications to be capitalized. R&D costs include payroll costs and stock-based compensation for the personnel involved in R&D functions, as well as indirect manufacturing costs and supplies, consulting services and internal infrastructure costs incurred in connection with product research and development. We incurred R&D expense of $441.6 million, $303.7 million and $233.8 million in 2024, 2023 and 2022, respectively.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement amounts of assets and liabilities and their respective tax bases, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced through the establishment of a valuation allowance if, based upon available evidence, it is determined that it is more likely than not that the deferred tax assets will not be realized. We use factors to assess the likelihood of realization of deferred tax assets such as the forecast of future taxable income and available tax planning that could be implemented to realize the deferred tax assets.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We also assess whether uncertain tax positions, as filed, could result in the recognition of a liability for possible interest and penalties. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. For additional details, refer to Note 14.

Fair Value Measurements and Financial Instruments

We use the fair value framework that prioritizes the inputs to valuation techniques for measuring financial assets and liabilities measured on a recurring basis and for non-financial assets and liabilities when these items are re-measured. Fair value is considered to be the exchange price in an orderly transaction between market participants, to sell an asset or transfer a liability at the measurement date. The hierarchy below lists three levels of fair value based on the extent to which

inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.
Level 2 – Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices from markets that are not active for assets or liabilities that are identical or similar to the assets or liabilities being measured. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.
Level 3 – Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect our own assumptions about inputs that market participants would use in pricing an asset or liability.

We have cash equivalents and investments, which at December 31, 2024 comprised money market funds, commercial paper, corporate bonds, term deposits, U.S. government bonds, U.S. Treasury bills, and agency bonds. For additional details regarding our cash equivalents and investments, refer to Note 3. Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. We have corporate-owned life insurance policies, included in the balance of other long-term assets, which are used to fund our deferred compensation plan. The balances of these policies as of December 31, 2024 and 2023 were $8.4 million and $7.6 million, respectively. We determine the fair values of our insurance contracts by obtaining the cash surrender value of the contracts from the issuer, a Level 2 valuation technique.

We have an investment in marketable securities, for which changes in fair value are recorded in the consolidated statements of operations as unrealized gain (or loss) on marketable securities, which is included in other income (loss), net.

We have strategic equity investments in various privately held companies as of December 31, 2024 and 2023. The estimated fair value of the investments was determined based on Level 3 inputs. In determining the estimated fair value of our strategic investments in privately held companies, we utilize observable data available to us as discussed further in Note 8.

The fair value of our 0.50% convertible senior notes due 2027 (the "Notes" or "2027 Notes") is determined based on the closing trading price per $1,000 of the Notes as of the last day of trading for the period. We consider the fair value of the 2027 Notes at December 31, 2024 and 2023, to be a Level 2 measurement based on the fair value hierarchy. The fair value is primarily affected by the trading price of our common stock and market interest rates.

Our financial instruments also include accounts and notes receivable, accounts payable and accrued liabilities. Due to the short-term nature of these instruments, their fair values approximate their carrying values on the consolidated balance sheets.

Stock-Based Compensation

We have historically utilized stock-based compensation for key employees and non-employee directors as a means of attracting and retaining talented personnel. We recognize compensation expense for our stock-based compensation program, which includes grants of RSUs, PSUs and stock options. Our stock-based compensation awards are classified as equity and measured at the fair market value of the underlying common stock at the grant date. When determining the grant date fair value of stock-based awards, we consider whether an adjustment is required to the observable market price or volatility of our common stock used in the valuation as a result of material non-public information.

RSUs

Stock-based compensation expense for RSUs is measured based on the closing fair market value of our common stock on the date of grant. We recognize stock-based compensation expense over the award’s requisite service period using the straight-line attribution method for service-based RSUs. Service-based grants generally have a vesting period of one to

four years and a contractual maturity of ten years. We account for forfeitures as they occur as a reduction to stock-based compensation expense and additional paid-in-capital.

PSUs

Stock-based compensation expense for PSUs is measured based on the closing fair market value of our common stock on the date of grant. We recognize stock-based compensation expense over the award's requisite service period, which is defined as the longest explicit, implicit or derived service period based on our estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date. The vesting of our PSUs is generally contingent upon the achievement of certain performance criteria related to our operating performance, as well as successful and timely development and market acceptance of future product introductions. For PSUs containing only performance conditions, compensation cost is recognized using the graded attribution model over the explicit or implicit service period. In addition, certain of the PSUs have further service requirements subsequent to achievement of the performance criteria.

Performance-based grants generally have vesting periods ranging from one to eight years and a contractual maturity of ten years. We account for forfeitures as they occur as a reduction to stock-based compensation expense and additional paid-in-capital. Our performance-based restricted stock units include XSUs granted under the 2024 Employee XSP and the 2024 CEO Performance Award discussed further below.

2024 Employee XSP and 2024 CEO Performance Award

On May 10, 2024, our shareholders approved the 2024 Employee XSP. The 2024 Employee XSP includes an approved pool of shares of common stock reserved for grants of awards of XSUs to employees. The grants of XSUs (the “2024 XSUs”) are grants of performance-based RSUs. The program includes seven substantially equal tranches that will vest upon certification by the Compensation Committee of the Board of Directors (the “Compensation Committee”) upon achievement of three independent vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service conditions.

Additionally, on May 10, 2024, shareholders approved a grant of XSUs to our CEO, Patrick W. Smith (the “2024 CEO Performance Award”). The stock price goals and operational goals applicable to the 2024 CEO Performance Award are identical to those under the 2024 Employee XSP, but Mr. Smith is subject to a longer minimum required service period.

Stock-based compensation expense associated with the XSUs is recognized over the requisite service period, which is considered the longest explicit, implicit or derived service period for each respective tranche. We utilized Monte Carlo simulations to evaluate a range of possible future stock price goals over the term of the awards at each of the respective grant dates. The median of all iterations of the simulation was used as the basis for the derived service period for each tranche.

We measured the grant date fair value of each tranche using a Monte Carlo simulation with the following assumptions: risk-free interest rate of 3.6% – 4.5%, expected volatility of 41.0% – 46.8%, expected term of 8.0 – 8.6 years, and dividend yield of 0.0%. We utilized a blended volatility assumption, equally weighting both historical volatility and implied volatility, resulting in a weighted-average expected volatility of 41.6%. An illiquidity discount is considered in our estimate of the fair value of shares during post-vesting holding periods. The mandatory post-vesting holding periods for XSUs will lapse on the earlier of (i) December 31, 2030, or (ii) the date that a subsequent tranche vests and settles. Therefore, the illiquidity discount is dependent upon projected tranche vesting dates, determined via the Monte Carlo simulation. This simulation is based on a subjective assessment of our forward-looking financial projections, taking into consideration statistical analysis.

Even though no tranche with respect to either XSUs granted under the 2024 Employee XSP or the 2024 CEO Performance Award vests unless the applicable stock price goal, operational goal and corresponding minimum service condition are achieved, stock-based compensation expense is recognized when an operational goal is considered probable of attainment regardless of the achievement of the stock price and minimum service conditions. As of December 31, 2024, we consider some of the tranches probable and will recognize the expense ratably over their respective expected vesting periods. This may result in volatility and higher upfront expense recognition and is subject to change based on periodic probability assessments. Refer to Note 16 for further discussion.

Stock Options

On May 24, 2018, our shareholders approved the Board of Directors’ grant of 6.4 million performance-based stock options to our CEO, Patrick W. Smith, (the “2018 CEO Performance Award”). The 2018 CEO Performance Award consisted of 12 substantially equal tranches with a vesting schedule based entirely on the attainment of both operational goals (performance conditions) and market capitalization goals (market conditions), assuming continued employment either as the Chief Executive Officer or as both Executive Chairman and Chief Product Officer and service through each vesting date. For performance-based stock options with a vesting schedule based entirely on the attainment of both performance and market conditions, stock-based compensation expense was recognized for each pair of performance and market conditions over the longer of the expected achievement period of the performance and market conditions, beginning at the point in time that the relevant performance condition is considered probable of achievement. The fair value of such awards was estimated on the grant date using Monte Carlo simulations.

Income per Common Share

Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods presented. Diluted income per share reflects the potential dilution from outstanding stock-based awards, our 2027 Notes, and warrants to acquire shares of our common stock (the "Warrants" or "2027 Warrants"). The effects of outstanding stock-based awards, our 2027 Notes, and our 2027 Warrants are excluded from the computation of diluted net income per share in periods in which the effect would be antidilutive. The calculation of the weighted average number of shares outstanding and earnings per share is as follows (in thousands except per share data):


	For the Year Ended December 31,
	2024		2023		2022
Numerator for basic and diluted earnings per share:
Net income	$	377,034	$	175,783	$	146,930
Denominator:
Weighted average shares outstanding	75,748		74,195		71,093
Dilutive effect of stock-based awards	1,435		1,261		1,441
Dilutive effect of 2027 Notes	1,139		—		—
Dilutive effect of 2027 Warrants	236		—		—
Diluted weighted average shares outstanding	78,558		75,456		72,534

Net income per common share:
Basic	$	4.98	$	2.37	$	2.07
Diluted	$	4.80	$	2.33	$	2.03

Potentially dilutive securities that are not included in the calculation of diluted net income per share because doing so would be antidilutive are as follows (in thousands):


	For the Year Ended December 31,
	2024	2023	2022
Stock-based awards	4,132	1,014	3,264
2027 Notes	1,877	3,017	3,017
2027 Warrants	2,781	3,017	3,017
Total potentially dilutive securities	8,790	7,048	9,298

For additional information regarding our 2027 Notes, refer to Note 12.

Recently Issued Accounting Guidance

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires improvements to annual and interim

segment disclosures, primarily through enhanced disclosures around significant segment expenses. We adopted this ASU effective for our Annual Report on Form 10-K for the year ending December 31, 2024, and as a result, enhanced certain qualitative considerations within "Segment Information" of Note 1. There were no significant impacts to our existing quantitative disclosures as a result of our adoption of this ASU.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax. The provisions of ASU 2023-09 are effective for our Annual Report on Form 10-K for the year ending December 31, 2025, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.

In March 2024, the SEC adopted final rules under SEC Release No. 34-99678 and No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Final Rules”), which will require registrants to provide certain climate-related information in their registration statements and annual reports. The Final Rules require, among other things, disclosure in the notes to the audited financial statements of the effects of severe weather events and other natural conditions, subject to certain thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates in certain circumstances. The financial statement disclosure requirements of the Final Rules will begin phasing in for fiscal year 2025. In April 2024, the SEC stayed the effectiveness of the Final Rules pending judicial review. We are currently evaluating the impact of the Final Rules on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures. ASU 2024-03 is intended to enhance level of detail disclosed related to expense categories and provide additional disclosure of expenses by nature. The provisions of ASU 2024-03 are effective for our Annual Report on Form 10-K for the year ending December 31, 2027, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-04, Debt (Topic 470): Debt with Conversion and Other Options. ASU 2024-04 clarifies the assessment of whether a transaction should be accounted for as an induced conversion or debt extinguishment when the terms of convertible debt are changed to induce conversion. The provisions of ASU 2024-04 are effective for our Annual Report on Form 10-K for the year ending December 31, 2026, with early adoption permitted. We are currently evaluating the impact of this update.

Note 2 - Revenues

Nature of Products and Services

The following table presents our revenues by primary product and service offering and reportable segment (in thousands):


	Year Ended December 31, 2024						Year Ended December 31, 2023
	TASER		Software and Sensors		Total		TASER		Software and Sensors		Total
TASER Devices (Professional)	$	453,055	$	—	$	453,055	$	333,923	$	—	$	333,923
Cartridges	246,766		—		246,766		193,285		—		193,285
Axon Evidence and Cloud Services	54,913		808,256		863,169		35,680		566,003		601,683
Extended Warranties	37,515		66,141		103,656		31,689		55,154		86,843
Axon Body Cameras and Accessories	—		246,855		246,855		—		183,023		183,023
Axon Fleet Systems	—		104,890		104,890		—		121,842		121,842
Other (1) (2)	26,424		37,711		64,135		18,933		21,167		40,100
Total	$	818,673	$	1,263,853	$	2,082,526	$	613,510	$	947,189	$	1,560,699


	Year Ended December 31, 2022
	TASER		Software and Sensors		Total
TASER Devices (Professional)	$	282,698	$	—	$	282,698
Cartridges	181,686		—		181,686
Axon Evidence and Cloud Services	18,182		367,852		386,034
Extended Warranties	29,056		45,507		74,563
Axon Body Cameras and Accessories	—		157,281		157,281
Axon Fleet Systems	—		63,017		63,017
Other (1) (2)	19,422		22,442		41,864
Total	$	531,044	$	656,099	$	1,187,143

(1)TASER segment “Other” includes smaller categories, such as VR hardware, weapons training revenue such as revenue associated with our Master Instructor School, and TASER consumer device sales.

