Axon Enterprise (AXON) 10-K risk factor changes: FY2023 vs FY2022

You should carefully consider the trends, risks and uncertainties described below and other information in this [added: Annual Report on] Form 10-K and subsequent reports filed with or furnished to the SEC before making any investment decision with respect to our securities.

We are substantially dependent on acceptance of our products [added: and services] by law enforcement [removed: markets,] [added: agencies] throughout the world.

If law enforcement agencies do not continue to purchase and use our products and services, our growth prospects, operating results and financial [removed: conditions] [added: condition] will be materially adversely affected.

At any point, whether or not related to the performance of our products and services, law enforcement agencies may elect to no longer purchase [added: or use] our CEDs or other products and services.

For example, [removed: in the past,] we believe that [added: in the past] our sales were adversely impacted by negative coverage and publicity surrounding our products and services and their use.

We substantially depend on sales of our TASER CEDs, and if these products do not continue to be widely accepted, our growth [removed: prospects] [added: prospects, operating results and financial condition] will be diminished.

In [added: each of] the years ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020,] [added: 2021,] we derived a significant portion of our revenues from sales of TASER brand devices and related cartridges, whether on a standalone basis or as part of a bundled offering, and expect to depend on sales of these products for a significant portion of our revenue for the foreseeable future.

A decrease in the selling prices [removed: of,] [added: of] or demand for these products, or their failure to maintain broad market acceptance, would significantly harm our [added: competitive position,] growth prospects, operating results and financial condition.

The development of new products and new product features is complex, [removed: time consuming] [added: time-consuming] and expensive, and we may experience delays in completing the development and introduction of new products.

[removed: Customer] [added: Customers’] requirements for these products are complex and varied.

[removed: If we are unable to develop scalable solutions] that can [removed: be] consistently [removed: configured for customers with minimal effort, or if we are unable to grow a professional services team that can consistently] configure our products to meet the requirements of large numbers of customers in a timely and cost-effective manner, our ability to broadly scale our cloud-based productivity and real-time operations SaaS solutions could be negatively impacted, and our business prospects, operating results and financial condition could be negatively [removed: impacted..][added: impacted.]

Our distribution strategy is to pursue sales through multiple [removed: channels] [added: channels,] which [removed: is] [added: are] principally [removed: through] direct sales and independent distributors.

[removed: and our inability to grow sales to these agencies in this manner would materially adversely affect our business prospects, operating results and financial condition] In addition, our inability to establish relationships with and retain law enforcement equipment distributors, who we believe can successfully sell our products, would materially adversely affect our business prospects, operating results and financial condition.

In certain states and foreign [removed: jurisdictions] [added: jurisdictions,] we have decided to pursue sales directly with law enforcement customers, rather than working through established distribution channels.

Our customers may have strong working relationships with [removed: distributors] [added: distributors,] and we may face resistance to this change.

Acquisitions of, or investments in, other [removed: companies,] products, [removed: or] technologies [removed: may require significant management attention and] [added: or businesses] could disrupt our business, dilute [removed: stockholder] [added: shareholder] value, and adversely affect our operating results.

Our business strategy [added: has in the past and] may [added: in the future] include acquiring [added: or making investments in] other complementary products, technologies or businesses.

[removed: Negotiating] [added: Identifying and negotiating] these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions [added: has in the past and] may [added: in the future] be subject to third-party approvals, such as government regulatory [removed: approvals,] [added: approvals and clearances,] which are beyond our control.

If we acquire [removed: businesses] [added: businesses, technologies] or [removed: technologies,] [added: products,] we may not be able to integrate the acquired personnel, operations, [removed: and] technologies [added: or products] successfully, or effectively manage the combined business following the acquisition.

| | ● | inability to integrate or benefit from acquired [removed: technologies,] products, [removed: personnel] [added: technologies] or [removed: services] [added: businesses] in a profitable manner; |

| | ● | unanticipated costs or liabilities associated with the acquisition, including potential liabilities due to litigation and potential identified or unknown security vulnerabilities in acquired technologies that expose us to additional security risks or delay our ability to integrate the [removed: product] [added: acquired products] into our offerings or recognize the benefits of our investment; |

| | ● | differences between our values and those of an acquired company, as well as potential disruptions to our workplace [removed: culture;] [added: culture or how we are perceived by investors;] |

| | ● | difficulty integrating the accounting and information systems, [removed: operations,] [added: operations] and personnel of the acquired business; |

| | ● | [removed: augmenting] [added: inability to augment] the acquired technologies and platforms to the levels that are consistent with our brand and reputation; |

If our integration and development efforts are not successful and the anticipated benefits of the acquisitions that we complete are not achieved, our business, operating results, financial [removed: condition,] [added: condition] and prospects could be adversely affected.

In connection with these types of transactions, we may issue additional equity securities that would dilute our [removed: stockholders,] [added: shareholders,] use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures and values, and become subject to adverse tax consequences, substantial depreciation, or deferred compensation charges.

These challenges could adversely affect our business, operating results, financial [removed: condition,] [added: condition] and prospects.

We are highly dependent on the services of [added: our executive officers, including] Patrick W.

Our future success depends upon our ability to retain executive officers, [removed: specifically] [added: including] Patrick W.

[removed: _Operational Risks_][added: Operational Risks]

Our reliance on third-party suppliers creates risks related to our potential inability to obtain an adequate supply of components or sub-assemblies and reduced control over pricing and timing of delivery of components and [removed: sub-assemblies.][added: sub-assemblies, including single or sole-source components used in the manufacture of our products.]

Additionally, if our suppliers do not accurately forecast and effectively allocate production or if they are not willing to allocate sufficient production to us, or they decommit to us previously [removed: agreed to] [added: agreed-to] supply levels, it may reduce our access to components and require us to search for new suppliers.

If we are unable to accurately match the timing and quantities of component purchases to our actual needs, we may incur unexpected production disruption, storage, transportation and write-off costs, which may harm our business and [removed: operating] [added: financial] results.

[removed: our financial condition or results of] [added: Our international] operations [removed: and] [added: expose us to additional risks that] could harm our [removed: reputation.][added: business, operating results and financial condition.]

Due to the unique requirements of [removed: the] TASER 10, [added: including the regulation of certain TASER 10 components for import into the United States and export from foreign sources,] we purchase our raw materials from a limited number of suppliers.

Some of the raw materials that are used in [removed: the] TASER 10 may be subject to fluctuations in market [removed: price] [added: price,] which we may be unable to pass through to our customers to offset market fluctuations.

Because of the unique requirements of [removed: the] TASER 10, we cannot change suppliers easily.

Any delay or interruption in the supply of [removed: these] [added: the] raw materials [added: that are used in TASER 10] could impair our ability to manufacture and deliver [removed: the] TASER 10, harm our reputation or cause a reduction in revenues.

A significant number of our raw materials or components [removed: are comprised of] [added: comprise] petroleum-based products or incur some form of landed cost associated with transporting the raw materials or components to our facility.

Our freight and import costs and the timely delivery of our products could be adversely impacted by [added: the materialization or re-emergence of] a number of factors [removed: which] [added: that] could reduce the profitability of our operations, including: higher fuel [removed: costs;] [added: costs (including increased petroleum prices as a result of, among other things, climate change-related regulations);] potential port [removed: closures;] [added: closures or shipping disruptions;] customs clearance issues; increased government regulation or regulatory changes for imports of foreign products into the [removed: U.S.;] [added: United States and exports from foreign sources;] delays created by terrorist attacks or threats, public health issues, national disasters or work stoppages; and other matters.

Our largest customer segment is U.S. state and local law enforcement.

Axon has a customer relationship with a substantial number of state and local law enforcement agencies in the United States.

The acceptance of these devices is critical to our growth prospects, operating results and financial condition.

If we are unable to continue to meet customer demands or to achieve more widespread market acceptance of these products, our growth prospects, operating results and financial condition will be materially adversely affected.

Demand for these offerings is affected by a number of factors (some of which are beyond our control), including continued market acceptance of these products by our customers, technological change and growth or contraction of the economy in general.

Our TASER CEDs and other offerings or products could fail to maintain or attain sufficient customer acceptance for many reasons, including:

| | ● | our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand; |

| | ● | real or perceived defects, errors or failures; |

| | ● | negative publicity about their performance or effectiveness; |

| | ● | delays in releasing to the market our improved offerings or enhancements; |

| | ● | introduction or anticipated introduction of competing products; and |

| | ● | budget constraints or other limitations for our customers. |

If we cannot develop scalable solutions that can be consistently configured for customers with minimal effort or grow a professional services team

The introduction of products embodying new technologies (such as the use of AI and machine learning) and the emergence of new industry standards can render existing products obsolete and unmarketable.

Additionally, our products are expected to meet and keep pace with evolving security standards and requirements of our industry and customers, including those of the U.S. federal government and international governments.

Additionally, our competitors may develop competing technologies or products that provide superior features or are less expensive than our products, or our competitors may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing, manufacturing and other resources than we do, or may be more successful in attracting potential customers, employees and strategic partners.

If we are not able to compete effectively, our business and financial results could be adversely affected.

We are focusing on direct sales to larger agencies through our regional sales managers and our inability to grow sales to these agencies in this manner would materially adversely affect our business prospects, operating results and financial condition.

Negative publicity could adversely impact sales, which could cause our revenues or operation results to decline.

Our business is dependent upon the reputation of the Axon brand.

If we are unable to maintain the position of the Axon brand, our business may be adversely affected by diminishing the appeal of the brand to our customer base.

This could result in lower sales and earnings.

In addition, unfavorable media or investor and analyst reports related to our industry, company, brand, marketing, personnel, operations, business performance or prospects may affect our stock price and the performance of our business, regardless of accuracy.

Furthermore, the speed at which negative publicity is disseminated has increased dramatically through the use of electronic communication, including social media outlets, websites and other digital platforms.

Our success in maintaining and enhancing our brand depends on our ability to adapt to this rapidly changing

media environment.

Adverse publicity or negative commentary from any media outlets could damage our reputation and reduce the demand for our products and services, which would adversely affect our business and financial results.

| | ● | inability to correct or achieve regulatory approvals or certifications; |

Our failure to retain executive officers could adversely impact our business.

Among other qualifications, Patrick W.

Smith is the founder of Axon and brings extensive executive leadership experience in the technology industry, including the management of worldwide operations, sales, service and support as well as technology innovation as an inventor listed on 52 U.S. patents.

Mr. Smith has been instrumental in building the public safety operating system of the future by integrating a suite of hardware devices and cloud software solutions that lead to modern policing and help save lives.

From the early days of founding the organization to today as a market leader, Mr. Smith’s expertise has brought forth entirely new product categories, including the less-lethal TASER de-escalation platform, body-worn cameras and cloud software that lead to modernized public safety.

The loss of any of our senior management, including Patrick W.

Smith, could interrupt our ability to execute our business plan, as such individuals may be difficult to replace.

We may be slower to establish alternative sources of supply for TASER 10 components as we continue to refine the design of the product.

We are also subject to supply chain disruption should we learn that any of our suppliers is in violation of legislation that bans the import of goods based on their method of production, such as using forced labor or otherwise.

This may also result in negative publicity regarding our production methods, and alleged unethical or illegal practices of any of our suppliers could adversely affect our reputation.

As we develop additional products, we may need to bring new equipment on-line, implement new systems, technology, methods and processes and hire personnel with different qualifications.

The costs associated with implementing new manufacturing technologies, methods and processes, including the purchase of new equipment, and any resulting delays, inefficiencies and loss of sales, could harm our financial results.

We are focusing on direct sales to larger agencies through our regional sales managers

Single or sole-source components used in the manufacture of our products may become unavailable or discontinued.

Delays caused by industry allocations or obsolescence may take weeks or months to resolve.

In some cases, parts obsolescence may require a product re-design to ensure quality replacement components.

These delays could cause significant delays in manufacturing and loss of sales, leading to adverse effects significantly impacting

For example, revenue from TASER 7 for 2022 was impacted by approximately $35.0 million for orders that were scheduled to ship prior to December 31, 2022, but could not be fulfilled due to the delayed receipt of a manufacturing component for our TASER 7 devices.

Additionally, Axon Body revenue was impacted by approximately $15.5 million for orders that were scheduled to ship prior to December 31, 2022, but could not be fulfilled due to supply chain constraints for our Axon Body 3 devices.

New products and enhancements to existing products can require long development and testing periods.

The length of our sales cycle may range from a few weeks to as long as several years.

Defects in our products could result in a loss of sales, delay in market

Our international operations expose us to additional risks that could harm our business, operating results, and financial condition.

applicable terms of the employment agreements.

will not be prevented or detected on a timely basis.

Controls and Procedures.

We may experience a decline in gross margins due to a shift in product sales to software and sensors products and services which may continue to carry a lower gross margin than that of Tasers.

We continue to invest in the growth of the Software and Sensors segment, and this expected growth may result in a higher percentage of total revenues being comprised of Software and Sensors products and services.

In 2022, gross margin as a percentage of net sales for the Software and Sensors segment was 59.5% while it was 63.3% for the TASER segment, and may continue to be lower in the future thus decreasing our consolidated gross margin.

experienced historically.

If we achieve specific operational goals and the covered employees complete the requisite service conditions for the performance-based awards with multiple service, performance, and market conditions, including our CEO Performance Award and our eXponential Stock Performance Plan ("XSPP"), we will recognize stock compensation expense regardless of whether the market conditions are achieved and the underlying tranches vest.

in U.S. dollars which could increase our foreign exchange rate risk caused by foreign currency transaction gains and losses.

There is also a risk of adverse judgments, as the outcome of litigation is inherently uncertain.

The right to stop others from misusing our trademarks and

Our intellectual property may also be at risk if we are unable to defend against enforcement actions, such as that filed by the FTC regarding our acquisition of Vievu LLC from Safariland LLC on May 3, 2018.