(2)Software and Sensors segment “Other” includes revenue from items including Signal Sidearm, Interview Room, Axon Air, partners' contra-revenue and other sensors and equipment.

The following table presents our revenues disaggregated by geography (in thousands):


	Year Ended December 31,
	2024				2023				2022
United States	$	1,775,194	85	%	$	1,335,516	86	%	$	985,183	83	%
Other countries	307,332		15		225,183		14		201,960		17
Total	$	2,082,526	100	%	$	1,560,699	100	%	$	1,187,143	100	%

Contract Balances

The following table presents our contract assets, contract liabilities and certain information related to these balances as of and for the year ended December 31, 2024 (in thousands):


	Year Ended December 31,
	2024		2023		2022
Contract assets, net	$	487,805	$	371,614	$	249,001
Contract liabilities (deferred revenue)	973,640		741,316		593,038
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	499,727		357,979		258,063

During the year ended December 31, 2024, our contract assets balance increased by $116.2 million, or 31.3%, due to increased sales under subscription plans. Contract liabilities increased $232.3 million, or 31.3%, for the year ended December 31, 2024 due to acquisitions and increased subscription invoicing for Software and Sensors hardware and services in advance of fulfilling performance obligations to customers.

Contract liabilities (deferred revenue) consisted of the following (in thousands):


	December 31, 2024						December 31, 2023
	Current		Long-Term		Total		Current		Long-Term		Total
Warranty:
TASER	$	16,107	$	19,288	$	35,395	$	14,666	$	18,828	$	33,494
Software and Sensors	36,842		19,706		56,548		22,642		8,165		30,807
	52,949		38,994		91,943		37,308		26,993		64,301
Hardware:
TASER	49,195		35,116		84,311		35,845		29,689		65,534
Software and Sensors	89,992		144,191		234,183		63,299		117,024		180,323
	139,187		179,307		318,494		99,144		146,713		245,857
Services:
TASER	9,635		6,134		15,769		7,832		3,983		11,815
Software and Sensors	411,184		136,250		547,434		326,131		93,212		419,343
	420,819		142,384		563,203		333,963		97,195		431,158
Total	$	612,955	$	360,685	$	973,640	$	470,415	$	270,901	$	741,316


	December 31, 2024						December 31, 2023
	Current		Long-Term		Total		Current		Long-Term		Total
TASER	$	74,937	$	60,538	$	135,475	$	58,343	$	52,500	$	110,843
Software and Sensors	538,018		300,147		838,165		412,072		218,401		630,473
Total	$	612,955	$	360,685	$	973,640	$	470,415	$	270,901	$	741,316

Remaining Performance Obligations

As of December 31, 2024, we had approximately $7.9 billion of remaining performance obligations, which included both recognized contract liabilities as well as amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under ASC 606 as of December 31, 2024. We currently expect to recognize between approximately 20% - 25% of this balance over the next 12 months, and expect the remainder to be recognized over the following ten years, subject to risks related to delayed deployments, budget appropriation, or other contract cancellation clauses.

Costs to Obtain a Contract

We recognize an asset for the incremental costs of obtaining a contract with a customer, which consist primarily of sales commissions. As of December 31, 2024, our assets for costs to obtain contracts were as follows (in thousands):


	December 31, 2024		December 31, 2023
Current deferred commissions (1)	$	59,025	$	46,224
Deferred commissions, net of current portion (2)	154,894		119,084
	$	213,919	$	165,308

(1)Current deferred commissions are included within prepaid expenses and other current assets on the consolidated balance sheets.

(2)Deferred commissions, net of current portion, are included in other long-term assets on the consolidated balance sheets.

During the years ended December 31, 2024, 2023 and 2022, we recognized $50.8 million, $34.1 million, and $24.4 million, respectively, of amortization related to deferred commissions. These costs are recorded within SG&A expenses in the consolidated statements of operations and comprehensive income (loss).

Significant Judgments

Our contracts with certain municipal government customers may be subject to budget appropriation, other contract cancellation clauses or optional renewal periods. In contracts where the customer’s performance is subject to budget appropriation clauses, we generally consider the likelihood of non-appropriation to be remote when determining the contract term and transaction price. Contracts with other cancellation provisions or optional periods may require judgment in determining the contract term, including the existence of substantive termination penalties, determining transaction price and identifying the performance obligations.

At times, customers may request changes that either amend, replace or cancel existing contracts. Judgment is required to determine whether the specific facts and circumstances within the contracts require the changes to be accounted for as a separate contract or as a modification. Generally, contract modifications containing additional goods and services that are determined to be distinct and sold at their SSP are accounted for as a separate contract. For contract modifications where both criteria are not met, the original contract is updated and the required adjustments to revenue and contract assets, liabilities and other accounts are made accordingly.

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require significant judgment. We consider CED devices and related accessories, as well as Axon cameras and related accessories, to be separately identifiable from each other as well as from extended warranties on these products and the SaaS subscriptions to Axon Evidence and other cloud services.

In contracts where there are timing differences between when we transfer a promised good or service to the customer and when the customer pays for that good or service, we assess whether there is any implied financing within the transaction, and if so, recognize related interest income, or expense, on the transaction. The amount of imputed interest is immaterial for the years ended December 31, 2024, 2023 and 2022.

Judgment is required to determine the SSP for each distinct performance obligation. We analyze stand-alone sales of our products and services as a basis for estimating the SSP of our products and services and then use that SSP as the basis for allocating the transaction price when our products and services are sold together in a contract with multiple performance obligations. In instances where the SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include cost plus margin, market comparisons and other observable inputs.

Note 3 - Cash, Cash Equivalents and Investments

The following table summarizes our cash, cash equivalents, marketable securities and available-for-sale investments at December 31, 2024 (in thousands):


	As of December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities		Short-Term Investments
Cash	$	94,919	$	—	$	—	$	94,919	$	94,919	$	—	$	—

Level 1:
Money market funds	322,874		—		—		322,874		322,874		—		—
Agency bonds	996		—		—		996		—		—		996
U.S. Government bonds	75,994		7		(5)		75,996		—		—		75,996
U.S. Treasury bills	14,431		25		—		14,456		—		—		14,456
Marketable securities	90,000		108,270		—		198,270		—		198,270		—
Subtotal	504,295		108,302		(5)		612,592		322,874		198,270		91,448
Level 2:
Term deposits	136,480		—		—		136,480		11,480		—		125,000
Corporate bonds	122,018		10		(63)		121,965		24,075		—		97,890
Commercial paper	20,393		—		—		20,393		1,496		—		18,897
Subtotal	278,891		10		(63)		278,838		37,051		—		241,787
Total	$	878,105	$	108,312	$	(68)	$	986,349	$	454,844	$	198,270	$	333,235

As of December 31, 2024, we had $136.7 million of available-for-sale investments with unrealized losses of which none have been in a continuous unrealized loss position for 12 months or longer. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases.

Acquired common stock is recorded as marketable securities in the consolidated balance sheets and its fair value is adjusted every reporting period. Changes in fair value are recorded in the consolidated statement of operations as unrealized gain (or loss) on marketable securities, which is included in other income (loss), net. During the year ended December 31, 2024, we recorded an unrealized gain on marketable securities of $120.3 million.

The following table summarizes our cash, cash equivalents and available-for-sale investments at December 31, 2023 (in thousands):


	As of December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities		Short-Term Investments
Cash	$	406,743	$	—	$	—	$	406,743	$	406,743	$	—	$	—

Level 1:
Money market funds	1,470		—		—		1,470		1,470		—		—
Agency bonds	222,057		2		(174)		221,885		101,635		—		120,250
U.S. Government bonds	238,747		120		(237)		238,630		—		—		238,630
U.S. Treasury bills	148,063		28		—		148,091		88,697		—		59,394
Marketable securities	90,000		—		(12,060)		77,940		—		77,940		—
Subtotal	700,337		150		(12,471)		688,016		191,802		77,940		418,274
Level 2:
Term deposits	128,205		—		—		128,205		—		—		128,205
Corporate bonds	80,646		8		(165)		80,489		—		—		80,489
Treasury inflation-protected securities	2,635		—		(5)		2,630		—		—		2,630
Commercial paper	14,456		—		—		14,456		—		—		14,456
Subtotal	225,942		8		(170)		225,780		—		—		225,780
Total	$	1,333,022	$	158	$	(12,641)	$	1,320,539	$	598,545	$	77,940	$	644,054

As of December 31, 2023, we had $420.4 million of available-for-sale investments with unrealized losses. Of this amount, $138.8 million had been in a continuous unrealized loss position for 12 months or longer, with total gross unrealized losses of $0.3 million. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases. During the years ended December 31, 2023 and 2022, we recorded a $38.7 million unrealized gain and $32.9 million unrealized loss on marketable securities, respectively.

Note 4 - Expected Credit Losses

Accounts and notes receivable, contract assets and off-balance-sheet exposures are presented net of a reserve for expected credit losses, which totaled $5.6 million, $4.0 million and $3.6 million as of December 31, 2024, 2023, and 2022, respectively.

The following table provides a roll-forward of the allowance for expected credit losses for finance receivables and off-balance-sheet exposures. The expected credit losses for receivables is deducted from the amortized cost basis of accounts receivable, contract assets and notes receivable to present the net amount expected to be collected (in thousands):


	Year Ended December 31, 2024						Year Ended December 31, 2023						Year Ended December 31, 2022
	United States		Other countries		Total		United States		Other countries		Total		United States		Other countries		Total
Balance, beginning of period	$	3,369	$	597	$	3,966	$	3,064	$	566	$	3,630	$	3,171	$	178	$	3,349
Provision for expected credit losses	3,725		308		4,033		815		269		1,084		309		391		700
Amounts written off charged against the allowance	(2,309)		(95)		(2,404)		(510)		(244)		(754)		(416)		—		(416)
Other, including foreign currency translation	—		14		14		—		6		6		—		(3)		(3)
Balance, end of period (1)	$	4,785	$	824	$	5,609	$	3,369	$	597	$	3,966	$	3,064	$	566	$	3,630

(1)Ending balance includes allowance for credit losses recorded in other current liabilities on the consolidated balance sheets, which is related to off-balance-sheet credit exposure.

As of December 31, 2024 and December 31, 2023, the allowance for expected credit losses for each type of customer receivable and off-balance-sheet exposures were as follows (in thousands):


	December 31, 2024		December 31, 2023
Accounts receivable and notes receivable, current	$	3,322	$	2,392
Contract assets, net	2,239		1,516
Long-term notes receivable, net of current portion	48		44
Other current liabilities	—		14
Total allowance for expected credit losses on customer receivables	$	5,609	$	3,966

Note 5 - Inventory

Inventory consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):


	December 31, 2024		December 31, 2023
Raw materials	$	93,070	$	104,112
Finished goods	172,246		165,743
Total inventory	$	265,316	$	269,855

During the year ended December 31, 2024, we recorded provisions to reduce inventories to their lower of cost or net realizable value of approximately $17.8 million compared to $5.4 million during the year ended December 31, 2023.

Note 6 - Property and Equipment

Property and equipment consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):


	Estimated Useful Life	December 31, 2024		December 31, 2023
Land	N/A	$	51,612	$	51,612
Building and leasehold improvements	3 - 39 years	52,065		32,092
Production equipment	3 - 5 years	148,922		105,245
Computers, equipment and software	3 - 5 years	34,429		30,778
Furniture and office equipment	3 - 5 years	10,058		8,383
Vehicles	5 years	8,139		7,451
Capitalized internal software development costs	3 - 5 years	15,906		14,799
Construction-in-process	N/A	62,178		55,397
Total cost		383,309		305,757
Less: Accumulated depreciation		(135,985)		(105,224)
Property and equipment, net		$	247,324	$	200,533

Construction-in-process included $33.6 million and $31.0 million related to our development in Scottsdale, Arizona at December 31, 2024 and December 31, 2023, respectively.

Depreciation and amortization expense related to property and equipment was $39.4 million, $28.1 million and $20.4 million for the years ended December 31, 2024, 2023 and 2022, respectively, of which $21.4 million, $13.6 million and $8.5 million was included in cost of sales for the respective years.

Note 7 - Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the years ended December 31, 2024 and December 31, 2023 were as follows (in thousands):


	Year Ended December 31, 2024						Year Ended December 31, 2023
	TASER		Software and Sensors		Total		TASER		Software and Sensors		Total
Balance, beginning of period	$	2,984	$	54,961	$	57,945	$	2,957	$	42,026	$	44,983
Goodwill acquired	—		701,695		701,695		—		12,751		12,751
Purchase accounting adjustments	—		(479)		(479)		—		(19)		(19)
Foreign currency translation adjustments	(131)		(2,192)		(2,323)		27		203		230
Balance, end of period	$	2,853	$	753,985	$	756,838	$	2,984	$	54,961	$	57,945

There were no accumulated impairment losses as of December 31, 2024 and 2023.

Intangible assets (other than goodwill) consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):


		December 31, 2024						December 31, 2023
	Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable (definite-lived) intangible assets:
Developed technology	3 ‑ 8 years	$	118,322	$	(21,337)	$	96,985	$	29,402	$	(16,562)	$	12,840
Customer relationships	5 ‑ 10 years	33,223		(4,716)		28,507		5,530		(3,620)		1,910
Issued trademarks	3 ‑ 23 years	6,706		(1,784)		4,922		1,333		(817)		516
Issued patents	8 ‑ 26 years	2,931		(1,470)		1,461		3,222		(1,707)		1,515
Domain names	5 ‑ 10 years	3,043		(2,433)		610		3,043		(2,128)		915
Non-compete agreements		—		—		—		448		(448)		—
Total amortizable		164,225		(31,740)		132,485		42,978		(25,282)		17,696
Non-amortizable (indefinite-lived) intangible assets:
In-process research and development(1)		41,000		—		41,000		—		—		—
Trademarks		1,068		—		1,068		1,068		—		1,068
Patents and trademarks pending		604		—		604		775		—		775
Total non-amortizable		42,672		—		42,672		1,843		—		1,843
Total intangible assets		$	206,897	$	(31,740)	$	175,157	$	44,821	$	(25,282)	$	19,539

(1) Consists of in-process research and development costs pertaining to the acquisition of Dedrone. For additional details, refer to Note 21.

Amortization expense of intangible assets was $17.4 million, $4.5 million and $4.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. Estimated amortization for intangible assets with definite lives for the next five years ended December 31, and thereafter, is as follows (in thousands):


2025	$	23,850
2026	23,655
2027	22,423
2028	21,437
2029	19,203
Thereafter	21,917
Total	$	132,485

Note 8 – Strategic Investments

Strategic investments include equity and debt investments in a number of non-public technology driven companies. We generally account for strategic equity investments under the ASC 321 measurement alternative for equity securities without readily determinable fair values, as there are no quoted market prices for the equity investments. The equity investments are measured at cost less impairment, adjusted for observable price changes and are assessed for impairment whenever events or changes in circumstances indicate that the fair value may be less than its carrying value.

For the debt security strategic investment, we have elected to account for this investment and the associated embedded derivatives utilizing the fair value option. Unrealized changes in fair value for the entire hybrid instrument are recorded within other income (loss), net in the consolidated statement of operations.

In conjunction with certain of our strategic investments, we may have the ability to commit additional capital over time through warrants and call options; for some investments, the exercisability and exercise prices are conditional on the achievement of certain performance metrics. Depending on their contractual terms, our warrants and call options may be accounted for under either the ASC 321 measurement alternative or as derivative instruments under ASC 815.

The following tables provide a roll-forward of the balance of strategic investments (in thousands):


	Year Ended December 31, 2024										Year Ended December 31, 2023
	Equity investments		Warrants		Call options		Debt investments		Total		Equity investments		Warrants		Call Options		Total
Balance, beginning of period	$	212,996	$	1,501	$	17,233	$	—	$	231,730	$	277,676	$	1,654	$	17,233	$	296,563
Investments	103,888		2,012		—		7,500		113,400		15,016		1,176		—		16,192
Fair value adjustments:
Realized gains (losses) during the period, net	95,429		—		(4,279)		—		91,150		—		—		—		—
Unrealized gains on strategic investments still held at the reporting date	74,784		855		—		1,084		76,723		—		—		—		—
Unrealized losses on strategic investments still held at the reporting date	(4,093)		—		(893)		—		(4,986)		(81,196)		(1,329)		—		(82,525)
Exercises	(163,406)		—		(12,061)		—		(175,467)		1,500		—		—		1,500
Balance, end of period	$	319,598	$	4,368	$	—	$	8,584	$	332,550	$	212,996	$	1,501	$	17,233	$	231,730

During the year ended December 31, 2024, we exercised call options and acquired the remaining outstanding stock of two strategic investments - Fusus L.L.C. ("Fusus") and Dedrone Holdings, Inc. ("Dedrone"). Our pre-existing interests had fair values at the acquisition dates of $63.3 million and $112.2 million, respectively. The acquisitions of Fusus and Dedrone resulted in net non-taxable gains of $42.3 million and $51.6 million related to the existing strategic equity investments and call options in Fusus and Dedrone, respectively. For additional discussion, refer to Note 21.

Additionally, as a result of an observable price change for a separate strategic investee, we recognized an unrealized gain of $75.6 million for the strategic investment and related warrants in other income (loss), net on our consolidated statement of operations during the year ended December 31, 2024.

For the debt security strategic investment, we recognized an unrealized gain of $1.1 million for the entire hybrid instrument in other income (loss), net on our consolidated statement of operations during the year ended December 31, 2024.


	Inception to date
	Equity investments		Warrants		Call options		Debt investments		Total
Investments	$	325,105	$	6,235	$	17,232	$	7,500	$	356,072
Fair value adjustments:
Realized gains (losses) on strategic investment transactions, net	107,741		—		(4,279)		—		103,462
Cumulative unrealized gains (losses)	63,203		88,298		(893)		1,084		151,692
Exercises	(161,905)		(90,165)		(12,060)		—		(264,130)
Sales	(14,546)		—		—		—		(14,546)
Balance, end of period	$	319,598	$	4,368	$	—	$	8,584	$	332,550

Strategic investment cumulative unrealized net gains are comprised of upward adjustments of $240.7 million and downward adjustments and impairments of $89.0 million.

Note 9 - Variable Interest Entities

We evaluate our investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If we conclude that an investee is a VIE, we evaluate our power to direct the activities of the investee, our obligation to absorb the expected losses of the investee and our right to receive the expected residual returns of the investee to determine whether we are the primary beneficiary of the investee. If we are the primary beneficiary of a VIE, we will consolidate such entity and reflect the non-controlling interest of other beneficiaries of that entity.

We determine whether we are the primary beneficiary of a VIE by performing an analysis that principally considers:

The VIE’s purpose, design, and risks the VIE was designed to create and pass through to its variable interest holders;
The VIE’s capital structure;
The terms between the VIE and its variable interest holders and other parties involved with the VIE; and
Related party affiliations.

As of December 31, 2024 and December 31, 2023, the unconsolidated non-public VIEs in which we hold variable interests were as follows (in thousands):


			December 31, 2024						December 31, 2023
Carrying value of variable interest - assets(1)			$	25,171					$	4,986

(1) Balance reflects the maximum exposure to loss, which is limited to the carrying value of the interest.

The primary purpose of our U.S.-based, unconsolidated VIE investments is to create strategic partnerships with market-leading providers of law enforcement technology solutions. We present all variable interests in unconsolidated VIEs as strategic investments within the long-term assets section of the consolidated balance sheets.

We have provided financial support to the unconsolidated VIEs in exchange for investments in debt and preferred equity securities as well as warrants and call options that give us the ability to commit additional capital over time. Financial support provided to the unconsolidated VIEs is used to continue to finance their operations.

Note 10 - Other Long-Term Assets

Other long-term assets consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):


	December 31, 2024		December 31, 2023
Deferred commissions	$	154,894	$	119,084
Operating lease assets	44,567		36,155
Deferred cost of goods sold	14,123		14,388
Cash surrender value of corporate-owned life insurance policies	8,398		7,558
Deferred implementation costs	1,305		2,175
Prepaid expenses, deposits and other	14,333		11,671
Total other long-term assets	$	237,620	$	191,031

Note 11 - Accrued Liabilities

Accrued liabilities consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):


	December 31, 2024		December 31, 2023
Accrued commissions	$	88,237	$	58,641
Accrued bonus	59,780		56,188
Accrued income and other taxes	27,863		5,784
Accrued salaries and benefits	25,233		10,807
Accrued inventory in transit	13,101		12,197
Accrued cloud hosting fees	10,673		8,530
Accrued warranty expense	8,284		7,374
Accrued consulting and IT fees	7,846		5,421
Other accrued expenses	38,176		28,608
Total accrued liabilities	$	279,193	$	193,550

Note 12 – Convertible Senior Notes

2027 Notes

In December 2022, we issued $690.0 million aggregate principal amount of our 2027 Notes (the “Notes” or the “2027 Notes”) in a private offering, which aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to an additional $90.0 million principal amount of the Notes. The Notes mature on December 15, 2027 and bear interest at a fixed rate of 0.50% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023. The total net proceeds from the issuance of the Notes, after deducting initial purchasers’ discounts and commissions and estimated debt issuance costs of $16.2 million, were approximately $673.8 million. The effective interest rate for the Notes was 0.99% and included interest payable and amortization of debt issuance cost.


	December 31, 2024
	Maturity Date	Initial Conversion Price per Share	Initial Conversion Rate per $1,000 Par Value	Initial Number of Shares
2027 Notes	December 15, 2027	$228.73	4.3720 shares	3,016,680

The terms of the 2027 Notes require conversion into cash up to the principal amount, with conversion into common stock, cash, or a combination of cash and common stock, at our option, for any amount in excess of the principal. The notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding September 15, 2027 only under the following circumstances:

during any calendar quarter commencing after the calendar quarter ending on March 31, 2023 (and only during such fiscal quarter), if the last reported sale price per common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter (the “130% Conversion Price Feature”);
any time preceding September 15, 2027, when during the five consecutive business days immediately after any 10 consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day;
upon the occurrence of certain corporate events or distributions on our ordinary shares, as provided in the indenture governing the Notes;
if we call the Notes for redemption; or any time from, and including, September 15, 2027 until the close of business on the second scheduled trading day immediately before the maturity date

If we undergo a fundamental change (as defined in the indenture governing the Notes), holders may require us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, up to but excluding the fundamental change repurchase date. In addition, following certain corporate events or if we issue a notice of redemption, it will increase the conversion rate for holders who elect to convert their Notes in connection with such corporate event or during the relevant redemption period.

On or after December 22, 2025, we may redeem for cash all or any portion of the notes in accordance with the optional redemption terms of the convertible debt agreement.

The following table summarizes the carrying value of the Notes (in thousands), as restated:


	December 31, 2024		December 31, 2023
Principal	$	690,000	$	690,000
Unamortized debt issuance costs	(9,711)		(12,887)
Convertible notes carrying amount, net	680,289		677,113
Less: current portion (1)	(680,289)		—
Long-term convertible notes carrying amount, net	$	—	$	677,113

(1)Pursuant to the terms of the Notes and the 130% Conversion Price Feature discussed in further detail above, the carrying amount of the Notes are included in current liabilities in the consolidated balance sheet as of December 31, 2024. The 130% Conversion Price Feature was not met as of December 31, 2023.