If successful, the FTC is seeking a divestiture of Vievu along with Axon assets sufficient to stand up a viable competitor.

We may be limited in our ability to enforce patent rights internationally to only those jurisdictions in which our patent applications have been granted.

Additionally, these laws and regulations, or any associated inquiries or investigations or other government actions,

_Radio Spectrum Devices_

We are also subject to U.S. laws and regulations, including, without limitation, the California Privacy Rights Act, which provides for enhanced consumer protections for California residents, a private

right of action for data breaches and statutory fines and damages for data breaches or other California Consumer Privacy Act violations, as well as a requirement of “reasonable” cybersecurity.

[removed: Our MD&A should be read in conjunction with the other sections of this Annual Report on Form 10-K, including Part I, Item 1A: “Risk Factors” and Part II, Item 8: “Financial] [added: Financial] Statements and Supplementary Data.” The various sections of [removed: this] [added: our] MD&A contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing.

[removed: This section] [added: Our MD&A] discusses our results of operations for the year ended December 31, [removed: 2022] [added: 2023] as compared to the year ended December 31, [removed: 2021.][added: 2022.]

For a discussion and analysis of the year ended December 31, [removed: 2021,] [added: 2022 as] compared to the [removed: same period in 2020] [added: year ended December 31, 2021,] please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, [removed: 2021,] [added: 2022,] filed with the SEC on February [removed: 25, 2022.][added: 28, 2023.]

[removed: Axon's] [added: Axon’s] product suite includes [removed: TASER energy devices, body-worn cameras, in-car cameras,] cloud-hosted digital evidence [removed: management solutions,] [added: management,] productivity [removed: software] and real-time operations [removed: capabilities.][added: software, body-worn cameras, in-car cameras, TASER energy devices, robotic security and training solutions.]

| | [removed: 1.] [added: 2.] | Software and Sensors: We develop, manufacture and sell 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. Our software offerings also support productivity and real-time operations. |

| | [removed: 2.] [added: 1.] | TASER: Axon is the market leader in the development, manufacture and sale of CEDs, which we sell under our brand name, TASER. |

We derive revenue from two primary sources: [removed: (1)] [added: (i)] the sale of physical products, including Axon cameras, Axon [removed: Signal enabled] [added: Signal-enabled] devices, CEDs, corresponding hardware extended warranties, and related accessories such as Axon docks, cartridges and batteries, among others, and [removed: (2)] [added: (ii)] subscriptions to our Axon Evidence digital evidence management [removed: software-as-a-service ("SaaS")] [added: SaaS offering] (including data storage fees and other ancillary services), which includes varying levels of support.

We also bundle our hardware products and services together and sell them to our customers in single [removed: transactions,] [added: transactions] where the customer can make payments over a multi-year period.

Our revenues for the year ended December 31, [removed: 2022] [added: 2023] were [removed: $1,189.9 million,] [added: $1.6 billion,] an increase of [removed: $326.6] [added: $373.5] million, or [removed: 37.8%,] [added: 31.4%,] from the prior year.

We had income from operations of [removed: $93.3] [added: $154.8] million [added: in 2023] compared to [removed: a loss] [added: income] from operations of [removed: $168.1] [added: $93.3] million in the prior year.

[removed: For] [added: This represented an increase of $27.1 million over net income of $147.1 million for] the year ended December 31, 2022, [removed: we recorded net income of $147.1 million,] which [removed: reflected net] [added: included an] unrealized [removed: gains] [added: gain] of $131.9 million related to observable price changes for our existing investments and related warrants and an unrealized loss of $32.9 million [removed: on market securities] related to [removed: our investment in Cellebrite DI Ltd (“CLBT”), compared to a net loss of $60.0 million] [added: CLBT] for the prior year.

| Net sales from products | | $ | [removed: 801,388] [added: 967,711] | | [removed: 67.3] [added: 61.9] | % | ​ | $ | [removed: 608,525] [added: 801,388] | [added: ​] | [removed: 70.5] [added: 67.3] | % |

| Net sales from services | ​ | | [removed: 388,547] [added: 595,680] | | [removed: 32.7] [added: 38.1] | ​ | ​ | | [removed: 254,856] [added: 388,547] | | [removed: 29.5] [added: 32.7] | ​ |

| Net sales | ​ | | [removed: 1,189,935] [added: 1,563,391] | | 100.0 | ​ | ​ | | [removed: 863,381] [added: 1,189,935] | | 100.0 | ​ |

| Cost of product sales | ​ | | [removed: 363,219] [added: 450,718] | | [removed: 30.5] [added: 28.8] | ​ | ​ | | [removed: 260,098] [added: 363,219] | | [removed: 30.1] [added: 30.5] | ​ |

| Cost of service sales | ​ | | [removed: 98,078] [added: 157,291] | | [removed: 8.3] [added: 10.1] | ​ | ​ | | [removed: 62,373] [added: 98,078] | | [removed: 7.2] [added: 8.3] | ​ |

| Cost of sales | ​ | | [removed: 461,297] [added: 608,009] | | [removed: 38.8] [added: 38.9] | ​ | ​ | | [removed: 322,471] [added: 461,297] | | [removed: 37.3] [added: 38.8] | ​ |

| Gross margin | ​ | | [removed: 728,638] [added: 955,382] | | [removed: 61.2] [added: 61.1] | ​ | ​ | | [removed: 540,910] [added: 728,638] | | [removed: 62.7] [added: 61.2] | ​ |

| Operating expenses: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | [removed: ​] | [removed: ​] | ​ | ​ |

| Sales, general and administrative | ​ | | [removed: 401,575] [added: 496,874] | | [removed: 33.7] [added: 31.8] | ​ | ​ | | [removed: 515,007] [added: 401,575] | | [removed: 59.7] [added: 33.7] | ​ |

| Research and development | ​ | | [removed: 233,810] [added: 303,719] | | [removed: 19.7] [added: 19.4] | ​ | ​ | | [removed: 194,026] [added: 233,810] | | [removed: 22.5] [added: 19.7] | ​ |

| Total operating expenses | ​ | | [removed: 635,385] [added: 800,593] | | [removed: 53.4] [added: 51.2] | ​ | ​ | | [removed: 709,033] [added: 635,385] | | [removed: 82.2] [added: 53.4] | ​ |

| Income [removed: (loss)] from operations | ​ | | [removed: 93,253] [added: 154,789] | | [removed: 7.8] [added: 9.9] | ​ | ​ | | [removed: (168,123)] [added: 93,253] | | [removed: (19.5)] [added: 7.8] | ​ |

| Income [removed: (loss)] before provision for income taxes | ​ | | [removed: 196,518] [added: 155,000] | | [removed: 16.5] [added: 9.9] | ​ | ​ | | [removed: (141,375)] [added: 196,518] | | [removed: (16.4)] [added: 16.5] | ​ |

| Provision for (benefit from) income taxes | ​ | | [removed: 49,379] [added: (19,227)] | | [removed: 4.1] [added: (1.2)] | ​ | ​ | | [removed: (81,357)] [added: 49,379] | | [removed: (9.4)] [added: 4.1] | ​ |

| Net income [removed: (loss)] | | $ | [removed: 147,139] [added: 174,227] | | [removed: 12.4] [added: 11.1] | % | ​ | $ | [removed: (60,018)] [added: 147,139] | | [removed: (7.0)] [added: 12.4] | % |

Net sales to the [removed: U.S.] [added: United States] and other countries are summarized as follows (dollars in thousands):

| United States | | $ | [removed: 987,975] [added: 1,338,208] | | [removed: 83] [added: 86] | % | ​ | $ | [removed: 686,914] [added: 987,975] | | [removed: 80] [added: 83] | % |

| Other Countries | ​ | | [removed: 201,960] [added: 225,183] | | [removed: 17] [added: 14] | ​ | ​ | | [removed: 176,467] [added: 201,960] | | [removed: 20] [added: 17] | ​ |

| Total | ​ | $ | [removed: 1,189,935] [added: 1,563,391] | | 100 | % | ​ | $ | [removed: 863,381] [added: 1,189,935] | | 100 | % |

International revenue increased in [removed: 2022,] [added: 2023,] driven by strength in our [removed: Asia-Pacific (“APAC”)] [added: Americas] region, but decreased as a percentage of total revenue compared to [removed: 2021.][added: 2022.]

Our operations [removed: are comprised of] [added: comprise] two reportable segments.

| | [removed: o] [added: ●] | [removed: “Axon Cloud revenue”] [added: The Software and Sensors segment] includes [added: the sales of sensors, including body-worn cameras, in-car cameras, other hardware sensors, warranties on sensors, and other products, as well as] recurring cloud-hosted software revenue, related non-recurring professional [removed: services,] [added: services revenue,] and [added: revenue from] certain software, including on-premise licenses. |

| | ● | The [removed: “TASER”] [added: TASER] segment includes the manufacture and sale of CEDs, batteries, accessories and extended [removed: warranties] [added: warranties, digital subscription training content, VR training content, TASER Evidence.com license revenue,] and other [removed: products] [added: professional services tied to TASER] and [removed: services;] [added: VR deployments.] |

For the Years Ended December 31, [removed: 2022] [added: 2023] and [removed: 2021][added: 2022]

Net sales by product line were as follows for the years ended December 31, [removed: 2022] [added: 2023] and [removed: 2021] [added: 2022] (dollars in thousands):

| ​ | ​ | [removed: 2022] [added: 2023] | | | | ​ | [removed: 2021] [added: 2022] | | | | ​ | Change | | ​ | Change | |

| Axon Evidence and [removed: cloud services] [added: Cloud Services] | ​ | | [removed: 18,752] [added: 34,775] | | [removed: 1.6] [added: 2.2] | ​ | | [removed: 9,159] [added: 18,752] | | [removed: 1.1] [added: 1.6] | ​ | | [removed: 9,593] [added: 16,023] | | [removed: 104.7] [added: 85.4] | ​ |

| Axon Evidence and [removed: cloud services] [added: Cloud Services] | ​ | | [removed: 371,889] [added: 566,183] | | [removed: 31.2] [added: 36.2] | ​ | | [removed: 246,005] [added: 371,889] | | [removed: 28.5] [added: 31.2] | ​ | | [removed: 125,884] [added: 194,294] | | [removed: 51.2] [added: 52.2] | ​ |

| ​ | ​ | Year Ended December 31, | | | [removed: ​] | [removed: Unit] | [removed: ​ | Percent | |]

Our MD&A should be read in conjunction with the other sections of this Annual Report on Form 10-K, including “Part I, Item 1A.

Risk Factors” and “Part II, Item 8.

Gross margin dollars increased by $226.7 million in 2023 but remained relatively flat as a percentage of revenue compared to 2022.

Operating expenses for the year ended December 31, 2023 increased $165.2 million, reflecting an increase of $97.2 million in salaries, benefits and bonus expense and an increase in stock compensation of $23.2 million primarily related to an increase in headcount.

For the year ended December 31, 2023, we recorded net income of $174.2 million, which reflected net unrealized losses of $80.5 million related to impairment and observable price changes for our existing investments and related warrants, interest income, net of $42.1 million, and an unrealized gain of $38.7 million on marketable securities related to our investment in Cellebrite DI Ltd.

(“CLBT”).

| ​ | ​ | 2023 | | | | | ​ | 2022 | | | | |

| Interest income, net | ​ | ​ | 42,112 | ​ | 2.7 | ​ | ​ | ​ | 4,294 | ​ | 0.4 | ​ |

| Other income (loss), net | ​ | | (41,901) | | (2.7) | ​ | ​ | | 98,971 | | 8.3 | ​ |

| ​ | ​ | 2023 | | | | ​ | ​ | 2022 | | | | |

| TASER Devices (Professional) | ​ | $ | 333,923 | ​ | 21.4 | % | $ | 282,698 | ​ | 23.8 | % | $ | 51,225 | | 18.1 | % |

| Cartridges | ​ | | 193,285 | | 12.4 | ​ | | 181,686 | | 15.3 | ​ | | 11,599 | | 6.4 | ​ |

| Extended Warranties | ​ | | 31,689 | | 2.0 | ​ | | 29,008 | | 2.4 | ​ | | 2,681 | | 9.2 | ​ |

| Other (1) | ​ | | 18,933 | | 1.2 | ​ | | 19,422 | | 1.6 | ​ | | (489) | | (2.5) | ​ |

| TASER segment | ​ | | 612,605 | | 39.2 | ​ | | 531,566 | | 44.7 | ​ | | 81,039 | | 15.2 | ​ |

| Axon Body Cameras and Accessories | ​ | | 183,023 | | 11.7 | ​ | | 157,281 | | 13.2 | ​ | | 25,742 | | 16.4 | ​ |

| Axon Fleet Systems | ​ | | 118,129 | | 7.6 | ​ | | 63,017 | | 5.3 | ​ | | 55,112 | | 87.5 | ​ |

| Extended Warranties | ​ | | 62,577 | | 4.0 | ​ | | 49,765 | | 4.2 | ​ | | 12,812 | | 25.7 | ​ |

| Other (2) | ​ | | 20,874 | | 1.3 | ​ | | 16,417 | | 1.4 | ​ | | 4,457 | | 27.1 | ​ |

| Software and Sensors segment | ​ | | 950,786 | | 60.8 | ​ | | 658,369 | | 55.3 | ​ | | 292,417 | | 44.4 | ​ |

| Total net sales | ​ | $ | 1,563,391 | | 100.0 | % | $ | 1,189,935 | | 100.0 | % | $ | 373,456 | | 31.4 | % |

(1) TASER segment “Other” includes smaller categories, such as VR hardware, CED 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 and Axon Air.

We continue to see strong adoption of our next generation product, TASER 10, which began shipping in the first quarter of 2023.