We consider the fair value of the Notes to be a Level 2 measurement. The estimated fair value of the Notes at December 31, 2024 and December 31, 2023 is based on the closing trading price per $1,000 of the Notes as of the last day of trading for each period as follows (in millions):


			December 31, 2024						December 31, 2023
2027 Notes			$	1,798.5					$	873.3

Interest expense related to the Notes was as follows (in thousands):


	December 31, 2024		December 31, 2023
Contractual interest expense	$	3,451	$	3,450
Amortization of debt issuance costs	3,176		3,126
Total interest expense	$	6,627	$	6,576

Note Hedge

To reduce the impact of potential economic dilution upon conversion of the Notes, we entered into a convertible note hedge transaction (the “Note Hedge” or “2027 Note Hedge”) with certain investment banks, with respect to our common stock, concurrently with the issuance of the 2027 Notes.


			Purchase Price						Shares Purchased
2027 Note Hedge			$	194,994					3,016,680

The Note Hedge covers shares of our common stock at a strike price per share that corresponds to the initial conversion price of the respective Notes, subject to adjustment, and is exercisable upon conversion of the Notes. If exercised, we may elect to receive cash, shares of our common stock, or a combination of cash and shares. We have accounted for the aggregate amount of purchase price for the Note Hedge as a reduction to additional paid-in capital. The Note Hedge will expire upon the maturity of the Notes. The Note Hedge is intended to reduce the potential economic dilution upon conversion of the Notes in the event that the market value per share of our common stock at the time of exercise is greater than the conversion price of the Notes. The Note Hedge is a separate transaction and is not part of the terms of the Notes. Holders of the Notes do not have any rights with respect to the Note Hedge. The Note Hedge does not impact earnings per share, as it was entered into to offset any dilution from the Notes. As of December 31, 2024, 3,016,680 shares remain subject to the Note Hedge.

Note Warrants


			Proceeds						Shares						Strike Price						First Expiration
2027 Warrants			$	124,269					3,016,680						$	338.86					March 15, 2028

Separately, we entered into warrant transactions with certain investment banks, whereby we sold warrants to acquire, subject to adjustment, the number of shares of our common stock shown in the table above. If the average market value per share of our common stock exceeds the strike price of the Warrants, such Warrants would have a dilutive effect on our earnings per share to the extent we report net income. According to the terms of the Warrants, the Warrants will be automatically exercised over a 60-trading day period beginning on the first expiration date as set forth above.

Note 13 - Commitments and Contingencies

Cloud Service Commitments

In June 2022, we entered into a purchase agreement for cloud hosting with a six year term beginning July 1, 2022. The purchase agreement includes a total commitment of $425.0 million. Storage fees under this agreement were $81.9 million for the year ended December 31, 2024. The remaining purchase commitment at December 31, 2024 was $265.5 million.

Purchase Commitments

We routinely enter into cancelable and non-cancelable purchase orders with many of our key vendors. Based on the strategic relationships with many of these vendors, our ability to cancel these purchase orders and maintain a favorable relationship would be limited. As of December 31, 2024, we had approximately $637.5 million of open purchase orders and $272.1 million of other purchase obligations, inclusive of the data storage commitment noted above.

Product Litigation

As a manufacturer of weapons and other law enforcement tools used in high-risk field environments, we are often the subject of products liability litigation concerning the use of our products. We are currently named as a defendant in two such lawsuits in which the plaintiffs allege either wrongful death or personal injury in situations in which a TASER CED was used by law enforcement officers in connection with arrests or training. While the facts vary from case to case, these product liability claims typically allege defective product design, manufacturing, and/or failure to warn. They seek compensatory and sometimes punitive damages, often in unspecified amounts.

We continue to aggressively defend all product litigation. As a general rule, it is our policy not to settle suspect injury or death cases. Exceptions are sometimes made where the settlement is strategically beneficial to us. Due to the confidential nature of our litigation strategy and the confidentiality agreements that are executed in the event of a settlement, we do not identify or comment on specific settlements by case or amount. Based on current information, we do not believe that the outcome of any such legal proceeding will have a material effect on our financial position, results of operations or cash flows. We are self-insured for the first $5.0 million of any product claim made after 2014. No judgment or settlement has ever exceeded this amount in any products liability case. We continue to maintain product liability insurance coverage, including an insurance policy fronting arrangement, above our self-insured retention with various limits depending on the policy period.

Other Matters

Despite the FTC’s dismissal of its administrative enforcement complaint against Axon without consent decree or other condition in October 2023, other parties continue to allege that Axon’s May 2018 acquisition of an insolvent body camera competitor, Vievu LLC, was anticompetitive. Two purported antitrust lawsuits based largely on the FTC’s unproven allegations are pending in the District of New Jersey (Case No. 3:23-cv-7182) and District of Arizona (Case No. 2:24-cv-01869-SMB). Axon denies all allegations of anticompetitive or other misconduct and is vigorously defending the cases.

Pending in the Eastern District of Virginia (Case No. 1:24-CV-01625) is a patent infringement suit filed by Airspace Systems, Inc. against Dedrone Holdings, Inc. involving certain drone technology. After Axon acquired Dedrone on

October 1, 2024, Airspace amended its complaint and added Axon as a defendant. Axon and Dedrone deny infringement and further contend that the three asserted patents are invalid and/or contain patent ineligible subject matter.

General

From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time.

Based on our assessment of outstanding litigation and claims as of December 31, 2024, we have determined that it is not reasonably possible that these losses, if any, from lawsuits will individually, or in the aggregate, materially affect our results of operations, financial condition or cash flows. However, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.

Off-Balance Sheet Arrangements

Under certain circumstances, we use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the installation and integration of Axon cameras and related technologies. Certain of our letters of credit and surety bonds have stated expiration dates with others being released as the contractual performance terms are completed. At December 31, 2024, we had outstanding letters of credit issued under our credit facility of $7.8 million that are expected to expire through 2026. We also had outstanding letters of credit of $0.1 million that do not draw against our credit facility. Additionally, we had $20.9 million of outstanding surety bonds as of December 31, 2024, with expiration dates ranging through 2029.

Note 14 - Income Taxes

Income before provision (benefit) for income taxes included the following components for the years ended December 31 (in thousands):


	2024		2023		2022
United States	$	357,484	$	134,509	$	191,353
Foreign	24,020		22,552		4,885
Total	$	381,504	$	157,061	$	196,238

Significant components of the provision (benefit) for income taxes were as follows for the years ended December 31 (in thousands):


	2024		2023		2022
Current:
Federal	$	60,924	$	33,084	$	10,804
State	18,298		10,371		10,118
Foreign	3,388		2,804		2,892
Total current	82,610		46,259		23,814
Deferred:
Federal	(63,073)		(60,673)		26,180
State	(20,838)		(9,172)		(2,015)
Foreign	(1,815)		89		(2,146)
Total deferred	(85,726)		(69,756)		22,019
Tax impact of unrecorded tax benefits liability	7,586		4,775		3,475
Provision for (benefit from) income taxes	$	4,470	$	(18,722)	$	49,308

A reconciliation of our effective income tax rate to the federal statutory rate follows for the years ended December 31 (in thousands):


	2024			2023			2022
Federal income tax at the statutory rate	$	80,120		$	32,983		$	41,224
Excess stock-based compensation benefit	(83,748)			(106,522)			(4,616)
Executive compensation limitation	51,858			77,350			5,784
R&D credits	(36,571)			(26,204)			(13,340)
Nontaxable gain on investments	(19,727)			—			—
Change in unrecognized tax benefits	7,356			4,351			3,215
Other permanent differences	5,176			1,201			1,118
Global intangible low-taxed income	3,081			1,890			653
Foreign derived intangible income deduction	(2,558)			(961)			(2,597)
Foreign tax credit	(1,914)			(1,922)			—
State income taxes, net of federal benefit	1,713			3,730			7,915
Change in valuation allowance	(903)			(4,695)			10,216
Tax effects of intercompany transactions	(222)			(2,033)			(417)
Difference between statutory and foreign tax rates	801			1,013			(428)
Other	8			1,097			581
Provision for (benefit from) income taxes	$	4,470		$	(18,722)		$	49,308
Effective tax rate	1.2		%	(11.9)		%	25.1		%

Significant components of our deferred income tax assets and liabilities are as follows at December 31, 2024 and December 31, 2023 (in thousands):


	2024		2023
Deferred income tax assets:
R&D capitalization, net	$	193,265	$	99,746
Deferred revenue	66,948		59,443
Stock-based compensation	51,088		10,544
Convertible debt, net	31,603		39,649
Reserves, accruals, and other	21,634		12,264
R&D tax credit carryforward	19,100		16,554
Net operating loss carryforward	17,824		2,115
Accrued bonus	12,101		11,253
Lease liability	11,966		9,664
Inventory reserve	5,794		1,986
Deferred compensation	4,021		2,803
Strategic investments	—		6,109
Amortization	—		4,425
Total gross deferred tax assets	435,344		276,555
Valuation allowance	(23,054)		(21,600)
Total deferred income tax assets, net of valuation allowance	412,290		254,955
Deferred income tax liabilities:
Strategic investments	(42,260)		—
Amortization	(36,185)		—
Depreciation	(16,739)		(14,575)
Right of use asset	(10,639)		(8,404)
Prepaid expenses	(2,874)		(2,223)
Customer contract asset	(1,174)		(690)
Goodwill amortization	(509)		(314)
Other	—		(965)
Total deferred income tax liabilities	(110,380)		(27,171)
Net deferred income tax assets	$	301,910	$	227,784

Deferred taxes are reflected in the consolidated balance sheet as follows:
Non-current tax assets (included in deferred tax asset, net)	304,282		227,784
Non-current tax liabilities (included in other long-term liabilities)	(2,372)		—
Total	$	301,910	$	227,784

The following table presents the valuation allowance activity for years ended December 31, 2024, 2023 and 2022 (in thousands):


	2024		2023		2022
Balance, beginning of period	$	21,600	$	26,368	$	16,168
Tax provision (benefit)	(576)		(4,262)		10,409
Deductions charged to tax provision / benefit	(327)		(505)		(164)
Additions (reversals) to other accounts	2,357		(1)		(45)
Balance, end of period	$	23,054	$	21,600	$	26,368

As of December 31, 2024, we have recorded a net tax benefit totaling $17.8 million for U.S. federal, state, and foreign net operating loss carryforwards ("NOLs"). As of December 31, 2024, $15.5 million of NOLs may be carried forward indefinitely while the remaining $2.3 million will begin to expire at various times from 2036 through 2044. As of December 31, 2024, we have a total of $26.1 million state (net of federal benefit) R&D credit carryforwards available to offset future income taxes. A total of $2.5 million of the state R&D credits may be carried forward indefinitely while the remaining $23.6 million will begin to expire at various times from 2025 through 2044.

As of December 31, 2024, we anticipate sufficient future pre-tax book income to realize a significant portion of our deferred tax assets. However, as we have Arizona R&D tax credits expiring unutilized each year, unrealized investment losses for which realization is uncertain, and specific identified intangibles with an indefinite life, we have recorded a 23.1 million valuation allowance against these specific deferred tax assets as of December 31, 2024.

The net change in total valuation allowance for the years ended December 31, 2024, and 2023 was an increase of $1.5 million and decrease of $4.8 million, respectively. The valuation allowance changes are driven primarily by certain state R&D tax credits that are expected to expire unutilized, acquired state NOLs, and movement in deferred tax assets associated with unrealized investment losses and transaction costs incurred in connection with certain investments that are not more likely than not to be realized. Of the net change in the valuation allowance in 2024 and 2023, a decrease of $0.9 million and $4.8 million, respectively, was recorded to tax expense and an increase of $2.4 million and $0 million, respectively, was recorded through the consolidated balance sheet.

We consider the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We project that our foreign earnings will be utilized offshore for working capital and future foreign growth and we have not made a provision for U.S. or additional foreign withholding taxes of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. We have estimated the amount of deferred tax liability related to investments in these foreign subsidiaries undistributed earnings is approximately $1.1 million. If we decide to repatriate the undistributed foreign earnings, we will recognize the income tax effects in the period we change our assertion on indefinite reinvestment.