The increase in cartridge revenue was primarily attributable to growing sales of next generation TASER products.

The increase in the aggregate number of users and average revenue per user, driven primarily by software add-ons, drove the majority of the increase in Axon Evidence and cloud services revenue of $194.3 million in addition to increased professional services revenue associated with new product installations, including Axon Fleet cameras.

The $55.1 million increase in Axon Fleet systems revenue was primarily driven by higher unit sales.

Net sales of Axon Body cameras and accessories increased $25.7 million on higher volume driven by demand for our next generation product, Axon Body 4, which began shipping at the end of the second quarter of 2023.

An increase in cameras and docks in the field drove the $12.8 million increase in extended warranties, as most of those devices are sold with extended warranties.

Future Contracted Revenue - As of December 31, 2023 compared to December 31, 2022

Total company future contracted revenue represents remaining performance obligation and includes 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 Accounting Standards Codification Topic 606 as of December 31, 2023.

We currently expect to recognize between 15% to 25%

of this balance over the next 12 months, and generally 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.

As of December 31, 2023, we had approximately $7.1 billion of future contracted revenue, an increase from $4.6 billion as of December 31, 2022.

| TASER gross margin | ​ | ​ | 370,628 | ​ | ​ | 336,609 | ​ | ​ | 34,019 | ​ | 10.1 | % |

| TASER gross margin as % of TASER net sales | ​ | ​ | 60.5% | ​ | ​ | 63.3% | ​ | ​ | ​ | ​ | ​ | ​ |

| Software and Sensors gross margin | ​ | ​ | 584,754 | ​ | ​ | 392,029 | ​ | ​ | 192,725 | ​ | 49.2 | ​ |

| Software and Sensors gross margin as % of Software and Sensors net sales | ​ | ​ | 61.5% | ​ | ​ | 59.5% | ​ | ​ | ​ | ​ | ​ | ​ |

| Total gross margin | ​ | $ | 955,382 | ​ | $ | 728,638 | ​ | $ | 226,744 | | 31.1 | % |

| --- | --- | --- |

Gross margin dollars increased by $187.7 million, but decreased as a percentage of revenue compared to 2021, reflecting higher labor and freight costs.

Operating expenses decreased $73.6 million, reflecting a decrease of $195.9 million in stock-based compensation expense primarily related to the CEO Performance Award and XSPP, partially offset by an increase in salaries and bonus expense, and increases in travel and commissions expense.

| ​ | ​ | 2022 | | | | | ​ | 2021 | | | | |

| Interest and other income, net | ​ | | 103,265 | | 8.7 | ​ | ​ | | 26,748 | | 3.1 | ​ |

| ​ | ​ | 2022 | | | | ​ | ​ | 2021 | | | | |

Service revenue in both segments includes sales related to Axon Evidence.

| | ● | The "Software and Sensors" segment includes software and sensors, which includes the sale of devices, wearables, applications, cloud and mobile products, and services. |

| | o | “Sensors and Other revenue” is referred to as revenue from our “products” in the Software and Sensors segment, which is generally from the sales of sensors, including on-officer body cameras, Axon Fleet cameras, other hardware sensors, warranties on sensors, and other products. |

| | o | Service revenue in this segment also includes digital subscription training content, VR training content, TASER Evidence.com, and other professional services tied to TASER and VR deployments. |

Within the Software and Sensors segment, we include only revenues and costs attributable to that segment which costs include: costs of sales for both products and services, direct labor, and product management and R&D for products included, or to be included, within the Software and Sensors segment.

All other costs are included in the TASER segment.

Sales, general and administrative expenses are reported on a consolidated basis.

| TASER 7 | ​ | $ | 224,905 | ​ | 18.9 | % | $ | 135,906 | | 15.7 | % | $ | 88,999 | | 65.5 | % |

| TASER X26P | ​ | | 33,725 | | 2.8 | ​ | | 40,629 | | 4.7 | ​ | | (6,904) | | (17.0) | ​ |

| TASER X2 | ​ | | 24,068 | | 2.0 | ​ | | 58,081 | | 6.7 | ​ | | (34,013) | | (58.6) | ​ |

| TASER Consumer devices | ​ | | 6,420 | | 0.5 | ​ | | 7,132 | | 0.8 | ​ | | (712) | | (10.0) | ​ |

| Cartridges | ​ | | 181,686 | | 15.3 | ​ | | 152,842 | | 17.8 | ​ | | 28,844 | | 18.9 | ​ |

| Extended warranties | ​ | | 29,008 | | 2.5 | ​ | | 24,125 | | 2.8 | ​ | | 4,883 | | 20.2 | ​ |

| Other | ​ | | 13,002 | | 1.1 | ​ | | 9,053 | | 1.0 | ​ | | 3,949 | | 43.6 | ​ |

| TASER segment | ​ | | 531,566 | | 44.7 | ​ | | 436,927 | | 50.6 | ​ | | 94,639 | | 21.7 | ​ |

| Axon Body | ​ | | 124,164 | | 10.4 | ​ | | 75,484 | | 8.8 | ​ | | 48,680 | | 64.5 | ​ |

| Axon Flex | ​ | | 3,031 | | 0.3 | ​ | | 4,155 | | 0.5 | ​ | | (1,124) | | (27.1) | ​ |

| Axon Fleet | ​ | | 63,017 | | 5.3 | ​ | | 24,319 | | 2.8 | ​ | | 38,698 | | 159.1 | ​ |

| Axon Dock | ​ | | 30,086 | | 2.5 | ​ | | 24,441 | | 2.8 | ​ | | 5,645 | | 23.1 | ​ |

| Extended warranties | ​ | | 49,765 | | 4.2 | ​ | | 33,686 | | 3.9 | ​ | | 16,079 | | 47.7 | ​ |

| Other | ​ | | 16,417 | | 1.4 | ​ | | 18,364 | | 2.1 | ​ | | (1,947) | | (10.6) | ​ |

| Software and Sensors segment | ​ | | 658,369 | | 55.3 | ​ | | 426,454 | | 49.4 | ​ | | 231,915 | | 54.4 | ​ |

| Total net sales | ​ | $ | 1,189,935 | | 100.0 | % | $ | 863,381 | | 100.0 | % | $ | 326,554 | | 37.8 | % |

Net unit sales were as follows:

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| TASER 7 | | 139,217 | | 90,348 | | 48,869 | | 54.1 | % |

| TASER X26P | | 22,651 | | 30,083 | | (7,432) | | (24.7) | ​ |

| TASER X2 | | 13,927 | | 38,620 | | (24,693) | | (63.9) | ​ |

| TASER Consumer devices | | 23,223 | | 26,958 | | (3,735) | | (13.9) | ​ |

| Cartridges | | 5,635,369 | | 4,945,927 | | 689,442 | | 13.9 | ​ |

| Axon Body | | 253,501 | | 181,663 | | 71,838 | | 39.5 | ​ |

| Axon Flex | | 6,018 | | 7,828 | | (1,810) | | (23.1) | ​ |

| Axon Fleet | | 24,344 | | 11,264 | | 13,080 | | 116.1 | ​ |

All of our cash equivalents and investments are treated as [removed: “available-for-sale”.][added: “available-for-sale.” We report available-for-sale investments at fair value as of each balance sheet date and record any unrealized gains or losses as a component of stockholders’ equity.]

The credit-related impairment [added: amount is recognized in the consolidated statements of operations.]

Credit losses are recognized through the use of an allowance for credit losses account in the consolidated balance [removed: sheet] [added: sheets] and subsequent improvements in expected credit losses are recognized as a reversal of an amount in the allowance account.

Based on investment positions as of December 31, [removed: 2022,] [added: 2023,] a hypothetical 100 basis point increase in interest rates across all maturities would result in a [removed: $3.4] [added: $1.8] million decline in the fair market value of the portfolio.

Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit, which totaled [removed: $7.0] [added: $7.5] million at December 31, [removed: 2022.][added: 2023.]

At December 31, [removed: 2022,] [added: 2023,] there was no amount outstanding under the line of credit, and the available borrowing under the line of credit was [removed: $193.0] [added: $192.5] million.

However, we may choose not to hedge certain foreign exchange exposures for a variety of reasons, including [removed: but not limited to] the prohibitive economic cost of hedging particular exposures.

We report available-for-sale investments at fair value as of each balance sheet date and record any unrealized gains or losses as a component of stockholders’ equity.

amount is recognized in the consolidated statements of operations.

[removed: Axon’s mission] [added: Axon Enterprise, Inc. (“Axon,” the “Company,” “we” or “us”)] is [added: a market-leading provider of law enforcement technology solutions with a mission] to protect life in service of promoting peace, justice and strong institutions.

[removed: Our] [added: In 2022, we announced our] moonshot goal [removed: is] to cut gun-related deaths between police and the public in the United States [added: in half] by [removed: 50 percent before] 2033.

[removed: As a technology leader in global public safety,] Axon is building the public safety operating system of the future by integrating a suite of hardware devices and cloud software solutions that [removed: lead] [added: not only revolutionize] modern [removed: policing.][added: policing but also cater to federal agencies, corrections, justice and enterprise-level security needs.]

[removed: Axon's] [added: Axon’s] suite includes [removed: TASER energy devices, body-worn cameras, in-car cameras,] cloud-hosted digital evidence [removed: management solutions,] [added: management,] productivity [removed: software] and real-time operations [removed: capabilities.][added: software, body-worn cameras, in-car cameras, TASER energy devices, robotic security and training solutions.]

Our hardware and software solutions advance our long-term strategic vision of [removed: a)] [added: (i)] obsoleting the bullet, [removed: b)] [added: (ii)] reducing social conflict, [removed: c)] [added: (iii)] enabling a fair and effective justice system, and [removed: d)] [added: (iv)] building for racial equity, diversity, and inclusion.

Our financial strategy is to build highly recurring, highly profitable [removed: businesses.][added: businesses and to drive growth through this purposeful product innovation.]

| | [removed: 1.] [added: 2.] | Software and Sensors: We develop, manufacture and sell 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. Our software offerings also support productivity and real-time operations. |

| | [removed: 2.] [added: 1.] | TASER: Axon is the market leader in the development, manufacture and sale of [removed: conducted energy devices ("CEDs"),] [added: CEDs,] which we sell under our brand name, TASER. |

Further information about our reportable segments and sales by geographic region is included in Notes 1, 2 and [removed: 20] [added: 19] of the consolidated financial statements in Part II, Item 8 of this Annual Report on Form [removed: 10-K.][added: 10‑K.]

For [removed: backlog] [added: future contracted revenue] by reportable segment, refer to Part II, Item 7 of this Annual Report on Form [removed: 10-K.][added: 10‑K.]

Our [removed: physical] headquarters in Scottsdale, Arizona [removed: houses some] [added: and our software hub in Seattle, Washington house the majority of our in-person employees located in the United States, including members of our] executive [removed: management,] [added: management team, and] sales, marketing, certain engineering, manufacturing, finance and other administrative support functions.

We also have [removed: subsidiaries,] [added: subsidiaries] and [removed: in some cases] [added: / or] offices located in Australia, [added: Belgium,] Canada, Finland, France, Germany, Hong Kong, India, Italy, the Netherlands, Spain, the United [removed: Kingdom,] [added: Kingdom] and Vietnam.

| | ● | TASER: We develop smart devices, tools and services that support public safety officers in de-escalating situations, avoiding or minimizing use of force and aiding consumer personal protection. These tools include TASER devices, virtual reality [added: (“VR”)] training services and consumer devices. Research has shown that TASER devices are the most effective less-than-lethal force option, with the lowest likelihood of injury to officers and assailants. Since our inception in 1993, TASER devices have been [added: adopted by a majority of U.S. state and local law enforcement and are used daily to help keep communities safe. Global adoption of TASER devices remains early and we are expanding into new geographies. Axon VR solutions make public safety training more accessible, relevant and affordable — with the goal of using new immersive VR technologies to better prepare officers for real-life situations in the field.] |

| | ● | Sensors: Axon devices address many needs, including transparency, real-time situational awareness, and [removed: capturing evidence accurately] [added: accurate capture] and [removed: integrating] [added: integration of evidence] with software workflows. Product categories within sensors include Axon [removed: body] [added: Body] cameras, Axon Fleet in-car systems, and other devices that work with our software. [added: Our software solutions also support an open ecosystem of connected devices produced by other vendors.] |

| | ● | Software: Axon is building a suite of cloud-based, [removed: software-as-a-service (“SaaS”)] [added: SaaS] solutions that integrate with our sensors and TASER devices to benefit customers and drive annual recurring revenue, which totaled [removed: $473 million(a)] [added: $697 million[1](#footnote-2)] as of December 31, [removed: 2022.] [added: 2023.] We have many SaaS solutions, which can best be trisected into three categories: digital evidence management, productivity and real-time operations solutions. Axon Evidence is the world’s largest cloud-hosted public safety data repository of public safety video data and other types of digital evidence. Our productivity suite, which includes Axon Records, is designed to save officers time spent writing reports and doing paperwork. [removed: And our] [added: Our] real-time operations capabilities, which include Axon Respond, integrates location data, signal alerts and video feeds to provide a complete picture of evolving situations. |

[removed: | | (a) | _Monthly] [added: 1 _Calculated as monthly] recurring license, integration, warranty, and storage revenue for the year ended December 31, [removed: 2022._ |][added: 2023.]

We think of our core customers as falling into roughly four categories of funding sources: U.S. state and local governments, the U.S. federal government, international government [removed: customers,] [added: customers] and commercial enterprises.

Additionally, the types of customers who find value in our product offerings are expanding beyond law enforcement to include attorneys, [added: corrections,] fire and [removed: EMS personnel, corrections] [added: emergency medical services personnel] and the U.S. military.

No customer represented more than 10% of total net sales for the years ended December 31, [removed: 2022, 2021] [added: 2023, 2022] or [removed: 2020.][added: 2021.]

In recent years, we have been investing in sales personnel to capture these new markets, and [removed: in 2023,] we [removed: will] [added: continue to] focus on strategic headcount additions to support key new markets and [removed: newer] [added: new] products.

Governmental agencies generally have the ability to terminate our contracts, in whole or in part, for reasons [removed: including, but not limited to,] [added: including] non-appropriation of funds.

We perform light manufacturing, final [removed: assembly,] [added: assembly] and final test operations at our [removed: headquarters] [added: facilities] in Scottsdale, Arizona, and own substantially all of the equipment required to develop, prototype, manufacture and assemble our finished products.

We continue to take steps to diversify our supply chain and global manufacturing footprint, which [removed: positioned] [added: positions] us well [removed: managing through the recent] [added: to manage] supply chain [removed: challenges.][added: disruptions.]

We continue to adjust strategic inventory levels [added: in both raw and finished goods] based on areas of risk to mitigate potential supply disruptions.

In light of our broad domestic and international [removed: geographic] supplier base, we are continuously monitoring our supply chain to manage through potential impacts, identifying alternate shipping [removed: /] [added: and] logistic sources, and working with foreign regulators to ensure that our suppliers can provide parts.

[removed: We obtain many of our components from single source suppliers; however,] [added: However,] because we own [added: substantially all of] the injection molded component tooling used in their production, we believe we could obtain alternative suppliers in most cases [removed: without incurring significant production delays.][added: with varying levels of interruption.]

As of December 31, [removed: 2022,] [added: 2023,] we hold [removed: 274] [added: over 300] U.S. patents, [removed: 109] [added: over 125] U.S. registered trademarks, [removed: 165] [added: over 240] international [removed: patents,] [added: patents] and [removed: 415] [added: over 450] international registered trademarks, [removed: and also have] [added: as well as] numerous patent and trademark applications pending.

We continuously assess whether and where to seek formal protection for particular innovations and technologies based on such factors as the commercial significance [removed: of] [added: to] our operations and our competitors’ operations in particular countries and regions, our strategic technology or product directions in different countries, and the degree to which intellectual property laws exist and are meaningfully enforced in different jurisdictions.

We have the exclusive rights to many Internet domain names, primarily including [removed: “Axon.com”, “Evidence.com”,] [added: “Axon.com,” “Evidence.com”] and “TASER.com.” We also vigorously protect our intellectual property, including [removed: trademarks, patents] [added: patents, trademarks] and trade secrets against third-party infringement.

_Sensors — Connected Cameras and Digital Evidence Management Software:_ The body-worn camera and in-car video/automatic license plate readers [removed: market] [added: industry] is highly competitive.

Our competition includes [added: FileOnQ, FotoWare, Genetec Inc., IBM, i-PRO,] Motorola Solutions, [removed: Panasonic Corp., IBM, Oracle, FotoWare, Vidizmo, LLC,] NICE, [removed: QueTel Corporation,] OpenText Corporation, [added: Oracle, QueTel Corporation, Revir Technologies, Utility Associates] and [removed: FileOnQ] [added: Vidizmo, LLC,] among others.

Key competitive factors in this [removed: market] [added: product category] include product performance, product features (including live-streaming, GPS [removed: tracking,] [added: tracking] and pre-event buffering), battery life, product quality and warranty, total cost of ownership, data security, data and information workflows, company reputation and financial strength, and [removed: relationships with customers.][added: customer satisfaction and relationships.]

_Productivity and Real-Time Operations [added: Software] — Records Management System [removed: (RMS)] [added: (“RMS”)] and Computer Aided Dispatch [removed: (CAD):_] [added: (“CAD”):_] The RMS and CAD [removed: markets] [added: verticals] are highly competitive and highly fragmented.

We have identified more than 50 software providers, including [removed: Motorola Solutions, Tyler Technologies,] [added: 365Labs, Beacon Software Solutions Inc., Caliber Public Safety (parent, Harris Computer Systems),] Central Square Technologies (formerly Superion, TriTech and Aptean), [removed: Northrop Grumman,] [added: CivicEye, Core Technology Corporation, CSI Technology Group, EForce Software, Executive Information Services Inc.,] Hexagon AB, [added: Kologik, LawSoft Inc., Mark43 Inc, Motorola Solutions,] Niche Technology Inc., [removed: Caliber Public Safety (parent, Harris Computer Systems),] Saab, [added: SmartCop,] SOMA Global, [removed: RapidDeploy Inc.,] Sopra Steria, [removed: Mark43 Inc,] [added: Southern Software, Sun Ridge Systems Inc.] and [removed: CSI Technology Group.][added: Tyler Technologies.]

Our [added: Axon] Respond offering competes both with real-time operations platforms that ingest body camera video feeds, like [added: Genetec's Citigraf,] Motorola’s CommandCentral [removed: Aware, Hitachi's Visualization Suite] [added: Aware] and [removed: Genetec's Citigraf] [added: Utility Associates’ Titan,] as well as platforms that ingest video feeds exclusively from surveillance cameras, like [removed: Rave Mobile Safety,] [added: Hexagon's Connect,] Live Earth and [removed: Mutualink] [added: Spatialitics's GeoShield] among others.

_TASER for Professional [removed: User Markets:_] [added: Users:_] Our CEDs compete with a variety of less-lethal alternatives to firearms, including rubber bullets or rubber baton rounds, such as those made by Combined [removed: Systems;] [added: Systems, Inc.;] pepper spray, pepper spray projectiles, such as those made by Byrna Technologies Inc. (dba Fox Labs), SABRE [removed: Corporation,] [added: Corporation] and Mace Security International, Inc.; traditional stun guns, such as those made by UZI and Jolt; hand-held remote restraint devices involving a tether, such as the one made by Wrap Technologies Inc.; laser dazzlers that cause temporary blindness, such as the one made by B.E. Meyers & Co., Inc.; stun grenades, such as those made by Combined Systems, Inc.; long-range acoustic devices, such as the one made by Genasys Inc.; [added: and] police batons and night sticks, such as those made by Monadnock and by Armament Systems and Procedures, Inc. TASER devices offer advanced technology, versatility, portability, effectiveness, built-in accountability [removed: systems,] [added: systems] and low injury rates, which enable us to compete effectively against other less-lethal alternatives.

The [removed: primary] [added: key] competitive factors in this [removed: market] [added: product category] include a device’s accuracy, effectiveness, reputation, safety, cost, ease of use, and exceptional customer experience.

The design maturity of the TASER platform, as well as our development and sale of a [removed: two-shot] [added: multi-shot] device, are also key competitive differentiators.

We are aware of competitors providing competing CED products primarily [removed: in international markets.][added: outside of the United States.]

[removed: Virtual Reality (“VR”)] [added: _VR] De-Escalation Training for Law Enforcement, Corrections and Private [removed: Security Markets:] [added: Security:_] Our VR Training platform competes with several other companies in the space who offer simulation scenarios, including simulated training on the use of both lethal and less-lethal alternatives.

We aim to invent and deliver public safety products that progressively make the right things easier and the wrong things harder every day.

Annual recurring revenue is a performance indicator that management believes provides more visibility into the growth of our revenue generated by our highest margin, recurring services.

Annual recurring revenue should be viewed independently of revenue and deferred revenue because it is an operating measure and is not intended to be combined with or to replace GAAP revenue or deferred revenue, as they can be impacted by contract start and end dates and renewal rates.

Annual recurring revenue is not intended to be a replacement or forecast of revenue or deferred revenue._

Material availability has mostly stabilized from prior supply chain challenges while general levels of risk continue to exist in all businesses that manufacture products.

Supplier decommitments remain a top area of risk.

Even as we continue to expand our second sourcing of materials across our supply chain, we still obtain some unique components from single source suppliers.

In addition, we also have programs to hold additional raw materials (such as resins and critical semiconductors) to mitigate supply and better manage costs.

Our competition includes Axis Communications AB, Digital Ally Inc., Getac Technology Corporation, Halo Body Cameras, i-PRO, LensLock Inc., Motorola Solutions, Reveal Media, Safe Fleet, Utility Associates, Versaterm Inc., Wolfcom Enterprises, Wrap Technologies Inc. and Zepcam B.V., Applied Concepts Inc., Genetec Inc. and Insight LPR.

*​*

_Axon Air:_ Our end-to-end drone management software platform competes with a select set of companies in the space who offer drone programs and flight management software solutions.

Our competition in this space includes Aerodome Inc., Auterion Ltd., Motorola Solutions’ CAPE, Paladin Drones’ Watchtower and Votix, LLC, among a few others.

Key competitive factors in this product category include integration and compatibility with various drone hardware providers and other technology systems used by first responders (e.g., digital evidence management), drone program management and real-time situational awareness capabilities, intuitiveness of the user interface, the level of training and customer support provided (particularly for the drone-as-first-responder use case), the customization and flexibility allowed by the platform to meet specific operational needs and requirements of different customers (e.g., customizable flight restrictions) and the autonomy capabilities provided by the platform (e.g., creation of autonomous missions).

Our indoor tactical drone hardware platform, Sky-Hero, competes with a few other companies in the space, including Brinc, Indoor Robotics and XTEND.

Key competitive factors in this product category include variety and weight limits of compatible payloads, battery life and associated flight range, maneuverability and size, autonomy and onboard intelligence (including ability to navigate in GPS denied environments), sensor and imaging technology, durability and robustness of the drone, cost and maintenance required, reliability and security of communication and control systems, the simplicity of the drone piloting user interface and the training required to operate the drones.

_Radio Spectrum and Unmanned Aerial and Ground-Based Robotic Devices_

If current products do not comply with the regulations set forth by these regulatory bodies, we may be unable to sell our products or could incur penalties.

Our results could be negatively affected by the rules and regulations adopted from time to time by the U.S. Federal Communications Commission (“FCC”), Innovation, Science and Economic Development Canada (“ISED”), the European Union Directorate-General for Environment or regulatory bodies in other countries.

Regulatory changes in current spectrum bands may also require modifications to some of our products so they can continue to be manufactured and marketed.

Compliance with government regulations could increase our operations and product costs and impact our future financial results.

Additionally, some of our products depend on drones or other unmanned aerial and ground-based systems that operate on the radio spectrum.

The FCC, the Federal Aviation Administration and other agencies at the federal, state and local levels (as well as in foreign jurisdictions) are beginning to address some of the numerous certification, regulatory and legal challenges associated with drones, but a comprehensive set of standards and enforcement procedures has yet to be developed.

Changes to the regulation of drones or other unmanned aerial systems may impact our future financial results.

See “Item 1A.

Risk Factors – Legal and Compliance Risks - A variety of new and existing laws and/or interpretations could materially and adversely affect our business.”

_Federal regulation of sales in the United States:_ The majority of our currently offered CEDs are not classified as firearms regulated by the ATF.

However, the ATF regulates TASER 10 as a firearm under the Gun Control Act of 1968 (“GCA”) due to a technological advancement specific to the propulsion design of TASER 10 cartridges.

In the event we make TASER 10 available to our private citizen and enterprise customers, demand could be substantially reduced as a result of this classification because non-governmental end-users would be required to comply with

federal, state or local firearm transfer requirements prior to purchasing TASER 10.

In addition, the implications of such classification on use-of-force standards and regulations could impact our ability to sell TASER 10 to law enforcement and government entities.

Further, we are required to administer, track and remit firearm excise taxes as applicable.

Consequently, we must obtain export licenses from the DOC for any deemed export within the United States made to a foreign national employee exposed to the controlled technology.

Other jurisdictions may ban or restrict the sale of our TASER-branded devices, or restrict their use through changes to use-of-force laws or regulations, and our product sales may be significantly affected by additional state, county and city governmental regulation.

The change in TASER 10’s propulsion design may impact how TASER 10 is regulated at the state and/or local level depending on each state’s firearm laws.

Export of these components from abroad is subject to shifting regulatory landscapes imposed by both the foreign government and U.S. authorities upon import.

Abrupt changes to these regulations can result in delays or interruptions to final product supplies.

Additionally, ATF regulation of certain imports of TASER 10 components may limit Axon’s supply chain agility.

Any failure to comply with these requirements could limit our ability to sell, support or develop our products and services both internationally and in the United States.

We are subject to various U.S. and foreign laws and regulations associated with the collection, processing, storage and transmission of personally identifiable information and other sensitive and confidential information.

This data is wide ranging and relates to our employees, customers and other third parties, including the subjects of law enforcement.

Axon Enterprise, Inc. may be referred to as “the Company,” “Axon,” “we,” or “our.”

Axon products are generally cloud-connected, designed to drive better outcomes and customer experiences, and sold via mutually reinforcing integrated bundles.

| --- | --- | --- |

Our other key in-person facilities include Seattle, London and Ho Chi Minh City.

| | | adopted by a majority of U.S. state and local police departments and are used daily to help keep communities safe. Global adoption of TASER devices remains early and we are expanding into new geographies. Axon VR solutions make public safety training more accessible, relevant and affordable — with the goal of using new immersive VR technologies to better prepare officers for real-life situations in the field. |

Our largest customer segment is U.S. state and local law enforcement.

Axon has a customer relationship with over 95% of state and local law enforcement agencies in the United States.

The remaining agencies are served via our telesales team, as well as distributors.

Thus far, we have been able to produce and ship our critical core products.

As we enter 2023, material availability is improving but still poses real risks to all businesses that manufacture products.

Supplier decommitments remain our largest area of risk as we continue to experience this in several areas.

Our competition includes Motorola Solutions, Utility Associates, Getac Technology Corporation, Panasonic Corp., Reveal Media, Safe Fleet, Digital Ally Inc., Visual Labs Inc., Intrensic, LLC, as well as Safety Vision, LLC, Rekor Systems Inc., and Genetec Inc.