We complete R&D tax credit studies for each year that an R&D tax credit is claimed for federal and state income tax purposes. We have made the determination that it is not more likely than not that the full benefit of the R&D tax credit will be sustained on examination. As such, we recorded a liability for unrecognized tax benefits of $32.7 million as of December 31, 2024. We expect the amount of the unrecognized tax benefit to decrease by approximately $9.0 million within the next 12 months due to statute of limitations expirations. Should the unrecognized benefit of $32.7 million be recognized, our effective tax rate would be favorably impacted.

The following table presents a roll forward of our liability for unrecognized tax benefits, exclusive of accrued interest, as of December 31 (in thousands):


	2024		2023		2022
Balance, beginning of period	$	25,754	$	21,492	$	18,249
Increase (decrease) in previous year tax positions	501		(215)		232
Increase in current year tax positions	7,313		6,963		3,343
Decrease due to lapse of statute of limitations	(842)		(2,486)		(332)
Balance, end of period	$	32,726	$	25,754	$	21,492

Federal income tax returns for 2021 through 2023 remain open to examination by the U.S. Internal Revenue Service, while state and local income tax returns for 2020 through 2023 also generally remain open to examination by state taxing authorities. The 2010 through 2019 state and local income tax returns are only open to the extent that net operating losses or other tax attributes carrying forward from those years were utilized in 2020 through 2023. The foreign tax returns for 2020 through 2023 also generally remain open to examination, although some foreign jurisdictions can audit returns up to ten years.

We recognize interest and penalties related to unrecognized tax benefits within the provision (benefit) for income tax expense line in the consolidated statements of operations and comprehensive income. We have recognized expense (benefit), before federal tax impact, related to interest of $1.2 million, $0.3 million, and $0.1 million in 2024, 2023, and 2022 respectively. As of December 31, 2024, and 2023, we had accrued interest of $1.8 million and $0.6 million, respectively.

As part of the OECD global minimum tax framework, certain jurisdictions in which we operate have enacted or are in the process of implementing top-up tax provisions under Pillar Two. We have assessed the impact of these regulations on our tax position and included an immaterial adjustment in our income tax provision as of December 31, 2024. We continue to monitor legislative developments and will assess potential future impacts as additional guidance and implementation details become available.

Note 15 - Line of Credit

In December 2022, we entered into a credit agreement that provides for a senior unsecured multi-currency revolving credit facility (the "Credit Agreement") in an aggregate principal amount of up to $200.0 million, $30.0 million of which is available for the issuance of letters of credit. The Credit Agreement will mature on the earlier of December 15, 2027 or the date that is six months prior to the stated maturity date of the 2027 Notes unless the Notes have been redeemed, repurchased, converted or defeased in full. Additionally, the credit agreement has an accordion feature that allows for an increase in the total line of credit up to $300.0 million, in each lender’s sole discretion.

As of December 31, 2024, and 2023, respectively, no amounts were drawn under the Credit Agreement. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of December 31, 2024, we had letters of credit outstanding of approximately $7.8 million under the facility and available borrowing of $192.2 million, excluding amounts available under the accordion feature. Advances under the line of credit bear interest at Term SOFR plus 1.25 to 1.75% per year determined in accordance with a pricing grid based on our net debt to earnings before interest expense, taxes, depreciation and amortization (“EBITDA”) ratio, which for the purposes of the Credit Agreement excludes investment interest income. “SOFR” is defined as a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York or a successor administrator of the secured overnight financing rate.

We are required to comply with a net leverage ratio, defined as consolidated total indebtedness to EBITDA, of no greater than 3.50 to 1.00 based upon a trailing four fiscal quarter period. At December 31, 2024, our net leverage ratio was (0.17) to 1.00. Additionally, we must comply with a consolidated interest coverage ratio, defined as EBITDA to consolidated interest expense, of no less than 3.50 to 1.00 based upon a trailing four fiscal quarter end. At December 31, 2024, our consolidated interest coverage ratio was 71.07 to 1.00.

Note 16 - Stockholders’ Equity

Common Stock and Preferred Stock

We have authorized the issuance of two classes of stock designated as “common stock” and “preferred stock,” each having a par value of $0.00001 per share. We are authorized to issue 200 million shares of common stock and 25 million shares of preferred stock.

2018 CEO Performance Award

As of December 31, 2024, no unrecognized stock-based compensation expense remained under the 2018 CEO Performance Award. Furthermore, no performance-based stock options were awarded during the years ended December 31, 2024, 2023 or 2022.

2024 Employee XSP and 2024 CEO Performance Award

The 2024 Employee XSP includes an approved pool of 4.5 million shares of common stock reserved for grants of XSUs to employees. A total of approximately 4.1 million XSUs were granted in the year ended December 31, 2024. The

program includes seven substantially equal tranches that will vest upon certification by the Compensation Committee upon achievement of three independent vesting conditions, described in the following table:


	Operational Goals(1) (in millions)				Stock Price Goal			Minimum Service Requirement
Tranche	Revenue		Adj. EBITDA(2)				Employee XSP		CEO Award		Goal Expiration
1	$1,834	or	$382	and	$247.40	and		June 2025		December 2028		December 31, 2026
2	2,293	or	497	and	309.25	and		December 2025		December 2028		December 31, 2027
3	2,866	or	644	and	386.56	and		June 2026		December 2029		December 31, 2028
4	3,583	or	834	and	483.20	and		December 2026		December 2029		December 31, 2029
5	4,479	or	1,077	and	604.00	and		June 2027		December 2030		December 31, 2030
6	5,599	or	1,389	and	755.00	and		December 2027		December 2030		December 31, 2031
7	6,999	or	1,739	and	943.75	and		June 2028		December 2030		December 31, 2032

(1) Operational goals are measured, as of any date, for the previous four consecutive fiscal quarters, beginning with the Company's first full fiscal quarter ending after the fiscal quarter in which the grant date occurred

(2) In connection with certain acquisitions which were completed during fiscal year 2024, the Adjusted EBITDA goals were adjusted as required by the terms of the 2024 Employee XSP and 2024 CEO Performance Award

Additionally, 679,102 XSUs were granted to our CEO, Patrick W. Smith, pursuant to the terms of the 2024 CEO Performance Award. The stock price goals and operational goals applicable to the 2024 CEO Performance Award are identical to those under the 2024 Employee XSP described above, but Mr. Smith is subject to a longer minimum required service period.

Restricted Stock Units

The following table summarizes RSU activity for the years ended December 31 (number of units and aggregate intrinsic value in thousands):


	2024				2023			2022
	Number of Units		Weighted Average Grant-Date Fair Value		Number of Units	Weighted Average Grant-Date Fair Value		Number of Units	Weighted Average Grant-Date Fair Value
Units outstanding, beginning of year	1,615		$	193.09	1,565	$	145.48	1,115	$	133.40
Granted	1,131		440.76		915	227.62		1,142	143.03
Released	(909)		196.35		(740)	140.81		(541)	117.49
Forfeited	(153)		208.12		(125)	157.95		(151)	138.99
Units outstanding, end of year	1,684		356.31		1,615	193.09		1,565	145.48
Aggregate intrinsic value at year end	$	1,000,769

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $594.32 per share, multiplied by the number of RSUs outstanding. The fair value as of the respective vesting dates of RSUs that vested during the year was $426.3 million, $161.7 million, and $84.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2024, we had $530.4 million of total unrecognized stock-based compensation expense related to RSUs under our stock plans for shares that are expected to vest. We expect to recognize the cost related to the RSUs over a weighted average period of 2.31 years. Shares underlying RSUs are generally released when vesting requirements are met.

Certain RSUs that vested in the year ended December 31, 2024 were net-share settled, such that we withheld shares to cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Total shares withheld related to RSUs during 2024 were 122,020 and had a value of approximately $58.1 million on their respective vesting dates as determined by the closing stock price on such dates.

Payments for the employees’ tax obligations are reflected as a financing activity within the consolidated statements of cash flows. We record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

Performance Stock Units

The following table summarizes PSU activity, inclusive of XSUs, for the years ended December 31 (number of units and aggregate intrinsic value in thousands):


	2024				2023			2022
	Number of Units		Weighted Average Grant-Date Fair Value		Number of Units	Weighted Average Grant-Date Fair Value		Number of Units	Weighted Average Grant-Date Fair Value
Units outstanding, beginning of year	394		$	201.61	1,369	$	43.43	1,499	$	39.86
Granted	4,888		263.13		319	218.04		158	106.57
Released	(23)		140.90		(1,238)	37.98		(78)	107.58
Forfeited	(394)		232.94		(56)	48.40		(210)	41.62
Units outstanding, end of year	4,865		261.18		394	201.61		1,369	43.43
Aggregate intrinsic value at year end	$	2,891,142

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $594.32 per share, multiplied by the number of PSUs outstanding. The fair value as of the respective vesting dates of PSUs that vested during the year was $8.4 million, $256.5 million, and $10.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, there was $756.2 million in total unrecognized stock-based compensation expense related to PSUs under our stock plans for shares that are expected to vest. We expect to recognize the cost related to the PSUs over a weighted average period of 4.24 years. Shares underlying PSUs are released when vesting requirements are met.

Certain PSUs that vested in the year ended December 31, 2024 were net-share settled such that we withheld shares to cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Total shares withheld related to PSUs were approximately 370 and had a value of $0.1 million on their respective vesting dates as determined by the closing stock price on such dates. Payments for the employees’ tax obligations are reflected as a financing activity within the consolidated statements of cash flows. We record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

Stock Option Activity

The following table summarizes stock option activity for the years ended December 31 (number of options in thousands):


	2024			2023			2022
	Number of Options	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
Options outstanding, beginning of year	531	$	28.58	2,438	$	28.58	2,438	$	28.58
Granted	—	—		—			—	—
Exercised	(510)	28.58		(1,907)	28.58		—	—
Expired / terminated	—	—		—			—	—
Options outstanding, end of year	21	28.58		531	28.58		2,438	28.58
Options exercisable, end of year	21	28.58		531	28.58		1,377	28.58

We did not grant any stock options in 2024, 2023 or 2022. The total intrinsic value of options exercised was $178.1 million and $323.0 million for the years ended December 31, 2024 and 2023, respectively; no options were exercised in the year ending December 31, 2022. The intrinsic value for options exercised was calculated as the difference between the exercise price of the underlying stock option awards and the market price of our common stock on the date of exercise.

The following table summarizes information about stock options that were fully vested or expected to vest as of December 31, 2024 (number of options in thousands):


	Options Outstanding				Options Exercisable
Range of Exercise Price	Number of Options Outstanding	Weighted Average Exercise Price		Average Remaining Contractual Life (Years)	Weighted Number of Options Exercisable	Average Exercise Price		Average Remaining Contractual Life (Years)
$28.58	21	$	28.58	3.15	21	$	28.58	3.15

The aggregate intrinsic value of options exercisable at December 31, 2024 was $11.8 million. Aggregate intrinsic value represents the difference between the exercise price of the underlying stock option awards and the closing market price of our common stock of $594.32 on the last trading day for the period ending December 31, 2024.

Stock-based Compensation Expense

We account for stock-based compensation using the fair-value method. Reported stock-based compensation expense was classified as follows for the years ended December 31 (in thousands):


	2024		2023		2022
Cost of product and service sales	$	60,089	$	6,595	$	4,607
Selling, general and administrative expenses	190,561		58,533		51,301
Research and development expenses	131,954		66,230		50,268
Total stock-based compensation expense	$	382,604	$	131,358	$	106,176
Income tax benefit	$	79,275	$	13,509	$	25,154

Stock Incentive Plan

In May 2024, our shareholders approved the Axon Enterprise, Inc. Amended and Restated 2022 Stock Incentive Plan (the “Amended 2022 Plan”) authorizing an additional 2.2 million shares, plus remaining available shares under prior plans, for issuance under the Amended 2022 Plan. Combined with the shares of our common stock remaining available under our legacy stock incentive plans, there are 3.2 million shares available for grant as of December 31, 2024.

At-the-Market Equity Offering

We participate in an “at-the-market” equity offering program (the “ATM”), pursuant to which we are authorized to sell up to a total of approximately 2.0 million shares of our common stock. During the year ended December 31, 2024, no shares were sold under the ATM. During the year ended December 31, 2023, 467,594 shares of our common stock were sold under the ATM. We generated approximately $96.4 million in aggregate gross proceeds from these sales. Aggregate net proceeds were $94.7 million after deducting related expenses, including commissions to the sales agent and issuance costs of $1.7 million. During the year ended December 31, 2022, no shares were sold under the ATM.