The broader market for personal safety and home defense is far-reaching, and

_Radio Spectrum Devices_

In the U.S., the Federal Communications Commission (“FCC”) regulates spectrum use by non-federal entities and federal entities.

Similarly, countries around the world have one or more regulatory bodies that define and implement the rules for use of radio spectrum and electromagnetic interference, pursuant to their respective national laws.

The FCC regulates not only the "intentional radiation" of radio transmitters, but also the "unintentional radiation" of noise from all sorts of electrical equipment.

Current Axon products use Bluetooth, WiFi and/or Long-Term Evolution (“LTE”) radio technologies.

With the integration of LTE technologies, we must also apply for the approval of private certifications such as Cellular Telecommunications and Internet Association certification, required

by FirstNet and other operators.

_Federal regulation of sales in the U.S.:_ All current CED models, with the exception of TASER 10, which launched in January 2023, are not firearms regulated by the ATF, and our consumer products are regulated by the U.S. Consumer Product Safety Commission.

The TASER 10 is regulated by the ATF under the Gun Control Act of 1968 and is subject to applicable state and local firearms regulations that are jurisdiction-specific.

Additionally, if we fail to comply with ATF rules and regulations, the ATF may limit our TASER 10 activities or growth, fine us, or ultimately, suspend our ability to produce and sell the TASER 10 product line.

There are currently no federal laws restricting sales of our other currently offered CED products in the U.S.

Axon devices using lithium batteries are subject to U.S.-DOT/UN 38.3 for transportation.

As of December 31, 2022, Rhode Island is the only state that prohibits the possession of our TASER-branded devices that are not regulated by the ATF.

However, that prohibition was struck down as unconstitutional by a federal court, and new legislation is expected.

Additionally, some cities and municipalities also prohibit private citizen possession or use of our CED products.

However, with the launch of TASER 10 in January 2023, we may need to comply with additional state and local requirements governing the sale of firearms if that device is sold to non-law enforcement customers.

Additionally, certain TASER 10 components are regulated for import into the U.S. by the ATF and are subject to ATF import permits which limits Axon’s ability to source from some suppliers leading to a potential decrease in supply chain agility.

These laws and regulations often create private rights of action, impose new potential monetary penalties for noncompliance, and may require us to adopt additional contractual obligations as well as restrict our ability to store or process data.

We continue to monitor and assess for compliance as the regulatory environment evolves both within the United States and in relevant international markets.

Laws and regulations often involve matters central to our business, including:

| | ● | Privacy laws, such as the European General Data Protection Regulation, California’s Consumer Privacy Act and Privacy Rights Act, Illinois’ Biometric Information Privacy Act, Virginia’s Consumer Data Protection Act, the Colorado Privacy Act and other laws. |

| | ● | Data protection laws passed by many states within the U.S. regarding notification to data subjects or regulators where there is a security breach of personal data. |

| | ● | Data localization or data sovereignty laws requiring that certain data types collected in a particular country be stored or processed within that country. |

Dynamic, and sometimes inconsistent, interpretations of what constitutes “personal information” enhance the complexity of complying with these regulations across jurisdictions.

More than 90% of employees reported feeling proud to work at Axon during 2022’s employee engagement survey.

We believe that our ability to retain our workforce is dependent

See discussion of litigation in Note [removed: 13] [added: 12] to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, which discussion is incorporated by reference herein.

For the fiscal year ended December [removed: 31, 2022][added: 31, 2023]

As of June 30, [removed: 2022,] [added: 2023,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $6.3] [added: $14.3] billion based on the closing sale price as reported on The NASDAQ Global Select Market.

The number of shares of the registrant’s common stock outstanding as of February [removed: 24, 2023] [added: 23, 2024] was [removed: 72,862,227][added: 75,302,832]

Parts of the registrant’s definitive proxy statement for its [removed: 2023 annual meeting] [added: 2024 Annual Meeting] of [removed: stockholders] [added: Shareholders] to be prepared and filed with the Securities and Exchange Commission not later than 120 days after December 31, [removed: 2022] [added: 2023] are incorporated by reference into Part III of this Form 10-K.

FOR THE YEAR ENDED DECEMBER 31, [removed: 2022][added: 2023]

| [Item 1A.](#Item1ARiskFactors_991490) | [Risk Factors](#Item1ARiskFactors_991490) | ​ | [removed: 14] [added: 15] |

| [Item 1B.](#Item1BUnresolvedStaffComments_129436) | [Unresolved Staff Comments](#Item1BUnresolvedStaffComments_129436) | ​ | [removed: 33] [added: 39] |

| [Item 2.](#Item2Properties_797324) | [Properties](#Item2Properties_797324) | ​ | [removed: 33] [added: 43] |

| [Item 3.](#Item3LegalProceedings_457143) | [Legal Proceedings](#Item3LegalProceedings_457143) | ​ | [removed: 34] [added: 43] |

| [Item 4.](#Item4MineSafetyDisclosures_619104) | [Mine Safety Disclosures](#Item4MineSafetyDisclosures_619104) | ​ | [removed: 34] [added: 43] |

| [Item [removed: 5.](#Item5MarketforRegistrantsCommonEquityRel)] [added: 5.](#Item_5_Markets)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#Item5MarketforRegistrantsCommonEquityRel)] [added: Securities](#Item_5_Markets)] | ​ | [removed: 35] [added: 43] |

| [Item [removed: 6.](#Item6SelectedFinancialData_44868)] [added: 6.](#Item_6_Reserved)] | [removed: \[Reserved\]] [added: [\[Reserved\]](#Item_6_Reserved)] | ​ | [removed: 36] [added: 44] |

| [Item 7.](#Item7ManagementsDiscussionandAnalysisofF) | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#Item7ManagementsDiscussionandAnalysisofF) | ​ | [removed: 37] [added: 45] |

| [Item 7A.](#Item7AQuantitativeandQualitativeDisclosu) | [Quantitative and Qualitative Disclosures About Market Risk](#Item7AQuantitativeandQualitativeDisclosu) | ​ | [removed: 53] [added: 61] |

| [Item 8.](#Item8FinancialStatementsandSupplementary) | [Financial Statements and Supplementary Data](#Item8FinancialStatementsandSupplementary) | ​ | [removed: 55] [added: 62] |

| [Item 9.](#Item9ChangesinandDisagreementsWithAccoun) | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](#Item9ChangesinandDisagreementsWithAccoun) | ​ | [removed: 102] [added: 104] |

| [Item 9A.](#Item9AControlsandProcedures_674546) | [Controls and Procedures](#Item9AControlsandProcedures_674546) | ​ | [removed: 102] [added: 104] |

| [Item 9B.](#Item9BOtherInformation_873177) | [Other Information](#Item9BOtherInformation_873177) | ​ | [removed: 106] [added: 107] |

| [Item 9C.](#Item9cDisclosureRegardingForeignJurisdic) | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspection](#Item9cDisclosureRegardingForeignJurisdic) | ​ | [removed: 106] [added: 107] |

| [Item 10.](#Item10DirectorsExecutiveOfficersandCorpo) | [Directors, Executive Officers and Corporate Governance](#Item10DirectorsExecutiveOfficersandCorpo) | ​ | [removed: 106] [added: 107] |

| [Item 11.](#Item11ExecutiveCompensation_353609) | [Executive Compensation](#Item11ExecutiveCompensation_353609) | ​ | [removed: 106] [added: 107] |

| [Item 12.](#Item12SecurityOwnershipofCertainBenefici) | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#Item12SecurityOwnershipofCertainBenefici) | ​ | [removed: 106] [added: 107] |

| [Item 13.](#Item13CertainRelationshipsandRelatedTran) | [Certain Relationships and Related Transactions, and Director Independence](#Item13CertainRelationshipsandRelatedTran) | ​ | [removed: 107] [added: 108] |

| [Item 14.](#Item14PrincipalAccountingFeesandServices) | [Principal Accountant Fees and Services](#Item14PrincipalAccountingFeesandServices) | ​ | [removed: 107] [added: 108] |

| [Item 15.](#Item15ExhibitsFinancialStatementSchedule) | [Exhibits, Financial Statement Schedules](#Item15ExhibitsFinancialStatementSchedule) | ​ | [removed: 107] [added: 108] |

| [Item 16.](#Item16Form10KSummary_628319) | [Form 10-K Summary](#Item16Form10KSummary_628319) | ​ | [removed: 109] [added: 110] |

Statements contained in this [removed: report] [added: Annual Report on Form 10-K] that are not historical are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations, beliefs, intentions and strategies regarding the future.

This report lists various important factors that could cause actual results to differ materially from [removed: expected and] historical [added: and expected] results.

These factors are intended as cautionary statements for investors within the meaning of Section [removed: 21E] [added: 27A] of the [removed: Exchange] [added: Securities] Act and Section [removed: 27A] [added: 21E] of the [removed: Securities] [added: Exchange] Act.

You are advised, however, to consult any further disclosures we make on related subjects in our Form [removed: 10-Q, 8-K] [added: 8-K, 10-Q] and 10-K reports to the Securities and Exchange Commission [removed: ("SEC").][added: (“SEC”).]

The following should be read in conjunction with the more complete discussion of the [removed: risk factors] [added: risks] we face, which are set forth more fully in “Part I.

| | ● | If law enforcement agencies do not continue to purchase and use our products and services, our growth prospects, operating results and financial [removed: conditions] [added: condition] will be [added: materially] adversely affected. |

| | ● | If our TASER conducted energy devices (“CEDs”) do not continue to be widely accepted, our growth [removed: prospects] [added: prospects, operating results and financial condition] will be diminished. |

| | ● | Acquisitions of, or investments in, other [removed: companies,] products, [removed: or] technologies [added: or businesses] could disrupt our business, dilute [removed: stockholder] [added: shareholder] value, and adversely affect our operating results. |

| | ● | Our failure to retain executive officers, [removed: specifically] [added: including] Patrick W. Smith, could adversely impact our business. |

| | ● | Catastrophic events could materially adversely affect our [removed: business] [added: business, results of operations] and/or financial condition. |

| | ● | If our security measures or those of our third-party [added: providers, including] cloud storage [removed: providers] [added: providers,] are breached and unauthorized access is obtained to customers’ data or our data, our network, [added: data centers and service may be perceived as not being secure,] customers may curtail or stop using our [removed: service] [added: products] and [added: services, and] we may incur significant legal and financial exposure and liabilities. |

| | ● | Our international operations expose us to additional risks that could [removed: adversely affect] [added: harm] our [removed: business.] [added: business, operating results and financial condition.] |

| | ● | If we fail to comply with federal, state or local regulations applicable to TASER [removed: 10] [added: 10,] we may be subject to governmental actions or litigation [removed: which] [added: that] could [removed: adversely affect] [added: materially harm] our business. |

| | ● | An increasing percentage of our revenue is derived from subscription billing arrangements [removed: which] [added: that] may result in delayed cash collections and may increase customer credit risk on receivables and contract assets. |

| [Item 1C.](#Item_1C_Cybersecurity) | [Cybersecurity](#Item_1C_Cybersecurity) | ​ | 40 |

| ​ | [PART II](#Part_II) | ​ | ​ |

| | ● | Negative publicity could adversely impact sales, which could cause our revenues or operating results to decline. |

| | ● | Uncertainty in the development, deployment and use of artificial intelligence (“AI”) in our products and services, as well as our business more broadly, could adversely affect our business and reputation. |

| | ● | Our gross margin is dependent on a number of factors, including our product mix, cost structure and acquisitions we may make, any of which could cause our gross margin to decline. |

| | ● | The open bidding process creates uncertainty in predicting future contract awards. |

| | ● | Our profitability could suffer from declines in fair value or impairment of our investments, including our strategic investments, and could fluctuate if the fair values of our investments increase. |

| | ● | We may be unable to enforce patent rights internationally, which may limit our ability to prevent our product features from being used by competitors in some foreign jurisdictions. |

| | ● | The use of open source software in our products, services and technologies may expose us to additional risks and harm our intellectual property. |

| | ● | Our amended and restated bylaws include exclusive forum provisions that could increase costs to bring a claim, discourage claims or limit the ability of our shareholders to bring a claim in a judicial forum viewed by shareholders as more favorable for disputes. |

| ​ | ​ | ​ |

| --- | --- | --- |

| ​ | ​ | ​ | ​ |

| ​ | [PART II](#PARTII_824184) | ​ | ​ |

| | ● | We may experience a decline in gross margins due to a shift in product sales to software and sensors products and services which may continue to carry a lower gross margin than that of TASER devices. |

| | ● | We may be limited in our ability to enforce patent rights internationally to only those jurisdictions in which our patent applications have been granted. |

| | o | Our business could be adversely affected by rules and regulations governing our radio spectrum devices. |

| | o | Changes in statutes, regulations, and interpretation outside of our control may result in our products being classified or reclassified as firearms and could substantially reduce our private citizen market. |

| | o | Failure to comply with U.S. federal regulations could disrupt our operations. |

| | o | Our inability to obtain export licenses or classifications on a timely basis for sales of our products to our international customers could adversely affect our international sales. |

| | o | Inability to comply with federal regulation of foreign national employees could curtail the company’s ability to execute research and development and production related to CED technology. |

| | o | Our product sales may be adversely affected by state and local governmental regulation of our TASER-branded devices. |

| | o | Certain jurisdictions prohibit, restrict, or require a permit for importation, sale, possession or use of CEDs, including in some countries by law enforcement agencies, limiting our international sales opportunities. |

| | o | Abrupt changes to domestic and international regulation of imports and exports of components in our supply chain can result in delays or interruptions to final product supplies. |

| | o | Any failure to properly maintain or license our foreign operations could limit our ability to sell, support, or develop our products and services both internationally and in the U.S. market. |

| | o | We may be adversely impacted by environmental or climate change disclosure litigation and new, or changes in, environmental safety laws, regulations or rules. |

| | o | Our inability to adequately address privacy concerns, or comply with applicable laws, regulations, policies, industry standards and guidance, contractual obligations, or other legal obligations, could result in significant regulatory and third party liability, increased costs and may adversely affect our business. |

Our business is highly dependent on our information systems, including our ability to operate them effectively and to successfully implement new technologies, methods and processes, as well as adequate controls and cybersecurity incident recovery plans.

We rely on our information systems to manage our business, data, communications, supply chain, ordering, pricing, billing, inventory replenishment, accounting functions and other processes.

In addition, we must protect the confidentiality and integrity of the data of our business, employees, customers and other third parties.

Our business involves the collection, processing, storage and transmission of personally identifiable information and other sensitive and confidential information.

This data is wide ranging and relates to our employees, customers and third parties, including the subjects of law enforcement.

Our compliance obligations include those prescribed under the laws and regulations that dictate whether, how and under what circumstances we can receive, process, hold and/or transfer certain data that is critical to our operations, including data shared between countries or regions in which we operate and data shared among our products and services.

As part of our company-wide culture of security, we maintain a formal cybersecurity and information security program that is aligned with the standards set forth by the International Organization for Standardization (“ISO”), the American Institute of Certified Public Accountants in Systems and Organization Controls 2, the Criminal Justice Information Services, the Federal Risk and Authorization Management Program and the National Institute of Standards and Technology.

The Company’s Information Security Team maintains the program, which is designed to ensure proper monitoring, prevention, detection, mitigation and remediation of cybersecurity vulnerabilities, including the prompt investigation and management of all reported or discovered security events, including cybersecurity threats and incidents, in the ordinary course of the business of the Company.

Our cybersecurity and information security program is designed to comply with key global financial regulations and cybersecurity laws in the jurisdictions in which we operate.

The program includes taking several proactive steps to prepare for attempts to compromise our information systems.

To provide for the availability of critical data and systems, maintain regulatory compliance, manage our material cybersecurity risks, and protect against, detect and respond to cybersecurity threats and incidents, we undertake the below listed activities:

| | ● | closely monitor emerging data protection laws and implement changes to our processes designed to comply; |

| --- | --- | --- |

| | ● | undertake regular reviews (at least annually) of our consumer facing and internal policies and statements related to cybersecurity; |

| --- | --- | --- |

| | ● | proactively inform our customers of substantive changes related to customer data handling; |

| --- | --- | --- |

| | ● | conduct annual information security training for all our employees; |

| --- | --- | --- |

| | ● | recruit and retain highly skilled cybersecurity professionals, and provide regular training and development opportunities for our cybersecurity and information security employees; |

| --- | --- | --- |

| | ● | conduct regular phishing email simulations for all employees and all contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; |

| --- | --- | --- |

| | ● | through policy, practice and contract (as applicable), require employees, as well as third parties who provide services on our behalf, to treat customer information and data with care; |

| --- | --- | --- |

| | ● | perform due diligence on third-party vendors and, based on our risk assessment, put in place contractual undertakings and oversight to manage and reduce the risks associated with third-party vendors; |

| --- | --- | --- |

| | ● | run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our technologies, methods and processes; |

| --- | --- | --- |

| | ● | conduct regular risk assessments of our information systems to identify weaknesses, and develop and implement mitigations to improve our cybersecurity and information security program; |

| --- | --- | --- |

| | ● | conduct regular security assessments, vulnerability scans, and penetration tests (including by third-party assessment firms) of products systems and internal systems to discover vulnerabilities and apply appropriate mitigations within standardized timelines; |

| --- | --- | --- |

| | ● | maintain, implement, evaluate and update our cybersecurity technologies to address threats and vulnerabilities; and |

| --- | --- | --- |

| | ● | carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident. |

| --- | --- | --- |

_Third Party Monitoring and External Reviews_

Axon utilizes the assistance of third-party technology and providers to support our objective of protecting our information, information systems and network.

Services provided by third parties to assess the performance of our cybersecurity risk management systems and procedures and to identify cybersecurity risks to the Company include assessing products and internal systems for vulnerabilities, incident response services such as computer forensics, internal and external audits for security certifications globally and overall security program maturity evaluations.

[removed: We also lease premises in] [added: As of December 31, 2023, we had more than 15 leased locations including] Phoenix and Scottsdale, Arizona; [removed: San Leandro, California;] East Point, Georgia; [removed: Topsfield, Massachusetts; Seattle and Spokane,] [added: Seattle,] Washington; Melbourne and Sydney, Australia; [removed: Toronto, Canada;] [added: Brussels, Belgium;] Daventry and London, England; Tampere, Finland; Frankfurt, Germany; Delhi, India; [removed: Rome, Italy;] Amsterdam, Netherlands; and Ho Chi Minh City, Vietnam.

As of December 31, [removed: 2022,] [added: 2023,] there were [removed: 212] [added: 209] holders of record of our common stock.

[removed: During the year ended December 31, 2022, no common] shares were purchased under the program.

As of December 31, [removed: 2022,] [added: 2023,] $16.3 million remained available under the plan for future purchases.

The graph covers the period from December 31, [removed: 2017] [added: 2018] to December 31, [removed: 2022.][added: 2023.]

The graph assumes that the value of the investment in our stock and in each index was $100 at December 31, [removed: 2017,] [added: 2018,] and that all dividends were reinvested.

[removed: ][added: ]

| ​ | | [removed: 2017 | | |] 2018 | | | 2019 | | | 2020 | | | 2021 | | | 2022 | | [added: | 2023 | |]

[removed: Note:] Index data copyright [removed: NASDAQ OMX, Inc.;] [added: NASDAQ;] Russell Investments; and Standard and Poor’s, Inc. Used with permission.

During the year ended December 31, 2023, no common

| Axon Enterprise, Inc. | ​ | $ | 100.00 | ​ | $ | 167.50 | ​ | $ | 280.07 | ​ | $ | 358.86 | ​ | $ | 379.22 | ​ | $ | 590.32 |

| NASDAQ Composite | ​ | ​ | 100.00 | ​ | ​ | 136.69 | ​ | ​ | 198.10 | ​ | ​ | 242.03 | ​ | ​ | 163.28 | ​ | ​ | 236.17 |

| Russell 2000 | ​ | ​ | 100.00 | ​ | ​ | 125.52 | ​ | ​ | 150.58 | ​ | ​ | 172.90 | ​ | ​ | 137.56 | ​ | ​ | 160.85 |

| Russell Midcap Index | ​ | ​ | 100.00 | ​ | ​ | 130.54 | ​ | ​ | 152.87 | ​ | ​ | 187.39 | ​ | ​ | 154.94 | ​ | ​ | 181.63 |

| S&P 500 | ​ | ​ | 100.00 | ​ | ​ | 131.49 | ​ | ​ | 155.68 | ​ | ​ | 200.37 | ​ | ​ | 164.08 | ​ | ​ | 207.21 |

We have historically included the Russell 2000 and Russell Midcap as a point of reference in our Comparative Stock Performance chart; however, we have made the decision to remove the Russell 2000 and Russell Midcap from this chart beginning with our Annual Report on Form 10-K for the year ended December 31, 2024.

​

| Axon Enterprise, Inc. | ​ | $ | 100.00 | ​ | $ | 165.09 | ​ | $ | 276.53 | ​ | $ | 462.38 | ​ | $ | 592.45 | ​ | $ | 626.08 |

| NASDAQ Composite | ​ | ​ | 100.00 | ​ | ​ | 97.16 | ​ | ​ | 132.81 | ​ | ​ | 192.47 | ​ | ​ | 235.15 | ​ | ​ | 158.65 |

| Russell 2000 | ​ | ​ | 100.00 | ​ | ​ | 88.99 | ​ | ​ | 111.70 | ​ | ​ | 134.00 | ​ | ​ | 153.85 | ​ | ​ | 122.41 |

| Russell Midcap Index | ​ | ​ | 100.00 | ​ | ​ | 90.94 | ​ | ​ | 118.72 | ​ | ​ | 139.02 | ​ | ​ | 170.42 | ​ | ​ | 140.91 |

| S&P 500 | ​ | ​ | 100.00 | ​ | ​ | 95.62 | ​ | ​ | 125.72 | ​ | ​ | 148.85 | ​ | ​ | 191.58 | ​ | ​ | 156.88 |

| [Consolidated Balance Sheets as of December 31, [removed: 2022] [added: 2023] and [removed: 2021](#CONSOLIDATEDBALANCESHEETS_305970)] [added: 2022](#CONSOLIDATEDBALANCESHEETS_305970)] | ​ | [removed: 56] [added: 63] |

| [Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, [added: 2023,] 2022, [removed: 2021] and [removed: 2020](#CONSOLIDATEDSTATEMENTSOFOPERATIONSANDCOM)] [added: 2021](#CONSOLIDATEDSTATEMENTSOFOPERATIONSANDCOM)] | ​ | [removed: 57] [added: 64] |

| [Consolidated Statements of Stockholders’ Equity for the years ended December 31, [added: 2023,] 2022, [removed: 2021] and [removed: 2020](#CONSOLIDATEDSTATEMENTSOFSTOCKHOLDERSEQUI)] [added: 2021](#CONSOLIDATEDSTATEMENTSOFSTOCKHOLDERSEQUI)] | ​ | [removed: 58] [added: 65] |

| [Consolidated Statements of Cash Flows for the years ended December 31, [added: 2023,] 2022, [removed: 2021] and [removed: 2020](#CONSOLIDATEDSTATEMENTSOFCASHFLOWS_558214)] [added: 2021](#CONSOLIDATEDSTATEMENTSOFCASHFLOWS_558214)] | ​ | [removed: 59] [added: 66] |

| [Notes to Consolidated Financial Statements](#a1OrganizationandSummaryofSignificantAcc) | ​ | [removed: 60] [added: 67] |

| [Report of Grant Thornton LLP, Independent Registered Public Accounting [removed: Firm](#REPORTOFINDEPENDENTREGISTEREDPUBLICACCOU)] [added: Firm] (PCAOB ID [removed: No.] [added: No.](#REPORTOFINDEPENDENTREGISTEREDPUBLICACCOU)] 248) | ​ | [removed: 100] [added: 102] |

| ​ | [removed: ​] | [added: 2023 | | |] 2022 | | ​ | 2021 | |

| Cash and cash equivalents | ​ | $ | [added: 598,545 | ​ | $ |] 353,684 | ​ | $ | 356,332 |

| Marketable securities | ​ | ​ | [removed: 39,240] [added: 77,940] | ​ | ​ | [removed: 72,180] [added: 39,240] |

| Short-term investments | ​ | | [removed: 581,769] [added: 644,054] | ​ | | [removed: 14,510] [added: 581,769] |

| Accounts and notes receivable, net of allowance of [removed: $2,176] [added: $2,392] and [removed: $2,203] [added: $2,176] as of December 31, [removed: 2022] [added: 2023] and December 31, [removed: 2021,] [added: 2022,] respectively | ​ | | [removed: 358,190] [added: 417,690] | ​ | | [removed: 320,819] [added: 358,190] |

| Contract assets, net | ​ | | [removed: 196,902] [added: 275,779] | ​ | | [removed: 180,421] [added: 196,902] |

| Inventory | ​ | | [removed: 202,471] [added: 269,855] | ​ | | [removed: 108,688] [added: 202,471] |

| Prepaid expenses and other current assets | ​ | | [removed: 73,022] [added: 112,786] | ​ | | [removed: 56,540] [added: 73,022] |

| Total current assets | ​ | | [removed: 1,805,278] [added: 2,396,649] | ​ | | [removed: 1,109,490] [added: 1,805,278] |

| Property and equipment, net | ​ | | [removed: 169,843] [added: 200,533] | ​ | | [removed: 138,457] [added: 169,843] |

| Deferred tax assets, net | ​ | | [removed: 156,866] [added: 229,513] | ​ | | [removed: 127,193] [added: 156,866] |

| Intangible assets, net | ​ | | [removed: 12,158] [added: 19,539] | ​ | | [removed: 15,470] [added: 12,158] |

| Goodwill | ​ | | [removed: 44,983] [added: 57,945] | ​ | | [removed: 43,592] [added: 44,983] |

| Long-term investments | ​ | | [removed: 156,207] [added: —] | ​ | | [removed: 31,232] [added: 156,207] |

| Long-term notes receivable, net | ​ | | [removed: 5,210] [added: 2,588] | ​ | | [removed: 11,256] [added: 5,210] |

| Long-term contract assets, net | ​ | ​ | [removed: 45,170] [added: 77,710] | ​ | ​ | [removed: 29,753] [added: 45,170] |

| Strategic investments | ​ | ​ | [removed: 296,563] [added: 231,730] | ​ | ​ | [removed: 83,520] [added: 296,563] |

| Other long-term assets | ​ | | [removed: 159,616] [added: 220,638] | ​ | | [removed: 98,247] [added: 159,616] |

| Total assets | ​ | $ | [removed: 2,851,894] [added: 3,436,845] | ​ | $ | [removed: 1,688,210] [added: 2,851,894] |

| LIABILITIES AND STOCKHOLDERS’ EQUITY | ​ | | [added: ​] | ​ | | |

| Accounts payable | ​ | $ | [removed: 59,918] [added: 88,326] | ​ | $ | [removed: 32,220] [added: 59,918] |

| Accrued liabilities | ​ | | [removed: 155,934] [added: 188,230] | ​ | | [removed: 103,707] [added: 155,934] |

| Current portion of deferred revenue | ​ | | [removed: 360,037] [added: 491,691] | ​ | | [removed: 265,591] [added: 360,037] |