We intend to use the net proceeds from the ATM for general corporate purposes, which may include, among other things, providing capital to satisfy a portion of the tax obligations related to the vesting and settlement of stock compensation awards granted to our executive officers and other employees under our stock plans, to support our growth, and to acquire or invest in product lines, services, technologies or facilities.

Stock Repurchase Plan

In February 2016, our Board of Directors authorized a stock repurchase program to acquire up to $50.0 million of our outstanding common stock subject to stock market conditions and corporate considerations. As of December 31, 2024 and 2023, $16.3 million remained available under the plan for future purchases.

Note 17 – Accumulated Other Comprehensive Loss

The following table reflects the changes in accumulated other comprehensive loss, net of tax (in thousands):


	Unrealized Gains (Losses) on Available-for-Sale Investments (1)		Foreign Currency Translation		Total
Balance, December 31, 2021	$	(207)	$	(1,110)	$	(1,317)
Other comprehensive loss	(1,044)		(4,818)		(5,862)
Balance, December 31, 2022	$	(1,251)	$	(5,928)	$	(7,179)
Other comprehensive income (loss)	852		(4,352)		(3,500)
Balance, December 31, 2023	$	(399)	$	(10,280)	$	(10,679)
Other comprehensive income (loss)	369		(7,874)		(7,505)
Balance, December 31, 2024	$	(30)	$	(18,154)	$	(18,184)

(1)Amounts are net of immaterial tax impacts

Note 18 - Leases

We have operating leases for office space, manufacturing and logistical functions. Operating lease assets and liabilities consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):


Leases (in thousands)	Classification	December 31, 2024		December 31, 2023
Assets
Operating lease assets	Other assets	$	44,567	$	36,155
Liabilities
Current
Operating	Other current liabilities	$	9,453	$	7,938
Noncurrent
Operating	Long-term lease liabilities	41,383		33,550
Total lease liabilities		$	50,836	$	41,488

The components of operating lease expenses were as follows for the years ended December 31 (in thousands):


									2024						2023						2022
Total operating lease expense (1)									$	14,568					$	10,025					$	8,703

(1)Includes short-term leases, which are immaterial

Supplemental cash flow information related to operating leases were as follows for the year ended December 31 (in thousands):


	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	12,284	$	8,846	$	9,216
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	14,292	$	5,927	$	21,815

Weighted-average remaining lease term and discount rate at December 31, 2024 and December 31, 2023 were as follows:


	December 31, 2024		December 31, 2023
Weighted average remaining lease term:
Operating leases	7.7 years		7.1 years
Weighted average discount rate:
Operating leases	7.60	%	6.05	%

Future minimum operating lease payments under non-cancellable leases as of December 31, 2024 were as follows (in thousands):


	Operating
2025	13,791
2026	8,994
2027	6,606
2028	6,120
2029	5,546
Thereafter	28,409
Total minimum lease payments	69,466
Less: Amount representing interest	(18,630)
Present value of lease payments	$	50,836

Note 19 - Employee Benefit Plans

We have a defined contribution profit sharing 401(k) plan for eligible employees, which is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. Employees are entitled to make tax-deferred contributions of their eligible compensation up to the maximum allowed by law. We also sponsor defined contribution plans in certain of our international subsidiaries.

Our matching contributions for all defined contribution plans for the years ended December 31, 2024, 2023 and 2022, were approximately $17.2 million, $14.5 million and $10.9 million, respectively.

Note 20 - Segment Data

Information relative to our reportable segments was as follows (in thousands):


	For the year ended December 31, 2024
	TASER		Software and Sensors		Total
Net sales from products	$	763,761	$	457,531	$	1,221,292
Net sales from services	54,912		806,322		861,234
Net sales	818,673		1,263,853		2,082,526
Cost of sales	338,642		502,504		841,146
Other segment items(1)	34,937		39,130		74,067
Adjusted gross margin	$	514,968	$	800,479	$	1,315,447
Other segment items(1)					74,067
Selling, general and administrative					741,247
Research and development					441,593
Interest income, net					36,595
Other income (loss), net					286,369
Income before provision for income taxes					$	381,504

(1) Other segment items includes the adjustment for noncash stock-based compensation expense, amortization of acquired intangible assets, and inventory step-up amortization related to acquisitions to arrive at the profit measure used by the CODM


	For the year ended December 31, 2023
	TASER		Software and Sensors		Total
Net sales from products	$	577,610	$	386,392	$	964,002
Net sales from services	35,900		560,797		596,697
Net sales	613,510		947,189		1,560,699
Cost of sales	241,977		363,269		605,246
Other segment items(1)	2,235		7,504		9,739
Adjusted gross margin	$	373,768	$	591,424	$	965,192
Other segment items(1)					9,739
Selling, general and administrative					494,884
Research and development					303,719
Interest income, net					42,112
Other income (loss), net					(41,901)
Income before provision for income taxes					$	157,061

(1) Other segment items includes the adjustment for noncash stock-based compensation expense and amortization of acquired intangible assets to arrive at the profit measure used by the CODM


	For the year ended December 31, 2022
	TASER		Software and Sensors		Total
Net sales from products	$	511,057	$	286,120	$	797,177
Net sales from services	19,987		369,979		389,966
Net sales	531,044		656,099		1,187,143
Cost of sales	195,239		265,791		461,030
Other segment items(1)	1,562		5,708		7,270
Adjusted gross margin	$	337,367	$	396,016	$	733,383
Other segment items(1)					7,270
Selling, general and administrative					399,330
Research and development					233,810
Interest income, net					4,294
Other income (loss), net					98,971
Income before provision for income taxes					$	196,238

(1) Other segment items includes the adjustment for noncash stock-based compensation expense and amortization of acquired intangible assets to arrive at the profit measure used by the CODM

The following table presents supplemental information included within the measure of profit or loss, adjusted gross margin, reviewed by our CODM (in thousands). There are no other material items presented to our CODM by segment or included within adjusted gross margin for supplemental disclosure.


	Year Ended December 31, 2024							Year Ended December 31, 2023						Year Ended December 31, 2022
	TASER		S	Software and Sensors		Total		TASER		Software and Sensors		Total		TASER		Software and Sensors		Total
Depreciation and amortization	$	18,789		$	16,592	$	35,381	$	12,346	$	5,223	$	17,569	$	7,049	$	4,082	$	11,131
Significant noncash items:
Stock-based compensation expense	34,906			25,183		60,089		2,234		4,361		6,595		1,561		3,046		4,607
Provisions for inventory	4,508			12,091		16,599		3,642		752		4,394		—		—		—
Warranty reserve expense	4,743			849		5,592		7,325		737		8,062		53		145		198

Note 21 – Business Combinations

The consolidated financial statements include the operating results of each acquisition from the date of acquisition noted below. Pro forma results of operations and the revenue and net income subsequent to the acquisitions have not been presented because the effects of the acquisitions were not material to our financial results.

Fusus

On January 31, 2024, we acquired the remaining 79.7% interest in Fusus, a global leader in real-time crime center technology, for incremental consideration transferred of approximately $241.3 million (the “Fusus step acquisition”). Our existing 20.3% interest had a fair value at the acquisition date of $63.3 million, which resulted in a non-taxable gain of $42.3 million recorded in other income (loss), net in our consolidated statement of operations. The fair value of the previously held investment was remeasured using Level 3 valuation techniques, which include inputs to the valuation methodology that are considered unobservable and significant to the fair value measurement.

The acquisition expands our ability to aggregate live video, data and sensor feeds, which enhances situational awareness and investigative capabilities for our customers in public safety, education and enterprise. Total acquisition-

related transaction and integration costs for the years ended December 31, 2024 and 2023 were $4.7 million and $2.6 million, respectively. These transaction costs were expensed as incurred in SG&A in our consolidated statements of operations.

The purchase price allocation was subject to revision during the measurement period through the fourth quarter of 2024. Based on the final purchase price allocation, we recorded $249.9 million of goodwill, $72.9 million of identifiable intangible assets, and other net liabilities assumed of $7.8 million, excluding deferred taxes. We also recorded a net deferred tax liability of $10.4 million.

The identifiable intangible assets included $56.6 million of developed technology, $14.4 million of customer relationships, and $1.9 million of trademarks. With the assistance of third-party valuation experts, we calculated the fair values of the intangible assets using the multi-period excess earnings method for the acquired developed technology, the with and without method for the customer relationships, and the relief-from-royalty method for the trademarks. The valuation of acquired intangible assets utilized Level 3 valuation techniques, which include inputs to the valuation methodology that are considered unobservable and significant to the fair value measurement. Significant assumptions used by management in the Fusus developed technology multi-period excess earnings (income valuation) approach were projected revenues, earnings before interest, taxes, and depreciation and amortization (EBITDA) margins, obsolescence technology factor, and the discount rate. The weighted average amortization period of the acquired intangible assets as of the acquisition date was 7.5 years.

The goodwill generated from the acquisition is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the consolidated results of Fusus are included in our Software and Sensors operating segment following the acquisition.

Dedrone

On October 1, 2024, we acquired the remaining 79.8% interest in Dedrone, a global leader in air space security, for incremental consideration transferred of approximately $391.1 million, subject to customary purchase price adjustments (the “Dedrone step acquisition”). Our existing 20.2% interest had a fair value at the acquisition date of $112.2 million, which resulted in a non-taxable gain of $51.6 million recorded in other income (loss), net in our consolidated statement of operations. The fair value of the previously held investment was remeasured using Level 3 valuation techniques, which include inputs to the valuation methodology that are considered unobservable and significant to the fair value measurement.

This acquisition represents alignment to our mission and positions us to accelerate the next generation of drone and air space solutions. Total acquisition-related transaction and integration costs were $13.0 million for the year ended December 31, 2024. These transaction costs were expensed as incurred in SG&A in our consolidated statements of operations.

The purchase price allocation is subject to revision during the measurement period for normal closing activities, such as income tax filings and settlement of escrow balances, which is expected to be completed by the third quarter of 2025. Based on the initial purchase price allocation, we recorded $451.1 million of goodwill, $100.5 million of identifiable intangible assets, and other net liabilities assumed of $47.1 million, excluding deferred taxes. We also recorded a net deferred tax liability of $1.2 million.

The identifiable intangible assets included $41.0 million of developed technology, $41.0 million of in-process research and development, $15.0 million of customer relationships, and $3.5 million of trademarks. With the assistance of third-party valuation experts, we calculated the fair values of the intangible assets using the primary method of cost approach for the developed technology and in-process research and development, the with and without method for customer relationships, and the relief-from-royalty method for the trademarks. The valuation of the developed technology and in-process research and development was also supported by an income approach. The valuation of acquired intangible assets utilized Level 3 valuation techniques, which include inputs and assumptions to the valuation methodology that are considered unobservable and significant to the fair value measurement. The significant assumption used by management in the Dedrone developed technology and IPR&D cost approaches was direct development cost build-up. The weighted average amortization period of the acquired intangible assets as of the acquisition date was 5.5 years.

The acquired in-process research and development projects represent projects that are expected to enhance our drone capabilities, have not yet been completed for commercialization, and are required to be classified as indefinite-lived assets

until their successful completion. These projects are expected to be placed in service and begin amortizing once they are commercialized and begin contributing to our cash inflows during 2025.

The goodwill generated from the acquisition is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the consolidated results of Dedrone are included in our Software and Sensors operating segment following the acquisition.

Note 22 – Subsequent Events

In February 2025, we entered into a series of transactions to acquire additional equity interests in an existing strategic investee for an aggregate amount of $173.3 million. The closing of one of these transactions is contingent upon regulatory approval that is expected to be received in March 2025.

Note 23 - Revision of Prior Period Financial Statements

As previously disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 and in the Original 2024 Annual Report and discussed in Note 1 “Organization and Summary of Significant Accounting Policies”, separate from the restatement discussed in Note 1 “Organization and Summary of Significant Accounting Policies”, in preparing the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2024, we identified errors in our previously issued financial statements related to our historical conclusions of principal vs. agent accounting of certain reseller arrangements under ASC 606 and concluded they were not material to any previously issued financial statements.