| Customer deposits | ​ | | [removed: 20,399] [added: 21,935] | ​ | | [removed: 10,463] [added: 20,399] |

| Other current liabilities | ​ | | [removed: 6,358] [added: 9,787] | ​ | | [removed: 6,540] [added: 6,358] |

| Total current liabilities | ​ | | [removed: 602,646] [added: 799,969] | ​ | | [removed: 418,521] [added: 602,646] |

| Deferred revenue, net of current portion | ​ | | [removed: 248,003] [added: 281,852] | ​ | | [removed: 185,721] [added: 248,003] |

| Liability for unrecognized tax benefits | ​ | | [removed: 10,745] [added: 18,049] | ​ | | [removed: 3,797] [added: 10,745] |

| Long-term deferred compensation | ​ | | [removed: 6,285] [added: 11,342] | ​ | | [removed: 5,679] [added: 6,285] |

| Deferred tax liability, net | ​ | ​ | [removed: 1] [added: —] | ​ | ​ | [removed: 811] [added: 1] |

| Long-term lease liabilities | ​ | | [removed: 37,143] [added: 33,550] | ​ | | [removed: 20,440] [added: 37,143] |

| Convertible notes, net | ​ | ​ | [removed: 673,967] [added: 677,113] | ​ | ​ | [removed: \-] [added: 673,967] |

| Other long-term liabilities | ​ | | [removed: 4,613] [added: 2,936] | ​ | | [removed: 5,392] [added: 4,613] |

| Total liabilities | ​ | | [removed: 1,583,403] [added: 1,824,811] | ​ | | [removed: 640,361] [added: 1,583,403] |

| ​ | ​ | 2023 | | ​ | 2022 | |

| Interest income, net | ​ | ​ | 42,112 | ​ | ​ | 4,294 | ​ | ​ | 1,483 |

| Other income (loss), net | ​ | | (41,901) | ​ | | 98,971 | ​ | | 25,265 |

| Net income (loss) | ​ | $ | 174,227 | ​ | $ | 147,139 | ​ | $ | (60,018) |

| Issuance of common stock | | 467,594 | ​ | ​ | — | ​ | ​ | 94,705 | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | | 94,705 |

| Stock options exercised | ​ | 1,907,026 | ​ | ​ | — | ​ | ​ | 54,503 | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 54,503 |

| Net income | | — | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | 174,227 | ​ | ​ | — | ​ | | 174,227 |

| Balance, December 31, 2023 | | 75,301,424 | ​ | $ | 1 | ​ | $ | 1,347,410 | | 20,220,227 | ​ | $ | (155,947) | ​ | $ | 431,249 | ​ | $ | (10,679) | ​ | $ | 1,612,034 |

| Net income (loss) | ​ | $ | 174,227 | ​ | $ | 147,139 | ​ | $ | (60,018) |

| Other noncash items | ​ | ​ | 2,322 | ​ | ​ | 6,530 | ​ | ​ | 24 |

| Cash paid for interest | ​ | $ | 3,508 | ​ | $ | — | ​ | $ | — |

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.

Inventories are stated at lower of cost or realizable values.

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, 2023 and on an interim basis when certain events and circumstances exist.

During the year ended December 31, 2023, we recorded $0.3 million of impairment charges primarily related to construction in process.

Warranty Reserves

The company estimates and records a liability for standard warranty at the time products are sold.

The estimates are based on historical experience and reflect management’s 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 and service sales when the costs become probable and can be reasonably estimated

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.

quarters.

As of December 31, 2023, no unrecognized stock-based compensation expense remained under the 2019 XSPP.

As a result, 6.4 million stock options have vested.

As of December 31, 2023, no unrecognized stock-based compensation expense remained under the 2018 CEO Performance Award.

| Net income (loss) | ​ | $ | 174,227 | ​ | $ | 147,139 | ​ | $ | (60,018) |

| Basic | ​ | $ | 2.35 | ​ | $ | 2.07 | ​ | $ | (0.91) |

| Diluted | ​ | $ | 2.31 | ​ | $ | 2.03 | ​ | $ | (0.91) |

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.

ASU 2023-07 requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses.

The new standard is effective for our Annual Report on Form 10-K for the year ending December 31, 2024, and subsequent interim periods, with early adoption permitted.

We are currently evaluating the impact of this update on our consolidated financial statements.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

| --- | --- | --- |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| --- | --- | --- | --- | --- | --- | --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Interest and other income, net | ​ | | 103,265 | ​ | | 26,748 | ​ | | 7,859 |

​

| Balance, December 31, 2019 | | 59,497,759 | ​ | $ | 1 | ​ | $ | 528,272 | | 20,220,227 | ​ | $ | (155,947) | ​ | $ | 172,265 | ​ | $ | (1,096) | ​ | $ | 543,495 |

| Cumulative effect of applying a change in accounting principle | ​ | — | ​ | | — | ​ | | — | ​ | — | ​ | | — | ​ | ​ | (640) | ​ | ​ | — | ​ | ​ | (640) |

| Issuance of common stock | | 3,450,000 | ​ | ​ | — | ​ | ​ | 306,779 | ​ | — | ​ | | — | ​ | | — | ​ | | — | ​ | | 306,779 |

| Net loss | ​ | — | ​ | | — | ​ | | — | | — | ​ | | — | ​ | | (1,724) | ​ | | — | ​ | ​ | (1,724) |

| Loss on disposal and abandonment of intangible assets | ​ | | 110 | ​ | | 146 | ​ | | 320 |

| Loss on disposal and impairment of property, equipment, and other assets, net | ​ | | 5,452 | ​ | | 92 | ​ | | 1,722 |

| Exercise of warrants of strategic investments | ​ | ​ | (6,555) | ​ | ​ | — | ​ | ​ | — |

AXON ENTERPRISE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

| | ● | reserve for expected credit losses |

We do not intend to sell

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We use a standard cost methodology to approximate the cost basis for our inventories.

Costs include allocations for materials, labor, and overhead.

All variances between actual costs and standard costs are apportioned to inventory and cost of product sales based upon inventory turnover.

Land is not depreciated.

We have determined that technological feasibility is reached shortly before the release of those products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products are not material.

We perform our annual goodwill and intangible asset impairment tests in the fourth quarter of each year.

During the year ended December 31, 2020, we abandoned certain planning and site development activities related to our planned new headquarters, resulting in an impairment charge of $0.7 million, as well as recognized impairment charges totaling $0.5 million related to improvements and remodeling of certain of our offices.

During the year ended December 31, 2022, these charges were included in sales, general and administrative expense, except for $2.7 million related to the Seattle office lease cease-use, which was recorded in research and development (“R&D”), in the accompanying consolidated statements of operations.

We enter into contracts that can

Standard Warranties

Estimated costs for the standard warranty are charged to cost of products sold when revenue is recorded for the related product.

Future warranty costs are estimated on a quarterly basis based on historical data related to warranty claims and this rate is applied to current product sales.

Historically, reserve amounts have been increased if management becomes aware of a component failure or other issue that could result in larger than anticipated warranty claims from customers.

The warranty reserve is reviewed quarterly to verify that it sufficiently reflects the remaining warranty obligations based on the anticipated expenditures over the balance of the warranty obligation period, and adjustments are made when actual warranty claim experience differs from estimates.

The warranty reserve is included in accrued liabilities on the accompanying consolidated balance sheets.

We categorize each of our fair value measurements in

The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates.

other recurring cloud-hosted software revenue and related professional services.

A total of less than 0.1 million XSUs were granted during the year ended December 31, 2022.

The probability of meeting an operational goal and the expected achievement point in time for meeting a probable operational goal are based on a subjective assessment of our forward-looking financial projections, taking into consideration statistical analysis.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

This [removed: “Controls and Procedures”] section includes information concerning the controls and controls evaluation referred to in the certifications.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2022] [added: 2023] based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As a result of this assessment, management concluded that, as of December 31, [removed: 2022,] [added: 2023,] our internal control over financial reporting was [removed: not] effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with [removed: generally accepted accounting principles.][added: GAAP.]

[removed: During] [added: Management previously identified and disclosed in our Annual Report on Form 10-K for] the year ended December 31, 2022, [removed: we identified] [added: as well as in our Quarterly Reports on Form 10-Q for each interim period in fiscal 2023,] a material weakness in our internal control over financial reporting.

Specifically, during the [removed: year ended December 31,] [added: fourth quarter of] 2022, [removed: we] [added: management] identified a material weakness in our internal controls stemming from control deficiencies with respect to the risks of understatement of software and services revenue and overstatement of deferred revenue.

[removed: To remediate] [added: We have completed our plan of remediation for] the material weakness described above, [removed: we are designing] [added: which primarily consisted of the design] and [removed: implementing] [added: implementation of] new business processes and automation of integrations between our systems as well as [removed: enhancing] [added: enhanced] our reconciliation controls and monitoring procedures to properly ensure transactions are identified and recorded timely and accurately.

Except for the changes noted above, there have been no other changes in our internal control over financial reporting during the fiscal quarter ended December 31, [removed: 2022,] [added: 2023,] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We have audited the internal control over financial reporting of Axon Enterprise, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, [removed: 2022,] [added: 2023,] based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, [removed: because of] the [removed: effect of the material weakness described in the following paragraphs on the achievement of the objectives of the control criteria, the] Company [removed: has not maintained] [added: maintained, in all material respects,] effective internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] based on criteria established in the 2013 [removed: Internal] [added: _Internal] Control—Integrated [removed: Framework] [added: Framework_] issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, [removed: 2022.][added: 2023, and our report dated February 27, 2024 expressed an unqualified opinion on those financial statements.]

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that as of December 31, 2023 our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Remediation Plan of Prior Period Material Weakness

During the quarter ended December 31, 2023, management completed its evaluation and

testing of the operating effectiveness of the improved controls and deemed them to be designed and operating effectively.

As a result, management concluded that the previously disclosed material weakness has been remediated as of December 31, 2023.

February 27, 2024

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that as of December 31, 2022 our disclosure controls and procedures were not effective because of the material weakness in our internal control over financial reporting described below.

A material weakness is defined as 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 our financial statements will not be prevented or detected on a timely basis.

Additionally, there were limited instances of invoicing errors resulting from ineffective change management of the quote-to-cash systems implementation.

The manual business processes for tracking open software and services performance obligations and for monitoring billing events were not sufficiently robust to prevent the errors.

The related business processes and account reconciliation detective controls were not designed to operate with a sufficient degree of precision to identify these errors on a timely basis.

These deficiencies resulted in immaterial understatements of revenue that accumulated over time and were corrected in the fourth quarter of 2022 as disclosed in Note 1 of the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Remediation Plan

We are in the process of documenting, assessing and testing the necessary changes in our internal control over financial reporting as part of our efforts to comply with Section 404 of the Sarbanes-Oxley Act.

The material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We expect that the remediation of this material weakness will be completed prior to the end of fiscal year 2023.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

Management has identified a material weakness resulting from a failure to effectively manage the migration of triggering events for certain software and services performance obligations and invoicing errors during the quote-to-cash cycle.

The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does not affect our report dated February 28, 2023 which expressed an unqualified opinion on those financial statements.

February 28, 2023

During the fiscal quarter ended December 31, 2023, certain of our officers or directors have made, and may from time to time make, elections to have shares withheld or sold to cover withholding taxes or pay the exercise price of options, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K).

No other Rule 10b5-1 trading arrangements or “non-Rule 10b5-1 trading arrangements” (as defined by Item 408(c) of Regulation S-K) were entered into, modified or terminated by our directors or officers during such period.

None.

The information required to be disclosed by this item is incorporated herein by reference to our definitive proxy statement for the [removed: 2023] [added: 2024] Annual Meeting of [removed: Stockholders] [added: Shareholders] (the [removed: “2023] [added: “2024] Proxy Statement”), which [removed: proxy statement] we expect to file with the SEC within 120 days after the end of our fiscal year ended December 31, [removed: 2022.][added: 2023.]

The information required to be disclosed by this item is incorporated herein by reference to our [removed: 2023] [added: 2024] Proxy Statement.

A description of our equity compensation plans approved by our [removed: stockholders] [added: shareholders] is included in Note [removed: 16] [added: 15] to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The following table provides details of our equity compensation plans at December 31, [removed: 2022:][added: 2023:]

| Equity compensation plans approved by security holders | ​ | [removed: 5,096,956] [added: 2,469,260] | | $ | 28.58 | | [removed: 2,749,539] [added: 1,708,146] |

| Equity compensation plans not approved by security holders(2) | ​ | [removed: 275,095] [added: 70,694] | ​ | ​ | [removed: ​] [added: —] | | 112,505 |

| (1) | The weighted average exercise price is calculated based solely on the exercise prices of the outstanding [added: stock] options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs [removed: which] [added: that] have no exercise price. |

| (2) | In September 2022, our Board of Directors adopted the Axon Enterprise, Inc. 2022 Stock Inducement Plan (the “2022 Inducement Plan”) pursuant to which we reserved 250,000 shares of common stock for issuance under the [added: 2022] Inducement Plan. In September 2019, our Board of Directors adopted the Axon Enterprise, Inc. 2019 Stock Inducement Plan (the “2019 Inducement [removed: Plan”)] [added: Plan” and, together with the 2022 Inducement Plan, the “Inducement Plans”)] pursuant to which we reserved 500,000 shares of common stock for issuance under the [added: 2019] Inducement Plan. The [removed: 2022 and 2019] Inducement Plans were adopted without [removed: stockholder] [added: shareholder] approval pursuant to Rule 5635(c)(4) and Rule 5635(c)(3) of the Nasdaq Listing Rules. [removed: The] [added: Each] Inducement [removed: Plans] [added: Plan] provides for the grant of equity-based awards, including restricted [removed: stock units, restricted] stock, [removed: performance shares and performance units, and its terms are substantially similar to our stockholder-approved 2022 Plan and 2019 Plan, respectively. In accordance with Rule 5635(c)(4) and Rule 5635(c)(3) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be] |

| | [added: RSUs, performance shares and PSUs, and its terms are substantially similar to our shareholder-approved 2022 Plan and 2019 Plan, respectively. In accordance with Rule 5635(c)(4) and Rule 5635(c)(3) of the Nasdaq Listing Rules, awards under each Inducement Plan may only be] made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company. |

All other information required to be disclosed by this item is incorporated herein by reference to our [removed: 2023] [added: 2024] Proxy Statement.

| Total | ​ | 2,539,954 | | ​ | ​ | | 1,820,651 |

Equity Compensation Plan Information

| Total | ​ | 5,372,051 | | $ | — | | 2,862,044 |

The information required to be disclosed by this item is incorporated herein by reference to our [removed: 2023] [added: 2024] Proxy Statement.

The information required to be disclosed by this item is incorporated herein by reference to our [removed: 2023] [added: 2024] Proxy Statement.

| 3.2 | ​ | [Bylaws, as amended and restated (incorporated by reference to Exhibit 3.2 to the [removed: Quarterly] [added: Current] Report on Form [removed: 10-Q,] [added: 8-K,] filed [removed: August 9, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000106918322000036/axon-20220630xex3d2.htm)] [added: December 21, 2023)](https://www.sec.gov/Archives/edgar/data/1069183/000106918323000063/axon-20231220xex3d2.htm)] |

| [removed: 4.2] [added: 4.2*] | ​ | [Description of [removed: securities] [added: Securities] of Axon Enterprise, Inc. registered under Section 12 of the Exchange [removed: Act (incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K, filed February 28, 2020)](https://www.sec.gov/Archives/edgar/data/1069183/000155837021001873/axon-20201231xex4d2.htm)] [added: Act](https://www.sec.gov/Archives/edgar/data/1069183/000106918324000006/axon-20231231xex4d2.htm)] |

| 10.4+ | ​ | [removed: [2016] [added: [Axon Enterprise, Inc. 2018] Stock Incentive Plan (incorporated by reference to Annex B of [removed: 2016] [added: the Company’s] Proxy Statement, filed on April [removed: 15, 2016)](https://www.sec.gov/Archives/edgar/data/1069183/000106918316000167/a2016proxystatement.htm)] [added: 13, 2018)](https://www.sec.gov/Archives/edgar/data/1069183/000106918318000035/a2018defproxystatement.htm)] |

| [removed: 10.5+] [added: 10.6+] | ​ | [Axon Enterprise, Inc. [removed: 2018] [added: 2019] Stock Incentive Plan (incorporated by reference to Annex [removed: B] [added: A] of the Company’s Proxy Statement, filed on [removed: April 13, 2018)](https://www.sec.gov/Archives/edgar/data/1069183/000106918318000035/a2018defproxystatement.htm)] [added: December 31, 2018)](https://www.sec.gov/Archives/edgar/data/1069183/000106918318000143/a2018definitivespecialprox.htm)] |

| [removed: 10.6+] [added: 10.5+] | ​ | [CEO Performance Award (incorporated by reference to Annex A of the Company’s Proxy Statement, filed on April 13, 2018)](https://www.sec.gov/Archives/edgar/data/1069183/000106918318000035/a2018defproxystatement.htm) |

| 10.7+ | ​ | [Axon Enterprise, Inc. 2019 Stock Incentive Plan [added: Exponential Stock Unit Grant Notice] (incorporated by reference to Annex [removed: A] [added: B] of the Company’s Proxy Statement, filed on December 31, 2018)](https://www.sec.gov/Archives/edgar/data/1069183/000106918318000143/a2018definitivespecialprox.htm) |

| [removed: 10.8+] [added: 10.13+] | ​ | [Axon Enterprise, Inc. [removed: 2019] [added: 2022] Stock Incentive Plan [removed: Exponential Stock Unit Grant Notice] (incorporated by reference to Annex B of the Company’s Proxy Statement, filed [removed: on December 31, 2018)](https://www.sec.gov/Archives/edgar/data/1069183/000106918318000143/a2018definitivespecialprox.htm)] [added: April 8, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000155837022005230/tmb-20220520xdef14a.htm)] |

| [removed: 10.9+] [added: 10.8+] | ​ | [Executive Employment Agreement by and between Axon Enterprise, Inc. and [removed: Luke S. Larson] [added: Joshua M. Isner] (incorporated by reference to Exhibit [removed: 10.1] [added: 10.3] to the Current Report on Form 8-K, filed June 4, [removed: 2019)](https://www.sec.gov/Archives/edgar/data/1069183/000106918319000093/ex101.htm)] [added: 2019)](https://www.sec.gov/Archives/edgar/data/1069183/000106918319000093/ex103.htm)] |

| [removed: 10.10+] [added: 10.15+] | ​ | [Executive Employment Agreement by and between Axon Enterprise, Inc. and [removed: Joshua M. Isner] [added: Brittany Bagley] (incorporated by reference to Exhibit [removed: 10.3] [added: 10.1] to the [removed: Current] [added: Quarterly] Report on Form [removed: 8-K,] [added: 10-Q,] filed [removed: June 4, 2019)](https://www.sec.gov/Archives/edgar/data/1069183/000106918319000093/ex103.htm)] [added: November 9, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000106918322000055/axon-20220930xex10d1.htm)] |

| [removed: 10.11+] [added: 10.9+] | ​ | [Executive Employment Agreement by and between Axon Enterprise, Inc. and Jeffrey C. Kunins, dated September 23, 2019 (incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K, filed February 28, 2020)](https://www.sec.gov/Archives/edgar/data/1069183/000106918320000016/ex1016jeffkuninsemploy.htm) |

| [removed: 10.12+] [added: 10.10+] | ​ | [Axon Enterprise, Inc. 2019 Stock Inducement Plan (incorporated by reference to Exhibit 99.1 to the registration statement on Form S-8, filed September 23, 2019)](https://www.sec.gov/Archives/edgar/data/1069183/000106918319000123/a2019stockinducementplan.htm) |

| [removed: 10.13+] [added: 10.11+] | ​ | [Auction Statement from the Company to the Arizona State Land Department (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed November 6, 2020)](https://www.sec.gov/Archives/edgar/data/1069183/000106918320000075/aaxn-20200930ex1018fc955.htm) |

| [removed: 10.14±] [added: 10.12±] | ​ | [Construction Management Agreement, dated February 23, 2022, by and between Axon Enterprise, Inc. and Okland Construction Company, Inc. (incorporated by reference to Exhibit 10.19 to the Annual Report on Form 10-K, filed February 24, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000155837022002006/axon-20211231xex10d19.htm) |

| [removed: 10.15+] [added: 10.19+] | ​ | [removed: [Executive Employment Agreement] [added: [Employment Agreement, dated December 8, 2023,] by and between Axon Enterprise, Inc. and [removed: James C. Zito] [added: Patrick W. Smith] (incorporated by reference to Exhibit 10.1 to the [removed: Quarterly] [added: Current] Report on Form [removed: 10-Q,] [added: 8-K,] filed [removed: August 9, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000106918322000036/axon-20220630xex10d1.htm)] [added: December 14, 2023)](https://www.sec.gov/Archives/edgar/data/1069183/000155837023019797/axon-20231208xex10d1.htm)] |

| [removed: 10.16+] [added: 10.14+] | ​ | [Axon Enterprise, Inc. 2022 Stock [removed: Incentive] [added: Inducement] Plan (incorporated by reference to [removed: Annex B of] [added: Exhibit 99.1 to] the [removed: Company’s Proxy Statement,] [added: registration statement on Form S-8,] filed [removed: April 8, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000155837022005230/tmb-20220520xdef14a.htm)] [added: September 23, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000106918322000045/tmb-20220923xex99d1.htm)] |

| [removed: 10.18+] [added: 10.18] | ​ | [removed: [Executive Employment Agreement] [added: [Credit Agreement, dated December 15, 2022,] by and between Axon Enterprise, Inc. and [removed: Brittany Bagley] [added: JPMorgan Chase Bank, N.A.] (incorporated by reference to Exhibit [removed: 10.1] [added: 10.24] to the [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q,] [added: 10-K,] filed [removed: November 9, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000106918322000055/axon-20220930xex10d1.htm)] [added: February 28, 2023)](https://www.sec.gov/Archives/edgar/data/1069183/000155837023002413/axon-20221231xex10d24.htm)] |

| [removed: 10.19] [added: 10.16] | ​ | [Form of Convertible Note Hedge Confirmation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed December 9, 2022)](https://www.sec.gov/Archives/edgar/data/0001069183/000106918322000065/axon-20221206xex10d1.htm) |

| [removed: 10.20] [added: 10.17] | ​ | [Form of Warrant Confirmation (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed December 9, 2022)](https://www.sec.gov/Archives/edgar/data/0001069183/000106918322000065/axon-20221206xex10d2.htm) |

| 21.1* | ​ | [List of [removed: Subsidiaries](https://www.sec.gov/Archives/edgar/data/1069183/000155837023002413/axon-20221231xex21d1.htm)] [added: Subsidiaries](https://www.sec.gov/Archives/edgar/data/1069183/000106918324000006/axon-20231231xex21d1.htm)] |

| 23.1* | ​ | [Consent of Grant Thornton, LLP, independent registered public accounting [removed: firm](https://www.sec.gov/Archives/edgar/data/1069183/000155837023002413/axon-20221231xex23d1.htm)] [added: firm](https://www.sec.gov/Archives/edgar/data/1069183/000106918324000006/axon-20231231xex23d1.htm)] |

| 31.1* | ​ | [Principal Executive Officer Certification pursuant to Rule 13a-14(a) or Rule [removed: 15d-14(a)](https://www.sec.gov/Archives/edgar/data/1069183/000155837023002413/axon-20221231xex31d1.htm)] [added: 15d-14(a)](https://www.sec.gov/Archives/edgar/data/1069183/000106918324000006/axon-20231231xex31d1.htm)] |

| 31.2* | ​ | [Principal Financial Officer Certification pursuant to Rule 13a-14(a) or Rule [removed: 15d-14(a)](https://www.sec.gov/Archives/edgar/data/1069183/000155837023002413/axon-20221231xex31d2.htm)] [added: 15d-14(a)](https://www.sec.gov/Archives/edgar/data/1069183/000106918324000006/axon-20231231xex31d2.htm)] |

| 32 | ​ | [Principal Executive Officer and Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of [removed: 2002](https://www.sec.gov/Archives/edgar/data/1069183/000155837023002413/axon-20221231xex32.htm)] [added: 2002](https://www.sec.gov/Archives/edgar/data/1069183/000106918324000006/axon-20231231xex32.htm)] |

| 104 | ​ | The cover page from the Company’s Annual Report for the year ended December 31, [removed: 2022,] [added: 2023,] formatted in Inline XBRL |

| 10.20+ | ​ | [Letter Agreement, dated December 8, 2023, by and between Axon Enterprise, Inc. and Patrick W. Smith (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed December 14, 2023)](https://www.sec.gov/Archives/edgar/data/1069183/000155837023019797/axon-20231208xex10d2.htm) |

| 97* | ​ | [Axon Enterprise, Inc. Incentive Compensation Recovery Policy](https://www.sec.gov/Archives/edgar/data/1069183/000106918324000006/axon-20231231xex97.htm) |

| 10.17+ | ​ | [Axon Enterprise, Inc. 2022 Stock Inducement Plan (incorporated by reference to Exhibit 99.1 to the registration statement on Form S-8, filed September 23, 2022)](https://www.sec.gov/Archives/edgar/data/1069183/000106918322000045/tmb-20220923xex99d1.htm) |

| 10.21* | ​ | [Credit Agreement, dated December 15, 2022, by and between Axon Enterprise, Inc. and JPMorgan Chase Bank, N.A.](https://www.sec.gov/Archives/edgar/data/1069183/000155837023002413/axon-20221231xex10d24.htm) |

| Date: February [removed: 28, 2023] [added: 27, 2024] | ​ | ​ |

| Date: February [removed: 28, 2023] [added: 27, 2024] | By: | /s/ BRITTANY BAGLEY |

| ​ | ​ | _Chief [removed: Financial] [added: Operating] Officer and Chief [removed: Business] [added: Financial] Officer_ |

| /s/ PATRICK W. SMITH | ​ | (Principal Executive Officer) | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| ​ | ​ | Chief [removed: Financial] [added: Operating] Officer and Chief [removed: Business] [added: Financial] Officer | ​ | ​ |

| /s/ BRITTANY BAGLEY | ​ | (Principal Financial and Accounting Officer) | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ ADRIANE M. BROWN | ​ | Director | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ JULIE A. CULLIVAN | ​ | Director | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ MICHAEL GARNREITER | ​ | Director | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ CAITLIN E. KALINOWSKI | ​ | Director | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ MARK W. KROLL | ​ | Director | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ MATTHEW R. MCBRADY | ​ | Director | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ HADI PARTOVI | ​ | Director | ​ | February [removed: 28, 2023] [added: 27, 2024] |

| /s/ ERIKA AYERS BADAN | ​ | Director | ​ | February 27, 2024 |

| Erika Ayers Badan | ​ | ​ | ​ | ​ |

| ​ | ​ | ​ | ​ | ​ |

| ​ | ​ | ​ | ​ | ​ |

| /s/ GRAHAM SMITH | ​ | Director | ​ | February 27, 2024 |

| Graham Smith | ​ | ​ | ​ | ​ |

| ​ | ​ | ​ | ​ | ​ |

| /s/ JERI WILLIAMS | ​ | Director | ​ | February 27, 2024 |

| Jeri Williams | ​ | ​ | ​ | ​ |