The identified errors impacted our previously issued 2021 and 2022 annual financial statements, 2023 quarterly and annual financial statements, and 2024 quarterly financial statements through June 30, 2024. Consistent with revising our quarterly financial statements as of September 30, 2024, we made adjustments to the prior period amounts presented in these financial statements accordingly. Furthermore, we made adjustments to correct for other previously identified immaterial errors.

The following tables reflect the impact of the revision to the specific line items presented in our previously reported (a) consolidated balance sheet as of December 31, 2023; (b) consolidated statements of operations and comprehensive income for the years ended December 31, 2023 and December 31, 2022; (c) consolidated statements of stockholders' equity for the years ended December 31, 2023 and December 31, 2022; and (d) consolidated statements of cash flows for the years ended December 31, 2023 and December 31, 2022.

Consolidated Balance Sheet

(in thousands)


As of December 31, 2023	As Reported		Revision		As Revised

Accounts and notes receivable, net of allowance of $2,392 as of December 31, 2023	$	417,690	$	(4,729)	$	412,961
Contract assets, net	275,779		11,453		287,232
Prepaid expenses and other current assets	112,786		(9,731)		103,055
Total current assets	2,396,649		(3,007)		2,393,642
Deferred tax assets, net	229,513		(1,729)		227,784
Long-term contract assets, net	77,710		6,672		84,382
Other long-term assets	220,638		(29,607)		191,031
Total assets	3,436,845		(27,671)		3,409,174
Accounts payable	88,326		(22,474)		65,852
Accrued liabilities	188,230		5,320		193,550
Current portion of deferred revenue	491,691		(21,276)		470,415
Total current liabilities	799,969		(38,430)		761,539
Deferred revenue, net of current portion	281,852		(10,951)		270,901
Other long-term liabilities	2,936		17,979		20,915
Total liabilities	1,824,811		(31,402)		1,793,409
Retained earnings	431,249		3,731		434,980
Total stockholders’ equity	1,612,034		3,731		1,615,765
Total liabilities and stockholders’ equity	$	3,436,845	$	(27,671)	$	3,409,174

Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)


Year Ended December 31, 2023	As Reported		Revision		As Revised

Net sales from products	$	967,711	$	(3,709)	$	964,002
Net sales from services	595,680		1,017		596,697
Net sales	1,563,391		(2,692)		1,560,699
Cost of product sales	450,718		(3,010)		447,708
Cost of service sales	157,291		247		157,538
Cost of sales	608,009		(2,763)		605,246
Gross margin	955,382		71		955,453
Selling, general and administrative	496,874		(1,990)		494,884
Total operating expenses	800,593		(1,990)		798,603
Income from operations	154,789		2,061		156,850
Income before provision for income taxes	155,000		2,061		157,061
Provision for (benefit from) income taxes	(19,227)		505		(18,722)
Net income	$	174,227	$	1,556	$	175,783
Net income per common and common equivalent shares - Basic	$	2.35	$	0.02	$	2.37
Net income per common and common equivalent shares - Diluted	$	2.31	$	0.02	$	2.33
Comprehensive income	$	170,727	$	1,556	$	172,283


Year Ended December 31, 2022	As Reported		Revision		As Revised

Net sales from products	$	801,388	$	(4,211)	$	797,177
Net sales from services	388,547		1,419		389,966
Net sales	1,189,935		(2,792)		1,187,143
Cost of product sales	363,219		(2,310)		360,909
Cost of service sales	98,078		2,043		100,121
Cost of sales	461,297		(267)		461,030
Gross margin	728,638		(2,525)		726,113
Selling, general and administrative	401,575		(2,245)		399,330
Total operating expenses	635,385		(2,245)		633,140
Income from operations	93,253		(280)		92,973
Income before provision for income taxes	196,518		(280)		196,238
Provision for (benefit from) income taxes	49,379		(71)		49,308
Net income	$	147,139	$	(209)	$	146,930
Comprehensive income	$	141,277	$	(209)	$	141,068

There was no impact on disclosed basic and diluted income per common and common equivalent shares for the year ended December 31, 2022.

Consolidated Statements of Stockholders' Equity

(in thousands)


	As Reported				Revision				As Revised
	Retained Earnings		Total Stockholders’ Equity		Retained Earnings		Total Stockholders’ Equity		Retained Earnings		Total Stockholders’ Equity

Balance, December 31, 2021	$	109,883	$	1,047,849	$	2,384	$	2,384	$	112,267	$	1,050,233
Net income	147,139		147,139		(209)		(209)		146,930		146,930
Balance, December 31, 2022	257,022		1,268,491		2,175		2,175		259,197		1,270,666
Net income	174,227		174,227		1,556		1,556		175,783		175,783
Balance, December 31, 2023	$	431,249	$	1,612,034	$	3,731	$	3,731	$	434,980	$	1,615,765

Consolidated Statements of Cash Flows

(in thousands)


Year Ended December 31, 2023	As Reported		Revision		As Revised

Cash flows from operating activities:
Net income	$	174,227	$	1,556	$	175,783
Deferred income taxes	(73,002)		505		(72,497)
Provision for bad debts and inventory	1,090		4,394		5,484
Change in assets and liabilities:
Receivables and contract assets	(172,524)		(6,465)		(178,989)
Inventory	(71,896)		(5,730)		(77,626)
Deferred revenue	164,043		(17,224)		146,819
Accounts payable, accrued and other liabilities	64,384		945		65,329
Other - net	(102,370)		22,019		(80,351)
Net cash provided by operating activities	$	189,263	$	—	$	189,263

Other than the impact to the captions noted above, there was no impact on total cash flows from operating activities, or to cash flows from investing or financing activities.


Year Ended December 31, 2022	As Reported		Revision		As Revised

Cash flows from operating activities:
Net income	$	147,139	$	(209)	$	146,930
Deferred income taxes	22,090		(71)		22,019
Provision for bad debts and inventory	699		2		701
Change in assets and liabilities:
Receivables and contract assets	(73,228)		(4,998)		(78,226)
Inventory	(95,987)		976		(95,011)
Deferred revenue	159,718		(4,152)		155,566
Accounts payable, accrued and other liabilities	80,757		221		80,978
Other - net	(52,207)		8,231		(43,976)
Net cash provided by operating activities	$	235,361	$	—	$	235,361

Other than the impact to the captions noted above, there was no impact on total cash flows from operating activities, or to cash flows from investing or financing activities.

Note 24 - Impact of Revision on Quarterly Statements of Operations and Comprehensive Income (Unaudited)

Condensed Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)


	As Reported
Three Months Ended	December 31, 2024		September 30, 2024

Net sales	$	575,145	$	544,274
Gross margin	345,849		330,747
Income (loss) from operations	(15,755)		24,081
Net income	135,184		67,025
Net income per common and common equivalent shares - Basic	$	1.77	$	0.89
Net income per common and common equivalent shares - Diluted	$	1.67	$	0.86

As discussed within Note 1 “Organization and Summary of Significant Accounting Policies”, we recorded an out of period adjustment in the three months ended December 31, 2024. This adjustment reduced revenue and net income by $5.1 million and $3.7 million, respectively. Of this total adjustment, $3.3 million and $2.3 million for revenue and net income, respectively, pertained to prior fiscal years. These errors originated in prior years and were immaterial to each respective prior period.


Three Months Ended June 30, 2024	As Reported		Revision		As Revised

Net sales from products	$	295,185	$	(2,422)	$	292,763
Net sales from services	208,914		1,559		210,473
Net sales	504,099		(863)		503,236
Cost of product sales	145,154		(2,527)		142,627
Cost of service sales	55,210		(757)		54,453
Cost of sales	200,364		(3,284)		197,080
Gross margin	303,735		2,421		306,156
Sales, general and administrative	169,427		1,537		170,964
Total operating expenses	270,861		1,537		272,398
Income from operations	32,874		884		33,758
Income before provision for income taxes	50,590		884		51,474
Provision for (benefit from) income taxes	9,793		208		10,001
Net income	$	40,797	$	676	$	41,473
Net income per common and common equivalent shares - Basic	$	0.54	$	0.01	$	0.55
Net income per common and common equivalent shares - Diluted	$	0.53	$	—	$	0.53
Comprehensive income	$	38,189	$	676	$	38,865


Three Months Ended December 31, 2023	As Reported		Revision		As Revised

Net sales from products	$	258,405	$	(1,966)	$	256,439
Net sales from services	173,737		200		173,937
Net sales	432,142		(1,766)		430,376
Cost of product sales	125,664		(1,764)		123,900
Cost of service sales	42,591		(107)		42,484
Cost of sales	168,255		(1,871)		166,384
Gross margin	263,887		105		263,992
Sales, general and administrative	137,106		167		137,273
Total operating expenses	221,078		167		221,245
Income from operations	42,809		(62)		42,747
Income before provision for income taxes	55,802		(62)		55,740
Provision for (benefit from) income taxes	(1,469)		148		(1,321)
Net income	$	57,271	$	(210)	$	57,061
Net income per common and common equivalent shares - Basic	$	0.76	$	—	$	0.76
Net income per common and common equivalent shares - Diluted	$	0.75	$	—	$	0.75
Comprehensive income	$	59,461	$	(210)	$	59,251


Three Months Ended September 30, 2023	As Reported		Revision		As Revised

Net sales from products	$	256,443	$	(1,388)	$	255,055
Net sales from services	157,158		1,065		158,223
Net sales	413,601		(323)		413,278
Cost of product sales	116,278		(1,665)		114,613
Cost of service sales	42,051		(42)		42,009
Cost of sales	158,329		(1,707)		156,622
Gross margin	255,272		1,384		256,656
Sales, general and administrative	123,279		(922)		122,357
Total operating expenses	200,159		(922)		199,237
Income from operations	55,113		2,306		57,419
Income before provision for income taxes	69,423		2,306		71,729
Provision for (benefit from) income taxes	10,026		394		10,420
Net income	$	59,397	$	1,912	$	61,309
Net income per common and common equivalent shares - Basic	$	0.79	$	0.03	$	0.82
Net income per common and common equivalent shares - Diluted	$	0.78	$	0.03	$	0.81
Comprehensive income	$	53,254	$	1,912	$	55,166


Three Months Ended June 30, 2023	As Reported		Revision		As Revised

Net sales from products	$	233,474	$	214	$	233,688
Net sales from services	141,131		(2,115)		139,016
Net sales	374,605		(1,901)		372,704
Cost of product sales	101,192		(254)		100,938
Cost of service sales	41,292		133		41,425
Cost of sales	142,484		(121)		142,363
Gross margin	232,121		(1,780)		230,341
Sales, general and administrative	119,922		(614)		119,308
Total operating expenses	191,862		(614)		191,248
Income from operations	40,259		(1,166)		39,093
Income (loss) before provision for income taxes	(12,109)		(1,166)		(13,275)
Provision for (benefit from) income taxes	(24,529)		(260)		(24,789)
Net income	$	12,420	$	(906)	$	11,514
Net income per common and common equivalent shares - Basic	$	0.17	$	(0.01)	$	0.16
Net income per common and common equivalent shares - Diluted	$	0.16	$	(0.01)	$	0.15
Comprehensive income	$	11,013	$	(906)	$	10,107


Three Months Ended March 31, 2023	As Reported		Revision		As Revised

Net sales from products	$	219,389	$	(569)	$	218,820
Net sales from services	123,654		1,867		125,521
Net sales	343,043		1,298		344,341
Cost of product sales	107,584		673		108,257
Cost of service sales	31,357		263		31,620
Cost of sales	138,941		936		139,877
Gross margin	204,102		362		204,464
Sales, general and administrative	116,567		(621)		115,946
Total operating expenses	187,494		(621)		186,873
Income from operations	16,608		983		17,591
Income before provision for income taxes	41,884		983		42,867
Provision for (benefit from) income taxes	(3,255)		223		(3,032)
Net income	$	45,139	$	760	$	45,899
Net income per common and common equivalent shares - Basic	$	0.62	$	0.01	$	0.63
Net income per common and common equivalent shares - Diluted	$	0.61	$	0.01	$	0.62
Comprehensive income	$	46,999	$	760	$	47,759

Note 25 - Restated Interim Financial Information (Unaudited)

The following table reflects the correction of the balance sheet presentation error described in Note 1 “Organization and Summary of Significant Accounting Policies”. Refer to Note 1 “Organization and Summary of Significant Accounting Policies” and Note 12 “Convertible Senior Notes” in the notes to the consolidated financial statements in this Amended 2024 Annual Report for additional information regarding the presentation of the Notes. The effect of this balance sheet

presentation error did not impact Total Assets, Total Liabilities, or Stockholders' Equity in the consolidated balance sheets or the consolidated statements of operations, stockholders' equity or cash flows for the Affected Periods. The restatements pertaining to the Affected Periods are as follows:

Condensed Consolidated Balance Sheet

(in thousands)


As of September 30, 2024	As Reported		Adjustments		As Restated

Total current assets	$	2,433,746	$	—	$	2,433,746
Total assets	4,005,658		—		4,005,658
Current portion of convertible notes, net	—		679,483		679,483
Total current liabilities	823,227		679,483		1,502,710
Long-term convertible notes, net	679,483		(679,483)		—
Total liabilities	1,905,822		—		1,905,822
Total stockholders' equity	2,099,836		—		2,099,836

Given that financial statements effectuating the error correction in our previously reported revision as discussed in Note 1 “Organization and Summary of Significant Accounting Policies” and Note 23 “Revision of Prior Period Financial Statements” have not yet been reissued as of the date of filing this Amended 2024 Annual Report, the adjustments below applicable as of the period ended March 31, 2024 include both (1) the impact of the balance sheet presentation error; and (2) the immaterial errors identified in our previously issued financial statements as discussed in further detail in Note 1 “Organization and Summary of Significant Accounting Policies” and Note 23 “Revision of Prior Period Financial Statements”.

Condensed Consolidated Balance Sheet

(in thousands)


As of March 31, 2024	As Reported		Adjustments		As Restated

Contract assets, net	$	266,172	$	10,846	$	277,018
Prepaid expenses and other current assets	123,677		(12,347)		111,330
Total current assets	2,201,707		(1,501)		2,200,206
Deferred tax assets, net	208,861		(1,729)		207,132
Long-term contract assets, net	88,209		8,155		96,364
Other long-term assets	212,470		(35,635)		176,835
Total assets	3,616,196		(30,710)		3,585,486
Accounts payable	82,075		(18,241)		63,834
Accrued liabilities	127,415		2,922		130,337
Current portion of deferred revenue	516,404		(22,767)		493,637
Current portion of convertible notes, net	—		677,895		677,895
Total current liabilities	757,474		639,809		1,397,283
Deferred revenue, net of current portion	293,878		(11,082)		282,796
Long-term convertible notes, net	677,895		(677,895)		—
Other long-term liabilities	3,078		14,593		17,671
Total liabilities	1,798,181		(34,575)		1,763,606
Retained earnings	564,467		3,865		568,332
Total stockholders’ equity	1,818,015		3,865		1,821,880
Total liabilities and stockholders’ equity	$	3,616,196	$	(30,710)	$	3,585,486

Condensed Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)


Three Months Ended March 31, 2024	As Reported		Adjustments		As Restated

Net sales from products	$	272,048	$	(1,624)	$	270,424
Net sales from services	188,688		759		189,447
Net sales	460,736		(865)		459,871
Cost of product sales	151,698		462		152,160
Cost of service sales	48,992		91		49,083
Cost of sales	200,690		553		201,243
Gross margin	260,046		(1,418)		258,628
Sales, general and administrative	152,669		(1,594)		151,075
Total operating expenses	243,766		(1,594)		242,172
Income from operations	16,280		176		16,456
Income before provision for income taxes	165,720		176		165,896
Provision for (benefit from) income taxes	32,502		42		32,544
Net income	$	133,218	$	134	$	133,352
Net income per common and common equivalent shares - Basic	$	1.77	$	—	$	1.77
Net income per common and common equivalent shares - Diluted	$	1.73	$	—	$	1.73
Comprehensive income	$	132,311	$	134	$	132,445

There was no impact on disclosed basic and diluted income per common and common equivalent shares for the three months ended March 31, 2024.

Condensed Consolidated Statement of Stockholders' Equity

(in thousands)


	As Reported				Adjustments				As Restated
	Retained Earnings		Total Stockholders’ Equity		Retained Earnings		Total Stockholders’ Equity		Retained Earnings		Total Stockholders’ Equity

Balance, December 31, 2023	$	431,249	$	1,612,034	$	3,731	$	3,731	$	434,980	$	1,615,765
Net income	133,218		133,218		134		134		133,352		133,352
Balance, March 31, 2024	$	564,467	$	1,818,015	$	3,865	$	3,865	$	568,332	$	1,821,880

Condensed Consolidated Statement of Cash Flows

(in thousands)


Three Months Ended March 31, 2024	As Reported		Adjustments		As Restated

Cash flows from operating activities:
Net income	$	133,218	$	134	$	133,352
Provision for bad debts and inventory	216		1,364		1,580
Change in assets and liabilities:
Receivables and contract assets	(51,132)		(5,605)		(56,737)
Inventory	(710)		(1,364)		(2,074)
Deferred revenue	20,743		(1,622)		19,121
Accounts payable, accrued and other liabilities	(84,289)		(1,551)		(85,840)
Other - net	2		8,644		8,646

Other than the impact to the captions noted above, there was no impact on total cash flows from operating activities, or on cash flows from investing or financing activities.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Axon Enterprise, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Axon Enterprise, Inc. and its subsidiaries (the "Company") as of December 31, 2024, and the related consolidated statements of operations and comprehensive income (loss), of stockholders’ equity and of cash flows for the year then ended, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date as the Company (i) did not design and maintain effective controls related to revenue recognition for its customer contracts and (ii) did not design an effective control to periodically monitor the satisfaction of contingent conversion provisions within the Indenture governing the 2027 Notes and to assess the impact on the presentation between current and long-term liabilities.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Restatement of Previously Issued Financial Statements and Management’s Conclusion Regarding Internal Control over Financial Reporting

As discussed in Note 1 to the consolidated financial statements, the Company has restated its 2024 financial statements to correct an error.

Management and we previously concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2024 because of the material weakness related to revenue recognition for its customer contracts. However, management has subsequently determined that an additional material weakness in internal control over financial reporting existed as of December 31, 2024 as the Company did not design an effective control to periodically monitor the satisfaction of contingent conversion provisions within the Indenture governing the 2027 Notes and to assess the impact on the presentation between current and long-term liabilities. Accordingly, management’s report and our opinion on the effectiveness of internal control over financial reporting have been restated to include this additional material weakness.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material

misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition for Certain Products and Services

As described in Notes 1 and 2 to the consolidated financial statements, the Company’s net sales were $2.1 billion for the year ended December 31, 2024, a significant portion of which relates to certain products and services. The Company derives revenue from two primary sources: the sale of physical products and subscriptions to software-as-a-service (SaaS) offerings. To a lesser extent, the Company also recognizes revenue from training, professional services and other software and SaaS services. Revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Contracts include various combinations of products and services, each of which is generally distinct and accounted for as a separate performance obligation. Performance obligations to deliver products are generally satisfied at the point in time the Company ships the product as this is when the customer obtains control of the asset. Performance obligations to provide the SaaS offerings are generally satisfied over time as the customer receives and consumes the benefits of these services over the stated service period. Products and services may be sold on a standalone basis or as part of a bundle of hardware products and services together. Contracts with other cancellation provisions or optional periods may require judgment in determining the contract term, including the existence of substantive termination penalties, determining transaction price and identifying the performance obligations. Customers may request changes that amend, replace or cancel existing contracts and judgment is required to determine whether these changes should be accounted for as a separate contract or a modification to an existing contract.

The principal considerations for our determination that performing procedures relating to revenue recognition for certain products and services is a critical audit matter are (i) the significant judgment by management in evaluating key terms and conditions in contracts with customers that impact revenue recognition and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s evaluation of the key terms and conditions in contracts with customers related to contract term, cancellation provisions, substantive termination penalties, optional periods, and if changes to contracts should be accounted for as separate or modified contracts. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over contract reviews to identify key terms and conditions in contracts with customers. These procedures also included, among others, for a sample of revenue transactions from certain products and services, (i) evaluating the reasonableness of management’s judgments in accounting for the key terms and conditions in the contracts, including evaluating contract term, cancellation provisions, substantive termination penalties, optional periods, and if changes to contracts should be accounted for as separate or modified contracts; (ii) testing revenue recognized by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of transfer of control, and cash receipts; and (iii) confirming a sample of outstanding customer invoice balances as of December 31, 2024 and, for confirmations not returned, obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of transfer of control, and subsequent cash receipts.

Valuation of Certain Intangible Assets - Acquisitions of Fusus and Dedrone

As described in Notes 8 and 21 to the consolidated financial statements, during 2024, the Company completed the step acquisitions of its remaining interests in Fusus L.L.C. (“Fusus”) and Dedrone Holdings, Inc. (“Dedrone”). The incremental consideration transferred for the Fusus acquisition was $241.3 million, and $56.6 million of developed technology was recorded. The incremental consideration transferred for the Dedrone acquisition was $391.1 million, and $41.0 million of developed technology and $41.0 million of in-process research and development (IPR&D) was recorded. The fair value of the acquired Fusus developed technology was calculated using the multi-period excess earnings method, and significant assumptions used by management were projected revenues, earnings before interest, taxes, and depreciation and amortization (EBITDA) margins, obsolescence technology factor, and the discount rate. The fair value of the acquired Dedrone developed technology and IPR&D were calculated using the cost approach, and the significant assumption used by management was direct development cost build-up.

The principal considerations for our determination that performing procedures relating to the valuation of certain intangible assets acquired in the acquisitions of Fusus and Dedrone is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the Fusus developed technology and the Dedrone developed technology and IPR&D intangible assets acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the projected revenues, EBITDA margins, obsolescence technology factor, and discount rate for the Fusus developed technology intangible asset acquired and the direct development cost build-up for the Dedrone development technology and IPR&D intangible assets acquired; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the Fusus developed technology and the Dedrone developed technology and IPR&D intangible assets acquired. These procedures also included, among others (i) reading the purchase agreements; (ii) testing management’s process for developing the fair value estimates of the Fusus developed technology and the Dedrone developed technology and IPR&D intangible assets acquired; (iii) evaluating the appropriateness of the multi-period excess earnings method used by management for the Fusus developed technology and the cost approach used by management for the Dedrone developed technology and IPR&D; (iv) testing the completeness and accuracy of underlying data used by management in the valuation approaches; (v) and evaluating the reasonableness of significant assumptions used by management related to the projected revenues, EBITDA margins, obsolescence technology factor, and discount rate related to the Fusus developed technology and the direct development cost build-up related to the Dedrone developed technology and IPR&D intangible assets acquired. Evaluating the reasonableness of management’s significant assumptions related to the projected revenues and EBITDA margins for the Fusus developed technology and the direct development cost build-up related to the Dedrone developed technology and

IPR&D involved considering (i) the past performance of the acquired businesses, (ii) the consistency with external market and industry data, and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Evaluating the reasonableness of management’s significant assumption related to obsolescence technology factor for the Fusus developed technology involved considering (i) the consistency with external market data, and (ii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the (i) evaluation of the appropriateness of the multi-period excess earnings method and reasonableness of the obsolescence technology factor and discount rate assumptions used in the valuation of the Fusus developed technology intangible asset acquired and (ii) evaluation of the appropriateness of the cost approach used in the valuation of the Dedrone developed technology and IPR&D intangible assets acquired.

/s/ PricewaterhouseCoopers LLP

Phoenix, Arizona

February 28, 2025, except for the effects of the restatement discussed in Note 1 to the consolidated financial statements and the matter described in the penultimate paragraph of Management’s Report on Internal Control over Financial Reporting, as to which the date is May 7, 2025

We have served as the Company’s auditor since 2024.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Axon Enterprise, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Axon Enterprise, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We served as the Company’s auditor from 2005 to 2024

Phoenix, Arizona

February 27, 2024 (except for Note 20, Note 23 and Note 24, as to which the date is February 28, 2025)

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